UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period ended March 31, 2002
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number: 333-82617
VENTURE HOLDINGS COMPANY LLC
Michigan 38-3470015
VEMCO, INC.
Michigan 38-2737797
VENTURE INDUSTRIES CORPORATION
Michigan 38-2034680
VENTURE MOLD & ENGINEERING CORPORATION
Michigan 38-2556799
VENTURE LEASING COMPANY
Michigan 38-2777356
VEMCO LEASING, INC.
Michigan 38-2777324
VENTURE HOLDINGS CORPORATION
Michigan 38-2793543
VENTURE SERVICE COMPANY
Michigan 38-3024165
EXPERIENCE MANAGEMENT, LLC
Michigan 38-3382308
VENTURE EUROPE, INC.
Michigan 38-3464213
VENTURE EU CORPORATION
Michigan 38-3470019
(State or other (Exact name of registrant as
jurisdiction of specified in its charter) (I.R.S. Employer
incorporation or Identification
organization) Number)
33662 James J. Pompo
Fraser, Michigan 48026
(Address, including zip code of registrants' principal executive offices)
Registrants' telephone number, including area code:
(810) 294-1500
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION (UNAUDITED) PAGE #
------- ------
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 2002,
December 31, 2001 and March 31, 2001 3
Consolidated Statements of Income and Comprehensive Income
for the Three Months Ended March 31, 2002 and 2001 4
Consolidated Statements of Changes in Member's Equity
for the Three Months Ended March 31, 2002 and 2001 4
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 2002 and 2001 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 23
Item 3. Quantitative and Qualitative Disclosures About Market Risk 28
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 29
Signature 29
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VENTURE HOLDINGS COMPANY LLC
CONSOLIDATED BALANCE SHEETS
- -------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
MARCH 31, MARCH 31,
2002 DECEMBER 31, 2001
(UNAUDITED) 2001 (UNAUDITED)
----------- ----------- -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 5,896 $ 2 $ 2,168
Accounts receivable, net, includes related party receivables of $15,370,
$9,992 and $57,672 at March 31, 2002, December 31, 2001 and March 31,
2001, respectively (Note 5) 302,513 266,232 292,505
Inventories, including progress payments to a related party of
$41,239, $47,400, and $9,900 at March 31, 2002, December 31, 2001
and March 31, 2001, respectively (Note 2) 204,198 192,804 196,109
Investments (Note 4) -- -- 2,627
Prepaid and other current assets, including prepayments to a
related party of $23,900 at March 31, 2002 and December 31, 2001,
respectively 86,711 87,846 42,591
----------- ----------- -----------
Total current assets 599,318 546,884 536,000
Property, Plant and Equipment, Net 538,297 542,915 533,799
Goodwill, Net 106,755 106,068 114,816
Intangible Assets, Net 25,173 21,247 3,767
Other Assets, includes related party receivables of $31,703,at
March 31, 2002 and December 31, 2001 and 33,560 at March 31, 2001 (Note 5) 122,629 128,490 147,295
Deferred Tax Assets 67,662 70,527 60,669
----------- ----------- -----------
Total Assets $ 1,459,834 $ 1,416,131 $ 1,396,346
=========== =========== ===========
LIABILITIES AND MEMBER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 300,674 $ 261,613 $ 242,473
Accrued interest 14,924 12,948 18,266
Accrued expenses 110,839 99,993 112,649
Current portion of long term debt (Note 3) 47,393 30,813 26,547
----------- ----------- -----------
Total current liabilities 473,830 405,367 399,935
Pension Liabilities & Other 45,927 44,115 42,168
Deferred Tax Liabilities 32,566 33,379 38,368
Long Term Debt (Note 3) 830,046 862,961 855,809
----------- ----------- -----------
Total liabilities 1,382,369 1,345,822 1,336,280
Commitments and Contingencies -- -- --
Member's Equity:
Member's equity 82,597 73,425 67,147
Accumulated other comprehensive loss - cumulative
translation adjustments (5,132) (3,116) (7,081)
----------- ----------- -----------
Member's Equity 77,465 70,309 60,066
----------- ----------- -----------
Total Liabilities and Member's Equity $ 1,459,834 $ 1,416,131 $ 1,396,346
=========== =========== ===========
See notes to consolidated financial statements.
3
VENTURE HOLDINGS COMPANY LLC
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Unaudited)
- -------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
THREE MONTHS ENDED
MARCH 31,
-------------------------
2002 2001
--------- ---------
NET SALES $ 462,151 $ 486,054
COST OF PRODUCT SOLD 394,020 419,425
--------- ---------
GROSS PROFIT 68,131 66,629
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSE 31,419 28,242
--------- ---------
INCOME FROM OPERATIONS 36,712 38,387
INTEREST EXPENSE (Note 4) 21,225 26,757
OTHER EXPENSE (INCOME) (Note 4) 1,164 21,048
--------- ---------
INCOME (LOSS) BEFORE TAXES 14,323 (9,418)
TAX PROVISION (BENEFIT) 5,030 (4,674)
MINORITY INTEREST 120 349
--------- ---------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE 9,173 (5,093)
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE -- (182)
--------- ---------
NET INCOME (LOSS) 9,173 (5,275)
OTHER COMPREHENSIVE LOSS -
Cumulative translation adjustments (2,017) (1,696)
--------- ---------
COMPREHENSIVE INCOME (LOSS) $ 7,156 $ (6,971)
========= =========
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBER'S EQUITY (Unaudited)
- -------------------------------------------------------------------------------
(Dollars in Thousands)
THREE MONTHS ENDED
MARCH 31,
--------------------------
2002 2001
-------- --------
MEMBER'S EQUITY, BEGINNING
OF PERIOD $ 70,309 $ 67,037
COMPREHENSIVE LOSS:
NET INCOME (LOSS) 9,173 (5,275)
OTHER COMPREHENSIVE LOSS (2,017) (1,696)
-------- --------
COMPREHENSIVE LOSS 7,156 (6,971)
-------- --------
MEMBER'S EQUITY, END
OF PERIOD $ 77,465 $ 60,066
======== ========
See notes to consolidated financial statements.
4
VENTURE HOLDINGS COMPANY LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
- -------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
THREE MONTHS ENDED
MARCH 31,
2002 2001
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 9,173 $ (5,275)
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 22,785 23,254
Unrealized loss on currency exchange 2,784 20,529
Unrealized (gain) on investments -- (292)
Loss from the disposal of fixed assets -- 229
Change in accounts receivable (36,281) 567
Change in inventories (11,394) 10,513
Change in prepaid and other current assets 1,135 3,342
Change in other assets (3,418) 3,993
Change in accounts payable 39,061 (15,176)
Change in accrued expenses 12,823 (4,381)
Change in other liabilities 1,811 (9,202)
Change in deferred taxes 2,050 (9,127)
-------- --------
Net cash provided by operating activities 40,529 18,974
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (19,942) (22,244)
Proceeds from sale of fixed assets -- 27
-------- --------
Net cash used in investing activities (19,942) (22,217)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) borrowings under revolving credit agreement (12,588) 9,494
Net proceeds from the issuance of debt 3,073
Principal payments on debt (6,820) (4,124)
-------- --------
Net cash (used in) provided by financing activities (16,335) 5,370
Effect of exchange rate changes on cash and cash equivalents 1,642 (900)
NET INCREASE IN CASH 5,894 1,227
CASH AT BEGINNING OF PERIOD 2 941
-------- --------
CASH AT END OF PERIOD $ 5,896 $ 2,168
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for interest $ 17,978 $ 22,551
======== ========
Cash paid during the period for taxes $ 857 $ 816
======== ========
See notes to consolidated financial statements.
