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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
/X/ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 2001
OR
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______________ to ________________
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COMMISSION FILE NUMBER 333-49011
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[ ADVANCED ACCESSORY SYSTEMS LOGO ]
ADVANCED ACCESSORY SYSTEMS, LLC.
(Exact name of Registrant as specified in its Charter)
DELAWARE 13-3848156
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12900 HALL ROAD, SUITE 200, STERLING HEIGHTS, MI 48313
(Address of principal executive offices) (Zip Code)
(810) 997-2900
(Telephone Number)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
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, and (2) has been subject to such filing requirements
for the past 90 days.
Yes |X| No
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ADVANCED ACCESSORY SYSTEMS, LLC
INDEX
Page No.
--------
Part I. Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheets as of 1
September 30, 2001 and December 31, 2000
Consolidated Condensed Statements of Income 2
for the Three and Nine Months Ended
September 30, 2001 and 2000
Consolidated Condensed Statements of 3
Cash Flows for the Nine Months
Ended September 30, 2001 and 2000
Consolidated Condensed Statement of Changes 4
in Members' Equity for the Nine Months
Ended September 30, 2001
Notes to Consolidated Condensed Financial 5
Statements
Item 2. Management's Discussion and Analysis of 13
Financial Condition and Results of
Operations
Item 3. Quantitative and Qualitative Disclosures About 18
Market Risk
Part II. Other Information and Signature
Item 1. Legal Proceedings 18
Item 2. Changes in Securities 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Submission of Matters to a Vote of 18
Security-holders
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
Signature 19
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ADVANCED ACCESSORY SYSTEMS, LLC
CONSOLIDATED CONDENSED BALANCE SHEETS
AS OF SEPTEMBER 30, 2001 AND DECEMBER 31, 2000
(DOLLARS IN THOUSANDS)
September 30, December 31,
2001 2000
(Unaudited)
ASSETS
Current assets
Cash $ 1,837 $ 3,315
Accounts receivable, less reserves
of $1,724 and $2,140, respectively 55,380 42,942
Inventories
Raw materials 16,348 17,746
Work-in-process 9,025 7,910
Finished goods 17,037 18,978
Reserves (3,218) (2,540)
------------- --------------
Total inventory 39,192 42,094
Deferred income taxes 2,170 1,775
Other current assets 5,492 6,874
------------- --------------
Total current assets 104,071 97,000
Property and equipment, net 55,034 58,232
Goodwill, net 74,537 77,391
Other intangible assets, net 4,218 5,030
Deferred income taxes 1,919 2,020
Other noncurrent assets 2,072 2,824
------------- --------------
$ 241,851 $ 242,497
============= ==============
LIABILITIES AND MEMBERS' EQUITY
Current liabilities
Current maturities of long-term debt $ 36,281 $ 11,811
Accounts payable 31,531 24,996
Accrued liabilities 26,824 25,402
Mandatorily redeemable warrants 5,100 --
------------- --------------
Total current liabilities 99,736 62,209
------------- --------------
Noncurrent liabilities
Deferred income taxes 1,431 1,001
Other noncurrent liabilities 4,665 4,557
Long-term debt, less current maturities 124,663 163,824
------------- --------------
Total noncurrent liabilities 130,759 169,382
------------- --------------
Mandatorily redeemable warrants -- 5,010
------------- --------------
Members' equity
Class A Units 7,389 7,409
Class A-1 Units 4,106 4,117
Other comprehensive loss (174) (1,077)
Retained earnings (deficit) 35 (4,553)
------------- --------------
11,356 5,896
------------- --------------
$ 241,851 $ 242,497
============= ==============
The accompanying notes are an integral part of the
consolidated condensed financial statements.
1
ADVANCED ACCESSORY SYSTEMS, LLC
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
(DOLLARS IN THOUSANDS)
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
Net sales $ 75,555 $ 73,122 $ 243,648 $ 251,958
Cost of sales 57,840 56,605 184,170 186,334
------------- ------------- ------------- --------------
Gross profit 17,715 16,517 59,478 65,624
Selling, administrative and
product development expenses 11,066 11,021 34,142 34,919
Amortization of intangible assets 743 742 2,241 2,254
------------- ------------- ------------- --------------
Operating income 5,906 4,754 23,095 28,451
------------- ------------- ------------- --------------
Other income (expense)
Interest expense (4,245) (4,312) (13,286) (13,275)
Foreign currency gain (loss), net 2,679 (4,912) (3,364) (8,866)
Other expense (18) (59) (79) (60)
------------- ------------- ------------- --------------
Income (loss) before income taxes 4,322 (4,529) 6,366 6,250
Provision (benefit) for income taxes 1,890 (1,147) 963 (1,139)
------------- -------------- ------------- ---------------
Net income (loss) $ 2,432 $ (3,382) $ 5,403 $ 7,389
============= ============== ============= ==============
The accompanying notes are an integral part of the
consolidated condensed financial statements.
2
ADVANCED ACCESSORY SYSTEMS, LLC
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
(DOLLARS IN THOUSANDS)
(UNAUDITED)
Nine Months Ended
September 30,
2001 2000
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $ 5,403 $ 7,389
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 10,468 10,506
Loss on disposal of property and equipment 162 2
Deferred taxes 12 (2,049)
Foreign currency loss 3,035 7,883
Changes in assets and liabilities, net 1,141 (3,568)
------------- --------------
Net cash provided by operating
activities 20,221 20,163
------------- --------------
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Acquisition of property and equipment (5,414) (7,617)
Acquisition, net of cash acquired -- (2,774)
------------- --------------
Net cash used for investing activities (5,414) (10,391)
------------- --------------
CASH FLOWS USED FOR FINANCING
ACTIVITIES:
Net increase (reduction) in revolving loan (6,594) 2,000
Collection on notes receivable for unit purchase 59 65
Payments on long-term debt (8,789) (10,783)
Distributions to members (815) (6,103)
------------- --------------
Net cash used for financing activities (16,139) (14,821)
------------- --------------
Effect of exchange rate changes (146) 404
------------- --------------
Net decrease in cash (1,478) (4,645)
Cash at beginning of period 3,315 8,718
------------- --------------
Cash at end of period $ 1,837 $ 4,073
============= ==============
The accompanying notes are an integral part of the
consolidated condensed financial statements.
