UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 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:
(586) 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
--------- ------------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
VENTURE HOLDINGS COMPANY LLC
FORM 10-K
TABLE OF CONTENTS
PAGE #
PART I
Item 1. Business 1
Item 2. Properties 6
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to Vote of Security Holders 7
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholders Matters 7
Item 6. Selected Consolidated Financial Data 7
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations 8
Item 7a. Quantitative and Qualitative Disclosures about Market Risks 15
Item 8. Financial Statements and Supplementary Data 16
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure 54
PART III.
Item 10. Directors and Executive Officers of Registrant 54
Item 11. Executive Compensation 55
Item 12. Security Ownership of Certain Beneficial Owners and Management 56
Item 13. Certain Relationships and Related Transactions 57
PART IV.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 62
SIGNATURES 63
PART I
ITEM 1. BUSINESS GENERAL
Venture Holdings Company LLC is the successor to Venture Holdings
Trust, which was established in 1987. Venture Holdings Company LLC
owns, directly or indirectly, all of the outstanding capital stock of,
or equity interests in, each of its subsidiaries, except for its 70%
owned Mexican, 50% owned Spanish, and 50% owned French joint ventures.
As used in this report, unless otherwise stated, "our," "us," and "we"
refer to Venture Holdings Company LLC and its subsidiaries.
We are an industry leader and a worldwide full-service supplier,
systems integrator and manufacturer of plastic components, modules and
systems and an industry leader in applying new design and engineering
technology to develop innovative products, create new applications and
reduce product development time. We rank among the largest designers,
systems integrators and manufacturers of interior and exterior plastic
components and systems to the North American and European automotive
markets. We have the capability to provide customers state-of-the-art
design and advanced engineering services 24 hours a day around the
world. We also have extensive tool making capabilities. Our principal
customers include every major North American original equipment
manufacturer, or OEM, eleven of the twelve major European OEMs, several
major Japanese OEMs, and other leading direct suppliers to the OEM's or
"Tier 1" suppliers. We operate 63 facilities in the following 11
countries: the United States, Canada, Germany, Spain, France, Hungary,
the Czech Republic, United Kingdom, Mexico, the Netherlands, and
Brazil. See Note 14 of the Venture Holdings Company LLC Notes to
Consolidated Financial Statements for a description of our domestic and
export sales.
Our principal executive offices are located at 33662 James J. Pompo
Drive, Fraser, Michigan 48026 and our telephone number is (586)
294-1500.
1
PRINCIPAL PRODUCTS
We design and produce injection, compression, injection compression,
reaction injection ("RIM") and slush molded plastic parts primarily for
OEMs and other Tier I suppliers. We also emphasize complex products and
systems, such as instrument and door panel assemblies, which require
the integration of multiple components into sub-assemblies and complete
systems integration.
We currently supply components or systems on over 150 models. Interior
products include such items as instrument panel systems, door panels,
airbag covers, side wall trim, garnishment molding systems and
consoles. Exterior products include front and rear bumper fascias and
systems, body side moldings, hatchback doors, fenders, grille opening
panels and reinforcements, farings, wheel lips, and large body panels
such as hoods, sunroofs, doors and convertible hardtops.
CUSTOMERS AND MARKETING
We compete in the global OEM supplier industry, which is characterized
by a small number of OEMs, which are able to exert considerable
pressure on OEM suppliers. Sales to these customers consist of a large
number of different parts, tooling and other services, which are sold
to separate divisions and operating groups within each customer's
organization. We typically receive purchase orders from such customers
that generally provide for supplying the customer's requirements for a
particular model or model year rather than for manufacturing a specific
quantity of products. The loss of any one of such customers or purchase
orders, or a significant decrease in demand in the general retail
automobile industry, or for certain models or a group of related models
sold by any of our major customers could have a material adverse effect
on us. In addition, our failure to obtain new business on new models or
to retain or increase business on redesigned existing models could
adversely affect us. OEM customers are also able to exert considerable
pressure on component and system suppliers to reduce costs, finance
tooling, improve quality and provide additional design and engineering
capabilities. There can be no assurance that the additional costs of
increased quality standards, price reductions or additional engineering
capabilities required by OEMs will not have a material adverse effect
on our financial condition or results of operations.
Our principal customers include every major North American OEM, eleven
of the twelve major European OEMs, several major Japanese OEMs, and
leading Tier 1 suppliers, giving us geographic diversity. We maintain
diversity of volume among the various divisions of the OEMs, and we are
further diversified by our position as a supplier for a number of high
volume vehicle platforms manufactured by those divisions.
2
The approximate percentage of net sales to our principal customers for
the year ending December 31, 2001 is shown below:
YEAR ENDED
DECEMBER 31,
CUSTOMER 2001
-------- ------------
NORTH AMERICA:
General Motors 12%
Ford 6
DaimlerChrysler 6
Tier 1 Suppliers to OEMs 3
Other Automotive 2
EUROPE:
Audi AG 16
Volkswagen AG 12
DaimlerChrysler AG 6
PSA Peugeot Citroen 7
Renault SA 4
Other Automotive 5
Skoda Automobilova 4
Bayerische Motoren Werke AG (BMW) 5
Seat, S.A 4
Porsche AG 3
Adam Opel AG 3
OTHER:
Other 2
---
TOTAL 100%
===
Our sales are made directly to the OEMs with marketing, management and
customer support assistance provided by an affiliated company, wholly
owned by Larry J. Winget, and by other unaffiliated entities. See "Item
13. Certain Relationships and Related Transactions."
RAW MATERIALS
Our manufacturing processes use a variety of raw materials, principally
engineered plastic resins such as nylon, polypropylene (including
thermoplastics), polycarbonate, acrylonitrile-butadiene-styrene,
fiberglass reinforced polyester, polyethylene terephthalate ("PET") and
thermoplastic polyurethane ("TPU"); a variety of ingredients (such as
fiberglass) used in compounding materials used in the compression
molding process; paint related products; and steel for production
molds. Although all of these materials are available from one or more
suppliers, our customers generally specify materials and suppliers to
be used by us in connection with a specific program. We procure most of
our raw materials by issuing annual purchase orders under which our
annual needs for such materials are estimated. Releases against such
purchase orders are made only upon our receipt of corresponding orders
from our customers. We have not experienced raw material shortages,
although there can be no assurance that we will not experience raw
material shortages in the future. Our material costs can fluctuate with
world oil prices. We are working with our customers and alternative
suppliers to offset these increases, but there can be no assurance that
we can fully offset the effect of any increase, which may negatively
impact our gross margin.
COMPETITION
Our business is highly competitive, and competition generally occurs on
the basis of product groups. A large number of actual or potential
competitors exist, including the internal component operations of the
OEMs as well as independent suppliers, some of which are larger than
us. The competitive environment has been affected in recent years by
supplier consolidations resulting from OEM supplier optimization
policies and the spin-off by OEMs of former in-house plastics
manufacturing facilities.
We compete primarily on the basis of quality, cost, timely delivery and
customer service and, increasingly, on the basis of design and
engineering capability, painting capability, new product innovation,
product testing capability and the ability to reduce the time from
concept to mass production. Some of the OEMs have adopted supplier
management policies, which designate preferred future suppliers and, in
some cases, encourage new suppliers to supply selected product groups.
We believe that as the OEMs continue to strive to reduce new model
development cost and timing, innovation, and design and engineering
capabilities will become more important as a basis for distinguishing
competitors. We believe we maintain a competitive advantage due to our
position as a full-service OEM supplier and our technological
leadership in injection molding.
Our major competitors include Magna International, Meridian Automotive,
Collins and Aikman, Lear Corporation, Plastic Omnium, Faurecia, Dynamit
Nobel, Rehau, The Budd Company plastic division, Johnson Controls,
Inc., and Visteon Automotive.
3
EMPLOYEES
At December 31, 2001, we employed approximately 12,980 persons
worldwide. In North America, we have 931 hourly persons at our
Seabrook, New Hampshire; Lancaster, Ohio; and Grand Blanc, Michigan
facilities who are covered by collective bargaining agreements with the
United Auto Workers. Our contract with Seabrook employees expires in
June 2002 and negotiations have begun on a new agreement. We expect to
reach an agreement with our Seabrook employees prior to the expiration
of the current contract. The Lancaster contract was renegotiated during
2001 and the new contract expires in June 2006. The Grand Blanc
agreement expires in May 2003. Our Conneaut, Ohio facility, employs 191
people represented by a collective bargaining agreement with the
Teamsters Union which expires in August of 2003. We have not
experienced any work stoppages in North America and consider our
relations with our North American employees to be good.
For reasons of flexibility, part of our European workforce is employed
on short-term contracts. In addition, leased personnel are utilized in
Europe on a short-term basis to cover peak requirements.
The international workforce is covered by collective bargaining
agreements with the following workers unions:
Germany: IG Bergbau, Chemie and Erden, IG Holz and
Kunststoff, and IG Metall
France: CFTC, CGC, CGT, CGT-FO and Syndicat National
Autonome des
Plastiques
Spain: Comisiones Obreras, Union General
Trabajadores and Central
Intersindical Galega
Czech Republic: KOVO
United Kingdom: Amalgamated Engineering and Electrical Union
Brazil: Union of the Workers in the Industries of
Metal, Mechanics, Electrical Material,
Components and Parts for Automotive Vehicles
of Greater Curitiba
Although we have experienced several minor work stoppages in France in
the past, we believe that our relationships with the European works
councils and unions are good.
PATENTS
We have the right to use various patents. These patents begin to expire
over the next 15 years. The expiration of such patents is not expected
to have a material adverse effect on our financial position or results
of operations. (See "Item 13. Certain Relationships and Related
Transactions.")
ENVIRONMENTAL
Our operations are subject to numerous federal, state and local laws
and regulations pertaining to the generation and discharge of materials
into the environment. We have taken steps related to such matters in
order to minimize the risks of potentially harmful aspects of our
operations on the environment. However, from time to time, we have been
subject to claims asserted against us by regulatory agencies for
environmental matters relating to the generation and disposal of
hazardous substances and wastes. Some of these claims relate to
properties or business lines acquired by us after a release had
occurred. In each known instance, however, we believe that the claims
asserted against us, or obligations incurred by us, will not result in
a material adverse effect upon our financial position or results of
operations. Nonetheless, there can be no assurance that activities at
these facilities or facilities acquired in the future, or changes in
environmental laws and regulations, will not result in additional
environmental claims being asserted against us or additional
investigations or remedial actions being required.
We have been involved in legal proceedings with the Michigan Department
of Environmental Quality (MDEQ) concerning the emissions from our Grand
Blanc paint facility. In October 1999, the parties to the litigation
reached an agreement in principle to settle the case by the
installation of full pollution abatement equipment at the Grand Blanc
facility and payment by us of $1.1 million. The agreement was subject
to several conditions. In February of 2000, we applied for new permits
for the installation of the equipment. We entered into a consent decree
with MDEQ in January of 2001. The $1.1 million payment was made in
February of 2001. As required under the decree, we made capital
expenditures of approximately $8.5 million for additional pollution
abatement equipment at Grand Blanc, which were completed prior to July
of 2001. We also have substantially completed all of the other
conditions as required under the consent decree other than normal
compliance items for which there are stipulated penalties in the event
of non-compliance with our new permits. Thus, we believe this matter
has now been resolved although we will be subject to consent decree
terms until at least late 2003. See "Item 3. Legal Proceedings."
4
In 1998 and 1999, the MDEQ issued 3 letters of violation to our Grand
Rapids, Michigan facility, alleging violations of certain emission
limitations and coating solvent content requirements of the facility's
state air use permit. In late 2000, we filed suit against the MDEQ
contesting some of these violations. In 2001, jointly with MDEQ, we
suspended any proceedings under this suit and are presently reviewing
and discussing the alleged violations in an attempt to resolve this
matter without further litigation, as it is possible that some of the
violations may be the result of computation and reporting discrepancies
by the MDEQ. In December of 2001, we received a notice of violation
from the Environmental Protection Agency (EPA) regarding violation for
the same matters and years covered by the MDEQ's prior notices and for
the year 2001. We continue to meet with the MDEQ and EPA regarding
these violations. It is possible that the MDEQ and EPA may seek
administrative penalties in connection with the resolution of these
matters. As a result of operational changes made in Grand Rapids in mid
2001, the major source of these violations has ceased. We do not
believe that the amount of those penalties, if any, will have a
material adverse effect on our operations, or that the resolution of
these matters will require material capital expenditures, although
there can be no assurance that this will be the case.
The New Hampshire Department of Environmental Services is currently
undertaking an evaluation of certain modifications made in the early
1990's to the paint lines at our Seabrook, New Hampshire facility to
determine whether those changes made that facility subject to new
source review. The outcome of that evaluation cannot reasonably be
predicted or estimated at this time. If the New Hampshire Department of
Environmental Services concludes that the facility is subject to new
source review, it would likely require the installation of emission
control equipment and potentially other capital and operational
expenditures, and could possibly give rise to enforcement proceedings
against the facility. While we do not believe that any of the foregoing
would have a material adverse effect on our operations, there can be no
assurance that this will be the case.
In December of 1999, MDEQ contacted the Grand Blanc facility relating
to the classification of wastes leaving the facility. We have been
discussing the issue with the MDEQ and have been conducting tests of
the waste. As a result of the contact and to avoid future liability, we
voluntarily changed the classification of the waste on all subsequent
disposals even though we disagreed with MDEQ. In addition, we changed
materials and certain processes to remove the concern of the MDEQ. By
changing the classification of the waste for disposal subsequent to the
contact, we have limited our potential liability to disposals prior to
the contact. However, we may be exposed to some liability for past
disposal. On March 20, 2000 we received a notice of warning from MDEQ
regarding this matter. In light of the notice to Grand Blanc, we
voluntarily undertook the same actions and clean up procedures at our
Grand Rapids facility to minimize risk as the same procedures and
methods were used at the Grand Rapids and Grand Blanc facilities.
During 2001, we had meetings and exchanged documents with MDEQ in an
attempt to settle this matter through a consent decree, which may
require a payment by us. At the present time, it is not possible to
estimate the effect of the resolution of these issues, but management
believes the range of exposure would appear to be from $20 thousand to
$1.1 million. We have recorded a reserve of $20 thousand for this item.
In November of 2001, the EPA and other potentially responsible parties
offered a settlement to us as a deminimus participant in the Spectron
Inc. site located in Elkton, Maryland. We have indicated our wish to
accept this settlement offer which would require a total payment of
approximately $22,000 to cover expected future clean up activities. We
are now awaiting final approval of the settlement, which we expect in
late 2002. Upon finalization of the settlement documents and payment of
the amount, we will have complete settlement of this matter and have no
further liability. We have established a reserve for this expected
payment.
Estimates of the future cost of these environmental matters are
necessarily imprecise due to numerous uncertainties, including the
enactment of new laws and regulations, the development and application
of new technologies, the identification of new sites for which we may
have remediation responsibility and the apportionment and
collectibility of remediation costs among responsible parties. We
establish reserves for these environmental matters when the loss is
probable and reasonably estimable. At December 31, 2001, we had a
reserve of approximately $0.7 million, and at December 31, 2000, we had
a reserve of $1.7 million to address the issues discussed above and for
compliance monitoring activities. We periodically evaluate and revise
estimates for environmental reserves based upon expenditures against
established reserves and the availability of additional information. It
is possible that final resolution of some of these matters may require
us to make expenditures in excess of established reserves, over an
extended period of time and in a range of amounts that cannot be
reasonably estimated. Although the ultimate cost of resolving these
matters could not be precisely determined at December 31, 2001, we
believe, based on currently known facts and circumstances, that the
disposition of these matters will not have a material adverse effect on
our consolidated financial position and results of operations.
5
ITEM 2. PROPERTIES
Our executive offices are located in Fraser, Michigan, and we operate
63 facilities throughout the world. Our operations in the United States
and Canada occupy 3,340,000 square feet (1,644,500 square feet of which
represents leased facilities) in Michigan, Kentucky, New Hampshire,
Ohio, Indiana and Ontario, Canada. Our foreign operations occupy
6,949,000 square feet (3,396,000 square feet of which represents leased
facilities) in Germany, Czech Republic, France, Hungary, Spain, Mexico,
the Netherlands and the United Kingdom. Included in our foreign
operations is a 267,000 square foot facility in Spain, owned by a joint
venture in which we have a 50% interest, and a 66,000 square foot
facility in Mexico, leased by a joint venture in which we have a 70%
interest. The utilization and capacity of our facilities may fluctuate
based upon the mix of components we produce and the vehicle models for
which we are producing the components. We believe that substantially
all of our property and equipment is in good condition and that we have
sufficient capacity to meet our current manufacturing and distribution
needs through the 2004 model year.
In addition to the above facilities, we rely upon certain affiliated
companies, which are owned or controlled by Larry J. Winget, to provide
facilities, machinery and equipment, technology and services that are
necessary for us to be a full-service supplier. In addition, we have
subcontracted certain work to Nova Corporation and Deluxe Pattern
Corporation, businesses in which Mr. Winget has significant equity
interests. See "Item 13. Certain Relationships and Related
Transactions."
ITEM 3. LEGAL PROCEEDINGS
On February 23, 1998, the Attorney General of the State of Michigan and
the Michigan Department of Environmental Quality instituted legal
proceedings in state court alleging that we had ongoing violations of
air pollution control laws, primarily related to the level of emissions
and odors discharged from our Grand Blanc paint facility. In October of
1999, the parties reached an agreement in principle to settle the case
by installation of full pollution abatement equipment at Grand Blanc,
the payment of $1.1 million and execution of a consent decree all of
which is subject to several conditions precedent. In January of 2001,
upon the signing of a consent decree this action was jointly dismissed.
See "Item 1. Business - Environmental" for the current status of
events. Substantially all the other conditions in the consent decree
other than ongoing compliance requirements were also completed in 2001.
Thus, we believe this matter has now been resolved although we will be
subject to the consent decree terms until at least late 2003. During
the first quarter of 1999, the U.S. Environmental Protection Agency
issued a notice of violation and has taken an active role in monitoring
these legal proceedings and may take action separate and distinct from
the already dismissed proceedings begun by the State of Michigan and
the Michigan Department of Environmental Quality. We have not been
advised what the U.S. Environmental Protection Agency will do in light
of the consent decree with the State of Michigan. Upon our compliance
with the consent decree, we expect no action from the U.S.
Environmental Protection Agency, however, we can offer no assurance
that will happen.
In December of 2000, we filed suit against the State of Michigan and
Michigan Department of Environmental Quality over notices of air
pollution violations at our Grand Rapids facility. In February of 2001,
those proceedings were jointly suspended while the parties work to find
an acceptable solution to the issues. This may require the installation
of new abatement equipment at the facility, however, in light of
production changes at the plant, no new capital expenditures may be
required. It is still too early in the process to assess what actions
may be taken or required. See "Item 1. Business - Environmental" for
the current status of events.
In late 2000, we were notified by Union Carbide Corporation that, based
upon our usage of some paint application equipment at our Grand Blanc
facility, we were obligated to pay certain royalties related to patent
infringements. We have informed Union Carbide that because of
modifications we made, we believe we have not infringed upon their
applicable patents. We have not received a response from Union Carbide
as of the date of this filing. We use the Union Carbide equipment at
our Seabrook facility without the modifications, and are paying the
royalty at that location. However, we are reviewing this matter based
upon the previous information we discovered and may stop this payment
in the future.
In December of 2001, we agreed to a settlement in a lawsuit we filed
relating to pricing issues arising subsequent to an acquisition made in
1996. As a result of this settlement, we will receive $7.0 million,
which has been recorded in other income for the year ended December
31,2001.
In addition to the matters described above and under "Item 1. Business
-- Environmental," we are a party to several legal proceedings
incidental to the conduct of our business. We do not believe that any
of these actions, individually or in the aggregate, will have a
material adverse effect on our financial condition or results of
operations.
6
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
PART II
ITEM 5. MARKET FOR THE REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Venture Holdings Company LLC is a limited liability company and 100% of
our membership interests are held by Venture Holdings Trust, of which
Larry J. Winget is the sole beneficiary. There is no market for the
interests of Venture Holdings Company LLC. Venture Holdings Company LLC
owns, directly or indirectly, all of the outstanding capital stock of,
or equity interests in our subsidiaries, except for certain of our
joint ventures. There is no market for such capital stock or equity
interests.
We did not pay any cash dividends during the past three years, and we
are restricted in our ability to pay dividends under various debt
covenants other than for the payment of the member's tax obligations
resulting from the activities of the Company.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated balance sheet data presented below as of
December 31, 2001 and 2000 and the consolidated income statement data
presented below for the years ended December 31, 2001, 2000 and 1999,
are derived from our consolidated financial statements, audited by
Deloitte & Touche LLP, independent auditors, and should be read in
conjunction with our audited consolidated financial statements and
notes thereto included elsewhere herein. The selected consolidated
balance sheet data presented below as of December 31, 1999, 1998 and
1997 and the consolidated income statement data presented below for the
years ended December 31, 1998 and 1997, are derived from our audited
consolidated financial statements not included herein.
YEARS ENDED DECEMBER 31,
2001 2000 1999 1998 1997
--------- --------- --------- ------- -------
INCOME STATEMENT DATA (1) (2):
Net sales 1,862,328 1,829,965 1,366,170 645,196 624,113
Income from operations 113,768 96,030 41,224 52,163 45,063
Interest expense 97,658 102,513 72,606 36,641 30,182
Net (loss) income before taxes (11,038) (801) (160) 15,522 14,881
Tax (benefit) provision (3) (13,067) (11,289) 8,227 1,954 3,358
Net income (loss) 1,003 9,082 (14,510) 13,568 11,523
OTHER FINANCIAL DATA:
Depreciation and amortization 93,052 91,077 75,996 39,320 32,147
Capital expenditures 77,158 85,718 53,176 24,706 33,012
BALANCE SHEET DATA
Total assets 1,416,131 1,426,303 1,414,976 541,315 524,122
Total debt 893,774 876,983 920,376 364,939 336,188
Member's equity 70,309 67,037 60,903 77,113 64,282
(1) Venture Holdings Company LLC operates as a holding company and has no
independent operations of its own. Separate financial statements for our
subsidiaries have not been presented because we do not believe that such
information is material.
(2) The 1999 results include the operations of Peguform GmbH and its
subsidiaries from May 28, 1999.
(3) This (benefit)/provision relates to Venture Holdings Corporation (which
operates Bailey Corporation) and Peguform GmbH and its subsidiaries (see Note 2
above). Other significant subsidiaries of Venture have elected "S" corporation
status under the Code, or are limited liability companies taxed as partnerships,
and, consequently, do not incur liability for federal and certain state income
taxes.
7
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS RESULTS OF OPERATIONS
The following discussion and analysis contains a number of "forward
looking" statements within the meaning of the Securities Exchange Act
of 1934 and are subject to a number of risks and uncertainties. Such
factors include, among others, the following: international, national
and local political, economic and market conditions; incremental costs,
slowed automobile production or other effects that may occur as a
result of the September 2001 terrorist attacks on the World Trade
Center and the Pentagon or reactions thereto by us or our suppliers and
customers; possible future terrorist attacks; demographic changes; the
size and growth of the automobile market or the plastic automobile
component market; our ability to sustain, manage or forecast our
growth; the size, timing and mix of purchases of our products; our
ability to realize savings from our focus on reducing and controlling
costs; our 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 us;
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; control and the level of affiliated
transactions.
