UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended July 31, 2008
or
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period from to
Commission file number: 000-50303
Hayes Lemmerz International, Inc.
(Exact name of registrant as specified in its charter)
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Delaware
(State or other jurisdiction of
incorporation or organization)
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32-0072578
(IRS Employer
Identification No.)
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15300 Centennial Drive
Northville, Michigan
(Address of principal executive offices)
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48168
(Zip Code)
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Registrants telephone number, including area code:
(734) 737-5000
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes
þ
No
o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions
of large accelerated filer, accelerated filer and smaller reporting
company in Rule 12b-2 of the
Exchange Act. (Check one):
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Large accelerated filer
o
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Accelerated filer
þ
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Non-accelerated filer
o
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Smaller reporting company
o
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(Do not check if a smaller reporting company)
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes
o
No
þ
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and reports required to
be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court. Yes
þ
No
o
As
of September 2, 2008, the number of shares of common stock outstanding of Hayes Lemmerz
International, Inc., was 101,121,203 shares.
HAYES LEMMERZ INTERNATIONAL, INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
Unless otherwise indicated, references to we, us, or our mean Hayes Lemmerz International,
Inc., a Delaware corporation, and its subsidiaries. References to fiscal year means the 12-month
period commencing on February 1
st
of that year and ending January 31
st
of the
following year (e.g., fiscal 2008 means the period beginning February 1, 2008 and ending
January 31, 2009). This report contains forward looking statements with respect to our financial
condition, results of operations, and business. All statements other than statements of historical
fact made in this Quarterly Report on Form 10-Q are forward-looking. Such forward-looking
statements include, among others, those statements including the words expect, anticipate,
intend, believe, and similar language. These forward looking statements involve certain risks
and uncertainties. Our actual results may differ significantly from those projected in the
forward-looking statements. Factors that may cause actual results to differ materially from those
contemplated by such forward looking statements include, among others: (1) competitive pressure in
our industry; (2) fluctuations in the price of steel, aluminum, and other raw materials;
(3) changes in general economic conditions; (4) our dependence on the automotive industry (which
has historically been cyclical) and on a small number of major customers for the majority of our
sales; (5) pricing pressure from automotive industry customers and the potential for re-sourcing of
business to lower-cost providers; (6) changes in the financial markets or our debt ratings
affecting our financial structure and our cost of capital and borrowed money; (7) the uncertainties
inherent in international operations and foreign currency fluctuations; and (8) the risks described
in our Annual Report on Form 10-K for the fiscal year ended January 31, 2008. You are cautioned
not to place undue reliance on the forward-looking statements, which speak only as of the date of
this Quarterly Report on Form 10-Q. We have no duty to update the forward looking statements in
this Quarterly Report on Form 10-Q and we do not intend to provide such updates
2
Item 1.
Financial Statements
HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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Three Months Ended July 31,
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Six Months Ended July 31,
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2008
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2007
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2008
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2007
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(Dollars in millions, except per share amounts)
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Net sales
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$
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563.5
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$
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544.1
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$
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1,137.3
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$
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1,042.7
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Cost of goods sold
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491.6
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491.0
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1,001.7
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933.4
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Gross profit
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71.9
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53.1
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135.6
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109.3
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Marketing, general, and administrative
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39.4
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45.5
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78.7
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80.8
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Amortization of intangibles
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2.9
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2.6
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5.7
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5.0
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Asset impairments and other restructuring charges
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5.8
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1.5
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9.1
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3.9
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Other expense, net
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34.1
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9.5
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30.7
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7.5
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(Loss) earnings from operations
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(10.3
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(6.0
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11.4
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12.1
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Interest expense, net
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14.3
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15.8
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27.6
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33.9
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Loss on early extinguishment of debt
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21.2
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21.5
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Other non-operating expense
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1.0
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0.1
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2.7
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0.1
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Loss from continuing operations before taxes
and minority interest
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(25.6
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(43.1
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(18.9
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(43.4
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Income tax expense
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14.6
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13.3
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27.6
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21.8
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Loss from continuing operations before minority interest
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(40.2
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(56.4
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(46.5
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(65.2
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Minority interest
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6.8
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5.7
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13.3
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9.5
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Loss from continuing operations
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(47.0
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(62.1
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(59.8
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(74.7
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Discontinued operations:
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Income from operations, net of tax of
$0.0, $0.2, $0.0, $0.2, respectively
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2.5
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3.4
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Loss on sale of business, net of tax of $0 for all periods
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(27.5
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(31.1
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Loss from discontinued operations
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(25.0
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(27.7
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Net loss
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$
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(47.0
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$
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(87.1
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$
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(59.8
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$
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(102.4
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Loss per common share data
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Basic and diluted:
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Loss from continuing operations
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$
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(0.46
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$
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(0.78
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$
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(0.59
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$
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(1.25
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Loss from discontinued operations
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(0.32
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(0.46
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Net loss
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$
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(0.46
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$
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(1.10
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$
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(0.59
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$
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(1.71
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Weighted average shares outstanding (in thousands)
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101,104
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79,336
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101,087
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59,854
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See accompanying notes to consolidated financial statements.
3
HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
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July 31,
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January 31,
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2008
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2008
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(Dollars in millions)
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(Unaudited)
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ASSETS
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Current assets:
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Cash and cash equivalents
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$
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87.5
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$
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160.2
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Receivables, net of allowance of $1.3 and $1.5 at July 31, 2008
and January 31, 2008, respectively
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295.0
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305.6
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Other receivables
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43.2
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48.3
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Inventories
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218.4
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179.1
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Assets held for sale
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26.5
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21.4
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Deferred tax assets
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6.1
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5.0
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Prepaid expenses
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8.5
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7.2
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Total current assets
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685.2
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726.8
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Property, plant, and equipment, net of accumulated depreciation of $451.9 and
$385.0 as of July 31, 2008 and January 31, 2008, respectively
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630.8
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616.8
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Goodwill
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252.1
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240.5
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Customer relationships, net of amortization of $22.8 and $19.7 at July 31, 2008
and January 31, 2008, respectively
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106.6
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103.7
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Other intangible assets, net of amortization of $46.1 and $40.2 at July 31, 2008
and January 31, 2008, respectively
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65.3
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65.0
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Deferred tax assets
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1.8
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4.2
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Other assets
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52.4
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48.9
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Total assets
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$
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1,794.2
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$
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1,805.9
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LIABILITIES AND STOCKHOLDERS EQUITY
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Current liabilities:
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Bank borrowings and other notes
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$
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54.9
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$
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32.9
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Current portion of long-term debt
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5.0
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4.8
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Accounts payable
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342.4
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372.0
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Accrued payroll and employee benefits
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71.4
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76.4
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Liabilities held for sale
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8.6
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8.2
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Other accrued liabilities
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66.4
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61.6
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Total current liabilities
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548.7
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555.9
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Long-term debt, net of current portion
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601.6
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572.2
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Deferred tax liabilities
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78.0
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76.1
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Pension and other long-term liabilities
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322.4
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328.9
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Minority interest
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74.7
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70.5
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Commitments and contingencies
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Stockholders equity:
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Preferred stock, 1,000,000 shares authorized, none issued or outstanding at
July 31, 2008 or January 31, 2008
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Common stock, par value $0.01 per share:
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200,000,000 shares authorized; 101,116,801 and 101,057,966
issued and outstanding at July 31, 2008 and January 31, 2008, respectively
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1.0
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1.0
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Additional paid in capital
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884.2
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882.0
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Accumulated deficit
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(990.0
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(928.7
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Accumulated other comprehensive income
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273.6
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248.0
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Total stockholders equity
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168.8
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202.3
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Total liabilities and stockholders equity
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$
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1,794.2
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$
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1,805.9
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See accompanying notes to consolidated financial statements.
4
HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Six Months Ended July 31,
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2008
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2007
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(Dollars in millions)
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Cash flows from operating activities:
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Net loss
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$
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(59.8
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$
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(102.4
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)
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Adjustments to reconcile net loss from operations to net cash provided by
(used for) operating activities:
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Net loss from discontinued operations
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27.7
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Depreciation and amortization
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55.9
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56.4
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Amortization of deferred financing fees and accretion of discount
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1.2
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2.2
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Asset impairments
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7.3
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0.5
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Deferred income taxes
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(0.5
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4.6
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Minority interest
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13.3
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9.5
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Equity compensation expense
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2.0
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4.9
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Loss on sale of assets and businesses
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37.6
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12.2
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Loss on early extinguishment of debt
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21.5
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Changes in operating assets and liabilities that increase (decrease) cash flows:
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Receivables
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30.4
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(63.2
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Other receivables
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5.1
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(10.7
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Inventories
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(29.3
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(34.6
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Prepaid expenses and other
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(1.7
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2.1
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Accounts payable and accrued liabilities
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(74.3
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62.6
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Cash used for operating activities
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(12.8
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)
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(6.7
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Cash flows from investing activities:
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Purchase of property, plant, equipment, and tooling
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(43.0
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(40.8
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Sale of assets
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(26.4
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1.1
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Cash used for investing activities
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(69.4
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(39.7
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Cash flows from financing activities:
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Changes in bank borrowings and credit facilities
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20.8
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(0.3
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Repayment of long-term debt
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(1.5
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)
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(133.3
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)
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Dividends paid to minority shareholders
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(10.8
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)
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(10.1
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Proceeds from issuance of common stock
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193.1
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Fees paid for Rights Offering
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(31.5
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)
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Cash provided by financing activities
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8.5
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17.9
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Cash flows of discontinued operations:
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Net cash provided by operating activities
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|
|
|
|
|
6.6
|
|
Net cash provided by investing activities
|
|
|
|
|
|
|
37.4
|
|
Net cash used for financing activities
|
|
|
|
|
|
|
(4.6
|
)
|
|
|
|
|
|
|
|
Net cash provided by discontinued operations
|
|
|
|
|
|
|
39.4
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
1.0
|
|
|
|
2.9
|
|
|
|
|
|
|
|
|
(Decrease) increase in cash and cash equivalents
|
|
|
(72.7
|
)
|
|
|
13.8
|
|
Cash and cash equivalents at beginning of period
|
|
|
160.2
|
|
|
|
38.5
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
87.5
|
|
|
$
|
52.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental data:
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
29.2
|
|
|
$
|
32.1
|
|
Cash paid for income taxes
|
|
$
|
26.2
|
|
|
$
|
10.8
|
|
See accompanying notes to consolidated financial statements.
5
HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
Accumulated Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid in
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
|
|
|
|
Shares
|
|
|
Par Value
|
|
|
Capital
|
|
|
Deficit
|
|
|
Income
|
|
|
Total
|
|
|
|
(Dollars in millions, except share amounts)
|
|
Balance at January 31, 2008
|
|
|
101,057,966
|
|
|
$
|
1.0
|
|
|
$
|
882.0
|
|
|
$
|
(928.7
|
)
|
|
$
|
248.0
|
|
|
$
|
202.3
|
|
Preferred stock dividends accrued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.3
|
)
|
|
|
|
|
|
|
(0.3
|
)
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(59.8
|
)
|
|
|
|
|
|
|
(59.8
|
)
|
Currency translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21.5
|
|
|
|
21.5
|
|
Unrealized gain on derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.7
|
|
|
|
4.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(33.6
|
)
|
Shares of redeemable preferred stock of
subsidiary converted into common stock
|
|
|
14,152
|
|
|
|
|
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
|
|
0.2
|
|
Shares issued for vested RSUs
|
|
|
44,683
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension measurement date adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1.2
|
)
|
|
|
(0.6
|
)
|
|
|
(1.8
|
)
|
Equity compensation expense
|
|
|
|
|
|
|
|
|
|
|
2.0
|
|
|
|
|
|
|
|
|
|
|
|
2.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at July 31, 2008
|
|
|
101,116,801
|
|
|
$
|
1.0
|
|
|
$
|
884.2
|
|
|
$
|
(990.0
|
)
|
|
$
|
273.6
|
|
|
$
|
168.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 31, 2007
|
|
|
38,470,434
|
|
|
$
|
0.4
|
|
|
$
|
678.6
|
|
|
$
|
(733.6
|
)
|
|
$
|
156.4
|
|
|
$
|
101.8
|
|
Preferred stock dividends accrued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.4
|
)
|
|
|
|
|
|
|
(0.4
|
)
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(102.4
|
)
|
|
|
|
|
|
|
(102.4
|
)
|
Currency translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39.9
|
|
|
|
39.9
|
|
Unrealized gain on derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.7
|
|
|
|
1.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(60.8
|
)
|
Shares of redeemable preferred stock of
subsidiary converted into common stock
|
|
|
89,932
|
|
|
|
|
|
|
|
2.1
|
|
|
|
|
|
|
|
|
|
|
|
2.1
|
|
Shares issued for vested RSUs
|
|
|
847,341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued to note holders
|
|
|
1,049,020
|
|
|
|
|
|
|
|
5.3
|
|
|
|
|
|
|
|
|
|
|
|
5.3
|
|
Common stock issued, net of fees
|
|
|
59,423,077
|
|
|
|
0.6
|
|
|
|
184.8
|
|
|
|
|
|
|
|
|
|
|
|
185.4
|
|
Equity compensation expense
|
|
|
|
|
|
|
|
|
|
|
5.0
|
|
|
|
|
|
|
|
|
|
|
|
5.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at July 31, 2007
|
|
|
99,879,804
|
|
|
$
|
1.0
|
|
|
$
|
875.8
|
|
|
$
|
(836.4
|
)
|
|
$
|
198.0
|
|
|
$
|
238.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
6
HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three and six months ended July 31, 2008 and 2007
(Unaudited)
(Dollars in millions, unless otherwise stated)
Note 1. Description of Business
These financial statements should be read in conjunction with our Annual Report on Form 10-K
for the fiscal year ended January 31, 2008 as filed with the Securities and Exchange Commission on
April 10, 2008.
Description of Business
Unless otherwise indicated, references to us, we, or our mean Hayes Lemmerz
International, Inc., a Delaware corporation, and our subsidiaries, and references to fiscal year
mean our fiscal year commencing on February 1 of that year and ending on January 31 of the
following year (e.g., fiscal 2008 refers to the period beginning February 1, 2008 and ending
January 31, 2009, fiscal 2007 refers to the period beginning February 1, 2007 and ending
January 31, 2008).
Originally founded in 1908, Hayes Lemmerz International, Inc. is a leading worldwide producer
of aluminum and steel wheels for passenger cars and light trucks and of steel wheels for commercial
trucks and trailers. We are also a supplier of automotive powertrain components. We have global
operations with 22 facilities, including business and sales offices and manufacturing facilities
located in 13 countries around the world. We sell our products to every major North American,
Japanese, and European manufacturer of passenger cars and light trucks and to commercial highway
vehicle customers throughout the world.
Note 2. Basis of Presentation
Our unaudited interim consolidated financial statements do not include all of the disclosures
required by U.S. generally accepted accounting principles (GAAP) for annual financial statements.
In our opinion, all adjustments considered necessary for a fair presentation of the interim period
results have been included. Operating results for the fiscal 2008 interim period presented are not
necessarily indicative of the results that may be expected for the full fiscal year ending
January 31, 2009.
The preparation of consolidated financial statements in conformity with GAAP requires us 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 consolidated financial
statements and the reported amounts of revenues and expenses during the reporting period.
Considerable judgment is often involved in making these determinations; the use of different
assumptions could result in significantly different results. We believe our assumptions and
estimates are reasonable and appropriate; however, actual results could differ from those
estimates.
Certain prior period amounts have been reclassified to conform with the current year
presentation.
Note 3. Stock-Based Compensation
We have a Long Term Incentive Plan (LTIP) that provides for the grant of incentive stock
options (ISOs), stock options that do not qualify as ISOs, restricted shares of common stock, and
restricted stock units (collectively, the awards). Any officer, director, or key employee of Hayes
Lemmerz International, Inc. or any of its subsidiaries is eligible to be designated a participant
in the LTIP. We follow the provisions of the Statement of Financial Accounting Standards (SFAS)
123R, Share-Based Payment.
In
July 2008 we issued 914,364 restricted stock units and 180,006 shares of restricted stock
to our key employees and members of our Board of Directors. The
914,364 restricted stock units
were issued to our key employees and will vest in February 2011.
