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 September 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
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
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 .
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION (UNAUDITED) PAGE #
--------------------------------- -------
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 2001
and December 31, 2000 1
Consolidated Statements of Income and Comprehensive
Income for the Three Months and Nine Months Ended
September 30, 2001 and 2000 2
Consolidated Statements of Changes in Member's Equity
for the Three Months and Nine Months Ended September
30, 2001 and 2000 2
Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 2001 and 2000 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 20
Item 3. Quantitative and Qualitative Disclosures About Market
Risk 23
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 24
Signature 24
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VENTURE HOLDINGS COMPANY LLC
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
SEPTEMBER 30,
2001 DECEMBER 31,
(UNAUDITED) 2000
------------- ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ -- $ 941
Accounts receivable, net, includes related party
receivables of $52,410 and $54,478 at September
30, 2001 and December 31, 2000, respectively
(Note 5) 283,704 293,072
Inventories (Note 2) 194,826 206,622
Investments 5,731 489
Prepaid and other current assets 46,056 46,299
----------- -----------
Total current assets 530,317 547,423
Property, Plant and Equipment, Net 538,752 553,038
Intangible Assets, Net 124,447 127,445
Other Assets, includes related party receivable of $33,560
at September 30, 2001 and December 31, 2000 (Note 5) 134,766 147,257
Deferred Tax Assets 74,072 51,140
----------- -----------
Total Assets $ 1,402,354 $ 1,426,303
=========== ===========
LIABILITIES AND MEMBER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 248,939 $ 257,947
Accrued interest 15,598 15,482
Accrued expenses 97,333 120,128
Current portion of long term debt (Note 3) 29,206 24,405
----------- -----------
Total current liabilities 391,076 417,962
Pension Liabilities & Other 38,024 50,759
Deferred Tax Liabilities 36,662 37,967
Long Term Debt (Note 3) 859,476 852,578
----------- -----------
Total liabilities 1,325,238 1,359,266
Commitments and Contingencies -- --
Member's Equity:
Member's equity 80,234 72,422
Accumulated other comprehensive loss - cumulative
Translation adjustments (3,118) (5,385)
----------- -----------
Member's Equity 77,116 67,037
----------- -----------
Total Liabilities and Member's Equity $ 1,402,354 $ 1,426,303
=========== ===========
See notes to consolidated financial statements.
1
VENTURE HOLDINGS COMPANY LLC
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited)
(DOLLARS IN THOUSANDS)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- ---------------------------
2001 2000 2001 2000
--------- --------- ----------- -----------
NET SALES $ 415,282 $ 430,397 $ 1,382,220 $ 1,394,103
COST OF PRODUCT SOLD 376,812 391,253 1,215,511 1,223,250
--------- --------- ----------- -----------
GROSS PROFIT 38,470 39,144 166,709 170,853
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSE 26,822 32,124 87,640 105,788
PAYMENTS TO BENEFICIARY IN
LIEU OF DISTRIBUTIONS -- -- 1,400 1,165
--------- --------- ----------- -----------
INCOME FROM OPERATIONS 11,648 7,020 77,669 63,900
INTEREST EXPENSE 23,025 25,426 73,849 75,841
OTHER (INCOME) EXPENSE (Note 4) (20,062) 18,912 12,819 16,948
--------- --------- ----------- -----------
INCOME (LOSS) BEFORE TAXES 8,685 (37,318) (8,999) (28,889)
TAX BENEFIT (13,397) (29,665) (17,625) (31,480)
MINORITY INTEREST 63 256 631 736
--------- --------- ----------- -----------
NET INCOME (LOSS) BEFORE
CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE 22,019 (7,909) 7,995 1,855
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE -- -- (182) --
--------- --------- ----------- -----------
NET INCOME (LOSS) 22,019 (7,909) 7,813 1,855
OTHER COMPREHENSIVE INCOME (LOSS) --
Cumulative translation adjustments 3,519 (3,477) 2,266 (9,151)
--------- --------- ----------- -----------
COMPREHENSIVE INCOME (LOSS) $ 25,538 $ (11,386) $ 10,079 $ (7,296)
========= ========= =========== ===========
VENTURE HOLDINGS COMPANY LLC
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBER'S EQUITY (Unaudited)
(DOLLARS IN THOUSANDS)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
2001 2000 2001 2000
------- -------- ------- --------
MEMBER'S EQUITY, BEGINNING
OF PERIOD $51,578 $ 64,993 $67,037 $ 60,903
COMPREHENSIVE INCOME (LOSS):
NET INCOME (LOSS) 22,019 (7,909) 7,813 1,855
OTHER COMPREHENSIVE INCOME (LOSS) 3,519 (3,477) 2,266 (9,151)
------- -------- ------- --------
COMPREHENSIVE INCOME (LOSS) 25,538 (11,386) 10,079 (7,296)
------- -------- ------- --------
MEMBER'S EQUITY, END OF PERIOD $77,116 $ 53,607 $77,116 $ 53,607
======= ======== ======= ========
See notes to consolidated financial statements.
2
VENTURE HOLDINGS COMPANY LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(DOLLARS IN THOUSANDS)
NINE MONTHS ENDED
SEPTEMBER 30,
2001 2000
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 7,813 $ 1,855
Adjustments to reconcile net income to net cash
provided by
Operating activities:
Depreciation and amortization 68,061 72,242
Unrealized loss on currency exchange 13,583 59,734
Unrealized (gain) loss on investments (609) 37,174
Loss from the disposal of fixed assets 609 --
Change in accounts receivable 9,369 (17,502)
Change in inventories 11,794 (409)
Change in prepaid and other current assets 243 (11,057)
Change in other assets (640) 11,814
Change in accounts payable (9,007) (8,683)
Change in accrued expenses (22,678) (2,633)
Change in other liabilities (12,735) (5,436)
Change in deferred taxes (24,236) (37,269)
-------- --------
Net cash provided by operating activities 41,567 99,830
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (51,966) (66,416)
Proceeds from sale of fixed assets 251 206
-------- --------
Net cash used in investing activities (51,715) (66,210)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under revolving credit agreement 24,780 66,500
Principal payments on debt (13,082) (77,382)
-------- --------
Net cash provided by (used in) financing
activities 11,698 (10,882)
Effect of exchange rate changes on cash and cash
equivalents (2,491) (22,365)
NET (DECREASE) INCREASE IN CASH (941) 373
CASH AT BEGINNING OF PERIOD 941 7,392
-------- --------
CASH AT END OF PERIOD $ -- $ 7,765
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for interest $ 67,292 $ 72,501
======== ========
Cash paid during the period for taxes $ 4,597 $ 4,150
======== ========
See notes to consolidated financial statements.