5
VENTURE HOLDINGS COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
- -------------------------------------------------------------------------------
1. FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information. The consolidated financial statements include
the accounts of Venture Holdings Company LLC (hereinafter referred to as
"Venture") and all of Venture's domestic and foreign subsidiaries that are
wholly-owned or majority-owned (collectively referred to as the "Company").
The Company's investment in a less than majority-owned business is accounted
for under the equity method. In the opinion of management, all adjustments
(consisting of only normal recurring items), which are necessary for a fair
presentation have been included. The results for interim periods are not
necessarily indicative of results that may be expected for any other interim
period or for the full year. For further information, refer to the
consolidated financial statements and notes thereto included in the
Company's 2001 Annual Report on Form 10-K filed with the Securities and
Exchange Commission.
2. INVENTORIES
Inventories included the following (in thousands):
MARCH 31, DECEMBER 31, MARCH 31,
2002 2001 2001
-------- -------- --------
Raw materials $ 54,943 $ 52,839 $ 50,728
Work-in-process - manufactured parts 16,977 16,729 14,288
Work-in-process - tools and molds 111,784 103,698 113,197
Finished goods 20,495 19,538 17,896
-------- -------- --------
Total $204,198 $192,804 $196,109
======== ======== ========
Included in work-in-process tools and molds are progress payments of $41.2,
$47.4 and $9.9 million for the periods ended March 31, 2002 December 31,
2001 and March 31, 2001, respectively. These amounts were progress payments
on tooling being built by a related party, See Note 5.
3. DEBT
Debt consisted of the following (in thousands):
MARCH 31, DECEMBER 31, MARCH 31,
2002 2001 2001
-------- -------- --------
Credit agreement
Term loan A, with interest of 5.3%, Due 2004 $ 47,025 $ 51,150 $ 62,775
Term loan B, with interest of 6.05%, Due 2005 194,500 195,000 196,500
Revolving credit outstanding, with interest of between 4.9%,
And 6.0%Due 2004 129,746 142,334 125,617
Bank debt payable with interest from 0.0% to 8.63%,
Due 2004 28,109 20,828 12,425
Senior notes payable, Due 2005
With interest at 9.5% 205,000 205,000 205,000
Senior notes payable, Due 2007
With interest at 11.0% 125,000 125,000 125,000
Senior subordinated notes payable, Due 2009
With interest at 12.0% 125,000 125,000 125,000
Capital leases with interest from 3.95%
to 10.85% 22,869 29,167 29,382
Installment notes payable with
Interest from 7.9% 190 295 657
-------- -------- --------
Total $877,439 $893,774 $882,356
Less current portion of debt 47,393 30,813 26,547
-------- -------- --------
Total 830,046 862,961 855,809
======== ======== ========
6
The revolving credit facility permits the Company to borrow up to the lesser
of a borrowing base computed as a percentage of accounts receivable and
inventory, or $175 million less the amount of any letters of credit issued
against the credit agreement. Pursuant to the borrowing base formula as of
March 31, 2002, the Company could have borrowed an additional $41.3 million
under the revolving credit facility.
The Company's credit agreement, and documents governing the Company's 9 1/2%
unsecured senior notes due 2005 (the "1997 Senior Notes"), 11% unsecured
senior notes (the "1999 Senior Notes"), and 12% unsecured senior
subordinated notes (the "1999 Senior Subordinated Notes" and together with
the 1999 Senior Notes, the "1999 Notes"), contain restrictive covenants
relating to cash flow, fixed charges, debt, member's equity, net related
party receivables, 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. The credit agreement
was amended for the third time on March 29, 2002 to extend the requirement
for the issuance of the $125.0 million of securities until June 30, 2003. As
part of this amendment, 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 March 31, 2002, the Company was in compliance
with all debt covenants.
4. 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
treatment are marked to market and the related gains and losses are included
in net income.
The Company had entered into an interest rate swap agreement with a
notional value of $30 million for 2001 to mitigate the risk associated with
changing interest rates on certain floating rate debt. This interest rate
swap agreement was accounted for using settlement accounting. The Company
recorded a $0.3 million unrealized loss on this agreement for the three
months ended March 31, 2001, of which $0.2 million was recorded as a
cumulative change in accounting principle and $0.1 million was reported in
other income as a result of the adoption of SFAS No. 133 "Accounting for
Derivative Instruments and Hedging Activities." The Company had no hedging
agreements in place during the first quarter of 2002.
In July 2000, the Company paid $14.9 million to terminate the interest
portion of its cross currency swap agreements. This amount was capitalized
and is being amortized over the original terms of the cross currency swap
agreements. During each of the first quarters of fiscal years 2001 and 2002,
interest expense includes $1.3 million of this non-cash deferred interest
asset amortization.
5. RELATED PARTY TRANSACTIONS
Venture Holdings Trust (the "Trust") is the sole member of Venture. The
Company has entered into various transactions with entities that the sole
beneficiary of the Trust owns or controls. These transactions include leases
of real estate, usage of machinery, equipment and facilities, purchases and
sales of inventory, performance of manufacturing related services,
administrative services, insurance activities, and payment and receipt of
sales commissions. In addition, employees of the Company are made available
to certain of these entities for services such as design, model and tool
building. Since the Trust is the sole member of Venture, the terms of these
transactions are not the result of arms'-length bargaining; however, the
Company believes that such transactions are on terms no less favorable to
the Company than would be obtained if such transactions or arrangements were
arms'-length transactions with non-affiliated persons.
The Company provides, or arranges for others to provide, certain related
parties with various administrative and professional services, including
employee group insurance and benefit coverage, property and other insurance,
financial and cash management
7
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.
These related party transactions resulted in the following accounts
receivable balances in the Company's consolidated balance sheets (in
thousands):
MARCH 31, DECEMBER 31, MARCH 31,
2002 2001 2001
-------- -------- --------
Amounts receivable 66,147 $ 57,742 $113,563
Amounts payable 19,074 16,047 22,331
-------- -------- --------
Net amounts receivable $ 47,073 $ 41,695 $ 91,232
======== ======== ========
Of the above totals, $31.7 million at March 31, 2002 and December 31, 2001
and $33.6 million at March 31, 2001, were classified as other assets.
These related party transactions also resulted in the following asset
balances in the Company's consolidated balance sheets (in thousands):
MARCH 31, DECEMBER 31, MARCH 31,
2002 2001 2001
------- ------- -------
Prepaid Assets $23,900 $23,900 $
Tooling progress payment in inventory 41,239 47,400 9,900
Deposits, Net of impairment charge of $14
million at December 31, 2001 12,000 12,000 26,000
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 amounts is dependent upon the
Company providing future business to those related entities.
6. SEGMENT REPORTING
Operating segments are defined as components of an enterprise about which
separate financial information is available that is evaluated regularly by
the chief operating decision maker in deciding how to allocate resources and
in assessing performance. The Company has one reportable segment -
"Automotive".
FASB statement No. 131, "Disclosures about Segments of an Enterprise and
Related Information" requires enterprise wide disclosures by geographic
area. The following table presents net sales and long-lived assets by
geographic area as of and for the three months ended March 31 (in
thousands):
NET SALES LONG-LIVED ASSETS
------------------------- -------------------------
2002 2001 2002 2001
--------- --------- --------- ---------
UNITED STATES $ 192,047 $ 129,722 $ 581,088 $ 594,991
FOREIGN 316,799 357,295 519,731 481,658
ELIMINATIONS (46,695) (963) (240,303) (216,303)
--------- --------- --------- ---------
TOTAL 462,151 486,054 860,516 860,346
========= ========= ========= =========
7. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
Venture, as the successor to Venture Holdings Trust, and certain of its
100%-owned, domestic subsidiaries are jointly and severally liable for the
1997 Senior Notes issued on July 9, 1997. On May 27, 1999, certain
100%-owned, domestic subsidiaries of Venture became guarantors of the 1997
Senior Notes. These guarantees are full and unconditional, joint and
several. Venture issued the 1999 Notes on May 27, 1999 in connection with
the 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.
