<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - K
-----------------------------------------
Special Financial Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Fiscal Year Ended March 31, 1998
The Registrant's Registration Statement on Form F-4 (Registration Number 333-
8234) became effective on May 19, 1998 and did not contain certified financial
statements of the Registrant for the period from December 31, 1997 to March 31,
1998. This special financial report is filed pursuant to Rule 15d-2 and contains
only financial statements for the period ended March 31, 1998.
Commission File Number 333-8234
--------
TRIDENT AUTOMOTIVE PLC
(Exact name of Registrant as specified in its charter)
ENGLAND 6719 NONE
(State or other jurisdiction (Primary Standard Industrial (IRS Employer
of Incorporation or organization) Classification Code Number) Identification
Number)
47000 LIBERTY DRIVE
WIXOM, MICHIGAN 48393
(Address of Principal (Zip Code)
Executive Offices)
Registrants telephone number, including area code: (248) 960-6300
-----------------------------------------
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
NONE
-----------------------------------------
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__ No X
Indicate by check mark if disclosure of delinquent files pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of the Registrant's knowledge, in a definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [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.
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<PAGE>
This annual report on Form 10 - K for the fiscal year ended March 31, 1998 is
being filed pursuant to Rule 15d-2 under the Securities Exchange Act of 1934
and contains only certified financial statements as required by Rule 15d-2
and Management's Discussion and Analysis of Financial Condition and Results
of Operations. Rule 15d-2 provides generally that, if a registrant files a
registration statement under the Securities Act of 1933 which does not
contain certified financial statements for the registrant's last full fiscal
year (or for the life of the registrant if less than a full year), then the
registrant shall, within 90 days after the effective date of the registration
statement, file a special report furnishing certified financial statements
for such last fiscal year or other period as the case may be Rule 15d-2
further provides that such special financial report is to be field under the
cover of the facing sheet appropriate for the annual report of the
registrant. Trident Automotive plc's Registration Statement on From F-4
referenced above did not contain the certified financial statements
contemplated by Rule 15d-2; therefore, as required by Rule 15d-2, these
statements are being filed with the Securities and Exchange Commission under
cover of the facing page of an Annual Report on Form 10 - K.
PART II
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis of financial condition and results of
operations compares the pro forma fiscal year ended March 31, 1998 of Trident
Automotive plc (the "Company") to the historical fiscal year ended March 31,
1997of the Automotive Group of FKI plc ("FKI"). The pro forma period is made up
of the historical period under FKI ownership, from April 1, 1997 to December 12,
1997 combined with the results of the Company for the period December 13, 1997
to March 31, 1998. See Note 1 to the Consolidated Financial Statements for
information relating to the acquisition of the net assets of the FKI Automotive
Group on December 12, 1997 and the subsequent acquisition of the Company by Dura
Automotive Systems (UK) Ltd. on April 30, 1998.
RESULTS OF OPERATIONS
PRO FORMA TWELVE MONTHS ENDED MARCH 31, 1998 COMPARED TO HISTORICAL TWELVE
MONTHS ENDED MARCH 31, 1997
SALES. Consolidated net sales decreased slightly by $0.4 million, for the
twelve months ended March 31, 1998 to $297.5 million from $297.9 million for the
twelve months ending March 31, 1997. International net sales for the same period
increased $1.0 million. Sales for this period increased $12.9 million as a
result of new contracts and $18.5 million because of increased unit sales under
existing contracts, of which $3.2 million and $10.2 million, respectively, were
from international operations. Net sales of subsidiaries, classified under the
Company's Notes as Restricted Subsidiaries, for the 1998 fiscal year were
approximately 80% of total consolidated net sales, an increase of approximately
3% over the previous year.
New contracts included parking brake cable assembles for General Motors and
clutch cable assemblies for Peugeot, door handle assemblies for the Honda LS and
the manual and automatic transmission shift cables for the new Mercedes A Class
vehicle. Unit volume increases from existing contracts resulted from (i) the
effect of a full twelve months of sales of manual transmission shift cable
assemblies for the Ford Mondeo, (ii) unit volume increases from lighting
products on the Toyota Camry and (iii) speedometer cables for the European
market. Offsetting these increases were sales reductions (of which $2.0 million
were attributable to the Company's international operations) attributable to a
decline in Chrysler forward lighting sales, a volume reduction in parking brake
cable assemblies and phasing out of the Honda CY door handle assemblies.
Unfavorable foreign currency fluctuations reduced sales a further $9.5 million.
2
<PAGE>
GROSS PROFIT. Total gross profit decreased $1.6 million for the twelve
months ended March 31, 1998 to $49.5 million from $51.1 million for the twelve
months ending March 31, 1997. Margin improvements in the North American brake
cable and European cable operations, principally attributable to a reduction in
labor expenses, improved manufacturing efficiencies and volume increases, were
offset by start up costs incurred at the Kentwood facility during the most
recent six months, on two Tier II painting contracts and one Tier I door handle
contract, and production problems at the Blytheville cable facility. A review is
in process at the Kentwood facility to identify corrective actions and a
decision has been made, subsequent to March 31, 1998, to close the Blytheville
facility. Closure of this facility is not expected to have a significant effect
on Trident's financial position or results of operations.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the twelve months ended March 31, 1998 increased
$1.8 million. This increase is due to start up costs associated with the
acquisition of FKI plc's Automotive Group, amortization of intangibles recorded
in connection with that transaction and increased spending incurred in
connection with Trident's QS-9000 certification program.
TWELVE MONTHS ENDED MARCH 31, 1997 COMPARED TO TWELVE MONTHS ENDED MARCH 31,
1996
SALES. Net sales increased $9.8 million, or 3.4%, to $297.9 million in
fiscal 1997 from $288.1 million in fiscal 1996. International operations' net
sales increased $3.7 million, or 2.7%, to $141.9 million in fiscal 1997 from
$138.2 million in fiscal 1996. Net sales increased $28.7 million as a result of
new contracts totaling $11.9 million (of which $7.3 million was from
international operations) and increased sales under existing contracts totaling
$16.8 million (of which $3.4 million was from international operations). The new
contracts included manual transmission shift cable assemblies for the Ford
Mondeo, clutch and parking brake cable assemblies for Peugeot and parking brake
cable assemblies for Ford's North American light truck line. Volume increases
resulted from (i) the full year effect of sales of parking brake cable
assemblies for the Ford Taurus and Mercury Sable, accelerator cable assemblies
for General Motor's recreational vehicles and body-to-frame safety cable
assemblies for Ford's North American truck line and (ii) volume increases of
parking brake cable assemblies, forward lighting products for Chrysler Neon and
LH Series, rear lighting products for Toyota and door handle assemblies for
Honda. Offsetting these increases were sales reductions of $14.9 million (of
which $3.0 million was from international operations) including $13.4 million in
sales from expiring lighting contracts for the Chrysler N-Truck and the loss of
Ford production in Brazil as a result of Ford's decision to move production to
Argentina. Sales were further reduced by $4.0 million due to unfavorable foreign
currency fluctuations.
GROSS PROFIT. Gross profit increased by $2.1 million as a result of volume
increases in fiscal 1997 to $51.1 million from $49.0 million in fiscal 1996,
representing a nominal increase to 17.1% in fiscal 1997 from 17.0% in fiscal
1996. Gross profits for international operations remained flat for the two
fiscal years at $24.9 million. Gross profits were adversely affected by
increases in depreciation charges and start-up costs associated with the manual
transmission shift cable assemblies program for the Ford Mondeo and new
accelerator cable assemblies programs for General Motors in North America.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased by $3.4 million to $31.7 million in fiscal
1997 from $35.1 million in fiscal 1996. Included in selling, general and
administrative expenses in fiscal 1996 were $3.4 million in expenses associated
with an adverse judgment from a product liability suit. In addition, tooling
recoveries, net of deferred tooling costs, were slightly favorable. Reimbursable
tooling decreased significantly during fiscal 1997 as compared to fiscal 1996,
as tooling contracts related primarily to lighting and door handle products were
completed and reimbursed by customers.
3
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
OPERATING ACTIVITIES. Net cash provided by operating activities was $6.2
million for the period from inception to March 31, 1998.
INVESTING AND FINANCING. On March 31, 1998, the Company had indebtedness of
$127.8 million, consisting of $75.0 million of Senior Subordinated Notes and
$52.8 million of indebtedness under the credit facility.
The Company's credit facility provides for borrowing of up to $105.0
million, consisting of (i) a $50.0 million term loan which has scheduled
repayments beginning in March, 1999 and a final maturity in 2003, (ii) a $25.0
million revolving credit facility with a final maturity in 2003 and (iii) a
$30.0 million acquisition facility, the unused portion of which expires on the
December 12, 2000, with all drawn amounts subject to scheduled repayments
beginning thereafter and a final maturity in 2003. The Company has utilized the
entire term loan and had $2.8 million in borrowings under its revolving credit
facility at March 31, 1998. The revolving credit facility is used to fund
working capital and for general corporate purposes. The acquisition facility may
be drawn in the event that the Company makes acquisitions for cash
consideration. The credit facility is secured by all assets of the Company and
certain of its subsidiaries and contains restrictive covenants which limit,
among other things, the ability of the Company and its subsidiaries to incur
additional indebtedness, create liens and other encumbrances, make certain
payments and investments, sell or otherwise dispose of assets or merge or
consolidate with another entity. In addition, the credit facility also requires
maintenance of certain financial ratios. See Note 6 to the Consolidated
Financial Statements for a further description of this facility.
The Senior Subordinated Notes ("Notes") bear interest at 10% and are due
December 15, 2005. Interest is payable semi-annually on June 15th and
December 15th. The Notes are general unsecured obligations of the Company and
are subordinated in right of payment to all existing and future senior
indebtedness of the company. The indenture restricts, among other things, the
ability of the Company and its Restricted Subsidiaries to incur additional
indebtedness, sell preferred stock and pay dividends. The Company's payment
obligations under the Notes are jointly and severally guaranteed on a senior
subordinated basis by certain of the Company's subsidiaries (collectively the
"Guarantors"). There are currently no restrictions on the ability of the
Guarantors to make distributions to the Company. See Note 6 to the
Consolidated Financial Statements for a further description of the indenture.
