<PAGE> 1
================================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JANUARY 31, 1997
COMMISSION FILE NUMBER: 1-11592
HAYES WHEELS INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
(STATE OR OTHER JURISDICTION
OF INCORPORATION OR ORGANIZATION)
13-3384636
(I.R.S. EMPLOYER IDENTIFICATION NO.)
38481 HURON RIVER DRIVE, ROMULUS, MICHIGAN
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
48174
(ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (313) 941-2000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, PAR VALUE $.01 PER SHARE
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES [X] NO [ ]
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. [X]
THE AGGREGATE MARKET VALUE OF VOTING STOCK HELD BY NON-AFFILIATES OF THE
REGISTRANT AS OF APRIL 29, 1997 (BASED ON THE CLOSING PRICE OF THE REGISTRANT'S
COMMON STOCK REPORTED ON THE NASDAQ NATIONAL MARKET SYSTEM ON SUCH DATE) WAS
APPROXIMATELY $149 MILLION.
THE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AS OF APRIL 30, 1997 WAS
22,390,518 SHARES.
================================================================================
<PAGE> 2
HAYES WHEELS INTERNATIONAL, INC.
FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I
Item 1. Business ................................................... 3
Item 2. Properties ................................................. 12
Item 3. Legal Proceedings .......................................... 12
Item 4. Submission of Matters to a Vote of Security Holders ........ 14
Executive Officers of Registrant ........................... 14
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters ...................................... 15
Item 6. Selected Financial Data .................................... 16
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations ................................ 16
Item 8. Consolidated Financial Statements and Supplementary Data ... 19
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure ................................. 19
PART III
Item
10. Directors and Executive Officers of the Registrant ......... 19
Item
11. Executive Compensation ..................................... 21
Item
12. Security Ownership of Certain Beneficial Owners and
Management ............................................... 27
Item
13. Certain Relationships and Related Transactions ............. 29
PART IV
Item
14. Exhibits, Financial Statement Schedules and Reports on Form
8-K ...................................................... 31
Signatures .......................................................... 34
</TABLE>
THIS ANNUAL REPORT ON FORM 10-K 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,
INCLUDING STATEMENTS UNDER THE CAPTIONS "BUSINESS" AND "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS." 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 ANNUAL REPORT ON FORM 10-K AND THE COMPANY
DOES NOT INTEND TO PROVIDE SUCH UPDATES.
2
<PAGE> 3
PART I
ITEM 1. BUSINESS
GENERAL
Hayes Wheels International, Inc. and subsidiaries (collectively, the
"Company", unless the context requires otherwise) is a world leader in the
manufacture, design and supply of wheels and brake components to original
equipment manufacturers ("OEMs") of passenger cars, light trucks and commercial
highway vehicles.
The Company considers its operations to be operating in two geographic
areas (North America and Europe). The financial information required by
geographic area for the three years ended January 31, 1997, 1996 and 1995
("Fiscal 1996," "Fiscal 1995" and "Fiscal 1994", respectively) is included in
Note 14 of the "Notes to the Consolidated Financial Statements" section of the
1996 Annual Report, which section is incorporated herein by reference. Sales of
automotive wheel and brake products comprise approximately 87% of the Company's
combined net sales (80% wheels and 7% brake components), with the remainder
consisting of commercial highway wheel and brake products. The following table
sets forth the Company's estimated market position for its primary products in
North America and Europe in Fiscal 1996:
<TABLE>
<CAPTION>
MARKET POSITION
---------------
<S> <C>
NORTH AMERICA
Automotive Steel Wheels -- Including OEMs #1
Automotive Cast Aluminum Wheels #2
Automotive Fabricated Aluminum Wheels #1
Automotive Brake Rotors and Drums -- Excluding OEM #2
Automotive Brake Rotors and Drums -- Including OEM #3
Commercial Highway Wheels #2
Commercial Highway Brake Hubs and Drums #1
EUROPE
Automotive Aluminum Wheels #1
</TABLE>
The Company also has a 58% owned subsidiary in the Czech Republic and
strategic manufacturing joint ventures in Mexico, Brazil, Venezuela and the
United States, as well as a technical relationship in Thailand.
The Company's principal customers for wheel and brake products consist of
the majority of the OEMs in North America, Europe and Japan, including General
Motors, Ford, Chrysler (the three of which comprised approximately 74% of the
Company's combined Fiscal 1996 revenues), BMW, Renault, Fiat, Volkswagen,
Porsche, Toyota, Mazda, Nissan, Honda and Isuzu. The Company also has over 300
commercial highway customers in North America, including Trailmobile, Strick,
Great Dane Trailers, Freightliner and PACCAR.
A significant trend toward the use of lighter, more highly-styled wheels
for passenger cars and light trucks has increased the demand for and the use of
aluminum wheels. Aluminum wheel growth is primarily attributable to: (i) the
weight advantage of aluminum wheels, which helps OEMs meet government-imposed
fuel economy standards; and (ii) the aesthetics of styled cast aluminum wheels.
Aluminum wheel penetration (new vehicle installations) in North America has
increased from approximately 3% in 1980 to approximately 44% in 1996. Management
estimates that such penetration will reach approximately 55% by 2000 due
primarily to new aluminum wheel product innovations including fabricated
aluminum wheels and Full Face Cast aluminum ("FFC(TM)") wheels. Aluminum wheel
penetration in Europe in 1996 was approximately 21% and continues to display a
similar growth pattern as that experienced in North America. The Company is well
positioned to continue to increase sales of its aluminum wheels given the new,
but rapidly growing, fabricated aluminum wheel and FFC(TM) wheel designs where
the Company is the only significant manufacturer.
Raw materials and component parts used in the Company's manufacturing
operations are those commonly used in such operations and adequate supplies are
available. The Company is generally not dependent on long-term supply contracts
and has available to it alternate sources for its raw materials and component
parts.
3
<PAGE> 4
The Company is dedicated to the continued development of new and improved
wheels and brake components and related products either through its own
engineering efforts or joint ventures with other parties. These new designs
include full-faced styled steel wheels, light-weight fabricated aluminum wheels,
FFC(TM) wheels, clad-covered wheels and Centrifuse(R) brake drums. The Company's
North American Wheel and Brake Engineering, Design, and Advanced Research and
Development Groups are located in Romulus, Michigan. The Company believes that
it is a leader in advanced research for wheel and brake technology. All of the
research and development and engineering relating to the Company's European
aluminum wheel operations is conducted at the Company's Dello, Italy facility.
Supported by computer-aided design and manufacturing, as well as
finite-element analysis tools, the Company investigates specific wheel designs
for lighter-weight wheels that help reduce overall vehicle weight and provide
more attractive styling variations. To ensure that new, lighter-weight products
are sufficiently durable to meet vehicle requirements, the Company performs
fatigue tests that put prototype wheels through the equivalent of thousands of
miles of road use before they reach the manufacturing stage. To ensure longevity
of the wheels, salt-spray and other environmental tests are conducted on coated
wheels. During Fiscal 1996, Fiscal 1995 and Fiscal 1994, the Company spent
approximately $7.2 million, $4.7 million and $5.1 million, respectively, on
engineering and product development.
The Company owns numerous patents and trademarks and has patent licenses
from others relating to its products and manufacturing methods. The Company also
grants patent and trademark licenses to others throughout the world and receives
royalties under most of these licenses. While the Company does not consider any
particular patent or group of patents to be essential to its business as a
whole, it considers its patents to be significant to the conduct of its business
in certain product areas. In addition, the Company relies on proprietary data
and processes, including trade secrets and know-how, and depends, to some
extent, on such information remaining confidential.
The Company's business originated with Hayes Wheel, founded in 1908 by
Clarence Hayes, and K.H. Wheel Company, founded in 1909 by John Kelsey and John
Herbert, which produced wooden-spoked wheels for automobiles such as Henry
Ford's Model T. These companies merged in 1927 to form Kelsey-Hayes Wheel
Corporation, which was reorganized in 1933 into Kelsey-Hayes Wheel Company.
Varity Corporation ("Varity") acquired the Company in 1989 through the
acquisition of K-H Corporation ("K-H"), which was then the sole stockholder of
the Company. On December 16, 1992, the non-wheel businesses and assets of the
Company, particularly its automotive brake systems business and assets, were
transferred to, and certain liabilities related thereto were assumed by a wholly
owned subsidiary of the Company, Kelsey-Hayes Company ("Kelsey-Hayes"), the
capital stock of which was then transferred by the Company to K-H as an
extraordinary dividend (the "Reorganization"). On December 23, 1992, the Company
consummated an initial public offering of its common stock (the "IPO") upon the
completion of which Varity owned 46.3% of the Company's outstanding common
stock. On July 2, 1996, the Company consummated the transactions contemplated by
the Agreement and Plan of Merger, dated as of March 28, 1996, between MWC
Holdings, Inc. ("Holdings") and the Company (the "Merger Agreement"), and
certain related transactions, pursuant to which: (i) Holdings was merged with
and into the Company, with the Company as the surviving corporation (the
"Merger"); (ii) the Company's common stock was recapitalized with each share of
common stock then outstanding being exchanged for 1/10th share of new Common
Stock, par value $.01 per share (the "Common Stock"), and $28.80 (the
"Recapitalization"); (iii) Joseph, Littlejohn and Levy Fund II L.P. ("JLL Fund
II") and certain other investors acquired ownership of approximately 76.6% of
the Company's outstanding Common Stock; and (iv) and Varity's interest in the
Company was diluted to 7.3%. As a result of the Merger, Motor Wheel Corporation,
a wholly owned subsidiary of Holdings ("Motor Wheel"), became a wholly owned
subsidiary of the Company.
On December 9, 1996, the Company announced that it had signed a letter of
intent with Lemmerz Holding GmbH ("Lemmerz") and each of the shareholders of
Lemmerz, wherein the Company indicated its intent to acquire 76.63% of Lemmerz
(the "Acquisition"), with the right to acquire the remaining interest at a later
date. Lemmerz is the leading full-line steel wheel supplier in Europe. Lemmerz
manufactures steel and aluminum wheels for automobiles and light trucks, and
steel wheels for heavy-duty trucks. If the Acquisition is completed, Lemmerz, or
an entity formed for the purpose of receiving the Lemmerz shares in the
Acquisition, would become a subsidiary of the Company.
4
<PAGE> 5
INDUSTRY
Wheels for passenger cars and light trucks are generally made of steel or
aluminum, which offer OEMs a range of design options for the vehicles. Steel
wheels, which are heavier than aluminum wheels, are generally low-cost,
high-volume production items that consist of two separate pieces (a rim and a
center) welded together. The Company also manufactures more expensive stylized
full-faced steel wheels, with a clear, color or chrome finish. "Full-faced"
refers to a design approach in which the styling effect is obtained by forming
the entire face of the wheel into a one-piece styled design that is then welded
onto a partial rim assembly to form a complete wheel. Aluminum wheels are
generally lighter in weight, more readily stylized and more expensive than steel
wheels, and can be single-piece cast aluminum wheels, fabricated aluminum wheels
or FFC(TM) wheels, which are made from two separate pieces (a fabricated
aluminum rim and a cast aluminum center) welded together. The Company's
fabricated aluminum wheels are similar in design to fabricated steel wheels.
Though not as highly styled as cast aluminum wheels, they are lighter in weight
than both fabricated steel and one-piece cast aluminum wheels.
Based on published vehicle production statistics, the Company estimates
that in 1996 approximately 24.5 million one-piece cast aluminum automotive
wheels where manufactured in North America. The Company estimates that it sold
approximately 22% of the aluminum wheels manufactured in North America in 1996.
In Western Europe, the Company estimates that approximately 10.2 million cast
aluminum wheels were manufactured in 1996, of which approximately 15% were sold
by the Company.
The Company estimates that in 1996 approximately 45 million steel passenger
car and light truck wheels, including 14 million steel wheels manufactured by
the OEMs for their own use, were manufactured in North America. During 1996, the
Company believes that it sold approximately 51% of the independently
manufactured steel wheels and approximately 35% of all steel wheels manufactured
in North America.
General Motors, Ford and Chrysler, as well as Japanese OEMs and European
OEMs, continue to outsource component manufacturing. Wheel manufacturing is not
strategic to these companies and outsourcing has increased in response to
competitive pressures on OEMs to improve quality and reduce capital outlays,
production costs, overhead and inventory levels. The Company believes that it is
well positioned to benefit from any future outsourcing opportunities.
OEMs typically specify the features of the wheel, whether steel or
aluminum, which will be used for a particular model either as standard or
optional equipment. Among the features specified by OEMs are weight, styling and
pricing requirements. The OEM will ordinarily designate one supplier of a
particular wheel for a vehicle model, although a particular vehicle model may
utilize a number of different wheels produced by one or more suppliers. The
process of being designated as a supplier of a particular wheel can take more
than two years from the time of initial design to first delivery. A potential
supplier must first develop a wheel design based on styling and engineering
specifications provided by the OEM. After a comprehensive engineering and
feasibility review, the OEM then designates a specific supplier for a particular
wheel that meets the OEMs' cost, quality, styling and engineering specifications
for particular vehicle models. The duration of the designation is dependent upon
the life cycle of the vehicle model. Suppliers that design, engineer,
manufacture and conduct quality control testing are generally referred to as
Tier I suppliers. The Company believes that early involvement in the design and
engineering of new wheel and brake products as a Tier I supplier affords it a
competitive advantage in securing new business and provides customers a
significant cost reduction through coordination of design, development and
manufacturing processes. As a result of the lengthy approval process, combined
with the continued designation of a particular supplier for the life of the
vehicle model, increases or decreases in sales to a particular OEM and
corresponding changes in market share normally occur over an extended period of
time.
In fitting with its status as a full-line global wheel supplier, the
Company continues to offer its customers a wide range of products including
among others a base steel wheel for low cost, stylized and chromed steel wheels,
a cast aluminum wheel for high styling, a fabricated aluminum wheel for low
weight, a clad-covered wheel for a bright appearance at a significantly lower
cost than a fully-chromed wheel and finally, an FFC, two-piece aluminum wheel
which provides both high styling and lighter weight. The Company believes this
breadth of product offering and manufacturing capability enhances its ability to
support a full vehicle platform with any wheel designed by its customers.
5
<PAGE> 6
North American OEMs generally manufacture passenger cars and light trucks
with drum-brakes on the rear axle and disc brakes on the front axle, although
disc brakes are increasingly being used on rear axles for high performance
vehicles and vehicles incorporating anti-lock brake systems. OEMs offer
anti-lock brake systems as optional equipment on certain vehicle models and as
standard equipment on higher priced vehicle models. The Company manufactures
automotive brake components consisting primarily of composite metal drums, full
cast drums and cast iron hubs for drum-type brakes and cast iron rotors for disc
brakes. The Company's brake components have been incorporated into anti-lock
brake systems offered by its OEM customers. In addition to the OEM market for
automotive brake components, a growing service market exists for brake rotors
due to the high wear-out rate which is experienced with this product. As a
result, the automotive industry is facing a demand for brake rotors in excess of
manufacturing capacity.
In the commercial highway vehicle market, the Company sells wheels, rims
and brake products to OEMs (including replacement parts sold through original
equipment servicers ("OES")) and aftermarket distributors. Commercial highway
wheels, rims, brake components, and wheel hub and brake drum assemblies are
installed principally on trucks, trailers and buses. In the commercial highway
market, sales to OEMs are attributable to either having the product designated
as standard equipment by the OEM or obtaining fleet specifications where
purchasers of commercial highway vehicles specify the component parts to be
utilized on vehicles manufactured for their fleets.
In an effort to increase the quality of the vehicles they produce, OEMs
continue to increase the quality demands on their component suppliers. Each OEM
has a structured program and rating system for quality and grants awards to
suppliers. Examples include Ford's Q-l, General Motors' Targets for Excellence
and Chrysler's QE and Pentastar. Once a supplier receives a quality award, the
supplier retains the award level, subject to continuing favorable review by the
OEM. The Company endeavors to meet and exceed the quality demands of the OEMs.
All of the Company's manufacturing facilities have received such quality awards.
The domestic automotive industry has recently adopted new standards for
quality ratings commonly known as QS 9000 as to which each of the "Big Three"
OEMs will require compliance. The Company's Gainesville, Georgia location was
the first wheel plant in North America to qualify for this rating. All of the
Company's worldwide facilities have now received QS9000 and/or ISO9001
registration in compliance with all of its customers' requirements.
While the Company's business is not seasonal in the traditional sense, July
and December are usually lower volume months because OEMs typically perform
model changeovers during July and assembly plants are closed for a period
shortly before Christmas to after New Year's Day.
The Company competes for sales of its cast aluminum wheels, fabricated
steel wheels, fabricated aluminum wheels and brake components on the basis of
cost, delivery, quality and service. As a large portion of the Company's
business consists of sales to GM, Ford and Chrysler (in the aggregate, 89% of
cast aluminum wheel, 96% of fabricated wheel and substantially all of the brake
component production in the U.S.), the loss of a significant portion of the
Company's sales to any of these OEMs could have a material adverse impact on the
Company. The Company has been doing business with each of these OEMs for many
years, and sales are composed of a number of different products and of different
models or types of the same products and are made to individual divisions of
such OEMs.
CAST ALUMINUM WHEELS
The Company's cast aluminum wheels are produced in North America and Europe
and are sold in North America, Europe and Japan.
NORTH AMERICA
At four manufacturing facilities in the United States, the Company designs,
manufactures and distributes a full line of cast aluminum wheels to OEMs in the
passenger car and light truck segments of the automotive industry. In Fiscal
1996, the Company supplied approximately 22% of the cast aluminum wheels
purchased in North America. With the exception of a limited number of cast
aluminum wheels manufactured by Ford in New Zealand and aluminum wheels
manufactured by Toyota and Volkswagen, there is no significant OEM
6
<PAGE> 7
manufacturing of cast aluminum wheels. In 1996, the Company believes
approximately 44% of passenger cars and light trucks in North America used cast
aluminum wheels, up from approximately 42% in 1995.
Customers. In Fiscal 1996, approximately 89% of the Company's total cast
aluminum wheel production was sold to General Motors, Ford and Chrysler for use
on vehicles produced in North America. The Company exported approximately 4% of
its cast aluminum wheels to Nissan and Isuzu in Japan and sold approximately 7%
to Japanese transplants in the United States. The Company owns 100% of Hayes
Wheels Japan, a Japanese corporation that provides sales and service support for
the Company in the Japanese wheel market.
Supplier relationships with the OEMs are critical. The Company believes
that it has excellent relationships with its customers and is continually
working to strengthen these relationships.
Manufacturing. In manufacturing cast aluminum wheels, the Company uses both
gravity casting and low pressure casting. The Company has emphasized cost
control and product quality in its manufacturing processes and facilities.
The Company manufactures one-piece and two-piece wheels. One-piece wheels
comprise the bulk of the Company's current sales. The Company introduced its
innovative Street Smart Modular(R) two-piece wheel in 1987, and more recently,
the FFC(TM) two-piece wheel. These two-piece designs offer OEMs even greater
weight savings without sacrificing styling.
To enhance wheel design and reduce development lead-time, the Company
utilizes computer-aided design, has direct computer links to customers and
provides OEMs with engineering and manufacturing support. The Company utilizes a
computer-aided manufacturing system with which it gathers key data to control
cast aluminum wheel manufacturing to continually improve product quality and
cost.
The Company also utilizes other manufacturing techniques to reduce
manufacturing process time and improve product quality. An example is
Lok-Alloy(R), the Company's patented infra-red heat treating process that
changes the manufacturing of cast aluminum wheels from a traditional batch
process to a modern synchronous process. Lok-Alloy(R) reduces work-in-process
inventory and material handling, minimizes labor costs and improves quality.
Lok-Alloy(R) also reduces the total time to produce a wheel from three to five
days to three to five hours. The Company has implemented this process at its
Gainesville, Georgia facility.
Competition. The Company believes that its capabilities as a cost-effective
supplier of cast aluminum wheels meeting OEM requirements enable it to compete
effectively with other aluminum wheel manufacturers. The Company's primary
competitor in the North American cast aluminum wheel market is Superior
Industries International, Inc., which the Company estimates had approximately a
38% share of the North American market in 1996, as compared with the Company's
share of approximately 22%. Other aluminum wheel manufacturers that account for
the remaining market share include Wheeltek, Inc., a subsidiary of Amcast
Industrial Corp., American Racing Equipment, Inc., Alcoa, Reynolds Metals Co.,
Aluminum Wheel Technology, Inc. ("Alumitech"), a 50% owned joint venture of the
Company, and several foreign suppliers operating in the United States.
EUROPE
At its three manufacturing facilities in Europe, the Company designs,
manufactures and distributes a full line of cast aluminum wheels to OEMs in the
passenger car and light truck segments of the European automotive industry.
Customers. The Company estimates that its share of the European market for
cast aluminum wheels was approximately 15% for Fiscal 1996. Approximately 80% of
its European cast aluminum wheels were sold to BMW, Fiat, Renault and Ford of
Europe in that year.
Manufacturing. All engineering, research and development for the Company's
European cast aluminum wheel operations is performed at the Dello, Italy
facility.
The Company maintains substantial capability in Europe, to style and design
cast aluminum wheels for sale to particular OEMs. The Company offers its OEM
customers various Company-generated styles each year. The Company has also
established direct computer links with several customer locations in Europe to
streamline the design and approval process and reduce product development
lead-time. In Europe, the
7
<PAGE> 8
Company believes that its interaction with its customers through computer-aided
design offers a competitive advantage. In addition, the Company is actively
introducing its new weight and cost saving technologies to the European car
makers. Pressure for better fuel consumption and lower vehicle weight are
driving European car producers to seek new products such as fabricated aluminum
wheels and FFC(TM) wheels.
In 1988, the Company acquired its Campiglione, Italy aluminum wheel
operation from Fiat. The Company leases the plant (excluding equipment) from
Fiat on a year-to-year basis.
Competition. The Company's primary competitors in the European cast
aluminum wheel market for passenger cars are Ronal AG, Speedline S.p.A.,
Lemmerz, Alloy Wheel International Ltd. and Kronprinz (Mannesmann AG). These
competitors have market shares ranging from 6% to 13% each. Management estimates
that the Company had market share of 15% in 1996. The Company recently signed a
letter of intent to acquire 76.63% of Lemmerz. See "Item 1. Business-General".
The cast aluminum wheel market in Europe remains more fragmented than in
North America, with numerous producers possessing varying levels of financial
resources and market positions. The current installation rate of cast aluminum
wheels in Europe is significantly lower than in North America. As a result of
anticipated consolidations of small local manufacturers across the European
community and the expected increasing demand for cast aluminum wheels among
consumers and OEMs in Europe, the Company believes that, over the next several
years, the number of cast aluminum wheel manufacturers in Europe is likely to
decline and the remaining producers will increase their market shares. As a
result of its position in Europe and its advanced engineering and technology,
the Company believes that it is well positioned to meet these changes in the
European market.
FABRICATED WHEELS
The Company's fabricated steel and fabricated aluminum wheels are produced
and sold in North America and Europe.
NORTH AMERICA
At its manufacturing facilities in Sedalia, Missouri, Romulus, Michigan and
Bowling Green, Kentucky, the Company designs, manufactures and distributes a
full line of fabricated steel and fabricated aluminum wheels for sale to OEMs in
the passenger car and light truck segments of the automotive industry. Having
commenced production in the early 1900's, the Company has manufactured more
steel wheels in North America than any other manufacturer.
Revenues and unit sales in the Fabricated Wheel Group in North America
increased in Fiscal 1996 from prior year levels primarily due to the
introduction of new products, increased market share and additional sales
contributed by Motor Wheel, which was acquired effective July 2, 1996. The
Company's new products, including fabricated aluminum wheels, chromed, full-face
steel wheels, and clad-covered wheels have been well received by its customers.
The Company believes that new contracts obtained in 1995 and 1996 relating to
these new products have positioned this group for significant future growth. The
Company has signed contracts for the sale of fabricated aluminum wheels that in
total are in excess of $150 million by 1998. Currently the Company produces
fabricated aluminum wheels for both Ford and General Motors, including a
full-faced, styled version for the Ford F150 truck.
The Company believes that the North American steel wheel market will remain
significant because OEMs will continue to specify less costly steel wheels for
more moderately priced passenger cars and light trucks and for most spare
wheels. The rate of installation of steel or aluminum wheels for any model year
may be affected by OEM promotion programs. The Company continues to explore
other avenues of growth for steel wheels, including further penetration into
that portion of the market currently served by OEM wheel manufacturers.
Customers. The Company estimates that its share of the North American
market for steel wheels for fiscal 1996 was approximately 35% (including wheels
manufactured by OEMs). Approximately 96% of the Company's steel wheels were sold
to General Motors, Ford and Chrysler in fiscal 1996.
