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PROSPECTUS FILED PURSUANT TO
RULE 424(B)(3)
REGISTRATION NO. 333-75849
OFFER FOR ALL OUTSTANDING
10 1/8% SENIOR SUBORDINATED NOTES DUE 2007
SERIES A, B &C IN EXCHANGE FOR 10 1/8% SENIOR
SUBORDINATED NOTES DUE 2007, SERIES D OF
OXFORD AUTOMOTIVE, INC. LOGO
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON JUNE 9, 1999, UNLESS EXTENDED.
- --------------------------------------------------------------------------------
o EXCHANGE OFFER
Offer to exchange an aggregate principal amount of up to $200 million of 10 1/8%
Senior Subordinated Notes Due 2007, Series D for a like principal amount of
10 1/8% Senior Subordinated Notes Due 2007, Series A, 10 1/8% Senior
Subordinated Notes Due 2007, Series B and 10 1/8% Senior Subordinated Notes Due
2007, Series C.
We will not receive any proceeds from this Exchange Offer. Tenders of Series A,
B or C Notes pursuant to this Exchange Offer may be withdrawn at any time prior
to the expiration date. In the event we terminate this Exchange Offer and do not
accept for exchange any Series A, B, or C Notes with respect to this Exchange
Offer, we will promptly return such notes to the appropriate holders.
o EXPIRATION OF EXCHANGE OFFER
The Exchange Offer will expire at 5:00 p.m., New York City time, on
June 9, 1999, or if extended, no later than June 24, 1999. The Exchange Offer is
not conditioned upon any minimum principal amount of Series A, Series B or
Series C Notes being tendered for exchange.
o INDENTURE
The Series D Notes will be issued pursuant to, and entitled to the benefits of,
the Indenture governing the Series C Notes.
o MATURITY
The Series D Notes will mature on June 15, 2007.
o REDEMPTION
We may redeem the Series D Notes at any time after June 15, 2002. Before June
15, 2000, we may redeem up to 35% of the Series D Notes with the proceeds of
certain types of public equity offerings.
o MANDATORY OFFER TO REPURCHASE
If we sell certain assets or experience certain kinds of changes in control, we
must offer to repurchase the Series D Notes.
o GUARANTIES
If we cannot make payments on the Series D Notes when due, our guarantor
subsidiaries must make them instead. Not all of our subsidiaries will be
guarantors.
o RANKING
The Series D Notes and the subsidiary guaranties are subordinated to all of our
and our guarantor subsidiaries' Senior Indebtedness.
o INTEREST
The Series D Notes will bear interest at 10 1/8% from and including the date of
consummation of this Exchange Offer. Interest will be paid every six months on
June 15 and December 15 of each year.
THE NOTES AND THE EXCHANGE OFFER INVOLVE RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 14.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
Prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this Prospectus is May 7, 1999.
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WHERE YOU CAN FIND MORE INFORMATION
This Prospectus incorporates important business and financial information
about us that is not included in or delivered with the Prospectus. This
information is available without charge upon written or oral request to:
Secretary, Oxford Automotive, Inc., 1250 Stephenson Highway, Troy, Michigan
48083, (telephone 248-577-1400). In order to ensure timely delivery of any
documents, any request should be made no later than five business days prior to
the Expiration Date of June 9, 1999.
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SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and related notes appearing elsewhere in
this Prospectus. For purposes of this Prospectus, the "Company," "our," "we,"
and "us" shall refer to Oxford Automotive, Inc. ("Oxford Automotive") and all of
its consolidated subsidiaries, unless the context otherwise requires.
THE COMPANY
GENERAL
We are a leading Tier 1 or direct supplier of high-quality, engineered metal
components, assemblies and modules used by original equipment automotive
manufacturers, commonly referred to as "OEMs". Our core products are complex,
high value-added products, primarily assemblies containing multiple stamped
parts forgings and various welded, hemmed or fastened components. These products
which include large structural stampings and assemblies, including exposed Class
A surfaces, leaf springs and smaller complex welded assemblies, are used in
manufacturing a variety of sport utility vehicles, light and medium trucks,
mini-vans, vans and passenger cars. We are the sole source supplier of these
products to our customers.
On February 5, 1999, a wholly-owned subsidiary of the Company acquired 100%
of the shares of Cofimeta S.A. and approximately 99% of the shares of its four
subsidiaries: Somenor S.A.; Aubry S.A.; Ecrim S.A.; and Socori Technologies S.A.
Cofimeta S.A. and its four subsidiaries are collectively referred to as
"Cofimeta." Cofimeta is a leading supplier of closure panels, floor pans, deck
lids, structured pillars, cross members, radiator surrounds and front ends and
Class A surfaces. Cofimeta is headquartered in a suburb of Paris and operates
five facilities in France.
Our seven largest customers, based on proforma net sales for the nine months
ended December 31, 1998, assuming the acquisition of Cofimeta had occurred on
April 1, 1998 are GM, Ford, Renault, Peugeot Citroen, DaimlerChrysler, CAMI (a
joint venture of GM and Suzuki Motor Corporation) and Saturn. For the nine
months ended December 31, 1998, approximately 72% of our pro forma net sales
were derived from sales of our products manufactured for sport utility vehicles,
mini-vans, vans and light trucks.
We currently operate 21 manufacturing facilities which offer the latest
technologies in metal stamping, forging, welding and assembly production
equipment, including fully-automated hydraulic and wide-bed press lines (up to
180 inches), robotic welding cells, robotic hemming, autophoretic corrosion
resistant coating, and a patented eye forming process. Our diverse line of over
500 presses that range up to 3,000 tons including both conventional and transfer
technology and state-of-the-art robotic weld assembly and hemming equipment are
capable of manufacturing a broad assortment of parts and assemblies ranging from
simple stampings to full-size, exposed door and closure panels. We are one of a
few independent suppliers that have the ability to produce large, complex
stampings, as well as the technical expertise and automated assembly
capabilities to provide high value-added modules such as door apertures and
assemblies, A-pillars, exposed surface products and control arms, and multiple
leaf and parabolic leaf springs.
On a pro forma basis, assuming the acquisitions of Howell Industries, Inc.,
a Michigan corporation, RPI Holdings, Inc., a Michigan corporation and the
Suspension Division of Eaton Corporation, each described below, and Cofimeta had
occurred on April 1, 1997, we would have had net sales of $765.2 million and
EBITDA of $40.8 million for the fiscal year ended March 31, 1998. For the nine
months ended December 31, 1998, on a pro forma basis assuming the acquisition of
Cofimeta had occurred on April 1, 1998 we would have had net sales of $555.3
million and EBITDA of $41.6 million.
Our principal executive office is located at 1250 Stephenson Highway, Troy,
Michigan 48083, and its telephone number is (248) 577-1400.
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BUSINESS STRATEGY
Our principal objective is to be a leading, full-service, global Tier 1
supplier of integrated systems based on metal forming and related manufacturing
technologies. We believe that we are well positioned to benefit from two
significant trends in the stamping and metal forming segments of the automotive
industry, outsourcing and consolidation. Outsourcing of metal stamping has
increased in response to competitive pressures on OEMs to improve quality and
reduce capital requirements, labor costs, overhead and inventory. Consolidation
among automotive industry suppliers has occurred as OEMs have more frequently
awarded long-term sole source contracts to the most capable global suppliers.
In addition, OEMs are increasingly seeking systems suppliers who can provide
a complete package of design, engineering, manufacturing and project management
support for an integrated system (such as a front-end system). We intend to
capitalize on these trends through internal development and strategic
acquisitions. The key elements of our strategy include the following:
o provide full-service program capability,
o supply complex, high value-added systems,
o focus on high growth vehicle categories,
o establish a global presence, and
o pursue strategic acquisitions.
RECENT DEVELOPMENTS
On February 5, 1999, as described above, we acquired Cofimeta. On April 1,
1998, we acquired the Suspension Division of Eaton Corporation. The Suspension
Division is a leading Tier 1 North American supplier of leaf spring suspension
systems for automotive applications. Products of the Suspension Division include
multiple leaf, parabolic (long taper) multiple leaf, and single leaf long taper
suspension systems. The Suspension Division is held through two of the Company's
subsidiaries, Oxford Suspension, Inc. and Oxford Suspension Ltd.
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THE EXCHANGE OFFER
Securities Offered............................. Up to $200.0 million aggregate
principal amount of 10 1/8%
Senior Subordinated Notes Due
2007, Series D. The terms of
the Series D Notes are
identical in all material
respects, except for certain
transfer restrictions,
registration rights and
certain interest rate step-up
provisions, to the $40 million
aggregate principal amount of
10 1/8% Senior Subordinated
Notes Due 2007, Series C
issued by the Company on
December 8, 1998. The terms of
the Series D Notes are also
identical in all material
respects to the $125 million
aggregate principal amount of
10 1/8% Senior Subordinated
Notes Due 2007, Series A
issued by the Company on June
24, 1997 and the $35 million
aggregate principal amount of
10 1/8% Senior Subordinated
Notes Due 2007, Series B
issued by the Company on April
1, 1998. The Series A Notes,
Series B Notes and Series C
Notes are referred to as the
"Existing Notes". The Series A
Notes and the Series B Notes
were both issued under the
same Indenture dated as of
June 15, 1997. The Existing
Notes and the Series D Notes
are sometimes referred to
collectively as the "Notes."
See "The Series D Notes" and
"The Exchange Offer."
The Exchange Offer............................. The Series D Notes are being
offered in exchange (the
"Exchange Offer") for a like
principal amount of Existing
Notes. You may exchange
Existing Notes only in
integral multiples of $1,000.
The issuance of the Series D
Notes is intended to satisfy
obligations of the Company and
certain of its subsidiaries
(the "Subsidiary Guarantors")
that have fully and
unconditionally guaranteed
(the "Subsidiary Guaranties"),
on a joint and several basis,
and on an unsecured, senior
subordinated basis the Notes,
contained in the Registration
Rights Agreement dated
December 8, 1998, among the
Company, certain of the
Subsidiary Guarantors and
Bear, Stearns & Co. Inc., BT
Alex Brown Incorporated, and
Morgan Stanley & Co.
Incorporated, relating to the
Series C Notes (the
"Registration Agreement").
The objective of the Exchange
Offer is to create a single
series of debt securities
having a total outstanding
principal amount which is
larger than that of any of the
Existing Notes as separate
series. This may create
greater liquidity for the
Series D Notes. However, see
"Risk Factors -- Dilution of
Interest."
Expiration Date; Withdrawal of Tender.......... The Exchange Offer will expire
at 5:00 p.m. New York City
time, on June 9, 1999, unless
we extend the offer to a date
not later than June 24, 1999.
You may withdraw the tender of
Existing Notes pursuant to the
Exchange Offer at any time
prior to the Expiration Date.
Any Existing Notes not
accepted for exchange for any
reason will be returned
without expense to the
tendering holder of such
Existing Note as promptly as
practicable after the
expiration or termination of
the Exchange Offer. We will
provide written notice of any
extension, amendment,
non-acceptance or termination
to the holders of Existing
Notes, including those holders
who have previously tendered
their Existing Notes. See
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"The Exchange Offer -- Terms
of the Exchange Offer; Period
for Tendering Existing Notes"
and "-- Withdrawal Rights."
Certain Conditions to the Exchange Offer....... Our obligation to accept for
exchange, or to issue Series D
Notes in exchange for, any
Existing Notes is subject to
certain customary conditions
relating to compliance with
any applicable law, or order
of any governmental agency or
any applicable interpretation
by the Staff of the SEC, which
we may waive in our reasonable
discretion. We currently
expect that each of the
conditions will be satisfied
and that no waivers will be
necessary. See "The Exchange
Offer -- Certain Conditions to
the Exchange Offer."
Procedures for Tendering Existing Notes........ If you wish to accept the
Exchange Offer, you must
complete, sign and date the
accompanying Letter of
Transmittal, or a facsimile
thereof, in accordance with
the instructions contained in
such letter and in this
Prospectus, and mail or
otherwise deliver such Letter
of Transmittal, or such
facsimile, together with such
Existing Notes and any other
required documentation, to the
Exchange Agent at the address
set forth in this Prospectus.
See "The Exchange Offer --
Procedures for Tendering
Existing Notes."
Special Procedures for Beneficial Owners....... Any beneficial owner whose
Existing Notes are registered
in the name of a broker,
dealer, commercial bank, trust
company or other nominee and
who wishes to tender such
Existing Notes in the Exchange
Offer should contact such
registered holder promptly and
instruct such registered
holder to tender on such
beneficial owner's behalf. If
such beneficial owner wishes
to tender on such owner's own
behalf, such owner must, prior
to completing and executing
the Letter of Transmittal and
delivering its Existing Notes,
either make appropriate
arrangements to register
ownership of the Existing
Notes in such owner's name or
obtain a properly completed
bond power from the registered
holder. The transfer of
registered ownership may take
considerable time and may not
be completed prior to the
Expiration Date.
Guaranteed Delivery Procedures................. If you wish to tender your
Existing Notes and they are
not immediately available or
you cannot deliver your
Existing Notes, the Letter of
Transmittal or any other
documents required by the
Letter of Transmittal to the
Exchange Agent, prior to the
Expiration Date, you must
tender your Existing Notes
according to the guaranteed
delivery procedures set forth
in "The Exchange Offer --
Guaranteed Delivery Procedures
Use of Proceeds ............................. We will not receive any
proceeds from the exchange of
Series D Notes pursuant to the
Exchange Offer.
Exchange Agent ............................. U.S. Bank Trust National
Association is serving as the
Exchange Agent in connection
with the Exchange Offer.
Federal Income Tax Consequences................ We believe that the exchange
of Existing Notes pursuant to
the Exchange Offer will not be
a taxable event for federal
income tax purposes. See
"Certain Federal Income Tax
Considerations."
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CONSEQUENCES OF EXCHANGING EXISTING NOTES PURSUANT TO THE EXCHANGE OFFER
Based on certain interpretive letters issued by the Staff of the SEC to
third parties in unrelated transactions, we are of the view that holders, other
than any holder who is an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act, who exchange their Existing Notes for Series D
Notes pursuant to the Exchange Offer generally may offer such Series D Notes for
resale, resell such Series D Notes, and otherwise transfer such Series D Notes
without compliance with the registration and prospectus delivery provisions of
the Securities Act, provided such Series D Notes are acquired in the ordinary
course of the holders' business and such holders have no arrangement with any
person to participate in a distribution of such Series D Notes. Any holder who
tenders in the Exchange Offer with the intention or for the purpose of
participating in a distribution of the Series D Notes cannot rely on such
interpretation by the Staff of the SEC and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction. Unless an exemption from registration is otherwise
available, any such resale transaction should be covered by an effective
registration statement containing the information required by the Securities
Act.
This Prospectus may be used for an offer to resell, resale or other
retransfer of Series D Notes only as specifically set forth in this Prospectus.
Each broker-dealer that receives Series D Notes for its own account in exchange
for Existing Notes, where such Existing Notes were acquired by such
broker-dealer as a result of market-making activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such Series D Notes.
See "Plan of Distribution." In addition, to comply with the securities laws of
certain jurisdictions, if applicable, the Series D Notes may not be offered or
sold unless they have been registered or qualified for sale in such jurisdiction
or in compliance with an available exemption from registration or qualification.
We have agreed, pursuant to the Registration Agreement, to register or qualify
the Series D Notes for offer or sale under the securities or blue sky laws of
such jurisdictions as any holder of the Series C Notes reasonably requests in
writing.
CONSEQUENCES OF NOT EXCHANGING EXISTING NOTES
Holders of Series C Notes who do not exchange their Series C Notes for
Series D Notes pursuant to the Exchange Offer will continue to be subject to
restrictions on transfer. Generally, Series C Notes may not be offered or sold,
unless registered under the Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the Securities Act and applicable
state securities laws.
If you do not exchange your Existing Notes for Series D Notes, you will not
be able to take advantage of the increased liquidity that may be afforded by the
Series D Notes. The Series D Notes would have a total aggregate principal amount
of $200.0 million as opposed to $160.0 million for the Series A and Series B
Notes, which were issued under one indenture, and $40.0 million for the Series C
Notes, which were issued under a different indenture. See "Risk Factors --
Consequences of Failure to Exchange" and "The Exchange Offer -- Consequences of
Failure to Exchange; Resales of Series D Notes."
Holders of Series A Notes and Series B Notes who do not exchange their
Series A Notes and Series B Notes will continue to be subject to the Indenture
dated June 15, 1997 under which such notes were issued. This Indenture is
substantially the same as the Indenture governing the Series D Notes except for
the treatment of proceeds from certain asset sales. See "Description of the
Notes -- General; and -- Certain Covenants."
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THE SERIES D NOTES
The terms of the Series D Notes are identical in all material respects to
the Series C Notes, except for certain transfer restrictions, registration
rights and certain interest rate step-up provisions. The terms of the Series D
Notes are also identical in all material respects to the Series A Notes and the
Series B Notes.
Unlike the Series A Notes, the Series B Notes and the Series D Notes, the
Series C Notes were not registered under the Securities Act and were offered in
a transaction not involving any public offering within the meaning of the
Securities Act, and are therefore subject to certain transfer restrictions under
the Securities Act.
The Series C Notes also included certain registration rights relating to the
Registration Agreement that are not applicable to the Series D Notes. Pursuant
to the Registration Agreement, we agreed to:
o not later than 120 days after the closing of the sale of the
Series C Notes on December 8, 1998 (the "Closing Date"), file
with the SEC a Registration Statement on Form S-4 relating to
the Exchange Offer (the " Exchange Offer Registration
Statement," which term shall encompass all related amendments,
exhibits, annexes and schedules) and
o cause the Exchange Offer Registration Statement to be declared
effective under the Securities Act not later than 180 days
after the Closing Date.
The Exchange Offer Registration Statement also provides for the exchange of
the Series A Notes and the Series B Notes for Series D Notes having terms
substantially identical in all material respects to the Existing Notes.
In addition, we have agreed to file a shelf registration statement ("Shelf
Registration Statement") covering resales of the Series C Notes or those Series
D Notes to be exchanged for Series C Notes, to use our best efforts to cause the
Shelf Registration Statement to be declared effective under the Securities Act,
and to keep the Shelf Registration Statement effective until two years after its
effective date, or shorter period that will terminate when all Series C Notes or
those Series D Notes to be exchanged for Series C Notes, covered by the Shelf
Registration Statement have been sold pursuant to the Shelf Registration
Statement, if:
o applicable interpretations of the Staff of the SEC do not
permit us to effect the Exchange Offer, or if for any other
reason the Exchange Offer is not consummated within 210 days
after the Closing Date,
o Bear, Stearns & Co. Inc., BT Alex. Brown Incorporated and
Morgan Stanley & Co., Incorporated (the "Initial Purchasers")
request, with respect to Series C Notes not eligible to be
exchanged for Series D Notes in the Exchange Offer, or
o any holder of Series C Notes is not eligible to participate in
the Exchange Offer or participates in but does not receive
freely tradeable, except for prospectus delivery requirements,
Series D Notes in the Exchange Offer.
The Series C Notes have interest rate step-up provisions which primarily
become effective in the event certain registration requirements are not
satisfied by specified dates. The interest rate step-up provisions provide in
part that additional interest ("Special Interest") will accrue on the Series C
Notes and certain Series D Notes, if any of the following "Registration
Defaults" occur:
o if within 180 days after the Closing Date, the Exchange Offer
Registration Statement has not been declared effective;
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o if within 210 days after the Closing Date, neither the
Exchange Offer has been consummated nor the Shelf Registration
Statement has been declared effective; or
o if after either the Exchange Offer Registration Statement or
the Shelf Registration Statement has been declared effective,
such Registration Statement thereafter ceases to be effective
or usable, subject to certain exceptions, in connection with
resales of Series C Notes or those Series D Notes to be
exchanged for the Series C Notes.
Special Interest will accrue at a rate of 0.25% per annum during the 90-day
period immediately following the occurrence of any Registration Default and
shall increase by 0.25% per annum at the end of each subsequent 90- day period,
but in no event shall such rate exceed 1.00% per annum. The interest rate
step-up provisions do not apply to the Series A Notes, the Series B Notes, or
the Series D Notes to be exchanged for the Series A Notes and Series B Notes.
Issuer..................................... Oxford Automotive, Inc.
Series D Notes............................. $200.0 million in aggregate
principal amount of 10 1/8%
Senior Subordinated Notes Due
2007, Series D.
Maturity................................... June 15, 2007.
Interest Payment Dates..................... Each June 15 and December 15.
Subsidiary Guaranties...................... Like the Existing Notes, the
Series D Notes will be fully
and unconditionally guaranteed
on a joint and several basis,
and on a senior subordinated
basis by each Restricted
Subsidiary of the Company,
other than certain foreign
subsidiaries, that is an
obligor or guarantor of any
Bank Credit Agreement (the
"Subsidiary Guaranties"). See
"Description of the Notes --
Subsidiary Guaranties."
Subordination of Series D Notes and
Subsidiary Guaranties...................... Like the Existing Notes, the
Series D Notes and the
Subsidiary Guaranties will be
general unsecured senior
subordinated obligations of
the Company and the Subsidiary
Guarantors, as applicable. The
Series D Notes and the
Subsidiary Guaranties will be
subordinated in right of
payment to the prior payment
in full of all existing and
future Senior Indebtedness and
will rank pari passu with or
senior to all present and
future subordinated
indebtedness of the Company or
the relevant Subsidiary
Guarantors, as applicable. As
of December 31, 1998, the
Company had $30.0 million
outstanding Senior
Indebtedness and the
Subsidiary Guarantors'
outstanding Senior
Indebtedness was approximately
$3.0 million. See "Description
of the Notes --
Subordination."
Trustee.................................... U.S. Bank Trust National
Association.
Sinking Fund............................... None
Optional Redemption........................ Like the Existing Notes, the
Series D Notes will be
redeemable at our option in
whole or in part at any time
on or after June 15, 2002, at
the redemption prices set
forth in this Prospectus plus
accrued and unpaid interest,
if any, to the redemption
date. In addition, at any time
prior to
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June 15, 2000, we may redeem,
at our option, up to an
aggregate amount of 35% of the
original principal amount of
the Notes with the proceeds of
one or more Public Equity
Offerings following which
there is a Public Market at a
redemption price of 110.125%
of the principal amount
thereof plus accrued and
unpaid interest, if any, to
the redemption date, provided
that at least 65% of the
original aggregate principal
amount of the Notes remains
outstanding after each such
redemption. See "Description
of the Notes -- Optional
Redemption."
Change of Control.......................... Upon the occurrence of a
Change of Control, each holder
of Notes, including the Series
D Notes, will have the right
to require us to purchase all
or a portion of such holder's
Notes at a price in cash equal
to 101% of the aggregate
principal amount thereof plus
accrued and unpaid interest,
if any, to the date of
purchase. In the event of a
Change of Control, we cannot
assure that we will have the
financial resources or be
permitted under the terms of
our other indebtedness to
repurchase or redeem the
Notes. See "Description of the
Notes -- Change of Control."
Certain Covenants; Defaults................ The Indenture governing the
Series C Notes and the Series
D Notes the "Indenture"),
among other things, limits the
ability of the Company and its
Restricted Subsidiaries to:
- incur additional
indebtedness,
- pay dividends or make
other distributions with
respect to capital stock
of the Company and its
Restricted Subsidiaries,
- create certain liens,
- sell material assets of
the Company or its
Restricted Subsidiaries,
- enter into certain
mergers and
consolidations, and
- make capital
expenditures.
The Indenture also contains
certain events of default
including payment defaults and
a default arising upon an
acceleration by the holders of
certain other Indebtedness,
including the Senior Credit
Facility, because of a
default. See "Description of
the Notes -- Certain Covenants
and -- Defaults."
Risk Factors................................... See "Risk Factors" for a
discussion of certain factors
that should be considered in
connection with the Exchange
Offer.
SENIOR CREDIT FACILITY
On February 4, 1999, we entered into an amended and restated credit
agreement with NBD Bank, on behalf of itself and as agent for a syndicate of
other lenders, providing for a $35.0 million revolving credit facility to
finance customer tooling, a $30.0 million term loan and a $110.0 million
revolving credit facility (the "Senior Credit Facility"). On March 31, 1999, we
further amended the Senior Credit Facility to accommodate our lease transaction
with respect to our manufacturing operations in Ramos Arizpe, Mexico.
Approximately $80.3 million was available under the revolver at March 1, 1999,
reduced for the effect of a Letter of Credit issued for certain Industrial
Revenue Bonds and approximately $5.0 million was available under the revolver
available for customer tooling. The obligations under the Senior Credit Facility
are secured by substantially all the assets of the Subsidiary Guarantors and the
Company.
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<PAGE> 11
The Senior Credit Facility contains certain customary covenants, including
reporting and other affirmative covenants, financial covenants, and negative
covenants, as well as customary events of default, including non-payment of
principal, violation of covenants, and cross-defaults to certain other
indebtedness, including the indebtedness evidenced by the Notes. See
"Description of Certain Indebtedness and Preferred Stock -- Senior Credit
Facility."
As of March 1, 1999, there were borrowings of $89.7 million under the Senior
Credit Facility. See "Capitalization" and "Description of Certain Indebtedness
and Preferred Stock."
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SUMMARY CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL DATA
The following table sets forth (i) summary historical financial data of BMG
North America Limited ("BMG" or the "Predecessor") for the period from April 1,
1995 through October 27, 1995, (ii) summary historical financial data of the
Company from October 28, 1995 through March 31, 1996, for the years ended March
31, 1997 and 1998, and (iii) summary pro forma financial data for the year ended
March 31, 1998 and the nine months ended December 31, 1998. The summary
historical financial data for the period April 1, 1995 through October 27, 1995
and the period October 28, 1995 through March 31, 1996 was derived from the
audited consolidated financial statements of the Predecessor and the Company,
which are included elsewhere in this Prospectus, together with the report of
Deloitte & Touche LLP, independent accountants. The summary historical financial
data for the years ended March 31, 1997 and 1998 was derived from the audited
consolidated financial statements of the Company, which are included elsewhere
in this Prospectus, together with the report of PricewaterhouseCoopers LLP,
independent accountants.
The summary pro forma statement of operations data and other financial data
for the fiscal year ended March 31, 1998 were prepared to illustrate the effect
of the offering of the Series A Notes (the "Series A Offering") the offering of
the Series B Notes (the "Series B Offering"), the offering of the Series C Notes
(the "Series C Offering"), and the acquisitions of Howell Industries, Inc.
("Howell"), RPI Holdings, Inc. ("RPIH"), the Suspension Division of Eaton
Corporation (the "Suspension Division") and Cofimeta, as if each had occurred on
April 1, 1997.
The summary pro forma statement of operations data and other financial data
for the nine months ended December 31, 1998 were prepared to illustrate the
effect of the Series C Offering and the acquisition of Cofimeta, as if each had
occurred April 1, 1998. The summary pro forma balance sheet data at December 31,
1998 was prepared to illustrate the effect of the acquisition of Cofimeta, as if
it had occurred on December 31, 1998.
The pro forma data does not purport to be indicative of the results of
operations or the financial position of the Company that would have been
obtained if the acquisitions and the offerings had in fact been completed as of
such dates or to project the results of operations or the financial position of
the Company for any future date or period. The following table should be read in
conjunction with the "Selected Consolidated Historical Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Pro Forma Combined Financial Data," and the Consolidated Financial
Statements of the Company and the related notes and other financial information
presented elsewhere in this Prospectus.
10
<PAGE> 13
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------------------------------------------------- ---------------
PREDECESSOR COMPANY
--------------- ----------------------------------------------------------------
PERIOD PERIOD FISCAL YEAR FISCAL YEAR FISCAL YEAR
APR. 1, 1995 - OCT. 28, 1995 - ENDED ENDED ENDED
OCT. 27, 1995 MAR. 31, 1996 MAR. 31, 1997 MAR. 31, 1998 MAR. 31, 1998
--------------- --------------- ------------- ------------- ---------------
AUDITED AUDITED AUDITED AUDITED UNAUDITED
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C>
Net sales $ 49,043 $ 35,572 $ 136,861 $ 410,321 $ 765,194
Gross profit 2,148 3,948 11,486 41,901 57,442
Operating income (loss) (1,774) 1,713 3,801 20,054 4,085
Interest expense 1,048 1,096 3,388 10,710 24,262
Other income (expense) -- -- 2,201 321 1,151
Income (loss) before income taxes (2,822) 617 2,614 9,665 (19,026)
Provision (benefit) for income
Net income (loss) $ (1,884) $ 415 $ 1,549 $ 5,591 $ (11,697)
BALANCE SHEET DATA
(END OF PERIOD):
Cash and cash equivalents $ -- $ -- $ 9,671 $ 18,321
Trade accounts receivable, net 13,312 8,338 47,626 65,273
Inventories 4,429 3,719 13,411 21,305
Total assets 59,770 49,200 243,694 320,032
Total debt 23,233 26,758 99,829 139,448
Redeemable preferred stock -- -- 39,300 40,192
Total shareholders' equity 9,329 935 2,341 6,118
FINANCIAL RATIOS AND OTHER DATA:
Depreciation and amortization $ 919 $ 687 $ 5,041 $ 20,279
Capital expenditures 5,111 3,466 3,326 16,723
Ratio of earnings to fixed
charges (a) -- 1.5x 1.7x 1.7x
EBITDA(b) $ (855) $ 2,400 $ 11,043 $ 40,654
Gross margin (c) 4.38% 11.10% 8.60% 10.21%
EBITDA margin (d) NM 6.75% 8.07% 9.91%
Ratio of EBITDA to net interest expense (e) NM 2.2x 3.3x 3.8x
Ratio of net debt to EBITDA (f) NM 4.7x 8.2x 3.0x
</TABLE>
See accompanying Notes to Summary Consolidated Historical and Pro Forma
Financial Data.
11
<PAGE> 14
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
--------------------------- --------------
NINE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1998 1998
------------ ------------ --------------
UNAUDITED UNAUDITED UNAUDITED
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net Sales ................................... $295,530 $ 408,144 $ 555,251
Gross Profit ................................ 28,350 35,532 46,284
Operating income (loss) ..................... 14,763 12,121 14,472
Interest expense ............................ 7,921 14,255 18,568
Other income (expense) ...................... 531 949 962
Income (loss) before income taxes ........... 7,373 (1,185) (3,134)
Provision (benefit) for income taxes ........ 2,949 (475) (1,254)
Net income (loss) ........................... 4,424 (710) (1,880)
BALANCE SHEET DATA (END OF PERIOD):
Cash and cash equivalents ................... 19,555 318 8,621
Trade accounts receivable, net .............. 51,375 86,336 111,707
Inventories ................................. 20,158 33,911 51,959
Total assets ................................ 290,312 412,562 540,151
Total debt .................................. 138,517 230,960 294,273
Redeemable preferred stock .................. 40,458 40,586 40,586
Total shareholders' equity .................. 1,377 (2,078) (2,078)
FINANCIAL RATIOS AND OTHER DATA:
Depreciation and amortization ............... 14,580 19,552 26,159
Capital expenditures ........................ 11,418 20,369 24,099
Ratio of earnings to fixed charges(a) ....... 1.7x -- --
EBITDA(b) ................................... 29,874 32,622 41,593
Gross margin(c) ............................. 9.59% 8.71% 8.33%
EBITDA margin(d) ............................ 10.11% 7.99% 7.49%
Ratio of EBITDA to net interest expense(e) .. 3.8x 2.3x 2.2x
Ratio of net debt to EBITDA(f) .............. 3.0x 5.3x 5.2x
</TABLE>
See accompanying Notes to Summary Consolidated Historical and Pro Forma
Financial Data.
12
<PAGE> 15
(a) For purposes of this computation, earnings consist of income (loss) before
income taxes plus fixed charges. Fixed charges consist of interest on
indebtedness plus that portion of rental expense representative of the
interest factor. For fiscal 1994, the Company's ratio of earnings to fixed
charges was 2.2x. For fiscal 1995, the Company's earnings were insufficient
to cover fixed charges by $1.6 million. For the period April 1, 1995 to
October 27, 1995, the Company's earnings were insufficient to cover fixed
charges by $2.8 million. For the nine months ended December 31, 1998, the
Company's earnings were insufficient to cover fixed charges by $1.2
million. For the nine months ended December 31, 1998 on a pro forma basis
for the Cofimeta acquisition, the Company's earnings were insufficient to
cover fixed charges by $3.1 million.
(b) EBITDA is defined as income (loss) before interest, income taxes,
depreciation and amortization. EBITDA should not be construed as a
substitute for income from operations, net income or cash flow from
operating activities for the purpose of analyzing the Company's operating
performance, financial position and cash flows.
(c) Gross margin is defined as gross profit as a percent of net sales for each
of the applicable periods.
(d) EBITDA margin is defined as EBITDA as a percent of net sales for each of
the applicable periods.
(e) Defined as the ratio of EBITDA to net interest expense.
(f) Defined as the ratio of net debt to EBITDA with net debt consisting of
total debt less cash and cash equivalents and unexpended bond proceeds.
13
<PAGE> 16
RISK FACTORS
This Prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act, as amended. Discussions containing such
forward-looking statements may be found in the material set forth under
"Summary," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business," as well as within the Prospectus
generally. Actual results could differ materially from those projected in the
forward-looking statements as a result of the risk factors set forth below and
the matters set forth in the Prospectus generally. We caution you, however, that
this list of factors may not be exhaustive. In evaluating the Exchange Offer,
you should carefully consider the following risk factors, as well as the other
information set forth elsewhere in this Prospectus. The risk factors set forth
below are generally applicable to the Existing Notes as well as the Series D
Notes.
SUBSTANTIAL LEVERAGE - OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT
THE FINANCIAL HEALTH OF THE COMPANY AND PREVENT US FROM FULFILLING OUR
OBLIGATIONS UNDER THESE NOTES.
We have now and, after the Exchange Offer, will continue to have a
significant amount of indebtedness. The following chart shows certain important
credit data for your review:
<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, 1998
-----------------
<S> <C>
Total debt ............................ $ 294,273
Preferred stock ....................... 40,586
Shareholders' equity .................. (2,078)
</TABLE>
Our total indebtedness does not include unused commitments under the Senior
Credit Facility of approximately $85.3 million. In addition, if we are required
to incur or assume additional indebtedness in connection with our acquisition
strategy, our interest and debt service requirements will increase. See "Risk
Relating to Acquisitions."
Our substantial indebtedness could have important consequences to you. For
example, it could:
o impair our ability to obtain additional financing for working capital,
capital expenditures, acquisitions or general corporate purposes;
o reduce the funds available to us for purposes other than the payment
of interest on the Existing Notes, the Series D Notes, the Senior
Credit Facility and our other existing indebtedness;
o limit, along with the restrictive financial and operating covenants in
our long-term indebtedness, our ability to borrow additional funds;
o cause us to be vulnerable to increases in interest rates, due to the
variable interest rates applicable to certain indebtedness under the
Senior Credit Facility;
o make it more difficult for us to satisfy our obligations with respect
to the Series D Notes, as all of the indebtedness outstanding under
the Senior Credit Facility is secured by substantially all the assets
of the Subsidiary Guarantors and the Company and will become due prior
to the time the principal on the Series D Notes will become due;
o hinder our ability to adjust rapidly to changing market conditions;
and
o increase our vulnerability to general economic and industry
conditions.
ABILITY TO SERVICE DEBT - TO SERVICE OUR INDEBTEDNESS, WE WILL REQUIRE A
SIGNIFICANT AMOUNT OF CASH. OUR ABILITY TO GENERATE CASH DEPENDS ON MANY FACTORS
BEYOND OUR CONTROL.
The Indenture permits the Company and the Subsidiary Guarantors to incur
additional indebtedness, including Senior Indebtedness and indebtedness that
will rank pari passu with the Series D Notes.
14
<PAGE> 17
Our ability to pay interest on the Series D Notes and to satisfy our other
obligations will depend upon our future operating performance. This performance
will be affected by prevailing economic conditions and financial, business and
other factors, many of which are beyond our control. We anticipate that our
operating cash flow, together with available borrowings under the Senior Credit
Facility, will be sufficient to meet our operating expenses, to service interest
requirements on our debt obligations and to implement our business strategy. We
cannot assure you, however, that our business will generate sufficient cash flow
from operations or that future borrowings will be available in an amount
sufficient to enable us to service our indebtedness, including the Series D
Notes, or to fund our other liquidity needs.
Also, we are required to redeem certain preferred stock prior to the time
the principal on the Series D Notes will become due. The maximum aggregate
redemption price for such preferred stock, assuming we do not commence a public
offering of our common stock prior to June 30, 2000, is $40.9 million, plus any
accrued and unpaid dividends to the date of redemption.
The following is important earnings data for your review:
o For the nine months ended December 31, 1998, we experienced a net loss
of $0.7 million and our earnings were insufficient to cover fixed
charges by $1.2 million.
o Our predecessor experienced a net loss of $1.3 million for the year
ended March 31, 1995, and experienced a net loss of $1.9 million
during the period from April 1, 1995 through October 27, 1995. In
addition, for fiscal 1995, our earnings were insufficient to cover
fixed charges by $1.6 million. For the period April 1, 1995 to October
27, 1995, our earnings were insufficient to cover fixed charges by
$2.8 million.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity, Capital Resources and Financial Condition"
and "Description of Certain Indebtedness and Preferred Stock."
The Senior Credit Facility contains certain customary covenants, including
reporting and other affirmative covenants; financial covenants, including ratio
of total debt to EBITDA, net worth, fixed charge coverage ratio, interest
coverage ratio (each as defined in and calculated pursuant to the Senior Credit
Facility); and negative covenants, including restrictions on incurrence of other
indebtedness, payment of cash dividends and other distributions to shareholders,
liens in favor of parties other than the lenders under the Senior Credit
Facility, certain guaranties of obligations of or advances to others, sales of
material assets not in the ordinary course of business, restrictions on mergers
and acquisitions, and capital expenditures. We cannot assure you that these
requirements will be met in the future. If they are not, the holders of the
indebtedness under the Senior Credit Facility would be entitled to declare such
indebtedness immediately due and payable or, if we were unable to repay such
indebtedness, such holders could proceed against the collateral securing the
Senior Credit Facility. This collateral consists of substantially all of the
assets of the Company and the Subsidiary Guarantors. In addition, the Senior
Credit Facility contains customary events of default including non-payment of
principal, violation of covenants and cross-defaults to certain other
indebtedness, including the indebtedness evidenced by the Series D Notes. See
"Description of Certain Indebtedness and Preferred Stock -- Senior Credit
Facility."
SUBORDINATION - YOUR RIGHT TO RECEIVE PAYMENTS ON THESE NOTES IS JUNIOR TO
CERTAIN OF OUR EXISTING INDEBTEDNESS AND POSSIBLY FUTURE INDEBTEDNESS. THE
GUARANTEES OF THE NOTES ARE ALSO JUNIOR TO THE GUARANTORS' EXISTING INDEBTEDNESS
AND POSSIBLY FUTURE INDEBTEDNESS.
Like the Existing Notes, the Series D Notes will be subordinated in right of
payment to all present and future Senior Indebtedness of the Company and the
Subsidiary Guarantors, including the principal, premium (if any) and interest
with respect to the obligations outstanding under the Senior Credit Facility. In
addition, the Subsidiary Guaranties will be subordinated in right of payment to
all existing and future Senior Indebtedness of the Subsidiary Guarantors.
As of December 31, 1998, we had $30.0 million of Senior Indebtedness
outstanding (excluding unused commitments under the Senior Credit Facility) and
the Subsidiary Guarantors had approximately $3.0 million of Senior Indebtedness
outstanding. Consequently, in the event of a bankruptcy, liquidation,
dissolution, reorganization or similar proceeding with respect to the Company or
any Subsidiary Guarantor, assets of the Company or such Subsidiary Guarantor
will be available to pay obligations of the Notes only after all Senior
Indebtedness of the Company or such Subsidiary Guarantor has been paid in full.
We cannot assure that there will be sufficient assets to pay amounts due on all
or any of the Notes. See "Description of the Notes -- Subordination."
15
<PAGE> 18
ASSET ENCUMBRANCES - THE NOTES ARE UNSECURED AND WILL BE SUBORDINATED TO ANY
SECURED INDEBTEDNESS.
Like the Existing Notes, the Series D Notes are unsecured and will be
effectively subordinated to any secured indebtedness of the Company or any
Subsidiary Guarantor. The indebtedness outstanding under the Senior Credit
Facility is secured by liens on substantially all of the assets of the
Subsidiary Guarantors and the Company. Our ability to comply with the provisions
of the Senior Credit Facility may be affected by events beyond our control. Our
breach of any such provisions could result in a default under the Senior Credit
Facility, in which case, depending upon the actions taken by the lenders
thereunder or their successors or assignees, such lenders could elect to declare
all amounts borrowed under the Senior Credit Facility, together with accrued
interest, to be due and payable, and we could be prohibited from making payments
of interest and principal on the Notes until the default is cured or all Senior
Indebtedness is paid or satisfied in full. If we were unable to repay such
borrowings, such lenders could proceed against the collateral. If the
indebtedness under the Senior Credit Facility were accelerated, we cannot assure
you that the assets of the Company and the Subsidiary Guarantors would be
sufficient to repay in full such indebtedness and our other indebtedness,
including the Notes. See "Description of Certain Indebtedness and Preferred
Stock -- Senior Credit Facility" and "Description of the Notes --
Subordination."
HOLDING COMPANY STRUCTURE - WE RELY ON DIVIDENDS AND OTHER PAYMENTS FROM OUR
SUBSIDIARIES AND THAT COULD IMPAIR OUR ABILITY TO PAY OUR OBLIGATIONS.
Oxford Automotive is a holding company and derives all of its operating
income from its subsidiaries. The holders of the Series D Notes will have no
direct claim against such subsidiaries other than the claim created by the
Subsidiary Guaranties, which may be subject to legal challenge in the event of
the bankruptcy of a subsidiary. See "Risk Factors -- Fraudulent Conveyance." If
such a challenge were upheld with respect to any such Subsidiary Guarantee, such
Subsidiary Guarantee would be invalidated and unenforceable. To the extent that
the Subsidiary Guarantee is not enforceable, the rights of holders of the Series
D Notes to participate in any distribution of assets of the Subsidiary Guarantor
upon liquidation, bankruptcy, reorganization or otherwise may, as is the case
with our other unsecured creditors, be subject to prior claims of creditors of
that Subsidiary Guarantor. We must rely on dividends and other payments from our
subsidiaries to generate the funds necessary to meet our obligations, including
the payment of principal and interest on the Series D Notes. The Indenture
contains covenants that restrict the ability of our subsidiaries to enter into
any agreement limiting distributions and transfers, including dividends to us.
In addition, the ability of our subsidiaries to pay dividends and make other
payments are, and may in the future be, subject to certain statutory,
contractual and other restrictions. See "Description of Certain Indebtedness and
Preferred Stock."
THE OEM SUPPLIER INDUSTRY - WE ARE DEPENDENT ON A GROUP OF CUSTOMERS WHOSE
NEEDS ARE CYCLICAL AND SUBJECT TO LABOR DISPUTES.
The OEM supplier industry is highly cyclical and impacted by the strength of
the economy generally, by prevailing interest rates and by other factors which
may have an effect on the level of sales of automotive vehicles. The automotive
industry for which we supply components may experience downturns in the future.
An economic recession may impact substantially leveraged companies, such as
ours, more than similarly situated companies with less leverage. Also, a
significant percentage of our net sales are derived from sales of our products
manufactured for SUVs, mini- vans, vans and light trucks. A decrease in overall
consumer demand for these products could have a material adverse effect on our
business, financial condition, results of operations, and prospects.
The automotive industry is characterized by a small number of OEMs that are
able to exert considerable pressure on component and system suppliers to reduce
costs, improve quality and provide additional design and engineering
capabilities. In the past, OEMs have generally demanded and received price
reductions and measurable increases in quality by implementing competitive
selection processes, rating programs and various other arrangements. Also,
through increased partnering on platform work, OEMs have generally required
component and system suppliers to provide more design engineering input at
earlier stages of the product development process, the costs of which have, in
some cases, been absorbed by the suppliers.
The following requirements of the OEMs may have a material adverse effect on
our business, financial condition, results of operations, or prospects:
o future price reductions,
o increased quality standards, or
o additional engineering capabilities.
16
<PAGE> 19
Many OEMs and their Tier 1 suppliers are unionized. Work stoppages and
slowdowns experienced by OEMs and their Tier 1 suppliers, as a result of labor
disputes, could have a material adverse effect on our business, financial
condition, results of operations, or prospects.
GM recently experienced a strike at certain of its production facilities due
to a labor dispute between GM and the International Union, United Automobile,
Aerospace and Agricultural Implement Workers of America ("UAW"). Our results of
operations for the nine month period ended December 31, 1998, were adversely
affected by the GM strike, resulting in a reduction in sales of approximately
$12.7 million and reduced EBITDA of $5.2 million.
DEPENDENCE ON PRINCIPAL CUSTOMERS - WE ARE DEPENDENT ON A SMALL GROUP OF
PRINCIPAL CUSTOMERS.
Substantially all of our sales for the nine months ended December 31, 1998,
on a pro forma basis assuming the acquisition of Cofimeta had occurred on April
1, 1998, were to the following customers:
o GM (34%)
o Ford (25%)
o Renault (15%)
o DaimlerChrysler (10%)
o Peugeot Citroen (5%)
We cannot assure you that sales to these customers will continue at the same
level. Also, continuation of these relationships is dependent upon our
customers' satisfaction with the price, quality and delivery of our products.
Our agreements to produce parts are assigned to specific models or product
lines of our customers. Accordingly, our business, and estimates for future
business, are dependent upon consumer demand for the specific models and product
lines that incorporate our parts. Our arrangements with the OEMs are typically
in the form of purchase orders that may be canceled by the OEMs. The following
factors would have a material adverse effect on our business, financial
condition, results of operations, and prospects:
o a significant decrease in sales of vehicles using our products;
o our loss of the right to supply any of our products to our customers;
o our loss of GM, Ford, Renault, Peugeot Citroen or DaimlerChrysler as a
customer; or
o the delay or cancellation of material orders from, or design,
development, delivery or product projects at any of these customers.
UNIONIZED WORKFORCE - OUR WORKFORCE IS SUBSTANTIALLY UNIONIZED AND WE ARE
SUBJECT TO WORK STOPPAGES.
Substantially all of our employees are covered by collective bargaining
agreements with various local unions. Strikes or work stoppages and the
resultant adverse impact on our relationship with the OEMs could have a material
adverse effect on our business, financial condition, results of operations, and
prospects. We recently negotiated new agreements at the Chatham, Greencastle,
and Corydon facilities which will expire in February 2002, February 2004, and
January 2005. Our agreements at the Masury and Lapeer facilities will expire in
the first fiscal quarter of 2000. While the outcome, including the terms of the
new contracts and their impact on our future results of operations cannot be
predicted, management does not believe that the financial terms of the new
contracts will have a material adverse effect on our business, financial
condition, results of operations, and prospects. However, there can be no
assurance that we will be successful in our contract negotiations.
RISKS RELATING TO ACQUISITIONS - WE MAY NOT RECEIVE THE DESIRED BENEFITS OF
ACQUISITIONS.
A significant component of our historical sales and earnings growth has been
the acquisition of other automotive parts manufacturers in an effort to expand
our markets and capitalize on the consolidation trend in the automotive
industry. We may not be able to identify appropriate acquisitions in the future
or negotiate and consummate proposed or future acquisitions, and such
acquisitions may have an adverse effect upon our business, financial condition,
results of operations, or prospects. We are continuously evaluating possible
acquisition opportunities. Identifying, proposing, negotiating and consummating
acquisitions can be
17
<PAGE> 20
a lengthy and costly process and we cannot assure you that proposed transactions
can be consummated. Also, we anticipate that the integration of acquired
companies will require significant management attention.
We will be required to implement and improve our operations, financial and
management information systems and motivate and effectively manage an increasing
number of employees due to acquisitions. Accordingly, our operating results may
be adversely affected for several fiscal quarters following the consummation of
such acquisitions while the operations of the acquired businesses are integrated
into our operations and our costing and other management information systems are
implemented at the newly acquired facilities. There may be substantial
unanticipated costs or problems associated with the integration effort. We have
historically focused, and expect to continue to focus, on acquiring
under-performing companies which provide the opportunity for significant
operating improvements under our ownership. We may not be able to realize
improvements in the financial results of these acquisitions. The acquisition,
operation and integration of an acquired business may involve a number of risks,
including an increase in our indebtedness and substantial capital expenditures
for additional equipment and technology.
In addition to the foregoing, we are pursuing additional acquisitions and
strategic alliances in Europe and intend to pursue such acquisitions and
alliances in South America, Asia and other geographic markets. Other than the
acquisition of Cofimeta in February 1999, we have not previously consummated any
material acquisitions outside North America. Operations outside the United
States are subject to a number of risks in addition to those described above,
including:
o currency exchange rate fluctuations,
o trade barriers,
o exchange controls,
o risk of governmental expropriation or other regulation,
o political risk, and - risk of tax increases.
RISKS RELATED TO INTERNATIONAL OPERATIONS - OUR INTERNATIONAL OPERATIONS EXPOSE
US TO ADDITIONAL RISKS.
We have experienced fluctuations in our shareholders equity for foreign
currency adjustments due to our long-term investment in Canada. Although such
adjustments do not have an immediate impact on cash flow, they can adversely
impact our balance sheet and may have an impact on cash flow if we remitted
earnings from such foreign operations to the United States. Our exposure to such
exchange rate adjustments may increase in connection with the acquisition of
additional assets outside the United States. Additional problems inherent in
international operations include market differences which may impact
competition, pricing and relationships with our customers, as well as
differences in workforce, language and culture. Such factors which could
adversely affect the success of our potential future international acquisitions
could in turn have a material adverse effect on our business, financial
condition, results of operations, or prospects. See "Substantial Leverage and
Debt Service Obligations."
FRAUDULENT CONVEYANCE - FEDERAL AND STATE STATUTES ALLOW COURTS, UNDER SPECIFIC
CIRCUMSTANCES, TO VOID NOTES AND GUARANTEES AND REQUIRE NOTEHOLDERS TO
RETURN PAYMENTS RECEIVED FROM US.
Under relevant federal or state fraudulent conveyance statutes, a court
could void our obligations under the Series D Notes, recover payments made under
the Series D Notes, subordinate the Series D Notes to our other indebtedness or
take other action detrimental to the holders of the Series D Notes if such court
were to find that:
o we did not receive fair consideration or reasonably equivalent value
for incurring the indebtedness, including the Series D Notes; and, at
the time of such incurrence we:
o were insolvent; or rendered insolvent by reason of such
incurrence or grant; or
o were engaged in a business or transaction for which our remaining
assets constituted unreasonably small capital; or
o intended to incur, or believed that we would incur, debts beyond
our ability to pay such debts as they matured.
18
<PAGE> 21
The measure of insolvency for these purposes will depend upon the governing
law of the relevant jurisdiction. Generally, however, a company will be
considered insolvent for these purposes if:
o the sum of its debts were greater than the fair value of all of
that company's property, or
o the present fair salable value of its assets were less than the
amount that would be required to pay its probable liability on
its existing debts as they become absolute and mature, or
o it could not pay its debts as they become due.
Regardless of solvency, a court could void an incurrence of indebtedness,
including the Series D Notes, if it determined that such transaction was made
with the intent to hinder, delay or defraud creditors. In addition, a court
could subordinate the indebtedness, including the Series D Notes, to the claims
of all existing and future creditors on similar grounds. We believe that, after
giving effect to the Series D Offering, we;
o have not been rendered insolvent by the incurrence of
indebtedness in connection with the Series D Offering,
o are in possession of sufficient capital to run our business
effectively, and
o are incurring debts within our ability to pay as the same mature
or become due.
We cannot assure you as to what standard a court would apply in order to
determine whether we were "insolvent" upon the sale of the Existing Notes or
that a court would determine that we were not insolvent upon consummation of the
sale of the Existing Notes.
In addition, the Subsidiary Guaranties may be subject to review under
relevant federal and state fraudulent conveyance and similar statutes in a
bankruptcy or reorganization case or a lawsuit brought by or on behalf of
creditors of any of the Subsidiary Guarantors. In such a case, the analysis set
forth above would generally apply, except that the Subsidiary Guaranties could
also be subject to the claim that, since the Subsidiary Guaranties were incurred
for the benefit of the Company (and only indirectly for the benefit of the
Subsidiary Guarantors), the obligations of the Subsidiary Guarantors were
incurred for less than reasonably equivalent value or fair consideration. A
court could:
o void the Subsidiary Guarantors' obligation under the Subsidiary
Guaranties,
o recover payments made under the Subsidiary Guaranties,
o subordinate the Subsidiary Guaranties to other indebtedness of a
Subsidiary Guarantor, or
o take other action detrimental to the holders of the Notes.
CONTROL BY PRINCIPAL SHAREHOLDER - OUR PRINCIPAL SHAREHOLDER MAY HAVE INTERESTS
THAT CONFLICT WITH THE HOLDERS OF THE NOTES.
Selwyn Isakow (the "Principal Shareholder") beneficially owns 53% of the
Company's outstanding shares and exercises voting control over those shares not
owned by him, including shares held by the directors and officers of the
Company. Circumstances may occur in which the interests of the Principal
Shareholder could be in conflict with the interests of the holders of the Series
D Notes. For example, if we encounter financial difficulties or are unable to
pay certain of our debts as they mature, the interests of the Principal
Shareholder might conflict with those of the holders of the Series D Notes. In
addition, the Principal Shareholder may have an interest in pursuing
acquisitions, divestitures or other transactions that, in his judgment, could
enhance his equity investment, even though such transactions might involve risks
to the holders of the Series D Notes. See "Principal Shareholders."
COMPETITION - WE MAY NOT CONTINUE TO PERFORM SUCCESSFULLY IN OUR HIGHLY
COMPETITIVE INDUSTRY.
The motor vehicle parts industry in which we operate is fragmented and
competitive. Our competitors include divisions or subsidiaries of companies that
are larger and have substantially greater resources than we do, as well as
divisions of OEMs with internal stamping and assembly operations. We cannot
assure you that our products will be able to compete successfully with those of
our competitors. See "Business -- Competition."
ENVIRONMENTAL RISKS - WE MAY BE ADVERSELY AFFECTED BY ENVIRONMENTAL CLAIMS
RESULTING FROM OUR OPERATIONS.
Our operations and properties are subject to federal, state, local and
foreign laws, regulations and ordinances relating to the use, storage, handling,
generation, treatment, emission, release, discharge and disposal of certain
materials, substances and wastes. In many jurisdictions these laws are complex
and change frequently. Such laws, including but not limited to the Comprehensive
19
<PAGE> 22
Environmental Response, Compensation & Liability Act ("CERCLA" or "Superfund")
may impose joint and several liability and apply to remediation of contamination
at properties presently or formerly owned or operated by an entity or its
predecessors, as well as to conditions at properties at which wastes or other
contamination attributable to an entity or its predecessors have been sent or
otherwise come to be located. The nature of our operations exposes us to the
risk of liabilities or claims with respect to environmental matters, including
off-site disposal matters, and material costs may be incurred in connection with
such liabilities or claims.
Based upon our experience to date, we believe that the future cost of
compliance with existing environmental laws, regulations and ordinances (or
liability for known environmental claims) will not have a material adverse
effect on our business, financial condition and results of operations. However,
future events, such as changes in existing laws and regulations or their
interpretation, may give rise to additional compliance costs or liabilities that
could have a material adverse effect on our business, financial condition and
results of operations. We may be required to make additional material
expenditure in order to comply with more stringent laws or regulations, as well
as more vigorous enforcement policies of regulatory agencies or stricter or
different interpretations of existing laws. See "Business -- Regulatory Matters"
and -- "Legal Proceedings."
CHANGE OF CONTROL - WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO
FINANCE THE CHANGE OF CONTROL OFFER REQUIRED BY THE INDENTURE.
Upon the occurrence of certain types of change of control events, we may be
required to repurchase all or any part of the Existing Notes and Series D Notes.
Such repurchase would be at a price equal to 101% of the principal amount, plus
accrued and unpaid interest, to the date of repurchase. The occurrence of a
Change of Control may constitute a default under the Senior Credit Facility. In
addition, the Senior Credit Facility will prohibit the purchase of the Existing
Notes and the Series D Notes by us in the event of a default under the Senior
Credit Facility, unless and until such time as the indebtedness under the Senior
Credit Facility is repaid in full. Our failure to purchase the Existing Notes
and the Series D Notes would result in a default under the Indenture and under
the indenture pursuant to which the Series A and Series B Notes were issued. The
inability to repay the indebtedness under the Senior Credit Facility, if
accelerated, would also constitute an event of default under the Indenture,
which could have adverse consequences for the Company and the holders of the
Notes. It is possible that we will not have sufficient funds at the time of a
change of control to make the required purchase of Notes or that restrictions in
the Senior Credit Facility will not allow such repurchases. In addition, we
could engage in a highly leveraged transaction, with certain adverse
consequences to holders of the Notes, which would not constitute a Change of
Control. See "Description of the Notes -- Change of Control" and "Description of
Certain Indebtedness and Preferred Stock -- Senior Credit Facility."
YEAR 2000 - WE CANNOT ASSURE YOU THAT WE, OR OUR CUSTOMERS AND SUPPLIERS, WILL
BE YEAR 2000 COMPLIANT. PROBLEMS ASSOCIATED WITH THE YEAR 2000 MAY ADVERSELY
AFFECT OUR OPERATIONS.
We cannot assure you that our computer systems or software products or those
of our suppliers and customers will accept input of, store, manipulate and
output dates prior to the Year 2000 or thereafter without error or interruption.
We are assessing the issues related to the Year 2000 problem, and we have
implemented a readiness program to mitigate the problem of business interruption
or other risks. We are also requesting assurances from our significant suppliers
and customers that their systems are Year 2000 compliant or that they are
identifying and addressing problems to ready themselves for the Year 2000. We
cannot assure you that we will identify all Year 2000 problems in advance of
their occurrence, or that we will be able to successfully remedy problems that
are discovered. The expense of our efforts to identify and address such
problems, or the expenses or liabilities to which we may become subject to as a
result of such problems, could have a material adverse effect on the Company.
CONSEQUENCES OF FAILURE TO EXCHANGE - IF YOU DO NOT EXCHANGE YOUR NOTES, YOU MAY
BE SUBJECT TO TRANSFER RESTRICTIONS OR A TRADING MARKET THAT IS LESS LIQUID.
Holders of Series C Notes who do not exchange their Series C Notes for
Series D Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Series C Notes. These restrictions are a
consequence of the issuance of the Series C Notes pursuant to exemption from, or
in transactions not subject to, the registration requirements of the Securities
Act and applicable state laws. Subject to our obligation to file a shelf
registration statement covering resales of Series C Notes in certain limited
circumstances, we do not intend to register the Series C Notes under the
Securities Act and, after consummation of the Exchange Offer, will not be
obligated to do so. In addition, any holder of Series C Notes who tenders in the
Exchange Offer for the purpose of participating in a distribution of the Series
D Notes may be deemed to have received restricted securities and, if so, will be
20
<PAGE> 23
required to comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction.
In addition, as a result of the Exchange Offer, it is expected that a
substantial decrease in the aggregate principal amount of Series C Notes
outstanding will occur. As a result, it is unlikely that a liquid trading market
will exist for the Series C Notes at any time. This lack of liquidity will make
transactions more difficult and may reduce the trading price of the Series C
Notes. Also, holders of Existing Notes who do not exchange their Existing Notes
for Series D Notes will not be able to take advantage of any increased liquidity
afforded by the Series D Notes. The Series D Notes would have an aggregate
principal amount of $200 million as opposed to $160 million for the Series A and
Series B Notes and $40 million for the Series C Notes. See "The Exchange Offer."
ABSENCE OF PUBLIC MARKET FOR THE SERIES D NOTES - YOU CANNOT BE SURE THAT AN
ACTIVE TRADING MARKET WILL DEVELOP FOR THE NOTES.
The Series D Notes are new securities and there is currently no established
market for the Series D Notes. Future trading prices of the Series D Notes will
depend on many factors, including, among other things, prevailing interest
rates, our operating results and the market for similar securities.
Historically, the market for securities similar to the Series D Notes, including
non-investment grade debt, has been subject to disruptions that have caused
substantial volatility in the prices of such securities. It is possible that any
market for the Series D Notes, if such market develops, will be subject to
similar disruptions. The Initial Purchasers have advised us that they currently
intend to make a market in the Series D Notes offered hereby. However, the
Initial Purchasers are not obligated to do so and any market making may be
discontinued at any time without notice. The Company and the Subsidiary
Guarantors do not intend to apply for listing of the Series D Notes on any
national securities exchange or for their quotation through the National
Association of Securities Dealers Automated Quotation System. The Exchange Offer
is not conditioned upon any minimum or maximum aggregate principal amount of the
Existing Notes being tendered for exchange.
There may be a lack of liquidity for the Series D Notes or, in the case of
non-tendering holders of Existing Notes, the trading market for the Existing
Notes following the Exchange Offer. We are offering to accept all Existing Notes
in exchange for Series D Notes in order to increase the liquidity of all series.
However, it is possible that not all of the Existing Notes will participate in
the exchange, in which case the Series A Notes and Series B Notes will together
continue as a separate series of notes under a separate indenture.
DILUTION OF INTEREST - BY EXCHANGING YOUR NOTES, YOUR INDIVIDUAL VOTING
INTERESTS WILL BE DILUTED.
If all of the Existing Notes are exchanged for Series D Notes, $200.0
million aggregate principal amount of Series D Notes will be outstanding
following consummation of the Exchange Offer and the Series D Notes will be
deemed to be a single series of notes outstanding under the Indenture. In such
case, any actions requiring the consent of each holder or the holders of a
majority of outstanding principal amount of Notes under the Indenture will
require the consent of each holder of Series D Notes or the holders of a
majority in aggregate principal amount of such outstanding Series D Notes, and
the individual voting interest of each holder will be diluted. In addition,
issuances of additional notes under the Indenture, to the extent permitted by
the debt incurrence limitations of the Indenture, may result in further dilution
of the individual voting interests of the holders of the Series D Notes.
USE OF PROCEEDS
The Exchange Offer is intended to satisfy certain of the Company's and the
Subsidiary Guarantors' obligations under the Registration Agreement. We will not
receive any cash proceeds from the issuance of the Series D Notes in the
Exchange Offer. In consideration for issuing the Series D Notes as contemplated
in this Prospectus, we will receive Existing Notes in like principal amount. The
form and terms of the Series D Notes are identical in all material respects to
the form and terms of the Existing Notes, except, with respect to the Series C
Notes, for certain transfer restrictions and registration rights relating to the
Series C Notes and except for certain provisions providing for an increase in
the interest rate on the Series C Notes under certain circumstances relating to
the timing of the Exchange Offer. The Existing Notes surrendered in exchange for
the Series D Notes will be retired and canceled and cannot be reissued.
Accordingly, issuance of the Series D Notes will not result in any increase in
our outstanding debt. Our net proceeds from the sale of the Series C Notes were
approximately $40.8 million (after the inclusion of approximately $1.5 million
in premium and the deduction of estimated expenses incurred in connection with
the Series C Offering and related transactions of approximately $0.7 million).
We used the net proceeds from the offering to repay borrowings under the Senior
Credit Facility and for working capital and other general corporate purposes.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity, Capital Resources and Financial Condition."
21
<PAGE> 24
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1998
and as adjusted to give effect to the acquisition of Cofimeta. This table should
be read in conjunction with the unaudited "Pro Forma Combined Consolidated
Financial Data," "Selected Consolidated Historical Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and related notes thereto
included elsewhere in this Prospectus. See also "Description of Certain
Indebtedness and Preferred Stock."
<TABLE>
<CAPTION>
DECEMBER 31, 1998
--------------------------
AS
ACTUAL ADJUSTED
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents ............................ $ 318 $ 8,621
========== ==========
Long-term debt (including current portion):
Senior Credit Facility (a)
Term Loan ........................................ -- 30,000
Revolving Credit Facilities ...................... 22,694 30,319
Industrial Revenue Bonds ........................... 2,495 2,495
EDC Tooling ........................................ 2,026 2,026
Cofimeta Deferred Purchase Price ................... -- 19,452
Continuation Plan .................................. -- 6,236
Other Debt (b) ..................................... 540 540
10 1/8% Senior Subordinated Notes Due 2007, Series A . 124,841 124,841
10 1/8% Senior Subordinated Notes Due 2007, Series B . 36,878 36,878
10 1/8% Senior Subordinated Notes Due 2007, Series C . 41,486 41,486
Total debt ....................................... 230,960 294,273
Redeemable preferred stock (c)
Series A ........................................... 40,586 40,856
Shareholders' equity:
Common stock (400,000 shares authorized; 309,750
issued and outstanding) ......................... 1,050 1,050
Accumulated other comprehensive loss ............... (3,128) (3,128)
---------- ----------
Total shareholders' equity ....................... (2,078) (2,078)
Total capitalization ................................. $ 269,468 $ 333,051
========== ==========
</TABLE>
- ------------------
(a) On December 31, 1998, the Company had $30.0 million of borrowings under the
Senior Credit Facility and availability was approximately $80.0 million. On
February 4, 1999, the Company entered into the amended and restated Senior
Credit Facility which provides for a $35.0 million revolving credit
facility to finance customer tooling, a $30.0 million term loan and a
$110.0 million revolving credit facility.
(b) Consists of debt of RPIH and certain other debt of the Company. Certain of
the RPIH debt is secured by the assets of RPI.
(c) See "Description of Certain Indebtedness and Preferred Stock - Preferred
Stock of Lobdell."
22
<PAGE> 25
PRO FORMA COMBINED FINANCIAL DATA
(UNAUDITED)
(DOLLARS IN THOUSANDS)
The unaudited pro forma combined balance sheet as of December 31, 1998 (the
"Unaudited Pro Forma Balance Sheet") gives pro forma effect to the acquisition
of Cofimeta as if it had occurred on December 31, 1998. The acquisition of
Cofimeta is accounted for by the purchase method of accounting pursuant to which
the purchase price is allocated among the acquired tangible and intangible
assets and assumed liabilities in accordance with estimates of their fair values
on the date of acquisition. The pro forma adjustments represent management's
preliminary determination of purchase accounting adjustments and are based upon
available information and certain assumptions that the Company believes to be
reasonable under the circumstances. Consequently, the amounts reflected in the
Unaudited Pro Forma Balance Sheet are subject to change and the final values may
differ substantially from these amounts. Management does not expect that
differences between the preliminary and final purchase price allocation will
have a material impact on the Company's financial position. The Unaudited Pro
Forma Balance Sheet does not purport to be indicative of the financial position
of the Company had such transaction actually been completed as of the assumed
date and for the period presented, or which may be obtained in the future.
The unaudited pro forma combined statement of operations for the year ended
March 31, 1998 gives pro forma effect to the Series A Offering, the Series B
Offering, the Series C Offering, and the acquisitions of Cofimeta, Howell, RPIH
and the Suspension Division as if they had occurred on April 1, 1997. The
unaudited pro forma combined statement of operations for the nine months ended
December 31, 1998 gives pro forma effect to the Series C Offering and the
acquisition of Cofimeta, as if each had occurred April 1, 1998. The unaudited
pro forma combined statements of operations for the year ended March 31, 1998
and for the nine months ended December 31, 1998 are collectively referred to as
the "Unaudited Pro Forma Statements of Operations." The Unaudited Pro Forma
Statements of Operations do not purport to be indicative of the results of
operations of the Company had such transactions actually been completed as of
the assumed dates and for the periods presented, or which may be obtained in the
future.
23
<PAGE> 26
UNAUDITED PRO FORMA COMBINED BALANCE SHEET AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
COMPANY COFIMETA PRO FORMA PRO FORMA
DEC. 31, 1998 SEP. 30, 1998(a) ADJUSTMENTS COMBINED
---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash and cash equivalents ................ $ 318 $ 8,303 $ -- $ 8,621
Trade accounts receivable, net ........... 86,336 26,240 (869)(c) 111,707
Inventories .............................. 33,911 18,917 (869)(c) 51,959
Reimbursable tooling ..................... 40,237 -- -- 40,237
Unexpended bond proceeds ................. 6 -- -- 6
Prepaid expenses and other current
assets ................................ 3,630 48,239 (8,336)(c) 43,533
Deferred income taxes .................... 4,399 -- -- 4,399
---------- ---------- ---------- ----------
Total current assets ................ 168,837 101,699 (10,074) 260,462
Deferred income taxes .................... 7,918 -- 12,176(d) 20,094
Property, plant and equipment,
net ................................... 191,446 24,534 (1,199)(c) 214,781
Marketable Securities .................... 8,092 -- -- 8,092
Other noncurrent assets .................. 36,269 453 -- 36,722
---------- ---------- ---------- ----------
Total assets ........................ $ 412,562 $ 126,686 $ 903 $ 540,151
========== ========== ========== ==========
Trade accounts payable ................... $ 54,428 $ 29,177 $ 173(c) $ 83,778
Accrued expenses and other
liabilities ........................... 20,918 13,348 -- 34,266
Restructuring reserve .................... 3,019 1,423 13,781(c) 18,223
Current portion of long-term deb3,411 .... -- 6,568(b) 9,979
---------- ---------- ---------- ----------
Total current liabilities ........... 81,776 43,948 20,522 146,246
Deferred income taxes .................... 13,962 -- -- 13,962
Pension liability ........................ 5,470 2,740 8,210
Postretirement medical benefits 41,427 ... -- -- 41,427
Other noncurrent liabilities ............. 3,870 12,928 (9,294)(c) 7,504
Long-term debt ........................... 227,549 67,190 (10,445)(b) 284,294
---------- ---------- ---------- ----------
Total liabilities ................... 374,054 126,806 783 501,643
---------- ---------- ---------- ----------
Redeemable Series A preferred
stock ................................. 40,586 -- -- 40,586
Total shareholders' equity (2,078) .. (120) 120(c) (2,078)
---------- ---------- ---------- ----------
Total liabilities and
shareholders' equity ............... $ 412,562 $ 126,686 $ 903 $ 540,151
========== ========== ========== ==========
</TABLE>
- ---------------
See accompanying Notes to Unaudited Pro Forma Combined Balance Sheet.
