<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 March 31, 1999
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)
2791 RESEARCH DRIVE
ROCHESTER HILLS, MICHIGAN 48309
(address of principal executive officers) (Zip Code)
(248) 299-7500
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
--- ---
All of the outstanding capital stock of the Registrant is held by Dura UK
Limited.
As of March 31, 1999, the Registrant had 50,000 Ordinary Shares of (pound)1 each
and 17,000,000 Ordinary Shares of $1 each outstanding.
<PAGE>
ITEM 1 - FINANCIAL INFORMATION
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS - UNAUDITED)
<TABLE>
<CAPTION>
FKI
COMPANY PREDECESSOR
------- -----------
Three months ended Three months ended
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Revenues $ 56,691 $ 86,342
Cost of sales 46,562 71,295
-------- --------
Gross profit 10,129 15,047
Selling, general and administrative expenses 3,767 8,737
Amortization expense 1,621 1,171
-------- --------
Operating income 4,741 5,139
Interest expense, net (2,624) (3,613)
Exchange gain (loss) 321 (922)
Other income 135 24
-------- --------
Income before provision for income taxes 2,573 628
Provision for income taxes 1,029 505
-------- --------
Net income $ 1,544 $ 123
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated statements.
-2-
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
March 31, December 31,
Assets 1999 1998
- ------------------------------------------------------------------ ---- ----
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,860 $ 8,368
Accounts receivable, net 47,479 55,735
Inventories 14,380 15,758
Other current assets 23,393 21,281
------------ ------------
Total current assets 91,112 101,142
------------ ------------
Property, plant and equipment, net 53,466 57,332
Goodwill, net 213,617 215,425
Other assets, net 11,240 9,074
------------ ------------
$ 369,435 $ 382,973
------------ ------------
------------ ------------
Liabilities and Stockholders' Investment
- ------------------------------------------------------------------
Current liabilities:
Current portion of long-term debt $ 59 $ 7,059
Accounts payable 29,597 33,796
Accrued expenses 49,781 54,068
------------ ------------
Total current liabilities 79,437 94,923
------------ ------------
Noncurrent liabilities:
Long-term debt, less current portion 140,621 136,799
Accrued pension and other postretirement liabilities 12,654 12,957
Other noncurrent liabilities 38,240 37,200
------------ ------------
Total liabilities 270,952 281,879
------------ ------------
Minority interest in subsidiary company -- 786
Stockholder's investment:
Common stock -- Sterling ordinary shares 85 85
Common stock -- U.S. dollar ordinary shares 17,000 17,000
Additional paid-in capital 78,157 78,157
Retained earnings 7,420 5,876
Accumulated other comprehensive income --
cumulative translation adjustment (4,179) (810)
------------ ------------
Total stockholder's investment 98,483 100,308
------------ ------------
$ 369,435 $ 382,973
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated balance sheets.
-3-
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS - UNAUDITED)
<TABLE>
<CAPTION>
FKI
COMPANY PREDECESSOR
------- -----------
Three months Three months
Ended March 31, Ended March 31,
1999 1998
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,544 $ 123
Adjustments to reconcile net income to net
cash provided by operating activities--
Depreciation and amortization 3,731 3,547
Exchange (gain) loss (321) 922
Minority interest -- (24)
Changes in other operating items (1,902) 1,646
---------- -----------
Net cash provided by operating activities 3,052 6,214
INVESTING ACTIVITIES:
Capital disposals (expenditures), net 467 (7,786)
Purchase of minority interest (1,508) --
Purchase of Predecessor, net -- (155,490)
---------- -----------
Net cash used in investing activities (1,041) (163,276)
---------- -----------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt -- 75,000
Proceeds from borrowings under credit facility 72,332 57,763
Repayment of debt (75,518) (4,963)
Receipt of capital from Investor Group -- 42,585
Equity fees paid to affiliates of Investor Group -- (1,500)
---------- -----------
Net cash provided by (used in) financing activities (3,186) 168,885
---------- -----------
EFFECT OF EXCHANGE RATES ON CASH (1,333) (408)
---------- -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS (2,508) 11,415
CASH AND CASH EQUIVALENTS, beginning of period 8,368 --
---------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 5,860 $ 11,415
---------- -----------
---------- -----------
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated statements.