8
<PAGE> 9
In 1995, the Company and General Motors entered into a contract for the
supply of steel wheels which will initially extend through the 2000 model year.
Under certain circumstances, this contract may be extended or terminated. The
Company also has a long term supply contract with Ford.
Manufacturing. The Company's fabricated steel and fabricated aluminum
wheels are manufactured by a continuous in-line process, thus enhancing quality
standardization and reducing work-in-process inventory. Although tooling is
relatively expensive for steel wheels, a particular style is likely to be run
for a customer in high volume over a long period, lowering the unit production
cost.
As a result of the Merger, the Company had four fabricated steel wheel
manufacturing facilities. The Company made the decision to consolidate
fabricated steel wheel production into two facilities due to the reduction in
demand for steel wheels resulting from the growing demand for aluminum wheels in
North America. Production will continue in the Bowling Green, Kentucky and
Sedalia, Missouri facilities. The former Motor Wheel facility in Mendota,
Illinois was closed in the fourth quarter of fiscal 1996. On January 9, 1997,
the Company announced the closing of its Romulus, Michigan facility. The Company
expects that the fabricated steel and fabricated aluminum wheel capacity
associated with its Romulus facility will be shifted to the Sedalia, Missouri
and Bowling Green, Kentucky facilities by the end of 1997. Management believes
that consolidating production from four facilities into two will allow the
Company to optimize capacity utilization and thereby reduce costs.
Competition. The Company's primary non-OEM competitors in the North
American steel wheel market for passenger cars and light trucks are
Rockwell-Fumagalli (a Brazilian subsidiary of Rockwell International), Accuride,
Topy and Central Manufacturing Company. The Company estimates that the
competitors held a combined share of approximately 34% of the steel wheel market
in 1996 while the OEMs together accounted for 31% of the market in 1996. The
Company believes that it is well-positioned to maintain its market share of
steel wheels at General Motors, Ford and Chrysler against non-OEM competition.
The Company remains vulnerable to increased sourcing of steel wheels by
General Motors and Ford to their respective wheel operations, which may win
contracts based on factors other than quality, price and efficiency. General
Motors supplied approximately 45% of its steel wheel needs in 1996 and 1995. In
1996, Ford supplied approximately 65% of its steel wheel needs, similar to 1995.
The Company believes, however, that, with OEMs becoming increasingly sensitive
to the cost of their products, and with new products such as styled steel and
fabricated aluminum wheels, it will be able to capture market share from the
OEMs. Neither General Motors nor Ford has production capability for stylized
steel wheels or fabricated aluminum wheels. The Company continues to work with
both General Motors and Ford on proposals to outsource their current in-house
production of steel wheels.
EUROPE
In October 1993, the Company and Nova Hut a.s. Ostrava ("Nova Hut")
established a joint venture company, named Hayes Wheels Autokola NH, a.s.
("Autokola") to manufacture fabricated steel and fabricated aluminum wheels in
the Czech Republic. The Company initially acquired a 45% interest in the joint
venture company, with the right (but not the obligation) to increase its
interest to 60% at any time. Effective October, 1996, the Company exercised this
option and increased its ownership to 58%. The Company and Nova Hut have granted
Autokola the exclusive right to sell its products in the Czech Republic, the
Slovak Republic, Poland, Romania, Croatia, Serbia and the other republics of
territories formerly comprising Yugoslavia, Albania, Bulgaria, Russia, the
Soviet Union and Hungary. The Company has signed a marketing assistance
agreement for sales outside the exclusive territories and a technical assistance
agreement with Autokola, under which it has licensed its wheel patents and other
technical information to Autokola and has agreed to furnish Autokola with
technical assistance. The Company will receive fees and commissions under the
former agreement and license fees and royalties under the latter.
Upon formation of the joint venture, Autokola had capacity to produce 1.5
million base steel wheels annually. Subsequent to the establishment of the joint
venture, capacity has been increased to 4.5 million fabricated steel and
fabricated aluminum wheels. Beginning in Fiscal 1996, Autokola began shipping
wheels to GM-Opel in Germany.
9
<PAGE> 10
Customers. Autokola's principal customer is Skoda, the national automobile
manufacturer of the Czech Republic, for which it is the sole supplier of wheels.
Sales related to the increased capacity relate primarily to Opel.
Manufacturing. Subsequent to the establishment of the joint venture,
Autokola completed a new paint facility and installed a new fabricated aluminum
wheel rim and assembly line and a steel wheel rim and assembly line. This
equipment is state-of-the-art and was required to meet the volume and quality
demands of Skoda and Autokola's new Western European customers.
Competition. Prior to the establishment of the joint venture, Autokola had
no competition as sole supplier to Skoda for steel wheels. As Autokola expands
into the Western European market, Autokola is experiencing increased competition
from other Western European companies as well as other Eastern European
companies.
AUTOMOTIVE BRAKE COMPONENTS
The Company manufactures automotive brake components consisting primarily
of composite metal drums and full cast drums for drum-type brakes and cast iron
rotors for disc brakes. Sales of automotive brake products accounted for
approximately 7% of the Company's net sales for fiscal 1996.
Customers. The Company sells substantially all of its automotive brake
components to Chrysler and Ford.
Manufacturing. The Company currently has three manufacturing facilities in
North America which produce brake components. These facilities currently include
Homer, Michigan, Ypsilanti, Michigan and a 75% owned subsidiary in Monterey,
Mexico. Prior to the Merger, Motor Wheel had announced that as a result of
maximizing manufacturing capacity and minimizing non-competitive costs, the
Ypsilanti, Michigan plant would be closed. The plant is expected to close during
the second quarter of fiscal 1997. Existing production will be transferred to
the remaining two facilities.
Competition. The principal non-OEM competitors of the Company for the sale
of automotive brake components include Kelsey-Hayes, Bosch, American Axle and
Racini. The Company believes that Kelsey-Hayes and Bosch supply brake drums and
rotors as well as anti-lock brake systems, while American Axle and Racini are
suppliers of brake rotors and drums. General Motors is also a significant
manufacturer of automotive brake components, installed primarily on General
Motors' vehicles.
COMMERCIAL HIGHWAY PRODUCTS
The Company manufactures disc wheels and demountable rims for commercial
highway vehicles. The Company also manufactures two-piece take-apart wheels for
certain special applications, the most significant of which is for the High
Mobility Multiple Purpose Wheeled Vehicle (the "Hummer") produced by AM General
Corporation. The Company manufactures brake components for commercial highway
vehicles consisting of Centrifuse(R) drums which can be assembled together with
iron or aluminum hubs and sold as a unit. Unlike conventional cast iron brake
drums, Centrifuse(R) drums are manufactured using a proprietary process to fuse
iron to a steel jacket to combine the advantages of iron and steel to produce a
lighter and stronger brake drum. The Company has achieved a significant market
share for this product which is supplied to OEMs almost exclusively as a result
of fleet specification. Sales of commercial highway products accounted for
approximately 13% of the Company's net sales for fiscal 1996.
Customers. The Company's largest customers for commercial highway wheels
and rims include Trailmobile, Strick and Great Dane Trailers, while its largest
customers for commercial highway brake components include Freightliner
Corporation, PACCAR and Dana Corporation. Sales to OEM/OES, and warehouse
distributors and others constituted approximately 67% and 33%, respectively, of
the Company's commercial highway net sales for 1996.
Manufacturing. The Company has two manufacturing facilities which produce
components for the commercial highway market. The Akron, Ohio facility produces
wheels and rims and the Berea, Kentucky facility produces brake components.
Competition. The Company competes for sales of commercial highway wheels,
rims and brake components on the basis of cost, delivery, quality and service.
The Company spends a considerable amount of effort
10
<PAGE> 11
obtaining fleet specifications where purchasers of commercial highway vehicles
specify to the OEMs the components to be used. The principal competitors of the
Company for the sale of commercial highway wheels and rims include Accuride
Corporation, Alcoa and Bosch. The Company believes that Accuride Corporation
predominantly supplies steel wheels, but also supplies aluminum wheels, while
Alcoa supplies aluminum wheels and Bosch supplies steel wheels and brake
components. The Company is the only producer of the Centrifuse(R) drum which
does not compete with full cast iron drums.
INVESTMENTS
The Company has additional interests, to the extent described below, in the
following entities located throughout the world:
(i) a 49% interest in Hayes Wheels de Venezuela, C.A., a steel wheel
manufacturer in Venezuela;
(ii) a 40% interest in Hayes Wheels de Mexico, S.A. de C.V. an aluminum
and steel wheel manufacturer in Mexico;
(iii) a 50% interest in Alumitech, a cast aluminum wheel manufacturer
in Somerset, Kentucky;
(iv) a 29.6% interest in Riviera Tool Company, a manufacturer of
stamping dies sold to domestic automobile manufacturers and their
suppliers;
(v) a 49% interest in Metalurgica FPS do Brasil, Ltda., a manufacturer
of aluminum wheels in Brazil; and
(vi) a 100% interest in Hayes Wheels Japan, Inc. a sales and service
support company in the Japanese wheel market.
In addition, the Company has a technical assistance agreement with ATP, a
wheel manufacturer in Thailand.
ENVIRONMENTAL COMPLIANCE
The Company, like most other manufacturing companies, is subject to and is
required from time to time to take action at its facilities to comply with
federal, state, local and foreign laws and regulations relating to pollution
control and protection of the environment. In this regard, the Company maintains
an ongoing compliance program to anticipate and, if necessary, correct
environmental problems.
The Company spent approximately $0.6 million for environmental compliance
and cleanup in Fiscal 1996. Company management believes that its Fiscal 1997 and
1998 expenditures for environmental compliance, including potential expenditures
for compliance with the permitting and other requirements of the federal Clean
Air Act, will not exceed a total of $3 million. The Company's cleanup program,
commenced in 1990, is scheduled to be completed in fiscal 1999, with average
annual amounts approximating $1.5 million. The Company believes it is in
material compliance with applicable federal, state, local and foreign laws and
regulations relating to pollution control and protection of the environment. See
"Item 3. Legal Proceedings."
EMPLOYEES
Approximately 28% of the Company's employees in the United States at
January 31, 1997, were represented by the United Auto Workers ("UAW") or United
Steel Workers ("USW"). Collective bargaining agreements with the UAW or USW
affecting these employees expire at various times through 1997 and 1998. As is
common in many European jurisdictions, substantially all of the Company's
employees in Europe are covered by country-wide collective bargaining
agreements. In Europe, bargaining agreements are often made on a local basis.
These agreements expire at various times through 1998. There are no Company-wide
or industry-wide bargaining units in the United States. The Company considers
its employee relations to be satisfactory. See "Item 2. Properties" for a
listing of employees by location.
ITEM 2. PROPERTIES
The Company operates twelve major manufacturing facilities in North
America, and has its headquarters in Romulus, Michigan. Total North American
manufacturing space exceeds 3.5 million square feet. Outside
11
<PAGE> 12
of North America, the Company operates four manufacturing facilities with
approximately 1.2 million square feet in the aggregate. The Company believes
that its plants are adequate and suitable for the manufacturing of products for
the markets in which it sells. Moreover, the Company believes that it maintains
adequate production capacity at its manufacturing facilities to meet current
product demand for cast aluminum wheels and steel wheels and brake components in
North America, cast aluminum wheels and steel wheels in Europe, and steel wheels
and brake components for the commercial highway market in North America and that
such capacity will be sufficient to meet projected product demand. To meet
projected demand for fabricated aluminum wheels in North America and Europe, the
Company expects to continue upgrading and expanding its current manufacturing
facilities.
The Company's manufacturing and research facilities are as follows:
<TABLE>
<CAPTION>
OWNED OR
LOCATION EMPLOYEES USE LEASED
-------- --------- --- --------
<S> <C> <C> <C>
Romulus, MI(a) 670 Fabricated Wheels, Headquarters Owned
and R&D
Howell, MI 370 Cast Aluminum Wheels Owned
Gainesville, GA 245 Cast Aluminum Wheels Owned
Huntington, IN 425 Cast Aluminum Wheels Owned
La Mirada, CA 580 Cast Aluminum Wheels Leased
Sedalia, MO 555 Fabricated Wheels Owned
Bowling Green, KY 185 Fabricated Wheels Leased
Ypsilanti, MI(a) 135 Automotive Brake Components Owned
Homer, MI 190 Automotive Brake Components Owned
Monterey, Mexico 90 Automotive Brake Components Leased
Akron, OH 155 Commercial Highway Wheels Owned
Berea, KY 140 Commercial Highway Brake Owned
Components
Barcelona, Spain 95 Cast Aluminum Wheels Owned
Dello, Italy 290 Cast Aluminum Wheels and R&D Owned
Campiglione Fenile, Italy 85 Cast Aluminum Wheels Leased
Ostrava, Czech Republic 620 Fabricated Wheels Owned
</TABLE>
- ---------------
(a) Plants scheduled to close during fiscal 1997.
The Company leases the former Motor Wheel headquarters in Okemos, Michigan
pursuant to a ten-year lease expiring in July 2004. The Company has subleased
these premises for the entire remaining term of its lease pursuant to a sublease
scheduled to commence in May 1997.
ITEM 3. LEGAL PROCEEDINGS
In the ordinary course of its business, the Company is a party to
litigation involving its operations and products, which may include allegations
as to safety and design. Except as described below, management believes that the
outcome of this litigation will not have a material adverse effect on the
consolidated operations or financial condition of the Company.
The Company is a party to two lawsuits, Joseph Golden et al. v Kelsey-Hayes
Company et al. and Richard Helwig et al. v Kelsey-Hayes Company, each of which
was brought in 1995 in the U.S. District Court for the Eastern District of
Michigan, pursuant to which salaried and union pensioners and their surviving
spouses have alleged that the Company breached its welfare benefit plans when
the Company amended such plans in 1992 and 1994. Although the Company denies all
substantive allegations of the plaintiffs in these lawsuits and is vigorously
defending these cases, in the event that these lawsuits are determined adversely
to the Company, the Company could be required to incur material costs to
maintain the pre-amendment terms of the Company's welfare benefit plans and to
reimburse the plaintiffs in these lawsuits for costs incurred by them since the
date of such amendments.
12
<PAGE> 13
The Company is a party to a patent infringement action, Lacks Incorporated
v Hayes Wheels International, Inc., et al. brought in March 1997 in the U.S.
District Court for the Eastern District of Michigan, regarding certain
proprietary processes which it uses and upon which it has patents. The Company
intends to vigorously defend this matter. The Company was served with the
complaint in this lawsuit on April 14, 1997 and, accordingly, is not yet in a
position to evaluate the impact, if any which this lawsuit may have on the
Company's financial condition or operations.
The Company has received notice of potential environmental liability
arising out of both its wheel and non-wheel businesses at fifteen (15) Superfund
sites (the "Sites") under the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended (CERCLA). Of the Sites, ten
(10) Sites were acquired from The Goodyear Tire & Rubber Co. ("Goodyear") in
1986 by Holdings. In connection with such transaction, Goodyear agreed to retain
all liabilities relating to these sites and to indemnify and hold the Company
harmless with respect thereto. Goodyear has acknowledged this responsibility and
is presently representing the interests of the Company with respect to all
matters relating to these Sites.
As a result of activities which took place at the Company's Howell,
Michigan facility prior to its acquisition by the Company, the State of Michigan
is performing a remedial investigation/feasibility study of PCB contamination at
such facility, and in the adjacent South Branch of the Shiawasee River. Under
the terms of a consent judgment entered into in 1981 by Cast Forge, Inc. (the
previous owner of this Site) and the State of Michigan, any additional PCB
cleanup which may be required is the responsibility of the State of Michigan,
and not of Cast Forge or its successors or assigns (including the Company). The
federal Environmental Protection Agency (the "EPA") has concurred in the consent
judgment. Since the time of the consent judgment, the State of Michigan has not
asserted that Cast Forge or the Company is liable for remediation at the site.
The Company and other parties have, however, received information requests from
the EPA and the State of Michigan. In addition, at the time the Company acquired
the corporation that owns the Howell facility, the Company received an indemnity
against liability arising from the prior use of PCBs at the site from
Multifastener Corp. ("Multifastener"), one of the stockholders in that
corporation. Although Multifastener has to date honored its indemnity
obligations, no assurance can be given that it will continue to do so. If the
State of Michigan takes the position that it has not retained liability for the
cleanup at this site, and if Multifastener should fail to honor all or part of
its indemnity obligations, the Company could be required to participate in
cleanup efforts mandated by the EPA or the State of Michigan. In such instance,
the Company's expenses with respect to cleanup of this Site potentially could
have a material adverse effect on the consolidated operations or financial
condition of the Company.
The Company has entered into settlements with various government agencies
and the other parties identified by the applicable agency as "potentially
responsible parties" to resolve its liability with respect to the remaining four
Sites.
The Company has also received notice of potential environmental liability
at three state-listed sites (two of which are company owned properties). Of
these, one was closed through delisting in early 1997. The Company is presently
working with the appropriate government agencies to resolve its liability with
respect to the remaining two sites.
While the Company remains potentially liable under CERCLA to the federal
and certain state governments with respect to the Sites, it believes that its
maximum financial exposure will be less than $3.8 million.
In addition to the Sites, the Company has received notice of potential
environmental liability at twelve (12) Superfund sites arising out of businesses
presently operated by Kelsey-Hayes. Kelsey-Hayes assumed and agreed to indemnify
the Company with respect to any liabilities associated with these sites.
Kelsey-Hayes has acknowledged this responsibility and is presently representing
the interests of the Company with respect to these sites.
Kelsey-Hayes, and in certain cases the Company, may remain liable with
respect to environmental cleanup costs in connection with certain divested
businesses, relating to aerospace, heavy-duty truck components and farm
implements, under Federal and state laws and under agreements with purchasers of
these divested businesses. The Company believes, however, that such costs in the
aggregate will not have a material adverse effect on the consolidated operations
or financial condition of the Company and, in any event,
13
<PAGE> 14
Kelsey-Hayes has assumed and agreed to indemnify the Company with respect to any
liabilities arising out of or associated with these divested businesses. See
"Item 13. Certain Relationships and Related Transactions," below.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
SUPPLEMENTAL INFORMATION
Executive Officers of the Registrant
The following table sets out the names and ages of each of the executive
officers of the Company, their present positions, the date on which they were
appointed to such positions and their business experience during the past five
years. All positions shown are with the Company or its subsidiaries unless
otherwise indicated. All executive officers are elected by the Board of
Directors of the Company and serve at its pleasure. There are no family
relationships among any of the executive officers, directors or persons
nominated for such positions and there is no arrangement or understanding
between any of the executive officers and any other person pursuant to which he
was selected as an officer.
<TABLE>
<CAPTION>
DATE OF
NAME TITLE AGE APPOINTMENT EXPERIENCE
---- ----- --- ----------- ----------
<S> <C> <C> <C> <C>
Ranko "Ron" Cucuz..... Chairman of the Board of 53 October Group President of the wheels
Directors; President 1992 division of the Company as it
and Chief Executive existed prior to the Reorganization,
Officer August 1992 to October 1992.
President, Steel Wheel Business Unit
(renamed Fabricated Wheels), June
1991 to October 1992.
Giancarlo Dallera..... Vice President -- 51 October Managing Director, Director and
President, European 1992 General Manager of Hayes Wheels,
Aluminum Wheels S.p.A., since April 1990, 1985 and
1981, respectively. Managing
Director of Hayes Wheels de Espana,
S.A., since October 1992.
Ronald L.
Kolakowski.......... Vice President -- 50 November Plant Manager, Sedalia Plant, June
President, North 1995 1993 to October 1995. Vice
American Aluminum President, U.S. Operations for Acco
Wheels Controls Group -- Babcock
Industries, January 1990 to May
1993.
William S. Linski..... Vice President -- 50 November Chairman, Supervisory Board of
President, Fabricated 1993 Autokola since October 1993. Vice
Wheels President, Operations -- Fabricated
Wheels, October 1992 to October
1993. Plant Manager, Sedalia Plant,
August 1988 to October 1992.
Michael C. McGrath.... Vice President -- 52 February Vice President and General Manager,
President, Commercial 1994 Kelsey-Hayes Parts Division,
Highway and Aftermarket February 1990 to January 1994.
Services
William D. Shovers.... Vice President -- Chief 43 February Director of Autokola since October
Financial Officer and 1993 1993. Director of Hayes Wheels,
Principal Accounting S.p.A. since February 1993. Vice
Officer President -- Finance, Monroe Auto
Equipment Company, a subsidiary of
Tenneco, Inc., November 1989 to
January 1993.
</TABLE>
14
<PAGE> 15
<TABLE>
<CAPTION>
DATE OF
NAME TITLE AGE APPOINTMENT EXPERIENCE
---- ----- --- ----------- ----------
<S> <C> <C> <C> <C>
Daniel M. Sandberg.... Vice President -- 37 March 1994 Director of Autokola since December
International 1996. Director of Hayes Wheels,
Operations, General S.p.A. since September 1994.
Counsel and Secretary Executive Vice President and General
Counsel, Kelter-Thorner, Inc.,
October 1990 to March 1994. General
Counsel and Secretary, Meadowdale
Foods, Inc., September 1988 to
September 1990.
Larry Karenko......... Vice President -- Human 47 October Federal Mogul Corporation: Group
Resources 1994 Human Resources Manager, Chassis
Products Operation, August 1993 to
October 1994; Group Human Resources
Manager, Powertrain Products
Operation, August 1992 to August
1993; Division Human Resources
Manager, Precision Forged Products
Division, June 1986 to August 1992.
John A. Salvette...... Treasurer 41 February Director, Investor Relations and
1995 Business Planning, May 1993 to
January 1995. Group Controller,
North American Aluminum Wheels, May
1990 to April 1993.
</TABLE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company had 22,390,518 shares of Common Stock outstanding and 101
record holders as of April 21, 1997. The Company's shares are traded on the
Nasdaq National Market System under the symbol "HAYS". Set forth below are the
high and low sales prices for the Company's Common Stock as reported on Nasdaq
for each quarterly period since July 2, 1996, the date of the Recapitalization.
All prices were restated to reflect the 2-for-1 stock split effected in the form
of a 100% stock dividend paid on January 6, 1997, to stockholders of record on
December 20, 1996.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
Quarter ended January 31, 1997............................ $22.750 $16.625
Quarter ended October 31, 1996............................ 16.875 13.875
July 2, 1996 through July 31, 1996........................ 16.000 14.750
</TABLE>
Since the Merger and Recapitalization, the Company has not paid dividends
on its Common Stock and does not intend to pay dividends in the foreseeable
future.
15
<PAGE> 16
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial data with
respect to the Company for the five fiscal years ended January 31, 1997. The
information set forth below should be read in conjunction with the section
entitled "Consolidated Financial Statements and Notes to Consolidated Financial
Statements" section of the 1996 Annual Report, which section is incorporated
herein by reference.
<TABLE>
<CAPTION>
(AMOUNTS IN MILLIONS, EXCEPT SHARE AMOUNTS) YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JANUARY 31, JANUARY 31, JANUARY 31, JANUARY 31, JANUARY 31,
1993 1994 1995 1996 1997
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales................................ $408.7 $428.2 $537.6 $611.1 $ 778.2
Depreciation and amortization............ 18.5 20.0 24.0 26.6 36.6
Interest expense, net.................... 33.8 13.6 13.4 15.0 48.5
Earnings (loss) before cumulative effect
of changes in accounting principles
and extraordinary items............... 3.6 24.6 29.9 28.4 (65.5)
Cumulative effect of change in accounting
principles............................ -- (24.6) -- -- --
Extraordinary items...................... -- -- -- -- 7.4
------ ------ ------ ------ --------
Net income (loss)........................ $ 3.6 $ -- $ 29.9 $ 28.4 $ (72.9)
====== ====== ====== ====== ========
BALANCE SHEET DATA:
Total assets............................. $499.9 $527.6 $589.6 $633.9 $1,183.1
Long-term debt........................... 102.1 104.0 112.7 129.0 710.2
Stockholders' equity (deficit)........... 191.9 184.8 216.4 245.4 (41.1)
COMMON STOCK DATA:
Earnings (loss) before cumulative effect
of change in accounting principles and
extraordinary items................... $ 0.20 $ 0.70 $ 0.85 $ 0.81 $ (2.36)
Cumulative effect of change in accounting
principles............................ -- (0.70) -- -- --
Extraordinary items, net of tax.......... -- -- -- -- (0.27)
------ ------ ------ ------ --------
Earnings (loss) per share................ $ 0.20 $ -- $ 0.85 $ 0.81 $ (2.63)
====== ====== ====== ====== ========
Dividends declared per share............. -- $ 0.03 $ 0.03 $ 0.03 $ 0.015
Average shares outstanding (in
thousands)............................ 18,202 35,148 35,148 35,148 27,703
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Sales of the Company's wheels and brake components produced in the United
States are directly affected by the overall level of passenger car, light truck
and commercial highway vehicle production of North American OEMs, while sales of
its wheels in Europe are directly affected by the overall vehicle production in
Europe. The North American and European automotive industries are sensitive to
the overall strength of their respective economies.
