<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---- ----
Commission file number 0-21139
DURA AUTOMOTIVE SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 38-3185711
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4508 IDS CENTER 55402
MINNEAPOLIS, MINNESOTA (Zip Code)
(Address of principal executive offices)
(612) 342-2311
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
--- ---
The number of shares outstanding of the Registrant's Class A common stock, par
value $.01 per share, at July 31, 2000 was 14,148,697 shares. The number of
shares outstanding of the Registrant's Class B common stock, par value $.01 per
share, at July 31, 2000 was 3,320,303 shares.
<PAGE> 2
DURA AUTOMOTIVE SYSTEMS, INC.
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements:
Condensed Consolidated Statements of Income for the Three Months Ended June 30, 2000
and 1999 (unaudited)
Condensed Consolidated Statements of Income for the Six Months Ended June 30, 2000 and 1999
(unaudited)
Condensed Consolidated Balance Sheets at June 30, 2000 (unaudited) and December 31,
1999
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30,
2000 and 1999 (unaudited)
Notes to Condensed Consolidated Financial Statements (unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
SIGNATURE
</TABLE>
-2-
<PAGE> 3
ITEM 1 - FINANCIAL INFORMATION
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS - UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30,
---------------------------
2000 1999
----------- ---------
<S> <C> <C>
Revenues $ 707,690 $ 685,167
Cost of sales 593,263 582,668
--------- ---------
Gross profit 114,427 102,499
Selling, general and administrative expenses 43,647 38,079
Product recall charge 16,000 --
Amortization expense 7,030 7,346
--------- ---------
Operating income 47,750 57,074
Interest expense, net 27,348 23,723
--------- ---------
Income before provision for income taxes,
equity in losses of affiliate and minority
interests 20,402 33,351
Provision for income taxes 8,155 13,220
Equity in losses of affiliate and minority
interests 116 1,151
Minority interest - dividends on trust preferred
securities, net 611 611
--------- ---------
Income before extraordinary item 11,520 18,369
Extraordinary item - loss on early
extinguishment of debt, net -- (2,700)
--------- ---------
Net income $ 11,520 $ 15,669
========= =========
Basic earnings per common share:
Income before extraordinary item $ 0.66 $ 1.06
Extraordinary item -- (0.16)
--------- ---------
Net income $ 0.66 $ 0.90
========= =========
Diluted earnings per common share:
Income before extraordinary item $ 0.64 $ 1.00
Extraordinary item -- (0.14)
--------- ---------
Net income $ 0.64 $ 0.86
========= =========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated statements.
-3-
<PAGE> 4
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS - UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
2000 1999
---------- ----------
<S> <C> <C>
Revenues $1,390,459 $ 949,868
Cost of sales 1,166,917 800,887
---------- ----------
Gross profit 223,542 148,981
Selling, general and administrative expenses 87,565 54,976
Product recall charge 16,000 --
Amortization expense 14,071 10,589
---------- ----------
Operating income 105,906 83,416
Interest expense, net 55,269 31,060
---------- ----------
Income before provision for income taxes,
equity in losses of affiliate and minority
interests 50,637 52,356
Provision for income taxes 20,521 20,931
Equity in losses of affiliate and minority
interests 914 2,493
Minority interest - dividends on trust preferred
securities, net 1,222 1,222
---------- ----------
Income before extraordinary item and
accounting change 27,980 27,710
Extraordinary item - loss on early
extinguishment of debt, net -- (5,402)
Cumulative effect of change in accounting, net -- (3,147)
---------- ----------
Net income $ 27,980 $ 19,161
========== ==========
Basic earnings per common share:
Income before extraordinary item and
accounting change $ 1.60 $ 1.83
Extraordinary item -- (0.35)
Cumulative effect of change in accounting -- (0.21)
---------- ----------
Net income $ 1.60 $ 1.27
========== ==========
Diluted earnings per common share:
Income before extraordinary item and
accounting change $ 1.54 $ 1.74
Extraordinary item -- (0.32)
Cumulative effect of change in accounting -- (0.19)
---------- ----------
Net income $ 1.54 $ 1.23
========== ==========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated statements.
-4-
<PAGE> 5
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, December 31,
Assets 2000 1999
------------------------------------------------------------------ ------------------- -------------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 21,407 $ 23,697
Accounts receivable, net 500,101 478,542
Inventories 130,770 136,562
Other current assets 163,799 154,704
------------------- -------------------
Total current assets 816,077 793,505
------------------- -------------------
Property, plant and equipment, net 505,097 500,894
Goodwill, net 1,045,824 1,067,937
Deferred income taxes and other assets, net 74,978 82,531
------------------- -------------------
$ 2,441,976 $ 2,444,867
=================== ==================
Liabilities and Stockholders' Investment
------------------------------------------------------------------
Current liabilities:
Current maturities of long-term debt $ 50,531 $ 52,712
Accounts payable 310,032 281,413
Accrued liabilities 294,175 296,431
------------------- -------------------
Total current liabilities 654,738 630,556
------------------- -------------------
Long-term debt, net of current maturities 748,436 776,750
Subordinated notes 393,650 401,560
Other noncurrent liabilities 155,034 149,755
Mandatorily redeemable convertible trust preferred securities 55,250 55,250
------------------- -------------------
Stockholders' investment:
Common stock - Class A 141 141
Common stock - Class B 33 33
Additional paid-in capital 339,389 339,041
Treasury stock (1,723) --
Retained earnings 136,252 108,272
Accumulated other comprehensive loss -
cumulative translation adjustment (39,224) (16,491)
------------------- -------------------
Total stockholders' investment 434,868 430,996
------------------- -------------------
$ 2,441,976 $ 2,444,867
=================== ===================
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated balance sheets.