3
ADVANCED ACCESSORY SYSTEMS, LLC
CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN MEMBERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
(DOLLARS IN THOUSANDS)
(UNAUDITED)
Other Retained Total
Members' comprehensive earnings members'
capital loss (deficit) equity
------------- ------------- ------------- -------------
Balance at December 31, 2000 $ 11,526 $ (1,077) $ (4,553) $ 5,896
Collection on notes receivable for unit purchase 59 -- -- 59
Accretion of membership warrants (90) -- -- (90)
Distributions to members -- -- (815) (815)
Currency translation adjustment -- 903 -- 903
Net income -- -- 5,403 5,403
------------- ------------- ------------- -------------
Balance at September 30, 2001 $ 11,495 $ (174) $ 35 $ 11,356
============= ============= ============= =============
The accompanying notes are an integral part of the
consolidated condensed financial statements.
4
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
1. BASIS OF PRESENTATION
In the opinion of the Company, the accompanying unaudited consolidated
condensed financial statements contain all adjustments, which are
normal and recurring in nature, necessary to present fairly its
financial position as of September 30, 2001 and December 31, 2000 and
the results of its operations for the three and nine months ended
September 30, 2001 and 2000 and its cash flows for the nine months
ended September 30, 2001 and 2000.
During 2000, the Company adopted the provisions of the EITF 00-10,
"Accounting for Shipping and Handling Revenues and Costs", which
requires that all amounts billed to customers related to shipping and
handling costs be classified as revenue. In prior years, these costs
and the reimbursement of these costs were netted in our financial
statements. Accordingly, amounts billed to customers are now included
in net sales and the related costs are included in cost of sales in the
accompanying statement of operations. There was no impact on net income
(loss).
These consolidated condensed financial statements should be read
together with the Company's audited financial statements presented in
the Company's Annual Report on Form 10-K for the year ended December
31, 2000, filed with the Securities and Exchange Commission on March
27, 2001.
2. COMPREHENSIVE INCOME
Comprehensive income for the third quarter of 2001 and 2000 of $3,096
and $(3,081), respectively, and for the first nine months of 2001 and
2000 of $6,309 and $8,177, respectively, includes reported net income
adjusted by the effect of changes in the cumulative translation
adjustment.
3. MANDATORILY REDEEMABLE WARRANTS
Effective June 30, 2001, the Company adopted Emerging Issues Task Force
(EITF) Consensus 00-19, "Determination of Whether Share Settlement is
Within the Control of the Issuer for Purposes of Applying Issue No.
96-13, 'Accounting for Derivative Financial Instruments Indexed to, and
Potentially Settled in, a Company's Own Stock'". Accordingly, based
upon the terms of the warrants, the Company has reclassified the
mandatorily redeemable warrants to a component of current liabilities.
Future accretion will be included in the determination of net income or
loss for each reporting period.
4. DEBT
Effective as of September 30, 2001 the Company received a waiver from
its senior lenders which waived violations in the maintenance of
certain financial covenants for the quarter ending September 30, 2001
until December 15, 2001. The waiver is intended to allow the Company
sufficient time to negotiate an amendment to the Second Amended and
Restated Credit Agreement with its lenders which would reset the
financial covenant requirements to levels consistent with future
operating projections. Unless the Company obtains such an amendment or
future waivers of its existing credit facilities or is able to
refinance such credit facilities, the Company believes that it is
probable that it will not be in compliance with one or more of the
financial covenants during future periods. Accordingly, the related
debt has been classified as current.
5
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
5. CONDENSED CONSOLIDATING INFORMATION
On October 1, 1997, the Company and its wholly-owned subsidiary, AAS
Capital Corporation, issued and sold $125,000 of its 9 3/4 Senior
Subordinated Notes due 2007 ("the Notes"). The Notes are guaranteed on
a full, unconditional and joint and several basis by all of the
Company's direct and indirect wholly-owned domestic subsidiaries. The
following condensed consolidating financial information presents the
financial position, results of operations and cash flows of (i) the
Company as parent, as if it accounted for its subsidiaries on the
equity method, and AAS Capital Corporation as issuers; (ii) guarantor
subsidiaries which are domestic, wholly-owned subsidiaries and include
SportRack LLC, AAS Holdings, Inc., Valley Industries, LLC, and ValTek,
LLC; and (iii) the non-guarantor subsidiaries which are foreign,
wholly-owned subsidiaries and include Brink International B.V. and its
subsidiaries, SportRack Accessories, Inc. and its subsidiary, and
SportRack Automotive GmbH and its subsidiaries. The guarantor and
non-guarantor subsidiaries for the three and nine months ended
September 30, 2001 and 2000 have been allocated a portion of certain
corporate overhead costs on a basis consistent with each subsidiary's
relative business activity and interest on intercompany debt balances.
Since its formation in September 1997, AAS Capital Corporation has had
no operations and has no assets or liabilities at September 30, 2001.