On December 9, 1996, the Company announced that it had signed a letter of
intent with Lemmerz, wherein the Company acknowledged its intent to buy 76.63%
of Lemmerz with the right to acquire the remaining interest at a later date.
Lemmerz is the leading full-line steel wheel supplier in Europe. Lemmerz
manufactures steel and aluminum wheels for automobiles and light trucks, and
steel wheels for heavy duty trucks. Management believes that the Company has
adequate sources of funding to finance this Acquisition.
If the Acquisition is consummated, the respective businesses of the Company
and Lemmerz will be combined. As a result, the results of operations of the
combined entity may not be comparable to the results of operations of the
Company prior to the Acquisition.
The discussion below does not take into account the execution of the
Lemmerz letter of intent or the Acquisition.
16
<PAGE> 17
Fiscal 1996 Compared to Fiscal 1995
The Company's net sales for Fiscal 1996 increased by $167.1 million or
27.0% as compared to Fiscal 1995. This increase was attributable to the
additional sales contributed by Motor Wheel which was acquired effective July 2,
1996 and increased volume in North America. These results were partially offset
by the General Motors strikes during the first, third and fourth quarters and
lower selling prices due to the pass-through of lower aluminum prices.
The Company's gross profit for Fiscal 1996 increased to $103.0 million or
13.2% of net sales, compared with $97.7 million or 16.0% of net sales for Fiscal
1995. The decrease in margin percentage was attributable to: (1) the write-down
of certain assets during the second quarter; (2) inefficiencies in former Motor
Wheel plants that are either being prepared for or are undergoing major
restructuring; and (3) production losses resulting from the General Motor
strikes.
Marketing, general and administrative expenses were $6.2 million higher for
Fiscal 1996 as compared with Fiscal 1995. However, these costs decreased from
4.9% of net sales for Fiscal 1995 to 4.6% of net sales for the current year due
to synergies being recognized as a result of the consolidation of the Hayes
Wheels and Motor Wheel headquarters.
Engineering and product development expenses increased $2.5 million for
Fiscal 1996 versus Fiscal 1995. This increase is due to additional engineering
and product development costs related to new product lines acquired as a result
of the merger and a decrease in recovery on engineering expenses related to the
timing of new programs.
Equity in loss of subsidiaries for Fiscal 1996 includes the 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. de
C.V., offset by earnings related to the Company's investment in Hayes Wheels de
Venezuela, C.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.
Other income increased by $3.0 million for Fiscal 1996 versus Fiscal 1995.
This increase is due to the recognition of a gain on the sale of the Company's
7.0% equity investment in Central Manufacturing Company located in Kentucky,
sale of molds and low pressure machines in the Company's European operations and
effects of currency exchange on transactions.
Nonrecurring charges of $115.4 million consist of a one-time charge for the
closing of the Company's Romulus, Michigan facility of $109.0 million,
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
Romulus plant closure consists of three main areas; (1) $63 million related to
the writedown of assets to their estimated realizable value based on the decline
in the steel wheel market since 1989 and the merger with Motor Wheel. This
reserve reflects the writedown of excess land, buildings and equipment to fair
value, as well as the writedown of certain tooling and goodwill; (2) $25 million
for estimated employee costs associated with pension and postretirement
benefits. As a result of the current contract related to the closing, additional
employees qualify for retirement benefits necessitating additional pension and
retiree medical liabilities; and (3) $21 million for estimated termination
benefits, costs to shutdown the facility and other miscellaneous costs.
Interest expense increased to $48.5 million for Fiscal 1996, an increase of
$33.5 million from Fiscal 1995. This change was primarily caused by increased
debt as a result of the acquisition of Motor Wheel and the recapitalization of
the Company and higher bank fees and interest rates associated with the this new
debt.
The extraordinary loss for bond defeasance represents 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.
Fiscal 1995 Compared to Fiscal 1994
The Company's net sales for Fiscal 1995 increased by $73.5 million or 13.7%
as compared with fiscal 1994. This increase was due to significant increased
unit volume in Europe, higher selling prices resulting from the pass through of
increased aluminum and steel costs and a shift in the Company's steel wheel
sales mix toward more highly styled full-face wheels.
17
<PAGE> 18
The Company's gross profit for Fiscal 1995 increased to $97.7 million or
16% of net sales, compared with $96.2 million or 17.9% of net sales for the same
period in 1994. The decrease in margin percentage was attributable to; (1)
higher selling prices, while maintaining the same profit level, resulting from
the pass through of increased aluminum and steel costs; (2) plant capacity
additions resulting in higher support costs that were not fully absorbed due to
softer customer demand; (3) customer delays of new product launches and (4) the
impact of the strike at the Company's Howell, Michigan facility.
Marketing, general and administrative expenses increased $1.1 million for
Fiscal 1995 as compared to Fiscal 1994. However these costs decreased from 5.3%
of net sales for fiscal 1994 to 4.9% of net sales for the current period.
During the fourth quarter of Fiscal 1995, the Company recognized
non-recurring charges of $3.6 million. These charges include a $1.4 million
provision associated with the restructuring of the North American Aluminum Wheel
group and $2.2 million of charges associated with the withdrawn Varity
Corporation proposal to purchase the Company's outstanding publicly held shares.
Interest expense increased to $15.0 million for Fiscal 1995, an increase of
$1.6 million over the same period of 1994. This change was due primarily to (1)
higher short term borrowing rates in the U.S.; (2) an increase in borrowing
levels to support working capital needs; and (3) higher bank fees associated
with the Company's U.S. bank facility which was increased in March 1995.
Capital Resources and Liquidity
The Company's operations provided $71.2 million in cash during fiscal 1996,
an increase of $26.3 million over the same period of fiscal 1995. This increase
is due to improved results of operations, excluding the effect of non-cash items
and improved management of working capital.
Capital expenditures for Fiscal 1996 amounted to $71.4 million. These
capital expenditures include the acquisition of machinery and equipment
primarily for additional production capacity at our North American facilities to
meet future customer requirements for fabricated aluminum and FFC(TM) wheels.
The Company anticipates capital expenditures for fiscal 1997 will be
approximately $77 million.
The Company is party to a credit agreement dated June 27, 1996 ("the Credit
Agreement") with Canadian Imperial Bank of Commerce ("CIBC"), and Merrill Lynch
Capital Corporation (together the "Managing Agents"). Pursuant to the Credit
Agreement, among other things, the Managing Agents have committed to lend to the
Company up to $423.5 million in the form of a senior secured term loan facility,
such aggregate amount being allocated among (i) a Tranche A Term Loan facility
in an aggregate principal amount of up to $198.5 million, (ii) a Tranche B Term
Loan Facility in an aggregate principal amount of up to $125 million and (iii) a
Tranche C Term Loan Facility in an aggregate principal amount of up to $100
million (collectively, the "Facilities"), and up to $220 million in the form of
a senior secured revolving credit facility (the "Revolving Facility", and,
together with the Facilities, the "Loans"). The Facilities are guaranteed by the
Company and all of its existing and future domestic subsidiaries. The Facilities
are secured by a first priority lien in substantially all of the properties and
assets of the Company and its domestic subsidiaries, now owned or acquired
later, including a pledge of all of the shares of certain of the Company's
existing and future domestic subsidiaries and 65% of the shares of certain of
the Company's existing and future foreign subsidiaries. As of January 31, 1997,
there was $423.5 million outstanding under these Facilities and $220 million
available under the Revolving Facility.
In connection with the 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 "Senior Subordinated Notes") in a public
offering. The Senior Subordinated 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.
18
<PAGE> 19
At January 31, 1997, the Company was in compliance with the various
covenants under the agreements pursuant to which it may borrow money. Management
expects that the Company will remain in material compliance with these covenants
through the period ending January 31, 1998.
During the next five years, the Company believes that its cash requirements
for working capital, capital expenditures, interest and debt repayments will be
met through internally generated funds and utilization of available borrowing
sources.
The Company does not believe that sales of its products are materially
affected by inflation, although there can be no assurance that such an effect
will not occur in the future. In accordance with industry practice, the costs or
benefits of fluctuations in aluminum prices are passed through to customers. In
the United States, the Company adjusts the sales prices of its aluminum wheels
every three months, if necessary, to reflect fully any increase or decrease in
the price of aluminum. A general decline in aluminum prices in Fiscal 1996 and
higher prices in Fiscal 1994 (approximately 70% increase) have been passed
through to the Company's customers. As a result, the Company's net sales of
aluminum wheels were adjusted, although gross profit per wheel was not
materially affected. Prices remained relatively stable during Fiscal 1995. From
time to time, the Company enters into futures contracts or purchase commitments
solely to hedge against possible aluminum price changes that may occur between
the dates of aluminum wheel price adjustments. Pricing and purchasing practices
are similar in Europe, but opportunities to recover increased material costs
from customers are more limited than in the United States. These arrangements
typically relate on average up to 50% of the Company's production needs for the
next three to six months.
The value of the Company's consolidated assets and liabilities located
outside the United States (which are translated at period end exchange rates)
and income and expenses (which are translated using average rates prevailing
during the period) have been affected by the translation values, particularly
those of the Italian lira and Spanish peseta. Such translation adjustments are
reported as a separate component of stockholders' equity. While foreign exchange
rate fluctuations have historically not had a significant impact on the
Company's reported results of operations, the recent devaluations of the Italian
lira and Spanish peseta may result in lower translated values. However, due to
the self-sustaining nature of these businesses (which maintain their own credit
facilities and incur costs in their respective local currencies), the financial
effect of these devaluations is expected to be minimal.
The Company's net sales are continually affected by pressure from its major
customers to reduce prices. The Company's emphasis on reduction of production
costs, increased productivity and improvement of production facilities may
enable the Company to respond to this pressure.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the "Consolidated Financial Statements and Notes to
Consolidated Financial Statements" section of the 1996 Annual Report, which
section is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The following sets forth certain information with respect to the directors
of the Company:
RANKO ("RON") CUCUZ, age 53, was elected Chairman of the Board of Directors
of the Company in July 1996, and has been President, Chief Executive Officer and
a Director of the Company since October 1992. He also serves as Chairman of the
Management Board of Hayes Wheels Autokola NH, a.s., the Company's joint venture
located in the Czech Republic, as a director of Hayes Wheels, S.p.A. (Italy) and
Hayes Wheels de Espana, S.A. (Spain), the Company's wholly owned subsidiaries,
and serves as Chairman of each of the Aluminum Wheel subsidiaries. From August
1992 to October 1992, Mr. Cucuz served as Group President of the Wheels Division
of the Company as it existed prior to the Reorganization. Previously, Mr. Cucuz
was President of the Steel Wheels (renamed Fabricated Wheels) Business Unit from
June 1991 to October 1992.
19
<PAGE> 20
CLEVELAND A. CHRISTOPHE, age 51, has been a Director of the Company since
July 1996. Mr. Christophe has been a Managing Partner and major shareholder of
TSG Capital Group, L.L.C. since January 1995, and a director and the President
of TSG Associates II, Inc. since January 1995. He has served as a principal, a
director and the Executive Vice President of TSG Ventures Inc. (formerly known
as Equico Capital Corporation ("Equico")), a private equity investment firm,
since May 1992. From February 1990 to May 1992, Mr. Christophe was a Vice
President of Equico. Mr. Christophe is also a director of Envirotest Systems
Corporation.
TIMOTHY J. CLARK, age 32, has been a Director of the Company since July
1996. Mr. Clark is a principal of Joseph Littlejohn and Levy ("JLL") (the
managing general partner of Joseph Littlejohn and Levy Fund II, L.P.), which he
joined in 1993. Prior to that time, Mr. Clark was corporate planning manager of
Edgcomb Metals Company and a financial analyst at the Blackstone Group. Mr.
Clark is also a director of Freedom Chemical Company ("Freedom").
ANDREW R. HEYER, age 39, has been a director of the Company since April
1997. Mr. Heyer has been a Managing Director and co-head of the High Yield Group
of CIBC Wood Gundy Securities Corp. since August 1995. From February 1990 until
July 1995, Mr. Heyer was a founder and the Managing Director of The Argosy
Group, an investment banking firm. Mr. Heyer is Chairman of the Board of The
Hain Food Group and a director of Niagara Corporation.
PETER A. JOSEPH, age 45, has been a Director of the Company since July
1996. Mr. Joseph has been a partner of JLL from its inception on 1988. Mr.
Joseph is also a director of Freedom, OrNda HealthCorp ("OrNda"), Lancer
Industries, Inc. ("Lancer"), Foodbrands America, Inc. ("Foodbrands") and
Fairfield Manufacturing Company, Inc. ("Fairfield"). Mr. Joseph is also
President and Secretary of Lancer and Vice President and Secretary of Fairfield.
PAUL S. LEVY, age 49, has been a Director of the Company since July 1996.
Mr. Levy has been a partner of JLL from its inception in 1988. Mr. Levy has
served as Chairman of the Board of Directors and Chief Executive Officer of
Lancer since July 1989. Mr. Levy is also a director of Foodbrands, OrNda and
Fairfield. Mr. Levy is also Vice President and Assistant Secretary of Fairfield.
JOHN S. RODEWIG, age 63, has been a Director of the Company since December
1992. He served as President of Eaton Corporation ("Eaton") and as its Chief
Operating Officer -- Vehicle Components from 1992 until his retirement on
January 1, 1996. He served as President of the Truck Components Group of Eaton
from 1991 to 1992. Mr. Rodewig also serves as Chairman of the Board of Directors
of Eaton Limited (United Kingdom) and as a director of FKI plc and AP Parts
International.
In connection with the Merger, JLL Fund II, TSG Capital Fund II, L.L.P.
("TSG"), CIBC WG Argosy Merchant Fund 2, L.L.C. ("Argosy"), Nomura Holding
America, Inc. and Chase Equity Associates (together, the "New Investors")
entered into a Stockholders' Agreement with the Company (the "Stockholders'
Agreement") which relates to, in the aggregate, approximately 76.6% of the
Company's outstanding Common Stock. This Stockholders' Agreement, as amended as
of April 8, 1997, provides that certain of the New Investors will vote their
shares of Common Stock so that the Board of Directors of the Company will be
comprised of nine directors, consisting of the Chief Executive Officer of the
Company (currently, Mr. Cucuz), four designees of JLL Fund II (currently,
Messrs. Clark, Joseph and Levy), one designee of TSG (currently, Mr.
Christophe), one designee of Argosy (currently, Mr. Heyer) and two individuals
determined by the Board who are not affiliated with the Company or any of the
parties to the Stockholders' Agreement. Mr. Marcos A. Rodriquez, formerly a
partner of JLL, and Mr. Kenneth L. Way recently resigned from the Company's
Board of Directors, leaving two vacancies.
Pursuant to the Company's Certificate of Incorporation, the Board of
Directors is divided into three classes, each consisting as nearly as may be
possible, of one-third of the total number of directors. Class I directors
(Messrs. Joseph and Heyer) are serving for a term that expires at the 1997
Annual Meeting of Stockholders of the Company, Class II directors (Messrs. Cucuz
and Clark) are serving for a term that expires at the 1998 Annual Meeting of
Stockholders of the Company and Class III directors (Messrs. Christophe, Levy
and Rodewig) are serving for a term that expires at the 1999 Annual Meeting of
Stockholders of the Company. At each annual meeting of stockholders, successors
to the class of directors whose terms expire at that annual meeting will be
elected by stockholders for a three-year term and until their successors are
duly elected and qualified. Any director elected to fill a vacancy resulting
from an increase in
20
<PAGE> 21
any class or from the removal from office, death, disability, resignation or
disqualification of a director or other cause will hold office for the remaining
term of the class in which such vacancy existed.
Except as described above, there are no arrangements or understandings
between any director and any other person pursuant to which he was selected as a
director.
Certain information respecting the officers of the Company appears at the
end of Part I of this Annual Report on Form 10-K under the caption
"Supplementary Information -- Executive Officers of the Registrant."
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY OF COMPENSATION FOR FISCAL 1996
The following summary compensation table sets forth certain information
concerning compensation for services in all capacities awarded to, earned by or
paid to the Company's Chief Executive Officer and each of the four other most
highly compensated executive officers (the "Named Executive Officers") for
Fiscal 1996, Fiscal 1995 and Fiscal 1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------- ---------------------
AWARDS PAYOUTS
OTHER ---------- -------
ANNUAL SECURITIES LTIP ALL OTHER
FISCAL SALARY BONUS COMPENSATION UNDERLYING PAYOUTS COMPENSATION
NAME YEAR ($) ($) ($)(1) OPTIONS(2) ($) ($)(3)
---- ------ ------- ------- ------------ ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cucuz, Ranko....................... 1996 389,502 366,076 649,366 857,731 -- 3,000
CEO, President 1995 322,000 --
1994 244,000 109,941
Dallera, Giancarlo(4).............. 1996 228,000 137,902 112,343 194,586 -- --
Vice President -- 1995 215,000 --
President, European 1994 182,927 88,960
Aluminum Wheels
Linski, William S.................. 1996 188,000 107,706 205,145 185,586 -- 3,000
Vice President -- 1995 165,000 --
President, Fabricated 1994 135,000 52,563
Wheels
Sandberg, Daniel M................. 1996 168,000 88,240 71,851 145,239 -- 3,000
Vice President -- 1995 147,000 --
International 1994 114,457 26,404
Operations, General
Counsel and Secretary
Shovers, William D................. 1996 214,500 129,896 336,226 190,086 -- 3,000
Vice President -- 1995 190,000 --
Chief Financial Officer 1994 172,000 70,902
</TABLE>
- ---------------
(1) In connection with the Merger, certain officers of the Company (including
all those listed above) were required by the New Investors to exercise
certain stock options which they held at the time. As consideration for such
requirement, the Company agreed to compensate such officers for the tax
liabilities to be incurred by them as a result of such option exercise. The
amounts listed above are the amounts paid to compensate the listed officer
for such tax liabilities.
(2) Shares of the Company's Common Stock. All amounts have been restated to
reflect the two-for-one stock split effected in the form of a 100% stock
dividend (the "Stock Split") paid on January 6, 1997, to the Company's
shareholders of record as of December 20, 1996. Includes options granted
under the Company's 1992 Stock Incentive Plan (the "1992 Plan") and the
Company's 1996 Stock Option Plan (the "1996 Plan"). The options granted
under the 1996 Plan are effective as of July 2, 1996, pending approval of
such plan by the Company's Board of Directors and the Company's
stockholders. See "Item 11. Executive Compensation -- Option Grants in
Fiscal 1996" below.
(3) Matching contributions accrued under the Company's Retirement Savings Plan.
(4) Mr. Dallera's salary is paid in Italian lira and his bonus is paid in U.S.
dollars. The U.S. dollar amount for Mr. Dallera's salary was calculated
using the exchange rate of 1 lira = 0.00064 dollars.
21
<PAGE> 22
OPTION GRANTS IN FISCAL 1996
The following tables sets forth certain information respecting grants of
stock options during Fiscal 1996 under the 1992 Plan and the 1996 Plan:
OPTIONS GRANTED UNDER 1992 PLAN
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENT OF PER SHARE AT ASSUMED ANNUAL RATES
SECURITIES OPTIONS EXERCISE OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO OR FOR OPTION TERM(1)
NAME OF OPTIONEE AND OPTIONS EMPLOYEES IN BASE EXPIRATION ---------------------------
TYPE OF OPTION(2) GRANTED(3) FISCAL 1996(4) PRICE(3) DATE 5% 10%
-------------------- ---------- --------------- --------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Cucuz, Ranko
Premium.................. 97,300 21.54% $10.00 2/19/06 $611,044 $1,550,962
FMV...................... -- -- -- -- -- --
Dallera, Giancarlo
Premium.................. 17,000 3.76% 10.00 2/19/06 106,760 270,980
FMV...................... 25,500 5.64% 10.00 2/19/06 160,140 406,470
Linski, William S.
Premium.................. 13,400 2.97% 10.00 2/19/06 84,152 213,596
FMV...................... 20,100 4.45% 10.00 2/19/06 126,228 320,394
Sandberg, Daniel M.
Premium.................. 7,400 1.64% 10.00 2/19/06 46,472 117,956
FMV...................... 11,100 2.46% 10.00 2/19/06 69,708 176,934
Shovers, William D.
Premium.................. 15,200 3.36% 10.00 2/19/06 95,456 242,288
FMV...................... 22,800 5.05% 10.00 2/19/06 143,184 363,432
</TABLE>
- ---------------
(1) Values are reported net of the option's exercise price, but before taxes
associated with exercise. These values are calculated using assumed rates
of appreciation prescribed by the Securities and Exchange Commission.
(2) "FMV Options" were granted at an exercise price equal to the closing market
price per share of Common Stock on the trading day immediately prior to
their grant date and, at the time of grant, became cumulatively exercisable
in thirds on the first, second and third anniversaries of their grant date
or, if earlier, on the date on which the Premium Options granted on the
same date become exercisable. "Premium Options" have the same exercise
price as the FMV Options, but, at the time of grant, the Premium Options
were not to become exercisable until nine years after their grant date or,
if earlier, on the business day after the closing price for Common Stock,
as reported on the New York Stock Exchange (the exchange upon which the
Company's Common Stock traded at the time of grant), shall have equaled or
exceeded $25.94 for ten consecutive trading days. Notwithstanding the
foregoing, in connection with the transactions contemplated by the Merger,
on July 2, 1996, the Company exchanged all the options granted during
Fiscal 1996 under the 1992 Plan to acquire shares of the Company's Common
Stock prior to the Recapitalization for an equal number of options to
acquire shares of Common Stock. The exercise price of such options remained
unchanged at $10.00 per share and, as the terms of such options provided,
they became exercisable upon a change in control of the Company on such
date.
(3) All options granted during Fiscal 1996 under the 1992 Stock Option Plan were
granted on February 20, 1996 at a price of $20.00 per share. As described
in footnote (2) above, all such options were exchanged in connection with
the Merger for options to acquire an equal number of shares of Common Stock
at exercise prices which remained unchanged. The number of options granted
and the exercise price, however, have been restated to reflect the Stock
Split which occurred on January 6, 1997.
(4) Percentages reflect percentage of options granted during Fiscal 1996 under
the 1992 Plan only.
22
<PAGE> 23
OPTIONS GRANTED UNDER 1996 PLAN(1)
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
NUMBER OF PERCENT OF ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO PER SHARE FOR OPTION TERM(2)
NAME OF OPTIONEE AND OPTIONS EMPLOYEES IN EXERCISE OR EXPIRATION ------------------------------
TYPE OF OPTION(3) GRANTED(4) FISCAL 1996(5) BASE PRICE(4) DATE 5% 10%
-------------------- ---------- -------------- ------------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Cucuz, Ranko............ 760,431 40.00% $16.00 7/02/06 $1,528,160 $5,324,226
Dallera, Giancarlo...... 152,086 8.00% 16.00 7/02/06 305,632 1,064,838
Linski, William S....... 152,086 8.00% 16.00 7/02/06 305,632 1,064,838
Sandberg, Daniel M...... 126,739 6.67% 16.00 7/02/06 254,695 887,348
Shovers, William D...... 152,086 8.00% 16.00 7/02/06 305,632 1,064,838
</TABLE>
- ---------------
(1) The 1996 Plan has been adopted and approved by the Compensation Committee of
the Company's Board of Directors, but has not yet been approved and adopted
by the full Board of Directors of the Company or by the Company's
stockholders. Until such time as such approvals are obtained, the options
granted under the 1996 Plan are not effective or exercisable (even if all
other conditions to vesting and exercise described in footnote (3) below are
met). The Company will seek to obtain all necessary approvals for the 1996
Plan at or before the Annual Meeting of Stockholders to be held during
fiscal 1997. If such approvals are obtained, all stock option grants
reported in this table will be effective retroactively to July 2, 1996.
(2) Values are reported net of the option's exercise price, but before taxes
associated with exercise. These values are calculated using assumed rates of
appreciation prescribed by the Securities and Exchange Commission.
(3) The options under the 1996 Plan were granted at an exercise price equal to
the cash consideration payable for shares of the Company's Common Stock in
connection with the Merger. Each such option grant is divided into five
tranches (each, a "Tranche") of an equal number of options. The options in
each such Tranche vest when both of the following conditions have been met:
(a) 20% of each Tranche vests on the last day of each fiscal year commencing
on January 31, 1997, and continuing until January 31, 2001, if the employee
to whom they were granted is then still an employee of the Company; and (b)
the average share price for any twenty consecutive day period on the
principal exchange upon which the Common Stock is traded equals or exceeds
certain specified prices (the "Target Prices") ranging from $16.00 per share
for the first Tranche and increasing ratably to $80.00 per share for the
fifth Tranche. A particular Target Price need only be reached on one
occasion for all options within the Tranche to which such Target Price
relates to become vested, subject to the satisfaction of the condition to
such vesting set forth in clause (a) above. In addition, notwithstanding the
foregoing conditions to vesting, the options granted under the 1996 Plan
become exercisable nine years after their grant date if the employee to whom
they were granted is then still an employee of the Company. The Company's
Common Stock has traded at the prices necessary to allow the options in the
first Tranche to vest, subject to the satisfaction of the condition to such
vesting set forth in clause (a) above. Accordingly, in the event the 1996
Plan does receive all necessary approvals, 20% of the first Tranche options
granted to each executive officer are now vested and exercisable.
