1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 28, 1999
Commission File Number: 333-34475
Michigan Venture Holdings Company LLC 38-3470015
Michigan Vemco, Inc. 38-2737797
Michigan Venture Industries Corporation 38-2034680
Michigan Venture Mold & Engineering Corporation 38-2556799
Michigan Venture Leasing Company 38-2777356
Michigan Vemco Leasing, Inc. 38-2777324
Michigan Venture Holdings Corporation 38-2793543
Michigan Venture Service Company 38-3024165
(State or other jurisdiction (Exact name of registrant (IRS Employer
of incorporation) as specified in its charter) Identification
Number)
33662 James J. Pompo
Fraser, Michigan 48083
(Address of principal executive offices)
Registrant's telephone number, including area code: (810) 294-1500
(Former Name or Former Address, if Changed Since Last Report)
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AMENDMENT NO. 1
The undersigned Registrants hereby amend the following items, financial
statements, exhibits or other portions of their Current Report on Form 8-K dated
May 28, 1999 as set forth on the pages attached hereto.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS
(a) Financial Statements of Businesses Acquired.
Filed with this Amendment are the following financial
statements of Peguform GmbH ("Peguform"):
(1) Consolidated Balance Sheets as of September 30, 1997
and 1998, and December 31, 1998
(2) Consolidated Statements of Income for the years ended
September 30, 1997 and 1998, and the three months
ended December 31, 1997 and 1998
(3) Consolidated Statements of Stockholders' Equity for
the years ended September 30, 1997 and 1998, and the
three months ended December 31, 1997 and 1998
(4) Consolidated Statements of Cash Flows for the years
ended September 30, 1997 and 1998, and the three
months ended December 31, 1997 and 1998
(b) Pro Forma Financial Information.
Filed with this Amendment is the following pro forma financial
information:
(1) Unaudited Consolidated Pro Forma Balance Sheet as of
March 31, 1999 (December 31, 1998 for Peguform)
(2) Unaudited Consolidated Pro Forma Statement of
Operations for Year ended December 31, 1998
(3) Unaudited Consolidated Pro Forma Statement of
Operations for the three months ended March 31, 1999
(three months ended December 31, 1998 for Peguform)
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3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
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
/s/ James E. Butler, Jr.
--------------------------
James E. Butler, Jr.
Executive Vice President and
Chief Financial Officer
Dated: August 10, 1999
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4
INDEX TO FINANCIAL STATEMENTS
Peguform GmbH
Report of Independent Auditors............................................ F-2
Consolidated Balance Sheets............................................... F-3
Consolidated Statements of Income......................................... F-5
Consolidated Statements of Stockholders' Equity........................... F-6
Consolidated Statements of Cash Flows..................................... F-7
Notes to the Consolidated Financial Statements............................ F-9
Unaudited Pro Forma Financial Statements.................................. F-24
F - 1
5
REPORT OF INDEPENDENT AUDITORS
To the Board of Management and
Shareholders of PEGUFORM GmbH
We have audited the accompanying consolidated balance sheets of PEGUFORM
GmbH and subsidiaries as of September 30, 1997 and 1998, and the related
consolidated statements of income, stockholders' equity and cash flows for the
years then ended. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements, based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in Germany, which are substantially the same as those followed in the
United States. 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 financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
PEGUFORM GmbH and subsidiaries as of September 30, 1997 and 1998 and the
consolidated results of their operations, changes in stockholders' equity and
cash flows for the years then ended in conformity with generally accepted
accounting principles in the United States.
Our audit also included the translation of Deutsche Mark amounts into U.S.
dollar amounts and, in our opinion, such translation has been made in conformity
with the basis stated in note 2. Such U.S. dollar amounts are presented solely
for the convenience of the readers.
Dusseldorf,
December 18, 1998, except for the adjustments according to U.S.
GAAP (see note 2), as to which the date is April 26, 1999
BDO International GmbH
Wirtschaftsprufungsgesellschaft
F - 2
6
PEGUFORM GMBH, BOTZINGEN
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1997 AND 1998 AND DECEMBER 31, 1998
(DEM IN THOUSANDS)
THOUSANDS OF THOUSANDS OF
U.S. DOLLARS U.S. DOLLARS
(CONVENIENCE (CONVENIENCE
SEPTEMBER 30, TRANSLATION) TRANSLATION)
--------------------- SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1997 1998 1998 1998 1998
--------- --------- ------------- ------------ ------------
(UNAUDITED) (UNAUDITED)
ASSETS
CURRENT ASSETS
Cash and cash equivalents............... 3,486 4,964 2,961 13,869 8,272
Accounts receivable (note 4)............ 276,685 277,891 165,737 267,052 159,272
Inventories (note 5).................... 180,996 201,439 120,140 193,298 115,285
Deferred tax assets (note 13)........... 6,479 5,235 3,122 3,518 2,098
Prepaid expenses........................ 3,558 3,122 1,862 6,996 4,172
--------- --------- -------- --------- --------
Total current assets............... 471,204 492,651 293,822 484,733 289,099
Investment in associated company........ 6,431 7,665 4,571 8,245 4,918
Property, plant and equipment (note
6).................................... 488,218 535,199 319,198 523,166 312,021
Intangible assets....................... 74,894 65,206 38,889 65,949 39,332
Other assets............................ 3,866 5,244 3,128 5,449 3,251
Deferred tax assets (note 13)........... 4,073 6,063 3,616 5,054 3,014
--------- --------- -------- --------- --------
Total assets....................... 1,048,686 1,112,028 663,224 1,092,596 651,635
========= ========= ======== ========= ========
F - 3
7
THOUSANDS OF THOUSANDS OF
U.S. DOLLARS U.S. DOLLARS
(CONVENIENCE (CONVENIENCE
SEPTEMBER 30, TRANSLATION) TRANSLATION)
--------------------- SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1997 1998 1998 1998 1998
--------- --------- ------------- ------------ ------------
(UNAUDITED) (UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of debt (note 9)........ 309,677 360,365 214,925 362,297 216,077
Accounts payable (note 8)............... 226,453 260,163 155,164 253,814 151,377
Accrued payroll......................... 56,781 63,500 37,872 55,096 32,860
Other accrued expenses.................. 37,267 25,105 14,973 22,114 13,189
Income taxes payable.................... 5,583 3,162 1,886 10,341 6,167
Deferred tax liabilities (note 13)...... 3,564 3,618 2,158 2,587 1,543
Other current liabilities and deferred
income................................ 20,278 12,979 7,741 12,227 7,292
--------- --------- -------- --------- --------
Total current liabilities.......... 659,603 728,892 434,719 718,476 428,505
Long term debt (note 9)................. 101,893 97,855 58,362 94,203 56,184
Accrual for pension obligations (note
12)................................... 39,458 44,913 26,786 46,277 27,600
Deferred tax liabilities (note 13)...... 20,847 20,432 12,186 13,480 8,040
Minority interest....................... 6,248 1,450 865 952 568
Other non current liabilities and
deferred income....................... 2,266 3,850 2,295 3,887 2,319
--------- --------- -------- --------- --------
Total liabilities.................. 830,315 897,392 535,213 877,275 523,216
--------- --------- -------- --------- --------
STOCKHOLDERS' EQUITY
Capital stock........................... 70,000 70,000 41,749 70,000 41,749
Additional paid in capital.............. 358,397 373,234 222,600 373,234 222,600
Deficit................................. (194,311) (209,995) (125,243) (209,392) (124,883)
Cumulative currency translation
adjustment............................ (14,628) (16,376) (9,767) (16,010) (9,549)
Accumulated other comprehensive income
(note 12)............................. (1,087) (2,227) (1,328) (2,511) (1,498)
--------- --------- -------- --------- --------
Total stockholders' equity......... 218,371 214,636 128,011 215,321 128,419
--------- --------- -------- --------- --------
Total liabilities and stockholders'
equity........................... 1,048,686 1,112,028 663,224 1,092,596 651,635
========= ========= ======== ========= ========
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PEGUFORM GMBH, BOTZINGEN
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED SEPTEMBER 30, 1997 AND 1998
AND THREE MONTHS ENDED DECEMBER 31, 1997 AND 1998
(DEM IN THOUSANDS)
THOUSANDS OF
THOUSANDS OF U.S. DOLLARS
U.S. DOLLARS (CONVENIENCE
(CONVENIENCE TRANSLATION)
YEAR ENDED TRANSLATION) THREE MONTHS ENDED THREE MONTHS
SEPTEMBER 30, YEAR ENDED DECEMBER 31, ENDED
----------------------- SEPTEMBER 30, ------------------------- DECEMBER 31,
1997 1998 1998 1997 1998 1998
---------- ---------- ------------- ----------- ----------- ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
Revenues
Net sales................... 1,664,884 1,977,698 1,179,518 441,841 577,725 344,561
Other revenues.............. 17,717 45,728 27,272 1,265 1,974 1,177
Total revenues........... 1,682,601 2,023,426 1,206,790 443,106 579,699 345,738
Cost of products sold......... (1,482,448) (1,806,115) (1,077,184) (404,477) (519,424) (309,789)
---------- ---------- ---------- -------- -------- --------
Gross profit............. 200,153 217,311 129,606 38,629 60,275 35,949
Selling, general and
administrative expenses..... (154,427) (201,040) (119,902) (37,915) (51,407) (30,660)
Other expenses................ (7,524) (2,408) (1,436) (8,883) (1,595) (951)
Interest expense (net)........ (23,267) (23,992) (14,309) (6,815) (6,333) (3,777)
---------- ---------- ---------- -------- -------- --------
Income (loss) before income
taxes.................... 14,935 (10,129) (6,041) (14,984) 940 561
Taxes on income............... (6,029) (6,060) (3,614) (895) (798) (476)
Minority interest............. (618) 505 301 4 461 275
========== ========== ========== ======== ======== ========
Consolidated net income
(loss)................... 8,288 (15,684) (9,354) (15,875) 603 360
========== ========== ========== ======== ======== ========
Foreign currency translation
adjustments................. (1,508) (1,748) (1,042) (1,135) 366 218
Other comprehensive income.... (1,087) (1,140) (680) (275) (284) (169)
---------- ---------- ---------- -------- -------- --------
Total other comprehensive
income................. (2,595) (2,888) (1,722) (1,410) 82 49
---------- ---------- ---------- -------- -------- --------
Comprehensive income..... 5,693 (18,572) (11,076) (17,285) 685 409
========== ========== ========== ======== ======== ========
See notes to the consolidated financial statements.
