1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period ended June 30, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------- ---------
Commission File Number: 333-82617
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VENTURE HOLDINGS COMPANY LLC
Michigan 38-3470015
VEMCO, INC.
Michigan 38-2737797
VENTURE INDUSTRIES CORPORATION
Michigan 38-2034680
VENTURE MOLD & ENGINEERING CORPORATION
Michigan 38-2556799
VENTURE LEASING COMPANY
Michigan 38-2777356
VEMCO LEASING, INC.
Michigan 38-2777324
VENTURE HOLDINGS CORPORATION
Michigan 38-2793543
VENTURE SERVICE COMPANY
Michigan 38-3024165
EXPERIENCE MANAGEMENT, LLC
Michigan 38-3382308
VENTURE EUROPE, INC.
Michigan 38-3464213
VENTURE EU CORPORATION
Michigan 38-3470019
(State or other (Exact name of registrant as
jurisdiction of specified in its charter) (I.R.S. Employer
incorporation or Identification
organization) Number)
------------------
33662 James J. Pompo
Fraser, Michigan 48026
(Address, including zip code of registrants' principal executive offices)
Registrants' telephone number, including area code:
(810) 294-1500
2
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X . No .
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TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION (UNAUDITED) PAGE #
--------------------------------- ------
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 2001 and
December 31, 2000 1
Consolidated Statements of Income and Comprehensive Income
for the Three Months and Six Months Ended June 30, 2001
and 2000 2
Consolidated Statements of Changes in Member's Equity
for the Three Months and Six Months Ended June 30, 2001
and 2000 3
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 2001 and 2000 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 21
Item 3. Quantitative and Qualitative Disclosures About Market Risk 25
PART II. OTHER INFORMATION
-----------------
Item 1. Legal Proceedings 25
Item 6. Exhibits and Reports on Form 8-K 26
Signature 26
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VENTURE HOLDINGS COMPANY LLC
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
June 30,
2001 December 31,
ASSETS (Unaudited) 2000
- ------ ----------- -----------
CURRENT ASSETS:
Cash and cash equivalents $ -- $ 941
Accounts receivable, net, includes related party
receivables of $49,277 and $54,478 at June 30, 2001 and
December 31, 2000, respectively (Note 5) 277,447 293,072
Inventories (Note 2) 168,516 206,622
Investments 1,344 489
Prepaid and other current assets 40,512 46,299
----------- -----------
Total current assets 487,819 547,423
Property, Plant and Equipment, Net 525,395 553,038
Intangible Assets, Net 120,205 127,445
Other Assets, includes related party receivable of $33,560 at
June 30, 2001 and December 31, 2000 (Note 5) 138,218 147,257
Deferred Tax Assets 62,721 51,140
----------- -----------
Total Assets $ 1,334,358 $ 1,426,303
=========== ===========
LIABILITIES AND MEMBER'S EQUITY
- -------------------------------
CURRENT LIABILITIES:
Accounts payable $ 239,560 $ 257,947
Accrued interest 12,962 15,482
Accrued expenses 94,913 120,128
Current portion of long term debt (Note 3) 27,787 24,405
----------- -----------
Total current liabilities 375,222 417,962
Pension Liabilities & Other 36,022 50,759
Deferred Tax Liabilities 36,862 37,967
Long Term Debt (Note 3) 834,674 852,578
----------- -----------
Total liabilities 1,282,780 1,359,266
Commitments and Contingencies -- --
Member's Equity:
Member's equity 58,216 72,422
Accumulated other comprehensive loss - cumulative
Translation adjustments (6,638) (5,385)
----------- -----------
Member's Equity 51,578 67,037
----------- -----------
Total Liabilities and Member's Equity $ 1,334,358 $ 1,426,303
=========== ===========
See notes to consolidated financial statements.
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VENTURE HOLDINGS COMPANY LLC
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited)
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2001 2000 2001 2000
---- ---- ---- ----
NET SALES $ 480,884 $ 483,200 $ 966,938 $ 963,706
COST OF PRODUCT SOLD 419,274 421,249 838,699 831,997
--------- --------- --------- ---------
GROSS PROFIT 61,610 61,951 128,239 131,709
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSE 32,576 33,360 60,818 73,664
PAYMENTS TO BENEFICIARY IN
LIEU OF DISTRIBUTIONS 1,400 600 1,400 1,165
--------- --------- --------- ---------
INCOME FROM OPERATIONS 27,634 27,991 66,021 56,880
INTEREST EXPENSE 24,067 24,754 50,824 50,415
OTHER EXPENSE (INCOME) (Note 4) 11,833 (1,749) 32,881 (1,964)
--------- --------- --------- ---------
(LOSS) INCOME BEFORE TAXES (8,266) 4,986 (17,684) 8,429
TAX PROVISION (BENEFIT) 446 586 (4,228) (1,815)
MINORITY INTEREST 219 210 568 480
--------- --------- --------- ---------
NET (LOSS) INCOME BEFORE
CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE (8,931) 4,190 (14,024) 9,764
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE -- -- (182) --
--------- --------- --------- ---------
NET (LOSS) INCOME (8,931) 4,190 (14,206) 9,764
OTHER COMPREHENSIVE INCOME (LOSS) --
Cumulative translation adjustments 443 504 (1,253) (5,674)
--------- --------- --------- ---------
COMPREHENSIVE (LOSS) INCOME $ (8,488) $ 4,694 $ (15,459) $ 4,090
========= ========= ========= =========
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VENTURE HOLDINGS COMPANY LLC
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBER'S EQUITY (Unaudited)
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2001 2000 2001 2000
---- ---- ---- ----
MEMBER'S EQUITY, BEGINNING
OF PERIOD $ 60,066 $ 60,299 $ 67,037 $ 60,903
COMPREHENSIVE (LOSS) INCOME:
NET (LOSS) INCOME (8,931) 4,190 (14,206) 9,764
OTHER COMPREHENSIVE INCOME (LOSS) 443 504 (1,253) (5,674)
-------- -------- -------- --------
COMPREHENSIVE (LOSS) INCOME (8,488) 4,694 (15,459) 4,090
-------- -------- -------- --------
MEMBER'S EQUITY, END OF PERIOD $ 51,578 $ 64,993 $ 51,578 $ 64,993
======== ======== ======== ========
See notes to consolidated financial statements.
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VENTURE HOLDINGS COMPANY LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
Six Months Ended
June 30,
2001 2000
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $(14,206) $ 9,764
Adjustments to reconcile net income to net cash provided by
Operating activities:
Depreciation and amortization 45,991 47,012
Unrealized loss on currency exchange 33,163 46,742
Unrealized gain on investments (378) (3,511)
Loss from the disposal of fixed assets 591 22
Change in accounts receivable 15,625 (40,855)
Change in inventories 38,105 (6,145)
Change in prepaid and other current assets 5,788 (3,036)
Change in other assets 5,167 20,736
Change in accounts payable (18,386) 13,594
Change in accrued expenses (27,731) 11,093
Change in other liabilities (14,738) (2,850)
Change in deferred taxes (12,688) (9,553)
-------- --------
Net cash provided by operating activities 56,303 83,013
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (41,014) (41,439)
Proceeds from sale of fixed assets 139 172
-------- --------
Net cash used in investing activities (40,875) (41,267)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) borrowings under revolving credit agreement (6,316) 37,000
Principal payments on debt (8,207) (71,970)
-------- --------
Net cash used in financing activities (14,523) (34,970)
Effect of exchange rate changes on cash and cash equivalents (1,846) (9,021)
NET DECREASE IN CASH (941) (2,245)
CASH AT BEGINNING OF PERIOD 941 7,392
-------- --------
CASH AT END OF PERIOD $ -- $ 5,147
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for interest $ 49,627 $ 49,215
======== ========
Cash paid during the period for taxes $ 2,558 $ 3,035
======== ========
See notes to consolidated financial statements.
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VENTURE HOLDINGS COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
- --------------------------------------------------------------------------------
1. FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in
the United States of America for interim financial information. The
consolidated financial statements include the accounts of Venture
Holdings Company LLC (hereinafter referred to as "Venture") and all of
Venture's domestic and foreign subsidiaries that are wholly-owned or
majority-owned (collectively referred to as the "Company"). The Company's
investment in a less than majority-owned business is accounted for under
the equity method. In the opinion of management, all adjustments
(consisting of only normal recurring items), which are necessary for a
fair presentation have been included. The results for interim periods are
not necessarily indicative of results which may be expected for any other
interim period or for the full year. For further information, refer to
the consolidated financial statements and notes thereto included in the
Company's 2000 Annual Report on Form 10-K filed with the Securities and
Exchange Commission. Certain reclassifications have been made to the 2000
financial statements in order to conform to the 2001 presentation.
