-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J8d09yOyCvW1SjVeTZDkgxKxWiDkn+WunqxIA2lv7O/YMPiLUQjkQAWtZgl8p78V szT7qpDxG+JQZzeJGTNV3A== 0000950124-98-004915.txt : 19980914 0000950124-98-004915.hdr.sgml : 19980914 ACCESSION NUMBER: 0000950124-98-004915 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980731 FILED AS OF DATE: 19980911 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HAYES LEMMERZ INTERNATIONAL INC CENTRAL INDEX KEY: 0000893670 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 133384636 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-11592 FILM NUMBER: 98708079 BUSINESS ADDRESS: STREET 1: 38481 HURON RIVER DR CITY: ROMULUS STATE: MI ZIP: 48174 BUSINESS PHONE: 3139412000 MAIL ADDRESS: STREET 1: 38481 HURON RIVER DR CITY: RONULUS STATE: MI ZIP: 48174 FORMER COMPANY: FORMER CONFORMED NAME: HAYES WHEELS INTERNATIONAL INC DATE OF NAME CHANGE: 19951214 10-Q 1 FORM 10-Q 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JULY 31, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER: 1-11592 HAYES LEMMERZ INTERNATIONAL, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE (STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) 13-3384636 (IRS EMPLOYER IDENTIFICATION NO.) 38481 HURON RIVER DRIVE ROMULUS, MICHIGAN 48174 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)(ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (734) 941-2000 INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES [X] NO [ ] THE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AS OF SEPTEMBER 12, 1998, WAS 30,179,985 SHARES. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 HAYES LEMMERZ INTERNATIONAL, INC. QUARTERLY REPORT ON FORM 10-Q TABLE OF CONTENTS
PAGE ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Statements of Operations....................... 3 Consolidated Balance Sheets................................. 4 Consolidated Statements of Cash Flows....................... 5 Notes to Consolidated Financial Statements.................. 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................................... 15 PART II. OTHER INFORMATION Item 1. Legal Proceedings........................................... 18 Item 2. Changes in Securities....................................... 18 Item 3. Defaults upon Senior Securities............................. 18 Item 4. Submission of Matters to a Vote of Security-Holders......... 18 Item 5. Other Information........................................... 18 Item 6. Exhibits and Reports on Form 8-K............................ 18 Signatures............................................................. 19
UNLESS OTHERWISE INDICATED, REFERENCES TO THE "COMPANY" MEAN HAYES LEMMERZ INTERNATIONAL, INC., AND ITS SUBSIDIARIES AND REFERENCE TO A FISCAL YEAR MEANS THE COMPANY'S YEAR ENDED JANUARY 31 OF THE FOLLOWING YEAR (E.G., FISCAL 1998 MEANS THE PERIOD BEGINNING FEBRUARY 1, 1998, AND ENDING JANUARY 31, 1999). THIS REPORT CONTAINS FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 WITH RESPECT TO THE FINANCIAL CONDITION, RESULTS OF OPERATIONS, AND BUSINESS OF THE COMPANY. THESE FORWARD LOOKING STATEMENTS INVOLVE CERTAIN RISKS AND UNCERTAINTIES. NO ASSURANCE CAN BE GIVEN THAT ANY OF SUCH MATTERS WILL BE REALIZED. FACTORS THAT MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD LOOKING STATEMENTS INCLUDE, AMONG OTHERS, THE FOLLOWING POSSIBILITIES: (1) COMPETITIVE PRESSURE IN THE COMPANY'S INDUSTRY INCREASES SIGNIFICANTLY; (2) GENERAL ECONOMIC CONDITIONS ARE LESS FAVORABLE THAN EXPECTED; (3) THE COMPANY'S DEPENDENCE ON THE AUTOMOTIVE INDUSTRY (WHICH HAS HISTORICALLY BEEN CYCLICAL); (4) CHANGES IN THE FINANCIAL MARKETS AFFECTING THE COMPANY'S FINANCIAL STRUCTURE AND THE COMPANY'S COST OF CAPITAL AND BORROWED MONEY; AND (5) THE UNCERTAINTIES INHERENT IN INTERNATIONAL OPERATIONS AND FOREIGN CURRENCY FLUCTUATIONS. THE COMPANY HAS NO DUTY UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 TO UPDATE THE FORWARD LOOKING STATEMENTS IN THIS QUARTERLY REPORT ON FORM 10-Q AND THE COMPANY DOES NOT INTEND TO PROVIDE SUCH UPDATES. 2 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (MILLIONS OF DOLLARS, EXCEPT SHARE AMOUNTS) (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED JULY 31, JULY 31, ------------------ ------------------ 1998 1997 1998 1997 ---- ---- ---- ---- Net sales............................................... $383.0 $277.9 $796.9 $528.1 Cost of goods sold...................................... 321.1 231.1 662.9 443.3 ------ ------ ------ ------ Gross profit.......................................... 61.9 46.8 134.0 84.8 Marketing, general and administration................... 16.8 12.5 32.0 21.4 Engineering and product development..................... 5.6 2.6 10.0 4.9 Amortization of intangibles............................. 4.2 2.8 8.1 5.1 Other income............................................ (1.4) (1.1) (2.1) (1.8) Equity in earnings of unconsolidated subsidiaries....... (0.4) -- (1.0) -- ------ ------ ------ ------ Earnings from operations.............................. 37.1 30.0 87.0 55.2 Interest expense, net................................... 22.8 21.8 47.0 40.2 ------ ------ ------ ------ Earnings before taxes on income, minority interest and extraordinary loss................................. 14.3 8.2 40.0 15.0 Income tax provision.................................... 6.0 3.5 16.8 6.4 ------ ------ ------ ------ Earnings before minority interest and extraordinary loss............................................... 8.3 4.7 23.2 8.6 Minority interest....................................... 0.8 -- 1.0 0.1 ------ ------ ------ ------ Earnings before extraordinary loss.................... 7.5 4.7 22.2 8.5 Extraordinary loss, net of tax of $6.0 (Note 6)......... (8.3) -- (8.3) -- ------ ------ ------ ------ Net income (loss)..................................... $ (0.8) $ 4.7 $ 13.9 $ 8.5 ====== ====== ====== ====== Per share information (Note 3): Earnings before extraordinary loss...................... $ 0.25 $ 0.20 $ 0.74 $ 0.37 Extraordinary loss, net of tax.......................... (0.28) -- (0.28) -- ------ ------ ------ ------ Basic net income (loss) per share....................... $(0.03) $ 0.20 $ 0.46 $ 0.37 ====== ====== ====== ====== Basic average shares outstanding (in thousands)......... 30,124 24,075 30,107 23,246 ====== ====== ====== ====== Earnings before extraordinary loss...................... $ 0.23 $ 0.20 $ 0.68 $ 0.37 Extraordinary loss, net of tax.......................... (0.25) -- (0.25) -- ------ ------ ------ ------ Diluted net income (loss) per share..................... $(0.02) $ 0.20 $ 0.43 $ 0.37 ====== ====== ====== ====== Diluted average shares outstanding (in thousands)....... 32,916 24,075 32,668 23,246 ====== ====== ====== ======