8
The principal elimination entries in the condensed consolidating financial
information set forth below eliminate investments in subsidiaries and
intercompany balances and transactions.
1997 SENIOR NOTES:
The following condensed consolidating financial information presents:
(1) Condensed consolidating financial statements as of March 31, 2002,
December 31, 2001 and March 31, 2001 and for the three month periods
ended March 31, 2002 and 2001, of (a) Venture, as a co-issuer of the
1997 Senior Notes (b) the subsidiaries that are co-issuers of the 1997
Senior Notes, (c) the guarantor subsidiaries, (d) the nonguarantor
subsidiaries and (e) the Company on a consolidated basis, and
(2) Elimination entries necessary to consolidate Venture, the other issuers
and the guarantor subsidiaries with the nonguarantor subsidiaries.
CONDENSED CONSOLIDATING BALANCE SHEET (Unaudited)
AS OF MARCH 31, 2002
- -------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
OTHER GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE ISSUERS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
----------- ----------- ----------- ----------- ----------- -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ -- $ 370 $ (434) $ 5,960 $ -- $ 5,896
Accounts receivable, net -- 129,360 50 173,103 -- 302,513
Inventories -- 81,610 -- 122,588 -- 204,198
Prepaid and other current assets -- 31,718 -- 54,993 -- 86,711
----------- ----------- ----------- ----------- ----------- -----------
Total current assets 243,058 (384) 356,644 -- 599,318
Property, Plant and Equipment, Net -- 186,681 4 351,612 -- 538,297
Goodwill, Net 46,362 60,393 106,755
Intangible Assets, Net -- 8,893 -- 16,280 -- 25,173
Other Assets 5,966 86,987 -- 29,676 -- 122,629
Deferred Tax Asset -- 5,892 -- 61,770 -- 67,662
Net Investment in and advances to (from)
subsidiaries & affiliates 931,434 (505,815) 108,623 (293,939) (240,303) --
----------- ----------- ----------- ----------- ----------- -----------
Total Assets $ 937,400 $ 72,058 $ 108,243 $ 582,436 $ (240,303) $ 1,459,834
=========== =========== =========== =========== =========== ===========
LIABILITIES AND MEMBER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ -- $ 67,568 $ -- $ 233,106 $ -- $ 300,674
Accrued interest 14,539 -- -- 385 -- 14,924
Accrued expenses -- 9,816 2,585 98,438 -- 110,839
Current portion of long term debt 25,998 -- -- 21,395 -- 47,393
----------- ----------- ----------- ----------- ----------- -----------
Total current liabilities 40,537 77,384 2,585 353,324 -- 473,830
Pension Liabilities & Other -- 5,579 -- 40,348 -- 45,927
Deferred Tax Liabilities -- 9,860 -- 22,706 -- 32,566
Long Term Debt 800,273 420 -- 29,353 -- 830,046
----------- ----------- ----------- ----------- ----------- -----------
Total liabilities 840,810 93,243 2,585 445,731 -- 1,382,369
Commitments and Contingencies -- -- -- -- -- --
Member's Equity:
Member's equity 96,590 (21,029) 105,658 141,681 (240,303) 82,597
Accumulated other comprehensive
loss-cumulative translation
adjustments -- (156) -- (4,976) -- (5,132)
----------- ----------- ----------- ----------- ----------- -----------
Member's Equity 96,590 (21,185) 105,658 136,705 240,303 77,465
----------- ----------- ----------- ----------- ----------- -----------
Total Liabilities and Member's Equity $ 937,400 $ 72,058 $ 108,243 $ 582,436 $ 240,303 $ 1,459,834
=========== =========== =========== =========== =========== ===========
9
CONDENSED CONSOLIDATING STATEMENTS OF INCOME (Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 2002
- -------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
OTHER GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE ISSUERS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
--------- --------- --------- --------- --------- ---------
NET SALES $ -- $ 160,302 $ 31,745 $ 316,799 $ (46,695) $ 462,151
COST OF PRODUCT SOLD -- 138,353 30,836 271,526 (46,695) 394,020
--------- --------- --------- --------- --------- ---------
GROSS PROFIT -- 21,949 909 45,273 -- 68,131
SELLING, GENERAL & ADMINISTRATIVE
EXPENSE -- 5,812 388 25,219 -- 31,419
--------- --------- --------- ---------
INCOME FROM OPERATIONS -- 16,137 521 20,054 -- 36,712
INTEREST EXPENSE 18,303 (228) -- 3,150 -- 21,225
INTERCOMPANY INTEREST ALLOCATION -- -- (6,986) 6,986 -- --
OTHER (INCOME) EXPENSE (18,441) 8,316 5,747 5,542 -- 1,164
--------- --------- --------- --------- --------- ---------
INCOME (LOSS) BEFORE TAXES 138 8,049 1,760 4,376 -- 14,323
TAX PROVISION -- 85 -- 4,945 -- 5,030
MINORITY INTEREST -- -- -- 120 -- 120
--------- --------- --------- --------- --------- ---------
NET INCOME (LOSS) BEFORE
CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE 138 7,964 1,760 (689) -- 9,173
--------- --------- --------- --------- --------- ---------
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE -- -- -- -- --
--------- --------- --------- --------- --------- ---------
NET INCOME (LOSS) $ 138 $ 7,964 $ 1,760 $ (689) $ -- $ 9,173
========= ========= ========= ========= ========= =========
10
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 2002
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
OTHER GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE ISSUERS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------- ------------ ------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 138 $ 7,964 $ 1,760 $ (689) $ -- $ 9,173
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 1,271 10,483 1 11,030 -- 22,785
Unrealized (gain) loss on currency exchange (878) (414) 6,456 (2,380) -- 2.784
Change in accounts receivable -- (18,013) 12 (18,280) -- (36,281)
Change in inventories -- 5,433 -- (16,827) -- (11,394)
Change in prepaid and other current assets -- (1,645) 145 2,635 -- 1,135
Change in other assets -- 1,204 -- (4,622) -- (3,418)
Change in accounts payable -- 21,834 (226) 17,453 -- 39,061
Change in accrued expenses 1,920 (544) 1,456 9,991 -- 12,823
Change in other liabilities -- 20 -- 1,791 -- 1,811
Change in deferred taxes -- 710 -- 1,340 -- 2,050
-------- -------- -------- -------- -------- --------
Net cash provided by (used in) operating
Activities 2,451 27,032 9,604 1,442 -- 40,529
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures -- (5,438) -- (14,504) -- (19,942)
Net activity in investments in and advances to (from)
Subsidiaries and affiliates 13,883 (16,990) (3,241) 6,348 -- --
Proceeds from sale of fixed assets -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Net cash (used in) provided by investing activities 13,883 (22,428) (3,241) (8,156) -- (19,942)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under revolving credit
Agreement (12,588) -- -- -- -- (12,588)
Net proceeds from issuance of debt -- -- -- 3,073 3,073
Principal payments on debt (4,625) (217) -- (1,978) -- (6,820)
-------- -------- -------- -------- -------- --------
Net cash provided by (used in)
Financing activities (17,213) (217) -- 1,095 -- (16,335)
Effect of exchange rate changes on cash and cash
Equivalents (879) 13,915 7,142 (16,377) -- 1,642
NET INCREASE IN CASH -- (4,085) (779) 10,758 -- 5,894
CASH AT BEGINNING OF PERIOD $ -- $ (4,454) $ (343) $ 4,799 $ -- $ 2
-------- -------- -------- -------- -------- --------
CASH AT END OF PERIOD $ -- $ (8,539) $ (1,122) $ 15,557 $ -- $ 5,896
======== ======== ======== ======== ======== ========
11
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 62 187,823 -- 266,232
Inventories -- 87,043 -- 105,761 -- 192,804
Investments -- -- -- -- -- --
Prepaid and other current assets -- 5,295 145 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
Goodwill, Net 46,362 59,706 106,068
Intangible Assets, Net -- 8,084 -- 13,163 -- 21,247
