<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
--------------------------------------------
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
TransitionReport Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934 for the Transition Period From
April 1, 1998 to December 31, 1998
For the fiscal year ended: Commission file number:
DECEMBER 31, 1998 333-8234
---------------------------------------------
TRIDENT AUTOMOTIVE PLC
(Exact name of Registrant as specified in its charter)
ENGLAND NONE
(State of Incorporation or other (I.R.S. Employer
jurisdiction of Incorporation or organization) Identification No.)
2791 RESEARCH DRIVE
ROCHESTER HILLS, MICHIGAN 48309
(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code: (248) 299-7500
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
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Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934,
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in 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 UK
Limited.
As of December 31, 1998, the Registrant had 50,000 Ordinary Shares of(pound)1
each and 17,000,000 Ordinary Shares of $1 each outstanding.
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<PAGE>
TRIDENT AUTOMOTIVE PLC
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Results of Operations and
Financial Condition
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
</TABLE>
2
<PAGE>
PART I
ITEM 1. BUSINESS
(A) GENERAL DEVELOPMENT OF BUSINESS
BACKGROUND OF COMPANY
Trident Automotive plc ("Trident" or the "Company") is leading
international Tier 1 designer and manufacturer of cable assemblies for the
global automotive industry. Trident is also a supplier of lighting products for
the North American automotive industry. Trident supplies the world's leading
automotive OEMs and its products are used in substantially all of the top
selling vehicle models produced worldwide. Through its six design and
manufacturing facilities located in the United States, Canada, the United
Kingdom, France and Brazil and its existing strategic relationships with
Japanese cable manufacturers, Trident has an established international presence
to meet OEMs' global sourcing requirements.
Trident has supplied a variety of automotive components to OEMs since
the 1920's. Trident's primary focus is on the design and manufacture of parking
brake and manual transmission shifter cable assemblies. During the nine months
ended December 31, 1998, approximately 73% of Trident's revenues were derived
from sales of parking brake cable assemblies. Trident supplies substantially all
of the parking brake cable assemblies used by DaimlerChrysler and is a
significant supplier to Ford and General Motors. In Europe, where sales of
vehicles with manual transmissions predominate, Trident has focused on the
production of manual transmission shifter cable assemblies. This market is
growing rapidly as a result of a movement by OEMs to replace linked rods in
manual transmissions with cable assemblies. Trident also manufactures a wide
variety of other automotive cable products in the domestic and international
automotive markets, including accelerator and speed control cable assemblies.
Trident also manufactures automotive lighting products. In the twelve months
ended December 31, 1997, approximately 72% of Trident's total sales was derived
from cable assemblies and approximately 28% was derived from lighting and other
products.
Effective December 31, 1998, the Company changed its fiscal year end
from March 31, 1998 to December 31, 1998. Accordingly, all general references to
years relate to fiscal years unless otherwise noted.
INDUSTRY TRENDS
Trident's performance and growth is directly related to certain trends
within the automotive market, including the consolidation of the component
supply industry, the growth of system sourcing and the increase in global
sourcing.
- SUPPLIER CONSOLIDATION. OEMs have significantly consolidated their
supplier bases to reduce costs and accelerate new platform development. OEMs
evaluate suppliers on the basis of product quality, cost, reliability of
delivery, product design capability, financial strength, new technology
implementation, quality and condition of production facilities and overall
management. The European supplier base is currently larger and more fragmented
than the North American base and is believed by Trident's management to be in an
earlier stage of consolidation.
- SYSTEM SOURCING. OEMs increasingly are seeking suppliers capable of
providing complete automotive systems rather than suppliers that produce only
individual components of a
3
<PAGE>
system. By outsourcing complete systems, OEMs can reduce their costs associated
with the design and integration of different components and improve quality by
requiring suppliers to assemble and test major portions of the vehicle prior to
beginning production.
- GLOBAL SOURCING. Regions such as Asia, Latin America and Eastern Europe
are expected to experience significant growth in vehicle demand over the next
several years. OEMs are positioning themselves to reach these markets in a cost
effective manner by designing "world cars" that can be produced and sold in
different geographic markets, thereby allowing OEMs to reduce design costs and
take full advantage of low-cost manufacturing locations. Consequently, OEMs are
seeking suppliers whose design and production facilities parallel their own.
COMPANY STRENGTHS
Trident believes it is well-positioned to capitalize on opportunities
presented by current industry trends as a result of the following competitive
strengths:
LEADING AUTOMOTIVE CABLE SUPPLIER; FOCUS ON HIGH VALUE ADDED SECTORS.
Trident is a Tier 1 supplier to automotive OEMs and its products are used in
substantially all of the top selling vehicle models produced worldwide. Trident
is a significant supplier to DaimlerChrysler, Ford and General Motors. In
Europe, where sales of vehicles with manual transmissions predominate, Trident
has focused on the production of manual transmission shift cable assemblies. As
a result of worldwide market consolidation, Trident believes that it is a
leading worldwide suppliers of cable assemblies for clutch, accelerator, cruise
control and automatic transmissions.
STRONG CUSTOMER FOCUS. Trident works closely with OEMs, particularly
during the product design stage, to develop products that are tailored to their
requirements. Its customer orientation has earned Trident a reputation for
timely delivery, responsive customer service and high quality products at
competitive prices. Trident's global presence enables it to work closely with
its customers to identify business opportunities and respond to their needs.
PRODUCT EXCELLENCE. Trident applies extensive experience in product
development and manufacturing process improvements to develop and manufacture
reliable, high quality products. Trident has received citations for quality from
Ford, General Motors, DamilerChrysler, Peugeot, Renault and Nissan, including
Ford Q-1 in North America, General Motors "Target for Excellence" in North
America, Chrysler Gold PentaStar "Quality Excellence" and "A" rating at Peugeot
and Renault. The Company has attained QS-9000 qualification, the quality rating
system most recently adopted by the automotive industry.
DIVERSIFIED REVENUE SOURCES. Trident's revenues are diversified in
terms of its customer base, geographic scope, product mix and model type. No
single customer accounted for more than 25% of total Company revenues in fiscal
1998. Trident secures multi-year contracts with its OEM customers that match
model production life (typically three to seven years), providing predictable
revenues based on OEM demand. Once a manufacturer has been designated to supply
components for a new program (provided competitive pricing and quality are
maintained), an OEM will generally continue to purchase those components from
the designated producer for the life of the platform. Approximately 73% of 1998
revenues was derived from sales of cable assemblies and approximately 27% of
1998 revenues from sales of lighting and other products.
GLOBAL DESIGN AND MANUFACTURING CAPABILITY. Trident has an established
international presence through its six major design and manufacturing facilities
located in the United States, Canada, the United Kingdom, France and Brazil and
its existing strategic relationships with
4
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Japanese cable manufacturers. Trident believes that its established
international presence is a distinct competitive advantage, since it can
efficiently meet OEMs' global sourcing requirements due to its geographic
proximity to the OEMs' engineering and manufacturing facilities. Moreover, the
size and scope of its cable operations create economies of scale in sales,
manufacturing, engineering, purchasing and distribution needed to maintain price
competitiveness.
BUSINESS STRATEGY
Trident's strategy, which is designed to capitalize on its competitive
strengths and to position it for further global growth through both strategic
combinations and internal development, consists of the following components:
MAINTAIN LEADERSHIP IN QUALITY AND CUSTOMER CONFIDENCE. Trident employs
advanced design, manufacturing and testing technologies and intends to continue
investing in product development and continuous manufacturing process
improvements to maintain high levels of product quality and customer confidence.
Trident's cable products have earned numerous customer quality awards, and
management believes that its products are among the highest quality in the
industry. Trident believes that its commitment to product excellence and
customer relations will be an important competitive advantage as the industry
continues to consolidate.
CAPITALIZE ON GLOBAL DESIGN AND MANUFACTURING CAPABILITIES. Management
believes that the Latin American and Far Eastern markets will experience high
growth in automobile production over the next several years. Trident believes
that its existing global manufacturing capabilities and strong relationships
with international OEMs will enable it to capitalize on these and similar
opportunities.
STRATEGIC RELATIONSHIPS
Trident, having been acquired by Dura Automotive Systems, Inc. (Dura)
on April 30, 1998, has formed a strategic relationship with other suppliers of
automotive cable-related products throughout the world in order to increase
sales on a global basis and provide Trident with access to new markets and
complementary product offerings.
THE CHUO LICENSING AGREEMENT. On April 26, 1995, the Company signed a
non-exclusive licensing agreement with Chuo Spring Limited ("Chuo") of Japan for
a term of ten years. Pursuant to this licensing agreement, Trident manufactures
cable assemblies of Chuo's design for Toyota Carinas produced in the United
Kingdom, for which Chuo receives quarterly royalty payments.
CUSTOMERS
Trident has a diverse customer base that includes DaimlerChrysler,
General Motors, Ford, Honda, Volkswagen, Peugeot, Toyota, Renault, Nissan and
BMW. The following table
5
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lists each of Trident's customers that accounted for a significant portion of
sales in each of the past three fiscal years and the percentage of consolidated
revenues attributed to such customers.
<TABLE>
<CAPTION>
Nine
YEAR ENDED MARCH 31, Months Ended
1996 1997 DEC. 31, 1998
---- ---- -------------
CUSTOMER
--------
<S> <C> <C> <C>
DaimlerChrysler 29% 25% 19
General Motors 12 15 17
Ford 12 14 16
Honda 6 6 5
Volkswagen 7 6 4
Peugeot 5 6 7
Toyota 4 4 5
Renault 3 3 5
Other 22 21 22
------- ------- ------
100% 100% 100%
------- ------- ------
------- ------- ------
</TABLE>
Most of Trident's contracts with OEMs have terms which correspond to
model production life (generally three to seven years) and are awarded two to
three years prior to the start of production of such model. Consequently,
Trident is required to bid for contracts on a continuous basis in order to
maintain stable revenues. Trident is not dependent on sales from a single model
and, thus, will not be materially adversely affected by the loss of any single
model. In addition, some of Trident's agreements with OEMs provide for annual
price reductions, typically 2% to 3%. To date, Trident has been able to meet
these price reductions and maintain its margins through cost reductions and by
requiring its suppliers to offer similar price reductions.
