10-Q
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
FORM 10-Q
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(Mark One)
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x
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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 June 30, 2008
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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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Commission File Number:
333-123708
COOPER-STANDARD HOLDINGS
INC.
(Exact name of registrant as
specified in its charter)
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Delaware
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20-1945088
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(State or other jurisdiction
of incorporation or organization)
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(I.R.S. Employer
Identification No.)
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39550 Orchard Hill Place Drive
Novi, Michigan 48375
(Address of principal executive
offices)
(Zip Code)
(248) 596-5900
(Registrants telephone
number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes x No 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 o
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Non-accelerated
filer x
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Smaller reporting
company o
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(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No x
Number of
shares of common stock of registrant outstanding, at
August 6, 2008:
3,479,100 shares
of common stock, $0.01 par value
PART I
FINANCIAL INFORMATION
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Item 1.
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Financial
Statements.
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CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND 2008
(UNAUDITED)
(Dollar amounts in thousands)
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Three Months Ended
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Six Months Ended
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June 30,
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June 30,
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2007
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2008
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2007
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2008
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Sales
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$
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623,998
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$
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765,639
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$
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1,200,259
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$
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1,521,660
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Cost of products sold
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517,190
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647,650
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999,974
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1,284,552
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Gross profit
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106,808
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117,989
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200,285
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237,108
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Selling, administration, & engineering expenses
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51,309
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69,029
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100,029
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136,432
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Amortization of intangibles
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7,930
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7,925
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15,739
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15,761
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Restructuring
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9,049
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1,243
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13,792
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3,638
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Operating profit
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38,520
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39,792
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70,725
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81,277
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Interest expense, net of interest income
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(21,040
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)
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(23,383
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(42,884
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(47,598
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Equity earnings
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322
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2,059
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654
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4,204
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Other income (expense), net
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461
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(361
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(781
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3,114
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Income before income taxes
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18,263
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18,107
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27,714
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40,997
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Provision for income tax expense
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8,577
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6,520
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13,354
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13,738
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Net income
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$
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9,686
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$
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11,587
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$
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14,360
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$
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27,259
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The accompanying notes are an integral part of these financial
statements.
2
CONDENSED
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands)
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December 31,
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June 30,
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2007
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2008
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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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40,877
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$
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32,210
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Accounts receivable, net
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546,794
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603,770
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Inventories, net
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155,321
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151,228
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Prepaid expenses
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19,603
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19,573
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Other
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9,674
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9,447
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Total current assets
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772,269
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816,228
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Property, plant, and equipment, net
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722,373
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740,790
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Goodwill
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290,588
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290,209
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Intangibles, net
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256,258
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245,847
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Other assets
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120,767
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125,268
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$
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2,162,255
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$
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2,218,342
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Liabilities and Stockholders Equity
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Current liabilities:
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Debt payable within one year
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$
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51,999
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$
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46,605
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Accounts payable
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295,638
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289,434
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Payroll liabilities
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103,161
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116,791
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Accrued liabilities
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78,218
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73,588
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Total current liabilities
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529,016
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526,418
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Long-term debt
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1,088,162
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1,077,712
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Pension benefits
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109,101
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112,536
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Postretirement benefits other than pensions
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76,514
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78,840
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Deferred tax liabilities
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28,331
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26,751
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Other long-term liabilities
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62,573
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61,869
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Stockholders equity:
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Common stock, $0.01 par value, 4,000,000 shares
authorized
at December 31, 2007 and June 30, 2008,
3,483,600 shares issued
and outstanding at December 31, 2007 and June 30, 2008
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35
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35
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Additional paid-in capital
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354,874
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355,523
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Accumulated deficit
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(155,339
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(128,080
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Accumulated other comprehensive income
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68,988
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106,738
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Total stockholders equity
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268,558
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334,216
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$
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2,162,255
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$
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2,218,342
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The accompanying notes are an integral part of these financial
statements.
3
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2007 AND 2008
(UNAUDITED)
(Dollar amounts in thousands)
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2007
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2008
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Operating Activities:
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Net income
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$
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14,360
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$
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27,259
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Adjustments to reconcile net income to net cash provided by
operating
activities:
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Depreciation
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45,569
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55,263
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Amortization
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15,739
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15,761
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Non-cash restructuring charges
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7
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132
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Gain on bond repurchase
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(1,696
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Amortization of debt issuance cost
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2,435
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2,378
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Stock-based compensation expense
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328
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853
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Changes in operating assets and liabilities
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13,298
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(54,856
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Net cash provided by operating activities
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91,736
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45,094
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Investing activities:
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Property, plant, and equipment
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(43,775
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(47,979
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Acquisition of business, net of cash acquired
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(9,958
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Gross proceeds from sale-leaseback transaction
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4,806
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Other
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297
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545
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Net cash used in investing activities
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(48,630
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(47,434
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Financing activities:
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Increase in short-term debt
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2,369
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11,734
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Principal payments on long-term debt
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(28,910
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)
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(8,852
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Repurchase of bonds
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(5,306
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)
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Other
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(450
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)
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127
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Net cash used in financing activities
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(26,991
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)
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(2,297
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Effects of exchange rate changes on cash
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2,543
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(4,030
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Changes in cash and cash equivalents
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18,658
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(8,667
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Cash and cash equivalents at beginning of period
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56,322
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40,877
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Cash and cash equivalents at end of period
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$
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74,980
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$
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32,210
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The accompanying notes are an integral part of these financial
statements.
4
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar
amounts in thousands except per share amounts)
Description
of business
Cooper-Standard Holdings Inc. (the Company), through
its wholly-owned subsidiary
Cooper-Standard
Automotive Inc., is a leading global manufacturer of
body & chassis and fluid handling components, systems,
subsystems, and modules, primarily for use in passenger vehicles
and light trucks for global original equipment manufacturers
(OEMs) and replacement markets. The Company conducts
substantially all of its activities through its subsidiaries.
Basis of
presentation
The accompanying unaudited condensed consolidated financial
statements have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission
(SEC) for interim financial information and should
be read in conjunction with the consolidated financial
statements and notes thereto included in the Companys
Annual Report on
Form 10-K
for the year ended December 31, 2007, as filed with the
SEC. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted
in the United States for complete financial statements. These
financial statements include all adjustments (consisting of
normal, recurring adjustments) considered necessary for a fair
presentation of the financial position and results of operations
of the Company. The operating results for the interim period
ended June 30, 2008 are not necessarily indicative of
results for the full year.
Stock-based
compensation
Effective January 1, 2006, the Company adopted
SFAS No. 123(R), Share-Based Payment, using the
prospective method. The prospective method requires compensation
cost to be recognized for all
share-based
payments granted after the effective date of
SFAS No. 123(R). All awards granted prior to the
effective date will be accounted for in accordance with
Accounting Principles Board Opinion (APB)
No. 25, Accounting for Stock Issued to Employees.
Reclassifications
During 2007, the Company revised its segment disclosures from
two reportable segments to three reportable segments and has
revised the prior period amounts to conform to the current
period presentation.
Recent
accounting pronouncements
In March 2008, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 161, Disclosures
About Derivative Instruments and Hedging Activities
an Amendment of FASB Statement No. 133.
SFAS No. 161 requires entities that utilize derivative
instruments to provide qualitative disclosures about their
objectives and strategies for using such instruments, as well as
any details of credit risk related contingent features contained
within derivatives. SFAS No. 161 also requires
entities to disclose additional information about the amounts
and locations of derivatives located within the financial
statements, how the provisions of SFAS No. 133 have
been applied and the impact that hedges have on an entitys
financial position, financial performance, and cash flows.
SFAS No. 161 is effective for fiscal years and interim
periods beginning after November 15, 2008, with early
application encouraged. The Company is currently evaluating the
impact this statement will have on its consolidated financial
statements.
In December 2007, the FASB issued SFAS No. 141
(revised 2007), Business Combinations. This
statement significantly changes the financial accounting and
reporting of business combination
5
transactions. The provisions of this statement are to be applied
prospectively to business combination transactions in the first
annual reporting period beginning on or after December 15,
2008.
In December 2007, the FASB issued SFAS No. 160,
Noncontrolling Interests in Consolidated Financial
Statements an amendment of ARB No. 51.
SFAS No. 160 establishes accounting and reporting
standards for noncontrolling interests in subsidiaries. This
statement requires the reporting of all noncontrolling interests
as a separate component of stockholders equity, the
reporting of consolidated net income (loss) as the amount
attributable to both the parent and the noncontrolling interests
and the separate disclosure of net income (loss) attributable to
the parent and to the noncontrolling interests. In addition,
this statement provides accounting and reporting guidance
related to changes in noncontrolling ownership interests. Other
than the reporting requirements described above which require
retrospective application, the provisions of
SFAS No. 160 are to be applied prospectively in the
first annual reporting period beginning on or after
December 15, 2008.
In February 2007, the FASB issued SFAS No. 159
The Fair Value Option for Financial Assets and Financial
Liabilities, including an amendment to FASB Statement 115.
This statement permits entities to choose to measure financial
instruments and certain other items at fair value that are not
currently required to be measured at fair value. This statement
also establishes presentation and disclosure requirements
designed to facilitate comparisons between entities that choose
different measurement attributes for similar types of assets and
liabilities. SFAS No. 159 is effective for fiscal
years beginning after November 15, 2007. The Company
adopted SFAS No. 159 as of January 1, 2008, but
it had no impact on our financial condition or results of
operations as we did not elect to apply the fair value option.
In September 2006, the FASB issued SFAS No. 158,
Employers Accounting for Defined Benefit Pension and
Other Postretirement Plans, an amendment of FASB Statements
No. 87, 88, 106, and 132(R). This statement requires
employers to recognize the overfunded or underfunded status of a
defined benefit post-retirement plan as an asset or liability in
the statement of financial position. Further, this statement
requires employers to recognize changes in the funded status in
the year in which the changes occur through comprehensive
income. In addition, this statement 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. SFAS No. 158 requires prospective
application and is effective for non-public companies for fiscal
years ending after June 15, 2007. The Company adopted the
recognition provisions as of December 31, 2007, and the
funded status of its defined benefit plans is reflected in its
consolidated balance sheet as of December 31, 2007.
This statement also requires the measurement of defined benefit
plan asset and liabilities as of the annual balance sheet date.
The measurement date provisions of SFAS No. 158 are
effective for fiscal years ending after December 15, 2008.
The Company previously measured its pension and other
postretirement benefit obligations as of October 1 each year.
The adoption of the measurement date provisions of
SFAS No. 158 will increase long-term liabilities by
approximately $3,700 and accumulated deficit by approximately
$3,400, representing the net periodic benefit cost for the
period between the measurement date utilized in 2007 and the
beginning of 2008. There will be no effect on the Companys
results of operations or cash flows.
In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurements. SFAS No. 157
defines fair value, establishes a framework for measuring fair
value in generally accepted accounting principles, and expands
disclosures about fair value measurement. This statement applies
under other accounting pronouncements that require or permit
fair value measurements and does not require any new fair value
measurements. SFAS No. 157 is effective for the fiscal
year beginning after November 15, 2007. The Company adopted
SFAS No. 157 as of January 1, 2008 except for
non-financial assets and liabilities recognized or disclosed at
fair value on a non-recurring basis, for which the effective
date is fiscal years beginning after November 15, 2008. See
Note 14, Derivative Instruments and Hedging Activities for
additional discussion of SFAS No. 157.
6
On August 31, 2007 the Company completed the acquisition of
nine Metzeler Automotive Profile Systems sealing systems
operations in Germany, Italy, Poland, Belarus, Belgium, and a
joint venture interest in China (MAPS or the
MAPS businesses), from Automotive Sealing Systems
S.A. The MAPS businesses were acquired for $143,063 subject to
an adjustment based on the difference between targeted working
capital and working capital at the closing date, which was
settled in June 2008. After adjusting for working capital and
direct acquisition costs, the total acquisition value under
purchase accounting was $144,378.
The condensed consolidated financial statements of the Company
reflect the acquisition under the purchase method of accounting,
in accordance with SFAS No. 141, Business
Combinations (SFAS No. 141).
The acquisition of the MAPS businesses were accounted for as a
purchase business combination and accordingly, the assets
purchased and liabilities assumed were included in the
Companys condensed consolidated balance sheet as of
June 30, 2008. The operating results of the MAPS businesses
were included in the condensed consolidated financial statements
from the date of acquisition. The following summarizes the
preliminary allocation of the purchase price to the estimated
fair values of the assets acquired and liabilities assumed at
the date of acquisition.
