SEC Info  
   Home     Search     My Interests     Help     Sign In     Please Sign In  

Oxford Automotive Inc, et al. · 424B3 · On 5/17/99

Filed On 5/17/99   ·   Accession Number 950124-99-3391   ·   SEC Files 333-75849, -01, -02, -03, -04, -05, -06, -07, -08, -09, -10, -11, -12, -13, -14, -15, -16, -17

  in   Show  and 
Help... Wildcards:  ? (any letter),  * (many).  Logic:  for Docs:  & (and),  | (or);  for Text:  | (anywhere),  "(&)" (near).
 
  As Of                Filer                Filing    For/On/As Docs:Size              Issuer               Agent

 5/17/99  Oxford Automotive Inc             424B3                  1:676K                                   Bowne of Detroit...01/FA
          Howell Industries Inc
          Lobdell Emery Corp
          Winchester Fabrication Corp
          Creative Fabrication Corp
          Parallel Group International Inc
          Concept Management Corp
          Lewis Emery Capital Corp
          Laserweld International LLC
          BMG Holdings Inc
          BMG North America Ltd
          Oxford Suspension Ltd
          Oxford Suspension Inc
          Rpi Holdings Inc/MI
          Oasp II Inc
          Oasp Inc
          Rpi Inc/MI
          Prudenville Manufacturing Inc

Prospectus   —   Rule 424(b)(3)
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 424B3       Prospectus                                           221   1.13M 


Document Table of Contents

Page (sequential) | (alphabetic) Top
 
11st Page   -   Filing Submission
3Summary
"The Company
5The Exchange Offer
8The Series D Notes
10Senior Credit Facility
16Risk Factors
23Use of Proceeds
24Capitalization
25Pro Forma Combined Financial Data
36Selected Consolidated Historical Financial Data
39Management's Discussion and Analysis of Financial Condition and Results of Operations
42Liquidity, Capital Resources and Financial Condition
43Shareholders' equity
45Terms of the Exchange Offer; Period for Tendering Existing Notes
"Procedures for Tendering Existing Notes
47Withdrawal Rights
48Certain Conditions to the Exchange Offer
"Exchange Agent
49Consequences of Failure to Exchange; Resales of Series D Notes
50Business
59Competition
60Regulatory Matters
61Legal Proceedings
62Management
64Compensation Committee Interlocks and Insider Participation
66Employment Agreements
"Principal Shareholders
67Shareholder Agreements
68Certain Transactions
"Description of Certain Indebtedness and Preferred Stock
70Preferred Stock of Lobdell
71Description of the Notes
"The Notes
72Optional Redemption
73Subsidiary Guaranties
74Subordination
75Change of Control
77Certificated Notes
"Certain Covenants
"Limitation on Indebtedness
79Limitation on Restricted Payments
81Limitation on Sales of Assets and Subsidiary Stock
82Limitation on Affiliate Transactions
84Merger and Consolidation
85Defaults
87Defeasance
88Certain Definitions
101Certain Federal Income Tax Considerations
103Backup Withholding
"Plan of Distribution
104Legal Matters
"Experts
105Index to Consolidated Financial Statements
107Report of Independent Accountants
108Independent Auditors' Report
111Predecessor
112Company
115Notes to Consolidated Financial Statements
181Suspension Division
184Notes to Combined Financial Statements
199Continuation Plan
221Oxford Automotive
424B31st Page of 221TOCTopPreviousNextBottomJust 1st
 

PROSPECTUS FILED PURSUANT TO RULE 424(B)(3) REGISTRATION NO. 333-75849 OFFER FOR ALL OUTSTANDING 10 1/8% SENIOR SUBORDINATED NOTES DUE 2007 SERIES A, B &C IN EXCHANGE FOR 10 1/8% SENIOR SUBORDINATED NOTES DUE 2007, SERIES D OF OXFORD AUTOMOTIVE, INC. LOGO THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON JUNE 9, 1999, UNLESS EXTENDED. -------------------------------------------------------------------------------- o EXCHANGE OFFER Offer to exchange an aggregate principal amount of up to $200 million of 10 1/8% Senior Subordinated Notes Due 2007, Series D for a like principal amount of 10 1/8% Senior Subordinated Notes Due 2007, Series A, 10 1/8% Senior Subordinated Notes Due 2007, Series B and 10 1/8% Senior Subordinated Notes Due 2007, Series C. We will not receive any proceeds from this Exchange Offer. Tenders of Series A, B or C Notes pursuant to this Exchange Offer may be withdrawn at any time prior to the expiration date. In the event we terminate this Exchange Offer and do not accept for exchange any Series A, B, or C Notes with respect to this Exchange Offer, we will promptly return such notes to the appropriate holders. o EXPIRATION OF EXCHANGE OFFER The Exchange Offer will expire at 5:00 p.m., New York City time, on June 9, 1999, or if extended, no later than June 24, 1999. The Exchange Offer is not conditioned upon any minimum principal amount of Series A, Series B or Series C Notes being tendered for exchange. o INDENTURE The Series D Notes will be issued pursuant to, and entitled to the benefits of, the Indenture governing the Series C Notes. o MATURITY The Series D Notes will mature on June 15, 2007. o REDEMPTION We may redeem the Series D Notes at any time after June 15, 2002. Before June 15, 2000, we may redeem up to 35% of the Series D Notes with the proceeds of certain types of public equity offerings. o MANDATORY OFFER TO REPURCHASE If we sell certain assets or experience certain kinds of changes in control, we must offer to repurchase the Series D Notes. o GUARANTIES If we cannot make payments on the Series D Notes when due, our guarantor subsidiaries must make them instead. Not all of our subsidiaries will be guarantors. o RANKING The Series D Notes and the subsidiary guaranties are subordinated to all of our and our guarantor subsidiaries' Senior Indebtedness. o INTEREST The Series D Notes will bear interest at 10 1/8% from and including the date of consummation of this Exchange Offer. Interest will be paid every six months on June 15 and December 15 of each year. THE NOTES AND THE EXCHANGE OFFER INVOLVE RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 14. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this Prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The date of this Prospectus is May 7, 1999.
424B32nd Page of 221TOC1stPreviousNextBottomJust 2nd
WHERE YOU CAN FIND MORE INFORMATION This Prospectus incorporates important business and financial information about us that is not included in or delivered with the Prospectus. This information is available without charge upon written or oral request to: Secretary, Oxford Automotive, Inc., 1250 Stephenson Highway, Troy, Michigan 48083, (telephone 248-577-1400). In order to ensure timely delivery of any documents, any request should be made no later than five business days prior to the Expiration Date of June 9, 1999. i
424B33rd Page of 221TOC1stPreviousNextBottomJust 3rd
 SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements and related notes appearing elsewhere in this Prospectus. For purposes of this Prospectus, the "Company," "our," "we," and "us" shall refer to Oxford Automotive, Inc. ("Oxford Automotive") and all of its consolidated subsidiaries, unless the context otherwise requires.  THE COMPANY GENERAL We are a leading Tier 1 or direct supplier of high-quality, engineered metal components, assemblies and modules used by original equipment automotive manufacturers, commonly referred to as "OEMs". Our core products are complex, high value-added products, primarily assemblies containing multiple stamped parts forgings and various welded, hemmed or fastened components. These products which include large structural stampings and assemblies, including exposed Class A surfaces, leaf springs and smaller complex welded assemblies, are used in manufacturing a variety of sport utility vehicles, light and medium trucks, mini-vans, vans and passenger cars. We are the sole source supplier of these products to our customers. On February 5, 1999, a wholly-owned subsidiary of the Company acquired 100% of the shares of Cofimeta S.A. and approximately 99% of the shares of its four subsidiaries: Somenor S.A.; Aubry S.A.; Ecrim S.A.; and Socori Technologies S.A. Cofimeta S.A. and its four subsidiaries are collectively referred to as "Cofimeta." Cofimeta is a leading supplier of closure panels, floor pans, deck lids, structured pillars, cross members, radiator surrounds and front ends and Class A surfaces. Cofimeta is headquartered in a suburb of Paris and operates five facilities in France. Our seven largest customers, based on proforma net sales for the nine months ended December 31, 1998, assuming the acquisition of Cofimeta had occurred on April 1, 1998 are GM, Ford, Renault, Peugeot Citroen, DaimlerChrysler, CAMI (a joint venture of GM and Suzuki Motor Corporation) and Saturn. For the nine months ended December 31, 1998, approximately 72% of our pro forma net sales were derived from sales of our products manufactured for sport utility vehicles, mini-vans, vans and light trucks. We currently operate 21 manufacturing facilities which offer the latest technologies in metal stamping, forging, welding and assembly production equipment, including fully-automated hydraulic and wide-bed press lines (up to 180 inches), robotic welding cells, robotic hemming, autophoretic corrosion resistant coating, and a patented eye forming process. Our diverse line of over 500 presses that range up to 3,000 tons including both conventional and transfer technology and state-of-the-art robotic weld assembly and hemming equipment are capable of manufacturing a broad assortment of parts and assemblies ranging from simple stampings to full-size, exposed door and closure panels. We are one of a few independent suppliers that have the ability to produce large, complex stampings, as well as the technical expertise and automated assembly capabilities to provide high value-added modules such as door apertures and assemblies, A-pillars, exposed surface products and control arms, and multiple leaf and parabolic leaf springs. On a pro forma basis, assuming the acquisitions of Howell Industries, Inc., a Michigan corporation, RPI Holdings, Inc., a Michigan corporation and the Suspension Division of Eaton Corporation, each described below, and Cofimeta had occurred on April 1, 1997, we would have had net sales of $765.2 million and EBITDA of $40.8 million for the fiscal year ended March 31, 1998. For the nine months ended December 31, 1998, on a pro forma basis assuming the acquisition of Cofimeta had occurred on April 1, 1998 we would have had net sales of $555.3 million and EBITDA of $41.6 million. Our principal executive office is located at 1250 Stephenson Highway, Troy, Michigan 48083, and its telephone number is (248) 577-1400. 1
424B34th Page of 221TOC1stPreviousNextBottomJust 4th
BUSINESS STRATEGY Our principal objective is to be a leading, full-service, global Tier 1 supplier of integrated systems based on metal forming and related manufacturing technologies. We believe that we are well positioned to benefit from two significant trends in the stamping and metal forming segments of the automotive industry, outsourcing and consolidation. Outsourcing of metal stamping has increased in response to competitive pressures on OEMs to improve quality and reduce capital requirements, labor costs, overhead and inventory. Consolidation among automotive industry suppliers has occurred as OEMs have more frequently awarded long-term sole source contracts to the most capable global suppliers. In addition, OEMs are increasingly seeking systems suppliers who can provide a complete package of design, engineering, manufacturing and project management support for an integrated system (such as a front-end system). We intend to capitalize on these trends through internal development and strategic acquisitions. The key elements of our strategy include the following: o provide full-service program capability, o supply complex, high value-added systems, o focus on high growth vehicle categories, o establish a global presence, and o pursue strategic acquisitions. RECENT DEVELOPMENTS On February 5, 1999, as described above, we acquired Cofimeta. On April 1, 1998, we acquired the Suspension Division of Eaton Corporation. The Suspension Division is a leading Tier 1 North American supplier of leaf spring suspension systems for automotive applications. Products of the Suspension Division include multiple leaf, parabolic (long taper) multiple leaf, and single leaf long taper suspension systems. The Suspension Division is held through two of the Company's subsidiaries, Oxford Suspension, Inc. and Oxford Suspension Ltd. 2
424B35th Page of 221TOC1stPreviousNextBottomJust 5th
 THE EXCHANGE OFFER Securities Offered............................. Up to $200.0 million aggregate principal amount of 10 1/8% Senior Subordinated Notes Due 2007, Series D. The terms of the Series D Notes are identical in all material respects, except for certain transfer restrictions, registration rights and certain interest rate step-up provisions, to the $40 million aggregate principal amount of 10 1/8% Senior Subordinated Notes Due 2007, Series C issued by the Company on December 8, 1998. The terms of the Series D Notes are also identical in all material respects to the $125 million aggregate principal amount of 10 1/8% Senior Subordinated Notes Due 2007, Series A issued by the Company on June 24, 1997 and the $35 million aggregate principal amount of 10 1/8% Senior Subordinated Notes Due 2007, Series B issued by the Company on April 1, 1998. The Series A Notes, Series B Notes and Series C Notes are referred to as the "Existing Notes". The Series A Notes and the Series B Notes were both issued under the same Indenture dated as of June 15, 1997. The Existing Notes and the Series D Notes are sometimes referred to collectively as the "Notes." See "The Series D Notes" and "The Exchange Offer." The Exchange Offer............................. The Series D Notes are being offered in exchange (the "Exchange Offer") for a like principal amount of Existing Notes. You may exchange Existing Notes only in integral multiples of $1,000. The issuance of the Series D Notes is intended to satisfy obligations of the Company and certain of its subsidiaries (the "Subsidiary Guarantors") that have fully and unconditionally guaranteed (the "Subsidiary Guaranties"), on a joint and several basis, and on an unsecured, senior subordinated basis the Notes, contained in the Registration Rights Agreement dated December 8, 1998, among the Company, certain of the Subsidiary Guarantors and Bear, Stearns & Co. Inc., BT Alex Brown Incorporated, and Morgan Stanley & Co. Incorporated, relating to the Series C Notes (the "Registration Agreement"). The objective of the Exchange Offer is to create a single series of debt securities having a total outstanding principal amount which is larger than that of any of the Existing Notes as separate series. This may create greater liquidity for the Series D Notes. However, see "Risk Factors -- Dilution of Interest." Expiration Date; Withdrawal of Tender.......... The Exchange Offer will expire at 5:00 p.m. New York City time, on June 9, 1999, unless we extend the offer to a date not later than June 24, 1999. You may withdraw the tender of Existing Notes pursuant to the Exchange Offer at any time prior to the Expiration Date. Any Existing Notes not accepted for exchange for any reason will be returned without expense to the tendering holder of such Existing Note as promptly as practicable after the expiration or termination of the Exchange Offer. We will provide written notice of any extension, amendment, non-acceptance or termination to the holders of Existing Notes, including those holders who have previously tendered their Existing Notes. See 3
424B36th Page of 221TOC1stPreviousNextBottomJust 6th
"The Exchange Offer -- Terms of the Exchange Offer; Period for Tendering Existing Notes" and "-- Withdrawal Rights." Certain Conditions to the Exchange Offer....... Our obligation to accept for exchange, or to issue Series D Notes in exchange for, any Existing Notes is subject to certain customary conditions relating to compliance with any applicable law, or order of any governmental agency or any applicable interpretation by the Staff of the SEC, which we may waive in our reasonable discretion. We currently expect that each of the conditions will be satisfied and that no waivers will be necessary. See "The Exchange Offer -- Certain Conditions to the Exchange Offer." Procedures for Tendering Existing Notes........ If you wish to accept the Exchange Offer, you must complete, sign and date the accompanying Letter of Transmittal, or a facsimile thereof, in accordance with the instructions contained in such letter and in this Prospectus, and mail or otherwise deliver such Letter of Transmittal, or such facsimile, together with such Existing Notes and any other required documentation, to the Exchange Agent at the address set forth in this Prospectus. See "The Exchange Offer -- Procedures for Tendering Existing Notes." Special Procedures for Beneficial Owners....... Any beneficial owner whose Existing Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender such Existing Notes in the Exchange Offer should contact such registered holder promptly and instruct such registered holder to tender on such beneficial owner's behalf. If such beneficial owner wishes to tender on such owner's own behalf, such owner must, prior to completing and executing the Letter of Transmittal and delivering its Existing Notes, either make appropriate arrangements to register ownership of the Existing Notes in such owner's name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time and may not be completed prior to the Expiration Date. Guaranteed Delivery Procedures................. If you wish to tender your Existing Notes and they are not immediately available or you cannot deliver your Existing Notes, the Letter of Transmittal or any other documents required by the Letter of Transmittal to the Exchange Agent, prior to the Expiration Date, you must tender your Existing Notes according to the guaranteed delivery procedures set forth in "The Exchange Offer -- Guaranteed Delivery Procedures Use of Proceeds ............................. We will not receive any proceeds from the exchange of Series D Notes pursuant to the Exchange Offer. Exchange Agent ............................. U.S. Bank Trust National Association is serving as the Exchange Agent in connection with the Exchange Offer. Federal Income Tax Consequences................ We believe that the exchange of Existing Notes pursuant to the Exchange Offer will not be a taxable event for federal income tax purposes. See "Certain Federal Income Tax Considerations." 4
424B37th Page of 221TOC1stPreviousNextBottomJust 7th
CONSEQUENCES OF EXCHANGING EXISTING NOTES PURSUANT TO THE EXCHANGE OFFER Based on certain interpretive letters issued by the Staff of the SEC to third parties in unrelated transactions, we are of the view that holders, other than any holder who is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act, who exchange their Existing Notes for Series D Notes pursuant to the Exchange Offer generally may offer such Series D Notes for resale, resell such Series D Notes, and otherwise transfer such Series D Notes without compliance with the registration and prospectus delivery provisions of the Securities Act, provided such Series D Notes are acquired in the ordinary course of the holders' business and such holders have no arrangement with any person to participate in a distribution of such Series D Notes. Any holder who tenders in the Exchange Offer with the intention or for the purpose of participating in a distribution of the Series D Notes cannot rely on such interpretation by the Staff of the SEC and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. Unless an exemption from registration is otherwise available, any such resale transaction should be covered by an effective registration statement containing the information required by the Securities Act. This Prospectus may be used for an offer to resell, resale or other retransfer of Series D Notes only as specifically set forth in this Prospectus. Each broker-dealer that receives Series D Notes for its own account in exchange for Existing Notes, where such Existing Notes were acquired by such broker-dealer as a result of market-making activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Series D Notes. See "Plan of Distribution." In addition, to comply with the securities laws of certain jurisdictions, if applicable, the Series D Notes may not be offered or sold unless they have been registered or qualified for sale in such jurisdiction or in compliance with an available exemption from registration or qualification. We have agreed, pursuant to the Registration Agreement, to register or qualify the Series D Notes for offer or sale under the securities or blue sky laws of such jurisdictions as any holder of the Series C Notes reasonably requests in writing. CONSEQUENCES OF NOT EXCHANGING EXISTING NOTES Holders of Series C Notes who do not exchange their Series C Notes for Series D Notes pursuant to the Exchange Offer will continue to be subject to restrictions on transfer. Generally, Series C Notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. If you do not exchange your Existing Notes for Series D Notes, you will not be able to take advantage of the increased liquidity that may be afforded by the Series D Notes. The Series D Notes would have a total aggregate principal amount of $200.0 million as opposed to $160.0 million for the Series A and Series B Notes, which were issued under one indenture, and $40.0 million for the Series C Notes, which were issued under a different indenture. See "Risk Factors -- Consequences of Failure to Exchange" and "The Exchange Offer -- Consequences of Failure to Exchange; Resales of Series D Notes." Holders of Series A Notes and Series B Notes who do not exchange their Series A Notes and Series B Notes will continue to be subject to the Indenture dated June 15, 1997 under which such notes were issued. This Indenture is substantially the same as the Indenture governing the Series D Notes except for the treatment of proceeds from certain asset sales. See "Description of the Notes -- General; and -- Certain Covenants." 5
424B38th Page of 221TOC1stPreviousNextBottomJust 8th
THE SERIES D NOTES The terms of the Series D Notes are identical in all material respects to the Series C Notes, except for certain transfer restrictions, registration rights and certain interest rate step-up provisions. The terms of the Series D Notes are also identical in all material respects to the Series A Notes and the Series B Notes. Unlike the Series A Notes, the Series B Notes and the Series D Notes, the Series C Notes were not registered under the Securities Act and were offered in a transaction not involving any public offering within the meaning of the Securities Act, and are therefore subject to certain transfer restrictions under the Securities Act. The Series C Notes also included certain registration rights relating to the Registration Agreement that are not applicable to the Series D Notes. Pursuant to the Registration Agreement, we agreed to: o not later than 120 days after the closing of the sale of the Series C Notes on December 8, 1998 (the "Closing Date"), file with the SEC a Registration Statement on Form S-4 relating to the Exchange Offer (the " Exchange Offer Registration Statement," which term shall encompass all related amendments, exhibits, annexes and schedules) and o cause the Exchange Offer Registration Statement to be declared effective under the Securities Act not later than 180 days after the Closing Date. The Exchange Offer Registration Statement also provides for the exchange of the Series A Notes and the Series B Notes for Series D Notes having terms substantially identical in all material respects to the Existing Notes. In addition, we have agreed to file a shelf registration statement ("Shelf Registration Statement") covering resales of the Series C Notes or those Series D Notes to be exchanged for Series C Notes, to use our best efforts to cause the Shelf Registration Statement to be declared effective under the Securities Act, and to keep the Shelf Registration Statement effective until two years after its effective date, or shorter period that will terminate when all Series C Notes or those Series D Notes to be exchanged for Series C Notes, covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement, if: o applicable interpretations of the Staff of the SEC do not permit us to effect the Exchange Offer, or if for any other reason the Exchange Offer is not consummated within 210 days after the Closing Date, o Bear, Stearns & Co. Inc., BT Alex. Brown Incorporated and Morgan Stanley & Co., Incorporated (the "Initial Purchasers") request, with respect to Series C Notes not eligible to be exchanged for Series D Notes in the Exchange Offer, or o any holder of Series C Notes is not eligible to participate in the Exchange Offer or participates in but does not receive freely tradeable, except for prospectus delivery requirements, Series D Notes in the Exchange Offer. The Series C Notes have interest rate step-up provisions which primarily become effective in the event certain registration requirements are not satisfied by specified dates. The interest rate step-up provisions provide in part that additional interest ("Special Interest") will accrue on the Series C Notes and certain Series D Notes, if any of the following "Registration Defaults" occur: o if within 180 days after the Closing Date, the Exchange Offer Registration Statement has not been declared effective; 6
424B39th Page of 221TOC1stPreviousNextBottomJust 9th
o if within 210 days after the Closing Date, neither the Exchange Offer has been consummated nor the Shelf Registration Statement has been declared effective; or o if after either the Exchange Offer Registration Statement or the Shelf Registration Statement has been declared effective, such Registration Statement thereafter ceases to be effective or usable, subject to certain exceptions, in connection with resales of Series C Notes or those Series D Notes to be exchanged for the Series C Notes. Special Interest will accrue at a rate of 0.25% per annum during the 90-day period immediately following the occurrence of any Registration Default and shall increase by 0.25% per annum at the end of each subsequent 90- day period, but in no event shall such rate exceed 1.00% per annum. The interest rate step-up provisions do not apply to the Series A Notes, the Series B Notes, or the Series D Notes to be exchanged for the Series A Notes and Series B Notes. Issuer..................................... Oxford Automotive, Inc. Series D Notes............................. $200.0 million in aggregate principal amount of 10 1/8% Senior Subordinated Notes Due 2007, Series D. Maturity................................... June 15, 2007. Interest Payment Dates..................... Each June 15 and December 15. Subsidiary Guaranties...................... Like the Existing Notes, the Series D Notes will be fully and unconditionally guaranteed on a joint and several basis, and on a senior subordinated basis by each Restricted Subsidiary of the Company, other than certain foreign subsidiaries, that is an obligor or guarantor of any Bank Credit Agreement (the "Subsidiary Guaranties"). See "Description of the Notes -- Subsidiary Guaranties." Subordination of Series D Notes and Subsidiary Guaranties...................... Like the Existing Notes, the Series D Notes and the Subsidiary Guaranties will be general unsecured senior subordinated obligations of the Company and the Subsidiary Guarantors, as applicable. The Series D Notes and the Subsidiary Guaranties will be subordinated in right of payment to the prior payment in full of all existing and future Senior Indebtedness and will rank pari passu with or senior to all present and future subordinated indebtedness of the Company or the relevant Subsidiary Guarantors, as applicable. As of December 31, 1998, the Company had $30.0 million outstanding Senior Indebtedness and the Subsidiary Guarantors' outstanding Senior Indebtedness was approximately $3.0 million. See "Description of the Notes -- Subordination." Trustee.................................... U.S. Bank Trust National Association. Sinking Fund............................... None Optional Redemption........................ Like the Existing Notes, the Series D Notes will be redeemable at our option in whole or in part at any time on or after June 15, 2002, at the redemption prices set forth in this Prospectus plus accrued and unpaid interest, if any, to the redemption date. In addition, at any time prior to 7
424B310th Page of 221TOC1stPreviousNextBottomJust 10th
June 15, 2000, we may redeem, at our option, up to an aggregate amount of 35% of the original principal amount of the Notes with the proceeds of one or more Public Equity Offerings following which there is a Public Market at a redemption price of 110.125% of the principal amount thereof plus accrued and unpaid interest, if any, to the redemption date, provided that at least 65% of the original aggregate principal amount of the Notes remains outstanding after each such redemption. See "Description of the Notes -- Optional Redemption." Change of Control.......................... Upon the occurrence of a Change of Control, each holder of Notes, including the Series D Notes, will have the right to require us to purchase all or a portion of such holder's Notes at a price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase. In the event of a Change of Control, we cannot assure that we will have the financial resources or be permitted under the terms of our other indebtedness to repurchase or redeem the Notes. See "Description of the Notes -- Change of Control." Certain Covenants; Defaults................ The Indenture governing the Series C Notes and the Series D Notes the "Indenture"), among other things, limits the ability of the Company and its Restricted Subsidiaries to: - incur additional indebtedness, - pay dividends or make other distributions with respect to capital stock of the Company and its Restricted Subsidiaries, - create certain liens, - sell material assets of the Company or its Restricted Subsidiaries, - enter into certain mergers and consolidations, and - make capital expenditures. The Indenture also contains certain events of default including payment defaults and a default arising upon an acceleration by the holders of certain other Indebtedness, including the Senior Credit Facility, because of a default. See "Description of the Notes -- Certain Covenants and -- Defaults." Risk Factors................................... See "Risk Factors" for a discussion of certain factors that should be considered in connection with the Exchange Offer.  SENIOR CREDIT FACILITY On February 4, 1999, we entered into an amended and restated credit agreement with NBD Bank, on behalf of itself and as agent for a syndicate of other lenders, providing for a $35.0 million revolving credit facility to finance customer tooling, a $30.0 million term loan and a $110.0 million revolving credit facility (the "Senior Credit Facility"). On March 31, 1999, we further amended the Senior Credit Facility to accommodate our lease transaction with respect to our manufacturing operations in Ramos Arizpe, Mexico. Approximately $80.3 million was available under the revolver at March 1, 1999, reduced for the effect of a Letter of Credit issued for certain Industrial Revenue Bonds and approximately $5.0 million was available under the revolver available for customer tooling. The obligations under the Senior Credit Facility are secured by substantially all the assets of the Subsidiary Guarantors and the Company. 8
424B311th Page of 221TOC1stPreviousNextBottomJust 11th
The Senior Credit Facility contains certain customary covenants, including reporting and other affirmative covenants, financial covenants, and negative covenants, as well as customary events of default, including non-payment of principal, violation of covenants, and cross-defaults to certain other indebtedness, including the indebtedness evidenced by the Notes. See "Description of Certain Indebtedness and Preferred Stock -- Senior Credit Facility." As of March 1, 1999, there were borrowings of $89.7 million under the Senior Credit Facility. See "Capitalization" and "Description of Certain Indebtedness and Preferred Stock." 9
424B312th Page of 221TOC1stPreviousNextBottomJust 12th
SUMMARY CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL DATA The following table sets forth (i) summary historical financial data of BMG North America Limited ("BMG" or the "Predecessor") for the period from April 1, 1995 through October 27, 1995, (ii) summary historical financial data of the Company from October 28, 1995 through March 31, 1996, for the years ended March 31, 1997 and 1998, and (iii) summary pro forma financial data for the year ended March 31, 1998 and the nine months ended December 31, 1998. The summary historical financial data for the period April 1, 1995 through October 27, 1995 and the period October 28, 1995 through March 31, 1996 was derived from the audited consolidated financial statements of the Predecessor and the Company, which are included elsewhere in this Prospectus, together with the report of Deloitte & Touche LLP, independent accountants. The summary historical financial data for the years ended March 31, 1997 and 1998 was derived from the audited consolidated financial statements of the Company, which are included elsewhere in this Prospectus, together with the report of PricewaterhouseCoopers LLP, independent accountants. The summary pro forma statement of operations data and other financial data for the fiscal year ended March 31, 1998 were prepared to illustrate the effect of the offering of the Series A Notes (the "Series A Offering") the offering of the Series B Notes (the "Series B Offering"), the offering of the Series C Notes (the "Series C Offering"), and the acquisitions of Howell Industries, Inc. ("Howell"), RPI Holdings, Inc. ("RPIH"), the Suspension Division of Eaton Corporation (the "Suspension Division") and Cofimeta, as if each had occurred on April 1, 1997. The summary pro forma statement of operations data and other financial data for the nine months ended December 31, 1998 were prepared to illustrate the effect of the Series C Offering and the acquisition of Cofimeta, as if each had occurred April 1, 1998. The summary pro forma balance sheet data at December 31, 1998 was prepared to illustrate the effect of the acquisition of Cofimeta, as if it had occurred on December 31, 1998. The pro forma data does not purport to be indicative of the results of operations or the financial position of the Company that would have been obtained if the acquisitions and the offerings had in fact been completed as of such dates or to project the results of operations or the financial position of the Company for any future date or period. The following table should be read in conjunction with the "Selected Consolidated Historical Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Pro Forma Combined Financial Data," and the Consolidated Financial Statements of the Company and the related notes and other financial information presented elsewhere in this Prospectus. 10
424B313th Page of 221TOC1stPreviousNextBottomJust 13th
[Enlarge/Download Table] HISTORICAL PRO FORMA ---------------------------------------------------------------- --------------- PREDECESSOR COMPANY --------------- ---------------------------------------------------------------- PERIOD PERIOD FISCAL YEAR FISCAL YEAR FISCAL YEAR APR. 1, 1995 - OCT. 28, 1995 - ENDED ENDED ENDED OCT. 27, 1995 MAR. 31, 1996 MAR. 31, 1997 MAR. 31, 1998 MAR. 31, 1998 --------------- --------------- ------------- ------------- --------------- AUDITED AUDITED AUDITED AUDITED UNAUDITED (DOLLARS IN THOUSANDS) STATEMENT OF OPERATIONS DATA: Net sales $ 49,043 $ 35,572 $ 136,861 $ 410,321 $ 765,194 Gross profit 2,148 3,948 11,486 41,901 57,442 Operating income (loss) (1,774) 1,713 3,801 20,054 4,085 Interest expense 1,048 1,096 3,388 10,710 24,262 Other income (expense) -- -- 2,201 321 1,151 Income (loss) before income taxes (2,822) 617 2,614 9,665 (19,026) Provision (benefit) for income Net income (loss) $ (1,884) $ 415 $ 1,549 $ 5,591 $ (11,697) BALANCE SHEET DATA (END OF PERIOD): Cash and cash equivalents $ -- $ -- $ 9,671 $ 18,321 Trade accounts receivable, net 13,312 8,338 47,626 65,273 Inventories 4,429 3,719 13,411 21,305 Total assets 59,770 49,200 243,694 320,032 Total debt 23,233 26,758 99,829 139,448 Redeemable preferred stock -- -- 39,300 40,192 Total shareholders' equity 9,329 935 2,341 6,118 FINANCIAL RATIOS AND OTHER DATA: Depreciation and amortization $ 919 $ 687 $ 5,041 $ 20,279 Capital expenditures 5,111 3,466 3,326 16,723 Ratio of earnings to fixed charges (a) -- 1.5x 1.7x 1.7x EBITDA(b) $ (855) $ 2,400 $ 11,043 $ 40,654 Gross margin (c) 4.38% 11.10% 8.60% 10.21% EBITDA margin (d) NM 6.75% 8.07% 9.91% Ratio of EBITDA to net interest expense (e) NM 2.2x 3.3x 3.8x Ratio of net debt to EBITDA (f) NM 4.7x 8.2x 3.0x See accompanying Notes to Summary Consolidated Historical and Pro Forma Financial Data. 11
424B314th Page of 221TOC1stPreviousNextBottomJust 14th
[Enlarge/Download Table] HISTORICAL PRO FORMA --------------------------- -------------- NINE MONTHS NINE MONTHS NINE MONTHS ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, 1997 1998 1998 ------------ ------------ -------------- UNAUDITED UNAUDITED UNAUDITED (DOLLARS IN THOUSANDS) STATEMENT OF OPERATIONS DATA: Net Sales ................................... $295,530 $ 408,144 $ 555,251 Gross Profit ................................ 28,350 35,532 46,284 Operating income (loss) ..................... 14,763 12,121 14,472 Interest expense ............................ 7,921 14,255 18,568 Other income (expense) ...................... 531 949 962 Income (loss) before income taxes ........... 7,373 (1,185) (3,134) Provision (benefit) for income taxes ........ 2,949 (475) (1,254) Net income (loss) ........................... 4,424 (710) (1,880) BALANCE SHEET DATA (END OF PERIOD): Cash and cash equivalents ................... 19,555 318 8,621 Trade accounts receivable, net .............. 51,375 86,336 111,707 Inventories ................................. 20,158 33,911 51,959 Total assets ................................ 290,312 412,562 540,151 Total debt .................................. 138,517 230,960 294,273 Redeemable preferred stock .................. 40,458 40,586 40,586 Total shareholders' equity .................. 1,377 (2,078) (2,078) FINANCIAL RATIOS AND OTHER DATA: Depreciation and amortization ............... 14,580 19,552 26,159 Capital expenditures ........................ 11,418 20,369 24,099 Ratio of earnings to fixed charges(a) ....... 1.7x -- -- EBITDA(b) ................................... 29,874 32,622 41,593 Gross margin(c) ............................. 9.59% 8.71% 8.33% EBITDA margin(d) ............................ 10.11% 7.99% 7.49% Ratio of EBITDA to net interest expense(e) .. 3.8x 2.3x 2.2x Ratio of net debt to EBITDA(f) .............. 3.0x 5.3x 5.2x See accompanying Notes to Summary Consolidated Historical and Pro Forma Financial Data. 12
424B315th Page of 221TOC1stPreviousNextBottomJust 15th
(a) For purposes of this computation, earnings consist of income (loss) before income taxes plus fixed charges. Fixed charges consist of interest on indebtedness plus that portion of rental expense representative of the interest factor. For fiscal 1994, the Company's ratio of earnings to fixed charges was 2.2x. For fiscal 1995, the Company's earnings were insufficient to cover fixed charges by $1.6 million. For the period April 1, 1995 to October 27, 1995, the Company's earnings were insufficient to cover fixed charges by $2.8 million. For the nine months ended December 31, 1998, the Company's earnings were insufficient to cover fixed charges by $1.2 million. For the nine months ended December 31, 1998 on a pro forma basis for the Cofimeta acquisition, the Company's earnings were insufficient to cover fixed charges by $3.1 million. (b) EBITDA is defined as income (loss) before interest, income taxes, depreciation and amortization. EBITDA should not be construed as a substitute for income from operations, net income or cash flow from operating activities for the purpose of analyzing the Company's operating performance, financial position and cash flows. (c) Gross margin is defined as gross profit as a percent of net sales for each of the applicable periods. (d) EBITDA margin is defined as EBITDA as a percent of net sales for each of the applicable periods. (e) Defined as the ratio of EBITDA to net interest expense. (f) Defined as the ratio of net debt to EBITDA with net debt consisting of total debt less cash and cash equivalents and unexpended bond proceeds. 13
424B316th Page of 221TOC1stPreviousNextBottomJust 16th
 RISK FACTORS This Prospectus contains forward-looking statements within the meaning of Section 27A of the Securities Act, as amended. Discussions containing such forward-looking statements may be found in the material set forth under "Summary," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business," as well as within the Prospectus generally. Actual results could differ materially from those projected in the forward-looking statements as a result of the risk factors set forth below and the matters set forth in the Prospectus generally. We caution you, however, that this list of factors may not be exhaustive. In evaluating the Exchange Offer, you should carefully consider the following risk factors, as well as the other information set forth elsewhere in this Prospectus. The risk factors set forth below are generally applicable to the Existing Notes as well as the Series D Notes. SUBSTANTIAL LEVERAGE - OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT THE FINANCIAL HEALTH OF THE COMPANY AND PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER THESE NOTES. We have now and, after the Exchange Offer, will continue to have a significant amount of indebtedness. The following chart shows certain important credit data for your review: [Download Table] PRO FORMA DECEMBER 31, 1998 ----------------- Total debt ............................ $ 294,273 Preferred stock ....................... 40,586 Shareholders' equity .................. (2,078) Our total indebtedness does not include unused commitments under the Senior Credit Facility of approximately $85.3 million. In addition, if we are required to incur or assume additional indebtedness in connection with our acquisition strategy, our interest and debt service requirements will increase. See "Risk Relating to Acquisitions." Our substantial indebtedness could have important consequences to you. For example, it could: o impair our ability to obtain additional financing for working capital, capital expenditures, acquisitions or general corporate purposes; o reduce the funds available to us for purposes other than the payment of interest on the Existing Notes, the Series D Notes, the Senior Credit Facility and our other existing indebtedness; o limit, along with the restrictive financial and operating covenants in our long-term indebtedness, our ability to borrow additional funds; o cause us to be vulnerable to increases in interest rates, due to the variable interest rates applicable to certain indebtedness under the Senior Credit Facility; o make it more difficult for us to satisfy our obligations with respect to the Series D Notes, as all of the indebtedness outstanding under the Senior Credit Facility is secured by substantially all the assets of the Subsidiary Guarantors and the Company and will become due prior to the time the principal on the Series D Notes will become due; o hinder our ability to adjust rapidly to changing market conditions; and o increase our vulnerability to general economic and industry conditions. ABILITY TO SERVICE DEBT - TO SERVICE OUR INDEBTEDNESS, WE WILL REQUIRE A SIGNIFICANT AMOUNT OF CASH. OUR ABILITY TO GENERATE CASH DEPENDS ON MANY FACTORS BEYOND OUR CONTROL. The Indenture permits the Company and the Subsidiary Guarantors to incur additional indebtedness, including Senior Indebtedness and indebtedness that will rank pari passu with the Series D Notes. 14
424B317th Page of 221TOC1stPreviousNextBottomJust 17th
Our ability to pay interest on the Series D Notes and to satisfy our other obligations will depend upon our future operating performance. This performance will be affected by prevailing economic conditions and financial, business and other factors, many of which are beyond our control. We anticipate that our operating cash flow, together with available borrowings under the Senior Credit Facility, will be sufficient to meet our operating expenses, to service interest requirements on our debt obligations and to implement our business strategy. We cannot assure you, however, that our business will generate sufficient cash flow from operations or that future borrowings will be available in an amount sufficient to enable us to service our indebtedness, including the Series D Notes, or to fund our other liquidity needs. Also, we are required to redeem certain preferred stock prior to the time the principal on the Series D Notes will become due. The maximum aggregate redemption price for such preferred stock, assuming we do not commence a public offering of our common stock prior to June 30, 2000, is $40.9 million, plus any accrued and unpaid dividends to the date of redemption. The following is important earnings data for your review: o For the nine months ended December 31, 1998, we experienced a net loss of $0.7 million and our earnings were insufficient to cover fixed charges by $1.2 million. o Our predecessor experienced a net loss of $1.3 million for the year ended March 31, 1995, and experienced a net loss of $1.9 million during the period from April 1, 1995 through October 27, 1995. In addition, for fiscal 1995, our earnings were insufficient to cover fixed charges by $1.6 million. For the period April 1, 1995 to October 27, 1995, our earnings were insufficient to cover fixed charges by $2.8 million. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity, Capital Resources and Financial Condition" and "Description of Certain Indebtedness and Preferred Stock." The Senior Credit Facility contains certain customary covenants, including reporting and other affirmative covenants; financial covenants, including ratio of total debt to EBITDA, net worth, fixed charge coverage ratio, interest coverage ratio (each as defined in and calculated pursuant to the Senior Credit Facility); and negative covenants, including restrictions on incurrence of other indebtedness, payment of cash dividends and other distributions to shareholders, liens in favor of parties other than the lenders under the Senior Credit Facility, certain guaranties of obligations of or advances to others, sales of material assets not in the ordinary course of business, restrictions on mergers and acquisitions, and capital expenditures. We cannot assure you that these requirements will be met in the future. If they are not, the holders of the indebtedness under the Senior Credit Facility would be entitled to declare such indebtedness immediately due and payable or, if we were unable to repay such indebtedness, such holders could proceed against the collateral securing the Senior Credit Facility. This collateral consists of substantially all of the assets of the Company and the Subsidiary Guarantors. In addition, the Senior Credit Facility contains customary events of default including non-payment of principal, violation of covenants and cross-defaults to certain other indebtedness, including the indebtedness evidenced by the Series D Notes. See "Description of Certain Indebtedness and Preferred Stock -- Senior Credit Facility." SUBORDINATION - YOUR RIGHT TO RECEIVE PAYMENTS ON THESE NOTES IS JUNIOR TO CERTAIN OF OUR EXISTING INDEBTEDNESS AND POSSIBLY FUTURE INDEBTEDNESS. THE GUARANTEES OF THE NOTES ARE ALSO JUNIOR TO THE GUARANTORS' EXISTING INDEBTEDNESS AND POSSIBLY FUTURE INDEBTEDNESS. Like the Existing Notes, the Series D Notes will be subordinated in right of payment to all present and future Senior Indebtedness of the Company and the Subsidiary Guarantors, including the principal, premium (if any) and interest with respect to the obligations outstanding under the Senior Credit Facility. In addition, the Subsidiary Guaranties will be subordinated in right of payment to all existing and future Senior Indebtedness of the Subsidiary Guarantors. As of December 31, 1998, we had $30.0 million of Senior Indebtedness outstanding (excluding unused commitments under the Senior Credit Facility) and the Subsidiary Guarantors had approximately $3.0 million of Senior Indebtedness outstanding. Consequently, in the event of a bankruptcy, liquidation, dissolution, reorganization or similar proceeding with respect to the Company or any Subsidiary Guarantor, assets of the Company or such Subsidiary Guarantor will be available to pay obligations of the Notes only after all Senior Indebtedness of the Company or such Subsidiary Guarantor has been paid in full. We cannot assure that there will be sufficient assets to pay amounts due on all or any of the Notes. See "Description of the Notes -- Subordination." 15
424B318th Page of 221TOC1stPreviousNextBottomJust 18th
ASSET ENCUMBRANCES - THE NOTES ARE UNSECURED AND WILL BE SUBORDINATED TO ANY SECURED INDEBTEDNESS. Like the Existing Notes, the Series D Notes are unsecured and will be effectively subordinated to any secured indebtedness of the Company or any Subsidiary Guarantor. The indebtedness outstanding under the Senior Credit Facility is secured by liens on substantially all of the assets of the Subsidiary Guarantors and the Company. Our ability to comply with the provisions of the Senior Credit Facility may be affected by events beyond our control. Our breach of any such provisions could result in a default under the Senior Credit Facility, in which case, depending upon the actions taken by the lenders thereunder or their successors or assignees, such lenders could elect to declare all amounts borrowed under the Senior Credit Facility, together with accrued interest, to be due and payable, and we could be prohibited from making payments of interest and principal on the Notes until the default is cured or all Senior Indebtedness is paid or satisfied in full. If we were unable to repay such borrowings, such lenders could proceed against the collateral. If the indebtedness under the Senior Credit Facility were accelerated, we cannot assure you that the assets of the Company and the Subsidiary Guarantors would be sufficient to repay in full such indebtedness and our other indebtedness, including the Notes. See "Description of Certain Indebtedness and Preferred Stock -- Senior Credit Facility" and "Description of the Notes -- Subordination." HOLDING COMPANY STRUCTURE - WE RELY ON DIVIDENDS AND OTHER PAYMENTS FROM OUR SUBSIDIARIES AND THAT COULD IMPAIR OUR ABILITY TO PAY OUR OBLIGATIONS. Oxford Automotive is a holding company and derives all of its operating income from its subsidiaries. The holders of the Series D Notes will have no direct claim against such subsidiaries other than the claim created by the Subsidiary Guaranties, which may be subject to legal challenge in the event of the bankruptcy of a subsidiary. See "Risk Factors -- Fraudulent Conveyance." If such a challenge were upheld with respect to any such Subsidiary Guarantee, such Subsidiary Guarantee would be invalidated and unenforceable. To the extent that the Subsidiary Guarantee is not enforceable, the rights of holders of the Series D Notes to participate in any distribution of assets of the Subsidiary Guarantor upon liquidation, bankruptcy, reorganization or otherwise may, as is the case with our other unsecured creditors, be subject to prior claims of creditors of that Subsidiary Guarantor. We must rely on dividends and other payments from our subsidiaries to generate the funds necessary to meet our obligations, including the payment of principal and interest on the Series D Notes. The Indenture contains covenants that restrict the ability of our subsidiaries to enter into any agreement limiting distributions and transfers, including dividends to us. In addition, the ability of our subsidiaries to pay dividends and make other payments are, and may in the future be, subject to certain statutory, contractual and other restrictions. See "Description of Certain Indebtedness and Preferred Stock." THE OEM SUPPLIER INDUSTRY - WE ARE DEPENDENT ON A GROUP OF CUSTOMERS WHOSE NEEDS ARE CYCLICAL AND SUBJECT TO LABOR DISPUTES. The OEM supplier industry is highly cyclical and impacted by the strength of the economy generally, by prevailing interest rates and by other factors which may have an effect on the level of sales of automotive vehicles. The automotive industry for which we supply components may experience downturns in the future. An economic recession may impact substantially leveraged companies, such as ours, more than similarly situated companies with less leverage. Also, a significant percentage of our net sales are derived from sales of our products manufactured for SUVs, mini- vans, vans and light trucks. A decrease in overall consumer demand for these products could have a material adverse effect on our business, financial condition, results of operations, and prospects. The automotive industry is characterized by a small number of OEMs that are able to exert considerable pressure on component and system suppliers to reduce costs, improve quality and provide additional design and engineering capabilities. In the past, OEMs have generally demanded and received price reductions and measurable increases in quality by implementing competitive selection processes, rating programs and various other arrangements. Also, through increased partnering on platform work, OEMs have generally required component and system suppliers to provide more design engineering input at earlier stages of the product development process, the costs of which have, in some cases, been absorbed by the suppliers. The following requirements of the OEMs may have a material adverse effect on our business, financial condition, results of operations, or prospects: o future price reductions, o increased quality standards, or o additional engineering capabilities. 16
424B319th Page of 221TOC1stPreviousNextBottomJust 19th
Many OEMs and their Tier 1 suppliers are unionized. Work stoppages and slowdowns experienced by OEMs and their Tier 1 suppliers, as a result of labor disputes, could have a material adverse effect on our business, financial condition, results of operations, or prospects. GM recently experienced a strike at certain of its production facilities due to a labor dispute between GM and the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America ("UAW"). Our results of operations for the nine month period ended December 31, 1998, were adversely affected by the GM strike, resulting in a reduction in sales of approximately $12.7 million and reduced EBITDA of $5.2 million. DEPENDENCE ON PRINCIPAL CUSTOMERS - WE ARE DEPENDENT ON A SMALL GROUP OF PRINCIPAL CUSTOMERS. Substantially all of our sales for the nine months ended December 31, 1998, on a pro forma basis assuming the acquisition of Cofimeta had occurred on April 1, 1998, were to the following customers: o GM (34%) o Ford (25%) o Renault (15%) o DaimlerChrysler (10%) o Peugeot Citroen (5%) We cannot assure you that sales to these customers will continue at the same level. Also, continuation of these relationships is dependent upon our customers' satisfaction with the price, quality and delivery of our products. Our agreements to produce parts are assigned to specific models or product lines of our customers. Accordingly, our business, and estimates for future business, are dependent upon consumer demand for the specific models and product lines that incorporate our parts. Our arrangements with the OEMs are typically in the form of purchase orders that may be canceled by the OEMs. The following factors would have a material adverse effect on our business, financial condition, results of operations, and prospects: o a significant decrease in sales of vehicles using our products; o our loss of the right to supply any of our products to our customers; o our loss of GM, Ford, Renault, Peugeot Citroen or DaimlerChrysler as a customer; or o the delay or cancellation of material orders from, or design, development, delivery or product projects at any of these customers. UNIONIZED WORKFORCE - OUR WORKFORCE IS SUBSTANTIALLY UNIONIZED AND WE ARE SUBJECT TO WORK STOPPAGES. Substantially all of our employees are covered by collective bargaining agreements with various local unions. Strikes or work stoppages and the resultant adverse impact on our relationship with the OEMs could have a material adverse effect on our business, financial condition, results of operations, and prospects. We recently negotiated new agreements at the Chatham, Greencastle, and Corydon facilities which will expire in February 2002, February 2004, and January 2005. Our agreements at the Masury and Lapeer facilities will expire in the first fiscal quarter of 2000. While the outcome, including the terms of the new contracts and their impact on our future results of operations cannot be predicted, management does not believe that the financial terms of the new contracts will have a material adverse effect on our business, financial condition, results of operations, and prospects. However, there can be no assurance that we will be successful in our contract negotiations. RISKS RELATING TO ACQUISITIONS - WE MAY NOT RECEIVE THE DESIRED BENEFITS OF ACQUISITIONS. A significant component of our historical sales and earnings growth has been the acquisition of other automotive parts manufacturers in an effort to expand our markets and capitalize on the consolidation trend in the automotive industry. We may not be able to identify appropriate acquisitions in the future or negotiate and consummate proposed or future acquisitions, and such acquisitions may have an adverse effect upon our business, financial condition, results of operations, or prospects. We are continuously evaluating possible acquisition opportunities. Identifying, proposing, negotiating and consummating acquisitions can be 17
424B320th Page of 221TOC1stPreviousNextBottomJust 20th
a lengthy and costly process and we cannot assure you that proposed transactions can be consummated. Also, we anticipate that the integration of acquired companies will require significant management attention. We will be required to implement and improve our operations, financial and management information systems and motivate and effectively manage an increasing number of employees due to acquisitions. Accordingly, our operating results may be adversely affected for several fiscal quarters following the consummation of such acquisitions while the operations of the acquired businesses are integrated into our operations and our costing and other management information systems are implemented at the newly acquired facilities. There may be substantial unanticipated costs or problems associated with the integration effort. We have historically focused, and expect to continue to focus, on acquiring under-performing companies which provide the opportunity for significant operating improvements under our ownership. We may not be able to realize improvements in the financial results of these acquisitions. The acquisition, operation and integration of an acquired business may involve a number of risks, including an increase in our indebtedness and substantial capital expenditures for additional equipment and technology. In addition to the foregoing, we are pursuing additional acquisitions and strategic alliances in Europe and intend to pursue such acquisitions and alliances in South America, Asia and other geographic markets. Other than the acquisition of Cofimeta in February 1999, we have not previously consummated any material acquisitions outside North America. Operations outside the United States are subject to a number of risks in addition to those described above, including: o currency exchange rate fluctuations, o trade barriers, o exchange controls, o risk of governmental expropriation or other regulation, o political risk, and - risk of tax increases. RISKS RELATED TO INTERNATIONAL OPERATIONS - OUR INTERNATIONAL OPERATIONS EXPOSE US TO ADDITIONAL RISKS. We have experienced fluctuations in our shareholders equity for foreign currency adjustments due to our long-term investment in Canada. Although such adjustments do not have an immediate impact on cash flow, they can adversely impact our balance sheet and may have an impact on cash flow if we remitted earnings from such foreign operations to the United States. Our exposure to such exchange rate adjustments may increase in connection with the acquisition of additional assets outside the United States. Additional problems inherent in international operations include market differences which may impact competition, pricing and relationships with our customers, as well as differences in workforce, language and culture. Such factors which could adversely affect the success of our potential future international acquisitions could in turn have a material adverse effect on our business, financial condition, results of operations, or prospects. See "Substantial Leverage and Debt Service Obligations." FRAUDULENT CONVEYANCE - FEDERAL AND STATE STATUTES ALLOW COURTS, UNDER SPECIFIC CIRCUMSTANCES, TO VOID NOTES AND GUARANTEES AND REQUIRE NOTEHOLDERS TO RETURN PAYMENTS RECEIVED FROM US. Under relevant federal or state fraudulent conveyance statutes, a court could void our obligations under the Series D Notes, recover payments made under the Series D Notes, subordinate the Series D Notes to our other indebtedness or take other action detrimental to the holders of the Series D Notes if such court were to find that: o we did not receive fair consideration or reasonably equivalent value for incurring the indebtedness, including the Series D Notes; and, at the time of such incurrence we: o were insolvent; or rendered insolvent by reason of such incurrence or grant; or o were engaged in a business or transaction for which our remaining assets constituted unreasonably small capital; or o intended to incur, or believed that we would incur, debts beyond our ability to pay such debts as they matured. 18
424B321st Page of 221TOC1stPreviousNextBottomJust 21st
The measure of insolvency for these purposes will depend upon the governing law of the relevant jurisdiction. Generally, however, a company will be considered insolvent for these purposes if: o the sum of its debts were greater than the fair value of all of that company's property, or o the present fair salable value of its assets were less than the amount that would be required to pay its probable liability on its existing debts as they become absolute and mature, or o it could not pay its debts as they become due. Regardless of solvency, a court could void an incurrence of indebtedness, including the Series D Notes, if it determined that such transaction was made with the intent to hinder, delay or defraud creditors. In addition, a court could subordinate the indebtedness, including the Series D Notes, to the claims of all existing and future creditors on similar grounds. We believe that, after giving effect to the Series D Offering, we; o have not been rendered insolvent by the incurrence of indebtedness in connection with the Series D Offering, o are in possession of sufficient capital to run our business effectively, and o are incurring debts within our ability to pay as the same mature or become due. We cannot assure you as to what standard a court would apply in order to determine whether we were "insolvent" upon the sale of the Existing Notes or that a court would determine that we were not insolvent upon consummation of the sale of the Existing Notes. In addition, the Subsidiary Guaranties may be subject to review under relevant federal and state fraudulent conveyance and similar statutes in a bankruptcy or reorganization case or a lawsuit brought by or on behalf of creditors of any of the Subsidiary Guarantors. In such a case, the analysis set forth above would generally apply, except that the Subsidiary Guaranties could also be subject to the claim that, since the Subsidiary Guaranties were incurred for the benefit of the Company (and only indirectly for the benefit of the Subsidiary Guarantors), the obligations of the Subsidiary Guarantors were incurred for less than reasonably equivalent value or fair consideration. A court could: o void the Subsidiary Guarantors' obligation under the Subsidiary Guaranties, o recover payments made under the Subsidiary Guaranties, o subordinate the Subsidiary Guaranties to other indebtedness of a Subsidiary Guarantor, or o take other action detrimental to the holders of the Notes. CONTROL BY PRINCIPAL SHAREHOLDER - OUR PRINCIPAL SHAREHOLDER MAY HAVE INTERESTS THAT CONFLICT WITH THE HOLDERS OF THE NOTES. Selwyn Isakow (the "Principal Shareholder") beneficially owns 53% of the Company's outstanding shares and exercises voting control over those shares not owned by him, including shares held by the directors and officers of the Company. Circumstances may occur in which the interests of the Principal Shareholder could be in conflict with the interests of the holders of the Series D Notes. For example, if we encounter financial difficulties or are unable to pay certain of our debts as they mature, the interests of the Principal Shareholder might conflict with those of the holders of the Series D Notes. In addition, the Principal Shareholder may have an interest in pursuing acquisitions, divestitures or other transactions that, in his judgment, could enhance his equity investment, even though such transactions might involve risks to the holders of the Series D Notes. See "Principal Shareholders." COMPETITION - WE MAY NOT CONTINUE TO PERFORM SUCCESSFULLY IN OUR HIGHLY COMPETITIVE INDUSTRY. The motor vehicle parts industry in which we operate is fragmented and competitive. Our competitors include divisions or subsidiaries of companies that are larger and have substantially greater resources than we do, as well as divisions of OEMs with internal stamping and assembly operations. We cannot assure you that our products will be able to compete successfully with those of our competitors. See "Business -- Competition." ENVIRONMENTAL RISKS - WE MAY BE ADVERSELY AFFECTED BY ENVIRONMENTAL CLAIMS RESULTING FROM OUR OPERATIONS. Our operations and properties are subject to federal, state, local and foreign laws, regulations and ordinances relating to the use, storage, handling, generation, treatment, emission, release, discharge and disposal of certain materials, substances and wastes. In many jurisdictions these laws are complex and change frequently. Such laws, including but not limited to the Comprehensive 19
424B322nd Page of 221TOC1stPreviousNextBottomJust 22nd
