<PAGE> 1
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED APRIL 30, 1999
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 COMMON STOCK OUTSTANDING AS OF JUNE 14, 1999, WAS
30,335,375 SHARES.
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<PAGE> 2
HAYES LEMMERZ INTERNATIONAL, INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Statements of Operations....................... 3
Consolidated Balance Sheets................................. 4
Consolidated Statements of Cash Flows....................... 5
Notes to Consolidated Financial Statements.................. 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 15
Item 3. Quantitative and Qualitative Disclosures About Market
Risk........................................................ 17
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings........................................... 18
Item 2. Changes in Registered Securities............................ 18
Item 3. Defaults upon Senior Securities............................. 18
Item 4. Submission of Matters to a Vote of Security Holders......... 18
Item 5. Other Information........................................... 18
Item 6. (a) Exhibits................................................ 18
Item 6. (b) Reports on Form 8-K..................................... 18
Signatures............................................................. 19
</TABLE>
UNLESS OTHERWISE INDICATED, REFERENCES TO THE "COMPANY" MEAN HAYES LEMMERZ
INTERNATIONAL, INC., AND ITS SUBSIDIARIES AND REFERENCE TO A FISCAL YEAR MEANS
THE COMPANY'S YEAR ENDED JANUARY 31 OF THE FOLLOWING YEAR (E.G., FISCAL 1999
MEANS THE PERIOD BEGINNING FEBRUARY 1, 1999, AND ENDING JANUARY 31, 2000). THIS
REPORT CONTAINS FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995 WITH RESPECT TO THE FINANCIAL
CONDITION, RESULTS OF OPERATIONS AND BUSINESS OF THE COMPANY. THESE FORWARD
LOOKING STATEMENTS INVOLVE CERTAIN RISKS AND UNCERTAINTIES. NO ASSURANCE CAN BE
GIVEN THAT ANY OF SUCH MATTERS WILL BE REALIZED. FACTORS THAT MAY CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD LOOKING
STATEMENTS INCLUDE, AMONG OTHERS, THE FOLLOWING POSSIBILITIES: (1) COMPETITIVE
PRESSURE IN THE COMPANY'S INDUSTRY INCREASES SIGNIFICANTLY; (2) GENERAL ECONOMIC
CONDITIONS ARE LESS FAVORABLE THAN EXPECTED; (3) THE COMPANY'S DEPENDENCE ON THE
AUTOMOTIVE INDUSTRY (WHICH HAS HISTORICALLY BEEN CYCLICAL); (4) CHANGES IN THE
FINANCIAL MARKETS AFFECTING THE COMPANY'S 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 PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
APRIL 30,
-------------------
1999 1998
---- ----
<S> <C> <C>
Net sales................................................... $587.9 $413.9
Cost of goods sold.......................................... 481.8 341.8
------ ------
Gross profit........................................... 106.1 72.1
Marketing, general and administration....................... 24.5 15.2
Engineering and product development......................... 6.2 4.4
Amortization of intangible assets........................... 7.0 3.9
Equity in loss of subsidiary................................ 0.3 --
Other income, net........................................... (0.7) (1.3)
------ ------
Earnings from operations............................... 68.8 49.9
Interest expense, net....................................... 39.5 24.2
------ ------
Earnings before taxes on income and minority
interest.............................................. 29.3 25.7
Income tax provision........................................ 12.6 10.8
------ ------
Earnings before minority interest...................... 16.7 14.9
Minority interest........................................... 0.4 0.2
------ ------
Net income............................................. $ 16.3 $ 14.7
====== ======
Basic net income per share.................................. $ 0.54 $ 0.49
====== ======
Diluted net income per share................................ $ 0.51 $ 0.45
====== ======
</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,
1999 1999
--------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 107.7 $ 51.3
Receivables (less allowance of $6.3 million at April 30,
1999 and $4.0 million at January 31, 1999)............. 259.3 181.6
Inventories (Note 4)...................................... 183.9 166.6
Prepaid expenses and other................................ 10.9 22.8
-------- --------
Total current assets................................. 561.8 422.3
Property, plant and equipment, net (Note 5)............... 1,073.6 878.0
Goodwill and other assets................................. 1,157.7 810.6
-------- --------
Total assets......................................... $2,793.1 $2,110.9
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank borrowings........................................... $ 108.5 $ 44.8