On May 28, 1999, we acquired Peguform GmbH, a leading international
designer and manufacturer of complete interior modules, door panels and
dashboards and of exterior modules and other structural plastic body
parts, including bumper fascias and hatchback doors.
The following table sets forth, for the periods indicated, our
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 notes
thereto included elsewhere herein.
YEARS ENDED DECEMBER 31,
2001 2000 1999
----- ----- -----
Net sales 100.0% 100.0% 100.0%
Cost of products sold 87.7 87.6 89.0
----- ----- -----
Gross profit 12.3 12.4 11.0
Selling, general and administrative expense 6.1 7.1 8.0
Payments to beneficiary in lieu of distributions 0.1 0.1 0.0
----- ----- -----
Income from operations 6.1 5.2 3.0
Interest expense 5.2 5.6 5.3
Other expense (income) 1.5 (0.3) (2.3)
----- ----- -----
(Loss) income before taxes (0.6) (0.1) 0.0
Tax (benefit) provision (0.7) (0.6) 0.6
Minority interest 0.0 0.1 0.0
----- ----- -----
Net income (loss) before extraordinary loss 0.1 0.4 (0.6)
Extraordinary loss on early extinguishment of debt 0.0 0.0 0.5
----- ----- -----
Net income (loss) before cumulative effect of change in
Accounting Principle 0.1 0.4 (0.6)
Cumulative effect of change in Accounting Principle 0.0 0.0 0.0
----- ----- -----
Net income (loss) 0.1% 0.4% (1.1)%
===== ===== =====
YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000
Net sales increased $32.3 million for the year ended December 31, 2001,
or 1.8 %, to $1,862.3 million, compared to net sales of $1,829.9
million for the year ended December 31, 2000. Foreign sales increased
$85.1 million or 6.8% due to higher tooling sales, increased volume and
more content per vehicle. This increase was offset by a decrease of
2.8% in the average currency exchange rate between fiscal years 2000
and 2001, which resulted in a reduction in foreign sales of
approximately $3.8 million. Domestically, sales decreased $49.5
million, or 8.5%, due to a general softening of the North American
automotive market. Included in net sales is $8.5 million recovered from
an OEM due to program delays incurred in 2000 and 2001 at our foreign
operations.
8
Gross profit for the year ended December 31, 2001 increased $1.6
million, or .7 %, to $229.2 million compared to $227.6 million for the
year ended December 31, 2000. As a percentage of net sales, gross
profit decreased from 12.4% for the year ended December 31, 2000 to
12.3 % for the year ended December 31, 2001. Domestically, gross profit
as a percent of sales was 12.5% as the result of the implementation of
lean manufacturing techniques despite the decrease in sales, compared
to 9.8% for the year ended December 31, 2000. Internationally, gross
profit as a percent of sales was 11.8% for the year ended December 31,
2001 as compared to 13.5% for the year ended December 31, 2000 or a
decrease of 1.7%. This decease was due to start up manufacturing
inefficiencies and average lower margins on increased tooling sales. We
expect to maintain our current efficiencies and obtain further
manufacturing efficiencies in 2002.
Selling, general and administrative expense for the year ended December
31, 2001 decreased by $16.4 million, or 12.6%, to $114.0 million
compared to $130.4 million for the year ended December 31, 2000. As a
percentage of net sales, selling, general and administrative expense
decreased to 6.1% for the year ended December 31, 2001 as compared to
7.1% for the year ended December 31, 2000. The decrease as a percent of
net sales and in absolute dollars is primarily attributable to cost
control efforts involving increased review of expenses and a reduction
in salaried employees. Venture Sales & Engineering (a related party)
irrevocably forgave $4.6 million of management fees charged to us,
accounting for approximately 0.2% of the decrease. This was done as an
inducement to us to lower our quoted price on a prospective new program
to an OEM in expectation of receiving this new program. We expect
selling, general and administrative expenses to be lower in fiscal 2002
due to the adoption of FASB Statement No. 142, wherein we will cease
amortizing goodwill. We will begin to periodically evaluate goodwill
for impairment amortization expense. Goodwill amortization in fiscal
2001 was $4.4 million.
As a result of the foregoing, income from operations for the year ended
December 31, 2001 increased $17.8 million, or 18.5%, to $113.8 million,
compared to $96.0 million for the year ended December 31, 2000. As a
percentage of net sales, income from operations increased to 6.1% in
fiscal 2001 from 5.2% in fiscal 2000.
Interest expense decreased $4.8 million to $97.7 million in fiscal 2001
compared to $102.5 million in fiscal 2000. The decrease was due to the
overall reduction in interest rates mitigated by higher average
borrowings. This decrease in interest expense was offset by an increase
of $2.7 million related to noncash amortization from the termination of
interest rate swaps, which increased from $2.5 million for the year
ended December 31, 2000 to $5.2 million for the year ended December 31,
2001.
Other expense (income) primarily consists of $18.7 million of
unrealized currency exchange losses on inter-company loans and a $14
million non cash write down of the deposits made with Shelby American,
Inc. in fiscal years 2000 and 1999, (See "Item 13. Certain
Relationships and Related Transaction--Business Relationships") offset
by approximately $7 million of income due to a settlement, related to
pricing issues arising subsequent to a prior acquisition, for domestic
operations. (See "Item 3. Legal Proceedings"). Other (income) expense
for the year ended December 31, 2000 consisted of $34.9 million of net
realized and unrealized gains on cross-currency interest rate swap and
foreign exchange collar derivative transactions and third party
interest income of $4.0 million, offset by realized and unrealized
currency exchange losses of $33.3 million. (See note 8 of Notes to
Consolidated Financial Statements)
For the year ended December 31, 2001, we reported a net tax benefit of
$13.1 million, $18.7 million of this tax benefit was a result of
decreasing currency exchange rates related to the Euro, and was offset
by $5.6 million of income tax expense charged to the normal operations
of Venture Holdings Corporation and the Peguform group of companies.
Due to the foregoing, net income for the year ended December 31, 2001
was $1.0 million compared to net income of $9.0 million for year ended
December 31, 2000 or a decrease of $8.0 million. As a percentage of net
sales, net income decreased from 0.4% to 0.1%.
9
YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999
Net sales increased $463.8 million for the year ended December 31,
2000, or 33.9%, to $1,829.9 million, compared to net sales of $1,366.2
million for the year ended December 31, 1999. This increase was mainly
due to the addition of Peguform's net sales for twelve months in 2000
compared to seven months in 1999. On a proforma basis, sales decreased
$96.6 million from 1999, with $74.3 million of the decrease was due to
Euro devaluation offset by net increases in European volumes.
Domestically, sales decreased $22.4 million, or 3.7%, due to a general
softening of the automotive market.
Gross profit for the year ended December 31, 2000 increased $76.9
million, or 51.0%, to $227.6 million compared to $150.7 million for the
year ended December 31, 1999. As a percentage of net sales, gross
profit increased from 11.0% for the year ended December 31, 1999 to
12.4% for the year ended December 31, 2000. This dollar increase was
mainly due to the addition of Peguform's activity for twelve months in
2000 compared to seven months in 1999. Domestically, gross profit as a
percent of sales increased 1.0% due to the implementation of lean
manufacturing techniques despite sales reductions. Internationally,
gross profit as a percent of sales increased 1.0% due to manufacturing
efficiencies. We expect to continue to achieve manufacturing
efficiencies in 2001. Effective January 1, 2001, we granted
DaimlerChrysler Corporation in North America a 5% sales price
reduction. We are attempting to recover all of this from either our
suppliers or our own operating efficiencies. We may not be able to
fully offset this reduction which could reduce margins.
Selling, general and administrative expense for the year ended December
31, 2000 increased by $21.2 million, or 19.4%, to $130.4 million
compared to $109.2 million for the year ended December 31, 1999. As a
percentage of net sales, selling, general and administrative expense
decreased to 7.1% for the year ended December 31, 2000 as compared to
8.0% for the year ended December 31, 1999. The overall dollar increase
was mainly due to the addition of Peguform's activity for twelve months
in 2000 compared to seven months in 1999. The decrease as a percent of
net sales is primarily attributable to Peguform's lower selling,
general and administrative expense as a percentage of net sales,
relative to Venture's. Venture Sales & Engineering (a related party)
eliminated $2.6 million of management fees relating to sales
commissions charged to us. This was done due to the slow down in the
automotive industry and to ensure that we remained competitive.
As a result of the foregoing, income from operations for the year ended
December 31, 2000 increased $54.8 million, or 132.9%, to $96.0 million,
compared to $41.2 million for the year ended December 31, 1999. As a
percentage of net sales, income from operations increased to 5.2% in
fiscal 2000 from 3.0% in fiscal 1999.
Interest expense increased $29.9 million to $102.5 million in fiscal
2000 compared to $72.6 million in fiscal 1999. The increase is the
result of incurring interest for twelve months in 2000 as opposed to
only seven months in 1999 related to the increased debt associated with
the acquisition of Peguform and rising interest rates. $2.5 million of
this expense is noncash amortization from the termination of interest
rate swaps.
Other (income) expense includes $75.8 million of realized gains and
$40.9 million of unrealized losses related to cross-currency interest
rate swap and foreign exchange collar transactions and third party
interest income of $4.0 million. Other (income) expense also includes
unrealized currency losses of $41.9 million offset by realized currency
gains of $8.6 million. (See note 8 of Notes to Consolidated Financial
Statements)
For the year ended December 31, 2000, we reported a net tax benefit of
$11.3 million. The tax benefit was generated as a result of finalizing
the restructuring of the Peguform companies. $3.1 million was a
reduction of the tax rates in Germany and $22.7 million was from the
recognition of the benefit of NOL carryforwards. $14.5 million was
income tax expense charged to the normal operations of Venture Holdings
Corporation and the Peguform Group of companies.
Due to the foregoing, net income for the year ended December 31, 2000
was $9.0 million compared to a net loss of $14.5 million for year ended
December 31, 1999.
10
LIQUIDITY AND CAPITAL RESOURCES
Our consolidated working capital was $141.5 million at December 31,
2001 compared to $129.5 million at December 31, 2000, an increase of
$12.0 million. Our working capital ratio was 1.3x and 1.3x at December
31, 2001 and 2000, respectively. Net cash provided by operating
activities was $63.1 million for the year ended December 31, 2001
compared to net cash provided by operating activities of $61.3 million
for the year ended December 31, 2000. The increase was caused by a net
increase in working capital requirements of approximately $23.0 million
consisting of an increase in other current assets, accounts payable and
deferred taxes, offset by decreases in accounts receivables, inventory,
accrued expenses and other liabilities. In addition, there was a net
increase of $16.9 million in fiscal year 2001 associated with currency
and hedging transaction losses, as compared to the year ended December
31, 2000. These changes were offset by an increase in net income after
adding back noncash charges of $7.9 million.
Capital expenditures were $77.2 million for the year ended December 31,
2001 compared to $85.7 million for the year ended December 31, 2000. We
continue to upgrade machinery and equipment and paint lines at all
facilities to handle expected increased volumes and general
reconditioning of equipment. In 2000, we received $78.5 million from
the termination of derivatives, which resulted in a net use of cash of
$6.5 million from investment activities.
In the ordinary course of business, we seek additional business with
existing and new customers. We continue to compete for the right to
supply new components which could be material to us and require
substantial capital investment in machinery, equipment, tooling and
facilities. As of the date hereof, however, we have no formal
commitments with respect to any such material business. Assuming a
constant currency relative to the US dollar, we do expect increasing
sales over the next several years but only a slight increase in 2002.
This is, however, subject to certain expectations for product demand
and currency movements; thus we can give no assurance that increased
sales expectations will be achieved. Our volume assumptions are based
upon information we obtain from our customers. We are generally
assuming currency movements will average at the current levels. In
later years, we may be required to replace or update some of our paint
lines to handle expected volumes. This decision will be made late in
2002 and would be reflected in 2003 expenditures.
Net cash provided by financing activities was $16.8 million for the
year ended December 31, 2001 compared to net cash used in financing
activities of $43.4 million for the year ended December 31, 2000, which
in both years reflects the scheduled paydown of debt offset by
increased net borrowings under our revolving credit agreement to fund
our operations.
Our senior credit facility provides for borrowings of (1) up to $175.0
million under a revolving credit facility, which, in addition to those
matters described below, is used for working capital and general
corporate purposes; (2) $75.0 million under a five year term loan A;
and (3) $200.0 million under a six year term loan B. The credit
facility also originally provided for a $125.0 million 18 month interim
term loan which was repaid in full by November of 2000. The senior
credit facility was amended in 2000 to extend the date by which we were
required to issue $125 million principal amount of securities that rank
pari passu in right of payment with, or junior to, our 12% senior
subordinated notes due 2009, described below, to March 31, 2002. On
March 29, 2002, the senior credit facility was amended to further
extend the deadline for this requirement to June 30, 2003. See Note 6
of Notes to consolidated Financial Statements.
The revolving credit facility permits us 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 December 31, 2001, we could have borrowed an additional
$28.4 million under the revolving credit facility. Obligations under
the senior credit facility are jointly and severally guaranteed by our
domestic subsidiaries and are secured by first priority security
interests in substantially all of our assets and our domestic
subsidiaries. We also rely on the non-recourse sale of certain European
automotive company receivables to fund our operations.
11
The credit agreement and documents governing our $205 million of 9 1/2%
senior notes due 2005 (the "1997 Senior Notes"), and the documents
governing our $125 million of 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. Our debt obligations also contain various restrictive
covenants that require us 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 part of the March 29, 2002 amendment to the credit agreement,
an additional restrictive covenant was added that limits our net
related party receivables to $65.0 million at December 31, 2001 and
requires further reductions over the next several years to a maximum of
$35 million by December 31, 2003 and any time thereafter. At December
31, 2002 the net related party receivables balance must not exceed $55
million. As of December 31, 2001, we were in compliance with all debt
covenants.
In connection with the senior credit facility and the 1999 Notes, we
entered into two five-year Euro dollar cross-currency interest rate
swap agreements and one three-year Euro dollar cross-currency interest
rate swap agreement.
During 1999, the net impact on earnings due to the cross-currency swap
agreements was an unrealized gain of $27.1 million. In March 2000, we
terminated our 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 twelve months ended
December 31, 2000 was a realized gain of $14.9 million.
The cross-currency swap agreements were replaced with a twelve-month
zero-cost foreign exchange collar. As a result of these foreign
exchange collar transactions, the net impact on earnings for the twelve
months ended December 31, 2000 was income of $16.8 million. On March
16, 2001, the original call side of the foreign currency exchange
collar expired unexercised.
The interest rate swap agreement within one of our cross-currency swap
agreements, which was accounted for using settlement accounting,
resulted in interest expense of $0.5 million during 2000. During July
2000, we 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 term of the cross currency interest rate
swap agreements. During 2000 and 2001, interest expense includes $2.5
million and $5.2 million, respectively, of this deferred interest
amortization.
The other interest rate swap agreements did not meet all the criteria
for settlement accounting. The net impact on earnings during 1999 was
an increase in other income of $11.0 million. During July 2000, we
terminated these financial instruments and realized a cash gain of
$16.9 million plus interest income of $0.1 million. The net impact on
earnings during 2000 was an increase in other income of $3.6 million.
We had also entered into interest rate swap agreements with a total
notional value of $55.0 million to mitigate the risk associated with
changing interest rates on certain floating rate debt. During 2000 and
2001, all of these interest rate swaps agreements expired. All of these
interest rate swap agreements were accounted for using settlement
accounting. The impact of these interest rate swap agreements resulted
in $0.4 million, $0.1 million and $0.8 million of additional interest
expense during 2001, 2000 and 1999, respectively.
On January 1, 2001, as a result of the adoption of SFAS No. 133
"Accounting for Derivative Instruments and Hedging Activities", we
recorded a ($0.2) million cumulative effect of a change in accounting
principle.
We have not entered into any new hedging agreements since the above
described transactions were completed. Consequently, our ability to
service our various debt obligations may be effected by our exposure to
fluctuations in various foreign currencies relative to the U.S. dollar,
as well as fluctuations in interest rates. (See "Item 7A. Quantitative
and Qualitative Disclosures about Market Risk") We are attempting to
address this concern and are focusing on correcting or limiting this
exposure as we seek new financing in the future.
12
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 have been made available to certain of these
entities for services such as design, model and tool building. Since
the Trust is the sole member of Venture Holdings Company LLC, 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. Some, but not all, of these transactions have
been reviewed by a Fairness Committee as required by various loan
agreements. Those not reviewed have been in existence prior to
the loan agreements and have been exempted from the Fairness
Committee approvals as they were in existence prior to entering into
the loan agreements
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 following is a summary of transactions with all related parties at
December 31, 2001, 2000 and 1999 (in thousands):
DECEMBER 31,
2001 2000 1999
-------- -------- --------
Revenue $ 38,836 $ 26,596 $ 22,094
Expenses/Purchases 105,837 39,935 36,191
Assets:
Property, plant and equipment purchased -- -- 965
Deposit, paid for vehicles 273 12,400 13,268
The increase in related party revenue is primarily due to the sale of
raw materials to affiliates that increases the purchasing volume with
our suppliers and affords us greater purchasing leverage and
consequently lower prices. The increase in related party
expenses/purchases is due to an increase in usage fees, rentals,
manufacturing related services and inventory purchases.
These related party transactions result in the following accounts
receivable balances in the Company's consolidated balance sheets (in
thousands):
DECEMBER 31,
2001 2000
-------- --------
Amounts receivable $ 57,742 $113,557
Amounts payable 16,047 25,519
-------- --------
Net amounts receivable $ 41,695 $ 88,038
======== ========
These related party transactions also result in the following asset
balances in the Company's consolidated balance sheets (in thousands):
December 31,
2001 2000
------- -------
Prepaid assets $23,900 $ -
======= =======
Tooling progress payments
in inventory $47,400 $ 9,900
======= =======
Deposits, net of impairment
Charge of $14,000 at
December 31, 2001 $12,000 $26,000
======= =======
13
As part of the related party transactions in 2001, detailed in the
table above, we entered into new agreements which resulted in recording
several noncash transactions that effectively settled related party
receivables through the receipt of services. We believe the net
receivables, prepaids and inventory are fully collectible. For a more
complete description of these transactions, see Note 9 of the Venture
Holdings Company LLC Notes to Consolidated Financial Statements and
"Item 13. Certain Relationships and Related Transactions."
We believe that our existing cash balances, operating cash flow,
borrowings under our revolving credit facility and other short term
arrangements, such as factoring in certain foreign jurisdictions, will
be sufficient to fund working capital needs, and normal capital
expenditures required for the operation of our existing business
through the end of 2003. However, over the next fourteen months we must
seek to address our currency exposure related to the existing financing
structure and also deal with the need to issue new debt as required
under the current credit agreement as outlined above. To assist our
working capital needs and as part of the March 29, 2002 amendment to
the credit agreement, we have also requested an additional $50 million
of borrowings under the credit agreement. This would be accomplished by
adding a Term loan C to the existing facility. The expected transaction
would require that 50% of the net proceeds of Term loan C be used to
prepay Term loans A and B equally and we would receive a pro rata
reduction in future principal payments over the remaining term of the
loans. The remaining 50% of Term loan C would be used for general
corporate purposes. This loan is presently being syndicated and is
expected to close prior to June 30, 2002, however, at this time we can
not provide assurance that we will attract a sufficient number of
lenders willing to fill the entire loan commitment.
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. As a
result of the adoption of SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities" on January 1, 2001, we recorded a
($0.2) million cumulative effect of a change in accounting principle.
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. We adopted this statement and it
had no material impact on our results of operations or financial
position.
In June 2001, the FASB issued Statement No. 142, "Goodwill and Other
Intangible Assets", which establishes new standards for goodwill
acquired in business combinations. Beginning January 1, 2002, we will
no longer amortize goodwill, but will periodically evaluate it for
impairment. We amortized $4.4 million of goodwill in the year 2001. We
are in the process of completing our transitional goodwill impairment
testing, but do not expect the adoption of this Statement will result
in an impairment of goodwill.
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. We are currently assessing the impact of adopting this
Statement. We do not expect a material impact on our results of
operations or financial position at the date of adoption of 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 an 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. On
January 1, 2002, we adopted this Statement and it has had no material
impact on our results of operations or financial position
14
SIGNIFICANT ACCOUNTING POLICIES
Our significant accounting policies are more fully described in Note 1
to our consolidated financial statements. Certain of our accounting
policies require the application of significant judgment by us in
selecting the appropriate assumptions for calculating financial
estimates. By their nature, these judgements are subject to an inherent
degree of uncertainty. These judgements are based on our historical
experience, terms of existing contracts, our observations of trends in
the industry, information provided by customers and information
available from other sources, as appropriate. Our significant
accounting policies include: 1) revenue recognition in reporting the
transactions and agreements with our customers and our contractual
rights under such agreements all of which are effected by the normal
course of business between the parties and 2) Allowance for doubtful
accounts and our recording of such provisions given the relationship
and dealings we have with our customers and our rights and obligations
under these customer contracts.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
We are 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, we had selectively entered into a variety
of foreign exchange and interest rate financial instruments. A
discussion of our 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 this report.
FOREIGN CURRENCY EXCHANGE RATE RISK
We have foreign currency exposures related to buying, selling and
financing in currencies other than the local currencies in which we
operate. Our most significant foreign currency exposures relate to the
European Union, the Czech Republic, Mexico, Brazil, United Kingdom and
Canada. As of December 31, 2000, the net fair value asset of financial
instruments with exposure to foreign currency risk was approximately
$(0.6) million. The potential loss in fair value for such financial
instruments from a hypothetical 10% adverse change in quoted foreign
currency exchange rates would be approximately $57,000. As of December
31, 2001 we had no financial instruments of this type. 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 and liabilities denominated
in a foreign currency.
A portion of our assets are based in our 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, our consolidated member's equity will fluctuate depending
upon the weakening or strengthening of the U. S. dollar against the
respective foreign currency. A hypothetical 10% change in foreign
currency exchange rates would result in an approximate $26.0 million
and $50.5 million change in earnings for the twelve months ended
December 31, 2001 and 2000, respectively. 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
We have exposure to interest rate risk on a portion of our debt
obligations. A one percent change in interest rates on floating rate
debt would result in approximately $3.9 million and $3.8 million change
in earnings for the twelve months ended December 31, 2001 and 2000,
respectively.
