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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 3, 2005
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___ to ___
Commission file number 0-21139
DURA AUTOMOTIVE SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 38-3185711
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2791 RESEARCH DRIVE 48309
ROCHESTER HILLS, MICHIGAN (Zip Code)
(Address of principal executive offices)
(248) 299-7500
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report)
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, and (2) has been subject to such filing requirements
for the past 90 days.
Yes [X] No [ ]
The number of shares outstanding of the Registrant's Class A common stock, par
value $.01 per share, at May 1, 2005 was 18,709,890 shares.
DURA AUTOMOTIVE SYSTEMS, INC.
FORM 10-Q
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Statements of Operations for the Three
Months Ended April 3, 2005 and March 28, 2004 (unaudited)
Condensed Consolidated Balance Sheets at April 3, 2005
(unaudited) and December 31, 2004
Condensed Consolidated Statements of Cash Flows for the Three
Months Ended April 3, 2005 and March 28, 2004 (unaudited)
Notes to Condensed Consolidated Financial Statements
(unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Item 4. Controls and Procedures
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
CERTIFICATIONS
-2-
ITEM 1: FINANCIAL INFORMATION
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS -UNAUDITED)
Three Months Ended
------------------------------------
April 3, 2005 March 28, 2004
------------- --------------
Revenues $ 619,979 $ 634,563
Cost of sales 559,398 557,898
--------- ---------
Gross profit 60,581 76,665
Selling, general and administrative expenses 42,173 38,911
Facility consolidation and other charges 1,666 1,448
Amortization expense 112 116
--------- ---------
Operating income 16,630 36,190
Interest expense, net 24,970 21,249
--------- ---------
Income/(loss) from continuing operations before provision for
income taxes (8,340) 14,941
Provision/(benefit) for income taxes (3,617) 5,080
--------- ---------
Income/(loss) from continuing operations (4,723) 9,861
Loss from discontinued operations, net (109) (693)
--------- ---------
Net income/(loss) $ (4,832) $ 9,168
========= =========
Basic earnings/(loss) per share:
Income/(loss) from continuing operations $ (0.25) $ 0.54
Discontinued operations (0.01) (0.04)
--------- ---------
Net income/(loss) $ (0.26) $ 0.50
========= =========
Basic shares outstanding 18,662 18,385
========= =========
Diluted earnings/(loss) per share:
Income/(loss) from continuing operations $ (0.25) $ 0.52
Discontinued operations (0.01) (0.04)
--------- ---------
Net income/(loss) $ (0.26) $ 0.48
========= =========
Diluted shares outstanding 18,662 18,960
========= =========
The accompanying notes are an integral part of these condensed consolidated
balance sheets.
-3-
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
April 3, December 31,
2005 2004
----------- ------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 111,592 $ 191,568
Accounts receivable, net 320,426 273,956
Inventories 144,291 149,834
Current portion of derivative instruments 5,541 7,746
Other current assets 111,948 92,016
----------- ----------
Total current assets 693,798 715,120
----------- ----------
Property, plant and equipment, net 470,812 487,106
Goodwill, net 891,263 903,584
Noncurrent portion of derivative instruments 6,569 10,601
Deferred income taxes and other assets, net 97,433 107,510
----------- ----------
$ 2,159,875 $2,223,921
=========== ==========
Liabilities and Stockholders' Investment
Current liabilities:
Accounts payable $ 271,059 $ 270,341
Accrued liabilities 204,165 187,254
Current maturities of long-term debt 2,516 2,968
----------- ----------
Total current liabilities 477,740 460,563
----------- ----------
Long-term debt, net of current maturities 1,111,564 1,158,714
Mandatorily redeemable convertible trust preferred securities 55,250 55,250
Other noncurrent liabilities 133,125 141,903
Stockholders' investment:
Common stock 187 186
Additional paid-in capital 351,701 351,571
Treasury stock at cost (2,127) (2,513)
Accumulated deficit (98,174) (93,342)
Accumulated other comprehensive income 130,609 151,589
----------- ----------
Total stockholders' investment 382,196 407,491
----------- ----------
$ 2,159,875 $2,223,921
=========== ==========
The accompanying notes are an integral part of these condensed consolidated
balance sheets.
-4-
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS - UNAUDITED)
Three Months Ended
-------------------------------------
April 3, 2005 March 28, 2004
------------- --------------
OPERATING ACTIVITIES:
Income (loss) from continuing operations $ (4,723) $ 9,861
Adjustments to reconcile income (loss) from continuing
operations to net cash provided by operating activities -
Depreciation and amortization 20,547 22,147
Amortization of deferred financing fees 987 878
Deferred income taxes 519 (27)
Changes in other operating items (51,675) (34,859)
--------- ---------
Net cash used in operating activities (34,345) (2,000)
--------- ---------
INVESTING ACTIVITIES:
Capital expenditures, net (14,278) (15,607)
Acquisitions, net - (10,476)
--------- ---------
Net cash used in investing activities (14,278) (26,083)
--------- ---------
FINANCING ACTIVITIES:
Long-term borrowings 413 568
Repayments of long-term borrowings (35,658) (3,280)
Proceeds from issuance of common stock and
exercise of stock options, net 517 1,281
Other, net (455) (301)
--------- ---------
Net cash used in financing activities (35,183) (1,732)
--------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS 3,939 3,748
--------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS FROM
CONTINUING OPERATIONS (79,867) (26,067)
NET OPERATING CASH FLOW USED IN DISCONTINUED OPERATIONS (109) (693)
CASH AND CASH EQUIVALENTS:
Beginning of period 191,568 181,268
--------- ---------
End of period $ 111,592 $ 154,508
========= =========
SUPPLEMENTAL DISCLOSURE:
Cash paid for interest $ 3,679 $ 1,648
Cash paid for income taxes $ 941 $ 2,361
The accompanying notes are an integral part of these condensed consolidated
statements.
-5-
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
Dura Automotive Systems, Inc. (a Delaware Corporation) and subsidiaries
("Dura") designs and manufactures components and systems for the global
automotive and recreation & specialty vehicle industries. Dura has 59
manufacturing and product development facilities located in the United States,
Brazil, Canada, China, Czech Republic, France, Germany, Mexico, Portugal,
Slovakia, Spain and the United Kingdom. Dura also has a presence in Japan and
India through alliances or technical licenses.
We have prepared the condensed consolidated financial statements of Dura,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. The information furnished in the condensed consolidated
financial statements includes normal recurring adjustments and reflects all
adjustments which are, in our opinion, necessary for a fair presentation of the
results of operations and statements of financial position for the interim
periods presented. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States have been condensed or
omitted pursuant to such rules and regulations. We believe that the disclosures
are adequate to make the information presented not misleading when read in
conjunction with the financial statements and the notes thereto included in our
Annual Report on Form 10-K, as filed with the Securities and Exchange Commission
for the period ended December 31, 2004.
Revenues and operating results for the three months ended April 3, 2005
are not necessarily indicative of the results to be expected for the full year.
2. INVENTORIES
Inventories consisted of the following (in thousands):
April 3, December 31,
2005 2004
--------- ------------
Raw materials $ 72,843 $ 71,881
Work-in-process 31,441 30,192
Finished goods 40,007 47,761
--------- ----------
$ 144,291 $ 149,834
========= ==========
3. STOCKHOLDERS' INVESTMENT
Earnings Per Share
Basic earnings per share were computed by dividing net income by the
weighted average number of Class A and Class B common shares outstanding during
the period. In accordance with Statement of Financial Accounting Standards
("SFAS") No. 128, an entity that reports a discontinued operation, an
extraordinary item, or the cumulative effect of an accounting change in a period
shall use income from continuing operations, adjusted for preferred dividends,
as the control number in determining whether those potential common shares are
dilutive or antidilutive. As a result, diluted earnings per share, and all other
diluted per share amounts presented, were computed utilizing the same number of
potential common shares used in computing the diluted per share amount for
income from continuing operations,
-6-
regardless if those amounts were antidilutive to their respective basic per
share amounts, as follows (in thousands, except per share amounts):
Three months ended
April 3, March 28,
2005 2004
-------- ---------
Net income/(loss) applicable to common
stockholders - diluted $ (4,832) $ 9,168
Weighted average number of Class A
common shares outstanding 18,662 16,776
Weighted average number of Class B
common shares outstanding - 1,609
-------- ---------
18,662 18,385
Dilutive effect of outstanding stock options
after application of the treasury stock method - 575
-------- ---------
Diluted shares outstanding 18,662 18,960
======== =========
Basic earnings/(loss) per share $ (0.26) $ 0.50
======== =========
Diluted earnings/(loss) per share $ (0.26) $ 0.48
======== =========
Potential common shares of 3,000,243 and 1,186,718 related to Dura's
outstanding stock options were excluded from the computation of diluted
earnings/(loss) per share for the three months ended April 3, 2005 and March 28,
2004, as inclusion of these shares would have been anti-dilutive. Potential
common shares of approximately 1,289,000 and interest expense for the three
months ended April 3, 2005 of $0.6 million, relating to Dura's outstanding 7 1/2
percent Convertible Trust Preferred Securities ("Preferred Securities") were
excluded from the computation of diluted earnings/(loss) per share, as inclusion
of these shares and the related interest expense would have been anti-dilutive.