Current portion of long-term debt......................... 15.0 12.3
Accounts payable and accrued liabilities.................. 476.1 456.7
-------- --------
Total current liabilities............................ 599.6 513.8
Long-term debt............................................ 1,600.7 976.1
Deferred income taxes..................................... 87.1 58.4
Pension and other long-term liabilities................... 299.9 329.1
Minority interest......................................... 12.8 12.6
-------- --------
Total liabilities.................................... 2,600.1 1,890.0
Commitments and contingencies (Note 8):
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, 27,675,209 at April 30, 1999 and January
31, 1999.............................................. 0.3 0.3
Nonvoting -- authorized 5,000,000; issued and
outstanding, 2,649,026 at April 30, 1999 and January
31, 1999.............................................. -- --
Additional paid in capital................................ 236.8 236.8
Retained earnings (accumulated deficit)................... 9.2 (7.1)
Accumulated other comprehensive income.................... (53.3) (9.1)
-------- --------
Total stockholders' equity........................... 193.0 220.9
-------- --------
Total liabilities and stockholders' equity........... $2,793.1 $2,110.9
======== ========
</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,
-------------------
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 16.3 $ 14.7
Adjustments to reconcile net income to net cash used for
operating activities:
Depreciation and tooling amortization.................. 27.8 15.8
Amortization of intangibles............................ 6.9 4.2
Amortization of deferred financing fees................ 2.5 1.6
Increase in deferred taxes............................. 8.7 7.4
Changes in operating assets and liabilities that
increase (decrease) cash flows:
Receivables.......................................... (72.6) (20.7)
Inventories.......................................... (1.1) (10.7)
Prepaid expenses and other........................... 10.4 2.4
Accounts payable and accrued liabilities............. (20.7) (13.1)
Other long-term liabilities.......................... (17.8) (11.3)
------- ------
Cash used for operating activities................ (39.6) (9.7)
Cash flows from investing activities:
Acquisition of property, plant and equipment........... (26.2) (31.5)
Tooling expenditures................................... (4.8) (5.2)
Proceeds from assumption of future commitments in
acquisitions.......................................... -- 12.0
Purchase of business................................... (605.0) --
Other, net............................................. (5.6) 13.5
------- ------
Cash used for investing activities................ (641.6) (11.2)
Cash flows from financing activities:
Increase (decrease) in bank borrowings and revolver.... 703.0 (63.8)
Fees paid to issue long term debt...................... (15.0) --
Net proceeds under accounts receivable securitization
program............................................... 46.6 87.2
------- ------
Cash provided by financing activities............. 734.6 23.4
Effect of exchange rate changes on cash and cash
equivalents............................................... 3.0 0.2
------- ------
Increase in cash and cash equivalents............. 56.4 2.7
Cash and cash equivalents at beginning of year.............. 51.3 23.1
------- ------
Cash and cash equivalents at end of period.................. $ 107.7 $ 25.8
======= ======
Supplemental data:
Cash paid for interest................................. $ 5.5 $ 11.5
Cash paid for income taxes............................. $ 2.7 $ 1.8
</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, 1999 AND 1998
(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, 1999, and January 31, 1999, and the
results of its operations and cash flows for the three months ended April 30,
1999 and 1998. 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, 1999. Results for interim periods are not necessarily indicative of
those to be expected for the year.
(2) ACQUISITIONS
On February 3, 1999, the Company completed the acquisition of CMI
International Inc. ("CMI"). The purchase price for CMI was $605 million in cash,
of which approximately $129 million was used to repay CMI's outstanding
indebtedness existing at the time of the acquisition, and of which approximately
$476 million was paid to the shareholders of CMI. The cash portion of the
consideration, the refinancing of the existing CMI debt and the fees and
expenses of the acquisition of CMI were financed with the proceeds of the
Company's senior secured credit facilities and the issuance of the 8 1/4% Senior
Subordinated Notes (the "8 1/4% Notes").
