UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Form 10-Q
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(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 September 30, 2002 | ||
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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 1-10218
Collins & Aikman Corporation
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DELAWARE
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13-3489233 | |
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(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
250 Stephenson Highway
(248) 824-2500
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.
As of October 31, 2002, the number of outstanding shares of the Registrant’s common stock, $.01 par value, was 83,630,087 shares.
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
| Quarter Ended | Nine Months Ended | ||||||||||||||||
| September 30, | September 30, | September 30, | September 30, | ||||||||||||||
| 2002 | 2001 | 2002 | 2001 | ||||||||||||||
| (Footnote 2) | |||||||||||||||||
| (Unaudited) | |||||||||||||||||
| (in millions, except for per share data) | |||||||||||||||||
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Net sales
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$ | 922.5 | $ | 430.4 | $ | 2,922.6 | $ | 1,341.1 | |||||||||
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Cost of goods sold
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821.8 | 377.1 | 2,532.3 | 1,164.7 | |||||||||||||
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Gross profit
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100.7 | 53.3 | 390.3 | 176.4 | |||||||||||||
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Selling, general and administrative expenses
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71.2 | 41.8 | 215.8 | 118.2 | |||||||||||||
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Restructuring charges and impairment of
long-lived assets
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33.8 | — | 42.8 | 9.2 | |||||||||||||
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Operating income (loss)
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(4.3 | ) | 11.5 | 131.7 | 49.0 | ||||||||||||
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Interest expense, net
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37.0 | 20.4 | 112.6 | 64.3 | |||||||||||||
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Loss on sale of receivables
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0.8 | 1.0 | 3.0 | 4.7 | |||||||||||||
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Subsidiary preferred stock dividend
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6.2 | — | 24.4 | — | |||||||||||||
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Subsidiary preferred stock accretion
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1.8 | — | 5.6 | — | |||||||||||||
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Other expense, net
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2.0 | 0.9 | 13.4 | 6.7 | |||||||||||||
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Income (loss) from continuing operations before
income taxes
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(52.1 | ) | (10.8 | ) | (27.3 | ) | (26.7 | ) | |||||||||
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Income tax expense (benefit)
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(6.9 | ) | 3.0 | 20.9 | (7.6 | ) | |||||||||||
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Income (loss) from continuing operations before
extraordinary items and cumulative effect of change in
accounting principle
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(45.2 | ) | (13.8 | ) | (48.2 | ) | (19.1 | ) | |||||||||
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Income from discontinued operations, net of
income taxes of $0.0 and $0.9 for the quarters ended and $6.3
and $5.7 for the nine months, 2002 and 2001, respectively
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— | 1.4 | 9.5 | 8.8 | |||||||||||||
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Cumulative effect of change in accounting
principle, net of income taxes of $0.0 in 2002
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— | — | (11.7 | ) | — | ||||||||||||
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Income (loss) before extraordinary charge
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(45.2 | ) | (12.4 | ) | (50.4 | ) | (10.3 | ) | |||||||||
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Extraordinary charge, net of income taxes of $0.2
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— | — | — | (.3 | ) | ||||||||||||
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Net income (loss)
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$ | (45.2 | ) | $ | (12.4 | ) | $ | (50.4 | ) | $ | (10.6 | ) | |||||
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Earnings per share data:
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Net income (loss)
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$ | (45.2 | ) | $ | (12.4 | ) | $ | (50.4 | ) | $ | (10.6 | ) | |||||
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Loss on redemption of subsidiary preferred stock
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— | — | (36.3 | ) | — | ||||||||||||
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Net income (loss) available to common shareholders
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$ | (45.2 | ) | $ | (12.4 | ) | $ | (86.7 | ) | $ | (10.6 | ) | |||||
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Net income (loss) per basic and diluted common
share:
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Continuing operations
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$ | (0.54 | ) | $ | (0.32 | ) | $ | (1.15 | ) | $ | (0.54 | ) | |||||
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Discontinued operations
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— | 0.03 | 0.13 | 0.25 | |||||||||||||
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Cumulative effect of change in accounting
Principle
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— | — | (0.16 | ) | — | ||||||||||||
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Extraordinary charge
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— | — | — | (0.01 | ) | ||||||||||||
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Net income (loss) available to common shareholders
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$ | (0.54 | ) | $ | (0.29 | ) | $ | (1.18 | ) | $ | (0.30 | ) | |||||
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Average basic and diluted common shares
outstanding:
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83.6 | 42.5 | 73.7 | 35.3 | |||||||||||||
The accompanying notes are an integral part of the financial statements.