-7-
Stock-Based Compensation Plans
Dura has elected to continue accounting for its stock-based compensation
plans under APB Opinion No. 25, "Accounting for Stock Issued to Employees",
under which no compensation cost has been recognized during the three months
ended April 3, 2005 and March 28, 2004, as the exercise prices of all options
are equal to the market value of Dura's stock on the grant date. Had
compensation cost for these plans been determined as required under SFAS No.
123, "Accounting for Stock-Based Compensation", Dura's pro forma net
income/(loss) and pro forma earnings/(loss) per share would have been as follows
(in thousands, except per share amounts):
Three months ended
April 3, March 28,
2005 2004
--------- ---------
Net income/(loss)
As Reported - Basic $ (4,832) $ 9,168
Pro Forma $ (5,578) $ 8,311
As Reported - Diluted $ (4,832) $ 9,168
Pro Forma $ (5,578) $ 8,311
Basic earnings/(loss) per share
As Reported $ (0.26) $ 0.50
Pro Forma $ (0.30) $ 0.45
Diluted earnings/(loss) per share
As Reported $ (0.26) $ 0.48
Pro Forma $ (0.30) $ 0.44
The effect of the stock issued under the Employee Stock Purchase Plan was
not material for 2005 and 2004. There were no options granted during the
quarters ended April 3, 2005 and March 28, 2004, respectively.
4. DISCONTINUED OPERATIONS
During the fourth quarter of 2002, Dura adopted a plan to divest its
Mechanical Assemblies Europe business, as it believed this business would not
assist Dura in reaching its strategic growth and profitability targets for the
future. The Mechanical Assemblies Europe business generated annualized revenues
of approximately $111.9 million from facilities in Grenoble and Boynes, France;
and Woodley, Nottingham and Stourport, UK. In March 2003, Dura completed the
divestiture of its Mechanical Assemblies Europe business to Magal Engineering
and members of the local management group, located in Woodley, England. The
Mechanical Assemblies Europe divestiture was treated as a discontinued operation
under SFAS No. 144.
During the year ended December 31, 2004, net negative adjustments totaling
$0.7 million were recorded resulting from less favorable settlement of retained
liabilities than anticipated.
At April 3, 2005, Dura had remaining reserves related to the divestiture
of the Mechanical Assemblies Europe business of $18.4 million, primarily related
to the facilities retained by Dura, principally lease costs, and are anticipated
to be completed in 2021. Also included in the $18.4 million is $3.0 million of
acquisition integration reserves related to facility closures. During quarter
ended April 3, 2005 the reserve decreased by approximately $0.3 million due to
the impact of foreign currency exchange rates and increased by approximately
$0.3 million due to an increase in the long-term lease
-8-
commitment and other reserves. Costs incurred and charged to the reserve during
2005 included $0.3 million related to facility closure and other costs.
5. FACILITY CONSOLIDATION AND OTHER CHARGES
Facility Consolidation
As a part of Dura's ongoing cost reduction and capacity utilization
efforts, Dura has taken numerous actions to improve its cost structure. These
costs are reflected as facility consolidation and other charges in the
consolidated statement of operations and were accounted for in accordance with
SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities"
("SFAS No. 146").
During the first quarter of 2005, Dura announced a plan to migrate to one
enterprise resource planning system and centralize many of its functional
operations over the next twenty-four months. These actions are anticipated to
result in the reduction of approximately 200 to 250 employees worldwide. This
action resulted in a facility consolidation and other charge of $0.6 million in
the first quarter of 2005 relating to employee severance. Dura expects to incur
additional restructuring charges related to these actions of approximately $2.0
million in severance costs through December 31, 2006.
During the fourth quarter of 2004, Dura closed its Bondoufle, France sales
and engineering facility and relocated to Velizy, France, which is located near
its French OEM customers. This action resulted in a restructuring charge of $0.3
million related to facility closure and other costs. Costs incurred and charged
to the reserve as of April 3, 2005 amounted to $0.1 million in facility closure
costs.
During the second quarter of 2004, in order to improve capacity
utilization, Dura announced a plan to consolidate certain of its Body & Glass
Division product lines in Europe. This action resulted in a restructuring charge
of $1.5 million and $2.5 million in the second and third quarters of 2004,
respectively, relating primarily to severance, which completed the facility
consolidation charges to be incurred related to this action. Additionally, there
was a $0.2 million adjustment to decrease the reserve in the fourth quarter of
2004. Continuing these actions in 2005, Dura adjusted the reserve down by $0.3
million during the first quarter. Costs incurred and charged to the reserve as
of April 3, 2005 amounted to $2.8 million in severance related costs. In
addition, during the second quarter of 2004, Dura announced a plan to exit two
manufacturing facilities in Rockford, Illinois and combine the business with
other Dura operations. Dura also announced the relocation of its Atwood Mobile
Products division headquarters from Rockford, Illinois to Elkhart, Indiana.
These actions resulted in a restructuring charge of $1.7 million, $1.2 million,
and $0.8 million in the second, third and fourth quarters of 2004, respectively,
relating primarily to severance. Dura also expensed as incurred approximately
$0.3 million and $1.8 million of facility closure and other costs in the third
quarter and fourth quarters of 2004, of which $0.2 million is related to asset
impairments. These actions continued during 2005 with an additional
restructuring charge of $0.8 million in the first quarter, of which $0.6 million
is related to severance and $0.2 million is related to facility closure and
other costs. Additionally during the first quarter, Dura increased the reserve
by $0.3 million. Dura also expensed as incurred $0.3 million of facility closure
and other costs in the first quarter of 2005, which included asset impairment
charges of $0.1 million. Costs incurred and charged to the reserve as of April
3, 2005 amounted to $3.5 million in severance related costs. Dura expects to
incur additional restructuring charges related to the exit of the Rockford
facilities of approximately $0.1 million relating to facility closure costs
through December 31, 2005.
During the first quarter of 2004, in order to improve capacity
utilization, Dura announced a plan to exit its Brookfield, Missouri facility and
combine the business with other Dura operations. This action resulted in a
restructuring charge of $0.1 million, $0.4 million, $0.2 million and $0.2
million in the first, second, third and fourth quarters of 2004, respectively,
relating primarily to severance. Dura also expensed as incurred approximately
$0.1 million of facility closure and other costs in each of the second, third
and fourth quarters of 2004. Continuing these actions in 2005, Dura expensed as
incurred
-9-
approximately $0.1 million of facility closure and other costs in the first
quarter. Costs incurred and charged to the reserve as of April 3, 2005 amounted
to $0.6 million in severance related costs. Dura expects to incur $0.2 million
of additional restructuring charges associated with exiting the Brookfield
facility through December 31, 2005. In addition, during the first quarter of
2004, Dura announced a plan to exit its Pikeville, Tennessee facility and
combine the business with other Dura operations. This action resulted in a
restructuring charge of $0.4 million and $0.5 million in the first and second
quarters of 2004, respectively, relating to severance. Costs incurred and
charged to the reserve as of April 3, 2005 amounted to $0.8 million in severance
related costs. In continuation of these actions, Dura expensed as incurred
approximately $0.1 million of facility closure and other costs in the second and
third quarters of 2004, combined. Netted in this charge is an additional $0.2
million related to fixed asset write-downs and a $0.2 million adjustment to
reduce the facility consolidation charge in the third quarter. Dura does not
expect to incur any additional restructuring charges related to the exit of the
Pikeville facility.
During the second quarter of 2003, Dura announced a plan to exit its
Fulton, Kentucky facility. This action resulted in a second quarter 2003
restructuring charge of $1.5 million, including severance of $0.3 million and
facility closure and other costs of $1.2 million. In continuation of these
actions during 2003, Dura recorded $1.3 million of additional restructuring
charges, including severance of $1.2 million and facility closure and other
costs of $0.1 million. Dura also expensed as incurred approximately $2.5 million
and $3.4 million of certain facility closure and other costs incurred during the
third and fourth quarters of 2003, respectively. During 2004, Dura continued
such actions and recorded $0.2 million and $0.4 million in the first and third
quarters, respectively, of additional restructuring charges for severance
related costs. Dura also expensed as incurred $0.1 million, $0.2 million, and
$0.1 million in the first, second and fourth quarters of 2004, respectively,
related to severance costs and $0.2 million of facility closure and other costs
in the first quarter of 2004. Costs incurred and charged to the reserve as of
April 3, 2005 amounted to $2.0 million in severance related costs and $1.4
million in facility closure and other costs. Dura does not expect to incur any
additional restructuring charges related to the exit of the Fulton facility.
6. ACQUISITION INTEGRATIONS
Dura has developed and implemented the majority of the facility
consolidation plans designed to integrate the operations of past acquisitions.
As of April 3, 2005, purchase liabilities recorded in conjunction with the
acquisitions included approximately $8.4 million for costs associated with the
shutdown and consolidation of certain acquired facilities and $2.3 million for
severance and other related costs. Costs incurred and charged to these reserves
amounted to $0.6 million related to the consolidation of certain acquired
facilities and $0.1 million related to severance during first quarter 2005. The
remaining employee terminations and facility closures were completed by December
31, 2004 except for contractual obligations, consisting principally of facility
lease payments, which will continue through 2005.