-5-
<PAGE> 6
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS - UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-----------------------------------------
2000 1999
------------------- -----------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 27,980 $ 19,161
Adjustments to reconcile net income to
net cash provided by operating activities -
Depreciation and amortization 45,024 33,960
Deferred income taxes (2,001) (3,078)
Equity in losses of affiliates and minority interest 914 2,493
Extraordinary loss on extinguishment of debt -- 5,402
Cumulative effect of change in accounting, net -- 3,147
Changes in other operating items 20,657 (57,731)
------------------- -----------------
Net cash provided by operating activities 92,574 3,354
------------------- -----------------
INVESTING ACTIVITIES:
Capital expenditures, net (58,552) (30,956)
Acquisitions, net of cash acquired (19,836) (395,527)
------------------- -----------------
Net cash used in investing activities (78,388) (426,483)
------------------- -----------------
FINANCING ACTIVITIES:
Short-term repayments, net (2,470) (4,873)
Long-term debt borrowings (repayments), net (37,131) 524,821
Debt issuance costs -- (19,537)
Common stock repurchases (1,723) --
Proceeds from issuance of common stock and
exercise of stock options 348 1,379
------------------- -----------------
Net cash provided by (used in) financing activities (40,976) 501,790
------------------- -----------------
EFFECT OF EXCHANGE RATE ON CASH 24,500 (7,565)
------------------- -----------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(2,290) 71,096
CASH AND CASH EQUIVALENTS:
Beginning of period 23,697 20,544
------------------- -----------------
End of period $ 21,407 $ 91,640
=================== =================
SUPPLEMENTAL DISCLOSURE:
Cash paid for interest $ 54,639 $ 20,853
Cash paid for income taxes $ 1,523 $ 9,048
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated statements.
-6-
<PAGE> 7
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
We have prepared the condensed consolidated financial statements of Dura
Automotive Systems, Inc. ("Dura"), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. The information furnished
in the condensed consolidated financial statements includes normal recurring
adjustments and reflects all adjustments which are, in our opinion, necessary
for a fair presentation of the results of operations and statements of financial
position for the interim periods presented. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. We believe that the disclosures are
adequate to make the information presented not misleading when read in
conjunction with the financial statements and the notes thereto included in our
Annual Report on Form 10-K, as filed with the Securities and Exchange Commission
for the period ended December 31, 1999.
Revenues and operating results for the three and six months ended June
30, 2000 are not necessarily indicative of the results to be expected for the
full year.
Certain prior period amounts have been reclassified to conform with the
current period presentation.
2. INVENTORIES
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
June 30, 2000 Dec. 31, 1999
----------------- -----------------
<S> <C> <C>
Raw materials $ 86,930 $ 85,609
Work-in-process 18,491 21,162
Finished goods 25,349 29,791
----------------- -----------------
$ 130,770 $ 136,562
================= =================
</TABLE>
3. 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 period. Diluted earnings per share include (i) the effects of outstanding
stock options and warrants using the treasury stock method and (ii) the
conversion of the Preferred Securities, as follows (in thousands, except per
share amounts):
-7-
<PAGE> 8
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
---------------------------- -------------------------
2000 1999 2000 1999
------------ ------------ ---------- -----------
<S> <C> <C> <C> <C>
Net income $ 11,520 $ 15,669 $ 27,980 $ 19,161
Interest expense on mandatorily redeemable
convertible preferred securities, net of tax 611 611 1,222 1,222
------------ ------------ ---------- -----------
Net income applicable to common
stockholders - diluted $ 12,131 $ 16,280 $ 29,202 $ 20,383
============ ============ ========== ===========
Weighted average number of Class A
common shares outstanding 14,128 14,023 14,119 11,787
Weighted average number of Class B
common shares outstanding 3,320 3,325 3,320 3,325
------------ ------------ ---------- -----------
17,448 17,348 17,439 15,112
Dilutive effect of outstanding stock options
after application of the treasury stock method 14 133 49 111
Dilutive effect of warrants 152 152 152 76
Dilutive effect of mandatorily redeemable
convertible preferred securities, assuming
conversion 1,289 1,289 1,289 1,289
------------ ------------ ---------- -----------
Diluted shares outstanding 18,903 18,922 18,929 16,588
============ ============ ========== ===========
Basic earnings per share $ 0.66 $ 0.90 $ 1.60 $ 1.27
============ ============ ========== ===========
Diluted earnings per share $ 0.64 $ 0.86 $ 1.54 $ 1.23
============ ============ ========== ===========
</TABLE>
4. PRODUCT RECALL CHARGE
In the second quarter of 2000, Dura settled two product recall issues
through a cost sharing agreement with a significant customer. As a result of
this agreement, Dura recorded a one-time pretax charge to operations of $16.0
million to cover amounts not previously reserved. These recalls were announced
in the first half of 1999 and involved concerns associated with Trident
Automotive plc (Trident) speed control cables and a secondary hood latch. Dura
acquired Trident in April of 1998.
5. 1999 FACILITY CONSOLIDATION CHARGE
In the fourth quarter of 1999, Dura began to implement a comprehensive
plan (the "Plan") to consolidate certain facilities designed to lower its cost
structure and improve the long-term competitive position of Dura. As a result of
the Plan, Dura recognized charges to operations of $16.2 million. Included in
this charge are the costs associated with consolidating and eliminating certain
facilities and associated lease obligations of $1.4 million; severance related
to employee terminations of $13.2 million; and asset impairments of $1.6
million. Costs incurred and charged to the reserves as of June 30, 2000 amounted
to $0.5 million related to lease and other closure costs, $3.6 million in
severance and $1.6 million related to asset impairment. There have been no
significant changes to the original Plan. The Plan originally called for the
termination of approximately 5 salaried plant management and 313 hourly plant
manufacturing employees, of which 3 salaried and 33 hourly employees had been
terminated as of June 30, 2000.
