<PAGE>
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 period ended June 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 333-8234
--------
TRIDENT AUTOMOTIVE PLC
(Exact name of Registrant as specified in its charter)
ENGLAND NONE
(State or other jurisdiction of (IRS Employer Identification
Incorporation or organization) Number)
47000 LIBERTY DRIVE
WIXOM, MICHIGAN 48393
(address of principal executive (Zip Code)
officers)
(248) 960-6300
(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 No X
--- ---
All of the outstanding capital stock of the Registrant is held by Dura
Automotive Systems (UK) Limited.
As of June 30, 1998, the Registrant had 50,000 Ordinary Shares of L1 each and
17,000,000 Ordinary Shares of $1 each outstanding.
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS - UNAUDITED)
<TABLE>
<CAPTION>
ASSETS JUNE 30, MARCH 31,
1998 1998
-------------------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 4,832 $ 11,415
Accounts receivable, less allowance for doubtful
accounts of $1,778 and $1,745 58,897 48,875
Inventories 14,722 18,798
Other current assets 11,155 10,526
-------- ---------
Total current assets 89,606 89,614
-------- ---------
PROPERTY AND EQUIPMENT, NET 54,746 64,873
GOODWILL, NET 146,685 88,945
DEFERRED FINANCING COSTS AND OTHER, NET 21,761 15,398
-------- ---------
$312,798 $258,830
-------- ---------
-------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 1,500 $ 1,500
Accounts payable 36,306 37,018
Accrued expenses 29,709 28,570
-------- ---------
Total current liabilities 67,515 67,088
NONCURRENT LIABILITIES:
Long-term debt, less current portion 133,329 126,300
Accrued pension and other postretirement liabilities 14,349 12,891
Other noncurrent liabilities 53,635 11,536
-------- ---------
Total liabilities 268,828 217,815
-------- ---------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST IN SUBSIDIARY COMPANY 880 1,170
-------- ---------
REDEEMABLE U.S. DOLLAR ORDINARY SHARES:
$1 par value; 0 and 296,000 shares issued and outstanding;
valued at redemption value -- 740
-------- ---------
SHAREHOLDERS' EQUITY:
Common stock -
Sterling ordinary shares; $1.70 par value; 50,000 shares
issued and outstanding 85 85
U.S. Dollar ordinary shares; $1.00 par value; 25,000,000 shares authorized;
17,000,000 and 16,704,000 shares issued and outstanding 17,000 16,704
Additional paid-in-capital 24,000 23,556
Retained earnings 1,741 123
Cumulative translation adjustment 264 (1,363)
-------- ---------
Total shareholders' equity 43,090 39,105
-------- ---------
$312,798 $258,830
-------- ---------
-------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
-2-
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS - UNAUDITED)
<TABLE>
<CAPTION>
TRIDENT FKI
COMPANY PREDECESSOR PREDECESSOR
---------------- --------------- ------------------
Two months ended One month ended Three months ended
June 30, 1998 April 30, 1998 June 30, 1997
---------------- --------------- ------------------
<S> <C> <C> <C>
Revenues $49,971 $26,475 $80,762
Cost of sales 40,134 26,184 66,565
------- -------- -------
Gross profit 9,837 291 14,197
Selling, general and administrative
expenses 4,073 4,056 8,001
Amortization expense 806 341 -
------- -------- -------
Operating income (loss) 4,958 (4,106) 6,196
Interest expense (2,040) (976) (73)
Interest income 38 24 79
Unrealized exchange gain (loss) (88) 341 (40)
Other income 12 61 4
------- -------- -------
Income (loss) before provision
(benefit) for income taxes and
minority interest 2,880 (4,656) 6,166
Provision (benefit) for income taxes 1,143 (1,656) 827
Minority interest in loss (earnings)
of subsidiary 4 69 (136)
------- -------- -------
Income before extraordinary item 1,741 (2,931) 5,203
Extraordinary item - loss on early
extinguishment of debt, net - (1,804) -
------- -------- -------
Net income (loss) $ 1,741 $ (4,735) $ 5,203
------- -------- -------
------- -------- -------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
-3-