15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
VENTURE HOLDINGS COMPANY LLC
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
Report of Independent Public Accountants.................................... 17
Consolidated Balance Sheets................................................. 18
Consolidated Statements of Operations and Comprehensive Income (Loss)....... 19
Consolidated Statements of Changes in Member's Equity....................... 19
Consolidated Statements of Cash Flow........................................ 20
Notes to Consolidated Financial Statements.................................. 21
16
INDEPENDENT AUDITORS' REPORT
Member of Venture Holdings Company LLC
Fraser, Michigan
We have audited the accompanying consolidated balance sheets of Venture
Holdings Company LLC and subsidiaries ("Venture") as of December 31, 2001 and
2000, and the related consolidated statements of operations, comprehensive
income (loss), changes in member's equity and cash flows for each of the three
years in the period ended December 31, 2001. Our audits also included the
consolidated financial statement schedule listed in the Index at Item 14. These
consolidated financial statements and the consolidated financial statement
schedule are the responsibility of Venture's management. Our responsibility is
to express an opinion on these consolidated financial statements and the
consolidated financial statement schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the consolidated financial position of Venture
Holdings Company LLC and subsidiaries as of December 31, 2001 and 2000, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2001, in conformity with accounting principles
generally accepted in the United States of America. Also, in our opinion, such
consolidated financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
Deloitte & Touche LLP
April 8, 2002
Detroit, Michigan
17
VENTURE HOLDINGS COMPANY LLC
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
DECEMBER 31, DECEMBER 31,
ASSETS 2001 2000
- ------------------------------------------ ----------- -----------
CURRENT ASSETS:
Cash and cash equivalents $ 2 $ 941
Accounts receivable, net, includes related party receivables of $9,992
and $54,478 at December 31, 2001 and, 2000,
respectively (Notes 3 & 9) 266,232 293,072
Inventories, including progress payments to a related party of
$47,400 and $9,900 at December 31, 2001 and 2000 respectively
(Note 4 & 9) 192,804 206,622
Investments (Note 8) 489
Prepaid and other current assets, including prepayments to a related party
of $23,900 at December 31, 2001 (Notes 9 & 13) 87,846 46,299
----------- -----------
Total current assets 546,884 547,423
Property, Plant and Equipment, Net (Notes 1 & 5) 542,915 553,038
Intangible Assets, Net (Note 1) 127,315 127,445
Other Assets, includes related party receivables of $31,703 and $33,560 at
December 31, 2001 and 2000 respectively. (Notes 1 & 9) 128,490 147,257
Deferred Tax Assets (Note 13) 70,527 51,140
----------- -----------
Total Assets $ 1,416,131 $ 1,426,303
=========== ===========
LIABILITIES AND MEMBER'S EQUITY
- ------------------------------------------
CURRENT LIABILITIES:
Accounts payable (Note 9) $ 261,613 $ 257,947
Accrued interest 12,948 15,482
Accrued expenses 99,993 120,128
Current portion of long term debt (Note 6) 30,813 24,405
----------- -----------
Total current liabilities 405,367 417,962
Pension Liabilities & Other (Note 12) 44,115 50,759
Deferred Tax Liabilities (Note 13) 33,379 37,967
Long Term Debt (Note 6) 862,961 852,578
----------- -----------
Total liabilities 1,345,822 1,359,266
Commitments and Contingencies (Note 10) -- --
Member's Equity:
Member's equity 73,425 72,422
Accumulated other comprehensive (loss) income -
Cumulative translation adjustment and minimum pension
Liability in excess of unrecognized prior service cost net of tax (3,116) (5,385)
----------- -----------
Member's Equity 70,309 67,037
----------- -----------
Total Liabilities and Member's Equity $ 1,416,131 $ 1,426,303
=========== ===========
See notes to consolidated financial statements.
18
VENTURE HOLDINGS COMPANY LLC
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(DOLLARS IN THOUSANDS)
YEARS ENDED DECEMBER 31,
2001 2000 1999
---- ---- ----
Net Sales (Notes 9 & 11) $ 1,862,328 $ 1,829,965 $ 1,366,170
Cost of Products Sold (Note 9) 1,633,129 1,602,326 1,215,472
----------- ----------- -----------
Gross Profit 229,199 227,639 150,698
Selling, General, and Administrative
Expense (Note 9) 114,009 130,444 109,215
Payments to Beneficiary in Lieu of
Distributions 1,422 1,165 259
----------- ----------- -----------
Income From Operations 113,768 96,030 41,224
Interest Expense (Note 6) 97,658 102,513 72,606
Other Expense (Income) (Notes 8 & 10) 27,148 (5,682) (31,222)
----------- ----------- -----------
(Loss) Before Taxes (11,038) (801) (160)
Tax (Benefit) Provision (Note 13) (13,067) (11,289) 8,227
Minority Interest 844 1,406 554
----------- ----------- -----------
Net Income (Loss) Before
Extraordinary Loss 1,185 9,082 (8,941)
Extraordinary Loss on Early
Extinguishment Of Debt -- -- 5,569
----------- ----------- -----------
Net Income (Loss) Before Cumulative
Effect of Change in Accounting Principle 1,185 9,082 (14,510)
Cumulative Effect of Change in
Accounting Principle (182) -- --
----------- ----------- -----------
Net Income (Loss) 1,003 9,082 (14,510)
Other Comprehensive (Loss)
Income - minimum pension
liability in excess of
unrecognized prior service cost,
net of tax (156) -- 737
Other Comprehensive Income
(Loss) - cumulative translation
Adjustments 2,425 (2,948) (2,437)
----------- ----------- -----------
Comprehensive Income (Loss) $ 3,272 $ 6,134 $ (16,210)
=========== =========== ===========
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBER'S EQUITY
(DOLLARS IN THOUSANDS)
YEARS ENDED DECEMBER 31,
2001 2000 1999
---- ---- ----
Member's Equity, Beginning of $67,037 $ 60,903 $ 77,113
Period
Comprehensive Income (Loss):
Net Income (Loss) 1,003 9,082 (14,510)
Other Comprehensive Income (Loss) 2,269 (2,948) (1,700)
------ -------- --------
Comprehensive Income (Loss) 3,272 6,134 (16,210)
------ -------- --------
Member's Equity, End of Period 70,309 $ 67,037 $ 60,903
====== ======== ========
See notes to consolidated financial statements.
19
VENTURE HOLDINGS COMPANY LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
YEARS ENDED DECEMBER 31,
2001 2000 1999
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 1,003 $ 9,082 $ (14,510)
Adjustments to reconcile net income to net
cash provided by operating
activities:
Depreciation and amortization 93,052 91,077 75,996
Deposit write-down 14,000 -- --
Unrealized loss on currency exchange 21,720 41,623 17,419
Unrealized gain on investments (609) -- (40,501)
Net gain on termination of derivatives (37,421) --
Loss from the disposal of fixed assets 830 564 181
Net extraordinary loss on early
extinguishment of debt -- 5,569
Change in accounts receivable 26,841 18,272 53,004
Change in inventories 13,818 (52,000) 23,900
Change in prepaid and other current
assets (41,547) 7,561 (8,704)
Change in other assets (16,347) (44,680) (29,715)
Change in investments in associated
company -- -- (723)
Change in accounts payable 3,666 63,350 10,205
Change in accrued expenses (22,668) 13,553 (13,645)
Change in other liabilities (6,644) (6,856) 4,499
Change in deferred taxes (23,975) (42,779) 5,836
-------- --------- ---------
Net cash provided by operating activities 63,140 61,346 88,811
-------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of subsidiaries, net of cash
acquired -- -- (444,061)
Capital expenditures (77,158) (85,718) (53,176)
Proceeds from sale of fixed assets 314 661 390
Proceeds from termination of derivatives -- 78,531 --
-------- --------- ---------
Net cash used in investing activities (76,844) (6,526) (496,847)
-------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under
revolving credit agreement 24,387 96,452 (71,571)
Debt issuance fees -- (27,066)
Net proceeds from issuance of debt 16,819 -- 650,000
Payment for early extinguishment of debt 5,717 (128,650)
Principal payments on debt (24,417) (145,527) (5,859)
-------- --------- ---------
Net cash provided by (used in) financing
activities 16,789 (43,358) 416,854
-------- --------- ---------
Effect of exchange rate changes on cash
and cash equivalents (4,024) (17,913) (1,556)
NET (DECREASE) INCREASE IN CASH (939) (6,451) 7,262
CASH AT BEGINNING OF PERIOD 941 7,392 130
-------- --------- ---------
CASH AT END OF PERIOD $ 2 $ 941 $ 7,392
======== ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for interest $ 95,037 $ 93,083 $ 72,129
======== ========= =========
Cash paid during the period for taxes $ 5,116 $ 5,827 $ 4,337
======== ========= =========
See notes to consolidated financial statements.
20
VENTURE HOLDINGS COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF ACCOUNTING POLICIES
Organization - In 1987, the sole shareholder of the Venture Group of
companies contributed all of the common stock of the companies to Venture
Holdings Trust (the "Trust"). Simultaneously, certain property, plant, and
equipment were contributed by the sole shareholder to certain companies owned
by the Trust. In exchange, the shareholder was named the sole beneficiary of
the Trust. In May of 1999, the Trust effected a trust contribution by
contributing its assets, including the capital stock of the companies owned
by the Trust other than the membership interest in Venture Holdings Company
LLC ("Venture"), to Venture. Venture, a wholly owned subsidiary of the Trust,
also assumed the obligations of the Trust. The Trust is the sole member of
Venture.
Principles of Consolidation - The consolidated financial statements include
the accounts of Venture and all of Venture's subsidiaries that are wholly
owned or majority-owned (collectively referred to as the "Company"). The
Company's investments in less than majority-owned businesses are accounted
for under the equity method. All intercompany accounts and transactions have
been eliminated.
Business - The Company is a worldwide full-service supplier, systems
integrator and manufacturer of plastic components, modules and systems. The
Company provides state-of-the-art design and advanced engineering services
around the world. The Company also has extensive tool making capabilities.
Estimates - The preparation of the Company's financial statements in
conformity with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Cash and Cash Equivalents - Highly liquid investments with an initial
maturity of three months or less are classified as cash equivalents.
Inventories - Manufactured parts inventories are stated at the lower of cost
or market using the first-in, first-out method. Inventory also includes costs
and progress payments associated with building molds under contract. Molds
owned by the Company and used in the Company's manufacturing operations are
transferred to tooling, in property, plant and equipment, when the molds are
operational. Progress payments on tooling being built by a related party are
recorded in inventory.
Property and Depreciation - Property, plant, and equipment are recorded at
cost. Depreciation is computed by the straight-line method over the estimated
useful lives of the various classes of assets. Tooling is amortized on a
piece price or straight line basis over the related production contract,
generally 3 to 7 years. The principal estimated useful lives are as follows:
YEARS
-----
Building and improvements 10-40
Machinery and equipment, and
automobiles 3-20
Leasehold improvements are amortized over the useful life or the term of the
lease, whichever is shorter. Expenditures for maintenance and repairs are
charged to expense as incurred.
Other Assets - Deferred financing costs are included in other assets and are
amortized over the life of the related financing arrangement. The Company's
interest in subsidiaries that are not controlled by the Company are accounted
for under the equity method.
21
Program Costs - Program costs include costs incurred for the design of
components and for the design and building of tooling and are included in
other assets. Prior to January 1, 2000, the costs capitalized were supported
by a purchase order signed by the customer and were recovered over future
production volumes. Subsequent to January 1, 2000, costs incurred for the
design of components are capitalized only when a contractual guarantee of
reimbursement from the customer exists. Costs incurred for the design and
building of tooling are capitalized only when the Company has the
unconditional right to use the tooling during the term of the supply
arrangement.
Intangible Assets - The purchase price of companies in excess of the fair
value of net identifiable assets acquired ("goodwill") is amortized over 30
years using the straight-line method. The amount of goodwill reported at
December 31, 2001 and 2000 was $106.1 million and $119.3 million,
respectively, which is net of accumulated amortization.
Long-Lived Assets and Long-Lived Assets to be Disposed of - Long-Lived assets
and certain identifiable intangibles to be held and used by the Company are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. The Company
periodically evaluates the carrying value for impairment, such evaluations
are based principally on the undiscounted cash flows of the operations to
which the asset is related.
Derivative Financial Instruments and Hedging Activities - The Company was
party to a number of derivative agreements entered into in connection with
the management of its exposure to fluctuations in foreign exchange rates and
interest rates. 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 and hedging activities are recognized as either assets
or liabilities in the statement of financial position and measured at fair
value with the related gains and losses included in net income. See Note
8-Derivative Financial Instruments and Risk Management.
Revenue Recognition - Revenue from the sale of manufactured parts is
recognized when the parts are shipped. Revenue from mold sales is recognized
using the completed contract method due to the reasonably short build cycle.
Accounts receivable includes unbilled receivables for mold contracts that are
substantially complete. The amounts are billed when final approval has been
received from the customer or in accordance with contract terms. Provision
for estimated losses on uncompleted contracts, if any, is made in the period
such losses are identified.
Income Taxes - Amounts in the financial statements relating to income taxes
relate to the subsidiaries that are not limited liability companies or have
not elected S corporation status and are calculated using the SFAS No. 109,
"Accounting for Income Taxes". Other significant subsidiaries have elected to
be taxed as S corporations or limited liability companies taxed as a
partnership under the Internal Revenue Code. The beneficiary of Venture
Holdings Trust is required to report all income, gains, losses, deductions,
and credits of the S corporations or limited liability companies included in
the Trust on his individual tax returns.
Foreign Currencies - Currency translation is based upon the SFAS 52 "Foreign
Currency Translation," whereby the assets and liabilities of foreign
subsidiaries where the functional currency is the local currency are
generally translated using period end exchange rates while the income
statements are translated using average exchange rates during the period.
Differences arising from the translation of assets and liabilities in
comparison with the translation of the previous periods are included as a
separate component of stockholders' equity.
Reclassifications - Certain reclassifications have been made to the 2000
financial statements in order to conform to the 2001 presentation.
Recent Accounting Pronouncements - 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. The Company adopted this
statement and it had no material impact on our results of operations or
financial position.
In June 2001, the FASB issued Statement No. 142, "Goodwill and Other
Intangible Assets", which establishes new standards for goodwill acquired in
business combinations. Beginning January 1, 2002, the Company will no longer
amortize goodwill, but will periodically evaluate it for impairment. The
Company amortized $4.4 million of goodwill in the year 2001. The Company is
in the process of completing its transitional goodwill impairment testing,
but does not expect the adoption of this Statement will result in an
impairment of goodwill.
22
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. The Company does not expect any material effect
on our results of operations or financial position due to the adoption of
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 an 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. On January 1, 2002 the Company adopted
this Statement and it has had no material impact on our results of operations
or financial position.
2. ACQUISITION
On May 28, 1999, the Company purchased Peguform GmbH ("Peguform"), a leading
European supplier of high performance interior and exterior plastic modules,
systems and components to European OEMs (the "Peguform Acquisition"), for
approximately $463.0 million. During the second quarter of 2000, an agreement
was reached on post closing adjustments related to the Peguform Acquisition
reducing the consideration paid for Peguform by $18.0 million to $445.0
million. The Company used the proceeds of the final settlement to reduce its
outstanding borrowings.
The following unaudited pro forma financial data is presented to illustrate
the estimated effects of the Peguform Acquisition, as if the transaction had
occurred as of the beginning of the period presented.
YEAR ENDED DECEMBER 31,
1999
----
Net sales $1,926,594
Net income before extraordinary loss 12,150
Net income 6,581
3. ACCOUNTS RECEIVABLE
Accounts receivable included DECEMBER 31
the following (in thousands): 2001 2000
---- ----
Accounts receivable (including
related parties Note 9) $237,434 $284,233
Unbilled mold contract receivables 44,652 19,290
-------- --------
282,086 303,523
Allowance for doubtful accounts (15,854) (10,451)
-------- --------
Net accounts receivable $266,232 $293,072
======== ========
Excluding receivables from related parties, substantially all of the
receivables are from companies operating in the automotive industry.
4. INVENTORIES
Inventories included the following (in thousands):
DECEMBER 31,
2001 2000
---- ----
Raw materials $ 52,839 $ 49,672
Work-in-process - 16,729 15,721
manufactured parts
Work-in-process - tools and
molds 103,698 119,537
Finished goods 19,538 21,692
-------- --------
Total $192,804 $206,622
======== ========
Included in work-in-process tools and molds are progress payments of $47.4 and
$9.9 million for the years ended December 31, 2001 and 2000, respectively. These
amounts were progress payments on tooling being built by a related party, See
Note 9.
23
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following (in thousands):
DECEMBER 31,
2001 2000
---- ----
Land $ 24,105 $ 25,598
Building and improvements 216,387 209,933
Leasehold improvements 7,212 6,524
Machinery and equipment 484,081 431,736
Tooling/molds 13,174 12,713
Office and transportation
equipment 30,555 25,746
Construction in progress 45,686 56,056
-------- --------
821,200 768,306
Less accumulated
depreciation and
amortization 278,285 215,268
-------- --------
Total $542,915 $553,038
======== ========
Included in property, plant and equipment is equipment and buildings held
under capitalized leases. These assets had a cost basis of $48.9 million and
accumulated depreciation relating to these assets of $10.6 million at
December 31, 2001. As of December 31, 2000, these assets had a cost basis of
$39.1 million and accumulated depreciation of $5.9 million.
6. DEBT
Debt consisted of the following (in thousands):
DECEMBER 31,
2001 2000
---- ----
Credit agreement
Term loan A, with interest
of 5.30%, Due 2004 $ 51,150 $ 66,150
Term loan B, with interest
of 6.05%, Due 2005 195,000 197,000
Revolving credit
outstanding, with
interest of 6.00%,
to 7.98% Due 2004 142,334 117,947
Bank debt payable with
interest from 0.0%
to 8.63%, Due 2004 20,828 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 10.20% 29,167 32,941
Installment notes payable
with interest Of 7.9% 295 807
-------- --------
Total 893,774 876,983
Less current portion of debt 30,813 24,405
-------- --------
Total $862,961 $852,578
======== ========
On June 29, 2000, the credit agreement was amended for several purposes.
First, the requirement that the Company issue $125.0 million of securities
that rank pari passu in right of payment with, or are junior to, the
Company's 12% senior subordinated notes due 2009, described below, was
extended from November 27, 2000 to March 31, 2002. Second, the credit
agreement was amended to allow for a $100.0 million non-recourse factoring
program. Third, certain restrictive covenants were amended to provide the
Company with additional flexibility in its stipulated financial ratios. The
credit agreement was modified again on March 29, 2002 to extend the
requirement for the issuance of the $125.0 million of securities until June
30, 2003.
The revolving credit facility permits the Company to borrow up to the lesser
of a borrowing base computed as a percentage of accounts receivable and
inventory, or $175.0 million less the amount of any letters of credit issued
against the credit agreement. Pursuant to the borrowing base formula as of
December 31, 2001, the Company could have borrowed an additional $28.4
million under the revolving credit facility. Obligations under the credit
agreement are jointly and severally guaranteed by Venture's domestic
subsidiaries and are secured by first priority security interests in
substantially all of the assets of Venture and its domestic subsidiaries.
24
The credit agreement, the documents governing the Company's 9 1/2% senior
notes due 2005 (the "1997 Senior Notes"), and the documents governing the
Company's 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 part of the amendment of the credit
agreement on March 29, 2002, the Company is also subject to a new financial
covenant limiting net related party receivables to $65.0 million as of
December 31, 2001 and requires further reduction over the next several years
to a maximum of $35.0 million by December 31, 2003 and any time thereafter.
At December 31, 2002, the net related party receivables balance must not
exceed $55.0 million. As of December 31, 2001, the Company was in compliance
with all debt covenants.
Scheduled maturities of debt at December 31, 2001 were as follows (in
thousands):
2002 30,813
2003 32,352
2004 181,242
2005 386,038
2006 2,121
Remaining years 261,208
--------
Total $893,774
========
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of cash and cash equivalents, accounts receivable,
accounts payable and accrued expenses approximate fair market value due to
the short-term maturities of these instruments.
Debt Instruments
The estimated fair values of the Company's debt instruments have been
determined using available market information. However, considerable judgment
is required in interpreting market data to develop the estimates of fair
value. Accordingly, the estimates presented herein may not be indicative of
the amounts that the Company could realize in a current market exchange. The
use of different assumptions or valuation methodologies may have a material
effect on the estimated fair value amounts. The fair value of long-term debt
was estimated using quoted market prices (in thousands).
DECEMBER 31, 2001 DECEMBER 31, 2000
CARRYING AMOUNT FAIR VALUE CARRYING AMOUNT FAIR VALUE
--------------- ---------- --------------- ----------
Debt $893,774 $741,624 $876,983 $558,133
8. DERIVATIVE FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
At various times, the Company may be a party to various derivative 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 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
treatments are marked to market and the related gains and losses are included
in net income.
25
Foreign Exchange Forward Contracts
For the twelve months ended December 31, 1999, as a result of the fair value
of the cross-currency swap agreements, the net impact on earnings was an
unrealized gain of $27.1 million. 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 twelve months ended December 31, 2000 was a
realized gain of $14.9 million.
The cross-currency swap agreements were replaced with a twelve month
zero-cost 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. During
November 2000, the Company terminated the put side of its replacement put and
received $9.2 million. At December 31, 2000, only the original call side of
the foreign currency exchange collar remained outstanding. The estimated fair
market value of this financial instrument was $(0.6) million and was recorded
as an investment on the balance sheet at December 31, 2000. Accordingly, as a
result of these foreign exchange collar transactions, the net impact on
earnings for the twelve months ended December 31, 2000 was a realized gain of
$16.8 million. On March 16, 2001, the original call side of the foreign
currency exchange collar expired unexercised, and we recorded an unrealized
gain of $0.6 million.
The interest rate swap agreement within one of the Company's cross-currency
swap agreements which was accounted for using settlement accounting, resulted
in (decreased)/increased interest expense during 1999 and 2000 of $(0.9)
million and $0.5 million, 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. During 2000 and 2001,
interest expense includes $2.5 million and $5.2 million, respectively, of
this non-cash deferred interest asset amortization.
The other interest rate swap agreements within the original cross currency
swap agreements were terminated in July 2000 and the Company realized a cash
gain of $16.9 million plus interest income of $0.1 million. These did not
meet all the criteria for settlement accounting, During 2000 and 1999, these
interest rate swap agreements resulted in other income, of $3.6 million and
$11.0 million, respectively.
Interest Rate Swaps
The Company had entered into interest rate swap agreements with a total
notional value of $55 million to mitigate the risk associated with changing
interest rates on certain floating rate debt. During 2000 and 2001, all of
these interest rate swaps agreements expired. All of these interest rate swap
agreements were accounted for using settlement accounting. The impact of
these interest rate swap agreements resulted in $0.4 million, $0.1 million
and $0.8 million of additional interest expense during 2001, 2000 and 1999,
respectively.
As a result of the adoption of SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities", the Company recorded a ($0.2) million
cumulative effect of a change in accounting principle, as of January 1, 2001.
9. RELATED PARTY TRANSACTIONS
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 have been made
available to certain of these entities for services such as design, model and
tool building. Since the Trust is the sole member of Venture Holdings Company
LLC, 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.
Some but not all of these transactions have been reviewed by a Fairness
Committee as required by various loan agreements.
26
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.
Pompo Insurance & Indemnity Company Ltd.
The Company purchased from Pompo Insurance & Indemnity Company Ltd.
("Pompo"), a corporation indirectly owned by the sole beneficiary of the
Trust, insurance to cover certain medical claims by the Company's covered
employees and certain workers compensation claims. The Company remains an
obligor for any amounts in excess of insurance coverage or any amounts not
paid by Pompo under these coverages. If a liability is settled for less than
the amount of the premium a portion of the excess is available as a premium
credit on future insurance. The Company has accounted for this arrangement
using the deposit method wherein the full amount of the estimated liability
for such claims is recorded in other liabilities and the premiums paid to
Pompo are recorded in other assets until such time that the claims are
settled. The Company made payments of $1.6 million, $0.9 million and $0.8
million to Pompo in 2001, 2000 and 1999, respectively. At December 31, 2001,
2000 and 1999, the Company had approximately $5.1 million, $3.7 million and
$3.7 million for each period respectively, on deposit with Pompo.
Shelby American, Inc.
