<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 1998
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 333-58131
OXFORD AUTOMOTIVE, INC.
(Exact name of Registrant as specified in its charter)
MICHIGAN 38-3262809
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1250 STEPHENSON HIGHWAY, TROY MICHIGAN 48083
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (248) 577-1400
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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
309,750 shares of the registrant's Common Stock
were outstanding as of October 31, 1998.
<PAGE> 2
PART I. FINANCIAL INFORMATION
Oxford Automotive, Inc.
Consolidated Statements of Operations
(Dollars In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net sales $ 118,508 $ 93,572 $ 258,410 $ 185,532
Cost of sales 109,296 85,578 237,559 167,030
------------------ ---------------- -------------------- -----------------
Gross profit 9,212 7,994 20,851 18,502
Selling, general and
administrative expenses 7,007 5,017 14,806 7,919
Restructuring provision 1,176 1,176
------------------ ---------------- -------------------- -----------------
Operating income 1,029 2,977 4,869 10,583
Other income (expense):
Interest income 12 570 30 681
Interest expense (4,736) (3,534) (9,167) (5,443)
Other income 71 231 394 268
------------------ --------------- ------------------- -----------------
Income before income taxes (3,624) 244 (3,874) 6,089
Income taxes (1,450) 59 (1,550) 2,397
------------------ --------------- -------------------- -----------------
Net income (loss) (2,174) 185 (2,324) 3,692
------------------ --------------- ------------------- -----------------
Accrued dividends and accretion on
redeemable preferred stock 330 337 660 672
------------------ --------------- ------------------- -----------------
Net income (loss) applicable to
common stock $ (2,504) $ (152) $ (2,984) $ 3,020
================== =============== =================== =================
Net income (loss)
per share (basic and diluted) $ (8.08) $ (0.49) $ (9.63) $ 9.75
================== =============== =================== =================
Weighted average shares
outstanding 309,750 309,750 309,750 309,750
================== =============== =================== =================
</TABLE>
See accompanying Notes to Consolidated Financial Statements
2
<PAGE> 3
Oxford Automotive, Inc.
Consolidated Balance Sheets
(Dollars In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
September 30, March 31,
1998 1998
(unaudited)
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 3,421 $ 18,321
Accounts receivable, trade 77,326 65,273
Reimbursable tooling 15,714 13,315
Inventory 33,983 21,305
Unexpended bond proceeds 4,274 4,159
Deferred income taxes 4,398 4,399
Refundable income taxes 2,388 1,601
Prepaid expenses and other
current assets 6,410 2,803
--------- ---------
Total Current Assets 147,914 131,176
Property, plant and equipment, net 187,446 163,708
Marketable securities 5,780 8,627
Other noncurrent assets 34,433 10,116
Deferred income taxes 6,801 6,405
--------- --------
Total Assets $ 382,374 $ 320,032
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 47,730 $ 52,214
Restructuring reserve 5,309 6,363
Employee compensation 9,959 4,808
Other current liabilities 15,395 12,242
Current portion of
long-term debt 12,830 10,965
--------- ---------
Total Current Liabilities 91,223 86,592
LONG-TERM LIABILITIES
Pension liability 4,894 4,727
Post retirement medical benefits 40,512 35,992
Deferred taxes 14,483 15,332
Other non current 4,126 2,596
Long term debt 191,401 128,483
--------- ---------
Total Liabilities 346,639 273,722
</TABLE>
3
<PAGE> 4
Oxford Automotive, Inc.
Consolidated Balance Sheets (continued)
(Dollars In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
September 30, March 31,
1998 1998
(unaudited)
<S> <C> <C>
Redeemable Series A $3.00
Cumulative preferred stock,
$100 stated value - 457,541
shares authorized, 397,539 shares
issued and outstanding at
September 30, 1998, and
March 31, 1998 40,256 40,192
SHAREHOLDERS' EQUITY
Common stock 1,050 1,050
Retained earnings 1,766 4,750
Accumulated other
comprehensive income (loss) (7,337) 318
---------- ---------
(4,521) 6,118
---------- ---------
Total liabilities &
shareholders' equity $ 382,374 $ 320,032
========== =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
4
<PAGE> 5
Oxford Automotive, Inc.