-10-
7. LONG-TERM DEBT
Long-term debt consisted of the following (in thousands):
April 3, December 31,
2005 2004
------------ ------------
Credit Agreement:
Tranche C term loan $ 110,965 $ 146,250
Senior notes 400,000 400,000
Subordinated notes 583,691 589,469
Mandatorily redeemable convertible
trust preferred securities 55,250 55,250
Senior notes - derivative
instrument adjustment 12,110 18,347
Other 7,314 7,616
------------ ------------
1,169,330 1,216,932
Less - Current maturities (2,516) (2,968)
------------ ------------
Total long-term debt $ 1,166,814 $ 1,213,964
============ ============
In April 2002, Dura completed the offering of $350.0 million 8 5/8 percent
senior unsecured notes ("2002 Senior Notes"), due April 2012. The interest on
the 2002 Senior Notes is payable semi-annually beginning October 15, 2002. Dura
also entered into a fixed to floating interest rate swap (notional amount of
$325.0 million) with various financial institutions that more closely mirrors
the cost of its bank debt.
In November 2003, Dura completed the 2003 Senior Notes offering of $50.0
million. The interest on the 2003 Senior Notes is payable semi-annually
beginning April 15, 2004. In conjunction with this transaction, Dura amended and
restated its revolving credit facility ("2003 Credit Agreement"). The 2003
Credit Agreement provides for $175.0 million of revolving credit, available
until October 2008. At April 3, 2005, Dura had unused borrowing capacity of
approximately $154.9 million, of which $52.2 million was available under its
most restrictive debt covenant and $20.1 million in letters of credit
outstanding. No borrowings under the revolving credit facility occurred during
2005. The existing tranche C term loan remains outstanding. Dura also entered
into a fixed to floating interest rate swap (notional amount of $75.0 million)
with various financial institutions that more closely mirrors the cost of its
bank debt.
In February 2005, Dura amended its 2003 Credit Agreement to, among other
things, adjust the total leverage, senior leverage and interest coverage ratios
that it was required to maintain over the next six quarters beginning April 3,
2005. In addition, Dura repaid $35.0 million of the tranche C term loan.
As of April 3, 2005, the rate on borrowings under the 2003 Credit
Agreement was based on LIBOR and was 5.35 percent. The 2003 Credit Agreement
contains various restrictive covenants which amongst other things, limit
indebtedness, investments, capital expenditures and certain dividends. The 2003
Credit Agreement also requires Dura to maintain certain financial ratios
including debt and interest coverage. Dura was in compliance with the covenants
as of April 3, 2005. Borrowings under the 2003 Credit Agreement are
collateralized by substantially all assets of Dura.
The 2003 Credit Agreement provides Dura with the ability to denominate a
portion of its revolving credit borrowings in foreign currencies up to an amount
equal to $53.1 million. As of April 3, 2005, Dura had no borrowings outstanding
under the indebtedness.
-11-
Dura also utilizes uncommitted overdraft facilities to satisfy the
short-term working capital requirements of its foreign subsidiaries. At April 3,
2005, Dura had overdraft facilities available from banks of approximately $26.4
million, of which, it had no borrowings outstanding.
Included in interest expense, net, in the consolidated statements of
operations is approximately $0.7 million and $0.5 million of interest income
earned on Dura's cash balances in the quarters ended April 3, 2005 and March 28,
2004, respectively.
In May 2005, Dura entered into new senior secured credit facilities with
an aggregate borrowing capacity of approximately $325 million, consisting of a
five-year $175 million asset-based revolving credit facility and a six-year $150
million senior secured second lien term loan. Interest under these facilities is
based on LIBOR. The senior secured second lien term loan is due and payable in
its entirety in May 2011. Proceeds of $144.0 million, net of transaction costs
for the new revolver and the senior secured second lien term loan were used to
repay Dura's existing $111 million term loan C facility and general corporate
purposes. The revolver is an asset-backed revolving credit facility, which is
supported by a monthly borrowing base. Availability under the revolver is
determined by advances against eligible accounts receivables, eligible inventory
balances and certain fixed assets. On a pro forma basis as of April 3, 2005,
Dura's liquidity under the new senior secured credit facilities was $319.7
million. The revolver is secured by all of Dura's U.S. and Canadian assets and
a 65 percent pledge of the stock of Dura's foreign subsidiaries. The senior
secured second lien term loan is secured by all of the U.S. assets and a 65
percent pledge of the stock of Dura's foreign subsidiaries. In connection with
the termination of Dura's 2003 Credit Agreement, Dura will write-off debt
issuance costs of approximately $3.4 million during the second quarter of 2005.
8. SUBORDINATED NOTES
Dura has $589.5 million of 9 percent Subordinated Notes, due May 2009
outstanding as of April 3, 2005. The interest on the Subordinated Notes is
payable semiannually. These notes are collateralized by guarantees of certain of
Dura's subsidiaries.
9. BUSINESS COMBINATIONS, GOODWILL AND INTANGIBLE ASSETS
In July 2001, the FASB issued SFAS No. 141, "Business Combinations," and
SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS No. 141 requires all
business combinations initiated after June 30, 2001 to be accounted for using
the purchase method of accounting. Under SFAS No. 142, goodwill and intangible
assets with indefinite lives are no longer amortized, but reviewed for
impairment annually, or more frequently if impairment indicators arise.
Separable intangible assets that are not deemed to have indefinite lives will
continue to be amortized over their useful lives. Other intangible assets at
April 3, 2005 are approximately $15.7 million, primarily consisting of
non-amortizable trademarks and amortizable license agreements. The amortization
of other intangible assets was not significant in 2005 and 2004.
10. DERIVATIVES AND HEDGING ACTIVITIES
Dura is exposed to various market risks, including changes in foreign
currency exchange rates and interest rates. Market risk is the potential loss
arising from adverse changes in market rates and prices, such as foreign
currency exchange and interest rates. Dura does not enter into derivatives or
other financial instruments for trading or speculative purposes. Dura enters
into financial instruments to manage and reduce the impact of changes in foreign
currency exchange rates and interest rates. The counter parties to these
financial instruments are major financial institutions.
-12-
At April 3, 2005, Dura had outstanding interest rate swap contracts that
effectively converted $400.0 million of its Senior Notes into floating rate
obligations. Under these swap contracts, which expire in April 2012, Dura
receives payments at fixed rates, while it makes payments at variable rates
(6.31 percent to 8.625 percent at April 3, 2005). The net interest paid or
received is included in interest expense. Dura designated these swap contracts
as fair value hedges at their inception. At April 3, 2005, the fair value of
the interest rate swap contracts was a net gain position for Dura of
approximately $12.1 million, representing the estimated benefit that would
accrue to Dura to terminate the agreements, and is included in current and
noncurrent assets with a corresponding increase to debt in the accompanying
consolidated April 3, 2005 balance sheet.
From time to time, Dura also uses forward exchange contracts to hedge its
foreign currency exposure related to certain intercompany transactions. At April
3, 2005, Dura had a contract outstanding to purchase Euro 13.1 million
(approximately $17.0 million). Dura designated this contract at its inception as
a cash flow hedge. The estimated fair value of the foreign exchange contract
based upon market quotes was approximately $16.7 million. The net unrealized
loss of approximately $0.3 million is included in accumulated other
comprehensive loss.
11. COMPREHENSIVE INCOME
Comprehensive income reflects the change in equity of a business
enterprise during a period from transactions and other events and circumstances
from non-owner sources. For Dura, comprehensive income represents net income
adjusted for foreign currency translation adjustments, minimum pension liability
and the deferred gain/ loss on derivative instruments utilized to hedge Dura's
interest and foreign exchange exposures. Comprehensive income for the periods is
as follows (in thousands):
Three months ended
April 3, March 28,
2005 2004
-------- ---------
Net income/(loss) $ (4,832) $ 9,168
Other comprehensive income:
Foreign currency
translation adjustment (20,810) (10,727)
Minimum pension liability 165 75
Derivative instruments (334) -
-------- --------
Comprehensive income (loss) $(25,811) $ (1,484)
======== ========
12. WARRANTY AND ENVIRONMENTAL
Dura faces an inherent business risk of exposure to product liability and
warranty claims in the event that its products fail to perform as expected and
such failure of its products results, or is alleged to result, in bodily injury
and/or property damage. OEMs are increasingly requiring their outside suppliers
to guarantee or warrant their products and bear the costs of repair and
replacement of such products under new vehicle warranties. Depending on the
terms under which Dura supplies products to an OEM, an OEM may hold Dura
responsible for some or all of the repair or replacement costs of defective
products
-13-
under new vehicle warranties when the product supplied did not perform as
represented. In addition, Dura is subject to the requirements of federal, state,
local and foreign environmental and occupational health and safety laws and
regulations. Some of Dura's operations generate hazardous substances. Like all
manufacturers, if a release of hazardous substances occurs or has occurred at or
from any of Dura's current or former properties or at a landfill or another
location where Dura has disposed of wastes, Dura may be held liable for the
contamination, and the amount of such liability could be material. Dura's policy
is to record reserves for customer warranty and environmental costs on a case by
case basis at the time it believes such amount is probable and estimable and to
review these determinations on a quarterly basis, or more frequently, as
additional information is obtained. Dura has established reserves for issues
that are probable and estimable in amounts management believes are adequate to
cover reasonable adverse judgments. Dura determines its warranty and
environmental reserves based on identified claims and the estimated ultimate
projected claim cost. The final amounts determined to be due related to these
matters could differ significantly from recorded estimates. Dura no longer
carries insurance for recall matters, as the cost and availability for such
insurance, in the opinion of management, is cost prohibitive or not available.
