<PAGE> 1
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: 1-11592
HAYES LEMMERZ INTERNATIONAL, INC.
(FORMERLY KNOWN AS HAYES WHEELS INTERNATIONAL, INC.)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
13-3384636
(IRS EMPLOYER IDENTIFICATION NO.)
38481 HURON RIVER DRIVE
ROMULUS, MICHIGAN 48174
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)(ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (313) 941-2000
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES [X] NO [ ]
THE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AS OF DECEMBER 12, 1997
WAS 30,108,145 SHARES.
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<PAGE> 2
HAYES LEMMERZ INTERNATIONAL, INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Statements of Operations....................... 3
Consolidated Balance Sheets................................. 4
Consolidated Statements of Cash Flows....................... 5
Notes to Consolidated Financial Statements.................. 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................... 16
Item 2. Changes in Securities....................................... 16
Item 3. Defaults upon Senior Securities............................. 17
Item 4. Submission of Matters to a Vote of Security-Holders......... 17
Item 5. Other Information........................................... 18
Item 6. Exhibits and Reports on Form 8-K............................ 18
Signatures............................................................. 19
</TABLE>
UNLESS OTHERWISE INDICATED REFERENCES TO THE "COMPANY" MEAN HAYES LEMMERZ
INTERNATIONAL, INC. AND ITS SUBSIDIARIES AND REFERENCE TO A FISCAL YEAR MEANS
THE COMPANY'S YEAR ENDED JANUARY 31 OF THE FOLLOWING YEAR (E.G., FISCAL 1997
MEANS THE PERIOD BEGINNING FEBRUARY 1, 1997, AND ENDING JANUARY 31, 1998). THIS
REPORT CONTAINS FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995 WITH RESPECT TO THE FINANCIAL
CONDITION, RESULTS OF OPERATIONS AND BUSINESS OF THE COMPANY. THESE FORWARD
LOOKING STATEMENTS INVOLVE CERTAIN RISKS AND UNCERTAINTIES. NO ASSURANCE CAN BE
GIVEN THAT ANY OF SUCH MATTERS WILL BE REALIZED. FACTORS THAT MAY CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD LOOKING
STATEMENTS INCLUDE, AMONG OTHERS, THE FOLLOWING POSSIBILITIES: (1) COMPETITIVE
PRESSURE IN THE COMPANY'S INDUSTRY INCREASES SIGNIFICANTLY; (2) GENERAL ECONOMIC
CONDITIONS ARE LESS FAVORABLE THAN EXPECTED; (3) THE COMPANY'S DEPENDENCE ON THE
AUTOMOTIVE INDUSTRY (WHICH HAS HISTORICALLY BEEN CYCLICAL); (4) CHANGES IN THE
FINANCIAL MARKETS AFFECTING THE COMPANY'S FINANCIAL STRUCTURE AND THE COMPANY'S
COST OF CAPITAL AND BORROWED MONEY; AND (5) THE UNCERTAINTIES INHERENT IN
INTERNATIONAL OPERATIONS AND FOREIGN CURRENCY FLUCTUATIONS. THE COMPANY HAS NO
DUTY UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 TO UPDATE THE
FORWARD LOOKING STATEMENTS IN THIS QUARTERLY REPORT ON FORM 10-Q AND THE COMPANY
DOES NOT INTEND TO PROVIDE SUCH UPDATES.
2
<PAGE> 3
HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(MILLIONS OF DOLLARS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
OCTOBER 31, OCTOBER 31,
------------------ ------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales............................................... $ 369.8 $ 234.4 $ 897.9 $ 555.8
Cost of goods sold...................................... 305.0 198.5 748.3 486.3
------- ------- ------- -------
Gross profit.......................................... 64.8 35.9 149.6 69.5
Marketing, general and administration................... 15.1 7.3 36.5 20.7
Engineering and product development..................... 3.2 2.0 8.1 5.6
Amortization of intangibles............................. 3.5 2.3 8.6 4.8
Other income............................................ (0.8) (1.8) (2.6) (3.4)
Equity in (income) loss of unconsolidated
subsidiaries.......................................... (0.6) -- (0.6) 3.2
Nonrecurring charges.................................... -- -- -- 6.4
------- ------- ------- -------
Earnings from operations.............................. 44.4 26.1 99.6 32.2
Interest expense, net................................... 25.7 18.3 65.9 30.4
------- ------- ------- -------
Income before taxes on income, minority interest and
extraordinary items................................ 18.7 7.8 33.7 1.8
Income tax provision.................................... 7.8 3.1 14.2 0.5
------- ------- ------- -------
Income before minority interest and extraordinary
items.............................................. 10.9 4.7 19.5 1.3
Minority interest....................................... -- -- 0.1 --
------- ------- ------- -------
Income before extraordinary items..................... 10.9 4.7 19.4 1.3
Extraordinary items-bond defeasance, net of tax of
$4.9.................................................. -- -- -- (7.4)
------- ------- ------- -------
Net income (loss)..................................... $ 10.9 $ 4.7 $ 19.4 $ (6.1)
======= ======= ======= =======
Per share information:
Income before extraordinary items....................... $ 0.34 $ 0.21 $ 0.72 $ 0.05
Extraordinary items, net of tax......................... -- -- -- (0.25)
------- ------- ------- -------
Net income (loss)..................................... $ 0.34 $ 0.21 $ 0.72 $ (0.20)
======= ======= ======= =======
Weighted average shares outstanding (in thousands)...... 31,691 22,390 26,803 29,493
======= ======= ======= =======
Dividends declared per share............................ $ -- $ -- $ -- $ 0.015
======= ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
OCTOBER 31, JANUARY 31,
1997 1997
----------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents................................. $ 108.1 $ 47.5
Receivables (less allowance of $5.2 million and $2.2
million at October 31, 1997 and January 31, 1997)...... 224.6 145.2
Inventory (Note 2)........................................ 133.9 82.9
Prepaid expenses and other................................ 11.5 13.9
-------- --------
Total current assets................................. 478.1 289.5
-------- --------
Property, plant and equipment:
Land...................................................... 35.6 20.1
Buildings................................................. 163.9 98.0
Machinery and equipment................................... 692.4 515.2
-------- --------
891.9 633.3
Accumulated depreciation.................................. (185.2) (146.9)
-------- --------
Net property, plant and equipment...................... 706.7 486.4
Goodwill and other assets................................... 722.1 407.2
-------- --------
Total assets........................................... $1,906.9 $1,183.1
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
-------------------------------------------------
Current liabilities:
Bank borrowings........................................... $ 21.5 $ 5.6
Current portion of long-term debt......................... 29.7 23.9