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PEGUFORM GMBH, BOTZINGEN
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1997 AND 1998
AND THREE MONTHS ENDED DECEMBER 31,
1997 AND 1998
(DEM IN THOUSANDS EXCEPT FOR SHARE DATA)
CUMULATIVE ACCUMULATED
COMMON STOCK ADDITIONAL CURRENCY OTHER
---------------- PAID IN TRANSLATION COMPREHENSIVE
SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT INCOME TOTAL
------ ------- ---------- -------- ----------- ------------- -------
BALANCE AT OCTOBER 1, 1996....... 18 70,000 358,397 (198,050) (13,120) 217,227
Net income....................... 8,288 8,288
Dividend paid.................... (4,549) (4,549)
Currency translation............. (1,508) (1,508)
Additional minimum pension
liability...................... (1,087) (1,087)
-- ------- ------- -------- ------- ------ -------
BALANCE AT SEPTEMBER 30, 1997.... 18 70,000 358,397 (194,311) (14,628) (1,087) 218,371
Net loss......................... (15,684) (15,684)
Capital contribution............. 14,837 14,837
Currency translation............. (1,748) (1,748)
Additional minimum pension
liability...................... (1,140) (1,140)
-- ------- ------- -------- ------- ------ -------
BALANCE AT SEPTEMBER 30, 1998.... 18 70,000 373,234 (209,995) (16,376) (2,227) 214,636
== ======= ======= ======== ======= ====== =======
Thousands of U.S. Dollars
(Convenience translation)
September 30, 1998............. 41,749 222,600 (125,243) (9,767) (1,328) 128,011
======= ======= ======== ======= ====== =======
BALANCE AT SEPTEMBER 30, 1997.... 18 70,000 358,397 (194,311) (14,628) (1,087) 218,371
Net (loss)....................... (15,875) (15,875)
Dividend paid.................... 0
Currency translation............. (1,135) (1,135)
Additional minimum pension
liability...................... (275) (275)
-- ------- ------- -------- ------- ------ -------
BALANCE AT DECEMBER 31, 1997
(Unaudited).................... 18 70,000 358,397 (210,186) (15,763) (1,362) 201,086
== ======= ======= ======== ======= ====== =======
BALANCE AT SEPTEMBER 30, 1998.... 18 70,000 373,234 (209,995) (16,376) (2,227) 214,636
Net loss......................... 603 603
Capital contribution............. 0
Currency translation............. 366 366
Additional minimum pension
liability...................... (284) (284)
-- ------- ------- -------- ------- ------ -------
BALANCE AT DECEMBER 31, 1998
(Unaudited).................... 18 70,000 373,234 (209,392) (16,010) (2,511) 215,321
== ======= ======= ======== ======= ====== =======
Thousands of U.S. Dollars
(Convenience translation)
December 31, 1998.............. 41,749 222,600 (124,883) (9,549) (1,498) 128,419
======= ======= ======== ======= ====== =======
See notes to the consolidated financial statements.
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PEGUFORM GMBH, BOTZINGEN
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1997 AND 1998 AND THREE MONTHS ENDED
DECEMBER 31, 1997 AND 1998
(DEM IN THOUSANDS)
THOUSANDS OF U.S. DOLLARS
U.S. DOLLARS (CONVENIENCE
(CONVENIENCE TRANSLATION)
YEAR ENDED TRANSLATION) THREE MONTHS ENDED THREE MONTHS
SEPTEMBER 30, YEAR ENDED DECEMBER 31, ENDED
------------------- SEPTEMBER 30, ------------------------- DECEMBER 31,
1997 1998 1998 1997 1998 1998
-------- -------- ------------- ----------- ----------- ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
Cash Flows From Operating Activities
Net income (loss)......................... 8,288 (15,684) (9,354) (15,875) 603 360
Adjustments to reconcile net income to net
cash provided by operating activities...
Depreciation and amortization........... 87,828 88,734 52,922 23,802 24,555 14,645
(Gain) loss from the disposal of fixed
assets -- net......................... (1,621) (4,237) (2,527)
Change in accounts receivable........... (42,777) (1,206) (719) (9,608) 10,839 6,464
Change in inventories................... (30,614) (20,443) (12,192) (11,407) 8,141 4,855
Change in prepaid expenses.............. 1,877 436 260 (4,393) (3,874) (2,311)
Change in investment in associated
company............................... (1,373) (1,234) (736) (336) (580) (346)
Change in other assets.................. 582 (1,378) (822) 526 (205) (122)
Change in accounts payable.............. 37,879 31,289 18,661 (23,822) 830 495
Change in accrued expenses.............. 12,661 (2,378) (1,418) (14,943) (10,620) (6,334)
Change in other liabilities............. 5,760 (10,513) (6,270) 16,090 (1,213) (723)
Change in deferred taxes................ (3,483) 264 157 (21) (4,903) (2,924)
-------- -------- ------- ------- ------- -------
Net cash provided by (used in)
operating activities............... 75,007 63,650 37,962 (39,987) 23,573 14,059
-------- -------- ------- ------- ------- -------
Cash Flows From Investing Activities
Proceeds from sale of fixed assets........ 10,524 19,381 11,559 2,213 11,078 6,607
Capital expenditures...................... (102,014) (143,552) (85,616) (37,057) (23,736) (14,156)
-------- -------- ------- ------- ------- -------
Net cash used for investing
activities............................ (91,490) (124,171) (74,057) (34,844) (12,658) (7,549)
-------- -------- ------- ------- ------- -------
Cash Flows From Financing Activities
Capital contribution...................... 0 14,837 8,849 0 0 0
Dividends paid............................ (4,549) 0 0 0 0 0
Net borrowings............................ 38,734 60,141 35,869 185,306 67,351 40,169
Principal payments on debt................ (17,356) (12,967) (7,734) (54,163) (69,084) (41,203)
-------- -------- ------- ------- ------- -------
Net cash provided by (used for)
financing activities.................. 16,829 62,011 36,984 131,143 (1,733) (1,034)
-------- -------- ------- ------- ------- -------
Effect of foreign exchange rate changes..... 838 (12) (7) (115) (277) (165)
-------- -------- ------- ------- ------- -------
Net Decrease in Cash........................ 1,184 1,478 882 56,197 8,905 5,311
Cash and Cash Equivalents at Beginning of
Period.................................... 2,302 3,486 2,079 3,486 4,964 2,961
-------- -------- ------- ------- ------- -------
Cash and Cash Equivalents at End of
Period.................................... 3,486 4,964 2,961 59,683 13,869 8,272
======== ======== ======= ======= ======= =======
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THOUSANDS OF U.S. DOLLARS
U.S. DOLLARS (CONVENIENCE
(CONVENIENCE TRANSLATION)
YEAR ENDED TRANSLATION) THREE MONTHS ENDED THREE MONTHS
SEPTEMBER 30, YEAR ENDED DECEMBER 31, ENDED
------------------- SEPTEMBER 30, ------------------------- DECEMBER 31,
1997 1998 1998 1997 1998 1998
-------- -------- ------------- ----------- ----------- ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
Supplemental Cash Flow Information
Cash paid during the period for interest.... 26,758 30,136 17,973
Income taxes paid (refunded)................ 3,026 7,372 4,391
Non-cash changes relating to additional
minimum liability
Change in minimum liability............... 3,301 2,390 1,425 598 589 351
Change in intangible asset................ (819) 121 72 30 49 29
Change in deferred asset.................. (1,395) (1,371) (817) (353) (354) (211)
Other comprehensive income................ (1,087) (1,140) (680) (275) (284) (170)
See notes to consolidated financial statements.