2. INVENTORIES
Inventories included the following (in thousands):
June 30, December 31,
2001 2000
---- ----
Raw materials $ 48,701 $ 49,672
Work-in-process - manufactured parts 13,620 15,721
Work-in-process - tools and molds 87,566 119,537
Finished goods 18,629 21,692
----------- -----------
Total $ 168,516 $ 206,622
=========== ===========
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3. DEBT
Debt consisted of the following (in thousands):
June 30, December 31,
2001 2000
---- ----
Credit agreement
Term loan A, with interest of 6.50%, Due 2004 $ 59,400 $ 66,150
Term loan B, with interest of 7.25%, Due 2005 196,000 197,000
Revolving credit outstanding, with interest of
6.50%, Due 2004 110,204 117,947
Bank debt payable with interest from 0.0% to 9.04%,
Due 2004 13,959 7,138
Senior notes payable, Due 2005
With interest at 9.5% 205,000 205,000
Senior notes payable, Due 2007
With interest at 11.0% 125,000 125,000
Senior subordinated notes payable, Due 2009
With interest at 12.0% 125,000 125,000
Capital leases with interest from 3.95%
to 11.25% 27,353 32,941
Installment notes payable with
Interest from 3.00% to 7.41% 545 807
-------- --------
Total $862,461 $876,983
Less current portion of debt 27,787 24,405
-------- --------
Total $834,674 $852,578
======== ========
The revolving credit facility permits the Company to borrow up to the
lesser of a borrowing base computed as a percentage of accounts
receivable and inventory, or $175 million less the amount of any letters
of credit issued against the credit agreement. Pursuant to the borrowing
base formula as of June 30, 2001, the Company could have borrowed an
additional $61 million under the revolving credit facility
The Company's credit agreement, and documents governing the Company's
9 1/2% unsecured senior notes due 2005 (the "1997 Senior Notes"), 11%
unsecured senior notes (the "1999 Senior Notes") and 12% unsecured senior
subordinated notes (the "1999 Senior Subordinated Notes" and together
with the 1999 Senior Notes, the "1999 Notes"), contain restrictive
covenants relating to cash flow, fixed charges, debt, member's equity,
distributions, leases, and liens on assets. The Company's debt
obligations also contain various restrictive covenants that require the
Company to maintain stipulated financial ratios, including a minimum
consolidated net worth (adjusted yearly), fixed charge coverage ratio,
interest coverage ratio and total indebtedness ratio. As of June 30,
2001, the Company was in compliance with all debt covenants.
4. DERIVATIVE FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Venture is party to foreign exchange and interest rate contracts entered
into in connection with the management of the Company's exposure to
fluctuations in foreign exchange rates and interest rates. The primary
classes of derivatives used by Venture are foreign exchange forward
contracts and interest rate swaps. Those instruments involve, to varying
degrees, market risk, as the instruments are subject to rate and price
fluctuations. Derivative transactions are used to hedge underlying
business exposures. Market risk in these instruments is offset by
opposite movements in the underlying exposure. Cash receipts or payments
on these contracts normally occur at maturity, or for interest rate swap
agreements, at periodic contractually defined intervals. Gains and losses
from interest rate swaps and options that are designated, and are
effective, as hedges of underlying debt obligations are used to adjust
interest expense recognized over the lives of the underlying debt
agreements. Gains and losses from terminated hedge contracts are deferred
and amortized
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9
over the remaining period of the original swap or the remaining term of
the underlying exposure, whichever is shorter. Derivative instruments
that do not qualify for hedge accounting treatment are marked to market
and the related gains and losses are included in net income.
Foreign Exchange Forward Contracts
----------------------------------
In March 2000, the Company terminated its cross-currency swap agreements
and realized a cash gain of $42.0 million. As a result of the
termination of the cross-currency swap agreements, the net impact on
earnings for the six months ended June 30, 2000 was an increase in other
income of $14.9 million, which was comprised of a realized gain of $42.0
million, offset by an unrealized loss of $27.1 million.
The cross-currency swap agreements were replaced with a twelve-month
foreign exchange collar. In relation to the foreign exchange collar, an
unrealized gain of $1.6 million and $3.8 million was recorded in other
income for the three and six months ended June 30, 2000, respectively.
The interest rate swap agreement within one of the Company's cross
currency swap agreements, which was accounted for using settlement
accounting, resulted in interest expense of $0.3 million and $0.5 million
for the three and six months ended June 30, 2000, respectively. The other
interest rate swap agreements, which did not meet all the criteria for
settlement accounting, within the original cross currency swap
agreements resulted in unrealized gains for the three and six months
ended June 30, 2000 of $4.0 million and $3.5 million, respectively.
During July 2000, the Company paid $14.9 million to terminate the
interest portion of the cross currency swap agreements. This amount was
capitalized and is being amortized over the original terms of the cross
currency swap agreements. The impact of the amortization resulted in
$1.3 million and $2.6 million of additional interest expense for the
three and six months ended June 30, 2001. There was no similar
amortization expense for the three and six months ended June 30, 2000.
Interest Rate Swaps
-------------------
At June 30, 2001 and 2000, the notional amount of interest rate contracts
with off-balance-sheet risk was $30.0 million and $55.0 million,
respectively. The impact of these interest rate swap agreements resulted
in $0.1 million of additional interest expense for the three and six
months ended June 30, 2001, and $0.1 million and $0.2 million of
additional interest expense for the three and six months ended June 30,
2000, respectively. The Company recorded a $0.1 million unrealized gain
on these agreements for the three months ended June 30, 2001. As a
result, the Company recorded a $0.2 million unrealized loss on these
agreements for the six months ended June 30, 2001, of which $0.2 million
was recorded as a cumulative change in accounting principle as a result
of the adoption of SFAS No. 133 "Accounting for Derivative Instruments
and Hedging Activities". The Company also recorded a $4.0 million and
$3.5 million unrealized gain on these agreements for the three and six
months ended June 30, 2000, respectively.
5. RELATED PARTY TRANSACTIONS
Venture Holdings Trust (the "Trust") is the sole member of Venture. The
Company has entered into various transactions with entities that the sole
beneficiary of the Trust owns or controls. These transactions include
leases of real estate, usage of machinery, equipment and facilities,
purchases and sales of inventory, performance of manufacturing related
services, administrative services, insurance activities, and payment and
receipt of sales commissions. In addition, employees of the Company are
made available to certain of these entities for services such as design,
model and tool building. Since the Company operates for the benefit of
the sole beneficiary of the Trust, the terms of these transactions are
not the result of arms'-length bargaining; however, the Company believes
that such transactions are on terms no less favorable to the Company than
would be obtained if such transactions or arrangements were arms'-length
transactions with non-affiliated persons.
The Company provides or arranges for others to provide certain related
parties with various administrative and professional services, including
employee group insurance and benefit coverage, property and other
insurance, financial and cash management and administrative services such
as data processing. The related parties are charged fees and premiums for
these services. Administrative services were allocated to the entity
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10
for which they were incurred and certain entities were charged a
management fee. In connection with the above cash management services,
the Company pays the administrative and operating expenses on behalf of
certain related parties and charges them for the amounts paid which
results in receivables from these related parties.
The result of these related party transactions was a net receivable,
which was included in accounts receivable as follows:
June 30, December 31,
2001 2000
---- ----
Amounts receivable $111,217 $113,557
Amounts payable 28,380 25,519
-------- --------
Net amounts receivable $ 82,837 $ 88,038
======== ========
Based on management's assessment and finalization of certain repayment
agreements, $33.6 million at June 30, 2001 and December 31, 2000 was
classified as other assets. These amounts are generally from entities
wholly owned by the sole beneficiary of the Trust and management believes
that the amounts are fully recoverable.
6. SEGMENT REPORTING
The Company is organized and managed based primarily on geographic
markets served. Under this organizational structure, the Company's
operating segments have been aggregated into two reportable segments:
North America (excluding Mexico) and International. The following table
presents net sales and other financial information by business segment
for the six months ended June 30, 2001 (in thousands):
INCOME NET TOTAL
NET SALES FROM OPERATIONS (LOSS) INCOME ASSETS
--------- --------------- ------------- ------
NORTH AMERICA $ 272,377 $ 18,018 $ (44,167) $ 989,869
INTERNATIONAL 696,370 48,003 29,961 344,489
ELIMINATIONS (1,809) -- -- --
---------- ---------- ---------- ----------
TOTAL 966,938 66,021 (14,206) 1,334,358
========== ========== ========== ==========
The following table presents net sales and other financial information by
business segment for the six months ended June 30, 2000 (in thousands):
INCOME NET TOTAL
NET SALES FROM OPERATIONS INCOME (LOSS) ASSETS
--------- --------------- ------------- ------
NORTH AMERICA $ 326,078 $ 18,918 $ 5,965 $1,003,159
INTERNATIONAL 641,092 37,962 3,799 410,077
ELIMINATIONS (3,464) -- -- --
---------- ---------- ---------- ----------
TOTAL 963,706 56,880 9,764 1,413,236
========== ========== ========== ==========
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7. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
Venture, as the successor to Venture Holdings Trust, and certain of its
100%-owned, domestic subsidiaries are jointly and severally liable for
the 1997 Senior Notes issued on July 9, 1997. On May 27, 1999, certain
100%-owned, domestic subsidiaries of Venture became guarantors of the
1997 Senior Notes. These guarantees are full and unconditional, joint and
several. Venture issued the 1999 Notes on May 27, 1999 in connection with
the acquisition of Peguform GmbH, as a result of which Venture acquired
certain additional foreign subsidiaries. The 1999 Notes are guaranteed by
each of Venture's 100%-owned, domestic subsidiaries. The guarantees of
these 100%-owned, domestic subsidiaries are full and unconditional, joint
and several.
