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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON,Washington, D.C. 20549FORM 10-Q
(Mark One)
[X][X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934FOR THE QUARTERLY PERIOD ENDED APRIL 30,For the quarterly period ended October 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13
ORor 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER:For the transition period from to
Commission file number: 1-11592
HAYES LEMMERZ INTERNATIONAL, INC.
(EXACT NAME(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 13-3384636 (State or Other Jurisdiction of (IRS Employer Incorporation or Organization) Identification No.) 15300 CENTENNIAL DRIVE
NORTHVILLE, MICHIGAN 48167(Address of Principal Executive Offices)(Zip Code)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 December 15, 1999, was 30,339,345 shares.
HAYES LEMMERZ INTERNATIONAL, INC.QUARTERLY REPORT ON FORM 10-Q
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PAGE ----Page PART I. FINANCIAL INFORMATION: Item 1. Financial Statements Consolidated Statements of Operations.......................Operations3 Consolidated Balance Sheets.................................Sheets4 Consolidated Statements of Cash Flows.......................Flows5 Notes to Consolidated Financial Statements..................Statements6 Item 2. Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations................................... 15Operations16 Item 3. Quantitative and Qualitative Disclosures Aboutabout MarketRisk........................................................ 17Risk19 PART II. OTHER INFORMATION: Item 1. Legal Proceedings........................................... 18Proceedings20 Item 2. Changes in Registered Securities............................ 18Securities20 Item 3. Defaults upon Senior Securities............................. 18Securities20 Item 4. Submission of Matters to a Vote of Security Holders......... 18Security-Holders20 Item 5. Other Information........................................... 18Information20 Item 6. (a) Exhibits................................................ 18 Item 6. (b)Exhibits and Reports on Form 8-K..................................... 18 Signatures............................................................. 198-K20 Signatures 21 UNLESS OTHERWISE INDICATED, REFERENCES TO THE
"COMPANY"“COMPANY” MEAN HAYES LEMMERZ INTERNATIONAL, INC., AND ITS SUBSIDIARIES AND REFERENCE TO A FISCAL YEAR MEANS THECOMPANY'SCOMPANY’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 THECOMPANY'SCOMPANY’S INDUSTRY INCREASES SIGNIFICANTLY; (2) GENERAL ECONOMIC CONDITIONS ARE LESS FAVORABLE THAN EXPECTED; (3) THECOMPANY'SCOMPANY’S DEPENDENCE ON THE AUTOMOTIVE INDUSTRY (WHICH HAS HISTORICALLY BEEN CYCLICAL); (4) CHANGES IN THE FINANCIAL MARKETS AFFECTING THECOMPANY'SCOMPANY’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
3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTSTable of Contents
HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS (MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)Consolidated Statements Of Operations
(Millions of dollars, except share amounts)(Unaudited)
THREE MONTHS ENDED APRIL 30, -------------------Three Months Ended Nine Months Ended October 31, October 31, 1999 1998 ---- ----1999 1998 Net sales................................................... $587.9 $413.9sales$ 598.5 $ 443.9 $ 1,730.8 $ 1,240.8 Cost of goods sold.......................................... 481.8 341.8 ------ ------sold493.1 361.2 1,425.2 1,024.1 Gross profit........................................... 106.1 72.1profit105.4 82.7 305.6 216.7 Marketing, general and administration....................... 24.5 15.2administration21.8 16.7 70.7 48.7 Engineering and product development......................... 6.2development4.4 5.7 15.6 15.7 Amortization of intangible assets........................... 7.0intangibles8.2 4.6 22.0 12.7 Other income (1.5 ) (1.8 ) (5.3 ) (3.9 ) Equity in losslosses (earnings) ofsubsidiary................................ 0.3 -- Other income, net........................................... (0.7) (1.3) ------ ------unconsolidated subsidiaries(0.8 ) 0.4 (2.1 ) (0.6 ) Earnings from operations............................... 68.8 49.9operations73.3 57.1 204.7 144.1 Interest expense, net....................................... 39.5 24.2 ------ ------net37.5 22.4 115.5 69.4 Earnings before taxes on income, minority interest and minority interest.............................................. 29.3 25.7extraordinary loss35.8 34.7 89.2 74.7 Income tax provision........................................ 12.6 10.8 ------ ------provision15.5 14.6 38.4 31.4 Earnings before minority interest...................... 16.7 14.9interest and extraordinary loss20.3 20.1 50.8 43.3 Minority interest...........................................interest0.4 0.2 ------ ------0.4 1.3 1.4 Earnings before extraordinary loss 19.9 19.7 49.5 41.9 Extraordinary loss, net of tax of $6.0 million — — — (8.3 ) Net income.............................................income$ 16.319.9 $ 14.7 ====== ======19.7 $ 49.5 $ 33.6 Per share information: Earnings before extraordinary loss $ 0.66 $ 0.65 $ 1.63 $ 1.39 Extraordinary loss, net of tax — — — (0.28 ) Basic net income per share..................................share$ 0.540.66 $ 0.49 ====== ======0.65 $ 1.63 $ 1.11 Basic average shares outstanding (in thousands) 30,337 30,180 30,333 30,134 Earnings before extraordinary loss $ 0.63 $ 0.62 $ 1.55 $ 1.29 Extraordinary loss, net of tax — — — (0.26 ) Diluted net income per share................................share$ 0.510.63 $ 0.45 ====== ======0.62 $ 1.55 $ 1.03 Diluted average shares outstanding (in thousands) 31,678 32,004 31,880 32,482 See accompanying notes to consolidated financial statements.