The following unaudited pro forma financial data illustrates the estimated
effects as if the above mentioned acquisition had been completed as of the
beginning of the periods presented, after including the impact of certain
adjustments, such as amortization, depreciation, interest expense and the
related income tax effects.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
APRIL 30
----------------
1999 1998
---- ----
<S> <C> <C>
Sales....................................................... $587.9 $597.7
Net income.................................................. $ 16.3 $ 13.2
Basic net income per share.................................. $ 0.54 $ 0.44
Diluted net income per share................................ $ 0.51 $ 0.42
</TABLE>
(3) SUMMARY OF NEW ACCOUNTING PRONOUNCEMENTS
In 1998, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") 98-5. "Reporting the Costs of Start-Up
Activities." SOP 98-5 is effective January 1, 1999, and requires that start-up
costs capitalized prior to January 1, 1999 be written off and any future
start-up costs be expensed as incurred. The Company adopted this standard on
February 1, 1999 and adoption did not have a material impact on the Company's
results of operations.
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities". The Statement establishes
accounting and reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as either an asset or liability measured at its
fair value. The Statement requires that changes in the derivative's fair value
be recognized currently in earnings unless specific hedge accounting criteria
are met. Special accounting for qualifying hedges allows a derivative's gains
and losses to offset related results on the hedged
6
<PAGE> 7
HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THREE MONTHS ENDED APRIL 30, 1999 AND 1998
(UNAUDITED)
(MILLIONS OF DOLLARS, UNLESS OTHERWISE STATED)
(3) SUMMARY OF NEW ACCOUNTING PRONOUNCEMENTS -- (CONTINUED)
item in the income statement, and requires that a company must formally
document, designate, and assess the effectiveness of transactions that receive
hedge accounting. Statement 133 is effective for fiscal years beginning after
June 15, 1999. The Company anticipates adopting this standard in its fiscal year
2000 and does not anticipate a material impact on the Company's financial
position or results of operations when adopted.
(4) INVENTORIES
The major classes of inventory are as follows:
<TABLE>
<CAPTION>
APRIL 30, JANUARY 31,
1999 1999
--------- -----------
<S> <C> <C>
Raw materials.............................................. $ 66.0 $ 65.2
Work-in-process............................................ 58.4 48.8
Finished goods............................................. 59.5 52.6
------ ------
Total................................................. $183.9 $166.6
====== ======
</TABLE>
(5) PROPERTY, PLANT AND EQUIPMENT
The major classes of property, plant and equipment are as follows:
<TABLE>
<CAPTION>
APRIL 30, JANUARY 31,
1999 1999
--------- -----------
<S> <C> <C>
Land...................................................... $ 23.8 $ 24.9
Buildings................................................. 240.3 201.1
Machinery and equipment................................... 1,017.0 832.8
-------- --------
1,281.1 1,058.8
Accumulated depreciation.................................. (207.5) (180.8)
-------- --------
Net property, plant and equipment.................... $1,073.6 $ 878.0
======== ========
</TABLE>
(6) EARNINGS PER SHARE
SFAS No. 128, "Earnings per Share" ("EPS") requires two calculations of
earnings per share to be disclosed, basic EPS and diluted EPS. Basic EPS is
computed using only the weighted average shares outstanding, while diluted EPS
is computed considering the dilutive effect of options and warrants.
Shares outstanding for the three months ended April 30, 1999 and 1998 are
as follows:
<TABLE>
<CAPTION>
APRIL 30, APRIL 30,
1999 1998
--------- ---------
<S> <C> <C>
Weighted average shares outstanding...................... 30,324 30,090
Dilutive effect of options and warrants.................. 1,386 2,340
------ ------
Diluted shares outstanding.......................... 31,710 32,430
====== ======
</TABLE>
7
<PAGE> 8
HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THREE MONTHS ENDED APRIL 30, 1999 AND 1998
(UNAUDITED)
(MILLIONS OF DOLLARS, UNLESS OTHERWISE STATED)
(7) COMPREHENSIVE INCOME
SFAS No. 130, "Reporting Comprehensive Income" 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.