-8-
<PAGE> 9
6. FACILITY REORGANIZATION RELATED TO ACQUISITIONS
Dura has implemented reorganization plans designed to integrate the
operations of recent acquisitions. As of June 30, 2000, purchase liabilities
recorded in conjunction with the acquisitions included approximately $44.6
million for costs associated with the shutdown and consolidation of certain
acquired facilities and $28.1 million for severance and other related costs.
Adjustments to the reserve recorded during the six months ended June 30, 2000
included $7.1 million for costs related to acquired facilities and a reduction
of $0.7 million in severance and other related costs. All adjustments were
reflected as an adjustment to goodwill. Costs incurred and charged to the
reserves during the six months ended June 30, 2000 amounted to $7.5 million
related to acquired facilities and $8.3 million in severance and other related
costs.
7. LONG-TERM DEBT
Long-term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
----------------- -----------------
<S> <C> <C>
Credit Agreement:
Tranche A and B term loans $ 537,490 $ 550,521
Revolving credit facility 232,622 208,751
Other 28,855 70,190
----------------- -----------------
798,967 829,462
Less - Current maturities (50,531) (52,712)
----------------- -----------------
Total long-term debt $ 748,436 $ 776,750
================= =================
</TABLE>
In connection with the acquisitions of Adwest and Excel, Dura 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 June 30, 2000,
rates on borrowings under the Credit Agreement ranged from 6.0% to 9.0%.
Borrowings under the tranche A term loan are due and payable in March 2005 and
borrowings under the tranche B term loan are due and payable in March 2006. The
revolving credit facility is available until March 2005. The Credit Agreement
contains various restrictive covenants which limit indebtedness, investments,
rental obligations and cash dividends. The Credit Agreement also requires Dura
to maintain certain financial ratios including minimum liquidity and interest
coverage. Dura was in compliance with the covenants as of June 30, 2000.
Borrowings under the Credit Agreement are collateralized by substantially all
assets of Dura.
The Credit Agreement 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 June 30, 2000, $205.0 million of borrowings were
denominated in US dollars, $6.0 million of borrowings were denominated in
Canadian dollars, $3.6 million of borrowings were denominated in Australian
dollars, and $18.0 million in British pound sterling.
-9-
<PAGE> 10
8. SENIOR SUBORDINATED NOTES
In April 1999, Dura completed the offering of $300.0 million and Euro
100.0 million of senior subordinated notes ("Subordinated Notes"). The
Subordinated Notes mature in May 2009 and bear interest at 9% per year, which is
payable semi-annually. Net proceeds from this offering of approximately $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.
9. COMPREHENSIVE INCOME
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 Dura, comprehensive income represents net income
adjusted for foreign currency translation adjustments. Comprehensive income for
the periods is as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------------------- ---------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net income $ 11,520 $ 15,669 $ 27,980 $ 19,161
Other comprehensive income:
Foreign currency translation adjustment (16,304) (5,310) (22,733) (17,934)
----------- ----------- ----------- -----------
Comprehensive income (loss) $ (4,784) $ 10,359 $ 5,247 $ 1,227
=========== =========== =========== ===========
</TABLE>
10. CONDENSED CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION
The following condensed consolidating financial information presents
balance sheets, statements of income and cash flow information related to Dura's
business. Each Guarantor, as defined, is a direct or indirect wholly owned
subsidiary of Dura has fully and unconditionally guaranteed the 9% senior
subordinated notes issued by Dura Operating Corp., on a joint and several basis.
Separate financial statements and other disclosures concerning the Guarantors
have not been presented because management believes that such information is not
material to investors.
-10-
<PAGE> 11
10. CONDENSED CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION:
(Continued)
DURA AUTOMOTIVE SYSTEMS, INC.
CONSOLIDATING BALANCE SHEETS AS OF JUNE 30, 2000
(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 $ 3,046 $ 1,182 $ 17,179 $ -- $ 21,407
Accounts receivable, net 217,689 54,129 228,283 -- 500,101
Inventories 43,335 23,015 64,420 -- 130,770
Other current assets 86,108 13,653 64,038 -- 163,799
Due from affiliates 69,851 41,480 5,872 (117,203) --
------------- -------------- ------------ ------------ ------------
Total current assets 420,029 133,459 379,792 (117,203) 816,077
------------- -------------- ------------ ------------ ------------
Property, plant and equipment,
net 195,501 51,706 257,890 -- 505,097
Investment in subsidiaries 463,903 27,558 48,210 (539,671) --
Notes receivable from
affiliates 430,686 40,751 35,902 (507,339) --
Goodwill, net 481,539 61,162 503,123 -- 1,045,824
Other assets, net 17,692 15,706 41,580 -- 74,978
------------- -------------- ------------ ------------ ------------
$ 2,009,350 $ 330,342 $ 1,266,497 $(1,164,213) $ 2,441,976
============= ============== ============ ============ ============
Liabilities and Stockholders'
Investment
------------------------------------
Current liabilities:
Accounts payable $ 133,044 $ 27,114 $ 149,874 -- $ 310,032
Accrued liabilities 136,023 21,226 136,926 -- 294,175
Current maturities of long-
term debt 32,435 17 18,079 -- 50,531
Due to affiliates 41,798 29,845 45,560 (117,203) --
------------- -------------- ------------ ------------ ------------
Total current liabilities 343,300 78,202 350,439 (117,203) 654,738
------------- -------------- ------------ ------------ ------------
Long-term debt, net of
current maturities 660,136 -- 88,300 -- 748,436
Subordinated notes 393,650 -- -- -- 393,650
Other noncurrent liabilities 43,949 31,283 79,802 -- 155,034
Notes payable to affiliates 38,973 (11,406) 479,772 (507,339) --
------------- -------------- ------------ ------------ ------------
Total liabilities 1,480,008 98,079 998,313 (624,542) 1,951,858
------------- -------------- ------------ ------------ ------------
Mandatorily redeemable
convertible trust preferred
securities 55,250 -- -- -- 55,250
Stockholders' investment: 474,092 232,263 307,408 (539,671) 474,092
Accumulated other compre-
hensive loss - cumulative
translation adjustment -- -- (39,224) -- (39,224)
------------- -------------- ------------ ------------ ------------
$ 2,009,350 $ 330,342 $1,266,497 $(1,164,213) $ 2,441,976
============= ============== ============ ============= ============
</TABLE>
-11-
<PAGE> 12
10. CONDENSED CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION:
(Continued)
DURA AUTOMOTIVE SYSTEMS, INC.
