-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HoNgNRkREA2IDrjNOwnsD5Dng4Onv79JUEiPf2SkW0cff6GH+YWjHXAyHTGm8iX8 Vh9rSj4F6MYqhRgmFJBqZw== 0000950124-99-002200.txt : 19990331 0000950124-99-002200.hdr.sgml : 19990331 ACCESSION NUMBER: 0000950124-99-002200 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADVANCED ACCESSORY SYSTEMS LLC CENTRAL INDEX KEY: 0001057836 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 133848156 STATE OF INCORPORATION: DE FISCAL YEAR END: 1226 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 333-49011 FILM NUMBER: 99578588 BUSINESS ADDRESS: STREET 1: 12900 HALL RD STREET 2: SUITE 200 CITY: STERLING HEIGHTS STATE: MI ZIP: 48313 BUSINESS PHONE: 8109972900 MAIL ADDRESS: STREET 1: 12900 HALL RD STREET 2: SUITE 200 CITY: STERLING HEIGHTS STATE: MI ZIP: 48313 10-K 1 FORM 10-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------- FORM 10-K (Mark One) /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998 OR / / 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 333-49011 [ADVANCED ACCESSORY SYSTEMS LOGO] ADVANCED ACCESSORY SYSTEMS, LLC (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 13-3848156 (STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 12900 HALL ROAD, SUITE 200, STERLING HEIGHTS, MI 48313 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE: (810) 997-2900 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE 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 shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /x/ No / / Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / / The aggregate fair market value of the Registrant's Class A Units held by non-affiliates of the Registrant as of March 15, 1999, based upon the good faith determination of the Board of Managers was approximately $3,982,000. For purposes of this disclosure, shares of Class A Units held by persons who hold more than 5% of the outstanding Class A Units and Class A Units held by officers and directors of the Registrant have been excluded because such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily conclusive for other purposes. The number of the Registrant's Class A Units, outstanding at March 15, 1999 was 16,450. Documents Incorporated by Reference None 2 ADVANCED ACCESSORY SYSTEMS, LLC FORM 10-K YEAR ENDED DECEMBER 31, 1998 TABLE OF CONTENTS PART I Item 1. BUSINESS........................................................... 1 Item 2. PROPERTIES......................................................... 10 Item 3. LEGAL PROCEEDINGS.................................................. 10 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................ 10 PART II Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED MEMBERS' MATTERS................................................... 11 Item 6. SELECTED HISTORICAL FINANCIAL DATA................................. 12 Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS................................ 14 Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK......... 22 Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA........................ 22 Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE................................ 48 PART III Item 10. MANAGERS AND EXECUTIVE OFFICERS OF THE REGISTRANT.................. 48 Item 11. EXECUTIVE COMPENSATION............................................. 49 Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT......................................................... 51 Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................... 52 PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K........................................................... 53 SIGNATURES.................................................................. 55 i 3 FORWARD-LOOKING STATEMENTS THIS BUSINESS SECTION AND OTHER PARTS OF THIS ANNUAL REPORT ON FORM 10-K CONTAIN FORWARD LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS, AND SUCH DIFFERENCES MAY BE MATERIAL. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED BELOW AND IN "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS." PART I ITEM 1. BUSINESS GENERAL Advanced Accessory Systems, LLC (together with its subsidiaries, the "Company" or "AAS") is one of the world's largest suppliers of towing and rack systems and related accessories for the automotive original equipment manufacturer ("OEM") market and the automotive aftermarket. The Company's products include a complete line of towing systems including accessories such as trailer balls, ball mounts, electrical harnesses, safety chains and locking hitch pins. The Company's broad offering of rack systems includes fixed and detachable racks and accessories which can be installed on vehicles to carry items such as bicycles, skis, luggage, surfboards and sailboards. The Company's products are sold as standard accessories or options for a variety of light vehicles. In 1998, the Company estimates that approximately 45% of its net sales were generated from products sold for light trucks. For the year ended December 31, 1998, the Company's net sales and EBITDA, as adjusted, were $290.1 million and $38.4 million, respectively. In September 1995, the Company, through its SportRack, LLC subsidiary ("SportRack"), acquired substantially all of the net assets of the MascoTech Accessories division (the "MascoTech Division") of MascoTech, Inc. ("MascoTech" or the "Predecessor"). The MascoTech Division was a North American supplier of rack systems and accessories to the automotive OEM market and aftermarket. In October 1996, the Company acquired (the "Brink Acquisition") all of the capital stock of Brink B.V., a private company with limited liability incorporated under the laws of The Netherlands and a European supplier of towing systems to the automotive OEM market and aftermarket. In December 1996, ownership of Brink B.V. and its subsidiaries was transferred to a newly formed subsidiary of the Company, Brink International B.V. ("Brink"). In August 1997, the Company formed Valley Industries, LLC ("Valley") to acquire (the "Valley Acquisition") the net assets of Valley Industries, Inc. ("Valley Industries"), a North