<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 27, 2000
REGISTRATION NO. 333-82703
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 1
TO
Form S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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DURA AUTOMOTIVE SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 3714 38-3185711
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification Number)
organization)
</TABLE>
4508 IDS CENTER, MINNEAPOLIS, MINNESOTA 55402 TELEPHONE: (612) 342-2311
(Address, including zip code, and telephone number, including area code, of
Registrants' principal offices)
WILLIAM F. OHRT, VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
DURA AUTOMOTIVE SYSTEMS, INC.
2791 RESEARCH DRIVE, ROCHESTER HILLS, MI 48309 TELEPHONE: (248) 299-7500
(Address, including zip code, and telephone number, including area code, of
Agent for Service)
COPY TO:
DENNIS M. MYERS, ESQ.
KIRKLAND & ELLIS
200 EAST RANDOLPH DRIVE, CHICAGO, IL 60601 TELEPHONE: (312) 861-2000
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement.
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If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT FILES
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
WILL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT BECOMES EFFECTIVE ON
SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY
DETERMINE.
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<PAGE> 2
PROSPECTUS
152,401 SHARES
DURA AUTOMOTIVE SYSTEMS, INC.
CLASS A COMMON STOCK
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The shares of Class A common stock covered by this prospectus may be sold
from time to time by the selling stockholders identified in this prospectus
under the heading "Selling Stockholders." Dura will not receive any part of the
proceeds from the sale of the shares. See "Use of Proceeds."
Our Class A common stock is traded on the Nasdaq Stock Market (the
"Nasdaq") under the symbol "DRRA." On April 26, 2000, the last reported closing
price for the Class A common stock was $16.00 per share.
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INVESTING IN OUR CLASS A COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 7.
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Neither the Securities and Exchange Commission nor any other regulatory body has
approved or disapproved of these Securities or passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
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Dura has agreed to pay the cost of the registration of the shares and the
preparation of this prospectus and registration statement under which it is
filed. The expenses so payable by Dura are estimated to be approximately
$85,000.
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THE DATE OF THIS PROSPECTUS IS APRIL 27, 2000.
<PAGE> 3
You should rely on the information contained in this prospectus. We have
not authorized anyone to provide you with information different from that
contained in this prospectus. The information contained in this prospectus is
accurate only as of the date of this prospectus, regardless of the time of
delivery of this prospectus. In this prospectus, unless otherwise noted, Dura
Automotive Systems, Inc., is referred to as "DASI," exclusive of its
subsidiaries. References to "we," "our," "ours," "us" and "Dura" refer to DASI
and its consolidated subsidiaries, including the Dura Operating Corp.
We acquired Excel Industries, Inc. ("Excel") on March 23, 1999 and Adwest
Automotive Plc ("Adwest") on March 15, 1999. Such acquisitions are collectively
referred to herein as the "Acquisitions." Unless otherwise indicated, financial
and operating data presented herein for 1999 on a pro forma basis give effect to
the Excel acquisition and the Adwest acquisition as if each occurred on January
1, 1999. See "Unaudited Pro Forma Financial Statements."
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TABLE OF CONTENTS
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PAGE
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Prospectus Summary...................... 1
Risk Factors............................ 7
Forward-Looking Statements May Prove
Inaccurate............................ 13
Use of Proceeds......................... 13
Market Price for Class A Common Stock... 14
Dividend Policy......................... 14
Capitalization.......................... 15
Unaudited Pro Forma Financial
Statements............................ 16
Selected Consolidated Financial Data.... 20
Management's Discussion and Analysis of
Results of Operations and Financial
Condition............................. 26
Business................................ 38
</TABLE>
<TABLE>
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PAGE
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Management.............................. 58
Security Ownership of Certain Beneficial
Owners and Management................. 65
Selling Stockholders.................... 66
Certain Relationships and Related Party
Transactions.......................... 68
Description of Capital Stock............ 68
Description of Certain Indebtedness..... 70
Plan of Distribution.................... 74
Legal Matters........................... 76
Experts................................. 76
Where You Can Find More Information..... 76
Index to Financial Statements........... F-1
</TABLE>
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<PAGE> 4
CURRENCIES AND EXCHANGE RATES
References in this prospectus to "Dollars," "$" or "c" are to the currency
of the United States and references to "United States" and "U.S." means the
United States of America, its states, territories, possessions and all areas
subject to its jurisdiction. References herein to "Euro" and "E" are to the
currency that was introduced at the start of the third stage of economic and
monetary union pursuant to the treaty establishing the European Economic
Community, as amended by the Treaty on European Union, signed at Maastricht, the
Netherlands on February 7, 1992. Except as otherwise stated herein, conversions
of non-Dollar currencies to Dollars in the financial statements and the other
information included herein have been calculated, for income statement purposes,
on the basis of average exchange rates over the related periods and, for balance
sheet purposes, on the date thereof. These translations should not be construed
as representations that the non-Dollar currency amounts actually represent such
Dollar amounts or could be converted into Dollars at the rates indicated or at
any other rates.
References to "Pounds Sterling," "Pounds," "L," "Pence" or "p" are to the
currency of the United Kingdom (the "U.K."). There are 100 Pence to each Pound.
References in this prospectus to "DM" are to the currency of Germany.
Solely for your convenience, this prospectus contains translations of
certain financial data of Adwest from Pounds to Dollars. The following table
reflects the exchange rates used as well as other information for your benefit.
Dura does not represent that the Pound amounts shown in this prospectus would
have been converted into Dollars at the quoted exchange rates.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED
JUNE 30, DECEMBER 31,
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1997 1998 1997 1998
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<S> <C> <C> <C> <C>
Operating results..................................... 1.6094 1.6464 1.6433 1.6627
Balance sheet......................................... 1.6448 1.6509 1.6607 1.6710
</TABLE>
As of April 26, 2000, the closing rate with respect to the Pound was L1.00
= $1.5756.
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<PAGE> 5
PROSPECTUS SUMMARY
The following summary contains the basic information about Dura. It does
not contain all of the information that is important to you in deciding whether
to purchase the Class A common stock offered hereby. We encourage you to read
the prospectus in its entirety.
DURA AUTOMOTIVE SYSTEMS, INC.
We are the world's largest independent designer and manufacturer of driver
control systems for the global automotive industry. We are also a leading global
supplier of window systems, door systems and engineered mechanical components.
Our products include:
- driver control products -- automotive cables, parking brake mechanisms,
transmission shifter mechanisms, brake, clutch and accelerator pedals;
- window system products -- encapsulated windows, push out and sliding
windows;
- door system products -- window regulators, frames, hinges and door
modules; and
- engineered products -- seating systems, engine control products and
engineered mechanical components, such as underbody tire carriers,
jacks, turn signal and tilt lever assemblies, injection molded plastic
parts, hood hinges, automotive lighting products and latches,
thixomolded magnesium and mobile products.
We sell our products to every major North American, European and Japanese
automotive original equipment manufacturer, or OEM, including Ford, General
Motors, DaimlerChrysler, Volkswagen, BMW, Toyota, Honda, PSA (Peugeot and
Citroen), Renault and Nissan. We have over 80 manufacturing and product
development facilities located in the United States, Australia, Brazil, Canada,
the Czech Republic, France, Germany, India, Mexico, Portugal, Spain and the U.K.
In March 1999, we completed both the Excel acquisition and the Adwest
acquisition. Excel is a leading supplier of window systems, door systems,
seating systems and injection molded plastic parts for the global automotive
market and appliances, hardware products, window systems, door systems and
seating systems for the North American recreational vehicle, mass transit and
heavy truck industries, or "mobile products" industries. On a pro forma basis
giving effect to a 1998 acquisition, Excel had net sales of $1.2 billion for the
year ended January 2, 1999. Adwest is a leading European supplier of driver
control products, including transmission shifter mechanisms, parking brake
mechanisms, steering columns and gears, cables and engine control products, such
as engine thermostats, radiator caps and fuel caps, primarily for European
automotive OEMs. Adwest had revenues of $399.7 million for the twelve month
period ended December 31, 1998.
The Acquisitions have significantly increased our product offerings, global
reach and scale. Strategic benefits of the Acquisitions include:
- Diversification of our revenue base and expansion of our product
offerings through the addition of a broad array of products, including
such major product categories as window systems and door systems;
- Global leadership in driver control systems, including parking brake
systems and transmission shifter systems;
- Significant expansion of both our European manufacturing operations and
customer base; and
- Substantial opportunities for operational synergies driven by the
similarity of the manufacturing processes and technical capabilities and
the sharing of best practices among all of our businesses.
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We believe, based upon our experience in the automotive supply industry,
that we hold the #1 or #2 market position for our principal products in the
following markets. The table below sets forth our estimated combined market
position in North America and Europe in 1999:
<TABLE>
<CAPTION>
MARKET
PRODUCT CATEGORY REGION POSITION
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<S> <C> <C>
Automotive cables........................ North America............................ #1
Europe................................... #1
Parking brake mechanisms................. North America............................ #1
Europe................................... #1
Transmission shifter mechanisms.......... North America............................ #1
Europe................................... #2
Window systems........................... North America............................ #1
Europe................................... #2
Window regulators........................ North America............................ #1
</TABLE>
COMPETITIVE STRENGTHS
We believe that we possess a number of competitive strengths that have been
further enhanced by the Acquisitions, including:
- Well Positioned to Take Advantage of Market Trends: We believe that we
are well positioned to meet the demands of OEMs for fewer, full-service
and globally positioned suppliers. We believe our advanced design
capabilities, broad product lines and ability to supply complete
systems, combined with our global production capabilities, will enable
us to take advantage of these market trends.
- Strong OEM Partnerships: We have formed strong partnerships with our
major OEM customers due to our high level of product quality, customer
service, product design and engineering capabilities. Our application of
innovative operating techniques, combined with investments in
sophisticated capital equipment, has led to a high level of product
quality, industry-low defect rates and the receipt of numerous supplier
awards.
- Well Positioned on Popular Platforms: We manufacture products for many
of the most popular car, light truck and sport utility vehicle models.
In North America, these include all of the top ten selling vehicles for
1999: the Ford Taurus, Explorer, Ranger and F-Series pickups, the GM C/K
pickup, the Dodge Caravan and Ram pickup, the Honda Accord and Civic,
and the Toyota Camry.
- Significant Acquisition Experience: Our leadership team, the members of
which have an average of 20 years of experience in the automotive supply
industry, has successfully completed fifteen acquisitions and two joint
ventures over the last four years. We have been successfully integrating
the acquired operations and generating significant operational
efficiencies and cost savings. In addition, we have generally retained
key personnel from acquired companies, which has enabled us to
strengthen our global management team as we have grown.
BUSINESS STRATEGY
Our primary 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 the systems that we supply to OEMs
worldwide. The key elements of our operating and growth strategies are as
follows:
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OPERATING STRATEGY
- Continuous Operational Improvements: We continuously implement
strategic initiatives designed to improve product quality and reduce
manufacturing costs through, among other things, the introduction of
cellular manufacturing methods, consolidation of manufacturing
facilities, improvement in inventory management and the reduction of
scrap.
- Capitalize on Opportunities for Operating Synergies: Our acquisitions
typically provide us with a number of opportunities to reduce costs and
improve operational efficiency. The similarity of the manufacturing
processes and technical capabilities of Dura and the Acquisitions is
expected to result in significant cost savings and operating synergies.
- Foster a Decentralized, Participatory Culture: Our decentralized
approach to managing our manufacturing facilities encourages decision
making and employee participation in areas such as manufacturing
processes and customer service. This "team" approach fosters a unified
culture and enhances communication of strategic direction and goals,
while facilitating a greater success rate in reaching and exceeding our
objectives.
GROWTH STRATEGY
- Focus on Systems: OEMs are increasingly seeking suppliers capable of
providing complete systems rather than suppliers who only provide
separate component parts. A key element of our growth strategy has been
to add to our ability to provide complete systems to our OEM customers.
- Increase Platform and Customer Penetration: A key element of our
strategy is to increase volume by adding new customers and to strengthen
our existing customer relationships by broadening our range of products
through internal development efforts and acquisitions. The acquisitions
completed during 1999 expanded our relationships with most of the North
American and European OEMs.
- Extend Global Manufacturing Reach: In 1999, over 72 percent of total
worldwide passenger vehicle production occurred outside North America.
To meet OEMs' increasing preference for suppliers with global
capabilities, we have expanded our manufacturing operations into new
geographic markets through strategic acquisitions and joint ventures.
- Pursue Strategic Acquisitions: We compete in what we believe to be a
$12 to $14 billion, highly fragmented, worldwide automotive market that
provides numerous potential acquisition and joint venture opportunities.
Since 1996, we have successfully completed fifteen strategic
acquisitions and formed two joint ventures.
RECENT ACQUISITIONS
On March 23, 1999, we acquired Excel through a merger of Excel with and
into Dura Operating Corp. In the merger, DASI issued an aggregate of
approximately 5.1 million shares of its Class A common stock and paid $155.5
million in cash to Excel's former shareholders. The Excel acquisition had a
transaction value of approximately $471.3 million, plus fees and expenses. The
cash consideration and related fees and expenses paid in the Excel acquisition
(including acquired indebtedness) were financed through borrowings under our
amended and restated $1,150 million senior secured credit facility, which we
refer to in this prospectus as our "new credit facility."
On March 15, 1999, Dura acquired through a cash tender offer approximately
95 percent of the outstanding ordinary shares of Adwest. The aggregate
consideration (including acquired indebtedness) and related fees and expenses
paid in the Adwest acquisition were financed through borrowings under our new
credit facility. Dura subsequently purchased the remaining five percent. The
aggregate cost of the Adwest acquisition, including the amount necessary to
acquire the remaining outstanding shares, was approximately $320 million.
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<PAGE> 8
On June 28, 1999, Dura acquired Metallifacture Limited ("Metallifacture")
from Bullough plc for an aggregate purchase price of approximately $22.0 million
which was financed with borrowings under Dura's credit facility. Metallifacture,
located in Nottingham, England, is a manufacturer of jacks and tire carriers for
the European automotive industry. It had annual revenues of approximately $25
million and its major customers include Ford, General Motors, Rover, Nissan and
Volkswagen.
On December 1, 1999, Dura acquired the seat adjusting business of Meritor
Automotive, Inc. ("Meritor") for total cash consideration of $130 million.
Meritor's seat track business manufactures seat track adjusting mechanisms for
the North American automotive industry. Meritor, with operations in Bracebridge,
Ontario and Gordonsville, Tennessee, had annual revenues of approximately $130
million and is a Tier II supplier to Lear Corporation and other automotive
interior suppliers.
COMPANY BACKGROUND
DASI is a holding company whose predecessor was formed in 1990 by Hidden
Creek Industries, Onex Corporation, J2R Corporation and certain others for the
purpose of acquiring certain operating divisions from the Wickes Manufacturing
Company.
Our principal executive offices are located at 4508 IDS Center,
Minneapolis, Minnesota 55402, and our telephone number is (612) 342-2311.
4
<PAGE> 9
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
We derived the following historical financial information from the audited
consolidated financial statements of Dura for 1997, 1998 and 1999. The summary
pro forma financial data of Dura for the year ended December 31, 1999 have been
derived from the pro forma financial statements and related notes contained
elsewhere in this prospectus. The pro forma financial statements do not purport
to represent what our results of operations actually would have been if the
events assumed therein had occurred as of the dates indicated or what our
results will be for any future period.
You should read the following summary together with the "Management's
Discussion and Analysis of Results of Operations and Financial Condition" for
each of Dura, Excel and Adwest and the audited and unaudited financial
statements and the related notes and the unaudited pro forma financial
statements and related notes contained elsewhere in this prospectus.
DURA AUTOMOTIVE SYSTEMS, INC.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
PRO FORMA
1997(1) 1998(2) 1999(3) 1999(4)(5)
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(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues....................................... $449,111 $739,467 $2,200,385 $2,589,436
Gross profit................................... 74,025 130,949 345,680 370,100
Operating income............................... 37,610 71,256 170,879 167,881
Net income..................................... 16,642 26,024 41,220 29,599
Basic earnings per share(6).................... $ 1.89 $ 2.43 $ 2.53 $ 1.70
Diluted earnings per share(6).................. $ 1.88 $ 2.37 $ 2.46 $ 1.69
OTHER FINANCIAL DATA:
Depreciation and amortization.................. $ 12,303 $ 27,571 $ 76,654 $ 91,906
Capital expenditures, net...................... 16,242 31,822 80,469 96,514
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and cash equivalents...................... $ 4,148 $ 20,544 $ 23,697 $ 23,697
Working capital................................ 50,304 63,766 162,949 162,949
Total assets................................... 419,264 929,383 2,444,867 2,444,867
Total debt..................................... 180,322 331,906 1,231,022 1,231,022
Total stockholders' investment................. 101,708 238,037 430,996 430,996
</TABLE>
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(1) Includes the results of operations of (i) VOFA Group ("VOFA") from January
1, 1997, (ii) the parking brake business of Excel from May 5, 1997, (iii) GT
Automotive Systems, Inc. ("GT Automotive") from August 29, 1997, and (iv)
REOM Industries (Aust) Pty Ltd. ("REOM Industries") from December 12, 1997,
which represent their respective dates of acquisition.
(2) Includes the results of operations of (i) Universal Tool & Stamping Co.,
Inc. ("Universal") from March 8, 1998, (ii) Trident Automotive plc
("Trident") from April 30, 1998, and (iii) the hinge business of Tower
Automotive, Inc. (the "Hinge Business") from September 8, 1998, which
represent their respective dates of acquisition. In March 1998, Dura
Automotive Systems Capital Trust (the "Dura Trust") issued 7 1/2 percent
convertible trust preferred securities (the "Trust Preferred Securities")
with an aggregate liquidation preference of $55.3 million. In June 1998,
DASI issued 3,500,000 shares of its Class A common stock, giving effect to
the exercise of the underwriters' over-allotment option (the "June 1998
Offering").
(3) Includes the results of operations of (i) Excel from March 23, 1999, (ii)
Adwest from March 15, 1999, (iii) Metallifacture from June 28, 1999, and
(iv) the seat adjusting business of Meritor from December 1, 1999, which
represent their respective dates of acquisition. In April 1999, Dura
completed the offering of $300 million and E100 million of 9 percent senior
subordinated notes due
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<PAGE> 10
May 2009. In June 1999, Dura retired the $75 million of Trident's
outstanding 10 percent senior subordinated notes due 2005. In addition,
Dura recognized $16.2 million of charges to operations during the fourth
quarter of 1999 which reflected costs Dura will incur under its
comprehensive plan to consolidate certain facilities.
(4) The pro forma statement of operations data for the year ended December 31,
1999 give effect to: (i) the acquisitions of Excel and Adwest by Dura, (ii)
the offering of the subordinated notes, and (iii) the retirement of the
Trident notes, as if each had been consummated on January 1, 1999. The
inclusion of Metallifacture and Meritor for the periods prior to acquisition
would not have materially affected Dura's pro forma results of operations.
(5) Amounts for Adwest have been translated from Pounds into Dollars using the
exchange rates set forth herein for convenience purposes only. In addition,
certain amounts of Adwest have been adjusted to conform to U.S. GAAP. See
Note 31 to the Consolidated Financial Statements of Adwest, Note 5 to the
Unaudited Interim Consolidated Financial Statements of Adwest and
"Currencies and Exchange Rates" included elsewhere herein.
(6) Basic earnings per share were computed by dividing net income by the
weighted average number of shares of Class A common stock and Class B common
stock outstanding during the year. Diluted earnings per share include the
dilutive effects of outstanding stock options using the treasury stock
method and the Trust Preferred Securities.
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<PAGE> 11
RISK FACTORS
You should read and consider carefully each of the following factors, as
well as the other information contained in this prospectus, before making a
decision to purchase Class A common stock offered hereby.
OUR BUSINESS MAY BE ADVERSELY IMPACTED AS A RESULT OF OUR SUBSTANTIAL LEVERAGE
We have a significant amount of indebtedness. As of December 31, 1999, we
had approximately $1,231 million of outstanding debt, $55.3 million of
outstanding Trust Preferred Securities and approximately $431.0 million of
stockholders' investment, and our ratio of earnings to fixed charges for the
period ended December 31, 1999 was 2.0 to 1. In addition, under our new credit
facility we are able to incur substantial additional indebtedness in the future.
Our new credit facility provides for revolving credit borrowings of up to $400
million, subject to certain financial covenants set forth therein.
Our indebtedness could have several important consequences to you,
including but not limited to the following:
- our ability to obtain additional financing in the future for working
capital, capital expenditures, potential acquisition opportunities,
general corporate purposes or other purposes may be impaired;
- a substantial portion of our cash flow from operations must be dedicated
to the payment of principal and interest on our indebtedness;
- we may be more vulnerable to economic downturns, may be limited in our
ability to withstand competitive pressures and may have reduced
flexibility in responding to changing business, regulatory and economic
conditions; and
- fluctuations in market interest rates will affect the cost of our
borrowings to the extent not covered by interest rate hedge agreements
because a portion of our indebtedness is payable at variable rates.
Our ability to service our indebtedness will depend on our future
performance, which will be affected by prevailing economic conditions and
financial, business, regulatory and other factors. Certain of these factors are
beyond our control. We believe that, based upon current levels of operations, we
will be able to meet our debt service obligations when due. Significant
assumptions underlie this belief, including, among other things, that we will
continue to be successful in implementing our business strategy and that there
will be no material adverse developments in our business, liquidity or capital
requirements. If we cannot generate sufficient cash flow from operations to
service our indebtedness and to meet our other obligations and commitments, we
might be required to pursue one or more alternative strategies such as selling
assets, restructuring or refinancing our indebtedness or seeking additional
equity capital, which may substantially dilute the ownership interest of holders
of our common stock. We cannot assure you that any of these strategies could be
effected on satisfactory terms, if at all.
WE ARE SUBJECT TO SUBSTANTIAL RESTRICTIONS AND COVENANTS UNDER THE INDENTURES
AND NEW CREDIT FACILITY
The indentures under which the 9 percent senior subordinated notes were
issued and the new credit facility contain numerous restrictive covenants,
including, but not limited to, covenants that restrict Dura's ability to incur
indebtedness, pay dividends, create liens, sell assets and engage in certain
mergers and acquisitions. In addition, the new credit facility also requires
Dura to maintain certain financial ratios. Our ability to comply with the
covenants and other terms of the new credit facility and the indentures and to
satisfy our other respective debt obligations, including, without limitation,
borrowings and other obligations under the new credit facility, and our ability
to make cash payments with respect to the notes will depend on our future
operating performance. In the event that we fail to comply with the various
covenants contained in the new credit facility or the indentures, as applicable,
we would be in default thereunder, and in any such case, the maturity of
substantially all of our long-term indebtedness could be accelerated.
A default under the indentures would also constitute an event of default
under the new credit facility. In addition, the lenders under the new credit
facility could elect to declare all amounts borrowed
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<PAGE> 12
thereunder, together with accrued interest, to be due and payable. If we were
unable to repay such borrowings, such lenders could proceed against our assets,
which secure our borrowings under the new credit facility.
WE ARE DEPENDENT ON FORD, GM AND DAIMLER/CHRYSLER AS OUR LARGEST CUSTOMERS
Our revenues from Ford, GM and DaimlerChrysler represented approximately 26
percent, 15 percent and 11 percent, respectively, of our revenues in 1999. The
loss of Ford, GM, DaimlerChrysler or any other significant customer could have a
material adverse effect on us. The contracts we have entered into with many of
our customers provide for supplying the customers' requirements for a particular
model, rather than for manufacturing a specific quantity of products. Such
contracts range from one year to the life of the model, usually three to seven
years, and do not require the purchase by the customer of any minimum number of
parts. Therefore, the loss of any one of such customers or a significant
decrease in demand for certain key models or group of related models sold by any
of our major customers could have a material adverse effect on us. We are
involved in claims relating to our products with certain of our significant
customers. As a result of these claims, it is possible that our relationship
with these customers could be adversely affected. See "Business -- Legal
Proceedings."
WE MAY EXPERIENCE DIFFICULTIES IN INTEGRATING THE ACQUISITIONS
We believe that the Acquisitions will provide us with significant
opportunities to achieve operating synergies and cost savings. There can be no
assurance, however, that such benefits will be realized, that the combination of
Dura and acquired businesses will be successful, or that we will not experience
difficulties in integrating the operations of Excel and Adwest with our
operations. For example, the integration of these acquisitions will require the
experience and expertise of certain former key managers of Excel and Adwest,
respectively, who have been retained by Dura. There can be no assurance,
however, that these managers will remain with Dura for the time period necessary
to successfully integrate the acquired operations with our operations. In
addition, the Acquisitions may present significant challenges for our management
due to the increased time and resources required to properly integrate
management, employees, information systems, accounting controls, personnel and
administrative functions with those of Dura and to manage the combined company
on a going forward basis. We cannot assure you that we will be able to
successfully integrate and streamline overlapping functions or, if successfully
accomplished, that such integration will not be more costly to accomplish than
presently contemplated or that we will not encounter difficulties in managing
the combined company due to its increased size and scope.
In addition, we cannot assure you that we will achieve the operating
synergies and annual cost savings that we expect to result from the
Acquisitions. These estimates constitute forward-looking information and involve
known and unknown risks, uncertainties and other factors that may cause the
actual cost savings or cash generated to be materially different from our
estimates or result in these savings not being realized in the time frame
expected. In addition to the general factors discussed above, such estimates are
based on a variety of other factors and were derived utilizing numerous
important assumptions, including:
- achieving estimated reductions in personnel at currently projected
severance cost levels, while maintaining historical sales levels;
- achieving a sufficient level of sales necessary to yield planned
production efficiencies and absorption of fixed costs;
- eliminating certain components of fixed overhead without affecting our
ability to manage our restructured operations;
- not disrupting planned production schedules; and
- achieving operating improvements at certain of the acquired facilities.
8
<PAGE> 13
WE MAY BE UNABLE TO COMPLETE ADDITIONAL STRATEGIC ACQUISITIONS
The automotive component supply industry has undergone, and is likely to
continue to experience, consolidation as OEMs seek to reduce costs and reduce
their supplier base. We intend to actively pursue acquisition targets that will
allow us to continue to expand into new geographic markets, add new customers,
provide new product, manufacturing and service capabilities or increase model
penetration with existing customers. There can be no assurance that we will find
attractive acquisition candidates or successfully integrate acquired businesses
into our existing business. If the expected synergies from such acquisitions do
not materialize or we fail to successfully integrate new businesses into our
existing businesses, our results of operations could be adversely affected. To
the extent that we may be considered as an acquisition candidate by a third
party, certain provisions in our restated certificate of incorporation and our
amended and restated by-laws may inhibit a change in control.
WE ARE SUBJECT TO CERTAIN RISKS ASSOCIATED WITH OUR FOREIGN OPERATIONS
We have significant international operations, specifically in Europe,
Canada and Latin America and the Acquisitions have further increased our
international operations. Excel has significant operations in Europe and
substantially all of Adwest's operations are located in Europe. Certain risks
are inherent in international operations, including:
- the difficulty of enforcing agreements and collecting receivables
through certain foreign legal systems;
- foreign customers may have longer payment cycles than customers in the
United States;
- tax rates in certain foreign countries may exceed those in the United
States and foreign earnings may be subject to withholding requirements
or the imposition of tariffs, exchange controls or other restrictions;
- general economic and political conditions in countries where Dura, Excel
and Adwest operate may have an adverse effect on their operations in
those countries;
- the difficulties associated with managing a large organization spread
throughout various countries; and
- required compliance with a variety of foreign laws and regulations.
As we continue to expand our business globally, our success will be
dependent, in part, on our ability to anticipate and effectively manage these
and other risks. We cannot assure you that these and other factors will not have
a material adverse effect on our international operations or our business as a
whole. In addition, we generate a significant portion of our revenues and incur
a significant portion of our expenses in currencies other than Dollars. To the
extent that we are unable to match revenues received in foreign currencies with
costs paid in the same currency, exchange rate fluctuations in any such currency
could have an adverse effect on our financial results.
WE MAY BE ADVERSELY IMPACTED BY WORK STOPPAGES AND OTHER LABOR MATTERS
Approximately 5,250 of our employees are unionized, which represents
approximately 25 percent of our employees at December 31, 1999. We cannot assure
you that we will not encounter strikes, further unionization efforts or other
types of conflicts with labor unions or our employees. Any of these factors may
have an adverse effect on us or may limit our flexibility in dealing with our
workforce.
In addition, many OEMs and their suppliers have unionized work forces. Work
stoppages or slow-downs experienced by OEMs or their suppliers could result in
slow-downs or closures of assembly plants where our products are included in
assembled vehicles. For example, strikes by the United Auto Workers led to the
shut down of most of GM's North American assembly plants in June and July 1998.
We estimate that this work stoppage at GM's facilities had an unfavorable impact
of approximately
9
<PAGE> 14
$16.7 million on our 1998 revenues. In the event that one or more of our
customers experiences a material work stoppage, such work stoppage could have a
material adverse effect on our business.
WE MAY BE ADVERSELY AFFECTED BY ENVIRONMENTAL AND SAFETY REGULATIONS TO WHICH WE
ARE SUBJECT
We are subject to the requirements of federal, state, local and foreign
environmental and occupational health and safety laws and regulations. We cannot
assure you that we operate at all times in complete compliance with all such
requirements. We could be subject to potentially significant fines and penalties
for any noncompliance that may occur. We have made and will continue to make
capital and other expenditures to comply with environmental requirements. We are
also subject to laws requiring the cleanup of contamination. Some of our
operations generate hazardous substances. If a release of hazardous substances
occurs at or from any of our current or former properties or at a landfill or
another location where we have disposed of wastes, we may be held liable for the
contamination, and the amount of such liability could be material. We are
currently addressing environmental contamination matters at certain facilities,
including facilities in Mancelona, Michigan, Butler, Indiana, and Rotenberg,
Einbeck and Dusseldorf, Germany, which could result in material expenditures.
See "Business -- Environmental Matters."
CERTAIN STOCKHOLDERS CURRENTLY CONTROL ALL MATTERS SUBMITTED TO A STOCKHOLDER
VOTE
Onex Corporation, Alkin Co. and certain other stockholders associated with
Dura or Hidden Creek Industries beneficially own all of our outstanding shares
of Class B common stock, representing approximately 59 percent of the combined
voting power of our outstanding common stock as of December 31, 1999. Each share
of Class B common stock has ten votes, as compared to one vote for each share of
Class A common stock. As a result of such stock ownership, these stockholders
are able to control the vote on all matters submitted to a vote of the holders
of our common stock, including the election of directors, amendments to our
restated certificate of incorporation and by-laws and approval of significant
corporate mergers. Such consolidation of voting power could also have the effect
of delaying, deterring or preventing a change in control of Dura that might be
otherwise beneficial to Dura. See "Description of Capital Stock."
CYCLICALITY AND SEASONALITY COULD ADVERSELY AFFECT US
The automotive and recreational vehicle markets are highly cyclical and
both markets are dependent on consumer spending. Economic factors adversely
affecting automotive production and consumer spending could adversely impact us.
In addition, our business is somewhat seasonal. We typically experience
decreased revenues and operating income during the third calendar quarter of
year due to the impact of scheduled OEM plant shutdowns in July and August for
vacations and new model changeovers.
WE MAY BE ADVERSELY AFFECTED BY PRODUCT LIABILITY EXPOSURE CLAIMS
We face an inherent business risk of exposure to product liability claims
in the event that the failure of our products results in personal injury or
death, and there can be no assurance that we will not experience any material
product liability losses in the future. In addition, if any of our products
prove to be defective, we may be required to participate in a recall involving
such products. In late 1994, Ford issued a recall of a series of manual
transmission Ford F-Series pickups to repair the self-adjust parking brakes
originally manufactured by the brake and cable business of Alkin Co. (the "Brake
and Cable Business"). Our share of such costs, which was fully reserved at the
time of the acquisition of the Brake and Cable Business has reached the full
$6.0 million limit agreed to between us and Ford. We are also involved in a
product recall relating to the same issue with respect to the Mondeo in Europe.
We have agreed to pay 50 percent of the costs of that recall not to exceed $1.0
million, which payments totaled $0.4 million at December 31, 1999. The types of
alleged failures that prompted the F-Series recall have also led to a number of
claims and lawsuits filed against Ford, one of which culminated in a July 1998
award of punitive damages against Ford of more than $151 million (which has
subsequently been reduced on appeal to $69 million) and Ford is appealing the
decision. To date, two cases have been brought directly against
10
<PAGE> 15
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, 1999, Ford
had tendered its defense of approximately 30 such claims to Dura and Alkin Co.
Dura and Alkin Co. have submitted these claims to their insurance carriers. We
maintain insurance against product liability claims, but there can be no
assurance that such coverage will be adequate for liabilities ultimately
incurred or that it will continue to be available on terms acceptable to us. In
November 1996, one of our insurance carriers brought a declaratory judgment that
its policy did not provide coverage for an allegedly defective parking brake
manufactured prior to August 31, 1994.
In March 1999, we were notified by Ford of its decision to institute a
recall of certain of its vehicles, including Explorers, Mountaineers, Rangers,
Mustangs and F-Series pickups, relating to the speed control cable. Ford has
reported that certain of such vehicles could be equipped with a speed control
cable that could interfere with the speed control pulley and thus result in a
"stuck" throttle. In June 1999, Ford notified us that as many as 987,839
vehicles could be affected at an alleged cost of up to $60 per vehicle. Based
upon our tests and investigations to date, we do not believe that our product is
responsible for the problems associated with the speed control unit. To date, we
have not been provided with any documents from Ford that support its
allegations.
In October 1999, Ford announced that it was voluntarily recalling all
1998-1999 Ford Explorers and Mountaineers (approximately 932,000) vehicles) to
replace the auxiliary hood latches. Ford contends that we failed to provide
adequate corrosion protection, thereby allowing the secondary latch to remain
open, which may potentially lead to hoods flying open. Ford projects that the
recall will cost Ford approximately $23 million. We deny any liability for this
recall, in part, because the latch was manufactured to specifications
established by Ford. We are working to resolve the hood latch issue in
conjunction with the speed control cable issues noted above.
A successful claim brought against us in excess of available insurance
coverage or a requirement to participate in any product recall may have a
material adverse effect on our results of operations or financial condition. See
"Business -- Legal Proceedings."
WE OPERATE IN THE HIGHLY COMPETITIVE AUTOMOTIVE SUPPLY INDUSTRY
The automotive component supply industry is highly competitive. Some of our
competitors are companies, or divisions or subsidiaries of companies, that are
larger and have greater financial and other resources than we do. In addition,
with respect to certain of our products, some of our competitors are divisions
of our OEM customers. There can be no assurance that our products will be able
to compete successfully with the products of these other companies.
We principally compete for new business both at the beginning of the
development of new models and upon the redesign of existing models by our major
customers. New model development generally begins two to five years prior to the
marketing of such models to the public. The failure to obtain new business on
new models or to retain or increase business on redesigned existing models could
adversely affect our business.
In addition, there is substantial and continuing pressure from the major
OEMs to reduce costs, including the cost of products purchased from outside
suppliers such as Dura. If we are unable to generate sufficient production cost
savings in the future to offset price reductions, our gross margin could be
adversely affected.
TECHNOLOGICAL AND REGULATORY CHANGES MAY ADVERSELY AFFECT US
Changes in legislative, regulatory or industry requirements or competitive
technologies may render certain of our products obsolete. Our ability to
anticipate changes in technology and regulatory standards and to develop and
introduce new and enhanced products successfully on a timely basis will be a
11
<PAGE> 16
significant factor in our ability to grow and to remain competitive. There can
be no assurance that we will be able to achieve the technological advances that
may be necessary for us to remain competitive or that certain of our products
will not become obsolete. We are also subject to the risks generally associated
with new product introductions and applications, including lack of market
acceptance, delays in product development and failure of products to operate
properly.
SUBSTANTIAL SALES OF OUR CLASS A COMMON STOCK COULD ADVERSELY AFFECT ITS MARKET
PRICE
No prediction can be made as to the effect, if any, that future sales of
shares of our Class A common stock or the availability of such shares for future
sale will have on the market price of our Class A common stock prevailing from
time to time. Sales of substantial amounts of our Class A common stock, or the
perception that such sales could occur, could adversely affect prevailing market
prices for our Class A common stock. Currently, an aggregate of 3,320,303 shares
of Class B common stock convertible into shares of Class A common stock are
eligible for sale under Rule 144 under the Securities Act and are subject to
certain rights to register such shares under the Securities Act at Dura's
expense. In addition, an aggregate of 1,289,000 shares of Class A common stock
have been reserved for issuance upon conversion of the Trust Preferred
Securities.
DURA DOES NOT INTEND TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE
We currently intend to retain earnings to support our growth strategy and
do not anticipate paying dividends on our Class A common stock in the
foreseeable future. As a holding company, the ability of DASI to pay dividends
in the future is dependent upon the receipt of dividends or other payments from
its principal operating subsidiary, Dura Operating Corp. The payment of
dividends by such subsidiary to DASI for the purpose of paying dividends to
holders of Class A common stock is limited by the terms of Dura's new credit
facility and the indentures under which the 9 percent senior subordinated notes
were issued.
CERTAIN PROVISIONS OF OUR ORGANIZATIONAL DOCUMENTS COULD DELAY OR PREVENT A
CHANGE OF CONTROL
Certain provisions of our restated certificate of incorporation and by-laws
may inhibit changes in control of Dura that are not approved by Dura's board of
directors. These provisions include
- disparate voting rights per share between the Class A common stock and
the Class B common stock,
- a prohibition on stockholder action through written consents,
- a requirement that special meetings of stockholders be called only by
the board,
- advance notice requirements for stockholder proposals and nominations,
- limitations on the ability of stockholders to amend, alter or repeal our
by-laws and
- the authority of the board to issue without stockholder approval
preferred stock with such terms as the board may determine.
Dura is also subject to the protections of Section 203 of the Delaware
General Corporation Law, which could have similar effects. See "Description of
Capital Stock."
12
<PAGE> 17
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE
This prospectus contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Such forward-looking
statements are subject to risks and uncertainties. You should not place undue
reliance on those statements because they only speak as of the date of this
prospectus. Forward-looking statements include information concerning the
possible or assumed future results of operations of Dura, including forecasts,
projections and descriptions of expected cost savings or other anticipated
synergies related to the Acquisitions. These statements often include words such
as "believe," "expect," "anticipate," "intend," "plan," "estimate," or similar
expressions. These statements are based on certain assumptions that we have made
in light of our experience in the industry as well as our perceptions of
historical trends, current conditions, expected future developments and other
factors we believe are appropriate in these circumstances. As you read and
consider this prospectus, you should understand that these statements are not
guarantees of performance or results. They involve risks, uncertainties and
assumptions. Although we believe that these forward-looking statements are based
on reasonable assumptions, you should be aware that many factors could affect
our actual financial results or results of operations and could cause actual
results to differ materially from those in the forward-looking statements. These
factors include:
- general economic or business conditions affecting the automotive
industry (which is dependent on consumer spending), either nationally or
regionally, being less favorable than expected;
- expected synergies, economies of scale and cost savings from the
Acquisitions not being fully realized or realized within the expected
time frames;
- costs or operational difficulties related to integrating the operations
of Excel and Adwest with our operations being greater than expected;
- our failure to develop or successfully introduce new products;
- inherent business risk of exposure to product liability claims;
- increased competition in the automotive components supply market;
- unforseen problems associated with international sales, including gains
and losses from foreign currency exchange;
- implementation of or changes in the laws, regulations or policies
governing the automotive industry that could negatively affect the
automotive components supply industry;
- changes in general economic conditions in the United States and Europe;
and
- various other factors beyond our control.
All future written and oral forward-looking statements by us or persons
acting on our behalf are expressly qualified in their entirety by the cautionary
statements contained or referred to above. Except for our ongoing obligations to
disclose material information as required by the federal securities laws, we do
not have any obligation or intention to release publicly any revisions to any
forward-looking statements to reflect events or circumstances in the future or
to reflect the occurrence of unanticipated events. YOU SHOULD ALSO READ
CAREFULLY THE FACTORS DESCRIBED IN THE "RISK FACTORS" SECTION OF THIS
PROSPECTUS.
USE OF PROCEEDS
Dura is registering the shares on behalf of the Selling Stockholders
pursuant to its obligations under a registration rights agreement. Dura will not
receive any cash proceeds from the sale of the shares by the Selling
Stockholders. All of the shares of Class A common stock covered by this
prospectus may be acquired by the Selling Stockholder upon the exercise of
outstanding warrants. The exercise price per share for the warrants is $16.56.
Any proceeds received by Dura upon the exercise of the warrants will be used for
general corporate purposes. See "Selling Stockholders."
13
<PAGE> 18
MARKET PRICE OF CLASS A COMMON STOCK
Dura's Class A common stock is traded on Nasdaq under the symbol "DRRA."
The following table sets forth, for the periods indicated, the high and low
closing prices for the Class A common stock as regularly quoted on Nasdaq.
<TABLE>
<CAPTION>
HIGH LOW
---- ----------
<S> <C> <C>
FISCAL YEAR 1998:
First Quarter............................................. $32 1/2 $24 3/8
Second Quarter............................................ 40 1/4 30 3/8
Third Quarter............................................. 34 5/16 20
Fourth Quarter............................................ 34 1/8 20 5/8
FISCAL YEAR 1999:
First Quarter............................................. $33 9/16 $23 13/16
Second Quarter............................................ 33 1/4 23 1/2
Third Quarter............................................. 34 1/8 22 1/2
Fourth Quarter............................................ 24 15 7/8
FISCAL YEAR 2000:
First Quarter............................................. $19 1/8 $12 3/8
Second Quarter (through April 26, 2000)................... 16 13 15/16
</TABLE>
On April 26, 2000, the last reported sale price of the Class A common stock
on Nasdaq was $16.00. On April 26, 2000, there were approximately 707 holders of
record of the Class A common stock and twelve holders of record of the Class B
common stock. We believe that there are significantly more beneficial owners of
our Class A common stock.
DIVIDEND POLICY
Dura has not declared or paid any dividends on its Class A common stock in
the past and currently intends to retain its earnings to support its growth
strategy and does not anticipate paying dividends in the foreseeable future. As
a holding company, DASI's ability to pay dividends in the future is dependent
upon the receipt of dividends or other payments from its principal operating
subsidiary, Dura Operating Corp. Any future payment of dividends is within the
discretion of the board and will depend upon, among other factors, the capital
requirements, operating results and financial condition of Dura from time to
time. In addition, Dura's ability to pay cash dividends on its Class A common
stock is limited by the terms of its new credit facility and the indentures
under which the 9 percent senior subordinated notes were issued.
14
<PAGE> 19
CAPITALIZATION
The following table sets forth as of December 31, 1999 the actual
consolidated capitalization of Dura. This table should be read in conjunction
with the audited consolidated financial statements and related notes and the
unaudited pro forma financial statements and related notes appearing elsewhere
in this prospectus.
<TABLE>
<CAPTION>
AS OF
DECEMBER 31,
1999
------------
(DOLLARS IN
THOUSANDS)
<S> <C>
Cash and cash equivalents................................... $ 23,697
==========
Long-term debt, including current maturities:
New credit facility:
Revolving credit facility.............................. $ 208,751
Tranche A term loan.................................... 275,521
Tranche B term loan.................................... 275,000
Other senior indebtedness................................. 70,190
----------
Total senior debt...................................... 829,462
9 percent senior subordinated notes....................... 401,560
----------
Total debt............................................. 1,231,022
----------
Trust Preferred Securities(1)............................... 55,250
Stockholders' investment:
Preferred Stock, $1.00 par value per share; 5,000,000
shares authorized; none issued or outstanding.......... --
Class A Common Stock, $0.01 par value per share;
60,000,000 shares authorized; 14,101,511 shares issued
and outstanding on an actual basis..................... 141
Class B Common Stock, $0.01 par value per share;
10,000,000 shares authorized; 3,320,303 shares issued
and outstanding on an actual basis..................... 33
Additional paid-in capital................................ 339,041
Retained earnings......................................... 108,272
Accumulated other comprehensive loss...................... (16,491)
----------
Total stockholders' investment......................... 430,996
----------
Total capitalization................................. $1,717,268
==========
</TABLE>
- ---------------
(1) Represents the Trust Preferred Securities issued by the Dura Trust in March
1998. The sole assets of the Dura Trust are approximately $57.0 million
principal amount of DASI's 7 1/2 percent convertible subordinated debentures
due March 31, 2028, such amount being the sum of the stated liquidation
preference of the Trust Preferred Securities and the capital contributed by
DASI in exchange for the common securities of the Dura Trust. DASI has
guaranteed, on a subordinated basis, certain obligations of the Dura Trust
under the Trust Preferred Securities.
15
<PAGE> 20
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The Unaudited Pro Forma Statement of Operations for the year ended December
31, 1999 gives effect to: (1) the acquisitions of Excel and Adwest by Dura, (2)
the sale of the 9 percent senior subordinated notes and the application of the
net proceeds therefrom and (3) the retirement of the Trident notes, as if such
transactions had occurred on January 1, 1999. The inclusion of Metallifacture
and Meritor for the periods prior to acquisition would not have materially
affected Dura's pro forma results of operations.
The unaudited pro forma financial data presented in this prospectus are
based on the assumptions and adjustments described in the accompanying notes.
The Unaudited Pro Forma Statements of Operations do not purport to represent
what our results of operations actually would have been if the events described
above had occurred as of the dates indicated or what our results will be for any
future periods. The Unaudited Pro Forma Financial Statements are based upon
assumptions and adjustments that we believe are reasonable. You should read the
Unaudited Pro Forma Financial Statements and the accompanying notes in
conjunction with the historical financial statements, including the related
notes, included elsewhere in this prospectus.
The acquisitions of Excel and Adwest have been accounted for using the
purchase method of accounting and, accordingly, the assets acquired and
liabilities assumed have been recorded at their fair values as of the dates of
their respective acquisitions. These amounts have been recorded based upon
preliminary estimates as of such dates. Dura does not believe the final
allocation of purchase price will be materially different from preliminary
allocations. Further adjustments to the acquired assets and assumed liabilities
will be reflected as a change in goodwill.
16
<PAGE> 21
DURA AUTOMOTIVE SYSTEMS, INC.
UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
PRO FORMA
DURA(1) EXCEL(2) ADWEST(3) ADJUSTMENTS PRO FORMA
---------- -------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Revenues..................................... $2,200,385 $308,705 $80,346 $ -- $2,589,436
Cost of sales................................ 1,854,705 272,716 69,840 22,075(4) 2,219,336
---------- -------- ------- ----------- ---------
Gross profit................................. 345,680 35,989 10,506 (22,075) 370,100
Selling, general & administrative expenses... 130,079 17,991 7,027 -- 155,097
Facility consolidation charge................ 16,246 -- -- -- 16,246
Amortization expense......................... 28,476 358 655 1,387(5) 30,876
---------- -------- ------- ----------- ---------
Operating income............................. 170,879 17,640 2,824 (23,462) 167,881
Interest expense, net........................ 76,703 2,704 2,035 12,262(6) 93,704
Other income................................. -- (582) -- -- (582)
---------- -------- ------- ----------- ---------
Income before provision for income taxes,
equity in losses of affiliates and minority
interests.................................. 94,176 15,518 789 (35,724) 74,759
Provision for income taxes................... 37,984 7,991 433 (16,028)(7) 30,380
Minority interest-trust preferred securities,
net........................................ 2,445 -- -- -- 2,445
Minority interest and equity in losses of
affiliates, net............................ 3,978 (177) (15) -- 3,786
---------- -------- ------- ----------- ---------
Income before extraordinary item and
accounting change.......................... 49,769 7,704 371 (19,696) 38,148
Extraordinary item -- loss on early
extinguishment of debt, net................ (5,402) -- -- -- (5,402)
Cumulative effect of change in accounting,
net........................................ (3,147) -- -- -- (3,147)
---------- -------- ------- ----------- ---------
Net income (loss)........................ $ 41,220 $ 7,704 $ 371 $ (19,696) $ 29,599
========== ======== ======= =========== =========
Diluted shares outstanding(8)................ 17,767 1,166 18,933
========== =========== =========
Diluted earnings per share(8)................ $ 2.46 $ 1.69
========== =========
Basic shares outstanding(8).................. 16,263 1,173 17,436
========== =========== =========
Basic earnings per share..................... $ 2.53 $ 1.70
========== =========
</TABLE>
17
<PAGE> 22
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
(1) Represents the results of operations of Dura for the year ended December 31,
1999, including the results of operations of Excel, Adwest, Metallifacture
and Meritor from their respective dates of acquisition.
(2) Represents the results of operations for Excel from January 1, 1999 through
the date of acquisition, March 23, 1999.
(3) Represents the results of operations for Adwest from January 1, 1999 through
the date of acquisition, March 15, 1999.
(4) Reflects the change in depreciation expense resulting from adjustments to
the depreciable lives of property, plant and equipment of Excel and Adwest
to their estimated useful lives at the time of their acquisition and from
adjustments to value such property, plant and equipment at fair value as of
the date of acquisition as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1999
------------
<S> <C>
Excel....................................................... $(22,637)
Adwest...................................................... 562
--------
Total.................................................. $(22,075)
========
</TABLE>
(5) Reflects the additional amortization of goodwill and other intangible assets
arising from the acquisitions of Excel and Adwest, net of amortization of
goodwill and other intangible assets previously recorded by Excel and
Adwest:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1999
------------
<S> <C>
Amortization of goodwill and other intangible assets:
Excel..................................................... $1,159
Adwest.................................................... 1,241
------
2,400
Amortization previously recorded by:
Excel..................................................... (358)
Adwest.................................................... (655)
------
(1,013)
------
Net increase........................................... $1,387
======
</TABLE>
Goodwill is amortized on a straight-line basis over a forty-year period.
Other intangible assets are amortized over the useful life of the related
asset.
18
<PAGE> 23
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS -- (CONTINUED)
(6) Represents the change in interest expense arising from:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1999
------------
<S> <C>
Interest expense on Term Loan A............................. $ 5,328
Interest expense on Term Loan B............................. 5,500
Interest expense on senior subordinated notes............... 9,180
Interest expense on other senior indebtedness............... 2,888
Amortization of capitalized financing fees.................. 1,000
--------
Total adjustments...................................... 23,896
--------
Interest expense, net previously recorded by:
Dura........................................................ (6,895)
Excel....................................................... (2,704)
Adwest...................................................... (2,035)
--------
(11,634)
--------
Net increase........................................... $ 12,262
========
</TABLE>
(7) Adjusts the provision for income taxes on a pro forma basis to reflect
Dura's incremental tax rate of 40.5 percent.
(8) Basic earnings per share were computed by dividing net income by the
weighted average number of shares of Class A common stock and Class B
common stock outstanding during the year. Diluted earnings per share for
the year ended December 31, 1999 include the dilutive effects of
outstanding stock options using the treasury stock method and assumes the
conversion of the Trust Preferred Securities into shares of Class A common
stock. Pro forma weighted average shares outstanding include the effects of
the shares that were issued in connection with the acquisition of Excel.
19
<PAGE> 24
SELECTED CONSOLIDATED FINANCIAL DATA
DURA
The following table sets forth selected consolidated financial data with
respect to Dura for each of the periods indicated. The selected historical
financial data for Dura for the years ended December 31, 1995 through 1999 have
been derived from Dura's consolidated financial statements which have been
audited by Arthur Andersen LLP, independent public accountants. The selected
historical consolidated financial data should be read in conjunction with
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" and the consolidated financial statements and notes thereto all
included elsewhere herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1995(1) 1996(2) 1997(3) 1998(4) 1999(5)
-------- -------- -------- -------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.................................................... $253,726 $245,329 $449,111 $739,467 $2,200,385
Cost of sales............................................... 219,559 207,810 375,086 608,518 1,854,705
-------- -------- -------- -------- ----------
Gross profit................................................ 34,167 37,519 74,025 130,949 345,680
Selling, general and administrative expenses................ 15,513 17,157 32,815 49,825 130,079
Facility consolidation charge............................... -- -- -- -- 16,246
Amortization expense........................................ 1,094 1,036 3,600 9,868 28,476
-------- -------- -------- -------- ----------
Operating income............................................ 17,560 19,326 37,610 71,256 170,879
Interest expense, net....................................... 4,822 2,589 9,298 20,267 76,703
Other income(1)............................................. (4,240) -- -- -- --
-------- -------- -------- -------- ----------
Income before income taxes.................................. 16,978 16,737 28,312 50,989 94,176
Provision for income taxes.................................. 6,852 6,609 11,670 20,933 37,984
Minority interest and equity in losses of affiliate, net.... -- -- -- 1,481 3,978
Minority interest(6)........................................ -- -- -- 1,908 2,445
-------- -------- -------- -------- ----------
Income before extraordinary item and accounting change...... 10,126 10,128 16,642 26,667 49,769
Extraordinary item, net..................................... -- -- -- 643 (5,402)
Cumulative effect of change in accounting, net.............. -- -- -- -- (3,147)
-------- -------- -------- -------- ----------
Net income.............................................. $ 10,126 $ 10,128 $ 16,642 $ 26,024 $ 41,220
======== ======== ======== ======== ==========
Basic earnings per share(7)................................. $ 2.04 $ 1.57 $ 1.89 $ 2.43 $ 2.53
======== ======== ======== ======== ==========
Diluted earnings per share(7)............................... $ 2.03 $ 1.57 $ 1.88 $ 2.37 $ 2.46
======== ======== ======== ======== ==========
OTHER FINANCIAL DATA:
Depreciation and amortization............................... $ 5,578 $ 6,079 $ 12,303 $ 27,571 $ 76,654
Capital expenditures, net................................... 6,116 6,260 16,242 31,822 80,469
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and cash equivalents................................... $ 1,732 $ 1,667 $ 4,148 $ 20,544 $ 23,697
Working capital............................................. 13,701 27,528 50,304 63,766 162,949
Total assets................................................ 140,531 246,129 419,264 929,383 2,444,867
Total debt.................................................. 51,776 77,456 180,322 331,906 1,231,022
Total stockholders' investment.............................. 27,683 87,367 101,708 238,037 430,996
</TABLE>
- ---------------
(1) In April 1995, Dura sold the net assets of its window regulator business to
Rockwell, realizing a pretax gain of approximately $4.2 million. The results
of operations of the window regulator business have been included in the
consolidated financial statements of Dura through April 2, 1995, the date of
divestiture.
(2) Includes the results of operations of (i) the parking brake business from
Rockwell from October 1, 1996 and (ii) KPI from December 5, 1996, their
respective dates of acquisition. Dura issued an aggregate of 3,795,000
shares of its Class A common stock in August 1996 in connection with its
initial public offering.
(3) Includes the results of operations of (i) VOFA from January 1, 1997, (ii)
the parking brake business of Excel from May 5, 1997, (iii) GT Automotive
from August 29, 1997 and (iv) REOM Industries from December 12, 1997, which
represent their respective dates of acquisition.
20
<PAGE> 25
(4) Includes the results of operations of (i) Universal from March 8, 1998, (ii)
Trident from April 30, 1998, and (iii) the Hinge Business from September 8,
1998, which represent their respective dates of acquisition. In March 1998,
the Dura Trust issued the Trust Preferred Securities. In June 1998, DASI
issued 3,500,000 shares of its Class A common stock, giving effect to the
exercise of the underwriters' over-allotment option.