6
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
5. CONDENSED CONSOLIDATING INFORMATION -- (continued)
CONDENSED CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 2001
GUARANTOR NON-GUARANTOR ELIMINATIONS/
ISSUERS SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
-------------- ------------- ----------------- -------------- ------------
(DOLLAR AMOUNTS IN THOUSANDS)
ASSETS
Current assets
Cash................................... $ 1,129 $ 242 $ 466 $ -- $ 1,837
Accounts receivable.................... -- 36,171 19,209 -- 55,380
Inventories............................ -- 17,360 21,832 -- 39,192
Deferred income taxes and other
current assets........................ 278 4,016 3,368 -- 7,662
----------- ----------- ----------- ----------- ----------
Total current assets.............. 1,407 57,789 44,875 -- 104,071
----------- ----------- ----------- ----------- ----------
Property and equipment, net.............. -- 34,293 20,741 -- 55,034
Goodwill, net............................ 995 54,487 19,055 -- 74,537
Intangible assets, net................... 3,601 80 537 -- 4,218
Deferred income taxes and other
noncurrent assets...................... 93 1,515 2,383 -- 3,991
Investment in subsidiaries............... 70,098 9,955 -- (80,053) --
Intercompany notes receivable............ 80,982 -- -- (80,982) --
------------ ----------- ----------- ----------- ----------
Total assets...................... $ 157,176 $ 158,119 $ 87,591 $ (161,035) $ 241,851
============ =========== =========== =========== ==========
LIABILITIES AND MEMBERS'
EQUITY
Current liabilities
Current maturities of long-term debt... $ 4,751 $ 1,005 $ 30,525 $ -- $ 36,281
Accounts payable....................... -- 23,322 8,209 -- 31,531
Accrued liabilities and deferred
income taxes......................... 9,441 8,012 9,371 -- 26,824
Mandatorily redeemable warrants.......... 5,100 -- -- -- 5,100
------------ ----------- ----------- ----------- ----------
Total current liabilities......... 19,292 32,339 48,105 -- 99,736
------------ ----------- ----------- ----------- ----------
Deferred income taxes and other
noncurrent liabilities................. 2,003 496 3,597 -- 6,096
Long-term debt, less current maturities.. 124,663 -- -- -- 124,663
Intercompany debt........................ -- 26,444 54,538 (80,982) --
Members' equity.......................... 11,218 98,840 (18,649) (80,053) 11,356
------------ ----------- ----------- ----------- ----------
Total liabilities and members'
equity......................... $ 157,176 $ 158,119 $ 87,591 $ (161,035) $ 241,851
============ =========== =========== =========== ==========
7
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
5. CONDENSED CONSOLIDATING INFORMATION -- (continued)
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2000
GUARANTOR NON-GUARANTOR ELIMINATIONS/
ISSUERS SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
-------------- ------------- ----------------- -------------- ------------
(DOLLAR AMOUNTS IN THOUSANDS)
ASSETS
Current assets
Cash................................... $ 1,153 $ 246 $ 1,916 $ -- $ 3,315
Accounts receivable.................... -- 28,309 14,633 -- 42,942
Inventories............................ -- 19,148 22,946 -- 42,094
Deferred income taxes and other
current assets........................ 7 5,180 3,462 -- 8,649
----------- ----------- ----------- ----------- ----------
Total current assets.............. 1,160 52,883 42,957 -- 97,000
----------- ----------- ----------- ----------- ----------
Property and equipment, net.............. -- 34,830 23,402 -- 58,232
Goodwill, net............................ 1,025 56,144 20,222 -- 77,391
Other intangible assets, net............. 3,968 234 828 -- 5,030
Deferred income taxes and other
noncurrent assets...................... 93 2,385 2,366 -- 4,844
Investment in subsidiaries............... 57,615 9,955 -- (67,570) --
Intercompany notes receivable............ 91,695 -- -- (91,695) --
------------ ----------- ----------- ----------- ----------
Total assets...................... $ 155,556 $ 156,431 $ 89,775 $ (159,265) $ 242,497
============ =========== =========== =========== ==========
LIABILITIES AND MEMBERS'
EQUITY
Current liabilities
Current maturities of long-term debt... $ -- $ -- $ 11,811 $ -- $ 11,811
Accounts payable....................... -- 16,689 8,307 -- 24,996
Accrued liabilities and deferred
income taxes......................... 6,799 8,027 10,576 -- 25,402
------------ ----------- ----------- ----------- ----------
Total current liabilities......... 6,799 24,716 30,694 -- 62,209
------------ ----------- ----------- ----------- ----------
Deferred income taxes and other
noncurrent liabilities................. 2,003 343 3,212 -- 5,558
Long-term debt, less current maturities.. 135,976 -- 27,848 -- 163,824
Intercompany debt........................ -- 46,064 45,631 (91,695) --
Mandatorily redeemable warrants.......... 5,010 -- -- -- 5,010
Members' equity.......................... 5,768 85,308 (17,610) (67,570) 5,896
------------ ----------- ----------- ----------- ----------
Total liabilities and members'
equity........................ $ 155,556 $ 156,431 $ 89,775 $ (159,265) $ 242,497
============ =========== =========== =========== ==========
8
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
5. CONDENSED CONSOLIDATING INFORMATION -- (continued)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001
GUARANTOR NON-GUARANTOR ELIMINATIONS/
ISSUERS SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
-------------- ------------- ----------------- -------------- ------------
(DOLLAR AMOUNTS IN THOUSANDS)
Net sales................................ $ -- $ 53,656 $ 21,899 $ -- $ 75,555
Cost of sales............................ -- 43,493 14,347 -- 57,840
---------- ---------- ----------- ---------- ----------
Gross profit........................... -- 10,163 7,552 -- 17,715
Selling, administrative and product
development expenses................... 72 5,992 5,002 -- 11,066
Amortization of intangible assets........ 9 549 185 -- 743
---------- ---------- ----------- ---------- ----------
Operating income (loss)................ (81) 3,622 2,365 -- 5,906
