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Previous: CORPORATE INCOME FUND MON PYMT SER 319 DEFINED ASSET FDS, 485BPOS, EX-99.C1ACCTCONST, 2000-09-13 |
Next: HAYES LEMMERZ INTERNATIONAL INC, 10-Q, EX-27, 2000-09-13 |
UNITED STATES
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
For the quarterly period ended July 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
For the transition period from to
Commission file number: 1-11592
HAYES LEMMERZ INTERNATIONAL, INC.
| DELAWARE | 13-3384636 | |
| (State or Other Jurisdiction of | (IRS Employer | |
| Incorporation or Organization) | Identification No.) |
15300 CENTENNIAL DRIVE
Registrant’s telephone number, including area code: (734) 737-5000
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 September 13, 2000, was 28,899,495 shares.
HAYES LEMMERZ INTERNATIONAL, INC.
| Page | |||||||
| PART I. FINANCIAL INFORMATION | |||||||
| Item 1. | Financial Statements | ||||||
| Consolidated Statements of Operations | 3 | ||||||
| Consolidated Balance Sheets | 4 | ||||||
| Consolidated Statements of Cash Flows | 5 | ||||||
| Notes to Consolidated Financial Statements | 6 | ||||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 14 | |||||
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 15 | |||||
| PART II. OTHER INFORMATION | |||||||
| Item 1. | Legal Proceedings | 16 | |||||
| Item 2. | Changes in Securities and Use of Proceeds | 16 | |||||
| Item 3. | Defaults Upon Senior Securities | 16 | |||||
| Item 4. | Submission of Matters to a Vote of Security Holders | 16 | |||||
| Item 5. | Other Information | 16 | |||||
| Item 6. | Exhibits and Reports on Form 8-K | 17 | |||||
| SIGNATURES | 18 | ||||||
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 2000 MEANS THE PERIOD BEGINNING FEBRUARY 1, 2000, AND ENDING JANUARY 31, 2001). THIS REPORT CONTAINS FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 WITH RESPECT TO THE FINANCIAL CONDITION, RESULTS OF OPERATIONS, AND BUSINESS OF THE COMPANY. THESE FORWARD LOOKING STATEMENTS INVOLVE CERTAIN RISKS AND UNCERTAINTIES. NO ASSURANCE CAN BE GIVEN THAT ANY OF SUCH MATTERS WILL BE REALIZED. FACTORS THAT MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD LOOKING STATEMENTS INCLUDE, AMONG OTHERS, THE FOLLOWING POSSIBILITIES: (1) COMPETITIVE PRESSURE IN THE COMPANY’S INDUSTRY INCREASES SIGNIFICANTLY; (2) GENERAL ECONOMIC CONDITIONS ARE LESS FAVORABLE THAN EXPECTED; (3) THE COMPANY’S DEPENDENCE ON THE AUTOMOTIVE INDUSTRY (WHICH HAS HISTORICALLY BEEN CYCLICAL); (4) CHANGES IN THE FINANCIAL MARKETS AFFECTING THE COMPANY’S FINANCIAL STRUCTURE AND THE COMPANY’S COST OF CAPITAL AND BORROWED MONEY; AND (5) THE UNCERTAINTIES INHERENT IN INTERNATIONAL OPERATIONS AND FOREIGN CURRENCY FLUCTUATIONS. THE COMPANY HAS NO DUTY UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 TO UPDATE THE FORWARD LOOKING STATEMENTS IN THIS QUARTERLY REPORT ON FORM 10-Q AND THE COMPANY DOES NOT INTEND TO PROVIDE SUCH UPDATES.
2
HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
| Three Months Ended | Six Months Ended | ||||||||||||||||
| July 31, | July 31, | ||||||||||||||||
| 2000 | 1999 | 2000 | 1999 | ||||||||||||||
| Net sales | $ | 542.8 | $ | 544.4 | $ | 1,137.6 | $ | 1,132.3 | |||||||||
| Cost of goods sold | 458.4 | 450.3 | 951.3 | 932.1 | |||||||||||||
| Gross profit | 84.4 | 94.1 | 186.3 | 200.2 | |||||||||||||
| Marketing, general and administration | 24.0 | 24.4 | 48.5 | 48.9 | |||||||||||||
| Engineering and product development | 3.2 | 5.0 | 9.4 | 11.2 | |||||||||||||
| Amortization of intangibles | 7.1 | 6.8 | 14.3 | 13.8 | |||||||||||||
| Other income | (2.5 | ) | (4.1 | ) | (4.9 | ) | (4.8 | ) | |||||||||
| Equity in losses (earnings) of unconsolidated subsidiaries | 0.6 | (0.6 | ) | (0.5 | ) | (0.3 | ) | ||||||||||
| Earnings from operations | 52.0 | 62.6 | 119.5 | 131.4 | |||||||||||||
| Interest expense, net | 40.0 | 38.5 | 78.8 | 78.0 | |||||||||||||
| Earnings before taxes on income and minority interest | 12.0 | 24.1 | 40.7 | 53.4 | |||||||||||||
| Income tax provision | 5.0 | 10.3 | 17.1 | 22.9 | |||||||||||||
| Earnings before minority interest | 7.0 | 13.8 | 23.6 | 30.5 | |||||||||||||
| Minority interest | 0.5 | 0.5 | 1.4 | 0.9 | |||||||||||||
| Net income | $ | 6.5 | $ | 13.3 | $ | 22.2 | $ | 29.6 | |||||||||
| Per share information: | |||||||||||||||||
| Basic net income per share | $ | 0.21 | $ | 0.44 | $ | 0.73 | $ | 0.98 | |||||||||
| Basic average shares outstanding (in thousands) | 30,357 | 30,337 | 30,357 | 30,330 | |||||||||||||
| Diluted net income per share | $ | 0.21 | $ | 0.41 | $ | 0.73 | $ | 0.93 | |||||||||
| Diluted average shares outstanding (in thousands) | 30,446 | 32,219 | 30,575 | 31,977 | |||||||||||||
See accompanying notes to consolidated financial statements.