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Cash and cash equivalents
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$
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10,237
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Accounts receivable, net
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118,216
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Inventories, net
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33,415
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Prepaid expenses
|
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7,995
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Property, plant, and equipment, net
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123,982
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Investments
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16,531
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Other assets
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32,061
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|
|
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Total assets acquired
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342,437
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Accounts payable
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66,211
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|
Short-term notes payable
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|
|
22,039
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Payroll liabilities
|
|
|
28,806
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|
Accrued liabilities
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|
|
12,376
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|
Long-term debt
|
|
|
14,556
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|
Pension benefits
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|
|
37,839
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|
Other long-term liabilities
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|
|
16,232
|
|
|
|
|
|
|
Total liabilities assumed
|
|
|
198,059
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|
|
|
|
|
|
Net assets acquired
|
|
$
|
144,378
|
|
|
|
|
|
|
Cash and cash equivalents, accounts receivable, other current
assets, accounts payable, and other current liabilities were
stated at historical carrying values which management believes
approximates fair value given the short-term nature of these
assets and liabilities. Inventories were recorded at fair value
which is estimated for finished goods and
work-in-process
based upon the expected selling price less costs to complete,
selling, and disposal costs, and a normal profit to the buyer.
Raw material inventory was recorded at carrying value as such
value approximates the replacement cost. Tooling in process,
which is included in other assets, was recorded at fair value
which is based upon expected selling price less costs to
complete. The Companys pension obligations have been
recorded in the allocation of purchase price at the projected
benefit obligation less plan assets at fair market value.
Deferred income taxes have been provided in the consolidated
balance sheet based on the Companys estimates of the tax
versus book basis of the assets acquired and liabilities
assumed, adjusted to estimated fair values. Management has
estimated the fair value of property, plant, and equipment,
7
intangibles and other long-lived assets based upon financial
estimates and projections prepared in conjunction with the
transaction.
The value assigned to all assets and liabilities assumed
exceeded the acquisition price. Accordingly, an adjustment to
reduce the value of long-lived assets was recorded in accordance
with SFAS No. 141 and no goodwill was recorded related
to this transaction as of June 30, 2008.
The following unaudited pro forma financial data summarizes the
results of operations for the six months ended June 30,
2007, as if the MAPS acquisition had occurred as of
January 1, 2007. Pro forma adjustments include liquidation
of inventory fair value
write-up as
it had occurred during the reporting periods, depreciation and
amortization to reflect the fair value of property, plant, and
equipment and identified finite-lived intangible assets, the
elimination of the amortization of unrecognized pension benefit
losses, additional interest expense to reflect the
Companys new capital structure, and certain corresponding
adjustments to income tax expense. These unaudited pro forma
amounts are not necessarily indicative of the results that would
have been attained if the acquisition had occurred at
January 1, 2007, or that may be attained in the future and
do not include other effects of the acquisition.
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30, 2007
|
|
|
June 30, 2007
|
|
|
Sales
|
|
$
|
742,888
|
|
|
$
|
1,428,019
|
|
Operating Profit
|
|
|
50,384
|
|
|
|
89,060
|
|
Net income
|
|
|
14,468
|
|
|
|
21,396
|
|
In March of 2007, the Company completed the acquisition of the
El Jarudo fuel rail manufacturing business of Automotive
Components Holdings, LLC (El Jarudo or the El
Jarudo business). The business is located in Juarez,
Mexico and is a producer of automotive fuel rails. This
acquisition does not meet the thresholds for a significant
acquisition and therefore no pro forma financial information is
presented.
In December of 2007, the Company completed the acquisition of
the 74% joint venture interest of Automotive Sealing Systems,
S.A. (ASSSA) in Metzeler Automotive Profiles India Private
Limited (MAP India). This acquisition does not meet
the thresholds for a significant acquisition and therefore no
pro forma financial information is presented.
|
|
3.
|
Goodwill
and Intangibles
|
The changes in the carrying amount of goodwill by reportable
operating segment for the six months ended June 30, 2008
are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Body & Chassis
|
|
|
Fluid
|
|
|
Asia Pacific
|
|
|
Total
|
|
|
Balance at January 1, 2008
|
|
$
|
153,836
|
|
|
$
|
135,331
|
|
|
$
|
1,421
|
|
|
$
|
290,588
|
|
Adjustments to the Acquisition of El Jarudo
|
|
|
|
|
|
|
(379
|
)
|
|
|
|
|
|
|
(379
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2008
|
|
$
|
153,836
|
|
|
$
|
134,952
|
|
|
$
|
1,421
|
|
|
$
|
290,209
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive industry conditions in North America and Europe
continue to be challenging. In North America vehicle
production volumes are declining and product mix is changing and
in Europe the market is fragmented with significant
overcapacity. If these conditions continue the Company could
potentially need to record a goodwill charge to the Fluid
segment.
8
The following table presents intangible assets and accumulated
amortization balances of the Company as of December 31,
2007 and June 30, 2008, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Carrying
|
|
|
Accumulated
|
|
|
Net Carrying
|
|
|
Amortization
|
|
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
|
Period
|
|
|
Customer contracts
|
|
$
|
157,897
|
|
|
$
|
(59,100
|
)
|
|
$
|
98,797
|
|
|
|
7 to 9 years
|
|
Customer relationships
|
|
|
171,291
|
|
|
|
(25,484
|
)
|
|
|
145,807
|
|
|
|
15 to 20 years
|
|
Developed technology
|
|
|
14,466
|
|
|
|
(4,603
|
)
|
|
|
9,863
|
|
|
|
5 to 12 years
|
|
Trademarks and tradenames
|
|
|
1,700
|
|
|
|
(199
|
)
|
|
|
1,501
|
|
|
|
12 to 20 years
|
|
Other
|
|
|
2,755
|
|
|
|
(2,465
|
)
|
|
|
290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
$
|
348,109
|
|
|
$
|
(91,851
|
)
|
|
$
|
256,258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer contracts
|
|
$
|
161,205
|
|
|
$
|
(70,523
|
)
|
|
$
|
90,682
|
|
|
|
7 to 9 years
|
|
Customer relationships
|
|
|
175,182
|
|
|
|
(30,481
|
)
|
|
|
144,701
|
|
|
|
15 to 20 years
|
|
Developed technology
|
|
|
14,573
|
|
|
|
(5,588
|
)
|
|
|
8,985
|
|
|
|
5 to 12 years
|
|
Trademarks and tradenames
|
|
|
1,700
|
|
|
|
(252
|
)
|
|
|
1,448
|
|
|
|
12 to 20 years
|
|
Other
|
|
|
2,754
|
|
|
|
(2,723
|
)
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2008
|
|
$
|
355,414
|
|
|
$
|
(109,567
|
)
|
|
$
|
245,847
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense totaled $7,930 and $7,925 for the three
months ended June 30, 2007 and 2008, respectively, and
$15,739 and $15,761 for the six months ended June 30, 2007
and 2008, respectively. Estimated amortization expense will
total approximately $31,000 for the year ending
December 31, 2008.
2005
Initiatives
In 2005, the Company implemented a restructuring strategy and
announced the closure of two manufacturing facilities in the
United States and the decision to exit certain businesses within
and outside the U.S. Both of the closures were
substantially completed as of June 30, 2008, although the
Company will continue to incur costs until the facilities are
closed.
During the six months ended June 30, 2008, the Company
recorded total costs of $1,095 related to the previously
announced U.S. closures and workforce reductions in Europe.
These costs consisted of severance and other exit costs of $103
and $1,125. In addition the Company received $133 for assets
that were previously written off. The following table summarizes
the activity for this initiative during the six months ended
June 30, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
|
|
|
|
|
|
|
|
|
|
|
|
|
Separation
|
|
|
Other Exit
|
|
|
Asset
|
|
|
|
|
|
|
Costs
|
|
|
Costs
|
|
|
Impairments
|
|
|
Total
|
|
|
Balance at January 1, 2008
|
|
$
|
775
|
|
|
$
|
542
|
|
|
$
|
|
|
|
$
|
1,317
|
|
Expense incurred
|
|
|
103
|
|
|
|
1,125
|
|
|
|
(133
|
)
|
|
|
1,095
|
|
Cash payments
|
|
|
(830
|
)
|
|
|
(1,242
|
)
|
|
|
133
|
|
|
|
(1,939
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2008
|
|
$
|
48
|
|
|
$
|
425
|
|
|
$
|
|
|
|
$
|
473
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
Initiatives
In May 2006, the Company implemented a restructuring action and
announced the closure of a manufacturing facility located in
Canada and the transfer of related production to other
facilities in North America. The closure was completed during
2008 at a total cost of $3,809. During the six months ended
June 30, 2008, the Company reversed $9 of severance costs.
9
European
Initiatives
In 2006, the Company implemented a European restructuring
initiative, which addressed the operations of our non-strategic
facilities. The initiative includes the closure of a
manufacturing facility, terminations, and the transfer of
production to other facilities in Europe and North America. The
initiative is expected to be completed in 2008 at an estimated
total cost of approximately $22,300. The Company recorded
severance, and other exit costs of $277 and $150, respectively,
during the six months ended June 30, 2008. The
following table summarizes the activity for this initiative
during the six months ended June 30, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
|
|
|
|
|
|
|
|
|
|
|
|
|
Separation
|
|
|
Other Exit
|
|
|
Asset
|
|
|
|
|
|
|
Costs
|
|
|
Costs
|
|
|
Impairments
|
|
|
Total
|
|
|
Balance at January 1, 2008
|
|
$
|
1,442
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,442
|
|
Expense incurred
|
|
|
277
|
|
|
|
150
|
|
|
|
|
|
|
|
427
|
|
Cash payments
|
|
|
(1,001
|
)
|
|
|
(150
|
)
|
|
|
|
|
|
|
(1,151
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2008
|
|
$
|
718
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
718
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHS
Acquisition Initiatives
In connection with the acquisition of the automotive fluid
handling systems business of ITT Industries, Inc.
(FHS), the Company formalized a restructuring plan
to address the redundant positions created by the consolidation
of the businesses. In connection with this restructuring plan,
the Company announced the closure of several manufacturing
facilities located in North America, Europe, and Asia and the
transfer of related production to other facilities. The closures
are expected to be completed in 2008 at an estimated total cost
of approximately $21,000, including costs recorded through
purchase accounting. As a result of this initiative, the Company
recorded certain severance and other exit costs of $11,833 and
$720, respectively, through purchase accounting in 2006. The
Company recorded severance, and other exit costs of $452 and
$1,491, respectively, during the six months ended June 30,
2008. The following table summarizes the activity for this
initiative during the six months ended June 30, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
|
|
|
|
|
|
|
|
|
|
|
|
|
Separation
|
|
|
Other Exit
|
|
|
Asset
|
|
|
|
|
|
|
Costs
|
|
|
Costs
|
|
|
Impairments
|
|
|
Total
|
|
|
Balance at January 1, 2008
|
|
$
|
6,450
|
|
|
$
|
4,210
|
|
|
$
|
|
|
|
$
|
10,660
|
|
Expense incurred
|
|
|
452
|
|
|
|
1,491
|
|
|
|
|
|
|
|
1,943
|
|
Cash payments
|
|
|
(2,046
|
)
|
|
|
(5,173
|
)
|
|
|
|
|
|
|
(7,219
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2008
|
|
$
|
4,856
|
|
|
$
|
528
|
|
|
$
|
|
|
|
$
|
5,384
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
Initiatives
In May 2007, the Company implemented a restructuring action and
announced the closure of a manufacturing facility located in
Mexico and the transfer of related production to other
facilities in North America. The closure was substantially
completed in 2007. The estimated total cost of this closure is
expected to be approximately $1,200, as the Company will
continue to incur costs until the facility is sold. During the
six months ended June 30, 2008 the Company recognized
restructuring costs of $182 related to this initiative.