24
<PAGE> 27
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(Dollars in thousands)
(a) Represents the balance sheet of Cofimeta at September 30, 1998. The
September 30, 1998 balance sheet for Cofimeta was derived from
Cofimeta's audited financial statements.
(b) Reflects the following estimated sources and uses of funds for the
acquisition of Cofimeta as if it had occurred on December 31, 1998:
<TABLE>
<S> <C>
Purchase price paid at closing (including estimated closing costs) $ 37,625
Deferred share price and debt purchase - recorded at
net present value as of the closing date 19,452
Reduction of face value of indebtedness as a part of acquisition
and in conjunction with the Continuation Plan (60,954)
--------
Net reduction in total debt $ (3,877)
Less: net increase in current portion of debt 6,568
--------
Net reduction in long-term debt $(10,445)
========
</TABLE>
(c) The acquisition of Cofimeta will be accounted for by the purchase
method of accounting, pursuant to which the purchase price is allocated
among the acquired tangible and intangible assets and assumed
liabilities in accordance with their estimated fair market values on
the date of acquisition. The estimated purchase price and preliminary
adjustments to historical book value of Cofimeta as a result of the
transaction are as follows:
<TABLE>
<S> <C> <C>
Reserves recorded to conform accounting policies of the
Company with those of Cofimeta
Allowance for bad debt reserve (869)
Inventory obsolescence reserve (869) (1,738)
Elimination of inter-company receivable, settled as a part
of acquisition price (8,336)
Recording of deferred tax asset on net operating losses acquired 12,176
Write-down of property plant and equipment for capital
portion of restructuring reserves (1,199)
----------
Net increase in assets $ 903
==========
Elimination of inter-company payable, settled as a part of
acquisition price (9,294)
Reserves recorded to conform accounting policies of the
Company with those of Cofimeta
Accounts payable unrecorded liability reserve 173
Increase in restructuring reserve
Plant restructuring and closure 10,689
Other reserves 3,092 13,781
----------
Net reduction of indebtedness as a part of acquisition (3,877)
Elimination of retained earnings as a result of purchase
accounting 120
Net increase in liabilities and shareholders equity $ 903
==========
</TABLE>
(d) The deferred tax asset can be realized in accordance with FAS 109 only
by the operations in France, not on a consolidated basis with U.S. or
Canadian operations.
25
<PAGE> 28
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
COMPANY HOWELL RPIH
COMPANY(a) PRO FORMA PRO FORMA(e) PRO FORMA (f)
------------- ------------- ------------ -------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MAR. 31, 1998 MAR. 31, 1998 MAR. 31,1998 MAR. 31, 1998
------------- ------------- ------------ -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales ...................... $ 410,321 $ -- $ 34,329 $ 9,035
Cost of sales .................. 368,420 -- 31,189 10,642
--------- --------- --------- ---------
Gross profit ................... 41,901 -- 3,140 (1,607)
Selling, general and
administrative expenses ...... 21,839 37(b) 177 1,651
Reorganization cost ............ -- -- -- --
Restructuring provision ........ 1,610 -- -- --
Gain on sale of equipment ...... (1,602) -- -- --
--------- --------- --------- ---------
Income (loss) from
Operations ................... 20,054 (37) 1,489 (1,784)
Interest expense, net .......... 10,710 (431)(c) 858 432
Other income (expense) ......... 321 -- -- (35)
--------- --------- --------- ---------
Income (loss) before income
taxes ........................ 9,665 394 631 (2,251)
Provision (benefit) for income
taxes ........................ 4,074 158(d) 269 (846)
--------- --------- --------- ---------
Net income (loss) .............. 5,591 $ 236 $ 362 $ (1,405)
========= ========= ========= =========
FINANCIAL RATIOS AND
OTHER DATA:
Depreciation and
amortization ................. $ 20,279 $ 37 $ 769 $ 296
Capital expenditures ........... 16,723 -- 728 119
Ratio of earnings to fixed
charges(i) ................... 1.7x
EBITDA(j) ...................... 40,654 -- 2,258 (1,523)
Ratio of EBITDA to
interest expense(k) .......... 3.8x
Ratio of net debt to
EBITDA(l) .................... 3.0x
</TABLE>
26
<PAGE> 29
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
SUSPENSION COFIMETA
DIVISION PRO PRO FORMA
PRO FORMA (G) FORMA (H) COMBINED
------------- ------------- -------------
YEAR ENDED YEAR ENDED YEAR ENDED
MAR. 31, 1998 DEC. 31, 1997 MAR. 31, 1998
------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales ........................ $ 122,478 $ 189,031 $ 765,194
Cost of sales .................... 114,721 182,780 707,752
----------- ----------- -----------
Gross profit ..................... 7,757 6,251 57,442
Selling, general and
administrative expenses ........ 7,545 14,789 46,038
Reorganization cost .............. -- 1,158 1,158
Restructuring provision .......... -- 6,153 7,763
Gain on sale of equipment ........ -- (1,602)
----------- ----------- -----------
Income (loss) from Operations .... 212 (15,849) 4,085
Interest expense, net ............ 5,108 7,585 24,262
Other income (expense) ........... 860 5 1,151
----------- ----------- -----------
Income (loss) before income
taxes .......................... (4,036) (23,429) (19,026)
Provision (benefit) for income
taxes .......................... (1,612) (9,372) (7,329)
----------- ----------- -----------
Net income (loss) ................ $ (2,424) (14,057) $ (11,697)
=========== =========== ===========
FINANCIAL RATIOS AND
OTHER DATA:
Depreciation and amortization .... $ 4,641 9,535 $ 35,557
Capital expenditures ............. 5,761 1,884 25,215
Ratio of earnings to fixed
charges(i)
EBITDA(j) ...................... 5,713 (6,309) 40,793
Ratio of EBITDA to
interest expense(k) ............ 1.7x
Ratio of net debt to
EBITDA(l)
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Statements of Operations.
27
<PAGE> 30
<TABLE>
<CAPTION>
COMPANY COFIMETA PRO FORMA
COMPANY PRO FORMA PRO FORMA (O) COMBINED
------------- ------------ ------------- -------------
NINE MONTHS NINE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
DEC. 31, 1998 DEC. 31,1998 SEP. 30, 1998 DEC. 31, 1998
------------- ------------ ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales $ 408,144 $ $ 147,107 $ 555,251
Cost of sales 372,612 136,355 508,967
------------ ------------ ------------ ------------
Gross profit 35,532 10,752 46,284
Selling, general and
administrative expenses 22,235 9,656 31,891
Reorganization costs -- -- (1,350) (1,350)
Restructuring provision 1,176 95 1,271
Gain on sale of equipment --
------------ ------------ ------------ ------------
Income (loss) from Operations 12,121 2,351 14,472
Interest expense, net 14,255 (422)(m) 4,735 18,568
Other income (expense) 949 13 962
------------ ------------ ------------ ------------
Income (loss) before income
taxes (1,185) 422 (2,371) (3,134)
Provision (benefit) for income
taxes (475) 169(n) (948) (1,254)
------------ ------------ ------------ ------------
Net income (loss) $ (710) $ 253 $ (1,423) $ (1,880)
============ ============ ============ ============
FINANCIAL RATIOS AND
OTHER DATA:
Depreciation and amortization $ 19,552 $ $ 6,607 $ 26,159
Capital expenditures
Ratio of earnings to fixed
charges(i) -- --
EBITDA (j) 32,622 8,971 41,593
Ratio of EBITDA to
interest expense(k) 2.3x 2.2x
Ratio of net debt to 5.3x 5.2x
EBITDA(l)
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Statements of Operations.
28
<PAGE> 31
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
(a) Statement of Operations Data for the Company for the year ended March
31, 1998 includes operating data for Howell and RPIH for the periods
subsequent to acquisition (Howell - August 14, 1997 to March 31, 1998
and RPIH - November 26, 1997 to March 31, 1998).
(b) Represents amortization of bond acquisition fees associated with the
Series A Notes.
(c) Represents the net effect on interest expense as a result of (1) the
elimination of historical interest expense after the repayment of the
existing senior bank credit facilities and other outstanding debt,
using proceeds from the Series A Offering and (2) the Series A, Series
B and Series C Offerings, using an interest rate of 10.125% per annum
for the Series A Notes and 9.25% per annum for the Series B Notes and
9.685% for the Series C Notes. This amount excludes interest on the
portion of the proceeds of the Series A, Series B and Series C
Offerings used for the Howell, RPIH, Suspension Division and Cofimeta
acquisitions as follows:
<TABLE>
<S> <C>
Interest differential historical versus Offerings $ 8,507
Acquisition of:
Howell (884)
RPI (169)
Suspension (4,075)
Cofimeta (3,810)
-------
$ (431)
=======
</TABLE>
See Notes (e)(4), (f)(4), (g)(3) and (h)(4).
(d) Represents the estimated income tax effect of the pro forma
adjustments using an effective tax rate of 40%.
(e) The Howell Pro Forma information includes Statement of Operations data
for Howell as if the Company had acquired Howell on April 1, 1997:
<TABLE>
<CAPTION>
PRO FORMA HOWELL
HOWELL(1) ADJUSTMENTS PRO FORMA
--------------- --------------- ---------------
PERIOD FROM PERIOD FROM PERIOD FROM
APRIL 1, 1997 APRIL 1, 1997 APRIL 1, 1997
THROUGH THROUGH THROUGH
AUGUST 13, 1997 AUGUST 13, 1997 AUGUST 13, 1997
--------------- --------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales $ 34,329 $ -- $ 34,329
Cost of sales 31,070 119(2) 31,189
------------ ------------ ------------
Gross profit 3,259 (119) 3,140
Selling, general and administrative expenses 1,626 25(3) 1,651
Reorganization cost -- -- --
Restructuring provision -- -- --
Gain on sale of equipment -- -- --
------------ ------------ ------------
Income (loss) from operations 1,633 (144) 1,489
Interest expense, net (26) 884(4) 858
Other income (expense) -- -- --
------------ ------------ ------------
Income (loss) before income taxes 1,659 (1,028) 631
Provision (benefit) for income taxes 680 (411)(5) 269
------------ ------------ ------------
Net income (loss) $ 979 $ (617) $ 362
============ ============ ============
</TABLE>
(1) Statement of Operations data for Howell for the period prior to
acquisition by the Company (April 1, 1997 - August 13, 1997). The
information was derived from Howell's unaudited internal financial
statements.
29
<PAGE> 32
(2) Represents increased depreciation expense as a result of the write up
of property, plant and equipment to fair market value as a part of the
purchase accounting related to the acquisition of Howell.
(3) Represents amortization of acquisition expenses related to the Howell
acquisition.
(4) Represents the net effect on interest expense as a result of the use
of proceeds from the Series A Offering for the acquisition of Howell
of $23,245. Interest expense is calculated using an interest rate of
10.125% per annum. See Note (c).
(5) Represents the estimated income tax effect of the pro forma
adjustments using an effective tax rate of 40%.
(f) The RPIH Pro Forma information includes Statement of Operations data as if
the Company had acquired RPIH on April 1, 1997:
<TABLE>
<CAPTION>
PRO FORMA RPIH
RPIH(1) ADJUSTMENTS PRO FORMA
----------------- ----------------- -----------------
PERIOD FROM PERIOD FROM PERIOD FROM
APRIL 1, 1997 APRIL 1, 1997 APRIL 1, 1997
THROUGH THROUGH THROUGH
NOVEMBER 25, 1997 NOVEMBER 25, 1997 NOVEMBER 25, 1997
----------------- ----------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales $ 9,035 $ -- $ 9,035
Cost of sales 10,602 40(2) 10,642
-------------- -------------- --------------
Gross profit (1,567) (40) (1,607)
Selling, general and administrative expenses 127 50(3) 177
Reorganization cost -- -- --
Restructuring provision -- -- --
Gain on sale of equipment -- -- --
-------------- -------------- --------------
Income (loss) from operations (1,694) (90) (1,784)
Interest expense, net 263 169(4) 432
Other income (expense) (35) -- (35)
-------------- -------------- --------------
Income (loss) before income taxes (1,992) (259) (2,251)
Provision (benefit) for income taxes (742) (104)(5) (846)
-------------- -------------- --------------
Net income (loss) $ (1,250) $ (155) $ (1,405)
============== ============== ==============
</TABLE>
(1) Statement of Operations data for RPIH for the period prior to
acquisition by the Company (April 1, 1997 to November 25, 1997). The
information was derived from RPIH's unaudited internal financial
statements.
(2) Represents increased depreciation expense as a result of the write up
of property, plant and equipment to fair market value as a part of the
purchase accounting related to the acquisition of RPIH.
(3) Represents amortization of acquisition expenses and goodwill related
to the RPIH acquisition.
(4) Represents the net effect on interest expense as a result of the use
of proceeds from the Series A Offering for the acquisition of RPIH of
$2,500. Interest expense is calculated using an interest rate of
10.125% per annum. See Note (c).
(5) Represents the estimated income tax effect of the pro forma
adjustments using an effective tax rate of 40%.
30
<PAGE> 33
(g) The Suspension Division Pro Forma information includes Statement of
Operations data as if the Company had acquired the Suspension Division on
April 1, 1997:
<TABLE>
<CAPTION>
SUSPENSION
SUSPENSION PRO FORMA DIVISION
DIVISION(1) ADJUSTMENTS PRO FORMA
-------------- -------------- --------------
PERIOD FROM PERIOD FROM PERIOD FROM
APR. 1, 1997 - APR. 1, 1997 - APR. 1, 1997 -
MAR. 31, 1998 MAR. 31, 1998 MAR. 31, 1998
-------------- -------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales $ 122,478 $ -- $ 122,478
Cost of sales 114,721 -- 114,721
-------------- -------------- --------------
Gross profit 7,757 -- 7,757
Selling, general and administrative expenses 7,154 391(2) 7,545
Reorganization cost -- -- --
Restructuring provision -- -- --
Gain on sale of equipment -- -- --
-------------- -------------- --------------
Income (loss) from operations 603 (391) 212
Interest expense, net 1,033 4,075(3) 5,108
Other income (expense) 860 -- 860
-------------- -------------- --------------
Income (loss) before income taxes 430 (4,466) (4,036)
Provision (benefit) for income taxes 174 (1,786)(4) (1,612)
-------------- -------------- --------------
Net income (loss) $ 256 $ (2,680) $ (2,424)
============== ============== ==============
</TABLE>
(1) Statement of Operations data for the Suspension Division for the
twelve months ended March 31, 1998 was derived from the Suspension
Division's unaudited internal financial statements.
(2) Represents amortization of acquisition expenses and goodwill related
to the Suspension Division acquisition.
(3) Represents the net effect on interest expense as a result of the use
of proceeds from the Series A and Series B Offerings for the
acquisition of the Suspension Division of $53,465. Interest expense is
calculated using an interest rate of 10.125% per annum for the Series
A Notes and 9.25% per annum for the Series B Notes. See Note (c).
(4) Represents the estimated income tax effect of the pro forma
adjustments using an effective tax rate of 40%.
(h) The Cofimeta Pro Forma information includes Statement of Operations data as
if the Company had acquired Cofimeta on April 1, 1997:
<TABLE>
<CAPTION>
PRO FORMA COFIMETA
COFIMETA(1) ADJUSTMENTS PRO FORMA
-------------- -------------- --------------
PERIOD FROM PERIOD FROM PERIOD FROM
JAN. 1, 1997 - JAN. 1, 1997 - JAN. 1, 1997 -
DEC. 31, 1997 DEC. 31, 1997 DEC. 31, 1997
-------------- -------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales $ 189,031 $ -- $ 189,031
Cost of sales 181,985 795(2) 182,780
-------------- -------------- --------------
Gross profit 7,046 (795) 6,251
Selling, general and administrative expenses 14,697 92(3) 14,789
Reorganization cost 1,158 -- 1,158
Restructuring provision 6,153 6,153
Gain on sale of equipment -- --
-------------- -------------- --------------
Income (loss) from operations (14,962) (887) (15,849)
Interest expense, net 2,505 5,080(4) 7,585
Other income (expense) 5 5
-------------- -------------- --------------
Income (loss) before income taxes (17,462) (5,967) (23,429)
Provision (benefit) for income taxes 17 (9,389)(5) (9,372)
-------------- -------------- --------------
Net income (loss) $ (17,479) $ 3,422 $ (14,057)
============== ============== ==============
</TABLE>
31
<PAGE> 34
(1) Statement of Operations data for Cofimeta for the period January 1 to
December 31, 1997 were derived from Cofimeta audited financial
statements.
(2) Represents increased depreciation expense as a result of the
conformance of accounting policies and depreciable lives between the
Company and Cofimeta.
(3) Represents amortization of debt issuance cost related to the Series C
bond issuance.
(4) Represents the net effect on interest expense as a result of the
following:
<TABLE>
<S> <C>
Use of proceeds from the Series C offering for the
acquisition of Cofimeta of $37,625. Interest expense
is calculated using an interest rate of 10.125% per
annum - See Note C $3,810
Interest on deferred share purchase price in accordance
with the acquisition. Interest is calculated using an
effective interest rate of 10% per annum 941
Net effect on interest expense as a result of revaluation
of indebtedness as a part of the acquisition
Includes deferred debt payments as well as
Continuation Plan indebtedness 329
------
$5,080
======
</TABLE>
(5) Represents the estimated income tax effect of the pro forma
adjustments and restatement of the historical provision to reflect the
recording of a deferred tax asset during purchase accounting using an
effective tax rate of 40%.
(i) For purposes of this computation, earnings consist of income (loss) before
income taxes plus fixed charges. Fixed charges consist of interest on
indebtedness plus that portion of rental expense representative of the
interest factor. For the fiscal year ended March 31, 1998, on a pro forma
basis for the Howell, RPIH, Suspension Division and Cofimeta acquisitions,
earnings were insufficient to cover fixed charges by $19.0 million. For the
nine months ended December 31, 1998, earnings were insufficient to cover
fixed charges by $1.2 million. For the nine months ended December 31, 1998
on a pro forma basis for the Cofimeta acquisition, earnings were
insufficient to cover fixed charges by $3.1 million.
(j) EBITDA is defined as income (loss) before interest, income taxes,
depreciation and amortization. EBITDA should not be construed as a
substitute for income from operations, net income or cash flow from
operating activities for the purpose of analyzing the Company's operating
performance, financial position and cash flows.
(k) Defined as the ratio of EBITDA to net interest expense.
(l) Ratio of net debt to EBITDA with net debt consisting of total debt less
cash and cash equivalents and unexpended bond proceeds.
(m) Represents the net effect on interest expense as a result of the
elimination of historical interest expense after the repayment of existing
senior bank credit facilities, the issuance of the Series C Notes and the
acquisition of Cofimeta as follows:
<TABLE>
<S> <C>
Interest differential historical versus Series C $ 2,434
Acquisition of Cofimeta (2,856)
----------
$ (422)
==========
</TABLE>
(n) Represents the estimated income tax effect of the pro forma adjustments
using an effective tax rate of 40%.
32
<PAGE> 35
(o) The Cofimeta Pro Forma information includes Statement of Operations data as
if the Company had acquired Cofimeta on April 1, 1998:
<TABLE>
<CAPTION>
PRO FORMA COFIMETA
COFIMETA(1) ADJUSTMENTS PRO FORMA
------------------ ------------------ ------------------
PERIOD FROM PERIOD FROM PERIOD FROM
JAN. 1, 1998 - JAN. 1, 1998 - JAN. 1, 1998 -
SEPTEMBER 30, 1998 SEPTEMBER 30, 1998 SEPTEMBER 30, 1998
------------------ ------------------ ------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales $ 147,107 $ -- $ 147,107
Cost of sales 135,773 582 136,355
-------------- -------------- --------------
Gross profit 11,334 (582) 10,752
Selling, general and administrative expenses 9,587 69(3) 9,656
Reorganization Cost (1,350) -- (1,350)
Restructuring provision 95 95
Gain on sale of equipment -- --
-------------- -------------- --------------
Income (loss) from operations 3,002 (651) 2,351
Interest expense, net 980 3,755(4) 4,735
Other income 13 -- 13
-------------- -------------- --------------
Income (loss) before income taxes 2,035 (4,406) (2,371)
Provision (benefit) for income taxes 54 (1,002)(5) (948)
-------------- -------------- --------------
Net income (loss) $ 1,981 $ (3,404) $ (1,423)
============== ============== ==============
</TABLE>
(1) Statement of Operations data for Cofimeta for the period January 1, 1998 to
September 30, 1998 were derived from Cofimeta Audited Financial Statements.
(2) Represents increased depreciation expense as a result of the conformance of
accounting policies and depreciation lives between the Company and
Cofimeta.
(3) Represents amortization of debt issue cost related to the Series C Bond
issuance.
(4) Represents the net effect on interest as result of following:
<TABLE>
<S> <C>
Use of proceeds from the Series C offering for the acquisition of
Cofimeta of $37,625. Interest expense is calculated using an interest
rate of 10.125% per annum - See Note C 2,856
Interest on deferred share purchase price in accordance with
the purchase agreement. Interest is calculated using an
effective interest rate of 10% per annum 702
Net effect on interest expense as a result of revaluation of
indebtedness as a part of the acquisition. Includes deferred
debt payments as well as Continuation Plan indebtedness
Interest expense is calculated using an effective interest
rate of 10% per annum 197
--------
$ 3,755
========
</TABLE>
(5) Represents the estimated income tax effect of the pro forma adjustments and
restatement of the historical provision to reflect the recording of a
deferred tax asset during purchase accounting using an effective rate of
40%.
33
<PAGE> 36
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
The following table sets forth (i) the selected consolidated historical
financial data of the Predecessor for the years ended March 31, 1994 and 1995
which was derived from the audited consolidated financial statements of the
Predecessor, (ii) selected consolidated historical financial data of the
Predecessor for the period from April 1, 1995 through October 27, 1995, (iii)
selected consolidated historical financial data of the Company from October 28,
1995 through March 31, 1996 and the years ended March 31, 1997 and 1998, and
(iv) selected consolidated historical financial data of the Company for the nine
months ended December 31, 1997 and 1998. The selected consolidated historical
financial data for the period April 1, 1995 through October 27, 1995; and the
period October 28, 1995 through March 31, 1996 was derived from the audited
consolidated financial statements of the Predecessor and the Company, which are
included elsewhere in this Prospectus, together with the report of Deloitte &
Touche LLP, independent accountants. The selected consolidated historical
financial data for the years ended March 31, 1997 and 1998, was derived from the
audited consolidated financial statements of the Company, which are included
elsewhere in this Prospectus, together with the report of a predecessor of
Pricewaterhouse Coopers LLP (Price Waterhouse LLP), independent accountants. The
selected consolidated historical financial data for the nine months ended
December 31, 1997 and 1998 were derived from unaudited interim financial
statements which, in the opinion of management, have been prepared on the same
basis as the audited financial statements and include all adjustments (all of
which are of a normal recurring nature) that are necessary for a fair
presentation of the results for the period. The following table should be read
in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Pro Forma Combined Financial Data," and the
Consolidated Financial Statements of the Company and the related notes and other
financial information presented elsewhere in this Prospectus.
<TABLE>
<CAPTION>
HISTORICAL
----------------------------------------------------------------------------
PREDECESSOR COMPANY
------------------------------------------------------- --------------
MAR. 31, MAR. 31, APR. 1, 1995- OCT. 28, 1995-
1994(a) 1995 OCT. 27, 1995 MAR. 31, 1996
-------------- -------------- -------------- --------------
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C>
Net sales $ 65,182 $ 75,097 $ 49,043 $ 35,572
Gross profit 5,955 4,206 2,148 3,948
Selling, general and
administrative 2,164 4,554 3,922 2,235
Restructuring provision -- -- -- --
Gain on sale of equipment -- -- -- --
-------------- -------------- -------------- --------------
Operating income (loss) 3,791 (348) (1,774) 1,713
Interest expense 1,658 1,267 1,048 1,096
Other income (expense) -- -- -- --
-------------- -------------- -------------- --------------
Income (loss) before income -- -- -- --
taxes 2,133 (1,615) (2,822) 617
Provision (benefit) for income
taxes 706 (349) (938) 202
-------------- -------------- -------------- --------------
Net income (loss) $ 1,427 $ (1,266) $ (1,884) $ 415
============== ============== ============== ==============
Net income (loss) per share -- -- -- $ 9.10
BALANCE SHEET DATE
(END OF PERIOD):
Cash and cash equivalents $ 4,261 $ -- $ -- $ --
Accounts receivable 7,936 9,835 13,312 8,338
Inventories 3,542 4,170 4,429 3,719
Total assets 36,127 41,523 59,770 49,200
Total debt 13,396 12,907 23,233 26,758
Redeemable preferred stock -- -- -- --
Total shareholders equity 12,406 10,833 9,329 935(c)
OTHER DATA:
Depreciation and amortization $ 1,747 $ 1,413 $ 919 $ 687
Capital expenditures 920 4,384 5,111 3,466
Ratio of earnings to fixed
charges(d) 2.2x -- -- 1.5x
EBITDA(e) $ 5,538 $ 1,065 $ (855) $ 2,400
Gross margin(f) 9.14% 5.60% 4.38% 11.10%
</TABLE>
34
<PAGE> 37
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA (CONTINUED)
<TABLE>
<CAPTION>
HISTORICAL
-----------------------------------------------------------------------
COMPANY
-----------------------------------------------------------------------
Mar. 31, Mar. 31, Nine Months Ended Dec. 31,
1997 1998 1997 1998
------------- ------------- ------------- -------------
(unaudited)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales $ 136,861 $ 410,321 $ 295,530 $ 408,144
Gross profit 11,486 41,901 28,350 35,532
Selling, general and administrative 7,685 21,839 13,587 22,235
Restructuring provision -- 1,610 -- 1,176
Gain on sale of equipment -- (1,602) -- --
------------- ------------- ------------- -------------
Operating income (loss) 3,801 20,054 14,763 12,121
Interest expense 3,388 10,710 7,921 14,255
Other income (expense) 2,201 321 531 949
------------- ------------- ------------- -------------
Income (loss) before income
taxes 2,614 9,665 7,373 (1,185)
Provision (benefit) for income
taxes 1,065 4,074 2,949 (475)
------------- ------------- ------------- -------------
Net income (loss) $ 1,549 $ 5,591 $ 4,424 $ (710)
============= ============= ============= =============
Net income (loss) per share $ 9.37 $ 13.74 $ 11.05 $ (5.49)
BALANCE SHEET DATA
(END OF PERIOD):
Cash and cash equivalents $ 9,671 $ 18,321 19,555 $ 318
Accounts receivable 47,626 65,273 51,375 86,336
Inventories 13,411 21,305 20,158 33,911
Total assets 243,694 320,032 290,312 412,562
Total debt 99,829 139,448 128,517 374,054
Redeemable preferred stock 39,300 40,192 40,458 40,586
Total shareholders equity 2,341 6,118 1,377 (2,078)
OTHER DATA:
Depreciation and amortization $ 5,041 $ 20,279 $ 14,580 $ 19,552
Capital expenditures 3,326 16,723 11,418 20,369
Ratio of earnings to fixed
charges(d) 1.7x 1.7x
EBITDA(e) $ 11,043 $ 40,654 $ 29,874 $ 32,622
Gross margin(f) 8.60% 10.21% 9.59% 8.71%
</TABLE>
See Notes to Selected Consolidated Historical Financial Data.
(a) Reflects the audited financial statements of the Predecessor prepared in
accordance with Canadian generally accepted accounting principals, with
Canadian dollars being converted to a U.S. dollar equivalent using an
average Canadian to U.S. foreign currency exchange rate of 1.3810, for the
period ended March 31, 1994.
(b) This provision includes income before taxes for the discontinuance of
Laserweld and Parallel. Management does not anticipate that these costs
will be a part of future operations.
(c) The reduction in equity of $8.4 million from October 27, 1995 to March 31,
1996, is primarily a result of the elimination of the Predecessor's equity
as a part of the purchase accounting adjustments made upon the acquisition
of the Predecessor on October 27, 1995.
35
<PAGE> 38
(d) For purposes of this computation, earnings consist of income (loss) before
income taxes plus fixed charges. Fixed charges consist of interest on
indebtedness plus that portion of rental expense representative of the
interest factor. For fiscal 1995, the Company's earnings were insufficient
to cover fixed charges by $1.6 million. For the period April 1, 1995 to
October 27, 1995, the Company's earnings were insufficient to cover fixed
charges by $2.8 million. For the nine months ended December 31, 1998, the
Company's earnings were insufficient to cover fixed charges by $1.2
million.
(e) EBITDA is defined as income (loss) before interest, income taxes,
depreciation and amortization. EBITDA should not be construed as a
substitute for income from operations, net income or cash flow from
operating activities for the purpose of analyzing the Company's operating
performance, financial position and cash flows.
(f) Gross margin is defined as gross profit as a percent of net sales for each
of the applicable periods.
36
<PAGE> 39
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following management's discussion and analysis of financial
condition and results of operations should be read in conjunction with our
"Pro Forma Combined Financial Data" and our Consolidated Financial
Statements and notes thereto included elsewhere in this Prospectus. The
historical information for the fiscal year ended March 31, 1997 includes the
Lobdell results of operations for the period subsequent to its acquisition.
For comparative purposes, the financial information for the fiscal year
ended March 31, 1996 represents the combination of the results of operations
for the Predecessor for the period from April 1, 1995 to October 27, 1995
together with our results of operations from October 28, 1995 through March
31, 1996 (the period subsequent to the acquisition of the Predecessor by the
Company). The financial statements of the Predecessor and the Company in the
two combined periods are not comparable in certain respects due to
differences between the cost basis of certain assets held by the Company
versus that of the Predecessor, resulting in reduced depreciation and
amortization charges subsequent to October 27, 1995, changes in accounting
policies and the recording of certain liabilities at the date of acquisition
in connection with the purchase of the Predecessor by the Company.
Accordingly, the combination of these two periods does not purport to
represent what the results of operations of the Company would have been on a
pro forma basis had it acquired the Predecessor on April 1, 1995.
The nine months ended December 31, 1998 statements of operations for the
Company include the results of operations for all subsidiaries, including
Lobdell, Howell, RPIH, and the Suspension Division. Lobdell was acquired on
January 10, 1997, Howell was acquired August 13, 1997, RPIH was acquired on
November 25, 1997, and the Suspension Division was acquired on April 1,
1998. Each was accounted for using the purchase method of accounting.
Therefore, the nine month statements of operations for the period ended
December 31, 1997 includes only a portion of the operating results of Howell
and RPIH, and do not include the operating results of the Suspension
Division.
Nine Months Ended December 31, 1998 Compared to Nine Months Ended
December 31, 1997
Net Sales -- Net sales for the nine months ended December 31, 1998 were
$408.1 million, an increase of $112.6 million as compared to $295.5 million
for the same period last year. The overall increase is primarily the result
of the acquisitions made since the prior year ($132.5 million) offset by the
year to date net impact of the GM strike ($12.7 million) and similar factors
as described below.
Gross Profit -- For the nine months ended December 31, 1998, gross
profit was $35.5 million, an increase of $7.2 million as compared to $28.3
million for the same period last year. The increase is primarily the result
of profit on incremental sales resulting from acquisitions, offset by the
net impact of the General Motors strike ($5.2 million) and by the reduced
market price for processed scrap ($2.9 million) on normal yield experience.
Selling, General and Administrative Expenses ("SG&A") -- For the nine
months ended December 31, 1998, SG&A expenses increased to $22.2 million or
5.4% of net sales as compared to $13.6 million or 4.6% of net sales for the
prior year. The increase in expenditure levels is primarily due to the
support of current program launches (CAMI, Saturn and Ford) as well as the
resources necessary to support the newly awarded programs for General Motors
(closure panels and rear underbody components for a new platform to be
assembled solely in Mexico and chassis components for the North American
production of global platforms). The Company intends to invest in the
necessary resources to support customer engineering requirements and global
program management needs.
Operating Income -- For the nine months ended December 31, 1998,
operating income was $12.1 million, a decrease of $2.7 million as compared
to $14.8 million for the same period last year. The decrease is primarily
the result of the net impact of the General Motors strike and decreasing
scrap recovery prices on normal yield experience partially offset by the
profit on incremental sales generated by acquisitions.
Interest Expense -- For the nine months ended December 31, 1998, net
interest expense was $14.3 million, an increase of $6.4 million as compared
to $7.9 million for the same period last year. The increase in expense was
due primarily to the issuance of $35.0 million of 10 1/8% Senior
Subordinated Notes due 2007, Series B (the "Series B Notes") on April 1,
1998, and the issuance
37
<PAGE> 40
of $40.0 million of 10 1/8% Senior Subordinated Notes due 2007, Series C (the
"Series C Notes") on December 8, 1998. The Series B Notes and Series C Notes
represent incremental borrowings issued at effective interest rates of
approximately 9.25% and 9.685% respectively. The balance of the increase can
be attributed to the impact of the General Motors strike on operating cash
flow and the interim financing of customer tooling for current program
launches.
Net Income -- For the nine months ended December 31, 1998, we reported a
net loss of $0.7 million, a decrease of $5.1 million as compared to the
prior year. As explained above, the decrease relates primarily to increased
interest expense ($3.8 million), the impact of the General Motors strike
($3.1 million) and the impact of the lower scrap sales pricing ($1.7
million).
Fiscal Year Ended March 31, 1998 Compared to Fiscal Year Ended March 31,
1997
Net Sales -- Net sales for the year ended March 31, 1998 were $410.3
million. This represents an increase of $273.4 million as compared to net
sales for the fiscal year ended March 31, 1997 of $136.9 million. Net sales
for the fiscal year ended March 31, 1997 included net sales of Lobdell only
from the acquisition date of January 10, 1997 through March 31, 1997. The
increase for the year was due principally from the Lobdell, Howell and RPIH
acquisitions ($269.8 million). The balance of the increase related primarily
to the strength of light truck and sport utility vehicle production
partially offset by the discontinuance of certain customer platforms. On a
pro forma basis, had the net sales from all acquisitions been included for
the entire fiscal 1998, net sales would have been $453.7 million.
Gross Profit -- Gross profit was $41.9 million or 10.2% of net sales for
the year ended March 31, 1998 as compared to $11.8 million or 8.6% of net
sales for the year ended March 31, 1997. This represents an increase of
$30.1 million as compared to the prior year. The gross profit increase is
related to the incremental sales resulting from the acquisitions, combined
with operating improvements made throughout the year on existing as well as
acquired sales. The increase in gross margin is a result of operating
improvements through employment and cost reductions, productivity
improvements, increased capacity utilization, quality improvements and
production schedule attainment. The increased gross profit was partially
offset by costs associated with the conversion of Canadian operations to
transfer and robotic technology, startup of the Mexican operations and costs
associated with the launch of future platforms (Saturn LS, Windstar and Ford
heavy-duty pickup (PN131)).
Selling, General and Administrative Expenses ("SG&A") -- SG&A expenses
were $21.8 million or 5.3% of net sales as compared to $7.7 million or 5.6%
for the year ended March 31, 1997. The decrease as a percentage of net sales
was a result of the efficiencies derived through acquisition integration and
cost reduction programs. The financial and administrative functions were
consolidated into the Troy office, thereby allowing for the closure of the
Alma and Southfield administrative offices. The increase in expenditures is
primarily due to the overall growth of the organization during the year and
the need to provide the necessary resources to support customer engineering
support, global program management and the continued growth initiatives of
the organization.
Operating Income -- Income from operations was $20.1 million or 4.9% of
net sales for the year ended March 31, 1998 as compared to $3.8 million or
2.8% of net sales for the year ended March 31, 1997. For fiscal 1998,
operating income benefited from the growth in the light truck and SUV
programs as well acquisitions during the year. The increase in operating
margin reflects the continued improvement of operations, implementation of
cost saving programs and gain on the sale of equipment of the laser welding
operations. Partially offsetting the increase was the recording of
restructuring charges as a part of our overall plant rationalization
initiatives.
Other Income - Other income for the year ended March 31, 1998 was $0.3
million or 0.1% of net sales as compared to $2.2 million or 1.6% of net
sales for the year ended March 31, 1997. The decrease was due primarily to
foreign currency exchange transactions gains recorded in fiscal 1997 which
were not present in fiscal 1998.
Interest Expense - Interest expense for the year ended March 31, 1998
was $10.7 million or 2.6% of net sales as compared to $3.4 million or 2.5%
of net sales for the year ended March 31, 1997. While interest as a
percentage of net sales remained relatively flat, the overall increase in
expense was due primarily to the issuance of $125.0 million of 10 1/8%
Senior Subordinated Notes on June 24, 1997. The Notes represent both
incremental borrowing as well as increased interest rate as compared to
outstanding debt of the prior period. Proceeds of the Notes were used to pay
off existing debt and support acquisition activities. The increase in
interest expense was partially offset by interest income derived over the
year on unused bond proceeds available for short term investment.
38
<PAGE> 41
Income Tax -- Income tax expense was $4.1 million or 1.0% of net sales
for the period ended March 31, 1998 as compared to $1.1 million or 0.8% of
net sales for the year ended March 31, 1997. The increased income tax of
$3.0 million is a result of the $7.1 million increase in income before taxes
for the year ended March 31, 1998 as compared to the previous year and an
increase in our overall effective tax rate.
Net Income - Net income was $5.6 million or 1.4% of net sales for the
year ended March 31, 1998 as compared to $1.5 million or 1.1% of net sales
for the year ended March 31, 1997. The improvement of $4.1 million was a
result of increased operating and other income of $14.4 million, offset by
the increase in interest expense of $7.3 million and income taxes of $3.0
million.
Fiscal Year Ended March 31, 1997 Compared to Fiscal Year Ended March 31,
1996
Net Sales -- Net sales for the year ended March 31, 1997 were $136.9
million, including the net sales of Lobdell from January 10, 1997 (the
"Acquisition Date") through March 31, 1997. This was an increase of $52.2
million or 61.7% as compared to net sales for the fiscal year ended March
31, 1996 of $84.6 million. The increase was due principally to the
acquisition of Lobdell and was partially offset by lower sales volume due to
model changeovers. On a pro forma basis, if Lobdell net sales were included
with that of the Company for the entire fiscal year ended March 31, 1997,
net sales would have been $330.2 million, an increase of $245.6 million as
compared to the prior year, and if Howell and RPIH net sales were also
included for fiscal 1997, net sales would have been $433.4 million, an
increase of $348.8 million as compared to the prior year.
Gross Profit -- Gross profit was $11.8 million or 8.6% of net sales for
the year ended March 31, 1997 as compared to $6.1 million or 7.2% of net
sales for the year ended March 31, 1996. This represents an increase of $5.7
million, or 93.4% as compared to the prior year. The increase was primarily
a result of higher margins on Lobdell sales for the eighty day period from
the Acquisition Date through March 31, 1997. Gross profit also increased due
to (i) workforce reductions, (ii) improved materials cost management which
resulted in lower raw material costs and (iii) strong sales in the light
truck and SUV markets, our largest sales segments and those which produce
its highest margins. The increased gross profit was partially offset by
costs associated with the production launch of the Saturn Coupe stampings.
Selling, General and Administrative Expenses ("SG&A") -- SG&A expenses
were $7.7 million or 5.6% of net sales for the year ended March 31, 1997 as
compared to $6.2 million or 7.3% of net sales for the year ended March 31,
1996. The decrease as a percentage of net sales was a result of efficiencies
and cost reduction programs undertaken by management. Specifically, the
reduction in SG&A expenses as a percentage of net sales resulted from a
restructuring of the sales and product engineering functions into customer
focused business units.
Operating Income -- Income from operations was $3.8 million or 2.8% of
net sales for the year ended March 31, 1997 as compared to a deficit of $0.1
million for the year ended March 31, 1996. The improvement of $3.9 million
was a result of improved gross profit of $5.7 million, partially offset by
increased SG&A expenses of $1.5 million.
Other Income -- Other income for the year ended March 31, 1997 was $2.2
million or 1.6% of net sales due primarily to foreign currency exchange
transactions. No significant other income was earned for the year ended
March 31, 1996.
Interest Expense -- Interest expense for the year ended March 31, 1997
was $3.4 million or 2.5% of net sales, an increase of $1.3 million over the
interest expense for the year ended March 31, 1996. While interest expense
for both periods remained constant at 2.5% of net sales, the increase of
$1.3 million was a result of variations in base lending rates and additional
borrowings resulting from the acquisition of Lobdell.
Income Tax -- Income tax expense was $1.1 million or 0.8% of net sales
for the period ended March 31, 1997 as compared to a benefit of $0.7 million
or 0.8% of net sales for the year ended March 31, 1996. The increased income
tax expense of $1.8 million is a result of the $4.8 million increase in
income before taxes for the year ended March 31, 1997 as compared to the
previous year.
Net Income -- Net income was $1.5 million or 1.1% of net sales for the
year ended March 31, 1997 as compared to a loss of $1.5 million or 1.8% of
net sales for the year ended March 31, 1996. The improvement of $3.0 million
was a result of improved operating income of $3.9 million and increased
other income of $2.2 million. The increase in net income was partially
offset by increased interest expense and income taxes of $1.3 million and
$1.8 million, respectively.
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<PAGE> 42
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
Net income adjusted for non-cash charges (depreciation and amortization
and deferred taxes) generated approximately $15.9 million of cash for the
nine months ended December 31, 1998 and generated approximately $24.4
million of cash for the year ended March 31, 1998. Cash decreased by $36.9
million during the nine months ended December 31, 1998 based on an overall
increase in accounts receivable, inventories, and reimbursable tooling,
offset slightly by a decrease in other assets. During the nine months ended
December 31, 1998, we used approximately $75.1 million for investing
activities, including the acquisitions of the Suspension Division ($53.9
million). These investing activities were supported substantially by the
issuance of the Series B Notes as described below and line of credit
borrowings. The cash generated by financing activities was made up primarily
of $78.5 million of proceeds from the Series B Notes and Series C Notes.
Cash increased during the year ended March 31, 1998 based on overall
increases in trade accounts payable of $11.4 million and refundable income
taxes of $2.9 million. Offsetting the increase in cash for fiscal 1998 was a
net increase in accounts receivable, customer tooling, and other working
capital requirements of $13.7 million. The increase in customer tooling is
primarily a result of progress payments made to tooling vendors to support
scheduled program launches set for fiscal 1999 (Saturn LS, Ford Windstar,
and CAMI J2). During the year, we used approximately $43.2 million for
investing activities, including the acquisitions of Howell and RPIH, as well
as the purchase of an equity interest in a publicly traded automotive
supplier. The overall cash requirements were funded by approximately $26.3
million of incremental borrowings.
At December 31, 1998 we had approximately $82.5 million available under
the Senior Credit Facility. At December 31, 1998, we had $ 22.7 million
outstanding under the line of credit and $4.8 million in outstanding letters
of credit to support certain IRBs and workers compensation commitments.
During the nine months ended December 31, 1998, we received net proceeds
of $40.8 million from the offering of the Series C Notes, after the
inclusion of approximately $1.5 million in premium and after the payment of
$0.7 million in issuance costs. We used the net proceeds from the Series C
Notes to repay borrowings under the Senior Credit Facility and for working
capital and other general corporate purposes.
During fiscal 1998, we received net proceeds of $37.6 million from our
offering of Series A Notes, after payment of approximately $83.1 million to
refinance existing indebtedness and approximately $4.3 million in issuance
costs. We used approximately $23.2 million and $2.5 million respectively
toward the acquisitions of Howell and RPIH and related expenses. The
remainder of the proceeds were used for general corporate purposes and in
part to fund the acquisition of the Suspension Division. The balance of the
Suspension Division acquisition was funded by the issuance of the Series B
Notes.
We believe our application of the proceeds from the Existing Notes has
enhanced our ability to meet our growth and business objectives. However,
interest payments on the Existing Notes will represent a significant
liquidity requirement for us. We will be required to make scheduled
semi-annual interest payments on the Existing Notes of approximately $10.1
million on June 15 and December 15 each year until their maturity on June
15, 2007 or until the Notes are redeemed.
Capital expenditures were $20.4 million, or 5.0% of net sales for the
nine months ended December 31, 1998 as compared to $11.4 million or 3.9% of
net sales for the nine months ended December 31, 1997. The increase of $9.0
million was due primarily to customer programs (the 1999 model year Saturn
LS) and press equipment and automation upgrades. Other capital expenditures
included health and safety items, computer and network upgrades and Y2K
support.
Capital expenditures were $16.7 million, or 4.1% of net sales for the
year ending March 31, 1998 as compared to $3.3 million, or 2.4% of net sales
for the year ended March 31, 1997. The increase of $13.4 million was due
primarily to the inclusion of acquisitions, the start up of two Mexican
operations ($3.7 million) and the development of a corporate Technical and
Administrative center ($1.3 million). Other capital expenditures included
investments to support new business (primarily the 1999 model year Saturn LS
(previously designated Innovate), and Ford's Windstar and CAMI's J2, each
due to launch during the summer of 1998), press equipment and rebuilds,
safety and maintenance equipment, automation and other productivity
improvement expenditures, and other items including computers and welding
equipment.
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<PAGE> 43
For fiscal 1999, our capital expenditures are expected to be $34.9
million, consisting of a $14.0 million investment to support new business
and increase capacity; $11.0 million for press automation, rebuilds and
improvements; $2.5 million in computer system and network upgrades and $7.4
million in other expenditures, including health, safety, environmental, cost
reduction and maintenance items.
We believe that cash generated from operations, together with amounts
available under the Senior Credit Facility will be adequate to meet our debt
service requirements, capital expenditures and working capital needs for the
foreseeable future, although no assurance can be given in this regard. Our
future operating performance and ability to service or refinance the
Existing Notes and to extend or refinance our other indebtedness will be
subject to future economic conditions and to financial, business and other
factors that are beyond our control.
RAMOS ARIZPE - MEXICO FACILITY
On March 31, 1999 we entered into a synthetic lease transaction through
a wholly-owned Mexican subsidiary for the acquisition of new equipment for
and construction of a new facility being built in Ramos Arizpe, Mexico.
Under U.S. Generally Accepted Accounting Principles, this transaction is
classified as an operating lease. The approximately 330,000 sq. ft. facility
will support the General Motors GMT 250/257 program (SUV/ Hybrid vehicle)
slated to begin production in April 2000. The GMT 250/257 program is
expected to generate approximately $90.0 million of sales when in full
production. We were awarded substantially all closure panels and rear
underbody components for the program. Plant rationalization has allowed for
the transfer of equipment already owned to the facility. The lease payments
for the facility will be approximately $6.0 million per year. The award of
the program is in line with our expected growth into Mexico and is seen as
key to our future success in that country.
ACQUISITIONS
We believe that the operations of the Suspension Division and Cofimeta
will enhance our ability to develop key suspension and structural
components. We believe that these acquisitions will have a positive impact
on our results of operations for the fiscal year ending March 31, 1999 and
thereafter.
SHAREHOLDERS' EQUITY
For the nine months ended December 31, 1998, the fluctuation in
shareholders' equity for foreign currency adjustments of ($5.5 million) is
due to our long-term investment in Canada. This adjustment reflects the
relative weakening of the Canadian dollar, and has no impact on cash flow.
For the nine months ended December 31, 1998, the reduction in
shareholders' equity for holdings of marketable securities of ($1.0 million)
is due to stock price fluctuation of our strategic investment in a
synergistic company.
IMPACT OF GENERAL MOTORS STRIKE
During a portion of the nine months ended December 31, 1998,
substantially all of General Motors vehicle production was shut down due to
two local strikes in Flint, Michigan. General Motors is a significant
customer of ours and the prolonged shutdown had an adverse effect on our
results of operations for the nine months ended December 31, 1998. We took
all steps necessary to lessen the overall impact. A portion of the sales
lost during the strike were made up in the three months ended December 31,
1998. The effect of the strike on these periods was as follows:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
DEC. 31, 1998 DEC. 31, 1998
------------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Sales $ 5.6 $ (12.7)
Gross Profit 1.3 (5.2)
Net Income 0.8 (3.1)
EBITDA 1.3 (5.2)
</TABLE>
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<PAGE> 44
YEAR 2000
We are aware of the potential impacts of the millennium change on
business. In response, we have created a Year 2000 project team to perform
inventory, remediation, and testing of possibly affected systems. The Year
2000 project team is coordinated at the corporate level with support from
senior management. Key individuals at the facility level are executing the
Year 2000 efforts. We have also employed some external Year 2000 contractors
to assist with compliance in some areas. We are following the Year 2000
guidelines set forth by the Automotive Industry Action Group ("AIAG") and
are reporting Year 2000 status quarterly to the AIAG.
We have broken the Year 2000 program into the following assessment
areas: business computer systems, desktop computing, network infrastructure,
voice systems, shop floor systems, non-information technology items, and
suppliers/business partners. As it relates to the AIAG areas for evaluation,
we do not have dedicated product-testing facilities nor do its products
contain any computer chips. We have completed a significant portion of Year
2000 remediation with the remainder to be finalized by July 31, 1999. In
addition, we are committed to complete Year 2000 testing between March 31,
1999 and September 31, 1999. We will continue Year 2000 compliance testing
throughout 1999 to ensure that regression does not occur.
We have completed a thorough assessment of all manufacturing,
administrative and management software. We have begun to upgrade certain
software modules and/or code to comply with AIAG Year 2000 guidelines and
timing. At the same time, we are implementing new software where compliance
through upgrade could not be achieved in either a timely or cost effective
manner. We are on target and expect to achieve Year 2000 compliance for all
of our software by July 31, 1999. Further, we initiated the move to a common
software system as we continue the implementation effort across all
facilities.
We are assessing the Year 2000 readiness of our external suppliers,
business partners, and service providers to ensure that business
associations will not be negatively impacted by the Year 2000 date. We will
use alternate sourcing and contingency planning in situations that threaten
our ability to deliver products or conduct business. Since these other
companies are in various stages of Year 2000 readiness, we will be
monitoring their progress throughout 1999, assessing associated risks, and
taking a course of action to ensure business continuity.
In addition to efforts of the internal staff, we are using external
resources to complete the project. The cost of external resources for 1998
totaled $0.3 million and the total capital spending for 1998 was $1.4
million of which, approximately $0.4 million relates to software projects.
In 1999, the external costs will approximate $0.1 million, which will relate
to any remediation activities derived from Year 2000 testing, and the
remaining capital expenditures will approximate $0.2 million.
THE EXCHANGE OFFER
Pursuant to the Registration Agreement, we have agreed (i) to file a
registration statement with respect to a registered offer to exchange the
Series C Notes for the Series D Notes, which will have terms substantially
identical in all material respects to the Series C Notes (except that the
Series D Notes will not contain terms with respect to transfer restrictions,
certain registration rights and certain interest rate step-up provisions)
within 120 days after the date of original issuance of the Series C Notes,
and (ii) to use reasonable best efforts to cause such registration statement
to become effective under the Securities Act at the earliest possible time
but in any event no later than 180 days after issuance of the Series C
Notes. The Registration Agreement also provides for the exchange of the
Series A Notes and the Series B Notes for Series D Notes having terms
substantially identical in all material respects to the Series A Notes and
the Series B Notes. The interest rate step-up provisions provide that
special interest will accrue on the Series C Notes (in addition to the
stated interest on the Series C Notes) at a rate of 0.25% per annum during
the 90-day period immediately following the occurrence of any Registration
Default, and shall increase by 0.25% per annum at the end of each subsequent
90-day period, but in no event shall such rate exceed 1.00% per annum. See
"Summary -- The Series D Notes." In the event that applicable law or
interpretations of the Staff of the SEC do not permit us to file the
registration statement containing this Prospectus or to effect the Exchange
Offer, or if certain holders of the Series C Notes notify us that they are
prohibited by law or SEC policy from participating in the Exchange Offer, or
subject to other restrictions, we will use our reasonable best efforts to
cause to become effective a shelf registration statement with respect to the
resale of the Series C Notes only and to keep the shelf registration
statement effective until the earlier of two years following the date the
shelf registration statement is declared effective by the SEC and such time
as all the Series C Notes have been sold thereunder. Holders of Existing
Notes do not have any
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<PAGE> 45
appraisal or dissenters' rights in connection with the Exchange Offer. The
interest rate step-up provisions do not apply to the Series A Notes, the
Series B Notes, or the Series D Notes to be exchanged for the Series A Notes
and Series B Notes.
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING EXISTING NOTES
Upon the terms and subject to the conditions set forth in this
Prospectus and in the accompanying Letter of Transmittal (which together
constitute the Exchange Offer), we will accept for exchange Existing Notes
which are properly tendered on or prior to the Expiration Date and not
withdrawn as permitted below. As used herein, the term "Expiration Date"
means 5:00 p.m., New York City time, on June 9, 1999; provided, however,
that if we have extended the period of time for which the Exchange Offer is
open, which in no event shall be later than June 24, 1999, the term
"Expiration Date" means the latest time and date to which the Exchange Offer
is extended.
As of the date of this Prospectus, $200.0 million aggregate principal
amount of Existing Notes are outstanding. This Prospectus, together with the
Letter of Transmittal, is first being sent on or about May 10, 1999 to all
holders of Existing Notes known to us. Our obligation to accept Existing
Notes for exchange pursuant to the Exchange Offer is subject to certain
conditions as set forth under "--Certain Conditions to the Exchange Offer"
below.
We expressly reserve the right, at any time or from time to time, to
extend the period of time during which the Exchange Offer is open, and
thereby delay acceptance for any exchange of any Existing Notes, by giving
written notice of such extension to the holders thereof, including those
holders who have previously tendered their Existing Notes. During any such
extension, all Existing Notes previously tendered will remain subject to the
Exchange Offer and may be accepted for exchange by us. Any Existing Notes
not accepted for exchange for any reason will be returned without expense to
the tendering holder thereof as promptly as practicable after the expiration
or termination of the Exchange Offer.
We expressly reserve the right to amend or terminate the Exchange Offer,
and not to accept for exchange any Existing Notes not previously accepted
for exchange, upon the occurrence of any of the conditions of the Exchange
Offer specified below under "--Certain Conditions to the Exchange Offer." We
will give written notice of any extension, amendment, non-acceptance or
termination to the holders of the Existing Notes, including those holders
who have previously tendered their Existing Notes, as promptly as
practicable, such notice in the case of any extension to be issued no later
than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date.
PROCEDURES FOR TENDERING EXISTING NOTES
The tender to us of Existing Notes by a holder of such notes as set
forth below and the acceptance of such notes by us will constitute a binding
agreement between the tendering holder and us upon the terms and subject to
the conditions set forth in this Prospectus and in the accompanying Letter
of Transmittal. Except as set forth below, a holder who wishes to tender
Existing Notes for exchange pursuant to the Exchange Offer must transmit a
properly completed and duly executed Letter of Transmittal, including all
other documents required by such Letter of Transmittal, to U.S. Bank Trust
National Association, (the "Exchange Agent") at one of the addresses set
forth below under "Exchange Agent" on or prior to the Expiration Date. In
addition, either (i) certificates for such Existing Notes must be received
by the Exchange Agent along with the Letter of Transmittal, or (ii) a timely
confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such
Existing Notes, if such procedure is available, into the Exchange Agent's
account at The Depository Trust Company (the "Book-Entry Transfer Facility")
pursuant to the procedure for book-entry transfer described below, must be
received by the Exchange Agent prior to the Expiration Date, or (iii) the
holder must comply with the guaranteed delivery procedures described below.
THE METHOD OF DELIVERY OF EXISTING NOTES, THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER. IF
SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY
INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL
OR EXISTING NOTES SHOULD BE SENT TO US.
Any beneficial owner whose Existing Notes are registered in the name of
a broker, dealer, commercial bank, trust company or other nominee and who
wishes to tender should contact the registered holder promptly and instruct
such registered holder of Existing Notes to tender on such beneficial
owner's behalf. If such beneficial owner wishes to tender on such owner's
own behalf, such owner must, prior to completing and executing the Letter of
Transmittal and delivering such owner's Existing Notes, either
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<PAGE> 46
make appropriate arrangements to register ownership of the Existing Notes in
such owner's name or obtain a properly completed bond power from the
registered holder of Existing Notes. The transfer of registered ownership may
take considerable time and may not be able to be completed prior to the
Expiration Date.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Existing Notes surrendered for
exchange pursuant thereto are tendered (i) by a registered holder of the
Existing Notes who has not completed the box entitled "Special Issuance
Instruction" or "Special Delivery Instructions" on the Letter of
Transmittal, or (ii) for the account of an Eligible Institution (as defined
below). In the event that signatures on a Letter of Transmittal or a notice
of withdrawal, as the case may be, are required to be guaranteed, such
guarantees must be by a firm which is a member of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc. or by a commercial bank or trust company having an office or
correspondent in the United States or an eligible guarantor institution
within the meaning of Rule 17Ad-15 under the Securities Exchange Act of
1934, as amended (the "Exchange Act") which is a member of one of the
recognized signature guarantee programs identified in the Letter of
Transmittal (collectively, "Eligible Institutions"). If Existing Notes are
registered in the name of a person other than a signer of the Letter of
Transmittal, the Existing Notes surrendered for exchange must be endorsed
by, or be accompanied by a written instrument or instruments of transfer or
exchange, in satisfactory form as determined by us in our sole discretion,
duly executed by, the registered holder with the signature thereon
guaranteed by an Eligible Institution. If the Letter of Transmittal or any
Existing Notes or powers of attorney are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or
others acting in a fiduciary or representative capacity, such persons should
so indicate when signing, and, unless waived by us, proper evidence
satisfactory to us of their authority to so act must be submitted.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Existing Notes tendered for exchange will be
determined by us in our sole discretion, which determination shall be final
and binding. We reserve the absolute right to reject any and all tenders of
any particular Existing Notes not properly tendered or to not accept any
particular Existing Notes which acceptance might, in our judgment or the
judgment of our counsel, be unlawful. We also reserve the absolute right to
waive any defects or irregularities or conditions of the Exchange Offer as
to any particular Existing Notes either before or after the Expiration Date
(including the right to waive the ineligibility of any holder who seeks to
tender Existing Notes in the Exchange Offer). The interpretation of the
terms and conditions of the Exchange Offer as to any particular Existing
Notes either before or after the Expiration Date (including the Letter of
Transmittal and the instructions thereto) by us shall be final and binding
on all parties. Unless waived, any defects or irregularities in connection
with tenders of Existing Notes for exchange must be cured within such
reasonable period of time as we shall determine. Neither the Company, the
Exchange Agent nor any other person shall be under any duty to give
notification of any defect or irregularity with respect to any tender of
Existing Notes for exchange, nor shall any of them incur any liability for
failure to give such notification.
In connection with the tender of the Existing Notes, each broker-dealer
holder will represent to us in writing that, among other things, the Series
D Notes acquired pursuant to the Exchange Offer are being obtained in the
ordinary course of business of the holder and any beneficial holder, that
neither the holder nor any such beneficial holder has an arrangement or
understanding with any person to participate in the distribution of such
Series D Notes and that neither the holder nor any such other person is an
"affiliate," as defined under Rule 405 of the Securities Act, of the
Company. If the holder is not a broker-dealer, the holder must represent
that it is not engaged in nor does it intend to engage in a distribution of
the Series D Notes.
ACCEPTANCE OF EXISTING NOTES FOR EXCHANGE; DELIVERY OF SERIES D NOTES
For each Existing Note accepted for exchange, the holder of such
Existing Note will receive a Series D Note having a principal amount equal
to that of the surrendered Existing Note. For purposes of the Exchange
Offer, we shall be deemed to have accepted properly tendered Existing Notes
for exchange when, as and if we have given oral and written notice thereof
to the Exchange Agent.
In all cases, issuance of Series D Notes for Existing Notes that are
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of certificates for such Existing Notes
or a timely Book-Entry Confirmation of such Existing Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility, a properly completed
and duly executed Letter of Transmittal and all other required documents. If
any tendered Existing Notes are not accepted for any reason set forth in the
terms and conditions of the Exchange Offer or if Existing Notes are
submitted for a greater principal amount than the holder desires to
exchange, such unaccepted or non-exchanged Existing Notes will be returned
without expense to the
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<PAGE> 47
tendering holder thereof (or, in the case of Existing Notes tendered by
book-entry transfer into the Exchange Agent's account at the Book-Entry
Transfer Facility pursuant to the book-entry transfer procedures described
below, such non- exchanged Existing Notes will be credited to an account
maintained with such Book-Entry Transfer Facility) as promptly as practicable
after the expiration of the Exchange Offer.
BOOK-ENTRY TRANSFER
Any financial institution that is a participant in the Book-Entry
Transfer Facility's systems may make book-entry delivery of Existing Notes
by causing the Book-Entry Transfer Facility to transfer such Existing Notes
into the Exchange Agent's account at the Book-Entry Transfer Facility in
accordance with such Book-Entry Transfer Facility's procedures for transfer.
However, although delivery of Existing Notes may be effected through
book-entry transfer at the Book-Entry Transfer Facility, the Letter of
Transmittal or facsimile thereof with any required signature guarantees and
any other required documents must, in any case, be transmitted to and
received by the Exchange Agent at one of the addresses set forth below under
"Exchange Agent" on or prior to the Expiration Date or the guaranteed
delivery procedures described below must be complied with.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Existing Notes desires to tender such
Existing Notes and the Existing Notes are not immediately available, or time
will not permit such holder's Existing Notes or other required documents to
reach the Exchange Agent before the Expiration Date, or the procedure for
book-entry transfer cannot be completed on a timely basis, a tender may be
effected if (i) the tender is made through an Eligible Institution, and (ii)
prior to the Expiration Date, the Exchange Agent received from such Eligible
Institution a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by us (by telegram, telex,
facsimile, mail or hand delivery), setting forth the name and address of the
holder of Existing Notes and the amount of Existing Notes tendered, stating
that the tender is being made thereby and guaranteeing that within three New
York Stock Exchange ("NYSE") trading days after the Expiration Date, the
certificates for all physically tendered Existing Notes, in proper form for
transfer, or a confirmation of book-entry transfer of such Existing Notes
into the Exchange Agent's account at the Book-Entry Transfer Facility (a
"Book-Entry Confirmation"), as the case may be, a properly completed and
duly executed Letter of Transmittal and any other documents required by the
Letter of Transmittal will be deposited by the Eligible Institution with the
Exchange Agent.
WITHDRAWAL RIGHTS
Tenders of Existing Notes may be withdrawn at any time prior to 5:00
p.m., New York City time, on the business day prior to the Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at one of the addresses set forth below under
"Exchange Agent." Any such notice of withdrawal must specify the name of the
person having tendered the Existing Notes to be withdrawn, identify the
Existing Notes to be withdrawn (including the principal amount of such
Existing Notes), and (where certificates for Existing Notes have been
transmitted) specify the name in which such Existing Notes are registered,
if different from that of the withdrawing holder. If certificates for
Existing Notes have been delivered or otherwise identified to the Exchange
Agent, then, prior to the release of such certificates, the withdrawing
holder must also submit the serial numbers of the particular certificates to
be withdrawn and a signed notice of withdrawal with signatures guaranteed by
an Eligible Institution unless such holder is an Eligible Institution. If
Existing Notes have been tendered pursuant to the procedure for book-entry
transfer described above, any notice of withdrawal must specify the name and
number of the account at the Book-Entry Transfer Facility to be credited
with the withdrawn Existing Notes and otherwise comply with the procedures
of such facility. All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by us, and
our determination shall be final and binding on all parties. Any Existing
Notes so withdrawn will be deemed not to have been validly tendered for
exchange for purposes of the Exchange Offer. Any Existing Notes which have
been tendered for exchange but which are not exchanged for any reason will
be returned to the holder thereof without cost to such holder (or, in the
case of Existing Notes tendered by book-entry transfer into the Exchange
Agent's account at the Book-Entry Transfer Facility pursuant to the book
entry transfer described above, such Existing Notes will be credited to an
account maintained with such Book-Entry Transfer Facility for the Existing
Notes) as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Existing Notes may be
retendered by following one of the procedures described under "-- Procedures
for Tendering Existing Notes" above at any time on or prior to the
Expiration Date.
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<PAGE> 48
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, we shall not
be required to accept for exchange, or to issue Series D Notes in exchange
for, any Existing Notes and may terminate or amend the Exchange Offer if, at
any time before the acceptance of such Existing Notes for exchange or the
exchange of Series D Notes for such Existing Notes, we determine that the
Exchange Offer violates applicable law, any applicable interpretation of the
Staff of the SEC or any order of any governmental agency or court of
competent jurisdiction.
The foregoing conditions are for our sole benefit and may be asserted by
us regardless of the circumstances giving rise to any such condition or may
be waived by us in whole or in part at any time and from time to time in its
reasonable discretion. Our failure at any time to exercise any of the
foregoing rights shall not be deemed a waiver of such right and each such
right shall be deemed an ongoing right which may be asserted at any time and
from time to time.
In addition, we will not accept for exchange any Existing Notes
tendered, and no Series D Notes will be issued in exchange for any such
Existing Notes, if at such time any stop order shall be threatened or in
effect with respect to the Registration Statement of which this Prospectus
constitutes a part or the qualification of the Indenture under the Trust
Indenture Act of 1939, as amended (the "TIA"). In any such event we are
required to use every reasonable effort to obtain the withdrawal of any stop
order at the earliest possible time.
EXCHANGE AGENT
U.S. Bank Trust National Association, has been appointed as the Exchange
Agent for the Exchange Offer. All executed Letters of Transmittal should be
directed to the Exchange Agent at one of the addresses set forth below.
Questions and requests for assistance, requests for additional copies of
this Prospectus or of the Letter of Transmittal and requests for Notices of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows.
<TABLE>
<S> <C>
BY HAND (NEW YORK DEPOSITORY ONLY): BY HAND (ALL OTHERS):
U.S. Bank Trust National Association U.S. Bank Trust National Association
100 Wall Street, 20th Floor Fourth Floor - Bond Drop Window
New York, NY 10005 180 East Fifth Street
St. Paul, MN 55101
By Registered, Certified or Overnight Mail: By First Class Mail:
U.S. Bank Trust National Association U.S. Bank Trust National Association
Attn.: Specialized Finance P.O. Box 64485
180 East Fifth Street St. Paul, MN 55164-9549
St. Paul, MN 55101
By Facsimile: By Telephone:
(612) 244-1537 (800) 934-6802 Bondholder Services
(For Eligible Institutions Only)
</TABLE>
DELIVERY OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
FEES AND EXPENSES
We will not make any payments to brokers, dealers or others soliciting
acceptances of the Exchange Offer. The principal solicitation is being made
by mail; however, our officers and employees may make additional
solicitations in person or by telephone.
We will pay the expenses to be incurred in connection with the Exchange
Offer. Such expenses include fees and expenses of the Exchange Agent and
Trustee, accounting and legal fees and printing costs, among others.
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ACCOUNTING TREATMENT
We will record the Series D Notes at the same carrying value as the
Existing Notes, which is the principal amount as reflected in our accounting
records on the date of the exchange. Accordingly, we will not recognize any
gain or loss for accounting purposes. We will capitalize the expenses of the
Exchange Offer for accounting purposes.
TRANSFER TAXES
Holders who tender their Existing Notes for exchange will not be
obligated to pay any transfer taxes in connection therewith, except that
holders who instruct us to register Series D Notes in the name of, or
request that Existing Notes not tendered or not accepted in the Exchange
Offer be returned to, a person other than the registered tendering holder
will be responsible for the payment of any applicable transfer tax thereon.
CONSEQUENCES OF FAILURE TO EXCHANGE; RESALES OF SERIES D NOTES
Holders of Existing Notes who do not exchange their Existing Notes for
Series D Notes in the Exchange Offer will not be able to take advantage of
any increased liquidity afforded by the Series D Notes. The Series D Notes
would have an aggregate principal amount of $200.0 million as opposed to
$160.0 million for the Series A and B Notes and $40.0 million for the Series
C Notes.
In addition, holders of Series C Notes who do not exchange their Series
C Notes for Series D Notes pursuant to the Exchange Offer will continue to
be subject to the restrictions on transfer of such Series C Notes as set
forth in the legend thereon as a consequence of the issuance of the Series C
Notes pursuant to the exemptions from, or in transactions not subject to,
the registration requirements of, the Securities Act and applicable state
securities law. Series C Notes not exchanged pursuant to the Exchange Offer
will continue to accrue interest at 10 1/8% per annum and will otherwise
remain outstanding in accordance with their terms. In general, the Series C
Notes may not be offered or sold unless registered under the Securities Act,
except pursuant to an exemption from, or in a transaction not subject to,
the Securities Act and applicable state securities laws. We do not currently
anticipate that we will register the Series C Notes under the Securities
Act. However if (i) the Initial Purchasers so request with respect to Series
C Notes held by them following consummation of the Exchange Offer, or (ii)
any holder of Series C Notes is not eligible to participate in the Exchange
Offer because, for example, such holder is an affiliate of the Company, does
not acquire the Series D Notes in the ordinary course of business or has an
arrangement to participate in the distribution of the Series D Notes, or
(iii) any holder of Series C Notes that participates in the Exchange Offer
does not receive freely tradable Series D Notes in exchange for Series C
Notes, we are obligated to file a shelf registration statement on the
appropriate form under the Securities Act relating to the Notes held by such
persons.