3
HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
| July 31, | January 31, | ||||||||||
| 2000 | 2000 | ||||||||||
| (Unaudited) | |||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 16.6 | $ | 25.9 | |||||||
| Receivables (less allowance of $5.5 million at July 31, 2000 and $6.3 million at January 31, 2000) | 203.8 | 188.7 | |||||||||
| Inventory | 211.4 | 175.6 | |||||||||
| Prepaid expenses and other | 14.1 | 9.4 | |||||||||
| Total current assets | 445.9 | 399.6 | |||||||||
| Property, plant and equipment, net | 1,187.4 | 1,178.4 | |||||||||
| Goodwill and other assets | 1,181.0 | 1,198.8 | |||||||||
| Total assets | $ | 2,814.3 | $ | 2,776.8 | |||||||
| Liabilities and Stockholders’ Equity | |||||||||||
| Current liabilities: | |||||||||||
| Bank borrowings | $ | 77.8 | $ | 73.6 | |||||||
| Current portion of long-term debt | 70.0 | 69.6 | |||||||||
| Accounts payable and accrued liabilities | 469.0 | 583.9 | |||||||||
| Total current liabilities | 616.8 | 727.1 | |||||||||
| Long-term debt | 1,539.3 | 1,384.6 | |||||||||
| Pension and other long-term liabilities | 288.9 | 316.3 | |||||||||
| Deferred income taxes | 115.0 | 115.6 | |||||||||
| Minority interest | 8.0 | 14.3 | |||||||||
| Total liabilities | 2,568.0 | 2,557.9 | |||||||||
| Commitments and Contingencies | |||||||||||
| 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 shares; issued and outstanding 27,707,919 at July 31, 2000 and 27,705,019 at January 31, 2000 | 0.3 | 0.3 | |||||||||
| Nonvoting — authorized 5,000,000 shares; issued and outstanding, 2,649,026 at July 31, 2000 and January 31, 2000 | — | — | |||||||||
| Additional paid in capital | 237.1 | 237.1 | |||||||||
| Retained earnings | 80.3 | 58.0 | |||||||||
| Accumulated other comprehensive loss | (71.4 | ) | (76.5 | ) | |||||||
| Total stockholders’ equity | 246.3 | 218.9 | |||||||||
| Total liabilities and stockholders’ equity | $ | 2,814.3 | $ | 2,776.8 | |||||||
See accompanying notes to consolidated financial statements.