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS - UNAUDITED)
<TABLE>
<CAPTION>
TRIDENT FKI
COMPANY PREDECESSOR PREDECESSOR
---------------- --------------- ------------------
Two months One month Three months
ended June 30, ended April 30, ended June 30,
1998 1998 1997
---------------- --------------- ------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 1,741 $ (4,735) $ 5,203
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities-
Depreciation and amortization 2,000 1,456 3,146
Write-off of deferred financing costs - 2,775 -
Unrealized exchange gain (loss) 88 (341) -
Minority interest (4) (69) 136
Changes in other operating items (13,432) 3,004 (13,533)
-------- -------- --------
Net cash provided by (used in) operating activities (9,607) 2,090 (5,048)
-------- -------- --------
INVESTING ACTIVITIES:
Capital expenditures, net (2,882) (2,454) (1,741)
-------- -------- --------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt - 50,000 -
Proceeds from borrowings on revolving credit facility 9,829 3,500 -
Repayment of debt (3,500) (52,800)
Net borrowings from FKI plc - - 6,938
-------- -------- --------
Net cash provided by financing activities 6,329 700 6,938
-------- -------- --------
EFFECT OF EXCHANGE RATES ON CASH (1,449) 690 (149)
-------- -------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS (7,609) 1,026 -
CASH AND CASH EQUIVALENTS, beginning of period 12,441 11,415 -
-------- -------- --------
CASH AND CASH EQUIVALENTS, end of period $ 4,832 $ 12,441 $ - .
-------- -------- --------
-------- -------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
-4-
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - THE COMPANY:
On April 30, 1998, Trident Automotive plc (the ''Company'') was acquired by
Dura Automotive Systems (UK), Ltd. ("Dura Ltd."), a wholly owned subsidiary
of Dura Automotive Systems, Inc. ("Dura") (the "Dura Acquisiton"). Dura
Ltd. acquired all of the outstanding shares of the Company for an aggregate
purchase price of approximately $87.5 million and assumed the Company's
outstanding indebtedness of approximately $128 million.
Dura Ltd. is a wholly-owned subsidiary of Dura Automotive Systems, Inc., a
Delaware corporation, which is a leading designer and manufacturer of
driver control systems, engineered mechanical components and cable-related
systems for the global automotive industry.
The Company was formed on December 12, 1997, when it acquired substantially
all of the assets and the operations of the FKI Automotive Group from FKI
plc (the "FKI Acquisition"). The aggregate purchase price, including
transaction costs, was approximately $170 million. The FKI Acquisition was
financed with $42.5 million in equity contributions, $75 million in
proceeds from a private placement of the Company's 10% Senior Subordinated
Notes due 2005 (the "Notes") and borrowings under a $105 million secured
credit facility.
In connection with the Dura Acquisition, the Company's credit facility was
replaced by a new Credit Agreement (see Note 3). The initial borrowing
under the Credit Agreement occurred concurrent with the Dura Acquisition.
Accordingly, deferred financing costs related to the Company's former
credit facility were written-off in April 1998 resulting in an
extraordinary charge of approximately $1.8 million, net of the related tax
benefit of approximately $1.0 million.
The Dura Acquisition constituted a change of control as defined by the
Company's Notes Indenture ("Indenture"). Upon the occurrence of a change
of control, each holder of the Notes may require the Company to repurchase
all or any part of the Notes held by such holder at an offer price in cash
equal to 101% of the aggregate principal amount thereof, plus accrued
interest and other specified costs to the date of repurchase. Pursuant to
the terms of the Indenture, Dura initiated a change of control offer to the
holders of the Notes on May 8, 1998. No holders tendered their Notes prior
to the June 20, 1998 expiration of the offer.