10
Inventories are comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2007
|
|
|
2008
|
|
|
Finished goods
|
|
$
|
50,679
|
|
|
$
|
45,977
|
|
Work in process
|
|
|
32,665
|
|
|
|
34,987
|
|
Raw materials and supplies
|
|
|
71,977
|
|
|
|
70,264
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
155,321
|
|
|
$
|
151,228
|
|
|
|
|
|
|
|
|
|
|
Outstanding debt consisted of the following at December 31,
2007 and June 30, 2008:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2007
|
|
|
2008
|
|
|
Senior Notes
|
|
$
|
200,000
|
|
|
$
|
200,000
|
|
Senior Subordinated Notes
|
|
|
330,500
|
|
|
|
323,350
|
|
Term Loan A
|
|
|
40,062
|
|
|
|
34,703
|
|
Term Loan B
|
|
|
67,033
|
|
|
|
66,699
|
|
Term Loan C
|
|
|
167,531
|
|
|
|
166,668
|
|
Term Loan D
|
|
|
186,200
|
|
|
|
185,250
|
|
Term Loan E
|
|
|
93,508
|
|
|
|
100,382
|
|
Revolving Credit Facility
|
|
|
|
|
|
|
6,100
|
|
Capital leases and other borrowings
|
|
|
55,327
|
|
|
|
41,165
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
1,140,161
|
|
|
|
1,124,317
|
|
Less: debt payable within one year
|
|
|
(51,999
|
)
|
|
|
(46,605
|
)
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
$
|
1,088,162
|
|
|
$
|
1,077,712
|
|
|
|
|
|
|
|
|
|
|
On April 17, 2008, the Company finalized an amendment to a
factoring agreement existing between MAPS Italy and a local
Italian factoring company. The amendment changed certain terms
and conditions within the agreement, which changed the nature of
the transactions and now allows certain factored receivables to
be treated as true sales. Receivables factored under this
arrangement are not included in the Companys consolidated
accounts receivable and debt totals. At December 31, 2007,
prior to the amendment of the factoring arrangement, MAPS Italy
had outstanding factored receivables of approximately $23,500
USD equivalent included in Capital leases and other borrowings
in the table above.
The Company had $6,100 of outstanding borrowings and $26,596 of
standby letters of credit outstanding under the Revolving Credit
Facility as of June 30, 2008, leaving $92,304 of undrawn
availability.
During the first quarter of 2008, the Company purchased and
retired $7,150 of its $330,500 outstanding Senior Subordinated
Notes on the open market. The purchase was accounted for as an
extinguishment of debt and, accordingly, $1,696 was recognized
as a gain on debt extinguishment, after writing off the related
unamortized debt issuance costs. The gain is included in other
income (expense) in the consolidated statement of income.
11
|
|
7.
|
Pension
and Postretirement Benefits other than Pensions
|
The following tables disclose the amount of net periodic benefit
costs for the three and six month periods ended June 30,
2007 and 2008 for the Companys defined benefit plans and
other postretirement benefit plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
|
|
Three Months Ended June 30,
|
|
|
|
2007
|
|
|
2008
|
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
Service cost
|
|
$
|
3,008
|
|
|
$
|
1,403
|
|
|
$
|
2,533
|
|
|
$
|
946
|
|
Interest cost
|
|
|
3,597
|
|
|
|
1,321
|
|
|
|
3,879
|
|
|
|
2,028
|
|
Expected return on plan assets
|
|
|
(4,235
|
)
|
|
|
(993
|
)
|
|
|
(4,538
|
)
|
|
|
(1,091
|
)
|
Amortization of prior service cost and recognized actuarial loss
|
|
|
60
|
|
|
|
178
|
|
|
|
48
|
|
|
|
96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
$
|
2,430
|
|
|
$
|
1,909
|
|
|
$
|
1,922
|
|
|
$
|
1,979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
|
|
Six Months Ended June 30,
|
|
|
|
2007
|
|
|
2008
|
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
U.S.
|
|
|
Non-U.S.
|
|
|
Service cost
|
|
$
|
6,015
|
|
|
$
|
2,708
|
|
|
$
|
5,066
|
|
|
$
|
1,871
|
|
Interest cost
|
|
|
7,195
|
|
|
|
2,542
|
|
|
|
7,758
|
|
|
|
3,988
|
|
Expected return on plan assets
|
|
|
(8,470
|
)
|
|
|
(1,923
|
)
|
|
|
(9,076
|
)
|
|
|
(2,194
|
)
|
Amortization of prior service cost and recognized actuarial loss
|
|
|
120
|
|
|
|
343
|
|
|
|
96
|
|
|
|
193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
$
|
4,860
|
|
|
$
|
3,670
|
|
|
$
|
3,844
|
|
|
$
|
3,858
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a result of previous changes in discount rates and
participant census data pension net periodic benefit cost has
decreased compared to the prior year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Postretirement Benefits
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
Service cost
|
|
$
|
862
|
|
|
$
|
575
|
|
|
$
|
1,717
|
|
|
$
|
1,151
|
|
Interest cost
|
|
|
1,385
|
|
|
|
1,205
|
|
|
|
2,763
|
|
|
|
2,411
|
|
Amortization of prior service cost and recognized actuarial loss
|
|
|
(22
|
)
|
|
|
(495
|
)
|
|
|
(44
|
)
|
|
|
(990
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
$
|
2,225
|
|
|
$
|
1,285
|
|
|
$
|
4,436
|
|
|
$
|
2,572
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a result of previous changes in plan design, discount rates
and participant census data other postretirement benefits net
periodic benefit cost has decreased compared to the prior year.
Under Accounting Principles Board Opinion No. 28, Interim
Financial Reporting, the Company is required to determine its
effective tax rate each quarter based upon its estimated annual
effective tax rate. The Company is also required to record the
tax impact of certain unusual or infrequently occurring items,
including changes in judgment about valuation allowances and
effects of changes in tax laws or rates, in the interim period
in which they occur. In addition, jurisdictions with a projected
loss for the year where no tax benefit can be recognized are
excluded from the estimated annual effective tax rate.
12
The effective tax rate for the three and six months ended
June 30, 2007, were 47% and 48%, respectively, as compared
to 36% and 34%, respectively, for the three and six months ended
June 30, 2008. The income tax rate for the three and six
months ended June 30, 2008 varies from statutory rates due
to income taxes on foreign earnings, valuation allowances in the
U.S. and certain foreign jurisdictions, tax credits, income
tax incentives, withholding taxes, and other permanent items.
Further, the Companys current and future provision for
income taxes will be significantly impacted by the recognition
of valuation allowances in certain countries, particularly the
United States. The Company intends to maintain these allowances
until it is more likely than not that the deferred tax assets
will be realized. Accordingly, income taxes are impacted by the
U.S. valuation allowance and the mix of earnings among
jurisdictions.
During March 2008, the Company became aware of a potential
settlement of the bi-lateral Advance Pricing Agreement (APA)
negotiations between the United States and Canada relating to
the periods 2000 2007. Agreement between the two
governments will impact transfer pricing matters between the
Company and its wholly owned Canadian subsidiary. At this time,
the Company is unable to estimate the potential impact from this
settlement and will be unable to do so until a more definitive
agreement between all affected parties, resolving the APA is
reached. At such time, an estimate of the range of reasonably
possible impacts of such APA settlement can be made, and, if
significant, the Company will appropriately disclose such
results.
On an annual basis, disclosure of comprehensive income is
incorporated into the statement of stockholders equity,
which is not presented on a quarterly basis. The components of
comprehensive income, net of related tax, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
Net income
|
|
$
|
9,686
|
|
|
$
|
11,587
|
|
|
$
|
14,360
|
|
|
$
|
27,259
|
|
Currency translation adjustment
|
|
|
9,103
|
|
|
|
11,504
|
|
|
|
13,146
|
|
|
|
36,408
|
|
Pension and other postretirement benefits
|
|
|
(124
|
)
|
|
|
(755
|
)
|
|
|
(184
|
)
|
|
|
(723
|
)
|
Fair value change of derivatives
|
|
|
3,482
|
|
|
|
9,620
|
|
|
|
3,185
|
|
|
|
2,065
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
22,147
|
|
|
$
|
31,956
|
|
|
$
|
30,507
|
|
|
$
|
65,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.
|
Other
Income (Expense), net
|
The components of other income (expense), net are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
Foreign currency gains (losses)
|
|
$
|
109
|
|
|
$
|
(545
|
)
|
|
$
|
(854
|
)
|
|
$
|
1,258
|
|
Gain on debt repurchase
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,696
|
|
Minority interest
|
|
|
359
|
|
|
|
184
|
|
|
|
78
|
|
|
|
151
|
|
Gain/(loss) on disposal of fixed assets
|
|
|
(7
|
)
|
|
|
|
|
|
|
(5
|
)
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense), net
|
|
$
|
461
|
|
|
$
|
(361
|
)
|
|
$
|
(781
|
)
|
|
$
|
3,114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11.
|
Related
Party Transactions
|
Sales to NISCO, a 50% owned joint venture, totaled $7,948 and
$7,044 in the three months ended June 30, 2007 and 2008,
respectively and $16,091 and $14,650 in the six months ended
June 30, 2007 and 2008, respectively.
13
Purchases of materials from Guyoung Technology Co. Ltd, a 20%
owned joint venture, totaled $2,014 and $310 in the three months
ended June 30, 2007 and 2008, respectively, and $3,855 and
$902 in the six months ended June 30, 2007 and 2008,
respectively.
The Company operates in three business segments:
Body & Chassis Systems, Fluid Systems, and
Asia Pacific. The Body & Chassis segment consists
mainly of body sealing products and components that protect
vehicle interiors from weather, dust, and noise intrusion as
well as systems and components that control and isolate noise
vibration in a vehicle to improve ride and handling. The Fluid
segment consists primarily of subsystems and components that
direct, control, measure, and transport fluids and vapors
throughout a vehicle. The Asia Pacific segment consists of both
Body & Chassis and Fluid operations in that region
with the exception of the Companys interest in a joint
venture in China which was acquired as part of the MAPS
acquisition, and the MAP India joint venture. These joint
ventures are included in the Body & Chassis segment
which is in line with the internal management structure.
The Company evaluates segment performance based on segment
profit before tax. The following table details information on
the Companys business segments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
Sales to external customers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Body & Chassis
|
|
$
|
305,542
|
|
|
$
|
449,961
|
|
|
$
|
596,674
|
|
|
$
|
889,903
|
|
Fluid
|
|
|
293,910
|
|
|
|
289,737
|
|
|
|
556,676
|
|
|
|
580,963
|
|
Asia Pacific
|
|
|
24,546
|
|
|
|
25,941
|
|
|
|
46,909
|
|
|
|
50,794
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
623,998
|
|
|
$
|
765,639
|
|
|
$
|
1,200,259
|
|
|
$
|
1,521,660
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intersegment sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Body & Chassis
|
|
$
|
6,323
|
|
|
$
|
3,727
|
|
|
$
|
12,205
|
|
|
$
|
8,386
|
|
Fluid
|
|
|
1,113
|
|
|
|
839
|
|
|
|
2,026
|
|
|
|
1,863
|
|
Asia Pacific
|
|
|
1,289
|
|
|
|
2,284
|
|
|
|
1,990
|
|
|
|
5,135
|
|
Eliminations and other
|
|
|
(8,725
|
)
|
|
|
(6,850
|
)
|
|
|
(16,221
|
)
|
|
|
(15,384
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Body & Chassis
|
|
$
|
8,560
|
|
|
$
|
16,444
|
|
|
$
|
15,774
|
|
|
$
|
33,856
|
|
Fluid
|
|
|
12,388
|
|
|
|
6,121
|
|
|
|
17,584
|
|
|
|
15,007
|
|
Asia Pacific
|
|
|
(2,685
|
)
|
|
|
(4,458
|
)
|
|
|
(5,644
|
)
|
|
|
(7,866
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
$
|
18,263
|
|
|
$
|
18,107
|
|
|
$
|
27,714
|
|
|
$
|
40,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2007
|
|
|
2008
|
|
|
Segment assets
|
|
|
|
|
|
|
|
|
Body & Chassis
|
|
$
|
1,215,832
|
|
|
$
|
1,269,716
|
|
Fluid
|
|
|
811,715
|
|
|
|
838,799
|
|
Asia Pacific
|
|
|
89,568
|
|
|
|
99,212
|
|
Eliminations and other
|
|
|
45,140
|
|
|
|
10,615
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
2,162,255
|
|
|
$
|
2,218,342
|
|
|
|
|
|
|
|
|
|
|
Restructuring costs included in segment profit for
Body & Chassis totaled $8,124 and $419 for the three
months ended June 30, 2007 and 2008, respectively, Fluid
totaled $925 and $820 for the three
14
months ended June 30, 2007 and 2008, respectively, Asia
Pacific totaled $0 and $4 for the three months ended
June 30, 2007 and 2008, respectively.
