WASHINGTON, D.C. 20549
(Mark One)
x
For the fiscal year ended December 31, 2003
OR
o
(Mark One) | ||||
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934 | |||
For the fiscal year ended December 31, 2006 | ||||
OR | ||||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF | |||
For the transition period from to |
For the transition period fromto
Commission file number 0-3134
333-43005
Ohio | 34-6520107 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
23000 Euclid Avenue Cleveland, Ohio | 44117 | |
(Address of principal executive offices) | (Zip Code) |
The registrant meets the conditions set forth in General Instructions I 1(a)general instructions (I)(1)(a) and (b) of Form 10-K and is therefore filing this form with thein reduced disclosure format.
None
Item 1. | Business |
The Company
The Company operates throughdiversified manufacturing business operating in three segments,segments: Integrated Logistics Solutions (“ILS”), Aluminum Products and Manufactured Products. ILS is a leading supply chain logistics provider of production components
Operations
Net Sales | ||||||||
for the | ||||||||
Year Ended | ||||||||
Dec. 31, | ||||||||
Segment | Primary Industries Served | Selected Products/Services | 2003 | |||||
(millions) | ||||||||
INTEGRATED LOGISTICS SOLUTIONS | Heavy-duty truck, semiconductor equipment, industrial equipment, aerospace and defense, electrical controls, HVAC, vehicle parts and accessories, appliances, lawn and garden equipment and automotive | Cross-industry supply chain management services; planning, implementing and managing the physical flow of production components to the plant floor point of use for large multi-national manufacturing companies | $ | 377.6 | ||||
ALUMINUM PRODUCTS | Automotive, agricultural equipment, heavy-duty truck and construction equipment | Engineering, casting and machining of aluminum components | $ | 90.1 |
Integrated Logistics | ||||||
Solutions | Aluminum Products | Manufactured Products | ||||
NET SALES(1) | $598.2 million (57% of total) | $154.6 million (14% of total) | $303.4 million (29% of total) | |||
SELECTED PRODUCTS | Sourcing, planning and | • Pump housings | • Induction heating and | |||
procurement of over | • Clutch retainers/pistons | melting systems | ||||
175,000 production | • Control arms | • Pipe threading | ||||
components, including: | • Knuckles | systems | ||||
• Fasteners | • Master cylinders | • Industrial oven | ||||
• Pins | • Pinion housings | systems | ||||
• Valves | • Brake calipers | • Injection molded | ||||
• Hoses | • Oil pans | rubber components | ||||
• Wire harnesses | • Flywheel spacers | • Forging presses | ||||
• Clamps and fittings | ||||||
• Rubber and plastic components | ||||||
SELECTED INDUSTRIES | • Heavy-duty truck | • Automotive | • Steel | |||
SERVED | • Automotive and vehicle parts | • Agricultural equipment • Construction equipment | • Coatings • Forging | |||
• Electrical distribution and controls | • Heavy-duty truck • Marine equipment | • Foundry • Heavy-duty truck | ||||
• Power sports/fitness equipment | • Construction equipment • Bottling | |||||
• HVAC | • Automotive | |||||
• Aerospace and defense | • Oil and gas | |||||
• Electrical components • Appliance | • Rail and locomotive manufacturing | |||||
• Semiconductor equipment | • Aerospace and defense |
(1) | Results are for the year ended December 31, 2006 and exclude the results of operations related to the acquisition of NABS, Inc. prior to the date of acquisition on October 18, 2006. |
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1
Net Sales | ||||||||
for the | ||||||||
Year Ended | ||||||||
Dec. 31, | ||||||||
Segment | Primary Industries Served | Selected Products/Services | 2003 | |||||
(millions) | ||||||||
MANUFACTURED PRODUCTS | Aerospace, automotive, steel, forging, foundry, railroad, construction equipment, truck, oil, coatings, food processing, and consumer appliance | Engineering and manufacturing of the following: forged and machined products such as aircraft landing gears, locomotive crankshafts and camshafts; induction heating and melting systems; industrial rubber products; oil pipe threading systems; and industrial ovens | $ | 156.6 |
Large, multinational manufacturing companies continue to make it a priority to reduce their total cost of production components. Administrative and overhead costs to source, plan, purchase, quality-assure, inventory and handle production components comprise a large portion of total cost. ILS has the size, experience, highly-customized computer system and focus to reduce these costs substantially while providing reliable just-in-time delivery directly to the point of use.
consolidated financial statements included elsewhere herein.
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levels.
The Aluminum Products segment generated net sales of $90.1 million, or 14% of the Company’s net sales, for the year ended December 31, 2003. Management believes Aluminum Products is
Aluminum Products’ cast aluminum parts are manufacturedengine, transmission, brake, suspension and other components for automotive, agricultural equipment, construction equipment, heavy-duty truck and constructionmarine equipment OEMs, primarily located in North America.on a sole-source basis. Aluminum Products’ principal products include: transmissioninclude pump housings, intake manifolds, planetary pinion carriers, oil filter adapters, clutch retainers bearing cups, brackets,and pistons, control arms, knuckles, master cylinders, pinion housings, brake calipers, oil pans and flywheel spacers. Aluminum ProductsIn addition, we also providesprovide value-added services such as design engineering, machining drilling, tapping and part assembly. Although these parts are lightweight, they possess high durability and integrity characteristics even under extreme pressure and temperature conditions.
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The
The Company’sand Services. Our induction heating and melting business Ajax Tocco Magnethermic (“Ajax Tocco”),utilizes proprietary technology and specializes in the engineering, construction, service and repair of induction heating and melting systems, primarily for the steel, coatings, forging, foundry, automotive and construction equipment industries. Ajax Tocco’sOur induction heating and melting systems are engineered and built to customer specifications and are used primarily for melting, heating, and surface hardening of metals and curing of coatings. Approximately half40% to 45% of Ajax Tocco’s revenueour induction heating and melting systems’ revenues is derived from the sale of replacement parts and provision of field service, primarily for the installed base of itsour own products. The Company also produces other capital equipment includingOur pipe threading equipment and related parts forbusiness serves the oil drillingand gas industry, and complete oven systems that combine heat processingwhile our industrial ovens provide heating and curing technologies with material handlingfor bottling and conveying methods. The Companyother applications. We also engineersengineer and installsinstall mechanical forging presses, for the automotive and truck manufacturing industries, and sellssell spare parts and providesprovide field service for the large existing base of mechanical forging presses and hammers in North America. TheseWe machine, induction harden and surface finish crankshafts and camshafts, used primarily in locomotives. We forge aerospace and defense structural components such as landing gears and struts, as well as rail products such as railcar center plates and draft lugs. We injection mold rubber and silicone products, including wire harnesses, shock and vibration mounts, spark plug boots and nipples and general sealing gaskets.
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The Company manufactures injection molded rubber
The Company manufactures forged and machined products produced from closed-die metal forgings of up to 6,000 pounds. These products include crankshafts, aircraft structural components such as landing gears and rail products such as railcar center plates. Aerospace forgings are sold primarily to machining companies, and sub-assemblers who finish the products for sale to OEMs. The Company also machines, induction hardens and surface finishes crankshafts and camshafts used primarily in locomotives. In fourth quarter 2003, the Company decided to shut down its locomotive crankshaft forging plant, and entered into a long-term supply contract to purchase these forgings at a more favorable price from a third-party supplier. The 2003 restructuring is expected to increase both profitability and cash flow by approximately $15.0 million over the next five years. Forged rail products are sold primarily to railcar builders and maintenance providers. Forged and machined products are sold to a wide variety of
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The Company has
all three years. In September 2005, we entered into an exclusive, multi-year agreement with International Truck to supply a wide range of production components, expiring on December 31, 2008.
The Company is
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The Company has
The Company files
Item 1A. | Risk Factors |
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• | the loss of any key customer, in whole or in part; | |
• | the insolvency or bankruptcy of any key customer; |
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• | a declining market in which customers reduce orders or demand reduced prices; or | |
• | a strike or work stoppage at a key customer facility, which could affect both their suppliers and customers. |
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• | fluctuations in currency exchange rates; | |
• | limitations on ownership and on repatriation of earnings; | |
• | transportation delays and interruptions; | |
• | political, social and economic instability and disruptions; | |
• | government embargoes or foreign trade restrictions; | |
• | the imposition of duties and tariffs and other trade barriers; | |
• | import and export controls; | |
• | labor unrest and current and changing regulatory environments; | |
• | the potential for nationalization of enterprises; | |
• | difficulties in staffing and managing multinational operations; | |
• | limitations on our ability to enforce legal rights and remedies; and | |
• | potentially adverse tax consequences. |
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Item 1B. | Unresolved Staff Comments |
Item 2. Properties
The Company’s
Item 2. | Properties |
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Related Industry | Owned or | Approximate | ||||||||
Segment | Location | Leased | Square Footage | Use | ||||||
ILS(1) | Cleveland, OH | Leased | 60,350 | (2) | ILS Corporate Office | |||||
Dayton, OH | Leased | 112,960 | Logistics | |||||||
Lawrence, PA | Leased | 116,000 | Logistics and Manufacturing | |||||||
St. Paul, MN | Leased | 104,425 | Logistics | |||||||
Allentown, PA | Leased | 69,755 | Logistics | |||||||
Atlanta, GA | Leased | 56,000 | Logistics | |||||||
Dallas, TX | Leased | 49,985 | Logistics | |||||||
Memphis, TN | Leased | 48,750 | Logistics | |||||||
Louisville, KY | Leased | 46,230 | Logistics | |||||||
Nashville, TN | Leased | 44,900 | Logistics | |||||||
Tulsa, OK | Leased | 40,000 | Logistics | |||||||
Austin, TX | Leased | 30,000 | Logistics | |||||||
Kent, OH | Leased | 225,000 | Manufacturing | |||||||
Mississauga, | Leased | 117,000 | Manufacturing | |||||||
Ontario, Canada | ||||||||||
Solon, OH | Leased | 42,600 | Logistics | |||||||
Dublin, VA | Leased | 40,000 | Logistics | |||||||
Delaware, OH | Owned | 45,000 | Manufacturing | |||||||
ALUMINUM | Conneaut, OH(3) | Leased/Owned | 304,000 | Manufacturing | ||||||
PRODUCTS | Huntington, IN | Leased | 132,000 | Manufacturing | ||||||
Fremont, IN | Owned | 108,000 | Manufacturing | |||||||
Wapakoneta, OH | Owned | 188,000 | Manufacturing | |||||||
Richmond, IN | Leased/Owned | 97,300 | Manufacturing | |||||||
MANUFACTURED | Cuyahoga Hts., OH | Owned | 427,000 | Manufacturing | ||||||
PRODUCTS(4) | Le Roeulx, Belgium | Owned | 120,000 | Manufacturing | ||||||
Euclid, OH | Leased | 154,000 | Manufacturing | |||||||
Wickliffe, OH | Owned | 110,000 | Manufacturing | |||||||
Boaz, AL | Owned | 100,000 | Manufacturing | |||||||
Warren, OH | Owned | 195,000 | Manufacturing | |||||||
Canton, OH | Leased | 125,000 | Manufacturing | |||||||
Madison Heights, MI | Leased | 128,000 | Manufacturing | |||||||
Newport, AR | Leased | 111,300 | Manufacturing | |||||||
Cicero, IL | Owned | 45,000 | Manufacturing | |||||||
Cleveland, OH | Leased | 150,000 | Manufacturing | |||||||
Shanghai, China | Leased | 20,500 | Manufacturing |
ILS | ||||||||||||
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Item 3. Legal Proceedings
The Company is
Item 3. | Legal Proceedings |
Item 4. Submission of Matters to a Vote of Security Holders
Item 4. | Submission of Matters to a Vote of Security Holders |
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7
Item 5. | Market for the Registrant’s Common |
Item 6. | Selected |
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Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
The
Executive Overview
The Company operates through three segments,segments: ILS, Aluminum Products and Manufactured Products. ILS is a leading supply chain logistics provider of production components to large, multinational manufacturers. In connectionprovides customers with the supply of such production components, ILS provides a variety of value-added, cost-effectiveintegrated supply chain management services.services for a broad range of high-volume, specialty production components. ILS customers receive various value-added services, such as engineering and design services, part usage and cost analysis, supplier selection, quality assurance, bar coding, product packaging and tracking,just-in-time and point-of use delivery, electronic billing and ongoing technical support. The principal customers of ILS are in the heavy-duty truck, semiconductorautomotive and vehicle parts, electrical distribution and controls, power sports/fitness equipment, industrial equipment,HVAC, aerospace and defense, electrical controls, HVAC, vehicle partscomponents, appliance and accessories, appliances, and lawn and gardensemiconductor equipment industries. Aluminum Products manufactures castcasts and machines aluminum engine, transmission, brake, suspension and other components primarilysuch as pump housings, clutch retainers/pistons, control arms, knuckles, master cylinders, pinion housings, brake calipers, oil pans and flywheel spacers for automotive, manufactures,agricultural equipment, construction equipment, heavy-duty truck and marine equipment OEMs, primarily on a sole-source basis. Aluminum Products also provides value-added services such as design and engineering machining and assembly. Manufactured Products operates a diverse group of niche manufacturing businesses that design and manufacture a broad range of high qualityhighly-engineered products engineeredincluding induction heating and melting systems, pipe threading systems, industrial oven systems, injection molded rubber components, and forged and machined products. Manufactured Products also produces and provides services and spare parts for specific customer applications.the equipment it manufactures. The principal customers of Manufactured Products are OEMs,sub-assemblers and end-usersend users in the steel, coatings, forging, foundry, heavy-duty truck, construction equipment, bottling, automotive, oil and gas, rail and locomotive manufacturing and aerospace automotive, steel, forging, railroad, truck, oil, food processing and consumer appliancedefense industries. Sales, earnings and other relevant financial data for these three segments are provided in Note LB to the consolidated financial statements.
The Company is positioned for increased sales
1993 | 1999 | 2000 | 2001 | 2002 | 2003 | |||||||||||||||||||
Net sales | $ | 94.5 | $ | 717.2 | $ | 754.7 | $ | 636.4 | $ | 634.5 | $ | 624.3 | ||||||||||||
Restructuring and impairment charges | 28.5 | 19.2 | 19.4 | |||||||||||||||||||||
Non-recurring gains / losses (pretax) | 10.1 | 1.8 | ||||||||||||||||||||||
Income (loss) before income taxes and cumulative effect of accounting change | $ | 3.9 | $ | 28.4 | $ | 7.7 | $ | (37.4 | ) | $ | (11.5 | ) | $ | (10.9 | ) |
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The Company responded to the economic downturn by reducing costs, increasing prices on targeted products, restructuring many of its businesses and selling non-core manufacturing assets. During 2001 through 2003, the Company consolidated 28 supply chain logistics facilities, and closed or sold 11 manufacturing plants. With regard to these actions, the Company recorded restructuring and impairment charges in 2001, 2002 and 2003 (see table above and Note N to the consolidated financial statements). Management’s actions aimed to increase operational earnings during the economic downturn and position the Company for increased profitability when the manufacturing economy stabilizes and returns to growth. These actions resulted in increased income (as adjusted) in 2002 and 2003 despite flat to declining sales.
The Company’s 2003 non-cash restructuring and impairment charges totaled $19.4 million, of which 90% related to restructuring of the Forge Group, primarily impairment of property and equipment idled when the Company began purchasing crankshaft forgings instead of manufacturing them internally. Charges outside the Forge Group, totaling $1.9 million, consisted primarily of pension withdrawal charges for manufacturing units executing previously announced restructuring. The 2003 restructuring is expected to increase both profitability and cash flow by approximately $15.0 million over the next five years.