The 180,006 shares of restricted stock were issued to our Board of Directors and will vest in December 2008. As of July 31, 2008
there was $2.0 million of these unvested restricted stock outstanding, which will be expensed based
on the respective vesting dates.
In July 2008 we issued 1,268,984 stock options to our key employees and members of our Board
of Directors. There were 144,384 stock options issued to our Board of Directors, which will vest
in December 2008. The remaining stock options were issued to our key employees and will vest as to
one-third of the options in each of February 2009, 2010, and 2011. As of July 31, 2008 there was
$1.4 million of these unvested stock options outstanding, which will be expensed based on the
respective vesting dates.
7
In July 2008 we also issued performance cash awards to our key employees with a value of $2.4
million at target performance levels. The awards will be determined based on 50% with respect to
performance through February 2010 and 50% with respect to performance through February 2011.
Note 4. Inventories
The major classes of inventory were as follows (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
July 31,
|
|
|
January 31,
|
|
|
|
2008
|
|
|
2008
|
|
Raw materials
|
|
$
|
51.5
|
|
|
$
|
41.4
|
|
Work-in-process
|
|
|
45.2
|
|
|
|
41.8
|
|
Finished goods
|
|
|
87.5
|
|
|
|
62.4
|
|
Spare parts and supplies
|
|
|
34.2
|
|
|
|
33.5
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
218.4
|
|
|
$
|
179.1
|
|
|
|
|
|
|
|
|
Note 5. Assets Held for Sale
Assets held for sale consist of the following (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
July 31,
|
|
|
January 31,
|
|
|
|
2008
|
|
|
2008
|
|
Nuevo Laredo, Mexico facility
|
|
$
|
23.3
|
|
|
$
|
16.0
|
|
Huntington, Indiana facility
|
|
|
1.7
|
|
|
|
2.7
|
|
Howell, Michigan facility
|
|
|
1.5
|
|
|
|
2.7
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
26.5
|
|
|
$
|
21.4
|
|
|
|
|
|
|
|
|
The balance includes our Nuevo Laredo facility, which met the criteria for an asset held for
sale during the last quarter of fiscal 2007 in accordance with Statement of Financial Accounting
Standards SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144).
The Nuevo Laredo facility is included in our Other segment and is expected to be sold during fiscal
2008. Also included in the balance are land and idle buildings in Huntington, Indiana and Howell,
Michigan, which we are currently marketing for sale.
The assets and liabilities of our Nuevo Laredo facility were as follows (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
July 31,
|
|
|
January 31,
|
|
|
|
2008
|
|
|
2008
|
|
Receivables
|
|
$
|
16.0
|
|
|
$
|
11.3
|
|
Inventories
|
|
|
5.8
|
|
|
|
4.1
|
|
Prepaid expenses
|
|
|
0.2
|
|
|
|
0.1
|
|
Property, plant, and equipment, net
|
|
|
1.3
|
|
|
|
0.5
|
|
|
|
|
|
|
|
|
Total assets held for sale
|
|
$
|
23.3
|
|
|
$
|
16.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
8.6
|
|
|
$
|
8.0
|
|
|
|
|
|
|
|
|
Total liabilities held for sale
|
|
$
|
8.6
|
|
|
$
|
8.0
|
|
|
|
|
|
|
|
|
On June 13, 2008 we sold our Hoboken, Belgium subsidiary to BBS
International GmbH (BBS), a subsidiary of Punch International nv (Punch).
Under the agreement, BBS acquired all of the outstanding shares of stock of
Hayes Lemmerz Belgie B.V.B.A., which had operations in Hoboken (near
Antwerp, Belgium). The Hoboken factory produced cast aluminum wheels for
passenger cars and employed approximately 315 people. The purchase price of
the transaction was not material to either party. We recorded a loss
on the sale of approximately $38 million and contributed
$27 million in cash as part of the transaction.
8
Note 6. Discontinued Operations
On November 9, 2007 we completed the sale of our Brakes business to Brembo North America, Inc.
Under the agreement, Brembo North America, Inc., a subsidiary of Brembo S.p.A., acquired all of
the stock of two subsidiary companies that ran our brake manufacturing operations in Homer,
Michigan and Monterrey, Mexico, and certain assets used in connection with the divisions sales,
marketing, and engineering group located at our headquarters in Northville, Michigan. Proceeds
from the sale were approximately $57 million. We recognized a gain on the sale of approximately
$16.8 million.
Operating results for the Brakes business were as follows (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
|
Six Months Ended July 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
Net sales
|
|
$
|
|
|
|
$
|
26.2
|
|
|
$
|
|
|
|
$
|
56.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income tax expense
|
|
$
|
|
|
|
$
|
1.1
|
|
|
$
|
|
|
|
$
|
5.1
|
|
Income tax expense
|
|
|
|
|
|
|
0.2
|
|
|
|
|
|
|
|
0.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
|
|
|
$
|
0.9
|
|
|
$
|
|
|
|
$
|
4.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On June 29, 2007 we completed the sale of all of the issued and outstanding shares of capital
stock of MGG Group B.V. (MGG Group) to an affiliate of ECF Group, a privately held company based in
the Netherlands and Switzerland. MGG Group and its subsidiaries operate aluminum casting and
machining facilities located in Tegelen and Nieuw Bergen, the Netherlands and in Antwerp, Belgium,
and represented our International Components business. We received proceeds of $17.5 million. We
recorded a loss on the sale of $27.5 million.
Operating results for MGG Group were as follows (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
|
Six Months Ended July 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
Net sales
|
|
$
|
|
|
|
$
|
23.8
|
|
|
$
|
|
|
|
$
|
55.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income tax expense
|
|
$
|
|
|
|
$
|
(25.3
|
)
|
|
$
|
|
|
|
$
|
(27.5
|
)
|
Income tax benefit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
|
|
|
$
|
(25.3
|
)
|
|
$
|
|
|
|
$
|
(26.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In the beginning of fiscal 2007 we divested Hayes Lemmerz International Bristol, Inc. and
Hayes Lemmerz International Montague, Inc., which operated our suspension business operations in
Bristol, Indiana and Montague, Michigan. We received consideration for the sale of approximately $26.2 million, which consisted of approximately
$21.1 million in cash plus the assumption of approximately $5.1 million of debt under capital
leases for equipment at the facilities. The loss recorded on the sale through July 31, 2008 was
$3.2 million. In October 2006 we sold the outstanding shares of stock of Hayes Lemmerz
International Southfield, Inc., our Southfield, Michigan iron suspension components machining
plant. We received net cash proceeds of approximately $18 million and recorded a loss on the sale
through July 31, 2008 of $2.1 million. In fiscal 2005 we sold our suspension facility in Cadillac,
Michigan. These facilities made up our suspension components business (Suspension business) and
were part of our previous reported Components segment We divested these operations in order to
streamline our business in North America, provide us with greater financial flexibility, and focus
our global resources on core businesses.
As of January 31, 2008, we had a balance of $0.2 million in accrued liabilities for our
Suspension business. Operating results for the Suspension business were as follows (dollars in
millions):
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
|
Six Months Ended July 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
Net sales
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
6.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income tax expense
|
|
$
|
|
|
|
$
|
(0.6
|
)
|
|
$
|
|
|
|
$
|
(5.1
|
)
|
Income tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
|
|
|
$
|
(0.6
|
)
|
|
$
|
|
|
|
$
|
(5.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The operating results of the Brakes business, MGG Group, and Suspension business were
classified as discontinued operations and prior periods have been reclassified in accordance with
SFAS 144.
Note 7. Bank Borrowings, Other Notes, and Long-Term Debt
Short term bank borrowings and other notes were $54.9 million as of July 31, 2008 with a
weighted average interest rate of 6.2% and $32.9 million as of January 31, 2008 with a weighted
average interest rate of 6.0%. These consist primarily of short-term credit facilities at our
foreign subsidiaries.
Long-term debt consists of the following (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
July 31,
|
|
|
January 31,
|
|
|
|
2008
|
|
|
2008
|
|
Various foreign bank and government loans, weighted average interest rates of
4.7% and 4.0% at July 31, 2008 and January 31, 2008, respectively
|
|
$
|
2.9
|
|
|
$
|
3.3
|
|
Term Loan maturing 2014, weighted average interest rate of 7.1% and 7.4%
at July 31, 2008 and January 31, 2008, respectively
|
|
|
401.1
|
|
|
|
381.5
|
|
8.25% New Senior Notes due 2015
|
|
|
202.6
|
|
|
|
192.2
|
|
|
|
|
|
|
|
|
|
|
|
606.6
|
|
|
|
577.0
|
|
Less current portion of long-term debt
|
|
|
(5.0
|
)
|
|
|
(4.8
|
)
|
|
|
|
|
|
|
|
Total long-term debt
|
|
$
|
601.6
|
|
|
$
|
572.2
|
|
|
|
|
|
|
|
|
Euro Denominated Debt
The balance of our Term Loan maturing 2014 was approximately 257.4 million and 258.1
million as of July 31, 2008 and January 31, 2008 respectively. The balance of our 8.25% New Senior
Notes due 2015 was 130 million as of July 31, 2008 and January 31, 2008. Due to the
fluctuation in exchange rates, the US Dollar balance of the Term Loan maturing 2014 increased from
$381.5 million as of January 31, 2008 to $401.1 million as of July 31, 2008, and the balance
of the 8.25% New Senior Notes due 2015 increased from $192.2 million as of January 31, 2008 to
$202.6 million as of July 31, 2008.
Rights Offering
On March 16, 2007 we announced that our Board of Directors approved a Rights Offering of up to
$180 million of common stock to our stockholders at a subscription price of $3.25 per share. The
Board of Directors set the record date of April 10, 2007 for determining the stockholders entitled
to participate in the Rights Offering. On April 16, 2007, the Board of Directors amended the
Rights Offering, reducing the number of shares available to Deutsche Bank Securities subject to its
Direct Investment option at a price of $3.25 per share from a maximum of 5,538,462 shares to a
maximum of 4,038,462 shares. In addition, Deutsche Bank agreed that shares exercised pursuant to
the Direct Investment would be in addition to, and not reduce the number of shares of the Companys
Common Stock offered in the Rights Offering, raising the total value of the Rights Offering and
Direct Investment to $193.1 million. The Rights Offering and the Direct Investment were approved at
a special meeting of stockholders held on May 4, 2007.
In May 2007, we distributed to stockholders of record as of April 10, 2007 non-transferable
subscription rights to purchase shares of our common stock in connection with the Rights Offering.
Stockholders on the record date received 1.3970 rights for each share of our common stock held on
the record date. The Rights Offering included an oversubscription privilege entitling holders of
the rights to subscribe for additional shares not purchased upon exercise of rights. The Rights
Offering was fully subscribed and Deutsche Bank
10
Securities, Inc. exercised the Direct Investment.
On May 30, 2007 we closed on the Rights Offering and Direct Investment and issued 59,423,077 new
shares of common stock. Net proceeds of $185.4 million, after fees and expenses of $7.7 million,
were used to repurchase the outstanding 10
1
/
2
% Senior Notes due 2010 (Old Notes) pursuant to the
tender offer described below, with the excess being used to provide working capital and for general
corporate purposes.
Old Notes
As of January 31, 2007, HLI Operating Company, Inc. (HLI Opco) had $162.5 million aggregate
principal amount of Old Notes that were to mature on June 15, 2010. Interest on the Old Notes
accrued at a rate of 10
1
/
2
% per annum and was payable semi-annually in arrears on June 15 and
December 15. During the first quarter of fiscal 2007, we issued common stock in exchange for $5.0
million of the Old Notes, reducing the principal amount outstanding from $162.5 million to $157.5
million. During the second quarter of fiscal 2007 these notes were repurchased by HLI Opco pursuant
to the tender offer.
Except as set forth below, the Old Notes were not redeemable at the option of HLI Opco prior
to June 15, 2007. Starting on that date, HLI Opco could redeem all or any portion of the Old Notes,
at once or over time, upon the terms and conditions set forth in the senior note indenture
agreement (Old Indenture). At any time prior to June 15, 2007, HLI Opco could redeem all or any
portion of the Old Notes, at once or over time, at a redemption price equal to 100% of the
principal amount of the Old Notes to be redeemed, plus a specified make-whole premium.
The Old Indenture provided for certain restrictions regarding additional debt, dividends and
other distributions, additional stock of subsidiaries, certain investments, liens, transactions
with affiliates, mergers, consolidations, and the transfer and sales of assets. The Indenture also
provided that a holder of the Old Notes could, under certain circumstances, have the right to
require that we repurchase such holders Old Notes upon a change of control of the Company. The Old
Notes were unconditionally guaranteed as to the payment of principal, premium, if any, and
interest, jointly and severally on a senior, unsecured basis by us and substantially all of our
domestic subsidiaries.
Tender Offer for Senior Notes
On May 8, 2007, HLI Opco commenced a cash tender offer to repurchase all of its outstanding
Old Notes, which had an aggregate principal amount outstanding of $157.5 million. Concurrently
with the tender offer, HLI Opco solicited consents to amend the indenture governing the Old Notes.
The tender offer expired at 11:59 p.m., Eastern Standard time, on Tuesday, June 5, 2007. The
purchase price for the tendered Old Notes was based on a fixed spread of 50 basis points over the
yield on the 3.625% U.S. Treasury Note due June 30, 2007. Holders who validly tendered their Old
Notes and delivered their consents to the proposed amendments to the indenture on or prior to 5:00
p.m., Eastern Standard time, on May 21, 2007, were paid, in addition to the purchase price for the
Old Notes, a consent payment equal to $30.00 per $1,000 in principal amount of Old Notes. Holders
of approximately $154.2 million principal amount tendered their Old Notes and consented to the
amendments to the Indenture. On June 6, 2007 the remaining $3.3 million in Senior Notes were
tendered for redemption.
New Senior Notes
On May 30, 2007 we closed on a new offering of 130 million 8
1
/
4
% senior unsecured notes (New
Notes) issued by Hayes Lemmerz Finance LLC Luxembourg S.C.A., a newly formed European subsidiary
(Hayes Luxembourg). The New Notes mature in 2015 and contain customary covenants and restrictions.
The New Notes and the related Indenture restrict our ability to, among other things, make certain
restricted payments, incur debt and issue preferred stock, incur liens, permit dividends and other
distributions by our subsidiaries, merge, consolidate, or sell assets, and engage in transactions
with affiliates. The New Notes and the Indenture also contain customary events of default,
including failure to pay principal or interest on the Notes or the guarantees when due, among
others. The New Notes are fully and unconditionally guaranteed on a senior unsecured basis by us
and substantially all of our direct and indirect domestic subsidiaries and certain of our indirect
foreign subsidiaries. Proceeds from the issuance of the New Notes, together with the proceeds from
the New Credit Facilities (as described below), were used to refinance obligations under our
Amended and Restated Credit Agreement, dated as of April 11, 2005, to repay in full the
approximately $21.8 million mortgage note on our headquarters building in Northville, Michigan, to
pay related fees and expenses, and for working capital and other general corporate purposes.
We were required to exchange the New Senior Notes for substantially identical senior notes
that have been registered with the SEC (Exchange Notes). In connection with this obligation, we
were required to file a registration statement with the SEC with
respect to the Exchange Notes.
11
The registration statement was
declared effective on April 11, 2008 and the exchange offer was completed on May 12, 2008.
Credit Facility
On June 3, 2003 HLI Opco, entered into a $550 million senior secured credit facility (Old
Credit Facility), which initially consisted of a $450 million six-year amortizing term loan (Term
Loan B) and a five-year $100 million revolving credit facility.
On April 11, 2005 we amended and restated the Old Credit Facility to establish a new second
lien $150 million term loan (Term Loan C), from which 50% of the net proceeds were to be used for
general corporate purposes, with the remainder of the net proceeds used to repay a portion of the
Term Loan B. The Term Loan C principal balance of $150 million was due on June 3, 2010.