CONSOLIDATING STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED JUNE 30, 2000
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
------------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues $ 314,750 $ 133,940 $ 270,221 $ (11,221) $ 707,690
Cost of sales 261,843 110,936 231,705 (11,221) 593,263
------------- ----------- ----------- ------------- -------------
Gross profit 52,907 23,004 38,516 -- 114,427
Selling, general and
administrative expenses 23,330 4,631 15,686 -- 43,647
Product recall charge 16,000 -- -- -- 16,000
Amortization expense 3,207 593 3,230 -- 7,030
------------- ----------- ----------- ------------- -------------
Operating income 10,370 17,780 19,600 -- 47,750
Interest expense, net 15,298 668 11,382 -- 27,348
------------- ----------- ----------- ------------- -------------
Income (loss) before provision
for income taxes, equity in
earnings of affiliates and
minority interest (4,928) 17,112 8,218 -- 20,402
Provision (benefit) for income
taxes (893) 5,516 3,532 -- 8,155
Minority interests and equity in
earnings of affiliates, net (16,166) -- (2,537) 18,819 116
Minority interest-dividends on
trust preferred securities, net 611 -- -- -- 611
------------- ----------- ----------- ------------- -------------
Net income $ 11,520 $ 11,596 $ 7,223 $ (18,819) $ 11,520
============= =========== =========== ============= =============
</TABLE>
-12-
<PAGE> 13
10. CONDENSED CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION:
(Continued)
DURA AUTOMOTIVE SYSTEMS, INC.
CONSOLIDATING STATEMENTS OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, 2000
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
------------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues $ 656,183 $ 221,492 $ 538,835 $ (26,051) $ 1,390,459
Cost of sales 554,531 181,167 457,270 (26,051) 1,166,917
------------- ----------- ----------- ------------- -------------
Gross profit 101,652 40,325 81,565 -- 223,542
Selling, general and
administrative expenses 41,556 8,939 37,070 -- 87,565
Product recall charge 16,000 -- -- -- 16,000
Amortization expense 6,594 1,133 6,344 -- 14,071
------------- ----------- ----------- ------------- -------------
Operating income 37,502 30,253 38,151 -- 105,906
Interest expense, net 30,498 1,340 23,431 -- 55,269
Income before provision for ------------- ----------- ----------- ------------- -------------
income taxes, equity in
earnings of affiliates and
minority interest 7,004 28,913 14,720 -- 50,637
Provision for income taxes 4,133 9,559 6,829 -- 20,521
Minority interests and equity in
earnings of affiliates, net (26,331) -- (4,499) 31,744 914
Minority interest-dividends on
trust preferred securities, net 1,222 -- -- -- 1,222
------------- ----------- ----------- ------------- -------------
Net income $ 27,980 $ 19,354 $ 12,390 $ (31,744) $ 27,980
============= =========== =========== ============= =============
</TABLE>
-13-
<PAGE> 14
10. CONDENSED CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION:
(Continued)
DURA AUTOMOTIVE SYSTEMS, INC.