In July 2003, the Company entered into a four-year bank revolving credit agreement under which it may
resulted in additional goodwill of $2.3 million. The Company soldacquisition was funded with borrowings from foreign subsidiaries of the Company.
Accounting Changes and date.
On January 1, 2002, the Company adopted
In accordance with FAS 142, goodwill is now reviewed annually for potential impairment. This review was performed as of October 1, 20032006, 2005 and 2002,2004, using forecasted discounted cash flows, and it was determined that no further impairment is required. At December 31, 2003, the2006, our balance sheet reflected $82.3$98.2 million of goodwill in the ILS and Aluminum Products segments.goodwill. In 2003,2006, discount rates
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The Company changed its method of accounting for the 15% of its inventories utilizing the LIFO method to the FIFO method. As required by accounting principles generally accepted in the United States, the Company has restated its balance sheet as of December 31, 2002 to increase inventories by the recorded LIFO reserve ($4.4 million), increase deferred tax liabilities ($1.7 million), and increase shareholders’ equity ($2.7 million). Previously reported results of operations have not been restated because the impact of utilizing the LIFO method had an insignificant impact on the Company’s reported amounts for consolidated net income (loss). See also Note B to the consolidated financial statements.
Percent | ||||||||||||||||
2003 | 2002 | Change | Change | |||||||||||||
ILS | $ | 377.6 | $ | 398.1 | $ | (20.5 | ) | -5 | % | |||||||
Aluminum products | 90.1 | 106.1 | (16.0 | ) | -15 | % | ||||||||||
Manufactured products | 156.6 | 130.2 | 26.4 | 20 | % | |||||||||||
Consolidated Net Sales | $ | 624.3 | $ | 634.4 | $ | (10.1 | ) | -2 | % | |||||||
Year Ended | Acquired/ | |||||||||||||||||||
December 31, | Percent | (Divested) | ||||||||||||||||||
2006 | 2005 | Change | Change | Sales | ||||||||||||||||
ILS | $ | 598.2 | $ | 532.6 | $ | 65.6 | 12 | % | $ | 38.7 | ||||||||||
Aluminum products | 154.6 | 159.1 | (4.5 | ) | (3 | )% | 0.0 | |||||||||||||
Manufactured products | 303.4 | 241.2 | 62.2 | 26 | % | 22.9 | ||||||||||||||
Consolidated Net Sales | $ | 1,056.2 | $ | 932.9 | $ | 123.3 | 13 | % | $ | 61.6 | ||||||||||
January 2006, respectively.
2003 | 2002 | |||||||||||||||||||||||
Percent | Gross | Gross | ||||||||||||||||||||||
2003 | 2002 | Change | Change | Margin | Margin | |||||||||||||||||||
Consolidated cost of products sold | $ | 527.6 | $ | 546.9 | $ | (19.3 | ) | -4 | % | |||||||||||||||
Inventory writedowns from restructuring included in Cost of Products Sold | 0.6 | 5.6 | (5.0 | ) | ||||||||||||||||||||
Net gross profit impact of acquisition & divestitures | (4.4 | ) | (4.4 | ) | ||||||||||||||||||||
Consolidated gross profit | $ | 96.7 | $ | 87.6 | $ | 9.1 | 10 | % | 15.5 | % | 13.8 | % |
Note: 25% of increase in Induction gross profit attributed to non-acquisition actions.
Year Ended | ||||||||||||||||
December 31, | Percent | |||||||||||||||
2006 | 2005 | Change | Change | |||||||||||||
Consolidated cost of products sold | $ | 908.1 | $ | 796.3 | $ | 111.8 | 14 | % | ||||||||
Consolidated gross profit | $ | 148.1 | $ | 136.6 | $ | 11.5 | 8 | % | ||||||||
Gross Margin | 14.0 | % | 14.6 | % |
Year Ended | ||||||||||||||||
December 31, | Percent | |||||||||||||||
2006 | 2005 | Change | Change | |||||||||||||
Consolidated SG&A expenses | $ | 88.9 | $ | 81.4 | $ | 7.5 | 9 | % | ||||||||
SG&A percent | 8.4 | % | 8.7 | % |
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Year Ended | ||||||||||||||
December 31, | Percent | |||||||||||||
2006 | 2005 | Change | Change | |||||||||||
Interest expense | $ | 31.3 | $ | 27.1 | $ | 4.2 | 15% | |||||||
Average outstanding borrowings | $ | 376.5 | $ | 357.1 | $ | 19.4 | 5% | |||||||
Average borrowing rate | 8.31 | % | 7.59 | % | 72 | basis points |
Year Ended December 31, | ||||||||
2006 | 2005 | |||||||
Income before income taxes | $ | 28.8 | $ | 27.3 | ||||
Income taxes (benefit) | $ | 3.2 | $ | (4.3 | ) | |||
Reversal of tax valuation allowance included in income | (5.0 | ) | (7.3 | ) | ||||
Income taxes, excluding reversal of tax valuation allowance — (non GAAP) | $ | 8.2 | $ | 3.0 | ||||
Effective income tax (benefit) rate | 11 | % | (16 | )% | ||||
Effective income tax rate excluding reversal of tax valuation allowance — (non GAAP) | 28 | % | 11 | % |
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Acquired/ | ||||||||||||||||||||
Year Ended December 31, | Percent | (Divested) | ||||||||||||||||||
2005 | 2004 | Change | Change | Sales | ||||||||||||||||
ILS | $ | 532.6 | $ | 453.2 | $ | 79.4 | 18 | % | $ | 31.4 | ||||||||||
Aluminum Products | 159.1 | 135.4 | 23.7 | 18 | % | 34.5 | ||||||||||||||
Manufactured Products | 241.2 | 220.1 | 21.1 | 10 | % | 3.5 | ||||||||||||||
Consolidated net sales | $ | 932.9 | $ | 808.7 | $ | 124.2 | 15 | % | $ | 69.4 | ||||||||||
Year Ended December 31, | Percent | |||||||||||||||
2005 | 2004 | Change | Change | |||||||||||||
Consolidated cost of products sold | $ | 796.3 | $ | 682.6 | $ | 113.7 | 17 | % | ||||||||
Consolidated gross profit | $ | 136.6 | $ | 126.1 | $ | 10.5 | 8 | % | ||||||||
Gross margin | 14.6 | % | 15.6 | % |
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equipment, pipe threading equipment and forging businesses, and also due to $.8 million writeoff of inventory associated with discontinued product lines.
2003 | 2002 | |||||||||||||||||||||||
Percent | SG&A | SG&A | ||||||||||||||||||||||
2003 | 2002 | Change | Change | Percent | Percent | |||||||||||||||||||
Consolidated SG&A expenses | $ | 62.4 | $ | 57.4 | $ | 5.0 | 9 | % | 10.0 | % | 9.1 | % | ||||||||||||
Net SG&A expense impact of acquisition & divestitures | (3.9 | ) | (3.9 | ) |
Year Ended December 31, | Percent | |||||||||||||||
2005 | 2004 | Change | Change | |||||||||||||
Consolidated SG&A expenses | $ | 81.4 | $ | 76.7 | $ | 4.7 | 6 | % | ||||||||
SG&A percent | 8.7 | % | 9.5 | % |
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point.
2003 | 2002 | Change | Percent | |||||||||||||
Interest expense | $ | 26.2 | $ | 27.6 | $ (1.4 | ) | -5% | |||||||||
Average outstanding borrowings | $ | 320.8 | $ | 333.6 | $(12.8 | ) | -4% | |||||||||
Average borrowing rate | 8.15 | % | 8.28 | % | (13) basis points |
Year Ended December 31, | Percent | |||||||||||||
2005 | 2004 | Change | Change | |||||||||||
Interest expense | $ | 27.1 | $ | 31.4 | $(4.3) | (14 | )% | |||||||
Debt extinguishment costs included in interest expense | -0- | $ | 6.0 | $(6.0) | ||||||||||
Average outstanding borrowings | $ | 357.1 | $ | 328.9 | $28.2 | 9 | % | |||||||
Average borrowing rate | 7.59 | % | 7.72 | % | (13) basis points |
compared to 2004, which increased primarily as a result of actions by the Federal Reserve.
Year Ended December 31, | ||||||||
2005 | 2004 | |||||||
Income before income taxes | $ | 27.3 | $ | 17.9 | ||||
Income taxes (benefit) | $ | (4.3 | ) | $ | 3.4 | |||
Reversal of tax valuation allowance included in 2005 income tax benefit | (7.3 | ) | ||||||
2005 Income taxes excluding reversal of tax valuation allowance — (non GAAP) | $ | 3.0 | ||||||
Effective income tax (benefit) rate | (16 | )% | 19 | % | ||||
Effective income tax rate excluding reversal of tax valuation allowance — (non GAAP) | 11 | % |
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2002 versus 2001
Net Sales by Segment:
Percent | ||||||||||||||||
2002 | 2001 | Change | Change | |||||||||||||
ILS | $ | 398.1 | $ | 416.9 | $ | (18.8 | ) | -5 | % | |||||||
Aluminum products | 106.1 | 84.9 | 21.2 | 25 | % | |||||||||||
Manufactured products | 130.2 | 134.6 | (4.4 | ) | -3 | % | ||||||||||
Consolidated Net Sales | $ | 634.4 | $ | 636.4 | $ | (2.0 | ) | 0 | % | |||||||
Net sales declined less than 1% in 2002. The ILS net sales decline of 5% was due primarily to the sales volume reductions in heavy truck and other customer industries. The Aluminum Products net sales increase of 25% was due primarily to the initiation or ramp-up of new production contracts. The Manufactured Products net sales decline of 3% or $4.4 million was due primarily to divestitures. The divestitures of Castle Rubber and Cleveland City Forge decreased 2002 net sales by $13.0 million and the acquisition of Ajax Magnethermic increased 2002 net sales by $6.1 million.
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Cost of Products Sold & Gross Profit:
2002 | 2001 | |||||||||||||||||||||||
Percent | Gross | Gross | ||||||||||||||||||||||
2002 | 2001 | Change | Change | Margin | Margin | |||||||||||||||||||
Consolidated cost of products sold | $ | 546.9 | $ | 552.3 | $ | (5.4 | ) | -1 | % | |||||||||||||||
Inventory writedowns from restructuring included in Cost of Products Sold | 5.6 | 10.3 | (4.7 | ) | ||||||||||||||||||||
Net gross profit impact of acquisition & divestitures | 1.7 | 1.7 | ||||||||||||||||||||||
Consolidated gross profit | $ | 87.6 | $ | 84.1 | $ | 3.5 | 4 | % | 13.8 | % | 13.2 | % |
Cost of products sold declined 1% in 2002. Inventory write-downs included in cost of products sold primarily related to discontinued product lines. Gross profit increased 4% in 2002, while gross margin increased to 13.8% in 2002, from 13.2% in 2001. This increase reflected increased margins in Aluminum Products, partially offset by decreased margins in the ILS and Manufactured Products segments. Declines in ILS and Manufactured Products gross margins related primarily to reduced volumes resulting in the absorption of fixed operational overheads over a smaller sales or production base. The increase in Aluminum Products gross margin related to new, higher-margin contracts, discontinuation of low margin contracts, cost reductions, plant closures and the absorption of fixed manufacturing overheads over a larger production base.
Selling, General & Administrative (“SG&A”) Expenses:
2002 | 2001 | |||||||||||||||||||||||
Percent | SG&A | SG&A | ||||||||||||||||||||||
2002 | 2001 | Change | Change | Percent | Percent | |||||||||||||||||||
Consolidated SG&A expenses | $ | 57.4 | $ | 66.1 | $ | (8.7 | ) | -13 | % | 9.1 | % | 10.4 | % |
Consolidated SG&A expenses decreased by 13% in 2002, while SG&A expenses as a percentage of net sales decreased to 9.1% during 2002 as compared to 10.4% for 2001. This decrease was primarily due to cost reductions in all three segments resulting from business restructuring initiatives implemented by the Company. During 2003, SG&A expenses were negatively affected by a decrease in net pension credits of $.8 million, reflecting less favorable investment returns on pension plan assets.
Interest Expense:
2002 | 2001 | Change | Percent | |||||||||||||
Interest expense | $ | 27.6 | $ | 31.1 | $ (3.5 | ) | -11 | % | ||||||||
Average outstanding borrowings | $ | 333.6 | $ | 353.4 | $(19.8 | ) | -6 | % | ||||||||
Average borrowing rate | 8.28 | % | 8.80 | % | (52) basis points |
Interest expense decreased by 11% in 2002 due to lower average debt outstanding and lower average interest rates. The decrease in borrowings related primarily to working capital reductions in the course of 2001, which were retained in 2002. The lower average borrowing rate in 2002 was due primarily to decreased rates on the Company’s revolving credit facility.
In accordance with the provision of Statement of Financial Accounting Standards No. 109 (“FAS 109”), “Accounting for Income Taxes,” the Company recorded no tax benefit for the 2003 net loss, because it had incurred three years of cumulative losses. Income taxes of $.9 million were provided in 2003, primarily for state and foreign taxes on profitable operations. The effective tax rate for 2001 was 30.5%, which was less than the statutory rate due to the amortization of non-deductible goodwill and other non-deductible items. At December 31, 2003, subsidiaries of the Company had $25.6 million of net operating loss carryforwards for federal tax purposes. The Company has not recognized any tax benefit for these loss carryforwards.
12
valuation allowance reversal to facilitate comparison between the periods.
statements included elsewhere herein.
21
In 2003, the
13
The Company, with assistance of an outside consultant, completed the transitional impairment review of goodwill during the fourth quarter of 2002 and recorded a non-cash charge of $48.8 million. The charge has been reported as a cumulative effect of a change in accounting principle. The Company has also We have completed the annual impairment test as of October 1, 20032006, 2005 and 2002,2004 and hashave determined that no additional goodwill impairment existed as of those dates.
paid and accordingly records a tax valuation allowance if, based on the weight of available evidence it is more likely than not that some portion or all of our deferred tax assets will not be realized as required by FAS 109.
and 2024.
22
23
The Company’s
14
Item 7A. | Quantitative and Qualitative Disclosures About Market Risk |
24
15
25
Item 8. | Financial Statements and Supplementary Data |
Page | ||||||||
27 | ||||||||
28 | ||||||||
29 | ||||||||
EX-24.1 | ||||||||
EX-31.1 | ||||||||
EX-31.2 | ||||||||
EX-32.1 |
26
16
27
REGISTERED PUBLIC ACCOUNTING FIRM
28
accounting principles.
![]() |
Sponsoring Organizations of the Treadway Commission and our report dated March 12, 2007 expressed an unqualified opinion thereon.