Restructuring costs included in segment profit for
Body & Chassis totaled $12,689 and $1,011 for the six
months ended June 30, 2007 and 2008, respectively, Fluid
totaled $1,099 and $2,621 for the six months ended June 30,
2007 and 2008, respectively, Asia Pacific totaled $4 and $6 for
the six months ended June 30, 2007 and 2008, respectively.
|
|
13.
|
Guarantor
and Non-Guarantor Subsidiaries
|
In connection with the December 2004 acquisition by the Company
of the automotive segment of Cooper Tire & Rubber
Company, Cooper-Standard Automotive Inc. (the
Issuer), a wholly-owned subsidiary, issued the
Senior Notes and Senior Subordinated Notes with a total
principal amount of $550,000. Cooper-Standard Holdings Inc. (the
Parent) and all wholly-owned domestic subsidiaries
of Cooper-Standard Automotive Inc. (the Guarantors)
unconditionally guarantee the notes. The following condensed
consolidated financial data provides information regarding the
financial position, results of operations, and cash flows of the
Guarantors. Separate financial statements of the Guarantors are
not presented because management has determined that those would
not be material to the holders of the notes. The Guarantors
account for their investments in the non-guarantor subsidiaries
on the equity method. The principal elimination entries are to
eliminate the investments in subsidiaries and intercompany
balances and transactions (dollars in millions). Cash flows from
operating activities for the Non-Guarantors for the six months
ended June 30, 2007, have been adjusted downwards by
approximately $11,100, which does not affect the consolidated
totals.
15
CONSOLIDATING
STATEMENT OF INCOME
For the Three Months Ended June 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Non-Guarantors
|
|
|
Eliminations
|
|
|
Totals
|
|
|
|
(In millions)
|
|
|
Sales
|
|
$
|
|
|
|
$
|
125.8
|
|
|
$
|
195.0
|
|
|
$
|
332.2
|
|
|
$
|
(29.0
|
)
|
|
$
|
624.0
|
|
Cost of products sold
|
|
|
|
|
|
|
112.0
|
|
|
|
155.8
|
|
|
|
278.4
|
|
|
|
(29.0
|
)
|
|
|
517.2
|
|
Selling, administration, & engineering expenses
|
|
|
|
|
|
|
28.2
|
|
|
|
7.3
|
|
|
|
15.8
|
|
|
|
|
|
|
|
51.3
|
|
Amortization of intangibles
|
|
|
|
|
|
|
5.4
|
|
|
|
0.7
|
|
|
|
1.8
|
|
|
|
|
|
|
|
7.9
|
|
Restructuring
|
|
|
|
|
|
|
1.3
|
|
|
|
0.4
|
|
|
|
7.4
|
|
|
|
|
|
|
|
9.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit (loss)
|
|
|
|
|
|
|
(21.1
|
)
|
|
|
30.8
|
|
|
|
28.8
|
|
|
|
|
|
|
|
38.5
|
|
Interest expense, net of interest income
|
|
|
|
|
|
|
(18.5
|
)
|
|
|
|
|
|
|
(2.5
|
)
|
|
|
|
|
|
|
(21.0
|
)
|
Equity earnings
|
|
|
|
|
|
|
(0.4
|
)
|
|
|
0.8
|
|
|
|
|
|
|
|
|
|
|
|
0.4
|
|
Other income (expense), net
|
|
|
|
|
|
|
11.3
|
|
|
|
0.1
|
|
|
|
(11.0
|
)
|
|
|
|
|
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
|
|
|
|
(28.7
|
)
|
|
|
31.7
|
|
|
|
15.3
|
|
|
|
|
|
|
|
18.3
|
|
Provision for income tax
expense (benefit)
|
|
|
|
|
|
|
9.1
|
|
|
|
(9.0
|
)
|
|
|
8.5
|
|
|
|
|
|
|
|
8.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before equity in income (loss) of subsidiaries
|
|
|
|
|
|
|
(37.8
|
)
|
|
|
40.7
|
|
|
|
6.8
|
|
|
|
|
|
|
|
9.7
|
|
Equity in net income (loss) of subsidiaries
|
|
|
9.7
|
|
|
|
47.5
|
|
|
|
|
|
|
|
|
|
|
|
(57.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS)
|
|
$
|
9.7
|
|
|
$
|
9.7
|
|
|
$
|
40.7
|
|
|
$
|
6.8
|
|
|
$
|
(57.2
|
)
|
|
$
|
9.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATING
STATEMENT OF INCOME
For the Three Months Ended June 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Non-Guarantors
|
|
|
Eliminations
|
|
|
Totals
|
|
|
|
(In millions)
|
|
|
Sales
|
|
$
|
|
|
|
$
|
107.4
|
|
|
$
|
152.4
|
|
|
$
|
533.4
|
|
|
$
|
(27.5
|
)
|
|
$
|
765.7
|
|
Cost of products sold
|
|
|
|
|
|
|
92.2
|
|
|
|
127.0
|
|
|
|
456.0
|
|
|
|
(27.5
|
)
|
|
|
647.7
|
|
Selling, administration, & engineering expenses
|
|
|
|
|
|
|
31.5
|
|
|
|
9.1
|
|
|
|
28.4
|
|
|
|
|
|
|
|
69.0
|
|
Amortization of intangibles
|
|
|
|
|
|
|
5.2
|
|
|
|
0.6
|
|
|
|
2.2
|
|
|
|
|
|
|
|
8.0
|
|
Restructuring
|
|
|
|
|
|
|
(0.1
|
)
|
|
|
0.5
|
|
|
|
0.8
|
|
|
|
|
|
|
|
1.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit (loss)
|
|
|
|
|
|
|
(21.4
|
)
|
|
|
15.2
|
|
|
|
46.0
|
|
|
|
|
|
|
|
39.8
|
|
Interest expense, net of interest income
|
|
|
|
|
|
|
(19.0
|
)
|
|
|
|
|
|
|
(4.4
|
)
|
|
|
|
|
|
|
(23.4
|
)
|
Equity earnings
|
|
|
|
|
|
|
|
|
|
|
1.4
|
|
|
|
0.7
|
|
|
|
|
|
|
|
2.1
|
|
Other income (expense), net
|
|
|
|
|
|
|
8.4
|
|
|
|
0.3
|
|
|
|
(9.1
|
)
|
|
|
|
|
|
|
(0.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
|
|
|
|
(32.0
|
)
|
|
|
16.9
|
|
|
|
33.2
|
|
|
|
|
|
|
|
18.1
|
|
Provision for income tax
expense (benefit)
|
|
|
|
|
|
|
1.8
|
|
|
|
(0.4
|
)
|
|
|
5.1
|
|
|
|
|
|
|
|
6.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before equity in income (loss) of subsidiaries
|
|
|
|
|
|
|
(33.8
|
)
|
|
|
17.3
|
|
|
|
28.1
|
|
|
|
|
|
|
|
11.6
|
|
Equity in net income (loss) of subsidiaries
|
|
|
11.6
|
|
|
|
45.4
|
|
|
|
|
|
|
|
|
|
|
|
(57.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS)
|
|
$
|
11.6
|
|
|
$
|
11.6
|
|
|
$
|
17.3
|
|
|
$
|
28.1
|
|
|
$
|
(57.0
|
)
|
|
$
|
11.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
CONSOLIDATING
STATEMENT OF INCOME
For the Six Months Ended June 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Non-Guarantors
|
|
|
Eliminations
|
|
|
Totals
|
|
|
|
(In millions)
|
|
|
Sales
|
|
$
|
|
|
|
$
|
249.6
|
|
|
$
|
363.8
|
|
|
$
|
644.8
|
|
|
$
|
(57.9
|
)
|
|
$
|
1,200.3
|
|
Cost of products sold
|
|
|
|
|
|
|
223.9
|
|
|
|
290.5
|
|
|
|
543.5
|
|
|
|
(57.9
|
)
|
|
|
1,000.0
|
|
Selling, administration, & engineering expenses
|
|
|
|
|
|
|
56.7
|
|
|
|
14.0
|
|
|
|
29.4
|
|
|
|
|
|
|
|
100.1
|
|
Amortization of intangibles
|
|
|
|
|
|
|
10.7
|
|
|
|
1.4
|
|
|
|
3.6
|
|
|
|
|
|
|
|
15.7
|
|
Restructuring
|
|
|
|
|
|
|
2.0
|
|
|
|
0.4
|
|
|
|
11.4
|
|
|
|
|
|
|
|
13.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit (loss)
|
|
|
|
|
|
|
(43.7
|
)
|
|
|
57.5
|
|
|
|
56.9
|
|
|
|
|
|
|
|
70.7
|
|
Interest expense, net of interest income
|
|
|
|
|
|
|
(37.6
|
)
|
|
|
|
|
|
|
(5.2
|
)
|
|
|
|
|
|
|
(42.8
|
)
|
Equity earnings
|
|
|
|
|
|
|
(0.5
|
)
|
|
|
1.2
|
|
|
|
|
|
|
|
|
|
|
|
0.7
|
|
Other income (expense), net
|
|
|
|
|
|
|
21.0
|
|
|
|
0.1
|
|
|
|
(21.9
|
)
|
|
|
|
|
|
|
(0.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
|
|
|
|
(60.8
|
)
|
|
|
58.8
|
|
|
|
29.8
|
|
|
|
|
|
|
|
27.8
|
|
Provision for income tax
expense (benefit)
|
|
|
|
|
|
|
10.9
|
|
|
|
(11.2
|
)
|
|
|
13.7
|
|
|
|
|
|
|
|
13.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before equity in income (loss) of subsidiaries
|
|
|
|
|
|
|
(71.7
|
)
|
|
|
70.0
|
|
|
|
16.1
|
|
|
|
|
|
|
|
14.4
|
|
Equity in net income (loss) of subsidiaries
|
|
|
14.4
|
|
|
|
86.1
|
|
|
|
|
|
|
|
|
|
|
|
(100.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS)
|
|
$
|
14.4
|
|
|
$
|
14.4
|
|
|
$
|
70.0
|
|
|
$
|
16.1
|
|
|
$
|
(100.5
|
)
|
|
$
|
14.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATING
STATEMENT OF INCOME
For the Six Months Ended June 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Non-Guarantors
|
|
|
Eliminations
|
|
|
Totals
|
|
|
|
(In millions)
|
|
|
Sales
|
|
$
|
|
|
|
$
|
223.8
|
|
|
$
|
319.4
|
|
|
$
|
1,035.0
|
|
|
$
|
(56.5
|
)
|
|
$
|
1,521.7
|
|
Cost of products sold
|
|
|
|
|
|
|
193.7
|
|
|
|
263.7
|
|
|
|
883.7
|
|
|
|
(56.5
|
)
|
|
|
1,284.6
|
|
Selling, administration, & engineering expenses
|
|
|
|
|
|
|
63.3
|
|
|
|
16.2
|
|
|
|
56.9
|
|
|
|
|
|
|
|
136.4
|
|
Amortization of intangibles
|
|
|
|
|
|
|
10.3
|
|
|
|
1.2
|
|
|
|
4.3
|
|
|
|
|
|
|
|
15.8
|
|
Restructuring
|
|
|
|
|
|
|
0.6
|
|
|
|
0.9
|
|
|
|
2.1
|
|
|
|
|
|
|
|
3.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit (loss)
|
|
|
|
|
|
|
(44.1
|
)
|
|
|
37.4
|
|
|
|
88.0
|
|
|
|
|
|
|
|
81.3
|
|
Interest expense, net of interest income
|
|
|
|
|
|
|
(38.7
|
)
|
|
|
|
|
|
|
(8.9
|
)
|
|
|
|
|
|
|
(47.6
|
)
|
Equity earnings (losses)
|
|
|
|
|
|
|
(0.1
|
)
|
|
|
3.1
|
|
|
|
1.2
|
|
|
|
|
|
|
|
4.2
|
|
Other income (expense), net
|
|
|
|
|
|
|
22.8
|
|
|
|
0.4
|
|
|
|
(20.1
|
)
|
|
|
|
|
|
|
3.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
|
|
|
|
(60.1
|
)
|
|
|
40.9
|
|
|
|
60.2
|
|
|
|
|
|
|
|
41.0
|
|
Provision for income tax
expense (benefit)
|
|
|
|
|
|
|
4.0
|
|
|
|
(2.3
|
)
|
|
|
12.0
|
|
|
|
|
|
|
|
13.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before equity in income (loss) of subsidiaries
|
|
|
|
|
|
|
(64.1
|
)
|
|
|
43.2
|
|
|
|
48.2
|
|
|
|
|
|
|
|
27.3
|
|
Equity in net income (loss) of subsidiaries
|
|
|
27.3
|
|
|
|
91.4
|
|
|
|
|
|
|
|
|
|
|
|
(118.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS)
|
|
$
|
27.3
|
|
|
$
|
27.3
|
|
|
$
|
43.2
|
|
|
$
|
48.2
|
|
|
$
|
(118.7
|
)
|
|
$
|
27.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
CONSOLIDATING
BALANCE SHEET
December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Non-Guarantors