-4-
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The accompanying condensed consolidated financial statements have been
prepared by Trident Automotive plc (the "Company") without audit, pursuant
to the rules and regulations of the Securities and Exchange Commission. The
information furnished in the condensed consolidated financial statements
includes normal recurring adjustments and reflects all adjustments which
are, in 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 condensed consolidated financial
statements be read in conjunction with the audited financial statements and
the notes thereto included in the Company's Annual Report on Form 10-K for
its fiscal year ended December 31, 1998.
Revenues and operating results for the three months ended March 31, 1999,
are not necessarily indicative of the results to be expected for the full
year.
2. The Company, incorporated in the United Kingdom, and its subsidiaries were
formed on September 19, 1997 to acquire the net assets of the FKI
Automotive Group from FKI plc (the "FKI Acquisition"). The FKI Acquisition
occurred on December 12, 1997. 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, Dura UK, Ltd. ("Dura Ltd.") acquired the Company. Dura
Ltd. is a wholly owned subsidiary of Dura Automotive Systems, Inc., a
Delaware corporation, which is a leading designer and manufacturer of
driver control systems, engineered mechanical components and cable-related
systems for the global automotive industry.
The 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 and Dura Acquisitions were accounted for using the purchase method
of accounting and, accordingly, the assets acquired and liabilities assumed
have been recorded at their fair values as of the dates of the
acquisitions. The excess of the purchase price over the fair value of the
assets acquired and liabilities assumed has been recorded as goodwill and
is being amortized over 40 years. The assets acquired and liabilities have
been recorded based upon preliminary estimates of fair value as of the
dates of acquisition. The Company does not believe the final allocation of
purchase price will be materially different from preliminary allocations.
Any changes to the preliminary estimates will be reflected as an adjustment
to goodwill. Additional purchase liabilities recorded in conjunction with
these acquisitions
-5-
<PAGE>
included approximately $44 million for costs associated with the
shutdown and consolidation of certain acquired facilities and $15
million for associated severance and other related costs. At March 31,
1999, liabilities for approximately $29.5 million for costs associated
with the shutdown and consolidation of certain acquired facilities and
$12.5 million in severance costs are recorded on the condensed
consolidated balance sheet. No additional reserves were recorded during
the first quarter of 1999. Results of operations for these acquisitions
have been included in the accompanying condensed consolidated financial
statements since the dates of acquisition.
Included in these reserves are amounts associated with businesses to be
exited in conjunction with the acquisition by Dura. The accompanying
consolidated statements of operations include revenues and operating
income from these businesses as follows (in thousands):
<TABLE>
<CAPTION>
Period Ended
------------------------------------
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Revenues $ 8,650 $ 23,912
Operating income $ 136 $ 1,164
</TABLE>
These dispositions are anticipated to be completed by the end of the second
quarter of 1999.
3. 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>
March 31, December 31,
1999 1998
---- ----
<S> <C> <C>
Finished products $ 4,341 $ 5,797
Work-in-process 2,267 3,470
Raw materials 7,772 6,491
--------- --------
Total $ 14,380 $ 15,758
--------- --------
--------- --------
</TABLE>
4. Long-term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
---- ----
<S> <C> <C>
Bank Credit Agreement:
Term loan $ 38,264 $ 43,500
Revolving credit facility 21,203 18,894
Capital leases 279 314
Notes, due 2005 80,934 81,150
--------- --------
140,680 143,858
Less - current portion (59) (7,059)
--------- --------
Total long-term debt $ 140,621 $136,799
--------- --------
--------- --------
</TABLE>
On March 23, 1999, Dura and the Company entered into a an amended and
restated $1.15 billion credit agreement (the "Credit Agreement"). The
Credit Agreement provides Dura and the Company with a $275 million tranche
A term loan, a $275 million tranche B term loan, a $400 million revolving
credit facility and a $200 million interim term loan which was repaid on
April 23, 1999. As it relates to the Company, the Credit Agreement provides
the Company with a term loan and a $55.0 million revolving credit
facility, has a term of five years and borrowings bear interest at the
lenders reference rate or the
-6-
<PAGE>
Eurocurrency rate. The interest rate on borrowings outstanding under the
Credit Agreement ranged from 5.25% to 8.28125% as of March 31, 1999. 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 by
the Company; but, so long as the Notes remain outstanding, neither the
Company nor any of its subsidiaries have guaranteed any obligations that
are not borrowed by the Company.