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 debt 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-
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 (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
=========== =========== =========== =========== =========== ===========
12
CONDENSED CONSOLIDATING BALANCE SHEET (Unaudited)
AS OF MARCH 31, 2001
- -------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
OTHER GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE ISSUERS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
----------- ----------- ----------- ----------- ----------- -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ -- $ 99 $ -- $ 2,069 $ -- $ 2,168
Accounts receivable, net -- 152,838 74 139,593 -- 292,505
Inventories -- 69,337 -- 126,772 -- 196,109
Investments (317) -- -- 2,944 -- 2,627
Prepaid and other current assets -- 5,970 -- 36,621 -- 42,591
----------- ----------- ----------- ----------- ----------- -----------
Total current assets (317) 228,244 74 307,999 -- 536,000
Property, Plant and Equipment, Net -- 191,659 9 342,131 -- 533,799
Goodwill, Net 47,778 67,038 114,816
Intangible Assets, Net -- -- 3,767 -- 3,767
Other Assets 11,120 115,949 -- 20,226 -- 147,295
Deferred Tax Asset -- 12,173 -- 48,496 -- 60,669
Net Investment in and advances to
(from)subsidiaries & affiliates 923,139 (533,816) 60,614 (233,634) (216,303) --
----------- ----------- ----------- ----------- ----------- -----------
Total Assets $ 933,942 $ 61,987 $ 60,697 $ 556,023 $ (216,303) $ 1,396,346
=========== =========== =========== =========== =========== ===========
LIABILITIES AND MEMBER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ -- $ 59,913 $ 560 $ 182,000 $ -- $ 242,473
Accrued interest 18,057 -- -- 209 -- 18,266
Accrued expenses -- 8,645 2,858 101,146 -- 112,649
Current portion of long term debt 18,619 -- -- 7,928 -- 26,547
----------- ----------- ----------- ----------- ----------- -----------
Total current liabilities
36,676 68,558 3,418 291,283 -- 399,935
Pension Liabilities & Other - -- 4,599 -- 37,569 -- 42,168
Deferred Tax Liabilities -- 11,946 -- 26,422 -- 38,368
Long Term Debt 821,273 1,253 -- 33,283 -- 855,809
----------- ----------- ----------- ----------- ----------- -----------
Total liabilities 857,949 86,356 3,418 388,557 -- 1,336,280
Commitments and Contingencies -- -- -- -- -- --
Member's Equity:
Member's equity 75,993 (24,369) 57,279 174,547 (216,303) 67,147
Accumulated other comprehensive
loss-cumulative translation
adjustments -- -- -- (7,081) -- (7,081)
----------- ----------- ----------- ----------- ----------- -----------
Member's Equity 75,993 (24,369) 57,279 167,466 (216,303) 60,066
----------- ----------- ----------- ----------- ----------- -----------
Total Liabilities and Member's Equity $ 933,942 $ 61,987 $ 60,697 $ 556,023 $ (216,303) $ 1,396,346
=========== =========== =========== =========== =========== ===========
13
CONDENSED CONSOLIDATING STATEMENTS OF INCOME (Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 2001
- -------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
OTHER GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE ISSUERS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
--------- --------- --------- --------- --------- ---------
NET SALES $ -- $ 96,979 $ 32,743 $ 357,295 $ (963) $ 486,054
COST OF PRODUCT SOLD -- 80,667 31,964 307,757 (963) 419,425
--------- --------- --------- --------- --------- ---------
GROSS PROFIT -- 16,312 779 49,538 -- 66,629
SELLING, GENERAL & ADMINISTRATIVE
EXPENSE -- 11,068 216 16,958 -- 28,242
-- -- -- -- -- --
--------- --------- --------- --------- --------- ---------
INCOME FROM OPERATIONS -- 5,244 563 32,580 -- 38,387
INTEREST EXPENSE 24,557 28 -- 2,172 -- 26,757
INTERCOMPANY INTEREST ALLOCATION (23,286) 14,617 (6,975) 15,644 -- --
OTHER (INCOME) EXPENSE (4,847) 2,857 (8,604) 31,642 -- 21,048
--------- --------- --------- --------- --------- ---------
INCOME (LOSS) BEFORE TAXES 3,576 (12,258) 16,142 (16,878) -- (9,418)
TAX BENEFIT -- (576) -- (4,098) -- (4,674)
MINORITY INTEREST -- -- -- 349 -- 349
--------- --------- --------- --------- --------- ---------
NET INCOME (LOSS) BEFORE
CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE 3,576 (11,682) 16,142 (13,129) -- (5,093)
--------- --------- --------- --------- --------- ---------
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE (182) -- -- -- -- (182)
--------- --------- --------- --------- --------- ---------
NET INCOME (LOSS) $ 3,394 $ (11,682) $ 16,142 $ (13,129) $ -- $ (5,275)
========= ========= ========= ========= ========= =========
14
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 2001
- -------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
OTHER GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE ISSUERS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
-------- -------- -------- -------- ------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 3,394 $(11,682) $ 16,142 $(13,129) $ -- $ (5,275)
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation and amortization 1,271 9,690 -- 12,293 -- 23,254
Unrealized (gain) loss on currency
exchange (3,395) 2,684 (11,009) 32,249 -- 20,529
Unrealized gain on investments (292) -- -- -- -- (292)
Loss from the disposal of fixed assets -- -- -- 229 -- 229
Change in accounts receivable -- (6,529) 43 7,053 -- 567
Change in inventories -- (872) -- 11,385 -- 10,513
Change in prepaid and other current assets -- (675) 319 3,698 -- 3,342
Change in other assets -- (417) -- 4,410 -- 3,993
Change in accounts payable -- (7,649) (649) (6,878) -- (15,176)
Change in accrued expenses 2,763 451 909 (8,504) -- (4,381)
Change in pension liabilities -- (1,183) -- (8,019) -- (9,202)
and other
Change in deferred taxes -- (554) -- (8,573) -- (9,127)
-------- -------- -------- -------- ------- --------
Net cash provided by (used in)
operating activities 3,741 (16,736) 5,755 26,214 -- 18,974
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures -- (7,904) -- (14,340) -- (22,244)
Net activity in investments in and
advances to (from) Subsidiaries
and affiliates (10,931) 27,664 (16,764) 31 -- --
Proceeds from sale of fixed assets -- -- -- 27 -- 27
-------- -------- -------- -------- ------- --------
Net cash (used in) provided by investing
activities (10,931) 19,760 (16,764) (14,282) -- (22,217)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under revolving credit
agreement 7,670 -- -- 1,824 -- 9,494
Principal payments on debt (3,875) (249) -- -- -- (4,124)
-------- -------- -------- -------- ------- --------
Net cash provided by (used in)
Financing activities 3,795 (249) -- 1,824 -- 5,370
Effect of exchange rate changes on cash and
cash Equivalents 3,395 (2,676) 11,009 (12,628) -- (900)
NET INCREASE IN CASH
-- 99 -- 1,128 -- 1,227
CASH AT BEGINNING OF PERIOD
CASH AT END OF PERIOD $ -- $ -- $ -- $ 941 $ -- $ 941
-------- -------- -------- -------- ------- --------
CASH AT END OF PERIOD $ -- $ 99 $ $ 2,069 $ -- $ 2,168
======== ======== ======== ======== ======= ========
$ -- $ 58 $ $ 2,514 $ -- $ 2,572
======== ======== ======== ======== ======= ========
15
1999 NOTES:
The following condensed consolidating financial information presents:
(1) Condensed consolidating financial statements as of March 31, 2002, December
31, 2001, and March 31, 2001 and for the three month periods ended March 31,
2002 and 2001, of (a) Venture, the sole issuer of the 1999 Notes, (b) the
guarantor subsidiaries, (c) the nonguarantor subsidiaries and (d) the
Company on a consolidated basis, and
(2) Elimination entries necessary to consolidate Venture and the guarantor
subsidiaries with the nonguarantor subsidiaries.