PRODUCTS
Trident's principal products include cable assemblies used in parking
brake and manual transmission shifter systems, clutch, accelerator and speed
control cable assemblies and other automotive applications. Trident also
manufactures lighting products, decorative trim, fasteners and other cosmetic
components. The following table summarizes Trident's relative sales by product
category for the following periods:
<TABLE>
<CAPTION>
Percentage of Total Sales
--------------------------------------------
Year Ended March 31, Nine Months
------------------------- Ended
1996 1997 Dec. 31, 1998
---- ---- -------------
<S> <C> <C> <C>
Parking brake cable assemblies 27% 31% 36%
Clutch cable assemblies 9 10 9
Transmission shifter cable assemblies 8 8 12
Other cable products 21 20 16
Lighting, handles and fasteners 35 31 27
---- ---- ----
Total 100% 100% 100%
---- ---- ----
---- ---- ----
</TABLE>
6
<PAGE>
DESIGN AND ENGINEERING
Trident believes that engineering service and support are key factors
in successfully obtaining new business. Trident utilizes customer-dedicated
platform teams, which have full design, development, test and commercial
responsibility under the operational control of a single manager. In addition,
cross-functional teams are established for each new program to ensure proper
management from program conception through product launch. Trident continually
applies advanced technological developments to update its manufacturing process
and products with customers often included in the product development teams.
MANUFACTURING
CABLE ASSEMBLIES. Cable assemblies are manufactured using a variety of
processes, including plastic injection molding, polymer extrusion, stranding,
flat wire coiling and zinc die-casting. The strand portion of the assembly is
made by forming wire purchased from outside sources into contra-twisted layers
on wire bunching machines. Corrosion resistance is achieved through the
combination of a highly specialized strand design and the application of a
polymer coating. The conduit portion of the cable is produced by coiling wire
around an extruded polymer liner. The conduit is then finished with an extruded
polymer in order to provide further corrosion resistance, durability and
efficiency. Finally, the finished cable is assembled with customized fittings
some of which are purchased from outside vendors, using a highly efficient work
cell assembly process.
LIGHTING. Headlamps and tail lamp housings are manufactured through
injection molding of a variety of resins on molding machines of various sizes
and types. The interior of the housings are then coated and at times vacuum
metalized to obtain the proper reflective qualities. Lenses are added to the
housings on a semi-automated production line.
OEMs have established quality rating systems involving rigorous
inspections of suppliers' facilities and operations. The OEMs' factory rating
programs provide a quantitative measure of a company's success in improving the
quality of its operations. The QS-9000 award, the quality rating system most
recently adopted by the automotive industry, was designed by OEMs to measure the
quality of products and manufacturing systems. All of the Company's
manufacturing facilities are QS-9000 certified. Each facility is required to be
QS-9000 certified in order to maintain Tier 1 status.
SUPPLIERS AND RAW MATERIALS
The principal raw materials used by Trident include (i) metal wire
(generally steel) and resin (for protective coating) in cable production and
(ii) resins and lighting components in lighting production. Trident coordinates
global sourcing of raw materials through a single location to acquire quality
materials at competitive prices. Trident employs just-in-time manufacturing and
sourcing systems, enabling it to meet customer requirements for faster
deliveries while minimizing the need to carry significant inventory levels. For
certain raw materials, Trident is dependent on certain suppliers as its sole
source. However, Trident has not experienced any significant shortages of raw
materials and normally does not carry inventories of raw materials or finished
products in excess of those reasonably required to meet production and shipping
schedules.
7
<PAGE>
COMPETITION
The automotive component supply industry is highly competitive. Many of
these competitors have substantially greater financial and other resources and
lower costs of funds than Trident and its parent, Dura, and may offer other
products which are not provided by Trident. Providers of automotive components,
such as Trident, have traditionally competed on the basis of cost, service,
engineering excellence and strong customer relationships.
In recent years, the total number of Trident's competitors has
decreased due to ongoing supplier consolidation by the OEMs. In the non-parking
brake automotive cable market, the Company's principal North American competitor
is Teleflex Incorporated ("Teleflex"). Principal competitors of the Company in
Europe include, Sila SpA, Ficosa International, S.A. and Kuster Espana S.A.
Principal competitors of Trident in the North American lighting business include
Delphi Interior and Lighting Systems (a division of General Motors), Visteon
Automotive Systems (a subsidiary of Ford), I.I. Stanley, North American
Lighting, Inc., and Osram Sylvania, Inc.
Trident principally competes for new business both at the beginning of
the development of new models and upon the redesign of existing models. New
model development generally begins two to five years before the marketing of
such models to the public. Once a manufacturer has been designated to supply
parts for a new program, an OEM usually will continue to purchase those parts
from the designated manufacturer for the life of the program, although not
necessarily upon a redesign of the program. Competitive factors in the market
for Trident's products include the ability to provide a complete cable system,
product quality and reliability, cost, timely delivery, technical expertise and
development capability, new product innovation and customer service.
EMPLOYEES
As of December 31, 1998, Trident had 2,371 employees, including 1,514
in North America, 711 in Europe and 146 in Brazil. 2,064 are hourly employees
and 307 are salaried personnel. Trident's employees at its U.S. operations are
not unionized. 689 of Trident's hourly employees at its Canadian, United Kingdom
and Brazilian operations are unionized.
Trident is a party to a collective bargaining agreement, which expires
in 2000, with respect to hourly workers at the Dominion Controls division in
Ontario. Trident has entered into a Wages and Conditions Agreement with the
A.E.E.U. and trade Union governing the hours of work and rates of pay for
employees at the Stourport-on-Severn, U.K. facility. Similarly, in Brazil,
Trident is a party to a collective bargaining agreement providing tenure rights
for certain employees.
In France, employment agreements for blue collar workers and for white
collar employees below management level are generally collectively negotiated
between the national association (with respect to white collar employees) or
regional associations (with respect to blue collar employees) of the companies
within a particular industry and the respective unions. Certain of Trident's
workers at its French facilities are subject to nationally negotiated employment
agreements in the metallurgy industry. Employees at its French facilities and
German facility are represented by works councils. In Germany, the works council
and management have entered into a bargaining agreement regarding overtime
wages.
8
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Management believes its relationship with its employees is good.
Trident has not experienced any material work interruptions resulting from labor
disputes with its employees.
(B) SAFE HARBOR PROVISIONS
Forward-looking statements included in this Form 10-K are made pursuant
to the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. There are certain important factors that could cause future results to
differ materially from those that might be anticipated based on some of the
statements made in this report. Investors are cautioned that all forward-looking
statements involve risks and uncertainty. Among the factors that could cause
actual results to differ materially are the following:
- RELIANCE ON MAJOR CUSTOMERS. Trident's three largest customers,
DaimlerChrysler, GM and Ford, represented approximately 19%, 17% and 16%,
respectively, of Trident's 1998 revenues. The loss of DaimlerChrysler, Ford, GM
or any of Trident's other significant customers could have a material adverse
effect on Trident.
- INDUSTRY CYCLICALITY AND SEASONALITY. The automotive market is highly
cyclical and is dependent on consumer spending. Economic factors adversely
affecting automotive production and consumer spending could adversely impact
Trident.
- FAILURE TO OBTAIN BUSINESS RELATED TO NEW AND REDESIGNED MODEL
INTRODUCTIONS. The failure of Trident to obtain new business on new models or to
retain or increase business on redesigned existing models could adversely affect
Trident.
- PRODUCT LIABILITY EXPOSURE. Trident faces an inherent business risk of
exposure to product liability claims in the event that the failure of its
products result in personal injury or death, and there can be no assurance that
Trident will not experience material product liability losses in the future.
ITEM 2. PROPERTIES
The following table sets forth certain information concerning Trident's
principal facilities:
<TABLE>
<CAPTION>
Approximate
Location Square Footage Owned/Leased
- ------------------------------------------- -------------- ------------
<S> <C> <C>
Kentwood, Michigan, U.S. 870,000 Leased
Stratford, Ontario, Canada 250,000(1) Owned
Milan, Tennessee, U.S. 152,000 Owned
Stourport-on-Severn, U.K. 100,000 Owned
Stourport-on-Severn, U.K. 85,000 Owned
Lechlade, U.K. 7,700 Owned
Le Mans, FR 120,000 Leased
Evry, FR 12,000 Owned
Cluses, FR 10,000 Leased
Melun, FR 9,000 Leased
Sao Paulo, Brazil 108,000 75% Owned
</TABLE>
- ---------------------------------------------------------------
(1) The facility consists of approximately 100,000 square feet occupied by
Trident for its production facilities, approximately 65,400 square feet
leased to unaffiliated third parties and approximately 84,600 square feet
of warehouse space.
9
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ITEM 3. LEGAL PROCEEDINGS
Trident faces an inherent business risk of exposure to product
liability claims in the event that the failure of its products results in
personal injury or death, and there can be no assurance that it will not
experience any material product liability losses in the future. In addition, if
any of the products Trident has designed prove to be defective, it may be
required to participate in a recall involving such products.
From time to time, in the ordinary course of our business, the Company
receives notice from a customer that a product may not be properly functioning.
In March 1999, the Company was notified by Ford of its decision to institute a
recall of certain of its vehicles, including Explorers, Mountaineers, Rangers,
Mustangs and F-Series pickups, relating to the speed control cable. Ford has
reported that certain of such vehicles could be equipped with a speed control
cable that could interfere with the speed control pulley and thus result in a
"stuck" throttle. Ford has notified the Company that as many as 945,000 vehicles
could be affected. Based upon tests and investigations to date, the Company does
not believe that its products are responsible for the problems associated with
the speed control unit. The Company is working with Ford to resolve this matter
and does not believe that the ultimate cost of resolution will have a material
adverse effect on the Company's results of operations and financial condition.
It is possible that such manufacturers will seek contribution from the Company
with respect to the costs they incur if recalls are undertaken or for costs
associated with possible repairs. Based upon the information available to date,
the Company does not expect any of these matters either individually or
collectively to result in payments that will have a material effect on the
Company's results of operations and financial position.
ENVIRONMENTAL MATTERS
Like similar companies, the Company's operations and properties are
subject to extensive environmental laws. Inherent in manufacturing operations
and the Company's real estate ownership and occupancy activities is the risk of
environmental liabilities as a result of both current and past operations, which
liabilities cannot be predicted with certainty. The Company has incurred and
will continue to incur costs associated with environmental laws in its business.