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HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS (MILLIONS OF DOLLARS)Consolidated Balance Sheets
(Millions of Dollars)
APRIL 30, JANUARYOctober 31, January 31, 1999 1999 --------- ----------- (UNAUDITED)ASSETS(Unaudited) Assets Current assets: Cash and cash equivalents.................................equivalents$ 107.750.6 $ 51.3 Receivables (less allowance of $6.3 million at April 30,October 31, 1999 and $4.0 million at January 31, 1999)............. 259.3246.7 181.6 Inventories (Note 4)...................................... 183.9Inventory 184.7 166.6 Prepaid expenses and other................................ 10.9other17.9 22.8 -------- --------Total current assets................................. 561.8assets499.9 422.3 Property,Net property, plant and equipment net (Note 5)............... 1,073.61,155.2 878.0 Goodwill and other assets................................. 1,157.7assets1,176.9 810.6 -------- --------Total assets......................................... $2,793.1 $2,110.9 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITYassets$ 2,832.0 $ 2,110.9 Liabilities and Stockholders’ Equity Current liabilities: Bank borrowings...........................................borrowings$ 108.589.2 $ 44.8 Current portion of long-term debt......................... 15.0debt18.5 12.3 Accounts payable and accrued liabilities.................. 476.1liabilities502.3 456.7 -------- --------Total current liabilities............................ 599.6liabilities610.0 513.8 Long-term debt............................................ 1,600.7debt1,571.3 976.1 Deferred income taxes..................................... 87.1 58.4Pension and other long-term liabilities................... 299.9liabilities339.0 329.1 Deferred income taxes 76.6 58.4 Minority interest......................................... 12.8interest13.0 12.6 -------- --------Total liabilities.................................... 2,600.1liabilities2,609.9 1,890.0 Commitments and contingencies (Note 8): Stockholders'Contingencies:Stockholders’ equity: Preferred stock, 25,000,000 shares authorized, none issued or outstanding......................................... -- --outstanding— — Common stock, par value $0.01 per share: Voting --— authorized99,000,000;99,000,000 shares; issued and outstanding 27,690,069 at October 31, 1999 and 27,675,209 atApril 30, 1999 andJanuary 31,1999..............................................19990.3 0.3 Nonvoting --— authorized5,000,000;5,000,000 shares; issued and outstanding, 2,649,026 atApril 30,October 31 1999 and January 31,1999.............................................. -- --1999— — Additional paid in capital................................capital237.1 236.8 236.8Retained earnings (accumulated deficit) ................... 9.2 (7.1)42.4 (7.1 ) Accumulated other comprehensive income.................... (53.3) (9.1) -------- --------income(57.7 ) (9.1 ) Total stockholders' equity........................... 193.0stockholders’ equity222.1 220.9 -------- --------Total liabilities and stockholders' equity........... $2,793.1 $2,110.9 ======== ========stockholders’ equity$ 2,832.0 $ 2,110.9 See accompanying notes to consolidated financial statements.
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HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS (MILLIONS OF DOLLARS) (UNAUDITED)Consolidated Statements of Cash Flows
(Millions of Dollars)(Unaudited)
THREE MONTHS ENDED APRIL 30, -------------------Nine Months Ended October 31, 1999 1998 ---- ----Cash flows from operating activities: Net income................................................income$ 16.349.5 $ 14.733.6 Adjustments to reconcile net income to net cash used forprovided by operating activities:Depreciation and tooling amortization.................. 27.8 15.8amortization79.8 49.6 Amortization of intangibles............................ 6.9 4.2intangibles22.0 13.6 Amortization of deferred financing fees................ 2.5 1.6fees4.9 3.6 Increase (decrease) in deferred taxes (2.0 ) 12.9 Increase in deferred taxes............................. 8.7 7.4minority interest1.3 3.6 Equity in earnings of subsidiaries (2.1 ) (0.6 ) Extraordinary loss — 14.4 Gain on disposal of assets/business (8.0 ) — Changes in operating assets and liabilities that increase (decrease) cash flows: Receivables.......................................... (72.6) (20.7) Inventories.......................................... (1.1) (10.7)Receivables (112.8 ) (40.6 ) Inventories (0.6 ) (2.7 ) Prepaid expenses and other........................... 10.4 2.4other3.2 (1.8 ) Accounts payable and accrued liabilities............. (20.7) (13.1)liabilities6.1 7.5 Other long-term liabilities.......................... (17.8) (11.3) ------- ------liabilities(6.2 ) (27.0 ) Cash used forprovided by operatingactivities................ (39.6) (9.7)activities35.1 66.1 Cash flows from investing activities: Acquisition of property, plant and equipment........... (26.2) (31.5)equipment(136.1 ) (88.9 ) Tooling expenditures................................... (4.8) (5.2)expenditures(9.2 ) (6.6 ) Purchase of businesses, net of cash received (630.1 ) (79.3 ) Proceeds from assumptiondisposal offuture commitments in acquisitions.......................................... -- 12.0 Purchase of business................................... (605.0) --assets/business40.0 — Other, net............................................. (5.6) 13.5 ------- ------net(12.1 ) (26.7 ) Cash used for investing activities................ (641.6) (11.2)activities(747.5 ) (201.5 ) Cash flows from financing activities: Increase (decrease)Net change in bank borrowings and revolver.... 703.0 (63.8)revolver630.3 10.7 Proceeds from accounts receivable securitization 99.4 120.8 Stock options exercised 0.2 1.7 Fees paid to issue long term debt...................... (15.0) -- Net proceeds under accounts receivable securitization program............................................... 46.6 87.2 ------- ------debt(15.2 ) (1.4 ) Cash provided by financing activities............. 734.6 23.4activities714.7 131.8 Effect of exchange rate changes on cash and cash equivalents...............................................equivalents(3.0 0.2 ------- ------ Increase) (1.7 ) Decrease in cash and cash equivalents............. 56.4 2.7equivalents(0.7 ) (5.3 ) Cash and cash equivalents at beginning of year..............year51.3 23.1 ------- ------Cash and cash equivalents at end of period..................period$ 107.750.6 $ 25.8 ======= ======17.8 Supplemental data: Cash paid for interest.................................interest$ 5.517.2 $ 11.556.2 Cash paid for income taxes.............................taxes$ 2.712.5 $ 1.86.9 See accompanying notes to consolidated financial statements.