(4) All options granted during Fiscal 1996 under the 1996 Stock Option Plan were
granted effective as of July 2, 1996, at a price of $32.00 per share. The
number of options granted, the exercise price and the vesting prices,
however, have been restated to reflect the Stock Split which occurred on
January 6, 1997.
(5) Percentages reflect percentage of options granted during Fiscal 1996 under
the 1996 Plan only.
23
<PAGE> 24
AGGREGATE OPTION EXERCISES IN FISCAL 1996 AND JANUARY 31, 1997 OPTION VALUE(1)
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS AT
SHARES ACQUIRED AT JANUARY 31, 1997 JANUARY 31, 1997
NAME ON EXERCISE VALUE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- --------------- -------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Cucuz, Ranko............ 48,710 $779,383 210,717/730,014 $1,205,173/$547,511
Dallera, Giancarlo...... 21,064 337,028 71,383/146,003 486,438/ 109,503
Linski, William S. ..... 15,388 246,220 58,483/146,003 390,746/ 109,503
Sandberg, Daniel M...... 5,388 86,328 31,070/121,669 223,155/ 91,251
Shovers, William D...... 20,494 327,924 68,083/146,003 440,222/ 109,503
</TABLE>
- ---------------
(1) No stock appreciation rights have been granted in connection with any stock
options.
PENSION PLAN
The Company maintains a defined benefit pension plan covering all persons
who were United States salaried employees of the Company and its subsidiaries on
or before December 31, 1994. Pension income at normal retirement age is
calculated by averaging the participant's highest consecutive 60 months of
compensation out of the final 120 months of compensation and providing 1% of the
first $7,800 thereof and 1 1/3% of the remainder for each of the first 30 years
of service, and 1/2% and 2/3% of such compensation, respectively, for each of
the next 10 years of service. Benefits under the Company's pension plan are
limited by restrictions imposed by the Internal Revenue Code of 1986, as amended
(the "Code"). Prior to the IPO in 1992, the eligible United States salaried
employees of the Company participated in a pension plan sponsored by K-H. K-H
transferred the assets and liabilities of its plan relating to participants
employed in the Company's wheel business to the Company's pension plan, in
accordance with the requirements of the Employee Retirement Income Security Act
of 1974, as amended. Effective January 1, 1995, (1) certain provisions of the
plan that had frozen final average compensation for purposes of the plan as of
December 31, 1991, were rescinded, (2) no new participants may enter the plan
and (3) for purposes of calculating benefits payable under the plan, no
additional service may be credited under the plan; however, service continues to
be credited under the plan for vesting purposes and to determine eligibility for
retirement benefits under the plan. In addition, increases in compensation will
be recognized under the plan for purposes of determining pensions.
The following table illustrates the annual pension benefits payable from
the Company's defined benefit pension plan to a person in the specified earnings
and years of service classifications at normal retirement date.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
COVERED --------------------------------------------------------------
COMPENSATION 10 15 20 25 30 35
- ------------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
$ 50,000 ............... $ 6,407 $ 9,610 $12,813 $16,017 $19,220 $20,822
100,000 ............... 13,073 19,610 26,147 32,683 39,220 42,488
150,000 ............... 19,740 29,610 39,480 49,350 59,220 64,155
200,000 ............... 19,740 29,610 39,480 49,350 59,220 64,155
250,000 ............... 19,740 29,610 39,480 49,350 59,220 64,155
300,000 ............... 19,740 29,610 39,480 49,350 59,220 64,155
350,000 ............... 19,740 29,610 39,480 49,350 59,220 64,155
400,000 ............... 19,740 29,610 39,480 49,350 59,220 64,155
</TABLE>
Base salary is the only compensation upon which benefits under this plan
are determined.
24
<PAGE> 25
All of the individuals named in the Summary Compensation Table, except Mr.
Dallera, are participants in the pension plan described above, and each had
covered compensation and years of service as set forth below:
<TABLE>
<CAPTION>
COVERED YEARS OF
NAME COMPENSATION SERVICE
- ---- ------------ --------
<S> <C> <C>
Cucuz, Ranko............................................. $150,000 5
Linski, William S........................................ 150,000 4
Sandberg, Daniel M....................................... 150,000 3
Shovers, William D....................................... 150,000 4
</TABLE>
The covered compensation amounts set forth in the above table differ from the
amounts set forth in the Summary Compensation Table because of limitations
contained in the Code on compensation permitted to be used for pension plan
purposes.
The Pension Plan Table shows amounts that are payable in the form of a
straight-life annuity; such amounts are not subject to offset for Social
Security or any other payments.
Effective January 1, 1995, the Company adopted a defined contribution
pension plan for its United States salaried employees, under which, the Company
contributes to a retirement account for each eligible employee 5% of his
compensation up to the amount of the Social Security wage base ($62,700 in 1996)
plus 8% of his compensation over the amount of the Social Security wage base.
Compensation, for purposes of this plan, includes salary, bonus and commissions,
but is limited to a maximum of $150,000 under provisions of the Code. The
retirement account is invested at the direction and risk of the employee, who is
entitled, subject to certain vesting requirements, to the contents of his
account when his employment terminates at retirement or otherwise. The Company
does not assure the employee of the amount of his retirement benefit or the
value of this account at any time.
COMPENSATION OF DIRECTORS
The Company's independent directors (those who are not Company employees
and are not affiliated with any of the New Investors) receive an annual retainer
of $20,000, a fee of $1,000 for each Board or committee meeting attended and are
reimbursed for expenses incurred in attending Board and/or committee meetings.
All other directors of the Company do not receive any retainer, fees or
reimbursement for their participation as directors.
COMPENSATION COMMITTEE INTERLOCKS
The members of the Compensation Committee of the Board of Directors are
Messrs. Christophe and Rodewig.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company, through its subsidiary, Hayes Wheels, S.p.A. ("HWI Italy"),
entered into an employment agreement with Mr. Dallera, dated February 1, 1993,
as amended on June 6, 1996, that provides for his employment as General Manager
of HWI Italy at an initial base salary which automatically increases annually
following increases in an index commonly used to determine the cost of living
increases for senior managers in Italy. For Fiscal 1996, Mr. Dallera's base
salary was $228,000 (translated from Italian lire at the rate of 1 lira =
0.00064 US Dollar). Under this agreement, Mr. Dallera is entitled to all HWI
Italy employee benefits; his annual bonus, however, is based upon the criteria
established for the other executive officers of the Company. The agreement
expires by its terms on December 31, 2003, or in the event of Mr. Dallera's
death.
The Company entered into separate agreements dated November 6, 1995 (the
"Company Severance Agreements"), with nine executive officers and three other
employees of the Company (the "Covered Individuals"), including Messrs. Cucuz,
Dallera, Linski, Sandberg and Shovers pursuant to which, upon a change of
control of the Company (as defined therein), each Covered Individual, including
Covered Individuals whose employment with the Company is terminated in
anticipation of a change of control, is entitled to an immediate payment of all
earned but unpaid compensation, including any unpaid bonuses for
25
<PAGE> 26
previous fiscal years and a pro rata bonus payment (based on Highest
Compensation (as defined below) and the greater of normative bonus percentage
and estimated projected bonus percentage) for the current fiscal year under any
bonus plan for which he is then eligible.
In addition, the Company Severance Agreements provide that each Covered
Individual whose employment with the Company is terminated: (i) by the Company
upon a change of control or in anticipation of a change of control; (ii) by the
Company, other than for cause or as a result of death or disability, within
three years following a change of control; or (iii) voluntarily by such Covered
Individual, within three years following a change of control, because of a
change in the material terms of his employment (such as compensation or
responsibilities), is entitled to a lump sum cash payment, payable within 30
days of such termination, in the aggregate amount of: (a) for all Covered
Individuals, earned but unpaid compensation, less any payment previously made in
respect of such amount; (b) for all Covered Individuals, the product of the
individual's Highest Compensation, his highest normative bonus percentage in the
immediately preceding three fiscal years and the fraction of the current fiscal
year expired at the time of such termination, less any payments previously made
in respect of such amounts upon such change of control; (c) with respect to
eight Covered Individuals (including the five currently most highly compensated
executive officers) three times, with respect to one Covered Individual two
times and with respect to three Covered Individuals one times the sum of (x) the
individual's Highest Compensation and (y) the product of his Highest
Compensation and his highest normative bonus percentage in the immediately
preceding three fiscal years; (d) 20% of Highest Compensation with respect to
three Covered Individuals, 40% of Highest Compensation with respect to one
Covered Individual and with respect to eight Covered Individuals (including the
five currently most highly compensated executive officers), the greater of 60%
of the individual's Highest Compensation and $100,000; and (e) for all Covered
Individuals, an amount equal to any accrued but unvested account balances as of
the date of termination and the actuarial present value of any accrued but
unvested benefits other than account balances that as a result of termination
are forfeited under any qualified or nonqualified Company retirement or pension
plan. The Company Severance Agreements also provide that each such Covered
Individual is also entitled to have the Company (i) continue for at least three
years for eight Covered Individuals (including the five currently most highly
compensated executive officers), at least two years for one Covered Individual
and at least one year for three Covered Individuals, all welfare benefit
programs, such as medical and life, provided by the Company and its affiliated
companies; (ii) for eight Covered Individuals (including the five currently most
highly compensated executive officers), timely pay or provide any other amounts,
including reimbursable expenses incurred prior to the date of termination, or
benefits required or permitted under any plan, program, policy, practice,
contract or agreement of the Company and its affiliated companies (subject to
limitations); (iii) provide the title to the individual's Company automobile for
eight Covered Individuals (including the five currently most highly compensated
executive officers), or make a cash payment equal to the value of such
automobile in certain cases; and (iv) for all Covered Individuals, provide key
executive level outplacement services.
The Company Severance Agreements define Highest Compensation as twelve
times a Covered Individual's highest monthly cash compensation (not including
any bonus), whether current or deferred, at any time during the period
commencing on the first day of the calendar month containing the 365th day prior
to the day a change of control occurs and ending on the date of the termination
of such Covered Individual's employment with the Company.
The Company Severance Agreements also contain provisions regarding
termination of employment upon disability, death, and other certain
circumstances. In addition, if any payments or benefits paid to the Covered
Individuals under the Company Severance Agreements or any other plan,
arrangement or agreement with the Company are subject to the federal excise tax
on excess parachute payments or any similar state or local tax, or any interest
or penalties are incurred with respect thereto, the Company will pay to the
Covered Individuals an additional amount so that the net amount retained by the
Covered Individuals after deduction or payment of those taxes will be as if no
such tax, interest or penalty were imposed.
The Merger constituted a change of control under the Company Severance
Agreements. Consequently, the Covered Individuals received cash payments
consisting solely of a pro rata portion of the annual bonuses which would
otherwise have been payable to them in the following amounts: Mr. Cucuz,
$88,500; Mr. Dallera, $45,600; Mr. Linski, $35,798; Mr. Sandberg, $31,999; Mr.
Shovers, $40,800; and in the aggregate, $402,438. See "Item 12. Security
Ownership of Certain Beneficial Owners and Management -- Changes in Control".
26
<PAGE> 27
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The names and ownership positions of stockholders who, to the knowledge of
the Company (based on filings with the Securities and Exchange Commission (the
"Commission")), were the beneficial owners of more than 5% of the outstanding
Common Stock of the Company on April 30, 1997, and certain other information,
are set forth in the following table:
<TABLE>
<CAPTION>
PERCENT OF OWNERSHIP PERCENT OF OWNERSHIP
OF SHARES OF OF SHARES OF
NAME AND ADDRESS SHARES OF COMMON STOCK COMMON STOCK
OF BENEFICIAL OWNER COMMON STOCK WARRANTS(1) (EXCLUDING WARRANTS)(2) (INCLUDING WARRANTS)(3)
- ------------------- ------------ ----------- ----------------------- -----------------------
<S> <C> <C> <C> <C>
Joseph Littlejohn & Levy Fund
II, L.P...................... 9,634,176 1,825,376 43.3% 46.1%
450 Lexington Avenue
Suite 3350
New York, New York 10017
TSG Capital Fund II, L.P..... 2,812,500 67,500 12.6% 11.6%
177 Broad Street
12th Floor
Stamford, Connecticut 06901
CIBC WG Argosy Merchant Fund
2, L.L.C..................... 2,500,000(4) 60,000 11.2% 10.3%
425 Lexington Avenue
Third Floor
New York, New York 10017
LucasVarity plc(5)........... 1,628,800 -- 7.3% 6.6%
9 Upper Belgrave Street
London SWIX 8BD, England
Chase Equity Associates,
L.P.......................... 1,250,000(6) 30,000 5.6% 5.1%
380 Madison Avenue
12th Floor
New York, New York 10017
</TABLE>
- ---------------
(1) Each Warrant allows the holder thereof to acquire one share of Common Stock
for a purchase price of $24.00. The Warrants are exercisable from July 2,
2000 through July 2, 2003.
(2) Excludes options to purchase Common Stock held by certain officers and
directors of the Company and also excludes Warrants to purchase 2,600,000
shares of Common Stock.
(3) Excludes options to purchase Common Stock held by certain officers and
directors of the Company, but includes Warrants to purchase 2,600,000 shares
of Common Stock.
(4) Does not include 624,500 shares (2.8% of the Common Stock) owned by CIBC
Wood Gundy Securities Corp. ("CIBC Wood Gundy"), an affiliate of Argosy;
Argosy disclaims beneficial ownership of all such shares.
(5) LucasVarity plc owns its shares through K-H, its indirect wholly-owned
subsidiary.
(6) Includes 159,026 shares of non-voting Common Stock.
27
<PAGE> 28
SECURITY OWNERSHIP OF MANAGEMENT AND THE BOARD OF DIRECTORS
The following table sets forth, as of April 30, 1997, the beneficial
ownership (as defined by the Commission) of the Company's Common Stock by each
of the Directors and the named executive officers of the Company and by the
Directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
NUMBER OF
NAME OF BENEFICIAL OWNER SHARES(1)(2)
- ------------------------ ------------
<S> <C>
Cucuz, Ranko................................................ 260,298
Dallera, Giancarlo.......................................... 92,447
Linski, William S........................................... 69,241
Sandberg, Daniel M.......................................... 36,665
Shovers, William D.......................................... 89,137
Christophe, Cleveland A.(3)................................. --
Clark, Timothy J.(4)........................................ --
Heyer, Andrew R.(5)......................................... --
Joseph, Peter A.(4)......................................... 9,634,176
Levy, Paul S.(4)............................................ 9,634,176
Rodewig, John S............................................. 60
All directors and officers as a group (15 persons)(4)....... 10,277,610
</TABLE>
- ---------------
(1) Includes the following shares of Common Stock issuable upon the exercise of
options which are exercisable within 60 days of April 30, 1997, and shares
of Common Stock purchased under the Company's Retirement Savings Plan (the
"Savings Plan"):
<TABLE>
<CAPTION>
ISSUABLE UPON ISSUABLE UPON
EXERCISE OF OPTIONS EXERCISE OF OPTIONS
GRANTED UNDER GRANTED UNDER PURCHASED UNDER
NAME 1992 PLAN 1996 PLAN SAVINGS PLAN
---- ------------------- ------------------- ---------------
<S> <C> <C> <C>
Cucuz, Ranko................ 180,300 30,417 311
Dallera, Giancarlo.......... 65,300 6,083 --
Linski, William S........... 52,400 6,083 --
Sandberg, Daniel M.......... 26,000 5,070 107
Shovers, William D.......... 62,000 6,083 --
All Directors and Executive
Officers as a Group....... 452,100 73,001 1,971
</TABLE>
(2) In each case, except as to Messrs. Joseph and Levy and "All Directors and
Executive Officers as a Group," less than 1% of the outstanding shares of
Common Stock. Messrs. Joseph and Levy may be deemed to beneficially own
43.3% of the Common Stock of the Company (see footnote (4) below).
(3) Mr. Christophe is associated with TSG, which owns 12.6% of the Common Stock
of the Company; he disclaims any beneficial ownership of such Common Stock.
See "Item 12. Security Ownership of Certain Beneficial Owners and Management
-- Ownership of Certain Beneficial Owners."
(4) Mr. Clark, Mr. Joseph and Mr. Levy are all associated with JLL Fund II,
which owns 43.3% of the Common Stock of the Company. Mr. Clark disclaims any
beneficial ownership of such Common Stock. Messrs. Joseph and Levy are
general partners of JLL Associates II, L.P., the general partner of JLL Fund
II, and, as a result, each of them may be deemed to beneficially own all of
the shares of Common Stock held directly or indirectly by JLL Fund II. See
"Item 12. Security Ownership of Certain Beneficial Owners and Management --
Ownership of Certain Beneficial Owners."
(5) Mr. Heyer is associated with Argosy, which owns 11.3% of the Common Stock of
the Company, and CIBC Wood Gundy, which owns 2.8% of the Common Stock of the
Company; he disclaims any beneficial ownership of all such Common Stock. See
"Item 12. Security Ownership of Certain Beneficial Owners and Management --
Ownership of Certain Beneficial Owners."
As of April 30, 1997, all Directors and executive officers as a group were
deemed beneficially to own approximately 46.1% of the outstanding Common Stock.
28
<PAGE> 29
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On December 16, 1992, the non-wheel businesses and assets of the Company,
particularly its automotive brake systems business and assets, were transferred
to, and the liabilities related thereto were assumed by, Kelsey-Hayes (which was
then a wholly owned subsidiary of the Company), the capital stock of which was
transferred by the Company to K-H as an extraordinary dividend (the
"Reorganization"). Pursuant to the terms of the agreement providing for the
transfer, Kelsey-Hayes agreed to indemnify the Company for substantially all
liabilities related to the transferred businesses and assets; however, the
Company retains residual liability with respect to certain matters (the direct
liability with respect to which Kelsey-Hayes assumed). The Company agreed to
indemnify Kelsey-Hayes for substantially all liabilities related to the
businesses and assets retained by the Company pursuant to the Reorganization. In
connection and contemporaneously with the Reorganization, the Company entered
into a number of agreements with certain affiliates, as follows:
Non-Competition Agreement. The Company entered into a Non-Competition
Agreement with Varity. The agreement prohibits Varity and its other affiliates
(excluding Kelsey-Hayes de Mexico S.A. de C.V.,) from directly or indirectly
engaging in any business competitive with the automotive wheel systems business
of the Company, in its current or planned future markets. Varity also agreed
first to offer the Company any business opportunities of which Varity is
apprised or which Varity initiates that relate to the automotive wheel systems
business of the Company, prior to availing itself of such opportunity. Varity
and the Company also agreed not to divulge to any third parties or appropriate
for its own use confidential or proprietary information concerning one another's
respective businesses. The term of the Non-Competition Agreement extends until
the latest of (i) the date that the Management Services Agreement (described
below) is terminated; (ii) the date that Varity and its affiliates, in the
aggregate, shall be the beneficial owners of less than thirty percent (30%) of
the outstanding voting stock of the Company; and (iii) the date that is five
years after the date of the Non-Competition Agreement.
Management Services Agreement. The Company entered into a Management
Services Agreement with K-H, pursuant to which K-H agreed to provide a variety
of management services, including, but not limited to, accounting, financial,
marketing, legal, tax, environmental, insurance, property, management and human
resource services. In exchange for these services, the Company agreed to pay a
designated monthly fee (initially $873,500) calculated to cover the direct and
indirect costs of the services, including salary and other administrative costs
and expenses, subject to periodic increases based on the consumer price index
for the geographic area in which the Company's headquarters is located, as
reported by the United States Department of Labor Statistics. Historically, the
Company reimbursed K-H for its payment for the services described above,
including direct costs for services rendered by third parties (i.e., auditing,
consulting, insurance, etc.) for the benefit of the Company. Effective in Fiscal
1993, the Company and K-H adjusted the designated monthly fee to exclude such
direct costs, which are now billed separately to the Company by the third party
providing the service and the designated monthly fee was substantially reduced.
The Company has, when it has deemed it advantageous, increased its in-house
staff and reduced its reliance upon services rendered by K-H under the
Management Services Agreement. As a result, no amounts were paid by the Company
to K-H during Fiscal 1996 and it is not anticipated that any amounts will be
paid during Fiscal 1997. The Management Services Agreement has an indefinite
term, but may be terminated by either the Company or K-H upon six months' prior
written notice or sooner upon mutual agreement.
Lease. The Company entered into a lease agreement with K-H whereby the
Company leased portions of its Romulus, Michigan facilities to K-H. K-H, in
turn, subleased a portion of these facilities to Kelsey-Hayes. The lease
agreement had an initial term of one year and was subject to automatic renewal
for successive one-year terms unless terminated, on six months' notice, by
either K-H or the Company at the end of any renewal term. The lease agreement
provided for an initial rental, based on the area rented and the nature of the
space, which was adjustable annually pursuant to the provisions of the lease
agreement; the Company believes that such initial rents approximated market
values for similar properties in the Greater Detroit, Michigan region when the
lease was entered into. The lease agreement was terminated on December 31, 1995.
After such termination, Kelsey-Hayes occupied a portion of the premises on a
month-to-month basis until April 1997, at which time such occupancy was
terminated by the Company effective as of June 1, 1997.
29
<PAGE> 30
Mr. Dallera is the President of Cromodora Wheels S.p.A. ("Cromodora").
Prior to June 6, 1996, the Company's subsidiary, Hayes Wheels S.p.A., was a 30%
stockholder in Cromodora and Mr. Dallera was a 35% stockholder in Cromodora. On
June 6, 1996, Hayes Wheels S.p.A. sold one-third of its equity interest in
Cromodora to Cromodora and two-thirds of its equity interest in Cromodora to Mr.
Dallera. The sale price for the Company's equity interest in Cromodora was an
aggregate of approximately $1,437,000, which amount was offset by the Company's
agreement to pay Cromodora and Mr. Dallera approximately $562,000 for a five
year non-competition agreement with the Company, resulting in net sale proceeds
to the Company of approximately $875,000. This sale price was established based
upon an appraisal of Cromodora performed by an independent third party. In
connection with this transaction, Mr. Dallera agreed to extend the term of his
employment agreement with the Company so that it will not expire until December
31, 2003 (previously, the expiration date was April 30, 1998).
The Company is a party to certain business arrangements with Cromodora, as
follows: (a) the Company manufactures and sells castings to Cromodora on a
cost-plus basis; (b) the Company provides certain marketing services to
Cromodora relating to certain proprietary technology being offered by Cromodora
to European OEMs of high performance automobiles; and (c) the Company has
entered into agreements to purchase certain aluminum wheel designs from
Cromodora. The Company does not believe that these arrangements have a material
effect on the Company's operations or financial condition.
On October 11, 1995, Mr. Kolakowski signed a promissory note in favor of
the Company, under which the Company extended an $80,000 bridge loan in
connection with his purchase of a primary residence upon his relocation to
Michigan. The loan was repaid in full on April 16, 1996.
Prior to the Reorganization, the Board of Directors of the Company adopted
a resolution providing that the Company will not enter into any transaction with
or pay any fee to an affiliate or associate (as such terms are defined under
Rule 12b-2 under the Exchange Act) of the Company (other than any subsidiary or
associate of the Company in which no direct or indirect parent company of the
Company has any interest otherwise than through the Company), unless (i) the
transaction or fee is as fair to the Company as would be the case if such
transaction or fee had been negotiated on an arm's-length basis with an
unaffiliated third party and (ii) the transaction or fee (if the value or cost
thereof to the Company is $10 million or more) is approved by a majority of the
Company's directors who are not employees of or otherwise associated with
significant shareholders of the Company.
Pursuant to the Stockholders' Agreement, the Company has agreed not to
enter into or suffer to exist any transaction or series of transactions with any
affiliate (as defined in Rule 405 promulgated under the Securities Act of 1933,
as amended) of the Company or any holder of more than 10% of the Company's
Common Stock, other than transactions between or among the Company and/or its
subsidiaries or transactions which are fair and reasonable to the Company or its
subsidiaries and are upon terms which are at least as favorable as those which
could be obtained in comparable transactions made on an arm's-length basis
between unaffiliated parties. Further, subject to similar exceptions, the
Company will not extend, renew, waive or otherwise modify the terms of any
transaction with affiliates entered into prior to the date of the Stockholders'
Agreement.
