<PAGE> 1
================================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED APRIL 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: 1-11592
HAYES LEMMERZ INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
13-3384636
(IRS EMPLOYER IDENTIFICATION NO.)
38481 HURON RIVER DRIVE
ROMULUS, MICHIGAN 48174
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)(ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (734) 941-2000
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES [X] NO [ ]
THE NUMBER OF SHARES OF THE REGISTRANT'S COMMON STOCK OUTSTANDING AS OF
JUNE 9, 1998 WAS 30,091,305 SHARES.
================================================================================
<PAGE> 2
HAYES LEMMERZ INTERNATIONAL, INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Statements of Operations....................... 3
Consolidated Balance Sheets................................. 4
Consolidated Statements of Cash Flows....................... 5
Notes to Consolidated Financial Statements.................. 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 8
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings........................................... 10
Item 2. Changes in Registered Securities............................ 10
Item 3. Defaults upon Senior Securities............................. 10
Item 4. Submission of Matters to a Vote of Security Holders......... 10
Item 5. Other Information........................................... 10
Item 6. (a) Exhibits................................................ 10
Item 6. (b) Reports on Form 8-K..................................... 10
Signatures............................................................. 11
</TABLE>
UNLESS OTHERWISE INDICATED, REFERENCES TO THE "COMPANY" MEAN HAYES LEMMERZ
INTERANATIONAL, INC., AND ITS SUBSIDIARIES AND REFERENCE TO A FISCAL YEAR MEANS
THE COMPANY'S YEAR ENDED JANUARY 31 OF THE FOLLOWING YEAR (E.G., FISCAL 1998
MEANS THE PERIOD BEGINNING FEBRUARY 1, 1998, AND ENDING JANUARY 31, 1999). THIS
REPORT CONTAINS FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995 WITH RESPECT TO THE FINANCIAL
CONDITION, RESULTS OF OPERATIONS AND BUSINESS OF THE COMPANY. THESE FORWARD
LOOKING STATEMENTS INVOLVE CERTAIN RISKS AND UNCERTAINTIES. NO ASSURANCE CAN BE
GIVEN THAT ANY OF SUCH MATTERS WILL BE REALIZED. FACTORS THAT MAY CAUSE ACTUAL
RESULTS TO DIFFER MATIERIALLY 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 ECONOMIS
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 MONEY; AND (5) THE UNCERTAINTIES
INHERENT IN INTERNATIONAL OPERATIONS AND FOREIGN CURRENCY FLUCTUATIONS. THE
COMPANY HAS NO DUTY UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
TO UPDATE THE FORWARD LOOKING STATEMENTS IN THIS QUARTERLY REPORT ON FORM 10-Q
AND THE COMPANY DOES NOT INTEND TO PROVIDE SUCH UPDATES.
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(MILLIONS OF DOLLARS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED APRIL 30,
----------------
1998 1997
---- ----
<S> <C> <C>
Net sales................................................... $413.9 $250.2
Cost of goods sold.......................................... 341.8 212.2
------ ------
Gross profit.............................................. 72.1 38.0
Marketing, general and administration....................... 15.2 8.9
Engineering and product development......................... 4.4 2.3
Amortization of intangible assets........................... 3.9 2.3
Other income, net........................................... (1.3) (0.7)
------ ------
Earnings from operations.................................. 49.9 25.2
Interest and other financing costs, net..................... 24.2 18.4
------ ------
Earnings before taxes on income and minority interest..... 25.7 6.8
Income tax provision........................................ 10.8 2.9
------ ------
Earnings before minority interest......................... 14.9 3.9
Minority interest........................................... 0.2 0.1
------ ------
Net income................................................ $ 14.7 $ 3.8
====== ======
Basic net income per share.................................. $ 0.49 $ 0.17
====== ======
Diluted net income per share................................ $ 0.45 $ 0.17
====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
APRIL 30, JANUARY 31,
1998 1998
--------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents................................. $ 25.8 $ 23.1
Receivables (less allowance of $4.3 million at April 30,
1998 and January 31, 1998) (Note 4).................... 153.3 217.8
Inventories (Note 3)...................................... 145.8 131.5
Prepaid expenses and other................................ 7.4 10.0
-------- --------
Total current assets................................... 332.3 382.4
Property, plant and equipment:
Land...................................................... 15.3 15.6
Buildings................................................. 165.8 154.7
Machinery and equipment................................... 678.0 622.3