Consolidated Statement of Cash Flows
(Dollars In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
For the Six For the Six
Months Ended Months Ended
September 30, September 30
1998 1997
(unaudited) (unaudited)
OPERATING ACTIVITIES
<S> <C> <C>
Net Income $ (2,324) $ 3,692
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities
Depreciation and amortization 13,169 9,012
Deferred income taxes (1,916) (2,793)
Loss on sale of equipment 52
Changes in operating assets and
liabilities affecting cash
Accounts receivable, trade (1,920) 4,215
Reimbursable tooling (3,580) 1,044
Inventories (1,476) (1,342)
Prepaid expenses and other assets (1,806) (2,956)
Accounts payable (8,853) (7,888)
Restructuring reserve (1,053) (1,250)
Employee compensation (275) 4,042
Accrued expenses and other liabilities 1,093 (2,533)
Income taxes payable/refundable (787) 312
Other noncurrent liabilities 890 1,186
---------- -----------
Net cash provided by (used in) operating
activities (8,838) 4,793
---------- -----------
INVESTING ACTIVITIES
Purchase of business, net of cash acquired (53,465) (21,113)
Net purchase of property, plant
and equipment (15,291) (5,999)
Proceeds from sale of equipment 1,050
Purchases of marketable securities (887)
---------- -----------
Net cash used in investing activities (69,643) (26,062)
FINANCING ACTIVITIES
Net proceeds (payments) on borrowings 28,178 (85,606)
Proceeds from borrowing arrangements 37,044 124,814
Debt financing costs (647)
Payment of preferred dividends (596) (536)
---------- -----------
Net cash provided by financing activities 63,979 38,672
</TABLE>
5
<PAGE> 6
Oxford Automotive, Inc.
Consolidated Statement of Cash Flows (continued)
(Dollars In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
For the Six For the Six
Months Ended Months Ended
September 30, September 30
1998 1997
(unaudited) (unaudited)
<S> <C> <C>
Effect of exchange rate
changes on cash (398) (152)
Net increase (decrease) in cash
and cash equivalents (14,900) 17,251
Cash and cash equivalents
at beginning of period 18,321 9,671
-------- --------
Cash and cash equivalents
at end of period $ 3,421 $ 26,922
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
6
<PAGE> 7
Oxford Automotive, Inc.
Notes to Consolidated Financial Statements
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of Oxford
Automotive, Inc. (the "Company") have been prepared in accordance with Rule
10-01 of Regulation S-X and do not include all the information and notes
required by generally accepted accounting principles for complete financial
statements. All adjustments, which include only normal recurring adjustments
that are, in the opinion of management, necessary for a fair presentation of the
results of the interim periods have been made. The results of operations for
such interim periods are not necessarily indicative of results of operations for
a full year. The unaudited condensed financial statements should be read in
conjunction with the Company's consolidated audited financial statements and
notes thereto for the year ended March 31, 1998.
2. INVENTORIES
Inventories are comprised of the following:
<TABLE>
<CAPTION>
September 30, March 31,
1998 1998
<S> <C> <C>
Raw materials $ 15,433 $ 6,737
Finished goods and work-in-process 19,642 15,135
-------- --------
35,075 21,872
LIFO and other reserves (1,092) (567)
-------- --------
$ 33,983 $ 21,305
======== ========
</TABLE>
The Company does not separately identify finished goods from work-in-process.
3. SENIOR SUBORDINATED NOTES
On April 1, 1998 the Company issued $35.0 million of unsecured 10 1/8% Senior
Subordinated Notes due 2007, Series B (the "Series B Notes"). The Series B Notes
are substantially identical to and rank pari passu in right of payment with the
$125.0 million of unsecured 10 1/8% Senior Subordinated Notes due 2007 issued by
the Company on June 24, 1997 (the "Series A Notes"). The Series A Notes and the
Series B Notes are collectively referred to as the "Notes". The Notes pay
interest semi-annually on June 15 and December 15. The Notes provide for certain
covenants, including limitations on: indebtedness, restricted payments,
distributions, sale of assets, affiliate transactions and merger and
consolidation. The Company has optional redemption rights beginning June 15,
2002.
The Notes are limited to $160.0 million aggregate principal amount. The net
7
<PAGE> 8
proceeds to the Company from the sale of the Series B Notes were approximately
$37.6 million (after the inclusion of approximately $2.0 million in premium and
accrued interest of approximately $1.0 million paid by the initial purchaser of
the Series B Notes and the deduction of estimated expenses of approximately $0.4
million). The Company used all of the net proceeds in connection with the
acquisition of the Suspension Division of Eaton Corporation (the "Suspension
Division"). See Note 4.
The Company filed a Registration Statement on Form S-4 ("Registration
Statement") with the Securities and Exchange Commission in order to effect the
exchange of the Series B Notes for new Series B Notes, with substantially the
same terms as the Series B Notes except with respect to certain transfer
restrictions and registration rights. On July 9, 1998, the Registration
Statement was declared effective by the Securities and Exchange Commission and
the exchange offer was completed on August 13, 1998.
4. ACQUISITION
On April 1, 1998, the Company purchased the assets of the Suspension Division of
Eaton Corporation (the "Suspension Division") for cash of approximately $53.5
million, including the investment in the Metalcar joint venture. The acquisition
was financed through the proceeds of the Notes described in Note 3, including
the issuance of the Series B Notes and cash on hand. The acquisition was
recorded in accordance with the purchase method of accounting. Accordingly,
results of operations are included only for the periods subsequent to
acquisition. The purchase price plus direct cost of the acquisition will be
allocated to the assets acquired and liabilities assumed based on their
estimated fair values at the date of acquisition. The unaudited financial
statements reflect the preliminary allocation of purchase price, as the
allocation has not been finalized.