See accompanying notes to consolidated financial statements. 3 4 HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (MILLIONS OF DOLLARS)
JULY 31, JANUARY 31, 1998 1998 -------- ----------- (UNAUDITED) ASSETS Current assets: Cash and cash equivalents................................. $ 1.6 $ 23.1 Receivables (less allowance of $4.3 million at July 31, 1998 and January 31, 1998)............................. 166.3 217.8 Inventory (Note 2)........................................ 168.9 131.5 Prepaid expenses and other................................ 15.0 10.0 -------- -------- Total current assets................................. 351.8 382.4 -------- -------- Property, plant and equipment: Land...................................................... 22.3 15.6 Buildings................................................. 181.0 154.7 Machinery and equipment................................... 744.1 622.3 -------- -------- 947.4 792.6 Accumulated depreciation.................................. (156.9) (122.2) -------- -------- Net property, plant and equipment.................... 790.5 670.4 Goodwill and other assets................................... 751.4 706.1 -------- -------- Total assets......................................... $1,893.7 $1,758.9 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Bank borrowings........................................... $ 40.7 $ 23.6 Current portion of long-term debt......................... 7.8 14.4 Accounts payable and accrued liabilities.................. 372.4 334.9 -------- -------- Total current liabilities............................ 420.9 372.9 Noncurrent liabilities: Long-term debt............................................ 893.4 882.6 Pension and other long-term liabilities................... 334.8 301.5 Deferred income taxes..................................... 50.3 34.8 Minority interest......................................... 12.1 5.6 -------- -------- Total noncurrent liabilities......................... 1,290.6 1,224.5 Commitments and Contingencies (Note 7): Stockholders' equity: Preferred stock, 25,000,000 shares authorized, none issued or outstanding......................................... -- -- Common stock, par value $0.01 per share: Voting -- authorized 99,000,000 shares; and outstanding 27,530,959 at July 31, 1998 and 27,439,419 at January 31, 1998.............................................. 0.3 0.3 Nonvoting -- authorized 5,000,000; and outstanding, 2,649,026 at July 31, 1998 and January 31, 1998....... -- -- Additional paid in capital................................ 236.8 229.4 Accumulated deficit....................................... (37.0) (50.8) Accumulated other comprehensive income (Note 3)........... (17.9) (17.4) -------- -------- Total stockholders' equity........................... 182.2 161.5 -------- -------- Total liabilities and stockholders' equity.................. $1,893.7 $1,758.9 ======== ========
See accompanying notes to consolidated financial statements. 4 5 HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (MILLIONS OF DOLLARS) (UNAUDITED)
SIX MONTHS ENDED JULY 31, ------------------ 1998 1997 ---- ---- Cash flows from operating activities: Net income.................................................. $ 13.9 $ 8.5 Adjustments to reconcile net income to net cash provided by (used for) operating activities: Depreciation.............................................. 32.7 23.1 Amortization of intangibles and debt issue costs.......... 11.5 7.7 Increase in deferred taxes................................ 8.5 -- Increase in minority interest............................. 3.2 -- Equity in earnings of subsidiaries........................ (1.0) -- Extraordinary loss........................................ 14.4 -- Changes in operating assets and liabilities: Decrease in receivables................................ 2.8 13.4 Increase in inventories................................ (15.8) (13.9) Decrease in prepaid expenses and other................. 1.4 5.1 Decrease in accounts payable and accrued liabilities... (2.4) (31.5) Decrease in other long-term liabilities................ (15.9) (21.2) ------- ------- Cash provided by (used for) operating activities..... 53.3 (8.8) ------- ------- Cash flows from investing activities: Acquisition of property, plant and equipment.............. (56.4) (27.4) Purchase of businesses, net of cash received.............. (21.4) (197.5) Proceeds from assumption of future commitments in acquisition............................................ 12.0 -- Purchase of minority interest............................. (50.8) -- Other, net................................................ (11.7) (5.9) ------- ------- Cash used for investing activities..................... (128.3) (230.8) ------- ------- Cash flows from financing activities: Increase (decrease) in short-term bank borrowings......... (27.3) 1.3 Increase (decrease) in long-term and bank revolving loans.................................................. 