Based on certain interpretive letters issued by the staff of the SEC to
third parties in unrelated transactions, we are of the view that Series D
Notes issued pursuant to the Exchange Offer may be offered for resale,
resold or otherwise transferred by holders thereof (other than (i) any such
holder which is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act, or (ii) any broker-dealer that purchases Series D
Notes from the Company to resell pursuant to Rule 144A or any other
available exemption) without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such Series D Notes
are acquired in the ordinary course of such holders' business and such
holders have no arrangement or understanding with any person to participate
in the distribution of such Series D Notes. If any holder has any
arrangement or understanding with respect to the distribution of the Series
D Notes to be acquired pursuant to the Exchange Offer, such holder (i) could
not rely on the applicable interpretations of the staff of the SEC, and (ii)
must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with a secondary resale transaction. A
broker-dealer who holds Existing Notes that were acquired for its own
account as a result of market-making or other trading activities may be
deemed to be an "underwriter" within the meaning of the Securities Act and
must, therefore, deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of Series D Notes. Each such
broker-dealer that receives Series D Notes for its own account in exchange
for Existing Notes, where such Existing Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge in the Letter of Transmittal that it will
deliver a prospectus in connection with any resale of such Series D Notes.
See "Plan of Distribution."
In addition, to comply with the securities laws of certain
jurisdictions, if applicable, the Series D Notes may not be offered or sold
unless they have been registered or qualified for sale in such jurisdiction
or an exemption from registration or qualification is
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<PAGE> 50
available and is complied with. We have agreed, pursuant to the Registration
Agreement and subject to certain specified limitations therein, to register
or qualify the Series D Notes for offer or sale under the securities or blue
sky laws of such jurisdictions as any holder of the Notes reasonably requests
in writing.
BUSINESS
GENERAL
We are a leading Tier 1 or direct supplier of high-quality, engineered
metal components, assemblies and modules used by OEMs. Our core products are
complex, high value-added products, primarily assemblies containing multiple
stamped parts, forgings and various welded, hemmed or fastened components.
These products which include large structural stampings and assemblies,
including exposed "Class A" surfaces, leaf springs and smaller complex
welded assemblies, are used in the manufacturing of a variety of sport
utility vehicles ("SUVs"), light and medium trucks, mini-vans, vans and
passenger cars. We are the sole source supplier of these products to its
customers. On a pro forma basis, assuming the acquisitions of Howell, RPIH,
the Suspension Division and Cofimeta had occurred on April 1, 1997, we would
have had net sales of $765.2 million and EBITDA (as defined herein) of $40.8
million for the fiscal year ended March 31, 1998. For the nine months ended
December 31, 1998, on a pro forma basis for such period, assuming the
acquisition of Cofimeta had occurred on April 1, 1998, we would have had net
sales of $555.3 million and EBITDA of $41.6 million.
Our seven largest customers, based on pro forma net sales for the nine
months ended December 31, 1998, assuming the acquisition of Cofimeta had
occurred April 1, 1998 are: General Motors Corporation ("GM") (34%), Ford
Motor Company ("Ford") (25%), Renault S.A. (15%), DaimlerChrysler AG
("DaimlerChrysler") (10%), PSA Peugeot Citroen ("PSA") (5%), CAMI (1%), and
The Saturn Corporation ("Saturn") (1%). We have been providing products
directly to GM and Ford for more than 50 years and have earned outstanding
commercial ratings for our high-quality standards, including GM's Supplier
of the Year and Mark of Excellence Awards, Ford's Q1 Award and CAMI's
President's Award. We also sell our products to other Tier 1 suppliers. For
the fiscal year ended March 31, 1998, approximately 71% of our net sales, on
a pro forma basis assuming the acquisitions of Howell, RPIH, the Suspension
Division, and Cofimeta occurred on April 1, 1997, were derived from sales of
our products manufactured for SUVs, mini-vans, vans and light trucks. In
recent years, SUVs, mini-vans, vans and light trucks have experienced
stronger growth in vehicle production as compared to the passenger car
sector. This sector includes those platforms and models which have strong
consumer demand, such as GM's popular C/K platform (full-size pickups and
the Yukon/Tahoe/Suburban models), Ford's Ranger, Explorer and Windstar,
DaimlerChrysler's Ram pickup and mini-van, and Renault's Kangoo and Espace.
See Note 16 of the Oxford Automotive, Inc. Notes to Consolidated Financial
Statements for a description of the Company's domestic and export sales.
With the acquisition of Cofimeta, the description of future financial data
for geographic areas will include information for Europe.
Our recent acquisitions significantly strengthen our position as a
leading Tier 1 supplier of assemblies and modules to the OEMs. These
strategic combinations provide us with the critical mass and capabilities in
the areas of design and engineering, sales and marketing, and product
expertise which provide the basis for our strategy of becoming a
fully-integrated, global systems supplier. The Company has implemented a
successful, focused sales and marketing initiative. As a result, the Company
was awarded the door assemblies and the side panel package for the new
Saturn LS Program (the "LS Program"), the new vehicle which Saturn is
launching in 1999 based upon the current Opel Vectra. Management believes
these awards from Saturn will generate approximately $65.0 million of annual
net sales beginning with the 1999 model year. In addition, the Company was
recently awarded the door, hood, and underbody assemblies for the GMT
250/257 Program (Pontiac Recon, Buick Signia) (the "GMT 250 Program") and
chassis components for the North American production of a global platform
for GM. The GMT 250 Program, a new GM platform, will be produced solely in
Mexico and management believes will generate approximately $90.0 million of
annual net sales beginning in 1999. Management believes the other GM program
will generate approximately $158.0 million of annual net sales beginning in
2002.
We currently operate 21 manufacturing facilities which offer the latest
technologies in metal stamping, forging, welding and assembly production
equipment, including fully-automated hydraulic and wide-bed press lines (up
to 180 inches), robotic welding cells, robotic hemming, autophoretic
corrosion resistant coating and a patented eye forming process. We also have
the world-wide exclusive rights (outside the CIS--formerly Soviet Union) to
the "MAZ" tapering process for our suspension applications. Since 1992, we
have invested in excess of $125.0 million in capital investments to support
sales growth, expand production capabilities
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<PAGE> 51
and improve efficiency and flexibility. Our diverse line of over 500
presses that range up to 3,000 tons including both conventional and transfer
technology and state-of-the-art robotic weld assembly and hemming equipment are
capable of manufacturing a broad assortment of parts and assemblies ranging from
simple stampings to full-size, Class A door and closure panels. We are one of a
few independent suppliers that has the ability to produce large, complex
stampings, as well as the technical expertise and automated assembly
capabilities to provide high value-added modules such as door apertures and
assemblies, A-pillars, Class A surface products and control arms, and multiple
leaf and parabolic leaf springs. We have entered into a lease transaction for a
new 330,000 sq. ft. facility in Ramos Arizpe, Mexico to support the GMT 250
Program and other opportunities in the Mexican market.
BUSINESS STRATEGY
Our principal objective is to be a leading, full-service, global Tier 1
supplier of integrated systems based on metal forming and related manufacturing
technologies. We believe that we are well positioned to benefit from two
significant trends in the stamping and metal forming segments of the automotive
industry: outsourcing and consolidation. Outsourcing of metal stamping has
increased in response to competitive pressures on OEMs to improve quality and
reduce capital requirements, labor costs, overhead and inventory. Consolidation
among automotive industry suppliers has occurred as OEMs have more frequently
awarded long-term sole source contracts to the most capable global suppliers. In
addition, OEMs are increasingly seeking systems suppliers who can provide a
complete package of design, engineering, manufacturing and project management
support for an integrated system (such as a front-end system). We intend to
capitalize on these trends through internal development and strategic
acquisitions. The key elements of our strategy include the following:
Provide Full-Service Program Capability. We are focused on developing
full-service program capabilities. We work with OEMs throughout the product
development process from concept and prototype development through the design
and implementation of manufacturing processes. We believe that our ability to
provide the package of design, engineering, prototyping, tooling, blanking,
stamping, forging, assembly, and corrosion resistant coating to our customers
creates a unique capability present in only a limited number of suppliers. We
believe this capability will enable us to manage large programs, assist us in
reducing customer program launch time, lower customer costs and increase our
margins.
Supply Complex, High Value-Added Systems. As a result of our technical
design and engineering capabilities and our reputation for highly-efficient
manufacturing operations, we are able to secure supply relationships for
complex, high value-added products, primarily assemblies and modules that
contain multiple stamped parts and various welded, hemmed or fastened
components. For example, we produce the rear door for GM's Yukon/Tahoe/Suburban
vehicles, the lower control arm for GM's four wheel drive C/K vehicles, the
control arm assemblies for Ford's F-Series pickups and DaimlerChrysler's T-300,
the radiator support assembly for GM's W-car (Grand Prix, Century, Lumina, Monte
Carlo and Intrigue), and complex A- pillar assemblies for the Ford Mustang and
the Ford Ranger pickup, and multiple leaf, parabolic (long taper) multiple leaf,
and single leaf long taper suspension systems for products ranging from Ford's
F-Series pickups to DaimlerChrysler's mini-vans. These complex products
typically generate higher dollar content per vehicle as well as higher margins
for the Company as compared to simple, individual stampings. We plan to
capitalize on our ability to develop and provide integrated modules and
assemblies to deliver to the OEMs an integrated product such as a complete door
or front-end system. In addition to doors, radiator supports and Class A surface
components, we believe we have unique expertise with respect to control arms and
leaf springs, which we will further develop as a fully integrated suspension
system.
Focus on High Growth Vehicle Categories. Our sales and marketing efforts
have been, and will continue to be, directed toward sectors of the automotive
market that have experienced strong consumer demand. For the fiscal year ended
March 31, 1998, approximately 71% of our net sales on a pro forma basis for the
acquisitions of Howell, RPIH, the Suspension Division, and Cofimeta were derived
from sales of products manufactured for SUVs, mini-vans, vans and light trucks.
Similarly, our sales to the passenger car market have been, and will continue to
be, directed to the segments with stronger sales growth, including Saturn cars.
Establish a Global Presence. The Company is actively pursuing additional
strategic acquisitions and joint-venture opportunities in Europe and intends to
pursue opportunities which will allow the Company to increase its presence in
South America, and establish a presence in Asia and other markets in order to
serve its customers on a global basis. Several OEMs have announced certain
models designed for the world automobile market ("World Car"). As a result, the
OEMs have encouraged their existing suppliers to establish foreign production
support for World Car programs. This globalization provides access to new
customers
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<PAGE> 52
and technology, as well as economic cycle diversification. We have operations
in France and have established a presence in Mexico and Venezuela and currently
provide components for OEMs doing business in Mexico and South America.
Pursue Strategic Acquisitions. In response to the trend in the OEM market
toward "systems suppliers," we are focused on making strategic acquisitions that
will enhance our ability to provide integrated systems (such as a door or front
end systems) or otherwise leverage our existing business by providing additional
product, manufacturing and service capabilities. We also intend to pursue
acquisitions which will expand our customer base by providing an entree to new
customers, including the North American operations of Asian and European based
OEMs. We believe that the continuing supplier consolidation in the stamping and
metal forming segments may also provide attractive opportunities to acquire
high-quality companies at favorable prices, including businesses which can be
improved financially through overhead elimination, organizational restructuring,
plant reconfiguration, labor contract negotiations and management changes. We
will also pursue acquisitions that enable us to achieve a global presence.
RECENT DEVELOPMENTS
On April 1, 1998, we acquired the Suspension Division. The Suspension
Division is a leading Tier 1 North American supplier of leaf spring suspension
systems for automotive applications. Products of the Suspension Division include
multiple leaf, parabolic (long taper) multiple leaf, and single leaf long taper
suspension systems. The Suspension Division is held through two of the Company's
subsidiaries, Oxford Suspension, Inc. and Oxford Suspension Ltd., both of which
are Subsidiary Guarantors.
The Suspension Division is a major supplier to the traditional North
American light truck vehicle manufacturers, and also one Japanese automotive
transplant, one Japanese heavy truck manufacturer, and one European vehicle
program. The Suspension Division designs, manufactures and markets leaf springs
for original equipment vehicle markets with product applications in light truck
rear suspensions. The Suspension Division is focused on the light truck market,
where full-size pick-ups and vans, mini pick-ups and vans, and sport utility
vehicles are the major users of leaf springs, primarily for rear suspension
applications. The Suspension Division includes a 49% interest in Metalcar, a
Venezuelan manufacturer of conventional leaf springs and coil springs for both
light and heavy trucks. The Suspension Division had net sales of $125.8 million
for its fiscal year ended December 31, 1997. For its fiscal year ended December
31, 1997, the Suspension Division had EBITDA of $7.4 million.
On February 5, 1999, we acquired the shares of Cofimeta for FF80 million
(approximately $13.9 million) in immediately available funds and deferred
payments over three years in the amounts of FF27 million (approximately $4.7
million, based upon the U.S. Dollar exchange rate on February 2, 1999) for each
of the first two years and FF36 million (approximately $6.2 million, based upon
the U.S. Dollar exchange rate on February 2, 1999) for the third year. Cofimeta
is a leading supplier of closure panels, floor pans, deck lids, structural
pillars, cross members, radiator surrounds and front ends, and Class A surfaces.
Cofimeta is headquartered in a suburb of Paris and operates manufacturing
facilities in France located in Douai, St. Florent and Orbec. Cofimeta employs
approximately 1,600 persons and is a major supplier to Renault and PSA. For the
nine months ended September 30, 1998, Cofimeta had net sales of $147.1 million
and EBITDA of $9.0 million. Amounts set forth in U.S. Dollars with respect to
Cofimeta for the nine months ended September 30, 1998 are based upon the average
published U.S. Dollar exchange rates for the period.
Cofimeta had previously benefited from a final order, entered approximately
nineteen months ago, of the French Commercial Court in Douai, France, approving
a continuation plan for Cofimeta (the "Continuation Plan"). The Continuation
Plan authorized certain restructuring plans, which included reductions in
employment levels, capital increases by its prior parent, and the rescheduling
of payment of all trade payables and other obligations over a ten year period.
Pursuant to an application by Group Valfond S.A., the prior owner of Cofimeta,
to the Court of Douai, the court by judgment dated January 7, 1999 authorized,
inter alia, (i) the sale of the Cofimeta shares to the Company, (ii) termination
of the Continuation Plan with respect to Cofimeta, and (iii) the establishment
of Cofimeta Defeasance S.A. by Cofimeta to which the payment obligations of
Cofimeta remaining under the Continuation Plan were transferred. Of the FF 372
million of original Continuation Plan obligations of Cofimeta, which were
transferred to Cofimeta Defeasance, S.A., approximately FF 305 million have been
acquired by the Company and FF 67 million remain payable to unrelated third
parties. Under the Continuation Plan, approximately 75% of the scheduled
repayment of all of the Continuation Plan obligations will occur in the last
five years of the ten year period.
Cofimeta is held as a subsidiary of Oxford Automotive France SAS which is
held by OASP, Inc. and OASP II, Inc., both wholly-owned subsidiaries of Oxford
Automotive and Subsidiary Guarantors.
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In March 1999 the Company announced the closure of its Hamilton, Indiana
facility. The decision to close this facility was based on the Company's
rationalization of its current capacity and will result in fixed cost
reductions and improved productivity through reallocation of production to
other facilities during fiscal 2000. The costs associated with the closure
had been previously reserved for in purchase accounting and will therefore
have no adverse impact on the financial results of the Company. The Company
is currently redeploying production assets from this and other previously
closed facilities to support recently awarded programs (e.g. GMT 250
Program).
On a pro forma basis for the fiscal year ended March 31, 1998, assuming
the acquisitions of Howell, RPIH, the Suspension Division, and Cofimeta had
occurred on April 1, 1997, (i) our net sales and EBITDA would have been
$765.2 million and $40.8 million, respectively, (ii) the SUV, mini-van, van
and light truck segment represented approximately 71% of net sales and (iii)
our net sales by major customers would have been approximately as follows:
Ford 30%; GM 29%; Renault 15%; DaimlerChrysler 10%; PSA 6%, CAMI 1%, and
Saturn 1%.
INDUSTRY TRENDS
The OEM market to which we sell our products consists of the design,
engineering, development, production and sale of parts, components,
assemblies and modules or systems (several components assembled together)
for use in the manufacture of new motor vehicles. Our performance, growth
and strategic plan are directly related to certain trends within the OEM
market. Since the 1980s, DaimlerChrysler, Ford and GM have each been
substantially reducing the number of suppliers that may bid for awards and
outsourcing an increasing percentage of their production requirements. As a
result of these trends, the OEMs are focusing on the development of
long-term, sole source relationships with suppliers who can provide more
complex parts, as well as complete subassemblies and modules on a
just-in-time basis while at the same time meeting strict quality
requirements. These requirements are accelerating the trend toward
consolidation of the OEM's supplier base, as those suppliers who lack the
capital and production expertise to meet the OEM's needs, either cease to
operate or are merged with larger suppliers. OEMs benefit from outsourcing
because outside suppliers generally have significantly lower cost structures
and, as described below, suppliers can assist in shortening development
periods for new products.
In addition to consolidation and outsourcing, suppliers are
participating earlier in the design and engineering process, providing
research, as well as product development, product testing/validation,
prototyping and tooling. OEMs generally expect Tier 1 suppliers to (i)
participate in the design and engineering of complex assemblies, (ii)
develop the required manufacturing process to deliver these assemblies on a
just-in-time basis, and (iii) assume responsibility for quality control.
This results in shorter development times for new products, as well as
higher quality and lower parts costs.
While the focus today by the OEMs is on quality, cost and service, we
believe that the focus for the future will be on global capabilities,
innovation and ability to provide value-added products and systems. The OEMs
have been very successful in making high-quality and low cost a minimum
requirement to remain in the industry, as opposed to a competitive advantage
for certain suppliers.
These evolving requirements can best be addressed by suppliers with
sufficient resources to meet such demands. For full-service suppliers such
as the Company, this environment provides an opportunity to grow by
obtaining business previously provided by other suppliers who can no longer
meet the current or future requirements and expectations of the OEMs and by
acquisitions that further enhance product manufacturing and service
capabilities. Although the requirements of the OEMs have already resulted in
significant consolidation of component suppliers in many product segments,
we believe that many opportunities exist for further consolidation within
our stamping and metal forming industry.
PRODUCTS
We generate the majority of our net sales from large, complex, high
value-added products, primarily assemblies that generally consist of
multiple parts, which we stamp and forge and combine with various welded or
fastened components. We are the sole source supplier of these complex
modules and assemblies. These products include unexposed components and
assemblies that are intrinsic to the structural integrity of the vehicle
such as A-pillars, radiator supports, floor pans, toe-to-dash panels, leaf
springs, frame and suspension components and reinforcements. In addition to
unexposed components and assemblies, we have the capability and expertise to
produce Class A surfaces such as door assemblies, door apertures, rocker
panels, fuel filler doors, and
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box side outers, which require virtually flawless finishes and more stringent
customer requirements than unexposed assemblies. These products require
superior engineering and automated manufacturing and assembly capabilities
due to their complexity and high volume requirements.
While we have the capability to produce small stampings, such as
brackets and braces, we focus on more complex and larger components and
assemblies which typically generate higher dollar content per vehicle as
well as higher margins for the Company. These assemblies, such as the A, B
and C pillars, control arms, leaf springs, door assemblies, door apertures,
deck lids and radiator supports require larger, high tonnage, wide-bed,
fully-automated press capabilities, complex automated weld and hemming
assembly, autophoretic corrosion resistant coating, machining, and automated
assembly of purchased components.
The chart below details by major customer our major products, the type
of vehicle and the model/platform for which they are produced
<TABLE>
<CAPTION>
CUSTOMER TYPE MODEL/PLATFORM COMPONENTS SUPPLIED
------------------ ------------- ---------------------------- ---------------------------------------
<S> <C> <C> <C>
General Motors Sport Utility Suburban/Tahoe/Yukon Door Assemblies, Door Apertures,
Rocker Panels, Lower Control Arms,
Wheel Moldings
Sport Utility Blazer/Jimmy Leaf Springs, Seat Supports/Rails
Sport Utility Pontiac Recon/Buick Signia Door Assemblies, Tailgate Assemblies,
(2000 Launch) Hoods, Floor Assemblies, Rocker
Panels, Rail Assemblies
Light Truck S10/Sonoma Pickup Leaf Springs
Light Truck C/K Crew Cab Pickup Door Apertures, Wheel Moldings
Light Truck C/K Pick Up Lower Control Arms (4 Wheel Drive),
Rocker Panels, Wheel Moldings
Light Truck C/K Pick Up (Mexico) Class A Blanks
Mini-Van Astro/Safari Struts, Lower Control Arms (All Wheel
Drive), A Pillars, Leaf Springs
Vans Savanna/Express Leaf Springs, Pillar
Reinforcements, Latches, Supports
Medium Duty Commercial Chassis Leaf Springs, Toe-to-Dash Panel
Medium Duty Kodiak Floor Assembly, Fuel Tank Straps,
Raised Roof Panel
Passenger Car Saturn SC Deck Lid, Pillar Reinforcement, Inner
Doors, Window Frame Reinforcement
Passenger Car Saturn SC/SL/SW (1999 Launch) Underbody Rails
Passenger Car Saturn LS (1999 Launch) Body Side Inners, Door Assemblies,
Shelf Panel, Wheel House Inners,
Radiator Support, Heat Shield, Gas
Tank Shield
Passenger Car Grand Prix, Regal, Intrigue, Radiator Supports
Monte Carlo, Lumina
Passenger Car Corvette Floor Panels
Passenger Car EV1 Floor Panels, Wheel Houses
Passenger Car Malibu, Cutlass Sun Roof Assembly
Passenger Car Grand Am, Alero Door Beams
Passenger Car Park Avenue, Riviera, Aurora, Rocker Panels
Seville, Deville
Passenger Car Joy, Swing, Monza (Mexico) Class A Blanks, Floor Pan Assemblies
Passenger Car Cavalier/Sunfire (Mexico) Floor Pan Assemblies
Ford Sport Utility Explorer, Mountaineer Rear Floor Reinforcement, Center Body
Pillar, B-Pillar Assembly, Leaf Springs
Sport Utility Expedition, Navigator Control Arms
</TABLE>
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<TABLE>
<CAPTION>
CUSTOMER TYPE MODEL/PLATFORM COMPONENTS SUPPLIED
------------------ ------------- ---------------------------- ---------------------------------------
<S> <C> <C> <C>
Light Truck F Series Pickup Control Arms, Load Floor, Leaf Springs
Light Truck Ranger, Mazda Pickup A Pillar, Upper/Lower Back Panel,
Roof Panel, Windshield Header, Box
Side Outer, Leaf Springs
Van Windstar Rear Floor Assembly, Dash Panel, Rear
Cross Members, Cowl Sides, Radiator
Support
Van Econoline Roof Rails, A-Pillar, Floor Pan, Shock
Tower, Fuel Filler Doors, Leaf Springs,
Brackets, Latches
Passenger Car Contour/Mystique/Mondeo Front & Rear Control Arms, Rear Suspension
(Europe) Bar Assembly, Brackets
Passenger Car Cougar Front & Rear Control Arms, Rear
Suspension Bar Assembly, Brackets
Ford/Nissan Mini-Van Villager, Quest Leaf Springs
DaimlerChrysler Sport Utility Cherokee Control Arms
Light Truck Dakota Leaf Springs, Control Arms (1999
Launch)
Sport Utility Durango Skid Plates, Brackets, Control Arms
(1999 Launch)
Light Truck Ram Pickup Control Arms
Minivan Extended Voyager/Caravan, Leaf Springs
AWD Eurostar (Europe)
Isuzu Medium Duty NPR/W4 Truck Leaf Springs
CAMI Sport Utility Tracker/Sidekick Rear Bumper, Side Frame Member,
Door Inner Reinforcement, Floor
Bar, Underbody Components
Passenger Car Metro/Swift Rear Cross Members, Side Sill, Dash
Panel
Renault Passenger Car Megane Engine Cradle, Radiator Support, Pillar
Assemblies, Structural Supports
Gas Tank Heat Shield, Bulkhead Heat Shield,
Door Beam
Van Kangoo Longitudinal Body Rails, Structural Supports,
Engine Cradles, Structural
Cross Members
Passenger Car X53 Hood Assembly, Cross Members, Reinforcements
Van Express Pillar Reinforcements, Cross Members
Van Master Pillar Reinforcements, Cross Members
Passenger Car Clio Door Beam
Van Traffic Pillar Reinforcements, Cross Members
Passenger Car Saffrane Cross Members, Structural Supports
Passenger Car X40 Cross Members, Structural Supports
Heavy Truck Various Instrument Panel Assembly, Structural Pillar
Assemblies
Passenger Car Laguna Structural Cross Members, Fender Support,
Reinforcements
Van Twingo Floor Reinforcements
</TABLE>
53
<PAGE> 56
<TABLE>
<CAPTION>
CUSTOMER TYPE MODEL/PLATFORM COMPONENTS SUPPLIED
------------------ ------------- ---------------------------- ---------------------------------------
<S> <C> <C> <C>
PSA Van Monospace Pillar Reinforcements, Cross Members
Passenger Car 205 Hood Outer, Hood Inner, Floor Extensions
Passenger Car ZX/306 Cross Members
Passenger Car 405 Support, Cross Member, Inner Fender
Reinforcements
Passenger Car Xantia Heat Shield, Cross Member, Structural
Reinforcements
Passenger Car Various Clutch Pedal Assemblies
Passenger Car Z8 (606) Reinforcements, Cross Members, Heat Shield,
Tank
Shield
Matra Van Espace Floor Pan Assemblies, Pillar Assemblies
Nissan Passenger Car Micra Oil Pan, Heat Shield, Clutch Pedal
GM Passenger Car Astra Dash Panel Reinforcement, Structural
Cross Member, Brackets
Passenger Car Omega Radiator Support Stampings
Saab Passenger Car 900 Floor Cross Member, Reinforcements
VW Passenger Car Golf Heat Shield, Brackets, Reinforcements
SEAT Passenger Car Toledo Door Beams
Faurecia Passenger Car Audi B6 Cross Members, Inserts For Instrument Panel
Passenger Car PSA Z8 (606) Seat Structure Cross Members
Passenger Car PSA X4 Xantia Seat Structure Cross Members
Van VW T5 Van Seat Structure Cross Members
Sevel Nord Van U64 Trunk Lid Inner, Fender Inner, Floorpan Parts,
Fender Inner, Hood Panel
</TABLE>
The Company has received purchase orders for production commencing after
the current model year, which production typically continues through the
product's life cycle and is subject to the volume requirements of customers, for
the following major products: (i) the new Saturn LS Program, which management
believes will generate approximately $65.0 million of annual net sales beginning
with the 1999 model year, (ii) the GMT 250 Program, which management believes
will generate approximately $90.0 million of annual net sales beginning in 1999,
(iii) the 2001 DaimlerChrysler Durango/Dakota control arms, which management
believes will generate approximately $11.1 million of annual sales beginning in
2000 (iv) the GM Blazer /Jimmy/ Bravada control arms, which management believes
will generate approximately $ 50.1 million of annual net sales beginning in 2001
and (v) chassis components for the North American production of a GM global
platform, which management believes will generate approximately $158.0 million
of annual sales beginning in 2002.
DESIGN AND ADVANCED ENGINEERING
We strive to maintain a technological advantage through investment in
product development and advanced engineering capabilities that utilize
structured program management techniques in an effort to exceed the customer's
expectations for value and service. Our engineering staff encompasses such
disciplines as program management, computer aided design ("CAD"), virtual
prototyping, draw die and process simulation, advanced engineering,
manufacturing feasibility, and tooling and process development. Responsibilities
of our engineers include (i) design, (ii) initial prototype development, (iii)
design and implementation of manufacturing processes, (iv) production
feasibility and improvement, and (v) data management.
54
<PAGE> 57
As our customers continue to out source larger assembled systems which
must be designed at earlier stages of vehicle development rather than the
smaller parts which are attached to them, we are increasingly required to
utilize advanced engineering resources early in the planning process.
Advanced engineering resources create improved engineering design, CAD
feasibility studies, working prototypes and testing programs to meet
customer specifications. Given this increased demand for early involvement
in the design and engineering aspects of production development, we
established a new technical center which houses our engineering and design
group. We utilize structured program management based on the Automotive
Industry Action Group sanctioned Advanced Part Quality Planning principles
to ensure part quality in all phases of design and manufacturing. We have
established a data management and CAD department which is able to support
all major customer systems. We provide "gray box" engineering capabilities
in which the customer has principal design responsibility while our
engineers work closely with the customer in designing the specifications of
the product material, the part to be produced and the tooling required to
produce the finished product. We are also on-line with all major customers
which accelerates the process of design changes.
Our design and advanced engineering expertise is an important
differentiating factor in maintaining our relationships with and obtaining
new business from our customers and, in management's judgment, was an
essential factor in winning the new business described above.
CUSTOMERS AND MARKETING
We supply our products on a long-term preferred and sole source basis,
primarily to GM (34%), Ford (25%), Renault (15%), DaimlerChrysler (10%), PSA
(5%), CAMI (1%), and Saturn (1%) (percentages are approximates of net sales
for the nine months ended December 31, 1998 on a pro forma basis for the
acquisition of Cofimeta) with the remaining net sales comprised of sales
primarily to other automotive suppliers. We have been providing products
directly to GM and Ford for more than 50 years, and directly to
DaimlerChrysler, Renault, and PSA for more than 20 years. We currently have
locations in the United States, Canada, Mexico, France and Venezuela and
provide components for OEMs doing business in Europe, North America and
South America. We believe our presence in Europe and Mexico is strategically
important and has led to several significant new opportunities (e.g. GM 250
Program) with OEMs doing business in these locations. We also believe the
Venezuelan joint venture provides further entree into Latin and South
American markets. Metalcar's production capabilities and strong management
team will provide the Company the means to further penetrate these markets
not only for springs, but also metal stamping and other Company products. We
maintain very strong relationships with our customers and continually strive
to exceed customer expectations and anticipate customer needs. This approach
has enabled us to maintain our status as a long-term supplier with each of
our major customers and as part of a limited group of preferred suppliers
invited to bid for platform work.
With the efforts by the OEMs to reduce the product development cycle
time, top suppliers are increasingly included in the early design and
development stages. For example, we obtain many of our new orders through a
presourcing process by which the customer invites one or a few preferred
suppliers to manufacture and design a component, assembly or module that
meets certain price, timing and functional parameters. Upon selection at the
development stage, we typically agree with the customer to cooperate in
developing the product to meet the specified parameters. Upon completion of
the development stage and the award of the manufacturing business, we
receive a blanket purchase order for those components, assemblies or modules
for the life of a vehicle model or platform, which typically range from five
to seven years. Consequently, the key success factors for OEM suppliers now
include total program management that encompasses state-of-the-art design,
reduced launch cycle times, manufacture and delivery of high quality
products at competitive prices.
We believe that the advanced engineering and sales organization at our
technical center offers services few other suppliers have available for
their customers. The group's primary activities are: (i) Quoting/Cost
Estimating; (ii) Assembly/Automation; (iii) CAD Design and Data Control;
(iv) Virtual prototyping; (v) Draw die simulation; (vi) Tool Process/Design;
and (vii) Program Management. The sales group is divided into customer
oriented business units, each with a business unit manager responsible for
all facets of customer needs, as well as strategies for growing their
particular customer base. The entire group is dedicated to advanced
technical development and servicing a multitude of customers' needs as one
team.
55
<PAGE> 58
MANUFACTURING AND FACILITIES
Our corporate headquarters, engineering, technical center and sales
offices are currently located in Troy, a suburb of Detroit, Michigan, close
to our core of automotive customers. Our manufacturing plants are
strategically located near OEM manufacturing sites.
We operate over 500 presses ranging from under 100 ton to 3,000 ton
capabilities. We are capable of producing components and assemblies from the
smallest brackets to full-size, Class A door and closure panels with our
unique wide-bed (180 inch), automated press lines. Production systems
include oil feeders, welding robots, pick and place robots and other
state-of-the-art automation, as well as autophoretic corrosion resistant
coating systems.
As OEMs have increased quality standards and implemented just-in-time
and sequenced delivery/inventory management methods, the consistency of
quality, as well as the timeliness and reliability of shipments by OEM
suppliers, have become crucial in meeting logistical demands of the OEMs and
reducing operating costs of the supplier. We have responded by developing
and adopting manufacturing practices that seek to maximize quality and
eliminate waste and inefficiency in our own operations and in those of our
customers. Our manufacturing and engineering capabilities enable us to
design and build high-quality, efficient manufacturing systems, processes
and equipment. We have invested heavily in our commitment to quality through
education of employees and implementation of cost management and control
systems from the plant floor up.
All suppliers are required to meet numerous quality standards in order
to qualify as a preferred and long-term supplier to the OEMs. The QS-9000
standards were developed by international and domestic automobile and truck
manufacturers to ensure that their suppliers meet consistent quality
standards that can be independently audited. The QS-9000 standards provide
for the standardization and documentation of a supplier's policies and
procedures to improve suppliers' efficiencies. The European automobile and
truck manufactures have developed similar standards to the QS-9000 standards
(EAQF). We are QS-9000 certified and Cofimeta is EAQF certified.
In addition to the QS-9000 standard, each OEM maintains its own
certification or award system for preferred suppliers based on the
supplier's demonstrated quality, delivery and certain commercial
considerations. Ford requires that all suppliers receive its Q1 rating in
order to quote for new production business. GM's Supplier of the Year Award
provides certain competitive advantages to the recipients but is not a
requirement for current GM suppliers to bid on new business. DaimlerChrysler
allows suppliers who have received its Gold Pentastar Award to retain any
current business when it is replaced by a new model without competitive
bidding. Other OEMs maintain various award programs for their suppliers that
recognize outstanding performance by the supplier. We have received
DaimlerChrysler's Gold Pentastar Award for each of our facilities that have
DaimlerChrysler as a customer. We have the Q1 rating from Ford at all plants
that are required to have the Q1 rating.
A summary of our major facilities, including the facilities of our less than
majority owned affiliates is set forth below:
<TABLE>
<CAPTION>
SIZE
FACILITY (SQ. FT.)
---------------------- ---------
<S> <C>
Alma, Michigan 389,000
Argos, Indiana 386,000
Corydon, Indiana 200,000
Greencastle, Indiana 214,000
Cambridge, Ontario 290,000
Delhi, Ontario 115,000
Athens, Tennessee 100,000
Masury, Ohio 150,000
Lapeer, Michigan 85,000
Prudenville, Michigan 76,000
Oscoda, Michigan 57,000
Hamilton, Indiana 85,000
Chatham, Ontario 190,000
Wallaceburg, Ontario 240,000
Saltillo, Mexico(1) 20,000
Silao, Mexico(1) 42,000
</TABLE>
56
<PAGE> 59
<TABLE>
<CAPTION>
SIZE
FACILITY (SQ. FT.)
---------------------- ---------
<S> <C>
Troy, Michigan(1) 34,000
Douai, France 538,000
St. Florent, France 431,000
Orbec, France 188,000
Valencia, Venezuela(2) 122,000
</TABLE>
- --------------------
(1) All properties above are owned, with the exception of the Silao and Saltillo
facilities and the Troy office. These properties are leased with lease
expiration dates ranging from December 1999 to June 2005.
(2) Owned by Metalurgica Carabobo, S.A., a Venezuelan joint venture of which we
have a 49% interest.
The Company has entered into a lease transaction for a new facility in Ramos
Arizpe, Mexico. The 330,000 sq. ft. facility will support the GMT 250 Program as
well as other customer opportunities.
RAW MATERIALS
The cost of raw materials represented approximately 51.3% of our net sales
for the fiscal year ended March 31, 1998 on a pro forma basis for the
acquisitions of Howell, RPIH, the Suspension Division, and Cofimeta. On an
annual basis, steel represents approximately 68% of total raw materials
purchases. We expect to purchase nearly 360,000 tons of steel in fiscal 1999 for
use in its production. The remaining 32% of raw materials purchases is
represented by various purchased parts such as forgings, bushings, ball joints,
isolators, corrosion resistant coating, and various fasteners.
We participate with respect to the majority of our platforms in steel
purchase programs through Ford, GM and DaimlerChrysler wherein the steel is
purchased by the OEM from the steel mill and sold to us at a negotiated price.
These purchase programs effectively neutralize the exposure to steel price
increases, as any price increases from the steel mills are either absorbed by
the OEM prior to our purchase of the steel or such increases are reflected in
our purchase of the steel and passed back to the OEM in the product pricing.
COMPETITION
The market for our products is characterized by strong competition from both
captive OEM suppliers and external, non-captive suppliers. We compete with a
limited number of competitors that have the physical assets and technical
resources to produce large bed stampings, complex parts and subassemblies of
multiple parts. Our largest competitors include The Budd Company, a subsidiary
of Thyssen AG; Magna International Inc.; Tower Automotive, Inc.; Aetna
Industries, Inc.; Ogihara America Corp., a subsidiary of Marubeni Corp.; Midway
Products Corporation; Active Tool & Manufacturing Co., Inc.; A.G. Simpson
Automotive, Inc.; Mayflower Vehicle Systems Inc.; L&W Engineering; National
Automotive Radiator Manufacturing Company; and divisions of OEMs with internal
stamping and assembly operations.
We compete for business at the beginning of the development for new model
platforms, as well as the redesign of current models. This process can begin
from two to five years prior to the introduction of the new model. After the
customer awards a program, that supplier is generally designated as the sole
source supplier for the life of that program, which typically lasts 4 to 5 years
for passenger cars and up to 10 years for trucks (particularly for unexposed
structural components and assemblies).
EMPLOYEES
At March 1, 1999, we employed approximately 4,900 persons in the United
States, Canada, Mexico, and France, approximately 1,100 of whom are employed on
a salaried basis and the balance of whom are hourly employees. Substantially all
of the hourly employees are represented by various local unions through
collective bargaining agreements. These individual agreements which are from
three to five years in length expire over the period April 1999 through February
2004.
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<PAGE> 60
In 1994, we experienced a two-week work stoppage at the Chatham, Ontario
facility. Other than this event, we have not experienced any organized work
stoppages at any time during the past ten years. At the present time, we believe
that our relations with our employees are good.
REGULATORY MATTERS
Our facilities and operations are subject to a wide variety of federal,
state, local, and foreign environmental laws, regulations, and ordinances,
including those related to air emissions, wastewater discharges, and chemical
and hazardous waste management and disposal ("Environmental Laws"). Our
operations also are governed by laws relating to workplace safety and worker
health, primarily the Occupational Safety and Health Act, and foreign
counterparts to such laws. In many jurisdictions, these laws are complex and
change frequently. The nature of our operations exposes us to risks of
liabilities or claims with respect to environmental and worker health and safety
matters. At March 31, 1998, we had a liability of approximately $1.7 million
recorded for estimated costs of known environmental matters. There can be no
assurance that material costs will not be incurred in connection with such
liabilities or claims. See Note 15 to Oxford Automotive, Inc.
Notes to Consolidated Financial Statements.
Based on our experience to date, we believe that the future cost of
compliance with existing Environmental Laws (or liability for known
environmental claims) will not have a material adverse effect on our business,
financial condition or results of operations. However, future events, such as
changes in existing Environmental Laws or their interpretation, may give rise to
additional compliance costs or liabilities that could have a material adverse
effect on the Company's business, financial condition or results of operations.
Compliance with more stringent Environmental Laws, as well as more vigorous
enforcement policies of regulatory agencies or stricter or different
interpretations of existing Environmental Laws, may require additional
expenditures by the Company that may be material.
Certain Environmental Laws hold current owners or operators of land or
businesses liable for their own and for previous owners' or operators' releases
of hazardous or toxic substances, materials or wastes, pollutants or
contaminants, including petroleum and petroleum products ("Hazardous
Substances"). Certain laws, including but not limited to CERCLA, may impose
joint and several liability on responsible parties. Because of our operations,
the long history of industrial uses at some of its facilities, the operations of
predecessor owners or operators of certain of the businesses, and the use,
production, and releases of Hazardous Substances at these sites, we are affected
by such liability provisions of the Environmental Laws. Several of our
facilities have experienced some level of regulatory scrutiny in the past and
are or may be subject to further regulatory inspections, future requests for
investigation or liability for past disposal practices.
Our Alma, Michigan plant is listed on the Michigan Department of
Environmental Quality ("MDEQ") list of Michigan Sites of Environmental
Contamination. Based on filings with the MDEQ by the current owner of the
petroleum refinery which adjoins the Alma Plant property, the refinery has been
determined by the MDEQ to be the source of certain contamination existing in the
eastern area of the Alma plant property. While we are currently conducting
certain remedial activity at our Alma plant in connection with this
contamination, we may have claims against the refinery owner relating to this
contamination. While we do not expect to incur significant future costs in
connection with this matter, we cannot guarantee that such future costs will not
be material.
The Resource Conservation and Recovery Act and the regulations thereunder
("RCRA") regulates the generation, treatment and disposal of hazardous wastes.
In the mid-1980s, we entered into a Consent Agreement and Final Order, through
Lobdell, with the United States Environmental Protection Agency (the "EPA")
relating to the final closure of a surface water impoundment area at the Alma
plant under RCRA. We have remediated the impoundment soils and sediments and we
are now implementing a groundwater monitoring program with EPA approval under
RCRA. In addition, we are conducting groundwater monitoring in a separate
section of the Alma plant at which contaminants have been detected by our
consultants. Both of these programs may be affected by the suspected
contamination from the petroleum refinery described above. While future
groundwater remediation costs, if any, are not expected to be material, we
cannot predict such costs with certainty and no guarantee can be made that these
costs will not be material.
We have been named as a potentially responsible party, along with several
other companies, in connection with a former disposal facility located in the
St. Louis, Michigan area. We, along with certain other named parties, in
cooperation with the State of Michigan, currently are undertaking a remedy for
which we are sharing costs. Groundwater at the site is currently being monitored
and while the
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<PAGE> 61
costs of groundwater remediation, if any, are not expected to be material, we
cannot accurately estimate such costs at this time. See "Risk Factors --
Environmental Risks and -- Legal Proceedings."
On April 1, 1998, we acquired the Suspension Division and are in the process
of addressing certain environmental concerns. Eaton Corporation has agreed to
retain and reimburse us for all known environmental liabilities for which claims
are made prior to April 1, 2008 arising from the operation of the acquired
facilities prior to the acquisition of the Suspension Division, including the
present remediation efforts. Eaton Corporation has also agreed to retain and
reimburse us for all unknown environmental liabilities arising from the
operation of the acquired facilities prior to the acquisition of the Suspension
Division, for which claims are made prior to April 1, 2000, up to a $1.5 million
aggregate cap. While there can be no assurance that all costs associated with
such matters will ultimately be reimbursed by Eaton Corporation, we do not
currently believe that any liability associated with such matters will be
material.
LEGAL PROCEEDINGS
We are subject to various claims, lawsuits and administrative proceedings
related to matters arising in the normal course of business. In the opinion of
management, after reviewing the information which is currently available with
respect to such matters and consulting with legal counsel, any liability which
may ultimately be incurred with respect to these matters will not materially
affect our financial position.
AVAILABLE INFORMATION
We are subject to the informational requirements of the Exchange Act, and in
accordance therewith file periodic reports and other information with the SEC.
We have, and the Subsidiary Guarantors have, filed with the SEC an Exchange
Offer Registration Statement pursuant to the Securities Act, and the rules and
regulations promulgated thereunder, covering the Series D Notes being offered
hereby. This Prospectus does not contain all the information set forth in the
Exchange Offer Registration Statement. For further information with respect to
the Company, the Subsidiary Guarantors and the Exchange Offer, reference is made
to the Exchange Offer Registration Statement. Statements made in this Prospectus
as to the contents of any contract, agreement or other document referred to
accurately describe the material terms so referred to, but are not necessarily a
complete description of the contents of any such contract, agreement or other
document. With respect to each such contract, agreement or other document filed
as an exhibit to the Exchange Offer Registration Statement, reference is made to
the exhibit for a more complete description of the document or matter involved,
and each such statement shall be deemed qualified in its entirety by such
reference. The Exchange Offer Registration Statement, including the exhibits
thereto, as well as the reports and other information filed by us with the SEC,
can be inspected and copied at the public reference facilities maintained by the
SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Regional Offices of the SEC at Seven World Trade Center, Suite 1300, New York,
New York 10048 and at Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of such materials can be obtained from the
Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. Information on the operation of the Public Reference
Room is available from the SEC at 1-800-SEC-0330. In addition, the SEC maintains
a Web site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the SEC. The
address of such Web site is: http://www.sec.gov.
In the event we cease to be subject to the informational requirements of the
Exchange Act, we will be required under the Indenture to continue to file with
the SEC the annual and quarterly reports, information, documents or other
reports, including, without limitation, reports on Forms 10-K, 10-Q and 8-K,
which would be required pursuant to the informational requirements of the
Exchange Act. We will also furnish such other reports as may be required by law.
In addition, for so long as any of the Series C Notes are restricted securities
within the meaning of Rule 144(a)(3) under the Securities Act, we have agreed to
make available to any prospective purchaser of the Series C Notes or beneficial
owner of the Series C Notes, in connection with any sale thereof, the
information required by Rule 144A(d)(4) under the Securities Act.
We are not required to send annual reports to security holders under the
SEC's proxy rules or regulations. We will provide the Trustee with reports,
including reports on Forms 10-K (including audited financial statements), 10- Q
and 8-K, pursuant to the terms of the Indenture.
59
<PAGE> 62
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the name, age and position of each of the
directors and executive officers of Oxford Automotive. Each director of Oxford
Automotive will hold office until the next annual meeting of shareholders or
until his successor has been elected and qualified. Officers of Oxford
Automotive serve at the discretion of the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITIONS
----------------------- ------- ------------------------------------------------------
<S> <C> <C>
Selwyn Isakow ............. 46 Chairman of the Board of Directors
Rex E. Schlaybaugh, Jr .... 50 Vice Chairman of the Board of Directors and Secretary
Steven M. Abelman ......... 48 Director, President and Chief Executive Officer
Manfred J. Walt ........... 46 Director
Dennis K. Pawley .......... 57 Director
Aurelian Bukatko .......... 48 Senior Vice President-Chief Financial Officer
Larry C. Cornwall ......... 51 Senior Vice President-Sales and Engineering
John H. Ferguson .......... 50 Vice President-Financial Operations and Assistant
Secretary
</TABLE>
Selwyn Isakow, Chairman of the Board of Directors. Mr. Isakow has been a
director of Oxford Automotive since its inception in 1995, was the President of
Oxford Automotive from 1995 to May 1997, and was appointed Chairman of the Board
in May 1997. Since 1985, Mr. Isakow has been the President of The Oxford
Investment Group, Inc. ("Oxford Investment"), a private investment and corporate
development company that acquires majority equity positions on behalf of its
principals in industrial products manufacturing, financial services, niche
distribution and other selected companies. Mr. Isakow generally serves as
Chairman of the Board and a director of all such portfolio companies. Mr. Isakow
is also a director of Champion Enterprises, Inc. and Ramco Gershenson Properties
Trust, and serves on the boards of numerous community organizations. From 1982
to 1985, Mr. Isakow was the Executive Vice President of Comerica Incorporated, a
regional bank holding company, and from 1978 to 1982, was a principal at Booz,
Allen and Hamilton, management consultants.
Rex E. Schlaybaugh, Jr., Vice Chairman of the Board of Directors and
Secretary. Mr. Schlaybaugh has been the Secretary and a director of Oxford
Automotive since its inception in 1995 and was appointed Vice Chairman of the
Board in May 1997. Mr. Schlaybaugh was appointed the Vice Chairman of Oxford
Investment in May 1997. Mr. Schlaybaugh has been a member of the firm of Dykema
Gossett PLLC since 1985. Mr. Schlaybaugh is also a director of certain other
portfolio companies of Oxford Investment. Mr. Schlaybaugh is also a member of
the Board of Directors of the Manufacturers Life Insurance Company (U.S.A.), the
Michigan State Chamber of Commerce and is a Trustee of Oakland University.
Steven M. Abelman, Director, President and Chief Executive Officer. Mr.
Abelman was appointed President and Chief Executive Officer of Oxford Automotive
in May 1997. Prior to joining Oxford Automotive, Mr. Abelman was Deputy Chief
Executive Officer of Bundy North America ("Bundy"), an automotive supplier of
brake and fuel delivery systems, from February 1996 until May 1997 and prior to
that he was President of Bundy from September 1995 until February 1996. From
December 1991 to September 1995, Mr. Abelman was Vice President and General
Manager of Augat Wiring Systems, a manufacturer of automotive wiring systems and
components.
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<PAGE> 63
Manfred J. Walt, Director. Mr. Walt has been a director of Oxford Automotive
since May 1997. Mr. Walt has been the Executive Vice President and Chief
Financial Officer of Central Park Lodges Ltd., a Canadian assisted living
company located in Toronto, Canada, since May 1998. From October 1997 to May
1998, Mr. Walt was the Sr. Vice President of Gentra, Inc., a Real Estate Company
based in Toronto, Canada. From 1989 to September 1997, Mr. Walt was the Managing
Partner-Financial Services of Edper Brascan Corporation ("Edper"), a diversified
natural resources, energy and property development company. Gentra, Inc. is an
affiliate of Edper. From 1980 to 1989, Mr. Walt served in various capacities
with Edper.
Dennis K. Pawley, Director. Mr. Pawley was appointed a director of Oxford
Automotive in January 1999. Mr. Pawley has been the President and Chief
Operating Officer of Performance Learning, a consulting company located in Las
Vegas, Nevada, since February 1999. From 1991 to 1998, Mr. Pawley served as the
Executive Vice President of Manufacturing for DaimlerChrysler in Auburn Hills,
Michigan.
Aurelian Bukatko, Senior Vice President-Chief Financial Officer. Mr. Bukatko
was appointed Senior Vice President-Chief Financial Officer of Oxford Automotive
in February 1999. From December 1997 to February 1999, Mr. Bukatko was Corporate
Treasurer of Hayes-Lemmerz International, a worldwide manufacturer of wheels,
brake drums and rotors for motor vehicles. From August 1996 to November 1997,
Mr. Bukatko served as Director of Global Currency Management for the Lear
Corporation, a worldwide supplier of automotive interiors. From September 1991
to July 1996, Mr. Bukatko was the Treasurer and Financial Director,
International for Lear Seating in Gustavsburg, Germany.
Larry C. Cornwall, Senior Vice President-Sales and Engineering. Mr. Cornwall
was appointed Vice President-Sales and Engineering of Oxford Automotive in May
1997. From October 1995 to May 1997, Mr. Cornwall was the Senior Vice
President-Sales and Engineering at BMG. From 1991 to 1995, Mr. Cornwall was Vice
President of Sales and Engineering at Veltri International, an automotive
stamper.
John H. Ferguson, Vice President-Financial Operations and Assistant
Secretary. Mr. Ferguson was appointed as a Vice President-Financial Operations
and Assistant Secretary of Oxford Automotive in May 1997. Mr. Ferguson is also
the Chief Financial Officer of BMG, a position he has held since April 1996.
Prior to that time, Mr. Ferguson was with Bundy, where he acted as Group Plant
Manager from 1994 to 1996 and as Corporate Controller from 1992 to 1994. From
1984 to 1992, Mr. Ferguson held several positions with GenCorp. Inc., an
automotive tire supplier, including Controller of the Automotive Products Group.
Certain of the officers and directors of Oxford Automotive are also
directors or officers of Oxford Automotive subsidiaries.
BOARD COMMITTEES
The Board of Directors have established an Executive Committee, an Audit
Committee, and a Compensation Committee.
The Executive Committee is responsible for exercising all of the duties of
the Board of Directors that may lawfully be delegated to it by the Board of
Directors under Michigan Law. The Executive Committee consists of Messrs.
Isakow, Schlaybaugh and Abelman.
The Audit Committee is responsible for reviewing with management our
financial controls and accounting and reporting activities. The Audit Committee
reviews the qualifications of our independent auditors, make recommendations to
the Board of Directors regarding the selection of independent auditors, review
the scope, fees and results of any audit and review non-audit services and
related fees. The Audit Committee consists of Messrs. Schlaybaugh and Walt.
The Compensation Committee is responsible for the administration of all
salary and incentive compensation plans for our officers and key employees,
including bonuses. Salaries and bonuses will be reviewed by the Compensation
Committee and will be adjusted in light of our performance, the responsibilities
of each of our officers in meeting corporate performance objectives and other
factors, such as length of service and subjective assessments. The Compensation
Committee consists of Messrs. Isakow and Walt.
DIRECTOR COMPENSATION AND ARRANGEMENTS
We pay fees to our non-employee directors of up to $2,000 per meeting and
reimburse the out-of-pocket expenses related to directors' attendance at each
Board and committee meeting. In addition, we may elect to adopt a non-employee
director option plan or other similar plan to provide for grants of stock
options or other benefits as a means of attracting and retaining highly
qualified
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<PAGE> 64
independent directors for the Company. Members of the Board of Directors are
elected pursuant to certain shareholder agreements by and among the Company and
certain of its shareholders. See "Principal Shareholders -- Shareholder
Agreements."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
We did not have a Compensation Committee prior to August 4, 1997.
Accordingly, all determinations with respect to executive compensation were made
by the Board of Directors. Prior to August 4, 1997, Messrs. Isakow and
Schlaybaugh participated in deliberations of our Board of Directors concerning
executive officers compensation. On August 4, 1997 a Compensation Committee,
whose members are Selwyn Isakow and Manfred Walt, was appointed by the Board of
Directors. Mr. Isakow is our Chairman and was our President from our inception
in 1995 to May 1997. Pursuant to the terms of the indentures for the Existing
Notes, we are not permitted to enter into any transaction (including employee
compensation arrangements) with any Affiliate (as defined) unless the
transaction is arm's length and, if the transaction involves amounts in excess
of $1 million in any one year, the terms of the transaction are set forth in
writing and approved by a majority of the disinterested members of the Board of
Directors. For similar transactions in excess of $5 million in any one year, an
opinion of a recognized investment banking firm that such transaction is fair,
from a financial standpoint, is also required. See "Description of the Notes --
Certain Covenants." See "Certain Transactions."
Mr. Isakow controls Oxford Investment, a private investment and corporate
development company and Mr. Schlaybaugh is the Vice Chairman of Oxford
Investment. At the time we acquired Lobdell (January 10, 1997), Oxford
Investment entered into a management agreement with Lobdell (the "Lobdell
Agreement"). At the time we acquired BMG (October 25, 1995), Oxford Investment
entered into a management agreement with BMG (the "BMG Agreement"). The Lobdell
Agreement and the BMG Agreement were terminated on June 24, 1997. We entered
into a new management agreement with Oxford Investment upon the termination of
the Lobdell Agreement and the BMG Agreement. Pursuant to the terms of this
management agreement, Oxford Investment will perform various consulting,
management and financial advisory services on our behalf. We will pay Oxford
Investment a monthly management fee of $83,334 and will pay an investment
banking fee, for acquisitions of $2.5 million or more, of 1.0% or 1.25% (for
acquisitions outside of North America) of the aggregate acquisition cost for
advice and assistance in connection with such acquisition, with a minimum fee of
$200,000. No investment banking fee will be paid to Oxford Investment in
connection with acquisitions for aggregate consideration of less than $2.5
million. The initial term of the agreement will end on December 31, 2001, but
will automatically extend for additional one-year periods thereafter unless
either party terminates the agreement. In addition, pursuant to the management
agreement, Oxford Investment will license to us the name "Oxford Automotive"
which is owned by Oxford Investment.
During the fiscal years ended March 31, 1998, 1997 and 1996 we paid Oxford
Investment management fees of approximately $1.0 million, $275,000 and $71,000
respectively and investment banking fees during the fiscal years ended March 31,
1998, 1997 and 1996 of $230,000, $300,000 and $200,000 respectively. In
connection with the acquisition of the Suspension Division, we paid Oxford
Investment an investment banking fee of approximately $500,000 during the first
quarter of fiscal 1999. In connection with the acquisition of Cofimeta we paid
Oxford Investment an investment banking fee of $1.2 million during the fourth
quarter of fiscal 1999.
On November 25, 1997, we acquired all of the issued and outstanding shares
of the common stock of RPIH, the parent of RPI for approximately $2.5 million.
The shareholders of RPIH received approximately $2.5 million in the aggregate
for all outstanding RPIH shares. In addition, the shareholders of RPIH received
approximately $402,788 as payment of the principal and accrued interest on
certain outstanding loans to RPIH. Certain of our officers, directors, and
shareholders were also officers, directors, or shareholders of RPIH prior to the
transaction. Messrs. Isakow and Schlaybaugh were officers, directors and
shareholders of RPIH. Robert H. Orley was also an officer, director and
shareholder of RPIH and is a shareholder of the Company. Mr. Isakow, directly
and indirectly, received $753,150, which included the payment of $117,971 for
the principal and accrued interest on certain outstanding loans to RPIH. Mr.
Schlaybaugh received $91,296, which included the payment of $13,120 for the
principal and accrued interest on an outstanding loan to RPIH. Messrs. Robert H.
and Gregg L. Orley, each beneficial owners of more than 5% of the Company's
outstanding Common Stock, each received $252,248, which included the payment of
$50,293 to each for the principal and accrued interest on an outstanding loan to
RPIH.
RPIH's wholly owned subsidiary, RPI, Inc. ("RPI"), a Michigan corporation,
issued various demand notes to Lobdell in the aggregate principal amount of $1.4
million during the year ended March 31, 1998, each bearing interest at the prime
rate plus 1.0% per annum. The notes were issued in connection with our ongoing
discussions with RPIH regarding a possible merger or other similar transaction
in consideration for which RPIH had agreed to deal exclusively with the Company
and its affiliates until December 31, 1997. This agreement to deal exclusively
with the Company allowed us to negotiate a transaction with RPIH without undue
interference from a third party.
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<PAGE> 65
EXECUTIVE COMPENSATION
The following table sets forth certain information as to the compensation
earned by our Chief Executive Officer and our four other most highly paid
officers (the "Named Executive Officers") for the last three fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION (1)
-------------------------------------------------
OTHER ANNUAL ALL OTHER
NAME AND TITLE YEAR SALARY BONUS COMPENSATION COMPENSATION
-------------- ---- ------ ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Selwyn Isakow, Chairman (2) 1998 $ 95,577 $ 101,250 $ -- $ --
1997 -- -- -- --
Rex E. Schlaybaugh, Jr., 1998 $ 138,462 $ 101,250 $ -- $ --
Vice Chairman (3) 1997 -- -- -- --
Steven M. Abelman, President and 1998 $ 230,769 $ 150,000 $ -- $ --
Chief Executive Officer (4)
Donald C. Campion, Senior Vice 1998 $ 147,808 $ 52,500 $ -- $ --
President-Chief Financial Officer (5) 1997 -- -- -- --
Larry C. Cornwall, Senior Vice 1998 $ 161,846 $ 68,000 $ -- $ --
President-Sales and Engineering (6) 1997 124,196 36,000 -- --
1996 31,504 24,200 -- --
John H. Ferguson, Vice President- 1998 $ 131,500 $ 39,000 $ -- $ --
Financial Operations and Assistant 1997 101,250 -- -- --
Secretary (7)
</TABLE>
- ----------------
(1) The Company was formed in October 1995 and executive officers of the
Company did not receive any compensation prior to 1997.
(2) Mr. Isakow was the President of the Company from its inception until May
1997, for which he did not receive any compensation from the Company. Steven M.
Abelman was appointed President and Chief Executive Officer in May 1997. Mr.
Isakow received compensation during the last fiscal year in connection with his
position as Chairman of the Board of the Company.
(3) Mr. Schlaybaugh did not receive any compensation from the Company prior
to the last fiscal year.
(4) Mr. Abelman was appointed President and Chief Executive Officer in May
1997. See "-Employment Agreements."
(5) Mr. Campion was appointed Senior Vice President-Chief Financial Officer
of Oxford Automotive in July 1997. Mr. Campion resigned from his position with
Oxford Automotive on February 6, 1999. See "--Employment Agreements."
(6) Mr. Cornwall joined the Company in October 1995 and only received
compensation from the Company for a full fiscal year in 1997 and 1998.
(7) Mr. Ferguson joined the Company in April 1996 and only received
compensation from the Company for a full fiscal year in 1998.
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<PAGE> 66
EMPLOYMENT AGREEMENTS
As of May 1, 1997, Oxford Automotive and Steven M. Abelman entered into an
Employment and Noncompetition Agreement. The agreement provides that Mr. Abelman
will serve as President and Chief Executive Officer of Oxford Automotive on an
"at-will" basis. The agreement provides that Mr. Abelman will receive an annual
base salary, will be eligible to receive a bonus of up to 60% of his salary as
determined by the Board of Directors of Oxford Automotive, and will be entitled
to certain fringe benefits. Mr. Abelman has also agreed not to compete with the
Company during the period of his employment and for two years following the
termination of his employment. Upon the termination of his employment without
cause, Mr. Abelman is entitled to severance payments equal to (a) his annual
base salary, if such termination is prior to May 1, 1999 or (b) 1.5 times his
annual base salary, if such termination is after May 1, 1999.
On November 24, 1995, BMG and Larry C. Cornwall entered into an Employment
Agreement. The agreement provides that Mr. Cornwall will serve as Senior Vice
President-Sales and Marketing of BMG on an "at-will" basis. Mr. Cornwall has
subsequently been appointed as Senior Vice President-Sales and Engineering of
Oxford Automotive. The agreement provides that Mr. Cornwall will receive an
annual base salary, will be eligible to receive a bonus of up to 50% of his
salary as determined by the Board of Directors of BMG, will be eligible to
participate in the Company's profit sharing plan, and will be entitled to
certain fringe benefits. Upon the termination of the agreement, Mr. Cornwall
will be entitled to continue to receive his base salary for the longer of three
months or the Canadian statutory requirement.
As of July 21, 1997, Oxford Automotive and Donald C. Campion entered into an
Employment and Noncompetition Agreement. The agreement provided that Mr. Campion
would serve as Senior Vice President-Chief Financial Officer of Oxford
Automotive on an "at-will" basis. The agreement provided that Mr. Campion would
receive an annual base salary, would be eligible to receive a bonus of up to 50%
of his salary as determined by the Board of Directors of Oxford Automotive, and
would be entitled to certain fringe benefits. Mr. Campion also agreed not to
compete with the Company during the period of his employment and for two years
following the termination of his employment. Upon his resignation, Mr. Campion
agreed to certain severance arrangements with the Company, and his shares were
repurchased in accordance with his Employment and Noncompetition Agreement.
See also "Certain Transactions -- Management Agreements."
PRINCIPAL SHAREHOLDERS
As of February 28, 1999, there were 309,750 issued and outstanding shares of
the Common Stock, without par value, of the Company (the "Common Stock"). The
following table sets forth information as of March 1, 1999 with respect to the
Common Stock beneficially owned by each of our directors, the Named Executive
Officers, all of our directors and executive officers as a group, and by other
holders known to us as having beneficial ownership of more than 5% of the Common
Stock. Selwyn Isakow and our other shareholders have entered into certain
agreements, each of which contain substantially identical terms, the result of
which gives Mr. Isakow voting control of 100% of the Common Stock, except under
certain circumstances. See "-- Shareholder Agreements." Unless otherwise
specified, the address for each person is 1250 Stephenson Highway, Troy,
Michigan 48083.
<TABLE>
<CAPTION>
NUMBER OF PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OF CLASS
------------------------------------ ------ --------
<S> <C> <C>
Selwyn Isakow (1) .............................. 164,224 53.02%
2000 N. Woodward Avenue, Suite 130,
Bloomfield Hills, Michigan 48304
Rex E. Schlaybaugh, Jr ......................... 20,900 6.75%
2000 N. Woodward Avenue, Suite 130,
Bloomfield Hills, Michigan 48304
</TABLE>
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<PAGE> 67
<TABLE>
<CAPTION>
NUMBER OF PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OF CLASS
------------------------------------------------- -------- --------
<S> <C> <C>
Steven M. Abelman (2) .............................. 12,326 3.98%
Manfred J. Walt .................................... 2,300 *
175 Boor St., E., S. Tower, Suite 601
Toronto, Ontario, Canada M4W 3R8
John H. Ferguson ................................... 6,180 2.0%
Larry C. Cornwall .................................. 7,000 2.26%
Robert H. Orley .................................... 20,600 6.65%
2000 N. Woodward Avenue, Suite 130,
Bloomfield Hills, Michigan 48304
Gregg L. Orley ..................................... 20,600 6.65%
2000 N. Woodward Avenue, Suite 130,
Bloomfield Hills, Michigan 48304
All directors and officers as a group (8 persons) .. 212,930 68.84%
(1)(2)
</TABLE>
- --------------------
*Less than 1.0%
(1) Includes 140,124 shares owned by Hilsel Investment Company Limited
Partnership, of which Tridec Management, Inc. is General Partner. Mr. Isakow is
the President and a shareholder of Tridec Management, Inc. In addition, Mr.
Isakow may be deemed to be the beneficial owner of all of the outstanding shares
of Common Stock as a result of certain voting power over such shares pursuant to
the shareholder agreements described below and certain purchase options that may
be exercised by Mr.
Isakow with respect to 47,900 outstanding shares of Common Stock.
(2) Mr. Abelman's Employment and Noncompetition Agreement with Oxford
Automotive provides Oxford Automotive or its assigns with the right to
repurchase his shares of Common Stock if his employment is terminated for any
reason.
SHAREHOLDER AGREEMENTS
Each holder of Common Stock is a party to a shareholder agreement which
provides for certain restrictions on transfer by shareholders and grants certain
other shareholders the option to purchase the shares of a shareholder upon his
death. Each surviving shareholder has the right to exercise this option within
30 days of the death of a shareholder. The exercising shareholders will divide
the deceased shareholder's shares as they agree or, if they are not able to
agree, pro rata. If the exercising shareholders are not able to agree on a
purchase price with the estate of the deceased shareholder, then the per share
purchase price shall be the per share value of the Company based on the greater
of the value of the Company as a going concern or on a liquidation basis, as
determined by an independent appraisal. The purchase price shall be paid by an
initial cash payment of up to 20% of the purchase price with the balance paid
pursuant to a five-year, unsecured promissory note bearing interest at the prime
rate. The agreements also provide that each shareholder will grant a proxy to
Mr. Isakow to vote all of the shareholder's shares at any meeting of the
Company; provided, however, that if holders of shares having a majority in
interest of the shares of Common Stock determine that it is in the best interest
of all of the shareholders to sell all or substantially all of the assets of the
Company or to cause the Company to merge or consolidate with or into another
corporation, Mr. Isakow shall exercise the proxies provided to him consistent
with that decision. As a result, except as described above, Mr. Isakow has
voting control of 100% of the Common Stock.
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<PAGE> 68
CERTAIN TRANSACTIONS
As of March 31, 1997, Mr. Abelman issued a note to the Company in connection
with his acquisition of shares of the Common Stock. The principal amount of the
note was $130,000 and the note bears interest at the prime rate plus 1.0%, which
rate is adjusted on March 31 of each year to reflect the then current prime
rate. Principal and interest on the note is payable in equal annual installments
with interest on the unpaid principal, with the final payment due May 31, 2002.
As of February 28, 1999 the principal amount outstanding of the note was
$113,469.
As of March 31, 1997, the Company issued a subordinated demand note to Mr.
Robert H. Orley in connection with the redemption of certain shares of the
Company's Common Stock. The principal amount of the note was $108,203 and was
paid in full subsequent to March 31, 1997.
On February 1, 1999 we entered into a Consulting Services Agreement (the
"Consulting Agreement") with Performance Learning, Inc., a Nevada corporation,
("Performance Learning"). Dennis K. Pawley, a director of Oxford Automotive is
the President and Chief Operating Officer and a shareholder of Performance
Learning. Under the Consulting Agreement, Performance Learning has agreed to
provide consulting services to us for a one year period, which commenced on
February 15, 1999. As compensation for such consulting services we will pay
Performance Learning a $100,000 retainer, $5,000 per day for each day a
principal of Performance Learning performs consulting services for the Company,
and $1,000 per day for each day a non-principal of Performance Learning performs
consulting services for the Company. The retainer is payable in two equal
installments and the second installment will not be paid if we terminate the
agreement after six months. We will pay additional amounts to reimburse
Performance Learning for reasonable expenses it incurs in connection with
performing the consulting services.
See also "Management - Compensation Committee Interlocks and Insider
Participation."
LEGAL
Rex E. Schlaybaugh, Jr. is a shareholder, the Vice Chairman of the Board and
a director of the Company. Dykema Gossett PLLC, of which Mr. Schlaybaugh is a
member, has performed legal services for the Company since its inception,
including services performed in connection with the Series C Offering and this
Exchange Offer. The Company expects to continue to retain the firm as general
counsel after the Exchange Offer.