(5) Includes the results of operations of (i) Excel from March 23, 1999, (ii)
Adwest from March 15, 1999, and (iii) Meritor from November 30, 1999. In
April 1999, Dura completed the offering of the senior subordinated notes and
in June 1999, Dura retired the Trident notes.
(6) Represents dividends, net of income taxes, on the Trust Preferred
Securities.
(7) Basic earnings per share were computed by dividing net income by the
weighted average number of shares of Class A common stock and Class B common
stock outstanding during the year. Diluted earnings per share include the
dilutive effects of outstanding stock options using the treasury stock
method and the Trust Preferred Securities.
21
<PAGE> 26
EXCEL
The following table sets forth selected consolidated financial data with
respect to Excel for each of the periods indicated. The selected historical
financial data for Excel for the fiscal years ended December 28, 1996, December
27, 1997 and January 2, 1999 have been derived from Excel's consolidated
financial statements, which have been audited by Arthur Andersen LLP,
independent accountants. The selected historical consolidated financial data
should be read in conjunction with "Management's Discussion and Analysis of
Results of Operations and Financial Condition" and the consolidated financial
statements and notes thereto all included elsewhere herein.
EXCEL INDUSTRIES, INC.
<TABLE>
<CAPTION>
YEAR ENDED,
----------------------------------
DEC. 28, DEC. 27, JAN. 2,
1996(1) 1997 1999(2)
-------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................................... $887,741 $962,333 $1,106,103
Cost of goods sold...................................... 783,375 846,990 995,982
-------- -------- ----------
Gross profit.......................................... 104,366 115,343 110,121
Selling, administrative and engineering expenses........ 65,652 79,267 78,615
-------- -------- ----------
Operating income...................................... 38,714 36,076 31,506
Interest expense........................................ 9,784 10,984 11,628
Other income, net....................................... (1,736) (1,930) (2,074)
-------- -------- ----------
Income before income taxes and minority interest...... 30,666 27,022 21,952
Provision for income taxes.............................. 11,550 9,458 3,632
Minority interest....................................... -- -- 1,367
-------- -------- ----------
Net income......................................... $ 19,116 $ 17,564 $ 16,953
======== ======== ==========
OTHER FINANCIAL DATA:
Depreciation and amortization........................... $ 26,246 $ 33,382 $ 39,679
Capital expenditures, net............................... 29,209 39,287 45,958
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and short-term investments......................... $ 6,580 $ 2,317 $ 16,290
Working capital......................................... 114,140 116,550 118,796
Total assets............................................ 443,234 457,797 594,384
Total debt.............................................. 133,006 108,615 167,035
Shareholders' equity.................................... 150,725 185,315 194,258
</TABLE>
- ---------------
(1) On April 3, 1996, Excel acquired Anderson Industries, Inc. ("Anderson"),
whose primary asset was Atwood Industries, Inc. ("Atwood"). The results of
operations of Atwood have been included in the consolidated financial
statements of Excel from April 3, 1996.
(2) The results of operations of Schade have been included in the consolidated
financial statements of Excel since July 1, 1998.
22
<PAGE> 27
ADWEST
The following table sets forth selected consolidated financial data with
respect to Adwest for each of the periods indicated. The selected historical
financial data for Adwest for the fiscal years ended June 30, 1997 and 1998, set
forth in U.K. GAAP in Pounds, have been derived from Adwest's consolidated
financial statements, which have been audited by KPMG Audit Plc, independent
public accountants. The data as of and for the six months ended December 31,
1997 and 1998, set forth in U.K. GAAP in Pounds, have been derived from Adwest's
unaudited consolidated financial statements which, in the opinion of Adwest's
management, contain all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of the financial condition and results of
operations for these periods. The results of operations for the six months ended
December 31, 1998 are not necessarily indicative of the results that may be
expected for the entire fiscal year. The consolidated financial statements of
Adwest for the periods presented have been prepared in accordance with U.K.
GAAP, which differs in certain significant respects from U.S. GAAP. See Note 31
to the Consolidated Financial Statements of Adwest and Note 5 to the Unaudited
Interim Consolidated Financial Statements of Adwest included elsewhere herein.
The selected financial data for the fiscal years ended June 30, 1997 and 1998,
and the six months ended December 31, 1998, set forth in U.S. GAAP in Dollars,
has been derived from the audited and unaudited consolidated financial
statements of Adwest and adjusted for differences between U.K. GAAP and U.S.
GAAP. The selected historical consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Results of Operations
and Financial Condition" and the consolidated financial statements and notes
thereto all included elsewhere herein.
ADWEST AUTOMOTIVE PLC
<TABLE>
<CAPTION>
U.K. GAAP IN POUNDS
----------------------------------------------------
FISCAL YEAR ENDED SIX MONTHS ENDED
JUNE 30, DECEMBER 31,
---------------------- --------------------------
1997(1) 1998(1)(2) 1997(1)(2) 1998(2)
-------- ---------- ----------- -----------
(UNAUDITED) (UNAUDITED)
(POUNDS IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT IN PROFIT AND LOSS DATA:
TURNOVER.................................... L191,412 L249,853 L112,190 L118,155
Net operating costs......................... 173,399 228,495 102,736 109,829
-------- -------- -------- --------
OPERATING PROFIT............................ 18,013 21,358 9,454 8,326
Associated undertakings..................... 21 21 -- --
Net interest................................ (2,892) (5,199) (2,196) (2,924)
Loss on disposal of businesses.............. (791) (13,501) -- --
-------- -------- -------- --------
PROFIT ON ORDINARY ACTIVITIES BEFORE TAX.... 14,351 2,679 7,258 5,402
Taxation on ordinary activities............. 4,527 4,529 2,249 1,536
-------- -------- -------- --------
(LOSS)/PROFIT FOR THE FINANCIAL YEAR AFTER
TAX....................................... 9,824 (1,850) 5,009 3,866
Minority interests.......................... 400 505 246 133
-------- -------- -------- --------
(LOSS)/PROFIT FOR THE FINANCIAL YEAR........ 9,424 (2,355) 4,763 3,733
Dividends................................... 6,428 6,442 1,897 --
-------- -------- -------- --------
RETAINED (LOSS)/PROFIT FOR THE FINANCIAL
YEAR...................................... L2,996 L(8,797) L2,866 L3,733
======== ======== ======== ========
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital............................. L34,876 L11,758 L13,482 L(2,289)
Total assets................................ 121,640 160,647 157,041 158,110
Borrowings due after more than one year..... 38,767 61,093 66,680 53,724
Shareholders' funds-equity.................. 29,451 8,246 4,371 11,577
</TABLE>
23
<PAGE> 28
<TABLE>
<CAPTION>
U.K. GAAP IN DOLLARS(3)(4)
-----------------------------------------------------
FISCAL YEAR ENDED SIX MONTHS ENDED
JUNE 30, DECEMBER 31,
------------------------- -------------------------
1997(1) 1998(1)(2) 1997(1)(2) 1998
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues...................................... $242,765 $365,814 $163,020 $196,456
Cost of sales................................. 202,876 313,450 137,681 170,792
-------- -------- -------- --------
Gross profit.................................. 39,889 52,364 25,339 25,664
Selling, general and administrative
expenses.................................... 14,543 23,084 13,168 14,058
Amortization expense.......................... 1,704 2,267 853 1,510
-------- -------- -------- --------
Operating income.............................. 23,642 27,013 11,318 10,096
Interest expense.............................. 4,654 8,560 3,609 4,860
-------- -------- -------- --------
Income from continuing operations before
provisions for income taxes and minority
interest.................................... 18,988 18,453 7,709 5,236
Provision for income taxes.................... 6,370 6,182 2,829 2,779
Minority interest............................. 651 831 408 208
-------- -------- -------- --------
Net income from continuing operations.... $ 11,967 $ 11,440 $ 4,472 $ 2,249
======== ======== ======== ========
OTHER FINANCIAL DATA:
Depreciation and amortization................. $ 13,939 $ 16,515 $ 7,671 $ 9,625
Capital expenditures, net..................... 9,521 27,556 12,479 13,263
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital............................... $ 47,079 $ 11,976 $ 12,545 $(22,446)
Total assets.................................. 291,014 374,066 398,869 376,476
Long-term debt (less current portion)......... 63,764 100,858 110,735 89,773
Shareholders' equity.......................... 137,288 122,316 139,192 121,721
</TABLE>
- ---------------
(1) In May 1998 Adwest disposed of its U.S. electronics division for $38.0
million. Adwest realized a pre-tax loss of approximately $9.7 million
related to the sale. The results of operations of the electronics division
have been included in the consolidated financial statements of Adwest
through the date of divestiture.
During the year ended June 30, 1997, Adwest finalized the disposal of the
U.K. power systems division and property portfolio. The loss from the
disposal of these entities was $1.3 million for the year ended June 30,
1997. The results of operations of these entities have been included in the
consolidated financial statements of Adwest through the dates of
divestiture.
(2) On September 11, 1997, Adwest acquired Heidemann Verwaltungs GmbH
("Heidemann") and its subsidiary undertakings for DM132.0 million. The
results of operations of Heidemann have been included in the consolidated
financial statements of Adwest from September 11, 1997.
24
<PAGE> 29
(3) The Adwest historical financial statements were prepared in accordance with
U.K. GAAP, which differs in certain significant respects from U.S. GAAP. The
following table reconciles the Adwest profit/loss as reported under U.K.
GAAP to net income as stated under U.S. GAAP:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTH ENDED
JUNE 30, DECEMBER 31,
----------------- ---------------
1997 1998 1997 1998
------- ------- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
(Loss)/profit attributable to shareholders as
reported under U.K. GAAP.......................... L9,424 L(2,355) L4,763 L3,733
Converted to U.S. Dollars........................... $15,167 $(3,877) $7,827 $6,207
U.S. GAAP adjustments (in U.S. Dollars):
Goodwill amortization............................. (2,361) (2,267) (853) (1,510)
Impact of goodwill previously amortized on sale of
subsidiary..................................... -- 4,783 -- --
Cumulative exchange loss on sale of foreign
subsidiaries................................... -- (1,946) -- --
Pension costs..................................... 533 26 15 (414)
Deferred taxation -- full provision............... (270) (235) (150) (219)
Tax effect of U.S. GAAP reconciling items......... (428) (49) (10) 90
Fixed asset reevaluations......................... 818 165 82 83
Deferred profit on sale of property............... 488 499 250 253
Pre-production costs.............................. -- (1,976) (629) (2,097)
Other............................................. (26) 34 (13) (60)
Minority interests................................ (8) -- (3) 12
Reverse prior year adjustment..................... -- -- -- (978)
------- ------- ------ ------
Net (loss)/income under U.S. GAAP................... $13,913 $(4,843) $6,516 $1,367
======= ======= ====== ======
</TABLE>
(4) Operating results and balance sheet data of Adwest have been translated from
Pounds to Dollars using the following ratios:
<TABLE>
<CAPTION>
FISCAL YEAR SIX MONTHS
ENDED JUNE 30, ENDED DECEMBER 31,
---------------- ------------------
1997 1998 1997 1998
------ ------ ------- -------
<S> <C> <C> <C> <C>
Operating results................................. 1.6094 1.6464 1.6433 1.6627
Balance sheet..................................... 1.6448 1.6509 1.6607 1.6710
</TABLE>
25
<PAGE> 30
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
GENERAL
We ordinarily begin working on products awarded for new or redesigned
models two to five years prior to the marketing of such models to the public.
During such period, we incur (1) costs related to the design and engineering of
such products, (2) costs related to the production of the tools and dies used to
manufacture the new product and (3) start-up costs associated with the initial
production of such product. In general, design and engineering costs are
expensed in the period incurred unless they are reimbursed by the customer, in
which case they are capitalized and amortized over the life of such product as
they are recovered from the customer. Costs incurred in the production of the
tools and dies are generally capitalized and reimbursed by the customer prior to
production. Start-up costs, which are generally incurred 30 to 60 days
immediately prior to and immediately after initial production, are expensed as
incurred.
RESULTS OF OPERATIONS
DURA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1998 1999
----- ----- -----
<S> <C> <C> <C>
Revenues.................................................... 100.0% 100.0% 100.0%
Cost of sales............................................... 83.5 82.3 84.3
----- ----- -----
Gross profit................................................ 16.5 17.7 15.7
Selling, general and administrative expenses................ 7.3 6.7 5.9
Facility consolidation charge............................... -- -- 0.7
Amortization expense........................................ 0.8 1.3 1.3
----- ----- -----
Operating income............................................ 8.4 9.7 7.8
Interest expense, net....................................... 2.1 2.7 3.5
----- ----- -----
Income before provision for income taxes, equity in losses
of affiliates and minority interest....................... 6.3 7.0 4.3
Provision for income taxes.................................. 2.6 2.9 1.7
Equity in losses of affiliates and minority interest........ -- 0.2 0.2
Minority interest-dividends on Trust Preferred Securities,
net....................................................... -- 0.3 0.1
----- ----- -----
Income before extraordinary item and accounting
change................................................ 3.7% 3.6% 2.3%
===== ===== =====
</TABLE>
COMPARISON OF YEAR ENDED DECEMBER 31, 1999 TO YEAR ENDED DECEMBER 31, 1998
Revenues. Revenues for the year ended December 31, 1999 increased by
$1,460.9 million, or 197.6 percent, to $2,200.4 million from $739.5 million for
1998. The increase in revenues relates primarily to the acquisitions of Excel
and Adwest in March 1999, Metallifacture in June 1999 and the seat track
business of Meritor in December 1999. Revenues also benefited from strong North
American vehicle production in 1999.
Cost of Sales. Cost of sales for the year ended December 31, 1999
increased by $1,246.2 million, or 204.8 percent, to $1,854.7 million from $608.5
million for 1998. Cost of sales as a percentage of revenues for the year ended
December 31, 1999 was 84.3 percent compared to 82.3 percent for 1998. The
decrease in gross margin is primarily the result of historically lower margins
being achieved at certain of the acquired operations offset by efficiency
improvements at certain Dura operations.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $80.3 million, or 161.2 percent, to $130.1
million for the year ended December 31, 1999 from $49.8 million for 1998. The
increase is due primarily to incremental costs from the acquisitions discussed
above. As a percentage of revenues, selling, general and administrative expenses
decreased to 5.9 percent
26
<PAGE> 31
for 1999 compared to 6.7 percent for 1998. This decrease is primarily the result
of cost savings and synergies realized by Dura as part of the integration of its
recent acquisitions.
Facility Consolidation Charge. Dura finalized plans for integrating its
acquisitions, which results in the consolidation of certain operating
facilities. Since some of the facilities were original Dura facilities, a $16.2
million charge was recorded during the fourth quarter of 1999. The charge
included $1.4 million associated with eliminating certain facilities and
associated lease obligations, $13.2 million of severance related to employee
terminations, and $1.6 million of asset impairments. Costs incurred and charged
in 1999 related to these reserves amounted to $2.1 million related to severance
and $1.6 million related to asset impairment. Dura anticipates incurring the
majority of the remaining costs in 2000. Dura expects to fund these expenditures
through cash flow from operations. Management expects the benefits of these
actions will significantly exceed the charge and will begin to be realized in
2000.
Amortization Expense. Amortization expense increased from $9.9 million for
the year ended December 31, 1998 to $28.5 million for 1999. The increase is the
result of goodwill amortization arising from the acquisitions discussed above.
Interest Expense. Interest expense for the year ended December 31, 1999
was $76.7 million compared to $20.3 million for 1998. The increase was due
principally to borrowings incurred related to the acquisitions discussed above.
Income Taxes. The effective income tax rate was 40.3 percent for 1999
compared to 41.1 percent for 1998. The effective rates differed from the
statutory rates primarily as a result of higher foreign tax rates, state taxes
and non-deductible goodwill amortization. The 1999 rate benefited from research
and development credits not available in prior years.
Minority Interest and Equity in Losses of Affiliates. Equity in losses of
affiliate for the year ended December 31, 1998 represents Dura's share of the
loss of its Brazilian joint venture's operations in 1998. In connection with the
Excel acquisition in March 1999, Dura began fully consolidating the results of
its Brazilian joint venture and recording the related minority interest in its
operating results. 1999 also includes the minority interests in two other
subsidiaries related to the acquisitions discussed above.
Minority Interest. Minority interest for the years ended December 31, 1999
and 1998 represents dividends, net of income tax benefits, on the Trust
Preferred Securities which were issued on March 20, 1998. The increase between
periods is a result of the Trust Preferred Securities being outstanding for the
full year in 1999.
Extraordinary Item. The extraordinary loss for the years ended December
31, 1999 and 1998 represents the write-off, net of income taxes, of deferred
financing costs related to Dura's former credit facilities.
Cumulative Effect of Change in Accounting. The cumulative effect of change
in accounting for the year ended December 31, 1999 represents the write-off, net
of income taxes, of the unamortized balance of capitalized start-up costs
pursuant to the provisions of SOP 98-5.
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 percent, 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.
Cost of Sales. Cost of sales for the year ended December 31, 1998
increased by $233.4 million, or 62.2 percent, 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 percent compared to 83.5 percent for 1997. The
improvement
27
<PAGE> 32
in gross margin is primarily the result of lower costs of purchased materials
and higher margins from efficiency improvements and plant rationalizations in
certain acquired operations.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $17 million, or 51.8 percent, 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 percent for 1998 compared to 7.3 percent 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 percent for 1998
compared to 41.2 percent 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 percent, 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 Trust Preferred
Securities.
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.
EXCEL
Excel was founded in 1928 and became a public company in April 1984.
Effective July 1, 1998, Excel acquired 70 percent of Schade. Schade has sales
and manufacturing operations in the Czech Republic, Germany, Portugal, Spain and
the U.K. Schade and its affiliated companies are engaged in the manufacture and
distribution of modular windows, decorative trims, body components and injection
molded plastic components for the automotive industry. In April 1996, Excel
acquired all of the outstanding common shares of Anderson, located in Rockford,
Illinois. Anderson is a holding company whose main asset is Atwood. Atwood
manufactures seating systems, including seat and height adjusters, recliner
mechanisms, transmission selectors and hood and deck hinges, all for the
automotive industry. In addition, Atwood produces appliances such as water
heaters, furnaces, stoves and ranges, hardware, such as jacks, couplers and
surge brake actuators, seating frames, seat adjusters and recliner mechanisms
for the recreational vehicle industry, and window systems and door systems for
the mass transit and heavy truck industries. The comparability of Excel's
results on a period-to-period basis is significantly affected by these
acquisitions.
Historically, Excel's operating units were aggregated into two segments for
financial reporting purposes: (1) light vehicle products, which included plastic
and metal framed window and door assemblies, manual and power window regulator
systems, manual seating systems, decorative trims and injection molded plastic
parts and (2) mobile products, which included appliances (water heaters,
furnaces, stoves and ranges), jacks, couplers, seating frames and seat
adjusters, preassembled doors and windows for motor homes and window assemblies
for mass transit systems and heavy trucks.
28
<PAGE> 33
The following table sets forth the percentage relationship of certain items
to revenues for Excel for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------
DEC. 28, DEC. 27, JAN. 2,
1996 1997 1999
-------- -------- --------
<S> <C> <C> <C>
Net sales................................................... 100.0% 100.0% 100.0%
Cost of good sold........................................... 88.2 88.0 90.0
----- ----- -----
Gross profit................................................ 11.8 12.0 10.0
Selling, administrative and engineering expenses............ 7.4 8.2 7.1
----- ----- -----
Operating income............................................ 4.4 3.8 2.9
Interest expense............................................ 1.1 1.1 1.1
Other income, net........................................... (0.2) (0.2) (0.2)
----- ----- -----
Income before income taxes and minority interest............ 3.5 2.8 2.0
Provision for income taxes.................................. 1.3 1.0 0.3
Minority interest........................................... -- -- 0.1
----- ----- -----
Net income............................................. 2.2% 1.8% 1.5%
===== ===== =====
</TABLE>
COMPARISON OF YEAR ENDED JANUARY 2, 1999 TO YEAR ENDED DECEMBER 27, 1997
Sales for the year ended January 2, 1999 totaled $1,106 million, an
increase of $144.0 million or 15 percent from 1997. The light vehicle products
segment accounted for $126.0 million of the increase, with mobile products
making up the difference. Sales in the light vehicle products segment totaled
$885.0 million as compared to $759.6 million in 1997. The acquisition of Schade
added $165.0 million in sales in the second half of 1998, while sales in North
America declined $39.0 million. The decline in North America light vehicle
product sales results from programs that were discontinued or canceled amounting
to approximately $76.6 million offset by sales of new programs of $59.2 million,
with the remainder of the sales decline due to a decline in passenger car
production.
Sales of the Mobile Products segment increased $18.0 million, as the
recreational vehicle industry production volumes were up approximately 15
percent and mass transit production was also strong.
Gross profit totaled $110.1 million or 10 percent of sales, which compares
with $115.3 million or 12 percent of sales in 1997. This decrease in gross
profit of $5 million and in profit percentage results from losses incurred in
the seating systems area amounting to approximately $18.0 million arising from
excessive launch costs, tooling costs, pricing and other issues. In addition, a
reserve to cover estimated losses on long-term production contracts was
established in the fourth quarter in the amount of $4.5 million. Gross profit of
19 percent in 1998 in the mobile products segment was identical with that in
1997.
Selling, administrative and engineering expenses totaled $78.6 million or
7.1 percent of sales for 1998, down from $79.3 million or 8.2 percent of sales
in 1997. Excluding Schade's expenses of approximately $8.8 million in 1998,
total expenses would have been lower by $9.5 million. Approximately $5.5 million
of the decrease was due to a reduction in product development expenses, $2.3
million was due to the administrative costs of the North American facilities
closed in late 1997, $1.2 million was due to costs associated with the closure
of the Italian operation recorded in 1997, and $500,000 results from a reduction
in compensation.
Other income, net, consists primarily of interest income of $2.0 million
and royalty income of $0.7 million, less losses on a Brazilian joint venture of
$1.5 million in 1998, which compares to interest income of $2.0 million in 1997.
Interest costs of $11.6 million for 1998 increased slightly from $11.0
million in 1997, as the interest on Schade's bank loans were partially offset by
the elimination of interest on convertible subordinated notes that were
converted into common shares of Excel in 1997.
29
<PAGE> 34
Provision for taxes on income in 1998 includes the benefit of tax credits
related to prior years. In 1998, Excel completed a review of qualified research
and development expenditures for the years 1994 to 1997 and recorded tax credits
totaling $4.0 million. The effective rate for U.S. taxes was lowered to 16.5
percent for 1998, down from 35.0 percent in 1997 due to the current year's
effect of these credits.
COMPARISON OF YEAR ENDED DECEMBER 27, 1997 TO YEAR ENDED DECEMBER 28, 1996
Sales for the year ended December 27, 1997 totaled $962.3 million, up $74.6
million or 8 percent from the preceding year. The Anderson acquisition added
$98.2 million in sales in the first quarter of 1997. This increase was offset by
reductions in parts shipped for passenger cars and selling price reductions on
products under long-term pricing agreements. Specifically, passenger car
production in 1997 for Excel's largest customer, Ford, was 10 percent lower than
the previous year. Also, discontinued programs such as Aerostar, Thunderbird and
Cougar adversely affected sales by $10.7 million. These items, including the
Anderson acquisition, accounted for the change in sales for 1997 to $759.6
million for the light vehicle segment from $730.3 million in 1996. Sales for
1997 for the mobile products segment were $202.8 million, up from $157.5 million
in 1996, due primarily to the Anderson acquisition.
Gross profit totaled $115.3 million, or 12.0 percent of sales, as compared
with $104.4 million, or 11.8 percent of sales for the prior year. The increase
was due to the addition of the Anderson locations offsetting approximately $4.1
million in start-up costs on new programs and approximately $4.7 million in
costs associated with the closure of two domestic plants. Gross profit for 1997
was $76.8 million or 10.1 percent of sales for the light vehicle segment
compared to $73.8 million or 10.1 percent of sales in 1996. Gross profit for the
mobile products segment was $38.5 million or 19.0 percent of sales in 1997
compared to $30.5 million or 19.4 percent of sales in 1996.
Selling, administrative and engineering expenses totaled $79.3 million or
8.2 percent of sales for 1997, up from $65.7 million or 7.4 percent of sales in
1996. The increase was due to the addition of Anderson locations, increases in
product development expenses and $1.2 million in costs associated with the
closure of the Italian operation.
Interest costs of $11.0 million for 1997 increased from $9.8 million in
1996 due to the senior notes issued in connection with the Anderson acquisition
in 1996. Interest income of $2.0 million in 1997, recorded in other income, was
up slightly from $1.8 million in 1996.
The income tax provision was 35 percent of pre-tax income in 1997, down
from 37.7 percent in the preceding year. The decrease was due to lower estimated
state income taxes and favorable benefits of Excel's foreign sales corporation.
ADWEST
The following discussion is based upon the Consolidated Financial
Statements of Adwest included in this prospectus, which have been prepared in
conformity with U.K. GAAP which differs in certain significant respects from
U.S. GAAP. The significant differences between U.S. GAAP and U.K. GAAP as they
relate to Adwest are summarized in Note 31 to the Consolidated Financial
Statements of Adwest.
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<PAGE> 35
The following table sets forth the percentage relationship of certain items
to turnover for Adwest for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
Turnover.................................................... 100.0% 100.0% 100.0%
Net operating costs......................................... 93.3 90.6 91.5
Operating profit............................................ 6.7 9.4 8.5
Exceptional items........................................... (2.2) -- --
Associated undertakings..................................... -- -- --
Net interest................................................ (1.7) (1.5) (2.1)
Loss on disposal of business................................ (13.1) (0.4) (5.4)
(Loss)/profit on ordinary activities before tax............. (10.3) 7.5 1.0
Tax on profit on ordinary activities........................ 0.9 2.4 1.8
(Loss)/profit for financial year............................ (11.2) 5.1 (0.8)
Minority interests.......................................... 0.1 0.2 0.2
Retained (loss)/profit for financial year................... (11.3)% 4.9% (1.0)%
</TABLE>
COMPARISON OF YEAR ENDED JUNE 30, 1998 WITH YEAR ENDED JUNE 30, 1997
Turnover -- Total group turnover for the year ended June 30, 1998
increased by L58.4 million or 30.5 percent to L249.9 million from L191.4 million
for the year ended June 30, 1997. These results include the U.S. electronics
division for all of fiscal 1997 and the first ten months of fiscal 1998. Total
turnover from the automotive division (continuing operations) for the year ended
June 30, 1998 increased by L71.3 million, or 47.3 percent, to L222.2 million
from L150.8 million for the year ended June 30, 1997. The increase in turnover
is primarily the result of the acquisition of Heidemann in September 1997.
Operating Costs -- Total group operating costs for the year ended June 30,
1998 increased by L55.1 million or 31.8 percent to L228.5 million from L173.4
million for the year ended June 30, 1997. Operating costs from continuing
operations for the year ended June 30, 1998 increased by L67.4 million, or 49.5
percent, to L203.7 million from L136.2 million for the year ended June 30, 1997.
Operating costs from continuing operations, as a percentage of turnover from
continuing operations was 91.7 percent for the year ended June 30, 1998 compared
to 90.3 percent for the year ended June 30, 1997. The decline in gross margins
is due to the short-term reversal of profits in U.S. operations and relatively
lower margins at some of the newly acquired Heidemann facilities.
Selling, general and administrative expenses are included as a component of
operating costs in accordance with U.K. accounting requirements. Selling,
general and administrative expenses from continuing operations increased by L4.7
million to L14.4 million for the year ended June 30, 1998 from L9.7 million for
the year ended June 30, 1997. This increase is due primarily to incremental
costs related to the acquisition of Heidemann. As a percent of revenues,
selling, general and administrative expenses from continuing operations were 6.5
percent for the year ended June 30, 1998 and 6.4 percent for the year ended June
30, 1997.
Interest Expense -- Interest expense for the year ended June 30, 1998 was
L5.2 million compared to L2.9 million for the year ended June 30, 1997. The
increase was due principally to borrowings incurred related to the acquisition
of Heidemann.
Income Taxes -- The effective income tax rate was 28.0 percent for the
year ended June 30, 1998 and 31.5 percent for the year ended June 30, 1997. The
reduction in the effective income tax rate is primarily related to offsetting
the impact of high tax rates in France and Germany with structuring the
Heidemann acquisition and low effective tax rates in Spain and the U.S.
Discontinued Operations -- The loss from discontinued operations for the
year ended June 30, 1998 was L13.5 million and L791,000 for the year ended June
30, 1997. During fiscal 1998, Adwest disposed of three business units. In May
1998, Adwest announced the disposal of their U.S. electronics division for
31
<PAGE> 36
$38.0 million. Of that amount, $3.0 million has been retained in an escrow
account, with $1.0 million to be released annually upon expiration of certain
warranties and indemnities. In accordance with U.K. accounting requirements, the
original goodwill on the acquisition of these businesses totaling L17.6 million
has been included in discontinued operations in the consolidated profit and loss
account for the year ended June 30, 1998. In addition, Adwest disposed of the
Heidemann galvanizing business for DM6.3 million in aggregate consideration and
the last significant investment portfolio property for L900,000 in aggregate
consideration. The loss in fiscal 1998 is net of a gain on the disposal of these
divisions of L4.1 million offset by the write-off of the original goodwill of
L17.6 million in accordance with U.K. accounting requirements.
COMPARISON OF YEAR ENDED JUNE 30, 1997 WITH YEAR ENDED JUNE 30, 1996
Turnover -- Total group turnover for the year ended June 30, 1997 decreased
by L32.2 million or 14.4 percent to L191.4 million from L223.7 million for the
year ended June 30, 1996. These results include the U.K. power systems division
and the property portfolio, which were substantially disposed of during 1996.
Total turnover from the automotive division (continuing operations) for the year
ended June 30, 1997 increased by L23.5 million, or 18.5 percent, to L150.8
million from L127.3 million for the year ended June 30, 1996. The increase in
turnover is primarily the result of the acquisition of Adwest Rearsby in June of
fiscal 1996 offset by an L8.2 million reduction in turnover at overseas entities
caused by the movement in average exchange rates between the two years.
Operating Costs -- Total group operating costs for the year ended June 30,
1997 decreased by L35.3 million or 16.9 percent to L173.4 million from L208.7
million for the year ended June 30, 1996. Operating costs from continuing
operations for the year ended June 30, 1997 increased by L19.5 million, or 16.7
percent, to L136.2 million from L116.7 million for the year ended June 30, 1996.
Operating costs from continuing operations, as a percentage of turnover from
continuing operations was 90.3 percent for the year ended June 30, 1997 compared
to 91.6 percent for the year ended June 30, 1996. The increase in gross margins
is primarily due to cost reductions from improved design and technology within
the automotive division.
Selling, general and administrative expenses are included as a component of
operating costs in accordance with U.K. accounting requirements. Selling,
general and administrative expenses from continuing operations increased by L2.5
million to L9.7 million for the year ended June 30, 1997 from L7.2 million for
the year ended June 30, 1996. This increase is due primarily to incremental
costs related to the acquisition of Rearsby. As a percent of revenues selling,
general and administrative expenses were 6.4 percent for the year ended June 30,
1997 and 5.7 percent for the year ended June 30, 1996.
Exceptional Items -- During fiscal 1996, Adwest recorded a charge of L5.0
million related to a reorganization of the automotive division and redundancy
and disruption costs within the electronics division following cancellation of a
customer order.
Interest Expense -- Interest expense for the year ended June 30, 1997 was
L2.9 million compared to L3.9 million for the year ended June 30, 1996. The
decrease was due principally to retirement of debt from increased operating cash
flows and the proceeds of the disposal of the U.K. power systems divisions and
the property portfolio.
Income Taxes -- The effective income tax rate was 31.5 percent for the year
ended June 30, 1997 and 33.2 percent for the year ended June 30, 1996. The
reduction in the effective income tax rate is primarily related to a reduction
in the U.K. corporate tax rate partially offset by the impact of a temporary
increase in corporate tax rates in France.
Discontinued Operations -- The loss from discontinued operations for the
year ended June 30, 1997 was L791,000 compared to a loss of L29.3 million for
the year ended June 30, 1996. The loss in fiscal 1997 represents loss from the
finalization of the disposal of the U.K. power systems entities and the property
portfolio. During fiscal 1996, Adwest disposed of its U.K. power systems
division and property portfolio. The loss on disposal of these divisions was
L9.1 million before goodwill. The write off of the original
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<PAGE> 37
goodwill of L20.2 million in accordance with U.K. accounting requirements
increased the overall loss to L29.3 million.
LIQUIDITY AND CAPITAL RESOURCES
DURA
During 1999, Dura provided cash from operations of $80.9 million, compared
to $7.7 million in 1998. Cash generated from operations before changes in
working capital items was $144.7 million for 1999 compared to $63.2 million for
1998. Increases in working capital used cash of $63.8 million in 1999 compared
to $55.5 million in 1998. The increase in working capital is primarily the
result of the timing of cash receipts from Dura's major customers that were
received subsequent to the 1999 period.
Net cash used in investing activities was $607.9 million for 1999 as
compared to $167.5 million in 1998. Net capital expenditures totaled $80.5
million for 1999 primarily for equipment and dedicated tooling purchases related
to new or replacement programs with an additional $524.0 million used primarily
for the acquisitions of Adwest and Excel. This compares with net capital
expenditures of $31.8 million in 1998 and $135.7 million used for the
acquisitions of Universal, Trident and the Hinge Business.
Net cash provided by financing activities totaled $526.3 million for 1999
compared with $176.6 million in 1998. Included in this source of funds is $394.7
million of cash that was provided through the subordinated note offering
discussed below.
In connection with the acquisitions of Adwest and Excel, Dura entered into
an amended and restated $1.15 billion senior credit facility. The senior credit
facility provides for revolving credit facilities of $400.0 million, a $275.0
million tranche A term loan, a $275.0 million tranche B term loan and a $200.0
million interim term loan facility. As of December 31, 1999, rates on borrowings
under the senior credit facility ranged from 5.2 percent to 8.6 percent.
Borrowings under the tranche A term loan are due and payable in March 2005 and
borrowings under the tranche B term loan are due and payable in March 2006. The
revolving credit facility is available until March 2005. Borrowings under the
interim loan were due and payable in September 2000 and, as further discussed
below, were repaid in April 1999. The senior credit facility contains various
restrictive covenants that limit indebtedness, investments, rental obligations
and cash dividends. The senior credit facility also requires Dura to maintain
certain financial ratios including minimum liquidity and interest coverage. Dura
was in compliance with the covenants as of December 31, 1999. Borrowings under
the senior credit facility are collateralized by substantially all assets of
Dura.
The senior credit facility provides Dura 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, 1999, $180.0 million of borrowings
were denominated in US dollars; $5.5 million in Canadian dollars; $3.9 million
in Australian dollars; and $19.4 million in British pound sterling.
At December 31, 1999, Dura had unused borrowing capacity of approximately
$118.9 million under its most restrictive debt covenant. Dura believes the
borrowing availability under its senior credit facility, 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. Dura estimates its
2000 capital expenditures will be approximately $100 million.
In April 1999, Dura completed the offering of $300 million and E100 million
of senior subordinated notes. The subordinated notes mature in May 2009 and bear
interest at 9 percent per year, which is payable semi-annually. Net proceeds
from this offering of approximately $394.7 million were used to repay the $200.0
million interim term loan, approximately $78.1 million to retire other
indebtedness and approximately $118.9 million was used for general corporate
purposes. These notes are collateralized by guarantees of certain of Dura's
subsidiaries.
33
<PAGE> 38
In June 1999, Dura retired the $75.0 million of Trident's outstanding 10
percent senior subordinated notes due 2005. The total consideration paid was
approximately $84.0 million of principal and premium and was funded through
borrowings under the senior credit facility.
In connection with the termination of Dura's former credit facility, Dura
wrote-off deferred financing costs of approximately $2.7 million, net of income
taxes, during the first quarter of 1999. In addition, Dura wrote-off costs of
approximately $2.7 million, net of income taxes, related to the tender of the
Trident notes during the second quarter of 1999. These charges are reflected as
extraordinary items in the accompanying 1999 statement of operations.
In March 1999, Dura acquired through a cash tender offer approximately 95
percent of the outstanding ordinary shares of Adwest. Dura subsequently
purchased the remaining 5 percent. Adwest had annual revenues of approximately
$400 million and is a supplier of driver control products primarily for European
OEMs. Dura paid approximately $320 million to acquire all of the outstanding
shares of Adwest, including the assumption of approximately $106.1 million in
indebtedness.
In March 1999, Dura completed its merger with Excel. Excel had annual
revenues of approximately $1.1 billion of which 75 percent were 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 were generated in North America with the remainder in Europe. Dura
issued an aggregate of approximately 4.9 million shares of its Class A common
stock and paid $155.5 million in cash to Excel's former shareholders. In
addition, outstanding options and warrants of Excel were converted to options
and warrants of Dura, amounting to 257,520 options and 152,401 warrants. The
number of options and warrants and their respective exercise prices were
adjusted based upon the share exchange ratio. Dura also assumed approximately
$100.0 million of indebtedness. In August 1999, Dura acquired the remaining 30
percent minority interest in Schade from Excel's former European partner for
approximately $16.4 million in cash.
In June 1999, Dura acquired Metallifacture from Bullough plc for an
aggregate purchase price of approximately $22.0 million which was financed with
borrowings under Dura's credit facility. Metallifacture, located in Nottingham,
England, is a manufacturer of jacks and tire carriers for the European
automotive industry. It had annual revenues of approximately $25 million and its
major customers include Ford, General Motors, Rover, Nissan and Volkswagen.
In December 1999, Dura acquired the seat adjusting business of Meritor for
total cash consideration of $130 million. Meritor's seat track business
manufactures seat track adjusting mechanisms for the North American automotive
industry. Meritor, with operations in Bracebridge, Ontario and Gordonsville,
Tennessee, had annual revenues of approximately $130 million and is a Tier II
supplier to Lear Corporation and other automotive interior suppliers.
EXCEL -- HISTORICAL
Effective July 1, 1998, Excel purchased through its wholly owned
subsidiary, Excel Industries Germany GmbH, a 70 percent interest in Schade. The
aggregate purchase price for Schade was DM 17,036,400, or approximately
$9,689,000 plus transaction costs. Excel also assumed approximately $68.0
million of Schade's debt. The amount of Excel's contribution to the capital of
Schade was DM 27,340,000, or approximately $15,548,000. Funds for the purchase
price for the interests and the contribution came from Excel's cash on hand.
The remaining 30 percent of Schade is owned by Hella KG Hueck & Co.,
another international OEM supplier. The acquisition of Schade was accounted for
as a purchase. The excess of the purchase price over the estimated fair value of
net assets acquired, approximately $4.0 million, has been accounted for as
goodwill and is being amortized over 40 years using the straight-line method.
Working capital totaled $119.0 million as of January 2, 1999, and the
current ratio was 1.6 to 1. Cash and marketable securities totaled $30.3 million
as of January 2, 1999, an increase of $3.6 million from the prior year.
34
<PAGE> 39
In 1998, cash flow from operations totaled $76.0 million, compared to $40.5
million in 1997. The increase, after considering the effect of the Schade
acquisition, was due to reductions in accounts receivable and tooling billed to
customers. Dividends increased to $6.2 million from $5.6 million due to the
additional common shares issued for the conversion of Excel's 10 percent
convertible subordinated notes in October 1997.
Long-term debt of $149.9 million as of January 2, 1999, or 43 percent of
total capitalization, is up from $105.9 million at the beginning of the year due
to the inclusion of Schade's debt at January 2, 1999. New borrowings consisted
of bank loans to Schade. Excel acquired treasury shares during 1998 to be used
for the issuance of shares under Excel's stock compensation and incentive plans
and for the exercise of outstanding warrants.
Expenditures for capital equipment in 1998 were $46.0 million up from $39.3
million in 1997 and $29.2 million in 1996. The increase in 1998 was mainly due
to capital expenditures in Schade in the last half of 1998. Capital additions
consisting mainly of machinery and equipment totaled $40.8 million in the light
vehicle segment and $4.8 million in the mobile products segment. Capital
expenditures for 1999 are budgeted at $50.0 million. Starting in 1998, Excel
changed the method of depreciating new capital expenditures from accelerated
methods to the straight-line method. The favorable effect of the change on net
income for the year ending January 2, 1999 was approximately $1.1 million or
$.09 per share.
There are claims and pending legal proceedings against Excel and its
subsidiaries with respect to taxes, workers' compensation, warranties and other
matters arising out of the ordinary conduct of the business. The ultimate
results of these claims and proceedings at January 2, 1999 is not determinable,
but, in the opinion of management, adequate provision for anticipated costs has
been made or insurance coverage exists to cover such costs.
ADWEST -- HISTORICAL
During fiscal 1998, Adwest provided cash flow from operations of L26.4
million, compared to L25.2 million for the year ended June 30, 1997. Cash
generated from operations before changes in working capital items was L31.2
million in fiscal 1998 compared to L25.6 million for the year ended June 30,
1997. The increase in working capital items is primarily the result of new
program ramp-ups in a number of subsidiaries.
Net cash used for capital expenditure was L16.8 million in fiscal 1998
compared to L5.9 million in fiscal 1997. The increase in capital expenditure
during 1998 is related to plant expansion at Adwest Driver Systems and Adwest
Heidemann Einbeck and additional equipment and dedicated tooling purchases
related to new or replacement programs.
Net cash used for acquisitions and disposals was L11.4 million in fiscal
1998 compared to cash provided from acquisitions and disposals of L11.8 million
in fiscal 1997. The 1998 cash used for acquisitions can be summarized as follows
(in thousands):
<TABLE>
<CAPTION>
AMOUNT
------
<S> <C>
Heidemann acquisition....................................... L 46.8
Disposal of U.S. Electronics................................ (21.2)
------
Total.................................................. 25.6
Less Heidemann debt assumption.............................. (14.2)
------
Total cash used for acquisition........................ L 11.4
======
</TABLE>
Net cash provided from financing activities was L10.2 million for the year
ended June 30, 1998 compared to cash used for financing activities of L10.0
million for the year ended June 30, 1997. During 1998, approximately L34.8
million of cash was provided through additional borrowings primarily related to
the acquisition and refinancing of Heidemann. This amount was partially offset
by debt repayments of
35
<PAGE> 40
L24.8 million. The net cash used for financing activities for the year ended
June 30, 1997 relates exclusively to debt repayments.
Adwest paid dividends of L6.4 million for each of the years ended June 30,
1998 and 1997.
Adwest acquired Heidemann and its subsidiary undertakings on September 11,
1997 for DM132.0 million of consideration including the assumption of DM40.0
million of Heidemann indebtedness. Heidemann manufactures gearshifts, steering
columns and fuel caps in Germany and Spain.
SEASONALITY
Dura typically experiences decreased revenues and operating income during
the third calendar quarter of each year due to production shutdowns at OEMs for
model changeovers and vacations. Excel's automotive operations normally
experience reduced sales volume in the months of July, August and December as
vacation periods, model changeover and startups and, in the case of December,
holidays which commence prior to Christmas and run through New Year's Day,
affect the number of production days. Adwest experiences decreased revenues
during August and December, as it shuts down operations during these months due
to vacation periods and holidays. The mobile products segment is seasonal in
that sales in the quarter October through December are normally at reduced
levels.
EFFECTS OF INFLATION
Inflation potentially affects Dura in two principal ways. First, a
significant 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.
MARKET RISK
Dura 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. Dura does not enter into derivatives or
other financial instruments for trading or speculative purposes. Dura enters
into financial instruments to manage and reduce the impact of changes in foreign
currency exchange rates and interest rates. The counterparties are major
financial institutions.
Dura 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 of such debt but do not impact earnings or cash flows. Conversely for
variable rate debt, interest rate changes generally do not affect the fair
market value of such debt but do impact future earnings and cash flows, assuming
other factors are held constant. At December 31, 1999, Dura had fixed rate debt
of $401.6 million and variable rate debt of $829.4 million. Holding other
variables constant (such as foreign exchange rates and debt levels) a one
percentage point increase in interest rates would have decreased the unrealized
fair market value of the fixed rate debt at December 31, 1999 by approximately
$40.2 million and the impact on variable rate debt would be expected to have an
estimated impact on pre-tax earnings and cash flows for the next year of
approximately $8.3 million.
FOREIGN CURRENCY TRANSACTIONS
A significant portion of Dura's revenues during the year ended December 31,
1999 were derived from manufacturing operations in Europe, Latin America and
Canada. The results of operations and the 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
36
<PAGE> 41
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, 1999 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 Dura may,
from time to time, engage in hedging programs intended to reduce Dura's exposure
to currency fluctuations.
INTRODUCTION OF THE EURO
Eleven of the fifteen member countries of the European Union adopted the
Euro as their common legal currency on January 1, 1999, based on fixed
conversion rates between their existing sovereign currencies. The existing
currencies are scheduled to remain legal tender in the participating countries
as denominations of the Euro between January 1, 1999 and January 1, 2002. During
this transition period, public and private parties may pay for goods and
services using either the Euro or the participating country's legacy currency.
The Euro will then trade on currency exchanges and be available for non-cash
transactions. Dura does not expect this conversion to have a material impact on
its operating results, financial condition or cash flows.
YEAR 2000
There currently has been no impact of the year 2000 on the processing of
Dura's time-sensitive information by its computerized information systems.
Dura's facilities primarily use commercial, vendor-supported software and
hardware, which have been certified as year 2000 compliant. Because of Dura's
substantial investments in computerized systems that are year 2000 compliant, it
does not anticipate any future problems with respect to its systems. As of
December 31, 1999, Dura incurred costs of approximately $5.0 million relating to
year 2000 compliance and does not anticipate any future costs.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," becomes effective for years beginning after June 15, 2000. SFAS No.
133 establishes accounting and reporting standards requiring that every
derivative instrument, including certain derivative instruments embedded in
other contracts be recorded in the balance sheet as either an asset or liability
measured at its fair value. SFAS No. 133 requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge criteria are met. Special accounting for qualifying hedges allow a
derivative's gains or losses to offset related results on the hedged item in the
income statement and requires that a company must formally document, designate
and assess the effectiveness of transactions that receive hedge accounting. Dura
has not yet quantified the impacts of adopting SFAS No. 133.
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<PAGE> 42
BUSINESS
GENERAL
We are the world's largest independent designer and manufacturer of driver
control systems for the global automotive industry. We are also a leading global
supplier of window systems, door systems and engineered mechanical components.
Our products include:
- driver control products -- automotive cables, parking brake mechanisms,
transmission shifter mechanisms, brake, clutch and accelerator pedals;
- window system products -- encapsulated windows, push out and sliding
windows;
- door system products -- window regulators, frames, hinges and door
modules; and
- engineered products -- seating systems, engine control products and
engineered mechanical components, such as underbody tire carriers,
jacks, turn signal and tilt lever assemblies, injection molded plastic
parts, hood hinges, automotive lighting products and latches,
thixomolded magnesium and mobile products.
We sell our products to every major North American, Japanese and European
automotive OEMs. We have over 80 manufacturing and product development
facilities located in the United States, Australia, Brazil, Canada, the Czech
Republic, France, Germany, India, Mexico, Portugal, Spain and the United
Kingdom.
In March 1999, we completed both the Excel acquisition and the Adwest
acquisition. Excel is a leading supplier of window systems, door systems,
seating systems and injection molded plastic parts for the global automotive
market and appliances, hardware products, window systems, door systems and
seating systems for the mobile products industries in North America. On a pro
forma basis giving effect to a 1998 acquisition, Excel had net sales of $1.2
billion for the year ended January 2, 1999. Adwest is a leading European
supplier of driver control products, including transmission shifter mechanisms,
parking brake mechanisms, steering columns and gears, cables and engine control
products, such as engine thermostats, radiator caps and fuel caps, primarily for
European automotive OEMs. Adwest had revenues of $399.7 million for the twelve
month period ended December 31, 1998.
INDUSTRY TRENDS
Our performance and growth is directly related to certain trends within the
automotive market. The consolidation of the component supply industry includes
the growth of system sourcing and the increase in global sourcing.
Supplier Consolidation. During the 1990s, OEMs have continued to reduce
their supplier base, awarding sole-source contracts to full-service suppliers.
As a result, OEMs currently work with a smaller number of 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. This environment provides an opportunity to grow by obtaining
business previously provided by other non full-service suppliers and by
acquiring suppliers that further enhance product, manufacturing and service
capabilities. OEMs rigorously evaluate suppliers on the basis of product
quality, cost control, reliability of delivery, product design capability,
financial strength, new technology implementation, facilities and overall
management. Suppliers that obtain superior ratings are considered for new
business. Although these supplier policies have already resulted in significant
consolidation of component suppliers in certain segments, we believe that
opportunities exist for further consolidation within our segment. This is
particularly true in Europe, which has many suppliers 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 individual
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
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<PAGE> 43
of the vehicle prior to beginning production. We have capitalized on this trend
by designing our mechanisms and cable systems to function together and by
providing mechanism and cable designs that are integrated into the design of the
entire vehicle.
Global Sourcing. Regions such as Asia, Latin America and Eastern Europe
are expected to experience significant growth in vehicle demand over the next
ten years. OEMs are positioning themselves to reach these emerging markets in a
cost-effective manner by seeking to design and produce "world cars" which can be
designed in one vehicle center but produced and sold in many different
geographic markets, thereby allowing OEMs to reduce design costs and take full
advantage of low-cost manufacturing locations. OEMs increasingly are requiring
their suppliers to have the capability to design and manufacture their products
in multiple geographic markets.
We have over 40 manufacturing facilities located in Australia, Brazil,
Canada, the Czech Republic, France, Germany, India, Mexico, Portugal, Spain and
the United Kingdom. In addition, we have formed strategic alliances, which range
from investments in other manufacturers to informal understandings, should not
only give us access to new geographic markets and customers, but also the
capability of offering complementary products. We also have nine technical
centers located at our facilities in Europe and we have relocated technical
personnel resources to locations in which OEMs will develop "world cars." By
participating in the design of these vehicles and through implementation of
manufacturing processes near the point of use, we believe we can continue to
expand on our international presence.
COMPETITIVE STRENGTHS
We believe that we possess a number of competitive strengths that have been
further enhanced by the Acquisitions, including:
- Well Positioned to Take Advantage of Market Trends: We believe that we
are well positioned to meet the demands of OEMs for fewer, full-service
and globally positioned suppliers. As further described below, we
believe our advanced design capabilities, broad product lines and
ability to supply complete systems, combined with our global production
capabilities, well enable us to take advantage of these market trends.
ADVANCED DESIGN CAPABILITIES: We seek to maintain a technological
advantage through our investment in product development and advanced
engineering. Our design and engineering staff works in partnership with
OEMs throughout the design, prototype development and manufacturing
implementation of our products. This partnership approach generates
cost-saving ideas that reduce product development cycle time and improve
vehicle quality by assuring better integration of components into the
assembled vehicle. Our CAD systems are compatible with those of our
major customers, enabling us to communicate design developments with
customer engineers throughout the design and development stage.
BROAD PRODUCT LINES AND COMPLETE SYSTEMS CAPABILITIES: We believe that
the breadth of our product capabilities in the markets in which we
compete is unmatched by any competitor and has been further enhanced by
the Acquisitions. As a result of the Acquisitions, we are one of a
limited number of suppliers that can develop and produce complete driver
control systems globally, which include the mechanical assembly as well
as the actuating cables. OEMs favor suppliers that can provide entire
systems versus individual components due to the improved quality and
lower cost of installing a system.
GLOBAL PRESENCE: Adwest's operations and technical capabilities in
France, Germany, India, Spain and the U.K., combined with Excel's
operations and technical capabilities in the Czech Republic, Germany,
mexico, Portugal, Spain and the U.K., complement our existing global
operations to provide expanded global production capabilities for both
North American and international OEMs. As a result of the Acquisitions,
we have global leadership positions in several key products, including
automotive cables, parking brake mechanisms, transmission shifter
mechanisms window systems and door systems. Approximately 32 percent of
our 1999
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<PAGE> 44
revenues were generated from sales in Europe. We believe that this
global production capability provides us with a competitive advantage in
obtaining business on the OEMs' "world car" platforms.
- Strong OEM Partnerships: We have formed strong partnerships with our
major OEM customers due to our high level of product quality, customer
service, product design and engineering capabilities. Our application of
innovative operating techniques, combined with investments in
sophisticated capital equipment, has led to a high level of product
quality, industry-low defect rates and the receipt of numerous supplier
awards including the Ford Q-1 Certification, DaimlerChrysler Gold
Pentastar Award, GM Target for Excellence, Nummi Delivery Performance
Award and the Isuzu Quality Achievement Award. Stringent internal
controls, including strong inventory and project management systems,
enable us to provide high customer service levels. OEMs are demanding
increasingly more from their suppliers in regard to just-in-time
inventory management, particularly during the critical launch period of
a model. Our strong performance in this area has substantially
strengthened our relationships with our OEM customers.
- Well Positioned on Popular Product Platforms: We manufacture products
for many of the most popular car, light truck and sport utility vehicle
models. In North America, these include all of the top ten selling
vehicles for 1999: the Ford Taurus, Explorer, Ranger and F-Series
pickups, the GM C/K pickup, the Dodge Caravan and Ram pickup, the Honda
Accord and Civic, and the Toyota Camry. We generated revenues from sales
to European OEMs including Volkswagen, Mercedes, PSA (Peugeot and
Citroen), BMW and Renault.
- Significant Acquisition Experience: Our leadership team, the members of
which have an average of 20 years of experience in the automotive supply
industry, has successfully completed fifteen acquisitions and two joint
ventures over the last four years. We have been successfully integrating
the acquired operations and generating significant operational
efficiencies and cost savings. In addition, we have generally retained
key personnel from acquired companies, which has enabled us to
strengthen our global management team as we have grown.
BUSINESS STRATEGY
Our primary 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 the systems we supply to OEMs worldwide. The
key elements of our operating and growth strategies are as follows:
OPERATING STRATEGY
- Continuous Operational Improvements. We continuously implement
strategic initiatives designed to improve product quality and reduce
manufacturing costs through the introduction of cellular manufacturing
methods, consolidation of manufacturing facilities, improvement in
inventory management and the reduction of scrap. Our most recently
adopted initiative is Black Belt-Six Sigma which is designed to enable
us to reduce manufacturing and administrative costs. Manufacturing
flexibility enables our facilities to produce systems in a
cost-effective manner and strengthens our ability to meet the
just-in-time and in-line sequence delivery schedules of many of its
customers. We utilize a common set of key metrics used to measure actual
performance in comparison to standards and goals.
- Capitalize on Opportunities for Operating Synergies. Our acquisitions
typically provide us with a number of opportunities to reduce costs and
improve operational efficiency. For example, the similarity of the
manufacturing processes and technical capabilities of Dura and the
acquired companies is expected to result in significant cost savings and
operating synergies. Immediately following the execution of acquisition
agreements, we establish cross-functional teams which identify synergies
expected to be realized from consolidation of the design, engineering
and administrative functions, plant restructuring and realignment and
coordination of raw material purchases. The cross-functional teams
formulate an overall integration plan.