5. STATEMENT OF RETAINED EARNINGS (In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Net
Foreign Unrealized
Currency Retained Gain (loss) on
Common Translation Earnings Marketable
Stock Adjustment (Deficit) Securities Total
<S> <C> <C> <C> <C> <C>
Balances at
March 31, 1998 $1,050 $ (651) $4,750 $ 969 $ 6,118
Net income (2,324) (2,324)
Foreign currency
translation
adjustments (5,249) (5,249)
Accrued dividends
and accretion
of redeemable
preferred stock (660) (660)
Unrealized loss
on marketable
securities (2,406) (2,406)
------ ------- ------ ------ -------
Balances at
September 30,
1998 $1,050 $(5,900) $1,766 $(1,437) $(4,521)
====== ======= ====== ======= =======
</TABLE>
8
<PAGE> 9
6. Effective April 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, (SFAS 130"), "Reporting Comprehensive
Income." SFAS 130 requires the presentation of "comprehensive income"
in a separate financial statement. Comprehensive income includes net
income or loss and "other comprehensive income," which comprises such
items as foreign currency translation adjustments, minimum pension
liability adjustments, and unrealized gains and losses on marketable
securities classified as available-for-sale. SFAS 130 does not change
the accounting for these items; rather, it promulgates the presentation
of comprehensive income, which was not previously presented. The
Company's total comprehensive income was as follows:
<TABLE>
<CAPTION>
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net income (loss) $ (2,174) $ 185 $ (2,324) $ 3,692
------------ ------------- ---------- -----------
Other comprehensive
income
(loss), net of tax:
Foreign currency
translation
adjustment (2,983) (98) (5,249) (152)
Net unrealized loss on
marketable securities (488) (2,406)
------------ ------------- ---------- -----------
Other comprehensive (3,471) (98) (7,655) (152)
income (loss) ------------ ------------- ---------- -----------
Total comprehensive
income (loss) $ (5,645) $ 87 $ (9,979) $ 3,540
============ ============= ========== ===========
</TABLE>
7. CONDENSED CONSOLIDATING INFORMATION
The Notes are guaranteed by certain of the Company's wholly-owned
subsidiaries, including BMG Holdings, Inc., Howell Industries, Inc.,
Lobdell Emery Corporation, Oxford Suspension, Inc., Oxford Suspension
Ltd., and RPI Holdings, Inc. (the Guarantor Subsidiaries). The Notes are
not guaranteed by the Company's other consolidated subsidiary, Oxford
Automotriz de Mexico S.A. de C.V. (the Non-guarantor Subsidiary).
The guarantee of the Notes by the Company and the Guarantor Subsidiaries
is full and unconditional. The following unaudited condensed consolidated
financial information presents the financial position, results of
operations and cash flows of (i) the Company as if it accounted for its
subsidiaries on the equity method, (ii) the Guarantor Subsidiaries on a
combined basis and (iii) the Non-guarantor Subsidiary.
9
<PAGE> 10
Condensed consolidated financial information for the interim periods
prior to September 30, 1998 are not presented because the non-guarantors
during those periods were inconsequential, individually and in the
aggregate, to the consolidated financial statements, and management has
determined that they would not be material to investors.