Under the terms of the Credit Agreement, an event of default by Dura also
causes an event of default for the Company. The Company and Dura were in
compliance with the covenants as of March 31, 1999. The assets of the
Company have been pledged as collateral to secure the borrowings of the
Company under the Credit Agreement.
The Credit Agreement provides the Company with the ability to denominate
its credit borrowings in foreign currencies. As of March 31, 1999, $11.0
million of borrowings were denominated in US dollars, $5.7 million were
denominated in British pound sterling and $4.5 million were denominated in
Euro.
The Notes, with a face value of $75 million, were issued on December 12,
1997, concurrent with the FKI Acquisition and are due in December 2005.
Interest is payable semi-annually on June 15 and December 15 of each year.
As further discussed in Note 7, the Notes are guaranteed by certain
subsidiaries of the Company. The Notes were recorded at their fair value of
$81.2 million as part of the Dura Acquisition. The premium in excess of
face value is being amortized over the life of the Notes using the
effective interest method.
5. 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
loss was approximately $1.8 million and $1.2 million for the three months
ended March 31, 1999 and 1998, respectively.
6. 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.
During the first quarter of 1999, the Company adopted Financial Accounting
Standards Board Statement of Position (SOP) No. 98-5, "Reporting on the
Costs of Start-up Activities." SOP 98-5 requires that start-up activities
be expensed as incurred, versus capitalizing and expensing them over a
period of time. The adoption of SOP 98-5 did not affect the Company's
consolidated results of operations or the financial position of the
Company.
-7-
<PAGE>
7. Supplemental cash flow information (in thousands):
<TABLE>
<CAPTION>
FKI
COMPANY PREDECESSOR
------- -----------
Three Months Ended Three Months Ended
March 31, March 31,
1999 1998
---- ----
<S> <C> <C>
Income taxes $ 429 $ 510
Interest 2,362 1,546
</TABLE>
8. 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.
-8-
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEETS AS OF MARCH 31, 1999
(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 $ 155 $ 1,304 $ 4,401 $ - $ 5,860
Accounts receivable, net - 30,554 16,925 47,479
Inventories - 11,195 3,185 - 14,380
Due from affiliates 771 26,727 208 (27,706) -
Other current assets 105 18,865 4,423 - 23,393
----------- --------- -------- --------- ----------
Total current assets 1,031 88,645 29,142 (27,706) 91,112
----------- --------- -------- --------- ----------
Property, plant and equipment, net - 45,393 8,073 - 53,466
Note receivable from subsidiaries - 26,682 - (26,682) -
Goodwill, net 74,456 119,190 24,747 (4,776) 213,617
Other assets, net 170,306 15,248 1,578 (175,892) 11,240
----------- --------- -------- --------- ----------
$ 245,793 $ 295,158 $ 63,540 $(235,056) $ 369,435
----------- --------- -------- --------- ----------
----------- --------- -------- --------- ----------
Liabilities and Stockholders' Investment
- ------------------------------------------------------
Current liabilities:
Current portion of long-term debt $ - $ 16 $ 43 $ - $ 59
Accounts payable - 19,208 10,389 - 29,597
Accrued expenses 2,659 39,928 7,227 (33) 49,781
Due to affiliates 25,929 216 1,528 (27,673) -
----------- --------- -------- --------- ----------
Total current liabilities 28,588 59,368 19,187 (27,706) 79,437
----------- --------- -------- --------- ----------
Non-current liabilities:
Long-term debt, less current portion 122,198 18,209 214 - 140,621
Note payable to Parent (3,476) 610 29,548 (26,682) -
Accrued pension and other postretirement
liabilities - 11,665 989 - 12,654
Other noncurrent liabilities - 35,854 2,386 - 38,240
----------- --------- -------- --------- ----------
Total liabilities 147,310 125,706 52,324 (54,388) 270,952
----------- --------- -------- --------- ----------
Minority interest in subsidiary company - - - - -
Stockholders' investment 98,483 169,452 11,216 (180,668) 98,483
----------- --------- -------- --------- ----------
$ 245,793 $ 295,158 $ 63,540 $(235,056) $ 369,435