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<PAGE> 45
- Foster a Decentralized, Participatory Culture. Our decentralized
approach to managing our manufacturing facilities encourages decision
making and employee participation in areas such as manufacturing
processes and customer service. This "team" approach fosters a unified
culture and enhances communication of strategic direction and goals,
while facilitating a greater success rate in reaching and exceeding our
objectives. We provide ownership-related incentives to not only our
managers, but also to our salaried and hourly employees, through grants
under our stock option plan and participation in the employee stock
discount purchase plan.
GROWTH STRATEGY
- Focus on Systems. OEMs are increasingly seeking suppliers capable of
providing complete systems rather than suppliers who only provide
separate component parts. A key element of our growth strategy has been
to add to our ability to provide complete systems to our OEM customers.
The Adwest acquisition significantly enhanced our ability to provide
transmission shifter systems and parking brake systems on a global basis
while the Excel acquisition expanded our product offerings by adding new
product systems including window, door, and seat systems.
- Increase Platform and Customer Penetration. A key element of our
strategy is to increase volume by adding new customers and to strengthen
our existing customer relationships by broadening our range of products
through internal development efforts and acquisitions. The acquisitions
completed during 1999 expanded our relationships with the North American
and European OEMs. We have also obtained significant firm orders on a
number of new platforms for the years 2000 through 2002 for incremental
new business in North America and Europe. We believe that our geographic
diversity and product depth strengthen our ability to pursue new vehicle
platform contracts in the future.
- Extend Global Manufacturing Reach. In 1999, over 72 percent of total
worldwide passenger vehicle production occurred outside North America.
To meet OEMs' increasing preference for suppliers with global
capabilities, we have expanded our manufacturing operations into new
geographic markets through strategic acquisitions and joint ventures.
Consistent with this strategy, the acquisitions of the VOFA Group
(Germany, Spain), REOM Industries (Aust) Pty Ltd. (Australia), Trident
(Brazil, Canada, France, Germany, U.K.), Pollone, S.A. (Brazil), Excel
(Czech Republic, Germany, Mexico, Portugal, Spain, U.K.) and Adwest
(France, Germany, India, Spain, U.K.) enhanced our ability to serve our
customers globally. Increased international sales will also allow us to
mitigate the effects of cyclical downturns in a given geographic region
and further diversify our OEM customer base.
- Pursue Strategic Acquisitions. We compete in what we believe to be a
$12 to $14 billion, highly fragmented, worldwide automotive market that
provides numerous potential acquisition and joint venture opportunities.
Since 1996, we have successfully completed fifteen strategic
acquisitions and formed two joint ventures. Our management has
substantial experience in completing and integrating acquisitions within
the automobile parts industry and believes that this experience will
help us select and pursue acquisition opportunities that meet our
criteria of: (1) providing additional and complementary product,
manufacturing and technical capabilities; (2) broadening our geographic
coverage and strengthening our ability to supply products on a global
basis; (3) increasing both the number of models for which we supply
products and the content level on existing models; and (4) increasing
our customer penetration.
THE ACQUISITIONS
EXCEL ACQUISITION
On March 23, 1999, we acquired Excel through a merger of Excel with and
into Dura Operating Corp. In the merger, DASI issued an aggregate of
approximately 5.1 million shares of its Class A common stock and paid $155.5
million in cash to Excel's former shareholders. The Excel Acquisition had a
transaction value of approximately $471.3 million, plus fees and expenses. The
cash
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<PAGE> 46
consideration and related fees and expenses paid in the Excel acquisition
(including acquired indebtedness) were financed through borrowings under the new
credit facility.
Excel is a leading tier-one and tier-two supplier to the automotive and
mobile products industries. Excel produces window systems, door systems and
seating systems and injection molded plastic parts for North American OEMs,
which accounted for approximately 75 percent of Excel's 1998 North American net
sales. The balance of Excel's net sales in North America relate to the design
and manufacture of appliances, hardware products, window systems, door systems
and seating systems for the mobile products industries. Excel is the leading
independent supplier of window systems to the combined automotive, light truck
and van, bus and recreational vehicle markets in North America.
On July 1, 1998, Excel acquired 70 percent of Schade, a designer and
manufacturer of window systems ornament and roof moldings, door frames, plastic
body components (wind deflectors, air intakes and ventilation covers) and
plastic interior fittings or equipment (center consoles, roof covers and panels
and sliding roof covers) for European OEMs.
Excel and Schade supply products primarily to Ford/Jaguar, DaimlerChrysler,
GM, Volkswagen, BMW, Lear Corporation, Johnson Controls and Fleetwood
Enterprises through 31 facilities located in the Czech Republic, Germany,
Mexico, Portugal, Spain, the U.K. and the United States. For the year ended
January 2, 1999, Excel generated net sales of $1.1 billion and, on a pro forma
basis giving effect to the acquisition of Schade, net sales of $1.2 billion.
ADWEST ACQUISITION
On March 15, 1999, Dura acquired through a cash tender offer approximately
95 percent of the outstanding ordinary shares of Adwest. The aggregate
consideration (including acquired indebtedness) and related fees and expenses
paid in the Adwest acquisition were financed through borrowings under the new
credit facility. We subsequently acquired all of the remaining ordinary shares.
The aggregate cost of the Adwest acquisition, including the amount necessary to
acquire the remaining outstanding shares, was approximately $320 million.
Adwest is a leading European supplier of driver control products, including
transmission shifter mechanisms, parking brake mechanisms, steering columns and
gears, cables and engine control products, such as engine thermostats, radiator
caps and fuel caps. Prior to the Adwest acquisition, our primary strength in
Europe was the design and manufacture of automotive cables. Following the Adwest
acquisition, we have the capability to supply complete driver control systems in
Europe. Adwest supplies its products primarily to Volkswagen, BMW, PSA (Peugeot
and Citroen), Ford, Renault, GM, Nissan, Volvo and other European OEMs. Adwest's
operations consist of 17 facilities in France, Germany, India, Spain, the U.K.
and the United States. Adwest had revenues of $399.7 million for the twelve
month period ended December 31, 1998.
STRATEGIC BENEFITS OF THE ACQUISITIONS
As a result of the Acquisitions, we have significantly increased our
product offerings, scale and global reach. We believe that we are now able to
provide greater value to our customers due to the addition of several new and
complementary product lines, as well as our ability to provide complete
transmission shifter systems and parking brake systems on a global basis. The
Acquisitions represent our two largest acquisitions to date and we believe that
the strategic benefits of the Acquisitions include the following:
Enhanced Systems Capabilities and Product Offerings. OEMs are increasingly
seeking suppliers capable of providing complete systems rather than suppliers
who only provide separate component parts. A key element of our acquisition
strategy has been to add to our ability to provide complete systems to our OEM
customers. The Excel acquisition further diversifies our revenue base by
bringing complete product systems, including window systems and door systems.
Adwest is a leading provider of transmission shifter mechanisms in Europe and
provides us with needed mechanism manufacturing capability and established
transmission shifter contracts. Adwest's parking brake systems and broad array
of cable assembly products
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<PAGE> 47
complement our existing product lines and enhance our ability to deliver more
complete systems to the OEMs at a lower overall cost.
Increased Customer Penetration. As a result of the Acquisitions, we are a
supplier to almost every major automotive OEM on a worldwide basis. The Excel
acquisition significantly expanded our penetration within each of the three
major North American OEMs (GM, Ford and DaimlerChrysler), which were the top
three customers of Dura for 1999. Adwest's strong relationship with a broad
customer base, specifically with Volkswagen (currently Adwest's and Schade's
largest customer and the highest volume producer of automobile's in Europe) and
BMW, further strengthens and diversifies our global position. Adwest currently
supplies Ford Europe with its engine thermostats and has been appointed the sole
supplier worldwise of transmission shifters to Volkswagen for their new
generation of Polo, Golf and Audi models.
Increased Model Penetration. The Excel acquisition increases our content
per vehicle on key light trucks and sport utility vehicles, such as the Ford
Explorer, Ford Windstar, Dodge Durango and GM full size pickup, as well as on
high volume passenger cars such as the Chrysler Concorde, Dodge Intrepid and
Ford Taurus and Escort. The Adwest acquisition increases our content per vehicle
on high volume European passenger cars such as the Ford Mondeo, Volkswagen Golf
and Polo, BMW 3 Series and GM Epsilon.
Expanded Global Capabilities. OEMs are increasingly demanding that their
suppliers have global production capabilities. Adwest's operations and technical
capabilities in France, Germany, India, Spain and the U.K., combined with
Excel's operations and technical capabilities in the Czech Republic, Germany,
Mexico, Portugal, Spain and the U.K., complement Dura's current European
initiatives to provide expanded global production capabilities for both North
American and international OEMs. On a combined basis, we have global leadership
positions in several key products, including cables, transmission shifter
mechanisms, parking brake mechanisms, window systems and door systems.
Approximately 32 percent of our 1999 revenues were generated from sales in
Europe.
Critical Mass. Size is a critical factor in the automotive industry where
increasing scale is necessary for long-term success as OEMs continue to reduce
suppliers, focusing only on those with quality products, leading edge design and
engineering capabilities, service and long term sustainability.
Operational Efficiencies. The Acquisitions are expected to provide us with
a number of opportunities to reduce costs and improve operational efficiency.
The similarity of the manufacturing processes and technical capabilities of
Dura, Excel and Adwest is expected to result in significant cost savings and
operating synergies. We have established cross-functional teams, which have
identified synergies expected to be realized from our consolidation of design,
engineering and administrative functions, plant restructuring and realignment,
coordination of raw material purchases and other operating improvements.
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PRODUCTS
We are the world's largest independent designer and manufacturer of driver
control systems for the global automotive industry. We are also a leading global
supplier of window systems and door systems. We believe, based upon our
experience in the automotive supply industry, that we hold the number one or
number two market position for our principal products in the following markets.
The table below sets forth our market position in North America and Europe in
1999:
<TABLE>
<CAPTION>
MARKET
PRODUCT CATEGORY REGION POSITION
- ---------------- ------ --------
<S> <C> <C>
Automotive cables........................................... North America #1
Europe #1
Parking brake mechanisms.................................... North America #1
Europe #1
Transmission shifter mechanisms............................. North America #1
Europe #2
Window systems.............................................. North America #1
Europe #2
Window regulators........................................... North America #1
</TABLE>
We also hold the #1 market position in Europe for engine thermostats and
the #1 position in North America for tire carriers.
Although a portion of our products are sold directly to OEMs as finished
components, we use most of our products to produce "systems" or "subsystems,"
which are groups of component parts located throughout the vehicle which operate
together to provide a specific vehicle function. Systems currently produced by
us include parking brake, transmission shifter, latch, window, door, seating and
engine control systems.
A brief summary of each of our principal product categories is set forth
below:
<TABLE>
<CAPTION>
PRODUCT CATEGORY DESCRIPTION
- ---------------- -----------
<S> <C>
Driver Control Systems:
Automotive cables.................. cables used for parking brakes, transmission shifters
(manual and automatic), throttles and light duty cables
(such as cables used for oil level gauges, hood releases and
fuel doors)
Parking brake mechanisms........... components used for both foot and hand operated parking
brakes
Transmission shifter
mechanisms...................... manual and automatic console-based and column-mounted
transmission shifters
Window Systems....................... various types of automotive windshields and rear, vent,
quarter, pushout and sliding windows
Door Systems......................... window regulators (both manual and automatic), door latches,
door frames, door hinges and related components
Seating Systems...................... seat and height adjuster systems and recliner mechanisms
Mobile Products...................... appliances (such as water heaters, furnaces, stoves and
ranges), seating components, door and window assemblies,
wing ventilator, fixed and moveable windows
Other Engineered Products............ engineered mechanical components (such as underbody tire
carriers, jacks, brake, clutch and accelerator pedals and
turn signal and tilt lever assemblies), hood hinges,
injection molded plastic parts (including door, window and
body components), steering gears, rack and pinion gears,
headlamps, latches (primary, secondary and combination hood,
deck lid and tailgate) and engine control products (engine
thermostats, radiator caps and fuel caps)
</TABLE>
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The following table sets forth the approximate composition by product
category of our revenues for the last three fiscal years:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
PRODUCT CATEGORY 1999 1998 1997
- ---------------- ----- ----- -----
<S> <C> <C> <C>
Driver Control Systems:
Automotive cables......................................... 19% 38% 44%
Parking brake mechanisms.................................. 11% 18% 26%
Transmission shifter mechanisms........................... 10% 17% 13%
Window Systems.............................................. 18% -- --
Door Systems................................................ 10% -- --
Mobile Products............................................. 6% -- --
Seating Systems............................................. 5% -- --
Other Engineered Products................................... 21% 27% 17%
---- ---- ----
Total.................................................. 100% 100% 100%
==== ==== ====
</TABLE>
CUSTOMERS AND MARKETING
The North American automotive market is dominated by GM, Ford and
DaimlerChrysler, with Japanese and foreign manufacturers accounting for
approximately 20 percent of the market. In North America, we supply our products
primarily to Ford, GM, DaimlerChrysler and Toyota. As a result of the
acquisitions of Adwest and Excel, we have further expanded our global presence
and have added new customers and increased penetration into certain existing
customers such as Volkswagen and BMW. As a result of our acquisition of Excel,
we also sell certain of our automotive products to other Tier 1 suppliers, such
as Lear Corporation, Johnson Controls Inc. and Fleetwood Enterprises, Inc.
In 1999, approximately 72 percent of total worldwide passenger vehicle
production occurred outside of North America. As a result of our recent
acquisitions, we derive a significant amount of our revenues from sales to OEMs
located outside of North America. Set forth below is a summary of our sales by
geographic region for 1999, 1998 and 1997:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
REGION 1999 1998 1997
- ------ ----- ----- -----
<S> <C> <C> <C>
North America............................................... 68% 77% 79%
Europe...................................................... 31% 20% 20%
Other....................................................... 1% 3% 1%
---- ---- ----
Total.................................................. 100% 100% 100%
==== ==== ====
</TABLE>
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The following is a summary of our significant customers for each of the
last three fiscal years:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
CUSTOMER 1999 1998 1997
- -------- ----- ----- -----
<S> <C> <C> <C>
Ford/Jaguar................................................. 26% 36% 42%
GM.......................................................... 15% 23% 25%
DaimlerChrysler............................................. 11% 15% 10%
Volkswagen.................................................. 7% 4% 4%
BMW......................................................... 4% 2% 3%
PSA (Peugeot and Citroen)................................... 3% 3% --
Lear........................................................ 3% -- --
Toyota...................................................... 2% 4% 4%
Renault..................................................... 2% 1% --
Nissan...................................................... 2% -- --
Honda....................................................... 1% 2% --
Other....................................................... 24% 10% 12%
---- ---- ----
Total.................................................. 100% 100% 100%
==== ==== ====
</TABLE>
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Our customers award contracts for a particular car platform, which may
include more than one car model. Such contracts range from one year to the life
of the models, which is generally three to seven years, and do not require the
purchase by the customer of any minimum number of parts. We also compete for new
business to supply parts for successor models. Because we supply parts for a
broad cross-section of both new and mature models, our reliance on any
particular model is minimized. We manufacture products for many of the most
popular car, light truck, sport utility and mini-van models in North America and
Europe. Although not comprehensive, the following table presents an overview of
the major models for which we have orders to supply products on current or new
model vehicles:
<TABLE>
<CAPTION>
CUSTOMER CAR MODELS* TRUCK AND VAN MODELS*
- -------- ----------- ---------------------
<S> <C> <C>
Ford........................... Continental/Town Car, Contour/ Autoeuropa MPV, Econoline, Escort
Mystique/Mondeo, Cougar, Crown Van, Expedition/Navigator,
Victoria/ Grand Marquis, Escort/ F-Series, Explorer/ Mountaineer,
Tracer, Fiesta, Mazda 626, Mustang, Pampa, Ranger, Transit,
Ka, Taurus/Sable Villager/Quest, Windstar, Mazda
Pickup
GM............................. Cutlass/Malibu/Grand Am, Astra, Blazer/Jimmy/Bravada, C/K Pickup/
Aurora/ Park Avenue/Bonneville/ Tahoe/Sierra/Yukon/Escalade/
LeSabre, Century, Corsa, Corvette, Denali, GMT 800,
Deville/Seville/Eldorado, Firebird/ Silhouette/TransSport/ Venture/
Camaro, Kadett, Lumina/Monte Carlo/ Montana, Corsa Pickup, D-20, D-40,
Regal/Intrigue/Grand Prix, Alero, D-60, Express, Postal, S-10
Saturn, Innovate, Sunfire/Cavalier, Pickup/Sonoma, Safari/Astro,
Vectra Savana, Silverado, Suburban, UPS
Daimler/Chrysler............... Breeze, Cirrus, Intrepid/ Caravan/Voyager/Town & Country,
Concorde/300M, Neon, Prowler, Cherokee/Grand Cherokee, Dakota/
Sebring, Viper, Stratus, A, C, E, M Durango, Eurostar, RamVan & Pickup,
and S Class, Cabrio Wrangler, L-608 D, L709E, LS 1935,
SKN, Sprinter
Toyota......................... Avalon, Camry, Carina, Corolla, Sienna, Toyota Pickup
Lexus, Prizm, Solara
Volkswagen..................... Beetle, A4, A8, Gol, Golf, Lupo, Bus, Kombi, Saveiro, Tansporter
Parati, Passat, Polo, Quantum,
Santana, Sub-Polo, VW Synchro, Audi
A3, TT, Skoda, MPV GP, Rolls Royce
BMW............................ Z5 Coupe, Z3(B16), 3, 5, 7 and 8 --
Series
Citroen........................ Evasion, Saxo, Xsara, Xantia, XM, Berlingo, Jumper
ZX
Fiat S.P.A..................... Ulysse --
Honda.......................... Accord, Acura, Civic --
Nissan......................... Sentra, Micra, Primera --
Peugeot........................ 106, 306, 406, 605, 806 Expert, Partner
Porsche AG..................... 968, 986, 996 --
Renault........................ Clio, Espace, Laguna, Megane, Kangoo, Master
Safrane, Twingo
Rover Group Limited............ Metro, Rover 800 Discovery, Rover
SEAT, S.A...................... Arota, Cordoba, Ibiza, Toledo, S5 --
</TABLE>
- ---------------
* Models manufactured outside of North America are italicized.
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Most of the parts we produce have a lead time of two to five years from
product development to production. Although not comprehensive, the following
table presents an overview of the major models for which we have been awarded
new business (i.e., parts not currently supplied by us):
<TABLE>
<CAPTION>
MODEL
YEAR OEM MODEL(1) TYPE OF BUSINESS
- ----- --- -------- ----------------
<S> <C> <C> <C>
2000 GM..................... Impala/Monte Carlo Transmission shifter mechanisms
Deville, Bonneville/ Hood latch
LeSabre/Antares
Astra, Vectra Transmission shifter cable
Corsa Door cables, manual transmission cables and
parking brake cables
Ford................... Transit Parking brake system
T-Bird Hood and deck hinge
Equator Hood hinge
Explorer Hood hinge and transmission shifter
mechanisms
SUV Hood hinge
P-207 Parking brake mechanisms, door, door glass
and rear slide glass
CD 132 B-pillar cappings
CT 170 Door
UW-137 Seats
DaimlerChrysler........ Mid Size Hood hinge, transmission shifter mechanisms,
parking brake mechanisms
Ram Van, Dakota Transmission shifter mechanisms
PT44 Door
Peugeot................ Z8 Parking brake mechanisms
306NF Roof moldings
406 Front brake cable
Toyota................. Avalon Accelerator pedal
120N SUV Door hinge
Mercedes............... Sprinter Transmission shifter cables
Volkswagen............. Polo Transmission shifter cables
T5 Sliding window
Golf, Audi A3 Transmission shifter mechanisms
Audi B6 Cross beam
BMW.................... E46/5 Roof moldings, climate control cable, door
cable
2001.. Ford................... Explorer Transmission shifter mechanisms, glass
Lincoln LS Seat release cable, parking brake and hood
latch systems
U231 Glass
Mondeo Transmission shifter mechanisms and cables
Jaguar, X350, X400 Quarter windshield, back lite, trim
Mustang Hood hinge
T-Bird Parking brake mechanisms
C212 B-pillar cappings
Navigator Transmission shifter mechanisms, door
U204 SUV Window latch and hood release cables
PN96 Glass
GM..................... GMX-320 Parking brake mechanisms
GMX-240 Jack and tire carrier
</TABLE>
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<PAGE> 53
<TABLE>
<CAPTION>
MODEL
YEAR OEM MODEL(1) TYPE OF BUSINESS
- ----- --- -------- ----------------
<S> <C> <C> <C>
GMT-560 Clutch
GMT-360 Parking brake mechanisms, transmission
shifter mechanisms
A Quarter panel glass and remote access door
glass
DaimlerChrysler........ Ram Truck Hood hinge
PT-74 Door
S203 C-pillar caps/molding, side window
Toyota................. 887T SUV Accelerator pedal
Honda.................. SUV Tire carrier
Nissan................. Altima Jack
Almera Brake, accelerator, hood lock, fuel filler
cables
Volkswagen............. MPV GP Transmission shifter mechanisms
2002.. Ford................... Ranger Rear slide glass
Transit Climate control cables
Windstar Liftgate glass
Mondeo Transmission shifter system
DaimlerChrysler........ C Class Parking brake cable
GM..................... GMT-355, Saturn Glass
Corsa, Epsilon Transmission shifter mechanisms
Gamma Parking brake and door release cables
Citroen................ Xsara Parking brake cables
Peugeot................ 206 Clutch cable
Honda.................. Civic Glass
Volkswagen............. Beetle, Synchro Transmission shifter mechanisms
Sharan, Passat Climate control cables
BMW.................... 7 series Parking brake cables
Volvo.................. 850 Door cables
</TABLE>
- ---------------
(1) Models manufactured outside of North America are italicized.
Major customers for our mobile products include Fleetwood Enterprises,
Winnebago, Damon, Jayco, Thor, Coachmen, Motor Coach Industries and Navistar
International Corporation. Separate sales and engineering groups are located in
Rockford, Illinois and Elkhart, Indiana to service customers in this business
segment. Similar to the automotive industry, customers in the mobile products
business generally issue purchase orders for products on an annual basis and
periodically issue releases against those purchase orders. Accordingly, this
business does not have a significant backlog of orders at any particular time.
Our sales and marketing efforts are designed to create overall awareness of
our engineering, design and manufacturing capabilities and to have us considered
and selected to supply our products for new and redesigned models of our OEM
customers. Our sales and marketing staff works closely with our design and
engineering personnel to prepare the materials used for bidding on new business
as well as to provide a consistent interface between us and our key customers.
Most of our sales and marketing personnel have engineering backgrounds which
enable them to understand and participate in the design and engineering aspects
of acquiring new business as well as ongoing customer service. Our sales and
marketing personnel are organized, together with our design and engineering
personnel, into customer-dedicated program teams. Each program team is under the
leadership of a program manager, who, in turn, reports to our vice president of
sales and marketing. Each of our major customers has its own dedicated program
manager. We currently have sales and marketing personnel located in every major
region in which it operates. From time to time, we also participate in industry
trade shows and advertise in industry publications.
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<PAGE> 54
DESIGN AND ENGINEERING SUPPORT
We believe that engineering service and support are key factors in
successfully obtaining new business. We utilize program management with
customer-dedicated program teams, which have full design, development, test and
commercial issues under the operational control of a single manager. In
addition, we have established cross-functional teams for each new program to
ensure efficient product development from program conception through product
launch.
We have technical centers located in Australia, France, Germany, the United
Kingdom and the United States. A separate advanced technology group has been
established to maintain our position as a technology leader. The advanced
technology group has developed many innovative features in our products,
including many features which were developed in conjunction with our customers.
We utilize computer aided designs, or CAD, in the design process, which enables
us to share data files with our customers via compatible systems during the
design stage, thereby improving function, fit and performance within the total
vehicle. We also utilize CAD links with our manufacturing engineers to enhance
manufacturability and quality of the designs early in the development process.
We have more than 360 patents granted or in the application process. The
patents granted expire over several years beginning in 2001. Although we believe
that, taken together, the patents are significant, the loss or expiration of any
particular patent would not be material to us.
MANUFACTURING
We employ a number of different manufacturing processes. We utilize
flexible manufacturing cells in both the mechanism and cable assembly processes.
Manufacturing cells are clusters of individual manufacturing operations and work
stations grouped in a cylindrical configuration, with the operators placed
centrally within the configuration. This provides flexibility by allowing
efficient changes to the number of operations each operator performs. When
compared to the more traditional, less flexible assembly line process, cell
manufacturing allows us to maintain our product output consistent with our
customers' requirements and reduce the level of inventory. In addition, we
utilize high volume production lines for final assembly of our automotive
lighting products.
Mechanical assemblies consist of between five and 50 individual components,
which are attached to form an integrated mechanism. Our assembly operations are
performed on either dedicated, high-volume, automated assembly machines or on
low capital-intensive, flexible, cell-oriented assembly units capable of low or
high volume production runs. The assembly operations construct the final product
through hot or cold forging machines, plastic injection molding, welding,
staking and riveting the component parts. A large portion of the component parts
are purchased from our outside suppliers. However, we manufacture our own
stampings, a process which consists of passing sheet metal through dies in a
stamping press to form the metal into three-dimensional parts. We produce
stamped parts using single-stage and progressive dies in presses, which range in
size from 150 to 600 tons. Through cell teams, which stress employee
involvement, our processes are continuously upgraded to increase flexibility,
improve operating safety and minimize changeover times of the dies.
Our door systems and body components use similar processes coupled with
roll forming and stretch bending. Roll forming is a continuous process in which
coiled steel is passed through a series of rollers which progressively form the
metal into a consistently shaped section. When viewed from one end, the profile
may be u-shaped for glass channels and roof rails. More complex shapes are
processed for upper door profiles. Stretch bending involves clamping a length of
the rolled profile at numerous points and then twisting or bending the metal to
form contoured surfaces, such as door frames. Door and body components also
require welding, grinding and polishing operations to provide a smooth finish.
Cables are manufactured using a variety of processes, including plastic
injection molding, extrusion, wire flattening, spring making and zinc
diecasting. Wire is purchased from outside suppliers and then formed into
contra-twisted layers on tubular stranders and bunching machines to produce up
to 19-wire stranded cable. Corrosion resistance is provided by a proprietary,
ceramic coating applied during the
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<PAGE> 55
stranding process. The cable then is plastic-coated by an extrusion process to
provide a smooth, low coefficient surface that results in high efficiency and
durability. Conduit is then produced by flattening and coiling wire, which is
then extruded with a protective coating. Proprietary strand and conduit cutting
machines enable efficient processing. Assembly operations are arranged in cells
to minimize inventory, improve quality, reduce scrap, improve productivity and
enhance employee involvement. The cables are assembled with various attachments
and end fittings that allow the customer to install the cables to the
appropriate mating mechanisms.
Our window systems broadly include two categories of products: mechanically
framed glass products and molded framed glass. Mechanically framed glass
products are produced by putting glass panes through a series of value-added
processes, which include adding handles, hinges, aluminum and steel based edge
frame assemblies, electrical connectors and fasteners. The production of molded
framed glass products involves two primary molding media: RIM (Reaction
Injection Molding: Polyurethane) and PVC (Poly Vinyl Chloride). Both media
provide a "surround" to the glass panes that incorporates the styling, sealing
and mechanical attachment features of the product. Our ability to utilize either
media provides OEMs with the maximum advantage in terms of cost, styling
imperatives and robustness. The glass panes used in the production of our window
systems are purchased from outside suppliers.
Our injection molded plastic parts are manufactured through injection
molding of a variety of resins on molding machines of various sizes and types.
Headlamp and taillamp housings are also manufactured through the injection
molding process. The interior of the housings are then coated and at times
vacuum metalized to obtain the proper reflective qualities. Lenses are added to
the housings on a semi-automated production line.
We utilize frequent communication meetings at all levels of manufacturing
to provide training and instruction as well as to assure a cohesive, focused
effort toward common goals. We encourage employee involvement in all production
activity and view such involvement as a key element in our success. We also
aggressively pursue involvement from our suppliers, which is necessary to assure
a consistent flow of raw materials and components on a timely basis with
consistently high quality. We utilize 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. We have made substantial
investments in manufacturing technology and product design capability to support
our products, including modern manufacturing equipment, fineblanking,
sophisticated CAD systems and highly-trained engineering personnel. These
advanced capabilities have helped to further reduce scrap rates, ensure superior
product quality and increase efficiency.
The automotive industry has adopted a quality rating system known as
QS-9000, a rigorous inspection of a suppliers' facilities and operating systems
performed by independent certified auditors. Certification and on-going
maintenance of certification is mandatory for future supply consideration. We
have received QS-9000 certification at all of our facilities.
Our plants have been recognized by our customers with various awards, such
as the DaimlerChrysler Gold Pentastar Award, GM Target for Excellence, Nummi
Delivery Performance Award and Isuzu Quality Achievement Award. We have also
received an "A" rating at Peugeot and Renault. We have received Ford Q-1
certification at all facilities shipping current model Ford product.
COMPETITION
We operate in a highly competitive environment. We principally compete for
new business at the beginning of the development of new models and upon the
redesign of existing models. New model development generally begins two to five
years before marketing of such models to the public. Once a producer has been
designated to supply parts for a new program, an OEM usually will continue to
purchase those parts from the designated producer for the life of the program,
although not necessarily for a redesign. Competitive factors in the market for
our products include product quality and reliability, cost, timely delivery,
technical expertise and development capability, new product innovation and
customer
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<PAGE> 56
service. The number of our competitors has decreased due to the supplier
consolidation resulting from changing OEM policies. Some of our competitors have
substantial size, scale and financial resources.
In addition, there is substantial and continuing pressure from the OEMs to
reduce costs, including the cost of products purchased from outside suppliers
such as Dura. We are able to generate sufficient production cost savings to
offset these price reductions.
Set forth below is a brief summary of our most significant competitors in
each of our principal product categories:
Automotive Cables. Our primary competitors in automotive cables are
Teleflex Incorporated ("Teleflex") and Hi-Lex Corporation ("Hi-Lex") in North
America and Kuester & Co. GmbH, Ficosa International, S.A. ("Ficosa") and Sila
Holding Industriale ("Sila") in Europe.
Parking Brakes. Our primary competitors in parking brakes are Ventra
Group, Inc. and Magna International Inc. ("Magna") in North America and
Scharwaechter GmbH & Co. ("Edscha"), Ficosa and Aries Industries in Europe.
Transmission Shifters. Our primary competitors in transmission shifter
mechanisms is Grand Haven Stamped Products in North America and Teleflex,
Ficosa, and Sila in Europe.
Window Systems. Our primary competitors in window systems are Donnelly
Corporation, Libbey-Owens Ford Co., PPG Inc. and Guardian Industries, Inc. in
North America and Sekurit and Pilkington in Europe.
Door Systems. Our primary competitors in door systems are Peregrine Inc.
and Hi-Lex in North America and Brose Fahrzeagteile Glaswerke GmbH & Co.
("Brose") and Magna in Europe.
Seating Systems. Our primary competitors in seating systems are Lear
Corporation and Johnson Controls, Inc. in North America and Bertraud Faure,
Brose, C. Rob Hammerstein GmbH & Co. KG, Lear Corporation and Keiper Recaro GmbH
& Co. in Europe.
Mobile Products. Our primary competitors in mobile products include
Suburban Manufacturing Company, Maytag Appliances/Magic Chef RV Products, The
Hammerblow Corporation and Hehr International, Inc.
SUPPLIERS AND RAW MATERIALS
Our principal raw materials include (1) coil steel and resin in mechanism
production, (2) metal wire and resin in cable production, (3) glass in window
systems, and (4) resins and lighting components in automotive lighting
production. We do not manufacture or sell primary glass. The types of steel we
purchase include hot and cold rolled, galvanized, organically coated and
aluminized steel. In general, the wire used by us is produced from steel with
many of the same characteristics with the exception that it has a higher carbon
content. We utilize plastic resin to produce the protective coating for our
cables and to produce transmission shifter components, as well as its automotive
lighting products and injection molded plastic parts. We employ just-in-time
manufacturing and sourcing systems enabling us to meet customer requirements for
faster deliveries while minimizing our need to carry significant inventory
levels. We have not experienced any significant shortages of raw materials and
normally do not carry inventories of raw materials or finished products in
excess of those reasonably required to meet production and shipping schedules.
We typically negotiate blanket purchase orders or 12-month supply
agreements with integrated steel suppliers, mini-mills and service centers that
have demonstrated timely delivery, quality steel and competitive prices. These
relationships allow us to order precise quantities and types of steel for
delivery on short notice, thereby permitting us to maintain low inventories. In
addition, we occasionally "spot buy" steel from service centers to meet customer
demand, engineering changes or new part tool trials.
Other raw materials purchased by us include dies, motors, fasteners,
springs, rivets and rubber products, all of which are available from numerous
sources.
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EMPLOYEES
As of December 31, 1999, we had approximately 21,000 employees. Overall,
approximately 19 percent of our employees are salaried and the balance are paid
hourly. Approximately 25 percent of our employees are currently covered by
collective bargaining agreements as follows:
<TABLE>
<CAPTION>
LOCATION COLLECTIVE BARGAINING AGREEMENT EXPIRATION
- -------- ---------------------------------------------- ------------------
<S> <C> <C>
Australia...................... Australian Metals Workers No term
Brazil......................... Sindicato dos Metalungicos do ABC No term
Canada......................... CAW June 2001
CAW June 2002
CAW September 2002
Int'l Assoc. of Machinists & Aeorspace Workers June 2000
Czech Republic................. KOVO December 2000
France......................... Confederation Francaise de L'Encadrement December 1999
Confederation Francaise Democratique du December 1999
Travail
Germany........................ IG-Metall February 2000
December 2000
Mexico......................... Confederacion Trabajodores de Mexico June 2000/Annually
Portugal....................... Sindicato dos trabalhadores da Industria No term
Metalurgica e Metalomecanica do distrito da
Guarda
Spain.......................... Comisiones Oberera December 1999
United Kingdom................. Managerial Scientific & Financial March 2000
AEEU March 2000
United States.................. UAW April 2000
December 2000
December 2000
June 2001
April 2002
Universal Employees December 2000
Teamsters December 2000
Independent April 2001
</TABLE>
Although we believe that our relationship with our union employees is good,
there can be no assurance that we will be able to negotiate new agreements on
favorable terms. In the event we are unsuccessful in negotiating new agreements,
these facilities could be subject to work stoppages, which could have a material
adverse effect on our operations.
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<PAGE> 58
PROPERTIES
Our corporate office is located in Minneapolis, Minnesota and occupies
approximately 5,700 square feet. Our operating headquarters is located in
Rochester Hills, Michigan and occupies approximately 65,000 square feet, a
portion of which is used for product development activities. Both of these
facilities are leased.
We believe that the productive capacity and utilization of our facilities
is sufficient to allow us to conduct our operations in accordance with our
business strategy. All of our owned facilities are subject to liens under the
credit facility. The following table shows our principal facilities as of
December 31, 1999:
<TABLE>
<CAPTION>
NUMBER OF
COUNTRY SITES
- ------- ---------
<S> <C>
United States........................................ 42
Canada............................................... 4
United Kingdom(1).................................... 9
Germany.............................................. 10
France............................................... 8
Portugal............................................. 2
Spain................................................ 5
Mexico............................................... 2
Australia............................................ 1
Brazil(2)............................................ 2
India(3)............................................. 1
Czech Republic....................................... 1
--
Total........................................... 87
==
</TABLE>
- ---------------
(1) One of our facilities located in the U.K. is owned by a corporation in which
Nippon Cable Systems Inc. (TSK) owns a 35 percent equity interest.
(2) We hold a 51 percent equity interest of Pollone, S.A., a Brazilian auto
supplier that operates through one facility located in Sao Paulo, Brazil.
(3) Facility is owned by a joint venture in which we hold a 49 percent ownership
interest.
Our manufacturing facilities have a combined square footage in excess of
9,000,000, approximately 72 percent of which is owned and approximately 28
percent is leased. Nine of our U.S. facilities, encompassing 630,000 square feet
on a combined basis, are dedicated to producing our mobile products. To increase
efficiency, we expect to consolidate the operations of certain of our
manufacturing facilities and technical centers over the next twelve months.
In some cases, several of our manufacturing sites, technical centers and/or
product development centers and sales activity offices are located at a single
multi-purpose site. As of December 31, 1999, we had an aggregate of 15 technical
centers, with 6 located in the United States, 8 located in Europe and 1 in
Australia.
Management believes that substantially all of our property and equipment is
in good condition and that it has sufficient capacity to meet our current
manufacturing needs. Utilization of our facilities varies with North American
and European light vehicle production and general economic conditions in such
regions.
LEGAL PROCEEDINGS
We face an inherent business risk of exposure to product liability claims
in the event that the failure of our products results in personal injury or
death, and there can be no assurance that we will not experience any material
product liability losses in the future. In addition, if any of the products we
have designed prove to be defective, we may be required to participate in a
recall involving such products.
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<PAGE> 59
In late 1994, Ford issued a recall of a series of manual transmission Ford
F-Series pickups to repair the self-adjust parking brakes originally
manufactured by the Brake and Cable Business. Ford had received several reports
that the brakes failed. Pursuant to a letter agreement entered into in
connection with our acquisition of the Brake and Cable Business in August 1994,
we agreed to reimburse Ford for up to $6.0 million of Ford's costs of the
recall. We have reimbursed Ford for the full amount under this agreement. We are
also involved in a product recall relating to the same issue with respect to the
Ford Mondeo in Europe. We have agreed to pay 50 percent of the costs of that
recall not to exceed $1.0 million, which payments totaled $0.4 million as of
December 31, 1999.
The type of alleged failures that prompted the F-Series recalls have also
led to a number of claims and lawsuits filed against Ford, one of which
culminated in a July 1998 award of punitive damages against Ford of more than
$151 million (which has subsequently been reduced on appeal to $69 million) and
Ford is appealing the decision. We may be subject to claims brought directly
against us by injured occupants of Ford vehicles and to claims for contribution
or indemnification asserted by Ford. The agreement relating to the acquisition
of the Brake and Cable Business provided that we are liable for claims arising
out of accidents that take place on or after August 31, 1994 and that we will be
liable for other claims only to the extent any losses by Alkin relating to such
claims are not paid by Alkin's insurance policies (either because they are not
over the deductible amount, because Alkin's policy limits have been exceeded or
because they are not covered by Alkin's insurance policies for other reasons).
To date, two cases have been brought directly against us or Alkin relating to
personal injury claims, and Ford has received over 400 claims (generally for
property damage) relating to alleged defects in the self-adjust parking brakes.
The claims that purport to seek recovery for personal injury allegedly as a
result of the recall condition, with several exceptions, have generally involved
relatively minor injuries, suffered principally while occupants were trying to
stop or jump out of rolling vehicles on home driveways or similar inclines. Ford
has maintained that Dura or Alkin is responsible for all damages or liabilities
arising out of these claims. We dispute this position. As of December 31, 1999,
Ford had tendered its defense of approximately 30 such claims to Dura and Alkin,
and indicated that it would look to Dura and Alkin for indemnification were Ford
ultimately found to be liable and required to make any payments relating to such
claims. Dura and Alkin have submitted these claims to their insurance carriers.
We have attempted to work with Ford to address the claims arising from the
self-adjust parking brakes originally manufactured by the Brake and Cable
Business and do not believe that these claims have adversely affected its
business relationship with Ford.
From time to time, in the ordinary course of its business, we receive
notice from a customer that a product may not be properly functioning. For
example, in November 1998, we were notified by Ford of an alleged failure of one
of our cables used to control the speed control on certain of Ford's vehicles.
In March 1999, we were notified by Ford of its decision to institute a recall of
certain of its vehicles, including Explorers, Mountaineers, Rangers, Mustangs
and F-Series pickups, relating to the speed control cable. Ford has reported
that certain of such vehicles could be equipped with a speed control cable that
could interfere with the speed control pulley and thus result in a "stuck"
throttle. In June 1999, Ford notified us that as many as 987,839 vehicles could
be affected at an alleged cost of up to $60 per vehicle. Based upon our tests
and investigations to date, we do not believe that our product is responsible
for the problems associated with the speed control unit. To date, we have not
been provided with any documents from Ford that support its allegations.
In October 1999, Ford announced that it was voluntarily recalling all
1998-1999 Ford Explorers and Mountaineers (approximately 932,000) vehicles) to
replace the auxiliary hood latches. Ford contends that we failed to provide
adequate corrosion protection, thereby allowing the secondary latch to remain
open, which may potentially lead to hoods flying open. Ford projects that the
recall will cost Ford approximately $23 million. We deny any liability for this
recall, in part, because the latch was manufactured to specifications
established by Ford. We are working to resolve the hood latch issue in
conjunction with the speed control cable issues noted above.
We have also received notices from GM, Renault and Audi with respect to
alleged failures of products that we have supplied to them. In all of these
cases, it is possible that such manufacturers will
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<PAGE> 60
seek contribution from us with respect to the costs they incur if recalls are
undertaken or for costs associated with possible repairs. Based upon the
information available to date, we do not expect any of these matters either
individually or collectively to have a material effect on our results of
operations and financial position.
In early November 1996, we were served with a lawsuit brought by affiliates
of AIG, its excess insurance carrier, in Toronto, Canada seeking a declaratory
judgment that the umbrella and excess liability policies that it had issued to
Onex do not provide coverage in connection with allegedly defective self-adjust
parking brakes manufactured by Alkin prior to August 31, 1994. The AIG policies
at issue provided (a) the first layer of excess coverage (beyond our $3 million
primary policy per year) for claims arising from August 31, 1994 to April 1,
1996 in the amount of $20 million coverage per year, and (b) an additional layer
of excess coverage at $33 to $53 million per year. In principal part, the AIG
affiliates claim that the policies do not provide coverage with respect to
products manufactured prior to August 31, 1994 or liabilities assumed by us
pursuant to purchase agreements. The AIG affiliates also claim that the policies
should be voided with respect to self-adjust parking brake claims for inadequate
disclosure at the time the policies were applied for. Dura and Onex dispute the
allegations of the Ontario lawsuit and have filed a counterclaim against the AIG
affiliates for breach of contract.
We believe that we maintain adequate insurance, including product liability
coverage, to cover the claims described above. We have also established reserves
in amounts we believe adequate to cover any adverse judgments. However, any
adverse judgment in excess of our insurance coverage and such reserves could
result in a material adverse effect to our results of operations and financial
condition.
In February 1998, we were contacted by an attorney for the Lemelson
Medical, Education & Research Foundation Limited Partnership (the "Foundation"),
alleging that our operations infringe on the Foundation's portfolio of patents
relating to machine vision, bar coding and flexible manufacturing. Attorneys for
the Foundation have threatened to initiate litigation against us unless we agree
to pay royalty fees pursuant to a negotiated license agreement. We dispute the
infringement allegation.
We have received notice from an attorney representing Teleflex alleging
that a transmission shifter cable manufactured by us in Europe infringes a U.S.
patent held by Teleflex. We are currently in the process of investigating this
matter and believe, based on the information available at this time, that this
matter will not have a material adverse effect on our operations.
ENVIRONMENTAL MATTERS
We are subject to the requirements of federal, state, local and foreign
environmental and occupational health and safety laws and regulations. While we
devote resources designed to maintaining compliance with these requirements,
there can be no assurance that we operate at all times in complete compliance
with all such requirements. We could be subject to potentially significant fines
and penalties for any noncompliance that may occur. Although we have made and
will continue to make capital and other expenditures to comply with
environmental requirements, we do not expect to incur material capital
expenditures for environmental controls in 2000.
Some of our operations generate hazardous substances. Like all
manufacturers, if a release of hazardous substances occurs or has occurred at or
from any of our current or former properties or at a landfill or another
location where we have disposed of wastes, we may be held liable for the
contamination, and the amount of such liability could be material.
In 1995, the Michigan Department of Environmental Quality, or MDEQ,
requested that we and Wickes conduct an environmental investigation at and
around our Mancelona, Michigan facility, which we acquired from Wickes in 1990.
The investigation detected trichloroethylene, or TCE, in groundwater at the
facility and offsite locations. We have not used TCE since it acquired the
Mancelona facility, although TCE may have been used by prior operators. We have
arranged and paid for the sampling of several residential drinking water wells
in the area and for the replacement of drinking water wells found to contain TCE
above drinking water standards. Sampling of residential wells, and replacement
of such wells,
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<PAGE> 61
when necessary, will continue. We will likely incur additional costs to further
investigate, monitor or remediate the contamination, and possibly to provide
additional alternative drinking water supplies. Such costs may be material. In
April 1999, we settled certain potential claims asserted by a ski resort with
respect to possible future impact on the resort's water supply wells.
The Mancelona groundwater contamination matter is subject to an indemnity
from Wickes. In connection with our acquisition of certain assets from Wickes in
1990, Wickes agreed to indemnify us with respect to certain environmental
liabilities associated with Wickes' operation of the subject facilities subject
to a $750,000 basket (which has been reached), up to a $2.5 million cap. We will
be obligated to indemnify Wickes with respect to any liabilities above such cap.
Wickes has acknowledged that we made a timely and adequate claim for
indemnification with respect to the Mancelona matter, and has been paying
indemnification claims relating to the Mancelona matter, subject to a
reservation of rights.
In 1998, we acquired Universal. The seller in the Universal transaction
agreed to indemnify us for environmental liabilities arising from the operation
of the acquired facilities prior to the acquisition. Following the acquisition,
pursuant to the indemnity, the seller continued to address certain environmental
matters, including the cleanup of TCE-contaminated soil at our Butler, Indiana
facility. In 1998, the seller filed for reorganization under the federal
bankruptcy laws and appears to have ceased performing its obligations under the
indemnity. In March 1999, the seller requested bankruptcy court approval to
reject their contractual indemnity obligations to us. Subject to our right to
seek repayment in the bankruptcy proceeding, it is likely that we will be
responsible for completing the cleanup at our Butler facility. Although we
cannot provide complete assurance, based on estimates provided by the
environmental consultant that has been performing the cleanup, we do not expect
the cost to complete the cleanup to be material.
In 1998, Excel entered into a partial consent decree to settle its
liability for past costs at the Main Street Well Field Site in Elkhart, Indiana,
where TCE was found in a municipal well field near Excel's Elkhart facility.
Excel is one of several potentially responsible parties involved at the site.
Under the settlement, Excel has a continuing payment obligation for operation
and maintenance of a groundwater treatment system and for a soil vapor
extraction system. These obligations will likely continue for several years. The
annual cost to operate these systems is not material. In addition, Excel expects
to receive certain payments from other parties involved at the site.
We are involved as a potentially responsible party at several waste
disposal sites. Although the environmental laws provide for joint and several
liability at such sites, liability is typically allocated among the viable
parties involved. We believe that we have no liability at some of these sites,
and that adequate reserves are in place for current estimates of our share of
liability at the other sites. We cannot provide complete assurance, however,
that our liability at these sites will not materially exceed the current amount
of our reserves.
In 1997, Adwest acquired Heidemann. Areas of contamination from historical
operations exist at the Heidemann facilities located in Rotenburg, Einbeck and
Kohler, Germany. We are currently operating treatment systems to clean up
contamination at the Rotenburg and the two Einbeck facilities and are monitoring
groundwater contamination at the Kohler facility. When Adwest acquired these
facilities, the seller posted a DM 5 million escrow, in part, to cover
environmental claims field during an 18-month period following the acquisition.
Adwest filed environmental claims totaling DM 2 million against the escrow for
expenses to remediate contamination at the Rotenburg and Einbeck facilities and
upgrade the wastewater treatment system at the Rotenburg facility. We expect to
negotiate with the seller in the near future regarding the amount of recovery
for these environmental claims. We may incur costs beyond the amount recovered
from the escrow to continue to operate and maintain the treatment systems, and
to perform additional investigation and clean up, if necessary. Based on current
information, such costs are not expected to be material. However, should
additional or more extensive contamination be discovered, we may incur material
expenditures to address such contamination.
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<PAGE> 62
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to our
directors and executive officers as of March 1, 2000:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- ---- --- -----------
<S> <C> <C>
S.A. Johnson......................... 59 Chairman and Director
Karl F. Storrie...................... 62 President, Chief Executive Officer and Director
Donald DeFosset II................... 51 Executive Vice President and Chief Operating Officer
David R. Bovee....................... 50 Vice President and Assistant Secretary
Joe A. Bubenzer...................... 48 President, Engineered Products Division
John J. Knappenberger................ 53 Vice President
Milton D. Kniss...................... 52 Vice President
William F. Ohrt...................... 51 Vice President and Chief Financial Officer
Michael C. Paquette.................. 57 Vice President
Robert A. Pickering.................. 56 Vice President
Scott D. Rued........................ 43 Vice President
Jurgen von Heyden.................... 52 Vice President
Robert E. Brooker, Jr................ 62 Director
Jack K. Edwards...................... 55 Director
James O. Futterknecht, Jr............ 52 Director
J. Richard Jones..................... 57 Director
John C. Jorgensen.................... 62 Director
William L. (Barry) Orscheln.......... 49 Director
Eric J. Rosen........................ 39 Director
Ralph R. Whitney, Jr................. 64 Director
</TABLE>
S.A. Johnson has served as Chairman and a Director of Dura since November
1990. Mr. Johnson is the founder, Chief Executive Officer and President of
Hidden Creek Industries ("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 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.
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.
Donald DeFosset II has served as Executive Vice President and Chief
Operating Officer since joining the Company in October 1999. Mr. DeFosset began
his career with Rockwell International in 1971 rising to President of their Off
Highway division. He served as Executive Vice President-Operations with Mack
Trucks from 1989-1992 and held various senior-level positions with Allied Signal
from 1992-1996. Prior to joining Dura, Mr. DeFosset was President of Navistar's
Truck Group, Corporate Executive Vice President, and a member of the company's
Office of Chief Executive Officer.
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<PAGE> 63
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.
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.
William F. Ohrt has served as Vice President and Chief Financial Officer of
Dura since December 1999. Prior to joining Dura, Mr. Ohrt served as Vice
President and Chief Financial Officer for the Navistar International Truck and
Parts Group. Prior to that he was employed by ITT Industries as Vice President
Finance in their Automotive Electrical Systems business.
Michael C. Paquette has served as Vice President of Human Resources of Dura
since March 1999. From 1995 to February 1999, Mr. Paquette was Vice President of
Corporate Human Resources of Excel. From 1983 to 1995, Mr. Paquette was Vice
President of Human Resources for the Power Generation Group of Cummins Engine
Company, a manufacturer of diesel engines and related components.
Robert A. Pickering has served as Vice President of Dura since March 1999,
with responsibility for recreational and heavy vehicle and mass transit
operations. From December 1996 to March 1999, Mr. Pickering was Vice President
of Excel. From 1989 to 1996, Mr. Pickering was employed by Atwood Industries,
serving as Vice President of manufacturing of Atwood Automotive Division from
1989 to 1991 and President of Atwood Mobile Products from 1991 to 1996. Prior to
joining Atwood Industries, Mr. Pickering's employment included seven years with
Tech Form Industries, an automotive OEM supplier, six years with Volkswagen of
America, and ten years with the Chevrolet Division of General Motors.
Scott D. Rued has served as Vice President of Dura since November 1990. Mr.
Rued, a stockholder of J2R, has also served as Executive Vice President and
Chief Financial Officer of Hidden Creek since January 1994 and served as its
Vice President-Finance and Corporate Development from June 1989 through 1993.
Mr. Rued has served as Vice President, Corporate Development and a director of
Tower Automotive, Inc. since April 1993. Mr. Rued served as Vice President,
Chief Financial Officer and a director of Automotive Industries Holding, Inc.
from April 1990 to 1995. Mr. Rued is also a director of The Rottlund Company,
Inc., a corporation engaged in the development and sale of residential real
estate.
Jurgen von Heyden has served as Vice President of Dura since February 2000
and served as Managing Director of Dura Body & Glass Systems GmbH in
Plettenberg, Germany from March 1999 to January 2000. Prior to the acquisition
of Schade, Mr. von Heyden served as the Managing Director/CEO of Schade since
1997. Before joining Schade he was the Managing Director of Happich, later
becoming Becker-Group. Mr. von Heyden has been in the automotive supplier
industry since 1984 with professional training of Diplom-Ingenieur and
Diplom-Wirtschaftsingenieur.
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<PAGE> 64
Robert E. Brooker, Jr., 62, has served as a Director of Dura since
September 1996. From 1993 to 1995, Mr. Brooker was President and Chief Operating
Officer of Connell Limited Partnership. Prior thereto, Mr. Brooker served six
years as President and Chief Executive Officer at Lord Corporation. Mr. Brooker
is also a director of Full Circle Investments, a private investment company.
Jack K. Edwards, 55, has served as a Director of Dura since December 1996.
Mr. Edwards joined Cummins Engine Co., Inc. in 1972 and has served as Executive
Vice President and Group President -- Power Generation and International since
March 1996. Mr. Edwards is also a director of David J. Joseph Co., a processor
and trader of steel scrap.
James O. Futterknecht, Jr., 52, has served as a Director of Dura since May
1999. Mr. Futterknecht joined Excel in 1970, was Vice President-Corporate Sales
from 1976 until 1984, was Vice President-Automotive Products from 1984 until
1987, was Vice President-Automotive Sales and Engineering from 1987 to 1990 and
was Executive Vice President from 1990 to 1992. He was elected as President and
Chief Operating Officer and was appointed as an Excel director in 1992. In 1995,
he was elected to the additional offices of Chairman of the Board and Chief
Executive Officer and served those offices until Dura acquired Excel in March
1999. Mr. Futterknecht is currently Managing Director and Vice President of
Hammond, Kennedy, Whitney & Company, Inc., a New York, New York financial
intermediary and private investment banking firm.
J. Richard Jones, 57, has served as a Director of Dura since May 1998.
Prior to the acquisition of Trident in April 1998, 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.
John C. Jorgensen, 62, has served as a Director of Dura since May 1998. Mr.
Jorgensen has served as president of ORTECH CO. since March 1992, Senior Vice
President of Manufacturing for Orscheln Management Co. since April 1996 and
Executive Vice President of Orscheln Products L.L.C. since March 1992. Prior to
1992, Mr. Jorgensen was responsible for the operations at Orscheln Co.
Manufacturing.
William L. (Barry) Orscheln, 49, has served as a Director of Dura since
August 1994. Mr. Orscheln has also served as President of Alkin (and its
predecessors) since March 1994, as President of Orscheln Farm and Home since
September 1995, as President of Orscheln Properties Co., L.L.C. since October
1994 and as President of Orscheln Management Co. since December 1987. Mr.
Orscheln has served as a director of UMB Bank, a bank holding company, since
July 1989 and as a director of Orscheln Management Co. since 1987.
Eric J. Rosen, 39, has served as a Director of Dura since January 1995. Mr.
Rosen is Managing Director of Onex Investment Corp., a diversified industrial
corporation and an affiliate of Onex Corporation, and served as a Vice President
of Onex Investment Corp. from 1989 to February 1994. Prior thereto, Mr. Rosen
worked in the merchant banking group at Kidder, Peabody & Co. Incorporated from
1987 to 1989.