29
17
December 31, | ||||||||
2006 | 2005 | |||||||
(Dollars in thousands) | ||||||||
ASSETS | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 20,872 | $ | 17,868 | ||||
Accounts receivable, less allowances for doubtful accounts of $4,305 in 2006 and $5,120 in 2005 | 181,893 | 153,502 | ||||||
Inventories | 223,936 | 190,553 | ||||||
Deferred tax assets | 34,142 | 8,627 | ||||||
Other current assets | 29,715 | 27,753 | ||||||
Total Current Assets | 490,558 | 398,303 | ||||||
Property, Plant and Equipment: | ||||||||
Land and land improvements | 3,188 | 6,964 | ||||||
Buildings | 36,197 | 38,384 | ||||||
Machinery and equipment | 209,445 | 198,019 | ||||||
248,830 | 243,367 | |||||||
Less accumulated depreciation | 146,352 | 130,265 | ||||||
102,478 | 113,102 | |||||||
Other Assets: | ||||||||
Goodwill | 98,180 | 82,703 | ||||||
Net assets held for sale | 4,967 | -0- | ||||||
Other | 87,877 | 70,617 | ||||||
$ | 784,060 | $ | 664,725 | |||||
LIABILITIES AND SHAREHOLDER’S EQUITY | ||||||||
Current Liabilities | ||||||||
Trade accounts payable | $ | 132,859 | $ | 115,396 | ||||
Accrued expenses | 78,225 | 65,184 | ||||||
Current portion of long-term liabilities | 5,873 | 4,161 | ||||||
Total Current Liabilities | 216,957 | 184,741 | ||||||
Long-Term Liabilities, less current portion | ||||||||
8.375% senior subordinated notes due 2014 | 210,000 | 210,000 | ||||||
Revolving credit | 156,700 | 128,300 | ||||||
Other long-term debt | 4,790 | 6,705 | ||||||
Deferred tax liability | 32,089 | 3,176 | ||||||
Other postretirement benefits and other long-term liabilities | 24,434 | 26,174 | ||||||
428,013 | 374,355 | |||||||
Shareholder’s Equity | ||||||||
Common stock, par value $1 per share | -0- | -0- | ||||||
Additional paid-in capital | 64,844 | 64,844 | ||||||
Retained earnings | 68,422 | 42,887 | ||||||
Accumulated other comprehensive income (loss) | 5,824 | (2,102 | ) | |||||
139,090 | 105,629 | |||||||
$ | 784,060 | $ | 664,725 | |||||
30
18
Year Ended December 31 | ||||||||||||||
2003 | 2002 | 2001 | ||||||||||||
(Dollars in thousands) | ||||||||||||||
Net sales | $ | 624,295 | $ | 634,455 | $ | 636,417 | ||||||||
Cost of products sold | 527,586 | 546,857 | 552,293 | |||||||||||
Gross profit | 96,709 | 87,598 | 84,124 | |||||||||||
Selling, general and administrative expenses | 62,369 | 57,418 | 66,114 | |||||||||||
Amortization of goodwill | -0- | -0- | 3,733 | |||||||||||
Restructuring and impairment charges | 18,808 | 13,601 | 18,163 | |||||||||||
Operating income (loss) | 15,532 | 16,579 | (3,886 | ) | ||||||||||
Non-operating items, net | -0- | -0- | 1,850 | |||||||||||
Interest expense | 26,151 | 27,623 | 31,108 | |||||||||||
Loss before income taxes and cumulative effect of accounting change | (10,619 | ) | (11,044 | ) | (36,844 | ) | ||||||||
Income taxes (benefit) | 904 | 897 | (11,400 | ) | ||||||||||
Loss before cumulative effect of accounting change | (11,523 | ) | (11,941 | ) | (25,444 | ) | ||||||||
Cumulative effect of accounting change | -0- | (48,799 | ) | -0- | ||||||||||
Net loss | $ | (11,523 | ) | $ | (60,740 | ) | $ | (25,444 | ) | |||||
Year Ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(Dollars in thousands) | ||||||||||||
Net sales | $ | 1,056,246 | $ | 932,900 | $ | 808,718 | ||||||
Cost of products sold | 908,095 | 796,283 | 682,658 | |||||||||
Gross profit | 148,151 | 136,617 | 126,060 | |||||||||
Selling, general and administrative expenses | 88,940 | 81,368 | 76,714 | |||||||||
Restructuring and impairment charges (credits) | (809 | ) | 943 | -0- | ||||||||
Operating income | 60,020 | 54,306 | 49,346 | |||||||||
Interest expense | 31,267 | 27,056 | 31,413 | |||||||||
Income before income taxes | 28,753 | 27,250 | 17,933 | |||||||||
Income taxes (benefit) | 3,218 | (4,323 | ) | 3,400 | ||||||||
Net income | $ | 25,535 | $ | 31,573 | $ | 14,533 | ||||||
31
19
Accumulated | |||||||||||||||||||||
Additional | Other | ||||||||||||||||||||
Common | Paid-In | Retained | Comprehensive | ||||||||||||||||||
Stock | Capital | Earnings | Income (Loss) | Total | |||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||
Balance at January 1, 2001, as previously stated | $ | -0- | $ | 64,844 | $ | 91,747 | $ | (2,858 | ) | $ | 153,733 | ||||||||||
Adjustment for the cumulative effect on the prior years of applying retroactively the change in the method of accounting for inventories (see Note B) | 2,741 | 2,741 | |||||||||||||||||||
Balance January 1, 2001, as restated | -0- | 64,844 | 94,488 | (2,858 | ) | 156,474 | |||||||||||||||
Comprehensive (loss): | |||||||||||||||||||||
Net loss | (25,444 | ) | (25,444 | ) | |||||||||||||||||
Foreign currency translation adjustment | (1,394 | ) | (1,394 | ) | |||||||||||||||||
Comprehensive (loss) | (26,838 | ) | |||||||||||||||||||
Balance at December 31, 2001 | -0- | 64,844 | 69,044 | (4,252 | ) | 129,636 | |||||||||||||||
Comprehensive (loss): | |||||||||||||||||||||
Net loss | (60,740 | ) | (60,740 | ) | |||||||||||||||||
Foreign currency translation adjustment | 1,711 | 1,711 | |||||||||||||||||||
Minimum pension liability | (5,555 | ) | (5,555 | ) | |||||||||||||||||
Comprehensive (loss) | (64,584 | ) | |||||||||||||||||||
Balance at December 31, 2002 | $ | -0- | $ | 64,844 | $ | 8,304 | $ | (8,096 | ) | $ | 65,052 | ||||||||||
Comprehensive (loss): | |||||||||||||||||||||
Net Loss | (11,523 | ) | (11,523 | ) | |||||||||||||||||
Foreign currency translation adjustment | 3,632 | 3,632 | |||||||||||||||||||
Minimum pension liability | 1,200 | 1,200 | |||||||||||||||||||
Comprehensive (loss) | (6,691 | ) | |||||||||||||||||||
Balance at December 31, 2003 | $ | -0- | $ | 64,844 | $ | (3,219 | ) | $ | (3,264 | ) | $ | 58,361 | |||||||||
Accumulated | ||||||||||||||||||||
Additional | Other | |||||||||||||||||||
Common | Paid-In | Retained | Comprehensive | |||||||||||||||||
Stock | Capital | Earnings | Income (Loss) | Total | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Balance at January 1, 2004 | $ | -0- | $ | 64,844 | $ | (3,219 | ) | $ | (3,264 | ) | $ | 58,361 | ||||||||
Comprehensive income (loss): | ||||||||||||||||||||
Net income | 14,533 | 14,533 | ||||||||||||||||||
Foreign currency translation adjustment | 2,071 | 2,071 | ||||||||||||||||||
Minimum pension liability | (483 | ) | (483 | ) | ||||||||||||||||
Comprehensive income | 16,121 | |||||||||||||||||||
Balance at December 31, 2004 | -0- | 64,844 | 11,314 | (1,676 | ) | 74,482 | ||||||||||||||
Comprehensive income (loss): | ||||||||||||||||||||
Net income | 31,573 | 31,573 | ||||||||||||||||||
Foreign currency translation adjustment | 94 | 94 | ||||||||||||||||||
Minimum pension liability | (520 | ) | (520 | ) | ||||||||||||||||
Comprehensive income | 31,147 | |||||||||||||||||||
Balance at December 31, 2005 | -0- | 64,844 | 42,887 | (2,102 | ) | 105,629 | ||||||||||||||
Comprehensive income (loss): | ||||||||||||||||||||
Net income | 25,535 | 25,535 | ||||||||||||||||||
Foreign currency translation adjustment | 2,128 | 2,128 | ||||||||||||||||||
Minimum pension liability | 5,358 | 5,358 | ||||||||||||||||||
Comprehensive income | 33,021 | |||||||||||||||||||
Adjustment recognized upon adoption of SFAS No. 158 (net of income tax of $404) | 440 | 440 | ||||||||||||||||||
Balance at December 31, 2006 | $ | -0- | $ | 64,844 | $ | 68,422 | $ | 5,824 | $ | 139,090 | ||||||||||
32
20
Year Ended December 31 | |||||||||||||
2003 | 2002 | 2001 | |||||||||||
(Dollars in thousands) | |||||||||||||
OPERATING ACTIVITIES | |||||||||||||
Net income (loss) | $ | (11,523 | ) | $ | (60,740 | ) | $ | (25,444 | ) | ||||
Adjustments to reconcile net income (loss) to net cash provided by operations: | |||||||||||||
Cumulative effect of accounting change | -0- | 48,799 | -0- | ||||||||||
Depreciation and amortization | 15,479 | 16,265 | 19,911 | ||||||||||
Restructuring and impairment charges | 18,641 | 10,399 | 16,362 | ||||||||||
Deferred income taxes | -0- | 1,951 | (6,473 | ) | |||||||||
Changes in operating assets and liabilities excluding acquisitions of businesses: | |||||||||||||
Accounts receivable | 539 | 4,652 | 16,257 | ||||||||||
Inventories | 6,991 | 4,682 | 34,327 | ||||||||||
Accounts payable and accrued expenses | (12,160 | ) | 15,856 | (23,911 | ) | ||||||||
Other | (6,149 | ) | (12,770 | ) | (8,731 | ) | |||||||
Net Cash Provided by Operating Activities | 11,818 | 29,094 | 22,298 | ||||||||||
INVESTING ACTIVITIES | |||||||||||||
Purchases of property, plant and equipment, net | (10,869 | ) | (13,731 | ) | (13,923 | ) | |||||||
Costs of acquisitions, net of cash acquired | -0- | (5,748 | ) | -0- | |||||||||
Proceeds from the sale of business units | 7,340 | 2,486 | 6,051 | ||||||||||
Net Cash Used by Investing Activities | (3,529 | ) | (16,993 | ) | (7,872 | ) | |||||||
FINANCING ACTIVITIES | |||||||||||||
Proceeds from financing arrangements | 112,000 | 6,749 | 19,000 | ||||||||||
Payments on long-term debt | (126,898 | ) | (12,394 | ) | (33,634 | ) | |||||||
Net Cash Used by Financing Activities | (14,898 | ) | (5,645 | ) | (14,634 | ) | |||||||
Increase (Decrease) in Cash and Cash Equivalents | (6,609 | ) | 6,456 | (208 | ) | ||||||||
Cash and Cash Equivalents at Beginning of Year | 8,800 | 2,344 | 2,552 | ||||||||||
Cash and Cash Equivalents at End of Year | $ | 2,191 | $ | 8,800 | $ | 2,344 | |||||||
Taxes paid (refunded) | $ | (1,038 | ) | $ | (4,817 | ) | $ | (3,346 | ) | ||||
Interest paid | 25,213 | 25,880 | 28,554 |
Year Ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(Dollars in thousands) | ||||||||||||
OPERATING ACTIVITIES | ||||||||||||
Net income | $ | 25,535 | $ | 31,573 | $ | 14,533 | ||||||
Adjustments to reconcile net income to net cash provided by operations: | ||||||||||||
Depreciation and amortization | 20,037 | 17,261 | 15,385 | |||||||||
Restructuring and impairment charges (credits) | (9 | ) | 1,776 | -0- | ||||||||
Deferred income taxes | (4,631 | ) | (6,525 | ) | 1,074 | |||||||
Changes in operating assets and liabilities excluding acquisitions of businesses: | ||||||||||||
Accounts receivable | (16,219 | ) | 5,507 | (35,606 | ) | |||||||
Inventories | (28,443 | ) | (1,699 | ) | (26,541 | ) | ||||||
Accounts payable and accrued expenses | 16,760 | (934 | ) | 39,400 | ||||||||
Other | (8,269 | ) | (12,464 | ) | (7,331 | ) | ||||||
Net cash provided by operating activities | 4,761 | 34,495 | 914 | |||||||||
INVESTING ACTIVITIES | ||||||||||||
Purchases of property, plant and equipment, net | (19,256 | ) | (20,295 | ) | (9,963 | ) | ||||||
Business acquisitions, net of cash acquired | (23,271 | ) | (12,181 | ) | (9,997 | ) | ||||||
Proceeds from sale-leaseback transactions | 9,420 | -0- | -0- | |||||||||
Proceeds from the sale of assets held for sale | 3,200 | 1,100 | -0- | |||||||||
Net cash used by investing activities | (29,907 | ) | (31,376 | ) | (19,960 | ) | ||||||
FINANCING ACTIVITIES | ||||||||||||
Proceeds from bank arrangements, net | 28,150 | 8,342 | 18,013 | |||||||||
Payments on long-term debt | -0- | -0- | (199,930 | ) | ||||||||
Issuance of 8.375% senior subordinated notes, net of deferred financing costs | -0- | -0- | 205,179 | |||||||||
Net cash provided by financing activities | 28,150 | 8,342 | 23,262 | |||||||||
Increase in cash and cash equivalents | 3,004 | 11,461 | 4,216 | |||||||||
Cash and cash equivalents at beginning of year | 17,868 | 6,407 | 2,191 | |||||||||
Cash and cash equivalents at end of year | $ | 20,872 | $ | 17,868 | $ | 6,407 | ||||||
Income taxes paid | $ | 5,291 | $ | 881 | $ | 3,370 | ||||||
Interest paid | 28,997 | 24,173 | 28,891 |
33
21
The Company does not have off-balance sheet arrangements or financings with unconsolidated entities or other persons. In the ordinary course of business, the Company leases certain real properties as described in Note K. Transactions with related parties are in the ordinary course of business, are conducted on an arm’s-length basis, and are not material to the Company’s financial position, results of operations or cash flows.
December 31 | ||||||||
2003 | 2002 | |||||||
In-process and finished goods | $ | 121,154 | $ | 136,430 | ||||
Raw materials and supplies | 27,921 | 19,637 | ||||||
$ | 149,075 | $ | 156,067 | |||||
December 31, | ||||||||
2006 | 2005 | |||||||
Finished goods | $ | 143,071 | $ | 128,465 | ||||
Work in process | 42,405 | 32,547 | ||||||
Raw materials and supplies | 38,460 | 29,541 | ||||||
$ | 223,936 | $ | 190,553 | |||||
M.
their estimated useful lives.
34
22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued
rates. In determining these amounts, management determined the probability of realizing deferred tax assets, taking into consideration factors including historical operating results, expectations of future earnings, and taxable income and the extended period of time over which the postretirement benefits will be paid and accordingly records valuation allowances when necessary (See Note H).
if, based on the weight of available evidence it is more likely than not that some portion or all of our deferred tax assets will not be realized as required by SFAS No. 109 (“FAS 109”), “Accounting for Income Taxes.”
35
23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued
begun prior to 2003.January 1, 2006. The adoption of this statementSFAS No. 151 did not have a material effectimpact on the Company’s financial position or results of operation.
operations.
position or results of operations.
In April 2003, the FASB issued Statement of Financial Accounting Standards No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities (“FAS 149”). FAS 149 amends and clarifies the accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under FAS 133, “Accounting for Derivative Instruments and Hedging Activities.” FAS 149 is generally effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. The Company’s adoption of FAS 149 had no effect on its financial position, results of operations and cash flows.
In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (“FAS 150”). FAS 150 requires that certain financial instruments, which under previous guidance were accounted for as equity, must now be accounted for as liabilities. The financial instruments affected include mandatorily redeemable stock, certain financial instruments that require or may require the issuer to buy back some of its shares in exchange for cash or other assets and certain obligations that can be settled with shares of stock. FAS 15048 is effective for all financial instruments entered into or modified after May 31, 2003 and mustthe Company in 2007. FIN 48 requires the cumulative effect of applying the provisions to be appliedreported separately as an adjustment to the Company’s existing financial instruments effective July 1, 2003,opening balance of retained earnings in the beginningyear of adoption. We are currently evaluating the first fiscal period after June 15, 2003. The Company adopted FAS 150 on June 1, 2003. The adoptionimpact of this statement had no effect onInterpretation and do not believe at this time that its implementation will result in a significant impact to the Company’s financial position, resultsstatements.