The principal elimination entries in the condensed consolidating
financial information set forth below eliminate investments in
subsidiaries and intercompany balances and transactions.
1997 SENIOR NOTES:
The following condensed consolidating financial information presents:
(1) Condensed consolidating financial statements as of June 30, 2001
and December 31, 2000 and for the three and six month periods ended
June 30, 2001 and June 30, 2000, of (a) Venture, as a co-issuer of
the 1997 Senior Notes (b) the subsidiaries that are co-issuers of
the 1997 Senior Notes, (c) the guarantor subsidiaries, (d) the
nonguarantor subsidiaries and (e) the Company on a consolidated
basis, and
(2) Elimination entries necessary to consolidate Venture, the other
issuers and the guarantor subsidiaries with the nonguarantor
subsidiaries.
CONDENSED CONSOLIDATING BALANCE SHEET
- --------------------------------------------------------------------------------
AS OF JUNE 30, 2001
(DOLLARS IN THOUSANDS)
OTHER GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE ISSUERS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------- ------------ ------------ ------------ -----
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ -- $ (3,201) $ (15) $ 3,216 $ -- $ --
Accounts receivable, net -- 137,869 67 139,511 -- 277,447
Inventories -- 67,798 -- 100,718 -- 168,516
Investments (230) -- -- 1,574 -- 1,344
Prepaid and other current assets -- 6,177 956 33,379 -- 40,512
--------- ---------- -------- --------- ---------- ----------
Total current assets (230) 208,643 1,008 278,398 -- 487,819
Property, Plant and Equipment, Net -- 191,301 8 334,086 -- 525,395
Intangible Assets, Net -- 51,885 -- 68,320 -- 120,205
Other Assets 9,835 108,823 -- 19,560 -- 138,218
Deferred Tax Assets -- 11,059 -- 51,662 -- 62,721
Net Investment in and advances to (from)
subsidiaries & affiliates 899,950 (520,625) 70,882 (233,904) (216,303) --
--------- ---------- -------- --------- ---------- ----------
Total Assets $ 909,555 $ 51,086 $ 71,898 $ 518,122 $ (216,303) $1,334,358
========= ========== ======== ========= ========== ==========
LIABILITIES AND MEMBER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ -- $ 53,955 $ 561 $ 185,044 $ -- $ 239,560
Accrued interest 12,744 -- -- 218 -- 12,962
Accrued expenses -- 8,427 2,372 84,114 -- 94,913
Current portion of long term debt 19,369 -- -- 8,418 -- 27,787
--------- ---------- -------- --------- ---------- ----------
Total current liabilities 32,113 62,382 2,933 277,794 -- 375,222
Pension Liabilities & Other -- 4,072 -- 31,950 -- 36,022
Deferred Tax Liabilities -- 11,701 -- 25,161 -- 36,862
Long Term Debt 801,234 1,044 -- 32,396 -- 834,674
--------- ---------- -------- --------- ---------- ----------
Total liabilities 833,347 79,199 2,933 367,301 -- 1,282,780
Commitments and Contingencies -- -- -- -- -- --
Member's Equity:
Member's equity 76,208 (28,113) 68,965 157,459 (216,303) 58,216
Accumulated other comprehensive loss-
cumulative translation adjustments -- -- -- (6,638) -- (6,638)
--------- ---------- -------- --------- ---------- ----------
Member's Equity 76,208 (28,113) 68,965 150,821 (216,303) 51,578
--------- ----------- -------- --------- ---------- ----------
Total Liabilities and Member's Equity $ 909,555 $ 51,086 $ 71,898 $ 518,122 $ (216,303) $1,334,358
========= ========== ======== ========= ========== ==========
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CONDENSED CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 2000
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
OTHER GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE ISSUERS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
----------- ----------- ------------ ------------ ------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ -- $ -- $ -- $ 941 $ -- $ 941
Accounts receivable, net -- 146,309 117 146,646 -- 293,072
Inventories -- 68,466 -- 138,156 -- 206,622
Investments (609) -- -- 1,098 -- 489
Prepaid and other current assets -- 5,661 319 40,319 -- 46,299
----------- ----------- ----------- ----------- ----------- -----------
Total current assets (609) 220,436 436 327,160 -- 547,423
Property, Plant and Equipment, Net -- 190,545 10 362,483 -- 553,038
Intangible Assets, Net -- 52,566 -- 74,879 -- 127,445
Other Assets 12,392 113,284 -- 21,581 -- 147,257
Deferred Tax Assets -- 11,864 -- 39,276 -- 51,140
Net Investment in and advances to (from)
subsidiaries & affiliates 912,207 (506,152) 43,849 (233,601) (216,303) --
----------- ----------- ----------- ----------- ----------- -----------
Total Assets $ 923,990 $ 82,543 $ 44,295 $ 591,778 $ (216,303) $ 1,426,303
=========== =========== =========== =========== =========== ===========
LIABILITIES AND MEMBER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ -- $ 67,860 $ 1,209 $ 188,878 $ -- $ 257,947
Accrued interest 15,294 -- -- 188 -- 15,482
Accrued expenses -- 8,508 1,949 109,671 -- 120,128
Current portion of long term debt 17,908 -- -- 6,497 -- 24,405
----------- ----------- ----------- ----------- ----------- -----------
Total current liabilities 33,202 76,368 3,158 305,234 -- 417,962
Pension Liabilities & Other -- 5,172 -- 45,587 -- 50,759
Deferred Tax Liabilities -- 12,191 -- 25,776 -- 37,967
Long Term Debt 818,189 1,500 -- 32,889 -- 852,578
----------- ----------- ----------- ----------- ----------- -----------
Total liabilities 851,391 95,231 3,158 409,486 -- 1,359,266
Commitments and Contingencies -- -- -- -- -- --
Member's Equity:
Member's equity 72,599 (12,688) 41,137 187,677 (216,303) 72,422
Accumulated other comprehensive loss-
Cumulative translation adjustments -- -- -- (5,385) -- (5,385)
----------- ----------- ----------- ----------- ----------- -----------
Member's Equity 72,599 (12,688) 41,137 182,292 (216,303) 67,037
----------- ----------- ----------- ----------- ----------- -----------
Total Liabilities and Member's Equity $ 923,990 $ 82,543 $ 44,295 $ 591,778 $ (216,303) $ 1,426,303
=========== =========== =========== =========== =========== ===========
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CONDENSED CONSOLIDATING STATEMENTS OF INCOME (Unaudited)
FOR THE SIX MONTHS ENDED JUNE 30, 2001
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
OTHER GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE ISSUERS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
--------- --------- ------------ ------------ ------------ ---------
NET SALES $ -- $ 213,083 $ 65,669 $ 689,995 $ (1,809) $ 966,938
COST OF PRODUCT SOLD -- 169,775 64,835 605,898 (1,809) 838,699
--------- --------- --------- --------- --------- ---------
GROSS PROFIT -- 43,308 834 84,097 -- 128,239
SELLING, GENERAL & ADMINISTRATIVE
EXPENSE -- 24,119 680 36,019 -- 60,818
PAYMENTS TO BENEFICIARY IN LIEU OF
TAXES -- 1,400 -- -- -- 1,400
--------- --------- --------- --------- --------- ---------
INCOME FROM OPERATIONS 17,789 154 48,078 -- 66,021
INTEREST EXPENSE 46,703 22 -- 4,099 -- 50,824
INTERCOMPANY INTEREST ALLOCATION (44,147) 27,144 (13,533) 30,536 -- --
OTHER (INCOME) EXPENSE (6,347) 5,637 (14,141) 47,732 -- 32,881
--------- --------- --------- --------- --------- ---------
INCOME (LOSS) BEFORE TAXES 3,791 (15,014) 27,828 (34,289) -- (17,684)
TAX PROVISION (BENEFIT) -- 412 -- (4,640) -- (4,228)
MINORITY INTEREST -- -- -- 568 -- 568
--------- --------- --------- --------- --------- ---------
NET INCOME (LOSS) BEFORE
CUMULATIVE EFFECT OF CHANGE IN 3,791 (15,426) 27,828 (30,217) -- (14,024)
ACCOUNTING PRINCIPLE
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE (182) -- -- -- -- (182)
--------- --------- --------- --------- --------- ---------
NET INCOME (LOSS) $ 3,609 $ (15,426) $ 27,828 $ (30,217) $ -- $ (14,206)
========= ========= ========= ========= ========= =========
CONDENSED CONSOLIDATING STATEMENTS OF INCOME (Unaudited)
FOR THE THREE MONTHS ENDED JUNE 30, 2001
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
OTHER GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE ISSUERS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