Accounts payable and accrued liabilities.................. 336.6 244.8
-------- --------
Total current liabilities.............................. 387.8 274.3
Noncurrent liabilities:
Long-term debt............................................ 998.8 686.3
Deferred income taxes..................................... 2.9 --
Pension and other long-term liabilities................... 352.4 255.3
Minority interest......................................... 5.0 8.3
-------- --------
Total noncurrent liabilities........................... 1,359.1 949.9
Commitments and Contingencies (Note 4)
Stockholders' equity (deficit):
Common stock, par value $0.01 per share:
Voting -- authorized 99,000,000 shares; and outstanding
29,959,119............................................ 0.3 0.2
Nonvoting -- authorized 5,000,000; and outstanding,
149,026............................................... -- --
Additional paid in capital................................ 230.1 43.6
Accumulated deficit....................................... (62.7) (82.2)
Cumulative translation adjustment......................... (5.5) (0.5)
Pension liability adjustment.............................. (2.2) (2.2)
-------- --------
Total stockholders' equity (deficit)................... 160.0 (41.1)
-------- --------
Total liabilities and stockholders' equity (deficit)........ $1,906.9 $1,183.1
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(MILLIONS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
OCTOBER 31,
------------------
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)........................................... $ 19.4 $ (6.1)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation.............................................. 37.5 26.2
Amortization of intangibles and debt issue costs.......... 14.1 7.6
Decrease in deferred taxes................................ (2.4) (11.5)
Asset writedown........................................... -- 11.9
Nonrecurring charges...................................... -- 6.4
Equity in (income) losses of subsidiaries................. (0.6) 3.2
Extraordinary loss........................................ -- 12.3
Changes in operating assets and liabilities:
Increase in receivables................................ (24.6) (3.1)
(Increase) decrease in inventories..................... (2.6) 0.4
(Increase) decrease in prepaid expenses and other...... 4.4 (2.0)
Increase in accounts payable and accrued liabilities... 5.6 7.5
Decrease in other long-term liabilities................ (27.6) (23.5)
------- -------
Cash provided by operating activities.................. 23.2 29.3
------- -------
Cash flows from investing activities:
Acquisition of property, plant and equipment.............. (56.1) (51.4)
Purchase of business, net of cash received................ (197.5) --
Purchase of business...................................... (17.5) --
Purchase of minority interest............................. (13.0) --
Other, net................................................ (10.9) (6.6)
------- -------
Cash used for investing activities..................... (295.0) (58.0)
------- -------
Cash flows from financing activities:
Decrease in short-term bank borrowings.................... (17.7) (1.2)
Retirement of long term debt.............................. -- (106.4)
Retirement of acquired long term debt..................... -- (137.7)
Common stock repurchase................................... -- (506.1)
Proceeds from equity infusion, net of costs............... -- 185.4
Proceeds from issuance of long term debt.................. 500.0 673.5
Proceeds from equity offering, net of costs............... 77.9 --
Dividend paid to stockholders............................. -- (0.5)
Fees paid to issue long term debt......................... (17.0) (35.0)
Decrease in bank revolving & long-term loans.............. (211.9) (29.5)
------- -------
Cash provided by financing activities.................. 331.3 42.5
------- -------
Effect of exchange rate changes on cash and cash
equivalents............................................... 1.1 --
------- -------
Increase in cash and cash equivalents..................... 60.6 13.8
Cash and cash equivalents at beginning of year.............. 47.5 1.8
------- -------
Cash and cash equivalents at end of period.................. $ 108.1 $ 15.6
======= =======
Supplemental data:
Cash paid for interest.................................... $ 45.9 $ 18.0
Cash paid for income taxes................................ $ 10.9 $ 7.3
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED OCTOBER 31, 1997 AND 1996
(UNAUDITED)
(MILLIONS OF DOLLARS UNLESS OTHERWISE STATED)
(1) BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared by
management and in the opinion of management, contain all adjustments, consisting
of normal recurring adjustments, necessary to present fairly the financial
position of the Company as of October 31, 1997 and January 31, 1997, and the
results of its operations for the three and nine months ended October 31, 1997
and 1996 and cash flows for the nine months ended October 31, 1997 and 1996. The
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the fiscal year ended January 31, 1997. Results
for interim periods are not necessarily indicative of those to be expected for
the year.
(2) INVENTORIES
The major classes of inventory are as follows:
<TABLE>
<CAPTION>
OCTOBER 31, JANUARY 31,
1997 1997
----------- -----------
<S> <C> <C>
Raw materials............................................... $ 44.7 $32.0
Work-in-progress............................................ 34.5 21.1
Finished goods.............................................. 54.7 29.8
------ -----
Total.................................................. $133.9 $82.9
====== =====
</TABLE>
(3) ACQUISITIONS AND OTHER TRANSACTIONS
On June 30, 1997, the Company completed the acquisition of Lemmerz Holding
GmbH ("Lemmerz") in exchange for payment to the shareholders of Lemmerz of (i)
$200 million in cash and (ii) a total of five million shares of the Company's
Series A Convertible Participating Preferred Stock, par value $0.01 per share,
which, upon receipt of stockholder approval on October 22, 1997, automatically
converted into five million shares of the Company's common stock (the "Lemmerz
Acquisition"). As a result of the Lemmerz Acquisition, Lemmerz became a wholly
owned subsidiary of the Company. At the Company's annual shareholders meeting
held on October 22, 1997, the Company formally approved the change of its name
to Hayes Lemmerz International, Inc.
The Lemmerz Acquisition was accounted for by the purchase method of
accounting with the results of Lemmerz included from the acquisition date. The
fair value of the assets acquired, including goodwill, was $631.4 million and
liabilities assumed totaling $312.3 million. Goodwill and other intangibles of
$205.7 million are being amortized over a 40-year life on a straight-line basis.