3
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):
SEPTEMBER 30, DECEMBER 31,
2001 2000
------------ ------------
Raw materials $ 49,835 $ 49,672
Work-in-process - manufactured parts 14,186 15,721
Work-in-process - tools and molds 112,973 119,537
Finished goods 17,832 21,692
-------- --------
Total $194,826 $206,622
======== ========
3. DEBT
Debt consisted of the following (in thousands):
SEPTEMBER 30, DECEMBER 31,
2001 2000
------------ -------------
Credit agreement
Term loan A, with interest of 6.33%,
Due 2004 $ 55,275 $ 66,150
Term loan B, with interest of 7.08%,
Due 2005 195,500 197,000
Revolving credit outstanding, with interest
of 6.33%, Due 2004 134,555 117,947
Bank debt payable with interest from 0.0% to
9.04%, Due 2004 19,999 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% 27,951 32,941
Installment notes payable with
Interest from 3.00% to 7.41% 402 807
-------- --------
Total $888,682 $876,983
Less current portion of debt 29,206 24,405
-------- --------
Total $859,476 $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
September 30, 2001, the Company could have borrowed an additional $38
million under the revolving credit facility
4
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 September 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 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 nine
months ended September 30, 2000 was an increase in other income of $14.9
million.
The cross-currency swap agreements were replaced with a twelve-month foreign
exchange collar. During July 2000, the Company terminated the put side of
its original collar and received $10.9 million. The Company used $2.7
million of the proceeds to purchase a replacement put. In relation to the
foreign exchange collars, a net unrealized gain of $28 million was recorded
in other income for the three and nine months ended September 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 $0.1 million and $0.5 million for the three
and nine months ended September 30, 2000, respectively. During July 2000,
the Company paid $14.9 million to terminate the interest portion of the
cross currency swap agreement. 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 $1.2 million and $3.8 million of
additional interest expense for the three and nine months ended September
30, 2001. For the three and nine months ended September 30, 2000, the
amortization resulted in $1.2 million of additional interest expense.
The other interest rate swap agreements, which did not meet all the criteria
for settlement accounting, within the original cross currency swap
agreements, were terminated in July 2000. As a result, the net impact on
earnings for the nine months ended September 30, 2000 was an increase in
other income of $3.5 million.
Interest Rate Swaps
During September 2001, the Company's $30.0 million notional value interest
rate swap contracts expired. At September 30, 2000, the notional amount of
interest rate contracts with off-balance-sheet risk was $55.0 million. These
agreements resulted in $0.3 million and $0.4 million of additional interest
expense for the three and nine months ended September 30, 2001,
respectively, and $0.1 million of additional interest expense for the nine
months ended September 30, 2000. The Company recorded a $0.2 million
unrealized gain on these agreements for the three months ended September 30,
2001. For the nine months ended September 30, 2001, the Company recorded a
$0.2 million unrealized gain offset by a ($0.2) million cumulative change in
accounting principle as a result of the adoption of SFAS No. 133 "Accounting
for Derivative Instruments and Hedging Activities".
5
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 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:
SEPTEMBER 30, DECEMBER 31,
2001 2000
------------- ------------
Amounts receivable $117,155 $113,557
Amounts payable 31,185 25,519
-------- --------
Net amounts receivable $ 85,970 $ 88,038
======== ========
Based on management's assessment and finalization of certain repayment
agreements, $33.6 million at September 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
Operating segments are defined as components of an enterprise about which
separate financial information is available that is evaluated regularly by
the chief operating decision maker in deciding how to allocate resources and
in assessing performance. During the third quarter of 2001, the Company
implemented a new organization structure that is in closer alignment with
our significant customer base. Consistent with the new organization, the
Company has one reportable segment - "Automotive". This one reportable
segment replaces the previous geographic-oriented reportable segments.
FASB statement No. 131, "Disclosures about Segments of an Enterprise and
Related Information" requires enterprise wide disclosures by geographic
area. The following table presents net sales by geographic area (in
thousands):
THREE MONTHS ENDED
SEPTEMBER 30,
---------------------------
2001 2000
--------- --------
UNITED STATES $119,003 $119,942
FOREIGN 296,302 310,455
ELIMINATIONS (23) --
-------- --------
TOTAL 415,282 430,397
======== ========
6
The following table presents net sales and long-lived assets by geographic
area as of and for the nine months ended September 30 (in thousands):
<Table>
<Caption>
NET SALES LONG-LIVED ASSETS
------------------------- -------------------------
2001 2000 2001 2000
---------- ---------- ---------- ----------
UNITED STATES $ 391,379 $ 446,019 $353,973 $312,077
FOREIGN 992,673 951,548 443,992 439,087
ELIMINATIONS (1,832) (3,464) -- --
---------- ---------- -------- --------
TOTAL 1,382,220 1,394,103 797,965 751,164
========== ========== ======== ========
</Table>
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.