The Company's ability to make scheduled payments of principal of, or to pay
the interest on, or to refinance, its indebtedness (including the Notes), or to
fund planned capital expenditures and product development expense will depend on
its future performance, which, to a certain extent, is subject to general
economic, financial and other factors that are beyond its control. Based upon
the current level of operations, management believes that cash flow from
operations and available cash, together with available borrowings under the
Company's credit facility, will be adequate to meet liquidity needs for several
years. There can be no assurance, however, that the Company's business will
generate sufficient cash flow from operations or that future borrowings will be
available under the credit facility in an amount sufficient to enable the
Company to service its indebtedness, including the Notes, or to fund its other
liquidity needs. Trident may need to refinance all or a portion of its
indebtedness on or prior to maturity. There can be no assurance, however, that
the Company will be able to effect any such refinancing on commercially
reasonable terms or at all.
4
<PAGE>
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS OF FORM 8-K
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
(a) Index to Financial Statements filed as part of this 10-K
<TABLE>
<CAPTION>
PERIOD ENDED MARCH 31, 1998 Page
<S> <C>
Report of Independent Public Accountants ....................... 6
Consolidated Balance Sheet as of March 31, 1998 ................ 7
Consolidated Statement of Operations for the period from
inception (September 19, 1997) to March 31, 1998 ............... 8
Consolidated Statement of Shareholders' Equity for
the period from inception (September 19, 1997) to
March 31, 1998 ................................................. 9
Consolidated Statement of Cash Flows for the period from
inception (September 19, 1997) to March 31, 1998 ............... 10
Notes to Consolidated Financial Statements ..................... 11
PERIODS ENDED MARCH 31, 1997 AND MARCH 31, 1996
Reports of Predecessor Company Independent Public Accountants .. 27 - 28
Statement of Net Assets to be Sold as of March 31, 1997 ........ 29
Statements of Operations to be Sold ............................ 30
Statements of Cash Flows from Operations to be Sold ............ 31
Notes to Statements of Net Assets and Operations to be Sold .... 32
</TABLE>
All other schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
(b) Reports on Form 8-K not applicable to this filing.
(c) Exhibits
23.1 Consent of Arthur Andersen LLP for Trident Automotive plc.
23.2 Consent of Arthur Andersen LLP for FKI Automotive Group.
27.1 Financial Data Schedule.
5
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trident Automotive plc:
We have audited the accompanying consolidated balance sheet of Trident
Automotive plc (a company registered under the laws of England) and subsidiaries
as of March 31, 1998, and the related consolidated statements of operations,
shareholders' equity and cash flows for the period from inception (September 19,
1997) to March 31, 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Trident Automotive plc and
subsidiaries as of March 31, 1998, and the results of their operations and their
cash flows for the period from inception (September 19, 1997) to March 31, 1998
in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Grand Rapids, Michigan,
May 22, 1998.
6
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1998
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 11,415
Accounts receivable, less allowance for doubtful
accounts of $1,745 48,875
Inventories 18,798
Other current assets 10,526
---------
Total current assets 89,614
---------
OTHER ASSETS:
Property and equipment, net 64,873
Goodwill 88,945
Deferred financing costs 6,426
Other assets 8,972
---------
Total assets $ 258,830
---------
---------
CURRENT LIABILITIES:
Current portion of long-term debt $ 1,500
Accounts payable 37,018
Accrued expenses 28,570
---------
Total current liabilities 67,088
---------
NONCURRENT LIABILITIES:
Long-term debt, less current portion above 126,300
Accrued pension and other postretirement liabilities 12,891
Other noncurrent liabilities 11,536
---------
Total liabilities 217,815
---------
COMMITMENTS AND CONTINGENCIES
MINORITY INTERESTS IN SUBSIDIARY COMPANY 1,170
---------
REDEEMABLE U.S. DOLLAR ORDINARY SHARES;
$1.00 par value; 296,000 shares issued and
outstanding; valued at redemption value 740
---------
SHAREHOLDERS' EQUITY:
Common-
Sterling ordinary shares; $1.70 par value;
50,000 shares issued and outstanding 85
U.S. Dollar ordinary shares; $1.00 par value;
25,000,000 shares authorized; 16,704,000
shares issued and outstanding 16,704
Additional paid-in-capital 23,556
Retained earnings 123
Cumulative translation adjustment (1,363)
---------
Total shareholders' equity 39,105
---------
Total liabilities and shareholders' equity $ 258,830
---------
---------
</TABLE>
The accompanying notes are an integral part of this consolidated balance sheet
7
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (SEPTEMBER 19, 1997) TO MARCH 31, 1998
(IN THOUSANDS)
<TABLE>
<S> <C>
Net sales $ 86,342
Cost of sales 71,295
---------
Gross profit 15,047
Selling and distribution expenses 2,634
General and administrative expenses 7,000
---------
Operating income 5,413
Interest expense 4,092
Interest income (205)
Unrealized exchange loss 922
Other income (24)
---------
Income before provision for income taxes 628
Provision for income taxes 505
---------
Net income $ 123
---------
---------
</TABLE>
The accompanying notes are an integral part of this consolidated statement.
8
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (SEPTEMBER 19, 1997) TO MARCH 31, 1998
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
Common Stock
---------------------------------------------
Sterling U.S. Dollar Additional Cumulative Total
Ordinary Ordinary Paid-in- Retained Translation Shareholders'
Shares Dollars Shares Dollars Capital Earnings Adjustment Equity
-------- ------- ----------- ------- ---------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial capitalization of
Trident Automotive plc 50,000 $ 85 - $ - $ - $ - $ - $ 85
Issuance of U.S. Dollar
ordinary shares - - 16,704,000 16,704 23,556 - - 40,260
Net income - - - - - 123 - 123
Change in cumulative
translation adjustment - - - - - - (1,363) (1,363)
------ ----- ---------- ------- ------- ---- ------- --------
Balance at March 31, 1998 50,000 $ 85 16,704,000 $16,704 $23,556 $123 $(1,363) $ 39,105
------ ----- ---------- ------- ------- ---- ------- --------
------ ----- ---------- ------- ------- ---- ------- --------
</TABLE>
The accompanying notes are an integral part of this consolidated statement.
9
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (SEPTEMBER 19,1997) TO MARCH 31, 1998
(IN THOUSANDS)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 123
Adjustments to reconcile net income to net
cash provided by operating activities-
Depreciation and amortizati 3,547
Unrealized exchange loss 922
Minority interests (24)
Decrease (increase) in assets:
Accounts receivable 1,806
Inventories 2,052
Other current assets (2,658)
Other assets (938)
(Decrease) increase in liabilities:
Accounts payable 9,231
Accrued expenses (10,915)
Other noncurrent liabilities 3,068
---------
Net cash provided by operating activities 6,214
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Predecessor, net of cash acquired (155,490)
Purchase of property and equipment (7,810)
Proceeds from sale of property and equipment 24
---------
Net cash used in investing activities (163,276)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 125,000
Proceeds from borrowings on revolving credit facility 7,763
Payments on revolving credit facility (4,963)
Receipt of capital from Investor Group 42,585
Equity fees paid to affiliates of Investor Group (1,500)
---------
Net cash provided by financing activities 168,885
---------
Effect of exchange rate changes on cash (408)
---------
Net increase in cash and cash equivalents 11,415
CASH AND CASH EQUIVALENTS, beginning of period -
---------
CASH AND CASH EQUIVALENTS, end of period $ 11,415
---------
---------
</TABLE>
The accompanying notes are an integral part of this consolidated statement.
10
<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"). See notes 6 and 11 for information related to this
transaction.
The accompanying consolidated financial statements include the accounts of
the Company, a public limited company organized under the laws of
England, and its majority-owned subsidiaries. The Company and its
subsidiaries were formed on September 19, 1997 to acquire the net assets
of the FKI Automotive Group (the "FKI Acquisition") from FKI plc ("FKI").
On December 12, 1997, the Company completed the FKI Acquisition at a cost
of approximately $162.2 million plus fees and expenses of approximately
$13.8 million. The FKI Acquisition was financed through the issuance of
$75.0 million of 10% Senior Subordinated Notes due 2005, $42.6 million in
equity contributions from an investor group and borrowings under the
Company's new $105.0 million secured credit facility (the "New Credit
Facility"). Two affiliates of one of the investors received fees totaling
$0.6 million each for assistance in financing the transaction. In
addition, certain affiliates of the investor group received private
equity fees totalling $1.5 million and the Company paid an affiliate of
one of the investors $0.9 million for advisory services related to the
acquisition.
The Company designs and manufactures cable assemblies for the global
automotive industry. Cable assemblies are sold primarily to original
equipment manufacturers ("OEMs"). The Company also designs and
manufactures lighting products and door handle assemblies which are sold
to automotive OEM's and automotive suppliers in the United States and
Canada. The Company has eight design and manufacturing facilities in the
United States, Canada, the United Kingdom, France, Germany and Brazil.
Accounting records are maintained in local currencies and converted to
U.S. dollars in accordance with United States Generally Accepted
Accounting Principles. The Company is a holding company, with a fiscal
year end of March 31, that conducts all of its operations through its
subsidiaries. Accordingly, the Company is dependent on the cash flows of
its subsidiaries in order to meet debt service obligations.
The FKI Acquisition was accounted for using the purchase method of
accounting. Accordingly, the purchase price was allocated based on the
estimated fair value of assets acquired and liabilities assumed. The fair
value of the assets acquired and liabilities assumed was approximately
$159.8 million and $87.2 million, respectively. The balance of the
purchase price, approximately $89.6 million, was recorded as goodwill.
This allocation was based upon available information and assumptions that
management considers reasonable under the circumstances and is subject to
adjustment based on further analysis by management and on formal
appraisals not yet available. Management believes that the final
allocation of the purchase price will not materially differ from the
March 31, 1998 allocation. Assumed liabilites include approximately $3.2
million for costs associated with the consolidation of certain facilities
and approximately $3.0 million for severance costs as of March 31, 1998.
Through March 31, 1998, approximately $0.2 million was charged to such
reserves.