Condensed Consolidating Balance Sheets
September 30, 1998
(Dollar Amount in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Non-guarantor Guarantor Eliminations/
Parent subsidiary subsidiaries adjustments Consolidated
Assets
<S> <C> <C> <C> <C> <C>
Current assets
Cash and cash
equivalents $ 2,056 $ 47 $ 1,318 $ $ 3,421
Receivables (net) 11,506 2,305 76,703 (13,188) 77,326
Inventories 905 33,078 33,983
Refundable taxes 2,388 2,388
Reimbursable Tooling 533 82 15,099 15,714
Deferred income taxes 92 4,306 4,398
Unexpended bond proceeds 4,274 4,274
Prepaid expenses and
other current assets 657 770 4,983 6,410
--------- ---------- -------- --------- --------
Total current assets 14,844 4,109 142,149 (13,188) 147,914
Marketable securities 5,780 5,780
Other noncurrent assets 6,167 200 22,766 29,133
Deferred income 6,801 6,801
Property, plant and
equipment, net 3,429 4,422 179,595 187,446
Investment in
consolidation subsidiaries 80,703 5,300 (80,703) 5,300
--------- ---------- -------- --------- --------
Total assets 110,923 8,731 356,611 (93,891) 382,374
========= ========== ======== ========= ========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current Liabilities
Trade accounts payable 653 2,743 44,334 47,730
Employee compensation 829 548 8,582 9,959
Intercompany accounts (83,161) 7,885 75,276 0
Restructuring reserve 5,309 5,309
Accrued expenses and
other current
liabilities 3,390 (209) 25,402 (13,188) 15,395
Current portion
of borrowings 12,830 12,830
--------- ---------- -------- --------- --------
Total current liabilities (78,289) 10,967 171,733 (13,188) 91,223
Pension liability -- -- 4,894 -- 4,894
Post retirement $ 0 $ 0 $ 40,512 $ 40,512
Medical benefits
liability
Deferred income taxes 279 (576) 14,780 14,483
Other non-current
liabilities 0 26 4,100 4,126
Long-term borrowings
less current portion 188,996 0 2,405 191,401
--------- ---------- ------------ --------- --------
Total liabilities 110,986 10,417 238,424 (13,188) 346,639
Redeemable preferred
stock 0 0 40,256 40,256
Shareholder's equity
common stock 1,050 0 80,703 (80,703) 1,050
Accumulated other
Comprehensive 0 (185) (5,715) (5,900)
Income (loss) (1,437) 0 0 (1,437)
Retained earnings 324 (1,501) 2,943 1,766
--------- ---------- ------------ --------- --------
Total liabilities and
shareholders equity $110.923 $8,731 $356,611 $(93,891) $382,374
========= ========== ============ ========= ========
</TABLE>
10
<PAGE> 11
Condensed Consolidating Statement of Operations
For the Three Months ended September 30, 1998
(Dollar Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Non-guarantor Guarantor Eliminations
Parent Subsidiary Subsidiaries Adjustments Consolidated
<S> <C> <C> <C> <C> <C>
Sales $ $ 2,319 $ 116,189 $ $ 118,508
Cost of sales 2,420 106,876 109,296
------------ --------------- ------------ ------------- -----------
Gross profit (101) 9,313 9,212
Selling, general and
administrative
expenses (1,104) 8,111 7,007
Restructuring provision 1,176 1,176
------------ --------------- ------------ ------------- -----------
Operating income 1,104 (101) 26 1,029
Other income
(expense) 257 (78) (108) 71
Interest income 12 12
Interest expense 0 (1) (4,735) (4,736)
------------ --------------- ------------ ------------- -----------
Income before income
taxes 1,361 (180) (4,805) (3,624)
Income taxes 544 (72) (1,922) (1,450)
Income before equity ------------ --------------- ------------ ------------- -----------
in income of
consolidated
subsidiaries 817 (108) (2,883) (2,174)
Equity in income of
consolidated
subsidiaries (2,991) 2,991
------------ --------------- ------------ ------------- -----------
Net income $ (2,174) $ (108) $ (2,883) $ 2,991 $ (2,174)
============ =============== ============ ============= ===========
</TABLE>
11
<PAGE> 12
Condensed Consolidating Statement of Operations
For the Six Months ended September 30, 1998
(Dollar Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Non-guarantor Guarantor Eliminations
Parent Subsidiary Subsidiaries Adjustments Consolidated
<S> <C> <C> <C> <C> <C>
Sales $ $ 2,650 $ 255,760 $ $ 258,410
Cost of sales 3,175 234,384 237,559
-------------- ------------- ------------
Gross profit (525) 21,376 20,851
Selling, general and
administrative
expenses (1,286) 16,092 14,806
Restructuring provision 1,176 1,176
------------ ------------- ------------- ------------- ------------
Operating income 1,286 (525) 4,108 4,869
Other income
(expense) 257 (69) 206 394
Interest income 30 30
Interest expense (1) (9,166) (9,167)
----------- -------------- -------------- ------------- ------------
Income before income
taxes 1,543 (595) (4,822) (3,874)
Income taxes 617 (213) (1,954) (1,550)
Income before equity ----------- -------------- -------------- ------------- ------------
in income of
consolidated
subsidiaries 926 (382) (2,868) (2,324)
Equity in income of
consolidated
subsidiaries (3,250) 3,250
------------ ------------- ------------- ------------- ------------
Net income $ (2,324) $ (382) $ (2,868) $ 3,250 $ (2,324)
=========== ============= ============= ============= ============
</TABLE>
12
<PAGE> 13
Condensed Consolidating Statement of Cash Flows
For the Six Months Ended September 30, 1998
(Dollar Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Non-guarantor Guarantor
Parent subsidiary subsidiaries Consolidated
<S> <C> <C> <C> <C>
Net cash provided by (used in)
operating activities $(18,756) $1,018 $ 8,900 $ (8,838)
-------- ------- ------- --------
Investing activities
Purchase of businesses,
net of cash acquired (53,465) (53,465)
Purchase of property,
plant and equipment (1,434) $(961) (12,896) (15,291)
Purchase of Marketable
Securities (887) (887)
-------- ------- ------- --------
Net cash used in
investing activities (55,786) (961) (12,896) (69,643)
Financing activities
Net proceeds (payments)
on borrowings 27,124 1,054 28,178
Principal repayments
on borrowing
arrangements 37,044 37,044
Payment of preferred dividends (596) (596)
Debt financing costs (647) (647)
---------- ------- ------- --------
Net cash provided by
Financing activities 62,925 1,054 63,979
Effect of foreign
currency rate
fluctuation on cash (332) (66) (398)
Net (decrease) in cash (11,617) (275) (3,008) (14,900)
Cash at beginning
of period 13,673 322 4,326 18,321
---------- ------- ------- --------
Cash at end
of period $ 2,056 $ 47 $ 1,318 $ 3,421
========== ======= ======= ========
</TABLE>
8. RECLASSIFICATION
Certain amounts in the prior periods' statements have been reclassified to
conform to the current periods' presentation.