During 1999, the Company entered into an agreement to purchase vehicles from
Shelby American, Inc. ("Shelby"), an entity in which the sole beneficiary of
the Trust has a 75% ownership interest. The Company made deposits of
approximately $26 million ($13 million for each of the years ended December
31, 2000 and 1999) on these vehicles. These deposits are recorded as other
assets in the Company's December 31, 2001 and 2000 consolidated balance
sheets. The Company's expectation was to receive repayment of the deposits
from the proceeds of the sale of the vehicles to third parties. As of April
1, 2002, the Company has not recovered any of the deposits. Sales results to
date have proven more difficult to achieve than had been anticipated due to
quality, marketing, pricing, environmental and overall management issues,
which have resulted in operating losses for Shelby over the past few years.
Based upon past sales performance and in consultation with independent third
party appraisers, the Company has recorded an impairment charge on the
deposit in the fourth quarter of 2001, in the amount of $14 million. This
impairment charge was determined based upon an estimate of future cash flows
expected to result from the sale of vehicles and a discount from appraised
liquidation value of the Shelby assets. At the time of the original deposits
to Shelby, the Company entered into a security agreement and obtained a
security interest in all of the assets of Shelby. The Company believes it has
a perfected security interest in Shelby's assets that could be foreclosed on
as a means of recovery, in the event that the proceeds from the sales of the
vehicles do not provide full recovery of the deposits or other events dictate
taking such action. Presently, the Company does not believe that foreclosure
is in its best interest. The Company is continuing to monitor this situation
and may take such action in the future. As of December 31, 2001, the Company
has approximately $1.4 million of tooling capitalized for tools and fixtures
used in the production of the vehicle parts. During 1999, the Company sold
certain parts to Shelby for use in the manufacturing of these vehicles and
performed engineering services totaling $3.8 million.
Deluxe Pattern Corporation
The Company contracts with Deluxe Pattern Corporation ("Deluxe"), an entity
wholly owned by the sole beneficiary of the Trust, to provide the Company
with design, prototype, tooling, and fixture work. Currently, Deluxe
generates the majority of its revenue from the Company and generates minimal
revenue from third parties. During the years ended December 31, 2001, 2000,
and 1999, the Company was charged $75.5 million, $18.9 million, and $11.0
million, respectively, under this arrangement. Deluxe is paid in accordance
with agreed upon contract terms that require progress payments at various
stages of work. Initial payment terms can range from 30% to 90% based upon
program timing, pricing and the agreement between the parties. In accordance
with these terms at December 31, 2001 and 2000, the Company made progress
payments to Deluxe of $70.2 million and $9.9 million, respectively, of which
$29.5 million in 2001 was settled through a reduction of the related party
receivable. At December 31, 2001 and 2000, $47.4 and $9.9 million of these
progress payments remain in tools and mold inventory as the tools are not yet
complete. For the year ended December 31, 2001, $34.4 million of these
progress payments were expensed as part of costs of products sold when
tooling was completed and sold to outside third parties.
27
Deluxe also buys services from the Company, principally labor and materials,
however, these services were significantly reduced in 2001 and will be
reduced in the future. During the years ended December 31, 2001, 2000, and
1999, respectively, Deluxe made purchases in the amount of $1.0 million, $9.1
million, and $12.9 million. In addition to the above transactions, Deluxe
also charged the Company approximately $1.1 million during each of the years
ended December 31, 2000, and 1999 for equipment rental and other services.
These equipment rentals ceased at the end of 2000. The net effect of these
transactions between Deluxe and the Company was a receivable balance from
Deluxe of $14.4 million and $30.2 million, of which $11.1 million and $3.3
million have been recorded as a long term receivable in other assets as of
December 31, 2001 and 2000, respectively.
Venture Sales and Engineering
Venture Sales and Engineering (VS&E), an entity wholly owned by the sole
beneficiary of the Trust, serves as the Company's sales and management
representative. Currently VS&E generates the majority of its sales and
management fees from the Company and generates minimal sales and management
fees from third parties. The Company pays Venture Sales and Engineering a
sales management fee of 3% on all North American production sales. VS&E has
conducted sales and marketing activities around the world for the Company and
has been advanced certain funds in order to carry on these activities on
behalf of the Company. During 2000, the Company amended the agreements to
allow flexibility to reduce this expense. VS&E agreed to forego approximately
$2.6 million of management fees relating to sales commissions for the fourth
quarter of 2000 and $4.6 million in the fourth quarter of 2001. In 2000, this
was done due to the slowing of the automotive industry and to ensure the
Company remained competitive. In 2001, this was done as an inducement to have
the Company reduce its quoted prices for a future OEM program that it was
bidding on. As part of this transaction and as additional consideration, VS&E
and other entities owned or controlled by the sole beneficiary of the Trust
required that the Company also agree to prepay one year's management fee, and
rental and usage fees. No cash was exchanged as a result of this portion of
the transaction as the parties agreed to a set off of the then related party
receivable balances. The total offset was approximately $23.9 million, ($14.6
million management fee and $9.3 million rentals and usage fees). These annual
prepayments will continue until 2006. This transaction was presented to and
approved by the Fairness Committee. These activities result in a net
receivable from VS&E of $14.0 million (after the applicable set off) and
$25.5 million as of December 31, 2001 and 2000 respectively, of which $6.6
million at December 31, 2001 and $15.5 million at December 31, 2000 were
recorded as a long term receivable in other assets.
Venture Africa
During 1999, the Company advanced approximately $5.5 million to Venture
Africa, an entity wholly owned by the sole beneficiary of the Trust for the
construction and refurbishment of a paint line. This amount was repaid in
early 2001. In 2000, the Company began selling raw material to Venture
Africa. The sale agreement included established repayment terms. Sales of raw
materials for the years ended December 31, 2001 and 2000 were $33.1 million
and $10.3 million, respectively. At December 31, 2001 and 2000, the account
receivable due to these transactions was $12.3 million and $16.0 million,
respectively, all of which has been classified as short-term.
From time to time, the Company makes certain employees available to the sole
beneficiary of the Trust for purposes of performing services for companies
controlled by the beneficiary. The beneficiary was indebted to the Company in
the amount of $1.1 million and $0.5 million at December 31, 2000 and 1999,
respectively. These amounts were repaid in 2001.
During 1999, the Company contracted with M&M Flow Through Systems, LLC
("M&M"), an entity owned by the son of the sole beneficiary of the Trust, to
manufacture certain machinery and equipment used at the Company's Grand Blanc
facility. The Company purchased three machines from M&M at a cost of
$965,000. In addition, the Company contracts M&M to dispose of scrap parts
that have previously been rejected by the automotive original equipment
manufacturers. The Company's sales of these parts to M&M for the year
December 31, 1999 were approximately $200,000. In 2001, M&M provided part
reclamation services to the Company for which they were paid $2.6 million.
During 1999, the Company leased buildings and machinery and equipment to an
entity in which the sole beneficiary of the Trust owns a significant equity
interest. The Company received $0.2 million in connection with this
agreement.
The Company provided management services to Venture Asia Pacific Pty. Ltd.
(VAP) and its subsidiaries and corporations wholly owned by the sole
beneficiary of the Trust. The Company billed management fees and commissions
totaling $4.9 million and $4.5 million to VAP in 2000 and 1999, respectively.
In addition, the Company made advances to VAP and performed tooling build and
design work for VAP. As a result of these transactions, VAP owes the Company
$15.0 million and $20.3 million at December 31, 2001 and 2000, respectively,
of which $14.0 million and $14.7 million were classified as a long-term
receivable in other assets.
28
The Company has entered into a contract with Supercart Holdings Pty., Ltd.
(Supercart), a company in which the sole beneficiary of the Trust has a
minority interest, to design, produce and sell shopping carts to Supercart.
An affiliate of the Company has produced and sold these shopping carts in
South Africa for a number of years. During 2001, the Company designed and
built tooling for Supercart. These costs will be recovered through the piece
price of the shopping carts sold. Supercart has agreed to unconditionally
reimburse the Company for tooling costs that are not collected through the
piece price. For the year ended December 31, 2001, the Company had sales of
$0.4 million. At December 31, 2001, Supercart owed the Company $69,000 and
had unamortized tooling of $0.8 million.
As part of its efforts to meet OEM minority development initiatives, the
Company has an arrangement with Universal Venture Automotive (UVA), a company
in which the sole beneficiary of the Trust has a 49% interest, to provide
certain plastic manufacturing and sub assembly operations to the Company. In
addition, UVA buys certain raw materials from the Company as needed in its
manufacturing operations. For the years ending December 31, 2001 and 2000,
the Company had raw material sales of $1.5 million and $0.4 million ,
respectively to UVA. In addition, UVA has sold certain products to the
Company in the amount of $1.2 and $0.4 million for the years ended December
31, 2001 and 2000, respectively. At December 31, 2001 and 2000 the Company
owed UVA the net amount of $98,000 and $111,000 respectively.
The following is a summary of transactions with all related parties at
December 31, 2001, 2000 and 1999 (in thousands):
DECEMBER 31,
Revenue for: 2001 2000 1999
---- ---- ----
Materials sold, tooling sales,
Sales commission and rent
charged $38,836 $21,154 $17,618
Providing administrative
services -- 462 --
Management fees -- 4,980 4,476
Payments made for or expenses
incurred
Subcontracted services -- 75 --
Manufacturing related
services and inventory
purchased 85,232 21,862 15,557
Rent expense paid 2,011 2,180 2,599
Machine and facility usage
fees paid 9,804 6,699 6,340
Commission expense paid 7,147 8,206 10,929
Litigation, workers
compensation and medical
insurance premiums 1,643 913 766
Property, plant and equipment
purchased -- -- 965
Deposit, paid for vehicles 273 12,400 13,268
These related party transactions result in the following accounts receivable
balances in the Company's consolidated balance sheets (in thousands):
DECEMBER 31,
2001 2000
---- ----
Amounts receivable $57,742 $113,557
Amounts payable 16,047 25,519
------- --------
Net amounts receivable $41,695 $ 88,038
======= ========
These related party transactions also result in the following asset balances
in the Company's consolidated balance sheets (in thousands):
December 31,
2001 2000
---- ----
Prepaid assets $23,900 $ --
======= =======
Tooling progress payments
in inventory $47,400 $ 9,900
======= =======
Deposits, net of
impairment charge of
$14,000 at December
31, 2001 $12,000 $26,000
======= =======
29
These amounts are generally from entities wholly owned by the sole
beneficiary of the Trust and management believes that the amounts are fully
recoverable. The recoverability of certain of these amounts is dependent upon
the Company providing future business to these entities.
10. COMMITMENTS AND CONTINGENCIES
Operating Leases - The Company leases certain machinery and equipment under
operating leases which have initial or remaining terms of one year or more at
December 31, 2001. Future minimum lease commitments, including related party
leases, are as follows (in thousands):
RELATED PARTY OTHER
OPERATING LEASES OPERATING LEASES
---------------- ----------------
Years:
2002 $ 2,011 $18,254
2003 2,011 16,248
2004 2,011 12,803
2005 2,011 7,872
2006 2,011 13,251
Remaining years 5,027 20,584
------- -------
Total $15,082 $89,012
======= =======
Rent expense for operating leases and other agreements with a term of greater
than one month, including amounts paid to related parties, was $16.8 million,
$17.4 million and $10.9 million for the years ended December 31, 2001, 2000,
and 1999, respectively. Usage fees paid based on monthly usage of certain
machinery and equipment and facilities were $9.8 million, $7.0 million, and
$6.7 million for the years ended December 31, 2001, 2000 and 1999,
respectively. With the exception of $0.3 million paid during 2000 and 1999,
all usage fees were paid to related parties. As part of the transaction
described in Footnote 9 relating to VS&E, approximately $9.3 million of
rental and usage fees to the related parties were prepaid at December 31,
2001 through a set off to related party receivables.
Environmental Costs - The Company is subject to potential liability under
government regulations and various claims and legal actions which are pending
or may be asserted against the Company concerning environmental matters.
Estimates of future costs of such environmental matters are necessarily
imprecise due to numerous uncertainties, including the enactment of new laws
and regulations, the development and application of new technologies, the
identification of new sites for which the Company may have remediation
responsibility and the apportionment and collectibility of remediation costs
among responsible parties. The Company establishes reserves for these
environmental matters when a loss is probable and reasonably estimable. The
Company's reserves for these environmental matters totaled $0.7 million at
December 31, 2001 and $1.7 million at December 31, 2000.
The Company has been involved in legal proceedings with the Michigan
Department of Environmental Quality (MDEQ) concerning the emissions from our
Grand Blanc paint facility. In October 1999, the parties to the litigation
reached an agreement in principle to settle the case by the installation of
full pollution abatement equipment at the Grand Blanc facility and payment of
$1.1 million. The Company entered into a consent decree in January of 2001 to
settle this matter. During the fourth quarter of 1999, the Company
established a reserve in the amount of $1.1 million relating to this payment
and made the payment in February of 2001. Other than ongoing compliance
requirements, the Company has substantially completed the conditions of the
consent decree and believes this matter has now been resolved.
In December of 1999, the MDEQ contacted the Grand Blanc facility relating to
the classification of waste leaving the facility. The Company has been
discussing the issue with the MDEQ and conducting tests of the waste. As a
result of the contact and to avoid future liability, the Company voluntarily
changed the classification of the waste on all subsequent disposals even
though the Company disagreed with MDEQ. In addition, the Company changed
materials and certain processes to remove the concern of the MDEQ. By
changing the classification of the waste for disposal subsequent to the
contact the Company limited its potential liability to disposals prior to the
contact. However, the Company may be exposed to some liability for past
disposal. On March 20, 2000, the Company received a notice of warning from
MDEQ regarding this matter. As a result of the notice received for the Grand
Blanc facility, the Company voluntarily undertook the same actions at the
Grand Rapids facility to reduce risk of potential damage claims as the same
procedures and methods were used at the Grand Rapids and Grand Blanc
facilities. At the present time, it is not possible to estimate the effect of
the resolution of these issues, but management believes the range of exposure
would appear to be from $20,000 to $1.1 million. The Company established a
reserve of $20,000 for this item.
30
In 1998 and 1999, the MDEQ issued 3 letters of violation to the Company's
Grand Rapids, Michigan facility, alleging violations of certain emission
limitations and coating solvent content requirements of the facility's state
air use permit. In late 2000, the Company filed suit against the MDEQ
contesting some of these violations. In 2001, jointly with MDEQ, the Company
suspended any proceedings under this suit and are presently reviewing and
discussing the alleged violations in an attempt to resolve this matter
without further litigation, as it is possible that some of the violations may
be the result of computation and reporting discrepancies by the MDEQ. In
December of 2001, the Company received a notice of violation from the
Environmental Protection Agency (EPA) regarding violation for the same
matters and years covered by the MDEQ's prior notices and for the year 2001.
The Company continues to meet with the MDEQ and EPA regarding these
violations. It is possible that the MDEQ and EPA may seek administrative
penalties in connection with the resolution of these matters. As a result of
operational changes made at the Grand Rapids facility in mid 2001, the major
source of these violations has ceased. The Company does not believe that the
amount of those penalties, if any, will have a material adverse effect on our
operations, or that the resolution of these matters will require material
capital expenditures, although there can be no assurance that this will be
the case.
In late 2000, the Company was notified by Union Carbide Corporation that,
based upon the usage of some paint application equipment at the Grand Blanc
facility, the Company was obligated to pay certain royalties related to
patent infringements. We have informed Union Carbide that because of the
modifications we made, we believe we have not infringed upon their applicable
patents. We have not received a response from Union Carbide.
In December of 2001, the Company agreed to a settlement in a lawsuit we filed
relating to pricing issues arising subsequent to an acquisition made in 1996.
In the Statement of Operations for the year ended December 31, 2001, the
Company included $7.0 million in other income as a result of this settlement.
The Company is party to various contractual, legal and environmental
proceedings, some of which assert claims for large amounts. Although the
ultimate cost of resolving these matters could not be precisely determined at
December 31, 2001, management believes, based on currently known facts and
circumstances, that the disposition of these matters will not have a material
adverse effect on the Company's consolidated financial position and results
of operations. These matters are subject to many uncertainties, and the
outcome of individual matters is not predictable with assurance. It is more
than remote but less than likely that the final resolution of these matters
may require the Company to make expenditures, in excess of established
reserves, over an extended period of time and in a range of amounts that
cannot be reasonably estimated. The Company's reserves have been set based
upon a review of costs that may be incurred after considering the
credit-worthiness of guarantors and/or indemnification from third parties
which the Company has received. The Company is not covered by insurance for
any unfavorable environmental outcomes, but relies on the established
reserves, guarantees and indemnifications it has received.
11. CONCENTRATIONS
The Company's sales to Audi, General Motors Corporation ("GM"),
DaimlerChrysler Corporation ("DaimlerChrysler") and Volkswagen, expressed as
a percentage of sales, were 16%, 12%, 12%, and 12%, respectively, in 2001.
During 2000, the percentages were 14%, 13%, 11% and 11% for Audi, GM,
DaimlerChrysler, and Volkswagen, respectively. During 1999, the percentages
were 18%, 13%, 12%, 11% and 9% for GM, Audi, DaimlerChrysler, Ford Motor
Company ("Ford") and Volkswagen, respectively. Many of the Company's
automotive industry customers are unionized and work stoppages or slow-downs
experienced by them, and their employee relations policies could have an
adverse effect on the Company's results of operations. Approximately 38% of
the Company's North American workforce is covered by collective bargaining
agreements. A portion of the European workforce is covered by collective
bargaining agreements. The UAW contract at the Lancaster facility was
renegotiated in 2001 extending the contract until 2006. The UAW contract at
the Seabrook facility expires in June 2002. Negotiations have begun on a new
agreement at Seabrook and the Company expects to reach an agreement with its
Seabrook employees prior to the expiration date of the current contract.
Other union contracts do not expire until mid 2003.
12. PENSIONS, PROFIT-SHARING AND SALARY REDUCTION PLAN
North America
The Company sponsors profit-sharing and salary reduction 401(k) plans which
cover substantially all North American employees. The plans provide for the
Company to contribute a discretionary amount each year. Contributions were
$1.8 million, $2.3 million and $2.3 million for the years ended December 31,
2001, 2000 and 1999.
31
Venture Holdings Corporation, into which Bailey Corporation ("Bailey") was
merged in July 1997, has various retirement plans covering substantially all
North American employees, including two defined benefit pension plans
covering full-time hourly and salaried employees. The benefits payable under
the plans are generally determined based on the employee's length of service
and earnings. For all these plans the funding policy is to make at least the
minimum annual contributions required by Federal law and regulation.
The change in benefit obligation for the years ended December 31, 2001 and
2000 was as follows (in thousands):
DECEMBER 31,
2001 2000
---- ----
Benefit obligation
at beginning of year $ 11,556 $ 17,241
Service cost 388 443
Interest cost 890 1,299
Amendments 478 --
Actuarial loss 586 1,716
Effect of settlement -- (755)
Effect of curtailment (55) --
Benefits paid (480) (8,388)
-------- --------
Benefit obligation
at end of year $ 13,363 $ 11,556
======== ========
The change in the market value of plan assets for the years ended December
31, 2001 and 2000 was as follows (in thousands):
DECEMBER 31,
2001 2000
---- ----
Market value of plan
assets at
Beginning of year $ 9,951 $ 15,982
Actual return on plan
assets (1,115) 1,125
Employer contribution 1,100 1,232
Benefits paid (480) (8,388)
------- --------
Market value of plan
assets at end of year $ 9,456 $ 9,951
======= ========
The funded status of the defined benefit plans at December 31, 2001 was as
follows (in thousands):
ACCUMULATED
BENEFITS
EXCEED ASSETS
-------------
Actuarial present value of
benefit obligations:
Vested benefits $ 13,149
Nonvested benefits 214
--------
Accumulated benefit obligation 13,363
Projected benefit obligation 13,363
Market value of plan assets 9,456
--------
Deficiency of assets over
projected benefit Obligation (3,907)
Unrecognized net loss 261
Unrecognized prior service cost 1,358
Additional minimum pension liability (1,619)
--------
Accrued pension cost $ (3,907)
========
The funded status of the defined benefit plans at December 31, 2000 was as
follows (in thousands):
ACCUMULATED BENEFITS
EXCEED ASSETS
-------------
Actuarial present value of
benefit obligations:
Vested benefits $ 11,387
Nonvested benefits 168
--------
Accumulated benefit obligation 11,555
Projected benefit obligation 11,556
Market value of plan assets 9,951
--------
Deficiency of assets over
projected benefit Obligation (1,605)
Unrecognized net gain (2,399)
Unrecognized prior service cost 978
--------
Accrued pension cost $ (3,026)
========
32
Net periodic pension expense for the years ended December 31, 2001 and 2000
included the following components (in thousands):
DECEMBER 31,
2001 2000
---- ----
Service cost benefit $ 388 $ 443
during the year
Interest cost on 890 1,299
projected benefit obligation
Expected return on (846) (1,359)
plan assets
Net amortization and (25) (33)
deferral
Curtailment gain (45) --
----- -------
Net periodic pension
expense $ 362 $ 350
===== =======
The date used to measure plan assets and liabilities is as of September 30
each year.
The weighted-average assumed discount rate was 7.5% and 8.0% for 2001 and
2000, respectively. The assumed rate of return on plan assets was 8.5% for
2001 and 2002, respectively. For salary based plans, the expected rate of
increase in compensation levels was 0.0% (as all salaried plans have been
frozen).
At December 31, 2001, the Company recorded an intangible pension asset of
$1.4 million as an offset to recording the additional minimum pension
liability. An additional amount of $0.2 million was recorded (net of tax)
against member's equity at December 31, 2001, which represented the minimum
pension liability in excess of unrecognized prior service cost.
Plan assets consist principally of cash and cash equivalents, listed common
stocks, debentures, and fixed income securities.
A salaried pension plan has been frozen since 1992, and no further service
liability will accrue under the plan. During 1998, an additional salaried
pension plan and an hourly pension plan were frozen, and no further service
liability will accrue under these plans.
Effective January 1, 1999, the three frozen plans were merged into one plan.
The merged plan was terminated in 2000.
Europe
Peguform Germany maintains one defined benefit pension plan covering all its
full-time hourly and salaried employees plus some individual defined benefit
pension agreements for managers and members of the board. The benefits
payable under the plans are generally determined based on the employees'
length of service and earnings. These benefit plans are not funded.
The change in benefit obligation for the year ended December 31, 2001 and
2000 was as follows (in thousands):
DECEMBER 31, DECEMBER 31,
2001 2000
---- ----
Benefit obligation at beginning of year $ 27,187 $ 25,255
Service cost 1,169 1,174
Interest cost 1,528 1,404
Actuarial (gain) loss (3,531) 164
Asset transfer (121) --
Acquisition 1,178 --
Benefits paid (887) (810)
-------- --------
Benefit obligation at end of year $ 26,523 $ 27,187
======== ========
The funded status of the defined benefit plans at December 31, 2001 was as
follows (in thousands):
ACCUMULATED BENEFITS
EXCEED ASSETS
-------------
Actuarial present value of benefit obligations:
Vested benefits $ 22,629
Nonvested benefits 3,343
--------
Accumulated benefit obligation 25,972
Projected benefit obligation 26,523
Market value of plan assets --
--------
Deficiency of assets over
projected benefit obligation (26,523)
Unrecognized net gain (2,056)
--------
Accrued pension cost $(28,579)
========
33
The funded status of the defined benefit plans at December 31, 2000 was as
follows (in thousands):
ACCUMULATED BENEFITS
EXCEED ASSETS
-------------
Actuarial present value of
benefit obligations:
Vested benefits $ 23,374
Nonvested benefits 3,220
--------
Accumulated benefit obligation 26,594
Projected benefit obligation 27,187
Market value of plan assets --
--------
Deficiency of assets over
projected benefit obligation (27,187)
Unrecognized net gain (175)
--------
Accrued pension cost $(27,362)
========
Net periodic pension expense for the year ended December 31, 2001 and 2000
included the following components (in thousands):
DECEMBER 31, DECEMBER 31,
2001 2000
---- ----
Service cost benefit during $1,169 $1,174
the year
Interest cost on projected
benefit obligation 1,528 1,404
------ ------
Net periodic pension expense $2,697 $2,578
====== ======
The date used to measure plan assets and liabilities was as of December 31,
2001 and 2000.