DESCRIPTION OF CERTAIN
INDEBTEDNESS AND PREFERRED STOCK
SENIOR CREDIT FACILITY
General. We entered into the Senior Credit Facility, providing for up to (a)
$110.0 million of revolving credit availability (the "Revolving Line") including
the issuance of letters of credit, (b) $30.0 million pursuant to a term loan
(the "Term Loan"), and (c) $35.0 million of revolving credit availability for
tooling (the "Tooling Line"). We, along with certain principal operating
subsidiaries (the "Senior Credit Obligors") are parties to or guarantors of the
Senior Credit Facility. The obligations under the Senior Credit Facility (the
"Obligations") are secured by a first lien on substantially all the assets of
the Senior Credit Obligors. The Obligations and guaranties of the Senior Credit
Obligors (the "Senior Credit Guaranties") will rank senior to all of our other
indebtedness, including the Notes. Availability under the Revolving Line at
March 1, 1999 was approximately $80.3 million, reduced for the effect of a
Letter of Credit issued for the IRB's (as defined). Availability under the
Tooling Line at March 1, 1999 was approximately $5.0 million. Funds under the
Senior Credit Facility are available for general corporate purposes (including
acquisitions) and letters of credit. The Senior Credit Facility also
accommodates the lease transaction for the manufacturing operation in Ramos
Arizpe, Mexico.
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<PAGE> 69
Principal Payments. Unless otherwise required pursuant to the Senior Credit
Facility, we are required to pay amounts advanced under the Revolving Line and
the Tooling Line on July 31, 2004. We are required to pay the unpaid principal
amount of the Term Loan in twenty-two quarterly principal payments as follows:
<TABLE>
<CAPTION>
QUARTERLY PAYMENT DATES PRINCIPAL INSTALLMENT
----------------------- ---------------------
<S> <C>
July 31, 1999 to January 31, 2000 $ 500,000
April 30, 2000 to January 31, 2001 $ 1,250,000
April 30, 2001 to January 31, 2003 $ 1,500,000
April 30, 2003 to January 31, 2004 $ 1,875,000
April 30, 2004 to July 31, 2004 $ 2,250,000
</TABLE>
Interest Rates. Interest on outstanding borrowings under the Senior Credit
Facility is payable monthly and accrues at an annual rate equal to (a) the
Applicable Margin (as defined in the Senior Credit Facility) plus either (i) the
higher of the Prime Rate (as defined in the Senior Credit Facility) or 0.5% over
the Federal Funds Rate or (ii) with respect to Canadian based borrowings, the
higher of the prime rate of First Chicago/NBD Bank, Canada or 0.5% over the BA
Rate (the one month bankers' acceptance rates, as further defined in the Senior
Credit Facility), or (b) the London Interbank Offered Rate plus the Applicable
Margin (a "LIBOR-based Rate") or, with respect to Canadian based borrowings, the
BA Rate. The Applicable Margin will be based upon the Company's trailing four
quarter Ratio of Total Covenant Obligations to Total Covenant EBITDA (as defined
in the Senior Credit Facility) as follows:
<TABLE>
<CAPTION>
RATIO OF TOTAL
COVENANT OBLIGATIONS TO APPLICABLE MARGIN
TOTAL COVENANT EBITDA PRIME/LIBOR
--------------------- -----------
<S> <C>
> 4.75 1.00% /2.25%
4.01-- 4.75 0.75% /2.00%
3.51-- 4.00 0.50% /1.80%
3.01-- 3.50 0.125% /1.375%
3.00 0.00% /1.125%
</TABLE>
Maturity and Optional Prepayments. Unless accelerated due to default, all
borrowings under the Senior Credit Facility mature on July 31, 2004, and the
aggregate principal amount outstanding may not exceed 175.0 million at any time.
Borrowings under the Senior Credit Facility may be prepaid at any time without
premium or penalty, except that any prepayment of a LIBOR-based Rate loan that
is made prior to the end of the applicable interest period shall be subject to
reimbursement of breakage costs.
Covenants. The Senior Credit Facility contains certain customary covenants,
including without limitation, reporting and other affirmative covenants;
financial covenants including: ratios of Total Covenant Obligations to Total
Covenant EBITDA beginning at not greater than 5.25 to 1.00 and decreasing to not
greater than 4.00 to 1.00 after December 31, 2003; net worth of not less than
$40.2 million plus a percentage of our net income plus any proceeds from the
issuance of capital stock; fixed charge coverage ratio beginning at not less
than 1.00 to 1.00 and increasing to not less than 1.10 to 1.00 after December
31, 2002; and interest coverage ratio beginning at not less than 2.00 to 1.00
and increasing to not less than 2.75 to 1.00 after December 31, 2002 (each as
defined in and calculated pursuant to the Senior Credit Facility); and negative
covenants, including: restrictions on incurrence of indebtedness (other than as
provided for in the Senior Credit Facility, purchase money debt, the Notes,
tooling debt, and guaranties of certain other debt not to exceed $30.0 million),
payment of cash dividends and other distributions to shareholders, liens in
favor of parties other than the lenders under the Senior Credit Facility,
certain guaranties of obligations of or advances to others, sales of material
assets not in the ordinary course of business, restrictions on mergers and
acquisitions, and capital expenditures (each as defined in and calculated
pursuant to the Senior Credit Facility). Certain covenants were amended to
reflect our obligations in connection with the Ramos Arizpe lease transaction.
We remained in compliance with our covenants following the acquisition of
Cofimeta.
Events of Default. The Senior Credit Facility contains customary events of
default including non-payment of principal, interest or fees; violation of
covenants; inaccuracy of representations or warranties; cross-defaults to
certain other indebtedness and the agreement relating to the Ramos Arizpe lease,
including the indebtedness evidenced by the Notes, and bankruptcy.
Fees. We will pay, on a quarterly basis, a per annum fee ranging from 0.375%
to 0.50% of the Senior Credit Facility and letter of credit fees ranging from
1.125% to 2.25%, in each case based on certain of our financial ratios.
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<PAGE> 70
OTHER INDEBTEDNESS
The Canadian Department of Regional Industrial Expansion has provided a term
loan (the "IRDP Loan") to BMG, bearing interest at 6% with a final maturity date
of September 1, 2002. The IRDP Loan is unsecured. As of March 1, 1999, $0.3
million was outstanding with respect to the IRDP Loan.
The Export Development Corporation of Canada ("EDC") has provided a tooling
line facility to BMG (the "EDC Facility"), bearing interest at a fixed rate of
7.36%. The EDC Facility is secured by tooling at BMG relating to specific Saturn
contracts and has a final maturity of September 30, 1999. As of January 31,
1999, $1.9 million was outstanding with respect to the EDC Facility.
Lobdell, through its subsidiary Creative Fabrication Corporation
("Creative"), is financially obligated to the County of McMinn, Tennessee
pursuant to certain revenue bonds issued on behalf of Creative. On September 27,
1995, the Industrial Development Board of the County of McMinn issued $8.5
million of its Industrial Development Revenue Bonds ("IRBs") for the purpose of
lending the proceeds from the sale of the IRBs to Creative. The IRBs bear
interest at a variable rate which was 3.3% at March 31, 1999. The IRBs are
collateralized by a letter of credit issued by NBD Bank for the benefit of the
trustee under the indenture relating to the IRBs and by a mortgage on the
Creative facilities located in Tennessee and are guaranteed by Lobdell. Creative
is prohibited from paying, declaring or authorizing any dividend if there is an
event of default under the IRB documents. The IRBs mature in September 2010. As
of March 1, 1999, $2.5 million principal amount of IRBs were outstanding.
RPIH, through its subsidiary has been provided with a $0.6 million loan
facility from the National Association of Credit Management-Great Lakes (the
"RPIH Loan"), bearing interest at 6.0% with a final maturity date of April 30,
1999. As of January 31, 1999, $0.4 million was outstanding with respect to the
RPIH Loan.
PREFERRED STOCK OF LOBDELL
In connection with our acquisition of Lobdell, Lobdell issued 457,541 shares
of its Series A $3.00 Cumulative Preferred Stock ( the "Series A Preferred
Stock") and 49,938 shares of its Series B Preferred Stock (the "Series B
Preferred Stock" and together with the Series A Preferred Stock the "Lobdell
Preferred Stock"), each having a stated value of $100 per share, of which only
397,539 shares of Series A Preferred Stock are currently outstanding. All of the
Series B Preferred Stock has been cancelled, as described below. Generally,
except as required by law, the holders of Lobdell Preferred Stock have no voting
rights. However, the holders of Series A Preferred Stock, voting as a separate
class, are entitled to elect (i) one director of Lobdell, and (ii) if Lobdell
fails to pay three consecutive semi-annual dividend payments to the holders of
Series A Preferred Stock, one additional director until the payment default is
cured. Dividends on the Series A Preferred Stock accrue annually at the rate of
$3.00 per share and are cumulative, whether or not earned or declared. Lobdell
may not declare or pay any dividend or other distribution, other than in Lobdell
Common Stock or other stock junior to the Lobdell Preferred Stock ("Junior
Stock"), with respect to any Junior Stock unless all accrued, unpaid and current
dividends with respect to the Series A Preferred Stock have either been paid or
sufficient funds have been set apart for such payment. The Series A Preferred
Stock also has certain liquidation preferences.
The Series A Preferred Stock is mandatorily redeemable by Lobdell on
December 31, 2006 at a price per share of $100, plus accrued and unpaid
dividends to the date of redemption. However, if we do not commence a public
offering of our common stock pursuant to a firm commitment underwritten offering
prior to June 30, 2006, the payment for the shares of Series A Preferred Stock
to be redeemed will be $103 per share, plus accrued and unpaid dividends to the
date of redemption. In addition, at the option of the holders of Series A
Preferred Stock, if we do not commence such a public offering of our common
stock on or before December 31, 2001, Lobdell must redeem on December 31 of each
year commencing with 2002 up to 20% of the aggregate number of shares of Series
A Preferred Stock held by any such holder immediately prior to December 31,
2002. The Subsidiary Guaranty of Lobdell ranks senior to the Lobdell Preferred
Stock. See "Description of the Notes -- Subsidiary Guaranties."
In connection with our acquisition of Lobdell, we have agreed to exchange
our common stock for the shares of Series A Preferred Stock upon the initial
public offering ("Initial Public Offering") of our common stock to the public
which is exclusively for cash, subject to an effective registration statement
and underwritten on a firm commitment basis by one or more underwriters. The
holders of Series A Preferred Stock have the right to exchange up to 50% or some
lesser portion of their shares of Series A Preferred Stock (the "Election
Amount") for a number of shares of our common stock equal to (i) the Election
Amount, multiplied by (ii) the Exchange Ratio (the number equal to the
redemption value of a share of Series A Preferred Stock, divided by the price
per share to the public of Company common stock in the Initial Public Offering);
provided, however, that, in the aggregate, holders of Series A Preferred Stock
may not receive more than 25% of the number of shares of common stock registered
pursuant to the Initial Public Offering.
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<PAGE> 71
Pursuant to the acquisition of Lobdell, we obtained various indemnities for
certain purchase price adjustments arising out of a closing balance sheet and
for claims relating to representations and warranties made by the former common
shareholders of Lobdell in connection with the acquisition. At the closing of
such acquisition, 100,000 shares of Series A Preferred Stock were placed with an
escrow agent to fund indemnification claims of the Company. The Company and the
preferred shareholders of Lobdell have settled certain purchase price
adjustments relating to the difference between the shareholder's equity
reflected on the closing balance sheet and the amount that had previously been
projected by Lobdell, which has resulted in the cancellation of 60,002 shares of
the escrowed Series A Preferred Stock and 49,938 shares of Series B Preferred
Stock, which represented all of the outstanding Series B Preferred Stock. The
remaining 39,998 shares of escrowed Series A Preferred Stock were released to
the preferred shareholders of Lobdell.
DESCRIPTION OF THE NOTES
GENERAL
The Series C Notes were issued under an Indenture (the "Indenture") dated as
of December 1, 1998, among the Company, the Subsidiary Guarantors and U.S. Bank
Trust National Association, as Trustee (the "Trustee"). The terms of the
Indenture apply to the Series C Notes and to the Series D Notes to be issued in
exchange for the Series A Notes, Series B Notes, and Series C Notes pursuant to
the Exchange Offer. The Series C Notes and the Series D Notes are collectively
referred to in this section as the "Notes."
The Indenture is substantially identical to the Indenture dated as of June
15, 1997 under which the Series A Notes and Series B Notes were issued. The
Series A Notes and Series B Notes are substantially identical to, and rank pari
passu in right of payment with the Series C Notes and Series D Notes. Generally,
the only difference between the Series A Notes and Series B Notes, on the one
hand, and the Series C Notes and Series D Notes, on the other, is the priority
of Series A Notes and Series B Notes, if any remain outstanding after this
Exchange Offer, with respect to the payment of any Excess Proceeds (as described
below under "Certain Covenants-Limitation on Sales of Assets and Subsidiary
Stock). However, if holders of Series A Notes and Series B Notes exchange all of
their notes for Series D Notes, all holders of Series D Notes will participate
pro rata in any Excess Proceeds Offer. The Series A Notes and Series B Notes are
collectively referred to in this section as the "Existing Senior Subordinated
Notes."
The following is a summary of certain provisions of the Indenture and the
Notes, a copy of which Indenture and the form of Notes is available upon request
to the Company. Due to the complexity of various negotiated provisions of the
Indenture and various cross-references contained in the Indenture, the
discussion below follows closely the general format of the Indenture. However,
the following summary of certain provisions of the Indenture is not complete. We
urge you to read all the provisions of the Indenture, including the definitions
of certain terms included in the Indenture, because the Indenture defines your
rights as holders of the Notes. Capitalized terms used herein and not otherwise
defined have the meanings set forth in the section "-- Certain Definitions." As
used in this section, the term "Company" refers to Oxford Automotive, Inc.
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes may be exchanged or transferred, at the office or agency of the
Company, which, unless otherwise provided by the Company, will be the offices of
the Trustee. At the option of the Company, payment of interest may be made by
check mailed to the addresses of the Holders as such addresses appear in the
Note register.
The Notes are issued only in fully registered form, without coupons, in
denominations of $1,000 and any integral multiple of $1,000. No service charge
will be made for any registration of transfer or exchange of Notes, but the
Company may require payment of a sum sufficient to cover any transfer tax or
other similar governmental charge payable in connection therewith.
BRIEF DESCRIPTION OF THE NOTES AND GUARANTIES
The Notes
The Notes:
o are unsecured senior subordinated obligations of the Company;
o are subordinated in right of payment to all Senior Indebtedness of the
Company or the relevant Subsidiary Guarantor; and
o are irrevocably and unconditionally guaranteed by the Subsidiary
Guarantors.
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The Guaranties
The Notes are guaranteed by the following subsidiaries of the Company:
Lobdell Emery Corporation Howell Industries, Inc.
BMG North America Limited RPI Holdings, Inc.
BMG Holdings, Inc. RPI, Inc.
Winchester Fabrication Corporation Prudenville Manufacturing, Inc.
Creative Fabrication Corporation Oxford Suspension, Inc.
Parallel Group International, Inc. Oxford Suspension, Ltd.
Laserweld International, L.L.C. OASP, Inc.
Concept Management Corporation OASP II, Inc.
Lewis Emery Capital Corporation
The Guaranties of the Notes:
o are general obligations of each Subsidiary Guarantor; and
o are subordinated in right of payment to all Senior Indebtedness of each
Subsidiary Guarantor.
As of December 31, 1998, the Company and the Subsidiary Guarantors had total
Senior Indebtedness of approximately $30 million (excluding unused commitments
under the Senior Credit Facility). As indicated above and as discussed in detail
below under "Subordination," payments on the Notes and under the Subsidiary
Guaranties will be subordinated to the payment of Senior Indebtedness. The
Indenture will permit the Company and the Subsidiary Guarantors to incur
additional Senior Indebtedness.
As of the date of the Indenture, all of the Company's operating subsidiaries
are "Restricted Subsidiaries." Unrestricted Subsidiaries will not be subject to
many of the restrictive covenants in the Indenture. Unrestricted Subsidiaries
will not guarantee the Notes.
Not all of the Company's "Restricted Subsidiaries" will guarantee the Notes.
The Subsidiary Guarantors generated 98.3% of the Company's consolidated revenues
in the nine-month period ended December 31, 1998 and held 97.9% of the Company's
consolidated assets as of December 31, 1998. See Note 18 to the Company's
Consolidated Financial Statements included at the back of this Prospectus for
more detail about the division of the Company's consolidated revenues and assets
between guarantor and non-guarantor subsidiaries.
TERMS OF THE NOTES
The Notes are unsecured senior subordinated obligations of the Company,
limited to $250.0 million aggregate principal amount. Of this amount, $40.0
million were issued in the Series C Offering, $160.0 million are reserved for
issuance only in exchange for the Series A Notes and Series B Notes and $50.0
million are available for issuance in the future, only in accordance with
paragraph (a) of the covenant described under "Certain Covenants - Limitation on
Indebtedness." The Notes will mature on June 15, 2007. The Notes bear interest
at the rate per annum shown on the cover page hereof from December 8, 1998, or
from the most recent date to which interest has been paid or provided for,
payable semi-annually to Holders of record at the close of business on the June
1 or December 1 immediately preceding the interest payment date on June 15 and
December 15 of each year. The Company will pay interest on overdue principal at
1% per annum in excess of such rate, and it will pay interest on overdue
installments of interest at such higher rate to the extent lawful.
The interest rate on the Series C Notes is subject to increase in certain
circumstances if the Exchange Offer Registration Statement is not declared
effective on a timely basis or if certain other conditions are not satisfied, as
further described under "Summary-The Series D Notes." The interest rates on the
Series A Notes and the Series B Notes are not subject to such increases.
OPTIONAL REDEMPTION
Except as set forth in the following paragraph, the Notes are not redeemable
at the option of the Company prior to June 15, 2002. Thereafter, the Notes are
redeemable, at the Company's option, in whole or in part, at any time or from
time to time, upon not less than 30 nor more than 60 days' prior notice mailed
by first-class mail to each Holder's registered address, at the following
redemption
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prices (expressed in percentages of principal amount), plus accrued and unpaid
interest to the redemption date (subject to the right of Holders of record on
the relevant record date to receive interest due on the relevant interest
payment date), if redeemed during the 12-month period commencing on June 15 of
the years set forth below:
<TABLE>
<CAPTION>
REDEMPTION
PERIOD PRICE
--------------------------------- ----------
<S> <C>
2002 ........................... 105.063%
2003 ........................... 103.375
2004 ........................... 101.688
2005 and thereafter ............ 100.000
</TABLE>
In addition, at any time and from time to time prior to June 15, 2000, the
Company may redeem in the aggregate up to 35% of the original principal amount
of the Notes with the proceeds of one or more Public Equity Offerings following
which there is a Public Market, at a redemption price (expressed as a percentage
of principal amount) of 110.125% plus accrued and unpaid interest, if any, to
the redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date);
provided, however, that at least 65% of the original aggregate principal amount
of the Notes must remain outstanding after each such redemption.
SELECTION
In the case of any partial redemption, selection of the Notes for redemption
will be made by the Trustee on a pro rata basis, by lot or by such other method
as the Trustee in its sole discretion shall deem to be fair and appropriate,
although no Note of $1,000 in original principal amount or less will be redeemed
in part. If any Note is to be redeemed in part only, the notice of redemption
relating to such Note shall state the portion of the principal amount thereof to
be redeemed. A new Note in principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon cancellation of
the original Note.
SUBSIDIARY GUARANTIES
Each of the Company's Restricted Subsidiaries (other than certain foreign
subsidiaries) that, as of the Issue Date, were obligors or guarantors with
respect to the Senior Credit Facility irrevocably and unconditionally Guarantee,
as primary obligors and not merely as sureties, on an unsecured senior
subordinated basis the performance and punctual payment when due, whether at
Stated Maturity, by acceleration or otherwise, of all obligations of the Company
under the Indenture and the Notes, whether for payment of principal of or
interest on the Notes, expenses, indemnification or otherwise (all such
obligations guaranteed by the Subsidiary Guarantors being herein called the
"Guaranteed Obligations"). The Subsidiary Guarantors agree to pay, in addition
to the amount stated above, any and all expenses (including reasonable counsel
fees and expenses) incurred by the Trustee or the Holders in enforcing any
rights under the Subsidiary Guaranties. Each Subsidiary Guaranty will be limited
in amount to an amount not to exceed the maximum amount that can be Guaranteed
by the applicable Subsidiary Guarantor without rendering such Subsidiary
Guaranty voidable under applicable law relating to fraudulent conveyance or
fraudulent transfer or similar laws affecting the rights of creditors generally.
After the Issue Date, the Company will cause each Restricted Subsidiary that
becomes an obligor or guarantor with respect to any of the obligations under one
or more of the Bank Credit Agreements to execute and deliver to the Trustee a
supplemental indenture pursuant to which such Restricted Subsidiary will
Guarantee payment of the Notes. See "Certain Covenants -- Future Subsidiary
Guarantors" below.
Each Subsidiary Guaranty is a continuing guarantee and shall:
(a) remain in full force and effect until payment in full of all the
Guaranteed Obligations,
(b) be binding upon each Subsidiary Guarantor, and
(c) inure to the benefit of and be enforceable by the Trustee, the Holders
and their successors, transferees and assigns.
A Subsidiary Guaranty will be released upon the sale of all the capital
stock, or all or substantially all of the assets, of the applicable Subsidiary
Guarantor if such sale is made in compliance with the Indenture.
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SUBORDINATION
The indebtedness evidenced by the Notes and the Subsidiary Guaranties
represents senior subordinated obligations of the Company and the Subsidiary
Guarantors, as the case may be. The payment of the principal of, premium, if
any, and interest on the Notes, the payment of any Subsidiary Guaranty and all
other Obligations under or in connection with the Notes, the Subsidiary
Guaranties, the Indenture and/or any related agreements, documents or
instruments are subordinate in right of payment, as set forth in the Indenture,
to the prior payment in full of all Senior Indebtedness of the Company or the
relevant Subsidiary Guarantor, as the case may be, whether outstanding on the
Issue Date or thereafter incurred, including all Obligations of the Company and
such Subsidiary Guarantor under the Senior Credit Facility. The Notes and the
Subsidiary Guaranties are also effectively subordinated to any Secured
Indebtedness of the Company and the Subsidiary Guarantors to the extent of the
value of the assets securing such Indebtedness and to any liabilities of
Subsidiaries other than the Subsidiary Guarantors.
As of December 31, 1998:
o The Company had $30.0 million outstanding Senior Indebtedness (excluding
unused commitments under the Senior Credit Facility), and
o Senior Indebtedness of the Subsidiary Guarantors was approximately $3.0
million.
Although the Indenture contains limitations on the amount of additional
Indebtedness that the Company and its Restricted Subsidiaries may incur, under
certain circumstances the amount of such Indebtedness could be substantial and,
in any case, such Indebtedness may be Senior Indebtedness. See "Certain
Covenants -- Limitation on Indebtedness."
Only Indebtedness of the Company or a Subsidiary Guarantor that is Senior
Indebtedness will rank senior to the Notes and the relevant Subsidiary Guaranty
in accordance with the provisions of the Indenture. The Notes and each
Subsidiary Guaranty will in all respects rank pari passu with all other senior
subordinated Indebtedness of the Company and the relevant Subsidiary Guarantor,
respectively. The Company and each Subsidiary Guarantor has agreed in the
Indenture that it will not Incur, directly or indirectly, any Indebtedness that
is subordinate or junior in ranking in right of payment to its Senior
Indebtedness unless such Indebtedness is pari passu with or is expressly
subordinated in right of payment to the Notes. Unsecured Indebtedness is not
deemed to be subordinated or junior merely because it is unsecured.
The Company may not pay, directly or indirectly, principal of, premium (if
any) or interest on, the Notes or any other Obligations under or in connection
with the Notes, the Indenture and/or any related agreements, documents or
instruments or make any deposit pursuant to the provisions described under "--
Defeasance" below and may not repurchase, redeem or otherwise retire any Notes
(collectively, "pay the Subordinated Debt") if:
(1) any Senior Indebtedness is not paid when due or
(2) any other default on any such Senior Indebtedness occurs and the
maturity of such Senior Indebtedness is accelerated in accordance with
its terms
unless, in either case, the default has been cured or waived and any such
acceleration has been rescinded or such Senior Indebtedness has been paid in
full in cash. However, the Company may pay the Subordinated Debt without regard
to the foregoing if the Company and the Trustee receive written notice approving
such payment from the Representative of the Senior Indebtedness with respect to
which either of the events set forth in clause (1) or (2) of the immediately
preceding sentence has occurred and is continuing.
During the continuance of any default (other than a default described in
clauses (1) and (2) of the second preceding sentence) with respect to any Senior
Indebtedness pursuant to which the maturity thereof may be accelerated
immediately without further notice (except such notice as may be required to
effect such acceleration) or the expiration of any applicable grace periods, the
Company may not pay the Subordinated Debt for a period (a "Payment Blockage
Period") commencing upon the receipt by the Trustee (with a copy to the Company)
of written notice (a "Blockage Notice") of such default from the Representative
of the holders of such Designated Senior Indebtedness specifying an election to
effect a Payment Blockage Period and ending 180 days thereafter (or earlier if
such Payment Blockage Period is terminated:
(1) by written notice to the Trustee and the Company from the Person or
Persons who gave such Blockage Notice,
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(2) because the default giving rise to such Blockage Notice has been waived
in writing or
(3) because such Designated Senior Indebtedness has been repaid in full in
cash).
Notwithstanding the provisions described in the immediately preceding sentence,
unless the holders of such Designated Senior Indebtedness or the Representative
of such holders has accelerated the maturity of such Designated Senior
Indebtedness, the Company may resume payments on the Notes after the end of such
Payment Blockage Period. The Notes shall not be subject to more than one Payment
Blockage Period in any consecutive 360-day period, irrespective of the number of
such nonpayment defaults with respect to Designated Senior Indebtedness during
such period.
Upon any payment or distribution of the assets of the Company of any kind or
character, whether in cash, property or securities, to creditors upon a total or
partial liquidation or dissolution or reorganization of or similar proceeding
relating to the Company or its property or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding, the holders of Senior
Indebtedness will be entitled to receive payment in full in cash of such Senior
Indebtedness before the Noteholders are entitled to receive any payment, and,
until the Senior Indebtedness is paid in full in cash, any payment or
distribution to which Noteholders would be entitled but for the subordination
provisions of the Indenture will be made to holders of such Senior Indebtedness
as their interests may appear. If a payment or distribution is made to
Noteholders that, due to the subordination provisions, should not have been made
to them, such Noteholders are required to hold it in trust for the holders of
Senior Indebtedness and pay it over to them as their interests may appear.
The obligations of a Subsidiary Guarantor under its Subsidiary Guaranty are
senior subordinated obligations. As such, the rights of Noteholders to receive
payment by a Subsidiary Guarantor pursuant to its Subsidiary Guaranty will be
subordinated in right of payment to the rights of holders of Senior Indebtedness
of such Subsidiary Guarantor. The terms of the subordination provisions
described above with respect to the Company's obligations under the Notes apply
equally to a Subsidiary Guarantor and the obligations of such Subsidiary
Guarantor under its Subsidiary Guaranty.
By reason of the subordination provisions contained in the Indenture, in the
event of insolvency, creditors of the Company or a Subsidiary Guarantor who are
holders of Senior Indebtedness of the Company or a Subsidiary Guarantor, as the
case may be, may recover more, ratably, than the Noteholders, and creditors of
the Company who are not holders of Senior Indebtedness may recover less,
ratably, than holders of Senior Indebtedness and may recover more, ratably, than
the Noteholders.
The terms of the subordination provisions described above will not apply to
payments from money or the proceeds of U.S. Government Obligations held in trust
by the Trustee for the payment of principal of and interest on the Notes
pursuant to and in accordance with the provisions described under "--
Defeasance."
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder shall have the right
to require that the Company repurchase all or a portion of such holder's Notes
at a purchase price in cash equal to 101% of the principal amount thereof plus
accrued and unpaid interest, if any, to the date of repurchase (subject to the
right of Holders of record on the relevant record date to receive interest due
on the relevant interest payment date), in accordance with the provisions of the
next paragraph.
Within 30 days following any Change of Control, the Company shall mail a
notice to each Holder with a copy to the Trustee stating:
(1) that a Change of Control has occurred and that such Holder has the right
to require the Company to purchase such Holder's Notes at a purchase
price in cash equal to 101% of the principal amount outstanding at the
repurchase date plus accrued and unpaid interest, if any, to the date of
repurchase (subject to the right of Holders of record on the relevant
record date to receive interest on the relevant interest payment date);
(2) the circumstances and relevant facts and relevant financial information
regarding such Change of Control;
(3) the repurchase date (which shall be no earlier than 30 days nor later
than 60 days from the date such notice is mailed); and
(4) the instructions determined by the Company, consistent with the covenant
described hereunder, that a Holder must follow in order to have its
Notes repurchased.
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The Company shall comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Notes pursuant to the covenant described
hereunder. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of the covenant described hereunder,
the Company shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under the covenant
described hereunder by virtue thereof.
The occurrence of certain of the events which would constitute a Change of
Control would constitute a default under the Senior Credit Facility. Future
Senior Indebtedness of the Company may contain prohibitions of certain events
which would constitute a Change of Control or require such Senior Indebtedness
to be repurchased upon a Change of Control. Moreover, the exercise by the
Holders of their right to require the Company to repurchase the Notes could
cause a default under such Senior Indebtedness, even if the Change of Control
itself does not, due to the financial effect of such repurchase on the Company.
Finally, the Company's ability to pay cash to the Holders upon a repurchase may
be limited by the Company's then existing financial resources. There can be no
assurance that sufficient funds will be available when necessary to make any
repurchases required in connection with a Change of Control. The Company's
failure to purchase the Notes in connection with a Change in Control would
result in a default under the Indenture which would, in turn, constitute a
default under the Senior Credit Facility. In such circumstances, the
subordination provisions in the Indenture would likely restrict payment to the
Holders of the Notes.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth in the next paragraph, the Notes sold will be issued in
the form of a Global Note. The Global Note will be deposited with, or on behalf
of, the Depository and registered in the name of the Depository or its nominee.
Except as set forth below, the Global Note may be transferred, in whole and not
in part, only to the Depository or another nominee of the Depository. Investors
may hold their beneficial interests in the Global Note directly through the
Depository if they have an account with the Depository or indirectly through
organizations which have accounts with the Depository.
Notes that are issued as described below under "-- Certificated Notes" will
be issued in definitive form. Upon the transfer of a Note in definitive form,
such Note will, unless the Global Note has previously been exchanged for Notes
in definitive form, be exchanged for an interest in the Global Note representing
the principal amount of Notes being, transferred.
The Depository has advised the Company as follows: The Depository is a
limited-purpose trust company and organized under the laws of the State of New
York, a member of the Federal Reserve System, a "clearing corporation" within
the meaning of the New York Uniform Commercial Code, and "a clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934 (the "Exchange Act"). The Depository was created to hold securities
of institutions that have accounts with the Depository ("participants") and to
facilitate the clearance and settlement of securities transactions among its
participants in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical movement
of securities certificates. The Depository's participants include securities
brokers and dealers (which may include the Initial Purchasers), banks, trust
companies, clearing corporations and certain other organizations. Access to the
Depository's book-entry system is also available to others such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a participant, whether directly or indirectly.
Upon the issuance of the Global Note, the Depository will credit, on its
book-entry registration and transfer system, the principal amount of the Notes
represented by such Global Note to the accounts of participants. The accounts to
be credited shall be designated by the Initial Purchasers of such Notes.
Ownership of beneficial interests in the Global Note will be limited to
participants or persons that may hold interests through participants. Ownership
of beneficial interests in the Global Note will be shown on, and the transfer of
those ownership interests will be effected only through, records maintained by
the Depository (with respect to participants' interest) and such participants
(with respect to the owners of beneficial interests in the Global Note other
than participants). The laws of some jurisdictions may require that certain
purchasers of securities take physical delivery of such securities in definitive
form. Such limits and laws may impair the ability to transfer or pledge
beneficial interests in the Global Note.
So long as the Depository, or its nominee, is the registered holder and
owner of the Global Note, the Depository or such nominee, as the case may be,
will be considered the sole legal owner and holder of the related Notes for all
purposes of such Notes and the Indenture. Except as set forth below, owners of
beneficial interests in the Global Note will not be entitled to have the Notes
represented by the Global Note registered in their names, will not receive or be
entitled to receive physical delivery of certificated Notes in definitive form
and will not be considered to be the owners or holders of any Notes under the
Global Note. The Company
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understands that under existing industry practice, in the event an owner of a
beneficial interest in the Global Note desires to take any action that the
Depository, as the holder of the Global Note, is entitled to take, the
Depository would authorize the participants to take such action, and that the
participants would authorize beneficial owners owning through such participants
to take such action or would otherwise act upon the instructions of beneficial
owners owning through them.
Payment of principal of and interest on Notes represented by the Global Note
registered in the name of and held by the Depository or its nominee will be made
to the Depository or its nominee, as the case may be, as the registered owner
and holder of the Global Note.
The Company expects that the Depository or its nominee, upon receipt of any
payment of principal of or interest on the Global Note, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the Global Note as
shown on the records of the Depository or its nominee. The Company also expects
that payments by participants to owners of beneficial interests in the Global
Note held through such participants will be governed by standing instructions
and customary practices and will be the responsibility of such participants. The
Company will not have any responsibility or liability for any aspect of the
records relating to, or payments made on account of, beneficial ownership
interests in the Global Note for any Note or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests or for any
other aspect of the relationship between the Depository and its participants or
the relationship between such participants and the owners of beneficial
interests in the Global Note owning through such participants.
Unless and until it is exchanged in whole or in part for certificated Notes
in definitive form, the Global Note may not be transferred except as a whole by
the Depository to a nominee of such Depository or by a nominee of such
Depository to such Depository or another nominee of such Depository.
Although the Depository has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Note among participants of the
Depository, it is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. Neither the
Trustee nor the Company will have any responsibility for the performance by the
Depository or its participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.
CERTIFICATED NOTES
The Notes represented by the Global Note are exchangeable for certificated
Notes in definitive form of like tenor as such Notes in denominations of
U.S.$1,000 and integral multiples thereof if:
(1) the Depository notifies the Company that it is unwilling or unable to
continue as Depository for the Global Note or if at any time the
Depository ceases to be a clearing agency registered under the Exchange
Act,
(2) the Company in its discretion at any time determines not to have all of
the Notes represented by the Global Note or
(3) a default entitling the holders of the Notes to accelerate the maturity
thereof has occurred and is continuing.
Any Note that is exchangeable pursuant to the preceding sentence is exchangeable
for certificated Notes issuable in authorized denominations and registered in
such names as the Depository shall direct. Subject to the foregoing, the Global
Note is not exchangeable, except for a Global Note of the same aggregate
denomination to be registered in the name of the Depository or its nominee.
CERTAIN COVENANTS
The Indenture contains covenants including, among others, the following:
Limitation on Indebtedness. (a) The Company shall not, and shall not permit
any Restricted Subsidiary to, Incur, directly or indirectly, any Indebtedness
unless, immediately after giving effect to such Incurrence, the Consolidated
Coverage Ratio exceeds 2.00 to 1 if such Indebtedness is Incurred prior to June
15, 1999 or 2.25 to 1 if such Indebtedness is Incurred thereafter.
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(b) Notwithstanding the foregoing paragraph (a), the Company and its
Restricted Subsidiaries may Incur any or all of the following Indebtedness:
(1) Indebtedness and other Obligations Incurred pursuant to the Bank Credit
Agreements; provided, however, that, after giving effect to any such
Incurrence, the aggregate principal amount of such Indebtedness and
other Obligations then outstanding does not exceed the greater of (i)
$110 million and (ii) the sum of (x) 60% of the net book value of the
inventory of the Company and its Restricted Subsidiaries and (y) 90% of
the net book value of the accounts receivable of the Company and its
Restricted Subsidiaries, in each case determined in accordance with GAAP
and (z) $70 million;
(2) Indebtedness represented by the Notes issued on the Issue Date, the
Exchange Notes and the Existing Senior Subordinated Notes;
(3) Indebtedness outstanding on the Existing Senior Subordinated Note Issue
Date (other than Indebtedness described in clause (1) of this
paragraph), including, without limitation, the Existing Preferred Stock
and Indebtedness that was Incurred after the Existing Senior
Subordinated Issue Date in compliance with the Existing Indenture;
(4) Indebtedness of the Company owed to and held by any Wholly Owned
Subsidiary or Indebtedness of a Restricted Subsidiary owed to and held
by the Company or a Wholly Owned Subsidiary; provided, however, that any
subsequent issuance or transfer of any Capital Stock which results in
any such Wholly Owned Subsidiary ceasing to be a Wholly Owned Subsidiary
or any subsequent transfer of such Indebtedness (other than to the
Company or a Wholly Owned Subsidiary) shall be deemed, in each case, to
constitute the Incurrence of such Indebtedness by the issuer thereof;
(5) Refinancing Indebtedness in respect of Indebtedness Incurred pursuant to
paragraph (a) or pursuant to clause (1), (2), (3) or this clause (5);
(6) Indebtedness in respect of performance bonds, bankers' acceptances,
letters of credit and surety or appeal bonds entered into by the Company
and the Restricted Subsidiaries in the ordinary course of their
business;
(7) Hedging Obligations consisting of Interest Rate Agreements and Currency
Agreements entered into in the ordinary course of business and not for
the purpose of speculation; provided, however, that, in the case of
Currency Agreements and Interest Rate Agreements, such Currency
Agreements and Interest Rate Agreements do not increase the Indebtedness
of the Company outstanding at any time other than as a result of
fluctuations in foreign currency exchange rates or interest rates or by
reason of fees, indemnities and compensation payable thereunder;
(8) Purchase Money Indebtedness and Capital Lease Obligations Incurred to
finance the acquisition or improvement by the Company or a Restricted
Subsidiary of any assets in the ordinary course of business and which do
not exceed $15 million in the aggregate at any time outstanding;
(9) Indebtedness and other Obligations represented by the Subsidiary
Guaranties and Guarantees of Indebtedness Incurred pursuant to the Bank
Credit Agreements;
(10) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business, provided that such
Indebtedness is extinguished within five business days of Incurrence;
(11) Indebtedness of the Company and its Restricted Subsidiaries arising from
agreements providing for indemnification, adjustment of purchase price
or similar obligations, in any case Incurred in connection with the
disposition of any assets of the Company or any Restricted Subsidiary
(other than Guarantees of Indebtedness Incurred by any Person acquiring
all or any portion of such assets for the purpose of financing such
acquisition), in a principal amount not to exceed the gross proceeds
actually received by the Company or any Restricted Subsidiary in
connection with such disposition;
(12) Tooling Indebtedness; and
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(13) Indebtedness in an aggregate principal amount which, together with all
other Indebtedness of the Company and its Restricted Subsidiaries
outstanding on the date of such Incurrence (other than Indebtedness
permitted by clauses (1) through (12) above or paragraph (a)), does not
exceed $20 million.
(c) Notwithstanding the foregoing, the Company shall not, and shall not
permit any Restricted Subsidiary to, Incur any Indebtedness pursuant to the
foregoing paragraph (b) if the proceeds thereof are used, directly or
indirectly, to Refinance:
(i) any Subordinated Obligations unless such Indebtedness shall be
subordinated to the Notes, the Existing Senior Subordinated Notes and
the Subsidiary Guaranties, as applicable, to at least the same extent as
such Subordinated Obligations or
(ii) any Senior Subordinated Indebtedness unless such Indebtedness shall be
Senior Subordinated Indebtedness or shall be subordinated to the Notes,
the Existing Senior Subordinated Notes and the Subsidiary Guaranties, as
applicable.
(d) For purposes of determining compliance with the foregoing covenant,
(i) in the event that an item of Indebtedness meets the criteria of more
than one of the types of Indebtedness described above, the Company, in
its sole discretion, will classify such item of Indebtedness and only be
required to include the amount and type of such Indebtedness in one of
the above clauses and
(ii) an item of Indebtedness may be divided and classified in more than one
of the types of Indebtedness described above.
(e) Notwithstanding paragraphs (a) and (b) above, the Company shall not, and
shall not permit any Subsidiary Guarantor to, Incur:
(i) any Indebtedness if such Indebtedness is subordinate or junior in
ranking in any respect to any Senior Indebtedness of the Company or such
Subsidiary Guarantor, as applicable, unless such Indebtedness is Senior
Subordinated Indebtedness or is expressly subordinated in right of
payment to Senior Subordinated Indebtedness or
(ii) any Secured Indebtedness that is not Senior Indebtedness of the Company
or such Subsidiary Guarantor, as applicable, unless contemporaneously
therewith effective provision is made to secure the Notes or the
Subsidiary Guaranty, as applicable, equally and ratably with such
Secured Indebtedness for so long as such Secured Indebtedness is secured
by a Lien.
Limitation on Restricted Payments. (a) The Company shall not, and shall not
permit any Restricted Subsidiary, directly or indirectly, to make a Restricted
Payment if at the time the Company or such Restricted Subsidiary makes such
Restricted Payment:
(1) a Default shall have occurred and be continuing (or would result
therefrom);
(2) the Company is not able to Incur an additional $1.00 of Indebtedness
pursuant to paragraph (a) of the covenant described under "-- Limitation
on Indebtedness"; or
(3) the aggregate amount of such Restricted Payment together with all other
Restricted Payments (the amount of any payments made in property other
than cash to be valued at the fair market value of such property, as
determined in good faith by the Board of Directors) declared or made
since the Existing Senior Subordinated Note Issue Date would exceed the
sum of:
(A) 50% of the Consolidated Net Income accrued during the period (treated as
one accounting period) from the beginning of the fiscal quarter
immediately following the fiscal quarter during which the Series A Notes
were originally issued to the end of the most recent fiscal quarter
prior to the date of such Restricted Payment for which financial
statements are available (or, in case such Consolidated Net Income
accrued during such period (treated as one accounting period) shall be a
deficit, minus 100% of such deficit);
(B) the aggregate Net Cash Proceeds received by the Company from the
issuance or sale of its Capital Stock (other than Disqualified Stock)
subsequent to the Existing Senior Subordinated Note Issue Date (other
than an issuance or sale to a Subsidiary of the Company);
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(C) the amount by which Indebtedness of the Company or its Restricted
Subsidiaries is reduced on the Company's balance sheet upon the
conversion or exchange (other than by a Subsidiary of the Company)
subsequent to the Existing Senior Subordinated Note Issue Date, of any
Indebtedness of the Company or its Restricted Subsidiaries convertible
or exchangeable for Capital Stock (other than Disqualified Stock) of the
Company (less the amount of any cash, or the fair value of any other
property, distributed by the Company or any Restricted Subsidiary upon
such conversion or exchange);
(D) an amount equal to the sum of (i) the net reduction in Investments in
Unrestricted Subsidiaries resulting from dividends, repayments of loans
or advances or other transfers of assets subsequent to the Existing
Senior Subordinated Note Issue Date, in each case to the Company or any
Restricted Subsidiary from Unrestricted Subsidiaries, and (ii) the
portion (proportionate to the Company's equity interest in such
Subsidiary) of the fair market value of the net assets of an
Unrestricted Subsidiary at the time such Unrestricted Subsidiary is
designated a Restricted Subsidiary; provided, however, that the
foregoing sum shall not exceed, in the case of any Unrestricted
Subsidiary, the amount of Investments previously made (and treated as a
Restricted Payment) by the Company or any Restricted Subsidiary in such
Unrestricted Subsidiary; and
(E) $5 million.
(b) The provisions of the foregoing paragraph (a) shall not prohibit:
(i) any purchase or redemption of Capital Stock or Subordinated Obligations
of the Company or any Restricted Subsidiary made in exchange for, or out
of the proceeds of the substantially concurrent sale of, Capital Stock
of the Company (other than Disqualified Stock and other than Capital
Stock issued or sold to a Subsidiary of the Company); provided, however,
that (A) such purchase or redemption shall be excluded from the
calculation of the amount of Restricted Payments and (B) the Net Cash
Proceeds from such sale shall be excluded from the calculation of
amounts under clause (3)(B) of paragraph (a) above;
(ii) any purchase or redemption of (A) Subordinated Obligations of the
Company made in exchange for, or out of the proceeds of the
substantially concurrent sale of, Indebtedness of the Company which is
permitted to be Incurred pursuant to paragraphs (b) and (c) of the
covenant described under "-Limitation on Indebtedness" or (B)
Subordinated Obligations of a Restricted Subsidiary made in exchange
for, or out of the proceeds of the substantially concurrent sale of,
Indebtedness of such Restricted Subsidiary or the Company which is
permitted to be Incurred pursuant to paragraphs (b) and (c) of the
covenant described under "--Limitation on Indebtedness"; provided,
however, that such purchase or redemption shall be excluded from the
calculation of the amount of Restricted Payments;
(iii) any purchase or redemption of (A) Disqualified Stock of the Company
made in exchange for, or out of the proceeds of the substantially
concurrent sale of, Disqualified Stock of the Company or (B)
Disqualified Stock of a Restricted Subsidiary made in exchange for, or
out of the proceeds of the substantially concurrent sale of,
Disqualified Stock of such Restricted Subsidiary or the Company;
provided, however, that (1) at the time of such exchange, no Default or
Event of Default shall have occurred and be continuing or would result
therefrom and (2) such purchase or redemption will be excluded from the
calculation of the amount of Restricted Payments;
(iv) dividends paid within 60 days after the date of declaration thereof if
at such date of declaration such dividend would have complied with this
covenant; provided, however, that at the time of payment of such
dividend, no other Default shall have occurred and be continuing (or
would result therefrom); provided, further, however, that such dividend
shall be included in the calculation of the amount of Restricted
Payments;
(v) the repurchase of shares of, or options to purchase shares of, Capital
Stock of the Company or any of its Subsidiaries from officers, former
officers employees, former employees, directors or former directors of
the Company or any of its Subsidiaries (or permitted transferees of such
employees, former employees, directors or former directors), pursuant to
the terms of the agreements (including employment agreements) or plans
(or amendments thereto) approved by the Board of Directors under which
such individuals purchase or sell, or are granted the option to purchase
or sell, shares of such common stock; provided, however, that the
aggregate amount of such repurchases shall not exceed $2.5 million in
any one year and $5.0 million in the aggregate; provided, further,
however, that (1) at the time of such repurchase, no Default or Event of
Default shall have occurred and be continuing or would result therefrom
and (2) all such repurchases shall be included in the calculation of the
amount of Restricted Payments; or
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(vi) dividends and redemptions required to be made with respect to the
Existing Preferred Stock; provided, however, that (1) at the time of
any such dividend or redemption, no Default or Event of Default shall
have occurred and be continuing or would result therefrom and (2) all
such dividends and redemptions shall be included in the calculation of
the amount of Restricted Payments.
Limitation on Restrictions on Distributions from Restricted Subsidiaries.
The Company shall not, and shall not permit any Restricted Subsidiary to, create
or otherwise cause or permit to exist or become effective any consensual
encumbrance or consensual restriction on the ability of any Restricted
Subsidiary:
(a) to pay dividends or make any other distributions on its Capital Stock
to the Company or a Restricted Subsidiary or pay any Indebtedness owed
to the Company,
(b) to make any loans or advances to the Company or
(c) transfer any of its property or assets to the Company, except:
(i) any encumbrance or restriction pursuant to an agreement in effect at or
entered into on the Existing Senior Subordinated Note Issue Date;
(ii) any encumbrance or restriction with respect to a Restricted Subsidiary
pursuant to an agreement relating to any Indebtedness Incurred by such
Restricted Subsidiary which was entered into on or prior to the date on
which such Restricted Subsidiary was acquired by the Company (other
than as consideration in, or to provide all or any portion of the funds
or credit support utilized to consummate, the transaction or series of
related transactions pursuant to which such Restricted Subsidiary
became a Restricted Subsidiary or was acquired by the Company) and
outstanding on such date;
(iii) any encumbrance or restriction pursuant to an agreement effecting a
Refinancing of Indebtedness Incurred pursuant to an agreement referred
to in clause (i) or (ii) of this covenant (or effecting a Refinancing
of such Refinancing Indebtedness pursuant to this clause (iii)) or
contained in any amendment to an agreement referred to in clause (i) or
(ii) of this covenant or this clause (iii); provided, however, that the
encumbrances and restrictions with respect to such Restricted
Subsidiary contained in any such refinancing agreement or amendment are
no more restrictive in any material respect than the encumbrances and
restrictions with respect to such Restricted Subsidiary contained in
such agreements;
(iv) any such encumbrance or restriction consisting of customary
non-assignment provisions in leases governing leasehold interests to
the extent such provisions restrict the transfer of the lease or the
property leased thereunder;
(v) in the case of clause (c) above, restrictions contained in security
agreements or mortgages securing Indebtedness (other than Tooling
Indebtedness) of a Restricted Subsidiary to the extent such
restrictions restrict the transfer of the property subject to such
security agreements or mortgages;
(vi) any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of
all or substantially all the Capital Stock or assets of such Restricted
Subsidiary pending the closing of such sale or disposition; and
(vii) any restriction imposed by applicable law.
Limitation on Sales of Assets and Subsidiary Stock. The Company shall not,
and shall not permit any Restricted Subsidiary to, consummate any Asset
Disposition unless the Company or such Restricted Subsidiary receives
consideration at the time of such Asset Disposition at least equal to the fair
market value (including as to the value of all non-cash consideration), as
determined in good faith by the Board of Directors, of the shares and assets
subject to such Asset Disposition and at least 75% of the consideration therefor
received by the Company or such Restricted Subsidiary is in the form of cash or
cash equivalents. For the purposes of this covenant, the following are deemed to
be cash and cash equivalents: (1) the assumption of Indebtedness of the Company
or any Restricted Subsidiary and the release of the Company or such Restricted
Subsidiary from all liability on such Indebtedness in connection with such Asset
Disposition and (2) securities received by the Company or any Restricted
Subsidiary from the transferee that are immediately converted by the Company or
such Restricted Subsidiary into cash.
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With respect to any Asset Disposition occurring on or after the Existing
Senior Subordinated Note Issue Date from which the Company or any Restricted
Subsidiary receives Net Available Cash, the Company or such Restricted
Subsidiary shall:
(i) within 360 days after the date such Net Available Cash is received and
to the extent the Company or such Restricted Subsidiary elects (or is
required by the terms of any Senior Indebtedness) to (A) apply an
amount equal to such Net Available Cash to prepay, repay or purchase
Senior Indebtedness of the Company or such Restricted Subsidiary, in
each case owing to a Person other than the Company or any Affiliate of
the Company, or (B) invest an equal amount, or the amount not so
applied pursuant to clause (A), in Additional Assets (including by
means of an Investment in Additional Assets by a Restricted Subsidiary
with Net Available Cash received by the Company or another Restricted
Subsidiary) and
(ii) apply such excess Net Available Cash (to the extent not applied
pursuant to clause (i)) as provided in the following paragraphs of the
covenant described hereunder; provided, however, that in connection
with any prepayment, repayment or purchase of Senior Indebtedness
pursuant to clause (A) above, the Company or such Restricted Subsidiary
shall retire such Senior Indebtedness and shall cause the related loan
commitment (if any) to be permanently reduced in an amount equal to the
principal amount so prepaid, repaid or purchased.
The amount of Net Available Cash required to be applied pursuant to clause (ii)
above and not theretofore so applied shall constitute "Excess Proceeds." Pending
application of Net Available Cash pursuant to this provision, such Net Available
Cash shall be invested in Temporary Cash Investments.
If at any time the aggregate amount of Excess Proceeds not theretofore
subject to an Excess Proceeds Offer (as defined below) totals at least $5
million, the Company shall, not later than 30 days after the end of the period
during which the Company is required to apply such Excess Proceeds pursuant to
clause (i) of the immediately preceding paragraph (or, if the Company so elects,
at any time within such period), make an offer (an "Existing Note Excess
Proceeds Offer"), first, to purchase the Existing Senior Subordinated Notes, if
any are outstanding, in accordance with the Existing Indenture (as in effect on
the Issue Date) and, second, in the event that any Excess Proceeds are not
applied to an Existing Note Excess Proceeds Offer to purchase from the Holders
on a pro rata basis an aggregate principal amount of Notes equal to any
remaining Excess Proceeds (rounded down to the nearest multiple of $1,000) on
such date (an "Excess Proceeds Offer"), at a purchase price equal to 100% of the
principal amount of such Notes, plus, in each case, accrued interest (if any) to
the date of purchase (the "Excess Proceeds Payment"). Upon completion of an
Excess Proceeds Offer the amount of Excess Proceeds remaining after application
pursuant to such Excess Proceeds Offer, (including payment of the purchase price
for Notes duly tendered) may be used by the Company for any corporate purpose
(to the extent not otherwise prohibited by the Indenture).
The Company shall comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
thereunder in the event that such Excess Proceeds are received by the Company
under the covenant described hereunder and the Company is required to repurchase
the Notes as described above. To the extent that the provisions of any
securities laws or regulations conflict with the provisions of the covenant
described hereunder, the Company shall comply with the applicable securities
laws and regulations and shall not be deemed to have breached its obligations
under the covenant described hereunder by virtue thereof.
Limitation on Affiliate Transactions. (a) The Company shall not, and shall
not permit any Restricted Subsidiary to, enter into or permit to exist any
transaction or series of related transactions (including the purchase, sale,
lease or exchange of any property, employee compensation arrangements or the
rendering of any service) with any Affiliate of the Company (an "Affiliate
Transaction") unless the terms thereof:
(1) are no less favorable to the Company or such Restricted Subsidiary than
those that could be obtained at the time of such transaction in
arm's-length dealings with a Person who is not such an Affiliate,
(2) if such Affiliate Transaction (or series of related Affiliate
Transactions) involve aggregate payments in an amount in excess of $1
million in any one year, (i) are set forth in writing, (ii) comply with
clause (1) and (iii) have been approved by a majority of the
disinterested members of the Board of Directors and
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(3) if such Affiliate Transaction (or series of related Affiliate
Transactions) involve aggregate payments in an amount in excess of $5
million in any one year, (i) comply with clause (2) and (ii) have been
determined by a nationally recognized investment banking firm to be
fair, from a financial standpoint, to the Company and its Restricted
Subsidiaries.
(b) The provisions of the foregoing paragraph (a) shall not prohibit:
(i) any Restricted Payment permitted to be paid pursuant to the covenant
described under "-- Limitation on Restricted Payments,"
(ii) any issuance of securities, or other payments, awards or grants in
cash, securities or otherwise, pursuant to, or the funding of,
employment arrangements, stock options and stock ownership plans in the
ordinary course of business and approved by the Board of Directors,
(iii) the grant of stock options or similar rights to employees and
directors of the Company in the ordinary course of business and
pursuant to plans approved by the Board of Directors,
(iv) loans or advances to employees in the ordinary course of business of
the Company or its Restricted Subsidiaries,
(v) fees, compensation or employee benefit arrangements paid to and
indemnity provided for the benefit of directors, officers or employees
of the Company or any Subsidiary in the ordinary course of business,
(vi) payments made to The Oxford Investment Group, Inc. for (x) management
and consulting services in an aggregate amount not to exceed $1,000,000
in any one year and (y) investment banking services in connection with
acquisition of assets or businesses, by the Company or any Subsidiary
not to exceed the greater of (A) 1.25% of the purchase price paid by
the Company or such Subsidiary for the assets or business acquired
(including Indebtedness assumed by the Company or such Subsidiary as
part of such acquisition) and (B) $200,000; or
(vii) any Affiliate Transaction between the Company and a Restricted
Subsidiary or between Restricted Subsidiaries in the ordinary course of
business (so long as the other stockholders of any participating
Restricted Subsidiaries which are not Wholly Owned Restricted
Subsidiaries are not themselves Affiliates of the Company).
Limitation on the Issuance or Sale of Capital Stock of Restricted Subsidiaries.
The Company shall not:
(i) sell, pledge, hypothecate or otherwise dispose of any shares of Capital
Stock of a Restricted Subsidiary (other than pledges of Capital Stock
securing Senior Indebtedness) or
(ii) permit any Restricted Subsidiary, directly or indirectly, to issue or
sell or otherwise dispose of any shares of its Capital Stock other
than:
(A) to the Company or a Wholly Owned Subsidiary,
(B) directors' qualifying shares,
(C) if, immediately after giving effect to such issuance or sale, such
Restricted Subsidiary would no longer constitute a Restricted
Subsidiary or
(D) the issuance of Preferred Stock by any Subsidiary Guarantor as partial
payment for the acquisition by such Subsidiary Guarantor of Additional
Assets.
Notwithstanding the foregoing, the Company may sell, and may permit a Restricted
Subsidiary to issue and sell, up to 20% of the outstanding Common Stock of a
Restricted Subsidiary to officers and employees of such Restricted Subsidiary.
The proceeds of any sale of such Capital Stock permitted hereby will be treated
as Net Available Cash from an Asset Disposition and must be applied in
accordance with the terms of the covenant described under "-- Limitation on
Sales of Assets and Subsidiary Stock."
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Limitation on Liens. The Company shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, Incur or permit to exist any
Lien of any nature whatsoever on any property of the Company or any Restricted
Subsidiary (including Capital Stock of a Restricted Subsidiary), whether owned
at the Issue Date or thereafter acquired, which secures Indebtedness that ranks
pari passu with or is subordinated to the Notes or the Subsidiary Guaranties
unless:
(i) if such Lien secures Indebtedness that ranks pari passu with the Notes
and the Subsidiary Guaranties, the Notes are secured on an equal and
ratable basis with the obligation so secured until such time as such
obligation is no longer secured by a Lien or
(ii) if such Lien secures Indebtedness that is subordinated to the Notes and
the Subsidiary Guaranties, such Lien shall be subordinated to a Lien
granted to the Holders on the same collateral as that securing such
Lien to the same extent as such subordinated Indebtedness is
subordinated to the Note and the Subsidiary Guaranties.
Merger and Consolidation. The Company shall not consolidate with or merge
with or into, or convey, transfer or lease, in one transaction or a series of
related transactions, all or substantially all its assets to, any Person,
unless:
(i) the resulting, surviving or transferee Person (the "Successor Company")
shall be a Person organized and existing under the laws of the United
States of America, any State thereof or the District of Columbia and
the Successor Company (if not the Company) shall expressly assume, by
an indenture supplemental thereto, executed and delivered to the
Trustee, in form satisfactory to the Trustee, all the obligations of
the Company under the Notes and the Indenture;
(ii) immediately after giving effect to such transaction on a pro forma
basis (and treating any Indebtedness which becomes an obligation of the
Successor Company or any Subsidiary as a result of such transaction as
having been Incurred by such Successor Company or such Subsidiary at
the time of such transaction), no Default shall have occurred and be
continuing;
(iii) except in the case of a merger the sole purpose of which is to change
the Company's jurisdiction of incorporation, immediately after giving
effect to such transaction on a pro forma basis, the Successor Company
would be able to Incur an additional $1.00 of Indebtedness pursuant to
paragraph (a) of the covenant described under "-- Limitation on
Indebtedness";
(iv) immediately after giving effect to such transaction on a pro forma
basis, the Successor Company shall have Consolidated Net Worth in an
amount that is not less than the Consolidated Net Worth of the Company
immediately prior to such transaction; and
(v) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if
any) comply with the Indenture.
Notwithstanding the foregoing clauses (ii), (iii) and (iv), any Restricted
Subsidiary may consolidate with, merge into or transfer all or part of its
properties and assets to the Company.
The Successor Company shall be the successor to the Company and shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture, but the predecessor Company in the case of a
conveyance, transfer or lease shall not be released from the obligation to pay
the principal of and interest on the Notes.
The Company shall not permit any Subsidiary Guarantor to consolidate with or
merge with or into, or convey, transfer or lease, in one transaction or a series
of transactions, all or substantially all its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (if not such Subsidiary)
shall be a Person organized and existing under the laws of the United
States of America, any State thereof or the District of Columbia and
the Successor Company (if not such Subsidiary) shall expressly assume,
by a Guaranty Agreement, in form satisfactory to the Trustee, all the
obligations of such Subsidiary under its Subsidiary Guaranty;
(ii) immediately after giving effect to such transaction on a pro forma
basis (and treating any Indebtedness which becomes an obligation of the
resulting, surviving or transferee Person as a result of such
transaction as having been Incurred by such Person at the time of such
transaction), no Default shall have occurred and be continuing; and
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(iii) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such Guaranty Agreement comply
with the Indenture.
The provisions of clauses (i) and (iii) above shall not apply to any
transactions which constitute an Asset Disposition if the Company has complied
with the applicable provisions of the covenant described under "-- Limitation on
Sales of Assets and Subsidiary Stock" above.
Future Guarantors. The Company shall cause each Restricted Subsidiary that
at any time becomes an obligor or guarantor with respect to any obligations
under one or more Bank Credit Agreements to execute and deliver to the Trustee a
supplemental indenture pursuant to which such Restricted Subsidiary will
Guarantee payment of the Notes on the same terms and conditions as those set
forth in the Indenture. Each Subsidiary Guaranty will be limited in amount to an
amount not to exceed the maximum amount that can be Guaranteed by the applicable
Subsidiary Guarantor without rendering such Subsidiary Guaranty voidable under
applicable law relating to fraudulent conveyance or fraudulent transfer or
similar laws affecting the rights of creditors generally.
SEC Reports. Notwithstanding that the Company may not be required to remain
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, the Company shall file with the SEC and provide the Trustee and Noteholders
and prospective Noteholders (upon request) with such annual reports and such
information, documents and other reports as are specified in such Sections and
applicable to a U.S. corporation subject to such Sections, such information,
documents and other reports to be so filed and provided at the times specified
for the filing of such information, documents and reports under such Sections;
provided, however, that the Company shall not be required to file any report,
document or other information with the SEC if the SEC does not permit such
filing.
DEFAULTS
An Event of Default is defined in the Indenture as:
(i) a default in the payment of interest on the Notes when due (whether or
not such payment is prohibited by the provisions described under
"Subordination" above), continued for 30 days,
(ii) a default in the payment of principal of any Note when due at its
Stated Maturity, upon optional redemption, upon required repurchase,
upon declaration or otherwise (whether or not such payment is
prohibited by the provisions described under "Subordination" above),
(iii) the failure by the Company, to comply for 30 days after notice with
any of its obligations under the covenants described under "--
Limitation on Indebtedness," "-- Limitation on Restricted Payments,"
"Limitation on Sales of Assets and Subsidiary Stock," and "Merger,
Consolidation and Sale of Assets",
(iv) the failure by the Company to comply for 60 days after notice with its
other agreements contained in the Indenture,
(v) Indebtedness of the Company or any Restricted Subsidiary is not paid
within any applicable grace period after final maturity or is
accelerated by the holders thereof because of a default and the total
amount of such Indebtedness unpaid or accelerated exceeds $5 million
(the "cross-acceleration provision"),
(vi) certain events of bankruptcy, insolvency or reorganization of the
Company or a Significant Subsidiary (the "bankruptcy provisions"),
(vii) any judgment or decree for the payment of money in excess of $5
million is rendered against the Company or a Restricted Subsidiary,
remains outstanding following such judgment and is not discharged,
waived or stayed within 60 days after entry of such judgment or decree
(the "judgment default provision"), or
(viii) a Subsidiary Guaranty ceases to be in full force and effect (other
than in accordance with the terms of such Subsidiary Guaranty) or a
Subsidiary Guarantor denies or disaffirms its obligations under its
Subsidiary Guaranty.
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However, a default under clause (iii) or (iv) will not constitute an Event
of Default until the Trustee or the holders of 25% in principal amount of the
outstanding Notes notify the Company of the default and the Company does not
cure such default within the time specified in clauses (iii) and (iv) hereof
after receipt of such notice.
If an Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the outstanding Notes may declare the
principal of and accrued but unpaid interest on all the Notes to be due and
payable. Upon such a declaration, such principal and interest shall be due and
payable immediately. If an Event of Default relating to certain events of
bankruptcy, insolvency or reorganization of the Company occurs and is
continuing, the principal of and interest on all the Notes will ipso facto
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any Holders of the Notes. Under certain
circumstances, the Holders of a majority in principal amount of the outstanding
Notes may rescind any such acceleration with respect to the Notes and its
consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the Holders unless such Holders
have offered to the Trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of
principal, premium (if any) or interest when due, no Holder may pursue any
remedy with respect to the Indenture or the Notes unless:
(i) such Holder has previously given the Trustee notice that an Event of
Default is continuing,
(ii) Holders of at least 25% in principal amount of the outstanding Notes
have requested the Trustee to pursue the remedy,
(iii) such Holders have offered the Trustee reasonable security or indemnity
against any loss, liability or expense,
(iv) the Trustee has not complied with such request within 60 days after the
receipt thereof and the offer of security or indemnity and
(v) the Holders of a majority in principal amount of the outstanding Notes
have not given the Trustee a direction inconsistent with such request
within such 60-day period.
Subject to certain restrictions, the Holders of a majority in principal
amount of the outstanding Notes are given the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or of exercising any trust or power conferred on the Trustee. The Trustee,
however, may refuse to follow any direction that conflicts with law or the
Indenture or that the Trustee determines is unduly prejudicial to the rights of
any other Holder or that would involve the Trustee in personal liability.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each Holder notice of the Default
within 90 days after it occurs. Except in the case of a Default in the payment
of principal of or interest on any Note, the Trustee may withhold notice if and
so long as a committee of its trust officers determines that withholding notice
is not opposed to the interest of the Holders. In addition, the Company is
required to deliver to the Trustee, within 120 days after the end of each fiscal
year, a certificate indicating whether the signers thereof know of any Default
that occurred during the previous year. The Company also is required to deliver
to the Trustee, within 30 days after the occurrence thereof, written notice of
any event which would constitute certain Defaults, their status and what action
the Company is taking or proposes to take in respect thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the consent
of the Holders of a majority in principal amount of the Notes then outstanding
(including consents obtained in connection with a tender offer or exchange for
the Notes) and any past default or compliance with any provisions may also be
waived with the consent of the Holders of a majority in principal amount of the
Notes then outstanding. However, without the consent of each Holder of an
outstanding Note affected thereby, no amendment may, among other things:
(i) reduce the amount of Notes whose Holders must consent to an amendment,
(ii) reduce the rate of or extend the time for payment of interest on any
Note,
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(iii) reduce the principal of or extend the Stated Maturity of any Note,
(iv) reduce the premium payable upon the redemption of any Note or change
the time at which any Note may be redeemed as described under "--
Optional Redemption" above,
(v) make any Note payable in money other than that stated in the Note,
(vi) impair the right of any Holder to institute suit for the enforcement
of any payment on or with respect to such Holder's Notes or any
Subsidiary Guaranty,
(vii) make any change in the amendment provisions which require each
Holder's consent or in the waiver provisions or
(viii) make any change to the subordination provisions of the Indenture that
would adversely affect the Noteholders.
Without the consent of any Holder, the Company and Trustee may amend the
Indenture to cure any ambiguity, omission, defect or inconsistency, to provide
for the assumption by a successor corporation of the obligations of the Company
under the Indenture, to provide for uncertificated Notes in addition to or in
place of certificated Notes (provided that the uncertificated Notes are issued
in registered form for purposes of Section 163(f) of the Code, or in a manner
such that the uncertificated Notes are described in Section 163(f)(2)(B) of the
Code), to add guarantees with respect to the Notes, to release Subsidiary
Guarantors when permitted by the Indenture, to secure the Notes, to add to the
covenants of the Company for the benefit of the Holders or to surrender any
right or power conferred upon the Company, to make any change that does not
adversely affect the rights of any Holder or to comply with any requirement of
the SEC in connection with the qualification of the Indenture under the Trust
Indenture Act. However, no amendment may be made to the subordination provisions
of the Indenture that adversely affects the rights of any holder of Senior
Indebtedness then outstanding unless the holders of such Senior Indebtedness (or
their Representative) consents to such change.
The consent of the Holders is not necessary under the Indenture to approve
the particular form of any proposed amendment. It is sufficient if such consent
approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Company is
required to mail to Holders a notice briefly describing such amendment. However,
the failure to give such notice to all Holders, or any defect therein, will not
impair or affect the validity of the amendment.
TRANSFER
Certificated Notes will be issued in registered form and will be
transferable only upon the surrender of the Notes being transferred for
registration of transfer. The Company may require payment of a sum sufficient to
cover any tax, assessment or other governmental charge payable in connection
with certain transfers and exchanges.
DEFEASANCE
The Company at any time may terminate all its obligations under the Notes
and the Indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the Notes, to replace mutilated, destroyed, lost or
stolen Notes and to maintain a registrar and paying agent in respect of the
Notes. The Company at any time may terminate its obligations under "-- Change of
Control" and under the covenants described under "-- Certain Covenants" (other
than the covenant described under "-- Merger and Consolidation"), the operation
of the cross-acceleration provision, the bankruptcy provisions with respect to
Significant Subsidiaries and the judgment default provision described under "--
Defaults" above and the limitations contained in clauses (iii) and (iv) under
"Certain Covenants -- Merger and Consolidation" above ("covenant defeasance").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Notes may not be accelerated because of
an Event of Default with respect thereto. If the Company exercises its covenant
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default specified in clause (iii), (iv), (v), (vi) (with respect only
to Significant Subsidiaries) or (vii) under "-- Defaults" above
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or because of the failure of the Company to comply with clause (iii) or (iv)
under "Certain Covenants -- Merger and Consolidation" above. If the Company
exercises its legal defeasance option or its covenant defeasance option, each
Subsidiary Guarantor will be released from all of its obligations with respect
to its Subsidiary Guaranty.