American supplier of towing systems to the automotive OEM market and aftermarket. Two smaller acquisitions were completed in July 1997 by SportRack International, Inc. ("SportRack International"), a subsidiary of SportRack. SportRack International acquired from Bell Sports Corporation ("Bell") the net assets of its sportrack division, a Canadian supplier of rack systems and accessories to the automotive aftermarket. Chase Capital Partners ("CCP"), an affiliate of the Company, at that time was a significant equity investor in Bell. SportRack International also acquired the capital stock of Nomadic Sports, Inc. ("Nomadic"), a Canadian supplier of rack systems and accessories to the automotive OEM market and aftermarket. The acquisitions of the sportrack division of Bell and Nomadic are collectively referred to in this 10-K as the "SportRack International Acquisition." In January 1998, the Company through Brink International B.V., acquired (the "Ellebi Acquisition") the net assets of the towbar segment of Ellebi S.p.A. ("Ellebi"). Ellebi is an Italian supplier of towing systems to the automotive OEM market and aftermarket. In February 1998, the Company through SportRack International, Inc., acquired (the "Tranfo-Rakzs Acquisition") the net assets of Transfo-Rakzs, Inc. ("Transfo-Rakzs"). Transfo-Rakzs is a Canadian supplier of rear hitch rack carrying systems and related products to the automotive aftermarket. 1 4 COMPETITIVE ADVANTAGES Leading Global Market Position. Based on its knowledge of the industry, the Company believes that it is one of the world's largest suppliers of towing systems and one of the world's largest suppliers of rack systems. The Company also believes, based on its knowledge of the industry, that it is the largest supplier of towing systems in Europe, the largest supplier of towing systems to automotive OEMs in North America and the second largest supplier of towing systems to the aftermarket in North America. The Company also believes that it is one of the two largest suppliers of rack systems sold to automotive OEMs in North America. The Company has 25 engineering, manufacturing and distribution facilities strategically located in North America and Europe. By virtue of its size and global presence, the Company believes it benefits from several competitive advantages, including the ability to (i) satisfy local design, production, quality and timing requirements of global OEMs; (ii) provide "one-stop shopping" for customers' product and service requirements; (iii) optimize plant production; (iv) maximize its raw material purchasing power; (v) spread its selling, administrative and product development expenses over a large base of net sales; and (vi) develop and maintain state-of-the-art production facilities. Strong Relationships with Diverse Customer Base. The Company has an established position as a Tier 1 supplier of towing and/or rack systems to most of the OEMs manufacturing in North America and/or Europe including DaimlerChrysler, General Motors, Toyota, Opel, Volvo, Isuzu, Ford, BMW, Subaru, Fiat, Mitsubishi, Nissan, Volkswagen, SEAT, Skoda, Daewoo and Kia. The Company supplies DaimlerChrysler with substantially all its North American towing systems and rack systems and accessories. The Company also supplies approximately 50% of the towing and rack system requirements of General Motors. Tier 1 status and strong customer relationships are important elements in achieving continued profitable growth because, as OEMs narrow their supplier bases, well regarded, existing suppliers have an advantage in gaining new contracts. The evolution of OEM relationships into strategic partnerships provides a significant advantage to Tier 1 suppliers with system integration capabilities (such as the Company) in retaining existing contracts as well as in participating during the design phase for new vehicles, which is integral to becoming a supplier for such new platforms. The Company is also a leading supplier of towing and rack systems to automotive aftermarket wholesalers, retailers and installers, such as U-Haul, Pep Boys, Balkamp, Advance Auto Parts, Coast Distribution System, Discount Auto Parts, Ace Hardware, Norauto, Brezan, Feuvert and Canadian Tire. Comprehensive Product Line. The Company continues to position itself as a leading supplier to its customers for a growing range of products and services. Through its offering of over 2,000 towing system models, the Company's products fit virtually every light vehicle produced in North America and Europe. The Company is one of a limited number of European manufacturers with such a broad product line that also satisfies European Community ("EC") regulatory safety standards, even though such standards have not yet been adopted by each EC member country. Competitors whose products do not satisfy such standards face substantial design and testing costs to offer a comparable product line that meets these safety standards. The Company has provided OEMs with fixed rack systems for approximately half of the light truck models produced in North America that utilize vehicle-specific fixed racks. The Company believes that its broad product offerings also facilitate strategic partnerships with automotive aftermarket wholesalers, retailers and installers. Design and Engineering Expertise. The Company has an engineering and research and development staff that develops new products and processing technologies. The Company works directly with OEM designers to create innovative solutions that simplify vehicle assembly and reduce vehicle cost and weight. The Company is responsible for many industry innovations, including lighter, less obtrusive, round tube towing hitches as well as push button and pull lever stanchions on fixed rack systems. The Company believes its design and engineering capabilities provide significant value to its customers by (i) shortening OEM new product development cycles; (ii) lowering OEM manufacturing costs; (iii) providing technical expertise; and (iv) permitting aftermarket customers to maintain lower inventory levels. The Company also believes that its design innovations have