The components of comprehensive income for the three months ended April 30,
1999 and 1998 are as follows:
<TABLE>
<CAPTION>
APRIL 30, APRIL 30,
1999 1998
--------- ---------
<S> <C> <C>
Net Income.................................................. $ 16.3 $14.7
Cumulative translation adjustments.......................... (44.2) (7.3)
------ -----
Total comprehensive income............................. $(27.9) $ 7.4
====== =====
</TABLE>
In January 1999, the Brazilian Real experienced a significant devaluation
relative to the U.S. dollar. The result of this devaluation is reflected as a
component of cumulative translation adjustments.
(8) COMMITMENTS AND CONTINGENCIES
At April 30, 1999, 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, 2000.
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.
(9) SEGMENT REPORTING
The Company is organized based primarily on markets served and products
produced. Under this organization structure, the Company's operating segments
have been aggregated into three reportable segments: Automotive Wheels, Cast
Components and Other. The Other category includes Commercial Highway products,
the corporate office and elimination of intercompany activities, none of which
meet the requirements of being classified as an operating segment.
The following table presents revenues and other financial information by
business segment for the three months ended April 30,
<TABLE>
<CAPTION>
REVENUE NET INCOME TOTAL ASSETS
---------------- -------------- --------------------
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Automotive Wheels.......................... $338.9 $313.6 $13.2 $11.1 $1,998.3 $1,455.7
Cast Components............................ 191.3 50.4 3.2 2.8 908.7 198.1
Other...................................... 57.7 49.9 (0.1) 0.8 (113.9) 94.3
------ ------ ----- ----- -------- --------
Total............................ $587.9 $413.9 $16.3 $14.7 $2,793.1 $1,748.1
====== ====== ===== ===== ======== ========
</TABLE>
(10) RECLASSIFICATIONS
Certain prior period amounts have been reclassified to conform to the
current year presentation.
8
<PAGE> 9
HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THREE MONTHS ENDED APRIL 30, 1999 AND 1998
(UNAUDITED)
(MILLIONS OF DOLLARS, UNLESS OTHERWISE STATED)
(11) GUARANTOR AND NONGUARANTOR FINANCIAL STATEMENTS
In connection with the Company's merger with Motor Wheel 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"). The 9 1/8% 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 anticipation of the acquisition of CMI and as part of the financing
thereof, the Company issued and sold $250 million in aggregate principal amount
of the 8 1/4% Notes. The 8 1/4% Notes are general unsecured obligations of the
Company subordinated in right of payment to senior indebtedness of the Company
ranking pari passu with the 11% and the 9 1/8% Notes and senior in right of
payment to any current or future subordinated indebtedness of the Company. The
8 1/4% 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 April 30, 1999 and
January 31, 1999 and for the three month periods ended April 30, 1999
and 1998, 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.
9
<PAGE> 10
HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THREE MONTHS ENDED APRIL 30, 1999 AND 1998
(UNAUDITED)
(MILLIONS OF DOLLARS, UNLESS OTHERWISE STATED)
(11) GUARANTOR AND NONGUARANTOR FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF APRIL 30, 1999
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents............ $ 82.9 $ 0.2 $ 24.6 $ -- $ 107.7
Receivables.......................... 17.5 11.4 230.4 -- 259.3
Inventories.......................... 31.9 47.6 104.4 -- 183.9
Prepaid expenses and other........... 1.9 3.7 7.3 (2.0) 10.9
-------- ------ -------- --------- --------
Total current assets............ 134.2 62.9 366.7 (2.0) 561.8
Net property, plant and equipment.... 150.0 314.4 609.2 -- 1,073.6
Goodwill and other assets............ 1,417.1 308.1 698.6 (1,266.1) 1,157.7
-------- ------ -------- --------- --------
Total assets.................... $1,701.3 $685.4 $1,674.5 $(1,268.1) $2,793.1
======== ====== ======== ========= ========
Bank borrowings...................... $ 2.5 $ -- $ 106.0 $ -- $ 108.5
Current portion of long-term debt.... 0.2 -- 14.8 -- 15.0
Accounts payable and accrued
liabilities........................ 105.7 104.3 277.7 (11.6) 476.1
-------- ------ -------- --------- --------
Total current liabilities....... 108.4 104.3 398.5 (11.6) 599.6
Long-term debt, net of current