11
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - THE COMPANY- (Continued):
The following is unaudited pro forma financial information for the fiscal
year ended March 31, 1998 as if the FKI Acquisition had been completed at
the beginning of the year (in thousands):
<TABLE>
<CAPTION>
Year Ended
March 31, 1998
--------------
<S> <C>
Net sales $283,538
Operating income 14,526
Net loss (442)
</TABLE>
The unaudited pro forma financial information does not purport to represent
what the Company's results of operations would actually have been if the
FKI Acquisition had occurred at such date or to project the Company's
future results of operations.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION--The consolidated financial statements include
the accounts of Trident Automotive plc and its majority-owned
subsidiaries. All significant intercompany transactions have been
eliminated.
USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
REVENUE RECOGNITION AND SALES COMMITMENTS--The Company recognizes revenue
as its products are shipped to its customers. The Company enters into
agreements with its customers at the beginning of a given vehicle's life
to produce products. Once such agreements are entered into by the
Company, fulfillment of the customers' purchasing requirements is
generally the obligation of the Company for the entire production life of
the vehicle, generally with terms of up to five years. In certain
instances, the Company may be committed under existing agreements to
supply product to its customers at selling prices which are not
sufficient to cover the cost to produce such product. In such situations,
the Company records a liability for the estimated future amount of such
losses. Such losses are recognized at the time that the loss is probable
and reasonably estimable.
CASH EQUIVALENTS--Cash equivalents consist of highly liquid investments
with a maturity of three months or less when purchased.
INVENTORIES--Inventories are valued at the lower of cost or market on a
first-in, first-out (FIFO) basis. At March 31, 1998, inventories
consisted of the following (in thousands):
<TABLE>
<S> <C>
Finished products $ 4,158
Work-in-process 6,755
Raw materials 7,885
-------
$18,798
-------
-------
</TABLE>
12
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
OTHER CURRENT ASSETS--Other current assets consisted of the following at
March 31, 1998 (in thousands):
<TABLE>
<S> <C>
Deferred income taxes $ 4,885
Prepaid expenses 2,491
Other 3,150
---------
$ 10,526
---------
---------
</TABLE>
The Company designs and manufactures or purchases tooling for products sold
to its automotive customers. Excess costs over billings on uncompleted
tooling projects represent costs incurred by the Company in excess of
costs billed to the customer in the production of customer-owned tooling
to be used by the Company in the manufacture of its products. The Company
receives a specific purchase order for this tooling and is reimbursed by
the customer within one operating cycle. Costs are deferred until
reimbursed by the customer. Forecasted losses on incomplete projects are
recognized currently. Certain tooling and design costs related to
previously proven product designs are reimbursed by the Company's
customers as the related product is sold through an incremental increase
in each product's unit selling price. Such costs are capitalized and
amortized using the unit of production method over the life of the
related tool. Amounts capitalized and included in other current assets
was $.7 million at March 31, 1998. If the Company forecasts that the
amount of capitalized tooling and design costs exceeds the amount to be
realized through the sale of the product, a loss is recognized currently.
Research and development and start-up costs, which are not material, are
expensed as incurred.
PROPERTY AND EQUIPMENT--Property and equipment is recorded at historical or
acquired cost and is depreciated over the estimated useful lives of the
assets utilizing the straight-line method, generally as follows: land
improvements, 10 to 15 years; buildings, 30 years; machinery and
equipment, 5 to 15 years. Equipment, which is dedicated to a specific
contract is depreciated over the life of that contract. At March 31,
1998, property and equipment consisted of the following (in thousands):
<TABLE>
<S> <C>
Land and land improvements $ 3,378
Buildings 13,130
Machinery and equipment 45,613
Construction in progress 4,988
---------
67,109
Less- Accumulated depreciation (2,236)
---------
Property and equipment, net $ 64,873
---------
---------
</TABLE>
Maintenance and repairs are charged to expense as incurred. Major
betterments and improvements that extend the useful life of an item are
capitalized and depreciated. The cost and accumulated depreciation of
property and equipment retired or otherwise disposed of are removed from
the related accounts, and any residual values are charged or credited to
income.
13
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
INCOME TAXES--The Company accounts for income taxes under the liability
method, which requires recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been
included in the financial statements and tax bases of assets and
liabilities using currently enacted tax rates. The Company does not
provide for deferred taxes on its net investment in foreign subsidiaries
as it is essentially permanent in nature.
GOODWILL--Goodwill represents the excess of the purchase price over the
fair value of the net assets acquired and is amortized on a straight-line
basis over 40 years. The Company periodically evaluates whether events
and circumstances have occurred which may affect the recoverability of
the remaining balance of its goodwill and other long-lived assets. If
such events or circumstances were to indicate that the carrying amount of
these assets would not be recoverable, the Company would estimate the
future cash flows expected to result from the use of the assets and their
eventual disposition. If the sum of the expected future cash flows
(undiscounted and without interest charges) were less than the carrying
amount of the assets, the Company would recognize an impairment loss.
FOREIGN CURRENCY TRANSLATION--In accordance with Statement of Financial
Accounting Standards (SFAS) No. 52, substantially all assets and
liabilities of the Company's foreign subsidiaries are translated at the
year-end exchange rates; income and expenses are translated at the
average exchange rates prevailing during the period. Translation gains
and losses are accumulated as a separate component of shareholders'
equity.
FAIR VALUE OF FINANCIAL INSTRUMENTS--The fair value of the Company's Senior
Debt Credit Facility and Senior Subordinated Notes is estimated based on
current rates offered to the Company for debt of the same remaining
maturities and on quoted market rates, respectively. The estimated fair
value of the Company's Senior Debt Credit Facility approximates carrying
value. Based on quoted market prices, the estimated fair market value of
the Senior Subordinated Notes is approximately $78 million as of March
31, 1998.
ENVIRONMENTAL EXPENDITURES--Environmental expenditures that relate to
current or future revenues are expensed or capitalized as appropriate.
Expenditures that relate to an existing condition caused by past
operations that do not contribute to current or future revenues are
expensed as incurred.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS--During June 1997, the Financial
Accounting Standards Board released SFAS No. 130, "Reporting
Comprehensive Income," effective for fiscal years beginning after
December 15, 1997. SFAS No. 130 establishes standards for reporting and
diplay in the financial statements of total net income and the components
of all other nonowner changes in equity, referred to as comprehensive
income. The Company will adopt SFAS No. 130 in fiscal 1999 and
anticipates this statement will not have a material effect on the
financial statements.
SUPPLEMENTAL CASH FLOW INFORMATION--The Company paid cash in the following
amounts relating to interest and taxes for the period from inception
(September 19, 1997) to March 31, 1998 (in thousands):
<TABLE>
<S> <C>
Taxes $ 510
Interest 1,546
</TABLE>
14
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - ACCRUED EXPENSES:
Accrued expenses as of March 31, 1998 consisted of the following (in
thousands):
<TABLE>
<S> <C>
Accrued compensation $ 9,737
Accrued income taxes 3,695
Accrued taxes other than income taxes 2,721
Accrued interest 2,271
Accrued professional fees 3,332
Other 6,814
---------
$ 28,570
---------
---------
</TABLE>
NOTE 4 - COMMITMENTS AND CONTINGENCIES:
The Company is a defendant in various lawsuits, including a dispute with a
minority shareholder in the Company's Brazilian subsidiary, and
environmental proceedings that have arisen in the normal course of
business. Management believes that the ultimate resolution of these
matters will not have a material adverse effect on the Company's
financial position or results of operations.
The Company has noncancellable operating leases for its corporate
headquarters, certain manufacturing locations and various machinery and
equipment. The future minimum rental payments required under such leases
are as follows (in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ending March 31,
----------------------------
<S> <C>
1999 $ 2,464
2000 2,053
2001 1,812
2002 1,724
2003 1,711
Thereafter 3,538
---------
$ 13,302
---------
---------
</TABLE>
Total rental expense for the period from inception (September 19, 1997) to
March 31, 1998 was approximately $.6 million.
Asof March 31, 1998, the Company has unconditional agreements to purchase
approximately $4.4 million and $4.5 milion in raw materials and
equipment, respectively, expiring during the fiscal year ending March 31,
1999.
15
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - TAXES ON INCOME:
Income before provision for income taxes is comprised of the following (in
thousands):
<TABLE>
<S> <C>
U.S. $ 295
Foreign 333
---------
Total $ 628
---------
---------
</TABLE>
The provision for income taxes in the accompanying consolidated statement
of operations consisted of the following (in thousands):
<TABLE>
<S> <C>
Currently payable:
U.S. state and federal $ 2,580
Foreign 790
Deferred:
U.S state and federal (2,390)
Foreign (475)
Total
---------
$ 505
---------
---------
</TABLE>
The Company's effective tax rate differs from the U.S. statutory rate of
35% as follows (in thousands):
<TABLE>
<S> <C>
Federal income taxes at the U.S. statutory rate $ 220
State income taxes, net of federal benefits 15
Foreign losses not benefited 155
Book expenses not deductible for tax purposes,
primarily goodwill amortization 115
-----
$ 505
-----
-----
</TABLE>
The components of the net deferred tax asset are as follows (in thousands):
<TABLE>
<S> <C>
Current deferred tax asset:
Inventory $ 1,503
Accruals 2,894
Other 488
---------
$ 4,885
=========
Long-term deferred tax asset:
Accruals $ 3,281
Other (49)
---------
$ 3,232
---------
---------
</TABLE>
16
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - LONG-TERM DEBT:
<TABLE>
<S> <C>
Long-term debt as of March 31, 1998 consisted of the following (in
thousands):
Senior Debt:
New Credit Facility term loan refinanced subsequent
to yearend (see below) $ 50,000
New Credit Facility revolving loan refinanced subsequent to yearend (see below) 2,800
Subordinated Debt:
Senior Subordinated Notes due December 15, 2005, interest payable
semi-annually on June 15 and December 15 at a 10% annual rate 75,000
---------
127,800
Less- current maturities 1,500
---------
$126,300
---------
---------
</TABLE>
The effective rate of interest on the New Credit Facility term loan and
revolving loan was 7.9% and 9.5% as of March 31, 1998, respectively.
