<PAGE>
Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________________
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the period ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to______
Commission File Number 333-8234
TRIDENT AUTOMOTIVE PLC
(Exact name of Registrant as specified in its charter)
ENGLAND NONE
(State or other jurisdiction of (IRS Employer Identification
Incorporation or organization) Number)
2791RESEARCH DRIVE
ROCHESTER HILLS, MICHIGAN 48309
(address of principal executive officers) (Zip Code)
(248) 299-7500
(Registrant's telephone number, including area code)
47000 Liberty Drive
Wixom, Michigan 48393
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes ___ No X
All of the outstanding capital stock of the Registrant is held by Dura
Automotive Systems (UK) Limited.
As of September 30, 1998, the Registrant had 50,000 Ordinary Shares of L1 each
and 17,000,000 Ordinary Shares of $1 each outstanding.
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
FKI
Company Predecessor
----------- -----------
SEPT. 30, MARCH 31,
1998 1998
----------- -----------
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,875 $ 11,415
Accounts receivable, less allowance for doubtful
accounts of $1,574 and $1,745 55,721 48,875
Inventories 16,816 18,798
Other current assets 10,249 10,526
--------- --------
Total current assets 87,661 89,614
--------- --------
PROPERTY, PLANT AND EQUIPMENT, NET 55,669 64,873
GOODWILL, NET 146,568 88,945
OTHER ASSETS, NET 22,949 15,398
--------- --------
$312,847 $258,830
--------- --------
--------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 3,000 $ 1,500
Accounts payable 30,319 37,018
Accrued expenses 53,704 28,570
--------- --------
Total current liabilities 87,023 67,088
NONCURRENT LIABILITIES:
Long-term debt, less current portion 137,523 126,300
Accrued pension and other postretirement liabilities 12,957 12,891
Other noncurrent liabilities 26,574 11,536
--------- --------
Total liabilities 264,077 217,815
--------- --------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST IN SUBSIDIARY COMPANY 844 1,170
--------- --------
REDEEMABLE U.S. DOLLAR ORDINARY SHARES:
$1 par value; 0 and 296,000 shares issued and outstanding;
valued at redemption value -- 740
--------- --------
SHAREHOLDERS' EQUITY:
Common stock -
Sterling ordinary shares; $1.70 par value; 50,000 shares
issued and outstanding 85 85
U.S. Dollar ordinary shares; $1.00 par value; 25,000,000
shares authorized; 17,000,000 and 16,704,000 shares issued
and outstanding 17,000 16,704
Additional paid-in-capital 24,000 23,556
Retained earnings 3,623 123
Cumulative translation adjustment 3,218 (1,363)
--------- --------
Total shareholders' equity 47,926 39,105
--------- --------
$312,847 $258,830
--------- --------
--------- --------
</TABLE>
The accompanying notes are an integral part of
these consolidated balance sheets.
- 2 -
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS - UNAUDITED)
<TABLE>
<CAPTION>
FKI
COMPANY PREDECESSOR
------------------ ------------------
Three months ended Three months ended
September 30, 1998 September 30, 1997
------------------ ------------------
<S> <C> <C>
Revenues $64,360 $67,701
Cost of sales 51,356 56,228
------------------ ------------------
Gross profit 13,004 11,473
Selling, general and administrative
expenses 5,722 8,260
Amortization expense 1,349 --
------------------ ------------------
Operating income 5,933 3,213
Interest expense (2,878) (256)
Interest income 65 232
Exchange gain 28 40
Other income (expense) 49 (88)
------------------ ------------------
Income before provision for income
taxes and minority interest 3,197 3,141
Provision for income taxes 1,357 2,742
Minority interest in loss of subsidiary 42 136
------------------ ------------------
Net income $ 1,882 $ 535
------------------ ------------------
------------------ ------------------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
- 3 -
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS - UNAUDITED)
<TABLE>
<CAPTION>
Trident FKI
COMPANY Predecessor PREDECESSOR
------------------ --------------- ------------------
Five months ended One month ended Six months ended
September 30, 1998 April 30, 1998 September 30, 1997
------------------ --------------- ------------------
<S> <C> <C> <C>
Revenues $114,331 $26,475 $148,463
Cost of sales 91,490 26,184 122,793
------------------ --------------- ------------------
Gross profit 22,841 291 25,670
Selling, general and administrative
expenses 9,795 4,056 16,261
Amortization expense 2,155 341 --
------------------ --------------- ------------------
Operating income (loss) 10,891 (4,106) 9,409
Interest expense (4,918) (976) (329)
Interest income 103 24 311
Exchange gain (loss) (60) 341 (77)
Other income 61 61 100
------------------ --------------- ------------------
Income (loss) before provision
(benefit) for income taxes and
minority interest 6,077 (4,656) 9,414
Provision (benefit) for income taxes 2,500 (1,656) 3,569
Minority interest in (profit) loss of
subsidiary 46 69 (107)
------------------ --------------- ------------------
Income (loss) before extraordinary
item 3,623 (2,931) 5,738
Extraordinary item - loss on early
extinguishment of debt, net -- (1,804) --
------------------ --------------- ------------------
Net income (loss) $ 3,623 $(4,735) $ 5,738
------------------ --------------- ------------------