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HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED APRIL 30,Notes to Consolidated Financial StatementsThree and Nine Months Ended October 31, 1999ANDand 1998(UNAUDITED) (MILLIONS OF DOLLARS, UNLESS OTHERWISE STATED)(Unaudited)(Millions of Dollars Unless Otherwise Stated)(1)
BASIS OF PRESENTATIONBasis of PresentationThe 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,October 31, 1999, and January 31, 1999, and the results of its operations for the three and nine months ended October 31, 1999, and 1998 and cash flows for thethreenine months endedApril 30,October 31, 1999, and 1998. The consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in theCompany'sCompany’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)
ACQUISITIONSAcquisitions/DivestituresOn February 3, 1999, the Company completed the acquisition of CMI International, Inc.
("CMI"(“CMI”). The purchase price for CMI was $605 million in cash, of which approximately $129 million was used to repayCMI'sCMI’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 debt of CMIdebtand the fees and expenses of the acquisition of CMI were financed with the proceeds of theCompany'sCompany’s senior secured credit facilities and the issuance by the Company ofthe$250 million in aggregate principal amount of 8 1/4%Senior Subordinated Notessenior subordinated notes due 2008 (the"8“8 1/4%Notes"Notes”).On April 21, 1999, the Company completed the acquisition of Metaalindustrie Bergen B.V. (“MIB”). MIB is a full service machining supplier, specializing in the machining of large aluminum castings for a variety of automotive and industrial applications located in Bergen, the Netherlands.
On July 1, 1999, the Company acquired an additional 45% of the equity of its joint venture Siam Lemmerz Co., Limited in Thailand. This transaction increased the Company’s ownership from 25% to 70%.
On July 30, 1999, the Company completed the sale of its equity interests in A-CMI and A-CMI Scandinavia Casting Center ANS, two joint ventures formerly owned by CMI. The equity interests were purchased by ALCOA Inc., CMI’s partner in these joint ventures, for net proceeds of $37 million.
The following unaudited pro forma financial data illustrates the estimated effects as if the
above mentioned acquisitionabove-mentioned acquisitions 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 taxeffects.effects:
THREE MONTHS ENDED APRIL 30 ----------------Three Months Nine Months Ended Ended 1999 1998 ---- ----Sales....................................................... $587.9 $597.71999 1998 Sales $ 598.5 $ 573.9 $ 1,730.8 $ 1,703.9 Net income..................................................income$ 16.319.9 $ 13.219.7 $ 49.5 $ 29.3 Basic net income per share..................................share$ 0.540.66 $ 0.440.65 $ 1.63 $ 0.97 Diluted net income per share................................share$ 0.510.63 $ 0.420.62 $ 1.55 $ 0.92 The pro forma results are not necessarily indicative of the actual results as if the transactions had been in effect for the entire periods presented. In addition, they are not intended to be a projection of future results and do not reflect, among other things, any synergies that might have been achieved from combined operations.
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HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements — (Continued)
Three and Nine Months Ended October 31, 1999 and 1998(Unaudited)(Millions of Dollars Unless Otherwise Stated)(3)
SUMMARY OF NEW ACCOUNTING PRONOUNCEMENTSSummary of New Accounting PronouncementsIn 1998, the American Institute of Certified Public Accountants issued Statement of Position
("SOP"(“SOP”)98-5. "Reporting98-5, “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 theCompany'sCompany’s results of operations.In June 1998 and June 1999, the Financial Accounting Standards Board
("FASB"(“FASB”) issued Statement of Financial Accounting Standards("SFAS"(“SFAS”) No. 133,"Accounting“Accounting for Derivative Instruments and HedgingActivities". TheActivities” and SFAS 137, “Accounting for Derivative Instruments and Hedging Activities-Deferral of the Effective Date of FASB StatementestablishesNo. 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.The Statement requiresThese Statements require that changes in thederivative'sderivative’s fair value be recognized currently in earnings unless specific hedge accounting criteria are met.Special accounting for qualifying hedges allows a
derivative'sderivative’s gains and losses to offset related results on the hedged67 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 133This accounting is effective for fiscal years beginning after June 15,1999.2000. The Company anticipates adopting this standard in its fiscal year20002001 and does not, at this time, anticipate a material impact on theCompany'sCompany’s financial position or results of operations when adopted.In September 1999, the Emerging Issues Task Force reached a consensus for Issue 99-5, “Accounting for Pre-Production Costs Related to Long-Term Supply Arrangements.” This consensus may be applied on a prospective basis for costs incurred after December 31, 1999, or as a cumulative effect adjustment as of the beginning of the current fiscal year. The Company is currently reviewing the potential impact of this statement, but does not anticipate adoption will have a material impact on the financial statements.