|
|
|
Eliminations
|
|
|
Totals
|
|
|
|
(In millions)
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
|
|
|
$
|
42.6
|
|
|
$
|
|
|
|
$
|
(1.7
|
)
|
|
$
|
|
|
|
$
|
40.9
|
|
Accounts receivable, net
|
|
|
|
|
|
|
52.3
|
|
|
|
105.6
|
|
|
|
388.9
|
|
|
|
|
|
|
|
546.8
|
|
Inventories
|
|
|
|
|
|
|
24.4
|
|
|
|
28.9
|
|
|
|
102.0
|
|
|
|
|
|
|
|
155.3
|
|
Prepaid Expenses
|
|
|
|
|
|
|
(2.3
|
)
|
|
|
1.0
|
|
|
|
20.9
|
|
|
|
|
|
|
|
19.6
|
|
Other
|
|
|
|
|
|
|
9.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
|
|
|
|
126.7
|
|
|
|
135.5
|
|
|
|
510.1
|
|
|
|
|
|
|
|
772.3
|
|
Investments in affiliates and intercompany accounts, net
|
|
|
268.5
|
|
|
|
360.4
|
|
|
|
490.4
|
|
|
|
177.5
|
|
|
|
(1,260.1
|
)
|
|
|
36.7
|
|
Property, plant, and equipment, net
|
|
|
|
|
|
|
76.7
|
|
|
|
129.2
|
|
|
|
516.5
|
|
|
|
|
|
|
|
722.4
|
|
Goodwill
|
|
|
|
|
|
|
248.7
|
|
|
|
17.3
|
|
|
|
24.6
|
|
|
|
|
|
|
|
290.6
|
|
Other assets
|
|
|
|
|
|
|
199.7
|
|
|
|
35.0
|
|
|
|
105.6
|
|
|
|
|
|
|
|
340.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
268.5
|
|
|
$
|
1,012.2
|
|
|
$
|
807.4
|
|
|
$
|
1,334.3
|
|
|
$
|
(1,260.1
|
)
|
|
$
|
2,162.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES &
STOCKHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt payable within one year
|
|
$
|
|
|
|
$
|
7.6
|
|
|
$
|
|
|
|
$
|
44.4
|
|
|
$
|
|
|
|
$
|
52.0
|
|
Accounts payable
|
|
|
|
|
|
|
60.1
|
|
|
|
33.3
|
|
|
|
202.2
|
|
|
|
|
|
|
|
295.6
|
|
Accrued liabilities
|
|
|
|
|
|
|
54.6
|
|
|
|
8.1
|
|
|
|
118.7
|
|
|
|
|
|
|
|
181.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
|
|
|
|
122.3
|
|
|
|
41.4
|
|
|
|
365.3
|
|
|
|
|
|
|
|
529.0
|
|
Long-term debt
|
|
|
|
|
|
|
970.8
|
|
|
|
|
|
|
|
117.4
|
|
|
|
|
|
|
|
1,088.2
|
|
Other long-term liabilities
|
|
|
|
|
|
|
138.6
|
|
|
|
6.9
|
|
|
|
131.1
|
|
|
|
|
|
|
|
276.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,231.7
|
|
|
|
48.3
|
|
|
|
613.8
|
|
|
|
|
|
|
|
1,893.8
|
|
Total stockholders equity
|
|
|
268.5
|
|
|
|
(219.5
|
)
|
|
|
759.1
|
|
|
|
720.5
|
|
|
|
(1,260.1
|
)
|
|
|
268.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
268.5
|
|
|
$
|
1,012.2
|
|
|
$
|
807.4
|
|
|
$
|
1,334.3
|
|
|
$
|
(1,260.1
|
)
|
|
$
|
2,162.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
CONSOLIDATING
BALANCE SHEET
June 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Non-Guarantors
|
|
|
Eliminations
|
|
|
Totals
|
|
|
|
(In millions)
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
|
|
|
$
|
16.6
|
|
|
$
|
|
|
|
$
|
15.6
|
|
|
$
|
|
|
|
$
|
32.2
|
|
Accounts receivable, net
|
|
|
|
|
|
|
69.4
|
|
|
|
97.5
|
|
|
|
436.9
|
|
|
|
|
|
|
|
603.8
|
|
Inventories
|
|
|
|
|
|
|
21.8
|
|
|
|
27.8
|
|
|
|
101.6
|
|
|
|
|
|
|
|
151.2
|
|
Prepaid Expenses
|
|
|
|
|
|
|
(0.5
|
)
|
|
|
0.7
|
|
|
|
19.4
|
|
|
|
|
|
|
|
19.6
|
|
Other
|
|
|
|
|
|
|
9.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
|
|
|
|
116.7
|
|
|
|
126.0
|
|
|
|
573.5
|
|
|
|
|
|
|
|
816.2
|
|
Investments in affiliates and intercompany accounts, net
|
|
|
334.2
|
|
|
|
308.8
|
|
|
|
556.8
|
|
|
|
159.0
|
|
|
|
(1,318.8
|
)
|
|
|
40.0
|
|
Property, plant, and equipment, net
|
|
|
|
|
|
|
61.5
|
|
|
|
128.2
|
|
|
|
551.1
|
|
|
|
|
|
|
|
740.8
|
|
Goodwill
|
|
|
|
|
|
|
244.4
|
|
|
|
17.3
|
|
|
|
28.5
|
|
|
|
|
|
|
|
290.2
|
|
Other assets
|
|
|
|
|
|
|
199.9
|
|
|
|
21.4
|
|
|
|
109.8
|
|
|
|
|
|
|
|
331.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
334.2
|
|
|
$
|
931.3
|
|
|
$
|
849.7
|
|
|
$
|
1,421.9
|
|
|
$
|
(1,318.8
|
)
|
|
$
|
2,218.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES &
STOCKHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt payable within one year
|
|
$
|
|
|
|
$
|
10.9
|
|
|
$
|
|
|
|
$
|
35.7
|
|
|
$
|
|
|
|
$
|
46.6
|
|
Accounts payable
|
|
|
|
|
|
|
48.7
|
|
|
|
32.3
|
|
|
|
208.4
|
|
|
|
|
|
|
|
289.4
|
|
Accrued liabilities
|
|
|
|
|
|
|
44.6
|
|
|
|
8.5
|
|
|
|
137.3
|
|
|
|
|
|
|
|
190.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
|
|
|
|
104.2
|
|
|
|
40.8
|
|
|
|
381.4
|
|
|
|
|
|
|
|
526.4
|
|
Long-term debt
|
|
|
|
|
|
|
971.1
|
|
|
|
|
|
|
|
106.6
|
|
|
|
|
|
|
|
1,077.7
|
|
Other long-term liabilities
|
|
|
|
|
|
|
136.7
|
|
|
|
6.7
|
|
|
|
136.6
|
|
|
|
|
|
|
|
280.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,212.0
|
|
|
|
47.5
|
|
|
|
624.6
|
|
|
|
|
|
|
|
1,884.1
|
|
Total stockholders equity
|
|
|
334.2
|
|
|
|
(280.7
|
)
|
|
|
802.2
|
|
|
|
797.3
|
|
|
|
(1,318.8
|
)
|
|
|
334.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
334.2
|
|
|
$
|
931.3
|
|
|
$
|
849.7
|
|
|
$
|
1,421.9
|
|
|
$
|
(1,318.8
|
)
|
|
$
|
2,218.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
CONSOLIDATING
STATEMENT OF CASH FLOWS
For the Six Months Ended June 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Non-Guarantors
|
|
|
Eliminations
|
|
|
Totals
|
|
|
|
(In millions)
|
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
|
|
|
$
|
26.0
|
|
|
$
|
4.8
|
|
|
$
|
60.9
|
|
|
$
|
|
|
|
$
|
91.7
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant, and
equipment
|
|
|
|
|
|
|
(6.8
|
)
|
|
|
(5.2
|
)
|
|
|
(31.7
|
)
|
|
|
|
|
|
|
(43.7
|
)
|
Gross proceeds from sale-leaseback transaction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.8
|
|
|
|
|
|
|
|
4.8
|
|
Acquisition of El Jarudo, net
of cash acquired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10.0
|
)
|
|
|
|
|
|
|
(10.0
|
)
|
Other
|
|
|
|
|
|
|
0.1
|
|
|
|
|
|
|
|
0.2
|
|
|
|
|
|
|
|
0.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
|
|
|
|
(6.7
|
)
|
|
|
(5.2
|
)
|
|
|
(36.7
|
)
|
|
|
|
|
|
|
(48.6
|
)
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal payments on
long-term debt
|
|
|
|
|
|
|
(9.4
|
)
|
|
|
|
|
|
|
(19.4
|
)
|
|
|
|
|
|
|
(28.8
|
)
|
Net change in intercompany advances
|
|
|
0.5
|
|
|
|
(0.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
(0.5
|
)
|
|
|
|
|
|
|
|
|
|
|
2.4
|
|
|
|
|
|
|
|
1.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used
in) financing activities
|
|
|
|
|
|
|
(9.9
|
)
|
|
|
|
|
|
|
(17.0
|
)
|
|
|
|
|
|
|
(26.9
|
)
|
Effects of exchange rate
changes on cash
|
|
|
|
|
|
|
1.1
|
|
|
|
|
|
|
|
1.4
|
|
|
|
|
|
|
|
2.5
|
|
Changes in cash and cash equivalents
|
|
|
|
|
|
|
10.5
|
|
|
|
(0.4
|
)
|
|
|
8.6
|
|
|
|
|
|
|
|
18.7
|
|
Cash and cash equivalents at beginning of period
|
|
|
|
|
|
|
21.9
|
|
|
|
0.4
|
|
|
|
34.0
|
|
|
|
|
|
|
|
56.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at
end of period
|
|
$
|
|
|
|
$
|
32.4
|
|
|
$
|
|
|
|
$
|
42.6
|
|
|
$
|
|
|
|
$
|
75.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
$
|
|
|
|
$
|
20.1
|
|
|
$
|
15.0
|
|
|
$
|
26.1
|
|
|
$
|
|
|
|
$
|
61.2
|
|
20
CONSOLIDATING
STATEMENT OF CASH FLOWS
For the Six Months Ended June 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
|
Parent
|
|
|
Issuer
|
|
|
Guarantors
|
|
|
Non-Guarantors
|
|
|
Eliminations
|
|
|
Totals
|
|
|
|
(In millions)
|
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by
operating activities
|
|
$
|
|
|
|
$
|
(16.2
|
)
|
|
$
|
7.2
|
|
|
$
|
54.1
|
|
|
$
|
|
|
|
$
|
45.1
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant, and
equipment
|
|
|
|
|
|
|
(3.8
|
)
|
|
|
(7.4
|
)
|
|
|
(36.7
|
)
|
|
|
|
|
|
|
(47.9
|
)
|
Other
|
|
|
|
|
|
|
|
|
|
|
0.2
|
|
|
|
0.3
|
|
|
|
|
|
|
|
0.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
|
|
|
|
(3.8
|
)
|
|
|
(7.2
|
)
|
|
|
(36.4
|
)
|
|
|
|
|
|
|
(47.4
|
)
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase/(decrease) in short
term debt
|
|
|
|
|
|
|
3.0
|
|
|
|
|
|
|
|
8.7
|
|
|
|
|
|
|
|
11.7
|
|
Principal payments on
long-term debt
|
|
|
|
|
|
|
(6.5
|
)
|
|
|
|
|
|
|
(2.4
|
)
|
|
|
|
|
|
|
(8.9
|
)
|
Repurchase of bonds
|
|
|
|
|
|
|
(5.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5.3
|
)
|
Other
|
|
|
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
|
|
|
|
(8.7
|
)
|
|
|
|
|
|
|
6.3
|
|
|
|
|
|
|
|
(2.4
|
)
|
Effects of exchange rate
changes on cash
|
|
|
|
|
|
|
2.7
|
|
|
|
|
|
|
|
(6.7
|
)
|
|
|
|
|
|
|
(4.0
|
)
|
Changes in cash and cash
equivalents
|
|
|
|
|
|
|
(26.0
|
)
|
|
|
|
|
|
|
17.3
|
|
|
|
|
|
|
|
(8.7
|
)
|
Cash and cash equivalents at
beginning of period
|
|
|
|
|
|
|
42.6
|
|
|
|
|
|
|
|
(1.7
|
)
|
|
|
|
|
|
|
40.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at
end of period
|
|
$
|
|
|
|
$
|
16.6
|
|
|
$
|
|
|
|
$
|
15.6
|
|
|
$
|
|
|
|
$
|
32.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
$
|
|
|
|
$
|
18.4
|
|
|
$
|
12.5
|
|
|
$
|
40.1
|
|
|
$
|
|
|
|
$
|
71.0
|
|
21
|
|
14.
|
Derivative
Instruments and Hedging Activities
|
Interest Rate Swaps The Company uses interest rate
swap contracts to manage cash flow fluctuations of variable rate
debt due to changes in market interest rates. Interest rate swap
contracts which fix the interest payments of certain variable
rate debt instruments or fix the market rate component of
anticipated fixed rate debt instruments are accounted for as
cash flow hedges.