------------------ --------------- ------------------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
- 4 -
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS - UNAUDITED)
<TABLE>
<CAPTION>
TRIDENT FKI
COMPANY PREDECESSOR PREDECESSOR
--------------- -------------- ------------------
Five months One month Six months
ended September ended April 30, ended September 30,
30, 1998 1998 1997
--------------- -------------- ------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 3,623 $ (4,735) $ 5,738
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities-
Depreciation and amortization 5,460 1,456 6,534
Write-off of deferred financing costs -- 2,775 --
Exchange gain (loss) 60 (341) 77
Minority interest (46) (69) 107
Changes in other operating items (23,478) 3,004 418
----------- ----------- -----------
Net cash provided by (used in) operating activities (14,381) 2,090 12,874
----------- ----------- -----------
INVESTING ACTIVITIES:
Capital expenditures, net (5,540) (2,454) (3,760)
----------- ----------- -----------
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt -- 50,000 --
Proceeds from borrowings on revolving credit facility 27,145 3,500 --
Repayment of debt (15,500) (52,800) --
Net repayment to FKI plc -- -- (9,663)
----------- ----------- -----------
Net cash provided by (used in) financing activities 11,645 700 (9,663)
----------- ----------- -----------
EFFECT OF EXCHANGE RATES ON CASH 710 690 549
----------- ----------- -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS (7,566) 1,026 --
CASH AND CASH EQUIVALENTS, beginning of period 12,441 11,415 --
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 4,875 $ 12,441 $ --
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
- 5 -
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - THE COMPANY:
Trident Automotive plc (the "Company") was formed on December 12, 1997,
when it acquired substantially all of the assets and the operations of the
FKI Automotive Group from FKI plc (the "FKI Acquisition"). The aggregate
purchase price, including transaction costs, was approximately $170
million. The FKI Acquisition was financed with $42.5 million in equity
contributions, $75 million in proceeds from a private placement of the
Company's 10% Senior Subordinated Notes due 2005 (the "Notes") and
borrowings under a $105 million secured credit facility.
On April 30, 1998, the Company was acquired by Dura Automotive Systems
(UK), Ltd. ("Dura Ltd."), a wholly owned subsidiary of Dura Automotive
Systems, Inc. ("Dura") (the "Dura Acquisiton"). Dura Ltd. acquired all of
the outstanding shares of the Company for an aggregate purchase price of
approximately $87.5 million and assumed the Company's outstanding
indebtedness of approximately $128 million.
Dura Ltd. is a wholly-owned subsidiary of Dura Automotive Systems, Inc., a
Delaware corporation, which is a leading designer and manufacturer of
driver control systems, engineered mechanical components and cable-related
systems for the global automotive industry.
In connection with the Dura Acquisition, the Company's credit facility was
replaced by a new Credit Agreement (see Note 3). The initial borrowing
under the Credit Agreement occurred concurrent with the Dura Acquisition.
Accordingly, deferred financing costs related to the Company's former
credit facility were written-off in April 1998 resulting in an
extraordinary charge of approximately $1.8 million, net of the related tax
benefit of approximately $1.0 million.
The Dura Acquisition constituted a change of control as defined by the
Company's Notes Indenture ("Indenture"). Upon the occurrence of a change
of control, each holder of the Notes may require the Company to repurchase
all or any part of the Notes held by such holder at an offer price in cash
equal to 101% of the aggregate principal amount thereof, plus accrued
interest and other specified costs to the date of repurchase. Pursuant to
the terms of the Indenture, Dura initiated a change of control offer to the
holders of the Notes on May 8, 1998. No holders tended their Notes.
The FKI Acquisition and the Dura Acquisition were both accounted for using
the purchase method of accounting. Accordingly, the assets and liabilities
at each of the acquisition dates were recorded at their fair value. The
excess of the respective purchase prices was recorded as goodwill and is
being amortized over forty years. In the accompanying consolidated
financial statements, for the period prior to December 12, 1997, the
Company is referred to as the FKI Predecessor. For the period from
December 12, 1997 to April 30, 1998, the Company is referred to as the
Trident Predecessor. The accompanying consolidated financial statements
have been prepared by the Company without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. The information
furnished in the consolidated financial statements includes normal
recurring adjustments and reflects all adjustments which are, in the
opinion of management, necessary for a fair presentation of such financial
statements. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules
and regulations. Although the Company believes that the disclosures are
adequate to make the information presented not misleading, it is suggested
that these consolidated financial statements be read in conjunction with
the Company's audited financial statements and the notes thereto included
in the Company's Annual Report on Form 10-K for its fiscal year ended March
31, 1998.