On May 30, 2007 we amended and restated the credit facility to establish three new senior
secured credit facilities in an amount of approximately $495 million (New Credit Facilities). The
proceeds from the New Credit Facilities, together with the proceeds of other financing activities,
were used to refinance our obligations under the Old Credit Facility. Additional proceeds were
used to replace existing letters of credit and to provide for working capital and other general
corporate purposes, and to pay the fees and expenses associated with the New Credit Facilities.
The New Credit Facilities consist of a term loan facility of 260 million maturing in 2014
borrowed by Hayes Luxembourg, a revolving credit facility of $125 million maturing in 2013
available to HLI Opco and Hayes Luxembourg (Revolving Credit Facility), and a synthetic letter of
credit facility of 15 million available to both borrowers. The interest rate for the term loan
is generally the EURIBOR rate plus 2.75% per annum until the first date after October 31, 2007 that
our leverage ratio is equal to or less than 2.5 to 1.0 and, thereafter, the EURIBOR rate plus 2.50%
per annum. The interest rate for the Revolving Credit Facility is generally either the LIBOR rate
plus 2.75% per annum (for borrowings by HLI Opco) or the EURIBOR rate plus 2.75% per annum (for
borrowings by Hayes Luxembourg).
The obligations of HLI Opco and Hayes Luxembourg under the New Credit Facility are guaranteed
by us and substantially all of our direct and indirect domestic subsidiaries. In addition, the
obligations of Hayes Luxembourg under the New Credit Facilities are guaranteed, subject to certain
exceptions, by certain of our foreign subsidiaries. The obligations of HLI Opco and Hayes
Luxembourg under the New Credit Facilities and the guarantors obligations under their respective
guarantees of the New Credit Facilities are, subject to certain exceptions, secured by a first
priority perfected pledge of substantially all capital stock owned by the borrowers and the
guarantors (but not more than 65% of the capital stock of Hayes Luxembourg or any foreign
subsidiary can secure HLI Opcos obligations) and substantially all of the other assets owned by
the borrowers and the guarantors. All foreign guarantees and collateral
are subject to applicable restrictions on cross-stream and upstream guarantees and other legal
restrictions, including financial assistance rules, thin capitalization rules, and corporate
benefit rules.
The New Credit Facilities contain negative covenants restricting our ability and the ability
of our subsidiaries to, among other actions, declare dividends or repay or repurchase capital
stock, cancel, prepay, redeem or repurchase debt, incur liens and engage in sale-leaseback
transactions, make loans and investments, incur indebtedness, amend or otherwise alter certain debt
documents, engage in mergers, acquisitions and asset sales, engage in transactions with affiliates,
and alter their respective businesses. The financial covenants under the New Credit Facilities
include covenants regarding a maximum total leverage ratio, a minimum interest coverage ratio and a
maximum capital expenditures amount. The New Credit Facilities contain customary events of default
including, without limitation, failure to pay principal and interest when due, material inaccuracy
of any representation or warranty, failure to comply with any covenant, cross-defaults, failure to
satisfy or stay execution of judgments in excess of specified amounts, bankruptcy or insolvency,
the existence of certain materially adverse employee benefit liabilities in excess of a certain
specified amount, the invalidity or impairment of any loan documents and a change of control.
As of July 31, 2008 there were no outstanding borrowings and no letters of credit issued under
the Revolving Credit Facility, and 13.6 or $21.2 million in letters of credit issued under the
synthetic letter of credit facility. As of January 31, 2008 there were no outstanding borrowings,
approximately $0.8 million in letters of credit issued under the Revolving Credit Facility, and
approximately 14.1 million or $20.8 million in letters of credit issued under the synthetic
letter of credit facility. The amount available to borrow under the Revolving Credit Facility at
July 31, 2008 and January 31, 2008 was $125.0 million and $124.2 million, respectively. The
12
amount available to borrow under the synthetic letter of credit at July 31, 2008 and January
31, 2008 was 1.4 million and 0.9 million, respectively.
Note 8. Pension Plans and Postretirement Benefits Other Than Pensions
We sponsor several defined benefit pension plans (Pension Benefits) and health care and life
insurance benefits (Other Benefits) for certain employees around the world. We fund the Pension
Benefits based upon the funding requirements of United States and international laws and
regulations in advance of benefit payments and the Other Benefits as benefits are provided to the
employees.
The fiscal 2008 and fiscal 2007 amounts shown below present the Pension Benefits and Other
Benefits expense for the three and six months ended July 31, 2008 and 2007 (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US Plans
|
|
|
International Plans
|
|
|
|
Pension Benefits
|
|
|
Other Benefits
|
|
|
Pension Benefits
|
|
|
|
Three Months Ended July 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
Service cost
|
|
$
|
0.3
|
|
|
$
|
0.2
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
0.2
|
|
|
$
|
0.1
|
|
Interest cost
|
|
|
2.6
|
|
|
|
2.6
|
|
|
|
2.3
|
|
|
|
2.3
|
|
|
|
1.9
|
|
|
|
1.7
|
|
Expected return on plan assets
|
|
|
(3.3
|
)
|
|
|
(3.0
|
)
|
|
|
|
|
|
|
(0.1
|
)
|
|
|
(0.3
|
)
|
|
|
(0.2
|
)
|
Amortization of net loss
|
|
|
(0.3
|
)
|
|
|
|
|
|
|
(0.3
|
)
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
$
|
(0.7
|
)
|
|
$
|
(0.2
|
)
|
|
$
|
2.0
|
|
|
$
|
2.1
|
|
|
$
|
1.8
|
|
|
$
|
1.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US Plans
|
|
|
International Plans
|
|
|
|
Pension Benefits
|
|
|
Other Benefits
|
|
|
Pension Benefits
|
|
|
|
Six Months Ended July 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
Service cost
|
|
$
|
0.5
|
|
|
$
|
0.5
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
0.4
|
|
|
$
|
0.3
|
|
Interest cost
|
|
|
5.2
|
|
|
|
5.2
|
|
|
|
4.7
|
|
|
|
4.7
|
|
|
|
3.8
|
|
|
|
3.3
|
|
Expected return on plan assets
|
|
|
(6.6
|
)
|
|
|
(6.0
|
)
|
|
|
|
|
|
|
|
|
|
|
(0.6
|
)
|
|
|
(0.4
|
)
|
Amortization of net loss
|
|
|
(0.5
|
)
|
|
|
|
|
|
|
(0.8
|
)
|
|
|
(0.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
$
|
(1.4
|
)
|
|
$
|
(0.3
|
)
|
|
$
|
3.9
|
|
|
$
|
4.5
|
|
|
$
|
3.6
|
|
|
$
|
3.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We contributed $3.1 million to our U.S. Pension Benefits plan during the first six months of
fiscal 2008 and expect to contribute an additional $3.6 million during the remainder of fiscal
2008. We contributed $7.2 million to our U.S. Other Benefits plan during the first six months of
fiscal 2008 and expect to contribute an additional $6.7 million during the remainder of fiscal
2008. We contributed $5.7 million to our international Pension Benefits plan during the first six
months of fiscal 2008 and expect to contribute an additional $4.3 million during the remainder of
fiscal 2008.
Effective January 31, 2007, we adopted SFAS 158, Employers Accounting for Defined Benefit
Pension and Other Postretirement Plans (SFAS 158), which amends SFAS 87, Employers Accounting
for Pensions, SFAS 88, Employers Accounting for Settlements and Curtailments of Defined Benefit
Pension Plan and for Termination Benefits, SFAS 106, Employers Accounting for Postretirement
Benefits Other Than Pensions, and SFAS 132 (revised 2003), Employers Disclosures about Pensions
and Other Postretirement Benefits. SFAS 158 requires an employer to recognize the over funded or
under funded status of defined benefit pension and postretirement plans (other than a multi
employer plan) as an asset or liability in its statement of financial position and to recognize
changes in that funded status in the year in which the changes occur through comprehensive income.
This Statement also requires an employer to measure the funded status of a plan as of the date of
its year-end statement of financial position, with limited exceptions. During the first quarter of
fiscal 2008, we recorded $1.2 million as a decrease of beginning retained earnings and $0.6 million
as a decrease of accumulated other comprehensive income due to the change in measurement date.
13
Note 9. Asset Impairments and Other Restructuring Charges
Asset impairment losses and other restructuring charges for the three and six months ended
July 31, 2008 and 2007 were as follows (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31, 2008
|
|
|
|
Automotive
|
|
|
|
|
|
|
|
|
|
Wheels
|
|
|
Other
|
|
|
Total
|
|
Facility closure costs
|
|
$
|
0.3
|
|
|
$
|
0.1
|
|
|
$
|
0.4
|
|
Impairment of facility, machinery, and equipment
|
|
|
4.6
|
|
|
|
|
|
|
|
4.6
|
|
Severance and other restructuring costs
|
|
|
0.8
|
|
|
|
|
|
|
|
0.8
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5.7
|
|
|
$
|
0.1
|
|
|
$
|
5.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31, 2007
|
|
|
|
Automotive
|
|
|
|
|
|
|
|
|
|
Wheels
|
|
|
Other
|
|
|
Total
|
|
Facility closure costs
|
|
$
|
0.6
|
|
|
$
|
|
|
|
$
|
0.6
|
|
Impairment of facility, machinery, and equipment
|
|
|
0.4
|
|
|
|
|
|
|
|
0.4
|
|
Severance and other restructuring costs
|
|
|
|
|
|
|
0.5
|
|
|
|
0.5
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1.0
|
|
|
$
|
0.5
|
|
|
$
|
1.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended July 31, 2008
|
|
|
|
Automotive
|
|
|
|
|
|
|
|
|
|
Wheels
|
|
|
Other
|
|
|
Total
|
|
Facility closure costs
|
|
$
|
0.6
|
|
|
$
|
0.2
|
|
|
$
|
0.8
|
|
Impairment of facility, machinery, and equipment
|
|
|
7.3
|
|
|
|
|
|
|
|
7.3
|
|
Severance and other restructuring costs
|
|
|
0.9
|
|
|
|
0.1
|
|
|
|
1.0
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
8.8
|
|
|
$
|
0.3
|
|
|
$
|
9.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended July 31, 2007
|
|
|
|
Automotive
|
|
|
|
|
|
|
|
|
|
Wheels
|
|
|
Other
|
|
|
Total
|
|
Facility closure costs
|
|
$
|
2.7
|
|
|
$
|
0.1
|
|
|
$
|
2.8
|
|
Impairment of facility, machinery, and equipment
|
|
|
0.5
|
|
|
|
|
|
|
|
0.5
|
|
Severance and other restructuring costs
|
|
|
|
|
|
|
0.6
|
|
|
|
0.6
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3.2
|
|
|
$
|
0.7
|
|
|
$
|
3.9
|
|
|
|
|
|
|
|
|
|
|
|
In
May 2008 we announced the closure of our Gainesville, Georgia aluminum wheels facility. We
also announced that Punch Property International nv (Punch Property), the property investment
company of the Punch group, entered into a definitive agreement with Hayes Lemmerz International -
Georgia, Inc. to purchase the real estate and certain equipment from Gainesville. This acquisition
is expected to be completed following cessation of production in connection with the closure of the
facility, which is expected to occur by the end of December 2008. The purchase price of the
transaction was not material to either party. We expect to incur $1.7 million in one-time
termination benefits and severance related to this closure.
Asset Impairment Losses and Other Restructuring Charges for the Three Months Ended July 31, 2008
During the second quarter of fiscal 2008, we recorded facility closure, employee restructuring
charges, and asset impairments of $5.8 million.
In the Automotive Wheels segment we recorded expense of $5.7 million. Facility closure costs
of $0.3 million were related to ongoing costs for our idle aluminum wheel facilities in Howell,
Michigan and Huntington, Indiana. Asset impairments of $4.6 million
14
were related to our aluminum
wheel facilities in Gainesville, Georgia and Huntington, Indiana. These facilities were written
down to fair value based on current market conditions. Severance and other restructuring costs of
$0.8 million were related to our aluminum wheel facility in Gainesville, Georgia.
Expense of $0.1 million in the Other segment was related to facility closure cost for our
Ferndale, Michigan technical center, which was closed in fiscal 2007.
Asset Impairment Losses and Other Restructuring Charges for the Three Months Ended July 31, 2007
During the second quarter of fiscal 2007, we recorded facility closure, employee restructuring
charges, and asset impairments of $1.5 million.
In the Automotive Wheels segment we recorded expense of $1.0 million, principally related to
the closure of our Huntington, Indiana aluminum wheel facility as well as machinery and equipment
impairments recorded at our Brazil aluminum wheel facility.
The Other segment expense of $0.5 million was primarily related to severance expense at our
facility in Nuevo Laredo, Mexico.
Asset Impairment Losses and Other Restructuring Charges for the Six Months Ended July 31, 2008
During the first six months of fiscal 2008, we recorded facility closure, employee
restructuring charges, and asset impairments of $9.1 million.
In the Automotive Wheels segment we recorded expense of $8.8 million. Facility closure costs
of $0.6 million were related to ongoing costs for our idle aluminum wheel facilities in Howell,
Michigan and Huntington, Indiana. Asset impairments of $7.3 million were related to our aluminum
wheel facilities in Gainesville, Georgia; Huntington, Indiana; Howell, Michigan; Hoboken, Belgium;
and Chihuahua, Mexico. These facilities were written down to fair value based on current market
conditions. Severance and other restructuring costs of $0.9 million were related to our aluminum
wheel facility in Gainesville, Georgia.
Expense of $0.3 million in the Other segment consisted of $0.2 million for facility closure
cost and severance of $0.1 million for our Ferndale, Michigan technical center, which was closed in
fiscal 2007.
Asset Impairment Losses and Other Restructuring Charges for the Six Months Ended July 31, 2007
During the first six months of fiscal 2007, we recorded facility closure, employee
restructuring charges, and asset impairments of $3.9 million.
In the Automotive Wheels segment we recorded expense of $3.2 million, principally related to
the closure of our Huntington, Indiana aluminum wheel facility as well as machinery and equipment
impairments recorded at our Brazil aluminum wheel facility.
The Other segment expense of $0.7 million consisted of $0.1 million facility closure cost at
our Ferndale, Michigan technical center and $0.6 severance expense at our Nuevo Laredo facility in
Mexico and our corporate offices.
Facility Exit Costs and Severance Accruals
The following table describes the activity in the balance sheet accounts affected by severance
and other facility exit costs during the six months ended July 31, 2008 (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effects of
|
|
|
|
|
|
|
January 31,
|
|
|
|
|
|
|
Foreign
|
|
|
July 31, 2008
|
|
|
|
2008 Accrual
|
|
|
Expense
|
|
|
Currency
|
|
|
Accrual
|
|
Facility closure costs
|
|
$
|
|
|
|
$
|
0.8
|
|
|
$
|
(0.8
|
)
|
|
$
|
|
|
Severance and other restructuring costs
|
|
|
0.2
|
|
|
|
1.0
|
|
|
|
(0.2
|
)
|
|
|
1.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
0.2
|
|
|
$
|
1.8
|
|
|
$
|
(1.0
|
)
|
|
$
|
1.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
Note 10. Weighted Average Shares Outstanding
Shares outstanding for the three and six months ended July 31, 2008 and 2007 were as follows
(thousands of shares):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
Six Months Ended July 31,
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
Basic weighted average shares outstanding
|
|
|
101,104
|
|
|
|
79,336
|
|
|
|
101,087
|
|
|
|
59,854
|
|
Dilutive effect of options and warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares outstanding
|
|
|
101,104
|
|
|
|
79,336
|
|
|
|
101,087
|
|
|
|
59,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three and six months ended July 31, 2008 and 2007 all options, warrants, and unvested
restricted stock units were excluded from the calculation of diluted loss per share on the
Consolidated Statements of Operations as the effect was anti-dilutive due to the net loss in those
periods.