The following presents a summary of Dura's warranty and environmental position
(in thousands):
WARRANTY ENVIRONMENTAL
-------- -------------
Balance at December 31, 2004 ...... $ 8,937 $ 8,967
Reductions for payments made ...... (78) (82)
Additional reserves recorded ...... 76 24
Changes in pre-existing reserves .. (412) (28)
------- -------
Balance at April 3, 2005 .......... $ 8,523 $ 8,881
======= =======
13. NEW ACCOUNTING PRONOUNCEMENTS
In December 2004, the FASB revised SFAS No. 123 and issued SFAS No.
123(R). This Statement supercedes APB No. 25, which resulted in no stock-based
employee compensation cost related to stock options if the options granted had
an exercise price equal to the market value of the underlying common stock on
the date of grant. SFAS No. 123R requires recognition of employee services
provided in exchange for a share-based payment based on the grant date fair
market value. In April 2005, the SEC delayed the effective date of SFAS No. 123R
to fiscal years beginning after June 15, 2005. As a result, Dura is required to
adopt SFAS No. 123R as of January 1, 2006. As of the effective date, this
Statement applies to all new awards issued as well as awards modified,
repurchased, or cancelled. Additionally, for stock-based awards issued prior to
the effective date, compensation cost attributable to future services will be
recognized as the remaining service is rendered. Dura may also elect to restate
prior periods by applying a modified retrospective method to periods prior to
the effective date. Dura is in the process of determining which method of
adoption it will elect (see Note 3 for SFAS No. 123 required disclosures).
14. DEFINED BENFIT PLANS AND POST-RETIREMENT BENEFITS
Dura sponsors 17 defined benefit plans that cover certain hourly and
salaried employees in the United States and certain European countries. Dura's
policy is to make annual contributions to the plans to fund the normal cost as
required by local regulations. In addition, Dura has nine postretirement medical
benefit plans for certain employee groups and has recorded a liability for its
estimated obligation under these plans.
The components of net periodic benefit costs are as follows (in
thousands):
-14-
Postretirement Benefits
Pension Benefits Other than Pensions
Three Months Ended Three Months Ended
----------------------------- -----------------------------
April 3, 2005 March 28, 2004 April 3, 2005 March 28, 2004
------------- -------------- ------------- --------------
Service cost $ 587 $ 586 $ 185 $ 161
Interest cost 2,091 2,131 451 449
Expected return on plan assets (1,651) (1,589) - -
Amendments/curtailments - 339 - (109)
Amortization of prior service cost 295 519 - (2)
Recognized actuarial loss 370 43 90 60
-------- -------- ------- -------
Net periodic benefit cost $ 1,692 $ 2,029 $ 726 $ 559
======== ======== ======= =======
Dura previously disclosed in its financial statements for the year ended
December 31, 2004, that it expected to contribute $7.3 million to its pension
plans and $2.9 million to its post-retirement medical benefit plans in 2005. As
of April 3, 2005, $2.3 million and $0.6 million of contributions have been made
to the pension and postretirement benefit plans, respectively. Dura anticipates
contributing an additional $5.5 million to its pension plans and $1.7 million to
its post-retirement medical benefit plans in 2005 for total estimated
contributions during 2005 of $10.1 million.
15. CONDENSED CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION
The following condensed consolidating financial information presents
balance sheets, statements of operations and of cash flows related to Dura's
business. Each Guarantor, as defined, is a direct or indirect wholly owned
subsidiary of Dura and has fully and unconditionally guaranteed the 9 percent
senior subordinated notes issued by Dura Operating Corp., on a joint and several
basis. Separate financial statements and other disclosures concerning the
Guarantors have not been presented because management believes that such
information is not material to investors.
-15-
15. CONDENSED CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION:
(Continued)
DURA AUTOMOTIVE SYSTEMS, INC.
CONDENSED CONSOLIDATING BALANCE SHEETS AS OF APRIL 3, 2005
(AMOUNTS IN THOUSANDS - UNAUDITED)
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
----------- ---------- ---------- ------------ ------------
Assets
Current assets:
Cash and cash equivalents $ 39,969 $ 2,704 $ 68,919 $ - $ 111,592
Accounts receivable, net 34,387 101,374 184,665 - 320,426
Inventories 12,821 55,967 75,503 - 144,291
Current portion of derivative
instruments 5,541 - - - 5,541
Other current assets 21,915 14,092 75,941 - 111,948
Due from affiliates 175,807 39,046 8,870 (223,723) -
----------- ---------- ---------- ----------- ------------
Total current assets 290,440 213,183 413,898 (223,723) 693,798
----------- ---------- ---------- ----------- ------------
Property, plant and equipment, net 54,359 114,212 302,241 - 470,812
Investment in subsidiaries 794,350 28,799 183,654 (1,006,803) -
Notes receivable from affiliates 575,653 525,146 39,701 (1,140,500) -
Goodwill, net 380,907 128,773 381,583 - 891,263
Noncurrent portion of derivative
instruments 6,569 - - - 6,569
Other assets, net 69,199 7,876 20,358 - 97,433
----------- ---------- ---------- ----------- ------------
Total Assets $ 2,171,477 $1,017,989 $1,341,435 $(2,371,026) $ 2,159,875
=========== ========== ========== =========== ============
Liabilities and Stockholders'
Investment
Current liabilities:
Accounts payable $ 43,787 $ 74,645 $ 152,627 $ - $ 271,059
Accrued liabilities 69,826 21,740 112,599 - 204,165
Current maturities of long-term debt 1,141 - 1,375 - 2,516
Due to affiliates 42,336 155,857 25,530 (223,723) -
----------- ---------- ---------- ----------- ------------
Total current liabilities 157,090 252,242 292,131 (223,723) 477,740
----------- ---------- ---------- ----------- ------------
Long-term debt, net of current
maturities 109,824 - 5,939 - 115,763
Senior notes 400,000 - - - 400,000
Subordinated notes 583,691 - - - 583,691
Mandatorily redeemable convertible
trust preferred securities 55,250 - - - 55,250
Senior notes - derivative instrument
adjustment 12,110 - - - 12,110
Other noncurrent liabilities 55,830 17,578 59,717 - 133,125
Notes payable to affiliates 539,847 325,002 275,651 (1,140,500) -
----------- ---------- ---------- ----------- ------------
Total liabilities 1,913,642 594,822 633,438 (1,364,223) 1,777,679
----------- ---------- ---------- ----------- ------------
Stockholders' investment 270,197 423,167 565,025 (1,006,803) 251,586
Cumulative translation adjustment (12,362) - 142,972 - 130,610
----------- ---------- ---------- ----------- ------------
Total Liabilities and
Stockholders' Investment $ 2,171,477 $1,017,989 $1,341,435 $(2,371,026) $ 2,159,875
=========== ========== ========== =========== ============
-16-
15. CONDENSED CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION:
(Continued)
DURA AUTOMOTIVE SYSTEMS, INC.
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED
APRIL 3, 2005
(AMOUNTS IN THOUSANDS - UNAUDITED)
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
--------- --------- --------- ------------ ------------
Revenues $ 75,222 $ 224,390 $ 327,300 $ (6,933) $ 619,979
Cost of sales 72,837 201,813 291,681 (6,933) 559,398
-------- --------- --------- ----------- -----------
Gross profit 2,385 22,577 35,619 - 60,581
Selling, general and administrative
expenses 17,370 7,738 17,065 - 42,173
Facility consolidation and other charges 852 1,009 (195) - 1,666
Amortization expense 56 46 10 - 112
-------- --------- --------- ----------- -----------
Operating income (15,893) 13,784 18,739 - 16,630
Interest expense, net 20,629 1,748 2,593 - 24,970
-------- --------- --------- ----------- -----------
Income (loss) from continuing operations
before provision for income taxes and
minority interest (36,522) 12,036 16,146 - (8,340)
Provision (benefit) for income taxes (15,245) 5,508 6,120 - (3,617)
Equity in (earnings) losses of affiliates, net (14,763) - (607) 15,370 -
Dividends (to) from affiliates (1,682) - - 1,682 -
-------- --------- --------- ----------- -----------
Income/(loss) from continuing operations (4,832) 6,528 10,633 (17,052) (4,723)
Loss from discontinued operations - - (109) - (109)
-------- --------- --------- ----------- -----------
Net income (loss) $ (4,832) $ 6,528 $ 10,524 $ (17,052) $ (4,832)
======== ========= ========= =========== ===========
-17-
15. CONDENSED CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION:
(Continued)
DURA AUTOMOTIVE SYSTEMS, INC.