-------- --------
859.1 792.6
Accumulated depreciation.................................. (148.9) (122.2)
-------- --------
Net property, plant and equipment...................... 710.2 670.4
Goodwill and other assets................................... 705.6 706.1
-------- --------
Total assets........................................... $1,748.1 $1,758.9
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
--------------------------------------
Current liabilities:
Bank borrowings........................................... $ 26.0 $ 23.6
Current portion of long-term debt......................... 10.3 14.4
Accounts payable and accrued liabilities.................. 335.4 334.9
-------- --------
Total current liabilities.............................. 371.7 372.9
Noncurrent liabilities:
Long-term debt............................................ 855.3 882.6
Deferred income taxes..................................... 41.5 34.8
Pension and other long-term liabilities................... 304.9 301.5
Minority interest......................................... 5.8 5.6
-------- --------
Total noncurrent liabilities........................... 1,207.5 1,224.5
Commitments and contingencies: (Note 5) Stockholders'
equity:
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, 27,441,819 at April 30, 1998 and
27,439,419 at January 31, 1998........................ 0.3 0.3
Nonvoting -- authorized 5,000,000; issued and
outstanding, 2,649,026 at April 30, 1998 and January
31, 1998.............................................. -- --
Additional paid in capital................................ 229.4 229.4
Accumulated deficit....................................... (36.1) (50.8)
Accumulated other comprehensive income.................... (24.7) (17.4)
-------- --------
Total stockholders' equity............................. 168.9 161.5
-------- --------
Total liabilities and stockholders' equity............. $1,748.1 $1,758.9
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(MILLIONS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED APRIL 30,
----------------
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 14.7 $ 3.8
Adjustments to reconcile net income to net cash used for
operating activities:
Depreciation and tooling amortization.................. 15.8 12.3
Amortization of intangibles and debt issuance costs.... 5.8 3.8
Increase in deferred taxes............................. 7.4 --
Changes in operating assets and liabilities:
(Increase) decrease in receivables................... (19.9) (14.2)
Increase in inventories.............................. (10.7) (8.3)
Decrease in prepaid expenses and other............... 2.4 5.2
Decrease in accounts payable and accrued
liabilities......................................... (13.1) (5.0)
Decrease in other long-term liabilities.............. (11.3) (2.1)
------ ------
Cash used for operating activities................ (8.9) (4.5)
Cash flows from investing activities:
Acquisition of property, plant and equipment.............. (31.5) (16.7)
Proceeds from assumption of future commitments in
acquisition............................................ 12.0 --
Other, net................................................ 7.5 (0.2)
------ ------
Cash used for investing activities..................... (12.0) (16.9)
Cash flows used for financing activities:
Increase (decrease) in short-term bank borrowings and
loans.................................................. (29.1) 1.3
Decrease in bank revolving loan & other long-term loans... (34.7) (3.0)
Net proceeds under accounts receivable securitization
program................................................ 87.2 --
------ ------
Cash provided by (used for) financing activities....... 23.4 (1.7)
Effect of exchange rate changes on cash and cash
equivalents............................................... 0.2 0.4
------ ------
Increase (decrease) in cash and cash equivalents....... 2.7 (22.7)
Cash and cash equivalents at beginning of year.............. 23.1 47.5
------ ------
Cash and cash equivalents at end of period.................. $ 25.8 $ 24.8
====== ======
Supplemental data:
Cash paid for interest.................................... $ 11.5 $ 11.8
Cash paid for income taxes................................ $ 1.8 $ 0.1
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED APRIL 30, 1998 AND 1997
(UNAUDITED)
(MILLIONS OF DOLLARS, UNLESS OTHERWISE STATED)
(1) BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared by
management and in the opinion of management, contain all adjustments, consisting
of normal recurring adjustments, necessary to present fairly the financial
position of the Company as of April 30, 1998, and January 31, 1998, and the
results of its operations and cash flows for the three months ended April 30,
1998 and 1997. The consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the fiscal year ended
January 31, 1998. Results for interim periods are not necessarily indicative of
those to be expected for the year.