30
<PAGE> 31
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
The following documents are filed as part of this report:
(a) 1. Financial Statements
The following financial statements of the Registrant are filed herewith as
part of this report:
(1) Independent Auditors' Report
(2) Consolidated Statements of Operations for the years ended January 31,
1997, 1996 and 1995
(3) Consolidated Balance Sheets at January 31, 1997 and 1996
(4) Consolidated Statements of Changes in Stockholders' Equity (Deficit)
for the years ended January 31, 1997, 1996 and 1995
(5) Consolidated Statements of Cash Flows for the years ended January 31,
1997, 1996 and 1995
(6) Notes to Consolidated Financial Statements
2. Financial Statement Schedules for Fiscal 1996, 1995 and 1994
Schedule II Valuation and Qualifying Accounts. All other schedules are
omitted because the information required to be contained therein is disclosed
elsewhere in the financial statements or the amounts involved are not sufficient
to require submission or the schedule is otherwise not required to be submitted.
3. Exhibits
<TABLE>
<S> <C> <C>
(G) 2.1 Agreement and Plan of Merger, dated as of March 28, 1996,
between the Company and MWC Holdings, Inc. ("Holdings").
(H) 2.2 Stockholders' Agreement, dated as of July 2, 1996, among the
Company, Joseph Littlejohn & Levy Fund II, L.P., Chase
Equity Associates, CIBC WG Argosy Merchant Fund 2, L.L.C.,
Nomura Holding America, Inc. and TSG Capital Fund II, L.P.
(I) 2.2 Amendment No. 1 to Stockholders' Agreement, dated as of
April 8, 1997, among the Company, Joseph Littlejohn & Levy
Fund II, L.P., Chase Equity Associates, CIBC WG Argosy
Merchant Fund 2, L.L.C., Nomura Holding America, Inc. and
TSG Capital Fund II, L.P.
(H) 3.1 Restated Certificate of Incorporation of the Company and
Certificate of Correction thereof.
(H) 3.2 Amended and Restated By-Laws of the Company.
(H) 3.3 Certificate of Merger of Holdings into the Company, filed
with the Secretary of State of Delaware on July 2, 1996.
(B) 4.1 Reference is made to Exhibits 3.1 and 3.2.
(C) 4.2 Indenture, dated as of November 15, 1992, between the
Company and Manufacturers and Traders Trust Company, as
Trustee ($100,000,000 principal amount of 9 1/4% Senior
Notes due 2002), including all exhibits thereto.
(C) 4.3 Form of Senior Note issued pursuant to the Indenture filed
as Exhibit 4.2 hereto.
(H) 4.4 First Supplemental Indenture, dated as of June 20, 1996, to
the Indenture filed as Exhibit 4.2.
(H) 4.5 Second Supplemental Indenture, dated as of June 26, 1996, to
the Indenture filed as Exhibit 4.2.
(H) 4.6 Credit Agreement, dated June 27, 1996, among the Company,
Canadian Imperial Bank of Commerce and Merrill Lynch Capital
Corporation.
(G) 4.7 Form of Subscription Agreement between the Company and the
New Investors.
(B) 10.1 Management Services Agreement between the Company and K-H
Corporation ("K-H").
(B) 10.2 Tax Sharing Agreement among the Company, Kelsey-Hayes
Company and K-H.
(C) 10.3 Conveyance and Transfer Agreement, dated as of December 15,
1992, between the Company and Kelsey-Hayes Company.
(B) 10.4 Lease Agreement between the Company and K-H Corporation.
(B) 10.5 Michigan Workers' Compensation Claims Payment Guarantee
between the Company and Kelsey-Hayes Company.
(B) 10.6* 1992 Incentive Stock Option Plan.
(B) 10.7* Long-Term Savings Plan.
(B) 10.8 Non-competition Agreement between the Company and Varity
Corporation.
</TABLE>
31
<PAGE> 32
(B) 10.9* Employment Agreement, dated February 1, 1993, between Hayes
Wheels, S.p.A. and Giancarlo Dallera.
(C) 10.10 Joint Venture Agreement (the "Joint Venture Agreement"),
dated as of February 16, 1993, by and between the Company
and Nova Hut a.s. ("NH").
(D) 10.11 Amendment No. 1, dated August 17, 1993, to the Joint Venture
Agreement.
(D) 10.12 Amendment No. 2, dated October 26, 1993, to the Joint
Venture Agreement.
(D) 10.13 Project Funds Agreement, dated November 12, 1993, between
Hayes Wheels Autokola NH, a.s. ("Autokola"), the Company and
International Finance Corporation ("IFC").
(D) 10.14 Fee Clawback Agreement, dated November 12, 1993, between
Autokola, the Company and IFC.
(D) 10.15 Subordination Agreement, dated November 12, 1993, between
Autokola, NH, the Company and IFC.
(D) 10.16 Investment Agreement, dated November 12, 1993, between
Autokola and IFC.
(B) 10.17* Employee Benefits Agreement.
(F) 10.18* Severance Agreements, each dated November 6, 1995, between
the Company and its officers and certain employees.
(G) 10.21 Registration Rights Agreement, dated as of March 28, 1996,
among the Company, Varity Corporation and K-H Corporation.
(H) 10.22 Form of Indemnification Agreement between the Company and
each of its directors (filed as Exhibit B to the
Stockholders' Agreement filed as Exhibit 2.2).
(I) 10.23* First Amendment to Employment Agreement, dated June 6, 1996,
between Hayes Wheels, S.p.A. and Giancarlo Dallera.
(I) 12 Computation of Ratios.
(I) 22.1 Subsidiaries of the Company.
(I) 23 Consent of KPMG Peat Marwick LLP.
(I) 24 Powers of Attorney.
(I) 27 Financial Data Schedule.
- -------------------------
LEGEND FOR EXHIBITS
(A) Incorporated by reference from the Company's Annual Report on Form 10-K for
the Fiscal Year Ended January 31, 1996, filed with the SEC.
(B) Incorporated by reference from the Company's Registration Statement No.
33-53780 on Form S-l, filed with the SEC on October 27, 1992, as amended.
(C) Incorporated by reference from the Company's Annual Report on Form 10-K for
the Fiscal Year Ended January 31, 1993, filed with the SEC.
(D) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended October 31, 1993, filed with the SEC.
(E) Incorporated by reference from the Company's Annual Report on Form 10-K for
the Fiscal Year Ended January 31, 1995, filed with the SEC.
(F) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended October 31, 1995, filed with the SEC.
(G) Incorporated by reference from the Company's Current Report on Form 8-K,
dated March 28, 1996, filed with the SEC.
(H) Incorporated by reference from the Company's Current Report on Form 8-K,
dated July 2, 1996, filed with the SEC.
(I) Filed herewith.
* Denotes a compensatory plan, contract or arrangement.
32
<PAGE> 33
The Company will furnish to any stockholder a copy of the above exhibits
upon the written request of such stockholder and the payment to the Company of
the reasonable expenses incurred by the Company in furnishing such copy.
(b) Reports on Form 8-K
The Company filed no Current Reports on Form 8-K with the SEC during the
quarter ended January 31, 1997.
33
<PAGE> 34
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized, on the 30th day of April, 1997.
HAYES WHEELS INTERNATIONAL, INC.
/s/ WILLIAM D. SHOVERS
--------------------------------------
William D. Shovers
Vice President -- Finance
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ RANKO CUCUZ Chairman of the Board of Directors;
- ------------------------------------------------ President and Chief Executive
Ranko Cucuz Officer; Director April 30, 1997
/s/ WILLIAM D. SHOVERS Chief Financial Officer; Principal
- ------------------------------------------------ Accounting Officer April 30, 1997
William D. Shovers
/s/ CLEVELAND A. CHRISTOPHE* Director April 30, 1997
- ------------------------------------------------
Cleveland A. Christophe
/s/ TIMOTHY J. CLARK* Director April 30, 1997
- ------------------------------------------------
Timothy J. Clark
/s/ ANDREW R. HEYER* Director April 30, 1997
- ------------------------------------------------
Andrew R. Heyer
/s/ PETER A. JOSEPH* Director April 30, 1997
- ------------------------------------------------
Peter A. Joseph
/s/ PAUL S. LEVY* Director April 30, 1997
- ------------------------------------------------
Paul S. Levy
/s/ JOHN S. RODEWIG* Director April 30, 1997
- ------------------------------------------------
John S. Rodewig
</TABLE>
*By /s/ PATRICK B. CAREY
-----------------------------------------------
Patrick B. Carey
Attorney-in-fact
34
<PAGE> 35
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Hayes Wheels International, Inc.
We have audited the accompanying consolidated balance sheets of Hayes Wheels
International, Inc. and subsidiaries as of January 31, 1997 and 1996, and the
related consolidated statements of operations, changes in stockholders' equity
(deficit), and cash flows for each of the years in the three year period ended
January 31, 1997. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated 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 the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Hayes Wheels
International, Inc. and subsidiaries as of January 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the years in the
three year-period ended January 31, 1997, in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick LLP
Detroit, Michigan
February 25, 1997
F-1
<PAGE> 36
HAYES WHEELS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(MILLIONS OF DOLLARS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
JANUARY 31, JANUARY 31, JANUARY 31,
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Net sales................................................... $778.2 $611.1 $537.6
Cost of goods sold.......................................... 675.2 513.4 441.4
------ ------ ------
Gross profit........................................... 103.0 97.7 96.2
Marketing, general and administration....................... 35.9 29.7 28.6
Engineering and product development......................... 7.2 4.7 5.1
Equity in loss of unconsolidated subsidiaries............... 2.5 -- --
Other income, net........................................... (4.5) (1.5) (0.8)
Nonrecurring charges (Note 10).............................. 115.4 3.6 --
------ ------ ------
Earnings (loss) from operations........................ (53.5) 61.2 63.3
Interest expense, net....................................... 48.5 15.0 13.4
------ ------ ------
Earnings (loss) before taxes on income, minority
interest and extraordinary items..................... (102.0) 46.2 49.9
Income tax (benefit) provision (Note 6)..................... (36.7) 17.8 20.0
------ ------ ------
Earnings (loss) before minority interest and
extraordinary items.................................. (65.3) 28.4 29.9
Minority interest........................................... 0.2 -- --
------ ------ ------
Earnings (loss) before extraordinary items............. (65.5) 28.4 29.9
Extraordinary items, net of tax of $4.9 (Note 7)............ 7.4 -- --
------ ------ ------
Net income (loss)...................................... $(72.9) $ 28.4 $ 29.9
====== ====== ======
Per share income (loss) (Note 1):
Income (loss) before extraordinary items............... $(2.36) $ 0.81 $ 0.85
Extraordinary items, net of tax........................ (0.27) -- --
------ ------ ------
Net income (loss)...................................... $(2.63) $ 0.81 $ 0.85
====== ====== ======
Weighted average shares outstanding (in thousands).......... 27,703 35,148 35,148
====== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE> 37
HAYES WHEELS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(MILLIONS OF DOLLARS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
JANUARY 31, JANUARY 31,
ASSETS 1997 1996
------ ----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 47.5 $ 1.8
Receivables (less allowance of $2.2 at January 31, 1997
and $0.1 at January 31, 1996).......................... 145.2 109.6
Inventories (Note 3)...................................... 82.9 58.9
Prepaid expenses and other................................ 13.9 9.9
-------- -------
Total current assets................................... 289.5 180.2
Property, plant and equipment:
Land...................................................... 20.1 18.3
Buildings................................................. 98.0 76.8
Machinery and equipment................................... 515.2 319.7
-------- -------
633.3 414.8
Accumulated depreciation.................................. (146.9) (110.4)
-------- -------
Net property, plant and equipment...................... 486.4 304.4
Goodwill and other assets (Note 4).......................... 407.2 149.3
-------- -------
Total assets.............................................. $1,183.1 $ 633.9
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
- ------------------------------------------------------------
Current liabilities:
Bank borrowings (Note 7).................................. $ 5.6 $ 4.1
Current portion of long-term debt (Note 7)................ 23.9 0.1
Accounts payable and accrued liabilities (Notes 5 and
11).................................................... 244.8 125.5
-------- -------
Total current liabilities.............................. 274.3 129.7
Noncurrent liabilities:
Long-term debt, net of current portion (Note 7)........... 686.3 128.9
Deferred income taxes (Note 6)............................ -- 48.1
Minority interest......................................... 8.3 --
Pension and other long-term liabilities (Notes 9 and
10).................................................... 255.3 81.8
-------- -------
Total noncurrent liabilities........................... 949.9 258.8
Commitments and contingencies (Notes 7, 9, 10 and 12)
Stockholders' equity (deficit): (Notes 1 and 13)
Preferred Stock, 25,000,000 shares authorized, none
issued or outstanding................................. -- --
Common stock, par value $0.01 per share:
Voting -- authorized 99,000,000; issued and
outstanding, 22,390,518 at January 31, 1997 and
35,148,000 at January 31, 1996...................... 0.2 0.4
Nonvoting -- authorized 1,000,000; issued and
outstanding, 159,026 at January 31, 1997 and zero at
January 31, 1996....................................
Additional paid-in capital............................. 43.6 198.3
Retained earnings (accumulated deficit)................ (82.2) 49.6
Cumulative translation adjustment...................... (0.5) (0.3)
Pension liability adjustment........................... (2.2) (2.6)
-------- -------
Total stockholders' equity (deficit)................. (41.1) 245.4
-------- -------
Total liabilities and stockholders' equity
(deficit)........................................... $1,183.1 $ 633.9
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 38
HAYES WHEELS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED JANUARY 31, 1997, 1996, 1995
(MILLIONS OF DOLLARS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK
(NOTE 1) RETAINED
------------------- ADDITIONAL EARNINGS CUMULATIVE PENSION
PAR PAID-IN (ACCUMULATED TRANSLATION LIABILITY
SHARES VALUE CAPITAL DEFICIT) ADJUSTMENT ADJUSTMENT
------ ----- ---------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 31, 1994.......... 35,148,000 $ 0.4 $ 198.3 $ (6.5) $(3.5) $(3.9)
Cash dividends ($0.03 per share)... -- -- -- (1.1) -- --
Net income......................... -- -- -- 29.9 -- --
Translation adjustment............. -- -- -- -- 1.3 --
Pension adjustment................. -- -- -- -- -- 1.5
----------- ----- ------- ------ ----- -----
Balance, January 31, 1995.......... 35,148,000 0.4 198.3 22.3 (2.2) (2.4)
Cash dividends ($0.03 per share)... -- -- -- (1.1) -- --
Net income......................... -- -- -- 28.4 -- --
Translation adjustment............. -- -- -- -- 1.9 --
Pension adjustment................. -- -- -- -- -- (0.2)
----------- ----- ------- ------ ----- -----
Balance, January 31, 1996.......... 35,148,000 0.4 198.3 49.6 (0.3) (2.6)
Cash dividends ($0.015 per
share)........................... -- -- -- (0.5) -- --
Net loss........................... -- -- -- (72.9) -- --
Translation adjustment............. -- -- -- -- (0.2) --
Pension adjustment................. -- -- -- -- -- 0.4
Exercise of options................ 125,718 -- 2.0 -- -- --
Recapitalization................... (12,883,200) (0.2) (156.7) (58.4) -- --
----------- ----- ------- ------ ----- -----
Balance, January 31, 1997.......... 22,390,518 $ 0.2 $ 43.6 $(82.2) $(0.5) $(2.2)
=========== ===== ======= ====== ===== =====
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 39
HAYES WHEELS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(MILLIONS OF DOLLARS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
JANUARY 31, JANUARY 31, JANUARY 31,
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities
Net income (loss)....................................... $ (72.9) $ 28.4 $ 29.9
Adjustments to reconcile net income (loss) to net cash
provided by operations:
Depreciation and tooling amortization................ 36.6 26.6 24.0
Amortization of intangibles.......................... 11.0 6.1 5.6
Increase (decrease) in deferred taxes................ (31.5) 7.7 1.3
Nonrecurring charges................................. 115.4 3.6 --
Equity in losses of unconsolidated subsidiaries...... 2.5 -- --
Extraordinary loss................................... 12.3 -- --
Changes in operating assets and liabilities:
(Increase) decrease in receivables................... 3.3 (14.5) (30.9)
(Increase) decrease in inventories................... 4.4 (1.9) (13.1)
(Increase) decrease in prepaid expenses and other.... 1.9 (2.4) (2.2)
Increase in accounts payable and accrued
liabilities........................................ 15.9 2.9 12.4
Decrease in other long-term liabilities.............. (27.7) (11.6) (4.6)
------- ------ ------
Cash provided by operating activities........... 71.2 44.9 22.4
Cash flows from investment activities:
Acquisition of property, plant and equipment......... (71.4) (43.4) (39.9)
Net cash acquired with joint venture investment...... 5.0 -- --
Investment in joint venture.......................... -- (3.2) --
Other, net........................................... 1.3 (5.8) (1.0)
------- ------ ------
Cash used for investment activities............. (65.1) (52.4) (40.9)
Cash flows from financing activities:
Increase (decrease) in foreign bank borrowings and
loans.............................................. (4.1) (6.4) 6.0
Retirement of long term debt......................... (106.4) -- --
Retirement of acquired long term debt................ (137.7) -- --
Proceeds from issuance of long term debt............. 673.5 -- --
Common stock repurchase.............................. (506.1) -- --
Proceeds from equity infusion, net of costs.......... 185.4 -- --
Dividends paid to stockholders....................... (0.5) (1.1) (1.1)
Fees paid to issue long term debt.................... (35.0) -- --
Increase (decrease) in bank revolving loan and other
domestic loans..................................... (29.5) 16.3 8.6
------- ------ ------
Cash provided by financing activities........... 39.6 8.8 13.5
Effect of exchange rate changes on cash and cash
equivalents............................................. -- -- 0.2
------- ------ ------
Increase (decrease) in cash and cash
equivalents................................... 45.7 1.3 (4.8)
Cash and cash equivalents at beginning of year............ 1.8 0.5 5.3
------- ------ ------
Cash and cash equivalents at end of year.................. $ 47.5 $ 1.8 $ 0.5
======= ====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 40
HAYES WHEELS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 1997, 1996 AND 1995
------------------------------------
(1) ORGANIZATION
Organization
Unless otherwise indicated, references to "Company" mean Hayes Wheels
International, Inc. and its subsidiaries and reference to fiscal year means the
Company's year ended January 31 of the following year (e.g., "fiscal 1996"
refers to the period beginning February 1, 1996 and ending January 31, 1997,
"fiscal 1995" refers to the period beginning February 1, 1995 and ending January
31, 1996 and "fiscal 1994" refers to the period beginning February 1, 1994 and
ending January 31, 1995).
The Company designs, engineers and manufactures steel and aluminum wheels
and brake components, principally to original equipment manufacturers ("OEMs")
of passenger cars, light trucks and commercial highway vehicles worldwide. The
Company's products include one-piece cast aluminum wheels, fabricated aluminum
wheels, fabricated steel wheels, full-faced cast aluminum wheels, clad covered
wheels and brake drums, hubs and rotors.
On December 6, 1996, the Company's Board of Directors declared a stock
split to be effected in the form of a stock dividend which resulted in the
issuance of one additional share of the Company's common stock for every
outstanding share of common stock. All share information included in the
accompanying financial statements and footnote information has been adjusted to
reflect the effect of the stock split.
In October, 1996, the Company exercised its right to increase its ownership
in Hayes Wheels Autokola N.H. a.s. ("Autokola") from 45% to 58% in consideration
for a cash contribution of $6.0 million. As a result of the increased ownership,
financial results for Autokola have been included in the consolidated financial
statements of the Company since November, 1996.
On July 2, 1996, the Company consummated a merger between MWC Holdings,
Inc. ("Holdings") and the Company, (the "Merger") pursuant to which, among other
things, Holdings was merged with and into the Company, with the Company as the
surviving corporation. As a result of the Merger, Motor Wheel Corporation, a
wholly owned subsidiary of Holdings ("Motor Wheel"), became a wholly owned
subsidiary of the Company.
Immediately prior to the Merger and as part of the financing thereof (the
"Recapitalization"), the Company issued and sold to certain new investors (i) an
aggregate of 200,000 shares of Company Preferred Stock, which upon consummation
of the Merger were converted into an aggregate of 12,500,000 shares 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) 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.
F-6
<PAGE> 41
HAYES WHEELS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED JANUARY 31, 1997, 1996 AND 1995
------------------------------------
(1) ORGANIZATION -- (CONTINUED)
Unaudited pro forma results of operations, assuming the Merger and
Recapitalization had been completed on February 1, 1995, are as follows (dollars
in millions, except per share amounts):
<TABLE>
<CAPTION>
UNAUDITED
--------------------------
YEAR ENDED YEAR ENDED
JANUARY 31, JANUARY 31,
1997 1996
----------- -----------
<S> <C> <C>
Net sales............................................... $913.1 $968.3
Earnings (loss) from operations......................... (50.9) 43.9
Net loss................................................ (85.4) (17.4)
Net loss per common share............................... $(3.81) $(0.78)
</TABLE>
The pro forma results are not necessarily indicative of the actual results
if the transactions had been in effect for the entire period 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.
(2) SUMMARY OF ACCOUNTING PRINCIPLES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its majority owned subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation. The Company's investments in
joint ventures are accounted for under the equity method. Financial position and
results of operations for these entities as of, and for the twelve months ended
January 31, 1997, 1996 and 1995, respectively, were not material to the
consolidated financial statements of the Company.
Revenue Recognition
Sales are recorded when products are shipped to customers.
Inventories
Inventories are stated at the lower of cost or market, with cost determined
by the last in, first out (LIFO) method for a portion of domestic inventories.
Cost for other inventories, including foreign, which were approximately 48
percent and 62 percent of inventories at January 31, 1997 and 1996,
respectively, are stated using the first in, first out (FIFO) or average cost
method. Cost includes the cost of materials, direct labor and the applicable
share of manufacturing overhead.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Depreciation is
generally provided on a straight-line basis at rates which are designed to write
off the assets over their estimated useful lives, principally as follows:
<TABLE>
<S> <C>
Buildings................................................... 25 years
Machinery and equipment..................................... 12 to 14 years
</TABLE>
Expenditures for maintenance, repairs and minor replacements of $28.1
million, $22.8 million and $18.5 million for the years ended January 31, 1997,
1996 and 1995, respectively, were charged to expense as incurred.
F-7
<PAGE> 42
HAYES WHEELS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED JANUARY 31, 1997, 1996 AND 1995
------------------------------------
(2) SUMMARY OF ACCOUNTING PRINCIPLES -- (CONTINUED)
Special Tooling
Expenditures made to meet special tooling requirements are capitalized.
Special tooling which is reimbursable by the customer is classified as either a
current asset or noncurrent asset, depending upon the expected time of
reimbursement. Special tooling which is not reimbursable by the customer is
classified as a noncurrent asset and is charged to expense on a pro rata basis
over its estimated useful life.
Goodwill
Goodwill, which represents the excess of purchase price over fair value of
net assets acquired, is amortized on a straight-line basis over 40 years.
Recoverability is reviewed annually or sooner if events or changes in
circumstances indicate that the carrying amount may exceed fair value.
Recoverability is then determined by comparing the undiscounted net cash flows
of the assets to which the goodwill applies to the net book value including
goodwill of those assets.
Research and Development Costs
Research and development costs are expensed as incurred. Amounts expensed
during the years ended January 31, 1997, 1996 and 1995, were approximately $3.1
million, $2.3 million and $2.2 million, respectively.
Financial Instruments
The carrying amounts of cash and cash equivalents, receivables, and
accounts payable and accrued liabilities approximate fair value because of the
short maturity of these instruments. The carrying amount of bank borrowings,
variable rate long-term debt, and other liabilities approximate market value, as
interest rates vary with market rates. The fair value of fixed rate debt is
discussed in Note 7.
In accordance with industry practice, the costs or benefits of fluctuations
in aluminum prices are passed through to customers. Futures contracts and
purchase commitments are entered into by the Company, from time to time, to
hedge its exposure to future increases in aluminum prices that may occur between
the dates of aluminum wheel price adjustments. Outstanding contracts represent
future commitments and are not included in the consolidated balance sheet.
Substantially all of such contracts mature within a period of three months.
Gains or losses resulting from the liquidation of futures contracts are
recognized in the income statement currently as part of costs of goods sold.
The Company has entered into interest rate cap agreements to minimize the
impact of increases in short-term interest rates on its debt. The costs of
interest rate cap agreements are included in interest expense ratably over the
lives of the agreements. The unamortized costs of the cap agreements are
included in other assets and approximate fair value.
Foreign Currency Translation
Translation of assets and liabilities of subsidiaries denominated in
foreign currencies, other than those located in highly inflationary countries,
are translated at the rate of exchange in effect on the balance sheet date;
income and expenses are translated at the average rates of exchange prevailing
during the year. The related translation adjustments are reflected in the
cumulative translation adjustment section of Stockholders' Equity (Deficit).