In January 2004,2006, the FASB issued FASB Staff Position (“FSP”) 106-1,(FSP) AUG AIR-1, “Accounting and Disclosure Requirements Related tofor Planned Major Maintenance Activities,” (“FSP AUG AIR-1”). FSP AUG AIR-1 prohibits the Medicare Prescription Drug, Improvement and Modernization Actuse of 2003” (“the Act”). The FSP permits a sponsoraccrue-in-advance method of a postretirement health care plan that provides a prescription drug benefit to make a one-time election to defer accounting for the effects of the Act. Regardless of whether a sponsor elects that deferral, the FSP requires certain disclosures pending further consideration of the underlying accounting issues. The Company has elected to defer accountingplanned major maintenance activities in annual and interim financial reporting periods and is effective for the effectsCompany in 2007. The adoption of FSP AUG AIR-1 is not expected to have a material impact on the Company’s financial statements.
24
36
gains or losses, prior service costs or credits, and transition assets or obligations. See Note J for the impact of the adoption of SFAS No. 158 on the Company’s financial statements.
Effective June 30, 2003, the Company changed the method of accounting for the 15% of its inventories utilizing the LIFO method to the FIFO method. The Company believes that this change is preferable for the following reasons: 1) the change conforms all of its inventories to one method of determining cost, which is the FIFO method; 2) the costs of the Company’s inventories have remained fairly level during the past several years, which has substantially negated the benefits of the LIFO method (a better matching of current costs with current revenue in periods of rising costs); 3) the impact of utilizing the LIFO method has had an insignificant impact on the Company’s consolidated net income (loss) during the past several years; and 4) the FIFO method results in the valuation of inventories at current costs on the consolidated balance sheet, which provides a more meaningful presentation for investors and financial institutions.
As required under accounting principles generally accepted in the United States, the Company has restated the consolidated balance sheet as of December 31, 2002 to increase inventories by the recorded LIFO reserve ($4.4 million), increase deferred tax liabilities ($1.7 million), and increase shareholders’ equity ($2.7 million). Previously reported results of operations have not been restated because the impact of utilizing the LIFO method had an insignificant impact on the Company’s reported amounts for consolidated net income (loss).
NOTE C — Adoption of FAS 142, “Goodwill and Other Intangible Assets”
Effective January 1, 2002, the Company adopted FAS 142, “Goodwill and Other Intangible Assets.” Under this standard, goodwill is no longer amortized, but is subject to an impairment test at least annually. The Company has selected October 1 as its annual testing date. In the year of adoption, FAS 142 also requires the Company to perform a transitional test to determine whether goodwill was impaired as of the beginning of the year. Under FAS 142, the initial step in testing for goodwill impairment is to compare the fair value of each reporting unit to its book value. To the extent the fair value of any reporting unit is less than its book value, which would indicate that potential impairment of goodwill exists, a second test is required to determine the amount of impairment.
The Company, with assistance of an outside consultant, completed the transitional impairment review of goodwill using a discounted cash flow approach to determine the fair value of each reporting unit. Based upon the results of these calculations, the Company recorded a non-cash charge for goodwill impairment which aggregated $48,799. In accordance with the provisions of FAS 142, the charge has been accounted for as a cumulative effect of a change in accounting principle, effective January 1, 2002. The Company also completed the annual impairment tests as of October 1, 2003 and 2002, and has determined that no additional impairment of goodwill existed as of those dates.
25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued
The following table summarizes the transitional goodwill impairment charge by reporting segment as well as the carrying amount of goodwill for the years ended December 31, 2002 and December 31, 2003.
Impairment Charge | ||||||||||||
Reporting | recorded effective | Goodwill at | Goodwill at | |||||||||
Segment | January 1, 2002 | December 31, 2002 | December 31, 2003 | |||||||||
ILS | $ | 32,239 | $ | 64,949 | $ | 65,763 | ||||||
Aluminum Products | 9,700 | 16,515 | 16,515 | |||||||||
Manufactured Products | 6,860 | -0- | -0- | |||||||||
$ | 48,799 | $ | 81,464 | $ | 82,278 | |||||||
The increase in the goodwill in the ILS segment during 2003 results from foreign currency fluctuations.
In accordance with FAS 142, prior period amounts have not been restated. The following table summarizes the reported results for 2001, and the results that would have been reported had the non-amortization provisions of FAS 142 been in effect for that year.
December 31 | ||||
2001 | ||||
Reported net loss | $ | (25,444 | ) | |
Amortization of goodwill adjustment, net of tax | 3,315 | |||
Adjusted net loss | $ | (22,129 | ) | |
NOTE D — Acquisitions and Dispositions
During the first quarter of 2003, the Company completed the sale of substantially all of the assets of Green Bearing (“Green”) and St. Louis Screw and Bolt (“St. Louis Screw”) for cash of approximately $7,300. No gain or loss was recorded on the sale. Green and St. Louis Screw were non-core businesses in the ILS Segment and Manufactured Products Segment, respectively, and had been identified as businesses the Company was selling as part of its restructuring activities during 2002 and 2001.
On September 10, 2002, the Company acquired substantially all of the assets of Ajax Magnethermic Corporation (“Ajax”), a manufacturer of induction heating and melting equipment. The purchase price of approximately $5,500 and the results of operations of Ajax prior to its date of acquisition were not deemed significant as defined in Regulation S-X.
On April 26, 2002, the Company completed the sale of substantially all of the assets of Castle Rubber Company for cash of approximately $2,500. Castle Rubber, a non-core business in the Manufactured Products Segment, had been identified as a business the Company was discontinuing as part of its restructuring activities during 2001. No gain or loss was recorded on the sale.
On December 21, 2001, the Company completed the sale of substantially all of the assets of Cleveland City Forge for cash of approximately $6,100 and recorded a gain of approximately $100. Cleveland City Forge was a non-core business in the Manufactured Products Segment, producing clevises and turnbuckles for the construction industry.
26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued
NOTE E — Other Assets
Other assets consists of the following:
December 31 | |||||||||
2003 | 2002 | ||||||||
Pension assets | $ | 36,186 | $ | 32,816 | |||||
Idle assets | 6,516 | -0- | |||||||
Deferred financing costs | 5,774 | 4,636 | |||||||
Tooling | 4,222 | 4,213 | |||||||
Software development costs | 3,947 | 4,118 | |||||||
Other | 4,665 | 5,800 | |||||||
Totals | $ | 61,310 | $ | 51,583 | |||||
NOTE F — Accrued Expenses
Accrued expenses include the following:
December 31 | |||||||||
2003 | 2002 | ||||||||
Accrued salaries, wages and benefits | $ | 9,484 | $ | 10,583 | |||||
Advance billings | 8,496 | 6,594 | |||||||
Warranty and installation accruals | 6,762 | 8,990 | |||||||
Severance and exit costs | 2,535 | 4,045 | |||||||
Interest payable | 2,055 | 3,529 | |||||||
State and local taxes | 3,809 | 3,206 | |||||||
Sundry | 13,243 | 11,892 | |||||||
Totals | $ | 46,384 | $ | 48,839 | |||||
Substantially all advance billings and warranty and installation accruals relate to the Company’s capital equipment businesses.
The changes in the aggregate product warranty liability are as follows for the year ended December 31, 2003 and 2002:
December 31 | ||||||||
2003 | 2002 | |||||||
Balance at beginning of year | $ | 6,506 | $ | 997 | ||||
Claims paid during the year | (2,399 | ) | (1,430 | ) | ||||
Additional warranties issued during year | 1,139 | 1,858 | ||||||
Acquired warranty liabilities | -0- | 5,081 | ||||||
Other | 368 | -0- | ||||||
Balance at end of year | $ | 5,614 | $ | 6,506 | ||||
The acquired warranty liability during 2002 reflects the warranty liability of Ajax, which was acquired in September, 2002.
27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued
NOTE G — Financing Arrangements
Long-term debt consists of the following:
December 31 | |||||||||
2003 | 2002 | ||||||||
9.25% Senior Subordinated Notes due 2007. | $ | 199,930 | $ | 199,930 | |||||
Revolving credit maturing on June 30, 2004. | -0- | 114,000 | |||||||
Revolving credit maturing on July 30, 2007. | 101,000 | -0- | |||||||
Industrial Development Revenue Bonds maturing in 2012 at interest rates from 2.00% to 4.15% | 4,478 | 4,863 | |||||||
Other | 4,817 | 6,329 | |||||||
310,225 | 325,122 | ||||||||
Less current maturities | 1,061 | 1,306 | |||||||
Total | $ | 309,164 | $ | 323,816 | |||||
Maturities of long-term debt during each of the five years following December 31, 2003 are approximately $1,061 in 2004, $1,011 in 2005, $1,016 in 2006, $301,969 in 2007 and $804 in 2008.
The Company is a party to a credit and security agreement dated November 5, 2003, as amended (“Credit Agreement”), with a group of banks, under which it may borrow or issue standby letters of credit or commercial letters of credit up to $165,000. The Credit Agreement currently contains a detailed borrowing base formula which provides borrowing capacity to the Company based on negotiated percentages of eligible accounts receivable, inventory and fixed assets. At December 31, 2003, the Company had approximately $47,500 of unused borrowing capacity available under the Credit Agreement. Interest is payable quarterly at either the bank’s prime lending rate (4.00% at December 31, 2003) or, at Park-Ohio’s election, at LIBOR plus 1.75%-2.50%. The Company’s ability to elect LIBOR-based interest as well as the overall interest rate are dependent on the Company’s Debt Service Coverage Ratio, as defined in the Credit Agreement. Up to $20,000 in standby letters of credit and commercial letters of credit may be issued under the Credit Agreement. As of December 31, 2003, in addition to amounts borrowed under the Credit Agreement, there is $7,900 outstanding primarily for standby letters of credit. A fee of .25% is imposed by the bank on the unused portion of available borrowings. The Credit Agreement expires on July 30, 2007 and borrowings are secured by substantially all of the Company’s assets.
Provisions of the indenture governing the Senior Subordinated Notes and the revolving credit agreement contain restrictions on the Company’s ability to incur additional indebtedness, to create liens or other encumbrances, to make certain payments, investments, loans and guarantees and to sell or otherwise dispose of a substantial portion of assets or to merge or consolidate with an unaffiliated entity. At December 31, 2003, the Company was in compliance with all financial covenants of the Credit Agreement.
The weighted average interest rate on all debt was 7.26% at December 31, 2003.
The fair market value of the Senior Subordinated Notes based on published market prices was approximately $201,429 and $129,955 at December 31, 2003 and 2002, respectively. The carrying value of cash and cash equivalents, accounts receivable, accounts payable, and borrowings under the credit agreement approximate fair value at December 31, 2003 and 2002.
28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued
NOTE H — Income Taxes
Income taxes consisted of the following:
Year Ended December 31 | |||||||||||||
2003 | 2002 | 2001 | |||||||||||
Current (refundable): | |||||||||||||
Federal | $ | -0- | $ | (2,210 | ) | $ | (5,828 | ) | |||||
State | 16 | 387 | 369 | ||||||||||
Foreign | 888 | 769 | 532 | ||||||||||
904 | (1,054 | ) | (4,927 | ) | |||||||||
Deferred: | |||||||||||||
Federal | -0- | 1,951 | (6,135 | ) | |||||||||
State | -0- | -0- | (338 | ) | |||||||||
-0- | 1,951 | (6,473 | ) | ||||||||||
Income taxes | $ | 904 | $ | 897 | $ | (11,400 | ) | ||||||
The reasons for the difference between income tax expense and the amount computed by applying the statutory Federal income tax rate to income before income taxes are as follows:
Year Ended December 31 | ||||||||||||
2003 | 2002 | 2001 | ||||||||||
Computed statutory amount | $ | (3,712 | ) | $ | (3,895 | ) | $ | (12,700 | ) | |||
Effect of state income taxes | 11 | 411 | 20 | |||||||||
Goodwill | -0- | -0- | 668 | |||||||||
Foreign rate differences | 815 | 599 | 275 | |||||||||
Valuation allowance | 3,695 | 3,475 | -0- | |||||||||
Other, net | 95 | 307 | 337 | |||||||||
Income taxes (benefit) | $ | 904 | $ | 897 | $ | (11,400 | ) | |||||
29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued
Significant components of the Company’s net deferred tax assets and liabilities are as follows:
December 31 | ||||||||||
2003 | 2002 | |||||||||
Deferred tax assets: | ||||||||||
Postretirement benefit obligation | $ | 7,600 | $ | 8,100 | ||||||
Inventory | 8,400 | 7,200 | ||||||||
Net operating loss and tax credit carryforwards | 14,300 | 10,900 | ||||||||
Goodwill | 6,800 | 6,800 | ||||||||
Other—net | 8,400 | 2,600 | ||||||||
Total deferred tax assets | 45,500 | 35,600 | ||||||||
Deferred tax liabilities: | ||||||||||
Tax over book depreciation | 13,900 | 12,800 | ||||||||
Pension | 11,400 | 10,500 | ||||||||
Total deferred tax liabilities | 25,300 | 23,300 | ||||||||
20,200 | 12,300 | |||||||||
Valuation reserves | (20,200 | ) | (12,300 | ) | ||||||
Net deferred tax assets | $ | -0- | $ | -0- | ||||||
At December 31, 2003, the Company has net operating loss carryforwards for income tax purposes of approximately $35,700, which will expire between 2021 and 2023. In accordance with the provisions of FAS 109 “Accounting for Income Taxes”, the tax benefits related to these carryforwards have been fully reserved as of December 31, 2003 since the Company is in a three year cumulative loss position.
NOTE I — Legal Proceedings
The Company is subject to various pending and threatened lawsuits in which claims for monetary damages are asserted in the ordinary course of business. While any litigation involves an element of uncertainty, in the opinion of management, liabilities, if any, arising from currently pending or threatened litigation will not have a material adverse effect on the Company’s financial condition, liquidity and results of operations.