Environmental Response, Compensation & Liability Act ("CERCLA" or "Superfund") may impose joint and several liability and apply to remediation of contamination at properties presently or formerly owned or operated by an entity or its predecessors, as well as to conditions at properties at which wastes or other contamination attributable to an entity or its predecessors have been sent or otherwise come to be located. The nature of our operations exposes us to the risk of liabilities or claims with respect to environmental matters, including off-site disposal matters, and material costs may be incurred in connection with such liabilities or claims. Based upon our experience to date, we believe that the future cost of compliance with existing environmental laws, regulations and ordinances (or liability for known environmental claims) will not have a material adverse effect on our business, financial condition and results of operations. However, future events, such as changes in existing laws and regulations or their interpretation, may give rise to additional compliance costs or liabilities that could have a material adverse effect on our business, financial condition and results of operations. We may be required to make additional material expenditure in order to comply with more stringent laws or regulations, as well as more vigorous enforcement policies of regulatory agencies or stricter or different interpretations of existing laws. See "Business -- Regulatory Matters" and -- "Legal Proceedings." CHANGE OF CONTROL - WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FINANCE THE CHANGE OF CONTROL OFFER REQUIRED BY THE INDENTURE. Upon the occurrence of certain types of change of control events, we may be required to repurchase all or any part of the Existing Notes and Series D Notes. Such repurchase would be at a price equal to 101% of the principal amount, plus accrued and unpaid interest, to the date of repurchase. The occurrence of a Change of Control may constitute a default under the Senior Credit Facility. In addition, the Senior Credit Facility will prohibit the purchase of the Existing Notes and the Series D Notes by us in the event of a default under the Senior Credit Facility, unless and until such time as the indebtedness under the Senior Credit Facility is repaid in full. Our failure to purchase the Existing Notes and the Series D Notes would result in a default under the Indenture and under the indenture pursuant to which the Series A and Series B Notes were issued. The inability to repay the indebtedness under the Senior Credit Facility, if accelerated, would also constitute an event of default under the Indenture, which could have adverse consequences for the Company and the holders of the Notes. It is possible that we will not have sufficient funds at the time of a change of control to make the required purchase of Notes or that restrictions in the Senior Credit Facility will not allow such repurchases. In addition, we could engage in a highly leveraged transaction, with certain adverse consequences to holders of the Notes, which would not constitute a Change of Control. See "Description of the Notes -- Change of Control" and "Description of Certain Indebtedness and Preferred Stock -- Senior Credit Facility." YEAR 2000 - WE CANNOT ASSURE YOU THAT WE, OR OUR CUSTOMERS AND SUPPLIERS, WILL BE YEAR 2000 COMPLIANT. PROBLEMS ASSOCIATED WITH THE YEAR 2000 MAY ADVERSELY AFFECT OUR OPERATIONS. We cannot assure you that our computer systems or software products or those of our suppliers and customers will accept input of, store, manipulate and output dates prior to the Year 2000 or thereafter without error or interruption. We are assessing the issues related to the Year 2000 problem, and we have implemented a readiness program to mitigate the problem of business interruption or other risks. We are also requesting assurances from our significant suppliers and customers that their systems are Year 2000 compliant or that they are identifying and addressing problems to ready themselves for the Year 2000. We cannot assure you that we will identify all Year 2000 problems in advance of their occurrence, or that we will be able to successfully remedy problems that are discovered. The expense of our efforts to identify and address such problems, or the expenses or liabilities to which we may become subject to as a result of such problems, could have a material adverse effect on the Company. CONSEQUENCES OF FAILURE TO EXCHANGE - IF YOU DO NOT EXCHANGE YOUR NOTES, YOU MAY BE SUBJECT TO TRANSFER RESTRICTIONS OR A TRADING MARKET THAT IS LESS LIQUID. Holders of Series C Notes who do not exchange their Series C Notes for Series D Notes pursuant to the Exchange Offer will continue to be subject to the restrictions on transfer of such Series C Notes. These restrictions are a consequence of the issuance of the Series C Notes pursuant to exemption from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state laws. Subject to our obligation to file a shelf registration statement covering resales of Series C Notes in certain limited circumstances, we do not intend to register the Series C Notes under the Securities Act and, after consummation of the Exchange Offer, will not be obligated to do so. In addition, any holder of Series C Notes who tenders in the Exchange Offer for the purpose of participating in a distribution of the Series D Notes may be deemed to have received restricted securities and, if so, will be 20
424B323rd Page of 221TOC1stPreviousNextBottomJust 23rd
required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. In addition, as a result of the Exchange Offer, it is expected that a substantial decrease in the aggregate principal amount of Series C Notes outstanding will occur. As a result, it is unlikely that a liquid trading market will exist for the Series C Notes at any time. This lack of liquidity will make transactions more difficult and may reduce the trading price of the Series C Notes. Also, holders of Existing Notes who do not exchange their Existing Notes for Series D Notes will not be able to take advantage of any increased liquidity afforded by the Series D Notes. The Series D Notes would have an aggregate principal amount of $200 million as opposed to $160 million for the Series A and Series B Notes and $40 million for the Series C Notes. See "The Exchange Offer." ABSENCE OF PUBLIC MARKET FOR THE SERIES D NOTES - YOU CANNOT BE SURE THAT AN ACTIVE TRADING MARKET WILL DEVELOP FOR THE NOTES. The Series D Notes are new securities and there is currently no established market for the Series D Notes. Future trading prices of the Series D Notes will depend on many factors, including, among other things, prevailing interest rates, our operating results and the market for similar securities. Historically, the market for securities similar to the Series D Notes, including non-investment grade debt, has been subject to disruptions that have caused substantial volatility in the prices of such securities. It is possible that any market for the Series D Notes, if such market develops, will be subject to similar disruptions. The Initial Purchasers have advised us that they currently intend to make a market in the Series D Notes offered hereby. However, the Initial Purchasers are not obligated to do so and any market making may be discontinued at any time without notice. The Company and the Subsidiary Guarantors do not intend to apply for listing of the Series D Notes on any national securities exchange or for their quotation through the National Association of Securities Dealers Automated Quotation System. The Exchange Offer is not conditioned upon any minimum or maximum aggregate principal amount of the Existing Notes being tendered for exchange. There may be a lack of liquidity for the Series D Notes or, in the case of non-tendering holders of Existing Notes, the trading market for the Existing Notes following the Exchange Offer. We are offering to accept all Existing Notes in exchange for Series D Notes in order to increase the liquidity of all series. However, it is possible that not all of the Existing Notes will participate in the exchange, in which case the Series A Notes and Series B Notes will together continue as a separate series of notes under a separate indenture. DILUTION OF INTEREST - BY EXCHANGING YOUR NOTES, YOUR INDIVIDUAL VOTING INTERESTS WILL BE DILUTED. If all of the Existing Notes are exchanged for Series D Notes, $200.0 million aggregate principal amount of Series D Notes will be outstanding following consummation of the Exchange Offer and the Series D Notes will be deemed to be a single series of notes outstanding under the Indenture. In such case, any actions requiring the consent of each holder or the holders of a majority of outstanding principal amount of Notes under the Indenture will require the consent of each holder of Series D Notes or the holders of a majority in aggregate principal amount of such outstanding Series D Notes, and the individual voting interest of each holder will be diluted. In addition, issuances of additional notes under the Indenture, to the extent permitted by the debt incurrence limitations of the Indenture, may result in further dilution of the individual voting interests of the holders of the Series D Notes.  USE OF PROCEEDS The Exchange Offer is intended to satisfy certain of the Company's and the Subsidiary Guarantors' obligations under the Registration Agreement. We will not receive any cash proceeds from the issuance of the Series D Notes in the Exchange Offer. In consideration for issuing the Series D Notes as contemplated in this Prospectus, we will receive Existing Notes in like principal amount. The form and terms of the Series D Notes are identical in all material respects to the form and terms of the Existing Notes, except, with respect to the Series C Notes, for certain transfer restrictions and registration rights relating to the Series C Notes and except for certain provisions providing for an increase in the interest rate on the Series C Notes under certain circumstances relating to the timing of the Exchange Offer. The Existing Notes surrendered in exchange for the Series D Notes will be retired and canceled and cannot be reissued. Accordingly, issuance of the Series D Notes will not result in any increase in our outstanding debt. Our net proceeds from the sale of the Series C Notes were approximately $40.8 million (after the inclusion of approximately $1.5 million in premium and the deduction of estimated expenses incurred in connection with the Series C Offering and related transactions of approximately $0.7 million). We used the net proceeds from the offering to repay borrowings under the Senior Credit Facility and for working capital and other general corporate purposes. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity, Capital Resources and Financial Condition." 21
424B324th Page of 221TOC1stPreviousNextBottomJust 24th
 CAPITALIZATION The following table sets forth our capitalization as of December 31, 1998 and as adjusted to give effect to the acquisition of Cofimeta. This table should be read in conjunction with the unaudited "Pro Forma Combined Consolidated Financial Data," "Selected Consolidated Historical Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements and related notes thereto included elsewhere in this Prospectus. See also "Description of Certain Indebtedness and Preferred Stock." [Download Table] DECEMBER 31, 1998 -------------------------- AS ACTUAL ADJUSTED ---------- ---------- (IN THOUSANDS) Cash and cash equivalents ............................ $ 318 $ 8,621 ========== ========== Long-term debt (including current portion): Senior Credit Facility (a) Term Loan ........................................ -- 30,000 Revolving Credit Facilities ...................... 22,694 30,319 Industrial Revenue Bonds ........................... 2,495 2,495 EDC Tooling ........................................ 2,026 2,026 Cofimeta Deferred Purchase Price ................... -- 19,452 Continuation Plan .................................. -- 6,236 Other Debt (b) ..................................... 540 540 10 1/8% Senior Subordinated Notes Due 2007, Series A . 124,841 124,841 10 1/8% Senior Subordinated Notes Due 2007, Series B . 36,878 36,878 10 1/8% Senior Subordinated Notes Due 2007, Series C . 41,486 41,486 Total debt ....................................... 230,960 294,273 Redeemable preferred stock (c) Series A ........................................... 40,586 40,856 Shareholders' equity: Common stock (400,000 shares authorized; 309,750 issued and outstanding) ......................... 1,050 1,050 Accumulated other comprehensive loss ............... (3,128) (3,128) ---------- ---------- Total shareholders' equity ....................... (2,078) (2,078) Total capitalization ................................. $ 269,468 $ 333,051 ========== ========== ------------------ (a) On December 31, 1998, the Company had $30.0 million of borrowings under the Senior Credit Facility and availability was approximately $80.0 million. On February 4, 1999, the Company entered into the amended and restated Senior Credit Facility which provides for a $35.0 million revolving credit facility to finance customer tooling, a $30.0 million term loan and a $110.0 million revolving credit facility. (b) Consists of debt of RPIH and certain other debt of the Company. Certain of the RPIH debt is secured by the assets of RPI. (c) See "Description of Certain Indebtedness and Preferred Stock - Preferred Stock of Lobdell." 22
424B325th Page of 221TOC1stPreviousNextBottomJust 25th
 PRO FORMA COMBINED FINANCIAL DATA (UNAUDITED) (DOLLARS IN THOUSANDS) The unaudited pro forma combined balance sheet as of December 31, 1998 (the "Unaudited Pro Forma Balance Sheet") gives pro forma effect to the acquisition of Cofimeta as if it had occurred on December 31, 1998. The acquisition of Cofimeta is accounted for by the purchase method of accounting pursuant to which the purchase price is allocated among the acquired tangible and intangible assets and assumed liabilities in accordance with estimates of their fair values on the date of acquisition. The pro forma adjustments represent management's preliminary determination of purchase accounting adjustments and are based upon available information and certain assumptions that the Company believes to be reasonable under the circumstances. Consequently, the amounts reflected in the Unaudited Pro Forma Balance Sheet are subject to change and the final values may differ substantially from these amounts. Management does not expect that differences between the preliminary and final purchase price allocation will have a material impact on the Company's financial position. The Unaudited Pro Forma Balance Sheet does not purport to be indicative of the financial position of the Company had such transaction actually been completed as of the assumed date and for the period presented, or which may be obtained in the future. The unaudited pro forma combined statement of operations for the year ended March 31, 1998 gives pro forma effect to the Series A Offering, the Series B Offering, the Series C Offering, and the acquisitions of Cofimeta, Howell, RPIH and the Suspension Division as if they had occurred on April 1, 1997. The unaudited pro forma combined statement of operations for the nine months ended December 31, 1998 gives pro forma effect to the Series C Offering and the acquisition of Cofimeta, as if each had occurred April 1, 1998. The unaudited pro forma combined statements of operations for the year ended March 31, 1998 and for the nine months ended December 31, 1998 are collectively referred to as the "Unaudited Pro Forma Statements of Operations." The Unaudited Pro Forma Statements of Operations do not purport to be indicative of the results of operations of the Company had such transactions actually been completed as of the assumed dates and for the periods presented, or which may be obtained in the future. 23
424B326th Page of 221TOC1stPreviousNextBottomJust 26th
UNAUDITED PRO FORMA COMBINED BALANCE SHEET AS OF DECEMBER 31, 1998 [Enlarge/Download Table] COMPANY COFIMETA PRO FORMA PRO FORMA DEC. 31, 1998 SEP. 30, 1998(a) ADJUSTMENTS COMBINED ---------- ---------- ---------- ---------- (DOLLARS IN THOUSANDS) Cash and cash equivalents ................ $ 318 $ 8,303 $ -- $ 8,621 Trade accounts receivable, net ........... 86,336 26,240 (869)(c) 111,707 Inventories .............................. 33,911 18,917 (869)(c) 51,959 Reimbursable tooling ..................... 40,237 -- -- 40,237 Unexpended bond proceeds ................. 6 -- -- 6 Prepaid expenses and other current assets ................................ 3,630 48,239 (8,336)(c) 43,533 Deferred income taxes .................... 4,399 -- -- 4,399 ---------- ---------- ---------- ---------- Total current assets ................ 168,837 101,699 (10,074) 260,462 Deferred income taxes .................... 7,918 -- 12,176(d) 20,094 Property, plant and equipment, net ................................... 191,446 24,534 (1,199)(c) 214,781 Marketable Securities .................... 8,092 -- -- 8,092 Other noncurrent assets .................. 36,269 453 -- 36,722 ---------- ---------- ---------- ---------- Total assets ........................ $ 412,562 $ 126,686 $ 903 $ 540,151 ========== ========== ========== ========== Trade accounts payable ................... $ 54,428 $ 29,177 $ 173(c) $ 83,778 Accrued expenses and other liabilities ........................... 20,918 13,348 -- 34,266 Restructuring reserve .................... 3,019 1,423 13,781(c) 18,223 Current portion of long-term deb3,411 .... -- 6,568(b) 9,979 ---------- ---------- ---------- ---------- Total current liabilities ........... 81,776 43,948 20,522 146,246 Deferred income taxes .................... 13,962 -- -- 13,962 Pension liability ........................ 5,470 2,740 8,210 Postretirement medical benefits 41,427 ... -- -- 41,427 Other noncurrent liabilities ............. 3,870 12,928 (9,294)(c) 7,504 Long-term debt ........................... 227,549 67,190 (10,445)(b) 284,294 ---------- ---------- ---------- ---------- Total liabilities ................... 374,054 126,806 783 501,643 ---------- ---------- ---------- ---------- Redeemable Series A preferred stock ................................. 40,586 -- -- 40,586 Total shareholders' equity (2,078) .. (120) 120(c) (2,078) ---------- ---------- ---------- ---------- Total liabilities and shareholders' equity ............... $ 412,562 $ 126,686 $ 903 $ 540,151 ========== ========== ========== ========== --------------- See accompanying Notes to Unaudited Pro Forma Combined Balance Sheet. 24
424B327th Page of 221TOC1stPreviousNextBottomJust 27th
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET (Dollars in thousands) (a) Represents the balance sheet of Cofimeta at September 30, 1998. The September 30, 1998 balance sheet for Cofimeta was derived from Cofimeta's audited financial statements. (b) Reflects the following estimated sources and uses of funds for the acquisition of Cofimeta as if it had occurred on December 31, 1998: [Download Table] Purchase price paid at closing (including estimated closing costs) $ 37,625 Deferred share price and debt purchase - recorded at net present value as of the closing date 19,452 Reduction of face value of indebtedness as a part of acquisition and in conjunction with the Continuation Plan (60,954) -------- Net reduction in total debt $ (3,877) Less: net increase in current portion of debt 6,568 -------- Net reduction in long-term debt $(10,445) ======== (c) The acquisition of Cofimeta will be accounted for by the purchase method of accounting, pursuant to which the purchase price is allocated among the acquired tangible and intangible assets and assumed liabilities in accordance with their estimated fair market values on the date of acquisition. The estimated purchase price and preliminary adjustments to historical book value of Cofimeta as a result of the transaction are as follows: [Enlarge/Download Table] Reserves recorded to conform accounting policies of the Company with those of Cofimeta Allowance for bad debt reserve (869) Inventory obsolescence reserve (869) (1,738) Elimination of inter-company receivable, settled as a part of acquisition price (8,336) Recording of deferred tax asset on net operating losses acquired 12,176 Write-down of property plant and equipment for capital portion of restructuring reserves (1,199) ---------- Net increase in assets $ 903 ========== Elimination of inter-company payable, settled as a part of acquisition price (9,294) Reserves recorded to conform accounting policies of the Company with those of Cofimeta Accounts payable unrecorded liability reserve 173 Increase in restructuring reserve Plant restructuring and closure 10,689 Other reserves 3,092 13,781 ---------- Net reduction of indebtedness as a part of acquisition (3,877) Elimination of retained earnings as a result of purchase accounting 120 Net increase in liabilities and shareholders equity $ 903 ========== (d) The deferred tax asset can be realized in accordance with FAS 109 only by the operations in France, not on a consolidated basis with U.S. or Canadian operations. 25
424B328th Page of 221TOC1stPreviousNextBottomJust 28th
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS [Enlarge/Download Table] COMPANY HOWELL RPIH COMPANY(a) PRO FORMA PRO FORMA(e) PRO FORMA (f) ------------- ------------- ------------ ------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED MAR. 31, 1998 MAR. 31, 1998 MAR. 31,1998 MAR. 31, 1998 ------------- ------------- ------------ ------------- (DOLLARS IN THOUSANDS) Net sales ...................... $ 410,321 $ -- $ 34,329 $ 9,035 Cost of sales .................. 368,420 -- 31,189 10,642 --------- --------- --------- --------- Gross profit ................... 41,901 -- 3,140 (1,607) Selling, general and administrative expenses ...... 21,839 37(b) 177 1,651 Reorganization cost ............ -- -- -- -- Restructuring provision ........ 1,610 -- -- -- Gain on sale of equipment ...... (1,602) -- -- -- --------- --------- --------- --------- Income (loss) from Operations ................... 20,054 (37) 1,489 (1,784) Interest expense, net .......... 10,710 (431)(c) 858 432 Other income (expense) ......... 321 -- -- (35) --------- --------- --------- --------- Income (loss) before income taxes ........................ 9,665 394 631 (2,251) Provision (benefit) for income taxes ........................ 4,074 158(d) 269 (846) --------- --------- --------- --------- Net income (loss) .............. 5,591 $ 236 $ 362 $ (1,405) ========= ========= ========= ========= FINANCIAL RATIOS AND OTHER DATA: Depreciation and amortization ................. $ 20,279 $ 37 $ 769 $ 296 Capital expenditures ........... 16,723 -- 728 119 Ratio of earnings to fixed charges(i) ................... 1.7x EBITDA(j) ...................... 40,654 -- 2,258 (1,523) Ratio of EBITDA to interest expense(k) .......... 3.8x Ratio of net debt to EBITDA(l) .................... 3.0x 26
424B329th Page of 221TOC1stPreviousNextBottomJust 29th
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS (CONTINUED) [Download Table] SUSPENSION COFIMETA DIVISION PRO PRO FORMA PRO FORMA (G) FORMA (H) COMBINED ------------- ------------- ------------- YEAR ENDED YEAR ENDED YEAR ENDED MAR. 31, 1998 DEC. 31, 1997 MAR. 31, 1998 ------------- ------------- ------------- (DOLLARS IN THOUSANDS) Net sales ........................ $ 122,478 $ 189,031 $ 765,194 Cost of sales .................... 114,721 182,780 707,752 ----------- ----------- ----------- Gross profit ..................... 7,757 6,251 57,442 Selling, general and administrative expenses ........ 7,545 14,789 46,038 Reorganization cost .............. -- 1,158 1,158 Restructuring provision .......... -- 6,153 7,763 Gain on sale of equipment ........ -- (1,602) ----------- ----------- ----------- Income (loss) from Operations .... 212 (15,849) 4,085 Interest expense, net ............ 5,108 7,585 24,262 Other income (expense) ........... 860 5 1,151 ----------- ----------- ----------- Income (loss) before income taxes .......................... (4,036) (23,429) (19,026) Provision (benefit) for income taxes .......................... (1,612) (9,372) (7,329) ----------- ----------- ----------- Net income (loss) ................ $ (2,424) (14,057) $ (11,697) =========== =========== =========== FINANCIAL RATIOS AND OTHER DATA: Depreciation and amortization .... $ 4,641 9,535 $ 35,557 Capital expenditures ............. 5,761 1,884 25,215 Ratio of earnings to fixed charges(i) EBITDA(j) ...................... 5,713 (6,309) 40,793 Ratio of EBITDA to interest expense(k) ............ 1.7x Ratio of net debt to EBITDA(l) See accompanying Notes to Unaudited Pro Forma Combined Statements of Operations. 27
424B330th Page of 221TOC1stPreviousNextBottomJust 30th
[Enlarge/Download Table] COMPANY COFIMETA PRO FORMA COMPANY PRO FORMA PRO FORMA (O) COMBINED ------------- ------------ ------------- ------------- NINE MONTHS NINE MONTHS NINE MONTHS NINE MONTHS ENDED ENDED ENDED ENDED DEC. 31, 1998 DEC. 31,1998 SEP. 30, 1998 DEC. 31, 1998 ------------- ------------ ------------- ------------- (DOLLARS IN THOUSANDS) Net sales $ 408,144 $ $ 147,107 $ 555,251 Cost of sales 372,612 136,355 508,967 ------------ ------------ ------------ ------------ Gross profit 35,532 10,752 46,284 Selling, general and administrative expenses 22,235 9,656 31,891 Reorganization costs -- -- (1,350) (1,350) Restructuring provision 1,176 95 1,271 Gain on sale of equipment -- ------------ ------------ ------------ ------------ Income (loss) from Operations 12,121 2,351 14,472 Interest expense, net 14,255 (422)(m) 4,735 18,568 Other income (expense) 949 13 962 ------------ ------------ ------------ ------------ Income (loss) before income taxes (1,185) 422 (2,371) (3,134) Provision (benefit) for income taxes (475) 169(n) (948) (1,254) ------------ ------------ ------------ ------------ Net income (loss) $ (710) $ 253 $ (1,423) $ (1,880) ============ ============ ============ ============ FINANCIAL RATIOS AND OTHER DATA: Depreciation and amortization $ 19,552 $ $ 6,607 $ 26,159 Capital expenditures Ratio of earnings to fixed charges(i) -- -- EBITDA (j) 32,622 8,971 41,593 Ratio of EBITDA to interest expense(k) 2.3x 2.2x Ratio of net debt to 5.3x 5.2x EBITDA(l) See accompanying Notes to Unaudited Pro Forma Combined Statements of Operations. 28
424B331st Page of 221TOC1stPreviousNextBottomJust 31st
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS (a) Statement of Operations Data for the Company for the year ended March 31, 1998 includes operating data for Howell and RPIH for the periods subsequent to acquisition (Howell - August 14, 1997 to March 31, 1998 and RPIH - November 26, 1997 to March 31, 1998). (b) Represents amortization of bond acquisition fees associated with the Series A Notes. (c) Represents the net effect on interest expense as a result of (1) the elimination of historical interest expense after the repayment of the existing senior bank credit facilities and other outstanding debt, using proceeds from the Series A Offering and (2) the Series A, Series B and Series C Offerings, using an interest rate of 10.125% per annum for the Series A Notes and 9.25% per annum for the Series B Notes and 9.685% for the Series C Notes. This amount excludes interest on the portion of the proceeds of the Series A, Series B and Series C Offerings used for the Howell, RPIH, Suspension Division and Cofimeta acquisitions as follows: [Download Table] Interest differential historical versus Offerings $ 8,507 Acquisition of: Howell (884) RPI (169) Suspension (4,075) Cofimeta (3,810) ------- $ (431) ======= See Notes (e)(4), (f)(4), (g)(3) and (h)(4). (d) Represents the estimated income tax effect of the pro forma adjustments using an effective tax rate of 40%. (e) The Howell Pro Forma information includes Statement of Operations data for Howell as if the Company had acquired Howell on April 1, 1997: [Enlarge/Download Table] PRO FORMA HOWELL HOWELL(1) ADJUSTMENTS PRO FORMA --------------- --------------- --------------- PERIOD FROM PERIOD FROM PERIOD FROM APRIL 1, 1997 APRIL 1, 1997 APRIL 1, 1997 THROUGH THROUGH THROUGH AUGUST 13, 1997 AUGUST 13, 1997 AUGUST 13, 1997 --------------- --------------- --------------- (DOLLARS IN THOUSANDS) Net sales $ 34,329 $ -- $ 34,329 Cost of sales 31,070 119(2) 31,189 ------------ ------------ ------------ Gross profit 3,259 (119) 3,140 Selling, general and administrative expenses 1,626 25(3) 1,651 Reorganization cost -- -- -- Restructuring provision -- -- -- Gain on sale of equipment -- -- -- ------------ ------------ ------------ Income (loss) from operations 1,633 (144) 1,489 Interest expense, net (26) 884(4) 858 Other income (expense) -- -- -- ------------ ------------ ------------ Income (loss) before income taxes 1,659 (1,028) 631 Provision (benefit) for income taxes 680 (411)(5) 269 ------------ ------------ ------------ Net income (loss) $ 979 $ (617) $ 362 ============ ============ ============ (1) Statement of Operations data for Howell for the period prior to acquisition by the Company (April 1, 1997 - August 13, 1997). The information was derived from Howell's unaudited internal financial statements. 29
424B332nd Page of 221TOC1stPreviousNextBottomJust 32nd
(2) Represents increased depreciation expense as a result of the write up of property, plant and equipment to fair market value as a part of the purchase accounting related to the acquisition of Howell. (3) Represents amortization of acquisition expenses related to the Howell acquisition. (4) Represents the net effect on interest expense as a result of the use of proceeds from the Series A Offering for the acquisition of Howell of $23,245. Interest expense is calculated using an interest rate of 10.125% per annum. See Note (c). (5) Represents the estimated income tax effect of the pro forma adjustments using an effective tax rate of 40%. (f) The RPIH Pro Forma information includes Statement of Operations data as if the Company had acquired RPIH on April 1, 1997: [Enlarge/Download Table] PRO FORMA RPIH RPIH(1) ADJUSTMENTS PRO FORMA ----------------- ----------------- ----------------- PERIOD FROM PERIOD FROM PERIOD FROM APRIL 1, 1997 APRIL 1, 1997 APRIL 1, 1997 THROUGH THROUGH THROUGH NOVEMBER 25, 1997 NOVEMBER 25, 1997 NOVEMBER 25, 1997 ----------------- ----------------- ----------------- (DOLLARS IN THOUSANDS) Net sales $ 9,035 $ -- $ 9,035 Cost of sales 10,602 40(2) 10,642 -------------- -------------- -------------- Gross profit (1,567) (40) (1,607) Selling, general and administrative expenses 127 50(3) 177 Reorganization cost -- -- -- Restructuring provision -- -- -- Gain on sale of equipment -- -- -- -------------- -------------- -------------- Income (loss) from operations (1,694) (90) (1,784) Interest expense, net 263 169(4) 432 Other income (expense) (35) -- (35) -------------- -------------- -------------- Income (loss) before income taxes (1,992) (259) (2,251) Provision (benefit) for income taxes (742) (104)(5) (846) -------------- -------------- -------------- Net income (loss) $ (1,250) $ (155) $ (1,405) ============== ============== ============== (1) Statement of Operations data for RPIH for the period prior to acquisition by the Company (April 1, 1997 to November 25, 1997). The information was derived from RPIH's unaudited internal financial statements. (2) Represents increased depreciation expense as a result of the write up of property, plant and equipment to fair market value as a part of the purchase accounting related to the acquisition of RPIH. (3) Represents amortization of acquisition expenses and goodwill related to the RPIH acquisition. (4) Represents the net effect on interest expense as a result of the use of proceeds from the Series A Offering for the acquisition of RPIH of $2,500. Interest expense is calculated using an interest rate of 10.125% per annum. See Note (c). (5) Represents the estimated income tax effect of the pro forma adjustments using an effective tax rate of 40%. 30
424B333rd Page of 221TOC1stPreviousNextBottomJust 33rd
(g) The Suspension Division Pro Forma information includes Statement of Operations data as if the Company had acquired the Suspension Division on April 1, 1997: [Enlarge/Download Table] SUSPENSION SUSPENSION PRO FORMA DIVISION DIVISION(1) ADJUSTMENTS PRO FORMA -------------- -------------- -------------- PERIOD FROM PERIOD FROM PERIOD FROM APR. 1, 1997 - APR. 1, 1997 - APR. 1, 1997 - MAR. 31, 1998 MAR. 31, 1998 MAR. 31, 1998 -------------- -------------- -------------- (DOLLARS IN THOUSANDS) Net sales $ 122,478 $ -- $ 122,478 Cost of sales 114,721 -- 114,721 -------------- -------------- -------------- Gross profit 7,757 -- 7,757 Selling, general and administrative expenses 7,154 391(2) 7,545 Reorganization cost -- -- -- Restructuring provision -- -- -- Gain on sale of equipment -- -- -- -------------- -------------- -------------- Income (loss) from operations 603 (391) 212 Interest expense, net 1,033 4,075(3) 5,108 Other income (expense) 860 -- 860 -------------- -------------- -------------- Income (loss) before income taxes 430 (4,466) (4,036) Provision (benefit) for income taxes 174 (1,786)(4) (1,612) -------------- -------------- -------------- Net income (loss) $ 256 $ (2,680) $ (2,424) ============== ============== ============== (1) Statement of Operations data for the Suspension Division for the twelve months ended March 31, 1998 was derived from the Suspension Division's unaudited internal financial statements. (2) Represents amortization of acquisition expenses and goodwill related to the Suspension Division acquisition. (3) Represents the net effect on interest expense as a result of the use of proceeds from the Series A and Series B Offerings for the acquisition of the Suspension Division of $53,465. Interest expense is calculated using an interest rate of 10.125% per annum for the Series A Notes and 9.25% per annum for the Series B Notes. See Note (c). (4) Represents the estimated income tax effect of the pro forma adjustments using an effective tax rate of 40%. (h) The Cofimeta Pro Forma information includes Statement of Operations data as if the Company had acquired Cofimeta on April 1, 1997: [Enlarge/Download Table] PRO FORMA COFIMETA COFIMETA(1) ADJUSTMENTS PRO FORMA -------------- -------------- -------------- PERIOD FROM PERIOD FROM PERIOD FROM JAN. 1, 1997 - JAN. 1, 1997 - JAN. 1, 1997 - DEC. 31, 1997 DEC. 31, 1997 DEC. 31, 1997 -------------- -------------- -------------- (DOLLARS IN THOUSANDS) Net sales $ 189,031 $ -- $ 189,031 Cost of sales 181,985 795(2) 182,780 -------------- -------------- -------------- Gross profit 7,046 (795) 6,251 Selling, general and administrative expenses 14,697 92(3) 14,789 Reorganization cost 1,158 -- 1,158 Restructuring provision 6,153 6,153 Gain on sale of equipment -- -- -------------- -------------- -------------- Income (loss) from operations (14,962) (887) (15,849) Interest expense, net 2,505 5,080(4) 7,585 Other income (expense) 5 5 -------------- -------------- -------------- Income (loss) before income taxes (17,462) (5,967) (23,429) Provision (benefit) for income taxes 17 (9,389)(5) (9,372) -------------- -------------- -------------- Net income (loss) $ (17,479) $ 3,422 $ (14,057) ============== ============== ============== 31
424B334th Page of 221TOC1stPreviousNextBottomJust 34th
(1) Statement of Operations data for Cofimeta for the period January 1 to December 31, 1997 were derived from Cofimeta audited financial statements. (2) Represents increased depreciation expense as a result of the conformance of accounting policies and depreciable lives between the Company and Cofimeta. (3) Represents amortization of debt issuance cost related to the Series C bond issuance. (4) Represents the net effect on interest expense as a result of the following: [Download Table] Use of proceeds from the Series C offering for the acquisition of Cofimeta of $37,625. Interest expense is calculated using an interest rate of 10.125% per annum - See Note C $3,810 Interest on deferred share purchase price in accordance with the acquisition. Interest is calculated using an effective interest rate of 10% per annum 941 Net effect on interest expense as a result of revaluation of indebtedness as a part of the acquisition Includes deferred debt payments as well as Continuation Plan indebtedness 329 ------ $5,080 ====== (5) Represents the estimated income tax effect of the pro forma adjustments and restatement of the historical provision to reflect the recording of a deferred tax asset during purchase accounting using an effective tax rate of 40%. (i) For purposes of this computation, earnings consist of income (loss) before income taxes plus fixed charges. Fixed charges consist of interest on indebtedness plus that portion of rental expense representative of the interest factor. For the fiscal year ended March 31, 1998, on a pro forma basis for the Howell, RPIH, Suspension Division and Cofimeta acquisitions, earnings were insufficient to cover fixed charges by $19.0 million. For the nine months ended December 31, 1998, earnings were insufficient to cover fixed charges by $1.2 million. For the nine months ended December 31, 1998 on a pro forma basis for the Cofimeta acquisition, earnings were insufficient to cover fixed charges by $3.1 million. (j) EBITDA is defined as income (loss) before interest, income taxes, depreciation and amortization. EBITDA should not be construed as a substitute for income from operations, net income or cash flow from operating activities for the purpose of analyzing the Company's operating performance, financial position and cash flows. (k) Defined as the ratio of EBITDA to net interest expense. (l) Ratio of net debt to EBITDA with net debt consisting of total debt less cash and cash equivalents and unexpended bond proceeds. (m) Represents the net effect on interest expense as a result of the elimination of historical interest expense after the repayment of existing senior bank credit facilities, the issuance of the Series C Notes and the acquisition of Cofimeta as follows: [Download Table] Interest differential historical versus Series C $ 2,434 Acquisition of Cofimeta (2,856) ---------- $ (422) ========== (n) Represents the estimated income tax effect of the pro forma adjustments using an effective tax rate of 40%. 32
424B335th Page of 221TOC1stPreviousNextBottomJust 35th
(o) The Cofimeta Pro Forma information includes Statement of Operations data as if the Company had acquired Cofimeta on April 1, 1998: [Enlarge/Download Table] PRO FORMA COFIMETA COFIMETA(1) ADJUSTMENTS PRO FORMA ------------------ ------------------ ------------------ PERIOD FROM PERIOD FROM PERIOD FROM JAN. 1, 1998 - JAN. 1, 1998 - JAN. 1, 1998 - SEPTEMBER 30, 1998 SEPTEMBER 30, 1998 SEPTEMBER 30, 1998 ------------------ ------------------ ------------------ (DOLLARS IN THOUSANDS) Net sales $ 147,107 $ -- $ 147,107 Cost of sales 135,773 582 136,355 -------------- -------------- -------------- Gross profit 11,334 (582) 10,752 Selling, general and administrative expenses 9,587 69(3) 9,656 Reorganization Cost (1,350) -- (1,350) Restructuring provision 95 95 Gain on sale of equipment -- -- -------------- -------------- -------------- Income (loss) from operations 3,002 (651) 2,351 Interest expense, net 980 3,755(4) 4,735 Other income 13 -- 13 -------------- -------------- -------------- Income (loss) before income taxes 2,035 (4,406) (2,371) Provision (benefit) for income taxes 54 (1,002)(5) (948) -------------- -------------- -------------- Net income (loss) $ 1,981 $ (3,404) $ (1,423) ============== ============== ============== (1) Statement of Operations data for Cofimeta for the period January 1, 1998 to September 30, 1998 were derived from Cofimeta Audited Financial Statements. (2) Represents increased depreciation expense as a result of the conformance of accounting policies and depreciation lives between the Company and Cofimeta. (3) Represents amortization of debt issue cost related to the Series C Bond issuance. (4) Represents the net effect on interest as result of following: [Download Table] Use of proceeds from the Series C offering for the acquisition of Cofimeta of $37,625. Interest expense is calculated using an interest rate of 10.125% per annum - See Note C 2,856 Interest on deferred share purchase price in accordance with the purchase agreement. Interest is calculated using an effective interest rate of 10% per annum 702 Net effect on interest expense as a result of revaluation of indebtedness as a part of the acquisition. Includes deferred debt payments as well as Continuation Plan indebtedness Interest expense is calculated using an effective interest rate of 10% per annum 197 -------- $ 3,755 ======== (5) Represents the estimated income tax effect of the pro forma adjustments and restatement of the historical provision to reflect the recording of a deferred tax asset during purchase accounting using an effective rate of 40%. 33
424B336th Page of 221TOC1stPreviousNextBottomJust 36th
 SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA The following table sets forth (i) the selected consolidated historical financial data of the Predecessor for the years ended March 31, 1994 and 1995 which was derived from the audited consolidated financial statements of the Predecessor, (ii) selected consolidated historical financial data of the Predecessor for the period from April 1, 1995 through October 27, 1995, (iii) selected consolidated historical financial data of the Company from October 28, 1995 through March 31, 1996 and the years ended March 31, 1997 and 1998, and (iv) selected consolidated historical financial data of the Company for the nine months ended December 31, 1997 and 1998. The selected consolidated historical financial data for the period April 1, 1995 through October 27, 1995; and the period October 28, 1995 through March 31, 1996 was derived from the audited consolidated financial statements of the Predecessor and the Company, which are included elsewhere in this Prospectus, together with the report of Deloitte & Touche LLP, independent accountants. The selected consolidated historical financial data for the years ended March 31, 1997 and 1998, was derived from the audited consolidated financial statements of the Company, which are included elsewhere in this Prospectus, together with the report of a predecessor of Pricewaterhouse Coopers LLP (Price Waterhouse LLP), independent accountants. The selected consolidated historical financial data for the nine months ended December 31, 1997 and 1998 were derived from unaudited interim financial statements which, in the opinion of management, have been prepared on the same basis as the audited financial statements and include all adjustments (all of which are of a normal recurring nature) that are necessary for a fair presentation of the results for the period. The following table should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Pro Forma Combined Financial Data," and the Consolidated Financial Statements of the Company and the related notes and other financial information presented elsewhere in this Prospectus. [Enlarge/Download Table] HISTORICAL ---------------------------------------------------------------------------- PREDECESSOR COMPANY ------------------------------------------------------- -------------- MAR. 31, MAR. 31, APR. 1, 1995- OCT. 28, 1995- 1994(a) 1995 OCT. 27, 1995 MAR. 31, 1996 -------------- -------------- -------------- -------------- (DOLLARS IN THOUSANDS) STATEMENT OF OPERATIONS DATA: Net sales $ 65,182 $ 75,097 $ 49,043 $ 35,572 Gross profit 5,955 4,206 2,148 3,948 Selling, general and administrative 2,164 4,554 3,922 2,235 Restructuring provision -- -- -- -- Gain on sale of equipment -- -- -- -- -------------- -------------- -------------- -------------- Operating income (loss) 3,791 (348) (1,774) 1,713 Interest expense 1,658 1,267 1,048 1,096 Other income (expense) -- -- -- -- -------------- -------------- -------------- -------------- Income (loss) before income -- -- -- -- taxes 2,133 (1,615) (2,822) 617 Provision (benefit) for income taxes 706 (349) (938) 202 -------------- -------------- -------------- -------------- Net income (loss) $ 1,427 $ (1,266) $ (1,884) $ 415 ============== ============== ============== ============== Net income (loss) per share -- -- -- $ 9.10 BALANCE SHEET DATE (END OF PERIOD): Cash and cash equivalents $ 4,261 $ -- $ -- $ -- Accounts receivable 7,936 9,835 13,312 8,338 Inventories 3,542 4,170 4,429 3,719 Total assets 36,127 41,523 59,770 49,200 Total debt 13,396 12,907 23,233 26,758 Redeemable preferred stock -- -- -- -- Total shareholders equity 12,406 10,833 9,329 935(c) OTHER DATA: Depreciation and amortization $ 1,747 $ 1,413 $ 919 $ 687 Capital expenditures 920 4,384 5,111 3,466 Ratio of earnings to fixed charges(d) 2.2x -- -- 1.5x EBITDA(e) $ 5,538 $ 1,065 $ (855) $ 2,400 Gross margin(f) 9.14% 5.60% 4.38% 11.10% 34
424B337th Page of 221TOC1stPreviousNextBottomJust 37th
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA (CONTINUED) [Enlarge/Download Table] HISTORICAL ----------------------------------------------------------------------- COMPANY ----------------------------------------------------------------------- Mar. 31, Mar. 31, Nine Months Ended Dec. 31, 1997 1998 1997 1998 ------------- ------------- ------------- ------------- (unaudited) (DOLLARS IN THOUSANDS) STATEMENT OF OPERATIONS DATA: Net sales $ 136,861 $ 410,321 $ 295,530 $ 408,144 Gross profit 11,486 41,901 28,350 35,532 Selling, general and administrative 7,685 21,839 13,587 22,235 Restructuring provision -- 1,610 -- 1,176 Gain on sale of equipment -- (1,602) -- -- ------------- ------------- ------------- ------------- Operating income (loss) 3,801 20,054 14,763 12,121 Interest expense 3,388 10,710 7,921 14,255 Other income (expense) 2,201 321 531 949 ------------- ------------- ------------- ------------- Income (loss) before income taxes 2,614 9,665 7,373 (1,185) Provision (benefit) for income taxes 1,065 4,074 2,949 (475) ------------- ------------- ------------- ------------- Net income (loss) $ 1,549 $ 5,591 $ 4,424 $ (710) ============= ============= ============= ============= Net income (loss) per share $ 9.37 $ 13.74 $ 11.05 $ (5.49) BALANCE SHEET DATA (END OF PERIOD): Cash and cash equivalents $ 9,671 $ 18,321 19,555 $ 318 Accounts receivable 47,626 65,273 51,375 86,336 Inventories 13,411 21,305 20,158 33,911 Total assets 243,694 320,032 290,312 412,562 Total debt 99,829 139,448 128,517 374,054 Redeemable preferred stock 39,300 40,192 40,458 40,586 Total shareholders equity 2,341 6,118 1,377 (2,078) OTHER DATA: Depreciation and amortization $ 5,041 $ 20,279 $ 14,580 $ 19,552 Capital expenditures 3,326 16,723 11,418 20,369 Ratio of earnings to fixed charges(d) 1.7x 1.7x EBITDA(e) $ 11,043 $ 40,654 $ 29,874 $ 32,622 Gross margin(f) 8.60% 10.21% 9.59% 8.71% See Notes to Selected Consolidated Historical Financial Data. (a) Reflects the audited financial statements of the Predecessor prepared in accordance with Canadian generally accepted accounting principals, with Canadian dollars being converted to a U.S. dollar equivalent using an average Canadian to U.S. foreign currency exchange rate of 1.3810, for the period ended March 31, 1994. (b) This provision includes income before taxes for the discontinuance of Laserweld and Parallel. Management does not anticipate that these costs will be a part of future operations. (c) The reduction in equity of $8.4 million from October 27, 1995 to March 31, 1996, is primarily a result of the elimination of the Predecessor's equity as a part of the purchase accounting adjustments made upon the acquisition of the Predecessor on October 27, 1995. 35
424B338th Page of 221TOC1stPreviousNextBottomJust 38th
(d) For purposes of this computation, earnings consist of income (loss) before income taxes plus fixed charges. Fixed charges consist of interest on indebtedness plus that portion of rental expense representative of the interest factor. For fiscal 1995, the Company's earnings were insufficient to cover fixed charges by $1.6 million. For the period April 1, 1995 to October 27, 1995, the Company's earnings were insufficient to cover fixed charges by $2.8 million. For the nine months ended December 31, 1998, the Company's earnings were insufficient to cover fixed charges by $1.2 million. (e) EBITDA is defined as income (loss) before interest, income taxes, depreciation and amortization. EBITDA should not be construed as a substitute for income from operations, net income or cash flow from operating activities for the purpose of analyzing the Company's operating performance, financial position and cash flows. (f) Gross margin is defined as gross profit as a percent of net sales for each of the applicable periods. 36
424B339th Page of 221TOC1stPreviousNextBottomJust 39th
 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The following management's discussion and analysis of financial condition and results of operations should be read in conjunction with our "Pro Forma Combined Financial Data" and our Consolidated Financial Statements and notes thereto included elsewhere in this Prospectus. The historical information for the fiscal year ended March 31, 1997 includes the Lobdell results of operations for the period subsequent to its acquisition. For comparative purposes, the financial information for the fiscal year ended March 31, 1996 represents the combination of the results of operations for the Predecessor for the period from April 1, 1995 to October 27, 1995 together with our results of operations from October 28, 1995 through March 31, 1996 (the period subsequent to the acquisition of the Predecessor by the Company). The financial statements of the Predecessor and the Company in the two combined periods are not comparable in certain respects due to differences between the cost basis of certain assets held by the Company versus that of the Predecessor, resulting in reduced depreciation and amortization charges subsequent to October 27, 1995, changes in accounting policies and the recording of certain liabilities at the date of acquisition in connection with the purchase of the Predecessor by the Company. Accordingly, the combination of these two periods does not purport to represent what the results of operations of the Company would have been on a pro forma basis had it acquired the Predecessor on April 1, 1995. The nine months ended December 31, 1998 statements of operations for the Company include the results of operations for all subsidiaries, including Lobdell, Howell, RPIH, and the Suspension Division. Lobdell was acquired on January 10, 1997, Howell was acquired August 13, 1997, RPIH was acquired on November 25, 1997, and the Suspension Division was acquired on April 1, 1998. Each was accounted for using the purchase method of accounting. Therefore, the nine month statements of operations for the period ended December 31, 1997 includes only a portion of the operating results of Howell and RPIH, and do not include the operating results of the Suspension Division. Nine Months Ended December 31, 1998 Compared to Nine Months Ended December 31, 1997 Net Sales -- Net sales for the nine months ended December 31, 1998 were $408.1 million, an increase of $112.6 million as compared to $295.5 million for the same period last year. The overall increase is primarily the result of the acquisitions made since the prior year ($132.5 million) offset by the year to date net impact of the GM strike ($12.7 million) and similar factors as described below. Gross Profit -- For the nine months ended December 31, 1998, gross profit was $35.5 million, an increase of $7.2 million as compared to $28.3 million for the same period last year. The increase is primarily the result of profit on incremental sales resulting from acquisitions, offset by the net impact of the General Motors strike ($5.2 million) and by the reduced market price for processed scrap ($2.9 million) on normal yield experience. Selling, General and Administrative Expenses ("SG&A") -- For the nine months ended December 31, 1998, SG&A expenses increased to $22.2 million or 5.4% of net sales as compared to $13.6 million or 4.6% of net sales for the prior year. The increase in expenditure levels is primarily due to the support of current program launches (CAMI, Saturn and Ford) as well as the resources necessary to support the newly awarded programs for General Motors (closure panels and rear underbody components for a new platform to be assembled solely in Mexico and chassis components for the North American production of global platforms). The Company intends to invest in the necessary resources to support customer engineering requirements and global program management needs. Operating Income -- For the nine months ended December 31, 1998, operating income was $12.1 million, a decrease of $2.7 million as compared to $14.8 million for the same period last year. The decrease is primarily the result of the net impact of the General Motors strike and decreasing scrap recovery prices on normal yield experience partially offset by the profit on incremental sales generated by acquisitions. Interest Expense -- For the nine months ended December 31, 1998, net interest expense was $14.3 million, an increase of $6.4 million as compared to $7.9 million for the same period last year. The increase in expense was due primarily to the issuance of $35.0 million of 10 1/8% Senior Subordinated Notes due 2007, Series B (the "Series B Notes") on April 1, 1998, and the issuance 37
424B340th Page of 221TOC1stPreviousNextBottomJust 40th
of $40.0 million of 10 1/8% Senior Subordinated Notes due 2007, Series C (the "Series C Notes") on December 8, 1998. The Series B Notes and Series C Notes represent incremental borrowings issued at effective interest rates of approximately 9.25% and 9.685% respectively. The balance of the increase can be attributed to the impact of the General Motors strike on operating cash flow and the interim financing of customer tooling for current program launches. Net Income -- For the nine months ended December 31, 1998, we reported a net loss of $0.7 million, a decrease of $5.1 million as compared to the prior year. As explained above, the decrease relates primarily to increased interest expense ($3.8 million), the impact of the General Motors strike ($3.1 million) and the impact of the lower scrap sales pricing ($1.7 million). Fiscal Year Ended March 31, 1998 Compared to Fiscal Year Ended March 31, 1997 Net Sales -- Net sales for the year ended March 31, 1998 were $410.3 million. This represents an increase of $273.4 million as compared to net sales for the fiscal year ended March 31, 1997 of $136.9 million. Net sales for the fiscal year ended March 31, 1997 included net sales of Lobdell only from the acquisition date of January 10, 1997 through March 31, 1997. The increase for the year was due principally from the Lobdell, Howell and RPIH acquisitions ($269.8 million). The balance of the increase related primarily to the strength of light truck and sport utility vehicle production partially offset by the discontinuance of certain customer platforms. On a pro forma basis, had the net sales from all acquisitions been included for the entire fiscal 1998, net sales would have been $453.7 million. Gross Profit -- Gross profit was $41.9 million or 10.2% of net sales for the year ended March 31, 1998 as compared to $11.8 million or 8.6% of net sales for the year ended March 31, 1997. This represents an increase of $30.1 million as compared to the prior year. The gross profit increase is related to the incremental sales resulting from the acquisitions, combined with operating improvements made throughout the year on existing as well as acquired sales. The increase in gross margin is a result of operating improvements through employment and cost reductions, productivity improvements, increased capacity utilization, quality improvements and production schedule attainment. The increased gross profit was partially offset by costs associated with the conversion of Canadian operations to transfer and robotic technology, startup of the Mexican operations and costs associated with the launch of future platforms (Saturn LS, Windstar and Ford heavy-duty pickup (PN131)). Selling, General and Administrative Expenses ("SG&A") -- SG&A expenses were $21.8 million or 5.3% of net sales as compared to $7.7 million or 5.6% for the year ended March 31, 1997. The decrease as a percentage of net sales was a result of the efficiencies derived through acquisition integration and cost reduction programs. The financial and administrative functions were consolidated into the Troy office, thereby allowing for the closure of the Alma and Southfield administrative offices. The increase in expenditures is primarily due to the overall growth of the organization during the year and the need to provide the necessary resources to support customer engineering support, global program management and the continued growth initiatives of the organization. Operating Income -- Income from operations was $20.1 million or 4.9% of net sales for the year ended March 31, 1998 as compared to $3.8 million or 2.8% of net sales for the year ended March 31, 1997. For fiscal 1998, operating income benefited from the growth in the light truck and SUV programs as well acquisitions during the year. The increase in operating margin reflects the continued improvement of operations, implementation of cost saving programs and gain on the sale of equipment of the laser welding operations. Partially offsetting the increase was the recording of restructuring charges as a part of our overall plant rationalization initiatives. Other Income - Other income for the year ended March 31, 1998 was $0.3 million or 0.1% of net sales as compared to $2.2 million or 1.6% of net sales for the year ended March 31, 1997. The decrease was due primarily to foreign currency exchange transactions gains recorded in fiscal 1997 which were not present in fiscal 1998. Interest Expense - Interest expense for the year ended March 31, 1998 was $10.7 million or 2.6% of net sales as compared to $3.4 million or 2.5% of net sales for the year ended March 31, 1997. While interest as a percentage of net sales remained relatively flat, the overall increase in expense was due primarily to the issuance of $125.0 million of 10 1/8% Senior Subordinated Notes on June 24, 1997. The Notes represent both incremental borrowing as well as increased interest rate as compared to outstanding debt of the prior period. Proceeds of the Notes were used to pay off existing debt and support acquisition activities. The increase in interest expense was partially offset by interest income derived over the year on unused bond proceeds available for short term investment. 38
424B341st Page of 221TOC1stPreviousNextBottomJust 41st
Income Tax -- Income tax expense was $4.1 million or 1.0% of net sales for the period ended March 31, 1998 as compared to $1.1 million or 0.8% of net sales for the year ended March 31, 1997. The increased income tax of $3.0 million is a result of the $7.1 million increase in income before taxes for the year ended March 31, 1998 as compared to the previous year and an increase in our overall effective tax rate. Net Income - Net income was $5.6 million or 1.4% of net sales for the year ended March 31, 1998 as compared to $1.5 million or 1.1% of net sales for the year ended March 31, 1997. The improvement of $4.1 million was a result of increased operating and other income of $14.4 million, offset by the increase in interest expense of $7.3 million and income taxes of $3.0 million. Fiscal Year Ended March 31, 1997 Compared to Fiscal Year Ended March 31, 1996 Net Sales -- Net sales for the year ended March 31, 1997 were $136.9 million, including the net sales of Lobdell from January 10, 1997 (the "Acquisition Date") through March 31, 1997. This was an increase of $52.2 million or 61.7% as compared to net sales for the fiscal year ended March 31, 1996 of $84.6 million. The increase was due principally to the acquisition of Lobdell and was partially offset by lower sales volume due to model changeovers. On a pro forma basis, if Lobdell net sales were included with that of the Company for the entire fiscal year ended March 31, 1997, net sales would have been $330.2 million, an increase of $245.6 million as compared to the prior year, and if Howell and RPIH net sales were also included for fiscal 1997, net sales would have been $433.4 million, an increase of $348.8 million as compared to the prior year. Gross Profit -- Gross profit was $11.8 million or 8.6% of net sales for the year ended March 31, 1997 as compared to $6.1 million or 7.2% of net sales for the year ended March 31, 1996. This represents an increase of $5.7 million, or 93.4% as compared to the prior year. The increase was primarily a result of higher margins on Lobdell sales for the eighty day period from the Acquisition Date through March 31, 1997. Gross profit also increased due to (i) workforce reductions, (ii) improved materials cost management which resulted in lower raw material costs and (iii) strong sales in the light truck and SUV markets, our largest sales segments and those which produce its highest margins. The increased gross profit was partially offset by costs associated with the production launch of the Saturn Coupe stampings. Selling, General and Administrative Expenses ("SG&A") -- SG&A expenses were $7.7 million or 5.6% of net sales for the year ended March 31, 1997 as compared to $6.2 million or 7.3% of net sales for the year ended March 31, 1996. The decrease as a percentage of net sales was a result of efficiencies and cost reduction programs undertaken by management. Specifically, the reduction in SG&A expenses as a percentage of net sales resulted from a restructuring of the sales and product engineering functions into customer focused business units. Operating Income -- Income from operations was $3.8 million or 2.8% of net sales for the year ended March 31, 1997 as compared to a deficit of $0.1 million for the year ended March 31, 1996. The improvement of $3.9 million was a result of improved gross profit of $5.7 million, partially offset by increased SG&A expenses of $1.5 million. Other Income -- Other income for the year ended March 31, 1997 was $2.2 million or 1.6% of net sales due primarily to foreign currency exchange transactions. No significant other income was earned for the year ended March 31, 1996. Interest Expense -- Interest expense for the year ended March 31, 1997 was $3.4 million or 2.5% of net sales, an increase of $1.3 million over the interest expense for the year ended March 31, 1996. While interest expense for both periods remained constant at 2.5% of net sales, the increase of $1.3 million was a result of variations in base lending rates and additional borrowings resulting from the acquisition of Lobdell. Income Tax -- Income tax expense was $1.1 million or 0.8% of net sales for the period ended March 31, 1997 as compared to a benefit of $0.7 million or 0.8% of net sales for the year ended March 31, 1996. The increased income tax expense of $1.8 million is a result of the $4.8 million increase in income before taxes for the year ended March 31, 1997 as compared to the previous year. Net Income -- Net income was $1.5 million or 1.1% of net sales for the year ended March 31, 1997 as compared to a loss of $1.5 million or 1.8% of net sales for the year ended March 31, 1996. The improvement of $3.0 million was a result of improved operating income of $3.9 million and increased other income of $2.2 million. The increase in net income was partially offset by increased interest expense and income taxes of $1.3 million and $1.8 million, respectively. 39
424B342nd Page of 221TOC1stPreviousNextBottomJust 42nd
 LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION Net income adjusted for non-cash charges (depreciation and amortization and deferred taxes) generated approximately $15.9 million of cash for the nine months ended December 31, 1998 and generated approximately $24.4 million of cash for the year ended March 31, 1998. Cash decreased by $36.9 million during the nine months ended December 31, 1998 based on an overall increase in accounts receivable, inventories, and reimbursable tooling, offset slightly by a decrease in other assets. During the nine months ended December 31, 1998, we used approximately $75.1 million for investing activities, including the acquisitions of the Suspension Division ($53.9 million). These investing activities were supported substantially by the issuance of the Series B Notes as described below and line of credit borrowings. The cash generated by financing activities was made up primarily of $78.5 million of proceeds from the Series B Notes and Series C Notes. Cash increased during the year ended March 31, 1998 based on overall increases in trade accounts payable of $11.4 million and refundable income taxes of $2.9 million. Offsetting the increase in cash for fiscal 1998 was a net increase in accounts receivable, customer tooling, and other working capital requirements of $13.7 million. The increase in customer tooling is primarily a result of progress payments made to tooling vendors to support scheduled program launches set for fiscal 1999 (Saturn LS, Ford Windstar, and CAMI J2). During the year, we used approximately $43.2 million for investing activities, including the acquisitions of Howell and RPIH, as well as the purchase of an equity interest in a publicly traded automotive supplier. The overall cash requirements were funded by approximately $26.3 million of incremental borrowings. At December 31, 1998 we had approximately $82.5 million available under the Senior Credit Facility. At December 31, 1998, we had $ 22.7 million outstanding under the line of credit and $4.8 million in outstanding letters of credit to support certain IRBs and workers compensation commitments. During the nine months ended December 31, 1998, we received net proceeds of $40.8 million from the offering of the Series C Notes, after the inclusion of approximately $1.5 million in premium and after the payment of $0.7 million in issuance costs. We used the net proceeds from the Series C Notes to repay borrowings under the Senior Credit Facility and for working capital and other general corporate purposes. During fiscal 1998, we received net proceeds of $37.6 million from our offering of Series A Notes, after payment of approximately $83.1 million to refinance existing indebtedness and approximately $4.3 million in issuance costs. We used approximately $23.2 million and $2.5 million respectively toward the acquisitions of Howell and RPIH and related expenses. The remainder of the proceeds were used for general corporate purposes and in part to fund the acquisition of the Suspension Division. The balance of the Suspension Division acquisition was funded by the issuance of the Series B Notes. We believe our application of the proceeds from the Existing Notes has enhanced our ability to meet our growth and business objectives. However, interest payments on the Existing Notes will represent a significant liquidity requirement for us. We will be required to make scheduled semi-annual interest payments on the Existing Notes of approximately $10.1 million on June 15 and December 15 each year until their maturity on June 15, 2007 or until the Notes are redeemed. Capital expenditures were $20.4 million, or 5.0% of net sales for the nine months ended December 31, 1998 as compared to $11.4 million or 3.9% of net sales for the nine months ended December 31, 1997. The increase of $9.0 million was due primarily to customer programs (the 1999 model year Saturn LS) and press equipment and automation upgrades. Other capital expenditures included health and safety items, computer and network upgrades and Y2K support. Capital expenditures were $16.7 million, or 4.1% of net sales for the year ending March 31, 1998 as compared to $3.3 million, or 2.4% of net sales for the year ended March 31, 1997. The increase of $13.4 million was due primarily to the inclusion of acquisitions, the start up of two Mexican operations ($3.7 million) and the development of a corporate Technical and Administrative center ($1.3 million). Other capital expenditures included investments to support new business (primarily the 1999 model year Saturn LS (previously designated Innovate), and Ford's Windstar and CAMI's J2, each due to launch during the summer of 1998), press equipment and rebuilds, safety and maintenance equipment, automation and other productivity improvement expenditures, and other items including computers and welding equipment. 40
424B343rd Page of 221TOC1stPreviousNextBottomJust 43rd