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PEGUFORM GMBH, BOTZINGEN
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(DEM IN THOUSANDS)
(1) DESCRIPTION OF BUSINESS
The Company is a supplier to the automotive industry and mainly provides
plastic system components.
(2) BASIS OF PRESENTATION
Solely for the convenience of the readers, the consolidated financial
statements as of September 30, 1998 and for the year then ended and as of
December 31, 1998 and for the three months then ended have been translated to
U.S. dollars at the rate of DEM 1,6767 per U.S. dollar, the noon buying rate in
New York City for cable transfers in DEM as certified for customs purposes
published by the Federal Reserve Bank of New York as of December 31, 1998. The
translation should not be construed as a representation that the amounts shown
could be converted into U.S. dollars at such rate or any other rate.
The accompanying financial statements have been prepared in accordance with
United States generally accepted accounting principles ("U.S. GAAP"). The
company maintains its financial records in accordance with the German Commercial
Code, which represents generally accepted accounting principles in Germany
("German GAAP"). Generally, accepted accounting principles in Germany vary in
certain respects from U.S. GAAP. Accordingly, the Company has recorded certain
adjustments in order that these financial statements are in accordance with U.S.
GAAP.
(3) SUMMARY OF ACCOUNTING POLICIES
Fiscal year -- The Company's fiscal year runs from October 1 to September
30.
Principles of consolidation -- The consolidated financial statements
include the accounts of PEGUFORM GmbH and its wholly or majority owned
subsidiaries (collectively the "Group").
The Group accounts include the following companies:
PERCENTAGE HOLDING
NAME AND LOCATION OF SUBSIDIARY %
- ------------------------------- ------------------
PEGUFORM GmbH, Botzingen............................... 100
PEGUFORM France S.A., Vernon/France.................... 100
PEGUFORM Iberica S.A., Polinya/Spain................... 100
PEGUFORM Bohemia a.s., Liberec/Czech
Republic............................................. 100
PEGUFORM Hella Mexico, S.A. de C.V., Puebla/Mexico..... 70
INERGA Components S.A., Rubi/Spain..................... 100
INERGA Logistics S.L., Polinya/Spain................... 100
INERGA Argentina S.A., Buenos Aires/Argentina.......... 100
INERGA do Brasil Ltda., Guaranema/Brasil............... 100
PEGUFORM Slovakia s.r.o. Poprad/Slowacian Republic..... 100
F - 9
13
PEGUFORM GMBH, BOTZINGEN
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
All intercompany accounts and transactions have been eliminated.
The group holds a 50% interest in Celulosa Fabril (Cefa) S.A.,
Zaragoza/Spain. This investment is stated at equity.
Application of a new basis of accounting after a change in control of the
Company ("push-down accounting") -- In 1990 there was a change in the control of
the Company. 99% of the shares of Eurotec Systemteile GmbH, the then parent
company of PEGUFORM GmbH (which was merged downstream into PEGUFORM GmbH with
economic effect as of October 1, 1996), were acquired by Klockner Mercator
Maschinenbau GmbH, a subsidiary of Klockner-Werke AG. The paid purchase price
for the shares transferred was retroactively allocated to the net identifiable
assets. The remaining goodwill is amortized over 15 years using the
straight-line method.
Foreign Currencies -- Currency translation is based upon the Statement of
Financial Accounting Standards (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.
Estimates -- The preparation of the Company's financial statements in
conformity with generally accepted accounting principles 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 average cost method. Inventory also includes costs
associated with building molds under contract.
There are generally no molds used in the Company's manufacturing operations
which are owned by the Company.
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................................... 10-50
Machinery and equipment..................................... 3-20
Other equipment, office and transportation equipment........ 3-10
Leasehold improvements are amortized over the useful life or the term of
the lease. Expenditures for maintenance and repairs are charged to expense as
incurred.
Leases -- The group leases property, plant and equipment as a lessee. All
leases that meet certain specified criteria intended to represent situations
where the substantive risks and rewards of
F - 10
14
PEGUFORM GMBH, BOTZINGEN
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ownership have been transferred to the lessee are accounted for as capital
lease. All other leases are accounted for as operating lease.
Intangible Assets -- Purchased intangible assets are recorded at
acquisition cost. Amortization is computed by the straight-line method over the
estimated useful lives, generally 3 to 10 years.
The purchase price of companies in excess of the fair value of net
identifiable assets acquired ("goodwill") is capitalized and generally amortized
over 15 years using the straight-line method. The same applies to goodwill
resulting from push-down accounting for the change in control in the Company in
1990. In the case of Inerga Components S.A., which was acquired as of October 1,
1995, goodwill is amortized over 5 years.
Intangible assets include an amount relating to an additional minimum
pension liability. This amount is determined by the unrecognized transitional
amount considered to calculate accrued pension cost (see note 12).
Long-lived assets and long-lived assets to be disposed of -- Effective
October 1, 1996, the Statement of Financial Accounting Standards ("SFAS") No.
121 "Accounting for the Impairment of Long-lived Assets and for Long-Lived
Assets to be Disposed of" was adopted. This Statement establishes accounting
standards for the impairment of long-lived assets, and certain identifiable
intangibles, and goodwill related to those assets to be held and used and
long-lived and certain identifiable intangibles to be disposed of. The statement
requires that long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. In addition, the Statement requires that certain long-lived assets
and identifiable intangibles to be disposed of be reported at the lower of
carrying amount or fair value less cost to sell. The Company periodically
evaluates the carrying value for impairment.
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. The
revenues are recognized 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.
Related party transactions -- The Company is a 99% owned subsidiary of
Klockner Mercator Maschinenbau GmbH, a subsidiary of Klockner-Werke AG,
Duisburg, Germany. Besides immaterial transactions with sister companies the
Company has entered into various transactions with its parent company. These
transactions do not include operational activities but mostly administrative and
financing services. Since the Company operates for the sole benefit of the
parent company, the terms of these transactions are not the result of
arms'-length bargaining.
Since 1990 exist a so called "control and profit distribution agreement"
between Klockner Mercator Maschinenbau GmbH and PEGUFORM GmbH and its former
parent Eurotec Systemteile GmbH respectively. Under this agreement the company
has to distribute all its net income to the parent. On the other side the parent
company has to absorb any net losses incurred at the company. In these financial
statements the payments of the parent to absorb the losses are stated as
additional paid in capital. Any profit distributions are treated as dividends.