The Company formally documents its hedge relationships,
including the identification of the hedging instruments and the
hedged items, as well as its risk management objectives and
strategies for undertaking the cash flow hedges. The Company
also formally assesses whether a cash flow hedge is highly
effective in offsetting changes in the cash flows of the hedged
item. The changes in the cash flows of the interest rate swap
contracts are expected to exactly offset the changes in cash
flows attributed to the fluctuations in the variable rate debt.
As of June 30, 2008, interest rate swap contracts
representing $279,876 of notional amount were outstanding with
maturity dates of December, 2010 through September, 2013. These
contracts modify the variable rate characteristics of the
Companys variable rate debt instruments, which are
generally set at three-month USD LIBOR rates, Canadian Dollar
Bankers Acceptance Rates or six-month Euribor rates. Of the
above amount $243,729 of notional amount pertains to the swap of
USD denominated debt fixed at 5.764%, $21,735 pertains to
Canadian dollar denominated debt fixed at 4.91% and $14,412 of
notional amount pertains to EURO denominated debt fixed at
4.14%. As of June 30, 2008, the fair market value of
$(15,026) for the USD and Canadian swaps were recorded in other
long-term liabilities and the same amount of net losses were
recorded in accumulated other comprehensive income (loss). As of
June 30, 2008, the fair market value of $411 for the Euro
swap was recorded in other long-term assets and the same amount
of net income was recorded in accumulated other comprehensive
income (loss). The fair market value of all outstanding interest
rate swap contracts is subject to changes in value due to
changes in interest rates.
Forward foreign exchange contracts The Company uses
forward foreign exchange contracts to reduce the effect of
fluctuations in foreign exchange rates on Term Loan B, a
U.S. dollar denominated obligation of our Canadian
subsidiary, the portion of our Euro Term Loan E, and short-term
foreign currency denominated intercompany transactions. Gains
and losses on the derivative instruments are intended to offset
gains and losses on the hedged transaction in an effort to
reduce the earnings volatility resulting from fluctuations in
foreign exchange rates. The currencies hedged by these
arrangements are the Canadian Dollar, Euro and Brazilian Real.
Gains of $2,524 related to these contracts were recorded in
other income (expense) during the six months ended June 30,
2008. As of June 30, 2008 the fair market value of these
contracts was approximately ($193).
The Company also uses forward foreign exchange contracts to
hedge the Mexican peso to reduce the effect of fluctuations in
foreign exchange rates on a portion of the forecasted operating
expenses of our Mexican facilities. These contracts are
designated as cash flow hedges. As of June 30, 2008,
forward foreign exchange contracts representing $13,826 of
notional amount were outstanding with maturities of less than
twelve months and the fair market value of these contracts was
approximately $1,076.
The Company also used forward foreign exchange to hedge the
U.S. dollar to reduce the effect of fluctuations in foreign
exchange rates on a portion of the forecasted material purchases
of our Canadian facilities. As of June 30, 2008, forward
foreign exchange contracts representing $11,650 of notional
amount were outstanding with maturities of less than twelve
months and the fair market value of these contracts was
approximately $46.
The Company also used forward foreign exchange to hedge the
U.S. dollar to reduce the effect of fluctuations in foreign
exchange rates on a portion of the forecasted material purchases
of our European facilities. As of June 30, 2008, forward
foreign exchange contracts representing $18,772 of notional
amount were outstanding with maturities of less than twelve
months and the fair market value of these contracts was
approximately $324.
Commodity price hedges The Company has exposure to
the prices of commodities in the procurement of certain raw
materials. The primary purpose of the Companys commodity
price
22
hedging activities is to manage the volatility associated with
these forecasted purchases. The Company primarily utilizes
forward contracts with maturities of less than 24 months,
which are accounted for as cash flow hedges. These instruments
are intended to offset the effect of changes in commodity prices
on forecasted inventory purchases. As of June 30, 2008,
commodity contracts representing $3,543 of notional amount were
outstanding with a fair market value of approximately $63.
SFAS No. 157 clarifies that fair value is an exit
price, representing the amount that would be received to sell an
asset or paid to transfer a liability in an orderly transaction
between market participants. As such, fair value is a
market-based measurement that should be determined based upon
assumptions that market participants would use in pricing an
asset or liability. As a basis for considering such assumptions,
SFAS No. 157 establishes a three-tier fair value
hierarchy, which prioritizes the inputs used in measuring fair
value as follows:
|
|
|
|
|
|
Level 1:
|
|
Observable inputs such as quoted prices in active markets;
|
|
|
|
Level 2:
|
|
Inputs, other than quoted prices in active markets, that are
observable either directly or indirectly; and
|
|
|
|
Level 3:
|
|
Unobservable inputs in which there is little or no market data,
which require the reporting entity to develop its own
assumptions.
|
The Companys liabilities measured at fair value on a
recurring basis subject to the disclosure requirements of
SFAS No. 157 as of June 30, 2008 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Derivative financial instruments
|
|
$
|
13,299
|
|
|
$
|
|
|
|
$
|
13,299
|
|
|
$
|
|
|
|
|
15.
|
Sale
Leaseback Transaction
|
During the quarter ended June 30, 2007 the Company sold a
manufacturing facility to an independent third party. Gross
proceeds from this sale were $4,806. Concurrent with this sale,
the Company entered into an agreement to lease the facility back
from the purchaser over a lease term of 10 years. This
lease is accounted for as an operating lease. A gain of $723 was
deferred and is being amortized over the lease term.
On July 17, 2008, the Company announced the closure of two
manufacturing facilities, one located in Germany and the other
located in Australia. Both closures are a result of changes in
market demands and volume reductions and are expected to be
completed in 2009. As a result of these closures, the Company
will record severance and other exit costs in its financial
results as they occur.
|
|
Item 2.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations.
|
This Managements Discussion and Analysis of Financial
Condition and Results of Operations (MD&A)
presents information related to the condensed consolidated
results of operations of the Company, including the impact of
restructuring costs on the Companys results, a discussion
of the past results and future outlook of each of the
Companys segments, and information concerning both the
liquidity and capital resources of the Company. The following
discussion and analysis, which should be read in conjunction
with our condensed consolidated financial statements and the
notes included elsewhere in this report, contains certain
forward-looking statements relating to anticipated future
financial conditions and operating results of the Company and
its current business plans. In the future, the financial
condition and operating results of the Company could differ
materially from those discussed herein and its current business
plans could be altered in response to market conditions and
other factors beyond the Companys control. Important
factors that could cause or contribute to such differences or
changes include those discussed elsewhere in this report (see
Forward-Looking Statements) and in our most recently
filed annual report on
Form 10-K
(see Item 1A. Risk Factors).
23
Business
Environment and Outlook
Our business is greatly affected by the automotive build rates
in North America and Europe. New vehicle demand is driven by
macro-economic and other factors such as interest rates,
manufacturer and dealer sales incentives, fuel prices, consumer
confidence, and employment and income growth trends. According
to CSM Worldwide, light vehicle production in North America
is expected to be 13.3 million units in 2008, which is down
from 15.1 million units in 2007. European production levels
in 2008 are expected to be 22.0 million units as compared
to 21.7 million units in 2007. Light vehicle production in
South America is expected to increase to 4.1 million
vehicles in 2008 from 3.6 million vehicles in 2007. Asia
Pacific production levels in 2008 are expected to be
28.5 million units as compared to 26.5 million in 2007.
In the second quarter of 2008, our business was negatively
impacted by decreased OEM production volumes on certain
platforms in North America as structural changes take hold in
the industry with consumers exiting trucks and SUVs in
favor of cars with greater fuel economy. In addition, production
stoppages related to a strike at a major Tier One
Automotive Supplier further impacted volumes. According to CSM
Worldwide, actual North America light vehicle production volume
for the second quarter of 2008 was 3.5 million units, as
compared to 4.1 million units for the second quarter of
2007. Additionally, we continue to experience pricing pressure
from our customers as well as significant increases in certain
raw material prices, especially steel and oil based components.
Our contracts typically do not allow us to pass these price
increases on to our customers, although we have had some success
incorporating these increases into commercial negotiations. The
raw material price increases were partially offset by cost
savings, restructuring initiatives, and favorable foreign
currency translation.
According to CSM Worldwide, North America, Europe and Asia
Pacific light vehicle production in the third quarter of 2008 is
estimated at 3.1 million, 4.9 million and
6.9 million units, respectively, which is a
0.4 million unit decrease for North America and a
0.1 million unit increase for Europe and a 0.7 million
unit increase for Asia Pacific compared to the third
quarter of 2007. We expect that our performance in 2008 will
continue to be impacted by changes in light vehicle production
volumes, customer pricing pressures, and the cost of raw
materials.
Results
of Operations
(Dollar amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
Three Months Ended June 30,
|
|
|
June 30,
|
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
Sales
|
|
$
|
623,998
|
|
|
$
|
765,639
|
|
|
$
|
1,200,259
|
|
|
$
|
1,521,660
|
|
Cost of products sold
|
|
|
517,190
|
|
|
|
647,650
|
|
|
|
999,974
|
|
|
|
1,284,552
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
106,808
|
|
|
|
117,989
|
|
|
|
200,285
|
|
|
|
237,108
|
|
Selling, administration, & engineering expenses
|
|
|
51,309
|
|
|
|
69,029
|
|
|
|
100,029
|
|
|
|
136,432
|
|
Amortization of intangibles
|
|
|
7,930
|
|
|
|
7,925
|
|
|
|
15,739
|
|
|
|
15,761
|
|
Restructuring
|
|
|
9,049
|
|
|
|
1,243
|
|
|
|
13,792
|
|
|
|
3,638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
|
38,520
|
|
|
|
39,792
|
|
|
|
70,725
|
|
|
|
81,277
|
|
Interest expense, net of interest income
|
|
|
(21,040
|
)
|
|
|
(23,383
|
)
|
|
|
(42,884
|
)
|
|
|
(47,598
|
)
|
Equity earnings
|
|
|
322
|
|
|
|
2,059
|
|
|
|
654
|
|
|
|
4,204
|
|
Other income (expense), net
|
|
|
461
|
|
|
|
(361
|
)
|
|
|
(781
|
)
|
|
|
3,114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
18,263
|
|
|
|
18,107
|
|
|
|
27,714
|
|
|
|
40,997
|
|
Provision for income tax expense
|
|
|
8,577
|
|
|
|
6,520
|
|
|
|
13,354
|
|
|
|
13,738
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
9,686
|
|
|
$
|
11,587
|
|
|
$
|
14,360
|
|
|
$
|
27,259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
Three
Months Ended June 30, 2008 Compared with Three Months Ended
June 30, 2007
Sales: Consolidated sales increased
$141.6 million, or 22.7%, in the second quarter of 2008.
This increase resulted primarily from the MAPS and MAP India
acquisitions and favorable foreign exchange
($45.2 million). These favorable items were partially
offset by lower sales volume in North America and customer
price concessions.