For fiscal 1999, our capital expenditures are expected to be $34.9 million, consisting of a $14.0 million investment to support new business and increase capacity; $11.0 million for press automation, rebuilds and improvements; $2.5 million in computer system and network upgrades and $7.4 million in other expenditures, including health, safety, environmental, cost reduction and maintenance items. We believe that cash generated from operations, together with amounts available under the Senior Credit Facility will be adequate to meet our debt service requirements, capital expenditures and working capital needs for the foreseeable future, although no assurance can be given in this regard. Our future operating performance and ability to service or refinance the Existing Notes and to extend or refinance our other indebtedness will be subject to future economic conditions and to financial, business and other factors that are beyond our control. RAMOS ARIZPE - MEXICO FACILITY On March 31, 1999 we entered into a synthetic lease transaction through a wholly-owned Mexican subsidiary for the acquisition of new equipment for and construction of a new facility being built in Ramos Arizpe, Mexico. Under U.S. Generally Accepted Accounting Principles, this transaction is classified as an operating lease. The approximately 330,000 sq. ft. facility will support the General Motors GMT 250/257 program (SUV/ Hybrid vehicle) slated to begin production in April 2000. The GMT 250/257 program is expected to generate approximately $90.0 million of sales when in full production. We were awarded substantially all closure panels and rear underbody components for the program. Plant rationalization has allowed for the transfer of equipment already owned to the facility. The lease payments for the facility will be approximately $6.0 million per year. The award of the program is in line with our expected growth into Mexico and is seen as key to our future success in that country. ACQUISITIONS We believe that the operations of the Suspension Division and Cofimeta will enhance our ability to develop key suspension and structural components. We believe that these acquisitions will have a positive impact on our results of operations for the fiscal year ending March 31, 1999 and thereafter.  SHAREHOLDERS' EQUITY For the nine months ended December 31, 1998, the fluctuation in shareholders' equity for foreign currency adjustments of ($5.5 million) is due to our long-term investment in Canada. This adjustment reflects the relative weakening of the Canadian dollar, and has no impact on cash flow. For the nine months ended December 31, 1998, the reduction in shareholders' equity for holdings of marketable securities of ($1.0 million) is due to stock price fluctuation of our strategic investment in a synergistic company. IMPACT OF GENERAL MOTORS STRIKE During a portion of the nine months ended December 31, 1998, substantially all of General Motors vehicle production was shut down due to two local strikes in Flint, Michigan. General Motors is a significant customer of ours and the prolonged shutdown had an adverse effect on our results of operations for the nine months ended December 31, 1998. We took all steps necessary to lessen the overall impact. A portion of the sales lost during the strike were made up in the three months ended December 31, 1998. The effect of the strike on these periods was as follows: [Download Table] THREE MONTHS NINE MONTHS ENDED ENDED DEC. 31, 1998 DEC. 31, 1998 ------------- ------------- (DOLLARS IN MILLIONS) Sales $ 5.6 $ (12.7) Gross Profit 1.3 (5.2) Net Income 0.8 (3.1) EBITDA 1.3 (5.2) 41
424B344th Page of 221TOC1stPreviousNextBottomJust 44th
YEAR 2000 We are aware of the potential impacts of the millennium change on business. In response, we have created a Year 2000 project team to perform inventory, remediation, and testing of possibly affected systems. The Year 2000 project team is coordinated at the corporate level with support from senior management. Key individuals at the facility level are executing the Year 2000 efforts. We have also employed some external Year 2000 contractors to assist with compliance in some areas. We are following the Year 2000 guidelines set forth by the Automotive Industry Action Group ("AIAG") and are reporting Year 2000 status quarterly to the AIAG. We have broken the Year 2000 program into the following assessment areas: business computer systems, desktop computing, network infrastructure, voice systems, shop floor systems, non-information technology items, and suppliers/business partners. As it relates to the AIAG areas for evaluation, we do not have dedicated product-testing facilities nor do its products contain any computer chips. We have completed a significant portion of Year 2000 remediation with the remainder to be finalized by July 31, 1999. In addition, we are committed to complete Year 2000 testing between March 31, 1999 and September 31, 1999. We will continue Year 2000 compliance testing throughout 1999 to ensure that regression does not occur. We have completed a thorough assessment of all manufacturing, administrative and management software. We have begun to upgrade certain software modules and/or code to comply with AIAG Year 2000 guidelines and timing. At the same time, we are implementing new software where compliance through upgrade could not be achieved in either a timely or cost effective manner. We are on target and expect to achieve Year 2000 compliance for all of our software by July 31, 1999. Further, we initiated the move to a common software system as we continue the implementation effort across all facilities. We are assessing the Year 2000 readiness of our external suppliers, business partners, and service providers to ensure that business associations will not be negatively impacted by the Year 2000 date. We will use alternate sourcing and contingency planning in situations that threaten our ability to deliver products or conduct business. Since these other companies are in various stages of Year 2000 readiness, we will be monitoring their progress throughout 1999, assessing associated risks, and taking a course of action to ensure business continuity. In addition to efforts of the internal staff, we are using external resources to complete the project. The cost of external resources for 1998 totaled $0.3 million and the total capital spending for 1998 was $1.4 million of which, approximately $0.4 million relates to software projects. In 1999, the external costs will approximate $0.1 million, which will relate to any remediation activities derived from Year 2000 testing, and the remaining capital expenditures will approximate $0.2 million.  THE EXCHANGE OFFER Pursuant to the Registration Agreement, we have agreed (i) to file a registration statement with respect to a registered offer to exchange the Series C Notes for the Series D Notes, which will have terms substantially identical in all material respects to the Series C Notes (except that the Series D Notes will not contain terms with respect to transfer restrictions, certain registration rights and certain interest rate step-up provisions) within 120 days after the date of original issuance of the Series C Notes, and (ii) to use reasonable best efforts to cause such registration statement to become effective under the Securities Act at the earliest possible time but in any event no later than 180 days after issuance of the Series C Notes. The Registration Agreement also provides for the exchange of the Series A Notes and the Series B Notes for Series D Notes having terms substantially identical in all material respects to the Series A Notes and the Series B Notes. The interest rate step-up provisions provide that special interest will accrue on the Series C Notes (in addition to the stated interest on the Series C Notes) at a rate of 0.25% per annum during the 90-day period immediately following the occurrence of any Registration Default, and shall increase by 0.25% per annum at the end of each subsequent 90-day period, but in no event shall such rate exceed 1.00% per annum. See "Summary -- The Series D Notes." In the event that applicable law or interpretations of the Staff of the SEC do not permit us to file the registration statement containing this Prospectus or to effect the Exchange Offer, or if certain holders of the Series C Notes notify us that they are prohibited by law or SEC policy from participating in the Exchange Offer, or subject to other restrictions, we will use our reasonable best efforts to cause to become effective a shelf registration statement with respect to the resale of the Series C Notes only and to keep the shelf registration statement effective until the earlier of two years following the date the shelf registration statement is declared effective by the SEC and such time as all the Series C Notes have been sold thereunder. Holders of Existing Notes do not have any 42
424B345th Page of 221TOC1stPreviousNextBottomJust 45th
appraisal or dissenters' rights in connection with the Exchange Offer. The interest rate step-up provisions do not apply to the Series A Notes, the Series B Notes, or the Series D Notes to be exchanged for the Series A Notes and Series B Notes.  TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING EXISTING NOTES Upon the terms and subject to the conditions set forth in this Prospectus and in the accompanying Letter of Transmittal (which together constitute the Exchange Offer), we will accept for exchange Existing Notes which are properly tendered on or prior to the Expiration Date and not withdrawn as permitted below. As used herein, the term "Expiration Date" means 5:00 p.m., New York City time, on June 9, 1999; provided, however, that if we have extended the period of time for which the Exchange Offer is open, which in no event shall be later than June 24, 1999, the term "Expiration Date" means the latest time and date to which the Exchange Offer is extended. As of the date of this Prospectus, $200.0 million aggregate principal amount of Existing Notes are outstanding. This Prospectus, together with the Letter of Transmittal, is first being sent on or about May 10, 1999 to all holders of Existing Notes known to us. Our obligation to accept Existing Notes for exchange pursuant to the Exchange Offer is subject to certain conditions as set forth under "--Certain Conditions to the Exchange Offer" below. We expressly reserve the right, at any time or from time to time, to extend the period of time during which the Exchange Offer is open, and thereby delay acceptance for any exchange of any Existing Notes, by giving written notice of such extension to the holders thereof, including those holders who have previously tendered their Existing Notes. During any such extension, all Existing Notes previously tendered will remain subject to the Exchange Offer and may be accepted for exchange by us. Any Existing Notes not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the Exchange Offer. We expressly reserve the right to amend or terminate the Exchange Offer, and not to accept for exchange any Existing Notes not previously accepted for exchange, upon the occurrence of any of the conditions of the Exchange Offer specified below under "--Certain Conditions to the Exchange Offer." We will give written notice of any extension, amendment, non-acceptance or termination to the holders of the Existing Notes, including those holders who have previously tendered their Existing Notes, as promptly as practicable, such notice in the case of any extension to be issued no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date.  PROCEDURES FOR TENDERING EXISTING NOTES The tender to us of Existing Notes by a holder of such notes as set forth below and the acceptance of such notes by us will constitute a binding agreement between the tendering holder and us upon the terms and subject to the conditions set forth in this Prospectus and in the accompanying Letter of Transmittal. Except as set forth below, a holder who wishes to tender Existing Notes for exchange pursuant to the Exchange Offer must transmit a properly completed and duly executed Letter of Transmittal, including all other documents required by such Letter of Transmittal, to U.S. Bank Trust National Association, (the "Exchange Agent") at one of the addresses set forth below under "Exchange Agent" on or prior to the Expiration Date. In addition, either (i) certificates for such Existing Notes must be received by the Exchange Agent along with the Letter of Transmittal, or (ii) a timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such Existing Notes, if such procedure is available, into the Exchange Agent's account at The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedure for book-entry transfer described below, must be received by the Exchange Agent prior to the Expiration Date, or (iii) the holder must comply with the guaranteed delivery procedures described below. THE METHOD OF DELIVERY OF EXISTING NOTES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR EXISTING NOTES SHOULD BE SENT TO US. Any beneficial owner whose Existing Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact the registered holder promptly and instruct such registered holder of Existing Notes to tender on such beneficial owner's behalf. If such beneficial owner wishes to tender on such owner's own behalf, such owner must, prior to completing and executing the Letter of Transmittal and delivering such owner's Existing Notes, either 43
424B346th Page of 221TOC1stPreviousNextBottomJust 46th
make appropriate arrangements to register ownership of the Existing Notes in such owner's name or obtain a properly completed bond power from the registered holder of Existing Notes. The transfer of registered ownership may take considerable time and may not be able to be completed prior to the Expiration Date. Signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, must be guaranteed unless the Existing Notes surrendered for exchange pursuant thereto are tendered (i) by a registered holder of the Existing Notes who has not completed the box entitled "Special Issuance Instruction" or "Special Delivery Instructions" on the Letter of Transmittal, or (ii) for the account of an Eligible Institution (as defined below). In the event that signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantees must be by a firm which is a member of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc. or by a commercial bank or trust company having an office or correspondent in the United States or an eligible guarantor institution within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act") which is a member of one of the recognized signature guarantee programs identified in the Letter of Transmittal (collectively, "Eligible Institutions"). If Existing Notes are registered in the name of a person other than a signer of the Letter of Transmittal, the Existing Notes surrendered for exchange must be endorsed by, or be accompanied by a written instrument or instruments of transfer or exchange, in satisfactory form as determined by us in our sole discretion, duly executed by, the registered holder with the signature thereon guaranteed by an Eligible Institution. If the Letter of Transmittal or any Existing Notes or powers of attorney are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by us, proper evidence satisfactory to us of their authority to so act must be submitted. All questions as to the validity, form, eligibility (including time of receipt) and acceptance of Existing Notes tendered for exchange will be determined by us in our sole discretion, which determination shall be final and binding. We reserve the absolute right to reject any and all tenders of any particular Existing Notes not properly tendered or to not accept any particular Existing Notes which acceptance might, in our judgment or the judgment of our counsel, be unlawful. We also reserve the absolute right to waive any defects or irregularities or conditions of the Exchange Offer as to any particular Existing Notes either before or after the Expiration Date (including the right to waive the ineligibility of any holder who seeks to tender Existing Notes in the Exchange Offer). The interpretation of the terms and conditions of the Exchange Offer as to any particular Existing Notes either before or after the Expiration Date (including the Letter of Transmittal and the instructions thereto) by us shall be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Existing Notes for exchange must be cured within such reasonable period of time as we shall determine. Neither the Company, the Exchange Agent nor any other person shall be under any duty to give notification of any defect or irregularity with respect to any tender of Existing Notes for exchange, nor shall any of them incur any liability for failure to give such notification. In connection with the tender of the Existing Notes, each broker-dealer holder will represent to us in writing that, among other things, the Series D Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the holder and any beneficial holder, that neither the holder nor any such beneficial holder has an arrangement or understanding with any person to participate in the distribution of such Series D Notes and that neither the holder nor any such other person is an "affiliate," as defined under Rule 405 of the Securities Act, of the Company. If the holder is not a broker-dealer, the holder must represent that it is not engaged in nor does it intend to engage in a distribution of the Series D Notes. ACCEPTANCE OF EXISTING NOTES FOR EXCHANGE; DELIVERY OF SERIES D NOTES For each Existing Note accepted for exchange, the holder of such Existing Note will receive a Series D Note having a principal amount equal to that of the surrendered Existing Note. For purposes of the Exchange Offer, we shall be deemed to have accepted properly tendered Existing Notes for exchange when, as and if we have given oral and written notice thereof to the Exchange Agent. In all cases, issuance of Series D Notes for Existing Notes that are accepted for exchange pursuant to the Exchange Offer will be made only after timely receipt by the Exchange Agent of certificates for such Existing Notes or a timely Book-Entry Confirmation of such Existing Notes into the Exchange Agent's account at the Book-Entry Transfer Facility, a properly completed and duly executed Letter of Transmittal and all other required documents. If any tendered Existing Notes are not accepted for any reason set forth in the terms and conditions of the Exchange Offer or if Existing Notes are submitted for a greater principal amount than the holder desires to exchange, such unaccepted or non-exchanged Existing Notes will be returned without expense to the 44
424B347th Page of 221TOC1stPreviousNextBottomJust 47th
tendering holder thereof (or, in the case of Existing Notes tendered by book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry transfer procedures described below, such non- exchanged Existing Notes will be credited to an account maintained with such Book-Entry Transfer Facility) as promptly as practicable after the expiration of the Exchange Offer. BOOK-ENTRY TRANSFER Any financial institution that is a participant in the Book-Entry Transfer Facility's systems may make book-entry delivery of Existing Notes by causing the Book-Entry Transfer Facility to transfer such Existing Notes into the Exchange Agent's account at the Book-Entry Transfer Facility in accordance with such Book-Entry Transfer Facility's procedures for transfer. However, although delivery of Existing Notes may be effected through book-entry transfer at the Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof with any required signature guarantees and any other required documents must, in any case, be transmitted to and received by the Exchange Agent at one of the addresses set forth below under "Exchange Agent" on or prior to the Expiration Date or the guaranteed delivery procedures described below must be complied with. GUARANTEED DELIVERY PROCEDURES If a registered holder of the Existing Notes desires to tender such Existing Notes and the Existing Notes are not immediately available, or time will not permit such holder's Existing Notes or other required documents to reach the Exchange Agent before the Expiration Date, or the procedure for book-entry transfer cannot be completed on a timely basis, a tender may be effected if (i) the tender is made through an Eligible Institution, and (ii) prior to the Expiration Date, the Exchange Agent received from such Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by us (by telegram, telex, facsimile, mail or hand delivery), setting forth the name and address of the holder of Existing Notes and the amount of Existing Notes tendered, stating that the tender is being made thereby and guaranteeing that within three New York Stock Exchange ("NYSE") trading days after the Expiration Date, the certificates for all physically tendered Existing Notes, in proper form for transfer, or a confirmation of book-entry transfer of such Existing Notes into the Exchange Agent's account at the Book-Entry Transfer Facility (a "Book-Entry Confirmation"), as the case may be, a properly completed and duly executed Letter of Transmittal and any other documents required by the Letter of Transmittal will be deposited by the Eligible Institution with the Exchange Agent.  WITHDRAWAL RIGHTS Tenders of Existing Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the business day prior to the Expiration Date. For a withdrawal to be effective, a written notice of withdrawal must be received by the Exchange Agent at one of the addresses set forth below under "Exchange Agent." Any such notice of withdrawal must specify the name of the person having tendered the Existing Notes to be withdrawn, identify the Existing Notes to be withdrawn (including the principal amount of such Existing Notes), and (where certificates for Existing Notes have been transmitted) specify the name in which such Existing Notes are registered, if different from that of the withdrawing holder. If certificates for Existing Notes have been delivered or otherwise identified to the Exchange Agent, then, prior to the release of such certificates, the withdrawing holder must also submit the serial numbers of the particular certificates to be withdrawn and a signed notice of withdrawal with signatures guaranteed by an Eligible Institution unless such holder is an Eligible Institution. If Existing Notes have been tendered pursuant to the procedure for book-entry transfer described above, any notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Existing Notes and otherwise comply with the procedures of such facility. All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by us, and our determination shall be final and binding on all parties. Any Existing Notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the Exchange Offer. Any Existing Notes which have been tendered for exchange but which are not exchanged for any reason will be returned to the holder thereof without cost to such holder (or, in the case of Existing Notes tendered by book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the book entry transfer described above, such Existing Notes will be credited to an account maintained with such Book-Entry Transfer Facility for the Existing Notes) as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Existing Notes may be retendered by following one of the procedures described under "-- Procedures for Tendering Existing Notes" above at any time on or prior to the Expiration Date. 45
424B348th Page of 221TOC1stPreviousNextBottomJust 48th
CERTAIN CONDITIONS TO THE EXCHANGE OFFER Notwithstanding any other provision of the Exchange Offer, we shall not be required to accept for exchange, or to issue Series D Notes in exchange for, any Existing Notes and may terminate or amend the Exchange Offer if, at any time before the acceptance of such Existing Notes for exchange or the exchange of Series D Notes for such Existing Notes, we determine that the Exchange Offer violates applicable law, any applicable interpretation of the Staff of the SEC or any order of any governmental agency or court of competent jurisdiction. The foregoing conditions are for our sole benefit and may be asserted by us regardless of the circumstances giving rise to any such condition or may be waived by us in whole or in part at any time and from time to time in its reasonable discretion. Our failure at any time to exercise any of the foregoing rights shall not be deemed a waiver of such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. In addition, we will not accept for exchange any Existing Notes tendered, and no Series D Notes will be issued in exchange for any such Existing Notes, if at such time any stop order shall be threatened or in effect with respect to the Registration Statement of which this Prospectus constitutes a part or the qualification of the Indenture under the Trust Indenture Act of 1939, as amended (the "TIA"). In any such event we are required to use every reasonable effort to obtain the withdrawal of any stop order at the earliest possible time.  EXCHANGE AGENT U.S. Bank Trust National Association, has been appointed as the Exchange Agent for the Exchange Offer. All executed Letters of Transmittal should be directed to the Exchange Agent at one of the addresses set forth below. Questions and requests for assistance, requests for additional copies of this Prospectus or of the Letter of Transmittal and requests for Notices of Guaranteed Delivery should be directed to the Exchange Agent addressed as follows. [Download Table] BY HAND (NEW YORK DEPOSITORY ONLY): BY HAND (ALL OTHERS): U.S. Bank Trust National Association U.S. Bank Trust National Association 100 Wall Street, 20th Floor Fourth Floor - Bond Drop Window New York, NY 10005 180 East Fifth Street St. Paul, MN 55101 By Registered, Certified or Overnight Mail: By First Class Mail: U.S. Bank Trust National Association U.S. Bank Trust National Association Attn.: Specialized Finance P.O. Box 64485 180 East Fifth Street St. Paul, MN 55164-9549 St. Paul, MN 55101 By Facsimile: By Telephone: (612) 244-1537 (800) 934-6802 Bondholder Services (For Eligible Institutions Only) DELIVERY OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. FEES AND EXPENSES We will not make any payments to brokers, dealers or others soliciting acceptances of the Exchange Offer. The principal solicitation is being made by mail; however, our officers and employees may make additional solicitations in person or by telephone. We will pay the expenses to be incurred in connection with the Exchange Offer. Such expenses include fees and expenses of the Exchange Agent and Trustee, accounting and legal fees and printing costs, among others. 46
424B349th Page of 221TOC1stPreviousNextBottomJust 49th
ACCOUNTING TREATMENT We will record the Series D Notes at the same carrying value as the Existing Notes, which is the principal amount as reflected in our accounting records on the date of the exchange. Accordingly, we will not recognize any gain or loss for accounting purposes. We will capitalize the expenses of the Exchange Offer for accounting purposes. TRANSFER TAXES Holders who tender their Existing Notes for exchange will not be obligated to pay any transfer taxes in connection therewith, except that holders who instruct us to register Series D Notes in the name of, or request that Existing Notes not tendered or not accepted in the Exchange Offer be returned to, a person other than the registered tendering holder will be responsible for the payment of any applicable transfer tax thereon.  CONSEQUENCES OF FAILURE TO EXCHANGE; RESALES OF SERIES D NOTES Holders of Existing Notes who do not exchange their Existing Notes for Series D Notes in the Exchange Offer will not be able to take advantage of any increased liquidity afforded by the Series D Notes. The Series D Notes would have an aggregate principal amount of $200.0 million as opposed to $160.0 million for the Series A and B Notes and $40.0 million for the Series C Notes. In addition, holders of Series C Notes who do not exchange their Series C Notes for Series D Notes pursuant to the Exchange Offer will continue to be subject to the restrictions on transfer of such Series C Notes as set forth in the legend thereon as a consequence of the issuance of the Series C Notes pursuant to the exemptions from, or in transactions not subject to, the registration requirements of, the Securities Act and applicable state securities law. Series C Notes not exchanged pursuant to the Exchange Offer will continue to accrue interest at 10 1/8% per annum and will otherwise remain outstanding in accordance with their terms. In general, the Series C Notes may not be offered or sold unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. We do not currently anticipate that we will register the Series C Notes under the Securities Act. However if (i) the Initial Purchasers so request with respect to Series C Notes held by them following consummation of the Exchange Offer, or (ii) any holder of Series C Notes is not eligible to participate in the Exchange Offer because, for example, such holder is an affiliate of the Company, does not acquire the Series D Notes in the ordinary course of business or has an arrangement to participate in the distribution of the Series D Notes, or (iii) any holder of Series C Notes that participates in the Exchange Offer does not receive freely tradable Series D Notes in exchange for Series C Notes, we are obligated to file a shelf registration statement on the appropriate form under the Securities Act relating to the Notes held by such persons. Based on certain interpretive letters issued by the staff of the SEC to third parties in unrelated transactions, we are of the view that Series D Notes issued pursuant to the Exchange Offer may be offered for resale, resold or otherwise transferred by holders thereof (other than (i) any such holder which is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act, or (ii) any broker-dealer that purchases Series D Notes from the Company to resell pursuant to Rule 144A or any other available exemption) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such Series D Notes are acquired in the ordinary course of such holders' business and such holders have no arrangement or understanding with any person to participate in the distribution of such Series D Notes. If any holder has any arrangement or understanding with respect to the distribution of the Series D Notes to be acquired pursuant to the Exchange Offer, such holder (i) could not rely on the applicable interpretations of the staff of the SEC, and (ii) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. A broker-dealer who holds Existing Notes that were acquired for its own account as a result of market-making or other trading activities may be deemed to be an "underwriter" within the meaning of the Securities Act and must, therefore, deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of Series D Notes. Each such broker-dealer that receives Series D Notes for its own account in exchange for Existing Notes, where such Existing Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge in the Letter of Transmittal that it will deliver a prospectus in connection with any resale of such Series D Notes. See "Plan of Distribution." In addition, to comply with the securities laws of certain jurisdictions, if applicable, the Series D Notes may not be offered or sold unless they have been registered or qualified for sale in such jurisdiction or an exemption from registration or qualification is 47
424B350th Page of 221TOC1stPreviousNextBottomJust 50th
available and is complied with. We have agreed, pursuant to the Registration Agreement and subject to certain specified limitations therein, to register or qualify the Series D Notes for offer or sale under the securities or blue sky laws of such jurisdictions as any holder of the Notes reasonably requests in writing.  BUSINESS GENERAL We are a leading Tier 1 or direct supplier of high-quality, engineered metal components, assemblies and modules used by OEMs. Our core products are complex, high value-added products, primarily assemblies containing multiple stamped parts, forgings and various welded, hemmed or fastened components. These products which include large structural stampings and assemblies, including exposed "Class A" surfaces, leaf springs and smaller complex welded assemblies, are used in the manufacturing of a variety of sport utility vehicles ("SUVs"), light and medium trucks, mini-vans, vans and passenger cars. We are the sole source supplier of these products to its customers. On a pro forma basis, assuming the acquisitions of Howell, RPIH, the Suspension Division and Cofimeta had occurred on April 1, 1997, we would have had net sales of $765.2 million and EBITDA (as defined herein) of $40.8 million for the fiscal year ended March 31, 1998. For the nine months ended December 31, 1998, on a pro forma basis for such period, assuming the acquisition of Cofimeta had occurred on April 1, 1998, we would have had net sales of $555.3 million and EBITDA of $41.6 million. Our seven largest customers, based on pro forma net sales for the nine months ended December 31, 1998, assuming the acquisition of Cofimeta had occurred April 1, 1998 are: General Motors Corporation ("GM") (34%), Ford Motor Company ("Ford") (25%), Renault S.A. (15%), DaimlerChrysler AG ("DaimlerChrysler") (10%), PSA Peugeot Citroen ("PSA") (5%), CAMI (1%), and The Saturn Corporation ("Saturn") (1%). We have been providing products directly to GM and Ford for more than 50 years and have earned outstanding commercial ratings for our high-quality standards, including GM's Supplier of the Year and Mark of Excellence Awards, Ford's Q1 Award and CAMI's President's Award. We also sell our products to other Tier 1 suppliers. For the fiscal year ended March 31, 1998, approximately 71% of our net sales, on a pro forma basis assuming the acquisitions of Howell, RPIH, the Suspension Division, and Cofimeta occurred on April 1, 1997, were derived from sales of our products manufactured for SUVs, mini-vans, vans and light trucks. In recent years, SUVs, mini-vans, vans and light trucks have experienced stronger growth in vehicle production as compared to the passenger car sector. This sector includes those platforms and models which have strong consumer demand, such as GM's popular C/K platform (full-size pickups and the Yukon/Tahoe/Suburban models), Ford's Ranger, Explorer and Windstar, DaimlerChrysler's Ram pickup and mini-van, and Renault's Kangoo and Espace. See Note 16 of the Oxford Automotive, Inc. Notes to Consolidated Financial Statements for a description of the Company's domestic and export sales. With the acquisition of Cofimeta, the description of future financial data for geographic areas will include information for Europe. Our recent acquisitions significantly strengthen our position as a leading Tier 1 supplier of assemblies and modules to the OEMs. These strategic combinations provide us with the critical mass and capabilities in the areas of design and engineering, sales and marketing, and product expertise which provide the basis for our strategy of becoming a fully-integrated, global systems supplier. The Company has implemented a successful, focused sales and marketing initiative. As a result, the Company was awarded the door assemblies and the side panel package for the new Saturn LS Program (the "LS Program"), the new vehicle which Saturn is launching in 1999 based upon the current Opel Vectra. Management believes these awards from Saturn will generate approximately $65.0 million of annual net sales beginning with the 1999 model year. In addition, the Company was recently awarded the door, hood, and underbody assemblies for the GMT 250/257 Program (Pontiac Recon, Buick Signia) (the "GMT 250 Program") and chassis components for the North American production of a global platform for GM. The GMT 250 Program, a new GM platform, will be produced solely in Mexico and management believes will generate approximately $90.0 million of annual net sales beginning in 1999. Management believes the other GM program will generate approximately $158.0 million of annual net sales beginning in 2002. We currently operate 21 manufacturing facilities which offer the latest technologies in metal stamping, forging, welding and assembly production equipment, including fully-automated hydraulic and wide-bed press lines (up to 180 inches), robotic welding cells, robotic hemming, autophoretic corrosion resistant coating and a patented eye forming process. We also have the world-wide exclusive rights (outside the CIS--formerly Soviet Union) to the "MAZ" tapering process for our suspension applications. Since 1992, we have invested in excess of $125.0 million in capital investments to support sales growth, expand production capabilities 48
424B351st Page of 221TOC1stPreviousNextBottomJust 51st
and improve efficiency and flexibility. Our diverse line of over 500 presses that range up to 3,000 tons including both conventional and transfer technology and state-of-the-art robotic weld assembly and hemming equipment are capable of manufacturing a broad assortment of parts and assemblies ranging from simple stampings to full-size, Class A door and closure panels. We are one of a few independent suppliers that has the ability to produce large, complex stampings, as well as the technical expertise and automated assembly capabilities to provide high value-added modules such as door apertures and assemblies, A-pillars, Class A surface products and control arms, and multiple leaf and parabolic leaf springs. We have entered into a lease transaction for a new 330,000 sq. ft. facility in Ramos Arizpe, Mexico to support the GMT 250 Program and other opportunities in the Mexican market. BUSINESS STRATEGY Our principal objective is to be a leading, full-service, global Tier 1 supplier of integrated systems based on metal forming and related manufacturing technologies. We believe that we are well positioned to benefit from two significant trends in the stamping and metal forming segments of the automotive industry: outsourcing and consolidation. Outsourcing of metal stamping has increased in response to competitive pressures on OEMs to improve quality and reduce capital requirements, labor costs, overhead and inventory. Consolidation among automotive industry suppliers has occurred as OEMs have more frequently awarded long-term sole source contracts to the most capable global suppliers. In addition, OEMs are increasingly seeking systems suppliers who can provide a complete package of design, engineering, manufacturing and project management support for an integrated system (such as a front-end system). We intend to capitalize on these trends through internal development and strategic acquisitions. The key elements of our strategy include the following: Provide Full-Service Program Capability. We are focused on developing full-service program capabilities. We work with OEMs throughout the product development process from concept and prototype development through the design and implementation of manufacturing processes. We believe that our ability to provide the package of design, engineering, prototyping, tooling, blanking, stamping, forging, assembly, and corrosion resistant coating to our customers creates a unique capability present in only a limited number of suppliers. We believe this capability will enable us to manage large programs, assist us in reducing customer program launch time, lower customer costs and increase our margins. Supply Complex, High Value-Added Systems. As a result of our technical design and engineering capabilities and our reputation for highly-efficient manufacturing operations, we are able to secure supply relationships for complex, high value-added products, primarily assemblies and modules that contain multiple stamped parts and various welded, hemmed or fastened components. For example, we produce the rear door for GM's Yukon/Tahoe/Suburban vehicles, the lower control arm for GM's four wheel drive C/K vehicles, the control arm assemblies for Ford's F-Series pickups and DaimlerChrysler's T-300, the radiator support assembly for GM's W-car (Grand Prix, Century, Lumina, Monte Carlo and Intrigue), and complex A- pillar assemblies for the Ford Mustang and the Ford Ranger pickup, and multiple leaf, parabolic (long taper) multiple leaf, and single leaf long taper suspension systems for products ranging from Ford's F-Series pickups to DaimlerChrysler's mini-vans. These complex products typically generate higher dollar content per vehicle as well as higher margins for the Company as compared to simple, individual stampings. We plan to capitalize on our ability to develop and provide integrated modules and assemblies to deliver to the OEMs an integrated product such as a complete door or front-end system. In addition to doors, radiator supports and Class A surface components, we believe we have unique expertise with respect to control arms and leaf springs, which we will further develop as a fully integrated suspension system. Focus on High Growth Vehicle Categories. Our sales and marketing efforts have been, and will continue to be, directed toward sectors of the automotive market that have experienced strong consumer demand. For the fiscal year ended March 31, 1998, approximately 71% of our net sales on a pro forma basis for the acquisitions of Howell, RPIH, the Suspension Division, and Cofimeta were derived from sales of products manufactured for SUVs, mini-vans, vans and light trucks. Similarly, our sales to the passenger car market have been, and will continue to be, directed to the segments with stronger sales growth, including Saturn cars. Establish a Global Presence. The Company is actively pursuing additional strategic acquisitions and joint-venture opportunities in Europe and intends to pursue opportunities which will allow the Company to increase its presence in South America, and establish a presence in Asia and other markets in order to serve its customers on a global basis. Several OEMs have announced certain models designed for the world automobile market ("World Car"). As a result, the OEMs have encouraged their existing suppliers to establish foreign production support for World Car programs. This globalization provides access to new customers 49
424B352nd Page of 221TOC1stPreviousNextBottomJust 52nd
and technology, as well as economic cycle diversification. We have operations in France and have established a presence in Mexico and Venezuela and currently provide components for OEMs doing business in Mexico and South America. Pursue Strategic Acquisitions. In response to the trend in the OEM market toward "systems suppliers," we are focused on making strategic acquisitions that will enhance our ability to provide integrated systems (such as a door or front end systems) or otherwise leverage our existing business by providing additional product, manufacturing and service capabilities. We also intend to pursue acquisitions which will expand our customer base by providing an entree to new customers, including the North American operations of Asian and European based OEMs. We believe that the continuing supplier consolidation in the stamping and metal forming segments may also provide attractive opportunities to acquire high-quality companies at favorable prices, including businesses which can be improved financially through overhead elimination, organizational restructuring, plant reconfiguration, labor contract negotiations and management changes. We will also pursue acquisitions that enable us to achieve a global presence. RECENT DEVELOPMENTS On April 1, 1998, we acquired the Suspension Division. The Suspension Division is a leading Tier 1 North American supplier of leaf spring suspension systems for automotive applications. Products of the Suspension Division include multiple leaf, parabolic (long taper) multiple leaf, and single leaf long taper suspension systems. The Suspension Division is held through two of the Company's subsidiaries, Oxford Suspension, Inc. and Oxford Suspension Ltd., both of which are Subsidiary Guarantors. The Suspension Division is a major supplier to the traditional North American light truck vehicle manufacturers, and also one Japanese automotive transplant, one Japanese heavy truck manufacturer, and one European vehicle program. The Suspension Division designs, manufactures and markets leaf springs for original equipment vehicle markets with product applications in light truck rear suspensions. The Suspension Division is focused on the light truck market, where full-size pick-ups and vans, mini pick-ups and vans, and sport utility vehicles are the major users of leaf springs, primarily for rear suspension applications. The Suspension Division includes a 49% interest in Metalcar, a Venezuelan manufacturer of conventional leaf springs and coil springs for both light and heavy trucks. The Suspension Division had net sales of $125.8 million for its fiscal year ended December 31, 1997. For its fiscal year ended December 31, 1997, the Suspension Division had EBITDA of $7.4 million. On February 5, 1999, we acquired the shares of Cofimeta for FF80 million (approximately $13.9 million) in immediately available funds and deferred payments over three years in the amounts of FF27 million (approximately $4.7 million, based upon the U.S. Dollar exchange rate on February 2, 1999) for each of the first two years and FF36 million (approximately $6.2 million, based upon the U.S. Dollar exchange rate on February 2, 1999) for the third year. Cofimeta is a leading supplier of closure panels, floor pans, deck lids, structural pillars, cross members, radiator surrounds and front ends, and Class A surfaces. Cofimeta is headquartered in a suburb of Paris and operates manufacturing facilities in France located in Douai, St. Florent and Orbec. Cofimeta employs approximately 1,600 persons and is a major supplier to Renault and PSA. For the nine months ended September 30, 1998, Cofimeta had net sales of $147.1 million and EBITDA of $9.0 million. Amounts set forth in U.S. Dollars with respect to Cofimeta for the nine months ended September 30, 1998 are based upon the average published U.S. Dollar exchange rates for the period. Cofimeta had previously benefited from a final order, entered approximately nineteen months ago, of the French Commercial Court in Douai, France, approving a continuation plan for Cofimeta (the "Continuation Plan"). The Continuation Plan authorized certain restructuring plans, which included reductions in employment levels, capital increases by its prior parent, and the rescheduling of payment of all trade payables and other obligations over a ten year period. Pursuant to an application by Group Valfond S.A., the prior owner of Cofimeta, to the Court of Douai, the court by judgment dated January 7, 1999 authorized, inter alia, (i) the sale of the Cofimeta shares to the Company, (ii) termination of the Continuation Plan with respect to Cofimeta, and (iii) the establishment of Cofimeta Defeasance S.A. by Cofimeta to which the payment obligations of Cofimeta remaining under the Continuation Plan were transferred. Of the FF 372 million of original Continuation Plan obligations of Cofimeta, which were transferred to Cofimeta Defeasance, S.A., approximately FF 305 million have been acquired by the Company and FF 67 million remain payable to unrelated third parties. Under the Continuation Plan, approximately 75% of the scheduled repayment of all of the Continuation Plan obligations will occur in the last five years of the ten year period. Cofimeta is held as a subsidiary of Oxford Automotive France SAS which is held by OASP, Inc. and OASP II, Inc., both wholly-owned subsidiaries of Oxford Automotive and Subsidiary Guarantors. 50
424B353rd Page of 221TOC1stPreviousNextBottomJust 53rd
In March 1999 the Company announced the closure of its Hamilton, Indiana facility. The decision to close this facility was based on the Company's rationalization of its current capacity and will result in fixed cost reductions and improved productivity through reallocation of production to other facilities during fiscal 2000. The costs associated with the closure had been previously reserved for in purchase accounting and will therefore have no adverse impact on the financial results of the Company. The Company is currently redeploying production assets from this and other previously closed facilities to support recently awarded programs (e.g. GMT 250 Program). On a pro forma basis for the fiscal year ended March 31, 1998, assuming the acquisitions of Howell, RPIH, the Suspension Division, and Cofimeta had occurred on April 1, 1997, (i) our net sales and EBITDA would have been $765.2 million and $40.8 million, respectively, (ii) the SUV, mini-van, van and light truck segment represented approximately 71% of net sales and (iii) our net sales by major customers would have been approximately as follows: Ford 30%; GM 29%; Renault 15%; DaimlerChrysler 10%; PSA 6%, CAMI 1%, and Saturn 1%. INDUSTRY TRENDS The OEM market to which we sell our products consists of the design, engineering, development, production and sale of parts, components, assemblies and modules or systems (several components assembled together) for use in the manufacture of new motor vehicles. Our performance, growth and strategic plan are directly related to certain trends within the OEM market. Since the 1980s, DaimlerChrysler, Ford and GM have each been substantially reducing the number of suppliers that may bid for awards and outsourcing an increasing percentage of their production requirements. As a result of these trends, the OEMs are focusing on the development of long-term, sole source relationships with suppliers who can provide more complex parts, as well as complete subassemblies and modules on a just-in-time basis while at the same time meeting strict quality requirements. These requirements are accelerating the trend toward consolidation of the OEM's supplier base, as those suppliers who lack the capital and production expertise to meet the OEM's needs, either cease to operate or are merged with larger suppliers. OEMs benefit from outsourcing because outside suppliers generally have significantly lower cost structures and, as described below, suppliers can assist in shortening development periods for new products. In addition to consolidation and outsourcing, suppliers are participating earlier in the design and engineering process, providing research, as well as product development, product testing/validation, prototyping and tooling. OEMs generally expect Tier 1 suppliers to (i) participate in the design and engineering of complex assemblies, (ii) develop the required manufacturing process to deliver these assemblies on a just-in-time basis, and (iii) assume responsibility for quality control. This results in shorter development times for new products, as well as higher quality and lower parts costs. While the focus today by the OEMs is on quality, cost and service, we believe that the focus for the future will be on global capabilities, innovation and ability to provide value-added products and systems. The OEMs have been very successful in making high-quality and low cost a minimum requirement to remain in the industry, as opposed to a competitive advantage for certain suppliers. These evolving requirements can best be addressed by suppliers with sufficient resources to meet such demands. For full-service suppliers such as the Company, this environment provides an opportunity to grow by obtaining business previously provided by other suppliers who can no longer meet the current or future requirements and expectations of the OEMs and by acquisitions that further enhance product manufacturing and service capabilities. Although the requirements of the OEMs have already resulted in significant consolidation of component suppliers in many product segments, we believe that many opportunities exist for further consolidation within our stamping and metal forming industry. PRODUCTS We generate the majority of our net sales from large, complex, high value-added products, primarily assemblies that generally consist of multiple parts, which we stamp and forge and combine with various welded or fastened components. We are the sole source supplier of these complex modules and assemblies. These products include unexposed components and assemblies that are intrinsic to the structural integrity of the vehicle such as A-pillars, radiator supports, floor pans, toe-to-dash panels, leaf springs, frame and suspension components and reinforcements. In addition to unexposed components and assemblies, we have the capability and expertise to produce Class A surfaces such as door assemblies, door apertures, rocker panels, fuel filler doors, and 51
424B354th Page of 221TOC1stPreviousNextBottomJust 54th
box side outers, which require virtually flawless finishes and more stringent customer requirements than unexposed assemblies. These products require superior engineering and automated manufacturing and assembly capabilities due to their complexity and high volume requirements. While we have the capability to produce small stampings, such as brackets and braces, we focus on more complex and larger components and assemblies which typically generate higher dollar content per vehicle as well as higher margins for the Company. These assemblies, such as the A, B and C pillars, control arms, leaf springs, door assemblies, door apertures, deck lids and radiator supports require larger, high tonnage, wide-bed, fully-automated press capabilities, complex automated weld and hemming assembly, autophoretic corrosion resistant coating, machining, and automated assembly of purchased components. The chart below details by major customer our major products, the type of vehicle and the model/platform for which they are produced [Enlarge/Download Table] CUSTOMER TYPE MODEL/PLATFORM COMPONENTS SUPPLIED ------------------ ------------- ---------------------------- --------------------------------------- General Motors Sport Utility Suburban/Tahoe/Yukon Door Assemblies, Door Apertures, Rocker Panels, Lower Control Arms, Wheel Moldings Sport Utility Blazer/Jimmy Leaf Springs, Seat Supports/Rails Sport Utility Pontiac Recon/Buick Signia Door Assemblies, Tailgate Assemblies, (2000 Launch) Hoods, Floor Assemblies, Rocker Panels, Rail Assemblies Light Truck S10/Sonoma Pickup Leaf Springs Light Truck C/K Crew Cab Pickup Door Apertures, Wheel Moldings Light Truck C/K Pick Up Lower Control Arms (4 Wheel Drive), Rocker Panels, Wheel Moldings Light Truck C/K Pick Up (Mexico) Class A Blanks Mini-Van Astro/Safari Struts, Lower Control Arms (All Wheel Drive), A Pillars, Leaf Springs Vans Savanna/Express Leaf Springs, Pillar Reinforcements, Latches, Supports Medium Duty Commercial Chassis Leaf Springs, Toe-to-Dash Panel Medium Duty Kodiak Floor Assembly, Fuel Tank Straps, Raised Roof Panel Passenger Car Saturn SC Deck Lid, Pillar Reinforcement, Inner Doors, Window Frame Reinforcement Passenger Car Saturn SC/SL/SW (1999 Launch) Underbody Rails Passenger Car Saturn LS (1999 Launch) Body Side Inners, Door Assemblies, Shelf Panel, Wheel House Inners, Radiator Support, Heat Shield, Gas Tank Shield Passenger Car Grand Prix, Regal, Intrigue, Radiator Supports Monte Carlo, Lumina Passenger Car Corvette Floor Panels Passenger Car EV1 Floor Panels, Wheel Houses Passenger Car Malibu, Cutlass Sun Roof Assembly Passenger Car Grand Am, Alero Door Beams Passenger Car Park Avenue, Riviera, Aurora, Rocker Panels Seville, Deville Passenger Car Joy, Swing, Monza (Mexico) Class A Blanks, Floor Pan Assemblies Passenger Car Cavalier/Sunfire (Mexico) Floor Pan Assemblies Ford Sport Utility Explorer, Mountaineer Rear Floor Reinforcement, Center Body Pillar, B-Pillar Assembly, Leaf Springs Sport Utility Expedition, Navigator Control Arms 52
424B355th Page of 221TOC1stPreviousNextBottomJust 55th
[Enlarge/Download Table] CUSTOMER TYPE MODEL/PLATFORM COMPONENTS SUPPLIED ------------------ ------------- ---------------------------- --------------------------------------- Light Truck F Series Pickup Control Arms, Load Floor, Leaf Springs Light Truck Ranger, Mazda Pickup A Pillar, Upper/Lower Back Panel, Roof Panel, Windshield Header, Box Side Outer, Leaf Springs Van Windstar Rear Floor Assembly, Dash Panel, Rear Cross Members, Cowl Sides, Radiator Support Van Econoline Roof Rails, A-Pillar, Floor Pan, Shock Tower, Fuel Filler Doors, Leaf Springs, Brackets, Latches Passenger Car Contour/Mystique/Mondeo Front & Rear Control Arms, Rear Suspension (Europe) Bar Assembly, Brackets Passenger Car Cougar Front & Rear Control Arms, Rear Suspension Bar Assembly, Brackets Ford/Nissan Mini-Van Villager, Quest Leaf Springs DaimlerChrysler Sport Utility Cherokee Control Arms Light Truck Dakota Leaf Springs, Control Arms (1999 Launch) Sport Utility Durango Skid Plates, Brackets, Control Arms (1999 Launch) Light Truck Ram Pickup Control Arms Minivan Extended Voyager/Caravan, Leaf Springs AWD Eurostar (Europe) Isuzu Medium Duty NPR/W4 Truck Leaf Springs CAMI Sport Utility Tracker/Sidekick Rear Bumper, Side Frame Member, Door Inner Reinforcement, Floor Bar, Underbody Components Passenger Car Metro/Swift Rear Cross Members, Side Sill, Dash Panel Renault Passenger Car Megane Engine Cradle, Radiator Support, Pillar Assemblies, Structural Supports Gas Tank Heat Shield, Bulkhead Heat Shield, Door Beam Van Kangoo Longitudinal Body Rails, Structural Supports, Engine Cradles, Structural Cross Members Passenger Car X53 Hood Assembly, Cross Members, Reinforcements Van Express Pillar Reinforcements, Cross Members Van Master Pillar Reinforcements, Cross Members Passenger Car Clio Door Beam Van Traffic Pillar Reinforcements, Cross Members Passenger Car Saffrane Cross Members, Structural Supports Passenger Car X40 Cross Members, Structural Supports Heavy Truck Various Instrument Panel Assembly, Structural Pillar Assemblies Passenger Car Laguna Structural Cross Members, Fender Support, Reinforcements Van Twingo Floor Reinforcements 53
424B356th Page of 221TOC1stPreviousNextBottomJust 56th
[Enlarge/Download Table] CUSTOMER TYPE MODEL/PLATFORM COMPONENTS SUPPLIED ------------------ ------------- ---------------------------- --------------------------------------- PSA Van Monospace Pillar Reinforcements, Cross Members Passenger Car 205 Hood Outer, Hood Inner, Floor Extensions Passenger Car ZX/306 Cross Members Passenger Car 405 Support, Cross Member, Inner Fender Reinforcements Passenger Car Xantia Heat Shield, Cross Member, Structural Reinforcements Passenger Car Various Clutch Pedal Assemblies Passenger Car Z8 (606) Reinforcements, Cross Members, Heat Shield, Tank Shield Matra Van Espace Floor Pan Assemblies, Pillar Assemblies Nissan Passenger Car Micra Oil Pan, Heat Shield, Clutch Pedal GM Passenger Car Astra Dash Panel Reinforcement, Structural Cross Member, Brackets Passenger Car Omega Radiator Support Stampings Saab Passenger Car 900 Floor Cross Member, Reinforcements VW Passenger Car Golf Heat Shield, Brackets, Reinforcements SEAT Passenger Car Toledo Door Beams Faurecia Passenger Car Audi B6 Cross Members, Inserts For Instrument Panel Passenger Car PSA Z8 (606) Seat Structure Cross Members Passenger Car PSA X4 Xantia Seat Structure Cross Members Van VW T5 Van Seat Structure Cross Members Sevel Nord Van U64 Trunk Lid Inner, Fender Inner, Floorpan Parts, Fender Inner, Hood Panel The Company has received purchase orders for production commencing after the current model year, which production typically continues through the product's life cycle and is subject to the volume requirements of customers, for the following major products: (i) the new Saturn LS Program, which management believes will generate approximately $65.0 million of annual net sales beginning with the 1999 model year, (ii) the GMT 250 Program, which management believes will generate approximately $90.0 million of annual net sales beginning in 1999, (iii) the 2001 DaimlerChrysler Durango/Dakota control arms, which management believes will generate approximately $11.1 million of annual sales beginning in 2000 (iv) the GM Blazer /Jimmy/ Bravada control arms, which management believes will generate approximately $ 50.1 million of annual net sales beginning in 2001 and (v) chassis components for the North American production of a GM global platform, which management believes will generate approximately $158.0 million of annual sales beginning in 2002. DESIGN AND ADVANCED ENGINEERING We strive to maintain a technological advantage through investment in product development and advanced engineering capabilities that utilize structured program management techniques in an effort to exceed the customer's expectations for value and service. Our engineering staff encompasses such disciplines as program management, computer aided design ("CAD"), virtual prototyping, draw die and process simulation, advanced engineering, manufacturing feasibility, and tooling and process development. Responsibilities of our engineers include (i) design, (ii) initial prototype development, (iii) design and implementation of manufacturing processes, (iv) production feasibility and improvement, and (v) data management. 54
424B357th Page of 221TOC1stPreviousNextBottomJust 57th
As our customers continue to out source larger assembled systems which must be designed at earlier stages of vehicle development rather than the smaller parts which are attached to them, we are increasingly required to utilize advanced engineering resources early in the planning process. Advanced engineering resources create improved engineering design, CAD feasibility studies, working prototypes and testing programs to meet customer specifications. Given this increased demand for early involvement in the design and engineering aspects of production development, we established a new technical center which houses our engineering and design group. We utilize structured program management based on the Automotive Industry Action Group sanctioned Advanced Part Quality Planning principles to ensure part quality in all phases of design and manufacturing. We have established a data management and CAD department which is able to support all major customer systems. We provide "gray box" engineering capabilities in which the customer has principal design responsibility while our engineers work closely with the customer in designing the specifications of the product material, the part to be produced and the tooling required to produce the finished product. We are also on-line with all major customers which accelerates the process of design changes. Our design and advanced engineering expertise is an important differentiating factor in maintaining our relationships with and obtaining new business from our customers and, in management's judgment, was an essential factor in winning the new business described above. CUSTOMERS AND MARKETING We supply our products on a long-term preferred and sole source basis, primarily to GM (34%), Ford (25%), Renault (15%), DaimlerChrysler (10%), PSA (5%), CAMI (1%), and Saturn (1%) (percentages are approximates of net sales for the nine months ended December 31, 1998 on a pro forma basis for the acquisition of Cofimeta) with the remaining net sales comprised of sales primarily to other automotive suppliers. We have been providing products directly to GM and Ford for more than 50 years, and directly to DaimlerChrysler, Renault, and PSA for more than 20 years. We currently have locations in the United States, Canada, Mexico, France and Venezuela and provide components for OEMs doing business in Europe, North America and South America. We believe our presence in Europe and Mexico is strategically important and has led to several significant new opportunities (e.g. GM 250 Program) with OEMs doing business in these locations. We also believe the Venezuelan joint venture provides further entree into Latin and South American markets. Metalcar's production capabilities and strong management team will provide the Company the means to further penetrate these markets not only for springs, but also metal stamping and other Company products. We maintain very strong relationships with our customers and continually strive to exceed customer expectations and anticipate customer needs. This approach has enabled us to maintain our status as a long-term supplier with each of our major customers and as part of a limited group of preferred suppliers invited to bid for platform work. With the efforts by the OEMs to reduce the product development cycle time, top suppliers are increasingly included in the early design and development stages. For example, we obtain many of our new orders through a presourcing process by which the customer invites one or a few preferred suppliers to manufacture and design a component, assembly or module that meets certain price, timing and functional parameters. Upon selection at the development stage, we typically agree with the customer to cooperate in developing the product to meet the specified parameters. Upon completion of the development stage and the award of the manufacturing business, we receive a blanket purchase order for those components, assemblies or modules for the life of a vehicle model or platform, which typically range from five to seven years. Consequently, the key success factors for OEM suppliers now include total program management that encompasses state-of-the-art design, reduced launch cycle times, manufacture and delivery of high quality products at competitive prices. We believe that the advanced engineering and sales organization at our technical center offers services few other suppliers have available for their customers. The group's primary activities are: (i) Quoting/Cost Estimating; (ii) Assembly/Automation; (iii) CAD Design and Data Control; (iv) Virtual prototyping; (v) Draw die simulation; (vi) Tool Process/Design; and (vii) Program Management. The sales group is divided into customer oriented business units, each with a business unit manager responsible for all facets of customer needs, as well as strategies for growing their particular customer base. The entire group is dedicated to advanced technical development and servicing a multitude of customers' needs as one team. 55
424B358th Page of 221TOC1stPreviousNextBottomJust 58th
MANUFACTURING AND FACILITIES Our corporate headquarters, engineering, technical center and sales offices are currently located in Troy, a suburb of Detroit, Michigan, close to our core of automotive customers. Our manufacturing plants are strategically located near OEM manufacturing sites. We operate over 500 presses ranging from under 100 ton to 3,000 ton capabilities. We are capable of producing components and assemblies from the smallest brackets to full-size, Class A door and closure panels with our unique wide-bed (180 inch), automated press lines. Production systems include oil feeders, welding robots, pick and place robots and other state-of-the-art automation, as well as autophoretic corrosion resistant coating systems. As OEMs have increased quality standards and implemented just-in-time and sequenced delivery/inventory management methods, the consistency of quality, as well as the timeliness and reliability of shipments by OEM suppliers, have become crucial in meeting logistical demands of the OEMs and reducing operating costs of the supplier. We have responded by developing and adopting manufacturing practices that seek to maximize quality and eliminate waste and inefficiency in our own operations and in those of our customers. Our manufacturing and engineering capabilities enable us to design and build high-quality, efficient manufacturing systems, processes and equipment. We have invested heavily in our commitment to quality through education of employees and implementation of cost management and control systems from the plant floor up. All suppliers are required to meet numerous quality standards in order to qualify as a preferred and long-term supplier to the OEMs. The QS-9000 standards were developed by international and domestic automobile and truck manufacturers to ensure that their suppliers meet consistent quality standards that can be independently audited. The QS-9000 standards provide for the standardization and documentation of a supplier's policies and procedures to improve suppliers' efficiencies. The European automobile and truck manufactures have developed similar standards to the QS-9000 standards (EAQF). We are QS-9000 certified and Cofimeta is EAQF certified. In addition to the QS-9000 standard, each OEM maintains its own certification or award system for preferred suppliers based on the supplier's demonstrated quality, delivery and certain commercial considerations. Ford requires that all suppliers receive its Q1 rating in order to quote for new production business. GM's Supplier of the Year Award provides certain competitive advantages to the recipients but is not a requirement for current GM suppliers to bid on new business. DaimlerChrysler allows suppliers who have received its Gold Pentastar Award to retain any current business when it is replaced by a new model without competitive bidding. Other OEMs maintain various award programs for their suppliers that recognize outstanding performance by the supplier. We have received DaimlerChrysler's Gold Pentastar Award for each of our facilities that have DaimlerChrysler as a customer. We have the Q1 rating from Ford at all plants that are required to have the Q1 rating. A summary of our major facilities, including the facilities of our less than majority owned affiliates is set forth below: [Download Table] SIZE FACILITY (SQ. FT.) ---------------------- --------- Alma, Michigan 389,000 Argos, Indiana 386,000 Corydon, Indiana 200,000 Greencastle, Indiana 214,000 Cambridge, Ontario 290,000 Delhi, Ontario 115,000 Athens, Tennessee 100,000 Masury, Ohio 150,000 Lapeer, Michigan 85,000 Prudenville, Michigan 76,000 Oscoda, Michigan 57,000 Hamilton, Indiana 85,000 Chatham, Ontario 190,000 Wallaceburg, Ontario 240,000 Saltillo, Mexico(1) 20,000 Silao, Mexico(1) 42,000 56