99.8 (205.6) Repayment of term debt.................................... (100.5) -- Proceeds from accounts receivable securitization.......... 78.7 -- Stock options exercised................................... 1.7 -- Proceeds from issuance of long term debt.................. -- 500.0 Fees paid to issue long term debt......................... 1.3 (17.0) ------- ------- Cash provided by financing activities.................. 53.7 278.7 ------- ------- Effect of exchange rate changes on cash and cash equivalents............................................... (0.2) 0.9 ------- ------- Increase (decrease) in cash and cash equivalents.......... (21.5) 40.0 Cash and cash equivalents at beginning of year.............. 23.1 47.5 ------- ------- Cash and cash equivalents at end of period.................. $ 1.6 $ 87.5 ======= ======= Supplemental data: Cash paid for interest.................................... $ 51.6 $ 56.9 Cash paid for income taxes................................ $ 2.9 $ 0.9
See accompanying notes to consolidated financial statements. 5 6 HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THREE AND SIX MONTHS ENDED JULY 31, 1998 AND 1997 (UNAUDITED) (MILLIONS OF DOLLARS UNLESS OTHERWISE STATED) (1) BASIS OF PRESENTATION The accompanying consolidated financial statements have been prepared by management and in the opinion of management, contain all adjustments, consisting of normal recurring adjustments, necessary to present fairly the financial position of the Company as of July 31, 1998, and January 31, 1998, and the results of its operations for the three and six months ended July 31, 1998, and 1997 and cash flows for the six months ended July 31, 1998, and 1997. The consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 1998. Results for interim periods are not necessarily indicative of those to be expected for the year. (2) INVENTORIES The major classes of inventory are as follows:
JULY 31, JANUARY 31, 1998 1998 -------- ----------- Raw materials............................................... $ 53.4 $ 40.9 Work-in-progress............................................ 45.1 37.6 Finished goods.............................................. 70.4 53.0 ------ ------ Total..................................................... $168.9 $131.5 ====== ======
(3) SUMMARY OF NEW ACCOUNTING PRONOUNCEMENTS During 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share" ("EPS"), which changes the calculation of earnings per share to be more consistent with countries outside of the United States. In general, the statement 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. Net income per share information has been computed using the new standard for all periods presented. Shares outstanding for the three and six months ended July 31, 1998 and 1997, were as follows:
THREE MONTHS ENDED SIX MONTHS ENDED JULY 31, JULY 31, ------------------ ------------------ 1998 1997 1998 1997 ---- ---- ---- ---- Weighted average shares outstanding....................... 30,124 24,075 30,107 23,246 Dilutive effect of options and warrants................... 2,792 -- 2,561 -- ------ ------ ------ ------ Diluted shares outstanding................................ 32,916 24,075 32,668 23,246 ====== ====== ====== ======
During 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income," which establishes standards for the reporting and display of comprehensive income. Comprehensive income is defined as all changes in a Company's net assets except changes resulting from transactions with shareholders. It differs from net income in that certain items currently recorded to equity would be a part of comprehensive income. Comprehensive income must be reported in a financial statement with the cumulative total presented as a component of equity. This statement was adopted by the Company effective February 1, 1998. 6 7 HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) THREE AND SIX MONTHS ENDED JULY 31, 1998 AND 1997 (UNAUDITED) (MILLIONS OF DOLLARS UNLESS OTHERWISE STATED) (3) SUMMARY OF NEW ACCOUNTING PRONOUNCEMENTS -- (CONTINUED) The components of comprehensive income for the six months ended July 31, 1998 and 1997 are as follows:
JULY 31, JULY 31, 1998 1997 -------- -------- Net income.................................................. $13.9 $ 8.5 Cumulative translation adjustments.......................... (0.5) (1.9) ----- ----- Total comprehensive income............................. $13.4 $ 6.6 ===== =====
(4) ACQUISITIONS In February 1998, the Company purchased the remaining 50% equity in its aluminum wheel joint venture in Somerset, Kentucky, Aluminum Wheel Technology, Inc. ("Alumitech"). On March 4, 1998 the Company acquired 35% of the automotive wheel business of Automotive Overseas Investments Limited, an organization which owns and operates N.F. Die Casting (Pty) Ltd. ("N.F. Die"), a producer of cast aluminum wheels for the automotive industry in South Africa. The Company exercised its right to purchase an additional 16% of the operations on July 14, 1998 increasing its total interest in N.F. Die to 51%. On May 19, 1998, the Company purchased an additional 50.7% of the common equity and 46.2% of the preferred equity in its joint venture in Brazil, Borlem S.A. Emprendimentos Industriais ("Borlem"). This purchase increases the Company's ownership of Borlem to 98.7% of the common equity and 87.0% of the preferred equity, with the remaining shares being publicly held. On June 10, 1998, the Company acquired 100% of the common stock of MIN-CER, S.A. de C.V. ("MIN-CER"), Mexico's largest heavy-duty hub, drum and wheel manufacturer. On August 14, 1998, the Company acquired an additional 60% of the equity in its joint venture Kalyani Lemmerz Limited in India. This transaction increased the Company's ownership equity from 25% to 85%. The following unaudited pro forma financial data illustrates the estimated effects as if the above 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 tax effects.