The weighted-average assumed discount rate was 6.0% for 2001 and 2000. For
salary based plans, the expected rate of increase in compensation levels was
between 1.5% and 2.5% for 2001 and 2.0% for 2000.
As part of an acquisition made by our European operations during the fourth
quarter of 2001, we assumed a pension liability of $1.2 million. This
liability is included in the benefit obligation at the end of the year.
13. INCOME TAXES
Amounts in the financial statements related to income taxes are for the
operations of Venture Holdings Corporation, and Peguform subsidiaries. The
other significant Subsidiaries have elected S corporation or flow through tax
status under the Internal Revenue Code and will incur no domestic or foreign
income tax. The member is required to report all income, gains, losses,
deductions, and credits of the S corporations and other flow through entities
included in the LLC on his individual tax returns.
The provision for income tax (benefit) expense for the period ended (in
thousands):
DECEMBER 31,
2001 2000 1999
---- ---- ----
Currently Payable
United States $ 390 $ 60 $ (351)
State and Local -- -- --
Foreign 5,267 10,330 2,941
-------- -------- -------
Total 5,657 10,390 2,590
======== ======== =======
Deferred
United States $ 3,031 $ (197) $ 1,994
State and Local 450 (25) 297
Foreign (22,205) (21,457) 3,346
-------- -------- -------
Total $(18,724) (21,679) 5,637
======== ======== =======
The Company does not provide for U.S. income taxes or foreign withholding
taxes on cumulative undistributed earnings of foreign subsidiaries which are
considered to be permanently reinvested outside the U.S.
34
The effective tax rate of Venture Holdings Corporation on pre-tax income was
45.4% for the year ended December 31, 2001, of which 5.2% relates to
permanent differences not deductible for income taxes (primarily goodwill
amortization) and 5.2% for state and local income taxes, net of federal tax
benefit. The effective rate of foreign entities on pre-tax income was 64.1%
for the year ended December 31, 2001. The effective tax rate of Venture
Holdings Corporation on pre-tax income was 7.4% for the year ended December
31, 2000, of which 32.8% relates to permanent differences not deductible for
income taxes (primarily goodwill amortization) and 5.2% for state and local
income taxes, net of the federal tax benefit. The effective tax rate of
foreign entities on pre-tax income was 95.2% for the year ended December 31,
2000. The effective tax rate of Venture Holdings Corporation on pretax income
was 65.3% for the year ended December 31, 1999, of which 24.2% relates to
permanent differences not deductible for income taxes (primarily goodwill
amortization) and 5.2% for state and local income taxes, net of the federal
tax benefit. The effective tax rate of foreign entities on pre-tax income was
36.8% for the year ended December 31, 1999.
The tax benefits generated during 2001 were primarily as a result of currency
exchange movements due to the decrease in the Euro. The tax benefits were
generated during 2000 primarily as a result of finalizing the restructuring
of the Peguform group of companies, a reduction of tax rates in Germany and
the recognition of the benefit of NOL carryforwards. The tax-effected
temporary differences and carryforwards which comprised deferred assets and
liabilities were as follows (in thousands):
DECEMBER 31,
2001 2000
---- ----
Deferred tax assets:
Accrued expenses and reserves $ 7,275 $14,107
Net operating loss carryforward 65,411 38,181
Minimum tax credit carryforward 1,214 824
Other 4,350 7,211
------- -------
Total deferred tax assets $78,250 $60,323
======= =======
Deferred tax liabilities:
Depreciation $32,472 $38,138
Other 1,331 299
------- -------
Total deferred tax liabilities $33,803 $38,437
------- -------
Net deferred tax asset $44,447 $21,886
======= =======
The current portion of deferred tax assets, $7.7 million and $9.2 million is
included in prepaid and other current assets at December 31, 2001 and 2000,
respectively. The current portion of deferred tax liabilities of $0.4 million
and $0.5 million is included in accrued expenses at December 31, 2001 and
2000, respectively. As a result of restructuring the Peguform Group of
companies, deferred tax liabilities and goodwill were both reduced by $21.9
million at December 31, 2000. Venture Holdings Corporation U.S. net operating
loss carryforwards, which totaled $15.2 million and $33.4 million at December
31, 2001 and 2000, respectively, begins to expire in the year 2011. Peguform
France has net operating loss carryforwards of approximately $15.6 million
and $11.9 million at December 31, 2001 and 2000, respectively, which have an
unlimited expiration period. Peguform Brazil has net operating loss
carryforwards of approximately $24.3 million and $18.5 million at December
31, 2001 and 2000, respectively, which have an unlimited expiration period.
Venture Germany has net operating loss carryforwards of approximately $121.1
million and $62.2 million at December 31, 2001 and 2000, respectively, and an
unlimited expiration period. Alternative minimum tax credit carryforwards
totaled $1.2 million and $0.8 million at December 31, 2001 and 2000,
respectively, and have no expiration date. Management believes the net
operating loss carryforwards at December 31, 2001 are realizable based on
forecasted earnings and available tax planning strategies.
14. 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.
35
The following table presents net sales and long-lived assets by geographic
area as of and for the twelve months ended December 31 (in thousands):
NET SALES LONG-LIVED ASSETS
----------------------------------------- ------------------------
2001 2000 1999 2001 2000
---- ---- ---- ---- ----
UNITED STATES $ 568,253 $ 583,218 $ 605,637 $ 589,599 $ 620,964
FOREIGN 1,339,074 1,250,196 760,533 519,951 498,219
ELIMINATIONS (44,999) (3,449) -- (240,303) (240,303)
----------- ----------- ---------- --------- -----------
TOTAL 1,862,328 1,829,965 $1,366,170 869,247 878,880
=========== =========== ========== ========= ===========
15. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
Venture, as the successor to Venture Holdings Trust, and certain of its
wholly-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 Peguform
Acquisition, 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 eliminate investments in subsidiaries and
intercompany balances and transactions.
1997 SENIOR NOTES:
The following condensed consolidating financial information presents:
(1) Condensed consolidating financial statements for years ended December 31,
2001 and 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.
36
CONDENSED CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 2001
(DOLLARS IN THOUSANDS)
OTHER GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE ISSUERS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------- ------------ ------------ ------------ -----
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ -- $ (4,454) $ (343) $ 4,799 $ -- $ 2
Accounts receivable, net -- 111,347 62 154,823 -- 266,232
Inventories -- 87,043 -- 105,761 -- 192,804
Prepaid and other current assets -- 30,078 145 57,623 -- 87,846
-------- --------- --------- --------- --------- -----------
Total current assets -- 224,014 (136) 323,006 -- 546,884
Property, Plant and Equipment,
Net -- 189,120 6 353,789 -- 542,915
Intangible Assets, Net -- 54,446 -- 72,869 -- 127,315
Other Assets 7,237 91,626 -- 29,627 -- 128,490
Deferred Tax Assets -- 6,861 -- 63,666 -- 70,527
Net Investment in and advances
to (from) Subsidiaries &
affiliates 945,317 (522,805) 105,382 (287,591) (240,303) --
-------- --------- --------- --------- --------- -----------
Total Assets $952,554 $ 43,262 $ 105,252 $ 555,366 $(240,303) $ 1,416,131
======== ========= ========= ========= ========= ===========
LIABILITIES AND MEMBER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ -- $ 45,734 $ 226 $ 215,653 $ -- $ 261,613
Accrued interest 12,619 -- -- 329 -- 12,948
Accrued expenses -- 10,362 1,128 88,503 -- 99,993
Current portion of long term 20,604 -- -- 10,209 -- 30,813
-------- --------- --------- --------- --------- -----------
Total current liabilities 33,223 56,096 1,354 314,694 -- 405,367
Pension Liabilities & Other -- 5,559 -- 38,556 -- 44,115
Deferred Tax Liabilities -- 10,119 -- 23,260 -- 33,379
Long Term Debt 822,880 637 -- 39,444 -- 862,961
-------- --------- --------- --------- --------- -----------
Total Liabilities 856,103 72,411 1,354 415,954 -- 1,345,822
Commitments and Contingencies -- -- -- -- -- --
Member's Equity:
Member's equity 96,451 (28,993) 103,898 142,372 (240,303) 73,425
Accumulated other comprehensive
(loss) pension liability in
excess of Unrecognized prior
service cost, net of tax -- (156) -- -- -- (156)
Accumulated other comprehensive
(loss) Cumulative translation
adjustments -- -- -- (2,960) -- (2,960)
-------- --------- --------- --------- --------- -----------
Member's Equity 96,451 (29,149) 103,898 139,412 (240,303) 70,309
-------- --------- --------- --------- --------- -----------
Total Liabilities and Member's
Equity $952,554 $ 43,262 $ 105,252 $ 555,356 $(240,303) $ 1,416,131
======== ========= ========= ========= ========= -----------
37
CONDENSED CONSOLIDATING STATEMENTS OF INCOME FOR THE YEAR ENDED DECEMBER 31,
2001
(DOLLARS IN THOUSANDS)
OTHER GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE ISSUERS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------- ------------ ------------ ------------ -----
NET SALES $ -- $ 435,996 $ 132,257 $ 1,339,074 $ (44,999) $ 1,862,328
COST OF PRODUCT SOLD -- 368,713 128,754 1,180,661 (44,999) 1,633,129
GROSS PROFIT -- 67,283 3,503 158,413 -- 229,199
-------- --------- --------- ----------- --------- -----------
SELLING, GENERAL &
ADMINISTRATIVE EXPENSE -- 19,888 964 93,157 -- 114,009
PAYMENTS TO BENEFICIARY IN
LIEU OF TAXES 1,422 -- -- -- 1,422
--------- --------- ----------- --------- -----------
INCOME FROM OPERATIONS -- 45,973 2,539 65,256 -- 113,768
INTEREST EXPENSE 88,532 (953) -- 10,079 -- 97,658
INTERCOMPANY INTEREST
ALLOCATION (83,378) 49,170 (27,427) 61,635 --
OTHER (INCOME) EXPENSE (5,188) 10,190 (32,796) 54,942 -- 27,148
-------- --------- --------- ----------- --------- -----------
INCOME (LOSS) BEFORE TAXES 34 (12,434) 62,762 (61,400) -- (11,038)
TAX PROVISION (BENEFIT) -- 3,871 -- (16,938) -- (13,067)
MINORITY INTEREST -- -- -- 844 -- 844
-------- --------- --------- ----------- --------- -----------
NET INCOME (LOSS) BEFORE
CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE 34 (16,305) 62,762 (45,306) -- 1,185
CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE (182) -- -- -- -- (182)
-------- --------- --------- ----------- --------- -----------
NET (LOSS) INCOME $ (148) $ (16,305) $ 62,762 $ (45,306) $ -- $ 1,003
======== ========= ========= =========== ========= ===========
38
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31,
2001
(DOLLARS IN THOUSANDS)
OTHER GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE ISSUERS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------- ------------ ------------ ------------ -----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (148) $(16,305) $ 62,762 $ (45,306) $ -- $ 1,003
Adjustments to reconcile net (loss) income to net
cash provided by (used in) operating activities:
Depreciation and amortization 5,155 39,389 5 48,503 -- 93,052
Deposit write down 14,000 14,000
Unrealized loss on currency exchange (3,041) 2,573 (29,759) 51,947 -- 21,720
Net gain on termination of derivatives (609) -- -- -- -- (609)
Loss from the disposal of fixed assets -- 24 -- 806 -- 830
Change in accounts receivable -- 34,962 56 (8,177) -- 26,841
Change in inventories -- (18,578) -- 32,396 -- 13,818
Change in prepaid and other current assets -- (24,417) 174 (17,304) -- (41,547)
Change in other assets 5,155 (11,105) -- (10,397) -- (16,347)
Change in accounts payable -- (22,126) (984) 26,776 -- 3,666
Change in accrued expenses (2,675) 1,855 (821) (21,027) -- (22,668)
Change in pension liabilities and other -- 387 -- (7,031) -- (6,644)
Change in deferred taxes -- 2,931 -- (26,906) -- (23,975)
-------- -------- -------- -------- -------- --------
Net cash provided by operating Activities 3,837 3,590 31,433 24,280 63,140
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures -- (26,237) -- (50,921) -- (77,158)
Net activity in investments in and advances
to (from) subsidiaries and affiliates (9,110) 16,655 (61,535) 53,990 --
Proceeds from sale of fixed assets -- -- -- 314 -- 314
Proceeds from termination of derivatives -- -- -- -- --
-------- -------- -------- -------- -------- --------
Net cash (used in) provided by investing
activities (9,110) (9,582) (61,535) 3,383 -- (76,844)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) borrowings under revolving
credit facility 25,307 (920) -- -- 24,387
Principal payments on debt (17,920) -- (6,497) -- (24,417)
Net proceeds from issuance of debt -- 55 -- 16,764 -- 16,819
-------- -------- -------- -------- -------- --------
Net cash provided by (used in)
financing activities 7,387 (865) -- 10,267 -- 16,789
Effect of exchange rate changes on cash
and cash equivalents (2,114) 2,403 29,759 (34,072) -- (4,024)
NET (DECREASE) INCREASE IN CASH -- (4,454) (343) 3,858 -- (939)
CASH AT BEGINNING OF PERIOD $ $ $ -- $ 941 $ -- $ 941
-------- -------- -------- -------- -------- --------
CASH AT END OF PERIOD $ 0 $ (4,454) $ (343) $ 4,799 $ -- $ 2
======== ======== ======== ======== ======== ========
39
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
========= ========= ======= ========= ========= ===========
40
CONDENSED CONSOLIDATING STATEMENTS OF INCOME FOR THE YEAR ENDED DECEMBER 31,
2000
(DOLLARS IN THOUSANDS)
OTHER GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE ISSUERS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------- ------------ ------------ ------------ -----
NET SALES $ -- $ 413,394 $ 164,960 $ 1,255,060 $ (3,449) $ 1,829,965
COST OF PRODUCT SOLD -- 356,417 165,032 1,084,326 (3,449) 1,602,326
-------- --------- --------- ----------- -------- -----------
GROSS PROFIT -- 56,977 (72) 170,734 -- 227,639
SELLING, GENERAL & ADMINISTRATIVE
EXPENSE -- 34,701 -- 95,743 -- 130,444
PAYMENTS TO BENEFICIARY IN LIEU OF
TAXES 1,165 -- -- -- -- 1,165
-------- --------- --------- ----------- -------- -----------
(LOSS) INCOME FROM OPERATIONS (1,165) 22,276 (72) 74,991 -- 96,030
INTEREST EXPENSE 92,608 139 -- 9,766 -- 102,513
INTERCOMPANY INTEREST ALLOCATION (90,151) 57,825 (33,033) 65,359 -- --
OTHER (INCOME) EXPENSE (57,944) 3,436 (17,090) 41,916 24,000 (5,682)
-------- --------- --------- ----------- -------- -----------
INCOME (LOSS) BEFORE TAXES 54,322 (39,124) 50,051 (42,050) (24,000) (801)
TAX BENEFIT -- (163) -- (11,126) -- (11,289)
MINORITY INTEREST -- -- -- 1,406 -- 1,406
-------- --------- --------- ----------- -------- -----------
NET INCOME (LOSS) $ 54,322 $ (38,961) $ 50,051 $ (32,330) $(24,000) $ 9,082
======== ========= ========= =========== ======== ===========
41
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31,
2000
(DOLLARS IN THOUSANDS)
OTHER GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE ISSUERS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------- ------------ ------------ ------------ -----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 54,322 $(38,961) $ 50,051 $(32,330) $(24,000) $ 9,082
Adjustments to reconcile net income (loss) to
net cash provided (used in) by operating
activities:
Depreciation and amortization 2,457 43,385 5 45,230 -- 91,077
Unrealized loss (gain) on currency exchange -- 3,199 (12,735) 51,159 -- 41,623
Net gain on termination of derivatives (37,421) -- -- -- -- (37,421)
(Gain) Loss from the disposal of fixed
assets -- (43) -- 607 -- 564
Change in accounts receivable -- 42,454 36 (24,218) -- 18,272
Change in inventories -- (19,529) -- (32,471) -- (52,000)
Change in prepaid and other current assets -- 14,389 (319) (6,509) -- 7,561
Change in other assets (14,849) (66,320) -- 36,489 -- (44,680)
Change in accounts payable -- 10,473 697 52,180 -- 63,350
Change in accrued expenses 2,066 (7,652) 350 18,789 -- 13,553
Change in pension liabilities and other -- (1,068) -- (5,788) -- (6,856)
Change in deferred taxes -- (17) -- (42,762) -- (42,779)
--------- -------- -------- -------- -------- ---------
Net cash provided (used in ) by operating
Activities 6,575 (19,690) 38,085 60,376 (24,000) 61,346
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures -- (25,441) -- (60,277) -- (85,718)
Net activity in investments in and advances
(from) to subsidiaries and affiliates (62,753) 49,354 (50,820) 40,219 24,000 --
Proceeds from sale of fixed assets -- -- -- 661 -- 661
Proceeds from termination of derivatives 78,531 -- -- -- -- 78,531
--------- -------- -------- -------- -------- ---------
Net cash provided by (used in) investing
activities 15,778 23,913 (50,820) (19,397) 24,000 (6,526)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under revolving
credit Facility 112,447 -- -- (15,995) -- 96,452
Principal payments on debt (134,800) (982) -- (9,745) -- (145,527)
Payment for early extinguishment of debt -- -- -- 5,717 -- 5,717
--------- -------- -------- -------- -------- ---------
Net cash used in financing activities (22,353) (982) -- (20,023) -- (43,358)
Effect of exchange rate changes on cash and cash
Equivalents -- (3,267) 12,735 (27,381) -- (17,913)
NET DECREASE IN CASH -- (26) -- (6,425) -- (6,451)
CASH AT BEGINNING OF PERIOD $ -- $ 26 $ -- $ 7,366 $ -- $ 7,392
--------- -------- -------- -------- -------- ---------
CASH AT END OF PERIOD $ -- $ -- $ -- $ 941 $ -- $ 941
========= ======== ======== ======== ======== =========
42
CONDENSED CONSOLIDATING STATEMENTS OF INCOME FOR THE YEAR ENDED DECEMBER 31,
1999
(DOLLARS IN THOUSANDS)
OTHER GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE ISSUERS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------- ------------ ------------ ------------ -----
NET SALES $ -- $ 599,434 $ 157,376 $766,685 $(157,325) $ 1,366,170
COST OF PRODUCT SOLD -- 550,273 149,598 672,926 (157,325) 1,215,472
-------- --------- --------- -------- --------- -----------
GROSS PROFIT -- 49,161 7,778 93,759 -- 150,698
SELLING, GENERAL &
ADMINISTRATIVE EXPENSE -- 50,629 -- 58,586 -- 109,215
PAYMENTS TO BENEFICIARY IN
LIEU OF TAXES 259 -- -- -- -- 259
-------- --------- --------- -------- --------- -----------
(LOSS) INCOME FROM OPERATIONS (259) (1,468) 7,778 35,173 -- 41,224
INTEREST EXPENSE 67,271 171 -- 5,164 -- 72,606
INTERCOMPANY INTEREST ALLOCATION (67,271) 47,767 -- 19,504 -- --
OTHER EXPENSE (INCOME) (48,105) (514) 16,800 597 -- (31,222)
-------- --------- --------- -------- --------- -----------
(LOSS) INCOME BEFORE TAXES 47,846 (48,892) (9,022) 9,908 -- (160)
TAX (BENEFIT) PROVISION -- 1,940 -- 6,287 -- 8,227
MINORITY INTEREST -- -- -- 554 -- 554
-------- --------- --------- -------- --------- -----------
NET (LOSS) INCOME BEFORE
EXTRAORDINARY LOSS 47,846 (50,832) (9,022) 3,067 -- (8,941)
EXTRAORDINARY LOSS ON EARLY
EXTINGUISHMENT OF DEBT 5,569 -- -- -- -- 5,569
-------- --------- --------- -------- --------- -----------
NET (LOSS) INCOME $ 42,277 $ (50,832) $ (9,022) $ 3,067 $ -- $ (14,510)
======== ========= ========= ======== ========= ===========
43
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31,
1999
(DOLLARS IN THOUSANDS)
OTHER GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE ISSUERS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------- ------------ ------------ ------------ -----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 42,277 $(50,832) $ (9,022) $ 3,067 $ -- $ (14,510)
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities:
Depreciation and amortization -- 49,824 4 26,168 -- 75,996
Unrealized loss on currency exchange -- (411) 17,830 -- -- 17,419
Loss from the disposal of fixed
assets -- -- -- 181 -- 181
Unrealized gain on investments (40,501) -- -- -- -- (40,501)
Net extraordinary loss on early
extinguishment of debt 5,569 -- -- -- -- 5,569
Change in accounts receivable -- 419 (61) 52,646 -- 53,004
Change in inventories -- 1,834 -- 22,066 -- 23,900
Change in prepaid and other current
assets -- (13,834) -- 5,130 -- (8,704)
Change in other assets -- (29,884) -- 169 -- (29,715)
Change in investments in associated
Company -- -- -- (723) -- (723)
Change in accounts payable -- 6,113 (489) 4,581 -- 10,205
Change in accrued expenses (97) 3,921 (516) (16,953) -- (13,645)
Change in pension liabilities and
other -- 736 -- 3,763 -- 4,499
Change in deferred taxes -- 2,371 -- 3,465 -- 5,836
--------- -------- -------- --------- --------- ---------
Net cash provided by (used in)
operating Activities 7,248 (29,743) 7,746 103,560 -- 88,811
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of subsidiaries, net of cash
acquired -- -- (75,531) (368,530) -- (444,061)
Capital expenditures -- (23,740) -- (29,436) -- (53,176)
Net activity in investments in and
advances to (from) subsidiaries and
affiliates (502,960) 84,078 67,785 351,097 -- --
Proceeds from sale of fixed assets -- -- -- 390 -- 390
--------- -------- -------- --------- --------- ---------
Net cash used in investing activities (502,960) 60,338 (7,746) (46,479) -- (496,847)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) borrowings under
revolving credit facility (71,500) -- -- (71) -- (71,571)
Debt issuance fees -- (27,066) -- -- -- (27,066)
Net proceeds from issuance of debt 650,000 -- -- -- -- 650,000
Payment for early extinguishment of debt (82,788) -- -- (45,862) -- (128,650)
Principal payments on debt -- (3,532) -- (2,327) -- (5,859)
--------- -------- -------- --------- --------- ---------
Net cash (used in) provided by
financing activities 495,712 (30,598) -- (48,260) -- 416,854
Effect of exchange rate changes on cash and
cash Equivalents -- -- -- (1,556) -- (1,556)
NET INCREASE IN CASH -- (3) -- 7,265 -- 7,262
CASH AT BEGINNING OF PERIOD $ -- $ 29 $ -- $ 101 $ -- $ 130
--------- -------- -------- --------- --------- ---------
CASH AT END OF PERIOD $ -- $ 26 $ -- $ 7,366 $ -- $ 7,392
========= ======== ======== ========= ========= =========
44
1999 NOTES:
The following condensed consolidating financial information presents:
(1) Condensed consolidating financial statements for the years ended December
31, 2001 and 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.