30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued
NOTE J — Pensions and Postretirement Benefits
The following tables set forth the change in benefit obligation, plan assets, funded status and amounts recognized in the consolidated balance sheet for the defined benefit pension and postretirement benefit plans as of December 31, 2003 and 2002:
Postretirement | ||||||||||||||||
Pension | Benefits | |||||||||||||||
2003 | 2002 | 2003 | 2002 | |||||||||||||
Change in benefit obligation | ||||||||||||||||
Benefit obligation at beginning of year | $ | 52,481 | $ | 50,564 | $ | 24,869 | $ | 23,403 | ||||||||
Service cost | 545 | 399 | 147 | 204 | ||||||||||||
Curtailment and settlement | (208 | ) | 2,053 | -0- | -0- | |||||||||||
Interest cost | 3,498 | 3,556 | 1,701 | 1,712 | ||||||||||||
Plan participants’ contributions | -0- | -0- | 247 | 135 | ||||||||||||
Actuarial losses (gains) | 1,800 | 1,132 | 3,758 | 1,570 | ||||||||||||
Benefits and expenses paid | (5,041 | ) | (5,223 | ) | (3,356 | ) | (2,155 | ) | ||||||||
Benefit obligation at end of year | $ | 53,075 | $ | 52,481 | $ | 27,366 | $ | 24,869 | ||||||||
Change in plan assets | ||||||||||||||||
Fair value of plan assets at beginning of year | $ | 85,401 | $ | 100,498 | $ | -0- | $ | -0- | ||||||||
Actual return on plan assets | 17,243 | (8,811 | ) | -0- | -0- | |||||||||||
Settlement accounting | -0- | (1,063 | ) | -0- | -0- | |||||||||||
Company contributions | -0- | -0- | 3,109 | 2,020 | ||||||||||||
Plan participants’ contributions | -0- | -0- | 247 | 135 | ||||||||||||
Benefits and expense paid | (5,041 | ) | (5,223 | ) | (3,356 | ) | (2,155 | ) | ||||||||
Fair value of plan assets at end of year | $ | 97,603 | $ | 85,401 | $ | -0- | $ | -0- | ||||||||
Funded (underfunded) status of the plan | $ | 44,528 | $ | 32,920 | $ | (27,366 | ) | $ | (24,869 | ) | ||||||
Unrecognized net transition obligation | (487 | ) | (536 | ) | -0- | -0- | ||||||||||
Unrecognized net actuarial (gain) loss | (7,235 | ) | 1,547 | 5,375 | (303 | ) | ||||||||||
Unrecognized prior service cost (benefit) | 773 | 1,198 | (327 | ) | (407 | ) | ||||||||||
Net amount recognized at year end | $ | 37,579 | $ | 35,129 | $ | (22,318 | ) | $ | (25,579 | ) | ||||||
Amounts recognized in the consolidated balance sheets consists of:
2003 | 2002 | ||||||||
Prepaid pension cost | $ | 36,186 | $ | 32,816 | |||||
Accrued pension cost | (2,962 | ) | (3,526 | ) | |||||
Intangible asset | -0- | 284 | |||||||
Accumulated other comprehensive loss | 4,355 | 5,555 | |||||||
Net amount recognized at the end of year | $ | 37,579 | $ | 35,129 | |||||
31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued
The pension plan weighted-average asset allocation at year ended 2003 and 2002 and target allocation for 2004 are as follows:
Plan Assets | ||||||||||||
Target 2004 | 2003 | 2002 | ||||||||||
Asset Category | ||||||||||||
Equity securities | 60-70 | % | 64.8 | % | 62.7 | % | ||||||
Debt securities | 25-30 | 26.0 | 28.7 | |||||||||
Other | 5-10 | 9.2 | 8.6 | |||||||||
100 | % | 100 | % | 100 | % | |||||||
The Company recorded a minimum pension liability of $4,355 at December 31, 2003 and $5,555 at December 31, 2002, as required by Financial Accounting Standards Board Statement No. 87. The adjustment is reflected in other comprehensive income and long-term liabilities. The adjustment relates to two of the Company’s defined benefit plans, for which the accumulated benefit obligations of $16,336 at December 31, 2003 ($15,573 at December 31, 2002), exceed the fair value of the underlying pension assets of $13,374 at December 31, 2003 ($12,047 at December 31, 2002). Amounts were as follows:
2003 | 2002 | |||||||
Projected benefit obligation | $ | 16,336 | $ | 15,573 | ||||
Accumulated benefit obligation | $ | 16,336 | $ | 15,573 | ||||
Fair value of plan assets | $ | 13,374 | $ | 12,047 | ||||
The following tables summarize the assumptions used by the consulting actuary and the related cost information.
Postretirement | ||||||||||||||||
Pension | Benefits | |||||||||||||||
2003 | 2002 | 2003 | 2002 | |||||||||||||
Weighted-Average assumptions as of December 31 | ||||||||||||||||
Discount rate | 6.50 | % | 7.00 | % | 6.50 | % | 7.00 | % | ||||||||
Expected return on plan assets | 8.75 | % | 8.75 | % | N/A | N/A | ||||||||||
Rate of compensation increase | 2.00 | % | 2.00 | % | N/A | N/A |
In determining its expected return on plan assets assumption for the year ended December 31, 2003, the Company considered historical experience, its asset allocation, expected future long-term rates of return for each major asset class, and an assumed long-term inflation rate. Based on these factors, the Company derived an expected return on plan assets for the year ended December 31, 2003 of 8.75%. This assumption was supported by the asset return generation model used by the Company’s independent actuaries, which projected future asset returns using simulation and asset class correlation.
The Company has elected to defer recognition of the potential effect of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 until authoritative guidance on the accounting for the federal subsidy is issued.
For measurement purposes, a 10% percent annual rate of increase in the per capita cost of covered health care benefits was assumed for 2003. The rate was assumed to decrease gradually to 5% for 2009 and remain at that level thereafter.
32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued
Pension Benefits | Other Benefits | |||||||||||||||||||||||
2003 | 2002 | 2001 | 2003 | 2002 | 2001 | |||||||||||||||||||
Components of net periodic benefit cost | ||||||||||||||||||||||||
Service costs | $ | 545 | $ | 399 | $ | 590 | $ | 147 | $ | 204 | $ | 179 | ||||||||||||
Interest costs | 3,498 | 3,556 | 3,506 | 1,701 | 1,712 | 1,663 | ||||||||||||||||||
Expected return on plan assets | (7,229 | ) | (8,394 | ) | (8,658 | ) | -0- | -0- | -0- | |||||||||||||||
Transition obligation | (49 | ) | (49 | ) | (56 | ) | -0- | -0- | -0- | |||||||||||||||
Amortization of prior service cost | 257 | 319 | 363 | (80 | ) | (79 | ) | (79 | ) | |||||||||||||||
Recognized net actuarial (gain) loss | 361 | (1,055 | ) | (1,720 | ) | 43 | 11 | (28 | ) | |||||||||||||||
Benefit (income) costs | $ | (2,617 | ) | $ | (5,224 | ) | $ | (5,975 | ) | $ | 1,811 | $ | 1,848 | $ | 1,735 | |||||||||
The Company recorded $167 of non-cash pension curtailment charges in 2003, $2,700 in 2002 and $200 in 2001 related to the disposal or closure of three manufacturing facilities. These were classified as restructuring charges in each year.
The Company has two postretirement benefit plans. Under both of these plans, health care benefits are provided on both a contributory and noncontributory basis. The assumed health care cost trend rate has a significant effect on the amounts reported. A one-percentage-point change in the assumed health care cost trend rate would have the following effects:
1-Percentage | 1-Percentage | |||||||
Point | Point | |||||||
Increase | Decrease | |||||||
Effect on total of service and interest cost components in 2003 | $ | 138 | $ | 104 | ||||
Effect on post retirement benefit obligation as of December 31, 2003 | $ | 1,767 | $ | 1,545 |
The total contribution charged to pension expense for the Company’s defined contribution plans was $1,331 in 2003, $1,273 in 2002 and $1,382 in 2001. The Company expects to have no contribution to its defined benefit plans in 2004.
NOTE K — Leases
Rental expense for 2003, 2002 and 2001 was $10,263, $10,749 and $12,638, respectively. Future minimum lease commitments during each of the five years following December 31, 2003 are as follows: $7,178 in 2004, $5,259 in 2005, $3,273 in 2006, $1,600 in 2007, $1,329 in 2008 and $1,856 thereafter.
NOTE L — Industry Segments
33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued
facturingmanufacturing businesses that design and manufacture a broad range of high quality products engineered for specific customer applications. The principal customers of Manufactured Products are original equipment manufacturers and end-usersend users in the steel, coatings, forging, foundry, heavy-duty truck, construction equipment, bottling, automotive, oil and gas, rail and locomotive manufacturing and aerospace automotive, railroad, truck and oildefense industries.
37
Year Ended December 31 | |||||||||||||
2003 | 2002 | 2001 | |||||||||||
Net sales: | |||||||||||||
ILS | $ | 377,645 | $ | 398,141 | $ | 416,962 | |||||||
Aluminum products | 90,080 | 106,148 | 84,846 | ||||||||||
Manufactured products | 156,570 | 130,166 | 134,609 | ||||||||||
$ | 624,295 | $ | 634,455 | $ | 636,417 | ||||||||
Income (loss) before income taxes and amortization of goodwill: | |||||||||||||
ILS | $ | 24,893 | $ | 17,467 | $ | 22,944 | |||||||
Aluminum products | 10,201 | 4,739 | (2,327 | ) | |||||||||
Manufactured products | (13,759 | ) | (1,342 | ) | (14,287 | ) | |||||||
$ | 21,335 | $ | 20,864 | $ | 6,330 | ||||||||
Amortization of goodwill: | |||||||||||||
ILS | $ | -0- | $ | -0- | $ | 2,702 | |||||||
Aluminum products | -0- | -0- | 745 | ||||||||||
Manufactured products | -0- | -0- | 286 | ||||||||||
$ | -0- | $ | -0- | $ | 3,733 | ||||||||
Income (loss) before income taxes and change in accounting principle: | |||||||||||||
ILS | $ | 24,893 | $ | 17,467 | $ | 20,242 | |||||||
Aluminum products | 10,201 | 4,739 | (3,072 | ) | |||||||||
Manufactured products | (13,759 | ) | (1,342 | ) | (14,573 | ) | |||||||
21,335 | 20,864 | 2,597 | |||||||||||
Corporate costs | (5,803 | ) | (4,285 | ) | (6,483 | ) | |||||||
Interest expense | (26,151 | ) | (27,623 | ) | (31,108 | ) | |||||||
Non-operating items, net | -0- | -0- | (1,850 | ) | |||||||||
$ | (10,619 | ) | $ | (11,044 | ) | $ | (36,844 | ) | |||||
Year Ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
Net sales: | ||||||||||||
ILS | $ | 598,228 | $ | 532,624 | $ | 453,223 | ||||||
Aluminum Products | 154,639 | 159,053 | 135,402 | |||||||||
Manufactured Products | 303,379 | 241,223 | 220,093 | |||||||||
$ | 1,056,246 | $ | 932,900 | $ | 808,718 | |||||||
Income before income taxes: | ||||||||||||
ILS | $ | 38,383 | $ | 34,814 | $ | 29,191 | ||||||
Aluminum Products | 3,921 | 9,103 | 9,021 | |||||||||
Manufactured Products | 28,991 | 20,630 | 18,890 | |||||||||
71,295 | 64,547 | 57,102 | ||||||||||
Corporate costs | (11,275 | ) | (10,241 | ) | (7,756 | ) | ||||||
Interest expense | (31,267 | ) | (27,056 | ) | (31,413 | ) | ||||||
$ | 28,753 | $ | 27,250 | $ | 17,933 | |||||||
Identifiable assets: | ||||||||||||
ILS | $ | 382,101 | $ | 323,176 | $ | 297,002 | ||||||
Aluminum Products | 98,041 | 101,489 | 105,535 | |||||||||
Manufactured Products | 206,089 | 169,004 | 163,230 | |||||||||
General corporate | 97,829 | 71,056 | 46,080 | |||||||||
$ | 784,060 | $ | 664,725 | $ | 611,847 | |||||||
Depreciation and amortization expense: | ||||||||||||
ILS | $ | 4,365 | $ | 4,575 | $ | 4,608 | ||||||
Aluminum Products | 7,892 | 7,484 | 5,858 | |||||||||
Manufactured Products | 6,960 | 4,986 | 4,728 | |||||||||
General corporate | 820 | 216 | 191 | |||||||||
$ | 20,037 | $ | 17,261 | $ | 15,385 | |||||||
Capital expenditures: | ||||||||||||
ILS | $ | 2,447 | $ | 2,070 | $ | 3,691 | ||||||
Aluminum Products | 5,528 | 10,473 | 5,497 | |||||||||
Manufactured Products | 12,548 | 7,266 | 720 | |||||||||
General corporate | (1,267 | ) | 486 | 55 | ||||||||
$ | 19,256 | $ | 20,295 | $ | 9,963 | |||||||
34
38
Year Ended December 31 | |||||||||||||
2003 | 2002 | 2001 | |||||||||||
Identifiable assets: | |||||||||||||
ILS | $ | 267,361 | $ | 273,442 | $ | 312,288 | |||||||
Aluminum products | 88,031 | 79,797 | 95,033 | ||||||||||
Manufactured products | 121,331 | 151,880 | 141,774 | ||||||||||
General corporate | 32,821 | 37,824 | 45,813 | ||||||||||
$ | 509,544 | $ | 542,943 | $ | 594,908 | ||||||||
Depreciation and amortization expense: | |||||||||||||
ILS | $ | 4,868 | $ | 5,206 | $ | 8,441 | |||||||
Aluminum products | 5,342 | 6,432 | 5,532 | ||||||||||
Manufactured products | 5,050 | 4,307 | 5,632 | ||||||||||
General corporate | 219 | 320 | 306 | ||||||||||
$ | 15,479 | $ | 16,265 | $ | 19,911 | ||||||||
Capital expenditures: | |||||||||||||
ILS | $ | 3,017 | $ | 1,603 | $ | 1,972 | |||||||
Aluminum products | 1,878 | 5,927 | 3,160 | ||||||||||
Manufactured products | 5,867 | 6,201 | 8,352 | ||||||||||
General corporate | 107 | -0- | 439 | ||||||||||
$ | 10,869 | $ | 13,731 | $ | 13,923 | ||||||||
The Company had sales of $68,238 in 2003 to Navistar which represented approximately 11% of consolidated net sales. For 2002 and 2001, sales to no single customer were greater than 10% of consolidated net sales.