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED
APRIL 3, 2005
(AMOUNTS IN THOUSANDS - UNAUDITED)
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
--------- --------- --------- ------------ ------------
OPERATING ACTIVITIES:
Income (loss) from continuing operations $ (4,832) $ 6,528 $ 10,633 $ (17,052) $ (4,723)
Adjustments to reconcile income (loss)
from continuing operations to net cash
provided by operating activities:
Depreciation and amortization 2,268 5,135 13,144 - 20,547
Amortization of deferred financing fees 987 987
Deferred income taxes (14,581) 14,573 527 - 519
Equity in earnings of affiliates and
minority interest (14,763) - (607) 15,370 -
Changes in other operating items 28,669 (11,736) (68,608) - (51,675)
-------- -------- --------- ----------- -----------
Net cash (used in) provided by operating
activities (2,252) 14,500 (44,911) (1,682) (34,345)
-------- -------- --------- ----------- -----------
INVESTING ACTIVITIES:
Acquisitions, net - - - - -
Capital expenditures, net (3,974) (3,968) (6,336) - (14,278)
-------- -------- --------- ----------- -----------
Net cash used in investing activities (3,974) (3,968) (6,336) - (14,278)
-------- -------- --------- ----------- -----------
FINANCING ACTIVITIES:
Long-term borrowings - - 413 - 413
Repayments of long-term borrowings (35,285) (3) (370) - (35,658)
Purchase of treasury shares and other - -
Debt financing (to) from affiliates 84,523 (7,219) (77,304) - -
Proceeds from issuance of common stock
and exercise of stock options 517 - - - 517
Other, net (455) - (455)
Dividends paid - (2,232) 550 1,682 -
-------- -------- --------- ----------- -----------
Net cash (used in) provided by financing
activities 49,300 (9,454) (76,711) 1,682 (35,183)
EFFECT OF EXCHANGE RATE
CHANGES ON CASH (6,049) - 9,988 - 3,939
-------- -------- --------- ----------- -----------
NET CHANGE IN CASH AND CASH
EQUIVALENTS FROM CONTINUING
OPERATIONS 37,025 1,078 (117,970) - (79,867)
NET OPERATING CASH FLOW USED IN
DISCONTINUED OPERATIONS - - (109) - (109)
CASH AND CASH EQUIVALENTS:
Beginning of period 2,944 1,626 186,998 - 191,568
-------- -------- --------- ----------- -----------
End of period $ 39,969 $ 2,704 $ 68,919 $ - $ 111,592
======== ======== ========= =========== ===========
-18-
15. CONDENSED CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION:
(Continued)
DURA AUTOMOTIVE SYSTEMS, INC.
CONDENSED CONSOLIDATING BALANCE SHEETS AS OF DECEMBER 31, 2004
(AMOUNTS IN THOUSANDS)
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
----------- --------- ---------- ------------ ------------
Assets
Current assets:
Cash and cash equivalents $ 2,944 $ 1,626 $ 186,998 $ - $ 191,568
Accounts receivable, net 27,455 82,504 163,997 - 273,956
Inventories 12,735 60,326 76,773 - 149,834
Current poriton of derivative
instruments 7,746 - - - 7,746
Other current assets 14,485 19,868 57,663 - 92,016
Due from affiliates 181,728 39,261 7,599 (228,588) -
----------- --------- ---------- ----------- ------------
Total current assets 247,093 203,585 493,030 (228,588) 715,120
----------- --------- ---------- ----------- ------------
Property, plant and equipment, net 52,560 115,582 318,964 - 487,106
Investment in subsidiaries 761,450 28,799 74,338 (864,587) -
Notes receivable from affiliates 384,563 235,563 26,188 (646,314) -
Goodwill, net 380,907 128,773 393,904 - 903,584
Noncurrent portion of derivative
instruments 10,601 - - - 10,601
Other assets, net 61,918 15,668 29,924 - 107,510
----------- --------- ---------- ----------- ------------
Total Assets $ 1,899,092 $ 727,970 $1,336,348 $(1,739,489) $ 2,223,921
=========== ========= ========== =========== ============
Liabilities and Stockholders'
Investment
Current liabilities:
Accounts payable $ 45,103 $ 70,663 $ 154,575 $ - $ 270,341
Accrued liabilities 57,888 22,412 106,954 - 187,254
Current maturities of long-term debt 1,500 3 1,465 - 2,968
Due to affiliates 41,586 150,935 36,067 (228,588) -
----------- --------- ---------- ----------- ------------
Total current liabilities 146,077 244,013 299,061 (228,588) 460,563
----------- --------- ---------- ----------- ------------
Long-term debt, net of current
maturities 144,750 3 6,145 - 150,898
Senior notes 400,000 - - - 400,000
Subordinated notes 589,469 - - - 589,469
Mandatorily redeemable convertible
trust preferred securities 55,250 55,250
Senior notes - derivative instrument
adjustment 18,347 - - - 18,347
Other noncurrent liabilities 57,083 18,450 66,370 - 141,903
Notes payable to affiliates 236,752 158,282 251,280 (646,314) -
----------- --------- ---------- ----------- ------------
Total liabilities 1,647,728 420,748 622,856 (874,902) 1,816,430
----------- --------- ---------- ----------- ------------
Stockholders' investment 263,392 307,222 549,875 (864,587) 255,902
Cumulative Translation adjustment (12,028) - 163,617 - 151,589
----------- --------- ---------- ----------- ------------
Total Liabilities and
Stockholders' Investment $ 1,899,092 $ 727,970 $1,336,348 $(1,739,489) $ 2,223,921
=========== ========= ========== =========== ============
-19-
15. CONDENSED CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION:
(Continued)
DURA AUTOMOTIVE SYSTEMS, INC.
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED
MARCH 28, 2004
(AMOUNTS IN THOUSANDS - UNAUDITED)
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
--------- --------- --------- ------------ ------------
Revenues $ 83,293 $ 246,270 $ 318,458 $ (13,458) $ 634,563
Cost of sales 76,004 209,508 285,844 (13,458) 557,898
-------- --------- --------- ----------- -----------
Gross profit 7,289 36,762 32,614 - 76,665
Selling, general and administrative
expenses 16,188 7,819 14,904 - 38,911
Facility consolidation and other charges - 1,082 366 - 1,448
Amortization expense 60 45 11 - 116
-------- --------- --------- ----------- -----------
Operating income (loss) (8,959) 27,816 17,333 - 36,190
Interest expense (income), net 17,292 1,157 2,800 - 21,249
-------- --------- --------- ----------- -----------
Income (loss) from continuing operations
before provision for income taxes and
minority interest (26,251) 26,659 14,533 - 14,941
Provision (benefit) for income taxes (7,281) 7,952 4,409 - 5,080
Equity in earnings of affiliates, net (26,806) - (230) 27,036 -
Minority interest - dividends on trust
preferred securities, net - - - - -
Dividends from affiliates (1,332) - - 1,332 -
-------- --------- --------- ----------- -----------
Income (loss) from continuing operations 9,168 18,707 10,354 (28,368) 9,861
Loss from discontinued operations - - (693) - (693)
-------- --------- --------- ----------- -----------
Net income (loss) $ 9,168 $ 18,707 $ 9,661 $ (28,368) $ 9,168
======== ========= ========= =========== ===========
-20-
15. CONDENSED CONSOLIDATING GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION:
(Continued)
DURA AUTOMOTIVE SYSTEMS, INC.
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED
MARCH 28, 2004
(AMOUNTS IN THOUSANDS - UNAUDITED)
DURA NON-
OPERATING GUARANTOR GUARANTOR
CORP. COMPANIES COMPANIES ELIMINATIONS CONSOLIDATED
--------- --------- --------- ------------ ------------
OPERATING ACTIVITIES:
Income (loss) from continuing operations $ 9,168 $ 18,707 $ 10,354 $ (28,368) $ 9,861
Adjustments to reconcile income (loss)
from continuing operations to net cash
provided by operating activities:
Depreciation and amortization 2,264 5,723 14,160 - 22,147
Amortization of deferred financing fees 878 - - - 878
Facility consolidation and other - - - - -
Deferred income taxes 1,630 - (1,657) - (27)
Equity in earnings of affiliates and
minority interest (26,806) - (230) 27,036 -
Changes in other operating items 10,126 (5,088) (39,897) - (34,859)
-------- -------- --------- ----------- -----------
Net cash provided by (used in) operating
activities (2,740) 19,342 (17,270) (1,332) (2,000)
-------- -------- --------- ----------- -----------
INVESTING ACTIVITIES:
Acquisitions, net of cash acquired - (657) (9,819) (10,476)
Capital expenditures, net (773) (2,424) (12,410) - (15,607)
-------- -------- --------- ----------- -----------
Net cash used in investing activities (773) (3,081) (22,229) - (26,083)
-------- -------- --------- ----------- -----------
FINANCING ACTIVITIES:
Long-term borrowings - - 568 - 568
Repayments of long-term borrowings - (11) (3,269) - (3,280)
Debt financing (to) from affiliates 19,743 (14,469) (5,274) - -
Proceeds from issuance of common stock
and exercise of stock options 1,281 - - - 1,281
Other, net (301) - - - (301)
Dividends paid - (1,332) - 1,332 -
-------- -------- --------- ----------- -----------
Net cash (used in) provided by financing
activities 20,723 (15,812) (7,975) 1,332 (1,732)
EFFECT OF EXCHANGE RATE
CHANGES ON CASH (4,413) - 8,161 - 3,748
-------- -------- --------- ----------- -----------
NET CHANGE IN CASH AND CASH
EQUIVALENTS FROM CONTINUING
OPERATIONS 12,797 449 (39,313) - (26,067)
NET OPERATING CASH FLOW USED IN
DISCONTINUED OPERATIONS - - (693) - (693)
CASH AND CASH EQUIVALENTS:
Beginning of period 32,216 1,126 147,926 - 181,268
-------- -------- --------- ----------- -----------
End of period $ 45,013 $ 1,575 $ 107,920 $ - $ 154,508
======== ======== ========= =========== ===========
-21-
16. SUBSEQUENT EVENT
In May 2005, Dura entered into new senior secured credit facilities with
an aggregate borrowing capacity of approximately $325 million, consisting of a
five-year $175 million asset-based revolving credit facility and a six-year $150
million senior secured second lien term loan. Interest under these facilities is
based on LIBOR. The senior secured second lien term loan is due and payable in
its entirety in May 2011. Proceeds of $144.0 million, net of transaction costs
for the new revolver and the senior secured second lien term loan were used to
repay Dura's existing $111 million term loan C facility and general corporate
purposes. The revolver is an asset-backed revolving credit facility, which is
supported by a monthly borrowing base. Availability under the revolver is
determined by advances against eligible accounts receivables, eligible inventory
balances and certain fixed assets. On a pro forma basis as of April 3, 2005,
Dura's liquidity under the new senior secured credit facilities was $319.7
million. The revolver is secured by all of Dura's U.S. and Canadian Assets and a
65 percent pledge of the stock of Dura's foreign subsidiaries. The senior
secured second lien term loan is secured by all of the U.S. assets and a 65
percent pledge of the stock of Dura's foreign subsidiaries. In connection with
the termination of Dura's 2003 Credit Agreement, Dura will write-off debt
issuance costs of approximately $3.4 million during the second quarter of 2005.