4
HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
| Six Months Ended | |||||||||||
| July 31, | |||||||||||
| 2000 | 1999 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | 22.2 | $ | 29.6 | |||||||
| Adjustments to reconcile net income to net cash provided by (used for) operating activities: | |||||||||||
| Depreciation and tooling amortization | 59.1 | 56.4 | |||||||||
| Amortization of intangibles | 14.3 | 13.8 | |||||||||
| Amortization of deferred financing fees | 3.2 | 4.3 | |||||||||
| Increase in deferred taxes | 2.1 | 12.0 | |||||||||
| Increase in minority interest | 1.6 | — | |||||||||
| Equity in earnings of unconsolidated subsidiaries | (0.5 | ) | (0.3 | ) | |||||||
| Gain on disposal of assets/business | — | (8.0 | ) | ||||||||
| Changes in operating assets and liabilities that increase (decrease) cash flows: | |||||||||||
| Receivables | 1.3 | (26.6 | ) | ||||||||
| Inventories | (38.9 | ) | (14.8 | ) | |||||||
| Prepaid expenses and other | (4.9 | ) | 4.1 | ||||||||
| Accounts payable and accrued liabilities | (106.1 | ) | (39.8 | ) | |||||||
| Other long-term liabilities | (20.5 | ) | (11.6 | ) | |||||||
| Cash provided by (used for) operating activities | (67.1 | ) | 19.1 | ||||||||
| Cash flows from investing activities: | |||||||||||
| Acquisition of property, plant and equipment | (93.0 | ) | (79.4 | ) | |||||||
| Tooling expenditures | — | (6.2 | ) | ||||||||
| Purchase of businesses, net of cash received | — | (619.6 | ) | ||||||||
| Increased investment in majority-owned subsidiary | (7.3 | ) | — | ||||||||
| Proceeds from disposal of assets/business | — | 40.0 | |||||||||
| Other, net | 14.1 | (8.1 | ) | ||||||||
| Cash used for investing activities | (86.2 | ) | (673.3 | ) | |||||||
| Cash flows from financing activities: | |||||||||||
| Increase in bank borrowings and revolver | 167.4 | 585.8 | |||||||||
| Proceeds (payments) from accounts receivable securitization | (25.0 | ) | 76.8 | ||||||||
| Stock options exercised | — | 0.1 | |||||||||
| Fees paid to issue long term debt | — | (15.0 | ) | ||||||||
| Cash provided by financing activities | 142.4 | 647.7 | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | 1.6 | (3.9 | ) | ||||||||
| Decrease in cash and cash equivalents | (9.3 | ) | (10.4 | ) | |||||||
| Cash and cash equivalents at beginning of year | 25.9 | 51.3 | |||||||||
| Cash and cash equivalents at end of period | $ | 16.6 | $ | 40.9 | |||||||
| Supplemental data: | |||||||||||
| Cash paid for interest | $ | 86.2 | $ | 66.7 | |||||||
| Cash paid for income taxes | $ | 5.5 | $ | 9.6 | |||||||
See accompanying notes to consolidated financial statements.
5
HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
(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 July 31, 2000 and January 31, 2000, and the results of its operations for the three and six months ended July 31, 2000, and 1999 and cash flows for the six months ended July 31, 2000, and 1999. 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, 2000. Results for interim periods are not necessarily indicative of those to be expected for the year.
(2) Summary of New Accounting Pronouncements
In June 1998, June 1999 and June 2000, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities”, SFAS 137, “Accounting for Derivative Instruments and Hedging Activities-Deferral of the Effective Date of FASB Statement No. 133” and SFAS 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities an amendment of FASB Statement No. 133”. These Statements establish 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. These Statements require 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 item in the income statement, and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. This accounting is effective for fiscal years beginning after June 15, 2000. The Company anticipates adopting this standard in its fiscal year 2001 and does not, at this time, anticipate a material impact on the Company’s financial position or results of operations when adopted.
(3) Inventories
The major classes of inventory are as follows:
| July 31, | January 31, | ||||||||
| 2000 | 2000 | ||||||||
| Raw materials | $ | 79.3 | $ | 62.3 | |||||
| Work-in-process | 57.3 | 55.9 | |||||||
| Finished goods | 74.8 | 57.4 | |||||||
| Total | $ | 211.4 | $ | 175.6 | |||||
6
Notes to Consolidated Financial Statements — (Continued)
(4) Property, plant and equipment
The major classes of property, plant and equipment are as follows:
| July 31, | January 31, | ||||||||
| 2000 | 2000 | ||||||||
| Land | $ | 30.0 | $ | 30.1 | |||||
| Buildings | 265.5 | 265.5 | |||||||
| Machinery and equipment | 1,206.4 | 1,151.6 | |||||||
| 1,501.9 | 1,447.2 | ||||||||
| Accumulated depreciation | (314.5 | ) | (268.8 | ) | |||||
| Net property, plant and equipment | $ | 1,187.4 | $ | 1,178.4 | |||||
(5) 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 and six months ended July 31, 2000 and 1999, were as follows:
| Three Months | Six Months | ||||||||||||||||
| Ended | Ended | ||||||||||||||||
| 2000 | 1999 | 2000 | 1999 | ||||||||||||||
| Weighted average shares outstanding | 30,357 | 30,337 | 30,357 | 30,330 | |||||||||||||
| Dilutive effect of options and warrants | 89 | 1,882 | 218 | 1,647 | |||||||||||||
| Diluted shares outstanding | 30,446 | 32,219 | 30,575 | 31,977 | |||||||||||||
(6) 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 (loss) for the six months ended July 31, 2000 and 1999 are as follows:
| 2000 | 1999 | ||||||||
| Net Income | $ | 22.2 | $ | 29.6 | |||||
| Cumulative translation adjustments | 5.1 | (50.2 | ) | ||||||
| Total comprehensive income (loss) | $ | 27.3 | $ | (20.6 | ) | ||||
(7) Commitments and 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.