During the first quarter of fiscal 1998, the Company purchased the
remaining 50% equity in its aluminum wheel joint venture in Somerset, Kentucky,
Aluminum Wheel Technology, Inc.
(2) SUMMARY OF NEW ACCOUNTING PRONOUNCEMENTS
During 1997, the Financial Accounting Standards Board ("FASB") issued
Statement No. 130, "Reporting Comprehensive Income" which establishes standards
for the reporting and display of comprehensive income. Comprehensive income is
defined as all changes in a Company's net assets except changes resulting from
transactions with shareholders. It differs from net income in that certain items
currently recorded to equity would be a part of comprehensive income.
Comprehensive income must be reported in a financial statement with the
cumulative total presented as a component of equity. This statement was adopted
by the Company effective February 1, 1998.
The components of comprehensive income for the three months ended April 30,
1998 and 1997 are as follows:
<TABLE>
<CAPTION>
APRIL 30, APRIL 30,
1998 1997
--------- ---------
<S> <C> <C>
Net income.................................................. $14.7 $ 3.8
Cumulative translation adjustments.......................... (7.3) (2.9)
----- -----
Total comprehensive income................................ $ 7.4 $ 0.9
===== =====
</TABLE>
(3) INVENTORIES
The major classes of inventory are as follows:
<TABLE>
<CAPTION>
APRIL 30, JANUARY 31,
1998 1998
--------- -----------
<S> <C> <C>
Raw materials............................................... $ 47.4 $ 40.9
Work-in-progress............................................ 38.8 37.6
Finished goods.............................................. 59.6 53.0
------ ------
Total..................................................... $145.8 $131.5
====== ======
</TABLE>
(4) ACCOUNTS RECEIVABLES SECURITIZATION
In April 1998, the Company entered into a three-year trade securitization
agreement pursuant to which the Company and certain of its subsidiaries sold,
and will continue to sell on an on-going basis, a portion of their accounts
receivable to Hayes Lemmerz Funding Corporation ("Funding Co."), a wholly owned
6
<PAGE> 7
HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THREE MONTHS ENDED APRIL 30, 1998 AND 1997
(UNAUDITED)
(MILLIONS OF DOLLARS, UNLESS OTHERWISE STATED)
(4) ACCOUNTS RECEIVABLES SECURITIZATION -- (CONTINUED)
subsidiary of the Company. Accordingly, the Company and such subsidiaries,
irrevocably and without recourse, transferred and will transfer substantially
all of their U.S. dollar denominated trade accounts receivable to Funding Co.
Funding Co. then sold and will sell such trade accounts receivable to an
independent issuer of receivable-backed commercial paper. The trade receivable
securitization agreement was accounted for as a sale of receivables in
accordance with FASB No. 125 "Accounting for Transfers and Servicing of
Financial Assets & Extinguishments of Liabilities." The Company has collection
and administrative responsibilities with respect to all the receivables which
are sold.
(5) COMMITMENTS AND CONTINGENCIES
At April 30, 1998, management believes that the Company was in compliance
with its various financial covenants. Management expects that the Company will
remain in compliance with its financial covenants in all material respects
through the period ending April 30, 1999.
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.
(6) GUARANTOR AND NONGUARANTOR FINANCIAL STATEMENTS
In connection with the Company's merger with MWC Holdings, Inc. on July 2,
1996 and as part of the financing thereof, the Company issued and sold $250
million in aggregate principal amount of its 11% senior subordinated notes due
2006 (the "11% Notes") in a public offering. The 11% Notes are general unsecured
obligations of the Company, subordinated in right of payment to all existing and
future senior indebtedness of the Company, and are guaranteed by certain of the
Company's domestic subsidiaries.
In connection with the Company's acquisition of Lemmerz Holding GmbH on
June 30, 1997 (the "Lemmerz Acquisition"), the Company issued and sold $400
million in aggregate principal amount of its 9 1/8% senior subordinated notes
due 2007 (the "9 1/8% Notes") in two offerings under Rule 144A of the Securities
Act. The 9 1/8% Notes are general unsecured obligations of the Company, ranking
pari passu with the 11% Notes and are guaranteed by certain of the same domestic
subsidiaries of the Company as the guaranteed 11% Notes.