Principal maturities of long-term debt as of March 31, 1998 are as follows
(in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ending March 31,
----------------------------
<S> <C>
1999 $ 1,500
2000 8,000
2001 10,500
2002 12,000
2003 14,000
Thereafter 81,800
---------
$ 127,800
---------
---------
</TABLE>
The Company's payment obligations under the Notes are jointly and severally
guaranteed on a senior subordinated basis by certain of the Company's
subsidiaries (collectively, the "Guarantors"). The guarantees are
subordinated to the guarantees of Senior Indebtedness (as defined in the
Indenture governing the Notes (the "Indenture")) issued by the
Guarantors.
Prior to December 15, 2001, the Notes will be redeemable at the Company's
option subject to certain call premiums, as defined in the Indenture.
Thereafter, the Notes will be subject to redemption from time to time, at
the option of the Company, in whole or in part, at certain specified
redemption prices, plus accrued and unpaid interest and Liquidated
Damages (as defined in the Indenture) thereon (if any) to the redemption
date.
17
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - LONG TERM DEBT (Continued):
Concurrently with the FKI Acquisition, the Company and certain other
subsidiaries of the Company entered into the New Credit Facility, which
was repaid and replaced with a replacement credit facility (the
"Replacement Credit Facility") at the Dura Acquisition (see note 11).
Concurrently with the Dura Acquistion, the Company and certain of its
subsidiaries entered into the Replacement Credit Facility. Pursuant to
the Replacement Credit Facility, certain lenders provided a credit
facility that made available loans, letters of credit and commitments to
Dura and its subsidiaries, including the Company and its subsidiaries. In
order to comply with the terms of the Indenture, the lenders provided two
different sub- facilities under the Replacement Credit Facility; one sub-
facility (the "Trident Sub-Facility") was made available to the Company
and certain of its subsidiaries and the other sub-facility (the "Dura
Sub-Facility") was made available to Dura and its subsidiaries (other
than the Company and its subsidiaries). Pursuant to the terms of the
Replacement Credit Facility, Dura and certain of its subsidiaries (other
than the Company and its subsidiaries) will provide guarantees and
collateral to support obligations owing under the Trident Sub-Facility;
but, so long as the Notes issued under the Indenture remain outstanding,
none of the Company or any of its subsidiaries will provide any support
for obligations owing under the Dura Sub-Facility. However, the two
sub-facilities do not generally have separate representations,
warranties, covenants or events of default. Therefore, any event of
default relating to the Dura Sub-Facility will cause an event of default
under the Trident Sub-Facility.
Pursuant to the Trident Sub-Facility, the lenders provided (i) a Term Loan
to the Company in the aggregate principal amount of $50 million payable
in quarterly installments beginning March 1999 through April 2003, (ii) a
Revolving Credit and Letter of Credit Facility to the Company and certain
of its subsidiaries under which up to $25 million of loans and letters of
credit in the aggregate will from time to time be made available in
various currencies for working capital and general corporate purposes of
the Company and its subsidiaries maturing in April 2003 and (iii) an
acquisition loan facility to the Company under which up to $30 million in
loans will from time to time prior to April 28, 2000 be available in
various currencies to finance business acquisitions of the Company and
its subsidiaries maturing in April 2003 payable in quarterly installments
beginning March 2000 and maturing in April 2003.
Funds were drawn under the Trident Sub-Facility to refinance all amounts
owing under the New Credit Facility, which was terminated at the closing
of the Dura Acquisition. Loans under the Trident Sub-Facility can be made
in various currencies at the option of the Company. Each such loan will
bear interest at an applicable base rate, depending on the lending
currency, plus an applicable margin, as defined in the Replacment Credit
Facility agreement.
The Replacement Credit Facility contains a number of covenants that, among
other things, restrict the ability of the Company and its subsidiaries to
dispose of assets, incur additional indebtedness, incur gaurantee
obligations, repay other indebtedness or amend other debt instruments,
pay dividends, make acquisitions, engage in mergers or consolidations,
make capital expenditures, engage in certain transactions with
subsidiaries and affiliates and otherwise restrict corporate activities.
In addition, the Replacement Credit Facility also requires Dura to
maintain certain financial ratios, as defined in the Replacement Credit
Agreement. Failure of Dura or any of its subsidiaries to comply with any
of these covenants may cause an Event of Default under the Trident
Sub-Facility.
18
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - RETIREMENT BENEFITS:
DEFINED BENEFIT PLANS--Prior to the FKI Acquisition, employees participated
in FKI sponsored noncontributory defined benefit pension plans which
covered substantially all employees in the United States, the United
Kingdom and Canada. The plans provided benefits based on years of service
and compensation or stated amounts for years of service. In connection
with the FKI Acquisition, the Company established new defined benefit
pension plans that provide benefits to employees in the United States,
the United Kingdom and Canada substantially the same as those provided by
the FKI plans. In connection therewith, the FKI will transfer funds from
their pension trust funds in satisfaction of the actuarially determined
liability assumed by the Company. The Company's French subsidiary,
Trident Automotive S.A., provides certain retirement benefits to
employees who meet certain age and service requirements.
The funded status and amounts recognized in the Company's consolidated
balance sheet as of March 31, 1998 are as follows (in thousands):
<TABLE>
<CAPTION>
Domestic International
--------------- --------------------------------
Accumulated Assets Exceed Accumulated
Benefits Accumulated Benefits Exceed
Exceed Assets Benefits Assets Total
------------- ------------- --------------- -----
<S> <C> <C> <C> <C>
Actuarial present value of-
Vested benefits $(8,720) $(11,158) $(336) $(20,214)
Nonvested benefits (393) - (19) (412)
-------- --------- ------ ---------
Accumulated benefit obligation (9,113) (11,158) (355) (20,626)
Effect of anticipated future
compensation levels (2,563) (614) (306) (3,483)
-------- --------- ------ ---------
Projected benefit obligation (11,676) (11,772) (661) (24,109)
Plan assets at fair value 8,810 12,496 - 21,306
-------- --------- ------ ---------
Funded status $(2,866) $ 724 $(661) $ (2,803)
-------- --------- ------ ---------
-------- --------- ------ ---------
</TABLE>
Net periodic pension cost for the period from inception (September 19,
1997) to March 31, 1998 consisted of the following component (in
thousands):
<TABLE>
<CAPTION>
Domestic International Total
-------- ------------- -----
<S> <C> <C> <C>
Service cost $ 317 $ 229 $ 546
Interest cost on projected benefit obligation 255 264 519
Actual return on plan assets (253) (344) (597)
-------- -------- --------
Net periodic pension cost $ 319 $ 149 $ 468
-------- -------- --------
-------- -------- --------
</TABLE>
19
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - RETIREMENT BENEFITS (Continued):
The assumptions used to calculate the actuarial present value of the
benefit obligations as of March 31, 1998, were as follows:
<TABLE>
<CAPTION>
Domestic International
-------- -------------
<S> <C> <C>
Discount rate 7.4% 6.0%-7.0%
Rate of increase in compensation level 4.0% 4.5%-6.0%
Expected long-term rate of return on plan assets 9.5% 9.0%
</TABLE>
DEFINED CONTRIBUTION PLAN--The Company's U.S. employees participate in a
defined contribution plan. Salaried and non-union hourly employees are
eligible to participate. The plan provides for employee contributions
with certain matching and discretionary employer contributions. Expense
related to the plan for the period from inception (September 19, 1997) to
March 31, 1998 was $0.1 million.
POSTRETIREMENT HEALTH AND LIFE INSURANCE PLAN--FKI employees participated
in an FKI sponsored postretirement health and life insurance plan which
covered substantially all U.S. salaried and hourly employees.
Concurrently with the FKI Acquisition, the Company established a new plan
(the "Plan") with substantially similiar provisions and assumed
approximately $9.4 million of liabilities related to postretirement
health and life insurance benefits for employees of FKI Automotive Group
in the United States. To be eligible for benefits, employees must be at
least 60 years old with 10 years of service. The monthly benefit provided
by the Plan is generally $5.00 per year of service, with participants
paying any remaining premium cost. Certain participants who retired prior
to January 1993 or April 1994 pay a monthly rate with the Company paying
the remaining premium cost. The Plan is not funded.
The funded status of the Plan reconciles with the liability recorded as of
March 31, 1998 as follows (in thousands):
<TABLE>
<S> <C>
Actuarial present value of-
Retirees $ 4,701
Fully eligible active participants 1,035
Other active participants 3,638
---------
Accumulated and accrued postretirement benefit
obligation $ 9,374
---------
---------
</TABLE>
Net periodic postretirement benefit cost for the period from inception
(September 19, 1997) to March 31, 1998 consisted of the following
components (in thousands):
<TABLE>
<S> <C>
Service cost $ 69
Interest cost on accumulated postretirement benefit
Obligation 210
---------
Net postretirement benefit cost $ 279
---------
---------
</TABLE>
20
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - RETIREMENT BENEFITS (Continued):
The discount rate used in determining the accumulated postretirement
benefit obiligation was 7.4% as of March 31, 1998. The assumed health
care cost trend rate used in determining the accumulated postretirement
benefit obligation was 8% as of March 31, 1998. The rate was assumed to
decrease by .5% per year to 5.0% in 2003.
Increasing the assumed health care cost trend rate by one percentage- point
in the period would increase the accumulated postretirement benefit
obligation by approximately $.1 million and would increase the aggregate
of the service cost and interest cost components of the net
postretirement benefit cost by approximately $.01 million.
NOTE 8 - REDEEMABLE U.S. DOLLAR ORDINARY SHARES AND STOCK OPTIONS:
Redeemable U.S. Dollar ordinary shares represent shares owned by employees
which the Company may be required to repurchase. With respect to 136,000
shares, as defined in the Articles of Association, after the employee
shareholder's death or disability and expiration of 90 days without the
Company executing a call provision in the agreement, the employee, or
legal representative, may sell their shares to the Company at fair market
value within 120 days after employment cessation. As defined in an
employment agreement and subject to the Company meeting certain financial
goals, the remaining 160,000 shares can be sold to the Company within 120
days of employment termination at $2.50 per share, except upon death or
disability of the employee shareholder, at which time the purchase price
would be the greater of $2.50 per share or fair market value. All share
repurchases are subject to being permitted by applicable laws and by the
Company's financing agreements. The share repurchase requirements lapse
upon an initial public offering of the Company's common stock. On April
30, 1998, in connection with the Dura Aquisition discussed in Note 11,
the redeemable features of the stock discussed above were cancelled.