(4)
INVENTORIESInventoriesThe major classes of inventory are as follows:
APRIL 30, JANUARYOctober 31, January 31, 1999 1999 --------- -----------Raw materials..............................................Materials$ 66.066.6 $ 65.2 Work-in-process............................................ 58.4Work-in-process 59.3 48.8 Finished goods............................................. 59.5goods58.8 52.6 ------ ------ Total................................................. $183.9 $166.6 ====== ======Total $ 184.7 $ 166.6 7
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HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements — (Continued)
Three and Nine Months Ended October 31, 1999 and 1998(Unaudited)(Millions of Dollars Unless Otherwise Stated)(5)
PROPERTY, PLANT AND EQUIPMENTProperty, plant and equipmentThe major classes of property, plant and equipment are as follows:
APRIL 30, JANUARYOctober 31, January 31, 1999 1999 --------- -----------Land......................................................Land $ 23.829.0 $ 24.9 Buildings................................................. 240.3Buildings 262.8 201.1 Machinery and equipment................................... 1,017.0equipment1,108.4 832.8 -------- -------- 1,281.11,400.2 1,058.8 Accumulated depreciation.................................. (207.5) (180.8) -------- --------depreciation(245.0 ) (180.8 ) Net property, plant and equipment.................... $1,073.6equipment$ 1,155.2 $ 878.0 ======== ========(6)
EARNINGS PER SHAREEarnings per shareSFAS No. 128,
"Earnings“Earnings perShare" ("EPS"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 nine months ended
April 30,October 31, 1999 and 1998,arewere as follows:
APRIL 30, APRIL 30,Three Months Nine Months Ended Ended 1999 1998 --------- ---------Weighted1999 1998 Basic weighted average shares outstanding...................... 30,324 30,090outstanding30,337 30,180 30,333 30,134 Dilutive effect of options and warrants.................. 1,386 2,340 ------ ------warrants1,341 1,824 1,547 2,348 Diluted weighted average shares outstanding.......................... 31,710 32,430 ====== ======outstanding31,678 32,004 31,880 32,482 78 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 INCOMEComprehensive IncomeSFAS No. 130,
"Reporting“Reporting ComprehensiveIncome"Income,” establishes standards for the reporting and display of comprehensive income. Comprehensive income is defined as all changes in aCompany'sCompany’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
threenine months endedApril 30,October 31, 1999 and 1998 are as follows:
APRIL 30, APRIL 30,Oct. 31, Oct. 31, 1999 1998 --------- ---------Net Income..................................................Income$ 16.3 $14.749.5 $ 33.6 Cumulative translation adjustments.......................... (44.2) (7.3) ------ -----adjustments(48.6 ) 4.6 Total comprehensive income............................. $(27.9)income$ 7.4 ====== =====0.9 $ 38.2 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, managementCommitments and ContingenciesManagement believes that at October 31, 1999, the Company was in compliance with
itsthe variousfinancial covenants.covenants under the agreements pursuant to which it has or may borrow money. Management expects that the8
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HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements — (Continued)
Three and Nine Months Ended October 31, 1999 and 1998(Unaudited)(Millions of Dollars Unless Otherwise Stated)(8) Commitments and Contingencies — (Continued)Company will remain in compliance with
its financialthese covenants in all material respects through the period endingApril 30,October 31, 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 REPORTINGSegment ReportingThe Company is organized based primarily on markets served and products produced. Under this organization structure, the
Company'sCompany’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
presentsrepresents revenues and other financial information by business segment for thethreenine months endedApril 30,October 31:
REVENUE NET INCOME TOTAL ASSETS ---------------- -------------- --------------------Revenue Net Income Total Assets 1999 1998 1999 1998 1999 1998 ---- ---- ---- ---- ---- ----Automotive Wheels.......................... $338.9 $313.6 $13.2 $11.1 $1,998.3 $1,455.7Wheels$ 1,022.4 $ 934.9 $ 32.1 $ 21.4 $ 2,183.3 $ 2,103.7 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 ====== ====== ===== ===== ======== ========Components539.4 150.8 11.2 7.7 950.3 212.3 Other 169.0 155.1 6.2 4.5 (301.6 ) (313.8 ) Total $ 1,730.8 $ 1,240.8 $ 49.5 $ 33.6 $ 2,832.0 $ 2,002.2 (10)
RECLASSIFICATIONSReclassificationsCertain prior period amounts have been reclassified to conform to the current year presentation.
89 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 STATEMENTSGuarantor and Nonguarantor Financial StatementsIn connection with the
Company'sCompany’s merger with Motor Wheel, and as part of the financing thereof, the Company issued and sold $250 million in aggregate principal amount ofits11% senior subordinated notes due 2006 (the"11% Notes"“11% Notes”) in a public offering.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 9 1/8% senior subordinated notes due 2007 (the “9 1/8% Notes”).
In anticipation of the acquisition of CMI and as part of the financing thereof, the Company issued and sold the 8 1/4% Notes. Effective June 17, 1999, the Company completed the offer to exchange all of the 8 1/4% Notes for 8 1/4% Series B Senior Subordinated Notes due 2008.
The 11% Notes, 9 1/8% Notes and 8 1/4% Notes rank pari passu with each other and 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'sCompany’s domestic subsidiaries.In connection with the Company's acquisition9
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Lemmerz Holding GmbH on June 30, 1997 (the "Lemmerz Acquisition"), the Company issuedContentsHAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements — (Continued)
Three andsold $400 million in aggregate principal amountNine Months Ended October 31, 1999 and 1998(Unaudited)(Millions ofits 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 existingDollars Unless Otherwise Stated)(11) Guarantor 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.Nonguarantor Financial Statements — ContinuedThe following condensed consolidating financial information presents:
(1) Condensed consolidating financial statements as of April 30, 1999 and January
(1) Condensed consolidating financial statements as of October 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 January 31, 1999, and for the nine-month periods ended October 31, 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.