The following condensed consolidating financial information presents:
(1) Condensed consolidating financial statements as of April 30, 1998
and January 31, 1998 and for the three month periods ended April 30, 1998
and 1997, of (a) Hayes Lemmerz 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 Lemmerz
International, Inc., the parent, with the guarantor and nonguarantor
subsidiaries.
Investments in foreign subsidiaries are accounted for by the parent on the
equity method (domestic subsidiaries are accounted for by the parent on the cost
method) for purposes of the consolidating presentation. The principle
elimination entries eliminate investments in subsidiaries and intercompany
balances and transactions.
7
<PAGE> 8
HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THREE MONTHS ENDED APRIL 30, 1998 AND 1997
(UNAUDITED)
(MILLIONS OF DOLLARS, UNLESS OTHERWISE STATED)
(6) GUARANTOR AND NONGUARANTOR FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
APRIL 30, 1998
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents.............. $ -- $ (0.1) $ 25.9 $ -- $ 25.8
Receivables............................ 6.6 24.9 121.8 -- 153.3
Inventories............................ 38.0 44.8 63.0 -- 145.8
Prepaid expenses and other............. 0.9 3.9 2.8 (0.2) 7.4
------- ------ ------ ------- --------
Total current assets.............. 45.5 73.5 213.5 (0.2) 332.3
Property, plant and equipment.......... 166.0 363.3 329.8 -- 859.1
Accumulated depreciation............... (4.3) (96.7) (47.9) -- (148.9)
------- ------ ------ ------- --------
Net property, plant and
equipment....................... 161.7 266.6 281.9 -- 710.2
Goodwill and other assets.............. 759.1 307.1 282.0 (642.6) 705.6
------- ------ ------ ------- --------
Total assets...................... $ 966.3 $647.2 $777.4 $(642.8) $1,748.1
======= ====== ====== ======= ========
Bank borrowings........................ $ -- $ -- $ 26.0 $ -- $ 26.0
Current portion of long-term debt...... 2.9 -- 7.4 -- 10.3
Accounts payable and accrued
liabilities.......................... 93.3 122.0 120.1 -- 335.4
------- ------ ------ ------- --------
Total current liabilities......... 96.2 122.0 153.5 -- 371.7
Long-term debt......................... 820.4 -- 34.9 -- 855.3
Deferred income taxes.................. (7.5) 19.9 29.1 -- 41.5
Minority interest...................... -- 0.3 5.4 0.1 5.8
Pension and other long-term
liabilities.......................... 103.4 95.7 110.6 (4.8) 304.9
Parent loans........................... (247.2) 218.4 28.8 -- --
------- ------ ------ ------- --------
Total noncurrent liabilities...... 669.1 334.3 208.8 (4.7) 1,207.5
Common stock........................... 0.3 -- -- -- 0.3
Additional paid-in capital............. 246.9 90.9 276.1 (384.5) 229.4
Retained earnings (accumulated
deficit)............................. (40.6) 99.9 160.8 (256.2) (36.1)
Accumulated other comprehensive
income............................... (5.6) 0.1 (21.8) 2.6 (24.7)
------- ------ ------ ------- --------
Total stockholders' equity........ 201.0 190.9 415.1 (638.1) 168.9
Total liabilities and stockholders'
equity............................... $ 966.3 $647.2 $777.4 $(642.8) $1,748.1
======= ====== ====== ======= ========
</TABLE>
8
<PAGE> 9
HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THREE MONTHS ENDED APRIL 30, 1998 AND 1997
(UNAUDITED)
(MILLIONS OF DOLLARS, UNLESS OTHERWISE STATED)
(6) GUARANTOR AND NONGUARANTOR FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF JANUARY 31, 1998
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents.............. $ 4.6 $ 0.1 $ 18.4 $ -- $ 23.1
Receivables............................ 36.3 63.0 118.5 -- 217.8
Inventories............................ 32.9 43.2 55.4 -- 131.5
Prepaid expenses and other............. 1.5 3.3 5.4 (0.2) 10.0
------- ------ ------ ------- --------
Total current assets............ 75.3 109.6 197.7 (0.2) 382.4
Property, plant and equipment.......... 156.6 320.6 315.4 -- 792.6
Accumulated depreciation............... 1.5 (85.9) (37.8) -- (122.2)
------- ------ ------ ------- --------
Net property, plant and equipment.... 158.1 234.7 277.6 -- 670.4
Goodwill and other assets.............. 752.2 303.6 300.8 (650.5) 706.1
------- ------ ------ ------- --------