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED
JUNE 30, 2000
(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) $ 27,980 $ 19,354 $ 12,390 $ (31,744) $ 27,980
Adjustments to reconcile net
income (loss) to net cash
provided by (used in)
operating activities:
Depreciation and amortization 19,748 4,510 20,766 45,024
Deferred income taxes -- -- (2,001) -- (2,001)
Equity in losses of affiliates
and minority interest (26,331) -- (4,499) 31,744 914
Changes in other operating
items 20,259 4,747 (4,349) -- 20,657
------------- ----------- ----------- ------------- -------------
Net cash provided by
operating activities 41,656 28,611 22,307 -- 92,574
------------- ----------- ----------- ------------- -------------
INVESTING ACTIVITIES:
Acquisitions, net of cash
Acquired -- (9,190) (10,646) -- (19,836)
Capital expenditures, net (20,097) (5,698) (32,757) -- (58,552)
Net cash used in investing ------------- ----------- ----------- ------------- -------------
Activities (20,097) (14,888) (43,403) -- (78,388)
------------- ----------- ----------- ------------- -------------
FINANCING ACTIVITIES:
Short-term borrowings, net 14,361 (315) (16,516) (2,470)
Long-term borrowings, net (1,601) (79) (35,451) -- (37,131)
Debt financing (to)/from
Affiliates (31,165) (11,861) 43,026 -- --
Common stock repurchases (1,723) -- -- -- (1,723)
Proceeds from issuance of
common stock and exercise
of stock options 348 -- -- -- 348
------------- ----------- ----------- ------------- -------------
Net cash used in financing
activities (19,780) (12,255) (8,941) -- (40,976)
------------- ----------- ----------- ------------- -------------
EFFECT OF EXCHANGE
RATE ON CASH -- -- 24,500 -- 24,500
NET INCREASE IN CASH ------------- ----------- ----------- ------------- -------------
AND CASH EQUIVALENTS 1,779 1,468 (5,537) -- (2,290)
CASH AND CASH
EQUIVALENTS:
Beginning of period 1,267 (286) 22,716 -- 23,697
------------- ----------- ----------- ------------- -------------
End of period $ 3,046 $ 1,182 $ 17,179 -- $ 21,407
============= =========== =========== ============= =============
</TABLE>
-14-
<PAGE> 15
10. CONDENSED CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION:
(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 36,062 32,513 67,987 -- 136,562
Other current assets 66,920 23,171 64,613 -- 154,704
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 43,459 (631,451) --
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 $ 1,282,540 $ (1,437,158) $ 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: 447,487 343,907 287,544 (631,451) 447,487
Accumulated other compre-
hensive loss - cumulative
translation adjustment -- -- (16,491) -- (16,491)
------------- ------------- ------------ ------------- -------------
$ 1,961,401 $ 638,084 $ 1,282,540 $(1,437,158) $ 2,444,867
============= ============= ============ ============= =============
</TABLE>
-15-
<PAGE> 16
10. CONDENSED CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION:
(Continued)
DURA AUTOMOTIVE SYSTEMS, INC.
CONSOLIDATING STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED JUNE 30, 1999
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
----------- ------------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues $ 248,155 $ 195,988 $ 246,501 $ (5,477) $ 685,167
Cost of sales 215,184 166,306 206,655 (5,477) 582,668
----------- ------------- ------------ ------------- -------------
Gross profit 32,971 29,682 39,846 -- 102,499
Selling, general and
administrative expenses 16,682 4,952 16,445 -- 38,079
Amortization expense 2,245 1,440 3,661 -- 7,346
----------- ------------- ------------ ------------- -------------
Operating income 14,044 23,290 19,740 -- 57,074
Interest expense, net 15,560 872 7,291 -- 23,723
----------- ------------- ------------ ------------- -------------
Income before provision for
income taxes, equity in
earnings (losses) of
subsidiaries and minority
interest (1,516) 22,418 12,449 -- 33,351
Provision for income taxes (539) 7,979 5,780 -- 13,220
Equity in earnings (losses)
of subsidiaries (17,257) -- (824) 19,232 1,151
Minority interest-dividend on
trust preferred securities, net 611 -- -- -- 611
----------- ------------- ------------ ------------- -------------
Income (loss) before
extraordinary item 15,669 14,439 7,493 (19,232) 18,369
Extraordinary item - loss on
early extinguishment of
debt, net -- -- (2,700) -- (2,700)
----------- ------------- ------------ ------------- -------------
Net income (loss) $ 15,669 $ 14,439 $ 4,793 $ (19,232) $ 15,669
=========== ============= ============ ============= =============
</TABLE>
-16-
<PAGE> 17
10. CONDENSED CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION:
(Continued)
DURA AUTOMOTIVE SYSTEMS, INC.
CONSOLIDATING STATEMENTS OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, 1999
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
----------- ------------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues $ 357,110 $ 265,436 $ 337,349 $ (10,027) $ 949,868
Cost of sales 303,793 223,940 283,181 (10,027) 800,887
----------- ------------- ------------ ------------- -------------
Gross profit 53,317 41,496 54,168 -- 148,981
Selling, general and
administrative expenses 24,716 6,881 23,379 -- 54,976
Amortization expense 2,993 2,551 5,045 -- 10,589
----------- ------------- ------------ ------------- -------------
Operating income 25,608 32,064 25,744 -- 83,416
Interest expense, net 18,477 1,583 11,000 -- 31,060
----------- ------------- ------------ ------------- -------------
Income before provision for
income taxes, equity in
earnings (losses) of
subsidiaries and minority
interest 7,131 30,481 14,744 -- 52,356
Provision for income taxes 2,540 10,851 7,540 -- 20,931
Equity in earnings (losses)
of subsidiaries (20,950) -- (2,457) 25,900 2,493
Minority interest-dividend on
trust preferred securities, net 1,222 -- -- -- 1,222
----------- ------------- ------------ ------------- -------------
Income (loss) before
extraordinary item 24,319 19,630 9,661 (25,900) 27,710
Extraordinary item - loss on
early extinguishment of
debt, net (2,011) -- (3,391) -- (5,402)
Cumulative effect of change in
accounting, net (3,147) -- -- -- (3,147)
----------- ------------- ------------ ------------- -------------
Net income (loss) $ 19,161 $ 19,630 $ 6,270 $ (25,900) $ 19,161
=========== ============= ============ ============= =============
</TABLE>
-17-
<PAGE> 18
10. CONDENSED CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION:
(Continued)
DURA AUTOMOTIVE SYSTEMS, INC.