In connection with the Lemmerz Acquisition, the Company entered into an
amended and restated credit agreement dated June 30, 1997 under which the
Company has $320.5 million in term loan facilities and up to $270 million in a
revolving credit facility. Additionally the Company issued and sold $400 million
9 1/8% senior subordinated notes due in 2007 (the "New Notes").
On July 2, 1996, the Company consummated a merger between MWC Holdings,
Inc. ("Holdings") and the Company, pursuant to which, among other things,
Holdings was merged with and into the Company, with the Company as the surviving
corporation (the "Motor Wheel Merger"). As a result of the Motor Wheel Merger,
Motor Wheel Corporation, a wholly owned subsidiary of Holdings ("Motor Wheel"),
became a wholly owned subsidiary of the Company.
6
<PAGE> 7
HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THREE AND NINE MONTHS ENDED OCTOBER 31, 1997 AND 1996
(UNAUDITED)
(MILLIONS OF DOLLARS UNLESS OTHERWISE STATED)
(3) ACQUISITIONS AND OTHER TRANSACTIONS -- (CONTINUED)
Immediately prior to the Motor Wheel Merger and as a part of the financing
thereof (the "Recapitalization"), the Company issued and sold to certain new
investors: (i) an aggregate of 200,000 shares of Preferred Stock, which upon
consummation of the Merger were converted into an aggregate of 12,500,000 share
of new common stock, and (ii) 300,000 warrants, in exchange for aggregate cash
consideration, net of related costs, of $185.4 million. The Company also issued
new long-term debt totaling $673.5 million which was utilized along with the
equity infusion to (i) to retire $106.4 million principal amount plus redemption
premium of the Company's 9 1/4% Senior Notes due 2002; (ii) retire all existing
senior debt of Motor Wheel at the time of the acquisition; and (iii) repurchase
31,633,200 shares of the Company's common stock.
The Company acquired Holdings for a total purchase price of approximately
$105.4 million which included (i) the issuance of 6,250,000 shares of new common
stock, and (ii) 2,300,000 warrants. The merger was accounted for under the
purchase method of accounting with the results of operations of Motor Wheel
included in the accompanying financial statements from the date of the Merger.
The fair value of the assets acquired, including goodwill, was $420.8 million
and liabilities assumed totaling $315.4 million. Goodwill and other intangibles
of $224.5 million are being amortized over a 40-year life on a straight-line
basis.
The following unaudited pro forma financial data illustrates the estimated
effects as if the Motor Wheel Merger and Recapitalization, and the Lemmerz
Acquisition and issuance of New Notes had been completed as of the beginning of
the periods presented, after including the impact of certain adjustments, such
as amortization, depreciation, interest expense and the related income tax
effects.
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
---------------- --------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales.................................................... $369.8 $342.1 $1,083.9 $1,029.4
Operating income (loss).................................. 44.4 35.1 115.0 63.5
Net income (loss)........................................ 10.9 5.6 22.1 (14.5)
Net income (loss) per share.............................. $ 0.37 $ 0.21 $ 0.87 $ (0.53)
</TABLE>
The pro forma results are not necessarily indicative of the actual results
as if the transactions had been in effect for the entire periods presented. In
addition, they are not intended to be a projection of future results and do not
reflect, among other things, any synergies that might have been achieved from
combined operations.
Effective August 26, 1997, the Company issued and sold to the public
2,566,925 shares of common stock at a price of $31.50 per share. The net
proceeds to the Company of such sale of shares were $29.925 per share after
giving effect to the underwriting discount and commissions, which proceeds were
used to repay existing indebtedness of the Company. Concurrently with the
Company's offering, certain stockholders of the Company sold 1,779,502 shares of
common stock at a price of $31.50 per share ($29.925 per share after giving
effect to the underwriting discount and commissions).
On August 28, 1997, the Company completed the acquisition of the assets of
Bosch Braking Systems Corporation's heavy-duty hub and drum and medium- and
heavy-duty steel wheel businesses.
(4) COMMITMENTS AND CONTINGENCIES
Management believes that at October 31, 1997, the Company was in compliance
with the various covenants under the agreements pursuant to which it has or may
borrow money. Management expects that the
7
<PAGE> 8
HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THREE AND NINE MONTHS ENDED OCTOBER 31, 1997 AND 1996
(UNAUDITED)
(MILLIONS OF DOLLARS UNLESS OTHERWISE STATED)
(4) COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
Company will remain in compliance with these covenants in all material respects
through the period ending October 31, 1998.
The Company is party to various litigation. Management believes that the
outcome of these lawsuits will not have a material adverse effect on the
consolidated operations or financial condition of the Company.
(5) NEW ACCOUNTING PRONOUNCEMENTS
Earnings per Share
During 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share", which changes the calculation of earnings per share to be more
consistent with countries outside of the United States. In general, the
statement requires two calculations of earnings per share to be disclosed, basic
EPS and diluted EPS. Basic EPS is to be computed using only the weighed average
shares outstanding, while diluted EPS is computed considering the dilution of
options and warrants. This statement will be adopted by the Company in its
January 31, 1998 consolidated financial statements with all prior, interim and
annual periods restated. Adoption of the statement will not have a material
impact on the Company's financial statements.
Comprehensive Income
During 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income", which establishes standards for the reporting and display of
comprehensive income. Comprehensive income is defined as all changes in a
Company's net assets except changes resulting from transactions with
shareholders. It differs from net income in that certain items currently
recorded to equity would be a part of comprehensive income. Comprehensive income
must be reported in a financial statement with the cumulative total presented as
a component of equity. This statement will be adopted by the Company in the
first quarter of 1998.
Segment Information
During 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information", which introduces a new model for segment
reporting based upon the way the board of directors or other key decision-makers
organize segments within the Company for making operating decisions and
assessing performance. The Statement requires disclosures for each segment that
are similar to those currently required, with the addition of quarterly
disclosure requirements and geographic data by country. This statement will be
adopted by the Company in fiscal 1998.
