HAYES LEMMERZ INTERNATIONAL INC - 10-Q Quarterly Report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


Mark One)
þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the quarterly period ended July 31, 2004

or

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the transition period from to

Commission file number: 000-50303

Hayes Lemmerz International, Inc.

(Exact name of registrant as specified in its charter)


Delaware		32-0072578
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

15300 Centennial Drive Northville, Michigan		48167
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code:

(734) 737-5000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12(b)-2 of the Act). Yes þ No o

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 Section 12, 13 or 15(d) of the Act subsequent to the distributions of securities under a plan confirmed by a court. Yes þ No o

The number of shares of common stock outstanding as of September 7, 2004 was 37,847,078 shares.

HAYES LEMMERZ INTERNATIONAL, INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS


		Page

PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements		3
	Consolidated Statements of Operations		3
	Consolidated Balance Sheets		5
	Consolidated Statements of Cash Flows		6
	Notes to Consolidated Financial Statements		7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		33
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		48
Item 4.	Controls and Procedures		49
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings		50
Item 2.	Changes in Securities and Use of Proceeds		50
Item 3.	Defaults upon Senior Securities		50
Item 4.	Submission of Matters to a Vote of Security Holders		50
Item 5.	Other Information		51
Item 6.	Exhibits and Reports on Form 8-K		51
Signatures			52
Registration Rights Agreement, dated July 1, 2004
Amendment No. 3 dated as of May 6, 2004
Waiver of Certain Post Closing Covenants
302 Certification of Curtis J. Clawson
302 Certification of James A. Yost
906 Certification of Curtis J. Clawson
906 Certification of James A. Yost

FORWARD LOOKING STATEMENTS

Unless otherwise indicated, references to the “Company” mean Hayes Lemmerz International, Inc., and its subsidiaries, and references to a fiscal year means the Company’s year commencing on February 1 of that year and ending January 31 of the following year (e.g., fiscal 2004 means the period beginning February 1, 2004, and ending January 31, 2005). This report contains forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations, and business of the Company. These forward looking statements involve certain risks and uncertainties. No assurance can be given that any of such matters will be realized. Factors that may cause actual results to differ materially from those contemplated by such forward looking statements include, among others, the following possibilities: (1) competitive pressure in the Company’s industry increases significantly; (2) general economic conditions are less favorable than expected; (3) the Company’s dependence on the automotive industry (which has historically been cyclical); (4) pricing pressure from automotive industry customers; (5) changes in the financial markets affecting the Company’s financial structure and the Company’s cost of capital and borrowed money; (6) the uncertainties inherent in international operations and foreign currency fluctuations; and (7) uncertainties related to conflict in the Middle East. The Company has no duty under the Private Securities Litigation Reform Act of 1995 to update the forward looking statements in this Quarterly Report on Form 10-Q and the Company does not intend to provide such updates.

HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS



		Successor						Predecessor

		Three Months			Two Months			One Month
		Ended			Ended			Ended
		July 31,			July 31,			May 31,
		2004			2003			2003


		(Dollars in millions, except per share amounts)

		(Unaudited)
Net sales		$	523.7		$	328.3		$	174.5
Cost of goods sold			474.4			298.9			147.8

	Gross profit		49.3			29.4			26.7
Marketing, general and administration			39.9			24.9			7.7
Asset impairments and other restructuring charges			0.9			—			2.3
Other (income) expense, net			(1.0	)		2.1			(1.3	)
Reorganization items			—			—			31.9
Fresh start accounting adjustments			—			—			(63.1	)

	Earnings from operations		9.5			2.4			49.2
Interest expense, net			12.4			8.1			5.8
Other non-operating expense			—			0.1			—

	Earnings (loss) before taxes on income, minority interest and extraordinary gain on debt discharge		(2.9	)		(5.8	)		43.4
Income tax provision			5.6			2.6			54.4

	Loss before minority interest and extraordinary gain on debt discharge		(8.5	)		(8.4	)		(11.0	)
Minority interest			1.5			0.8			0.2

	Loss before extraordinary gain on debt discharge		(10.0	)		(9.2	)		(11.2	)
Extraordinary gain on debt discharge, net of tax $0			—			—			1,076.7

	Net income (loss)	$	(10.0	)	$	(9.2	)	$	1,065.5

Basic and diluted net loss per share		$	(0.26	)	$	(0.31	)

See accompanying notes to consolidated financial statements.

HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS



		Successor						Predecessor

		Six Months			Two Months			Four Months
		Ended			Ended			Ended
		July 31,			July 31,			May 31,
		2004			2003			2003


		(Dollars in millions, except per share amounts)

		(Unaudited)
Net sales		$	1,117.8		$	328.3		$	689.8
Cost of goods sold			994.4			298.9			611.3

	Gross profit		123.4			29.4			78.5
Marketing, general and administration			83.8			24.9			41.6
Asset impairments and other restructuring charges			3.3			—			6.4
Other (income) expense, net			0.6			2.1			(1.9	)
Reorganization items			—			—			45.0
Fresh start accounting adjustments			—			—			(63.1	)

	Earnings from operations		35.7			2.4			50.5
Interest expense, net			21.6			8.1			22.7
Other non-operating (income) expense			(0.1	)		0.1			—
Loss on early extinguishment of debt			12.2			—			—

	Earnings (loss) before taxes on income, minority interest, extraordinary gain on debt discharge		2.0			(5.8	)		27.8
Income tax provision			10.6			2.6			60.3

	Loss before minority interest and extraordinary gain on debt discharge		(8.6	)		(8.4	)		(32.5	)
Minority interest			4.1			0.8			1.2

	Loss before extraordinary gain on debt discharge		(12.7	)		(9.2	)		(33.7	)
Extraordinary gain on debt discharge, net of tax $0			—			—			1,076.7

	Net income (loss)	$	(12.7	)	$	(9.2	)	$	1,043.0

Basic and diluted net loss per share		$	(0.34	)	$	(0.31	)

See accompanying notes to consolidated financial statements.

HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


				July 31,			January 31,
				2004			2004

				(Unaudited)

				(Dollars in millions)
ASSETS
Current assets:
	Cash and cash equivalents			$	49.1		$	48.5
	Receivables				325.0			325.5
	Inventories				204.1			189.3
	Prepaid expenses and other				21.3			29.0

		Total current assets			599.5			592.3
Property, plant and equipment, net					966.4			966.5
Goodwill					407.2			416.2
Intangible assets, net					225.2			237.2
Other assets					51.6			85.5

		Total assets		$	2,249.9		$	2,297.7

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Bank borrowings and other notes			$	4.0		$	14.2
	Current portion of long-term debt				10.1			11.3
	Accounts payable and accrued liabilities				362.1			355.5

		Total current liabilities			376.2			381.0
Long-term debt, net of current portion					641.2			752.4
Pension and other long-term liabilities					517.7			526.5
Series A Warrants and Series B Warrants					3.0			8.2
Redeemable preferred stock of subsidiary					10.9			10.5
Minority interest					25.9			23.2
Commitments and contingencies
Stockholders’ equity:
	Preferred stock, 1,000,000 shares authorized, none issued or outstanding at July 31, 2004 or January 31, 2004				—			—
	Common stock, par value $0.01 per share:
		100,000,000 shares authorized; 37,847,078 and 30,000,000 issued and outstanding at July 31, 2004 and January 31, 2004, respectively			0.4			0.3
	Additional paid in capital				668.4			548.2
	Accumulated deficit				(59.2	)		(46.5	)
	Accumulated other comprehensive income				65.4			93.9

		Total stockholders’ equity			675.0			595.9

			Total liabilities and stockholders’ equity	$	2,249.9		$	2,297.7

See accompanying notes to consolidated financial statements.

HAYES LEMMERZ INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS



					Successor						Predecessor

					Six Months			Two Months			Four Months
					Ended			Ended			Ended
					July 31,			July 31,			May 31,
					2004			2003			2003


					(Dollars in millions)

					(Unaudited)
Cash flows from operating activities:
	Net income (loss)				$	(12.7	)	$	(9.2	)	$	1,043.0
	Adjustments to reconcile net income (loss) to net cash provided by operating activities:
		Depreciation and amortization				85.9			26.7			46.4
		Amortization of deferred financing fees				1.9			0.6			1.6
		Interest income resulting from fair value adjustment of Series A Warrants and Series B Warrants				(5.2	)		(4.5	)		—
		Change in deferred income taxes				(6.8	)		(1.8	)		52.6
		Asset impairments and other restructuring charges				3.3			—			6.4
		Minority interest				4.1			0.8			1.2
		Subsidiary preferred stock dividends				0.4			0.1			—
		Compensation expense related to restricted stock units				3.2			—			—
		Loss on extinguishment of debt				12.2			—			—
		(Gain) loss on sale of assets				(0.3	)		0.3			(0.4	)
		Changes in operating assets and liabilities:
			Receivables			(2.1	)		28.5			(13.7	)
			Inventories			(16.3	)		7.1			(4.0	)
			Prepaid expenses and other			0.2			(0.7	)		5.2
			Accounts payable and accrued liabilities			12.9			18.8			(6.9	)
	Chapter 11 items:
		Reorganization items				—			—			45.0
		Fresh start accounting adjustments				—			—			(63.1	)
		Extraordinary gain on debt discharge				—			—			(1,076.7	)
		Interest accrued on Credit Agreement				—			—			16.9
		Payments related to Chapter 11 Filings				(1.1	)		(22.3	)		(22.4	)

			Cash provided by operating activities			79.6			44.4			31.1

Cash flows from investing activities:
	Purchase of property, plant, equipment and tooling					(68.0	)		(19.5	)		(26.3	)
	Purchase of equipment previously leased					—			—			(23.6	)
	Proceeds from sale of assets					1.7			—			0.8

		Cash used for investing activities		<

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