The control and profit distribution agreement also has an effect for tax
purposes. PEGUFORM GmbH is no longer a separate taxable individual, with the
effect that all corporation taxes, if any, are
F - 11
15
PEGUFORM GMBH, BOTZINGEN
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
recorded and paid by the parent company. In years with profit the parent company
however charges PEGUFORM GmbH for income taxes. These tax charges are deemed to
be based on actual corporate and trade income tax rates. On the other hand no
tax credits are given for net losses.
Income taxes -- Deferred income taxes are provided using the liability
method in accordance with SFAS No. 109. "Accounting for income taxes".
Deferred taxes for German income taxes are recorded as if PEGUFORM GmbH
were a "stand alone" taxable unit for corporate and trade income taxes. Being
currently integrated for income tax purposes as a subsidiary of a German parent
company PEGUFORM GmbH may be charged for tax liabilities or credited for tax
receivables for future net profits or losses if there were no change in
ownership. With the sale of all the shares in the Company to a foreign company
there will be no future integration for tax purposes anymore thus resulting in
an income tax consideration of all temporary differences.
(4) ACCOUNTS RECEIVABLE
Accounts receivable consist of the following:
AT SEPTEMBER 30,
------------------ AT DECEMBER 31,
1997 1998 1998
------- ------- ---------------
(UNAUDITED)
Accounts receivable trade........................... 243,151 247,248 250,006
Other accounts receivable........................... 38,024 34,924 24,703
------- ------- -------
281,175 282,172 274,709
Allowance for doubtful accounts..................... (4,490) (4,281) (7,657)
------- ------- -------
Net accounts receivable............................. 276,685 277,891 267,052
======= ======= =======
Substantially all of the receivables are from companies operating in the
automobile industry.
(5) INVENTORIES
Inventories consist of the following:
AT SEPTEMBER 30,
------------------ AT DECEMBER 31,
1997 1998 1998
------- ------- ---------------
(UNAUDITED)
Raw material........................................ 48,437 57,376 69,247
Work-in-process..................................... 116,488 102,411 91,468
Finished goods...................................... 20,892 22,544 21,705
Payments on account................................. 33,230 51,960 41,600
Advance payments.................................... (38,051) (32,852) (30,722)
------- ------- -------
Total............................................... 180,996 201,439 193,298
======= ======= =======
F - 12
16
PEGUFORM GMBH, BOTZINGEN
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Payments on account and advance payments (received) mostly relate to molds.
The Company has no mold production, the manufacturing of the molds is
subcontracted to specialized suppliers usually receiving payments in advance.
There are usually also advance payments by the customer, not necessarily
identical to the ones to be paid to the subcontractor.
In case of probable losses on the purchase and sale of the molds provisions
for threatening losses are recorded.
(6) PROPERTY, PLANT, AND EQUIPMENT
Property, plant and equipment consist of the following:
AT SEPTEMBER 30,
---------------------- AT DECEMBER 31,
1997 1998 1998
--------- --------- ---------------
(UNAUDITED)
Land and buildings............................... 365,126 377,659 380,931
Machinery and equipment.......................... 689,912 751,878 755,224
Office and transportation equipment.............. 99,747 101,152 88,849
Construction in progress......................... 42,406 64,500 63,074
--------- --------- ---------
1,197,191 1,295,189 1,288,078
Less accumulated depreciation and amortization... (708,973) (759,990) (764,912)
--------- --------- ---------
Total............................................ 488,218 535,199 523,166
========= ========= =========
Included in property, plant and equipment is equipment and buildings held
under capitalized leases. These assets have a cost basis of DEM 94,494 and DEM
94,636 and accumulated depreciation relating to these assets of DEM 32,740 and
DEM 38,769 at September 30, 1997 and 1998 respectively.
(7) BUSINESS ACQUISITIONS
Effective July 1, 1990 shares in Eurotec Systemteile GmbH, the then parent
company of PEGUFORM GmbH, were acquired by Klockner Mercator Maschinenbau GmbH,
a subsidiary of Klockner-Werke AG. This transaction was accounted for as a
purchase and the purchase price was allocated applying "push-down" accounting to
the estimated fair value of assets and liabilities assumed, resulting in a
goodwill of approximately DEM 127.5 million.
Effective January 2, 1992 the Company acquired 51% of the shares of
PEGUFORM Bohemia a.s. This acquisition was accounted for as a purchase resulting
in a goodwill of approximately DEM 2.7 million. The goodwill is amortized over
15 years. At October 8, 1993 additional 25% of the shares in this company were
acquired increasing the goodwill already by DEM 1.0 million.
Effective January 26/February 12, 1998 the Company acquired the remaining
24% of outstanding shares in PEGUFORM Bohemia for a purchase price of DEM 4.67
million. This acquisition was accounted for as a purchase with the purchase
price allocated to the relating minority interest in equity. The net amount paid
included an adjustment for costs absorbed by the majority
F - 13
17
PEGUFORM GMBH, BOTZINGEN
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
shareholder. As a result of this adjustment, DEM 1.9 million was recorded in
revenue in the year ending September 30, 1998.
With a contract signed on October 2/October 14, 1998 the Company and Grupo
Hermez, S.A. de C.V., Mexico City/Mexico, established PEGUFORM Hella Mexico,
S.A. de C.V., Puebla/ Mexico, as a joint company. The Company holds 70% of the
shares, Grupo Hermez 30%.
The consolidated earnings include the operations of PEGUFORM Hella Mexico
from October 14, 1997, the operations of PEGUFORM Bohemia were already fully
consolidated in the prior two years.
Had the acquisition of the minority interest in PEGUFORM Bohemia occurred
before October 1, 1996 the pro forma effect on prior year financial statements
would have been the following increase of net profits resulting from a decrease
of minority interests:
YEAR ENDED
SEPTEMBER 30,
--------------
1997 1998
----- -----
Minority interests portion of the results of PEGUFORM
Bohemia................................................... 618 338
=== ===
(8) ACCOUNTS PAYABLE
Accounts payable consist of the following:
AT SEPTEMBER 30,
------------------ AT DECEMBER 31,
1997 1998 1998
------- ------- ---------------
(UNAUDITED)
Accounts payable trade.............................. 225,395 259,672 253,814
Liabilities to affiliated companies................. 1,058 491 0
------- ------- -------
Total............................................... 226,453 260,163 253,814
======= ======= =======
F - 14
18
PEGUFORM GMBH, BOTZINGEN
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(9) DEBT
Debt consist of the following:
AT SEPTEMBER 30,
INTEREST RATES ----------------- AT DECEMBER 31,
% MATURITIES 1997 1998 1998
-------------- ---------- ------- ------- ---------------
(UNAUDITED)
Liabilities to financial institutions.......... 3.25 - 15.5 1999 36,415 44,490 75,728
Liabilities to affiliated companies............ variable 1999 264,972 308,440 278,128
Liabilities from capital leases................ 4.16 - 11.76 1999 8,290 7,435 8,441
------- ------- -------
Short-term financial liabilities............... 309,677 360,365 362,297
------- ------- -------
Liabilities to financial institutions.......... 3.25 - 8.24 2000-2003 49,848 53,165 52,645
Liabilities from capital leases................ 4.16 - 11.76 2000-2011 52,045 44,690 41,558
------- ------- -------
Long-term financial liabilities................ 101,893 97,855 94,203
------- ------- -------
Total debt................................. 411,570 458,220 456,500
======= ======= =======
The liabilities to financial institutions include various loans received
from banks in different countries. In 1997/98 PEGUFORM GmbH has received two new
loans by Sudwest LB, Stuttgart, Germany, in the aggregate amount of DEM
21,535,000. These loans are to be repaid in four installments on December 30,
starting December 30, 1998. In a separate agreement with Klockner Mercator
Maschinenbau GmbH PEGUFORM receives the difference between the average monthly
internal group interest rate and the loan interest rate.
The Group has entered into various capital lease agreements for property,
plant and equipment. The leases require monthly, quarterly and half-yearly
payments of principal and interest. The Group usually intends to exercise the
options to buy the respective assets.