45
CONDENSED CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 2001
(DOLLARS IN THOUSANDS)
GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------------ ------------ ------------ -----
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ -- $ (4,797) $ 4,799 $ -- $ 2
Accounts receivable, net -- 111,409 154,823 -- 266,232
Inventories -- 87,043 105,761 -- 192,804
-- 30,223 57,623 -- 87,846
-------- --------- --------- --------- -----------
Total current assets -- 223,878 323,006 -- 546,884
Property, Plant and Equipment, Net -- 189,126 353,789 -- 542,915
Intangible Assets, Net -- 54,446 72,869 -- 127,315
Other Assets 7,237 91,626 29,627 -- 128,490
Deferred Tax Assets -- 6,861 63,666 -- 70,527
Net Investment in and advances to (from)
subsidiaries & affiliates 945,317 (417,423) (287,591) (240,303) --
-------- --------- --------- --------- -----------
Total Assets $952,554 $ 148,514 $ 555,366 $(240,303) $ 1,416,131
======== ========= ========= ========= ===========
LIABILITIES AND MEMBER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ -- $ 45,960 $ 215,653 $ -- $ 261,613
Accrued interest 12,619 -- 329 -- 12,948
Accrued expenses -- 11,490 88,503 -- 99,993
Current portion of long term debt 20,604 -- 10,209 -- 30,813
-------- --------- --------- --------- -----------
Total current liabilities 33,223 57,450 314,694 -- 405,367
Pension Liabilities & Other -- 5,559 38,556 -- 44,115
Deferred Tax Liabilities -- 10,119 23,260 -- 33,379
Long Term Debt 822,880 637 39,444 -- 862,961
-------- --------- --------- --------- -----------
Total liabilities 856,103 73,765 415,954 -- 1,345,822
Commitments and Contingencies -- -- -- -- --
Member's Equity:
Member's equity 96,451 74,905 142,372 (240,303) 73,425
Accumulated other comprehensive (loss)
minimum pension liability in excess
of unrecognized prior service cost,
net of tax -- (156) -- -- (156)
Accumulated other comprehensive (loss)
Cumulative translation adjustments -- -- (2,960) -- (2,960)
-------- --------- --------- --------- -----------
Member's Equity 96,451 74,749 139,412 (240,303) 70,309
-------- --------- --------- --------- -----------
Total Liabilities and Member's Equity $952,554 $ 148,514 $ 555,366 $(240,303) $ 1,416,131
======== ========= ========= ========= ===========
46
CONDENSED CONSOLIDATING STATEMENTS OF INCOME FOR THE YEAR ENDED DECEMBER 31,
2001
(DOLLARS IN THOUSANDS)
GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------------ ------------ ------------ -----
NET SALES $ -- 568,253 1,339,074 (44,999) 1,862,328
COST OF PRODUCT SOLD -- 497,467 1,180,661 (44,999) 1,633,129
-------- --------- ----------- -------- -----------
GROSS PROFIT -- 70,786 158,413 -- 229,199
SELLING, GENERAL & ADMINISTRATIVE
EXPENSE -- 20,852 93,157 -- 114,009
PAYMENTS TO BENEFICIARY IN LIEU OF
TAXES 1,422 -- -- 1,422
INCOME FROM OPERATIONS 48,512 65,256 113,768
INTEREST EXPENSE 88,532 (953) 10,079 -- 97,658
INTERCOMPANY INTEREST ALLOCATION (83,378) 21,743 61,635 -- --
OTHER (INCOME) EXPENSE (5,188) (22,606) 54,942 -- 27,148
-------- --------- ----------- -------- -----------
INCOME (LOSS) BEFORE TAXES 34 50,328 (61,400) -- (11,038)
TAX PROVISION (BENEFIT) -- 3,871 (16,938) -- (13,067)
MINORITY INTEREST -- -- 844 -- 844
-------- --------- ----------- -------- -----------
NET INCOME (LOSS) BEFORE CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE 34 46,457 (45,306) -- 1,185
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE (182) -- -- -- (182)
-------- --------- ----------- -------- -----------
NET (LOSS) INCOME $ (148) $ 46,457 $ (45,306) $ -- $ 1,003
======== ========= =========== ======== ===========
47
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31,
2001
(DOLLARS IN THOUSANDS)
GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------------ ------------ ------------ -----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (148) 46,457 (45,306) $ -- $ 1,003
Adjustments to reconcile net (loss) income
to net
Cash provided by (used in) operating activities:
Depreciation and amortization 5,155 39,394 48,503 -- 93,052
Deposit write down 14,000 14,000
Unrealized loss on currency exchange (3,041) (27,186) 51,947 -- 21,720
Net gain on termination of derivatives (609) -- -- -- (609)
Loss from the disposal of fixed assets -- 24 806 -- 830
Change in accounts receivable -- 35,018 (8,177) -- 26,841
Change in inventories -- (18,578) 32,396 -- 13,818
Change in prepaid and other current -- (24,243) (17,304) -- (41,547)
assets
Change in other assets 5,155 (11,105) (10,397) -- (16,347)
Change in accounts payable -- (23,110) 26,776 -- 3,666
Change in accrued expenses (2,675) 1,034 (21,027) -- (22,668)
Change in pension liabilities and other -- 387 (7,031) -- (6,644)
Change in deferred taxes -- 2,931 (26,906) -- (23,975)
-------- -------- -------- ------- --------
Net cash provided by operating 3,837 35,023 24,280 -- 63,140
Activities --
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures -- (26,237) (50,921) -- (77,158)
Net activity in investments in and advances
to (from) Subsidiaries and affiliates (9,110) (44,880) 53,990 -- --
Proceeds from sale of fixed assets -- -- 314 -- 314
Proceeds from termination of derivatives -- -- -- -- --
-------- -------- -------- ------- --------
Net cash used in investing activities (9,110) (71,117) 3,383 -- (76,844)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) borrowings under revolving
credit Facility 25,307 (920) -- 24,387
Principal payments on debt (17,920) (6,497) (24,417)
Net proceeds from issuance of debt 55 16,764 -- 16,819
-------- -------- -------- ------- --------
Net cash provided by (used in)
Financing activities 7,387 (865) 10,267 -- 16,789
Effect of exchange rate changes on cash and cash
Equivalents (2,114) 32,162 (34,072) -- (4,024)
NET (DECREASE) INCREASE IN CASH -- (4,797) 3,858 -- (939)
CASH AT BEGINNING OF PERIOD $ -- $ -- $ 941 $ -- $ 941
-------- -------- -------- ------- --------
CASH AT END OF PERIOD $ $ (4,797) $ 4,799 $ -- $ 2
======== ======== ======== ======= ========
48
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
========= ========= ========= ========= ===========
49
CONDENSED CONSOLIDATING STATEMENTS OF INCOME FOR THE YEAR ENDED DECEMBER 31,
2000
(DOLLARS IN THOUSANDS)
GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------------ ------------ ------------ -----
NET SALES $ -- $ 578,354 $ 1,255,060 $ (3,449) $ 1,829,965
COST OF PRODUCT SOLD -- 521,449 1,084,326 (3,449) 1,602,326
-------- --------- ----------- -------- -----------
GROSS PROFIT -- 56,905 170,734 -- 227,639
SELLING, GENERAL & ADMINISTRATIVE
EXPENSE -- 34,701 95,743 -- 130,444
PAYMENTS TO BENEFICIARY IN LIEU OF
TAXES 1,165 -- -- -- 1,165
-------- --------- ----------- -------- -----------
(LOSS) INCOME FROM OPERATIONS (1,165) 22,204 74,991 -- 96,030
INTEREST EXPENSE 92,608 139 9,766 -- 102,513
INTERCOMPANY INTEREST ALLOCATION (90,151) 24,792 65,359 -- --
OTHER (INCOME) EXPENSE (57,944) (13,654) 41,916 24,000 (5,682)
-------- --------- ----------- -------- -----------
INCOME (LOSS) BEFORE TAXES 54,322 10,927 (42,050) (24,000) (801)
TAX BENEFIT -- (163) (11,126) -- (11,289)
MINORITY INTEREST -- -- 1,406 -- 1,406
-------- --------- ----------- -------- -----------
NET INCOME (LOSS) $ 54,322 $ 11,090 $ (32,330) $(24,000) $ 9,082
======== ========= =========== ======== ===========
50
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31,
2000
(DOLLARS IN THOUSANDS)
GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------------ ------------ ------------ -----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 54,322 $ 11,090 $(32,330) $(24,000) $ 9,082
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation and amortization 2,457 43,390 45,230 -- 91,077
Unrealized (gain) loss on currency -- (9,536) 51,159 -- 41,623
exchange
Net gain on termination of derivatives (37,421) -- -- -- (37,421)
Loss from the disposal of fixed assets -- (43) 607 -- 564
Change in accounts receivable -- 42,490 (24,218) -- 18,272
Change in inventories -- (19,529) (32,471) -- (52,000)
Change in prepaid and other current -- 14,070 (6,509) -- 7,561
assets
Change in other assets (14,849) (66,320) 36,489 -- (44,680)
Change in accounts payable -- 11,170 52,180 -- 63,350
Change in accrued expenses 2,066 (7,302) 18,789 -- 13,553
Change in pension liabilities and other -- (1,068) (5,788) -- (6,856)
Change in deferred taxes -- (17) (42,762) -- (42,779)
--------- -------- -------- -------- ---------
Net cash provided by (used in) operating
Activities 6,575 18,395 60,376 (24,000) 61,346
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures -- (25,441) (60,277) -- (85,718)
Net activity in investments in and advances
(from) to subsidiaries and affiliates (62,753) (1,466) 40,219 24,000 --
Proceeds from sale of fixed assets -- -- 661 -- 661
Proceeds from termination of derivatives 78,531 -- -- -- 78,531
--------- -------- -------- -------- ---------
Net cash provided by (used in) investing 15,778 (26,907) (19,397) 24,000 (6,526)
activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under revolving
credit facility 112,447 -- (15,995) -- 96,452
Principal payments on debt (134,800) (982) (9,745) -- (145,527)
Net proceeds from issuance of debt -- -- 5,717 -- 5,717
--------- -------- -------- -------- ---------
Net cash used in financing activities (22,353) (982) (20,023) -- (43,358)
Effect of exchange rate changes on cash and cash
Equivalents -- 9,468 (27,381) -- (17,913)
NET DECREASE IN CASH -- (26) (6,425) -- (6,451)
CASH AT BEGINNING OF PERIOD $ -- $ 26 $ 7,366 $ -- $ 7,392
--------- -------- -------- -------- ---------
CASH AT END OF PERIOD $ -- $ -- $ 941 $ -- $ 941
========= ======== ======== ======== =========
51
CONDENSED CONSOLIDATING STATEMENTS OF INCOME FOR THE YEAR ENDED DECEMBER 31,
1999
(DOLLARS IN THOUSANDS)
GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------------ ------------ ------------ -----
NET SALES $ -- $ 756,810 $ 766,685 $(157,325) $ 1,366,170
COST OF PRODUCT SOLD -- 699,871 672,926 (157,325) 1,215,472
-------- --------- --------- --------- -----------
GROSS PROFIT -- 56,939 93,759 -- 150,698
SELLING ,GENERAL & ADMINISTRATIVE
EXPENSE -- 50,629 58,586 -- 109,215
PAYMENTS TO BENEFICIARY IN LIEU OF
TAXES 259 -- -- -- 259
-------- --------- --------- --------- -----------
(LOSS) INCOME FROM OPERATIONS (259) 6,310 35,173 -- 41,224
INTEREST EXPENSE 67,271 171 5,164 -- 72,606
INTERCOMPANY INTEREST ALLOCATION (67,271) 47,767 19,504 -- --
OTHER EXPENSE (INCOME) (48,105) 16,286 597 -- (31,222)
-------- --------- --------- --------- -----------
(LOSS) INCOME BEFORE TAXES 47,846 (57,914) 9,908 -- (160)
TAX (BENEFIT) PROVISION -- 1,940 6,287 -- 8,227
MINORITY INTEREST -- -- 554 -- 554
-------- --------- --------- --------- -----------
NET (LOSS) INCOME BEFORE
EXTRAORDINARY LOSS 47,846 (59,854) 3,067 -- (8,941)
EXTRAORDINARY LOSS ON EARLY
EXTINGUISHMENT OF DEBT 5,569 -- -- -- 5,569
-------- --------- --------- --------- -----------
NET (LOSS) INCOME $ 42,277 $ (59,854) $ 3,067 $ -- $ (14,510)
======== ========= ========= ========= ===========
52
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31,
1999
(DOLLARS IN THOUSANDS)
GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------------ ------------ ------------ -----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 42,277 $ (59,854) $ 3,067 $ -- $ (14,510)
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation and amortization -- 49,828 26,168 -- 75,996
Unrealized loss on currency exchange -- 17,419 -- -- 17,419
Loss from the disposal of fixed assets -- -- 181 -- 181
Unrealized gain on investments (40,501) -- -- -- (40,501)
Net extraordinary loss on early
extinguishment of debt 5,569 -- -- -- 5,569
Change in accounts receivable -- 358 52,646 -- 53,004
Change in inventories -- 1,834 22,066 -- 23,900
Change in prepaid and other current
assets -- (13,834) 5,130 -- (8,704)
Change in other assets -- (29,884) 169 -- (29,715)
Change in investments in associated -- -- (723) -- (723)
company
Change in accounts payable -- 5,624 4,581 -- 10,205
Change in accrued expenses (97) 3.405 (16,953) -- (13,645)
Change in pension liabilities and other -- 736 3,763 -- 4,499
Change in deferred taxes -- 2,371 3,465 -- 5,836
--------- --------- --------- ------- ---------
Net cash provided by (used in)
operating Activities 7,248 (21,997) 103,560 -- 88,811
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of subsidiaries, net of cash
acquired -- (75,531) (368,530) -- (444,061)
Capital expenditures -- (23,740) (29,436) -- (53,176)
Net activity in investments in and advances
to (from) subsidiaries and affiliates (502,960) 151,863 351,097 -- --
Proceeds from sale of fixed assets -- -- 390 -- 390
--------- --------- --------- ------- ---------
Net cash used in investing activities (502,960) 52,592 (46,479) -- (496,817)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) borrowings under revolving
credit facility (71,500) -- (71) -- (71,571)
Debt issuance fees -- (27,066) -- -- (27,066)
Net proceeds from issuance of debt 650,000 -- -- -- 650,000
Payment for early extinguishment of debt (82,788) -- (45,862) -- (128,650)
Principal payments on debt -- (3,532) (2,327) -- (5,859)
--------- --------- --------- ------- ---------
Net cash (used in) provided by
financing activities 495,712 (30,598) (48,260) -- 416,854
Effect of exchange rate changes on cash and cash
Equivalents -- -- (1,556) -- (1,556)
NET INCREASE IN CASH -- (3) 7,265 -- 7,262
CASH AT BEGINNING OF PERIOD $ -- $ 29 $ 101 $ -- $ 130
--------- --------- --------- ------- ---------
CASH AT END OF PERIOD $ -- $ 26 $ 7,366 $ -- $ 7,392
========= ========= ========= ======= =========
53
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The following individuals are the Executive Officers of the Company, having
the operational titles set forth opposite their names. Venture Holdings
Trust is the sole member of Venture Holdings Company LLC. Larry J. Winget
is the sole manager of the Venture Holdings Company LLC and exercises the
management powers of Venture Holdings Company LLC. Messrs. Winget, Schutz
and Torakis serve as the directors of each Subsidiary, other than Venture
Canada. Mr. Winget and Stephen M. Cheifetz serve as the directors of
Venture Canada. Mr. Butler is a director of Venture Holdings Corporation
only.
NAME AGE POSITION
- --------------------- --- --------------------------------------------------
Larry J. Winget 59 Chairman and Chief Executive Officer
Larry J. Winget, Jr. 41 Chairman of Peguform GmbH and Executive Vice
President
A. James Schutz 56 Vice Chairman
Fred L. Hubacker 57 Vice Chairman
Michael G. Torakis 45 President and Chief Operating Officer of Venture
Holdings Company LLC and Peguform GmbH
Michael D. Alexander 53 Chief Financial Officer, Vice President
James E. Butler, Jr. 48 Executive Vice President - Legal, Secretary
and Treasurer
Gary Woodall 59 President - North American Manufacturing
Patricia A. Stephens 54 Executive Vice President - Purchasing
Joseph R. Tignanelli 40 Executive Vice President - Interior Operations
Warren Brown 58 Vice President - Exterior and Composite Operations
Thomas Gougherty 46 Chief Financial Officer - European Operations
Larry J. Winget was one of the five original founders and shareholders of
Venture Industries Corporation and is the only one still involved with us.
Since 1987 he has owned 100% of Venture and is currently the sole
beneficiary of Venture Holdings Trust, which is the sole member of Venture.
Larry J. Winget, Jr., Larry J. Winget's son, has been employed by us
continuously in various positions since 1976. Mr. Winget was named
Executive Vice President in 1995 and on May 28, 1999, he became Chairman of
Peguform.
A. James Schutz assumed the position of Vice Chairman in October 1997 and
had been Vice President since 1987. He has been in the injection molding
business for 25 years.
Fred L. Hubacker joined Venture in January 2001 as Vice Chairman
responsible for business development worldwide including all joint ventures
and all financial activities. He previously served as President and CEO of
New Venture Gear, Inc from 1995 to December 2000.
Michael G. Torakis joined us in 1985 and has been President since 1995. On
May 28, 1999, Mr. Torakis became President of Peguform.
Michael D. Alexander joined Venture in March 2001 as Chief Financial
Officer. He previously served as Chief Financial Officer of New Venture
Gear from 1999 until joining Venture. Prior to New Venture Gear, Mr.
Alexander was Chief Financial Officer of American Axle and Manufacturing
from 1993 to 1999.
James E. Butler became Executive Vice President - Legal in April of 2001
and has been Secretary and Treasurer since 1995. Mr. Butler served as
Executive Vice President - Finance from 1995 to 1999 and Chief Financial
Officer from 1999 to 2001.
54
Gary Woodall joined us on April 1, 1999 as Vice President of Interior
Operations and General Motors Customer Executive. Late in 1999 Gary assumed
the role of President of North American Manufacturing. Mr. Woodall had
previously been employed by General Motors Corporation for over 35 years.
Mr. Woodall's last position with General Motors was as General Director of
Products, Manufacturing and Process Engineering. Prior to holding that
position, Mr. Woodall served as General Director of Operations, and was
responsible for General Motors' North American interior automotive
component manufacturing.
Patricia A. Stephens joined us in 1993 and has held positions involving
program management, contract administration and purchasing. She has been
Executive Vice President - Purchasing since 1997
Joseph R. Tignanelli, Larry J. Winget's son-in-law, has been employed by us
continuously in several positions since 1980. From 1995 until he assumed
his current position in December 1997 he was Executive Vice President -
Customer Service Operations.
Warren Brown joined us in 1993 as Vice President -- Mergers and
Acquisitions and assumed his current position in 1999.
Thomas Gougherty joined us in his current position in December 1999. From
1977 to 1999, Mr. Gougherty held a variety of Finance and Information
Technology positions with Ford Motor Company.
Stephen M. Cheifetz, 45, is a partner of Corrent and Macri and has served
as partner of that firm since 1999. Prior to joining his current firm, he
was a partner with Wilson, Walker, Hochberg, Slopen, a Windsor, Ontario law
firm, and served as a partner of that firm for over five years.
ITEM 11. EXECUTIVE COMPENSATION
The following Summary Compensation Tables sets forth compensation paid for
the years ended December 31, 2001, 2000 and 1999, respectively, to those
persons who were, at such date, the chief executive officer of Venture and
the other four most highly compensated executive officers.
SUMMARY COMPENSATION TABLE (1)
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) (2) BONUS ($) COMPENSATION (3) COMPENSATION (4)
- --------------------------- ---- -------------- --------- ---------------- ----------------
Larry J. Winget 2001 $509,025 $ -- $1,443,149 $ 96,250
Chairman and 2000 512,650 -- 1,182,141 152,140
Chief Executive Officer 1999 528,618 500,000 262,779 504,400
Michael G. Torakis 2001 $664,765 $ -- $ -- $ 5,400
President 2000 677,980 -- -- 5,400
1999 340,164 187,500 -- 5,100
Larry J. Winget, Jr 2001 $432,283 $ -- $ -- $ 4,200
Executive Vice President 2000 484,719 -- -- 4,275
1999 281,165 250,000 -- 5,100
Fred Hubacker 2001 $750,584 $ -- $ -- $ 5,400
Vice Chairman 2000 -- -- -- --
1999 -- -- -- --
Gary Woodall 2001 $390,805 $ -- $ -- $ 5,400
President of North American 2000 365,618 40,000 -- 5,400
Manufacturing 1999 199,545 -- -- 4,200
(1) The compensation described in this table does not include benefits
under group plans which do not discriminate in scope, terms or operation in
favor of the officers listed and that are generally available to all
salaried employees, and certain perquisites and personal benefits received
by the officers listed, where these perquisites do not exceed the lesser of
$50,000 or 10% of the officer's salary and bonus.
(2) Includes salary reductions made under Venture's 401(k) Plan and
Venture's Cafeteria Benefit Plan.
(3) The amount indicated for Mr. Winget represents compensation in lieu of
a distribution of Trust principal, equal to taxes incurred by the
beneficiary as a result of activities of Venture Holdings Trust's
subsidiaries which have elected "S" corporation status under the Internal
Revenue Code or are limited liability companies (taxed as partnerships).
55
(4) "All Other Compensation" is comprised of: (1) a contribution made by us
to the accounts of each of the officers listed under Venture's 401(k) Plan;
(2) the incremental cost to us of additional premiums for term life
insurance benefits for the officers listed which are not generally
available to the other salaried employees of Venture, and (3) for Mr.
Winget, the portion of the premium paid by us under a reverse split dollar
life insurance policy attributable to the build-up of the cash surrender
value of the policy, which aggregated $2,409,595, $2,318,745 and $2,172,005
at December 31, 2001, 2000 and 1999, respectively, and is owned by Mr.
Winget. We are the beneficiary of the term insurance portion of the reverse
split dollar policy, of which we pay all premiums due under the policy and
are entitled to receive a $20.0 million benefit in the event of Mr.
Winget's death. Mr. Winget has the right to designate the distribution of
the cash surrender value and may, prior to his death, surrender the policy
in cancellation thereof and receive the benefit of the cash surrender
value.
See the table below for complete details concerning all other compensation.
TERM LIFE REVERSE SPLIT
NAME AND YEAR 401(K) INSURANCE DOLLAR POLICY TOTAL
- ------------- ------ --------- ------------- -----
Winget
2001 $5,100 $300 $ 90,850 $ 96,250
2000 5,100 300 146,740 152,140
1999 4,800 300 499,300 504,400
Torakis
2001 $5,100 $300 $ -- $ 5,400
2000 5,100 300 -- 5,400
1999 4,800 300 -- 5,100
Winget, Jr.