-22-
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Dura's results of operations were impacted by several global economic
factors during the quarter ended April 3, 2005. During the first quarter of 2005
North American vehicle production was down approximately 4 percent and European
production was down approximately 3 percent when compared to the prior year
period. Approximately 57 percent of Dura's total revenues were generated in
North America during the first quarter of 2005 as compared to 59 percent in
2004. Dura's cost of production is higher in Europe as compared to North
America; thus, its future profitability could be impacted as volumes change and
/or as new business is awarded, should its current cost structure and revenue
mix by geographic location remain consistent. Dura is taking numerous actions to
improve its cost structure, including the various restructuring activities and
plant consolidations undertaken during 2004 and the first three months of 2005.
Similar actions will continue throughout the remainder of 2005 as Dura works to
maximize its facility and asset utilization worldwide. The cost of raw materials
has continued at increased levels industry wide during the first three months of
2005 and this has placed increased pressure on Dura's margins. If the elevated
raw material pricing continues and Dura is unable to offset the impact through
other cost reductions or price increases, it may negatively impact Dura's full
year results.
Given the significance of Dura's operations outside the U.S., the
strengthening of the foreign currencies against the dollar resulted in a $25.0
million increase to revenue in the first quarter of 2005 as compared to 2004.
Should the foreign currencies stabilize at current levels, or continue to
increase in 2005, Dura would anticipate a continued increase of the proportion
of its revenues generated in Europe, resulting in a corresponding increase in
cost of sales and negative pressure on gross margin for the reasons noted above.
The fluctuation of foreign currencies also has a significant impact on Dura's
consolidated debt levels. At April 3, 2005, approximately $136.9 million of
Dura's debt is denominated in Euro or other foreign currencies. The weakening of
the European currencies from December 31, 2004 to April 3, 2005 decreased Dura's
total debt level by approximately $6.4 million, holding all other factors
constant.
RESULTS OF OPERATIONS
The following management's discussion and analysis of financial
condition and results of operations (MD&A) should be read in conjunction with
the MD&A included in our Annual Report on Form 10-K for the year ended December
31, 2004.
COMPARISON OF THE THREE MONTHS ENDED APRIL 3, 2005 TO THE THREE MONTHS ENDED
MARCH 28, 2004
Revenues - Revenues for the three months ended April 3, 2005 were $620.0
million, a decrease of $14.6 million, or 2.3 percent, from $634.6 million for
the three months ended March 28, 2004. Factors that unfavorably impacted revenue
during the three months ended April 3, 2005 included lower North American
production volumes and selling price reductions offset by the strengthening of
foreign currencies in relation to the U.S. dollar of $25.0 million.
Cost of Sales - Cost of sales for the three months ended April 3, 2005
were $559.4 million, an increase of $1.5 million, or 0.3 percent, from $557.9
million for the three months ended March 28, 2004. Cost of sales as a percentage
of revenues for the first quarter of 2005 was 90.2 percent, which is up compared
to 87.9 percent in the first quarter of 2004. The increase in this percentage is
due to the impact of elevated raw material pricing and lower North American and
European automotive production volumes.
-23-
Selling, General, and Administrative - Selling, general, and
administrative expenses for the three months ended April 3, 2005 were $42.2
million, an increase of $3.3 million, or 8.4 percent, from $38.9 million for the
three months ended March 28, 2004. As a percentage of revenue, selling, general
and administrative expenses increased to 6.8 percent for 2005 compared to 6.1
percent in the first quarter of 2004. The increase is primarily due to one-time
investment in prototypes and non-employee related engineering development costs
supporting new programs. Dura's goal continues to be to reallocate certain of
the selling, general and administrative expenses to further support organic
growth while maintaining a 6.0 percent expense as a percentage of revenue.
Facility Consolidation and Other Charges -
Facility Consolidation
As a part of Dura's ongoing cost reduction and capacity utilization
efforts, Dura has taken numerous actions to improve its cost structure. These
costs are reflected as facility consolidation and other charges in the
consolidated statement of operations and were accounted for in accordance with
SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities"
("SFAS No. 146").
During the first quarter of 2005, Dura announced a plan to migrate to one
ERP system and centralize many of its functional operations. These actions are
anticipated to result in the reduction of approximately 200 to 250 employees
worldwide. This action resulted in a facility consolidation and other charge of
$0.6 million in the first quarter of 2005 relating to employee severance. Dura
expects to incur additional restructuring charges related to these actions of
approximately $2.0 million in severance costs through December 31, 2005.
During the fourth quarter of 2004, Dura closed its Bondoufle, France sales
and engineering facility and relocated to Velizy, France, which is located near
its French OEM customers. This action resulted in a restructuring charge of $0.3
million related to facility closure and other costs. Costs incurred and charged
to the reserve as of April 3, 2005 amounted to $0.1 million in facility closure
costs.
During the second quarter of 2004, in order to improve capacity
utilization, Dura announced a plan to consolidate certain of its Body & Glass
Division product lines in Europe. This action resulted in a restructuring charge
of $1.5 million and $2.5 million in the second and third quarters of 2004,
respectively, relating primarily to severance, which completed the facility
consolidation charges to be incurred related to this action. Additionally, there
was a $0.2 million adjustment to decrease the reserve in the fourth quarter of
2004. Continuing these actions in 2005, Dura adjusted the reserve down by $0.3
million during the first quarter. Costs incurred and charged to the reserve as
of April 3, 2005 amounted to $2.8 million in severance related costs. In
addition, during the second quarter of 2004, Dura announced a plan to exit two
manufacturing facilities in Rockford, Illinois and combine the business with
other Dura operations. Dura also announced the relocation of its Atwood Mobile
Products division headquarters from Rockford, Illinois to Elkhart, Indiana.
These actions resulted in a restructuring charge of $1.7 million, $1.2 million,
and $0.8 million in the second, third and fourth quarters of 2004, respectively,
relating primarily to severance. Dura also expensed as incurred approximately
$0.3 million and $1.8 million of facility closure and other costs in the third
quarter and fourth quarters of 2004, of which $0.2 million is related to asset
impairments. These actions continued during 2005 with an additional
restructuring charge of $0.8 million in the first quarter, of which $0.6 million
is related to severance and $0.2 million is related to facility closure and
other costs. Additionally during the first quarter, Dura increased the reserve
by $0.3 million. Dura also expensed as incurred $0.3 million of facility closure
and other costs in the first quarter of 2005, which included asset impairment
charges of $0.1 million. Costs incurred and charged to the reserve as of April
3, 2005 amounted to $3.5 million in severance related costs. Dura expects to
incur additional restructuring charges related to the exit of the Rockford
facilities of approximately $0.1 million relating to facility closure costs
through December 31, 2005.
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During the first quarter of 2004, in order to improve capacity
utilization, Dura announced a plan to exit its Brookfield, Missouri facility and
combine the business with other Dura operations. This action resulted in a
restructuring charge of $0.1 million, $0.4 million, $0.2 million and $0.2
million in the first, second, third and fourth quarters of 2004, respectively,
relating primarily to severance. Dura also expensed as incurred approximately
$0.1 million of facility closure and other costs in each of the second, third
and fourth quarters of 2004. Continuing these actions in 2005, Dura expensed as
incurred approximately $0.1 million of facility closure and other costs in the
first quarter. Costs incurred and charged to the reserve as of April 3, 2005
amounted to $0.6 million in severance related costs. Dura expects to incur $0.2
million of additional restructuring charges associated with exiting the
Brookfield facility through December 31, 2005. In addition, during the first
quarter of 2004, Dura announced a plan to exit its Pikeville, Tennessee facility
and combine the business with other Dura operations. This action resulted in a
restructuring charge of $0.4 million and $0.5 million in the first and second
quarters of 2004, respectively, relating to severance. Costs incurred and
charged to the reserve as of April 3, 2005 amounted to $0.8 million in severance
related costs. In continuation of these actions, Dura expensed as incurred
approximately $0.1 million of facility closure and other costs in the second and
third quarters of 2004, combined. Netted in this charge is an additional $0.2
million related to fixed asset write-downs and a $0.2 million adjustment to
reduce the facility consolidation charge in the third quarter. Dura does not
expect to incur any additional restructuring charges related to the exit of the
Pikeville facility.