The FKI Acquisition and the Dura Acquisition were both accounted for using
the purchase method of accounting. Accordingly, the assets and liabilities
at each of the acquisition dates were recorded at their fair value. The
excess of the respective purchase prices was recorded as goodwill and is
being amortized over forty years. In the accompanying consolidated
financial statements, for the period prior to December 12, 1997, the
Company is referred to as the FKI Predecessor. For the period from
December 12, 1997 to April 30, 1998, the Company is referred to as the
Trident Predecessor. The accompanying consolidated financial statements
have been prepared by the Company without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. The information
furnished in the consolidated financial statements includes normal
recurring adjustments and reflects all adjustments which are, in the
opinion of management, necessary for a fair presentation of such financial
statements. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules
and regulations. Although the Company believes that the disclosures are
adequate to make the information presented not misleading, it is suggested
that these consolidated financial statements be read in conjunction with
the Company's audited financial statements and the notes thereto included
in the Company's Annual Report on Form 10-K for its fiscal year ended March
31, 1998.
-5-
<PAGE>
NOTE 1 - THE COMPANY (continued):
Revenues and operating results for the one month ended April 30, 1998 and
the two months ended June 30, 1998, are not necessarily indicative of the
results to be expected for the full year.
The following unaudited pro forma financial information for the three
months ended June 30, 1998 and 1997 give effect to the Dura Acquisition as
if it had occurred at the beginning of the periods. The unaudited pro
forma information does not purport to represent what the Company's result
of operations would actually have been if such transaction in fact had
occurred at such date nor to project the Company's results of future
operations (in thousands):
<TABLE>
<CAPTION>
Three Months Ended June 30,
---------------------------
1998 1997
------------ ------------
<S> <C> <C>
Revenues $76,446 $80,762
------- -------
------- -------
Operating income $ 790 $ 4,987
------- -------
------- -------
Net income (loss) $(1,312) $ 1,046
------- -------
------- -------
</TABLE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Inventories--Inventories are valued at the lower of cost or market on a
first-in, first-out (FIFO) basis. Inventories consisted of the following
(in thousands):
<TABLE>
<CAPTION>
June 30, 1998 March 31, 1998
------------- --------------
<S> <C> <C>
Finished products $ 1,039 $ 4,158
Work-in-process 5,468 6,755
Raw materials 8,215 7,885
------- -------
Total $14,722 $18,798
------- -------
------- -------
</TABLE>
Supplemental Cash Flow Information--The Company paid cash in the following
amounts for interest and income taxes (in thousands):
<TABLE>
<CAPTION>
Two Months One Month Three Months
Ended June 30, Ended April 30, Ended June 30,
1998 1998 1997
-------------- --------------- --------------
<S> <C> <C> <C>
Income taxes $1,781 $ - $ -
Interest 3,812 361 -
</TABLE>
-6-
<PAGE>
NOTE 3 - LONG TERM DEBT:
Long-term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
June 30, March 31,
1998 1998
--------- ---------
<S> <C> <C>
Bank Credit Agreement:
Term loan $ 50,000 $ 50,000
Revolving credit facility 9,829 2,800
10% Senior Subordinated
Notes, due 2005 75,000 75,000
-------- --------
134,829 127,800
Less - current portion (1,500) (1,500)
-------- --------
Total long-term debt $133,329 $126,300
-------- --------
-------- --------
</TABLE>
On April 30, 1998, in connection with the Dura Acquisition, Dura and the
Company entered into a new $402.5 million credit agreement (the "Credit
Agreement"). The Credit Agreement provided Dura with total revolving
credit facilities of $225 million, term loans of $100 million, an
acquisition facility of $30 million and a twelve-month interim loan of
$47.5 million. The Credit Agreement made available to the Company, as a
sub-facility, a $50 million term loan, a $25 million revolving credit and
letter-of-credit facility and a $30 million acquisition facility (the
"Trident Sub-Facility"). The Credit Agreement has a term of five years and
borrowings bear interest at the lenders reference rate or the Eurocurrency
rate. The interest rate on borrowings outstanding under the Credit
Agreement ranged from 6.875% to 8.625% as of June 30, 1998. The Credit
Agreement contains various restrictive covenants, which limit indebtedness,
investments, rental obligations and cash dividends. The Credit Agreement
also requires the Company to maintain certain financial ratios including
minimum liquidity and interest coverage. Pursuant to the terms of the
Credit Agreement, Dura and certain of its subsidiaries will provide
guarantees and collateral to support obligations owing under the Trident
Sub-Facility; but, so long as the Notes remain outstanding, neither the
Company nor any of its subsidiaries have guaranteed any obligations that
are not borrowed pursuant to the Trident Sub-Facility. Under the terms of
the Credit Agreement, an event of default by Dura also causes an event of
default under the Trident Sub-Facility. The Company and Dura were in
compliance with the covenants as of June 30, 1998. The assets of the
Company have been pledged as collateral to secure borrowings under the
Trident Sub-Facility.