In order to exercise either defeasance option:
(a) such defeasance must not result in a breach of, or otherwise constitute
a default under any agreement or investment with respect to any Senior
Indebtedness, and no default may exist under any Indebtedness and
(b) the Company must irrevocably deposit in trust (the "defeasance trust")
with the Trustee money or U.S. Government Obligations for the payment
of principal and interest on the Notes to redemption or maturity, as
the case may be, and must comply with certain other conditions,
including delivery to the Trustee of an Opinion of Counsel to the
effect that holders of the Notes will not recognize income, gain or
loss for Federal income tax purposes as a result of such deposit and
defeasance and will be subject to Federal income tax on the same amount
and in the same manner and at the same times as would have been the
case if such deposit and defeasance had not occurred.
CONCERNING THE TRUSTEE
U.S. Bank Trust National Association is the Trustee under the Indenture and
has been appointed by the Company as Registrar and Paying Agent with regard to
the Notes.
The Holders of a majority in principal amount of the outstanding Notes will
have the right to direct the time, method and place of conducting any proceeding
for exercising any remedy available to the Trustee, subject to certain
exceptions. The Indenture provides that if an Event of Default occurs (and is
not cured), the Trustee will be required, in the exercise of its power, to use
the degree of care of a prudent man in the conduct of his own affairs. Subject
to such provisions, the Trustee will be under no obligation to exercise any of
its rights or powers under the Indenture at the request of any Holder of Notes,
unless such Holder shall have offered to the Trustee security and indemnity
satisfactory to it against any loss, liability or expense and then only to the
extent required by the terms of the Indenture.
GOVERNING LAW
The Indenture provides that it and the Notes are governed by, and construed
in accordance with, the laws of the State of New York without giving effect to
applicable principles of conflicts of law to the extent that the application of
the law of another jurisdiction would be required thereby.
CERTAIN DEFINITIONS
"Additional Assets" means:
(i) any property or assets (other than Indebtedness and Capital Stock) in a
Related Business; or
(ii) the Capital Stock of a Person that becomes a Restricted Subsidiary as a
result of the acquisition of such Capital Stock by the Company or
another Restricted Subsidiary; provided, however, that any such
Restricted Subsidiary is primarily engaged in a Related Business.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of the provisions described under "Certain Covenants -- Limitation on
Restricted Payments," "Certain Covenants -- Limitation on Affiliate
Transactions" and "Certain Covenants -- Limitations on Sales of Assets and
Subsidiary Stock" only, "Affiliate" shall also mean any beneficial owner of
Capital Stock representing 10% or more of the total voting power of the Voting
Stock (on a fully diluted basis) of the Company or of rights or warrants to
purchase such Capital Stock (whether or not currently exercisable) and any
Person who would be an Affiliate of any such beneficial owner pursuant to the
first sentence hereof.
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"Asset Disposition" means any sale, lease, transfer or other disposition (or
series of related sales, leases, transfers or dispositions) by the Company or
any Restricted Subsidiary, including any disposition by means of a merger,
consolidation or similar transaction (each referred to for the purposes of this
definition as a "disposition"), of:
(i) any shares of Capital Stock of a Restricted Subsidiary (other than
directors' qualifying shares and, to the extent required by local
ownership laws in foreign countries, shares owned by foreign
shareholders),
(ii) all or substantially all the assets of any division, business segment
or comparable line of business of the Company or any Restricted
Subsidiary or
(iii) any other assets of the Company or any Restricted Subsidiary outside
of the ordinary course of business of the Company or such Restricted
Subsidiary.
Notwithstanding the foregoing, the term "Asset Disposition" shall not include
(x) a disposition by a Restricted Subsidiary to the Company or by the Company or
a Restricted Subsidiary to a Wholly Owned Subsidiary, (y) for purposes of the
covenant described under "Certain Covenants -- Limitation on Sales of Assets and
Subsidiary Stock", a disposition that constitutes a Permitted Investment or a
Restricted Payment permitted by the covenant described under "Certain Covenants
- -- Limitation on Restricted Payments", and (z) a disposition of assets having a
fair market value of less than $1 million.
"Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at the
time of determination, the present value (discounted at the interest rate borne
by the Notes, compounded annually) of the total obligations of the lessee for
rental payments during the remaining term of the lease included in such
Sale/Leaseback Transaction (including any period for which such lease has been
extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of numbers of years from the date of determination to the dates
of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"Bank Credit Agreements" means the Senior Credit Facility and any other bank
credit agreement or similar facility entered into in the future by the Company
or any Restricted Subsidiary as any of the same may be amended, waived,
modified, Refinanced or replaced from time to time (except to the extent that
any such amendment, waiver, modification, replacement or Refinancing would be
prohibited by the terms of the Indenture).
"Bank Indebtedness" means any and all present and future amounts payable under
or in respect of the Bank Credit Agreements, including principal, premium (if
any), interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization, whether or not a claim for
post-filing interest is allowed in such proceedings), fees, charges, expenses,
reimbursement obligations, Guarantees and all other amounts and other
Obligations payable thereunder or in respect thereof at any time.
"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligations" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting purposes
in accordance with GAAP, and the amount of Indebtedness represented by such
obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" of any Person means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or interests
in (however designated) equity of such Person, including any Preferred Stock,
but excluding any debt securities convertible into such equity.
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"Change of Control" means the occurrence of any of the following events:
(i) any "person" or "group" (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act), other than one or more Permitted Holders,
is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5
under the Exchange Act, except that for purposes of this clause such
person or group shall be deemed to have "beneficial ownership" of all
shares that any such person or group has the right to acquire, whether
such right is exercisable immediately or only after the passage of
time), directly or indirectly, of more than 40% of the total voting
power of the Voting Stock of the Company; provided, however, that such
event shall not be deemed to be a Change of Control so long as the
Permitted Holders beneficially own, directly or indirectly, in the
aggregate a greater percentage of the total voting power of the Voting
Stock of the Company than such other person or group;
(ii) after the first public offering of common stock of the Company, during
any period of two consecutive years, individuals who at the beginning
of such period constituted the Board of Directors (together with any
new directors whose election by such Board of Directors or whose
nomination for election by the shareholders of the Company was approved
by a majority vote of the directors of the Company then still in office
who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the Board of Directors then
in office; or
(iii) the merger or consolidation of the Company with or into another Person
or the merger of another Person with or into the Company, or the sale
of all or substantially all the assets of the Company to another Person
(other than a Person that is controlled by the Permitted Holders), and,
in the case of any such merger or consolidation, the securities of the
Company that are outstanding immediately prior to such transaction and
which represent 100% of the aggregate voting power of the Voting Stock
of the Company are changed into or exchanged for cash, securities or
property, unless pursuant to such transaction such securities are
changed into or exchanged for, in addition to any other consideration,
securities of the surviving corporation that represent immediately
after such transaction, at least a majority of the aggregate voting
power of the Voting Stock of the surviving corporation.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Coverage Ratio" as of any date of determination means the ratio of
(i) the aggregate amount of EBITDA for the period of the most recent four
consecutive fiscal quarters ending at least 45 days (or, if less, the number of
days after the end of such fiscal quarter as the consolidated financial
statements of the Company shall be available) prior to the date of such
determination to (ii) Consolidated Interest Expense for such four fiscal
quarters; provided, however, that:
(1) if the Company or any Restricted Subsidiary has Incurred any
Indebtedness since the beginning of such period that remains
outstanding on such date of determination or if the transaction giving
rise to the need to calculate the Consolidated Coverage Ratio is an
Incurrence of Indebtedness, or both, EBITDA and Consolidated Interest
Expense for such period shall be calculated after giving effect on a
pro forma basis to such Indebtedness as if such Indebtedness had been
Incurred on the first day of such period and the discharge of any other
Indebtedness repaid, repurchased, defeased or otherwise discharged with
the proceeds of such new Indebtedness as if such discharge had occurred
on the first day of such period (except that, in the case of
Indebtedness used to finance working capital needs incurred under a
revolving credit or similar arrangement, the amount thereof shall be
deemed to be the average daily balance of such Indebtedness during such
four-fiscal-quarter period),
(2) if since the beginning of such period the Company or any Restricted
Subsidiary shall have made any Asset Disposition, the EBITDA for such
period shall be reduced by an amount equal to the EBITDA (if positive)
directly attributable to the assets which are the subject of such Asset
Disposition for such period, or increased by an amount equal to the
EBITDA (if negative) directly attributable thereto for such period, and
Consolidated Interest Expense for such period shall be reduced by an
amount equal to the Consolidated Interest Expense directly attributable
to any Indebtedness of the Company or any Restricted Subsidiary repaid,
repurchased, defeased, assumed by a third person (to the extent the
Company and its Restricted Subsidiaries are no longer liable for such
Indebtedness) or otherwise discharged with respect to the Company and
its continuing Restricted Subsidiaries in connection with such Asset
Disposition for such period (or, if the Capital Stock of any Restricted
Subsidiary is sold, the Consolidated Interest Expense for such period
directly attributable to the Indebtedness of such Restricted Subsidiary
to the extent the Company and its continuing Restricted Subsidiaries
are no longer liable for such Indebtedness after such sale),
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(3) if since the beginning of such period the Company shall have
consummated a Public Equity Offering following which there is a Public
Market, Consolidated Interest Expense for such period shall be reduced
by an amount equal to the Consolidated Interest Expense directly
attributable to any Indebtedness of the Company or any Restricted
Subsidiary repaid, repurchased, defeased or otherwise discharged with
respect to the Company and its Restricted Subsidiaries in connection
with such Public Equity Offering for such period,
(4) if since the beginning of such period the Company or any Restricted
Subsidiary (by merger or otherwise) shall have made an Investment in
any Restricted Subsidiary (or any Person which becomes a Restricted
Subsidiary) or an acquisition of assets, which acquisition constitutes
all or substantially all of an operating unit of a business, including
any such Investment or acquisition occurring in connection with a
transaction requiring a calculation to be made hereunder, EBITDA and
Consolidated Interest Expense for such period shall be calculated after
giving pro forma effect thereto (including the Incurrence of any
Indebtedness) as if such Investment or acquisition occurred on the
first day of such period and
(5) if since the beginning of such period any Person (that subsequently
became a Restricted Subsidiary or was merged with or into the Company
or any Restricted Subsidiary since the beginning of such period) shall
have made any Asset Disposition, any Investment or acquisition of
assets that would have required an adjustment pursuant to clause (3) or
(4) above if made by the Company or a Restricted Subsidiary during such
period, EBITDA and Consolidated Interest Expense for such period shall
be calculated after giving pro forma effect thereto as if such Asset
Disposition, Investment or acquisition occurred on the first day of
such period.
For purposes of this definition, whenever pro forma effect is to be given to an
acquisition of assets, the amount of income, earnings or expense relating
thereto and the amount of Consolidated Interest Expense associated with any
Indebtedness Incurred in connection therewith, the pro forma calculations shall
be prepared in accordance with Article 11 of Regulation S-X promulgated by the
Commission as determined in good faith by a responsible financial or accounting
Officer of the Company. If any Indebtedness bears a floating rate of interest
and is being given pro forma effect, the interest of such Indebtedness shall be
calculated as if the rate in effect on the date of determination had been the
applicable rate for the entire period (taking into account any Interest Rate
Agreement applicable to such Indebtedness if such Interest Rate Agreement has a
remaining term in excess of 12 months).
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Company and its consolidated Restricted Subsidiaries, plus, to
the extent not included in such total interest expense, and to the extent
incurred by the Company or its Restricted Subsidiaries:
(i) interest expense attributable to Capital Lease Obligations,
(ii) amortization of debt discount,
(iii) capitalized interest,
(iv) non-cash interest expenses,
(v) commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing,
(vi) net costs associated with Hedging Obligations (including amortization
of fees),
(vii) Preferred Stock dividends in respect of all Preferred Stock held by
Persons other than the Company or a Wholly Owned Subsidiary, and
(viii) interest actually paid on any Indebtedness of any other Person that
is Guaranteed by the Company or any Restricted Subsidiary.
Notwithstanding the foregoing, net interest expense attributable to Tooling
Indebtedness shall not be included in Consolidated Interest Expense except to
the extent such expense would be included in interest expense in accordance with
GAAP.
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"Consolidated Net Income" means, for any period, the net income of the Company
and its consolidated Subsidiaries; provided, however, that there shall not be
included in such Consolidated Net Income:
(i) any net income (or loss) of any Person if such Person is not a
Restricted Subsidiary, except that subject to the exclusion contained
in clause (iv) below, the Company's equity in the net income of any
such Person for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash actually distributed by such
Person during such period to the Company or a Restricted Subsidiary as
a dividend or other distribution (subject, in the case of a dividend
or other distribution paid to a Restricted Subsidiary, to the
limitations contained in clause (iii) below);
(ii) for purposes of subclause (a)(3)(A) of the covenant described under
"Certain Covenants -- Limitation on Restricted Payments" only, any net
income (or loss) of any Person acquired by the Company or a Subsidiary
in a pooling of interests transaction for any period prior to the date
of such acquisition;
(iii) any net income of any Restricted Subsidiary if such Restricted
Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to the Company, except that (A)
subject to the exclusion contained in clause (iv) below, the Company's
equity in the net income of any such Restricted Subsidiary for such
period shall be included in such Consolidated Net Income up to the
aggregate amount of cash that could have been distributed by such
Restricted Subsidiary consistent with such restriction during such
period to the Company or another Restricted Subsidiary as a dividend
or other distribution (subject, in the case of a dividend or other
distribution paid to another Restricted Subsidiary, to the limitation
contained in this clause) and (B) the Company's equity in a net loss
of any such Restricted Subsidiary for such period shall be included in
determining such Consolidated Net Income;
(iv) any gain (or loss) realized upon the sale or other disposition of any
assets of the Company or its consolidated Subsidiaries (including
pursuant to any sale-and-leaseback arrangement) which is not sold or
otherwise disposed of in the ordinary course of business and any gain
(or loss) realized upon the sale or other disposition of any Capital
Stock of any Person;
(v) extraordinary gains or losses; and
(vi) the cumulative effect of a change in accounting principles.
Notwithstanding the foregoing, for the purposes of the covenant described under
"Certain Covenants--Limitation on Restricted Payments" only, there shall be
excluded from Consolidated Net Income any dividends, repayments of loans or
advances or other transfers of assets from Unrestricted Subsidiaries to the
Company or a Restricted Subsidiary to the extent such dividends, repayments or
transfers increase the amount of Restricted Payments permitted under such
covenant pursuant to clause (a)(3)(D) thereof.
"Consolidated Net Worth" means the total of the amounts shown on the balance
sheet of the Company and its consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of the Company ending at least 45 days prior to the taking of any
action for the purpose of which the determination is being made, as:
(i) the par or stated value of all outstanding Capital Stock of the
Company plus
(ii) paid-in capital or capital surplus relating to such Capital Stock plus
(iii) any retained earnings or earned surplus less (A) any accumulated
deficit and (B) any amounts attributable to Disqualified Stock.
"Currency Agreement" means, with respect to any Person, any foreign exchange
contract, currency swap agreement or other similar agreement to which such
Person is a party or a beneficiary.
"Default" means any event which is, or after notice or passage of time or both
would be, an Event of Default.
"Designated Senior Indebtedness" means:
(i) the Bank Indebtedness and
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(ii) any other Senior Indebtedness of the Company which, at the date of
determination, has an aggregate principal amount outstanding of, or
under which, at the date of determination, the holders thereof are
committed to lend up to, at least $10 million and is specifically
designated by the Company in the instrument evidencing or governing
such Senior Indebtedness as "Designated Senior Indebtedness" for
purposes of the Indenture.
"Disqualified Stock" means, with respect to any Person, any Capital Stock which
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable) or upon the happening of any event:
(i) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise,
(ii) is convertible or exchangeable, at the option of the holder thereof,
for Indebtedness or Disqualified Stock or
(iii) is redeemable at the option of the holder thereof, in whole or in
part, in each case on or prior to the first anniversary of the Stated
Maturity of the Notes.
"EBITDA" for any period means the sum of Consolidated Net Income plus
Consolidated Interest Expense plus, without duplication, the following to the
extent deducted in calculating such Consolidated Net Income:
(i) income tax expense (including Michigan Single Business Tax expense),
(ii) depreciation expense,
(iii) amortization expense and
(iv) all other non-cash items reducing Consolidated Net Income (other than
items that will require cash payments and for which an accrual or
reserve is, or is required by GAAP to be, made), less all non-cash
items increasing Consolidated Net Income, in each case for such
period.
Notwithstanding the foregoing, the provision for taxes based on the income or
profits of, and the depreciation and amortization of, a Subsidiary of the
Company shall be added to Consolidated Net Income to compute EBITDA only to the
extent (and in the same proportion) that the net income of such Subsidiary was
included in calculating Consolidated Net Income.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Preferred Stock" means the Series A $3.00 cumulative Preferred Stock
issued by Lobdell and the Series B Preferred Stock issued by Lobdell in the
aggregate amount of $50.7 million, less any shares of such preferred stock
repurchased, redeemed or canceled subsequent to the Existing Senior Subordinated
Note Issue Date, as the terms of such preferred stock shall exist as of the
Existing Senior Subordinated Note Issue Date.
"Existing Indenture" means the Indenture, dated as of June 15, 1997, among the
Company, the Subsidiary Guarantors and First Trust National Association (now
known as U.S. Bank Trust National Association), as Trustee relating to the
Existing Senior Subordinated Notes.
"Existing Senior Subordinated Notes" means the Series A Notes and the Series B
Notes.
"Existing Senior Subordinated Note Issue Date" means June 24, 1997.
"GAAP" means generally accepted accounting principles in the United States of
America as in effect as of the Existing Senior Subordinated Note Issue Date,
including those set forth in:
(i) the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants,
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(ii) statements and pronouncements of the Financial Accounting Standards
Board and
(iii) such other statements by such other entity as approved by a
significant segment of the accounting profession.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other obligation of any
Person and any obligation, direct or indirect, contingent or otherwise, of such
Person:
(i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation of such Person
(whether arising by virtue of partnership arrangements, or by
agreements to keep-well, to purchase assets, goods, securities or
services, to take-or-pay or to maintain financial statement conditions
or otherwise) or
(ii) entered into for the purpose of assuring in any other manner the
obligee of such Indebtedness or other obligation of the payment
thereof or to protect such obligee against loss in respect thereof (in
whole or in part); provided, however, that the term "Guarantee" shall
not include endorsements for collection or deposit in the ordinary
course of business.
The term "Guarantee" used as a verb has a corresponding meaning. The term
"Guarantor" shall mean any Person Guaranteeing any obligation.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Noteholder" means the Person in whose name a Note is registered on
the Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable for;
provided, however, that any Indebtedness or Capital Stock of a Person existing
at the time such Person becomes a Subsidiary (whether by merger, consolidation,
acquisition or otherwise) shall be deemed to be Incurred by such Subsidiary at
the time it becomes a Subsidiary; provided, further, however, that in the case
of a discount security, neither the accrual of interest nor the accretion of
original issue discount shall be considered an Incurrence of Indebtedness, but
the entire face amount of such security shall be deemed Incurred upon the
issuance of such security. The term "Incurrence" when used as a noun shall have
a correlative meaning.
"Indebtedness" means, with respect to any Person on any date of determination
(without duplication):
(i) the principal of and premium (if any) in respect of (A) indebtedness
of such Person for money borrowed and (B) indebtedness evidenced by
notes, debentures, bonds or other similar instruments for the payment
of which such Person is responsible or liable;
(ii) all Capital Lease Obligations of such Person and all Attributable Debt
in respect of Sale/Leaseback Transactions entered into by such Person;
(iii) all obligations of such Person issued or assumed as the deferred
purchase price of property or services, all conditional sale
obligations of such Person and all obligations of such Person under
any title retention agreement (but excluding trade accounts payables
arising in the ordinary course of business and which are not more than
90 days past due and not in dispute), which purchase price or
obligation is due more than six months after the date of placing such
property in service or taking delivery and title thereto or the
completion of such services (provided that, in the case of obligations
of an acquired Person assumed in connection with an acquisition of
such Person, such obligations would constitute Indebtedness of such
Person);
(iv) all obligations of such Person for the reimbursement of any obligor on
any letter of credit, banker's acceptance or similar credit
transaction (other than obligations with respect to letters of credit
securing obligations (other than obligations described in (i) through
(iii) above) entered into in the ordinary course of business of such
Person to the extent such letters of credit are not drawn upon or, if
and to the extent drawn upon, such drawing is reimbursed no later than
the tenth Business Day following receipt by such Person of a demand
for reimbursement following payment on the letter of credit);
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(v) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock
or, with respect to any Subsidiary of such Person, any Preferred Stock
(but excluding, in each case, any accrued dividends);
(vi) all obligations of the type referred to in clauses (i) through (v) of
other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or liable, directly
or indirectly, as obligor, guarantor or otherwise, including by means
of any Guarantee;
(vii) all obligations of the type referred to in clauses (i) through (vi) of
other Persons secured by any Lien on any property or asset of such
Person (whether or not such obligation is assumed by such Person), the
amount of such obligation being deemed to be the lesser of the value
of such property or assets or the amount of the obligation so secured;
and
(viii) to the extent not otherwise included in this definition, Hedging
Obligations of such Person.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and the
maximum liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations as described above at such date;
provided, however, that the amount outstanding at any time of any Indebtedness
issued with original issue discount shall be deemed to be the face amount of
such Indebtedness less the remaining unamortized portion of the original issue
discount of such Indebtedness at such time as determined in conformity with
GAAP.
"Interest Rate Agreement" means any interest rate swap agreement, interest rate
cap agreement or other financial agreement or arrangement designed to protect
the Company or any Restricted Subsidiary against fluctuations in interest rates.
"Investment" in any Person means any direct or indirect advance, loan (other
than advances to customers in the ordinary course of business that are recorded
as accounts receivable on the balance sheet of such Person) or other extensions
of credit (including by way of Guarantee or similar arrangement) or capital
contribution to (by means of any transfer of cash or other property to others or
any payment for property or services for the account or use of others), or any
purchase or acquisition of Capital Stock, Indebtedness or other similar
instruments issued by such Person. For purposes of the definition of
"Unrestricted Subsidiary," the definition of "Restricted Payment" and the
covenant described under "Certain Covenants - Limitation on Restricted
Payments,"
(i) "Investment" shall include the portion (proportionate to the Company's
equity interest in such Subsidiary) of the fair market value of the
net assets of any Subsidiary of the Company at the time that such
Subsidiary is designated an Unrestricted Subsidiary; provided,
however, that upon a redesignation of such Subsidiary as a Restricted
Subsidiary, the Company shall be deemed to continue to have a
permanent "Investment" in an Unrestricted Subsidiary equal to an
amount (if positive) equal to (x) the Company's "Investment" in such
Subsidiary at the time of such redesignation less (y) the portion
(proportionate to the Company's equity interest in such Subsidiary) of
the fair market value of the net assets of such Subsidiary at the time
of such redesignation; and
(ii) any property transferred to or from an Unrestricted Subsidiary shall
be valued at its fair market value at the time of such transfer, in
each case as determined in good faith by the Board of Directors.
"Issue Date" means December 8, 1998.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions are not required to be open in the State of New York.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Net Available Cash" from an Asset Disposition means cash payments received by
the Company or any of its Subsidiaries therefrom (including any cash payments
received by way of deferred payment of principal pursuant to a note or
installment receivable or otherwise, but only as and when received, but
excluding any other consideration received in the form of assumption by the
acquiring Person of Indebtedness or other obligations relating to such
properties or assets or received in any other noncash form) in each case net of:
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(i) all legal, title and recording tax expenses, commissions and other
fees and expenses incurred, and all Federal, state, provincial,
foreign and local taxes required to be paid or accrued as a liability
under GAAP, as a consequence of such Asset Disposition,
(ii) all payments made on any Indebtedness which is secured by any assets
subject to such Asset Disposition, in accordance with the terms of any
Lien upon or other security agreement of any kind with respect to such
assets, or which must by its terms, or in order to obtain a necessary
consent to such Asset Disposition, or by applicable law, be repaid out
of the proceeds from such Asset Disposition,
(iii) all distributions and other payments required to be made to minority
interest holders in Subsidiaries or Joint Ventures as a result of such
Asset Disposition and
(iv) the deduction of appropriate amounts provided by the seller as a
reserve, in accordance with GAAP, against any liabilities associated
with the property or other assets disposed in such Asset Disposition
and retained by the Company or any Restricted Subsidiary after such
Asset Disposition, including without limitation liabilities under any
indemnification obligations associated with such Asset Disposition.
"Net Cash Proceeds," with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys fees,
accountants fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Obligations" means all present and future obligations for principal, premium,
interest (including, without limitation, any interest accruing subsequent to the
filing of a petition of bankruptcy at the rate provided for in the documentation
with respect thereto, whether or not such interest is an allowed claim under
applicable law), penalties, fees, indemnifications, reimbursements (including,
without limitation, all reimbursement and other obligation pursuant to any
letters of credit, bankers acceptances or similar instruments or documents),
damages and other liabilities payable under the documentation at any time
governing any indebtedness.
"Permitted Holders" means:
(i) any of Selwyn Isakow, his spouse and any of his lineal descendants and
their respective spouses (collectively, the "Isakow Family") whether
acting in their own name or as one or as a majority of persons having
the power to exercise the voting rights attached to, or having
investment power over, shares held by others,
(ii) any controlled Affiliate of any member of the Isakow Family, and
(iii) any trust solely for the benefit of one or more members of the Isakow
Family (whether or not any member of the Isakow Family is a trustee of
such trust).
"Permitted Investment" means an Investment by the Company or any Restricted
Subsidiary in:
(i) the Company,
(ii) a Restricted Subsidiary or a Person that will, upon the making of such
Investment, become a Restricted Subsidiary; provided, however, that
the primary business of such Restricted Subsidiary is a Related
Business;
(iii) another Person if as a result of such Investment such other Person is
merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, the Company or a Restricted
Subsidiary; provided, however, that such Person's primary business is
a Related Business;
(iv) Temporary Cash Investments;
(v) receivables owing to the Company or any Restricted Subsidiary if
created or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms; provided,
however, that such trade terms may include such concessionaire trade
terms as the Company or any such Restricted Subsidiary deems
reasonable under the circumstances;
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(vi) payroll, travel and similar advances to cover matters that are
expected at the time of such advances ultimately to be treated as
expenses for accounting purposes and that are made in the ordinary
course of business;
(vii) loans or advances to employees made in the ordinary course of business
consistent with past practices of the Company or such Restricted
Subsidiary;
(viii) stock, obligations or securities received in settlement of debts
created in the ordinary course of business and owing to the Company or
any Restricted Subsidiary or in satisfaction of judgments;
(ix) Persons other than Restricted Subsidiaries that are primarily engaged
in a Related Business, in an aggregate amount not to exceed $15
million (to the extent utilized for an Investment, such amount will be
reinstated to the extent that the Company or any Restricted Subsidiary
receives dividends, repayments of loans or other transfers of assets
as a return of such Investment);
(x) any Person to the extent such Investment is received in exchange for
the transfer to such Person of the assets owned as of the Existing
Senior Subordinated Note Issue Date by Laserweld International L.L.C.;
and
(xi) any Person to the extent such Investment represents the non-cash
portion of the consideration received for an Asset Disposition as
permitted pursuant to the covenant described under "Certain Covenants
- Limitation on Sales of Assets and Subsidiary Stock."
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"Preferred Stock," as applied to the Capital Stock of any corporation, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of Capital Stock of any other class of such corporation.
"Principal" of a Note means the principal of the Note, plus the premium, if any,
payable on the Note which is due or overdue or is to become due at the relevant
time.
"Public Equity Offering" means an underwritten primary public offering of common
stock of the Company pursuant to an effective registration statement under the
Securities Act.
"Public Market" means any time after:
(i) a Public Equity Offering has been consummated and
(ii) at least 10% of the total issued and outstanding common stock of the
Company has been distributed by means of an effective registration
statement under the Securities Act or sales pursuant to Rule 144 under
the Securities Act.
"Purchase Money Indebtedness" mean Indebtedness:
(i) consisting of the deferred purchase price of property, conditional
sale obligations, obligations under any title retention agreement,
other purchase money obligations and obligations in respect of
industrial revenue bonds or similar Indebtedness, in each case where
the maturity of such Indebtedness does not exceed the anticipated
useful life of the asset being financed, and
(ii) incurred to finance the acquisition by the Company or a Restricted
Subsidiary of such asset, including additions and improvements;
provided, however, that any Lien arising in connection with any such
Indebtedness shall be limited to the specified asset being financed
or, in the case of real property or fixtures, including additions and
improvements, the real property on which such asset is attached; and
provided, further, however, that such Indebtedness is Incurred within
90 days after such acquisition of such asset by the Company or
Restricted Subsidiary.
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"Refinance" means, in respect of any Indebtedness, to refinance, extend, renew,
refund, repay, prepay, redeem, defease or retire, or to issue other Indebtedness
in exchange or replacement for, such Indebtedness. "Refinanced" and
"Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any Indebtedness
of the Company or any Restricted Subsidiary existing on the Existing Senior
Subordinated Note Issue Date or Incurred in compliance with the Existing
Indenture; provided, however, that:
(i) such Refinancing Indebtedness has a Stated Maturity no earlier than
the Stated Maturity of the Indebtedness being Refinanced,
(ii) such Refinancing Indebtedness has an Average Life at the time such
Refinancing Indebtedness is Incurred that is equal to or greater than
the Average Life of the Indebtedness being Refinanced and
(iii) such Refinancing Indebtedness has an aggregate principal amount (or if
Incurred with original issue discount, an aggregate issue price) that
is equal to or less than the aggregate principal amount (or if
Incurred with original issue discount, the aggregate accredit value)
then outstanding or committed (plus fees and expenses, including any
premium and defeasance costs) under the Indebtedness being Refinanced;
provided further, however, that Refinancing Indebtedness shall not
include (x) Indebtedness of a Subsidiary that Refinances Indebtedness
of the Company or (y) Indebtedness of the Company or a Restricted
Subsidiary that Refinances Indebtedness of an Unrestricted Subsidiary.
"Related Business" means any business related, ancillary or complementary (as
determined in good faith by the Board of Directors) to the businesses of the
Company and the Restricted Subsidiaries on the Series A/B Issue Date.
"Representative" means any trustee, agent or representative (if any) for an
issue of Senior Indebtedness of the Company.
"Restricted Payment" means, with respect to any Person:
(i) the declaration or payment of any dividends or any other distributions
on or in respect of its Capital Stock (including any payment in
connection with any merger or consolidation involving such Person) or
similar payment to the holders of its Capital Stock, except dividends
or distributions payable solely in its Capital Stock (other than
Disqualified Stock) and except dividends or distributions payable
solely to the Company or a Restricted Subsidiary (and, if such
Restricted Subsidiary is not wholly owned, to its other shareholders
on a pro rata basis or on a basis that results in the receipt by the
Company or a Restricted Subsidiary of dividends or distributions of
greater value than it would receive on a pro rata basis),
(ii) the purchase, redemption or other acquisition or retirement for value
of any Capital Stock of the Company held by any Person or of any
Capital Stock of a Restricted Subsidiary held by any Affiliate of the
Company (other than a Restricted Subsidiary), including the exercise
of any option to exchange any Capital Stock (other than into Capital
Stock of the Company that is not Disqualified Stock),
(iii) the purchase, repurchase, redemption, defeasance or other acquisition
or retirement for value, prior to scheduled maturity, scheduled
repayment or scheduled sinking fund payment of any Subordinated
Obligations (other than the purchase, repurchase or other acquisition
of Subordinated Obligations purchased in anticipation of satisfying a
sinking fund obligation, principal installment or final maturity, in
each case due within one year of the date of acquisition) or
(iv) the making of any Investment in any Person (other than a Permitted
Investment).
"Restricted Subsidiary" means any Subsidiary of the Company that is not an
Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to property now owned
or hereafter acquired whereby the Company or a Restricted Subsidiary transfers
such property to a Person and the Company or a Restricted Subsidiary leases it
from such Person.
"SEC" means the Securities and Exchange Commission.
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"Secured Indebtedness" means any Indebtedness of the Company secured by a Lien.
"Secured Indebtedness" of any Subsidiary Guarantor has a correlative meaning.
"Senior Credit Facility" means the credit agreement dated as of June 24, 1997,
between the Company, the lenders and other persons party thereto and NBD Bank,
as Agent, together with the related documents thereto executed at any time
(including, without limitation, any guarantee agreements, security agreements
and other collateral documents) and the credit facilities thereunder, in each
case as such documents may be amended (including, without limitation, any
amendment and restatement thereof), supplemented or otherwise modified from time
to time, including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring (including, without limitation, increasing
the amount of available borrowings thereunder (provided that such increase in
borrowings is permitted by the covenant described under "Certain Covenants -
Limitation on Indebtedness") or adding subsidiaries as additional borrowers or
guarantors thereunder).
"Senior Indebtedness" of the Company means:
(i) all Bank Indebtedness of the Company, whether outstanding on the
Existing Senior Subordinated Note Issue Date or thereafter Incurred,
including the Guarantees by the Company of all Bank Indebtedness, and
(ii) accrued and unpaid interest (including interest accruing on or after
the filing of any petition in bankruptcy or for reorganization
relating to the Company whether or not a claim for post-filing
interest is allowed in such proceeding) in respect of (A) indebtedness
of the Company for money borrowed and (B) indebtedness evidenced by
notes, debentures, bonds or other similar instruments for the payment
of which the Company is responsible or liable unless, in the
instrument creating or evidencing the same or pursuant to which the
same is outstanding, it is provided that such obligations are
subordinate in right of payment to the Notes; provided, however, that
Senior Indebtedness shall not include (1) any obligation of the
Company to any Subsidiary, (2) any liability for Federal, state, local
or other taxes owed or owing by the Company, (3) any accounts payable
or other liability to trade creditors arising in the ordinary course
of business (including guarantees thereof or instruments evidencing
such liabilities), (4) any Indebtedness of the Company (and any
accrued and unpaid interest in respect thereof) which is subordinate
or junior in any respect (other than as a result of the Indebtedness
being unsecured) to any other Indebtedness or other obligation of the
Company, including any Senior Subordinated Indebtedness and any
Subordinated Obligations, (5) any obligations with respect to any
Capital Stock, (6) that portion of any Indebtedness which at the time
of Incurrence is Incurred in violation of the Indenture or (7) the
Notes or the Existing Senior Subordinated Notes. "Senior Indebtedness"
of any Subsidiary Guarantor has a correlative meaning.
"Senior Subordinated Indebtedness" of the Company means the Notes, the Existing
Senior Subordinated Notes and any other Obligations under or in connection with
the Notes, the Existing Senior Subordinated Notes, the Indenture, the Existing
Indenture and/or any related agreements, documents or instruments, whether now
owing or hereafter incurred or owing and any other Indebtedness of the Company
that specifically provides that such Indebtedness is to rank pari passu with the
Notes in right of payment and is not subordinated by its terms in right of
payment to any Indebtedness or other obligation of the Company which is not
Senior Indebtedness. "Senior Subordinated Indebtedness" of any Subsidiary
Guarantor has a correlative meaning.
"Series A Notes: means the $125 million aggregate principal amount of 10 1/8%
Senior Subordinated Notes due 2007 issued by the Company on June 24, 1997 under
the Existing Indenture.
"Series B Notes" means the $35 million aggregate principal amount of 10 1/8%
Senior Subordinated Notes due 2007 issued by the Company on April 1, 1998 under
the Existing Indenture.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the date specified in
such security as the fixed date on which the final payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).
"Subordinated Obligation" means any Indebtedness of the Company (whether
outstanding on the Issue Date or thereafter Incurred) which is subordinate or
junior in right of payment to the Notes and the Existing Senior Subordinated
Notes pursuant to a written agreement to that effect. "Subordinated Obligation"
of any Subsidiary Guarantor has a correlative meaning.
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"Subsidiary" means, in respect of any Person, any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other interests (including partnership
interests) entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by
(i) such Person,
(ii) such Person and one or more Subsidiaries of such Person or
(iii) one or more Subsidiaries of such Person.
"Subsidiary Guaranty" means the Guarantee by a Subsidiary Guarantor of the
Company's obligations with respect to the Notes and/or the Existing Senior
Subordinated Notes.
"Subsidiary Guarantor" means each Subsidiary designated as such on the signature
pages of the Indenture and any other Subsidiary that has issued a Subsidiary
Guaranty.
"Temporary Cash Investments" means any of the following:
(i) any investment in direct obligations of the United States of America
or any agency thereof or obligations guaranteed by the United States
of America or any agency thereof,
(ii) investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 180 days of the date of
acquisition thereof issued by a bank or trust company which is
organized under the laws of the United States of America, any state
thereof or any foreign country recognized by the United States, and
which bank or trust company has capital, surplus and undivided profits
aggregating in excess of $50,000,000 (or the foreign currency
equivalent thereof) and has outstanding debt which is rated "A" (or
such similar equivalent rating) or higher by at least one nationally
recognized statistical rating organization (as defined in Rule 436
under the Securities Act) or any money-market fund sponsored by an
registered broker dealer or mutual fund distributor,
(iii) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (i) above
entered into with a bank meeting the qualifications described in
clause (ii) above,
(iv) investments in commercial paper, maturing not more than 90 days after
the date of acquisition, issued by a corporation (other than an
Affiliate of the Company) organized and in existence under the laws of
the United States of America, any State thereof or the District of
Columbia or any foreign country recognized by the United States of
America with a rating at the time as of which any investment therein
is made of "P-1" (or higher) according to Moody's Investors Service,
Inc. or "A-1" (or higher) according to Standard and Poor's Ratings
Group, and
(v) investments in securities with maturities of six months or less from
the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least
"A" by Standard & Poor's Ratings Group or "A" by Moody's Investors
Service, Inc.
"Tooling Indebtedness" means all present and future Indebtedness of the Company
or any Restricted Subsidiary the proceeds of which are utilized to finance dies,
molds, tooling and similar items (collectively "Tooling") for which the sales of
such Tooling is covered under specific written purchase orders or agreements
between the Company or any Restricted Subsidiary and the purchaser of such
Tooling.
"Unrestricted Subsidiary" means:
(i) any Subsidiary of the Company that at the time of determination shall
be designated an Unrestricted Subsidiary by the Board of Directors in
the manner provided below and
(ii) any Subsidiary of an Unrestricted Subsidiary.
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The Board of Directors may designate any Subsidiary of the Company (including
any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary
unless such Subsidiary or any of its Subsidiaries owns any Capital Stock or
Indebtedness of, or holds any Lien on any property of, the Company or any other
Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so
designated; provided, however, that either (A) the Subsidiary to be so
designated has total assets of $1,000 or less or (B) if such Subsidiary has
assets greater than $1,000, such designation would be permitted under the
covenant described under "Certain Covenants - Limitation on Restricted
Payments." The Board of Directors may designate any Unrestricted Subsidiary to
be a Restricted Subsidiary; provided, however, that immediately after giving
effect to such designation (x) the Company could Incur $1.00 of additional
Indebtedness under paragraph (a) of the covenant described under "Certain
Covenants - Limitation on Indebtedness" and (y) no Default shall have occurred
and be continuing. Any such designation by the Board of Directors shall be
notified by the Company to the Trustee by promptly filing with the Trustee a
copy of the board resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
provisions.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or other interests
(including partnership interests) of such Person then outstanding and normally
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the Capital Stock of
which (other than directors' qualifying shares) is owned by the Company and/or
one or more Wholly Owned Subsidiaries.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes the certain United States federal income
tax consequences of the Exchange Offer to a holder of Existing Notes that is an
individual citizen or resident (within the meaning of Section 7701(b) of the
Internal Revenue Code of 1986, as amended to the date hereof (the "Code")) of
the United States or a United States corporation that purchased the Existing
Notes pursuant to their original issue (a "U.S. Holder"). It is based on the
Code, existing and proposed Treasury regulations, and judicial and
administrative determinations, all of which are subject to change at any time,
possibly on a retroactive basis. The following relates only to the Existing
Notes, and the Series D Notes received therefor, that are held as "capital
assets" within the meaning of Section 1221 of the Code by U.S. Holders. It does
not discuss state, local, or foreign tax consequences, nor does it discuss tax
consequences to categories of holders that are subject to special rules, such as
foreign persons, tax-exempt organizations, insurance companies, banks, and
dealers in stocks and securities. Tax consequences may vary depending on the
particular status of an investor. No rulings will be sought from the Internal
Revenue Service with respect to the federal income tax consequences of the
Exchange Offer.
THIS SECTION DOES NOT PURPORT TO DEAL WITH ALL ASPECTS OF FEDERAL INCOME
TAXATION THAT MAY BE RELEVANT TO AN INVESTOR'S DECISION TO EXCHANGE EXISTING
NOTES FOR SERIES D NOTES. EACH INVESTOR SHOULD CONSULT WITH ITS OWN TAX ADVISOR
CONCERNING THE APPLICATION OF THE FEDERAL INCOME TAX LAWS AND OTHER TAX LAWS TO
ITS PARTICULAR SITUATION BEFORE DETERMINING WHETHER TO EXCHANGE EXISTING NOTES
FOR SERIES D NOTES.
ADDITIONALLY, THE COMPANY DOES NOT BELIEVE, BASED ON THE FACTS AND
CIRCUMSTANCES OF THE EXCHANGE, THE LEGAL RIGHTS OR OBLIGATIONS THAT ARE ALTERED
AND THE DEGREE TO WHICH THEY ARE ALTERED ARE ECONOMICALLY SIGNIFICANT.
ACCORDINGLY, THE COMPANY BELIEVES THAT THE EXCHANGE OF THE EXISTING NOTES FOR
SERIES D NOTES WOULD NOT BE CONSIDERED A SIGNIFICANT MODIFICATION UNDER TREAS.
REG. SECTION 1.1001-3. HOWEVER, NEITHER A LETTER RULING FROM THE INTERNAL
REVENUE SERVICE NOR AN OPINION OF COUNSEL HAS NOT BEEN REQUESTED. EACH INVESTOR
SHOULD CONSULT WITH ITS OWN TAX ADVISOR CONCERNING THE APPLICATION OF TREAS.
REG. SECTION 1.1001-3, AS WELL AS OTHER TAX LAWS TO ITS PARTICULAR SITUATION
BEFORE DETERMINING WHETHER TO EXCHANGE EXISTING NOTES FOR SERIES D NOTES.
99
<PAGE> 102
THE EXCHANGE OFFER
The exchange of Existing Notes pursuant to the Exchange Offer should be
treated as a continuation of the corresponding Existing Notes because the terms
of the Series D Notes are not materially different from the terms of the
Existing Notes. Accordingly, it is the Company's belief that such exchange will
not constitute a taxable event to U.S. Holders and, therefore,
(i) no gain or loss should be realized by a U.S. Holder upon receipt of a
Series D Note,
(ii) the holding period of the Series D Note should include the holding
period of the Existing Note exchanged therefor and
(iii) the adjusted tax basis of the Series D Note should be the same as the
adjusted tax basis of the Existing Note exchanged therefor immediately
before the exchange.
STATED INTEREST
Stated interest on a Series D Note will be taxable to a U.S. Holder as
ordinary interest income at the time that such interest accrues or is received,
in accordance with the U.S. Holder's regular method of accounting for federal
income tax purposes. The Existing Notes are not considered to have been issued
with original issue discount for federal income tax purposes, and there will be
no original issue discount with respect to the Series D Notes.
PREMIUM
The Series B Notes and the Series C Notes were issued for an amount that, at
the time of issuance, was in excess of the amount payable at the maturity date
of the Series B Notes and the Series C Notes. Therefore, a U.S. Holder of Series
D Notes received in exchange for Series B Notes or Series C Notes will be
treated as holding Series D Notes at a premium.
A U.S. Holder generally may elect to amortize the premium over the term of
the Series D Note on a constant yield method. The amount amortized in any year
will be treated as a reduction of the U.S. Holder's interest income from the
Series D Note. The U.S. Holder's adjusted tax basis in the Series D Note will be
reduced to the extent of the deduction of amortizable bond premium. Premium on a
Series D Note held by a U.S. Holder that does not make such an election to
amortize will decrease the gain or increase the loss otherwise recognized on
disposition of the Series D Note.
U.S. Holders otherwise permitted to report income under the "cash method" of
accounting should carefully consider the advisability of such an election to
amortize premium, since it would not permit them to report interest income from
the Series D Note using the cash method and, accordingly, it may result in an
acceleration of interest income from a Series D Note.
The election to amortize premium on a constant yield method, once made,
applies to all debt obligations held or subsequently acquired by the electing
U.S. Holder on or after the first day of the first taxable year to which the
election applies and may not be revoked without the consent of the Internal
Revenue Service.
MARKET DISCOUNT
A U.S. Holder of a Note, other than an initial Holder, will be treated as
holding the Note at a market discount (a "Market Discount Note") if the amount
for which such U.S. Holder purchased the Note is less than the Note's principal
amount, subject to a de minimis rule.
In general, any partial payment on, or gain recognized on the maturity or
disposition of, a Market Discount Note will be treated as ordinary income to the
extent that such gain does not exceed the accrued market discount on such Note.
Alternatively, a U.S. Holder of a Market Discount Note may elect to include
market discount in income currently over the life of the Market Discount Note.
Such an election applies to all debt instruments with market discount acquired
by the electing U.S. Holder on or after the first day of the first taxable year
to which the election applies and may not be revoked without the consent of the
Internal Revenue Service.
Market discount accrues on a straight-line basis, unless the U.S. Holder
elects to accrue such discount on a constant yield to maturity basis. Such an
election is applicable only to the Note with respect to which it is made and is
irrevocable. A U.S. Holder of a
100
<PAGE> 103
Market Discount Note that does not elect to include market discount in income
currently, generally will be required to defer deductions for interest on
borrowings allocable to such Note, in an amount not exceeding the accrued market
discount on such Note, until the maturity or disposition of such Note.
SALE, EXCHANGE OR RETIREMENT OF THE NOTES
A U.S. Holder's tax basis in a Series D Note generally will be its cost. A
U.S. Holder generally will recognize gain or loss on the sale, exchange or
retirement of a Series D Note in an amount equal to the difference between the
amount realized on the sale, exchange or retirement and the tax basis of the
Series D Note. Gain or loss recognized on the sale, exchange or retirement of a
Series D Note (excluding amounts received in respect of accrued interest, which
will be taxable as ordinary interest income) generally will be capital gain or
loss and will be long-term capital gain or loss if the Series D Note was held
for more than one year.
BACKUP WITHHOLDING
Under certain circumstances, a U.S. Holder of a Series D Note may be subject
to "backup withholding" at a 31% rate with respect to payments of interest
thereon or the gross proceeds from the disposition thereof. This withholding
generally applies if the U.S. Holder fails to furnish his or her social security
number or other taxpayer identification number in the specified manner and in
certain other circumstances. Any amount withheld from a payment to a U.S. Holder
under the backup withholding rules is allowable as a credit against such U.S.
Holder's federal income tax liability, provided that the required information is
furnished to the Internal Revenue Service. Corporations and certain other
entities described in the Code and Treasury regulations are exempt from backup
withholding if their exempt status is properly established.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Series D Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Series D Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of Series D Notes received in exchange for Existing
Notes where such Existing Notes were acquired as a result of market-making
activities or other trading activities. Each of the Company and the Subsidiary
Guarantors has agreed that, starting on the Expiration Date and ending on the
close of business on the first anniversary of the Expiration Date, it will make
this Prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale. In addition, until August 5, 1999 (90
days after the date of this Prospectus), all dealers effecting transactions in
the Series D Notes may be required to deliver a prospectus.
Neither the Company nor any of the Subsidiary Guarantors will receive any
proceeds from any sale of Series D Notes by broker-dealers. Series D Notes
received by broker-dealers for their own account pursuant to the Exchange Offer
may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the Series D Notes or a combination of such methods of resale, at
market prices prevailing at the time of resale, at prices related to such
prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such Series D Notes. Any broker-dealer
that resells Series D Notes that were received by it for its own account
pursuant to the Exchange Offer and any broker or dealer that participates in a
distribution of such Series D Notes may be deemed to be an "underwriter" within
the meaning of the Securities Act and any profit on any such resale of Series D
Notes and any commissions or concessions received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that, by acknowledging that it will deliver and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of one year after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company and each of the Subsidiary Guarantors
have agreed to pay all expenses incident to the Exchange Offer (including the
expenses of one counsel for the holders of the Series C Notes) other than
commissions or concessions of any brokers or dealers and will indemnify the
holders of the Series C Notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act.
101
<PAGE> 104
LEGAL MATTERS
The validity of the Series D Notes offered hereby will be passed upon for
the Company by Dykema Gossett PLLC, Bloomfield Hills, Michigan. Rex E.
Schlaybaugh, Jr. is a shareholder, the Vice Chairman of the Board and a director
of the Company. Mr. Schlaybaugh is a member of Dykema Gossett PLLC. Certain
matters relating to the Subsidiary Guaranties and the application of Ontario law
to them will be passed upon for the Company by Fasken Campbell Godfrey, Toronto,
Ontario.
EXPERTS
On March 28, 1997, PricewaterhouseCoopers LLP, independent accountants, was
selected by the Board of Directors of Oxford Automotive, Inc. to audit the
financial statements of Oxford Automotive, Inc. for the fiscal year ended March
31, 1997.
The consolidated financial statements of Oxford Automotive, Inc. as of and
for the years ended March 31, 1998 and 1997 included in this Prospectus have
been so included in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The consolidated financial statements of the Company as of March 31, 1996
and for the period from October 28, 1995 through March 31, 1996 appearing in
this Prospectus and the related financial statement schedule included in the
Exchange Offer Registration Statement have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their report appearing herein, and are
included in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.
The consolidated financial statements of BMG North America Limited
(Predecessor) for the period from April 1, 1995 through October 27, 1995
appearing in this Prospectus and the related financial statement schedule
included in the Exchange Offer Registration Statement have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report appearing
herein, and are included in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
The consolidated financial statements of Lobdell Emery Corporation as of
December 31, 1996 and 1995 and for each of the three years in the period ended
December 31, 1996 included in this Prospectus have been so included in reliance
on the report of PricewaterhouseCoopers LLP, independent accountants, given on
the authority of said firm as experts in auditing and accounting.
The financial statements of Howell Industries, Inc. as of and for the year
ended July 31, 1997 included in this Prospectus have been so included in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
The consolidated financial statements of RPI Holdings, Inc. as of March 31,
1997 and June 30, 1996 and for the nine-month period ended March 31, 1997 and
year ended June 30, 1996 included in this Prospectus, have been so included in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
The combined financial statements of the Suspension Division of Eaton
Corporation as of December 31, 1997 and for the year then ended included in this
Prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
The financial statements of Cofimeta S.A. and its subsidiaries as of and
for the nine months ended September 30, 1998 and as of and for the years ended
December 31, 1997 and 1996 included in this Prospectus have been so included in
reliance on the report Coopers & Lybrand Audit, independent accountants, given
on the authority of said firm as experts in auditing and accounting.
102
<PAGE> 105
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
OXFORD AUTOMOTIVE, INC.
Report of Independent Accountants ................................................................ F-3
Independent Auditors' Report ..................................................................... F-4
Consolidated Balance Sheets as of March 31, 1998, 1997 and 1996 and December 31, 1998
(unaudited) ................................................................................. F-5
Consolidated Statements of Operations for the years ended March 31, 1998 and 1997, the period
from October 28, 1995 through March 31, 1996 and the nine months ended December
31, 1998 and 1997 (unaudited) for the Company; and for the period from
April 1, 1995 through October 27, 1995 for the Predecessor .................................. F-6
Consolidated Statements of Changes in Shareholders' Equity (Net Capital Deficiency)
and Comprehensive Income for the years ended March 31, 1998 and 1997, the
period from October 28, 1995 through March 31, 1996 and the nine months
ended December 31, 1998 (unaudited) for the Company; and for the period
from April 1, 1995 through October 27, 1995 for the Predecessor ............................. F-7
Consolidated Statements of Cash Flows for the years ended March 31, 1998 and 1997, the period
from October 28, 1995 through March 31, 1996 and the nine months ended December
31, 1998 and 1997 (unaudited) for the Company; and for the period from
April 1, 1995 through October 27, 1995 for the Predecessor .................................. F-10
Notes to Consolidated Financial Statements ....................................................... F-11
OXFORD AUTOMOTIVE, INC.
Condensed consolidating financial information as of and for the nine months ended
December 31, 1998 ........................................................................... F-27
LOBDELL EMERY CORPORATION
Report of Independent Accountants................................................................. F-37
Consolidated Balance Sheets as of December 31, 1996 and 1995 ..................................... F-38
Consolidated Statements of Operations for the years ended December 31, 1996, 1995 and 1994 ....... F-39
Consolidated Statement of Changes in Shareholders' Equity for the years ended December 31, 1996,
1995 and 1994 ............................................................................... F-40
Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994 ....... F-41
Notes to Consolidated Financial Statements ....................................................... F-42
HOWELL INDUSTRIES, INC.
Report of Independent Accountants ................................................................ F-52
Consolidated Balance Sheet as of July 31, 1997 ................................................... F-53
Statement of Operations for the year ended July 31, 1997 ......................................... F-54
Statement of Shareholders' Equity for the year ended July 31, 1997 ............................... F-55
Statement of Cash Flows for the year ended July 31, 1997 ......................................... F-56
Notes to Consolidated Financial Statements ....................................................... F-57
RPI HOLDINGS, INC.
Report of Independent Accountants ................................................................ F-63
Report of Independent Accountants ................................................................ F-64
Consolidated Balance Sheets as of March 31, 1997, June 30, 1996 and September 30, 1997
(unaudited) ................................................................................. F-65
</TABLE>
F-1
<PAGE> 106
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Consolidated Statements of Operations for the period from July 1, 1996 to March 31, 1997,
for the year ended June 30, 1996, and the six months ended September 30, 1997 and 1996
(unaudited) ................................................................................. F-66
Consolidated Statement of Changes in Shareholders' Equity for the period from July 1, 1996
to March 31, 1997, the period from July 1, 1995 to June 30, 1996, and for the six months
ended September 30, 1997 (unaudited) ........................................................ F-67
Consolidated Statements of Cash Flows for period from July 1, 1996 to
March 31, 1997, for the year ended June 30, 1996, and the six
months ended September 30, 1997 and 1996 (unaudited) ........................................ F-68
Notes to Consolidated Financial Statements ....................................................... F-69
SUSPENSION DIVISION OF EATON CORPORATION
Report of Independent Accountants ................................................................ F-76
Combined Balance Sheets as of December 31, 1997 and March 31, 1998 (unaudited) ................... F-77
Combined Statements of Operations for the year ended December 31, 1997, and for the three months
ended March 31, 1998 and 1997 (unaudited) ................................................... F-78
Combined Statements of Cash Flows for the year ended December 31, 1997, and for the three months
ended March 31, 1998 and 1997 (unaudited) ................................................... F-79
Notes to Combined Financial Statements ........................................................... F-80
COFIMETA S.A.
Independent Auditors Report ...................................................................... F-90
Consolidated Assets as of September 30, 1998 and December 31, 1997 ............................... F-91
Consolidated Liabilities as of September 30, 1998 and December 31, 1997 .......................... F-92
Consolidated Income Statements for the nine months ended September 30, 1998
and the years ended December 31, 1997 and 1996 ............................................. F-93
Consolidated Cash Flow Statements for the nine months ended September 30, 1998 and
the years ended December 31, 1997 and 1996 ................................................. F-94
Notes to Consolidated Financial Statements ....................................................... F-95
</TABLE>
F-2
<PAGE> 107
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of
Oxford Automotive, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of changes in shareholders' equity and of
cash flows present fairly, in all material respects, the financial position of
Oxford Automotive, Inc. and its subsidiaries (the Company) at March 31, 1998 and
1997 and the results of their operations and their cash flows for the years
ended March 31, 1998 and 1997 in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
The financial statements of the Company as of March 31, 1996 and for the period
from October 28, 1995 through March 31, 1996 and the financial statements of BMG
North America Limited (the Predecessor) for the period from April 1, 1995
through October 27, 1995 were audited by other independent accountants whose
report dated May 21, 1996 expressed an unqualified opinion on those statements.
PRICE WATERHOUSE LLP
Bloomfield Hills, Michigan
June 22, 1998
F-3
<PAGE> 108
INDEPENDENT AUDITORS' REPORT
To the Directors of
Oxford Automotive, Inc. and BMG North America Limited
We have audited the consolidated balance sheet of Oxford Automotive, Inc. as at
March 31, 1996 and the consolidated statements of operations, changes in
shareholders' equity and cash flows for the period from October 28, 1995 to
March 31, 1996 for Oxford Automotive, Inc. and the consolidated statements of
operations, changes in shareholders' equity and cash flows for the period from
April 1, 1995 to October 27, 1995 for BMG North America Limited. These financial
statements are the responsibility of the management of Oxford Automotive, Inc.
and BMG North America Limited. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance 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, these consolidated financial statements present fairly, in all
material respects, the financial position of Oxford Automotive, Inc., as at
March 30, 1996 and the results of its operations and its cash flows for the
period from October 28, 1995 to March 31, 1996 and the results of BMG North
America Limited's operations and its cash flows for the period from April 1,
1995 to October 27, 1995 in accordance with U.S. generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Chartered Accountants
Kitchener, Ontario
May 21, 1996
F-4
<PAGE> 109
OXFORD AUTOMOTIVE, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1998 1998 1997 1996
ASSETS (UNAUDITED)
<S> <C> <C> <C> <C>
Current assets
Cash and cash equivalents $ 318 $ 18,321 $ 9,671 $ --
Trade receivables, net 86,336 65,273 47,626 8,338
Inventories 33,911 21,305 13,411 3,719
Refundable income taxes 1,601 1,641
Reimbursable tooling 40,237 13,315 4,968 3,298
Deferred income taxes 4,399 4,399 4,633
Unexpended bond proceeds 6 4,159
Prepaid expenses and other current assets 3,630 2,803 1,181
--------- --------- --------- ---------
1,354
TOTAL CURRENT ASSETS 168,837 131,176 83,304 16,536
Unexpended bond proceeds 3,937
Marketable securities 8,092 8,627
Other noncurrent assets 36,269 10,116 4,588 6,734
Deferred income taxes 7,918 6,405 5,087 6,139
Property, plant and equipment, net 191,446 163,708 146,778 19,791
--------- --------- --------- ---------
TOTAL ASSETS $ 412,562 $ 320,032 $ 243,694 $ 49,200
========= ========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
Current liabilities
Trade accounts payable $ 54,428 $ 52,214 $ 31,421 $ 14,570
Employee compensation 10,918 4,808 4,986 1,883
Restructuring reserve 3,019 6,363 7,050 608
Accrued expenses and other current liabilities 10,000 12,242 9,040 3,299
Current portion of borrowings 3,411 10,965 24,274 11,258
--------- --------- --------- ---------
TOTAL CURRENT LIABILITIES 81,766 86,592 76,771 31,618
Pension liability 5,470 4,727 3,631 1,080
Postretirement medical benefits liability 41,427 35,992 33,467
Deferred income taxes 13,962 15,332 10,442
Other noncurrent liabilities 3,870 2,596 2,187 67
Long-term borrowings -- less current portion 227,549 128,483 75,555 15,500
--------- --------- --------- ---------
TOTAL LIABILITIES 374,054 273,722 202,053 48,265
--------- --------- --------- ---------
Commitments and contingent liabilities (Note 15)
Redeemable Series A $3.00 Cumulative Preferred Stock, $100 stated value --
457,541 shares authorized, 397,539 shares issued and outstanding in
1998 and 457,541 shares issued and outstanding in 1997 (Notes 3 and 13) 40,586 40,192 36,012
--------- --------- ---------
Redeemable Series B Preferred Stock, $100 stated value -- 49,938 shares
authorized, no shares issued and outstanding in 1998 and 49,938
shares issued and outstanding in 1997 (Notes 3 and 13) 3,288
--------- --------- ---------
SHAREHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
Common stock, 400,000 shares authorized; 309,750 shares issued and
outstanding at March 31, 1998 and 1997 and 75,000 shares issued
and outstanding at March 31, 1996 1,050 1,050 1,050 750
Accumulated other comprehensive income (6,178) 318 (281) (230)
Retained earnings 3,050 4,750 1,572 415
--------- --------- --------- ---------
(2,078) 6,118 2,341 935
--------- --------- --------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (NET CAPITAL DEFICIENCY) $ 412,562 $ 320,032 $ 243,694 $ 49,200
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE> 110
OXFORD AUTOMOTIVE, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMPANY PREDECESSOR
------------------------------------------------------------------------- -----------------
NINE MONTHS NINE MONTHS PERIOD FROM PERIOD FROM
ENDED ENDED YEAR ENDED YEAR ENDED OCTOBER 28, 1995 APRIL 1, 1995
DECEMBER 31, DECEMBER 31, MARCH 31, MARCH 31, THROUGH THROUGH
1998 1997 1998 1997 MARCH 31, 1996 OCTOBER 27, 1995
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 408,144 $ 295,530 $ 410,321 $ 136,861 $ 35,572 $ 49,043
Cost of sales 372,612 267,180 368,420 125,375 31,624 46,895
--------- --------- --------- --------- --------- ---------
GROSS PROFIT 35,532 28,350 41,901 11,486 3,948 2,148
Selling, general and administrative 22,235 13,587 21,839 7,685 2,235 3,922
Restructuring provision 1,176 1,610
--------- ---------
Gain on sale of equipment (1,602)
--------- --------- --------- --------- ---------
OPERATING INCOME 12,121 14,763 20,054 3,801 1,713 (1,774)
Other income (expense)
Interest expense (14,255) (7,921) (10,710) (3,388) (1,096) (1,048)
Other 949 531 321 2,201
--------- --------- --------- --------- ---------
INCOME BEFORE BENEFIT (PROVISION) FOR
INCOME TAXES (1,185) 7,373 9,665 2,614 617 (2,822)
Benefit (provision) for income taxes 475 (2,949) (4,074) (1,065) 202 938
--------- --------- --------- --------- --------- ---------
NET INCOME (710) 4,424 5,591 1,549 415 $ (1,884)
=========
Accrued dividends and accretion on
Redeemable preferred stock 990 1,002 1,334 300
--------- --------- --------- --------- ---------
NET INCOME APPLICABLE TO COMMON STOCK $ (1,700) $ 3,422 $ 4,257 $ 1,249 $ 415
========= ========= ========= ========= =========
NET INCOME PER SHARE (BASIC AND DILUTED) $ (5.49) $ 11.05 $ 13.74 $ 9.37 $ 9.10
========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE> 111
OXFORD AUTOMOTIVE, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(NET CAPITAL DEFICIENCY) AND COMPREHENSIVE INCOME
(DOLLAR AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PREDECESSOR
-----------------------------------------------------------------------
FOREIGN NET EQUITY
CURRENCY UNREALIZED GAIN ADJUSTMENT FOR
COMMON TRANSLATION ON MARKETABLE MINIMUM PENSION
STOCK ADJUSTMENT SECURITIES LIABILITY
<S> <C> <C> <C> <C>
APRIL 1, 1995 $ 14,262 $ 40 $ -- $ --
Comprehensive Income
Net loss
Foreign currency translation
adjustments 575 (155)
Comprehensive Income
Issuance of common stock, net
of redemptions (40)
-------- ------- ------- -------
OCTOBER 27, 1995 $ 14,797 $ (115) $ -- $ --
======== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
PREDECESSOR
-----------------------------------------------------------------------
SUBTOTAL
ACCUMULATED RETAINED
OTHER COMPREHENSIVE EARNINGS COMPREHENSIVE
INCOME (DEFICIT) INCOME TOTAL
<S> <C> <C> <C> <C>
APRIL 1, 1995 $ 40 $ (3,469) $ $ 10,833
Comprehensive Income
Net loss (1,884) (1,884) (1,884)
Foreign currency translation
adjustments (155) (155) 420
---------
Comprehensive Income $ (2,039)
=========
Issuance of common stock, net
of redemptions (40)
--- ---- ------ --------- ---------
OCTOBER 27, 1995 $ (115) $ (5,353) $ 9,329
=== ==== ====== ========= =========
</TABLE>
F-7
<PAGE> 112
OXFORD AUTOMOTIVE, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(NET CAPITAL DEFICIENCY) AND COMPREHENSIVE INCOME
(DOLLAR AMOUNTS IN THOUSANDS) (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMPANY
--------------------------------------------------------------------
FOREIGN NET EQUITY
CURRENCY UNREALIZED GAIN ADJUSTMENT FOR
COMMON TRANSLATION ON MARKETABLE MINIMUM PENSION
STOCK ADJUSTMENT SECURITIES LIABILITY
<S> <C> <C> <C> <C>
OCTOBER 28, 1995 $ 750 $ -- $ -- $ --
Comprehensive Income
Net income
Foreign currency translation
adjustments 5
Equity adjustment for
Minimum pension liability (235)
Comprehensive Income
------- --------- ------- -------
MARCH 31, 1996 750 5 -- (235)
Comprehensive Income
Net income
Foreign currency translation
Adjustments (33)
Equity adjustment for
Minimum pension liability (18)
Comprehensive Income
Accrued dividends and
Accretion of redeemable
Preferred stock
Issuance of common stock, net
of redemptions 300
------- --------- ------- -------
MARCH 31, 1997 1,050 (28) -- (253)
Comprehensive Income
Net income
Foreign currency translation
Adjustments (623)
Unrealized gain on marketable
securities 969
Equity adjustment for
minimum pension liability 253
Comprehensive Income
Excess of purchase price over
Predecessor basis
Accrued dividends and accretion
on redeemable preferred
stock
------- --------- ------- -------
MARCH 31, 1998 1,050 (651) 969
Comprehensive Income (unaudited)
Net income (unaudited)
Foreign currency translation
adjustments (unaudited) (5,481)
Unrealized loss on marketable
securities (unaudited) (1,015)
Comprehensive Income
Accrued dividends and
accretion of redeemable
preferred stock (unaudited)
------- --------- ------- -------
DECEMBER 31, 1998
(unaudited) $ 1,050 $ (6,132) $ (46) $ --
======= ========= ======= =======
</TABLE>
F-8
<PAGE> 113
OXFORD AUTOMOTIVE, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(NET CAPITAL DEFICIENCY) AND COMPREHENSIVE INCOME
(DOLLAR AMOUNTS IN THOUSANDS) (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMPANY
-----------------------------------------------------------------------
SUBTOTAL
ACCUMULATED
OTHER COMPREHENSIVE RETAINED COMPREHENSIVE
INCOME EARNINGS INCOME TOTAL
<S> <C> <C> <C> <C>
OCTOBER 28, 1995 $ -- $ -- $ -- $ 750
Comprehensive Income
Net income 415 415 415
Foreign currency translation
adjustments 5 5 5
Equity adjustment for
Minimum pension liability (235) (235) (235)
--------
Comprehensive Income 185
-------- ------- ======== --------
MARCH 31, 1996 (230) 415 935
Comprehensive Income
Net income 1,549 1,549 1,549
Foreign currency translation
Adjustments (33) (33) (33)
Equity adjustment for
Minimum pension liability (18) (18) (18)
--------
Comprehensive Income 1,498
========
Accrued dividends and
Accretion of redeemable
Preferred stock (300) (300)
Issuance of common stock, net
of redemptions (92) 208
-------- ------- --------
MARCH 31, 1997 (281) 1,572 2,341
Comprehensive Income
Net income 5,591 5,591 5,591
Foreign currency translation
Adjustments (623) (623) (623)
Unrealized gain on marketable
securities 969 969 969
Equity adjustment for
minimum pension liability 253 253 253
--------
Comprehensive Income 6,190
=======
Excess of purchase price over
Predecessor basis (1,079) (1,079)
Accrued dividends and accretion
on redeemable preferred stock (1,334) (1,334)
-------- ------- --------
MARCH 31, 1998 318 4,750 6,118
Comprehensive Income (unaudited)
Net income (unaudited) (710) (710) (710)
Foreign currency translation
adjustments (unaudited) (5,481) (5,481) (5,481)
Unrealized loss on marketable
securities (unaudited) (1,015) (1,015) (1,015)
--------
Comprehensive Income (unaudited) $ (7,206)
========
Accrued dividends and accretion
of redeemable preferred
stock (unaudited) (990) (990)
-------- ------- --------
DECEMBER 31, 1998
(unaudited) (6,178) $ 3,050 $ (2,078)
======== ======= ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-9
<PAGE> 114
OXFORD AUTOMOTIVE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLAR AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMPANY PREDECESSOR
---------------------------------------------------------------------- ----------------
PERIOD FROM PERIOD FROM
NINE MONTHS ENDED YEAR ENDED YEAR ENDED OCTOBER 28, 1995 APRIL 1, 1995
DECEMBER 31, MARCH 31, MARCH 31, THROUGH THROUGH
1998 1997 1998 1997 MARCH 31, 1996 OCTOBER 27, 1995
<S> <C> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (710) $ 4,424 $ 5,591 $ 1,549 $ 415 $ (1,884)
Adjustments to reconcile net income
(loss) to net cash provided by (used
in) operating activities
Depreciation and amortization 19,552 14,580 20,279 5,041 687 919
Deferred income taxes (2,968) (3,759) 137 2,136 230 (1,036)
Gain on sale of equipment 52 (1,586) (195) (2)
Changes in operating assets and
liabilities affecting cash
Trade receivables (11,162) 9,435 (4,615) (8,953) 6,617 (3,311)
Inventories (1,853) 2,832 1,496 (299) (277) (259)
Reimbursable tooling (27,237) (909) (7,368) (1,601) 1,824 (760)
Prepaid expenses and other assets 3,396 (2,334) 569 129 1,592 (1,768)
Other noncurrent assets (836) 3,544
Trade accounts payable (3,772) (7,948) 11,416 (605) (6,501) 6,417
Employee compensation 169 (6,072) 309 (493)
Restructuring reserve (3,272) (1,392) (745) (398)
Accrued expenses and other
liabilities 1,448 (1,143) (3,166) (1,885) (1,716) 3,504
Income taxes payable/refundable 2,914 (199)
Other noncurrent liabilities (4,589) 1,405 1,731 (39)
--------- -------- -------- --------- --------- ---------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (31,167) 15,243 25,986 (7,847) 3,178 1,329
--------- --------- --------- --------- --------- ---------
INVESTING ACTIVITIES
Purchase of businesses, net of cash
acquired (53,886) (24,145) (24,219) (9,309) (1,983)
Purchase of property, plant and
equipment (20,369) (11,418) (16,723) (3,326) (3,466) (5,111)
Proceeds from sale of equipment 1,050 5,433 341 33 11
Purchases of marketable securities (892) (7,658)
--------- -------- -------- --------- --------- ---------
NET CASH USED IN INVESTING
ACTIVITIES (75,147) (34,513) (43,167) (12,294) (5,416) (5,100)
--------- --------- --------- --------- --------- ---------
FINANCING ACTIVITIES
Issuance of share capital 300 750
Proceeds from borrowing arrangements 92,085 124,814 126,653 78,823 23,814 921
Principal payments on borrowing
arrangements (92,245) (93,782) (49,186) (16,482) (7,477)
Payment of preferred stock dividends (596) (597) (1,193)
Debt financing costs (2,621) (5,372)
Redemption and retirement of common
stock (92) (40)
Obligation under capital lease - net (6) (3)
--------- --------- --------- --------- --------- ---------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 88,868 31,972 26,306 29,845 8,076 (6,599)
--------- --------- --------- --------- --------- ---------
Effect of exchange rate changes on cash (557) (2,818) (475) (33)
--------- --------- --------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (18,003) 9,884 8,650 9,671 5,838 (10,370)
Cash and cash equivalents at beginning
of Period 18,321 9,671 9,671 (11,238) (868)
--------- --------- --------- --------- --------- ---------
Cash and cash equivalents at end of
period $ 318 $ 19,555 $ 18,321 $ 9,671 $ (5,400) $ (11,238)
========= ========= ========= ========= ========= =========
Cash paid for interest $ 18,269 $ 7,033 $ 7,338 $ 3,033 $ 1,096 $ 1,048
========= ========= ========= ========= ========= =========
Cash paid for income taxes $ 2,527 $ 4,190 $ 4,670 $ -- $ 42 $ 79
========= ========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-10
<PAGE> 115
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
1. NATURE OF OPERATIONS
Oxford Automotive, Inc. (the Company) is a full-service supplier of
metal stampings and welded assemblies used as original equipment
components primarily by North American original equipment automotive
manufacturers. The Company's products are used in a wide variety of
sport utility vehicles, light and medium trucks, vans and passenger
cars. The Company primarily operates from thirteen plants located in
the United States, Canada and Mexico. The Company's hourly workforce is
represented by various unions.