Bonds and liabilities to financial institutions are partially secured by a
comfort letter from Klockner-Werke AG as the ultimate parent of PEGUFORM GmbH.
Klockner-Werke AG has given to the banks the commitment not to cancel the
"profit distribution agreement" (see note 3: "related party transactions")
before the loans given to PEGUFORM GmbH have been repaid.
The Company had available unused unsecured short-term lines of credit of
DEM 59,715 at September 30, 1998 and unsecured long-term lines of credit of DEM
26,589 at September 30, 1998.
F - 15
19
PEGUFORM GMBH, BOTZINGEN
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Aggregate amounts of debt maturing during the next five years and
thereafter as of September 30, 1998 are as follows:
DEM
-------
1999........................................................ 360,365
2000........................................................ 21,567
2001........................................................ 23,169
2002........................................................ 17,278
2003........................................................ 10,219
Remaining years............................................. 25,622
-------
Total....................................................... 458,220
=======
(10) RELATED PARTY TRANSACTIONS
The transactions of the Company with its parent company Klockner Mercator
Maschinenbau GmbH include mostly financing and the distribution/absorption of
profit/losses. Additionally there were minor purchases of machinery from sister
companies.
The financing of the Company is done exclusively via short-term credits
without fixed repayment dates.
According to the profit distribution agreement (see note 3: related party
transactions) final net profits (before taxes) are to be distributed to the
parent company while net losses are to be absorbed.
In 1997/98 the parent company granted operating subsidies to the Company.
The current accounts with the parent company are to be charged with
variable interest rates.
The following is a summary of transactions with the parent company at
September 30, 1997 and 1998:
AT SEPTEMBER 30,
---------------- AT DECEMBER 31,
1997 1998 1998
------ ------ ---------------
(UNAUDITED)
Revenue received for:
Operating subsidies granted by the parent company... 0 13,335 0
------ ------ -----
0 13,335 0
====== ====== =====
Expenses charged for:
Interest on current intercompany accounts........... 9,962 14,320 3,257
Tax charge by parent company........................ 4,252 0 0
------ ------ -----
14,214 14,320 3,257
====== ====== =====
F - 16
20
PEGUFORM GMBH, BOTZINGEN
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Based on the control and profit distribution agreement with the parent
company, in the year ended September 30, 1997 the company distributed its net
income for the year in the amount of DEM 4,549. In the year ended September 30,
1998 the parent company absorbed the company's loss of DEM 13,335.
The result of the related party transactions is the following net payable.
The amounts are shown on a gross basis in accounts receivable and in accounts
payable and short-term debt:
AT SEPTEMBER 30,
------------------ AT DECEMBER 31,
1997 1998 1998
------- ------- ---------------
(UNAUDITED)
Amounts Receivable.................................. 0 0 0
Amounts Payable..................................... 266,030 308,931 278,128
------- ------- -------
Net Amounts Payable................................. 266,030 308,931 278,128
======= ======= =======
(11) COMMITMENTS AND CONTINGENCIES
Operating Leases -- The Company leases certain of its manufacturing
facilities, sales offices, transportation and other equipment under operating
leases. Total rental expense was approximately DEM 14,946 and DEM 19,994 for the
years ended September 30, 1997 and 1998 respectively.
Future minimum lease commitments under non-cancellable operating leases
with initial or remaining terms in excess of one year are as follows:
DEM
------
1999........................................................ 6,726
2000........................................................ 5,738
2001........................................................ 4,346
2002........................................................ 3,243
2003........................................................ 1,382
Remaining years............................................. 785
------
Total....................................................... 22,220
======
Other Commitments and contingencies -- The Company has in 1995 entered into
an agreement with a company regarding the use of EDP hardware components and
software as well as technical support. This agreement is not cancellable and
runs until September 30, 2003. Total expense was DEM 16,240 and DEM 22,841 for
the years ended September 30, 1997 and 1998 respectively.
F - 17
21
PEGUFORM GMBH, BOTZINGEN
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Future EDP cost commitments under this non-cancellable agreement are as
follows:
DEM
------
1999........................................................ 15,683
2000........................................................ 13,209
2001........................................................ 11,972
2002........................................................ 11,512
2003........................................................ 11,117
Remaining years............................................. 0
------
Total....................................................... 63,493
======
(12) PENSION PLANS
PEGUFORM GmbH 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 are no external findings of these schemes.
The funded status of the defined benefit plans was as follows:
ACCUMULATED
BENEFITS
EXCEED ASSETS
AT SEPTEMBER 30,
----------------
1997 1998
------ ------
Actuarial present value of benefit obligations
Vested Benefits........................................... 33,086 37,841
Nonvested benefits........................................ 6,372 7,073
------ ------
Accumulated benefit obligation.............................. 39,458 44,914
====== ======
Projected benefit obligation................................ 40,529 45,871
Market value of plan assets................................. 0 0
------ ------
Excess (deficiency) of assets over projected benefit
obligation................................................ 40,529 45,871
Unrecognized transitional amount............................ 1,331 1,210
Unrecognized net loss....................................... 3,553 5,951
Unrecognized prior service cost............................. 0 0
------ ------
Accrued pension cost........................................ 35,645 38,710
====== ======
F - 18
22
PEGUFORM GMBH, BOTZINGEN
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ACCUMULATED
BENEFITS
EXCEED ASSETS
AT SEPTEMBER 30,
----------------
1997 1998
------ ------
Amounts recognized in the balance sheet consist of
Accrued pension liability................................. 39,458 44,913
Intangible asset.......................................... 1,331 1,210
Unrecognized prior service cost........................... 2,482 4,993
------ ------
Net amount recognized....................................... 35,645 38,710
====== ======
The date used to measure plan liabilities is as of September 30 each year.
The weighted-average assumed discount rate was 6.0% for the years ended
September 30, 1997 and 1998 respectively. The expected rate of increase in
compensation levels was 2.0% and 1.6% respectively for the years ended September
30, 1997 and 1998 respectively. The same rates as for the compensation were used
for inflation and increase in social security contribution ceiling in the
actuarial calculation.
Net periodic pension expense for the years ended September 30, 1997 and
1998 included the following components:
AT
SEPTEMBER 30,
--------------
1997 1998
----- -----
Service cost benefits during the year....................... 1,692 1,910
Interest cost on projected benefit obligation............... 2,183 2,393
Actual return on plan assets................................ 0 0
Net amortization and deferral............................... 121 121
----- -----
Net periodic pension expense................................ 3,996 4,424
===== =====
(13) INCOME TAXES
Amounts in the financial statements related to income taxes are for the
operations of the consolidated subsidiaries as listed under note 3 and for
PEGUFORM GmbH as charged by its parent company.
As explained under note 3 deferred taxes for PEGUFORM GmbH are recorded
considering a full taxation of future profits and losses although this company
is currently not subject to German corporate and trade income taxes.
F - 19
23
PEGUFORM GMBH, BOTZINGEN
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The provision for income tax expense for the period ended:
AT
SEPTEMBER 30,
---------------
1997 1998
------ -----
Currently Payable
Germany................................................... 4,252 38
Foreign................................................... 1,367 4,728
------ -----
Total....................................................... 5,619 4,766
------ -----
Deferred
Germany................................................... 6,480 (624)
Foreign................................................... (6,070) 1,918
------ -----
Total....................................................... 410 1,294
------ -----
Total....................................................... 6,029 6,060
====== =====
German corporate tax law applies a split-rate computation with regard to
the taxation of the income of a corporation and its shareholders. Current German
taxes are recorded as being charged by the parent company based on the tax law
in effect for the respective fiscal period. Corporate income is initially
subject to a federal corporation tax of 45% plus a solidarity surcharge of 7.5%
until 1997 and 5.5% effective January 1, 1998 on the federal corporate tax
payable. Including the impact of the surcharge, the federal corporate tax rate
amounted to 48.375% until 1997 and to 47.475% effective January 1, 1998. Upon
distribution of retained earnings to stockholders, the corporate income tax rate
on the earnings is adjusted to 30%, plus the solidarity surcharge on the
distribution corporate tax by means of a refund for taxes previously paid. Upon
distribution of retained earnings in the form of a dividend, stockholders who
are taxpayers in Germany are entitled to a tax credit in the amount of federal
income taxes previously paid by the corporation.