13
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Three and six months ended September 30, 1998
versus three and six months ended September 30, 1997
Results of Operations
The three and six months ended September 30, 1998 statements of operations for
Oxford Automotive, Inc.(the "Company") include the results of operations for all
subsidiaries, including its principal operating subsidiaries, BMG North America
Limited, Lobdell Emery Corporation ("Lobdell"), Howell Industries, Inc.
("Howell"), RPI Holdings, Inc. ("RPIH"), and Oxford Suspension, Inc. and Oxford
Suspension Ltd. (collectively the "Suspension Division"). Lobdell was acquired
on January 10, 1997, Howell was acquired August 13, 1997, RPIH was acquired on
November 25, 1997, and the Suspension Division was acquired on April 1, 1998.
Each was accounted for using the purchase method of accounting. Therefore, the
three and six month statements of operations for the period ended September 30,
1997 include only a portion of the operating results of Howell and do not
include the operating results of RPIH or the Suspension Division.
The following table sets forth, for the periods indicated, certain accounts from
the Company's statements of operations and should be read in conjunction with
the unaudited condensed consolidated financial statements and related notes
included elsewhere herein.
(Dollars in millions)
<TABLE>
<CAPTION>
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
Sept. 30, 1998 Sept. 30, 1997 Sept. 30, 1998 Sept. 30, 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $118.5 100.0% $93.6 100.0% $258.4 100.0% $185.5 100.0%
Gross Profit 9.2 7.8% 8.0 8.6% 20.9 8.1% 18.5 10.0%
Selling,
general and
administrative 7.0 5.9% 5.0 5.3% 14.8 5.7% 7.9 4.3%
Operating
Income 1.0 0.8% 3.0 3.2% 4.9 1.9% 10.6 5.7%
Net Interest
Expense 4.7 4.0% 3.0 3.2% 9.1 3.5% 4.8 2.6%
Net income (loss) (2.2) (1.9)% 0.2 0.2% (2.3) (0.9)% 3.7 2.0%
Memo: EBITDA 7.7 6.5% 7.9 8.4% 18.4 7.1 % 19.9 10.8%
</TABLE>
NET SALES -- Net sales for the three months ended September 30, 1998 were $118.5
million. This represents an increase of $24.9 million as compared to net sales
for the three months ended September 30, 1997 of $93.6 million. The overall
increase is primarily the result of the acquisitions made since the
14
<PAGE> 15
prior year ($39.8 million). This increase was offset by the impact during the
quarter of the recently ended General Motors strike ($9.6 million), reduced
volumes related to model changeover (Ford - Windstar, CAMI J2), certain
passenger car platforms and the impact of discontinued models.
For the year to date period, net sales were $258.4 million, an increase of $72.9
million as compared to $185.5 million for the same period last year. Again, the
overall increase is primarily the result of the acquisitions made since the
prior year ($102.0 million) offset by the year to date impact of the GM strike
($18.3 million) and similar factors as described above.
GROSS PROFIT -- For the three months ended September 30, 1998, gross profit
increased to $9.2 million or 7.8% of net sales as compared to $8.0 million or
8.6% of net sales for the prior year. The gross profit increase is related to
the incremental sales resulting from the acquisitions, offset primarily by the
impact of the General Motors strike ($3.2 million) and the costs associated with
product launches during the quarter. The decrease in gross margin percentage is
a result of the loss of sales during the General Motors strike, the inclusion of
the Suspension Division operations at lower than average margins and the
pre-launch expenses incurred during the period (Saturn LS, Windstar and CAMI J2
launches). During the quarter, the Company completed the closure of its Delhi,
Ontario facility and moved the production to the Company's Cambridge, Ontario
facility. A charge of $1.2 million was recorded during the quarter for
employment related closure costs.