As is the case with manufacturers in general, if a release of hazardous
materials occurs, or has occurred, on the Company's properties or at any
off-site disposal or treatment facility used by the Company or its predecessors,
the Company may be held strictly, jointly and severally liable for investigation
or response costs or natural resource damages under Superfund. While the Company
devotes resources to ensuring that its operations are conducted in a manner
which reduces such risks, the amount of such liability could be material.
In connection with the acquisition of Trident from FKI Industries
("FKI"), Phase I environmental assessments were performed at the Company's major
facilities. The Phase I environmental assessments performed at the Kentwood,
Michigan facility leased by Trident from FKI, indicated that this facility has
chromium contamination of soil and groundwater, that is believed to have
resulted from leakage from plastic plating operations in the 1970s. FKI has been
performing remediation of chromium contamination in site groundwater under the
supervision of the Michigan Department of Environmental Quality and is proposing
to install an expanded and upgraded groundwater containment system at the
Kentwood facility. Remedial activities associated with the chromium
contamination have been ongoing for approximately 15 years, and it is
anticipated that such activities will continue.
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Under the terms of the Kentwood lease, FKI will be responsible for
capital expenditures for certain agreed improvements to the groundwater
containment system and Trident will pay the annual costs of operating and
monitoring that system. In addition, the Kentwood lease provides that FKI will
be solely responsible for the costs of remediation for any contamination by all
hazardous substances that FKI caused. Trident, in turn, will be solely
responsible for the costs of remediation for any contamination by all hazardous
substances that it causes subsequent to its acquisition by Dura. However, if it
cannot be determined whether FKI or Trident caused such contamination, Trident
and FKI will jointly share such remediation costs as follows: (i) during the
first five years of the Kentwood lease, Trident will pay 20% of such costs and
(ii) such percentage will increase to 38% in the sixth year, 41% in the seventh
year, 44% in the eighth year, 47% in the ninth year and 50% in the tenth and any
subsequent year of the Kentwood lease. The Kentwood lease provides that
Trident's remediation responsibility for such joint remedial efforts will be
capped at $3.0 million for the first seven and one-half years and $5.0 million
for the balance of the lease term. FKI will indemnify Trident for such joint
remediation costs in excess of these caps.
With the exception of the Kentwood facility, the Phase I environmental
assessments conducted in connection with the acquisition of Trident from FKI did
not reveal environmental matters involving actual or potential liabilities that
Trident believes are reasonably likely to be material to the Company. Under the
terms of the acquisition, in addition to the indemnification and other
provisions contained in the Kentwood lease, FKI has agreed to indemnify Trident
for any liabilities related to pre-closing disposal of hazardous materials at
certain identified off-site locations by the Kentwood facility and for certain
potential environmental liabilities at the Stratford, Ontario, facility.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIY HOLDERS
There were no matters submitted to a vote of stockholders during the
fourth quarter of 1998.
11
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Not applicable.
ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial data for Trident presented below
for, and as of the eight-month period ended December 31, 1998, the one-month
period ended April 30, 1998 and each of the years in the four-year period ended
March 31, 1998, is derived from Trident's Consolidated Financial Statements
which have been audited by Arthur Andersen LLP, independent public accountants.
The consolidated financial statements at December 31, 1998 and March 31, 1998
and for each of the one-month period ended April 30, 1998 and the eight-month
period ended December 31, 1998 and the report of independent public accountants
thereon are included elsewhere in this report. The remaining consolidated
financial statements are not included herein. This selected consolidated
financial data should be read in conjunction with "Management's Discussion and
Analysis of Results of Operations and Financial Condition" and Trident's
Consolidated Financial Statements and Notes to Consolidated Financial
Statements, included elsewhere in this report.
<TABLE>
<CAPTION>
TRIDENT
FKI PREDECESSOR (1) PREDECESSOR (1) COMPANY
---------------------------------------------------------- ---------------- -------------
YEARS ENDED MARCH 31, ONE-MONTH PERIOD EIGHT-MONTH
---------------------------------------------------------- ENDED APRIL 30, PERIOD ENDED
1995 1996 1997 1998 1998 DEC. 31, 1998
---- ---- ---- ---- ---- -------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues $ 297,139 $ 288,054 $ 297,884 $ 297,545 $ 26,475 $ 187,526
Cost of sales 247,586 239,034 246,810 248,055 26,184 151,302
S, G & A expense 33,804 31,689 31,563 33,363 4,009 14,314
Amortization expense -- -- -- 152 389 4,236
Operating income (loss) 14,932 13,943 19,379 15,975 (4,107) 17,674
Interest (income) expense, net (1,313) (793) (259) 3,939 952 7,703
Provision (benefit) for
income taxes 5,319 6,100 8,157 5,304 (656) 4,084
Net income (loss) 9,684 8,201 11,757 5,708 (2,931) 5,876
</TABLE>
<TABLE>
<CAPTION>
March 31, December 31,
1998 1998
----------- -------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital $ 22,526 $ 6,219
Total assets 258,830 382,973
Long-term debt, net 126,300 136,799
Stockholders' investment 39,105 100,308
</TABLE>
(1) On December 12, 1997, Trident acquired the operations of the
Automotive Group of FKI and on April 30, 1998, Dura Ltd. acquired
Trident. Accordingly, certain information provided for the year ended
March 31, 1998 and the one-month period ended April 30, 1998, is not
comparable to the Statement of Operations data for the eight-month
period ended December 31, 1998 of the Company due to the effects of
purchase accounting and the financing of the acquisitions. See
Management's Discussion and Analysis of Results of Operations and
Financial Condition.
12
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following discussion and analysis of the results of operations and
financial condition compares the combined nine-month period ended December 31,
1998 to the combined nine-month period ended December 31, 1997 and the combined
fiscal year ended March 31, 1998 of Trident to the historical fiscal year ended
March 31, 1997 of the Automotive Group of FKI. The pro forma period ended
December 31, 1998 consists of the Trident Predecessor for the one-month period
ended April 30, 1998 combined with the results of the Company for the
eight-month period ended December 31, 1998. The combined nine-month period ended
December 31, 1997 is made up of the historical period under FKI ownership from
April 1, 1997 to December 12, 1997, combined with the period under the Trident
Predecessor's ownership from December 13, 1997 to December 31, 1997. The
combined period ended March 31, 1998 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 from 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.
<TABLE>
<CAPTION>
NINE-MONTH PERIOD ENDED DECEMBER 31, TWELVE-MONTH PERIOD ENDED MARCH 31,
------------------------------------ -----------------------------------
1997 1998 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues $ 219,465 $ 214,001 $ 297,884 $ 297,545
Cost of sales 183,725 177,486 246,810 248,055
S, G & A expense 25,092 22,948 31,563 33,515
Operating income (loss) 10,648 13,567 19,379 15,975
Interest (income) expense, net (509) 8,656 (259) 3,939
Provision (benefit) for
income taxes 4,721 2,428 8,157 5,304
Net income (loss) 5,339 2,945 11,757 5,708
</TABLE>
COMBINED NINE-MONTH PERIOD ENDED DECEMBER 31, 1998 COMPARED TO COMBINED
NINE-MONTH PERIOD ENDED DECEMBER 31, 1997
SALES. Consolidated net sales decreased $5.5 million for the nine-month
period ended December 31, 1998 to $214.0 million from $219.5 million for the
nine-month period ended December 31, 1997. This decrease was essentially
attributable to the balancing out of certain forward lighting programs. In
addition, revenues were reduced by $2.4 million as a result of changes in
foreign currency exchange rates.
GROSS PROFIT. Gross profit increased $0.8 million for the nine-month
period ended December 31, 1998 to $36.5 million, or 17.1% of revenues, from
$35.7 million, or 16.3% of revenues for the nine-month period ended December 31,
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 for the nine-month period ended December 31, 1998
decreased by $5.9 million. This decrease is attributable to the savings being
realized by combining Dura's and Trident's selling and administrative functions.
13
<PAGE>
AMORTIZATION EXPENSE. Amortization expense was $4.6 million for the
nine-month period ended December 31, 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
nine-month period ended December 31, 1997.
INTEREST EXPENSE. Interest expense, net of interest income, was $8.7
million for the nine-month period ended December 31, 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 46% for
the nine-month period ended December 31, 1998 and the nine-month period ended
December 31, 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.
COMBINED TWELVE-MONTH PERIOD ENDED MARCH 31, 1998 COMPARED TO HISTORICAL
TWELVE-MONTH PERIOD ENDED MARCH 31, 1997
SALES. Consolidated net sales decreased slightly, by $0.4 million, for
the twelve-month period ended March 31, 1998 to $297.5 million from $297.9
million for the twelve-month period 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 assemblies for General
Motors, 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.
GROSS PROFIT. Total gross profit decreased $1.6 million for the
twelve-month period ended March 31, 1998 to $49.5 million from $51.1 million for
the twelve-month period 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. These improvements 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 the Company's financial position or
results of operations.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the twelve-month period 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,
14
<PAGE>
amortization of intangibles recorded in connection with that transaction and
increased spending incurred in connection with Trident's QS-9000 certification
program.
LIQUIDITY AND CAPITAL RESOURCES
OPERATING ACTIVITIES. Net cash provided by operating activities was
$6.2 million for the period from inception (September 19, 1997) to March 31,
1998, $3.3 million for the one-month period ended April 30, 1998 and $(11.7)
million for the eight-month period ended December 31, 1998.
INVESTING AND FINANCING. On December 31, 1998, the Company had
indebtedness of $143.8 million, including $81.2 million of Senior Subordinated
Notes and $62.7 million of indebtedness under the credit facility.
The Senior Subordinated Notes (the "Notes") bear interest at 10% and
are due in December 2005. Interest is payable semi-annually on June 15th and
December 15th. The Notes are generally 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 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 in
December 2000, with all drawn amounts subject to scheduled repayments beginning
thereafter and a final maturity in 2003. 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.
YEAR 2000
Trident is currently working to resolve the potential impact of the
year 2000 on the processing of time-sensitive information by its computerized
information systems. Any of its programs that have time-sensitive software may
recognize "00" as the year 1900 rather than the year 2000. This could result in
miscalculations, classification errors or systems failures.