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED
JUNE 30, 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) $ 19,161 $ 19,630 $ 6,270 $ (25,900) $ 19,161
Adjustments to reconcile net
income (loss) to net cash
provided by operating activities:
Depreciation and amortization 11,438 8,232 14,290 -- 33,960
Deferred income taxes -- -- (3,078) -- (3,078)
Equity in losses of affiliates (20,950) -- (2,457) 25,900 2,493
Extraordinary loss on
extinguishment of debt 2,011 -- 3,391 -- 5,402
Cumulative effect of change in
accounting, net 3,147 -- -- -- 3,147
Changes in other operating
items 40,778 (43,258) (55,251) -- (57,731)
---------- ---------- --------- ---------- ------------
Net cash provided by (used for)
operating activities 55,585 (15,396) (36,835) -- 3,354
---------- ---------- --------- ---------- ------------
INVESTING ACTIVITIES:
Acquisitions, net (225,265) -- (170,262) -- (395,527)
Capital expenditures, net (6,727) (9,218) (15,011) -- (30,956)
Other 572 (2,624) 2,052 -- --
Net cash used for investing ---------- ---------- --------- ---------- ------------
activities (231,420) (11,842) (183,221) -- (426,483)
---------- ---------- --------- ---------- ------------
FINANCING ACTIVITIES:
Short-term borrowings, net -- (1,381) (3,492) -- (4,873)
Long-term borrowings
(repayments), net 673,301 -- (148,480) -- 524,821
Debt issuance costs (19,537) -- -- -- (19,537)
Debt financing (to)/from affiliates (324,898) 28,314 296,584 -- --
Proceeds from issuance of common
stock and exercise of
stock options -- -- 1,379 -- 1,379
Net cash provided by ---------- ---------- --------- ---------- ------------
financing activities 328,866 26,933 145,991 -- 501,790
---------- ---------- --------- ---------- ------------
EFFECT OF EXCHANGE
RATE ON CASH -- -- (7,565) -- (7,565)
----------- ---------- --------- ---------- ------------
NET CHANGE IN CASH
AND CASH EQUIVALENTS 153,031 (305) (81,630) -- 71,096
CASH AND CASH
EQUIVALENTS:
Beginning of period 1,247 (557) 19,854 -- 20,544
---------- ---------- --------- ---------- ------------
End of period $ 154,278 $ (862) $ (61,776) $ -- $ 91,640
========== ========== ========= ========== ============
</TABLE>
-18-
<PAGE> 19
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following management's discussion and analysis of financial condition and
results of operations (MD&A) should be read in conjunction with the MD&A
included in Dura's Annual Report on Form 10-K for the period ended December 31,
1999.
COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 2000 TO THE THREE MONTHS ENDED
JUNE 30, 1999
Revenues -- Revenues were $707.7 million for the three months ended June 30,
2000 compared to $685.2 million for the comparable period of 1999. The increase
in revenues is primarily the result of the full quarter impact of the operations
of the Meritor seat track business acquired during the fourth quarter of 1999,
partially offset by unfavorable exchange rate fluctuations primarily related to
the devaluation of the Euro and U.K. pound.
Cost of Sales -- Cost of sales were $593.3 for the three months ended June 30,
2000 compared to $582.7 million for the comparable period of 1999. Cost of sales
as a percentage of revenues for the three months ended June 30, 2000 was 83.8%
compared to 85.0% for the comparable period of 1999. The corresponding increase
in gross margin is due primarily to the implementation of Dura's restructuring
plan and continued focus on cost reduction.
S, G & A Expenses -- Selling, general and administrative expenses were $43.6
million for the three months ended June 30, 2000 compared to $38.1 million for
the comparable period of 1999. As a percentage of revenues, selling, general and
administrative expenses were 6.2% for the three months ended June 30, 2000
compared to 5.6% for the comparable period of 1999. These increases are due
primarily to incremental costs from the Meritor acquisition discussed above,
ongoing consulting expenses for work performed by AT Kearney on web based
sourcing and the Six-Sigma Black Belt cost reduction program.
Product Recall Charge -- In the second quarter of 2000, Dura settled two product
recall issues through a cost sharing agreement with a significant customer. As a
result of this agreement, Dura recorded a one-time pretax charge to operations
of $16.0 million to cover amounts not previously reserved. The payments related
to this charge will be made over a three-year period beginning in July of 2000.
These recalls were announced in the first half of 1999 and involved concerns
associated with Trident Automotive plc (Trident) speed control cables and a
secondary hood latch. Dura acquired Trident in April of 1998.
Amortization Expense -- Amortization expense for the three months ended June 30,
2000 was $7.0 million compared to $7.3 million for the comparable period of
1999. The decrease is due to foreign exchange rate fluctuations.
Interest Expense -- Interest expense for the three months ended June 30, 2000
was $27.3 million compared to $23.7 million for the comparable period of 1999.
The increase was due principally to borrowings incurred related to the Meritor
acquisition discussed above.
-19-
<PAGE> 20
Income Taxes -- The effective income tax rate was 40.0% for the three months
ended June 30, 2000 and 39.6% for the comparable period of 1999. The effective
rates differed from the statutory rates as a result of higher foreign tax rates
and the effects of state taxes and non-deductible goodwill amortization.
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 2000 TO THE SIX MONTHS ENDED JUNE
30, 1999
Revenues -- Revenues were $1,390.5 million for the six months ended June 30,
2000 compared to $949.9 million for the comparable period of 1999. The increase
in revenues is primarily the result of the impact of the operations of Excel,
Adwest and the Meritor seat track business acquired during the first and fourth
quarter of 1999, partially offset by unfavorable exchange rate fluctuations
primarily related to the devaluation of the Euro and U.K. pound.
Cost of Sales -- Cost of sales were $1,166.9 million for the six months ended
June 30, 2000 compared to $800.9 million for the comparable period of 1999. Cost
of sales as a percentage of revenues for the six months ended June 30, 2000 was
83.9% compared to 84.3% for the comparable period of 1999. The corresponding
increase in gross margin is due primarily to the implementation of Dura's
restructuring plan and continued focus on cost reduction.