Interest expense......................... 2,210 526 1,509 -- 4,245
Equity in income of subsidiaries......... 4,723 -- -- (4,723) --
Foreign currency gain (loss)............. -- -- 2,679 -- 2,679
Other income (expense)................... -- (60) 42 -- (18)
---------- ---------- ----------- ---------- ----------
Income before income taxes............... 2,432 3,036 3,577 (4,723) 4,322
Provision for income taxes............... -- -- 1,890 -- 1,890
---------- ---------- ----------- ---------- ----------
Net income .............................. $ 2,432 $ 3,036 $ 1,687 $ (4,723) $ 2,432
========== ========== =========== ========== ==========
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000
GUARANTOR NON-GUARANTOR ELIMINATIONS/
ISSUERS SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
-------------- ------------- ----------------- -------------- ------------
(DOLLAR AMOUNTS IN THOUSANDS)
Net sales................................ $ -- $ 50,207 $ 22,915 $ -- $ 73,122
Cost of sales............................ -- 40,533 16,072 -- 56,605
---------- ---------- ----------- ---------- ----------
Gross profit........................... -- 9,674 6,843 -- 16,517
Selling, administrative and product
development expenses................... 372 6,150 4,499 -- 11,021
Amortization of intangible assets........ 9 547 186 -- 742
---------- ---------- ----------- ---------- ----------
Operating income (loss)................ (381) 2,977 2,158 -- 4,754
Interest expense......................... 1,333 1,094 1,885 -- 4,312
Equity in income of subsidiaries......... (1,668) -- -- 1,668 --
Foreign currency loss.................... -- -- 4,912 -- 4,912
Other income (expense)................... -- (52) (7) -- (59)
---------- ---------- ----------- ---------- ----------
Income before income taxes............... (3,382) 1,831 (4,646) 1,668 (4,529)
Benefit for income taxes................. -- -- (1,147) -- (1,147)
---------- ---------- ----------- ---------- ----------
Net income (loss)........................ $ (3,382) $ 1,831 $ (3,499) $ 1,668 $ (3,382)
========== ========== =========== ========== ==========
9
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
5. CONDENSED CONSOLIDATING INFORMATION -- (continued)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
GUARANTOR NON-GUARANTOR ELIMINATIONS/
ISSUERS SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
-------------- ------------- ----------------- -------------- ------------
(DOLLAR AMOUNTS IN THOUSANDS)
Net sales................................ $ -- $ 172,276 $ 71,372 $ -- $ 243,648
Cost of sales............................ -- 136,171 47,999 -- 184,170
---------- ---------- ----------- ---------- ----------
Gross profit........................... -- 36,105 23,373 -- 59,478
Selling, administrative and product
development expenses................... 220 18,528 15,394 -- 34,142
Amortization of intangible assets........ 27 1,656 558 -- 2,241
---------- ---------- ----------- ---------- ----------
Operating income (loss)................ (247) 15,921 7,421 -- 23,095
Interest expense......................... 5,940 2,307 5,039 -- 13,286
Equity in income of subsidiaries......... 11,590 -- -- (11,590) --
Foreign currency loss.................... -- -- 3,364 -- 3,364
Other income (expense)................... -- (82) 3 -- (79)
---------- ---------- ----------- ---------- ----------
Income before income taxes............... 5,403 13,532 (979) (11,590) 6,366
Provision for income taxes............... -- -- 963 -- 963
---------- ---------- ----------- ---------- ----------
Net income............................... $ 5,403 $ 13,532 $ (1,942) $ (11,590) $ 5,403
========== ========== =========== ========== ==========
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
GUARANTOR NON-GUARANTOR ELIMINATIONS/
ISSUERS SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
-------------- ------------- ----------------- -------------- ------------
(DOLLAR AMOUNTS IN THOUSANDS)
Net sales................................ $ -- $ 174,819 $ 77,139 $ -- $ 251,958
Cost of sales............................ -- 134,675 51,659 -- 186,334
---------- ---------- ----------- ---------- ----------
Gross profit........................... -- 40,144 25,480 -- 65,624
Selling, administrative and product
development expenses................... 864 18,814 15,241 -- 34,919
Amortization of intangible assets........ 27 1,645 582 -- 2,254
---------- ---------- ----------- ---------- ----------
Operating income (loss)................ (891) 19,685 9,657 -- 28,451
Interest expense......................... 4,230 3,438 5,607 -- 13,275
Equity in income of subsidiaries......... 12,510 -- -- (12,510) --
Foreign currency loss.................... -- -- 8,866 -- 8,866
Other income (expense)................... -- (361) 301 -- (60)
---------- ---------- ----------- ---------- ----------
Income before income taxes............... 7,389 15,886 (4,515) (12,510) 6,250
Benefit for income taxes................. -- -- (1,139) -- (1,139)
---------- ---------- ----------- ---------- ----------
Net income (loss)........................ $ 7,389 $ 15,886 $ (3,376) $ (12,510) $ 7,389
========== ========== =========== ========== ==========
10
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
5. CONDENSED CONSOLIDATING INFORMATION -- (continued)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
GUARANTOR NON-GUARANTOR ELIMINATIONS/
ISSUERS SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
------------ ------------- ----------------- -------------- ------------
(DOLLAR AMOUNTS IN THOUSANDS)
Net cash provided by (used for) operating
activities................................. $ (3,387) $ 23,110 $ 498 $ -- $ 20,221
---------- --------- ---------- ---------- ----------
Cash flows from investing activities:
Acquisition of property and
equipment................................ -- (3,494) (1,920) -- (5,414)
---------- --------- ---------- ---------- -----------
Net cash used for investing activities... -- (3,494) (1,920) -- (5,414)
---------- --------- ---------- ---------- ----------
Cash flows from financing activities:
Change in intercompany debt................ 10,713 (19,620) 8,907 -- --