Current taxes are calculated on the basis of the respective tax rates in
effect for the periods presented. This may presumably also apply to the tax
charges by the parent company of PEGUFORM GmbH for the German operations. The
calculation of the deferred taxes is based on future tax rates. As a result, the
deferred taxes for PEGUFORM GmbH are calculated with an effective corporate
income tax rate of 48.375% as of September 30, 1997 and 47.475% as of September
30, 1998 plus the after federal tax benefit rate for trade tax of 7.8% and 7.9%
as of September 30, 1997 and 1998 respectively.
A reconciliation of income taxes determined using the German corporate tax
rate of 48.375% plus the after federal tax benefit rate for trade taxes of 7.8%
for a combined statutory rate of 55.4% for the year ended September 30, 1997 and
of 47.475% plus the after federal tax benefit rate for trade
F - 20
24
PEGUFORM GMBH, BOTZINGEN
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
taxes of 7.9% for a combined statutory rate of 56.2% for the year ended
September 30, 1998 is as follows:
YEAR ENDED
SEPTEMBER 30,
----------------
1997 1998
------ ------
Expected provision (benefit) for income taxes............... 8,392 (5,613)
Non-deductible items........................................ 2,566 1,092
Tax free income............................................. (1,363) (1,631)
Write off of goodwill not tax-deductible.................... 5,237 5,159
Badwill credited to income not taxable...................... 0 (1,058)
Consolidation items not taxable............................. (907) (71)
Foreign tax rate differential............................... (6,893) (3,409)
Changes in valuation allowances on deferred tax assets...... (990) 2,090
Parent company's tax allocation differential................ 2,078 10,970
Investment and export tax credits (Spain)................... (1,966) (1,891)
Other....................................................... (125) 422
------ ------
Actual income tax expense................................... 6,029 6,060
====== ======
The amounts shown under Parent company's tax allocation differential relate
to the tax charges by Klockner Werke AG. There were no credits given for the
losses the year ending September 1998, while the charge for the year ending
September 1997 was not based on the taxable income of PEGUFORM GmbH.
The amount of the Group's deferred tax valuation allowances is based upon
management's belief that it is more likely than not that not all of the deferred
tax assets will be realized. In future periods, depending upon the Group's
financial results, management's estimate of the amount of the deferred tax
assets considered realizable may change, and hence the valuation allowance may
increase or decrease.
F - 21
25
PEGUFORM GMBH, BOTZINGEN
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax-effected temporary differences and carryforwards which comprised
deferred assets and liabilities were as follows:
YEAR ENDED
SEPTEMBER 30,
------------------
1997 1998
------- -------
Deferred tax assets:
Accounts receivable....................................... 127 235
Inventories............................................... 1,557 776
Property, plant and equipment............................. 368 0
Other accrued expenses.................................... 5,191 5,596
Net operating loss carryforwards.......................... 19,207 20,923
Additional minimum pension liability...................... 1,395 2,766
Other..................................................... 0 415
------- -------
27,845 30,711
Valuation allowances................................... (17,293) (19,413)
------- -------
Total deferred tax assets.............................. 10,552 11,298
------- -------
Deferred tax liabilities:
Accounts receivable....................................... 1,179 1,890
Inventories............................................... 0 603
Property, plant and equipment (including capital
leases)................................................ 17,998 17,483
Other accrued expenses.................................... 3,915 2,845
Other..................................................... 1,319 1,229
------- -------
Total deferred tax liabilities......................... 24,411 24,050
------- -------
Net deferred tax liabilities........................... (13,859) (12,752)
======= =======
At September 30, 1998, the Group had net operating losses ("NOLs")
amounting to DEM 53,883. The NOLs relate to losses of foreign companies and are
partly limited in their use to the Group.
Management believes the net operating loss carryforwards at September 30,
1998 are only to a limited extent realizable based on forecasted earnings and
available tax planning strategies.
With regard to the additional minimum pension liability we refer to Note
12. Changes in these deferred tax assets have no impact on the provision for
income tax expenses.
F - 22
26
PEGUFORM GMBH, BOTZINGEN
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Net deferred income tax assets and liabilities in the consolidated balance
sheets are as follows:
YEAR ENDED
SEPTEMBER 30,
------------------
1997 1998
------- -------
Current
Deferred income tax assets................................ 6,479 5,235
Deferred income tax liabilities........................... (3,564) (3,618)
------- -------
Total....................................................... 2,915 1,617
------- -------
Non-current
Deferred income tax assets................................ 4,073 6,063
Deferred income tax liabilities........................... (20,847) (20,432)
------- -------
Total....................................................... (16,774) (14,369)
------- -------
Total....................................................... (13,859) (12,752)
======= =======
F - 23
27
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The information set forth under the heading Pro Forma included in the
Unaudited Consolidated Pro Forma Balance Sheet as of March 31, 1999 (December
31, 1998 for Peguform GmbH) reflects: (1) the acquisition of Peguform (the
"Acquisition"); (2) the refinancing of Venture's prior senior credit facility
(the "Prior Credit Agreement") and redemption of Venture's $78.9 million of
9 3/4% Senior Subordinated Notes (the "1994 Notes"); and (3) the offering of
$125.0 million Of 11% Senior Notes due 2007 and $125.0 million of 12% Senior
Subordinated Notes due 2009 (the "Outstanding Notes") and borrowings under
Venture's existing senior credit facility (the "New Credit Agreement"), and the
application of the net proceeds therefrom, as if such transactions had occurred
on such date. The proceeds from the offering of the Outstanding Notes together
with $380.3 million drawn under the New Credit Agreement was used as follows:
(1) approximately $448.0 million was used to fund the cash consideration paid in
the Acquisition (excluding $7.0 million of acquired indebtedness included in the
$455.0 million aggregate purchase price); (2) approximately $82.8 million was
used to redeem the 1994 Notes, including prepayment premium; (3) approximately
$75.0 million was used to refinance the Prior Credit Agreement; and (4)
approximately $24.5 million was used to pay certain fees and expenses related to
the Acquisition and the offering of the Outstanding Notes.
The Unaudited Consolidated Pro Forma Statement of Operations for the year
ended December 31, 1998 gives effect to: (1) the Acquisition; (2) the
refinancing of the Prior Credit Agreement and redemption of the 1994 Notes; and
(3) the offering of the Outstanding Notes and borrowings under the New Credit
Agreement, and the application of the net proceeds therefrom as described above,
as if such transactions had occurred on January 1, 1998. The Unaudited
Consolidated Pro Forma Statement of Operations for the three months ended March
31, 1999 (three months ended December 31, 1998 for Peguform) gives effect to:
(1) the Acquisition; (2) the refinancing of the Prior Credit Agreement and
redemption of the 1994 Notes; and (3) the offering of the Outstanding Notes and
borrowings under the New Credit Agreement, and the application of the net
proceeds therefrom as described above, as if such transactions had occurred on
January 1, 1999.
The Unaudited Pro Forma Consolidated Statement of Operations does not
include pro forma adjustments for certain non-recurring costs and charges,
consisting of (1) the prepayment charge of $3.9 million on the redemption of the
1994 Notes and (2) the $1.8 million write-off of deferred financing costs.
The Unaudited Pro Forma Financial Statements do not reflect any of the
anticipated cost savings which the Company expects to achieve through
integration of the operations of Peguform and Venture.
Solely for the convenience of the readers, the historical financial
information for Peguform has been translated to United States dollars at the
rate of DEM 1.6767 per United States dollar, the Noon Buying Rate as of December
31, 1998. The translation should not be construed as a representation that the
amounts shown could be converted into United States dollars at such rate or any
other rate.
The unaudited pro forma financial data presented herein are based on the
assumptions and adjustments described in the accompanying notes. The Unaudited
Consolidated Pro Forma Statement of Operations does not purport to represent
what the Company's results of operations actually would have been if the events
described above had occurred as of the dates indicated or what such results will
be for any future periods. The Unaudited Pro Forma Financial Statements are
based upon assumptions and adjustments that we believe are reasonable.