S, G & A Expenses -- Selling, general and administrative expenses were $87.6
million for the six months ended June 30, 2000 compared to $55.0 million for the
comparable period of 1999. As a percentage of revenues, selling, general and
administrative expenses were 6.3% for the six months ended June 30, 2000
compared to 5.8% for the comparable period of 1999. These increases are due
primarily to incremental costs from the acquisitions discussed above, ongoing
consulting expenses for work performed by AT Kearney on web based sourcing and
the Six-Sigma Black Belt cost reduction program.
Product Recall Charge -- In the second quarter of 2000, Dura settled two product
recall issues through a cost sharing agreement with a significant customer. As a
result of this agreement, Dura recorded a one-time pretax charge to operations
of $16.0 million to cover amounts not previously reserved. The payments related
to this charge will be made over a three-year period beginning in July of 2000.
These recalls were announced in the first half of 1999 and involved concerns
associated with Trident speed control cables and a secondary hood latch. Dura
acquired Trident in April of 1998.
Amortization Expense -- Amortization expense for the six months ended June 30,
2000 was $14.1 million compared to $10.6 million for the comparable period of
1999. The increase is due to additional goodwill amortization as a result of the
acquisitions discussed above.
Interest Expense -- Interest expense for the six months ended June 30, 2000 was
$55.3 million compared to $31.1 million for the comparable period of 1999. The
increase is due principally to borrowings incurred related to the acquisitions
of Excel, Adwest and Meritor during 1999.
Income Taxes -- The effective income tax rate was 40.5% for the six months ended
June 30, 2000 and 40.0% for the comparable period of 1999. The effective rates
differed from the statutory rates as a result of higher foreign tax rates and
the effects of state taxes and non-deductible goodwill amortization.
-20-
<PAGE> 21
LIQUIDITY AND CAPITAL RESOURCES
In connection with the acquisitions of Excel and Adwest in March 1999, Dura
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 June 30, 2000,
rates on borrowings under the Credit Agreement ranged from 6.0% to 9.0%.
Borrowings under the tranche A term loan are due and payable in March 2005 and
borrowings under the tranche B term loan are due and payable in March 2006. The
revolving credit facility is available until March 2005. The Credit Agreement
contains various restrictive covenants that limit indebtedness, investments,
rental obligations and cash dividends. The Credit Agreement also requires Dura
to maintain certain financial ratios including minimum liquidity and interest
coverage. Dura was in compliance with the covenants as of June 30, 2000.
Borrowings under the Credit Agreement are collateralized by substantially all
assets of Dura.
The Credit Agreement 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 June 30, 2000, $205.0 million of borrowings were
denominated in US dollars, $6.0 million of borrowings were denominated in
Canadian dollars, $3.6 million of borrowings were denominated in Australian
dollars and $18.0 million in British pound sterling.
In April 1999, the Company completed the offering of $300.0 million and Euro
100.0 million of senior subordinated notes ("Subordinated Notes"). The
Subordinated Notes mature in May 2009 and bear interest at 9% per year, which is
payable semi-annually. Net proceeds from this offering of approximately $394.7
million were used to repay the $200.0 million interim term loan, approximately
$78.1 million to retire the 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.
During the first six months of 2000, Dura provided cash from operations of $92.6
million, compared to a $3.4 million in 1999. Cash generated from operations
before changes in working capital items was $71.9 million for 2000 compared to
$61.1 million for 1999. Working capital provided cash of $20.7 million in 2000
compared to a use of cash of $57.7 million in 1999. The increase in cash
provided by working capital is primarily the result of the timing of cash
receipts and cash payments.
Net cash used in investing activities was $78.4 million for the first six months
of 2000 as compared to $426.5 million in 1999. Net capital expenditures totaled
$58.6 million for the first six months of 2000 primarily for equipment and
dedicated tooling purchases related to new or replacement programs with an
additional $19.8 million used for acquisitions. This compares with net capital
expenditures of $31.0 million in 1999 and $395.5 million spent primarily on the
acquisitions of Excel and Adwest. The acquisitions made during the first six
months of 2000 included the purchase of the Jack Division of Ausco Products,
Inc. a supplier of mechanical jacks for the automotive industry and the purchase
of additional ownership in Pollone S.A. Industria E Comercio (Brazil) and Bowden
TSK (U.K.).
Net cash used for financing activities totaled $41.0 million for the first six
months of 2000 compared with cash provided of $501.8 million in 1999.
Approximately $39.6 million of cash was repaid through net borrowings.
-21-
<PAGE> 22
At June 30, 2000, Dura had unused borrowing capacity of approximately $153.2
million under its most restrictive debt covenant. Dura believes the borrowing
availability under its credit agreement, together with funds generated by
operations, should provide liquidity and capital resources to pursue its
business strategy for the foreseeable future, with respect to working capital,
capital expenditures, and other operating needs. Dura estimates its 2000 capital
expenditures will approximate $100 million. Under present conditions, management
does not believe access to funds will restrict its ability to pursue its
acquisition strategy.
During 1999, Dura established the Deferred Income Leadership Stock Purchase Plan
(the "Deferred Income Stock Plan"), which allows certain employees to defer
receipt of all or a portion of their annual cash bonus. Dura makes a matching
contribution of one-third of the employee's deferral. In accordance with the
terms of the plan, the employee's deferral and Dura's matching contribution have
been placed in a "Rabbi" trust, which invests solely in Dura's Class A common
stock. This trust arrangement offers the employee a degree of assurance for
ultimate payment of benefits without causing constructive receipt for income tax
purposes. The assets of the trust remain subject to the creditors of Dura and
are not the property of the employees; therefore, they are included as a
separate component of stockholders' investment under the caption Treasury Stock.
During the first six months of 2000, Dura made Class A common stock repurchases
of $1.7 million related to the Deferred Income Stock Plan.