424B359th Page of 221TOC1stPreviousNextBottomJust 59th
[Download Table] SIZE FACILITY (SQ. FT.) ---------------------- --------- Troy, Michigan(1) 34,000 Douai, France 538,000 St. Florent, France 431,000 Orbec, France 188,000 Valencia, Venezuela(2) 122,000 -------------------- (1) All properties above are owned, with the exception of the Silao and Saltillo facilities and the Troy office. These properties are leased with lease expiration dates ranging from December 1999 to June 2005. (2) Owned by Metalurgica Carabobo, S.A., a Venezuelan joint venture of which we have a 49% interest. The Company has entered into a lease transaction for a new facility in Ramos Arizpe, Mexico. The 330,000 sq. ft. facility will support the GMT 250 Program as well as other customer opportunities. RAW MATERIALS The cost of raw materials represented approximately 51.3% of our net sales for the fiscal year ended March 31, 1998 on a pro forma basis for the acquisitions of Howell, RPIH, the Suspension Division, and Cofimeta. On an annual basis, steel represents approximately 68% of total raw materials purchases. We expect to purchase nearly 360,000 tons of steel in fiscal 1999 for use in its production. The remaining 32% of raw materials purchases is represented by various purchased parts such as forgings, bushings, ball joints, isolators, corrosion resistant coating, and various fasteners. We participate with respect to the majority of our platforms in steel purchase programs through Ford, GM and DaimlerChrysler wherein the steel is purchased by the OEM from the steel mill and sold to us at a negotiated price. These purchase programs effectively neutralize the exposure to steel price increases, as any price increases from the steel mills are either absorbed by the OEM prior to our purchase of the steel or such increases are reflected in our purchase of the steel and passed back to the OEM in the product pricing.  COMPETITION The market for our products is characterized by strong competition from both captive OEM suppliers and external, non-captive suppliers. We compete with a limited number of competitors that have the physical assets and technical resources to produce large bed stampings, complex parts and subassemblies of multiple parts. Our largest competitors include The Budd Company, a subsidiary of Thyssen AG; Magna International Inc.; Tower Automotive, Inc.; Aetna Industries, Inc.; Ogihara America Corp., a subsidiary of Marubeni Corp.; Midway Products Corporation; Active Tool & Manufacturing Co., Inc.; A.G. Simpson Automotive, Inc.; Mayflower Vehicle Systems Inc.; L&W Engineering; National Automotive Radiator Manufacturing Company; and divisions of OEMs with internal stamping and assembly operations. We compete for business at the beginning of the development for new model platforms, as well as the redesign of current models. This process can begin from two to five years prior to the introduction of the new model. After the customer awards a program, that supplier is generally designated as the sole source supplier for the life of that program, which typically lasts 4 to 5 years for passenger cars and up to 10 years for trucks (particularly for unexposed structural components and assemblies). EMPLOYEES At March 1, 1999, we employed approximately 4,900 persons in the United States, Canada, Mexico, and France, approximately 1,100 of whom are employed on a salaried basis and the balance of whom are hourly employees. Substantially all of the hourly employees are represented by various local unions through collective bargaining agreements. These individual agreements which are from three to five years in length expire over the period April 1999 through February 2004. 57
424B360th Page of 221TOC1stPreviousNextBottomJust 60th
In 1994, we experienced a two-week work stoppage at the Chatham, Ontario facility. Other than this event, we have not experienced any organized work stoppages at any time during the past ten years. At the present time, we believe that our relations with our employees are good.  REGULATORY MATTERS Our facilities and operations are subject to a wide variety of federal, state, local, and foreign environmental laws, regulations, and ordinances, including those related to air emissions, wastewater discharges, and chemical and hazardous waste management and disposal ("Environmental Laws"). Our operations also are governed by laws relating to workplace safety and worker health, primarily the Occupational Safety and Health Act, and foreign counterparts to such laws. In many jurisdictions, these laws are complex and change frequently. The nature of our operations exposes us to risks of liabilities or claims with respect to environmental and worker health and safety matters. At March 31, 1998, we had a liability of approximately $1.7 million recorded for estimated costs of known environmental matters. There can be no assurance that material costs will not be incurred in connection with such liabilities or claims. See Note 15 to Oxford Automotive, Inc. Notes to Consolidated Financial Statements. Based on our experience to date, we believe that the future cost of compliance with existing Environmental Laws (or liability for known environmental claims) will not have a material adverse effect on our business, financial condition or results of operations. However, future events, such as changes in existing Environmental Laws or their interpretation, may give rise to additional compliance costs or liabilities that could have a material adverse effect on the Company's business, financial condition or results of operations. Compliance with more stringent Environmental Laws, as well as more vigorous enforcement policies of regulatory agencies or stricter or different interpretations of existing Environmental Laws, may require additional expenditures by the Company that may be material. Certain Environmental Laws hold current owners or operators of land or businesses liable for their own and for previous owners' or operators' releases of hazardous or toxic substances, materials or wastes, pollutants or contaminants, including petroleum and petroleum products ("Hazardous Substances"). Certain laws, including but not limited to CERCLA, may impose joint and several liability on responsible parties. Because of our operations, the long history of industrial uses at some of its facilities, the operations of predecessor owners or operators of certain of the businesses, and the use, production, and releases of Hazardous Substances at these sites, we are affected by such liability provisions of the Environmental Laws. Several of our facilities have experienced some level of regulatory scrutiny in the past and are or may be subject to further regulatory inspections, future requests for investigation or liability for past disposal practices. Our Alma, Michigan plant is listed on the Michigan Department of Environmental Quality ("MDEQ") list of Michigan Sites of Environmental Contamination. Based on filings with the MDEQ by the current owner of the petroleum refinery which adjoins the Alma Plant property, the refinery has been determined by the MDEQ to be the source of certain contamination existing in the eastern area of the Alma plant property. While we are currently conducting certain remedial activity at our Alma plant in connection with this contamination, we may have claims against the refinery owner relating to this contamination. While we do not expect to incur significant future costs in connection with this matter, we cannot guarantee that such future costs will not be material. The Resource Conservation and Recovery Act and the regulations thereunder ("RCRA") regulates the generation, treatment and disposal of hazardous wastes. In the mid-1980s, we entered into a Consent Agreement and Final Order, through Lobdell, with the United States Environmental Protection Agency (the "EPA") relating to the final closure of a surface water impoundment area at the Alma plant under RCRA. We have remediated the impoundment soils and sediments and we are now implementing a groundwater monitoring program with EPA approval under RCRA. In addition, we are conducting groundwater monitoring in a separate section of the Alma plant at which contaminants have been detected by our consultants. Both of these programs may be affected by the suspected contamination from the petroleum refinery described above. While future groundwater remediation costs, if any, are not expected to be material, we cannot predict such costs with certainty and no guarantee can be made that these costs will not be material. We have been named as a potentially responsible party, along with several other companies, in connection with a former disposal facility located in the St. Louis, Michigan area. We, along with certain other named parties, in cooperation with the State of Michigan, currently are undertaking a remedy for which we are sharing costs. Groundwater at the site is currently being monitored and while the 58
424B361st Page of 221TOC1stPreviousNextBottomJust 61st
costs of groundwater remediation, if any, are not expected to be material, we cannot accurately estimate such costs at this time. See "Risk Factors -- Environmental Risks and -- Legal Proceedings." On April 1, 1998, we acquired the Suspension Division and are in the process of addressing certain environmental concerns. Eaton Corporation has agreed to retain and reimburse us for all known environmental liabilities for which claims are made prior to April 1, 2008 arising from the operation of the acquired facilities prior to the acquisition of the Suspension Division, including the present remediation efforts. Eaton Corporation has also agreed to retain and reimburse us for all unknown environmental liabilities arising from the operation of the acquired facilities prior to the acquisition of the Suspension Division, for which claims are made prior to April 1, 2000, up to a $1.5 million aggregate cap. While there can be no assurance that all costs associated with such matters will ultimately be reimbursed by Eaton Corporation, we do not currently believe that any liability associated with such matters will be material.  LEGAL PROCEEDINGS We are subject to various claims, lawsuits and administrative proceedings related to matters arising in the normal course of business. In the opinion of management, after reviewing the information which is currently available with respect to such matters and consulting with legal counsel, any liability which may ultimately be incurred with respect to these matters will not materially affect our financial position. AVAILABLE INFORMATION We are subject to the informational requirements of the Exchange Act, and in accordance therewith file periodic reports and other information with the SEC. We have, and the Subsidiary Guarantors have, filed with the SEC an Exchange Offer Registration Statement pursuant to the Securities Act, and the rules and regulations promulgated thereunder, covering the Series D Notes being offered hereby. This Prospectus does not contain all the information set forth in the Exchange Offer Registration Statement. For further information with respect to the Company, the Subsidiary Guarantors and the Exchange Offer, reference is made to the Exchange Offer Registration Statement. Statements made in this Prospectus as to the contents of any contract, agreement or other document referred to accurately describe the material terms so referred to, but are not necessarily a complete description of the contents of any such contract, agreement or other document. With respect to each such contract, agreement or other document filed as an exhibit to the Exchange Offer Registration Statement, reference is made to the exhibit for a more complete description of the document or matter involved, and each such statement shall be deemed qualified in its entirety by such reference. The Exchange Offer Registration Statement, including the exhibits thereto, as well as the reports and other information filed by us with the SEC, can be inspected and copied at the public reference facilities maintained by the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Regional Offices of the SEC at Seven World Trade Center, Suite 1300, New York, New York 10048 and at Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials can be obtained from the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Information on the operation of the Public Reference Room is available from the SEC at 1-800-SEC-0330. In addition, the SEC maintains a Web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address of such Web site is: http://www.sec.gov. In the event we cease to be subject to the informational requirements of the Exchange Act, we will be required under the Indenture to continue to file with the SEC the annual and quarterly reports, information, documents or other reports, including, without limitation, reports on Forms 10-K, 10-Q and 8-K, which would be required pursuant to the informational requirements of the Exchange Act. We will also furnish such other reports as may be required by law. In addition, for so long as any of the Series C Notes are restricted securities within the meaning of Rule 144(a)(3) under the Securities Act, we have agreed to make available to any prospective purchaser of the Series C Notes or beneficial owner of the Series C Notes, in connection with any sale thereof, the information required by Rule 144A(d)(4) under the Securities Act. We are not required to send annual reports to security holders under the SEC's proxy rules or regulations. We will provide the Trustee with reports, including reports on Forms 10-K (including audited financial statements), 10- Q and 8-K, pursuant to the terms of the Indenture. 59
424B362nd Page of 221TOC1stPreviousNextBottomJust 62nd
 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS The following table sets forth the name, age and position of each of the directors and executive officers of Oxford Automotive. Each director of Oxford Automotive will hold office until the next annual meeting of shareholders or until his successor has been elected and qualified. Officers of Oxford Automotive serve at the discretion of the Board of Directors. [Enlarge/Download Table] NAME AGE POSITIONS ----------------------- ------- ------------------------------------------------------ Selwyn Isakow ............. 46 Chairman of the Board of Directors Rex E. Schlaybaugh, Jr .... 50 Vice Chairman of the Board of Directors and Secretary Steven M. Abelman ......... 48 Director, President and Chief Executive Officer Manfred J. Walt ........... 46 Director Dennis K. Pawley .......... 57 Director Aurelian Bukatko .......... 48 Senior Vice President-Chief Financial Officer Larry C. Cornwall ......... 51 Senior Vice President-Sales and Engineering John H. Ferguson .......... 50 Vice President-Financial Operations and Assistant Secretary Selwyn Isakow, Chairman of the Board of Directors. Mr. Isakow has been a director of Oxford Automotive since its inception in 1995, was the President of Oxford Automotive from 1995 to May 1997, and was appointed Chairman of the Board in May 1997. Since 1985, Mr. Isakow has been the President of The Oxford Investment Group, Inc. ("Oxford Investment"), a private investment and corporate development company that acquires majority equity positions on behalf of its principals in industrial products manufacturing, financial services, niche distribution and other selected companies. Mr. Isakow generally serves as Chairman of the Board and a director of all such portfolio companies. Mr. Isakow is also a director of Champion Enterprises, Inc. and Ramco Gershenson Properties Trust, and serves on the boards of numerous community organizations. From 1982 to 1985, Mr. Isakow was the Executive Vice President of Comerica Incorporated, a regional bank holding company, and from 1978 to 1982, was a principal at Booz, Allen and Hamilton, management consultants. Rex E. Schlaybaugh, Jr., Vice Chairman of the Board of Directors and Secretary. Mr. Schlaybaugh has been the Secretary and a director of Oxford Automotive since its inception in 1995 and was appointed Vice Chairman of the Board in May 1997. Mr. Schlaybaugh was appointed the Vice Chairman of Oxford Investment in May 1997. Mr. Schlaybaugh has been a member of the firm of Dykema Gossett PLLC since 1985. Mr. Schlaybaugh is also a director of certain other portfolio companies of Oxford Investment. Mr. Schlaybaugh is also a member of the Board of Directors of the Manufacturers Life Insurance Company (U.S.A.), the Michigan State Chamber of Commerce and is a Trustee of Oakland University. Steven M. Abelman, Director, President and Chief Executive Officer. Mr. Abelman was appointed President and Chief Executive Officer of Oxford Automotive in May 1997. Prior to joining Oxford Automotive, Mr. Abelman was Deputy Chief Executive Officer of Bundy North America ("Bundy"), an automotive supplier of brake and fuel delivery systems, from February 1996 until May 1997 and prior to that he was President of Bundy from September 1995 until February 1996. From December 1991 to September 1995, Mr. Abelman was Vice President and General Manager of Augat Wiring Systems, a manufacturer of automotive wiring systems and components. 60
424B363rd Page of 221TOC1stPreviousNextBottomJust 63rd
Manfred J. Walt, Director. Mr. Walt has been a director of Oxford Automotive since May 1997. Mr. Walt has been the Executive Vice President and Chief Financial Officer of Central Park Lodges Ltd., a Canadian assisted living company located in Toronto, Canada, since May 1998. From October 1997 to May 1998, Mr. Walt was the Sr. Vice President of Gentra, Inc., a Real Estate Company based in Toronto, Canada. From 1989 to September 1997, Mr. Walt was the Managing Partner-Financial Services of Edper Brascan Corporation ("Edper"), a diversified natural resources, energy and property development company. Gentra, Inc. is an affiliate of Edper. From 1980 to 1989, Mr. Walt served in various capacities with Edper. Dennis K. Pawley, Director. Mr. Pawley was appointed a director of Oxford Automotive in January 1999. Mr. Pawley has been the President and Chief Operating Officer of Performance Learning, a consulting company located in Las Vegas, Nevada, since February 1999. From 1991 to 1998, Mr. Pawley served as the Executive Vice President of Manufacturing for DaimlerChrysler in Auburn Hills, Michigan. Aurelian Bukatko, Senior Vice President-Chief Financial Officer. Mr. Bukatko was appointed Senior Vice President-Chief Financial Officer of Oxford Automotive in February 1999. From December 1997 to February 1999, Mr. Bukatko was Corporate Treasurer of Hayes-Lemmerz International, a worldwide manufacturer of wheels, brake drums and rotors for motor vehicles. From August 1996 to November 1997, Mr. Bukatko served as Director of Global Currency Management for the Lear Corporation, a worldwide supplier of automotive interiors. From September 1991 to July 1996, Mr. Bukatko was the Treasurer and Financial Director, International for Lear Seating in Gustavsburg, Germany. Larry C. Cornwall, Senior Vice President-Sales and Engineering. Mr. Cornwall was appointed Vice President-Sales and Engineering of Oxford Automotive in May 1997. From October 1995 to May 1997, Mr. Cornwall was the Senior Vice President-Sales and Engineering at BMG. From 1991 to 1995, Mr. Cornwall was Vice President of Sales and Engineering at Veltri International, an automotive stamper. John H. Ferguson, Vice President-Financial Operations and Assistant Secretary. Mr. Ferguson was appointed as a Vice President-Financial Operations and Assistant Secretary of Oxford Automotive in May 1997. Mr. Ferguson is also the Chief Financial Officer of BMG, a position he has held since April 1996. Prior to that time, Mr. Ferguson was with Bundy, where he acted as Group Plant Manager from 1994 to 1996 and as Corporate Controller from 1992 to 1994. From 1984 to 1992, Mr. Ferguson held several positions with GenCorp. Inc., an automotive tire supplier, including Controller of the Automotive Products Group. Certain of the officers and directors of Oxford Automotive are also directors or officers of Oxford Automotive subsidiaries. BOARD COMMITTEES The Board of Directors have established an Executive Committee, an Audit Committee, and a Compensation Committee. The Executive Committee is responsible for exercising all of the duties of the Board of Directors that may lawfully be delegated to it by the Board of Directors under Michigan Law. The Executive Committee consists of Messrs. Isakow, Schlaybaugh and Abelman. The Audit Committee is responsible for reviewing with management our financial controls and accounting and reporting activities. The Audit Committee reviews the qualifications of our independent auditors, make recommendations to the Board of Directors regarding the selection of independent auditors, review the scope, fees and results of any audit and review non-audit services and related fees. The Audit Committee consists of Messrs. Schlaybaugh and Walt. The Compensation Committee is responsible for the administration of all salary and incentive compensation plans for our officers and key employees, including bonuses. Salaries and bonuses will be reviewed by the Compensation Committee and will be adjusted in light of our performance, the responsibilities of each of our officers in meeting corporate performance objectives and other factors, such as length of service and subjective assessments. The Compensation Committee consists of Messrs. Isakow and Walt. DIRECTOR COMPENSATION AND ARRANGEMENTS We pay fees to our non-employee directors of up to $2,000 per meeting and reimburse the out-of-pocket expenses related to directors' attendance at each Board and committee meeting. In addition, we may elect to adopt a non-employee director option plan or other similar plan to provide for grants of stock options or other benefits as a means of attracting and retaining highly qualified 61
424B364th Page of 221TOC1stPreviousNextBottomJust 64th
independent directors for the Company. Members of the Board of Directors are elected pursuant to certain shareholder agreements by and among the Company and certain of its shareholders. See "Principal Shareholders -- Shareholder Agreements."  COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION We did not have a Compensation Committee prior to August 4, 1997. Accordingly, all determinations with respect to executive compensation were made by the Board of Directors. Prior to August 4, 1997, Messrs. Isakow and Schlaybaugh participated in deliberations of our Board of Directors concerning executive officers compensation. On August 4, 1997 a Compensation Committee, whose members are Selwyn Isakow and Manfred Walt, was appointed by the Board of Directors. Mr. Isakow is our Chairman and was our President from our inception in 1995 to May 1997. Pursuant to the terms of the indentures for the Existing Notes, we are not permitted to enter into any transaction (including employee compensation arrangements) with any Affiliate (as defined) unless the transaction is arm's length and, if the transaction involves amounts in excess of $1 million in any one year, the terms of the transaction are set forth in writing and approved by a majority of the disinterested members of the Board of Directors. For similar transactions in excess of $5 million in any one year, an opinion of a recognized investment banking firm that such transaction is fair, from a financial standpoint, is also required. See "Description of the Notes -- Certain Covenants." See "Certain Transactions." Mr. Isakow controls Oxford Investment, a private investment and corporate development company and Mr. Schlaybaugh is the Vice Chairman of Oxford Investment. At the time we acquired Lobdell (January 10, 1997), Oxford Investment entered into a management agreement with Lobdell (the "Lobdell Agreement"). At the time we acquired BMG (October 25, 1995), Oxford Investment entered into a management agreement with BMG (the "BMG Agreement"). The Lobdell Agreement and the BMG Agreement were terminated on June 24, 1997. We entered into a new management agreement with Oxford Investment upon the termination of the Lobdell Agreement and the BMG Agreement. Pursuant to the terms of this management agreement, Oxford Investment will perform various consulting, management and financial advisory services on our behalf. We will pay Oxford Investment a monthly management fee of $83,334 and will pay an investment banking fee, for acquisitions of $2.5 million or more, of 1.0% or 1.25% (for acquisitions outside of North America) of the aggregate acquisition cost for advice and assistance in connection with such acquisition, with a minimum fee of $200,000. No investment banking fee will be paid to Oxford Investment in connection with acquisitions for aggregate consideration of less than $2.5 million. The initial term of the agreement will end on December 31, 2001, but will automatically extend for additional one-year periods thereafter unless either party terminates the agreement. In addition, pursuant to the management agreement, Oxford Investment will license to us the name "Oxford Automotive" which is owned by Oxford Investment. During the fiscal years ended March 31, 1998, 1997 and 1996 we paid Oxford Investment management fees of approximately $1.0 million, $275,000 and $71,000 respectively and investment banking fees during the fiscal years ended March 31, 1998, 1997 and 1996 of $230,000, $300,000 and $200,000 respectively. In connection with the acquisition of the Suspension Division, we paid Oxford Investment an investment banking fee of approximately $500,000 during the first quarter of fiscal 1999. In connection with the acquisition of Cofimeta we paid Oxford Investment an investment banking fee of $1.2 million during the fourth quarter of fiscal 1999. On November 25, 1997, we acquired all of the issued and outstanding shares of the common stock of RPIH, the parent of RPI for approximately $2.5 million. The shareholders of RPIH received approximately $2.5 million in the aggregate for all outstanding RPIH shares. In addition, the shareholders of RPIH received approximately $402,788 as payment of the principal and accrued interest on certain outstanding loans to RPIH. Certain of our officers, directors, and shareholders were also officers, directors, or shareholders of RPIH prior to the transaction. Messrs. Isakow and Schlaybaugh were officers, directors and shareholders of RPIH. Robert H. Orley was also an officer, director and shareholder of RPIH and is a shareholder of the Company. Mr. Isakow, directly and indirectly, received $753,150, which included the payment of $117,971 for the principal and accrued interest on certain outstanding loans to RPIH. Mr. Schlaybaugh received $91,296, which included the payment of $13,120 for the principal and accrued interest on an outstanding loan to RPIH. Messrs. Robert H. and Gregg L. Orley, each beneficial owners of more than 5% of the Company's outstanding Common Stock, each received $252,248, which included the payment of $50,293 to each for the principal and accrued interest on an outstanding loan to RPIH. RPIH's wholly owned subsidiary, RPI, Inc. ("RPI"), a Michigan corporation, issued various demand notes to Lobdell in the aggregate principal amount of $1.4 million during the year ended March 31, 1998, each bearing interest at the prime rate plus 1.0% per annum. The notes were issued in connection with our ongoing discussions with RPIH regarding a possible merger or other similar transaction in consideration for which RPIH had agreed to deal exclusively with the Company and its affiliates until December 31, 1997. This agreement to deal exclusively with the Company allowed us to negotiate a transaction with RPIH without undue interference from a third party. 62
424B365th Page of 221TOC1stPreviousNextBottomJust 65th
EXECUTIVE COMPENSATION The following table sets forth certain information as to the compensation earned by our Chief Executive Officer and our four other most highly paid officers (the "Named Executive Officers") for the last three fiscal years. SUMMARY COMPENSATION TABLE [Enlarge/Download Table] ANNUAL COMPENSATION (1) ------------------------------------------------- OTHER ANNUAL ALL OTHER NAME AND TITLE YEAR SALARY BONUS COMPENSATION COMPENSATION -------------- ---- ------ ----- ------------ ------------ Selwyn Isakow, Chairman (2) 1998 $ 95,577 $ 101,250 $ -- $ -- 1997 -- -- -- -- Rex E. Schlaybaugh, Jr., 1998 $ 138,462 $ 101,250 $ -- $ -- Vice Chairman (3) 1997 -- -- -- -- Steven M. Abelman, President and 1998 $ 230,769 $ 150,000 $ -- $ -- Chief Executive Officer (4) Donald C. Campion, Senior Vice 1998 $ 147,808 $ 52,500 $ -- $ -- President-Chief Financial Officer (5) 1997 -- -- -- -- Larry C. Cornwall, Senior Vice 1998 $ 161,846 $ 68,000 $ -- $ -- President-Sales and Engineering (6) 1997 124,196 36,000 -- -- 1996 31,504 24,200 -- -- John H. Ferguson, Vice President- 1998 $ 131,500 $ 39,000 $ -- $ -- Financial Operations and Assistant 1997 101,250 -- -- -- Secretary (7) ---------------- (1) The Company was formed in October 1995 and executive officers of the Company did not receive any compensation prior to 1997. (2) Mr. Isakow was the President of the Company from its inception until May 1997, for which he did not receive any compensation from the Company. Steven M. Abelman was appointed President and Chief Executive Officer in May 1997. Mr. Isakow received compensation during the last fiscal year in connection with his position as Chairman of the Board of the Company. (3) Mr. Schlaybaugh did not receive any compensation from the Company prior to the last fiscal year. (4) Mr. Abelman was appointed President and Chief Executive Officer in May 1997. See "-Employment Agreements." (5) Mr. Campion was appointed Senior Vice President-Chief Financial Officer of Oxford Automotive in July 1997. Mr. Campion resigned from his position with Oxford Automotive on February 6, 1999. See "--Employment Agreements." (6) Mr. Cornwall joined the Company in October 1995 and only received compensation from the Company for a full fiscal year in 1997 and 1998. (7) Mr. Ferguson joined the Company in April 1996 and only received compensation from the Company for a full fiscal year in 1998. 63
424B366th Page of 221TOC1stPreviousNextBottomJust 66th
EMPLOYMENT AGREEMENTS As of May 1, 1997, Oxford Automotive and Steven M. Abelman entered into an Employment and Noncompetition Agreement. The agreement provides that Mr. Abelman will serve as President and Chief Executive Officer of Oxford Automotive on an "at-will" basis. The agreement provides that Mr. Abelman will receive an annual base salary, will be eligible to receive a bonus of up to 60% of his salary as determined by the Board of Directors of Oxford Automotive, and will be entitled to certain fringe benefits. Mr. Abelman has also agreed not to compete with the Company during the period of his employment and for two years following the termination of his employment. Upon the termination of his employment without cause, Mr. Abelman is entitled to severance payments equal to (a) his annual base salary, if such termination is prior to May 1, 1999 or (b) 1.5 times his annual base salary, if such termination is after May 1, 1999. On November 24, 1995, BMG and Larry C. Cornwall entered into an Employment Agreement. The agreement provides that Mr. Cornwall will serve as Senior Vice President-Sales and Marketing of BMG on an "at-will" basis. Mr. Cornwall has subsequently been appointed as Senior Vice President-Sales and Engineering of Oxford Automotive. The agreement provides that Mr. Cornwall will receive an annual base salary, will be eligible to receive a bonus of up to 50% of his salary as determined by the Board of Directors of BMG, will be eligible to participate in the Company's profit sharing plan, and will be entitled to certain fringe benefits. Upon the termination of the agreement, Mr. Cornwall will be entitled to continue to receive his base salary for the longer of three months or the Canadian statutory requirement. As of July 21, 1997, Oxford Automotive and Donald C. Campion entered into an Employment and Noncompetition Agreement. The agreement provided that Mr. Campion would serve as Senior Vice President-Chief Financial Officer of Oxford Automotive on an "at-will" basis. The agreement provided that Mr. Campion would receive an annual base salary, would be eligible to receive a bonus of up to 50% of his salary as determined by the Board of Directors of Oxford Automotive, and would be entitled to certain fringe benefits. Mr. Campion also agreed not to compete with the Company during the period of his employment and for two years following the termination of his employment. Upon his resignation, Mr. Campion agreed to certain severance arrangements with the Company, and his shares were repurchased in accordance with his Employment and Noncompetition Agreement. See also "Certain Transactions -- Management Agreements."  PRINCIPAL SHAREHOLDERS As of February 28, 1999, there were 309,750 issued and outstanding shares of the Common Stock, without par value, of the Company (the "Common Stock"). The following table sets forth information as of March 1, 1999 with respect to the Common Stock beneficially owned by each of our directors, the Named Executive Officers, all of our directors and executive officers as a group, and by other holders known to us as having beneficial ownership of more than 5% of the Common Stock. Selwyn Isakow and our other shareholders have entered into certain agreements, each of which contain substantially identical terms, the result of which gives Mr. Isakow voting control of 100% of the Common Stock, except under certain circumstances. See "-- Shareholder Agreements." Unless otherwise specified, the address for each person is 1250 Stephenson Highway, Troy, Michigan 48083. [Download Table] NUMBER OF PERCENT NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OF CLASS ------------------------------------ ------ -------- Selwyn Isakow (1) .............................. 164,224 53.02% 2000 N. Woodward Avenue, Suite 130, Bloomfield Hills, Michigan 48304 Rex E. Schlaybaugh, Jr ......................... 20,900 6.75% 2000 N. Woodward Avenue, Suite 130, Bloomfield Hills, Michigan 48304 64
424B367th Page of 221TOC1stPreviousNextBottomJust 67th
[Download Table] NUMBER OF PERCENT NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OF CLASS ------------------------------------------------- -------- -------- Steven M. Abelman (2) .............................. 12,326 3.98% Manfred J. Walt .................................... 2,300 * 175 Boor St., E., S. Tower, Suite 601 Toronto, Ontario, Canada M4W 3R8 John H. Ferguson ................................... 6,180 2.0% Larry C. Cornwall .................................. 7,000 2.26% Robert H. Orley .................................... 20,600 6.65% 2000 N. Woodward Avenue, Suite 130, Bloomfield Hills, Michigan 48304 Gregg L. Orley ..................................... 20,600 6.65% 2000 N. Woodward Avenue, Suite 130, Bloomfield Hills, Michigan 48304 All directors and officers as a group (8 persons) .. 212,930 68.84% (1)(2) -------------------- *Less than 1.0% (1) Includes 140,124 shares owned by Hilsel Investment Company Limited Partnership, of which Tridec Management, Inc. is General Partner. Mr. Isakow is the President and a shareholder of Tridec Management, Inc. In addition, Mr. Isakow may be deemed to be the beneficial owner of all of the outstanding shares of Common Stock as a result of certain voting power over such shares pursuant to the shareholder agreements described below and certain purchase options that may be exercised by Mr. Isakow with respect to 47,900 outstanding shares of Common Stock. (2) Mr. Abelman's Employment and Noncompetition Agreement with Oxford Automotive provides Oxford Automotive or its assigns with the right to repurchase his shares of Common Stock if his employment is terminated for any reason.  SHAREHOLDER AGREEMENTS Each holder of Common Stock is a party to a shareholder agreement which provides for certain restrictions on transfer by shareholders and grants certain other shareholders the option to purchase the shares of a shareholder upon his death. Each surviving shareholder has the right to exercise this option within 30 days of the death of a shareholder. The exercising shareholders will divide the deceased shareholder's shares as they agree or, if they are not able to agree, pro rata. If the exercising shareholders are not able to agree on a purchase price with the estate of the deceased shareholder, then the per share purchase price shall be the per share value of the Company based on the greater of the value of the Company as a going concern or on a liquidation basis, as determined by an independent appraisal. The purchase price shall be paid by an initial cash payment of up to 20% of the purchase price with the balance paid pursuant to a five-year, unsecured promissory note bearing interest at the prime rate. The agreements also provide that each shareholder will grant a proxy to Mr. Isakow to vote all of the shareholder's shares at any meeting of the Company; provided, however, that if holders of shares having a majority in interest of the shares of Common Stock determine that it is in the best interest of all of the shareholders to sell all or substantially all of the assets of the Company or to cause the Company to merge or consolidate with or into another corporation, Mr. Isakow shall exercise the proxies provided to him consistent with that decision. As a result, except as described above, Mr. Isakow has voting control of 100% of the Common Stock. 65
424B368th Page of 221TOC1stPreviousNextBottomJust 68th
CERTAIN TRANSACTIONS As of March 31, 1997, Mr. Abelman issued a note to the Company in connection with his acquisition of shares of the Common Stock. The principal amount of the note was $130,000 and the note bears interest at the prime rate plus 1.0%, which rate is adjusted on March 31 of each year to reflect the then current prime rate. Principal and interest on the note is payable in equal annual installments with interest on the unpaid principal, with the final payment due May 31, 2002. As of February 28, 1999 the principal amount outstanding of the note was $113,469. As of March 31, 1997, the Company issued a subordinated demand note to Mr. Robert H. Orley in connection with the redemption of certain shares of the Company's Common Stock. The principal amount of the note was $108,203 and was paid in full subsequent to March 31, 1997. On February 1, 1999 we entered into a Consulting Services Agreement (the "Consulting Agreement") with Performance Learning, Inc., a Nevada corporation, ("Performance Learning"). Dennis K. Pawley, a director of Oxford Automotive is the President and Chief Operating Officer and a shareholder of Performance Learning. Under the Consulting Agreement, Performance Learning has agreed to provide consulting services to us for a one year period, which commenced on February 15, 1999. As compensation for such consulting services we will pay Performance Learning a $100,000 retainer, $5,000 per day for each day a principal of Performance Learning performs consulting services for the Company, and $1,000 per day for each day a non-principal of Performance Learning performs consulting services for the Company. The retainer is payable in two equal installments and the second installment will not be paid if we terminate the agreement after six months. We will pay additional amounts to reimburse Performance Learning for reasonable expenses it incurs in connection with performing the consulting services. See also "Management - Compensation Committee Interlocks and Insider Participation." LEGAL Rex E. Schlaybaugh, Jr. is a shareholder, the Vice Chairman of the Board and a director of the Company. Dykema Gossett PLLC, of which Mr. Schlaybaugh is a member, has performed legal services for the Company since its inception, including services performed in connection with the Series C Offering and this Exchange Offer. The Company expects to continue to retain the firm as general counsel after the Exchange Offer.  DESCRIPTION OF CERTAIN INDEBTEDNESS AND PREFERRED STOCK  SENIOR CREDIT FACILITY General. We entered into the Senior Credit Facility, providing for up to (a) $110.0 million of revolving credit availability (the "Revolving Line") including the issuance of letters of credit, (b) $30.0 million pursuant to a term loan (the "Term Loan"), and (c) $35.0 million of revolving credit availability for tooling (the "Tooling Line"). We, along with certain principal operating subsidiaries (the "Senior Credit Obligors") are parties to or guarantors of the Senior Credit Facility. The obligations under the Senior Credit Facility (the "Obligations") are secured by a first lien on substantially all the assets of the Senior Credit Obligors. The Obligations and guaranties of the Senior Credit Obligors (the "Senior Credit Guaranties") will rank senior to all of our other indebtedness, including the Notes. Availability under the Revolving Line at March 1, 1999 was approximately $80.3 million, reduced for the effect of a Letter of Credit issued for the IRB's (as defined). Availability under the Tooling Line at March 1, 1999 was approximately $5.0 million. Funds under the Senior Credit Facility are available for general corporate purposes (including acquisitions) and letters of credit. The Senior Credit Facility also accommodates the lease transaction for the manufacturing operation in Ramos Arizpe, Mexico. 66
424B369th Page of 221TOC1stPreviousNextBottomJust 69th
Principal Payments. Unless otherwise required pursuant to the Senior Credit Facility, we are required to pay amounts advanced under the Revolving Line and the Tooling Line on July 31, 2004. We are required to pay the unpaid principal amount of the Term Loan in twenty-two quarterly principal payments as follows: [Download Table] QUARTERLY PAYMENT DATES PRINCIPAL INSTALLMENT ----------------------- --------------------- July 31, 1999 to January 31, 2000 $ 500,000 April 30, 2000 to January 31, 2001 $ 1,250,000 April 30, 2001 to January 31, 2003 $ 1,500,000 April 30, 2003 to January 31, 2004 $ 1,875,000 April 30, 2004 to July 31, 2004 $ 2,250,000 Interest Rates. Interest on outstanding borrowings under the Senior Credit Facility is payable monthly and accrues at an annual rate equal to (a) the Applicable Margin (as defined in the Senior Credit Facility) plus either (i) the higher of the Prime Rate (as defined in the Senior Credit Facility) or 0.5% over the Federal Funds Rate or (ii) with respect to Canadian based borrowings, the higher of the prime rate of First Chicago/NBD Bank, Canada or 0.5% over the BA Rate (the one month bankers' acceptance rates, as further defined in the Senior Credit Facility), or (b) the London Interbank Offered Rate plus the Applicable Margin (a "LIBOR-based Rate") or, with respect to Canadian based borrowings, the BA Rate. The Applicable Margin will be based upon the Company's trailing four quarter Ratio of Total Covenant Obligations to Total Covenant EBITDA (as defined in the Senior Credit Facility) as follows: [Download Table] RATIO OF TOTAL COVENANT OBLIGATIONS TO APPLICABLE MARGIN TOTAL COVENANT EBITDA PRIME/LIBOR --------------------- ----------- > 4.75 1.00% /2.25% 4.01-- 4.75 0.75% /2.00% 3.51-- 4.00 0.50% /1.80% 3.01-- 3.50 0.125% /1.375% 3.00 0.00% /1.125% Maturity and Optional Prepayments. Unless accelerated due to default, all borrowings under the Senior Credit Facility mature on July 31, 2004, and the aggregate principal amount outstanding may not exceed 175.0 million at any time. Borrowings under the Senior Credit Facility may be prepaid at any time without premium or penalty, except that any prepayment of a LIBOR-based Rate loan that is made prior to the end of the applicable interest period shall be subject to reimbursement of breakage costs. Covenants. The Senior Credit Facility contains certain customary covenants, including without limitation, reporting and other affirmative covenants; financial covenants including: ratios of Total Covenant Obligations to Total Covenant EBITDA beginning at not greater than 5.25 to 1.00 and decreasing to not greater than 4.00 to 1.00 after December 31, 2003; net worth of not less than $40.2 million plus a percentage of our net income plus any proceeds from the issuance of capital stock; fixed charge coverage ratio beginning at not less than 1.00 to 1.00 and increasing to not less than 1.10 to 1.00 after December 31, 2002; and interest coverage ratio beginning at not less than 2.00 to 1.00 and increasing to not less than 2.75 to 1.00 after December 31, 2002 (each as defined in and calculated pursuant to the Senior Credit Facility); and negative covenants, including: restrictions on incurrence of indebtedness (other than as provided for in the Senior Credit Facility, purchase money debt, the Notes, tooling debt, and guaranties of certain other debt not to exceed $30.0 million), payment of cash dividends and other distributions to shareholders, liens in favor of parties other than the lenders under the Senior Credit Facility, certain guaranties of obligations of or advances to others, sales of material assets not in the ordinary course of business, restrictions on mergers and acquisitions, and capital expenditures (each as defined in and calculated pursuant to the Senior Credit Facility). Certain covenants were amended to reflect our obligations in connection with the Ramos Arizpe lease transaction. We remained in compliance with our covenants following the acquisition of Cofimeta. Events of Default. The Senior Credit Facility contains customary events of default including non-payment of principal, interest or fees; violation of covenants; inaccuracy of representations or warranties; cross-defaults to certain other indebtedness and the agreement relating to the Ramos Arizpe lease, including the indebtedness evidenced by the Notes, and bankruptcy. Fees. We will pay, on a quarterly basis, a per annum fee ranging from 0.375% to 0.50% of the Senior Credit Facility and letter of credit fees ranging from 1.125% to 2.25%, in each case based on certain of our financial ratios. 67
424B370th Page of 221TOC1stPreviousNextBottomJust 70th
OTHER INDEBTEDNESS The Canadian Department of Regional Industrial Expansion has provided a term loan (the "IRDP Loan") to BMG, bearing interest at 6% with a final maturity date of September 1, 2002. The IRDP Loan is unsecured. As of March 1, 1999, $0.3 million was outstanding with respect to the IRDP Loan. The Export Development Corporation of Canada ("EDC") has provided a tooling line facility to BMG (the "EDC Facility"), bearing interest at a fixed rate of 7.36%. The EDC Facility is secured by tooling at BMG relating to specific Saturn contracts and has a final maturity of September 30, 1999. As of January 31, 1999, $1.9 million was outstanding with respect to the EDC Facility. Lobdell, through its subsidiary Creative Fabrication Corporation ("Creative"), is financially obligated to the County of McMinn, Tennessee pursuant to certain revenue bonds issued on behalf of Creative. On September 27, 1995, the Industrial Development Board of the County of McMinn issued $8.5 million of its Industrial Development Revenue Bonds ("IRBs") for the purpose of lending the proceeds from the sale of the IRBs to Creative. The IRBs bear interest at a variable rate which was 3.3% at March 31, 1999. The IRBs are collateralized by a letter of credit issued by NBD Bank for the benefit of the trustee under the indenture relating to the IRBs and by a mortgage on the Creative facilities located in Tennessee and are guaranteed by Lobdell. Creative is prohibited from paying, declaring or authorizing any dividend if there is an event of default under the IRB documents. The IRBs mature in September 2010. As of March 1, 1999, $2.5 million principal amount of IRBs were outstanding. RPIH, through its subsidiary has been provided with a $0.6 million loan facility from the National Association of Credit Management-Great Lakes (the "RPIH Loan"), bearing interest at 6.0% with a final maturity date of April 30, 1999. As of January 31, 1999, $0.4 million was outstanding with respect to the RPIH Loan.  PREFERRED STOCK OF LOBDELL In connection with our acquisition of Lobdell, Lobdell issued 457,541 shares of its Series A $3.00 Cumulative Preferred Stock ( the "Series A Preferred Stock") and 49,938 shares of its Series B Preferred Stock (the "Series B Preferred Stock" and together with the Series A Preferred Stock the "Lobdell Preferred Stock"), each having a stated value of $100 per share, of which only 397,539 shares of Series A Preferred Stock are currently outstanding. All of the Series B Preferred Stock has been cancelled, as described below. Generally, except as required by law, the holders of Lobdell Preferred Stock have no voting rights. However, the holders of Series A Preferred Stock, voting as a separate class, are entitled to elect (i) one director of Lobdell, and (ii) if Lobdell fails to pay three consecutive semi-annual dividend payments to the holders of Series A Preferred Stock, one additional director until the payment default is cured. Dividends on the Series A Preferred Stock accrue annually at the rate of $3.00 per share and are cumulative, whether or not earned or declared. Lobdell may not declare or pay any dividend or other distribution, other than in Lobdell Common Stock or other stock junior to the Lobdell Preferred Stock ("Junior Stock"), with respect to any Junior Stock unless all accrued, unpaid and current dividends with respect to the Series A Preferred Stock have either been paid or sufficient funds have been set apart for such payment. The Series A Preferred Stock also has certain liquidation preferences. The Series A Preferred Stock is mandatorily redeemable by Lobdell on December 31, 2006 at a price per share of $100, plus accrued and unpaid dividends to the date of redemption. However, if we do not commence a public offering of our common stock pursuant to a firm commitment underwritten offering prior to June 30, 2006, the payment for the shares of Series A Preferred Stock to be redeemed will be $103 per share, plus accrued and unpaid dividends to the date of redemption. In addition, at the option of the holders of Series A Preferred Stock, if we do not commence such a public offering of our common stock on or before December 31, 2001, Lobdell must redeem on December 31 of each year commencing with 2002 up to 20% of the aggregate number of shares of Series A Preferred Stock held by any such holder immediately prior to December 31, 2002. The Subsidiary Guaranty of Lobdell ranks senior to the Lobdell Preferred Stock. See "Description of the Notes -- Subsidiary Guaranties." In connection with our acquisition of Lobdell, we have agreed to exchange our common stock for the shares of Series A Preferred Stock upon the initial public offering ("Initial Public Offering") of our common stock to the public which is exclusively for cash, subject to an effective registration statement and underwritten on a firm commitment basis by one or more underwriters. The holders of Series A Preferred Stock have the right to exchange up to 50% or some lesser portion of their shares of Series A Preferred Stock (the "Election Amount") for a number of shares of our common stock equal to (i) the Election Amount, multiplied by (ii) the Exchange Ratio (the number equal to the redemption value of a share of Series A Preferred Stock, divided by the price per share to the public of Company common stock in the Initial Public Offering); provided, however, that, in the aggregate, holders of Series A Preferred Stock may not receive more than 25% of the number of shares of common stock registered pursuant to the Initial Public Offering. 68
424B371st Page of 221TOC1stPreviousNextBottomJust 71st
Pursuant to the acquisition of Lobdell, we obtained various indemnities for certain purchase price adjustments arising out of a closing balance sheet and for claims relating to representations and warranties made by the former common shareholders of Lobdell in connection with the acquisition. At the closing of such acquisition, 100,000 shares of Series A Preferred Stock were placed with an escrow agent to fund indemnification claims of the Company. The Company and the preferred shareholders of Lobdell have settled certain purchase price adjustments relating to the difference between the shareholder's equity reflected on the closing balance sheet and the amount that had previously been projected by Lobdell, which has resulted in the cancellation of 60,002 shares of the escrowed Series A Preferred Stock and 49,938 shares of Series B Preferred Stock, which represented all of the outstanding Series B Preferred Stock. The remaining 39,998 shares of escrowed Series A Preferred Stock were released to the preferred shareholders of Lobdell.  DESCRIPTION OF THE NOTES GENERAL The Series C Notes were issued under an Indenture (the "Indenture") dated as of December 1, 1998, among the Company, the Subsidiary Guarantors and U.S. Bank Trust National Association, as Trustee (the "Trustee"). The terms of the Indenture apply to the Series C Notes and to the Series D Notes to be issued in exchange for the Series A Notes, Series B Notes, and Series C Notes pursuant to the Exchange Offer. The Series C Notes and the Series D Notes are collectively referred to in this section as the "Notes." The Indenture is substantially identical to the Indenture dated as of June 15, 1997 under which the Series A Notes and Series B Notes were issued. The Series A Notes and Series B Notes are substantially identical to, and rank pari passu in right of payment with the Series C Notes and Series D Notes. Generally, the only difference between the Series A Notes and Series B Notes, on the one hand, and the Series C Notes and Series D Notes, on the other, is the priority of Series A Notes and Series B Notes, if any remain outstanding after this Exchange Offer, with respect to the payment of any Excess Proceeds (as described below under "Certain Covenants-Limitation on Sales of Assets and Subsidiary Stock). However, if holders of Series A Notes and Series B Notes exchange all of their notes for Series D Notes, all holders of Series D Notes will participate pro rata in any Excess Proceeds Offer. The Series A Notes and Series B Notes are collectively referred to in this section as the "Existing Senior Subordinated Notes." The following is a summary of certain provisions of the Indenture and the Notes, a copy of which Indenture and the form of Notes is available upon request to the Company. Due to the complexity of various negotiated provisions of the Indenture and various cross-references contained in the Indenture, the discussion below follows closely the general format of the Indenture. However, the following summary of certain provisions of the Indenture is not complete. We urge you to read all the provisions of the Indenture, including the definitions of certain terms included in the Indenture, because the Indenture defines your rights as holders of the Notes. Capitalized terms used herein and not otherwise defined have the meanings set forth in the section "-- Certain Definitions." As used in this section, the term "Company" refers to Oxford Automotive, Inc. Principal of, premium, if any, and interest on the Notes will be payable, and the Notes may be exchanged or transferred, at the office or agency of the Company, which, unless otherwise provided by the Company, will be the offices of the Trustee. At the option of the Company, payment of interest may be made by check mailed to the addresses of the Holders as such addresses appear in the Note register. The Notes are issued only in fully registered form, without coupons, in denominations of $1,000 and any integral multiple of $1,000. No service charge will be made for any registration of transfer or exchange of Notes, but the Company may require payment of a sum sufficient to cover any transfer tax or other similar governmental charge payable in connection therewith. BRIEF DESCRIPTION OF THE NOTES AND GUARANTIES  The Notes  The Notes: o are unsecured senior subordinated obligations of the Company; o are subordinated in right of payment to all Senior Indebtedness of the Company or the relevant Subsidiary Guarantor; and o are irrevocably and unconditionally guaranteed by the Subsidiary Guarantors. 69
424B372nd Page of 221TOC1stPreviousNextBottomJust 72nd
The Guaranties The Notes are guaranteed by the following subsidiaries of the Company: Lobdell Emery Corporation Howell Industries, Inc. BMG North America Limited RPI Holdings, Inc. BMG Holdings, Inc. RPI, Inc. Winchester Fabrication Corporation Prudenville Manufacturing, Inc. Creative Fabrication Corporation Oxford Suspension, Inc. Parallel Group International, Inc. Oxford Suspension, Ltd. Laserweld International, L.L.C. OASP, Inc. Concept Management Corporation OASP II, Inc. Lewis Emery Capital Corporation The Guaranties of the Notes: o are general obligations of each Subsidiary Guarantor; and o are subordinated in right of payment to all Senior Indebtedness of each Subsidiary Guarantor. As of December 31, 1998, the Company and the Subsidiary Guarantors had total Senior Indebtedness of approximately $30 million (excluding unused commitments under the Senior Credit Facility). As indicated above and as discussed in detail below under "Subordination," payments on the Notes and under the Subsidiary Guaranties will be subordinated to the payment of Senior Indebtedness. The Indenture will permit the Company and the Subsidiary Guarantors to incur additional Senior Indebtedness. As of the date of the Indenture, all of the Company's operating subsidiaries are "Restricted Subsidiaries." Unrestricted Subsidiaries will not be subject to many of the restrictive covenants in the Indenture. Unrestricted Subsidiaries will not guarantee the Notes. Not all of the Company's "Restricted Subsidiaries" will guarantee the Notes. The Subsidiary Guarantors generated 98.3% of the Company's consolidated revenues in the nine-month period ended December 31, 1998 and held 97.9% of the Company's consolidated assets as of December 31, 1998. See Note 18 to the Company's Consolidated Financial Statements included at the back of this Prospectus for more detail about the division of the Company's consolidated revenues and assets between guarantor and non-guarantor subsidiaries. TERMS OF THE NOTES The Notes are unsecured senior subordinated obligations of the Company, limited to $250.0 million aggregate principal amount. Of this amount, $40.0 million were issued in the Series C Offering, $160.0 million are reserved for issuance only in exchange for the Series A Notes and Series B Notes and $50.0 million are available for issuance in the future, only in accordance with paragraph (a) of the covenant described under "Certain Covenants - Limitation on Indebtedness." The Notes will mature on June 15, 2007. The Notes bear interest at the rate per annum shown on the cover page hereof from December 8, 1998, or from the most recent date to which interest has been paid or provided for, payable semi-annually to Holders of record at the close of business on the June 1 or December 1 immediately preceding the interest payment date on June 15 and December 15 of each year. The Company will pay interest on overdue principal at 1% per annum in excess of such rate, and it will pay interest on overdue installments of interest at such higher rate to the extent lawful. The interest rate on the Series C Notes is subject to increase in certain circumstances if the Exchange Offer Registration Statement is not declared effective on a timely basis or if certain other conditions are not satisfied, as further described under "Summary-The Series D Notes." The interest rates on the Series A Notes and the Series B Notes are not subject to such increases.  OPTIONAL REDEMPTION Except as set forth in the following paragraph, the Notes are not redeemable at the option of the Company prior to June 15, 2002. Thereafter, the Notes are redeemable, at the Company's option, in whole or in part, at any time or from time to time, upon not less than 30 nor more than 60 days' prior notice mailed by first-class mail to each Holder's registered address, at the following redemption 70
424B373rd Page of 221TOC1stPreviousNextBottomJust 73rd
prices (expressed in percentages of principal amount), plus accrued and unpaid interest to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the 12-month period commencing on June 15 of the years set forth below: [Download Table] REDEMPTION PERIOD PRICE --------------------------------- ---------- 2002 ........................... 105.063% 2003 ........................... 103.375 2004 ........................... 101.688 2005 and thereafter ............ 100.000 In addition, at any time and from time to time prior to June 15, 2000, the Company may redeem in the aggregate up to 35% of the original principal amount of the Notes with the proceeds of one or more Public Equity Offerings following which there is a Public Market, at a redemption price (expressed as a percentage of principal amount) of 110.125% plus accrued and unpaid interest, if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date); provided, however, that at least 65% of the original aggregate principal amount of the Notes must remain outstanding after each such redemption. SELECTION In the case of any partial redemption, selection of the Notes for redemption will be made by the Trustee on a pro rata basis, by lot or by such other method as the Trustee in its sole discretion shall deem to be fair and appropriate, although no Note of $1,000 in original principal amount or less will be redeemed in part. If any Note is to be redeemed in part only, the notice of redemption relating to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Note.  SUBSIDIARY GUARANTIES Each of the Company's Restricted Subsidiaries (other than certain foreign subsidiaries) that, as of the Issue Date, were obligors or guarantors with respect to the Senior Credit Facility irrevocably and unconditionally Guarantee, as primary obligors and not merely as sureties, on an unsecured senior subordinated basis the performance and punctual payment when due, whether at Stated Maturity, by acceleration or otherwise, of all obligations of the Company under the Indenture and the Notes, whether for payment of principal of or interest on the Notes, expenses, indemnification or otherwise (all such obligations guaranteed by the Subsidiary Guarantors being herein called the "Guaranteed Obligations"). The Subsidiary Guarantors agree to pay, in addition to the amount stated above, any and all expenses (including reasonable counsel fees and expenses) incurred by the Trustee or the Holders in enforcing any rights under the Subsidiary Guaranties. Each Subsidiary Guaranty will be limited in amount to an amount not to exceed the maximum amount that can be Guaranteed by the applicable Subsidiary Guarantor without rendering such Subsidiary Guaranty voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally. After the Issue Date, the Company will cause each Restricted Subsidiary that becomes an obligor or guarantor with respect to any of the obligations under one or more of the Bank Credit Agreements to execute and deliver to the Trustee a supplemental indenture pursuant to which such Restricted Subsidiary will Guarantee payment of the Notes. See "Certain Covenants -- Future Subsidiary Guarantors" below. Each Subsidiary Guaranty is a continuing guarantee and shall: (a) remain in full force and effect until payment in full of all the Guaranteed Obligations, (b) be binding upon each Subsidiary Guarantor, and (c) inure to the benefit of and be enforceable by the Trustee, the Holders and their successors, transferees and assigns. A Subsidiary Guaranty will be released upon the sale of all the capital stock, or all or substantially all of the assets, of the applicable Subsidiary Guarantor if such sale is made in compliance with the Indenture. 71
424B374th Page of 221TOC1stPreviousNextBottomJust 74th
SUBORDINATION The indebtedness evidenced by the Notes and the Subsidiary Guaranties represents senior subordinated obligations of the Company and the Subsidiary Guarantors, as the case may be. The payment of the principal of, premium, if any, and interest on the Notes, the payment of any Subsidiary Guaranty and all other Obligations under or in connection with the Notes, the Subsidiary Guaranties, the Indenture and/or any related agreements, documents or instruments are subordinate in right of payment, as set forth in the Indenture, to the prior payment in full of all Senior Indebtedness of the Company or the relevant Subsidiary Guarantor, as the case may be, whether outstanding on the Issue Date or thereafter incurred, including all Obligations of the Company and such Subsidiary Guarantor under the Senior Credit Facility. The Notes and the Subsidiary Guaranties are also effectively subordinated to any Secured Indebtedness of the Company and the Subsidiary Guarantors to the extent of the value of the assets securing such Indebtedness and to any liabilities of Subsidiaries other than the Subsidiary Guarantors. As of December 31, 1998: o The Company had $30.0 million outstanding Senior Indebtedness (excluding unused commitments under the Senior Credit Facility), and o Senior Indebtedness of the Subsidiary Guarantors was approximately $3.0 million. Although the Indenture contains limitations on the amount of additional Indebtedness that the Company and its Restricted Subsidiaries may incur, under certain circumstances the amount of such Indebtedness could be substantial and, in any case, such Indebtedness may be Senior Indebtedness. See "Certain Covenants -- Limitation on Indebtedness." Only Indebtedness of the Company or a Subsidiary Guarantor that is Senior Indebtedness will rank senior to the Notes and the relevant Subsidiary Guaranty in accordance with the provisions of the Indenture. The Notes and each Subsidiary Guaranty will in all respects rank pari passu with all other senior subordinated Indebtedness of the Company and the relevant Subsidiary Guarantor, respectively. The Company and each Subsidiary Guarantor has agreed in the Indenture that it will not Incur, directly or indirectly, any Indebtedness that is subordinate or junior in ranking in right of payment to its Senior Indebtedness unless such Indebtedness is pari passu with or is expressly subordinated in right of payment to the Notes. Unsecured Indebtedness is not deemed to be subordinated or junior merely because it is unsecured. The Company may not pay, directly or indirectly, principal of, premium (if any) or interest on, the Notes or any other Obligations under or in connection with the Notes, the Indenture and/or any related agreements, documents or instruments or make any deposit pursuant to the provisions described under "-- Defeasance" below and may not repurchase, redeem or otherwise retire any Notes (collectively, "pay the Subordinated Debt") if: (1) any Senior Indebtedness is not paid when due or (2) any other default on any such Senior Indebtedness occurs and the maturity of such Senior Indebtedness is accelerated in accordance with its terms unless, in either case, the default has been cured or waived and any such acceleration has been rescinded or such Senior Indebtedness has been paid in full in cash. However, the Company may pay the Subordinated Debt without regard to the foregoing if the Company and the Trustee receive written notice approving such payment from the Representative of the Senior Indebtedness with respect to which either of the events set forth in clause (1) or (2) of the immediately preceding sentence has occurred and is continuing. During the continuance of any default (other than a default described in clauses (1) and (2) of the second preceding sentence) with respect to any Senior Indebtedness pursuant to which the maturity thereof may be accelerated immediately without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, the Company may not pay the Subordinated Debt for a period (a "Payment Blockage Period") commencing upon the receipt by the Trustee (with a copy to the Company) of written notice (a "Blockage Notice") of such default from the Representative of the holders of such Designated Senior Indebtedness specifying an election to effect a Payment Blockage Period and ending 180 days thereafter (or earlier if such Payment Blockage Period is terminated: (1) by written notice to the Trustee and the Company from the Person or Persons who gave such Blockage Notice, 72