Net sales to the Company's three primary customers as a percentage of
total sales are as follows:
<TABLE>
<CAPTION>
PERIOD FROM
OCTOBER 28, 1995
YEAR ENDED YEAR ENDED THROUGH
MARCH 31, 1998 MARCH 31, 1997 MARCH 31, 1996
<S> <C> <C> <C>
General Motors Corporation 54% 62% 67%
Ford Motor Company 31% 17% --
Chrysler Corporation 9% -- --
</TABLE>
Accounts receivable from General Motors Corporation, Ford Motor Company
and Chrysler Corporation represent approximately 39%, 39% and 13%,
respectively, of the March 31, 1998 accounts receivable balance.
Although the Company is directly affected by the economic well being of
the automotive industry and customers referred to above, management
does not believe significant credit risk exists at March 31, 1998. The
Company does not require collateral to reduce such risk and
historically has not experienced significant losses related to
receivables from individual customers or groups of customers in the
automotive industry.
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The financial statements for the period from April 1, 1995 through
October 27, 1995 are those of BMG North America Limited (the
Predecessor), which was acquired by Oxford Automotive, Inc. (formerly
BMG-MI, Inc.) on October 28, 1995.
The consolidated financial statements as of March 31, 1998 and 1997 and
for the years then ended and for the period from October 28, 1995
through March 31, 1996 are those of the Company and its subsidiaries.
The financial statements of the Company and the Predecessor are not
comparable in certain respects due to differences between the cost
bases of certain assets held by the Company versus that of the
Predecessor, resulting in reduced depreciation and amortization charges
subsequent to October 27, 1995, changes in accounting policies and the
recording of certain liabilities at the date of acquisition in
connection with the purchase of the Predecessor by the Company, as well
as the Company's acquisitions subsequent to October 28, 1995 discussed
further in Note 3.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of the Company include the
accounts of Oxford Automotive, Inc. and its wholly-owned subsidiaries,
BMG Holdings, Inc. (BMGH), Howell Industries, Inc. (Howell), Lobdell
Emery Corporation (Lobdell), RPI Holdings, Inc. (RPIH) and Oxford
Automotriz de Mexico S.A. de C.V. (Oxford Mexico). Intercompany
accounts and transactions have been eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
F-11
<PAGE> 116
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION
Revenue is recognized by the Company upon shipment of product to the
customer.
FINANCIAL INSTRUMENTS
At March 31, 1998 and 1997, the carrying amount of financial
instruments such as cash and cash equivalents, trade receivables and
payables and unexpended bond proceeds, approximated their fair values.
The carrying amount of the long-term customer receivables and
borrowings at March 31, 1998 and 1997, approximated their fair values
based on the variable interest rates available to the Company for
similar arrangements.
CASH EQUIVALENTS
The Company considers all highly-liquid investments with maturity of
three months or less when purchased to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is
principally determined by the last-in, first-out (LIFO) method for the
Company's United States operations and by the first-in first-out (FIFO)
method for the Company's Canadian operations.
REIMBURSABLE TOOLING
Reimbursable tooling represents net costs incurred on tooling projects
for which the Company expects to be reimbursed by customers. Ongoing
estimates of total costs to be incurred on each tooling project are
made by management. Losses, if any, are recorded when known and in
cases where billings exceed costs incurred, the related tooling gain is
recognized upon acceptance of the tooling by the customer. Certain of
the Company's tooling costs are financed through lending institutions
and are reimbursed by customers on a piece price basis. These tooling
assets are classified as either accounts receivable ($2,676, $3,695,
and $1,809 at March 31, 1998, 1997, and 1996 respectively), other
noncurrent assets (none, $3,800 and $6,734 at March 31, 1998, 1997, and
1996 respectively) or equipment depending upon the ultimate title
holder of the tooling assets.
UNEXPENDED BOND PROCEEDS
Unexpended bond proceeds in the accompanying consolidated balance sheet
represent unexpended proceeds from the issuance of industrial
development revenue bonds by Creative Fabrication Corporation
(Creative), a wholly-owned subsidiary of Lobdell, as discussed in Note
8, and are invested in allowable money market accounts and commercial
paper with a maturity of 90 days or less.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated on the basis of cost and
include expenditures for improvements which materially increase the
useful lives of existing assets. Expenditures for normal repair and
maintenance are charged to operations as incurred. For federal income
tax purposes, depreciation is computed using accelerated and
straight-line methods. For financial reporting purposes, depreciation
is computed principally using the straight-line method over the
following estimated useful lives:
<TABLE>
<CAPTION>
YEARS
<S> <C>
Land improvements 15
Buildings and improvements 30-40
Machinery and equipment 3-20
</TABLE>
F-12
<PAGE> 117
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
IMPAIRMENT OF LONG-LIVED ASSETS
The Company accounts for long-lived assets in accordance with Statement
of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of". This Statement requires that long-lived assets and
certain identifiable intangibles to be held and used by the Company be
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be fully
recoverable. The Company recognizes impairment losses for assets or
groups of assets where the sum of the estimated future cash flows
(undiscounted and without interest charges) is less than the carrying
amount of the related asset or group of assets. The amount of the
impairment loss recognized is the excess of the carrying amount over
the fair value of the asset or group of assets being measured.
MARKETABLE SECURITIES
Marketable securities at March 31, 1998, mainly composed of equity
securities, are classified as available-for-sale securities and are
reported at fair value using quoted market prices. Unrealized holding
gains and losses are included as a separate component of shareholders'
equity until realized.
ENVIRONMENTAL COMPLIANCE AND REMEDIATION
Environmental expenditures that relate to current operations are
expensed or capitalized as appropriate. Expenditures that relate to an
existing condition caused by past operations which do not contribute to
current or future revenue generation are expensed. Liabilities are
recorded when environmental assessments and/or remedial efforts are
probable and the costs can be reasonably estimated. Estimated costs are
based upon enacted laws and regulations, existing technology and the
most probable method of remediation. The costs determined are not
discounted and exclude the effects of inflation and other social and
economic factors.
INCOME TAXES
Deferred taxes are provided to give recognition to the effect of
expected future tax consequences of temporary differences between the
carrying amounts for financial reporting purposes and the tax bases for
income tax purposes of assets and liabilities.
FOREIGN EXCHANGE CONTRACTS
Gains and losses of foreign currency firm commitment hedges are
deferred and included in the basis of the transactions underlying the
commitments. During fiscal 1997, the Company recognized a gain of
approximately $2,000 related to certain foreign currency exchange
transactions terminated during the year. The gain is included as a
component of other income in the accompanying March 31, 1997 statement
of operations. Had the foreign currency exchange transactions not been
terminated, the recognized gain would normally have been recorded as a
component of sales.
FOREIGN CURRENCY TRANSLATION
The foreign currency financial statements of BMGH and Oxford Mexico,
where the local currency is the functional currency, are translated
using exchange rates in effect at period end for assets and liabilities
and at weighted average exchange rates during the period for operating
statement accounts. The resulting foreign currency translation
adjustments are recorded as a separate component of shareholders'
equity. Exchange gains and losses resulting from foreign currency
transactions are included in operating results during the period in
which they occur.
PER SHARE AMOUNTS
The per share amounts of the Predecessor have not been presented as the
Company's capital structure is not comparable to that of the
Predecessor.
RECLASSIFICATIONS
Certain amounts from the prior year have been reclassified to conform
with the current year presentation.
F-13
<PAGE> 118
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
3. ACQUISITIONS
On October 28, 1995, the Company acquired all of the outstanding common
stock of BMG North America Limited (BMGNA). The acquisition was
financed through a $750 Series A promissory note. The acquisition has
been recorded in accordance with the purchase method of accounting.
Accordingly, the purchase price plus direct cost of the acquisition
have been allocated to the assets acquired and liabilities assumed
based on their estimated fair values at the date of acquisition.
On January 10, 1997, pursuant to an Agreement and Plan of Merger among
Lobdell Emery Corporation, certain shareholders of Lobdell Emery
Corporation, BMG-MI, Inc. and L-E Acquisition, Inc. as amended (the
Agreement), certain Lobdell Emery Corporation shareholders and option
holders had their respective shares and options redeemed for cash of
approximately $8,500 and all outstanding shares of common stock of
Lobdell Emery Corporation (Oldco) were exchanged for shares of
preferred stock of Oldco with a face value of approximately $40,700. In
addition, approximately $3,500 of expenses incurred by Oldco were
reimbursed by L-E Acquisition, Inc. In connection with the exchange of
Oldco's common stock for preferred stock, L-E Acquisition, Inc. was
merged with and into Lobdell Emery Corporation (Newco).
The acquisition was financed through the issuance of preferred stock
described in Note 13 and a term loan, which was subsequently
refinanced, as described in Note 8. The acquisition has been recorded
in accordance with the purchase method of accounting. Accordingly, the
purchase price plus direct cost of the acquisition have been allocated
to the assets acquired and liabilities assumed based on their estimated
fair values at the date of acquisition.
The fair market value of assets acquired and liabilities assumed, after
giving effect to the settlement described in Note 13, is summarized as
follows:
<TABLE>
<S> <C>
Current assets $ 56,993
Property, plant and equipment 129,966
Noncurrent assets 9,953
Current liabilities (50,028)
Long-term liabilities (107,130)
----------
Fair value of preferred stock $ 39,754
==========
</TABLE>
In accordance with the purchase method of accounting, Lobdell's
operating results have been included with those of the Company since
the date of acquisition.
On August 13, 1997, the Company acquired all of the outstanding common
stock of Howell for approximately $23,700 in cash, including
acquisition costs. The acquisition was financed through the proceeds of
the subordinated notes described in Note 8. The acquisition has been
recorded in accordance with the purchase method of accounting.
Accordingly, the purchase price plus direct cost of the acquisition
have been allocated to the assets acquired and liabilities assumed
based on their estimated fair values at the date of acquisition.
The fair market value of assets acquired and liabilities assumed is
summarized as follows:
<TABLE>
<S> <C>
Current assets $ 22,900
Property, plant and equipment 18,100
Current liabilities (14,100)
Long-term liabilities (3,200)
-----------
$ 23,700
===========
</TABLE>
On November 25, 1997, Oxford purchased all of the outstanding common
stock of RPIH for $2,500 in cash. The acquisition was financed through
the proceeds of the subordinated notes described in Note 8. The
acquisition has been recorded in accordance with the purchase method of
accounting. Accordingly, the purchase price has been allocated to the
assets acquired and liabilities assumed based on their estimated fair
values at the date of acquisition. The majority shareholder of Oxford
was also the majority shareholder of RPIH.
F-14
<PAGE> 119
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
3. ACQUISITIONS (CONTINUED)
The fair market value of assets acquired and liabilities assumed is
summarized as follows:
<TABLE>
<S> <C>
Current assets $ 3,900
Property, plant and equipment 5,000
Noncurrent assets 1,600
Current liabilities (5,400)
Long-term liabilities (3,700)
Excess of purchase price over predecessor basis 1,100
$ 2,500
</TABLE>
The excess of purchase price over predecessor basis is a result of the
common ownership by the majority shareholder of Oxford and represents
the portion of the fair value of the net assets acquired in excess of
their book value, multiplied by the majority shareholder's ownership
percentage in RPIH. The Company has recorded this amount as a deduction
from retained earnings in the accompanying statement of changes in
shareholders' equity. The following unaudited pro forma combined
results of operations of the Company have been prepared as if the
acquisitions of Lobdell, Howell and RPIH had occurred at the beginning
of fiscal 1998 and 1997.
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31, 1998 MARCH 31, 1997
<S> <C> <C>
Net sales $ 453,685 $ 433,443
Net income $ 4,692 $ 2,364
Net income applicable to common shares $ 3,358 $ 1,052
Net income per common share $ 10.84 $ 3.40
</TABLE>
The pro forma information is not intended to be a projection of future
results.
The foregoing unaudited pro forma results of operations reflect
adjustments for additional interest expense related to the financing of
the acquisitions and the additional depreciation expense, as a result
of the write-up of property, plant and equipment, net of the related
tax benefit.
4. ACCOUNTS RECEIVABLE
Accounts receivable are comprised of the following at March 31:
<TABLE>
<CAPTION>
1998 1997 1998
<S> <C> <C> <C>
Trade receivables $ 65,673 $ 48,898 $ 8,377
Less - allowance for doubtful accounts (400) (1,272) (39)
--------- -------- -------
Trade receivables, net $ 65,273 $ 47,626 $ 8,338
========= ======== =======
</TABLE>
5. INVENTORIES
Inventories are comprised of the following at March 31:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Raw materials $ 6,737 $ 5,688 $ 1,557
Finished goods and work-in-process 15,135 7,994 2,162
---------- --------- -------
21,872 13,682 3,719
LIFO and other reserves (567) (271)
---------- --------- -------
$ 21,305 $ 13,411 $ 3,719
========== ========= =======
</TABLE>
The Company does not separately identify finished goods from
work-in-process.
F-15
<PAGE> 120
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are comprised of the following at
March 31:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Land and land improvements $ 5,432 $ 5,073 $ 779
Buildings and improvements 29,126 24,697 3,171
Machinery and equipment 140,095 117,535 7,394
Construction-in-process 12,204 4,393 8,914
--------- --------- --------
186,857 151,698 20,258
Less - accumulated depreciation (23,149) (4,920) (467)
--------- --------- --------
$ 163,708 $ 146,778 $ 19,791
========= ========= ========
</TABLE>
Certain machinery and equipment with a net book value of $9,900 was
idle at March 31, 1998. Management intends to redeploy these assets
amongst its operating facilities and does not believe that the net book
value of these assets is impaired at March 31, 1998. In addition, in
connection with the restructuring activities described in Note 10,
management expects that additional assets, mainly land and buildings
with a net book value of $7,300 at March 31, 1998, will be idled next
year.
In March 1998, the Company sold assets acquired in connection with the
acquisition of Lobdell and recorded a gain on the sale of these assets
of $1,602.
As discussed in Note 10, certain of the Company's facilities were
closed during the year ended March 31, 1998. As management intends to
sell these facilities, the net book value of the land and buildings,
approximating $1,815, is classified in prepaid expenses and other
current assets as of March 31, 1998 in the accompanying consolidated
balance sheet.
7. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities are comprised of the
following at March 31:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Accrued interest $ 3,627 $ 103 $ --
Accrued workers' compensation 3,287 3,071 544
Accrued property taxes 1,454 2,350
Accrued medical benefits 1,040 1,827
Foreign exchange gain 1,975
Other 2,834 1,689 780
-------- ------- -------
$ 12,242 $ 9,040 $ 3,299
======== ======= =======
</TABLE>
F-16
<PAGE> 121
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
8. BORROWING ARRANGEMENTS
Borrowings consist of the following at March 31:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
SERIES A 10.125% SENIOR SUBORDINATED NOTES DUE 2007, OXFORD $ 124,827 $ -- $ --
INDUSTRIAL DEVELOPMENT REVENUE BONDS, CREATIVE
$8,500 issued September 27, 1995, floating rate interest (3.85% at
March 31, 1998). Quarterly principal payments based on graduated
maturity schedule. Backed by NBD Bank letter of credit 7,600 8,300
EDC TOOLING LOAN, BMGNA
Interest at a fixed rate of 7.36%. Payments based on parts shipped,
matures September 30, 1999 2,967 5,110
BANK SYNDICATE--REVOLVING CREDIT LINE, OXFORD
Interest at prime rate (8.5% at March 31, 1998), matures June 24, 2003 1,825
BANK--TERM LOAN, LOBDELL
Interest at .625% over 90-day LIBOR (6.435% at March 31, 1998).
Quarterly principal payments of approximately $400, matures
October 1, 1998 1,233 2,833
IRDP LOAN, BMGNA
Interest at 6%. Monthly principal payments of $7 to
October 31, 2000 and $11 thereafter, matures September 1, 2002 396 467 534
BANK SYNDICATE--TERM LOAN, LOBDELL
Interest at variable spread over prime. Quarterly principal payments
ranging from $1,250-$2,750 plus interest, repaid in full during 52,750
fiscal 1998 BANK SYNDICATE--REVOLVING CREDIT LINE, LOBDELL
Interest at variable spread over prime, repaid in full during
fiscal 1998 1,250
BANK SYNDICATE--TERM LOAN, BMGNA
Interest at prime rate plus 1.25%. Quarterly payments of $755 plus
interest, repaid in full during fiscal 1998 14,447
REVOLVING CREDIT LINE, BMGNA
Interest at prime rate plus 1.25%, repaid in full during fiscal 1998 10,376
NATIONS BANK -- SATURN TOOLING, BMGNA
Interest at a variable spread over prime (8.71% at March 31, 1997).
Payments based on parts shipped, repaid in full during fiscal 1998 1,380 7,047
CCFL LOAN, BMGNA
Interest at 11.11%. Monthly principal payments of $21, repaid in full
during fiscal 1998 2,475 2,768
TERM LOAN, BMGNA
Interest at Canadian Index Rate plus 3% or Canadian Banker's
Acceptance Rate plue 3.95%. Quarterly principal payments
based on graduated schedule, repaid in full during fiscal 1997 7,765
REVOLVING CREDIT LINE, BMGNA
Interest at Canadian Banker's Acceptance Rate plue 3.7%,
repaid in full during fiscal 1997 2,803
BANK LOAN, BMGNA
Interest at either the Canadian Index Rate plue 2.5% or BA
rate plus 3.45%, repaid in full during fiscal 1997 2,650
TOOLING LINE, BMGNA
Interest at the Canadian Index Rate plue 3% or the Canadian
Banker's Acceptance Rate plus 3.95%, repaid in full during
fiscal 1997 2,750
</TABLE>
F-17
<PAGE> 122
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
SERIES A PROMISSORY NOTE, BMGH
Interest at 7%, repaid in full during fiscal 1998 441 441
OTHER 600
--------- -------- --------
Total 139,448 99,829 26,758
Less - current portion of long-term borrowings (10,965) (24,274) (11,258)
--------- -------- --------
Long-term borrowings-- less current portion $ 128,483 $ 75,555 $ 15,500
========= ======== ========
</TABLE>
On June 24, 1997, the Company issued $125,000 of Series A 10.125%
Senior Subordinated Notes Due 2007 (the Notes). The Notes mature on
June 15, 2007 and require semi-annual interest payments of
approximately $6,300. The proceeds from the Notes were primarily used
to repay certain of the Company's indebtedness and finance the
Company's acquisitions of Howell and RPIH described in Note 3, as well
as the acquisition of the assets of the Suspension Division of Eaton
Corporation described in Note 17. The Notes are unsecured and are
guaranteed by Oxford and certain of its wholly-owned subsidiaries. See
Note 18. On April 1, 1997, the Company issued $35,000 of Series B
10.125% Senior Subordinated Notes Due 2007 as discussed in Note 17.
Concurrent with the issuance of the Notes, the Company entered into a
credit agreement with a syndicate of banks (the Oxford Credit
Agreement), under which the Company may borrow up to $110,000, of which
a maximum of $15,000 is available for letters of credit. At March 31,
1998, $1,825 was outstanding under the revolving line of credit and
$9,437 was outstanding under letters of credit, leaving $98,738 unused
and available. The terms of the Oxford Credit Agreement contain, amount
other provisions, requirements for maintaining defined levels of
tangible net worth, total debt to cash flows, interest coverage and
fixed charge coverage. The Oxford Credit Agreement also contains
certain restrictions on the payment of dividends. Quarterly commitment
fees on the unused amounts of the revolving credit line range from .25%
to .50% of the unused portion. Borrowings are secured by substantially
all of the assets of Oxford.
The proceeds of the industrial development revenue bonds were used to
finance the real and personal property of Creative. These bonds are
backed by an NBD letter of credit, which carries a rate of 1.50% and is
collateralized by substantially all assets of Creative. The letter of
credit reimbursement agreement includes covenants requiring minimum
tangible capital, debt service coverage and limitations on other
indebtedness.
The Bank--term loan, Lobdell and EDC tooling loan, BMGNA are used to
finance customer tooling. These loans are collateralized by either a
customer purchase order or the tooling assets.
Aggregate maturities of long-term borrowings at March 31, 1998 are as
follows
<TABLE>
<S> <C>
1999 $ 10,965
2000 2,032
2001 1,048
2002 93
2003 93
Thereafter 125,217
---------
$ 139,448
=========
</TABLE>
F-18
<PAGE> 123
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
9. INCOME TAXES
The Company's income tax provision (benefit) consists of the following:
<TABLE>
<CAPTION>
COMPANY PREDECESSOR
---------------------------------------------------------- -------------------
PERIOD FROM PERIOD FROM
OCTOBER 28, 1995 APRIL 1, 1995
YEAR ENDED YEAR ENDED THROUGH THROUGH
MARCH 31, 1998 MARCH 31, 1997 MARCH 31, 1996 OCTOBER 27, 1995
<S> <C> <C> <C> <C>
Current
Federal $ 3,116 $ (821) $ -- $ --
State 1,098 (124)
Foreign 34 46
------- ------- ------- -------
4,214 (945) 34 46
------- ------- ------- -------
Deferred
Federal 2,300 899
State (608) 137
Foreign (1,832) 974 168 (984)
------- ------- ------- -------
(140) 2,010 168 (984)
------- ------- ------- -------
$ 4,074 $ 1,065 $ 202 $ (938)
======= ======= ======= =======
</TABLE>
The difference between the statutory rate and the Company's effective
rate was as follows:
<TABLE>
<CAPTION>
COMPANY PREDECESSOR
-------------------------------------------------- ----------------
PERIOD FROM PERIOD FROM
OCTOBER 28, 1995 APRIL 1, 1995
YEAR ENDED YEAR ENDED THROUGH THROUGH
MARCH 31, 1998 MARCH 31, 1997 MARCH 31, 1996 OCTOBER 27, 1995
<S> <C> <C> <C> <C>
Statutory rate 35.0% 34.0% 36.0% 36.0%
Foreign rates varying from 34% (0.5) 1.8
Large corporation tax (2.8) (1.6)
State taxes, net of federal benefit 3.3 0.3
Nondeductible items 1.9 4.1 (0.5) (1.2)
Other 2.5 0.5
---- ----
Effective income tax rate 42.2% 40.7% 32.7% 33.2%
==== ==== ==== ====
</TABLE>
F-19
<PAGE> 124
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
9. INCOME TAXES (CONTINUED)
Significant components of the Company's deferred tax assets and
(liabilities) are as follows at March 31:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Deferred tax liabilities
Tax depreciation in excess of book $ (30,930) $ (30,065) $ --
Inventory reserve (1,581) (1,292)
Other (170)
--------- --------- ---------
Gross deferred tax liabilities (32,681) (31,357)
--------- --------- ---------
Deferred tax assets
Postretirement medical benefits 14,397 13,387
Impairment reserve 22 1,200
Workers' compensation 1,345 1,089
Medical benefits accrual 473 702
Allowance for bad debts 97 502
AMT credit carry forward 3,000
Pension benefits 2,514 1,606 498
Net operating loss carry forwards 2,381 2,905 3,066
Book depreciation in excess of tax 989
Restructuring reserve 3,698 3,927 311
Foreign exchange 127 46 696
Other 3,299 2,471 579
--------- --------- ---------
Gross deferred tax assets 28,353 30,835 6,139
--------- --------- ---------
Valuation allowance (200) (200)
--------- --------- ---------
Net deferred tax asset (liability) $ (4,528) $ (722) $ 6,139
========= ========= =========
</TABLE>
A valuation allowance is provided on the tax benefits otherwise
associated with certain tax attributes unless it is considered more
likely than not that the benefit will be realized.
The Company has net operating loss carry forwards for federal income
tax purposes with potential future tax benefits of approximately $2,147
at March 31, 1998. The federal net operating losses expire during 2011.
The Company has net operating loss carry forwards for Canadian income
tax purposes with potential future tax benefits of approximately $2,950
at March 31, 1998. The Canadian net operating losses expire during 2004
and 2005. In addition, the Company has net operating loss carry
forwards for Mexican income tax purposes with potential future tax
benefits of approximately $1,695 at March 31, 1998. The Mexican net
operating losses expire in seven to ten years.
The Company has net operating loss carry forwards with a potential
future tax benefit of approximately $202 for state income tax purposes
and Tennessee Jobs Tax Credit carry forwards of approximately $200 at
March 31, 1998, both of which expire during 2010 and 2011.
10. RESTRUCTURING RESERVES
In connection with the acquisition of Lobdell described in Note 3,
management began to formulate and assess a plan to exit certain
activities of Lobdell and, accordingly, established certain
restructuring reserves aggregating $7,050 in Lobdell's opening balance
sheet. Management's restructuring plan included the sale of certain
subsidiaries, closure of a Lobdell owned manufacturing facility and
sale of the current Lobdell owned corporate offices. Included in the
restructuring reserves at March 31, 1997 were costs for severance and
benefits for employees to be relocated and terminated ($5,052) and
other restructuring related costs ($1,998). During the year ended March
31, 1998, total payments to employees that were terminated were $1,979.
As a result of management's plans, approximately 375 employees were
terminated.
F-20
<PAGE> 125
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
10. RESTRUCTURING RESERVES (CONTINUED)
In connection with management's plans to reduce costs and improve
operating efficiencies at other facilities, the Company recorded a
provision for restructuring of $1,610 during the year ended March 31,
1998 and established restructuring reserves aggregating $1,339 in
Howell's opening balance sheet.
A summary of the restructuring activity is presented below. There was
no activity during the period from January 10, 1997 to March 31, 1997.
<TABLE>
<S> <C>
Balance at March 31, 1997 $ 7,050
1998 provision 1,610
1998 activity:
Restructuring accrual associated with the
acquisition of Howell 1,339
Reduction in workforce and other cash outflows (2,355)
Reversal of excess accruals to noncurrent assets (1,281)
--------
Balance at March 31, 1998 $ 6,363
========
</TABLE>
The provision for restructuring recorded during the year ended March
31, 1998 represents costs associated with management's plans to close
three Company facilities. Management expects that, as a result of these
closures, approximately 160 employees will be permanently separated.
Severance costs for these employees will be recorded in 1999. Costs
recorded in 1998 primarily relate to fixed assets.
The restructuring reserve established in Howell's opening balance sheet
represents management's best estimate of the costs to be incurred in
connection with the closure of a leased Howell facility. As a result of
this closure, no employees are expected to be terminated. Management
continues to assess the future manufacturing capacity of Howell and
expects to complete its assessment and finalization of the
restructuring plan within one year of the acquisition date of Howell.
The reversal of excess accruals recorded during the year ended March
31, 1998 is due to management's finalization of its restructuring plans
for Lobdell. No future requirement for this accrual exists.
These reversals were recorded as a reduction of noncurrent assets.
In connection with the Company's restructuring activities related to
Lobdell, certain employees of Lobdell were terminated. The termination
of certain of these employees resulted in a postretirement medical
benefit curtailment gain of $957 which, in accordance with the purchase
method of accounting, was treated as a reduction in liabilities assumed
at the acquisition date. Accordingly, no postemployment medical benefit
curtailment gain has been recognized in the Company's statement of
operations for the year ended March 31, 1997.
11. BENEFIT PLANS
The Company sponsors twelve noncontributory plans covering
substantially all employees meeting the age and length of service
requirements as specified in the plans. The plan covering salaried
employees provides pension benefits that are based on a percentage of
the employee's average monthly compensation during the five highest
consecutive years out of their last ten years, and their years of
credited service up to a maximum of 30 years. The hourly plans do not
provide for increases in future compensation levels. The Company's
funding policy for the plan covering salaried employees is to make
contributions in amounts sufficient to annually fund the plan's current
service cost and the initial past service cost, plus interest, over a
period of 30 years. Plans covering hourly employees generally provide
benefits of stated amounts based on their unique labor agreements for
each year of service. The Company's funding policy for these plans is
to make at least the minimum annual contributions required by
applicable regulations.
F-21
<PAGE> 126
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
11. BENEFIT PLANS (CONTINUED)
The following table sets forth the plans' funded status and amounts
recognized on the Company's balance sheets at March 31:
<TABLE>
<CAPTION>
OVERFUNDED PLANS UNDERFUNDED PLANS
---------------- -----------------
1998 1997 1996 1998 1997 1996
<S> <C> <C> <C> <C> <C> <C>
Actuarial present value of benefit obligation
Vested benefits $ 20,132 $ 17,573 $ 2,376 $ 43,620 $ 34,106 $ 11,539
Nonvested benefits 659 1,170 74 2,602 1,853 356
-------- -------- -------- -------- -------- --------
20,791 18,743 2,450 46,222 35,959 11,895
Effect of projected future compensation levels 2,329 4,060 1,285 3,187
-------- -------- -------- -------- -------- --------
Projected benefit obligation for service rendered 23,120 22,803 3,735 49,409 35,959 11,895
Plan assets at fair value (primarily U.S. government
securities, bonds and notes and mutual funds) (23,740) (22,854) (4,155) (47,484) (32,280) (10,525)
-------- -------- -------- -------- -------- --------
Plan assets less (greater) than projected benefit
obligation (620) (51) (420) 1,925 3,679 1,370
Unrecognized net loss, including asset
gains/losses not yet reflected in market values (1,663) 10 2,723 (21)
Unrecognized prior service cost 44 (20)
Unrecognized net obligation being recognized over
15-20 years 15
Experience gains (losses) (61) 125 (392) (363)
Adjustment required to recognize minimum liability 35 472 368
-------- -------- -------- -------- -------- --------
(Prepaid) accrued pension cost $ (2,283) $ (87) $ (295) $ 4,727 $ 3,718 $ 1,375
======== ======== ======== ======== ======== ========
</TABLE>
The minimum pension liability in excess of the allowable intangible
asset has been recorded as a separate component of equity, net of tax.
Net periodic pension cost for each year and the actuarial assumptions
used in determining the projected benefit obligation were as follows:
<TABLE>
<CAPTION>
COMPANY PRECEDESSOR
------------------------------------------------ ----------------
PERIOD FROM PERIOD FROM
YEAR ENDED YEAR ENDED OCTOBER 28, 1995 APRIL 1, 1995
MARCH 31, MARCH 31, THROUGH THROUGH
1998 1997 MARCH 31, 1996 OCTOBER 27, 1995
<S> <C> <C> <C> <C>
Service cost $ 2,143 $ 1,074 $ 266 $ 344
Interest cost 4,808 2,127 530 697
Actual return on assets (12,528) (2,138) (425) (533)
Net amortization and deferral 7,505 15 60
---------- ---------- ------ ------
Net periodic pension cost $ 1,928 $ 1,078 $ 371 $ 568
========== ========== ====== ======
Discount rate
U.S. plans 7.25% 7.75%
Canadian plans 6.50% 8.00% 8.50% 8.75%
Expected return on assets
U.S. plans 8.50-9.00% 9.00%
Canadian plans 8.50% 8.50% 8.50% 7.50%
Salary progression
U.S. plans 4.50% 4.50%
Canadian plans 5.50% 5.50% 5.50% 5.50%
</TABLE>
F-22
<PAGE> 127
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
11. BENEFIT PLANS (CONTINUED)
The Company sponsors seven defined contribution 401(k) plans. The
Company generally contributes 25% of the first 6% of the base
compensation that a participant contributes to the plans.
12. POSTRETIREMENT MEDICAL BENEFITS
In addition to the Company's defined benefit pension plans, Lobdell
sponsors unfunded defined benefit medical plans that provide
postretirement medical benefits to certain full-time employees meeting
the age, length of service and contractual requirements as specified in
the plans. The plan covering salaried employees is a contributory plan
providing medical benefits to those hired before July 1, 1993. The
percentage of cost paid by the retiree currently ranges from 10% for 30
or more years of service at retirement to 55% for 15 years of service
at retirement, with Company contributions commencing upon attainment of
age 62. Those retiring with less than 15 years of service and those
hired after June 30, 1993 may participate in the plan at their own
cost. The plan is currently noncontributory for those employees who
retired prior to July 1, 1993. The plans covering hourly employees
provide medical benefit plan options that are similar to those offered
to active hourly employees, with Lobdell contributions limited either
to that available under traditional coverage for Alma hourly retirees
or to 87% of the total applicable premium for Greencastle retirees.
The following table presents the plan's funded status reconciled with
amounts recognized in the Company's balance sheet at March 31.
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Accumulated postretirement benefit obligation
Retirees $ 16,332 $ 14,479
Full eligible active plan participants 6,195 4,287
Other active plan participants 18,134 13,510
-------- --------
Total unfunded obligation 40,661 32,276
Unrecognized gain (loss) (4,669) 1,191
-------- --------
Postretirement medical benefits liability $ 35,992 $ 33,467
======== ========
</TABLE>
Net periodic postretirement benefit cost included the following
components:
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
FOR THE YEAR JANUARY 10, 1997
ENDED THROUGH
MARCH 31, 1998 MARCH 31, 1997
<S> <C> <C>
Service cost--benefits earned during the period $ 1,025 $ 272
Interest cost on the accumulated postretirement benefit obligation 2,711 623
-------- --------
Net periodic postretirement benefit cost $ 3,736 $ 895
======== ========
</TABLE>
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.25% and 7.75% at March 31, 1998
and 1997, respectively. The weighted average annual assumed rate of
increase in the per capita cost of covered benefits (i.e., healthcare
cost trend rate) is 8.5% in 1998 trending to 6.5% in 2008 and
thereafter for retirees less than 65 years of age. For retirees 65
years of age and over, the rate is 8.3% in 1998 trending to 6.5% in
2008 and thereafter. The healthcare cost trend rate assumption has a
significant effect on the amounts reported. For example, increasing the
assumed healthcare cost trend rates by one percentage point in each
year would increase the accumulated postretirement benefit obligation
as of March 31, 1998 by approximately $5,919 and net periodic
postretirement benefit cost for the year ended March 31, 1998 by
approximately $573.
F-23
<PAGE> 128
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
13. REDEEMABLE PREFERRED STOCK
In connection with the acquisition of Lobdell described in Note 3,
redeemable preferred stock with a face value of $50,748 was issued.
Redeemable preferred stock with a face value of $40,748 was delivered
to the former shareholders of Lobdell on January 10, 1997. The
remaining redeemable preferred stock with a face value of $10,000 was
placed in escrow pending final determination of the purchase price. The
preferred stock issuance consisted of 457,541 shares of Series A $3.00
Cumulative Preferred Stock (Series A Preferred) and 49,938 shares of
Series B Preferred Stock (Series B Preferred). On July 15, 1997, the
Company entered into a Settlement Agreement and Mutual Release with the
preferred shareholders of Lobdell (the Settlement Agreement). Pursuant
to the Settlement Agreement, 60,002 shares of Series A Preferred held
in escrow and all Series B Preferred previously issued were canceled.
The remaining 39,938 shares of Series A Preferred held in escrow were
released to the preferred shareholders of Lobdell.
The annual dividend on the Series A Preferred is $3.00 per share,
payable semi-annually. Dividends on the Series A Preferred are
cumulative, but do not bear interest. Under the terms of the issuance
of the Series A Preferred (the Stock Agreement), the holders of the
Series A Preferred maintain limited voting rights. Holders are entitled
to vote on any provisions that would adversely affect their rights or
privileges or management's plans to issue any equity securities that
would rank prior to the Series A Preferred. Holders are also entitled
to elect at least one director of Lobdell, which, under certain
provisions of the Stock Agreement, may increase to two.
Lobdell is required to redeem all shares of Series A Preferred on
December 31, 2006 at a price of $100 per share, plus all declared or
accumulated but unpaid dividends. If Oxford does not commence an
initial public offering of common stock (IPO) prior to June 30, 2006,
then the redemption price of the Series A Preferred is $103 per share.
If an IPO does not occur by December 31, 2001, each holder of Series A
Preferred has the option to redeem annually a maximum of 20 percent of
the shares held at a price of $100 per share on each December 31,
beginning in 2002.
Series A Preferred holders are not allowed to transfer, sell or assign
the shares prior to February 1, 1999. Subsequent to that date, Lobdell
has the right of first refusal to purchase any of the shares
transferred, sold or assigned by a holder of Series A Preferred.
Holders of Series A Preferred are entitled to convert their shares to
Oxford common stock issued in connection with an IPO. Individual
holders may convert a maximum of 50% of their shares, but the total of
all Series A Preferred shares converted may not exceed 25% of the total
Series A Preferred shares outstanding.
The Series A Preferred has been included in the accompanying
consolidated balance sheet at its fair value at the date of issuance of
$39,754, and has been adjusted for accrued dividends and accretion
totaling $438 and $258 for the years ended March 31, 1998 and 1997,
respectively.
14. RELATED PARTY TRANSACTIONS
The Company is charged a fee by a related party, The Oxford Investment
Group, Inc., for consulting, finance and management services. Fees
charged to the Company by The Oxford Investment Group, Inc.
approximated $1,005 and $275 for the years ended March 31, 1998 and
1997, respectively. In connection with the acquisitions of BMGNA,
Lobdell and Howell, investment banking fees of $200, $300 and $230,
respectively, were paid to The Oxford Investment Group, Inc., during
the periods ended March 31, 1996, 1997 and 1998, respectively.
As described in Note 3, the majority shareholder of the Company was
also the majority shareholder of RPIH.
F-24
<PAGE> 129
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
15. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
As of March 31, 1998, the Company had long-term operating leases
covering certain machinery and equipment. The minimum rental
commitments under noncancellable operating leases with lease terms in
excess of one year are as follows as of March 31, 1998:
<TABLE>
<S> <C>
1999 $ 3,422
2000 3,480
2001 1,380
2002 3,370
2003 142
--------
$ 11,794
========
</TABLE>
ENVIRONMENTAL MATTERS
The Company is subject to federal, state and local laws and regulations
which govern environmental matters. These laws regulate the discharge
of materials into the environment and may require the Company to remove
or mitigate the environmental effects of the disposal or release of
petroleum or chemical substances. The Company has identified several
environmental matters resulting from prior operations. Due to the
relatively early stage of investigation of certain of these identified
matters as well as potential indemnification by other potentially
responsible parties, management is unable to reasonably estimate the
ultimate cost of remediating certain of these identified environmental
matters. The Company has recorded a liability of approximately $1,746
and $880 at March 31, 1998 and 1997, respectively, for estimated costs
of known environmental matters.
GENERAL
The Company is subject to various claims, lawsuits and administrative
proceedings related to matters arising out of the normal course of
business. In the opinion of management, after reviewing the information
which is currently available with respect to such matters and
consulting with legal counsel, any liability which may ultimately be
incurred with respect to these matters will not materially affect the
financial position, results of operations or cash flows of the Company.
F-25
<PAGE> 130
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
16. SEGMENT INFORMATION
The Company operates in one industry segment and all sales are to
unaffiliated customers. Net sales represent all sales to unaffiliated
customers. Net export sales represent sales to unaffiliated customers
outside of the enterprise's home country. The Company's home country is
the United States and the Predecessor's home country was Canada.
Accordingly, for the period from April 1, 1995 through October 27,
1995, net export sales represent sales to unaffiliated customers
outside of Canada. For the period from October 28, 1995 to March 31,
1996 and for the years ended March 31, 1997 and 1998, net export sales
represent sales to unaffiliated customers outside of the United States.
Net sales by geographic area, identifiable assets by geographic area
and net export sales by geographic area are as follows:
<TABLE>
<CAPTION>
COMPANY PREDECESSOR
-------------------------------------------------- -----------------
PERIOD FROM PERIOD FROM
YEAR ENDED YEAR ENDED OCTOBER 28, 1995 APRIL 1, 1995
MARCH 31, MARCH 31, THROUGH THROUGH
1998 1997 MARCH 31, 1996 OCTOBER 27, 1995
<S> <C> <C> <C> <C>
Net Sales
United States $ 324,335 $ 54,660 $ -- $ --
Canada 85,030 82,201 35,572 49,043
Mexico 956
--------- --------- --------- ---------
$ 410,321 $ 136,861 $ 35,572 $ 49,043
========= ========= ========= =========
Operating Income (Loss)
United States $ 22,234 $ 1,101 $ -- $
Canada (462) 2,700 1,713 (1,774)
Mexico (1,718)
--------- --------- --------- ---------
$ 20,054 $ 3,801 $ 1,713 $ (1,774)
========= ========= ========= =========
Identifiable Assets
United States $ 275,039 $ 189,308 $ --
Canada 40,634 57,153 49,200
Mexico 4,948
--------- --------- ---------
$ 320,621 $ 246,461 $ 49,200
========= ========= =========
Net Export Sales
Canada $ 63,985 $ 41,846 $ 16,476 $ --
United States 25,397
Mexico 52,834 13,573 1,366 664
Other 4,893 2,120
--------- --------- --------- ---------
$ 121,712 $ 57,539 $ 17,842 $ 26,061
========= ========= ========= =========
</TABLE>
17. SUBSEQUENT EVENT
On April 1, 1998, the Company purchased the assets of the Suspension
Division of Eaton Corporation (Suspension) for cash of approximately
$53,500, including the investment in the Metalcar joint venture. The
acquisition was financed through the proceeds of the Notes described in
Note 8 and the issuance of $35,000 of Series B 10.125% Senior
Subordinated Notes Due 2007. The acquisition will be recorded in
accordance with the purchase method of accounting. Accordingly, the
purchase price plus direct cost of the acquisition will be allocated to
the assets acquired and liabilities assumed based on their estimated
fair values at the date of acquisition.
F-26
<PAGE> 131
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
17. SUBSEQUENT EVENT (CONTINUED)
The estimated fair market value of assets acquired and liabilities
assumed is summarized as follows:
<TABLE>
<S> <C>
Current assets $ 22,700
Property, plant and equipment 47,200
Current liabilities (11,300)
Long-term liabilities (5,100)
---------
$ 53,500
=========
</TABLE>
The unaudited pro forma combined results of operations of the Company
and Suspension for the year ended March 31, 1998 including Howell and
RPIH as if the acquisitions had occurred at the beginning of fiscal
1998 and after giving effect to certain pro forma adjustments are as
follows:
<TABLE>
<S> <C>
Net sales $ 576,163
Net income $ 2,261
Net income applicable to common shares $ 927
Net income per common share $ 2.99
</TABLE>
The pro forma information is not intended to be a projection of future
results. The foregoing unaudited pro forma results of operations
reflect adjustments for additional interest expense related to the
financing of the acquisitions and the additional depreciation expense,
as a result of the write-up of property, plant and equipment, net of
the related tax benefit.
18. CONDENSED CONSOLIDATING INFORMATION
The Notes are guaranteed by Oxford Automotive, Inc. and certain of its
wholly-owned subsidiaries, including Lobdell, Howell, BMGH and RPIH
(the Guarantor Subsidiaries). The Notes are not guaranteed by the
Company's other consolidated subsidiary, Oxford Mexico (the
Non-guarantor Subsidiary). The guarantee of the Notes by the Company
and the Guarantor Subsidiaries is full and unconditional. The following
condensed consolidated financial information presents the financial
position, results of operations and cash flows of (i) the Company as if
it accounted for its subsidiaries on the equity method, (ii) the
Guarantor Subsidiaries on a combined basis and (iii) the Non-guarantor
Subsidiary. Condensed consolidated financial information for the
periods prior to March 31, 1998 are not presented because the
non-guarantors during those periods were inconsequential, individually
and in the aggregate, to the consolidated financial statements, and
management has determined that they would not be material to investors.
F-27
<PAGE> 132
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
18. CONDENSED CONSOLIDATING INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEETS
MARCH 31, 1998
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
NON-GUARANTOR GUARANTOR ELIMINATIONS/
PARENT SUBSIDIARIES SUBSIDIARY ADJUSTMENTS CONSOLIDATED
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash $ 13,673 $ 322 $ 4,326 $ $ 18,321
Receivables (net) 7,206 868 64,652 (7,453) 65,273
Inventories 40 21,265 21,305
Reimbursable tooling 13,315 13,315
Income taxes refundable 1,601 1,601
Deferred income taxes 92 4,307 4,399
Prepaid expenses and other 172 10 8,443 (1,663) 6,962
--------- --------- --------- --------- ---------
TOTAL CURRENT ASSETS 21,143 1,240 117,909 (9,116) 131,176
Other noncurrent assets 14,626 45 10,477 25,148
Property, plant and equipment (net) 2,141 3,663 157,904 163,708
Investment in consolidated subsidiaries 31,861 (31,861)
--------- --------- --------- --------- ---------
TOTAL ASSETS $ 69,771 $ 4,948 $ 286,290 $ (40,977) $ 320,032
========= ========= ========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 746 351 50,956 161 52,214
Employee compensation 1,330 3,478 4,808
Intercompany accounts (65,132) 6,041 52,986 6,105
Restructuring reserve 6,363 6,363
Accrued expenses and other 951 104 20,505 (9,318) 12,242
Current portion of borrowings 10,965 10,965
TOTAL CURRENT LIABILITIES (62,105) 6,496 145,253 (3,052) 86,592
Pension liability 4,727 4,727
Postretirement medical benefits 35,992 35,992
Deferred income taxes and other 279 (576) 18,225 17,928
Long-term borrowings 124,828 3,655 128,483
--------- --------- --------- --------- ---------
TOTAL LIABILITIES 63,002 5,920 207,852 (3,052) 273,722
--------- --------- --------- --------- ---------
Redeemable preferred stock 40,192 40,192
--------- --------- --------- --------- ---------
Shareholders' equity
Common stock 1,050 32,974 (32,974) 1,050
Foreign currency translation 147 (798) (651)
Retained earnings (accumulated deficit) 4,750 (1,119) 6,070 (4,951) 4,750
Unrealized gain on marketable securities 969 969
Equity adjustment for minimum pension
TOTAL SHAREHOLDERS' EQUITY 6,769 (972) 38,246 (37,925) 6,118
--------- --------- --------- --------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 69,771 $ 4,948 $ 286,290 $ (40,977) $ 320,032
========= ========= ========= ========= =========
</TABLE>
F-28
<PAGE> 133
OXFORD AUTOMOTIVE, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
18. CONDENSED CONSOLIDATING INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
YEAR ENDED MARCH 31, 1998
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
NON-GUARANTOR GUARANTOR ELIMINATIONS/
PARENT SUBSIDIARY SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Sales $ -- $ 956 $ 409,365 $ -- $ 410,321
Cost of sales 2,674 365,746 368,420
--------- --------- --------- --------- ---------
GROSS PROFIT (1,718) 43,619 41,901
Selling, general and administrative expenses (665) 22,504 21,839
Restructuring provision 1,610 1,610
Gain on sale of equipment (1,602) (1,602)
--------- --------- --------- --------- ---------
OPERATING INCOME 665 (1,718) 21,107 20,054
Other income (expense)
Interest expense (467) 2 (10,245) (10,710)
Other 21 300 321
--------- --------- --------- --------- ---------
INCOME BEFORE BENEFIT (PROVISION)
FOR INCOME TAXES 198 (1,695) 11,162 9,665
Benefit (provision) for income taxes (314) 576 (4,336) (4,074)
--------- --------- --------- --------- ---------
INCOME BEFORE EQUITY IN INCOME OF
CONSOLIDATED SUBSIDIARIES (116) (1,119) 6,826 5,591
Equity in income of consolidated subsidiaries 5,707 (5,707)
--------- --------- --------- --------- ---------
NET INCOME $ 5,591 (1,119) 6,826 (5,707) 5,591
========= ========= ========= ========= =========
</TABLE>
F-29
<PAGE> 134
OXFORD AUTOMOTIVE, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
18. CONDENSED CONSOLIDATING INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
YEAR ENDED MARCH 31, 1998
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
NON-GUARANTOR GUARANTOR
PARENT SUBSIDIARY SUBSIDIARIES CONSOLIDATED
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES $ (71,916) 3,801 94,101 25,986
--------- --------- --------- ---------
INVESTING ACTIVITIES
Purchase of businesses, net of cash acquired (24,219) (24,219)
Purchase of property, plant and equipment (2,228) (3,774) (10,721) (16,723)
Proceeds from sale of equipment 5,433 5,433
Purchases of marketable securities (7,658) (7,658)
--------- --------- --------- ---------
NET CASH USED IN INVESTING ACTIVITIES (34,105) (3,774) (5,288) (43,167)
--------- --------- --------- ---------
FINANCING ACTIVITIES
Proceeds from borrowing arrangements 124,828 1,825 126,653
Principal payments on borrowing arrangements (93,782) (93,782)
Payment of preferred stock dividends (1,193) (1,193)
Debt financing costs (5,372) (5,372)
--------- --------- --------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 119,456 (93,150) 26,306
--------- --------- --------- ---------
Effect of foreign currency rate fluctuations on cash 295 (770) (475)
--------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH 13,435 322 (5,107) 8,650
Cash at beginning of period 238 9,433 9,671
--------- --------- --------- ---------
Cash at end of period $ 13,673 322 4,326 18,321
========= ========= ========= =========
</TABLE>
F-30
<PAGE> 135
OXFORD AUTOMOTIVE, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
19. INTERIM DATA (UNAUDITED)
BASIS OF PRESENTATION
The accompanying unaudited balance sheet as of December 31, 1998 and
the unaudited consolidated statements of operations, of changes in
shareholders' equity and of cash flows for the nine months ended
December 31, 1998 and 1997 include all adjustments, consisting of
normal recurring adjustments, which in the opinion of management are
necessary for the fair presentation of the financial position, results
of operations, and cash flows of the Company. The results of operations
for any interim period are not necessarily indicative of the results of
operations for a full year.
SENIOR SUBORDINATED NOTES
On April 1, 1998, the Company issued $35.0 million of unsecured 10 1/8%
Senior Subordinated Notes due 2007, Series B (the "Series B Notes"). On
December 8, 1998, the Company issued $40.0 million of unsecured 10 1/8%
Senior Subordinated Notes due 2007, Series C (the "Series C Notes").
The Series B Notes and the Series C Notes are substantially identical
to and rank pari passu in right of payment with the $125.0 million of
unsecured 10 1/8% Senior Subordinated Notes due 2007 issued by the
Company on June 24, 1997 (the "Series A Notes"). The Series A Notes,
the Series B Notes, and the Series C Notes are collectively referred to
as the "Notes". The Notes pay interest semi-annually on June 15 and
December 15. The Notes provide for certain covenants, including
limitations on: indebtedness, restricted payments, distributions, sale
of assets, affiliate transactions and merger and consolidation. The
Company has optional redemption rights beginning June 15, 2002.
The Notes are limited to $250.0 million aggregate principal amount. The
net proceeds to the Company from the sale of Series B Notes were
approximately $37.6 million (after the inclusion of approximately $2.0
million in premium and accrued interest of approximately $1.0 million
paid by the initial purchaser of the Series B Notes and the deduction
of estimated expenses of approximately $0.4 million). The Company used
all of the net proceeds in connection with the acquisition of the
Suspension Division of Eaton Corporation. The net proceeds to the
Company from the sale of the Series C Note were approximately $40.8
million (after inclusion of approximately $1.5 million in premium and
the deduction of expenses or approximately $0.7 million). The Company
used the net proceeds to repay borrowings under the Company's Senior
Credit Facility and for working capital, acquisitions and other general
corporate purposes.
As of December 31, 1998, the Notes are guaranteed by certain of the
Company's wholly-owned subsidiaries, including BMGH, Howell, Lobdell,
Oxford Suspension, Inc., Oxford Suspension Ltd., and RPIH (the
"Guarantor Subsidiaries"). As of December 31, 1998 the Notes were not
guaranteed by the Company's other consolidated subsidiary, Oxford
Automotriz de Mexico S.A. de C.V. (the "Non-guarantor Subsidiary").
The guarantee of the Notes by the Company and the Guarantor
Subsidiaries is full and unconditional. The following unaudited
condensed consolidated financial information presents the financial
position, results of operations and cash flows of (i) the Company as if
it accounted for its subsidiaries on the equity method, (ii) the
Guarantor Subsidiaries on a combined basis and (iii) the Non-guarantor
Subsidiary.
Condensed consolidated financial information for the interim periods
prior to December 31, 1998 are not presented because the non-guarantors
during those periods were inconsequential, individually and in the
aggregate, to the consolidated financial statements, and management has
determined that they would not be material to investors.
F-31
<PAGE> 136
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNT IN THOUSANDS, EXCEPT SHRE-RELATED DATA)
- -------------------------------------------------------------------------------
19. INTERIM DATA (UNAUDITED)
CONDENSED CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NON-GUARANTOR GUARANTOR ELIMINATIONS/
PARENT SUBSIDIARY SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash
equivalents $ 44 $ 71 $ 203 $ 318
Receivables (net) (1,553) (8,192) 112,300 (16,219) 86,336
Inventories 1,352 32,559 33,911
Reimbursable Tooling 1,400 83 38,754 40,237
Deferred income taxes 92 4,307 4,399
Unexpended bond
proceeds 6 6
Prepaid expenses and
other current assets 632 510 2,488 3,630
-------------- -------------- -------------- -------------- --------------
Total Current Assets $ 615 $ (6,176) $ 190,617 $ (16,219) $ 168,837
Marketable securities $ 8,092 $ $ $ 8,092
Other noncurrent assets 7,671 5,212 23,386 36,269
Deferred income taxes 7,918 7,918
Property, plant and
equipment, net 3,839 5,550 182,057 191,446
Investment in
consolidation
subsidiaries 44,033 (44,033)
-------------- -------------- -------------- -------------- --------------
Total Assets $ 64,250 $ 4,586 $ 403,978 $ (60,252) $ 412,562
============== ============== ============== ============== ==============
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current Liabilities
Trade accounts payable $ 862 $ 7,156 $ 46,410 $ 54,428
Employee compensation 1,115 167 9,636 10,918
Intercompany accounts 16,219 (16,219)
Restructuring reservev 8 3,011 3,019
Accrued expenses and
other current
liabilities (2,342) 12,342 10,000
Current portion
of borrowings
3,411 3,411
-------------- -------------- -------------- -------------- --------------
Total Current Liabilities $ (357) $ 7,323 $ 91,029 $ (16,219) $ 81,776
</TABLE>
F-32
<PAGE> 137
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
19. INTERIM DATA (UNAUDITED)
CONDENSED CONSOLIDATING BALANCE SHEETS (CONTINUED)
DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NON-GUARANTOR GUARANTOR ELIMINATIONS/
PARENT SUBSIDIARY SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
<S> <C> <C> <C> <C> <C>
Pension liability $ 35 $ $ 5,435 $ 5,470
Post retirement
Medical benefits liability 41,427 41,427
Deferred income taxes 279 (956) 14,639 13,962
Other non-current liabilities (147,791) 151,661 3,870
Long-term borrowings less current
portion 208,030 19,519 227,549
--------- --------- --------- ---------- ---------
TOTAL LIABILITIES $ 60,196 $ 6,367 $ 323,710 $ (16,219) $ 374,054
Redeemable preferred stock $ $ $ 40,586 $ 40,586
Shareholder's equity common stock 1,050 41,371 (41,371) 1,050
Accumulated other comprehensive
income (loss) (46) (92) (6,040) (6,178)
Retained earnings 3,050 (1,689) 4,351 (2,662) 3,050
--------- --------- --------- ---------- ---------
4,054 (1,781) 39,682 (44,033) (2,078)
--------- --------- --------- ---------- ---------
TOTAL LIABILITIES & SHAREHOLDER'S
EQUITY $ 64,250 $ 4,586 $ 403,978 $ ($60,252) $ 412,562
========= ========= ========= ========== =========
</TABLE>
F-33
<PAGE> 138
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
19. INTERIM DATA (UNAUDITED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NON-GUARANTOR GUARANTOR ELIMINATIONS/
PARENT SUBSIDIARY SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
<S> <C> <C> <C> <C>
Sales $ 4,449 145,285 $ 149,734
Cost of sales 4,850 130,203 135,053
------- ------- --------- -------- ---------
GROSS PROFIT (401) 15,082 14,681
Selling, general and
administrative
expenses (571) 9 7,991 7,429
------- ------- --------- -------- ---------
OPERATING INCOME 571 (410) 7,091 7,252
Interest income 3,570 161 (3,610) 121
Interest expense (4,859) 1 (3,991) 3,610 (5,239)
Other income
(expense) 82 55 418 555
------- ------- --------- -------- ---------
INCOME BEFORE
INCOME TAXES (636) (354) 3,679 2,689
Income taxes (254) (142) 1,471 1,075
------- ------- --------- -------- ---------
INCOME BEFORE EQUITY
IN INCOME OF
CONSOLIDATED
SUBSIDIARIES (382) (212) 2,208 1,614
Equity in income of
consolidated
subsidiaries 1,996 (1,996)
------- ------- --------- -------- ---------
NET INCOME $ 1,614 $ (212) $ 2,208 $ (1,996) $ 1,614
======= ======= ========= ======== =========
</TABLE>
F-34
<PAGE> 139
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
19. INTERIM DATA (UNAUDITED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NON-GUARANTOR GUARANTOR ELIMINATIONS/
PARENT SUBSIDIARY SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
<S> <C> <C> <C> <C> <C>
Sales $ 7,099 401,045 $ 408,144
Cost of sales 8,025 364,587 372,612
-------- ------- --------- ------- ---------
GROSS PROFIT (926) 36,458 35,532
Selling, general and
administrative
expenses $ (1,857) 9 24,083 22,235
Restructuring 1,176 1,176
-------- ------- --------- ------- ---------
Provision
OPERATING INCOME 1,857 (935) 11,199 12,121
Interest income 12,629 160 (12,595) 194
Interest expense (13,725) (13,319) 12,595 (14,449)
Other income
(expense) 226 (14) 737 949
-------- ------- --------- ------- ---------
INCOME BEFORE 987 (949) (1,223) (1,185)
INCOME TAXES 395 (380) (490) (475)
-------- ------- --------- ------- ---------
Income taxes
INCOME BEFORE EQUITY
IN INCOME OF
CONSOLIDATED
SUBSIDIARIES 592 (569) (733) (710)
Equity in income of
consolidated
subsidiaries (1,302) 1,302
-------- ------- --------- ------- ---------
NET INCOME $ (710) $ (569) $ (733) $ 1,302 ($ 710)
======== ======= ========= ======= =========
</TABLE>
F-35
<PAGE> 140
OXFORD AUTOMOTIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
19. INTERIM DATA (UNAUDITED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NON GUARANTOR GUARANTOR
PARENT SUBSIDIARY SUBSIDIARIES CONSOLIDATED
<S> <C> <C> <C> <C>
Net cash provided by
(used in)
operating activities (38,174) $ 2,199 $ 4,808 ($31,167)
-------- ------- -------- --------
INVESTING ACTIVITIES
Purchase of businesses,
net of cash acquired (53,886) (53,886)
Purchase of property,
plant and equipment (1,962) (2,210) (16,197) (20,369)
Purchase of Marketable
Securities (892) (892)
-------- ------- -------- --------
NET CASH USED IN
INVESTING ACTIVITIES (56,740) (2,210) (16,197) (75,147)
FINANCING ACTIVITIES
Net proceeds (payments)
on borrowings 4,659 8,882 13,541
Proceeds from borrowing
arrangements 78,544 78,544
Payment of
preferred dividends (596) (596)
Debt financing costs (1,918) (703) (2,621)
-------- ------- -------- --------
NET CASH PROVIDED BY
(USED IN)
FINANCING ACTIVITIES 81,285 0 7,583 88,868
Effect of foreign
currency rate
fluctuation on cash (240) (317) (557)
NET INCREASE (DECREASE)
IN CASH (13,629) (251) (4,123) (18,003)
Cash at beginning
of period 13,673 322 4,326 18,321
-------- ------- -------- --------
Cash at end of period $ 44 $ 71 $ 203 $ 318
======== ======= ======== ========
</TABLE>
F-36
<PAGE> 141
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of
Lobdell Emery Corporation
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of changes in shareholders' equity and of
cash flows after the restatement discussed in Note 16 present fairly, in all
material respects, the financial position of Lobdell Emery Corporation and its
subsidiaries (the Corporation) at December 31, 1996 and 1995, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Corporation's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
As described in Note 15, on January 10, 1997 all of the outstanding shares
of common stock of the Corporation were sold to L-E Acquisition, Inc.
PRICE WATERHOUSE LLP
Detroit, Michigan
May 19, 1997
F-37
<PAGE> 142
LOBDELL EMERY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31,
1996 1995
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents ..................................... $ 278 $ 716
Trade receivables -- less allowance of $1,254 and $500,
respectively ............................................... 28,769 32,514
Inventories ................................................... 6,083 10,212
Income taxes receivable ....................................... 1,282
Reimbursable tooling .......................................... 47 407
Deferred income taxes ......................................... 3,081 3,038
Prepaid expenses and other current assets ..................... 191 827
--------- ---------
Total current assets ....................................... 39,731 47,714
--------- ---------
Advance under shareholders' redemption agreement ................ 1,542
Unexpended bond proceeds ........................................ 3,886 4,508
Intangible pension asset ........................................ 3,216 2,113
Other noncurrent assets ......................................... 2,483 3,825
Deferred income taxes ........................................... 2,531
Property, plant and equipment, net .............................. 72,804 72,503
--------- ---------
TOTAL ASSETS ............................................... $ 126,193 $ 130,663
========= =========
Employee compensation ......................................... 5,156 4,614
Accrued expenses and other current liabilities ................ 6,511 6,516
Current portion of long-term borrowings ....................... 2,200 7,169
--------- ---------
Total current liabilities .................................. 28,981 29,926
--------- ---------
Pension liability ............................................... 1,855 1,627
Postretirement medical benefits liability ....................... 19,639 16,889
Deferred income taxes ........................................... 1,180
Other noncurrent liabilities .................................... 1,950 1,739
--------- ---------
................................................................ 23,444 21,435
--------- ---------
Long-term borrowings -- less current portion .................... 41,134 39,097
--------- ---------
Total liabilities .......................................... 93,559 90,458
--------- ---------
Commitments and contingent liabilities (Note 13)
Redeemable Common stock, Class
B nonvoting, $1 par value, outstanding
137,112 shares (Note 11) ...................................... 1,800 1,297
--------- ---------
Shareholders' equity Common stock, Class A voting, $1 par
value, authorized 540,000 shares, outstanding 478,255 shares... 478 478
Common stock, Class B nonvoting, $1 par value authorized
5,400,000 shares; outstanding 3,430,623 shares ................ 3,431 3,431
Retained earnings ............................................. 27,376 35,730
Equity adjustment for minimum pension liability ............... (451) (731)
--------- ---------
30,834 38,908
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ..................... $ 126,193 $ 130,663
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-38
<PAGE> 143
LOBDELL EMERY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE RELATED DATA)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
---------------------------------------------
1996 1995 1994
<S> <C> <C> <C>
Net sales ..................................................... $ 253,997 $ 269,260 $ 270,062
Cost of sales ................................................. 244,129 252,671 252,275
--------- --------- ---------
GROSS PROFIT .................................................. 9,868 16,589 17,787
Selling, general and administrative ........................... 16,395 14,949 14,438
Equipment impairment .......................................... 3,000
--------- --------- ---------
OPERATING INCOME (LOSS) ..................................... (9,527) 1,640 3,349
Other income (expense)
Interest expense .............................................. (3,557) (3,448) (2,799)
Other income ................................................ 664 744 366
--------- --------- ---------
INCOME (LOSS) BEFORE BENEFIT (PROVISION) FOR INCOME TAXES ..... (12,420) (1,064) 916
Benefit (provision) for income taxes .......................... 4,569 264 (442)
--------- --------- ---------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF ACCOUNTING
CHANGE ...................................................... (7,851) (800) 474
Cumulative effect of accounting change -- post-employment
benefits, net of income tax benefit ($.12 per share) ........ (510)
--------- --------- ---------
NET LOSS ...................................................... $ (7,851) $ (800) $ (36)
========= ========= =========
NET LOSS PER SHARE ............................................ $ (1.94) $ (.19) $ (.01)
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-39
<PAGE> 144
LOBDELL EMERY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE RELATED DATA)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY
ADJUSTMENT
FOR MINIMUM
CLASS A CLASS B RETAINED PENSION
VOTING NONVOTING EARNINGS LIABILITY TOTAL
<S> <C> <C> <C> <C> <C>
BALANCES AT JANUARY 1, 1994 ............... $478 $ 3,427 $ 36,715 $-- $ 40,620
Net loss for 1994 ....................... (36) (36)
Stock option activity ................... 4 70 74
Dividends ($.06 per share) .............. (257) (257)
Accretion of redeemable common stock .... (63) (63)
Minimum pension liability adjustment .... (492) (492)
---- ------- -------- ----- --------
BALANCES AT DECEMBER 31, 1994 ............. 478 3,431 36,429 (492) 39,846
Net loss for 1995 ....................... (800) (800)
Stock option activity ................... 213 213
Dividends ($.03 per share) .............. (124) (124)
Accretion of redeemable common stock .... 12 12
Minimum pension liability adjustment .... (239) (239)
---- ------- -------- ----- --------
BALANCES AT DECEMBER 31, 1995 ............. 478 3,431 35,730 (731) 38,908
Net loss for 1996 ....................... (7,851) (7,851)
Accretion of redeemable common stock .... (503) (503)
Minimum pension liability adjustment .... 280 280
---- ------- -------- ----- --------
BALANCES AT DECEMBER 31, 1996 ............. $478 $ 3,431 $ 27,376 $(451) $ 30,834
==== ======= ======== ===== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-40
<PAGE> 145
LOBDELL EMERY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLAR AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
-------------------------------------------
1996 1995 1994
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss ..................................................... $ (7,851) $ (800) $ (36)
Adjustments to reconcile net loss to net cash provided by
operating activities
Depreciation ............................................ 13,746 12,486 12,045
Deferred income taxes ................................... (3,922) (1,332) (1,395)
Pension liability ....................................... (2,230) 657 159
Postretirement medical benefits liability ............... 2,750 2,245 2,923
Equipment impairment .................................... 3,000
Loss (Gain) on sale of equipment ........................ (23) (34) 68
Changes in operating assets and liabilities affecting cash
Trade receivables ....................................... 3,745 (644) (4,397)
Inventories ............................................. 4,129 (1,594) (66)
Income taxes receivable/payable ......................... (1,601) 290 (1,569)
Reimbursable tooling .................................... 360 (386) (483)
Prepaid expenses and other current assets ............... 635 (649) 60
Advance under shareholders' redemption agreement ........ (1,542) 500 113
Other noncurrent assets ................................. 3,456 (2,948) 1,619
Trade accounts payable .................................. 3,487 (1,769) (961)
Employee compensation ................................... 542 554 72
Accrued expenses and other current liabilities .......... (5) 1,241 219
Other noncurrent liabilities ............................ 220 9 850
-------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES .......... 18,896 7,826 9,221
-------- -------- --------
INVESTING ACTIVITIES
Acquisitions of property, plant and equipment ................ (16,439) (14,917) (8,696)
Proceeds from sale of equipment .............................. 37 276 175
-------- -------- --------
NET CASH USED IN INVESTING ACTIVITIES .............. (16,402) (14,641) (8,521)
FINANCING ACTIVITIES
Proceeds from long-term borrowing arrangements ............... 25,000 8,500 27,020
Principal payments on long-term borrowing arrangements ....... (23,932) (5,618) (32,831)
Net borrowings (payments) under lines of credit .............. (4,000) 5,350 5,550
Proceeds from exercise of stock options ...................... 213 74
Dividends .................................................... (124) (257)
Redemption and retirement of redeemable common stock ......... (1,581) (903)
-------- -------- --------
NET CASH USED IN FINANCING ACTIVITIES .............. (2,932) 6,740 (1,347)
-------- -------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS .................... (438) (75) (647)
Cash and cash equivalents at beginning of year ............... 716 791 1,438
-------- -------- --------
Cash and cash equivalents at end of year ..................... $ 278 $ 716 $ 791
======== ======== ========
Cash paid for interest ....................................... $ 3,774 $ 3,411 $ 2,732
======== ======== ========
Cash paid for income taxes ................................... $ 963 $ 291 $ 3,067
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-41
<PAGE> 146
LOBDELL EMERY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLAR AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
NOTE 1. NATURE OF OPERATIONS
Lobdell Emery Corporation (the Corporation) is a full-service supplier
of metal stampings and welded assemblies used as original equipment
components primarily by North American original equipment automotive
manufacturers. The Corporation's products are used in a wide variety of
sport utility vehicles, light and medium trucks, vans and passenger
cars. The Corporation primarily operates from five plants located in
the Midwest which account for approximately 98% of the Corporation's
sales for the year ended December 31, 1996. The Corporation's hourly
workforce is represented by various locals of the United Auto Workers.