THREE MONTHS SIX MONTHS ENDED ENDED ---------------- ---------------- 1998 1997 1998 1997 ---- ---- ---- ---- Sales....................................................... $414.3 $412.8 $871.8 $820.3 Net income (loss)........................................... $ (1.1) $ 4.2 $ 12.4 $ 8.3 Basic net income (loss) per share........................... $(0.04) $ 0.14 $ 0.41 $ 0.28 Diluted net income (loss) per share......................... $(0.03) $ 0.13 $ 0.38 $ 0.25
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. 7 8 HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) THREE AND SIX MONTHS ENDED JULY 31, 1998 AND 1997 (UNAUDITED) (MILLIONS OF DOLLARS UNLESS OTHERWISE STATED) (5) ACCOUNTS RECEIVABLE SECURITIZATION In April 1998, the Company entered into a three-year trade securitization agreement pursuant to which the Company and certain of its subsidiaries sold, and will continue to sell on an ongoing basis, a portion of their accounts receivable to a special purpose entity ("Funding Co."), which is wholly owned by the Company. Accordingly, the Company and such subsidiaries, irrevocably and without recourse, transferred and will transfer substantially all of their U.S. dollar denominated trade accounts receivable to Funding Co. Funding Co. then sold and will sell such trade accounts receivable to an independent issuer of receivable-backed commercial paper. The trade receivable securitization agreement was accounted for as a sale of receivables in accordance with FASB No. 125 "Accounting for Transfers and Servicing of Financial Assets & Extinguishments of Liabilities." The Company has collection and administrative responsibilities with respect to all the receivables which were and will be sold. (6) EXTRAORDINARY LOSS During the second quarter of fiscal 1998, the Company entered into a second amended and restated credit agreement dated June 12, 1998 (the "Second Amended and Restated Credit Agreement"). Pursuant to the Second Amended and Restated Credit Agreement, a syndicate of lenders agreed to lend to the Company up to $100 million in the form of a senior secured term loan facility and up to $400 million in the form of a senior secured revolving credit facility. This agreement amended and restated the credit agreement dated June 30, 1997 and thereby (a) eliminated (and repaid the outstanding principal balance of) certain of the then existing senior secured term loan facilities under the prior credit agreement and (b) increased the revolving credit facility to $400 million. In connection with this early repayment of the term loan facilities, the Company recorded an extraordinary loss writing off the remaining deferred financing costs associated with the term debt which was repaid. (7) COMMITMENTS AND CONTINGENCIES Management believes that at July 31, 1998, the Company was in compliance with the various covenants under the agreements pursuant to which it has or may borrow money. Management expects that the Company will remain in compliance with these covenants in all material respects through the period ending July 31, 1999. The Company is party to various litigation. Management believes that the outcome of these lawsuits will not have a material adverse effect on the consolidated operations or financial condition of the Company. (8) GUARANTOR AND NONGUARANTOR FINANCIAL STATEMENTS In connection with the Company's merger with MWC Holdings, Inc., on July 2, 1996, and as part of the financing thereof, the Company issued and sold $250 million in aggregate principal amount of its 11% senior subordinated notes due 2006 (the "11% Notes") in a public offering. The 11% Notes are general unsecured obligations of the Company, subordinated in right of payment to all existing and future senior indebtedness of the Company, and are guaranteed by certain of the Company's domestic subsidiaries. In connection with the Company's acquisition of Lemmerz Holding GmbH on June 30, 1997 (the "Lemmerz Acquisition"), the Company issued and sold $400 million in aggregate principal amount of its 9 1/8% senior subordinated notes due 2007 (the "9 1/8% Notes") in two offerings under Rule 144A of the Securities Act. The 9 1/8% Notes are general unsecured obligations of the Company, ranking pari passu with 8 9 HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) THREE AND SIX MONTHS ENDED JULY 31, 1998 AND 1997 (UNAUDITED) (MILLIONS OF DOLLARS UNLESS OTHERWISE STATED) (8) GUARANTOR AND NONGUARANTOR FINANCIAL STATEMENTS -- (CONTINUED) the 11% Notes and are guaranteed by certain of the same domestic subsidiaries of the Company as guaranteed the 11% Notes. The following condensed consolidating financial information presents: (1) Condensed consolidating financial statements as of July 31, 1998, and January 31, 1998, and for the six-month periods ended July 31, 1998, and 1997, of (a) Hayes Lemmerz International, Inc., the parent, (b) the guarantor subsidiaries, (c) the nonguarantor subsidiaries and (d) the Company on a consolidated basis, and (2) Elimination entries necessary to consolidate Hayes Lemmerz International, Inc., the parent, with the guarantor and nonguarantor subsidiaries. Investments in foreign subsidiaries are accounted for by the parent on the equity method (domestic subsidiaries are accounted for by the parent on the cost method) for purposes of the consolidating presentation. The principle elimination entries eliminate investments in subsidiaries and intercompany balances and transactions. 9 10 HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) THREE AND SIX MONTHS ENDED JULY 31, 1998 AND 1997 (UNAUDITED) (MILLIONS OF DOLLARS UNLESS OTHERWISE STATED) (8) GUARANTOR AND NONGUARANTOR FINANCIAL STATEMENTS -- (CONTINUED) CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JULY 31, 1998