424B375th Page of 221TOC1stPreviousNextBottomJust 75th
(2) because the default giving rise to such Blockage Notice has been waived in writing or (3) because such Designated Senior Indebtedness has been repaid in full in cash). Notwithstanding the provisions described in the immediately preceding sentence, unless the holders of such Designated Senior Indebtedness or the Representative of such holders has accelerated the maturity of such Designated Senior Indebtedness, the Company may resume payments on the Notes after the end of such Payment Blockage Period. The Notes shall not be subject to more than one Payment Blockage Period in any consecutive 360-day period, irrespective of the number of such nonpayment defaults with respect to Designated Senior Indebtedness during such period. Upon any payment or distribution of the assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon a total or partial liquidation or dissolution or reorganization of or similar proceeding relating to the Company or its property or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding, the holders of Senior Indebtedness will be entitled to receive payment in full in cash of such Senior Indebtedness before the Noteholders are entitled to receive any payment, and, until the Senior Indebtedness is paid in full in cash, any payment or distribution to which Noteholders would be entitled but for the subordination provisions of the Indenture will be made to holders of such Senior Indebtedness as their interests may appear. If a payment or distribution is made to Noteholders that, due to the subordination provisions, should not have been made to them, such Noteholders are required to hold it in trust for the holders of Senior Indebtedness and pay it over to them as their interests may appear. The obligations of a Subsidiary Guarantor under its Subsidiary Guaranty are senior subordinated obligations. As such, the rights of Noteholders to receive payment by a Subsidiary Guarantor pursuant to its Subsidiary Guaranty will be subordinated in right of payment to the rights of holders of Senior Indebtedness of such Subsidiary Guarantor. The terms of the subordination provisions described above with respect to the Company's obligations under the Notes apply equally to a Subsidiary Guarantor and the obligations of such Subsidiary Guarantor under its Subsidiary Guaranty. By reason of the subordination provisions contained in the Indenture, in the event of insolvency, creditors of the Company or a Subsidiary Guarantor who are holders of Senior Indebtedness of the Company or a Subsidiary Guarantor, as the case may be, may recover more, ratably, than the Noteholders, and creditors of the Company who are not holders of Senior Indebtedness may recover less, ratably, than holders of Senior Indebtedness and may recover more, ratably, than the Noteholders. The terms of the subordination provisions described above will not apply to payments from money or the proceeds of U.S. Government Obligations held in trust by the Trustee for the payment of principal of and interest on the Notes pursuant to and in accordance with the provisions described under "-- Defeasance."  CHANGE OF CONTROL Upon the occurrence of a Change of Control, each Holder shall have the right to require that the Company repurchase all or a portion of such holder's Notes at a purchase price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of repurchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date), in accordance with the provisions of the next paragraph. Within 30 days following any Change of Control, the Company shall mail a notice to each Holder with a copy to the Trustee stating: (1) that a Change of Control has occurred and that such Holder has the right to require the Company to purchase such Holder's Notes at a purchase price in cash equal to 101% of the principal amount outstanding at the repurchase date plus accrued and unpaid interest, if any, to the date of repurchase (subject to the right of Holders of record on the relevant record date to receive interest on the relevant interest payment date); (2) the circumstances and relevant facts and relevant financial information regarding such Change of Control; (3) the repurchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed); and (4) the instructions determined by the Company, consistent with the covenant described hereunder, that a Holder must follow in order to have its Notes repurchased. 73
424B376th Page of 221TOC1stPreviousNextBottomJust 76th
The Company shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Notes pursuant to the covenant described hereunder. To the extent that the provisions of any securities laws or regulations conflict with the provisions of the covenant described hereunder, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the covenant described hereunder by virtue thereof. The occurrence of certain of the events which would constitute a Change of Control would constitute a default under the Senior Credit Facility. Future Senior Indebtedness of the Company may contain prohibitions of certain events which would constitute a Change of Control or require such Senior Indebtedness to be repurchased upon a Change of Control. Moreover, the exercise by the Holders of their right to require the Company to repurchase the Notes could cause a default under such Senior Indebtedness, even if the Change of Control itself does not, due to the financial effect of such repurchase on the Company. Finally, the Company's ability to pay cash to the Holders upon a repurchase may be limited by the Company's then existing financial resources. There can be no assurance that sufficient funds will be available when necessary to make any repurchases required in connection with a Change of Control. The Company's failure to purchase the Notes in connection with a Change in Control would result in a default under the Indenture which would, in turn, constitute a default under the Senior Credit Facility. In such circumstances, the subordination provisions in the Indenture would likely restrict payment to the Holders of the Notes. BOOK-ENTRY, DELIVERY AND FORM Except as set forth in the next paragraph, the Notes sold will be issued in the form of a Global Note. The Global Note will be deposited with, or on behalf of, the Depository and registered in the name of the Depository or its nominee. Except as set forth below, the Global Note may be transferred, in whole and not in part, only to the Depository or another nominee of the Depository. Investors may hold their beneficial interests in the Global Note directly through the Depository if they have an account with the Depository or indirectly through organizations which have accounts with the Depository. Notes that are issued as described below under "-- Certificated Notes" will be issued in definitive form. Upon the transfer of a Note in definitive form, such Note will, unless the Global Note has previously been exchanged for Notes in definitive form, be exchanged for an interest in the Global Note representing the principal amount of Notes being, transferred. The Depository has advised the Company as follows: The Depository is a limited-purpose trust company and organized under the laws of the State of New York, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and "a clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934 (the "Exchange Act"). The Depository was created to hold securities of institutions that have accounts with the Depository ("participants") and to facilitate the clearance and settlement of securities transactions among its participants in such securities through electronic book-entry changes in accounts of the participants, thereby eliminating the need for physical movement of securities certificates. The Depository's participants include securities brokers and dealers (which may include the Initial Purchasers), banks, trust companies, clearing corporations and certain other organizations. Access to the Depository's book-entry system is also available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, whether directly or indirectly. Upon the issuance of the Global Note, the Depository will credit, on its book-entry registration and transfer system, the principal amount of the Notes represented by such Global Note to the accounts of participants. The accounts to be credited shall be designated by the Initial Purchasers of such Notes. Ownership of beneficial interests in the Global Note will be limited to participants or persons that may hold interests through participants. Ownership of beneficial interests in the Global Note will be shown on, and the transfer of those ownership interests will be effected only through, records maintained by the Depository (with respect to participants' interest) and such participants (with respect to the owners of beneficial interests in the Global Note other than participants). The laws of some jurisdictions may require that certain purchasers of securities take physical delivery of such securities in definitive form. Such limits and laws may impair the ability to transfer or pledge beneficial interests in the Global Note. So long as the Depository, or its nominee, is the registered holder and owner of the Global Note, the Depository or such nominee, as the case may be, will be considered the sole legal owner and holder of the related Notes for all purposes of such Notes and the Indenture. Except as set forth below, owners of beneficial interests in the Global Note will not be entitled to have the Notes represented by the Global Note registered in their names, will not receive or be entitled to receive physical delivery of certificated Notes in definitive form and will not be considered to be the owners or holders of any Notes under the Global Note. The Company 74
424B377th Page of 221TOC1stPreviousNextBottomJust 77th
understands that under existing industry practice, in the event an owner of a beneficial interest in the Global Note desires to take any action that the Depository, as the holder of the Global Note, is entitled to take, the Depository would authorize the participants to take such action, and that the participants would authorize beneficial owners owning through such participants to take such action or would otherwise act upon the instructions of beneficial owners owning through them. Payment of principal of and interest on Notes represented by the Global Note registered in the name of and held by the Depository or its nominee will be made to the Depository or its nominee, as the case may be, as the registered owner and holder of the Global Note. The Company expects that the Depository or its nominee, upon receipt of any payment of principal of or interest on the Global Note, will credit participants' accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of the Global Note as shown on the records of the Depository or its nominee. The Company also expects that payments by participants to owners of beneficial interests in the Global Note held through such participants will be governed by standing instructions and customary practices and will be the responsibility of such participants. The Company will not have any responsibility or liability for any aspect of the records relating to, or payments made on account of, beneficial ownership interests in the Global Note for any Note or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests or for any other aspect of the relationship between the Depository and its participants or the relationship between such participants and the owners of beneficial interests in the Global Note owning through such participants. Unless and until it is exchanged in whole or in part for certificated Notes in definitive form, the Global Note may not be transferred except as a whole by the Depository to a nominee of such Depository or by a nominee of such Depository to such Depository or another nominee of such Depository. Although the Depository has agreed to the foregoing procedures in order to facilitate transfers of interests in the Global Note among participants of the Depository, it is under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. Neither the Trustee nor the Company will have any responsibility for the performance by the Depository or its participants or indirect participants of their respective obligations under the rules and procedures governing their operations.  CERTIFICATED NOTES The Notes represented by the Global Note are exchangeable for certificated Notes in definitive form of like tenor as such Notes in denominations of U.S.$1,000 and integral multiples thereof if: (1) the Depository notifies the Company that it is unwilling or unable to continue as Depository for the Global Note or if at any time the Depository ceases to be a clearing agency registered under the Exchange Act, (2) the Company in its discretion at any time determines not to have all of the Notes represented by the Global Note or (3) a default entitling the holders of the Notes to accelerate the maturity thereof has occurred and is continuing. Any Note that is exchangeable pursuant to the preceding sentence is exchangeable for certificated Notes issuable in authorized denominations and registered in such names as the Depository shall direct. Subject to the foregoing, the Global Note is not exchangeable, except for a Global Note of the same aggregate denomination to be registered in the name of the Depository or its nominee.  CERTAIN COVENANTS The Indenture contains covenants including, among others, the following:  Limitation on Indebtedness. (a) The Company shall not, and shall not permit any Restricted Subsidiary to, Incur, directly or indirectly, any Indebtedness unless, immediately after giving effect to such Incurrence, the Consolidated Coverage Ratio exceeds 2.00 to 1 if such Indebtedness is Incurred prior to June 15, 1999 or 2.25 to 1 if such Indebtedness is Incurred thereafter. 75
424B378th Page of 221TOC1stPreviousNextBottomJust 78th
(b) Notwithstanding the foregoing paragraph (a), the Company and its Restricted Subsidiaries may Incur any or all of the following Indebtedness: (1) Indebtedness and other Obligations Incurred pursuant to the Bank Credit Agreements; provided, however, that, after giving effect to any such Incurrence, the aggregate principal amount of such Indebtedness and other Obligations then outstanding does not exceed the greater of (i) $110 million and (ii) the sum of (x) 60% of the net book value of the inventory of the Company and its Restricted Subsidiaries and (y) 90% of the net book value of the accounts receivable of the Company and its Restricted Subsidiaries, in each case determined in accordance with GAAP and (z) $70 million; (2) Indebtedness represented by the Notes issued on the Issue Date, the Exchange Notes and the Existing Senior Subordinated Notes; (3) Indebtedness outstanding on the Existing Senior Subordinated Note Issue Date (other than Indebtedness described in clause (1) of this paragraph), including, without limitation, the Existing Preferred Stock and Indebtedness that was Incurred after the Existing Senior Subordinated Issue Date in compliance with the Existing Indenture; (4) Indebtedness of the Company owed to and held by any Wholly Owned Subsidiary or Indebtedness of a Restricted Subsidiary owed to and held by the Company or a Wholly Owned Subsidiary; provided, however, that any subsequent issuance or transfer of any Capital Stock which results in any such Wholly Owned Subsidiary ceasing to be a Wholly Owned Subsidiary or any subsequent transfer of such Indebtedness (other than to the Company or a Wholly Owned Subsidiary) shall be deemed, in each case, to constitute the Incurrence of such Indebtedness by the issuer thereof; (5) Refinancing Indebtedness in respect of Indebtedness Incurred pursuant to paragraph (a) or pursuant to clause (1), (2), (3) or this clause (5); (6) Indebtedness in respect of performance bonds, bankers' acceptances, letters of credit and surety or appeal bonds entered into by the Company and the Restricted Subsidiaries in the ordinary course of their business; (7) Hedging Obligations consisting of Interest Rate Agreements and Currency Agreements entered into in the ordinary course of business and not for the purpose of speculation; provided, however, that, in the case of Currency Agreements and Interest Rate Agreements, such Currency Agreements and Interest Rate Agreements do not increase the Indebtedness of the Company outstanding at any time other than as a result of fluctuations in foreign currency exchange rates or interest rates or by reason of fees, indemnities and compensation payable thereunder; (8) Purchase Money Indebtedness and Capital Lease Obligations Incurred to finance the acquisition or improvement by the Company or a Restricted Subsidiary of any assets in the ordinary course of business and which do not exceed $15 million in the aggregate at any time outstanding; (9) Indebtedness and other Obligations represented by the Subsidiary Guaranties and Guarantees of Indebtedness Incurred pursuant to the Bank Credit Agreements; (10) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business, provided that such Indebtedness is extinguished within five business days of Incurrence; (11) Indebtedness of the Company and its Restricted Subsidiaries arising from agreements providing for indemnification, adjustment of purchase price or similar obligations, in any case Incurred in connection with the disposition of any assets of the Company or any Restricted Subsidiary (other than Guarantees of Indebtedness Incurred by any Person acquiring all or any portion of such assets for the purpose of financing such acquisition), in a principal amount not to exceed the gross proceeds actually received by the Company or any Restricted Subsidiary in connection with such disposition; (12) Tooling Indebtedness; and 76
424B379th Page of 221TOC1stPreviousNextBottomJust 79th
(13) Indebtedness in an aggregate principal amount which, together with all other Indebtedness of the Company and its Restricted Subsidiaries outstanding on the date of such Incurrence (other than Indebtedness permitted by clauses (1) through (12) above or paragraph (a)), does not exceed $20 million. (c) Notwithstanding the foregoing, the Company shall not, and shall not permit any Restricted Subsidiary to, Incur any Indebtedness pursuant to the foregoing paragraph (b) if the proceeds thereof are used, directly or indirectly, to Refinance: (i) any Subordinated Obligations unless such Indebtedness shall be subordinated to the Notes, the Existing Senior Subordinated Notes and the Subsidiary Guaranties, as applicable, to at least the same extent as such Subordinated Obligations or (ii) any Senior Subordinated Indebtedness unless such Indebtedness shall be Senior Subordinated Indebtedness or shall be subordinated to the Notes, the Existing Senior Subordinated Notes and the Subsidiary Guaranties, as applicable. (d) For purposes of determining compliance with the foregoing covenant, (i) in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described above, the Company, in its sole discretion, will classify such item of Indebtedness and only be required to include the amount and type of such Indebtedness in one of the above clauses and (ii) an item of Indebtedness may be divided and classified in more than one of the types of Indebtedness described above. (e) Notwithstanding paragraphs (a) and (b) above, the Company shall not, and shall not permit any Subsidiary Guarantor to, Incur: (i) any Indebtedness if such Indebtedness is subordinate or junior in ranking in any respect to any Senior Indebtedness of the Company or such Subsidiary Guarantor, as applicable, unless such Indebtedness is Senior Subordinated Indebtedness or is expressly subordinated in right of payment to Senior Subordinated Indebtedness or (ii) any Secured Indebtedness that is not Senior Indebtedness of the Company or such Subsidiary Guarantor, as applicable, unless contemporaneously therewith effective provision is made to secure the Notes or the Subsidiary Guaranty, as applicable, equally and ratably with such Secured Indebtedness for so long as such Secured Indebtedness is secured by a Lien.  Limitation on Restricted Payments. (a) The Company shall not, and shall not permit any Restricted Subsidiary, directly or indirectly, to make a Restricted Payment if at the time the Company or such Restricted Subsidiary makes such Restricted Payment: (1) a Default shall have occurred and be continuing (or would result therefrom); (2) the Company is not able to Incur an additional $1.00 of Indebtedness pursuant to paragraph (a) of the covenant described under "-- Limitation on Indebtedness"; or (3) the aggregate amount of such Restricted Payment together with all other Restricted Payments (the amount of any payments made in property other than cash to be valued at the fair market value of such property, as determined in good faith by the Board of Directors) declared or made since the Existing Senior Subordinated Note Issue Date would exceed the sum of: (A) 50% of the Consolidated Net Income accrued during the period (treated as one accounting period) from the beginning of the fiscal quarter immediately following the fiscal quarter during which the Series A Notes were originally issued to the end of the most recent fiscal quarter prior to the date of such Restricted Payment for which financial statements are available (or, in case such Consolidated Net Income accrued during such period (treated as one accounting period) shall be a deficit, minus 100% of such deficit); (B) the aggregate Net Cash Proceeds received by the Company from the issuance or sale of its Capital Stock (other than Disqualified Stock) subsequent to the Existing Senior Subordinated Note Issue Date (other than an issuance or sale to a Subsidiary of the Company); 77
424B380th Page of 221TOC1stPreviousNextBottomJust 80th
(C) the amount by which Indebtedness of the Company or its Restricted Subsidiaries is reduced on the Company's balance sheet upon the conversion or exchange (other than by a Subsidiary of the Company) subsequent to the Existing Senior Subordinated Note Issue Date, of any Indebtedness of the Company or its Restricted Subsidiaries convertible or exchangeable for Capital Stock (other than Disqualified Stock) of the Company (less the amount of any cash, or the fair value of any other property, distributed by the Company or any Restricted Subsidiary upon such conversion or exchange); (D) an amount equal to the sum of (i) the net reduction in Investments in Unrestricted Subsidiaries resulting from dividends, repayments of loans or advances or other transfers of assets subsequent to the Existing Senior Subordinated Note Issue Date, in each case to the Company or any Restricted Subsidiary from Unrestricted Subsidiaries, and (ii) the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of an Unrestricted Subsidiary at the time such Unrestricted Subsidiary is designated a Restricted Subsidiary; provided, however, that the foregoing sum shall not exceed, in the case of any Unrestricted Subsidiary, the amount of Investments previously made (and treated as a Restricted Payment) by the Company or any Restricted Subsidiary in such Unrestricted Subsidiary; and (E) $5 million. (b) The provisions of the foregoing paragraph (a) shall not prohibit: (i) any purchase or redemption of Capital Stock or Subordinated Obligations of the Company or any Restricted Subsidiary made in exchange for, or out of the proceeds of the substantially concurrent sale of, Capital Stock of the Company (other than Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary of the Company); provided, however, that (A) such purchase or redemption shall be excluded from the calculation of the amount of Restricted Payments and (B) the Net Cash Proceeds from such sale shall be excluded from the calculation of amounts under clause (3)(B) of paragraph (a) above; (ii) any purchase or redemption of (A) Subordinated Obligations of the Company made in exchange for, or out of the proceeds of the substantially concurrent sale of, Indebtedness of the Company which is permitted to be Incurred pursuant to paragraphs (b) and (c) of the covenant described under "-Limitation on Indebtedness" or (B) Subordinated Obligations of a Restricted Subsidiary made in exchange for, or out of the proceeds of the substantially concurrent sale of, Indebtedness of such Restricted Subsidiary or the Company which is permitted to be Incurred pursuant to paragraphs (b) and (c) of the covenant described under "--Limitation on Indebtedness"; provided, however, that such purchase or redemption shall be excluded from the calculation of the amount of Restricted Payments; (iii) any purchase or redemption of (A) Disqualified Stock of the Company made in exchange for, or out of the proceeds of the substantially concurrent sale of, Disqualified Stock of the Company or (B) Disqualified Stock of a Restricted Subsidiary made in exchange for, or out of the proceeds of the substantially concurrent sale of, Disqualified Stock of such Restricted Subsidiary or the Company; provided, however, that (1) at the time of such exchange, no Default or Event of Default shall have occurred and be continuing or would result therefrom and (2) such purchase or redemption will be excluded from the calculation of the amount of Restricted Payments; (iv) dividends paid within 60 days after the date of declaration thereof if at such date of declaration such dividend would have complied with this covenant; provided, however, that at the time of payment of such dividend, no other Default shall have occurred and be continuing (or would result therefrom); provided, further, however, that such dividend shall be included in the calculation of the amount of Restricted Payments; (v) the repurchase of shares of, or options to purchase shares of, Capital Stock of the Company or any of its Subsidiaries from officers, former officers employees, former employees, directors or former directors of the Company or any of its Subsidiaries (or permitted transferees of such employees, former employees, directors or former directors), pursuant to the terms of the agreements (including employment agreements) or plans (or amendments thereto) approved by the Board of Directors under which such individuals purchase or sell, or are granted the option to purchase or sell, shares of such common stock; provided, however, that the aggregate amount of such repurchases shall not exceed $2.5 million in any one year and $5.0 million in the aggregate; provided, further, however, that (1) at the time of such repurchase, no Default or Event of Default shall have occurred and be continuing or would result therefrom and (2) all such repurchases shall be included in the calculation of the amount of Restricted Payments; or 78
424B381st Page of 221TOC1stPreviousNextBottomJust 81st
(vi) dividends and redemptions required to be made with respect to the Existing Preferred Stock; provided, however, that (1) at the time of any such dividend or redemption, no Default or Event of Default shall have occurred and be continuing or would result therefrom and (2) all such dividends and redemptions shall be included in the calculation of the amount of Restricted Payments. Limitation on Restrictions on Distributions from Restricted Subsidiaries. The Company shall not, and shall not permit any Restricted Subsidiary to, create or otherwise cause or permit to exist or become effective any consensual encumbrance or consensual restriction on the ability of any Restricted Subsidiary: (a) to pay dividends or make any other distributions on its Capital Stock to the Company or a Restricted Subsidiary or pay any Indebtedness owed to the Company, (b) to make any loans or advances to the Company or (c) transfer any of its property or assets to the Company, except: (i) any encumbrance or restriction pursuant to an agreement in effect at or entered into on the Existing Senior Subordinated Note Issue Date; (ii) any encumbrance or restriction with respect to a Restricted Subsidiary pursuant to an agreement relating to any Indebtedness Incurred by such Restricted Subsidiary which was entered into on or prior to the date on which such Restricted Subsidiary was acquired by the Company (other than as consideration in, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was acquired by the Company) and outstanding on such date; (iii) any encumbrance or restriction pursuant to an agreement effecting a Refinancing of Indebtedness Incurred pursuant to an agreement referred to in clause (i) or (ii) of this covenant (or effecting a Refinancing of such Refinancing Indebtedness pursuant to this clause (iii)) or contained in any amendment to an agreement referred to in clause (i) or (ii) of this covenant or this clause (iii); provided, however, that the encumbrances and restrictions with respect to such Restricted Subsidiary contained in any such refinancing agreement or amendment are no more restrictive in any material respect than the encumbrances and restrictions with respect to such Restricted Subsidiary contained in such agreements; (iv) any such encumbrance or restriction consisting of customary non-assignment provisions in leases governing leasehold interests to the extent such provisions restrict the transfer of the lease or the property leased thereunder; (v) in the case of clause (c) above, restrictions contained in security agreements or mortgages securing Indebtedness (other than Tooling Indebtedness) of a Restricted Subsidiary to the extent such restrictions restrict the transfer of the property subject to such security agreements or mortgages; (vi) any restriction with respect to a Restricted Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all the Capital Stock or assets of such Restricted Subsidiary pending the closing of such sale or disposition; and (vii) any restriction imposed by applicable law.  Limitation on Sales of Assets and Subsidiary Stock. The Company shall not, and shall not permit any Restricted Subsidiary to, consummate any Asset Disposition unless the Company or such Restricted Subsidiary receives consideration at the time of such Asset Disposition at least equal to the fair market value (including as to the value of all non-cash consideration), as determined in good faith by the Board of Directors, of the shares and assets subject to such Asset Disposition and at least 75% of the consideration therefor received by the Company or such Restricted Subsidiary is in the form of cash or cash equivalents. For the purposes of this covenant, the following are deemed to be cash and cash equivalents: (1) the assumption of Indebtedness of the Company or any Restricted Subsidiary and the release of the Company or such Restricted Subsidiary from all liability on such Indebtedness in connection with such Asset Disposition and (2) securities received by the Company or any Restricted Subsidiary from the transferee that are immediately converted by the Company or such Restricted Subsidiary into cash. 79
424B382nd Page of 221TOC1stPreviousNextBottomJust 82nd
With respect to any Asset Disposition occurring on or after the Existing Senior Subordinated Note Issue Date from which the Company or any Restricted Subsidiary receives Net Available Cash, the Company or such Restricted Subsidiary shall: (i) within 360 days after the date such Net Available Cash is received and to the extent the Company or such Restricted Subsidiary elects (or is required by the terms of any Senior Indebtedness) to (A) apply an amount equal to such Net Available Cash to prepay, repay or purchase Senior Indebtedness of the Company or such Restricted Subsidiary, in each case owing to a Person other than the Company or any Affiliate of the Company, or (B) invest an equal amount, or the amount not so applied pursuant to clause (A), in Additional Assets (including by means of an Investment in Additional Assets by a Restricted Subsidiary with Net Available Cash received by the Company or another Restricted Subsidiary) and (ii) apply such excess Net Available Cash (to the extent not applied pursuant to clause (i)) as provided in the following paragraphs of the covenant described hereunder; provided, however, that in connection with any prepayment, repayment or purchase of Senior Indebtedness pursuant to clause (A) above, the Company or such Restricted Subsidiary shall retire such Senior Indebtedness and shall cause the related loan commitment (if any) to be permanently reduced in an amount equal to the principal amount so prepaid, repaid or purchased. The amount of Net Available Cash required to be applied pursuant to clause (ii) above and not theretofore so applied shall constitute "Excess Proceeds." Pending application of Net Available Cash pursuant to this provision, such Net Available Cash shall be invested in Temporary Cash Investments. If at any time the aggregate amount of Excess Proceeds not theretofore subject to an Excess Proceeds Offer (as defined below) totals at least $5 million, the Company shall, not later than 30 days after the end of the period during which the Company is required to apply such Excess Proceeds pursuant to clause (i) of the immediately preceding paragraph (or, if the Company so elects, at any time within such period), make an offer (an "Existing Note Excess Proceeds Offer"), first, to purchase the Existing Senior Subordinated Notes, if any are outstanding, in accordance with the Existing Indenture (as in effect on the Issue Date) and, second, in the event that any Excess Proceeds are not applied to an Existing Note Excess Proceeds Offer to purchase from the Holders on a pro rata basis an aggregate principal amount of Notes equal to any remaining Excess Proceeds (rounded down to the nearest multiple of $1,000) on such date (an "Excess Proceeds Offer"), at a purchase price equal to 100% of the principal amount of such Notes, plus, in each case, accrued interest (if any) to the date of purchase (the "Excess Proceeds Payment"). Upon completion of an Excess Proceeds Offer the amount of Excess Proceeds remaining after application pursuant to such Excess Proceeds Offer, (including payment of the purchase price for Notes duly tendered) may be used by the Company for any corporate purpose (to the extent not otherwise prohibited by the Indenture). The Company shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations thereunder in the event that such Excess Proceeds are received by the Company under the covenant described hereunder and the Company is required to repurchase the Notes as described above. To the extent that the provisions of any securities laws or regulations conflict with the provisions of the covenant described hereunder, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the covenant described hereunder by virtue thereof.  Limitation on Affiliate Transactions. (a) The Company shall not, and shall not permit any Restricted Subsidiary to, enter into or permit to exist any transaction or series of related transactions (including the purchase, sale, lease or exchange of any property, employee compensation arrangements or the rendering of any service) with any Affiliate of the Company (an "Affiliate Transaction") unless the terms thereof: (1) are no less favorable to the Company or such Restricted Subsidiary than those that could be obtained at the time of such transaction in arm's-length dealings with a Person who is not such an Affiliate, (2) if such Affiliate Transaction (or series of related Affiliate Transactions) involve aggregate payments in an amount in excess of $1 million in any one year, (i) are set forth in writing, (ii) comply with clause (1) and (iii) have been approved by a majority of the disinterested members of the Board of Directors and 80
424B383rd Page of 221TOC1stPreviousNextBottomJust 83rd
(3) if such Affiliate Transaction (or series of related Affiliate Transactions) involve aggregate payments in an amount in excess of $5 million in any one year, (i) comply with clause (2) and (ii) have been determined by a nationally recognized investment banking firm to be fair, from a financial standpoint, to the Company and its Restricted Subsidiaries. (b) The provisions of the foregoing paragraph (a) shall not prohibit: (i) any Restricted Payment permitted to be paid pursuant to the covenant described under "-- Limitation on Restricted Payments," (ii) any issuance of securities, or other payments, awards or grants in cash, securities or otherwise, pursuant to, or the funding of, employment arrangements, stock options and stock ownership plans in the ordinary course of business and approved by the Board of Directors, (iii) the grant of stock options or similar rights to employees and directors of the Company in the ordinary course of business and pursuant to plans approved by the Board of Directors, (iv) loans or advances to employees in the ordinary course of business of the Company or its Restricted Subsidiaries, (v) fees, compensation or employee benefit arrangements paid to and indemnity provided for the benefit of directors, officers or employees of the Company or any Subsidiary in the ordinary course of business, (vi) payments made to The Oxford Investment Group, Inc. for (x) management and consulting services in an aggregate amount not to exceed $1,000,000 in any one year and (y) investment banking services in connection with acquisition of assets or businesses, by the Company or any Subsidiary not to exceed the greater of (A) 1.25% of the purchase price paid by the Company or such Subsidiary for the assets or business acquired (including Indebtedness assumed by the Company or such Subsidiary as part of such acquisition) and (B) $200,000; or (vii) any Affiliate Transaction between the Company and a Restricted Subsidiary or between Restricted Subsidiaries in the ordinary course of business (so long as the other stockholders of any participating Restricted Subsidiaries which are not Wholly Owned Restricted Subsidiaries are not themselves Affiliates of the Company). Limitation on the Issuance or Sale of Capital Stock of Restricted Subsidiaries. The Company shall not: (i) sell, pledge, hypothecate or otherwise dispose of any shares of Capital Stock of a Restricted Subsidiary (other than pledges of Capital Stock securing Senior Indebtedness) or (ii) permit any Restricted Subsidiary, directly or indirectly, to issue or sell or otherwise dispose of any shares of its Capital Stock other than: (A) to the Company or a Wholly Owned Subsidiary, (B) directors' qualifying shares, (C) if, immediately after giving effect to such issuance or sale, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary or (D) the issuance of Preferred Stock by any Subsidiary Guarantor as partial payment for the acquisition by such Subsidiary Guarantor of Additional Assets. Notwithstanding the foregoing, the Company may sell, and may permit a Restricted Subsidiary to issue and sell, up to 20% of the outstanding Common Stock of a Restricted Subsidiary to officers and employees of such Restricted Subsidiary. The proceeds of any sale of such Capital Stock permitted hereby will be treated as Net Available Cash from an Asset Disposition and must be applied in accordance with the terms of the covenant described under "-- Limitation on Sales of Assets and Subsidiary Stock." 81
424B384th Page of 221TOC1stPreviousNextBottomJust 84th
Limitation on Liens. The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, Incur or permit to exist any Lien of any nature whatsoever on any property of the Company or any Restricted Subsidiary (including Capital Stock of a Restricted Subsidiary), whether owned at the Issue Date or thereafter acquired, which secures Indebtedness that ranks pari passu with or is subordinated to the Notes or the Subsidiary Guaranties unless: (i) if such Lien secures Indebtedness that ranks pari passu with the Notes and the Subsidiary Guaranties, the Notes are secured on an equal and ratable basis with the obligation so secured until such time as such obligation is no longer secured by a Lien or (ii) if such Lien secures Indebtedness that is subordinated to the Notes and the Subsidiary Guaranties, such Lien shall be subordinated to a Lien granted to the Holders on the same collateral as that securing such Lien to the same extent as such subordinated Indebtedness is subordinated to the Note and the Subsidiary Guaranties.  Merger and Consolidation. The Company shall not consolidate with or merge with or into, or convey, transfer or lease, in one transaction or a series of related transactions, all or substantially all its assets to, any Person, unless: (i) the resulting, surviving or transferee Person (the "Successor Company") shall be a Person organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and the Successor Company (if not the Company) shall expressly assume, by an indenture supplemental thereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company under the Notes and the Indenture; (ii) immediately after giving effect to such transaction on a pro forma basis (and treating any Indebtedness which becomes an obligation of the Successor Company or any Subsidiary as a result of such transaction as having been Incurred by such Successor Company or such Subsidiary at the time of such transaction), no Default shall have occurred and be continuing; (iii) except in the case of a merger the sole purpose of which is to change the Company's jurisdiction of incorporation, immediately after giving effect to such transaction on a pro forma basis, the Successor Company would be able to Incur an additional $1.00 of Indebtedness pursuant to paragraph (a) of the covenant described under "-- Limitation on Indebtedness"; (iv) immediately after giving effect to such transaction on a pro forma basis, the Successor Company shall have Consolidated Net Worth in an amount that is not less than the Consolidated Net Worth of the Company immediately prior to such transaction; and (v) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with the Indenture. Notwithstanding the foregoing clauses (ii), (iii) and (iv), any Restricted Subsidiary may consolidate with, merge into or transfer all or part of its properties and assets to the Company. The Successor Company shall be the successor to the Company and shall succeed to, and be substituted for, and may exercise every right and power of, the Company under the Indenture, but the predecessor Company in the case of a conveyance, transfer or lease shall not be released from the obligation to pay the principal of and interest on the Notes. The Company shall not permit any Subsidiary Guarantor to consolidate with or merge with or into, or convey, transfer or lease, in one transaction or a series of transactions, all or substantially all its assets to, any Person, unless: (i) the resulting, surviving or transferee Person (if not such Subsidiary) shall be a Person organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and the Successor Company (if not such Subsidiary) shall expressly assume, by a Guaranty Agreement, in form satisfactory to the Trustee, all the obligations of such Subsidiary under its Subsidiary Guaranty; (ii) immediately after giving effect to such transaction on a pro forma basis (and treating any Indebtedness which becomes an obligation of the resulting, surviving or transferee Person as a result of such transaction as having been Incurred by such Person at the time of such transaction), no Default shall have occurred and be continuing; and 82
424B385th Page of 221TOC1stPreviousNextBottomJust 85th
(iii) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such Guaranty Agreement comply with the Indenture. The provisions of clauses (i) and (iii) above shall not apply to any transactions which constitute an Asset Disposition if the Company has complied with the applicable provisions of the covenant described under "-- Limitation on Sales of Assets and Subsidiary Stock" above. Future Guarantors. The Company shall cause each Restricted Subsidiary that at any time becomes an obligor or guarantor with respect to any obligations under one or more Bank Credit Agreements to execute and deliver to the Trustee a supplemental indenture pursuant to which such Restricted Subsidiary will Guarantee payment of the Notes on the same terms and conditions as those set forth in the Indenture. Each Subsidiary Guaranty will be limited in amount to an amount not to exceed the maximum amount that can be Guaranteed by the applicable Subsidiary Guarantor without rendering such Subsidiary Guaranty voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally. SEC Reports. Notwithstanding that the Company may not be required to remain subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company shall file with the SEC and provide the Trustee and Noteholders and prospective Noteholders (upon request) with such annual reports and such information, documents and other reports as are specified in such Sections and applicable to a U.S. corporation subject to such Sections, such information, documents and other reports to be so filed and provided at the times specified for the filing of such information, documents and reports under such Sections; provided, however, that the Company shall not be required to file any report, document or other information with the SEC if the SEC does not permit such filing.  DEFAULTS An Event of Default is defined in the Indenture as: (i) a default in the payment of interest on the Notes when due (whether or not such payment is prohibited by the provisions described under "Subordination" above), continued for 30 days, (ii) a default in the payment of principal of any Note when due at its Stated Maturity, upon optional redemption, upon required repurchase, upon declaration or otherwise (whether or not such payment is prohibited by the provisions described under "Subordination" above), (iii) the failure by the Company, to comply for 30 days after notice with any of its obligations under the covenants described under "-- Limitation on Indebtedness," "-- Limitation on Restricted Payments," "Limitation on Sales of Assets and Subsidiary Stock," and "Merger, Consolidation and Sale of Assets", (iv) the failure by the Company to comply for 60 days after notice with its other agreements contained in the Indenture, (v) Indebtedness of the Company or any Restricted Subsidiary is not paid within any applicable grace period after final maturity or is accelerated by the holders thereof because of a default and the total amount of such Indebtedness unpaid or accelerated exceeds $5 million (the "cross-acceleration provision"), (vi) certain events of bankruptcy, insolvency or reorganization of the Company or a Significant Subsidiary (the "bankruptcy provisions"), (vii) any judgment or decree for the payment of money in excess of $5 million is rendered against the Company or a Restricted Subsidiary, remains outstanding following such judgment and is not discharged, waived or stayed within 60 days after entry of such judgment or decree (the "judgment default provision"), or (viii) a Subsidiary Guaranty ceases to be in full force and effect (other than in accordance with the terms of such Subsidiary Guaranty) or a Subsidiary Guarantor denies or disaffirms its obligations under its Subsidiary Guaranty. 83
424B386th Page of 221TOC1stPreviousNextBottomJust 86th
However, a default under clause (iii) or (iv) will not constitute an Event of Default until the Trustee or the holders of 25% in principal amount of the outstanding Notes notify the Company of the default and the Company does not cure such default within the time specified in clauses (iii) and (iv) hereof after receipt of such notice. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the outstanding Notes may declare the principal of and accrued but unpaid interest on all the Notes to be due and payable. Upon such a declaration, such principal and interest shall be due and payable immediately. If an Event of Default relating to certain events of bankruptcy, insolvency or reorganization of the Company occurs and is continuing, the principal of and interest on all the Notes will ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holders of the Notes. Under certain circumstances, the Holders of a majority in principal amount of the outstanding Notes may rescind any such acceleration with respect to the Notes and its consequences. Subject to the provisions of the Indenture relating to the duties of the Trustee, in case an Event of Default occurs and is continuing, the Trustee will be under no obligation to exercise any of the rights or powers under the Indenture at the request or direction of any of the Holders unless such Holders have offered to the Trustee reasonable indemnity or security against any loss, liability or expense. Except to enforce the right to receive payment of principal, premium (if any) or interest when due, no Holder may pursue any remedy with respect to the Indenture or the Notes unless: (i) such Holder has previously given the Trustee notice that an Event of Default is continuing, (ii) Holders of at least 25% in principal amount of the outstanding Notes have requested the Trustee to pursue the remedy, (iii) such Holders have offered the Trustee reasonable security or indemnity against any loss, liability or expense, (iv) the Trustee has not complied with such request within 60 days after the receipt thereof and the offer of security or indemnity and (v) the Holders of a majority in principal amount of the outstanding Notes have not given the Trustee a direction inconsistent with such request within such 60-day period. Subject to certain restrictions, the Holders of a majority in principal amount of the outstanding Notes are given the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. The Trustee, however, may refuse to follow any direction that conflicts with law or the Indenture or that the Trustee determines is unduly prejudicial to the rights of any other Holder or that would involve the Trustee in personal liability. The Indenture provides that if a Default occurs and is continuing and is known to the Trustee, the Trustee must mail to each Holder notice of the Default within 90 days after it occurs. Except in the case of a Default in the payment of principal of or interest on any Note, the Trustee may withhold notice if and so long as a committee of its trust officers determines that withholding notice is not opposed to the interest of the Holders. In addition, the Company is required to deliver to the Trustee, within 120 days after the end of each fiscal year, a certificate indicating whether the signers thereof know of any Default that occurred during the previous year. The Company also is required to deliver to the Trustee, within 30 days after the occurrence thereof, written notice of any event which would constitute certain Defaults, their status and what action the Company is taking or proposes to take in respect thereof. AMENDMENTS AND WAIVERS Subject to certain exceptions, the Indenture may be amended with the consent of the Holders of a majority in principal amount of the Notes then outstanding (including consents obtained in connection with a tender offer or exchange for the Notes) and any past default or compliance with any provisions may also be waived with the consent of the Holders of a majority in principal amount of the Notes then outstanding. However, without the consent of each Holder of an outstanding Note affected thereby, no amendment may, among other things: (i) reduce the amount of Notes whose Holders must consent to an amendment, (ii) reduce the rate of or extend the time for payment of interest on any Note, 84
424B387th Page of 221TOC1stPreviousNextBottomJust 87th
(iii) reduce the principal of or extend the Stated Maturity of any Note, (iv) reduce the premium payable upon the redemption of any Note or change the time at which any Note may be redeemed as described under "-- Optional Redemption" above, (v) make any Note payable in money other than that stated in the Note, (vi) impair the right of any Holder to institute suit for the enforcement of any payment on or with respect to such Holder's Notes or any Subsidiary Guaranty, (vii) make any change in the amendment provisions which require each Holder's consent or in the waiver provisions or (viii) make any change to the subordination provisions of the Indenture that would adversely affect the Noteholders. Without the consent of any Holder, the Company and Trustee may amend the Indenture to cure any ambiguity, omission, defect or inconsistency, to provide for the assumption by a successor corporation of the obligations of the Company under the Indenture, to provide for uncertificated Notes in addition to or in place of certificated Notes (provided that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Code, or in a manner such that the uncertificated Notes are described in Section 163(f)(2)(B) of the Code), to add guarantees with respect to the Notes, to release Subsidiary Guarantors when permitted by the Indenture, to secure the Notes, to add to the covenants of the Company for the benefit of the Holders or to surrender any right or power conferred upon the Company, to make any change that does not adversely affect the rights of any Holder or to comply with any requirement of the SEC in connection with the qualification of the Indenture under the Trust Indenture Act. However, no amendment may be made to the subordination provisions of the Indenture that adversely affects the rights of any holder of Senior Indebtedness then outstanding unless the holders of such Senior Indebtedness (or their Representative) consents to such change. The consent of the Holders is not necessary under the Indenture to approve the particular form of any proposed amendment. It is sufficient if such consent approves the substance of the proposed amendment. After an amendment under the Indenture becomes effective, the Company is required to mail to Holders a notice briefly describing such amendment. However, the failure to give such notice to all Holders, or any defect therein, will not impair or affect the validity of the amendment. TRANSFER Certificated Notes will be issued in registered form and will be transferable only upon the surrender of the Notes being transferred for registration of transfer. The Company may require payment of a sum sufficient to cover any tax, assessment or other governmental charge payable in connection with certain transfers and exchanges.  DEFEASANCE The Company at any time may terminate all its obligations under the Notes and the Indenture ("legal defeasance"), except for certain obligations, including those respecting the defeasance trust and obligations to register the transfer or exchange of the Notes, to replace mutilated, destroyed, lost or stolen Notes and to maintain a registrar and paying agent in respect of the Notes. The Company at any time may terminate its obligations under "-- Change of Control" and under the covenants described under "-- Certain Covenants" (other than the covenant described under "-- Merger and Consolidation"), the operation of the cross-acceleration provision, the bankruptcy provisions with respect to Significant Subsidiaries and the judgment default provision described under "-- Defaults" above and the limitations contained in clauses (iii) and (iv) under "Certain Covenants -- Merger and Consolidation" above ("covenant defeasance"). The Company may exercise its legal defeasance option notwithstanding its prior exercise of its covenant defeasance option. If the Company exercises its legal defeasance option, payment of the Notes may not be accelerated because of an Event of Default with respect thereto. If the Company exercises its covenant defeasance option, payment of the Notes may not be accelerated because of an Event of Default specified in clause (iii), (iv), (v), (vi) (with respect only to Significant Subsidiaries) or (vii) under "-- Defaults" above 85
424B388th Page of 221TOC1stPreviousNextBottomJust 88th
or because of the failure of the Company to comply with clause (iii) or (iv) under "Certain Covenants -- Merger and Consolidation" above. If the Company exercises its legal defeasance option or its covenant defeasance option, each Subsidiary Guarantor will be released from all of its obligations with respect to its Subsidiary Guaranty. In order to exercise either defeasance option: (a) such defeasance must not result in a breach of, or otherwise constitute a default under any agreement or investment with respect to any Senior Indebtedness, and no default may exist under any Indebtedness and (b) the Company must irrevocably deposit in trust (the "defeasance trust") with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the Notes to redemption or maturity, as the case may be, and must comply with certain other conditions, including delivery to the Trustee of an Opinion of Counsel to the effect that holders of the Notes will not recognize income, gain or loss for Federal income tax purposes as a result of such deposit and defeasance and will be subject to Federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred. CONCERNING THE TRUSTEE U.S. Bank Trust National Association is the Trustee under the Indenture and has been appointed by the Company as Registrar and Paying Agent with regard to the Notes. The Holders of a majority in principal amount of the outstanding Notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, subject to certain exceptions. The Indenture provides that if an Event of Default occurs (and is not cured), the Trustee will be required, in the exercise of its power, to use the degree of care of a prudent man in the conduct of his own affairs. Subject to such provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request of any Holder of Notes, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense and then only to the extent required by the terms of the Indenture. GOVERNING LAW The Indenture provides that it and the Notes are governed by, and construed in accordance with, the laws of the State of New York without giving effect to applicable principles of conflicts of law to the extent that the application of the law of another jurisdiction would be required thereby.  CERTAIN DEFINITIONS "Additional Assets" means: (i) any property or assets (other than Indebtedness and Capital Stock) in a Related Business; or (ii) the Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by the Company or another Restricted Subsidiary; provided, however, that any such Restricted Subsidiary is primarily engaged in a Related Business. "Affiliate" of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. For purposes of the provisions described under "Certain Covenants -- Limitation on Restricted Payments," "Certain Covenants -- Limitation on Affiliate Transactions" and "Certain Covenants -- Limitations on Sales of Assets and Subsidiary Stock" only, "Affiliate" shall also mean any beneficial owner of Capital Stock representing 10% or more of the total voting power of the Voting Stock (on a fully diluted basis) of the Company or of rights or warrants to purchase such Capital Stock (whether or not currently exercisable) and any Person who would be an Affiliate of any such beneficial owner pursuant to the first sentence hereof. 86
424B389th Page of 221TOC1stPreviousNextBottomJust 89th
"Asset Disposition" means any sale, lease, transfer or other disposition (or series of related sales, leases, transfers or dispositions) by the Company or any Restricted Subsidiary, including any disposition by means of a merger, consolidation or similar transaction (each referred to for the purposes of this definition as a "disposition"), of: (i) any shares of Capital Stock of a Restricted Subsidiary (other than directors' qualifying shares and, to the extent required by local ownership laws in foreign countries, shares owned by foreign shareholders), (ii) all or substantially all the assets of any division, business segment or comparable line of business of the Company or any Restricted Subsidiary or (iii) any other assets of the Company or any Restricted Subsidiary outside of the ordinary course of business of the Company or such Restricted Subsidiary. Notwithstanding the foregoing, the term "Asset Disposition" shall not include (x) a disposition by a Restricted Subsidiary to the Company or by the Company or a Restricted Subsidiary to a Wholly Owned Subsidiary, (y) for purposes of the covenant described under "Certain Covenants -- Limitation on Sales of Assets and Subsidiary Stock", a disposition that constitutes a Permitted Investment or a Restricted Payment permitted by the covenant described under "Certain Covenants -- Limitation on Restricted Payments", and (z) a disposition of assets having a fair market value of less than $1 million. "Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at the time of determination, the present value (discounted at the interest rate borne by the Notes, compounded annually) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale/Leaseback Transaction (including any period for which such lease has been extended). "Average Life" means, as of the date of determination, with respect to any Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum of the products of numbers of years from the date of determination to the dates of each successive scheduled principal payment of such Indebtedness or redemption or similar payment with respect to such Preferred Stock multiplied by the amount of such payment by (ii) the sum of all such payments. "Bank Credit Agreements" means the Senior Credit Facility and any other bank credit agreement or similar facility entered into in the future by the Company or any Restricted Subsidiary as any of the same may be amended, waived, modified, Refinanced or replaced from time to time (except to the extent that any such amendment, waiver, modification, replacement or Refinancing would be prohibited by the terms of the Indenture). "Bank Indebtedness" means any and all present and future amounts payable under or in respect of the Bank Credit Agreements, including principal, premium (if any), interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization, whether or not a claim for post-filing interest is allowed in such proceedings), fees, charges, expenses, reimbursement obligations, Guarantees and all other amounts and other Obligations payable thereunder or in respect thereof at any time. "Board of Directors" means the Board of Directors of the Company or any committee thereof duly authorized to act on behalf of such Board. "Business Day" means each day which is not a Legal Holiday. "Capital Lease Obligations" means an obligation that is required to be classified and accounted for as a capital lease for financial reporting purposes in accordance with GAAP, and the amount of Indebtedness represented by such obligation shall be the capitalized amount of such obligation determined in accordance with GAAP; and the Stated Maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. "Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity. 87
424B390th Page of 221TOC1stPreviousNextBottomJust 90th
"Change of Control" means the occurrence of any of the following events: (i) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more Permitted Holders, is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that for purposes of this clause such person or group shall be deemed to have "beneficial ownership" of all shares that any such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 40% of the total voting power of the Voting Stock of the Company; provided, however, that such event shall not be deemed to be a Change of Control so long as the Permitted Holders beneficially own, directly or indirectly, in the aggregate a greater percentage of the total voting power of the Voting Stock of the Company than such other person or group; (ii) after the first public offering of common stock of the Company, during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors (together with any new directors whose election by such Board of Directors or whose nomination for election by the shareholders of the Company was approved by a majority vote of the directors of the Company then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors then in office; or (iii) the merger or consolidation of the Company with or into another Person or the merger of another Person with or into the Company, or the sale of all or substantially all the assets of the Company to another Person (other than a Person that is controlled by the Permitted Holders), and, in the case of any such merger or consolidation, the securities of the Company that are outstanding immediately prior to such transaction and which represent 100% of the aggregate voting power of the Voting Stock of the Company are changed into or exchanged for cash, securities or property, unless pursuant to such transaction such securities are changed into or exchanged for, in addition to any other consideration, securities of the surviving corporation that represent immediately after such transaction, at least a majority of the aggregate voting power of the Voting Stock of the surviving corporation. "Code" means the Internal Revenue Code of 1986, as amended. "Consolidated Coverage Ratio" as of any date of determination means the ratio of (i) the aggregate amount of EBITDA for the period of the most recent four consecutive fiscal quarters ending at least 45 days (or, if less, the number of days after the end of such fiscal quarter as the consolidated financial statements of the Company shall be available) prior to the date of such determination to (ii) Consolidated Interest Expense for such four fiscal quarters; provided, however, that: (1) if the Company or any Restricted Subsidiary has Incurred any Indebtedness since the beginning of such period that remains outstanding on such date of determination or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, or both, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to such Indebtedness as if such Indebtedness had been Incurred on the first day of such period and the discharge of any other Indebtedness repaid, repurchased, defeased or otherwise discharged with the proceeds of such new Indebtedness as if such discharge had occurred on the first day of such period (except that, in the case of Indebtedness used to finance working capital needs incurred under a revolving credit or similar arrangement, the amount thereof shall be deemed to be the average daily balance of such Indebtedness during such four-fiscal-quarter period), (2) if since the beginning of such period the Company or any Restricted Subsidiary shall have made any Asset Disposition, the EBITDA for such period shall be reduced by an amount equal to the EBITDA (if positive) directly attributable to the assets which are the subject of such Asset Disposition for such period, or increased by an amount equal to the EBITDA (if negative) directly attributable thereto for such period, and Consolidated Interest Expense for such period shall be reduced by an amount equal to the Consolidated Interest Expense directly attributable to any Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased, defeased, assumed by a third person (to the extent the Company and its Restricted Subsidiaries are no longer liable for such Indebtedness) or otherwise discharged with respect to the Company and its continuing Restricted Subsidiaries in connection with such Asset Disposition for such period (or, if the Capital Stock of any Restricted Subsidiary is sold, the Consolidated Interest Expense for such period directly attributable to the Indebtedness of such Restricted Subsidiary to the extent the Company and its continuing Restricted Subsidiaries are no longer liable for such Indebtedness after such sale), 88
424B391st Page of 221TOC1stPreviousNextBottomJust 91st