Note 11. Taxes on Income
Income tax expense allocated to continuing operations for the three and six months ended July
31, 2008 and 2007 were as follows (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
|
2008
|
|
2007
|
|
|
US
|
|
Foreign
|
|
US
|
|
Foreign
|
Pre-tax loss
|
|
$
|
(23.2
|
)
|
|
$
|
(2.4
|
)
|
|
$
|
(23.1
|
)
|
|
$
|
(20.0
|
)
|
Income tax expense
|
|
|
0.4
|
|
|
|
14.2
|
|
|
|
0.5
|
|
|
|
12.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended July 31,
|
|
|
2008
|
|
2007
|
|
|
US
|
|
Foreign
|
|
US
|
|
Foreign
|
Pre-tax income (loss)
|
|
$
|
(41.3
|
)
|
|
$
|
22.4
|
|
|
$
|
(49.4
|
)
|
|
$
|
6.0
|
|
Income tax expense
|
|
|
0.7
|
|
|
|
26.9
|
|
|
|
0.7
|
|
|
|
21.1
|
|
Income tax expense for the three and six months ended July 31, 2008 and 2007 was primarily the
result of tax expense in foreign jurisdictions and various states.
We have determined that a valuation allowance is required against all net deferred tax assets
in the United States and certain deferred tax assets in foreign jurisdictions. As such, there is no
federal income tax benefit recorded against current losses incurred in the United States.
Effective February 1, 2007, we adopted Financial Accounting Standards Board Interpretation No.
48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 (FIN
48). FIN 48 provides guidance on financial statement recognition and measurement of tax positions
taken, or expected to be taken, in tax returns. The initial adoption of FIN 48 did not have a
material impact on our financial statements. As of January 31, 2008, the amount of unrecognized
tax benefits was $11.1 million, including $1.3 million of related accrued interest and penalties.
As of July 31, 2008, the amount of unrecognized tax benefits was $10.7 million, including $1.0
million of related accrued interest and penalties.
The amount of unrecognized tax benefits may increase or decrease in the future for various
reasons including adding amounts for current tax year positions, expiration of open income tax
returns due to the statutes of limitation, changes in managements judgment about the level of
uncertainty, status of examinations, litigation and legislative activity, and the addition or
elimination of uncertain tax positions. Our policy is to report interest related to unrecognized
tax benefits in interest expense and penalties, if any, related to unrecognized tax benefits in
income tax expense in our Consolidated Statements of Operations.
We have open tax years from primarily 2000 to 2007 with various significant taxing
jurisdictions including the United States, Germany, Italy, Brazil, Turkey, and Czech Republic.
These open years contain matters that could be subject to differing interpretations of applicable
tax laws and regulations as they relate to the amount, timing or inclusion of revenue and expenses
or the sustainability of income tax credits for a given audit cycle. We have recorded a tax benefit
only for those positions that meet the more-likely-than-not standard.
16
Note 12. Segment Reporting
We are organized based primarily on markets served and products produced. Under this
organizational structure, our operating segments have been aggregated into two reportable segments:
Automotive Wheels and Other. The Automotive Wheels segment includes results from our operations
that primarily design and manufacture fabricated steel and cast aluminum wheels for original
equipment manufacturers in the global passenger car, light vehicle, and commercial vehicle markets.
The Other segment includes results from our operations that primarily design and manufacture
powertrain components for the passenger car and light vehicle markets as well as financial results
related to the corporate office and the elimination of certain intercompany activities.
The following tables present revenues and other financial information by business segment
(dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31, 2008
|
|
|
Automotive
|
|
|
|
|
|
|
Wheels
|
|
Other
|
|
Total
|
Net sales
|
|
$
|
550.1
|
|
|
$
|
13.4
|
|
|
$
|
563.5
|
|
Asset impairments and other restructuring charges
|
|
|
5.7
|
|
|
|
0.1
|
|
|
|
5.8
|
|
(Loss) earnings from operations
|
|
|
(12.3
|
)
|
|
|
2.0
|
|
|
|
(10.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31, 2007
|
|
|
Automotive
|
|
|
|
|
|
|
Wheels
|
|
Other
|
|
Total
|
Net sales
|
|
$
|
521.2
|
|
|
$
|
22.9
|
|
|
$
|
544.1
|
|
Asset impairments and other restructuring charges
|
|
|
1.0
|
|
|
|
0.5
|
|
|
|
1.5
|
|
Earnings (loss) from operations
|
|
|
21.7
|
|
|
|
(27.7
|
)
|
|
|
(6.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended July 31, 2008
|
|
|
Automotive
|
|
|
|
|
|
|
Wheels
|
|
Other
|
|
Total
|
Net sales
|
|
$
|
1,112.1
|
|
|
$
|
25.2
|
|
|
$
|
1,137.3
|
|
Asset impairments and other restructuring charges
|
|
|
8.8
|
|
|
|
0.3
|
|
|
|
9.1
|
|
Earnings from operations
|
|
|
4.6
|
|
|
|
6.8
|
|
|
|
11.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended July 31, 2007
|
|
|
Automotive
|
|
|
|
|
|
|
Wheels
|
|
Other
|
|
Total
|
Net sales
|
|
$
|
988.0
|
|
|
$
|
54.7
|
|
|
$
|
1,042.7
|
|
Asset impairments and other restructuring charges
|
|
|
3.2
|
|
|
|
0.7
|
|
|
|
3.9
|
|
Earnings (loss) from operations
|
|
|
46.3
|
|
|
|
(34.2
|
)
|
|
|
12.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of July 31, 2008
|
|
|
Automotive
|
|
|
|
|
|
|
Wheels
|
|
Other
|
|
Total
|
Total assets
|
|
$
|
1,971.8
|
|
|
$
|
(177.6
|
)
|
|
$
|
1,794.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of January 31, 2008
|
|
|
Automotive
|
|
|
|
|
|
|
Wheels
|
|
Other
|
|
Total
|
Total assets
|
|
$
|
1,956.6
|
|
|
$
|
(150.7
|
)
|
|
$
|
1,805.9
|
|
Note 13. Minority Interest in Equity of Consolidated Subsidiaries
The consolidated financial statements include the accounts of our majority-owned subsidiaries
in which we have control. The balance sheet and results of operations of controlled subsidiaries
where ownership is greater than 50 percent, but less than 100 percent,
17
are included in the
consolidated financial statements and are offset by a related minority interest expense and
liability recorded for the minority interest ownership.
Minority interest includes common shares in consolidated subsidiaries where our ownership is
less than 100 percent and preferred stock issued by HLI Opco. The preferred stock is redeemable by
HLI Opco at any time after June 3, 2013, and may be exchanged at the option of the holders at any
time for shares of Hayes Lemmerz International, Inc. common stock. The holders of the preferred
stock are entitled to cash dividends of 8% of the liquidation preference per annum when, as, and if
declared by the Board of Directors of HLI Opco. Dividends accrue without interest from the date of
issuance until declared and paid or until the shares are redeemed by HLI Opco or exchanged by the
holders thereof.
The balance of minority interest is summarized as follows (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 31,
|
|
|
|
July 31, 2008
|
|
|
2008
|
|
Minority interest in consolidated affiliates
|
|
$
|
63.5
|
|
|
$
|
59.3
|
|
Minority interest in preferred stock
|
|
|
11.2
|
|
|
|
11.2
|
|
|
|
|
|
|
|
|
Total minority interest
|
|
$
|
74.7
|
|
|
$
|
70.5
|
|
|
|
|
|
|
|
|
Note 14. New Accounting Pronouncements
In March 2008 the Financial Accounting Standards Board issued SFAS 161,
Disclosures about
Derivative Instruments and Hedging Activities an amendment of FASB Statement No. 133
(SFAS 161).
This standard requires enhanced disclosures about an entitys derivative and hedging
activities. SFAS 161 requires qualitative disclosures about objectives and strategies for using
derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative
instruments, and disclosures about credit-risk-related contingent features in derivative
agreements. This standard is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008 and only requires disclosures for earlier periods
presented for comparative purposes beginning in the first year after the year of initial
adoption. We do not anticipate that the adoption of SFAS 161 will have a significant impact on our
financial condition or results of operations.
In December 2007 the FASB issued SFAS 141R,
Business Combinations
(SFAS 141R). This
standard establishes principles and requirements for how the acquirer recognizes and measures the
acquired identifiable assets, assumed liabilities, noncontrolling interest in the acquiree, and
acquired goodwill or gain from a bargain purchase. SFAS 141R also determines what information the
acquirer must disclose to enable users of the financial statements to evaluate the nature and
financial effects of the business combination. SFAS 141R applies prospectively to business
combinations for which the acquisition date is on or after January 1, 2009. We do not anticipate
that the adoption of SFAS 141R will have a significant impact on our financial condition or results
of operations.
In December 2007 the FASB issued SFAS 160,
Noncontrolling Interests in Consolidated Financial
Statements an amendment of ARB No. 51
(SFAS 160). This standard establishes accounting and
reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of
a subsidiary. SFAS 160 clarifies that a noncontrolling interest in a subsidiary is an ownership
interest in the consolidated entity that should be reported as equity in the consolidated financial
statements. SFAS 160 is effective for us as of February 1, 2009 with early adoption
prohibited. SFAS 160 shall be applied prospectively as of the beginning of the fiscal year in
which this standard is initially applied. The presentation and disclosure requirements of this
standard shall be applied retrospectively for all periods presented and will impact how we present
and disclose noncontrolling interests and income from noncontrolling interests in our financial
statements.
In September 2006 the FASB issued SFAS 157,
Fair Value Measurements
(SFAS 157). SFAS 157
establishes a framework for measuring fair value and expands disclosures about fair value
measurements. The changes to current practice resulting from the application of SFAS 157 relate to
the definition of fair value, the methods used to measure fair value, and the expanded disclosures
about fair value measurements. We adopted the provisions of SFAS 157 with our fiscal year beginning
February 1, 2008. The adoption of SFAS 157 did not have an impact on our consolidated financial
statements. In February 2008, the FASB issued FASB Staff Position (FSP) 157-2, Effective Date of
FASB Statement No. 157 (FSP 157-2). This FSP delays the effective date of SFAS 157 for all
nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at
fair value in the
18
financial statements on a recurring basis (at least annually). The effective date
for nonfinancial assets and nonfinancial liabilities has been delayed by one year to fiscal years
beginning after November 15, 2008 and interim periods within those fiscal years. We do not
anticipate that the adoption of FSP 157-2 will have a significant impact on our financial condition
and results of operations.
Note 15. Condensed Consolidating Financial Statements
The following condensed consolidating financial statements present the financial information
required with respect to those entities that guarantee certain of our debt.
The condensed consolidating financial statements are presented based on the equity method of
accounting. Under this method, the investments in subsidiaries are recorded at cost and adjusted
for our share of the subsidiaries cumulative results of operations, capital contributions,
distributions, and other equity changes. The principal elimination entries eliminate investments in
subsidiaries and intercompany balances and transactions.
Guarantor and Nonguarantor Financial Statements
As of July 31, 2008 Hayes Lemmerz International, Inc. (Hayes), HLI Parent Company, Inc.
(Parent), HLI Opco, and substantially all of our domestic subsidiaries and certain of our foreign
subsidiaries (collectively, excluding Hayes, the Guarantors) fully and unconditionally guaranteed,
on a joint and several basis, the New Notes. This guarantor structure is a result of the
restructuring of our debt as discussed in Note 7, Bank Borrowings, Other Notes, and Long-term Debt.
At July 31, 2008 certain of our foreign subsidiaries were not obligated to guaranty the New Notes,
nor were our domestic subsidiaries that are special purpose entities formed for domestic accounts
receivable securitization programs (collectively, the Nonguarantor Subsidiaries). In lieu of
providing separate unaudited financial statements for each of the Guarantors, we have included the
unaudited supplemental guarantor condensed consolidating financial statements. We do not believe
that separate financial statements for each of the Guarantors are material to investors. Therefore,
separate financial statements and other disclosures concerning the Guarantors are not presented. In
order to present comparable financial statements, we have presented them as if the current
guarantor structure had been in place for all periods presented.