- 6 -
<PAGE>
NOTE 1 - THE COMPANY (continued):
Revenues and operating results for the one month ended April 30, 1998 and
the five months ended September 30, 1998, are not necessarily indicative of
the results to be expected for the full year.
The following unaudited pro forma financial information for the six months
ended September 30, 1998 and 1997 give effect to the Dura Acquisition as if
it had occurred at the beginning of the periods. The unaudited pro forma
information does not purport to represent what the Company's result of
operations would actually have been if such transaction in fact had
occurred at such date nor to project the Company's results of future
operations (in thousands):
<TABLE>
<CAPTION>
Six Months Ended September 30,
------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
Revenues $140,806 $148,463
-------------- --------------
-------------- --------------
Operating income $ 6,695 $ 6,823
-------------- --------------
-------------- --------------
Net income $ 542 $ 60
-------------- --------------
-------------- --------------
</TABLE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Inventories--Inventories are valued at the lower of cost or market on a
first-in, first-out (FIFO) basis. Inventories consisted of the following
(in thousands):
<TABLE>
<CAPTION>
Sept. 30, 1998 March 31, 1998
-------------- --------------
<S> <C> <C>
Finished products $ 3,486 $ 4,158
Work-in-process 7,100 6,755
Raw materials 6,230 7,885
-------------- --------------
Total $16,816 $18,798
-------------- --------------
-------------- --------------
</TABLE>
Supplemental Cash Flow Information--The Company paid cash in the following
amounts for interest and income taxes (in thousands):
<TABLE>
<CAPTION>
Five Months One Month Six Months
Ended Ended Ended
September 30, 1998 April 30, 1998 September 30, 1997
------------------ -------------- ------------------
<S> <C> <C> <C>
Income taxes $2,789 $ -- $ --
Interest 4,751 361 --
</TABLE>
- 7 -
<PAGE>
NOTE 3 - LONG TERM DEBT:
Long-term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
September 30, March 31,
1998 1998
------------ ----------
<S> <C> <C>
Bank Credit Agreement:
Term loan $ 50,000 $ 50,000
Revolving credit facility 15,132 2,800
Capital Leases 391 --
Notes, due 2005 75,000 75,000
------------ ----------
140,523 127,800
Less - current portion (3,000) (1,500)
------------ ----------
Total long-term debt $137,523 $126,300
------------ ----------
</TABLE>
On April 30, 1998, in connection with the Dura Acquisition, Dura and the
Company entered into a new $402.5 million credit agreement (the "Credit
Agreement"). The Credit Agreement provided Dura with total revolving
credit facilities of $225 million, term loans of $100 million, an
acquisition facility of $30 million and a twelve-month interim loan of
$47.5 million. The Credit Agreement made available to the Company, as a
sub-facility, a $50 million term loan, a $25 million revolving credit and
letter-of-credit facility and a $30 million acquisition facility (the
"Trident Sub-Facility"). The Credit Agreement has a term of five years and
borrowings bear interest at the lenders reference rate or the Eurocurrency
rate. The interest rate on borrowings outstanding under the Credit
Agreement ranged from 6.275% to 9.3125% as of September 30, 1998. The
Credit Agreement contains various restrictive covenants, which limit
indebtedness, investments, rental obligations and cash dividends. The
Credit Agreement also requires the Company to maintain certain financial
ratios including minimum liquidity and interest coverage. Pursuant to the
terms of the Credit Agreement, Dura and certain of its subsidiaries will
provide guarantees and collateral to support obligations owing under the
Trident Sub-Facility; but, so long as the Notes remain outstanding, neither
the Company nor any of its subsidiaries have guaranteed any obligations
that are not borrowed pursuant to the Trident Sub-Facility. Under the
terms of the Credit Agreement, an event of default by Dura also causes an
event of default under the Trident Sub-Facility. The Company and Dura were
in compliance with the covenants as of September 30, 1998. The assets of
the Company have been pledged as collateral to secure borrowings under the
Trident Sub-Facility.
The Credit Agreement provides the Company with the ability to denominate
its revolving credit borrowings in foreign currencies. As of September 30,
1998, $11.5 million of borrowings were denominated in US dollars, $2.4
million were denominated in British pound sterling and $1.2 million were
denominated in Canadian dollars.
The Notes were issued on December 12, 1997, concurrent with the FKI
Acquisition. Interest is payable semi-annually on June 15 and December 15
of each year. As further discussed in Note 5, the Notes are guaranteed by
certain subsidiaries of the Company.
- 8 -
<PAGE>
NOTE 4 - ACCOUNTING CHANGES
Effective April 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income." This statement established standards for
reporting and display of comprehensive income and its components.