Ralph R. Whitney, Jr., 64, has served as a Director of Dura since May
1999. Mr. Whitney was a director of Excel from 1983 to March 1999 and was
Chairman of the Board from 1983 to 1985. Mr. Whitney has been a principal of
Hammond, Kennedy, Whitney & Company, Inc., a New York, New York financial
intermediary and private investment banking firm, since 1971. Mr. Whitney is
also a director of Relm Communications, Inc., First Technology plc., IFR
Systems, Inc. and Baldwin Technologies, Inc.
60
<PAGE> 65
EXECUTIVE COMPENSATION
The following table sets forth compensation packages for the years ended
December 31, 1999, 1998 and 1997 for our chief executive officer and the four
other executive officers of Dura who were the most highly compensated officers
of Dura for the year ended December 31, 1999. We refer to these five individuals
as our "named executive officers."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------ ------------
OTHER ANNUAL OPTIONS ALL OTHER
NAME AND SALARY BONUS COMPENSATION GRANTED COMPENSATION
PRINCIPAL POSITION YEAR ($)(1) ($)(1) ($) (#) ($)(3)
- ------------------ ---- -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Karl F. Storrie........................ 1999 $500,000 $800,000 $112,615(4) 140,000 $8,047
President and Chief 1998 400,000 550,000 (2) 90,000 6,906
Executive Officer 1997 345,833 425,000 (2) 30,000 6,856
Jurgen von Heyden...................... 1999 204,157 429,000 (2) -- --
Vice President(5)
Joe A. Bubenzer........................ 1999 259,000 275,000 (2) 50,000 6,802
Senior Vice President 1998 239,000 160,000 (2) 30,000 5,322
1997 187,083 150,000 (2) 12,500 5,322
Milton D. Kniss........................ 1999 250,000 275,000 (2) 50,000 6,949
Vice President 1998 200,000 190,000 (2) 37,500 5,724
1997 167,917 150,000 (2) 12,500 5,724
John J. Knappenberger.................. 1999 200,000 210,000 (2) 50,000 7,264
Vice President 1998 175,000 130,000 (2) 30,000 5,664
1997 147,500 120,000 (2) 10,000 5,614
</TABLE>
- ---------------
(1) Includes amounts deferred by employees under Dura's 401(k) employee savings
plan, pursuant to Section 401(k) of the Internal Revenue Code and bonus
amounts deferred into the Deferred Income Leadership Stock Purchase Plan.
(2) None of the perquisites or other benefits paid to each of the named
executive officer exceeded the lesser of $50,000 or 10 percent of the total
annual salary and bonus received by such named executive officers.
(3) The amounts disclosed in this column include amounts contributed by Dura to
Dura's 401(k) employees savings plan and profit sharing plan and dollar
value of premiums paid by Dura for term life insurance on behalf of the
named executive officers.
(4) Includes $96,764 of personal travel expenses paid by Dura.
(5) Mr. von Heyden became an employee of Dura in March 1999.
OPTION GRANT TABLE
The following table shows all grants of options to acquire shares of DASI
Class A common stock granted to the named executive officers under the 1998
Stock Incentive Plan (the "1998 Plan").
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED
SECURITIES % OF TOTAL ANNUAL RATES OF
UNDERLYING OPTIONS STOCK PRICE APPRECIATION
OPTIONS GRANTED TO EXERCISE FOR OPTION TERM(2)
GRANTED EMPLOYEES IN PRICE EXPIRATION -------------------------
NAME (#)(1) FISCAL YEAR (PER SHARE) DATE 5% 10%
- ---- ----------- ------------ ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
K.F. Storrie............................... 140,000 16.9% $17.00 12/17/09 $1,496,769 $3,793,107
J. von Heyden.............................. -- -- -- -- -- --
J.A. Bubenzer.............................. 50,000 6.1% 17.00 12/17/09 534,560 1,354,681
J.J. Knappenberger......................... 50,000 6.1% 17.00 12/17/09 534,560 1,354,681
M.D. Kniss................................. 50,000 6.1% 17.00 12/17/09 534,560 1,354,681
</TABLE>
- ---------------
(1) These options vest ratably over four years commencing one year from the date
of grant.
(2) Amounts reflect certain assumed rates of appreciation set forth in the
executive compensation disclosure rules of the SEC. Actual gains, if any, on
stock option exercises depend on future performance of DASI's Class A common
stock and overall stock market conditions. No assurances can be made that
the amounts reflected in these columns will be achieved.
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<PAGE> 66
OPTION EXERCISES AND YEAR-END VALUE TABLE
The following table shows aggregate exercise of options during 1999 by the
named executive officers and the aggregate value of unexercised in-the-money
options held by each named executive officer as of December 31, 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL
YEAR AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
YEAR-END(#) YEAR-END($)
--------------- --------------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- ---- ---------------- ------------ --------------- --------------------
<S> <C> <C> <C> <C>
K.F. Storrie...................................... -- -- 112,500/222,500 $220,350/$61,320
J. von Heyden..................................... -- -- 0/0 0/0
J.A. Bubenzer..................................... -- -- 21,250/81,250 0/21,900
J.J. Knappenberger................................ -- -- 38,623/78,750 65,732/21,900
M.D. Kniss........................................ -- -- 23,125/86,875 0/21,900
</TABLE>
STOCK PLANS
1998 STOCK INCENTIVE PLAN
The 1998 Stock Incentive Plan was adopted by the board of directors in
December 1998 and was approved by our stockholders in March 1999. As of the date
of this prospectus, options for an aggregate of 1,277,000 shares of Class A
common stock have been granted under the 1998 Plan.
The 1998 Plan provides for the grant of incentive stock options to our
employees (including officers and employee directors) and for the grant of
nonstatutory stock options and stock purchase rights, or SPRs, to our employees,
directors and consultants. A total of (1) 1,000,000 shares of Class A common
stock, (2) any shares returned to the 1996 Plan as a result of termination of
options and (3) annual increases to be added on the date of each annual meeting
of stockholders of Dura commencing in 1999 equal to the lesser of 500,000 shares
of Class A common stock, 5 percent of the outstanding shares of Class A common
stock, or such lesser amount as may be determined by the board of directors, are
currently reserved for issuance pursuant to the 1998 Plan. On December 16, 1999,
the Dura board amended the 1998 Plan to provide for annual increases of
1,000,000 shares, subject to stockholder approval.
The administrator of the 1998 Plan has the power to determine the terms of
the options or SPRs granted, including the exercise price of the option or SPR,
the number of shares subject to each option or SPR, the exercisability thereof,
and the form of consideration payable upon such exercise. In addition, the Dura
board has the authority to amend, suspend or terminate the 1998 Plan, provided
that no such action may affect any share of DASI common stock previously issued
and sold or any option or SPR previously granted under the 1998 Plan.
Options and SPRs granted under the 1998 Plan are generally not transferable
by the optionee, and each option and SPR is exercisable during the lifetime of
the optionee and only by such optionee. Options granted under the 1998 Plan must
generally be exercised within three months after the end of an optionee's status
as an employee, director or consultant of Dura, or within twelve months after
such optionee's termination by death or disability, but in no event later than
the expiration of the option term.
In the case of SPRs, unless the administrator determines otherwise, the
restricted stock purchase agreement shall grant DASI a repurchase option
exercisable upon the voluntary or involuntary termination of the purchaser's
employment or consulting relationship with Dura for any reason (including death
or disability). The purchase price for shares repurchased pursuant to the
restricted stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to Dura. The purchase option shall lapse at a rate determined by the
administrator.
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<PAGE> 67
The exercise price of all incentive stock options granted under the 1998
Plan must be at least equal to the fair market value of the Class A common stock
on the date of grant. The exercise price of nonstatutory stock options and SPRs
granted under the 1998 Plan is determined by the administrator, but with respect
to nonstatutory stock options intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the exercise
price must be at least equal to the fair market value of the Class A common
stock on the date of grant. With respect to any participant who owns stock
possessing more than 10 percent of the voting power of all classes of the
outstanding capital stock of Dura, the exercise price of any incentive stock
option granted must be at least equal to 110 percent of the fair market value on
the grant date and the term of such incentive stock option must not exceed five
years. The term of all other options granted under the 1998 Plan may not exceed
ten years.
The 1998 Plan provides that in the event of a merger of Dura with or into
another corporation, or a sale of substantially all of Dura's assets, each
option and SPR shall be assumed or an equivalent option substituted for by the
successor corporation. If the outstanding options and SPRs are not assumed or
substituted for by the successor corporation, the administrator shall provide
for the optionee to have the right to exercise the option or SPR as to all of
the optioned stock, including shares as to which it would not otherwise be
exercisable. If the administrator makes an option or SPR exercisable in full in
the event of a merger or sale of assets, the administrator shall notify the
optionee that the option or SPR shall be fully exercisable for a period of
fifteen (15) days from the date of such notice, and the option or SPR will
terminate upon the expiration of such period.
EMPLOYEE STOCK DISCOUNT PURCHASE PLAN
The Dura Employee Stock Discount Purchase Plan was approved by our board of
directors and stockholders in August 1996. The Employee Stock Purchase Plan was
established to give employees desiring to do so a convenient means of purchasing
shares of Class A common stock through payroll deductions.
Subject to certain restrictions, each of our employees who is a U.S.
resident or a U.S. citizen temporarily on location at a facility outside of the
U.S. is eligible to participate in the Employee Stock Purchase Plan if he or she
has been employed by Dura for more than six months. Participation is
discretionary with each eligible employee. We have reserved 500,000 shares of
Class A common stock for issuance in connection with the Employee Stock Purchase
Plan. As of December 31, 1999, 93,137 shares had been purchased under the
Employee Stock Purchase Plan. Each eligible employee is entitled to purchase a
maximum of 200 shares per year. Elections to participate and purchases of stock
are made on a quarterly basis. Each participating employee contributes to the
Employee Stock Purchase Plan by choosing a payroll deduction in any specified
amount, with a minimum deduction of $10 per payroll period. A participating
employee may increase or decrease the amount of his/her payroll deduction,
including a change to a zero deduction as of the beginning of any calendar
quarter. Elected contributions are credited to participants' accounts at the end
of each calendar quarter. In addition, employees may make lump sum contributions
at the end of the year to enable them to purchase the maximum number of shares
available for purchase during the plan year.
Each participating employee's contributions are used to purchase shares for
the employee's share account within 15 days after the last day of each calendar
quarter. The cost per share is 85 percent of the lower of the closing price of
the Class A common stock on the Nasdaq National Market on the first or the last
day of the calendar quarter. Shares purchased under the Employee Stock Purchase
Plan carry full rights to receive dividends declared from time to time, and any
dividends attributable to shares in the employee's share account are
automatically used to purchase additional shares for such employee's share
account. A participating employee has full ownership of all shares in his/her
share account and may withdraw them for sale or otherwise by written request to
the compensation committee of the Dura board following the close of each
calendar quarter. Subject to applicable federal securities and tax laws, the
Dura board has the right to amend or to terminate the Employee Stock Purchase
Plan. Amendments to the Employee Stock Purchase Plan do not affect a
participating employee's right to the benefit of the contributions made by such
employee prior to the date of any such amendment. In the event the
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<PAGE> 68
Employee Stock Purchase Plan is terminated, the compensation committee is
required to distribute all shares held in each participating employee's share
account plus an amount of cash equal to the balance in each participating
employee's cash account.
INDEPENDENT DIRECTOR STOCK OPTION PLAN
The Director Option Plan was approved by our board of directors and
stockholders in August 1996 to encourage stock ownership by certain directors of
Dura and to provide those individuals with an additional incentive to manage
Dura and to provide a form of compensation that would attract and retain highly
qualified individuals as members of Dura's board. The Director Option Plan
provides for the issuance of options to independent Directors, as defined,
covering 100,000 shares of Class A common stock, subject to certain adjustments
reflecting changes in Dura's capitalization.
The terms of each option granted under the Director Option Plan may not
exceed ten years from the date of grant. The option price for each option must
equal 100 percent of the fair market value of the Class A common stock on the
date the option is granted. In general, no option may be exercised in whole or
in part prior to the expiration of at least six months from the date of grant of
the option. In consideration of the grant of an option, an optionee is required
to agree to continue to serve as a director of Dura for the lesser of 12 months
from the date the option is granted or for the remainder of the optionee's term
as a director of Dura. Notwithstanding this requirement, nothing contained in
the Director Option Plan or any agreement to be executed pursuant to the
Director Option Plan obligates Dura, its board or its stockholders to retain an
optionee as a director of Dura. As of December 31, 1999, options to purchase an
aggregate of 21,000 shares of Class A common stock have been granted under the
Director Option Plan.
DEFERRED INCOME LEADERSHIP STOCK PURCHASE PLAN
On December 16, 1999, our board of directors adopted the Dura Automotive
Systems, Inc. Deferred Income Leadership Stock Purchase Plan, subject to
approval by our stockholders. The plan permits each key leadership employee
selected as a participant to defer and invest all or part of his or her annual
cash bonus in restricted stock units equivalent to shares of Class A common
stock of Dura. The purposes of the plan are to provide key leadership employees
the opportunity to acquire and increase his or her equity interest in Dura, to
attract and retain highly qualified key employees and to align their interests
with interests of our stockholders. The plan will be administered by the
compensation committee of our board of directors. Subject to the provisions of
the plan, the committee has the authority to select key leadership employees who
are eligible to participate in the plan for a particular year. With respect to
each plan year, the committee shall determine and select the leadership
employees who are eligible to participate in the plan for that plan year. With
respect to each plan year, the committee's determination of eligible leadership
employees shall be made on or before November 1 of that plan year. As of April
1, 2000, the committee had selected 38 leadership employees to participate in
the plan.
The plan permits each eligible leadership employee selected as a
participant to defer and invest all or part of his or her annual cash bonus in
restricted stock units equivalent to shares of Class A common stock of Dura.
Each plan year the eligible leadership employee may elect to defer a percentage
(at least 15 percent) of their cash bonus. The deferred amount shall be
reflected on Dura's records as restricted stock units credited to an account
maintained by Dura for each participant. The maximum aggregate number of shares
of Dura Class A common stock that may be issued under the plan is 500,000 shares
of authorized but unissued shares. An unlimited number of shares may be acquired
by Dura to fund its obligations under the plan. The number of shares may be
issued under the plan is subject to adjustments in the event of a merger,
reorganization, consolidation, recapitalization, dividend (other than ordinary
cash dividends), stock splits, or other change in corporate structure affecting
the Class A common stock. Our board may at any time amend, suspend, or terminate
the plan or any part
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thereof; provided, however, that no amendment may adversely affect the right of
any participant to have dividend units credited to a restricted stock unit
account or to receive payment of any shares of Class A common stock pursuant to
the payout of such accounts, unless the participant consents. Except as provided
in the plan, no amendment to the plan which increases the number of authorized
but unissued shares of Class A common stock which may be issued under this plan
shall be effective unless approved by our stockholders.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth certain information regarding the equity
ownership of Dura as of March 1, 2000 by (i) each person or entity known to Dura
who beneficially owns five percent or more of a class of common stock of DASI,
(ii) each director and named executive officer and (iii) all directors and
executive officers of Dura as a group. Unless otherwise stated, each of the
persons named in the table has sole voting and investment power with respect to
the securities beneficially owned by it or him as set forth opposite its or his
name. Beneficial ownership of the common stock listed in the table has been
determined in accordance with the applicable rules and resultations promulgated
under the Exchange Act.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
-------------------------------------------
CLASS A COMMON STOCK CLASS B COMMON STOCK
-------------------- --------------------
DIRECTORS, OFFICERS NUMBER PERCENT NUMBER PERCENT
AND 5% STOCKHOLDERS OF SHARES OF CLASS OF SHARES OF CLASS
- ------------------- --------- -------- --------- --------
<S> <C> <C> <C> <C>
ONEX DHC LLC (1)(2)................................. -- -- 1,972,913 59.4%
Alkin Co. (2)(3).................................... -- -- 1,366,810 41.0%
J2R Corporation (2)(4).............................. -- -- 308,211 9.3%
S.A. Johnson (2)(4)................................. 12,500 * 317,879 9.6%
Karl F. Storrie (2)(5).............................. 116,900 * 115,531 3.5%
David R. Bovee (2).................................. 20,000 * 26,308 *
Joe A. Bubenzer (2)................................. 22,450 * 23,814 *
Donald DeFosset, II................................. 112,365 * -- --
John J. Knappenberger............................... 45,959 * -- --
Milton D. Kniss (2)................................. 23,128 * 8,961 *
William Ohrt........................................ -- -- -- --
Michael Paquette.................................... 15,095 * -- --
Robert Pickering.................................... 9,570 * -- --
Scott D. Rued (2)(6)................................ 3,750 * 308,211 9.3%
Robert E. Brooker, Jr............................... 30,733 * -- --
W.H. Clement (2).................................... 2,000 * -- --
Jack K. Edwards..................................... 10,700 * -- --
James O. Futterknecht............................... 42,285 * -- --
J. Richard Jones.................................... 16,667 * -- --
John C. Jorgensen (2)(3)............................ -- -- 1,366,810 41.0%
William L. Orscheln (2)(3).......................... -- -- 1,366,810 41.0%
Eric J. Rosen (1)(2)................................ 5,000 * 1,972,913 59.4%
Ralph R. Whitney, Jr................................ 18,800 -- -- --
American Express Company (7)........................ 1,675,114 11.9% -- --
Dimensional Fund Advisors (8)....................... 714,888 5.1% -- --
All Directors and Officers as a group (20
persons).......................................... 395,537 2.7% 3,262,165 97.8%
</TABLE>
- ---------------
(1) Reflects shares of Class B common stock held by Onex DHC LLC, which has
shared voting power over 1,972,913 shares of common stock (see footnote (2))
and sole dispositive power over 1,394,913 shares of Class B common stock.
Mr. Rosen, a Director of Dura, is Managing Director of Onex Investment Corp.
and disclaims beneficial ownership of all shares of common stock owned by
Onex DHC LLC. Onex DHC LLC and Onex Investment Corp. are both wholly owned
subsidiaries of
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<PAGE> 70
Onex Corporation. The address for Onex DHC LLC and Mr. Rosen is c/o Onex
Investment Corp., 712 Fifth Avenue, 40th Floor, New York, New York 10019.
(2) Onex, J2R, Messrs. Johnson, Storrie, Bovee, Bubenzer, Kniss, Rosen and Rued
and certain of Dura's other existing stockholders have entered into
agreements pursuant to which such stockholders agreed to vote their shares
of common stock in the same manner as Onex votes its shares on all matters
presented to Dura's stockholders for a vote and, to the extent permitted by
law, granted to Onex a proxy to effectuate such agreement. As a result, Onex
has voting control of approximately 59.4 percent of the common stock.
(3) Includes 14,420 shares issuable upon the exercise of currently exercisable
options issued to Alkin in connection with Dura's acquisition of the
automotive parking brake cable and lever business and light duty cable
business from Alkin. Messrs. Jorgensen and Orscheln are officers of Alkin
and Mr. Jorgensen disclaims beneficial ownership of the shares owned by
Alkin. The address for Alkin is 2000 U.S. Highway 63 South, Moberly,
Missouri 65270, and the address for each such individual is c/o Alkin at the
same address.
(4) Includes 308,211 shares owned by J2R, of which Mr. Johnson is President, and
9,668 shares owned by Mr. Johnson. The address for Mr. Johnson and J2R is
c/o Dura Automotive Systems, Inc., 4508 IDS Center, Minneapolis, Minnesota
55402.
(5) Includes 1,400 shares owned by Mr. Storrie's wife. Mr. Storrie disclaims
beneficial ownership of such shares.
(6) Includes 308,211 shares owned by J2R, of which Mr. Rued is a stockholder.
Mr. Rued disclaims beneficial ownership of the shares owned by J2R. The
address for Mr. Rued is c/o Dura Automotive Systems, Inc., 4508 IDS Center,
Minneapolis, Minnesota 55402.
(7) American Express Company ("AEC") and American Express Financial Corporation
("AEFC") each reported as of December 31, 1999 shared dispositive power with
respect to 1,675,114 shares of Class A common stock and shared voting power
with respect to 114 shares of Class A common stock. AXP Discovery Fund Inc.
reported as of December 31, 1999 sole voting power and shared dispositive
power with respect to 1,675,000 shares of Class A common stock. The address
for AEC is American Express Tower, 200 Vesey Street, New York, New York
10285 and the address for AEFC and AXP Discovery Fund Inc. is IDS Tower 10,
Minneapolis, Minnesota 55440.
(8) Dimension Fund Advisors reported as of February 11, 2000 sole voting power
with respect to 714,888 shares of Class A common stock, representing 5.1
percent of the outstanding shares of Class A common stock at that time. The
address for Dimensional Fund Advisors Inc. is 1299 Ocean Avenue, 11th Floor,
Santa Monica, CA 90401.
SELLING STOCKHOLDERS
The shares of Class A common stock covered by this prospectus are being
offered by or for the account of the Selling Stockholders listed in the table
below (the "Selling Stockholders"). All of the shares of Class A common stock
listed in the following table relate to shares that may be acquired by such
Selling Stockholders upon the exercise of outstanding warrants. All of these
warrants were issued by Excel in connection with its acquisition of Anderson
Industries, Inc. on April 3, 1996. The warrants were assumed by Dura in
connection with its acquisition of Excel, which was completed on March 23, 1999.
Pursuant to the terms of the merger agreement, each outstanding warrant was
converted into a warrant to (A) purchase that number of shares of Class A common
stock equal to one-half of the number of shares of Excel common stock subject to
the warrant multiplied by 0.8 and (B) receive cash equal to one-half of the
number of shares of Excel common stock subject to the warrant multiplied by
$25.50. The exercise price for the warrants is $16.56 per share of Class A
common stock. None of the Selling Stockholders has had within the past three
years any material relationship with Dura or any of its predecessors or
affiliates.
The following table sets forth the name of each Selling Stockholder, the
number of shares of Class A common stock beneficially owned by each Selling
Stockholder immediately prior to the date of this
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<PAGE> 71
prospectus, the number of shares covered by this prospectus, the number of
shares of Class A common stock to be beneficially owned by each Selling
Stockholder upon completion of this offering, and the percentage of shares to be
owned by each Selling Stockholder upon completion of the offering. However,
because the Selling Stockholders may offer all or a portion of the shares
covered by this prospectus at any time and from time to time hereafter, the
exact number of shares that each Selling Stockholder may retain after completion
of the offering cannot be determined at this time. The last two columns of this
table assume that all shares covered by this prospectus will be sold by the
Selling Stockholders and that no additional shares of Class A common stock are
bought or sold by the Selling Stockholders. Each of the Selling Stockholders
named in the table has sole voting and investment power with respect to the
shares beneficially owned by it or her.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
SHARES NUMBER OF OWNED AFTER
BENEFICIALLY SHARES COVERED OFFERING
OWNED PRIOR TO BY THIS ----------------
OFFERING PROSPECTUS NUMBER PERCENT
-------------- -------------- ------ -------
<S> <C> <C> <C> <C>
Ralph F. Anderson, as Trustee of the Testamentary
Trust U/W/O Edith Anderson........................ 8,398 8,398 -- --
John R. Anderson, as Trustee of the John Anderson
Revocable Trust U/A/D 9/21/77..................... 23,714 23,634 80 *
Linda Anderson...................................... 234 234 -- --
John R. Anderson and Allan B. Muchin, as Co-Trustees
of the John Anderson Discretionary Trust U/A/D
12/28/76....................................... 16,418 16,418 -- --
John R. Anderson and Allan B. Muchin, as Co-Trustees
of the John Anderson Gift Trust U/A/D 12/28/76.... 3,400 3,400 -- --
John R. Anderson and Allan B. Muchin, as Co-Trustees
of the David Descendants Trust U/A/D 12/28/76..... 5,812 5,812 -- --
John R. Anderson and Allan B. Muchin, as Co-Trustees
of the David Family Trust U/A/D 12/28/76.......... 9,024 9,024 -- --
John R. Anderson and Allan B. Muchin, as Co-Trustees
of the Kristin Descendants Trust U/A/D 12/28/76... 5,812 5,812 -- --
John R. Anderson and Allan B. Muchin, as Co-Trustees
of the Kristin Family Trust U/A/D 12/28/76........ 9,024 9,024 -- --
John R. Anderson and Allan B. Muchin, as Co-Trustees
of the Tracy Descendants Trust U/A/D 12/28/76..... 5,812 5,812 -- --
John R. Anderson and Allan B. Muchin, as Co-Trustees
of the Tracy Family Trust U/A/D 12/28/76.......... 9,024 9,024 -- --
John R. Anderson and Allan B. Muchin, as Co-Trustees
of the Jeffrey Descendants Trust U/A/D 4/15/83.... 5,812 5,812 -- --
John R. Anderson and Allan B. Muchin, as Co-Trustees
of the Jeffrey Family Trust U/A/D 4/15/83......... 9,024 9,024 -- --
Judith E. Graff and John R. Anderson, as Co-Trustees
of the Judith E. Graff Family Trust U/A/D
12/28/76.......................................... 5,563 5,563 -- --
Judith E. Graff and John R. Anderson, as Co-Trustees
of the Judith E. Graff Discretionary Trust U/A/D
12/28/76.......................................... 1,621 1,621 -- --
Judith E. Graff, as Trustee of the Judith E. Graff
Revocable Trust U/A/D 9/15/78..................... 15,526 15,526 -- --
Allan B. Muchin and Richard A. Behr, as Co-Trustees
of the Jeffrey Anderson Trust U/A/D 5/1/80........ 467 467 -- --
John R. Anderson, as Trustee of the Tracy E.
Anderson Trust U/A/D 3/8/96....................... 467 467 -- --
John R. Anderson, as Trustee of the Kristin L.
Anderson Trust U/A/D 3/8/96....................... 467 467 -- --
</TABLE>
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<PAGE> 72
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
SHARES NUMBER OF OWNED AFTER
BENEFICIALLY SHARES COVERED OFFERING
OWNED PRIOR TO BY THIS ----------------
OFFERING PROSPECTUS NUMBER PERCENT
-------------- -------------- ------ -------
<S> <C> <C> <C> <C>
John R. Anderson, as Trustee of the David J.
Anderson Trust U/A/D 3/8/96....................... 3,475 3,475 -- --
Allan B. Muchin and Richard A. Behr, as Co-Trustees
of the John Anderson Children's Trust U/A/D
12/4/87........................................... 13,387 13,387 -- --
</TABLE>
- ---------------
* Less than one percent.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Dura, Onex, J2R, Alkin and S.A. Johnson and certain other investors are
parties to a Stockholders Agreement pursuant to which each party has agreed to
vote his or its shares in the same manner that Onex votes its shares of Dura's
common stock.
Dura, Onex and certain stockholders including J2R, Alkin, S.A. Johnson and
Karl F. Storrie are parties to a registration agreement pursuant to which Dura
has granted certain of its stockholders rights to register shares of Dura's
common stock.
Dura paid fees to Hidden Creek of approximately $9.5 million in 1999 in
connection with the acquisitions of Excel, Adwest and Meritor, the offering of
the subordinated notes, the tender of the Trident notes, the new senior credit
facility and for various other management services. Certain officers and
employees of Hidden Creek continue to provide such services to Dura.
In connection with the December 1991 private placement of common stock, Mr.
Storrie acquired 139,531 shares of Class B common stock of which 115,531 shares
are still held by Mr. Storrie. Dura loaned Mr. Storrie $75,000 in connection
with such purchase. Mr. Storrie repaid $12,900 of the outstanding balance as of
April 8, 1999. The remaining loan bears interest at 1 1/2 percent above the base
rate, matures on December 31, 2000 and is secured by a pledge of the shares.
DESCRIPTION OF CAPITAL STOCK
GENERAL MATTERS
The total amount of authorized capital stock of DASI consists of 60,000,000
shares of Class A common stock, par value $0.01 per share, 10,000,000 shares of
Class B common stock, par value $0.01 per share and 5,000,000 shares of
preferred stock, par value $1.00 per share. As of December 31, 1999, 14,101,511
shares of Class A common stock, 3,320,303 shares of Class B common stock and no
shares of preferred stock were issued and outstanding. As of December 31, 1999,
there were: (1) 3,457,520 shares of Class A common stock reserved for issuance
under Dura's stock option plans and Employee Stock Purchase Plan, of which
options to purchase 1,977,258 shares of Class A common stock were outstanding;
(2) 3,320,303 shares of Class A common stock reserved for issuance upon the
conversion of the Class B common stock and (3) 1,289,000 shares of Class A
common stock reserved for issuance upon the conversion of the Trust Preferred
Securities.
The following summary of certain provisions of DASI's capital stock
describes all material provisions of, but does not purport to be complete and is
subject to, and qualified in its entirety by, our restated certificate of
incorporation and by-laws, which are filed with the SEC. See "Where You Can Find
More Information."
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<PAGE> 73
CLASS A COMMON STOCK
All of the outstanding shares of Class A common stock are validly issued,
fully paid and nonassessable. Subject to the prior rights of the holders of any
preferred stock, the holders of outstanding shares of Class A common stock are
entitled to receive dividends out of assets legally available therefor at such
time and in such amounts as the Board may from time to time determine. The
shares of Class A common stock are not convertible and the holders thereof have
no preemptive or subscription rights to purchase any securities of Dura. Upon
liquidation, dissolution or winding up of Dura, the holders of Class A common
stock are entitled to receive pro rata the assets of Dura which are legally
available for distribution, after payment of all debts and other liabilities and
subject to the prior rights of any holders of preferred stock then outstanding.
Each outstanding share of Class A common stock is entitled to one vote on all
matters submitted to a vote of stockholders. Except as otherwise required by law
or our restated certificate, the Class A common stock and Class B common stock
vote together on all matters submitted to a vote of the stockholders, including
the election of directors.
The Class A common stock is traded on the Nasdaq National Market under the
symbol "DRRA."
CLASS B COMMON STOCK
The issued and outstanding shares of Class B common stock generally have
identical rights to those of the Class A common stock except with respect to
voting power and conversion rights. Each share of Class B common stock is
entitled to ten votes on all matters submitted to a vote of stockholders, as
compared to one vote for each share of Class A common stock. The Class B common
stock automatically ceases to have any voting rights, other than as required by
law, at any time that Onex Corporation, J2R Corporation and certain stockholders
affiliated with Hidden Creek Industries, in the aggregate, do not beneficially
own at least 10 percent of the total outstanding shares of common stock. As of
December 31, 1999, these stockholders collectively owned approximately 19
percent of the total outstanding shares of common stock. The Class B common
stock is convertible at the option of the holder, and mandatorily convertible
upon any transfer of the Class B common stock while it still has ten votes per
share (except to affiliates), into Class A common stock on a share-for-share
basis. The Class B common stock is not registered under the Exchange Act and is
not listed for trading on any national securities exchange or on the Nasdaq
Stock Market.
PREFERRED STOCK
The Dura board may, without further action by Dura's stockholders, from
time to time, direct the issuance of shares of preferred stock in series and
may, at the time of issuance, determine the rights, preferences and limitations
of each series. Satisfaction of any dividend preferences of outstanding shares
of preferred stock would reduce the amount of funds available for the payment of
dividends on shares of Class A common stock. Holders of shares of preferred
stock may be entitled to receive a preference payment in the event of any
liquidation, dissolution or winding-up of Dura before any payment is made to the
holders of shares of Class A common stock. Under certain circumstances, the
issuance of shares of preferred stock may render more difficult or tend to
discourage a merger, tender offer or proxy contest, the assumption of control by
a holder of a large block of Dura's securities or the removal of incumbent
management. Upon the affirmative vote of a majority of the total number of
directors then in office, the Dura board, without stockholder approval, may
issue shares of preferred stock with voting and conversion rights which could
adversely affect the holders of shares of Class A common stock. There are no
shares of preferred stock outstanding, and Dura has no present intention to
issue any shares of preferred stock. The affirmative vote of two-thirds of the
Dura board is required to issue any preferred stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Class A common stock is Firstar
Bank, N.A.
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<PAGE> 74
DESCRIPTION OF CERTAIN INDEBTEDNESS
NEW CREDIT FACILITY
General. In March 1999, Dura Operating Corp. ("DOC"), DASI and various
direct and indirect wholly owned subsidiaries of DASI (the "Borrowers"), entered
into the new credit facility with Bank of America National Trust and Savings
Association ("Bank of America") and certain other lenders. The new credit
facility provides for aggregate borrowings by Dura of approximately $1,150
million. As of December 31, 1999, there was $759.3 million of outstanding
indebtedness under the new credit facility and $191.2 million available under
the new credit facility for working capital and other corporate purposes.
The new credit facility includes (a) a $200.0 million interim term loan,
(b) a $275.0 million tranche A term loan, (c) a $275.0 million tranche B term
loan and (d) a $400.0 million revolving credit facility. The net proceeds from
the notes offering were used to repay to interim term loan.
Interest. Amounts outstanding under the new credit facility bear interest,
at Dura's option, at a rate per annum equal to either: (1) the Eurocurrency
interbank offered rate (the "Eurocurrency Rate") or (2) the alternate base rate,
in each case, plus an applicable margin. The "alternate base rate" is defined as
the higher of (x) Bank of America's reference rate, and (y) 0.50 percent per
annum over the federal funds rate. The applicable margin for the tranche A term
loan and the revolving credit facility is initially 2.25 percent for
Eurocurrency Rate loans and 0.75 percent for alternate base rate loans. The
applicable margin for tranche A term loans and the revolving credit facility
adjusts according to a performance pricing grid based on Dura's ratio of senior
indebtedness to EBITDA, ranging from (1) for Eurocurrency loans, 2.25 percent to
1.50 percent and (2) for alternate base rate loans, 0.75 percent to 0.00
percent. The applicable margin for the interim term loan is fixed at 2.25
percent for Eurocurrency loans and 0.75 percent for alternate base rate loans.
The applicable margin for the tranche B term loan is fixed at 2.50 percent for
Eurocurrency loans and 1.00 percent for alternate base rate loans. As of
December 31, 1999, Dura's borrowings under the new credit facility bore interest
at rates ranging from 5.2 percent to 8.6 percent.
Maturity. Borrowings under the tranche A term loan are due and payable in
March 2005 and borrowings under the tranche B term loan are due and payable in
March 2006. The revolving credit facility is available until March 2005.
Security and Guaranties. The new credit facility is secured by a first
priority security interest in all existing and after-acquired tangible and
intangible assets of the Borrowers and their material subsidiaries, including,
without limitation, intellectual property, real property, all of the capital
stock owned by the Borrowers and each of their material subsidiaries and any
inter-company debt obligations (with exceptions for certain foreign
subsidiaries). All of the Borrowers' obligations under the new credit facility
are fully and unconditionally guaranteed by DASI and all of DOC's material
subsidiaries (with exceptions for certain foreign subsidiaries).
Covenants. The new credit facility requires Dura to meet certain financial
tests, including, without limitation, maximum levels of senior debt as a ratio
to EBITDA, minimum interest coverage, total debt as a ratio of EBITDA and net
worth. The new credit facility contains certain covenants which, among other
things, limit the incurrence of additional indebtedness, investments, dividends,
transactions with affiliates, asset sales, acquisitions, mergers and
consolidations, payments of certain other indebtedness, liens and encumbrances.
Events of Default. The new credit facility contains customary events of
default, including, without limitation, payment defaults, breaches of
representations and warranties, covenant defaults, cross-defaults to certain
other indebtedness (including the notes), certain events of bankruptcy and
insolvency, judgment defaults, failure of any guaranty or security document
supporting the new credit facility to be in full force and effect and a change
of control of Dura.
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<PAGE> 75
9 PERCENT SENIOR SUBORDINATED NOTES
DOC issued $300,000,000 aggregate principal amount of 9 percent senior
subordinated notes ("dollar notes") pursuant to an Indenture, dated as of April
22, 1999 (the "Dollar Notes Indenture"), by and among DOC, DASI, the
subsidiaries of DOC named therein and U.S. Bank Trust National Association, as
trustee (the "Trustee") and issued E100,000,000 aggregate principal amount of 9
percent senior subordinated notes (the "euro notes" and together with the dollar
notes, the "notes") pursuant to an Indenture, dated as of April 22, 1999 (the
"Euro Notes Indenture" and, together with the Dollar Notes Indenture, the
"Indentures"), by and among DOC, DASI, the subsidiaries of DOC named therein and
the Trustee. The dollar notes are limited in aggregate principal amount to
$350,000,000 and the euro notes are limited in aggregate principal amount of
E150,000,000. The notes have a scheduled maturity of May 1, 2004. Interest on
the notes accrues at the rate of 9 percent per annum and is payable semiannually
in cash on each May 1 and November 1, to the persons who are registered holders
of the notes at the close of business on April 15 and October 15, respectively,
immediately preceding the applicable interest payment date. The notes are not
entitled to the benefit of any mandatory sinking fund.
The notes are senior subordinated debt of DOC. Accordingly, they rank:
- behind all of the senior debt of DOC.
- equally with all existing and future subordinated, unsecured debt of DOC
that does not expressly provide that it is subordinated to the notes.
- ahead of all future debt of DOC that expressly provides that it is
subordinated to the notes.
- behind all of the liabilities of DOC's foreign subsidiaries.
The notes are unconditionally guaranteed on a senior subordinated basis by
DASI and by each material existing domestic subsidiary of DOC.
The notes are redeemable, at our option, in whole or in part from time to
time, on and after May 1, 2004, upon not less than 30 nor more than 60 days'
notice, at the following redemption prices (expressed as percentages of the
principal amount thereof) if redeemed during the twelve-month period commencing
on May 1 of the year set forth below, plus, in each case, accrued interest to
the date of redemption:
<TABLE>
<CAPTION>
PERCENTAGE
----------
<S> <C>
2004........................................................ 104.50%
2005........................................................ 103.00
2006........................................................ 101.50
2007 and thereafter......................................... 100.00
</TABLE>
At any time, or from time to time, on or prior to May 1, 2002, we may, at
our option, use the net cash proceeds of one or more equity offerings to redeem
up to 35 percent of the aggregate principal amount of dollar notes and up to 35
percent of the aggregate principal amount of the euro notes originally issued at
a redemption price equal to 109 percent of the principal amount thereof plus
accrued and unpaid interest thereon, if any, to the date of such redemption;
provided that at least 65 percent of the dollar notes and at least 65 percent of
the euro notes originally issued remain outstanding immediately after any such
redemption.
The Indentures provide that, upon the occurrence of a change of control (as
defined below), each holder will have the right to require that DOC purchase all
or a portion of their notes, at a purchase price equal to 101 percent of the
principal amount thereof plus accrued interest thereon to the date of purchase.
"Change of control" is defined under the Indentures to include one or more of
the following events:
- the direct or indirect sale, transfer, conveyance or other disposition
(other than by way of merger or consolidation), in one or a series of
related transactions, of all or substantially all of the properties or
assets of DOC and its restricted subsidiaries taken as a whole to any
"person" other than a principal or a related party of a principal (each
as defined in the Indentures);
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<PAGE> 76
- the adoption of a plan relating to the liquidation or dissolution of
DOC;
- the consummation of any transaction (including, without limitation, any
merger or consolidation) the result of which is that any "person," other
than the principals and their Related Parties, becomes the beneficial
owner, directly or indirectly, of more than 50 percent of the voting
stock of DOC, measured by voting power rather than number of shares;
- the first day on which a majority of the members of the Board of
Directors of DOC are not continuing directors;
- the first day on which DASI ceases to own 100 percent of the outstanding
Equity Interests of DOC; or
- DOC consolidates with, or merges with or into, any person, or any person
consolidates with, or merges with or into, DOC, in any such event
pursuant to a transaction in which any of the outstanding voting stock
of DOC of such other person is converted into or exchanged for cash,
securities or other property, other than any such transaction where the
voting stock of DOC outstanding immediately prior to such transaction is
converted into or exchanged for voting stock (other than disqualified
stock) of the surviving or transferee person constituting a majority of
the outstanding shares of such voting stock of such surviving or
transferee person (immediately after giving effect to such issuance).
The following events are defined in the Indentures as "Events of Default":
- default for 30 days in the payment when due of interest on, or
liquidated damages with respect to, any Notes whether or not prohibited
by the subordination provisions of the Indentures;
- default in payment when due of the principal of, or premium, if any, on
the notes whether or not prohibited by the subordination provisions of
the Indentures;
- failure by DOC or any of its restricted subsidiaries to comply with the
covenants described under the caption "-- Certain Covenants -- Merger,
Consolidation or Sale of Assets;"
- default under any mortgage, indenture or instrument under which there is
issued and outstanding any Indebtedness for money borrowed by DOC or any
of it restricted subsidiaries (or the payment of which is guaranteed by
DOC or any of its restricted subsidiaries) whether such Indebtedness or
guarantee now exists, or is created after the dates of the Indentures,
if that default:
(a) is caused by a failure to pay principal of, or interest or premium,
if any, on such Indebtedness prior to the expiration of the grace
period provided in such indebtedness on the date of such default (a
"Payment Default"); or
(b) results in the acceleration of such indebtedness prior to its
express maturity, and, in each case, the principal amount of any
such indebtedness, together with the principal amount of any other
such Indebtedness the maturity of which has been so accelerated,
aggregates $20.0 million or more;
- failure by DOC or any of its restricted subsidiaries to pay final
judgements aggregating in excess of $20.0 million, which judgements are
not paid, vacated, discharged, stayed or non-appealable for a period of
60 days, and in the event such judgment is covered by insurance, an
enforcement proceeding has been commenced by any creditor upon such
judgement or decree which is not promptly stayed;
- except as permitted by the Indentures, any guaranty shall be held in any
judicial proceeding to be unenforceable or invalid or shall cease for
any reason to be in full force and effect or any guarantor, or any
person acting on behalf of any guarantor, shall deny or disaffirm its
obligations under its subsidiary guaranty or DASI, or any person acting
on behalf of DASI, shall deny or disaffirm its obligations under the
parent guaranty; and
72
<PAGE> 77
- certain events of bankruptcy or insolvency with respect to DASI, DOC or
any of its significant subsidiaries.
The Indentures contain certain covenants for the benefit of the holders of
the notes that, among other things, limit DOC's ability and any of its
restricted subsidiaries to:
- enter into certain transactions with affiliates;
- pay dividends or make certain other restricted payments;
- consummate certain asset sales;
- enter into certain transactions with affiliates;
- incur indebtedness that is senior in right of payment to the notes;
- incur liens;
- impose restrictions on the ability of a subsidiary to pay dividends or
make certain payments to DOC and its subsidiaries;
- merge or consolidate with any other person; or
- sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of the assets of DOC.
The foregoing summary of the material provisions of the Indentures is
qualified in its entirety by reference to all of the provisions of the
Indentures, which have been filed as an exhibit to the registration statement,
of which this prospectus forms a part. See "Where You Can Find More
Information."
73
<PAGE> 78
PLAN OF DISTRIBUTION
Dura is registering the shares on behalf of the Selling Stockholders. As
used herein, "Selling Stockholders" includes donees, pledgees, transferees or
other successors in interest selling shares received from a named Selling
Stockholder after the date of this prospectus. All costs, expenses and fees in
connection with the registration of the shares offered hereby will be borne by
Dura. Brokerage commissions and similar selling expenses, if any, attributable
to the sale of shares will be borne by the Selling Stockholders. Sales of shares
may be effected by Selling Stockholders from time to time on the Nasdaq, in the
over-the-counter market, in privately negotiated transactions, or otherwise. The
shares may be sold by the Selling Stockholders by one or more of the following
methods, without limitation:
- block trades in which the broker or dealer so engaged will attempt to
sell the shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction;
- purchases by a broker or dealer as principal and resale by such broker
or dealer for its account pursuant to this prospectus;
- an exchange distribution in accordance with the rules of such exchange;
- ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
- privately negotiated transactions;
- short sales;
- through the writing of options on the shares;
- in one or more underwritten offerings on a firm commitment or best
effort basis; and
- a combination of any such methods of sale.
The shares may be sold at fixed prices that may be changed, at market
prices prevailing at the time of sale, at prices related to such market prices
or at negotiated prices. Such transactions may or may not involve brokers or
dealers. The Selling Stockholders have not advised Dura that they have entered
into any agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of their securities.
The Selling Stockholders may effect such transactions by selling shares
directly to purchasers or to or through broker-dealers, which may act as agents
or principals. Such broker-dealers may receive compensation in the form of
discounts, concessions, or commissions from the Selling Stockholders and/or the
purchasers of shares for whom such broker-dealers may act as agents or to whom
they sell as principal, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions).
In effecting sales, brokers and dealers engaged by the Selling Stockholders
may arrange for other brokers or dealers to participate. Broker-dealers may
agree with the Selling Stockholders to sell a specified number of such shares at
a stipulated price per share. To the extent such broker-dealer is unable to do
so acting as agent for a Selling Stockholder, to purchase as principal any
unsold shares at the stipulated price. Broker-dealers who acquire shares as
principals may thereafter resell such shares from time to time in transactions
on Nasdaq at prices and on terms then prevailing at the time of sale, at prices
related to the then-current market price or in negotiated transactions.
Broker-dealers may use block transactions and sales to and through
broker-dealers, including transactions of the nature described above.
From time to time, one or more of the Selling Stockholders may pledge,
hypothecate or grant a security interest in some or all of the shares owned by
them. The pledgees, secured parties or persons to whom such securities have been
hypothecated will, upon foreclosure in the event of default, be deemed to be
Selling Stockholders. The number of a Selling Stockholder's shares offered under
this prospectus will decrease as and when it takes such actions. The plan of
distribution for such Selling Stockholder's shares will otherwise remain
unchanged. In addition, a Selling Stockholder may, from time to time, sell short
the
74
<PAGE> 79
common stock of Dura, and in such instances, this prospectus may be delivered in
connection with such short sales and the shares offered under this prospectus
may be used to cover such short sales.
A Selling Stockholder may enter into hedging transactions with
broker-dealers and the broker-dealers may engage in short sales of the common
stock of Dura in the course of hedging the positions they assume with such
Selling Stockholder, including, without limitation, in connection with
distributions of the common stock by such broker-dealers. A Selling Stockholder
may enter into option or other transactions with broker-dealers. A Selling
Stockholder may enter into option or other transactions with broker-dealers that
involve the delivery of the shares offered hereby to the broker-dealers, who may
then resell or otherwise transfer such shares. A Selling Stockholder may also
loan or pledge the shares offered hereby to a broker-dealer, and the
broker-dealer may sell the shares offered hereby so loaned or upon a default may
sell or otherwise transfer the pledged shares offered hereby.
The Selling Stockholders and any broker-dealers that act in connection with
the sale of shares might be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act, and any commissions received by such
broker-dealers and any profit on the resale of the shares sold by them while
acting as principals might be deemed to be underwriting discounts or commissions
under the Securities Act. Dura has agreed to indemnify each Selling Stockholder
against certain liabilities, including liabilities arising under the Securities
Act. The Selling Stockholders may agree to indemnify any agent, dealer or
broker-dealer that participates in transactions involving sales of the shares
against certain liabilities, including liabilities arising under the Securities
Act.
The Selling Stockholders will be subject to the prospectus delivery
requirements of the Securities Act with respect to sales of shares through this
prospectus. Dura intends to inform the Selling Stockholders that the
anti-manipulative provisions of Regulation M promulgated under the Exchange Act
may apply to their sales in the market.
Selling Stockholders also may resell all or a portion of the shares in open
market transactions in reliance upon Rule 144 under the Securities Act, provided
they conform to the requirements of such Rule.
Upon Dura being notified by a Selling Stockholder that any material
arrangement has been entered into with a broker-dealer for the sale of shares
through a block trade, special offering, exchange distribution or secondary
distribution or a purchase by a broker or dealer, a supplement to this
prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act, disclosing:
- the name of each such selling stockholder and of the participating
broker-dealer(s);
- the number of shares involved;
- the price at which such shares were sold;
- the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable;
- that such broker-dealer(s) did not conduct any investigation to verify
the information set out or incorporated by reference in this prospectus;
and
- other facts material to the transaction.
In addition, upon Dura's being notified by a Selling Stockholder that a
donee, pledgee, transferee or other successor in interest intends to sell more
than 500 shares, a supplement to this prospectus will be filed.
75
<PAGE> 80
LEGAL MATTERS
The validity of the shares of Class A common stock offered hereby will be
passed upon on behalf of Dura by Kirkland & Ellis (a partnership that includes
professional corporations), Chicago, Illinois.
EXPERTS
The consolidated financial statements of Dura as of December 31, 1998 and
1999 and for each of the three years in the period ended December 31, 1999
included in this prospectus, the consolidated financial statements of Excel as
of December 27, 1997 and January 2, 1999 and for each of the three years in the
period ended January 2, 1999 included in this prospectus and the consolidated
financial statements of Trident as of March 31, 1998 and December 31, 1998 and
for the period from inception (September 19, 1997) to March 31, 1998, the
one-month period ended April 30, 1998 and the eight-month period ended December
31, 1998, each included in this prospectus, were audited by Arthur Andersen LLP,
independent public accountants, as set forth in its reports thereon, included
herein, and are included herein in reliance upon the authority of said firm as
an expert in auditing and accounting in giving said reports.
The consolidated financial statements of Adwest as of June 30, 1997 and
1998 and for each of the three years in the period ended June 30, 1998 included
in this prospectus have been audited by KPMG Audit Plc, independent certified
public accountants. Such financial statements have been included in reliance
upon the report of KPMG Audit Plc.
WHERE YOU CAN FIND MORE INFORMATION
Dura has filed a registration statement on Form S-1 regarding the shares of
Class A common stock being offered hereby with the SEC. This prospectus does not
contain all of the information included in the registration statement. Any
statement made in this prospectus concerning the contents of any other document
is not necessarily complete. If we have filed any other document as an exhibit
to the registration statement, you should read the exhibit for a more complete
understanding of the document or matter. Each statement regarding any other
document does not necessarily contain all of the information important to you.
Dura is subject to the information requirements of the Exchange Act (SEC
File No. 0-21139), and in accordance therewith files periodic reports, proxy
statements and other information with the SEC relating to its business,
financial statements and other matters. Prior to its acquisition by Dura, Excel
was also subject to the information requirements of the Exchange Act (SEC File
No. 1-8684). The reports, proxy statements and other information filed by Dura
and Excel may be inspected and copied at prescribed rates at the public
reference facilities maintained by the SEC at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and should be available for inspection and copying at the
regional offices of the SEC located at 7 World Trade Center, Suite 1375, New
York, New York 10048 and at Citicorp Center, 500 West Madison Street, Chicago,
Illinois 60661. Copies of such material can be obtained at prescribed rates by
writing to the SEC Public Reference Section, 450 Fifth Street, N.W., Washington,
D.C. 20549 (telephone number: 1-800-SEC-0330). The SEC also maintains a Web site
that contains reports, proxy statements and other information regarding
registrants that file electronically with the SEC. The address of such site is
http://www.sec.gov. Such material relating to Dura can also be inspected at the
reading room of the library of the National Association of Securities Dealers,
Inc., 1735 K Street, N.W., 2nd Floor, Washington, D.C. 20006.
76
<PAGE> 81
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
DURA AUTOMOTIVE SYSTEMS, INC.
Report of Independent Public Accountants.................. F-2
Consolidated Balance Sheets as of December 31, 1998 and
1999................................................... F-3
Consolidated Statements of Operations for the Years Ended
December 31, 1997, 1998 and 1999....................... F-4
Consolidated Statements of Stockholders' Investment for
the Years Ended December 31, 1997, 1998 and 1999....... F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997, 1998 and 1999....................... F-6
Notes to Consolidated Financial Statements................ F-7
EXCEL INDUSTRIES, INC.
Report of Independent Public Accountants.................. F-34
Consolidated Balance Sheet as of December 27, 1997 and
January 2, 1999........................................ F-35
Consolidated Statement of Income for the Years Ended
December 28, 1996, December 27, 1997 and January 2,
1999................................................... F-36
Consolidated Statement of Cash Flows for the Years Ended
December 28, 1996, December 27, 1997 and January 2,
1999................................................... F-37
Consolidated Statement of Shareholders' Equity for the
Years Ended December 28, 1996, December 27, 1997 and
January 2, 1999........................................ F-38
Notes to Consolidated Financial Statements................ F-39
ADWEST AUTOMOTIVE PLC
Independent Auditors' Report.............................. F-66
Consolidated Profit and Loss Account for the Years Ended
June 30, 1996, 1997 and 1998........................... F-67
Consolidated Balance Sheet as of June 30, 1997 and 1998... F-68
Consolidated Cash Flow Statement for the Years Ended June
30, 1996, 1997 and 1998................................ F-69
Statement of Consolidated Recognized Gains and Losses for
the Years Ended June 30, 1996, 1997 and 1998........... F-70
Reconciliation of Movements in Shareholders' Funds........ F-71
Notes to the Accounts..................................... F-72
Unaudited Interim Consolidated Profit and Loss Account for
the Six Month Periods Ending December 31, 1997 and
1998................................................... F-96
Unaudited Interim Consolidated Balance Sheet as of
December 31, 1998...................................... F-97
Unaudited Interim Consolidated Cash Flow Statement for the
Six Month Periods Ending December 31, 1997 and 1998.... F-98
Unaudited Interim Reconciliation of Movements in
Shareholders' Funds for the Six Month Period Ended
December 31, 1997 and 1998............................. F-99
Unaudited Interim Analysis of Net Debt at July 1, 1998 and
December 31, 1998...................................... F-100
Unaudited Interim Segmental Information for the Six Month
Period Ended December 31, 1997 and 1998................ F-101
Notes to the Accounts (Unaudited)......................... F-102
</TABLE>
F-1
<PAGE> 82
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, 1999 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, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999 in conformity with accounting principles generally accepted in
the United States.