7
Notes to Consolidated Financial Statements — (Continued)
(8) 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 represents revenues and other financial information by business segment for the six months ended July 31:
| Revenue | Net Income | Total Assets | |||||||||||||||||||||||
| 2000 | 1999 | 2000 | 1999 | 2000 | 1999 | ||||||||||||||||||||
| Automotive wheels | $ | 702.1 | $ | 648.3 | $ | 22.7 | $ | 23.8 | $ | 1,465.6 | $ | 1,401.5 | |||||||||||||
| Cast components | 343.5 | 366.9 | 2.3 | 5.0 | 979.3 | 896.3 | |||||||||||||||||||
| Other | 92.0 | 117.1 | (2.8 | ) | 0.8 | 369.4 | 387.8 | ||||||||||||||||||
| Total | $ | 1,137.6 | $ | 1,132.3 | $ | 22.2 | $ | 29.6 | $ | 2,814.3 | $ | 2,685.6 | |||||||||||||
(9) Reclassifications
Certain prior period amounts have been reclassified to conform to the current year presentation.
(10) Guarantor and Nonguarantor Financial Statements
The Company’s senior subordinated notes are guaranteed by certain of the Company’s domestic subsidiaries. Certain other domestic subsidiaries and the foreign subsidiaries (the “Non-Guarantor Subsidiaries”) do not guarantee the senior subordinated notes.
The following condensed consolidating financial information presents:
| (1) Condensed consolidating financial statements as of July 31, 2000, and January 31, 2000, and for the six-month periods ended July 31, 2000, and 1999, 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 principal elimination entries eliminate investments in subsidiaries and intercompany balances and transactions.
8
Notes to Consolidated Financial Statements — (Continued)
Condensed Consolidating Statements of Operations
| Guarantor | Nonguarantor | Consolidated | |||||||||||||||||||
| Parent | Subsidiaries | Subsidiaries | Eliminations | Total | |||||||||||||||||
| Net sales | $ | 163.7 | $ | 346.8 | $ | 638.7 | $ | (11.6 | ) | $ | 1,137.6 | ||||||||||
| Cost of goods sold | 132.5 | 298.7 | 531.7 | (11.6 | ) | 951.3 | |||||||||||||||
| Gross profit | 31.2 | 48.1 | 107.0 | — | 186.3 | ||||||||||||||||
| Marketing, general and Administration | 2.9 | 12.0 | 33.6 | — | 48.5 | ||||||||||||||||
| Engineering and product development | 0.9 | 3.9 | 4.6 | — | 9.4 | ||||||||||||||||
| Amortization of intangibles | 0.5 | 4.1 | 9.7 | — | 14.3 | ||||||||||||||||
| Other expense (income), net | (0.1 | ) | 0.2 | (5.0 | ) | — | (4.9 | ) | |||||||||||||
| Equity in earnings of unconsolidated subsidiaries | (0.3 | ) | (0.2 | ) | — | — | (0.5 | ) | |||||||||||||
| Earnings from operations | 27.3 | 28.1 | 64.1 | — | 119.5 | ||||||||||||||||
| Interest expense, net | 12.5 | 28.5 | 37.8 | — | 78.8 | ||||||||||||||||
| Earnings (loss) before taxes on income, and minority interest | 14.8 | (0.4 | ) | 26.3 | — | 40.7 | |||||||||||||||
| Income tax provision | 3.3 | 2.1 | 11.7 | — | 17.1 | ||||||||||||||||
| Earnings (loss) before minority interest | 11.5 | (2.5 | ) | 14.6 | — | 23.6 | |||||||||||||||
| Minority interest | — | — | 1.4 | — | 1.4 | ||||||||||||||||
| Net income (loss) | $ | 11.5 | $ | (2.5 | ) | $ | 13.2 | $ | — | $ | 22.2 | ||||||||||
Condensed Consolidating Statements of Operations
| Guarantor | Nonguarantor | Consolidated | |||||||||||||||||||
| Parent | Subsidiaries | Subsidiaries | Eliminations | Total | |||||||||||||||||
| Net sales | $ | 165.6 | $ | 359.4 | $ | 608.8 | $ | (1.5 | ) | $ | 1,132.3 | ||||||||||
| Cost of goods sold | 140.2 | 298.8 | 494.6 | (1.5 | ) | 932.1 | |||||||||||||||
| Gross profit | 25.4 | 60.6 | 114.2 | — | 200.2 | ||||||||||||||||
| Marketing, general and Administration | 3.0 | 11.7 | 34.2 | — | 48.9 | ||||||||||||||||
| Engineering and product development | 2.8 | 3.4 | 5.0 | — | 11.2 | ||||||||||||||||
| Amortization of intangibles | 0.8 | 4.0 | 9.0 | — | 13.8 | ||||||||||||||||
| Other income, net | (3.0 | ) | (1.6 | ) | (0.2 | ) | — | (4.8 | ) | ||||||||||||
| Equity in earnings of unconsolidated subsidiaries | (0.3 | ) | — | — | — | (0.3 | ) | ||||||||||||||