Comprehensive income reflects the change in equity of a business
enterprise during a period from transactions and other events and
circumstances from non-owner sources. For the Company, comprehensive
income represents net income adjusted for foreign currency translation
adjustments. Comprehensive income was approximately $3.5 million for the
combined six months ended September 30, 1998 and $8.0 million for the
six months ended September 30, 1997.
During February 1998, the Financial Accounting Standards Board (the
"FASB") issued SFAS No. 132, "Employers' Disclosures about Pensions and
Other Postretirement Benefits," effective for fiscal years beginning
after December 31, 1997. SFAS No. 132 revises certain of the disclosure
requirements, but does not change the measurement or recognition of such
obligations. The adoption of SFAS No. 132 will result in revised and
additional disclosures, but will have no effect on the financial position,
results of operations, or liquidity of the Company.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" effective for years beginning after
June 15, 1999. SFAS No. 133 establishes accounting and reporting
standards requiring that every derivative instrument, including certain
derivative instruments embedded in other contracts, be recorded in the
balance sheet as either and asset or liability measured at its fair
value. SFAS No. 133 requires that changes in the derivative's fair
value be recognized currently in earnings unless specific hedge criteria
are met. Special accounting for qualifying hedges allow a derivative's
gains or losses to offset related results on the hedged item in the
income statement and requires that a company must formally document,
designate and assess the effectiveness of transactions that receive
hedge accounting. The Company has not yet quantified the impacts of
adopting SFAS No. 133 and has not yet determined the timing method of
adoption.
NOTE 5 - CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION
The following consolidating financial information presents balance
sheet, statement of operations and cash flow information related to the
Company's businesses. Each Guarantor is a direct or indirect
wholly-owned subsidiary of Trident Automotive plc and has fully and
unconditionally guaranteed, on a joint and several basis, the Notes.
The Company has not presented separate financial statements and other
disclosures concerning the Guarantors because management believes that
such information is not material. For presentation purposes, the
consolidating financial data for the one month ended April 30, 1998 and
the five months ended September 30, 1998 have been combined.
- 9 -
<PAGE>
NOTE 5 - CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL
INFORMATION (Continued):
CONSOLIDATING BALANCE SHEETS AS OF SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
Non-
Trident Guarantor Guarantor
Automotive plc Companies Companies Eliminations Consolidated
-------------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 57 $ 1,042 $ 3,776 $ -- $ 4,875
Accounts receivable, net -- 37,516 18,205 55,721
Inventories -- 13,012 3,804 -- 16,816
Due from affiliates 1,056 14,198 434 (15,688) --
Other current assets -- 6,993 3,256 -- 10,249
-------- -------- -------- --------- --------
Total current assets 1,113 72,761 29,475 (15,688) 87,661
Property, plant and equipment -- 43,674 11,995 -- 55,669
Note receivable from subsidiaries -- 22,281 -- (22,281) --
Goodwill 9,714 113,150 25,207 (1,503) 146,568
Other assets, net 170,076 34,227 1,383 (182,737) 22,949
-------- -------- -------- --------- --------
Total assets $180,903 $286,093 $ 68,060 $(222,209) $312,847
-------- -------- -------- --------- --------
-------- -------- -------- --------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 3,000 $ -- $ -- $ -- $ 3,000
Accounts payable -- 21,510 8,809 -- 30,319
Accrued expenses (401) 45,408 8,697 -- 53,704
Due to affiliates 11,854 2,463 1,371 (15,688) --
-------- -------- -------- --------- --------
Total current liabilities 14,453 69,381 18,877 (15,688) 87,023
Non-current liabilities:
Long-term debt, less current portion 122,000 15,145 378 -- 137,523
Note payable to Parent (3,476) 1,690 25,762 (23,976) --
Accrued pension and other postretirement
liabilities -- 11,881 1,076 -- 12,957
Other noncurrent liabilities -- 23,697 2,877 -- 26,574
-------- -------- -------- --------- --------
Total liabilities 132,977 121,794 48,970 (39,664) 264,077
Commitments and contingencies
Minority interest in subsidiary company -- -- 844 -- 844
Shareholders' equity 47,926 164,299 18,246 (182,545) 47,926
-------- -------- -------- --------- --------
Total liabilities and shareholders'
equity $180,903 $286,093 $ 68,060 $(222,209) $312,847
-------- -------- -------- --------- --------
-------- -------- -------- --------- --------
</TABLE>
- 10 -
<PAGE>
NOTE 5 - CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL
INFORMATION (Continued):
CONSOLIDATING STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
Non-
Trident Guarantor Guarantor
Automotive plc Companies Companies Eliminations Consolidated
-------------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues $ -- $110,622 $30,864 $ (680) $140,806
Cost of sales -- 93,400 24,954 (680) 117,674
------- -------- -------- ------- -------