7
1997 SENIOR NOTES:
The following condensed consolidating financial information presents:
(1) Condensed consolidating financial statements as of September 30, 2001
and December 31, 2000 and for the three and nine month periods ended
September 30, 2001 and September 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 SEPTEMBER 30, 2001
(DOLLARS IN THOUSANDS)
OTHER GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE ISSUERS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------- ------------ ------------ ------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ -- $ (677) $ (630) $ 1,307 $ -- $ --
Accounts receivable, net -- 132,931 64 150,709 -- 283,704
Inventories -- 74,924 -- 119,902 -- 194,826
Investments -- -- -- 5,731 -- 5,731
Prepaid and other current assets -- 4,558 586 40,912 -- 46,056
-------- --------- --------- --------- --------- -----------
Total current assets -- 211,736 20 318,561 -- 530,317
Property, Plant and Equipment, Net -- 186,964 7 351,781 -- 538,752
Intangible Assets, Net -- 51,383 -- 73,064 -- 124,447
Other Assets 8,550 106,491 -- 19,725 -- 134,766
Deferred Tax Assets -- 12,332 -- 61,740 -- 74,072
Net Investment in and advances to
(from) subsidiaries & affiliates 943,278 (514,860) 106,223 (294,338) (240,303) --
-------- --------- --------- --------- --------- -----------
Total Assets $951,828 $ 54,046 $ 106,250 $ 530,533 $(240,303) $ 1,402,354
======== ========= ========= ========= ========= ===========
LIABILITIES AND MEMBER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ -- $ 52,568 $ -- $ 196,371 $ -- $ 248,939
Accrued interest 15,377 -- -- 221 -- 15,598
Accrued expenses -- 8,532 2,236 86,565 -- 97,333
Current portion of long term debt 20,021 -- -- 9,185 -- 29,206
-------- --------- --------- --------- --------- -----------
Total current liabilities 35,398 61,100 2,236 292,342 -- 391,076
Pension Liabilities & Other -- 4,071 -- 33,953 -- 38,024
Deferred Tax Liabilities -- 11,326 -- 25,336 -- 36,662
Long Term Debt 820,310 850 -- 38,316 -- 859,476
-------- --------- --------- --------- --------- -----------
Total liabilities 855,708 77,347 2,236 389,947 -- 1,325,238
Commitments and Contingencies -- -- -- -- -- --
Member's Equity:
Member's equity 96,120 (23,301) 104,014 143,704 (240,303) 80,234
Accumulated other comprehensive
loss-cumulative translation
adjustments -- -- -- (3,118) -- (3,118)
-------- --------- --------- --------- --------- -----------
Member's Equity 96,120 (23,301) 104,014 140,586 (240,303) 77,116
-------- --------- --------- --------- --------- -----------
Total Liabilities and Member's Equity $951,828 $ 54,046 $ 106,250 $ 530,533 $(240,303) $ 1,402,354
======== ========= ========= ========= ========= ===========
8
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 936,207 (506,152) 43,849 (233,601) (240,303) --
--------- --------- ------- --------- --------- -----------
Total Assets $ 947,990 $ 82,543 $44,295 $ 591,778 $(240,303) $ 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 96,599 (12,688) 41,137 187,677 (240,303) 72,422
Accumulated other comprehensive
loss-Cumulative translation
adjustments -- -- -- (5,385) -- (5,385)
--------- --------- ------- --------- --------- -----------
Member's Equity 96,599 (12,688) 41,137 182,292 (240,303) 67,037
--------- --------- ------- --------- --------- -----------
Total Liabilities and Member's Equity $ 947,990 $ 82,543 $44,295 $ 591,778 $(240,303) $ 1,426,303
========= ========= ======= ========= ========= ===========
9
CONDENSED CONSOLIDATING STATEMENTS OF INCOME (Unaudited)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
(DOLLARS IN THOUSANDS)
OTHER GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE ISSUERS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------- ------------ ------------ ------------ ------------
NET SALES $ -- $ 291,511 $ 97,265 $ 995,276 $(1,832) $ 1,382,220
COST OF PRODUCT SOLD -- 239,039 95,133 883,171 (1,832) 1,215,511
-------- --------- -------- --------- ------- -----------
GROSS PROFIT -- 52,472 2,132 112,105 -- 166,709
SELLING, GENERAL & ADMINISTRATIVE
EXPENSE -- 20,494 1,007 66,139 -- 87,640
PAYMENTS TO BENEFICIARY IN LIEU OF
TAXES -- 1,400 -- -- -- 1,400
-------- --------- -------- --------- ------- -----------
INCOME FROM OPERATIONS -- 30,578 1,125 45,966 -- 77,669
INTEREST EXPENSE 67,386 61 -- 6,402 -- 73,849
INTERCOMPANY INTEREST ALLOCATION (63,535) 37,817 (20,366) 46,084 -- --
OTHER (INCOME) EXPENSE (3,555) 3,965 (41,386) 53,795 -- 12,819
-------- --------- -------- --------- ------- -----------
(LOSS) INCOME BEFORE TAXES (296) (11,265) 62,877 (60,315) -- (8,999)
TAX BENEFIT -- (652) -- (16,973) -- (17,625)
MINORITY INTEREST -- -- -- 631 -- 631
-------- --------- -------- --------- ------- -----------
NET (LOSS) INCOME BEFORE
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE (296) (10,613) 62,877 (43,973) -- 7,995
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE (182) -- -- -- -- (182)
-------- --------- -------- --------- ------- -----------
NET (LOSS) INCOME $ (478) $ (10,613) $ 62,877 $ (43,973) $ -- $ 7,813
======== ========= ======== ========= ======= ===========
CONDENSED CONSOLIDATING STATEMENTS OF INCOME (Unaudited)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001
(DOLLARS IN THOUSANDS)
OTHER GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE ISSUERS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------- ------------ ------------ ------------ ------------
NET SALES $ -- $ 78,427 $ 31,597 $ 305,281 $(23) $ 415,282
COST OF PRODUCT SOLD -- 69,263 30,299 277,273 (23) 376,812
-------- -------- -------- --------- ---- ---------
GROSS PROFIT -- 9,164 1,298 28,008 -- 38,470
SELLING, GENERAL & ADMINISTRATIVE
EXPENSE -- (3,625) 327 30,120 -- 26,822
PAYMENTS TO BENEFICIARY IN LIEU OF
TAXES -- -- -- -- -- --
-------- -------- -------- --------- ---- ---------
INCOME (LOSS) FROM OPERATIONS -- 12,789 971 (2,112) -- 11,648