For the year to date period, gross profit was $20.9 million, an increase of $2.4
million as compared to $18.5 million for the same period last year. As explained
above, the increase is primarily a result of profit on incremental sales
resulting from acquisitions, offset by the impact of the General Motors strike.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A") -- For the three month
period ended September 30, 1998, SG&A expenses increased to $7.0 million or 5.9%
of net sales as compared to $5.0 million or 5.3% of net sales for the prior
year. The increase in both percentage of sales and expenditure levels is
primarily due to the support of current program launches ( CAMI, Saturn and
Ford) as well as the resources necessary to support the major newly awarded
programs for General Motors (closure panels and rear underbody components for a
new platform to be assembled solely in Mexico and chassis components for the
North American production of a global platform). The Company intends to invest
in the necessary resources to support customer engineering requirements and
global program management needs.
For the year to date period, SG&A expenses increased to $14.8 million or 5.7% of
net sales as compared to $7.9 million or 4.3% of net sales for the prior year.
As explained above, the increases are primarily related to program awards and
customer support initiatives.
OPERATING INCOME - For the three months ended September 30, 1998,operating
income decreased to $1.0 million or 0.8% of net sales as compared to $3.0
million or 3.2% of net sales for the prior year. For the year to date period,
operating income was $4.9 million, a decrease of $5.7 million as compared to
$10.6 million for the same period last year. The decrease for both periods is
15
<PAGE> 16
primarily a result of the impact of the General Motors strike and other factors
as explained above.
INTEREST EXPENSE For the three months ended September 30, 1998, net interest
expense was $4.7 million, an increase of $1.7 million, as compared to $3.0
million for the same period last year. The increase in expense was due primarily
to the issuance of $35.0 million of 10 1/8% Senior Subordinated Notes due 2007,
Series B (the "Series B Notes") on April 1, 1998. The Series B Notes represent
incremental borrowings issued at an effective interest rate of approximately
9.25%. The balance of the increase can be attributed to the impact of the GM
strike on operating cash flow and the interim financing of customer tooling for
current program launches.
For the year to date period, net interest expense was $9.1 million, an increase
of $4.3 million as compared to $4.8 million for the same period last year. The
overall increase in expense was due primarily to the issuance of the $125.0
million of 10 1/8% Senior Subordinated Notes due 2007 (the "Series A Notes") on
June 24, 1997, in addition to the Series B Notes as explained above. The Series
B Notes together with the Series A Notes are collectively referred to as the
"Notes"). The Notes represent both incremental borrowing as well as an increased
interest rate as compared to outstanding debt of the prior period. The Series A
Notes were issued at an effective rate of 10.125%. As explained above, the cash
flow impact of the strike, also contributed to higher than expected borrowing
levels during the period.
NET INCOME For the three month period ended September 30, 1998, the Company
reported a net loss of $2.2 million, a decrease of $2.4 million as compared to a
prior year net income of $0.2 million. The decline in earnings was primarily a
result of increased interest expense ($.7 million) and the impact of the General
Motors strike ($2.0 million).
For the year to date period, the Company reported a Net loss of $2.3 million, a
decrease of $6.0 million as compared to the prior year. As explained above, the
decrease relates primarily to increased interest expense ($2.2 million) and the
impact of the General Motors strike ($4.0 million).
EBITDA Earnings Before Interest, Taxes and Depreciation and Amortization
(EBITDA) for the three month period ended September 30, 1998 was $7.7 million, a
decrease of $0.2 million as compared to $7.9 million for the same period last
year. For the year to date period, EBITDA was $18.4 million as compared to $19.9
million for the same period last year. In both periods, the decrease is
primarily a result of the General Motors strike ($3.2 million and $6.5 million
for the three and six month periods ending September 30 respectively), offset by
the incremental EBITDA for businesses acquired and productivity improvements
implemented during the period.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
Net income adjusted for non-cash charges (depreciation and amortization and
deferred taxes generated approximately $8.9 million of cash for the six
16
<PAGE> 17
months ended September 30, 1998. Cash decreased during the period based on an
overall increase in accounts receivable, inventories, reimbursable tooling and
other assets ($8.8 million). In addition, cash decreased $8.9 million related to
an overall decrease in accounts payable. The decrease in accounts payable was
related to progress payments for customer tooling and capital previously accrued
at year end. During the first quarter ended June 30, 1998, the Company used
approximately $59.6 million for investing activities, including the acquisitions
of the Suspension Division ($53.5 million). These investing activities were
supported substantially by the issuance of the Series B Notes as described below
and line of credit borrowings.
The Company currently has approximately $66.0 million available under its credit
facility with NBD Bank on behalf of itself and as agent for a syndicate of other
lenders (the "Senior Credit Facility"). At September 30, 1998, the Company had
$31.3 million outstanding under the line of credit and $9.4 million in
outstanding letters of credit to support certain Industrial Development Revenue
Bonds and workers compensation commitments.
During the three months ended June 30, 1998, the Company received net proceeds
of $37.6 million from the offering of its Series B Notes, after the inclusion
of approximately $2.0 million in premium and accrued interest of approximately
$1.0 million paid by the initial purchaser of the Series B Notes and after the
payment of $0.4 million in issuance costs. The Series B Notes were issued April
1, 1998 and are substantially identical to, and rank pari passu in right of
payment with the Series A Notes.