(6) GUARANTOR AND NONGUARANTOR FINANCIAL STATEMENTS
In connection with the Motor Wheel Merger and as part of the financing
thereof, the Company issued and sold $250 million in aggregate principal amount
of its 11% senior subordinated notes due 2006 (the "11% Notes") in a public
offering. The 11% Notes are general unsecured obligations of the Company,
subordinated in right of payment to all existing and future senior indebtedness
of the Company, and are guaranteed by certain of the Company's domestic
subsidiaries. The Company also retired $98.5 million principal amount of the
Company's 9 1/4% Senior Notes due 2002 and Motor Wheel redeemed all of its
11 1/2% Senior Notes due 2000 ($125 million principal amount) and repaid and
terminated its revolving credit facility.
8
<PAGE> 9
HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THREE AND NINE MONTHS ENDED OCTOBER 31, 1997 AND 1996
(UNAUDITED)
(MILLIONS OF DOLLARS UNLESS OTHERWISE STATED)
(6) GUARANTOR AND NONGUARANTOR FINANCIAL STATEMENTS -- (CONTINUED)
In connection with the Lemmerz Acquisition, the Company issued and sold the
New Notes in two offerings under Rule 144A of the Securities Act which closed
June 30, 1997 ($250 million in aggregate principal amount) and July 22, 1997
($150 million in aggregate principal amount). The New Notes are general
unsecured obligations of the Company, ranking pari passu with the 11% Notes and
are guaranteed by certain of the same domestic subsidiaries of the Company as
guaranteed the 11% Notes. The proceeds of the New Notes were used to pay the
cash portion of the Lemmerz Acquisition purchase price and to retire $200
million principal amount of existing term debt under the Amended Credit
Agreement.
The following condensed consolidating financial information presents:
(1) Condensed consolidating financial statements as of October 31,
1997 and January 31, 1997 and for the nine month periods ended October 31,
1997 and 1996, of (a) Hayes Wheels International, Inc., the parent, (b) the
guarantor subsidiaries, (c) the nonguarantor subsidiaries and (d) the
Company on a consolidated basis, and
(2) Elimination entries necessary to consolidate Hayes Wheels
International, Inc., the parent, with the guarantor and nonguarantor
subsidiaries.
Investments in foreign subsidiaries are accounted for by the parent on the
equity method (domestic subsidiaries are accounted for by the parent on the cost
method) for purposes of the consolidating presentation. The principle
elimination entries eliminate investments in subsidiaries and intercompany
balances and transactions.
9
<PAGE> 10
HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THREE AND NINE MONTHS ENDED OCTOBER 31, 1997 AND 1996
(UNAUDITED)
(MILLIONS OF DOLLARS UNLESS OTHERWISE STATED)
(6) GUARANTOR AND NONGUARANTOR FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED OCTOBER 31, 1997
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales................................... $276.4 $416.4 $207.3 $(2.2) $897.9
Cost of goods sold.......................... 225.4 354.0 171.1 (2.2) 748.3
------ ------ ------ ----- ------
Gross profit................................ 51.0 62.4 36.2 -- 149.6
Marketing, general and administration....... 9.8 15.6 11.1 -- 36.5
Engineering and product development......... 1.6 4.2 2.3 -- 8.1
Amortization of intangibles................. 1.3 5.9 1.4 -- 8.6
Other income................................ (0.5) (0.4) (1.7) -- (2.6)
Equity in earnings of unconsolidated subs... (0.6) -- -- -- (0.6)
------ ------ ------ ----- ------
Earnings from operations.................... 39.4 37.1 23.1 -- 99.6
Interest expense, net....................... 31.2 30.9 3.8 -- 65.9
Equity in earnings of consolidated
subsidiaries.............................. (5.0) -- -- 5.0 --
------ ------ ------ ----- ------
Earnings (loss) before taxes on income and
minority interest......................... 13.2 6.2 19.3 (5.0) 33.7
Income tax provision........................ 4.6 3.5 6.1 -- 14.2
------ ------ ------ ----- ------
Earnings (loss) before minority interest.... 8.6 2.7 13.2 (5.0) 19.5
Minority interest........................... -- (0.1) -- 0.2 0.1
------ ------ ------ ----- ------
Net Income (loss)........................... $ 8.6 $ 2.8 $ 13.2 $(5.2) $ 19.4
====== ====== ====== ===== ======
</TABLE>
FOR THE NINE MONTHS ENDED OCTOBER 31, 1996
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales................................... $197.8 $302.8 $57.7 $(2.5) $555.8
Cost of goods sold.......................... 182.9 258.7 47.2 (2.5) 486.3
------ ------ ----- ----- ------
Gross profit................................ 14.9 44.1 10.5 -- 69.5
Marketing, general and administration....... 4.6 13.0 3.1 -- 20.7
Engineering and product development......... 2.6 2.2 0.8 -- 5.6
Amortization of intangibles................. 1.3 3.5 -- -- 4.8
Other income................................ (0.7) (0.2) (2.5) -- (3.4)
Equity in loss of unconsolidated
subsidiaries.............................. 3.2 -- -- -- 3.2
Nonrecurring charges........................ 6.4 -- -- -- 6.4
------ ------ ----- ----- ------
Earnings (loss) from operations............. (2.5) 25.6 9.1 -- 32.2
Interest expense, net....................... 13.9 16.1 0.4 -- 30.4
Equity in earnings of consolidated
subsidiaries.............................. (5.0) -- -- 5.0 --
------ ------ ----- ----- ------
Earnings (loss) before taxes on income and
extraordinary items....................... (11.4) 9.5 8.7 (5.0) 1.8
Income tax provision (benefit).............. (7.7) 4.2 4.0 -- 0.5
------ ------ ----- ----- ------
Earnings (loss) before extraordinary
items..................................... (3.7) 5.3 4.7 (5.0) 1.3
Extraordinary items:
Bond defeasance, net of tax ($4.9).......... (7.4) -- -- -- (7.4)
------ ------ ----- ----- ------
Net Income (loss)........................... $(11.1) $ 5.3 $ 4.7 $(5.0) $ (6.1)
====== ====== ===== ===== ======