Decrease in revolving loan................. (6,594) -- -- -- (6,594)
Collection on notes receivable for unit
purchase................................. 59 -- -- -- 59
Repayment of debt.......................... -- -- (8,789) -- (8,789)
Distributions to members................... (815) -- -- -- (815)
---------- --------- ---------- ---------- ----------
Net cash provided by (used for)
financing activities................... 3,363 (19,620) 118 -- (16,139)
---------- --------- ---------- ---------- ----------
Effect of exchange rate changes.............. -- -- (146) -- (146)
---------- --------- ---------- ---------- ---------
Net decrease in cash......................... (24) (4) (1,450) -- (1,478)
Cash at beginning of period.................. 1,153 246 1,916 -- 3,315
---------- --------- ---------- ---------- ----------
Cash at end of period........................ $ 1,129 $ 242 $ 466 $ -- $ 1,837
========== ========= ========== ========== ==========
11
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
5. CONDENSED CONSOLIDATING INFORMATION -- (continued)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
GUARANTOR NON-GUARANTOR ELIMINATIONS/
ISSUERS SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
------------ ------------- ----------------- -------------- ------------
(DOLLAR AMOUNTS IN THOUSANDS)
Net cash provided by (used for) operating
activities.............................. $ (1,100) $ 16,318 $ 4,945 $ -- $ 20,163
---------- --------- ---------- ---------- ----------
Cash flows from investing activities:
Acquisition of property and
equipment............................. -- (6,148) (1,469) -- (7,617)
Acquisitions, net of cash acquired...... -- (1,515) (1,259) -- (2,774)
---------- --------- ---------- ---------- ----------
Net cash used for investing activities -- (7,663) (2,728) -- (10,391)
---------- --------- ---------- ---------- ----------
Cash flows from financing activities:
Change in intercompany debt............. 6,029 (13,980) 7,951 -- --
Increase in revolving loan.............. 2,000 -- -- -- 2,000
Collection on notes receivable for unit
purchase.............................. 65 -- -- -- 65
Repayment of debt....................... -- -- (10,783) -- (10,783)
Distributions to members................ (6,103) -- -- -- (6,103)
---------- --------- ---------- ---------- ----------
Net cash provided by (used for)
financing activities................ 1,991 (13,980) (2,832) -- (14,821)
---------- --------- ---------- ---------- ----------
Effect of exchange rate changes........... -- -- 404 -- 404
---------- --------- ---------- ---------- ---------
Net increase (decrease) in cash........... 891 (5,325) (211) -- (4,645)
Cash at beginning of period............... -- 5,469 3,249 -- 8,718
---------- --------- ---------- ---------- ----------
Cash at end of period..................... $ 891 $ 144 $ 3,038 $ -- $ 4,073
========== ========= ========== ========== ==========
12
ADVANCED ACCESSORY SYSTEMS, LLC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001
The following discussion of the results of operations and financial
condition of the Company should be read in conjunction with the financial
statements and notes thereto of the Company included elsewhere in this Form
10-Q. Discussions containing forward-looking statements may be found in the
material set forth below. These may include statements projecting, forecasting
or estimating Company performance and industry trends. General risks that may
impact the achievement of such forecasts include, but are not limited to:
compliance with new laws and regulations, general economic conditions in the
markets in which the Company operates, fluctuation in demand for the Company's
products, significant raw material price fluctuations, and other business
factors. Any such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties. Actual events or results may
differ materially from those discussed in the forward-looking statements. All of
these forward-looking statements are based on estimates and assumptions made by
management of the Company which, although believed to be reasonable, are
inherently uncertain. The Company does not intend to update these
forward-looking statements.
GENERAL
An affiliate of J.P. Morgan Partners, LLC ("JPMP") and certain members
of the Company's management formed the Company in September 1995 to make
strategic acquisitions of automotive exterior accessory manufacturers and to
integrate those acquisitions into a global enterprise that would be a preferred
supplier to the automotive industry.
RECENT ACQUISITIONS
In February 2000, the Company through Valley Industries, acquired the
net assets of Titan Industries, Inc. ("Titan"). Titan is a North American
supplier of trailer balls and other towing related accessories to the automotive
aftermarket.
In September 2000, the Company through SportRack Accessories, acquired
the net assets of the Wiswall Hill Corporation ("Wiswall Hill" or
"Barrecrafters"). Wiswall Hill is a North American supplier of rack systems and
accessories to the automotive aftermarket under its popular brand name,
Barrecrafters.
In each instance, the acquisition was accounted for in accordance with
the purchase method of accounting and the operating results of the acquired
company have been included in the Company's consolidated financial statements
since the date of the respective acquisition.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 2000.
Net sales. Net sales for the third quarter of 2001 were $75.5 million,
representing an increase of $2.4 million, or 3.3%, over net sales for the third
quarter of 2000. This increase resulted primarily from increased sales to OEMs
of approximately $2.2 million resulting from sales of new products for new
vehicles introduced during 2001. This increase was partially offset by lower
production levels by the OEMs compared to the prior year. Aftermarket sales also
increased by $653,000 during the quarter. Partially offsetting these increases
was lower sales of approximately $418,000 due to the effect of declining
exchange rates between the U.S. Dollar and the currencies used by the Company's
foreign subsidiaries.