CONDENSED CONSOLIDATING BALANCE SHEET (Unaudited)
AS OF MARCH 31, 2002
- -------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
----------- ----------- ----------- ----------- -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ -- $ (64) $ 5,960 $ -- $ 5,896
Accounts receivable, net -- 129,410 173,103 -- 302,513
Inventories -- 81,610 122,588 -- 204,198
Prepaid and other current assets -- 31,718 54,993 -- 86,711
----------- ----------- ----------- ----------- -----------
Total current assets 242,674 356,644 -- 599,318
Property, Plant and Equipment, Net -- 186,685 351,612 -- 538,297
Goodwill, Net 46,362 60,393 106,755
Intangible Assets, Net -- 8,893 16,280 -- 25,173
Other Assets 5,966 86,987 29,676 -- 122,629
Deferred Tax Asset -- 5,892 61,770 -- 67,662
Net Investment in and advances to (from)
subsidiaries & affiliates 931,434 (397,192) (293,939) (240,303) --
----------- ----------- ----------- ----------- -----------
Total Assets $ 937,400 $ 180,301 $ 582,436 $ (240,303) $ 1,459,834
=========== =========== =========== =========== ===========
LIABILITIES AND MEMBER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ -- $ 67,568 $ 233,106 $ -- $ 300,674
Accrued interest 14,539 -- 385 -- 14,924
Accrued expenses -- 12,401 98,438 -- 110,839
Current portion of long term debt 25,998 -- 21,395 -- 47,393
----------- ----------- ----------- ----------- -----------
Total current liabilities 79,969 353,324 -- 473,830
Pension Liabilities & Other -- 5,579 40,348 -- 45,927
Deferred Tax Liabilities -- 9,860 22,706 -- 32,566
Long Term Debt 800,273 420 29,353 -- 830,046
----------- ----------- ----------- ----------- -----------
Total liabilities 840,810 95,828 445,731 -- 1,382,369
Commitments and Contingencies -- -- -- -- --
Member's Equity:
Member's equity 96,590 84,629 141,681 (240,303) 82,597
Accumulated other comprehensive
loss-cumulative translation
adjustments -- (156) (4,976) -- (5,132)
----------- ----------- ----------- ----------- -----------
Member's Equity 96,590 84,473 136,705 240,303 77,465
----------- ----------- ----------- ----------- -----------
Total Liabilities and Member's Equity $ 937,400 $ 180,301 $ 582,436 $ 240,303 $ 1,459,834
=========== =========== =========== =========== ===========
16
CONDENSED CONSOLIDATING STATEMENTS OF INCOME (Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 2002
- -------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
--------- --------- --------- --------- ---------
NET SALES $ -- $ 192,047 $ 316,799 $ (46,695) $ 462,151
COST OF PRODUCT SOLD -- 169,189 (271,526) (46,695) (394,020)
--------- --------- --------- --------- ---------
GROSS PROFIT -- 22,858 45,273 -- 68,131
SELLING, GENERAL & ADMINISTRATIVE
EXPENSE -- 6,200 25,219 -- 31,419
--------- --------- --------- --------- ---------
INCOME FROM OPERATIONS -- 16,658 20,054 -- 36,712
INTEREST EXPENSE 18,303 (228) 3,150 -- 21,225
INTERCOMPANY INTEREST ALLOCATION -- (6,986) 6,986 -- --
OTHER (INCOME) EXPENSE (18,441) 14,063 5,542 -- 1,164
--------- --------- --------- --------- ---------
INCOME (LOSS) BEFORE TAXES 138 9,809 4,376 -- 14,323
TAX BENEFIT -- 85 4,945 -- 5,030
MINORITY INTEREST -- -- 120 -- 120
--------- --------- --------- --------- ---------
NET INCOME (LOSS) BEFORE CUMULATIVE 138 9,724 (689) 9,173
EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE --
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE -- -- -- --
--------- --------- --------- --------- ---------
NET INCOME (LOSS) $ 138 $ 9,724 $ (689) $ -- $ 9,173
========= ========= ========= ========= =========
17
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 2002
- -------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
-------- -------- -------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 138 $ 9,724 $ (689) $ -- $ 9,173
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation and amortization 1,271 10,484 11,030 -- 22,785
Unrealized (gain) loss on currency exchange (878) 6,042 (2,380) -- 2.784
Loss from the disposal of fixed assets -- -- -- -- --
Change in accounts receivable -- (18,001) (18,280) -- (36,281)
Change in inventories -- 5,433 (16,827) -- (11,394)
Change in prepaid and other current assets -- (1,500) 2,635 -- 1,135
Change in other assets -- 1,204 (4,622) -- (3,418)
Change in accounts payable -- 21,608 17,453 -- 39,061
Change in accrued expenses 1,920 912 9,991 -- 12,823
Change in other liabilities -- 20 1,791 -- 1,811
Change in deferred taxes -- 710 1,340 -- 2,050
-------- -------- -------- -------- --------
Net cash provided by (used in) operating activities
2,451 36,636 1,442 -- 40,529
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures -- (5,438) (14,504) -- (19,942)
Net activity in investments in and advances to
(from)subsidiaries and affiliates 13,883 (20,231) 6,348 -- --
Proceeds from sale of fixed assets -- -- -- -- --
-------- -------- -------- -------- --------
Net cash (used in) provided by
investing activities 13,883 (25,669) (8,156) -- (19,942)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under revolving credit
Agreement (12,588) -- -- -- (12,588)
Net proceeds from issuance of debt -- 3,073 3,073
Principal payments on debt (4,625) (217) (1,978) -- (6,820)
-------- -------- -------- -------- --------
Net cash provided by (used in) financing
activities (17,213) (217) 1,095 -- (16,335)
Effect of exchange rate changes on cash and
cash Equivalents 879 (15,614) 16,377 -- 1,642
NET INCREASE IN CASH -- (4,864) 10,758 -- 5,894
CASH AT BEGINNING OF PERIOD $ -- $ (4,797) $ 4,799 $ -- $ 2
-------- -------- -------- -------- --------
CASH AT END OF PERIOD $ -- $ (9,661) $ 15,557 $ -- $ 5,896
======== ======== ======== ======== ========
18
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 -- 111,409 187,823 -- 266,232
Inventories -- 87,043 105,761 -- 192,804
Investments -- -- -- -- --
Prepaid and other current assets -- 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
Goodwill, Net 46,362 59,706 106,068
Intangible Assets, Net -- 8,084 13,163 -- 21,247
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 $ -- $ 45,696 $ 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
income-minimum pension liability in
excess of unrecognized prior
service cost, net of tax -- (156) -- -- (156)
Accumulated other comprehensive
income-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 $ 555,356 $ (240,303) $ 1,416,131
=========== =========== =========== =========== ===========
19
CONDENSED CONSOLIDATING BALANCE SHEET (Unaudited)
AS OF MARCH 31, 2001
- ------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
----------- ----------- ----------- ----------- -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ -- $ 99 $ 2,069 $ -- $ 2,168
Accounts receivable, net -- 152,912 139,593 -- 292,505
Inventories -- 69,337 126,772 -- 196,109
Investments (317) -- 2,944 -- 2,627
Prepaid and other current assets -- 5,970 36,621 -- 42,591
----------- ----------- ----------- ----------- -----------
Total current assets (317) 228,318 307,999 -- 536,000
Property, Plant and Equipment, Net -- 191,668 342,131 -- 533,799
Goodwill, Net -- 47,778 67,038 -- 114,816
Intangible Assets, Net -- 3,767 3,767
Other Assets 11,120 115,949 20,226 -- 147,295
Deferred Tax Asset -- 12,173 48,496 -- 60,669
Net Investment in and advances to (from)
subsidiaries & affiliates 923,139 (473,202) (233,634) (216,303) --
----------- ----------- ----------- ----------- -----------