--------- --------- ------------ ------------ ------------ -----
NET SALES $ -- $ 116,104 $ 32,926 $ 332,700 $ (846) $ 480,884
COST OF PRODUCT SOLD -- 89,108 32,871 298,141 (846) 419,274
--------- --------- --------- --------- --------- ---------
GROSS PROFIT -- 26,996 55 34,559 -- 61,610
SELLING, GENERAL & ADMINISTRATIVE
EXPENSE -- 13,051 464 19,061 -- 32,576
PAYMENTS TO BENEFICIARY IN LIEU OF
TAXES -- 1,400 -- -- -- 1,400
--------- --------- --------- --------- --------- ---------
(LOSS) INCOME FROM OPERATIONS -- 12,545 (409) 15,498 -- 27,634
INTEREST EXPENSE (INCOME) 22,146 (6) -- 1,927 -- 24,067
INTERCOMPANY INTEREST ALLOCATION (20,861) 12,527 (6,558) 14,892 -- --
OTHER (INCOME) EXPENSE (1,500) 2,780 (5,537) 16,090 -- 11,833
--------- --------- --------- --------- --------- ---------
INCOME (LOSS) BEFORE TAXES 215 (2,756) 11,686 (17,411) -- (8,266)
TAX PROVISION (BENEFIT) -- 988 -- (542) -- 446
MINORITY INTEREST -- -- -- 219 -- 219
--------- --------- --------- --------- --------- ---------
NET INCOME (LOSS) BEFORE
CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE 215 (3,744) 11,686 (17,088) -- (8,931)
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE -- -- -- -- -- --
--------- --------- --------- --------- --------- ---------
NET INCOME (LOSS) $ 215 $ (3,744) $ 11,686 $ (17,088) $ -- $ (8,931)
========= ========= ========= ========= ========= =========
11
14
CONDENSED CONSOLIDATING STATEMENTS OF INCOME (Unaudited)
FOR THE SIX MONTHS ENDED JUNE 30, 2000
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
OTHER GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE ISSUERS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
--------- --------- ------------ ------------ ------------ -----
NET SALES $ -- $ 353,392 $ 82,978 $ 644,012 $(116,676) $ 963,706
COST OF PRODUCT SOLD -- 308,230 81,730 558,713 (116,676) 831,997
--------- --------- --------- --------- --------- ---------
GROSS PROFIT -- 45,162 1,248 85,299 -- 131,709
SELLING, GENERAL & ADMINISTRATIVE
EXPENSE -- 27,416 -- 46,248 -- 73,664
PAYMENTS TO BENEFICIARY IN LIEU OF
TAXES 1,165 -- -- -- -- 1,165
--------- --------- --------- --------- --------- ---------
(LOSS) INCOME FROM OPERATIONS (1,165) 17,746 1,248 39,051 -- 56,880
INTEREST EXPENSE 45,832 -- -- 4,583 -- 50,415
INTERCOMPANY INTEREST ALLOCATION (45,832) 45,832 (13,013) 13,013 -- --
OTHER (INCOME) EXPENSE (22,115) 583 1,543 18,025 -- (1,964)
--------- --------- --------- --------- --------- ---------
INCOME (LOSS) BEFORE TAXES 20,950 (28,669) 12,718 3,430 -- 8,429
TAX (BENEFIT) -- (31) -- (1,784) -- (1,815)
MINORITY INTEREST -- -- -- 480 -- 480
--------- --------- --------- --------- --------- ---------
NET INCOME (LOSS) $ 20,950 $ (28,638) $ 12,718 $ 4,734 $ -- $ 9,764
========= ========= ========= ========= ========= =========
CONDENSED CONSOLIDATING STATEMENTS OF INCOME (Unaudited)
FOR THE THREE MONTHS ENDED JUNE 30, 2000
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
OTHER GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE ISSUERS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
--------- --------- ------------ ------------ ------------ ------------
NET SALES $ -- $ 165,325 $ 40,502 $ 328,524 $ (51,151) $ 483,200
COST OF PRODUCT SOLD -- 144,107 41,097 287,196 (51,151) 421,249
--------- --------- --------- --------- --------- ---------
GROSS PROFIT -- 21,218 (595) 41,328 -- 61,951
SELLING, GENERAL & ADMINISTRATIVE
EXPENSE -- 10,129 -- 23,231 -- 33,360
PAYMENTS TO BENEFICIARY IN LIEU OF
TAXES 600 -- -- -- -- 600
--------- --------- --------- --------- --------- ---------
(LOSS) INCOME FROM OPERATIONS (600) 11,089 (595) 18,097 -- 27,991
INTEREST EXPENSE 22,759 -- 1,995 -- 24,754
INTERCOMPANY INTEREST ALLOCATION (22,759) 22,759 (6,065) 6,065 -- --
OTHER (INCOME) EXPENSE (4,551) 123 1,138 1,541 -- (1,749)
--------- --------- --------- --------- --------- ---------
INCOME (LOSS) BEFORE TAXES 3,951 (11,793) 4,332 8,496 -- 4,986
TAX PROVISION (BENEFIT) -- 1,595 -- (1,009) -- 586
MINORITY INTEREST -- -- -- 210 -- 210
--------- --------- --------- --------- --------- ---------
NET INCOME (LOSS) $ 3,951 $ (13,388) $ 4,332 $ 9,295 $ -- $ 4,190
========= ========= ========= ========= ========= =========
12
15
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (Unaudited)
FOR THE SIX MONTHS ENDED JUNE 30, 2001
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
OTHER GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE ISSUERS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
-------- -------- ------------ ------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 3,609 $(15,425) $ 27,828 $(30,218) $ -- $(14,206)
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 2,556 20,269 2 23,164 -- 45,991
Unrealized (gain) loss on currency exchange (4,630) 5,051 (16,086) 48,828 -- 33,163
Unrealized (gain) on investments (378) -- -- -- (378)
Loss from the disposal of fixed assets -- 29 -- 562 -- 591
Change in accounts receivable -- 8,455 50 7,120 -- 15,625
Change in inventories -- 668 -- 37,437 -- 38,105
Change in prepaid and other current assets -- (517) (636) 6,941 -- 5,788
Change in other assets -- (1,056) -- 6,223 -- 5,167
Change in accounts payable -- (13,345) (1,209) (3,832) -- (18,386)
Change in accrued expenses (2551) (77) 424 (25,527) -- (27,731)
Change in pension liabilities and other -- (1,101) -- (13,637) -- (14,738)
Change in deferred taxes -- 312 -- (13,000) -- (12,688)
------- ------- ------- ------- ------- -------
Net cash provided by (used in) operating (1,394) 3,263 10,373 44,061 -- 56,303
activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures -- (14,706) -- (26,308) -- (41,014)
Net activity in investments in
and advances to (from)
subsidiaries and affiliates 12,257 14,474 (27,034) 303 -- --
Proceeds from sale of fixed assets -- -- -- 139 -- 139
-------- -------- -------- -------- -------- --------
Net cash provided by (used in) 12,257 (232) (27,034) (25,866) -- (40,875)
investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under revolving credit
facility (7,744) -- -- 1,428 -- (6,316)
Principal payments on debt (7,749) (458) -- -- -- (8,207)
-------- -------- -------- -------- -------- --------
Net cash used in financing activities (15,493) (458) -- 1,428 -- (14,523)
Effect of exchange rate changes on cash and cash
equivalents 4,630 (5,774) 16,646 (17,348) -- (1,846)
NET DECREASE IN CASH -- (3,201) (15) 2,275 -- (941)
CASH AT BEGINNING OF PERIOD $ -- $ -- $ -- $ 941 $ -- $ 941
-------- -------- -------- -------- -------- --------
CASH AT END OF PERIOD $ -- $ (3,201) $ (15) $ 3,216 $ -- $ --
======== ======== ======== ======== ======== ========
13
16
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (Unaudited)
FOR THE SIX MONTHS ENDED JUNE 30, 2000
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
OTHER GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE ISSUERS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------- ------------ ------------ ------------ -----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $20,950 $(28,638) $ 12,718 $ 4,734 $ - $ 9,764
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Depreciation and amortization - 23,272 2 23,738 - 47,012
Unrealized (gain) loss on
currency exchange - 23,926 2,348 20,468 - 46,742
Unrealized gain on investments (3,511) - - - - (3,511)
Loss from the disposal of
fixed assets - - - 22 - 22
Change in accounts receivable - (15,918) 13 (24,950) - (40,855)
Change in inventories - (5,621) - (524) - (6,145)
Change in prepaid and other
current assets - (9,197) (310) 6,471 - (3,036)
Change in other assets - (2,349) - 23,085 - 20,736
Change in accounts payable - (941) 369 14,166 - 13,594
Change in accrued expenses 251 (5,995) 780 16,057 - 11,093
Change in pension liabilities
and other - (11) - (2,839) - (2,850)
Change in deferred taxes - (31) - (9,522) - (9,553)
------- --------- ---------- ----------- ----------- ----------
Net cash provided by (used
in) operating activities 17,690 (21,503) 15,920 70,906 - 83,013