1
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
| September 30, | December 31, | |||||||||
| 2002 | 2001 | |||||||||
| (Unaudited) | ||||||||||
| (in millions) | ||||||||||
| ASSETS | ||||||||||
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Current Assets:
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Cash and cash equivalents
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$ | 77.2 | $ | 73.9 | ||||||
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Accounts and other receivables, net
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472.3 | 406.1 | ||||||||
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Inventories
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173.5 | 132.6 | ||||||||
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Other
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123.2 | 131.9 | ||||||||
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Total current assets
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846.2 | 744.5 | ||||||||
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Property, plant and equipment, net
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654.0 | 612.6 | ||||||||
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Deferred tax assets
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122.6 | 136.5 | ||||||||
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Goodwill
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1,223.5 | 1,253.8 | ||||||||
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Intangible assets, net
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88.9 | 23.6 | ||||||||
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Other assets
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195.8 | 216.9 | ||||||||
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Total Assets
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$ | 3,131.0 | $ | 2,987.9 | ||||||
| LIABILITIES AND COMMON STOCKHOLDERS’ EQUITY | ||||||||||
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Current Liabilities:
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Short-term borrowings
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$ | 19.0 | $ | 35.7 | ||||||
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Current maturities of long-term debt
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22.3 | 19.5 | ||||||||
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Accounts payable
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476.8 | 468.7 | ||||||||
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Accrued expenses
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377.7 | 239.7 | ||||||||
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Total current liabilities
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895.8 | 763.6 | ||||||||
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Other, including post-retirement benefit
obligation
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371.9 | 402.7 | ||||||||
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Long-term debt
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1,264.8 | 1,282.4 | ||||||||
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Mandatorily redeemable preferred stock of
subsidiary
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115.5 | 149.3 | ||||||||
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Minority interest in consolidated subsidiary
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9.7 | 15.2 | ||||||||
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Contingencies
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Common stock ($0.01 par value, 300.0 shares
authorized, 83.6 shares issued and outstanding at
September 30, 2002, and 300.0 shares authorized, 67.2
shares issued and outstanding at December 31, 2001)
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0.8 | 0.7 | ||||||||
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Other paid-in capital
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1,282.7 | 1,124.1 | ||||||||
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Accumulated deficit
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(769.5 | ) | (682.8 | ) | ||||||
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Accumulated other comprehensive loss
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(40.7 | ) | (67.3 | ) | ||||||
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Total common stockholders’ equity
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473.3 | 374.7 | ||||||||
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Total Liabilities and Common Stockholders’
Equity
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$ | 3,131.0 | $ | 2,987.9 | ||||||
The accompanying notes are an integral part of the financial statements.
2
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
| Nine Months Ended | ||||||||||
| September 30, | ||||||||||
| 2002 | 2001 | |||||||||
| (Unaudited) | ||||||||||
| (in millions) | ||||||||||
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OPERATING ACTIVITIES
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Net income (loss)
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(50.4 | ) | (10.6 | ) | ||||||
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Adjustments to derive cash flow from operating
activities:
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Impairment of goodwill
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11.7 | 0.8 | ||||||||
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Impairment of fixed assets
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8.7 | — | ||||||||
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Deferred income tax expense (benefit)
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19.3 | (12.4 | ) | |||||||
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Subsidiary preferred stock requirements
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30.0 | — | ||||||||
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Depreciation
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69.7 | 49.5 | ||||||||
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Goodwill amortization
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— | 5.3 | ||||||||
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Amortization of other assets
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15.1 | 7.1 | ||||||||
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Loss on sale of property, plant and equipment
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2.1 | 4.3 | ||||||||
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(Increase) decrease in accounts and other
receivables
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(66.2 | ) | 84.5 | |||||||
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(Increase) decrease in inventories
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(36.6 | ) | 37.0 | |||||||
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Increase (decrease) in accounts payable
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25.2 | (11.8 | ) | |||||||
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Increase (decrease) in interest payable
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23.4 | 11.8 | ||||||||
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Changes in other assets
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37.5 | 26.2 | ||||||||
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Changes in other liabilities
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39.9 | (21.4 | ) | |||||||
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Net cash provided by operating activities
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129.4 | 170.3 | ||||||||
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INVESTING ACTIVITIES
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Additions to property, plant and equipment
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(101.2 | ) | (37.6 | ) | ||||||
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Sales of property, plant and equipment
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0.2 | 39.5 | ||||||||
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Additional investment in joint venture
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(6.0 | ) | — | |||||||
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Payments of acquisition costs
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(42.2 | ) | (171.2 | ) | ||||||
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Disposition of business
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— | 3.5 | ||||||||
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Net cash used in investing activities
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(149.2 | ) | (165.8 | ) | ||||||
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FINANCING ACTIVITIES
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Issuance of long-term debt
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— | 50.0 | ||||||||
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Debt issuance costs
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— | (10.7 | ) | |||||||
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Repayment of long-term debt
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(14.9 | ) | (73.6 | ) | ||||||
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Repurchase of preferred stock
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(100.0 | ) | — | |||||||
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Repayments on revolving credit facilities
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— | (43.7 | ) | |||||||
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Increase (decrease) in short-term
borrowings, net
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(5.7 | ) | 2.1 | |||||||
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Proceeds from issuance of stock
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150.8 | 47.4 | ||||||||
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Reissue of treasury stock
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— | 61.3 | ||||||||
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Repayment of debt assumed in acquisition
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(7.1 | ) | — | |||||||
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Net cash provided by (used in) financing
activities
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23.1 | 32.8 | ||||||||
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Net increase in cash and cash equivalents
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3.3 | 37.3 | ||||||||
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Cash and cash equivalents at beginning of period
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73.9 | 20.9 | ||||||||
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Cash and cash equivalents at end of period
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$ | 77.2 | $ | 58.2 | ||||||
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Supplementary information:
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Debt assumed in acquisition
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$ | 6.7 | $ | — | ||||||
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Taxes paid
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$ | 11.1 | $ | 13.9 | ||||||
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Interest paid
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$ | 77.5 | $ | 50.3 | ||||||
The accompanying notes are an integral part of the financial statements.