Total assets.................... $ 985.6 $647.9 $776.1 $(650.7) $1,758.9
======= ====== ====== ======= ========
Bank borrowings........................ $ -- $ -- $ 23.6 $ -- $ 23.6
Current portion of long-term debt...... 2.9 -- 11.5 -- 14.4
Accounts payable and accrued
liabilities.......................... 71.5 128.4 135.2 (0.2) 334.9
------- ------ ------ ------- --------
Total current liabilities....... 74.4 128.4 170.3 (0.2) 372.9
Long-term debt......................... 841.9 -- 40.7 -- 882.6
Deferred income taxes.................. (7.5) 17.9 24.4 -- 34.8
Minority interest...................... -- 0.2 5.3 0.1 5.6
Pension and other long-term
liabilities.......................... 83.6 85.4 135.4 (2.9) 301.5
Parent loans........................... (212.5) 219.7 (7.2) -- --
------- ------ ------ ------- --------
Total noncurrent liabilities.... 705.5 323.2 198.6 (2.8) 1,224.5
Common stock........................... 0.3 -- -- -- 0.3
Additional paid-in capital............. 246.9 104.5 272.9 (394.9) 229.4
Retained earnings (accumulated
deficit)............................. (30.6) 91.7 144.4 (256.3) (50.8)
Accumulated other comprehensive
income............................... (10.9) 0.1 (10.1) 3.5 (17.4)
------- ------ ------ ------- --------
Total stockholders' equity...... 205.7 196.3 407.2 (647.7) 161.5
------- ------ ------ ------- --------
Total liabilities and stockholders'
equity............................... $ 985.6 $647.9 $776.1 $(650.7) $1,758.9
======= ====== ====== ======= ========
</TABLE>
9
<PAGE> 10
HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THREE MONTHS ENDED APRIL 30, 1998 AND 1997
(UNAUDITED)
(MILLIONS OF DOLLARS, UNLESS OTHERWISE STATED)
(6) GUARANTOR AND NONGUARANTOR FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE QUARTER ENDED APRIL 30, 1998
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales............................... $73.2 $183.2 $159.3 $(1.8) $413.9
Cost of goods sold...................... 63.0 152.2 128.4 (1.8) 341.8
----- ------ ------ ----- ------
Gross profit............................ 10.2 31.0 30.9 -- 72.1
Marketing, general and administration... 2.4 4.9 7.9 -- 15.2
Engineering and product development..... 0.3 1.4 2.7 -- 4.4
Amortization of intangibles............. 0.3 2.1 1.5 -- 3.9
Other income, net....................... (0.6) 0.1 (0.8) -- (1.3)
----- ------ ------ ----- ------
Earnings from operations................ 7.8 22.5 19.6 -- 49.9
Interest expense, net................... 11.3 12.0 0.9 -- 24.2
----- ------ ------ ----- ------
Earnings (loss) before taxes on income,
and minority interest................. (3.5) 10.5 18.7 -- 25.7
Income tax provision.................... 4.5 4.2 2.1 -- 10.8
----- ------ ------ ----- ------
Earnings (loss) before minority
interest.............................. (8.0) 6.3 16.6 -- 14.9
Minority interest....................... -- 0.1 0.1 -- 0.2
----- ------ ------ ----- ------
Net income(loss)........................ $(8.0) $ 6.2 $ 16.5 $ -- $ 14.7
===== ====== ====== ===== ======
</TABLE>
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE QUARTER ENDED APRIL 30, 1997
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales............................... $76.8 $140.5 $ 33.4 $(0.5) $250.2
Cost of goods sold...................... 67.0 118.1 27.6 (0.5) 212.2
----- ------ ------ ----- ------
Gross profit............................ 9.8 22.4 5.8 -- 38.0
Marketing, general and administration... 2.0 5.1 1.8 -- 8.9
Engineering and product development..... 0.6 1.4 0.3 -- 2.3
Amortization of intangibles............. 0.3 2.0 -- -- 2.3
Other income, net....................... -- -- (0.7) -- (0.7)
----- ------ ------ ----- ------
Earnings from operations................ 6.9 13.9 4.4 -- 25.2
Interest expense, net................... 7.5 10.0 0.9 -- 18.4
Equity in earnings of consolidated
subsidiaries.......................... (2.6) -- -- 2.6 --
----- ------ ------ ----- ------
Earnings (loss) before taxes on income
and minority interest................. 2.0 3.9 3.5 (2.6) 6.8
Income tax (benefit) provision.......... (0.6) 2.0 1.5 -- 2.9
----- ------ ------ ----- ------
Earnings (loss) before minority
interest.............................. 2.6 1.9 2.0 (2.6) 3.9