The Company used the net proceeds from the Series B Notes as well as available
cash for the acquisition of the Suspension Division and related expenses.
The Company believes its application of the Note proceeds has enhanced its
ability to meet its growth and business objectives. However, interest payments
on the Notes will represent a significant liquidity requirement for the Company.
The Company will be required to make scheduled semi-annual interest payments on
the Notes of approximately $8.1 million on June 15 and December 15 each year
until their maturity on June 15, 2007 or until the Notes are redeemed.
Capital expenditures were $15.3 million, or 5.9% of net sales for the six months
ended September 30, 1998 as compared to $6.0 million or 3.2% of net sales for
the six months ended September 30, 1997. The increase of $9.3 million was due
primarily to customer programs (the 1999 model year Saturn LS) and press
equipment and automation upgrades. Other capital expenditures included health
and safety items and computer and network upgrades.
For fiscal 1999, the Company's capital expenditures are expected to be $34.9
million, consisting of a $14.0 million investment to support new business and
increase capacity; $11.0 million for press automation, rebuilds and productivity
improvements; $2.5 million in computer system and network upgrades and $7.4
million in other expenditures, including health, safety, environmental, cost
reduction and maintenance items.
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<PAGE> 18
The Company believes that cash generated from operations, together with amounts
available under the Senior Credit Facility will be adequate to meet its debt
service requirements, capital expenditures and working capital needs for the
foreseeable future, although no assurance can be given in this regard. The
Company's future operating performance and ability to service or refinance the
Series A and Series B Notes and to extend or refinance its other indebtedness
will be subject to future economic conditions and to financial, business and
other factors that are beyond the Company's control.
RAMOS ARIZPE - MEXICO FACILITY
The Company is currently in the process of having a new facility built in Ramos
Arizpe, Mexico. The Approximately 320,000 sq. ft. facility will support the
General Motors GMT 250/257 program ( SUV/ Hybrid vehicle) slated to begin
production in April 2000. The GMT 250/257 program is expected to generate
approximately $85.0 million of sales when in full production. The Company was
awarded substantially all closure panels and rear underbody components for the
program. Plant rationalization has allowed for the transfer of equipment already
owned to the facility as well as up to $30.0 million in additional new
equipment. The award of the program is in line with the expected growth of the
Company into Mexico and is seen as key to the Company's future success in that
country.
SUSPENSION DIVISION
The Company believes that the operations of the Suspension Division will enhance
the Company's ability to develop key suspension components. The Company believes
that the acquisition of the Suspension Division will have a positive impact on
the Company's results of operations for the fiscal year ending March 31, 1999
and thereafter.
SHAREHOLDERS' EQUITY
For the six months ended September 30, 1998, the fluctuation in shareholders'
equity for foreign currency adjustments of ($5.2 million) is due to the
Company's long-term investment in Canada. This adjustment reflects the relative
weakening of the Canadian dollar, and has no impact on cash flow.
For the six months ended September 30, 1998, the reduction in shareholders'
equity for holdings of marketable securities of ($2.4 million) is due to stock
price fluctuation of the Company's strategic investment in a synergistic
company.
IMPACT OF GENERAL MOTORS STRIKE
During a portion of the six months ended September 30, 1998, substantially all
of General Motors vehicle production was shut down due to two local strikes in
Flint, Michigan. General Motors is a significant customer of the Company and the
prolonged shutdown had an adverse effect on the Company's results of operations
for the three and six month periods ended September 30, 1998. The Company took
all steps necessary to lessen the overall impact. The effect of the strike on
these periods was as follows:
18
<PAGE> 19
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
Sept. 30, 1998 Sept. 30, 1998
<S> <C> <C>
(Dollars in millions)
Sales $(9.6) $(18.3)
Gross Profit (3.2) (6.5)
Net Income (1.9) (3.9)
EBITDA (3.2) (6.5)
</TABLE>
The Company expects that a portion of the sales lost during the strike will
continue to be made up in the third quarter.
YEAR 2000
The Company is aware of the potential impacts of the millennium change on
business. In response, it has created a Year 2000 project team to perform
inventory, remediation, and testing of possibly affected systems. The Year 2000
project team is coordinated at the corporate level with support from senior
management. Key individuals at the facility level are executing the Year 2000
plans. The Company has also employed some external Year 2000 contractors to
assist with compliance in some areas. The Company is following the Year 2000
guidelines set forth by the Automotive Industry Action Group (AIAG) and is
reporting Year 2000 status quarterly to the AIAG.