3
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
1. Organization
Collins & Aikman Corporation (the “Company”) is a Delaware corporation, headquartered in Troy, Michigan. The Company conducts all of its operating activities through its wholly owned Collins & Aikman Products Co. (“Products”) subsidiary. The Company is a global leader in design, engineering and manufacturing of automotive interior components, including instrument panels, fully assembled cockpit modules, floor and acoustic systems, automotive fabric, interior trim and convertible top systems. The Company operates through three divisions: North American Automotive Interior Systems, European and Rest of World Automotive Interior Systems and Specialty Automotive Products.
2. Basis of Presentation
a. Basis of Presentation
The accompanying condensed consolidated financial statements include the accounts of the Company and its subsidiaries and in the opinion of management, contain all adjustments, including adjustments of a normal and recurring nature, necessary for a fair presentation of financial position and results of operations. Certain prior year items have been reclassified to conform to the 2002 presentation. Results of operations for interim periods are not necessarily indicative of results for the full year. The accompanying consolidated financial statements and footnotes should be read in conjunction with the Company’s 2001 Annual Report on Form 10-K/A.
b. Reverse Stock Split
On May 28, 2002, the Company effected a one-for-2.5 reverse stock split of C&A common stock. All shares and per share data have been adjusted retroactively for all periods presented to reflect the stock split.
c. Other Expense, net
For the quarter ended September 30, 2002, “other expense, net” related primarily to $1.8 million of losses from an investment in a joint venture and $1.4 million of foreign currency transaction losses, reduced by minority interest share of losses of a consolidated subsidiary of $1.6 million. For the nine months ended September 30, 2002, “other expense, net” related primarily to $12.6 million of losses related to derivatives used in the Company’s foreign currency hedging strategy and $4.1 million of losses from an investment in a joint venture, reduced by $3.7 million of foreign currency transaction gains and minority interest share of losses of a consolidated subsidiary of $2.6 million.
For the quarter and nine months ended September 30, 2001, “other expense, net” related primarily to foreign currency transaction losses of $2.4 million and $9.0 million, respectively, losses related to a sale-leaseback transaction of $3.0 million for the nine months ended, reduced by gains related to derivatives used in the Company’s foreign currency hedging strategy of $1.4 and $6.0 million, respectively.
4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
d. Impact of Prior Period Adjustment
During the Company’s review of its financial information, an error in the mathematical computation of foreign currency exchange gains was discovered. The third quarter 2002 financial statements reflect the correction of the error as a prior period adjustment. The impact of the adjustment on the prior period financial statements follows:
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||
| March 31, | March 31, | June 30, | June 30, | June 30, | June 30, | |||||||||||||||||||
| 2002 | 2002 | 2002 | 2002 | 2002 | 2002 | |||||||||||||||||||
| (As Reported) | (Adjusted) | (As Reported) | (Adjusted) | (As Reported) | (Adjusted) | |||||||||||||||||||
| (in millions, except per share data) | ||||||||||||||||||||||||
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Net sales
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$ | 914.8 | $ | 914.8 | $ | 1,085.3 | $ | 1,085.3 | $ | 2,000.1 | $ | 2,000.1 | ||||||||||||
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Cost of goods sold
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783.7 | 783.7 | 926.8 | 926.8 | 1,710.5 | 1,710.5 | ||||||||||||||||||
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