Foreign currency gains and losses resulting from transactions and the
translation of financial statements of subsidiaries in highly inflationary
countries are included in results of operations.
F-8
<PAGE> 43
HAYES WHEELS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED JANUARY 31, 1997, 1996 AND 1995
------------------------------------
(2) SUMMARY OF ACCOUNTING PRINCIPLES -- (CONTINUED)
Pensions
The Company has trusteed noncontributory pension plans covering
substantially all domestic employees and funds at least the minimum required by
the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
Taxes on Income
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
No provision is necessary for future United States taxes on the
undistributed portion of the Company's equity in earnings of foreign affiliates,
since it is anticipated that the unremitted earnings will be permanently
invested for growth and expansion.
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 and that 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 societal and
economic factors. Where the cost estimates result in a range of equally probable
amounts, the lower end of the range is accrued. Amounts accrued for
environmental compliance and remediation are not material to the consolidated
financial statements as of January 31, 1997 and 1996.
Statement of Cash Flows
For purposes of reporting cash flows, the Company considers all investments
with an original maturity of three months or less to be cash equivalents. The
following is additional information to the Consolidated Statements of Cash Flows
(millions of dollars):
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
JANUARY 31, JANUARY 31, JANUARY 31,
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Cash paid for interest........................ $40.0 $13.8 $12.8
Cash paid for income taxes.................... 7.7 12.0 21.4
Non-cash financing activity:
Acquisition of Motor Wheel.................. 105.4 -- --
</TABLE>
Postretirement and Postemployment Benefits
The Company accounts for postretirement benefits other than pensions using
an accrual basis method of accounting recognizing the cost of these benefits
over an employee's active working career. The Company will continue its policy
of paying postretirement benefits as they become due.
F-9
<PAGE> 44
HAYES WHEELS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED JANUARY 31, 1997, 1996 AND 1995
------------------------------------
(2) SUMMARY OF ACCOUNTING PRINCIPLES -- (CONTINUED)
Impairment of Assets
The Company adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of" on February 1, 1996. This Statement
requires that long-lived assets and certain identifiable intangibles be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The adoption of SFAS No. 121
did not have a material effect on the Company's consolidated financial
statements.
Stock-Based Compensation
Prior to February 1, 1996, the Company accounted for its stock option plan
in accordance with the provisions of Accounting Principles Board ("APB") Opinion
No. 25, Accounting for Stock Issued to Employees, and related interpretations.
As such, compensation expense would be recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise price. On
February 1, 1996, the Company adopted SFAS No. 123 Accounting for Stock-Based
Compensation, which allows entities to continue to apply the provisions of APB
Opinion No. 25, and provide pro forma net income and pro forma earnings per
share disclosures for employee stock option grants made in fiscal 1995 and
future years as if the fair-value-based method defined in SFAS No. 123 had been
applied. The Company has elected to continue to apply the provisions of APB
Opinion No. 25 and provide the pro forma disclosure provisions of SFAS No. 123.
See Note 13.
Earnings Per Share
Per share income is calculated based on the number of weighted average
shares outstanding at the end of the year. The dilutive effect of common stock
equivalents has not been reflected as the effect is immaterial or anti-dilutive
to the calculation of per share income.
Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent liabilities to prepare these financial statements in conformity with
generally accepted accounting principles. Actual results could differ from those
estimates.
(3) INVENTORIES
The major classes of inventory are as follows (millions of dollars):
<TABLE>
<CAPTION>
JANUARY 31, JANUARY 31,
1997 1996
----------- -----------
<S> <C> <C>
Raw materials............................................ $32.0 $19.7
Work-in-process.......................................... 21.1 13.5
Finished goods........................................... 29.8 25.7
----- -----
Total.................................................. $82.9 $58.9
===== =====
</TABLE>
The replacement value of LIFO inventories approximates carrying value.
F-10
<PAGE> 45
HAYES WHEELS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED JANUARY 31, 1997, 1996 AND 1995
------------------------------------
(4) GOODWILL AND OTHER ASSETS
Goodwill and other assets consist of the following (millions of dollars):
<TABLE>
<CAPTION>
JANUARY 31, JANUARY 31,
1997 1996
----------- -----------
<S> <C> <C>
Goodwill and other intangibles........................... $328.4 $110.3
Unamortized debt issuance costs.......................... 29.5 3.6
Deferred tax assets...................................... 18.0 --
Other.................................................... 31.3 35.4
------ ------
Total............................................... $407.2 $149.3
====== ======
</TABLE>
Goodwill and other intangibles are presented net of accumulated
amortization of $35.8 million and $27.3 million at January 31, 1997 and 1996,
respectively.
(5) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consist of the following (millions
of dollars):
<TABLE>
<CAPTION>
JANUARY 31, JANUARY 31,
1997 1996
----------- -----------
<S> <C> <C>
Accounts payable......................................... $160.8 $ 86.8
Employee costs........................................... 24.1 19.7
Accrued interest......................................... 7.4 2.1
Other accrued liabilities................................ 52.5 16.9
------ ------
Total............................................... $244.8 $125.5
====== ======
</TABLE>
(6) TAXES ON INCOME
The components of pre-tax income (loss) are as follows (millions of
dollars):
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
JANUARY 31, JANUARY 31, JANUARY 31,
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
United States................................. $(127.6) $34.6 $42.8
Foreign....................................... 13.3 11.6 7.1
------- ----- -----
$(114.3) $46.2 $49.9
======= ===== =====
</TABLE>
F-11
<PAGE> 46
HAYES WHEELS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED JANUARY 31, 1997, 1996 AND 1995
------------------------------------
(6) TAXES ON INCOME -- (CONTINUED)
The provision for taxes on income is summarized as follows (millions of
dollars):
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
JANUARY 31, JANUARY 31, JANUARY 31,
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Current:
Federal and state........................... $(15.8) $ 4.5 $15.0
Foreign..................................... 4.1 4.0 2.2
------ ----- -----
$(11.7) $ 8.5 $17.2
Deferred:
Federal and state........................... $(29.3) $ 9.4 $ 2.6
Foreign..................................... (0.6) (0.1) 0.2
------ ----- -----
(29.9) 9.3 2.8
------ ----- -----
Less: Extraordinary items (Note 8).......... 4.9 -- --
------ ----- -----
Taxes on income excluding extraordinary
items............................... $(36.7) $17.8 $20.0
====== ===== =====
</TABLE>
A reconciliation of federal income tax computed at the statutory 35% rate
to the actual provision for taxes on income follows (millions of dollars):
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
JANUARY 31, JANUARY 31, JANUARY 31,
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Federal taxes computed at statutory rate....... $(40.0) $16.2 $17.5
Increase (decrease) resulting from:
Unrecognized tax benefit from net operating
loss carryforwards........................ 0.8 1.2 --
Tax benefit from foreign sales corporation... -- (0.5) (0.5)
Expiring foreign net operating loss.......... -- 0.7 2.4
Effective tax rate differential on earnings
of consolidated foreign affiliates........ (0.8) (0.4) 1.4
Permanent differences resulting from purchase
accounting................................ 2.3 0.9 0.9
Change in valuation allowance for foreign NOL
carryforward/deferred tax asset........... (0.8) (1.9) (2.4)
All other items.............................. (3.1) 1.6 0.7
------ ----- -----
Income tax expense (benefit)............ $(41.6) $17.8 $20.0
====== ===== =====
</TABLE>
F-12
<PAGE> 47
HAYES WHEELS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED JANUARY 31, 1997, 1996 AND 1995
------------------------------------
(6) TAXES ON INCOME -- (CONTINUED)
Deferred tax assets (liabilities) result from differences in the basis of
assets and liabilities for tax and financial statement purposes. The cumulative
tax effect of the major items follows (millions of dollars):
<TABLE>
<CAPTION>
JANUARY 31, JANUARY 31,
1997 1996
----------- -----------
<S> <C> <C>
Deferred tax assets:
Nondeductible accrued liabilities...................... $103.1 $ 24.7
Net operating loss and tax credit carryforwards........ 24.3 2.8
Pension................................................ 9.0 7.6
------ ------
Total gross deferred tax assets..................... 136.4 35.1
Less valuation allowance............................... (19.7) (2.5)
------ ------
Net deferred tax assets............................. $116.7 $ 32.6
Deferred tax liabilities:
Fixed assets, principally due to differences in
depreciation........................................ (90.9) (66.3)
Intangibles............................................ (7.8) (8.0)
Inventory.............................................. -- (2.8)
All other items........................................ -- (3.6)
------ ------
Total gross deferred tax liabilities................ (98.7) (80.7)
------ ------
Net deferred tax asset (liabilities)................ $ 18.0 $(48.1)
====== ======
</TABLE>
The Company has recorded a valuation allowance to reflect the estimated
amount of deferred tax assets which may not be realized principally due to the
inability of subsidiaries to fully utilize available net operating loss
carryforwards which expire through the year 2011. The subsequent recognition of
tax benefits relating to the valuation allowance will be reported in the
consolidated statement of operations $(9.7) million or as a reduction of
goodwill $(10.0) million as opportunities to utilize these carryforwards become
more certain.
(7) LONG-TERM DEBT AND BANK BORROWINGS
Long-term debt and bank borrowings of the Company consists of the following
(millions of dollars):
<TABLE>
<CAPTION>
JANUARY 31, JANUARY 31,
1997 1996
----------- -----------
<S> <C> <C>
11% Senior Subordinated Notes due 2006................... $250.0 $ --
9 1/4% Senior Notes due November 15, 2002................ 1.5 100.0
Bank Term Notes.......................................... 423.5 28.6
Other domestic loans maturing through 2001 with a fixed
annual rate of 6.5%.................................... 0.7 --
Various foreign bank and government loans maturing
through 2003, weighted average interest rate of 8.8%
and 11.9% at January 31, 1997 and 1996................. 34.5 0.4
------ ------
710.2 129.0
Less current portion..................................... 23.9 0.1
------ ------
$686.3 $128.9
====== ======
</TABLE>
F-13
<PAGE> 48
HAYES WHEELS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED JANUARY 31, 1997, 1996 AND 1995
------------------------------------
(7) LONG-TERM DEBT AND BANK BORROWINGS -- (CONTINUED)
The Company entered into a Credit Agreement, dated June 27, 1996, which
replaced the previous $180 million revolving credit agreement. The Credit
Agreement provides senior bank financing consisting of the following (millions
of dollars):
<TABLE>
<S> <C>
Revolving credit facility, including up to $75 million of
letters of credit, expiring on July 31, 2002.............. $220.0
Tranche A Term Notes, maturing through July 31, 2002........ 198.5
Tranche B Term Notes, maturing through July 31, 2003........ 125.0
Tranche C Term Notes, maturing through July 31, 2004........ 100.0
------
$643.5
======
</TABLE>
Borrowings on these facilities bear interest at one of the following rates
as selected by the Company: (i) the rate per annum equal to the London Interbank
Offered Rate ("LIBOR") plus the applicable margin or (ii) the bank's Alternate
Base Rate, as defined in the Credit Agreement ("ABR"), plus the applicable
margin. The ABR is defined as the highest of (i) the bank's prime rate or (ii)
the Federal Funds rate plus 1/2% or (iii) a certificate of deposit-based rate
plus 1%. The applicable margins under each of the loans as of January 31, 1997,
are as follows:
<TABLE>
<CAPTION>
ABR LIBOR
----- -----
<S> <C> <C>
Revolving Credit............................................ 1.50% 2.50%
Tranche A................................................... 1.50% 2.50%
Tranche B................................................... 2.00% 3.00%
Tranche C................................................... 2.50% 3.50%
</TABLE>
At January 31, 1997, the Company was paying interest on the Term Notes at
an average LIBOR-based interest rate of 8.39%.
The Company pays a commitment fee on the unused portion of the revolving
credit facility which was at a rate of 0.5% at January 31, 1997. The Company had
available revolver borrowing capacity under the Credit Agreement of $182.5
million, including unused letters of credit totaling $37.5 million as of January
31, 1997.
The Credit Agreement and certain foreign bank borrowings contain financial
covenants. The Company was in compliance with such covenants at January 31,
1997. The Credit Agreement is secured by a first priority lien on substantially
all of the properties and assets of the Company and its domestic subsidiaries,
now owned or acquired later, including a pledge of all of the shares of certain
of the Company's existing and future domestic subsidiaries and 65% of the shares
of certain of the Company's existing and future foreign subsidiaries.
In connection with the Merger and Recapitalization, the Company commenced
an offer to repurchase its 9 1/4% Senior Notes, of which substantially all were
tendered. Accordingly, the Company recorded an extraordinary loss of $12.3
million ($7.4 million, net of tax) related to the early retirement of debt. The
extraordinary loss was comprised of a prepayment penalty and deferred debt
issuance costs. The 11% Senior Subordinated Notes were issued on July 2, 1996.
The Notes are redeemable at the Company's option at specified prices, in whole
or in part, at any time on or after July 15, 2001. The Senior Subordinated Notes
are guaranteed by the Company's domestic subsidiaries, but are subordinated to
the Credit Agreement. The Company believes that as of January 31, 1997, the
market value of the Senior Notes exceeds their recorded value by approximately
10%.
F-14
<PAGE> 49
HAYES WHEELS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED JANUARY 31, 1997, 1996 AND 1995
------------------------------------
(7) LONG-TERM DEBT AND BANK BORROWINGS -- (CONTINUED)
Principal repayments on long-term debt and bank borrowings during the next
five years ending January 31 are as follows (millions of dollars): 1998-$23.9;
1999-$38.9; 2000-$48.7; 2001-$48.7; 2002-$54.0 and thereafter-$496.0. Bank
borrowings consist of short-term notes of the Company's foreign subsidiaries.
During the year, the Company entered into interest rate hedge agreements
with the objective of managing interest costs and exposure to changing interest
rates. The Credit Agreement requires the Company to provide interest rate
protection on a portion of the related outstanding indebtedness. Strategies for
achieving the Company's objectives have resulted in the Company maintaining
interest rate cap agreements covering an aggregate principal amount of $300
million in floating rate indebtedness at January 31, 1997. Various agreements
have been entered into with several banks and, on average, provide protection
against LIBOR rates higher than 6.67%, for an average of 2.3 years. Premiums
paid for these cap agreements are amortized to interest expense over the term of
the agreement. The unamortized costs of the cap agreements are included in other
assets and approximate fair value. The notional amount of interest rate cap
agreements do not represent amounts exchanged by the parties and are not a
measure of the Company's exposure to credit or market risks. The amounts
exchanged are calculated on the basis of the notional amounts and the other
terms of the cap agreements. Notional amounts are not included in the
consolidated balance sheet.
(8) LEASES
The Company leases certain production facilities and equipment under
agreements expiring from 1998 to 2002. The following is a schedule of future
minimum rental payments required under operating leases that have initial or
remaining noncancelable lease terms in excess of one year as of January 31, 1997
(millions of dollars):
<TABLE>
<CAPTION>
YEAR ENDING JANUARY 31:
- -----------------------
<S> <C> <C>
1998................................................................. $13.6
1999................................................................. 10.8
2000................................................................. 8.6
2001................................................................. 7.6
2002 and later years................................................. 25.9
-----
Total minimum payments required...................................... $66.5
=====
</TABLE>
Rent expense was $13.9 million, $7.8 million and $6.0 million for the years
ended January 31, 1997, 1996 and 1995, respectively.
F-15
<PAGE> 50
HAYES WHEELS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED JANUARY 31, 1997, 1996 AND 1995
------------------------------------
(9) PENSION PLANS AND POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The components of net pension cost included in operating results for the
years ended January 31, 1997, 1996 and 1995 are as follows (millions of
dollars):
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
JANUARY 31, JANUARY 31, JANUARY 31,
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Service cost.................................. $ 1.5 $ 0.8 $ 1.1
Interest on projected benefit obligation...... 8.9 5.1 4.7
Actual return on plan assets.................. (10.4) (5.0) (1.6)
Net amortization and deferral................. 3.8 3.1 (0.3)
------ ----- -----
Net pension cost............................ $ 3.8 $ 4.0 $ 3.9
====== ===== =====
Discount rate................................. 7.50% 7.50% 8.25%
Assumed rate of return........................ 9.00% 9.00% 8.50%
</TABLE>
The following table sets forth the plans' funded status (millions of
dollars):
<TABLE>
<CAPTION>
JANUARY 31, JANUARY 31,
1997 1996
----------- -----------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested employees......................................... $ 151.2 $ 56.5
Nonvested employees...................................... 9.4 9.2
------- ------
Accumulated benefit obligation........................... 160.6 65.7
Projected benefit obligation............................. 163.9 67.6
Plan assets at fair value (principally listed stocks and
bonds)................................................. (125.8) (38.0)
------- ------
Projected benefit obligation in excess of plan assets.... 38.1 29.6
Unrecognized net losses.................................. (5.5) (4.8)
Unrecognized prior service cost.......................... (3.9) (4.3)
Adjustment required to recognize minimum liability....... 6.7 7.1
------- ------
Accrued pension cost................................ $ 35.4 $ 27.6
======= ======
</TABLE>
The Company's defined benefit pension plans generally provide benefits
based on years of service. The projected unit credit funding method was used.
Prior service costs and actuarial gains and losses are generally amortized over
the average remaining service period of active employees.
Effective January 1, 1995, the Company modified the defined benefit
Salaried Pension Plan to freeze credited service and remove salary caps that had
been instituted in 1991. Assumed rates of increase in future compensation levels
for the Salaried Pension Plan range from 5 percent to 6 percent. In conjunction
with this change, the Company increased the basic contribution of the existing
salary defined contribution plan.
In connection with the Merger in July 1996, the Company was required to
contribute $10 million and $4 million to the Hayes Wheels and Motor Wheel
pension plans, respectively, as part of an agreement with the Pension Benefit
Guaranty Corporation ("PBGC"). Under this agreement, the Company is required to
provide contributions to the plans of $16 million, $13 million and $11 million
as of June 30, 1997, 1998 and 1999, respectively. To secure these contributions,
the Company provided the PBGC with an irrevocable letter of credit for the
benefit of the PBGC in the amount of $14 million. The letter of credit will be
reduced to $5 million after the Company contributes $13 million and $10 million
as of June 30, 1997 and 1998, respectively, to the Hayes Wheels plans. Once all
of the required contributions are made, the letter of credit will be canceled.
F-16
<PAGE> 51
HAYES WHEELS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED JANUARY 31, 1997, 1996 AND 1995
------------------------------------
(9) PENSION PLANS AND POSTRETIREMENT BENEFITS OTHER THAN PENSIONS -- (CONTINUED)
The Company also has contributory employee retirement savings plans
covering substantially all of its employees. The employer contribution is
determined at the discretion of the Company and totaled approximately $2.7
million, $2.7 million and $0.9 million for the years ended January 31, 1997,
1996 and 1995, respectively.
The Company provides comprehensive medical and group life benefits to
certain of its United States retirees who elect to participate in the Company's
medical and group life plans. The medical plan contributions are adjusted
periodically; the life insurance plan is non-contributory.
For the year ended January 31, 1997, 1996 and 1995, the components of
postretirement benefits expense (income) were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
JANUARY 31, JANUARY 31, JANUARY 31,
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Service cost (benefits earned during the
period)..................................... $ 0.4 $ 0.3 $ 0.6
Interest cost on accumulated postretirement
benefit obligations......................... 5.0 2.6 2.6
Net amortization.............................. (3.7) (4.1) (3.8)
----- ----- -----
Total....................................... $ 1.7 $(1.2) $(0.6)
===== ===== =====
Discount rate................................. 7.50% 7.50% 8.25%
</TABLE>
At January 31, 1997 and 1996, the recorded actuarial liabilities for these
postretirement benefits are as follows:
<TABLE>
<CAPTION>
JANUARY 31, JANUARY 31,
1997 1996
----------- -----------
<S> <C> <C>
Retirees................................................. $ 96.1 $22.6
Fully eligible active participants....................... 21.7 4.6
Other active participants................................ 10.5 10.2
------ -----
Subtotal............................................... $128.3 $37.4
Unamortized gains........................................ 9.9 9.8
------ -----
Total.................................................. $138.2 $47.2
====== =====
</TABLE>
The assumed health care cost trend was 7.0% (8.0% at January 31, 1996) and
was assumed to decrease by 1% per annum to an ultimate rate of 5%. This
assumption was modified in the case of the plan that was capped. The Company
estimates an increase in the assumed health care cost trend rate of 1% per year
would increase the accumulated postretirement benefit obligation as of January
31, 1997 and 1996 by $0.9 million but would have no effect on the aggregate of
the service and interest components of postretirement benefit expense for the
year ended January 31, 1997 and 1996.
The anticipated workforce reductions resulting from closure of the Romulus
Plant resulted in the recognition of $18.0 million of net curtailment loss in
fiscal 1996 related to both pension and postretirement benefits.
One of the Company's European subsidiaries provides benefits to its
employees through unfunded retirement arrangements. At January 31, 1997 and
1996, $4.7 million and $4.4 million, respectively, were accrued for such
obligations.
F-17
<PAGE> 52
HAYES WHEELS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED JANUARY 31, 1997, 1996 AND 1995
------------------------------------
(10) NONRECURRING CHARGES
On January 9, 1997, the Company announced that it was ceasing manufacturing
operations at its fabricated wheel facility in Romulus, Michigan and
consolidating such manufacturing operations into other fabricated wheel
facilities of the Company. This action is based on the continued decline in the
market for fabricated steel wheels and the merger with Motor Wheel which added
fabricated steel wheel manufacturing capacity to the Company's operations. In
connection with the closure, certain property, plant and equipment will be idled
and disposed of, other excess assets disposed of and the service of
approximately 450 active employees will be terminated. Management expects these
actions to be fully implemented by the end of calendar year 1997. The Company
has recorded a charge totaling $109.0 million for the fiscal year ended January
31, 1997, which consists of $63.0 million to writedown assets to estimated
realizable values; $25.0 million for pension and postretirement benefits; and
$21.0 million for termination benefits and other exit costs. At January 31,
1997, $31.0 million of the plant closure reserve was reflected as a current
accrued liability and $75.7 million was included in other long-term liabilities
on the accompanying consolidated balance sheet.
In connection with the Merger, the Company recorded nonrecurring charges of
$6.4 million. These charges consist 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. In addition, the Company assumed
plant closure liabilities of Holdings of $27.4 million relating to actions
undertaken by Holdings in fiscal 1995 and 1994 to close manufacturing operations
in its automotive wheel and brake businesses. As of January 31, 1997, $22.7
million of these liabilities remain on the balance sheet of the Company.
During the fourth quarter of fiscal 1995, the Company recognized
nonrecurring charges of $3.6 million. These charges include a $1.4 million
provision associated with the restructuring of the North American Aluminum Wheel
Group and $2.2 million of charges associated with Varity Corporation's proposal
to purchase the Company's outstanding shares not owned by Varity (at the time
the owner of 46.3% of the Company's outstanding common stock), which proposal
was made on September 27, 1995, and withdrawn on February 5, 1996.
(11) CONTINGENCIES
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.
(12) OTHER EQUITY INVESTMENTS
The Company holds the following investments which are accounted for under
the equity method.
As a result of the Merger, the Company acquired a 50% interest in Aluminum
Wheel Technology, Inc. ("Alumitech"), a manufacturer of cast aluminum wheels,
and a 50% interest in Riviera Tool Company, a manufacturer of stamping dies that
are sold to domestic automobile manufacturers and their suppliers. Subsequent to
year end, as a result of a public offering of stock by Riviera Tool Company, the
Company's interest in Riviera Tool Company was reduced to 29.6%
In fiscal 1995, the Company increased its ownership in Hayes Wheels de
Venezuela, C.A. to 49% in consideration for a contribution to the joint venture
of $1.4 million, which included capital equipment, tooling and a cash payment.
In fiscal 1995, the Company purchased a 40% interest in the wheel business
of Kelsey-Hayes de Mexico, S.A. de C.V. ("KHDM") for $0.2 million and made a
capital contribution of $2.0 million. KHDM was then renamed Hayes Wheels de
Mexico, S.A. de C.V.
The Company holds a 49% interest in Metalurgica FPS do Brasil, Ltda.
F-18
<PAGE> 53
HAYES WHEELS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED JANUARY 31, 1997, 1996 AND 1995
------------------------------------
(12) OTHER EQUITY INVESTMENTS -- (CONTINUED)
The aggregate financial position and results of operations for these
entities as of, and for the twelve months ended January 31, 1997, 1996 and 1995,
respectively, were not material to the consolidated financial statements of the
Company.