GUARANTOR NONGUARANTOR CONSOLIDATED PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL ------ ------------ ------------ ------------ ------------ Net sales.............................. $133.6 $335.8 $331.6 $(4.1) $796.9 Cost of goods sold..................... 117.7 282.5 266.8 (4.1) 662.9 ------ ------ ------ ----- ------ Gross profit........................... 15.9 53.3 64.8 -- 134.0 Marketing, general and administration....................... 4.4 10.3 17.3 -- 32.0 Engineering and product development.... 1.4 2.8 5.8 -- 10.0 Amortization of intangibles............ 0.6 4.1 3.4 -- 8.1 Other income (expense)................. (0.2) 0.2 (2.1) -- (2.1) Equity in earnings of unconsolidated subs................................. (1.0) -- -- -- (1.0) ------ ------ ------ ----- ------ Earnings from operations............... 10.7 35.9 40.4 -- 87.0 Interest expense, net.................. 20.5 23.2 3.3 -- 47.0 ------ ------ ------ ----- ------ Earnings (loss) before taxes on income, minority interest and extraordinary loss................................. (9.8) 12.7 37.1 -- 40.0 Income tax provision................... 3.7 5.3 7.8 -- 16.8 ------ ------ ------ ----- ------ Earnings (loss) before minority interest and extraordinary loss...... (13.5) 7.4 29.3 -- 23.2 Minority interest...................... -- 0.2 0.8 -- 1.0 ------ ------ ------ ----- ------ Earnings (loss) before extraordinary loss................................. (13.5) 7.2 28.5 -- 22.2 Extraordinary loss, net of tax......... 8.3 -- -- -- 8.3 ------ ------ ------ ----- ------ Net income (loss)...................... $(21.8) $ 7.2 $ 28.5 $ -- $ 13.9 ====== ====== ====== ===== ======
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JULY 31, 1997
GUARANTOR NONGUARANTOR CONSOLIDATED PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL ------ ------------ ------------ ------------ ------------ Net sales.............................. $182.9 $276.1 $70.5 $(1.4) $528.1 Cost of goods sold..................... 152.0 234.1 58.6 (1.4) 443.3 ------ ------ ----- ----- ------ Gross profit........................... 30.9 42.0 11.9 -- 84.8 Marketing, general and administration....................... 7.7 10.3 3.4 -- 21.4 Engineering and product development.... 1.5 2.8 0.6 -- 4.9 Amortization of intangibles............ 1.2 3.9 -- 5.1 Other income........................... (0.6) (0.1) (1.1) -- (1.8) ------ ------ ----- ----- ------ Earnings from operations............... 21.1 25.1 9.0 -- 55.2 Interest expense, net.................. 17.6 20.8 1.8 -- 40.2 Equity in earnings of consolidated subsidiaries......................... (4.8) -- -- 4.8 -- ------ ------ ----- ----- ------ Earnings before taxes on income and minority interest.................... 8.3 4.3 7.2 (4.8) 15.0 Income tax provision................... 0.8 2.5 3.1 -- 6.4 ------ ------ ----- ----- ------ Earnings (loss) before minority interest............................. 7.5 1.8 4.1 (4.8) 8.6 Minority interest...................... -- (0.1) -- 0.2 0.1 ------ ------ ----- ----- ------ Net income............................. $ 7.5 $ 1.9 $ 4.1 $(5.0) $ 8.5 ====== ====== ===== ===== ======
10 11 HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) THREE AND SIX MONTHS ENDED JULY 31, 1998 AND 1997 (UNAUDITED) (MILLIONS OF DOLLARS UNLESS OTHERWISE STATED) (8) GUARANTOR AND NONGUARANTOR FINANCIAL STATEMENTS -- (CONTINUED) CONDENSED CONSOLIDATING BALANCE SHEETS AS OF JULY 31, 1998
GUARANTOR NONGUARANTOR CONSOLIDATED PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL ------ ------------ ------------ ------------ ------------ Current assets: Cash and cash equivalents........... $ -- $ 0.2 $ 1.4 $ -- $ 1.6 Receivables......................... 0.9 9.0 156.4 -- 166.3 Inventories......................... 39.3 51.8 77.8 -- 168.9 Prepaid expenses and other.......... 0.8 4.2 10.2 (0.2) 15.0 ------- ------- ------ ------- -------- Total current assets........... 41.0 65.2 245.8 (0.2) 351.8 Property, plant and equipment......... 161.8 387.7 397.9 -- 947.4 Accumulated depreciation............ (7.4) (102.4) (47.1) -- (156.9) ------- ------- ------ ------- -------- Net property, plant and equipment................... 154.4 285.3 350.8 -- 790.5 Goodwill and other assets............. 788.5 310.5 319.2 (666.8) 751.4 ------- ------- ------ ------- -------- Total assets................... $ 983.9 $ 661.0 $915.8 $(667.0) $1,893.7 ======= ======= ====== ======= ======== Current liabilities: Bank borrowings..................... $ 2.7 $ -- $ 38.0 $ -- $ 40.7 Current portion of long-term debt... -- -- 7.8 -- 7.8 Account payable and accrued liabilities...................... 54.5 116.6 201.5 (0.2) 372.4 ------- ------- ------ ------- -------- Total current liabilities...... 57.2 116.6 247.3 (0.2) 420.9 Noncurrent liabilities: Long-term debt...................... 854.4 -- 39.0 -- 893.4 Pension and other long-term liabilities...................... 89.7 91.8 157.8 (4.5) 334.8 Deferred income taxes............... (5.1) 19.9 35.5 -- 50.3 Minority interest................... -- 0.4 11.6 0.1 12.1 Parent loans........................ (206.1) 222.7 (16.6) -- -- ------- ------- ------ ------- -------- Total noncurrent liabilities... 732.9 334.8 227.3 (4.4) 1,290.6 Stockholders' equity: Common stock........................ 0.3 -- -- -- 0.3 Additional paid-in capital.......... 251.8 108.7 279.1 (402.8) 236.8 Retained earnings (accumulated deficit)......................... (48.6) 100.9 172.9 (262.2) (37.0) Accumulated other comprehensive income........................... (9.7) -- (10.8) 2.6 (17.9) ------- ------- ------ ------- -------- Total stockholders' equity..... 193.8 209.6 441.2 (662.4) 182.2 ------- ------- ------ ------- -------- Total liabilities and stockholders' equity.............................. $ 983.9 $ 661.0 $915.8 $(667.0) $1,893.7 ======= ======= ====== ======= ========
11 12 HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) THREE AND SIX MONTHS ENDED JULY 31, 1998 AND 1997 (UNAUDITED) (MILLIONS OF DOLLARS UNLESS OTHERWISE STATED) (8) GUARANTOR AND NONGUARANTOR FINANCIAL STATEMENTS -- (CONTINUED) CONDENSED CONSOLIDATING BALANCE SHEET JANUARY 31, 1998