19
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Six Months Ended July 31, 2008
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Nonguarantor
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Total
|
|
|
|
(Dollars in millions)
|
|
Net sales
|
|
$
|
|
|
|
$
|
|
|
|
$
|
707.8
|
|
|
$
|
475.6
|
|
|
$
|
(46.1
|
)
|
|
$
|
1,137.3
|
|
Cost of goods sold
|
|
|
0.1
|
|
|
|
|
|
|
|
641.4
|
|
|
|
406.3
|
|
|
|
(46.1
|
)
|
|
|
1,001.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
66.4
|
|
|
|
69.3
|
|
|
|
|
|
|
|
135.6
|
|
Marketing, general, and administrative
|
|
|
|
|
|
|
0.4
|
|
|
|
54.6
|
|
|
|
23.7
|
|
|
|
|
|
|
|
78.7
|
|
Equity in (earnings) losses of
subsidiaries and joint ventures
|
|
|
59.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(59.7
|
)
|
|
|
|
|
Amortization of intangibles
|
|
|
|
|
|
|
|
|
|
|
0.3
|
|
|
|
5.4
|
|
|
|
|
|
|
|
5.7
|
|
Asset impairments and other restructuring charges
|
|
|
|
|
|
|
|
|
|
|
8.3
|
|
|
|
0.8
|
|
|
|
|
|
|
|
9.1
|
|
Other (income) expense, net
|
|
|
|
|
|
|
|
|
|
|
(5.2
|
)
|
|
|
16.8
|
|
|
|
19.1
|
|
|
|
30.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) earnings from operations
|
|
|
(59.8
|
)
|
|
|
(0.4
|
)
|
|
|
8.4
|
|
|
|
22.6
|
|
|
|
40.6
|
|
|
|
11.4
|
|
Interest expense (income), net
|
|
|
|
|
|
|
41.7
|
|
|
|
(21.0
|
)
|
|
|
6.9
|
|
|
|
|
|
|
|
27.6
|
|
Other non-operating expense
|
|
|
|
|
|
|
|
|
|
|
0.6
|
|
|
|
1.4
|
|
|
|
0.7
|
|
|
|
2.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) earnings from continuing operations
before taxes and minority interest
|
|
|
(59.8
|
)
|
|
|
(42.1
|
)
|
|
|
28.8
|
|
|
|
14.3
|
|
|
|
39.9
|
|
|
|
(18.9
|
)
|
Income tax expense
|
|
|
|
|
|
|
1.7
|
|
|
|
12.2
|
|
|
|
13.7
|
|
|
|
|
|
|
|
27.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) earnings from continuing
operations before minority interest
|
|
|
(59.8
|
)
|
|
|
(43.8
|
)
|
|
|
16.6
|
|
|
|
0.6
|
|
|
|
39.9
|
|
|
|
(46.5
|
)
|
Minority interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13.3
|
|
|
|
|
|
|
|
13.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(59.8
|
)
|
|
$
|
(43.8
|
)
|
|
$
|
16.6
|
|
|
$
|
(12.7
|
)
|
|
$
|
39.9
|
|
|
$
|
(59.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Six Months Ended July 31, 2007
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Nonguarantor
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in millions)
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
|
|
|
$
|
|
|
|
$
|
679.4
|
|
|
$
|
412.1
|
|
|
$
|
(48.8
|
)
|
|
$
|
1,042.7
|
|
Cost of goods sold
|
|
|
0.1
|
|
|
|
|
|
|
|
632.8
|
|
|
|
349.3
|
|
|
|
(48.8
|
)
|
|
|
933.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
46.6
|
|
|
|
62.8
|
|
|
|
|
|
|
|
109.3
|
|
Marketing, general, and administrative
|
|
|
|
|
|
|
|
|
|
|
62.2
|
|
|
|
18.6
|
|
|
|
|
|
|
|
80.8
|
|
Equity in (earnings) losses of
subsidiaries and joint ventures
|
|
|
102.3
|
|
|
|
33.4
|
|
|
|
|
|
|
|
|
|
|
|
(135.7
|
)
|
|
|
|
|
Amortization of intangibles
|
|
|
|
|
|
|
|
|
|
|
0.5
|
|
|
|
4.5
|
|
|
|
|
|
|
|
5.0
|
|
Asset impairments and other restructuring charges
|
|
|
|
|
|
|
|
|
|
|
3.9
|
|
|
|
|
|
|
|
|
|
|
|
3.9
|
|
Other expense (income) , net
|
|
|
|
|
|
|
|
|
|
|
5.5
|
|
|
|
(137.4
|
)
|
|
|
139.4
|
|
|
|
7.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) earnings from operations
|
|
|
(102.4
|
)
|
|
|
(33.4
|
)
|
|
|
(25.5
|
)
|
|
|
177.1
|
|
|
|
(3.7
|
)
|
|
|
12.1
|
|
Interest expense, net
|
|
|
|
|
|
|
7.9
|
|
|
|
21.0
|
|
|
|
5.0
|
|
|
|
|
|
|
|
33.9
|
|
Loss on early extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
21.5
|
|
|
|
|
|
|
|
|
|
|
|
21.5
|
|
Other non-operating (income) expense
|
|
|
|
|
|
|
|
|
|
|
(2.3
|
)
|
|
|
(1.0
|
)
|
|
|
3.4
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) earnings from continuing operations
before taxes and minority interest
|
|
|
(102.4
|
)
|
|
|
(41.3
|
)
|
|
|
(65.7
|
)
|
|
|
173.1
|
|
|
|
(7.1
|
)
|
|
|
(43.4
|
)
|
Income tax expense
|
|
|
|
|
|
|
|
|
|
|
11.5
|
|
|
|
10.3
|
|
|
|
|
|
|
|
21.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) earnings
from continuing operations before
minority interest
|
|
|
(102.4
|
)
|
|
|
(41.3
|
)
|
|
|
(77.2
|
)
|
|
|
162.8
|
|
|
|
(7.1
|
)
|
|
|
(65.2
|
)
|
Minority interest
|
|
|
|
|
|
|
|
|
|
|
(0.8
|
)
|
|
|
10.3
|
|
|
|
|
|
|
|
9.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) earnings from continuing operations
|
|
|
(102.4
|
)
|
|
|
(41.3
|
)
|
|
|
(76.4
|
)
|
|
|
152.5
|
|
|
|
(7.1
|
)
|
|
|
(74.7
|
)
|
(Loss) earnings from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
(33.9
|
)
|
|
|
6.2
|
|
|
|
|
|
|
|
(27.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(102.4
|
)
|
|
$
|
(41.3
|
)
|
|
$
|
(110.3
|
)
|
|
$
|
158.7
|
|
|
$
|
(7.1
|
)
|
|
$
|
(102.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
CONDENSED CONSOLIDATING BALANCE SHEETS
As of July 31, 2008
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Nonguarantor
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Total
|
|
|
|
(Dollars in millions)
|
|
Cash and cash equivalents
|
|
$
|
|
|
|
$
|
21.3
|
|
|
$
|
19.8
|
|
|
$
|
46.4
|
|
|
$
|
|
|
|
$
|
87.5
|
|
Receivables, net
|
|
|
|
|
|
|
|
|
|
|
150.2
|
|
|
|
144.8
|
|
|
|
|
|
|
|
295.0
|
|
Other receivables
|
|
|
|
|
|
|
|
|
|
|
43.2
|
|
|
|
43.2
|
|
|
|
(43.2
|
)
|
|
|
43.2
|
|
Inventories
|
|
|
|
|
|
|
|
|
|
|
139.5
|
|
|
|
78.9
|
|
|
|
|
|
|
|
218.4
|
|
Assets held for sale
|
|
|
|
|
|
|
|
|
|
|
26.5
|
|
|
|
|
|
|
|
|
|
|
|
26.5
|
|
Prepaid expenses and other current assets
|
|
|
|
|
|
|
|
|
|
|
7.0
|
|
|
|
7.7
|
|
|
|
(0.1
|
)
|
|
|
14.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
|
|
|
|
21.3
|
|
|
|
386.2
|
|
|
|
321.0
|
|
|
|
(43.3
|
)
|
|
|
685.2
|
|
Property, plant, and equipment, net
|
|
|
|
|
|
|
|
|
|
|
384.3
|
|
|
|
246.6
|
|
|
|
(0.1
|
)
|
|
|
630.8
|
|
Goodwill and other assets, net
|
|
|
168.8
|
|
|
|
854.0
|
|
|
|
111.6
|
|
|
|
361.0
|
|
|
|
(1,017.2
|
)
|
|
|
478.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
168.8
|
|
|
$
|
875.3
|
|
|
$
|
882.1
|
|
|
$
|
928.6
|
|
|
$
|
(1,060.6
|
)
|
|
$
|
1,794.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank borrowings and other notes
|
|
$
|
|
|
|
$
|
|
|
|
$
|
46.3
|
|
|
$
|
8.6
|
|
|
$
|
|
|
|
$
|
54.9
|
|
Current portion of long-term debt
|
|
|
|
|
|
|
4.1
|
|
|
|
|
|
|
|
0.9
|
|
|
|
|
|
|
|
5.0
|
|
Liabilities held for sale
|
|
|
|
|
|
|
|
|
|
|
8.6
|
|
|
|
|
|
|
|
|
|
|
|
8.6
|
|
Accounts payable and other accrued liabilities
|
|
|
|
|
|
|
6.3
|
|
|
|
274.2
|
|
|
|
242.7
|
|
|
|
(43.0
|
)
|
|
|
480.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
|
|
|
|
10.4
|
|
|
|
329.1
|
|
|
|
252.2
|
|
|
|
(43.0
|
)
|
|
|
548.7
|
|
Long-term debt, net of current portion
|
|
|
|
|
|
|
599.6
|
|
|
|
0.6
|
|
|
|
1.4
|
|
|
|
|
|
|
|
601.6
|
|
Pension and other long-term liabilities
|
|
|
|
|
|
|
|
|
|
|
282.9
|
|
|
|
117.5
|
|
|
|
|
|
|
|
400.4
|
|
Minority interest
|
|
|
|
|
|
|
|
|
|
|
11.2
|
|
|
|
64.8
|
|
|
|
(1.3
|
)
|
|
|
74.7
|
|
Parent loans
|
|
|
|
|
|
|
493.4
|
|
|
|
(614.4
|
)
|
|
|
145.8
|
|
|
|
(24.8
|
)
|
|
|
|
|
Common stock
|
|
|
1.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.0
|
|
Additional paid-in capital
|
|
|
884.2
|
|
|
|
(54.3
|
)
|
|
|
1,285.2
|
|
|
|
273.9
|
|
|
|
(1,504.8
|
)
|
|
|
884.2
|
|
Retained earnings (accumulated deficit)
|
|
|
(990.0
|
)
|
|
|
(193.3
|
)
|
|
|
(558.2
|
)
|
|
|
(131.8
|
)
|
|
|
883.3
|
|
|
|
(990.0
|
)
|
Accumulated other comprehensive
income (loss)
|
|
|
273.6
|
|
|
|
19.5
|
|
|
|
145.7
|
|
|
|
204.8
|
|
|
|
(370.0
|
)
|
|
|
273.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
168.8
|
|
|
|
(228.1
|
)
|
|
|
872.7
|
|
|
|
346.9
|
|
|
|
(991.5
|
)
|
|
|
168.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
168.8
|
|
|
$
|
875.3
|
|
|
$
|
882.1
|
|
|
$
|
928.6
|
|
|
$
|
(1,060.6
|
)
|
|
$
|
1,794.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
CONDENSED CONSOLIDATING BALANCE SHEETS
As of January 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Nonguarantor
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Total
|
|
|
|
(Dollars in millions)
|
|
Cash and cash equivalents
|
|
$
|
|
|
|
$
|
84.7
|
|
|
$
|
30.3
|
|
|
$
|
45.2
|
|
|
$
|
|
|
|
$
|
160.2
|
|
Receivables, net
|
|
|
|
|
|
|
|
|
|
|
151.1
|
|
|
|
154.5
|
|
|
|
|
|
|
|
305.6
|
|
Other receivables
|
|
|
|
|
|
|
|
|
|
|
48.3
|
|
|
|
48.3
|
|
|
|
(48.3
|
)
|
|
|
48.3
|
|
Inventories
|
|
|
|
|
|
|
|
|
|
|
111.3
|
|
|
|
67.8
|
|
|
|
|
|
|
|
179.1
|
|
Assets held for sale
|
|
|
|
|
|
|
|
|
|
|
21.4
|
|
|
|
|
|
|
|
|
|
|
|
21.4
|
|
Prepaid expenses and other current assets
|
|
|
|
|
|
|
|
|
|
|
7.0
|
|
|
|
5.3
|
|
|
|
(0.1
|
)
|
|
|
12.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
|
|
|
|
84.7
|
|
|
|
369.4
|
|
|
|
321.1
|
|
|
|
(48.4
|
)
|
|
|
726.8
|
|
Property, plant, and equipment, net
|
|
|
|
|
|
|
|
|
|
|
376.5
|
|
|
|
240.4
|
|
|
|
(0.1
|
)
|
|
|
616.8
|
|
Goodwill and other assets, net
|
|
|
202.3
|
|
|
|
811.0
|
|
|
|
112.6
|
|
|
|
346.3
|
|
|
|
(1,009.9
|
)
|
|
|
462.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
202.3
|
|
|
$
|
895.7
|
|
|
$
|
858.5
|
|
|
$
|
907.8
|
|
|
$
|
(1,058.4
|
)
|
|
$
|
1,805.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank borrowings and other notes
|
|
$
|
|
|
|
$
|
|
|
|
$
|
29.6
|
|
|
$
|
3.3
|
|
|
$
|
|
|
|
$
|
32.9
|
|
Current portion of long-term debt
|
|
|
|
|
|
|
3.8
|
|
|
|
|
|
|
|
1.0
|
|
|
|
|
|
|
|
4.8
|
|
Liabilities held for sale
|
|
|
|
|
|
|
|
|
|
|
8.2
|
|
|
|
|
|
|
|
|
|
|
|
8.2
|
|
Accounts payable and other accrued liabilities
|
|
|
|
|
|
|
6.2
|
|
|
|
288.5
|
|
|
|
263.7
|
|
|
|
(48.4
|
)
|
|
|
510.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
|
|
|
|
10.0
|
|
|
|
326.3
|
|
|
|
268.0
|
|
|
|
(48.4
|
)
|
|
|
555.9
|
|
Long-term debt, net of current portion
|
|
|
|
|
|
|
569.9
|
|
|
|
0.6
|
|
|
|
1.7
|
|
|
|
|
|
|
|
572.2
|
|
Pension and other long-term liabilities
|
|
|
|
|
|
|
|
|
|
|
287.8
|
|
|
|
117.2
|
|
|
|
|
|
|
|
405.0
|
|
Minority interest
|
|
|
|
|
|
|
|
|
|
|
11.2
|
|
|
|
60.5
|
|
|
|
(1.2
|
)
|
|
|
70.5
|
|
Parent loans
|
|
|
|
|
|
|
487.9
|
|
|
|
(543.3
|
)
|
|
|
78.1
|
|
|
|
(22.7
|
)
|
|
|
|
|
Common stock
|
|
|
1.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.0
|
|
Additional paid-in capital
|
|
|
882.0
|
|
|
|
(54.3
|
)
|
|
|
1,249.4
|
|
|
|
304.5
|
|
|
|
(1,499.6
|
)
|
|
|
882.0
|
|
Retained earnings (accumulated deficit)
|
|
|
(928.7
|
)
|
|
|
(149.2
|
)
|
|
|
(590.4
|
)
|
|
|
(101.5
|
)
|
|
|
841.1
|
|
|
|
(928.7
|
)
|
Accumulated other comprehensive
income (loss)
|
|
|
248.0
|
|
|
|
31.4
|
|
|
|
116.9
|
|
|
|
179.3
|
|
|
|
(327.6
|
)
|
|
|
248.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
202.3
|
|
|
|
(172.1
|
)
|
|
|
775.9
|
|
|
|
382.3
|
|
|
|
(986.1
|
)
|
|
|
202.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
202.3
|
|
|
$
|
895.7
|
|
|
$
|
858.5
|
|
|
$
|
907.8
|
|
|
$
|
(1,058.4
|
)
|
|
$
|
1,805.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Six Months Ended July 31, 2008
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Nonguarantor
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Total
|
|
|
|
(Dollars in millions)
|
|
Cash flows (used for) provided by operating activities
|
|
$
|
(0.1
|
)
|
|
$
|
(43.2
|
)
|
|
$
|
13.9
|
|
|
$
|
17.4
|
|
|
$
|
(0.8
|
)
|
|
$
|
(12.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property, plant,
equipment, and tooling
|
|
|
|
|
|
|
|
|
|
|
(14.8
|
)
|
|
|
(28.2
|
)
|
|
|
|
|
|
|
(43.0
|
)
|
Investments in subsidiaries
|
|
|
0.1
|
|
|
|
(0.6
|
)
|
|
|
(22.3
|
)
|
|
|
75.5
|
|
|
|
(52.7
|
)
|
|
|
|
|
Sale of assets
|
|
|
|
|
|
|
|
|
|
|
0.2
|
|
|
|
(29.9
|
)
|
|
|
3.3
|
|
|
|
(26.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by (used for) investing activities
|
|
|
0.1
|
|
|
|
(0.6
|
)
|
|
|
(36.9
|
)
|
|
|
17.4
|
|
|
|
(49.4
|
)
|
|
|
(69.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in bank borrowings and credit facilities
|
|
|
|
|
|
|
|
|
|
|
15.1
|
|
|
|
5.7
|
|
|
|
|
|
|
|
20.8
|
|
Repayment of long-term debt
|
|
|
|
|
|
|
(1.0
|
)
|
|
|
|
|
|
|
(0.5
|
)
|
|
|
|
|
|
|
(1.5
|
)
|
Dividends paid to minority shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10.8
|
)
|
|
|
|
|
|
|
(10.8
|
)
|
Proceeds from parent investments
|
|
|
|
|
|
|
|
|
|
|
39.1
|
|
|
|
(86.4
|
)
|
|
|
47.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash (used for) provided by financing activities
|
|
|
|
|
|
|
(1.0
|
)
|
|
|
54.2
|
|
|
|
(92.0
|
)
|
|
|
47.3
|
|
|
|
8.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Decrease) increase in parent loans
and advances
|
|
|
|
|
|
|
(20.9
|
)
|
|
|
(42.6
|
)
|
|
|
60.6
|
|
|
|
2.9
|
|
|
|
|
|
Effect of exchange rates on cash and cash
equivalents
|
|
|
|
|
|
|
2.3
|
|
|
|
0.9
|
|
|
|
(2.2
|
)
|
|
|
|
|
|
|
1.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Decrease) increase in cash and cash equivalents
|
|
|
|
|
|
|
(63.4
|
)
|
|
|
(10.5
|
)
|
|
|
1.2
|
|
|
|
|
|
|
|
(72.7
|
)
|
Cash and cash equivalents at beginning
of period
|
|
|
|
|
|
|
84.7
|
|
|
|
30.3
|
|
|
|
45.2
|
|
|
|
|
|
|
|
160.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
|
|
|
$
|
21.3
|
|
|
$
|
19.8
|
|
|
$
|
46.4
|
|
|
$
|
|
|
|
$
|
87.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Six Months Ended July 31, 2007
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Nonguarantor
|
|
|
|
|
|
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Total
|
|
|
|
(Dollars in millions)
|
|
Cash flows (used for) provided by
operating activities
|
|
$
|
(0.1
|
)
|
|
$
|
(0.8
|
)
|
|
$
|
(58.8
|
)
|
|
$
|
56.4
|
|
|
$
|
(3.4
|
)
|
|
$
|
(6.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property, plant,
equipment, and tooling
|
|
|
|
|
|
|
|
|
|
|
(17.8
|
)
|
|
|
(23.0
|
)
|
|
|
|
|
|
|
(40.8
|
)
|
Investments in subsidiaries
|
|
|
(185.3
|
)
|
|
|
(416.0
|
)
|
|
|
734.3
|
|
|
|
(61.9
|
)
|
|
|
(71.1
|
)
|
|
|
|
|
Sale of assets
|
|
|
|
|
|
|
|
|
|
|
3.9
|
|
|
|
(2.8
|
)
|
|
|
|
|
|
|
1.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash (used for) provided by investing activities
|
|
|
(185.3
|
)
|
|
|
(416.0
|
)
|
|
|
720.4
|
|
|
|
(87.7
|
)
|
|
|
(71.1
|
)
|
|
|
(39.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in bank borrowings and credit facilities
|
|
|
|
|
|
|
|
|
|
|
(0.6
|
)
|
|
|
0.3
|
|
|
|
|
|
|
|
(0.3
|
)
|
Repayment of long-term debt
|
|
|
|
|
|
|
523.2
|
|
|
|
(661.2
|
)
|
|
|
4.7
|
|
|
|
|
|
|
|
(133.3
|
)
|
Dividends paid to minority shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10.1
|
)
|
|
|
|
|
|
|
(10.1
|
)
|
Proceeds from issuance of common stock
|
|
|
193.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
193.1
|
|
Proceeds from parent investments
|
|
|
|
|
|
|
0.1
|
|
|
|
261.1
|
|
|
|
(339.0
|
)
|
|
|
77.8
|
|
|
|
|
|
Fees paid for Rights Offering
|
|
|
(7.7
|
)
|
|
|
(9.2
|
)
|
|
|
(15.1
|
)
|
|
|
0.5
|
|
|
|
|
|
|
|
(31.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by (used for) financing activities
|
|
|
185.4
|
|
|
|
514.1
|
|
|
|
(415.8
|
)
|
|
|
(343.6
|
)
|
|
|
77.8
|
|
|
|
17.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Decrease) increase in parent loans
and advances
|
|
|
|
|
|
|
(97.3
|
)
|
|
|
(246.5
|
)
|
|
|
347.1
|
|
|
|
(3.3
|
)
|
|
|
|
|
Cash flows from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
8.2
|
|
|
|
31.2
|
|
|
|
|
|
|
|
39.4
|
|
Effect of exchange rates on cash and cash
equivalents
|
|
|
|
|
|
|
|
|
|
|
0.5
|
|
|
|
2.4
|
|
|
|
|
|
|
|
2.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
8.0
|
|
|
|
5.8
|
|
|
|
|
|
|
|
13.8
|
|
Cash and cash equivalents at beginning
of period
|
|
|
|
|
|
|
|
|
|
|
8.2
|
|
|
|
30.3
|
|
|
|
|
|
|
|
38.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
|
|
|
$
|
|
|
|
$
|
16.2
|
|
|
$
|
36.1
|
|
|
$
|
|
|
|
$
|
52.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
Item 2.