----------- --------- -------- --------- ----------
----------- --------- -------- --------- ----------
</TABLE>
-9-
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED
MARCH 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
Non-
Trident Guarantor Guarantor
Automotive plc Companies Companies Eliminations Consolidated
-------------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues $ - $ 43,703 $ 13,103 $ (115) $ 56,691
Cost of sales - 35,836 10,841 (115) 46,562
----------- --------- -------- --------- ----------
Gross profit - 7,867 2,262 - 10,129
Selling, general and administrative expenses 8 2,146 1,613 - 3,767
Amortization expense 440 946 235 - 1,621
----------- --------- -------- --------- ----------
Operating income (loss) (448) 4,775 414 - 4,741
Interest expense (2,361) (278) (37) - (2,676)
Interest expense-intercompany - (2,545) (536) 3,081 -
Interest income - 35 17 - 52
Interest income - intercompany - 3,032 49 (3,081) -
Exchange gain (loss) 543 (60) 14 - 497
Equity in net income (loss) of subsidiaries 2,917 (207) - (2,710) -
Other income (expense) - (101) 60 - (41)
----------- --------- -------- --------- ----------
Net income (loss) before provision for
income taxes 651 4,651 (19) (2,710) 2,573
Provision (benefit) for income taxes (893) 1,734 188 - 1,029
----------- --------- -------- --------- ----------
Net income (loss) $ 1,544 $ 2,917 $ (207) $ (2,710) $ 1,544
----------- --------- -------- --------- ----------
----------- --------- -------- --------- ----------
</TABLE>
-10-
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED
MARCH 31, 1999
(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) $ 1,544 $ 2,917 $ (207) $ (2,710) $ 1,544
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities-
Depreciation and amortization 440 2,729 562 - 3,731
Exchange (gain) loss (543) 236 (14) - (321)
Due to/from affiliates 10,831 (8,759) 495 (2,567) -
Changes in other operating items (2,569) 140 (2,183) 2,710 (1,902)
----------- --------- -------- --------- ----------
Net cash provided by (used in) operating
activities 9,703 (2,737) (1,347) (2,567) 3,052
----------- --------- -------- --------- ----------
INVESTING ACTIVITIES:
Capital disposals (expenditures), net - 871 (404) - 467
Purchase of minority interest - (2,000) 492 - (1,508)
----------- --------- -------- --------- ----------
Net cash provided by (used in)
investing activities - (1,129) 88 - (1,041)
----------- --------- -------- --------- ----------
FINANCING ACTIVITIES:
Proceeds from borrowings under credit facility 44,807 27,525 - - 72,332
Repayment of debt (51,259) (24,238) (21) - (75,518)
----------- --------- -------- --------- ----------
Net cash provided by (used in) financing
activities (6,452) 3,287 (21) - (3,186)
----------- --------- -------- --------- ----------
EFFECT OF EXCHANGE RATES ON CASH (3,368) 163 (695) 2,567 (1,333)
----------- --------- -------- --------- ----------
NET CHANGE IN CASH AND CASH EQUIVALENTS (117) (416) (1,975) - (2,508)
CASH AND CASH EQUIVALENTS, beginning of period 272 1,719 6,377 - 8,368
----------- --------- -------- --------- ----------
CASH AND CASH EQUIVALENTS, end of period $ 155 $ 1,303 $ 4,402 $ - $ 5,860
----------- --------- -------- --------- ----------
----------- --------- -------- --------- ----------
</TABLE>
-11-
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEETS AS OF DECEMBER 31, 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 $ 272 $ 1,719 $ 6,377 $ -- $ 8,368
Accounts receivable, net -- 40,217 15,518 -- 55,735
Inventories -- 12,265 3,493 -- 15,758
Due from affiliates 649 18,708 707 (20,064) --
Other current assets -- 16,995 4,286 -- 21,281
----------- --------- -------- --------- ----------
Total current assets 921 89,904 30,381 (20,064) 101,142
Property, Plant and Equipment, net -- 48,223 9,109 -- 57,332
Note Receivable From Subsidiaries -- 27,032 -- (27,032) --
Deferred Financing Costs -- -- -- -- --
Investment in Subsidiaries 163,815 12,145 -- (175,960) --
Goodwill, net 74,896 119,542 25,763 (4,776) 215,425
Other Assets, net 4,236 3,368 1,470 -- 9,074
----------- --------- -------- --------- ----------
$243,868 $ 300,214 $ 66,723 $(227,832) $ 382,973
----------- --------- -------- --------- ----------