GUARANTOR NONGUARANTOR CONSOLIDATED PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL ------ ------------ ------------ ------------ ------------ Current assets: Cash and cash equivalents............ $ 4.6 $ 0.1 $ 18.4 $ -- $ 23.1 Receivables.......................... 36.3 63.0 118.5 -- 217.8 Inventories.......................... 32.9 43.2 55.4 -- 131.5 Prepaid expenses and other........... 1.5 3.3 5.4 (0.2) 10.0 ------- ------ ------ ------- -------- Total current assets.............. 75.3 109.6 197.7 (0.2) 382.4 Property, plant and equipment:......... 156.6 320.6 315.4 -- 792.6 Accumulated depreciation............. 1.5 (85.9) (37.8) -- (122.2) ------- ------ ------ ------- -------- Net property, plant and equipment....................... 158.1 234.7 277.6 -- 670.4 Goodwill and other assets.............. 752.2 303.6 300.8 (650.5) 706.1 ------- ------ ------ ------- -------- Total assets...................... $ 985.6 $647.9 $776.1 $(650.7) $1,758.9 ======= ====== ====== ======= ======== Current liabilities: Bank borrowings...................... $ -- $ -- $ 23.6 $ -- $ 23.6 Current portion of long-term debt.... 2.9 -- 11.5 -- 14.4 Accounts payable and accrued liabilities....................... 71.5 128.4 135.2 (0.2) 334.9 ------- ------ ------ ------- -------- Total current liabilities......... 74.4 128.4 170.3 (0.2) 372.9 Noncurrent liabilities: Long-term debt....................... 841.9 -- 40.7 -- 882.6 Pension and other long-term liabilities....................... 83.6 85.4 135.4 (2.9) 301.5 Deferred income taxes................ (7.5) 17.9 24.4 -- 34.8 Minority interest.................... -- 0.2 5.3 0.1 5.6 Parent loans......................... (212.5) 219.7 (7.2) -- -- ------- ------ ------ ------- -------- Total noncurrent liabilities...... 705.5 323.2 198.6 (2.8) 1,224.5 Stockholders' equity: Common stock......................... 0.3 -- -- -- 0.3 Additional paid-in capital........... 246.9 104.5 272.9 (394.9) 229.4 Retained earnings (accumulated deficit).......................... (30.6) 91.7 144.4 (256.3) (50.8) Accumulated other comprehensive income............................ (10.9) 0.1 (10.1) 3.5 (17.4) ------- ------ ------ ------- -------- Total stockholders' equity........... 205.7 196.3 407.2 (647.7) 161.5 Total liabilities and stockholders' equity............................... $ 985.6 $647.9 $776.1 $(650.7) $1,758.9 ======= ====== ====== ======= ========
12 13 HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) THREE AND SIX MONTHS ENDED JULY 31, 1998 AND 1997 (UNAUDITED) (MILLIONS OF DOLLARS UNLESS OTHERWISE STATED) (8) GUARANTOR AND NONGUARANTOR FINANCIAL STATEMENTS -- (CONTINUED) CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED JULY 31, 1998
GUARANTOR NONGUARANTOR CONSOLIDATED PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL ------ ------------ ------------ ------------ ------------ Cash flow provided by (used for) operating activities................ $ (1.8) $(15.0) $ 70.1 $ -- $ 53.3 Cash flows from investing activities: Acquisition of property, plant & equipment........................ (5.8) (23.8) (26.8) -- (56.4) Purchase of businesses, net of cash received......................... (20.8) -- (0.6) -- (21.4) Proceeds from assumption of future commitments in acquisition....... 12.0 -- -- -- 12.0 Purchase of minority interest....... -- -- (50.8) -- (50.8) Other, net.......................... (26.4) 13.5 1.2 -- (11.7) ------- ------ ------ ------ ------- Cash flow used for investing activities..................... (41.0) (10.3) (77.0) -- (128.3) Cash flows from financing activities: Decrease in short-term bank borrowings....................... -- (26.5) (0.8) -- (27.3) Increase (decrease) in long-term and bank revolving loans............. 110.0 (8.0) (2.2) -- (101.2) Repayment on term debt.............. (100.5) -- -- -- 100.5 Net proceeds under accounts receivable securitization program.......................... 78.7 -- -- -- 78.7 Stock options exercised............. 1.7 -- -- -- 1.7 Fees paid to issue long term debt... 1.3 -- -- -- 1.3 ------- ------ ------ ------ ------- Cash provided by (used for) financing activities........... 91.2 (34.5) (3.0) -- 53.7 Increase (decrease) in parent advances............................ (53.0) 59.9 (6.9) -- -- Effect of exchange rates on cash and cash equivalents.................... -- -- (0.2) -- (0.2) ------- ------ ------ ------ ------- Net increase (decrease) in cash and cash equivalents.................... (4.6) 0.1 (17.0) -- (21.5) Cash and cash equivalents at beginning of year............................. 4.6 0.1 18.4 -- 23.1 ------- ------ ------ ------ ------- Cash and cash equivalents at end of period.............................. $ -- $ 0.2 $ 1.4 $ -- $ 1.6 ======= ====== ====== ====== =======
13 14 HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) THREE AND SIX MONTHS ENDED JULY 31, 1998 AND 1997 (UNAUDITED) (MILLIONS OF DOLLARS UNLESS OTHERWISE STATED) (8) GUARANTOR AND NONGUARANTOR FINANCIAL STATEMENTS -- (CONTINUED) CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED JULY 31, 1997
GUARANTOR NONGUARANTOR CONSOLIDATED PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL ------ ------------ ------------ ------------ ------------ Cash flow provided by (used for) operating activities................ $ (13.0) $ 7.6 $ 1.4 $(4.8) $ (8.8) Cash flows from investing activities: Acquisition of property, plant & equipment........................ (7.8) (9.8) (9.8) -- (27.4) Purchase of business, net of cash received......................... (197.5) -- -- -- (197.5) Other, net.......................... (3.9) 10.2 (12.2) -- (5.9) ------- ------ ------ ----- ------- Cash flow used for investing activities..................... (209.2) 0.4 (22.0) -- (230.8) Cash flows from financing activities: Increase in short-term bank borrowings....................... -- -- 1.3 -- 1.3 Decrease in long-term & bank revolving loans.................. (202.9) -- (2.7) -- (205.6) Proceeds from issuance of long term debt............................. 500.0 -- -- -- 500.0 Fees paid to issue long term debt... (17.0) -- -- -- (17.0) ------- ------ ------ ----- ------- Cash provided by (used for) financing activities........... 280.1 -- (1.4) -- 278.7 Increase (decrease) in parent advances............................ (89.3) (12.1) 96.6 4.8 -- Effect of exchange rates on cash and cash equivalents.................... -- -- 0.9 -- 0.9 ------- ------ ------ ----- ------- Net increase (decrease) in cash and cash equivalents.................... (31.4) (4.1) 75.5 -- 40.0 Cash and cash equivalents at beginning of year............................. 41.2 (0.6) 6.9 -- 47.5 ------- ------ ------ ----- ------- Cash and cash equivalents at end of period.............................. $ 9.8 $ (4.7) $ 82.4 $ -- $ 87.5 ======= ====== ====== ===== =======