While Trident's various operations are at different stages of Year 2000
readiness, Trident 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.
15
<PAGE>
Trident'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 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 Trident needs to make its
products, which could result in delayed shipments to customers and lost sales
and profits to the Company. Trident 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 believe 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 it will not incur material
remediation costs beyond the above anticipated future costs, or that its
business, financial condition, or results of operations will be 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.
ITEM 7A. 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. At December 31, 1998, Trident had
fixed rate debt of $81.2 million and variable rate debt of $ 62.7 million.
Holding other variables constant (such as foreign exchange rates and debt
levels) a one percentage point increase in interest rates would have decreased
the unrealized fair market value of the fixed rate debt at December 31, 1998 by
approximately $4 million and would be expected to have an estimated impact on
pre-tax earnings and cash flows for next year of approximately $627,000.
16
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of Trident are hereby
incorporated by reference to Exhibit 99.1.
THE FINANCIAL STATEMENTS OF THE AUTOMOTIVE GROUP OF FKI (FKI PREDECESSOR) FOR
THE PERIOD ENDED MARCH 31, 1997 AND 1996 INCLUDED IN THE FORM 10-K OF TRIDENT
AUTOMOTIVE PLC FOR THE YEAR ENDED MARCH 31, 1998 ARE HEREBY INCORPORATED BY
REFERENCE INTO THIS FORM 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS
A. DIRECTORS OF THE REGISTRANT
The following sets forth information with respect to Trident's
directors as of December 31, 1998:
KARL F. STORRIE has served as Director of Trident since April 1998. In
addition, Mr. Storrie has served as President, Chief Executive Officer and a
Director of Dura since March 1991. Prior to joining Dura and from 1986, Mr.
Storrie was Group President of a number of aerospace manufacturing companies
owned by Coltec Industries, a multi-divisional public corporation. Prior to
becoming a Group President, Mr. Storrie was a Division President of two
aerospace design and manufacturing companies for Coltec Industries from 1981 to
1986. During his thirty-five year career, Mr. Storrie has held a variety of
positions in technical and operations management. Mr. Storrie is also a director
of Argo-Tech Corporation, a manufacturer of aircraft fuel, boost and transfer
pumps.
DAVID R. BOVEE has served as a Director of Trident since April 1998. In
addition, Mr. Bovee has served as Vice President of Dura since November 1990 and
Chief Financial Officer of Dura from November 1990 to May 1997. Mr. Bovee also
serves as Assistant Secretary for Dura. Prior to joining Dura, Mr. Bovee served
as Vice President at Wickes in its Automotive Group from 1987 to 1990.
STEPHEN E.K. GRAHAM has served as a Director of Trident since April
1998. In addition, Mr. Graham has served as Vice President and Chief Financial
Officer since joining Dura in June 1997. From 1996 to May 1997, Mr. Graham was
Chief Financial Officer of Cambridge Industries, Inc., a North American supplier
of components to the automotive industry. From 1994 to 1996, Mr. Graham was
Chief Financial officer of Truck Components, Inc., a supplier of components to
the automotive and heavy truck industry. From 1989 to 1994, Mr. Graham held
several positions with Magna International, Inc., an automotive component
supplier.
BERNARD P. TWYMAN has served as a Director and Secretary of Trident
since April 1998. In addition, Mr. Twyman has served as Financial Controller of
Dura UK Limited, Stourport, UK since April 1998 and under previous ownership
between January 1992 and 1998. A chartered
17
<PAGE>
management accountant, Mr. Twyman held finance positions with TI Group Plc and
Delta Group Plc prior to 1992.
B. EXECUTIVE OFFICERS
Not applicable.
C. SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires Trident's officers, directors and persons who beneficially own more
than ten percent of a registered class of Trident's equity securities to file
reports of securities ownership and changes in such ownership with the
Securities and Exchange Commission (the "SEC"). Officers, directors and greater
than ten percent beneficial owners are also required by rules promulgated by the
SEC to furnish Trident with copies of all Section 16(a) forms they file.
Based solely upon a review of the copies of such forms furnished to
Trident, or written representations that no Form 5 filings were required,
Trident believes that during the period from April 30, 1998 through December 31,
1998 all Section 16(a) filing requirements applicable to its officers, directors
and greater than ten percent beneficial owners were complied with.
ITEM 11. EXECUTIVE COMPENSATION
Not applicable.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
All of the outstanding capital stock of the Registrant is held by Dura
UK Limited.
As of December 31, 1998, the Registrant had 50,000 Ordinary Shares of
(pound)1 each and 17,000,000 Ordinary Shares of $1 each outstanding.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See Item 12 above.
18
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS OF FORM 8-K
(a) Index to Consolidated Financial Statements filed as part of this
Form 10-K
PERIODS ENDED DECEMBER 31, 1998 AND MARCH 31, 1998
Report of Independent Public Accountants
Consolidated Balance Sheets as of December 31, 1998 and March 31, 1998
Consolidated Statements of Operations for the eight-month period ended
December 31, 1998, the one-month period ended April 30, 1998, and the
period from inception (September 19, 1997) to March 31, 1998
Consolidated Statements of Shareholders' Equity for the eight-month
period ended December 31, 1998, the one-month period ended April 30,
1998, and the period from inception (September 19, 1997) to March 31,
1998
Consolidated Statements of Cash Flows for the eight-month period ended
December 31, 1998, the one-month period ended April 30, 1998, and the
period from inception (September 19, 1997) to March 31, 1998
Notes to Consolidated Financial Statements
Supplemental Schedule to Consolidated Financial Statements: Schedule II
- Valuation and Qualifying Accounts
All other schedules are omitted as the required information is
applicable or the information is presented in the consolidated
financial statements or related notes.
(b) Reports on Form 8-K
Not applicable to this filing.
(c) Exhibits
23.1 Consent of Arthur Andersen LLP
27.1 Financial Data Schedule
99.1 Consolidated Financial Statements and Supplemental Schedule
19
<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: April 14, 1999 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 Director April 14, 1999
- ------------------------------------
Karl F. Storrie
/S/ DAVID R. BOVEE Director April 14, 1999
- ------------------------------------
David R. Bovee
/S/ STEPHEN E.K. GRAHAM Director April 14, 1999
- ------------------------------------
Stephen E.K. Graham
/S/ BERNARD P. TWYMAN Director and April 14, 1999
- ------------------------------------ Secretary
Bernard P. Twyman
20
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our reports included and incorporated by reference in this Form 10-K, into
the Company's previously filed Registration Statement File No. 333-8234.
ARTHUR ANDERSEN LLP
/s/ Arthur Andersen LLP
Minneapolis, Minnesota,
April 14, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 8,368
<SECURITIES> 0
<RECEIVABLES> 57,973
<ALLOWANCES> (2,238)
<INVENTORY> 15,758
<CURRENT-ASSETS> 101,142
<PP&E> 57,332
<DEPRECIATION> 0
<TOTAL-ASSETS> 382,973
<CURRENT-LIABILITIES> 94,923
<BONDS> 0
0
0
<COMMON> 17,085
<OTHER-SE> 83,223
<TOTAL-LIABILITY-AND-EQUITY> 382,973
<SALES> 187,526
<TOTAL-REVENUES> 187,526
<CGS> 151,302
<TOTAL-COSTS> 151,302
<OTHER-EXPENSES> 18,550
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,703
<INCOME-PRETAX> 9,889
<INCOME-TAX> 4,084
<INCOME-CONTINUING> 5,876
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,876
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trident Automotive plc:
We have audited the accompanying consolidated balance sheets of Trident
Automotive plc (a company registered under the laws of England) and subsidiaries
as of December 31, 1998 and March 31, 1998, and the related consolidated
statements of operations, stockholders' investment and cash flows for the period
from inception (September 19, 1997) to March 31, 1998, the one month period
ended April 30, 1998 and the eight month period ended December 31, 1998. These
consolidated financial statements and the schedule referred to below are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule 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.
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 December 31, 1998 and 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, the one month period ended April 30, 1998 and the
eight month period ended December 31, 1998 in conformity with generally accepted
accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule listed in the index to the
consolidated financial statements is presented for purposes of complying with
the Securities and Exchange Commissions rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota,
March 26, 1999
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
FKI
COMPANY PREDECESSOR
December 31, March 31,
ASSETS 1998 1998
------------- --------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 8,368 $ 11,415
Accounts receivable, net of allowance for doubtful
accounts of $2,238 and $1,745 55,735 48,875
Inventories 15,758 18,798
Other current assets 21,281 10,526
------------- --------------
Total current assets 101,142 89,614
Property, Plant and Equipment, net 57,332 64,873
Goodwill, net of accumulated amortization of $3,908 and $679 215,425 88,945
Other Assets, net of accumulated amortization of $1,010 and
$564 9,074 15,398
------------- --------------
$ 382,973 $ 258,830
------------- --------------
------------- --------------
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Current portion of long-term debt $ 7,059 $ 1,500
Accounts payable 33,796 37,018
Accrued expenses 54,068 28,570
------------- --------------
Total current liabilities 94,923 67,088
Noncurrent Liabilities:
Long-term debt, less current portion 136,799 126,300
Accrued pension and other postretirement liabilities 12,957 12,891
Other noncurrent liabilities 37,200 11,536
------------- --------------
Total liabilities 281,879 217,815
------------- --------------
Minority Interest 786 1,170
Redeemable U.S. Dollar Ordinary Shares -- 740
Stockholders' Investment:
Common stock - Sterling ordinary shares;
$1.70 par value; 50,000 shares issued and outstanding 85 85
Common stock - 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 78,157 23,556
Retained earnings 5,876 123
Accumulated other comprehensive income (loss) -
cumulative translation adjustment (810) (1,363)
------------- --------------
Total stockholders' investment 100,308 39,105
------------- --------------
$ 382,973 $ 258,830
------------- --------------
------------- --------------
</TABLE>
The accompanying notes are an integral part of these consolidated
balance sheets.