----------- --------- -------- --------- ----------
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Current portion of long-term debt $ 7,059 $ -- $ -- $ -- $ 7,059
Accounts payable -- 22,878 10,918 -- 33,796
Accrued expenses 1,903 44,859 7,316 (10) 54,068
Due to affiliates 18,344 351 1,359 (20,054) --
----------- --------- -------- --------- ----------
Total current liabilities 27,306 68,088 19,593 (20,064) 94,923
----------- --------- -------- --------- ----------
Non-Current Liabilities:
Long-term debt, less current portion 121,650 14,923 226 -- 136,799
Note payable to Parent (3,476) 649 31,495 (28,668) --
Accrued pension and other postretirement
liabilities -- 11,891 1,066 -- 12,957
Other noncurrent liabilities -- 34,767 2,433 -- 37,200
----------- --------- -------- --------- ----------
Total liabilities 145,480 130,318 54,813 (48,732) 281,879
----------- --------- -------- --------- ----------
Minority Interest in Subsidiary Company -- -- 786 -- 786
Stockholders' Investment 98,388 169,896 11,124 (179,100) 100,308
----------- --------- -------- --------- ----------
$ 243,868 $ 300,214 $ 66,723 $(227,832) $ 382,973
----------- --------- -------- --------- ----------
----------- --------- -------- --------- ----------
</TABLE>
-12-
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF OPERATIONS FOR THE THREE MONTHS
ENDED MARCH 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
Non-
Trident Guarantor Guarantor
Automotive plc Companies Companies Eliminations Consolidated
-------------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues $ - $ 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, general and administrative expenses 22 6,329 2,386 - 8,737
Amortization expense 301 727 143 - 1,171
----------- --------- -------- --------- ----------
Operating income (323) 4,988 474 - 5,139
Interest expense 3,748 3,611 799 (4,340) 3,818
Interest income (2,481) (1,932) (132) 4,340 (205)
Exchange loss - 1 921 - 922
Other income (1,188) 792 (24) 396 (24)
----------- --------- -------- --------- ----------
Income before provision for income taxes (402) 2,516 (1,090) (396) 628
Provision for income taxes (525) 1,328 (298) - 505
----------- --------- -------- --------- ----------
Net income (loss) $ 123 $ 1,188 $ (792) $ (396) $ 123
----------- --------- -------- --------- ----------
----------- --------- -------- --------- ----------
</TABLE>
-13-
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS
ENDED MARCH 31, 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) $ 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 subsidiaries (1,188) 792 -- 396 --
Exchange gain -- 1 921 -- 922
Minority interest -- -- (24) -- (24)
Changes in other operating items (6,304) 6,763 1,134 53 1,646
----------- --------- -------- --------- ----------
Net cash provided by (used in) operating
activities (7,068) 11,108 2,121 53 6,214
----------- --------- -------- --------- ----------
INVESTING ACTIVITIES:
Capital expenditures, net -- (6,279) (1,507) -- (7,786)
Purchase of Predecessor, net of cash acquired (3,315) (118,321) (33,854) -- (155,490)
Investment in subsidiaries (42,508) (15,897) -- 58,405 --
----------- --------- -------- --------- ----------
Net cash provided by (used in) investing
activities (45,823) (140,497) (35,361) 58,405 (163,276)
----------- --------- -------- --------- ----------
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 (used in) financing
activities 53,186 135,918 38,186 (58,405) 168,885
----------- --------- -------- --------- ----------
EFFECT OF EXCHANGE RATES ON CASH -- (229) (126) (53) (408)
----------- --------- -------- --------- ----------
NET CHANGE 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>
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998
REVENUES -- Revenues decreased by $29.6 million for the three months ended March
31, 1999 to $56.7 million from $86.3 million in 1998. This decrease was
primarily attributable to: $18 million from the divestiture of certain product
lines; $7.8 million from plant consolidations resulting in the transfer of
production to other Dura facilities; $1.4 from the market slowdown in Brazil. In
addition, revenues were reduced by $1.1 million as a result of changes in
foreign currency exchange rates.