Gross profit -- 17,222 5,910 -- 23,132
Selling, general and administrative expenses 80 10,393 3,378 -- 13,851
Amortization expense 334 1,700 462 -- 2,496
------- -------- -------- ------- -------
Operating income (loss) (414) 5,129 2,070 -- 6,785
Interest expense (5,588) (144) (162) -- (5,894)
Interest expense-intercompany -- (6,074) (934) 7,008 --
Interest income -- 63 64 -- 127
Interest income - intercompany -- 7,008 -- (7,008) --
Exchange gain (loss) -- (336) 617 -- 281
Equity in net income of subsidiary 4,438 1,251 -- (5,689) --
Other income -- 16 106 -- 122
------- -------- -------- ------- -------
Net income (loss) before provision for
income taxes and minority interest (1,564) 6,913 1,761 (5,689) 1,421
Provision (benefit) for income taxes (2,256) 2,475 625 -- 844
Minority interest in loss of subsidiary -- -- 115 -- 115
------- -------- -------- ------- -------
Net income (loss) before extraordinary item 692 4,438 1,251 (5,689) 692
Extraordinary item - loss on early
extinguishment of debt, net (1,804) -- -- -- (1,804)
------- -------- -------- ------- -------
Net income (loss) $(1,112) $ 4,438 $ 1,251 $(5,689) $(1,112)
------- -------- -------- ------- -------
------- -------- -------- ------- -------
</TABLE>
- 11 -
<PAGE>
NOTE 5 - CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL
INFORMATION (Continued):
CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
Non-
Trident Guarantor Guarantor
Automotive plc Companies Companies Eliminations Consolidated
-------------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $(1,112) $ 4,438 $ 1,251 $(5,689) $ (1,112)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities-
Depreciation and amortization 334 5,205 1,377 -- 6,916
Write-off of deferred financing costs 2,775 -- -- -- 2,775
Exchange gain (loss) -- 336 (617) -- (281)
Minority interest -- -- (115) -- (115)
Changes in other operating items (2,694) (24,145) (950) 7,315 (20,474)
------- -------- ------- ------- ---------
Net cash provided by (used in)
operating activities (697) (14,166) 946 1,626 (12,291)
INVESTING ACTIVITIES:
Capital expenditures, net -- (6,667) (1,327) -- (7,994)
------- -------- ------- ------- ---------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 50,000 -- -- -- 50,000
Proceeds from borrowings under revolving
credit facility 3,500 27,145 -- -- 30,645
Repayment of debt (56,300) (12,000) -- -- (68,300)
------- -------- ------- ------- ---------
Net cash provided by (used in)
financing activities (2,800) 15,145 -- -- 12,345
------- -------- ------- ------- ---------
EFFECT OF EXCHANGE RATES ON CASH 3,259 430 (663) (1,626) 1,400
------- -------- ------- ------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS (238) (5,258) (1,044) -- (6,540)
CASH AND CASH EQUIVALENTS, beginning
of period 295 6,300 4,820 -- 11,415
------- -------- ------- ------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 57 $ 1,042 $ 3,776 $ -- $ 4,875
------- -------- ------- ------- ---------
------- -------- ------- ------- ---------
</TABLE>
- 12 -
<PAGE>
NOTE 5 - CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL
INFORMATION (Continued):
CONSOLIDATING STATEMENT OF OPERATIONS FOR THE SIX MONTHS
ENDED SEPTEMBER 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
Non-
Guarantor Guarantor
Companies Companies Eliminations Consolidated
---------- --------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 34,210 $ 115,353 $ (1,100) $ 148,463
Cost of sales 29,664 94,229 (1,100) 122,793
--------- ---------- --------- ----------
Gross profit 4,546 21,124 -- 25,670
Selling, general and administrative expenses 2,582 13,679 -- 16,261
---------- ---------- ---------- ----------
Operating income 1,964 7,445 -- 9,409
Interest expense (19) (310) -- (329)
Interest income -- 311 -- 311
Exchange loss (15) (62) -- (77)
Other income 43 57 -- 100
---------- ---------- ---------- ----------
Income before provision for income taxes 1,973 7,441 -- 9,414
Provision for income taxes 857 2,712 -- 3,569
Minority interest -- (107) -- (107)
---------- ---------- ---------- ----------
Net income $ 1,116 $ 4,622 $ -- $ 5,738
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
- 13 -
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Certain components of the results of operations for the periods presented are
not directly comparable as a result of the application of purchase accounting
and the financing related to the FKI Acquisition on December 12, 1997 and the
Dura Acquisition on April 30, 1998. The acquisitions were partially financed
with debt resulting in significantly higher interest expense as compared to
periods prior to December 12, 1997. In addition, the purchase price in
excess of the fair value of the net assets acquired has been reflected as
goodwill which is being amortized over forty years. There was no
amortization expense in the periods prior to December 12, 1997.
THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1997
REVENUES. Revenues decreased by $3.3 million for the three months ended
September 30 1998 to $64.4 million from $67.7 million for the three months
ended September 30, 1997. This decrease was essentially attributable to the
balancing out of certain forward lighting programs. In addition, revenues
were reduced by $0.8 million as a result of changes in foreign currency
exchange rates.