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FKI
PREDECESSOR
COMPANY TRIDENT Period From
Eight Month PREDECESSOR Inception
Period Ended One Month (September 19,
December Period Ended 1997) to March
31, 1998 APRIL 30, 1998 31, 1998
------------- -------------- --------------
<S> <C> <C> <C>
Revenues $ 187,526 $ 26,475 $ 86,342
Cost of sales 151,302 26,184 71,295
------------- -------------- --------------
Gross profit 36,224 291 15,047
Selling, general and administrative expenses 14,314 4,009 9,634
Amortization expense 4,236 389 --
------------- -------------- --------------
Operating income (loss) 17,674 (4,107) 5,413
Interest expense, net (7,703) (952) (3,887)
Exchange gain (loss) -- 341 (922)
Other income (expense) (82) 62 24
------------- -------------- --------------
Income (loss) before provision (benefit) for income
taxes and minority interest 9,889 (4,656) 628
Provision (benefit) for income taxes 4,084 (1,656) 505
Minority interest in profit of subsidiary (71) (69) --
------------- -------------- --------------
Net income (loss) $ 5,876 $ (2,931) $ 123
------------- -------------- --------------
------------- -------------- --------------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' INVESTMENT
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
--------------------------------------------------
Common Stock
--------------------------------------------------
STERLING U.S. DOLLARS
ORDINARY ORDINARY
SHARES DOLLARS SHARES DOLLARS
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Initial capitalization of Trident 50,000 $ 85 -- $ --
Automotive plc
Issuance of U.S. Dollar ordinary shares -- -- 16,704,000 16,704
Net income -- -- -- --
Other comprehensive income - translation
adjustment -- -- -- --
Total comprehensive income
----------- ----------- ------------ -----------
Balance, March 31, 1998 50,000 85 16,704,000 16,704
Net income -- -- -- --
Other comprehensive income - translation
adjustment -- -- -- --
Total comprehensive income
----------- ----------- ------------ -----------
Balance, April 30, 1998 50,000 85 16,704,000 16,704
Purchase by Dura -- 296,000 296 54,601
Net income -- -- -- --
Other comprehensive income - translation
adjustment -- -- -- --
Total comprehensive income
----------- ----------- ------------ -----------
Balance, December 31, 1998 50,000 $ 85 17,000,000 $ 17,000
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
</TABLE>
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER TOTAL
PAID-IN- RETAINED COMPREHENSIVE STOCKHOLDERS'
CAPITAL EARNINGS INCOME (LOSS) INVESTMENT
----------- ---------- ------------- -------------
<S> <C> <C> <C> <C>
Initial capitalization of Trident $ -- $ -- $ -- $ 85
Automotive plc
Issuance of U.S. Dollar ordinary shares 23,556 -- -- 40,260
Net income -- 123 --
Other comprehensive income - translation
adjustment -- -- (1,363)
Total comprehensive income (1,240)
----------- ---------- ------------- -------------
Balance, March 31, 1998 23,556 123 (1,363) 39,105
Net income -- (2,931) --
Other comprehensive income - translation
adjustment -- -- (1,895)
Total comprehensive income (4,826)
----------- ---------- ------------- -------------
Balance, April 30, 1998 23,556 (2,808) (3,258) 34,279
Purchase by Dura 2,808 3,258 60,963
----------- ---------- ------------- -------------
Net income -- 5,876 --
Other comprehensive income - translation
adjustment -- -- (810)
Total comprehensive income 5,066
----------- ---------- ------------- -------------
Balance, December 31, 1998 $ 78,157 $ 5,876 $ (810) $ 100,308
----------- ---------- ------------- -------------
----------- ---------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FKI
PREDECESSOR
TRIDENT Period From
COMPANY PREDECESSOR Inception
Eight Month One Month (Sept. 19, 1997)
Period Ended Period Ended to
DEC. 31, 1998 APRIL 30, 1998 MARCH 31, 1998
------------- -------------- --------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 5,876 $ (2,931) $ 123
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities-
Depreciation and amortization 9,582 1,456 3,547
Deferred tax 5,200 (1,681) (2,865)
Exchange (gain) loss -- (341) 922
Minority interest (71) (69) (24)
Changes in other operating items (32,263) 6,896 4,511
------------- -------------- --------------
Net cash provided by (used in) operating
activities (11,676) 3,330 6,214
------------- -------------- --------------
INVESTING ACTIVITIES:
Capital expenditures, net (8,939) (2,454) (7,786)
Purchase of Predecessor, net -- -- (155,490)
Acquisition and sale of subsidiaries 8,446 -- --
------------- -------------- --------------
Net cash provided by (used in) investing activities (493) (2,454) (163,276)
------------- -------------- --------------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 50,000 -- 125,000
Proceeds from borrowings on revolving credit facility 11,706 2,000 7,763
Repayment of debt (52,800) (1,300) (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 8,906 700 168,885
------------- -------------- --------------
EFFECT OF EXCHANGE RATES ON CASH (810) (550) (408)
------------- -------------- --------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (4,073) 1,026 11,415
CASH AND CASH EQUIVALENTS, beginning of period 12,441 11,415 --
------------- -------------- --------------
CASH AND CASH EQUIVALENTS, end of period $ 8,368 $ 12,441 $ 11,415
------------- -------------- --------------
------------- -------------- --------------
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for -
Interest $ 9,388 $ 361 $ 1,546
Income taxes 3,490 -- 510
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION:
Trident Automotive PLC (the "Company") incorporated in the UK, 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"). 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 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 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 December 31,
1998, liabilities for approximately $32 million for costs associated with
the shutdown and consolidation of certain acquired facilities and $13
million in severance costs are recorded on the consolidated balance sheet.
Results of operations for these acquisitions have been included in the
accompanying 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 losses
from these businesses as follows (in thousands):
<TABLE>
<CAPTION>
Period Ended
--------------------------------------------------------------
MARCH 31, 1998 APRIL 30, 1998 DECEMBER 31, 1998
-------------- -------------- -----------------
<S> <C> <C> <C>
Revenues $ 23,912 $ 7,179 $ 50,222
Operating income (loss) $ 1,164 $ (954) $ 3,650
</TABLE>
These dispositions are anticipated to be completed by the end of the second
quarter of 1999.
6
<PAGE>
The following unaudited consolidated pro forma results of operations for
the year ended March 31, 1998 give effect to the FKI Acquisition as if such
transactions had occurred at the beginning of the period (in thousands):
<TABLE>
<CAPTION>
1998
-----------
<S> <C>
Revenues $ 297,500
Operating income 14,526
Net loss (442)
</TABLE>
The unaudited pro forma consolidated financial information does not purport
to represent what the respective entity's financial position or results of
operations would actually have been if these transactions had occurred at
such dates or to project the Company's future results of operations.
2. SIGNIFCANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION:
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.
FISCAL YEAR:
Effective December 31, 1998, the Company changed its fiscal year end from
March 31 to December 31. The Company reports its operating results based on
a 52-/53-week fiscal year. For presentation purposes, the Company uses
December 31 as its fiscal year-end.
CASH EQUIVALENTS:
Cash equivalents consist of money market instruments with original
maturities of three months or less and are stated at cost which
approximates fair value.
INVENTORIES:
Inventories are valued at the lower of first-in, first-out ("FIFO") cost or
market.
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
FKI
COMPANY PREDECESSOR
DEC. 31, 1998 MARCH 31, 1998
------------- --------------
<S> <C> <C>
Finished products $ 5,797 $ 4,158
Work-in-process 3,470 6,755
Raw materials 6,491 7,885
------------- --------------
Total $ 15,758 $ 18,798
------------- --------------
------------- --------------
</TABLE>
7
<PAGE>
OTHER CURRENT ASSETS:
Other current assets consisted of the following (in thousands):
<TABLE>
<CAPTION>
FKI
COMPANY PREDECESSOR
DEC. 31, 1998 MARCH 31, 1998
------------- --------------
<S> <C> <C>
Deferred income taxes $ 15,639 $ 4,885
Prepaid expenses 2,600 2,856
Excess of cost over billings
on uncompleted tooling
projects 2,300 651
Taxes receivable 742 2,134
------------- --------------
$ 21,281 $ 10,526
------------- --------------
------------- --------------
</TABLE>
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment are stated at cost. For financial reporting
purposes, depreciation is provided on the straight-line method over the
following estimated useful lives:
<TABLE>
<CAPTION>
<S> <C>
Land and Improvements 10 to 15 years
Buildings 30 years
Machinery and equipment 5 to 15 years
</TABLE>
Accelerated depreciation methods are used for tax reporting purposes.
Maintenance and repairs are charged to expense as incurred. Major
betterments and improvements which extend the useful life of the item are
capitalized and depreciated. The cost and accumulated depreciation of
property, plant and equipment retired or otherwise disposed of are removed
from the related accounts, and any residual values are charged or credited
to income.
GOODWILL AND OTHER ASSETS:
Goodwill represents the excess of the purchase price over the fair value of
the net assets acquired and is being amortized on a straight-line basis
over 40 years. Other assets principally consist of debt financing costs
which are being amortized over the term of the applicable agreement.
The Company periodically evaluates whether events and circumstances have
occurred which may affect the estimated useful life or 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 goodwill and other long-lived assets, the Company would recognize
an impairment loss.
8
<PAGE>
ACCRUED LIABILITIES:
Accrued liabilities consisted of the following (in thousands):
<TABLE>
<CAPTION>
FKI
COMPANY PREDECESSOR
DEC. 31, 1998 MARCH 31, 1998
------------- --------------
<S> <C> <C>
Income taxes $ 5,385 $ 3,695
Plant closure and consolidation costs 29,635 4,363
Compensation and benefits 6,589 9,737
Medical insurance 557 --
Legal and environmental 1,873 3,332
Interest 1,764 2,271
Other 8,265 5,172
------------- --------------
$ 54,068 $ 28,570
------------- --------------
------------- --------------
</TABLE>
OTHER NONCURRENT LIABILITIES:
Other noncurrent liabilities consisted of the following (in thousands):
<TABLE>
<CAPTION>
FKI
COMPANY PREDECESSOR
DEC. 31, 1998 MARCH 31, 1998
--------------- --------------
<S> <C> <C>
Plant closure and consolidation costs $ 15,840 $ 4,858
Loss contracts 5,657 4,202
Legal and environmental 2,210 --
Deferred income taxes 13,493 --
Other -- 2,476
--------------- --------------
$ 37,200 $ 11,536
--------------- --------------
--------------- --------------
</TABLE>
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 the obligation of the Company for the entire
production life of the vehicle, with terms of up to seven years, and the
Company has no provisions to terminate such contracts. 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 direct 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 and is recorded at the minimum amount necessary to
fulfill the Company's obligations to its customers.