GROSS PROFIT -- Total gross profit decreased by $4.9 million for the three
months ended March 31, 1999 to $10.1 million from $15.0 million for the three
months ended March 31, 1998. This decrease in gross profit was a direct result
of the sales declines described above. Improved efficiencies being realized from
plant reorganizations increased the gross margin from 17.4% in 1998 to 17.9% in
1999.
S, G & A EXPENSES -- Selling, general and administrative expenses decreased by
$4.9 million for the three months ended March 31, 1999 to $3.8 million from $8.7
million the three months ended March 31, 1998. This decrease is the result of
the divestiture of certain product lines and reduced headcount.
AMORTIZATION EXPENSE -- Amortization expense was $1.6 million for the three
months ended March 31, 1999, an increase of $0.4 million over 1998 due to
increased goodwill amortization as a result of the acquisition by Dura on April
30, 1998. The expense represents amortization of goodwill and other intangibles
that were recorded in connection with the FKI Acquisition and the Dura
Acquisition.
INTEREST EXPENSE -- Interest expense, net of interest income, was $2.6 million
for the three months ended March 31, 1999, a reduction of $1.0 million from 1998
due to lower effective interest rates on borrowings. This interest results from
borrowings used to finance the FKI Acquisition and Dura Acquisition.
PROVISION FOR INCOME TAXES -- The effective income tax rate was 40% for the
three months ended March 31, 1999. The effective rates differed from the
statutory rates as a result of state income taxes, foreign income taxes and the
effects of certain non-deductible goodwill amortization.
LIQUIDITY AND CAPITAL RESOURCES
During the three months ended March 31, 1999, the Company generated cash from
operations of $5.0 million, before the effects of changes in other operating
items, compared to $4.6 million in 1998.
On March 23, 1999, Dura and the Company entered into a an amended and amended
and restated $1.15 billion credit agreement (the "Credit Agreement"). The Credit
Agreement provides Dura and the Company with a $275 million tranche A term loan,
a $275 million tranche B term loan, a $400 million revolving credit facility and
a $200 million interim term loan which was repaid on April 23, 1999. As it
relates to the Company, the Credit Agreement provides the Company with a term
loan and a $55.0 million revolving credit facility, has a term of five years
-15-
<PAGE>
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 5.25% to 8.28125% as of March 31, 1999. 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 by the Company; but,
so long as the Notes remain outstanding, neither the Company nor any of its
subsidiaries have guaranteed any obligations that are not borrowed by the
Company. Under the terms of the Credit Agreement, an event of default by Dura
also causes an event of default for the Company. The Company and Dura were in
compliance with the covenants as of March 31, 1999. The assets of the Company
have been pledged as collateral to secure the borrowings of the Company under
the credit facility.
The Company believes borrowing availability under its credit facility, together
with funds generated by the Company's operations, will provide sufficient
liquidity and capital resources for working capital, capital expenditures and
other needs through fiscal 1999.