| Earnings from operations | 22.1 | 43.1 | 66.2 | — | 131.4 | ||||||||||||||||
| Interest expense, net | 15.3 | 27.6 | 35.1 | — | 78.0 | ||||||||||||||||
| Earnings before taxes on income, and minority interest | 6.8 | 15.5 | 31.1 | — | 53.4 | ||||||||||||||||
| Income tax provision (benefit) | (0.2 | ) | 6.1 | 17.0 | — | 22.9 | |||||||||||||||
| Earnings before minority interest | 7.0 | 9.4 | 14.1 | — | 30.5 | ||||||||||||||||
| Minority interest | — | 0.2 | 0.7 | — | 0.9 | ||||||||||||||||
| Net income | $ | 7.0 | $ | 9.2 | $ | 13.4 | $ | — | $ | 29.6 | |||||||||||
9
Notes to Consolidated Financial Statements — (Continued)
Condensed Consolidating Balance Sheet
| Guarantor | Nonguarantor | Consolidated | |||||||||||||||||||
| Parent | Subsidiaries | Subsidiaries | Eliminations | Total | |||||||||||||||||
| Cash and cash equivalents | $ | 7.6 | $ | 0.2 | $ | 8.8 | $ | — | $ | 16.6 | |||||||||||
| Receivables | 24.8 | 12.4 | 166.6 | — | 203.8 | ||||||||||||||||
| Inventories | 36.2 | 60.2 | 115.0 | — | 211.4 | ||||||||||||||||
| Prepaid expenses and other | 3.1 | 5.9 | 15.9 | (10.8 | ) | 14.1 | |||||||||||||||
| Total current assets | 71.7 | 78.7 | 306.3 | (10.8 | ) | 445.9 | |||||||||||||||
| Property, plant and equipment, net | 160.9 | 337.8 | 688.7 | — | 1,187.4 | ||||||||||||||||
| Goodwill and other assets | 1,470.9 | 302.9 | 669.9 | (1,262.7 | ) | 1,181.0 | |||||||||||||||
| Total assets | $ | 1,703.5 | $ | 719.4 | $ | 1,664.9 | $ | (1,273.5 | ) | $ | 2,814.3 | ||||||||||
| Bank borrowings | $ | — | $ | — | $ | 77.8 | $ | — | $ | 77.8 | |||||||||||
| Current portion of long-term debt | 60.7 | — | 9.3 | — | 70.0 | ||||||||||||||||
| Accounts payable and accrued liabilities | 81.9 | 89.7 | 298.8 | (1.4 | ) | 469.0 | |||||||||||||||
| Total current liabilities | 142.6 | 89.7 | 385.9 | (1.4 | ) | 616.8 | |||||||||||||||
| Long-term debt, net of current portion | 1,431.3 | — | 108.0 | — | 1,539.3 | ||||||||||||||||
| Deferred income taxes | 18.4 | 28.5 | 68.1 | — | 115.0 | ||||||||||||||||
| Pension and other long-term liabilities | 79.1 | 53.9 | 155.9 | — | 288.9 | ||||||||||||||||
| Minority interest | — | — | 8.0 | — | 8.0 | ||||||||||||||||
| Parent loans | (197.3 | ) | 316.4 | (106.4 | ) | (12.7 | ) | — | |||||||||||||
| Total liabilities | 1,474.1 | 488.5 | 619.5 | (14.1 | ) | 2,568.0 | |||||||||||||||
| Common stock | 0.3 | — | — | — | 0.3 | ||||||||||||||||
| Additional paid-in capital | 251.9 | 108.7 | 1,005.9 | (1,129.4 | ) | 237.1 | |||||||||||||||
| Retained earnings (accumulated deficit) | (49.5 | ) | 122.2 | 137.6 | (130.0 | ) | 80.3 | ||||||||||||||
| Accumulated other comprehensive income (loss) | 26.7 | — | (98.1 | ) | — | (71.4 | ) | ||||||||||||||
| Total stockholders’ equity | 229.4 | 230.9 | 1,045.4 | (1,259.4 | ) | 246.3 | |||||||||||||||
| Total liabilities and stockholder’s equity | $ | 1,703.5 | $ | 719.4 | $ | 1,664.9 | $ | (1,273.5 | ) | $ | 2,814.3 | ||||||||||
10
Notes to Consolidated Financial Statements — (Continued)
(10) Guarantor and Nonguarantor Financial Statements — (Continued)
Condensed Consolidating Balance Sheet
| Guarantor | Nonguarantor | Consolidated | |||||||||||||||||||
| Parent | Subsidiaries | Subsidiaries | Eliminations | Total | |||||||||||||||||
| Cash and cash equivalents | $ | 6.8 | $ | 0.1 | $ | 19.0 | $ | — | $ | 25.9 | |||||||||||
| Receivables | 34.1 | 4.2 | 150.4 | — | 188.7 | ||||||||||||||||
| Inventories | 38.0 | 46.1 | 91.5 | — | 175.6 | ||||||||||||||||
| Prepaid expenses and other | 0.9 | 4.0 | 21.9 | (17.4 | ) | 9.4 | |||||||||||||||
| Total current assets | 79.8 | 54.4 | 282.8 | (17.4 | ) | 399.6 | |||||||||||||||
| Property, plant and equipment, net | 158.3 | 339.1 | 681.0 | — | 1,178.4 | ||||||||||||||||
| Goodwill and other assets | 1,464.0 | 304.8 | 694.3 | (1,264.3 | ) | 1,198.8 | |||||||||||||||
| Total assets | $ | 1,702.1 | $ | 698.3 | $ | 1,658.1 | $ | (1,281.7 | ) | $ | 2,776.8 | ||||||||||
| Bank borrowings | $ | — | $ | — | $ | 73.6 | $ | — | $ | 73.6 | |||||||||||