Year Ended | ||||||||||||
December 31 | ||||||||||||
2003 | 2002 | 2001 | ||||||||||
United States | 83 | % | 80 | % | 88 | % | ||||||
Canada | 8 | % | 13 | % | 7 | % | ||||||
Other | 9 | % | 7 | % | 5 | % | ||||||
100 | % | 100 | % | 100 | % | |||||||
Year Ended | ||||||||||||
December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
United States | 76 | % | 79 | % | 74 | % | ||||||
Canada | 9 | % | 7 | % | 9 | % | ||||||
Other | 15 | % | 14 | % | 17 | % | ||||||
100 | % | 100 | % | 100 | % | |||||||
Cash acquisition price, less cash acquired | $ | 20,053 | ||
Assets | ||||
Accounts receivable | (11,460 | ) | ||
Inventories | (4,326 | ) | ||
Other current assets | (201 | ) | ||
Equipment | (365 | ) | ||
Intangible assets subject to amortization | (8,020 | ) | ||
Other assets | (724 | ) | ||
Liabilities | ||||
Accounts payable | 8,989 | |||
Accrued expenses and other current liabilities | 3,904 | |||
Deferred tax liability | 3,128 | |||
Goodwill | $ | 10,978 | ||
35
39
Severance and | Exit and | |||||||||||
Personnel | Relocation | Total | ||||||||||
Balance at October 18, 2006 | $ | -0- | $ | -0- | $ | -0- | ||||||
Add: Accruals | 650 | 250 | 900 | |||||||||
Less: Payments | (136 | ) | (46 | ) | (182 | ) | ||||||
Balance at December 31, 2006 | $ | 514 | $ | 204 | $ | 718 | ||||||
Cash acquisition price, less cash acquired | $ | 4,698 | ||
Assets | ||||
Accounts receivable | (2,465 | ) | ||
Inventories | -0- | |||
Prepaid expenses | (97 | ) | ||
Equipment | (1,636 | ) | ||
Liabilities | ||||
Accrued expenses | 846 | |||
Goodwill | $ | 1,346 | ||
40
Cash acquisition price | $ | 7,000 | ||
Assets | ||||
Accounts receivable | (10,835 | ) | ||
Inventories | (10,909 | ) | ||
Prepaid expenses | (1,201 | ) | ||
Equipment | (407 | ) | ||
Liabilities | ||||
Accounts payable | 12,783 | |||
Accrued expenses | 2,270 | |||
Note payable | 1,299 | |||
Goodwill | $ | -0- | ||
Severance | Exit and | |||||||||||
and Personnel | Relocation | Total | ||||||||||
Balance at June 30, 2005 | $ | -0- | $ | -0- | $ | -0- | ||||||
Add: Accruals | 250 | 1,750 | 2,000 | |||||||||
Less: Payments | (551 | ) | (594 | ) | (1,145 | ) | ||||||
Transfers | 400 | (400 | ) | -0- | ||||||||
Balance at December 31, 2005 | $ | 99 | $ | 756 | $ | 855 | ||||||
Less: Payments and adjustments | (43 | ) | (417 | ) | (460 | ) | ||||||
Transfers | (17 | ) | 17 | -0- | ||||||||
Balance at December 31, 2006 | $ | 39 | $ | 356 | $ | 395 | ||||||
41
Cash acquisition price | $ | 10,000 | ||
Assets | ||||
Accounts receivable | (8,948 | ) | ||
Inventories | (2,044 | ) | ||
Property and equipment | (15,499 | ) | ||
Other | (115 | ) | ||
Liabilities | ||||
Accounts payable | 4,041 | |||
Compensation accruals | 3,825 | |||
Other accruals | 8,740 | |||
Goodwill | $ | -0- | ||
Severance | Exit | Relocation | Total | |||||||||||||
Balance at June 30, 2004 | $ | -0- | $ | -0- | $ | -0- | $ | -0- | ||||||||
Add: Accruals | 1,916 | 100 | 265 | 2,281 | ||||||||||||
Less: Payments | 295 | -0- | 2 | 297 | ||||||||||||
Balance at December 31, 2004 | 1,621 | 100 | 263 | 1,984 | ||||||||||||
Transfer | 0 | 48 | (48 | ) | 0 | |||||||||||
Adjustments | (612 | ) | 0 | (113 | ) | (725 | ) | |||||||||
Less: Payments | 1,009 | 148 | 102 | 1,259 | ||||||||||||
Balance at December 31, 2005 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||
42
Goodwill at | Goodwill at | |||||||
Reporting Segment | December 31, 2006 | December 31, 2005 | ||||||
ILS | $ | 77,732 | $ | 66,188 | ||||
Aluminum Products | 16,515 | 16,515 | ||||||
Manufactured Products | 3,933 | -0- | ||||||
$ | 98,180 | $ | 82,703 | |||||
Acquisition | Accumulated | |||||||||||
Costs | Amortization | Net | ||||||||||
Non-contractual customer relationships | $ | 7,200 | $ | -0- | $ | 7,200 | ||||||
Other | 820 | -0- | 820 | |||||||||
$ | 8,020 | $ | -0- | $ | 8,020 | |||||||
December 31, | ||||||||
2006 | 2005 | |||||||
Pension assets | $ | 60,109 | $ | 47,561 | ||||
Idle assets | -0- | 5,161 | ||||||
Deferred financing costs | 5,618 | 7,048 | ||||||
Tooling | 1,501 | 3,327 | ||||||
Software development costs | 2,868 | 2,485 | ||||||
Deferred tax assets | 6,555 | -0- | ||||||
Intangible assets subject to amortization | 8,779 | -0- | ||||||
Other | 2,447 | 5,035 | ||||||
Totals | $ | 87,877 | $ | 70,617 | ||||
43
December 31, | ||||||||
2006 | 2005 | |||||||
Accrued salaries, wages and benefits | $ | 17,349 | $ | 16,435 | ||||
Advance billings | 26,729 | 21,969 | ||||||
Warranty, project and installation accruals | 4,820 | 4,391 | ||||||
Severance and exit costs | -0- | 1,451 | ||||||
Interest payable | 3,232 | 2,900 | ||||||
State and local taxes | 5,746 | 4,866 | ||||||
Sundry | 20,349 | 13,172 | ||||||
Totals | $ | 78,225 | $ | 65,184 | ||||
December 31, | ||||||||
2006 | 2005 | |||||||
Balance at beginning of year | $ | 3,566 | $ | 4,281 | ||||
Claims paid during the year | (2,984 | ) | (3,297 | ) | ||||
Additional warranties issued during year | 2,797 | 2,593 | ||||||
Acquired warranty liabilities | 178 | -0- | ||||||
Other | -0- | (11 | ) | |||||
Balance at end of year | $ | 3,557 | $ | 3,566 | ||||
December 31, | ||||||||
2006 | 2005 | |||||||
8.375% senior subordinated notes due 2014 | $ | 210,000 | $ | 210,000 | ||||
Revolving credit facility maturing on December 31, 2010 | 156,700 | 128,300 | ||||||
Industrial development revenue bonds maturing in 2012 at interest rates from 2.00% to 4.15% | 3,114 | 3,586 | ||||||
Other | 4,986 | 4,763 | ||||||
374,800 | 346,649 | |||||||
Less current maturities | 3,310 | 1,644 | ||||||
Total | $ | 371,490 | $ | 345,005 | ||||
44
45
Year Ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
Current payable (benefit): | ||||||||||||
Federal | $ | 2,355 | $ | 165 | $ | (426 | ) | |||||
State | 432 | 198 | 23 | |||||||||
Foreign | 4,792 | 2,260 | 3,245 | |||||||||
7,579 | 2,623 | 2,842 | ||||||||||
Deferred: | ||||||||||||
Federal | (1,093 | ) | (7,300 | ) | -0- | |||||||
State | (1,521 | ) | -0- | -0- | ||||||||
Foreign | (1,747 | ) | 354 | 558 | ||||||||
(4,361 | ) | (6,946 | ) | 558 | ||||||||
Income taxes (benefit) | $ | 3,218 | $ | (4,323 | ) | $ | 3,400 | |||||
Rate Reconciliation | 2006 | 2005 | 2004 | |||||||||
Tax at statutory rate | $ | 9,571 | $ | 9,189 | $ | 5,984 | ||||||
Effect of state income taxes, net | (1,240 | ) | 129 | 15 | ||||||||
Effect of foreign operations | (1,441 | ) | (151 | ) | 661 | |||||||
Medicare subsidy | (126 | ) | (795 | ) | -0- | |||||||
Valuation allowance | (4,806 | ) | (12,093 | ) | (3,042 | ) | ||||||
Contingencies | 889 | 50 | -0- | |||||||||
Research and development credit | (250 | ) | (237 | ) | -0- | |||||||
Nondeductible expenses | 417 | 53 | 207 | |||||||||
Other, net | 204 | (468 | ) | (425 | ) | |||||||
Total | $ | 3,218 | $ | (4,323 | ) | $ | 3,400 | |||||
46
December 31, | ||||||||
2006 | 2005 | |||||||
Deferred tax assets: | ||||||||
Postretirement benefit obligation | $ | 9,409 | $ | 7,542 | ||||
Inventory | 12,493 | 10,433 | ||||||
Net operating loss and credit carryforwards | 18,626 | 18,996 | ||||||
Other — net | 11,616 | 12,246 | ||||||
Total deferred tax assets | 52,144 | 49,217 | ||||||
Deferred tax liabilities: | ||||||||
Tax over book depreciation | 12,858 | 15,578 | ||||||
Pension | 22,693 | 18,926 | ||||||
Inventory | 889 | -0- | ||||||
Intangible assets | 3,127 | -0- | ||||||
Deductible goodwill | 3,452 | 2,251 | ||||||
Total deferred tax liabilities | 43,019 | 36,755 | ||||||
9,125 | 12,462 | |||||||
Valuation reserves | (316 | ) | (7,011 | ) | ||||
Net deferred tax asset | $ | 8,809 | $ | 5,451 | ||||
47
At December 31, 2006 | ||||||||||||
Prior to | Effect of | As Reported | ||||||||||
Adopting SFAS | �� | Adopting SFAS | at December 31, | |||||||||
No. 158 | No. 158 | 2006 | ||||||||||
Assets | ||||||||||||
Other non-current assets | $ | 79,993 | $ | 7,884 | $ | 87,877 | ||||||
Total assets | $ | 776,176 | $ | 7,884 | $ | 784,060 | ||||||
Liabilities and Shareholder’s Equity: | ||||||||||||
Pension and postretirement benefit liabilities | $ | 15,951 | $ | 7,040 | $ | 22,989 | ||||||
Deferred income taxes | 12,880 | 404 | 13,284 | |||||||||
Accumulated other comprehensive income | -0- | 440 | 440 | |||||||||
Total liabilities and shareholder’s equity | $ | 776,176 | $ | 7,884 | $ | 784,060 | ||||||
48
Postretirement | ||||||||||||||||
Pension | Benefits | |||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
Change in benefit obligation | ||||||||||||||||
Benefit obligation at beginning of year | $ | 54,734 | $ | 55,303 | $ | 22,843 | $ | 24,680 | ||||||||
Service cost | 426 | 364 | 199 | 145 | ||||||||||||
Curtailment and settlement | 12 | (1,023 | ) | (254 | ) | -0- | ||||||||||
Interest cost | 2,915 | 3,194 | 1,292 | 1,281 | ||||||||||||
Amendments | -0- | -0- | (1,106 | ) | -0- | |||||||||||
Actuarial losses (gains) | (580 | ) | 2,101 | 3,047 | 200 | |||||||||||
Benefits and expenses paid, net of contributions | (5,120 | ) | (5,205 | ) | (3,032 | ) | (3,463 | ) | ||||||||
Benefit obligation at end of year | $ | 52,387 | $ | 54,734 | $ | 22,989 | $ | 22,843 | ||||||||
Change in plan assets | ||||||||||||||||
Fair value of plan assets at beginning of year | $ | 101,639 | $ | 103,948 | $ | -0- | $ | -0- | ||||||||
Actual return on plan assets | 15,977 | 3,919 | -0- | -0- | ||||||||||||
Company contributions | -0- | -0- | 3,032 | 3,463 | ||||||||||||
Curtailments and settlement | -0- | (1,023 | ) | -0- | -0- | |||||||||||
Benefits and expenses paid, net of contributions | (5,120 | ) | (5,205 | ) | (3,032 | ) | (3,463 | ) | ||||||||
Fair value of plan assets at end of year | $ | 112,496 | $ | 101,639 | $ | -0- | $ | -0- | ||||||||
Funded (underfunded) status of the plan | $ | 60,109 | $ | 46,905 | $ | (22,989 | ) | $ | (22,843 | ) | ||||||
49
Pension | Postretirement Benefits | |||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
Noncurrent assets | $ | 60,109 | $ | 47,561 | $ | -0- | $ | -0- | ||||||||
Noncurrent liabilities | -0- | (5,491 | ) | 13,387 | 20,326 | |||||||||||
Current liabilities | -0- | -0- | 2,564 | 2,517 | ||||||||||||
Accumulated other comprehensive (income) loss | (8,144 | ) | 5,358 | 7,038 | -0- | |||||||||||
Net amount recognized at the end of the year | $ | 51,965 | $ | 47,428 | $ | 22,989 | $ | 22,843 | ||||||||
Amounts recognized in accumulated other comprehensive income | ||||||||||||||||
Net actuarial loss/(gain) | $ | (8,452 | ) | N/A | $ | 7,153 | N/A | |||||||||
Net prior service cost (credit) | 646 | N/A | (115 | ) | N/A | |||||||||||
Net transition obligation (asset) | (338 | ) | N/A | -0- | N/A | |||||||||||
Accumulated other comprehensive income | $ | (8,144 | ) | N/A | $ | 7,038 | N/A | |||||||||
Plan Assets | ||||||||||||
Target 2007 | 2006 | 2005 | ||||||||||
Asset Category | ||||||||||||
Equity securities | 60-70 | % | 65.1 | % | 71.1 | % | ||||||
Debt securities | 20-30 | 25.7 | 19.7 | |||||||||
Other | 7-15 | 9.2 | 9.2 | |||||||||
100 | % | 100 | % | 100 | % | |||||||
For the Year Ended | ||||||||
December 31, | ||||||||
2006 | 2005 | |||||||
Projected benefit obligation | N/A | $ | 17,476 | |||||
Accumulated benefit obligation | N/A | $ | 17,476 | |||||
Fair value of plan assets | N/A | $ | 11,985 | |||||
50
Weighted-Average assumptions as of December 31, | ||||||||||||||||||||||||
Postretirement | ||||||||||||||||||||||||
Pension | Benefits | |||||||||||||||||||||||
2006 | 2005 | 2004 | 2006 | 2005 | 2004 | |||||||||||||||||||
Discount rate | 5.75 | % | 5.50 | % | 6.00 | % | 5.75 | % | 5.50 | % | 6.00 | % | ||||||||||||
Expected return on plan assets | 8.50 | % | 8.75 | % | 8.75 | % | N/A | N/A | N/A | |||||||||||||||
Rate of compensation increase | N/A | N/A | N/A | N/A | N/A | N/A |
Pension Benefits | Other Benefits | |||||||||||||||||||||||
2006 | 2005 | 2004 | 2006 | 2005 | 2004 | |||||||||||||||||||
Components of net periodic benefit cost | ||||||||||||||||||||||||
Service costs | $ | 426 | $ | 364 | $ | 291 | $ | 199 | $ | 145 | $ | 136 | ||||||||||||
Interest costs | 2,915 | 3,194 | 3,320 | 1,292 | 1,281 | 1,532 | ||||||||||||||||||
Expected return on plan assets | (8,408 | ) | (8,804 | ) | (8,313 | ) | -0- | -0- | -0- | |||||||||||||||
Transition obligation | (48 | ) | (49 | ) | (49 | ) | -0- | -0- | -0- | |||||||||||||||
FAS 88 one-time charge | 297 | -0- | -0- | -0- | -0- | -0- | ||||||||||||||||||
Amortization of prior service cost | 182 | 163 | 129 | (63 | ) | (69 | ) | (80 | ) | |||||||||||||||
Recognized net actuarial (gain) loss | 99 | (224 | ) | (286 | ) | 374 | 106 | 99 | ||||||||||||||||
Benefit (income) costs | $ | (4,537 | ) | $ | (5,356 | ) | $ | (4,908 | ) | $ | 1,802 | $ | 1,463 | $ | 1,687 | |||||||||
Other changes in plan assets and benefit obligations recognized in other comprehensive income(a) | ||||||||||||||||||||||||
AOCI at December 31, 2005 | $ | 5,358 | N/A | N/A | $ | -0- | N/A | N/A | ||||||||||||||||
Net loss/(gain) | ||||||||||||||||||||||||
Recognition of prior service cost/(credit) | -0- | N/A | N/A | -0- | N/A | N/A | ||||||||||||||||||
Recognition of loss/(gain) | -0- | N/A | N/A | -0- | N/A | N/A | ||||||||||||||||||
Decrease prior to adoption of SFAS No. 158 | (5,358 | ) | N/A | N/A | -0- | N/A | N/A | |||||||||||||||||
Increase (decrease) due to adoption of SFAS No. 158 | (8,144 | ) | N/A | N/A | 7,038 | N/A | N/A | |||||||||||||||||
Total recognized in other comprehensive income at December 31, 2006 | $ | (8,144 | ) | N/A | N/A | $ | 7,038 | N/A | N/A | |||||||||||||||
(a) | These disclosures are not applicable to 2005 and 2004 defined benefit pension plans and postretirement plans due to SFAS No. 158 being effective for the year ended December 31, 2006. |
51
Postretirement Benefits | ||||||||||||||||
Pension | Expected | Net including | ||||||||||||||
Benefits | Gross | Medicare Subsidy | Medicare Subsidy | |||||||||||||
2007 | $ | 4,373 | $ | 2,801 | $ | 237 | $ | 2,564 | ||||||||
2008 | 4,293 | 2,739 | 240 | 2,499 | ||||||||||||
2009 | 4,260 | 2,660 | 242 | 2,418 | ||||||||||||
2010 | 4,192 | 2,566 | 241 | 2,325 | ||||||||||||
2011 | 4,106 | 2,419 | 234 | 2,185 | ||||||||||||
2012 to 2016 | 19,493 | 9,726 | 1,033 | 8,693 |
1-Percentage | 1-Percentage | |||||||
Point | Point | |||||||
Increase | Decrease | |||||||
Effect on total of service and interest cost components in 2006 | $ | 155 | $ | (127 | ) | |||
Effect on postretirement benefit obligation as of December 31, 2006 | $ | 2,001 | $ | (1,709 | ) |
December 31 | |||||||||
2003 | 2002 | ||||||||
Foreign currency translation adjustment | $ | (1,091 | ) | $ | 2,541 | ||||
Minimum pension liability | 4,355 | 5,555 | |||||||
Total | $ | 3,264 | $ | 8,096 | |||||
December 31, | ||||||||
2006 | 2005 | |||||||
Foreign currency translation adjustment | $ | 5,384 | $ | 3,256 | ||||
Pension and postretirement benefit adjustments, net of tax | 440 | (5,358 | ) | |||||
Total | $ | 5,824 | $ | (2,102 | ) | |||
52
Since 2001,
During 2001,2005, the Company recorded restructuring and asset impairment charges aggregating $28,462, primarily related to management’s decision to exit certain under-performing product lines and to close or consolidate certain operating facilitiesassociated with executing restructuring actions in 2002. The Company’s actions included 1) selling or discontinuing the businesses of Castle Rubber and Ajax Manufacturing, 2) closing the Cicero Flexible Products’ manufacturing facility and discontinue certain product lines, 3) inventory write-downs and other restructuring activities at St. Louis Screw and Bolt and Tocco, 4) closing twenty ILS supply chain logistics facilities and two ILS manufacturing plants, 5) closing an Aluminum Products machining facility, and 6) write-down of certain Corporate assets to current value.Manufactured Products segments initiated in prior years. The charges were composed of $11,280 for$833 of inventory impairment included in Cost of Products Sold, $391 of asset impairment, $152 of multi-employer pension plan withdrawal costs and $400 of restructuring charges related to the impairmentclosure of property and equipment and other long-term assets; $10,299 million of cost of goods sold, primarily to write down inventory of discontinued businesses and product lines to current market value; and $6,883 for severance (525 employees) and exit costs.two Manufactured Products manufacturing facilities. Below is a summary of these charges by segment.