Concurrently with the FKI Acquisition, the Company entered into various
incentive stock option agreements (the "Stock Option Agreements") whereby
non-qualifying stock options were granted to certain executives of the
Company. The Company may be required to repurchase any shares purchased
pursuant to the exercise of options under the Stock Option Agreements
(the "Option Shares") under terms similar to those discussed above for
Redeemable U.S. Dollar ordinary shares. The Company has authorized the
granting of 3,000,000 options for purchase of shares of common stock. All
options granted pursuant to the Stock Option Agreements generally expire
ten years from the date of grant. The various classes of options vest
either (i) on a pro rata basis over periods ranging from two to five
years; (ii) based upon attainment of certain financial objectives; (iii)
based upon the successful acquisitons, as defined in the respective Stock
Option Agreements or (iv) immediately. Concurrently with the Dura
Acquisition (see Note 11), all options granted under the Stock Option
Agreements were cancelled or repurchased. Activity for these options is
detailed below:
21
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - REDEEMABLE U.S. DOLLAR ORDINARY SHARES AND STOCK OPTIONS (Continued):
<TABLE>
<CAPTION>
<S> <C>
Options granted during the period from inception 1,690,700
(September 19, 1997) to March 31, 1998
Options exercised during the period from inception -
(September 19, 1997) to March 31, 1998
Options terminated during the period from inception -
(September 19, 1997) to March 31, 1998
----------
1,690,700
----------
----------
Exercisable at March 31, 1998 242,675
----------
----------
</TABLE>
The Company accounts for the Redeemable U.S. Dollar ordinary shares and
options granted under the Stock Option Agreements, both discussed above, in
accordance with APB Opinion 25, "Accounting for Stock Issued to Employess,"
which requires the remeasurement of the value of the instruments to their
estimated redemption value during each reporting period. No compensation
expense was recognized during the period from inception (September 19,
1997) to March 31, 1998 related to the management stock and stock options.
This treatment is also in accordance with SFAS No. 123, "Accounting for
Stock Based Compensation".
NOTE 9 - CUSTOMER INFORMATION:
The Company sells its products primarily to OEMs in the automotive industry
on a worldwide basis. Sales are concentrated in North America and Europe
with the top three customers accounting for approximately 19%, 17% and
16% in the period from inception (September 19, 1997) to March 31, 1998.
The Company's largest customer will discontinue purchases of certain
products over the next five years. Sales of these products were
approximately 6% of net sales in the period from inception (September 19,
1997) to March 31, 1998.
The accounts receivable balances of each of these top three customers was
approximately 22%, 10% and 13% of the gross accounts receivable balance
as of March 31, 1998, respectively.
22
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - SEGMENT INFORMATION
The Company operates in one business segment that manufactures automotive
parts for sale to OEMs. The Company operates in various geographical
locations, as indicated below. Transactions between subsidiaries of the
Company are consumated at market rates. The Company periodically
benchmarks these transactions against competitve sources. Segment
financial information for the period from inception (September 19, 1997)
to March 31, 1998 is as follows (in thousands):
<TABLE>
<CAPTION>
North Latin
America Europe America Eliminations Total
------- ------ ------- ------------ -----
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated customers $ 59,308 $ 23,922 $ 3,112 $ - $ 86,342
Transfers between geographic areas 1,142 795 - (1,937) -
--------- --------- --------- --------- ---------
Net sales 60,450 24,717 3,112 (1,937) 86,342
Operating income 3,961 1,630 (178) - 5,413
Identifiable assets 91,164 55,377 7,074 - 153,615
</TABLE>
NOTE 11 - SUBSEQUENT EVENTS:
On April 30, 1998, Dura Ltd. acquired all of the outstanding shares of the
Company for an aggregate purchase price of approximately $87.5 million.
The stock purchase agreement with the principal shareholders of the
Company contains representations, warranties, covenants, conditions and
indemnities covering various aspects of the Dura Acquisition.
Dura Ltd. is a wholly-owned subsidiary of Dura., 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.
In connection with the Dura Acquisition, the New Credit Facility was
replaced by the Replacement Credit Facility (see Note 6). The initial
borrowing under the Replacement Credit Facility occurred simultaneously
with the consummation of the Dura Acquisition. Deferred financing costs,
related to the New Credit Facility, will be written off in the first
quarter of fiscal 1999, resulting in an extraordinary charge of
approximately $1.7 million, net of the related tax benefit of $1.1
million.
The Dura Acquisition constituted a change of control under the Notes. 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
made a change of control Offer (as defined in the Indenture) to the
holders of the Notes on May 8, 1998. Since the change of control offer
has been made by Dura rather than the Company, the purchase of the Notes
pursuant thereto will have no effect on the Company's financial position
or results of operations.
NOTE 12 - 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 became a direct or indirect
wholly-owned subsidiary of Trident Automotive plc upon consummation of
the FKI Acquisition 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 to investors.
23
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 - CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION
(Cont.)
<TABLE>
<CAPTION>
CONSOLIDATING BALANCE SHEET AS OF MARCH 31, 1998 (IN THOUSANDS)
Non-
Trident Guarantor Guarantor
Automotive plc Companies Companies Eliminations Consolidated
-------------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 295 $ 6,300 $ 4,820 $ - $ 11,415
Accounts receivable - 34,330 14,545 - 48,875
Inventories - 15,020 3,778 - 18,798
Due from affiliates 4,592 5,207 1,394 (11,193) -
Other current assets 603 6,589 3,334 - 10,526
----------- ----------- ----------- ------------ ------------
Total current assets 5,490 67,446 27,871 (11,193) 89,614
OTHER ASSETS:
Property and equipment, net - 53,804 11,069 - 64,873
Note receivable from subsidiaries - 22,281 - (22,281) -
Goodwill 3,796 62,996 22,153 - 88,945
Deferred financing costs 6,426 - - - 6,426
Investment in subsidiaries 158,232 13,984 - (172,216) -
Other Assets 11 7,571 1,390 - 8,972
----------- ----------- ----------- ------------ ------------
Total assets $ 173,955 $ 228,082 $ 62,483 $ (205,690) $ 258,830
----------- ----------- ----------- ------------ ------------
----------- ----------- ----------- ------------ ------------
CURRENT LIABILITIES:
Current portion of long-term debt $ 1,500 $ - $ - $ - $ 1,500
Accounts payable - 28,546 8,472 - 37,018
Accrued expenses 3,539 15,748 9,283 - 28,570
Due to affiliates 2,771 5,003 3,366 (11,140) -
----------- ----------- ----------- ------------ ------------
Total current liabilities 7,810 49,297 21,121 (11,140) 67,088
NONCURRENT LIABILITIES:
Long-term debt, less current portion
above 126,300 - - - 126,300
Note payable to parent - - 22,278 (22,278) -
Accrued pension and other
Postretirement liabilities - 11,920 971 - 12,891
Other noncurrent liabilities - 8,300 3,236 - 11,536
----------- ----------- ----------- ------------ ------------
Total liabilities 134,110 69,517 47,606 (33,418) 217,815
COMMITMENTS AND CONTINGENCIES
MINORITY INTERESTS IN
SUBSIDIARY COMPANY - - 1,170 - 1,170
REDEEMABLE U.S. DOLLAR ORDINARY
SHARES 740 - - - 740
SHAREHOLDERS' EQUITY 39,105 158,565 13,707 (172,272) 39,105
----------- ----------- ----------- ------------ ------------
Total Liabilities and Shareholders'
Equity $ 173,955 $ 228,082 $ 62,483 $ (205,690) $ 258,830
----------- ----------- ----------- ------------ ------------
----------- ----------- ----------- ------------ ------------
</TABLE>
24
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 - CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION
(Cont.):
CONSOLIDATING STATEMENT OF OPERATIONS FOR THE PERIOD FROM INCEPTION
(SEPTEMBER 19, 1997) TO MARCH 31, 1998 (IN THOUSANDS)
<TABLE>
<CAPTION>
Non-
Trident Guarantor Guarantor
Automotive plc Companies Companies Eliminations Consolidated
-------------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ - $ 69,293 $ 17,755 $ (706) $ 86,342
Cost of sales - 57,249 14,752 (706) 71,295
---------- ---------- ---------- ---------- ----------
Gross profit - 12,044 3,003 - 15,047
Selling and distribution expenses - 2,046 588 - 2,634
General and administrative expenses 49 5,010 1,941 - 7,000
---------- ---------- ---------- ---------- ----------
Operating income (loss) (49) 4,988 474 - 5,413
Interest expense 4,022 4 66 - 4,092
Interest expense-intercompany - 3,607 733 (4,340) -
Interest income (2) (71) (132) - (205)
Interest income-intercompany (2,479) (1,861) 4,340 -
Unrealized exchange loss - 1 921 - 922
Equity in net (income) loss of subsidiary (1,188) 792 - 396 -
Other (income) expense - - (24) - (24)
---------- ---------- ---------- ---------- ----------
Income (loss) before provision for
income taxes (402) 2,516 (1,090) (396) 628
Provision (credit) for income taxes (525) 1,328 (298) - 505
---------- ---------- ---------- ---------- ----------
Net income (loss) $ 123 $ 1,188 $ (792) $ (396) $ 123
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
25
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 - CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION
(Cont.):
CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE PERIOD FROM INCEPTION
(SEPTEMBER 19,1997) TO MARCH 31, 1998 (IN THOUSANDS)
<TABLE>
<CAPTION>
Non-
Trident Guarantor Guarantor
Automotive plc Companies Companies Eliminations Consolidated
-------------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) $ 123 $ 1,188 $ (792) $ (396) $ 123
Adjustments to reconcile net income
(loss) to net cash
provided by (used in) operating
activities-
Depreciation and amortization 301 2,364 882 - 3,547
(Income) loss from investment in
subsidiaries (1,188) 792 - 396 -
Unrealized exchange loss - 1 921 - 922
Minority interests - - (24) - (24)
Decrease (increase) in assets:
Accounts receivable 96 (5,706) 911 6,505 1,806
Inventories - 1,202 850 - 2,052
Other current assets (801) (2,234) 377 - (2,658)
Other assets - (796) (142) - (938)
(Decrease) increase in liabilities:
Accounts payable 2,771 11,842 1,070 (6,452) 9,231
Accrued expenses (8,370) (632) (1,913) - (10,915)
Other noncurrent liabilities - 3,087 (19) - 3,068
------------ --------- --------- ----------- ------------
Net cash provided by (used in)
operating activities (7,068) 11,108 2,121 53 6,214
------------ --------- --------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Predecessor, net of cash
acquired (3,315) (118,321) (33,854) - (155,490)
Investment in subsidiaries (42,508) (15,897) - 58,405 -
Purchase of property and equipment - (6,279) (1,531) - (7,810)
Proceeds from sale of property and
equipment - - 24 - 24
------------ --------- --------- ----------- ------------
Net cash used in investing activities (45,823) (140,497) (35,361) 58,405 (163,276)
------------ --------- --------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 125,000 - - - 125,000
Proceeds from borrowings on revolving
credit facility 7,263 500 - - 7,763
Payments on revolving credit facility (4,463) (500) - - (4,963)
Receipt of capital from Investor Group 42,585 - - - 42,585
Equity fees paid to affiliates of
Investor Group (1,500) - - - (1,500)
Notes (issued to subsidiary) received
from parent (115,699) 91,983 23,716 - -
Payments received (made) on intercompany
notes - 1,435 (1,435) - -
Equity contribution from parent - 42,500 15,905 (58,405) -
------------ --------- --------- ----------- ------------
Net cash provided by financing
activities 53,186 135,918 38,186 (58,405) 168,885
------------ --------- --------- ----------- ------------
Effect of exchange rate changes on cash - (229) (126) (53) (408)
------------ --------- --------- ----------- ------------
Net increase in cash and cash
equivalents 295 6,300 4,820 - 11,415
CASH AND CASH EQUIVALENTS, beginning of
period - - - - -
------------ --------- --------- ----------- ------------
CASH AND CASH EQUIVALENTS, end of period $ 295 $ 6,300 $ 4,820 $ - $ 11,415
------------ --------- --------- ----------- ------------
------------ --------- --------- ----------- ------------
</TABLE>
26
<PAGE>
Report of Independent Public Accountants
To the Stockholder and Board of Directors of
FKI Industries, Inc.:
We have audited the accompanying statement of net assets to be sold of the FKI
Automotive Group as of March 31, 1997, and the related statements of operations
to be sold and cash flows from operations to be sold for each of the two years
in the period ended March 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 1, these financial statements were prepared to present the
net assets to be sold of FKI Automotive Group and the related operations and
cash flows and are not intended to be a complete presentation of the Company's
assets, liabilities, operations and cash flows.