Managements Discussion and Analysis of Financial Condition and Results of Operations
Executive Summary
This discussion should be read in conjunction with the our Annual Report on Form 10-K for the
fiscal year ended January 31, 2008 as filed with the Securities and Exchange Commission on
April 10, 2008, and the other information included herein.
Company Overview
Unless otherwise indicated, references to we, us, or our mean Hayes Lemmerz
International, Inc., a Delaware corporation, and its subsidiaries. References to a fiscal year
means the 12-month period commencing on February 1 of that year and ending on January 31 of the
following year (i.e., fiscal 2008 refers to the period beginning February 1, 2008 and ending
January 31, 2009, fiscal 2007 refers to the period beginning February 1, 2007 and ending
January 31, 2008).
Originally founded in 1908, we are a leading worldwide producer of aluminum and steel wheels
for passenger cars and light trucks and of steel wheels for commercial trucks and trailers. We are
also a supplier of automotive powertrain components. We have global operations with 22 facilities,
including business and sales offices and manufacturing facilities located in 13 countries around
the world. We sell our products to every major North American, Japanese, and European manufacturer
of passenger cars and light trucks and to commercial highway vehicle customers throughout the
world.
Sales of our wheels and powertrain components produced in North America are directly affected
by the overall level of passenger car, light truck, and commercial highway vehicle production of
North American OEMs, while sales of our wheels in Europe are directly affected by the overall
vehicle production in Europe. The North American and European automotive industries are sensitive
to the overall strength of their respective economies.
We are organized based primarily on markets served and products produced. Under this
organizational structure, our operating segments have been aggregated into two reportable segments:
Automotive Wheels and Other. The Automotive Wheels segment includes results from our operations
that primarily design and manufacture fabricated steel and cast aluminum wheels for original
equipment manufacturers in the global passenger car, light vehicle, and commercial vehicle markets.
The Other segment includes results from our operations that primarily design and manufacture
powertrain components for passenger car and light vehicle markets as well as financial results
related to the corporate office and the elimination of certain intercompany activities.
In the first six months of fiscal 2008 we had net sales of $1.1 billion with approximately 84%
derived from international markets. In the six months of fiscal 2007 we had net sales of $1.0
billion with approximately 77% derived from international markets. We had earnings from operations
of $11.4 million for the first six months of fiscal 2008 compared to $12.1 million for the first
six months of fiscal 2007.
Results of Operations
Consolidated Results Comparison of the Three Months Ended July 31, 2008 to the Three Months
Ended July 31, 2007
The following table presents selected information about our consolidated results of operations
for the periods indicated (dollars in millions):
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
$ Change
|
|
|
% Change
|
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive Wheels
|
|
$
|
550.1
|
|
|
$
|
521.2
|
|
|
$
|
28.9
|
|
|
|
5.5
|
%
|
Other
|
|
|
13.4
|
|
|
|
22.9
|
|
|
|
(9.5
|
)
|
|
|
-41.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
563.5
|
|
|
$
|
544.1
|
|
|
$
|
19.4
|
|
|
|
3.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
$
|
71.9
|
|
|
$
|
53.1
|
|
|
$
|
18.8
|
|
|
|
35.4
|
%
|
Marketing, general, and administrative
|
|
|
39.4
|
|
|
|
45.5
|
|
|
|
(6.1
|
)
|
|
|
-13.4
|
%
|
Amortization of intangibles
|
|
|
2.9
|
|
|
|
2.6
|
|
|
|
0.3
|
|
|
|
11.5
|
%
|
Asset impairments and other restructuring charges
|
|
|
5.8
|
|
|
|
1.5
|
|
|
|
4.3
|
|
|
|
286.7
|
%
|
Other expense, net
|
|
|
34.1
|
|
|
|
9.5
|
|
|
|
24.6
|
|
|
|
258.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(10.3
|
)
|
|
|
(6.0
|
)
|
|
|
(4.3
|
)
|
|
|
-71.7
|
%
|
Interest expense, net
|
|
|
14.3
|
|
|
|
15.8
|
|
|
|
(1.5
|
)
|
|
|
-9.5
|
%
|
Loss on early extinguishment of debt
|
|
|
|
|
|
|
21.2
|
|
|
|
(21.2
|
)
|
|
|
-100.0
|
%
|
Other non-operating expense
|
|
|
1.0
|
|
|
|
0.1
|
|
|
|
0.9
|
|
|
|
900.0
|
%
|
Income tax expense
|
|
|
14.6
|
|
|
|
13.3
|
|
|
|
1.3
|
|
|
|
9.8
|
%
|
Minority interest
|
|
|
6.8
|
|
|
|
5.7
|
|
|
|
1.1
|
|
|
|
19.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
|
(47.0
|
)
|
|
|
(62.1
|
)
|
|
|
15.1
|
|
|
|
24.3
|
%
|
Loss from discontinued operations, net of tax
|
|
|
|
|
|
|
(25.0
|
)
|
|
|
25.0
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(47.0
|
)
|
|
$
|
(87.1
|
)
|
|
$
|
40.1
|
|
|
|
46.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
Our net sales increased 3.6% or $19.4 million to $563.5 million in the second quarter of
fiscal 2008 from $544.1 million in the second quarter of fiscal 2007. Favorable foreign currency
exchange rates relative to the US. dollar increased sales by $52.0 million. Lower volumes
decreased sales by $23.3 million, partially offset by favorable mix of $4.3 million. Net sales
decreased by $11.4 million due to the sale of our Wabash, Indiana facility during the second
quarter of fiscal 2007 and by $8.4 million due to the sale of the Hoboken, Belgium facility during
the second quarter of fiscal 2008. The remainder of the sales change was primarily due to higher
metal pass-through pricing, partially offset by price reductions to our customers
Gross profit
Our gross profit increased 35.4% or $18.8 million in the second quarter of fiscal 2008 to
$71.9 million from $53.1 million in the second quarter of fiscal 2007. Favorable fluctuations in
foreign currency exchange rates increased gross profit by $6.7 million. Gross profit declined $5.1
million due to lower volumes, unfavorable pricing, and mix. Favorable
material variances, manufacturing
efficiencies, and lower depreciation were partially offset by increased utility costs, for a
net improvement of $13.6
million.
Marketing, general, and administrative
Our marketing, general, and administrative expense decreased $6.1 million to $39.4 million
during the second quarter of fiscal 2008 from $45.5 million in the second quarter of fiscal 2007.
The primary reason for the expense reduction was lower employee and outside services costs as well
as a settlement of a lawsuit with our former directors in fiscal 2007. Foreign currency exchange
rate fluctuations increased expenses by $3.5 million, while stock based compensation expense
decreased by $3.4 million mainly due to one-time anti-dilution expenses incurred in the prior year
related to the Rights Offering.
Asset impairments and other restructuring charges
In May 2008 we announced the closure of our Gainesville, Georgia aluminum wheels facility. We
also announced that Punch Property International nv (Punch Property), the property investment
company of the Punch group, entered into a definitive agreement with Hayes Lemmerz International -
Georgia, Inc. to purchase the real estate and certain equipment from Gainesville. This acquisition
is expected to be completed following cessation of production in connection with the closure
of the facility, which is expected to occur by the end of December 2008. The purchase price of the
transaction was not material to either party.
27
During the second quarter of fiscal 2008, we recorded facility closure, employee restructuring
charges, and asset impairments of $5.8 million. In the Automotive Wheels segment we recorded
expense of $5.7 million. Facility closure costs of $0.3 million were related to ongoing costs for
our idle aluminum wheel facilities in Howell, Michigan and Huntington, Indiana. Asset impairments
of $4.6 million were related to our aluminum wheel facilities in Gainesville, Georgia and
Huntington, Indiana. These facilities were written down to fair value based on current market
conditions. Severance and other restructuring costs of $0.8 million were related to our aluminum
wheel facility in Gainesville, Georgia. Expense of $0.1 million in the Other segment was related
to facility closure costs for our Ferndale, Michigan technical center, which was closed in fiscal
2007.
During the second quarter of fiscal 2007, we recorded facility closure, employee restructuring
charges, and asset impairments of $1.5 million. In the Automotive Wheels segment we recorded
expense of $1.0 million, principally related to the closure of our Huntington, Indiana aluminum
wheel facility as well as machinery and equipment impairments recorded at our Brazil aluminum wheel
facility. The Other segment expense of $0.5 million was primarily related to severance expense at
our facility in Nuevo Laredo, Mexico.
Other expense, net
The increase in other expense is primarily due to losses recorded for the sale of our Hoboken,
Belgium facility, which was sold during the second quarter of fiscal 2008. The prior year balance
consisted primarily of the loss on the sale of our Wabash, Indiana facility, which was sold during
the second quarter of fiscal 2007.
Interest expense, net
Interest expense decreased $1.5 million to $14.3 million for the second quarter of fiscal 2008
from $15.8 million for the second quarter of fiscal 2007. The decrease was driven by the
restructuring of our debt during the second quarter of fiscal 2007, which resulted in lower debt
levels and interest rates on both fixed and variable rate debt.
Income taxes
Income tax expense was $14.6 million for the second quarter of fiscal 2008 compared to $13.3
million for the second quarter of fiscal 2007. The increase was primarily due to higher
profitability in jurisdictions where we pay taxes, without an offsetting tax benefit. The income
tax rate varies from the United States statutory income tax rate of 35% due primarily to losses in
the United States and certain foreign jurisdictions without recognition of a corresponding income
tax benefit, as well as effective income tax rates in certain foreign jurisdictions that are
different than the United States statutory rates. Accordingly, our worldwide tax expense may not
bear a normal relationship to earnings before taxes on income.
Discontinued operations
Our Montague, Michigan and Bristol, Indiana facilities were part of our Suspension Components
business (Suspension business) and were sold in the first quarter of fiscal 2007. Our Tegelen and
Nieuw Bergen, the Netherlands and Antwerp, Belgium facilities (MGG Group) were sold in the second
quarter of fiscal 2007. Our brakes facilities in Homer, Michigan and Monterrey, Mexico (Brakes
Business) were sold in the fourth quarter of fiscal 2007.
The loss during the second quarter of fiscal 2007 of $25.0 million consists of a loss of $25.3
million from our MGG Group, a loss of $0.6 million for adjustments recorded on the sale of our
Suspension business, and income from our Brakes Business of $0.9 million.
Net loss
Due to the factors mentioned above, the net loss during the second quarter of fiscal 2008 was
$47.0 million compared to $87.1 million in the second quarter of fiscal 2007.
Segment Results Comparison of the Three Months Ended July 31, 2008 to the Three Months Ended
July 31, 2007
Automotive Wheels
The following table presents net sales, (loss) earnings from operations, and other information
for the Automotive Wheels segment for the periods indicated (dollars in millions):
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
$ Change
|
|
Net sales
|
|
$
|
550.1
|
|
|
$
|
521.2
|
|
|
$
|
28.9
|
|
Asset impairments and other restructuring charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
Facility closure costs
|
|
$
|
0.3
|
|
|
$
|
0.6
|
|
|
$
|
(0.3
|
)
|
Impairment of facility, machinery, and equipment
|
|
|
4.6
|
|
|
|
0.4
|
|
|
|
4.2
|
|
Severance and other restructuring costs
|
|
|
0.8
|
|
|
|
|
|
|
|
0.8
|
|
|
|
|
|
|
|
|
|
|
|
Total asset impairments and other restructuring charges
|
|
$
|
5.7
|
|
|
$
|
1.0
|
|
|
$
|
4.7
|
|
|
(Loss) earnings from operations
|
|
$
|
(12.3
|
)
|
|
$
|
21.7
|
|
|
$
|
(34.0
|
)
|
Net sales
Net sales from our Automotive Wheels segment increased $28.9 million to $550.1 million in the
second quarter of fiscal 2008 from $521.2 million during the second quarter of fiscal 2007.
Favorable foreign currency exchange rates relative to the U.S. dollar increased sales by $52.0
million. Lower volumes decreased sales by $24.6 million, partially offset by favorable mix of $4.3
million. The sale of the Hoboken, Belgium facility reduced sales by
$8.4 million. The remainder of the sales change was primarily due to higher metal pass-through pricing,
partially offset by price reductions to our customers.
Asset impairments and other restructuring charges
During the second quarter of fiscal 2008, we recorded facility closure, employee restructuring
charges, and asset impairments of $5.7 million. Facility closure costs of $0.3 million were
related to ongoing costs for our idle aluminum wheel facilities in Howell, Michigan and Huntington,
Indiana. Asset impairments of $4.6 million were related to our aluminum wheel facilities in
Gainesville, Georgia and Huntington, Indiana. Severance and other restructuring costs of $0.8
million were related to our aluminum wheel facility in Gainesville, Georgia.
During the second quarter of fiscal 2007, we recorded facility closure, employee restructuring
charges, and asset impairments of $1.0 million, principally related to the closure of our
Huntington, Indiana aluminum wheel facility as well as machinery and equipment impairments recorded
at our Brazil aluminum wheel facility.
(Loss) earnings from operations
The primary reason for the decrease in earnings from operations was the sale of our Hoboken,
Belgium facility during the second quarter of fiscal 2008, which was recorded at a loss of
approximately $38 million.
Other
The following table presents net sales, total asset impairments and other restructuring
charges, and earnings (loss) from operations for the Other segment for the periods indicated
(dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
|
|
|
2008
|
|
2007
|
|
$ Change
|
Net sales
|
|
$
|
13.4
|
|
|
$
|
22.9
|
|
|
$
|
(9.5
|
)
|
Total asset impairments and other restructuring charges
|
|
|
0.1
|
|
|
|
0.5
|
|
|
|
(0.4
|
)
|
Earnings (loss) from operations
|
|
|
2.0
|
|
|
|
(27.7
|
)
|
|
|
29.7
|
|
Net Sales
Net sales decreased by $9.5 million from $22.9 million in the second quarter of fiscal 2007 to
$13.4 million in the second quarter of fiscal 2008. This decrease is mainly due to the sale of our
Wabash facility in the second quarter of fiscal 2007, slightly offset by higher volumes of $1.3
million.