As discussed in Note 2 to the financial statements, effective January 1,
1999, the Company changed its method of accounting for certain start-up costs.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota,
January 28, 2000
F-2
<PAGE> 83
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1999 1998
---------- ----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................... $ 23,697 $ 20,544
Accounts receivable, net of reserve for doubtful accounts of
$12,777 and $4,150........................................ 478,542 158,465
Inventories................................................. 136,562 50,498
Other current assets........................................ 154,704 45,924
---------- ----------
Total current assets................................... 793,505 275,431
---------- ----------
Property, Plant and Equipment:
Land and buildings.......................................... 165,050 71,489
Machinery and equipment..................................... 373,943 144,931
Construction in progress.................................... 42,328 10,899
Less-accumulated depreciation............................... (80,427) (38,587)
---------- ----------
Net property, plant and equipment...................... 500,894 188,732
---------- ----------
Goodwill, net of accumulated amortization of $37,224 and
$13,926................................................... 1,067,937 435,960
Other Assets, net of accumulated amortization of $7,274 and
$2,419.................................................... 82,531 29,260
---------- ----------
$2,444,867 $ 929,383
========== ==========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Accounts payable............................................ $ 281,413 $ 99,512
Accrued liabilities......................................... 296,431 96,664
Current maturities of long-term debt........................ 52,712 15,489
---------- ----------
Total current liabilities.............................. 630,556 211,665
---------- ----------
Long-Term Debt, net of current maturities................... 776,750 316,417
Subordinated Notes.......................................... 401,560 --
Other Noncurrent Liabilities................................ 149,755 108,014
---------- ----------
Total liabilities...................................... 1,958,621 636,096
---------- ----------
Commitments and Contingencies (Notes 4, 11 and 12)
Mandatorily Redeemable Convertible Trust Preferred
Securities................................................ 55,250 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; 60,000,000 shares
authorized; 14,101,511 and 9,029,085 shares issued and
outstanding............................................... 141 90
Common stock, Class B; par value $.01; 10,000,000 shares
authorized; 3,320,303 and 3,325,303 shares issued and
outstanding............................................... 33 33
Additional paid-in capital.................................. 339,041 171,377
Retained earnings........................................... 108,272 67,052
Accumulated other comprehensive loss -- cumulative
translation adjustment.................................... (16,491) (515)
---------- ----------
Total stockholders' investment......................... 430,996 238,037
---------- ----------
$2,444,867 $ 929,383
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-3
<PAGE> 84
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Revenues............................................. $2,200,385 $ 739,467 $ 449,111
Cost of sales........................................ 1,854,705 608,518 375,086
---------- ---------- ----------
Gross profit......................................... 345,680 130,949 74,025
Selling, general and administrative expenses......... 130,079 49,825 32,815
Facility consolidation charge........................ 16,246 -- --
Amortization expense................................. 28,476 9,868 3,600
---------- ---------- ----------
Operating income..................................... 170,879 71,256 37,610
Interest expense, net................................ 76,703 20,267 9,298
---------- ---------- ----------
Income before provision for income taxes, equity in
losses of affiliates and minority interests........ 94,176 50,989 28,312
Provision for income taxes........................... 37,984 20,933 11,670
Minority interest and equity in losses of affiliates,
net................................................ 3,978 1,481 --
Minority interest -- dividends on trust preferred
securities, net.................................... 2,445 1,908 --
---------- ---------- ----------
Income before extraordinary item and accounting
change............................................. 49,769 26,667 16,642
Extraordinary item -- loss on early extinguishment of
debt, net.......................................... 5,402 643 --
Cumulative effect of change in accounting, net....... 3,147 -- --
---------- ---------- ----------
Net income...................................... $ 41,220 $ 26,024 $ 16,642
========== ========== ==========
Basic earnings per share:
Income before extraordinary item and accounting
change.......................................... $ 3.06 $ 2.49 $ 1.89
Extraordinary item................................. (0.33) (0.06) --
Cumulative effect of change in accounting.......... (0.20) -- --
---------- ---------- ----------
Net income...................................... $ 2.53 $ 2.43 $ 1.89
========== ========== ==========
Diluted earnings per share:
Income before extraordinary item and accounting
change.......................................... $ 2.94 $ 2.42 $ 1.88
Extraordinary item................................. (0.30) (0.05) --
Cumulative effect of change in accounting.......... (0.18) -- --
---------- ---------- ----------
Net income...................................... $ 2.46 $ 2.37 $ 1.88
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 85
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK
-------------------------------------------- ACCUMULATED
CLASS A CLASS B ADDITIONAL OTHER
-------------------- -------------------- PAID-IN RETAINED COMPREHENSIVE
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS LOSS
---------- ------ ---------- ------ ---------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
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.................. -- -- -- -- -- -- (2,810)
Total comprehensive
income..................
---------- ---- ---------- ---- -------- -------- --------
BALANCE, December 31, 1997.... 4,161,657 42 4,654,380 46 63,402 41,028 (2,810)
Sale of stock under Employee
Stock Discount Purchase
Plan........................ 24,932 -- -- -- 492 -- --
Exercise of options........... 5,700 -- 7,000 -- 97 -- --
Other issuance of shares...... 719 -- -- -- 20 -- --
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.................. -- -- -- -- -- -- 2,295
Total comprehensive
income..................
---------- ---- ---------- ---- -------- -------- --------
BALANCE, December 31, 1998.... 9,029,085 90 3,325,303 33 171,377 67,052 (515)
Issuance of shares for
acquisition of Excel........ 4,934,414 49 -- -- 165,121 -- --
Sale of stock under Employee
Stock Discount Purchase
Plan........................ 51,283 1 -- -- 1,156 -- --
Exercise of options........... 80,015 1 -- -- 1,337 -- --
Other issuance of shares...... 1,714 -- -- -- 50 -- --
Conversion from Class B to
Class A..................... 5,000 -- (5,000) -- -- -- --
Net income.................... -- -- -- -- -- 41,220 --
Other comprehensive income-
foreign currency translation
adjustment.................. -- -- -- -- -- -- (15,976)
Total comprehensive
income..................
---------- ---- ---------- ---- -------- -------- --------
BALANCE, December 31, 1999.... 14,101,511 $141 3,320,303 $ 33 $339,041 $108,272 $(16,491)
========== ==== ========== ==== ======== ======== ========
<CAPTION>
TOTAL
STOCKHOLDERS'
INVESTMENT
-------------
<S> <C>
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..................
Total comprehensive
income.................. 13,832
--------
BALANCE, December 31, 1997.... 101,708
Sale of stock under Employee
Stock Discount Purchase
Plan........................ 492
Exercise of options........... 97
Other issuance of shares...... 20
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..................
Total comprehensive
income.................. 28,319
--------
BALANCE, December 31, 1998.... 238,037
Issuance of shares for
acquisition of Excel........ 165,170
Sale of stock under Employee
Stock Discount Purchase
Plan........................ 1,157
Exercise of options........... 1,338
Other issuance of shares...... 50
Conversion from Class B to
Class A..................... --
Net income....................
Other comprehensive income-
foreign currency translation
adjustment..................
Total comprehensive
income.................. 25,244
--------
BALANCE, December 31, 1999.... $430,996
========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 86
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income............................................ $ 41,220 $ 26,024 $ 16,642
Adjustments required to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization....................... 76,654 27,571 12,303
Deferred income tax provision (benefit)............. (1,899) 7,833 1,521
Extraordinary loss on extinguishment of debt, net... 5,402 643 --
Change in method of accounting, net................. 3,147 -- --
Facility consolidation charge....................... 16,246 -- --
Equity in losses of affiliates and minority
interest......................................... 3,978 1,481 --
Other............................................... -- (315) --
Change in other operating items:
Accounts receivable.............................. 148 (13,536) (12,841)
Inventories...................................... 11,194 (905) 2,512
Other current assets............................. (28,498) (7,631) (7,803)
Accounts payable and accrued liabilities......... (10,821) 8,203 3,479
Other assets and liabilities..................... (35,829) (41,681) (7,297)
--------- --------- ---------
Net cash provided by operating activities........ 80,942 7,687 8,516
--------- --------- ---------
INVESTING ACTIVITIES:
Capital expenditures, net............................. (80,469) (31,822) (16,242)
Acquisitions, net..................................... (524,033) (135,712) (70,481)
Other, net............................................ (3,443) -- (6,663)
--------- --------- ---------
Net cash used in investing activities............ (607,945) (167,534) (93,386)
--------- --------- ---------
FINANCING ACTIVITIES:
Borrowings under revolving credit facilities.......... 202,871 417,267 267,987
Repayments of revolving credit facilities............. (147,553) (385,052) (174,869)
Long-term borrowings.................................. 754,124 100,265 --
Repayments of long-term borrowings.................... (660,830) (116,351) (6,008)
Proceeds from issuance of subordinated notes, net..... 394,653 -- --
Proceeds from stock offering and exercise of stock
options, net........................................ 2,545 107,966 510
Proceeds from issuance of preferred securities........ -- 52,525 --
Debt issue costs...................................... (19,537) -- --
--------- --------- ---------
Net cash provided by financing activities........ 526,273 176,620 87,620
--------- --------- ---------
EFFECT OF EXCHANGE RATES ON CASH...................... 3,883 (377) (269)
--------- --------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS............... 3,153 16,396 2,481
CASH AND CASH EQUIVALENTS, beginning of period........ 20,544 4,148 1,667
--------- --------- ---------
CASH AND CASH EQUIVALENTS, end of period.............. $ 23,697 $ 20,544 $ 4,148
========= ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for --
Interest......................................... $ 70,209 $ 24,941 $ 8,715
========= ========= =========
Income taxes..................................... $ 30,071 $ 11,446 $ 5,589
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 87
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 components and systems primarily for the global automotive
industry. The Company has over 80 manufacturing and product development
facilities located in the United States, Australia, Brazil, Canada, the Czech
Republic, France, Germany, India, Mexico, Portugal, Spain and the 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 refers to December 31 as its fiscal
year-end. Fiscal years in the three-year period ended December 31, 1999 each
contain 52 weeks.
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,
--------------------
1999 1998
-------- --------
<S> <C> <C>
Raw materials............................................... $ 85,609 $ 23,067
Work-in-process............................................. 21,162 11,155
Finished goods.............................................. 29,791 16,276
-------- --------
$136,562 $ 50,498
======== ========
</TABLE>
OTHER CURRENT ASSETS:
Other current assets consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1999 1998
-------- -------
<S> <C> <C>
Excess of cost over billings on uncompleted tooling
projects.................................................. $ 49,671 $20,640
Deferred income taxes....................................... 64,946 14,023
Prepaid expenses............................................ 40,087 11,261
-------- -------
$154,704 $45,924
======== =======
</TABLE>
F-7
<PAGE> 88
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (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, deferred income taxes 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.
F-8
<PAGE> 89
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ACCRUED LIABILITIES:
Accrued liabilities consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1999 1998
-------- -------
<S> <C> <C>
Compensation and benefits................................... $ 92,332 $21,557
Facility closure and consolidation costs.................... 63,137 35,055
Legal and environmental..................................... 25,996 4,752
Interest.................................................... 19,285 3,785
Accrued income taxes........................................ 18,936 5,953
Medical insurance........................................... 8,143 11,057
Loss contracts.............................................. 6,196 2,721
Other....................................................... 62,406 11,784
-------- -------
$296,431 $96,664
======== =======
</TABLE>
OTHER NONCURRENT LIABILITIES:
Other noncurrent liabilities consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1999 1998
-------- --------
<S> <C> <C>
Pension and post-retirement benefits........................ $ 46,899 $ 21,191
Facility closure and consolidation costs.................... 33,091 46,154
Legal and environmental..................................... 23,141 14,673
Loss contracts.............................................. 21,973 16,557
Other....................................................... 24,651 9,439
-------- --------
$149,755 $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.
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
F-9
<PAGE> 90
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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:
The Company follows the provisions of SFAS No. 130, "Reporting
Comprehensive Income," which 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.
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
non-subordinated long-term debt approximates fair value because of the
variability of the interest cost associated with these instruments. The fair
value of the Company's Subordinated Notes, based on quoted market activity
approximated $372.5 million as of December 31, 1999. The fair value of the
Company's Preferred Securities, based on Nasdaq market quote activity
approximated $21.6 million as of December 31, 1999.
SEGMENT REPORTING:
The Company follows the provisions of SFAS No. 131, "Disclosure About
Segments of an Enterprise and Related Information." SFAS No. 131 replaces the
"industry segment" approach with the "management" approach of reporting segment
information. 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
(see Note 10).
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 10 votes per share.
STOCK OPTIONS:
The Company accounts for stock options under the provisions of Accounting
Principles Board Opinion ("APB") No. 25, under which no compensation expense is
recognized when the stock options are granted. The pro forma effects had the
Company followed the provisions of SFAS No. 123 are included in Note 4.
USE OF ESTIMATES:
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. The ultimate results could differ from those estimates.
F-10
<PAGE> 91
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOREIGN CURRENCY TRANSLATION:
Assets and liabilities of the Company's foreign operations are translated
using the year-end rates of exchange. Results of operations are translated using
the average rates prevailing throughout the period. Translation gains or losses
are accumulated as a separate component of stockholders' investment.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," effective for
years beginning after June 15, 2000. SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument, including
certain derivative instruments embedded in other contracts, be recorded in the
balance sheet as either an asset or liability measured at its fair value. SFAS
No. 133 requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge criteria are met. Special accounting
for qualifying hedges allow a derivative's gains or losses to offset related
results on the hedged item in the income statement and requires that a company
must formally document, designate and assess the effectiveness of transactions
that receive hedge accounting. The Company has not yet quantified the impacts of
adopting SFAS No. 133.
CHANGE IN ACCOUNTING METHOD:
Effective January 1, 1999, the Company adopted the provisions of the
Financial Accounting Standards Board Statement of Position ("SOP") No. 98-5,
"Reporting on the Costs of Start-Up Activities." SOP 98-5 requires costs
associated with certain start-up activities be expensed as incurred versus
capitalizing and expensing them over a period of time. Previously, the Company
capitalized certain design and engineering costs which related to future
programs and amortized these costs over the life of the program once production
began. Pursuant to the provisions of SOP 98-5, the Company wrote off the
unamortized balance of such capitalized costs, net of income tax benefits, of
approximately $3.1 million. The write-off is reflected as a cumulative effect of
change in accounting in the accompanying consolidated statement of operations
for the year ended December 31, 1999. Amounts capitalized and included in other
assets were $5.1 million at December 31, 1998.
3. FACILITY CONSOLIDATION CHARGE:
In the fourth quarter of 1999, the Company approved a comprehensive plan
(the "Plan") to consolidate certain facilities to lower the Company's cost
structure and improve its long-term competitive position. The Company recognized
charges to operations of $16.2 million in the fourth quarter, which reflected
the estimated costs the Company will incur under the Plan. The provision for the
facility consolidation charge was developed based on management's best judgment
and estimates.
The charge includes costs associated with consolidating and eliminating
certain facilities and associated lease obligations; severance related to
employee terminations; and asset impairments. The majority of the countries in
which the Company operates have statutory requirements with regards to the
minimum severance payments that must be made to employees upon termination. The
Company has accrued $13.2 million of severance costs for approximately five
salaried plant management and 313 hourly plant manufacturing employees primarily
under SFAS No. 112, "Employers' Accounting for Post-employment Benefits," at
December 31, 1999. Through December 31, 1999, the Company has eliminated
approximately 20 positions pursuant to the Plan. The asset impairments consist
of long-lived assets, including fixed assets, manufacturing equipment, and
leasehold improvements, from facilities the Company intends to dispose of or
discontinue their use. Impairment was measured based on estimated proceeds on
the sale of the facilities and equipment.
Costs incurred and charged to these reserves amounted to $2.1 million
related to severance costs and $1.6 million related to asset impairments during
the year ended December 31, 1999. As of December 31, 1999,
F-11
<PAGE> 92
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
reserves of $11.1 million related to severance costs and $1.4 million related to
lease and other obligations remain unutilized.
The Company anticipates incurring the majority of these costs in 2000 with
the exception of the noncancellable lease obligation costs, for which payments
extend through 2005.
4. STOCKHOLDERS' INVESTMENT:
PUBLIC OFFERING OF COMMON STOCK:
During June 1998, the Company completed an offering of 3,500,000 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 $107.4 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.
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 and warrants using the treasury stock method, (ii) the conversion
of the Preferred Securities from their date of issuance on March 20, 1998, and
(iii) the effects of shares issued under the deferred income leadership stock
purchase plan, as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Net income.................................................. $41,220 $26,024 $16,642
Dividends on mandatorily redeemable convertible preferred
securities, net of tax.................................... 2,445 1,908 --
------- ------- -------
Net income applicable to common stockholders -- diluted..... $43,665 $27,932 $16,642
======= ======= =======
Weighted average number of Class A common shares
outstanding............................................... 12,940 6,763 3,907
Weighted average number of Class B common shares
outstanding............................................... 3,323 3,945 4,901
------- ------- -------
16,263 10,708 8,808
Dilutive effect of outstanding stock options after
application of the treasury stock method.................. 101 81 61
Dilutive effect of warrants................................. 114 -- --
Dilutive effect of mandatorily redeemable convertible
preferred securities, assuming conversion................. 1,289 1,006 --
------- ------- -------
Diluted shares outstanding.................................. 17,767 11,795 8,869
======= ======= =======
Basic earnings per share.................................... $ 2.53 $ 2.43 $ 1.89
======= ======= =======
Diluted earnings per share.................................. $ 2.46 $ 2.37 $ 1.88
======= ======= =======
</TABLE>
F-12
<PAGE> 93
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
STOCK OPTION PLAN:
During 1998, the board of directors and stockholders approved the 1998
Stock Incentive Plan (the "1998 Plan"). Certain people who are full-time,
salaried employees of the Company are eligible to participate in the 1998 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 1996 Key Employee Stock Option Plan plus an annual
increase, as defined in the 1998 Plan, subject to certain adjustments reflecting
changes in the Company's capitalization. Information regarding the option plans
is as follows:
<TABLE>
<CAPTION>
WEIGHTED
SHARES EXERCISE AVERAGE
UNDER OPTION PRICE EXERCISE PRICE
------------ ------------ --------------
<S> <C> <C> <C>
Outstanding, December 31, 1996.................... 187,734 $14.50-23.50 $17.20
Granted......................................... 144,300 24.50-28.00 25.37
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......................................... 740,700 29.00-38.63 30.96
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
Granted......................................... 826,000 17.00-29.25 18.13
Granted(1)...................................... 257,520 15.31-26.72 20.35
Exercised....................................... (80,015) 15.47-25.75 17.48
Forfeited....................................... (52,045) 15.47-38.63 28.89
--------- ------------
Outstanding, December 31, 1999.................... 1,956,258 $14.50-38.63 $23.01
========= ============
</TABLE>
- ---------------
(1) These shares were granted in accordance with the acquisition of Excel
Industries, Inc. in March 1999 (See Note 6).
Of the outstanding options at December 31, 1999, options covering 527,134
shares are currently exercisable with a weighted average exercise price of
$23.09 per share.
The weighted average fair value of options granted was $10.75 during 1999,
$16.61 during 1998 and $14.05 during 1997.
As of December 31, 1999, the outstanding stock options granted in 1999 have
a remaining contractual life of 10 years, the outstanding stock options granted
in 1998 have a remaining contractual life of 9 years and the outstanding stock
options granted in 1997 have a remaining contractual life of 8 years.
INDEPENDENT DIRECTOR STOCK OPTION PLAN:
The Dura Automotive Systems, Inc. Independent Director Stock Option Plan
(the "Director Option Plan") 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
market value of the
F-13
<PAGE> 94
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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, 1999, 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, 1999, 19,000 of these options were exercisable. No
granted options have been exercised.
EMPLOYEE STOCK DISCOUNT PURCHASE PLAN:
The Dura Automotive Systems, Inc. Employee Stock Discount Purchase Plan
(the "Employee Stock Purchase Plan") 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 percent
of the market value of the Company's Class A common stock at the date of
purchase, as defined. Pursuant to this plan, 51,283, 24,932 and 16,922 shares of
Class A common stock were issued to employees during the years ended December
31, 1999, 1998 and 1997, respectively. The weighted average fair value of shares
purchased in 1999, 1998 and 1997 was $26.42, $25.94 and $22.63, respectively.
STOCK-BASED COMPENSATION PLANS:
As discussed above, the Company has two stock option plans, the 1998 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. No
compensation cost has been recognized during the three years ended December 31,
1999. 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, except per share amounts):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C> <C>
Net income............................... As Reported -- Basic $41,220 $26,024 $16,642
Pro Forma 38,728 25,530 16,504
As $43,665 $27,932 $16,642
Reported -- Diluted
Pro Forma 41,173 27,438 16,504
Basic earnings per share................. As Reported $ 2.53 $ 2.43 $ 1.89
Pro Forma 2.38 2.38 1.87
Diluted earnings per share............... As Reported $ 2.46 $ 2.37 $ 1.88
Pro Forma 2.32 2.33 1.86
</TABLE>
The effect of the stock offered under the Employee Stock Purchase Plan was
not material for 1999, 1998 and 1997.
The fair value of each option grant is estimated on the date of the grant
using the Black-Scholes option pricing model with the following weighted average
assumptions: risk-free interest rates of 5.3 percent to 6.4 percent in 1999, 4.6
percent to 5.7 percent in 1998 and 5.7 percent to 6.5 percent in 1997; expected
life of seven years for 1999, 1998 and 1997; an average expected volatility of
47 percent in 1999, 46 percent in 1998 and 39 percent in 1997.
DIVIDENDS:
The Company has not declared or paid any cash dividends in the past. As
discussed in Note 7, the Company's credit agreement restricts the amount of
dividends the Company can declare or pay. As of December 31, 1999, under the
most restrictive debt covenants, the Company could not have paid any cash
dividends.
F-14
<PAGE> 95
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. MANDATORILY REDEEMABLE CONVERTIBLE TRUST PREFERRED SECURITIES:
In March 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 percent 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 percent convertible subordinated debentures due March 2028
issued by the Company and (iii) the obligations of the Issuer under the
Preferred Securities are fully and unconditionally guaranteed by the Company.
6. ACQUISITIONS:
In August 1997, the Company acquired GT Automotive Systems, Inc. ("GT
Automotive"). GT Automotive had manufacturing facilities in Michigan and
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 made 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.
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 had 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 percent Senior Subordinated Notes (the "Notes"), which subsequently were
retired (see Note 7). The Company also repaid Trident's outstanding senior
indebtedness of approximately $53.0 million. The acquisition of Trident was
financed with proceeds from borrowings under the Company's bank credit
agreement.
In March 1999, Dura acquired through a cash tender offer approximately 95
percent of the outstanding ordinary shares of Adwest Automotive plc ("Adwest").
The Company subsequently purchased the remaining 5 percent. Adwest had annual
revenues of approximately $400 million and is a supplier of driver control
products primarily for European OEMs. The Company paid approximately $320
million to acquire all of the outstanding shares of Adwest, including the
assumption of approximately $106.1 million in indebtedness.
In March 1999, the Company completed its merger with Excel Industries, Inc.
("Excel"). Excel had annual revenues of approximately $1.1 billion of which
approximately 78 percent were generated in North
F-15
<PAGE> 96
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
America with the remainder in Europe. The Company issued an aggregate of
approximately 4.9 million shares of its Class A common stock and paid
approximately $155.5 million in cash to Excel's former shareholders. In
addition, outstanding options and warrants of Excel were converted to options
and warrants of the Company, amounting to 257,520 options and 152,401 warrants.
The number of options and warrants and their respective exercise prices were
adjusted based upon the share exchange ratio. The Company also assumed
approximately $100.0 million of indebtedness. In August 1999, the Company
acquired the remaining 30 percent minority interest in Schade from Excel's
former European partner for approximately $16.4 million in cash.
In addition to the acquisitions noted above, Dura acquired Meritor
Automotive, Inc. and Metallifacture Limited in 1999, Universal Tool and Stamping
Co., Inc. and the Hinge business of Tower Automotive, Inc. in 1998, and REOM
Industries (Aust) Pty Ltd. in 1997 (the "Other Acquisitions"). The inclusion of
the above acquisitions for periods prior to the date of acquisition would not
have materially affected the Company's results of operations.
The cash consideration related to the acquisitions of Adwest, Excel and the
Other Acquisitions were financed with borrowings under a new credit facility
that is further described in Note 7.
The acquisitions 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. Certain of the liabilities
assumed of Adwest, Excel, and the Other Acquisitions have been recorded based
upon preliminary estimates as of the dates of acquisition. The Company does not
believe the final allocation of purchase price will be materially different from
preliminary allocations. Any changes to the preliminary estimates will be
reflected as an adjustment to goodwill. Additional purchase liabilities recorded
during 1999 in connection with the finalization of estimates from the Trident
acquisition and the 1999 acquisitions included approximately $11.0 million for
costs associated with the shutdown and consolidation of certain acquired
facilities and $28.9 million for severance and other related costs. As of
December 31, 1999, purchase liabilities recorded in conjunction with the
acquisitions included approximately $45.0 million for costs associated with the
shutdown and consolidation of certain acquired facilities and $37.1 million for
severance and other related costs. Costs incurred and charged to these reserves
amounted to $14.8 million related to acquired facilities and $24.1 million in
severance and other related costs during the year ended December 31, 1999.
Results of operations for these acquisitions have been included in the
accompanying consolidated financial statements since their respective dates of
acquisition.
F-16
<PAGE> 97
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The accompanying unaudited consolidated pro forma results of operations for
the year ended December 31, 1999 give effect to (i) the acquisitions of Adwest
and Excel, (ii) the offering of the Senior Subordinated Notes (see Note 7), and
(iii) the tender of the Trident notes (see Note 7) as if such transactions had
occurred at the beginning of the period and excludes the effects of the
extraordinary loss and change in accounting method. The accompanying unaudited
consolidated pro forma results of operations for the year ended December 31,
1998 give effect to (i) the acquisitions of Adwest, Excel and the Other
Acquisitions, (ii) the Offering, (iii) the offering of the Preferred Securities,
(iv) the offering of the Senior Subordinated Notes and (v) the tender of the
Trident notes as if such transactions had occurred at the beginning of the
period and excludes the effects of the extraordinary loss (in thousands, except
per share amounts):
<TABLE>
<CAPTION>
PRO FORMA FOR THE
YEARS ENDED DECEMBER 31,
------------------------
1999 1998
---------- ----------
<S> <C> <C>
Revenues.................................................. $2,589,436 $2,525,448
Operating income.......................................... 167,881 159,559
Net income before extraordinary item...................... 38,138 30,371
Basic earnings per share.................................. $ 2.20 $ 1.70
Diluted earnings per share................................ $ 2.14 $ 1.70
</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.
7. DEBT:
Debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1999 1998
---------- --------
<S> <C> <C>
Credit Agreement:
Tranche A and B term loans............................... $ 550,521 $ --
Revolving credit facility................................ 208,751 --
9 percent Senior subordinated notes...................... 401,560 --
Trident, 10 percent senior subordinated notes.............. -- 81,150
Old bank credit agreement.................................. -- 243,510
Other...................................................... 70,190 7,246
---------- --------
1,231,022 331,906
Less -- Current maturities................................. (52,712) (15,489)
---------- --------
$1,178,310 $316,417
========== ========
</TABLE>
F-17
<PAGE> 98
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Future maturities of long-term debt as of December 31, 1999 are as follows
(in thousands):
<TABLE>
<S> <C>
2000........................................................ $ 52,712
2001........................................................ 50,493
2002........................................................ 60,478
2003........................................................ 65,424
2004........................................................ 66,897
Thereafter.................................................. 935,018
----------
$1,231,022
==========
</TABLE>
In connection with the acquisitions of Adwest and Excel, the Company
entered into an amended and restated $1.15 billion credit agreement ("Credit
Agreement"). The Credit Agreement provides for revolving credit facilities of
$400.0 million, a $275.0 million tranche A term loan, a $275.0 million tranche B
term loan and a $200.0 million interim term loan facility. As of December 31,
1999, rates on borrowings under the Credit Agreement ranged from 5.2 percent to
8.6 percent. Borrowings under the tranche A term loan are due and payable in
March 2005 and borrowings under the tranche B term loan are due and payable in
March 2006. The revolving credit facility is available until March 2005.
Borrowings under the interim loan were due and payable in September 2000, and,
as further discussed below, were repaid in April 1999. The Credit Agreement
contains various restrictive covenants which limit indebtedness, investments,
rental obligations and cash dividends. The Credit Agreement also requires the
Company to maintain certain financial ratios including minimum liquidity and
interest coverage. The Company was in compliance with the covenants as of
December 31, 1999. Borrowings under the Credit Agreement are collateralized by
substantially all assets of the Company.
The Credit Agreement provides the Company with the ability to denominate a
portion of its revolving credit borrowings in foreign currencies up to an amount
equal to $100.0 million. As of December 31, 1999, $180.0 million of borrowings
were denominated in U.S. dollars, $5.5 million of borrowings were denominated in
Canadian dollars, $3.9 million of borrowings were denominated in Australian
dollars and $19.4 million in British pound sterling.
In June 1999, Dura retired the $75.0 million of Trident's outstanding 10
percent senior subordinated notes (the "Trident Notes") due 2005. The total
consideration paid was approximately $84.0 million of principal and premium and
was funded through borrowings under the Credit Agreement.
In connection with the termination of the Company's former credit facility,
the Company wrote-off deferred financing costs of approximately $2.7 million,
net of income taxes, during the first quarter of 1999. In addition, the Company
wrote-off costs of approximately $2.7 million, net of income taxes, related to
the tender of the Trident Notes during the second quarter of 1999. These charges
are reflected as extraordinary items in the accompanying 1999 statement of
operations.
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 1998 statement of operations.
8. SENIOR SUBORDINATED NOTES:
In April 1999, the Company completed the offering of $300 million and Euro
100 million of senior subordinated notes ("Subordinated Notes"). The
Subordinated Notes mature in May 2009 and bear interest at 9 percent per year,
which is payable semi-annually. Net proceeds from this offering of approximately
$394.7 million were used to repay the $200.0 million interim term loan,
approximately $78.1 million to retire
F-18
<PAGE> 99
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
other indebtedness and approximately $118.9 million was used for general
corporate purposes. These notes are collateralized by guarantees of certain of
the Company's subsidiaries.
9. INCOME TAXES:
The summary of income before provision for income taxes, equity in losses
of affiliates, minority interests, cumulative effect of change in accounting and
extraordinary items consisted of the following (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Domestic............................................ $81,714 $43,048 $22,582
Foreign............................................. 12,462 7,941 5,730
------- ------- -------
Total............................................... $94,176 $50,989 $28,312
======= ======= =======
</TABLE>
The provision for income taxes consisted of the following (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Currently payable --
Domestic.......................................... $32,478 $ 9,827 $ 8,711
Foreign........................................... 7,405 3,273 1,438
------- ------- -------
Total.......................................... 39,883 13,100 10,149
------- ------- -------
Deferred --
Domestic.......................................... (3,525) 6,797 510
Foreign........................................... 1,626 1,036 1,011
------- ------- -------
Total.......................................... (1,899) 7,833 1,521
------- ------- -------
Total.......................................... $37,984 $20,933 $11,670
======= ======= =======
</TABLE>
A reconciliation of the provision for income taxes at the statutory rates
to the reported income tax provision is as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Federal provision at statutory rates........................ $32,962 $17,846 $ 9,909
Amortization of non-deductible goodwill..................... 2,921 943 440
Foreign provision in excess of U.S. tax rate................ 2,089 1,830 444
Research & development credits.............................. (2,250) -- --
State taxes, net of federal benefit......................... 1,495 900 990
Foreign sales corporation benefit........................... (953) (570) (260)
Other, net.................................................. 1,720 (16) 147
------- ------- -------
Total..................................................... $37,984 $20,933 $11,670
======= ======= =======
</TABLE>
F-19
<PAGE> 100
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of deferred tax assets (liabilities) is as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1999 1998
-------- --------
<S> <C> <C>
Depreciation and property basis differences................. $(43,377) $ (7,901)
Facility closure and consolidation costs.................... 35,080 1,818
Legal and environmental costs............................... 17,063 597
Accrued compensation costs.................................. 12,682 3,077
Post-retirement benefit obligations......................... 12,724 1,282
Loss contracts.............................................. 9,859 4,468
Net operating loss carryforwards............................ 7,570 5,620
Bad debt allowance.......................................... 4,472 1,450
Inventory valuation adjustments............................. 4,200 1,025
Other....................................................... 15,561 (2,347)
Tooling and design costs.................................... -- (1,802)
Valuation allowance......................................... (4,175) (1,916)
-------- --------
$ 71,659 $ 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. No provision has been made for U.S. income taxes
related to undistributed earnings of foreign subsidiaries that are intended to
be permanently reinvested. As of December 31, 1999, the Company had
approximately $22 million of foreign net operating loss carryforwards with
varying carryforward periods of 7 years to unlimited carryforward in certain
foreign locations.
10. GEOGRAPHIC AND PRODUCT LINE INFORMATION:
The Company follows the provisions of SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." The Company is organized in
four divisions based on the products that each division offers to vehicle OEM
customers. Each division reports their results of operations, submits budgets
and makes capital expenditure requests to the chief operating decision-making
group. This group consists of the president and chief executive officer, the
chief operating officer, the chief financial officer and the vice-presidents of
operations, sales, engineering and human resources. The Company's operating
segments have been aggregated into one reportable segment, as the Company
believes it meets the aggregation criteria of SFAS No. 131. The Company's
divisions, each with a separate management team, are dedicated to providing
vehicle components and systems to OEM customers. Each of the divisions
demonstrate similar economic performance, mainly driven by vehicle production
volumes of the customers for which they service. All of the Company's operations
use similar manufacturing techniques and utilize common cost saving tools
overseen by the Company's vice president of operations. These techniques include
continuous improvement programs designed to reduce the Company's overall cost
base and to enable the Company to better handle OEM volume fluctuations.
F-20
<PAGE> 101
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following is a summary of revenues and long-lived assets by geographic
location (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------
1999 1998 1997
----------------------- --------------------- ---------------------
LONG-LIVED LONG-LIVED LONG-LIVED
REVENUES ASSETS REVENUES ASSETS REVENUES ASSETS
---------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
North America.............. $1,493,749 $300,391 $570,464 $126,368 $356,249 $ 68,257
Europe..................... 679,662 192,862 149,914 57,803 87,800 32,131
Other foreign countries.... 26,974 7,641 19,089 4,561 5,062 1,150
---------- -------- -------- -------- -------- --------
$2,200,385 $500,894 $739,467 $188,732 $449,111 $101,538
========== ======== ======== ======== ======== ========
</TABLE>
Revenues are attributed to geographic locations based on the location of
product production.
The following is a summary composition by product category of the Company's
revenues (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Parking brake mechanisms............................. $ 246,124 $ 134,856 $ 124,683
Automotive cables.................................... 411,740 282,616 170,988
Transmission shifter mechanisms...................... 214,387 124,004 70,191
Window systems....................................... 393,202 -- --
Door systems......................................... 220,938 -- --
Seating systems...................................... 123,112 -- --
Engineered products.................................. 459,579 197,991 83,249
Mobile products...................................... 131,303 -- --
---------- ---------- ----------
Revenues from external customers................... $2,200,385 $ 739,467 $ 449,111
========== ========== ==========
</TABLE>
The Company sells its products directly to OEMs. Customers that accounted
for a significant portion of consolidated revenues for each of the three years
in the period ended December 31, 1999 were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Ford...................................................... 26% 36% 42%
GM........................................................ 15% 23% 25%
DaimlerChrysler........................................... 11% 15% 7%
</TABLE>
As of December 31, 1999 and 1998, receivables from these customers
represented 41 percent and 70 percent of total accounts receivable.
11. EMPLOYEE BENEFIT PLANS:
DEFINED BENEFIT PLANS AND POST-RETIREMENT BENEFITS:
The Company sponsors 22 defined benefit plans that cover certain hourly and
salary employees in the United States and certain European countries. The
Company's policy is to make annual contributions to the plans to fund the normal
cost and certain unfunded frozen initial liabilities over 11.5 years. In
addition, the Company has 10 post-retirement medical benefit plans for certain
employee groups and has recorded a liability for its estimated obligation under
these plans.
F-21
<PAGE> 102
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The change in benefit obligation, plan assets and funded status consisted
of the following (in thousands):
<TABLE>
<CAPTION>
PENSION PLANS IN WHICH PENSION PLANS IN WHICH
ASSETS EXCEED ACCUMULATED BENEFITS POST-RETIREMENT BENEFITS
ACCUMULATED BENEFITS EXCEED ASSETS OTHER THAN PENSIONS
----------------------- ----------------------- -------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
----------------------- ----------------------- -------------------------
1999 1998 1999 1998 1999 1998
---------- ---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation at beginning of
year............................. $ 12,656 $ -- $ 22,786 $ 4,157 $ 17,685 $ 5,755
Service cost....................... 1,980 -- 3,810 1,371 777 243
Interest cost...................... 3,391 -- 4,539 1,412 1,851 825
Plan participants' contributions... 420 -- 210 -- 136 131
Actuarial (gain) loss.............. (2,595) -- (1,141) 4,977 (891) 2,471
Acquisitions....................... 69,189 -- 64,232 23,720 5,277 9,394
Benefits paid...................... (3,123) -- (4,244) (195) (1,747) (1,134)
Exchange rate changes.............. 429 -- (333) -- 95 --
-------- -------- -------- -------- -------- --------
Benefit obligation at end of
year............................. $ 82,347 $ -- $ 89,859 $ 35,442 $ 23,183 $ 17,685
======== ======== ======== ======== ======== ========
CHANGE IN PLAN ASSETS:
Fair value of plan assets at
beginning of year................ $ 11,127 $ -- $ 15,362 $ 3,206 $ -- $ --
Actual return on plan assets....... 8,901 -- 1,529 1,544 -- --
Acquisitions....................... 92,370 -- 52,515 20,870 -- --
Employer contributions............. 1,505 -- 1,596 1,064 1,706 401
Plan participants' contributions... 420 -- 210 -- 104 131
Benefits paid...................... (3,123) -- (3,781) (195) (1,810) (532)
Exchange rate changes.............. 382 -- (54) -- -- --
-------- -------- -------- -------- -------- --------
Fair value of plan assets at end of
year............................. $111,582 $ -- $ 67,377 $ 26,489 $ -- $ --
======== ======== ======== ======== ======== ========
CHANGE IN FUNDED STATUS:
Funded status...................... $ 29,235 $ -- $(22,482) $ (8,953) $(23,183) $(17,685)
Unrecognized actuarial (gain)
loss............................. (3,084) -- 2,335 5,532 (1,102) 1,233
Unrecognized prior service cost
(benefit)........................ 256 -- 192 301 (72) (81)
Adjustment to recognize minimum
liability........................ (797) -- (643) (1,008) -- --
-------- -------- -------- -------- -------- --------
Prepaid (accrued) benefit cost..... $ 25,610 $ -- $(20,598) $ (4,128) $(24,357) $(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,
--------------------- --------------------
1999 1998 1999 1998
--------- --------- ----------- ------
<S> <C> <C> <C> <C>
Discount rate....................................... 5.50-7.50% 5.75-6.75% 6.75-7.50% 6.75%
Expected return on plan assets...................... 7.50-9.50% 8.00-9.50% N/A N/A
Rate of compensation increase....................... 2.50-4.80% 4.00-6.00% N/A N/A
</TABLE>
F-22
<PAGE> 103
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
For measurement purposes, a 5.0 percent-8.5 percent annual rate of increase
in the per capita cost of covered health care benefits was assumed for 1999. The
rate was assumed to remain constant thereafter.
The components of net periodic benefit costs are as follows (in thousands):
<TABLE>
<CAPTION>
POST-RETIREMENT BENEFITS
PENSION BENEFITS OTHER THAN PENSIONS
YEARS ENDED DECEMBER 31, YEARS ENDED DECEMBER 31,
------------------------------ ------------------------------
1999 1998 1997 1999 1998 1997
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Service cost................. $ 6,070 $ 1,377 $ 185 $ 780 $ 246 $ 101
Interest cost................ 7,926 1,424 252 1,872 830 433
Expected return on plan
assets..................... (10,763) (1,600) (232) -- -- --
Amendments/curtailments...... (470) -- -- -- -- --
Amortization of prior service
cost....................... (319) 46 45 (8) (8) (8)
Recognized actuarial (gain)
loss....................... 644 15 (3) 25 (72) (89)
-------- -------- -------- -------- -------- --------
Net periodic benefit cost.... $ 3,088 $ 1,262 $ 247 $ 2,669 $ 996 $ 437
======== ======== ======== ======== ======== ========
</TABLE>
Assumed health care cost trend rates have a significant effect on the
amounts reported for the post-retirement medical benefit plans. A one
percentage-point change in assumed health care cost trend rates would have the
following effects (in thousands):
<TABLE>
<CAPTION>
1-PERCENTAGE-POINT 1-PERCENTAGE-POINT
INCREASE DECREASE
------------------ ------------------
<S> <C> <C>
Effect on total of service and interest cost
components..................................... $ 261 $ (219)
======= =======
Effect on the post-retirement benefit
obligation..................................... $ 1,717 $(1,530)
======= =======
</TABLE>
RETIREMENT SAVINGS PLANS:
The Company sponsors various employee retirement savings plans that 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 $4.7 million, $2.8 million and $2.2 million
during fiscal 1999, 1998 and 1997.
F-23
<PAGE> 104
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. 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, 1999 under these operating leases are as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR AMOUNT
- ---- -------
<S> <C>
2000........................................................ $11,270
2001........................................................ 9,157
2002........................................................ 7,959
2003........................................................ 6,203
2004........................................................ 5,155
Thereafter.................................................. 29,592
</TABLE>
THIXOTECH:
In December 1997, the Company purchased approximately 19 percent 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. During 1998 and 1999, the Company purchased approximately $4.2
million of 5 percent convertible preferred stock of Thixotech. In addition, the
Company has guaranteed approximately $1.5 million of Thixotech capital lease
financing. Subsequent to year-end, the Company exercised its conversion rights
under the notes discussed above, becoming the majority owner of Thixotech.
LITIGATION:
The Company is 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. In the event
of a product recall by an original equipment manufacturer, it is possible that
the manufacturer will seek reimbursement of the costs to repair from the
Company. In addition, the Company is currently in discussions with a significant
customer regarding certain alleged product warranty and other contractual
matters. All such matters are subject to many uncertainties, and the outcomes of
individual matters are not predictable with assurance. Management believes that
the Company maintains adequate insurance, including product liability coverage,
to cover certain of the claims above. The Company has established reserves in
amounts management believes are adequate to cover reasonable adverse judgments
not covered by insurance. Based upon the information available to management and
discussions with legal counsel, it is the opinion of management that 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.
13. RELATED PARTY TRANSACTIONS:
The Company paid fees to Hidden Creek Industries ("HCI"), an affiliate of
the Company, of approximately $9.5 million in 1999 in connection with the
acquisitions of Excel and Adwest, the offering of the Subordinated Notes, the
tender of the Trident notes and the amended Credit Agreement , $3.7 million in
1998 in connection with the acquisition of Universal, Hinge and Trident, the
Offering and the Preferred Securities Offering and $850,000 in 1997 in
connection with the acquisitions of VOFA and GT Automotive. See Note 6 for
discussion of acquisitions.
F-24
<PAGE> 105
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. QUARTERLY FINANCIAL DATA (UNAUDITED):
The following is a condensed summary of actual quarterly results of
operations for 1999 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>
1999:
First.............................. $ 264,701 $ 46,482 $ 25,900 $ 3,492 $0.27 $0.27
Second............................. 685,167 102,499 55,781 15,669 0.90 0.86
Third.............................. 580,886 89,407 43,845 11,291 0.65 0.63
Fourth............................. 669,631 107,292 45,353 10,768 0.62 0.60
---------- -------- -------- -------
$2,200,385 $345,680 $170,879 $41,220 $2.53 $2.46
========== ======== ======== =======
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 shares issued in connection with the
acquisition of Excel and the timing of the Offering and their effects on the
computation of weighted average number of shares outstanding.
15. CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION:
The following consolidating financial information presents balance sheets,
statements of operations and cash flow information related to the Company's
business. Each Guarantor, as defined, is a direct or indirect wholly owned
subsidiary of the Company has fully and unconditionally guaranteed the 9 percent
senior subordinated notes issued by Dura Operating Corp., on a joint and several
basis. Separate financial statements and other disclosures concerning the
Guarantors have not been presented because management believes that such
information is not material to investors.
F-25
<PAGE> 106
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DURA AUTOMOTIVE SYSTEMS, INC.
CONSOLIDATING BALANCE SHEETS
AS OF DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
----------- ----------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........ $ 277 $ 704 $ 22,716 $ -- $ 23,697
Accounts receivable, net......... 161,403 94,542 222,597 -- 478,542
Inventories...................... 36,063 32,513 67,987 -- 136,563
Other current assets............. 66,919 23,171 64,613 -- 154,703
Due from affiliates.............. 167,536 136,813 10,666 (315,015) --
----------- ----------- ---------- ----------- -----------
Total current assets........... 432,198 287,743 388,579 (315,015) 793,505
----------- ----------- ---------- ----------- -----------
Property, plant and equipment,
net............................ 125,328 117,960 257,606 -- 500,894
Investment in subsidiaries....... 558,950 29,042 46,118 (634,110) --
Notes receivable from
affiliates..................... 450,669 3,466 36,557 (490,692) --
Goodwill, net.................... 355,605 186,117 526,215 -- 1,067,937
Other assets, net................ 38,651 13,756 30,124 -- 82,531
----------- ----------- ---------- ----------- -----------
$ 1,961,401 $ 638,084 $1,285,199 $(1,439,817) $ 2,444,867
=========== =========== ========== =========== ===========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current liabilities:
Accounts payable................. $ 102,983 $ 37,324 $ 141,106 -- $ 281,413
Accrued liabilities.............. 93,727 51,379 151,325 -- 296,431
Current maturities of long-term
debt........................... 16,247 2,159 34,306 -- 52,712
Due to affiliates................ 155,773 111,204 48,038 (315,015) --
----------- ----------- ---------- ----------- -----------
Total current liabilities...... 368,730 202,066 374,775 (315,015) 630,556
----------- ----------- ---------- ----------- -----------
Long-term debt, net of current
maturities..................... 661,737 79 114,934 -- 776,750
Subordinated notes............... 401,560 -- -- -- 401,560
Other noncurrent liabilities..... 26,637 55,467 67,651 -- 149,755
Notes payable to affiliates...... -- 36,565 454,127 (490,692) --
----------- ----------- ---------- ----------- -----------
Total liabilities.............. 1,458,664 294,177 1,011,487 (805,707) 1,958,621
----------- ----------- ---------- ----------- -----------
Mandatorily redeemable
convertible trust preferred
securities..................... 55,250 -- -- -- 55,250
Stockholders' investment:........ 447,487 343,907 290,203 (634,110) 447,487
Accumulated other comprehensive
loss -- cumulative translation
adjustment..................... -- -- (16,491) -- (16,491)
----------- ----------- ---------- ----------- -----------
$ 1,961,401 $ 638,084 $1,285,199 $(1,439,817) $ 2,444,867
=========== =========== ========== =========== ===========
</TABLE>
F-26
<PAGE> 107
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DURA AUTOMOTIVE SYSTEMS, INC.
CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
--------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues................................. $831,615 $588,412 $805,217 $(24,859) $2,200,385
Cost of sales............................ 703,071 499,400 677,093 (24,859) 1,854,705
-------- -------- -------- -------- ----------
Gross profit............................. 128,544 89,012 128,124 -- 345,680
Selling, general and administrative
expenses............................... 58,493 16,099 55,487 -- 130,079
Facility consolidation charge............ 290 -- 15,956 -- 16,246
Amortization expense..................... 12,343 5,514 10,619 -- 28,476
-------- -------- -------- -------- ----------
Operating income......................... 57,418 67,399 46,062 -- 170,879
Interest expense, net.................... 35,266 3,627 37,810 -- 76,703
-------- -------- -------- -------- ----------
Income before provision for income taxes,
equity in (earnings) losses of
affiliates and minority interests...... 22,152 63,772 8,252 -- 94,176
-------- -------- -------- -------- ----------
Provision for income taxes............... 4,275 24,761 8,948 -- 37,984
Minority interest and equity in
(earnings) losses of affiliates, net... (30,947) -- (1,121) 36,046 3,978
Minority interest -- dividends on trust
preferred securities, net.............. 2,445 -- -- -- 2,445
-------- -------- -------- -------- ----------
Income before extraordinary item and
accounting change...................... 46,379 39,011 425 (36,046) 49,769
-------- -------- -------- -------- ----------
Extraordinary item -- loss on early
extinguishment of debt, net............ 2,012 (279) 3,669 -- 5,402
Cumulative effect of change in
accounting, net........................ 3,147 -- -- -- 3,147
-------- -------- -------- -------- ----------
Net income (loss)........................ $ 41,220 $ 39,290 $ (3,244) $(36,046) $ 41,220
======== ======== ======== ======== ==========
</TABLE>
F-27
<PAGE> 108
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DURA AUTOMOTIVE SYSTEMS, INC.
CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
--------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)....................................... $ 41,220 $ 39,290 $ (3,244) $ (36,046) $ 41,220
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization......................... 26,032 14,290 36,332 76,654
Deferred income tax benefit........................... (1,899) -- -- -- (1,899)
Equity in losses of affiliates and minority
interest............................................ (30,947) -- (1,121) 36,046 3,978
Extraordinary loss on extinguishment of debt.......... 2,012 -- 3,390 -- 5,402
Change in method of accounting........................ 3,147 -- -- -- 3,147
Facility consolidation charge......................... 290 -- 15,956 -- 16,246
Changes in other operating items...................... 9,033 (16,444) (56,395) -- (63,806)
--------- --------- --------- --------- ---------
Net cash provided by (used in) operating
activities........................................ 48,888 37,136 (5,082) -- 80,942
--------- --------- --------- --------- ---------
INVESTING ACTIVITIES:
Acquisitions, net of cash Acquired...................... (185,259) (8,619) (330,155) -- (524,033)
Capital expenditures, net............................... (16,011) (20,007) (44,451) -- (80,469)
Other, net.............................................. -- (1,994) (1,449) -- (3,443)
--------- --------- --------- --------- ---------
Net cash used in investing activities............... (201,270) (30,620) (376,055) -- (607,945)
--------- --------- --------- --------- ---------
FINANCING ACTIVITIES:
Proceeds from borrowings, net........................... 358,551 (10,710) (199,229) -- 148,612
Debt financing (to)/from affiliates..................... (584,800) 5,455 579,345 -- --
Proceeds from stock offering and exercise of stock
options............................................... 2,545 -- -- -- 2,545
Proceeds from issuance of subordinated notes............ 394,653 -- -- -- 394,653
Debt issue costs........................................ (19,537) -- -- -- (19,537)
--------- --------- --------- --------- ---------
Net cash provided by (used for) financing
activities........................................ 151,412 (5,255) 380,116 -- 526,273
--------- --------- --------- --------- ---------
EFFECT OF EXCHANGE
RATES ON CASH........................................... -- -- 3,883 -- 3,883
--------- --------- --------- --------- ---------
NET CHANGE IN CASH
AND CASH EQUIVALENTS.................................... (970) 1,261 2,862 -- 3,153
CASH AND CASH
EQUIVALENTS:
Beginning of period..................................... 1,247 (557) 19,854 -- 20,544
--------- --------- --------- --------- ---------
End of period........................................... $ 277 $ 704 $ 22,716 $ -- $ 23,697
========= ========= ========= ========= =========
</TABLE>
F-28
<PAGE> 109
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DURA AUTOMOTIVE SYSTEMS, INC.
CONSOLIDATING BALANCE SHEETS
AS OF DECEMBER 31, 1998
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
--------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............. $ 1,247 $ (557) $ 19,854 $ -- $ 20,544
Accounts receivable, net............... 70,332 41,863 46,270 -- 158,465
Inventories............................ 19,134 10,454 20,910 -- 50,498
Other current assets................... 12,576 25,780 7,568 -- 45,924
Due from affiliates.................... 8,878 16,822 5,421 (31,121) --
--------- --------- --------- --------- ---------
Total current assets................. 112,167 94,362 100,023 (31,121) 275,431
--------- --------- --------- --------- ---------
Property, plant and equipment, net..... 62,464 48,546 77,722 -- 188,732
Investment in subsidiaries............. 202,697 27,736 40,238 (266,747) 3,924
Notes receivable from affiliates....... 47,329 -- 29,911 (77,240) --
Goodwill, net.......................... 107,469 150,740 177,751 -- 435,960
Other assets, net...................... 13,564 2,102 9,670 -- 25,336
--------- --------- --------- --------- ---------
$ 545,690 $ 323,486 $ 435,315 $(375,108) $ 929,383
========= ========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current liabilities:
Accounts payable....................... $ 39,019 $ 22,638 $ 37,855 $ -- $ 99,512
Accrued liabilities.................... 28,167 46,131 22,366 -- 96,664
Current maturities of long-term debt... 7,064 16 8,409 -- 15,489
Due to affiliates...................... 8,793 7,806 14,522 (31,121) --
--------- --------- --------- --------- ---------
Total current liabilities............ 83,043 76,591 83,152 (31,121) 211,665
--------- --------- --------- --------- ---------
Long-term debt, net of
current maturities................... 155,408 8,010 152,999 -- 316,417
Other noncurrent liabilities........... 13,437 61,538 33,039 -- 108,014
Notes payable to affiliates............ -- 27,668 49,572 (77,240) --
--------- --------- --------- --------- ---------
Total liabilities.................... 251,888 173,807 318,762 (108,361) 636,096
--------- --------- --------- --------- ---------
Mandatorily redeemable convertible
trust preferred securities........... 55,250 -- -- -- 55,250
Stockholders' investment............... 238,552 149,679 116,553 (266,747) 238,037
--------- --------- --------- --------- ---------
$ 545,690 $ 323,486 $ 435,315 $(375,108) $ 929,383
========= ========= ========= ========= =========
</TABLE>
F-29
<PAGE> 110
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DURA AUTOMOTIVE SYSTEMS, INC.
CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
--------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues.................................. $356,683 $184,956 $210,449 $(12,621) $739,467
Cost of sales............................. 296,863 151,546 172,730 (12,621) 608,518
-------- -------- -------- -------- --------
Gross profit.............................. 59,820 33,410 37,719 -- 130,949
Selling, general and administrative
expenses................................ 21,445 11,183 17,197 -- 49,825
Amortization expense...................... 3,522 2,864 3,482 -- 9,868
-------- -------- -------- -------- --------
Operating income.......................... 34,853 19,363 17,040 -- 71,256
Interest expense, net..................... 7,970 2,808 9,489 -- 20,267
-------- -------- -------- -------- --------
Income before provision for income taxes,
equity in earnings (losses) of
subsidiaries and minority interest...... 26,883 16,555 7,551 -- 50,989
Provision for income taxes................ 10,030 6,176 4,727 -- 20,933
Equity in earnings (losses) of
subsidiaries............................ 11,722 -- 4,259 (17,462) (1,481)
Minority interest -- dividend on trust
preferred securities, net............... 1,908 -- -- -- 1,908
-------- -------- -------- -------- --------
Income (loss) before extraordinary item... 26,667 10,379 7,083 (17,462) 26,667
Extraordinary item -- loss on early
extinguishment of debt, net............. 643 -- -- -- 643
-------- -------- -------- -------- --------
Net income (loss)......................... $ 26,024 $ 10,379 $ 7,083 $(17,462) $ 26,024
======== ======== ======== ======== ========
</TABLE>
F-30
<PAGE> 111
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DURA AUTOMOTIVE SYSTEMS, INC.
CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
--------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)...................................... $ 26,024 $ 10,379 $ 7,083 $(17,462) $ 26,024
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities:
Depreciation and amortization........................ 11,587 6,466 9,518 -- 27,571
Deferred income tax provision........................ 7,833 -- -- -- 7,833
Extraordinary loss on extinguishment of debt......... 643 -- -- -- 643
Other................................................ (315) -- -- -- (315)
(Income)/loss from investment in subsidiaries........ (13,203) -- (4,259) 17,462 --
Due (to)/from affiliates............................. 4,152 (6,939) 2,787 -- --
Equity in losses of affiliates....................... 1,481 -- -- -- 1,481
Changes in other operating items..................... (21,127) (40,084) 5,661 -- (55,550)
--------- -------- -------- -------- ---------
Net cash provided by (used for) operating
activities....................................... 17,075 (30,178) 20,790 -- 7,687
--------- -------- -------- -------- ---------
INVESTING ACTIVITIES:
Capital expenditures, net.............................. (15,742) (6,181) (9,899) -- (31,822)
Acquisitions, net...................................... (135,712) -- -- -- (135,712)
--------- -------- -------- -------- ---------
Net cash used for investing activities............. (151,454) (6,181) (9,899) -- (167,534)
--------- -------- -------- -------- ---------
FINANCING ACTIVITIES:
Borrowings under revolving credit facilities........... 352,296 8,000 56,971 -- 417,267
Repayments of revolving credit facilities.............. (350,546) -- (34,506) -- (385,052)
Long-term borrowings................................... 50,000 -- 50,265 -- 100,265
Repayments of long-term borrowings..................... (50,984) -- (65,367) -- (116,351)
Debt financing (to)/from affiliates.................... (26,923) 27,668 (745) -- --
Proceeds from stock offering, net...................... 107,848 -- -- -- 107,848
Proceeds from issuance of preferred securities......... 52,525 -- -- -- 52,525
Sale of common stock, net.............................. 118 -- -- -- 118
--------- -------- -------- -------- ---------
Net cash provided by financing activities.......... 134,334 35,668 6,618 -- 176,620
--------- -------- -------- -------- ---------
EFFECT OF EXCHANGE
RATES ON CASH.......................................... -- -- (377) -- (377)
--------- -------- -------- -------- ---------
NET CHANGE IN CASH
AND CASH EQUIVALENTS................................... (45) (691) 17,132 -- 16,396
CASH AND CASH
EQUIVALENTS:
Beginning of period.................................... 1,292 134 2,722 -- 4,148
--------- -------- -------- -------- ---------
End of period.......................................... $ 1,247 $ (557) $ 19,854 $ -- $ 20,544
========= ======== ======== ======== =========
</TABLE>
F-31
<PAGE> 112
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DURA AUTOMOTIVE SYSTEMS, INC.
CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
--------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues................................... $345,641 $15,824 $89,074 $(1,428) $449,111
Cost of sales.............................. 291,219 11,837 73,458 (1,428) 375,086
-------- ------- ------- ------- --------
Gross profit............................... 54,422 3,987 15,616 -- 74,025
Selling, general and administrative
expenses................................. 25,062 1,048 6,705 -- 32,815
Amortization expense....................... 3,037 303 260 -- 3,600
-------- ------- ------- ------- --------
Operating income........................... 26,323 2,636 8,651 -- 37,610
Interest expense, net...................... 6,479 18 2,801 -- 9,298
-------- ------- ------- ------- --------
Income before provision for income taxes,
equity in earnings (losses) of
subsidiaries............................. 19,844 2,618 5,850 -- 28,312
Provision for income taxes................. 7,665 1,181 2,824 -- 11,670
Equity in earnings (losses) of
subsidiaries............................. 4,463 -- -- (4,463) --
-------- ------- ------- ------- --------
Net income (loss).......................... $ 16,642 $ 1,437 $ 3,026 $(4,463) $ 16,642
======== ======= ======= ======= ========
</TABLE>
F-32
<PAGE> 113
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DURA AUTOMOTIVE SYSTEMS, INC.
CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
--------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)........................ $ 16,642 $ 1,437 $ 3,026 $ (4,463) $ 16,642
Adjustments to reconcile net income
(loss) to net cash provided by (used
for) operating activities:
Depreciation and amortization.......... 9,910 606 1,787 -- 12,303
Deferred income tax provision.......... 1,521 -- -- -- 1,521
(Income)/loss from investment in
subsidiaries........................ (4,463) -- -- 4,463 --
Due (to)/from affiliates............... (4,189) (2,077) 6,266 -- --
Changes in other operating items....... (1,791) 924 (21,083) -- (21,950)
--------- -------- -------- -------- ---------
Net cash provided by (used for)
operating activities.............. 17,630 890 (10,004) -- 8,516
--------- -------- -------- -------- ---------
INVESTING ACTIVITIES:
Capital expenditures, net................ (13,952) (756) (1,534) -- (16,242)
Acquisitions, net........................ (70,481) -- -- -- (70,481)
Investments in joint ventures and
other.................................. (6,663) -- -- -- (6,663)
--------- -------- -------- -------- ---------
Net cash used for investing
activities........................ (91,096) (756) (1,534) -- (93,386)
--------- -------- -------- -------- ---------
FINANCING ACTIVITIES:
Borrowings under revolving credit
facilities............................. 267,987 -- -- -- 267,987
Repayments of revolving credit
facilities............................. (174,869) -- -- -- (174,869)
Repayments of long-term borrowings....... (80) -- (5,928) -- (6,008)
Debt financing (to)/from affiliates...... (20,406) -- 20,406 -- --
Sale of common stock, net................ 510 -- -- -- 510
--------- -------- -------- -------- ---------
Net cash provided by financing
activities........................ 73,142 -- 14,478 -- 87,620
--------- -------- -------- -------- ---------
EFFECT OF EXCHANGE
RATES ON CASH............................ -- -- (269) -- (269)
--------- -------- -------- -------- ---------
NET CHANGE IN CASH AND
CASH EQUIVALENTS:........................ (324) 134 2,671 -- 2,481
Beginning of period...................... 1,616 -- 51 -- 1,667
--------- -------- -------- -------- ---------
End of period............................ $ 1,292 $ 134 $ 2,722 $ -- $ 4,148
========= ======== ======== ======== =========
</TABLE>
F-33
<PAGE> 114
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To: Excel Industries, Inc.
We have audited the accompanying consolidated balance sheets of Excel
Industries, Inc. (an Indiana corporation) and Subsidiaries as of December 27,
1997 and January 2, 1999 and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three years in the period
ended January 2, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Excel Industries, Inc. and
Subsidiaries as of December 27, 1997 and January 2, 1999, and the results of
their operations and their cash flows for each of the three years in the period
ended January 2, 1999 in conformity with generally accepted accounting
principles.
As explained in Note 2 to the financial statements, effective December 28,
1997, the Company changed its method of computing depreciation.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota
June 16, 1999
F-34
<PAGE> 115
EXCEL INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 27, JANUARY 2,
1997 1999
------------ ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and short-term investments............................. $ 2,317 $ 16,290
Marketable securities....................................... 24,420 14,000
Accounts receivable -- trade, less allowances of $1,318 in
1997 and $1,810 in 1998................................... 140,910 167,400
Customer tooling to be billed............................... 22,356 30,649
Inventories................................................. 40,929 59,402
Prepaid expenses............................................ 14,929 15,640
--------- ---------
Total current assets........................................ 245,861 303,381
Property, plant and equipment:
Land........................................................ 3,227 5,153
Buildings and improvements.................................. 52,056 77,101
Machinery and equipment..................................... 225,046 302,691
Accumulated depreciation.................................... (119,361) (152,276)
--------- ---------
160,968 232,669
Goodwill, net of accumulated amortization of $5,387 in 1997
and $7,012 in 1998........................................ 35,960 41,865
Other assets................................................ 15,008 16,469
--------- ---------
$ 457,797 $ 594,384
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................ $ 85,469 $ 107,052
Accrued liabilities:
Salaries and wages.......................................... 9,249 16,875
Employee benefits........................................... 11,136 14,464
Other....................................................... 20,785 25,439
Income taxes payable........................................ -- 3,599
Current maturities of long-term debt........................ 2,672 17,156
--------- ---------
Total current liabilities................................... 129,311 184,585
Long-term debt.............................................. 105,943 149,879
Long-term employee benefits................................. 32,934 44,469
Other long-term liabilities................................. 4,294 9,085
Minority interest........................................... -- 12,108
Commitments and contingent liabilities...................... -- --
Shareholders' equity:
Preferred shares -- no par value, authorized 1,000 shares;
none issued............................................... -- --
Common shares -- no par value, authorized 20,000 shares;
issued and outstanding in 1997, 12,414; issued in 1998,
12,468.................................................... 114,730 115,646
Retained earnings........................................... 70,585 81,373
Accumulated other comprehensive income...................... -- 1,045
Treasury shares at cost, 289 shares......................... -- (3,806)
--------- ---------
Total shareholders' equity.................................. 185,315 194,258
--------- ---------
$ 457,797 $ 594,384
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-35
<PAGE> 116
EXCEL INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF INCOME
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------
DECEMBER 28, DECEMBER 27, JANUARY 2,
1996 1997 1999
------------ ------------ ----------
<S> <C> <C> <C>
Net sales........................................... $ 887,741 $ 962,333 $1,106,103
Cost of goods sold.................................. 783,375 846,990 995,982
---------- ---------- ----------
Gross profit........................................ 104,366 115,343 110,121
Selling, administrative and engineering expenses.... 65,652 79,267 78,615
---------- ---------- ----------
Operating income.................................... 38,714 36,076 31,506
Interest expense.................................... 9,784 10,984 11,628
Other income, net................................... (1,736) (1,930) (2,074)
---------- ---------- ----------
Income before income taxes and minority interest.... 30,666 27,022 21,952
Provision for income taxes.......................... 11,550 9,458 3,632
Minority interest................................... -- -- 1,367
---------- ---------- ----------
Net income.......................................... $ 19,116 $ 17,564 $ 16,953
---------- ---------- ----------
Net income per share:
Basic............................................. $ 1.79 $ 1.59 $ 1.37
Diluted........................................... 1.62 1.48 1.36
Cash dividends per share............................ $ .455 $ .50 $ .50
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-36
<PAGE> 117
EXCEL INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------
DECEMBER 28, DECEMBER 27, JANUARY 2,
1996 1997 1999
------------ ------------ ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................................ $ 19,116 $ 17,564 $ 16,953
-------- -------- --------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization....................... 26,246 33,382 39,679
Deferred income taxes............................... (1,613) 3,093 782
Other............................................... 348 2,093 2,121
Changes in assets and liabilities, excluding effect of
acquisitions:
Accounts receivable and prepaid expenses............ 19,206 (12,396) 14,769
Inventories and customer tooling.................... 25,955 (3,180) 5,119
Accounts payable and accrued liabilities............ (19,409) (79) (3,421)
-------- -------- --------
Total adjustments................................ 50,733 22,913 59,049
-------- -------- --------
Net cash provided by operating activities........ 69,849 40,477 76,002
-------- -------- --------
Cash flows from investing activities:
Purchase of property, plant and equipment........... (29,209) (39,287) (45,958)
Businesses acquired................................. (58,984) (2,415) (10,080)
Sale (purchase) of investments, net................. 8,290 (2,471) 10,420
Proceeds from disposal of business.................. -- 6,793 --
Other............................................... 929 199 1,693
-------- -------- --------
Net cash used for investing activities........... (78,974) (37,181) (43,925)
-------- -------- --------
Cash flows from financing activities:
Issuance of common shares........................... 278 543 916
Payments of long-term debt.......................... (79,934) (2,470) (15,905)
Dividends........................................... (4,875) (5,632) (6,165)
Purchase of treasury shares......................... (155) -- (3,806)
Issuance of long-term debt.......................... 100,000 -- 3,359
Other............................................... -- -- 3,497
-------- -------- --------
Net cash provided by (used for) financing
activities..................................... 15,314 (7,559) (18,104)
-------- -------- --------
Net change in cash and short-term investments......... 6,189 (4,263) 13,973
Cash and short-term investments at beginning of
period.............................................. 391 6,580 2,317
-------- -------- --------
Cash and short-term investments at end of period...... $ 6,580 $ 2,317 $ 16,290
======== ======== ========
Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest............................................ $ 9,288 $ 11,182 $ 11,504
Income taxes, net of refunds........................ 10,524 8,895 3,594
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-37
<PAGE> 118
EXCEL INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED
COMMON OTHER
SHARES COMMON RETAINED COMPREHENSIVE TREASURY
OUTSTANDING SHARES EARNINGS INCOME SHARES TOTAL
----------- -------- -------- ------------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 30, 1995..... 10,703 $ 95,157 $44,412 $ (659) $(4,593) $134,317
Comprehensive income:
Net income..................... 19,116 19,116
Cumulative translation
adjustment.................. 45 45
Minimum pension liability
adjustment.................. 499 499
--------
Total comprehensive income....... 19,660
--------
Dividends........................ -- -- (4,875) -- -- (4,875)
Share options exercised.......... 12 86 -- -- -- 86
Shares issued under employee
stock purchase plan............ 15 192 -- -- -- 192
Warrants issued.................. 1,500 -- -- -- 1,500
Treasury shares purchased........ (12) -- -- -- (155) (155)
Treasury shares canceled......... -- (4,748) -- -- 4,748 --
------ -------- ------- ------ ------- --------
BALANCE AT DECEMBER 28, 1996..... 10,718 92,187 58,653 (115) -- 150,725
Comprehensive income:
Net income..................... 17,564 17,564
Cumulative translation
adjustment.................. (45) (45)
Minimum pension liability
adjustment.................. 160 160
--------
Total comprehensive income....... 17,679
--------
Dividends........................ -- -- (5,632) -- -- (5,632)
Share options exercised.......... 9 116 -- -- -- 116
Shares issued under employee
stock purchase plan............ 22 427 -- -- -- 427
Conversion of 10 percent
subordinated notes............. 1,665 22,000 -- -- -- 22,000
------ -------- ------- ------ ------- --------
BALANCE AT DECEMBER 27, 1997..... 12,414 114,730 70,585 -- -- 185,315
Comprehensive income:
Net income..................... 16,953 16,953
Cumulative translation
adjustment.................. 2,042 2,042
Minimum pension liability
adjustment.................. (997) (997)
--------
Total comprehensive income....... 17,998
--------
Dividends........................ -- -- (6,165) -- -- (6,165)
Share options exercised.......... 13 162 -- -- -- 162
Shares issued under employee
stock purchase plan............ 41 754 -- -- -- 754
Treasury shares purchased........ (289) -- -- -- (3,806) (3,806)
------ -------- ------- ------ ------- --------
BALANCE AT JANUARY 2, 1999....... 12,179 $115,646 $81,373 $1,045 $(3,806) $194,258
====== ======== ======= ====== ======= ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-38
<PAGE> 119
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
The Company designs, manufactures and sells automotive window, door and
seating systems and decorative trims for original equipment manufacturers (OEMs)
and Tier I suppliers. It also manufactures and sells appliances, jacks and
couplers, and window and door systems for the recreational vehicle industry and
windows for the mass transit and heavy truck industries. The Company has
manufacturing facilities located in the United States, Mexico, Germany, United
Kingdom, Spain, Portugal, and the Czech Republic.
Effective July 1, 1998, the Company acquired 70 percent of Schade GmbH &
Co. KG, headquartered in Plettenberg, Germany as described in note 3.
2. SIGNIFICANT ACCOUNTING PRINCIPLES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its majority-owned subsidiaries. All significant intercompany transactions,
profits and balances are eliminated. The Company has a 25 percent interest in a
Brazilian joint venture, which is accounted for on the equity method and
resulted in losses of $1.5 million in 1998.
FISCAL YEAR
The Company's fiscal year consists of 52 or 53 weeks ending on the Saturday
nearest the calendar year end.
NET INCOME PER SHARE
In 1997, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 128, "Earnings Per Share." All net income per share amounts reported
herein are in accordance with this Statement.
Basic net income per share is computed using the weighted average number of
shares outstanding during the period. Shares used to compute basic net income
per share were 10,709,000 for 1996, 11,079,000 for 1997 and 12,370,000 for 1998.
Diluted earnings per share assumes, when dilutive, the exercise of common
share options and warrants outstanding and the conversion of the 10 percent
convertible subordinated notes until their conversion into common shares in
October, 1997. Shares used to compute diluted earnings per share included the
number of shares used for basic net income per share plus 56,000 in 1996,
187,000 in 1997 and 118,000 in 1998 for the exercise of options and warrants and
2,220,000 in 1996 and 1,370,000 in 1997 for the assumed conversion of the notes.
Net income used to compute diluted earnings per share included an add-back of
$1,907,000 in 1996 and $1,192,000 in 1997 for interest, net of taxes, on the
notes.
SHORT-TERM INVESTMENTS AND MARKETABLE SECURITIES
Short-term investments amounting to $2,000,000 at December 27, 1997 and
$3,770,000 at January 2, 1999 consist of investments generally held in money
market funds.
Marketable securities represent investments with maturities generally
longer than 90 days. All securities mature prior to December, 1999 and are
considered available for sale. Interest and dividends on marketable securities
are included in income as earned. Realized gains or losses are determined on the
specific identification method.
F-39
<PAGE> 120
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Marketable securities are carried at cost, which approximates market value,
and consist of the following (in thousands):
<TABLE>
<CAPTION>
1997 1998
------- -------
<S> <C> <C>
Government securities....................................... $10,885 $ --
Tax-free municipal securities............................... 5,335 --
Municipal fund par value preferred shares................... 2,200 --
Other tax-free securities................................... 6,000 14,000
------- -------
$24,420 $14,000
======= =======
</TABLE>
Other income includes interest income of $1,772,000 in 1996, $1,957,000 in
1997 and $2,005,000 in 1998.
INVENTORIES
Inventories are valued at the lower of cost or market. At December 27,
1997, the LIFO method was used to value 84 percent of inventories. At January 2,
1999, the last-in, first-out (LIFO) method was used to determine cost for
approximately 60 percent of inventories while the first-in, first-out (FIFO)
method was used for the remaining inventories primarily related to foreign
inventories.
CUSTOMER TOOLING TO BE BILLED
Excess of cost over billings on uncompleted tooling projects represents
costs incurred by the Company in the production of customer-owned tooling to be
used by the Company in the manufacture of its products. The Company receives a
specific purchase order for this tooling and is reimbursed by the customer
within one operating cycle. Costs are deferred until reimbursed by the customer.
Forecasted losses on incomplete projects are recognized currently.
PROPERTIES
Property, plant and equipment are carried at cost and include expenditures
for new facilities and those which substantially increase the useful lives of
existing plant and equipment. Expenditures for repairs and maintenance are
expensed as incurred.
DEPRECIATION
The Company provides for depreciation of property, plant and equipment
using methods and rates designed to amortize the cost of such equipment over its
useful life. The estimated useful lives range from 10 to 40 years for buildings
and improvements and 2 to 20 years for machinery and equipment. Prior to 1998,
depreciation was computed using accelerated methods of depreciation for new
plant and equipment. A survey conducted by the Company confirmed the
straight-line method of depreciation as the predominant method used throughout
the automotive supply industry. Accordingly, for new capital expenditures for
the 1998 fiscal year and thereafter, the Company adopted the straight-line
method of depreciation for financial reporting purposes. The favorable effect of
the change on net income for the year ending January 2, 1999 was approximately
$1.1 million or $.09 per share.
GOODWILL
The excess of purchase price over the fair value of net assets of acquired
businesses (goodwill) is amortized on a straight-line basis over 15 to 40 years.
The Company periodically evaluates whether events and circumstances have
occurred which may affect the estimated useful life or the recoverability of the
remaining
F-40
<PAGE> 121
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
balance of its goodwill and other long-lived assets. If such events or
circumstances were to indicate that the carrying amount of these assets would
not be recoverable, the Company would estimate the future cash flows expected to
result from the use of the assets and their eventual disposition. If the sum of
the expected future cash flows (undiscounted and without interest charges) were
less than the carrying amount of goodwill, the Company would recognize an
impairment loss.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company estimates the fair value of all financial instruments where the
face value differs from the fair value, primarily long-term debt, based upon
quoted amounts or the current rates available for similar financial instruments.
If fair value accounting had been used at January 2, 1999, long-term debt would
exceed the reported level by approximately $9 million.
REVENUE RECOGNITION AND SALES COMMITMENTS
The Company recognizes revenue as its products are shipped to its
customers. The Company enters into agreements with its customers at the
beginning of a given vehicle's life to produce products. Once such agreements
are entered into by the Company, fulfillment of the customers' purchasing
requirements is generally the obligation of the Company for the entire
production life of the vehicle, generally with terms of up to seven years. In
certain instances, the Company may be committed under existing agreements to
supply product to its customers at selling prices which are not sufficient to
cover the direct cost to produce such product. In such situations, the Company
records a liability for the estimated future amount of such losses. Such losses
are recognized at the time that the loss is probable and reasonably estimable.
The Company recorded a $4.5 million reserve for these losses in 1998.
INCOME TAXES
Deferred income taxes are provided using the liability method in accordance
with SFAS No. 109, "Accounting for Income Taxes".
FOREIGN CURRENCY TRANSLATION
For operations outside the United States that prepare financial statements
in currencies other than the United States dollar, the balance sheet, income,
expense and cash flow amounts are translated in accordance with SFAS No. 52,
"Foreign Currency Translation".
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
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
F-41
<PAGE> 122
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
hedges allow a derivative's gains or losses to offset related results on the
hedged item in the statement of operations and requires that a company must
formally document, designate and assess the effectiveness of transactions that
receive hedge accounting. The Company has not yet quantified the impacts of
adopting SFAS No. 133 and has not yet determined the timing of adoption.
3. ACQUISITIONS AND DISPOSALS
Effective July 1, 1998, the Company purchased through its wholly-owned
subsidiary, Excel Industries Germany GmbH, a 70 percent interest in Schade GmbH
& Co. K.G. (Schade), a German limited partnership. The aggregate purchase price
for Schade was DM 17,036,400, or approximately $9,689,000 plus transaction
costs. The Company also assumed approximately $68 million of Schade's debt. The
amount of the Company's contribution to the capital of Schade was DM 27,340,000,
or approximately $15,548,000. Funds for the purchase price for the interests and
the contribution came from the Company's cash on hand.
The remaining 30 percent of Schade is owned by Hella KG Hueck & Co.,
another international OEM supplier. Schade has sales and manufacturing
operations in Germany, Portugal, Spain, United Kingdom and the Czech Republic
with annual sales of more than $300 million. Schade and its affiliated companies
are engaged in the manufacture and distribution of decorative trims, body
components, injected molded plastic components and modular windows for the
automotive industry.
The acquisition of Schade was accounted for as a purchase. The assets
acquired and liabilities assumed have been recorded based on preliminary
estimates of fair value as of the date of acquisition. The Company does not
believe the final allocation of purchase price will be materially different from
preliminary allocations. Any changes to the preliminary estimates will be
reflected as an adjustment to goodwill. The excess of the purchase price over
the estimated fair value of net assets acquired has been accounted for as
goodwill and is being amortized over 40 years using the straight-line method.
The accompanying consolidated statements of income include the operating
results of Schade since July 1, 1998. Pro forma unaudited consolidated operating
results of the Company and Schade for the year ended December 27, 1997 and
January 2, 1999, assuming the acquisition had been made as of the beginning of
1997 and 1998, are summarized below (in thousands, except per share amounts):
<TABLE>
<CAPTION>
YEAR ENDED
------------------------
1997 1998
---------- ----------
<S> <C> <C>
Net sales................................................. $1,243,541 $1,264,654
Net income................................................ 21,116 18,919
Net income per share, basic............................... 1.91 1.53
Net income per share, diluted............................. 1.77 1.52
</TABLE>
On April 3, 1996, the Company completed the purchase of all of the
outstanding common shares of Anderson Industries, Inc. (Anderson) for
approximately $62,562,000 including five-year warrants for 381,000 shares of
Excel common stock exercisable at $13.25 per share (valued at $1.5 million) and
expenses of the transaction.
The acquisition of Anderson, a holding company whose main asset was Atwood
Industries, Inc. (Atwood), was accounted for as a purchase. Accordingly, the
purchase price was allocated to the net assets acquired based upon their
estimated fair market values. The excess of the purchase price over the
estimated fair value of net assets acquired, $26,482,000, was accounted for as
goodwill and is being amortized over 35 years using the straight-line method.
F-42
<PAGE> 123
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The accompanying consolidated statements of income include the operating
results of Anderson since April 3, 1996. Pro forma unaudited consolidated
operating results of the Company and Anderson, assuming the acquisition had been
made as of the beginning of 1996, are summarized below (in thousands except per
share amounts):
<TABLE>
<CAPTION>
YEAR ENDED
1996
----------
<S> <C>
Net sales................................................... $985,555
Net income.................................................. 20,745
Net income per share, basic................................. 1.94
Net income per share, diluted............................... 1.74
</TABLE>
The unaudited pro forma financial information presented for both
acquisitions is not necessarily indicative either of the results of operations
that would have occurred had the transactions been completed on the indicated
dates or of future results of operations of the combined companies.
In the first quarter of 1997, the Company recorded an $8.7 million pre-tax
restructuring reserve for the closure of manufacturing facilities in 1997 at
Rockford, Illinois and Battle Creek, Michigan which had been acquired as part of
the acquisition of Anderson. The reserve consists of personnel related costs
(mainly severance pay and fringe benefits) and costs related to the disposals of
buildings and equipment. The reserve increased the associated goodwill by $5.4
million (which is net of income taxes) and was not a charge to earnings. Total
charges to the reserve (personnel related costs and costs related to the
disposals of buildings and equipment) through January 2, 1999 were $7.8 million.
Any excess reserves remaining at the completion of the restructuring activities
will be recorded as a reduction in goodwill.
In January, 1997, the Company completed the purchase of the assets of The
Compliance Group located in Greendale, Wisconsin for approximately $2.4 million
in cash. The excess of the purchase price over the estimated fair value of
assets acquired ($2.5 million) has been accounted for as goodwill and is being
amortized over 15 years using the straight-line method.
In May, 1997, the Company completed the sale of the automotive parking
brake product line for $2.9 million, which was acquired when the Company
purchased Anderson. Sales were approximately $6 million in 1997 and $12 million
in 1996 or less than 2 percent of total sales. At the date of the Anderson
acquisition, this asset was held for sale and the gain on the sale was recorded
as an adjustment to goodwill.
In September, 1997, the Company announced the closure of its Italian
manufacturing division. Closing expenses recorded in the third quarter of 1997
were approximately $1,242,000. Historically, this division had annual sales of
approximately $2.5 million and losses in excess of $1 million. Losses in 1997
were approximately $900,000.
4. RESEARCH, ENGINEERING AND DEVELOPMENT
Research, engineering and development expenditures charged to operations
approximated $17,237,000 in 1996, $25,245,000 in 1997 and $28,900,000 in 1998.
F-43
<PAGE> 124
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
1997 1998
------- -------
<S> <C> <C>
Raw materials............................................... $23,591 $32,515
Work in process and finished goods.......................... 18,674 28,553
LIFO reserve................................................ (1,336) (1,666)
------- -------
$40,929 $59,402
======= =======
</TABLE>
6. PENSION AND OTHER EMPLOYEE BENEFIT PLANS
PENSION AND PROFIT SHARING PLANS
The Company and its subsidiaries provide retirement benefits to
substantially all employees through various pension, savings and profit sharing
plans. Defined benefit plans provide pension benefits that are based on the
employee's final average salary for salaried employees and stated amounts for
each year of credited service for hourly employees.
It is the Company's policy to fund the ERISA minimum contribution
requirement. Plan assets are invested primarily in corporate equity securities,
fixed income bonds and insurance annuity contracts.
Contributions and costs for the Company's various other benefit plans are
generally determined based on the employee's annual salary. The Company also
provides supplemental retirement benefits for certain executives. Total expense
relating the Company's retirement plans, including the defined contribution and
defined benefit pension plans, aggregated $7,577,000 in 1996, $8,153,000 in
1997, and $8,541,000 in 1998.
SUPPLEMENTAL AND OTHER POSTRETIREMENT BENEFITS
In addition to providing pension benefits, the Company provides certain
health care benefits to substantially all active employees and postretirement
health care benefits to certain salaried employees. In addition, certain hourly
and salary employees are eligible for postretirement medical coverage until age
65. The Company is primarily self-insured for such benefits.
F-44
<PAGE> 125
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. PENSION AND OTHER EMPLOYEE BENEFIT PLANS (CONTINUED)
The following provides a reconciliation of benefit obligations, plan assets
and funded status of the Company's pension and other postretirement benefit
plans (in thousands):
<TABLE>
<CAPTION>
OTHER
POSTRETIREMENT
PENSION BENEFITS BENEFITS
------------------- -------------------
1997 1998 1997 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year........... $ 43,613 $ 46,320 $ 12,656 $ 11,285
Acquired company.................................. -- 11,607 -- --
Service cost...................................... 2,687 3,221 1,060 952
Interest cost..................................... 3,207 3,779 913 922
Plan amendments................................... 215 -- (1,804) --
Actuarial (gain) loss............................. 320 2,802 (698) 2,476
Curtailments...................................... (254) -- -- --
Benefits paid..................................... (3,468) (2,648) (842) (943)
-------- -------- -------- --------
Benefit obligation at end of year................. 46,320 65,081 11,285 14,692
-------- -------- -------- --------
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year.... 34,451 40,117 -- --
Acquired company.................................. -- 2,614 -- --
Actual return on plan assets...................... 6,139 4,943 -- --
Company contributions............................. 2,995 3,367 842 943
Benefits paid..................................... (3,468) (2,648) (842) (943)
-------- -------- -------- --------
Fair value of plan assets at end of year.......... 40,117 48,393 -- --
-------- -------- -------- --------
Funded status..................................... (6,203) (16,688) (11,285) (14,692)
Unrecognized actuarial (gain) loss................ 36 1,124 (4,524) (1,847)
Unrecognized prior service cost................... 187 170 (2,556) (2,452)
Unrecognized transition obligation................ (52) (41) -- --
-------- -------- -------- --------
Net amount recognized............................. $ (6,032) $(15,435) $(18,365) $(18,991)
======== ======== ======== ========
Amounts recognized in the balance sheet consist
of:
Accrued benefit liability....................... $ (6,260) $(16,907) $(18,365) $(18,991)
Intangible asset................................ 228 475 -- --
Accumulated other comprehensive income.......... -- 997 -- --
-------- -------- -------- --------
Net amount recognized............................. $ (6,032) $(15,435) $(18,365) $(18,991)
======== ======== ======== ========
Weighted-average assumptions as of year end:
Discount rate..................................... 7.5% 5.5%-7.0% 7.5% 7.0%
Expected return on plan assets.................... 8.0% 8.0% N/A N/A
Rate of compensation increase..................... 5.0% 2.5%-4.0% N/A N/A
</TABLE>
The weighted average assumed health care cost trend rate used in measuring
the accumulated postretirement benefit obligation was 8.3 percent in 1997 and
7.7 percent in 1998, declining by .5 percent per year to a weighted average rate
of 6.3 percent.
F-45
<PAGE> 126
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. PENSION AND OTHER EMPLOYEE BENEFIT PLANS (CONTINUED)
The projected benefit obligation, accumulated benefit obligation, and fair
value of plan assets for the pension plans with accumulated benefit obligations
in excess of plan assets were $14,200,000, $14,151,000, and $12,117,000 at 1997
and $39,659,000, $37,479,000, and $24,927,000 at 1998 respectively.
The projected benefit obligation for pension plans outside of the U.S. are
$11,728,000 at January 2, 1999.
Components of net pension expense for qualified defined benefit pension
plans are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
Service cost................................................ $2,470 $2,687 $3,221
Interest cost............................................... 2,711 3,207 3,779
Expected return on plan assets.............................. (2,248) (2,770) (3,086)
Net amortization of deferrals............................... 53 48 28
------ ------ ------
Net periodic benefit cost................................... $2,986 $3,172 $3,942
====== ====== ======
</TABLE>
The components of net periodic postretirement benefit cost are as follows
(in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
Service cost................................................ $ 868 $1,060 $ 952
Interest cost............................................... 780 913 922
Amortization of prior service cost.......................... (57) (56) (174)
Recognized actuarial gain................................... (143) (147) (131)
------ ------ ------
Net periodic benefit cost................................... $1,448 $1,770 $1,569
====== ====== ======
</TABLE>
Assumed health care cost trend rates have a significant effect on the
amounts reported for the other postretirement benefit plans. A
one-percentage-point change in assumed health care cost trend rates would have
the following effects (in thousands):
<TABLE>
<CAPTION>
1-PERCENTAGE 1-PERCENTAGE
POINT INCREASE POINT DECREASE
-------------- --------------
<S> <C> <C>
Effect on total service and interest cost................... $ 348 $ (283)
Effect on postretirement benefit obligation................. 2,306 (1,920)
</TABLE>
F-46
<PAGE> 127
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. LONG-TERM DEBT
Following is a summary of long-term debt of the Company (in thousands):
<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
7.78 percent Senior notes................................... $100,000 $100,000
German bank loans........................................... -- 51,261
Other....................................................... 8,615 15,774
-------- --------
108,615 167,035
Current maturities.......................................... (2,672) (17,156)
-------- --------
$105,943 $149,879
======== ========
</TABLE>
The Senior notes are due April 30, 2011. Interest only is payable in
quarterly installments until 2000 at which time annual payments will commence
ranging from $3.9 million to $12.2 million. The debt agreements contain certain
restrictive covenants which, among other things, require that the Company
maintain certain financial ratios at specified levels, restrict the amount of
additional borrowings and limit the amount of dividends that can be paid.
The German bank loans consist of various loans that are payable
periodically through 2008 with interest rates ranging from 4 percent to 9
percent.
The other debt consists primarily of loans from previous Schade
shareholders, mortgages and equipment loans with interest rates ranging from 5.5
percent to 10.1 percent. Certain plant and equipment purchased with the proceeds
of the debt collateralize these obligations.
The Company had available unused unsecured lines of credit of approximately
$56,000,000 at January 2, 1999 under the terms of an agreement executed in
April, 1996. Funds are available under this agreement through April, 2000 at an
interest rate equal to the London Interbank rate plus 75 basis points.
Long-term debt maturities are $17,156,000 in 1999, $17,081,000 in 2000,
$11,904,000 in 2001, $11,020,000 in 2002, $21,243,000 in 2003 and $88,631,000
thereafter.
8. LEASES
The Company leases certain of its manufacturing facilities, sales offices,
transportation and other equipment. Total rental expense was approximately
$4,471,000 in 1996, $5,037,000 in 1997 and $4,505,000 in 1998. Future minimum
lease payments under noncancellable operating leases are $3,691,000 in 1999,
$2,811,000 in 2000, $2,180,000 in 2001, $1,638,000 in 2002, $1,188,000 in 2003
and $713,000 thereafter.
9. INCOME TAXES
Pre-tax income reported by U.S. and foreign subsidiaries was as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
United States....................................... $31,531 $29,070 $16,715
Foreign............................................. (865) (2,048) 5,237
------- ------- -------
$30,666 $27,022 $21,952
======= ======= =======
</TABLE>
F-47
<PAGE> 128
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. INCOME TAXES (CONTINUED)
The provision (benefit) for income taxes is summarized below (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------
1996 1997 1998
------- ------ ------
<S> <C> <C> <C>
Current:
U.S. federal........................................ $11,070 $5,187 $ 236
Foreign............................................. -- -- 1,479
State............................................... 2,093 1,178 1,078
------- ------ ------
13,163 6,365 2,793
------- ------ ------
Deferred:
U.S. federal........................................ (1,720) 3,022 (96)
Foreign............................................. -- -- 1,124
State............................................... 107 71 (189)
------- ------ ------
(1,613) 3,093 839
------- ------ ------
$11,550 $9,458 $3,632
======= ====== ======
</TABLE>
Deferred income taxes are provided for the temporary differences between
the financial reporting basis and tax basis of the Company's assets and
liabilities. Current deferred income tax assets of $11,076,000 and $10,608,000
are classified as prepaid expenses at December 27, 1997 and January 2, 1999,
respectively. Long-term deferred income tax liabilities of $2,051,000 and
$4,510,000 are classified as other long-term liabilities at December 27, 1997
and January 2, 1999 respectively.
Deferred income taxes are comprised of the following at December 27, 1997
and January 2, 1999 (in thousands):
<TABLE>
<CAPTION>
1997 1998
------- -------
<S> <C> <C>
Gross deferred tax liabilities
Property, plant and equipment............................. $16,457 $19,427
Other..................................................... 607 590
------- -------
17,064 20,017
------- -------
Gross deferred tax assets
Pension and postretirement benefit obligations............ 14,036 16,486
Other accrued liabilities................................. 11,898 9,629
Inventories............................................... 155 --
Tax credit and net operating loss carryforwards........... 1,355 1,162
------- -------
27,444 27,277
Valuation allowance......................................... (1,355) (1,162)
------- -------
Net deferred tax assets..................................... $ 9,025 $ 6,098
======= =======
</TABLE>
At December 27, 1997 and January 2, 1999 the Company maintained a valuation
allowance for foreign tax credit and foreign net operating loss carryforwards,
which expire in 1999-2004. Based upon past operating results, the Company
estimates that it is more likely than not that these carryforwards cannot be
utilized
F-48
<PAGE> 129
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. INCOME TAXES (CONTINUED)
before they expire. The Company does not provide U.S. income taxes on earnings
of foreign subsidiaries ($3.2 million) since it is intended that these earnings
be indefinitely reinvested.
Provision for taxes on income in 1998 includes the benefit of tax credits
related to prior years. In 1998, the Company completed a review of qualified
research and development expenditures for the years 1994-1997 and recorded tax
credits totaling $4 million. The provision for income taxes computed by applying
the Federal statutory rate to income before income taxes is reconciled to the
recorded provision as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------
1996 1997 1998
------- ------ ------
<S> <C> <C> <C>
Tax at United States statutory rate......................... $10,733 $9,458 $7,683
State income taxes, net of federal benefit.................. 1,430 812 578
Research and development tax credits........................ (80) (187) (5,472)
Foreign income taxed at rates different than U.S............ 303 (186) 770
Foreign Sales Corporation................................... (494) (682) (684)
Non-taxable interest income................................. (340) (382) (235)
Amortization of goodwill.................................... 346 479 561
Other....................................................... (348) 146 431
------- ------ ------
$11,550 $9,458 $3,632
======= ====== ======
</TABLE>
10. COMMON SHARES
In 1997, the Company reserved 500,000 common shares for the Excel
Industries, Inc. 1997 Long-Term Incentive Plan (LTIP). Under the LTIP,
performance shares awarded to key executives of the Company are earned based on
the attainment of one or more pre-established performance goals over a specified
performance period. Through January 2, 1999, 135,000 performance shares had been
awarded.
The Company has 473,550 common shares reserved for issuance to officers,
other key employees and non-employee directors for the 1994 Stock Compensation
Plan (the Plan). The Plan provides that options may be granted at not less than
fair market value and are exercisable for ten years from the date of grant.
Generally, the options become exercisable at the rate of 25 percent per year
commencing one year from the date of grant.
F-49
<PAGE> 130
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. COMMON SHARES (CONTINUED)
The following table sets forth stock option activity:
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------------------------
1996 1997 1998
------------------ ------------------ ------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Stock options outstanding at
beginning of year................. 263,750 $12.23 250,900 $12.45 352,250 $14.73
Options granted..................... 15,000 12.25 127,000 19.19 9,000 17.17
Options exercised................... (12,200) 7.54 (9,400) 12.38 (13,100) 12.38
Options canceled.................... (15,650) 12.38 (16,250) 15.73 (26,250) 16.53
------- ------ ------- ------ ------- ------
Stock options outstanding at end of
year.............................. 250,900 $12.45 352,250 $14.73 321,900 $14.75
======= ====== ======= ====== ======= ======
Options exercisable at year end..... 57,300 $12.56 110,000 $12.51 177,275 $13.48
======= ====== ======= ====== ======= ======
</TABLE>
<TABLE>
<CAPTION>
EXERCISE PRICE RANGE
------------------------------
$12.25-$13.81 $16.13-$21.38 TOTAL
------------- ------------- ----------
<S> <C> <C> <C>
Options outstanding................................. 210,900 111,000 321,900
Weighted average exercise price..................... $12.40 $19.21 $14.75
Remaining contractual life.......................... 6.2 years 8.2 years 6.9 years
Options exercisable................................. 147,525 29,750 177,275
Weighted average exercise price..................... $12.37 $18.98 $13.48
</TABLE>
The Company has adopted the disclosure only provisions of SFAS No. 123,
"Accounting for Stock Based Compensation." Accordingly, the element of
compensation cost applicable to the granting of stock options has not been
recognized for financial statement purposes. Had compensation cost for the
options granted been recognized for financial statement purposes using the
Black-Scholes option pricing model, the Company's net earnings and basic
earnings per share would have been reduced to the pro-forma amounts indicated
below (in thousands except per share amounts):
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------------------------------
1996 1997 1998
-------------------- -------------------- --------------------
REPORTED PRO-FORMA REPORTED PRO-FORMA REPORTED PRO-FORMA
-------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net earnings..................... $19,116 $18,882 $17,564 $17,191 $16,953 $16,523
Per share........................ 1.79 1.77 1.59 1.55 1.37 1.34
</TABLE>
The fair value of the option grant is estimated on the date of grant with
the following assumptions:
<TABLE>
<CAPTION>
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Dividend yield.............................................. 3.2% 2.8% 2.86%
Expected volatility......................................... 33% 31% 33%
Risk-free interest rate..................................... 6.5% 5.75% 4.5%
Expected life............................................... 5 years 5 years 5 years
</TABLE>
The Company has an employee stock purchase plan and has reserved 251,659
common shares for this purpose. The plan allows eligible employees to authorize
payroll withholdings which are used to purchase
F-50
<PAGE> 131
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. COMMON SHARES (CONTINUED)
common shares from the Company at ninety percent (90 percent) of the closing
price of the common shares on the date of purchase. Through January 2, 1999,
198,341 shares had been issued under the plan.
The Company has outstanding warrants for the purchase of 381,000 common
shares at a price of $13.25. These warrants were issued in connection with the
acquisition of Anderson Industries and if not exercised, expire April 2001.
The Company has a shareholder rights plan to protect shareholders against
unsolicited attempts to acquire control of the Company that do not offer what
the Company believes to be an adequate price to all shareholders. The rights
were issued to shareholders of record on January 22, 1996 and will expire on
January 22, 2006. The plan provides for the issuance of one right for each
outstanding share of the Company's Common Stock. The rights will become
exercisable only if a person or group acquires or announces a tender offer to
acquire 20 percent or more of the Company's outstanding voting stock. Each right
entitles the holder to buy one one-hundredth share of a newly authorized series
of preferred stock from the Company. Also, after such acquisition all rights
holders except the acquirer will be entitled to purchase common shares at
one-half of the then current market price of the common shares. Any activity
regarding this plan would have a dilutive effect on earnings per share
calculations.
11. SEGMENT INFORMATION AND MAJOR CUSTOMERS
The Company adopted SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information," in 1998 and restated prior year disclosures
for certain minor differences. The Company's operating segments are aggregated
for reporting purposes into two reportable segments based on similarities of the
nature of products and production processes, the types of customers, the method
of distribution of products, and economic characteristics.
The light vehicle products segment designs, manufactures and sells products
for passenger cars and pick-up trucks for OEMs and Tier I suppliers. Products
include plastic and metal framed window and door assemblies, manual and power
window regulator systems, manual seat systems, decorative trims and injection
molded plastic parts. Principal markets are in North America, Europe, and
Mexico.
The recreational vehicles, mass transit and heavy truck products segment
(RV/MT/HT) manufactures and sells products for recreational vehicles, mass
transit and heavy trucks. Products include appliances such as water heaters,
furnaces, stoves and ranges, hardware such as jacks and couplers, seating frames
and seat adjusters, preassembled doors and windows for motor homes and window
assembles for mass transit systems and heavy trucks. Principal markets are in
the United States. Segment information is summarized in the following tables
with years prior to 1998 restated (in thousands):
F-51
<PAGE> 132
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. SEGMENT INFORMATION AND MAJOR CUSTOMERS (CONTINUED)
<TABLE>
<CAPTION>
LIGHT VEHICLE RV/MT/HT
PRODUCTS PRODUCTS CORPORATE TOTAL
------------- -------- --------- ----------
<S> <C> <C> <C> <C>
DECEMBER 28, 1996
Sales......................................... $730,255 $157,486 $ -- $ 887,741
Operating income (expense).................... 34,140 13,337 (8,763) 38,714
Assets........................................ 301,197 87,643 54,394 443,234
Capital expenditures.......................... 23,816 3,768 1,625 29,209
Depreciation and amortization expense......... 20,626 4,283 1,337 26,246
DECEMBER 27, 1997
Sales......................................... $759,569 $202,764 $ -- $ 962,333
Operating income (expense).................... 28,546 15,392 (7,862) 36,076
Assets........................................ 319,284 84,156 54,357 457,797
Capital expenditures.......................... 32,932 5,916 439 39,287
Depreciation and amortization expense......... 24,348 7,481 1,553 33,382
JANUARY 2, 1999
Sales......................................... $885,383 $220,720 $ -- $1,106,103
Operating income (expense).................... 18,051 19,737 (6,282) 31,506
Assets........................................ 484,126 81,198 29,060 594,384
Capital expenditures.......................... 40,824 4,779 355 45,958
Depreciation and amortization expense......... 31,725 6,905 1,049 39,679
</TABLE>
The following table presents revenues by country (in thousands):
<TABLE>
<CAPTION>
1996 1997 1998
-------- -------- ----------
<S> <C> <C> <C>
United States........................................... $742,047 $788,952 $ 786,672
Canada.................................................. 106,640 134,801 125,376
Germany................................................. -- -- 111,180
Mexico.................................................. 29,863 24,062 23,411
Other................................................... 9,191 14,518 59,464
-------- -------- ----------
$887,741 $962,333 $1,106,103
======== ======== ==========
</TABLE>
The following table presents long-lived assets by country (in thousands):
<TABLE>
<CAPTION>
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
United States............................................ $201,253 $209,012 $216,230
Germany.................................................. -- -- 39,539
Other.................................................... 3,031 2,924 35,234
-------- -------- --------
$204,284 $211,936 $291,003
======== ======== ========
</TABLE>
Sales to three major customers, Ford Motor Company, DaimlerChrysler, and
General Motors Corporation, were approximately 47 percent, 12 percent and 6
percent, respectively, of the Company's net sales in 1996 as compared to 41
percent, 11 percent and 7 percent in 1997 and 36 percent, 9 percent and 5
percent in 1998.
F-52
<PAGE> 133
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. SEGMENT INFORMATION AND MAJOR CUSTOMERS (CONTINUED)
Accounts receivable from Ford Motor Company, DaimlerChrysler, and General
Motors Corporation approximated 60 percent of trade accounts receivable at
December 27, 1997 and 46 percent at January 2, 1999.
12. CONTINGENCIES
A chemical cleaning compound, trichloroethylene (TCE), was found in the
soil and groundwater on the Company's property in Elkhart, Indiana, and in 1981
TCE was found in a well field of the City of Elkhart in close proximity to the
Company's facility. On June 9, 1998, the United States District Court for the
Northern District of Indiana accepted a consent decree specifying a payment of
Federal Past Response Costs. Together with amounts due the Indiana Department of
Environmental Management, the Company paid approximately $3.4 million in 1998 to
complete its obligation for the remedial clean-up.
The Company has been named a potentially responsible party for costs at six
disposal sites. The remedial investigations and feasibility studies have been
completed, and the results of those studies have been provided to the
appropriate agencies. The studies indicated a range of viable remedial
approaches, but agreement has not yet been reached with the authorities on the
final remediation approach. Furthermore, the PRPs for these sites have not
reached an agreement on the allocation of costs between the PRPs. The Company
believes it either has no liability as a responsible party or that adequate
provisions have been recorded for current estimates of the Company's liability
and estimated legal costs associated with the settlement of these claims. It is
reasonably possible that the Company's recorded estimate of its obligation may
change in the near term.
There are claims and pending legal proceedings against the Company and its
subsidiaries with respect to taxes, workers' compensation, warranties and other
matters arising out of the ordinary conduct of the business. The ultimate result
of these claims and proceedings at January 2, 1999 is not determinable, but, in
the opinion of management, adequate provision for anticipated costs has been
made or insurance coverage exists to cover such costs.
13. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following table sets forth in summary form the quarterly results of
operations for the fiscal years ended December 27, 1997 and January 2, 1999 (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
1997
-----------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales......................................... $251,216 $264,474 $213,548 $233,095
Gross profit...................................... 30,998 37,099 21,659 25,587
Net income........................................ 6,302 9,067 297 1,898
Net income per share:
Basic........................................... $ .59 $ .85 $ .03 $ .16
Diluted......................................... .53 .75 .03 .16
-------- -------- -------- --------
</TABLE>
F-53
<PAGE> 134
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1998
-----------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales......................................... $230,994 $247,237 $280,231 $347,641
Gross profit...................................... 27,580 28,650 20,648 33,243
Net income........................................ 5,379 5,756 1,589 4,229
Net income per share:
Basic........................................... $ .43 $ .46 $ .13 $ .35
Diluted......................................... .43 .46 .13 .35
-------- -------- -------- --------
</TABLE>
14. SUBSEQUENT EVENT
On March 23, 1999, all of the Company's outstanding stock was acquired by
Dura Automotive Systems, Inc. (Dura). In the aggregate, the stockholders of
Excel received consideration of approximately $155.5 million in cash and
approximately 5.1 million shares of Dura's Class A common stock. Upon completion
of this transaction, the Company became a wholly owned subsidiary of Dura.
Dura is a leading designer and manufacturer of driver control systems,
engineered mechanisms and cable-related systems for the global automotive
industry. Their products include parking brake systems, automotive cables,
transmission shifter systems, latches, underbody tire carriers, jacks, brake,
clutch and accelerator pedals and other mechanical assemblies. Their products
are sold to major North American OEMs, including Ford, General Motors and
DaimlerChrysler, as well as Japanese OEMs including Toyota and Honda. Dura's
European and Latin American facilities support Ford, GM, Volkswagen, Mercedes,
BMW, PSA (Peugeot and Citroen) and various other OEMs. Dura's operating
headquarters are in Rochester Hills, MI, and its corporate office is in
Minneapolis, MN.
15. CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION
The following consolidating financial information presents balance sheet,
statement of income and cash flow information related to the Company's
businesses. Upon completion of the transaction described in Note 14, each
Guarantor became a direct or indirect wholly owned subsidiary of Dura and fully
and unconditionally guaranteed Dura's 9 percent senior subordinated notes, on a
joint and several basis. Separate financial statements and other disclosures
concerning the Guarantors have not been presented because management believes
that such information is not material.
F-54
<PAGE> 135
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
EXCEL INDUSTRIES, INC.
CONSOLIDATING STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 28, 1996
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
GUARANTOR GUARANTOR
COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
--------- --------- ------------ ------------
<S> <C> <C> <C> <C>
Net sales...................................... $878,037 $ 9,807 $ (103) $887,741
Cost of goods sold............................. 773,972 9,506 (103) 783,375
-------- -------- -------- --------
Gross profit................................. 104,065 301 -- 104,366
Selling, administrative and engineering
expenses..................................... 64,440 1,212 -- 65,652
-------- -------- -------- --------
Operating income (loss)...................... 39,625 (911) -- 38,714
Interest expense............................... 9,785 47 (48) 9,784
Other income, net.............................. (1,691) (93) 48 (1,736)
-------- -------- -------- --------
Income (loss) before taxes and minority
interest.................................. 31,531 (865) -- 30,666
Provision for income taxes..................... 11,550 -- -- 11,550
-------- -------- -------- --------
Net income (loss)............................ $ 19,981 $ (865) $ -- $ 19,116
======== ======== ======== ========
</TABLE>
F-55
<PAGE> 136
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
EXCEL INDUSTRIES, INC.
CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 28, 1996
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
GUARANTOR GUARANTOR
COMPANIES COMPANIES CONSOLIDATED
--------- --------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)..................................... $ 19,981 $ (865) $ 19,116
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization...................... 25,731 515 26,246
Deferred income taxes.............................. (1,613) -- (1,613)
Other.............................................. 348 -- 348
Changes in other operating items................... 24,594 1,158 25,752
-------- ------- --------
Net cash provided by operating activities........ 69,041 808 69,849
-------- ------- --------
Cash flows from investing activities:
Purchase of property, plant and equipment............. (28,744) (465) (29,209)
Businesses acquired................................... (58,984) -- (58,984)
Sale of investments, net.............................. 8,290 -- 8,290
Other................................................. 389 540 929
-------- ------- --------
Net cash provided by (used for) investing
activities.................................... (79,049) 75 (78,974)
-------- ------- --------
Cash flows from financing activities:
Issuance of common shares............................. 278 -- 278
Payments of long-term debt............................ (79,934) -- (79,934)
Dividends............................................. (4,875) -- (4,875)
Purchase of treasury shares........................... (155) -- (155)
Issuance of other long-term debt...................... 100,000 -- 100,000
-------- ------- --------
Net cash provided by financing activities........ 15,314 -- 15,314
-------- ------- --------
Net change in cash and short-term investments........... 5,306 883 6,189
Cash and short-term investments at beginning of
period................................................ 39 352 391
-------- ------- --------
Cash and short-term investments at end of period........ $ 5,345 $ 1,235 $ 6,580
======== ======= ========
</TABLE>
F-56
<PAGE> 137
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
EXCEL INDUSTRIES, INC.
CONSOLIDATING BALANCE SHEETS
AS OF DECEMBER 27, 1997
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
GUARANTOR GUARANTOR
COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
--------- --------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and short-term investments.......... $ 590 $1,727 $ -- $ 2,317
Marketable securities.................... 24,420 -- -- 24,420
Accounts receivable -- trade............. 140,380 530 -- 140,910
Customer tooling to be billed............ 22,176 180 -- 22,356
Inventories.............................. 40,116 813 -- 40,929
Prepaid expenses......................... 14,927 2 -- 14,929
-------- ------ ------- --------
Total current assets.................. 242,609 3,252 -- 245,861
Property, plant & equipment, net........... 158,044 2,924 -- 160,968
Goodwill, net.............................. 35,960 -- -- 35,960
Other assets............................... 23,035 -- (8,027) 15,008
-------- ------ ------- --------
$459,648 $6,176 $(8,027) $457,797
======== ====== ======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable......................... $ 85,160 $ 309 $ -- $ 85,469
Accrued liabilities:
Salaries and wages.................... 9,249 -- -- 9,249
Employee benefits..................... 11,136 -- -- 11,136
Other................................. 20,032 753 -- 20,785
Current maturities of long-term debt..... 2,672 -- -- 2,672
-------- ------ ------- --------
Total current liabilities............. 128,249 1,062 -- 129,311
Long-term debt............................. 105,943 -- -- 105,943
Long-term employee benefits................ 32,934 -- -- 32,934
Other long-term liabilities................ 4,294 1,617 (1,617) 4,294
Shareholders' equity....................... 188,228 3,497 (6,410) 185,315
-------- ------ ------- --------
$459,648 $6,176 $(8,027) $457,797
======== ====== ======= ========
</TABLE>
F-57
<PAGE> 138
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
EXCEL INDUSTRIES, INC.