(13) STOCK OPTIONS AND WARRANTS
In 1992, the Company adopted the Hayes Wheels International, Inc. 1992
Stock Incentive Plan (the "1992 Plan"), under which 500,000 shares of Common
Stock are available for issuance with respect to awards granted to officers,
management and other key employees of the Company. In connection with the Merger
and Recapitalization, certain of the stock options were exercised with the
remainder becoming vested. At January 31, 1997, 301,100 options were exercisable
at a price of $10.00, 161,900 options were exercisable at a price of $19.94, and
7,500 options were exercisable at a price of $19.69.
At the time of the Recapitalization, the Company established the Hayes
Wheels International, Inc. 1996 Stock Option Plan (the "1996 Plan"), which plan
remains subject to certain approvals required by applicable law, under which
2,534,770 shares of Common Stock are available for issuance with respect to
awards granted to officers, management and other key employees of the Company.
Each such option grant is divided into five tranches (each, a "Tranche") of an
equal number of options. The options in each such Tranche vest when both of the
following conditions have been met: (a) 20% of each Tranche vests on the last
day of each fiscal year commencing on January 31, 1997, and continuing until
January 31, 2001, if the employee to whom they were granted is then still an
employee of the Company; and (b) the average share price for any twenty
consecutive day period on the principal exchange upon which the Common Stock is
traded equals or exceeds certain specified prices (the "Target Prices") ranging
from $16.00 per share for the first Tranche and increasing ratably to $80.00 per
share for the fifth Tranche. A particular Target Price need only be reached on
one occasion for all options within the Tranche to which such Target Price
relates to become vested, subject to the satisfaction of the condition to such
vesting set forth in clause (a) above. In addition, notwithstanding the
foregoing conditions to vesting, the options granted under the 1996 Plan become
exercisable nine years after their grant date if the employee to whom they were
granted is then still an employee of the Company. At January 31, 1997, awards
for 76,043 stock options under the first tranche of the 1996 Plan were
exercisable, subject to the approvals described above.
Also, in connection with the Merger, 150,702 options with an exercise price
of $2.05 were granted to a former shareholder of Holdings. Of these stock
options, 90,470 are exercisable, with the remainder becoming exercisable on July
2, 1997.
Information with respect to all stock options is summarized below:
<TABLE>
<CAPTION>
1992 PLAN 1996 PLAN OTHER TOTAL
--------- --------- ------- ---------
<S> <C> <C> <C> <C>
Outstanding at January 31, 1995....... 464,100 -- -- 464,100
Granted............................... 266,000 -- -- 266,000
Exercised............................. -- -- -- --
Expired............................... (80,000) -- -- (80,000)
-------- --------- ------- ---------
Outstanding at January 31, 1996....... 650,100 -- -- 650,100
Granted............................... 301,100 1,901,077 150,702 2,352,879
Exercised............................. (480,700) -- -- (480,700)
-------- --------- ------- ---------
Outstanding at January 31, 1997....... 470,500 1,901,077 150,702 2,522,279
======== ========= ======= =========
</TABLE>
F-19
<PAGE> 54
HAYES WHEELS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED JANUARY 31, 1997, 1996 AND 1995
------------------------------------
(13) STOCK OPTIONS AND WARRANTS -- (CONTINUED)
The Company applies APB Opinion 25 and related Interpretations in
accounting for stock options. Compensation cost charged against operations for
1996 was $3.5 million which reflects amounts paid in connection with the
exercise of certain of the stock options granted under the 1992 Plan.
In compliance with SFAS No. 123, the Company has elected to provide the pro
forma disclosure. As such, the Company's net income (loss) and earnings (loss)
per share for 1996 and 1995 adjusted to reflect pro forma amounts are indicated
below:
<TABLE>
<CAPTION>
1996 1995
------ -----
<S> <C> <C>
Net income (loss)
As reported............................................... $(72.9) $28.4
Pro forma................................................. (75.1) 28.2
Earnings (loss) per share
As reported............................................... $(2.63) $0.81
Pro forma................................................. (2.73) 0.80
</TABLE>
The fair value of stock options granted in 1996 and 1995 was estimated on
the date of grant using the Black-Scholes option-pricing model. The weighted
average fair values and related assumptions were:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Weighted average fair value............................... $9.32 $4.74
Expected volatility....................................... 41.2% 40.3%
Risk free interest rate................................... 6.8% 6.2%
Expected lives............................................ 8.7 years 6.7 years
</TABLE>
Dividend yield for all grants was assumed to be insignificant.
At January 31, 1997, warrants, issued in conjunction with the Merger and
Recapitalization, to purchase 2.6 million common shares were outstanding. Each
warrant allows the holder thereof to acquire one share of Common Stock for a
purchase price of $24.00. The warrants are exercisable from July 2, 2000 through
July 2, 2003.
(14) INFORMATION BY GEOGRAPHIC AREA
The Company operates principally in one segment -- the design, manufacture
and supply of wheels and brake components to OEMs of automobiles, light trucks
and commercial highway vehicles. Operating data and identifiable assets by
geographic area follow (millions of dollars):
<TABLE>
<CAPTION>
EARNINGS (LOSS) BEFORE TAXES ON INCOME,
REVENUE(1) MINORITY INTEREST AND EXTRAORDINARY ITEMS
--------------------------------------- ------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JANUARY 31, JANUARY 31, JANUARY 31, JANUARY 31, JANUARY 31, JANUARY 31,
1997 1996 1995 1997 1996 1995
----------- ----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
North America............. $689.5 $527.3 $474.9 $ (67.8) $ 48.4 $ 54.6
Europe(2)................. 88.7 83.8 62.7 14.3 12.8 8.7
------ ------ ------ ------- ------ ------
Totals.................. 778.2 611.1 537.6 (53.5) 61.2 63.3
General corporate(3)...... -- -- -- -- -- --
Interest expense.......... -- -- -- (48.5) (15.0) (13.4)
------ ------ ------ ------- ------ ------
Consolidated totals....... $778.2 $611.1 $537.6 $(102.0) $ 46.2 $ 49.9
====== ====== ====== ======= ====== ======
<CAPTION>
YEAR-END
IDENTIFIABLE ASSETS
-------------------------
JANUARY 31, JANUARY 31,
1997 1996
----------- -----------
<S> <C> <C>
North America............. $ 988.9 $552.8
Europe(2)................. 164.7 77.5
-------- ------
Totals.................. 1,153.6 630.3
General corporate(3)...... 29.5 3.6
Interest expense.......... -- --
-------- ------
Consolidated totals....... $1,183.1 $633.9
======== ======
</TABLE>
- ---------------
(1) Sales were made to three major automotive customers each in amounts
exceeding 10 percent of total sales. Sales to one of these customers totaled
$185.3 million in fiscal 1996, $197.6 million in fiscal 1995
F-20
<PAGE> 55
HAYES WHEELS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED JANUARY 31, 1997, 1996 AND 1995
------------------------------------
(14) INFORMATION BY GEOGRAPHIC AREA -- (CONTINUED)
and $180.3 million in fiscal 1994. Sales to another customer totaled $182.5
million in fiscal 1996, $161.0 million for fiscal 1995 and $130.5 million
for fiscal 1994. Sales to a third major customer totaled $205.4 million in
fiscal 1996, $129.1 million for fiscal 1995 and $122.5 million for fiscal
1994.
(2) Europe includes subsidiaries in Italy, Spain and the Czech Republic.
(3) General corporate assets are unamortized debt issuance costs.
(15) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following represents the Company's quarterly results (millions of
dollars, except share amounts):
<TABLE>
<CAPTION>
QUARTERS ENDED
---------------------------------------------------------------------------------------------------
JANUARY 31, OCTOBER 31, JULY 31, APRIL 30, JANUARY 31, OCTOBER 31, JULY 31, APRIL 30,
1997 1996 1996 1996 1996 1995 1995 1995
----------- ----------- -------- --------- ----------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales............... $222.3 $234.4 $165.3 $156.2 $142.1 $157.9 $151.4 $159.7
Gross profit............ 33.5 35.9 11.0 22.6 22.9 25.2 23.0 26.6
Net income (loss)....... (66.8) 4.7 (16.9) 6.1 4.9 8.0 7.2 8.3
Net income (loss) per
share................. $(2.98) $ 0.21 $(0.54) $ 0.17 $ 0.14 $ 0.23 $ 0.20 $ 0.24
</TABLE>
(16) GUARANTOR AND NONGUARANTOR FINANCIAL STATEMENTS
In connection with the Merger and as part of the financing thereof, the
Company issued and sold $250 million aggregate principal amount of its 11%
Senior Subordinated Notes due 2006 (the "Senior Subordinated Notes") in a public
offering. The Senior Subordinated 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 following condensed consolidating financial information presents:
(1) Condensed consolidating financial statements as of January 31,
1997 and 1996 and for the twelve month periods ended January 31, 1997, 1996
and 1995, 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 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.
F-21
<PAGE> 56
HAYES WHEELS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED JANUARY 31, 1997, 1996 AND 1995
------------------------------------
(16) GUARANTOR AND NONGUARANTOR FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF JANUARY 31, 1997
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents.............. $ 41.2 $ (0.6) $ 6.9 $ -- $ 47.5
Receivables............................ 51.0 62.9 31.3 -- 145.2
Inventories............................ 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
======= ====== ====== ======= ========
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
Long-term debt, net of current
portion.............................. 658.3 -- 28.0 -- 686.3
Deferred income taxes.................. (31.1) 18.0 13.1 -- --
Minority interest...................... -- 0.2 -- 8.1 8.3
Pension and other long-term
liabilities.......................... 143.2 103.3 12.1 (3.3) 255.3
Parent loans........................... (211.2) 208.0 3.2 -- --
------- ------ ------ ------- --------
Total noncurrent liabilities......... 559.2 329.5 56.4 4.8 949.9
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)
Cumulative translation adjustment...... (1.0) (0.1) 2.0 (1.4) (0.5)
Pension liability adjustment........... (2.2) -- -- -- (2.2)
------- ------ ------ ------- --------
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>
F-22
<PAGE> 57
HAYES WHEELS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED JANUARY 31, 1997, 1996 AND 1995
------------------------------------
(16) GUARANTOR AND NONGUARANTOR FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF JANUARY 31, 1996
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents.............. $ 1.0 $ 0.1 $ 0.7 $ -- $ 1.8
Receivables............................ 50.4 35.6 23.6 -- 109.6
Inventories............................ 36.4 18.7 3.8 -- 58.9
Prepaid expenses and other............. 3.4 3.9 2.8 (0.2) 9.9
------- ------ ------ ------- --------
Total current assets................. 91.2 58.3 30.9 (0.2) 180.2
Property, plant and equipment.......... 178.5 173.2 63.1 -- 414.8
Accumulated depreciation............... (37.2) (53.1) (20.1) -- (110.4)
------- ------ ------ ------- --------
Net property, plant and equipment.... 141.3 120.1 43.0 -- 304.4
Goodwill and other assets.............. 169.6 76.3 5.0 (101.6) 149.3
------- ------ ------ ------- --------
Total assets......................... $ 402.1 $254.7 $ 78.9 $(101.8) $ 633.9
======= ====== ====== ======= ========
Bank borrowings........................ $ -- $ -- $ 4.1 $ -- $ 4.1
Current portion of long-term debt...... -- -- 0.1 -- 0.1
Accounts payable and accrued
liabilities.......................... 78.8 26.2 20.8 (0.3) 125.5
------- ------ ------ ------- --------
Total current liabilities............ 78.8 26.2 25.0 (0.3) 129.7
Long-term debt, net of current
portion.............................. 128.6 -- 0.3 -- 128.9
Deferred income taxes.................. 18.4 18.0 11.7 -- 48.1
Pension and other long-term
liabilities.......................... 76.7 0.1 9.2 (4.2) 81.8
Parent loans........................... (115.4) 117.3 15.9 (17.8) --
------- ------ ------ ------- --------
Total noncurrent liabilities......... 108.3 135.4 37.1 (22.0) 258.8
Common stock........................... 0.4 -- -- -- 0.4
Additional paid-in capital............. 198.3 6.5 1.9 (8.4) 198.3
Retained earnings (accumulated
deficit)............................. 20.7 86.6 12.5 (70.2) 49.6
Cumulative translation adjustment...... (1.8) -- 2.4 (0.9) (0.3)
Pension liability adjustment........... (2.6) -- -- -- (2.6)
------- ------ ------ ------- --------
Total stockholders' equity
(deficit)......................... 215.0 93.1 16.8 (79.5) 245.4
Total liabilities and stockholders'
equity (deficit).................. $ 402.1 $254.7 $ 78.9 $(101.8) $ 633.9
======= ====== ====== ======= ========
</TABLE>
F-23
<PAGE> 58
HAYES WHEELS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED JANUARY 31, 1997, 1996 AND 1995
------------------------------------
(16) GUARANTOR AND NONGUARANTOR FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JANUARY 31, 1997
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales............................. $264.9 $424.9 $91.5 $(3.1) $ 778.2
Cost of goods sold.................... 239.8 363.5 75.0 (3.1) 675.2
------- ------ ----- ----- -------
Gross profit........................ 25.1 61.4 16.5 -- 103.0
Marketing, general and
administration...................... 7.8 23.0 5.1 -- 35.9
Engineering and product development... 2.7 3.3 1.2 -- 7.2
Equity in loss of unconsolidated
subsidiaries........................ 2.5 -- -- -- 2.5
Other income, net..................... (0.7) (0.4) (3.4) -- (4.5)
Nonrecurring charges.................. 115.4 -- -- -- 115.4
------- ------ ----- ----- -------
Earnings (loss) from operations..... (102.6) 35.5 13.6 -- (53.5)
Interest expense, net................. 21.7 25.7 1.1 -- 48.5
Equity in earnings of consolidated
subsidiaries........................ (7.2) -- -- 7.2 --
------- ------ ----- ----- -------
Earnings (loss) before taxes on
income, minority interest and
extraordinary items.............. (117.1) 9.8 12.5 (7.2) (102.0)
Income tax (benefit) provision........ (46.8) 4.5 5.6 -- (36.7)
------- ------ ----- ----- -------
Earnings (loss) before minority
interest and extraordinary
items............................ (70.3) 5.3 6.9 (7.2) (65.3)
Minority interest..................... -- -- -- 0.2 0.2
------- ------ ----- ----- -------
Earnings (loss) before extraordinary
items............................ (70.3) 5.3 6.9 (7.4) (65.5)
Extraordinary items, net of tax....... 7.4 -- -- -- 7.4
------- ------ ----- ----- -------
Net income(loss).................... $ (77.7) $ 5.3 $ 6.9 $(7.4) $ (72.9)
======= ====== ===== ===== =======
</TABLE>
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JANUARY 31, 1996
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales.............................. $249.9 $280.5 $83.8 $(3.1) $611.1
Cost of goods sold..................... 206.5 242.3 67.7 (3.1) 513.4
------ ------ ----- ----- ------
Gross profit......................... 43.4 38.2 16.1 -- 97.7
Marketing, general and
administration....................... 8.7 15.2 5.8 -- 29.7
Engineering and product development.... 2.3 1.6 0.8 -- 4.7
Other (income) expense, net............ 6.8 -- (9.9) 1.6 (1.5)
Nonrecurring charges................... 3.6 -- -- -- 3.6
------ ------ ----- ----- ------
Earnings (loss) from operations...... 22.0 21.4 19.4 (1.6) 61.2
Interest expense, net.................. 1.3 7.7 6.0 -- 15.0
Equity in earnings of consolidated
subsidiaries......................... (5.7) -- -- 5.7 --
------ ------ ----- ----- ------
Earnings (loss) before taxes on
income............................ 26.4 13.7 13.4 (7.3) 46.2
Income tax provision................... 6.8 5.2 5.8 -- 17.8
------ ------ ----- ----- ------
Net income(loss)..................... $ 19.6 $ 8.5 $ 7.6 $(7.3) $ 28.4
====== ====== ===== ===== ======
</TABLE>
F-24
<PAGE> 59
HAYES WHEELS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED JANUARY 31, 1997, 1996 AND 1995
------------------------------------
(16) GUARANTOR AND NONGUARANTOR FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JANUARY 31, 1995
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales.............................. $201.9 $276.9 $62.7 $(3.9) $537.6
Cost of goods sold..................... 171.6 225.0 48.7 (3.9) 441.4
------ ------ ----- ----- ------
Gross profit......................... 30.3 51.9 14.0 -- 96.2
Marketing, general and
administration....................... 9.2 12.3 7.1 -- 28.6
Engineering and product development.... 1.9 1.4 1.8 -- 5.1
Other (income) expense, net............ 5.1 (0.1) (5.8) -- (0.8)
------ ------ ----- ----- ------
Earnings (loss) from operations...... 14.1 38.3 10.9 -- 63.3
Interest expense, net.................. 4.4 7.0 2.0 -- 13.4
Equity in earnings of consolidated
subsidiaries......................... (2.7) -- -- 2.7 --
------ ------ ----- ----- ------
Earnings (loss) before taxes on
income............................ 12.4 31.3 8.9 (2.7) 49.9
Income tax provision................... 2.6 11.8 5.6 -- 20.0
------ ------ ----- ----- ------
Net income(loss)..................... $ 9.8 $ 19.5 $ 3.3 $(2.7) $ 29.9
====== ====== ===== ===== ======
</TABLE>
F-25
<PAGE> 60
HAYES WHEELS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED JANUARY 31, 1997, 1996 AND 1995
------------------------------------
(16) GUARANTOR AND NONGUARANTOR FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED JANUARY 31, 1997
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash flows provided from (used by)
operating activities.................. $ 31.4 $ 31.2 $16.0 $(7.4) $ 71.2
Cash flows from investing activities:
Acquisition of property, plant and
equipment.......................... (28.9) (25.6) (16.9) -- (71.4)
Other, net............................ (4.3) 12.1 (1.5) -- 6.3
------ ------ ----- ----- ------
Cash used by investing
activities....................... (33.2) (13.5) (18.4) -- (65.1)
Cash flows from financing activities:
Increase (decrease) in foreign bank
borrowings and loans............... -- -- (4.1) -- (4.1)
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
Dividends paid to stockholders........ (0.5) -- -- -- (0.5)
Fees paid to issue long term debt..... (35.0) -- -- -- (35.0)
Increase (decrease) in bank revolving
loan and other domestic loans...... (29.5) -- -- -- (29.5)
------ ------ ----- ----- ------
Cash provided by financing
activities....................... 181.4 (137.7) (4.1) 0.0 39.6
Increase (decrease) in parent loans and
advances.............................. (139.4) 119.3 12.7 7.4 --
Effect of exchange rates of cash and
cash equivalents...................... -- -- -- -- --
Net increase (decrease) in cash and
cash equivalents................. 40.2 (0.7) 6.2 -- 45.7
Cash and cash equivalents at beginning
of period............................. 1.0 0.1 0.7 -- 1.8
------ ------ ----- ----- ------
Cash and cash equivalents at end of
period................................ $ 41.2 $ (0.6) $ 6.9 $ -- $ 47.5
====== ====== ===== ===== ======
</TABLE>
F-26
<PAGE> 61
HAYES WHEELS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED JANUARY 31, 1997, 1996 AND 1995
------------------------------------
(16) GUARANTOR AND NONGUARANTOR FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED JANUARY 31, 1996
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash flows provided from (used by)
operating activities.................. $24.0 $ 8.7 $22.0 $(9.8) $44.9
Cash flows from investing activities:
Acquisition of property, plant and
equipment.......................... (23.5) (15.1) (4.8) -- (43.4)
Other, net............................ (10.0) 2.1 (1.1) -- (9.0)
----- ----- ----- ----- -----
Cash used by investing
activities....................... (33.5) (13.0) (5.9) -- (52.4)
Cash flows from financing activities:
Increase (decrease) in foreign bank
borrowings and loans............... -- -- (6.4) -- (6.4)
Dividends paid to stockholders........ (1.1) -- -- -- (1.1)
Increase (decrease) in bank revolving
loan and other domestic loans...... 17.7 (1.3) (0.1) -- 16.3
----- ----- ----- ----- -----
Cash provided by financing
activities....................... 16.6 (1.3) (6.5) -- 8.8
Increase (decrease) in parent loans and
advances.............................. (6.2) 5.6 (9.2) 9.8 --
Effect of exchange rates of cash and
cash equivalents...................... -- -- -- -- --
Net increase (decrease) in cash and
cash equivalents................... 0.9 -- 0.4 -- 1.3
Cash and cash equivalents at beginning
of period............................. 0.1 0.1 0.3 -- 0.5
----- ----- ----- ----- -----
Cash and cash equivalents at end of
period................................ $ 1.0 $ 0.1 $ 0.7 $ -- $ 1.8
===== ===== ===== ===== =====
</TABLE>
F-27
<PAGE> 62
HAYES WHEELS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED JANUARY 31, 1997, 1996 AND 1995
------------------------------------
(16) GUARANTOR AND NONGUARANTOR FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED JANUARY 31, 1995
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash flows provided from (used by)
operating activities.................. $ 5.4 $21.0 $(1.3) $(2.7) $22.4
Cash flows from investing activities:
Acquisition of property, plant and
equipment.......................... (10.4) (26.5) (3.0) -- (39.9)
Other, net......................... (0.2) (0.5) (0.3) -- (1.0)
----- ----- ----- ----- -----
Cash used by investing activities..... (10.6) (27.0) (3.3) -- (40.9)
Cash flows from financing activities:
Increase (decrease) in foreign bank
borrowings and loans............... -- -- 6.0 -- 6.0
Dividends paid to stockholders........ (1.1) -- -- -- (1.1)
Increase (decrease) in bank revolving
loan and other domestic loans...... 10.0 (1.3) (0.1) -- 8.6
----- ----- ----- ----- -----
Cash provided by financing
activities....................... 8.9 (1.3) 5.9 -- 13.5
Increase (decrease) in parent loans and
advances.............................. (4.0) 3.7 (2.4) 2.7 --
Effect of exchange rates of cash and
cash equivalents...................... -- -- 0.2 -- 0.2
Net increase (decrease) in cash and
cash equivalents................. (0.3) (3.6) (0.9) -- (4.8)
Cash and cash equivalents at beginning
of period............................. 0.4 3.7 1.2 -- 5.3
----- ----- ----- ----- -----
Cash and cash equivalents at end of
period................................ $ 0.1 $ 0.1 $ 0.3 $ -- $ 0.5
===== ===== ===== ===== =====
</TABLE>
(17) PENDING ACQUISITION
On December 9, 1996, the Company announced that it had signed a Letter of
Intent (the "Letter") with Lemmerz Holding GmbH ("Lemmerz") and each of the
shareholders of Lemmerz, wherein the Company indicated its intent to acquire
76.63% of the total equity capital interest in Lemmerz (the "Acquisition"), with
the right to acquire the remaining interest at a later date.
Lemmerz is the leading full-line wheel supplier in Europe and manufactures
steel and aluminum wheels for automobiles and light trucks, and steel wheels for
heavy-duty trucks. If the Acquisition is completed, Lemmerz, or an entity formed
for the purpose of receiving the Lemmerz shares in the Acquisition, would become
a subsidiary of the Company.
Consummation of the Acquisition is subject to various conditions, including
(i) the negotiation and execution of a definitive agreement and agreements with
key management employees; (ii) receipt by Lemmerz, the Lemmerz shareholders and
the Company of all required governmental and third-party approvals to the
Acquisition, including, but not limited to, the expiration or termination of any
applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and any applicable German or other antitrust legislation;
and (iii) the satisfactory completion of due diligence reviews of Lemmerz and
the Company, by the Company and the Lemmerz shareholders, respectively.
F-28
<PAGE> 63
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(IN MILLIONS)
<TABLE>
<CAPTION>
ADDITIONS --
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
DESCRIPTION OF YEAR EXPENSES DEDUCTIONS YEAR
----------- ---------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
Year ended January 31, 1995
Allowance for doubtful accounts.................. $0.1 -- -- $0.1
Year ended January 31, 1996
Allowance for doubtful accounts.................. 0.1 -- -- $0.1
Year ended January 31, 1997
Allowance for doubtful accounts.................. $0.1 $2.1 -- $2.2
</TABLE>
F-29
<PAGE> 64
RESPONSIBILITIES FOR CONSOLIDATED FINANCIAL STATEMENTS
The Board of Directors and Stockholders
Hayes Wheels International, Inc.
The consolidated financial statements of Hayes Wheels International, Inc. and
subsidiaries were prepared by management, which is responsible for their
integrity and objectivity. The statements have been prepared in conformity with
generally accepted accounting principles and, as such include amounts based on
judgements of management. Financial information elsewhere in this Report is
consistent with that in the financial statements.