2001 $3,900 $300 $ -- $ 4,200
2000 3,975 300 -- 4,275
1999 4,800 300 -- 5,100
Hubacker
2001 $5,100 $300 $ -- $ 5,400
2000 -- -- -- --
1999 -- -- -- --
Woodall
2001 $5,100 $300 $ -- $ 5,400
2000 5,100 300 -- 5,400
1999 3,900 300 -- 4,200
COMPENSATION OF DIRECTORS
Mr. Winget serves as the Special Advisor to Venture, Messrs. Winget, Schutz
and Torakis serve as the directors of each guarantor of the Notes, and Mr.
Butler serves as director of Venture Holdings Corporation. None receive any
additional compensation or fees for their service in these capacities. Mr.
Cheifetz does not receive compensation for acting as a director of Venture
Canada; however, the law firm of which he is a partner acts as counsel to
Venture Canada.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
All of the compensation for each of the officers listed in the Summary
Compensation Table above for the year ended December 31, 2001 was paid by
Experience Management LLC. Messrs. Winget and Torakis, in their capacities
as directors, participated in the deliberations concerning executive
compensation. In addition, some of the officers listed in the Summary
Compensation Table above have engaged in certain transactions with Venture.
See "Item 13. Certain Relationships and Related Transactions."
OPTIONS
None of the officers listed in the Summary Compensation Table above hold
any options to acquire any interest in Venture or to acquire stock of the
subsidiaries of Venture or were granted any such options in the 2001 fiscal
year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Venture owns, directly or indirectly, all of the outstanding capital stock
of, or equity interests in, its subsidiaries, except for its 70%-owned
Mexican, 50% owned French and 50%-owned Spanish joint ventures. Venture
Holdings Trust is the sole member of Venture, and Mr. Winget is the sole
beneficiary of Venture Holdings Trust. Mr. Winget's address is c/o Venture
Holdings Company LLC, 33662 James J. Pompo Drive, Fraser, Michigan 48026.
56
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In addition to making distributions to Mr. Winget and also compensating him
in his capacity as an Executive Officer of Venture, Venture has maintained
business relationships and engaged in certain transactions with Mr. Winget
and certain companies owned or controlled by him (each an "affiliate" and
collectively, the "affiliates") as described below. Since Mr. Winget is the
sole beneficiary of Venture Holdings Trust, which is the sole member of
Venture the terms of these transactions are not the result of arms'-length
bargaining; however, we believe that these transactions are on terms no
less favorable to us than would be obtained if these transactions or
arrangements were arms'-length transactions with non-affiliated persons.
Pursuant to the indentures governing the 11% Senior Notes due 2007 and 12%
Senior Subordinated Notes due 2009 issued in 1999 and the indenture
governing the 1997 senior notes, Venture, each issuer of the 1997 senior
notes and each guarantor of each of the 1997 senior notes and the 1999
notes is required to maintain a Fairness Committee, at least one of whose
members is independent, which approves the terms and conditions of certain
transactions between Venture and our affiliates and participates in
decisions concerning whether certain corporate opportunities will be
pursued by us. All transaction described below which management determined
required review and approval by the Fairness Committee have been so
reviewed and approved. The indentures also contain restrictions on
distributions to Mr. Winget and other restrictions on transactions with
affiliates, including the Corporate Opportunity Agreement. The Corporate
Opportunity Agreements require Mr. Winget to offer to us certain corporate
opportunities which relate to our business before he may pursue these
opportunities outside Venture.
FACILITIES AND EQUIPMENT
We lease, or have arranged for the usage of, certain facilities, machinery
and equipment that are owned by affiliates, as set forth below. We believe
that the lease and usage agreements are based on the fair market value of
the facilities, machinery and equipment at the inception or renewals of
the agreements. Venture has made significant capital improvements to these
properties. Venture has accounted for these improvements as leasehold
improvements. At the conclusion of the applicable lease or usage agreement,
the benefits of these improvements inure to the benefit of the lessor.
Venture Real Estate, Inc., a corporation wholly owned by Mr. Winget's
living trust since 1988, leases three buildings to us in our Malyn Complex,
Almont II Facility and our Commerce Mold Shop. We paid Venture Real Estate,
Inc. approximately $0.5 million for the year ending December 31, 2001.
Harper Properties of Clinton Township Limited Partnership leases its Harper
facility to us. Realven Corporation also leases the machinery and equipment
located at the Harper facility to us on a month-to-month basis. Harper
Properties is a limited partnership in which the living trusts of Mr.
Winget and his wife, Alicia, and an affiliated company are the general
partners and Mr. Winget, members of his family, A. James Schutz, an
Executive Officer of Venture, and Michael G. Torakis, an Executive Officer
of Venture, are the limited partners. Realven is a corporation wholly owned
by Mr. Winget and his wife, Alicia. The Harper lease provides for semi-
annual lease payments. Harper Properties and Realven have the right to
require us to enter into negotiations regarding an increase in the lease
payments under the Harper lease and the Realven lease, so that lease
payments under these leases will reflect all expenses to Harper Properties,
Realven and their owners. Venture has made several improvements to the
Harper facility and the machinery and equipment leased from Realven, and
has accounted for them as leasehold improvements. At the termination of the
Harper and Realven leases, Harper Properties and Realven, respectively,
will retain the value, if any, of the leasehold improvements. Venture paid
Harper Properties $2.0 million for the year ending December 31, 2001 under
the Harper lease. Venture paid Realven $0.7 million for the year ending
December 31, 2001 under the Realven lease.
Mr. Winget, and/or a company he controls, Venture Heavy Machinery Limited
Liability Company, has since 1996 allowed Venture to use molding machines
pursuant to the terms of usage agreements. Venture paid Venture Heavy
Machinery Limited Liability Company $5.2 million for the year ending
December 31, 2001 under the usage agreements.
Venture Real Estate Acquisition Company and Venture Equipment Acquisition
Company, each wholly owned by Mr. Winget's living trust, acquired a 176,000
square foot injection molding facility and the machinery and equipment
located in the facility, including 35 molding machines, on February 4,
1994. Venture entered into usage agreements for this facility, the Masonic
facility, and the machinery and equipment, the terms of which were
initially reviewed and approved by the Fairness Committee. During 2001
Venture paid $1.0 million to Venture Real Estate Acquisition Company and
Venture Equipment Acquisition Company pursuant to these agreements.
57
Venture Automotive Corp., a corporation wholly owned by Mr. Winget, leases
a warehouse building to us for our Grand Blanc facility. We pay rent and
operating expenses for this facility. Rent paid to Venture Automotive Corp
for the period ending December 31, 2001 was $2.0 million.
As further discussed in "Item 13. Certain Relationships and Related
Transactions -- Business Relationships," we have prepaid one year's rentals
and usage fees of approximately $9.3 million to the affiliates identified
below pursuant to an agreement entered into by us and certain of our
affiliates in the fourth quarter of 2001. The actual prepayments were $0.4
million to Venture Real Estate, $0.7 million to Realven, $4.9 million to
Venture Heavy Machinery LLC, $2.0 million to Venture Automotive Corp and,
in the aggregate, $1.3 million to Venture Real Estate Acquisition and
Venture Equipment Acquisition. No cash was exchanged relative to these
prepayments, but was accomplished through a set off of the related party
receivables.
BUSINESS RELATIONSHIPS
We maintain ongoing business relationships with affiliates, as set forth
below:
Nova Corporation is a corporation in which Windall Industries, a
corporation wholly owned by Mr. Winget and Mr. A. James Schutz, an
Executive Officer of Venture. Nova supplies us with certain small parts or
components of large assemblies that are sold to our customers. Venture paid
Nova $1.7 million for the year ending December 31, 2001. In connection with
this relationship, Venture has provided Nova with various raw materials at
cost and received commission income, for which Nova paid Venture $0.1
million for the year ending December 31, 2001. Nova sells products to other
customers besides us, and has and will compete with us for certain
contracts. Venture paid Windall Industries usage fees of $0.1 million for
the year ending December 31, 2001.
Venture Sales and Engineering (VS&E) and Venture Foreign Sales Corporation,
Corporations wholly owned by Mr. Winget, serve as our sales and management
representative. Currently, VS&E generates the majority of its sales and
management fees from us and generates minimal sales and management fees
from third parties. We pay VS&E a sales management fee of 3% on all North
American production sales. Venture Sales has conducted sales and marketing
activities around the world for us and has been advanced certain funds in
order to carry on that work on our behalf. Venture Foreign Sales
Corporation ceased operations in 2001 due to tax law changes. Venture paid
VS&E, $7.1 million for the year ending December 31, 2001. During 2000, we
amended these agreements to allow us flexibility to reduce this expense. In
the fourth quarter of 2001, this was done again in the amount of $4.6
million as an inducement to have us reduce our quoted prices for a future
OEM program that we were bidding on. As part of this transaction and as
additional consideration, VS&E and other entities owned or controlled by
the sole beneficiary of the Trust required that we also agree to prepay one
year's management fee, and rental and usage fees. No cash was exchanged as
a result of this portion of the transaction all parties agreed to a set off
of the respective related party receivable balances. The total offset was
approximately $23.9 million, ($14.6 million management fee and $9.3 million
rentals and usage fees). These annual prepayments will continue until 2006.
This transaction was presented to and approved by the Fairness Committee.
At the end of 2001, VS&E was obligated to us in the amount of $14.0 million
(after the applicable set off) and $25.5 million as of December 31, 2001
and 2000 respectively, of which $6.6 million at December 31, 2001 and $15.5
million at December 31, 2000 were classified as long term and included in
other assets.
58
During 1999, we entered into an agreement to purchase vehicles from Shelby
American, Inc. ("Shelby"), an entity in which the sole beneficiary of the
Trust has a 75% ownership interest. We made deposits of approximately $26
million ($13 million for each of the years ended December 31, 2000 and
1999) on these vehicles. These deposits are recorded as other assets in the
Company's December 31, 2001 and 2000 consolidated balance sheets. Our
expectation was to receive repayment of the deposits from the proceeds of
the sale of the vehicles to third parties. As of April 1, 2002, we have not
recovered any of the deposits. Sales results to date have proven more
difficult to achieve than had been anticipated due to quality, marketing,
pricing, environmental and overall management issues which have resulted in
operating losses for Shelby over the past few years. Based upon past sales
performance and in consultation independent third party appraisers, we have
recorded an impairment charge of the deposit in the fourth quarter of 2001,
in the amount of $14 million. This impairment charge was determined based
upon an estimate of future cash flows expected to result from the sale of
vehicles and a discount from appraised liquidation value of the Shelby
assets. At the time of the original deposits to Shelby, we entered into a
security agreement and obtained a security interest in all of the assets of
Shelby. We believe we have a perfected security interest in Shelby's assets
that could be foreclosed on as a means of recovery, in the event that the
proceeds from the sales of the vehicles do not provide full recovery of
the deposit or other events dictate taking such action. Presently, we do
not believe that foreclosure is in our best interest. We are continuing to
monitor this situation and may take such action in the future. As of
December 31, 2001, we have approximately $1.4 million of tooling
capitalized for tools and fixtures used in the production of the vehicle
parts. During 1999, we sold certain parts to Shelby for use in the
manufacturing of these vehicles and performed engineering services totaling
$3.8 million.
We contract with Deluxe Pattern Corporation ("Deluxe"), an entity wholly
owned by Mr. Winget, to provide us with design, tooling, prototype, and
fixture work. Currently, Deluxe generates the majority of its revenue from
us and generates minimal revenue from third parties. During the year ended
December 31, 2001, we were charged $75.5 million, under this arrangement.
Deluxe is paid in accordance with agreed upon contract terms that require
progress payments at various stages of work. Initial payment terms can
range from 30% to 90% based upon program timing, pricing and agreement
between the parties. In accordance with these terms at December 31, 2001,
we made progress payments to Deluxe of $70.2 million, of which $29.5
million, in 2001, was settled through a set off of the related party
receivable. At December 31, 2001, $47.4 million of these progress payments
remain in tools and mold inventory as the tools are not yet complete. For
the years ended December 31, 2001, $34.4 million of these progress payments
were expensed as part of costs of products sold when tooling was completed
and sold to outside third parties.
Deluxe also buys services from us, principally labor and materials,
however, these services were significantly reduced in 2001 and will be
reduced in the future. During the year ended December 31, 2001, Deluxe made
purchases in the amount of $1.0 million. The net effect of these
transactions was a receivable balance from Deluxe of $15.1 million at
December 31, 2001, of which $11.1 million is recorded as a long term
receivable in other assets as of December 31, 2001.
We contracted with M&M Flow Through Systems, LLC ("M&M"), an entity owned
by Mr. Winget's son, in 1999 to dispose of scrap parts that have previously
been rejected by the automotive original equipment manufacturers and to
assist in reclaiming defective product. We paid M&M $2.6 million during
2001 for these services.
We entered into a contract with Supercart Holdings Pty., Ltd. (Supercart),
a company in which the sole beneficiary of the Trust has a minority
interest, to design, produce and sell shopping carts to Supercart. An
affiliate of ours has produced and sold these shopping carts in South
Africa for a number of years. During 2001, the Company designed and built
tooling for Supercart. These costs will be recovered through the piece
price of the shopping carts sold. Supercart has agreed to unconditionally
reimburse us for the tooling costs that are not collected through the piece
price. For the year ended December 31, 2001, we had sales of $0.4 million.
At December 31, 2001, Supercart owed us $69 thousand and had unamortized
tooling of $0.8 million.
As part of our efforts to meet OEM minority development initiatives, we
have an arrangement with Universal Venture Automotive (UVA), a company in
which the sole beneficiary of the Trust has a 49% interest, in which UVA
will provide certain plastic manufacturing and sub assembly operations to
us. In addition, UVA buys certain raw materials from us as needed in their
manufacturing operations. For the year ended December 31, 2001, we had raw
material sales of $1.5 million to UVA. In addition, UVA has sold certain
products to us in the amount of $1.2 million for the year ended December
31, 2001. At December 31, 2001 the Company owed UVA the net amount of
$98,000.
59
MANAGEMENT SERVICES
Venture Asia Pacific Pty. Ltd., a corporation wholly owned by Mr. Winget,
reimburses Venture for expenditures made on its behalf in connection with
management and sales services. In addition, we made advances to VAP and
performed tooling build and design work for VAP. As a result of the
transactions, VAP owes the Company $15.0 million at December 31, 2001, of
which $14.0 million was classified as long-term receivables.
Pompo Insurance & Indemnity Company Ltd., a Barbados corporation indirectly
wholly owned by Mr. Winget, was incorporated in 1992 under the Barbados
Exempt Insurance Act. We purchase insurance from Pompo Insurance to cover
certain medical claims by our employees and certain workers compensation
claims. Venture has accounted for this arrangement using the deposit method
wherein the full amount of the estimated liability for these claims is
recorded in other liabilities and the premiums paid to Pompo are recorded
in other assets until such time that the claims are settled. We remain
primarily liable for any amounts in excess of insurance coverage or any
amounts not paid by Pompo Insurance under these coverages. If a liability
is settled for less than the amount of the premium paid to Pompo, a portion
of the excess is available as a premium credit on future insurance. In
2001, Venture paid Pompo Insurance $1.6 million in premiums and utilized
premium credits of $1.0 million.
OTHER
From time to time, we pay certain expenses on behalf of Mr. Winget which he
is obligated to repay to us. These amounts payable by Mr. Winget do not
bear interest and are payable on demand. Mr. Winget was not indebted to us
at December 31, 2001 for these activities. In addition, from time to time
we make certain employees available to Mr. Winget for purposes of
performing services for other companies owned by and controlled by Mr.
Winget.
Mr. Winget and his wife, Alicia, own the Acropolis Resort, which consists
of several separate units and a lodge in a resort community north of
Detroit. We lease this facility from Mr. Winget primarily for use by our
employees, who are permitted to use the facility on an availability basis.
Our lease obligation to Mr. Winget is based upon the actual use of the
facility by our employees, provided that we are required to pay for the use
of 500 room nights per calendar year, approximately $25,000, whether or not
these rooms are rented. Venture paid Mr. Winget $114,000 in the year ending
December 31, 2001 under this arrangement.
Farm and Country Real Estate Company, a corporation wholly owned by Mr.
Winget, leases to us approximately 84 acres of undeveloped land adjacent to
our Grand Blanc facility on a month-to-month basis. This lease provides for
monthly rental payments. Rent paid in 2001 was $0.2 million.
Mr. Winget and Patent Holdings, Inc., a corporation wholly owned by Mr.
Winget, have granted to us non-exclusive, royalty free licenses to certain
patents which have been issued under applications filed by Mr. Winget, as
assignee. Mr. Winget and the affiliated companies also generally permit us
to utilize proprietary technologies or processes, which are developed by
Deluxe and the affiliated companies. The licenses are perpetual, but
provide that the licensor may negotiate a reasonable royalty in the event
that Mr. Winget or an Excluded Person, as defined in the indenture relating
to the 1997 senior notes, no longer owns at least 80% of the beneficial
interest of Venture Holdings Company LLC.
On July 1, 1996, Venture Industries Corporation and its affiliated
companies, not including Venture Holdings Company LLC or Venture Canada,
along with VIC Management, LLC, a limited liability company wholly owned,
directly or indirectly, by Mr. Winget, entered into an agreement
guaranteeing up to $3.5 million of the obligations of Atlantic Automotive
Components, LLC to RIC Management Corp. This guarantee is one of a series
of transactions whereby VIC Management acquired RIC Management's minority
interest in Atlantic Automotive. Deluxe agreed to fully indemnify the
Venture entities for all amounts paid under the guarantee.
In 1999, we acquired a number of corporate and non-resident golf
memberships for certain of our employees in a golf club wholly owned by
companies Mr. Winget controls. The aggregate initial fee for these
memberships was approximately $1.5 million. The initial fees are refundable
upon termination, over various periods. We reimburse annual dues of
approximately $0.3 million for these memberships to certain of our
employees. We do not pay dues for these employees in other clubs to which
they may belong.
60
During 1999 we advanced approximately $5.5 million to Venture Africa, an
entity wholly owned by Mr. Winget, for the construction and refurbishment
of a paint line. This amount was repaid in 2001. In 2000, we began selling
raw materials to Venture Africa. The sales agreement included established
repayment terms. In 2001, we sold raw materials to Venture Africa amounting
to $33.1 million. At December 31, 2001, the account receivable due to these
transactions was $12.3 million, all of which has been classified as
short-term.
61
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements. Financial Statements filed as part of
this Form 10-K are under Part II, Item 8.
2. Financial Statement Schedules. Valuation and qualifying
accounts for the years ended December 31, 2001, 2000 and 1999.
3. Exhibits. A list of the exhibits required to be filed as part
of this Form 10-K is included under the heading "Exhibit
Index" in this Form 10-K and incorporated herein by reference.
(b) The Company did not file any reports on Form 8-K during the quarter ended
December 31, 2001.
62
SIGNATURES
Pursuant to the requirements of section 13 or 15 (d) of the Securities 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,
Date: April 15, 2002 By: /s/ LARRY J. WINGET
-------------------------
LARRY J. WINGET, Chairman
VEMCO, INC., VENTURE INDUSTRIES CORPORATION,
VENTURE MOLD & ENGINEERING CORPORATION,
VENTURE LEASING COMPANY, VEMCO LEASING,
INC., VENTURE SERVICE COMPANY, VENTURE
HOLDINGS CORPORATION, EXPERIENCE MANAGEMENT
LLC, VENTURE EUROPE, INC., VENTURE EU
CORPORATION
Date: April 15, 2002 By: /s/ MICHAEL G. TORAKIS
-------------------------
MICHAEL G. TORAKIS, President
Pursuant to the requirements of the Securities Act of 1934, this report has been
signed by the following persons on behalf of each registrant in the capacities
indicated on April 15, 2002.
SIGNATURES TITLE
/s/ Larry J. Winget Chairman and Principal Executive Officer and
---------------------- Special Advisor to Venture, and Director of each
Larry J. Winget other registrant
/s/ Michael G. Torakis President and Principal Executive Officer and
------------------------ Director of each registrant other than Venture
Michael G. Torakis
/s/ A. James Schutz Director of each registrant other than Venture
----------------------
A. James Schutz
/s/ James E. Butler, Jr. Director of Venture Holdings Corporation
-------------------------
James E. Butler, Jr.
/s/ Michael D. Alexander Principal Financial Officer and Principal
------------------------- Accounting Officer of each registrant
Michael D. Alexander
63
INDEX TO EXHIBITS
2.1 Share Purchase and Transfer Agreement between
Klockner Mercator Maschinenbau GmbH, on the
one hand, and Venture Beteiligungs GmbH and
Venture Holdings Trust, on the other hand,
dated March 8, 1999, filed as Exhibit 2.1 to
the Issuer's Annual Report on Form 10-K for
the year ended December 31, 1998 (File No.
333-34475) and Incorporated herein by
reference. Schedules to the Agreement, listed
on the last two pages of the Agreement, were
not filed, but will be provided to the
Commission supplementary upon request.
2.2 Share Purchase and Transfer Agreement among
Neptuno Verwaltungs-und-Treuhand-Gesellschaft
mbH, and Venture Verwaltungs GmbH and Venture
Holdings Trust, dated March 8, 1999, filed as
Exhibit 2.2 to Venture's Current Report on
Form 8-K on June 11, 1999 (File No.
333-34475) and incorporated herein by
reference.
2.3 Trust Contribution Agreement, made as of the
27th day of May, 1999, by and between Venture
Holdings Trust and Venture Holdings Company
LLC, filed as Exhibit 2.3 to Venture's
Current Report on Form 8-K on June 11, 1999
(File No. 333-34475) and incorporated herein
by reference.
3.1 Restated Articles of Organization of Venture
Holdings Company LLC, filed as Exhibit 3.1 to
Venture's Registration Statement on Form S-4,
effective October 21, 1999 (Registration No.
333-82617) and Incorporated herein by
reference.
3.2 Restated Articles of Incorporation of Vemco,
Inc., filed as Exhibit 3.1 to Venture's
Registration Statement on Form S-4, effective
October 27, 1997 (Registration No.
333-34475), and Incorporated herein by
reference.
3.3 Restated Articles of Incorporation of Venture
Industries Corporation, filed as Exhibit 3.2
to Venture's Registration Statement on Form
S-4, effective October 27, 1997 (Registration
No. 333-34475), and incorporated herein by
reference.
3.4 Restated Articles of Incorporation of Venture
Mold & Engineering Corporation, filed as
Exhibit 3.3 to Venture's Registration
Statement on Form S-4, effective October 27,
1997 (Registration No. 333-34475), and
incorporated herein by reference.
3.5 Restated Articles of Incorporation of Venture
Leasing Company, filed as Exhibit 3.4 to
Venture's Registration Statement on Form S-4,
effective October 27, 1997 (Registration No.
333-34475), and Incorporated herein by
reference.
3.6 Restated Articles of Incorporation of Vemco,
Leasing, Inc., filed as Exhibit 3.5 to
Venture's Registration Statement on Form S-4,
effective October 27, 1997 (Registration No.
333-34475), and Incorporated herein by
reference.
3.7 Restated Articles of Incorporation of Venture
Holdings Corporation, filed as Exhibit 3.6 to
Venture's Registration Statement on Form S-4,
effective October 27, 1997 (Registration No.
333-34475), and incorporated herein by
reference.
3.8 Restated Articles of Incorporation of Venture
Service Company, filed as Exhibit 3.7 to
Venture's Registration Statement on Form S-4,
effective October 27, 1997 (Registration No.