Minority interest....................... -- -- -- 0.1 0.1
----- ------ ------ ----- ------
Net income(loss)........................ $ 2.6 $ 1.9 $ 2.0 $(2.7) $ 3.8
===== ====== ====== ===== ======
</TABLE>
10
<PAGE> 11
HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THREE MONTHS ENDED APRIL 30, 1998 AND 1997
(UNAUDITED)
(MILLIONS OF DOLLARS, UNLESS OTHERWISE STATED)
(6) GUARANTOR AND NONGUARANTOR FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE QUARTER ENDED APRIL 30, 1998
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash flows provided from (used by) operating
activities.................................... $(23.9) $ 32.7 $(17.7) $ -- $ (8.9)
Cash flows from investing activities:
Acquisition of property, plant and
equipment................................... (9.5) (11.1) (10.9) -- (31.5)
Proceeds from assumption of future commitments
in acquisition.............................. 12.0 -- -- -- 12.0
Other, net.................................... (11.6) 14.0 5.1 -- 7.5
------ ------ ------ ----- ------
Cash used by investing activities........... (9.1) 2.9 (5.8) -- (12.0)
Cash flows from financing activities:
Decrease in short-term bank borrowings and
loans....................................... -- (26.5) (2.6) -- (29.1)
Decrease in bank revolving loan & other
long-term loans............................. (21.4) (8.0) (5.3) -- (34.7)
Net proceeds under accounts receivable
securitization program...................... 87.2 -- -- -- 87.2
------ ------ ------ ----- ------
Cash provided by financing activities....... 65.8 (34.5) (7.9) -- 23.4
Increase (decrease) in parent loans and
advances...................................... (37.4) (1.3) 38.7 -- --
Effect of exchange rates of cash and cash
equivalents................................... -- -- 0.2 -- 0.2
------ ------ ------ ----- ------
Net increase (decrease) in cash and cash
equivalents............................... (4.6) (0.2) 7.5 -- 2.7
Cash and cash equivalents at beginning of
period........................................ 4.6 0.1 18.4 -- 23.1
------ ------ ------ ----- ------
Cash and cash equivalents at end of period...... $ -- $ (0.1) $ 25.9 $ -- $ 25.8
====== ====== ====== ===== ======
</TABLE>
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE QUARTER ENDED APRIL 30, 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.................................... $ 0.2 $ (1.6) $ (0.7) $(2.4) $ (4.5)
Cash flows from investing activities:
Acquisition of property, plant and
equipment................................... (3.0) (4.7) (9.0) -- (16.7)
Other, net.................................... (7.6) 5.0 2.4 -- (0.2)
------ ------ ------ ----- ------
Cash used by investing activities........... (10.6) 0.3 (6.6) -- (16.9)
Cash flows from financing activities:
Increase in foreign bank borrowings and
loans....................................... -- -- 1.3 -- 1.3
Decrease in bank revolving loan & other long
term loans.................................. (3.0) -- -- -- (3.0)
------ ------ ------ ----- ------
Cash provided by financing activities....... (3.0) -- 1.3 -- (1.7)
Increase (decrease) in parent loans and
advances...................................... (20.0) 18.5 (0.9) 2.4 --
Effect of exchange rates of cash and cash
equivalents................................... -- -- 0.4 -- 0.4
------ ------ ------ ----- ------
Net increase (decrease) in cash and cash
equivalents............................... (33.4) 17.2 (6.5) -- (22.7)
Cash and cash equivalents at beginning of
period........................................ 41.2 (0.6) 6.9 -- 47.5
------ ------ ------ ----- ------
Cash and cash equivalents at end of period...... $ 7.8 $ 16.6 $ 0.4 $ -- $ 24.8
====== ====== ====== ===== ======
</TABLE>
11
<PAGE> 12
HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THREE MONTHS ENDED APRIL 30, 1998 AND 1997
(UNAUDITED)
(MILLIONS OF DOLLARS, UNLESS OTHERWISE STATED)
(7) SUBSEQUENT EVENTS
On May 19, 1998, the Company purchased an additional 50.7% of the common
equity and 46.2% of the preferred equity in its joint venture in Brazil, Borlem
S.A. Emprendimentos Industriais ("Borlem"). This purchase increases the
Company's ownership of Borlem to 98.7% of the common equity and 87% of the
preferred equity, with the remaining shares being held by the public.