QUARTERLY RESULTS OF OPERATIONS AND SEASONALITY
Dura typically experiences decreased revenues and operating income during the
third calendar quarter of each year due to production shutdowns at OEMs for
model changeovers and vacations. Certain mobile products are seasonal in that
sales in the fourth quarter 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 for Dura.
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.
-22-
<PAGE> 23
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 but do not impact earnings or cash flows. Conversely for variable rate
debt, interest rate changes generally do not affect the fair market value but do
impact future earnings and cash flows, assuming other factors are held constant.
FOREIGN CURRENCY TRANSACTIONS
A significant portion of Dura's revenues were derived from manufacturing
operations in Europe, Canada and Latin America. The results of operations and
financial position of Dura's operations in these countries are principally
measured in their respective currency and translated into U.S. dollars. The
effects of foreign currency fluctuations in such countries are somewhat
mitigated by the fact that expenses are generally incurred in the same
currencies in which revenues are generated. The reported income of these
subsidiaries will be higher or lower depending on a weakening or strengthening
of the U.S. dollar against the respective foreign currency.
A significant portion of Dura's assets are based in its foreign operations and
are translated into U.S. dollars at foreign currency exchange rates in effect as
of the end of each period, with the effect of such translation reflected as a
separate component of stockholders' investment. Accordingly, Dura's consolidated
stockholders' investment will fluctuate depending upon the weakening or
strengthening of the U.S. dollar against the respective foreign currency.
Dura's strategy for management of currency risk relies primarily upon conducting
its operations in such countries' respective currency and may, from time to
time, engage in hedging programs intended to reduce Dura exposure to currency
fluctuations.
FORWARD-LOOKING STATEMENTS
All statements, other than statements of historical fact, included in this Form
10-Q, including without limitation the statements under "Management's Discussion
and Analysis of Financial Condition and Results of Operations" are, or may be
deemed to be, forward-looking statements within the meaning of Section 27A of
the Securities Act and Section 21E of the Securities Exchange Act of 1934, as
amended. When used in this Form 10-Q, the words "anticipate," "believe,"
"estimate," "expect," "intends," and similar expressions, as they relate to
Dura, are intended to identify forward-looking statements. Such forward-looking
statements are based on the beliefs of Dura's management as well as on
assumptions made by and information currently available to Dura at the time such
statements were made. Various economic and competitive factors could cause
actual results to differ materially from those discussed in such forward-looking
statements, including factors which are outside the control of Dura, such as
risks relating to: (i) the degree to which Dura is leveraged; (ii) Dura's
reliance on major customers and selected models; (iii) the cyclicality and
seasonality of the automotive market; (iv) the failure to realize the benefits
of recent acquisitions and joint ventures; (v) obtaining new business on new and
redesigned models; (vi) Dura's ability to continue to implement its acquisition
strategy; and (vii) the highly competitive nature of the automotive supply
industry. All subsequent written and oral forward-looking statements
attributable to Dura or persons acting on behalf of Dura are expressly qualified
in their entirety by such cautionary statements.
-23-
<PAGE> 24
PART II. OTHER INFORMATION
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
Item 1. Legal Proceedings:
Other than as reported in Dura's 1999 Annual Report on Form 10-K under
the caption "Legal Proceedings," Dura is not currently a party to any
material pending legal proceedings, other than routine matters
incidental to the business.
In the second quarter of 2000, Dura settled two product recall issues
through a cost sharing agreement with a significant customer. As a
result of this agreement, Dura recorded a one-time pretax charge to
operations of $16.0 million to cover amounts not previously reserved.
These recalls were announced in the first half of 1999 and involved
concerns associated with Trident Automotive plc (Trident) speed control
cables and a secondary hood latch. Dura acquired Trident in April of
1998.
Item 2. Change in Securities:
None
Item 3. Defaults Upon Senior Securities:
None
Item 4. Submission of Matters to a Vote of Security Holders:
The Annual Meeting of Stockholders of Dura Automotive Systems, Inc. was
held on May 25, 2000. At the meeting, the following matters were
submitted to a vote of the stockholders of Dura:
1. The election of ten directors to serve for one year beginning at
the 2000 annual stockholders' meeting and expiring at the 2001
annual stockholders' meeting. Each of the nominees Robert E.
Brooker, Jr., Jack K. Edwards, James O. Futterknecht, Jr, S.A.
Johnson, J. Richard Jones, John C. Jorgensen, William L. Orscheln,
Eric J. Rosen, Karl F. Storrie and Ralph R. Whitney, Jr. were
elected. Of the 47,303,544 votes, at least 46,050,679 votes
granted authority to vote for these directors and no more than
1,252,865 abstaining votes were cast.
2. The Deferred Income Leadership Stock Purchase Plan was approved by
the stockholders by 40,440,905 votes.
3. An amendment to the 1998 Stock Incentive Plan that would allow for
annual increase in the number of shares of Class A Stock that may
be issued was approved by 36,493,398 votes.
-24-
<PAGE> 25
4. The Director Deferred Stock Purchase Plan was approved by
41,852,136 votes.
5. The ratification of the appointment of Arthur Andersen LLP to
serve as Dura's independent public accountants for the year ending
December 31, 2000 was approved by 46,029,241 votes.
Item 5. Other Information:
None
Item 6. Exhibits and Reports on Form 8-K:
None
-25-
<PAGE> 26
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DURA AUTOMOTIVE SYSTEMS, INC.
Date: August 9, 2000 By /s/ William Ohrt
----------------
William Ohrt
Vice President, Chief Financial Officer
(principal accounting and financial
officer)
-26-
<PAGE> 27
Exhibit Index
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