Management is further responsible for maintaining a system of internal
accounting controls, designed to provide reasonable assurance that the books and
records reflect the transactions of the companies and that its established
policies and procedures are carefully followed. From a stockholder's point of
view, perhaps the most important feature in the system of control is that it is
continually reviewed for its effectiveness, the careful selection and training
of qualified personnel, and a program of internal audit. KPMG Peat Marwick LLP,
an independent auditing firm, is engaged to audit the consolidated financial
statements of Hayes Wheels International, Inc. and its subsidiaries and issue
reports thereon. The audit is conducted in accordance with generally accepted
auditing standards which includes reviews of various aspects of the control
system and makes test checks of compliance. The Independent Auditors' Report
appears on the following page.
The Board of Directors, through the Audit Committee (which is comprised entirely
of non-employee Directors), is responsible for assuring that management fulfills
its responsibilities in the preparation of the consolidated financial
statements. The Committee selects the independent auditors annually in advance
of the Annual Meeting of Stockholders and submits the selection for ratification
at the Meeting. In addition, the Committee reviews the scope of the audits and
the accounting principles being applied in financial reporting. The independent
auditors, representatives of management, and the internal auditors meet
regularly (separately and jointly) with the Committee to review the activities
of each to ensure that each is properly discharging its responsibilities.
It is management's conclusion that the system of internal accounting controls at
January 31, 1997 provides reasonable assurance that the books and records
reflect the transactions of the companies and that its established policies and
procedures are complied with. To ensure complete independence, KPMG Peat Marwick
LLP has full and free access to meet with the Audit Committee, without
management representatives present, to discuss the results of the audit, the
adequacy of internal accounting controls, and the quality of the financial
reporting.
/s/ R. Cucuz
President and Chief Executive Officer
/s/ W.D. Shovers
Chief Financial Officer
F-30
<PAGE> 65
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Hayes Wheels International, Inc.:
Under date of February 25, 1997, we reported on the consolidated balance sheets
of Hayes Wheels International, Inc. and subsidiaries as of January 31, 1997 and
1996, and the related consolidated statements of operations, changes in
stockholders' equity (deficit), and cash flows for each of the years in the
three-year period ended January 31, 1997, which are included in the annual
report on Form 10-K of Hayes Wheels International, Inc. In connection with our
audits of the aforementioned consolidated financial statements, we also audited
the related consolidated financial statement schedule in Form 10-K. The
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion on the financial statement schedule
based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
KPMG Peat Marwick LLP
Detroit, Michigan
February 25, 1997
F-31
<PAGE> 66
EXHIBIT INDEX
2.2 Amendment No. 1 to Stockholders' Agreement, dated as of
April 8, 1997, among the Company, Joseph Littlejohn & Levy
Fund II, L.P., Chase Equity Associates, CIBC WG Argosy
Merchant Fund 2, L.L.C., Nomura Holding America, Inc. and
TSG Capital Fund II, L.P.
10.23 First Amendment to Employment Agreement, dated June 6, 1996,
between Hayes Wheels, S.p.A. and Giancarlo Dallera.
12 Computation of Ratios.
22.1 Subsidiaries of the Company.
23 Consent of KPMG Peat Marwick LLP.
24 Powers of Attorney.
27 Financial Data Schedule.
<PAGE> 1
EXHIBIT 2.2
AMENDMENT NO. 1
TO
STOCKHOLDERS' AGREEMENT
This AMENDMENT NO. 1 to Stockholders' Agreement, is dated as of
April 8, 1997 and is by and among Hayes Wheels International,
Inc., a Delaware corporation (the "Company"), Joseph Littlejohn & Levy Fund
II, L.P., a Delaware limited partnership ("JLL"), Chase Equity Associates,
a California limited partnership ("Chase"), CIBC WG Argosy Merchant Fund 2,
L.L.C., a Delaware limited liability company ("Argosy"), Nomura Holding
America, Inc., a Delaware corporation ("Nomura"), and TSG Capital Fund II,
L.P., a Delaware limited partnership ("TSG") (JLL, Chase, Argosy, Nomura
and TSG, each being referred to herein as a "Stockholder" and collectively
being referred to herein as the "Stockholders"). Capitalized terms used
but not otherwise defined shall have the respective meanings set forth in
the Stockholders' Agreement (as defined below).
WITNESSETH
WHEREAS, the Stockholders are parties to that certain
Stockholders' Agreement, dated as of July 2, 1996 (the "Stockholders'
Agreement"), relating to shares of common stock, par value $.01 per share,
of the Company.
WHEREAS, under the terms of the Stockholders' Agreement, Argosy
is entitled to appoint a non-voting representative to attend meetings of
the Company's Board of Directors.
WHEREAS, the Stockholders are desirous of amending the
Stockholders' Agreement to permit Argosy to designate a representative as a
voting member of the Company's Board of Directors.
NOW THEREFORE, in consideration of good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Section 3.01(a) of the Stockholders' Agreement is hereby
amended in its entirety to read as follows:
(a) Members. During the term of this Agreement, each of JLL,
TSG, Nomura and Argosy will use their best efforts to cause the
<PAGE> 2
Board of Directors of the Company (the "Board") to consist of
nine (9) members, of which: (i) four members shall be
designees of JLL; (ii) one member shall be a designee of TSG;
(iii) one member shall be a designee of Argosy; (iv) one member
shall be the Chief Executive Officer of the Company; and (v)
the other two members shall be determined by the Board;
provided, however, such members determined by the Board shall
not be affiliated with the Company or any of the Stockholders.
During the term of this Agreement, the Company shall use its
best efforts and shall exercise all authority under applicable
law to cause to be elected or appointed, as the case may be, as
directors of the Company a slate of directors consisting of
individuals meeting the requirements of the previous sentence.
2. The last sentence of Section 4.01(b) is hereby amended in
its entirety to read as follows:
Notwithstanding anything stated herein to the contrary, the
Transfer of Shares by any of JLL, TSG or Argosy shall not
result in the assignment of such transferring Stockholder's
rights under Section 3.01(a) hereof.
3. Except as specifically amended hereby, the Stockholders'
Agreement shall continue and remain in full force and effect in accordance with
its terms. From and after the date hereof, all references in the Stockholders'
Agreement to the "Agreement," "hereunder," "hereof," "herein," or words of
similar import shall mean and be a reference to the Stockholders' Agreement as
amended by this Amendment No. 1.
[Signature Page Follows]
2
<PAGE> 3
IN WITNESS WHEREOF, the undersigned hereby agrees to be bound by the
terms and provisions of this Amendment No. 1 to the Stockholders' Agreement as
of the date first above written.
HAYES WHEELS INTERNATIONAL, INC.
By: /s/ Daniel M. Sandberg
--------------------------------
Name: Daniel M. Sandberg
Title: Vice President
JOSEPH LITTLEJOHN & LEVY FUND II, L.P.
By: JLL ASSOCIATES II, L.P.,
its General Partner
By: /s/ Paul S. Levy
--------------------------------
Name: Paul S. Levy
Title: General Partner
CHASE EQUITY ASSOCIATES, a
California Limited Partnership
By: CHASE CAPITAL PARTNERS,
its General Partner
By: /s/ Donald J. Hoffman
--------------------------------
Name: Donald J. Hoffman
Title: General Partner
CIBC WG ARGOSY MERCHANT FUND 2,
L.L.C.
By: /s/ Jay Bloom
--------------------------------
Name: Jay Bloom
Title: Member
3
<PAGE> 4
NOMURA HOLDING AMERICA, INC.
By: /s/ Dennis Dolan
--------------------------------
Name: Dennis Dolan
Title: Managing Director
TSG CAPITAL FUND II, L.P.
By: TSG ASSOCIATES II, L.P.,
its General Partner
By: TSG ASSOCIATES II, INC.,
its General Partner
By: /s/ Cleveland A. Christophe
--------------------------------
Name: Cleveland A. Christophe
Title: President
<PAGE> 1
EXHIBIT 10.23
FIRST AMENDMENT TO
EMPLOYMENT AGREEMENT
THIS AGREEMENT is dated and effective this 6th day of June, 1996, and
amends that certain Employment Agreement, dated February 1, 1993, by and between
HAYES WHEELS, S.p.A. f/k/a FPS/Kelsey-Hayes, S.p.A., an Italian corporation
(the "Company" or "FPS") and GIANCARLO DALLERA, an individual employed by the
Company ("Dallera").
WHEREAS, the Company desires to continue to retain Dallera as an employee
of the Company because of his experience, expertise and abilities;
WHEREAS, Dallera desires to accept the Company's offer to have Dallera
continue to work for the Company beyond the term originally agreed to in the
Agreement, subject to the terms in the Agreement originally as amended herein;
WHEREAS, the Company has agreed to amend the Agreement and to sell to
Dallera the Company's equity interest in and to Cromodora Wheels S.p.A., as
consideration for Dallera's agreement to remain with the Company as its
Chairman and Managing Director;
WHEREFORE, as consideration for the mutual promises, rights and
obligations set forth herein, and other valuable consideration, the receipt and
adequacy of which is hereby acknowledged, Dallera and the Company agree to
amend the Agreement as follows:
A. In Section 1 of the Agreement, the term of May 1, 1993 through April
30, 1998 is deleted and replaced with the term of May 1, 1993 through December
31, 2003.
B. Section 3 of the Agreement is deleted and replaced with the
following:
"3. RESTRICTIVE COVENANT. Dallera agrees that during the term of this
Agreement: (a) he shall promptly reveal to the Board of Directors of FPS all
matters coming to his attention pertaining to the business or interest of FPS
and, except as permitted by clause (c) below, he shall not accept employment
from or serve in any capacity with, any other concern which is at such time
engaged in a business of a like or similar nature to the business being
conducted by FPS or any of its sister, parent or affiliated companies; (b) he
shall not reveal, without the written consent of FPS, any matter, the
revelation of which could in any manner, adversely affect FPS's business or
prospects, unless required by law to do so; (c) he shall not, directly or
indirectly, as an individual, partner, shareholder, trustee, executor or
through one or more intermediaries or otherwise, control or be controlled by or
under the common control or employment of, any corporation, firm, person or
other entity, engaged in competition with any business, trade or occupation
identical or similar to that carried on by FPS or its sister, parent or
<PAGE> 2
affiliated companies, except that Dallera may be associated with
Cromodora Wheels S.p.A., as an officer, director and/or shareholder so
long as the time expended by Dallera in such association does not
interfere with his duties under this Agreement and so long as Cromodora
Wheels S.p.A. is not in a business which is in competition with the
business carried on by the Company; and (d) he shall not, directly or
indirectly, cause, entice, offer or encourage to leave the employ of
FPS, nor shall he solicit for employment other than for employment
with FPS or its sister, parent or affiliated companies, any of the
officers, directors or other employees of FPS."
C. The Company and Dallera hereby acknowledge that FPS, as
referred to in the Agreement, is now known as and has become "Hayes Wheels,
S.p.A.."
D. Except as modified and amended herein, the Company and Dallera
hereby ratify and reaffirm in all respects the terms of the Agreement, which
terms as modified above remain in full force and effect.
WHEREFORE, Dallera and the Company have executed this Agreement as of
the date set forth above.
HAYES WHEELS, S.p.A. f/k/a
FPS/Kelsey-Hayes, S.p.A., an
Italian corporation
"Company" "Dallera"
By: /s/ R. Cucuz /s/ Giancarlo Dallera
----------------------------- -------------------------------------
R. Cucuz Giancarlo Dallera
Director
<PAGE> 1
EXHIBIT 12
HAYES WHEELS INTERNATIONAL, INC.
RATIOS OF EARNINGS TO FIXED CHARGES
(UNAUDITED)
(MILLIONS OF DOLLARS EXCEPT RATIOS)
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
JAN. 31, JAN. 31, JAN. 31, JAN. 31, JAN. 31,
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Earnings:
Earnings (loss) before taxes on income and
minority interest.............................. $ 7.8 $42.2 $49.9 $46.2 $(102.0)
Interest expense:
Bank borrowings and long-term debt................ 33.8 13.6 13.4 15.0 48.5
Rentals(1)........................................ 0.5 1.0 2.0 2.6 4.6
----- ----- ----- ----- -------
Earnings before interest expense, taxes on income
and minority interest............................. $42.1 $56.8 $65.3 $63.8 $ (48.9)
===== ===== ===== ===== =======
Fixed charges:
Bank borrowings and long-term debt................ $33.8 $13.6 $13.4 $15.0 $ 48.5
Rentals(1)........................................ .05 1.0 2.0 2.6 4.6
----- ----- ----- ----- -------
Total fixed charges............................ $34.3 $14.6 $15.4 $17.6 $ 53.1
===== ===== ===== ===== =======
Ratio of earnings to fixed charges.................. 1.23 3.89 4.24 3.63 (0.92)
===== ===== ===== ===== =======
Coverage deficiency on fixed charges................ N/A N/A N/A N/A $ 102.0
===== ===== ===== ===== =======
</TABLE>
- ---------------
(1) Estimated interest component of rent expense.
<PAGE> 1
EXHIBIT 22.1
SUBSIDIARIES OF
HAYES WHEELS INTERNATIONAL, INC.
<TABLE>
<CAPTION>
JURISDICTION OF PERCENTAGE
NAME OF SUBSIDIARY INCORPORATION OWNERSHIP
- ------------------ --------------- ----------
<S> <C> <C>
Hayes Wheels International -- California,
Inc. ........................................ Delaware 100%
Hayes Wheels International -- Michigan,
Inc. ........................................ Michigan 100%
Hayes Wheels International -- Indiana, Inc. ... Delaware 100%
Hayes Wheels International -- Georgia, Inc. ... Delaware 100%
Hayes Wheels, S.p.A. .......................... Italy 100%
HWI (Europe), LTD. ............................ Delaware 100%
Hayes Wheels de Espana, S.A. .................. Spain 100%
Hayes Wheels International -- Mexico, Inc. .... Delaware 100%
Hayes Wheels Japan............................. Japan 100%
Hayes Wheels International -- China, Inc. ..... Delaware 100%
Motor Wheel Corporation........................ Ohio 100%
Motor Wheel Corporation of Canada, Ltd......... Canada 100%
MWC Acquisition Sub, Inc....................... Delaware 100%
AMW Holdings, Inc.............................. Delaware 100%
Motor Wheel de Mexico, S.A. de C.V. ........... Mexico 75%
Hayes Wheels Autokola NH a.s. ................. Czech Republic 58%
Aluminum Wheel Technology, Inc................. Delaware 50%
Metalurgica FPS do Brasil, Ltda................ Brazil 49%
Hayes Wheels de Venezuela, C.A. ............... Venezuela 49%
Hayes Wheels de Mexico, S.A. de C.V. .......... Mexico 40%
Riviera Tool Company........................... Michigan 29.6%
</TABLE>
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Hayes Wheels International, Inc.:
We consent to incorporation by reference in the registration statements (No.
33-80552 and 33-71708) on Form S-8 of Hayes Wheels International, Inc. of our
reports dated February 25, 1997, relating to the consolidated balance sheets of
Hayes Wheels International, Inc. and subsidiaries as of January 31, 1997 and
1996, and the related consolidated statements of operations, changes in
stockholders' equity (deficit), and cash flows for each of the years in the
three-year period ended January 31, 1997, and our report on the accompanying
financial statement schedule which reports appears in the January 31, 1997,
annual report on Form 10-K of Hayes Wheels International, Inc.
KPMG Peat Marwick LLP
Detroit, Michigan
April 30, 1997
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Daniel M.
Sandberg and Patrick B. Carey, and each of them, as his true and lawful
agent and attorney-in fact, with full power of substitution and resubstitution,
to execute and deliver on behalf of the undersigned: (1) any Annual Reports on
Form 10-K required to be filed by Hayes Wheels International, Inc. (the
"Company") with the United States Securities and Exchange Commission (the
"SEC"), and any amendments thereto; (2) any reports required to be filed with
the SEC by the undersigned pursuant to Section 16 of the Securities Exchange
Act of 1934, as amended (the "1934 Act"), respecting transactions involving the
equity securities of the Company, including without limitation reports on Forms
3, 4 and 5 (and any amendments thereto); and (3) any reports of the undersigned
to the SEC on Form 144 promulgated pursuant to the Securities Act of 1933, as
amended, respecting sales of the Company's equity securities. This Power of
Attorney shall grant to the aforesaid persons the power to file any or all of
the foregoing reports with the SEC and generally to do anything else necessary
or proper in connection therewith. The authority of the aforesaid persons
under this Power of Attorney shall continue until the undersigned is no longer
a director of the Company or until otherwise revoked in writing. The
undersigned acknowledges that the aforesaid persons are not assuming any of the
undersigned's responsibilities to comply with Section 16 of the 1934 Act.
/s/ Cleveland A. Christophe
-----------------------------------
Dated: April 23, 1997
Print Name: Cleveland A. Christophe
-------------------------
<PAGE> 2
EXHIBIT 24
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Daniel M.
Sandberg and Patrick B. Carey, and each of them, as his true and lawful agent
and attorney-in fact, with full power of substitution and resubstitution, to
execute and deliver on behalf of the undersigned: (1) any Annual Reports on
Form 10-K required to be filed by Hayes Wheels International, Inc. (the
"Company") with the United States Securities and Exchange Commission (the
"SEC"), and any amendments thereto; (2) any reports required to be filed with
the SEC by the undersigned pursuant to Section 16 of the Securities Exchange
Act of 1934, as amended (the "1934 Act"), respecting transactions involving the
equity securities of the Company, including without limitation reports on Forms
3, 4 and 5 (and any amendments thereto); and (3) any reports of the undersigned
to the SEC on Form 144 promulgated pursuant to the Securities Act of 1933, as
amended, respecting sales of the Company's equity securities. This Power of
Attorney shall grant to the aforesaid persons the power to file any or all of
the foregoing reports with the SEC and generally to do anything else necessary
or proper in connection therewith. The authority of the aforesaid persons
under this Power of Attorney shall continue until the undersigned is no longer
a director of the Company or until otherwise revoked in writing. The
undersigned acknowledges that the aforesaid persons are not assuming any of the
undersigned's responsibilities to comply with Section 16 of the 1934 Act.
/s/ John S. Rodewig
-----------------------------------
Dated: April 23, 1997
Print Name: JOHN S. RODEWIG
-----------------------
<PAGE> 3
EXHIBIT 24
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Daniel M. Sandberg
and Patrick B. Carey, and each of them, as his true and lawful agent and
attorney-in fact, with full power of substitution and resubstitution, to
execute and deliver on behalf of the undersigned: (1) any Annual Reports on Form
10-K required to be filed by Hayes Wheels International, Inc. (the "Company")
with the United States Securities and Exchange Commission (the "SEC"), and any
amendments thereto; (2) any reports required to be filed with the SEC by the
undersigned pursuant to Section 16 of the Securities Exchange Act of 1934, as
amended ( the "1934 Act"), respecting transactions involving the equity
securities of the Company, including without limitation reports on Forms 3, 4
and 5 (and any amendments thereto); and (3) any reports of the undersigned to
the SEC on Form 144 promulgated pursuant to the Securities Act of 1933, as
amended, respecting sales of the Company's equity securities. This Power of
Attorney shall grant to the aforesaid persons the power to file any or all of
the foregoing reports with the SEC and generally to do anything else necessary
or proper in connection therewith. The authority of the aforesaid persons
under this Power of Attorney shall continue until the undersigned is no longer
a director of the Company or until otherwise revoked in writing. The
undersigned acknowledges that the aforesaid persons are not assuming any of the
undersigned's responsibilities to comply with Section 16 of the 1934 Act.
/s/ Paul S. Levy
-------------------------------
Dated: April 23, 1997
Print Name: Paul S. Levy
------------------
<PAGE> 4
EXHIBIT 24
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Daniel M.
Sandberg and Patrick B. Carey, and each of them, as his true and lawful agent
and attorney-in fact, with full power of substitution and resubstitution, to
execute and deliver on behalf of the undersigned: (1) any Annual Reports on
Form 10-K required to be filed by Hayes Wheels International, Inc. (the
"Company") with the United States Securities and Exchange Commission (the
"SEC"), and any amendments thereto; (2) any reports required to be filed with
the SEC by the undersigned pursuant to Section 16 of the Securities Exchange
Act of 1934, as amended (the "1934 Act"), respecting transactions involving the
equity securities of the Company, including without limitation reports on Forms
3, 4 and 5 (and any amendments thereto); and (3) any reports of the undersigned
to the SEC on Form 144 promulgated pursuant to the Securities Act of 1933, as
amended, respecting sales of the Company's equity securities. This Power of
Attorney shall grant to the aforesaid persons the power to file any or all of
the foregoing reports with the SEC and generally to do anything else necessary
or proper in connection therewith. The authority of the aforesaid persons
under this Power of Attorney shall continue until the undersigned is no longer
a director of the Company or until otherwise revoked in writing. The
undersigned acknowledges that the aforesaid persons are not assuming any of the
undersigned's responsibilities to comply with Section 16 of the 1934 Act.
/s/ Peter Joseph
-------------------------------
Dated: April 23, 1997
Print Name: Peter Joseph
--------------------
<PAGE> 5
EXHIBIT 24
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Daniel M.
Sandberg and Patrick B. Carey, and each of them, as his true and lawful agent
and attorney-in fact, with full power of substitution and resubstitution, to
execute and deliver on behalf of the undersigned: (1) any Annual Reports on
Form 10-K required to be filed by Hayes Wheels International, Inc. (the
"Company") with the United States Securities and Exchange Commission (the
"SEC"), and any amendments thereto; (2) any reports required to be filed with
the SEC by the undersigned pursuant to Section 16 of the Securities Exchange
Act of 1934, as amended (the "1934 Act"), respecting transactions involving the
equity securities of the Company, including without limitation reports on Forms
3, 4 and 5 (and any amendments thereto); and (3) any reports of the undersigned
to the SEC on Form 144 promulgated pursuant to the Securities Act of 1933, as
amended, respecting sales of the Company's equity securities. This Power of
Attorney shall grant to the aforesaid persons the power to file any or all of
the foregoing reports with the SEC and generally to do anything else necessary
or proper in connection therewith. The authority of the aforesaid persons
under this Power of Attorney shall continue until the undersigned is no longer
a director of the Company or until otherwise revoked in writing. The
undersigned acknowledges that the aforesaid persons are not assuming any of the
undersigned's responsibilities to comply with Section 16 of the 1934 Act.
/s/ Timothy J. Clark
-------------------------------
Dated: April 23, 1997
Print Name: Timothy J. Clark
--------------------
<PAGE> 6
EXHIBIT 24
POWER OF ATTORNEY
The person whose signature appears below hereby appoints Daniel M.
Sandberg and Patrick B. Carey, and each of them, as his true and lawful agent
and attorney-in-fact, with full power of substitution and resubstitution, to
execute and deliver on behalf of the undersigned: (1) any Annual Reports on
Form 10-K required to be filed by Hayes Wheels International, Inc. (the
"Company") with the United States Securities and Exchange Commission (the
"SEC"), and any amendments thereto; (2) any reports required to be filed with
the SEC by the undersigned pursuant to Section 16 of the Securities Exchange
Act of 1934, as amended (the "1934 Act"), respecting transactions involving the
equity securities of the Company, including without limitation reports on Forms
3, 4 and 5 (and any amendments thereto); and (3) any reports of the undersigned
to the SEC on Form 144 promulgated pursuant to the Securities Act of 1933, as
amended, respecting sales of the Company's equity securities. This Power of
Attorney shall grant to the aforesaid persons the power to file any or all of
the foregoing reports with the SEC and generally to do anything else necessary
or proper in connection therewith. The authority of the aforesaid persons
under this Power of Attorney shall continue until the undersigned is no longer
a director of the Company or until otherwise revoked in writing. The
undersigned acknowledges that the aforesaid persons are not assuming any of the
undersigned's responsibilities to comply with Section 16 of the 1934 Act.
/s/ Andrew R. Heyer
------------------------------
Dated: April 23, 1997
Print Name: Andrew R. Heyer
-------------------
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-START> FEB-01-1996
<PERIOD-END> JAN-31-1997
<CASH> 47500
<SECURITIES> 0
<RECEIVABLES> 145200
<ALLOWANCES> 0
<INVENTORY> 82900
<CURRENT-ASSETS> 289500
<PP&E> 633300
<DEPRECIATION> (146900)
<TOTAL-ASSETS> 1183100
<CURRENT-LIABILITIES> 274300
<BONDS> 0
0
0
<COMMON> 200
<OTHER-SE> (41300)
<TOTAL-LIABILITY-AND-EQUITY> 1183100
<SALES> 778200
<TOTAL-REVENUES> 778200
<CGS> 675200
<TOTAL-COSTS> 675200
<OTHER-EXPENSES> 156500
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 48500
<INCOME-PRETAX> (102000)
<INCOME-TAX> (36700)
<INCOME-CONTINUING> (65500)
<DISCONTINUED> 0
<EXTRAORDINARY> 7400
<CHANGES> 0
<NET-INCOME> (72900)
<EPS-PRIMARY> (2.63)
<EPS-DILUTED> (2.63)
</TABLE>