EFFECTS OF INFLATION
Inflation potentially affects the Company in two principal ways. First, a
portion of the Company's debt is tied to prevailing short-term interest rates
which may change as a result of inflation rates, translating into changes in
interest expense. Second, general inflation can impact material purchases, labor
and other costs. In many cases, the Company has limited ability to pass through
inflation-related cost increases due to the competitive nature of the markets
that the Company serves. In the past few years, however, inflation has not been
a significant factor for the Company.
FOREIGN CURRENCY TRANSACTIONS
A significant portion of the Company's revenues are derived from manufacturing
operations in Europe, Latin America and Canada. The results of operations and
the financial position of the Company's operations in these countries are
principally measured in their respective currency and translated into U.S.
dollars. The effects of foreign currency fluctuations in such countries are
somewhat mitigated by the fact that expenses are generally incurred in the same
currencies in which revenues are generated. The reported income of these
subsidiaries will be higher or lower depending on a weakening or strengthening
of the U.S. dollar against the respective foreign currency.
A significant portion of the Company's assets are also based in its foreign
operations and are translated into U.S. dollars at foreign currency exchange
rates in effect as of the end of each period, with the effect of such
translation reflected as a separate component of shareholders' equity.
Accordingly, the Company's consolidated shareholders' investment 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. The Company has no hedges currently
outstanding.
-16-
<PAGE>
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 completed its global compliance review. Based on the
information available to date, the Company does not anticipate any significant
readiness problems with respect to its systems.
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. The remediation may include repair, replacement
or upgrading 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 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. The Company has completed an assessment of its critical suppliers and
has developed contingency plans to address the risks that have been identified.
These plans include resourcing materials or building inventory banks. The
Company has aggressively addressed this issue with all major suppliers and
believes that contingency plans are in place.
The Company has spent approximately $200,000 on Year 2000 activities to date and
anticipates that it will incur additional future costs not to exceed $400,000 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
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.
During the first quarter of 1999, the Company adopted Financial Accounting
Standards Board Statement of Position (SOP) No. 98-5, "Reporting on the Costs of
Start-up Activities." SOP 98-5 requires that start-up activities be expensed as
incurred, versus capitalizing and expensing them over a period of time. The
adoption of SOP 98-5 did not affect the Company's consolidated results of
operations or the financial position of the Company.
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>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Trident is exposed to various market risks, including changes in foreign
currency exchange rates and interest rates. Market risk is the potential loss
arising from adverse changes in market rates and prices, such as foreign
currency exchange and interest rates. Trident does not enter into derivatives or
other financial instruments for trading or speculative purposes.
Trident manages it interest rate risk by balancing the amount of fixed and
variable rate debt. For fixed rate debt, interest rate changes affect the fair
market value of such debt but do not impact earnings or cash flows. Conversely
for variable rate debt, interest rate changes generally do not affect the fair
market value of such debt but do impact future earnings and cash flows, assuming
other factors are held constant
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations" for discussion of foreign currency risk.
-19-
<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
-20-
<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: May 17, 1999 By /s/ Stephen E.K. Graham
------------------------------------
Stephen E.K. Graham
Secretary
-21-
<TABLE> <S> <C>
<PAGE>
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<CIK> 0001053616
<NAME> TRIDENT AUTOMOTIVE
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 5,860
<SECURITIES> 0
<RECEIVABLES> 47,479
<ALLOWANCES> 0
<INVENTORY> 14,380
<CURRENT-ASSETS> 91,112
<PP&E> 53,466
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<CURRENT-LIABILITIES> 79,437
<BONDS> 0
0
0
<COMMON> 17,085
<OTHER-SE> 81,398
<TOTAL-LIABILITY-AND-EQUITY> 369,435
<SALES> 56,691
<TOTAL-REVENUES> 56,691
<CGS> 46,562
<TOTAL-COSTS> 46,562
<OTHER-EXPENSES> 5,388
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,624
<INCOME-PRETAX> 2,573
<INCOME-TAX> 1,029
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</TABLE>