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures - (13,334) - (28,105) - (41,439)
Net activity in investments in
and advances to (from) 8,321 35,395 (13,572) (30,144) - -
subsidiaries and affiliates
Proceeds from sale of fixed assets - - - 172 - 172
------- --------- ---------- ----------- ----------- ----------
Net cash provided by (used in)
investing activities 8,321 22,061 (13,572) (58,077) - (41,267)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under
revolving credit
facility 37,000 - - - - 37,000
Principal payments on debt (63,011) - - (8,959) - (71,970)
------- --------- ---------- ----------- ----------- ----------
Net cash used in financing
activities (26,011) - - (8,959) - (34,970)
Effect of exchange rate changes on
cash and cash equivalents - (584) (2,348) (6,089) - (9,021)
NET DECREASE IN CASH - (26) - (2,219) - (2,245)
CASH AT BEGINNING OF PERIOD $ - $ 26 $ - $ 7,366 $ - $ 7,392
======= ========= ========== =========== =========== ==========
CASH AT END OF PERIOD $ - $ - $ - $ 5,147 $ - $ 5,147
======= ========= ========== =========== =========== ==========
14
17
-------------------------------------------------------------------------
1999 NOTES:
The following condensed consolidating financial information presents:
(1) Condensed consolidating financial statements as of June 30, 2001,
December 31, 2000 and for the three and six month periods ended
June 30, 2001 and June 30, 2000, of (a) Venture, the sole issuer
of the 1999 Notes, (b) the guarantor subsidiaries, (c) the
nonguarantor subsidiaries and (d) the Company on a consolidated
basis, and
(2) Elimination entries necessary to consolidate Venture and the
guarantor subsidiaries with the nonguarantor subsidiaries.
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF JUNE 30, 2001
- -------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------------ ------------ ------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ - $ (3,216) $ 3,216 $ - $ -
Accounts receivable, net - 137,936 139,511 - 277,447
Inventories - 67,798 100,718 - 168,516
Investments (230) - 1,574 - 1,344
Prepaid and other current assets - 7,133 33,379 - 40,512
---------- --------- --------- ---------- -----------
Total current assets (230) 209,651 278,398 - 487,819
Property, Plant and Equipment, Net - 191,309 334,086 - 525,395
Intangible Assets, Net - 51,885 68,320 - 120,205
Other Assets 9,835 108,823 19,560 - 138,218
Deferred Tax Assets - 11,059 51,662 - 62,721
Net Investment in and advances to (from)
subsidiaries & affiliates 899,950 (449,743) (233,904) (216,303) -
---------- --------- ---------- ---------- ----------
Total Assets $ 909,555 $ 122,984 $ 518,122 $ (216,303) $1,334,358
========== ========= ========== ========== ==========
LIABILITIES AND MEMBER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ - $ 54,516 $ 185,044 $ - $ 239,560
Accrued interest 12,744 - 218 - 12,962
Accrued expenses - 10,799 84,114 - 94,913
Current portion of long term debt 19,369 - 8,418 - 27,787
---------- --------- ---------- ---------- ----------
Total current liabilities 32,113 65,315 277,794 - 375,222
Pension Liabilities & Other - 4,072 31,950 - 36,022
Deferred Tax Liabilities - 11,701 25,161 - 36,862
Long Term Debt 801,234 1,044 32,396 - 834,674
---------- --------- ---------- ---------- ----------
Total liabilities 833,347 82,132 367,301 - 1,282,780
Commitments and Contingencies - -- - - -
Member's Equity:
Member's equity 76,208 40,852 157,459 (216,303) 58,216
Accumulated other comprehensive loss
cumulative translation adjustments - - (6,638) - (6,638)
---------- --------- ---------- ---------- ----------
Member's Equity 76,208 40,852 150,821 (216,303) 51,578
---------- --------- ---------- ---------- ----------
Total Liabilities and Member's Equity $ 909,555 $ 122,984 $ 518,122 $ (216,303) $1,334,358
========== ========= ========== ========== ==========
15
18
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 2000
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------------ ------------ ------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ - $ - $ 941 $ - $ 941
Accounts receivable, net - 146,426 146,646 - 293,072
Inventories - 68,466 138,156 - 206,622
Investments (609) - 1,098 - 489
Prepaid and other current assets - 5,980 40,319 - 46,299
--------- --------- --------- --------- ----------
Total current assets (609) 220,872 327,160 - 547,423
Property, Plant and Equipment, Net - 190,555 362,483 - 553,038
Intangible Assets, Net - 52,566 74,879 - 127,445
Other Assets 12,392 113,284 21,581 - 147,257
Deferred Tax Assets - 11,864 39,276 - 51,140
Net Investment in and advances to
(from) subsidiaries & affiliates 912,207 (462,303) (233,601) (216,303) -
--------- --------- --------- --------- ----------
Total Assets $ 923,990 $ 126,838 $ 591,778 $(216,303) $1,426,303
========= ========= ========= ========= ==========
LIABILITIES AND MEMBER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ - $ 69,069 $ 188,878 $ - $ 257,947
Accrued interest 15,294 - 188 - 15,482
Accrued expenses - 10,457 109,671 - 120,128
Current portion of long term debt 17,908 - 6,497 - 24,405
--------- --------- --------- --------- ----------
Total current liabilities 33,202 79,526 305,234 - 417,962
Pension Liabilities & Other - 5,172 45,587 - 50,759
Deferred Tax Liabilities - 12,191 25,776 - 37,967
Long Term Debt 818,189 1,500 32,889 - 852,578
--------- --------- --------- --------- ----------
Total liabilities 851,391 98,389 409,486 - 1,359,266
Commitments and Contingencies - - - - -
Member's Equity:
Member's equity 72,599 28,449 187,677 (216,303) 72,422
Accumulated other comprehensive loss-
cumulative translation adjustments - - (5,385) - (5,385)
--------- --------- --------- --------- ----------
Member's Equity 72,599 28,449 182,292 (216,303) 67,037
--------- --------- --------- --------- ----------
Total Liabilities and Member's Equity $ 923,990 $ 126,838 $ 591,778 $(216,303) $1,426,303
========= ========= ========= ========= ==========
16
19
CONDENSED CONSOLIDATING STATEMENTS OF INCOME (Unaudited)
FOR THE SIX MONTHS ENDED JUNE 30, 2001
-------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------------ ------------ ------------ -----
NET SALES $ - $ 278,752 $ 689,995 $ (1,809) $966,938
COST OF PRODUCT SOLD - 234,610 605,898 (1,809) 838,699
---------- ---------- ----------- ---------- ----------
GROSS PROFIT - 44,142 84,097 - 128,239
SELLING, GENERAL & ADMINISTRATIVE
EXPENSE - 24,799 36,019 - 60,818
PAYMENTS TO BENEFICIARY IN LIEU OF
TAXES - 1,400 - - 1,400
---------- ---------- ----------- ---------- ----------
INCOME FROM OPERATIONS 17,943 48,078 - 66,021
INTEREST EXPENSE 46,703 22 4,099 - 50,824
INTERCOMPANY INTEREST ALLOCATION (44,147) 13,611 30,536 - -
OTHER (INCOME) EXPENSE (6,347) (8,504) 47,732 - 32,881
---------- ---------- ----------- ---------- ----------
INCOME (LOSS) BEFORE TAXES 3,791 12,814 (34,289) - (17,684)
TAX PROVISION (BENEFIT) - 412 (4,640) - (4,228)
MINORITY INTEREST - - 568 - 568
---------- ---------- ----------- ---------- ----------
NET INCOME (LOSS) BEFORE
CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE 3,791 12,402 (30,217) - (14,024)
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE (182) - - - (182)
---------- ---------- ----------- ---------- ----------
NET INCOME (LOSS) $ 3,609 $ 12,402 $ (30,217) $ - $(14,206)
========== ========== =========== ========== ==========
CONDENSED CONSOLIDATING STATEMENTS OF INCOME (Unaudited)
FOR THE THREE MONTHS ENDED JUNE 30, 2001
-------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------------ ------------ ------------ -----
NET SALES $ - $ 149,030 $ 332,700 $ (846) $ 480,884
COST OF PRODUCT SOLD - 121,979 298,141 (846) 419,274
---------- ---------- ----------- -------- ----------
GROSS PROFIT - 27,051 34,559 - 61,610
SELLING, GENERAL & ADMINISTRATIVE
EXPENSE - 13,515 19,061 - 32,576
PAYMENTS TO BENEFICIARY IN LIEU OF
TAXES - 1,400 - - 1,400
---------- ---------- ----------- -------- ----------
INCOME FROM OPERATIONS 12,136 15,498 - 27,634