29
Asset impairments and other restructuring charges
During the second quarter of fiscal 2008, we recorded facility closure costs of $0.1 million
for our Ferndale, Michigan technical center, which was closed in fiscal 2007. During the second
quarter of fiscal 2007, we recorded $0.5 million primarily related to severance expense at our
facility in Nuevo Laredo, Mexico.
Earnings (loss) from operations
Earnings from operations in the second quarter of fiscal 2008 were $2.0 million compared to a
loss of $27.7 million during the second quarter of fiscal 2007. The improvement was primarily due
to the loss on the sale of the Wabash, Indiana facility as well as net operating losses incurred
for Wabash in the prior year.
Consolidated Results Comparison of the Six Months Ended July 31, 2008 to the Six Months Ended
July 31, 2007
The following table presents selected information about our consolidated results of operations
for the periods indicated (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended July 31,
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
$ Change
|
|
|
% Change
|
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive Wheels
|
|
$
|
1,112.1
|
|
|
$
|
988.0
|
|
|
$
|
124.1
|
|
|
|
12.6
|
%
|
Other
|
|
|
25.2
|
|
|
|
54.7
|
|
|
|
(29.5
|
)
|
|
|
-53.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,137.3
|
|
|
$
|
1,042.7
|
|
|
$
|
94.6
|
|
|
|
9.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
$
|
135.6
|
|
|
$
|
109.3
|
|
|
$
|
26.3
|
|
|
|
24.1
|
%
|
Marketing, general, and administrative
|
|
|
78.7
|
|
|
|
80.8
|
|
|
|
(2.1
|
)
|
|
|
-2.6
|
%
|
Amortization of intangibles
|
|
|
5.7
|
|
|
|
5.0
|
|
|
|
0.7
|
|
|
|
14.0
|
%
|
Asset impairments and other restructuring charges
|
|
|
9.1
|
|
|
|
3.9
|
|
|
|
5.2
|
|
|
|
133.3
|
%
|
Other expense, net
|
|
|
30.7
|
|
|
|
7.5
|
|
|
|
23.2
|
|
|
|
309.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from operations
|
|
|
11.4
|
|
|
|
12.1
|
|
|
|
(0.7
|
)
|
|
|
-5.8
|
%
|
Interest expense, net
|
|
|
27.6
|
|
|
|
33.9
|
|
|
|
(6.3
|
)
|
|
|
-18.6
|
%
|
Loss on early extinguishment of debt
|
|
|
|
|
|
|
21.5
|
|
|
|
(21.5
|
)
|
|
|
-100.0
|
%
|
Other non-operating expense
|
|
|
2.7
|
|
|
|
0.1
|
|
|
|
2.6
|
|
|
|
2600.0
|
%
|
Income tax expense
|
|
|
27.6
|
|
|
|
21.8
|
|
|
|
5.8
|
|
|
|
26.6
|
%
|
Minority interest
|
|
|
13.3
|
|
|
|
9.5
|
|
|
|
3.8
|
|
|
|
40.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
|
(59.8
|
)
|
|
|
(74.7
|
)
|
|
|
14.9
|
|
|
|
19.9
|
%
|
Loss from discontinued operations, net of tax
|
|
|
|
|
|
|
(27.7
|
)
|
|
|
27.7
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(59.8
|
)
|
|
$
|
(102.4
|
)
|
|
$
|
42.6
|
|
|
|
41.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
Our net sales increased 9.1% or $94.6 million to $1,137.3 million in the first six months of
fiscal 2008 from $1,042.7 million in the first six months of fiscal 2007. Favorable foreign
currency exchange rates relative to the US dollar increased sales by $122.0 million. Net sales
decreased by $28.3 million due to the sale of our Wabash, Indiana facility during the second
quarter of fiscal 2007 and by $8.4 million due to the sale of the Hoboken, Belgium facility during
the second quarter of fiscal 2008. The remainder of the sales change was primarily due to the
impact of higher metal pass-through pricing, partially offset by lower volumes and price reductions
to our customers.
Gross profit
Our gross profit increased 24.1% or $26.3 million in the first six months of fiscal 2008 to
$135.6 million from $109.3 million in the first six months of fiscal 2007. Favorable fluctuations
in foreign currency exchange rates increased gross profit by
$13.9 million. Favorable material variances and
manufacturing efficiencies were partially offset by increased utility costs, for a net improvement
of $9.4 million.
30
Marketing, general, and administrative
Our marketing, general, and administrative expense decreased $2.1 million to $78.7 million
during the first six months of fiscal 2008 from $80.8 million in the first six months of fiscal
2007. The primary reason for the expense reduction was lower employee and outside services costs
as well as a settlement of a lawsuit with our former directors in fiscal 2007. Foreign currency
exchange rate fluctuations resulted in increases to expenses of $7.1 million, while stock based
compensation expense decreased by $3.0 million mainly due to one-time anti-dilution expenses
incurred in the prior year related to the Rights Offering.
Asset impairments and other restructuring charges
During the first six months of fiscal 2008, we recorded facility closure, employee
restructuring charges, and asset impairments of $9.1 million. In the Automotive Wheels segment we
recorded expense of $8.8 million, which consisted of $0.6 million of facility closure costs related
to ongoing costs for our idle aluminum wheel facilities in Howell, Michigan and Huntington,
Indiana. Asset impairments of $7.3 million were related to our aluminum wheel facilities in
Gainesville, Georgia; Huntington, Indiana; Howell, Michigan; Hoboken, Belgium; and Chihuahua,
Mexico. These facilities were written down to fair value based on current market conditions.
Severance and other restructuring costs of $0.9 million were related to our aluminum wheel facility
in Gainesville, Georgia. During the second quarter of fiscal 2008, we announced the closure of our
Gainesville plant, which is expected to be completed by the end of December 2008. We also recorded
expense of $0.3 million in the Other segment, consisting of facility closure costs and severance
for our Ferndale, Michigan technical center, which was closed in fiscal 2007.
During the first six months of fiscal 2007, we recorded facility closure, employee
restructuring charges, and asset impairments of $3.9 million. In the Automotive Wheels segment we
recorded expense of $3.2 million, principally related to the closure of our Huntington, Indiana
aluminum wheel facility as well as machinery and equipment impairments recorded at our Brazil
aluminum wheel facility. The Other segment expense of $0.6 million is primarily related to
severance expense at our Nuevo Laredo facility in Mexico and our corporate offices as well as
closure costs of $0.1 million related to the Ferndale, Michigan technical center..
Other expense, net
The increase in other expense is primarily due to the loss recorded for the sale of our
Hoboken, Belgium facility, which was sold during the second quarter of fiscal 2008. The prior year
balance consisted primarily of the loss on the sale of our Wabash, Indiana facility, which was sold
during the second quarter of fiscal 2007.
Interest expense, net
Interest expense decreased $6.3 million to $27.6 million for the first six months of fiscal
2008 from $33.9 million for the first six months of fiscal 2007. The decrease was driven by the
restructuring of our debt during the second quarter of fiscal 2007, which resulted in lower debt
levels and interest rates on both fixed and variable rate debt.
Income taxes
Income tax expense was $27.6 million for the first six months of fiscal 2008 compared to $21.8
million for the first six months of fiscal 2007. The increase was primarily due to higher
profitability in jurisdictions where we pay taxes, without an offsetting tax benefit. The income
tax rate varies from the United States statutory income tax rate of 35% due primarily to losses in
the United States and certain foreign jurisdictions without recognition of a corresponding income
tax benefit, as well as effective income tax rates in certain foreign jurisdictions that are
different than the United States statutory rates. Accordingly, our worldwide tax expense may not
bear a normal relationship to earnings before taxes on income.
Discontinued operations
Our Montague, Michigan and Bristol, Indiana facilities were part of our Suspension Components
business (Suspension business) and were sold in the first quarter of fiscal 2007. Our Tegelen and
Nieuw Bergen, the Netherlands and Antwerp, Belgium facilities
(MGG Group) were sold in the second quarter of fiscal 2007. Our brakes facilities in Homer,
Michigan and Monterrey, Mexico (Brakes Business) were sold in the fourth quarter of fiscal 2007.
The loss during the first six months of fiscal 2007 of $27.7 million primarily consists of a
loss of $26.8 million from our MGG Group, a loss of $5.1 million from our Suspension business, and
income from our Brakes Business of $4.2 million.
31
Net loss
Due to the factors mentioned above, net loss during the first six months of fiscal 2008 was
$59.8 million compared to $102.4 million in the first six months of fiscal 2007.
Segment Results Comparison of the Six Months Ended July 31, 2008 to the Six Months Ended July
31, 2007
Automotive Wheels
The following table presents net sales, earnings from operations, and other information for
the Automotive Wheels segment for the periods indicated (dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended July 31,
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
$ Change
|
|
Net sales
|
|
$
|
1,112.1
|
|
|
$
|
988.0
|
|
|
$
|
124.1
|
|
Asset impairments and other restructuring charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
Facility closure costs
|
|
$
|
0.6
|
|
|
$
|
2.7
|
|
|
$
|
(2.1
|
)
|
Impairment of facility, machinery, and equipment
|
|
|
7.3
|
|
|
|
0.5
|
|
|
|
6.8
|
|
Severance and other restructuring costs
|
|
|
0.9
|
|
|
|
|
|
|
|
0.9
|
|
|
|
|
|
|
|
|
|
|
|
Total asset impairments and other restructuring charges
|
|
$
|
8.8
|
|
|
$
|
3.2
|
|
|
$
|
5.6
|
|
|
Earnings from operations
|
|
$
|
4.6
|
|
|
$
|
46.3
|
|
|
$
|
(41.8
|
)
|
Net sales
Net sales from our Automotive Wheels segment increased $124.1 million to $1,112.1 million in
the first six months of fiscal 2008 from $988.0 million during the first six months of fiscal 2007.
Favorable foreign currency exchange rates relative to the US dollar increased sales by $122.0
million. The remainder of the sales change was primarily due to the impact of higher metal
pass-through pricing, partially offset by lower volumes and price reductions to our customers.
Asset impairments and other restructuring charges
During the first six months of fiscal 2008, we recorded expense of $8.8 million, which
consisted of $0.6 million of facility closure costs related to ongoing costs for our idle aluminum
wheel facilities in Howell, Michigan and Huntington, Indiana. Asset impairments of $7.3 million
were related to our aluminum wheel facilities in Gainesville, Georgia; Huntington, Indiana; Howell,
Michigan; Hoboken, Belgium; and Chihuahua, Mexico. Severance and other restructuring costs of $0.9
million were related to our aluminum wheel facility in Gainesville, Georgia.
During the first six months of fiscal 2007, we recorded expense of $3.2 million, principally
related to the closure of our Huntington, Indiana aluminum wheel facility as well as machinery and
equipment impairments recorded at our Brazil aluminum wheel facility.
Earnings from operations
Earnings from our Automotive Wheels segment decreased $41.8 million to $4.6 million in the
first six months of fiscal 2008 from $46.3 million in the first six months of fiscal 2007. The
decrease in earnings from operations in the first six months of fiscal 2008 is primarily due to a
loss of approximately $38 million on the sale of our Hoboken, Belgium facility.
Other
The following table presents net sales, total asset impairments and other restructuring
charges, and earnings (loss) from operations for the Other segment for the periods indicated
(dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended July 31,
|
|
|
|
|
2008
|
|
2007
|
|
$ Change
|
Net sales
|
|
$
|
25.2
|
|
|
$
|
54.7
|
|
|
$
|
(29.5
|
)
|
Total asset impairments and other restructuring charges
|
|
|
0.3
|
|
|
|
0.7
|
|
|
|
(0.4
|
)
|
Earnings (loss) from operations
|
|
|
6.8
|
|
|
|
(34.2
|
)
|
|
|
41.0
|
|
32
Net Sales
Net sales decreased by $29.5 million from $54.7 million in the first six months of fiscal 2007
to $25.2 million in the first quarter of fiscal 2008. This decrease is mainly due to the sale of
our Wabash facility in the second quarter of fiscal 2007.
Asset impairments and other restructuring charges
During the first six months of fiscal 2008, we recorded expense of $0.3 million in the Other
segment, consisting of facility closure costs and severance for our Ferndale, Michigan technical
center, which was closed in fiscal 2007.
During the first six months of fiscal 2007, we recorded expense of $0.6 million primarily
related to severance expense at our Nuevo Laredo, Mexico facility and our corporate offices as well
as closure costs of $0.1 million related to the Ferndale, Michigan technical center.
Earnings (loss) from operations
Earnings from operations in the first six months of fiscal 2008 were $6.8 million compared to
a loss of $34.2 million during the first six months of fiscal 2007. The improvement was primarily
due to the sale of the Wabash, Indiana facility, which had been experiencing losses in the prior
year, and the sale of our Hoboken, Belgium facility in June, 2008.
Liquidity and Capital Resources
Sources of Liquidity
The principal sources of liquidity for our future operating, capital expenditure, facility
closure, restructuring, and reorganization requirements are expected to be (i) cash flows from
continuing operations, (ii) cash and cash equivalents on hand, (iii) proceeds related to our trade
receivable securitization and financing programs, and (iv) borrowings from our New Credit
Facilities. While we expect that such sources will meet these requirements, there can be no
assurances that such sources will prove to be sufficient, in part, due to inherent uncertainties
about applicable future business and capital market conditions.
Capital Resources
We have a domestic accounts receivable securitization facility with a program limit of $25
million. There was $4 million of borrowings under this program as of July 31, 2008 and no
borrowings under this program as of January 31, 2008.
We have an accounts receivable financing program in Germany with a local financial
institution. The program limit was
25 million as of July 31, 2008 and
20 million as of January
31, 2008. Borrowings under this program of approximately
25 million or $39.0 million and
20
million or $29.6 million at July 31, 2008 and January 31, 2008, respectively, are included in short
term bank borrowings.
We also have an accounts receivable factoring program in the Czech Republic with a local
financial institution. The program limit is 480 million Czech Crown or approximately $31 million
and $28 million as of July 31, 2008 and January 31, 2008, respectively. As of July 31, 2008 and
January 31, 2008, approximately 392.9 million Czech Crown or $25.7 million and 344.0 million Czech
Crown or $19.7 million, respectively, was factored under this program. The transactions are
accounted for as sales of receivables under the provisions of SFAS 140, Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities (SFAS 140) and the
receivables are removed from the Consolidated Balance Sheets.
Cash Flows
Operating Activities:
Cash used for operations was $12.8 million in the first six months of
fiscal 2008 compared to $6.7 million in the first six months of
fiscal 2007. The $6.1 million
increased use of cash resulted from increased use of working capital in the first six months of
fiscal 2008, primarily caused by decreased accounts payable due to the expiration of special year
end payment terms, which was somewhat offset by lower accounts receivable balances, net of foreign
currency exchange, due to reduced sales volumes.
33
Investing Activities:
Cash used for investing activities was $69.4 million during the first
six months of fiscal 2008 compared to $39.7 million in the first six months of fiscal 2007. The
increased use of cash was primarily due to the disposition of the Hoboken, Belgium facility during
the second quarter of fiscal 2008, which included a contribution of $27 million in cash as part of the transaction.
Financing Activities:
Cash provided by financing activities was $8.5 million in the first six
months of fiscal 2008 compared to $17.9 million in the first six months of fiscal 2007. During the
second quarter of fiscal 2007, proceeds from the Rights Offering, net of fees, of $161.6 million
were used to pay off $133.3 million of long-term debt. During fiscal 2008, we increased short-term
borrowings by $20.8 million mainly through securitization and factoring of accounts receivable.
Off Balance Sheet Arrangements
We have a $25 million domestic accounts receivable securitization facility. The facility has
an expiration date of May 30, 2013 and an interest rate equal to LIBOR plus 2.25%. The actual
amount of funding available at any given time is based on availability of eligible receivables and
other customary factors.
Pursuant to the securitization facility, certain of our consolidated subsidiaries sell
substantially all U.S. short term receivables to a non-consolidated special purpose entity (SPE I)
at face value and no gains or losses are recognized in connection with the sales. The purchase
price for the receivables sold to SPE I is paid in a combination of cash and short term notes. The
short term notes appear in Other Receivables on our Consolidated Balance Sheets and represent the
difference between the face amount of accounts receivables sold and the cash received for the
sales. SPE I resells the receivables to a non-consolidated qualifying special purpose entity (SPE
II) at an annualized discount of 2.4% to 4.4%. SPE II pays the purchase price for the receivables
with cash received from borrowings and a short term note to SPE I for the excess of the purchase
price of the receivables over the cash payment. SPE II pledges the receivables to secure
borrowings from commercial lenders. This debt is not included in our consolidated financial
statements.