INCOME TAXES:
The Company accounts for income taxes following the provisions of Statement
of Financial Accounting Standards ("SFAS") No. 109, 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 or tax returns. Under this method, deferred tax assets and
liabilities are determined based on the difference between the financial
statement and tax bases of assets and liabilities using currently enacted
tax rates.
9
<PAGE>
COMPREHENSIVE INCOME:
Effective January 1, 1998, the Company adopted the provisions of 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. In accordance
with SFAS No. 130, the Company has chosen to disclose comprehensive income
in the consolidated statements of stockholders' investment. Prior years
have been restated to conform to the SFAS No. 130 requirements.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
The carrying amount of cash and cash equivalents, accounts receivable,
accounts payable and revolving credit facilities approximates fair value
because of the short maturity of these instruments. The carrying amount of
the Company's long-term debt approximates fair value because of the
variability of the interest cost associated with these instruments. The
Notes were recorded at fair value in connection with the Dura acquisition
in April 1998, and the Company believes there has been no material change
in the estimated fair value since such date.
SEGMENT REPORTING:
In 1998, the Company adopted SFAS No. 131, "Disclosure About Segments of an
Enterprise and Related Information." SFAS No. 131 supersedes SFAS No. 14,
replacing the "industry segment" approach with the "management" approach.
The management approach designates the internal organization that is used
by management for making operating decisions and assessing performance as
the source of the Company's reportable segments. SFAS No. 131 also requires
disclosures about products and services, geographic areas and major
customers. The adoption of SFAS No. 131 did not affect results of
operations or financial position but did affect the disclosure of segment
information (see Note 5).
USE OF ESTIMATES:
The preparation of consolidated 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. Ultimate results could differ from
those estimates.
FOREIGN CURRENCY TRANSLATION:
Assets and liabilities of the Company's foreign operations are translated
using the year-end rates of exchange. Results of operations are translated
using the average rates prevailing throughout the period. Translation gains
or losses are accumulated as a separate component of stockholders'
investment.
10
<PAGE>
RECLASSIFICATIONS:
Certain amounts in the prior period financial statements have been
reclassified to conform to the current presentation. These
reclassifications were not material to the Company's financial position or
results of operations.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:
In June 1998, the Financial Accounting Standards Board 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 of adoption.
In April 1998, the Financial Accounting Standards Board issued Statement of
Position (SOP) No. 98-5, "Reporting on the Costs of Start-Up Activities,"
effective for fiscal years beginning after December 15, 1998. SOP 98-5
requires the expensing of start-up activities as incurred, versus
capitalizing and expensing them over a period of time. The Company will
adopt this new pronouncement in the first quarter of 1999 and does not
estimate a material impact upon adoption.
2. DEBT:
Debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
FKI
COMPANY PREDECESSOR
DECEMBER MARCH 31, 1998
31, 1998
----------- --------------
<S> <C> <C>
Bank Credit Agreement:
Term loan $ 43,500 $ 50,000
Revolving credit facility 18,894 2,800
Capital leases 314 --
Notes 81,150 75,000
----------- --------------
143,858 127,800
Less - current portion (7,059) (1,500)
----------- --------------
Total long-term debt $ 136,799 $ 126,300
----------- --------------
----------- --------------
</TABLE>
Future maturities of long-term debt as of December 31, 1998 are as follows
(in thousands):
<TABLE>
<CAPTION>
<S> <C>
1999 $ 7,059
2000 7,525
2001 11,529
2002 12,529
2003 23,923
Thereafter 81,293
---------
$ 143,858
</TABLE>
11
<PAGE>
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"). This Credit Agreement was used to replace the Company's credit
facility. 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 lender's reference rate or the Eurocurrency
rate. The interest rate on borrowings outstanding under the Trident Sub
Facility ranged from 5.775% to 7.9625% as of December 31, 1998. The Credit
Agreement 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 December 31, 1998. The assets of the
Company have been pledged as collateral to secure borrowings under the
Trident Sub-Facility.
The Trident Sub-Facility provides the Company with the ability to
denominate its revolving credit borrowings in foreign currencies. As of
December 31, 1998, $51.6 million of borrowings were denominated in U.S.
dollars, $4.7 million were denominated in British pound sterling, $1.4
million were denominated in Canadian dollars and $4.7 million were
denomination in French francs.
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 9, the Notes are guaranteed by certain
subsidiaries of the Company. The Notes were recorded at their fair value of
$81.150 million as part of the Dura Acquisition. The premium in excess of
face value will be amortized over the life of the Notes using the effective
interest method. The Notes contain various restrictive covenants which the
Company was in compliance with as of December 31, 1998.
The Dura Acquisition constituted a change of control as defined by the
Company's Notes Indenture (the "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.
Subsequent to year-end, Dura and the Company entered into a new credit
facility (the "New Credit Facility"). The New Credit Facility provides for
borrowings aggregating up to approximately $1.15 billion, including a $275
million term loan A, a $275 million term loan B, a $400 million revolving
credit facility and a $200 million interim term loan. The New Credit
Facility contains the same sub-facilities for Trident as the Credit
Agreement.
12
<PAGE>
4. INCOME TAXES:
The provision for income taxes consisted of the following (in thousands):
<TABLE>
<CAPTION>
FKI
TRIDENT PREDECESSOR
COMPANY PREDECESSOR PERIOD FROM
EIGHT MONTH ONE MONTH PERIOD INCEPTION
PERIOD ENDED ENDED APRIL 30, (SEPT. 19, 1997)
DEC. 31, 1998 1998 TO MAR. 31, 1998
-------------- ---------------- ----------------
<S> <C> <C> <C>
Current $ (1,116) $ 25 $ 3,370
Deferred 5,200 (1,681) (2,865)
-------------- ---------------- ----------------
Total $ 4,084 $ (1,656) $ 505
-------------- ---------------- ----------------
-------------- ---------------- ----------------
</TABLE>
A reconciliation of the provision for income taxes at the U.S. statutory
rates of 35% to the reported income tax provision is as follows (in
thousands):
<TABLE>
<CAPTION>
FKI
TRIDENT PREDECESSOR
COMPANY PREDECESSOR PERIOD FROM
EIGHT MONTH ONE MONTH INCEPTION (SEPT.
PERIOD ENDED PERIOD ENDED 19,1997) TO
DEC. 31, 1998 APRIL 30, 1998 MARCH 31, 1998
------------- -------------- --------------
<S> <C> <C> <C>
Federal provision at statutory rates $ 3,461 $ (1,630) $ 220
State taxes, net of federal benefit -- -- 15
Foreign provision in excess of U.S.
tax rate 29 (164) 155
Unbenefitted foreign losses 793 79 --
Other (199) 59 115
------------- -------------- --------------
Total $ 4,084 $ (1,656) $ 505
------------- -------------- --------------
------------- -------------- --------------
</TABLE>
A summary of deferred tax assets (liabilities) is as follows (in
thousands):
<TABLE>
<CAPTION>
FKI
COMPANY PREDECESSOR
DECEMBER 31, MARCH 31,
1998 1998
------------ -------------
<S> <C> <C>
Net operating loss carryforwards $ 3,705 $ --
Accrued plant closure and consolidation costs 11,120 3,281
Inventory valuation adjustments -- 1,503
Capitalized reserves and accruals 814 2,894
Long-term basis differences,
including goodwill (13,493) --
Other -- 439
------------ -------------
$ 2,146 $ 8,117
------------ -------------
------------ -------------
</TABLE>
5. GEOGRAPHIC AND PRODUCT LINE INFORMATION:
In 1998, the Company adopted SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." The Company manufactures engineered
mechanisms for the global automotive industry and operates in a single
reportable business segment, automotive products. The Company internally
evaluates its business principally by product category; however, because of
the similar economic characteristics of the operations, including the
13
<PAGE>
nature of products, production processes and customers, those operations
have been aggregated following the provisions of SFAS No. 131 for segment
reporting purposes.
The following is a summary of revenues and long-lived assets by geographic
location (in thousands):
<TABLE>
<CAPTION>
Period from Inception
EIGHT MONTH PERIOD ENDED ONE MONTH PERIOD ENDED (SEPTEMBER 19, 1997) TO
DECEMBER 31, 1998 APRIL 30, 1998 MARCH 31, 1998
------------------------------ ------------------------------ ------------------------------
LONG-LIVED LONG-LIVED LONG-LIVED
REVENUES ASSETS REVENUES ASSETS REVENUES ASSETS
---------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
North America $ 122,472 $ 32,643 $ 18,150 $ 37,987 $ 58,513 $ 38,499
Europe 58,574 22,041 7,384 23,305 24,717 23,386
Other foreign countries $ 6,480 $ 2,648 $ 941 $ 2,601 3,112 2,988
---------- ----------- ----------- ----------- ----------- -----------
$ 187,526 $ 57,332 $ 26,475 $ 63,893 $ 86,342 $ 64,873
---------- ----------- ----------- ----------- ----------- -----------
---------- ----------- ----------- ----------- ----------- -----------
</TABLE>
Revenues are attributed to geographic locations based on the location of
product production.
The following is a summary of the approximate composition by product
category of the Company's revenues (in thousands):
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
EIGHT-MONTH ONE-MONTH PERIOD (SEPTEMBER 19,
PERIOD ENDED ENDED 1997) TO MARCH 31,
DEC. 31, 1998 APRIL 30, 1998 1998
--------------- ----------------- ------------------
<S> <C> <C> <C>
Automotive fixtures $ 50,222 $ 7,179 $ 23,912
Automotive cables 137,304 19,296 62,430
--------------- ----------------- ------------------
$ 187,526 $ 26,475 $ 86,342
--------------- ----------------- ------------------
--------------- ----------------- ------------------
</TABLE>
The Company sells its products directly to automobile manufacturers.