portion............................ 1,562.2 -- 38.5 -- 1,600.7
Deferred income taxes................ (5.1) 28.5 63.7 -- 87.1
Pension and other long-term
liabilities........................ 78.6 70.9 152.9 (2.5) 299.9
Minority interest.................... -- 0.3 12.5 -- 12.8
Parent loans......................... (229.4) 253.9 (31.3) 6.8 --
-------- ------ -------- --------- --------
Total liabilities............... 1,514.7 457.9 634.8 (7.3) 2,600.1
Common stock......................... 0.3 -- -- -- 0.3
Additional paid-in capital........... 251.7 108.7 836.2 (959.8) 236.8
Retained earnings (accumulated
deficit)........................... (56.4) 118.8 247.8 (301.0) 9.2
Accumulated other comprehensive
income............................. (9.0) -- (44.3) -- (53.3)
-------- ------ -------- --------- --------
Total stockholders' equity...... 186.6 227.5 1,039.7 (1,260.8) 193.0
-------- ------ -------- --------- --------
Total liabilities and
stockholder's equity.......... $1,701.3 $685.4 $1,674.5 $(1,268.1) $2,793.1
======== ====== ======== ========= ========
</TABLE>
10
<PAGE> 11
HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THREE MONTHS ENDED APRIL 30, 1999 AND 1998
(UNAUDITED)
(MILLIONS OF DOLLARS, UNLESS OTHERWISE STATED)
(11) GUARANTOR AND NONGUARANTOR FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF JANUARY 31, 1999
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents............... $ 23.3 $ 0.1 $ 27.9 $ -- $ 51.3
Receivables............................. 42.9 26.0 112.7 -- 181.6
Inventories............................. 33.1 49.8 83.7 -- 166.6
Prepaid expenses and other.............. 1.6 2.9 19.9 (1.6) 22.8
-------- ------ -------- ------- --------
Total current assets............... 100.9 78.8 244.2 (1.6) 422.3
Net property, plant and equipment....... 148.1 313.9 416.0 -- 878.0
Goodwill and other assets............... 799.1 309.2 363.4 (661.1) 810.6
-------- ------ -------- ------- --------
Total assets....................... $1,048.1 $701.9 $1,023.6 $(662.7) $2,110.9
======== ====== ======== ======= ========
Bank borrowings......................... $ 2.6 $ -- $ 42.2 $ -- $ 44.8
Current portion of long-term debt....... 0.2 -- 12.1 -- 12.3
Accounts payable and accrued
liabilities........................... 87.5 159.1 211.2 (1.1) 456.7
-------- ------ -------- ------- --------
Total current liabilities.......... 90.3 159.1 265.5 (1.1) 513.8
Long-term debt, net of current
portion............................... 900.8 -- 75.3 -- 976.1
Deferred income taxes................... (5.1) 13.0 50.5 -- 58.4
Pension and other long-term
liabilities........................... 83.1 79.4 169.1 (2.5) 329.1
Minority interest....................... -- 0.4 12.2 -- 12.6
Parent loans............................ (191.5) 228.7 (33.9) (3.3) --
-------- ------ -------- ------- --------
Total liabilities.................. 877.6 480.6 538.7 (6.9) 1,890.0
Common stock............................ 0.3 -- -- -- 0.3
Additional paid-in capital.............. 251.7 108.7 293.4 (417.0) 236.8
Retained earnings (accumulated
deficit).............................. (59.4) 112.6 178.5 (238.8) (7.1)
Accumulated other comprehensive
income................................ (22.1) -- 13.0 -- (9.1)
-------- ------ -------- ------- --------
Total stockholders' equity......... 170.5 221.3 484.9 (655.8) 220.9
-------- ------ -------- ------- --------
Total liabilities and stockholder's
equity........................... $1,048.1 $701.9 $1,023.6 $(662.7) $2,110.9
======== ====== ======== ======= ========
</TABLE>
11
<PAGE> 12
HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THREE MONTHS ENDED APRIL 30, 1999 AND 1998
(UNAUDITED)
(MILLIONS OF DOLLARS, UNLESS OTHERWISE STATED)
(11) GUARANTOR AND NONGUARANTOR FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE QUARTER ENDED APRIL 30, 1999
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales................................ $89.4 $191.0 $311.2 $ (3.7) $587.9
Cost of goods sold....................... 74.9 157.5 253.1 (3.7) 481.8
----- ------ ------ ------ ------
Gross profit........................... 14.5 33.5 58.1 -- 106.1
Marketing, general and administration.... 1.4 5.9 17.2 -- 24.5
Engineering and product development...... 1.9 1.7 2.6 -- 6.2
Amortization of intangibles.............. 0.4 2.1 4.5 -- 7.0
Equity in earnings of unconsolidated
subsidiaries........................... 0.3 -- -- -- 0.3
Other income, net........................ (0.2) -- (0.5) -- (0.7)
----- ------ ------ ------ ------