Cost of | ||||||||||||||||
Products | Asset | Restructuring | ||||||||||||||
Sold | Impairment | & Severance | Total | |||||||||||||
Manufactured Products | $ | 8,599 | $ | 10,080 | $ | 2,030 | $ | 20,709 | ||||||||
ILS | 1,700 | 600 | 4,070 | 6,370 | ||||||||||||
Aluminum Products | -0- | -0- | 783 | 783 | ||||||||||||
Corporate | -0- | 600 | -0- | 600 | ||||||||||||
$ | 10,299 | $ | 11,280 | $ | 6,883 | $ | 28,462 | |||||||||
During 2002,
Cost of | ||||||||||||||||||||
Products | Asset | Restructuring | Pension | |||||||||||||||||
Sold | Impairment | & Severance | Curtailment | Total | ||||||||||||||||
Manufactured Products | $ | 833 | $ | -0- | $ | 400 | $ | 152 | $ | 1,385 | ||||||||||
Aluminum Products | -0- | 391 | -0- | -0- | 391 | |||||||||||||||
$ | 833 | $ | 391 | $ | 400 | $ | 152 | $ | 1,776 | |||||||||||
36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued
Cost of | ||||||||||||||||||||
Products | Asset | Restructuring | Pension | |||||||||||||||||
Sold | Impairment | & Severance | Curtailment | Total | ||||||||||||||||
ILS | $ | 4,500 | $ | -0- | $ | 2,534 | $ | 2,000 | $ | 9,034 | ||||||||||
Manufactured Products | 1,128 | 2,103 | 2,628 | 700 | 6,559 | |||||||||||||||
Aluminum Products | -0- | 3,160 | 437 | -0- | 3,597 | |||||||||||||||
$ | 5,628 | $ | 5,263 | $ | 5,599 | $ | 2,700 | $ | 19,190 | |||||||||||
During the fourth quarter of 2003, the Company continued its multi-year efforts to position the Company for renewed, more profitable growth and recorded restructuring and asset impairment charges aggregating $19,446.associated with its planned closure of a manufacturing facility in the ILS segment. The action primarily related to restructuring at the Company’s Forge Group resulting from a decision to shut down its locomotive crankshaft forging plant after entering into a long-term supply contract to purchase these forgings from a third party. The charges (credits) were composed of $990 for exit costs; $638$800 of costinventory and tooling included in Cost of goods sold primarily to write down inventoryProducts Sold, $297 of discontinued product lines to current market value; $1,767 for pension curtailment and multi-employer pension plan withdrawal costs resulting primarily from the termination$(1,106) of union representation at the locomotive crankshaft forging plant and another Manufactured Products manufacturing facility and the closure of an Aluminum Products manufacturing plant; and $16,051 for impairment of property and equipment and other long-term assets. Below is a summary of these charges by segment.
Cost of | ||||||||||||||||||||
Products | Asset | Restructuring | Pension | |||||||||||||||||
Sold | Impairment | & Severance | Curtailment | Total | ||||||||||||||||
Manufactured Products | $ | 638 | $ | 16,051 | $ | 990 | $ | 1,600 | $ | 19,279 | ||||||||||
Aluminum Products | -0- | -0- | -0- | 167 | 167 | |||||||||||||||
$ | 638 | $ | 16,051 | $ | 990 | $ | 1,767 | $ | 19,446 | |||||||||||
postretirement benefit curtailment.
Severance and exit charges recorded in 2001 | $ | 6,883 | ||
Cash payments made in 2001 | (2,731 | ) | ||
Balance at December 31, 2001 | 4,152 | |||
Severance and exit charges recorded in 2002 | 5,599 | |||
Cash payments made in 2002 | (5,706 | ) | ||
Balance at December 31, 2002 | 4,045 | |||
Severance and exit charges recorded in 2003 | 990 | |||
Cash payments made in 2003 | (2,500 | ) | ||
Balance at December 31, 2003 | $ | 2,535 | ||
Balance at January 1, 2004 | 2,535 | |||
Severance and exit charges recorded in 2004 | -0- | |||
Cash payments made in 2004 | (2,073 | ) | ||
Balance at December 31, 2004 | 462 | |||
Exit charges recorded in 2005 | 400 | |||
Cash payments made in 2005 | (266 | ) | ||
Balance at December 31, 2005 | 596 | |||
Cash payments made in 2006 | (312 | ) | ||
Balance at December 31, 2006 | $ | 284 | ||
Idle fixed assets of $6,516 were included in other assets as of December 31, 2003. These consisted primarily of property, plant and equipment of two idled aluminum casting plants, for which the Com-
37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued
pany is evaluating new products and technologies. These assets may either be reclassified to property, plant and equipment if placed in service, or sold. They are currently carried at estimated fair value.
38
53
54
55
Combined | Combined | |||||||||||||||||||
Guarantor | Non-Guarantor | Reclassifications/ | ||||||||||||||||||
Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
ASSETS | ||||||||||||||||||||
Current assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | (15,770 | ) | $ | 570 | $ | 12,382 | $ | 23,690 | $ | 20,872 | |||||||||
Accounts receivable, net | (1,043 | ) | 147,834 | 35,102 | -0- | 181,893 | ||||||||||||||
Inventories | -0- | 187,649 | 36,287 | -0- | 223,936 | |||||||||||||||
Other current assets | 3,362 | 12,278 | 8,575 | 9,927 | 34,142 | |||||||||||||||
Deferred tax assets | -0- | -0- | -0- | 29,715 | 29,715 | |||||||||||||||
Total Current Assets | (13,451 | ) | 348,331 | 92,346 | 63,332 | 490,558 | ||||||||||||||
Investment in subsidiaries | 388,117 | 17,169 | (17,169 | ) | (388,117 | ) | -0- | |||||||||||||
Inter-company advances | 338,471 | 531,453 | 4,427 | (874,351 | ) | -0- | ||||||||||||||
Property, Plant and Equipment, net | 448 | 86,978 | 15,052 | -0- | 102,478 | |||||||||||||||
Other Assets: | ||||||||||||||||||||
Goodwill | (5,514 | ) | 96,830 | 6,864 | -0- | 98,180 | ||||||||||||||
Other | 52,312 | 37,099 | 719 | 2,714 | 92,844 | |||||||||||||||
Total Other Assets | 46,798 | 133,929 | 7,583 | 2,714 | 191,024 | |||||||||||||||
Total Assets | $ | 760,383 | $ | 1,117,860 | $ | 102,239 | $ | (1,196,422 | ) | $ | 784,060 | |||||||||
LIABILITIES AND SHAREHOLDER’S EQUITY | ||||||||||||||||||||
Current Liabilities: | ||||||||||||||||||||
Trade accounts payable | $ | 3,759 | $ | 84,003 | $ | 21,610 | $ | 23,487 | $ | 132,859 | ||||||||||
Accrued expenses | 1,579 | 51,638 | 12,138 | 12,870 | 78,225 | |||||||||||||||
Current portion of long-term liabilities | -0- | 552 | 2,758 | 2,563 | 5,873 | |||||||||||||||
Total Current Liabilities | 5,338 | 136,193 | 36,506 | 38,920 | 216,957 | |||||||||||||||
Long-Term Liabilities, less current portion | ||||||||||||||||||||
8.375% Senior Subordinated Notes due 2014 | 210,000 | -0- | -0- | -0- | 210,000 | |||||||||||||||
Revolving credit maturing on December 31, 2010 | 156,700 | -0- | -0- | -0- | 156,700 | |||||||||||||||
Other long-term debt | -0- | 3,027 | 1,763 | -0- | 4,790 | |||||||||||||||
Deferred tax liability | -0- | -0- | 42 | 32,047 | 32,089 | |||||||||||||||
Other postretirement benefits and other long-term liabilities | 9,199 | 54,136 | 2,692 | (41,593 | ) | 24,434 | ||||||||||||||
Total Long-Term Liabilities | 375,899 | 57,163 | 4,497 | (9,546 | ) | 428,013 | ||||||||||||||
Inter-company advances | 242,672 | 594,730 | 17,423 | (854,825 | ) | -0- | ||||||||||||||
Shareholder’s Equity | 136,474 | 329,774 | 43,813 | (370,971 | ) | 139,090 | ||||||||||||||
Total Liabilities and Shareholder’s Equity | $ | 760,383 | $ | 1,117,860 | $ | 102,239 | $ | (1,196,422 | ) | $ | 784,060 | |||||||||
56
Combined | Combined | |||||||||||||||||||
Guarantor | Non-Guarantor | Reclassifications/ | ||||||||||||||||||
Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
ASSETS | ||||||||||||||||||||
Current assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | (11,036 | ) | $ | 626 | $ | 11,899 | $ | 16,379 | $ | 17,868 | |||||||||
Accounts receivable, net | -0- | 129,302 | 24,200 | -0- | 153,502 | |||||||||||||||
Inventories | -0- | 160,775 | 29,778 | -0- | 190,553 | |||||||||||||||
Other current assets | 464 | 20,029 | 1,147 | 6,113 | 27,753 | |||||||||||||||
Deferred tax assets | -0- | -0- | -0- | 8,627 | 8,627 | |||||||||||||||
Total Current Assets | (10,572 | ) | 310,732 | 67,024 | 31,119 | 398,303 | ||||||||||||||
Investment in subsidiaries | 290,802 | -0- | -0- | (290,802 | ) | -0- | ||||||||||||||
Inter-company advances | 359,963 | 372,156 | 8,208 | (740,327 | ) | -0- | ||||||||||||||
Property, Plant and Equipment, net | 2,536 | 98,046 | 12,520 | -0- | 113,102 | |||||||||||||||
Other Assets: | ||||||||||||||||||||
Goodwill | -0- | 78,424 | 4,279 | -0- | 82,703 | |||||||||||||||
Other | 34,724 | 37,530 | 686 | (2,323 | ) | 70,617 | ||||||||||||||
Total Other Assets | 34,724 | 115,954 | 4,965 | (2,323 | ) | 153,320 | ||||||||||||||
Total Assets | $ | 677,453 | $ | 896,888 | $ | 92,717 | $ | (1,002,333 | ) | $ | 664,725 | |||||||||
LIABILITIES AND SHAREHOLDER’S EQUITY | ||||||||||||||||||||
Current Liabilities: | ||||||||||||||||||||
Trade accounts payable | $ | 3,348 | $ | 87,666 | $ | 9,778 | $ | 14,604 | $ | 115,396 | ||||||||||
Accrued expenses | 1,643 | 43,718 | 14,763 | 5,060 | 65,184 | |||||||||||||||
Current portion of long-term liabilities | -0- | 11,054 | 590 | (7,483 | ) | 4,161 | ||||||||||||||
Total Current Liabilities | 4,991 | 142,438 | 25,131 | 12,181 | 184,741 | |||||||||||||||
Long-Term Liabilities, less current portion | ||||||||||||||||||||
8.375% Senior Subordinated Notes due 2014 | 210,000 | -0- | -0- | -0- | 210,000 | |||||||||||||||
Revolving credit maturing on December 31, 2010 | 128,300 | -0- | -0- | -0- | 128,300 | |||||||||||||||
Other long-term debt | -0- | 34,533 | 3,140 | (30,968 | ) | 6,705 | ||||||||||||||
Deferred tax liability | -0- | -0- | -0- | 3,176 | 3,176 | |||||||||||||||
Other postretirement benefits and other long-term liabilities | 4,115 | 21,501 | 3,076 | (2,518 | ) | 26,174 | ||||||||||||||
Total Long-Term Liabilities | 342,415 | 56,034 | 6,216 | (30,310 | ) | 374,355 | ||||||||||||||
Inter-company advances | 227,614 | 415,558 | 17,674 | (660,846 | ) | -0- | ||||||||||||||
Shareholder’s Equity | 102,433 | 282,858 | 43,696 | (323,358 | ) | 105,629 | ||||||||||||||
Total Liabilities and Shareholder’s Equity | $ | 677,453 | $ | 896,888 | $ | 92,717 | $ | (1,002,333 | ) | $ | 664,725 | |||||||||
57
Combined | Combined | |||||||||||||||||||
Guarantor | Non-Guarantor | |||||||||||||||||||
Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Net sales | $ | -0- | $ | 912,060 | $ | 144,186 | $ | -0- | $ | 1,056,246 | ||||||||||
Cost of sales | 800 | 795,936 | 111,359 | -0- | 908,095 | |||||||||||||||
Gross profit | (800 | ) | 116,124 | 32,827 | -0- | 148,151 | ||||||||||||||
Operating Expenses: | ||||||||||||||||||||
Selling, general and administrative expenses | (55,175 | ) | 100,320 | 20,769 | 23,026 | 88,940 | ||||||||||||||
Restructuring and impairment charges | -0- | (809 | ) | -0- | -0- | (809 | ) | |||||||||||||
Operating Income | 54,375 | 16,613 | 12,058 | (23,026 | ) | 60,020 | ||||||||||||||
Interest expense | 30,496 | 1,067 | 304 | (600 | ) | 31,267 | ||||||||||||||
Income before income taxes | 23,879 | 15,546 | 11,754 | (22,426 | ) | 28,753 | ||||||||||||||
Income taxes | (2,419 | ) | 57 | 5,580 | -0- | 3,218 | ||||||||||||||
Net income | $ | 26,298 | $ | 15,489 | $ | 6,174 | $ | (22,426 | ) | $ | 25,535 | |||||||||
58
Combined | Combined | |||||||||||||||||||
Guarantor | Non-Guarantor | |||||||||||||||||||
Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Net sales | $ | -0- | $ | 827,815 | $ | 114,179 | $ | (9,094 | ) | $ | 932,900 | |||||||||
Cost of sales | -0- | 715,057 | 90,320 | (9,094 | ) | 796,283 | ||||||||||||||
Gross profit | -0- | 112,758 | 23,859 | -0- | 136,617 | |||||||||||||||
Operating Expenses: | ||||||||||||||||||||
Selling, general and administrative expenses | 3,349 | 62,394 | 15,025 | 600 | 81,368 | |||||||||||||||
Restructuring and impairment charges | -0- | 943 | -0- | -0- | 943 | |||||||||||||||
Operating Income | (3,349 | ) | 49,421 | 8,834 | (600 | ) | 54,306 | |||||||||||||
Interest expense | (5,346 | ) | 31,442 | 1,560 | (600 | ) | 27,056 | |||||||||||||
Income before income taxes | 1,997 | 17,979 | 7,274 | -0- | 27,250 | |||||||||||||||
Income taxes | (7,439 | ) | 59 | 3,057 | -0- | (4,323 | ) | |||||||||||||
Net income | $ | 9,436 | $ | 17,920 | $ | 4,217 | $ | -0- | $ | 31,573 | ||||||||||
Combined | Combined | |||||||||||||||||||
Guarantor | Non-Guarantor | |||||||||||||||||||
Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Net sales | $ | -0- | $ | 697,888 | $ | 123,827 | $ | (12,997 | ) | $ | 808,718 | |||||||||
Cost of sales | -0- | 599,379 | 96,276 | (12,997 | ) | 682,658 | ||||||||||||||
Gross profit | -0- | 98,509 | 27,551 | -0- | 126,060 | |||||||||||||||
Operating Expenses: | ||||||||||||||||||||