GROSS PROFIT. Total gross profit increased by $1.5 million for the three
months ended September 30, 1998 to $13.0 million from $11.5 million for the
three months ended September 30, 1997. This increase in gross profit was
attributable to improved efficiency being realized due to the reorganization
instituted related to the Trident acquisition and the subsequent Dura
acquisition.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased by $2.6 million for the three months ended
September 30, 1998 to $5.7 million from $8.3 million the three months ended
September 30, 1997. This decrease is attributable to the savings being
realized by combining Dura's and Trident's selling and administrative
functions.
AMORTIZATION EXPENSE. Amortization expense was $1.3 million for the three
months ended September 30, 1998. The expense represents amortization of
goodwill and other intangibles that were recorded in connection with the FKI
Acquisition and the Dura Acquisition. There was no amortization expense for
the three months ended September 30, 1997.
INTEREST EXPENSE. Interest expense, net of interest income, was $2.8
million for the three months ended September 30, 1998. This interest results
from borrowings used to finance the FKI Acquisition and Dura Acquisition.
PROVISION FOR INCOME TAXES. The effective income tax rate was 42.4% for the
three months ended September 30, 1998. The effective rates differed from the
statutory rates as a result of state income taxes, foreign income taxes and
the effects of non-deductible goodwill amortization.
- 14 -
<PAGE>
SIX MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO SIX MONTHS ENDED SEPTEMBER
30, 1997
Certain components of results of operations (revenues, cost of sales, gross
profit and selling, general and administrative expenses) are comparable for
the one month ended April 30, 1998 and the five months ended September 30,
1998. Accordingly, such components have been combined for the six months
ended September 30, 1998 for purposes of management's discussion and analysis
as follows:
<TABLE>
<CAPTION>
Company and FKI Predecessor
Trident Predecessor Six Months Ended
Combined Six Months Ended September 30,
September 30, 1998 1997
------------------------- -----------------
<S> <C> <C>
Revenues $ 140,806 $ 148,463
Cost of sales 117,674 122,793
------------------------- ----------------
Gross profit $ 23,132 $ 25,670
------------------------- ----------------
------------------------- ----------------
Selling, general and administrative
expenses $ 13,851 $ 16,261
------------------------- ----------------
------------------------- ----------------
</TABLE>
REVENUES. Revenues decreased by $7.7 million for the combined six months
ended September 30, 1998 to $140.8 million from $148.5 million for the six
months ended September 30, 1997. This decrease was essentially attributable
to the balancing out of certain forward lighting programs. In addition,
revenues were reduced by $1.4 million as a result of changes in foreign
currency exchange rates.
GROSS PROFIT. Total gross profit decreased by $2.6 million for the combined
six months ended September 30, 1998 to $23.1 million from $25.7 million for
the six months ended September 30, 1997. This decrease in gross profit was
due to the reduction in revenues and a charge of approximately $3.6 million
relating to the recognition of obligations to certain customers which was
recognized in April 1998.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased by $2.4 million for the combined six months
ended September 30, 1998 to $13.9 million from $16.3 million for the six months
ended September 30, 1997. This decrease is attributable to the savings being
realized by combining Dura's and Trident's selling and administrative functions.
AMORTIZATION EXPENSE. Amortization expense was $2.5 million for the combined
six months ended September 30, 1998. The expense represents amortization of
goodwill and other intangibles that were recorded in connection with the FKI
Acquisition and the Dura Acquisition. There was no amortization expense for
the six months ended September 30, 1997.
INTEREST EXPENSE. Interest expense, net of interest income, was $5.8
million for the combined six months ended September 30, 1998. This interest
is the results from borrowings used to finance the FKI Acquisition and Dura
Acquisition.
- 15-
<PAGE>
PROVISION FOR INCOME TAXES. The effective income tax rate was 41.1% for the
five months ended September 30, 1998, 35.6% for the one month ended April 30,
1998 and 37.9% for the six months ended September 30, 1997. The effective
rates differed from the statutory rates as a result of state income taxes,
foreign income taxes and the effects of non-deductible goodwill amortization.
EXTRAORDINARY ITEM. The extraordinary loss for the one month ended April
30, 1998 represents the write-off, net of income tax benefit, of deferred
financing costs related to the Company's former credit facility. The former
credit facility was terminated in connection with the Dura Acquisition.
LIQUIDITY AND CAPITAL RESOURCES
During the combined six months ended September 30, 1998, the Company
generated cash from operations of $8.2 million, before the effects of changes
in other operating items, compared to $12.4 million in 1997. The Company
estimates that it will fund approximately $5 million in capital expenditures
for the remainder of fiscal year 1999. These capital expenditures will be
used primarily for the purchase of machinery and equipment to support new
business awards, as well as to support continued cost reduction efforts.