Sales to the Corporation's Two Primary Customers as a Percentage of
Total Sales Approximated the Following for the Years Ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Ford Motor Company ........... 43% 52% 64%
General Motors Corporation ... 49% 40% 29%
</TABLE>
Accounts receivable from Ford Motor Company and General Motors
Corporation represent approximately 47% and 49%, respectively, of the
December 31, 1996 accounts receivable balance.
Although the Corporation is directly affected by the economic well
being of the automotive industry and customers referred to above,
management does not believe significant credit risk exists at December
31, 1996. The Corporation does not require collateral to reduce such
risk and historically has not experienced significant losses related to
receivables from individual customers or groups of customers in the
automotive industry.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated balance sheets include the accounts of Lobdell Emery
Corporation and its wholly-owned subsidiaries, Lewis Emery Capital
Corporation (Lewis), Concept Management Corporation and subsidiaries
(Concept), Laserweld International (Laserweld) and Parallel Group
International (Parallel). Concept Management Corporation also includes
the accounts of its wholly-owned subsidiaries, Winchester Fabrication
Corporation (Winchester) and Creative Fabrication Corporation
(Creative). Intercompany accounts and transactions have been
eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
REVENUE RECOGNITION
Revenue is recognized by the Corporation upon shipment of product to
the customer.
FINANCIAL INSTRUMENTS
At December 31, 1996, the carrying amount of financial instruments such
as cash and cash equivalents, trade receivables and payables and
unexpended bond proceeds, approximated their fair values. The carrying
amount of the long-term customer receivables and borrowings at December
31, 1996, approximated their fair values based on the variable interest
rates available to the Corporation for similar arrangements.
CASH EQUIVALENTS
The Corporation considers all highly-liquid investments with maturity
of three months or less when purchased to be cash equivalents.
F-42
<PAGE> 147
LOBDELL EMERY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLAR AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is
principally determined by the last-in, first-out (LIFO) method.
UNEXPENDED BOND PROCEEDS
Unexpended bond proceeds in the accompanying consolidated balance
sheets represent unexpended proceeds from the issuance of industrial
development revenue bonds by Creative as discussed in Note 6, and are
invested in allowable money market accounts and commercial paper with a
maturity of 90 days or less.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated on the basis of historical
cost and include expenditures for improvements which materially
increase the useful lives of existing assets. Expenditures for normal
repair and maintenance are charged to operations as incurred. For
federal income tax purposes, depreciation is computed using accelerated
and straight-line methods. For financial reporting purposes,
depreciation is computed principally using the straight-line method
over the following estimated useful lives:
<TABLE>
<CAPTION>
YEARS
<S> <C>
Land improvements 15
Buildings 30
Machinery and equipment 3-10
</TABLE>
At December 31, 1996, the Corporation had a machine in process at a
vendor location. The aggregate cost of the machine will be $5,300, for
which the Corporation has recorded approximately $2,700 in the
accompanying consolidated balance sheet. The remaining $2,600 will be
recorded by the Corporation upon final technical approval of the
machine.
In accordance with the provisions of Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of," the Corporation
established an impairment reserve against certain of the assets of
Laserweld in the amount of $3,000 at December 31, 1996. The reserve
represents the difference between the fair value of the Laserweld
assets, based primarily on a recent independent appraisal, and the cost
of such assets.
ENVIRONMENTAL COMPLIANCE AND REMEDIATION
Environmental expenditures that relate to current operations are
expensed or capitalized as appropriate. Expenditures that relate to an
existing condition caused by past operations which do not contribute to
current or future revenue generation are expensed. Liabilities are
recorded when environmental assessments and/or remedial efforts are
probable and the costs can be reasonably estimated. Estimated costs are
based upon enacted laws and regulations, existing technology and the
most probable method of remediation. The costs determined are not
discounted and exclude the effects of inflation and other social and
economic factors.
INCOME TAXES
Deferred taxes are provided to give recognition to the effect of
expected future tax consequences of temporary differences between the
carrying amounts for financial reporting purposes and the tax bases for
income tax purposes of assets and liabilities.
REIMBURSABLE TOOLING
Reimbursable tooling represents net costs incurred on tooling projects
for which the Corporation expects to be reimbursed by customers.
Ongoing estimates of total costs to be incurred on each tooling project
are made by management and losses, if any, are recorded when known.
Under certain tooling projects, billings exceed costs incurred and the
related tooling gain is recognized upon acceptance of the tooling by
the customer.
F-43
<PAGE> 148
LOBDELL EMERY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLAR AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
At December 31, 1996, approximately $2,800 of reimbursable tooling was
in process at various vendor locations. These amounts, which have not
been recorded in the accompanying consolidated balance sheet, will be
recorded and paid upon the Corporation's receipt of payment from the
owners of the tooling.
NET LOSS PER SHARE
Net loss per share is determined by dividing net loss by the weighted
average number of common shares outstanding during the period.
RECLASSIFICATIONS
Certain amounts from the prior year have been reclassified to conform
with the current year presentation.
NOTE 3. INVENTORIES
Inventories are comprised of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Raw materials ......................... $ 3,851 $ 3,861
Finished goods and work-in-process .... 5,278 10,177
-------- --------
9,129 14,038
LIFO reserve .......................... (3,046) (3,826)
-------- --------
$ 6,083 $ 10,212
======== ========
</TABLE>
The Corporation does not separately identify finished goods from
work-in-process.
During 1996, inventory quantities were reduced. This reduction resulted
in a liquidation of LIFO inventory quantities carried at lower costs
prevailing in prior years as compared with the cost of 1996 purchases,
the effect of which increased net income by approximately $300.
NOTE 4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are comprised of the following at
December 31:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Land and land improvements ...................................... $ 11,130 $ 10,760
Buildings ....................................................... 33,515 32,801
Machinery and equipment, net of impairment reserve of $3,000
in 1996 ....................................................... 137,914 127,389
Construction-in-process ......................................... 6,495 5,216
--------- ---------
189,054 176,166
Less -- accumulated depreciation ................................ (116,250) (103,663)
--------- ---------
$ 72,804 $ 72,503
========= =========
</TABLE>
NOTE 5. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities are comprised of the
following at December 31:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Accrued workers' compensation ..... $2,438 $2,438
Accrued property taxes ............ 1,950 1,622
Accrued medical benefits .......... 1,816 1,615
Other ............................. 307 841
------ ------
$6,511 $6,516
====== ======
</TABLE>
F-44
<PAGE> 149
LOBDELL EMERY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLAR AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
NOTE 6. BORROWING ARRANGEMENTS
Borrowings consist of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
BANK SYNDICATE -- TERM LOAN, LOBDELL EMERY CORPORATION
Interest at variable spread over prime (8.25% at December
31, 1996). Quarterly principal payments of $893 plus
interest, matures September 12, 1999 .............................. $ 24,107 $ 21,230
BANK -- TERM LOAN, LEWIS
Interest at .625% over 90-day LIBOR (6.19% at December 31,
1996). Quarterly principal payments of approximately $400,
matures October 1, 1998 ........................................... 3,227 4,936
BANK SYNDICATE -- REVOLVING CREDIT LINE, LOBDELL EMERY CORPORATION
Interest at variable spread over prime (8.25% at December
31, 1996) ......................................................... 7,600 11,600
INDUSTRIAL DEVELOPMENT REVENUE BONDS -- CREATIVE
$8,500 issued September 27, 1995, floating rate interest
(4.35% at December 31, 1996). Quarterly principal payments
based on graduated maturity schedule. Backed by NBD Bank
letter of credit .................................................. 8,400 8,500
-------- --------
Total ............................................................. 43,334 46,266
Less -- current portion of long-term borrowings ..................... (2,200) (7,169)
-------- --------
Long-term borrowings -- less current portion ........................ $ 41,134 $ 39,097
======== ========
</TABLE>
Subsequent to December 31, 1996, the Bank syndicate term loan and
revolving credit line were paid in full, with accrued interest, in
connection with the merger described in Note 15. These borrowings were
replaced with a $54,000 term loan, $38,000 revolving line of credit and
$3,000 swing line of credit, each expiring on January 10, 2002.
Accordingly, these amounts are classified as long-term borrowings at
December 31, 1996. The term loan bears interest at a variable spread
over 90-day LIBOR, and the revolving and swing lines of credit bear
interest at a variable spread over the prime rate. The Corporation also
entered into an $18,000 capital expenditure line of credit that expires
on January 10, 2002. The agreements contain various financial and other
covenants. Borrowings are secured by substantially all of the assets of
the Corporation.
The proceeds of the Lewis term debt were used to finance customer
tooling. The debt is collateralized by a customer purchase order which
allows for recovery of the term-debt principal and interest,
administrative cost and a predetermined markup.
The proceeds of the industrial development revenue bonds were used to
finance the real and personal property of Creative. These bonds are
backed by an NBD Bank letter of credit, which carries a rate of .8% and
is collateralized by substantially all assets of Creative. The letter
of credit reimbursement agreement includes covenants requiring minimum
tangible capital, debt service coverage and limitations on other
indebtedness.
NOTE 7. STOCK OPTION PLAN
The Corporation adopted a stock option plan in 1990 which provides for
the granting of discretionary and nondiscretionary options, alternative
stock appreciation rights, cash payment rights, incentive stock
options, or a combination thereof. Each option granted under the plan
is for a unit consisting of one share of Class A and ten shares of
Class B common stock. During the years ended December 31, 1995 and 1994
the Corporation recorded compensation expense of $213 and $70,
respectively. No options were granted or exercised during the year
ended December 31, 1996. Subsequent to December 31, 1996 and in
connection with the merger described in Note 15, all of the outstanding
stock options were canceled. The costs incurred by the Corporation in
connection with the cancellation of the outstanding stock options were
reimbursed by L-E
F-45
<PAGE> 150
LOBDELL EMERY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLAR AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
NOTE 7. STOCK OPTION PLAN (CONTINUED)
Acquisition, Inc. at close. The Corporation has treated the
reimbursement as a credit to compensation expense recognized in
connection with the cancellation of the aforementioned stock options.
The disclosures required under Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation," have been
omitted as all outstanding stock options were canceled subsequent to
December 31, 1996. Because the acquiring company (see Note 15) has no
stock option plan, the Corporation's management does not believe such
disclosure to be relevant to the users of the consolidated financial
statements.
NOTE 8. INCOME TAXES
The Corporation's benefit for income taxes consists of the following
for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Current
Federal .......... $ (647) $ 399 $ 1,425
State ............ 371 375
------- ------- -------
(647) 770 1,800
------- ------- -------
Deferred
Federal .......... (3,405) (869) (1,206)
State ............ (517) (165) (152)
------- ------- -------
(3,922) (1,034) (1,358)
------- ------- -------
$(4,569) $ (264) $ 442
======= ======= =======
</TABLE>
A reconciliation between the Corporation's income tax provision
(benefit) and the amount computed by applying the statutory income tax
rate to income before income taxes is as follows for the years ended
December 31:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Statutory rate ................................... $(4,223) $(362) $ 311
State taxes, net of federal benefit .............. (517) 136 147
Nondeductible items .............................. 212 104 76
Other ............................................ (41) (142) (92)
------- ----- -----
Provision (benefit) for income taxes ............. $(4,569) $(264) $ 442
======= ===== =====
</TABLE>
F-46
<PAGE> 151
LOBDELL EMERY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLAR AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
NOTE 8. INCOME TAXES (CONTINUED)
Significant components of the Corporation's deferred tax assets and
(liabilities) are as follows at December 31:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Deferred tax liabilities
Tax depreciation in excess of book ...... $ (8,312) $ (8,619)
Prepaid pension asset ................... (427) (574)
-------- --------
Gross deferred tax liabilities ............ (8,739) (9,193)
-------- --------
Deferred tax assets
Postretirement medical benefits ......... 7,463 6,418
Equipment impairment reserve ............ 1,140
Workers' compensation ................... 926 927
Medical benefits accrual ................ 687 611
Allowance for bad debts ................. 477 190
Environmental reserves .................. 334 334
Postemployment benefits ................. 323 323
AMT credit carry forward ................ 1,871 1,708
Other ................................... 1,330 540
-------- --------
Gross deferred tax assets ................. 14,551 11,051
-------- --------
Valuation allowance ....................... (200)
-------- --------
Net deferred tax asset .................... $ 5,612 $ 1,858
======== ========
</TABLE>
A valuation allowance is provided on the tax benefits otherwise
associated with certain tax attributes unless it is considered more
likely than not that the benefit will be realized.
The Corporation has net operating loss carry forwards for state income
tax purposes with potential future tax benefits of approximately $150
at December 31, 1996, which expire during the years 2010 and 2011.
The Corporation has Tennessee Jobs Tax Credit carry forwards of
approximately $200 at December 31, 1996, which expire during the years
2010 and 2011.
NOTE 9. BENEFIT PLANS
The Corporation sponsors six noncontributory-defined benefit pension
plans covering substantially all employees meeting the age and length
of service requirements as specified in the plans. The plan covering
salaried employees provides pension benefits that are based on a
percentage of the employee's average monthly compensation during the
five highest consecutive years out of their last ten years, and their
years of credited service up to a maximum of 30 years. The
Corporation's hourly pension plans do not provide for increases in
future compensation levels. The Corporation's funding policy for this
plan is to make contributions in amounts sufficient to annually fund
the plan's current service cost and the initial past service cost, plus
interest, over a period of 30 years. Plans covering hourly employees
generally provide benefits of stated amounts based on their unique
labor agreements for each year of service. The Corporation's funding
policy for these plans is to make at least the minimum annual
contributions required by applicable regulations.
F-47
<PAGE> 152
LOBDELL EMERY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLAR AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
NOTE 9. BENEFIT PLANS (CONTINUED)
The following table sets forth the plans' funded status and amounts
recognized on the Corporation's balance sheet at December 31:
<TABLE>
<CAPTION>
1996 1995
------------------------ -------------------------
OVERFUNDED UNDERFUNDED OVERFUNDED UNDERFUNDED
PLANS PLANS PLANS PLANS
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligation:
Vested benefits ............................ $ 14,784 $ 21,270 $ 13,718 $ 18,926
Nonvested benefits ......................... 1,174 1,468 1,143 1,597
-------- -------- -------- --------
15,958 22,738 14,861 20,523
Effect of projected future compensation
levels ..................................... 3,278 2,866
-------- -------- -------- --------
Projected benefit obligation for service
rendered ................................... 19,236 22,738 17,727 20,523
Plan assets at fair value (primarily U.S.
government securities, bonds and notes
and mutual funds) .......................... (18,857) (19,656) (17,092) (17,477)
-------- -------- -------- --------
Plan assets less than projected benefit
obligation ................................. 379 3,082 635 3,046
Unrecognized net loss ........................ (2,080) (865) (2,612) (1,353)
Unrecognized prior service cost .............. 174 (2,757) 227 (1,572)
Unrecognized net obligation being
recognized over 15-20 years ................ 300 (346) 350 (426)
Adjustment required to recognize minimum
liability .................................. 3,968 3,332
-------- -------- -------- --------
(Prepaid) accrued pension cost ............... $ (1,227) $ 3,082 $ (1,400) $ 3,027
======== ======== ======== ========
</TABLE>
The minimum pension liability in excess of the allowable intangible
asset of $751 and $1,218 at December 31, 1996 and 1995, respectively,
has been recorded as a separate component of equity, net of tax.
F-48
<PAGE> 153
LOBDELL EMERY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLAR AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
NOTE 9. BENEFIT PLANS (CONTINUED)
Net periodic pension cost included the following components for the
year ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Service cost ...................... $ 1,100 $ 857 $ 1,142
Interest cost ..................... 2,800 2,641 2,418
Actual return on plan assets ...... (4,322) (5,867) (232)
Net amortization and deferral ..... 1,560 3,606 (1,993)
------- ------- -------
Net periodic pension cost ......... $ 1,138 $ 1,237 $ 1,335
======= ======= =======
</TABLE>
Actuarial assumptions used in determining the projected benefit
obligation are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Discount rate .................................. 7.5% 7.5% 8.5%
Rate of increase in future compensation ........ 4.5% 4.5% 4.5%
Expected long-term rate of return on assets .... 9.0% 9.0% 8.0%
</TABLE>
The Corporation sponsors a Supplemental Employee Retirement Plan (SERP)
which covers three key officers of the Corporation. At December 31,
1996, the Corporation has accrued a liability of $217 related to the
SERP.
The Corporation sponsors five defined contribution 401(k) plans. The
Salaried Employees' Retirement Savings Plan covers all salaried
employees of the Corporation and Winchester. The Alma Hourly Employees'
Retirement Savings Plan, the Argos Hourly Employees' Retirement Savings
Plan, the Creative Fabrication Corporation and the Greencastle Hourly
Employees' Plan cover all eligible hourly employees at the respective
locations. The Corporation generally contributes 25% of the first 6% of
the base compensation that a participant contributes to the plans.
NOTE 10. POSTRETIREMENT MEDICAL BENEFITS
In addition to the Corporation's defined benefit pension plans, the
Corporation sponsors unfunded defined benefit medical plans that
provide postretirement medical benefits to certain full-time employees
meeting the age, length of service and contractual requirements as
specified in the plans. The plan covering salaried employees is a
contributory plan providing medical benefits to those hired before July
1, 1993. The percentage of cost paid by the retiree currently ranges
from 10% for 30 or more years of service at retirement to 55% for 15
years of service at retirement, with Corporation contributions
commencing upon attainment of age 62. Those retiring with less than 15
years of service and those hired after June 30, 1993 may participate in
the plan at their own cost. The plan is currently noncontributory for
those employees who retired prior to July 1, 1993. The plans covering
hourly employees provide medical benefit plan options that are similar
to those offered to active hourly employees, with Corporation
contributions limited either to that available under traditional
coverage for Alma hourly retirees or to 87% of the total applicable
premium for Greencastle retirees.
The following table presents the plans' funded status reconciled with
amounts recognized in the Corporation's balance sheets at December 31:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Accumulated postretirement benefit obligation
Retirees ....................................... $ 14,420 $ 13,132
Full eligible active plan participants ......... 4,767 4,408
Other active plan participants ................. 14,613 12,931
-------- --------
Total unfunded obligation ................... 33,800 30,471
Unrecognized loss ................................ (2,618) (1,481)
Unrecognized transition obligation ............... (11,543) (12,101)
-------- --------
Postretirement medical benefits liability ........ $ 19,639 $ 16,889
======== ========
</TABLE>
F-49
<PAGE> 154
LOBDELL EMERY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLAR AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
NOTE 10. POSTRETIREMENT MEDICAL BENEFITS (CONTINUED)
Net periodic postretirement benefit cost included the following
components for the year ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Service cost ............................................. $ 947 $ 785 $1,088
Interest cost ............................................ 2,216 2,010 2,238
Amortization of transition obligation prior losses ....... 722 643 997
------ ------ ------
Net periodic postretirement benefit cost ................. $3,885 $3,438 $4,323
====== ====== ======
</TABLE>
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.5% in 1996 and 1995. The
weighted average annual assumed rate of increase in the per capita cost
of covered benefits (i.e., healthcare cost trend rate) is 9.2% in 1997
trending to 6.5% in 2008 and thereafter for retirees less than 65 years
of age. For retirees 65 years of age and over, the rate is 8.9% in 1997
trending to 6.5% in 2008 and thereafter. The healthcare cost trend rate
assumption has a significant effect on the amounts reported. For
example, increasing the assumed healthcare cost trend rates by one
percentage point in each year would increase the accumulated
postretirement benefit obligation as of December 31, 1996 and net
periodic postretirement benefit cost for the year then ended by
approximately $4,861 and $496, respectively.
NOTE 11. SHAREHOLDERS' REDEMPTION AGREEMENT AND REDEEMABLE COMMON STOCK
Due to the death of a major shareholder, the Corporation entered into
an agreement in December, 1988, providing for the redemption from the
estate of any class of common stock. The Corporation shall purchase for
cash certain shares of common stock as required each year, for the
payment by the estate of federal and state taxes and other
miscellaneous expenses allowed by Internal Revenue Code Section 6166.
The redemption price is based upon the fair value, as previously
determined by an independent appraisal at the date of death, adjusted
for subsequent increases or decreases in book value as defined in the
agreement. Subsequent to December 31, 1996 and in connection with the
merger as described in Note 15, a portion of the common stock owned by
the estate will be redeemed to cover payment of remaining taxes and
administrative expenses. Prior to the merger, $1,542 was advanced to
the estate to effectuate a release of an Internal Revenue Service lien.
Common shares that are redeemable under that terms of the agreement
have been recorded in the consolidated balance sheets as Redeemable
Common Stock. During the years ended December 31, 1995 and 1994, the
Company redeemed 165,555 shares and 96,597 shares, respectively, at a
per share price of $9.55 and $9.34, respectively. The redeemable common
stock has been accredit to its redemption value in each of the
accompanying consolidated balance sheets.
NOTE 12. LEWIS EMERY CAPITAL CORPORATION
Lewis was established in order to facilitate the financing of a tooling
project for Ford Motor Company (Ford). In 1993, Lewis signed a contract
to finance $8,500 of tooling. The transaction was financed with
proceeds from the term loan described in Note 6. The receivable from
Ford is due in 20 quarterly installments through October 1998.
NOTE 13. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
As of December 31, 1996, the Corporation had long-term operating leases
covering certain machinery and equipment. The minimum rental
commitments under noncancellable operating leases with lease terms in
excess of one year are as follows as of December 31, 1996:
<TABLE>
<S> <C>
1997 $ 4,690
1998 3,241
1999 3,367
2000 1,178
2001 3,355
-------
$15,831
=======
</TABLE>
F-50
<PAGE> 155
LOBDELL EMERY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(DOLLAR AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
NOTE 13. COMMITMENTS AND CONTINGENCIES (CONTINUED)
ENVIRONMENTAL MATTERS
The Corporation is subject to federal, state and local laws and
regulations which govern environmental matters. These laws regulate the
discharge of materials into the environment and may require the
Corporation to remove or mitigate the environmental effects of the
disposal or release of petroleum or chemical substances. The
Corporation has identified several environmental matters resulting from
prior operations. Due to the relatively early stage of investigation of
certain of these identified matters as well as potential
indemnification by other potentially responsible parties, management is
unable to reasonably estimate the ultimate cost of remediating certain
of these identified environmental matters. At December 31, 1996 and
1995, the Corporation has a liability of approximately $880 recorded
for estimated costs of known environmental matters.
GENERAL
The Corporation is subject to various claims, lawsuits and
administrative proceedings related to matters arising out of the normal
course of business. In the opinion of management, after reviewing the
information which is currently available with respect to such matters
and consulting with legal counsel, any liability which may ultimately
be incurred with respect to these matters will not materially affect
the financial position of the Corporation.
NOTE 14. RELATED-PARTY TRANSACTION
During 1996, the Corporation paid sales commissions, based upon
qualified foreign sales to Grace Emery Sales Corporation, a Domestic
International Sales Corporation (DISC) owned by the shareholders of the
Corporation. Commissions payable to the DISC are subject to certain
restrictions. Commissions were $369, $521 and $772 in 1996, 1995 and
1994, respectively.
NOTE 15. SUBSEQUENT EVENT
On January 10, 1997, pursuant to an Agreement and Plan of Merger among
Lobdell Emery Corporation, certain shareholders of Lobdell Emery
Corporation, BMG-MI, Inc. and L-E Acquisition, Inc. as amended, certain
Lobdell Emery Corporation shareholders and option holders had their
respective shares and options redeemed for cash of approximately $8,500
and all outstanding shares of common stock of Lobdell Emery Corporation
(Oldco) were exchanged for shares of preferred stock of L-E
Acquisition, Inc. with a face value of approximately $40,800. In
addition, approximately $3,500 of expenses incurred by the Corporation
were reimbursed by L-E Acquisition, Inc. Subsequent to the exchange of
Oldco's common stock for preferred stock, L-E Acquisition, Inc. was
merged with and into Lobdell Emery Corporation (Newco).
NOTE 16. RESTATEMENT OF PRIOR YEAR FINANCIAL STATEMENTS
The Corporation's management has restated the consolidated financial
statements for periods prior to December 31, 1996. The consolidated
financial statements have been restated to correct the misstatement of
certain assets and liabilities including accounts receivable, accrued
employee benefit related costs and accrued environmental costs, net of
related tax benefits. The effect of the restatement was to decrease
retained earnings at January 1, 1994 by $1,987, decrease net loss by
$36 ($.01 per share) for the year ended December 31, 1995, and increase
net loss by $647 ($.15 per share) for the year ended December 31, 1994.
F-51
<PAGE> 156
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders
of Howell Industries, Inc.
In our opinion, the accompanying balance sheet and the related statement of
operations, of changes in stockholders' equity and of cash flows present fairly,
in all material respects, the financial position of Howell Industries, Inc. at
July 31, 1997, and the results of its operations and its cash flows for the year
then ended, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of management; our responsibility is
to express an opinion on these financial statements based on our audit. We
conducted our audit of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free from
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.
As described in Note 11, on August 13, 1997 all of the outstanding shares of
common stock of Howell Industries, Inc. were acquired by Oxford Automotive, Inc.
PRICE WATERHOUSE LLP
Bloomfield Hills, Michigan
June 15, 1998
F-52
<PAGE> 157
HOWELL INDUSTRIES, INC.
BALANCE SHEET
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
July 31, 1997
<S> <C>
ASSETS
Current assets
Cash and cash equivalents (including interest
bearing instruments of $1,167) $ 1,997
Accounts receivable 8,583
Income taxes refundable 522
Inventories, net of LIFO reserve of $1,354
Raw material 895
Work-in-process and finished goods 5,331
-------
Total inventories 6,226
Unbilled die costs 957
Prepaid expenses and other assets 1,095
Deferred income taxes 1,229
-------
Total current assets 20,609
Property, plant and equipment, net 10,214
-------
TOTAL ASSETS $30,823
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 4,888
Accrued expenses and other liabilities 4,840
-------
Total current liabilities 9,728
Pension liability 522
Other long-term liabilities 508
Deferred income taxes 851
-------
TOTAL LIABILITIES 11,609
-------
Stockholders' equity
Common stock, no par value, 2,500,000 shares
authorized, 622,738 issued and outstanding 594
Retained earnings 18,620
-------
Total stockholders' equity 19,214
-------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $30,823
=======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-53
<PAGE> 158
HOWELL INDUSTRIES, INC.
STATEMENT OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
JULY 31, 1997
<S> <C>
Net sales $95,240
Cost of sales 89,410
-------
GROSS PROFIT 5,830
Selling and administrative expenses 4,748
-------
OPERATING INCOME 1,082
Other income 142
-------
INCOME BEFORE PROVISION FOR INCOME TAXES 1,224
Provision for income taxes 504
-------
NET INCOME $ 720
=======
NET INCOME PER COMMON SHARE $ 1.16
=======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-54
<PAGE> 159
HOWELL INDUSTRIES, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCK ISSUED
AND OUTSTANDING
-----------------
RETAINED
SHARES AMOUNT EARNINGS
<S> <C> <C> <C>
BALANCE, JULY 31, 1996 622,738 $594 $18,367
Cash dividends ($0.75 per share) (467)
Net income 720
------- ---- -------
BALANCE, JULY 31, 1997 622,738 $594 $18,620
======== ==== =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-55
<PAGE> 160
HOWELL INDUSTRIES, INC.
STATEMENT OF CASH FLOWS
(DOLLAR AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
JULY 31, 1997
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 720
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation 1,590
Gain on sale of equipment (2)
Provision for deferred taxes (442)
Change in operating assets and liabilities
Accounts receivable (2,728)
Income taxes refundable (522)
Unbilled die costs 6,689
Inventories (5,414)
Prepaid expenses 377
Accounts payable (733)
Accrued expenses 3,242
Pension liability 2
Other long-term liabilities (943)
-------
Net cash provided by operating activities 1,836
-------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of equipment 63
Capital expenditures (4,095)
-------
NET CASH USED IN INVESTING ACTIVITIES (4,032)
-------
CASH FLOWS FOR FINANCING ACTIVITIES
Dividends paid (467)
-------
NET CASH USED IN FINANCING ACTIVITIES (467)
-------
Decrease in cash and cash equivalents (2,663)
Cash and cash equivalents at beginning of year 4,660
-------
Cash and cash equivalents at end of year $ 1,997
=======
Cash paid for income taxes $ 1,429
=======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-56
<PAGE> 161
HOWELL INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1997
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
1. NATURE OF OPERATIONS
Howell Industries, Inc. ("the Company"), specializes in the production
of stamped structural components for the automotive industry, with
significant sales within the light-duty truck segment. The Company
primarily operates from two plants which are located in Michigan and
Ohio.
Net sales to the Company's two primary customers as a percentage of
total net sales for the year ended July 31, 1997 are as follows:
<TABLE>
<CAPTION>
1997
<S> <C>
Ford Motor Company 53%
Chrysler Corporation 47%
</TABLE>
Accounts receivable from Ford Motor Company and Chrysler Corporation
represent approximately 68% and 31%, respectively, of the July 31, 1997
accounts receivable balance.
Although the Company is directly affected by the economic well being of
the North American automotive industry and customers referred to above,
management does not believe significant credit risk exists at July 31,
1997. The Company does not require collateral to reduce such risk and
historically has not experienced significant losses related to
receivables from individual customers or groups of customers in the
automotive industry.
The Company's primary raw material in the manufacture of structural
components is steel. Although steel is available in an adequate supply
from numerous vendors, a significant increase in the price of this raw
material could affect operating results adversely.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Revenue is recognized by the Company upon shipment of product to the
customer.
CASH EQUIVALENTS
The Company considers all highly-liquid investments with a maturity of
three month or less when purchased to be cash equivalents.
UNBILLED DIE COSTS
Unbilled die costs represents net costs incurred on tooling projects
for which the Company expects to be reimbursed by customers. Ongoing
estimates of total costs to be incurred on each tooling project are
made by management and losses, if any, are recorded when known. Tooling
revenue is recognized upon acceptance of the tooling by the customer.
F-57
<PAGE> 162
HOWELL INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1997
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated on the basis of cost and
include expenditures for improvements which materially increase the
useful lives of existing assets. Expenditures for normal repair and
maintenance are charged to operations as incurred. For federal income
tax purposes, depreciation is computed using accelerated and
straight-line methods. For financial reporting purposes, depreciation
is computed using the straight-line method over the following estimated
useful lives:
<TABLE>
<CAPTION>
YEARS
<S> <C>
Buildings and improvements 10-25
Machinery and equipment 5-25
Furniture and fixtures 5-7
Automobiles and trucks 3-5
</TABLE>
USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could differ
from those estimates.
3. PREPAID EXPENSES AND OTHER ASSETS
Prepaid expenses and other assets are comprised of the following:
<TABLE>
<CAPTION>
JULY 31,
1997
<S> <C>
Prepaid insurance $135
Prepaid pension costs 146
Intangible pension asset 477
Other 337
------
$1,095
======
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are comprised of the following:
<TABLE>
<CAPTION>
JULY 31,
1997
<S> <C>
Land $ 76
Buildings and improvements 4,210
Machinery and equipment 19,521
Furniture and fixtures 1,735
Automobiles and trucks 590
Construction in progress 629
-------
26,761
Less - accumulated depreciation (16,547)
-------
$10,214
=======
</TABLE>
F-58
<PAGE> 163
HOWELL INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1997
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
5. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities are comprised of the following:
<TABLE>
<CAPTION>
JULY 31,
1997
<S> <C>
Income taxes payable $ 188
Accrued die maintenance costs 2,000
Accrued salaries and wages 1,610
Accrued workers' compensation 655
Accrued property and other taxes 221
Other 166
------
$4,840
======
</TABLE>
6. OTHER LONG-TERM LIABILITIES
Other long-term liabilities are comprised of the following:
<TABLE>
<CAPTION>
JULY 31,
1997
<S> <C>
Reserve for plant consolidation $ 120
Environmental reserve 388
-----
Total $ 508
=====
</TABLE>
7. INCOME TAXES
The Company's income tax expense consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED
JULY 31, 1997
<S> <C>
Current provision
Federal $ 795
State and local 112
Deferred provision (403)
-----
$ 504
=====
</TABLE>
A reconciliation of the income tax provision to that which would result
by applying the United States statutory tax rate (34%) to earnings
before taxes follows:
<TABLE>
<CAPTION>
YEAR ENDED
JULY 31, 1997
<S> <C>
Tax based on statutory tax rate $ 416
Tax-exempt income (29)
Tax deductible ESOP dividend (21)
Non-deductible expenses 64
State and local income taxes, net of
federal income tax benefit 74
-----
Taxes on income $ 504
=====
</TABLE>
F-59
<PAGE> 164
HOWELL INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1997
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
7. INCOME TAXES (CONTINUED)
Significant components of the Company's deferred tax assets and
(liabilities) are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
JULY 31, 1997
<S> <C>
Deferred tax assets
Reserves recorded for financial accounting purposes, not
deductible for tax purposes until paid $ 901
Employee benefits and payroll-related deferrals 380
--------
Total deferred tax assets 1,281
--------
Deferred tax liabilities
Employee benefits and payroll-related deferrals (98)
Tax depreciation in excess of book (780)
Other (25)
--------
Total deferred tax liabilities (903)
--------
Net deferred tax asset $ 378
========
</TABLE>
8. EMPLOYEE BENEFIT PLANS
The Company has three noncontributory defined benefit pension plans
covering substantially all of its employees and an unfunded
noncontributory defined contribution plan for certain officers.
Benefits, which differ by plan are based on years of service and/or the
employee's five-year average compensation. The Company's funding policy
for its defined benefit plans is to contribute annually an amount
necessary to meet or exceed the Employee Retirement Income Security
Act's (ERISA) minimum funding standards.
The components of net pension cost are as follows:
<TABLE>
YEAR ENDED
JULY 31, 1997
<S> <C>
Defined benefit plans
Service cost - benefits earned during the year $ 226
Interest cost on projected benefit obligation 347
Actual return on plan assets (788)
Net amortization, deferral and other 517
--------
Total 302
Defined contribution plan 30
--------
Net pension costs $ 332
========
</TABLE>
F-60
<PAGE> 165
HOWELL INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1997
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
8. EMPLOYEE BENEFIT PLANS (CONTINUED)
The following table sets forth the funded status and amounts recognized
in the balance sheets for the defined benefit plans as of July 31,
1997:
<TABLE>
<CAPTION>
ASSETS ACCUMULATED
EXCEED BENEFITS
ACCUMULATED EXCEED
BENEFITS ASSETS
<S> <C> <C>
Actuarial present value of benefit obligation
Vested benefit obligation $ 1,255 $ 2,788
Nonvested benefit obligation 65 207
-------- --------
Accumulated benefit obligation 1,320 2,995
Effect of future salary increases 746
--------
Projected benefit obligation 2,066 2,995
Plan assets at fair value 2,584 2,473
-------- --------
Plan assets greater (less) than projected
benefit obligation 518 (522)
Unrecognized net gain (409) (12)
Unrecognized prior service cost 131 405
Unrecognized net transition (asset) obligation (94) 84
Adjustment required to recognize minimum liability (477)
-------- --------
Net prepaid pension cost (pension liability)
recognized in the balance sheet $ 146 $ (522)
======== ========
</TABLE>
The actuarial assumptions used in determining the present value of the
projected benefit obligations are:
<TABLE>
<CAPTION>
Year Ended
July 31, 1997
<S> <C>
Weighted average discount rate 7.4%
Increase in future compensation levels 5.0%
</TABLE>
The expected long-term rate of return on assets is 7.5%. Plan assets
are invested in a portfolio of cash, income and equity securities and a
diversified fund with guaranteed returns.
The Company also maintains an Employee Stock Ownership Plan (ESOP) and
an Employee Savings Plan (401(k) plan) covering substantially all
employees not covered by a collective bargaining agreement.
At July 31, 1997, the ESOP owned 60,005 shares of common stock, all of
which had been allocated to individual participants.
Contributions to the ESOP are authorized at the discretion of the Board
of Directors. No contributions were charged to expense during 1997.
There were no amounts accrued at July 31, 1997 for such contributions.
The Employee Savings Plan provides for participants to contribute up to
10% of their annual compensation each year. In addition, the Company
contributes an amount equal to 25% of the first $1 contributed by the
employee, plus $0.2. Company contributions amounted to approximately
$30 in 1997.
9. LINE OF CREDIT
The Company maintains a $4,000 unsecured line of credit with a 5%
compensating balance agreement. The Company did not borrow under this
line of credit in 1997.
F-61
<PAGE> 166
HOWELL INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1997
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA)
- --------------------------------------------------------------------------------
10. OPERATING LEASES
The Company rents a warehouse under a noncancelable operating lease,
and certain facilities and equipment under cancelable leases. Total
rent expense under these leases was $361 in 1997.
11. SUBSEQUENT EVENTS
On August 13, 1997, Oxford Automotive, Inc., purchased all of the
outstanding common stock of the Company for approximately $23,000 in
cash.
F-62
<PAGE> 167
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of
RPI Holdings, Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations, of changes in shareholders' equity and of cash flows present fairly,
in all material respects, the financial position of RPI Holdings, Inc., (the
Company) at March 31, 1997 and the result of its operations and cash flows for
the period from July 1, 1996 to March 31, 1997 in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these statements in accordance with generally accepted auditing standards
which 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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
The financial statements of the Company as of and for the year ended June 30,
1996 were audited by other accountants whose report dated February 4, 1998
expressed an unqualified opinion on those statements.
As described in Note 2, on November 25, 1997 all of the outstanding shares of
common stock of the Company were sold to Oxford Automotive, Inc.
PRICE WATERHOUSE LLP
Detroit, Michigan
February, 6, 1998
F-63
<PAGE> 168
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of RPI Holdings, Inc.
We have audited the accompanying consolidated balance sheet of RPI Holdings,
Inc. and Subsidiaries as of June 30, 1996 and the related consolidated
statements of operations, stockholders' equity, and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of RPI Holdings, Inc.
and Subsidiaries as of June 30, 1996, and the consolidated results of their
operations and their cash flows for the year then ended, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Detroit, Michigan
February 4, 1998
F-64
<PAGE> 169
RPI HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31, JUNE 30,
1997 1997 1996
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets
Cash $ 32,086 $ 36,145 $ 60,568
Accounts receivable, less allowance for doubtful
accounts of $66,055 in 1997 and $80,000 in 1996 1,633,602 1,755,481 1,705,609
Accounts receivable, other 6,414 33,009
Notes receivable 25,000 31,159 10,585
Refundable income taxes 254,000 254,000 300,000
Inventories
Raw material 491,219 572,015 378,776
Work-in-process 707,434 671,224 248,934
Finished goods 311,162 347,894 200,672
------------ ------------ ------------
1,509,815 1,591,133 828,382
Prepaid expenses 92,022 162,246 292,082
Deferred income taxes 47,600 62,600 47,600
------------ ------------ ------------
Total current assets 3,594,125 3,899,178 3,277,835
Property, plant and equipment, net 2,965,362 3,024,876 2,764,259
Deferred income taxes 484,500
------------ ------------ ------------
TOTAL ASSETS $ 7,043,987 $ 6,924,054 $ 6,042,094
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt $ 4,269,842 $ 2,937,611 $ 410,092
Accounts payable 2,340,402 2,482,615 1,435,794
Accrued expenses and other liabilities 333,296 416,520 437,939
------------ ------------ ------------
Total current liabilities 6,943,540 5,836,746 2,283,825
Long-term debt, less current maturities 474,337 509,720 2,504,550
Notes payable to shareholders 364,760 364,760 364,760
Deferred income taxes 63,200 150,300
------------ ------------ ------------
Total liabilities 7,782,637 6,774,426 5,303,435
Commitments and contingent liabilities (Note 6)
Shareholders' equity (deficit)
Common stock (no par value; 60,000
shares authorized, 752.8 shares issued
and outstanding) 373,295 373,295 373,295
Retained (deficit) earnings (1,111,945) (223,667) 365,364
------------ ------------ ------------
Total shareholders' equity (738,650) 149,628 738,659
------------ ------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) $ 7,043,987 $ 6,924,054 $ 66,042,094
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-65
<PAGE> 170
RPI HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE PERIOD FROM FOR THE YEAR
ENDED SEPTEMBER 30, JULY 1, 1996 TO ENDED
1997 1996 MARCH 31, 1997 JUNE 30, 1996
(UNAUDITED)
<S> <C> <C> <C> <C>
Net sales $ 6,938,452 $ 5,021,666 $ 8,823,948 $ 9,819,907
Cost of sales 7,985,430 4,620,341 9,037,409 8,826,609
------------ ------------ ------------ ------------
GROSS PROFIT (1,046,978) 401,325 (213,461) 993,298
Selling and administrative expenses 143,793 614,816 535,017 1,264,314
------------ ------------ ------------ ------------
OPERATING LOSS (1,190,771) (213,491) (748,478) (271,016)
Other income (expense)
Interest expense (203,081) (155,360) (251,585) (404,322)
Miscellaneous income (expense) (22,426) 63,911 54,932 (38,740)
------------ ------------ ------------ ------------
LOSS BEFORE INCOME TAXES (1,416,278) (304,940) (945,131) (714,078)
Income tax benefit 528,000 128,000 356,100 300,000
------------ ------------ ------------ ------------
NET LOSS $ (888,278) $ (176,940) $ (589,031) $ (414,078)
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-66
<PAGE> 171
RPI HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON COMMON RETAINED
STOCK STOCK EARNINGS TOTAL
<S> <C> <C> <C> <C>
BALANCES AT JULY 1, 1995 770 $ 383,845 $ 779,442 $ 1,163,287
Net loss (414,078) (414,078)
Redemption of common stock (17) (10,550) (10,550)
------ ------------ ------------ ------------
BALANCES AT JUNE 30, 1996 753 373,295 365,364 738,659
Net loss (589,031) (589,031)
------ ------------ ------------ ------------
BALANCES AT MARCH 31, 1997 753 373,295 (223,667) 149,628
Net loss (unaudited) (888,278) (888,278)
------ ------------ ------------ ------------
BALANCES AT SEPTEMBER 30, 1997 (UNAUDITED) 753 $ 373,295 $ (1,111,945) $ (738,650)
====== ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-67
<PAGE> 172
RPI HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE PERIOD FROM FOR THE YEAR
ENDED SEPTEMBER 30, JULY 1, 1996 TO ENDED
1997 1996 MARCH 31, 1997 JUNE 30, 1996
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (888,278) $ (176,940) $ (589,031) $ (414,078)
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation and amortization 153,111 105,256 202,051 213,050
Loss on sale of property and equipment 4,800
Deferred income taxes (532,700) 164,410 (102,100) 12,700
Changes in operating assets and liabilities
Accounts receivable 128,293 (272,998) (49,872) 278,413
Accounts receivable, other 26,595 63,479
Notes receivable 6,159 (10,586) (20,574) 3,529
Refundable income taxes 46,000 (300,000)
Inventories 81,318 (45,306) (762,751) 290,684
Prepaid expenses and other current assets 75,463 157,560 129,836 (60,560)
Accounts payable (142,213) 260,756 1,046,821 33,095
Accrued expenses and other liabilities (88,463) (191,506) (21,419) (204,769)
------------ ------------ ------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (1,207,310) (9,354) (89,644) (84,457)
------------ ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (93,597) (224,814) (671,758) (250,007)
proceeds from sale of assets 204,290
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (93,597) (224,814) (467,468) (250,007)
------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal borrowings on revolving line of
credit, net (65,069) 157,575 515,049 390,475
Proceeds from debt obligations 58,303 792,252 274,757
Principal payments of debt obligations (223,677) (774,612) (350,775)
Advances from related party 1,585,594
Redemption of common stock (10,550)
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,296,848 215,878 532,689 303,907
------------ ------------ ------------ ------------
Net decrease in cash (4,059) (18,290) (24,423) (30,557)
Cash, beginning of year 36,145 78,575 60,568 91,125
------------ ------------ ------------ ------------
Cash, end of year $ 32,086 $ 60,285 $ 36,145 $ 60,568
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-68
<PAGE> 173
RPI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. NATURE OF OPERATIONS
RPI Holdings, Inc. (the Company), specializes in the production of
roll-formed pieces, metal stampings with clinch or welded fasteners and
welded assemblies of functional and decorative trim for the automotive
industry. The Company primarily operates from two plants located in
Michigan.
Net sales to the Company's two primary customers as a percentage of
total sales are as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM JULY 1, 1996 FOR THE YEAR ENDED
TO MARCH 31, 1997 JUNE 30, 1996
<S> <C> <C>
General Motors Corporation 63% 46%
Johnson Controls International 19% 19%
</TABLE>
Accounts receivable from General Motors Corporation and Johnson
Controls International represent approximately 53% and 23%,
respectively, of the March 31, 1997 accounts receivable balance.
Although the Company is directly affected by the economic well being of
the automotive industry and customers referred to above, management
does not believe significant credit risk exists at March 31, 1997. The
Company does not require collateral to reduce such risk and
historically has not experienced significant losses related to
receivables from individual customers or groups of customers in the
automotive industry.
2. SUBSEQUENT EVENTS
Subsequent to March 31, 1997, the Company was advanced $1,500,000 in
various installments from Lobdell Emery Corporation, a wholly-owned
subsidiary of Oxford Automotive, Inc. (Oxford). The advances were used
to support the ongoing operations of the Company. The majority
shareholder of Oxford is also the majority shareholder of the Company.
On November 25, 1997, Oxford purchased all of the outstanding common
stock of the Company for $2,500,000 in cash. In connection with the
acquisition, the notes payable to shareholders of $364,760 and the RPI,
Inc. revolving credit, bank term, revolving equipment and revolving
tooling loans described in Note 4 were repaid.
3. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
During the period ended March 31, 1997, the Company changed its fiscal
year end to March 31. Previously, the Company's fiscal year ended on
June 30.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of the Company include the
accounts of RPI Holdings, Inc. and its wholly-owned subsidiaries, RPI,
Inc. and Prudenville Manufacturing, Inc. (PMI). RPI Holdings, Inc. and
PMI had no revenues or operations during the periods presented.
REVENUE RECOGNITION
Revenue is recognized by the Company upon shipment of product to the
customer.
CASH EQUIVALENTS
The Company considers all highly-liquid investments with maturity of
three months or less when purchased to be cash equivalents.
F-69
<PAGE> 174
RPI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVENTORIES
Inventories are stated at the lower of cost or market with cost
determined on a first-in, first-out basis ("FIFO").
REIMBURSABLE TOOLING
Reimbursable tooling represents net costs incurred on tooling projects
for which the Company expects to be reimbursed by customers. Ongoing
estimates of total costs to be incurred on each tooling project are
made by management and losses, if any, are recorded when known.
Generally, tooling revenue is recognized upon acceptance of the tooling
by the customer. At March 31, 1997 and June 30, 1996, all reimbursable
tooling is recorded in prepaid expenses.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated on the basis of cost and
include expenditures for improvements which materially increase the
useful lives of existing assets. Expenditures for normal repair and
maintenance are charged to operations as incurred. For federal income
tax purposes, depreciation is computed using accelerated and
straight-line methods. For financial reporting purposes, depreciation
is computed using the straight-line method over the following estimated
useful lives:
<TABLE>
<CAPTION>
YEARS
<S> <C>
Land improvements 30
Buildings 30-40
Machinery and equipment 3-20
Furniture and fixtures 7-10
</TABLE>
IMPAIRMENT OF LONG-LIVED ASSETS
The Company accounts for long-lived assets in accordance with Statement
of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of". This Statement requires that long-lived assets and
certain identifiable intangibles to be held and used by the Company be
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be fully
recoverable. The Company recognizes impairment losses for assets or
groups of assets where the sum of the estimated future cash flows
(undiscounted and without interest charges) is less than the carrying
amount of the related asset or group of assets. The amount of the
impairment loss recognized is the excess of the carrying amount over
the fair value of the asset or group of assets being measured.
NOTES PAYABLE TO SHAREHOLDERS
The notes payable to shareholders accrue interest at an annual rate of
6%, payable quarterly. As described in Note 2, the notes payable to
shareholders were repaid in connection with the acquisition of the
Company by Oxford.
INCOME TAXES
Deferred taxes are provided to give recognition to the effect of
expected future tax consequences of temporary differences between the
carrying amounts for financial reporting purposes and the tax bases for
income tax purposes of assets and liabilities.
FAIR VALUE OF FINANCIAL INSTRUMENTS
At March 31, 1997 and June 30, 1996, the carrying amount of financial
instruments such as cash and cash equivalents and trade receivables and
payables approximated their fair values. Based upon the borrowing rates
currently available to the Company, the carrying value of debt
approximates fair value.
F-70
<PAGE> 175
RPI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are comprised of the following:
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1997 1996
<S> <C> <C>
Land and land improvements $ 104,272 $ 113,243
Buildings 1,379,118 1,460,792
Machinery and equipment 2,167,939 1,654,716
Furniture and fixtures 203,748 216,545
------------ ------------
3,855,077 3,445,296
Less - accumulated depreciation (830,201) (681,037)
------------ ------------
$ 3,024,876 $ 2,764,259
============ ============
</TABLE>
5. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities are composed of the following:
<TABLE>
<CAPTION>
March 31, June 30,
1997 1996
<S> <C> <C>
Accrued interest $ 67,919 $ 53,873
Accrued salaries and wages 91,172 68,595
Accrued professional fees 87,382 94,636
Accrued commissions 62,545 130,012
Other 107,502 90,823
-------- --------
$416,520 $437,939
======== ========
</TABLE>
F-71
<PAGE> 176
RPI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6. BORROWING ARRANGEMENTS
<TABLE>
<CAPTION>
MARCH 31, 1997 JUNE 30, 1996
<S> <C> <C>
REVOLVING CREDIT LOAN - RPI, INC.
Interest at prime rate plus .5% (9% at March 31, 1997),
matures December 31, 1997 $ 1,359,961 $ 844,912
BANK TERM LOAN - RPI, INC
Interest at prime rate plus 1% (9.5% at March 31, 1997),
Monthly principal payments of $20,833, matures
December 31, 1997 598,011 885,508
REVOLVING EQUIPMENT LOAN - RPI, INC
Interest at prime rate plus 1% (9.5% at March 31, 1997),
Monthly principal payments of $15,511, matures
December 31, 1997 707,192 347,510
REVOLVING TOOLING LOAN - RPI, INC
Interest at prime rate plus 1% (9.5% at March 31, 1997),
matures December 31, 1997 151,787 222,280
TERM NOTE PAYABLE - PMI
Interest at 6% payable annually. Monthly principal
payments of $2,500, matures April 30, 1999 477,500 500,000
LAND CONTRACT - PMI
Interest at 8%. Monthly payments of $3,000, matures
May 31, 1999 77,766 104,766
OTHER 75,114 9,666
------------ ------------
3,447,331 2,914,642
Less - current portion (2,937,611) (410,092)
------------ ------------
$ 509,720 $ 2,504,550
============ ============
</TABLE>
Borrowing under the revolving credit and bank term loan agreements are
subject to certain limitations determined by a formula based on 80% of
eligible accounts receivable and 35% of eligible inventories, or a
maximum of $500,000. Upon the occurrence of any default, interest
accrues on the unpaid principal balance at an annual rate of four
percent above the bank's prime rate. The financing is collateralized by
all assets of RPI, Inc.
The Company was in default of certain provisions of the revolving
credit loan, bank term loan, revolving equipment loan and revolving
tooling loan agreements as of March 31, 1997. The agreements were
amended subsequent to March 31, 1997. Under the new terms, the amount
available under the revolving credit loan decreased from $3,250,000 to
$2,600,000, additional advances under the revolving equipment loan and
revolving tooling loan were terminated, certain covenants were amended
and the balances of the revolving credit loan, bank term loan,
revolving equipment loan and revolving tooling loan were due October
15, 1997. Subsequent to this amendment, the due date was extended to
December 31, 1997.
F-72
<PAGE> 177
RPI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6. BORROWING ARRANGEMENTS (CONTINUED)
As described in Note 2, the revolving credit loan, bank term loan,
revolving equipment loan and revolving tooling loan were repaid in full
in connection with the acquisition of the Company on November 25, 1997.
Scheduled maturities of long-term debt, after giving effect to the
amendments described above, are as follows:
<TABLE>
<CAPTION>
YEARS ENDING
MARCH 31
<S> <C>
1998 $ 2,937,611
1999 71,844
2000 429,110
2001 5,844
2002 2,922
--------------
$ 3,447,331
==============
</TABLE>
Cash paid for interest during the nine month period ended March 31,
1997 and for the year ended June 30, 1996 approximated $238,000 and
$375,000, respectively.
7. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company leases certain buildings and equipment under operating
lease agreements. The future minimum lease payments under these
operating leases are:
<TABLE>
<CAPTION>
YEARS ENDING
MARCH 31
<S> <C>
1998 $ 200,111
1999 154,030
2000 90,730
--------------
Total minimum lease payments $ 444,871
==============
</TABLE>
Rental expense for the nine month period ended March 31, 1997 and for
the year ended June 30, 1996 approximated $178,000 and $218,000,
respectively.
GENERAL
The Company is subject to various claims, lawsuits and administrative
proceedings related to matters arising out of the normal course of
business, including an audit of the Company's June 30, 1996 tax return
by the Internal Revenue Service. In the opinion of management, after
reviewing the information which is currently available with respect to
such matters and consulting with legal counsel, any liability which may
ultimately be incurred with respect to these matters will not
materially affect the financial position, results of operations or cash
flows of the Company.
F-73
<PAGE> 178
RPI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
8. INCOME TAXES
The Company's income tax benefit consists of the following:
<TABLE>
<CAPTION>
FOR THE PERIOD FROM FOR THE YEAR
JULY 1, 1996 TO ENDED
MARCH 31, 1997 JUNE 30, 1996
<S> <C> <C>
Current benefit $ 254,000 $ 312,700
Deferred benefit (provision) 102,100 (12,700)
---------- ----------
$ 356,100 $ 300,000
========== ==========
</TABLE>
A reconciliation between the Company's income tax benefit and the
amount computed by applying the statutory income tax rate to income
before income taxes is as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD FROM FOR THE YEAR
JULY 1, 1996 TO ENDED
MARCH 31, 1997 JUNE 30, 1996
<S> <C> <C>
Statutory rate $ 321,300 $ 242,800
Net operating loss carry forward 71,800
Inventory adjustment (20,500)
Other (16,500) 57,200
---------- ----------
Income tax benefit $ 356,100 $ 300,000
========== ==========
</TABLE>
Significant components of the Company's deferred tax assets and
(liabilities) are as follows:
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1997 1996
<S> <C> <C>
Deferred tax liabilities
Tax depreciation in excess of book $ (161,000) $ (150,300)
---------- ----------
Deferred tax assets
Net operating loss carrry forward 71,800
Inventory 38,400
AMT credit carry forward 26,000
Allowance for doubtful accounts 22,500 27,200
Other 1,700 20,400
---------- ----------
Gross deferred tax assets 160,400 47,600
---------- ----------
Net deferred tax liability $ (600) $ (102,700)
========== ==========
</TABLE>
F-74
<PAGE> 179
RPI HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
8. INCOME TAXES (CONTINUED)
The Company has a net operating loss carry forward for federal income
tax purposes with potential future tax benefits of approximately
$72,000, which expires during 2012. In addition, the Company has
Alternative Minimum Tax credit carry forwards aggregating $26,000 at
March 31, 1997 which can be carried forward indefinitely. Due to the
subsequent acquisition of the Company, as more fully described in Note
2, there are annual limitations on the amount of the carry forwards
which can be utilized. Management believes that it is more likely than
not that the benefit of these tax benefits will be realized and,
therefore, no valuation allowance is provided at March 31, 1997.
The Company paid no income taxes for both the nine month period ended
March 31, 1997 and the year ended June 30, 1996.
9. RELATED PARTY TRANSACTIONS
The Company is charged fees by a related party, The Oxford Investment
Group, Inc., for consulting, finance and management services and a
sales representative agreement. These fees approximated $116,000 and
$325,000 for the nine month period ended March 31, 1997 and for the
year ended June 30, 1996, respectively.
10. INTERIM DATA (UNAUDITED)
The accompanying unaudited balance sheet as of September 30, 1997 and
the unaudited consolidated statements of operations and cash flows for
the six-month periods ended September 30, 1997 and 1996 include all
adjustments, consisting of normal recurring adjustments, which in the
opinion of management are necessary for the fair presentation of the
financial position, results of operations and cash flows. The results
of operations for any interim period are not necessarily indicative of
the results of operations for a full year.
F-75
<PAGE> 180
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders
and Directors of
Oxford Automotive, Inc.
In our opinion, the accompanying combined balance sheet and the related combined
statements of operations and of cash flows present fairly, in all material
respects, the financial position of the Suspension Division (Suspension), a
Division of Eaton Corporation (Eaton), at December 31, 1997, and the results of
its operations and its cash flows for the year ended December 31, 1997, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the management of Suspension; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
Our engagement as auditors of Suspension was subsequent to December 31, 1997.
Therefore, we were not present to observe physical inventories taken on or prior
to that date, the amounts of which entered into the determination of cost of
goods sold for the year ended December 31, 1997. However, we observed physical
inventories subsequent to December 31, 1997 and performed such other procedures
as we deemed appropriate.
Suspension, as disclosed in Note 2 to the accompanying financial statements, is
a division of Eaton and has extensive transactions and relationships with Eaton.
Because of these relationships, it is possible that the terms of these
transactions are not the same as those that would result from transactions among
wholly unrelated parties.
As discussed in Note 14, on April 1, 1998, Eaton sold certain net assets of
Suspension to Oxford Automotive, Inc. The accompanying financial statements do
not give effect to this purchase transaction.
PRICE WATERHOUSE LLP
Detroit, Michigan
June 11, 1998
F-76
<PAGE> 181
SUSPENSION DIVISION
A DIVISION OF EATON CORPORATION
COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
(UNAUDITED)
ASSETS
<S> <C> <C>
Current assets
Cash $ 2 $ 7
Accounts receivable 11,784 13,115
Inventories 11,704 9,574
Prepaid expenses 30 21
-------- --------
Total current assets 23,520 22,717
Property, plant and equipment, net 26,869 26,808
Prepaid pension asset 5,078 4,770
Other assets 3,575 3,346
-------- --------
TOTAL ASSETS $ 59,042 $ 57,641
======== ========
LIABILITIES AND EATON INVESTMENT
Current liabilities
Accounts payable $ 6,002 $ 7,164
Employee compensation 2,869 2,381
Accrued expenses and other current liabilities 1,750 1,798
-------- --------
Total current liabilities 10,621 11,343
Deferred income taxes 2,059 2,059
Postretirement benefits liability 2,554 2,360
Environmental commitments and contingencies (Note 12) 1,557 1,557
-------- --------
TOTAL LIABILITIES 16,791 17,319
Eaton investment 42,251 40,322
-------- --------
TOTAL LIABILITIES AND EATON INVESTMENT $ 59,042 $ 57,641
======== ========
</TABLE>
See accompanying notes to combined financial statements.
F-77
<PAGE> 182
SUSPENSION DIVISION
A DIVISION OF EATON CORPORATION
COMBINED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
1998 1997 1997
(UNAUDITED)
<S> <C> <C> <C>
Sales $ 30,261 $ 33,559 $ 125,776
Cost of goods sold 28,808 30,572 116,485
------------ ------------ ------------
GROSS PROFIT 1,453 2,987 9,291
Selling, general and administrative expense 1,740 1,799 7,214
------------ ------------ ------------
OPERATING INCOME (LOSS) (287) 1,188 2,077
------------ ------------ ------------
Equity in income of Metalcar 226 39 741
Interest expense (291) (273) (1,015)
Other income (expense) (248) 100 280
------------ ------------ ------------
INCOME (LOSS) BEFORE PROVISION (BENEFIT)
FOR INCOME TAXES (600) 1,054 2,083
Provision (benefit) for income taxes (237) 416 827
------------ ------------ ------------
NET INCOME (LOSS) $ (363) $ 638 $ 1,256
============ ============ ============
</TABLE>
See accompanying notes to combined financial statements.
F-78
<PAGE> 183
SUSPENSION DIVISION
A DIVISION OF EATON CORPORATION
COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
1998 1997 1997
(UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities
Net income (loss) $ (363) $ 638 $ 1,256
Adjustments to reconcile net income (loss) to net
cash provided by (used for) operating activities
Depreciation and amortization 957 1,024 4,317
Loss on disposal of fixed assets 8 49 451
Income of affiliate, net of dividend received (226) (59) (238)
Deferred income taxes 516
Changes in assets and liabilities
Accounts receivable 1,399 (2,228) 236
Inventories (2,067) 407 (1,158)
Prepaid expenses (9) (202) 1
Other noncurrent assets (308) (318) (1,243)
Accounts payable (1,198) (1,079) 1,907
Employee compensation 473 641 (287)
Accrued expenses and other current liabilities (93) 510 683
Postretirement benefits liability 194 (50) 355
Environmental commitments and contingencies 37 (23) (20)
---------- ---------- ----------
NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES (1,196) (690) 6,776
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment (919) (152) (4,994)
---------- ---------- ----------
NET CASH USED FOR INVESTING ACTIVITIES (919) (152) (4,994)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Intercompany activity 2,292 644 (3,024)
---------- ---------- ----------
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES 2,292 644 (3,024)
---------- ---------- ----------
Effect of exchange rate changes on cash (182) 198 1,248
---------- ---------- ----------
NET DECREASE IN CASH (5) -- 6
---------- ---------- ----------
Cash at beginning of the period 7 1 1
---------- ---------- ----------
Cash at end of the period $ 2 $ 1 $ 7
========== ========== ==========
</TABLE>
See accompanying notes to combined financial statements.
F-79
<PAGE> 184
SUSPENSION DIVISION
A DIVISION OF EATON CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
1. DESCRIPTION OF BUSINESS
The Suspension Division (Suspension) of Eaton Corporation (Eaton) is a
leading tier one North American supplier of leaf spring suspension
systems for automotive applications. Suspension's products are
primarily sold to original equipment manufacturers (OEMs) of passenger
cars, light trucks and heavy trucks.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
These financial statements present the historical financial position,
results of operations and cash flows of Suspension previously included
in the Eaton consolidated financial statements. Suspension's financial
information included herein is not necessarily indicative of the
financial position, results of operations and cash flows of Suspension
in the future or of the results which would have been reported if
Suspension had operated as an unaffiliated enterprise.
Transactions between Eaton and Suspension (and Eaton's other business
units) are herein referred to as "intercompany" or "related party"
transactions.
If Suspension was operated as an independent, unaffiliated entity, it
may not be able to obtain raw material and other goods and services at
historical price levels obtained when purchasing as a part of Eaton's
worldwide purchasing process.
Suspension accounts for its investment in the Metalurgica Carabobo,
S.A. (Metalcar) joint venture under the equity method of accounting.
Metalcar is included in the combined financial statements on the basis
of its September 30, 1997 fiscal year end.
CONCENTRATION OF CREDIT RISK
Suspension's customer base is primarily comprised of OEMs. Sales to
Suspension's three largest customers aggregated 71%, 14% and 8% of 1997
sales. Financial instruments which potentially expose Suspension to a
concentration of credit risk consist primarily of accounts receivable.
At December 31, 1997, the aforementioned customers represented
approximately 50%, 24% and 21% of trade accounts receivable.
Although Suspension is directly affected by the economic well being of
the automotive industry, as well as its major customers, management
does not believe significant credit risk exists at December 31, 1997.
Suspension does not require collateral to reduce such credit risk and
historically has not experienced significant losses related to
receivables.
FOREIGN CURRENCY TRANSLATION\
The functional currency of the Canadian operations is the local
currency. Financial statements for these operations are translated into
United States dollars at year-end exchange rates as to assets and
liabilities and weighted-average exchange rates as to revenues and
expenses. The resulting translation adjustments are recorded as a
component of Eaton investment.
INVENTORIES
Inventories are carried at lower of cost or market using the first-in,
first-out (FIFO) method.
F-80
<PAGE> 185
SUSPENSION DIVISION
A DIVISION OF EATON CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated on the basis of cost and
include expenditures for improvements which materially increase the
useful lives of existing assets. Expenditures for normal repairs and
maintenance are charged to operations as incurred. For federal income
tax purposes, depreciation is computed using accelerated methods. For
financial reporting purposes, depreciation is computed principally
using the straight-line method over the following estimated useful
lives:
<TABLE>
<CAPTION>
YEARS
<S> <C>
Land improvements 40
Buildings and building improvements 10-40
Machinery and equipment 3-10
</TABLE>
VALUATION OF LONG-LIVED ASSETS
In accordance with Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be disposed of, Suspension periodically evaluates the
carrying value of long-lived assets to be held and used. The carrying
value of a long-lived asset is considered impaired when the anticipated
undiscounted cash flow from such asset is separately identifiable and
is less than its carrying value. In that event, a loss is recognized
based on the amount by which the carrying value exceeds the fair market
value of the long-lived asset. Fair market value is determined
primarily using the anticipated cash flows discounted at a rate
commensurate with the risk involved or independent appraisal.
REVENUE RECOGNITION
Sales and related cost of sales are recognized when products are
shipped.
INCOME TAXES
Suspension's United States and Canadian locations are included in the
consolidated federal income tax returns of Eaton Corporation and Eaton
Yale Limited, respectively. In preparing its combined financial
statements, Suspension has determined its tax provision on a separate
return basis. Income taxes payable and refundable income taxes are
recorded as a component of Eaton investment. Deferred tax liabilities
or assets reflect the impact of temporary differences between amounts
of assets and liabilities for financial and tax reporting. Such amounts
are subsequently adjusted, as appropriate, to reflect changes in tax
rates expected to be in effect when the temporary differences reverse.
A valuation allowance on deferred tax assets is provided if it is
considered more likely than not that such deferred tax assets will not
be realized.
ESTIMATES
Preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions in certain circumstances that affect amounts reported
in the accompanying combined financial statements and notes. Actual
results could differ from these estimates.
ENVIRONMENTAL
Suspension expenses environmental expenditures related to existing
conditions resulting from past or current operations and from which no
current or future benefit is discernible. Expenditures which extend the
life of the related property or mitigate or prevent future
environmental contamination are capitalized. Suspension records a
liability for remediation costs at the time when it is probable and can
be reasonably estimated. The estimated liability of Suspension is not
discounted or reduced for possible recoveries from insurance carriers.
F-81
<PAGE> 186
SUSPENSION DIVISION
A DIVISION OF EATON CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
3. ACCOUNTS RECEIVABLE
Accounts receivable comprises the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1997
<S> <C>
Trade $ 12,811
Other 304
----------
$ 13,115
==========
</TABLE>
4. INVENTORIES
Inventories comprise the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
(UNAUDITED)
<S> <C> <C>
Raw materials $ 7,694 $ 5,633
Work-in-process 3,141 2,768
Finished goods 1,298 1,600
---------- ----------
12,133 10,001
Less - inventory reserve (429) (427)
---------- ----------
$ 11,704 $ 9,574
========== ==========
</TABLE>
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment comprise the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1997
<S> <C>
Land and land improvements $ 503
Buildings and building improvements 10,817
Machinery and equipment 47,238
Construction-in-progress 3,562
--------
62,120
Less - Accumulated depreciation (35,312)
--------
$ 26,808
========
</TABLE>
F-82
<PAGE> 187
SUSPENSION DIVISION
A DIVISION OF EATON CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
6. OTHER ASSETS
Other assets comprise the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1997
<S> <C>
Equity investment in Metalcar $ 3,284
Other 62
--------
$ 3,346
========
</TABLE>
The table below contains the summarized financial information of
Metalcar for the year ended September 30, 1997:
<TABLE>
<S> <C>
Net sales $ 15,737
========
Operating income $ 2,581
========
Net income $ 1,509
========
Current assets $ 6,174
Non-current assets 4,336
--------
Total assets $ 10,510
========
Current liabilities $ 3,725
Non-current liabilities 81
Shareholders equity 6,704
--------
Total liabilities and equity $ 10,510
========
</TABLE>
Suspension has a 49% joint venture interest in Metalcar, a Venezuelan
manufacturer of conventional leaf springs and coil springs for both
light and heavy trucks.
7. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities comprise the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1997
<S> <C>
Utilities $ 561
Warranty 458
Other 779
--------
$ 1,798
========
</TABLE>
F-83
<PAGE> 188
SUSPENSION DIVISION
A DIVISION OF EATON CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
8. EMPLOYEE BENEFIT PLANS
PENSIONS
Substantially all salaried employees of Suspension participate in
defined benefit pension plans covering all Eaton salaried employees.
Plan benefits are generally based on years of service and the
employee's compensation. Solely for the purpose of these financial
statements, Suspension salaried employees are considered to have
participated in multi-employer pension plans. Suspension recorded net
periodic pension benefits of $30 for the year ended December 31, 1997,
related to its participation in the Eaton defined benefit pension
plans.
In addition, Suspension sponsors two noncontributory defined benefit
pension plans covering substantially all hourly employees at
Suspension's two Canadian manufacturing facilities. These plans are
subject to collective bargaining agreements and provide pension
benefits that are based on a fixed rate applied to the hourly
employees' years of credited service up to a maximum of 30 years. The
hourly plans do not provide for increases in future compensation
levels. Suspension's funding policy for these plans is to make
contributions in amounts sufficient to fund the plan's current service
cost and any going concern unfunded actuarial liabilities and/or
solvency deficiencies.
The following table sets forth the Canadian hourly plans' funded status
and amounts recognized on Suspension's combined balance sheet at
December 31, 1997:
<TABLE>
<S> <C>
Actuarial present value of benefit obligation
Vested benefits $ 19,236
Nonvested benefits 724
--------
Projected benefit obligation 19,960
Plan assets at fair value (primarily U.S. government securities,
bonds, notes and mutual funds) 22,821
--------
Plan assets greater than projected benefit obligation 2,861
Unrecognized net gains (543)
Unrecognized prior service cost 2,902
Unrecognized net asset being recognized over 15-20 years (450)
--------
Prepaid pension cost $ 4,770
========
</TABLE>
Net periodic pension cost for 1997 and the actuarial assumptions used
in determining the projected benefit obligation are as follows:
<TABLE>
<S> <C>
Service cost $ 636
Interest cost 1,367
Actual return on assets (3,589)
Net amortization and deferral 2,074
--------
Net periodic pension cost $ 488
========
Discount rate 7.25%
Expected return on assets 9.25%
</TABLE>
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
U.S. retiree medical programs cover employees who retire with
eligibility for hospital, professional and other medical services. Most
of the programs require deductibles and copayments and virtually all
are integrated with Medicare. Retiree contributions are generally
required based on length of service, location, coverage type, plan and
Medicare eligibility. For U.S. salaried employees, Eaton also sponsors
retiree life insurance programs which generally provide a benefit as a
percent of pay.
F-84
<PAGE> 189
SUSPENSION DIVISION
A DIVISION OF EATON CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
8. EMPLOYEE BENEFIT PLANS (CONTINUED)
Solely for the purposes of these financial statements, Suspension's
U.S. salaried employees are considered to have participated in a
multi-employer postretirement benefit plan. Suspension charged $128 to
expense for the year ended December 31, 1997, related to its
participation in this plan.
In addition to the aforementioned defined benefit plans, Suspension
also sponsors several defined benefit postretirement plans covering
substantially all Canadian salaried and hourly employees. These plans
provide health care and life insurance benefits for eligible retirees
and are noncontributory. Provisions of the benefit plans for hourly
employees are subject to collective bargaining agreements. Both
Canadian salaried and hourly postretirement medical benefits are
supplements to Canadian government sponsored benefits. Suspension's
postretirement health care and life insurance plans are unfunded.
The following table presents the Canadian salaried and hourly employee
funded status reconciled with amounts recognized in Suspension's
December 31, 1997 combined balance sheet.
<TABLE>
<S> <C>
Accumulated postretirement benefit obligations
Retirees $ 1,449
Full eligible active plan participants 1,240
Non-eligible plan participants 2,339
--------
Accumulated postretirement benefit obligation 5,028
Unrecognized prior service cost (2,673)
Unrecognized gain 5
--------
Accrued postretirement medical benefit obligation $ 2,360
========
</TABLE>
Net periodic postretirement benefit cost for 1997 included the
following components:
<TABLE>
<S> <C>
Service cost benefits earned during the period $ 143
Amortization of prior service cost 155
Interest cost on the accumulated postretirement
benefit obligation 258
--------
Net periodic postretirement benefit cost $ 556
========
</TABLE>
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.0%. The weighted average annual
assumed rate of increase in the per capita cost of covered benefits
(i.e., healthcare cost trend rate) is 10.0% in 1998 trending to 5.0% in
2003. The healthcare cost trend rate assumption has a significant
effect on the amounts reported. For example, increasing the assumed
healthcare cost trend rates by one percentage point in each year would
increase the accumulated postretirement benefit obligation as of
December 31, 1997 by approximately $905 and net periodic postretirement
benefit cost for the period from January 1, 1997 to December 31, 1997
by approximately $147.
F-85
<PAGE> 190
SUSPENSION DIVISION
A DIVISION OF EATON CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
9. INCOME TAXES
The provision for income taxes comprises:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
<S> <C>
Income (loss) before taxes on income:
United States $ (3,916)
Canada 5,999
--------
$ 2,083
========
Taxes (benefit) on income:
United States $ (1,332)
Canada 2,159
--------
$ 827
========
Taxes (benefit) on income consist of:
Current
United States $ (1,417)
Canada 1,728
--------
$ 311
========
Deferred
United States $ 85
Canada 431
--------
$ 516
========
</TABLE>
The principal items accounting for the difference in taxes on income
computed at the U.S. statutory rate and as recorded on an overall basis
are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
<S> <C>
Statutory U.S. federal income tax rate 35.0%
----
Taxes on foreign earnings over
U.S. tax rate 2.9
Effect of U.S. graduated rates 1.8
----
39.7%
====
</TABLE>
The temporary differences which give rise to deferred tax assets and
(liabilities) are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1997
<S> <C>
Deferred tax assets
Postretirement benefits $ 849
Environmental reserve 560
Other 215
--------
Gross deferred tax assets 1,624
--------
Deferred tax liabilities
Property, plant and equipment (1,966)
Pension benefits (1,717)
--------
Gross deferred tax liabilities (3,683)
--------
Net deferred tax liability $ (2,059)
========
</TABLE>
F-86
<PAGE> 191
SUSPENSION DIVISION
A DIVISION OF EATON CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
10. INTERCOMPANY TRANSACTIONS AND ALLOCATIONS
CASH MANAGEMENT
Suspension utilizes Eaton's centralized cash management services. Under
this arrangement, Suspension's accounts receivable are collected and
its cash disbursements are funded by Eaton on a daily basis. Net
activity between Eaton and Suspension is reflected in Eaton's
investment in Suspension.
CORPORATE SERVICES
Eaton allocates costs associated with certain corporate overhead,
including executive salaries, risk management, sales and marketing,
human resources, corporate finance and accounting, treasury and public
affairs to its divisions through a corporate assessment charge which is
allocated based on operating capital which consists primarily of
current assets, capital assets and current liabilities. Charges from
Eaton for such costs aggregated $1,563 for the year ended December 31,
1997 and are included in selling, general and administrative expenses
in the accompanying combined statement of operations.
Eaton charges its divisions interest expense based on Eaton's overall
debt structure as well as the net cash used or provided by the
divisions. Interest charges from Eaton aggregated $1,015 for the year
ended December 31, 1997.
Eaton provides various information systems assistance, employee payroll
processing, accounts receivable processing, accounts payable
processing, payment processing and fixed asset processing. These costs
are allocated to Suspension based on certain criteria, including
invoices or checks processed, headcount, fixed asset line items
maintained, predetermined rates or on actual services provided. Charges
from Eaton for such costs aggregated $423 for the year ended December
31, 1997 and are included in selling, general and administrative
expenses in the accompanying combined statement of operations.
Eaton manages employee medical, dental, life insurance, pension,
postretirement and postemployment benefits on a consolidated basis.
Eaton charges Suspension for its share of such employee-related costs
based upon Suspension's estimated experience or headcount, depending on
the nature of the cost. Charges for such costs are disclosed in the
related footnotes herein with the exception of self insured medical
charges for U.S. employees which aggregated $454 in 1997.
Eaton provides certain research and development and manufacturing
technology services to its divisions. Eaton allocates these costs based
on hours applicable to the respective division. Charges from Eaton to
Suspension for such services aggregated $1,369 for the year ended
December 31, 1997. Of this amount, $271 is included in selling, general
and administrative and $1,098 is included in cost of goods sold in the
accompanying statement of operations.
Suspension shares certain facilities with other Eaton divisions. Eaton
allocates rent expense to Suspension based on square footage occupied.
These charges aggregated $150 in 1997.
Management believes that the methods utilized to allocate costs to
Suspension, as discussed above, are reasonable. However, the terms of
transactions between Eaton and Suspension, including allocated costs,
may differ from those that would result from transactions with
unrelated parties.
INTERCOMPANY PURCHASES
Suspension purchased approximately $471 of inventory from Eaton Japan,
a related party. This inventory is used in the leaf spring
manufacturing process from which the related products are sold to a
Japanese transplant.
F-87
<PAGE> 192
SUSPENSION DIVISION
A DIVISION OF EATON CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
10. INTERCOMPANY TRANSACTIONS AND ALLOCATIONS (CONTINUED)
EATON INVESTMENT
The Eaton investment balance represents the cumulative transaction
adjustment, cumulative intercompany activity from transactions, cost
allocations, cash management and other charges and credits, between
Suspension and Eaton (and its other business units). A summary of
changes in Eaton investment follows.
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED
ENDED DECEMBER 31,
MARCH 31, 1998 1997
(UNAUDITED)
<S> <C> <C>
Beginning Eaton investment $ 40,322 $ 42,090
Net (loss) income (363) 1,256
Intercompany activity 2,292 (3,024)
------------ ------------
Ending Eaton investment $ 42,251 $ 40,322
============ ============
</TABLE>
11. LEASE COMMITMENTS
Suspension leases certain buildings and equipment under operating lease
agreements. Future minimum lease payments under operating leases having
initial or remaining noncancellable lease terms in excess of one year
are as follows for the year ended December 31:
<TABLE>
<S> <C>
1998 $ 284
1999 117
2000 58
2001 53
------
$ 512
======
</TABLE>
Rent expense for the year ended December 31, 1997 was $476.
12. COMMITMENTS AND CONTINGENCIES
ENVIRONMENTAL
Suspension is subject to federal, state and local regulations which
govern environmental matters. Suspension has recorded amounts
aggregating $1,557 which, in management's best estimate, will be
sufficient to provide for anticipated costs of known environmental
matters, which consist primarily of remediation requirements at
Suspension's Canadian facilities.
The effect of resolution of environmental matters on results of
operations cannot be predicted due to the uncertainty concerning both
the amount and timing of future expenditures and future results of
operations. However, management believes, on the basis of
presently-available information, that resolution of these matters will
not materially affect the financial condition of Suspension.
13. GEOGRAPHIC AREAS - FINANCIAL DATA
<TABLE>
<CAPTION>
United
States Canada Total
<S> <C> <C> <C> <C>
Net sales 1997 $ 15,941 $109,835 $125,776
Net income (loss) 1997 (2,584) 3,840 1,256
Assets 1997 14,536 43,105 57,641
Liabilities 1997 2,625 14,694 17,319
</TABLE>
F-88
<PAGE> 193
SUSPENSION DIVISION
A DIVISION OF EATON CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
13. GEOGRAPHIC AREAS - FINANCIAL DATA (CONTINUED)
Sales between geographic areas approximate market and are not
significant. Suspension corporate office income, expenses, assets and
liabilities are included in the United States column.
14. SUBSEQUENT EVENTS
On April 1, 1998, Eaton sold substantially all of the net assets of
Suspension to Oxford Automotive, Inc. The accompanying financial
statements do not give effect to this transaction.
F-89
<PAGE> 194
INDEPENDENT AUDITORS REPORT
We have audited the accompanying consolidated balance sheets of COFIMETA S.A.
("the Company") and its subsidiaries as at September 30, 1998 and December 31,
1997 and the related statements of income, and cash flows for each of the two
years in the period ended December 31, 1997 and for the nine month period ended
September 1998 which have been prepared in accordance with accounting principles
generally accepted in France. These financial statements are the responsibility
of the Company's management. Our responsibility is to express our opinion on
these financial statements based on our audits.
We conducted our audit in accordance with the professional standards generally
accepted in France, which are substantially similar to generally accepted
auditing standards in the United States. Those standards required that we plan
and perform our audit to obtain reasonable assurance that the financial
statements are free from 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 in the preparation of the financial statements, as
well as evaluating their overall presentation. We believe that our audit
provides a reasonable basis for our opinion.
As described in Note 1 to the consolidated financial statements, the financial
statements related to the years ended December 31, 1997 and 1996 have been
extracted from the consolidated financial statements of GROUPE VALFOND and
GROUPE ARBEL, respectively which were the shareholders of the Company as at the
respective dates.
The accounting principles followed by GROUPE VALFOND differ in certain material
respects to those previously applied by GROUPE ARBEL and the impact of the
changes has been recorded as a credit to Group reserves in the Shareholders'
equity and described in Note 6 to the consolidated financial statements prepared
for the year ended December 31, 1997.
In our opinion, the accompanying consolidated financial statements present
fairly, in all material respects, the financial position of COFIMETA S.A. and
its subsidiaries as at September 30, 1998 and December 31, 1997 and the results
of their operations and their cash flows for each of the two years in the period
December 31, 1997 and for the nine month period ended September 30, 1998, in
conformity with accounting principles generally accepted in France.
Accounting principles generally accepted in France vary in certain material
respects from accounting principles generally accepted in the United States. The
application of the latter would have affected the determination of the
consolidated net income for the nine months period ended September 30, 1998 and
the year ended December 31, 1997 and the determination of the consolidated
Shareholders' equity and consolidated financial position as at September 30,
1998 and December 31, 1997 to the extent summarized in Note 17 to the
consolidated financial statements.
Paris, March 31, 1999
COOPERS & LYBRAND AUDIT
Guy-Alain Sitbon
Partner
F-90
<PAGE> 195
COFIMETA SA
CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1998
CONSOLIDATED ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
IN THOUSAND FRENCH FRANCS NOTES GROSS AMORT. & NET
DEPRECIATION
<S> <C> <C> <C> <C>
FIXED ASSETS
- - Intangible assets 2 8,239.4 7,837.2 402.2
- - Tangible assets 2 608,636.3 454,238.5 154,397.8
- - Financial assets 2 6,768.1 867.8 5,900.3
-- ----------- ----------- -----------
TOTAL 623,643.8 462,943.5 160,700.3
-- ----------- ----------- -----------
CURRENT ASSETS
- - Inventories 3 125,448.3 16,556.8 108,891.5
- - Payments on account on orders -- 3,587.0 3,587.0
- - Trade accounts receivable and related 4 165,542.4 4,585.4 160,957.0
accounts
- - Other debtors 5 280,859.7 3,181.9 277,677.8
- - Cash and banks -- 48,586.5 1,039.1 47,547.4
- - Deferred charges -- 2,607.2 2,607.2
-- ----------- ----------- -----------
TOTAL 626,631.1 25,363.2 601,267.9
-- ----------- ----------- -----------
- - Realizable exchange losses -- 0.8 0.8
-- ----------- ----------- -----------
TOTAL 1,250,275.7 488,306.7 761,969.0
-- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
IN THOUSAND FRENCH FRANCS GROSS AMORT. & NET
DEPRECIATION
<S> <C> <C> <C>
FIXED ASSETS
- - Intangible assets 8,095.2 7,591.4 503.8
- - Tangible assets 591,857.4 421,365.0 170,492.4
- - Financial assets 6,638.0 871.0 5,767.0
------------ ---------- ----------
TOTAL 606,590.6 429,827.4 176,763.2
------------ ---------- ----------
CURRENT ASSETS
- - Inventories 124,147.0 16,691.4 107,455.6
- - Payments on account on orders 2,335.4 2,335.4
- - Trade accounts receivable
and related accounts 216,182.0 5,124.0 211,058.0
- - Other debtors 203,629.0 2,893.0 200,736.0
- - Cash and banks 84,684.9 1,539.0 83,145.9
- - Deferred charges 1,616.9 1,616.9
------------ ---------- ----------
TOTAL 632,595.2 26,247.4 606,347.8
------------ ---------- ----------
- - Realizable exchange losses 14.0 14.0
------------ ---------- ----------
TOTAL 1,239,199.8 456,074.8 783,125.0
------------ ---------- ----------
</TABLE>
F-91
<PAGE> 196
COFIMETA SA
CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1998
CONSOLIDATED LIABILITIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IN THOUSAND FRENCH FRANCS NOTES SEPTEMBER 30, 1998 DECEMBER 31, 1997
<S> <C> <C> <C>
EQUITY
- - Share capital 6 25,113.3 25,113.3
- - Premiums on share issues 6 66,800.9 66,800.9
- - Reserves 6 80.0 80.0
- - Consolidated Group reserves 6 2,954.3 74,182.8
- - Losses carried forward 6 (116,911.1) (48,856.2)
- - Group net income 6 10,447.4 (139,283.4)
--- ----------- -----------
TOTAL (11,515.2) (21,962.6)
--- ----------- -----------
Minority interests 6 (3.3) (3.9)
--- ----------- -----------
PROVISIONS
- - Provisions for liabilities 7 76,686.6 83,117.1
- - Provisions for charges 7 2,835.1 4,643.7
- - Provisions for deferred taxes --
----------- -----------
TOTAL 79,521.7 87,760.8
--- ----------- -----------
LIABILITIES
- - Financial liabilities 8 2,989.6 3,910.4
- - Trade accounts payable and related accounts - 155,924.4 110,607.6
- - Tax and social liabilities -- 74,323.7 68,745.7
- - Other liabilities 9 460,294.7 534,067.0
- - Deferred income -- 433.4
--- ----------- -----------
TOTAL 693,965.8 717,330.7
--- ----------- -----------
- - Realizable exchange losses --
--- ----------- -----------
TOTAL LIABILITIES 761,969.0 783,125.0
--- ----------- -----------
</TABLE>
F-92
<PAGE> 197
COFIMETA SA
CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1998
CONSOLIDATED INCOME STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
IN THOUSAND FRENCH FRANCS NOTES SEPTEMBER 30, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996
<S> <C> <C> <C> <C>
- - Net sales 10 945,069.9 1,219,552.0 1,044,918.0
- - Change in work in progress and finished goods
inventories -- (4,665.1) (61,639.0) 41,882.0
- - Own work capitalized -- 110.0 389.0 3,038.0
- - Other income 11 16,319.2 40,569.0 8,762.0
-------------- -------------- --------------
TOTAL OPERATING INCOME 956,834.0 1,198,871.0 1,098,600.0
-------------- -------------- --------------
- - Consumption of raw materials and supplies -- 481,163.7 563,885.0 532,228.0
- - External services -- 170,513.1 231,350.0 207,003.0
- - Taxes, levies and similar payments -- 22,974.5 29,140.0 28,492.0
- - Personnel costs -- 222,905.5 335,950.0 336,442.0
- - Depreciation and provisions -- 44,139.0 65,828.0 79,422.0
- - Other charges -- 1,189.2 4,938.0 10,995.0
TOTAL OPERATING CHARGES 942,885.0 1,231,091.0 1,194,582.0
-------------- -------------- --------------
OPERATING INCOME/(LOSS) 13,949.0 (32,220.0) (95,982.0)
-------------- -------------- --------------
- - Financial income 12 5,332.5 7,057.0 2,876.0
- - Financial charges 12 9,561.7 18,965.0 17,093.0
FINANCIAL INCOME/(LOSS) (4,229.2) (11,908.0) (14,217.0)
-------------- -------------- --------------
EARNINGS FROM OPERATIONS BEFORE INCOME TAX 9,719.8 (44,128.0) (110,199.0)
-------------- -------------- --------------
- - Extraordinary income 13 44,652.1 4,102.0 15,233.0
- - Extraordinary charges 13 43,400.3 99,205.0 32,576.0
EXTRAORDINARY INCOME/(LOSS) 1,251.8 (95,103.0) (17,343.0)
-------------- -------------- --------------
- - Employee profit share --
- - Income tax -- 523.6 75.0 509.0
---
NET INCOME/(LOSS) 14 10,448.0 (139,306.0) (128,051.0)
GROUP NET INCOME/(LOSS) 10,447.4 (139,283.4) (128,036.0)
-------------- -------------- --------------
Minority interest net income/(loss) 0.6 (22.6) (15.0)
-------------- -------------- --------------
</TABLE>
F-93
<PAGE> 198
COFIMETA SA
CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1998
CONSOLIDATED CASH FLOW STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES SEPTEMBER 30, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996
<S> <C> <C> <C>
NET INCOME 10,448.0 (139,306.0) (128,051.0)
Elimination of charges and income with no effect on cash or
non operating:
- Depreciation and amortization expense 35,704.7 50,592.0 51,302.0
- Current assets depreciation 7,509.8 10,110.0 --
- Provision for risks 27,801.8 87,543.0 --
- Reversals and transfers of charges (41,692.1) (28,876.5) --
- Sales/write off of fixed assets (383.7) (348.3) (1,812.0)
Working capital :
(Increase)/decrease in inventory (1,301.7) 59,154.0 (27,554.0)
(Increase)/decrease in trade accounts receivable 50,639.6 15,496.0 46,481.0
(Increase)/decrease in other debtors (78,482.6) (110,932.4) --
(Increase)/decrease in deferred charges (991.2) 159.1 910.0
Increase/(decrease) in trade accounts payable 45,315.6 (205,911.4) 49,380.0
Increase/(decrease) in other creditors (68,195.8) 385,589.5 5,044.0
Increase/(decrease) in deferred income 433.4 (244.0) 244.0
TOTAL CASH FLOWS FROM OPERATING ACTIVITIES (13,194.3) 123,025.0 (4,056.0)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of fixed assets (22,215.7) (11,020.6) (62,865.0)
Purchases of intangible assets (144.2) (264.9)
Sales of fixed assets 568.0 1,822.9 2,357.0
TOTAL CASH FLOWS FROM INVESTING ACTIVITIES (21,791.9) (9,462.6) (60,508.0)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of dividends
Increase in financial assets (192.0) 4,816.0 5,641.0
Increase in medium-term debt 480.0 1,214.8 1,026.0
Reimbursement of medium-term debt (47,857.0)
Increase of capital 34,999.8
TOTAL CASH FLOWS FROM FINANCING ACTIVITIES 288.0 41,030.6 (41,190.0)
----------- ----------- -----------
TOTAL CASH FLOWS (34,698.2) 154,593.0 (105,754.0)
----------- ----------- -----------
Cash balance - beginning 81,990.0 (72,603.0) 33,151.0
Cash balance - ending 47,291.8 81,990.0 (72,603.0)
FLUCTUATIONS (34,698.2) 154,593.0 (105,754.0)
----------- ----------- -----------
</TABLE>
F-94
<PAGE> 199
COFIMETA SA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
NOTE 1 The consolidated financial statements have been prepared using the full
consolidation method and include all the subsidiaries of Cofimeta SA.
SUBSIDIARIES
The following subsidiaries have been included:
<TABLE>
<CAPTION>
% SHAREHOLDING
--------------
<S> <C>
Aubry SA 99.9
Ecrim SA 99.9
Somenor SA 99.9
Socori Technologies SA 99.9
</TABLE>
CLOSING DATE OF THE ACCOUNTS
All the subsidiaries have their normal year-end as of December 31.
However, as part of the current changes taking place at the level of
COFIMETA shareholding, the attached consolidated financial statements
have been prepared at an interim date which covers the nine month
period ended September 30, 1998 using the same methods and principles
of their normal year-end.
It is intended that the financial statements will continue to be
prepared for their usual December 31 year-end.
CONTINUATION PLAN
The COFIMETA Group was declared under a legal continuation plan as at
January 29, 1997. The legal observation period ended on June 26, 1997
with the judgement allowing the companies to continue their business
under certain obligations.
The accounts payable shown under "Continuation Plan Liabilities" for
each company are those accounts payable which have been formally
admitted to be part of the company's liabilities. The first installment
payment took place on June 26, 1998 for an amount of 18.5 million FF
including the specific requirements which have been accepted by the
Court.
The reimbursement of the "Continuation Plan Liabilities" will be made
in accordance with the following timetable:
<TABLE>
<CAPTION>
YEAR 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Option 1 1.2% 1.2% 3.32% 6.40% 12.56% 12.56% 12.56% 16.73% 16.73% 16.73%
Option 2 1.2% 1.2% 3.32% 6.40% 12.56% 12.56% 12.56% 16.73% 16.73% 16.73%
Refusals 0.50% 0.50% 1.20% 3.20% 12.56% 12.56% 12.56% 18.97% 18.97% 18.97%
</TABLE>
ACCOUNTING PRINCIPLES AND EVALUATION METHODS
The consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in France.
Under French law, COFIMETA is exempted from the preparation of
consolidated financial statements provided that the accounts of the
company and its subsidiaries ("the COFIMETA Group") are themselves
included in the consolidated financial statements of the company
holding the shares of COFIMETA or in those of the ultimate owner.
As at December 31, 1996 and for the year then ended, the COFIMETA Group
accounts were included in those of Groupe ARBEL, a company incorporated
in France and of which Coopers & Lybrand Audit were the co-statutory
auditors together with Cabinet Constantin.
On December 30, 1997, Groupe VALFOND acquired 80.1% of the COFIMETA
shares.
As at December 31, 1997, the Groupe VALFOND included in its
consolidated accounts the consolidated Balance Sheet of the COFIMETA
Group. The consolidated accounts of Groupe VALFOND are audited by
Calan, Ramolino et Associes and ATC-SOFIRAC.
F-95
<PAGE> 200
COFIMETA SA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1998
- -------------------------------------------------------------------------------
NOTE 1 (CONTINUED)
Groupe VALFOND accounting principles differ in certain material
respects from those of Groupe ARBEL and the consolidated balance sheet
as at December 31, 1997 as well as the related statement of income for
the year ended at that date have been prepared in accordance with the
accounting principles of Groupe VALFOND. The impact of the change has
been recorded as a credit to the Group reserves in the Shareholder's
equity and described in Note 6 to the consolidated financial
statements.
INTANGIBLE ASSETS
Purchased goodwill is stated at historical cost and is not depreciated.
Software costs are depreciated over 1 to 5 years under the
straight-line depreciation method.
TANGIBLE ASSETS
Tangible assets are stated at historical cost and are generally
depreciated using the straight-line depreciation method. The
accelerated method of depreciation has been utilized for certain fixed
assets when it better reflects the industrial usage of the fixed
assets.
The average rates of depreciation are :
- Buildings 20 years
- Light Buildings 10 years
- Fixtures and fittings 10 years
- Technical installations 8 to 10 years
- Industrial equipment and toolings 10 years
- Other tangible assets 3 to 10 years
INVENTORIES
Inventories are carried at the lower of average cost or market value.
Cost of goods purchased for resale and raw materials include the
purchase price and incidental expenses.
Cost of finished goods include production cost represented by raw
materials, direct and indirect charges (including depreciation costs of
the related fixed assets).
Financial costs are excluded from inventories.
Market value is represented either by the current market value or the
selling price after deduction of direct selling costs.
RECEIVABLES
Receivables are stated at nominal value. A provision is recorded when
book value is higher than net realizable value.
Factored receivables are presented as a reduction of trade accounts
receivable.
F-96
<PAGE> 201
COFIMETA SA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1998
- -------------------------------------------------------------------------------
NOTE 1 (CONTINUED)
PROVISIONS
An amount of 12 million FF was provided as of December 31, 1997 to
cover "warranties given to customers". This amount was directly debited
to retained earnings.
Potential risks on litigations with customers and suppliers are
provided for in the accounts.
Provisions related to litigations with employees are recorded when the
risk is known or when individual measures are anticipated.
Accounts receivable related to 1995, 1996 and 1997, for which full
documentation has not yet been completed have been provided for.
Provisions for restructuring include indemnities due to employees and
related costs, costs of cancellation of leases and write-down of fixed
assets related to those activities which are being restructured.
RETIREMENT INDEMNITIES
Retirement indemnities are not booked but disclosed and the evaluation
is based on an actuarial computation.
These indemnities are calculated in accordance with the projected unit
credit method, employee by employee, by applying probability mortality
rates as well as seniority at the date of retirement to the accumulated
rights as of September 30, 1998, with an actualisation rate (interest
rate less salary progression) of 3%.
LEASES
Fixed assets purchased under financial lease agreements have not been
capitalized.
TAXATION
The "Tax consolidation Group" as of September 30, 1998 only includes
COFIMETA, ECRIM and SOCORI Technologies.
Because of the magnitude of net loss carry forwards, no income tax has
been booked except for the compulsory lump-sum taxes paid by the
companies.
Addresses of the legal entities part of Group COFIMETA are the
following :
COFIMETA SA
68, rue de Villiers
92300 Levallois-Perret
tel. 01 40 89 69 00
SIREN 334.924.677
AUBRY SA
Avenue Jean Jaures
18400 St Florent sur Cher
tel. 02 48 23 70 50
SIREN 572.175.701
F-97
<PAGE> 202
COFIMETA SA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
NOTE 1 (CONTINUED)
ECRIM SA
Chemin de Chambrais
La Vespiere
14290 Orbec
tel. 02 31 48 47 46
SIREN 300.759.412
SOMENOR SA
194, boulevard Faidherbe
59500 Douai
tel. 03 27 93 39 39
SIREN 337.853.337
SOCORI TECHNOLOGIES SA
515, avenue Roland Garros
78530 Buc
Tel. 01 39 24 13 30
SIREN 340.086.339
F-98
<PAGE> 203
COFIMETA SA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
NOTE 2 FIXED ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
GROSS BOOK GROSS BOOK NET BOOK
INTANGIBLE ASSETS VALUE AS OF VALUE AS OF VALUE AS OF
IN THOUSAND FRENCH FRANCS JAN 1, 1998 ACQUISITIONS SEPT 30, 1998 AMORTIZ. SEPT 30, 1998
------------------------- ----------- ------------ ------------- --------- -------------
<S> <C> <C> <C> <C> <C>
- - Concessions, patents, licences 5,241.7 124.4 5,366.1 4,986.7 379.4
- - Goodwill 743.8 743.8 743.8
- - Others 2,109.7 19.8 2,129.5 2,106.7 22.8
--------- ------- --------- -------- -------
TOTAL 8,095.2 144.2 8,239.4 7,837.2 402.2
--------- ------- --------- -------- -------
</TABLE>
<TABLE>
GROSS BOOK GROSS BOOK NET BOOK
TANGIBLE ASSETS VALUE AS OF VALUE AS OF VALUE AS OF
IN THOUSAND FRENCH FRANCS JAN 1, 1998 ACQUISITIONS DISPOSALS SEPT 30, 1998 AMORTIZ. SEPT 30, 1998
------------------------- ----------- ------------ --------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
- - Land 12,281.7 326.0 12,607.7 3,449.3 9,158.4
- - Buildings 99,911.5 512.2 240.0 100,183.7 74,173.2 26,010.5
- - Plant and machinery, tools and
equipment 450,454.6 18,374.2 155.5 468,673.3 356,861.3 111,812.0
- - Other tangible assets 24,635.3 708.8 690.8 24,653.3 19,754.7 4,898.6
- - Assets in course of construction 4,280.9 2,294.5 4,280.9 2,294.5 2,294.5
- - Payments on account 293.4 69.6 223.8 223.8
----------- ---------- --------- ------------ ---------- -----------
TOTAL 591,857.4 22,215.7 5,436.8 608,636.3 454,238.5 154,397.8
----------- ---------- --------- ------------ ---------- -----------
</TABLE>
<TABLE>
<CAPTION>
GROSS BOOK GROSS BOOK NET BOOK
FINANCIAL ASSETS VALUE AS OF VALUE AS OF VALUE AS OF
IN THOUSAND FRENCH FRANCS JAN 1, 1998 ACQUISITIONS DISPOSALS SEPT 30, 1998 DEPRECIATION SEPT 30, 1998
------------------------- ------------ ------------ --------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
- - Other investments held as
fixed assets 631.4 631.4 602.8 28.6
- - Loans 5,021.7 13.7 5,008.0 5,008.0
- - Other financial assets 984.9 192.0 48.2 1,128.7 265.0 863.7
--------- --------- --------- ---------- --------- ----------
TOTAL 6,638.0 192.0 61.9 6,768.1 867.8 5,900.3
--------- --------- --------- ---------- --------- ----------
</TABLE>
F-99
<PAGE> 204
COFIMETA SA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1998
- -------------------------------------------------------------------------------
NOTE 2 FIXED ASSETS (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1997
GROSS BOOK GROSS BOOK NET BOOK
INTANGIBLE ASSETS VALUE AS OF VALUE AS OF VALUE AS OF
IN THOUSAND FRENCH FRANCS JAN 1, 1997 ACQUISITIONS DISPOSALS DEC 31, 1997 AMORTIZ. DEC 31, 1997
------------------------- ----------- ------------ --------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C>
- - Concessions, patents, licences 4,997.3 251.9 7.5 5,241.7 4,802.1 439.6
- - Goodwill 743.8 743.8 743.8
- - Others 2,096.7 13.0 2,109.7 2,045.5 64.2
--------- -------- ------- --------- --------- --------
TOTAL 7,837.8 264.9 7.5 8,095.2 7,591.4 503.8
--------- -------- ------- --------- --------- --------
</TABLE>
<TABLE>
<CAPTION>
GROSS BOOK GROSS BOOK NET BOOK
TANGIBLE ASSETS VALUE AS OF VALUE AS OF VALUE AS OF
IN THOUSAND FRENCH FRANCS JAN 1, 1997 ACQUISITIONS DISPOSALS DEC 31, 1997 AMORTIZ. DEC 31, 1997
------------------------- ----------- ------------ --------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C>
- - Land 12,501.7 220.0 12,281.7 3,316.8 8,964.9
- - Buildings 99,537.4 1,161.1 787.0 99,911.5 70,094.5 29,817.0
- - Plant and machinery, tools and
equipment 430,967.9 23,898.6 4,411.9 450,454.6 328,340.6 122,114.0
- - Other tangible assets 24,020.1 2,019.2 1,404.0 24,635.3 19,613.1 5,022.2
- - Assets in course of construction 25,136.1 4,425.4 25,280.6 4,280.9 4,280.9
- - Payments on account 293.4 (0.0) 293.4 293.4
---------- ---------- ---------- ---------- ----------- -----------
TOTAL 592,163.2 31,797.7 32,103.5 591,857.4 421,365.0 170,492.4
---------- ---------- ---------- ---------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
GROSS BOOK GROSS BOOK NET BOOK
FINANCIAL ASSETS VALUE AS OF VALUE AS OF VALUE AS OF
IN THOUSAND FRENCH FRANCS JAN 1, 1997 ACQUISITIONS DISPOSALS DEC 31, 1997 AMORTIZ. DEC 31, 1997
------------------------- ----------- ------------ --------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C>
- - Other investments held as
fixed assets 630.3 1.7 0.6 631.4 606.0 25.4
- - Loans 4,859.0 201.3 38.6 5,021.7 5,021.7
- - Other financial assets 985.0 365.0 365.1 984.9 265.0 719.9
---------- --------- ---------- ---------- ---------- -----------
TOTAL 6,474.3 568.0 404.3 6,638.0 871.0 5,767.0
---------- --------- ---------- ---------- ---------- -----------
</TABLE>
F-100
<PAGE> 205
COFIMETA SA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
NOTE 3 INVENTORIES
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
OPENING GROSS CHANGE CLOSING
INVENTORIES NET BOOK IN INVENTORY NET BOOK
IN THOUSAND FRENCH FRANCS VALUE INVENTORY RESERVE VALUE
------------------------- --------- ------------ --------- ---------
<S> <C> <C> <C> <C>
- - Raw materials 46,758.7 5,966.9 424.4 52,301.2
- - Work in progress 29,334.6 (4,650.5) 99.2 24,584.9
- - Semi-processed and finished goods 31,362.3 (14.7) (657.8) 32,005.4
----------- ---------- ---------- ------------
TOTAL 107,455.6 1,301.7 (134.2) 108,891.5
----------- ---------- ---------- ------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
OPENING GROSS CHANGE CLOSING
INVENTORIES NET BOOK IN INVENTORY NET BOOK
IN THOUSAND FRENCH FRANCS VALUE INVENTORY RESERVE VALUE
------------------------- --------- ------------ --------- ---------
<S> <C> <C> <C> <C>
- - Raw materials 44,847.0 2,485.7 574.0 46,758.7
- - Work in progress 67,674.0 (51,863.4) (13,524.0) 29,334.6
- - Semi-processed and finished goods 36,268.0 (9,776.7) (4,871.0) 31,362.3
----------- ---------- ---------- ------------
TOTAL 148,789.0 (59,154.4) (17,821.0) 107,455.6
----------- ---------- ---------- ------------
</TABLE>
NOTE 4 TRADE ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
OPENING CLOSING
TRADE ACCOUNTS RECEIVABLE NET BOOK CHANGE IN BAD DEBT NET BOOK
IN THOUSAND FRENCH FRANCS VALUE GROSS VALUE RESERVE VALUE
------------------------- ------------ ----------- --------- ------------
<S> <C> <C> <C> <C>
- - Trade accounts receivable 211,058.0 (50,639.6) (538.6) 160,957.0
------------ ----------- --------- ------------
TOTAL 211,058.0 (50,639.6) (538.6) 160,957.0
------------ ----------- --------- ------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
OPENING CLOSING
TRADE ACCOUNTS RECEIVABLE NET BOOK CHANGE IN BAD DEBT NET BOOK
IN THOUSAND FRENCH FRANCS VALUE GROSS VALUE RESERVE VALUE
------------------------- ------------ ----------- --------- ------------
<S> <C> <C> <C> <C>
- - Trade accounts receivable 227,812.0 (15,497.0) 1,257.0 211,058.0
------------ ----------- ----------- ------------
TOTAL 227,812.0 (15,497.0) 1,257.0 211,058.0
------------ ----------- ----------- ------------
</TABLE>
F-101
<PAGE> 206
COFIMETA SA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
NOTE 5 OTHER DEBTORS
<TABLE>
<CAPTION>
DESIGNATION AMOUNT AMOUNT
IN THOUSAND FRENCH FRANCS SEPTEMBER 30, 1998 DECEMBER 31, 1997
------------------------- ------------------ -----------------
<S> <C> <C>
- - Social accounts receivable 763.6 2,470.4
- - Tax accounts receivable 43,642.8 51,804.2
- - Fixed asset accounts receivable 800.0 800.0
- - Amounts due on sale of receivables (1) 166,867.0 64,304.2
- - Supplier prepayments 20,308.8 13,036.9
- - Other debtors 45,295.6 68,320.3
------------ ------------
TOTAL 277,677.8 200,736.0
------------ ------------
</TABLE>
(1) Represents retention amounts for factored receivables and amounts
factored but not financed under the "Daily" law.
NOTE 6 NET EQUITY CHANGES
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1998
PRIOR YEAR-END NET INCOME FOR
DESIGNATION OPENING INCOME 9 MONTHS ENDED CLOSING
IN THOUSAND FRENCH FRANCS BALANCE ALLOCATION SEPT 30, 1998 BALANCE
------------------------- -------- ---------- ------------- -------
<S> <C> <C> <C> <C>
Share capital 25,113.3 25,113.3
Premiums on share issues 66,800.9 66,800.9
Legal reserves 72.2 72.2
Regimented reserves 7.8 7.8
Group reserves 74,182.8 (71,228.5) 2,954.3
Losses carried forward (48,856.2) (68,054.9) (116,911.1)
Group net income (139,283.4) 139,283.4 10,447.4 10,447.4
------------ ---------- ----------- ------------
TOTAL SHAREHOLDER'S EQUITY (21,962.6) (0.0) 10,447.4 (11,515.2)
------------ ---------- ----------- ------------
</TABLE>
F-102
<PAGE> 207
COFIMETA SA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
NOTE 6 NET EQUITY CHANGES (CONTINUED)
AS OF SEPTEMBER 30, 1998 (CONTINUED)
<TABLE>
<CAPTION>
PRIOR YEAR-END NET INCOME FOR
DESIGNATION OPENING INCOME 9 MONTHS ENDED CLOSING
IN THOUSAND FRENCH FRANCS BALANCE ALLOCATION SEPT 30, 1998 BALANCE
------------------------- ------- -------------- --------------- -------
<S> <C> <C> <C> <C>
Minority interest reserves 18.7 (22.6) (3.9)
Minority interest income/(loss) (22.6) 22.6 0.6 0.6
-------- ------- ------ -------
TOTAL MINORITY INTEREST (3.9) 0.0 0.6 (3.3)
-------- ------- ------ -------
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
PRIOR YEAR-END NET INCOME FOR
DESIGNATION OPENING CAPITAL INCOME OTHERS 12 MONTHS ENDED CLOSING
IN THOUSAND FRENCH FRANCS BALANCE CHANGES ALLOCATION CHANGES(1) DEC 31, 1997 BALANCE
------------------------- ------- ------- --------------- ----------- --------------- -------
<S> <C> <C> <C> <C> <C> <C>
Share capital 5,909.0 19,204.3 25,113.3
Premiums on share issues 63,005.4 15,795.5 (12,000.0) 66,800.9
Legal reserves 72.2 72.2
Regimented reserves 7.8 7.8
Group reserves 152,213.2 (89,906.6) 11,876.2 74,182.8
Losses carried forward (10,727.3) (38,128.9) (48,856.2)
Group net income (128,035.5) 128,035.5 (139,283.4) (139,283.4)
------------- ----------- ----------- ----------- ------------- -----------
TOTAL SHAREHOLDER'S EQUITY 82,444.8 34,999.8 0.0 (123.8) (139,283.4) (21,962.6)
------------- ----------- ----------- ---------- ------------- -----------
</TABLE>
<TABLE>
<CAPTION>
PRIOR YEAR-END NET INCOME FOR
DESIGNATION OPENING CAPITAL INCOME OTHERS 12 MONTHS ENDED CLOSING
IN THOUSAND FRENCH FRANCS BALANCE CHANGES ALLOCATION CHANGES DEC 31, 1997 BALANCE
------------------------- ------- ------- --------------- ----------- --------------- -------
<S> <C> <C> <C> <C> <C> <C>
Minority interest reserves 157.0 (15.0) (123.3) 18.7
Minority interest income/(loss) (15.0) 15.0 (22.6) (22.6)
------------- ----------- ----------- ---------- ------------- -----------
TOTAL MINORITY INTEREST 142.0 0.0 0.0 (123.3) (22.6) (3.9)
------------- ----------- ----------- ---------- ------------- -----------
</TABLE>
F-103
<PAGE> 208
COFIMETA SA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1998
- -------------------------------------------------------------------------------
NOTE 6 NET EQUITY CHANGES (CONTINUED)
(1) As at December 1997, the accounting principles applied by Groupe
Valfond differred from those previously applied by Groupe Arbel. The
impact of the changes which has been recorded as an adjustment to
shareholder's equity is summarized as follows:
<TABLE>
<CAPTION>
THOUSANDS OF FF
---------------
<S> <C>
Change from accelerated method of depreciation to straight-line method
on certain fixed assets 6,394
Groupe VALFOND policy is to maintain as an asset the long-terms loans
to employees previously expensed 4,654
Groupe VALFOND policy is not to capitalize leases which was the
policy previously adopted (133)
Groupe VALFOND did not record the impact of a
negative goodwill which arose at Groupe ARBEL level 1,073
Other (112)
--------
TOTAL 11,876
</TABLE>
NOTE 7 PROVISIONS FOR LIABILITIES AND CHARGES
AS OF SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
DESIGNATION OPENING CLOSING
IN THOUSAND FRENCH FRANCS BALANCE ADDITIONS REVERSALS BALANCE
------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
POVISIONS FOR LIABILITIES
Risks and disputes 15,653.0 15,122.2 9,519.9 21,255.3
Customer warranty 12,000.0 12,000.0
Restructuring provisions 55,019.0 4,909.0 16,868.7 43,059.3
Major maintenance expenses 252.1 252.1
Other 445.1 24.0 349.2 119.9
------------ ------------ ------------ ------------
SUB-TOTAL 83,117.1 20,307.3 26,737.8 76,686.6
------------ ------------ ------------ ------------
PROVISIONS FOR CHARGES
Risks and disputes 680.0 110.0 570.0
Restructuring provisions 1,282.1 350.0 642.1 990.0
Other 2,681.6 1,406.5 1,275.1
------------ ------------ ------------ ------------
SUB-TOTAL 4,643.7 350.0 2,158.6 2,835.1
------------ ------------ ------------ ------------
TOTAL 87,760.8 20,657.3 28,896.4 79,521.7
------------ ------------ ------------ ------------
</TABLE>
F-104
<PAGE> 209
COFIMETA SA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
NOTE 7 PROVISIONS FOR LIABILITIES AND CHARGES (CONTINUED)
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
DESIGNATION OPENING CLOSING
IN THOUSAND FRENCH FRANCS BALANCE ADDITIONS REVERSALS BALANCE
------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
PROVISIONS FOR LIABILITIES
Risks and disputes 5,192.0 12,323.1 1,862.1 15,653.0
Customer warranty 12,000.0 12,000.0
Restructuring provisions 1,750.0 53,719.0 450.0 55,019.0
Major maintenance expenses
Other 30.2 414.9 445.1
------------ ------------ ------------ ------------
SUB-TOTAL 6,972.2 78,457.0 2,312.1 83,117.1
------------ ------------ ------------ ------------
PROVISIONS FOR CHARGES
Risks and disputes 550.0 130.0 680.0
Restructuring provisions 1,282.1 1,282.1
Other 309.4 2,421.9 49.7 2,681.6
------------ ------------ ------------ ------------
SUB-TOTAL 859.4 3,834.0 49.7 4,643.7
------------ ------------ ------------ ------------
TOTAL 7,831.6 82,291.0 2,361.8 87,760.8
------------ ------------ ------------ ------------
</TABLE>
NOTE 8 FINANCIAL LIABILITIES
AS OF SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
TERM BANK BANK
IN THOUSAND FRENCH FRANCS OVERDRAFTS LOANS GROUP OTHER TOTAL
------------------------- ---------- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
- - Less than one year 1,294.8 1,214.8 2,509.6
- - Between one and five years 120.0 120.0
- - Over five years 360.0 360.0
---------- ---------- ---------
TOTAL 1,294.8 1,694.8 2,989.6
---------- ---------- ---------
</TABLE>
F-105
<PAGE> 210
COFIMETA SA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
NOTE 8 FINANCIAL LIABILITIES (CONTINUED)
<TABLE>
<CAPTION>
LESSORS Legal Initial Remaining Remaining Future
IN THOUSAND FRENCH FRANCS Entity Amount Capital Duration Interest
------------------------- ------ ------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Cicobail Aubry 12,626.1 8,207.0 19.5 semesters 1,827.9
Sovac Aubry 109.7 40.9 6 quarters 2.9
Bail Materiel Socori 1,580.0 669.9 21 months 48.3
---------- --------- --------
TOTAL 14,315.8 8,917.8 1,879.1
---------- --------- --------
</TABLE>
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
TERM BANK BANK
IN THOUSAND FRENCH FRANCS OVERDRAFTS LOANS GROUP OTHER TOTAL
------------------------- ---------- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
- - Less than one year 2,695.6 1,214.8 3,910.4
- - Between one and five years
- - Over five years
--------- --------- --------
TOTAL 2,695.6 1,214.8 3,910.4
--------- --------- --------
</TABLE>
<TABLE>
<CAPTION>
LESSORS Legal Initial Remaining Remaining Future
IN THOUSAND FRENCH FRANCS Entity Amount Capital Duration Interest
------------------------- ------ ------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Cicobail Aubry 12,626.1 9,048.6 21.5 semesters 2,211.4
Sovac Aubry 109.7 61.4 9 quarters 4.4
Bail Materiel Socori 1,580.0 900.2 30 months 92.0
---------- --------- --------
TOTAL 14,315.8 10,010.2 2,307.8
---------- --------- --------
</TABLE>
F-106
<PAGE> 211
COFIMETA SA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1998
- -------------------------------------------------------------------------------
NOTE 9 OTHER LIABILITIES
<TABLE>
<CAPTION>
DESIGNATION MONTANT MONTANT
IN THOUSAND FRENCH FRANCS AU 30/09/1998 AU831/12/1997
- -------------------------------------------------------------
<S> <C> <C>
- - Customer prepayments 12,018.1 59,156.3
- - Continuation plan liabilities 386,768.6
- - Other liabilities 61,508.0 474,910.7
----------- -----------
TOTAL 460,294.7 534,067.0
----------- -----------
</TABLE>
See Note 1 for a definition of these liabilities and their
reimbursement terms.
The "Continuation Plan Liabilities" do not take into account the
subsequent modifications of these liabilities after September 30, 1998.
As of December 31, 1998, "Continuation Plan Liabilities" amount to
371,278.2 thousand French Francs.
NOTE 10 SALES
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1998
----------------------------------------------------------------------------------
CONSOLIDATED
SALES BY ENTITY TOTAL SALES GROUP SALES SALES
IN THOUSAND FRENCH FRANCS 1 2 1-2
------------------------- --------------- --------------- ---------------
<S> <C> <C> <C>
- - COFIMETA 39,995.1 39,580.1 415.0
- - AUBRY 214,147.2 4,317.0 209,830.2
- - ECRIM 242,279.4 29,760.6 212,518.8
- - SOMENOR 534,049.8 21,136.3 512,913.5
- - SOCORI 10,997.7 1,605.3 9,392.4
--------------- --------------- ---------------
TOTAL 1,041,469.2 96,399.3 945,069.9
--------------- --------------- ---------------
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED SALES BY NATURE
AS OF SEPTEMBER 30, 1998
----------------------------------------------------------------------------------------------------
SALES OF
SALES BY NATURE GOODS FOR PRODUCTION
IN THOUSAND FRENCH FRANCS RESALE SOLD SERVICES TOTAL
------------------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
- - COFIMETA 415.0 415.0
- - AUBRY 209,333.9 496.3 209,830.2
- - ECRIM 7,908.6 204,590.0 20.2 212,518.8
- - SOMENOR 511,907.8 1,005.7 512,913.7
- - SOCORI 9,392.4 9,392.4
--------------- --------------- --------------- ---------------
TOTAL 8,323.6 925,831.7 10,914.6 945,069.9
--------------- --------------- --------------- ---------------
</TABLE>
F-107
<PAGE> 212
COFIMETA SA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
NOTE 10 SALES (CONTINUED)
<TABLE>
<CAPTION>
CONSOLIDATED SALES BY ZONE
AS OF SEPTEMBER 30, 1998
- -------------------------------------------------------------------------- ---------------
SALES BY GEOGRAPHICAL ZONE
IN THOUSANDS FRENCH FRANCS FRANCE EU OTHERS TOTAL
- ---------------------------
<S> <C> <C> <C> <C>
- - COFIMETA 415.0 415.0
- - AUBRY 188,773.5 21,056.7 209,830.2
- - ECRIM 164,295.7 39,509.4 8,713.7 212,518.8
- - SOMENOR 490,319.9 13,909.8 8,683.8 512,913.5
- - SOCORI 9,392.4 9,392.4
---------- -------- -------- ---------
TOTAL 853, 916.5 74,475.9 17,397.5 945,069.9
---------- -------- -------- ---------
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
- ----------------------------------------------------------------------------------
CONSOLIDATED
SALES BY ENTITY TOTAL SALES GROUP SALES SALES
IN THOUSANDS FRENCH FRANCS 1 2 1-2
- -------------------------- ----------- --------- -----------
<S> <C> <C> <C>
- - COFIMETA 21,922.5 20,191.1 1,731.4
- - AUBRY 310,958.0 5,567.9 305,390.1
- - ECRIM 313,997.6 18,287.1 295,710.5
- - SOMENOR 677,572.4 81,023.7 596,548.7
- - SOCORI 22,117.2 1,945.9 20,171.3
----------- --------- -----------
TOTAL 1,346,567.7 127,015.7 1,219,552.0
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED SALES BY NATURE
AS OF DECEMBER 31, 1997
SALES OF
SALES BY NATURE GOODS FOR PRODUCTION
IN THOUSANDS FRENCH FRANCS RESALE SOLD SERVICES TOTAL
--------------------------- --------- ---------- -------- ----------
<S> <C> <C> <C> <C>
- - COFIMETA 514.6 1,216.8 1,731.4
- - AUBRY 305,225.5 164.6 305,390.1
- - ECRIM 43,045.9 251,974.9 689.7 295,710.5
- - SOMENOR 596,390.3 158.4 596,548.7
- - SOCORI 20,171.3 20,171.3
--------- ----------- -------- -----------
TOTAL 43,560.5 1,153,590.7 22,400.8 1,219,552.0
--------- ----------- -------- -----------
</TABLE>
F-108
<PAGE> 213
COFIMETA SA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1998
- -------------------------------------------------------------------------------
NOTE 10 SALES (CONTINUED)
CONSOLIDATED SALES BY ZONES
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
-------------------------------------------------------------------------------------------------
SALES BY GEOGRAPHICAL ZONE
IN THOUSANDS FRENCH FRANCS FRANCE EU OTHERS TOTAL
-------------------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
- - COFIMETA 1,731.4 1,731.4
- - AUBRY 271,536.8 32,412.4 1,440.9 305,390.1
- - ECRIM 239,522.1 46,661.2 9,527.2 295,710.5
- - SOMENOR 580,963.9 8,369.4 7,215.4 596,548.7
- - SOCORI 20,171.3 20,171.3
--------------- --------------- --------------- ---------------
TOTAL 1,113,925.5 87,443.0 18,183.5 1,219,552.0
--------------- --------------- --------------- ---------------
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996
----------------------------------------------------------------------------------
CONSOLIDATED
SALES BY ENTITY TOTAL SALES GROUP SALES SALES
IN THOUSANDS FRENCH FRANCS 1 2 1-2
--------------- --------------- ---------------
<S> <C> <C> <C>
- - COFIMETA 36,393.7 29,867.7 6,526.0
- - AUBRY 207,885.5 4,321.5 203,564.0
- - ECRIM 265,428.5 8,098.5 257,330.0
- - SOMENOR 613,844.8 58,194.8 555,650.0
- - SOCORI 31,563.7 9,715.7 21,848.0
--------------- --------------- ---------------
TOTAL 1,155,116.2 110,198.2 1,044,918.0
--------------- --------------- ---------------
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED SALES BY NATURE
AS OF DECEMBER 31, 1996
-----------------------------------------------------------------------------------------------------
SALES OF
SALES BY NATURE GOODS FOR PRODUCTION
IN THOUSANDS FRENCH FRANCS RESALE SOLD SERVICES TOTAL
-------------------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
- - COFIMETA 2,785.9 3,740.1 6,526.0
- - AUBRY 201,873.8 1,690.2 203,564.0
- - ECRIM 42,838.7 213,754.2 737.1 257,330.0
- - SOMENOR 554,149.2 1,500.8 555,650.0
- - SOCORI 343.0 21,505.0 21,848.0
--------------- --------------- --------------- ---------------
TOTAL 45,967.6 969,777.2 29,173.2 1,044,918.0
--------------- --------------- --------------- ---------------
</TABLE>
F-109
<PAGE> 214
COFIMETA SA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
NOTE 10 SALES (CONTINUED)
<TABLE>
<CAPTION>
CONSOLIDATED SALES BY ZONE
AS OF DECEMBER 31, 1996
-----------------------------------------------------------------------------------
SALES BY ZONE
IN THOUSANDS FRENCH FRANCS FRANCE OTHERS TOTAL
-------------------------- --------------- --------------- ---------------
<S> <C> <C> <C>
- - COFIMETA 5,711.8 814.2 6,526.0
- - AUBRY 170,062.5 33,501.5 203,564.0
- - ECRIM 207,565.8 49,764.2 257,330.0
- - SOMENOR 532,446.1 23,203.9 555,650.0
- - SOCORI 21,814.6 33.4 21,848.0
--------------- --------------- ---------------
TOTAL 937,600.8 107,317.2 1,044,918.0
--------------- --------------- ---------------
</TABLE>
<TABLE>
<CAPTION>
NOTE 11 OTHER INCOME
DESIGNATION AMOUNT AMOUNT AMOUNT
IN THOUSAND FRENCH FRANCS SEPTEMBER 30, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- - Operating subsidies 163.5 279.0 1,139.0
- - Reversals of reserves and transfer of charges(1) 11,971.8 38,473.0 7,568.0
- - Other income 4,183.9 1,817.0 55.0
--------------- --------------- ---------------
TOTAL OTHER INCOME 16,319.2 40,569.0 8,762.0
--------------- --------------- ---------------
</TABLE>
(1) Mainly comprises reversals of inventory reserves and bad debt
allowances.
F-110
<PAGE> 215
COFIMETA SA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1998
- -------------------------------------------------------------------------------
NOTE 12 BREAKDOWN OF FINANCIAL INCOME/(LOSS)
<TABLE>
<CAPTION>
DESIGNATION AMOUNT AMOUNT AMOUNT
IN THOUSAND FRENCH FRANCS SEPTEMBER 30, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996
- ------------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C>
- - Short term investments 250.8 450.0 3.0
- - Other interest income and related income 5,058.1 5,842.0 1,527.0
- - Reversal of depreciation and transfer of charges 6.0 657.0
- - Currency exchange gains 17.6 108.0 1,346.0
TOTAL FINANCIAL INCOME 5,332.5 7,057.0 2,876.0
--------------- --------------- --------------
- - Increase in depreciation and transfer of charges 295.0 987.0
- - Interest expense and related charges 9,515.5 18,172.0 16,071.0
- - Currency exchange losses 46.2 498.0 35.0
TOTAL FINANCIAL CHARGES 9,561.7 18,965.0 17,093.0
--------------- --------------- --------------
FINANCIAL INCOME/(LOSS) (4,229.2) (11,908.0) (14,217.0)
--------------- --------------- --------------
</TABLE>
F-111
<PAGE> 216
COFIMETA SA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
NOTE 13 BREAKDOWN OF EXTRAORDINARY INCOME/(LOSS)
<TABLE>
<CAPTION>
DESIGNATION AMOUNT AMOUNT AMOUNT
IN THOUSAND FRENCH FRANCS SEPTEMBER 30, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996
- ------------------------- ------------------- ------------------- --------------------
<S> <C> <C> <C>
Extraordinary income from operating transactions 14,250.1 1,700.0 7,745.0
Extraordinary income from capital transactions 693.2 1,902.0 2,460.0
Reversal of extraordinary provisions and depreciation 29,708.8 500.0 5,028.0
---------------- ---------------- ----------------
TOTAL EXTRAORDINARY INCOME 44,652.1 4,102.0 15,233.0
---------------- ---------------- ----------------
Extraordinary charges from operating transactions 17,216.2 27,602.0 20,122.0
Extraordinary charges from capital transactions 960.5 1,481.0 5,132.0
Additions to extraordinary provisions and depreciation 25,223.6 70,122.0 7,322.0
---------------- ---------------- ----------------
TOTAL EXTRAORDINARY CHARGES 43,400.3 99,205.0 32,576.0
---------------- ---------------- ----------------
EXTRAORDINARY INCOME / (LOSS) 1,251.8 (95,103.0) (17,343.0)
---------------- ---------------- ----------------
</TABLE>
Extraordinary income mainly includes :
- utilization of provisions for restructuring
- utilization of provisions for customer and supplier litigations
- supplier accounts which have not been claimed under the Continuation
Plan and are no longer considered as valid claims.
- insurance indemnities.
Extraordinary charges mainly include :
- restructuring costs (mainly employee costs)
- legal fees in connection with the Continuation Plan
- provisions for depreciation of old accounts receivable
F-112
<PAGE> 217
COFIMETA SA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
NOTE 14 NET INCOME
The contribution of each legal entity to the consolidated net income is
as follows :
<TABLE>
<CAPTION>
LEGAL ENTITIES NET INCOME/(LOSS) NET INCOME/(LOSS) NET INCOME/(LOSS)
IN THOUSAND FRENCH FRANCS SEPTEMBER 30, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996
- ------------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C>
- - COFIMETA 6,547.4 (40,315.5) (1,386.0)
- - AUBRY 1,645.8 (5,709.2) (40,395.0)
- - ECRIM 98.4 3,207.6 (3,103.0)
- - SOMENOR 4,148.1 (68,628.7) (74,976.0)
- - SOCORI (1,991.7) (27,860.2) (8,191.0)
----------------- ---------------- ----------------
CONSOLIDATED NET INCOME 10,448.0 (139,306.0) (128,051.0)
----------------- ---------------- ----------------
</TABLE>
F-113
<PAGE> 218
COFIMETA SA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
NOTE 15 HEADCOUNT
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1998
DEFINED
TERM TOTAL
CATEGORIES MANAGERS EMPLOYEES WORKERS CONTRACTS REGISTERED INTERIM
---------- -------- --------- ------- --------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
- - COFIMETA 26 5 2 33
- - AUBRY 12 63 253 328 64
- - ECRIM 10 59 237 18 324 56
- - SOMENOR 25 109 574 708 43
- - SOCORI 11 31 1 43 1
---- ---- -------- ----- ------ ------
TOTAL HEADCOUNT 84 267 1,064 21 1,436 164
---- ---- -------- ----- ------ ------
AS OF DECEMBER 31, 1997 106 264 1,035 8 1,413 45
---- ---- -------- ----- ------ ------
</TABLE>
No compensation is given to members of the management board.
NOTE 16 EXISTING AMOUNTS RECEIVABLE AND PAYABLE BETWEEN COFIMETA AND GROUPS
ARBEL AND VALFOND
As of September 30, 1998 the amounts receivable from Group ARBEL are as
follows:
- ARBEL INDUSTRIE 43,210 thousand FF,
- Other ARBEL affiliates 4,775 thousand FF.
As of February 3rd, 1999, the amounts are as follows :
- ARBEL INDUSTRIE 43,832 thousand FF,
- Other ARBEL affiliates 2,115 thousand FF.
Accounts payable to Group VALFOND amount to :
- As of September 30, 1998 53,498 thousand FF,
- As of February 3rd, 1999 52,966 thousand FF.
Those accounts receivable and payable will be paid or compensated at
the date of closing which will take place on February 5th, 1999.
F-114
<PAGE> 219
COFIMETA SA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1998
- -------------------------------------------------------------------------------
NOTE 17 DIFFERENCES BETWEEN GENERALLY ACCEPTED PRINCIPLES IN FRANCE AND IN THE
UNITED STATES
Differences between generally accepted accounting principles in France
and in the United States.
The consolidated financial statements of COFIMETA S.A. and its
subsidiaries have been prepared in accordance with French accounting
principles which differ in certain material respects from generally
accepted accounting principles in the United States. The principal
differences as they relate to the consolidated net income and the
consolidated equity of COFIMETA and its subsidiaries are summarized
below :
Reconciliation of net income to US GAAP
<TABLE>
<CAPTION>
NINE MONTHS PERIOD
ENDED SEPTEMBER 30, YEAR ENDED
IN THOUSANDS OF FRF 1998 DECEMBER 31, 1997
------------------ -----------------
<S> <C> <C>
Net income (loss) as reported 10,447 (139,283)
1. Provisions for restructuring
recorded in the year-ended 31
December 1997 (2,700) 37,052
2. Provisions for restructuring
recorded in the nine-month period
ended 30 September 1998 3,878
3. Mark-to-market adjustment on
Investment Funds shares 247
--------------- ---------------
Net income (loss) as adjusted for
US GAAP 11,872 (102,231)
--------------- ---------------
</TABLE>
1 In 1997, provisions for restructuring reserves have been recorded
under French GAAP, however since they do not meet the EITF 94-3
criteria, they are not allowed under US GAAP.
During the nine-month period ended September 30, 1998, an amount of
KFF 2, 700 has been taken back into income under French GAAP and
therefore should be deducted from the net income for US GAAP
purposes.
2 Additional provisions for restructuring have been recorded as at
September 30, 1998 for an amount of KFF 3,878 which do not meet the
EITF 94-3 criteria and therefore are not allowed under US GAAP.
3 A potential gain of KFF 247 on Investments Funds shares could not be
recorded under French GAAP but should be recorded in income
following the mark-to-market rule under US GAAP.
Reconciliation of Shareholder's equity to US GAAP
<TABLE>
<CAPTION>
IN THOUSANDS OF FRF SEPTEMBER 30, 1998 DECEMBER 31, 1997
------------------- -------------------- --------------------
<S> <C> <C>
Shareholder's equity as reported (21,963) 117,321
1. Retirement indemnities (15,772) (15,772)
2. Adjustments to equity (11,876) (11,876)
-------------------- --------------------
Shareholder's equity as adjusted for
US GAAP (49,611) 89,673
-------------------- --------------------
</TABLE>
F-115
<PAGE> 220
COFIMETA SA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1998
- -------------------------------------------------------------------------------
1 Retirement liabilities are disclosed in the footnotes but not
recorded as permitted by French GAAP ; under US GAAP, they must be
recorded.
2 As described in Note 1, Groupe VALFOND acquired Groupe COFIMETA in
December 30, 1997. As permitted by French GAAP, Groupe VALFOND did
not allocate the purchase price to the fair values of assets
acquired and liabilities assumed. VALFOND carried over the
historical net book values of assets and liabilities of COFIMETA and
recorded a cumulative adjustment for KF 11,876. The difference of KF
52,520 between the purchase price of COFIMETA and the net book value
of net assets acquired was recorded as Goodwill in the financial
statements of VALFOND. It was not pushed down to COFIMETA.
Under US GAAP, the purchase price should be allocated to the fair
values of the assets acquired and liabilities assumed, and such
cumulative effects adjustments would not be permitted. The excess
purchase price would therefore generally result in the step up of
certain assets, with the residual amount recorded as goodwill.
Also, in general the purchase price of a company should be pushed
down (reflected) in its separate financial statements if at least
95% of its shares have been acquired by another company. Such
pushdown accounting is not permitted if less than 80% of its shares
have been purchased. If between 80% and 95% of its shares have been
purchased, pushdown accounting is optional.
Had this excess purchase price been pushed down to COFIMETA and so
allocated to certain assets and goodwill with an average estimated
remaining useful life of 20 years, under US GAAP there would be an
additional annual charge for depreciation and amortization of
approximately KF 2,600 (9 months : 1,950). If this entire excess
purchase price were considered to be Goodwill with a 40 years life
the additional annual amortization charge would be approximately KF
1,300 (9 months : 975).
NOTE 18 CONTINGENT LIABILITIES (EXCEPT FOR CAPITAL LEASES)
<TABLE>
<CAPTION>
DESIGNATION AMOUNT AMOUNT
IN THOUSAND FRENCH FRANCS SEPTEMBER 30, 1998 DECEMBER 31, 1997
- ------------------------- -------------------- --------------------
<S> <C> <C>
- - Retirement indemnities 15,771.6 15,771.6
- - Discounted notes not yet matured 18,915.8 --
---------------- ----------------
TOTAL 34,687.4 15,771.6
---------------- ----------------
</TABLE>
NOTE 19 POST BALANCE SHEETS EVENTS
As at 5th February 1999, OXFORD AUTOMOTIVE has acquired 100% of the
shares of COFIMETA S.A. As part of closing of this transaction, the
accounts receivable and payable between COFIMETA, Groupe VALFOND and
Groupe ARBEL have been settled. The shareholders should also agree to
change the year-end of the Company to 31st March.
F-116
<PAGE> 221
WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS. YOU MUST NOT RELY ON ANY UNAUTHORIZED INFORMATION. THIS PROSPECTUS
DOES NOT OFFER TO SELL OR BUY ANY SECURITIES IN ANY JURISDICTION WHERE IT IS
UNLAWFUL. THIS PROSPECTUS IS CURRENT AS OF MAY 7, 1999.
---------------
TABLE OF CONTENTS
PAGE
----
[S] [C]
Available Information........................................................i
Summary......................................................................1
Risk Factors................................................................14
Use of Proceeds.............................................................21
Capitalization..............................................................22
Pro Forma Combined Financial Data...........................................23
Selected Consolidated Historical
Financial Data...........................................................34
Management's Discussion and Analysis of
Financial Condition and Results of
Operations...............................................................37
The Exchange Offer..........................................................42
Business....................................................................48
Management..................................................................60
Principal Shareholders......................................................64
Certain Transactions........................................................66
Description of Certain Indebtedness and
Preferred Stock..........................................................66
Description of the Notes....................................................69
Certain Federal Income Tax Considerations...................................99
Plan of Distribution.......................................................101
Legal Matters..............................................................102
Experts....................................................................102
Index to Consolidated Financial Statements.................................F-1
$200,000,000
OXFORD AUTOMOTIVE, INC.
OXFORD
AUTOMOTIVE
LOGO
10 1/8% SENIOR SUBORDINATED
NOTES DUE 2007, SERIES D
PROSPECTUS
OFFER TO EXCHANGE
10 1/8% SENIOR SUBORDINATED
NOTES DUE 2007
DATED MAY 7, 1999