| Current portion of long-term debt | 57.9 | — | 11.7 | — | 69.6 | ||||||||||||||||
| Accounts payable and accrued liabilities | 126.9 | 154.1 | 326.1 | (23.2 | ) | 583.9 | |||||||||||||||
| Total current liabilities | 184.8 | 154.1 | 411.4 | (23.2 | ) | 727.1 | |||||||||||||||
| Long-term debt, net of current portion | 1,289.2 | — | 95.4 | — | 1,384.6 | ||||||||||||||||
| Deferred income taxes | 18.5 | 28.5 | 68.6 | — | 115.6 | ||||||||||||||||
| Pension and other long-term liabilities | 80.3 | 57.1 | 181.4 | (2.5 | ) | 316.3 | |||||||||||||||
| Minority interest | — | — | 14.3 | — | 14.3 | ||||||||||||||||
| Parent loans | (61.9 | ) | 225.2 | (166.7 | ) | 3.4 | — | ||||||||||||||
| Total liabilities | 1,510.9 | 464.9 | 604.4 | (22.3 | ) | 2,557.9 | |||||||||||||||
| Common stock | 0.3 | — | — | — | 0.3 | ||||||||||||||||
| Additional paid-in capital | 251.9 | 108.7 | 1,005.9 | (1,129.4 | ) | 237.1 | |||||||||||||||
| Retained earnings (accumulated deficit) | (61.1 | ) | 124.7 | 124.4 | (130.0 | ) | 58.0 | ||||||||||||||
| Accumulated other comprehensive income (loss) | 0.1 | — | (76.6 | ) | — | (76.5 | ) | ||||||||||||||
| Total stockholders’ equity | 191.2 | 233.4 | 1,053.7 | (1,259.4 | ) | 218.9 | |||||||||||||||
| Total liabilities and stockholder’s equity | $ | 1,702.1 | $ | 698.3 | $ | 1,658.1 | $ | (1,281.7 | ) | $ | 2,776.8 | ||||||||||
11
Notes to Consolidated Financial Statements — (Continued)
(10) Guarantor and Nonguarantor Financial Statements — (Continued)
Condensed Consolidating Statement of Cash Flows
| Guarantor | Nonguarantor | Consolidated | ||||||||||||||||||||
| Parent | Subsidiaries | Subsidiaries | Eliminations | Total | ||||||||||||||||||
| Cash flows provided by (used in) operating activities | $ | 10.2 | $ | (70.3 | ) | $ | (7.0 | ) | $ | — | $ | (67.1 | ) | |||||||||
| Cash flows from investing activities: | ||||||||||||||||||||||
| Acquisition of property, plant and equipment | (6.4 | ) | (13.8 | ) | (72.8 | ) | — | (93.0 | ) | |||||||||||||
| Increased investment in majority-owned subsidiary | — | — | (7.3 | ) | — | (7.3 | ) | |||||||||||||||
| Other, net | 12.7 | (6.9 | ) | 8.3 | — | 14.1 | ||||||||||||||||
| Cash provided by (used in) investing activities | 6.3 | (20.7 | ) | (71.8 | ) | — | (86.2 | ) | ||||||||||||||
| Cash flows from financing activities: | ||||||||||||||||||||||
| Net change in bank borrowings and revolver | 145.0 | — | 22.4 | — | 167.4 | |||||||||||||||||
| Net proceeds from accounts receivable securitization | (25.0 | ) | — | — | — | (25.0 | ) | |||||||||||||||
| Cash provided by financing activities | 120.0 | — | 22.4 | — | 142.4 | |||||||||||||||||
| Increase (decrease) in parent loans and advances | (135.7 | ) | 91.1 | 44.6 | — | — | ||||||||||||||||
| Effect of exchange rates of cash and cash equivalents | — | — | 1.6 | — | 1.6 | |||||||||||||||||
| Net increase (decrease) in cash and cash equivalents | 0.8 | 0.1 | (10.2 | ) | — | (9.3 | ) | |||||||||||||||
| Cash and cash equivalents at beginning of period | 6.8 | 0.1 | 19.0 | — | 25.9 | |||||||||||||||||
| Cash and cash equivalents at end of period | $ | 7.6 | $ | 0.2 | $ | 8.8 | $ | — | $ | 16.6 | ||||||||||||
12
Notes to Consolidated Financial Statements — (Continued)
(10) Guarantor and Nonguarantor Financial Statements — (Continued)
Condensed Consolidating Statement of Cash Flows
| Guarantor | Nonguarantor | Consolidated | ||||||||||||||||||||
| Parent | Subsidiaries | Subsidiaries | Eliminations | Total | ||||||||||||||||||
| Cash flows provided by (used in) operating activities | $ | (0.5 | ) | $ | (19.1 | ) | $ | 38.7 | $ | — | $ | 19.1 | ||||||||||
| Cash flows from investing activities: | ||||||||||||||||||||||
| Acquisition of property, plant and equipment | (16.7 | ) | (22.8 | ) | (39.9 | ) | — | (79.4 | ) | |||||||||||||
| Acquisition of tooling | (6.2 | ) | — | — | — | (6.2 | ) | |||||||||||||||
| Purchase of businesses, net of cash | (605.0 | ) | — | (14.6 | ) | — | (619.6 | ) | ||||||||||||||