Customers that accounted for a significant portion of consolidated revenues
in the eight month period ended December 31, 1998, the one month period
ended April 30, 1998 and the period from inception (September 19, 1997) to
March 31, 1998 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 APRIL 30, 1998 MARCH 31, 1998
----------------- -------------- --------------
<S> <C> <C> <C>
Ford 16% 16% 16%
GM 17 17 17
DaimlerChrysler 19 19 19
</TABLE>
As of December 31, 1998 and March 31, 1998, receivables from these
customers represented 42% and 45% of total accounts receivable.
6. EMPLOYEE BENEFIT PLANS:
PENSION PLANS AND POSTRETIREMENT BENEFITS:
The Company sponsors six defined benefit pension plans which cover certain
hourly and salary employees. The Company's policy is to make annual
contributions to the plans to fund the normal cost and the unfunded frozen
initial liability over 11.5 years. In addition, the Company has various
postretirement medical benefit plans for certain employee groups and has
recorded a liability for its estimated obligation under these plans.
14
<PAGE>
The change in benefit obligation and plan assets consisted of the following (in
thousands):
<TABLE>
<CAPTION>
Postretirement Benefits
Pension Benefits Other Than Pensions
---------------- -------------------
December 31, March 31, December 31, March 31,
1998 1998 1998 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation at beginning of the
period $ 23,926 $ 22,911 $ 9,473 $ 9,374
Service cost 1,287 526 166 69
Interest cost 1,264 519 506 209
Plan participants' contributions -- 29 -- --
Actuarial gain 4,672 -- 1,994 --
Acquisition of Trident -- -- -- --
Benefits paid -- (59) (616) (179)
----------- ------------ ----------- ----------
Benefit obligation at end of the period $31,149 $ 23,926 $ 11,523 $ 9,473
----------- ------------ ----------- ----------
----------- ------------ ----------- ----------
CHANGE IN PLAN ASSETS:
Fair value at plan assets at beginning
of the period 21,258 20,625 -- --
Actual return on plan assets 1,312 604 -- --
Acquisition of Trident -- -- -- --
Employer contributions 344 59 -- --
Plan participants contributions -- 29 -- --
Benefits paid -- (59) -- --
------------- ------------ ------------- ------------
Fair value of plan assets at end of the
period $ 22,914 $ 21,258 $ -- $ --
------------- ------------ ------------- ------------
------------- ------------ ------------- ------------
</TABLE>
All of the Company's plans have benefit obligations in excess of their
respective plan assets. The funded status of the Company's plans is as
follows (in thousands):
<TABLE>
<CAPTION>
Postretirement Benefits
Pension Benefits Other Than Pensions
---------------- -------------------
Dec. 31, March 31, Dec. 31, March 31,
1998 1998 1998 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Funded status
Unrecognized actuarial gain $ 8,235 $ 2,668 $ 11,523 $ 9,473
Unrecognized prior service cost -- -- (1,995) --
Adjustment to recognize -- -- --
minimum liability -- -- -- --
------------- ----------- -------------- -------------
Accrued benefit cost $ 8,235 $ 2,668 $ 9,528 $ 9,473
------------- ----------- -------------- -------------
------------- ----------- -------------- -------------
</TABLE>
The following weighted average assumptions were used to account for the
plans:
<TABLE>
<CAPTION>
Postretirement Benefits
Pension Benefits Other Than Pensions
---------------- -------------------
Dec. 31, March 31, Dec. 31, March 31,
1998 1998 1998 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Discount rate 5.750-7.375% 6.00-6.375% 6.75-7.375% 7.375%
Expected return on plan assets 9-9.5% 9-9.5% N/A N/A
Rate of compensation increase 4-6% 4.5-6% N/A N/A
</TABLE>
15
<PAGE>
For measurement purposes, a 7% annual rate of increase in the per capita
cost of covered health care benefits was assumed for 1998. The rate was
assumed to decrease .5% per year in 1999 to 5% in 2003.
The components of net periodic benefit costs are as follows (amounts in
thousands):
<TABLE>
<CAPTION>
Postretirement Benefits
Pension Benefits Other Than Pensions
---------------- -------------------
Period From
Inception
Period From (Sept. 19,
Nine Month Inception (Sept. Nine Month 1997) to
Period Ended 19, 1997) to Period Ended March 31,
Dec. 31, 1998 March 31, 1998 Dec. 31, 1998 1998
------------- -------------- ------------- ----
<S> <C> <C> <C> <C>
Service cost $ 1,287 $ 526 166 $ 69
Interest cost 1,264 519 506 209
Expected return on plan
assets (1,464) (603) -- --
Amortization of prior service
cost -- -- -- --
Recognized actuarial (gain)
loss -- -- -- --
----------- ---------- ----------- -----------
Net periodic benefit cost $ 1,087 $ 442 $ 672 $ 278
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
</TABLE>
Assumed health care cost trend rates have a significant effect on the
amounts reported for the post retirement medical benefit plans. A one
percentage-point change in assumed health care cost trend rates would have
the following effects:
<TABLE>
<CAPTION>
1-Percentage-Point 1-Percentage-Point
Increase Decrease
--------------------------- --------------------------
<S> <C> <C>
Effect on total of service and interest
cost components $ 13 $ (12)
-------- ---------
-------- ---------
Effect on the post retirement
benefit obligation $ 182 $ (164)
-------- ---------
-------- ---------
</TABLE>
7. COMMITMENTS AND CONTINGENCIES:
LEASES:
The Company leases office and manufacturing space and certain equipment
under operating lease agreements which require it to pay maintenance,
insurance, taxes and other expenses in addition to annual rentals. Future
annual rental commitments at December 31, 1998 under these operating leases
are as follows (in thousands):
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1999 $ 2,153
2000 2,099
2001 1,998
2002 1,779
2003 1,642
Thereafter 1,425
</TABLE>
16
<PAGE>
LITIGATION:
The Company is from time to time subject to various legal actions and
claims incidental to its business, including those arising out of alleged
defects, product warranties, employment-related matters and environmental
matters. Litigation is subject to many uncertainties, and the outcome of
individual litigated matters is not predictable with assurance. After
discussions with counsel, it is the opinion of management that the Company
has provided adequate reserves to cover these matters, and the ultimate
outcome of such matters will not have a material adverse impact on the
consolidated financial position, results of operations or cash flows of the
Company.
8. COMBINED HISTORICAL FINANCIAL RESULTS (UNAUDITED):
The results of operations for the nine months ended December 31, 1997 were
as follows:
<TABLE>
<S> <C>
Revenues $219,465
Gross profit 35,740
Net income 5,339
</TABLE>
These represent the results of operations for the historical period under
FKI ownership from April 1, 1997 to December 12, 1997, combined with the
results of the Company for the period from December 13, 1997 to December
31, 1997.
9. RELATED PARTY TRANSACTIONS:
In December 1998, the Company sold its investment in its German subsidiary
to Dura for approximately $4 million. The selling price was based on book
value and, therefore, no gain or loss resulted from the sale.
In December 1998, the Company purchased 100% of the common stock of the
French brake subsidiary of Dura at book value. The Company paid
approximately $45,000 in cash and assumed $4.9 million in debt.
Dura provides certain services on behalf of the Company. These services
include accounting and treasury functions, maintenance of management
information systems, legal services and assistance with other legal
matters. Dura does not charge Trident for any of these services.
10. 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 the
Notes, on a joint and several basis. The Company has not presented separate
financial statements and other disclosures concerning the Guarantors
because management believes that such information is not material.