CONSOLIDATING STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 27, 1997
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
GUARANTOR GUARANTOR
COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
--------- --------- ------------ ------------
<S> <C> <C> <C> <C>
Net sales.................................. $951,611 $10,906 $ (184) $962,333
Cost of goods sold......................... 836,634 10,540 (184) 846,990
-------- ------- ------ --------
Gross profit............................. 114,977 366 -- 115,343
Selling, administrative and engineering
expenses................................. 76,910 2,357 -- 79,267
-------- ------- ------ --------
Operating income (loss).................. 38,067 (1991) -- 36,076
Interest expense........................... 10,984 20 (20) 10,984
Other (income) expense, net................ (1,987) 37 20 (1,930)
-------- ------- ------ --------
Income (loss) before taxes and minority
interest.............................. 29,070 (2,048) -- 27,022
Provision for income taxes................. 9,458 -- -- 9,458
-------- ------- ------ --------
Net income (loss)........................ $ 19,612 $(2,048) $ -- $ 17,564
======== ======= ====== ========
</TABLE>
F-58
<PAGE> 139
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
EXCEL INDUSTRIES, INC.
CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 27, 1997
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
GUARANTOR GUARANTOR
COMPANIES COMPANIES CONSOLIDATED
--------- --------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)..................................... $ 19,612 $(2,048) $ 17,564
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization...................... 32,822 560 33,382
Deferred income taxes.............................. 3,093 -- 3,093
Other.............................................. 2,080 13 2,093
Due (to)/from affiliates........................... 1,710 (1,710) --
Changes in other operating items................... (19,157) 3,502 (15,655)
-------- ------- --------
Net cash provided by operating activities........ 40,160 317 40,477
-------- ------- --------
Cash flows from investing activities:
Purchase of property, plant and equipment............. (39,008) (279) (39,287)
Business acquired..................................... (2,415) -- (2,415)
Purchase of investments, net.......................... (2,471) -- (2,471)
Proceeds from disposal of business.................... 6,793 -- 6,793
Other................................................. (255) 454 199
-------- ------- --------
Net cash provided by (used for) investing
activities.................................... (37,356) 175 (37,181)
-------- ------- --------
Cash flows from financing activities:
Issuance of common shares............................. 543 -- 543
Payments of long-term debt............................ (2,470) -- (2,470)
Dividends............................................. (5,632) -- (5,632)
-------- ------- --------
Net cash used for financing activities........... (7,559) -- (7,559)
-------- ------- --------
Net change in cash and short-term investments........... (4,755) 492 (4,263)
Cash and short-term investments at beginning of
period................................................ 5,345 1,235 6,580
-------- ------- --------
Cash and short-term investments at end of period........ $ 590 $ 1,727 $ 2,317
======== ======= ========
</TABLE>
F-59
<PAGE> 140
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
EXCEL INDUSTRIES, INC.
CONSOLIDATING BALANCE SHEETS
AS OF JANUARY 2, 1999
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
GUARANTOR GUARANTOR
COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
--------- --------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and short-term investments.............. $ 295 $ 15,995 $ -- $ 16,290
Marketable securities........................ 14,000 -- -- 14,000
Accounts receivable -- trade................. 127,110 40,290 -- 167,400
Customer tooling to be billed................ 21,646 9,003 -- 30,649
Inventories.................................. 39,869 19,533 -- 59,402
Prepaid expenses............................. 15,089 551 -- 15,640
-------- -------- -------- --------
Total current assets...................... 218,009 85,372 -- 303,381
Property, plant & equipment, net............... 162,374 70,295 -- 232,669
Goodwill, net.................................. 41,865 -- -- 41,865
Other assets................................... 47,594 4,478 (35,603) 16,469
-------- -------- -------- --------
$469,842 $160,145 $(35,603) $594,384
======== ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable............................. $ 85,188 $ 21,864 $ -- $107,052
Accrued liabilities:
Salaries and wages........................ 16,875 -- -- 16,875
Employee benefits......................... 14,464 -- -- 14,464
Other..................................... 9,765 15,674 -- 25,439
Income taxes payable......................... 1,461 2,138 -- 3,599
Current maturities of long-term debt......... 2,001 15,155 -- 17,156
-------- -------- -------- --------
Total current liabilities................. 129,754 54,831 -- 184,585
Long-term debt................................. 103,928 45,951 -- 149,879
Long-term employee benefits.................... 44,469 -- -- 44,469
Other long-term liabilities.................... (695) 20,359 (10,579) 9,085
Minority interest.............................. -- 12,108 -- 12,108
Shareholders' equity........................... 192,386 26,896 (25,024) 194,258
-------- -------- -------- --------
$469,842 $160,145 $(35,603) $594,384
======== ======== ======== ========
</TABLE>
F-60
<PAGE> 141
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
EXCEL INDUSTRIES, INC.
CONSOLIDATING STATEMENTS OF INCOME
FOR THE YEAR ENDED JANUARY 2, 1999
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
GUARANTOR GUARANTOR
COMPANIES COMPANIES CONSOLIDATED
--------- --------- ------------
<S> <C> <C> <C>
Net sales............................................... $936,940 $169,163 $1,106,103
Cost of goods sold...................................... 844,573 151,409 995,982
-------- -------- ----------
Gross profit.......................................... 92,367 17,754 110,121
Selling, administrative and engineering expenses........ 69,272 9,343 78,615
-------- -------- ----------
Operating income...................................... 23,095 8,411 31,506
Interest expense........................................ 11,628 -- 11,628
Other (income) expense, net............................. (3,772) 1,698 (2,074)
-------- -------- ----------
Income before taxes and minority interest............. 15,239 6,713 21,952
Provision for income taxes.............................. 1,029 2,603 3,632
Minority interest....................................... -- 1,367 1,367
-------- -------- ----------
Net income............................................ $ 14,210 $ 2,743 $ 16,953
======== ======== ==========
</TABLE>
F-61
<PAGE> 142
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
EXCEL INDUSTRIES, INC.
CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED JANUARY 2, 1999
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
GUARANTOR GUARANTOR
COMPANIES COMPANIES CONSOLIDATED
--------- --------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................................ $ 14,210 $ 2,743 $ 16,953
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization...................... 31,726 7,953 39,679
Deferred income taxes.............................. (394) 1,176 782
Other.............................................. (734) 2,855 2,121
Due (to)/from affiliates........................... (986) 986 --
Changes in other operating items................... 19,185 (2,718) 16,467
-------- -------- --------
Net cash provided by operating activities........ 63,007 12,995 76,002
-------- -------- --------
Cash flows from investing activities:
Purchase of property, plant and equipment............. (37,040) (8,918) (45,958)
Businesses acquired................................... (608) (9,472) (10,080)
Sale of investments, net.............................. 10,420 -- 10,420
Disposal of business.................................. (18,605) 18,605 --
Other................................................. (3,239) 4,932 1,693
-------- -------- --------
Net cash provided by (used for) investing
activities.................................... (49,072) 5,147 (43,925)
-------- -------- --------
Cash flows from financing activities:
Issuance of common shares............................. 916 -- 916
Payments of long-term debt............................ (5,175) (10,730) (15,905)
Dividends............................................. (6,165) -- (6,165)
Purchase of treasury shares........................... (3,806) -- (3,806)
Issuance of other long-term debt...................... -- 3,359 3,359
Other................................................. -- 3,497 3,497
-------- -------- --------
Net cash used for financing activities........... (14,230) (3,874) (18,104)
-------- -------- --------
Net change in cash and short-term investments........... (295) 14,268 13,973
Cash and short-term investments at beginning of
period................................................ 590 1,727 2,317
-------- -------- --------
Cash and short-term investments at end of period........ $ 295 $ 15,995 $ 16,290
======== ======== ========
</TABLE>
F-62
<PAGE> 143
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
EXCEL INDUSTRIES, INC.
CONSOLIDATING BALANCE SHEETS
AS OF MARCH 28, 1998
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
GUARANTOR GUARANTOR
COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
--------- --------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and short-term investments.............. $ 24,746 $ 809 $ -- $ 25,555
Accounts receivable -- trade................. 147,687 780 -- 148,467
Customer tooling to be billed................ 24,723 4 -- 24,727
Inventories.................................. 39,147 848 -- 39,995
Prepaid expenses............................. 12,181 14 -- 12,195
-------- -------- -------- --------
Total current assets...................... 248,484 2,455 -- 250,939
Property, plant & equipment, net............... 161,664 2,867 -- 164,531
Other assets................................... 59,379 -- (7,941) 51,438
-------- -------- -------- --------
$469,527 $ 5,322 $ (7,941) $466,908
======== ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable............................. $ 82,716 $ 304 $ -- $ 83,020
Accrued liabilities.......................... 43,759 409 -- 44,168
Income taxes payable......................... 4,662 -- -- 4,662
Current maturities of long-term debt......... 2,712 -- -- 2,712
-------- -------- -------- --------
Total current liabilities................. 133,849 713 -- 134,562
Long-term debt................................. 105,317 -- -- 105,317
Other long-term liabilities.................... 37,546 1,531 (1,531) 37,546
Shareholders' equity........................... 192,815 3,078 (6,410) 189,483
-------- -------- -------- --------
$469,527 $ 5,322 $ (7,941) $466,908
======== ======== ======== ========
</TABLE>
F-63
<PAGE> 144
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
EXCEL INDUSTRIES, INC.
CONSOLIDATING STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 28, 1998
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
GUARANTOR GUARANTOR
COMPANIES COMPANIES CONSOLIDATED
--------- --------- ------------
<S> <C> <C> <C>
Net sales............................................... $230,583 $ 411 $230,994
Cost of goods sold...................................... 202,714 700 203,414
-------- ------ --------
Gross profit (loss)................................... 27,869 (289) 27,580
Selling, administrative and engineering expenses........ 17,110 126 17,236
-------- ------ --------
Operating income (loss)............................... 10,759 (415) 10,344
Other expense, net...................................... 2,190 4 2,194
-------- ------ --------
Income (loss) before taxes and minority interest...... 8,569 (419) 8,150
-------- ------ --------
Provision for income taxes.............................. 2,771 -- 2,771
-------- ------ --------
Net income (loss)..................................... $ 5,798 $ (419) $ 5,379
======== ====== ========
</TABLE>
F-64
<PAGE> 145
EXCEL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
EXCEL INDUSTRIES, INC.
CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 28, 1998
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
GUARANTOR GUARANTOR
COMPANIES COMPANIES CONSOLIDATED
--------- --------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)..................................... $ 5,798 $ (419) $ 5,379
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Depreciation and amortization...................... 7,735 113 7,848
Deferred income taxes.............................. 2,246 -- 2,246
Other.............................................. 206 8 214
Due (to)/from affiliates........................... 86 (86) --
Changes in other operating items................... (575) (470) (1,045)
------- ------ -------
Net cash provided by (used for) operating
activities.................................... 15,496 (854) 14,642
------- ------ -------
Cash flows from investing activities:
Purchase of property, plant and equipment............. (11,226) (64) (11,290)
Other................................................. (2,737) -- (2,737)
------- ------ -------
Net cash used for investing activities........... (13,963) (64) (14,027)
------- ------ -------
Cash flows from financing activities:
Issuance of common shares............................. 344 -- 344
Payments of long-term debt............................ (586) -- (586)
Dividends............................................. (1,555) -- (1,555)
------- ------ -------
Net cash used for financing activities........... (1,797) -- (1,797)
------- ------ -------
Net change in cash and short-term investments........... (264) (918) (1,182)
Cash and short-term investments at beginning of
period................................................ 25,010 1,727 26,737
------- ------ -------
Cash and short-term investments at end of period........ $24,746 $ 809 $25,555
======= ====== =======
</TABLE>
F-65
<PAGE> 146
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of Adwest Automotive Plc
We have audited the accompanying consolidated balance sheets of Adwest
Automotive Plc and its subsidiaries at 30 June 1998 and 1997, and the related
consolidated profit and loss accounts, statements of movements in shareholders'
equity and consolidated cash flow statements for each of the years in the three
year period ended 30 June 1998. These consolidated financial statements are the
responsibility of the management of Adwest Automotive Plc. Our responsibility is
to express an opinion on these consolidated financial statements based on our
audit.
We conducted our audits in accordance with auditing standards generally
accepted in the United Kingdom, which are substantially consistent with those of
the United States of America. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Adwest
Automotive Plc and its subsidiaries at 30 June 1998 and 1997, and the results of
their operations and their cash flows for each of the years in the three year
period ended 30 June 1998, in conformity with generally accepted accounting
principles in the United Kingdom.
Accounting principles generally accepted in the United Kingdom vary in
certain significant respects from accounting principles generally accepted in
the United States of America. Application of accounting principles generally
accepted in the United States would have affected net profit for the two years
ended 30 June 1998 and shareholders' equity at 30 June 1998 and 1997, to the
extent summarized in Note 31 to the consolidated financial statements.
KPMG Audit Plc
Chartered Accountants
Registered Auditor
London, England
7 September 1998
F-66
<PAGE> 147
ADWEST AUTOMOTIVE PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30 JUNE
<TABLE>
<CAPTION>
NOTES 1998 1997 1996
----- -------- -------- --------
L000 L000 L000
<S> <C> <C> <C> <C>
TURNOVER
Continuing operations.............................. 149,166 150,842 127,345
Acquisitions....................................... 73,024 -- --
-------- -------- --------
TOTAL CONTINUING OPERATIONS........................ 222,190 150,842 127,345
Discontinued operations............................ 24,680 40,570 96,305
Discontinued acquisitions.......................... 2,983 -- --
-------- -------- --------
2 249,853 191,412 223,650
-------- -------- --------
OPERATING PROFIT
Continuing operations.............................. 13,586 14,602 10,221
Acquisitions....................................... 4,937 -- --
-------- -------- --------
TOTAL CONTINUING OPERATIONS........................ 18,523 14,602 10,221
Discontinued operations............................ 2,959 3,411 4,729
Discontinued acquisitions.......................... (124) -- --
-------- -------- --------
2 21,358 18,013 14,950
EXCEPTIONAL ITEMS.................................. 3
Continuing operations.............................. -- -- (3,130)
Discontinued operations............................ -- -- (1,835)
-------- -------- --------
OPERATING PROFIT AFTER EXCEPTIONAL ITEMS........... 4 21,358 18,013 9,985
Associated undertakings............................ 21 21 86
Profit less losses on disposal of interests in
associates....................................... -- -- 53
Profit/(losses) and provision for losses on
disposal of subsidiaries......................... 4,051 (791) (9,096)
Goodwill written off on disposal of subsidiaries... (17,552) -- (20,173)
6 (13,501) (791) (29,269)
-------- -------- --------
PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORE
INTEREST......................................... 7,878 17,243 (19,145)
Net interest charge................................ 7 (5,199) (2,892) (3,852)
-------- -------- --------
PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORE
TAXATION......................................... 2,679 14,351 (22,997)
Taxation credit (charge)........................... 8 (4,529) (4,527) (2,082)
-------- -------- --------
(LOSS)/PROFIT ON ORDINARY ACTIVITIES AFTER
TAXATION......................................... (1,850) 9,824 (25,079)
Minority interests -- equity....................... (505) (400) (263)
-------- -------- --------
(LOSS)/PROFIT FOR THE FINANCIAL YEAR............... (2,355) 9,424 (25,342)
Dividends.......................................... 9 (6,442) (6,428) (6,400)
-------- -------- --------
RETAINED PROFIT/(LOSS)............................. 24 (8,797) 2,996 (31,742)
======== ======== ========
EARNINGS PER SHARE
(Loss)/earnings per share.......................... 10 (2.8)p 11.4p (30.7)p
</TABLE>
F-67
<PAGE> 148
ADWEST AUTOMOTIVE PLC
CONSOLIDATED BALANCE SHEET
AT 30 JUNE
<TABLE>
<CAPTION>
NOTES 1998 1997
----- ------ ------
L000 L000
<S> <C> <C> <C>
FIXED ASSETS
Tangible assets............................................. 12 61,545 37,336
Investments................................................. 14 755 805
------ ------
62,300 38,141
------ ------
CURRENT ASSETS
Stock and work in progress.................................. 15 18,969 15,387
Debtors (see note below).................................... 16 59,646 45,840
Bank and cash balances...................................... 19,732 22,272
------ ------
98,347 83,499
------ ------
CREDITORS: DUE WITHIN ONE YEAR
Bank loans and overdrafts................................... 19 9,885 821
Creditors................................................... 17 72,159 43,266
Proposed final dividend..................................... 4,545 4,536
------ ------
86,589 48,623
------ ------
NET CURRENT ASSETS.......................................... 11,758 34,876
------ ------
TOTAL ASSETS LESS CURRENT LIABILITIES....................... 74,058 73,017
CREDITORS: DUE AFTER MORE THAN ONE YEAR:
Borrowings.................................................. 18 54,319 33,061
Others...................................................... 18 8,375 6,320
------ ------
62,694 39,381
PROVISIONS FOR LIABILITIES AND CHARGES...................... 21 (74) 1,533
------ ------
NET ASSETS.................................................. 2 11,438 32,103
====== ======
CAPITAL AND RESERVES
Called up share capital..................................... 23 20,794 20,746
Share premium account....................................... 23 486 355
Revaluation reserve......................................... 24 761 876
Special reserve............................................. 25 20,561 20,561
Profit and loss account..................................... 24 38,885 47,235
------ ------
EQUITY SHAREHOLDERS' FUNDS BEFORE GOODWILL.................. 81,487 89,773
Goodwill on acquisition..................................... 26 73,241 60,322
------ ------
SHAREHOLDERS' FUNDS -- EQUITY............................... 8,246 29,451
MINORITY EQUITY INTERESTS................................... 3,192 2,652
------ ------
11,438 32,103
====== ======
</TABLE>
Debtors include amounts recoverable after more than one year of L8,655,000
(1997: L7,671,000).
F-68
<PAGE> 149
ADWEST AUTOMOTIVE PLC
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 JUNE
<TABLE>
<CAPTION>
NOTES 1998 1997 1996
----- ------- ------- -------
L000 L000 L000
<S> <C> <C> <C> <C>
NET CASH INFLOW FROM OPERATING ACTIVITIES................... 28a 26,353 25,201 15,769
------- ------- -------
DIVIDENDS FROM ASSOCIATES................................... 5 5 4
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest received........................................... 427 400 538
Interest paid on loans...................................... (4,961) (3,235) (4,079)
Interest paid on finance leases............................. (434) (285) (329)
Dividends paid to minority interest......................... -- -- (122)
------- ------- -------
Net cash outflow from returns on investments and servicing
of finance................................................ (4,968) (3,120) (3,992)
------- ------- -------
TAXATION PAID............................................... (5,762) (3,459) (4,679)
------- ------- -------
CAPITAL EXPENDITURE
Purchase of tangible fixed assets........................... (18,554) (6,708) (9,830)
Disposal of fixed assets.................................... 1,817 792 811
------- ------- -------
Net cash outflow from capital expenditure................... (16,737) (5,916) (9,019)
------- ------- -------
ACQUISITIONS AND DISPOSALS
Receipts from sale of subsidiaries and businesses........... 28f 21,141 12,373 28,445
Overdrafts and cash balances transferred as part of sale of
subsidiaries.............................................. -- 1,191 (44)
Receipts from sale of interest in associated undertaking.... -- -- 1,221
Purchase of subsidiary undertakings......................... 28g (35,172) (1,809) (34,282)
Cash acquired with subsidiary acquired...................... 28g 2,697 -- 508
Additional investment in associate.......................... (38) -- --
------- ------- -------
Net cash flow from acquisitions and disposals............... (11,372) 11,755 (4,152)
------- ------- -------
EQUITY DIVIDENDS PAID....................................... (6,440) (6,418) (6,398)
------- ------- -------
MANAGEMENT OF LIQUID RESOURCES
Cash withdrawn from/(paid into) short term deposits......... 12,811 (12,811) --
Monies paid into escrow account............................. (1,822) -- --
------- ------- -------
Net cash flow from management of liquid resources........... 10,989 (12,811) --
------- ------- -------
NET CASH FLOW BEFORE FINANCING.............................. (7,932) 5,237 (12,467)
------- ------- -------
FINANCING
Receipts from issue of ordinary share capital............... 179 188 352
Additional capital contribution from minority interest...... -- -- 1,346
New loans................................................... 34,813 -- --
Repayment of loans.......................................... (23,951) (9,853) (1,455)
Finance lease capital repayments............................ (875) (344) (321)
Movement on loan with associated undertaking................ -- -- 420
------- ------- -------
Net cash flow from financing................................ 10,166 (10,009) 342
------- ------- -------
Increase/(decrease) in cash................................. 28b 2,234 (4,772) (12,125)
======= ======= =======
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
(NOTE 28D)
Increase/(decrease) in cash in the year..................... 2,234 (4,772) (12,125)
Cash outflow from reduction in debt and lease financing..... 24,826 10,369 1,732
Cash inflow from new loans.................................. (34,813) (172) --
Cash flow from (decrease)/increase in liquid resources...... (10,989) 12,811 --
------- ------- -------
Change in net debt resulting from cash flows................ (18,742) 18,236 (10,393)
------- ------- -------
Finance leases sold with subsidiaries....................... 435 -- --
Loans and finance leases acquired with subsidiaries......... (15,297) -- (537)
New finance leases.......................................... (1,840) (4,641) (78)
Translation difference...................................... 1,266 2,607 --
------- ------- -------
Movement in net debt in the year............................ (34,178) 16,202 (11,008)
Net debt at 1 July.......................................... (17,959) (34,161) (23,153)
------- ------- -------
Net debt at 30 June......................................... (52,137) (17,959) (34,161)
======= ======= =======
</TABLE>
F-69
<PAGE> 150
ADWEST AUTOMOTIVE PLC
STATEMENT OF CONSOLIDATED RECOGNISED GAINS AND LOSSES
FOR THE YEAR ENDED 30 JUNE
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ -------
L000 L000 L000
<S> <C> <C> <C>
(Loss)/profit for the financial year........................ (2,355) 9,424 (25,342)
Unrealised deficit on revaluation of properties............. -- -- (50)
Currency translation differences on net investments......... 332 (2,219) (462)
------ ------ -------
TOTAL RECOGNISED GAINS AND (LOSSES)/GAINS FOR THE FINANCIAL
YEAR...................................................... (2,023) 7,205 (25,854)
====== ====== =======
</TABLE>
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
FOR THE YEAR ENDED 30 JUNE
<TABLE>
<CAPTION>
1998 1997 1996
------- ------ -------
L000 L000 L000
<S> <C> <C> <C>
GROUP
Profit/(loss) for the financial year........................ (2,355) 9,424 (25,342)
Ordinary dividends.......................................... (6,442) (6,428) (6,400)
------- ------ -------
Retained profit/(loss) for the year......................... (8,797) 2,996 (31,742)
Goodwill on disposal of subsidiaries included in the profit
and loss account for the year but previously written
off....................................................... 17,552 -- 20,173
Other recognised gains and losses........................... 332 (2,219) (512)
New share capital issued.................................... 179 188 352
Goodwill in the year on acquisitions (see note 26).......... (30,471) (1,329) (29,289)
------- ------ -------
Net reductions to shareholders' funds....................... (21,205) (364) (41,018)
------- ------ -------
Shareholders' funds brought forward......................... 29,451 29,815 70,833
------- ------ -------
Shareholders' funds carried forward......................... 8,246 29,451 29,815
======= ====== =======
</TABLE>
F-70
<PAGE> 151
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS
1 PRINCIPAL ACCOUNTING POLICIES
(a) The financial statements have been prepared under the historical cost
convention modified by the revaluation of certain properties, the Companies Act
1985 and in accordance with applicable accounting standards.
(b) The consolidated accounts incorporate the accounts of the holding
company and its subsidiaries, together with the group's share of the results of
its associated undertakings.
Results of subsidiaries acquired are included from the effective date of
acquisition. Results of subsidiary and business disposals are included up to the
effective date of disposal.
(c) Premiums for goodwill and discounts on the acquisition of businesses,
subsidiary and associated undertakings are dealt with through reserves at the
time of purchase. The profit or loss on disposal of previously acquired
businesses reflects the attributable amount of premium or discount on
acquisition relating to that business.
(d) Depreciation and amortisation of fixed assets is on a straight line
basis calculated at the annual rates set out below which are estimated to write
off each asset over the term of its useful life to its residual value.
<TABLE>
<S> <C>
Freehold buildings.......................................... 2-2 1/2%
Long leasehold property..................................... 2 1/2%
Short leasehold property.................................... over term of lease
Plant and equipment......................................... 10-15%
Vehicles.................................................... 25%
</TABLE>
(e) Deferred taxation is calculated using the liability method in respect
of the taxation effect of all timing differences to the extent that it is
probable that provisions will crystallise in the foreseeable future.
(f) Assets held under finance leases are capitalised as tangible fixed
assets and depreciated in line with group policy. The corresponding liability,
net of interest charges, is categorised under creditors due within one year and
after one year, as appropriate.
The interest element of the lease instalments is allocated over the life of
each lease so as to produce a constant periodic rate of charge.
(g) Operating leases are accounted for by charging the instalments as an
expense in the profit and loss account, on a straight line basis.
(h) Exchange rates
(i) Transactions denominated in foreign currencies are recorded at the
rate of exchange ruling at the date of the transaction. Balances
denominated in foreign currencies are translated into sterling at the
exchange rate ruling on the balance sheet date. Differences on exchange are
dealt with through the profit and loss account.
(ii) Exchange differences on translation of the net investment in
overseas subsidiaries and associated undertakings are taken to reserves. To
the extent that such net investment is matched by a corresponding currency
borrowing, the matching exchange difference is also taken to reserves.
(iii) Profits and losses of overseas subsidiaries are translated at
average rates of exchange during the year. The adjustment to financial year
end rates is taken to reserves.
(i) Research and development expenditure is charged to the profit and loss
account as incurred.
F-71
<PAGE> 152
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS -- (CONTINUED)
(j) Estimated current pension scheme surpluses are spread over the expected
average working lifetime of current pension scheme members after deducting the
regular cost of providing pension benefits.
(k) Stock and work in progress
(i) Stock and work in progress is stated at the lower of cost,
including factory overheads, and net realisable value.
(ii) Any significant pre-production costs on new products which are
not pre-funded by the customer are carried forward in work in progress.
These costs are then written off on a unit of production basis over the
life of the contract with the customer.
2 SEGMENTAL ANALYSIS
Turnover of the group operating profit and net assets are analysed as
follows:
<TABLE>
<CAPTION>
CLASS OF BUSINESS 1998 1997 1996
- ----------------- ------- ------- -------
L000 L000 L000
<S> <C> <C> <C>
TURNOVER
Automotive:
UK.......................................................... 79,696 77,347 45,649
Rest of Europe.............................................. 134,384 65,315 70,871
USA......................................................... 8,110 8,180 10,825
------- ------- -------
Continuing operations....................................... 222,190 150,842 127,345
Discontinued operations..................................... 27,663 40,570 96,305
------- ------- -------
249,853 191,412 223,650
======= ======= =======
OPERATING PROFIT
Automotive:
UK.......................................................... 7,281 6,637 3,827
Rest of Europe.............................................. 11,864 7,547 2,242
USA......................................................... (622) 418 1,022
------- ------- -------
Continuing operations....................................... 18,523 14,602 7,091
Discontinued operations..................................... 2,835 3,411 2,894
------- ------- -------
21,358 18,013 9,985
======= ======= =======
NET ASSETS
Automotive continuing operations............................ 62,545 35,028
Discontinued operations..................................... (501) 13,704
------- -------
62,044 48,732
======= =======
</TABLE>
F-72
<PAGE> 153
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS -- (CONTINUED)
<TABLE>
<CAPTION>
TURNOVER BY DESTINATION TURNOVER BY ORIGIN
--------------------------- ---------------------------
1998 1997 1996 1998 1997 1996
------- ------- ------- ------- ------- -------
L000 L000 L000 L000 L000 L000
<S> <C> <C> <C> <C> <C> <C>
GEOGRAPHICAL SEGMENTS
United Kingdom...................... 76,193 84,583 98,189 79,696 91,895 112,316
Rest of Europe...................... 140,542 72,736 64,905 137,367 65,315 81,697
USA................................. 29,627 31,167 39,003 32,790 34,202 29,637
Rest of the World................... 3,491 2,926 21,553 -- -- --
------- ------- ------- ------- ------- -------
249,853 191,412 223,650 249,853 191,412 223,650
======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
OPERATING PROFIT NET ASSETS
-------------------------- ----------------
1998 1997 1996 1998 1997
------ ------ ------ ------ ------
L000 L000 L000 L000 L000
<S> <C> <C> <C> <C> <C>
GEOGRAPHICAL SEGMENTS
United Kingdom................................ 7,281 7,397 5,348 26,708 24,570
Rest of Europe................................ 11,740 7,547 2,242 28,964 9,209
USA........................................... 2,337 3,069 2,395 6,372 14,953
Rest of the World............................. -- -- -- -- --
------ ------ ------ ------ ------
21,358 18,013 9,985 62,044 48,732
====== ====== ====== ====== ======
</TABLE>
RECONCILIATION OF CONSOLIDATED NET ASSETS
<TABLE>
<CAPTION>
1998 1997
------- -------
L000 L000
<S> <C> <C>
Net assets as shown above................................... 62,044 48,732
Associated undertaking...................................... 114 81
Proposed dividend........................................... (4,545) (4,536)
Net borrowings.............................................. (44,472) (11,610)
Net taxation payable and deferred taxation.................. (1,703) (564)
------- -------
Net assets per consolidated balance sheet................... 11,438 32,103
======= =======
</TABLE>
3 EXCEPTIONAL ITEMS
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -----
L000 L000 L000
<S> <C> <C> <C>
ONGOING ACTIVITIES:
Reorganisation and redundancy costs within the Automotive
Division including reduction of French Productive
capacity.................................................. -- -- 3,130
DISCONTINUED AND TO BE DISCONTINUED ACTIVITIES:
Reorganisation and redundancy cost re Power Systems
Division.................................................. -- -- 607
Redundancy, disruption and related costs with US electronics
following cancellation of customer order.................. -- -- 1,228
------- ------- -----
-- -- 4,965
======= ======= =====
</TABLE>
F-73
<PAGE> 154
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS -- (CONTINUED)
4 OPERATING PROFIT
Operating profit can be analysed as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
L000 L000 L000
<S> <C> <C> <C>
Turnover................................................... 249,853 191,412 223,650
Cost of sales.............................................. (210,178) (156,799) (188,046)
-------- -------- --------
Gross profit............................................... 39,675 34,613 35,604
Distribution costs......................................... (6,197) (4,404) (7,274)
Administration expenses.................................... (12,120) (12,196) (18,345)
-------- -------- --------
Operating profit after exceptional items................... 21,358 18,013 9,985
======== ======== ========
</TABLE>
Included above in 1996 is cost of sales of L670,000 and administration
costs of L4,295,000 relating to exceptional items.
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
L000 L000 L000
<S> <C> <C> <C>
OPERATING PROFIT IS AFTER CREDITING
Rents receivable............................................ 378 127 2,437
Pension credit (note 5)..................................... 1,200 1,050 876
Industrial development government grant..................... 36 68 80
AND AFTER CHARGING:
Hire of plant and machinery................................. 269 125 560
Other operating leases...................................... 428 220 1,937
Depreciation of fixed assets -- owned....................... 9,193 7,481 8,691
Depreciation of fixed assets held under finance leases...... 402 174 159
Auditors' remuneration -- audit............................. 257 274 358
Auditors' remuneration -- other............................. 79 142 438
Research and development.................................... 4,283 3,988 4,140
------ ------ ------
</TABLE>
5 EMPLOYEES OF THE GROUP AND PENSIONS COST
The average number of persons employed by the group was as follows:
<TABLE>
<CAPTION>
1998 1996 1997
------ ------ ------
NUMBER NUMBER NUMBER
<S> <C> <C> <C>
Production.................................................. 3,270 2,290 3,219
Distribution................................................ 85 49 106
Administration.............................................. 418 398 446
----- ----- -----
3,773 2,737 3,771
===== ===== =====
</TABLE>
F-74
<PAGE> 155
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS -- (CONTINUED)
The aggregate payroll costs of these persons were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
L000 L000 L000
<S> <C> <C> <C>
Wages and salaries.......................................... 55,506 40,207 53,413
Social security costs....................................... 11,149 7,950 9,711
Pension costs............................................... 138 70 278
------ ------ ------
66,793 48,227 63,402
====== ====== ======
</TABLE>
The Adwest Group 1988 Pension and Assurance Plan is a defined benefit
scheme for employees of the company and its UK subsidiaries who qualify for
membership. The assets of the scheme are held in separate trustee administered
funds. Other small pension schemes exist in certain subsidiaries.
Pension costs are determined in accordance with the recommendations of
independent actuaries using the projected unit method, so as to spread the cost
of pensions over employees' working lives with the group. Actuarial valuations
are completed every three years, the most recent being at 6 April 1995. The
assumptions which have the most significant effect on the results of the
valuation are those relating to the rate of return on investments and the rates
of increase in salaries and pensions. It was assumed that the average investment
return would exceed by 2 percent per annum the average rate of salary increase
and that present and future pensions would increase at a rate of 4 percent per
annum.
At 6 April 1995 the assets of the plan amounted to L36,646,000, with
investments taken at market value. At that date, the actuarial value of the
assets was sufficient to cover 128 percent of the benefits that had accrued to
members, after allowing for expected future increases in earnings and pensions.
Accordingly, the actuaries have indicated that no company contributions were
required and therefore the Trustees have not called for, and the group has not
paid, any contributions during the year. The actuaries are currently carrying
out a valuation of the Plan as at 6 April 1998.
Using the same assumptions as in previous years, the credit to profits for
the year in respect of pensions would have been L1,600,000. In the light of
recent changes to tax credits available to exempt funds and until the actuarial
valuation at 6 April 1998 is available, it has been decided based on actuarial
advice, to limit the effect of pensions on the profit and loss account for the
year to a credit of L1,200,000 (1997: L1,050,000, 1996: L876,000). This credit
represents the amortisation of surpluses over the expected average working
lifetime of the current membership less the regular cost of providing pension
benefits.
The consolidated balance sheet recognizes a prepayment of L7,948,000 (1997:
L6,748,000) representing the excess of the amortisation of surpluses over the
accumulated regular cost of providing benefits.
F-75
<PAGE> 156
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS -- (CONTINUED)
6 DISPOSALS
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
L000 L000 L000
<S> <C> <C> <C>
DISCONTINUED:
Property Division........................................... (689) -- (1,574)
Automotive Division......................................... -- -- 15
UK Power Systems............................................ (558) (791) (5,742)
Profit on disposal of US Electronics before goodwill write
off....................................................... 5,891 -- --
Loss on disposal of Heidemann Oberflachentecknik GmbH....... (593) -- --
Cost of disposal............................................ -- -- (1,795)
------- ------- -------
4,051 (791) (9,096)
Goodwill on disposal........................................ (17,552) -- (20,173)
------- ------- -------
(13,501) (791) (29,269)
======= ======= =======
</TABLE>
7 NET INTEREST CHARGE
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
L000 L000 L000
<S> <C> <C> <C>
Payable on bank loans and overdrafts repayable within five
years..................................................... (4,250) (2,390) (1,991)
Payable on loans repayable after more than five years....... (916) (852) (2,162)
Payable on finance leases................................... (434) (309) (329)
------- ------- -------
(5,600) (3,551) (4,482)
Bank and other interest receivable.......................... 401 659 630
------- ------- -------
(5,199) (2,892) (3,852)
======= ======= =======
</TABLE>
8 TAXATION ON ORDINARY ACTIVITIES
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- ------
L000 L000 L000
<S> <C> <C> <C>
Taxation of profits on ordinary activities is made up as
follows:
UK corporation tax at 31 percent (1997: 32.5 percent; 1996:
33 percent)............................................... 2,901 1,258 1,906
Overseas taxation........................................... 1,994 2,112 1,320
Associated undertakings (including overseas taxation of
L2,000 (1997: L8,000, 1996: L12,000)...................... 2 8 31
Deferred taxation (note 21)................................. (332) 1,133 (1,878)
Prior year adjustments...................................... (36) 16 (297)
ACT written off............................................. -- -- 1,000
----- ----- ------
4,529 4,527 2,082
===== ===== ======
</TABLE>
Total loss on disposals included in the Profit and Loss account, including
goodwill, is L13.5 million (1997 L791,000, 1996 L29.3 million) and the related
taxation charge is nil (1997 nil, 1996 nil).
F-76
<PAGE> 157
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS -- (CONTINUED)
9 DIVIDENDS
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- -----
L000 L000 L000
<S> <C> <C> <C>
Interim paid 2.3p per share................................. 1,897 1,892 1,877
Final proposed 5.5p per share............................... 4,545 4,536 4,523
----- ----- -----
6,442 6,428 6,400
===== ===== =====
</TABLE>
Shareholders holding 468,009 (1997: 533,792, 1996: 554,678) shares at 30
June 1998 have waived their entitlement to dividends and have been paid no
dividends during the year.
10 EARNINGS PER SHARE
(Loss)/earning per share are based on losses of L2,355,000 (1997 earnings
of L9,424,000, 1996 losses of L25,342,000) and on 83,057,054 (1997: 82,863,578,
1996: 82,504,902) ordinary shares in issue in the year weighted on a time basis.
11 NOTE OF HISTORICAL COST PROFITS/(LOSSES)
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ -------
L000 L000 L000
<S> <C> <C> <C>
Profit/(loss) on ordinary activities before taxation........ 2,679 14,351 (22,997)
Realisation of property revaluation gains of prior years.... -- 433 14,845
Difference between the historical cost depreciation charge
and the actual depreciation for the year calculated on the
revalued amount........................................... 100 75 21
------ ------ -------
Historical cost profit/(loss) on ordinary activities before
taxation.................................................. 2,779 14,859 (8,131)
------ ------ -------
Historical cost profit/(loss) retained after taxation,
minority interest and dividends........................... (8,697) 3,504 (16,876)
====== ====== =======
</TABLE>
F-77
<PAGE> 158
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS -- (CONTINUED)
12 FIXED ASSETS: TANGIBLE ASSETS
<TABLE>
<CAPTION>
LAND AND PLANT VEHICLES ASSETS IN COURSE
BUILDINGS AND EQUIPMENT OF CONSTRUCTION TOTAL
--------- -------------- ---------------- -------
L000 L000 L000 L000
<S> <C> <C> <C> <C>
COST OR VALUATION
At 1 July 1997................................ 11,155 62,758 2,763 76,676
Exchange rate adjustments..................... (966) (2,462) -- (3,428)
Additions..................................... 2,353 17,639 -- 19,992
Disposals..................................... (2,192) (7,334) -- (9,526)
Transfers between categories.................. 3,255 (492) (2,763) --
Acquisition of subsidiaries................... 12,267 35,277 -- 47,544
Disposal of fixed assets with subsidiaries
sold........................................ (1,206) (6,162) -- (7,368)
------ ------ ------ -------
At 30 June 1998............................... 24,666 99,224 -- 123,890
------ ------ ------ -------
DEPRECIATION
At 1 July 1997................................ 2,403 36,937 -- 39,340
Exchange rate adjustments..................... (146) (1,816) -- (1,962)
Disposals..................................... (692) (5,936) -- (6,628)
Transfer between categories................... 158 (158) -- --
Acquisition of subsidiaries................... 1,406 24,738 -- 26,144
Disposal of subsidiaries...................... (945) (3,199) -- (4,144)
Charge for the year........................... 671 8,924 -- 9,595
------ ------ ------ -------
At 30 June 1998............................... 2,855 59,490 -- 62,345
------ ------ ------ -------
NET BOOK VALUES AT 30 JUNE 1998............... 21,811 39,734 -- 61,545
------ ------ ------ -------
Net book values at 30 June 1997............... 8,752 25,821 2,763 37,336
====== ====== ====== =======
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT OTHER
PROPERTIES PROPERTIES TOTAL
---------- ---------- ------
L000 L000 L000
<S> <C> <C> <C>
ANALYSIS OF LAND AND BUILDINGS
BY TENURE AT NET BOOK VALUE:
Freehold.................................................... -- 19,103 19,103
Long lease.................................................. 434 -- 434
Short lease................................................. 137 2,137 2,274
--- ---------- ------
571 21,240 21,811
=== ========== ======
BY COST OR VALUATION:
Cost........................................................ -- 23,014 23,014
Professional valuation -- 1989 to 1997...................... -- 1,050 1,050
Directors' valuation -- 1998................................ 602 -- 602
--- ---------- ------
602 24,064 24,666
=== ========== ======
</TABLE>
F-78
<PAGE> 159
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS -- (CONTINUED)
<TABLE>
<CAPTION>
1998 1997
------ ------
L000 L000
<S> <C> <C>
HISTORICAL COST OF LAND AND BUILDINGS:
Cost........................................................ 23,843 10,276
Depreciation................................................ 2,793 2,400
------ ------
21,050 7,876
====== ======
</TABLE>
The net book value for the group included L6,578,000 (1997: L4,462,000) in
respect of land and buildings and assets in the course of construction and
L1,222,000 (1997: L551,000) in respect of plant, vehicles and equipment held
under finance leases. The depreciation included above in respect of these assets
is L402,000 (1997: L174,000).
The net book value of land and buildings includes amounts of L571,000
(1997: L1,945,000) relating to investment properties and L1,110,000 (1997:
L486,000) relating to the value of land in other freehold property on which no
depreciation is charged.
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- -----
L000 L000 L000
<S> <C> <C> <C>
CAPITAL COMMITMENTS:
Contracts placed............................................ 3,298 3,494 2,718
===== ===== =====
</TABLE>
13 SHARE OPTION TRUST
As at 30 June 1998, the total market value of own shares within the share
option trust was L62,000 below the original total cost. The directors do not
consider this diminution in value to be permanent and therefore no provision has
been made.
At 30 June 1998 the nominal value of own shares with the share option trust
was L114,392 (1997: L133,448).
14 INVESTMENTS
<TABLE>
<CAPTION>
1998 1997
---- ----
L000 L000
<S> <C> <C>
Investment in associated undertaking........................ 114 81
Investment in own shares.................................... 641 724
--- ---
755 805
=== ===
</TABLE>
The group's investments in associated undertakings is as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
L000 L000
<S> <C> <C>
Investments in shares of associated undertakings at cost
Share of post acquisition retained profits.................. 53 15
Share of net assets......................................... 61 66
--- --
114 81
=== ==
</TABLE>
F-79
<PAGE> 160
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS -- (CONTINUED)
<TABLE>
<CAPTION>
UNLISTED SHARES
---------------
L000
<S> <C>
At July 1997................................................ 81
Exchange differences........................................ (19)
Share of profit before taxation............................. 21
Share of taxation........................................... (2)
Dividends................................................... (5)
Additional investment in year............................... 38
---
At 30 June 1998............................................. 114
===
</TABLE>
The results included for the associate are for the year ended 31 March
1998, the latest available audited accounts.
Details of associated undertaking are set out in note 30.
15 STOCK AND WORK IN PROGRESS
<TABLE>
<CAPTION>
1998 1997
------ ------
L000 L000
<S> <C> <C>
Raw materials............................................... 7,756 5,866
Work in progress............................................ 8,709 6,142
Finished goods.............................................. 2,504 3,379
------ ------
18,969 15,387
====== ======
</TABLE>
16 DEBTORS
<TABLE>
<CAPTION>
1998 1997
------ ------
L000 L000
<S> <C> <C>
Trade debtors............................................... 38,384 32,925
Other debtors............................................... 7,738 2,843
Taxation recoverable........................................ 1,395 923
Prepayments and accrued income.............................. 12,129 9,149
------ ------
59,646 45,840
====== ======
</TABLE>
Included in group prepayments is a sum of L7,948,000 (1997: L6,748,000)
attributable to advanced pension contributions extending beyond one year (note
5).
Taxation recoverable in the group includes advanced corporation tax
recoverable after more than one year of L502,000 (1997: L923,000) which is
expected to be offset against mainstream corporation tax.
F-80
<PAGE> 161
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS -- (CONTINUED)
17 CREDITORS
<TABLE>
<CAPTION>
1998 1997
------ ------
L000 L000
<S> <C> <C>
Trade creditors............................................. 37,952 26,077
Finance lease obligations (note 20)......................... 891 643
Other creditors............................................. 11,505 1,702
PAYE and social security.................................... 4,553 3,543
Taxation payable............................................ 3,551 3,158
Accruals and deferred income................................ 13,707 8,143
------ ------
72,159 43,266
====== ======
</TABLE>
Taxation payable in the Group includes advance corporation tax amounting to
L1,136,000 (1997: L1,132,000) attributable to the proposed final dividend.
18 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
<TABLE>
<CAPTION>
1998 1997
------ ------
L000 L000
<S> <C> <C>
Borrowings (note 19)........................................ 54,319 33,061
Finance lease obligations (note 20)......................... 6,774 5,706
Retirement indemnity provision.............................. 1,601 614
------ ------
62,694 39,381
====== ======
</TABLE>
19 BORROWINGS
<TABLE>
<CAPTION>
1998 1997
------ ------
L000 L000
<S> <C> <C>
Bank overdrafts............................................. 6,842 298
Bank and other loans repayable within one year.............. 3,043 523
------ ------
9,885 821
------ ------
Bank and other loans repayable:
Between one and two years................................... 14,503 150
Between two and five years.................................. 25,358 23,292
In five years or more....................................... 14,458 9,619
------ ------
54,319 33,061
====== ======
</TABLE>
In 1998, loans repayable after one year represent:
- Loans from two financial institutions totalling US $40,000,000. These US
notes are repayable in six annual installments commencing in March 2000
and bear interest at a fixed rate of 8.6 percent
- A FF 85,000,000 loan from a UK bank, which is repayable in December 1999
and bears interest at a fixed rate of 4.99 percent.
- A DM 30,000,000 loan from a UK bank, which bears interest at a fixed
rate of 5.51 percent, and is repayable in five annual installments
commencing in October 1998.
F-81
<PAGE> 162
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS -- (CONTINUED)
- A DM 20,000,000 loan which bears interest at a fixed rate of 5.47
percent, and is repayable in January 2003.
- A DM 20,000,000 loan which bears interest at a fixed rate of 5.84
percent, and is repayable in twenty quarterly instalments commencing in
March 2003.
Other bank borrowing bear interest at fluctuating rates, linked to the
London Inter-Bank Market rate.
There are no borrowings in the associated undertaking.
At 30 June 1998, the Group had forward contracts outstanding in Japanese
Yen amounting to the equivalent of L1,124,798 (1997: L1,415,000).
20 OBLIGATIONS UNDER FINANCE LEASES
The future finance leases payments, to which the Group were committed at 30
June, were as follows:
<TABLE>
<CAPTION>
1998 1997
----- -----
L000 L000
<S> <C> <C>
Within one year............................................. 891 643
Between one and five years.................................. 2,810 3,599
Over five years............................................. 3,964 2,107
----- -----
7,665 6,349
===== =====
</TABLE>
21 PROVISIONS FOR LIABILITIES AND CHARGES
<TABLE>
<CAPTION>
PROVISION FOR LOSS
ON DISPOSAL OF REORGANISATION DEFERRED
SUBSIDIARIES PROVISION TAXATION TOTAL
------------------ -------------- -------- ------
L000 L000 L000 L000
<S> <C> <C> <C> <C>
At 1 July 1997.............................. 400 2,804 (1,671) 1,533
Exchange rate adjustments................... -- (26) (32) (58)
Acquisition of subsidiaries................. -- -- 17 17
Change to profit and loss account........... -- 279 (332) (53)
Provisions utilized......................... (300) (1,895) -- (2,195)
Advance corporation tax and other
movements................................. -- -- 867 867
Disposal of subsidiaries and business....... -- (883) 698 (185)
---- ------ ------ ------
At 30 June 1998............................. 100 279 (453) (74)
==== ====== ====== ======
</TABLE>
Balances for the provision of deferred taxation are analysed as follows:
<TABLE>
<CAPTION>
AMOUNTS NOT
PROVIDED FOR IN THESE AMOUNTS PROVIDED FOR
ACCOUNTS IN THESE ACCOUNTS
---------------------- --------------------
1998 1997 1998 1997
--------- --------- -------- --------
L000 L000 L000 L000
<S> <C> <C> <C> <C>
Accelerated capital allowances.......................... -- -- (1,650) 2,097
Other timing differences................................ 349 163 1,432 (1,247)
------ ------ ------ ------
349 163 (218) 850
Advanced corporation tax recoverable.................... -- -- (235) (2,521)
------ ------ ------ ------
349 163 (453) (1,671)
====== ====== ====== ======
</TABLE>
F-82
<PAGE> 163
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS -- (CONTINUED)
22 LEASE OBLIGATIONS
<TABLE>
<CAPTION>
LAND AND
BUILDINGS OTHER
-------------- ------------
1998 1997 1998 1997
----- ----- ---- ----
L000 L000 L000 L000
<S> <C> <C> <C> <C>
Operating lease rentals payable within one year relating to
commitments expiring:
Within one year............................................. -- 77 271 121
Within two and five years................................... 97 384 443 475
After five years............................................ 945 884 -- --
----- ----- --- ---
1,042 1,345 714 596
===== ===== === ===
</TABLE>
23 SHARE CAPITAL AND SHARE PREMIUM ACCOUNT
<TABLE>
<CAPTION>
CALLED UP
AUTHORISED AND FULLY PAID
---------------- ----------------
1998 1997 1998 1997
------ ------ ------ ------
L000 L000 L000 L000
<S> <C> <C> <C> <C>
Ordinary shares of 25p each............................. 25,000 25,000 20,794 20,746
====== ====== ====== ======
</TABLE>
24 RESERVES
<TABLE>
<CAPTION>
PROFIT AND LOSS PROFIT AND LOSS
REVALUATION COMPANY AND ASSOCIATED PROFIT AND
RESERVE SUBSIDIARIES UNDERTAKING LOSS TOTAL
----------- --------------- --------------- ----------
L000 L000 L000 L000
<S> <C> <C> <C> <C>
At 1 July 1997............................. 876 47,169 66 47,235
Retained profit/(loss) for the year........ -- (8,811) 14 (8,797)
Exchange rate adjustments.................. (15) 366 (19) 347
Depreciation on revalued assets............ (100) 100 -- 100
---- ------ --- ------
At 30 June 1998............................ 761 38,824 61 38,885
==== ====== === ======
</TABLE>
F-83
<PAGE> 164
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS -- (CONTINUED)
25 SPECIAL RESERVE
The special reserve was created on 31 January 1996 when court permission
was obtained for the cancellation of the share premium account, which had a
value at the date of L20,561,000. The special reserve is non distributable.
26 GOODWILL
<TABLE>
<CAPTION>
1998 1997 1996
------- ------ -------
L000 L000 L000
<S> <C> <C> <C>
At start of year............................................ 60,322 58,993 49,877
Purchase of Conversion Devices Inc.......................... -- -- 3,498
Purchase of Rearsby Automotive Limited...................... -- -- 25,539
Transferred to profit and loss account on disposal of
subsidiaries.............................................. (17,552) -- (20,173)
Additional goodwill re Conversion Devices Inc............... -- 734 --
Additional goodwill re Rearsby Automotive Limited........... -- 595 --
Purchase of Heidemann Verwaltungsgesellschaft mit
beschranker Haftung....................................... 29,318 -- --
Other adjustments........................................... 1,153 -- 252
------- ------ -------
At end of year.............................................. 73,241 60,322 58,993
======= ====== =======
</TABLE>
27 DIRECTORS' EMOLUMENTS AND SHARE INTERESTS
TOTAL DIRECTORS' EMOLUMENTS:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
L000 L000 L000
<S> <C> <C> <C>
Fees and benefits to non-executive directors................ 99 121 130
Remuneration (including pension contributions).............. 621 498 622
Performance related emoluments.............................. 95 217 100
--- --- ---
815 836 852
=== === ===
</TABLE>
F-84
<PAGE> 165
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS -- (CONTINUED)
28 CONSOLIDATED CASH FLOW STATEMENT
(A) RECONCILIATION OF OPERATING PROFIT TO NET CASH FLOW FROM OPERATING
ACTIVITIES
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
L000 L000 L000
<S> <C> <C> <C>
Operating profit............................................ 21,358 18,013 9,985
Depreciation................................................ 9,595 7,655 8,850
Loss/(profit) on disposal of fixed assets................... 247 (86) --
Acquisition provisions utilised............................. -- -- (272)
(Increase)/decrease in stocks............................... (3,688) 5,241 (2,093)
(Increase)/decrease in debtors.............................. (3,726) (1,145) (2,102)
Increase/(decrease) in creditors............................ 2,567 (4,477) 1,401
------ ------ ------
Net cash flow from operating activities..................... 26,353 25,201 15,769
====== ====== ======
</TABLE>
(B) ANALYSIS OF CHANGES IN CASH AND FINANCING DURING THE YEAR
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ----
L000 L000 L000
<S> <C> <C> <C>
At 1 July 1996.............................................. 12,073 20,695 218
Non-cash movements.......................................... 3,000 -- --
Exchange movements.......................................... (1,138) -- --
Net cash inflows............................................ (4,772) 51 137
------ ------ ---
Change in the year.......................................... (2,910) 51 137
------ ------ ---
At 1 July 1997.............................................. 9,163 20,746 355
Exchange movements.......................................... (305) -- --
Net cash inflows............................................ 2,234 48 131
------ ------ ---
Change in the year.......................................... 1,929 48 131
------ ------ ---
At 30 June 1998............................................. 11,092 20,794 486
====== ====== ===
</TABLE>
(C) ANALYSIS OF CASH
<TABLE>
<CAPTION>
1998 1997
L000 L000
------ -----
<S> <C> <C>
Cash at bank and in hand.................................... 17,934 9,461
Bank overdrafts............................................. (6,842) (298)
------ -----
11,092 9,163
====== =====
</TABLE>
F-85
<PAGE> 166
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS -- (CONTINUED)
(D) RECONCILIATION OF NET DEBT
<TABLE>
<CAPTION>
ACQUISITION OTHER NON
AT 1 JULY (EXCL CASH & CASH DISPOSAL OF EXCHANGE AT 30 JUNE
1996 CASH FLOW OVERDRAFTS) MOVEMENTS SUBSIDIARIES MOVEMENT 1997
--------- --------- ------------ --------- ------------ -------- ----------
L000 L000 L000 L000 L000 L000 L000
<S> <C> <C> <C> <C> <C> <C> <C>
Cash at bank and in hand........... 13,515 (2,864) -- -- -- (1,190) 9,461
Bank overdrafts.................... (1,442) (1,908) -- 3,000 -- 52 (298)
(4,772)
Borrowings due after one year...... (26,572) 263 -- (9,489) -- 2,737 (33,061)
Borrowings due within one year..... (16,741) 9,590 -- 6,489 -- 139 (523)
Finance leases..................... (2,921) 344 -- (4,641) -- 869 (6,349)
10,197
Current asset investments.......... -- 12,811 -- -- -- -- 12,811
------- ------- ------- ------- ------- ------- -------
(34,161) 18,236 -- (4,641) -- 2,607 (17,959)
======= ======= ======= ======= ======= ======= =======
</TABLE>
Current asset investments at 30 June 1997 represent cash balances on one
month and three months deposit.