Gross profit. Gross profit for the third quarter of 2001 was $17.7
million, representing an increase of $1.2 million, or 7.3%, over the gross
profit for the third quarter of 2000. This increase resulted from the increase
in net sales and an increase in the gross margin percentage. Gross profit as a
percentage of net sales was 23.4% in the third quarter of 2001 compared to 22.6%
in the third quarter of 2000. The increase in the gross margin percentage is
attributable to the effects of spreading fixed costs over a higher sales base.
Selling, administrative and product development expenses. Selling,
administrative and product development expenses for the third quarter of 2001
were $11.0 million were unchanged as compared with the selling, administrative
and product development expenses for the third quarter of 2000. Selling,
administrative and product development expenses as a percentage of net sales
decreased to 14.6% in the third quarter of 2001 from 15.1% in the third quarter
of 2000. This decrease is the result of spreading fixed costs over a higher
sales base and decreased corporate administrative expenses.
Operating income. Operating income for the third quarter of 2001 was
$5.9 million, an increase of $1.2 million, or 24.2%, over operating income for
the third quarter of 2000 due to increased gross profit and decreased selling,
administrative and product development expenses. Operating income as a
percentage of net sales increased to 7.8% in the third quarter of 2001 from 6.5%
in the third quarter of 2000 due to the increase in the gross margin percentage
and the decrease in the percentage of selling, administrative and product
development expenses to sales.
13
ADVANCED ACCESSORY SYSTEMS, LLC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001
Interest expense. Interest expense for the third quarter of 2001 was
$4.2 million, which was approximately the same as interest expense for the third
quarter of 2000. Higher interest expense attributable to increased interest
rates on the Company's variable rate debt offset the lower average indebtedness
for the period.
Foreign currency gain (loss). Foreign currency gain in the third
quarter of 2001 was $2.7 million, compared to a foreign currency loss of $4.9
million in the third quarter of 2000. The Company's foreign currency loss is
primarily related to Brink which has indebtedness denominated in U.S. Dollars.
During the third quarter of 2001 the U.S. Dollar weakened in relation to the
European Euro, the functional currency of Brink, as compared with third quarter
of 2000 when the U.S. Dollar strengthened in relation to the European Euro.
Provision for income taxes. The Company and certain of its domestic
subsidiaries have elected to be taxed as limited liability companies for federal
income tax purposes. As a result of this election, most of the Company's
domestic taxable income accrues to the individual members. Certain of the
Company's domestic subsidiaries and foreign subsidiaries are subject to income
taxes in their respective jurisdictions. During the third quarter of 2001, the
Company had income before income taxes for its taxable subsidiaries totaling
$3.6 million and recorded a provision for income taxes of $1.9 million. The
effective tax rate differs from the U.S. federal income tax rate primarily due
to changes in valuation allowances on the deferred tax assets of SportRack
Accessories and differences in the tax rates of foreign countries. During the
third quarter of 2000, the Company had a loss before income taxes for its
taxable subsidiaries totaling $4.6 million and recorded a benefit for income
taxes of $1.1 million.
Net income. Net income for the third quarter of 2001 was $2.4 million,
as compared to a net loss of $3.4 million in the third quarter of 2000, a change
of $5.8 million. The change in net income is primarily attributable to increased
operating income and the foreign currency gain in the third quarter of 2001 as
compared with a foreign currency loss during the third quarter of 2000.
NINE MONTHS ENDED SEPTEMBER 31, 2001 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER
30, 2000.
Net sales. Net sales for the first nine months of 2001 were $243.6
million, representing a decrease of $8.3 million, or 3.3%, from net sales for
the first nine months of 2000. This decrease resulted from decreased sales to
OEMs of approximately $7.4 million and the effect of declining exchange rates
between the U.S. Dollar and the currencies used by the Company's foreign
subsidiaries totaling $3.2 million. The North American OEMs reduced vehicle
production beginning in the fourth quarter of 2000 and continuing in the first
nine months of 2001 in response to lower sales of new vehicles in the North
American automotive market. These decreases were partially offset by sales of
new products for new vehicles introduced during 2001 and higher sales to the
automotive aftermarket totaling $2.3 million.
Gross profit. Gross profit for the first nine months of 2001 was $59.5
million, representing a decrease of $6.1 million, or 9.4%, from the gross profit
for the first nine months of 2000. This decrease resulted from the decrease in
net sales and by a decrease in the gross margin percentage. Gross profit as a
percentage of net sales was 24.4% in the first nine months of 2001 compared to
26.0% in the first nine months of 2000. The decrease in the gross margin
percentage is attributable to the effects of spreading fixed costs over a lower
sales base, lower gross margin for North American towing products and
proportionately lower sales for Brink which has a greater gross margin
percentage as compared with the Company as a whole.
Selling, administrative and product development expenses. Selling,
administrative and product development expenses for the first nine months of
2001 were $34.1 million, representing a decrease of $777,000, or 2.2%, compared
with the selling, administrative and product development expenses for the first
nine months of 2000. Selling, administrative and product development expenses as
a percentage of net sales increased to 14.0% in the first nine months of 2001
from 13.9% in the first nine months of 2000.
Operating income. Operating income for the first nine months of 2001
was $23.1 million, a decrease of $5.4 million, or 18.8%, over operating income
for the first nine months of 2000. Operating income as a percentage of net sales
decreased to 9.5% in the first nine months of 2001 from 11.3% in the first nine
months of 2000 due to the decrease in the gross margin percentage and the
increase in the percentage of selling, administrative and product development
expenses to sales.
Interest expense. Interest expense for the first nine months of 2001
was $13.3 million, which was approximately the same as interest expense for the
first nine months of 2000. Higher interest expense attributable to increased
interest rates on the Company's variable rate debt offset the lower average
indebtedness for the period.