</TABLE>
10
<PAGE> 11
HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THREE AND NINE MONTHS ENDED OCTOBER 31, 1997 AND 1996
(UNAUDITED)
(MILLIONS OF DOLLARS UNLESS OTHERWISE STATED)
(6) GUARANTOR AND NONGUARANTOR FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEETS
OCTOBER 31, 1997
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Current Assets
Cash and cash equivalents............. $ 42.4 $ 1.0 $ 64.7 $ -- $ 108.1
Receivables........................... 49.0 71.6 104.0 -- 224.6
Inventory............................. 39.5 38.2 56.2 -- 133.9
Prepaid expenses and other............ 1.5 3.3 6.9 (0.2) 11.5
-------- ------ -------- --------- --------
Total current assets............. 132.4 114.1 231.8 (0.2) 478.1
Property, plant and equipment........... 254.5 301.8 335.6 -- 891.9
Accumulated depreciation (56.1) (81.5) (47.6) -- (185.2)
-------- ------ -------- --------- --------
Net property, plant and equipment..... 198.4 220.3 288.0 -- 706.7
Goodwill and other assets............... 759.6 313.0 903.5 (1,254.0) 722.1
-------- ------ -------- --------- --------
Total assets..................... $1,090.4 $647.4 $1,423.3 $(1,254.2) $1,906.9
======== ====== ======== ========= ========
Current liabilities
Bank borrowings....................... $ -- $ -- $ 21.5 $ -- $ 21.5
Current portion of long-term debt..... 17.5 -- 12.2 -- 29.7
Account payable and accrued
liabilities........................ 93.9 99.3 143.6 (0.2) 336.6
-------- ------ -------- --------- --------
Total current liabilities........ 111.4 99.3 177.3 (0.2) 387.8
Noncurrent liabilities:
Long-term debt........................ 955.2 -- 43.6 -- 998.8
Pension and other long-term
liabilities........................ 129.2 89.9 139.1 (5.8) 352.4
Deferred income taxes................. (31.0) 18.0 15.9 -- 2.9
Minority interest..................... -- 0.1 4.9 -- 5.0
Parent loans.......................... (265.5) 239.4 271.9 (245.8) --
-------- ------ -------- --------- --------
Total noncurrent liabilities..... 787.9 347.4 475.4 (251.6) 1,359.1
Stockholders' equity (deficit):
Capital stock......................... 0.3 -- -- -- 0.3
Additional paid-in capital............ 247.6 104.5 751.2 (873.2) 230.1
Retained earnings (accumulated
deficit)........................... (35.8) 96.2 29.2 (152.3) (62.7)
Pension liability adjustment.......... (2.2) -- -- -- (2.2)
Cumulative translation adjustment..... (18.8) -- (9.8) 23.1 (5.5)
-------- ------ -------- --------- --------
Total stockholders' equity
(deficit)..................... 191.1 200.7 770.6 (1,002.4) 160.0
-------- ------ -------- --------- --------
Total liabilities and stockholders'
equity (deficit)...................... $1,090.4 $647.4 $1,423.3 $(1,254.2) $1,906.9
======== ====== ======== ========= ========
</TABLE>
11
<PAGE> 12
HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THREE AND NINE MONTHS ENDED OCTOBER 31, 1997 AND 1996
(UNAUDITED)
(MILLIONS OF DOLLARS UNLESS OTHERWISE STATED)
(6) GUARANTOR AND NONGUARANTOR FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
JANUARY 31, 1997
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Current Assets
Cash and cash equivalents........... $ 41.2 $ (0.6) $ 6.9 $ -- $ 47.5
Receivables......................... 51.0 62.9 31.3 -- 145.2
Inventory........................... 36.4 34.5 12.0 -- 82.9
Prepaid expenses and other.......... 3.3 3.5 7.4 (0.3) 13.9
------- ------ ------ ------- --------
Total current assets........... 131.9 100.3 57.6 (0.3) 289.5
Property, plant and equipment......... 249.2 267.9 116.2 -- 633.3
Accumulated depreciation............ (49.1) (67.1) (30.7) -- (146.9)
------- ------ ------ ------- --------
Net property, plant and equipment... 200.1 200.8 85.5 -- 486.4
Goodwill and other assets............. 345.8 323.9 12.6 (275.1) 407.2
------- ------ ------ ------- --------
Total assets................... $ 677.8 $625.0 $155.7 $(275.4) $1,183.1
======= ====== ====== ======= ========
Current Liabilities
Bank borrowings..................... $ -- $ -- $ 5.6 $ -- $ 5.6
Current portion of long-term debt... 17.4 -- 6.5 -- 23.9
Accounts payable and accrued
liabilities...................... 105.2 97.7 42.2 (0.3) 244.8
------- ------ ------ ------- --------
Total current liabilities...... 122.6 97.7 54.3 (0.3) 274.3
Noncurrent liabilities:
Long-term debt...................... 658.3 -- 28.0 -- 686.3
Pension and other long-term
liabilities...................... 143.2 103.3 12.1 (3.3) 255.3
Deferred income taxes............... (31.1) 18.0 13.1 -- --
Minority interest................... -- 0.2 -- 8.1 8.3
Parent loans........................ (211.2) 208.0 3.2 -- --
------- ------ ------ ------- --------
Total noncurrent liabilities... 559.2 329.5 56.4 4.8 949.9
Stockholders' equity (deficit)
Common stock........................ 0.2 -- -- -- 0.2
Additional paid-in capital.......... 43.5 104.5 33.5 (137.9) 43.6
Retained earnings (accumulated
deficit)......................... (44.5) 93.4 9.5 (140.6) (82.2)
Pension liability adjustment........ (2.2) -- -- -- (2.2)
Cumulative translation adjustment... (1.0) (0.1) 2.0 (1.4) (0.5)
------- ------ ------ ------- --------
Total stockholders' equity
(deficit)................... (4.0) 197.8 45.0 (279.9) (41.1)
Total liabilities and stockholders'
equity (deficit).................... $ 677.8 $625.0 $155.7 $(275.4) $1,183.1
======= ====== ====== ======= ========
</TABLE>
12
<PAGE> 13
HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THREE AND NINE MONTHS ENDED OCTOBER 31, 1997 AND 1996
(UNAUDITED)
(MILLIONS OF DOLLARS UNLESS OTHERWISE STATED)
(6) GUARANTOR AND NONGUARANTOR FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED OCTOBER 31, 1997
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash flow provided by (used for)
Operating activities............................ $ 5.3 $ 3.2 $ 20.4 $(5.1) $ 23.8
Cash flows from investing activities:
Acquisition of property, plant & equipment...... (10.2) (12.1) (33.8) -- (56.1)