The Credit Agreement provides the Company with the ability to denominate
its revolving credit borrowings in foreign currencies. As of June 30,
1998, $8.5 million of borrowings were denominated in US dollars and $1.3
million were denominated in British pound sterling.
The 10% Senior Subordinated Notes were issued on December 12, 1997,
concurrent with the FKI Acquisition. Interest is payable semi-annually on
June 15 and December 15 of each year. As further discussed in Note 5, the
Notes are guaranteed by certain subsidiaries of the Company.
-7-
<PAGE>
NOTE 4 - ACCOUNTING CHANGES
Effective April 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income." This statement established standards for reporting
and display of comprehensive income and its components. Comprehensive
income reflects the change in equity of a business enterprise during a
period from transactions and other events and circumstances from non-owner
sources. For the Company, comprehensive income represents net income
adjusted for foreign currency translation adjustments. Comprehensive
income was approximately $.7 million, $(5.4) million and $4.6 million for
the two months ended June 30, 1998, the one month ended April 30, 1998 and
the three months ended June 30, 1997, respectively.
During February 1998, the Financial Accounting Standards Board (the "FASB")
issued SFAS No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits," effective for fiscal years beginning after
December 31, 1997. SFAS No. 132 revises certain of the disclosure
requirements, but does not change the measurement or recognition of such
obligations. SFAS No. 132 superceded SFAS No. 106; "Employers' Accounting
for Postretirement Benefits Other Than Pensions." The adoption of SFAS No.
132 will result in revised and additional disclosures, but will have no
effect on the financial position, results of operations, or liquidity of
the Company.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" effective for years beginning after
June 15, 1999. SFAS No. 133 establishes accounting and reporting standards
requiring that every derivative instrument, including certain derivative
instruments embedded in other contracts, be recorded in the balance sheet
as either and asset or liability measured at its fair value. SFAS No. 133
requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge criteria are met. Special
accounting for qualifying hedges allow a derivative's gains or losses to
offset related results on the hedged item in the income statement and
requires that a company must formally document, designate and assess the
effectiveness of transactions that receive hedge accounting. The Company
has not yet quantified the impacts of adopting SFAS No. 133 and has not yet
determined the timing method of adoption.
NOTE 5 - CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION
The following consolidating financial information presents balance sheet,
statement of operations and cash flow information related to the Company's
businesses. Each Guarantor is a direct or indirect wholly-owned subsidiary
of Trident Automotive plc and has fully and unconditionally guaranteed, on
a joint and several basis, the Notes. The Company has not presented
separate financial statements and other disclosures concerning the
Guarantors because management believes that such information is not
material. For presentation purposes, the consolidating financial data for
the one month ended April 30, 1998 and the two months ended June 30, 1998
have been combined.