(3) if since the beginning of such period the Company shall have consummated a Public Equity Offering following which there is a Public Market, Consolidated Interest Expense for such period shall be reduced by an amount equal to the Consolidated Interest Expense directly attributable to any Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to the Company and its Restricted Subsidiaries in connection with such Public Equity Offering for such period, (4) if since the beginning of such period the Company or any Restricted Subsidiary (by merger or otherwise) shall have made an Investment in any Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary) or an acquisition of assets, which acquisition constitutes all or substantially all of an operating unit of a business, including any such Investment or acquisition occurring in connection with a transaction requiring a calculation to be made hereunder, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto (including the Incurrence of any Indebtedness) as if such Investment or acquisition occurred on the first day of such period and (5) if since the beginning of such period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of such period) shall have made any Asset Disposition, any Investment or acquisition of assets that would have required an adjustment pursuant to clause (3) or (4) above if made by the Company or a Restricted Subsidiary during such period, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto as if such Asset Disposition, Investment or acquisition occurred on the first day of such period. For purposes of this definition, whenever pro forma effect is to be given to an acquisition of assets, the amount of income, earnings or expense relating thereto and the amount of Consolidated Interest Expense associated with any Indebtedness Incurred in connection therewith, the pro forma calculations shall be prepared in accordance with Article 11 of Regulation S-X promulgated by the Commission as determined in good faith by a responsible financial or accounting Officer of the Company. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest of such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term in excess of 12 months). "Consolidated Interest Expense" means, for any period, the total interest expense of the Company and its consolidated Restricted Subsidiaries, plus, to the extent not included in such total interest expense, and to the extent incurred by the Company or its Restricted Subsidiaries: (i) interest expense attributable to Capital Lease Obligations, (ii) amortization of debt discount, (iii) capitalized interest, (iv) non-cash interest expenses, (v) commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing, (vi) net costs associated with Hedging Obligations (including amortization of fees), (vii) Preferred Stock dividends in respect of all Preferred Stock held by Persons other than the Company or a Wholly Owned Subsidiary, and (viii) interest actually paid on any Indebtedness of any other Person that is Guaranteed by the Company or any Restricted Subsidiary. Notwithstanding the foregoing, net interest expense attributable to Tooling Indebtedness shall not be included in Consolidated Interest Expense except to the extent such expense would be included in interest expense in accordance with GAAP. 89
424B392nd Page of 221TOC1stPreviousNextBottomJust 92nd
"Consolidated Net Income" means, for any period, the net income of the Company and its consolidated Subsidiaries; provided, however, that there shall not be included in such Consolidated Net Income: (i) any net income (or loss) of any Person if such Person is not a Restricted Subsidiary, except that subject to the exclusion contained in clause (iv) below, the Company's equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the Company or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution paid to a Restricted Subsidiary, to the limitations contained in clause (iii) below); (ii) for purposes of subclause (a)(3)(A) of the covenant described under "Certain Covenants -- Limitation on Restricted Payments" only, any net income (or loss) of any Person acquired by the Company or a Subsidiary in a pooling of interests transaction for any period prior to the date of such acquisition; (iii) any net income of any Restricted Subsidiary if such Restricted Subsidiary is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions by such Restricted Subsidiary, directly or indirectly, to the Company, except that (A) subject to the exclusion contained in clause (iv) below, the Company's equity in the net income of any such Restricted Subsidiary for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash that could have been distributed by such Restricted Subsidiary consistent with such restriction during such period to the Company or another Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution paid to another Restricted Subsidiary, to the limitation contained in this clause) and (B) the Company's equity in a net loss of any such Restricted Subsidiary for such period shall be included in determining such Consolidated Net Income; (iv) any gain (or loss) realized upon the sale or other disposition of any assets of the Company or its consolidated Subsidiaries (including pursuant to any sale-and-leaseback arrangement) which is not sold or otherwise disposed of in the ordinary course of business and any gain (or loss) realized upon the sale or other disposition of any Capital Stock of any Person; (v) extraordinary gains or losses; and (vi) the cumulative effect of a change in accounting principles. Notwithstanding the foregoing, for the purposes of the covenant described under "Certain Covenants--Limitation on Restricted Payments" only, there shall be excluded from Consolidated Net Income any dividends, repayments of loans or advances or other transfers of assets from Unrestricted Subsidiaries to the Company or a Restricted Subsidiary to the extent such dividends, repayments or transfers increase the amount of Restricted Payments permitted under such covenant pursuant to clause (a)(3)(D) thereof. "Consolidated Net Worth" means the total of the amounts shown on the balance sheet of the Company and its consolidated Subsidiaries, determined on a consolidated basis in accordance with GAAP, as of the end of the most recent fiscal quarter of the Company ending at least 45 days prior to the taking of any action for the purpose of which the determination is being made, as: (i) the par or stated value of all outstanding Capital Stock of the Company plus (ii) paid-in capital or capital surplus relating to such Capital Stock plus (iii) any retained earnings or earned surplus less (A) any accumulated deficit and (B) any amounts attributable to Disqualified Stock. "Currency Agreement" means, with respect to any Person, any foreign exchange contract, currency swap agreement or other similar agreement to which such Person is a party or a beneficiary. "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default. "Designated Senior Indebtedness" means: (i) the Bank Indebtedness and 90
424B393rd Page of 221TOC1stPreviousNextBottomJust 93rd
(ii) any other Senior Indebtedness of the Company which, at the date of determination, has an aggregate principal amount outstanding of, or under which, at the date of determination, the holders thereof are committed to lend up to, at least $10 million and is specifically designated by the Company in the instrument evidencing or governing such Senior Indebtedness as "Designated Senior Indebtedness" for purposes of the Indenture. "Disqualified Stock" means, with respect to any Person, any Capital Stock which by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or upon the happening of any event: (i) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise, (ii) is convertible or exchangeable, at the option of the holder thereof, for Indebtedness or Disqualified Stock or (iii) is redeemable at the option of the holder thereof, in whole or in part, in each case on or prior to the first anniversary of the Stated Maturity of the Notes. "EBITDA" for any period means the sum of Consolidated Net Income plus Consolidated Interest Expense plus, without duplication, the following to the extent deducted in calculating such Consolidated Net Income: (i) income tax expense (including Michigan Single Business Tax expense), (ii) depreciation expense, (iii) amortization expense and (iv) all other non-cash items reducing Consolidated Net Income (other than items that will require cash payments and for which an accrual or reserve is, or is required by GAAP to be, made), less all non-cash items increasing Consolidated Net Income, in each case for such period. Notwithstanding the foregoing, the provision for taxes based on the income or profits of, and the depreciation and amortization of, a Subsidiary of the Company shall be added to Consolidated Net Income to compute EBITDA only to the extent (and in the same proportion) that the net income of such Subsidiary was included in calculating Consolidated Net Income. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Existing Preferred Stock" means the Series A $3.00 cumulative Preferred Stock issued by Lobdell and the Series B Preferred Stock issued by Lobdell in the aggregate amount of $50.7 million, less any shares of such preferred stock repurchased, redeemed or canceled subsequent to the Existing Senior Subordinated Note Issue Date, as the terms of such preferred stock shall exist as of the Existing Senior Subordinated Note Issue Date. "Existing Indenture" means the Indenture, dated as of June 15, 1997, among the Company, the Subsidiary Guarantors and First Trust National Association (now known as U.S. Bank Trust National Association), as Trustee relating to the Existing Senior Subordinated Notes. "Existing Senior Subordinated Notes" means the Series A Notes and the Series B Notes. "Existing Senior Subordinated Note Issue Date" means June 24, 1997. "GAAP" means generally accepted accounting principles in the United States of America as in effect as of the Existing Senior Subordinated Note Issue Date, including those set forth in: (i) the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, 91
424B394th Page of 221TOC1stPreviousNextBottomJust 94th
(ii) statements and pronouncements of the Financial Accounting Standards Board and (iii) such other statements by such other entity as approved by a significant segment of the accounting profession. "Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness or other obligation of any Person and any obligation, direct or indirect, contingent or otherwise, of such Person: (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation of such Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take-or-pay or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided, however, that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. The term "Guarantor" shall mean any Person Guaranteeing any obligation. "Hedging Obligations" of any Person means the obligations of such Person pursuant to any Interest Rate Agreement or Currency Agreement. "Holder" or "Noteholder" means the Person in whose name a Note is registered on the Registrar's books. "Incur" means issue, assume, Guarantee, incur or otherwise become liable for; provided, however, that any Indebtedness or Capital Stock of a Person existing at the time such Person becomes a Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by such Subsidiary at the time it becomes a Subsidiary; provided, further, however, that in the case of a discount security, neither the accrual of interest nor the accretion of original issue discount shall be considered an Incurrence of Indebtedness, but the entire face amount of such security shall be deemed Incurred upon the issuance of such security. The term "Incurrence" when used as a noun shall have a correlative meaning. "Indebtedness" means, with respect to any Person on any date of determination (without duplication): (i) the principal of and premium (if any) in respect of (A) indebtedness of such Person for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable; (ii) all Capital Lease Obligations of such Person and all Attributable Debt in respect of Sale/Leaseback Transactions entered into by such Person; (iii) all obligations of such Person issued or assumed as the deferred purchase price of property or services, all conditional sale obligations of such Person and all obligations of such Person under any title retention agreement (but excluding trade accounts payables arising in the ordinary course of business and which are not more than 90 days past due and not in dispute), which purchase price or obligation is due more than six months after the date of placing such property in service or taking delivery and title thereto or the completion of such services (provided that, in the case of obligations of an acquired Person assumed in connection with an acquisition of such Person, such obligations would constitute Indebtedness of such Person); (iv) all obligations of such Person for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction (other than obligations with respect to letters of credit securing obligations (other than obligations described in (i) through (iii) above) entered into in the ordinary course of business of such Person to the extent such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the tenth Business Day following receipt by such Person of a demand for reimbursement following payment on the letter of credit); 92
424B395th Page of 221TOC1stPreviousNextBottomJust 95th
(v) the amount of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock or, with respect to any Subsidiary of such Person, any Preferred Stock (but excluding, in each case, any accrued dividends); (vi) all obligations of the type referred to in clauses (i) through (v) of other Persons and all dividends of other Persons for the payment of which, in either case, such Person is responsible or liable, directly or indirectly, as obligor, guarantor or otherwise, including by means of any Guarantee; (vii) all obligations of the type referred to in clauses (i) through (vi) of other Persons secured by any Lien on any property or asset of such Person (whether or not such obligation is assumed by such Person), the amount of such obligation being deemed to be the lesser of the value of such property or assets or the amount of the obligation so secured; and (viii) to the extent not otherwise included in this definition, Hedging Obligations of such Person. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations as described above at such date; provided, however, that the amount outstanding at any time of any Indebtedness issued with original issue discount shall be deemed to be the face amount of such Indebtedness less the remaining unamortized portion of the original issue discount of such Indebtedness at such time as determined in conformity with GAAP. "Interest Rate Agreement" means any interest rate swap agreement, interest rate cap agreement or other financial agreement or arrangement designed to protect the Company or any Restricted Subsidiary against fluctuations in interest rates. "Investment" in any Person means any direct or indirect advance, loan (other than advances to customers in the ordinary course of business that are recorded as accounts receivable on the balance sheet of such Person) or other extensions of credit (including by way of Guarantee or similar arrangement) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, Indebtedness or other similar instruments issued by such Person. For purposes of the definition of "Unrestricted Subsidiary," the definition of "Restricted Payment" and the covenant described under "Certain Covenants - Limitation on Restricted Payments," (i) "Investment" shall include the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of any Subsidiary of the Company at the time that such Subsidiary is designated an Unrestricted Subsidiary; provided, however, that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue to have a permanent "Investment" in an Unrestricted Subsidiary equal to an amount (if positive) equal to (x) the Company's "Investment" in such Subsidiary at the time of such redesignation less (y) the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of such Subsidiary at the time of such redesignation; and (ii) any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer, in each case as determined in good faith by the Board of Directors. "Issue Date" means December 8, 1998. "Legal Holiday" means a Saturday, a Sunday or a day on which banking institutions are not required to be open in the State of New York. "Lien" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any conditional sale or other title retention agreement or lease in the nature thereof). "Net Available Cash" from an Asset Disposition means cash payments received by the Company or any of its Subsidiaries therefrom (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise, but only as and when received, but excluding any other consideration received in the form of assumption by the acquiring Person of Indebtedness or other obligations relating to such properties or assets or received in any other noncash form) in each case net of: 93
424B396th Page of 221TOC1stPreviousNextBottomJust 96th
(i) all legal, title and recording tax expenses, commissions and other fees and expenses incurred, and all Federal, state, provincial, foreign and local taxes required to be paid or accrued as a liability under GAAP, as a consequence of such Asset Disposition, (ii) all payments made on any Indebtedness which is secured by any assets subject to such Asset Disposition, in accordance with the terms of any Lien upon or other security agreement of any kind with respect to such assets, or which must by its terms, or in order to obtain a necessary consent to such Asset Disposition, or by applicable law, be repaid out of the proceeds from such Asset Disposition, (iii) all distributions and other payments required to be made to minority interest holders in Subsidiaries or Joint Ventures as a result of such Asset Disposition and (iv) the deduction of appropriate amounts provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the property or other assets disposed in such Asset Disposition and retained by the Company or any Restricted Subsidiary after such Asset Disposition, including without limitation liabilities under any indemnification obligations associated with such Asset Disposition. "Net Cash Proceeds," with respect to any issuance or sale of Capital Stock, means the cash proceeds of such issuance or sale net of attorneys fees, accountants fees, underwriters' or placement agents' fees, discounts or commissions and brokerage, consultant and other fees actually incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof. "Obligations" means all present and future obligations for principal, premium, interest (including, without limitation, any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law), penalties, fees, indemnifications, reimbursements (including, without limitation, all reimbursement and other obligation pursuant to any letters of credit, bankers acceptances or similar instruments or documents), damages and other liabilities payable under the documentation at any time governing any indebtedness. "Permitted Holders" means: (i) any of Selwyn Isakow, his spouse and any of his lineal descendants and their respective spouses (collectively, the "Isakow Family") whether acting in their own name or as one or as a majority of persons having the power to exercise the voting rights attached to, or having investment power over, shares held by others, (ii) any controlled Affiliate of any member of the Isakow Family, and (iii) any trust solely for the benefit of one or more members of the Isakow Family (whether or not any member of the Isakow Family is a trustee of such trust). "Permitted Investment" means an Investment by the Company or any Restricted Subsidiary in: (i) the Company, (ii) a Restricted Subsidiary or a Person that will, upon the making of such Investment, become a Restricted Subsidiary; provided, however, that the primary business of such Restricted Subsidiary is a Related Business; (iii) another Person if as a result of such Investment such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all its assets to, the Company or a Restricted Subsidiary; provided, however, that such Person's primary business is a Related Business; (iv) Temporary Cash Investments; (v) receivables owing to the Company or any Restricted Subsidiary if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided, however, that such trade terms may include such concessionaire trade terms as the Company or any such Restricted Subsidiary deems reasonable under the circumstances; 94
424B397th Page of 221TOC1stPreviousNextBottomJust 97th
(vi) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business; (vii) loans or advances to employees made in the ordinary course of business consistent with past practices of the Company or such Restricted Subsidiary; (viii) stock, obligations or securities received in settlement of debts created in the ordinary course of business and owing to the Company or any Restricted Subsidiary or in satisfaction of judgments; (ix) Persons other than Restricted Subsidiaries that are primarily engaged in a Related Business, in an aggregate amount not to exceed $15 million (to the extent utilized for an Investment, such amount will be reinstated to the extent that the Company or any Restricted Subsidiary receives dividends, repayments of loans or other transfers of assets as a return of such Investment); (x) any Person to the extent such Investment is received in exchange for the transfer to such Person of the assets owned as of the Existing Senior Subordinated Note Issue Date by Laserweld International L.L.C.; and (xi) any Person to the extent such Investment represents the non-cash portion of the consideration received for an Asset Disposition as permitted pursuant to the covenant described under "Certain Covenants - Limitation on Sales of Assets and Subsidiary Stock." "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Preferred Stock," as applied to the Capital Stock of any corporation, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such corporation, over shares of Capital Stock of any other class of such corporation. "Principal" of a Note means the principal of the Note, plus the premium, if any, payable on the Note which is due or overdue or is to become due at the relevant time. "Public Equity Offering" means an underwritten primary public offering of common stock of the Company pursuant to an effective registration statement under the Securities Act. "Public Market" means any time after: (i) a Public Equity Offering has been consummated and (ii) at least 10% of the total issued and outstanding common stock of the Company has been distributed by means of an effective registration statement under the Securities Act or sales pursuant to Rule 144 under the Securities Act. "Purchase Money Indebtedness" mean Indebtedness: (i) consisting of the deferred purchase price of property, conditional sale obligations, obligations under any title retention agreement, other purchase money obligations and obligations in respect of industrial revenue bonds or similar Indebtedness, in each case where the maturity of such Indebtedness does not exceed the anticipated useful life of the asset being financed, and (ii) incurred to finance the acquisition by the Company or a Restricted Subsidiary of such asset, including additions and improvements; provided, however, that any Lien arising in connection with any such Indebtedness shall be limited to the specified asset being financed or, in the case of real property or fixtures, including additions and improvements, the real property on which such asset is attached; and provided, further, however, that such Indebtedness is Incurred within 90 days after such acquisition of such asset by the Company or Restricted Subsidiary. 95
424B398th Page of 221TOC1stPreviousNextBottomJust 98th
"Refinance" means, in respect of any Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue other Indebtedness in exchange or replacement for, such Indebtedness. "Refinanced" and "Refinancing" shall have correlative meanings. "Refinancing Indebtedness" means Indebtedness that Refinances any Indebtedness of the Company or any Restricted Subsidiary existing on the Existing Senior Subordinated Note Issue Date or Incurred in compliance with the Existing Indenture; provided, however, that: (i) such Refinancing Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the Indebtedness being Refinanced, (ii) such Refinancing Indebtedness has an Average Life at the time such Refinancing Indebtedness is Incurred that is equal to or greater than the Average Life of the Indebtedness being Refinanced and (iii) such Refinancing Indebtedness has an aggregate principal amount (or if Incurred with original issue discount, an aggregate issue price) that is equal to or less than the aggregate principal amount (or if Incurred with original issue discount, the aggregate accredit value) then outstanding or committed (plus fees and expenses, including any premium and defeasance costs) under the Indebtedness being Refinanced; provided further, however, that Refinancing Indebtedness shall not include (x) Indebtedness of a Subsidiary that Refinances Indebtedness of the Company or (y) Indebtedness of the Company or a Restricted Subsidiary that Refinances Indebtedness of an Unrestricted Subsidiary. "Related Business" means any business related, ancillary or complementary (as determined in good faith by the Board of Directors) to the businesses of the Company and the Restricted Subsidiaries on the Series A/B Issue Date. "Representative" means any trustee, agent or representative (if any) for an issue of Senior Indebtedness of the Company. "Restricted Payment" means, with respect to any Person: (i) the declaration or payment of any dividends or any other distributions on or in respect of its Capital Stock (including any payment in connection with any merger or consolidation involving such Person) or similar payment to the holders of its Capital Stock, except dividends or distributions payable solely in its Capital Stock (other than Disqualified Stock) and except dividends or distributions payable solely to the Company or a Restricted Subsidiary (and, if such Restricted Subsidiary is not wholly owned, to its other shareholders on a pro rata basis or on a basis that results in the receipt by the Company or a Restricted Subsidiary of dividends or distributions of greater value than it would receive on a pro rata basis), (ii) the purchase, redemption or other acquisition or retirement for value of any Capital Stock of the Company held by any Person or of any Capital Stock of a Restricted Subsidiary held by any Affiliate of the Company (other than a Restricted Subsidiary), including the exercise of any option to exchange any Capital Stock (other than into Capital Stock of the Company that is not Disqualified Stock), (iii) the purchase, repurchase, redemption, defeasance or other acquisition or retirement for value, prior to scheduled maturity, scheduled repayment or scheduled sinking fund payment of any Subordinated Obligations (other than the purchase, repurchase or other acquisition of Subordinated Obligations purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of acquisition) or (iv) the making of any Investment in any Person (other than a Permitted Investment). "Restricted Subsidiary" means any Subsidiary of the Company that is not an Unrestricted Subsidiary. "Sale/Leaseback Transaction" means an arrangement relating to property now owned or hereafter acquired whereby the Company or a Restricted Subsidiary transfers such property to a Person and the Company or a Restricted Subsidiary leases it from such Person. "SEC" means the Securities and Exchange Commission. 96
424B399th Page of 221TOC1stPreviousNextBottomJust 99th
"Secured Indebtedness" means any Indebtedness of the Company secured by a Lien. "Secured Indebtedness" of any Subsidiary Guarantor has a correlative meaning. "Senior Credit Facility" means the credit agreement dated as of June 24, 1997, between the Company, the lenders and other persons party thereto and NBD Bank, as Agent, together with the related documents thereto executed at any time (including, without limitation, any guarantee agreements, security agreements and other collateral documents) and the credit facilities thereunder, in each case as such documents may be amended (including, without limitation, any amendment and restatement thereof), supplemented or otherwise modified from time to time, including any agreement extending the maturity of, refinancing, replacing or otherwise restructuring (including, without limitation, increasing the amount of available borrowings thereunder (provided that such increase in borrowings is permitted by the covenant described under "Certain Covenants - Limitation on Indebtedness") or adding subsidiaries as additional borrowers or guarantors thereunder). "Senior Indebtedness" of the Company means: (i) all Bank Indebtedness of the Company, whether outstanding on the Existing Senior Subordinated Note Issue Date or thereafter Incurred, including the Guarantees by the Company of all Bank Indebtedness, and (ii) accrued and unpaid interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company whether or not a claim for post-filing interest is allowed in such proceeding) in respect of (A) indebtedness of the Company for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which the Company is responsible or liable unless, in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is provided that such obligations are subordinate in right of payment to the Notes; provided, however, that Senior Indebtedness shall not include (1) any obligation of the Company to any Subsidiary, (2) any liability for Federal, state, local or other taxes owed or owing by the Company, (3) any accounts payable or other liability to trade creditors arising in the ordinary course of business (including guarantees thereof or instruments evidencing such liabilities), (4) any Indebtedness of the Company (and any accrued and unpaid interest in respect thereof) which is subordinate or junior in any respect (other than as a result of the Indebtedness being unsecured) to any other Indebtedness or other obligation of the Company, including any Senior Subordinated Indebtedness and any Subordinated Obligations, (5) any obligations with respect to any Capital Stock, (6) that portion of any Indebtedness which at the time of Incurrence is Incurred in violation of the Indenture or (7) the Notes or the Existing Senior Subordinated Notes. "Senior Indebtedness" of any Subsidiary Guarantor has a correlative meaning. "Senior Subordinated Indebtedness" of the Company means the Notes, the Existing Senior Subordinated Notes and any other Obligations under or in connection with the Notes, the Existing Senior Subordinated Notes, the Indenture, the Existing Indenture and/or any related agreements, documents or instruments, whether now owing or hereafter incurred or owing and any other Indebtedness of the Company that specifically provides that such Indebtedness is to rank pari passu with the Notes in right of payment and is not subordinated by its terms in right of payment to any Indebtedness or other obligation of the Company which is not Senior Indebtedness. "Senior Subordinated Indebtedness" of any Subsidiary Guarantor has a correlative meaning. "Series A Notes: means the $125 million aggregate principal amount of 10 1/8% Senior Subordinated Notes due 2007 issued by the Company on June 24, 1997 under the Existing Indenture. "Series B Notes" means the $35 million aggregate principal amount of 10 1/8% Senior Subordinated Notes due 2007 issued by the Company on April 1, 1998 under the Existing Indenture. "Significant Subsidiary" means any Restricted Subsidiary that would be a "Significant Subsidiary" of the Company within the meaning of Rule 1-02 under Regulation S-X promulgated by the SEC. "Stated Maturity" means, with respect to any security, the date specified in such security as the fixed date on which the final payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency unless such contingency has occurred). "Subordinated Obligation" means any Indebtedness of the Company (whether outstanding on the Issue Date or thereafter Incurred) which is subordinate or junior in right of payment to the Notes and the Existing Senior Subordinated Notes pursuant to a written agreement to that effect. "Subordinated Obligation" of any Subsidiary Guarantor has a correlative meaning. 97
424B3100th Page of 221TOC1stPreviousNextBottomJust 100th
"Subsidiary" means, in respect of any Person, any corporation, association, partnership or other business entity of which more than 50% of the total voting power of shares of Capital Stock or other interests (including partnership interests) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by (i) such Person, (ii) such Person and one or more Subsidiaries of such Person or (iii) one or more Subsidiaries of such Person. "Subsidiary Guaranty" means the Guarantee by a Subsidiary Guarantor of the Company's obligations with respect to the Notes and/or the Existing Senior Subordinated Notes. "Subsidiary Guarantor" means each Subsidiary designated as such on the signature pages of the Indenture and any other Subsidiary that has issued a Subsidiary Guaranty. "Temporary Cash Investments" means any of the following: (i) any investment in direct obligations of the United States of America or any agency thereof or obligations guaranteed by the United States of America or any agency thereof, (ii) investments in time deposit accounts, certificates of deposit and money market deposits maturing within 180 days of the date of acquisition thereof issued by a bank or trust company which is organized under the laws of the United States of America, any state thereof or any foreign country recognized by the United States, and which bank or trust company has capital, surplus and undivided profits aggregating in excess of $50,000,000 (or the foreign currency equivalent thereof) and has outstanding debt which is rated "A" (or such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act) or any money-market fund sponsored by an registered broker dealer or mutual fund distributor, (iii) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (i) above entered into with a bank meeting the qualifications described in clause (ii) above, (iv) investments in commercial paper, maturing not more than 90 days after the date of acquisition, issued by a corporation (other than an Affiliate of the Company) organized and in existence under the laws of the United States of America, any State thereof or the District of Columbia or any foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of "P-1" (or higher) according to Moody's Investors Service, Inc. or "A-1" (or higher) according to Standard and Poor's Ratings Group, and (v) investments in securities with maturities of six months or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least "A" by Standard & Poor's Ratings Group or "A" by Moody's Investors Service, Inc. "Tooling Indebtedness" means all present and future Indebtedness of the Company or any Restricted Subsidiary the proceeds of which are utilized to finance dies, molds, tooling and similar items (collectively "Tooling") for which the sales of such Tooling is covered under specific written purchase orders or agreements between the Company or any Restricted Subsidiary and the purchaser of such Tooling. "Unrestricted Subsidiary" means: (i) any Subsidiary of the Company that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below and (ii) any Subsidiary of an Unrestricted Subsidiary. 98
424B3101st Page of 221TOC1stPreviousNextBottomJust 101st
The Board of Directors may designate any Subsidiary of the Company (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Capital Stock or Indebtedness of, or holds any Lien on any property of, the Company or any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated; provided, however, that either (A) the Subsidiary to be so designated has total assets of $1,000 or less or (B) if such Subsidiary has assets greater than $1,000, such designation would be permitted under the covenant described under "Certain Covenants - Limitation on Restricted Payments." The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that immediately after giving effect to such designation (x) the Company could Incur $1.00 of additional Indebtedness under paragraph (a) of the covenant described under "Certain Covenants - Limitation on Indebtedness" and (y) no Default shall have occurred and be continuing. Any such designation by the Board of Directors shall be notified by the Company to the Trustee by promptly filing with the Trustee a copy of the board resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. "U.S. Government Obligations" means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable at the issuer's option. "Voting Stock" of a Person means all classes of Capital Stock or other interests (including partnership interests) of such Person then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof. "Wholly Owned Subsidiary" means a Restricted Subsidiary all the Capital Stock of which (other than directors' qualifying shares) is owned by the Company and/or one or more Wholly Owned Subsidiaries.  CERTAIN FEDERAL INCOME TAX CONSIDERATIONS The following discussion summarizes the certain United States federal income tax consequences of the Exchange Offer to a holder of Existing Notes that is an individual citizen or resident (within the meaning of Section 7701(b) of the Internal Revenue Code of 1986, as amended to the date hereof (the "Code")) of the United States or a United States corporation that purchased the Existing Notes pursuant to their original issue (a "U.S. Holder"). It is based on the Code, existing and proposed Treasury regulations, and judicial and administrative determinations, all of which are subject to change at any time, possibly on a retroactive basis. The following relates only to the Existing Notes, and the Series D Notes received therefor, that are held as "capital assets" within the meaning of Section 1221 of the Code by U.S. Holders. It does not discuss state, local, or foreign tax consequences, nor does it discuss tax consequences to categories of holders that are subject to special rules, such as foreign persons, tax-exempt organizations, insurance companies, banks, and dealers in stocks and securities. Tax consequences may vary depending on the particular status of an investor. No rulings will be sought from the Internal Revenue Service with respect to the federal income tax consequences of the Exchange Offer. THIS SECTION DOES NOT PURPORT TO DEAL WITH ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO AN INVESTOR'S DECISION TO EXCHANGE EXISTING NOTES FOR SERIES D NOTES. EACH INVESTOR SHOULD CONSULT WITH ITS OWN TAX ADVISOR CONCERNING THE APPLICATION OF THE FEDERAL INCOME TAX LAWS AND OTHER TAX LAWS TO ITS PARTICULAR SITUATION BEFORE DETERMINING WHETHER TO EXCHANGE EXISTING NOTES FOR SERIES D NOTES. ADDITIONALLY, THE COMPANY DOES NOT BELIEVE, BASED ON THE FACTS AND CIRCUMSTANCES OF THE EXCHANGE, THE LEGAL RIGHTS OR OBLIGATIONS THAT ARE ALTERED AND THE DEGREE TO WHICH THEY ARE ALTERED ARE ECONOMICALLY SIGNIFICANT. ACCORDINGLY, THE COMPANY BELIEVES THAT THE EXCHANGE OF THE EXISTING NOTES FOR SERIES D NOTES WOULD NOT BE CONSIDERED A SIGNIFICANT MODIFICATION UNDER TREAS. REG. SECTION 1.1001-3. HOWEVER, NEITHER A LETTER RULING FROM THE INTERNAL REVENUE SERVICE NOR AN OPINION OF COUNSEL HAS NOT BEEN REQUESTED. EACH INVESTOR SHOULD CONSULT WITH ITS OWN TAX ADVISOR CONCERNING THE APPLICATION OF TREAS. REG. SECTION 1.1001-3, AS WELL AS OTHER TAX LAWS TO ITS PARTICULAR SITUATION BEFORE DETERMINING WHETHER TO EXCHANGE EXISTING NOTES FOR SERIES D NOTES. 99
424B3102nd Page of 221TOC1stPreviousNextBottomJust 102nd
 THE EXCHANGE OFFER The exchange of Existing Notes pursuant to the Exchange Offer should be treated as a continuation of the corresponding Existing Notes because the terms of the Series D Notes are not materially different from the terms of the Existing Notes. Accordingly, it is the Company's belief that such exchange will not constitute a taxable event to U.S. Holders and, therefore, (i) no gain or loss should be realized by a U.S. Holder upon receipt of a Series D Note, (ii) the holding period of the Series D Note should include the holding period of the Existing Note exchanged therefor and (iii) the adjusted tax basis of the Series D Note should be the same as the adjusted tax basis of the Existing Note exchanged therefor immediately before the exchange. STATED INTEREST Stated interest on a Series D Note will be taxable to a U.S. Holder as ordinary interest income at the time that such interest accrues or is received, in accordance with the U.S. Holder's regular method of accounting for federal income tax purposes. The Existing Notes are not considered to have been issued with original issue discount for federal income tax purposes, and there will be no original issue discount with respect to the Series D Notes. PREMIUM The Series B Notes and the Series C Notes were issued for an amount that, at the time of issuance, was in excess of the amount payable at the maturity date of the Series B Notes and the Series C Notes. Therefore, a U.S. Holder of Series D Notes received in exchange for Series B Notes or Series C Notes will be treated as holding Series D Notes at a premium. A U.S. Holder generally may elect to amortize the premium over the term of the Series D Note on a constant yield method. The amount amortized in any year will be treated as a reduction of the U.S. Holder's interest income from the Series D Note. The U.S. Holder's adjusted tax basis in the Series D Note will be reduced to the extent of the deduction of amortizable bond premium. Premium on a Series D Note held by a U.S. Holder that does not make such an election to amortize will decrease the gain or increase the loss otherwise recognized on disposition of the Series D Note. U.S. Holders otherwise permitted to report income under the "cash method" of accounting should carefully consider the advisability of such an election to amortize premium, since it would not permit them to report interest income from the Series D Note using the cash method and, accordingly, it may result in an acceleration of interest income from a Series D Note. The election to amortize premium on a constant yield method, once made, applies to all debt obligations held or subsequently acquired by the electing U.S. Holder on or after the first day of the first taxable year to which the election applies and may not be revoked without the consent of the Internal Revenue Service. MARKET DISCOUNT A U.S. Holder of a Note, other than an initial Holder, will be treated as holding the Note at a market discount (a "Market Discount Note") if the amount for which such U.S. Holder purchased the Note is less than the Note's principal amount, subject to a de minimis rule. In general, any partial payment on, or gain recognized on the maturity or disposition of, a Market Discount Note will be treated as ordinary income to the extent that such gain does not exceed the accrued market discount on such Note. Alternatively, a U.S. Holder of a Market Discount Note may elect to include market discount in income currently over the life of the Market Discount Note. Such an election applies to all debt instruments with market discount acquired by the electing U.S. Holder on or after the first day of the first taxable year to which the election applies and may not be revoked without the consent of the Internal Revenue Service. Market discount accrues on a straight-line basis, unless the U.S. Holder elects to accrue such discount on a constant yield to maturity basis. Such an election is applicable only to the Note with respect to which it is made and is irrevocable. A U.S. Holder of a 100
424B3103rd Page of 221TOC1stPreviousNextBottomJust 103rd
Market Discount Note that does not elect to include market discount in income currently, generally will be required to defer deductions for interest on borrowings allocable to such Note, in an amount not exceeding the accrued market discount on such Note, until the maturity or disposition of such Note. SALE, EXCHANGE OR RETIREMENT OF THE NOTES A U.S. Holder's tax basis in a Series D Note generally will be its cost. A U.S. Holder generally will recognize gain or loss on the sale, exchange or retirement of a Series D Note in an amount equal to the difference between the amount realized on the sale, exchange or retirement and the tax basis of the Series D Note. Gain or loss recognized on the sale, exchange or retirement of a Series D Note (excluding amounts received in respect of accrued interest, which will be taxable as ordinary interest income) generally will be capital gain or loss and will be long-term capital gain or loss if the Series D Note was held for more than one year.  BACKUP WITHHOLDING Under certain circumstances, a U.S. Holder of a Series D Note may be subject to "backup withholding" at a 31% rate with respect to payments of interest thereon or the gross proceeds from the disposition thereof. This withholding generally applies if the U.S. Holder fails to furnish his or her social security number or other taxpayer identification number in the specified manner and in certain other circumstances. Any amount withheld from a payment to a U.S. Holder under the backup withholding rules is allowable as a credit against such U.S. Holder's federal income tax liability, provided that the required information is furnished to the Internal Revenue Service. Corporations and certain other entities described in the Code and Treasury regulations are exempt from backup withholding if their exempt status is properly established.  PLAN OF DISTRIBUTION Each broker-dealer that receives Series D Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Series D Notes. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Series D Notes received in exchange for Existing Notes where such Existing Notes were acquired as a result of market-making activities or other trading activities. Each of the Company and the Subsidiary Guarantors has agreed that, starting on the Expiration Date and ending on the close of business on the first anniversary of the Expiration Date, it will make this Prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until August 5, 1999 (90 days after the date of this Prospectus), all dealers effecting transactions in the Series D Notes may be required to deliver a prospectus. Neither the Company nor any of the Subsidiary Guarantors will receive any proceeds from any sale of Series D Notes by broker-dealers. Series D Notes received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Series D Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such Series D Notes. Any broker-dealer that resells Series D Notes that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such Series D Notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of Series D Notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of one year after the Expiration Date, the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. The Company and each of the Subsidiary Guarantors have agreed to pay all expenses incident to the Exchange Offer (including the expenses of one counsel for the holders of the Series C Notes) other than commissions or concessions of any brokers or dealers and will indemnify the holders of the Series C Notes (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. 101
424B3104th Page of 221TOC1stPreviousNextBottomJust 104th
 LEGAL MATTERS The validity of the Series D Notes offered hereby will be passed upon for the Company by Dykema Gossett PLLC, Bloomfield Hills, Michigan. Rex E. Schlaybaugh, Jr. is a shareholder, the Vice Chairman of the Board and a director of the Company. Mr. Schlaybaugh is a member of Dykema Gossett PLLC. Certain matters relating to the Subsidiary Guaranties and the application of Ontario law to them will be passed upon for the Company by Fasken Campbell Godfrey, Toronto, Ontario.  EXPERTS On March 28, 1997, PricewaterhouseCoopers LLP, independent accountants, was selected by the Board of Directors of Oxford Automotive, Inc. to audit the financial statements of Oxford Automotive, Inc. for the fiscal year ended March 31, 1997. The consolidated financial statements of Oxford Automotive, Inc. as of and for the years ended March 31, 1998 and 1997 included in this Prospectus have been so included in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. The consolidated financial statements of the Company as of March 31, 1996 and for the period from October 28, 1995 through March 31, 1996 appearing in this Prospectus and the related financial statement schedule included in the Exchange Offer Registration Statement have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report appearing herein, and are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. The consolidated financial statements of BMG North America Limited (Predecessor) for the period from April 1, 1995 through October 27, 1995 appearing in this Prospectus and the related financial statement schedule included in the Exchange Offer Registration Statement have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report appearing herein, and are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. The consolidated financial statements of Lobdell Emery Corporation as of December 31, 1996 and 1995 and for each of the three years in the period ended December 31, 1996 included in this Prospectus have been so included in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. The financial statements of Howell Industries, Inc. as of and for the year ended July 31, 1997 included in this Prospectus have been so included in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. The consolidated financial statements of RPI Holdings, Inc. as of March 31, 1997 and June 30, 1996 and for the nine-month period ended March 31, 1997 and year ended June 30, 1996 included in this Prospectus, have been so included in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. The combined financial statements of the Suspension Division of Eaton Corporation as of December 31, 1997 and for the year then ended included in this Prospectus have been so included in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. The financial statements of Cofimeta S.A. and its subsidiaries as of and for the nine months ended September 30, 1998 and as of and for the years ended December 31, 1997 and 1996 included in this Prospectus have been so included in reliance on the report Coopers & Lybrand Audit, independent accountants, given on the authority of said firm as experts in auditing and accounting. 102
424B3105th Page of 221TOC1stPreviousNextBottomJust 105th
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS [Enlarge/Download Table] PAGE ---- OXFORD AUTOMOTIVE, INC. Report of Independent Accountants ................................................................ F-3 Independent Auditors' Report ..................................................................... F-4 Consolidated Balance Sheets as of March 31, 1998, 1997 and 1996 and December 31, 1998 (unaudited) ................................................................................. F-5 Consolidated Statements of Operations for the years ended March 31, 1998 and 1997, the period from October 28, 1995 through March 31, 1996 and the nine months ended December 31, 1998 and 1997 (unaudited) for the Company; and for the period from April 1, 1995 through October 27, 1995 for the Predecessor .................................. F-6 Consolidated Statements of Changes in Shareholders' Equity (Net Capital Deficiency) and Comprehensive Income for the years ended March 31, 1998 and 1997, the period from October 28, 1995 through March 31, 1996 and the nine months ended December 31, 1998 (unaudited) for the Company; and for the period from April 1, 1995 through October 27, 1995 for the Predecessor ............................. F-7 Consolidated Statements of Cash Flows for the years ended March 31, 1998 and 1997, the period from October 28, 1995 through March 31, 1996 and the nine months ended December 31, 1998 and 1997 (unaudited) for the Company; and for the period from April 1, 1995 through October 27, 1995 for the Predecessor .................................. F-10 Notes to Consolidated Financial Statements ....................................................... F-11 OXFORD AUTOMOTIVE, INC. Condensed consolidating financial information as of and for the nine months ended December 31, 1998 ........................................................................... F-27 LOBDELL EMERY CORPORATION Report of Independent Accountants................................................................. F-37 Consolidated Balance Sheets as of December 31, 1996 and 1995 ..................................... F-38 Consolidated Statements of Operations for the years ended December 31, 1996, 1995 and 1994 ....... F-39 Consolidated Statement of Changes in Shareholders' Equity for the years ended December 31, 1996, 1995 and 1994 ............................................................................... F-40 Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994 ....... F-41 Notes to Consolidated Financial Statements ....................................................... F-42 HOWELL INDUSTRIES, INC. Report of Independent Accountants ................................................................ F-52 Consolidated Balance Sheet as of July 31, 1997 ................................................... F-53 Statement of Operations for the year ended July 31, 1997 ......................................... F-54 Statement of Shareholders' Equity for the year ended July 31, 1997 ............................... F-55 Statement of Cash Flows for the year ended July 31, 1997 ......................................... F-56 Notes to Consolidated Financial Statements ....................................................... F-57 RPI HOLDINGS, INC. Report of Independent Accountants ................................................................ F-63 Report of Independent Accountants ................................................................ F-64 Consolidated Balance Sheets as of March 31, 1997, June 30, 1996 and September 30, 1997 (unaudited) ................................................................................. F-65 F-1
424B3106th Page of 221TOC1stPreviousNextBottomJust 106th
[Enlarge/Download Table] PAGE ---- Consolidated Statements of Operations for the period from July 1, 1996 to March 31, 1997, for the year ended June 30, 1996, and the six months ended September 30, 1997 and 1996 (unaudited) ................................................................................. F-66 Consolidated Statement of Changes in Shareholders' Equity for the period from July 1, 1996 to March 31, 1997, the period from July 1, 1995 to June 30, 1996, and for the six months ended September 30, 1997 (unaudited) ........................................................ F-67 Consolidated Statements of Cash Flows for period from July 1, 1996 to March 31, 1997, for the year ended June 30, 1996, and the six months ended September 30, 1997 and 1996 (unaudited) ........................................ F-68 Notes to Consolidated Financial Statements ....................................................... F-69 SUSPENSION DIVISION OF EATON CORPORATION Report of Independent Accountants ................................................................ F-76 Combined Balance Sheets as of December 31, 1997 and March 31, 1998 (unaudited) ................... F-77 Combined Statements of Operations for the year ended December 31, 1997, and for the three months ended March 31, 1998 and 1997 (unaudited) ................................................... F-78 Combined Statements of Cash Flows for the year ended December 31, 1997, and for the three months ended March 31, 1998 and 1997 (unaudited) ................................................... F-79 Notes to Combined Financial Statements ........................................................... F-80 COFIMETA S.A. Independent Auditors Report ...................................................................... F-90 Consolidated Assets as of September 30, 1998 and December 31, 1997 ............................... F-91 Consolidated Liabilities as of September 30, 1998 and December 31, 1997 .......................... F-92 Consolidated Income Statements for the nine months ended September 30, 1998 and the years ended December 31, 1997 and 1996 ............................................. F-93 Consolidated Cash Flow Statements for the nine months ended September 30, 1998 and the years ended December 31, 1997 and 1996 ................................................. F-94 Notes to Consolidated Financial Statements ....................................................... F-95 F-2
424B3107th Page of 221TOC1stPreviousNextBottomJust 107th
 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Oxford Automotive, Inc. In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of changes in shareholders' equity and of cash flows present fairly, in all material respects, the financial position of Oxford Automotive, Inc. and its subsidiaries (the Company) at March 31, 1998 and 1997 and the results of their operations and their cash flows for the years ended March 31, 1998 and 1997 in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. The financial statements of the Company as of March 31, 1996 and for the period from October 28, 1995 through March 31, 1996 and the financial statements of BMG North America Limited (the Predecessor) for the period from April 1, 1995 through October 27, 1995 were audited by other independent accountants whose report dated May 21, 1996 expressed an unqualified opinion on those statements. PRICE WATERHOUSE LLP Bloomfield Hills, Michigan June 22, 1998 F-3
424B3108th Page of 221TOC1stPreviousNextBottomJust 108th
INDEPENDENT AUDITORS' REPORT To the Directors of Oxford Automotive, Inc. and BMG North America Limited We have audited the consolidated balance sheet of Oxford Automotive, Inc. as at March 31, 1996 and the consolidated statements of operations, changes in shareholders' equity and cash flows for the period from October 28, 1995 to March 31, 1996 for Oxford Automotive, Inc. and the consolidated statements of operations, changes in shareholders' equity and cash flows for the period from April 1, 1995 to October 27, 1995 for BMG North America Limited. These financial statements are the responsibility of the management of Oxford Automotive, Inc. and BMG North America Limited. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of Oxford Automotive, Inc., as at March 30, 1996 and the results of its operations and its cash flows for the period from October 28, 1995 to March 31, 1996 and the results of BMG North America Limited's operations and its cash flows for the period from April 1, 1995 to October 27, 1995 in accordance with U.S. generally accepted accounting principles. DELOITTE & TOUCHE LLP Chartered Accountants Kitchener, Ontario May 21, 1996 F-4
424B3109th Page of 221TOC1stPreviousNextBottomJust 109th
OXFORD AUTOMOTIVE, INC. CONSOLIDATED BALANCE SHEETS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) -------------------------------------------------------------------------------- [Enlarge/Download Table] DECEMBER 31, MARCH 31, 1998 1998 1997 1996 ASSETS (UNAUDITED) Current assets Cash and cash equivalents $ 318 $ 18,321 $ 9,671 $ -- Trade receivables, net 86,336 65,273 47,626 8,338 Inventories 33,911 21,305 13,411 3,719 Refundable income taxes 1,601 1,641 Reimbursable tooling 40,237 13,315 4,968 3,298 Deferred income taxes 4,399 4,399 4,633 Unexpended bond proceeds 6 4,159 Prepaid expenses and other current assets 3,630 2,803 1,181 --------- --------- --------- --------- 1,354 TOTAL CURRENT ASSETS 168,837 131,176 83,304 16,536 Unexpended bond proceeds 3,937 Marketable securities 8,092 8,627 Other noncurrent assets 36,269 10,116 4,588 6,734 Deferred income taxes 7,918 6,405 5,087 6,139 Property, plant and equipment, net 191,446 163,708 146,778 19,791 --------- --------- --------- --------- TOTAL ASSETS $ 412,562 $ 320,032 $ 243,694 $ 49,200 ========= ========= ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY (NET CAPITAL DEFICIENCY) Current liabilities Trade accounts payable $ 54,428 $ 52,214 $ 31,421 $ 14,570 Employee compensation 10,918 4,808 4,986 1,883 Restructuring reserve 3,019 6,363 7,050 608 Accrued expenses and other current liabilities 10,000 12,242 9,040 3,299 Current portion of borrowings 3,411 10,965 24,274 11,258 --------- --------- --------- --------- TOTAL CURRENT LIABILITIES 81,766 86,592 76,771 31,618 Pension liability 5,470 4,727 3,631 1,080 Postretirement medical benefits liability 41,427 35,992 33,467 Deferred income taxes 13,962 15,332 10,442 Other noncurrent liabilities 3,870 2,596 2,187 67 Long-term borrowings -- less current portion 227,549 128,483 75,555 15,500 --------- --------- --------- --------- TOTAL LIABILITIES 374,054 273,722 202,053 48,265 --------- --------- --------- --------- Commitments and contingent liabilities (Note 15) Redeemable Series A $3.00 Cumulative Preferred Stock, $100 stated value -- 457,541 shares authorized, 397,539 shares issued and outstanding in 1998 and 457,541 shares issued and outstanding in 1997 (Notes 3 and 13) 40,586 40,192 36,012 --------- --------- --------- Redeemable Series B Preferred Stock, $100 stated value -- 49,938 shares authorized, no shares issued and outstanding in 1998 and 49,938 shares issued and outstanding in 1997 (Notes 3 and 13) 3,288 --------- --------- --------- SHAREHOLDERS' EQUITY (NET CAPITAL DEFICIENCY) Common stock, 400,000 shares authorized; 309,750 shares issued and outstanding at March 31, 1998 and 1997 and 75,000 shares issued and outstanding at March 31, 1996 1,050 1,050 1,050 750 Accumulated other comprehensive income (6,178) 318 (281) (230) Retained earnings 3,050 4,750 1,572 415 --------- --------- --------- --------- (2,078) 6,118 2,341 935 --------- --------- --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (NET CAPITAL DEFICIENCY) $ 412,562 $ 320,032 $ 243,694 $ 49,200 ========= ========= ========= ========= The accompanying notes are an integral part of the financial statements. F-5
424B3110th Page of 221TOC1stPreviousNextBottomJust 110th
OXFORD AUTOMOTIVE, INC. CONSOLIDATED STATEMENT OF OPERATIONS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) -------------------------------------------------------------------------------- [Enlarge/Download Table] COMPANY PREDECESSOR ------------------------------------------------------------------------- ----------------- NINE MONTHS NINE MONTHS PERIOD FROM PERIOD FROM ENDED ENDED YEAR ENDED YEAR ENDED OCTOBER 28, 1995 APRIL 1, 1995 DECEMBER 31, DECEMBER 31, MARCH 31, MARCH 31, THROUGH THROUGH 1998 1997 1998 1997 MARCH 31, 1996 OCTOBER 27, 1995 (UNAUDITED) (UNAUDITED) Net sales $ 408,144 $ 295,530 $ 410,321 $ 136,861 $ 35,572 $ 49,043 Cost of sales 372,612 267,180 368,420 125,375 31,624 46,895 --------- --------- --------- --------- --------- --------- GROSS PROFIT 35,532 28,350 41,901 11,486 3,948 2,148 Selling, general and administrative 22,235 13,587 21,839 7,685 2,235 3,922 Restructuring provision 1,176 1,610 --------- --------- Gain on sale of equipment (1,602) --------- --------- --------- --------- --------- OPERATING INCOME 12,121 14,763 20,054 3,801 1,713 (1,774) Other income (expense) Interest expense (14,255) (7,921) (10,710) (3,388) (1,096) (1,048) Other 949 531 321 2,201 --------- --------- --------- --------- --------- INCOME BEFORE BENEFIT (PROVISION) FOR INCOME TAXES (1,185) 7,373 9,665 2,614 617 (2,822) Benefit (provision) for income taxes 475 (2,949) (4,074) (1,065) 202 938 --------- --------- --------- --------- --------- --------- NET INCOME (710) 4,424 5,591 1,549 415 $ (1,884) ========= Accrued dividends and accretion on Redeemable preferred stock 990 1,002 1,334 300 --------- --------- --------- --------- --------- NET INCOME APPLICABLE TO COMMON STOCK $ (1,700) $ 3,422 $ 4,257 $ 1,249 $ 415 ========= ========= ========= ========= ========= NET INCOME PER SHARE (BASIC AND DILUTED) $ (5.49) $ 11.05 $ 13.74 $ 9.37 $ 9.10 ========= ========= ========= ========= ========= The accompanying notes are an integral part of the financial statements. F-6
424B3111th Page of 221TOC1stPreviousNextBottomJust 111th
OXFORD AUTOMOTIVE, INC. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (NET CAPITAL DEFICIENCY) AND COMPREHENSIVE INCOME (DOLLAR AMOUNTS IN THOUSANDS) -------------------------------------------------------------------------------- [Enlarge/Download Table]  PREDECESSOR ----------------------------------------------------------------------- FOREIGN NET EQUITY CURRENCY UNREALIZED GAIN ADJUSTMENT FOR COMMON TRANSLATION ON MARKETABLE MINIMUM PENSION STOCK ADJUSTMENT SECURITIES LIABILITY APRIL 1, 1995 $ 14,262 $ 40 $ -- $ -- Comprehensive Income Net loss Foreign currency translation adjustments 575 (155) Comprehensive Income Issuance of common stock, net of redemptions (40) -------- ------- ------- ------- OCTOBER 27, 1995 $ 14,797 $ (115) $ -- $ -- ======== ======= ======= ======= [Enlarge/Download Table]  PREDECESSOR ----------------------------------------------------------------------- SUBTOTAL ACCUMULATED RETAINED OTHER COMPREHENSIVE EARNINGS COMPREHENSIVE INCOME (DEFICIT) INCOME TOTAL APRIL 1, 1995 $ 40 $ (3,469) $ $ 10,833 Comprehensive Income Net loss (1,884) (1,884) (1,884) Foreign currency translation adjustments (155) (155) 420 --------- Comprehensive Income $ (2,039) ========= Issuance of common stock, net of redemptions (40) --- ---- ------ --------- --------- OCTOBER 27, 1995 $ (115) $ (5,353) $ 9,329 === ==== ====== ========= ========= F-7
424B3112th Page of 221TOC1stPreviousNextBottomJust 112th
OXFORD AUTOMOTIVE, INC. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (NET CAPITAL DEFICIENCY) AND COMPREHENSIVE INCOME (DOLLAR AMOUNTS IN THOUSANDS) (CONTINUED) -------------------------------------------------------------------------------- [Enlarge/Download Table]  COMPANY -------------------------------------------------------------------- FOREIGN NET EQUITY CURRENCY UNREALIZED GAIN ADJUSTMENT FOR COMMON TRANSLATION ON MARKETABLE MINIMUM PENSION STOCK ADJUSTMENT SECURITIES LIABILITY OCTOBER 28, 1995 $ 750 $ -- $ -- $ -- Comprehensive Income Net income Foreign currency translation adjustments 5 Equity adjustment for Minimum pension liability (235) Comprehensive Income ------- --------- ------- ------- MARCH 31, 1996 750 5 -- (235) Comprehensive Income Net income Foreign currency translation Adjustments (33) Equity adjustment for Minimum pension liability (18) Comprehensive Income Accrued dividends and Accretion of redeemable Preferred stock Issuance of common stock, net of redemptions 300 ------- --------- ------- ------- MARCH 31, 1997 1,050 (28) -- (253) Comprehensive Income Net income Foreign currency translation Adjustments (623) Unrealized gain on marketable securities 969 Equity adjustment for minimum pension liability 253 Comprehensive Income Excess of purchase price over Predecessor basis Accrued dividends and accretion on redeemable preferred stock ------- --------- ------- ------- MARCH 31, 1998 1,050 (651) 969 Comprehensive Income (unaudited) Net income (unaudited) Foreign currency translation adjustments (unaudited) (5,481) Unrealized loss on marketable securities (unaudited) (1,015) Comprehensive Income Accrued dividends and accretion of redeemable preferred stock (unaudited) ------- --------- ------- ------- DECEMBER 31, 1998 (unaudited) $ 1,050 $ (6,132) $ (46) $ -- ======= ========= ======= ======= F-8
424B3113th Page of 221TOC1stPreviousNextBottomJust 113th
OXFORD AUTOMOTIVE, INC. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (NET CAPITAL DEFICIENCY) AND COMPREHENSIVE INCOME (DOLLAR AMOUNTS IN THOUSANDS) (CONTINUED) -------------------------------------------------------------------------------- [Enlarge/Download Table]  COMPANY ----------------------------------------------------------------------- SUBTOTAL ACCUMULATED OTHER COMPREHENSIVE RETAINED COMPREHENSIVE INCOME EARNINGS INCOME TOTAL OCTOBER 28, 1995 $ -- $ -- $ -- $ 750 Comprehensive Income Net income 415 415 415 Foreign currency translation adjustments 5 5 5 Equity adjustment for Minimum pension liability (235) (235) (235) -------- Comprehensive Income 185 -------- ------- ======== -------- MARCH 31, 1996 (230) 415 935 Comprehensive Income Net income 1,549 1,549 1,549 Foreign currency translation Adjustments (33) (33) (33) Equity adjustment for Minimum pension liability (18) (18) (18) -------- Comprehensive Income 1,498 ======== Accrued dividends and Accretion of redeemable Preferred stock (300) (300) Issuance of common stock, net of redemptions (92) 208 -------- ------- -------- MARCH 31, 1997 (281) 1,572 2,341 Comprehensive Income Net income 5,591 5,591 5,591 Foreign currency translation Adjustments (623) (623) (623) Unrealized gain on marketable securities 969 969 969 Equity adjustment for minimum pension liability 253 253 253 -------- Comprehensive Income 6,190 ======= Excess of purchase price over Predecessor basis (1,079) (1,079) Accrued dividends and accretion on redeemable preferred stock (1,334) (1,334) -------- ------- -------- MARCH 31, 1998 318 4,750 6,118 Comprehensive Income (unaudited) Net income (unaudited) (710) (710) (710) Foreign currency translation adjustments (unaudited) (5,481) (5,481) (5,481) Unrealized loss on marketable securities (unaudited) (1,015) (1,015) (1,015) -------- Comprehensive Income (unaudited) $ (7,206) ======== Accrued dividends and accretion of redeemable preferred stock (unaudited) (990) (990) -------- ------- -------- DECEMBER 31, 1998 (unaudited) (6,178) $ 3,050 $ (2,078) ======== ======= ======== The accompanying notes are an integral part of the financial statements. F-9