On June 10, 1998, the Company acquired 100% of the common stock of Min-Cer,
S.A. de C.V., Mexico's largest heavy-duty hub, drum and wheel manufacturer.
12
<PAGE> 13
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended April 30, 1998 Compared to the Three Months Ended April 30,
1997
The Company's net sales for the first quarter of fiscal 1998 were $413.9
million, an increase of 65.4% as compared to net sales for the first quarter of
fiscal 1997. This increase was due to the additional sales contributed by
Lemmerz, which was acquired effective June 30, 1997, and higher sales in the
North American and European Aluminum Wheel groups and the Automotive Brake and
Commercial Highway businesses in North America.
The Company's gross profit for the first quarter of fiscal 1998 increased
to $72.1 million or 17.4% of net sales as compared to $38.0 million or 15.2% of
net sales for the first quarter of fiscal 1997. This increase in margin was
attributable to the increased revenues and improved productivity in all of the
Company's businesses.
Marketing, general and administrative expenses were $15.2 million or 3.7%
of net sales for the first quarter of fiscal 1998 as compared to $8.9 million or
3.6% of net sales for the same period of fiscal 1997. This increase was
attributable to additional costs incurred as a result of the Lemmerz
Acquisition. The Company believes that marketing, general and administrative
costs as a percent of net sales will improve as the expected savings are
realized as a result of the Lemmerz Acquisition.
Engineering and product development costs were $4.4 million or 1.0% of net
sales for the first quarter of fiscal 1998 as compared to $2.3 million or 0.9%
of net sales for the first quarter of fiscal 1997. The Company believes that
engineering and product development costs as a percent of sales will improve
even as these costs increase to successfully develop new products.
Amortization of intangibles increased by $1.6 million to $3.9 million for
the first quarter of fiscal 1998. This increase is attributable to the increased
goodwill recognized as a result of the Lemmerz Acquisition.
Interest expense was $24.2 million for the first quarter of fiscal 1998, an
increase of $5.8 million over the same period of fiscal 1997. This increase was
due to the increase in debt as a result of the Lemmerz Acquisition.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company's operations used $8.9 million in cash during the first quarter
of fiscal 1998, a decrease of $4.4 million as compared to the same period of
fiscal 1997. This decrease in cash flow was attributable primarily to higher
working capital requirements related to the Lemmerz Acquisition.
Capital expenditures for the quarter amounted to $31.5 million. These
capital expenditures were primarily for additional machinery and equipment to
increase production capacity at the Company's North American and European
Aluminum Wheel facilities to meet expected future customer requirements for
fabricated aluminum and FFC(TM) wheels. The Company anticipates capital
expenditures for fiscal 1998 will be approximately $110.0 million relating
primarily to new vehicle platforms, cost reduction programs and maintenance.