<TABLE>
<CAPTION>
ACQUISITION OTHER NON
AT 1 JULY (EXCL CASH & CASH DISPOSAL OF EXCHANGE AT 30 JUNE
1997 CASH FLOW OVERDRAFTS) MOVEMENTS SUBSIDIARIES MOVEMENT 1998
--------- --------- ------------ --------- ------------ -------- ----------
L000 L000 L000 L000 L000 L000 L000
<S> <C> <C> <C> <C> <C> <C> <C>
Cash at bank and in hand........... 9,461 8,987 -- -- -- (514) 17,934
Bank overdrafts.................... (298) (6,753) -- -- -- 209 (6,842)
2,234
Borrowings due after one year...... (33,061) (9,453) (13,152) 83 -- 1,264 (54,319)
Borrowings due within one year..... (523) (1,409) (1,129) (83) -- 101 (3,043)
Finance leases..................... (6,349) 875 (1,016) (1,840) 435 230 (7,665)
(9,987)
Current asset investments.......... 12,811 (10,989) -- -- -- (24) 1,798
------- ------- ------- ------- ------- ------- -------
(17,959) (18,742) (15,297) (1,840) 435 1,266 (52,137)
======= ======= ======= ======= ======= ======= =======
</TABLE>
Current asset investments at 30 June 1998 represent part of the sale
proceeds from the sale of the US Electronics companies, which are being held in
an escrow account until May 2001.
(E) MAJOR NON-CASH TRANSACTIONS
During 1998 the Group entered into finance lease arrangements in respect of
assets with a total capital value at the inception of the leases of L1,840,000
(1997: L4,641,000).
F-86
<PAGE> 167
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS -- (CONTINUED)
(F) SALE OF SUBSIDIARY UNDERTAKINGS
<TABLE>
<CAPTION>
US ELECTRONICS
COMPANIES
--------------
L000
<S> <C>
Net assets sold excluding cash:
Fixed assets................................................ 3,224
Stock....................................................... 8,157
Other working capital....................................... 3,741
-------
Total net assets sold....................................... 15,122
Disposal costs paid out in cash............................. 1,937
Disposal costs accrued...................................... 128
Profit on sale.............................................. 5,891
-------
23,078
=======
SATISFIED BY:
Receipt of cash............................................. 21,256
Receipt of escrow monies.................................... 1,822
-------
Net inflow of cash.......................................... 23,078
=======
</TABLE>
The US Electronics subsidiaries sold during the year contributed L1,432,000
to the group's net operating cash flows, paid L715,000 in respect of net returns
on investments and serving of finance, paid L731,000 in respect of taxation and
utilised L815,000 for capital expenditure.
F-87
<PAGE> 168
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS -- (CONTINUED)
(G) PURCHASE OF SUBSIDIARY UNDERTAKINGS
<TABLE>
<CAPTION>
FAIR VALUE FAIR VALUE
FAIR VALUE ADJUSTMENTS ADJUSTMENTS
HEIDEMANN ADJUSTMENTS ACCOUNTING POLICY OTHER FAIR VALUE
COMPANIES REVALUATIONS ADJUSTMENTS ADJUSTMENTS BALANCE SHEET
--------- ------------ ----------------- ----------- -------------
L000 L000 L000 L000 L000
<S> <C> <C> <C> <C> <C>
Provisional net assets acquired:
Fixed assets....................... 22,549 (1,149) -- -- 21,400
Stock.............................. 9,122 -- (316) -- 8,806
Other working capital.............. (11,716) -- -- -- (11,716)
Provisions......................... -- -- (101) (562) (663)
Net borrowings..................... (14,281) -- -- -- (14,281)
------- ------ ---- ---- -------
5,674 (1,149) (417) (562) 3,546
Provisional goodwill (note 26)..... 29,318
-------
32,864
=======
SATISFIED BY:
Purchase consideration............. 31,127
Acquisition costs.................. 3,217
Cash acquired...................... (2,733)
-------
Net outflow of cash (i)............ 31,611
Purchase consideration accrued..... 1,253
-------
32,864
=======
</TABLE>
The net assets acquired above exclude 5 percent of the net assets of Adwest
Heidemann Iberica SA which are held by a third party.
Certain fixed assets have been written down in the revaluation column to
reflect their value based upon current earnings and cash generation. The
accounting policy adjustments are to bring stock, warranty and repairs and
maintenance provisions in line with UK GAAP requirements. Other adjustments
represent provisions in respect of potential environmental liabilities at the
time of acquisition.
<TABLE>
<CAPTION>
PURCHASE OF
SUBSIDIARY CASH ACQUIRED WITH
UNDERTAKINGS SUBSIDIARY ACQUIRED TOTAL
------------ ------------------- -------
L000 L000 L000
<S> <C> <C> <C>
Net cash outflow of cash as above (i)................ (34,344) 2,733 (31,611)
Minority interest in Adwest Heidemann Iberica SA
cash............................................... -- (36) (36)
Deferred consideration re Electronics Division....... (767) -- (767)
Other................................................ (61) -- (61)
------- ------- -------
Per cash flow statement.............................. (35,172) 2,697 (32,475)
======= ======= =======
</TABLE>
Heidemann Verwaltungsgesellschaft mit beschranker Haftung and its
subsidiary undertakings were acquired on 11 September 1997, and have been
accounted for using the acquisition method.
The subsidiary undertakings acquired during the year contributed L2,963,000
to the group's net operating cash flows, paid L1,425,000 in respect of net
returns on investments and servicing of finance, received L372,000 in respect of
taxation and utilised L6,620,000 for capital expenditure.
F-88
<PAGE> 169
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS -- (CONTINUED)
In the year ended 31 January 1997, the latest available statutory accounts
before acquisition, the Heidemann group of companies had profit after tax of
L1,073,000 and minority interests of L281,000.
In the period 1 February 1997 to 11 September 1997 -- the date of
acquisition by Adwest, the unaudited results for the company showed the
following.
<TABLE>
<CAPTION>
L000
------
<S> <C>
Turnover.................................................... 54,530
Operating profit............................................ 2,788
Profit before taxation...................................... 1,954
Taxation charge............................................. 974
Minority interests.......................................... 97
======
</TABLE>
There were no material recognised gains or losses, other than the results
for the period shown above.
29 PRINCIPAL SUBSIDIARY UNDERTAKINGS
<TABLE>
<S> <C> <C> <C>
Adwest Steering Ltd.............. Woodley Power steering gears, precision UK
plastic parts
Adwest Bowden TSK Ltd............ Llanelli Control cables, gearshifters UK
Adwest Bowden France SA.......... Cauvigny, Boynes Control cables, gearshifters, France
handbrakes, jacks
Adwest Dauphinoise Thomson SA.... Grenoble Engine thermostats, wax element France
regulators
Adwest OCI SA.................... La Talaudiere Gearshifters France
Adwest Driver Systems Ltd........ Rearsby Pedal boxes, gearshifters, UK
handbrakes, suspension links
Adwest Western Automotive Inc.... Michigan Precision tubular components and USA
engine thermostats
Adwest Western Thomson Ltd....... Woodley, Chard Engine thermostats, radiator caps UK
Adwest Heidemann Einbeck
GmbH........................... Einbeck Gearshifters, steering columns, Germany
tubular structures
Adwest Heidemann Rotenburg
GmbH........................... Rotenburg Valve spring retainers, fine Germany
blanked parts, tubular structures
Adwest Heidemann Iberica SA...... Valencia, Pamplona Gearshifters, steering columns Spain
Adwest Kohler GmbH............... Lippstadt Fuel caps, precision pressed parts Germany
Adwest Heidemann do Brasil....... Curitiba Gearshifters Brazil
</TABLE>
The Company owns 100 percent of the ordinary share capital of all
subsidiaries, with the exception of Adwest Bowden TSK Ltd of which 35 percent of
the ordinary share capital is owned by Nippon Cable Systems Inc. (TSK), a
Japanese company, and Adwest Heidemann Iberica SA, of which 5 percent of the
ordinary share capital is owned by local management.
F-89
<PAGE> 170
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS -- (CONTINUED)
The subsidiaries operate principally in the country in which they are
incorporated.
A full list of subsidiaries will be included within the next annual return.
30 ASSOCIATED UNDERTAKING
<TABLE>
<CAPTION>
ISSUED SHARE CAPITAL ACTIVITIES HOLDING INCORPORATED
----------------------------- ----------- ------- ------------
<S> <C> <C> <C> <C>
Western Thomson (India) Ltd.(1)... 295,878 shares (10 rupees p.s) Engine 49% India
thermostats
</TABLE>
- ---------------
(1) Held by Adwest Western Thomson Ltd. and located in Madras, India.
31. SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
The Group's accounts are prepared in conformity with generally accepted
accounting principles applicable in the United Kingdom (UK GAAP), which differ
in certain significant respects from those applicable in the United States (US
GAAP). These differences, together with the approximate effects of the
adjustments on net profit and shareholders' funds, relate principally to the
items set out below:
GOODWILL AND OTHER INTANGIBLE ASSETS
Under UK GAAP goodwill arising on acquisition has been charged to reserves.
Under US GAAP goodwill is capitalised and amortised by charges against income
over the period, not to exceed 40 years, over which the benefit arises. For US
GAAP, goodwill has been amortised by the Group over 40 years.
Under UK GAAP the profit and loss on the disposal of all or part of a
previously acquired business has been calculated after taking account of the
gross amount of any goodwill previously charged to reserves. Under US GAAP an
adjustment to profit or loss on disposal is required in respect of goodwill
previously amortised.
CUMULATIVE EXCHANGE LOSS ON SALE OF FOREIGN SUBSIDIARIES
Under UK GAAP gains or loss arising on the sale or liquidation of a foreign
subsidiary does not include the related cumulative exchange gain or loss,
previously recorded as a separate component of shareholders' equity for that
investment. Under US GAAP, the gain or loss on sale or liquidation includes the
related cumulative exchange gain or loss.
DIVIDENDS
Under UK GAAP dividends proposed after the end of an accounting period in
respect of that accounting period are deducted in arriving at retained earnings
for that period. Under US GAAP such dividends are not deducted until declared.
DEFERRED TAXATION
Under UK GAAP provision is made for deferred taxation only to the extent
that it is probable that an actual liability or asset will crystallise in the
foreseeable future. US GAAP requires full provision for deferred income taxes
under the liability method on all temporary differences and, if required, a
valuation allowance is established to reduce gross deferred taxation assets to
the amount which is more likely than not to be realised.
Deferred taxation also arises in relation to the tax effect of other US
GAAP differences.
F-90
<PAGE> 171
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS -- (CONTINUED)
PENSION COSTS
Under UK GAAP, the cost of providing pensions is charged against profits on
a systematic basis, with pension surpluses and deficits being amortised over the
expected remaining service lives of current employees. Under US GAAP, costs and
surpluses are similarly spread over the expected remaining service lives but
based on prescribed actuarial assumptions, allocation of costs and valuation
methods, which differ in certain respects from those used for UK GAAP.
DEFERRED PROFIT ON SALE OF PROPERTY
In 1996, properties were disposed of which had previously been revalued
under UK GAAP. No profit arose on this transaction under UK GAAP. A profit
arises under US GAAP on the basis that US GAAP does not permit the revaluation
of property. Under US GAAP, the element of the profit in respect of property
subsequently leased back on an operating lease basis is amortised in equal
instalments over the life of the lease.
EMPLOYEE SHARE TRUST ARRANGEMENTS
Employee share trusts have been established in order to hedge obligations
in respect of options issued under certain employee share option schemes. Under
UK GAAP the Company's ordinary shares held by the employee share trusts are
included at cost in fixed asset investments. Dividends receivable on such shares
are included in the statement of income. Under US GAAP, such shares and
dividends receivable from those shares are treated as treasury stock and
included in shareholders' equity.
REVALUATION OF FIXED ASSETS
Under UK GAAP the Group has revalued certain fixed assets. This is not
permitted under US GAAP.
PRE-PRODUCTION COSTS
Under UK GAAP, certain significant pre-production costs on new products
which are not prefunded by the customer are carried forward in work in progress.
These costs are then written off on a unit of production basis over the life of
the contract with the customer. Under US GAAP these costs are generally expensed
as incurred.
CURRENT ASSETS AND LIABILITIES
Under UK GAAP current assets include amounts which fall due after more than
one year. Under US GAAP such assets would be reclassified as non-current assets.
Also under UK GAAP provisions for liabilities and charges include amounts due
within one year which would be reclassified to current liabilities under US
GAAP.
EARNINGS PER ORDINARY SHARE
Under UK GAAP earnings per share is based on profit for the financial year
and computed using the weighted average number of Ordinary Shares in issue
during the year. Under US GAAP basic earnings per share is based on net income
and computed using the weighted average number of Ordinary Shares in issue
during the year. US GAAP also requires the presentation of diluted earnings per
share which is based upon net income, as adjusted, computed using the weighted
average shares and the effect of other dilutive instruments.
F-91
<PAGE> 172
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS -- (CONTINUED)
CASH FLOWS
The principal difference between UK GAAP and US GAAP is in respect of
classification. Under UK GAAP, the Group presents its cash flows for operating
activities, returns on investments and servicing of finance, taxation, capital
expenditures and financial investments, acquisition and disposals, equity
dividends paid, management of liquid resources, and financing. US GAAP requires
only three categories of cash flow activities which are operating, investing and
financing.
Cash flows arising from taxation and returns on investments and servicing
of finance under UK GAAP would, with the exception of dividends paid, be
included as operating activities under US GAAP; dividend payments would be
included as a financing activity under US GAAP. In addition, capital
expenditures and financial investment, acquisition and disposals, and management
of liquid resources under UK GAAP would be presented as investing activities
under US GAAP.
UK GAAP defines cash as cash in hand and deposits repayable on demand.
Short term deposits which are readily convertible into known amounts of cash at,
or close to, their carrying value are classified as liquid resources. US GAAP
defines cash and cash equivalents as cash in hand and short term highly liquid
investments with original maturities of three months or less. Cash flows in
respect of short term deposits with original maturities exceeding three months
are included in investing activities under US GAAP and are included in capital
expenditure and financial investment under UK GAAP.
Under US GAAP, the following amounts would be reported:
<TABLE>
<CAPTION>
1998 1997
------- -------
L000 L000
<S> <C> <C>
Net cash provided by operating activities................... 15,628 18,627
Net cash used in investing activities....................... (29,931) 5,839
Net cash provided by/(used in) financing activities......... 10,479 (14,519)
Effect of changes in exchange rate.......................... (514) (1,190)
------- -------
Net (decrease)/increase in cash and cash equivalents........ (4,338) 8,757
Cash and cash equivalents at beginning of year.............. 22,272 13,515
------- -------
Cash and cash equivalents at end of year.................... 17,934 22,272
======= =======
</TABLE>
F-92
<PAGE> 173
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS -- (CONTINUED)
Effect on (loss)/profit attributable to shareholders of differences between
UK and US GAAP
<TABLE>
<CAPTION>
1998 1997
------ ------
L000 L000
<S> <C> <C>
(Loss)/profit attributable to shareholders as reported under
UK GAAP................................................... (2,355) 9,424
US GAAP adjustments:
Goodwill.................................................. (1,377) (1,467)
Impact of goodwill previously amortised on sale of
subsidiary............................................. 2,905 --
Cumulative exchange loss on sale of foreign
subsidiaries........................................... (1,182) --
Pension costs............................................. 16 331
Deferred taxation -- full provision....................... (143) (168)
Tax effect of other US GAAP reconciling items............. (30) (266)
Fixed asset revaluations.................................. 100 508
Deferred profit on sale of property....................... 303 303
Pre-production costs...................................... (1,200) --
Other..................................................... 21 (16)
Minority interests........................................ -- (5)
------ ------
Net (loss)/income under US GAAP............................. (2,942) 8,644
====== ======
Net (loss)/income under US GAAP
Continuing................................................ 6,001 6,015
Discontinued.............................................. (8,943) 2,629
------ ------
(2,942) 8,644
====== ======
</TABLE>
<TABLE>
<CAPTION>
PENCE PER SHARE PENCE PER SHARE
1998 1997
--------------- ---------------
<S> <C> <C>
Basic and diluted earnings per share under US GAAP
Continuing................................................ 7.3 7.2
Discontinued.............................................. (10.9) 3.3
----- -----
(3.6) 10.5
===== =====
</TABLE>
F-93
<PAGE> 174
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS -- (CONTINUED)
Effect on shareholders' funds of differences between UK and US GAAP
<TABLE>
<CAPTION>
1998 1997
------ ------
L000 L000
<S> <C> <C>
Shareholders' funds as reported under UK GAAP............... 8,246 29,451
US GAAP adjustments:
Goodwill.................................................. 64,744 52,109
Pension costs............................................. 4,930 4,913
Deferred taxation -- full provision....................... (310) (168)
Tax effect of other US GAAP reconciling items............. (1,285) (1,283)
Fixed asset revaluations.................................. (761) (876)
Proposed dividends........................................ 4,545 4,536
Deferred profit on sale of property....................... (4,127) (4,430)
Pre-production costs...................................... (1,200) --
Employee share trust arrangements......................... (641) (724)
Other..................................................... 99 86
Minority interests........................................ (149) (146)
------ ------
Shareholders' funds under US GAAP........................... 74,091 83,468
====== ======
</TABLE>
NEW US ACCOUNTING STANDARDS AND PRONOUNCEMENTS NOT YET ADOPTED
SFAS 133 -- In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting
for Derivative Instruments and Hedging Activities". This statement establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives) and for hedging activities. It requires that an entity recognise
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. This statement is
effective for all fiscal quarters of fiscal years beginning after June 15, 1999.
Management has not determined the effect of the adoption of SFAS 133.
SOP 98-1 -- During January 1998, the American Institute of Certified Public
Accountants (AICPA) issued Statement of Position 98-1 Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use ("SOP 98-1") which
becomes effective for all fiscal years beginning after December 15, 1998. Under
SOP 98-1, computer software costs that are incurred in the preliminary project
stage are expensed as incurred. Once specific capitalisation criteria have been
met, external direct costs of materials and service consumed in developing or
obtaining internal-use computer software, certain personnel costs, and interest
costs incurred when developing computer software for internal use are
capitalised. Training costs and data conversion costs are generally expensed as
incurred. Such capitalised costs are amortised over the estimated useful life of
the software. The company is evaluating the effect of the pronouncement.
NEW UK ACCOUNTING STANDARDS NOT YET ADOPTED
FRS 10 -- Goodwill and Intangible Assets: In December 1997, the Accounting
Standard Board in the United Kingdom issued Financial Reporting Standard No. 10
"Goodwill and Intangible Assets" (FRS 10). FRS 10 requires that purchased
goodwill and intangible assets should be capitalised as assets and amortised
over the life of the assets. Goodwill and intangible assets need not be
amortised if it can be demonstrated that the current market value of the
goodwill or intangible is not below its carrying value. FRS 10 is effective for
accounting periods ending on or after 23 December 1998. The standard does not
require reinstatement of goodwill previously eliminated against retained
surplus.
F-94
<PAGE> 175
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS -- (CONTINUED)
FRS 11 -- Impairment of fixed assets and goodwill: In July 1998, the
Accounting Standards Board in the United Kingdom issued Financial Reporting
Standard No. 11 "Impairment of fixed assets and goodwill" (FRS 11). The standard
requires that any impairment in the carrying value of fixed assets should be
recognised in the profit and loss account in the current period and requires
that impairment reviews be undertaken when there is some indication of
impairment. The review should be performed on individual income generating units
based on discounted cash flows. FRS 11 covers not only tangible fixed assets,
intangible fixed assets and goodwill but also investments in subsidiaries,
associates and joint ventures to the extent that they are not covered by other
standards. FRS 11 is effective for accounting periods ending on or after 23
December 1998.
FRS 12 -- Provisions, contingent liabilities and contingent assets: In
September 1998, the Accounting Standard Board in the United Kingdom issued
Financial Reporting Standard No. 12 "Provisions, contingent liabilities and
contingent assets" (FRS 12). The principal feature of the standard is that it
requires that a provision is recognised when there is a legal or constructive
obligation arising from past events and it is probable (ie, more likely than
not) that there will be an outflow of benefits and the amount can be reliably
estimated. FRS 12 is effective for accounting periods ending on or after 23
March 1999.
FRS 13 -- Derivatives and other financial instruments -- disclosures: In
September 1998, the Accounting Standards Board in the United Kingdom issued
Financial Reporting Standard No. 13 "Derivatives and other financial
instruments: disclosures" (FRS 13). FRS 13 is concerned only with disclosure and
the requirements comprise both narrative and numerical disclosures. FRS 13 is
effective for accounting periods ending on or after 23 March 1999.
FRS 14 -- Earnings per share: In October 1998, the Accounting Standards
Board in the United Kingdom issued Financial Reporting Standard No. 14 "Earnings
per share" (FRS 14). The standard applies to all entities whose ordinary or
potential ordinary shares are currently publicly traded, or are in the process
of becoming so, and to any other entity providing earnings per share (eps)
information voluntarily. FRS 14 is effective for accounting periods ending on or
after 23 December 1998.
COMPANIES ACT 1985
These consolidated financial statements do not constitute "statutory
accounts" within the meaning of the Companies Act 1985 of Great Britain for any
of the periods presented. Statutory accounts for the years ended 30 June 1997
and 30 June 1998 have been filed with the United Kingdom's Registrar of
Companies. The auditor has reported on these accounts. The reports were
unqualified and did not contain statements under Section 237 (2) or (3) of the
Act.
These consolidated financial statements exclude certain parent company
statements and other information required by the Companies Act 1985, however,
they include all material disclosures required by generally accepted accounting
principles in the United Kingdom including those Companies Act 1985 disclosures
relating to the statement of income and balance sheet items.
F-95
<PAGE> 176
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS -- (CONTINUED)
ADWEST AUTOMOTIVE PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT -- UK GAAP
FOR THE SIX MONTHS ENDED 31 DECEMBER
<TABLE>
<CAPTION>
1998 1997
----------- -----------
L000 L000
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
TURNOVER
Continuing operations....................................... 118,155 99,203
Discontinued operations..................................... -- 12,987
----------- -----------
118,155 112,190
----------- -----------
OPERATING PROFIT
Continuing operations....................................... 8,326 7,587
Discontinued operations..................................... -- 1,867
----------- -----------
PROFIT ON ORDINARY ACTIVITIES BEFORE INTEREST............... 8,326 9,454
Net interest charge......................................... (2,924) (2,196)
----------- -----------
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION............... 5,402 7,258
Taxation charge............................................. (1,536) (2,249)
----------- -----------
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION................ 3,866 5,009
Profit attributable to minority shareholders -- equity...... (133) (246)
----------- -----------
PROFIT FOR THE PERIOD....................................... 3,733 4,763
Dividends:
Interim 0p per share (1997 2.3p).......................... -- (1,897)
----------- -----------
RETAINED PROFIT FOR THE PERIOD.............................. 3,733 2,866
=========== ===========
Earnings per share -- UK GAAP............................... 4.5p 5.7p
</TABLE>
F-96
<PAGE> 177
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS -- (CONTINUED)
ADWEST AUTOMOTIVE PLC
CONSOLIDATED BALANCE SHEET -- UK GAAP
AT 31 DECEMBER
<TABLE>
<CAPTION>
1998 1997
----------- -----------
L000 L000
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
FIXED ASSETS
Tangible assets............................................. 70,822 61,513
Investments................................................. 755 770
----------- -----------
71,577 62,283
----------- -----------
CURRENT ASSETS
Stock and work in progress.................................. 22,314 26,295
Debtors..................................................... 53,214 56,004
Bank and cash balances...................................... 11,005 12,459
----------- -----------
86,533 94,758
----------- -----------
CREDITORS: DUE WITHIN ONE YEAR
Borrowings.................................................. (17,916) (9,143)
Other creditors............................................. (70,906) (72,133)
----------- -----------
(88,822) (81,276)
----------- -----------
NET CURRENT (LIABILITIES)/ASSETS............................ (2,289) 13,482
CREDITORS: DUE AFTER ONE YEAR
Borrowings.................................................. (45,593) (60,542)
Provisions and other creditors.............................. (8,782) (7,718)
----------- -----------
(54,375) (68,260)
----------- -----------
NET ASSETS.................................................. 14,913 7,505
=========== ===========
CAPITAL AND RESERVES
Called up share capital..................................... 20,794 20,758
Reserves.................................................... 63,464 72,503
----------- -----------
Equity shareholders' funds before goodwill.................. 84,258 93,261
Goodwill on acquisition..................................... (72,681) (88,890)
----------- -----------
Shareholders' funds -- equity............................... 11,577 4,371
MINORITY INTEREST -- EQUITY................................. 3,336 3,134
----------- -----------
14,913 7,505
=========== ===========
</TABLE>
F-97
<PAGE> 178
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS -- (CONTINUED)
ADWEST AUTOMOTIVE PLC
CONSOLIDATED CASH FLOW STATEMENT -- UK GAAP
FOR THE SIX MONTHS ENDED 31 DECEMBER
<TABLE>
<CAPTION>
1998 1997
----------- -----------
L000 L000
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Net cash inflow from operating activities................... 8,391 17,807
Return on investments and servicing of finance.............. (2,947) (1,821)
Taxation paid............................................... (1,075) (3,180)
Capital expenditure......................................... (7,977) (7,594)
Equity dividends paid....................................... (4,551) (4,536)
Acquisitions and disposals.................................. 2,872 (32,095)
Management of liquid resources.............................. -- 12,811
------- -------
Net cash flow before financing.............................. (5,287) (18,608)
Financing................................................... (2,946) 20,015
------- -------
(Decrease)/increase in cash................................. (8,233) 1,407
======= =======
</TABLE>
<TABLE>
<CAPTION>
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT L000 L000
- ------------------------------------------------------- ----------- -----------
<S> <C> <C>
(Decrease)/increase in cash in the period................... (8,233) 1,407
Cash outflow from reduction in debt and lease financing..... 2,946 2,464
Cash inflow from net loans.................................. -- (22,420)
Cash inflow/(outflow) from movement in liquid resources..... -- (12,811)
------- -------
Change in net debt resulting from cash flows................ (5,287) (31,360)
Loans and finance leases acquired with subsidiary........... -- (14,848)
New finance leases.......................................... (2,038) (410)
Translation difference...................................... (2,576) 420
------- -------
Movement in net debt in the period.......................... (9,901) (46,198)
Net debt at beginning of period............................. (52,137) (17,959)
------- -------
Net debt at end of period................................... (62,038) (64,157)
======= =======
</TABLE>
F-98
<PAGE> 179
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS -- (CONTINUED)
ADWEST AUTOMOTIVE PLC
RECONCILIATION OF MOVEMENTS IN
CONSOLIDATED SHAREHOLDERS' FUNDS
FOR THE SIX MONTHS ENDED 31 DECEMBER
<TABLE>
<CAPTION>
1998 1997
----------- -----------
L000 L000
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Profit for the period....................................... 3,733 4,763
Ordinary dividends.......................................... -- (1,897)
------- -------
Retained profit for the period.............................. 3,733 2,866
Currency translation differences on net investments......... (374) 562
Prior year adjustment....................................... (588) --
New share capital issued.................................... -- 60
Goodwill in the period on acquisitions...................... 560 (28,568)
------- -------
NET ADDITIONS/(REDUCTIONS) TO SHAREHOLDERS' FUNDS........... 3,331 (25,080)
SHAREHOLDERS' FUNDS AT BEGINNING OF PERIOD.................. 8,246 29,451
------- -------
SHAREHOLDERS' FUNDS AT END OF PERIOD........................ 11,577 4,371
======= =======
</TABLE>
RECONCILIATION OF OPERATING PROFIT TO
NET CASH FLOW FROM OPERATING ACTIVITIES
FOR THE SIX MONTHS ENDED 31 DECEMBER
<TABLE>
<CAPTION>
1998 1997
----------- -----------
L000 L000
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Operating profit............................................ 8,326 9,454
Depreciation................................................ 4,931 4,508
Increase in stocks.......................................... (1,893) (2,105)
Decrease in debtors......................................... 5,811 3,794
(Decrease)/increase in creditors............................ (8,784) 2,156
------ ------
NET CASH FLOW FROM OPERATING ACTIVITIES..................... 8,391 17,807
====== ======
</TABLE>
F-99
<PAGE> 180
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS -- (CONTINUED)
ADWEST AUTOMOTIVE PLC
ANALYSIS OF NET DEBT
<TABLE>
<CAPTION>
OTHER AT
AT 1 JULY NON CASH EXCHANGE 31 DECEMBER
1998 CASH FLOW MOVEMENTS MOVEMENT 1998
--------- --------- --------- -------- -----------
L000 L000 L000 L000 L000
<S> <C> <C> <C> <C> <C>
Cash at bank and in hand................. 17,934 (10,143) -- 1,411 9,202
Bank overdraft........................... (6,842) 1,910 -- (535) (5,467)
-------
(8,233)
-------
Borrowings due after one year............ (54,319) 10 11,083 (2,367) (45,593)
Borrowings due within one year........... (3,043) 2,185 (11,083) (508) (12,449)
Finance leases........................... (7,665) 751 (2,038) (582) (9,534)
-------
2,946
-------
Current asset investments................ 1,798 -- -- 5 1,803
------- ------- ------- ------ -------
(52,137) (5,287) (2,038) (2,576) (62,038)
======= ======= ======= ====== =======
</TABLE>
F-100
<PAGE> 181
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS -- (CONTINUED)
ADWEST AUTOMOTIVE PLC
SEGMENTAL INFORMATION
FOR THE SIX MONTHS ENDED 31 DECEMBER
<TABLE>
<CAPTION>
1998 1997
----------- -----------
L000 L000
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
TURNOVER
Class of business
Automotive:
UK........................................................ 32,460 36,004
Rest of Europe............................................ 80,327 59,274
USA....................................................... 5,368 3,925
------- -------
Continuing operations....................................... 118,155 99,203
Discontinued operations..................................... -- 12,987
------- -------
118,155 112,190
======= =======
GEOGRAPHICAL SEGMENTS (BY DESTINATION)
UK.......................................................... 30,841 34,437
Rest of Europe.............................................. 80,337 62,127
USA......................................................... 5,628 14,664
Rest of the World........................................... 1,349 962
------- -------
118,155 112,190
======= =======
OPERATING PROFIT
Class of business
Automotive:
UK........................................................ 928 3,147
Rest of Europe............................................ 7,933 4,649
USA....................................................... (535) (209)
------- -------
Continuing operations....................................... 8,326 7,587
------- -------
Operating profit as percent of turnover..................... 7.1% 7.7%
Discontinued operations..................................... -- 1,867
------- -------
Operating profit as percent of turnover..................... -- 14.4%
------- -------
8,326 9,454
======= =======
</TABLE>
F-101
<PAGE> 182
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS
(UNAUDITED)
1 PREPARATION OF INTERIM FINANCIAL REPORT
The accompanying Condensed Consolidated Financial Statements present the
financial position and results of operations of the Group and have been prepared
in accordance with UK GAAP, which differ in certain significant respects from US
GAAP. See Note 5 for a discussion and quantifications of the principal
differences between UK GAAP affecting the Group.
The interim financial information included in these Condensed Consolidated
Financial Statements is unaudited but reflects all adjustments (consisting only
of normal recurring accruals) which are in the opinion of management necessary
for a fair presentation of the results for interim periods presented. The
interim Condensed Consolidated Financial Statements should be read in
conjunction with the Consolidated Financial Statements and notes thereto
included herein.
2 TAXATION CHARGE
The taxation charge before disposals is at an effective rate of 29 percent.
This compares to an effective rate of 31 percent for the half year to 31
December 1997.
3 EARNINGS PER SHARE
Earnings per share is calculated on earnings of L3,733,000 (L4,763,000 for
the half year to 31 December 1997) and on 83,173,908 (83,025,820 for the half
year to 31 December 1997) shares in issue, weighted on a time basis. Fully
diluted earnings per share based on the exercise of options under the employee
share schemes show no material dilution.
4 ACQUISITIONS AND DISPOSALS
Heidemann Verwaltungsgesellschaft mit beschrankter Haftung was acquired on
11 September 1997. The US Electronics division was sold in May 1998.
5 SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
These accounts are prepared in conformity with generally accepted
accounting principles applicable in the United Kingdom (UK GAAP). These differ
in certain significant respects from those applicable in the United States (US
GAAP). These differences, together with the approximate effects of the
adjustments on net profits and shareholders' funds, relate principally to the
items set out below:
GOODWILL AND OTHER INTANGIBLE ASSETS
Under UK GAAP goodwill arising on acquisition has been charged to reserves.
Under US GAAP goodwill is capitalised and amortised by charges against income
over the period, not to exceed 40 years, over which the benefit arises. For US
GAAP, goodwill has been amortised by the Group over 40 years.
PRIOR YEAR ADJUSTMENT
Under UK GAAP the introduction of a new accounting standard, FRS12, has
been treated as a prior year adjustment. Under US GAAP the charge is recognised
in the period in which the new accounting policy is implemented.
F-102
<PAGE> 183
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS -- (CONTINUED)
(UNAUDITED)
DIVIDENDS
Under UK GAAP dividends proposed after the end of an accounting period in
respect of that accounting period are deducted in arriving at retained earnings
for that period. Under US GAAP such dividends are not deducted until declared.
DEFERRED TAXATION
Under UK GAAP provision is made for deferred taxation only to the extent
that it is probable that an actual liability or asset will crystallise in the
foreseeable future. US GAAP requires full provision for deferred income taxes
under the liability method on all temporary differences and, if required, a
valuation allowance is established to reduce gross deferred taxation assets to
the amount which is more likely than not to be realised.
Deferred taxation also arises in relation to the tax effect of other US
GAAP differences.
PENSION COSTS
Under UK GAAP, the cost of providing pensions is charged against profits on
a systematic basis, with pension surpluses and deficits being amortised over the
expected remaining service lives of current employees. Under US GAAP, costs and
surpluses are similarly spread over the expected remaining service lives but
based on prescribed actuarial assumptions, allocation of costs and valuation
methods, which differ in certain respects from those used for UK GAAP.
DEFERRED PROFIT ON SALE OF PROPERTY
In 1996, properties were disposed of which had previously been revalued
under UK GAAP. No profit arose on this transaction under UK GAAP. A profit
arises under US GAAP on the basis that US GAAP does not permit the revaluation
of property. Under US GAAP, the element of the profit in respect of property
subsequently leased back on an operating lease basis is amortised in equal
installments over the life of the lease.
EMPLOYEE SHARE TRUST ARRANGEMENTS
Employee share trusts have been established in order to hedge obligations
in respect of options issued under certain employee share option schemes. Under
UK GAAP the Company's ordinary shares held by the employee share trusts are
included at cost in fixed asset investments. Dividends receivable on such shares
are included in the statement of income. Under US GAAP, such shares and
dividends receivable from those shares are treated as treasury stock and
included in shareholders' equity.
REVALUATION OF FIXED ASSETS
Under UK GAAP the Group has revalued certain fixed assets. This is not
permitted under US GAAP.
PRE-PRODUCTION COSTS
Under UK GAAP, certain significant pre-production costs on new products
which are not pre-funded by the customer are carried forward in work in
progress. These costs are then written off on a unit of production basis over
the life of the contract with the customer. Under US GAAP these costs are
generally expensed as incurred.
F-103
<PAGE> 184
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS -- (CONTINUED)
(UNAUDITED)
CURRENT ASSETS AND LIABILITIES
Under UK GAAP current assets include amounts which fall due after more than
one year. Under US GAAP such assets would be re-classified as non-current
assets. Also under UK GAAP provisions for liabilities and charges include
amounts due within one year which would be re-classified to current liabilities
under US GAAP.
EARNINGS PER ORDINARY SHARE
Under UK GAAP earnings per share is based on profit for the financial year
and computed using the weighted average number of Ordinary Shares in issue
during the year. US GAAP also requires the presentation of diluted earnings per
share which is based upon net income, as adjusted, computed using the weighted
average shares and the effect of other dilutive instruments.
CASH FLOWS
The principal difference between UK GAAP and US GAAP is in respect of
classification. Under UK GAAP, the Group presents its cash flows for operating
activities, returns on investments and servicing of finance, taxation, capital
expenditures and financial investments, acquisition and disposals, equity
dividends paid, management of liquid resources, and financing. US GAAP requires
only three categories of cash flow activities which are operating, investing and
financing.
Cash flows arising from taxation and returns on investments and servicing
of finance under UK GAAP would, with the exception of dividends paid, be
included as operating activities under US GAAP; dividend payments would be
included as a financing activity under US GAAP. In addition, capital
expenditures and financial investment, acquisition and disposals, and management
of liquid resources under UK GAAP would be presented as investing activities
under US GAAP.
UK GAAP defines cash as cash in hand and deposits repayable on demand.
Short term deposits which are readily convertible into cash, into known amounts
of cash at, or close to, their carrying value are classified as liquid
resources. US GAAP defines cash and cash equivalents as cash in hand and short
term highly liquid investments with original maturities of three months or less.
Cash flows in respect of short term deposits with original maturities of three
months or less. Cash flows in respect of short term deposits with original
maturities exceeding three months are included in investing activities under US
GAAP and are included in capital expenditure and financial investment under UK
GAAP.
Under US GAAP, the following amounts would be reported:
<TABLE>
<CAPTION>
HALF YEAR TO HALF YEAR TO
31 DECEMBER 31 DECEMBER
1998 1997
------------ ------------
L'000 L'000
<S> <C> <C>
Net cash provided by operating activities................... 4,368 12,806
Net cash used in investing activities....................... (5,105) (39,689)
Net cash (used in)/provided by financing activities......... (9,406) 17,242
Effect of changes in exchange rate.......................... 1,411 (172)
------ -------
Net decrease in cash & cash equivalents..................... (8,732) (9,813)
Cash & cash equivalents at beginning of year................ 17,934 22,272
------ -------
Cash & cash equivalents at end of year...................... 9,202 12,459
====== =======
</TABLE>
F-104
<PAGE> 185
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS -- (CONTINUED)
(UNAUDITED)
Effect on (loss)/profit attributable to shareholders of differences between
UK and US GAAP
<TABLE>
<CAPTION>
HALF YEAR TO HALF YEAR TO
31 DECEMBER 31 DECEMBER
1998 1997
------------ ------------
L'000 L'000
<S> <C> <C>
Profit attributable to shareholders as reported under UK
GAAP...................................................... 3,733 4,763
US GAAP adjustments:
Goodwill.................................................. (908) (519)
Pension costs............................................. (249) 9
Deferred taxation -- full provision....................... (132) (91)
Tax effect of other US GAAP reconciling items............. 54 (5)
Fixed asset revaluations.................................. 50 50
Deferred profit on sale of property....................... 152 152
Pre-production costs...................................... (1,262) (383)
Other..................................................... (36) (8)
Reverse prior year adjustment............................. (588) --
Minority interests........................................ 8 (2)
------ -----
Net income under US GAAP.................................... 822 3,966
====== =====
</TABLE>
<TABLE>
<CAPTION>
EARNINGS EARNINGS
PER SHARE PER SHARE
1998 1997
--------- ---------
PENCE PENCE
<S> <C> <C>
Basic and diluted earnings per share under US GAAP
Continuing................................................ 1.7 2.5
Discontinued.............................................. (0.7) 2.3
---- ---
1.0 4.8
==== ===
</TABLE>
F-105
<PAGE> 186
ADWEST AUTOMOTIVE PLC
NOTES TO THE ACCOUNTS -- (CONTINUED)
(UNAUDITED)
Effect on shareholders' funds of differences between UK and US GAAP
<TABLE>
<CAPTION>
AS AT AS AT
31 DECEMBER 31 DECEMBER
1998 1997
----------- -----------
L'000 L'000
<S> <C> <C>
Shareholders' funds as reported under UK GAAP............... 11,577 4,371
US GAAP adjustments:
Goodwill.................................................. 66,323 80,545
Pension costs............................................. 4,681 4,922
Deferred taxation -- full provision....................... (442) (259)
Tax effect of other US GAAP reconciling items............. (1,231) (1,288)
Fixed asset revaluations.................................. (711) (819)
Proposed dividends........................................ -- 1,897
Deferred profit on sale of property....................... (3,976) (4,278)
Pre-production costs...................................... (2,462) (383)
Employee share trust arrangements......................... (641) (651)
Other..................................................... (134) (94)
Minority interests........................................ (141) (148)
------ ------
Shareholders' funds under US GAAP........................... 72,843 83,815
====== ======
</TABLE>
F-106
<PAGE> 187
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
152,401 SHARES
[LOGO]
DURA AUTOMOTIVE SYSTEMS, INC.
CLASS A COMMON STOCK
---------------------
PROSPECTUS
---------------------
April 27, 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 188
PART II:
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is a statement of estimated expenses, to be paid solely by
Dura, of the issuance and distribution of the securities being registered:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 1,384
Printing expenses........................................... 50,000
Accounting fees and expenses................................ 5,000
Legal fees and expenses..................................... 25,000
Miscellaneous expenses...................................... 3,616
-------
Total............................................. $85,000
=======
</TABLE>
ITEM 14: INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Dura is incorporated under the laws of the State of Delaware. Section 145
of the General Corporation Law of the State of Delaware ("Section 145") provides
that a Delaware corporation may indemnify any persons who are, or are threatened
to be made, parties to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of such corporation), by reason of the fact that
such person is or was an officer, director, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgements, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding, provided such person acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the corporation's best interests and, with respect to any criminal action or
proceeding, had no reasonable cause to believe that his conduct was illegal. A
Delaware corporation may indemnify any persons who are, or are threatened to be
made, a party to any threatened, pending or completed action or suit by or in
the right of the corporation by reason of the fact that such person was a
director, officer, employee or agent of such corporation, or is or was serving
at the request of such corporation as a director, officer, employee or agent of
another corporation or enterprise. The indemnity may include expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
with the defense or settlement of such action or suit, provided such person
acted in good faith and in a manner he reasonably believed to be in or not
apposed to the corporation's best interests except that no indemnification is
permitted without judicial approval if the officer or director is adjudged to be
liable to the corporation. Where an officer or director is successful on the
merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses which such officer or
director has actually and reasonably incurred.
Article Eleven of the Restated Certificate of Incorporation of Dura
provides that no director of the corporation shall be liable to the corporation
or its stockholders for monetary damages arising from a breach of fiduciary duty
owned to the corporation or its stockholders to the fullest extent permitted by
the Delaware General Corporation Law.
Article V of Dura's Amended and Restated By-laws (the "Dura By-laws")
provides that each person who was or is made a party or is threatened to be made
a party to or is otherwise involved (including involvement as a witness) in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative by reason of the fact that the or she is or was a director or
officer of the corporation, is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including service with
respect to an employee benefit plan, whether the basis of such proceeding is
alleged action in an official capacity as a director or officer or in any other
capacity while serving as a director or officer, against all expense, liability
and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid in settlement) reasonably incurred
II-1
<PAGE> 189
or suffered by such indemnitee in connection therewith and such indemnification
shall continue as to an indemnitee who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the indemnitee's heirs,
executors and administrators; provided, however, that, except as provided below
with respect to proceedings to enforce rights to indemnification, the
corporation shall indemnify any such indemnitee in connection with a proceeding
(or part thereof) initiated by such indemnitee only if such proceeding (or part
thereof) was authorized by the Board of Directors. The right to indemnification
is a contract right and includes the right to be paid by the corporation the
expenses incurred in defending any such proceeding in advance of its final
disposition (advancement of expenses); provided, however, that, if and to the
extent that the Delaware General Corporation Law requires, an advancement of
expenses incurred by an indemnitee in his or her capacity as a director or
officer (and not in any other capacity in which service was or is rendered by
such indemnitee, including, without limitation, service to an employee benefit
plan) shall be made only upon delivery to the corporation of an undertaking by
or on behalf of such indemnitee, to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right to appeal than such indemnitee is not entitled to be indemnified
for such expenses.
Article V of the Dura By-laws further provides that any person serving as a
director, officer, employee or agent of a subsidiary of Dura shall be
conclusively presumed to be serving in such capacity at the request of Dura and,
hence, subject to indemnification by Dura.
Article V of the Dura By-laws further provides that persons who after the
date of the adoption of Article V become or remain directors or officers of the
corporation or who, while a director or officer of the corporation, become or
remain a director, officer, employee or agent of a subsidiary, shall be
conclusively presumed to have relied on the rights to indemnity, advancement of
expenses and other rights contained in Article V in entering into or continuing
such service. The rights to indemnification and to the advancement of expenses
conferred in Article V shall apply to claims made against a indemnitee arising
out of acts or omissions which occurred or occur both prior and subsequent to
the adoption hereof. The rights to indemnification and to the advancement of
expenses conferred in Article V shall apply to claims made against a indemnitee
arising out of acts or omissions which occurred or occur both prior and
subsequent to the adoption hereof. The rights to indemnification and to the
advancement of expenses conferred in Article V shall not be exclusive of any
other right which any person may have or hereafter acquire under the Amended and
Restated Certificate of Incorporation or under any statute, bylaw, agreement,
vote of stockholders or disinterested directors or otherwise.
Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or enterprise,
against any liability asserted against him and incurred by him in any such
capacity, arising out of his status as such, whether or not the corporation
would otherwise have the power to indemnify him under Section 145.
All of the directors and officers of Dura are covered by insurance policies
maintained and held in effect by such corporation against certain liabilities
for actions taken in such capacities, including liabilities under the Securities
Act of 1933.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Within the past three years, Dura Automotive Systems, Inc. has not issued
any securities without registration under the Securities Act of 1933, as
amended, except that, on April 22, 1999, Dura Operating Corp., a wholly owned
subsidiary of Dura Automotive Systems, Inc., sold $300 million in aggregate
principal amount of 9 percent Senior Subordinated Notes due 2009 and E100
million in aggregate principal amount of 9 percent Senior Subordinated Notes due
2009, each of which were guaranteed by DASI and certain of DOC's subsidiaries.
The above-described transaction was exempt from registration under the
Securities Act pursuant to Section 4(2) of the Securities Act as a transaction
not involving any public offering.
II-2
<PAGE> 190
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed as part of this Registration Statement
or incorporated by reference herein:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
2.1 Agreement and Plan of Merger, dated as of January 19, 1999,
among Dura Automotive Systems, Inc., Excel Industries,
Inc. and Windows Acquisition Corporation, incorporated by
reference to Exhibit 2.1 to Dura's Current Report on Form
8-K, dated January 22, 1999.
2.2 Amendment to Agreement and Plan of Merger, dated as of March
9, 1999, by and among Dura Automotive Systems, Inc., Dura
Operating Corp., Excel Industries, Inc. and Windows
Acquisition Corporation incorporated by reference to the
additional definitive proxy materials filed with the SEC
on March 11, 1999.
3.1 Restated Certificate of Incorporation of Dura Automotive
Systems, Inc., incorporated by reference to Exhibit 3.1 of
the Registration Statement on Form S-4 (Registration No.
333-81213).
3.2 Amended and Restated By-laws of Dura Automotive Systems,
Inc., incorporated by reference to Exhibit 3.2 of the
Registration Statement on Form S-1 (Registration No.
333-06601) (the "S-1").
4.1 Amended and Restated Stockholders Agreement, dated as of
August 13, 1996, by and among Dura, Onex U.S. Investments,
Inc., J2R, Alkin, the HCI Stockholders (as defined
therein) and the Management Stockholders (as defined
therein), incorporated by reference to Exhibit 10.30 of
the S-1.
4.2 Amendment No. 1 to Amendment and Restated Stockholders
Agreement, dated as of August 13, 1996, by and between
Dura, Onex DHC LLC, J2R, Alkin and the HCI Stockholders
and the Management Stockholders, incorporated by reference
to Exhibit 4.1 of the Quarterly Report on Form 10-Q for
the quarter ended September 30, 1997.
4.3 Registration Agreement, dated as of August 31, 1994, 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, and MC Stockholders (as defined therein)
and Alkin, incorporated by reference to Exhibit 4.4 of the
S-1.
4.5 Amended and Restated Investor Stockholder Agreement, dated
as of August 13, 1996, by and among Dura, Onex U.S.
Investments, Inc., J2R and certain other stockholders
party thereto, incorporated by reference to Exhibit 10.31
of the S-1.
4.6 Form of certificate representing Class A common stock of
Dura, incorporated by reference to Exhibit 4.6 of the S-1.
4.7 Indenture, dated April 22, 1999, between Dura Operating
Corp., Dura Automotive Systems, Inc., the Subsidiary
Guarantors and U.S. Bank Trust National Association, as
trustee, relating to the 9 percent senior subordinated
notes denominated in U.S. dollars.
4.8 Indenture, dated April 22, 1999, between Dura Operating
Corp., Dura Automotive Systems, Inc., the Subsidiary
Guarantors and U.S. Bank Trust National Association, as
trustee, relating to the 9 percent senior subordinated
notes denominated in euros.
4.9 Registration Rights Agreement, dated April 22, 1999, between
the initial purchasers named therein and Dura Operating
Corp., Dura Automotive Systems, Inc. and the Subsidiary
Guarantors, relating to the 9 percent senior subordinated
notes denominated in U.S. dollars.
4.10 Registration Rights Agreement, dated April 22, 1999, between
the initial purchasers named therein and Dura Operating
Corp., Dura Automotive Systems, Inc. and the Subsidiary
Guarantors, relating to the 9 percent senior subordinated
notes denominated in euros.
5.1 Opinion of Kirkland & Ellis regarding the validity of the
securities offered hereby.
</TABLE>
II-3
<PAGE> 191
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.1 Amended and Restated Credit Agreement, dated as of March 19,
1999, among Dura Automotive Systems, Inc., as Parent
Guarantor, Dura Operating Corp., Dura Automotive Systems
(Europe) GmbH, Dura Asia-Pacific Pty Limited ACN 004884539
and Dura Automotive Systems (Canada), Ltd., as Dura
Borrowers, Trident Automotive plc, Dura Automotive Systems
Limited, Spicebright Limited, Dura Automotive Systems
Cable Operating Inc., Dura Automotive Systems Cable
Operations Canada, Inc. and Moblan Investments B.V., as
Trident Borrowers, Dura Automotive Acquisition Limited, as
the initial Adwest Borrower, Bank of America National
Trust and Savings Association, as Agent, BA Australia
Limited, as Australian Lender, Bank of America Canada, as
Canadian Lender, Bank of America National Trust and
Savings Association, as Swing Line Lender and Issuing
Lender, and the other financial institutions party
thereto, NationsBanc Montgomery Securities LLC, as Lead
Arranger and Book Manager, incorporated by reference to
Exhibit 10.1 of the Company's Quarterly Report on Form
10-Q for the quarterly period ended March 31, 1999.
10.2 1996 Key Employee Stock Option Plan, incorporated by
reference to Exhibit 10.27 of the S-1.
10.3 Independent Director Stock Option Plan, incorporated by
reference to Exhibit 10.28 of the S-1.
10.4 Employee Stock Discount Purchase Plan, incorporated by
reference to Exhibit 10.29 of the S-1.
10.5 Stock 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.
10.6 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.
10.7 Joint Venture Agreement by and among Orscheln Co., MC
Holding Corp., Onex U.S. Investments, Inc., J2R
Corporation and Dura Automotive Holding, Inc., dated as of
August 31, 1994, incorporated by reference to Exhibit 10.1
of the S-1.
10.8 Stock Purchase Agreement, dated April 8, 1998, by and among
Dura Automotive Systems (UK) Limited and the various
selling shareholders listed on the various signature pages
thereto.
10.9 Stock Option Agreement, dated as of August 31, 1994, between
Dura Automotive Systems, Inc. and Alkin Co., incorporated
by reference to Exhibit 10.4 of the S-1.
10.10 Promissory Note, dated December 31, 1991, of Karl F. Storrie
in favor of Dura Automotive Systems, Inc., incorporated by
reference to Exhibit 10.17 of the S-1.
10.11 1998 Stock Incentive Plan, incorporated by reference to
Appendix B in the Registration Statement on Form S-4
(Registration No. 333-71483).
21.1 Subsidiaries of Dura Automotive Systems, Inc., incorporated
by reference to Exhibit 21.1 of Dura's annual report on
Form 10-K for the year ended December 31, 1999.
*23.1 Consent of Arthur Andersen LLP, Minneapolis, Minnesota.
*23.2 Consent of KPMG Audit Plc.
23.3 Consent of Kirkland & Ellis (included in Exhibit 5.1).
24.1 Power of Attorney (included on the signature page of the
Registration Statement on Form S-1, as filed with
Commission on July 12, 1999).
</TABLE>
- ---------------
* Filed herewith.
(b) No financial statement schedules are required to be filed herewith
pursuant to this Item.
II-4
<PAGE> 192
ITEM 22. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1993 may be permitted to directors, officers and controlling persons of
Dura pursuant to the provisions, or otherwise, Dura has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1993 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Dura of expenses incurred or paid by
a director, officer or controlling person of Dura in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, Dura
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act of 1993 and will be governed by the final
adjudication of such issue.
(b) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1993;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offing price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) of this section
do not apply if the registration statement is on Form S-3, Form S-8 or Form F-3,
and the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
II-5
<PAGE> 193
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Dura Automotive
Systems, Inc. duly caused this Post-Effective Amendment No. 1 to Registration
Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Rochester Hills, State of Michigan, on the 27th
day of April, 2000.
DURA AUTOMOTIVE SYSTEMS, INC.
/s/ S.A. JOHNSON
By:
--------------------------------------
S.A. Johnson
Chairman
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
POST-EFFECTIVE AMENDMENT NO. 1 TO REGISTRATION STATEMENT HAS BEEN SIGNED BY THE
FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED ON THE 27TH DAY
OF APRIL, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
* Chairman
- --------------------------------------------------------
S.A. Johnson
* President, Chief Executive Officer
- -------------------------------------------------------- and Director (principal executive officer)
Karl F. Storrie
* Director
- --------------------------------------------------------
Robert E. Brooker, Jr.
* Director
- --------------------------------------------------------
W.H. Clement
* Director
- --------------------------------------------------------
J. Richard Jones
* Director
- --------------------------------------------------------
Jack K. Edwards
* Director
- --------------------------------------------------------
John C. Jorgensen
* Director
- --------------------------------------------------------
James O. Futterknecht
* Director
- --------------------------------------------------------
Ralph R. Whitney, Jr.
</TABLE>
II-6
<PAGE> 194
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
* Director
- --------------------------------------------------------
William L. Orscheln
* Director
- --------------------------------------------------------
Eric J. Rosen
/s/ WILLIAM F. OHRT Vice President and Chief Financial Officer
- -------------------------------------------------------- (principal financial and accounting officer)
William F. Ohrt
</TABLE>
- ---------------
* The undersigned, by signing his name hereto, does sign and execute this
Post-Effective Amendment No. 1 to Registration Statement on Form S-1 pursuant
to the Power of Attorney executed by the above-named officers and directors of
the Registrant and previously filed with the Commission.
By: /s/ SCOTT D. RUED
-------------------------------------------------------
Scott D. Rued, Attorney-in-Fact
II-7
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports and to all references to our Firm included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota,
April 27, 2000
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the inclusion in the registration statement on Form S-1 dated
27 April 2000 of Dura Automotive Systems, Inc. of our report dated 7 September
1998, in respect of the consolidated balance sheets of Adwest Automotive Plc and
its subsidiaries at 30 June 1998 and 30 June 1997, and the related consolidated
profit and loss accounts, reconciliations of movements in shareholders' funds
and consolidated cash flow statements for each of the years in the three year
period ended 30 June 1998 and to the reference to our firm under the heading
"Experts" in the Form S-1 dated 27 April 2000.
KPMG Audit Plc
April 27, 2000