Earnings from operations............... 10.7 23.8 34.3 -- 68.8
Interest expense, net.................... 8.1 13.6 17.8 -- 39.5
Earnings before taxes on income, and
minority interest................... 2.6 10.2 16.5 -- 29.3
Income tax provision (benefit)........... (0.4) 4.0 9.0 -- 12.6
----- ------ ------ ------ ------
Earnings before minority interest...... 3.0 6.2 7.5 -- 16.7
Minority interest........................ -- -- 0.4 -- 0.4
----- ------ ------ ------ ------
Net income............................... $ 3.0 $ 6.2 $ 7.1 $ -- $ 16.3
===== ====== ====== ====== ======
</TABLE>
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 expense (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 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>
12
<PAGE> 13
HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THREE MONTHS ENDED APRIL 30, 1999 AND 1998
(UNAUDITED)
(MILLIONS OF DOLLARS, UNLESS OTHERWISE STATED)
(11) GUARANTOR AND NONGUARANTOR FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE QUARTER ENDED APRIL 30, 1999
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash flows provided by (used for)
operating activities................. $ 21.5 $(16.6) $(44.5) $ -- $(39.6)
Cash flows from investing activities:
Acquisition of property, plant and
equipment......................... (0.8) (13.2) (12.2) -- (26.2)
Acquisition of tooling............... (4.8) -- -- -- (4.8)
Purchase of business................. (605.0) -- -- -- (605.0)
Other, net........................... (6.2) 4.5 (3.9) -- (5.6)
------- ------ ------ ---- ------
Cash used for investing activities... (616.8) (8.7) (16.1) -- (641.6)
Cash flows from financing activities:
Net change in bank borrowings and
revolver.......................... 661.3 -- 41.7 -- 703.0
Fees paid to issue long term debt.... (15.0) -- -- -- (15.0)
Net proceeds from accounts receivable
securitization.................... 46.6 -- -- -- 46.6
------- ------ ------ ---- ------
Cash provided by financing
activities...................... 692.9 -- 41.7 -- 734.6
Increase (decrease) in parent loans and
advances............................. (37.9) 25.2 12.7 -- --
Effect of exchange rates of cash and
cash equivalents..................... -- -- 3.0 -- 3.0
Net increase (decrease) in cash and
cash equivalents.................. 59.7 (0.1) (3.2) -- 56.4
Cash and cash equivalents at beginning
of period............................ 23.3 0.1 27.9 -- 51.3
------- ------ ------ ---- ------
Cash and cash equivalents at end of
period............................... $ 83.0 $ -- $ 24.7 $ -- $107.7
======= ====== ====== ==== ======
</TABLE>
13
<PAGE> 14
HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THREE MONTHS ENDED APRIL 30, 1999 AND 1998
(UNAUDITED)
(MILLIONS OF DOLLARS, UNLESS OTHERWISE STATED)
(11) 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 by (used for)
operating activities................. $(24.7) $ 32.7 $(17.7) $ -- $ (9.7)
Cash flows from investing activities:
Acquisition of property, plant and
equipment......................... (9.5) (11.1) (10.9) -- (31.5)
Acquisition of tooling............... (5.2) -- -- -- (5.2)
Proceeds from assumption of future
commitments in acquisition........ 12.0 -- -- -- 12.0
Other, net........................... (5.6) 14.0 5.1 -- 13.5
------ ------ ------ ---- ------
Cash provided by (used for) investing
activities........................ (8.3) 2.9 (5.8) -- (11.2)
Cash flows from financing activities:
Net change in bank borrowings and
revolver.......................... (21.4) (34.5) (7.9) -- (63.8)
Net proceeds under accounts
receivable securitization
Program........................... 87.2 -- -- -- 87.2
------ ------ ------ ---- ------
Cash provided by (used for)
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>
14
<PAGE> 15
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended April 30, 1999 Compared to the Three Months Ended April 30,
1998
The Company's net sales for the first quarter of fiscal 1999 were $587.9
million, an increase of 42.0% as compared to net sales of $413.9 million for the
first quarter of fiscal 1998. This increase was due to the additional sales
contributed by CMI, which was acquired effective February 3, 1999, the
additional sales contributed by the acquisitions of Alumitech, Borlem, MIN-CER,
N.F. Die and Kalyani (the "1998 acquisitions"), and higher sales in the North
American Aluminum Wheel group. These sales increases were partially offset by
lower selling prices due to the pass through of lower aluminum costs.