INTEREST EXPENSE (INCOME) 22,146 (6) 1,927 - 24,067
INTERCOMPANY INTEREST ALLOCATION (20,861) 5,969 14,892 - -
OTHER (INCOME) EXPENSE (1,500) (2,757) 16,090 - 11,833
---------- ---------- ----------- -------- ----------
INCOME (LOSS) BEFORE TAXES 215 8,930 (17,411) - (8,266)
TAX PROVISION (BENEFIT) - 988 (542) - 446
MINORITY INTEREST - - 219 - 219
---------- ---------- ----------- -------- ----------
NET INCOME (LOSS) BEFORE
CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE 215 7,942 (17,088) - (8,931)
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE - - - - -
---------- ---------- ----------- -------- ----------
NET INCOME (LOSS) $ 215 $ 7,942 $ (17,088) $ - $ (8,931)
========== ========== =========== ======== ==========
17
20
CONDENSED CONSOLIDATING STATEMENTS OF INCOME (Unaudited)
FOR THE SIX MONTHS ENDED JUNE 30, 2000
-------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------------ ------------ ------------ ------------
NET SALES $ - $ 436,370 $ 644,012 $(116,676) $ 963,706
COST OF PRODUCT SOLD - 389,960 558,713 (116,676) 831,997
---------- ---------- ----------- ---------- ----------
GROSS PROFIT - 46,410 85,299 - 131,709
SELLING, GENERAL & ADMINISTRATIVE
EXPENSE - 27,416 46,248 - 73,664
PAYMENTS TO BENEFICIARY IN LIEU OF
TAXES 1,165 - - - 1,165
---------- ---------- ----------- -------- ----------
(LOSS) INCOME FROM OPERATIONS (1,165) 18,994 39,051 - 56,880
INTEREST EXPENSE 45,832 - 4,583 - 50,415
INTERCOMPANY INTEREST ALLOCATION (45,832) 32,819 13,013 - --
OTHER (INCOME) EXPENSE (22,115) 2,126 18,025 - (1,964)
---------- ---------- ----------- -------- ----------
INCOME (LOSS) BEFORE TAXES 20,950 (15,951) 3,430 - 8,429
TAX (BENEFIT) - (31) (1,784) - (1,815)
MINORITY INTEREST - - 480 - 480
---------- ---------- ----------- -------- ----------
NET INCOME (LOSS) $ 20,950 $ (15,920) $ 4,734 $ - $ 9,764
========== ========== =========== ======== ==========
CONDENSED CONSOLIDATING STATEMENTS OF INCOME (Unaudited)
FOR THE THREE MONTHS ENDED JUNE 30, 2000
-------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------------ ------------ ------------ ------------
NET SALES $ - $ 205,827 $ 328,524 $ (51,151) $ 483,200
COST OF PRODUCT SOLD - 185,204 287,196 (51,151) 421,249
---------- ---------- ----------- ---------- -----------
GROSS PROFIT - 20,623 41,328 - 61,951
SELLING, GENERAL & ADMINISTRATIVE
EXPENSE - 10,129 23,231 - 33,360
PAYMENTS TO BENEFICIARY IN LIEU OF
TAXES 600 - - - 600
---------- ---------- ----------- -------- ----------
(LOSS) INCOME FROM OPERATIONS (600) 10,494 18,097 - 27,991
INTEREST EXPENSE 22,759 - 1,995 - 24,754
INTERCOMPANY INTEREST ALLOCATION (22,759) 16,694 6,065 - --
OTHER (INCOME) EXPENSE (4,551) 1,261 1,541 - (1,749)
---------- ---------- ----------- -------- ----------
INCOME (LOSS) BEFORE TAXES 3,951 (7,461) 8,496 - 4,986
TAX PROVISION (BENEFIT) - 1,595 (1,009) - 586
MINORITY INTEREST - - 210 - 210
---------- ---------- ----------- -------- ----------
NET INCOME (LOSS) $ 3,951 $ (9,056) $ 9,295 $ - $ 4,190
========== ========== =========== ======== ==========
18
21
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (Unaudited)
FOR THE SIX MONTHS ENDED JUNE 30, 2001
-------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------------ ------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 3,609 $ 12,403 $ (30,218) $ - $ (14,206)
Adjustments to reconcile net
income to net cash provided by (used in)
operating activities:
Depreciation and amortization 2,556 20,271 23,164 - 45,991
Unrealized (gain) loss on
currency exchange (4,630) (11,035) 48,828 - 33,163
Unrealized (gain) on
investments (378) - - (378)
Loss from the disposal of
fixed assets - 29 562 - 591
Change in accounts receivable - 8,505 7,120 - 15,625
Change in inventories - 668 37,437 - 38,105
Change in prepaid and other current assets - (1,153) 6,941 - 5,788
Change in other assets - (1,056) 6,223 - 5,167
Change in accounts payable - (14,554) (3,832) - (18,386)
Change in accrued expenses (2,551) 347 (25,527) - (27,731)
Change in pension liabilities and other - (1,101) (13,637) - (14,738)
Change in deferred taxes - 312 (13,000) - (12,688)
Net cash (used in) provided by operating --------- ---------- ----------- ---------- ----------
Activities (1,394) 13,636 44,061 - 56,303
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures - (14,706) (26,308) - (41,014)
Net activity in investments in and
advances to (from)
Subsidiaries and affiliates 12,257 (12,560) 303 - -
Proceeds from sale of fixed assets - - 139 - 139
Net cash provided by (used in) --------- ---------- ----------- ---------- ----------
investing activities 12,257 (27,266) (25,866) - (40,875)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) borrowings under
revolving credit facility (7,744) - 1,428 - (6,316)
Principal payments on debt (7,749) (458) - - (8,207)
Net cash (used in) provided by --------- ---------- ----------- ---------- ----------
financing activities (15,493) (458) 1,428 - (14,523)
Effect of exchange rate changes on cash and cash
equivalents 4,630 10,872 (17,348) - (1,846)
NET (DECREASE) INCREASE IN CASH - (3,216) 2,275 - (941)
CASH AT BEGINNING OF PERIOD $ - $ - $ 941 $ - $ 941
--------- ---------- ----------- ---------- ----------
CASH AT END OF PERIOD $ - $ (3,216) $ 3,216 $ - $ -
========= ========== =========== ========== ==========
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CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (Unaudited)
-------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(DOLLARS IN THOUSANDS)
GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------------ ------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 20,950 $ (15,920) $ 4,734 $ - $ 9,764
Adjustments to reconcile net
income to net cash provided by (used in)
operating activities:
Depreciation and amortization - 23,274 23,738 - 47,012
Unrealized (gain)loss on currency exchange - 26,274 20,468 - 46,742
Unrealized gain on investments (3,511) - - - (3,511)
Loss from the disposal of fixed assets - - 22 - 22
Change in accounts receivable - (15,905) (24,950) - (40,855)
Change in inventories - (5,621) (524) - (6,145)
Change in prepaid and other current assets - (9,507) 6,471 - (3,036)
Change in other assets - (2,349) 23,085 - 20,736
Change in accounts payable - (572) 14,166 - 13,594
Change in accrued expenses 251 (5,215) 16,057 - 11,093
Change in pension liabilities and other - (11) (2,839) - (2,850)
Change in deferred taxes - (31) (9,522) - (9,553)
Net cash provided by (used in) operating --------- --------- ---------- ---------- ----------
activities 17,690 (5,583) 70,906 - 83,013
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures - (13,334) (28,105) - (41,439)
Net activity in investments in and advances to (from)
Subsidiaries and affiliates 8,321 21,823 (30,144) - -
Proceeds from sale of fixed assets - - 172 - 172
--------- --------- ---------- ---------- ----------
Net cash provided by (used in) investing activities 8,321 8,489 (58,077) - (41,267)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under revolving credit
facility 37,000 - - - 37,000
Principal payments on debt (63,011) - (8,959) - (71,970)
--------- --------- ---------- ---------- ----------
Net cash used in financing activities (26,011) - (8,959) - (34,970)
Effect of exchange rate changes on cash and cash
equivalents - (2,932) (6,089) - (9,021)
NET DECREASE IN CASH - (26) (2,219) - (2,245)
CASH AT BEGINNING OF PERIOD $ - $ 26 $ 7,366 $ - $ 7,392
--------- --------- ---------- ---------- ----------
CASH AT END OF PERIOD $ - $ - $ 5,147 $ - $ 5,147
========= ========= ========== ========== ==========
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
------------------------------------------------------------------------
The following management's discussion and analysis of financial condition
and results of operations ("MD&A") should be read in conjunction with the
MD&A included in the Company's 2000 Annual Report on Form 10-K filed with
the Securities and Exchange Commission.