14 15 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Three Months Ended July 31, 1998 Compared to Three Months Ended July 31, 1997 The Company's net sales for the second quarter of fiscal 1998 were $383.0 million, an increase of 38% as compared to net sales for the second quarter of fiscal 1997. This increase was due to the additional sales contributed by Lemmerz, which was acquired effective June 30, 1997, sales contributed by the recent acquisitions of Alumitech, Borlem and MIN-CER and higher sales in all of our European businesses and the Automotive Brake and Commercial Highway businesses in North America. These increases were partially offset by the negative impact of the GM strike. The Company's gross profit for the second quarter of fiscal 1998 increased to $61.9 million or 16.2% of net sales as compared to $46.8 million or 16.8% of net sales for the second quarter of fiscal 1997. This decrease in margin percent was due exclusively to the negative impact of the GM strike. Excluding this negative impact, gross profit would have been in excess of 17.6% of net sales for the quarter. Marketing, general and administrative expenses were $16.8 million or 4.4% of net sales for the second quarter of fiscal 1998 as compared to $12.5 million or 4.5% of net sales for the same period of fiscal 1997. This increase in costs was attributable to additional costs incurred as a result of the Lemmerz Acquisition. The Company believes that the marketing, general and administrative expenses as a percent of net sales will continue to improve as the expected savings are realized as a result of the Lemmerz Acquisition. Engineering and product development costs were $5.6 million or 1.5% of net sales for the second quarter of fiscal 1998 as compared to $2.6 million or 0.9% of net sales for the second quarter of fiscal 1997. This increase in costs and percent of net sales was attributable to additional costs incurred as a result of the Lemmerz Acquisition and the negative impact of the GM strike. The Company believes that engineering and product development costs as a percent of sales will improve even as these costs increase to successfully develop new products and as expected savings are realized as a result of the Lemmerz Acquisition. Amortization of intangibles increased by $1.4 million to $4.2 million for the second quarter of fiscal 1998. This increase is attributable to the increased goodwill recognized as a result of the Lemmerz Acquisition and the recent acquisitions of Alumitech, Borlem and MIN-CER. The extraordinary loss for early extinguishment of debt 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 the senior credit facility and fully repay certain of the outstanding term debt. Six Months Ended July 31, 1998 Compared to Six Months Ended July 31, 1997 The Company's net sales for the first half of fiscal 1998 were $796.9 million, an increase of 51% as compared to net sales for the first half of fiscal 1997. This increase was due to the additional sales contributed by Lemmerz, which was acquired effective June 30, 1997, sales contributed by the recent acquisitions of Alumitech, Borlem and MIN-CER and higher sales in all of our European businesses and the Automotive Brake and Commercial Highway businesses in North America. These increases were partially offset by the negative impact of the GM strike. The Company's gross profit for the first half of fiscal 1998 increased to $134.0 million or 16.8% of net sales as compared to $84.8 million or 16.1% of net sales for the first half of fiscal 1997. This increase in margin amount was achieved due to the increased revenues and improved productivity in all of the Company's businesses despite the negative impact of the GM strike. 15 16 Marketing, general and administrative expenses were $32.0 million or 4.0% of net sales for the first half of fiscal 1998 as compared to $21.4 million or 4.1% of net sales for the same period of fiscal 1997. This increase was attributable to additional costs incurred as a result of the Lemmerz Acquisition. The Company believes that the marketing, general and administrative expenses as a percent of net sales will continue improve as the expected savings are realized as a result of the Lemmerz Acquisition. Engineering and product development costs were $10.0 million or 1.3% of net sales for the first half of fiscal 1998 as compared to $4.9 million or 0.9% of net sales for the first half of fiscal 1997. This increase in costs and percent of net sales was attributable to additional costs incurred as a result of the Lemmerz Acquisition and the negative impact of the GM strike. The Company believes that engineering and product development costs as a percent of sales will improve even as these costs increase to successfully develop new products and as expected savings are realized as a result of the Lemmerz Acquisition. Amortization of intangibles increased by $3.0 million to $8.1 million for the first half of fiscal 1998. This increase is attributable to the increased goodwill recognized as a result of the Lemmerz Acquisition and the recent acquisitions of Alumitech, Borlem and MIN-CER. Interest expense was $47.0 million for the first half of fiscal 1998, an increase of $6.8 million over the same period of fiscal 1997. This increase was due to the increase in debt as a result of the Lemmerz Acquisition and the recent acquisitions of Alumitech, Borlem and MIN-CER. The extraordinary loss for early extinguishment of debt represented the write-off of the remaining deferred financing 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 provided $53.3 million in cash in the first six months of fiscal 1998, an increase of $62.1 million over the same period of fiscal 1997. This increase was due primarily to increased net income, improved working capital management and decreased funding requirements to the Company's pension plans. Capital expenditures for the first six months of fiscal 1998 were $56.4 million. These expenditures were primarily for additional machinery and equipment to increase the production capacity at the Company's North American and European Aluminum