9Condensed Consolidating Statement of Operations
For the Nine Months Ended October 31, 1999
Guarantor Nonguarantor Consolidated Parent Subsidiaries Subsidiaries Eliminations Total Net sales $ 261.6 $ 555.1 $ 916.5 $ (2.4 ) $ 1,730.8 Cost of goods sold 220.4 465.5 741.7 (2.4 ) 1,425.2 Gross profit 41.2 89.6 174.8 — 305.6 Marketing, general and administration 4.0 17.5 49.2 — 70.7 Engineering and product development 3.3 5.0 7.3 — 15.6 Amortization of intangibles 1.1 6.1 14.8 — 22.0 Equity in earnings of unconsolidated subsidiaries (1.8 ) — (0.3 ) — (2.1 ) Other income, net (2.1 ) (1.6 ) (1.6 ) — (5.3 ) Earnings from operations 36.7 62.6 105.4 — 204.7 Interest expense, net 20.8 41.9 52.8 — 115.5 Earnings before taxes on income, And minority interest 15.9 20.7 52.6 — 89.2 Income tax provision 8.3 9.7 20.4 — 38.4 Earnings before minority interest 7.6 11.0 32.2 — 50.8 Minority interest — 0.2 1.1 — 1.3 Net income $ 7.6 $ 10.8 $ 31.1 $ — $ 49.5 10
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HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIESNOTES 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
GUARANTOR NONGUARANTOR CONSOLIDATED PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL ------ ------------ ------------ ------------ ------------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 ======== ====== ======== ========= ========1011 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 JANUARYNotes to Consolidated Financial Statements — (Continued)
Three and Nine Months Ended October 31, 1999 and 1998(Unaudited)(Millions of Dollars Unless Otherwise Stated)(11) Guarantor and Nonguarantor Financial Statements — Continued
Condensed Consolidating Statement of Operations
For the Nine months ended October 31, 1998
GUARANTOR NONGUARANTOR CONSOLIDATED PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL ------ ------------ ------------ ------------ ------------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 -------- ------ -------- ------- --------Guarantor Nonguarantor Consolidated Parent Subsidiaries Subsidiaries Eliminations Total current assets............... 100.9 78.8 244.2 (1.6) 422.3Net 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) $2,110.9 ======== ====== ======== ======= ======== Bank borrowings.........................sales$ 2.6215.1 $ --514.0 $ 42.2519.3 $ --(7.6 ) $ 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 ======== ====== ======== ======= ========1112 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
GUARANTOR NONGUARANTOR CONSOLIDATED PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL ------ ------------ ------------ ------------ ------------Net sales................................ $89.4 $191.0 $311.2 $ (3.7) $587.91,240.8 Cost of goods sold....................... 74.9 157.5 253.1 (3.7) 481.8 ----- ------ ------ ------ ------sold185.2 428.1 418.4 (7.6 ) 1,024.1 Gross profit........................... 14.5 33.5 58.1 -- 106.1profit29.9 85.9 100.9 — 216.7 Marketing, general and administration.... 1.4 5.9 17.2 -- 24.5administration6.9 13.8 28.0 — 48.7 Engineering and product development...... 1.9 1.7 2.6 -- 6.2development2.1 4.2 9.4 — 15.7 Amortization of intangibles.............. 0.4 2.1 4.5 -- 7.0intangibles1.0 6.2 5.5 — 12.7 Equity in earnings of unconsolidated subsidiaries........................... 0.3 -- -- -- 0.3subsidiaries(0.6 ) — — — (0.6 ) Other income, net........................ (0.2) -- (0.5) -- (0.7) ----- ------ ------ ------ ------net(0.5 ) (0.1 ) (3.3 ) — (3.9 ) Earnings from operations............... 10.7 23.8 34.3 -- 68.8operations21.0 61.8 61.3 — 144.1 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 ===== ====== ====== ====== ======CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS FOR THE QUARTER ENDED APRIL 30, 1998
GUARANTOR NONGUARANTOR CONSOLIDATED PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL ------ ------------ ------------ ------------ ------------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 -- 24.2net28.7 35.4 5.3 — 69.4 Earnings (loss) before taxes on income, minority interest and minority interest................. (3.5) 10.5 18.7 -- 25.7extraordinary loss(7.7 ) 26.4 56.0 — 74.7 Income tax provision.................... 4.5 4.2 2.1 -- 10.8 ----- ------ ------ ----- ------provision11.5 9.4 10.5 — 31.4 Earnings (loss) before minority interest..... (8.0) 6.3 16.6 -- 14.9interest and extraordinary loss(19.2 ) 17.0 45.5 — 43.3 Minority interest....................... -- 0.1 0.1 --interest— 0.2 ----- ------ ------ ----- ------1.2 — 1.4 Earnings (loss) before extraordinary loss (19.2 ) 16.8 44.3 41.9 Extraordinary loss, net of tax 8.3 — — 8.3 Net income (loss) ..................... $(8.0)$ 6.2(27.5 ) $ 16.516.8 $ --44.3 $ 14.7 ===== ====== ====== ===== ======— $ 33.6 121311
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HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) THREE MONTHS ENDED APRIL 30,Notes to Consolidated Financial Statements — (Continued)
Three and Nine Months Ended October 31, 1999 and 1998(Unaudited)(Millions of Dollars Unless Otherwise Stated)(11) Guarantor and Nonguarantor Financial Statements — Continued
Condensed Consolidating Balance Sheet
As of October 31, 1999