424B3114th Page of 221TOC1stPreviousNextBottomJust 114th
OXFORD AUTOMOTIVE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLAR AMOUNTS IN THOUSANDS) -------------------------------------------------------------------------------- [Enlarge/Download Table] COMPANY PREDECESSOR ---------------------------------------------------------------------- ---------------- PERIOD FROM PERIOD FROM NINE MONTHS ENDED YEAR ENDED YEAR ENDED OCTOBER 28, 1995 APRIL 1, 1995 DECEMBER 31, MARCH 31, MARCH 31, THROUGH THROUGH 1998 1997 1998 1997 MARCH 31, 1996 OCTOBER 27, 1995 OPERATING ACTIVITIES Net income (loss) $ (710) $ 4,424 $ 5,591 $ 1,549 $ 415 $ (1,884) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities Depreciation and amortization 19,552 14,580 20,279 5,041 687 919 Deferred income taxes (2,968) (3,759) 137 2,136 230 (1,036) Gain on sale of equipment 52 (1,586) (195) (2) Changes in operating assets and liabilities affecting cash Trade receivables (11,162) 9,435 (4,615) (8,953) 6,617 (3,311) Inventories (1,853) 2,832 1,496 (299) (277) (259) Reimbursable tooling (27,237) (909) (7,368) (1,601) 1,824 (760) Prepaid expenses and other assets 3,396 (2,334) 569 129 1,592 (1,768) Other noncurrent assets (836) 3,544 Trade accounts payable (3,772) (7,948) 11,416 (605) (6,501) 6,417 Employee compensation 169 (6,072) 309 (493) Restructuring reserve (3,272) (1,392) (745) (398) Accrued expenses and other liabilities 1,448 (1,143) (3,166) (1,885) (1,716) 3,504 Income taxes payable/refundable 2,914 (199) Other noncurrent liabilities (4,589) 1,405 1,731 (39) --------- -------- -------- --------- --------- --------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (31,167) 15,243 25,986 (7,847) 3,178 1,329 --------- --------- --------- --------- --------- --------- INVESTING ACTIVITIES Purchase of businesses, net of cash acquired (53,886) (24,145) (24,219) (9,309) (1,983) Purchase of property, plant and equipment (20,369) (11,418) (16,723) (3,326) (3,466) (5,111) Proceeds from sale of equipment 1,050 5,433 341 33 11 Purchases of marketable securities (892) (7,658) --------- -------- -------- --------- --------- --------- NET CASH USED IN INVESTING ACTIVITIES (75,147) (34,513) (43,167) (12,294) (5,416) (5,100) --------- --------- --------- --------- --------- --------- FINANCING ACTIVITIES Issuance of share capital 300 750 Proceeds from borrowing arrangements 92,085 124,814 126,653 78,823 23,814 921 Principal payments on borrowing arrangements (92,245) (93,782) (49,186) (16,482) (7,477) Payment of preferred stock dividends (596) (597) (1,193) Debt financing costs (2,621) (5,372) Redemption and retirement of common stock (92) (40) Obligation under capital lease - net (6) (3) --------- --------- --------- --------- --------- --------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 88,868 31,972 26,306 29,845 8,076 (6,599) --------- --------- --------- --------- --------- --------- Effect of exchange rate changes on cash (557) (2,818) (475) (33) --------- --------- --------- --------- --------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (18,003) 9,884 8,650 9,671 5,838 (10,370) Cash and cash equivalents at beginning of Period 18,321 9,671 9,671 (11,238) (868) --------- --------- --------- --------- --------- --------- Cash and cash equivalents at end of period $ 318 $ 19,555 $ 18,321 $ 9,671 $ (5,400) $ (11,238) ========= ========= ========= ========= ========= ========= Cash paid for interest $ 18,269 $ 7,033 $ 7,338 $ 3,033 $ 1,096 $ 1,048 ========= ========= ========= ========= ========= ========= Cash paid for income taxes $ 2,527 $ 4,190 $ 4,670 $ -- $ 42 $ 79 ========= ========= ========= ========= ========= ========= The accompanying notes are an integral part of the financial statements. F-10
424B3115th Page of 221TOC1stPreviousNextBottomJust 115th
OXFORD AUTOMOTIVE, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) -------------------------------------------------------------------------------- 1. NATURE OF OPERATIONS Oxford Automotive, Inc. (the Company) is a full-service supplier of metal stampings and welded assemblies used as original equipment components primarily by North American original equipment automotive manufacturers. The Company's products are used in a wide variety of sport utility vehicles, light and medium trucks, vans and passenger cars. The Company primarily operates from thirteen plants located in the United States, Canada and Mexico. The Company's hourly workforce is represented by various unions. Net sales to the Company's three primary customers as a percentage of total sales are as follows: [Download Table] PERIOD FROM OCTOBER 28, 1995 YEAR ENDED YEAR ENDED THROUGH MARCH 31, 1998 MARCH 31, 1997 MARCH 31, 1996 General Motors Corporation 54% 62% 67% Ford Motor Company 31% 17% -- Chrysler Corporation 9% -- -- Accounts receivable from General Motors Corporation, Ford Motor Company and Chrysler Corporation represent approximately 39%, 39% and 13%, respectively, of the March 31, 1998 accounts receivable balance. Although the Company is directly affected by the economic well being of the automotive industry and customers referred to above, management does not believe significant credit risk exists at March 31, 1998. The Company does not require collateral to reduce such risk and historically has not experienced significant losses related to receivables from individual customers or groups of customers in the automotive industry. 2. SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The financial statements for the period from April 1, 1995 through October 27, 1995 are those of BMG North America Limited (the Predecessor), which was acquired by Oxford Automotive, Inc. (formerly BMG-MI, Inc.) on October 28, 1995. The consolidated financial statements as of March 31, 1998 and 1997 and for the years then ended and for the period from October 28, 1995 through March 31, 1996 are those of the Company and its subsidiaries. The financial statements of the Company and the Predecessor are not comparable in certain respects due to differences between the cost bases of certain assets held by the Company versus that of the Predecessor, resulting in reduced depreciation and amortization charges subsequent to October 27, 1995, changes in accounting policies and the recording of certain liabilities at the date of acquisition in connection with the purchase of the Predecessor by the Company, as well as the Company's acquisitions subsequent to October 28, 1995 discussed further in Note 3. PRINCIPLES OF CONSOLIDATION The consolidated financial statements of the Company include the accounts of Oxford Automotive, Inc. and its wholly-owned subsidiaries, BMG Holdings, Inc. (BMGH), Howell Industries, Inc. (Howell), Lobdell Emery Corporation (Lobdell), RPI Holdings, Inc. (RPIH) and Oxford Automotriz de Mexico S.A. de C.V. (Oxford Mexico). Intercompany accounts and transactions have been eliminated. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. F-11
424B3116th Page of 221TOC1stPreviousNextBottomJust 116th
OXFORD AUTOMOTIVE, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) -------------------------------------------------------------------------------- 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) REVENUE RECOGNITION Revenue is recognized by the Company upon shipment of product to the customer. FINANCIAL INSTRUMENTS At March 31, 1998 and 1997, the carrying amount of financial instruments such as cash and cash equivalents, trade receivables and payables and unexpended bond proceeds, approximated their fair values. The carrying amount of the long-term customer receivables and borrowings at March 31, 1998 and 1997, approximated their fair values based on the variable interest rates available to the Company for similar arrangements. CASH EQUIVALENTS The Company considers all highly-liquid investments with maturity of three months or less when purchased to be cash equivalents. INVENTORIES Inventories are stated at the lower of cost or market. Cost is principally determined by the last-in, first-out (LIFO) method for the Company's United States operations and by the first-in first-out (FIFO) method for the Company's Canadian operations. REIMBURSABLE TOOLING Reimbursable tooling represents net costs incurred on tooling projects for which the Company expects to be reimbursed by customers. Ongoing estimates of total costs to be incurred on each tooling project are made by management. Losses, if any, are recorded when known and in cases where billings exceed costs incurred, the related tooling gain is recognized upon acceptance of the tooling by the customer. Certain of the Company's tooling costs are financed through lending institutions and are reimbursed by customers on a piece price basis. These tooling assets are classified as either accounts receivable ($2,676, $3,695, and $1,809 at March 31, 1998, 1997, and 1996 respectively), other noncurrent assets (none, $3,800 and $6,734 at March 31, 1998, 1997, and 1996 respectively) or equipment depending upon the ultimate title holder of the tooling assets. UNEXPENDED BOND PROCEEDS Unexpended bond proceeds in the accompanying consolidated balance sheet represent unexpended proceeds from the issuance of industrial development revenue bonds by Creative Fabrication Corporation (Creative), a wholly-owned subsidiary of Lobdell, as discussed in Note 8, and are invested in allowable money market accounts and commercial paper with a maturity of 90 days or less. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated on the basis of cost and include expenditures for improvements which materially increase the useful lives of existing assets. Expenditures for normal repair and maintenance are charged to operations as incurred. For federal income tax purposes, depreciation is computed using accelerated and straight-line methods. For financial reporting purposes, depreciation is computed principally using the straight-line method over the following estimated useful lives: [Download Table] YEARS Land improvements 15 Buildings and improvements 30-40 Machinery and equipment 3-20 F-12
424B3117th Page of 221TOC1stPreviousNextBottomJust 117th
OXFORD AUTOMOTIVE, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) -------------------------------------------------------------------------------- 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) IMPAIRMENT OF LONG-LIVED ASSETS The Company accounts for long-lived assets in accordance with Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". This Statement requires that long-lived assets and certain identifiable intangibles to be held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. The Company recognizes impairment losses for assets or groups of assets where the sum of the estimated future cash flows (undiscounted and without interest charges) is less than the carrying amount of the related asset or group of assets. The amount of the impairment loss recognized is the excess of the carrying amount over the fair value of the asset or group of assets being measured. MARKETABLE SECURITIES Marketable securities at March 31, 1998, mainly composed of equity securities, are classified as available-for-sale securities and are reported at fair value using quoted market prices. Unrealized holding gains and losses are included as a separate component of shareholders' equity until realized. ENVIRONMENTAL COMPLIANCE AND REMEDIATION Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations which do not contribute to current or future revenue generation are expensed. Liabilities are recorded when environmental assessments and/or remedial efforts are probable and the costs can be reasonably estimated. Estimated costs are based upon enacted laws and regulations, existing technology and the most probable method of remediation. The costs determined are not discounted and exclude the effects of inflation and other social and economic factors. INCOME TAXES Deferred taxes are provided to give recognition to the effect of expected future tax consequences of temporary differences between the carrying amounts for financial reporting purposes and the tax bases for income tax purposes of assets and liabilities. FOREIGN EXCHANGE CONTRACTS Gains and losses of foreign currency firm commitment hedges are deferred and included in the basis of the transactions underlying the commitments. During fiscal 1997, the Company recognized a gain of approximately $2,000 related to certain foreign currency exchange transactions terminated during the year. The gain is included as a component of other income in the accompanying March 31, 1997 statement of operations. Had the foreign currency exchange transactions not been terminated, the recognized gain would normally have been recorded as a component of sales. FOREIGN CURRENCY TRANSLATION The foreign currency financial statements of BMGH and Oxford Mexico, where the local currency is the functional currency, are translated using exchange rates in effect at period end for assets and liabilities and at weighted average exchange rates during the period for operating statement accounts. The resulting foreign currency translation adjustments are recorded as a separate component of shareholders' equity. Exchange gains and losses resulting from foreign currency transactions are included in operating results during the period in which they occur. PER SHARE AMOUNTS The per share amounts of the Predecessor have not been presented as the Company's capital structure is not comparable to that of the Predecessor. RECLASSIFICATIONS Certain amounts from the prior year have been reclassified to conform with the current year presentation. F-13
424B3118th Page of 221TOC1stPreviousNextBottomJust 118th
OXFORD AUTOMOTIVE, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) -------------------------------------------------------------------------------- 3. ACQUISITIONS On October 28, 1995, the Company acquired all of the outstanding common stock of BMG North America Limited (BMGNA). The acquisition was financed through a $750 Series A promissory note. The acquisition has been recorded in accordance with the purchase method of accounting. Accordingly, the purchase price plus direct cost of the acquisition have been allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. On January 10, 1997, pursuant to an Agreement and Plan of Merger among Lobdell Emery Corporation, certain shareholders of Lobdell Emery Corporation, BMG-MI, Inc. and L-E Acquisition, Inc. as amended (the Agreement), certain Lobdell Emery Corporation shareholders and option holders had their respective shares and options redeemed for cash of approximately $8,500 and all outstanding shares of common stock of Lobdell Emery Corporation (Oldco) were exchanged for shares of preferred stock of Oldco with a face value of approximately $40,700. In addition, approximately $3,500 of expenses incurred by Oldco were reimbursed by L-E Acquisition, Inc. In connection with the exchange of Oldco's common stock for preferred stock, L-E Acquisition, Inc. was merged with and into Lobdell Emery Corporation (Newco). The acquisition was financed through the issuance of preferred stock described in Note 13 and a term loan, which was subsequently refinanced, as described in Note 8. The acquisition has been recorded in accordance with the purchase method of accounting. Accordingly, the purchase price plus direct cost of the acquisition have been allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The fair market value of assets acquired and liabilities assumed, after giving effect to the settlement described in Note 13, is summarized as follows: [Download Table] Current assets $ 56,993 Property, plant and equipment 129,966 Noncurrent assets 9,953 Current liabilities (50,028) Long-term liabilities (107,130) ---------- Fair value of preferred stock $ 39,754 ========== In accordance with the purchase method of accounting, Lobdell's operating results have been included with those of the Company since the date of acquisition. On August 13, 1997, the Company acquired all of the outstanding common stock of Howell for approximately $23,700 in cash, including acquisition costs. The acquisition was financed through the proceeds of the subordinated notes described in Note 8. The acquisition has been recorded in accordance with the purchase method of accounting. Accordingly, the purchase price plus direct cost of the acquisition have been allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The fair market value of assets acquired and liabilities assumed is summarized as follows: [Download Table] Current assets $ 22,900 Property, plant and equipment 18,100 Current liabilities (14,100) Long-term liabilities (3,200) ----------- $ 23,700 =========== On November 25, 1997, Oxford purchased all of the outstanding common stock of RPIH for $2,500 in cash. The acquisition was financed through the proceeds of the subordinated notes described in Note 8. The acquisition has been recorded in accordance with the purchase method of accounting. Accordingly, the purchase price has been allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The majority shareholder of Oxford was also the majority shareholder of RPIH. F-14
424B3119th Page of 221TOC1stPreviousNextBottomJust 119th
OXFORD AUTOMOTIVE, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) -------------------------------------------------------------------------------- 3. ACQUISITIONS (CONTINUED) The fair market value of assets acquired and liabilities assumed is summarized as follows: [Download Table] Current assets $ 3,900 Property, plant and equipment 5,000 Noncurrent assets 1,600 Current liabilities (5,400) Long-term liabilities (3,700) Excess of purchase price over predecessor basis 1,100 $ 2,500 The excess of purchase price over predecessor basis is a result of the common ownership by the majority shareholder of Oxford and represents the portion of the fair value of the net assets acquired in excess of their book value, multiplied by the majority shareholder's ownership percentage in RPIH. The Company has recorded this amount as a deduction from retained earnings in the accompanying statement of changes in shareholders' equity. The following unaudited pro forma combined results of operations of the Company have been prepared as if the acquisitions of Lobdell, Howell and RPIH had occurred at the beginning of fiscal 1998 and 1997. [Download Table] YEAR ENDED MARCH 31, 1998 MARCH 31, 1997 Net sales $ 453,685 $ 433,443 Net income $ 4,692 $ 2,364 Net income applicable to common shares $ 3,358 $ 1,052 Net income per common share $ 10.84 $ 3.40 The pro forma information is not intended to be a projection of future results. The foregoing unaudited pro forma results of operations reflect adjustments for additional interest expense related to the financing of the acquisitions and the additional depreciation expense, as a result of the write-up of property, plant and equipment, net of the related tax benefit. 4. ACCOUNTS RECEIVABLE Accounts receivable are comprised of the following at March 31: [Download Table] 1998 1997 1998 Trade receivables $ 65,673 $ 48,898 $ 8,377 Less - allowance for doubtful accounts (400) (1,272) (39) --------- -------- ------- Trade receivables, net $ 65,273 $ 47,626 $ 8,338 ========= ======== ======= 5. INVENTORIES Inventories are comprised of the following at March 31: [Download Table] 1998 1997 1996 Raw materials $ 6,737 $ 5,688 $ 1,557 Finished goods and work-in-process 15,135 7,994 2,162 ---------- --------- ------- 21,872 13,682 3,719 LIFO and other reserves (567) (271) ---------- --------- ------- $ 21,305 $ 13,411 $ 3,719 ========== ========= ======= The Company does not separately identify finished goods from work-in-process. F-15
424B3120th Page of 221TOC1stPreviousNextBottomJust 120th
OXFORD AUTOMOTIVE, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) -------------------------------------------------------------------------------- 6. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are comprised of the following at March 31: [Download Table] 1998 1997 1996 Land and land improvements $ 5,432 $ 5,073 $ 779 Buildings and improvements 29,126 24,697 3,171 Machinery and equipment 140,095 117,535 7,394 Construction-in-process 12,204 4,393 8,914 --------- --------- -------- 186,857 151,698 20,258 Less - accumulated depreciation (23,149) (4,920) (467) --------- --------- -------- $ 163,708 $ 146,778 $ 19,791 ========= ========= ======== Certain machinery and equipment with a net book value of $9,900 was idle at March 31, 1998. Management intends to redeploy these assets amongst its operating facilities and does not believe that the net book value of these assets is impaired at March 31, 1998. In addition, in connection with the restructuring activities described in Note 10, management expects that additional assets, mainly land and buildings with a net book value of $7,300 at March 31, 1998, will be idled next year. In March 1998, the Company sold assets acquired in connection with the acquisition of Lobdell and recorded a gain on the sale of these assets of $1,602. As discussed in Note 10, certain of the Company's facilities were closed during the year ended March 31, 1998. As management intends to sell these facilities, the net book value of the land and buildings, approximating $1,815, is classified in prepaid expenses and other current assets as of March 31, 1998 in the accompanying consolidated balance sheet. 7. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued expenses and other current liabilities are comprised of the following at March 31: [Download Table] 1998 1997 1996 Accrued interest $ 3,627 $ 103 $ -- Accrued workers' compensation 3,287 3,071 544 Accrued property taxes 1,454 2,350 Accrued medical benefits 1,040 1,827 Foreign exchange gain 1,975 Other 2,834 1,689 780 -------- ------- ------- $ 12,242 $ 9,040 $ 3,299 ======== ======= ======= F-16
424B3121st Page of 221TOC1stPreviousNextBottomJust 121st
OXFORD AUTOMOTIVE, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) -------------------------------------------------------------------------------- 8. BORROWING ARRANGEMENTS Borrowings consist of the following at March 31: [Enlarge/Download Table] 1998 1997 1996 SERIES A 10.125% SENIOR SUBORDINATED NOTES DUE 2007, OXFORD $ 124,827 $ -- $ -- INDUSTRIAL DEVELOPMENT REVENUE BONDS, CREATIVE $8,500 issued September 27, 1995, floating rate interest (3.85% at March 31, 1998). Quarterly principal payments based on graduated maturity schedule. Backed by NBD Bank letter of credit 7,600 8,300 EDC TOOLING LOAN, BMGNA Interest at a fixed rate of 7.36%. Payments based on parts shipped, matures September 30, 1999 2,967 5,110 BANK SYNDICATE--REVOLVING CREDIT LINE, OXFORD Interest at prime rate (8.5% at March 31, 1998), matures June 24, 2003 1,825 BANK--TERM LOAN, LOBDELL Interest at .625% over 90-day LIBOR (6.435% at March 31, 1998). Quarterly principal payments of approximately $400, matures October 1, 1998 1,233 2,833 IRDP LOAN, BMGNA Interest at 6%. Monthly principal payments of $7 to October 31, 2000 and $11 thereafter, matures September 1, 2002 396 467 534 BANK SYNDICATE--TERM LOAN, LOBDELL Interest at variable spread over prime. Quarterly principal payments ranging from $1,250-$2,750 plus interest, repaid in full during 52,750 fiscal 1998 BANK SYNDICATE--REVOLVING CREDIT LINE, LOBDELL Interest at variable spread over prime, repaid in full during fiscal 1998 1,250 BANK SYNDICATE--TERM LOAN, BMGNA Interest at prime rate plus 1.25%. Quarterly payments of $755 plus interest, repaid in full during fiscal 1998 14,447 REVOLVING CREDIT LINE, BMGNA Interest at prime rate plus 1.25%, repaid in full during fiscal 1998 10,376 NATIONS BANK -- SATURN TOOLING, BMGNA Interest at a variable spread over prime (8.71% at March 31, 1997). Payments based on parts shipped, repaid in full during fiscal 1998 1,380 7,047 CCFL LOAN, BMGNA Interest at 11.11%. Monthly principal payments of $21, repaid in full during fiscal 1998 2,475 2,768 TERM LOAN, BMGNA Interest at Canadian Index Rate plus 3% or Canadian Banker's Acceptance Rate plue 3.95%. Quarterly principal payments based on graduated schedule, repaid in full during fiscal 1997 7,765 REVOLVING CREDIT LINE, BMGNA Interest at Canadian Banker's Acceptance Rate plue 3.7%, repaid in full during fiscal 1997 2,803 BANK LOAN, BMGNA Interest at either the Canadian Index Rate plue 2.5% or BA rate plus 3.45%, repaid in full during fiscal 1997 2,650 TOOLING LINE, BMGNA Interest at the Canadian Index Rate plue 3% or the Canadian Banker's Acceptance Rate plus 3.95%, repaid in full during fiscal 1997 2,750 F-17
424B3122nd Page of 221TOC1stPreviousNextBottomJust 122nd
OXFORD AUTOMOTIVE, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) -------------------------------------------------------------------------------- [Download Table] 1998 1997 1996 SERIES A PROMISSORY NOTE, BMGH Interest at 7%, repaid in full during fiscal 1998 441 441 OTHER 600 --------- -------- -------- Total 139,448 99,829 26,758 Less - current portion of long-term borrowings (10,965) (24,274) (11,258) --------- -------- -------- Long-term borrowings-- less current portion $ 128,483 $ 75,555 $ 15,500 ========= ======== ======== On June 24, 1997, the Company issued $125,000 of Series A 10.125% Senior Subordinated Notes Due 2007 (the Notes). The Notes mature on June 15, 2007 and require semi-annual interest payments of approximately $6,300. The proceeds from the Notes were primarily used to repay certain of the Company's indebtedness and finance the Company's acquisitions of Howell and RPIH described in Note 3, as well as the acquisition of the assets of the Suspension Division of Eaton Corporation described in Note 17. The Notes are unsecured and are guaranteed by Oxford and certain of its wholly-owned subsidiaries. See Note 18. On April 1, 1997, the Company issued $35,000 of Series B 10.125% Senior Subordinated Notes Due 2007 as discussed in Note 17. Concurrent with the issuance of the Notes, the Company entered into a credit agreement with a syndicate of banks (the Oxford Credit Agreement), under which the Company may borrow up to $110,000, of which a maximum of $15,000 is available for letters of credit. At March 31, 1998, $1,825 was outstanding under the revolving line of credit and $9,437 was outstanding under letters of credit, leaving $98,738 unused and available. The terms of the Oxford Credit Agreement contain, amount other provisions, requirements for maintaining defined levels of tangible net worth, total debt to cash flows, interest coverage and fixed charge coverage. The Oxford Credit Agreement also contains certain restrictions on the payment of dividends. Quarterly commitment fees on the unused amounts of the revolving credit line range from .25% to .50% of the unused portion. Borrowings are secured by substantially all of the assets of Oxford. The proceeds of the industrial development revenue bonds were used to finance the real and personal property of Creative. These bonds are backed by an NBD letter of credit, which carries a rate of 1.50% and is collateralized by substantially all assets of Creative. The letter of credit reimbursement agreement includes covenants requiring minimum tangible capital, debt service coverage and limitations on other indebtedness. The Bank--term loan, Lobdell and EDC tooling loan, BMGNA are used to finance customer tooling. These loans are collateralized by either a customer purchase order or the tooling assets. Aggregate maturities of long-term borrowings at March 31, 1998 are as follows [Download Table] 1999 $ 10,965 2000 2,032 2001 1,048 2002 93 2003 93 Thereafter 125,217 --------- $ 139,448 ========= F-18
424B3123rd Page of 221TOC1stPreviousNextBottomJust 123rd
OXFORD AUTOMOTIVE, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) -------------------------------------------------------------------------------- 9. INCOME TAXES The Company's income tax provision (benefit) consists of the following: [Enlarge/Download Table] COMPANY PREDECESSOR ---------------------------------------------------------- ------------------- PERIOD FROM PERIOD FROM OCTOBER 28, 1995 APRIL 1, 1995 YEAR ENDED YEAR ENDED THROUGH THROUGH MARCH 31, 1998 MARCH 31, 1997 MARCH 31, 1996 OCTOBER 27, 1995 Current Federal $ 3,116 $ (821) $ -- $ -- State 1,098 (124) Foreign 34 46 ------- ------- ------- ------- 4,214 (945) 34 46 ------- ------- ------- ------- Deferred Federal 2,300 899 State (608) 137 Foreign (1,832) 974 168 (984) ------- ------- ------- ------- (140) 2,010 168 (984) ------- ------- ------- ------- $ 4,074 $ 1,065 $ 202 $ (938) ======= ======= ======= ======= The difference between the statutory rate and the Company's effective rate was as follows: [Enlarge/Download Table] COMPANY PREDECESSOR -------------------------------------------------- ---------------- PERIOD FROM PERIOD FROM OCTOBER 28, 1995 APRIL 1, 1995 YEAR ENDED YEAR ENDED THROUGH THROUGH MARCH 31, 1998 MARCH 31, 1997 MARCH 31, 1996 OCTOBER 27, 1995 Statutory rate 35.0% 34.0% 36.0% 36.0% Foreign rates varying from 34% (0.5) 1.8 Large corporation tax (2.8) (1.6) State taxes, net of federal benefit 3.3 0.3 Nondeductible items 1.9 4.1 (0.5) (1.2) Other 2.5 0.5 ---- ---- Effective income tax rate 42.2% 40.7% 32.7% 33.2% ==== ==== ==== ==== F-19
424B3124th Page of 221TOC1stPreviousNextBottomJust 124th
OXFORD AUTOMOTIVE, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) -------------------------------------------------------------------------------- 9. INCOME TAXES (CONTINUED) Significant components of the Company's deferred tax assets and (liabilities) are as follows at March 31: [Download Table] 1998 1997 1996 Deferred tax liabilities Tax depreciation in excess of book $ (30,930) $ (30,065) $ -- Inventory reserve (1,581) (1,292) Other (170) --------- --------- --------- Gross deferred tax liabilities (32,681) (31,357) --------- --------- --------- Deferred tax assets Postretirement medical benefits 14,397 13,387 Impairment reserve 22 1,200 Workers' compensation 1,345 1,089 Medical benefits accrual 473 702 Allowance for bad debts 97 502 AMT credit carry forward 3,000 Pension benefits 2,514 1,606 498 Net operating loss carry forwards 2,381 2,905 3,066 Book depreciation in excess of tax 989 Restructuring reserve 3,698 3,927 311 Foreign exchange 127 46 696 Other 3,299 2,471 579 --------- --------- --------- Gross deferred tax assets 28,353 30,835 6,139 --------- --------- --------- Valuation allowance (200) (200) --------- --------- --------- Net deferred tax asset (liability) $ (4,528) $ (722) $ 6,139 ========= ========= ========= A valuation allowance is provided on the tax benefits otherwise associated with certain tax attributes unless it is considered more likely than not that the benefit will be realized. The Company has net operating loss carry forwards for federal income tax purposes with potential future tax benefits of approximately $2,147 at March 31, 1998. The federal net operating losses expire during 2011. The Company has net operating loss carry forwards for Canadian income tax purposes with potential future tax benefits of approximately $2,950 at March 31, 1998. The Canadian net operating losses expire during 2004 and 2005. In addition, the Company has net operating loss carry forwards for Mexican income tax purposes with potential future tax benefits of approximately $1,695 at March 31, 1998. The Mexican net operating losses expire in seven to ten years. The Company has net operating loss carry forwards with a potential future tax benefit of approximately $202 for state income tax purposes and Tennessee Jobs Tax Credit carry forwards of approximately $200 at March 31, 1998, both of which expire during 2010 and 2011. 10. RESTRUCTURING RESERVES In connection with the acquisition of Lobdell described in Note 3, management began to formulate and assess a plan to exit certain activities of Lobdell and, accordingly, established certain restructuring reserves aggregating $7,050 in Lobdell's opening balance sheet. Management's restructuring plan included the sale of certain subsidiaries, closure of a Lobdell owned manufacturing facility and sale of the current Lobdell owned corporate offices. Included in the restructuring reserves at March 31, 1997 were costs for severance and benefits for employees to be relocated and terminated ($5,052) and other restructuring related costs ($1,998). During the year ended March 31, 1998, total payments to employees that were terminated were $1,979. As a result of management's plans, approximately 375 employees were terminated. F-20
424B3125th Page of 221TOC1stPreviousNextBottomJust 125th
OXFORD AUTOMOTIVE, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) -------------------------------------------------------------------------------- 10. RESTRUCTURING RESERVES (CONTINUED) In connection with management's plans to reduce costs and improve operating efficiencies at other facilities, the Company recorded a provision for restructuring of $1,610 during the year ended March 31, 1998 and established restructuring reserves aggregating $1,339 in Howell's opening balance sheet. A summary of the restructuring activity is presented below. There was no activity during the period from January 10, 1997 to March 31, 1997. [Download Table] Balance at March 31, 1997 $ 7,050 1998 provision 1,610 1998 activity: Restructuring accrual associated with the acquisition of Howell 1,339 Reduction in workforce and other cash outflows (2,355) Reversal of excess accruals to noncurrent assets (1,281) -------- Balance at March 31, 1998 $ 6,363 ======== The provision for restructuring recorded during the year ended March 31, 1998 represents costs associated with management's plans to close three Company facilities. Management expects that, as a result of these closures, approximately 160 employees will be permanently separated. Severance costs for these employees will be recorded in 1999. Costs recorded in 1998 primarily relate to fixed assets. The restructuring reserve established in Howell's opening balance sheet represents management's best estimate of the costs to be incurred in connection with the closure of a leased Howell facility. As a result of this closure, no employees are expected to be terminated. Management continues to assess the future manufacturing capacity of Howell and expects to complete its assessment and finalization of the restructuring plan within one year of the acquisition date of Howell. The reversal of excess accruals recorded during the year ended March 31, 1998 is due to management's finalization of its restructuring plans for Lobdell. No future requirement for this accrual exists. These reversals were recorded as a reduction of noncurrent assets. In connection with the Company's restructuring activities related to Lobdell, certain employees of Lobdell were terminated. The termination of certain of these employees resulted in a postretirement medical benefit curtailment gain of $957 which, in accordance with the purchase method of accounting, was treated as a reduction in liabilities assumed at the acquisition date. Accordingly, no postemployment medical benefit curtailment gain has been recognized in the Company's statement of operations for the year ended March 31, 1997. 11. BENEFIT PLANS The Company sponsors twelve noncontributory plans covering substantially all employees meeting the age and length of service requirements as specified in the plans. The plan covering salaried employees provides pension benefits that are based on a percentage of the employee's average monthly compensation during the five highest consecutive years out of their last ten years, and their years of credited service up to a maximum of 30 years. The hourly plans do not provide for increases in future compensation levels. The Company's funding policy for the plan covering salaried employees is to make contributions in amounts sufficient to annually fund the plan's current service cost and the initial past service cost, plus interest, over a period of 30 years. Plans covering hourly employees generally provide benefits of stated amounts based on their unique labor agreements for each year of service. The Company's funding policy for these plans is to make at least the minimum annual contributions required by applicable regulations. F-21
424B3126th Page of 221TOC1stPreviousNextBottomJust 126th
OXFORD AUTOMOTIVE, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) -------------------------------------------------------------------------------- 11. BENEFIT PLANS (CONTINUED) The following table sets forth the plans' funded status and amounts recognized on the Company's balance sheets at March 31: [Enlarge/Download Table] OVERFUNDED PLANS UNDERFUNDED PLANS ---------------- ----------------- 1998 1997 1996 1998 1997 1996 Actuarial present value of benefit obligation Vested benefits $ 20,132 $ 17,573 $ 2,376 $ 43,620 $ 34,106 $ 11,539 Nonvested benefits 659 1,170 74 2,602 1,853 356 -------- -------- -------- -------- -------- -------- 20,791 18,743 2,450 46,222 35,959 11,895 Effect of projected future compensation levels 2,329 4,060 1,285 3,187 -------- -------- -------- -------- -------- -------- Projected benefit obligation for service rendered 23,120 22,803 3,735 49,409 35,959 11,895 Plan assets at fair value (primarily U.S. government securities, bonds and notes and mutual funds) (23,740) (22,854) (4,155) (47,484) (32,280) (10,525) -------- -------- -------- -------- -------- -------- Plan assets less (greater) than projected benefit obligation (620) (51) (420) 1,925 3,679 1,370 Unrecognized net loss, including asset gains/losses not yet reflected in market values (1,663) 10 2,723 (21) Unrecognized prior service cost 44 (20) Unrecognized net obligation being recognized over 15-20 years 15 Experience gains (losses) (61) 125 (392) (363) Adjustment required to recognize minimum liability 35 472 368 -------- -------- -------- -------- -------- -------- (Prepaid) accrued pension cost $ (2,283) $ (87) $ (295) $ 4,727 $ 3,718 $ 1,375 ======== ======== ======== ======== ======== ======== The minimum pension liability in excess of the allowable intangible asset has been recorded as a separate component of equity, net of tax. Net periodic pension cost for each year and the actuarial assumptions used in determining the projected benefit obligation were as follows: [Enlarge/Download Table] COMPANY PRECEDESSOR ------------------------------------------------ ---------------- PERIOD FROM PERIOD FROM YEAR ENDED YEAR ENDED OCTOBER 28, 1995 APRIL 1, 1995 MARCH 31, MARCH 31, THROUGH THROUGH 1998 1997 MARCH 31, 1996 OCTOBER 27, 1995 Service cost $ 2,143 $ 1,074 $ 266 $ 344 Interest cost 4,808 2,127 530 697 Actual return on assets (12,528) (2,138) (425) (533) Net amortization and deferral 7,505 15 60 ---------- ---------- ------ ------ Net periodic pension cost $ 1,928 $ 1,078 $ 371 $ 568 ========== ========== ====== ====== Discount rate U.S. plans 7.25% 7.75% Canadian plans 6.50% 8.00% 8.50% 8.75% Expected return on assets U.S. plans 8.50-9.00% 9.00% Canadian plans 8.50% 8.50% 8.50% 7.50% Salary progression U.S. plans 4.50% 4.50% Canadian plans 5.50% 5.50% 5.50% 5.50% F-22
424B3127th Page of 221TOC1stPreviousNextBottomJust 127th
OXFORD AUTOMOTIVE, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) -------------------------------------------------------------------------------- 11. BENEFIT PLANS (CONTINUED) The Company sponsors seven defined contribution 401(k) plans. The Company generally contributes 25% of the first 6% of the base compensation that a participant contributes to the plans. 12. POSTRETIREMENT MEDICAL BENEFITS In addition to the Company's defined benefit pension plans, Lobdell sponsors unfunded defined benefit medical plans that provide postretirement medical benefits to certain full-time employees meeting the age, length of service and contractual requirements as specified in the plans. The plan covering salaried employees is a contributory plan providing medical benefits to those hired before July 1, 1993. The percentage of cost paid by the retiree currently ranges from 10% for 30 or more years of service at retirement to 55% for 15 years of service at retirement, with Company contributions commencing upon attainment of age 62. Those retiring with less than 15 years of service and those hired after June 30, 1993 may participate in the plan at their own cost. The plan is currently noncontributory for those employees who retired prior to July 1, 1993. The plans covering hourly employees provide medical benefit plan options that are similar to those offered to active hourly employees, with Lobdell contributions limited either to that available under traditional coverage for Alma hourly retirees or to 87% of the total applicable premium for Greencastle retirees. The following table presents the plan's funded status reconciled with amounts recognized in the Company's balance sheet at March 31. [Download Table] 1998 1997 Accumulated postretirement benefit obligation Retirees $ 16,332 $ 14,479 Full eligible active plan participants 6,195 4,287 Other active plan participants 18,134 13,510 -------- -------- Total unfunded obligation 40,661 32,276 Unrecognized gain (loss) (4,669) 1,191 -------- -------- Postretirement medical benefits liability $ 35,992 $ 33,467 ======== ======== Net periodic postretirement benefit cost included the following components: [Enlarge/Download Table] FOR THE PERIOD FROM FOR THE YEAR JANUARY 10, 1997 ENDED THROUGH MARCH 31, 1998 MARCH 31, 1997 Service cost--benefits earned during the period $ 1,025 $ 272 Interest cost on the accumulated postretirement benefit obligation 2,711 623 -------- -------- Net periodic postretirement benefit cost $ 3,736 $ 895 ======== ======== The weighted average discount rate used in determining the accumulated postretirement benefit obligation was 7.25% and 7.75% at March 31, 1998 and 1997, respectively. The weighted average annual assumed rate of increase in the per capita cost of covered benefits (i.e., healthcare cost trend rate) is 8.5% in 1998 trending to 6.5% in 2008 and thereafter for retirees less than 65 years of age. For retirees 65 years of age and over, the rate is 8.3% in 1998 trending to 6.5% in 2008 and thereafter. The healthcare cost trend rate assumption has a significant effect on the amounts reported. For example, increasing the assumed healthcare cost trend rates by one percentage point in each year would increase the accumulated postretirement benefit obligation as of March 31, 1998 by approximately $5,919 and net periodic postretirement benefit cost for the year ended March 31, 1998 by approximately $573. F-23
424B3128th Page of 221TOC1stPreviousNextBottomJust 128th
OXFORD AUTOMOTIVE, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) -------------------------------------------------------------------------------- 13. REDEEMABLE PREFERRED STOCK In connection with the acquisition of Lobdell described in Note 3, redeemable preferred stock with a face value of $50,748 was issued. Redeemable preferred stock with a face value of $40,748 was delivered to the former shareholders of Lobdell on January 10, 1997. The remaining redeemable preferred stock with a face value of $10,000 was placed in escrow pending final determination of the purchase price. The preferred stock issuance consisted of 457,541 shares of Series A $3.00 Cumulative Preferred Stock (Series A Preferred) and 49,938 shares of Series B Preferred Stock (Series B Preferred). On July 15, 1997, the Company entered into a Settlement Agreement and Mutual Release with the preferred shareholders of Lobdell (the Settlement Agreement). Pursuant to the Settlement Agreement, 60,002 shares of Series A Preferred held in escrow and all Series B Preferred previously issued were canceled. The remaining 39,938 shares of Series A Preferred held in escrow were released to the preferred shareholders of Lobdell. The annual dividend on the Series A Preferred is $3.00 per share, payable semi-annually. Dividends on the Series A Preferred are cumulative, but do not bear interest. Under the terms of the issuance of the Series A Preferred (the Stock Agreement), the holders of the Series A Preferred maintain limited voting rights. Holders are entitled to vote on any provisions that would adversely affect their rights or privileges or management's plans to issue any equity securities that would rank prior to the Series A Preferred. Holders are also entitled to elect at least one director of Lobdell, which, under certain provisions of the Stock Agreement, may increase to two. Lobdell is required to redeem all shares of Series A Preferred on December 31, 2006 at a price of $100 per share, plus all declared or accumulated but unpaid dividends. If Oxford does not commence an initial public offering of common stock (IPO) prior to June 30, 2006, then the redemption price of the Series A Preferred is $103 per share. If an IPO does not occur by December 31, 2001, each holder of Series A Preferred has the option to redeem annually a maximum of 20 percent of the shares held at a price of $100 per share on each December 31, beginning in 2002. Series A Preferred holders are not allowed to transfer, sell or assign the shares prior to February 1, 1999. Subsequent to that date, Lobdell has the right of first refusal to purchase any of the shares transferred, sold or assigned by a holder of Series A Preferred. Holders of Series A Preferred are entitled to convert their shares to Oxford common stock issued in connection with an IPO. Individual holders may convert a maximum of 50% of their shares, but the total of all Series A Preferred shares converted may not exceed 25% of the total Series A Preferred shares outstanding. The Series A Preferred has been included in the accompanying consolidated balance sheet at its fair value at the date of issuance of $39,754, and has been adjusted for accrued dividends and accretion totaling $438 and $258 for the years ended March 31, 1998 and 1997, respectively. 14. RELATED PARTY TRANSACTIONS The Company is charged a fee by a related party, The Oxford Investment Group, Inc., for consulting, finance and management services. Fees charged to the Company by The Oxford Investment Group, Inc. approximated $1,005 and $275 for the years ended March 31, 1998 and 1997, respectively. In connection with the acquisitions of BMGNA, Lobdell and Howell, investment banking fees of $200, $300 and $230, respectively, were paid to The Oxford Investment Group, Inc., during the periods ended March 31, 1996, 1997 and 1998, respectively. As described in Note 3, the majority shareholder of the Company was also the majority shareholder of RPIH. F-24
424B3129th Page of 221TOC1stPreviousNextBottomJust 129th
OXFORD AUTOMOTIVE, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) -------------------------------------------------------------------------------- 15. COMMITMENTS AND CONTINGENCIES OPERATING LEASES As of March 31, 1998, the Company had long-term operating leases covering certain machinery and equipment. The minimum rental commitments under noncancellable operating leases with lease terms in excess of one year are as follows as of March 31, 1998: [Download Table] 1999 $ 3,422 2000 3,480 2001 1,380 2002 3,370 2003 142 -------- $ 11,794 ======== ENVIRONMENTAL MATTERS The Company is subject to federal, state and local laws and regulations which govern environmental matters. These laws regulate the discharge of materials into the environment and may require the Company to remove or mitigate the environmental effects of the disposal or release of petroleum or chemical substances. The Company has identified several environmental matters resulting from prior operations. Due to the relatively early stage of investigation of certain of these identified matters as well as potential indemnification by other potentially responsible parties, management is unable to reasonably estimate the ultimate cost of remediating certain of these identified environmental matters. The Company has recorded a liability of approximately $1,746 and $880 at March 31, 1998 and 1997, respectively, for estimated costs of known environmental matters. GENERAL The Company is subject to various claims, lawsuits and administrative proceedings related to matters arising out of the normal course of business. In the opinion of management, after reviewing the information which is currently available with respect to such matters and consulting with legal counsel, any liability which may ultimately be incurred with respect to these matters will not materially affect the financial position, results of operations or cash flows of the Company. F-25
424B3130th Page of 221TOC1stPreviousNextBottomJust 130th
OXFORD AUTOMOTIVE, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) -------------------------------------------------------------------------------- 16. SEGMENT INFORMATION The Company operates in one industry segment and all sales are to unaffiliated customers. Net sales represent all sales to unaffiliated customers. Net export sales represent sales to unaffiliated customers outside of the enterprise's home country. The Company's home country is the United States and the Predecessor's home country was Canada. Accordingly, for the period from April 1, 1995 through October 27, 1995, net export sales represent sales to unaffiliated customers outside of Canada. For the period from October 28, 1995 to March 31, 1996 and for the years ended March 31, 1997 and 1998, net export sales represent sales to unaffiliated customers outside of the United States. Net sales by geographic area, identifiable assets by geographic area and net export sales by geographic area are as follows: [Enlarge/Download Table] COMPANY PREDECESSOR -------------------------------------------------- ----------------- PERIOD FROM PERIOD FROM YEAR ENDED YEAR ENDED OCTOBER 28, 1995 APRIL 1, 1995 MARCH 31, MARCH 31, THROUGH THROUGH 1998 1997 MARCH 31, 1996 OCTOBER 27, 1995 Net Sales United States $ 324,335 $ 54,660 $ -- $ -- Canada 85,030 82,201 35,572 49,043 Mexico 956 --------- --------- --------- --------- $ 410,321 $ 136,861 $ 35,572 $ 49,043 ========= ========= ========= ========= Operating Income (Loss) United States $ 22,234 $ 1,101 $ -- $ Canada (462) 2,700 1,713 (1,774) Mexico (1,718) --------- --------- --------- --------- $ 20,054 $ 3,801 $ 1,713 $ (1,774) ========= ========= ========= ========= Identifiable Assets United States $ 275,039 $ 189,308 $ -- Canada 40,634 57,153 49,200 Mexico 4,948 --------- --------- --------- $ 320,621 $ 246,461 $ 49,200 ========= ========= ========= Net Export Sales Canada $ 63,985 $ 41,846 $ 16,476 $ -- United States 25,397 Mexico 52,834 13,573 1,366 664 Other 4,893 2,120 --------- --------- --------- --------- $ 121,712 $ 57,539 $ 17,842 $ 26,061 ========= ========= ========= ========= 17. SUBSEQUENT EVENT On April 1, 1998, the Company purchased the assets of the Suspension Division of Eaton Corporation (Suspension) for cash of approximately $53,500, including the investment in the Metalcar joint venture. The acquisition was financed through the proceeds of the Notes described in Note 8 and the issuance of $35,000 of Series B 10.125% Senior Subordinated Notes Due 2007. The acquisition will be recorded in accordance with the purchase method of accounting. Accordingly, the purchase price plus direct cost of the acquisition will be allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. F-26
424B3131st Page of 221TOC1stPreviousNextBottomJust 131st
OXFORD AUTOMOTIVE, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) -------------------------------------------------------------------------------- 17. SUBSEQUENT EVENT (CONTINUED) The estimated fair market value of assets acquired and liabilities assumed is summarized as follows: [Download Table] Current assets $ 22,700 Property, plant and equipment 47,200 Current liabilities (11,300) Long-term liabilities (5,100) --------- $ 53,500 ========= The unaudited pro forma combined results of operations of the Company and Suspension for the year ended March 31, 1998 including Howell and RPIH as if the acquisitions had occurred at the beginning of fiscal 1998 and after giving effect to certain pro forma adjustments are as follows: [Download Table] Net sales $ 576,163 Net income $ 2,261 Net income applicable to common shares $ 927 Net income per common share $ 2.99 The pro forma information is not intended to be a projection of future results. The foregoing unaudited pro forma results of operations reflect adjustments for additional interest expense related to the financing of the acquisitions and the additional depreciation expense, as a result of the write-up of property, plant and equipment, net of the related tax benefit. 18. CONDENSED CONSOLIDATING INFORMATION The Notes are guaranteed by Oxford Automotive, Inc. and certain of its wholly-owned subsidiaries, including Lobdell, Howell, BMGH and RPIH (the Guarantor Subsidiaries). The Notes are not guaranteed by the Company's other consolidated subsidiary, Oxford Mexico (the Non-guarantor Subsidiary). The guarantee of the Notes by the Company and the Guarantor Subsidiaries is full and unconditional. The following condensed consolidated financial information presents the financial position, results of operations and cash flows of (i) the Company as if it accounted for its subsidiaries on the equity method, (ii) the Guarantor Subsidiaries on a combined basis and (iii) the Non-guarantor Subsidiary. Condensed consolidated financial information for the periods prior to March 31, 1998 are not presented because the non-guarantors during those periods were inconsequential, individually and in the aggregate, to the consolidated financial statements, and management has determined that they would not be material to investors. F-27
424B3132nd Page of 221TOC1stPreviousNextBottomJust 132nd
OXFORD AUTOMOTIVE, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) -------------------------------------------------------------------------------- 18. CONDENSED CONSOLIDATING INFORMATION (CONTINUED) CONDENSED CONSOLIDATING BALANCE SHEETS MARCH 31, 1998 (DOLLAR AMOUNTS IN THOUSANDS) [Enlarge/Download Table] NON-GUARANTOR GUARANTOR ELIMINATIONS/ PARENT SUBSIDIARIES SUBSIDIARY ADJUSTMENTS CONSOLIDATED (DOLLARS IN THOUSANDS) ASSETS Current assets Cash $ 13,673 $ 322 $ 4,326 $ $ 18,321 Receivables (net) 7,206 868 64,652 (7,453) 65,273 Inventories 40 21,265 21,305 Reimbursable tooling 13,315 13,315 Income taxes refundable 1,601 1,601 Deferred income taxes 92 4,307 4,399 Prepaid expenses and other 172 10 8,443 (1,663) 6,962 --------- --------- --------- --------- --------- TOTAL CURRENT ASSETS 21,143 1,240 117,909 (9,116) 131,176 Other noncurrent assets 14,626 45 10,477 25,148 Property, plant and equipment (net) 2,141 3,663 157,904 163,708 Investment in consolidated subsidiaries 31,861 (31,861) --------- --------- --------- --------- --------- TOTAL ASSETS $ 69,771 $ 4,948 $ 286,290 $ (40,977) $ 320,032 ========= ========= ========= ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $ 746 351 50,956 161 52,214 Employee compensation 1,330 3,478 4,808 Intercompany accounts (65,132) 6,041 52,986 6,105 Restructuring reserve 6,363 6,363 Accrued expenses and other 951 104 20,505 (9,318) 12,242 Current portion of borrowings 10,965 10,965 TOTAL CURRENT LIABILITIES (62,105) 6,496 145,253 (3,052) 86,592 Pension liability 4,727 4,727 Postretirement medical benefits 35,992 35,992 Deferred income taxes and other 279 (576) 18,225 17,928 Long-term borrowings 124,828 3,655 128,483 --------- --------- --------- --------- --------- TOTAL LIABILITIES 63,002 5,920 207,852 (3,052) 273,722 --------- --------- --------- --------- --------- Redeemable preferred stock 40,192 40,192 --------- --------- --------- --------- --------- Shareholders' equity Common stock 1,050 32,974 (32,974) 1,050 Foreign currency translation 147 (798) (651) Retained earnings (accumulated deficit) 4,750 (1,119) 6,070 (4,951) 4,750 Unrealized gain on marketable securities 969 969 Equity adjustment for minimum pension TOTAL SHAREHOLDERS' EQUITY 6,769 (972) 38,246 (37,925) 6,118 --------- --------- --------- --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 69,771 $ 4,948 $ 286,290 $ (40,977) $ 320,032 ========= ========= ========= ========= ========= F-28
424B3133rd Page of 221TOC1stPreviousNextBottomJust 133rd
OXFORD AUTOMOTIVE, INC. CONSOLIDATED BALANCE SHEETS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) -------------------------------------------------------------------------------- 18. CONDENSED CONSOLIDATING INFORMATION (CONTINUED) CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS YEAR ENDED MARCH 31, 1998 (DOLLAR AMOUNTS IN THOUSANDS) [Enlarge/Download Table] NON-GUARANTOR GUARANTOR ELIMINATIONS/ PARENT SUBSIDIARY SUBSIDIARIES ADJUSTMENTS CONSOLIDATED (DOLLARS IN THOUSANDS) Sales $ -- $ 956 $ 409,365 $ -- $ 410,321 Cost of sales 2,674 365,746 368,420 --------- --------- --------- --------- --------- GROSS PROFIT (1,718) 43,619 41,901 Selling, general and administrative expenses (665) 22,504 21,839 Restructuring provision 1,610 1,610 Gain on sale of equipment (1,602) (1,602) --------- --------- --------- --------- --------- OPERATING INCOME 665 (1,718) 21,107 20,054 Other income (expense) Interest expense (467) 2 (10,245) (10,710) Other 21 300 321 --------- --------- --------- --------- --------- INCOME BEFORE BENEFIT (PROVISION) FOR INCOME TAXES 198 (1,695) 11,162 9,665 Benefit (provision) for income taxes (314) 576 (4,336) (4,074) --------- --------- --------- --------- --------- INCOME BEFORE EQUITY IN INCOME OF CONSOLIDATED SUBSIDIARIES (116) (1,119) 6,826 5,591 Equity in income of consolidated subsidiaries 5,707 (5,707) --------- --------- --------- --------- --------- NET INCOME $ 5,591 (1,119) 6,826 (5,707) 5,591 ========= ========= ========= ========= ========= F-29
424B3134th Page of 221TOC1stPreviousNextBottomJust 134th
OXFORD AUTOMOTIVE, INC. CONSOLIDATED BALANCE SHEETS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) -------------------------------------------------------------------------------- 18. CONDENSED CONSOLIDATING INFORMATION (CONTINUED) CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS YEAR ENDED MARCH 31, 1998 (DOLLAR AMOUNTS IN THOUSANDS) [Enlarge/Download Table] NON-GUARANTOR GUARANTOR PARENT SUBSIDIARY SUBSIDIARIES CONSOLIDATED (DOLLARS IN THOUSANDS) NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ (71,916) 3,801 94,101 25,986 --------- --------- --------- --------- INVESTING ACTIVITIES Purchase of businesses, net of cash acquired (24,219) (24,219) Purchase of property, plant and equipment (2,228) (3,774) (10,721) (16,723) Proceeds from sale of equipment 5,433 5,433 Purchases of marketable securities (7,658) (7,658) --------- --------- --------- --------- NET CASH USED IN INVESTING ACTIVITIES (34,105) (3,774) (5,288) (43,167) --------- --------- --------- --------- FINANCING ACTIVITIES Proceeds from borrowing arrangements 124,828 1,825 126,653 Principal payments on borrowing arrangements (93,782) (93,782) Payment of preferred stock dividends (1,193) (1,193) Debt financing costs (5,372) (5,372) --------- --------- --------- --------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 119,456 (93,150) 26,306 --------- --------- --------- --------- Effect of foreign currency rate fluctuations on cash 295 (770) (475) --------- --------- --------- --------- NET INCREASE (DECREASE) IN CASH 13,435 322 (5,107) 8,650 Cash at beginning of period 238 9,433 9,671 --------- --------- --------- --------- Cash at end of period $ 13,673 322 4,326 18,321 ========= ========= ========= ========= F-30
424B3135th Page of 221TOC1stPreviousNextBottomJust 135th
OXFORD AUTOMOTIVE, INC. CONSOLIDATED BALANCE SHEETS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) -------------------------------------------------------------------------------- 19. INTERIM DATA (UNAUDITED) BASIS OF PRESENTATION The accompanying unaudited balance sheet as of December 31, 1998 and the unaudited consolidated statements of operations, of changes in shareholders' equity and of cash flows for the nine months ended December 31, 1998 and 1997 include all adjustments, consisting of normal recurring adjustments, which in the opinion of management are necessary for the fair presentation of the financial position, results of operations, and cash flows of the Company. The results of operations for any interim period are not necessarily indicative of the results of operations for a full year. SENIOR SUBORDINATED NOTES On April 1, 1998, the Company issued $35.0 million of unsecured 10 1/8% Senior Subordinated Notes due 2007, Series B (the "Series B Notes"). On December 8, 1998, the Company issued $40.0 million of unsecured 10 1/8% Senior Subordinated Notes due 2007, Series C (the "Series C Notes"). The Series B Notes and the Series C Notes are substantially identical to and rank pari passu in right of payment with the $125.0 million of unsecured 10 1/8% Senior Subordinated Notes due 2007 issued by the Company on June 24, 1997 (the "Series A Notes"). The Series A Notes, the Series B Notes, and the Series C Notes are collectively referred to as the "Notes". The Notes pay interest semi-annually on June 15 and December 15. The Notes provide for certain covenants, including limitations on: indebtedness, restricted payments, distributions, sale of assets, affiliate transactions and merger and consolidation. The Company has optional redemption rights beginning June 15, 2002. The Notes are limited to $250.0 million aggregate principal amount. The net proceeds to the Company from the sale of Series B Notes were approximately $37.6 million (after the inclusion of approximately $2.0 million in premium and accrued interest of approximately $1.0 million paid by the initial purchaser of the Series B Notes and the deduction of estimated expenses of approximately $0.4 million). The Company used all of the net proceeds in connection with the acquisition of the Suspension Division of Eaton Corporation. The net proceeds to the Company from the sale of the Series C Note were approximately $40.8 million (after inclusion of approximately $1.5 million in premium and the deduction of expenses or approximately $0.7 million). The Company used the net proceeds to repay borrowings under the Company's Senior Credit Facility and for working capital, acquisitions and other general corporate purposes. As of December 31, 1998, the Notes are guaranteed by certain of the Company's wholly-owned subsidiaries, including BMGH, Howell, Lobdell, Oxford Suspension, Inc., Oxford Suspension Ltd., and RPIH (the "Guarantor Subsidiaries"). As of December 31, 1998 the Notes were not guaranteed by the Company's other consolidated subsidiary, Oxford Automotriz de Mexico S.A. de C.V. (the "Non-guarantor Subsidiary"). The guarantee of the Notes by the Company and the Guarantor Subsidiaries is full and unconditional. The following unaudited condensed consolidated financial information presents the financial position, results of operations and cash flows of (i) the Company as if it accounted for its subsidiaries on the equity method, (ii) the Guarantor Subsidiaries on a combined basis and (iii) the Non-guarantor Subsidiary. Condensed consolidated financial information for the interim periods prior to December 31, 1998 are not presented because the non-guarantors during those periods were inconsequential, individually and in the aggregate, to the consolidated financial statements, and management has determined that they would not be material to investors. F-31
424B3136th Page of 221TOC1stPreviousNextBottomJust 136th
OXFORD AUTOMOTIVE, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNT IN THOUSANDS, EXCEPT SHRE-RELATED DATA) ------------------------------------------------------------------------------- 19. INTERIM DATA (UNAUDITED) CONDENSED CONSOLIDATING BALANCE SHEETS DECEMBER 31, 1998 (DOLLARS IN THOUSANDS) (UNAUDITED) [Enlarge/Download Table] NON-GUARANTOR GUARANTOR ELIMINATIONS/ PARENT SUBSIDIARY SUBSIDIARIES ADJUSTMENTS CONSOLIDATED ASSETS Current assets Cash and cash equivalents $ 44 $ 71 $ 203 $ 318 Receivables (net) (1,553) (8,192) 112,300 (16,219) 86,336 Inventories 1,352 32,559 33,911 Reimbursable Tooling 1,400 83 38,754 40,237 Deferred income taxes 92 4,307 4,399 Unexpended bond proceeds 6 6 Prepaid expenses and other current assets 632 510 2,488 3,630 -------------- -------------- -------------- -------------- -------------- Total Current Assets $ 615 $ (6,176) $ 190,617 $ (16,219) $ 168,837 Marketable securities $ 8,092 $ $ $ 8,092 Other noncurrent assets 7,671 5,212 23,386 36,269 Deferred income taxes 7,918 7,918 Property, plant and equipment, net 3,839 5,550 182,057 191,446 Investment in consolidation subsidiaries 44,033 (44,033) -------------- -------------- -------------- -------------- -------------- Total Assets $ 64,250 $ 4,586 $ 403,978 $ (60,252) $ 412,562 ============== ============== ============== ============== ============== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Trade accounts payable $ 862 $ 7,156 $ 46,410 $ 54,428 Employee compensation 1,115 167 9,636 10,918 Intercompany accounts 16,219 (16,219) Restructuring reservev 8 3,011 3,019 Accrued expenses and other current liabilities (2,342) 12,342 10,000 Current portion of borrowings 3,411 3,411 -------------- -------------- -------------- -------------- -------------- Total Current Liabilities $ (357) $ 7,323 $ 91,029 $ (16,219) $ 81,776 F-32
424B3137th Page of 221TOC1stPreviousNextBottomJust 137th
OXFORD AUTOMOTIVE, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) -------------------------------------------------------------------------------- 19. INTERIM DATA (UNAUDITED) CONDENSED CONSOLIDATING BALANCE SHEETS (CONTINUED) DECEMBER 31, 1998 (DOLLARS IN THOUSANDS) (UNAUDITED) [Enlarge/Download Table] NON-GUARANTOR GUARANTOR ELIMINATIONS/ PARENT SUBSIDIARY SUBSIDIARIES ADJUSTMENTS CONSOLIDATED Pension liability $ 35 $ $ 5,435 $ 5,470 Post retirement Medical benefits liability 41,427 41,427 Deferred income taxes 279 (956) 14,639 13,962 Other non-current liabilities (147,791) 151,661 3,870 Long-term borrowings less current portion 208,030 19,519 227,549 --------- --------- --------- ---------- --------- TOTAL LIABILITIES $ 60,196 $ 6,367 $ 323,710 $ (16,219) $ 374,054 Redeemable preferred stock $ $ $ 40,586 $ 40,586 Shareholder's equity common stock 1,050 41,371 (41,371) 1,050 Accumulated other comprehensive income (loss) (46) (92) (6,040) (6,178) Retained earnings 3,050 (1,689) 4,351 (2,662) 3,050 --------- --------- --------- ---------- --------- 4,054 (1,781) 39,682 (44,033) (2,078) --------- --------- --------- ---------- --------- TOTAL LIABILITIES & SHAREHOLDER'S EQUITY $ 64,250 $ 4,586 $ 403,978 $ ($60,252) $ 412,562 ========= ========= ========= ========== ========= F-33
424B3138th Page of 221TOC1stPreviousNextBottomJust 138th
OXFORD AUTOMOTIVE, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) -------------------------------------------------------------------------------- 19. INTERIM DATA (UNAUDITED) CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 1998 (DOLLARS IN THOUSANDS) (UNAUDITED) [Enlarge/Download Table] NON-GUARANTOR GUARANTOR ELIMINATIONS/ PARENT SUBSIDIARY SUBSIDIARIES ADJUSTMENTS CONSOLIDATED Sales $ 4,449 145,285 $ 149,734 Cost of sales 4,850 130,203 135,053 ------- ------- --------- -------- --------- GROSS PROFIT (401) 15,082 14,681 Selling, general and administrative expenses (571) 9 7,991 7,429 ------- ------- --------- -------- --------- OPERATING INCOME 571 (410) 7,091 7,252 Interest income 3,570 161 (3,610) 121 Interest expense (4,859) 1 (3,991) 3,610 (5,239) Other income (expense) 82 55 418 555 ------- ------- --------- -------- --------- INCOME BEFORE INCOME TAXES (636) (354) 3,679 2,689 Income taxes (254) (142) 1,471 1,075 ------- ------- --------- -------- --------- INCOME BEFORE EQUITY IN INCOME OF CONSOLIDATED SUBSIDIARIES (382) (212) 2,208 1,614 Equity in income of consolidated subsidiaries 1,996 (1,996) ------- ------- --------- -------- --------- NET INCOME $ 1,614 $ (212) $ 2,208 $ (1,996) $ 1,614 ======= ======= ========= ======== ========= F-34