Foreign currency loss. Foreign currency loss in the first nine months
of 2001 was $3.4 million, compared to a foreign currency loss of $8.9 million in
the first nine months of 2000. The Company's foreign currency loss is primarily
related to the Brink which has indebtedness denominated in U.S. Dollars. During
the first nine months of 2001 and 2000 the U.S. Dollar strengthened in
14
ADVANCED ACCESSORY SYSTEMS, LLC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001
relation to the European Euro, the functional currency of Brink. This U.S.
Dollar strengthening was more significant during the first nine months of 2000
than the same period in 2001.
Provision (Benefit) for income taxes. The Company and certain of its
domestic subsidiaries have elected to be taxed as limited liability companies
for federal income tax purposes. As a result of this election, the Company's
domestic taxable income accrues to the individual members. Certain of the
Company's domestic subsidiaries and foreign subsidiaries are subject to income
taxes in their respective jurisdictions. During the first nine months of 2001,
the Company had a loss before income taxes for its taxable subsidiaries totaling
$979,000 and recorded a provision for income taxes of $963,000. The effective
tax rate differs from the U.S. federal income tax rate primarily due to changes
in valuation allowances on the deferred tax assets of SportRack Accessories and
differences in the tax rates of foreign countries. During the first nine months
of 2000, the Company had a loss before income taxes for its taxable subsidiaries
totaling $4.5 million and recorded a benefit for income taxes of $1.1 million.
Net income. Net income for the first nine months of 2001 was $5.4
million, as compared to net income of $7.4 million in the first nine months of
2000, a decrease of $2.0 million. The decrease in net income is primarily
attributable to decreased operating income partially offset by the decreased
foreign currency loss.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal liquidity requirements are to service its debt
and meet its working capital and capital expenditure needs. The Company's
indebtedness at September 30, 2001 was $160.9 million including current
maturities of $36.3 million. The Company expects to be able to meet its
liquidity requirements in the next fiscal quarter through cash provided by
operations and through borrowings available under the Second Amended and
Restated Credit Agreement, as amended ("U.S. Credit Facility"), or other
financing sources, see "Debt and Credit Sources" below.
WORKING CAPITAL AND CASH FLOWS
Working capital and key elements of the consolidated statement of cash
flows are (in thousands):
SEPTEMBER 30, DECEMBER 31,
2001 2000
------------- ------------
Working Capital........................................ $ 4,335 $ 34,791
FIRST NINE MONTHS
2001 2000
------------- ------------
Cash flows provided by operating activities............ $ 20,221 $ 20,163
Cash flows (used for) investing activities............. $ (5,414) $(10,391)
Cash flows (used for) financing activities............. $(16,139) $(14,821)
Working capital
Working capital decreased by $30.5 million to $4.3 million at September
30, 2001 from $34.8 million at December 31, 2000 due to an increase in the
current portion of long term debt of $24.5 million, an increase in accounts
payable of $6.4 million, an increase in accrued liabilities of $3.9 million, a
reclassification of mandatorily redeemable warrants as a component of current
liabilities of $5.1 million, a decrease in inventory of $1.9 million, and a
decrease in cash of $1.5 million. These were partially offset by an increase in
accounts receivable of $12.8 million.
See "Debt and Credit Sources" below for a discussion about the increase
in the current portion of long term debt. Increases in accounts receivable were
attributable to increased sales levels in the third quarter of 2001 as compared
with the fourth quarter of 2000. Increases in accounts payable reflected
increased purchasing activities to support the increased sales volume during the
third quarter of 2001 as compared with the forth quarter of 2000. Accrued
liabilities increased primarily from an increase in accrued interest on the
Company's Senior Subordinated Notes, which is paid semiannually on October 1 and
April 1.
15
ADVANCED ACCESSORY SYSTEMS, LLC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001
Operating activities
Cash flow provided by operating activities for the first nine months of
2001 was $20.2 million. Operating cash flow was comparable between the first
nine months of 2001 and 2000 regardless of a decrease in operating profit for
the period due to reduced working capital during 2001 which was the result of
efforts to manage working capital investment during an environment of slowing
economic activity.
Investing activities
During the first nine months of 2001 and 2000, investing cash flows
include acquisitions of property and equipment of $5.4 million and $7.6 million,
respectively, and were primarily for the expansion of capacity, productivity and
process improvements and maintenance. The Company's ability to make capital
expenditures is subject to restrictions in the U.S. Credit Facility, including a
maximum of $12.5 million of capital expenditures annually.
Investing cash flows for the first nine months of 2000 also included
$2.8 million paid to acquire the net assets of Titan Industries, Inc. on
February 22, 2000 and the net assets of the Wiswall Hill Corporation on
September 5, 2000.
Financing activities
During the first nine months of 2001 and 2000, financing cash flows
included payments of principal on the Company's term indebtedness of $8.8
million and $10.8 million, respectively. Distributions to members, representing
amounts sufficient to meet the tax liability on the Company's domestic taxable
income which accrues to individual members were $815,000 during the first nine
months of 2001 and were $6.1 million in the first nine months of 2000. Financing
cash flows also included net repayments under the Company's revolving loans of
$6.6 million during the first nine months of 2001 and net borrowings of $2.0
million during the first nine months of 2000.