Guarantor Nonguarantor Consolidated Parent Subsidiaries Subsidiaries Eliminations Total Cash and cash equivalents $ 26.7 $ 0.1 $ 23.8 $ — $ 50.6 Receivables 88.7 35.9 122.1 — 246.7 Inventories 36.4 46.8 101.5 — 184.7 Prepaid expenses and other 4.6 5.0 10.0 (1.7 ) 17.9 Total current assets 156.4 87.8 257.4 (1.7 ) 499.9 Net property, plant and equipment 162.3 333.0 659.9 — 1,155.2 Goodwill and other assets 1,423.8 308.9 708.5 (1,264.3 ) 1,176.9 Total assets $ 1,742.5 $ 729.7 $ 1,625.8 $ (1,266.0 ) $ 2,832.0 Bank borrowings $ 2.7 — $ 86.5 — $ 89.2 Current portion of long-term debt 0.2 — 18.3 — 18.5 Accounts payable and accrued liabilities 125.2 104.0 276.8 (3.7 ) 502.3 Total current liabilities 128.1 104.0 381.6 (3.7 ) 610.0 Long-term debt, net of current portion 1,470.7 — 100.6 — 1,571.3 Deferred income taxes (5.1 ) 28.5 53.2 — 76.6 Pension and other long-term liabilities 91.3 62.3 187.9 (2.5 ) 339.0 Minority interest — — 13.0 — 13.0 Parent loans (135.4 ) 302.2 (166.4 ) (0.4 ) (0.0 ) Total liabilities 1,549.6 497.0 569.9 (6.6 ) 2,609.9 Common stock 0.3 — — — 0.3 Additional paid-in capital 252.0 110.5 1,004.0 (1,129.4 ) 237.1 Retained earnings (accumulated deficit) (51.8 ) 123.4 100.8 (130.0 ) 42.4 Accumulated other comprehensive income (7.6 ) (1.2 ) (48.9 ) — (57.7 ) Total stockholders’ equity 192.9 232.7 1,055.9 (1,259.4 ) 222.1 Total liabilities and stockholder’s equity $ 1,742.5 $ 729.7 $ 1,625.8 $ (1,266.0 ) $ 2,832.0 12
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HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements — (Continued)
Three and Nine Months Ended October 31, 1999 and 1998(UNAUDITED) (MILLIONS OF DOLLARS, UNLESS OTHERWISE STATED)(Unaudited)(Millions of Dollars Unless Otherwise Stated)(11)
GUARANTORGuarantor and Nonguarantor Financial Statements — ContinuedCondensed Consolidating Balance Sheet
January 31, 1999
Guarantor Nonguarantor Consolidated Parent Subsidiaries Subsidiaries Eliminations Total 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 13
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HAYES LEMMERZ INTERNATIONAL, INC. ANDNONGUARANTOR FINANCIAL STATEMENTS -- (CONTINUED) CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE QUARTER ENDED APRIL 30,SUBSIDIARIESNotes to Consolidated Financial Statements — (Continued)
Three and Nine Months Ended October 31, 1999 and 1998(Unaudited)(Millions of Dollars Unless Otherwise Stated)(11) Guarantor and Nonguarantor Financial Statements — Continued
Condensed Consolidating Statement of Cash Flows
For the nine months ended October 31, 1999
GUARANTOR NONGUARANTOR CONSOLIDATED PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL ------ ------------ ------------ ------------ ------------Guarantor Nonguarantor Consolidated Parent Subsidiaries Subsidiaries Eliminations Total Cash flows provided by (used for)in) operatingactivities.................activities$ 21.5 $(16.6) $(44.5)(80.2 ) $ -- $(39.6)(29.1 ) $ 144.4 $ — $ 35.1 Cash flows from investing activities: Acquisition of property, plant and equipment......................... (0.8) (13.2) (12.2) -- (26.2)equipment(24.1 ) (36.8 ) (75.2 ) — (136.1 ) Acquisition of tooling............... (4.8) -- -- -- (4.8)tooling(9.2 ) — — — (9.2 ) Purchase of business................. (605.0) -- -- -- (605.0)businesses, net of cash(615.0 ) (0.5 ) (14.6 ) — (630.1 ) Proceeds from disposal of assets/business — 2.6 37.4 — 40.0 Other, net........................... (6.2) 4.5 (3.9) -- (5.6) ------- ------ ------ ---- ------net21.3 (9.8 ) (23.6 ) — (12.1 ) Cash used forin investingactivities... (616.8) (8.7) (16.1) -- (641.6)activities(627.0 ) (44.5 ) (76.0 ) — (747.5 ) Cash flows from financing activities: Net change in bank borrowings and revolver.......................... 661.3 -- 41.7 -- 703.0revolver570.1 — 60.2 — 630.3 Fees paid to issue long term debt.... (15.0) -- -- -- (15.0)debt(15.2 ) — — — (15.2 ) Stock options exercised 0.2 — — — 0.2 Net proceeds from accounts receivable securitization.................... 46.6 -- -- -- 46.6 ------- ------ ------ ---- ------securitization99.4 — — — 99.4 Cash provided by financing activities...................... 692.9 -- 41.7 -- 734.6activities654.5 — 60.2 — 714.7 Increase (decrease) in parent loans and advances............................. (37.9) 25.2 12.7 -- --advances56.1 73.6 (129.7 ) — — Effect of exchange rates of cash and cash equivalents..................... -- --equivalents— — (3.0 --) — (3.0 ) Net increase (decrease) in cash and cash equivalents.................. 59.7 (0.1) (3.2) -- 56.4equivalents3.4 — (4.1 ) — (0.7 ) Cash and cash equivalents at beginning of period............................period23.3 0.1 27.9 --— 51.3 ------- ------ ------ ---- ------Cash and cash equivalents at end of period...............................period$ 83.026.7 $ --0.1 $ 24.723.8 $ -- $107.7 ======= ====== ====== ==== ======— $ 50.6 1314
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HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) THREE MONTHS ENDED APRIL 30,Notes to Consolidated Financial Statements — (Continued)
Three and Nine Months Ended October 31, 1999ANDand 1998(UNAUDITED) (MILLIONS OF DOLLARS, UNLESS OTHERWISE STATED)(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,Guarantor and Nonguarantor Financial Statements — ContinuedCondensed Consolidating Statement of Cash Flows