$ 933,942 $ 122,684 $ 556,023 $ (216,303) $ 1,396,346
=========== =========== =========== =========== ===========
Total Assets
LIABILITIES AND MEMBER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ -- $ 60,473 $ 182,000 $ -- $ 242,473
Accrued interest 18,057 -- 209 -- 18,266
Accrued expenses -- 11,503 101,146 -- 112,649
Current portion of long term debt 18,619 -- 7,928 -- 26,547
----------- ----------- ----------- ----------- -----------
Total current liabilities 36,676 71,976 291,283 -- 399,935
Pension Liabilities & Other -- 4,599 37,569 -- 42,168
Deferred Tax Liabilities -- 11,946 26,422 -- 38,368
Long Term Debt 821,273 1,253 33,283 -- 855,809
----------- ----------- ----------- ----------- -----------
Total liabilities 857,949 89,774 388,557 -- 1,336,280
Commitments and Contingencies -- -- -- -- --
Member's Equity:
Member's equity 75,993 32,910 174,547 (216,303) 67,147
Accumulated other comprehensive
loss-cumulative translation
adjustments -- -- (7,081) -- (7,081)
----------- ----------- ----------- ----------- -----------
Member's Equity 75,993 32,910 167,466 (216,303) 60,066
----------- ----------- ----------- ----------- -----------
Total Liabilities and Member's Equity $ 933,942 $ 122,684 $ 556,023 $ (216,303) $ 1,396,346
=========== =========== =========== =========== ===========
20
CONDENSED CONSOLIDATING STATEMENTS OF INCOME (Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 2001
- -------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
--------- --------- --------- --------- ---------
NET SALES $ -- $ 129,722 $ 357,295 $ (963) $ 486,054
COST OF PRODUCT SOLD -- 112,631 307,757 (963) 419,425
--------- --------- --------- --------- ---------
GROSS PROFIT -- 17,091 49,538 -- 66,629
SELLING, GENERAL & ADMINISTRATIVE
EXPENSE -- 11,284 16,958 -- 28,242
--------- --------- --------- --------- ---------
INCOME FROM OPERATIONS -- 5,807 32,580 -- 38,387
INTEREST EXPENSE 24,557 28 2,172 -- 26,757
INTERCOMPANY INTEREST ALLOCATION (23,286) 7,642 15,644 -- --
OTHER (INCOME) EXPENSE (4,847) (5,747) 31,642 -- 21,048
--------- --------- --------- --------- ---------
INCOME (LOSS) BEFORE TAXES 3,576 3,884 (16,878) -- (9,418)
TAX BENEFIT -- (576) (4,098) -- (4,674)
MINORITY INTEREST -- -- 349 -- 349
--------- --------- --------- --------- ---------
NET INCOME (LOSS) BEFORE CUMULATIVE
EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 3,576 4,460 (13,129) -- (5,093)
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE (182) -- -- -- (182)
--------- --------- --------- --------- ---------
NET INCOME (LOSS) $ 3,394 $ 4,460 $ (13,129) $ -- $ (5,275)
========= ========= ========= ========= =========
21
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 2001
- ------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE SUBSIDIARIES SUBSIDIARIES TOTAL
-------- -------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 3,394 $ 4,460 $(13,129) $ -- $ (5,275)
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation and amortization 1,271 9,690 12,293 -- 23,254
Unrealized (gain) loss on currency
exchange (3,395) (8,325) 32,249 -- 20,529
Unrealized gain on investments (292) -- -- -- (292)
Loss from the disposal of fixed assets -- -- 229 -- 229
Change in accounts receivable -- (6,486) 7,053 -- 567
Change in inventories -- (872) 11,385 -- 10,513
Change in prepaid and other
current assets -- (356) 3,698 -- 3,342
Change in other assets -- (417) 4,410 -- 3,993
Change in accounts payable -- (8,298) (6,878) -- (15,176)
Change in accrued expenses 2,763 1,360 (8,504) -- (4,381)
Change in pension liabilities and other -- (1,183) (8,019) -- (9,202)
Change in deferred taxes -- (554) (8,573) -- (9,127)
-------- -------- -------- ------ --------
Net cash provided by (used in) operating
activities 3,741 (10,981) 26,214 -- 18,974
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures -- (7,904) (14,340) -- (22,244)
Net activity in investments in and advances
to (from)subsidiaries and affiliates (10,931) 10,900 31 -- --
Proceeds from sale of fixed assets -- -- 27 -- 27
-------- -------- -------- ------ --------
Net cash (used in) provided by
investing activities (10,931) 2,996 (14,282) -- (22,217)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under revolving credit
agreement 7,670 -- 1,824 -- 9,494
Principal payments on debt (3,875) (249) -- -- (4,124)
-------- -------- -------- ------ --------
Net cash provided by (used in) financing
activities 3,795 (249) 1,824 -- 5,370
Effect of exchange rate changes on cash and
cash Equivalents 3,395 8,333 (12,628) -- (900)
NET INCREASE IN CASH -- 99 1,128 -- 1,227
CASH AT BEGINNING OF PERIOD $ -- $ -- $ 941 $ -- $ 941
-------- -------- -------- ------ --------
CASH AT END OF PERIOD $ -- $ 99 $ 2,069 $ -- $ 2,168
======== ======== ======== ====== ========
8. Adoption of New Accounting Standard Regarding Goodwill and Other Intangible
Assets
Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets" ("SFAS No. 142"), was issued in July 2001 and became
effective for the Company on January 1, 2002. SFAS No. 142 addresses how
goodwill and other intangible assets should be accounted for upon their
acquisition and afterwards. The primary impact of SFAS No. 142 on the Company is
that existing goodwill is no longer amortized beginning in 2002. Instead of
amortization, goodwill is subject to an assessment for impairment on a reporting
unit basis by applying a fair-value-based test annually, and more frequently if
circumstances indicate a possible impairment. If a reporting unit's net book
value is more than its fair value and the reporting unit's net book value of its
goodwill exceeds the fair value of that goodwill, an impairment loss is
recognized in an amount equal to the excess goodwill net book value. SFAS 142
requires an entity to complete the first step of the transitional goodwill
impairment test within six months of adopting the Statement.
Based on December 31, 2001 goodwill balances, the Company will report lower
amortization of goodwill and higher operating profit of approximately $4.4
million for the full 2002 fiscal year compared to the full 2001 fiscal year.
As of March 31, 2002, the Company is in the process of completing the
second step for goodwill in order to determine if an impairment will be
recorded.
22
Prior to the adoption of SFAS No. 142, the Company had $106.1 million of
goodwill acquired that was amortized on a straight-line basis over 30 years. Had
the Company accounted for goodwill in accordance with SFAS No. 142 in fiscal
year 2001, net income for the three months ended March 31, 2002 and March 31,
2001 would have been as follows:
2002 2001
---- -----
Reported net income (loss) $ 9.2 $(5.3)
Add back: Goodwill amortization 1.1
----- -----
Adjusted net income $ 9.2 $(4.2)
===== =====
The changes in the net carrying amounts of goodwill by segment for the three
months ended March 31, 2002 are as follows:
Total
--------
Balance as of December 31, 2001 $106,068
Effect of exchange rate change on
Foreign goodwill 687
--------
Balance as of March 31, 2002 $106,755
--------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following management's discussion and analysis of financial condition and
results of operations ("MD&A") should be read in conjunction with the MD&A
included in the Company's 2001 Annual Report on Form 10-K filed with the
Securities and Exchange Commission.