On April 30, 1998, in connection with the Dura Acquisition, Dura and the
Company entered into a new $402.5 million credit agreement ("Credit
Agreement"). The Credit Agreement provided Dura with total revolving credit
facilities of $225 million, term loans of $100 million, an acquisition
facility of $30 million and a twelve-month interim loan of $47.5 million.
The Credit Agreement made available to the Company, as a sub-facility, a $50
million term loan, a $25 million revolving credit and letter of credit
facility and a $30 million acquisition facility (the "Trident Sub-Facility").
The Credit agreement has a term of five years and borrowings bear interest
at the lenders reference rate or the Eurocurrency rate. The interest rate on
borrowings outstanding under the Credit Agreement ranged from 6.275% to
9.3125% as of September 30, 1998. The Credit Agreement contains various
restrictive covenants, which limit indebtedness, investments, rental
obligations and cash dividends. The Credit Agreement also requires the
Company to maintain certain financial ratios including minimum liquidity and
interest coverage. Pursuant to the terms of the Credit Agreement, Dura and
certain of its subsidiaries will provide guarantees and collateral to support
obligations owing under the Trident Sub-Facility; but, so long as the Notes
remain outstanding, neither the Company nor any of its subsidiaries have
guaranteed any obligations that are not borrowed pursuant to the Trident
Sub-Facility. Under the terms of the Credit Agreement, an event of default
by Dura also causes an event of default under the Trident Sub-Facility. The
Company and Dura were in compliance with the covenants as of September 30,
1998. The assets of the Company have been pledged as collateral borrowings
under the Credit Agreement.
The Company believes borrowing availability under its new credit facility,
together with funds generated by the Company's operations, will provide
sufficient liquidity and capital resources for working capital, capital
expenditures and other needs through fiscal 1999.
- 16 -
<PAGE>
EFFECTS OF INFLATION
Inflation potentially affects the Company in two principal ways. First, a
portion of the Company's debt is tied to prevailing short-term interest rates
which may change as a result of inflation rates, translating into changes in
interest expense. Second, general inflation can impact material purchases,
labor and other costs. In many cases, the Company has limited ability to pass
through inflation-related cost increases due to the competitive nature of the
markets that the Company serves. In the past few years, however, inflation
has not been a significant factor for the Company.
Foreign Currency Transactions
A significant portion of the Company's revenues are derived from
manufacturing operations in Europe, Latin America and Canada. The results of
operations and the financial position of the Company's operations in these
countries are principally measured in their respective currency and
translated into U.S. dollars. The effects of foreign currency fluctuations in
such countries are somewhat mitigated by the fact that expenses are generally
incurred in the same currencies in which revenues are generated. The reported
income of these subsidiaries will be higher or lower depending on a weakening
or strengthening of the U.S. dollar against the respective foreign currency.
A significant portion of the Company's assets are also based in its foreign
operations and are translated into U.S. dollars at foreign currency exchange
rates in effect as of the end of each period, with the effect of such
translation reflected as a separate component of shareholders' equity.
Accordingly, the Company's consolidated shareholders' equity will fluctuate
depending upon the weakening or strengthening of the U.S. dollar against the
respective foreign currency.
The Company's strategy for management of currency risk relies primarily upon
conducting its operations in such countries' respective currency, however,
the Company may, from time to time, engage in hedging programs intended to
reduce its exposure to currency fluctuations.
YEAR 2000
The Company is currently working to resolve the potential impact of the year
2000 on the processing of time-sensitive information by the Company's
computerized information systems. Any of the Company's programs that have
time-sensitive software may recognize the year "00" as 1900 rather than the
year 2000. This could result in miscalculations, classification errors or
system failures.
While the Company's various operations are at different stages of Year 2000
readiness, the Company has nearly completed its global product review. Based
on the information available to date, the Company does not anticipate any
significant readiness problems with respect to its products.
Most of the Company's facilities have completed the inventory and assessment
of their internal information technology ("IT") and non-IT systems (including
business, operating and factory floor systems) and are working on
remediation, as appropriate, for these systems. Those facilities that have
not yet completed this process are expected to be finished by the end of
1998. The remediation may include repair, replacement, upgrading, or
retirement of specific systems and components, with priorities based on a
business risk assessment. The Company expects that remediation activities
for its internal systems will be completed during the second quarter of 1999,
and contingency plans, as needed, before the end of the year.
The most reasonable likely worst case scenario that the Company currently
anticipates with respect to Year 2000 is the failure of some of its
suppliers, including utilities suppliers, to be ready. This could cause a
temporary interruption of materials or services that the Company needs to
make its products, which could result in delayed shipments to customers and
lost sales and profits for the Company. As the critical supplier assessments
are completed, the Company will develop contingency plans, as necessary, to
address the risks which are identified. Although such plans have not been
developed yet, they might include resourcing materials or building inventory
banks.