DEBT AND CREDIT SOURCES
The Company's indebtedness was $160.9 million and $175.6 million at
September 30, 2001 and December 31, 2000, respectively. The Company expects that
its primary sources of cash will be from operating activities and borrowings
under its revolving credit facilities. As of September 30, 2001, the Company had
borrowings of $4.7 million under the revolving credit facilities and had a $8.0
million outstanding letter of credit issued to benefit plaintiffs in a lawsuit
against the Company. The available borrowing capacity as of September 30, 2001
was $12.3 million. Effective as of September 30, 2001 the Company received a
waiver from its senior lenders which waived violations in the maintenance of
certain financial covenants for the quarter ending September 30, 2001 until
December 15, 2001. The waiver is intended to allow the Company sufficient time
to negotiate an amendment to the Second Amended and Restated Credit Agreement
with its lenders which would reset the financial covenant requirements to levels
consistent with future operating projections. Unless the Company obtains such an
amendment or future waivers of its existing credit facilities or is able to
refinance such credit facilities, the Company believes that it is probable that
it will not be in compliance with one or more of the financial covenants during
future periods. Accordingly, the related debt has been classified as current.
While the Company has been successful in obtaining amendments under its existing
credit facilities and believes that it should be able to obtain a new amendment,
there is no assurance that any amendments or further waivers will be obtained.
The Company is also in discussions with a financial institution to provide new
senior secured credit facilities, which if entered into, would refinance in full
its existing senior credit facilities and provide additional revolving credit
availability. There is no assurance that the Company and the new financial
institution will be able to enter into the new senior secured credit facilities.
In addition to the foregoing, the Company's ability to satisfy its debt
obligations will depend upon its future operating performance, which will be
affected by prevailing economic conditions and financial, business, and other
factors, certain of which are beyond its control, as well as the availability of
revolving credit borrowings under its current or successor credit facilities. If
the Company is unable to service its indebtedness, it will be forced to take
actions such as reducing or delaying acquisitions and/or capital expenditures,
selling assets, restructuring or refinancing its indebtedness, or seeking
additional equity capital. There is no assurance that any of these remedies can
be effected on satisfactory terms, if at all, including, whether, and on what
terms, the Company could raise equity capital.
16
ADVANCED ACCESSORY SYSTEMS, LLC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001
The Company conducts operations in several foreign countries including
Canada, The Netherlands, Denmark, the United Kingdom, Sweden, France, Germany,
Poland, Spain, Czech Republic and Italy. Net sales from international operations
during the first nine months of 2001 were approximately $71.4 million, or 29.3%
of the Company's net sales. At September 30, 2001, assets associated with these
operations were approximately 36.6% of total assets, and the Company had
indebtedness denominated in currencies other than the U.S. Dollar of
approximately $5.2 million.
The Company's international operations may be subject to volatility
because of currency fluctuations, inflation and changes in political and
economic conditions in these countries. Most of the revenues and costs and
expenses of the Company's operations in these countries are denominated in the
local currencies. The financial position and results of operations of the
Company's foreign subsidiaries are measured using the local currency as the
functional currency. Certain of the Company's foreign subsidiaries have debt
denominated in currencies other than their functional currency. As the exchange
rates between the currency of the debt and the subsidiaries functional currency
change the Company is subject to foreign currency gains and losses.
The Company may periodically use foreign currency forward option
contracts to offset the effects of exchange rate fluctuations on cash flows
denominated in foreign currencies. The Company has no outstanding foreign
currency forward options at September 30, 2001 and does not use derivative
financial instruments for trading or speculative purposes.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("FAS 133"). The Company adopted this
statement at the beginning of fiscal 2001. This pronouncement did not have a
material impact on the Company's results of operations.
In June 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 141, "Business Combinations", and
No. 142, "Goodwill and Other Intangible Assets", effective for fiscal years
beginning after December 15, 2001. Under the new rules, goodwill and intangible
assets deemed to have indefinite lives will no longer be amortized but will be
subject to annual impairment tests in accordance with the statements. Other
intangible assets will continue to be amortized over their useful lives. The
Company is currently reviewing the impact of SFAS Nos. 141 and 142 and will be
performing a fair-value analysis at a later date in connection with the adoption
of SFAS No. 142 on January 1, 2002.
Effective June 30, 2001, the Company adopted Emerging Issues Task Force
(EITF) Consensus 00-19, "Determination of Whether Share Settlement is Within the
Control of the Issuer for Purposes of Applying Issue No. 96-13, 'Accounting for
Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Company's Own Stock'". Accordingly, based upon the terms of the warrants, the
Company has reclassified the mandatorily redeemable warrants to a component of
current liabilities. Future accretion will be included in the determination of
net income or loss for each reporting period.
17
ADVANCED ACCESSORY SYSTEMS, LLC
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable as there have been no changes since that reported in the
Company's annual report on Form 10-K filed with the commission on March 27,
2001.
PART II. OTHER INFORMATION AND SIGNATURE
Item 1. Legal Proceedings
Gibbs vs. AAS: In February 1996, the Company commenced an action
against certain individuals alleging breach of contract under the terms
of an October 1992 Purchase Agreement and the individuals' respective
Employment Agreements with the predecessor of the Company. In March
1996, the individuals filed a separate lawsuit against the Company
alleging breach of contract under the respective Purchase Agreement and
their respective Employment Agreements. On May 7, 1999 a jury in the
United States District Court for the Eastern District of Michigan
reached a verdict against the Company and awarded the individuals
approximately $3.8 million plus interest and reasonable attorney fees.
The Company plans to file an appeal once a judgment is entered by the
court.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security-holders
None
Items 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
18
ADVANCED ACCESSORY SYSTEMS, LLC
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ADVANCED ACCESSORY SYSTEMS, LLC
(Registrant)
Date: November 12, 2001 /s/ BARRY G. STEELE
-----------------------------------
Barry G. Steele
Corporate Controller and Treasurer
(chief accounting officer
and authorized signatory)
19