424B3139th Page of 221TOC1stPreviousNextBottomJust 139th
OXFORD AUTOMOTIVE, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) -------------------------------------------------------------------------------- 19. INTERIM DATA (UNAUDITED) CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED DECEMBER 31, 1998 (DOLLARS IN THOUSANDS) (UNAUDITED) [Enlarge/Download Table] NON-GUARANTOR GUARANTOR ELIMINATIONS/ PARENT SUBSIDIARY SUBSIDIARIES ADJUSTMENTS CONSOLIDATED Sales $ 7,099 401,045 $ 408,144 Cost of sales 8,025 364,587 372,612 -------- ------- --------- ------- --------- GROSS PROFIT (926) 36,458 35,532 Selling, general and administrative expenses $ (1,857) 9 24,083 22,235 Restructuring 1,176 1,176 -------- ------- --------- ------- --------- Provision OPERATING INCOME 1,857 (935) 11,199 12,121 Interest income 12,629 160 (12,595) 194 Interest expense (13,725) (13,319) 12,595 (14,449) Other income (expense) 226 (14) 737 949 -------- ------- --------- ------- --------- INCOME BEFORE 987 (949) (1,223) (1,185) INCOME TAXES 395 (380) (490) (475) -------- ------- --------- ------- --------- Income taxes INCOME BEFORE EQUITY IN INCOME OF CONSOLIDATED SUBSIDIARIES 592 (569) (733) (710) Equity in income of consolidated subsidiaries (1,302) 1,302 -------- ------- --------- ------- --------- NET INCOME $ (710) $ (569) $ (733) $ 1,302 ($ 710) ======== ======= ========= ======= ========= F-35
424B3140th Page of 221TOC1stPreviousNextBottomJust 140th
OXFORD AUTOMOTIVE, INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) -------------------------------------------------------------------------------- 19. INTERIM DATA (UNAUDITED) CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED DECEMBER 31, 1998 (DOLLARS IN THOUSANDS) (UNAUDITED) [Download Table] NON GUARANTOR GUARANTOR PARENT SUBSIDIARY SUBSIDIARIES CONSOLIDATED Net cash provided by (used in) operating activities (38,174) $ 2,199 $ 4,808 ($31,167) -------- ------- -------- -------- INVESTING ACTIVITIES Purchase of businesses, net of cash acquired (53,886) (53,886) Purchase of property, plant and equipment (1,962) (2,210) (16,197) (20,369) Purchase of Marketable Securities (892) (892) -------- ------- -------- -------- NET CASH USED IN INVESTING ACTIVITIES (56,740) (2,210) (16,197) (75,147) FINANCING ACTIVITIES Net proceeds (payments) on borrowings 4,659 8,882 13,541 Proceeds from borrowing arrangements 78,544 78,544 Payment of preferred dividends (596) (596) Debt financing costs (1,918) (703) (2,621) -------- ------- -------- -------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 81,285 0 7,583 88,868 Effect of foreign currency rate fluctuation on cash (240) (317) (557) NET INCREASE (DECREASE) IN CASH (13,629) (251) (4,123) (18,003) Cash at beginning of period 13,673 322 4,326 18,321 -------- ------- -------- -------- Cash at end of period $ 44 $ 71 $ 203 $ 318 ======== ======= ======== ======== F-36
424B3141st Page of 221TOC1stPreviousNextBottomJust 141st
 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Lobdell Emery Corporation In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of changes in shareholders' equity and of cash flows after the restatement discussed in Note 16 present fairly, in all material respects, the financial position of Lobdell Emery Corporation and its subsidiaries (the Corporation) at December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Corporation's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As described in Note 15, on January 10, 1997 all of the outstanding shares of common stock of the Corporation were sold to L-E Acquisition, Inc. PRICE WATERHOUSE LLP Detroit, Michigan May 19, 1997 F-37
424B3142nd Page of 221TOC1stPreviousNextBottomJust 142nd
LOBDELL EMERY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) -------------------------------------------------------------------------------- [Enlarge/Download Table] December 31, 1996 1995 ASSETS Current assets Cash and cash equivalents ..................................... $ 278 $ 716 Trade receivables -- less allowance of $1,254 and $500, respectively ............................................... 28,769 32,514 Inventories ................................................... 6,083 10,212 Income taxes receivable ....................................... 1,282 Reimbursable tooling .......................................... 47 407 Deferred income taxes ......................................... 3,081 3,038 Prepaid expenses and other current assets ..................... 191 827 --------- --------- Total current assets ....................................... 39,731 47,714 --------- --------- Advance under shareholders' redemption agreement ................ 1,542 Unexpended bond proceeds ........................................ 3,886 4,508 Intangible pension asset ........................................ 3,216 2,113 Other noncurrent assets ......................................... 2,483 3,825 Deferred income taxes ........................................... 2,531 Property, plant and equipment, net .............................. 72,804 72,503 --------- --------- TOTAL ASSETS ............................................... $ 126,193 $ 130,663 ========= ========= Employee compensation ......................................... 5,156 4,614 Accrued expenses and other current liabilities ................ 6,511 6,516 Current portion of long-term borrowings ....................... 2,200 7,169 --------- --------- Total current liabilities .................................. 28,981 29,926 --------- --------- Pension liability ............................................... 1,855 1,627 Postretirement medical benefits liability ....................... 19,639 16,889 Deferred income taxes ........................................... 1,180 Other noncurrent liabilities .................................... 1,950 1,739 --------- --------- ................................................................ 23,444 21,435 --------- --------- Long-term borrowings -- less current portion .................... 41,134 39,097 --------- --------- Total liabilities .......................................... 93,559 90,458 --------- --------- Commitments and contingent liabilities (Note 13) Redeemable Common stock, Class B nonvoting, $1 par value, outstanding 137,112 shares (Note 11) ...................................... 1,800 1,297 --------- --------- Shareholders' equity Common stock, Class A voting, $1 par value, authorized 540,000 shares, outstanding 478,255 shares... 478 478 Common stock, Class B nonvoting, $1 par value authorized 5,400,000 shares; outstanding 3,430,623 shares ................ 3,431 3,431 Retained earnings ............................................. 27,376 35,730 Equity adjustment for minimum pension liability ............... (451) (731) --------- --------- 30,834 38,908 --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ..................... $ 126,193 $ 130,663 ========= ========= The accompanying notes are an integral part of the financial statements. F-38
424B3143rd Page of 221TOC1stPreviousNextBottomJust 143rd
LOBDELL EMERY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE RELATED DATA) -------------------------------------------------------------------------------- [Enlarge/Download Table] FOR THE YEAR ENDED DECEMBER 31, --------------------------------------------- 1996 1995 1994 Net sales ..................................................... $ 253,997 $ 269,260 $ 270,062 Cost of sales ................................................. 244,129 252,671 252,275 --------- --------- --------- GROSS PROFIT .................................................. 9,868 16,589 17,787 Selling, general and administrative ........................... 16,395 14,949 14,438 Equipment impairment .......................................... 3,000 --------- --------- --------- OPERATING INCOME (LOSS) ..................................... (9,527) 1,640 3,349 Other income (expense) Interest expense .............................................. (3,557) (3,448) (2,799) Other income ................................................ 664 744 366 --------- --------- --------- INCOME (LOSS) BEFORE BENEFIT (PROVISION) FOR INCOME TAXES ..... (12,420) (1,064) 916 Benefit (provision) for income taxes .......................... 4,569 264 (442) --------- --------- --------- INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE ...................................................... (7,851) (800) 474 Cumulative effect of accounting change -- post-employment benefits, net of income tax benefit ($.12 per share) ........ (510) --------- --------- --------- NET LOSS ...................................................... $ (7,851) $ (800) $ (36) ========= ========= ========= NET LOSS PER SHARE ............................................ $ (1.94) $ (.19) $ (.01) ========= ========= ========= The accompanying notes are an integral part of the financial statements. F-39
424B3144th Page of 221TOC1stPreviousNextBottomJust 144th
LOBDELL EMERY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE RELATED DATA) -------------------------------------------------------------------------------- [Enlarge/Download Table] EQUITY ADJUSTMENT FOR MINIMUM CLASS A CLASS B RETAINED PENSION VOTING NONVOTING EARNINGS LIABILITY TOTAL BALANCES AT JANUARY 1, 1994 ............... $478 $ 3,427 $ 36,715 $-- $ 40,620 Net loss for 1994 ....................... (36) (36) Stock option activity ................... 4 70 74 Dividends ($.06 per share) .............. (257) (257) Accretion of redeemable common stock .... (63) (63) Minimum pension liability adjustment .... (492) (492) ---- ------- -------- ----- -------- BALANCES AT DECEMBER 31, 1994 ............. 478 3,431 36,429 (492) 39,846 Net loss for 1995 ....................... (800) (800) Stock option activity ................... 213 213 Dividends ($.03 per share) .............. (124) (124) Accretion of redeemable common stock .... 12 12 Minimum pension liability adjustment .... (239) (239) ---- ------- -------- ----- -------- BALANCES AT DECEMBER 31, 1995 ............. 478 3,431 35,730 (731) 38,908 Net loss for 1996 ....................... (7,851) (7,851) Accretion of redeemable common stock .... (503) (503) Minimum pension liability adjustment .... 280 280 ---- ------- -------- ----- -------- BALANCES AT DECEMBER 31, 1996 ............. $478 $ 3,431 $ 27,376 $(451) $ 30,834 ==== ======= ======== ===== ======== The accompanying notes are an integral part of the financial statements. F-40
424B3145th Page of 221TOC1stPreviousNextBottomJust 145th
LOBDELL EMERY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLAR AMOUNTS IN THOUSANDS) -------------------------------------------------------------------------------- [Enlarge/Download Table] FOR THE YEAR ENDED DECEMBER 31, ------------------------------------------- 1996 1995 1994 OPERATING ACTIVITIES Net loss ..................................................... $ (7,851) $ (800) $ (36) Adjustments to reconcile net loss to net cash provided by operating activities Depreciation ............................................ 13,746 12,486 12,045 Deferred income taxes ................................... (3,922) (1,332) (1,395) Pension liability ....................................... (2,230) 657 159 Postretirement medical benefits liability ............... 2,750 2,245 2,923 Equipment impairment .................................... 3,000 Loss (Gain) on sale of equipment ........................ (23) (34) 68 Changes in operating assets and liabilities affecting cash Trade receivables ....................................... 3,745 (644) (4,397) Inventories ............................................. 4,129 (1,594) (66) Income taxes receivable/payable ......................... (1,601) 290 (1,569) Reimbursable tooling .................................... 360 (386) (483) Prepaid expenses and other current assets ............... 635 (649) 60 Advance under shareholders' redemption agreement ........ (1,542) 500 113 Other noncurrent assets ................................. 3,456 (2,948) 1,619 Trade accounts payable .................................. 3,487 (1,769) (961) Employee compensation ................................... 542 554 72 Accrued expenses and other current liabilities .......... (5) 1,241 219 Other noncurrent liabilities ............................ 220 9 850 -------- -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES .......... 18,896 7,826 9,221 -------- -------- -------- INVESTING ACTIVITIES Acquisitions of property, plant and equipment ................ (16,439) (14,917) (8,696) Proceeds from sale of equipment .............................. 37 276 175 -------- -------- -------- NET CASH USED IN INVESTING ACTIVITIES .............. (16,402) (14,641) (8,521) FINANCING ACTIVITIES Proceeds from long-term borrowing arrangements ............... 25,000 8,500 27,020 Principal payments on long-term borrowing arrangements ....... (23,932) (5,618) (32,831) Net borrowings (payments) under lines of credit .............. (4,000) 5,350 5,550 Proceeds from exercise of stock options ...................... 213 74 Dividends .................................................... (124) (257) Redemption and retirement of redeemable common stock ......... (1,581) (903) -------- -------- -------- NET CASH USED IN FINANCING ACTIVITIES .............. (2,932) 6,740 (1,347) -------- -------- -------- NET DECREASE IN CASH AND CASH EQUIVALENTS .................... (438) (75) (647) Cash and cash equivalents at beginning of year ............... 716 791 1,438 -------- -------- -------- Cash and cash equivalents at end of year ..................... $ 278 $ 716 $ 791 ======== ======== ======== Cash paid for interest ....................................... $ 3,774 $ 3,411 $ 2,732 ======== ======== ======== Cash paid for income taxes ................................... $ 963 $ 291 $ 3,067 ======== ======== ======== The accompanying notes are an integral part of the financial statements. F-41
424B3146th Page of 221TOC1stPreviousNextBottomJust 146th
LOBDELL EMERY CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1996, 1995 AND 1994 (DOLLAR AMOUNTS IN THOUSANDS) -------------------------------------------------------------------------------- NOTE 1. NATURE OF OPERATIONS Lobdell Emery Corporation (the Corporation) is a full-service supplier of metal stampings and welded assemblies used as original equipment components primarily by North American original equipment automotive manufacturers. The Corporation's products are used in a wide variety of sport utility vehicles, light and medium trucks, vans and passenger cars. The Corporation primarily operates from five plants located in the Midwest which account for approximately 98% of the Corporation's sales for the year ended December 31, 1996. The Corporation's hourly workforce is represented by various locals of the United Auto Workers. Sales to the Corporation's Two Primary Customers as a Percentage of Total Sales Approximated the Following for the Years Ended December 31: [Download Table] 1996 1995 1994 Ford Motor Company ........... 43% 52% 64% General Motors Corporation ... 49% 40% 29% Accounts receivable from Ford Motor Company and General Motors Corporation represent approximately 47% and 49%, respectively, of the December 31, 1996 accounts receivable balance. Although the Corporation is directly affected by the economic well being of the automotive industry and customers referred to above, management does not believe significant credit risk exists at December 31, 1996. The Corporation does not require collateral to reduce such risk and historically has not experienced significant losses related to receivables from individual customers or groups of customers in the automotive industry. NOTE 2. SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated balance sheets include the accounts of Lobdell Emery Corporation and its wholly-owned subsidiaries, Lewis Emery Capital Corporation (Lewis), Concept Management Corporation and subsidiaries (Concept), Laserweld International (Laserweld) and Parallel Group International (Parallel). Concept Management Corporation also includes the accounts of its wholly-owned subsidiaries, Winchester Fabrication Corporation (Winchester) and Creative Fabrication Corporation (Creative). Intercompany accounts and transactions have been eliminated. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. REVENUE RECOGNITION Revenue is recognized by the Corporation upon shipment of product to the customer. FINANCIAL INSTRUMENTS At December 31, 1996, the carrying amount of financial instruments such as cash and cash equivalents, trade receivables and payables and unexpended bond proceeds, approximated their fair values. The carrying amount of the long-term customer receivables and borrowings at December 31, 1996, approximated their fair values based on the variable interest rates available to the Corporation for similar arrangements. CASH EQUIVALENTS The Corporation considers all highly-liquid investments with maturity of three months or less when purchased to be cash equivalents. F-42
424B3147th Page of 221TOC1stPreviousNextBottomJust 147th
LOBDELL EMERY CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1996, 1995 AND 1994 (DOLLAR AMOUNTS IN THOUSANDS) -------------------------------------------------------------------------------- NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) INVENTORIES Inventories are stated at the lower of cost or market. Cost is principally determined by the last-in, first-out (LIFO) method. UNEXPENDED BOND PROCEEDS Unexpended bond proceeds in the accompanying consolidated balance sheets represent unexpended proceeds from the issuance of industrial development revenue bonds by Creative as discussed in Note 6, and are invested in allowable money market accounts and commercial paper with a maturity of 90 days or less. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated on the basis of historical cost and include expenditures for improvements which materially increase the useful lives of existing assets. Expenditures for normal repair and maintenance are charged to operations as incurred. For federal income tax purposes, depreciation is computed using accelerated and straight-line methods. For financial reporting purposes, depreciation is computed principally using the straight-line method over the following estimated useful lives: [Download Table] YEARS Land improvements 15 Buildings 30 Machinery and equipment 3-10 At December 31, 1996, the Corporation had a machine in process at a vendor location. The aggregate cost of the machine will be $5,300, for which the Corporation has recorded approximately $2,700 in the accompanying consolidated balance sheet. The remaining $2,600 will be recorded by the Corporation upon final technical approval of the machine. In accordance with the provisions of Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," the Corporation established an impairment reserve against certain of the assets of Laserweld in the amount of $3,000 at December 31, 1996. The reserve represents the difference between the fair value of the Laserweld assets, based primarily on a recent independent appraisal, and the cost of such assets. ENVIRONMENTAL COMPLIANCE AND REMEDIATION Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations which do not contribute to current or future revenue generation are expensed. Liabilities are recorded when environmental assessments and/or remedial efforts are probable and the costs can be reasonably estimated. Estimated costs are based upon enacted laws and regulations, existing technology and the most probable method of remediation. The costs determined are not discounted and exclude the effects of inflation and other social and economic factors. INCOME TAXES Deferred taxes are provided to give recognition to the effect of expected future tax consequences of temporary differences between the carrying amounts for financial reporting purposes and the tax bases for income tax purposes of assets and liabilities. REIMBURSABLE TOOLING Reimbursable tooling represents net costs incurred on tooling projects for which the Corporation expects to be reimbursed by customers. Ongoing estimates of total costs to be incurred on each tooling project are made by management and losses, if any, are recorded when known. Under certain tooling projects, billings exceed costs incurred and the related tooling gain is recognized upon acceptance of the tooling by the customer. F-43
424B3148th Page of 221TOC1stPreviousNextBottomJust 148th
LOBDELL EMERY CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1996, 1995 AND 1994 (DOLLAR AMOUNTS IN THOUSANDS) -------------------------------------------------------------------------------- NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) At December 31, 1996, approximately $2,800 of reimbursable tooling was in process at various vendor locations. These amounts, which have not been recorded in the accompanying consolidated balance sheet, will be recorded and paid upon the Corporation's receipt of payment from the owners of the tooling. NET LOSS PER SHARE Net loss per share is determined by dividing net loss by the weighted average number of common shares outstanding during the period. RECLASSIFICATIONS Certain amounts from the prior year have been reclassified to conform with the current year presentation. NOTE 3. INVENTORIES Inventories are comprised of the following at December 31: [Download Table] 1996 1995 Raw materials ......................... $ 3,851 $ 3,861 Finished goods and work-in-process .... 5,278 10,177 -------- -------- 9,129 14,038 LIFO reserve .......................... (3,046) (3,826) -------- -------- $ 6,083 $ 10,212 ======== ======== The Corporation does not separately identify finished goods from work-in-process. During 1996, inventory quantities were reduced. This reduction resulted in a liquidation of LIFO inventory quantities carried at lower costs prevailing in prior years as compared with the cost of 1996 purchases, the effect of which increased net income by approximately $300. NOTE 4. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are comprised of the following at December 31: [Enlarge/Download Table] 1996 1995 Land and land improvements ...................................... $ 11,130 $ 10,760 Buildings ....................................................... 33,515 32,801 Machinery and equipment, net of impairment reserve of $3,000 in 1996 ....................................................... 137,914 127,389 Construction-in-process ......................................... 6,495 5,216 --------- --------- 189,054 176,166 Less -- accumulated depreciation ................................ (116,250) (103,663) --------- --------- $ 72,804 $ 72,503 ========= ========= NOTE 5. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued expenses and other current liabilities are comprised of the following at December 31: [Download Table] 1996 1995 Accrued workers' compensation ..... $2,438 $2,438 Accrued property taxes ............ 1,950 1,622 Accrued medical benefits .......... 1,816 1,615 Other ............................. 307 841 ------ ------ $6,511 $6,516 ====== ====== F-44
424B3149th Page of 221TOC1stPreviousNextBottomJust 149th
LOBDELL EMERY CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1996, 1995 AND 1994 (DOLLAR AMOUNTS IN THOUSANDS) -------------------------------------------------------------------------------- NOTE 6. BORROWING ARRANGEMENTS Borrowings consist of the following at December 31: [Enlarge/Download Table] 1996 1995 BANK SYNDICATE -- TERM LOAN, LOBDELL EMERY CORPORATION Interest at variable spread over prime (8.25% at December 31, 1996). Quarterly principal payments of $893 plus interest, matures September 12, 1999 .............................. $ 24,107 $ 21,230 BANK -- TERM LOAN, LEWIS Interest at .625% over 90-day LIBOR (6.19% at December 31, 1996). Quarterly principal payments of approximately $400, matures October 1, 1998 ........................................... 3,227 4,936 BANK SYNDICATE -- REVOLVING CREDIT LINE, LOBDELL EMERY CORPORATION Interest at variable spread over prime (8.25% at December 31, 1996) ......................................................... 7,600 11,600 INDUSTRIAL DEVELOPMENT REVENUE BONDS -- CREATIVE $8,500 issued September 27, 1995, floating rate interest (4.35% at December 31, 1996). Quarterly principal payments based on graduated maturity schedule. Backed by NBD Bank letter of credit .................................................. 8,400 8,500 -------- -------- Total ............................................................. 43,334 46,266 Less -- current portion of long-term borrowings ..................... (2,200) (7,169) -------- -------- Long-term borrowings -- less current portion ........................ $ 41,134 $ 39,097 ======== ======== Subsequent to December 31, 1996, the Bank syndicate term loan and revolving credit line were paid in full, with accrued interest, in connection with the merger described in Note 15. These borrowings were replaced with a $54,000 term loan, $38,000 revolving line of credit and $3,000 swing line of credit, each expiring on January 10, 2002. Accordingly, these amounts are classified as long-term borrowings at December 31, 1996. The term loan bears interest at a variable spread over 90-day LIBOR, and the revolving and swing lines of credit bear interest at a variable spread over the prime rate. The Corporation also entered into an $18,000 capital expenditure line of credit that expires on January 10, 2002. The agreements contain various financial and other covenants. Borrowings are secured by substantially all of the assets of the Corporation. The proceeds of the Lewis term debt were used to finance customer tooling. The debt is collateralized by a customer purchase order which allows for recovery of the term-debt principal and interest, administrative cost and a predetermined markup. The proceeds of the industrial development revenue bonds were used to finance the real and personal property of Creative. These bonds are backed by an NBD Bank letter of credit, which carries a rate of .8% and is collateralized by substantially all assets of Creative. The letter of credit reimbursement agreement includes covenants requiring minimum tangible capital, debt service coverage and limitations on other indebtedness. NOTE 7. STOCK OPTION PLAN The Corporation adopted a stock option plan in 1990 which provides for the granting of discretionary and nondiscretionary options, alternative stock appreciation rights, cash payment rights, incentive stock options, or a combination thereof. Each option granted under the plan is for a unit consisting of one share of Class A and ten shares of Class B common stock. During the years ended December 31, 1995 and 1994 the Corporation recorded compensation expense of $213 and $70, respectively. No options were granted or exercised during the year ended December 31, 1996. Subsequent to December 31, 1996 and in connection with the merger described in Note 15, all of the outstanding stock options were canceled. The costs incurred by the Corporation in connection with the cancellation of the outstanding stock options were reimbursed by L-E F-45
424B3150th Page of 221TOC1stPreviousNextBottomJust 150th
LOBDELL EMERY CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1996, 1995 AND 1994 (DOLLAR AMOUNTS IN THOUSANDS) -------------------------------------------------------------------------------- NOTE 7. STOCK OPTION PLAN (CONTINUED) Acquisition, Inc. at close. The Corporation has treated the reimbursement as a credit to compensation expense recognized in connection with the cancellation of the aforementioned stock options. The disclosures required under Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," have been omitted as all outstanding stock options were canceled subsequent to December 31, 1996. Because the acquiring company (see Note 15) has no stock option plan, the Corporation's management does not believe such disclosure to be relevant to the users of the consolidated financial statements. NOTE 8. INCOME TAXES The Corporation's benefit for income taxes consists of the following for the years ended December 31: [Download Table] 1996 1995 1994 Current Federal .......... $ (647) $ 399 $ 1,425 State ............ 371 375 ------- ------- ------- (647) 770 1,800 ------- ------- ------- Deferred Federal .......... (3,405) (869) (1,206) State ............ (517) (165) (152) ------- ------- ------- (3,922) (1,034) (1,358) ------- ------- ------- $(4,569) $ (264) $ 442 ======= ======= ======= A reconciliation between the Corporation's income tax provision (benefit) and the amount computed by applying the statutory income tax rate to income before income taxes is as follows for the years ended December 31: [Download Table] 1996 1995 1994 Statutory rate ................................... $(4,223) $(362) $ 311 State taxes, net of federal benefit .............. (517) 136 147 Nondeductible items .............................. 212 104 76 Other ............................................ (41) (142) (92) ------- ----- ----- Provision (benefit) for income taxes ............. $(4,569) $(264) $ 442 ======= ===== ===== F-46
424B3151st Page of 221TOC1stPreviousNextBottomJust 151st
LOBDELL EMERY CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1996, 1995 AND 1994 (DOLLAR AMOUNTS IN THOUSANDS) -------------------------------------------------------------------------------- NOTE 8. INCOME TAXES (CONTINUED) Significant components of the Corporation's deferred tax assets and (liabilities) are as follows at December 31: [Download Table] 1996 1995 Deferred tax liabilities Tax depreciation in excess of book ...... $ (8,312) $ (8,619) Prepaid pension asset ................... (427) (574) -------- -------- Gross deferred tax liabilities ............ (8,739) (9,193) -------- -------- Deferred tax assets Postretirement medical benefits ......... 7,463 6,418 Equipment impairment reserve ............ 1,140 Workers' compensation ................... 926 927 Medical benefits accrual ................ 687 611 Allowance for bad debts ................. 477 190 Environmental reserves .................. 334 334 Postemployment benefits ................. 323 323 AMT credit carry forward ................ 1,871 1,708 Other ................................... 1,330 540 -------- -------- Gross deferred tax assets ................. 14,551 11,051 -------- -------- Valuation allowance ....................... (200) -------- -------- Net deferred tax asset .................... $ 5,612 $ 1,858 ======== ======== A valuation allowance is provided on the tax benefits otherwise associated with certain tax attributes unless it is considered more likely than not that the benefit will be realized. The Corporation has net operating loss carry forwards for state income tax purposes with potential future tax benefits of approximately $150 at December 31, 1996, which expire during the years 2010 and 2011. The Corporation has Tennessee Jobs Tax Credit carry forwards of approximately $200 at December 31, 1996, which expire during the years 2010 and 2011. NOTE 9. BENEFIT PLANS The Corporation sponsors six noncontributory-defined benefit pension plans covering substantially all employees meeting the age and length of service requirements as specified in the plans. The plan covering salaried employees provides pension benefits that are based on a percentage of the employee's average monthly compensation during the five highest consecutive years out of their last ten years, and their years of credited service up to a maximum of 30 years. The Corporation's hourly pension plans do not provide for increases in future compensation levels. The Corporation's funding policy for this plan is to make contributions in amounts sufficient to annually fund the plan's current service cost and the initial past service cost, plus interest, over a period of 30 years. Plans covering hourly employees generally provide benefits of stated amounts based on their unique labor agreements for each year of service. The Corporation's funding policy for these plans is to make at least the minimum annual contributions required by applicable regulations. F-47
424B3152nd Page of 221TOC1stPreviousNextBottomJust 152nd
LOBDELL EMERY CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1996, 1995 AND 1994 (DOLLAR AMOUNTS IN THOUSANDS) -------------------------------------------------------------------------------- NOTE 9. BENEFIT PLANS (CONTINUED) The following table sets forth the plans' funded status and amounts recognized on the Corporation's balance sheet at December 31: [Enlarge/Download Table] 1996 1995 ------------------------ ------------------------- OVERFUNDED UNDERFUNDED OVERFUNDED UNDERFUNDED PLANS PLANS PLANS PLANS Actuarial present value of benefit obligation: Vested benefits ............................ $ 14,784 $ 21,270 $ 13,718 $ 18,926 Nonvested benefits ......................... 1,174 1,468 1,143 1,597 -------- -------- -------- -------- 15,958 22,738 14,861 20,523 Effect of projected future compensation levels ..................................... 3,278 2,866 -------- -------- -------- -------- Projected benefit obligation for service rendered ................................... 19,236 22,738 17,727 20,523 Plan assets at fair value (primarily U.S. government securities, bonds and notes and mutual funds) .......................... (18,857) (19,656) (17,092) (17,477) -------- -------- -------- -------- Plan assets less than projected benefit obligation ................................. 379 3,082 635 3,046 Unrecognized net loss ........................ (2,080) (865) (2,612) (1,353) Unrecognized prior service cost .............. 174 (2,757) 227 (1,572) Unrecognized net obligation being recognized over 15-20 years ................ 300 (346) 350 (426) Adjustment required to recognize minimum liability .................................. 3,968 3,332 -------- -------- -------- -------- (Prepaid) accrued pension cost ............... $ (1,227) $ 3,082 $ (1,400) $ 3,027 ======== ======== ======== ======== The minimum pension liability in excess of the allowable intangible asset of $751 and $1,218 at December 31, 1996 and 1995, respectively, has been recorded as a separate component of equity, net of tax. F-48
424B3153rd Page of 221TOC1stPreviousNextBottomJust 153rd
LOBDELL EMERY CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1996, 1995 AND 1994 (DOLLAR AMOUNTS IN THOUSANDS) -------------------------------------------------------------------------------- NOTE 9. BENEFIT PLANS (CONTINUED) Net periodic pension cost included the following components for the year ended December 31: [Download Table] 1996 1995 1994 Service cost ...................... $ 1,100 $ 857 $ 1,142 Interest cost ..................... 2,800 2,641 2,418 Actual return on plan assets ...... (4,322) (5,867) (232) Net amortization and deferral ..... 1,560 3,606 (1,993) ------- ------- ------- Net periodic pension cost ......... $ 1,138 $ 1,237 $ 1,335 ======= ======= ======= Actuarial assumptions used in determining the projected benefit obligation are as follows: [Download Table] 1996 1995 1994 Discount rate .................................. 7.5% 7.5% 8.5% Rate of increase in future compensation ........ 4.5% 4.5% 4.5% Expected long-term rate of return on assets .... 9.0% 9.0% 8.0% The Corporation sponsors a Supplemental Employee Retirement Plan (SERP) which covers three key officers of the Corporation. At December 31, 1996, the Corporation has accrued a liability of $217 related to the SERP. The Corporation sponsors five defined contribution 401(k) plans. The Salaried Employees' Retirement Savings Plan covers all salaried employees of the Corporation and Winchester. The Alma Hourly Employees' Retirement Savings Plan, the Argos Hourly Employees' Retirement Savings Plan, the Creative Fabrication Corporation and the Greencastle Hourly Employees' Plan cover all eligible hourly employees at the respective locations. The Corporation generally contributes 25% of the first 6% of the base compensation that a participant contributes to the plans. NOTE 10. POSTRETIREMENT MEDICAL BENEFITS In addition to the Corporation's defined benefit pension plans, the Corporation sponsors unfunded defined benefit medical plans that provide postretirement medical benefits to certain full-time employees meeting the age, length of service and contractual requirements as specified in the plans. The plan covering salaried employees is a contributory plan providing medical benefits to those hired before July 1, 1993. The percentage of cost paid by the retiree currently ranges from 10% for 30 or more years of service at retirement to 55% for 15 years of service at retirement, with Corporation contributions commencing upon attainment of age 62. Those retiring with less than 15 years of service and those hired after June 30, 1993 may participate in the plan at their own cost. The plan is currently noncontributory for those employees who retired prior to July 1, 1993. The plans covering hourly employees provide medical benefit plan options that are similar to those offered to active hourly employees, with Corporation contributions limited either to that available under traditional coverage for Alma hourly retirees or to 87% of the total applicable premium for Greencastle retirees. The following table presents the plans' funded status reconciled with amounts recognized in the Corporation's balance sheets at December 31: [Download Table] 1996 1995 Accumulated postretirement benefit obligation Retirees ....................................... $ 14,420 $ 13,132 Full eligible active plan participants ......... 4,767 4,408 Other active plan participants ................. 14,613 12,931 -------- -------- Total unfunded obligation ................... 33,800 30,471 Unrecognized loss ................................ (2,618) (1,481) Unrecognized transition obligation ............... (11,543) (12,101) -------- -------- Postretirement medical benefits liability ........ $ 19,639 $ 16,889 ======== ======== F-49
424B3154th Page of 221TOC1stPreviousNextBottomJust 154th
LOBDELL EMERY CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1996, 1995 AND 1994 (DOLLAR AMOUNTS IN THOUSANDS) -------------------------------------------------------------------------------- NOTE 10. POSTRETIREMENT MEDICAL BENEFITS (CONTINUED) Net periodic postretirement benefit cost included the following components for the year ended December 31: [Download Table] 1996 1995 1994 Service cost ............................................. $ 947 $ 785 $1,088 Interest cost ............................................ 2,216 2,010 2,238 Amortization of transition obligation prior losses ....... 722 643 997 ------ ------ ------ Net periodic postretirement benefit cost ................. $3,885 $3,438 $4,323 ====== ====== ====== The weighted average discount rate used in determining the accumulated postretirement benefit obligation was 7.5% in 1996 and 1995. The weighted average annual assumed rate of increase in the per capita cost of covered benefits (i.e., healthcare cost trend rate) is 9.2% in 1997 trending to 6.5% in 2008 and thereafter for retirees less than 65 years of age. For retirees 65 years of age and over, the rate is 8.9% in 1997 trending to 6.5% in 2008 and thereafter. The healthcare cost trend rate assumption has a significant effect on the amounts reported. For example, increasing the assumed healthcare cost trend rates by one percentage point in each year would increase the accumulated postretirement benefit obligation as of December 31, 1996 and net periodic postretirement benefit cost for the year then ended by approximately $4,861 and $496, respectively. NOTE 11. SHAREHOLDERS' REDEMPTION AGREEMENT AND REDEEMABLE COMMON STOCK Due to the death of a major shareholder, the Corporation entered into an agreement in December, 1988, providing for the redemption from the estate of any class of common stock. The Corporation shall purchase for cash certain shares of common stock as required each year, for the payment by the estate of federal and state taxes and other miscellaneous expenses allowed by Internal Revenue Code Section 6166. The redemption price is based upon the fair value, as previously determined by an independent appraisal at the date of death, adjusted for subsequent increases or decreases in book value as defined in the agreement. Subsequent to December 31, 1996 and in connection with the merger as described in Note 15, a portion of the common stock owned by the estate will be redeemed to cover payment of remaining taxes and administrative expenses. Prior to the merger, $1,542 was advanced to the estate to effectuate a release of an Internal Revenue Service lien. Common shares that are redeemable under that terms of the agreement have been recorded in the consolidated balance sheets as Redeemable Common Stock. During the years ended December 31, 1995 and 1994, the Company redeemed 165,555 shares and 96,597 shares, respectively, at a per share price of $9.55 and $9.34, respectively. The redeemable common stock has been accredit to its redemption value in each of the accompanying consolidated balance sheets. NOTE 12. LEWIS EMERY CAPITAL CORPORATION Lewis was established in order to facilitate the financing of a tooling project for Ford Motor Company (Ford). In 1993, Lewis signed a contract to finance $8,500 of tooling. The transaction was financed with proceeds from the term loan described in Note 6. The receivable from Ford is due in 20 quarterly installments through October 1998. NOTE 13. COMMITMENTS AND CONTINGENCIES OPERATING LEASES As of December 31, 1996, the Corporation had long-term operating leases covering certain machinery and equipment. The minimum rental commitments under noncancellable operating leases with lease terms in excess of one year are as follows as of December 31, 1996: [Download Table] 1997 $ 4,690 1998 3,241 1999 3,367 2000 1,178 2001 3,355 ------- $15,831 ======= F-50
424B3155th Page of 221TOC1stPreviousNextBottomJust 155th
LOBDELL EMERY CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1996, 1995 AND 1994 (DOLLAR AMOUNTS IN THOUSANDS) -------------------------------------------------------------------------------- NOTE 13. COMMITMENTS AND CONTINGENCIES (CONTINUED) ENVIRONMENTAL MATTERS The Corporation is subject to federal, state and local laws and regulations which govern environmental matters. These laws regulate the discharge of materials into the environment and may require the Corporation to remove or mitigate the environmental effects of the disposal or release of petroleum or chemical substances. The Corporation has identified several environmental matters resulting from prior operations. Due to the relatively early stage of investigation of certain of these identified matters as well as potential indemnification by other potentially responsible parties, management is unable to reasonably estimate the ultimate cost of remediating certain of these identified environmental matters. At December 31, 1996 and 1995, the Corporation has a liability of approximately $880 recorded for estimated costs of known environmental matters. GENERAL The Corporation is subject to various claims, lawsuits and administrative proceedings related to matters arising out of the normal course of business. In the opinion of management, after reviewing the information which is currently available with respect to such matters and consulting with legal counsel, any liability which may ultimately be incurred with respect to these matters will not materially affect the financial position of the Corporation. NOTE 14. RELATED-PARTY TRANSACTION During 1996, the Corporation paid sales commissions, based upon qualified foreign sales to Grace Emery Sales Corporation, a Domestic International Sales Corporation (DISC) owned by the shareholders of the Corporation. Commissions payable to the DISC are subject to certain restrictions. Commissions were $369, $521 and $772 in 1996, 1995 and 1994, respectively. NOTE 15. SUBSEQUENT EVENT On January 10, 1997, pursuant to an Agreement and Plan of Merger among Lobdell Emery Corporation, certain shareholders of Lobdell Emery Corporation, BMG-MI, Inc. and L-E Acquisition, Inc. as amended, certain Lobdell Emery Corporation shareholders and option holders had their respective shares and options redeemed for cash of approximately $8,500 and all outstanding shares of common stock of Lobdell Emery Corporation (Oldco) were exchanged for shares of preferred stock of L-E Acquisition, Inc. with a face value of approximately $40,800. In addition, approximately $3,500 of expenses incurred by the Corporation were reimbursed by L-E Acquisition, Inc. Subsequent to the exchange of Oldco's common stock for preferred stock, L-E Acquisition, Inc. was merged with and into Lobdell Emery Corporation (Newco). NOTE 16. RESTATEMENT OF PRIOR YEAR FINANCIAL STATEMENTS The Corporation's management has restated the consolidated financial statements for periods prior to December 31, 1996. The consolidated financial statements have been restated to correct the misstatement of certain assets and liabilities including accounts receivable, accrued employee benefit related costs and accrued environmental costs, net of related tax benefits. The effect of the restatement was to decrease retained earnings at January 1, 1994 by $1,987, decrease net loss by $36 ($.01 per share) for the year ended December 31, 1995, and increase net loss by $647 ($.15 per share) for the year ended December 31, 1994. F-51
424B3156th Page of 221TOC1stPreviousNextBottomJust 156th
 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Howell Industries, Inc. In our opinion, the accompanying balance sheet and the related statement of operations, of changes in stockholders' equity and of cash flows present fairly, in all material respects, the financial position of Howell Industries, Inc. at July 31, 1997, and the results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles. These financial statements are the responsibility of management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above. As described in Note 11, on August 13, 1997 all of the outstanding shares of common stock of Howell Industries, Inc. were acquired by Oxford Automotive, Inc. PRICE WATERHOUSE LLP Bloomfield Hills, Michigan June 15, 1998 F-52
424B3157th Page of 221TOC1stPreviousNextBottomJust 157th
HOWELL INDUSTRIES, INC. BALANCE SHEET (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) -------------------------------------------------------------------------------- [Download Table] July 31, 1997 ASSETS Current assets Cash and cash equivalents (including interest bearing instruments of $1,167) $ 1,997 Accounts receivable 8,583 Income taxes refundable 522 Inventories, net of LIFO reserve of $1,354 Raw material 895 Work-in-process and finished goods 5,331 ------- Total inventories 6,226 Unbilled die costs 957 Prepaid expenses and other assets 1,095 Deferred income taxes 1,229 ------- Total current assets 20,609 Property, plant and equipment, net 10,214 ------- TOTAL ASSETS $30,823 ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $ 4,888 Accrued expenses and other liabilities 4,840 ------- Total current liabilities 9,728 Pension liability 522 Other long-term liabilities 508 Deferred income taxes 851 ------- TOTAL LIABILITIES 11,609 ------- Stockholders' equity Common stock, no par value, 2,500,000 shares authorized, 622,738 issued and outstanding 594 Retained earnings 18,620 ------- Total stockholders' equity 19,214 ------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $30,823 ======= The accompanying notes are an integral part of the financial statements. F-53
424B3158th Page of 221TOC1stPreviousNextBottomJust 158th
HOWELL INDUSTRIES, INC. STATEMENT OF OPERATIONS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) -------------------------------------------------------------------------------- [Download Table] YEAR ENDED JULY 31, 1997 Net sales $95,240 Cost of sales 89,410 ------- GROSS PROFIT 5,830 Selling and administrative expenses 4,748 ------- OPERATING INCOME 1,082 Other income 142 ------- INCOME BEFORE PROVISION FOR INCOME TAXES 1,224 Provision for income taxes 504 ------- NET INCOME $ 720 ======= NET INCOME PER COMMON SHARE $ 1.16 ======= The accompanying notes are an integral part of the financial statements. F-54
424B3159th Page of 221TOC1stPreviousNextBottomJust 159th
HOWELL INDUSTRIES, INC. STATEMENT OF SHAREHOLDERS' EQUITY (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) -------------------------------------------------------------------------------- [Download Table] COMMON STOCK ISSUED AND OUTSTANDING ----------------- RETAINED SHARES AMOUNT EARNINGS BALANCE, JULY 31, 1996 622,738 $594 $18,367 Cash dividends ($0.75 per share) (467) Net income 720 ------- ---- ------- BALANCE, JULY 31, 1997 622,738 $594 $18,620 ======== ==== ======= The accompanying notes are an integral part of the financial statements. F-55
424B3160th Page of 221TOC1stPreviousNextBottomJust 160th
HOWELL INDUSTRIES, INC. STATEMENT OF CASH FLOWS (DOLLAR AMOUNTS IN THOUSANDS) -------------------------------------------------------------------------------- [Download Table] YEAR ENDED JULY 31, 1997 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 720 Adjustments to reconcile net income to net cash provided by operating activities Depreciation 1,590 Gain on sale of equipment (2) Provision for deferred taxes (442) Change in operating assets and liabilities Accounts receivable (2,728) Income taxes refundable (522) Unbilled die costs 6,689 Inventories (5,414) Prepaid expenses 377 Accounts payable (733) Accrued expenses 3,242 Pension liability 2 Other long-term liabilities (943) ------- Net cash provided by operating activities 1,836 ------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of equipment 63 Capital expenditures (4,095) ------- NET CASH USED IN INVESTING ACTIVITIES (4,032) ------- CASH FLOWS FOR FINANCING ACTIVITIES Dividends paid (467) ------- NET CASH USED IN FINANCING ACTIVITIES (467) ------- Decrease in cash and cash equivalents (2,663) Cash and cash equivalents at beginning of year 4,660 ------- Cash and cash equivalents at end of year $ 1,997 ======= Cash paid for income taxes $ 1,429 ======= The accompanying notes are an integral part of the financial statements. F-56
424B3161st Page of 221TOC1stPreviousNextBottomJust 161st
HOWELL INDUSTRIES, INC. NOTES TO FINANCIAL STATEMENTS JULY 31, 1997 (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) -------------------------------------------------------------------------------- 1. NATURE OF OPERATIONS Howell Industries, Inc. ("the Company"), specializes in the production of stamped structural components for the automotive industry, with significant sales within the light-duty truck segment. The Company primarily operates from two plants which are located in Michigan and Ohio. Net sales to the Company's two primary customers as a percentage of total net sales for the year ended July 31, 1997 are as follows: [Download Table] 1997 Ford Motor Company 53% Chrysler Corporation 47% Accounts receivable from Ford Motor Company and Chrysler Corporation represent approximately 68% and 31%, respectively, of the July 31, 1997 accounts receivable balance. Although the Company is directly affected by the economic well being of the North American automotive industry and customers referred to above, management does not believe significant credit risk exists at July 31, 1997. The Company does not require collateral to reduce such risk and historically has not experienced significant losses related to receivables from individual customers or groups of customers in the automotive industry. The Company's primary raw material in the manufacture of structural components is steel. Although steel is available in an adequate supply from numerous vendors, a significant increase in the price of this raw material could affect operating results adversely. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES REVENUE RECOGNITION Revenue is recognized by the Company upon shipment of product to the customer. CASH EQUIVALENTS The Company considers all highly-liquid investments with a maturity of three month or less when purchased to be cash equivalents. UNBILLED DIE COSTS Unbilled die costs represents net costs incurred on tooling projects for which the Company expects to be reimbursed by customers. Ongoing estimates of total costs to be incurred on each tooling project are made by management and losses, if any, are recorded when known. Tooling revenue is recognized upon acceptance of the tooling by the customer. F-57
424B3162nd Page of 221TOC1stPreviousNextBottomJust 162nd
HOWELL INDUSTRIES, INC. NOTES TO FINANCIAL STATEMENTS JULY 31, 1997 (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) -------------------------------------------------------------------------------- 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated on the basis of cost and include expenditures for improvements which materially increase the useful lives of existing assets. Expenditures for normal repair and maintenance are charged to operations as incurred. For federal income tax purposes, depreciation is computed using accelerated and straight-line methods. For financial reporting purposes, depreciation is computed using the straight-line method over the following estimated useful lives: [Download Table] YEARS Buildings and improvements 10-25 Machinery and equipment 5-25 Furniture and fixtures 5-7 Automobiles and trucks 3-5 USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. 3. PREPAID EXPENSES AND OTHER ASSETS Prepaid expenses and other assets are comprised of the following: [Download Table] JULY 31, 1997 Prepaid insurance $135 Prepaid pension costs 146 Intangible pension asset 477 Other 337 ------ $1,095 ====== 4. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are comprised of the following: [Download Table] JULY 31, 1997 Land $ 76 Buildings and improvements 4,210 Machinery and equipment 19,521 Furniture and fixtures 1,735 Automobiles and trucks 590 Construction in progress 629 ------- 26,761 Less - accumulated depreciation (16,547) ------- $10,214 ======= F-58
424B3163rd Page of 221TOC1stPreviousNextBottomJust 163rd
HOWELL INDUSTRIES, INC. NOTES TO FINANCIAL STATEMENTS JULY 31, 1997 (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) -------------------------------------------------------------------------------- 5. ACCRUED EXPENSES AND OTHER LIABILITIES Accrued expenses and other liabilities are comprised of the following: [Download Table] JULY 31, 1997 Income taxes payable $ 188 Accrued die maintenance costs 2,000 Accrued salaries and wages 1,610 Accrued workers' compensation 655 Accrued property and other taxes 221 Other 166 ------ $4,840 ====== 6. OTHER LONG-TERM LIABILITIES Other long-term liabilities are comprised of the following: [Download Table] JULY 31, 1997 Reserve for plant consolidation $ 120 Environmental reserve 388 ----- Total $ 508 ===== 7. INCOME TAXES The Company's income tax expense consists of the following: [Download Table] YEAR ENDED JULY 31, 1997 Current provision Federal $ 795 State and local 112 Deferred provision (403) ----- $ 504 ===== A reconciliation of the income tax provision to that which would result by applying the United States statutory tax rate (34%) to earnings before taxes follows: [Download Table] YEAR ENDED JULY 31, 1997 Tax based on statutory tax rate $ 416 Tax-exempt income (29) Tax deductible ESOP dividend (21) Non-deductible expenses 64 State and local income taxes, net of federal income tax benefit 74 ----- Taxes on income $ 504 ===== F-59
424B3164th Page of 221TOC1stPreviousNextBottomJust 164th
HOWELL INDUSTRIES, INC. NOTES TO FINANCIAL STATEMENTS JULY 31, 1997 (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) -------------------------------------------------------------------------------- 7. INCOME TAXES (CONTINUED) Significant components of the Company's deferred tax assets and (liabilities) are as follows: [Download Table] YEAR ENDED JULY 31, 1997 Deferred tax assets Reserves recorded for financial accounting purposes, not deductible for tax purposes until paid $ 901 Employee benefits and payroll-related deferrals 380 -------- Total deferred tax assets 1,281 -------- Deferred tax liabilities Employee benefits and payroll-related deferrals (98) Tax depreciation in excess of book (780) Other (25) -------- Total deferred tax liabilities (903) -------- Net deferred tax asset $ 378 ======== 8. EMPLOYEE BENEFIT PLANS The Company has three noncontributory defined benefit pension plans covering substantially all of its employees and an unfunded noncontributory defined contribution plan for certain officers. Benefits, which differ by plan are based on years of service and/or the employee's five-year average compensation. The Company's funding policy for its defined benefit plans is to contribute annually an amount necessary to meet or exceed the Employee Retirement Income Security Act's (ERISA) minimum funding standards. The components of net pension cost are as follows: [Download Table] YEAR ENDED JULY 31, 1997 Defined benefit plans Service cost - benefits earned during the year $ 226 Interest cost on projected benefit obligation 347 Actual return on plan assets (788) Net amortization, deferral and other 517 -------- Total 302 Defined contribution plan 30 -------- Net pension costs $ 332 ======== F-60
424B3165th Page of 221TOC1stPreviousNextBottomJust 165th
HOWELL INDUSTRIES, INC. NOTES TO FINANCIAL STATEMENTS JULY 31, 1997 (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) -------------------------------------------------------------------------------- 8. EMPLOYEE BENEFIT PLANS (CONTINUED) The following table sets forth the funded status and amounts recognized in the balance sheets for the defined benefit plans as of July 31, 1997: [Download Table] ASSETS ACCUMULATED EXCEED BENEFITS ACCUMULATED EXCEED BENEFITS ASSETS Actuarial present value of benefit obligation Vested benefit obligation $ 1,255 $ 2,788 Nonvested benefit obligation 65 207 -------- -------- Accumulated benefit obligation 1,320 2,995 Effect of future salary increases 746 -------- Projected benefit obligation 2,066 2,995 Plan assets at fair value 2,584 2,473 -------- -------- Plan assets greater (less) than projected benefit obligation 518 (522) Unrecognized net gain (409) (12) Unrecognized prior service cost 131 405 Unrecognized net transition (asset) obligation (94) 84 Adjustment required to recognize minimum liability (477) -------- -------- Net prepaid pension cost (pension liability) recognized in the balance sheet $ 146 $ (522) ======== ======== The actuarial assumptions used in determining the present value of the projected benefit obligations are: [Download Table] Year Ended July 31, 1997 Weighted average discount rate 7.4% Increase in future compensation levels 5.0% The expected long-term rate of return on assets is 7.5%. Plan assets are invested in a portfolio of cash, income and equity securities and a diversified fund with guaranteed returns. The Company also maintains an Employee Stock Ownership Plan (ESOP) and an Employee Savings Plan (401(k) plan) covering substantially all employees not covered by a collective bargaining agreement. At July 31, 1997, the ESOP owned 60,005 shares of common stock, all of which had been allocated to individual participants. Contributions to the ESOP are authorized at the discretion of the Board of Directors. No contributions were charged to expense during 1997. There were no amounts accrued at July 31, 1997 for such contributions. The Employee Savings Plan provides for participants to contribute up to 10% of their annual compensation each year. In addition, the Company contributes an amount equal to 25% of the first $1 contributed by the employee, plus $0.2. Company contributions amounted to approximately $30 in 1997. 9. LINE OF CREDIT The Company maintains a $4,000 unsecured line of credit with a 5% compensating balance agreement. The Company did not borrow under this line of credit in 1997. F-61
424B3166th Page of 221TOC1stPreviousNextBottomJust 166th
HOWELL INDUSTRIES, INC. NOTES TO FINANCIAL STATEMENTS JULY 31, 1997 (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE-RELATED DATA) -------------------------------------------------------------------------------- 10. OPERATING LEASES The Company rents a warehouse under a noncancelable operating lease, and certain facilities and equipment under cancelable leases. Total rent expense under these leases was $361 in 1997. 11. SUBSEQUENT EVENTS On August 13, 1997, Oxford Automotive, Inc., purchased all of the outstanding common stock of the Company for approximately $23,000 in cash. F-62
424B3167th Page of 221TOC1stPreviousNextBottomJust 167th
 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of RPI Holdings, Inc. In our opinion, the accompanying balance sheet and the related statements of operations, of changes in shareholders' equity and of cash flows present fairly, in all material respects, the financial position of RPI Holdings, Inc., (the Company) at March 31, 1997 and the result of its operations and cash flows for the period from July 1, 1996 to March 31, 1997 in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above. The financial statements of the Company as of and for the year ended June 30, 1996 were audited by other accountants whose report dated February 4, 1998 expressed an unqualified opinion on those statements. As described in Note 2, on November 25, 1997 all of the outstanding shares of common stock of the Company were sold to Oxford Automotive, Inc. PRICE WATERHOUSE LLP Detroit, Michigan February, 6, 1998 F-63
424B3168th Page of 221TOC1stPreviousNextBottomJust 168th
 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors of RPI Holdings, Inc. We have audited the accompanying consolidated balance sheet of RPI Holdings, Inc. and Subsidiaries as of June 30, 1996 and the related consolidated statements of operations, stockholders' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of RPI Holdings, Inc. and Subsidiaries as of June 30, 1996, and the consolidated results of their operations and their cash flows for the year then ended, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. Detroit, Michigan February 4, 1998 F-64
424B3169th Page of 221TOC1stPreviousNextBottomJust 169th
RPI HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS -------------------------------------------------------------------------------- [Enlarge/Download Table] SEPTEMBER 30, MARCH 31, JUNE 30, 1997 1997 1996 (UNAUDITED) ASSETS Current assets Cash $ 32,086 $ 36,145 $ 60,568 Accounts receivable, less allowance for doubtful accounts of $66,055 in 1997 and $80,000 in 1996 1,633,602 1,755,481 1,705,609 Accounts receivable, other 6,414 33,009 Notes receivable 25,000 31,159 10,585 Refundable income taxes 254,000 254,000 300,000 Inventories Raw material 491,219 572,015 378,776 Work-in-process 707,434 671,224 248,934 Finished goods 311,162 347,894 200,672 ------------ ------------ ------------ 1,509,815 1,591,133 828,382 Prepaid expenses 92,022 162,246 292,082 Deferred income taxes 47,600 62,600 47,600 ------------ ------------ ------------ Total current assets 3,594,125 3,899,178 3,277,835 Property, plant and equipment, net 2,965,362 3,024,876 2,764,259 Deferred income taxes 484,500 ------------ ------------ ------------ TOTAL ASSETS $ 7,043,987 $ 6,924,054 $ 6,042,094 ============ ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Current maturities of long-term debt $ 4,269,842 $ 2,937,611 $ 410,092 Accounts payable 2,340,402 2,482,615 1,435,794 Accrued expenses and other liabilities 333,296 416,520 437,939 ------------ ------------ ------------ Total current liabilities 6,943,540 5,836,746 2,283,825 Long-term debt, less current maturities 474,337 509,720 2,504,550 Notes payable to shareholders 364,760 364,760 364,760 Deferred income taxes 63,200 150,300 ------------ ------------ ------------ Total liabilities 7,782,637 6,774,426 5,303,435 Commitments and contingent liabilities (Note 6) Shareholders' equity (deficit) Common stock (no par value; 60,000 shares authorized, 752.8 shares issued and outstanding) 373,295 373,295 373,295 Retained (deficit) earnings (1,111,945) (223,667) 365,364 ------------ ------------ ------------ Total shareholders' equity (738,650) 149,628 738,659 ------------ ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) $ 7,043,987 $ 6,924,054 $ 66,042,094 ============ ============ ============ The accompanying notes are an integral part of the financial statements. F-65
424B3170th Page of 221TOC1stPreviousNextBottomJust 170th
RPI HOLDINGS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS -------------------------------------------------------------------------------- [Enlarge/Download Table] FOR THE SIX MONTHS FOR THE PERIOD FROM FOR THE YEAR ENDED SEPTEMBER 30, JULY 1, 1996 TO ENDED 1997 1996 MARCH 31, 1997 JUNE 30, 1996 (UNAUDITED) Net sales $ 6,938,452 $ 5,021,666 $ 8,823,948 $ 9,819,907 Cost of sales 7,985,430 4,620,341 9,037,409 8,826,609 ------------ ------------ ------------ ------------ GROSS PROFIT (1,046,978) 401,325 (213,461) 993,298 Selling and administrative expenses 143,793 614,816 535,017 1,264,314 ------------ ------------ ------------ ------------ OPERATING LOSS (1,190,771) (213,491) (748,478) (271,016) Other income (expense) Interest expense (203,081) (155,360) (251,585) (404,322) Miscellaneous income (expense) (22,426) 63,911 54,932 (38,740) ------------ ------------ ------------ ------------ LOSS BEFORE INCOME TAXES (1,416,278) (304,940) (945,131) (714,078) Income tax benefit 528,000 128,000 356,100 300,000 ------------ ------------ ------------ ------------ NET LOSS $ (888,278) $ (176,940) $ (589,031) $ (414,078) ============ ============ ============ ============ The accompanying notes are an integral part of the financial statements. F-66
424B3171st Page of 221TOC1stPreviousNextBottomJust 171st
RPI HOLDINGS, INC. CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY -------------------------------------------------------------------------------- [Enlarge/Download Table] COMMON COMMON RETAINED STOCK STOCK EARNINGS TOTAL BALANCES AT JULY 1, 1995 770 $ 383,845 $ 779,442 $ 1,163,287 Net loss (414,078) (414,078) Redemption of common stock (17) (10,550) (10,550) ------ ------------ ------------ ------------ BALANCES AT JUNE 30, 1996 753 373,295 365,364 738,659 Net loss (589,031) (589,031) ------ ------------ ------------ ------------ BALANCES AT MARCH 31, 1997 753 373,295 (223,667) 149,628 Net loss (unaudited) (888,278) (888,278) ------ ------------ ------------ ------------ BALANCES AT SEPTEMBER 30, 1997 (UNAUDITED) 753 $ 373,295 $ (1,111,945) $ (738,650) ====== ============ ============ ============ The accompanying notes are an integral part of the financial statements. F-67
424B3172nd Page of 221TOC1stPreviousNextBottomJust 172nd
RPI HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS -------------------------------------------------------------------------------- [Enlarge/Download Table] FOR THE SIX MONTHS FOR THE PERIOD FROM FOR THE YEAR ENDED SEPTEMBER 30, JULY 1, 1996 TO ENDED 1997 1996 MARCH 31, 1997 JUNE 30, 1996 (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (888,278) $ (176,940) $ (589,031) $ (414,078) Adjustments to reconcile net loss to net cash used in operating activities Depreciation and amortization 153,111 105,256 202,051 213,050 Loss on sale of property and equipment 4,800 Deferred income taxes (532,700) 164,410 (102,100) 12,700 Changes in operating assets and liabilities Accounts receivable 128,293 (272,998) (49,872) 278,413 Accounts receivable, other 26,595 63,479 Notes receivable 6,159 (10,586) (20,574) 3,529 Refundable income taxes 46,000 (300,000) Inventories 81,318 (45,306) (762,751) 290,684 Prepaid expenses and other current assets 75,463 157,560 129,836 (60,560) Accounts payable (142,213) 260,756 1,046,821 33,095 Accrued expenses and other liabilities (88,463) (191,506) (21,419) (204,769) ------------ ------------ ------------ ------------ NET CASH USED IN OPERATING ACTIVITIES (1,207,310) (9,354) (89,644) (84,457) ------------ ------------ ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property and equipment (93,597) (224,814) (671,758) (250,007) proceeds from sale of assets 204,290 ------------ ------------ NET CASH USED IN INVESTING ACTIVITIES (93,597) (224,814) (467,468) (250,007) ------------ ------------ ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Principal borrowings on revolving line of credit, net (65,069) 157,575 515,049 390,475 Proceeds from debt obligations 58,303 792,252 274,757 Principal payments of debt obligations (223,677) (774,612) (350,775) Advances from related party 1,585,594 Redemption of