-8-
<PAGE>
NOTE 5 - CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL
INFORMATION (Continued):
CONSOLIDATING BALANCE SHEETS AS OF JUNE 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
Non-
Trident Guarantor Guarantor
Automotive plc Companies Companies Eliminations Consolidated
-------------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 44 $ 1,744 $ 3,044 $ - $ 4,832
Accounts receivable, net - 39,660 19,237 - 58,897
Inventories - 11,193 3,529 - 14,722
Due from affiliates 3,896 8,414 782 (13,092) -
Other current assets - 7,958 3,197 - 11,155
--------- --------- --------- --------- --------
Total current assets 3,940 68,969 29,789 (13,092) 89,606
Property, plant and equipment - 43,595 11,151 - 54,746
Note receivable from subsidiaries - 23,246 - (23,246) -
Goodwill 7,468 115,210 24,007 146,685
Deferred financing costs 4,381 - - - 4,381
Investment in subsidiaries 163,448 14,612 - (178,060) -
Other assets - 16,056 1,324 - 17,380
--------- --------- --------- --------- --------
Total assets $ 179,237 $ 281,688 $ 66,271 $(214,398) $ 312,798
--------- --------- --------- --------- --------
--------- --------- --------- --------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 1,500 $ - $ - $ - $ 1,500
Accounts payable - 26,643 9,663 - 36,306
Accrued expenses (138) 20,255 9,592 - 29,709
Due to affiliates 11,285 - 1,532 (12,817) -
--------- --------- --------- --------- --------
Total current liabilities 12,647 46,898 20,787 (12,817) 67,515
Non-current liabilities:
Long-term debt, less current portion 123,500 9,829 - - 133,329
Note payable to Parent - - 23,521 (23,521) -
Accrued pension and other postretirement liabilities - 13,378 971 - 14,349
Other noncurrent liabilities - 50,434 3,201 - 53,635
--------- --------- --------- --------- --------
Total liabilities 136,147 120,539 48,480 (36,338) 268,828
Commitments and contingencies
Minority interest in subsidiary company - - 880 - 880
Shareholders' equity 43,090 161,149 16,911 (178,060) 43,090
--------- --------- --------- --------- --------
Total liabilities and shareholders' equity $ 179,237 $ 281,688 $ 66,271 $(214,398) $312,798
--------- --------- --------- --------- --------
--------- --------- --------- --------- --------
</TABLE>
-9-
<PAGE>
NOTE 5 -CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL
INFORMATION (Continued):
CONSOLIDATING STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED
JUNE 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
Non-
Trident Guarantor Guarantor
Automotive plc Companies Companies Eliminations Consolidated
-------------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues $ - $ 60,128 $ 16,706 $ (388) $ 76,446
Cost of sales - 53,065 13,641 (388) 66,318
--------- --------- --------- --------- --------
Gross profit - 7,063 3,065 - 10,128
Selling , general and administrative expenses 22 5,965 2,142 - 8,129
Amortization expense 58 906 183 - 1,147
--------- --------- --------- --------- --------
Operating income (loss) (80) 192 740 - 852
Interest expense (2,909) (58) (49) - (3,016)
Interest expense-intercompany - (3,062) (558) 3,620 -
Interest income - 27 35 - 62
Interest income - intercompany - 3,620 - (3,620) -
Unrealized exchange gain (loss) - (361) 614 - 253
Equity in net income of subsidiary 748 628 - (1,376) -
Other income - - 73 - 73
--------- --------- --------- --------- --------
Net income (loss) before provision for
income taxes and minority interest (2,241) 986 855 (1,376) (1,776)
Provision (benefit) for income taxes (1,051) 239 299 - (513)
Minority interest - - 73 - 73
--------- --------- --------- --------- --------
Net income (loss) before extraordinary item (1,190) 747 629 (1,376) (1,190)
Extraordinary item - loss on early
extinguishment of debt, net (1,804) - - - (1,804)
--------- --------- --------- --------- --------
Net income (loss) $ (2,994) $ 747 $ 629 $ (1,376) $ (2,994)
--------- --------- --------- --------- --------
--------- --------- --------- --------- --------
</TABLE>
-10-
<PAGE>
NOTE 5 - CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL
INFORMATION (Continued):
CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED
JUNE 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
Non-
Trident Guarantor Guarantor
Automotive plc Companies Companies Eliminations Consolidated
-------------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ (2,996) $ 747 $ 629 $ (1,374) $ (2,994)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities-