The Company's gross profit for the first quarter of fiscal 1999 increased
to $106.1 million or 18.1% of net sales as compared to $72.1 million or 17.4% of
net sales for the first quarter of fiscal 1998. This increase in margin was
attributable to the increased revenues and improved productivity in the majority
of the Company's businesses.
Marketing, general and administrative expenses were $24.5 million or 4.2%
of net sales for the first quarter of fiscal 1999 as compared to $15.2 million
or 3.7% of net sales for the same period of fiscal 1998. This increase was
attributable to additional costs incurred as a result of the CMI and 1998
acquisitions. The Company believes that marketing, general and administrative
costs as a percent of net sales will improve as the expected synergies are
realized as a result of these acquisitions.
Engineering and product development costs were $6.2 million or 1.1% of net
sales for the first quarter of fiscal 1999 as compared to $4.4 million or 1.0%
of net sales for the first quarter of fiscal 1998. These increases were
attributable to additional costs incurred as a result of the CMI and 1998
acquisitions. The Company believes that as these costs increase, engineering and
product development costs as a percent of sales, however will improve as
expected savings are realized as a result of these acquisitions.
Amortization of intangibles increased by $3.1 million to $7.0 million for
the first quarter of fiscal 1999. This increase is attributable to the increased
goodwill recognized as a result of the CMI and 1998 acquisitions.
Interest expense was $39.5 million for the first quarter of fiscal 1999, an
increase of $15.3 million over the same period of fiscal 1998 of $24.2 million.
This increase was due to the increase in debt as a result of the CMI and 1998
acquisitions.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company's operations used $39.6 million in cash during the first
quarter of fiscal 1999, a decrease of $29.9 million as compared to the same
period of fiscal 1998. This decrease in cash flow was attributable primarily to
additional working capital assumed as a result of the acquisition of CMI and the
effect of the level of accounts receivable securitization which is used as a
financing source.
Capital expenditures for the quarter amounted to $26.2 million. These
expenditures were primarily for additional machinery and equipment to improve
productivity, increase production capacity and to meet expected requirements for
our products. The Company anticipates capital expenditures for fiscal 1999 will
be approximately $200.0 million relating primarily to new vehicle platforms,
cost reduction programs and the funding of new programs associated with the
acquisition of CMI.
On February 3, 1999, the Company entered into a third amended and restated
credit agreement (the "Third Amended and Restated Credit Agreement") with
Canadian Imperial Bank of Commerce ("CIBC") and Merrill Lynch Capital
Corporation ("Merrill Lynch"), as managing agents. Pursuant to the Third Amended
and Restated Credit Agreement, a syndicate of lenders agreed to lend the Company
up to $450 million in the form of a senior secured term loan facility and up to
$650 million in the form of a senior secured revolving credit facility. Such
term loan and revolving credit facilities are guaranteed by the Company
15
<PAGE> 16
and all of its existing and future material domestic subsidiaries. Such term
loan and revolving facilities 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 domestic subsidiaries
and 65% of the shares of certain of our existing and future foreign
subsidiaries. As of April 30, 1999, there was $450.0 million outstanding under
the term loan facilities and $396.5 million available under the revolving
facility.
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.
Accordingly, the Company and its subsidiaries, irrevocably and without recourse,
transferred and will transfer substantially all of the 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, 1999, 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, 2000.