Collections for the receivables are held by HLI Opco, and deposited into an account controlled
by the program agent. The servicing fees payable to HLI Opco are set off against interest and
other fees payable to the program agent and lenders. The program agent uses the proceeds to pay
off the short term borrowings from commercial lenders and returns the excess collections to SPE II,
which in turn pays down the short term note issued to SPE I. SPE I then pays down the short term
notes issued to the consolidated subsidiaries.
The securitization transactions are accounted for as sales of the receivables under the
provisions of SFAS 140 and are removed from the Consolidated Balance Sheets. The proceeds received
are included in cash flows from operating activities in the Consolidated Statements of Cash Flows.
Costs associated with the receivables facility are recorded as other expense in the Consolidated
Statements of Operations.
At July 31, 2008 and January 31, 2008 the outstanding balances of receivables sold to special
purpose entities were $47.2 million and $48.3 million, respectively. Our net retained interests at
July 31, 2008 and January 31, 2008 were $43.2 million and $48.3 million, respectively, which are
disclosed as Other Receivables on the Consolidated Balance Sheets and in cash flows from operating
activities in the Consolidated Statements of Cash Flows. There was $4.0 million in advances from
lenders at July 31, 2008 and no advances at January 31, 2008.
Credit Ratings
As of July 31, 2008 our credit ratings were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S&P
|
|
Moodys
|
|
Fitch
|
Corporate rating
|
|
|
B
|
|
|
|
B3
|
|
|
|
B
|
|
Bank debt rating
|
|
BB-
|
|
|
B2
|
|
|
BB/RR1
|
New Senior Note rating
|
|
|
B-
|
|
|
Caa2
|
|
B-/RR5
|
Contractual Obligations
The following table identifies our significant contractual obligations as of July 31, 2008
(dollars in millions):
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment Due by Period
|
|
|
|
Less than 1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
|
|
|
2-3 Years
|
|
|
4-5 Years
|
|
|
After 5 Years
|
|
|
Total
|
|
Short-term borrowings
|
|
$
|
54.9
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
54.9
|
|
Long-term debt
|
|
|
5.0
|
|
|
|
9.4
|
|
|
|
8.2
|
|
|
|
584.0
|
|
|
|
606.6
|
|
Operating leases
|
|
|
4.3
|
|
|
|
3.1
|
|
|
|
0.6
|
|
|
|
0.1
|
|
|
|
8.1
|
|
Capital expenditures
|
|
|
17.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17.6
|
|
United States pension contribution
|
|
|
5.4
|
|
|
|
7.5
|
|
|
|
5.4
|
|
|
|
|
|
|
|
18.3
|
|
Tax reserves
|
|
|
4.8
|
|
|
|
0.1
|
|
|
|
|
|
|
|
5.8
|
|
|
|
10.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total obligations
|
|
$
|
92.0
|
|
|
$
|
20.1
|
|
|
$
|
14.2
|
|
|
$
|
589.9
|
|
|
$
|
716.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Cash Requirements
We anticipate the following significant cash requirements to be paid during the remainder of
fiscal 2008 (dollars in millions):
|
|
|
|
|
Interest
|
|
$
|
28.6
|
|
Taxes
|
|
|
25.4
|
|
International pension and other post-retirement benefits funding
|
|
|
11.0
|
|
New Accounting Pronouncements
In March 2008 the Financial Accounting Standards Board issued SFAS 161,
Disclosures about
Derivative Instruments and Hedging Activities an amendment of FASB Statement No. 133
(SFAS 161).
This standard requires enhanced disclosures about an entitys derivative and hedging
activities. SFAS 161 requires qualitative disclosures about objectives and strategies for using
derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative
instruments, and disclosures about credit-risk-related contingent features in derivative
agreements. This standard is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008 and only requires disclosures for earlier periods
presented for comparative purposes beginning in the first year after the year of initial
adoption. We do not anticipate that the adoption of SFAS 161 will have a significant impact on our
financial condition or results of operations.
In December 2007 the FASB issued SFAS 141R,
Business Combinations
(SFAS 141R). This
standard establishes principles and requirements for how the acquirer recognizes and measures the
acquired identifiable assets, assumed liabilities, noncontrolling interest in the acquiree, and
acquired goodwill or gain from a bargain purchase. SFAS 141R also determines what information the
acquirer must disclose to enable users of the financial statements to evaluate the nature and
financial effects of the business combination. SFAS 141R applies prospectively to business
combinations for which the acquisition date is on or after January 1, 2009. We do not anticipate
that the adoption of SFAS 141R will have a significant impact on our financial condition or results
of operations.
In December 2007 the FASB issued SFAS 160,
Noncontrolling Interests in Consolidated Financial
Statements an amendment of ARB No. 51
(SFAS 160). This standard establishes accounting and
reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of
a subsidiary. SFAS 160 clarifies that a noncontrolling interest in a subsidiary is an ownership
interest in the consolidated entity that should be reported as equity in the consolidated financial
statements. SFAS 160 is effective for us as of February 1, 2009 with early adoption
prohibited. SFAS 160 shall be applied prospectively as of the beginning of the fiscal year in
which this standard is initially applied. The presentation and disclosure requirements of this
standard shall be applied retrospectively
for all periods presented and will impact how we present and disclose noncontrolling interests
and income from noncontrolling interests in our financial statements.
In September 2006 the FASB issued SFAS 157,
Fair Value Measurements
(SFAS 157). SFAS 157
establishes a framework for measuring fair value and expands disclosures about fair value
measurements. The changes to current practice resulting from the application of SFAS 157 relate to
the definition of fair value, the methods used to measure fair value, and the expanded disclosures
about fair value measurements. We adopted the provisions of SFAS 157 with our fiscal year beginning
February 1, 2008. The adoption of SFAS 157 did not have an impact on our consolidated financial
statements. In February 2008, the FASB issued FASB Staff Position (FSP) 157-2, Effective Date of
FASB Statement No. 157 (FSP 157-2). This FSP delays the effective date of SFAS 157 for all
nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at
fair value in the
35
financial statements on a recurring basis (at least annually). The effective date
for nonfinancial assets and nonfinancial liabilities has been delayed by one year to fiscal years
beginning after November 15, 2008 and interim periods within those fiscal years. We do not
anticipate that the adoption of FSP 157-2 will have a significant impact on our financial condition
and results of operations.
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
In the normal course of business we are exposed to market risks arising from changes in
foreign exchange rates, interest rates, raw material, and utility prices. We selectively use
derivative financial instruments to manage these risks, but do not enter into any derivative
financial instruments for trading purposes.
Foreign Exchange
We have global operations and thus make investments and enter into transactions in various
foreign currencies. In order to minimize the risks associated with foreign currency fluctuations,
we first seek to internally net foreign exchange exposures, and may use derivative financial
instruments to hedge any remaining net exposure. We use forward foreign currency exchange contracts
on a limited basis to reduce the earnings and cash flow impact of non-functional currency
denominated transactions. The gains and losses from these hedging instruments generally offset the
gains or losses from the hedged items and are recognized in the same period the hedged items are
settled.
The value of our consolidated assets and liabilities located outside the United States
(translated at period-end exchange rates) and income and expenses (translated using average rates
prevailing during the period), generally denominated in the Euro, Czech Crown, and the Brazilian
Real, are affected by the translation into our reporting currency (the U.S. Dollar). Such
translation adjustments are reported as a separate component of stockholders equity. In future
periods, foreign exchange rate fluctuations could have an increased impact on our reported results
of operations. However, due to the self-sustaining nature of our foreign operations, we believe we
can effectively manage the effect of these currency fluctuations. In addition, in order to further
hedge against such currency rate fluctuations, we have, from time to time, entered into certain
foreign currency swap arrangements.
In January 2006 we entered into a foreign currency swap agreement in Euros with a total
notional value of $50 million to hedge our net investment in certain of our foreign subsidiaries.
During the first quarter of fiscal 2007 the foreign currency swap agreement was effective. During
the second quarter of 2007 we terminated the swap due to our debt restructuring. During the fourth
quarter of fiscal 2007 we recognized the loss associated with the swap due to the liquidation of
the related foreign subsidiaries.
At
July 31, 2008 and January 31, 2008 approximately
419 or
$653 million and
410 or $607 million,
respectively, of our debt was denominated in Euros.
Interest Rates
We generally manage our risk associated with interest rate movements through the use of a
combination of variable and fixed rate debt. We have from time to time entered into interest rate
swap arrangements to further hedge against interest rate fluctuations. In January 2006 we entered
into an interest rate swap agreement with a total notional value of $50 million to hedge the
variability of interest payments associated with our variable-rate term debt. The swap agreement
was expected to settle in January 2009, and qualified for cash flow hedge accounting treatment.
During the first quarter of fiscal 2007 the swap was effective. During the second quarter of 2007
we terminated the swap due to our debt restructuring and recognized the loss associated with the
swap. During the second quarter of fiscal 2007 we entered into interest rate swaps with total
notional amount of
70 million. The swaps became effective on August 28, 2007 and mature on August
28, 2012. During the third quarter of fiscal 2007 we entered into interest rate swaps with total
notional amount of
50 million. The swaps became effective on September 30, 2007 and mature on
September 30, 2012. During the first quarter of fiscal 2008 we entered into interest rate swaps with total
notional amount of
50 million. The swaps became effective on February 28, 2008 and mature on
February 28, 2012.
At July 31, 2008 and January 31, 2008 approximately $183 million and $234 million,
respectively, of our debt was variable rate debt after considering the impact of the swaps.
Commodities
We rely on the supply of certain raw materials and other inputs in our production process,
including aluminum, steel, and natural gas. We manage the exposure associated with these
commitments primarily through the terms of our supply and procurement
36
contracts. We have entered
into firm purchase commitments or other arrangements for substantially all of our aluminum and
steel requirements for fiscal 2008, although as prices increase, suppliers may seek to impose
surcharges or other price increases above those in our purchase agreements. Additionally, in
accordance with industry practice, we generally pass through fluctuations in the price of aluminum
to our customers. We have also been successful in negotiating with some of our customers to pass
through a portion of fluctuations in the price of steel. If our costs for steel increase, we will
attempt to mitigate the impact of the higher material costs through pricing actions with our
customers, although those actions may not be sufficient to offset increased costs. We typically use
forward-fixed contracts to hedge against changes in commodity prices for a majority of our
outstanding purchase commitments. We also enter into forward purchase commitments for natural gas
to mitigate market fluctuations in natural gas prices.
Item 4.
Controls and Procedures
We maintain a disclosure committee (the Disclosure Committee) reporting to our Chief Executive
Officer to assist the Chief Executive Officer and Chief Financial Officer in fulfilling their
responsibility in designing, establishing, maintaining, and reviewing our Disclosure Controls and
Procedures. The Disclosure Committee is currently chaired by our Vice President and Chief
Financial Officer and includes our Chief Operating Officer and President, Global Wheel Group; Vice
President, General Counsel and Secretary; Director of Compensation and Benefits; Treasurer;
Assistant General Counsel; Director of Internal Audit; Director of Tax; and Director of Governance
and Reporting as its other members.
As of the end of the period covered by this report, our Chief Executive Officer and Chief
Financial Officer, along with the Disclosure Committee, evaluated the effectiveness of the design
and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e)
of the Securities Exchange Act of 1934. Based upon that evaluation, our Chief Executive Officer and
Chief Financial Officer concluded that our disclosure controls and procedures were effective as of
July 31, 2008 to ensure that information required to be disclosed by the Company in the reports
that it files and submits under the Securities Exchange Act of 1934 is accumulated and submitted to
the Companys management as appropriate to allow timely decisions regarding required disclosure.
PART II. OTHER INFORMATION
Item 1.
Legal Proceedings
There have been no material developments to our legal proceedings since our Annual Report on
Form 10-K filed on April 10, 2008.
Item 1A.
Risk Factors
There have been no material changes from the risk factors as previously disclosed in our most
recent Annual Report on Form 10-K.
Item 2.
Changes in Securities and Use of Proceeds
None.
Item 3.
Defaults upon Senior Securities
None.
Item 4.
Submission of Matters to a Vote of Security Holders
We held our annual meeting of stockholders on July 25, 2008 at our corporate headquarters in
Northville, Michigan. At the meeting the stockholders elected William H. Cunningham and Mohsen Sohi
as Class II directors to serve for a term of three years, expiring at the annual meeting of
stockholders to be held in 2011. Continuing Class III directors whose three-year terms expire at
the annual meeting of stockholders to be held in 2009 are Cynthia L. Feldmann, Henry D. G. Wallace
and Richard Wallman. Continuing Class I directors whose three-year terms expire at the annual
meeting of stockholders to be held in 2010 are George T. Haymaker, Jr. and Curtis J. Clawson. The
stockholders also voted to ratify the appointment of KPMG LLP as our independent auditors for the
fiscal year ending January 31, 2009.
37
The following is a summary of the votes cast for or withheld for each nominee for Class II
director, and the votes cast for, the votes cast against, and the shares abstaining from voting for
the ratification of the appointment of KPMG LLP:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Votes
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Nominee Name/Proposal
|
|
Votes For
|
|
Withheld/Against
|
|
Abstentions
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William H. Cunningham
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|
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79,959,728
|
|
|
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2,767,373
|
|
|
|
|
|
Mohsen Sohi
|
|
|
80,396,029
|
|
|
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2,331,072
|
|
|
|
|
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Ratification of KPMG LLP
|
|
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82,144,583
|
|
|
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580,173
|
|
|
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2,345
|
|
Item 5.
Other Information
None.
Item 6.
Exhibits
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|
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10.23
|
|
Hayes Lemmerz International, Inc. Performance Cash Plan
(incorporated by reference to Exhibit 10.1 to our Current Report on
Form 8-K filed on July 17, 2008).
|
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|
|
10.24
|
|
Form of Award Agreement under Hayes Lemmerz International, Inc.
Performance Cash Plan (incorporated by reference to Exhibit 10.2 to
our Current Report on Form 8-K filed on July 17, 2008).
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|
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31.1
|
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Certification of Curtis J. Clawson, Chairman of the Board,
President, and Chief Executive Officer, pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.*
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|
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31.2
|
|
Certification Mark A. Brebberman, Vice President, Chief Financial
Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
|
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|
|
32.1
|
|
Certification of Curtis J. Clawson, Chairman of the Board,
President, and Chief Executive Officer, Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.*
|
|
|
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32.2
|
|
Certification of Mark A. Brebberman, Vice President, Chief Financial
Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.*
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|
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*
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Filed electronically herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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HAYES LEMMERZ INTERNATIONAL, INC.
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/s/ MARK A. BREBBERMAN
|
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Mark A. Brebberman, Vice President, Chief Financial Officer
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|
|
|
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September 4, 2008
38
HAYES LEMMERZ INTERNATIONAL, INC.
10-Q EXHIBIT INDEX
|
|
|
10.23
|
|
Hayes Lemmerz International, Inc. Performance Cash Plan
(incorporated by reference to Exhibit 10.1 to our Current Report on
Form 8-K filed on July 17, 2008).
|
|
|
|
10.24
|
|
Form of Award Agreement under Hayes Lemmerz International, Inc.
Performance Cash Plan (incorporated by reference to Exhibit 10.2 to
our Current Report on Form 8-K filed on July 17, 2008).
|
|
|
|
31.1
|
|
Certification of Curtis J. Clawson, Chairman of the Board,
President, and Chief Executive Officer, pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.*
|
|
|
|
31.2
|
|
Certification Mark A. Brebberman, Vice President, Chief Financial
Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
|
|
|
|
32.1
|
|
Certification of Curtis J. Clawson, Chairman of the Board,
President, and Chief Executive Officer, Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.*
|
|
|
|
32.2
|
|
Certification of Mark A. Brebberman, Vice President, Chief Financial
Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.*
|
|
|
|
*
|
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Filed electronically herewith.
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39
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