Depreciation and amortization 60 2,715 681 - 3,456
Write-off of deferred financing costs 2,775 - - - 2,775
Unrealized exchange gain (loss) - 361 (614) - (253)
Minority interest - - (73) - (73)
Changes in other operating items 2,710 (13,409) (2,971) 3,242 (10,428)
--------- --------- --------- --------- --------
Net cash provided by (used in) 2,549 (9,586) (2,348) 1,868 (7,517)
operating activities
INVESTING ACTIVITIES:
Capital expenditures, net - (4,977) (359) - (5,336)
--------- --------- --------- --------- --------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 50,000 - - - 50,000
Proceeds from borrowings under revolving credit
facility (1,300) 9,829 - - 8,529
Repayment of debt (51,500) - - - (51,500)
--------- --------- --------- --------- --------
Net cash provided by (used in) (2,800) 9,829 - - 7,029
financing activities
--------- --------- --------- --------- --------
EFFECT OF EXCHANGE RATES ON CASH - 178 931 (1,868) (759)
--------- --------- --------- --------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS (251) (4,556) (1,776) - (6,583)
CASH AND CASH EQUIVALENTS, beginning of period 295 6,300 4,820 - 11,415
--------- --------- --------- --------- --------
CASH AND CASH EQUIVALENTS, end of period $ 44 $ 1,744 $ 3,044 $ - $ 4,832
--------- --------- --------- --------- --------
--------- --------- --------- --------- --------
</TABLE>
-11-
<PAGE>
NOTE 5 - CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL
INFORMATION (Continued):
CONSOLIDATING STATEMENT OF OPERATIONS FOR THE THREE MONTHS
ENDED JUNE 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Companies Companies Eliminations Consolidated
--------- --------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 62,686 $ 18,716 $ (640) $ 80,762
Cost of sales 51,715 15,490 (640) 66,565
--------- --------- --------- --------
Gross profit 10,971 3,226 - 14,197
Selling , general and administrative expenses 5,878 2,123 - 8,001
--------- --------- --------- --------
Operating income 5,093 1,103 - 6,196
Interest expense (9) (64) - (73)
Interest income - 79 - 79
Unrealized exchange loss (10) (30) - (40)
Other income 4 - - 4
--------- --------- --------- --------
Income before provision for income
taxes 5,078 1,088 - 6,166
Provision for income taxes 446 381 - 827
Minority interest - (136) - (136)
--------- --------- --------- --------
Net income $ 4,632 $ 571 $ - $ 5,203
--------- --------- --------- --------
--------- --------- --------- --------
</TABLE>
-12-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997
Certain components of the results of operations for the periods presented are
not directly comparable as a result of the application of purchase accounting
and the financing related to the FKI Acquisition on December 12, 1997 and the
Dura Acquisition on April 30, 1998. The acquisitions were partially financed
with debt resulting in significantly higher interest expense as compared to
periods prior to December 12, 1997. In addition, the purchase price in excess
of the fair value of the net assets acquired has been reflected as goodwill
which is being amortized over forty years. There was no amortization expense in
the periods prior to December 12, 1997.
Certain components of results of operations (revenues, cost of sales, gross
profit and selling, general and administrative expenses) are comparable for the
one month ended April 30, 1998 and the two months ended June 30, 1998.
Accordingly, such components have been combined for the three months ended June
30, 1998 for purposes of management's discussion and analysis as follows:
<TABLE>
<CAPTION>
Company and
Trident Predecessor FKI Predecessor
Combined Three Three Months
Months Ended Ended June 30,
June 30, 1998 1997
------------------- ----------------
<S> <C> <C>
Revenues $76,446 $80,762
Cost of sales 66,318 66,565
------- -------
Gross profit $10,128 $14,197
------- -------
------- -------
Selling, general and administrative
expenses $ 8,129 $ 8,001
------- -------
------- -------
</TABLE>
REVENUES. Revenues decreased by $4.4 million for the combined three months
ended June 30 1998 to $76.4 million from $80.8 million for the three months
ended June 30, 1997. This decrease was to the result of the balance out of
certain forward lighting programs. In addition, revenues were reduced by $1.1
million as a result of changes in foreign currency exchange rates.