In our opinion, the special purpose financial statements referred to above
present fairly, in all material respects, the net assets to be sold of the FKI
Automotive Group as of March 31, 1997, and its related operations and cash flows
from operations to be sold for each of the two years in the period ended
March 31, 1997, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Stamford, Connecticut,
October 17, 1997.
27
<PAGE>
Report of Independent Public Accountants
To Trident Automotive plc:
We have audited the accompanying statement of operations to be sold and cash
flows from operations to be sold of the FKI Automotive Group (the Predecessor of
Trident Automotive plc) for the period from April 1, 1997 to December 12, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
As discussed in Note 1, these financial statements were prepared to present the
operations and cash flows from operations to be sold of FKI Automotive Group and
are not intended to be a complete presentation of the Company's operations and
cash flows.
In our opinion, the special purpose financial statements referred to above
present fairly, in all material respects, the operations and cash flows from
operations to be sold of the FKI Automotive Group for the period from April 1,
1997 to December 12, 1997, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Grand Rapids, Michigan,
May 22, 1998.
28
<PAGE>
FKI AUTOMOTIVE GROUP
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS TO BE SOLD AS OF MARCH 31, 1997
(In thousands)
CURRENT ASSETS:
<S> <C>
Cash and cash equivalents $ -
Accounts receivable, less allowance for doubtful accounts of $922 51,835
Inventories 21,345
Reimbursable tooling 2,865
Other current assets 3,995
--------
Total current assets 80,040
--------
PROPERTY, PLANT AND EQUIPMENT, net 62,318
OTHER ASSETS 3,231
--------
Total assets 145,589
--------
CURRENT LIABILITIES:
Accounts payable 37,315
Accrued expenses 14,575
--------
Total current liabilities 51,890
ACCRUED PENSION LIABILITY 986
OTHER NON-CURRENT LIABILITIES 2,860
MINORITY INTERESTS IN SUBSIDIARY COMPANIES 1,168
COMMITMENTS AND CONTINGENCIES (NOTE 7) --------
NET ASSETS TO BE SOLD $ 88,685
--------
--------
</TABLE>
The accompanying notes are an integral part of this statement.
29
<PAGE>
FKI AUTOMOTIVE GROUP
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS TO BE SOLD
(In thousands)
For the Years Ended For the Period
March 31, from April 1,
------------------- to December 12,
1996 1997 1997
-------- -------- ---------------
<S> <C> <C> <C>
NET SALES $288,054 $297,884 $211,203
-------- -------- --------
COST OF SALES 239,034 246,810 176,760
Gross profit 49,020 51,074 34,443
SELLING AND DISTRIBUTION EXPENSES 10,575 11,318 7,635
GENERAL AND ADMINISTRATIVE EXPENSES 21,114 20,245 16,246
LEGAL JUDGMENTS AND EXPENSES 3,388 132 -
-------- -------- --------
Operating income 13,943 19,379 10,562
INTEREST EXPENSE 390 448 651
INTEREST INCOME (1,183) (707) (599)
EXCHANGE LOSS 275 307 126
-------- -------- --------
OTHER (INCOME) EXPENSE 160 (583) -
-------- -------- --------
Income before provision for
income taxes 14,301 19,914 10,384
Provision for income taxes 6,100 8,157 4,799
-------- -------- --------
Net income $ 8,201 $ 11,757 $ 5,585
-------- -------- --------
-------- -------- --------
</TABLE>
The accompanying notes are an integral part of these statements.
30
<PAGE>
FKI AUTOMOTIVE GROUP
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS FROM OPERATIONS TO BE SOLD
(in thousands)
For the
Period
from
For the Years Ended April 1,
March 31, to
------------------- December 12,
1996 1997 1997
--------- -------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 8,201 $ 11,757 $ 5,585
Adjustments to reconcile net income to net
cash provided by operating activities-
Depreciation and amortization 10,657 12,531 8,834
Provision for doubtful accounts 280 481 160
Loss (gain) on sale of property, plant
and equipment (313) 125 18
Changes in operating items-
Accounts receivable (658) (3,002) 2,717
Inventories 3,969 748 (586)
Reimbursable tooling (1,024) 6,367 617
Other current assets 346 (912) (991)
Other assets 132 133 295
Accounts payable (3,983) 418 (11,378)
Accrued expenses 804 (4,403) 56
Other non-current liabilities ( 642) 29 (21)
Minority interests (1,650) (263) 26
-------- ------- --------
Net cash provided by operating activities 16,119 24,009 5,332
-------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (15,355) (13,323) (9,853)
Proceeds from sale of property, plant and
equipment 427 468 217
Purchase of minority interest in
ACCO La Teledynamique S.A (276) - -
-------- ------- --------
Net cash used in investing activities (15,204) (12,855) (9,636)
-------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Collection of note receivable 33 112 901
Principal payments on capital leases (122) (42) (29)
Net transfers from (to) FKI Industries (755) (11,568) 1,909
-------- ------- --------
Net cash provided by (used in) financing
activities (844) (11,498) 2,781
Effect of exchange rate changes on cash (71) 344 1,523
-------- ------- --------
Net increase in cash and cash equivalents - - -
CASH AND CASH EQUIVALENTS, beginning of period - - -
-------- ------- --------
CASH AND CASH EQUIVALENTS, end of period $ - $ - $ -
-------- ------- --------
-------- ------- --------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION -
Cash paid during the period for-
Interest $ 224 $ 220 $ 138
Income taxes 4,019 2,859 1,930
</TABLE>
The accompanying notes are an integral part of these statements.
31
<PAGE>
FKI AUTOMOTIVE GROUP
NOTES TO FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION AND ORGANIZATION
The accompanying special purpose financial statements of FKI Automotive
Group (the "FKI Automotive Group" or the "Company") relate to the
automotive business of FKI Industries Inc. ("FKI Industries") and its
parent company, FKI plc ("FKI"). The accompanying special purpose
financial statements have been derived from the historical financial
statements of FKI Industries and FKI based on assumptions management
believes represent a reasonable basis for presenting the historical
financial position and results of operations of the FKI Automotive Group.
The financial statements of the FKI Automotive Group include allocations
of FKI Industries and FKI corporate expenses of approximately $1.5
million annually, as well as allocations of certain insurance, employee
benefit and other operating costs and expenses based on overall programs
administered by FKI Industries or FKI. These expenses have been allocated
to the FKI Automotive Group based on actuarial evaluations and management
estimates. Management believes this allocation methodology is reasonable
and that the allocated costs are comparable to those that the FKI
Automotive Group would have incurred on a stand-alone basis. The
financial information included herein may not necessarily reflect the
financial position and results of operations of the FKI Automotive Group
in the future.
The accompanying special purpose financial statements have been prepared in
connection with the December 12, 1997 sale of the FKI Automotive Group by
FKI Industries and subsidiaries of FKI to Trident Automotive plc and its
consolidated subsidiaries ("Trident" or the "Purchaser") and the
April 30, 1998 acquisition of all of the outstanding stock of Trident by
Dura Automotive Systems, Inc. ("Dura Automotive") (see note 13). The
accompanying financial statements reflect the combined financial
position, results of operations and cash flows of the following
subsidiaries (direct or indirect) and divisions of FKI Industries and FKI
that were included in the acquisitions by Trident and Dura Automotive:
ACCO Cable Controls Blytheville Division
ACCO Cable Controls Milan Division
Dominion Automotive Division
Keeler Automotive Division
Dominion Controls Division
ACCO La Teledynamique S.A.