F - 24
28
VENTURE HOLDINGS COMPANY LLC
UNAUDITED CONSOLIDATED PRO FORMA BALANCE SHEET
AS OF MARCH 31, 1999 (DECEMBER 31, 1998 FOR PEGUFORM)
HISTORICAL
---------------------- PRO FORMA
VENTURE PEGUFORM(A) ADJUSTMENTS PRO FORMA
-------- ----------- ----------- ----------
(DOLLARS IN THOUSANDS)
ASSETS
Current Assets:
Cash and cash equivalents.......... $ 3,153 $ 8,272 $ $ 11,425
Accounts receivable................ 200,067 159,272 359,339
Inventories........................ 53,288 115,285 168,573
Prepaid expenses/Other............. 8,648 6,270 14,918
-------- -------- ---------- ----------
Total current assets............ 265,156 289,099 554,255
Property, Plant & Equipment -- Net... 196,226 312,021 508,247
Intangible Assets.................... 51,552 39,332 (38,640)(B) 176,176
123,932(C)
Other Assets......................... 26,547 8,169 21,900(D) 54,839
(1,777)(E)
Deferred Tax Assets.................. 11,035 3,014 14,049
-------- -------- ---------- ----------
Total assets.................... $550,516 $651,635 $ 105,415 $1,307,566
======== ======== ========== ==========
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable................... $ 62,506 $151,377 $ $ 213,883
Accrued payroll & taxes............ 10,331 32,860 43,191
Accrued interest................... 6,274 -- 6,274
Other accrued expenses............. 5,701 28,191 33,892
Current portion of long-term
debt............................ 1,588 216,077 (209,614)(F) 8,051
-------- -------- ---------- ----------
Total current liabilities....... 86,400 428,505 (209,614) 305,291
Other Liabilities.................... 5,948 30,487 36,435
Deferred Tax Liabilities............. 11,881 8,040 19,921
Long-Term Debt....................... 361,068 56,184 630,300(G) 867,823
(25,789)(F)
(78,940)(E)
(75,000)(H)
-------- -------- ---------- ----------
Total liabilities............... 465,297 523,216 240,957 1,229,470
Trust Principal/Stockholders
Equity............................. 85,219 128,419 (129,917)(I) 78,096
(5,625)(E)
-------- -------- ---------- ----------
Total Liabilities and Trust
Principal/ Stockholders'
Equity........................ $550,516 $651,635 $ 105,415 $1,307,566
======== ======== ========== ==========
See notes to Unaudited Consolidated Pro Forma Balance Sheet.
F - 25
29
VENTURE HOLDINGS COMPANY LLC
NOTES TO UNAUDITED CONSOLIDATED PRO FORMA BALANCE SHEET
AS OF MARCH 31, 1999 (DECEMBER 31, 1998 FOR PEGUFORM)
(DOLLARS IN THOUSANDS)
(A) For purposes of the Unaudited Consolidated Pro Forma Balance Sheet, certain
items included in Peguform's historical balance sheet have been
reclassified to conform to Venture's historical balance sheet presentation
as follows:
(1) "Prepaid expenses/Other" includes the sum of "Deferred tax assets" and
"Prepaid expenses" as classified in the unaudited Consolidated Balance
Sheet of Peguform as of December 31, 1998;
(2) "Other accrued expenses" includes the sum of "Other accrued expenses,"
"Income taxes payable," "Deferred tax liabilities (short term)" and
"Other current liabilities and deferred income" as classified in the
unaudited Consolidated Balance Sheet of Peguform as of December 31,
1998; and
(3) "Other Liabilities" includes the sum of "Accrued for pension
obligations," "Minority interest" and "Other non-current liabilities
and deferred income" as classified in the unaudited Consolidated
Balance Sheet of Peguform as of December 31, 1998.
(B) The pro forma adjustment represents the elimination of goodwill recorded on
Peguform's balance sheet at December 31, 1998.
(C) The pro forma adjustment represents the estimated goodwill resulting from
the Acquisition. We are in the process of obtaining certain evaluations,
estimations, appraisals and actuarial and other studies for purposes of
computing the final amount of goodwill and allocating the portion of
goodwill applicable to other balance sheet line items. We may revise our
original estimate of goodwill as additional information is available.
(D) The pro forma adjustment represents the financing costs of $21,900 related
to the additional debt to finance the Acquisition, repay certain
indebtedness and pay related fees and expenses.
(E) The pro forma adjustments represent the repayment of the 1994 Notes of
$78,940, the pre-payment premium of $3,848 paid to retire the 1994 Notes
early and the write-off of $1,777 in unamortized financing costs associated
with the 1994 Notes.
EXTRAORDINARY
ITEM
-------------
Prepayment premium on 1994 Notes............................ $3,848
Unamortized Financing Costs................................. 1,777
------
$5,625
======
(F) Represents the repayment of Peguform debt as follows:
Current portion of long-term debt........................... $209,614
Long-term Debt.............................................. 25,789
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(G) The pro forma adjustment represents the additional debt necessary to finance
the Acquisition, repay certain indebtedness and pay related fees and
expenses.
Additional Debt (long term):
New Credit Agreement(1)
Revolving Credit Facility.............................. $ 5,300
Term Loans............................................. 375,000
11% Senior Notes due 2007................................. 125,000
12% Senior Subordinated Notes due 2009.................... 125,000
--------
$630,300
========
(1) As of June 4, 1999 the New Credit Agreement was amended to increase
the Term Loans from $375,000 to $400,000 and reduce the Revolving
Credit Facility from $200,000 to $175,000.
(H) The pro forma adjustment represents the repayment of the Company's Prior
Credit Agreement outstanding balance of $75,000.
(I) The pro forma adjustment represents the elimination of Peguform's
stockholders' equity, adjusted by $1,498 for accumulated other
comprehensive income relating to Peguform's minimum pension liability.
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31
VENTURE HOLDINGS COMPANY LLC
UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
HISTORICAL
---------------------- PRO FORMA
VENTURE PEGUFORM(A) ADJUSTMENTS PRO FORMA
-------- ----------- ----------- ----------
(DOLLARS IN THOUSANDS)
Net sales.......................... $645,196 $1,288,256 $ $1,933,452
Cost of products sold.............. 532,809 1,145,740 1,678,549
-------- ---------- -------- ----------
Gross profit....................... 112,387 142,516 254,903
Selling, general and administrative
expense.......................... 59,689 125,038 4,268(C) 192,290
3,295(D)
Payments to beneficiary in lieu of
trust distributions.............. 535 -- 535
-------- ---------- -------- ----------
Income (loss) from operations...... 52,163 17,478 (7,563) 62,078
Interest expense (net)............. 36,641 14,022(B) 18,699(E) 69,362(B)
-------- ---------- -------- ----------
Net income (loss) before taxes..... 15,522 3,456 (26,262) (7,284)
Tax provision (benefit)............ 1,954 3,556 (14,444)(F) (8,934)
Minority interest.................. -- (574) (574)
-------- ---------- -------- ----------
Net income (loss).................. $ 13,568 $ 474 $(11,818) $ 2,224
======== ========== ======== ==========
See notes to the Unaudited Consolidated Pro Forma Statement of Operations
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VENTURE HOLDINGS COMPANY LLC
NOTES TO UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
(A) The Peguform statement of operations represents the 12-months ended December
31, 1998. Amounts were derived from Peguform's audited financial statements
for the year ended September 30, 1998, and from unaudited financial
statements for the 3 months ended December 31, 1998, less the amounts from
unaudited financial statements for the 3 months ended December 31, 1997.
For purposes of the Unaudited Consolidated Pro Forma Statement of
Operations, certain items included in Peguform's historical financial data
have been reclassified to conform to Venture's historical statement of
operations presentations as follows:
(1) "Net sales" includes the sum of "net sales" and "other revenues" as
classified in and calculated from Peguform's Consolidated Statements of
Income; and
(2) "Selling, general and administrative expense" includes the sum of
"Selling, general and administrative expenses" and "Other expenses" as
classified in and calculated from Peguform's Consolidated Statements of
Income.