GROSS PROFIT. Total gross profit decreased by $4.1 million for the combined
three months ended June 30 1998 to $10.1 million from $14.2 million for the
three months ended June 30, 1997. This decrease in gross profit was due to the
reduction in revenues and a charge of approximately $3.6 million relating to the
recognition of obligations to certain customers which was recognized in April
1998.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $8.1 million for the combined three months ended
June 30 1998 a slight increase as compared to the $8.0 million for the three
months ended June 30, 1997.
-13-
<PAGE>
AMORTIZATION EXPENSE. Amortization expense was $0.8 million for the two months
ended June 30, 1998 and $0.3 million for the one month ended April 30, 1998.
The expense represents amortization of goodwill that was recorded in connection
with the FKI Acquisition and the Dura Acquisition. There was no amortization
expense for the three months ended June 30, 1997.
INTEREST EXPENSE. Interest expense, net of interest income was $2.0 million for
the two months ended June 30, 1998 and $1.0 million for the one month ended
April 30, 1998. For the interest results from borrowings used to finance the
FKI Acquisition and Dura Acquisition.
PROVISION FOR INCOME TAXES. The effective income tax rate was 39.7% for the two
months ended June 30, 1998, 35.6% for the month ended April 30, 1998 and 13.4%
for the three months ended June 30, 1997. The effective rates differed from the
statutory rates as a result of state income taxes, foreign income taxes and the
effects of non-deductible goodwill amortization.
EXTRAORDINARY ITEM. The extraordinary loss for the one month ended April 30,
1998 represents the write-off, net of income tax benefit, of deferred financing
costs related to the Company's former credit facility. The former credit
facility was terminated in connection with the Dura Acquisition.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal source of funds is anticipated to be its cash flows from
operations. During the combined three months ended June 30, 1998, the Company
generated cash from operations of $2.9million, before the effects of changes in
working capital, compared to $8.5 million in 1997. The Company estimates that
it will fund approximately $11 million in capital expenditures for the remainder
of fiscal year 1999. These capital expenditures will be used primarily for the
purchase of machinery and equipment to support new business awards, as well as
to support continued cost reduction efforts.
On April 30, 1998, in connection with the Dura Acquisition, Dura and the Company
entered into a new $402.5 million credit agreement ("Credit Agreement"). The
Credit Agreement provided Dura with total revolving credit facilities of $225
million, term loans of $100 million, an acquisition facility of $30 million and
a twelve-month interim loan of $47.5 million. The Credit Agreement made
available to the Company, as a sub-facility, a $50 million term loan, a $25
million revolving credit and letter of credit facility and a $30 million
acquisition facility (the "Trident Sub-Facility"). The Credit agreement has a
term of five years and borrowings bear interest at the lenders reference rate or
the Eurocurrency rate. The interest rate on borrowings outstanding under the
Credit Agreement ranged from 6.875% to 8.625% as of June 30, 1998. The Credit
Agreement contains various restrictive covenants, which limit indebtedness,
investments, rental obligations and cash dividends. The Credit Agreement also
requires the Company to maintain certain financial ratios including minimum
liquidity and interest coverage. Pursuant to the terms of the Credit Agreement,
Dura and certain of its subsidiaries will provide guarantees and collateral to
support obligations owing under the Trident Sub-Facility; but, so long as the
Notes remain outstanding, neither the Company nor any of its subsidiaries have
guaranteed any obligations that are not borrowed pursuant to the Trident
Sub-Facility. Under the terms of the Credit Agreement, an event of default by
Dura also causes an event of default under the Trident Sub-Facility. The
Company and Dura were in compliance with the covenants as of June 30, 1998. The
assets of the Company have been pledged as collateral borrowings under the
Credit Agreement.