Purchase of business, net of cash received...... (197.5) -- -- -- (197.5)
Purchase of business............................ (17.5) -- -- -- (17.5)
Purchase of minority interest................... (13.0) -- -- -- (13.0)
Other, net...................................... 39.3 (20.9) (29.9) -- (11.5)
------- ------ ------ ----- -------
Cash flow used for investing activities....... (198.9) (33.0) (63.7) -- (295.6)
Cash flows from financing activities:
Increase in short term bank borrowings.......... -- -- (17.7) -- (17.7)
Decrease in bank revolving & long term loans.... (203.0) -- (8.9) -- (211.9)
Proceeds from issuance of long term debt........ 500.0 -- -- -- 500.0
Proceeds from equity offering................... 77.9 -- -- -- 77.9
Fees paid to issue long term debt............... (17.0) -- -- -- (17.0)
------- ------ ------ ----- -------
Cash provided by (used for) financing
activities.................................. 357.9 -- (26.6) -- 331.3
Increase (decrease) in parent advances............ (163.1) 31.4 126.6 5.1 --
Effect of exchange rates on cash and cash
equivalents..................................... -- -- 1.1 -- 1.1
------- ------ ------ ----- -------
Net increase (decrease) in cash and cash
equivalents................................. 1.2 1.6 57.8 -- 60.6
Cash and cash equivalents at beginning of year.... 41.2 (0.6) 6.9 -- 47.5
------- ------ ------ ----- -------
Cash and cash equivalents at end of period........ $ 42.4 $ 1.0 $ 64.7 $ -- $ 108.1
======= ====== ====== ===== =======
</TABLE>
FOR THE NINE MONTHS ENDED OCTOBER 31, 1996
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash flow provided by (used for)
Operating activities............................ $ 11.7 $ 21.8 $ 0.8 $(5.0) $ 29.3
Cash flows from investing activities:
Acquisition of property, plant & equipment...... (35.6) (10.9) (4.9) -- (51.4)
Other, net...................................... 3.9 (10.5) -- -- (6.6)
------- ------- ----- ----- -------
Cash flow used by investing activities........ (31.7) (21.4) (4.9) -- (58.0)
Cash flows from financing activities:
Decrease in short term bank borrowings.......... -- -- (1.2) -- (1.5)
Decrease in bank revolving and long term
loans......................................... (29.5) -- -- -- (29.5)
Dividends paid to stockholders.................. (0.5) -- -- -- (0.5)
Retirement of long term debt.................... (106.4) -- -- -- (106.4)
Retirement of acquired long term debt........... -- (137.7) -- -- (137.7)
Proceeds from issuance of long term debt........ 673.5 -- -- -- 673.5
Common stock repurchase......................... (506.1) -- -- -- (506.1)
Proceeds from equity infusion, net of costs..... 185.4 -- -- -- 185.4
Fees paid to issue long term debt............... (35.0) -- -- -- (35.0)
------- ------- ----- ----- -------
Cash provided by (used for) financing
activities.................................. 181.4 (137.7) (1.2) -- 42.5
Increase (decrease) in parent advances............ (148.0) 137.7 5.3 5.0 --
Effect of exchange rates on cash and cash
equivalents..................................... -- -- -- -- --
------- ------- ----- ----- -------
Net increase (decrease) in cash and cash
equivalents................................. 13.4 0.4 -- -- 13.8
Cash and cash equivalents at beginning of year.... 1.0 0.1 0.7 -- 1.8
------- ------- ----- ----- -------
Cash and cash equivalents at end of period........ $ 14.4 $ 0.5 $ 0.7 $ -- $ 15.6
======= ======= ===== ===== =======
</TABLE>
13
<PAGE> 14
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended October 31, 1997 Compared to Three Months Ended October 31,
1996
The Company's net sales for the third quarter of fiscal 1997 were $369.8
million, an increase of $135.4 million or 58% over net sales for the third
quarter of fiscal 1996. This increase was due to the additional sales
contributed by Lemmerz which was acquired effective June 30, 1997, increased
volume in both the North American and European Aluminum Wheel groups and
increased sales in the Commercial Highway business. This increase was partially
offset by lower exchange rates in Europe.
The Company's gross profit for the third quarter of fiscal 1997 increased
to $64.8 million or 17.5% of net sales, compared to $35.9 million or 15.3% of
net sales for the third quarter of the fiscal 1996. The increase in margin was
due to the increased revenues, strong productivity at the Company's North
American and European Aluminum Wheel groups and positive results related to the
capacity rationalization programs in the Fabricated Wheels group.
Marketing, general and administrative expenses were $15.1 million as
compared to $7.3 million in the third quarter of fiscal 1996, a $7.8 million
increase. This increase was due to additional costs as a result the Lemmerz
Acquisition. The Company believes marketing, general and administrative costs
will improve as a percent of net sales due to synergies recognized as a result
of the Motor Wheel Merger and the expected savings to be realized as a result of
the Lemmerz Acquisition.
Engineering and product development costs increased by $1.2 million in the
third quarter of fiscal 1997 as compared to the third quarter of fiscal 1996.
This increase was due to additional costs as a result the Lemmerz Acquisition.
However, as a percent of net sales, these costs remained consistent with fiscal
1996 at 0.9% of net sales. The Company believes the percent-of-net-sales trend
will improve even as engineering and product development expenses increase to
successfully launch new products.
Amortization of intangibles increased by $1.2 million as compared to the
third quarter of fiscal 1996. This increase was due to increased goodwill
recognized as a result of the Lemmerz Acquisition.
Interest expense was $25.7 million for the third quarter of fiscal 1997, an
increase of $7.4 million from $18.3 million for the same period for fiscal 1996.