As of April 30, 1998, the Company was party to an amended credit agreement
dated June 30, 1997 (the "Amended Credit Agreement") with Canadian Imperial Bank
of Commerce ("CIBC") and Merrill Lynch Capital Corporation ("Merrill Lynch"), as
managing agents. Pursuant to the Amended Credit Agreement, a syndicate of
lenders agreed to lend to the Company up to $470.5 million in the form of senior
secured term loan facilities, such aggregate amount being allocated among (i) a
Tranche A-1 Term Loan facility in an aggregate principal amount of up to $173.0
million, (ii) a Tranche A-2 Term Loan facility in an aggregate principal amount
of up to $100 million, (iii) a Tranche B Term Loan facility in an aggregated
principal
13
<PAGE> 14
amount of up to $109 million and (iv) a Tranche C Term Loan facility in an
aggregate principal amount of up to $88.5 million, and up to $270 million in the
form of a senior secured revolving credit facility. Such term loan facilities
and revolving facility are guaranteed by the Company and all of its existing and
future material domestic subsidiaries. Such term loan facilities and revolving
facility are secured by a first priority lien in substantially all of the
properties and assets of the Company and its material domestic subsidiaries, now
owned or acquired later, including a pledge of all of the shares of certain of
the Company's existing and future material domestic subsidiaries and 65% of the
shares of certain of the Company's existing and future foreign subsidiaries. As
of April 30, 1998, there was $173.8 million outstanding under the term loan
facilities and $231.7 million available under the revolving facility. On June
12, 1998, the Company amended the Amended Credit Agreement and thereby (a)
eliminated (and repaid the outstanding principal balance of) the Tranche A-1, B
and C Term Loans and (b) increased the revolving credit facility to $400
million.
In April 1998, the Company entered into a three-year agreement pursuant to
which the Company and certain of its subsidiaries sold, and will continue to
sell on an on-going basis, a portion of their accounts receivable to Hayes
Lemmerz Funding Corporation ("Funding Co."), a wholly owned subsidiary of the
Company. Accordingly, the Company and such subsidiaries, irrevocably and without
recourse, transferred and will transfer substantially all of their U.S. dollar
denominated trade accounts receivable to Funding Co. Funding Co. then sold and
will sell such trade accounts receivable to an independent issuer of receivable-
backed commercial paper. The Company has collection and administrative
responsibilities with respect to all the receivables which are sold.
At April 30, 1998, management believes that 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 April 30, 1999.
OTHER MATTERS
The Company has conducted a comprehensive review of its computer systems
and related computer-controlled manufacturing and quality systems to identify
the systems that could be affected by the "Year 2000" issue and is developing an
implementation plan to resolve the issue. The Year 2000 problem is the result of
computer programs being written using two digits rather than four to define the
applicable year. Any of the Company's programs that have time-sensitive software
may recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a major system failure or miscalculations. The Company presently
believes that, with modifications to existing software and converting to new
software, the Year 2000 problem will not pose significant operational problems
for the Company's computer systems as so modified and converted and, as such,
the Company believes that the cost of modification and conversion related to the
Year 2000 problem will not have a material adverse effect on the results of
operations or financial condition of the Company. However, if such modifications
and conversions are not completed timely, the Year 2000 problem may have a
material impact on the operations of the Company.
14
<PAGE> 15
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN REGISTERED SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None.
(b) Reports of Form 8-K
None.
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HAYES LEMMERZ INTERNATIONAL, INC.
By:
/s/ D. N. Vermilya
------------------------------------
D.N. Vermilya
Corporate Controller and Chief
Accounting Officer
June 12, 1998
16
<PAGE> 17
Exhibit Index
-------------
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> APR-30-1998
<CASH> 25800
<SECURITIES> 0
<RECEIVABLES> 153300
<ALLOWANCES> (4300)
<INVENTORY> 145800
<CURRENT-ASSETS> 332300
<PP&E> 859100
<DEPRECIATION> (148900)
<TOTAL-ASSETS> 1748100
<CURRENT-LIABILITIES> 371700
<BONDS> 0
300
0
<COMMON> 0
<OTHER-SE> 168600
<TOTAL-LIABILITY-AND-EQUITY> 1748100
<SALES> 413900
<TOTAL-REVENUES> 413900
<CGS> 341800
<TOTAL-COSTS> 341800
<OTHER-EXPENSES> 22200
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24200
<INCOME-PRETAX> 25700
<INCOME-TAX> 10800
<INCOME-CONTINUING> 14700
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14700
<EPS-PRIMARY> 0.49
<EPS-DILUTED> 0.45
</TABLE>