333-34475), and Incorporated herein by
reference.
3.9 Articles of Organization of Experience
Management LLC, filed as Exhibit 3.9 to
Venture's Registration Statement on Form S-4,
effective October 21, 1999 (Registration No.
333-82617) and Incorporated herein by
reference.
3.10 Articles of Incorporation of Venture Europe,
Inc., filed as Exhibit 3.10 to Venture's
Registration Statement on Form S-4, effective
October 21, 1999 (Registration No. 333-
82617) and Incorporated herein by reference.
64
3.11 Articles of Incorporation of Venture EU
Corporation, filed as Exhibit 3.1 to
Venture's Registration Statement on Form S-4,
effective October 21, 1999 (Registration No.
333-82617) and incorporated herein by
reference.
3.12 Amended and Restated Operating Agreement of
Venture Holdings Company LLC, filed as
Exhibit 3.12 to Venture's Registration
Statement on Form S-4, effective October 21,
1999 (Registration No. 333-82617) and
incorporated herein by reference.
3.13 Bylaws of Vemco, Inc., filed as Exhibit 3.9
to Venture's Registration Statement on Form
S-1, effective February 8, 1994 (Registration
No. 33-72826), and incorporated herein by
reference.
3.14 Bylaws of Venture Industries Corporation,
filed as Exhibit 3.10 to Venture's
Registration Statement on Form S-1, effective
February 8, 1994 (Registration No. 33-72826),
and incorporated herein by reference.
3.15 Bylaws of Venture Mold & Engineering
Corporation, filed as Exhibit 3.11 to
Venture's Registration Statement on Form S-1,
effective February 8, 1994 (Registration No.
33-72826) and incorporated herein by
reference.
3.16 Bylaws of Venture Leasing Company, filed as
Exhibit 3.12 to Venture's Registration
Statement on Form S-1, effective February 8,
1994 (Registration No. 33-72826), and
incorporated herein by reference.
3.17 Bylaws of Vemco Leasing, Inc., filed as
Exhibit 3.13 to Venture's Registration
Statement on Form S-1, effective February 8,
1994 (Registration No. 33-72826), and
incorporated herein by reference.
3.18 Bylaws of Venture Holdings Corporation, filed
as Exhibit 3.14 to Venture's Registration
Statement on Form S-1, effective February 8,
1994 (Registration No. 33-72826), and
incorporated herein by reference.
3.19 Bylaws of Venture Service Company, filed as
Exhibit 3.15 to Venture's Registration
Statement on Form S-1, effective February 8,
1994 (Registration No. 33-72826), and
incorporated herein by reference.
3.20 Operating Agreement of Experience Management
LLC, filed as Exhibit 3.20 to Venture's
Registration Statement on Form S-4, effective
October 21, 1999 (Registration No. 333-82617)
and incorporated herein by reference.
3.21 Bylaws of Venture Europe, Inc., filed as
Exhibit 3.21 to Venture's Registration
Statement on Form S-4, effective October 21,
1999 (Registration No. 333-82617) and
incorporated herein by reference.
3.22 Bylaws of Venture EU Corporation, filed as
Exhibit 3.22 to Venture's Registration
Statement on Form S-4, effective October 21,
1999 (Registration No. 333-82617) and
incorporated herein by reference.
4.1 Indenture, dated as of May 27, 1999, between
Venture Holdings Trust and The Huntington
National Bank, as Trustee, regarding 11%
Senior Notes due 2007 (including form of
Notes), filed as Exhibit 4.1 to Venture's
Registration Statement on Form S-4, effective
October 21, 1999 (Registration No. 333-82617)
and incorporated herein by reference.
4.1.1 First Supplemental Indenture to the Indenture
incorporated herein as Exhibit 4.1, made as
of the 27th day of May, 1999, by and among
Venture Holdings Trust and The Huntington
National Bank, as Trustee, filed as Exhibit
4.1.1 to Venture's Registration Statement on
Form S-4, effective October 21, 1999
(Registration No. 333-82617) and incorporated
herein by reference.
65
4.2 Indenture, dated as of May 27, 1999, between
Venture Holdings Trust and The Huntington
National Bank, as Trustee, regarding 12%
Senior Subordinated Notes due 2009 (including
form of Notes), and filed as Exhibit 4.2 to
Venture's Registration Statement on Form S-4,
effective October 21, 1999 (Registration No.
333-82617) and incorporated herein by
reference.
4.2.1 First Supplemental Indenture to the Indenture
filed as Exhibit 4.2, made as of the 27th day
of May, 1999, by and among Venture Holdings
Trust and The Huntington National Bank, as
Trustee, and filed as Exhibit 4.2.1 to
Venture's Registration Statement on Form S-4,
effective October 21, 1999 (Registration No.
333-82617) and incorporated herein by
reference.
4.3 Indenture for 9 1/2% Senior Notes due 2005
(including form of Notes) filed as Exhibit
4.1 to Venture's Registration Statement on
Form S-4, effective October 27, 1997
(Registration No. 333-34475), and
incorporated herein by reference.
4.3.1 First Amendment to the Indenture incorporated
by reference as Exhibit 4.3, by and among
Venture Holdings Trust, Vemco, Inc. Vemco
Leasing, Inc., Venture Industries
Corporation, Venture Holdings Corporation,
Venture Leasing Company, Venture Mold &
Engineering Corporation and Venture Service
Company, as Issuers, and The Huntington
National Bank, as Trustee, made as of the
27th day of May, 1999, and filed as Exhibit
4.3.1 to Venture's Registration Statement on
Form S-4, effective October 21, 1999
(Registration No. 333-82617) and incorporated
herein by reference.
4.3.2 First Supplemental Indenture to the Indenture
incorporated by reference as Exhibit 4.3, by
and among Venture Holdings Trust, Vemco, Inc.
Vemco Leasing, Inc., Venture Industries
Corporation, Venture Holdings Corporation,
Venture Leasing Company, Venture Mold &
Engineering Corporation and Venture Service
Company, as Issuers, Venture Holdings Company
LLC, Experience Management LLC, Venture
Europe, Inc. and Venture EU Corporation, as
Guarantors, and The Huntington National Bank,
as Trustee, made as of May 27, 1999, and
filed as Exhibit 4.3.2 to Venture's
Registration Statement on Form S-4, effective
October 21, 1999 (Registration No. 333-82617)
and incorporated herein by reference.
4.3.3 Second Amendment to the Indenture
incorporated by reference as Exhibit 4.3, by
and among Venture Holdings Trust, Vemco, Inc.
Vemco Leasing, Inc., Venture Industries
Corporation, Venture Holdings Corporation,
Venture Leasing Company, Venture Mold &
Engineering Corporation and Venture Service
Company, as Issuers, and The Huntington
National Bank, as Trustee, made as of May 27,
1999, and filed as Exhibit 4.3.3 to Venture's
Registration Statement on Form S-4, effective
October 21, 1999 (Registration No. 333-82617)
and incorporated herein by reference.
4.3.4 Second Supplemental Indenture to the
Indenture incorporated by reference as
Exhibit 4.3, by and among Venture Holdings
Trust, Vemco, Inc. Vemco Leasing, Inc.,
Venture Industries Corporation, Venture
Holdings Corporation, Venture Leasing
Company, Venture Mold & Engineering
Corporation and Venture Service Company, as
Issuers, Venture Holdings Company LLC, and
The Huntington National Bank, as Trustee,
made as of May 27, 1999, and filed as Exhibit
4.3.4 to Venture's Registration Statement on
Form S-4, effective October 21, 1999
(Registration No. 333-82617) and incorporated
herein by reference.
4.3.5 Guarantee executed by Venture Holdings
Company LLC on the 27th day of May, 1999,
pursuant to the terms of the Indenture
incorporated by reference as Exhibit 4.3,
including Trustee's Certificate of
Authorization, and filed as Exhibit 4.3.5 to
Venture's Registration Statement on Form S-4,
effective October 21, 1999 (Registration No.
333-82617) and incorporated herein by
reference.
66
4.3.6 Guarantee executed by Experience Management
LLC on the 27th day of May, 1999, pursuant to
the terms of the Indenture incorporated by
reference as Exhibit 4.3, including Trustee's
Certificate of Authorization, and filed as
Exhibit 4.3.6 to Venture's Registration
Statement on Form S-4, effective October 21,
1999 (Registration No. 333-82617) and
incorporated herein by reference.
4.3.7 Guarantee executed by Venture Europe, Inc. on
the 27th day of May, 1999, pursuant to the
terms of the Indenture incorporated by
reference as Exhibit 4.3, including Trustee's
Certificate of Authorization, and filed as
Exhibit 4.3.7 to Venture's Registration
statement on Form S-4, effective October 21,
1999 (Registration No. 333-82617) and
incorporated herein by reference.
4.3.8 Guarantee executed by Venture EU Corporation
on the 27th day of May, 1999, pursuant to the
terms of the Indenture incorporated by
reference as Exhibit 4.3, including Trustee's
Certificate of Authorization, and filed as
Exhibit 4.3.8 to Venture's Registration
Statement on Form S-4, effective October 21,
1999 (Registration No. 333-82617) and
incorporated herein by reference.
4.4 Registrant Rights Agreement, made and entered
into as of May 27, 1999, among Venture
Holdings Trust, Vemco, Inc., Vemco Leasing,
Inc., Venture Industries Corporation, Venture
Holdings Corporation, Venture Leasing
Company, Venture Mold & Engineering
Corporation, Venture Service Company, Venture
Europe, Inc., Venture EU Corporation,
Experience Management LLC and Venture
Holdings Company LLC, as Issuers, and Banc
One Capital Markets, Inc. and Goldman Sachs &
Co., as Initial Purchasers, and filed as
Exhibit 4.4 to Venture's Registration
Statement on Form S-4, effective October 21,
1999 (Registration No. 333-82617) and
incorporated herein by reference.
10.1 Credit Agreement, dated as of May 27, 1999,
among Venture Holdings Trust, the Lenders (as
defined therein) and The First National Bank
of Chicago, as Administrative Agent, and
filed as Exhibit 10.1 to Venture's
Registration Statement on Form S-4, effective
October 21, 1999 (Registration No. 333-82617)
and incorporated herein by reference.
10.1.1 First Amendment, dated June 4, 1999, to the
Credit Agreement incorporated by reference as
Exhibit 10.1, and filed as Exhibit 10.1.1 to
Venture's Registration Statement on Form S-4,
effective October 21, 1999 (Registration No.
333-82617) and incorporated herein by
reference.
10.1.2 Second Amendment, dated June 29, 2000, to the
Credit Agreement incorporated by reference as
Exhibit 10.1, and filed as Exhibit 10.1.2 to
Venture's Quarterly Report on Form 10-Q for
the quarter ended June 30, 2000 (File No.
333-86217), and incorporated herein by
reference.
10.1.3 Third Amendment, dated March 29, 2002, to the
Credit Agreement.
10.2 ISDA Master Agreement, dated May 27, 1999,
between Venture Holdings Company LLC and The
First National Bank of Chicago, and filed as
Exhibit 10.2 to Venture's Registration
Statement on Form S-4, effective October 21,
1999 (Registration No. 333-82617) and
incorporated herein by reference.
10.2.1 Schedules to the Agreement incorporated by
reference as Exhibit 10.2, filed as Exhibit
10.2.1 to Venture's Registration Statement on
Form S-4, effective October 21, 1999
(Registration No. 333-82617) and incorporated
herein by reference.
10.3 Corporate Opportunity Agreement, made and
entered into on the 27th day of May, 1999, by
and between Larry J. Winget and The
Huntington National Bank, as Indenture
Trustee, filed as Exhibit 10.3 to Venture's
Registration Statement on Form S-4, effective
October 21, 1999 (Registration No. 333-82617)
and incorporated herein by reference.
67
10.4 Corporate Opportunity Agreement, dated
February 16, 1994, by and between Larry J.
Winget and Comerica Bank, as Indenture
Trustee, filed as Exhibit 10.3 to Venture's
Registration Statement on Form S-4, effective
October 27, 1997 (Registration No.
333-34475), and incorporated herein by
reference.
10.4.1 Agreement, dated October 21, 1997, by Larry
J. Winget to be bound by the terms of the
Corporate Opportunity Agreement, filed as
Exhibit 10.3, for the benefit of the holders
of the Issuers' 9 1/2% Senior Notes due 2005
filed as Exhibit 10.3.1 to Venture's
Registration Statement on Form S-4, effective
October 27, 1997 (Registration No.
333-34475), and incorporated herein by
reference.
10.5 Service Agreement, dated as of January 1,
1992, by and between Venture Industries
Corporation, Vemco, Inc., Venture Mold &
Engineering Corporation, Venture Leasing
Company, Vemco Leasing, Inc., Deluxe Pattern
Corporation, Venture Automotive Corp.,
Venture Sales & Engineering Corp. and Venture
Service Company, filed as Exhibit 10.11 to
Venture's Registration Statement on Form S-1,
effective February 8, 1994 (Registration No.
33-72826), and incorporated herein by
reference.
10.6 Lease, dated as of November 1, 1990, by and
among Venture Industries Corporation, Venture
Technical Development Company, Venture Mold &
Engineering Corporation, Vemco, Inc., Deluxe
Pattern Company, Venture Automotive Corp.,
Larry J. Winget and Alicia Winget (Acropolis
Resort), filed as Exhibit 10.14 to Venture's
Registration Statement on Form S-1, effective
February 8, 1994 (Registration No. 33-72826),
and incorporated herein by reference.
10.7 Real Estate Lease Agreement, dated December
7, 1988, by and between Harper Properties of
Clinton Township Limited Partnership and
Venture Industries Corporation (Harper
Lease), filed as Exhibit 10.15 to Venture's
Registration Statement on Form S-1, effective
February 8, 1994 (Registration No. 33-72826),
and incorporated herein by reference.
10.7.1 First amendment to Real Estate Lease
Agreement, dated December 30, 1993, by and
between Harper Properties of Clinton Township
Limited Partnership and Venture Industries
Corporation (Harper Lease), filed as Exhibit
10.15.1 to Venture's Registration Statement
on Form S-1, effective February 8, 1994
(Registration No. 33-72826), and incorporated
herein by reference.
10.8 Machinery and Equipment Lease Agreement,
dated as of December 7, 1988, by and between
Realven Corporation and Venture Industries
Corporation (Realven Lease), filed as Exhibit
10.16 to Venture's Registration Statement on
Form S-1, effective February 8, 1994
(Registration No. 33-72826), and incorporated
herein by reference.
10.8.1 First Amendment to Machinery and Equipment
Lease Agreement, dated December 30, 1993, by
and between Realven Corporation and Venture
Industries Corporation (Realven Lease), filed
as Exhibit 10.16.1 to Venture's Registration
Statement on Form S-1, effective February 8,
1994 (Registration No. 33-72826), and
incorporated herein by reference.
10.9 Real Estate Lease Agreement, dated as of
January 27, 1989, by and between Venture Real
Estate, Inc. and Venture Mold & Engineering
Corporation (Commerce Road facility), filed
as Exhibit 10.17 to Venture's Registration
Statement on Form S-1, effective February 8,
1994 (Registration No. 33-72826), and
incorporated herein by reference.
10.10 Real Estate Lease Agreement, dated as of
August 1, 1992, by and between Venture Real
Estate, Inc. and Venture Industries
Corporation (17400 Malyn), filed as Exhibit
10.18 to Venture's Registration Statement on
Form S-1, effective February 8, 1994
(Registration No. 33-72826), and incorporated
herein by reference.
68
10.11 Real Estate Lease Agreement, dated as of
August 1, 1992, by and between Venture Real
Estate, Inc. and Venture Industries
Corporation (17350 Malyn), filed as Exhibit
10.19 to Venture's Registration Statement on
Form S-1, effective February 8, 1994
(Registration No. 33-72826), and incorporated
herein by reference.
10.12 Farm and Country Real Estate Company and
Vemco, Inc. Real Estate Availability and
Usage Agreement, dated April 24, 1992, filed
as Exhibit 10.20 to Venture's Registration
Statement on Form S-1, effective February 8,
1994 (Registration No. 33-72826), and
incorporated herein by reference.
10.13 Sales Representation Agreement by and between
Vemco, Inc. and Venture Sales & Engineering
Corporation, filed as Exhibit 10.21 to
Venture's Registration Statement on Form S-1,
effective February 8, 1994 (Registration No.
33-72826), and incorporated herein by
reference.
10.13.1 Sales Representation Agreement by and between
Venture Industries Corporation and Venture
Sales & Engineering Corporation, filed as
Exhibit 10.21.1 to Venture's Registration
Statement on Form S-1, effective February 8,
1994 (Registration No. 33-72826), and
incorporated herein by reference.
10.13.2 Amendment to Sales/Management Representative
Agreements dated October 1, 2000, by and
between Venture Industries Corporation,
Vemco, Inc., Venture Holdings Corporation and
Venture Sales & Engineering Corporation filed
as Exhibit 10.13.2 to Venture's Annual Report
Form 10 K for the year ended December 31,
2000 (File number 333.86217) and incorporated
herein by reference
10.13.3 Amendment to Sales/Management/Rental/ Usage
Agreements dated December 12, 2001 by and
between Venture Industries Corporation,
Venture Holdings Corporation and Vemco and
Venture Sales and Engineering Corp, and
Venture Heavy Machinery LLC, Realven, Inc,
Venture Real Estate Inc., Venture Real Estate
Acquisition Company, Venture Equipment
Acquisition Company and Venture Automotive
Corp.
10.14 Manufacturing Agreement by and between
Venture Automotive Corp. and Vemco, Inc.,
filed as Exhibit 10.22 to Venture's
Registration Statement on Form S-1, effective
February 8, 1994 (Registration No. 33-72826),
and incorporated herein by reference.
10.15 Machinery Usage Agreements between Larry J.
Winget Living Trust and Venture Industries
Corporation, filed as Exhibit 10.23 to
Venture's Registration Statement on Form S-1,
effective February 8, 1994 (Registration No.
33-72826), and incorporated herein by
reference.
10.15.1 Machinery Usage Agreement between Larry J.
Winget Living Trust and Vemco, Inc., filed as
Exhibit 10.23.1 to Venture's Registration
Statement on Form S-1, effective February 8,
1994 (Registration No. 33-72826), and
incorporated herein by reference.
10.16 Machinery Usage Agreement between Deluxe
Pattern Corporation and Venture Mold &
Engineering, filed as Exhibit 10.24 to
Venture's Registration Statement on Form S-1,
effective February 8, 1994 (Registration No.
33-72826), and incorporated herein by
reference.
10.17 Form of Machinery and Equipment Lease
Agreement between Venture Industries
Corporation and Nova Industries, Inc., filed
as Exhibit 10.25 to Venture's Registration
Statement on Form S-1, effective February 8,
1994 (Registration No.33-72826), and
incorporated herein by reference.
10.18 Form of Machinery and Equipment Lease
Agreement between Venture Industries
Corporation and Nova Industries, Inc., filed
as Exhibit 10.26 to Venture's Registration
Statement on Form S-1, effective February 8,
1994 (Registration No. 33-72826), and
incorporated herein by reference.
10.19 Indemnification Agreement between the Company
and Larry J. Winget
69
filed as Exhibit 10.19 filed as Exhibit 10.19
to Venture's Registration Statement on Form
S-4 effective October 21, 1999 (Registration
No. 333-82617) and incorporated herein by
reference.
10.20 Indemnification Agreement between the Company
and Michael G. Torakis filed as Exhibit 10.20
to Venture's Registration statement on Form
S-4, effective October 21, 1999 (Registration
No. 333-82617) and incorporated herein by
reference.
10.21 Indemnification Agreement between the Company
and A. James Schutz filed as Exhibit 10.21 to
Venture's Registration statement on Form S-4,
effective October 21, 1999 (Registration No.
333-82617) and incorporated herein by
reference.
10.22 Insurance Policies issued by Pompo Insurance
& Indemnity Company Ltd. to the Registrants
and affiliated companies, filed as Exhibit
10.32 to Venture's Registration Statement on
Form S-1, effective February 8, 1994
(Registration No.33-72826), and incorporated
herein by reference.
10.23 Real Estate Usage Agreement between Venture
Real Estate Acquisition Company and Venture
Industries Corporation, dated February 15,
1995, filed as Exhibit 10.23 to Venture's
Registration Statement on Form S-4, effective
October 27, 1997 (Registration No.
333-34475), and incorporated herein by
reference.
10.24 Machinery Usage Agreement between Venture
Equipment Acquisition Company and Venture
Industries Corporation, dated February 15,
1995, filed as Exhibit 10.24 to Venture's
Registration Statement on Form S-4, effective
October 27, 1997 (Registration No.
333-34475), and incorporated herein by
reference.
10.25 Venture Industries Group Participation
Agreement between Venture Industries
Corporation and Venture Asia Pacific Pty Ltd.
filed as Exhibit 10.29 to Venture's
Registration Statement on Form S-4, effective
October 27, 1997 (Registration No.
333-34475), and incorporated herein by
reference.
10.26 License Agreement as to Proprietary
Technologies and Processes, dated July 2,
1997, between Larry J. Winget and Venture
Industries Corporation, Vemco, Inc., Venture
Mold & Engineering Corporation, Venture
Industries Canada Ltd., Vemco Leasing, Inc.,
Venture Leasing Company, Venture Service
Company, Venture Holdings Corporation and
Venture Holdings Trust filed as Exhibit 10.30
to Venture's Registration Statement on Form
S-4, effective October 27, 1997 (Registration
No. 333-34475), and incorporated herein by
reference.
10.27 License Agreement as to Patents, dated July
2, 1997, between Larry J. Winget and Venture
Industries Corporation, Vemco, Inc., Venture
Mold & Engineering Corporation, Venture
Industries Canada Ltd., Vemco Leasing, Inc.,
Venture Leasing Company, Venture Service
Company, Venture Holdings Corporation and
Venture Holdings Trust filed as Exhibit 10.31
to Venture's Registration Statement on Form
S-4, effective October 27, 1997 (Registration
No. 333-34475), and incorporated herein by
reference.
10.28 Purchase Agreement, dated May 25, 1999,
relating to $125,000,000 11% Senior Notes due
2007 and $125,000,000 12% Senior Subordinated
Notes due 2009, filed as Exhibit 10.4 to
Venture's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1999 (File No.
333-34475), and incorporated herein by
reference.
10.29 Purchase Agreement, entered into to be
effective as of the 15th day of October,
1999, by and among Venture Mold & Engineering
Corporation and Shelby American, Inc filed as
Exhibit 10.29 to Venture's Annual Report on
Form 10-K for the year ended December 31,
1999 (Registration No. 333-82617) and
incorporated herein by reference.
70
10.30 Agreement on Tooling Purchases in North
American entered into on December 12, 2001
between Venture Holdings Company LLC and
Venture Industries Corporation, Venture Mold
& Engineering Corporation, Vemco, Inc., Vemco
Leasing, Inc Venture Leasing Company, Venture
Europe, Inc., Venture EU Corporation, Venture
Holdings Corporation, Venture Service
Company, Experience Management LLC and Deluxe
Pattern Corporation.
12.1 Statement Regarding Computation of Ratio of
Earnings to Fixed Charges.
14(a)2 Valuation and Qualifying Accounts.
21.1 Subsidiaries of the Registrants, filed as
Exhibit 21.1 to Venture's Registration
Statement on Form S-4, effective October 21,
1999 (Registration No. 333-82617) and
incorporated herein by reference.
71