This increase was due to the increase in debt as a result of the Lemmerz
Acquisition and the financing transactions undertaken in connection therewith.
Nine Months Ended October 31, 1997 Compared to Nine Months Ended October 31,
1996
The Company's net sales for the first nine months of fiscal 1997 were
$897.9 million an increase of $342.1 million, or 62% over net sales for the
first nine months of fiscal 1996. This increase was due to the additional sales
contributed by Motor Wheel which was acquired effective July 2, 1996, the
additional sales contributed by Lemmerz which was acquired effective June 30,
1997, increased volume in both the North American and European Aluminum Wheel
groups and increased sales in the Commercial Highway business. This increase was
partially offset by lower selling prices due to the pass through of lower raw
material costs for the nine months, the negative effects of strikes at General
Motors and Chrysler Corporation and lower exchange rates in Europe.
The Company's gross profit for the first nine months of fiscal 1997
increased to $149.6 million or 16.7% of net sales, compared to $69.5 million or
12.5% of net sales for the first nine months of fiscal 1996. The increase in
margin was due to the increased revenues, strong productivity at the Company's
North American and European Aluminum Wheel groups and positive results related
to the capacity rationalization programs in the Fabricated Wheels group. Gross
profit in the second quarter of fiscal 1996 included (i) write-down of certain
14
<PAGE> 15
assets and (ii) inefficiencies in former Motor Wheel facilities that were either
being prepared for closure or were undergoing major restructurings.
Marketing, general and administrative expenses were $36.5 million as
compared to $20.7 million for the first nine months of fiscal 1996, an $15.8
million increase. This increase was due to additional costs as a result of both
the Motor Wheel Merger and the Lemmerz Acquisition. The Company believes
marketing, general and administrative costs will improve as a percent of net
sales due to savings recognized as a result of the Motor Wheel Merger synergies
and the expected savings to be realized as a result of the Lemmerz Acquisition.
Engineering and product development costs increased by $2.5 million in the
first nine months of fiscal 1997 as compared to the first nine months of fiscal
1996. However, as a percent of net sales, these costs improved to 0.9% of net
sales versus 1.0% of net sales in fiscal 1996. The Company believes this
positive percent-of-net-sales trend will continue even as engineering and
product development expenses increase to successfully launch new products.
Amortization of intangibles increased by $3.8 million as compared to the
first nine months of fiscal 1996. This increase was due to increased goodwill
recognized as a result of the Motor Wheel Merger and the Lemmerz Acquisition.
Equity in loss of subsidiaries in fiscal 1996 included recognition of
losses of the Company's Czech joint venture during its early production stage
and a writedown of the Company's investment in Hayes Wheels de Mexico, S.A. Due
to the ongoing condition of the Mexican economy, management determined that the
Company's investment in Mexico had become impaired resulting in a writedown of
the investment amount. The Company recorded $0.6 million in charges related to
equity in earnings of unconsolidated subsidiaries for the first nine of fiscal
1997.
Nonrecurring charges of $6.4 million in the second quarter of fiscal 1996
consisted of the elimination of $2.9 million of deferred costs resulting from a
previous patent infringement suit with Motor Wheel and $3.5 million of stock
compensation recorded in conjunction with the payout of the management stock
option plan. The Company did not incur any nonrecurring charges for the first
nine months of fiscal 1997.
Interest expense was $65.9 million for the first nine months of fiscal
1997, an increase of $35.5 million over the same period for fiscal 1996. This
increase was due to the increase in debt as a result of the Motor Wheel Merger
and the Lemmerz Acquisition.
The extraordinary loss for bond defeasance in fiscal 1996 represented the
redemption premium and unamortized debt issue costs related to the 9 1/4% Senior
Notes due 2002, of which $98.5 million principal amount was retired as part of
the Company's recapitalization. The Company did not incur any extraordinary
items for the first nine months of fiscal 1997.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company's operations provided $23.8 million in cash in the first nine
months of fiscal 1997, a decrease of $5.5 million over the same period of fiscal
1996. This decrease was due primarily to increased funding to the Company's
pension plans, higher interest payments related to the increased amount of debt
resulting from the Motor Wheel Merger and the Lemmerz Acquisition and increased
inventory levels resulting from the capacity rationalization programs in the
Fabricated Wheels group.
Capital expenditures for the first nine months of fiscal 1997 were $56.1
million. These expenditures were primarily for additional machinery and
equipment to increase the production capacity at the Company's North American
and European Aluminum Wheel facilities to meet expected future customer
requirements for fabricated aluminum and FFC wheels. The Company anticipates
that total capital expenditures for fiscal 1997 will be approximately $100
million.
The Company is party to an amended credit agreement dated June 30, 1997
(the "Amended Credit Agreement") with Canadian Imperial Bank of Commerce
("CIBC") and Merrill Lynch Capital Corporation ("Merrill Capital"), as managing
agents. Pursuant to the Amended Credit Agreement, among other things, a
15
<PAGE> 16
syndicate of lenders have agreed to lend to the Company up to $320.5 million in
the form of a senior secured term loan facility, such aggregate amount being
allocated among (i) a Tranche A-1 Term Loan facility in an aggregate principal
amount of up to $103.0 million, (ii) a Tranche A-2 Term Loan Facility in an
aggregate principal amount of up to $100.0 million, (iii) a Tranche B Term Loan
Facility in an aggregate principal amount of up to $64.9 million, and (iv) a
Tranche C Term Loan Facility in an aggregate principal amount of up to $52.6
million, and up to $270 million in the form of a senior secured revolving credit
facility. Such term loan facilities and revolving facility are secured by a
first priority lien in substantially all of the properties and assets of the
Company and its material domestic subsidiaries, now owned or acquired later,
including a pledge of all of the shares of certain of the Company's existing and
future material domestic subsidiaries and 65% of the shares of certain of the
Company's existing and future foreign subsidiaries. As of October 31, 1997,
there was $320.5 million outstanding under the term loan facilities and there
was $232.1 million available for borrowing under the revolving facility.