Wheel facilities to meet expected future customer requirements for fabricated aluminum and FFC wheels. The Company anticipates that capital expenditures for fiscal 1998 will be approximately $110 million relating primarily to new vehicle platforms, cost reduction programs and maintenance. As of July 31, 1998, the Company was party to a second amended and restated credit agreement dated June 12, 1998 (the "Second Amended and Restated Credit Agreement") with Canadian Imperial Bank of Commerce ("CIBC") and Merrill Lynch Capital Corporation ("Merrill Lynch"), as managing agents. Pursuant to the Second Amended and Restated Credit Agreement, a syndicate of lenders agreed to lend to the Company up to $100 million in the form of a senior secured term loan facility and up to $400 million in the form of a senior secured revolving credit facility. Such term loan and revolving facilities are guaranteed by the Company and all of its existing and future material domestic subsidiaries. Such term loan and revolving facilities are secured by a first priority lien in substantially all of the properties and assets of the Company and its material domestic subsidiaries, now owned or acquired later, including a pledge of all of the shares of certain of the Company's existing and future foreign subsidiaries. As of July 31, 1998 there was $100 million outstanding under the term loan facility and $277 million available under the revolving facility. In April 1998, the Company entered into a three-year agreement pursuant to which the Company and certain of its subsidiaries sold, and will continue to sell on an ongoing basis, a portion of their accounts receivables to a special purpose entity ("Funding Co."), which is wholly owned by the Company. Accordingly, the Company and such subsidiaries, irrevocably and without recourse, transferred and will transfer 16 17 substantially all of their U.S. dollar denominated trade accounts receivable to Funding Co. Funding Co. then sold and will sell such trade accounts receivable to an independent issuer of receivable-backed commercial paper. The Company has collection and administrative responsibilities with respect to all the receivables which are sold. At July 1998, management believes that the Company was in compliance with the various covenants under the agreements pursuant to which it has or may borrow money. Management expects that the Company will remain in compliance with these covenants in all material respects through the period ending July 31, 1999. OTHER MATTERS New Accounting Pronouncements On June 30, 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information", which introduces the "management approach" for segment reporting. This approach reflects management's organization of the business segments and is consistent with how the Company and its key decision-makers assess operating performance, make operating decisions and allocate resources. This approach also considers the existence of managers responsible for each business segment and how information is presented to the Company's Board of Directors. The statement requires disclosures for each segment that are similar to those currently required, with the adoption of quarterly disclosure requirements, after initial year of application, and geographic data by country. This statement will be adopted by the Company in its January 31, 1999 consolidated financial statements. In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". The Statement establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. The Statement requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement, and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. Statement 133 is effective for fiscal years beginning after June 15, 1999. The Company anticipates adopting this standard in its fiscal year 2000 and does not anticipate a material impact on the Company's financial position or results of operations when adopted. Year 2000 The Company has conducted a comprehensive review of its computer systems and related computer-controlled manufacturing and quality systems to identify the systems that could be affected by the "Year 2000" issue and is developing an implementation plan to resolve the issue. The Year 2000 problem is the result of computer programs being written using two digits rather than four to define the applicable year. Any of the Company's programs that have time-sensitive software may recognize using "00" as the year 1900 rather than the year 2000. This could result in a major system failure or miscalculations. The Company presently believes that, with modifications to existing software and converting to new software, the Year 2000 problem will not pose significant operational problems for the Company's computer systems as so modified and converted, and, as such, the Company believes that the cost of modification and conversion related to the Year 2000 problem will not have a material adverse effect on the results of operations or financial condition of the Company. However, if such modifications and conversions are not completed timely, the Year 2000 problem may have a material impact on the operations of the Company. 17 18 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None. ITEM 2. CHANGES IN SECURITIES None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS None. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits
EXHIBIT NUMBER DESCRIPTION -------------- ----------- 27 Financial Data Schedule
(b) Reports on Form 8-K None. 18 19 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HAYES LEMMERZ INTERNATIONAL, INC. By: /s/ D. N. VERMILYA ------------------------------------ D. N. Vermilya Corporate Controller and Chief Accounting Officer September 12, 1998 19 20 EXHIBIT INDEX
SEQUENTIALLY EXHIBIT NUMBERED NUMBER DESCRIPTION PAGE - ------- ----------- ------------ 27 Financial Data Schedule
20 EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS JAN-31-1999 MAY-01-1998 JUL-31-1998 1,600 0 166,300 0 168,900 351,800 947,400 (156,900) 1,893,700 420,900 0 0 0 300 181,900 1,893,700 383,000 383,000 321,100 321,100 24,800 0 22,800 14,300 6,000 7,500 0 (8,300) 0 (800) (0.03) (0.02)
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