INTEREST EXPENSE 20,683 40 -- 2,302 -- 23,025
INTERCOMPANY INTEREST ALLOCATION (19,388) 10,674 (6,833) 15,547 -- --
OTHER EXPENSE (INCOME) 2,792 (1,673) (27,244) 6,063 -- (20,062)
-------- -------- -------- --------- ---- ---------
(LOSS) BEFORE INCOME TAXES (4,087) 3,748 35,048 (26,024) -- 8,685
TAX BENEFIT -- (1,064) -- (12,333) -- (13,397)
MINORITY INTEREST -- -- -- 63 -- 63
-------- -------- -------- --------- ---- ---------
NET (LOSS) INCOME BEFORE
CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE (4,087) 4,812 35,048 (13,754) -- 22,019
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE -- -- -- -- -- --
-------- -------- -------- --------- ---- ---------
NET (LOSS) INCOME $ (4,087) $ 4,812 $ 35,048 $ (13,754) $ -- $ 22,019
======== ======== ======== ========= ==== =========
10
CONDENSED CONSOLIDATING STATEMENTS OF INCOME (Unaudited)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(DOLLARS IN THOUSANDS)
OTHER GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE ISSUERS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------- ------------ ------------ ------------ ------------
NET SALES $ -- $ 495,493 $ 123,157 $ 955,501 $(180,048) $ 1,394,103
COST OF PRODUCT SOLD -- 440,327 122,896 840,075 (180,048) 1,223,250
-------- --------- --------- --------- --------- -----------
GROSS PROFIT -- 55,166 261 115,426 -- 170,853
SELLING, GENERAL & ADMINISTRATIVE
EXPENSE -- 43,922 -- 61,866 -- 105,788
PAYMENTS TO BENEFICIARY IN LIEU OF
TAXES 1,165 -- -- -- -- 1,165
-------- --------- --------- --------- --------- -----------
(LOSS) INCOME FROM OPERATIONS (1,165) 11,244 261 53,560 -- 63,900
INTEREST EXPENSE 69,462 (49) -- 6,428 -- 75,841
INTERCOMPANY INTEREST ALLOCATION (69,462) 69,338 (24,127) 24,251 -- --
OTHER (INCOME) EXPENSE (36,352) 5,614 (5,868) 53,554 -- 16,948
-------- --------- --------- --------- --------- -----------
INCOME (LOSS) BEFORE TAXES 35,187 (63,659) 30,256 (30,673) -- (28,889)
TAX BENEFIT -- (59) -- (31,421) -- (31,480)
MINORITY INTEREST -- -- -- 736 -- 736
-------- --------- --------- --------- --------- -----------
NET INCOME (LOSS) $ 35,187 $ (63,600) $ 30,256 $ 12 $ -- $ 1,855
======== ========= ========= ========= ========= ===========
CONDENSED CONSOLIDATING STATEMENTS OF INCOME (Unaudited)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000
(DOLLARS IN THOUSANDS)
OTHER GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE ISSUERS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------- ------------ ------------ ------------ ------------
NET SALES $ -- $ 142,101 $ 40,179 $ 311,489 $(63,372) $ 430,397
COST OF PRODUCT SOLD -- 132,097 41,166 281,362 (63,372) 391,253
-------- --------- -------- --------- -------- ---------
GROSS PROFIT -- 10,004 (987) 30,127 -- 39,144
SELLING, GENERAL & ADMINISTRATIVE
EXPENSE -- 16,506 -- 15,618 -- 32,124
PAYMENTS TO BENEFICIARY IN LIEU OF
TAXES -- -- -- -- -- --
-------- --------- -------- --------- -------- ---------
(LOSS) INCOME FROM OPERATIONS -- (6,502) (987) 14,509 -- 7,020
INTEREST EXPENSE 23,630 (49) -- 1,845 -- 25,426
INTERCOMPANY INTEREST ALLOCATION (23,630) 23,506 (11,114) 11,238 -- --
OTHER (INCOME) EXPENSE (14,237) 5,031 (7,411) 35,529 -- 18,912
-------- --------- -------- --------- -------- ---------
INCOME (LOSS) BEFORE TAXES 14,237 (34,990) 17,538 (34,103) -- (37,318)
TAX BENEFIT -- (28) -- (29,637) -- (29,665)
MINORITY INTEREST -- -- -- 256 -- 256
-------- --------- -------- --------- -------- ---------
NET INCOME (LOSS) $ 14,237 $ (34,962) $ 17,538 $ (4,722) $ -- $ (7,909)
======== ========= ======== ========= ======== =========
11
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (Unaudited)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
(DOLLARS IN THOUSANDS)
OTHER GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE ISSUERS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------- ------------ ------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (478) $(10,613) $ 62,877 $(43,973) $ -- $ 7,813
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 3,841 30,974 3 33,243 -- 68,061
Unrealized (gain) loss on currency
exchange (1,606) 3,311 (38,281) 50,159 -- 13,583
Unrealized gain on investments (609) -- -- -- -- (609)
Loss from the disposal of fixed assets -- 25 -- 584 -- 609
Change in accounts receivable -- 13,378 53 (4,062) -- 9,369
Change in inventories -- (6,460) -- 18,254 -- 11,794
Change in prepaid and other current
assets -- 1,103 (266) (594) -- 243
Change in other assets -- (1,161) -- 521 -- (640)
Change in accounts payable -- (15,541) (1,209) 7,743 -- (9,007)
Change in accrued expenses 83 26 286 (23,073) -- (22,678)
Change in pension liabilities and other -- (1,101) -- (11,634) -- (12,735)
Change in deferred taxes -- (1,333) -- (22,903) -- (24,236)
-------- -------- -------- -------- ------ --------
Net cash provided by operating
activities 1,231 12,608 23,463 4,265 -- 41,567
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures -- (18,255) -- (33,711) -- (51,966)
Net activity in investments in
and advances (from) to
subsidiaries and affiliates (7,070) 8,709 (62,375) 60,736 -- --
Proceeds from sale of fixed assets -- -- -- 251 -- 251
-------- -------- -------- -------- ------ --------
Net cash (used in) provided by
investing activities (7,070) (9,546) (62,375) 27,276 -- (51,715)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under revolving credit
facility 16,608 57 -- 8,115 -- 24,780
Principal payments on debt (12,375) (707) -- -- -- (13,082)
-------- -------- -------- -------- ------ --------
Net cash provided by (used in) financing
activities 4,233 (650) -- 8,115 -- 11,698
Effect of exchange rate changes on cash and cash
Equivalents 1,606 (3,089) 38,282 (39,290) -- (2,491)
NET (DECREASE) INCREASE IN CASH -- (677) (630) 366 -- (941)
CASH AT BEGINNING OF PERIOD $ -- $ -- $ -- $ 941 $ -- $ 941
-------- -------- -------- -------- ------ --------