ACCO Cable Controls Ltd.
ACCO-PLATEN GmbH
ACCO Industria e Commercio Ltda.
32
<PAGE>
FKI AUTOMOTIVE GROUP
NOTES TO FINANCIAL STATEMENTS
(Continued)
The accompanying financial statements have not been adjusted to reflect the
effects of the acquisitions by Trident or Dura Automotive.
The FKI Automotive Group financial statements do not include an allocation
of FKI Industries' or FKI's assets and liabilities not specifically
identified to the FKI Automotive Group, including cash and intercompany
debt. In addition, certain property, plant and equipment of the Keeler
Automotive Division (a division of FKI Industries) were not included in
the acquisition by Trident. A subsidiary of Trident leases such assets
for approximately $1.5 million annually for a period of 7.5 years.
Accordingly, property, plant and equipment with a net book value of
approximately $15.6 million at March 31, 1997 have been excluded from the
accompanying statement of net assets to be sold. Depreciation expense
associated with these assets is included in the accompanying statements
of operations to be sold.
The Company is a manufacturer of cable assemblies, lighting products and
door handle assemblies primarily sold to original equipment manufacturers
("OEMs") predominantly in the automotive market. The Company's customers
include the major United States automotive OEMs as well as several
foreign automotive OEMs. The FKI Automotive Group has operations in the
United States, Canada, the United Kingdom, France, Germany and Brazil.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF PREPARATION
The special purpose financial statements include the accounts of the
automotive subsidiaries and divisions of FKI Industries and FKI. All
significant intercompany transactions within the FKI Automotive Group
have been eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
REVENUE RECOGNITION
Revenues and earnings are recognized upon shipment of products.
33
<PAGE>
FKI AUTOMOTIVE GROUP
NOTES TO FINANCIAL STATEMENTS
(Continued)
INVENTORIES
Inventories are valued at the lower of cost or market on a first-in,
first-out (FIFO) basis.
REIMBURSABLE TOOLING
The Company capitalizes tooling costs and depreciates these costs over the
life of the related product. Additionally, the Company capitalizes as a
receivable the cost of tooling that is reimbursable by its customers.
PROPERTY, PLANT AND EQUIPMENT
The cost of property, plant and equipment is depreciated over the estimated
useful lives of the assets using the straight-line method, generally as
follows: land improvements, ten to 15 years; buildings, 20 to 40 years;
machinery and equipment, five to 15 years. Certain property, plant and
equipment was acquired in 1987 in a transaction accounted for as a
purchase. Such property, plant and equipment was recorded based on an
independent appraisal and is depreciated over the estimated remaining
useful lives set forth in the appraisal as follows: land improvements and
buildings, seven to 25 years; machinery and equipment, seven to 14 years.
Upon retirement or sale, the cost and related accumulated depreciation are
removed from the accounts and any resulting gains or losses are included
in operations.
EMPLOYEE BENEFITS
FKI Automotive Group employees participate in FKI Industries and FKI
sponsored noncontributory defined benefit pension plans which cover
substantially all employees in the United States, the United Kingdom and
Canada. The plans provide benefits based on years of service and
compensation or stated amounts for years of service, and the plans are
funded by FKI Industries and FKI based on actuarial determinations. The
expense for these plans, which was allocated to the FKI Automotive Group
by FKI Industries and FKI based on actuarial evaluations, was
approximately $1.7 million for the years ended March 31, 1996 and 1997
and $1.2 million for the period from April 1, 1997 to December 12, 1997.
34
<PAGE>
FKI AUTOMOTIVE GROUP
NOTES TO FINANCIAL STATEMENTS
(Continued)
The Company's French subsidiary, ACCO La Teledynamique S.A., provides
certain retirement benefits to employees who meet certain age and service
requirements. The obligation is unfunded, and accruals of approximately
$1.0 million related to the plan are included in noncurrent liabilities
in the accompanying statement of net assets to be sold as of March 31,
1997. The related expense was $0.1 million for the years ended March 31,
1996 and 1997 and $0.1 million for the period from April 1, 1997 to
December 12, 1997.
FKI Automotive Group's U.S. employees also participate in an FKI Industries
sponsored defined contribution plan. Salaried and non-union hourly
employees are eligible to participate. The plan provides for employee
contributions with certain matching and discretionary employer
contributions. The Company's expense for contributions under the plan was
approximately $0.6 million and $0.6 million for the years ended March 31,
1996 and 1997, respectively, and $0.5 million for the period from
April 1, 1997 to December 12, 1997.
FKI Automotive Group's employees participate in an FKI Industries sponsored
postretirement health and life insurance plan which covers substantially
all U.S. salaried and hourly employees. The expense for this plan, which
was allocated to the FKI Automotive Group by FKI Industries based on
actuarial evaluations, was approximately $1.0 million, and $0.9 million
for the years ended March 31, 1996 and 1997, respectively, and
$0.7 million for the period from April 1, 1997 to December 12, 1997.
The pension and postretirement benefit expense allocations were estimated
using actuarial estimates and management assumptions. The estimates are
based on historical information, along with certain assumptions about
future events. Changes in assumptions, as well as changes in actual
experience, could cause the estimated expenses and liabilities to change.
In connection with the purchase of the FKI Automotive Group, the Purchaser
will establish new defined benefit pension plans that will provide
benefits to employees in the United States, the United Kingdom and Canada
identical to those provided by the existing FKI Industries and FKI plans.
In connection therewith, FKI Industries and FKI will transfer funds from
their pension trust funds in satisfaction of the actuarially determined
liability assumed by the Purchaser. The Purchaser also will establish a
new defined contribution plan for U.S. employees and will assume
approximately $8.7 million of liabilities related to postretirement
health and life insurance benefits for employees of FKI Automotive Group
in the United States.
35
<PAGE>
FKI AUTOMOTIVE GROUP
NOTES TO FINANCIAL STATEMENTS
(Continued)
INCOME TAXES
The FKI Automotive Group operated as a division of FKI Industries in the
United States and Canada, and related income taxes were not allocated to
the Company. The provision for income taxes in the accompanying financial
statements reflects U.S. and Canadian tax rates of 40% and 37%,
respectively, the estimated combined rates for current and deferred
state, federal and foreign income taxes. The related current or deferred
income taxes payable would have been transferred to FKI Industries, if
allocated, and are included in net assets. The provision for income taxes
related to the Company's other non-U.S. operations is based on statutory
tax rates. There are no significant temporary differences or related
deferred income tax assets, liabilities or provisions.
GOODWILL
Goodwill is amortized using the straight-line method over periods ranging
from ten to 40 years. Subsequent to acquiring goodwill, the Company
continually evaluates whether events and circumstances, including
anticipated future operating results, indicate the remaining useful life
of goodwill may warrant revision. Based upon its most recent analysis,
the Company believes that no material impairment of goodwill exists at
December 12, 1997. Accumulated amortization of goodwill was approximately
$0.4 million as of March 31, 1997.
FOREIGN CURRENCY TRANSLATION
Substantially all assets and liabilities of the Company's foreign
subsidiaries are translated at the year-end exchange rates; income and
expenses are translated at the average exchange rates prevailing during
the period. Translation adjustments are accumulated in net assets.
Translation adjustments relating to the Company's operations in
hyper-inflationary economies, which were not material in any of the
periods presented, are included in income.
36
<PAGE>
FKI AUTOMOTIVE GROUP
NOTES TO FINANCIAL STATEMENTS
(Continued)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of financial instruments approximates the carrying value.
Certain of the Company's divisions hedge foreign currency exposure for
inventory purchases that are not denominated in their local currency
through the use of forward exchange contracts. The forward contracts are
intended to cover anticipated operating needs rather than firm
commitments. Therefore, the gains and losses on these contracts are
included in income based on the market values at each reporting date. At
March 31, 1997, the Company held $6.0 million of foreign currency
contracts maturing through March 1998. The fair value of the contracts,
based upon quotes obtained from brokers, was approximately $0.2 million
at March 31, 1997.
RESEARCH AND DEVELOPMENT
Expenditures for research and development and new product development are
expensed as incurred.
ENVIRONMENTAL EXPENDITURES
Environmental expenditures that relate to current or future revenues are
expensed or capitalized as appropriate. Expenditures that relate to an
existing condition caused by past operations that do not contribute to
current or future revenues are expensed as incurred.
(3) INVENTORIES
Inventories consisted of the following as of March 31, 1997 (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Finished products $ 2,957
Work-in-process 11,175
Raw materials 7,213
--------
$ 21,345
--------
--------
</TABLE>
37
<PAGE>
FKI AUTOMOTIVE GROUP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(4) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following as of March 31,
1997 (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Land and land improvements $ 2,979
Buildings 12,839
Machinery and equipment 125,328
Construction in progress 4,041
---------
145,187
Less- Accumulated depreciation (82,869)
---------
Property, plant and equipment, net $ 62,318
---------
---------
</TABLE>
(5) OTHER ASSETS
Other assets consisted of the following as of March 31, 1997 (in
thousands):
<TABLE>
<CAPTION>
<S> <C>
Goodwill $2,213
Note receivable - long-term 901
Other 117
------
$3,231
------
------
</TABLE>
(6) ACCRUED EXPENSES
Accrued expenses consisted of the following as of March 31, 1997 (in
thousands):
<TABLE>
<CAPTION>
<S> <C>
Accrued compensation $ 5,681
Accrued insurance 235
Accrued taxes other than income taxes 3,834
Other 4,825
--------
$ 14,575
--------
--------
</TABLE>
38
<PAGE>
FKI AUTOMOTIVE GROUP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(7) COMMITMENTS AND CONTINGENCIES
During fiscal 1996, a judgment in the amount of $4.4 million plus $0.2
million of interest was entered against the Company in a product
liability lawsuit, which judgment was paid during 1997. The accompanying
statements of operations to be sold include expenses related to the
judgment and related legal fees and costs, net of insurance recoveries,
of $3.4 million and $0.1 million for the years ended March 31, 1996 and
1997, respectively. The Company is also a defendant in various other
lawsuits and environmental proceedings that have arisen in the normal
course of business. Management believes that the ultimate resolution of
these matters will not have a material adverse effect on the Company's
financial position or results of operations.