17
<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 15,123 226 -- 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>
18
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF OPERATIONS FOR THE EIGHT-MONTH PERIOD ENDED
DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
Non-
Trident Guarantor Guarantor
Automotive Plc Companies Companies Eliminations Consolidated
-------------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues $ -- $ 151,568 $ 42,232 $ (6,274) $ 187,526
Cost of sales -- 123,499 34,077 (6,274) 151,302
-------------- ---------- ---------- ------------- ----------
Gross profit -- 28,069 8,155 -- 36,224
Selling, general and administrative expenses 31 9,953 4,332 (2) 14,314
Amortization expense 1,451 2,349 517 (81) 4,236
-------------- ---------- ---------- ------------- ----------
Operating income (loss) (1,482) 15,767 3,306 83 17,674
Interest expense (7,389) (309) (249) -- (7,947)
Interest expense-intercompany -- (5,746) (1,088) 6,834 --
Interest income -- 112 132 -- 244
Interest income - intercompany 1 6,753 -- (6,754) --
Exchange gain (loss) -- -- -- -- --
Equity in net income of subsidiary 10,596 1,083 -- (11,679) --
Other income (expense) -- -- -- (82) (82)
-------------- ---------- ---------- ------------- ----------
Net income (loss) before provision
for income taxes and minority interest 1,726 17,660 2,101 (11,598) 9,889
Provision (benefit) for income taxes (2,230) 5,145 1,169 -- 4,084
Minority interest in profit of subsidiary -- -- (71) -- (71)
-------------- ---------- ---------- ------------- ----------
Net income (loss) $ 3,956 $ 12,515 $ 1,003 $ (11,598) $ 5,876
-------------- ---------- ---------- ------------- ----------
-------------- ---------- ---------- ------------- ----------
</TABLE>
19
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE EIGHT-MONTH PERIOD ENDED
DECEMBER 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) $ 3,956 $ 12,515 $ 1,003 $(11,598) $ 5,876
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating
activities-
Depreciation and amortization 1,451 6,344 1,787 -- 9,582
Loss (income) from investment in
subsidiaries (10,596) (1,083) -- 11,679 --
Exchange gain (loss) -- -- -- -- --
Minority interest -- -- (71) -- (71)
Deferred taxes (3,254) 9,143 (689) -- 5,200
Due to/from affiliates 17,277 (22,331) 3,965 1,089 --
Changes in other operating items (1,800) (27,185) (4,238) 960 (32,263)
---------- --------- --------- --------- ---------
Net cash provided by (used in) operating
activities 7,034 (22,597) 1,757 2,130 (11,676)
---------- --------- --------- --------- ---------
activities
INVESTING ACTIVITIES:
Capital expenditures, net -- (6,913) (1,945) (81) (8,939)
Acquisition and sale of subsidiaries -- 8,454 (8) -- 8,446
---------- --------- --------- --------- ---------
Net cash provided by (used in) investing activities -- 1,541 (1,953) (81) (493)
---------- --------- --------- --------- ---------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 50,000 -- -- -- 50,000
Proceeds from borrowings under revolving credit (3,200) 14,906 -- -- 11,706
facility
Repayment of debt (52,800) -- -- -- (52,800)
---------- --------- --------- --------- ---------
Net cash provided by (used in) financing
activities (6,000) 14,906 -- -- 8,906
---------- --------- --------- --------- ---------
EFFECT OF EXCHANGE RATES ON CASH (810) 928 1,121 (2,049) (810)
---------- --------- --------- --------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS 224 (5,222) 925 -- (4,073)
CASH AND CASH EQUIVALENTS, beginning of period 48 6,941 5,452 -- 12,441
---------- --------- --------- --------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 272 $ 1,719 $ 6,377 $ -- $ 8,368
---------- --------- --------- --------- ---------
---------- --------- --------- --------- ---------
</TABLE>
20
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEETS AS OF APRIL 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 $ 48 $ 6,941 $ 5,452 $ -- $ 12,441
Accounts receivable, net -- 35,046 15,337 -- 50,383
Inventories -- 14,410 3,813 -- 18,223
Due from affiliates 2,292 7,303 480 (10,075) --
Other current assets 997 2,703 3,204 -- 6,904
----------- --------- --------- ----------- ---------
Total current assets 3,337 66,403 28,286 (10,075) 87,951
Property, Plant and Equipment, net -- 52,562 11,331 63,893
Note Receivable from Subsidiaries -- 22,281 -- (22,281) --
Deferred Financing Costs 6,527 -- -- -- 6,527
Investment in Subsidiaries 154,041 14,301 -- (168,342) --
Goodwill, net 3,789 65,105 22,640 -- 91,534
Other Assets, net -- 13,585 666 -- 14,251
----------- --------- --------- ----------- ---------
$ 167,694 $ 234,237 $ 62,923 $ (200,698) $ 264,156
----------- --------- --------- ----------- ---------
----------- --------- --------- ----------- ---------
LIABILITIES AND STOCKHOLDERS' INVESTMENT Current Liabilities:
Current portion of long-term debt $ 1,500 $ -- $ -- $ -- $ 1,500
Accounts payable -- 28,988 9,128 -- 38,116
Accrued expenses 4,119 23,253 9,133 503 37,008
Due to affiliates 3,532 2,121 884 (6,537) --
----------- --------- --------- ----------- ---------
Total current liabilities 9,151 54,362 19,145 (6,034) 76,624
Non-Current Liabilities:
Long-term debt, less current portion 127,000 -- -- -- 127,000
Note payable to Parent (3,476) 3,276 24,152 (23,952) --
Accrued pension and other postretirement -- 13,271 992 -- 14,263
liabilities
Other noncurrent liabilities -- 6,918 3,230 -- 10,148
----------- --------- --------- ----------- ---------
Total liabilities 132,675 77,827 47,519 (29,986) 228,035
----------- --------- --------- ----------- ---------
Minority Interest in Subsidiary Company -- -- 1,101 -- 1,101
Stockholders' Investment 35,019 156,410 14,303 (170,712) 35,020
----------- --------- --------- ----------- ---------
$ 167,694 $ 234,237 $ 62,923 $ (200,698) $ 264,156
----------- --------- --------- ----------- ---------
----------- --------- --------- ----------- ---------
</TABLE>
21
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF OPERATIONS FOR THE ONE-MONTH PERIOD
ENDED APRIL 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
Trident Non-
Automotive Guarantor Guarantor
Plc Companies Companies Eliminations Consolidated
--- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues $ -- $ 20,931 $ 5,544 $ -- $ 26,475
Cost of sales -- 21,474 4,710 -- 26,184
--------- --------- --------- ----------- ------------
Gross profit -- (543) 834 -- 291
Selling, general and administrative 16 3,228 765 -- 4,009
expenses
Amortization 47 266 76 -- 389
--------- --------- --------- ----------- ------------
Operating income (63) (4,037) (7) -- (4,107)
Interest expense (955) (1,188) (198) 1,365 (976)
Interest income -- 1,376 8 (1,360) 24
Exchange (loss) gain -- (267) 613 (5) 341
Equity in net earnings of subsidiaries (2,307) 385 -- 1,922 --
Other income -- 51 11 -- 62
--------- --------- --------- ----------- ------------
Income before provision for
income taxes (3,325) (3,680) 427 1,922 (4,656)
Provision (benefit) for income taxes (394) (1,373) 111 -- (1,656)
Minority interest in profit of subsidiary -- -- (69) -- (69)
--------- --------- --------- ----------- ------------
Net income $ (2,931) $ (2,307) $ 385 $ 1,922 $ (2,931)
--------- --------- --------- ----------- ------------
--------- --------- --------- ----------- ------------
</TABLE>
22
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE ONE-MONTH PERIOD ENDED
APRIL 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
Non-
Trident Guarantor Guarantor
Automotive Plc Companies Companies Eliminations Consolidated
-------------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ (2,931) $ (2,307) $ 385 $ 1,922 $ (2,931)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating
activities-
Depreciation and amortization 47 1,183 226 -- 1,456
Loss (income) from investment in
subsidiaries 2,307 (385) -- (1,922) --
Deferred income taxes -- (1,679) (2) -- (1,681)
Unrealized exchange gain (loss) -- 267 (608) -- (341)
Minority interest -- -- (69) -- (69)
Changes in other operating items 52 5,639 843 362 6,896
-------- -------- -------- -------- --------
Net cash provided by (used in) operating
activities (525) 2,718 775 362 3,330
-------- -------- -------- -------- --------
INVESTING ACTIVITIES:
Capital expenditures, net -- (2,293) (161) -- (2,454)
-------- -------- -------- -------- --------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt -- -- -- -- --
Proceeds from borrowings under revolving credit
facility 2,000 -- -- -- 2,000
Repayment of debt (1,300) -- -- -- (1,300)
-------- -------- -------- -------- --------
Net cash provided by financing activities 700 -- -- -- 700
-------- -------- -------- -------- --------
--------
EFFECT OF EXCHANGE RATES ON CASH (422) 216 18 (362) (550)
-------- -------- -------- -------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS (247) 641 632 -- 1,026
CASH AND CASH EQUIVALENTS, beginning of period 295 6,300 4,820 -- 11,415
-------- -------- -------- -------- --------
CASH AND CASH EQUIVALENTS, end of period $ 48 $ 6,941 $ 5,452 $ -- $ 12,441
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
23
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEETS AS OF MARCH 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 $ 295 $ 6,300 $ 4,820 $ -- $ 11,415
Accounts receivable, net -- 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
-------- --------- --------- ---------- ---------
Property, Plant and Equipment, net -- 53,804 11,069 -- 64,873
Note Receivable from Subsidiaries -- 22,281 -- (22,281) --
Goodwill, net 3,796 62,996 22,153 -- 88,945
Deferred financing lists 6,426 -- -- -- 6,426
Investment in subsidiaries 158,232 13,984 -- (172,216) --
Other Assets, net 11 7,571 1,390 -- 8,972
-------- --------- --------- ---------- ---------
$173,955 $ 228,082 $ 62,483 $(205,690) $258,830
-------- --------- --------- ---------- ---------
-------- --------- --------- ---------- ---------
LIABILITIES AND STOCKHOLDERS' INVESTMENT
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
-------- --------- --------- ---------- ---------
Non-Current Liabilities:
Long-term debt, less current portion 126,300 -- -- -- 126,300
Note payable to Parent -- -- 22,278 (22,278) --
Accrued pension and other postretirement -- 11,920 971 -- 12,891
liabilities
Other noncurrent liabilities -- 8,300 3,236 -- 11,536
-------- --------- --------- ---------- ---------
Total liabilities 134,110 69,517 47,606 (33,418) 217,815
-------- --------- --------- ---------- ---------
Minority Interest in Subsidiary Company -- -- 1,170 -- 1,170
Redeemable U.S. Dollar Ordinary Shares 740 -- -- -- 740
Stockholders' Investment 39,105 158,565 13,707 (172,272) 39,105
-------- --------- --------- ---------- ---------
$173,955 $228,082 $ 62,483 $(205,690) $258,830
-------- --------- --------- ---------- ---------
-------- --------- --------- ---------- ---------
</TABLE>
24
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATING STATEMENTS 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>
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 49 7,056 2,529 -- 9,634
-------- -------- -------- -------- --------
Operating income (49) 4,988 474 -- 5,413
Interest expense 4,022 3,611 799 (4,340) 4,092
Interest income (2,481) (1,932) (132) 4,340 (205)
Exchange loss -- 1 921 -- 922
Other income (expense) (1,188) 792 (24) 396 (24)
-------- -------- -------- -------- --------
Income before provision for income taxes (402) 2,516 (1,090) (396) 628
Provision (benefit) for income taxes (525) 1,328 (298) -- 505
Minority interest in profit of subsidiary -- -- -- -- --
-------- -------- -------- -------- --------
Net income $ 123 $ 1,188 $ (792) $ (396) $ 123
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
25
<PAGE>
TRIDENT AUTOMOTIVE PLC AND SUBSIDIARIES
CONSOLIDATING STATEMENTS 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>
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>
26
<PAGE>
TRIDENT AUTOMOTIVE PLC
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Additions
-------------------------------
Balance at Charged to Charged to Balance at
Beginning Costs Other End of
of Period and Expenses Accounts (1) Deduction (2) Period
---------- ------------ ------------ ------------- ----------
<S> <C> <C> <C> <C> <C>
EIGHT-MONTH PERIOD ENDED
DECEMBER 31, 1998
Loss contract liability 4,902 -- 3,890 (2,370) 6,422
Reorganization liabilities
of acquired businesses 9,157 -- 49,707 (13,389) 45,475
ONE MONTH PERIOD ENDED
APRIL 30, 1998
Loss contract liability 5,350 -- -- (448) 4,902
Reorganization liabilities
of acquired businesses 9,221 -- -- (64) 9,157
PERIOD FROM INCEPTION
(SEPTEMBER 19, 1997) TO
MARCH 31, 1998
Loss contract liability -- -- 6,300 (950) 5,350
Reorganization liabilities
of acquired businesses -- -- 9,221 -- 9,221
</TABLE>
(1) Recorded via allocation of purchase price to fair value of assets and
liabilities of acquired businesses.
(2) Utilization of previously recorded balances.
27