CASH AT END OF PERIOD $ -- $ (677) $ (630) $ 1,307 $ -- $ --
======== ======== ======== ======== ====== ========
12
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (Unaudited)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(DOLLARS IN THOUSANDS)
OTHER GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE ISSUERS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------- ------------ ------------ ------------ ------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) $ 35,187 $(63,600) $ 30,256 $ 12 $-- $ 1,855
Adjustments to reconcile net
income to net cash
provided by (used in)
operating activities:
Depreciation and
amortization 1,158 34,911 3 36,170 -- 72,242
Unrealized loss (gain) on
currency exchange -- 5,779 (2,436) 56,391 -- 59,734
Unrealized loss on
investments 37,174 -- -- -- -- 37,174
Loss from the disposal of
fixed assets -- -- -- -- -- --
Change in accounts
receivable -- 3,079 19 (20,600) -- (17,502)
Change in inventories -- (11,069) -- 10,660 -- (409)
Change in prepaid and
other current assets -- (12,312) 57 1,198 -- (11,057)
Change in other assets (14,849) (7,691) -- 34,354 -- 11,814
Change in accounts
payable -- (9,413) 394 336 -- (8,683)
Change in accrued
expenses 2,111 (15,866) 615 10,507 -- (2,633)
Change in pension
liabilities
and other -- 470 -- (5,906) -- (5,436)
Change in deferred taxes -- 8,208 -- (45,477) -- (37,269)
-------- -------- -------- -------- --- --------
Net cash provided by
(used in) operating
activities 60,781 (67,504) 28,908 77,645 -- 99,830
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures -- (20,980) -- (45,436) -- (66,416)
Net activity in investments
in and advances (from) to
subsidiaries and affiliates (69,356) 89,046 (28,908) 9,218 -- --
Proceeds from sale of fixed
assets -- -- -- 206 -- 206
-------- -------- -------- -------- --- --------
Net cash (used in) provided
by investing activities (69,356) 68,066 (28,908) (36,012) -- (66,210)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net borrowings under
revolving
credit facility 66,500 -- -- -- -- 66,500
Principal payments on debt (57,925) (588) -- (18,869) -- (77,382)
-------- -------- -------- -------- --- --------
Net cash provided by (used
in) financing activities 8,575 (588) -- (18,869) -- (10,882)
Effect of exchange rate changes on
cash and cash equivalents -- -- -- (22,365) -- (22,365)
NET (DECREASE) INCREASE IN CASH -- (26) -- 399 -- 373
CASH AT BEGINNING OF PERIOD $ -- $ 26 $ -- $ 7,366 $-- $ 7,392
======== ======== ======== ======== === ========
CASH AT END OF PERIOD $ -- $ -- $ -- $ 7,765 $-- $ 7,765
======== ======== ======== ======== === ========
13
1999 NOTES:
The following condensed consolidating financial information presents:
(1) Condensed consolidating financial statements as of September 30, 2001,
December 31, 2000 and for the three and nine month periods ended
September 30, 2001 and September 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 SEPTEMBER 30, 2001
(DOLLARS IN THOUSANDS)
GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------------ ------------ ------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ -- $ (1,307) $ 1,307 $ -- $ --
Accounts receivable, net -- 132,995 150,709 -- 283,704
Inventories -- 74,924 119,902 -- 194,826
Investments -- -- 5,731 -- 5,731
Prepaid and other current assets -- 5,144 40,912 -- 46,056
-------- --------- --------- --------- -----------
Total current assets -- 211,756 318,561 -- 530,317
Property, Plant and Equipment, Net -- 186,971 351,781 -- 538,752
Intangible Assets, Net -- 51,383 73,064 -- 124,447
Other Assets 8,550 106,491 19,725 -- 134,766
Deferred Tax Assets -- 12,332 61,740 -- 74,072
Net Investment in and advances to (from)
subsidiaries & affiliates 943,278 (408,637) (294,338) (240,303) --
-------- --------- --------- --------- -----------
Total Assets $951,828 $ 160,296 $ 530,533 $(240,303) $ 1,402,354
======== ========= ========= ========= ===========
LIABILITIES AND MEMBER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ -- $ 52,568 $ 196,371 $ -- $ 248,939
Accrued interest 15,377 -- 221 -- 15,598
Accrued expenses -- 10,768 86,565 -- 97,333
Current portion of long term debt 20,021 -- 9,185 -- 29,206
-------- --------- --------- --------- -----------
Total current liabilities 35,398 63,336 292,342 -- 391,076
Pension Liabilities & Other -- 4,071 33,953 -- 38,024
Deferred Tax Liabilities -- 11,326 25,336 -- 36,662
Long Term Debt 820,310 850 38,316 -- 859,476
-------- --------- --------- --------- -----------
Total liabilities 855,708 79,583 389,947 -- 1,325,238
Commitments and Contingencies -- -- -- -- --
Member's Equity:
Member's equity 96,120 80,713 143,704 (240,303) 80,234
Accumulated other comprehensive loss
cumulative translation -- -- (3,118) -- (3,118)
adjustments -- -- -- -- --
-------- --------- --------- --------- -----------
Member's Equity 96,120 80,713 140,586 (240,303) 77,116
-------- --------- --------- --------- -----------
Total Liabilities and Member's Equity $951,828 $ 160,296 $ 530,533 $(240,303) $ 1,402,354
======== ========= ========= ========= ===========
14
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 936,207 (462,303) (233,601) (240,303) --
--------- --------- --------- --------- -----------
Total Assets $ 947,990 $ 126,838 $ 591,778 $(240,303) $ 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 96,599 28,449 187,677 (240,303) 72,422
Accumulated other comprehensive loss-
cumulative translation adjustments -- -- (5,385) -- (5,385)
--------- --------- --------- --------- -----------
Member's Equity 96,599 28,449 182,292 (240,303) 67,037
--------- --------- --------- --------- -----------
Total Liabilities and Member's Equity $ 947,990 $ 126,838 $ 591,778 $(240,303) $ 1,426,303
========= ========= ========= ========= ===========
15
CONDENSED CONSOLIDATING STATEMENTS OF INCOME (Unaudited)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
(DOLLARS IN THOUSANDS)
GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------------ ------------ ------------ ------------
NET SALES $ -- $ 388,776 $ 995,276 $(1,832) $ 1,382,220
COST OF PRODUCT SOLD -- 334,172 883,171 (1,832) 1,215,511
-------- --------- --------- ------- -----------
GROSS PROFIT -- 54,604 112,105 -- 166,709
SELLING, GENERAL & ADMINISTRATIVE
EXPENSE -- 21,501 66,139 -- 87,640
PAYMENTS TO BENEFICIARY IN LIEU OF
TAXES -- 1,400 -- -- 1,400
-------- --------- --------- ------- -----------
INCOME FROM OPERATIONS -- 31,703 45,966 -- 77,669
INTEREST EXPENSE 67,386 61 6,402 -- 73,849
INTERCOMPANY INTEREST ALLOCATION (63,535) 17,451 46,084 -- --
OTHER (INCOME) EXPENSE (3,555) (37,421) 53,795 -- 12,819
-------- --------- --------- ------- -----------
(LOSS) INCOME BEFORE TAXES (296) 51,612 (60,315) -- (8,999)
TAX BENEFIT -- (652) (16,973) -- (17,625)
MINORITY INTEREST -- -- 631 -- 631
-------- --------- --------- ------- -----------
NET (LOSS) INCOME BEFORE
CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE (296) 52,264 (43,973) -- 7,995
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE (182) -- -- -- (182)
-------- --------- --------- ------- -----------
NET (LOSS) INCOME $ (478) $ 52,264 $ (43,973) $ -- $ 7,813
======== ========= ========= ======= ===========
CONDENSED CONSOLIDATING STATEMENTS OF INCOME (Unaudited)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001
(DOLLARS IN THOUSANDS)
GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------------ ------------ ------------ ------------
NET SALES $ -- $ 110,024 $ 305,281 $(23) $ 415,282
COST OF PRODUCT SOLD -- 99,562 277,273 (23) 376,812
-------- --------- --------- ---- ---------
GROSS PROFIT -- 10,462 28,008 -- 38,470
SELLING, GENERAL & ADMINISTRATIVE
EXPENSE -- (3,298) 30,120 -- 26,822
PAYMENTS TO BENEFICIARY IN LIEU OF
TAXES -- -- -- -- --
-------- --------- --------- ---- ---------
INCOME (LOSS) FROM OPERATIONS -- 13,760 (2,112) -- 11,648
INTEREST EXPENSE 20,683 40 2,302 -- 23,025
INTERCOMPANY INTEREST ALLOCATION (19,388) 3,841 15,547 -- --
OTHER EXPENSE (INCOME) 2,792 (28,917) 6,063 -- (20,062)
-------- --------- --------- ---- ---------
(LOSS) INCOME BEFORE TAXES (4,087) 38,796 (26,024) -- 8,685
TAX BENEFIT -- (1,064) (12,333) -- (13,397)
MINORITY INTEREST -- -- 63 -- 63
-------- --------- --------- ---- ---------
NET (LOSS) INCOME BEFORE
CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE (4,087) 39,860 (13,754) -- 22,019
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE -- -- -- -- --
-------- --------- --------- ---- ---------
NET (LOSS) INCOME $ (4,087) $ 39,860 $ (13,754) $ -- $ 22,019
======== ========= ========= ==== =========
16
CONDENSED CONSOLIDATING STATEMENTS OF INCOME (Unaudited)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(DOLLARS IN THOUSANDS)
GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------------ ------------ ------------ ------------
NET SALES $ -- $ 618,650 $ 955,501 $(180,048) $ 1,394,103
COST OF PRODUCT SOLD -- 563,223 840,075 (180,048) 1,223,250
-------- --------- --------- --------- -----------
GROSS PROFIT -- 55,427 115,426 -- 170,853
SELLING, GENERAL & ADMINISTRATIVE
EXPENSE -- 43,922 61,866 -- 105,788
PAYMENTS TO BENEFICIARY IN LIEU OF
TAXES 1,165 -- -- -- 1,165
-------- --------- --------- --------- -----------
(LOSS) INCOME FROM OPERATIONS (1,165) 11,505 53,560 -- 63,900
INTEREST EXPENSE 69,462 (49) 6,428 -- 75,841
INTERCOMPANY INTEREST ALLOCATION (69,462) 45,211 24,251 -- --
OTHER (INCOME) EXPENSE (36,352) (254) 53,554 -- 16,948
-------- --------- --------- --------- -----------
INCOME (LOSS) BEFORE TAXES 35,187 (33,403) (30,673) -- (28,889)
TAX BENEFIT -- (59) (31,421) -- (31,480)
MINORITY INTEREST -- -- 736 -- 736
-------- --------- --------- --------- -----------
NET INCOME (LOSS) $ 35,187 $ (33,344) $ 12 $ -- $ 1,855
======== ========= ========= ========= ===========
CONDENSED CONSOLIDATING STATEMENTS OF INCOME (Unaudited)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000
(DOLLARS IN THOUSANDS)
GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------------ ------------ ------------ ------------
NET SALES $ -- $ 182,280 $ 311,489 $(63,372) $ 430,397
COST OF PRODUCT SOLD -- 173,263 281,362 (63,372) 391,253
-------- --------- --------- -------- ---------
GROSS PROFIT -- 9,017 30,127 -- 39,144
SELLING, GENERAL & ADMINISTRATIVE
EXPENSE -- 16,506 15,618 -- 32,124
PAYMENTS TO BENEFICIARY IN LIEU OF
TAXES -- -- -- -- --
-------- --------- --------- -------- ---------
(LOSS) INCOME FROM OPERATIONS -- (7,489) 14,509 -- 7,020
INTEREST EXPENSE 23,630 (49) 1,845 -- 25,426
INTERCOMPANY INTEREST ALLOCATION (23,630) 12,392 11,238 -- --
OTHER (INCOME) EXPENSE (14,237) (2,380) 35,529 -- 18,912
-------- --------- --------- -------- ---------
INCOME (LOSS) BEFORE TAXES 14,237 (17,452) (34,103) -- (37,318)
TAX BENEFIT -- (28) (29,637) -- (29,665)
MINORITY INTEREST -- -- 256 -- 256
-------- --------- --------- -------- ---------
NET INCOME (LOSS) $ 14,237 $ (17,424) $ (4,722) $ -- $ (7,909)
======== ========= ========= ======== =========
17
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (Unaudited)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
(DOLLARS IN THOUSANDS)
GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------------ ------------ ------------ -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (478) $ 52,264 $(43,973) $ -- $ 7,813
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 3,841 30,977 33,243 -- 68,061
Unrealized (gain) loss on currency
exchange (1,606) (34,970) 50,159 -- 13,583
Unrealized gain on investments (609) -- -- -- (609)
Loss from the disposal of fixed
assets -- 25 584 -- 609
Change in accounts receivable -- 13,431 (4,062) -- 9,369
Change in inventories -- (6,460) 18,254 -- 11,794
Change in prepaid and other current
assets -- 837 (594) -- 243
Change in other assets -- (1,161) 521 -- (640)
Change in accounts payable -- (16,750) 7,743 -- (9,007)