RESULTS OF OPERATIONS (UNAUDITED)
The following table sets forth, for the periods indicated, the Company's
consolidated statements of income expressed as a percentage of net sales. This
table and the subsequent discussion should be read in conjunction with the
consolidated financial statements and related notes.
THREE MONTHS ENDED
MARCH 31,
2002 2001
------------------
Net sales 100.0% 100.0%
Cost of products sold 85.3 86.3
----- -----
Gross profit 14.7 13.7
Selling, general and administrative expense 6.8 5.8
----- -----
Income from operations 7.9 7.9
Interest expense 4.6 5.5
Other expense 0.2 4.3
----- -----
Income (loss) before taxes 3.1 (1.9)
Tax provision (benefit) 1.1 (1.0)
Minority interest 0.0 0.1
----- -----
Net income (loss) before cumulative effect of change in
accounting principle 2.0 (1.0)
Cumulative effect of change in accounting principle -- (0.1)
----- -----
Net income (loss) 2.0% (1.1)%
===== =====
THREE MONTHS ENDED MARCH 31, 2002 COMPARED TO THREE MONTHS ENDED MARCH 31, 2001
NET SALES. Net sales for the first quarter of 2002 decreased $23.9 million, or
4.9%, from the first quarter of 2001. Internationally, net sales decreased 11.5%
or $41.0 million from $356.5 million to $315.5 million due to lower production
volumes and tooling sales offset by the increase sales of approximately $20
million associated with the new Mitiras business acquired in the fourth quarter
of 2001. Approximately $19 million of the $41 million decrease was due to the
devaluation of the Euro during the first quarter of 2002
23
compared to the first quarter of 2001. Domestically, net sales increased 12.3%
or $16.1 million from $130.5 million to $146.6 million generally due to
increased production volume and the inclusion of full quarter sales for programs
that were ramping up in 2001.
GROSS PROFIT. Gross profit for the first quarter of 2002 increased $1.5 million
to $68.1 million, compared to $66.6 million for the first quarter of 2001. As a
percentage of net sales, gross profit increased to 14.7% for 2002 compared with
13.7% for 2001. Internationally, gross profit decreased $4.5 million from $49.5
million to $45.0 million, or 9.1%. The decrease in international gross profit is
due primarily to the lower sales volumes offset by lower operating costs due to
reduced headcount and productivity gains. Included in the international gross
profit is approximately $0.9 million recorded from a related party for
engineering services and tooling. As a percentage of net sales, international
gross profit was 14.3% in 2002 compared with 13.9% in 2001 or an increase of
0.4%. Domestic gross profit increased 35.1% from $17.1 million to $23.1 million,
an increase of $6.0 million as a result of higher sales volumes. As a percentage
of net sales, domestic gross profit was 15.5% in 2002 as compared to 13.1% in
2001.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and administrative
expense for the first quarter of 2002 increased $3.2 million, or 11.4%, to $31.4
million, compared to $28.2 million 2001. As a percentage of net sales, selling,
general and administrative expense increased to 6.8% for the first quarter of
2002 as compared to 5.8% for the first quarter of 2001. Internationally, the
increase was 49.1%, or $8.3 million, from $16.9 million to $25.2 million.
Domestically, there was decrease of 45.1%, or $5.1 million, from $11.3 million
to $6.2 million. Approximately $6 million of the international increase and
domestic decrease was due to internal reallocation of expenses. Otherwise, the
increase in selling, general and administrative expense internationally was
associated with the new Mitiras business acquired in the fourth quarter of 2001,
described above under "Net Sales." The overall domestic decrease in selling,
general and administrative expense was partially offset by an increase due to
increased sales. These increases were offset by a reduction in goodwill
amortization of $1.1 million due to the adoption of SFAS 142 as compared to the
first quarter of fiscal year 2001. See Note 8 of "Notes to Consolidated
Financial Statements (unaudited)."
INCOME FROM OPERATIONS. As a result of the foregoing, income from operations for
the first quarter of 2002 decreased $1.7 million, or 4.4%, to $36.7 million,
compared to income of $38.4 million for the first quarter of 2001. As a
percentage of net sales, income from operations remained at 7.9% for the first
quarter of 2002 as it was for the first quarter of 2001.
INTEREST EXPENSE. Interest expense for the first quarter of 2002 decreased $5.5
million, or 20.6 %, to $21.2 million as compared to $26.7 million in 2001,
primarily due to decreased interest rates offset by higher average borrowings.
Of the total interest expense for the first quarters of 2002 and 2001, $1.3
million each quarter was a noncash amortization from the termination of interest
rate swaps.
OTHER EXPENSE. Other expense for the first quarter of 2002 is primarily
unrealized currency exchange losses of $2.8 million offset by $0.8 million of
realized currency exchange gains. In the first quarter of 2001 other expense was
comprised of $20.0 million of unrealized currency exchange losses.
INCOME TAX PROVISION (BENEFIT) The income tax provision for the first quarter of
2002 was $5.0 million compared with a tax benefit of $4.7 million in 2001 or an
increase in tax expense of $9.7 million. This increase in tax is generally
associated with foreign currency losses that were incurred in the first quarter
of 2001, which did not reoccur during the same period in 2002.
NET INCOME (LOSS). Due to the foregoing, the net income for the first quarter of
2002 was $9.2 million compared to net loss of $5.3 million for the first quarter
of 2001, or an increase in net income of $14.5 million. For the first quarter of
2001, excluding the after tax effect of the unrealized currency exchange losses
of $12.6 million, the Company would have had net income of $7.3 million.
LIQUIDITY AND CAPITAL RESOURCES (UNAUDITED)
Our consolidated working capital was $125.5 million at March 31, 2002, compared
to $136.1 million at March 31, 2001, a decrease of $10.6 million. Our working
capital ratio decreased to 1.26x at March 31, 2002 from 1.34x at March 31, 2001.
The decrease is primarily due to the increase in the current portion of long
term debt of $20.8 million that was offset by a net increase in the other
components of working capital in the amount of $10.3 million. The other
components in net working capital increased due to growth in accounts receivable
and inventory which exceed the increase in accounts payable and accrued
expenses. Net cash provided by operating activities was $40.5 million for the
quarter ended March 31, 2002 compared to $18.9 million for the quarter ended
March 31, 2001. The increase in cash provided by operations is due primarily to
increased current liabilities, deferred payments to vendors, and a smaller
increase in current assets.
24
Capital expenditures were $19.9 million for the three months ended March 31,
2002 compared to $22.2 million for the same period in 2001. We continue to
upgrade machinery and equipment and paint lines at all facilities to handle
expected increased sales volumes and to provide a general reconditioning of
equipment.
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 U.S. dollar, we 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 currencies will uniformly strengthen or weaken relative
to the U.S. dollar consistent with 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 the 2002 fiscal year and would be
reflected in 2003 fiscal year expenditures. Our expectations as to future sales
is a "forward looking statement" within the meaning of the Securities Exchange
Act of 1934, as amended. Such expectations are subject to a number of
uncertainties described in "Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Safe Harbor Statement."
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 in 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.
Net cash used in financing activities was $16.3 million for the three months
ended March 31, 2002 compared to net cash provide by financing activities of
$5.4 million for the same period in 2001. This fluctuation is due to net
repayments on the Company's various loan obligations for the first quarter of
2002 compared to net borrowing for the same period in 2001.
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
$175.0 million less the amount of any letters of credit issued against the
credit agreement. At March 31, 2002, we had $129.7 million outstanding and could
have borrowed an additional $41.3 million under the revolving credit facility.