RESULTS OF OPERATIONS (UNAUDITED)
The following table sets forth, for the periods indicated, the Company's
consolidated statements of income expressed as a percentage of net sales.
This table and the subsequent discussion should be read in conjunction
with the consolidated financial statements and related notes.
Three months ended Six months ended
June 30, June 30,
2001 2000 2001 2000
---- ---- ---- ----
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of products sold 87.2 87.2 86.7 86.3
-------- ---------- ---------- -------
Gross profit 12.8 12.8 13.3 13.7
Selling, general and administrative expense 6.8 6.9 6.3 7.7
Payments to beneficiary in lieu of taxes 0.3 0.1 0.1 0.1
-------- ---------- ---------- -------
Income from operations 5.7 5.8 6.9 5.9
Interest expense 5.0 5.1 5.3 5.2
Other expense (income) 2.4 (0.4) 3.4 (0.2)
-------- ---------- ---------- -------
(Loss) Income before taxes (1.7) 1.1 (1.8) 0.9
Tax provision (benefit) 0.1 0.1 (0.4) (0.2)
Minority interest 0.0 0.0 0.1 0.1
-------- ---------- ---------- -------
Net (loss) income before cumulative effect of
change in accounting principle (1.8) 1.0 (1.5) 1.0
Cumulative effect of change in accounting
principle 0.0 0.0 0.0 0.0
-------- ---------- ---------- -------
Net (loss) income (1.8)% 1.0 % (1.5)% 1.0 %
======== ========== ========== =======
THREE MONTHS ENDED JUNE 30, 2001 COMPARED TO THREE MONTHS ENDED JUNE 30,
2000
NET SALES. Net sales for the second quarter of 2001 decreased $2.3
million, or 0.5%, from the second quarter of 2000. Internationally, sales
increased $12.9 million, or 3.9%, due to increased volumes. This increase
was negatively impacted by a $22.0 million devaluation of the Euro during
the second quarter of 2001 compared to the second quarter of 2000.
Domestically, sales decreased $15.2 million, or 9.7%, generally due to
the slow down in the retail automotive market creating sales volume
decreases.
GROSS PROFIT. Gross profit for the second quarter of 2001 decreased $0.4
million, or 0.6%, to $61.6 million compared to $62.0 million for the
second quarter of 2000. As a percentage of net sales, gross profit was
comparable with the second quarter of 2000. Internationally, there was a
decrease in gross profit margin to 10.1% from a gross profit margin of
12.5% in the second quarter of 2000. This decrease in gross profit margin
is mainly due to an increase in sales of modules with module purchased
components which have a lower percentage markup. Domestically, there was
an increase in the gross profit margin to 19.2%, from a gross profit
margin of 13.5% in the second quarter of 2000. The domestic gross profit
margin was higher primarily due to profitability associated with tooling.
The Company continues to evaluate loss reserves and in the second quarter
of 2001 reduced the reserve for bad debt in the amount of $2.3 million.
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SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expense for the second quarter of 2001 decreased $0.8
million, or 2.4%, to $32.6 million compared to $33.4 million for the
second quarter of 2000. As a percentage of net sales, selling, general
and administrative expense decreased to 6.8% for the second quarter of
2001 as compared to 6.9% for the second quarter of 2000. The decrease is
primarily attributable to the Company's continued focus on reducing and
controlling costs.
INCOME FROM OPERATIONS. As a result of the foregoing, income from
operations for the second quarter of 2001 decreased $0.4 million, or
1.3%, to $27.6 million, compared to income from operations of $28.0
million for the second quarter of 2000. As a percentage of net sales,
income from operations decreased to 5.7% for the second quarter of 2001
from 5.8% for the second quarter of 2000.
INTEREST EXPENSE. Second quarter interest expense decreased $0.7 million,
or 2.8%, to $24.1 million in 2001 as compared to interest expense of
$24.8 million in 2000. The decrease is the result of lower interest rates
on variable rate debt. Of the total interest expense for the second
quarter of 2001, $1.3 million was a non-cash amortization expense due to
the termination of interest rate swaps in 2000.
OTHER EXPENSE (INCOME). Other expense for the second quarter of 2001 is
primarily composed of unrealized currency exchange losses of $12.6
million. Other income for the second quarter of 2000 is primarily
composed of $7.0 million unrealized gain from derivative activity and
interest income offset by $5.3 million of unrealized currency exchange
losses.
NET (LOSS) INCOME. Due to the foregoing, the Company experienced a net
loss for the second quarter of 2001 of $8.9 million compared to net
income of $4.2 million for the second quarter of 2000. Excluding the
after tax effect of the net unrealized currency exchange losses during
the second quarter of 2001, the Company would have had a net loss of $2.7
million.
SIX MONTHS ENDED JUNE 30, 2001 COMPARED TO SIX MONTHS ENDED JUNE 30, 2000
NET SALES. Net sales for the first six months of 2001 increased $3.2
million, or 0.3%, from the first six months of 2000. Internationally,
sales increased $55.2 million, or 8.6%, to $696.4 million, due to
increased volumes. This increase was negatively impacted by a $25.3
million devaluation of the Euro during the first six months of 2001
compared to the first six months of 2000. Domestically, sales decreased
$52.0 million, or 16.1%, generally due to the slow down in the retail
automotive market creating sales volume decreases.
GROSS PROFIT. Gross profit for the first six months of 2001 decreased
$3.5 million to $128.2 million compared to $131.7 million for the first
six months of 2000. As a percentage of net sales, gross profit was
comparable with the prior year. The Company continues to evaluate loss
reserves and in the first six months of 2001 reduced the reserve for bad
debt in the amount of $2.3 million.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expense for the first six months of 2001 decreased $12.8
million, or 17.4%, to $60.9 million compared to $73.7 million for the
first six months of 2000. As a percentage of net sales, selling, general
and administrative expense decreased to 6.3% for the first six months of
2001 as compared to 7.7% for the first six months of 2000. The decrease
is mainly attributable to the Company's continued focus on reducing and
controlling costs.
INCOME FROM OPERATIONS. As a result of the foregoing, income from
operations for the first six months of 2001 increased $9.1 million, or
16.0%, to $66.0 million, compared to $56.9 million for the first six
months of 2000. As a percentage of net sales, income from operations
increased to 6.9% for the first six months of 2001 compared to 5.9% for
the first six months of 2000 mainly due to the reasons mentioned above.
INTEREST EXPENSE. Interest expense for the first six months of 2001
increased $0.4 million, or 0.8%, to $50.8 million in 2001 as compared to
$50.4 million for the first six months of 2000. Of the total interest
expense for the first six months of 2001, $2.6 million was a non-cash
amortization expense due to the termination of interest rate swaps in
2000. There was no similar non-cash expense during the first six months
of 2000.
22
25
OTHER EXPENSE (INCOME). Other expense for the first six months of 2001 is
primarily composed of unrealized currency exchange losses of $33.2
million. Other income for the first six months of 2000 is primarily
composed of $45.4 million of realized gain from derivative activity and
interest income offset by $43.1 million of unrealized currency exchange
losses and derivative activity.
NET (LOSS) INCOME. Due to the foregoing, net loss for the first six
months of 2001 was $14.2 million compared to net income of $9.8 million
for the first six months of 2000. Excluding the after tax effect of the
net unrealized currency exchange losses during the first six months of
2001, the Company would have had net income of $0.1 million.