Change in accrued expenses 83 312 (23,073) -- (22,678)
Change in pension liabilities and
other -- (1,101) (11,634) -- (12,735)
Change in deferred taxes -- (1,333) (22,903) -- (24,236)
-------- -------- -------- -------- --------
Net cash provided by operating
activities 1,231 36,071 4,265 -- 41,567
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures -- (18,255) (33,711) -- (51,966)
Net activity in investments in and
advances (from) to subsidiaries
and affiliates (7,070) (53,666) 60,736 -- --
Proceeds from sale of fixed assets -- -- 251 -- 251
-------- -------- -------- -------- --------
Net cash (used in) provided by
investing activities (7,070) (71,921) 27,276 -- (51,715)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under
Revolving credit facility 16,608 57 8,115 -- 24,780
Principal payments on debt (12,375) (707) -- -- (13,082)
-------- -------- -------- -------- --------
Net cash provided by (used in)
financing activities 4,233 (650) 8,115 -- 11,698
Effect of exchange rate changes on cash
and cash equivalents 1,606 35,193 (39,290) -- (2,491)
NET (DECREASE) INCREASE IN CASH -- (1,307) 366 -- (941)
CASH AT BEGINNING OF PERIOD $ -- $ -- $ 941 $ -- $ 941
-------- -------- -------- -------- --------
CASH AT END OF PERIOD $ -- $ (1,307) $ 1,307 $ -- $ --
======== ======== ======== ======== ========
18
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (Unaudited)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 (DOLLARS IN THOUSANDS)
GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------------ ------------ ------------ -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 35,187 $(33,344) $ 12 $ -- $ 1,855
Adjustments to reconcile net
income to net cash provided by (used in)
operating activities:
Depreciation and amortization 1,158 34,914 36,170 -- 72,242
Unrealized loss on currency exchange -- 3,343 56,391 -- 59,734
Unrealized loss on investments 37,174 -- -- -- 37,174
Loss from the disposal of fixed assets -- -- -- -- --
Change in accounts receivable -- 3,098 (20,600) -- (17,502)
Change in inventories -- (11,069) 10,660 -- (409)
Change in prepaid and other current
assets -- (12,255) 1,198 -- (11,057)
Change in other assets (14,849) (7,691) 34,354 -- 11,814
Change in accounts payable -- (9,019) 336 -- (8,683)
Change in accrued expenses 2,111 (15,251) 10,507 -- (2,633)
Change in pension liabilities and other -- 470 (5,906) -- (5,436)
Change in deferred taxes -- 8,208 (45,477) -- (37,269)
-------- -------- -------- ----------- --------
Net cash provided by (used in) operating
activities 60,781 (38,596) 77,645 -- 99,830
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures -- (20,980) (45,436) -- (66,416)
Net activity in investments in and advances
(from) to subsidiaries and affiliates (69,356) 60,138 9,218 -- --
Proceeds from sale of fixed assets -- -- 206 -- 206
-------- -------- -------- ----------- --------
Net cash (used in) provided by investing
activities (69,356) 39,158 (36,012) -- (66,210)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under revolving credit
facility 66,500 -- -- -- 66,500
Principal payments on debt (57,925) (588) (18,869) -- (77,382)
-------- -------- -------- ----------- --------
Net cash provided by (used in) financing
activities 8,575 (588) (18,869) -- (10,882)
Effect of exchange rate changes on cash and cash
equivalents -- -- (22,365) -- (22,365)
NET (DECREASE) INCREASE IN CASH -- (26) 399 -- 373
CASH AT BEGINNING OF PERIOD $ -- $ 26 $ 7,366 $ -- $ 7,392
-------- -------- -------- ----------- --------
CASH AT END OF PERIOD $ -- $ -- $ 7,765 $ -- $ 7,765
======== ======== ======== =========== ========
19
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 NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2001 2000 2001 2000
------ ------ ------ ------
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of products sold 90.7 90.9 87.9 87.7
----- ----- ----- -----
Gross profit 9.3 9.1 12.1 12.3
Selling, general and administrative
expense 6.5 7.5 6.3 7.6
Payments to beneficiary in lieu of taxes 0.0 0.0 0.1 0.1
----- ----- ----- -----
Income from operations 2.8 1.6 5.7 4.6
Interest expense 5.5 5.9 5.4 5.5
Other (income) expense (4.8) 4.4 0.9 1.2
----- ----- ----- -----
Income (Loss) before taxes 2.1 (8.7) (0.6) (2.1)
Tax benefit (3.2) (7.0) (1.3) (2.3)
Minority interest 0.0 0.1 0.0 0.1
----- ----- ----- -----
Net income (loss) before cumulative
effect of change in accounting
principle 5.3 (1.8) 0.7 0.1
Cumulative effect of change in
accounting principle 0.0 0.0 0.0 0.0
----- ----- ----- -----
Net income (loss) 5.3% (1.8)% 0.7% 0.1%
===== ===== ===== =====
THREE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 2000
NET SALES. Net sales for the third quarter of 2001 decreased $15.1 million, or
3.5%, from the third quarter of 2000. Net sales decreased due to lower sales
volumes, and a labor strike at Volkswagen which effected the Company's Mexican
operations.
GROSS PROFIT. Gross profit for the third quarter of 2001 decreased $0.7 million,
or 1.8%, to $38.4 million compared to $39.1 million for the third quarter of
2000. As a percentage of net sales, gross profit was comparable with the third
quarter of 2000.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and administrative
expense for the third quarter of 2001 decreased $5.3 million, or 16.5%, to $26.8
million compared to $32.1 million for the third quarter of 2000. As a percentage
of net sales, selling, general and administrative expense decreased to 6.5% for
the third quarter of 2001 as compared to 7.5% for the third 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 third quarter of 2001 increased $4.6 million, or 65.7%, to $11.6 million,
compared to income from operations of $7.0 million for the third quarter of
2000. As a percentage of net sales, income from operations increased to 2.8% for
the third quarter of 2001 from 1.6% for the third quarter of 2000.