OTHER MATTERS
Year 2000
The Company has developed plans to address its exposure in all critical
information technology ("IT") and non-IT systems to computer programs which
identify years with two digits instead of four. Such programs may recognize the
year 2000 as the year 1900. The Company is also assessing the year 2000
capabilities of its critical suppliers, customers and key service providers to
determine, to the extent possible, whether its operations will be adversely
impacted by these companies.
The Company primarily relies on packaged software applications which are
year 2000 compliant. The Company has substantially completed the testing of
these applications and has confirmed their year 2000 compliance. The Company is
also testing all internally developed IT software for the year 2000 compliance.
This process will be completed by the end of the second quarter of fiscal 1999.
The Company continues to assess all critical non-IT systems for year 2000
compliance. Non-IT systems include, among other things, manufacturing equipment,
telephone systems and heating and cooling systems. An inventory of all critical
non-IT systems and manufacturers to determine year 2000 compliance has been
prepared. This process was completed during the first quarter of fiscal 1998.
As of April 30, 1999, the costs incurred directly related to becoming year
2000 compliant were approximately $3.0 million and the costs which are expected
to be incurred subsequent to April 30, 1999 are approximately $2.4 million. The
year 2000 remediation effort has not postponed any IT projects, the delay of
which would have a material adverse effect on the business, financial condition
or results of operations.
The Company is not entirely year 2000 compliant at this time, but has
targeted the end of the third quarter of fiscal 1999 to have all critical
business and production processes ready. Although the Company is striving to be
completely year 2000 compliant, year 2000 issues may still negatively affect the
Company. Based on progress to date, management believes that such impact, if
any, will not have a material adverse impact on the business, financial
condition or results of operations. The Company cannot guarantee that this will
be so.
Although the Company has contacted critical suppliers, customers and key
service providers to determine their level of year 2000 compliance, a lack of
year 2000 readiness at these companies could adversely impact the Company's
operations. The Company has developed a program for monitoring year 2000 risk in
its supply chain and have mailed "Supplier Year 2000 Self-Assessment"
questionnaires to all critical suppliers and key service providers. The full
extent of any such adverse impact (if any) is impossible to determine. The
16
<PAGE> 17
Company is attempting to mitigate any possible adverse impact by identifying
alternate suppliers where possible. The Company may also increase inventory of
crucial materials in anticipation of possible disruptions.
The Company has developed contingency plans for all critical business and
production processes which the Company believes will help to minimize its year
2000 risk.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For the period ended April 30, 1999, the Company did not experience any
material change in market risk exposures affecting the quantitative and
qualitative disclosures as presented in the Company's Annual Report on Form 10-K
for the year ended January 31, 1999.
17
<PAGE> 18
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
27 -- Financial Data Schedule
(b) Reports of Form 8-K
During the fiscal quarter ended April 30, 1999, the Company filed a Current
Report on Form 8-K with the SEC on February 18, 1999.
18
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HAYES LEMMERZ INTERNATIONAL, INC.
By: /s/ D. N. VERMILYA
------------------------------------
D. N. Vermilya
Corporate Controller and Chief
Accounting Officer
June 14, 1999
19
<PAGE> 20
Exhibit Index
-------------
Exhibit No. Description
- ----------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-START> FEB-01-1999
<PERIOD-END> APR-30-1999
<CASH> 107700
<SECURITIES> 0
<RECEIVABLES> 259300
<ALLOWANCES> 0
<INVENTORY> 183900
<CURRENT-ASSETS> 561800
<PP&E> 1073600
<DEPRECIATION> 0
<TOTAL-ASSETS> 2793100
<CURRENT-LIABILITIES> 599600
<BONDS> 0
0
0
<COMMON> 300
<OTHER-SE> 192700
<TOTAL-LIABILITY-AND-EQUITY> 2793100
<SALES> 587900
<TOTAL-REVENUES> 587900
<CGS> 481800
<TOTAL-COSTS> 481800
<OTHER-EXPENSES> 37300
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 39500
<INCOME-PRETAX> 29300
<INCOME-TAX> 12600
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16300
<EPS-BASIC> 0.54
<EPS-DILUTED> 0.51
</TABLE>