Gross Profit: Gross profit increased
$11.2 million to $118.0 million (approximately 15.4%
of sales) in the second quarter of 2008 as compared to
$106.8 million (approximately 17.1% of sales) in the second
quarter of 2007. This increase resulted primarily from the MAPS,
and MAP India acquisitions, favorable foreign exchange and the
favorable impact of various cost saving initiatives. These
favorable items were partially offset by increased material
costs and customer price concessions. The decline in margin
percentage was primarily due to raw material prices and North
America vehicle volume/mix.
Selling, Administration, and
Engineering: Selling, administration, and
engineering expenses increased $17.7 million to
$69.0 million in the second quarter of 2008 compared to
$51.3 million in the second quarter of 2007, primarily due
to the MAPS and MAP India acquisitions.
Interest Expense, net: The increase in
interest expense of $2.3 million in the second quarter of
2008 resulted primarily from increased indebtedness used to
finance the acquisition of MAPS, increased short-term
borrowings, as well as the translational impact of the stronger
Euro and Canadian dollar.
Other Income (Expense): Other expense
increased $0.8 million in the second quarter of 2008
primarily due to foreign currency losses.
Provision for Income Tax Expense
(Benefit): For the three months ended
June 30, 2008, the Company recorded income tax expense of
$6.5 million on earnings before income taxes of
$18.1 million. This compares to an income tax expense of
$8.6 million on earnings before income taxes of
$18.3 million for the same period of 2007. Income tax
expense for the three month period ended June 30, 2008
differs from statutory rates due to income taxes on foreign
earnings, valuation allowances in the U.S. and certain
foreign jurisdictions, tax credits, income tax incentives,
withholding taxes, and other permanent items. Further, the
Companys current and future provision for income taxes
will be significantly impacted by the recognition of valuation
allowances in certain countries, particularly the United States.
The Company intends to maintain these allowances until it is
more likely than not that the deferred tax assets will be
realized. Accordingly, income taxes are impacted by the
U.S. valuation allowance and the mix of earnings among
jurisdictions.
Six
Months Ended June 30, 2008 Compared with Six Months Ended
June 30, 2007
Sales: Consolidated sales increased
$321.4 million, or 26.8%, in the six months ended
June 30, 2008. This increase resulted primarily from the
full six months impact of the MAPS, El Jarudo and MAP India
acquisitions, and favorable foreign exchange
($90.3 million). These favorable items were partially
offset by lower sales volume in North America and customer price
concessions.
Gross Profit: Gross profit increased
$36.8 million to $237.1 million (approximately 15.6%
of sales) in the six months ended June 30, 2008 as compared
to $200.3 million (approximately 16.7% of sales) in the six
months ended June 30, 2007. This increase resulted
primarily from the MAPS, El Jarudo and MAP India acquisitions,
favorable foreign exchange and the favorable impact of various
cost saving initiatives. These favorable items were partially
offset by increased material costs and customer price
concessions. The decline in margin percentage was primarily due
to raw material prices and North America volume/mix.
Selling, Administration, and
Engineering: Selling, administration, and
engineering expenses increased $36.4 million to
$136.4 million in the six months ended June 30, 2008
compared to $100.0 million for the six months ended
June 30 2007, primarily due to the MAPS, El Jarudo and MAP India
acquisitions.
Interest Expense, net: The increase in
interest expense of $4.7 million in the six months ended
June 30, 2008 resulted primarily from increased
indebtedness used to finance the acquisition of MAPS,
25
increased short-term borrowings, as well as the translational
impact of the stronger Euro and Canadian dollar.
Other Income (Expense): Other income was
$3.1 million in the six months ended June 30, 2008
compared to other expense of $0.8 million in the six months
ended June 30, 2007. This was due primarily to an increase
in foreign currency gains and gain on debt repurchase.
Provision for Income Tax Expense
(Benefit): For the six months ended June 30,
2008, the Company recorded income tax expense of
$13.7 million on earnings before income taxes of
$41.0 million. This compares to an income tax expense of
$13.4 million on earnings before income taxes of
$27.7 million for the same period of 2007. Income tax
expense for the six month period ended June 30, 2008
differs from statutory rates due to income taxes on foreign
earnings, valuation allowances in the U.S. and certain
foreign jurisdictions, tax credits, income tax incentives,
withholding taxes, and other permanent items. Further, the
Companys current and future provision for income taxes
will be significantly impacted by the recognition of valuation
allowances in certain countries, particularly the United States.
The Company intends to maintain these allowances until it is
more likely than not that the deferred tax assets will be
realized. Accordingly, income taxes are impacted by the
U.S. valuation allowance and the mix of earnings among
jurisdictions.
Segment
Results of Operations
(Dollar amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
Three Months Ended June 30,
|
|
|
June 30,
|
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Body & Chassis
|
|
$
|
305,542
|
|
|
$
|
449,961
|
|
|
$
|
596,674
|
|
|
$
|
889,903
|
|
Fluid
|
|
|
293,910
|
|
|
|
289,737
|
|
|
|
556,676
|
|
|
|
580,963
|
|
Asia Pacific
|
|
|
24,546
|
|
|
|
25,941
|
|
|
|
46,909
|
|
|
|
50,794
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
623,998
|
|
|
$
|
765,639
|
|
|
$
|
1,200,259
|
|
|
$
|
1,521,660
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Body & Chassis
|
|
$
|
8,560
|
|
|
$
|
16,444
|
|
|
$
|
15,774
|
|
|
$
|
33,856
|
|
Fluid
|
|
|
12,388
|
|
|
|
6,121
|
|
|
|
17,584
|
|
|
|
15,007
|
|
Asia Pacific
|
|
|
(2,685
|
)
|
|
|
(4,458
|
)
|
|
|
(5,644
|
)
|
|
|
(7,866
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
18,263
|
|
|
$
|
18,107
|
|
|
$
|
27,714
|
|
|
$
|
40,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended June 30, 2008 Compared with Three Months Ended
June 30, 2007
Body & Chassis: Sales increased
$144.4 million, or 47.3%, primarily due to the MAPS and MAP
India acquisitions, and favorable foreign exchange
($25.9 million), partially offset by lower sales volume and
customer price concessions. Segment profit increased by
$7.9 million, primarily due to the favorable impact of
various cost saving initiatives and the acquisition of MAPS and
MAP India, partially offset by higher raw material costs, lower
sales volume and customer price concessions.
Fluid: Sales decreased $4.2 million, or
1.4%, primarily due to customer price concessions and lower
volume in North America, partially offset by favorable foreign
exchange ($19.0 million). Segment profit decreased by
$6.3 million, primarily due to lower sales volume, customer
price concessions and increased material costs, partially offset
by the favorable impact of various cost savings initiatives.
Asia Pacific: Sales increased
$1.4 million, or 5.7%, primarily due to increased sales
volume. Segment loss increased by $1.8 million, primarily
as a result of start up related costs for operations in this
region and increased material costs.
26
Six
Months Ended June 30, 2008 Compared with Six Months Ended
June 30, 2007
Body & Chassis: Sales increased
$293.2 million, or 49.1%, primarily due to the MAPS and MAP
India acquisitions and favorable foreign exchange
($52.6 million), partially offset by lower sales volume and
customer price concessions. Segment profit increased by
$18.1 million, primarily due to the favorable impact of
various cost saving initiatives and the acquisition of MAPS and
MAP India, partially offset by higher raw material costs, lower
sales volume and customer price concessions.
Fluid: Sales increased $24.3 million, or
4.4%, primarily due to the acquisition of El Jarudo and
favorable foreign exchange ($36.0 million), partially
offset by lower sales volume in North America and customer price
concessions. Segment profit decreased by $2.6 million,
primarily due to increased material costs, lower sales volume
and customer price concessions, partially offset by the
favorable impact of various cost savings initiatives and the
acquisition of El Jarudo.
Asia Pacific: Sales increased
$3.9 million, or 8.3%, primarily due to favorable foreign
exchange ($1.7 million) and increased volume. Segment loss
increased by $2.2 million, primarily as a result of start
up related costs for operations in this region and increased
material costs.
Restructuring
We continually evaluate alternatives in an effort to align our
business with the changing needs of our customers and lower the
operating cost of our Company. This may include the realignment
of our existing manufacturing capacity, facility closures, or
similar actions. See the Notes to the Condensed Consolidated
Financial Statements for discussion of restructuring activities
during the six months ended June 30, 2008.
Liquidity
and Capital Resources
Operating Activities: Cash provided by
operations in the six months ended June 30, 2008 was
$45.1 million which included $54.9 million of cash
used for changes in operating assets and liabilities due to
anticipated seasonal fluctuations. Cash provided by operations
of $91.7 million in the six months ended June 30,
2007, included $13.3 million of cash provided by changes in
operating assets and liabilities. We anticipate that cash flows
from operations for the year to exceed our projected capital
expenditures and working capital needs.
Investing Activities: Cash used in investing
activities was $47.4 million in the six months ended
June 30, 2008, which primarily consisted of
$48.0 million of capital spending, as compared to
$48.6 million usage in the six months ended
June 30, 2007, which primarily consisted of acquisition
cost of $10.0 million related to the acquisition of El
Jarudo and capital spending of $43.8 million partially
offset by gross proceeds of $4.8 million from the
sale-leaseback transaction. We anticipate that we will spend
approximately $125.0 million on capital expenditures in the
year ending December 31, 2008. This anticipated capital
spending is within the limits prescribed by our amended senior
secured credit facilities.
Financing Activities: Cash used in financing
activities in the six months ended June 30, 2008 was
$2.3 million, which consisted primarily of normal debt
payments and repurchase of bonds, partially offset by increased
short-term debt, as compared to cash used in financing
activities of $27.0 million in the six months ended
June 30, 2007, which consisted primarily of normal debt
payments and voluntary prepayments on our term loans.
The Company is significantly leveraged. As of June 30,
2008, we had outstanding $1,124.3 million in aggregate
indebtedness, with an additional $92.3 million of borrowing
capacity available under our revolving credit facility (after
giving effect to $32.7 million of usage). Our future
liquidity requirements will likely be significant, primarily due
to debt service obligations. Future debt service obligations
will include required prepayments from annual excess cash flows,
as defined, under our senior credit agreement commencing with
the year ended December 31, 2008, which would be due five
days after filing of our
Form 10-K
or in connection with specific transactions, such as certain
asset sales and the incurrence of debt not permitted under the
senior credit agreement.
27
Our compliance with certain of the covenants contained in our
senior credit agreement is determined based on financial ratios
that are derived using our reported EBITDA, as adjusted for
unusual items and certain other contingencies described in those
agreements. The breach of such covenants in our senior credit
agreement could result in a default under that agreement and the
lenders could elect to declare all amounts borrowed due and
payable. Any such acceleration would also result in a default
under our indentures. Additionally, under our debt agreements,
our ability to engage in activities such as incurring additional
indebtedness, making investments, and paying dividends is
limited with exceptions that are either partially tied to
similar financial ratios (in the case of the notes indentures)
or are based on negotiated carveouts and baskets (in the case of
the credit agreement). We refer to EBITDA as adjusted under the
indentures as Indentures EBITDA and EBITDA as adjusted under the
senior credit agreement as Consolidated EBITDA.
We believe that the inclusion of supplementary adjustments to
EBITDA applied in presenting Consolidated EBITDA is appropriate
to provide additional information to investors to demonstrate
compliance with our financing covenants. However, EBITDA and
Consolidated EBITDA are not recognized terms under GAAP and do
not purport to be alternatives to net income as a measure of
operating performance. Additionally, EBITDA and Consolidated
EBITDA are not intended to be measures of free cash flow for
managements discretionary use, as they do not consider
certain cash requirements such as interest payments, tax
payments and debt service requirements. Because not all
companies use identical calculations, these presentations of
EBITDA and Consolidated EBITDA may not be comparable to
similarly titled measures of other companies.