The Company, combined with Dura, has spent approximately $1.5 million on Year
2000 activities to date and anticipates that it will incur additional future
costs not to exceed $5.0 million in total in addressing Year 2000 issues.
The outcome of the Company's Year 2000 program is subject to a number of
risks and uncertainties, some of which (such as the availability of qualified
computer personnel and the Year 2000 responses of third parties) are beyond
its control. Therefore, there can be no assurances that the Company will not
incur material remediation costs beyond the above anticipated future costs,
or that the Company's business, financial condition, or results of operations
will not be significantly impacted if Year 2000 problems with its systems, or
with the products or systems of other parties with whom it does business, are
not resolved in a timely manner.
- 17 -
<PAGE>
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
During June 1997, the Financial Accounting Standards Board released SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information,"
effective for fiscal years beginning after December 14, 1997. SFAS No. 131
requires disclosure of business and geographic segments in the consolidated
financial statements of the Company. The Company will adopt SFAS No. 131 in
fiscal 1999 and is currently analyzing the impact it will have on the
disclosures in its financial statements.
During February 1998, the Financial Accounting Standards Board (the "FASB")
issued SFAS No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits," effective for fiscal years beginning after December
31, 1997. SFAS No. 132 revises certain of the disclosure requirements, but
does not change the measurement or recognition of those obligations. The
adoption of SFAS No. 132 will result in revised and additional disclosures,
but will have no effect on the financial position, results of operations, or
liquidity of the Company.
In June 1998 the FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities" effective for years beginning after June
15, 1999. SFAS No. 133 establishes accounting and reporting standards
requiring that every derivative instrument, including certain derivative
instruments embedded in other contracts be recorded in the balance sheet as
either an asset or liability measured at its fair value. SFAS No. 133
requires that changes in the derivative's fair value be recognized currently
in earnings unless specific hedge criteria are met. Special accounting for
qualifying hedges allow a derivative's gains or losses to offset related
results on the hedged item in the income statement and requires that a
company must formally document, designate and assess the effectiveness of
transactions that receive hedge accounting. The Company has not yet
quantified the impacts of adopting SFAS No. 133 and has not yet determined
the timing or method of adoption.
FORWARD-LOOKING STATEMENTS
All statements, other than statements of historical fact, included in this
Form 10-Q, including without limitation the statements under "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
are, or may be deemed to be, forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange
Act of 1934, as amended. When used in this Form 10-Q, the words
"anticipate," "believe," "estimate," "expect," "intends," and similar
expressions, as they relate to the Company, are intended to identify
forward-looking statements. Such forward-looking statements are based on the
beliefs of the Company's management as well as on assumptions made by and
information currently available to the Company at the time such statements
were made. Various economic and competitive factors could cause actual
results to differ materially from those discussed in such forward-looking
statements, including factors which are outside the control of the Company,
such as risks relating to: (i) the degree to which the Company is leveraged;
(ii) the Company's reliance on major customers and selected models; (iii) the
cyclicality and seasonality of the automotive market; (iv) the failure to
realize the benefits of recent acquisitions and joint ventures; (v) obtaining
new business on new and redesigned models; (vi) the Company's ability to
continue to implement its acquisition strategy; and (vii) the highly
competitive nature of the automotive supply industry. All subsequent written
and oral forward-looking statements attributable to the Company or persons
acting on behalf of the Company are expressly qualified in their entirety by
such cautionary statements.
- 18 -
<PAGE>
PART II. OTHER INFORMATION
TRIDENT AUTOMOTIVE PLC
Item 1. Legal Proceedings:
None
Item 2. Change in Securities:
None
Item 3. Defaults Upon Senior Securities:
None
Item 4. Submission of Matters to a Vote of Security Holders:
None
Item 5. Other Information:
None
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits:
27.1 Financial Data Schedule.
(b) Reports on Form 8-K:
None
- 19 -
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TRIDENT AUTOMOTIVE PLC
Date: November 13, 1998 By /s/ Stephen E.K. Graham
-------------------------------
Stephen E.K. Graham
Secretary
- 20 -
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> MAY-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 4,875
<SECURITIES> 0
<RECEIVABLES> 57,295
<ALLOWANCES> (1,574)
<INVENTORY> 16,816
<CURRENT-ASSETS> 87,661
<PP&E> 55,669
<DEPRECIATION> 0
<TOTAL-ASSETS> 312,847
<CURRENT-LIABILITIES> 87,023
<BONDS> 0
0
0
<COMMON> 17,085
<OTHER-SE> 30,841
<TOTAL-LIABILITY-AND-EQUITY> 312,847
<SALES> 114,331
<TOTAL-REVENUES> 114,331
<CGS> 91,490
<TOTAL-COSTS> 91,490
<OTHER-EXPENSES> 11,950
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,918
<INCOME-PRETAX> 6,077
<INCOME-TAX> 2,500
<INCOME-CONTINUING> 3,623
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,623
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