During the second quarter of 2003, Dura announced a plan to exit its
Fulton, Kentucky facility. This action resulted in a second quarter 2003
restructuring charge of $1.5 million, including severance of $0.3 million and
facility closure and other costs of $1.2 million. In continuation of these
actions during 2003, Dura recorded $1.3 million of additional restructuring
charges, including severance of $1.2 million and facility closure and other
costs of $0.1 million. Dura also expensed as incurred approximately $2.5 million
and $3.4 million of certain facility closure and other costs incurred during the
third and fourth quarters of 2003, respectively. During 2004, Dura continued
such actions and recorded $0.2 million and $0.4 million in the first and third
quarters, respectively, of additional restructuring charges for severance
related costs. Dura also expensed as incurred $0.1 million, $0.2 million, and
$0.1 million in the first, second and fourth quarters of 2004, respectively,
related to severance costs and $0.2 million of facility closure and other costs
in the first quarter of 2004. Costs incurred and charged to the reserve as of
April 3, 2005 amounted to $2.0 million in severance related costs and $1.4
million in facility closure and other costs. Dura does not expect to incur any
additional restructuring charges related to the exit of the Fulton facility.
Amortization Expense - Amortization expense for the three months ended
April 3, 2005, was $0.1 million, which is flat compared to $0.1 million for the
three months ended March 28, 2004.
Interest Expense - Interest expense for the three months ended April 3,
2005 was $25.0 million, an increase of $3.7 million, or 17.5 percent, from $21.2
million for the three months ended March 28, 2004. This increase in interest
expense is due to the higher average interest rates on LIBOR based borrowings.
Income Taxes - The effective income tax rate was 43.4 percent for the
three months ended April 3, 2005 and 34.0 percent for the three months ended
March 28, 2004. The increase in the effective tax rate relates primarily to the
mix of income among Dura's North American and European tax jurisdictions and the
impact of tax planning strategies slightly offset by not benefiting losses in
certain locations and increases in valuation allowances. The overall effective
rates differed from statutory rates as a result of higher combined foreign tax
rates, the effects of state taxes and the provision of a valuation allowance on
certain losses in foreign jurisdictions.
Discontinued Operations - Discontinued operations for the three months
ended April 3, 2005 was a loss of $0.1 million, a decrease of $0.6 million, from
the $0.7 million for the three months ended March
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28, 2004. These amounts relate to adjustments associated with the March 2003
divestiture of Dura's Mechanical Assemblies Europe business. Dura does not
believe future adjustments related to retained liabilities of the discontinued
operations will be material.
The Mechanical Assemblies Europe divestiture was treated as a discontinued
operation under SFAS No. 144. The results of operations of the Mechanical
Assemblies Europe business and the related charges have been classified as
discontinued operations in the condensed consolidated statements of operations.
LIQUIDITY AND CAPITAL RESOURCES
During the first three months of 2005, Dura used cash from operations of
$34.3 million, compared to $2.0 million in 2004. Cash generated from operations
before changes in working capital items was $17.4 million for the first three
months of 2005 compared to $32.9 million for 2004 primarily as a result of
lower operating margins. Working capital used cash of $51.7 million in the
first three months of 2005 compared to $34.9 million in 2004. This increase in
cash used from working capital is primarily the result of the timing of cash
receipts.
Net cash used in investing activities was $14.3 million for the first
three months of 2005 compared to $26.1 million used in 2004. In the first
quarter of 2004, $10.5 million was used for acquisitions, $9.8 million was used
for the final purchase price for the Reiche acquisition and $0.7 million was
used for the working capital adjustment for the Creation Group acquisition. Net
capital expenditures totaled $14.3 million for the first three months of 2005
compared to $15.6 million for the first three months of 2004. The capital
expenditures were primarily for equipment and dedicated tooling purchases
related to new or replacement programs.
Net cash used in financing activities totaled $35.2 million for the first
three months of 2005 compared to $1.7 million in 2004, principally for the
repayment of outstanding indebtedness.
In April 2002, Dura completed the offering of $350.0 million 8 5/8 percent
senior unsecured notes ("2002 Senior Notes"), due April 2012. The interest on
the 2002 Senior Notes is payable semi-annually beginning October 15, 2002. Dura
also entered into a fixed to floating interest rate swap (notional amount of
$325.0 million) with various financial institutions that more closely mirrors
the cost of its bank debt.
In November 2003, Dura completed the 2003 Senior Notes offering of $50.0
million. The interest on the 2003 Senior Notes is payable semi-annually
beginning April 15, 2004. In conjunction with this transaction, Dura amended and
restated its revolving credit facility ("2003 Credit Agreement"). The 2003
Credit Agreement provides for $175.0 million of revolving credit, available
until October 2008. At April 3, 2005, Dura had unused borrowing capacity of
approximately $154.9 million, of which $52.2 million was available under its
most restrictive debt covenant and $20.1 million in letters of credit
outstanding. No borrowings under the revolving credit facility occurred during
2005. The existing tranche C term loan remains outstanding. Dura also entered
into a fixed to floating interest rate swap (notional amount of $75.0 million)
with various financial institutions that more closely mirrors the cost of its
bank debt.
In February 2005, Dura amended its 2003 Credit Agreement to, among other
things, adjust the total leverage, senior leverage and interest coverage ratios
that it was required to maintain over the next six quarters beginning April 3,
2005. In addition, Dura repaid $35.0 million of the tranche C term loan.
As of April 3, 2005, the rate on borrowings under the 2003 Credit
Agreement was based on LIBOR and was 5.35 percent. The 2003 Credit Agreement
contains various restrictive covenants which amongst other things, limit
indebtedness, investments, capital expenditures and certain dividends. The 2003
Credit Agreement also requires Dura to maintain certain financial ratios
including debt and interest coverage.
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Dura was in compliance with the covenants as of April 3, 2005. Borrowings under
the 2003 Credit Agreement are collateralized by substantially all assets of
Dura.
The 2003 Credit Agreement provides Dura with the ability to denominate a
portion of its revolving credit borrowings in foreign currencies up to an amount
equal to $53.1 million. As of April 3, 2005, Dura had no borrowings outstanding
under the indebtedness.
Dura also utilizes uncommitted overdraft facilities to satisfy the
short-term working capital requirements of its foreign subsidiaries. At April 3,
2005, Dura had overdraft facilities available from banks of approximately $26.4
million, of which, it had no borrowings outstanding.
Included in interest expense, net, in the consolidated statements of
operations is approximately $0.7 million and $0.5 million of interest income
earned on Dura's cash balances in the quarters ended April 3, 2005 and March 28,
2004, respectively.
In May 2005, Dura entered into new senior secured credit facilities with
an aggregate borrowing capacity of approximately $325 million, consisting of a
five-year $175 million asset-based revolving credit facility and a six-year $150
million senior secured second lien term loan. Interest under these facilities is
based on LIBOR. The senior secured second lien term loan is due and payable in
its entirety in May 2011. Proceeds of $144.0 million, net of transaction costs
for the new revolver and the senior secured second lien term loan were used to
repay Dura's existing $111 million term loan C facility and general corporate
purposes. The revolver is an asset-backed revolving credit facility, which is
supported by a monthly borrowing base. Availability under the revolver is
determined by advances against eligible accounts receivables, eligible inventory
balances and certain fixed assets. On a pro forma basis as of April 3, 2005,
Dura's liquidity under the new senior secured credit facilities was $319.7
million. The revolver is secured by all of Dura's U.S. and Canadian assets and
a 65 percent pledge of the stock of Dura's foreign subsidiaries. The senior
secured second lien term loan is secured by all of the U.S. assets and a 65
percent pledge of the stock of Dura's foreign subsidiaries. In connection with
the termination of Dura's 2003 Credit Agreement, Dura will write-off debt
issuance costs of approximately $3.4 million during the second quarter of 2005.
In April 1999, Dura completed the offering of its Subordinated Notes, due
May 2009. The interest on the Subordinated Notes is payable semi-annually. Net
proceeds from this offering of approximately $394.7 million were used to repay
the $200.0 million interim term loan, approximately $78.1 million to retire
other indebtedness and approximately $118.9 million was used for general
corporate purposes. In June 2001, Dura completed a similar offering of 9 percent
senior subordinated notes due May 2009 with a face amount of $158.5 million. The
interest on these notes is also payable semi-annually. Unamortized discount and
debt issuance costs were approximately $8.5 million, yielding an imputed
interest rate of 10 percent. Net proceeds of approximately $147.1 million were
used to reduce the borrowings outstanding under the revolving credit facility.
These notes are collateralized by guarantees of certain of Dura's subsidiaries.
Dura is limited as to its ability to declare or make certain dividend
payments or other distributions of assets under its 2003 Credit Agreement,
Senior Notes and Subordinated Notes. Certain distributions relating to items
such as a company stock purchase program, tax sharing arrangements, as required
under Dura's Preferred Securities, are permitted.
Dura's principal source of liquidity is cash flow generated from
operations and borrowings under its $175 million revolving credit facility. Dura
believes that such funds will be sufficient to meet its liquidity needs for at
least the next twelve months. Dura's principal use of liquidity will be to meet
debt service requirements, finance capital expenditures and to provide working
capital availability. Dura expects that capital expenditures in 2005 will be
approximately $70.0 million. These capital expenditures will be used primarily
for equipment and dedicated tooling purchases and facility improvements.
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Dura's ability to service its indebtedness will depend on its future
performance, which will be affected by prevailing economic conditions and
financial, business, regulatory and other factors. Certain of these factors are
beyond Dura's control. Dura believes that, based upon current levels of
operations, it will be able to meet its debt service obligations when due.