The following table reconciles net income to EBITDA and pro
forma Indentures EBITDA under the credit agreement (dollars in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
Net income
|
|
$
|
9.7
|
|
|
$
|
11.6
|
|
|
$
|
14.4
|
|
|
$
|
27.3
|
|
Provision for income tax expense
|
|
|
8.6
|
|
|
|
6.5
|
|
|
|
13.4
|
|
|
|
13.7
|
|
Interest expense, net of interest income
|
|
|
21.1
|
|
|
|
23.4
|
|
|
|
42.9
|
|
|
|
47.6
|
|
Depreciation and amortization
|
|
|
31.3
|
|
|
|
35.2
|
|
|
|
61.2
|
|
|
|
71.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
$
|
70.7
|
|
|
$
|
76.7
|
|
|
$
|
131.9
|
|
|
$
|
159.6
|
|
Restructuring
|
|
|
6.2
|
|
|
|
1.2
|
|
|
|
10.9
|
|
|
|
3.6
|
|
Gain on bond repurchase
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1.7
|
)
|
Foreign exchange
gain(1)
|
|
|
(0.2
|
)
|
|
|
|
|
|
|
(0.5
|
)
|
|
|
(0.5
|
)
|
Claim
reserve(2)
|
|
|
|
|
|
|
(0.6
|
)
|
|
|
|
|
|
|
(0.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76.7
|
|
|
|
77.3
|
|
|
|
142.3
|
|
|
|
160.4
|
|
Pro forma adjustments related to
acquisitions(3)
|
|
|
17.4
|
|
|
|
|
|
|
|
30.9
|
|
|
|
|
|
EBITDA adjustment related to other joint
ventures(4)
|
|
|
2.2
|
|
|
|
1.6
|
|
|
|
3.9
|
|
|
|
4.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated EBITDA
|
|
$
|
96.3
|
|
|
$
|
78.9
|
|
|
$
|
177.1
|
|
|
$
|
164.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Unrealized foreign exchange gain on Acquisition-related
indebtedness. |
|
(2) |
|
Excess reserve due to favorable settlement on a bankruptcy claim. |
|
(3) |
|
Pro forma adjustments related to reported EBITDA for the period
from April 1, 2007 to June 30, 2007 and
January 1, 2007 to June 30, 2007, for the three and
six months ended June 30, 2007, respectively. |
|
(4) |
|
The Companys share of EBITDA in its joint ventures, net of
equity earnings. |
28
Our covenant level and ratio for the four quarters ended
June 30, 2008 are as follows:
|
|
|
|
|
|
|
|
|
|
|
Covenant Level
|
|
|
|
|
|
|
at June 30,
|
|
|
Covenant
|
|
|
|
2008
|
|
|
Thresholds
|
|
|
Senior Credit Facilities
|
|
|
|
|
|
|
|
|
Senior Secured Debt to Consolidated EBITDA ratio
|
|
|
1.8 to 1.0
|
|
|
|
£3.25
to 1.0
|
|
Recent
Accounting Pronouncements
See Note 1 to the condensed consolidated financial
statements included elsewhere in this
Form 10-Q.
Forward-Looking
Statements
This report includes what the Company believes are
forward-looking statements as that term is defined
under the Private Securities Litigation Reform Act of 1995.
These forward-looking statements include statements concerning
our plans, objectives, goals, strategies, future events, future
revenue or performance, capital expenditures, financing needs,
plans or intentions relating to acquisitions, business trends,
and other information that is not historical information. When
used in this report, the words estimates,
expects, anticipates,
projects, plans, intends,
believes, forecasts, or future or
conditional verbs, such as will, should,
could, or may, and variations of such
words or similar expressions are intended to identify
forward-looking statements. All forward-looking statements,
including, without limitation, managements examination of
historical operating trends and data are based upon our current
expectations and various assumptions. Our expectations, beliefs,
and projections are expressed in good faith and we believe there
is a reasonable basis for them. However, we cannot assure you
that these expectations, beliefs, and projections will be
achieved.
Such risks, uncertainties, and other important factors include,
among others: our substantial leverage; limitations on
flexibility in operating our business contained in our debt
agreements; our dependence on the automotive industry;
availability and cost of raw materials; our dependence on
certain major customers; competition in our industry; sovereign
and other risks related to our conducting operations outside the
United States; the uncertainty of our ability to achieve
expected cost reduction savings; our exposure to product
liability and warranty claims; labor conditions; our
vulnerability to rising interest rates; our ability to meet our
customers needs for new and improved products in a timely
manner; our ability to attract and retain key personnel; the
possibility that our owners interests will conflict with
yours; our recent status as a stand-alone company; our legal
rights to our intellectual property portfolio; our underfunded
pension plans; environmental and other regulation; and the
possibility that our acquisition strategy will not be
successful. See Item 1A. Risk Factors, in our
Form 10-K
for our fiscal year ended December 31, 2007 for additional
information regarding these and other risks and uncertainties.
There may be other factors that may cause our actual results to
differ materially from the forward-looking statements.
All forward-looking statements attributable to us or persons
acting on our behalf apply only as of the date of this report
and are expressly qualified in their entirety by the cautionary
statements included in this report. We undertake no obligation
to update or revise forward-looking statements to reflect events
or circumstances that arise after the date made or to reflect
the occurrence of unanticipated events.
|
|
Item 3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
Interest
Rate and Currency Exchange Risk
We are exposed to fluctuations in interest rates and currency
exchange rates. We actively monitor our exposure to risk from
changes in foreign currency exchange rates and interest rates
through the use of derivative financial instruments in
accordance with managements guidelines. We do not enter
into derivative instruments for trading purposes.
As of June 30, 2008, we had $559.8 million of variable
rate debt. A 1% increase in the average interest rate would
increase future interest expense by approximately
$2.9 million per year, after considering
29
the effects of the interest rate swap contracts, which were used
to manage cash flow fluctuations of certain variable rate debt
due to changes in market interest rates. Interest rate swap
contracts which fix the interest payments of certain variable
rate debt instruments or fix the market rate component of
anticipated fixed rate debt instruments are accounted for as
cash flow hedges.
As of June 30, 2008, interest rate swap contracts
representing $279.9 million of notional amount were
outstanding with maturity dates of December, 2010 through
September, 2013. These contracts modify the variable rate
characteristics of the Companys variable rate debt
instruments, which are generally set at three-month
USD LIBOR rates, Canadian Dollar Bankers Acceptance Rates
or six-month Euribor rates. Of the above amount
$243.7 million of notional amount pertains to the swap of
USD denominated debt fixed at 5.764%, $21.7 million
pertains to Canadian dollar denominated debt fixed at 4.91% and
$14.4 million pertains to EURO denominated debt fixed at
4.14%. As of June 30, 2008, the fair market value of
$(15.0) million for the USD and Canadian swaps were
recorded in other long-term liabilities and the same amount of
net losses were recorded in accumulated other comprehensive
income (loss). As of June 30, 2008, the fair market value
of $0.4 million for the Euro swap was recorded in other
long-term assets and the same amount of net income was recorded
in accumulated other comprehensive income (loss). The fair
market value of all outstanding interest rate swap contracts is
subject to changes in value due to changes in interest rates. A
100 basis point parallel increase of the discount curve
would change the fair value of the swap contracts by
$7.8 million to $(6.8) million. A 100 basis point
parallel decrease of the discount curve would change the fair
value of the swap contracts by $8.2 million to
$(22.8) million.
The Company uses forward foreign exchange contracts to reduce
the effect of fluctuations in foreign exchange rates on Term
Loan B, a U.S. dollar denominated obligation of our
Canadian subsidiary, the portion of our Euro Term Loan E
and short-term, foreign currency denominated intercompany
transactions. Gains and losses on the derivative instruments are
intended to offset gains and losses on the hedged transaction in
an effort to reduce the earnings volatility resulting from
fluctuations in foreign exchange rates. The currencies hedged by
these arrangements are the Canadian Dollar, Euro and Brazilian
Real. As of June 30, 2008 the fair market value of these
contracts was approximately $(0.2) million.
The Company also uses forward foreign exchange contracts to
hedge the Mexican peso to reduce the effect of fluctuations in
foreign exchange rates on a portion of the forecasted operating
expenses of our Mexican facilities. As of June 30, 2008,
forward foreign exchange contracts representing
$13.8 million of notional amount were outstanding with
maturities of less than twelve months and the fair market value
of these contracts was approximately $1.1 million. A 10%
strengthening of the U.S. dollar relative to the Mexican
peso would result in a decrease of $1.3 million in the fair
market value of these contracts. A 10% weakening of the
U.S. dollar relative to the Mexican peso would result in an
increase of $1.6 million in the fair market value of these
contracts.
The Company also uses forward foreign exchange contracts to
hedge the U.S. dollar to reduce the effect of fluctuations
in foreign exchange rates on a portion of the forecasted
material purchases of our Canadian facilities. As of
June 30, 2008, forward foreign exchange contracts
representing $11.7 million of notional amount were
outstanding with maturities of less than twelve months and the
fair market value of these contracts was approximately
$0.1 million. A 10% strengthening of the U.S. dollar
relative to the Canadian dollar would result in an increase of
$0.6 million in the fair market value of these contracts. A
10% weakening of the U.S. dollar relative to the Canadian
dollar would result in a decrease of $0.6 million in the
fair market value of these contracts.
The Company also uses forward foreign exchange contracts to
hedge the U.S. dollar to reduce the effect of fluctuations
in foreign exchange rates on a portion of the forecasted
material purchases of our European facilities. As of
June 30, 2008, forward foreign exchange contracts
representing $18.8 million of notional amount were
outstanding with maturities of less than twelve months and the
fair market value of these contracts was approximately
$0.3 million. A 10% strengthening of the U.S. dollar
relative to the Euro would result in an increase of
$1.9 million in the fair market value of these contracts. A
10% weakening of the U.S. dollar relative to the Euro would
result in a decrease of $1.5 million in the fair market
value of these contracts.
30
The Company has exposure to the prices of commodities in the
procurement of certain raw materials. The primary purpose of the
Companys commodity price hedging activities is to manage
the volatility associated with these forecasted purchases. The
Company primarily utilizes forward contracts with maturities of
less than 24 months. These instruments are intended to
offset the effect of changes in commodity prices on forecasted
inventory purchases. As of June 30, 2008, commodity
contracts representing $3.5 million of notional amount were
outstanding with a fair market value of approximately
$0.1 million. A 10% change in the equivalent commodity
price would result in a change of $0.3 million in the fair
market value of these contracts.
|
|
Item 4.
|
Controls
and Procedures.
|
The Company has evaluated, under the supervision and with the
participation of the Companys management, including the
Companys Chief Executive Officer and Chief Financial
Officer, the effectiveness of the Companys disclosure
controls and procedures (as defined in
Rules 15d-15(e)
under the Securities Exchange Act of 1934, as amended (the
Exchange Act)) as of the end of the period covered
by this Report. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if
any, within the Company have been detected. However, based on
that evaluation, the Companys Chief Executive Officer
along with the Chief Financial Officer have concluded that the
Companys disclosure controls and procedures were effective
as of the end of the period covered by this Report.
There have been no changes in the Companys internal
control over financial reporting during the quarter ended
June 30, 2008 that have materially affected, or are
reasonably likely to materially affect, the Companys
internal control over financial reporting.
PART II
OTHER INFORMATION
|
|
Item 1.
|
Legal
Proceedings.
|
The Company is periodically involved in claims, litigation and
various legal matters that arise in the ordinary course of
business. In addition, the Company conducts and monitors
environmental investigations and remedial actions at certain
locations. Each of these matters is subject to various
uncertainties, and some of these matters may be resolved
unfavorably with respect to the Company. A reserve estimate is
established for each matter and updated as additional
information becomes available. We do not believe that the
ultimate resolution of any of these matters will have a material
adverse effect on our financial condition, results of
operations, or cash flows.
31
The exhibits listed on the Index to Exhibits are
filed with this
Form 10-Q
or incorporated by reference as set forth below.
32
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.
|
|
|
|
|
COOPER-STANDARD HOLDINGS INC.
|
|
|
|
|
|
/s/ Edward A. Hasler
Edward A. Hasler
President and Chief Executive Officer
(Principal Executive Officer)
|
|
|
|
|
|
/s/ Allen J. Campbell
Allen J. Campbell
Chief Financial Officer
(Principal Financial Officer)
|
|
|
|
|
|
/s/ Helen T. Yantz
Helen T. Yantz
Controller
(Principal Accounting Officer)
|
33
INDEX TO
EXHIBITS
|
|
|
|
|
Exhibit No.
|
|
Description of Exhibit
|
|
|
31
|
.1*
|
|
Certification of Edward A. Hasler, Chief Executive Officer,
pursuant to
Rule 13a-14(a)/15d-14(a),
as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
|
|
|
|
|
31
|
.2*
|
|
Certification of Allen J. Campbell, Chief Financial Officer,
pursuant to
Rule 13a-14(a)/15d-14(a),
as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
|
|
|
|
|
32
|
.1*
|
|
Certification of Edward A. Hasler, 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 Allen J. Campbell, Chief Financial Officer,
pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
34