| Proceeds from sale of business | — | 2.6 | 37.4 | — | 40.0 | |||||||||||||||||
| Other, net | 20.9 | (7.2 | ) | (21.8 | ) | — | (8.1 | ) | ||||||||||||||
| Cash used in investing activities | (607.0 | ) | (27.4 | ) | (38.9 | ) | — | (673.3 | ) | |||||||||||||
| Cash flows from financing activities: | ||||||||||||||||||||||
| Net change in bank borrowings and revolver | 513.9 | — | 71.9 | — | 585.8 | |||||||||||||||||
| Fees paid to issue long term debt | (15.0 | ) | — | — | — | (15.0 | ) | |||||||||||||||
| Stock options exercised | 0.1 | — | — | — | 0.1 | |||||||||||||||||
| Net proceeds from accounts receivable securitization | 76.8 | — | — | — | 76.8 | |||||||||||||||||
| Cash provided by financing activities | 575.8 | — | 71.9 | — | 647.7 | |||||||||||||||||
| Increase (decrease) in parent loans and advances | 12.2 | 46.5 | (58.7 | ) | — | — | ||||||||||||||||
| Effect of exchange rates of cash and cash equivalents | — | — | (3.9 | ) | — | (3.9 | ) | |||||||||||||||
| Net increase (decrease) in cash and cash equivalents | (19.5 | ) | — | 9.1 | — | (10.4 | ) | |||||||||||||||
| Cash and cash equivalents at beginning of period | 23.3 | 0.1 | 27.9 | — | 51.3 | |||||||||||||||||
| Cash and cash equivalents at end of period | $ | 3.8 | $ | 0.1 | $ | 37.0 | $ | — | $ | 40.9 | ||||||||||||
13
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Results of Operations
Three Months Ended July 31, 2000 Compared to Three Months Ended July 31, 1999
The Company’s net sales for the second quarter of fiscal 2000 were $542.8 million compared to net sales of $544.4 million for the second quarter of fiscal 1999. Higher sales in the North American and European Wheel Groups were offset by lower sales in the North American Commercial Highway business due to softening market conditions. Additionally, sales were negatively impacted due to the Euro weakening against the Dollar by approximately 11% in the second quarter of fiscal 2000 as compared to the second quarter of fiscal 1999.
The Company’s gross profit margin for the second quarter of fiscal 2000 decreased to $84.4 million or 15.5% of net sales as compared to $94.1 million or 17.3% of net sales for the second quarter of fiscal 1999. The Company’s second quarter gross profit margin was negatively impacted by the reduction in the North American Commercial Highway sales, the weakening Euro against the Dollar and launch costs related to new model production start-up.
Marketing, general and administrative expenses were consistent for the comparative quarters at $24.0 million or 4.4% of net sales for the second quarter of fiscal 2000 as compared to $24.4 million or 4.5% for the second quarter of fiscal 1999.
Engineering and product development costs were $3.2 million or 0.6% of net sales for the second quarter of fiscal 2000 as compared to $5.0 million or 0.9% of net sales for the second quarter of fiscal 1999. This improvement principally reflects the timing associated with recovery of engineering and development costs from our customers.
Other income was $2.5 million for the second quarter of fiscal 2000, a decrease of $1.6 million from $4.1 million for the same period in fiscal 1999. In the second quarter of fiscal 1999, other income included gains on the sale of a joint venture interest and other assets.
Equity in losses (earnings) of unconsolidated subsidiaries decreased $1.2 million to $0.6 million of losses for the second quarter of fiscal 2000 as compared to $0.6 million of earnings for the same period in fiscal 1999. The majority of this decrease was due to the Company’s Mexico joint venture, which is a 40% owned joint venture producing both steel and aluminum wheels for the light vehicle market in North America.
Interest expense was $40.0 million for the second quarter of fiscal 2000, an increase of $1.5 million over $38.5 million for the same period of fiscal 1999. This increase was due primarily to the increase in interest rates.