For the nine months ended October 31, 1998
GUARANTOR NONGUARANTOR CONSOLIDATED PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL ------ ------------ ------------ ------------ ------------Guarantor Nonguarantor Consolidated Parent Subsidiaries Subsidiaries Eliminations Total Cash flows provided by (used for)in) operatingactivities................. $(24.7)activities$ 32.7 $(17.7)(54.5 ) $ --44.3 $ (9.7)76.3 $ — $ 66.1 Cash flows from investing activities: Acquisition of property, plant and equipment......................... (9.5) (11.1) (10.9) -- (31.5)equipment(12.3 ) (31.9 ) (44.7 ) — (88.9 ) Acquisition of tooling............... (5.2) -- -- -- (5.2) Proceeds from assumptiontooling(6.6 ) — — — (6.6 ) Purchase of future commitments in acquisition........ 12.0 -- -- -- 12.0businesses, net of cash received(8.8 ) — (70.5 ) — (79.3 ) Other, net........................... (5.6) 14.0 5.1 -- 13.5 ------ ------ ------ ---- ------net(35.5 ) 8.7 0.1 — (26.7 ) Cash provided by (used for)in) investingactivities........................ (8.3) 2.9 (5.8) -- (11.2)activities(63.2 ) (23.2 ) (115.1 ) — (201.5 ) Cash flows from financing activities: Net change in bank borrowings and revolver.......................... (21.4) (34.5) (7.9) -- (63.8)revolver4.7 (34.5 ) 40.5 — 10.7 Stock options exercised 1.7 — — — 1.7 Fees paid to issue debt (1.4 ) — — — (1.4 ) Net proceeds underfrom accounts receivable securitizationProgram........................... 87.2 -- -- -- 87.2 ------ ------ ------ ---- ------120.8 — — — 120.8 Cash provided by (used for)in) financingactivities............ 65.8 (34.5) (7.9) -- 23.4activities125.8 (34.5 ) 40.5 — 131.8 Increase (decrease) in parent loans and advances............................. (37.4) (1.3) 38.7 -- --advances(12.7 ) 13.1 (0.4 ) — — Effect of exchange rates of cash and cash equivalents..................... -- -- 0.2 -- 0.2 ------ ------ ------ ---- ------equivalents— — (1.7 ) — (1.7 ) Net increase (decrease) in cash and cash equivalents.................. (4.6) (0.2) 7.5 -- 2.7equivalents(4.6 ) (0.3 ) (0.4 ) — (5.3 ) Cash and cash equivalents at beginning of period............................period4.6 0.1 18.4 --— 23.1 ------ ------ ------ ---- ------Cash and cash equivalents at end of period...............................period$ --— $ (0.1)(0.2 ) $ 25.918.0 $ --— $ 25.8 ====== ====== ====== ==== ======17.8 1415
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Item 2.
MANAGEMENT'SMANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONSRESULTS OF OPERATIONSResults of Operations
Three Months Ended
April 30,October 31, 1999 Compared totheThree Months EndedApril 30,October 31, 1998The
Company'sCompany’s net sales for thefirstthird quarter of fiscal 1999 were$587.9$598.5 million, an increase of42.0%34.8% as compared to net sales of$413.9$443.9 million for thefirstthird quarter of fiscal 1998. This increase was due to the additional sales contributedbyas a result of the CMI acquisition, which wasacquiredeffective February 3, 1999, and higher sales in the North American Automotive Wheel group. These sales increases were partially offset by lower selling prices due to the pass through of lower aluminum costs and the maxi-devaluation of the Brazilian economy.The Company’s gross profit for the third quarter of fiscal 1999 increased to $105.4 million or 17.6% of net sales as compared to $82.7 million or 18.6% of net sales for the third quarter of fiscal 1998. The Company’s third quarter gross profit was negatively impacted primarily by inefficiencies and premium costs associated with the unexpectedly strong demand for lightweight aluminum wheels in both North America and Europe, slower demand for steel wheels in Europe as a result of the higher aluminum wheel penetration and the continuation of the economic devaluation in developing markets.
Marketing, general and administrative expenses were $21.8 million or 3.6% of net sales for the third quarter of fiscal 1999 as compared to $16.7 million or 3.8% of net sales for the same period of fiscal 1998. The increase in expenses was attributable to additional costs incurred as a result of the CMI acquisition. As a percent of sales, however, marketing, general and administrative costs have improved as synergies from this acquisition have been realized.
Engineering and product development costs were $4.4 million or 0.7% of net sales for the third quarter of fiscal 1999 as compared to $5.7 million or 1.3% of net sales for the third quarter of fiscal 1998. Engineering and product development costs were lower, despite the CMI acquisition, due to synergies realized and timing associated with recovery of engineering costs from our customers.
Amortization of intangibles increased by $3.6 million to $8.2 million for the third quarter of fiscal 1999. This increase is attributable to the increased goodwill recognized as a result of the CMI acquisition.
Interest expense was $37.5 million for the third quarter of fiscal 1999, an increase of $15.1 million over the same period of fiscal 1998 of $22.4 million. This increase was due to the increase in debt as a result of the CMI acquisition.