We also rely on the non recourse sale of certain European automotive company
receivables to fund our operations. The credit agreement and documents governing
our 9 1/2% senior notes due 2005, 11% senior notes due 2007 and 12% senior
subordinated notes due 2009 contain various covenants. 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 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 March
31, 2002, the Company was in compliance with all such covenants.
Ours interest rates under the credit agreement are based on the London Interbank
Offer Rate ("LIBOR"), or an Alternate Base Rate ("ABR"), which is the larger of
the bank's corporate base rate of interest announced from time-to-time or the
federal funds rate plus 1/2% per annum, and, in the case of non-dollar
denominated loans, a Euro currency reference rate. Interest rates are determined
by reference to the relevant interest rate option, plus an Applicable Margin (as
defined) based on our Consolidated Ratio of Total Debt to EBITDA. Obligations
under the credit agreement 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 currently have no hedging agreements in place. 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 3. 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.
25
Venture Holdings Trust (the "Trust") is the sole member of Venture. We have
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 our's have been made available to certain of these entities for
services such as design, model and tool building. Since the Trust is our sole
member the terms of these transactions are not the result of arms'-length
bargaining; however, we believe that such transactions are on terms no less
favorable to us 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 exempted from the Fairness
Committee approvals because they were in existence prior to entering into the
loan agreements
We provide or arrange 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,
we pay the administrative and operating expenses on behalf of certain related
parties and charge them for the amounts paid which results in receivables from
these related parties.
These related party transactions result in the following accounts receivable
balances in the Company's consolidated balance sheets (in thousands):
MARCH 31, DECEMBER 31, MARCH 31,
2002 2001 2001
-------- -------- --------
Amounts receivable $ 66,147 $ 57,742 $113,563
Amounts payable 19,074 16,047 22,331
-------- -------- --------
Net amounts receivable $ 47,073 $ 41,695 $ 91,232
======== ======== ========
The increase in related party receivables is primarily due to increased sales to
related parties offset by a smaller growth in accounts payable due to the timing
of payments on certain rentals.
These related party transactions also resulted in the following asset balances
in our consolidated balance sheets (in thousands):
MARCH 31, DECEMBER 31, MARCH 31,
2002 2001 2001
---------- --------- -------
Prepaid Assets $23,900 $23,900 $
Tooling progress payment in inventory 41,239 47,400 9,900
Deposits, Net of impairment charge of $14
million at December 31, 2001 12,000 12,000 26,000
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, prior to June 30, 2002 we
must address the need to issue $125 million of new debt as required under the
current credit agreement as outlined above and seek to address our currency
exposure related to the existing financing structure. To assist our working
capital needs and as part of the March 29, 2002 amendment to the credit
agreement, we requested an additional $50 million of borrowings under the credit
agreement. This will be accomplished by adding a Term loan C to the existing
facility. This transaction will require that 50% of the net proceeds of Term
loan C be used to prepay Term loans A and B equally and we will receive a pro
rata reduction in future principal payments over the remaining term of the
loans. The remaining 50% of Term loan C will be used for general corporate
purposes. We expect to close on a portion of the loan prior to May 21, 2002. We
have been informed by the agent for the credit agreement lenders that, as of the
commitment deadline of May 10, 2002, they had received commitments from the
lenders for participation in Term loan C substantially in excess of $50 million.
We are now discussing with the credit agreement lenders a fourth amendment to
the credit agreement to increase the Term loan C by an additional $50 million
for a total of $100 million. As presently being discussed, 40% of the net
proceeds of this additional $50 million Term loan C will again 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 60% or
$30 million of additional Term loan C would be used for general corporate
purposes. In addition, we are seeking approval to close approximately $40
million of this additional loan in euros to assist us in hedging. We cannot
provide any assurance at this time that we will enter into a fourth amendment to
the credit agreement under the terms outlined above, or any other terms. If
approved we expect to close on this additional $50 million prior to the end of
May 2002. Our discussion of the terms of a fourth amendment to the credit
agreement and
26
closing date of Term loan C is a "forward looking statement" within the meaning
of the Securities Exchange Act of 1934, as amended. Such discussion is subject
to a number of uncertainties described in "Item 2. Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Safe Harbor
Statement."
INDUSTRY TRENDS
As a result of higher production volumes for our North American customers in the
first quarter of 2002, as compared to the same period in 2001, our domestic net
sales increased 12.3% during the first quarter of 2002. In light of the current
market conditions, higher industry volumes and other factors, orders from our
North American customers in 2002 are forecasted to be higher than the levels in
2001. In response to these market factors, we continue to reassess staffing
levels and other contractual relationships to control and reduce costs. European
sales in the second quarter of 2002 should approximate the level of the first
quarter of 2002 based upon orders received to date. However, we expect this to
be only temporary and average daily European sales should be increasing
throughout the remainder of the year. Overall we expect sales in fiscal year
2002 to be only slightly above the level of 2001. As is customary in our
industry, we continue to experience substantial and continuing pressure from our
customers to reduce costs and assume greater responsibility for the design and
engineering of our products. In addition, certain or our customers impose annual
selling price reductions on products we supply. We continue to address these
issues and we believe these factors will continue to affect our operations. Our
discussion of industry trends and expected sales is a "forward looking
statement" within the meaning of the Securities Exchange Act of 1934, as
amended. Such discussion is subject to a number of uncertainties described in
"Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Safe Harbor Statement."
NEW ACCOUNTING STANDARD
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 no longer amortize goodwill, but
will periodically evaluate it for impairment. We amortized $4.4 million of
goodwill in the year ended December 31, 2001. We are in the process of
completing our transitional goodwill impairment testing which may 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
27
SIGNIFICANT ACCOUNTING POLICIES
Our significant accounting policies are more fully described in Note 1 to our
consolidated financial statements found in Item 8 of our 2001 Annual Report on
Form 10-K. 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.
* * * * * * *
SAFE HARBOR STATEMENT
The foregoing discussion in MD&A includes 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
We are exposed to various market risks, including changes in foreign currency
exchange rates and interest rates. 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 the Company's 2001 Annual Report on Form
10-K.
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
Germany, Spain, France, the Czech Republic, United Kingdom, Mexico, Brazil and
Canada.
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 $31.8 million change in
earnings. The model assumes a parallel shift in foreign currency exchange rates.
Exchange rates rarely move in the same direction. The assumption that exchange
rates change in a parallel fashion may overstate or understate the impact of
changing exchange rates on assets, liabilities and earnings denominated in a
foreign currency.
INTEREST RATE RISK. 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 $0.9 million change in earnings.
28
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits. A list of the exhibits required to
be filed as part of this Form 10-Q is
included under the heading "Exhibit Index"
in this Form 10-Q and incorporated herein by
reference.
(b) The Company did not file any reports on Form
8-K during the quarter ended March 31, 2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VENTURE HOLDINGS COMPANY LLC,
VEMCO, INC., VENTURE INDUSTRIES
CORPORATION, VENTURE MOLD &
ENGINEERING CORPORATION, VENTURE
LEASING COMPANY, VEMCO LEASING,
INC., VENTURE HOLDINGS
CORPORATION, VENTURE SERVICE
COMPANY, EXPERIENCE MANAGEMENT
LLC, VENTURE EUROPE, INC., AND
VENTURE EU CORPORATION
Date: May 15, 2002 /s/ Michael Alexander
-----------------------
Michael Alexander
Chief Financial Officer
Signing on behalf of each registrant and
as principal financial officer of each
registrant.
Exhibit Index
Exhibit No. Description
10.1 Third Amendment dated March 29, 2002, to the
Credit Agreement filed as Exhibit 10.1.3 to
Venture's Annual Report on Form 10-K for the
year ended December 31, 2001 (File No.
333-82617), and incorporated herein by
reference.
29