The Company has broken the Year 2000 program into the following assessment
areas: business computer systems, desktop computing, network infrastructure,
voice systems, shop floor systems, non-information technology items, and
suppliers/business partners. As it relates to the AIAG areas for evaluation, the
Company does not have dedicated product-testing facilities nor do its products
contain any computer chips. The Company has targeted Year 2000 remediation
completion for December 31, 1998. In addition, it has targeted Year 2000 testing
to be completed by March 31, 1999. Year 2000 compliance testing will continue
throughout 1999 to ensure that regression does not occur.
A thorough assessment of all manufacturing, administrative and management
software has been completed by the Company. Efforts are underway which will
upgrade certain software modules and/or code to comply with AIAG Year 2000
guidelines and timing. At the same time, the implementation of new software is
taking place where compliance through upgrade could not be achieved in either a
timely or cost effective manner. The Company is on target and expects to achieve
Year 2000 compliance for all of its software by December 31, 1998. Further, the
Company will move to a common software system early in 1999, as it continues the
implementation effort across all facilities.
The Company is assessing the Year 2000 readiness of its external suppliers,
business partners, and service providers to ensure that business associations
will not be negatively impacted by the Year 2000 date. Alternate sourcing and
contingency planning will be used in situations that threaten the
19
<PAGE> 20
Companies' ability to deliver products or conduct business. Since these other
companies are in various stages of Year 2000 readiness, the Company will be
monitoring their progress throughout 1999, assessing associated risks, and
taking a course of action to ensure business continuity.
In addition to the efforts of internal staff, external resources are being used
to complete the project. The cost of external resources for 1998 will total
$279,000 and the total capital spending planned for 1998 will be $1,386,000, of
which approximately $400,000 relates to software projects. The only external
spending for the Year 2000 project expected in 1999 will come from any
remediation activities derived from Year 2000 testing.
FORWARD-LOOKING STATEMENTS
This report contains statements relating to such matters as anticipated
financial performance, business prospects, Year 2000 issues and other matters
that may be construed as forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended. In addition, the
Company may from time to time publish or communicate other statements that could
also be construed to be forward-looking statements. These statements are or will
be based on the Company's estimates, assumptions and projections, and are
subject to risks and uncertainties, including those specifically listed below,
that could cause actual results to differ materially from those included in the
forward-looking statements.
The risks and uncertainties that may affect the operations, performance,
development and results of operations of the Company include the following: (1)
the original equipment manufacturer ("OEM") supplier industry is highly cyclical
and, in large part, impacted by the strength of the economy generally, by
prevailing interest rates and by other factors which may have an effect on the
level of sales of automotive vehicles; (2) future price reductions, increased
quality standards or additional engineering capabilities may be required by the
OEMs, which are able to exert considerable pressure on their suppliers; (3) the
OEMs may decide to in-source some of the work currently performed by the
Company; (4) work stoppages and slowdowns may be experienced by OEMs and their
Tier 1 suppliers, as a result of labor disputes; (5) there may be a significant
decrease in sales of vehicles using the Company's products or the loss by the
Company of the right to supply any of such products to its major customers;
(6)increased competition could arise in the OEM supplier industry; (7) changing
federal, state, local and foreign laws, regulations and ordinances relating to
environmental matters could affect the Company's operations; and (8) there may
be unfavorable currency exchange rates relative to the U.S. dollar, which could
impact the Company's operations.
20
<PAGE> 21
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) A list of Exhibits included as part of this report is set forth in
the Exhibit Index which immediately precedes such exhibits and is incorporated
herein by reference.
(b) No reports on Form 8-K were filed by the registrant during the three
months ended September 30, 1998.
21
<PAGE> 22
SIGNATURES
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.
Dated: November 13, 1998 OXFORD AUTOMOTIVE, INC.
By: /s/ DONALD C. CAMPION
Donald C. Campion
Senior Vice President and
Chief Financial Officer
(Principal Accounting and
Financial Officer)
22
<PAGE> 23
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
27 Financial Data Schedule
23
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED FINANCIAL STATEMENTS AS OF AND FOR THE PERIOD ENDING
SEPTEMBER 30, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<CASH> 3,421
<SECURITIES> 5,780
<RECEIVABLES> 77,326
<ALLOWANCES> 328
<INVENTORY> 33,983
<CURRENT-ASSETS> 147,914
<PP&E> 187,446
<DEPRECIATION> 35,002
<TOTAL-ASSETS> 382,374
<CURRENT-LIABILITIES> 91,223
<BONDS> 161,787
0
40,256
<COMMON> 1,050
<OTHER-SE> (5,571)
<TOTAL-LIABILITY-AND-EQUITY> 382,374
<SALES> 258,410
<TOTAL-REVENUES> 258,410
<CGS> 237,559
<TOTAL-COSTS> 237,559
<OTHER-EXPENSES> 14,806
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,167
<INCOME-PRETAX> (3,874)
<INCOME-TAX> (1,550)
<INCOME-CONTINUING> (2,324)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,324)
<EPS-PRIMARY> (9.63)
<EPS-DILUTED> (9.63)
</TABLE>