Six Months Ended July 31, 2000 Compared to Six Months Ended July 31, 1999
The Company’s net sales for the first half of fiscal 2000 were $1,137.6 million, an increase of 0.5%, as compared to net sales of $1,132.3 million for the first half of fiscal 1999. This increase was due to higher sales in the North American and European Wheel Groups offset by lower sales in the North American Commercial Highway business due to softening marketing conditions and the weakening of the Euro against the Dollar by approximately 11%.
The Company’s gross profit for the first half of fiscal 2000 decreased to $186.3 million or 16.4% of net sales as compared to $200.2 million or 17.7% of net sales for the first half of fiscal 1999. This decrease reflects the negative impact of soft market conditions in the North American Commercial Highway business and the devaluation of the Euro against the Dollar.
Engineering and product development costs were $9.4 million or 0.8% of net sales for the first half of fiscal 2000 as compared to $11.2 million or 1.0% of net sales for the first half of fiscal 1999. The improvement results principally from the timing of engineering and development cost recoveries.
14
Equity in earnings of unconsolidated subsidiaries was $0.5 million for the first half of fiscal 2000, a $0.2 million increase over the first half of fiscal 1999. The increase is due to earnings from the Company’s Mexico joint venture, which is a 40% owned joint venture producing both steel and aluminum wheels for the light vehicle market in North America.
Financial Condition, Liquidity and Capital Resources
The Company’s operations used $67.1 million in cash in the first half of fiscal 2000, an increase of $86.2 million over the same period of fiscal 1999. This increase was due primarily to timing of payments to suppliers and higher inventories.
Capital expenditures for the first six months of fiscal 2000 were $93.0 million. These expenditures were primarily for additional machinery and equipment to improve productivity, to increase production capacity and to meet expected requirements for our products. The Company anticipates capital expenditures for fiscal 2000 will be approximately $190.0 million relating primarily to new vehicle platforms, capacity increases worldwide to meet the growing demand for the Company’s products, cost reduction programs and the funding of new programs associated with the acquisition of CMI International, Inc.
On February 3, 1999, the Company entered into a third amended and restated credit agreement (the “Third Amended and Restated Credit Agreement”). Pursuant to the Third Amended and Restated Credit Agreement, a syndicate of lenders agreed to lend to 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 facilities are guaranteed by the Company 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 July 31, 2000 there was $420 million outstanding under the term loan facilities and $478.1 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 ongoing basis, a portion of their accounts receivables to a special purpose entity (“Funding Co.”), which is wholly owned by 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.
During the second quarter, the Board of Directors approved the repurchase of up to an aggregate of $30.0 million of the Company’s outstanding common stock. Through August 31, 2000, the Company has repurchased approximately 1.3 million shares of its common stock for an aggregate purchase price of approximately $18.1 million.
At July 31, 2000, management believes that the Company was in compliance with the various covenants under the agreements pursuant to which it has or may borrow money. Management expects that the Company will remain in compliance with these covenants in all material respects through the period ending July 31, 2001.
For the period ended July 31, 2000, 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, 2000.
15
None
None
None
The Company held its Annual Meeting of Stockholders on August 3, 2000. At the Annual Meeting, the following matters were proposed and voted upon by the Company’s stockholders (including the number of votes cast for, against or withheld, as well as the number of abstentions for each such matter):
| 1. | To elect three Class 1 Directors (nominees were Anthony Grillo, Horst Kukwa-Lemmerz and Jeffrey Lightcap) to serve until the Company’s 2003 Annual Meeting of Stockholder. The number of votes cast with respect to this matter were as follows: |
| Nominee | For | Withheld | ||||||
| Anthony Grillo | 22,606,441 | 1,139,511 | ||||||
| Horst Kukwa-Lemmerz | 23,326,642 | 419,310 | ||||||
| Jeffrey Lightcap | 23,365,906 | 380,046 | ||||||
| The terms of office of each of the following directors also continued after the meeting: Ranko Cucuz, Cleveland A. Christophe, Andrew R. Heyer, Paul S. Levy, Wienand Meilicke, John S. Rodewig, Ray H. Witt and David Ying. |
| 2. | To approve the adoption of the Company’s Amended and Restated Annual Performance Plan. The number of votes cast with respect to this matter were as follows: |
For: 23,341,109 Against: 376,911 Abstain: 27,932
| 3. | To approve the amendment of the Company’s 1996 Stock Option Plan. The number of votes cast with respect to this matter were as follows: |
For: 22,248,347 Against: 1,466,521 Abstain: 31,084
| 4. | To ratify the appointment of KPMG LLP as the Company’s independent auditors for the fiscal year ending January 31, 2001. The number of votes cast with respect to this matter were as follows: |
For: 23,684,902 Against: 36,817 Abstain: 24,233
There were no broker held non-voted shares represented at the Annual Meeting with respect to any of the foregoing matters.
None
16
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
| Exhibit Number | Description | |||
| 27 | Financial Data Schedule | |||
17
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 |
|
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| D. N. Vermilya | |
| Corporate Controller and Chief Accounting Officer |
September 13, 2000
18
| Exhibit | ||||
| Number | Description | |||
| 27 | Financial Data Schedule | |||
19
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