Selling, general and administrative expenses | (22,748 | ) | 82,657 | 16,605 | 200 | 76,714 | ||||||||||||||
Operating Income | 22,748 | 15,852 | 10,946 | (200 | ) | 49,346 | ||||||||||||||
Interest expense | 30,954 | 439 | 220 | (200 | ) | 31,413 | ||||||||||||||
Income before income taxes | (8,206 | ) | 15,413 | 10,726 | -0- | 17,933 | ||||||||||||||
Income taxes | 318 | -0- | 3,082 | -0- | 3,400 | |||||||||||||||
Net income | $ | (8,524 | ) | $ | 15,413 | $ | 7,644 | $ | -0- | $ | 14,533 | |||||||||
59
Combined | Combined | |||||||||||||||||||
Guarantor | Non-Guarantor | |||||||||||||||||||
Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Net cash provided (used) by operations | $ | (27,090 | ) | $ | 27,983 | $ | 3,868 | $ | -0- | $ | 4,761 | |||||||||
Cash flows from investing activities: | ||||||||||||||||||||
Purchases of property, plant and equipment, net | 1,267 | (16,347 | ) | (4,176 | ) | -0- | (19,256 | ) | ||||||||||||
Acquisitions, net of cash acquired | -0- | (23,271 | ) | -0- | -0- | (23,271 | ) | |||||||||||||
Proceeds from sale of assets held for sale | -0- | 3,200 | -0- | -0- | 3,200 | |||||||||||||||
Proceeds from sale-leaseback transaction | -0- | 9,420 | -0- | -0- | 9,420 | |||||||||||||||
Net cash provided (used) in investing activities | 1,267 | (26,998 | ) | (4,176 | ) | -0- | (29,907 | ) | ||||||||||||
Cash flows from financing activities: | ||||||||||||||||||||
Proceeds from bank arrangements | 28,400 | -0- | 791 | -0- | 29,191 | |||||||||||||||
Principal payments on long-term debt | -0- | (1,041 | ) | -0- | -0- | (1,041 | ) | |||||||||||||
Net cash provided (used) by financing activities | 28,400 | (1,041 | ) | 791 | -0- | 28,150 | ||||||||||||||
Increase (decrease) in cash and cash equivalents | 2,577 | (56 | ) | 483 | -0- | 3,004 | ||||||||||||||
Cash and cash equivalents at beginning of year | 5,343 | 626 | 11,899 | -0- | 17,868 | |||||||||||||||
Cash and cash equivalents at end of year | $ | 7,920 | $ | 570 | $ | 12,382 | $ | -0- | $ | 20,872 | ||||||||||
60
Combined | Combined | |||||||||||||||||||
Guarantor | Non-Guarantor | |||||||||||||||||||
Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Net cash provided (used) by operations | $ | (1,228 | ) | $ | 29,314 | $ | 6,409 | $ | -0- | $ | 34,495 | |||||||||
Cash flows from investing activities: | ||||||||||||||||||||
Purchases of property, plant and equipment, net | (486 | ) | (17,769 | ) | (2,040 | ) | -0- | (20,295 | ) | |||||||||||
Acquisitions, net of cash acquired | -0- | (12,181 | ) | -0- | -0- | (12,181 | ) | |||||||||||||
Proceeds from sale of assets held for sale | -0- | 1,100 | -0- | -0- | 1,100 | |||||||||||||||
Net cash provided (used) in investing activities | (486 | ) | (28,850 | ) | (2,040 | ) | -0- | (31,376 | ) | |||||||||||
Cash flows from financing activities: | ||||||||||||||||||||
Proceeds from bank arrangements, net | 7,700 | (37 | ) | 679 | -0- | 8,342 | ||||||||||||||
Net cash provided (used) by financing activities | 7,700 | (37 | ) | 679 | -0- | 8,342 | ||||||||||||||
Increase (decrease) in cash and cash equivalents | 5,986 | 427 | 5,048 | -0- | 11,461 | |||||||||||||||
Cash and cash equivalents at beginning of year | (643 | ) | 199 | 6,851 | -0- | 6,407 | ||||||||||||||
Cash and cash equivalents at end of year | $ | 5,343 | $ | 626 | $ | 11,899 | $ | -0- | $ | 17,868 | ||||||||||
61
Combined | Combined | |||||||||||||||||||
Guarantor | Non-Guarantor | |||||||||||||||||||
Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Net cash provided (used) by operations | $ | (24,045 | ) | $ | 18,123 | $ | 6,836 | $ | -0- | $ | 914 | |||||||||
Cash flows from investing activities: | ||||||||||||||||||||
Purchases of property, plant and equipment, net | (55 | ) | (8,979 | ) | (929 | ) | -0- | (9,963 | ) | |||||||||||
Acquisitions, net of cash acquired | -0- | (9,997 | ) | -0- | -0- | (9,997 | ) | |||||||||||||
Proceeds from sale of assets held for sale | -0- | -0- | -0- | -0- | -0- | |||||||||||||||
Net cash provided (used) in investing activities | (55 | ) | (18,976 | ) | (929 | ) | -0- | (19,960 | ) | |||||||||||
Cash flows from financing activities: | ||||||||||||||||||||
Proceeds from 8.375% Senior Subordinated Notes | 205,179 | -0- | -0- | -0- | 205,179 | |||||||||||||||
Payment on 9.25% Senior Subordinated Notes | (199,930 | ) | -0- | -0- | -0- | (199,930 | ) | |||||||||||||
Principal payments on revolving credit and long-term debt, net | 19,600 | 171 | (1,758 | ) | -0- | 18,013 | ||||||||||||||
Net cash provided (used) by financing activities | 24,849 | 171 | (1,758 | ) | -0- | 23,262 | ||||||||||||||
Increase (decrease) in cash and cash equivalents | 749 | (682 | ) | 4,149 | -0- | 4,216 | ||||||||||||||
Cash and cash equivalents at beginning of year | (1,392 | ) | 881 | 2,702 | -0- | 2,191 | ||||||||||||||
Cash and cash equivalents at end of year | $ | (643 | ) | $ | 199 | $ | 6,851 | $ | -0- | $ | 6,407 | |||||||||
62
Item 9. | Changes in and Disagreements |
Item 9A. | Controls and Procedures |
Item 9B. | Other Information |
63
Item 10. | Directors, |
Item 11. | Executive Compensation |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
Item 13. | Certain Relationships and Related Transactions, and Director Independence |
Item 14. | Principal Accountant Fees and Services |
2003 | 2002 | |||||||
Audit fees | $ | 401,000 | $ | 427,000 | ||||
Tax fees | 67,250 | 71,000 | ||||||
Audit-related fees | 215,500 | 204,000 |
2005:
2006 | 2005 | |||||||
Audit fees | $ | 1,084,000 | $ | 1,075,000 | ||||
Audit-related fees | 83,000 | 60,000 | ||||||
Tax fees | 112,000 | 179,000 |
64
39
Item 15. | Exhibits and Financial Statement Schedules |
Page | |||||
Management’s Annual Report on Internal Control Over Financial Reporting | 27 | ||||
Report of | |||||
Report of Independent Registered Public Accounting Firm | 29 | ||||
Consolidated Balance Sheets — December 31, 2006 and 2005 | 30 | ||||
Consolidated Statements of Income — Years Ended December 31, 2006, 2005 and 2004 | 31 | ||||
Consolidated Statements of Shareholder’s Equity — Years Ended December 31, 2006, 2005 and 2004 | 32 | ||||
Consolidated Statements of Cash Flows — Years Ended December 31, 2006, 2005 and 2004 | 33 | ||||
Notes to Consolidated Financial Statements | 34 | ||||
All schedules for which provision is made in the applicable accounting regulations |
(3) Exhibits:
Supplemental Information to be furnished with reports filed pursuant to Section 15(d) of the ActSEC are not required under the related instructions or are not applicable and, therefore, have been omitted.
65
No annual report or proxy statement covering the Company’s last fiscal year has been or will be circulated to security holders.
40
By: | /s/ |
Richard P. Elliott |
26, 2007
* Edward F. Crawford | Chairman, Chief Executive Officer and Director | |||||
March 26, 2007 | ||||||
* Richard P. Elliott | Vice President | March 15, 2007 | ||||
* The undersigned, pursuant to a Power of Attorney executed by each of the Directors and officers identified above and filed with the Securities and Exchange Commission, by signing his name hereto, does hereby sign and execute this report on behalf of each of the persons noted above, in the capacities indicated.
March 29, 2004
41
ANNUAL REPORT ON FORM 10-K
For the Year Ended December 31, 2003
EXHIBIT INDEX
* | ||||||
* Patrick V. Auletta | Director | March 15, 2007 | ||||
* Kevin R. Greene | Director | March 15, 2007 | ||||
* Dan T. Moore | Director | March 15, 2007 | ||||
* Ronna Romney | Director | March 15, 2007 | ||||
* James W. Wert | Director | March 15, 2007 |
* | The undersigned, pursuant to a Power of Attorney executed by each of the directors and officers identified above and filed with the Securities and Exchange Commission, by signing his name hereto, does hereby sign and execute this report on behalf of each of the persons noted above, in the capacities indicated. |
/s/ Robert D. Vilsack, |
66
Exhibit | ||||
3 | .1 | Amended and Restated Articles of Incorporation of Park-Ohio Holdings Corp. (filed as Exhibit 3.1 to theForm 10-K of Park-Ohio Industries, Inc. for the year ended December 31, 1998, SEC File No. 333-43005 and incorporated by reference and made a part hereof) | ||
3 | .2 | Code of Regulations of Park-Ohio Industries, Inc. (filed as Exhibit 3.2 to theForm 10-K of Park-Ohio Industries, Inc. for the year ended December 31, 1998, SEC File No. 333-43005 and incorporated by reference and made a part hereof) | ||
4 | .1 | Amended and Restated Credit Agreement, dated November 5, 2003, among Park-Ohio Industries, Inc., the other loan parties party thereto, the lenders party thereto, Bank One, NA and Banc One Capital Markets Inc. (filed as Exhibit 4 to theForm 10-Q of Park-Ohio Holdings Corp. for the quarter ended September 30, 2003, SEC FileNo. 000-03134 and incorporated by reference and made a part hereof) | ||
4 | .2 | First Amendment, dated September 30, 2004, to the Amended and Restated Credit Agreement, dated November 5, 2003, among Park-Ohio Industries, Inc., the other loan parties thereto, the lenders party thereto, Bank One, NA and Bank One Capital Markets, Inc. (filed as Exhibit 4.1 to theForm 8-K of Park-Ohio Holdings Corp. on October 1, 2004, SEC FileNo. 000-03134 and incorporated herein by reference and made a part hereof) | ||
4 | .3 | Second Amendment, dated December 29, 2004, to the Amended and Restated Credit Agreement, dated November 5, 2003, among Park-Ohio Industries, Inc., the other loan parties thereto, the lenders party thereto and JP Morgan Chase Bank, NA (successor by merger to Bank One, NA), as agent (filed as Exhibit 4.1 to theForm 8-K of Park-Ohio Holdings Corp. filed on January 5, 2005, SEC FileNo. 000-03134 and incorporated herein by reference and made a part hereof) | ||
4 | .4 | Third Amendment, dated May 5, 2006, to the Amended and Restated Credit Agreement, dated November 5, 2003, among Park-Ohio Industries, Inc., the other loan parties thereto, the lender’s party thereto and J.P. Morgan Chase Bank, NA (successor by merger to Bank One, NA), as agent (filed as Exhibit 4 to theForm 10-Q of Park-Ohio Holdings Corp. for the quarter ended March 31, 2006, SEC FileNo. 000-03134 and incorporated herein by reference and made a part hereof) | ||
4 | .5 | Fourth Amendment, dated June 9, 2006, to the Amended and Restated Credit Agreement, dated November 5, 2003, among Park-Ohio Industries, Inc., the other loan parties thereto, the lender’s party thereto and J.P. Morgan Chase Bank, NA (successor by merger to Bank One, NA), as agent (filed as Exhibit 4.1 to theForm 8-K of Park-Ohio Holdings Corp. filed on June 14, 2006, SEC FileNo. 000-03134 and incorporated herein by reference and made a part hereof) | ||
4 | .6 | Fifth Amendment, dated October 18, 2006, to the Amended and Restated Credit Agreement, dated November 5, 2003, among Park-Ohio Industries, Inc., the other loan parties thereto, the lender’s party thereto and J.P. Morgan Chase Bank, NA (successor by merger to Bank One, NA), as agent (filed as Exhibit 4.1 to theForm 8-K of Park-Ohio Holdings Corp. filed on October 24, 2006, SEC FileNo. 000-03134 and incorporated herein by reference and made a part hereof) | ||
4 | .7 | Indenture, dated as of November 30, 2004, among Park-Ohio Industries, Inc., the Guarantors (as defined therein) and Wells Fargo Bank, NA, as trustee (filed as Exhibit 4.1 to theForm 8-K of Park-Ohio Holdings Corp. filed on December 6, 2004, SEC FileNo. 000-03134 and incorporated herein by reference and made a part hereof) | ||
10 | .1 | Form of Indemnification Agreement entered into between Park-Ohio Industries, Inc. and each of its directors and certain officers (filed as Exhibit 10.1 to theForm 10-K of Park-Ohio Industries, Inc. for the year ended December 31, 1998, SEC File No. 333-43005 and incorporated by reference and made a part hereof) | ||
10 | .2* | Amended and Restated 1998 Long-Term Incentive Plan (filed as Appendix A to the Definitive Proxy Statement of Park-Ohio Holdings Corp., filed on April 23, 2001, SEC FileNo. 000-03134 and incorporated by reference and made a part hereof) | ||
24 | .1 | Power of Attorney |
Exhibit | ||||
31 | .1 | Principal Executive Officer’s Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
31 | .2 | Principal Financial Officer’s Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
32 | .1 | Certification requirement under Section 906 of the Sarbanes-Oxley Act of 2002 |
* | ||||