(B) The Peguform historical and pro forma amounts are net of interest income of
$3,364 at Peguform for the 12 months ended December 31, 1998.
(C) The pro forma adjustment represents the amortization of goodwill resulting
from the Acquisition over a 30 year period.
(D) The pro forma adjustment represents the amortization of financing costs
resulting from the financing of the Acquisition, including the New Credit
Agreement and the Outstanding Notes, over the respective maturities of the
additional debt. The maturities of the New Credit Agreement range from 18
months to 6 years, and maturities on the 11% Senior Notes due 2007 and 12%
Senior Subordinated Notes due 2009 are assumed to be 8 and 10 years,
respectively.
(E) The pro forma adjustment represents the incremental interest expense
necessary to reflect the total interest expense on the outstanding debt of
the combined Company for the period.
Elimination of historical interest expense.................. $(31,022)
Interest expense with respect to New Credit Agreement(1).... 32,215
Interest expenses with respect to Outstanding Notes(2)...... 22,500
Reduction in interest expense with respect to Venture's $205
million of 9 1/2% Senior Notes due 2005 (the "1997 Senior
Notes")(3)............................................... (4,994)
--------
Total incremental interest................................ $ 18,699
========
(1) Assumes that loans under the New Credit Agreement (which bear interest
at floating rates) bear interest at a weighted average interest rate of
8.05% per annum, including the impact of existing interest rate swap
agreements, and that the New Credit Agreement maintains an average
outstanding balance of $400,000.
(2) We entered into interest rate swaps with 5 year terms which
effectively convert our United States dollar fixed rate coupon on the
Outstanding Notes to a euro fixed rate coupon. We entered into this
arrangement to take advantage of lower interest rates in Europe and to
hedge our
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33
exchange rate risk. Interest expense on the Outstanding Notes reflects
these interest rate swaps, with a weighted average interest rate of
11.50% on the 11% Senior Notes due 2007 and 12% Senior Subordinated
Notes due 2009 converted into a weighted average euro interest rate of
9.00%. These instruments may not qualify for hedge accounting, which
may result in non-cash charges to earnings related to the mark to
market on the swaps.
(3) We entered into interest rate swaps with 3-year terms which effectively
convert our United States dollar fixed rate coupon on the 1997 Senior
Notes to a euro fixed rate coupon. We entered into this arrangement to
take advantage of lower interest rates in Europe and to hedge our
exchange rate risk. Interest expense on the 1997 Senior Notes reflects
these interest rate swaps with an interest rate of 9.50% converted into
a euro interest rate of 7.09%. These instruments may not qualify for
hedge accounting, which may result in non-cash charges to earnings
related to the mark to market on the swaps.
(4) Our actual interest expense could differ from the above amounts based
on increases in interest rates on floating rate debt. An increase of
0.25% in interest rates on anticipated borrowings under the New Credit
Agreement would have the effect of increasing interest expense by $0.9
million.
(F) The pro forma adjustment represents the tax impact at the applicable
statutory rates for Peguform of (55%).
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34
VENTURE HOLDINGS COMPANY LLC
UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999
(THREE MONTHS ENDED DECEMBER 31, 1998 FOR PEGUFORM)
HISTORICAL
---------------------- PRO FORMA
VENTURE PEGUFORM(A) ADJUSTMENTS PRO FORMA
-------- ----------- ----------- ---------
(DOLLARS IN THOUSANDS)
Net sales................................ $165,992 $345,738 $ $511,730
Cost of products sold.................... 133,070 309,789 442,859
-------- -------- -------- --------
Gross profit............................. 32,922 35,949 68,871
Selling, general and administrative
expense................................ 14,270 31,611 1,033(C) 47,737
823(D)
Payments to beneficiary in lieu of trust
distributions.......................... -- --
-------- -------- -------- --------
Income (loss) from operations............ 18,652 4,338 (1,856) 21,134
Interest expense (net)................... 9,479 3,777(B) 4,553(E) 17,809
-------- -------- -------- --------
Net income (loss) before taxes........... 9,173 561 (6,409) 3,325
Tax provision (benefit).................. 1,067 476 (3,525)(F) (1,982)
Minority interest........................ -- (275) (275)
-------- -------- -------- --------
Net income (loss)........................ $ 8,106 $ 360 $ (2,884) $ 5,582
======== ======== ======== ========
See notes to the Unaudited Consolidated Pro Forma Statement of Operations
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35
VENTURE HOLDINGS COMPANY LLC
NOTES TO UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999
(THREE MONTHS ENDED DECEMBER 31, 1998 FOR PEGUFORM)
(DOLLARS IN THOUSANDS)
(A) The Peguform statement of operations represents the 3-months ended December
31, 1998. Amounts were derived from Peguform's unaudited financial
statements for the 3-months ended December 31, 1998.
For purposes of the Unaudited Consolidated Pro Forma Statement of
Operations, certain items included in Peguform's historical financial data
have been reclassified to conform to Venture's historical statement of
operations presentations as follows:
(1) "Net sales" includes the sum of "net sales" and "other revenues" as
classified in and calculated from Peguform's Consolidated Statements of
Income; and
(2) "Selling, general and administrative expense" includes the sum of
"Selling, general and administrative expenses" and "Other expenses" as
classified in and calculated from Peguform's Consolidated Statements of
Income.
(B) The Peguform historical and pro forma amounts are net of interest income of
$317 at Peguform for the 3-months ended December 31, 1998.
(C) The pro forma adjustment represents the amortization of goodwill resulting
from the Acquisition over a 30 year period.
(D) The pro forma adjustment represents the amortization of financing costs
resulting from the financing of the Acquisition, including the New Credit
Agreement and the Outstanding Notes, over the respective maturities of the
additional debt. The maturities of the New Credit Agreement range from 18
months to 6 years, and maturities on the 11% Senior Notes due 2007 and 12%
Senior Subordinated Notes due 2009 are assumed to be 8 and 10 years,
respectively.
(E) The pro forma adjustment represents the incremental interest expense
necessary to reflect the total interest expense on the outstanding debt of
the combined Company for the period.
Elimination of historical interest expense.................. $ (7,777)
Interest expense with respect to New Credit Agreement(1).... 8,102
Interest expenses with respect to Outstanding Notes(2)...... 5,625
Reduction in interest expense with respect to 1997
Senior Notes(3)........................................... (1,397)
--------
Total incremental interest................................ $ 4,553
========
(1) Assumes that loans under the New Credit Agreement (which bear interest
at floating rates) bear interest at a weighted average interest rate of
8.10% per annum, including the impact of existing interest rate swap
agreements, and that the New Credit Agreement maintains an average
outstanding balance of $400,000.
(2) We entered into interest rate swaps with 5 year terms which effectively
convert our United States dollar fixed rate coupon on the Outstanding
Notes to a euro fixed rate coupon. We entered into this arrangement to
take advantage of lower interest rates in Europe and to hedge our
exchange rate risk.
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36
Interest expense on the Outstanding Notes reflects these interest rate
swaps, with a weighted average interest rate of 11.50% on the 11%
Senior Notes due 2007 and 12% Senior Subordinated Notes due 2009
converted into a weighted average euro interest rate of 9.00%. These
instruments may not qualify for hedge accounting, which may result in
non-cash charges to earnings related to the mark to market on the
swaps.
(3) We entered into interest rate swaps with 3 year terms which effectively
convert our United States dollar fixed rate coupon on the 1997 Senior
Notes to a euro fixed rate coupon. We entered into this arrangement to
take advantage of lower interest rates in Europe and to hedge our
exchange rate risk. Interest expense on the 1997 Senior Notes reflects
these interest rate swaps with an interest rate of 9.50% converted into
a euro interest rate of 7.09%. These instruments may not qualify for
hedge accounting, which may result in non-cash charges to earnings
related to the mark to market on the swaps.
(4) Our actual interest expense could differ from the above amounts based
on increases in interest rates on floating rate debt. An increase of
0.25% in interest rates on anticipated borrowings under the New Credit
Agreement would have the effect of increasing interest expense by $0.2
million.
(F) The pro forma adjustment represents the tax impact at the applicable
statutory rates for Peguform of (55%).
F - 33