-14-
<PAGE>
The Company believes borrowing availability under its new credit facility,
together with funds generated by the Company's operations, will provide
sufficient liquidity and capital resources for working capital, capital
expenditures and other needs through fiscal 1999.
EFFECTS OF INFLATION
Inflation potentially affects the Company in two principal ways. First, a
portion of the Company'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, the Company has limited ability to pass
through inflation-related cost increases due to the competitive nature of the
markets that the Company serves. In the past few years, however, inflation has
not been a significant factor for the Company.
FOREIGN CURRENCY TRANSACTIONS
A significant portion of the Company's revenues are derived from manufacturing
operations in Europe, Latin America and Canada. The results of operations and
the financial position of the Company'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 the Company's assets are also 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 shareholders' equity.
Accordingly, the Company's consolidated shareholders' equity will fluctuate
depending upon the weakening or strengthening of the U.S. dollar against the
respective foreign currency.
The Company's strategy for management of currency risk relies primarily upon
conducting its operations in such countries' respective currency, however, the
Company may, from time to time, engage in hedging programs intended to reduce
its exposure to currency fluctuations.
YEAR 2000
The Company is in the process of replacing and upgrading its computer systems,
which, among other things, will accommodate the year 2000 issues. The Company
currently expects its computer systems to be year 2000 compliant prior to the
year 2000 so as not to adversely affect its operations. The Company does not
expect that the cost of achieving year 2000 compliance will have a significant
effect on its financial position or results of operations. However, failure of
the Company to make required modifications on a timely basis or the inability of
other companies with which the Company does business to complete their year 2000
modifications on a timely basis, could adversely affect the Company's
operations.
-15-
<PAGE>
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
During June 1997, the Financial Accounting Standards Board released SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information,"
effective for fiscal years beginning after December 14, 1997. SFAS No. 131
requires disclosure of business and geographic segments in the consolidated
financial statements of the Company. The Company will adopt SFAS No. 131 in
fiscal 1999 and is currently analyzing the impact it will have on the
disclosures in its financial statements.
During February 1998, the Financial Accounting Standards Board (the "FASB")
issued SFAS No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits," effective for fiscal years beginning after December
31, 1997. SFAS No. 132 revises certain of the disclosure requirements, but does
not change the measurement or recognition of those obligations. SFAS No. 132
superceded SFAS No. 106; "Employers' Accounting for Postretirement Benefits
Other Than Pensions." The adoption of SFAS No. 132 will result in revised and
additional disclosures, but will have no effect on the financial position,
results of operations, or liquidity of the Company.
In June 1998 the FASB issued SFAS No. 133 "Accounting for Derivative Instruments
and Hedging Activities" effective for years beginning after June 15, 1999. SFAS
No. 133 establishes accounting and reporting standards requiring that every
derivative instrument, including certain derivative instruments embedded in
other contracts be recorded in the balance sheet as either an asset or liability
measured at its fair value. SFAS No. 133 requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge criteria are met. Special accounting for qualifying hedges allow a
derivative's gains or losses to offset related results on the hedged item in the
income statement and requires that a company must formally document, designate
and assess the effectiveness of transactions that receive hedge accounting. The
Company has not yet quantified the impacts of adopting SFAS No. 133 and has not
yet determined the timing or method of adoption.
-16-
<PAGE>
PART II. OTHER INFORMATION
TRIDENT AUTOMOTIVE PLC
Item 1. Legal Proceedings:
None
Item 2. Change in Securities:
None
Item 3. Defaults Upon Senior Securities:
None
Item 4. Submission of Matters to a Vote of Security Holders:
None
Item 5. Other Information:
None
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits:
27.1 Financial Data Schedule.
(a) Reports on Form 8-K:
None
-17-
<PAGE>
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.
TRIDENT AUTOMOTIVE PLC
Date: August 19, 1998 By /s/ Stephen E.K. Graham
---------------------------
Stephen E.K. Graham
Secretary
-18-
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