LIQUIDITY AND CAPITAL RESOURCES (UNAUDITED)
The Company's consolidated working capital was $112.6 million at June 30,
2001, compared to $129.5 million at December 31, 2000, a decrease of
$16.9 million. The Company's working capital ratio was 1.3x at June 30,
2001 and December 31, 2000. The decrease in working capital is due to a
decrease in current assets, primarily accounts receivables, inventories,
and prepaid and other current assets slightly offset by decreases in
accounts payable and accrued expenses. Net cash provided by operating
activities was $56.3 million for the year ended June 30, 2001 compared to
$83.0 million for the six months ended June 30, 2000. The decrease in
cash provided by operations is largely due to lower results of operations
and the absence of realized gains on derivatives.
Capital expenditures were $41.0 million for the six months ended June 30,
2001 compared to $41.4 million for the same period in 2000. The Company
continues to upgrade machinery and equipment and paint lines at all
facilities to handle increased sales volumes and general reconditioning
of equipment.
In the ordinary course of business, the Company seeks additional business
with existing and new customers. The Company continues to compete for the
right to supply new components which could be material to the Company and
requires substantial capital investment in machinery, equipment, tooling
and facilities. As of the date hereof, however, the Company has no formal
commitments with respect to any such material business.
Net cash used in financing activities was $14.5 million for the six
months ended June 30, 2001 compared to net cash used in financing
activities of $35.0 million for the same period in 2000. The fluctuation
primarily relates to additional payments made in 2000 that were not made
in 2001 on the interim term loan.
The revolving credit facility permits the Company to borrow up to the
lesser of a borrowing base computed as a percentage of accounts
receivable and inventory, or $175.0 million less the amount of any
letters of credit issued against the credit agreement. At June 30, 2001
the Company had $114.1 million outstanding with $60.9 million still
available under the revolving credit facility. The credit agreement and
documents governing the Company's 9 1/2% senior notes due 2005, 11%
senior notes due 2007 and 12% senior subordinated notes due 2009 contain
various covenants. As of June 30, 2001, the Company was in compliance
with all such covenants.
The Company believes that its existing cash balances, operating cash
flow, borrowings under its bank credit facility and other short term
arrangements will be sufficient to fund working capital needs and normal
capital expenditures required for the operation of its existing business
through the end of 2001. The Company is obligated to issue $125 million
of senior subordinated notes prior to March 31, 2002. The Company is
exploring its options related to this new debt issuance and the existing
bank credit facility due to this obligation. In addition, the Company is
currently not hedged on any foreign currency fluctuations and is
reviewing options to mitigate its exposure to currency movements.
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26
INDUSTRY TRENDS
As a result of lower production volumes for our North American customers
in the second quarter of 2001, as compared to the same period in 2000, as
well as the weaker retail automotive market in North America, our
domestic net sales decreased 9.7% during the second quarter of 2001. In
light of the current market conditions, sales to our North American
customers for production parts are forecasted to be lower than the levels
in 2000, although, we expect some of the lost sales from the first six
months to be made up in the third and fourth quarters. In response to
these market factors, we continue to reassess staffing levels and other
contractual relationships to control and reduce costs. European
operations continue to be strong, but there are indications of weakening
within the European market. In addition, currency movements may continue
to have a significant impact on operations throughout the year.
NEW ACCOUNTING STANDARDS
In June 1998, the FASB approved SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and
reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging
activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and
measure those instruments at fair value. This Standard was effective in
the first quarter of the Company's fiscal year beginning January 1, 2001.
The effect to the Company on adopting this standard was to record a
cumulative effect of change in accounting principle of $0.2 million and
an additional $0.1 million of unrealized loss in the first quarter of
2001 offset by a $0.1 million unrealized gain in the second quarter of
2001.
In June 2001, the FASB Statement No. 142, "Goodwill and Other Intangible
Assets," was approved for issuance. FASB Statement No. 142 establishes
new standards for goodwill acquired in business combinations. Once we
adopt FASB Statement No. 142 on January 1, 2002, we will no longer
amortize goodwill. Instead, we will periodically evaluate goodwill for
impairment. We expect to amortize approximately $6.0 million of goodwill
in the year 2001.
* * * * * * *
The foregoing discussion in MD&A includes forward-looking statements
within the meaning of the Securities Exchange Act of 1934 and that are
subject to a number of risks and uncertainties. Such factors include,
among others, the following: international, national and local general
economic and market conditions; demographic changes; the size and growth
of the automobile market or the plastic automobile component market; the
ability of the Company to sustain, manage or forecast its growth; the
Company successfully remediating Year 2000 issues; the size, timing and
mix of purchases of the Company's products; new product development and
introduction; existing government regulations and changes in, or the
failure to comply with, government regulations; adverse publicity;
dependence upon original equipment manufacturers; liability and other
claims asserted against the Company; competition; the loss of significant
customers or suppliers; fluctuations and difficulty in forecasting
operating results; unfavorable currency exchange rates relative to the
U.S. dollar; changes in business strategy or development plans; business
disruptions; product recalls; warranty costs; the ability to attract and
retain qualified personnel; the ability to protect technology; retention
of earnings; and control and the level of affiliated transactions.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company is exposed to various market risks, including changes in
foreign currency exchange rates and interest rates. In order to manage
the risk arising from these exposures, Venture has entered into a variety
of foreign exchange and interest rate financial instruments. A discussion
of the Company's accounting policies for derivative financial instruments
can be found in the Organization and Summary of Significant Accounting
Policies and Financial Instruments footnotes to the financial statements
found in Item 8 of the Company's 2000 Annual Report on Form 10-K.
FOREIGN CURRENCY EXCHANGE RATE RISK. The Company has foreign currency
exposures related to buying, selling, and financing in currencies other
than the local currencies in which it operates. The Company's most
significant foreign currency exposures relate to Germany, Spain, France,
the United Kingdom, the Czech Republic, Mexico, Brazil and Canada.
A portion of the Company's assets are based in its foreign operations and
are translated into U. S. dollars at foreign currency exchange rates in
effect as of the end of each period, with the effect of such translation
reflected as a separate component of member's equity. Accordingly, the
Company's consolidated member's equity will fluctuate depending upon the
weakening or strengthening of the U. S. dollar against the respective
foreign currency. A hypothetical 10% change in foreign currency exchange
rates would result in an approximate $26.2 million change in earnings.
The model assumes a parallel shift in foreign currency exchange rates.
Exchange rates rarely move in the same direction. The assumption that
exchange rates change in a parallel fashion may overstate or understate
the impact of changing exchange rates on assets, liabilities and earnings
denominated in a foreign currency.
INTEREST RATE RISK. The Company has exposure to interest rate risk on a
portion of its debt obligations. A one percent change in interest rates
on floating rate debt would result in approximately $1.8 million change
in earnings for the six months ended June 30, 2001.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In 1998 and 1999, the Michigan Department of Environmental Quality (MDEQ)
issued three letters of violation to our Grand Rapids, Michigan facility,
alleging violations of certain emission limitations and coating solvent
content requirements of the facility's state air use permit. In December
of 2000, we filed suit against the MDEQ contesting some of these
violations. In 2001, jointly with MDEQ, we have suspended any proceedings
under this suit and are presently reviewing and discussing the alleged
violations with the hope of resolving this matter without further
litigation, as it is possible that some of the violations may be the
result of computation and reporting discrepancies. It is possible that
the MDEQ may seek administrative penalties in connection with the
resolution of these matters. We do not believe that the amount of those
penalties, if any, will have a material adverse effect on our operations,
or that the resolution of these matters will require material capital
expenditures, although there can be no assurance that this will be the
case. On April 9, 2001, the U.S. Environmental Protection Agency (EPA)
issued a Notice of Violation (NOV) to us regarding air emission for the
years 1998 and 2000 for the same facility. Specifically, the NOV states
that the Company exceeded certain permit levels for emission of volatile
organic compounds for the years noted above. In May of 2001 we met with
the EPA to discuss the NOV and are awaiting a request for more
information. On July 17, 2001, the MDEQ issued another NOV for the same
facility for the year 2001 alleging the same exceedance of certain permit
limits. The Company has taken steps to cease any further violations of
this same type. At the present time, the Company is unable to quantify or
qualify any liability for these alleged EPA or MDEQ violations.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits. None
(b) The Company did not file any reports on Form
8-K during the quarter ended June 30, 2001.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VENTURE HOLDINGS COMPANY LLC, VEMCO, INC.,
VENTURE INDUSTRIES CORPORATION, VENTURE
MOLD & ENGINEERING CORPORATION, VENTURE
LEASING COMPANY, VEMCO LEASING, INC.,
VENTURE HOLDINGS CORPORATION, VENTURE
SERVICE COMPANY, EXPERIENCE MANAGEMENT
LLC, VENTURE EUROPE, INC., AND VENTURE EU
CORPORATION
Date: August 14, 2001 /s/ Michael D. Alexander
-----------------------------------
Michael D. Alexander
Chief Financial Officer
Signing on behalf of each registrant and as
principal financial officer of each registrant.
26