INTEREST EXPENSE. Third quarter interest expense decreased $2.4 million, or
9.4%, to $23.0 million in 2001 as compared to interest expense of $25.4 million
in 2000. The decrease is the result of lower interest rates on variable rate
debt. Of the total interest expense for the third quarter of 2001 and 2000,
$1.2 million was a non-cash amortization expense due to the termination of
interest rate swaps in 2000.
OTHER (INCOME) EXPENSE. Other income for the third quarter of 2001 is primarily
composed of unrealized currency exchange gains of $19.6 million. Other income
for the third quarter of 2000 is primarily composed of $35.0 million of realized
20
gain from derivative activity, realized gain from currency exchange and interest
income offset by $53.9 million of unrealized loss from derivative activity and
unrealized currency exchange losses.
TAX BENEFIT. The tax benefit of $13.4 million for the third quarter of 2001 is
primarily the result of the Company's European operations which generated a
taxable loss due to intercompany allocations and general tax reduction plans.
The tax benefit of $29.7 million for the third quarter of 2000 is primarily the
result of the Company's European operations which generated a taxable loss due
to currency losses.
NET INCOME (LOSS). Due to the foregoing, the Company experienced net income for
the third quarter of 2001 of $22.0 million compared to net loss of $7.9 million
for the third quarter of 2000.
NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
2000
NET SALES. Net sales for the first nine months of 2001 decreased $11.9 million,
or 0.8%, from the first nine months of 2000. Net sales decreased generally due
to the slowdown of the retail automotive market creating sales volume losses.
GROSS PROFIT. Gross profit for the first nine months of 2001 decreased $4.2
million, or 2.4%, to $166.7 million compared to $170.9 million for the first
nine 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 nine 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 nine months of 2001 decreased $18.2 million, or 17.2%, to
$87.6 million compared to $105.8 million for the first nine months of 2000. As a
percentage of net sales, selling, general and administrative expense decreased
to 6.3% for the first nine months of 2001 as compared to 7.6% for the first nine
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 nine months of 2001 increased $13.8 million, or 21.6%, to $77.7
million, compared to $63.9 million for the first nine months of 2000. As a
percentage of net sales, income from operations increased to 5.7% for the first
nine months of 2001 compared to 4.6% for the first nine months of 2000 mainly
due to the reasons mentioned above.
INTEREST EXPENSE. Interest expense for the first nine months of 2001 decreased
$2.0 million, or 2.6%, to $73.8 million in 2001 as compared to $75.8 million for
the first nine months of 2000. Of the total interest expense for the first nine
months of 2001 and 2000, $3.8 million and $1.2 million, respectively, was a
non-cash amortization expense due to the termination of interest rate swaps in
2000.
OTHER EXPENSE. Other expense for the first nine months of 2001 is primarily
composed of unrealized currency exchange losses of $13.6 million. Other income
for the first nine months of 2000 is primarily composed of $80.0 million of
realized gain from derivative activity and interest income offset by $96.9
million of unrealized currency exchange losses and derivative activity.
TAX BENEFIT. The tax benefit of $17.6 million for the first nine months of 2001
is primarily the result of the Company's European operations which generated a
taxable loss due to currency losses, intercompany allocations and general tax
reduction plans. The tax benefit of $31.5 million for the first nine months of
2000 is primarily the result of the Company's European operations which
generated a taxable loss due to currency losses.
NET INCOME. Due to the foregoing, net income for the first nine months of 2001
was $7.8 million compared to net income of $1.9 million for the first nine
months of 2000.
21
LIQUIDITY AND CAPITAL RESOURCES (UNAUDITED)
The Company's consolidated working capital was $139.2 million at September 30,
2001, compared to $129.5 million at December 31, 2000, an increase of $9.7
million. The Company's working capital ratio was 1.3x at September 30, 2001 and
December 31, 2000. The increase in working capital is due to a decrease in
current liabilities, primarily accounts payable and accrued expenses slightly
offset by decreases in accounts receivable and inventory. Net cash provided by
operating activities was $41.6 million for the nine months ended September 30,
2001 compared to $99.8 million for the nine months ended September 30, 2000. The
decrease in cash provided by operations is largely due to the absence of
realized gains on derivatives offset by decreases in accounts payable and
accrued expenses.
Capital expenditures were $52.0 million for the nine months ended September 30,
2001 compared to $66.4 million for the same period in 2000. The decrease in
capital expenditures is due to deferral and timing of program expenditures.
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 provided by financing activities was $11.7 million for the nine months
ended September 30, 2001 compared to net cash used in financing activities of
$10.9 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 Company's
interim term loan.
The Company's 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 September 30, 2001, the Company had $137.0
million outstanding with $38.0 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 September 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.
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.
22
In July 2001, the FASB issued Statement No. 141, "Business Combinations". This
Statement replaces Accounting Principles Board ("APB") Opinion No. 16,
"Business Combinations". Under this Statement, all business combinations
initiated after June 30, 2001 are accounted for using only the purchase method.
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.
In August 2001, the FASB issued Statement No. 143, "Accounting for Asset
Retirement Obligations", which requires an entity to record the fair value of a
liability for an asset retirement obligation in the period in which it is
incurred and a corresponding increase in the related long-lived asset. The
liability is adjusted to its present value each period and the asset is
depreciated over its useful life. A gain or loss may be incurred upon settlement
of the liability. Statement No. 143 is effective for fiscal years beginning
after June 15, 2002. The Company is currently assessing the impact of adopting
this Statement.
In October 2001, the FASB issued Statement No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets", which replaces Statement No. 121
and provisions of APB Opinion No. 30 for the disposal of segments of a business.
This Statement creates on accounting model, based on the framework established
in Statement No. 121, to be applied to all long-lived assets including
discontinued operations. Statement No. 144 is effective for fiscal years
beginning December 15, 2001. The Company is currently assessing the impact of
adopting this Statement.
* * * * * * *
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 political, economic and market
conditions; incremental costs, slowed automobile production or other effects
that may occur as a result of the September terrorist attacks or reactions
thereto by the Company or its suppliers and customers; 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 size, timing and mix of purchases of the Company's products; the Company's
ability to realize savings from its focus on reducing and controlling costs; the
Company's ability to realize the benefits of general tax reduction plans; 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.
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 $24.6
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 $2.9 million change in earnings for the nine
months ended September 30, 2001.
23
PART II - OTHER INFORMATION
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 September 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: November 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.
24