The Company has noncancellable operating leases for its corporate
headquarters, certain manufacturing locations and various machinery and
equipment. The future minimum rental payments required under such leases
are as follows (in thousands):
Fiscal Year Ending March 31,
<TABLE>
<CAPTION>
<S> <C>
1998 $1,413
1999 1,027
2000 685
2001 225
2002 124
Thereafter 112
------
$3,586
------
------
</TABLE>
(8) TAXES ON INCOME
Income before provision for income taxes is comprised of the following
(in thousands):
<TABLE>
<CAPTION>
March 31,
----------------------- December 12,
1996 1997 1997
------- ------- ------------
<S> <C> <C> <C>
U.S $ 1,894 $ 7,571 $ (103)
Foreign 12,407 12,343 10,487
------- ------- -------
Total $14,301 $19,914 $10,384
------- ------- -------
------- ------- -------
</TABLE>
39
<PAGE>
FKI AUTOMOTIVE GROUP
NOTES TO FINANCIAL STATEMENTS
(Continued)
The provision for income taxes in the accompanying statements of operations
to be sold consists of the following (in thousands):
<TABLE>
<CAPTION>
March 31,
---------------------- December 12,
1996 1997 1997
------ ------ ------------
<S> <C> <C> <C>
U.S. state and federal $ 658 $2,933 $ (41)
Foreign 5,442 5,224 4,840
------ ------ ------
$6,100 $8,157 $4,799
------ ------ ------
------ ------ ------
</TABLE>
The Company's effective tax rate differs from the U.S. statutory rate of
35% as follows (in thousands):
<TABLE>
<CAPTION>
March 31,
--------------------- December 12,
1996 1997 1997
------ ------ ------------
<S> <C> <C> <C>
Federal income taxes at the U.S.
statutory rate $5,005 $6,970 $3,634
State income taxes, net of federal
benefits 82 367 (3)
Foreign losses not benefited 841 756 301
Settlement of prior year taxes - - 694
Other, net 172 64 173
------ ------ ------
$6,100 $8,157 $4,799
------ ------ ------
------ ------ ------
</TABLE>
(9) RELATED PARTY TRANSACTIONS:
The Company routinely enters into transactions with FKI and other companies
within the worldwide group of FKI. The amounts included in the
accompanying financial statements resulting from these related party
transactions are as follows (in thousands):
<TABLE>
<CAPTION>
March 31,
--------------------- December 12,
1996 1997 1997
------ ------ ------------
<S> <C> <C> <C>
Sales $ 120 $ 92 $ 40
Purchases 9,973 10,073 7,108
Interest income 66 65 4
</TABLE>
40
<PAGE>
FKI AUTOMOTIVE GROUP
NOTES TO FINANCIAL STATEMENTS
(Continued)
The Company maintains insurance coverage with a third party carrier that
reinsures a portion of the Company's coverage with a captive insurance
company of FKI. The Company's U.S. and Canadian entities are insured for
workers' compensation, general and product liability, and automobile
liability through this coverage. Premiums paid for all insurance coverage
through the captive insurance company were approximately $1.9 million,
$2.0 million and $1.4 million for the years ended March 31, 1996 and 1997
and the period from April 1, 1997 to December 12, 1997, respectively.
(10) SUPPLEMENTARY PROFIT AND LOSS INFORMATION
The statements of operations to be sold include the following expenses (in
thousands):
<TABLE>
<CAPTION>
March 31,
---------------------- December 12,
1996 1997 1997
------- ------- ------------
<S> <C> <C> <C>
Depreciation and amortization $10,657 $12,531 $8,834
Research and development 3,380 3,133 582
Rental 1,680 908 965
</TABLE>
(11) CUSTOMER INFORMATION
The Company sells its products primarily to OEMs in the automotive industry
on a worldwide basis. Sales are concentrated in North America and Europe
with the top three customers accounting for approximately 29%, 12% and
12% in fiscal 1996; 25%, 15% and 14% in fiscal 1997 and; 21%, 17% and 15%
for the period from April 1, 1997 to December 12, 1997. The Company's
largest customer will discontinue purchases of certain products over the
next five years. Sales of these products were approximately 6.0% of total
sales for the period from April 1, 1997 to December 12, 1997.
41
<PAGE>
FKI AUTOMOTIVE GROUP
NOTES TO FINANCIAL STATEMENTS
(Continued)
(12) SEGMENT INFORMATION
The Company operates in one business segment that manufactures automotive
parts for sale to OEMs. The Company operates in various geographical
locations, as indicated below. Segment financial information is as
follows:
SEGMENT INFORMATION FOR FISCAL 1996
<TABLE>
<CAPTION>
North Latin
America Europe America Eliminations Total
-------- ------- ------- ------------ --------
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated
customers $195,492 $75,608 $16,954 $ - $288,054
Transfers between geographic
areas 4,495 1,382 - (5,877) -
-------- ------- ------- ------- --------
Net sales $199,987 $76,990 $16,954 $(5,877) $288,054
-------- ------- ------- ------- --------
-------- ------- ------- ------- --------
Operating income $ 9,115 $ 4,302 $ 526 $ - $ 13,943
-------- ------- ------- ------- --------
-------- ------- ------- ------- --------
Identifiable assets $ 95,903 $46,320 $ 6,061 $ - $148,284
-------- ------- ------- ------- --------
-------- ------- ------- ------- --------
</TABLE>
<TABLE>
<CAPTION>
North Latin
America Europe America Eliminations Total
-------- ------- ------- ------------ --------
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated
customers $203,369 $79,967 $14,548 $ - $297,884
Transfers between geographic
areas 2,684 2,290 - (4,974) -
-------- ------- ------- ------- --------
Net sales $206,053 $82,257 $14,548 $(4,974) $297,884
-------- ------- ------- ------- --------
-------- ------- ------- ------- --------
Operating income $ 12,998 $ 7,326 $ (945) $ - $ 19,379
-------- ------- ------- ------- --------
-------- ------- ------- ------- --------
Identifiable assets $ 90,832 $49,396 $ 5,361 $ - $145,589
-------- ------- ------- ------- --------
-------- ------- ------- ------- --------
</TABLE>
42
<PAGE>
FKI AUTOMOTIVE GROUP
NOTES TO FINANCIAL STATEMENTS
(Continued)
SEGMENT INFORMATION FOR THE PERIOD APRIL 1, 1997 TO DECEMBER 12, 1997
<TABLE>
<CAPTION>
North Latin
America Europe America Eliminations Total
-------- ------- ------- ------------ --------
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated
customers $142,308 $59,181 $9,714 $ - $211,203
Transfers between
geographic areas 2,502 1,955 - (4,457) -
-------- ------- ------ ------- --------
Net sales $144,810 $61,136 $9,714 $(4,457) $211,203
-------- ------- ------ ------- --------
-------- ------- ------ ------- --------
Operating income $ 4,088 $ 6,249 $ 225 $ - $ 10,562
-------- ------- ------ ------- --------
-------- ------- ------ ------- --------
</TABLE>
(13) ACQUISITIONS:
On December 12, 1997, Trident completed the acquisition of the FKI
Automotive Group (the "Acquisition"). The Acquisition purchase price was
approximately $162.2 million. The Acquisition purchase price and related
fees and expenses of approximately $13.8 million were financed through
the issuance of $75.0 million 10% Senior Subordinated Notes due 2005
through a private placement offering, borrowings under the Company's new
$105.0 million secured credit facility and $42.6 million in equity
contributions.
On April 30, 1998, all of the outstanding stock of Trident was acquired by
an indirect, wholly owned subsidiary of Dura Automotive for cash
consideration of approximately $87.5 million. Upon completion of the
acquisition, Trident became an indirect, wholly owned subsidiary of Dura
Automotive.
The above acquisitions were accounted for as purchases and, accordingly,
the assets and liabilities were adjusted to fair values as of the
respective dates of acquisition. The accompanying financial statements do
not reflect the effects of the acquisitions described above.
43
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
TRIDENT AUTOMOTIVE PLC
Date: July 29, 1998 By /s/ Karl F. Storrie
--------------------------------
Karl F. Storrie, Director
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Karl F. Storrie July 29, 1998
- -------------------------- Director
Karl F. Storrie
/s/ David R. Bovee July 29, 1998
- -------------------------- Director
David R. Bovee
/s/ Stephen E.K. Graham July 29, 1998
- -------------------------- Secretary
Stephen E.K. Graham
44
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report included in this Form 10-K, into the Company's previously filed
Registration Statement File No. 333-8234.
ARTHUR ANDERSEN LLP
Grand Rapids, Michigan,
July 24, 1998
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report included in this Form 10-K, into the Company's previously filed
Registration Statement File No. 333-8234.
ARTHUR ANDERSEN LLP
Stamford, Connecticut,
July 24, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE TRIDENT
AUTOMOTIVE PLC AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR
THE YEAR ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> SEP-19-1997
<PERIOD-END> MAR-31-1998
<CASH> 11,415
<SECURITIES> 0
<RECEIVABLES> 50,620
<ALLOWANCES> 1,745
<INVENTORY> 18,798
<CURRENT-ASSETS> 89,614
<PP&E> 67,109
<DEPRECIATION> (2,236)
<TOTAL-ASSETS> 258,830
<CURRENT-LIABILITIES> 67,088
<BONDS> 0
0
0
<COMMON> 16,789
<OTHER-SE> 22,316
<TOTAL-LIABILITY-AND-EQUITY> 258,830
<SALES> 86,342
<TOTAL-REVENUES> 86,342
<CGS> 71,295
<TOTAL-COSTS> 71,295
<OTHER-EXPENSES> 9,634
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,887
<INCOME-PRETAX> 628
<INCOME-TAX> 505
<INCOME-CONTINUING> 123
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 123
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