Significant assumptions underlie this belief, including, among other things,
that Dura will continue to be successful in implementing its business strategy
and that there will be no material adverse developments in its business,
liquidity or capital requirements. If Dura cannot generate sufficient cash flow
from operations to service its indebtedness and to meet its other obligations
and commitments, Dura might be required to refinance its debt or to dispose of
assets to obtain funds for such purpose. There is no assurance that refinancing
or asset dispositions could be effected on a timely basis or on satisfactory
terms, if at all, or would be permitted by the terms of the New Credit
Agreement. In the event that Dura is unable to refinance its various debt
facilities or raise funds through asset sales, sales of equity or otherwise, its
ability to pay principal of, and interest on, its debt would be impaired.
QUARTERLY RESULTS OF OPERATIONS AND SEASONALITY
Dura typically experiences decreased revenues and operating income during
the third calendar quarter of each year due to production shutdowns at OEMs for
model changeovers and vacations. The recreation & specialty vehicle industry is
seasonal in that sales in the fourth quarter are normally at reduced levels.
EFFECTS OF INFLATION
Inflation potentially affects Dura in two principal ways. First, a
significant portion of Dura's debt is tied to prevailing short-term interest
rates which may change as a result of inflation rates, translating into changes
in interest expense. Second, general inflation can impact material purchases,
labor and other costs. In many cases, Dura has limited ability to pass through
inflation-related cost increases due to the competitive nature of the markets
that Dura serves. In the past few years, other than material costs, inflation
has not been a significant factor.
FOREIGN CURRENCY TRANSACTIONS
A significant portion of Dura's revenues during the three and nine months
ended April 3, 2005 were derived from manufacturing operations in Europe, Canada
and Latin America. The results of operations and the financial position of
Dura's operations in these countries are principally measured in their
respective currencies and translated into U.S. dollars. The effects of foreign
currency fluctuations in such countries are somewhat mitigated by the fact that
expenses are generally incurred in the same currencies in which revenues are
generated. The reported income of these subsidiaries will be higher or lower
depending on a weakening or strengthening of the U.S. dollar against the
respective foreign currencies.
A significant portion of Dura's assets at April 3, 2005 are based in its
foreign operations and are translated into U.S. dollars at foreign currency
exchange rates in effect as of the end of each period, with the effect of such
translation reflected as a separate component of stockholders' investment.
Accordingly, Dura's consolidated stockholders' investment will fluctuate
depending upon the weakening or strengthening of the U.S. dollar against the
respective foreign currencies.
Dura's strategy for management of currency risk relies primarily upon
conducting its operations in such countries' respective currencies and Dura may,
from time to time, engage in hedging programs intended to reduce Dura's exposure
to currency fluctuations.
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NEW ACCOUNTING PRONOUNCEMENTS
In December 2004, the FASB revised SFAS No. 123 and issued SFAS No.
123(R). This Statement supercedes APB No. 25, which resulted in no stock-based
employee compensation cost related to stock options if the options granted had
an exercise price equal to the market value of the underlying common stock on
the date of grant. SFAS No. 123R requires recognition of employee services
provided in exchange for a share-based payment based on the grant date fair
market value. In April 2005, the SEC delayed the effective date of SFAS No. 123R
to fiscal years beginning after June 15, 2005. As a result, Dura is required to
adopt SFAS No. 123R as of January 1, 2006. As of the effective date, this
Statement applies to all new awards issued as well as awards modified,
repurchased, or cancelled. Additionally, for stock-based awards issued prior to
the effective date, compensation cost attributable to future services will be
recognized as the remaining service is rendered. Dura may also elect to restate
prior periods by applying a modified retrospective method to periods prior to
the effective date. Dura is in the process of determining which method of
adoption it will elect (see Note 3 for SFAS No. 123 required disclosures).
FORWARD-LOOKING STATEMENTS
All statements, other than statements of historical fact, included in this
Form 10-Q, including without limitation the statements under "Management's
Discussion and Analysis of Financial Condition and Results of Operations" are,
or may be deemed to be, forward-looking statements within the meaning of Section
27A of the Securities Act and Section 21E of the Securities Exchange Act of
1934, as amended. When used in this Form 10-Q, the words "anticipate,"
"believe," "estimate," "expect," "intends," and similar expressions, as they
relate to Dura, are intended to identify forward-looking statements. Such
forward-looking statements are based on the beliefs of Dura's management as well
as on assumptions made by and information currently available to Dura at the
time such statements were made. Various economic and competitive factors could
cause actual results to differ materially from those discussed in such
forward-looking statements, including factors which are outside the control of
Dura, such as risks relating to: (i) the degree to which Dura is leveraged; (ii)
Dura's reliance on major customers and selected models; (iii) the cyclicality
and seasonality of the automotive market; (iv) the failure to realize the
benefits of recent acquisitions and joint ventures; (v) obtaining new business
on new and redesigned models; (vi) Dura's ability to continue to implement its
acquisition strategy; and (vii) the highly competitive nature of the automotive
supply industry. All subsequent written and oral forward-looking statements
attributable to Dura or persons acting on behalf of Dura are expressly qualified
in their entirety by such cautionary statements.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
At April 3, 2005, Dura had outstanding interest rate swap contracts that
effectively converted $400.0 million of its Senior Notes into floating rate
obligations. Under these swap contracts, which expire in April 2012, Dura
receives payments at fixed rates, while it makes payments at variable rates
(6.31 percent to approximately 8.625 percent at April 3, 2005). The net interest
paid or received is included in interest expense. Dura designated these swap
contracts as fair value hedges at their inception. At April 3, 2005, the fair
value of the interest rate swap contracts was a net gain position for Dura of
approximately $12.1 million, representing the estimated benefit that would
accrue to Dura to terminate the agreements, and is included in current and
noncurrent assets with a corresponding increase to debt in the accompanying
consolidated April 3, 2005 balance sheet.
From time to time, Dura also uses forward exchange contracts to hedge its
foreign currency exposure related to certain intercompany transactions. At April
3, 2005, Dura had a contract outstanding to purchase Euro 13.1 million
(approximately $17.0 million). Dura designated this contract at its inception as
a cash flow hedge. The estimated fair value of the foreign exchange contract
based upon market quotes was approximately $16.7 million. The net unrealized
loss of
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approximately $0.3 million is included in accumulated other comprehensive loss
in the accompanying consolidated April 3, 2005 statement of stockholders'
investment.
There have been no other material changes to our exposures to market risk
since December 31, 2004.
ITEM 4. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
As of April 3, 2005, an evaluation was carried out under the supervision and
with the participation of the company's management, including our Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures (as defined in
Rules l3a-l5(e) and 15d-l5(e) under the Securities Exchange Act of 1934). Based
upon that evaluation, the Chief Executive Officer and the Chief Financial
Officer concluded that the design and operation of these disclosure controls and
procedures were effective to ensure that information required to be disclosed by
the company in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in applicable rules and forms.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING DURING THE QUARTER ENDED
APRIL 3, 2005
There were no significant changes in our internal control over financial
reporting that occurred during the Company's quarter ended April 3, 2005 that
have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
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PART II. OTHER INFORMATION
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
Item 1. Legal Proceedings:
Other than as reported in Dura's 2004 Annual Report on Form 10-K under the
caption "Legal Proceedings," Dura is not currently a party to any material
pending legal proceedings, other than routine matters incidental to the
business of Dura.
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
10.1 Consulting Agreement, dated as of April 8, 1998, between Dura
Automotive Systems, Inc. and J. Richard Jones
10.2 Amendment to Consulting Agreement, dated December 7, 1998,
between Dura Automotive Systems, Inc. and J. Richard Jones
31.1 Certification by Lawrence A. Denton, President, Chief
Executive Officer and Director
31.2 Certification by Keith R. Marchiando, Vice President and Chief
Financial Officer
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K
During the three months ended April 3, 2005 for which this report is
filed, Dura Automotive Systems, Inc. filed the following reports on
Form 8-K:
February 14, 2005, Form 8-K reporting under "Item 5.02. Departure
of Directors or Principal Officers" disclosing resignation of
Charles M. Brennan from the Board of Directors.
March 1, 2005, Form 8-K reporting under "Item 8.01. Other Events"
disclosing Amendment to Dura's Senior Secured Revolving Credit
Facility.
March 4, 2005, Form 8-K reporting under "Item 1.01. Entry into a
Material Definitive Agreement" disclosing Change of Control
Agreement with Keith R. Marchiando.
March 16, 2005, Form 8-K reporting under "Item 2.02. Results of
Operation and Financial Condition" revising first quarter and
full-year 2005 outlook.
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SIGNATURE
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.
DURA AUTOMOTIVE SYSTEMS, INC.
Date: May 10, 2005 By /s/ Keith R. Marchiando
-----------------------
Keith R. Marchiando
Vice President, Chief Financial Officer
(principal accounting and financial
officer)
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EXHIBIT INDEX
Exhibit 10.1 Consulting Agreement, dated as of April 8, 1998, between Dura
Automotive Systems, Inc. and J. Richard Jones
Exhibit 10.2 Amendment to Consulting Agreement, dated December 7, 1998,
between Dura Automotive Systems, Inc. and J. Richard Jones
Exhibit 31.1 Certification by Lawrence A. Denton, President, Chief Executive
Officer and Director
Exhibit 31.2 Certification by Keith R. Marchiando, Vice President and Chief
Financial Officer
Exhibit 32.1 Certification Pursuant to 18 U.S.C. Section 1350, As Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 32.2 Certification Pursuant to 18 U.S.C. Section 1350, As Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002