Nine Months Ended October 31, 1999 Compared to Nine Months Ended October 31, 1998
The Company’s net sales for the first nine months of fiscal 1999 were $1,730.8 million, an increase of 39.5% as compared to net sales of $1,240.8 million for the first nine months of fiscal 1998. This increase was due to the additional sales contributed as a result of the CMI acquisition, which was effective February 3, 1999, the additional sales contributed by the acquisitions of Alumitech, Borlem, MIN-CER, N.F. Die and Kalyani (the
"1998 acquisitions"“1998 acquisitions”), and higher sales in the North AmericanAluminumAutomotive Wheel group. These sales increases were partially offset by lower selling prices due to the pass through of lower aluminumcosts.costs and the maxi-devaluation of the Brazilian economy.The
Company'sCompany’s gross profit for the firstquarternine months of fiscal 1999 increased to$106.1$305.6 million or18.1%17.7% of net sales as compared to$72.1$216.7 million or17.4%17.5% of net sales for the firstquarternine months of fiscal 1998. This increase in margin was attributable to the increased revenues and improved productivity in the majority of theCompany'sCompany’s businesses.Marketing, general and administrative expenses were
$24.5$70.7 million or4.2%4.1% of net sales for the firstquarternine months of fiscal 1999 as compared to$15.2$48.7 million or3.7%3.9% of net sales for the same period of fiscal 1998. This16
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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 theexpectedsynergies are realized as a result of these acquisitions.Engineering and product development costs were
$6.2$15.6 million or1.1%0.9% of net sales for the firstquarternine months of fiscal 1999 as compared to$4.4$15.7 million or1.0%1.3% of net sales for the firstquarternine months of fiscal 1998.These increases wereDespite the increase in costs attributable toadditional costs incurred as a result ofthe CMI and 1998acquisitions. The Company believes that as these costs increase,acquisitions, engineering and product development costs as a percent of saleshowever will improve as expected savings are realized as a result of these acquisitions.improved over the prior fiscal year.Amortization of intangibles increased by
$3.1$9.3 million to$7.0$22.0 million for the firstquarternine months of fiscal 1999. This increase is attributable to the increased goodwill recognized as a result of the CMI and 1998 acquisitions.Interest expenseOther income was
$39.5$5.3 million for the firstquarternine months of fiscal 1999, an increase of$15.3$1.4 million over the same period of fiscal 1998. This increase was due primarily to gains on the sales of a joint venture interest and other assets, partially offset by currency losses and other redundancy costs associated with productivity improvement programs in the Company.Interest expense was $115.5 million for the first nine months of fiscal 1999, an increase of $46.1 million over the same period of fiscal 1998 of
$24.2$69.4 million. This increase was due to the increase in debt as a result of the CMI and 1998 acquisitions.FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCESThe
Company'sextraordinary loss for early extinguishment of debt in fiscal 1998 represented the write-off of the remaining deferred financing costs associated with the term debt incurred in connection with both the Lemmerz Acquisition and the merger with Motor Wheel. As a result of strong cash flow and significantly improved credit position, the Company was able to restructure its senior credit facility and fully repay certain of the outstanding term debt.Financial Condition, Liquidity and Capital Resources
The Company’s operations
used $39.6provided $35.1 million in cashduringin the firstquarternine months of fiscal 1999, a decrease of$29.9$31.0 millionas compared toover the same period of fiscal 1998. This decreasein cash flowwasattributabledue primarily toadditionalincreased working capitalassumedrequirements as a result of the acquisition ofCMI and the effect of the level of accounts receivable securitization which is used as a financing source.CMI.Capital expenditures for the
quarter amounted to $26.2first nine months of fiscal 1999 were $136.1 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$190 million relating primarily to new vehicle platforms, capacity increases worldwide to meet the growing demand for our products, 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“Third Amended and Restated CreditAgreement"Agreement”) with Canadian Imperial Bank of Commerce("CIBC"(“CIBC”) and Merrill Lynch Capital Corporation("(“MerrillLynch"Lynch”), as managing agents. 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 revolvingcreditfacilities are guaranteed by the Company1516and 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 theCompany'sCompany’s existing and future domestic subsidiaries and 65% of the shares of certain of our existing and future foreign subsidiaries. As ofApril 30,October 31, 1999 there was$450.0$450 million outstanding under the term loan facilities and$396.5$489 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-goingongoing basis, a portion of their accountsreceivablereceivables toHayes Lemmerz Funding Corporation ("a special purpose entity (“Funding Co."”),awhich is wholly ownedsubsidiary.by the Company. Accordingly,17
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the Company anditssuch subsidiaries, irrevocably and without recourse, transferred and will transfer substantially all ofthetheir 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,October 31, 1999, 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 inmaterialcompliance with these covenants in all material respects through the period endingApril 30,October 31, 2000.OTHER MATTERSOther Matters
Year 2000
The Company has developed plans to address its exposure in all critical information technology
("IT"(“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 bewas 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
1998.1999.As of
April 30,October 31, 1999, the costs incurred directly related to becoming year 2000 compliant were approximately$3.0$5.4 millionand thewith minimal additional costswhich areexpected to be incurred subsequent toApril 30, 1999 are approximately $2.4 million.October 31, 1999. 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 entirelyyear 2000 compliant at this timebut has targeted the end of the third quarter of fiscal 1999 to havewith 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'sCompany’s operations. The Company has developed a program for monitoring year 2000 risk in its supply chain and have mailed"Supplier“Supplier Year 2000Self-Assessment"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. The1617Company 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.
ITEM18
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Item 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKQuantitative and Qualitative Disclosures about Market Risk
For the period ended
April 30,October 31, 1999, the Company did not experience any material change in market risk exposures affecting the quantitative and qualitative disclosures as presented in theCompany'sCompany’s Annual Report on Form 10-K for the year ended January 31, 1999.171819
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PARTII 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.II. OTHER INFORMATIONNone. ITEMItem 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security-Holders
Item 5. Other Information
Item 6.
EXHIBITS AND REPORTS ON FORM 8-K (a)Exhibits27 -- Financial Data Schedule (b)and Reportsof Form 8-K During the fiscal quarter ended April 30, 1999, the Company filed a Current Reporton Form 8-Kwith the SEC(a) Exhibits
Exhibit Number Description 27 Financial Data Schedule (b) Reports on
February 18, 1999. 1819Form 8-K20
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SIGNATURESPursuant 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,
HAYES LEMMERZ INTERNATIONAL, INC.
By: /s/ D. N. VERMILYA
D. N. Vermilya Corporate Controller and Chief Accounting Officer December 15, 1999
1920 Exhibit Index ------------- Exhibit No. Description - ----------- -----------21
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EXHIBIT INDEX
Sequentially Exhibit Numbered Number Description Page 27 Financial Data Schedule 22