In connection with the Motor Wheel Merger and as part of the financing
thereof, the Company issued and sold $250 million in aggregate principal amount
of its 11% senior subordinated notes due 2006 (the "11% Notes") in a public
offering. The 11% Notes are general unsecured obligations of the Company,
subordinated in right of payment to all existing and future senior indebtedness
of the Company, and are guaranteed by certain of the Company's domestic
subsidiaries. The Company also retired $98.5 million principal amount of the
Company's 9 1/4% Senior Notes due 2002 and Motor Wheel redeemed all of its
11 1/2% Senior Notes due 2000 ($125 million principal amount) and repaid and
terminated its revolving credit facility.
In connection with the Lemmerz Acquisition, the Company issued and sold
9 1/8% senior subordinated notes due 2007 (the "9 1/8% Notes") in two offerings
under Rule 144A of the Securities Act which closed June 30, 1997 ($250 million
in aggregate principal amount) and July 22, 1997 ($150 million in aggregate
principal amount). The 9 1/8% Notes are general unsecured obligations of the
Company, ranking pari passu with the 11% Notes and are guaranteed by certain of
the same domestic subsidiaries of the Company as guaranteed the 11% Notes. The
proceeds of the 9 1/8% Notes were used to pay the cash portion of the Lemmerz
Acquisition purchase price and to retire $200 million principal amount of
existing term debt under the Amended Credit Agreement.
Management believes that, at October 31, 1997, the Company was in
compliance with the various covenants under the agreements pursuant to which it
has or may borrow money. Management expects that the Company will remain in
compliance with these covenants in all material respects through the period
ending October 31, 1998.
The Company believes that cash generated from operations, together with
amounts available under the Amended Credit Facility and any other available
financing sources, will be adequate to permit the Company to meet its debt
service obligations, capital expenditure program requirements, ongoing operating
costs and working capital needs, although no assurance can be given in this
regard. The Company's future operating performance and ability to service or
refinance the 11% Notes and the 9 1/8% Notes and to repay, extend or refinance
the Amended Credit Agreement will be subject to future economic conditions and
to financial, business and other factors, many of which are beyond the Company's
control.
16
<PAGE> 17
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
The Company held its 1997 Annual Meeting of Stockholders on October 22,
1997. At the Annual Meeting, the following matters were proposed and voted upon
by the Company's stockholders (including the number of votes cast for, against
or withheld, as well as the number of abstentions for each such matter):
1. To elect three Class 1 Directors (nominees were Timothy J. Clark, Horst
Kukwa-Lemmerz and Jeffrey Lightcap) to serve until the Company's 2000 Annual
Meeting of Stockholders. The number of votes cast with respect to this matter
were as follows:
<TABLE>
<CAPTION>
NOMINEE FOR WITHHELD
------- --- --------
<S> <C> <C>
Timothy J. Clark............................................ 21,922,250 304,913
Horst Kukwa-Lemmerz......................................... 22,115,347 111,816
Jeffrey Lightcap............................................ 22,023,462 203,701
</TABLE>
The terms of office of each of the following directors also continued after
the meeting: Ranko Cucuz, Cleveland A. Christophe, Andrew R. Heyer, Paul S.
Levy, Weinand Meilicke, John S. Rodewig and David Y. Ying.
2. To approve the adoption of the Company's 1996 Stock Option Plan. The
number of votes cast with respect to this matter were as follows:
For: 18,935,962 Against: 1,842,459 Abstain: 4,983
3. To authorize the issuance of shares of the Company's Common Stock upon
conversion of shares of the Company's Series A Convertible Participating
Preferred Stock issued in connection with the acquisition by the Company of
Lemmerz Holding GmbH. The number of votes cast with respect to this matter were
as follows:
For: 20,626,447 Against: 100,262 Abstain: 1,678
4. To approve an amendment to the Company's Restated Certificate of
Incorporation changing the name of the Company to Hayes Lemmerz International,
Inc. The number of votes cast with respect to this matter were as follows:
For: 22,194,141 Against: 31,926 Abstain: 1,096
5. To approve an approve an amendment to the Company's Restated Certificate
of Incorporation increasing the number of authorized shares of the Company's
Nonvoting Common Stock from 1,000,000 to 5,000,000 shares. The number of votes
cast with respect to this matter were as follows:
<TABLE>
<CAPTION>
COMMON STOCK NONVOTING COMMON STOCK
------------ ----------------------
<S> <C> <C>
For: .................................................. 21,848,161 149,026
Against: .............................................. 366,133 0
Abstain: .............................................. 12,869 0
</TABLE>
17
<PAGE> 18
6. To ratify the appointment of KPMG Peat Marwick LLP as the Company's
independent auditors for the fiscal year ending January 31, 1998. The number of
votes cast with respect to this matter were as follows:
For: 22,200,459 Against: 25,842 Abstain: 862
There were no broker held non-voted shares represented at the Meeting with
respect to any of the foregoing matters.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
<C> <S>
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
None
18
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HAYES LEMMERZ INTERNATIONAL, INC.
By: /s/ WILLIAM D. SHOVERS
--------------------------------
William D. Shovers
Vice President and Chief Financial
Officer
December 12, 1997
19
<PAGE> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ----------- ------------
<C> <S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-01-1997
<PERIOD-END> OCT-31-1997
<CASH> 108,100
<SECURITIES> 0
<RECEIVABLES> 244,600
<ALLOWANCES> 0
<INVENTORY> 133,900
<CURRENT-ASSETS> 478,100
<PP&E> 891,900
<DEPRECIATION> (185,200)
<TOTAL-ASSETS> 1,906,900
<CURRENT-LIABILITIES> 387,800
<BONDS> 0
0
0
<COMMON> 300
<OTHER-SE> 159,700
<TOTAL-LIABILITY-AND-EQUITY> 1,906,900
<SALES> 369,800
<TOTAL-REVENUES> 369,800
<CGS> 305,000
<TOTAL-COSTS> 305,000
<OTHER-EXPENSES> 20,400
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25,700
<INCOME-PRETAX> 18,700
<INCOME-TAX> 7,800
<INCOME-CONTINUING> 10,900
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,900
<EPS-PRIMARY> 0.34
<EPS-DILUTED> 0.34
</TABLE>