created value for end users by providing products that are durable and easy to install and that enhance vehicle utility and appearance. High Quality, Low Cost Manufacturing Position. The Company believes that it is one of the highest quality, lowest cost suppliers of towing and rack systems in North America and Europe. The Company has received numerous quality and performance awards, including DaimlerChrysler's Gold Pentastar Award, Ford's Q-1 Award, Toyota's Distinguished Supplier Award and Nissan's Superior Supplier Performance Award. Supplier quality systems are currently being standardized across OEMs through the ISO-9000 and QS-9000 programs. The Company has achieved ISO-9000 or QS-9000 certification for 11 of its 20 manufacturing and engineering facilities and is in the process of obtaining certification for other of its facilities. The Company's low cost position is a result of its strict cost controls and continuous improvement programs designed to enhance productivity. OEMs typically prefer stable suppliers who can generate productivity gains that can be shared to reduce OEM costs. The Company's cost controls are closely integrated with its quality driven manufacturing operations, thereby allowing it to profitably deliver high quality, easy to install and competitively-priced components on a just-in-time basis. The Company's focus on low cost manufacturing also provides benefits when selling products to the less price sensitive aftermarket. 2 5 BUSINESS STRATEGY The Company's objective is to strengthen its position as a leading global supplier of automotive exterior accessories, thereby increasing revenue and cash flow. In order to accomplish its goal, the Company intends to pursue the following strategies. Increase Global Market Share. The Company intends to capitalize on its expanded presence in North America and Europe by marketing products to its global automotive OEM customers. Through its past acquisitions of complementary product lines, the Company is able to offer an expanded range of products and services to its extended customer base. The Company also expects to secure new customers by virtue of its expanded market presence and broad product and service offerings. The Company believes its continued emphasis on new technology (both product and process), will result in the development of more innovative, high margin towing and rack system products which it expects to market to its expanding customer base. Maintain and Enhance Strong Customer Relationships. The Company intends to strengthen and expand its relationships with global automotive OEMs and aftermarket customers by (i) continuing its commitment to innovative design and development of products during the early stages of vehicle design and redesign; (ii) building on its position as a low cost supplier of quality accessory products; (iii) offering new products in existing and new geographic areas by taking advantage of existing OEM relationships; and (iv) working with aftermarket customers to develop new products and marketing strategies. Increase Operating Efficiencies. The Company believes there are opportunities for improvement in margins and cash flow through intercompany cooperation among its various acquired business units, including (i) realizing economies of scale from the combined purchasing power of a larger company; (ii) achieving production and other operating efficiencies through the implementation of a "best practices" program; (iii) reducing certain selling, general and administrative and product development expenses; and (iv) reducing capital and operating expenditures from coordinated use of manufacturing resources. Pursue Strategic Acquisitions. In response to the trend in the OEM market toward systems suppliers, the Company is focused on making strategic acquisitions that will enhance its ability to provide integrated systems (such as a towing or rack system) or otherwise leverage its existing business by providing additional product, manufacturing and service capabilities. The Company also intends to pursue acquisitions which will expand its customer base by providing an entree to new customers, including expansion into selected geographic areas. The Company believes that such acquisitions should provide additional opportunities for increased net sales and cash flow by enhancing the Company's manufacturing and marketing capabilities. AUTOMOTIVE OEM AND AFTERMARKET TRENDS As automobile and light truck manufacturers have faced increased global competition, they have sought to significantly improve quality, reduce costs and shorten the development time required for new vehicle models. These changes have altered the OEM/supplier relationship and benefited larger suppliers that have strong product engineering and development capabilities, superior quality products, lower unit costs and the ability to deliver products on a timely basis. As a result, the Company believes that it has benefited and will continue to benefit from the following automotive OEM and aftermarket trends. Consolidation of Supplier Base by OEMs. Since the 1980's, OEMs have significantly consolidated their supplier base in an effort to reduce their procurement-related costs, ensure high quality and accelerate new model development. As a result, many smaller, poorly capitalized suppliers with limited product lines and engineering and design capabilities have been eliminated as direct suppliers to OEMs. Consequently, larger suppliers with broad product lines, in-house design and engineering capabilities and the ability to effectively manage their own supplier bases, have been able to significantly increase their market share. The consolidation by OEMs has altered the typical structure of supplier contracts. In the past, OEMs supplied all design, development and manufacturing expertise for accessory parts and were responsible for consistency of quality and reliability of delivery. On newer models, however, there has been a trend toward involving potential suppliers earlier in the design and development process to encourage suppliers to share design and development responsibility. In some cases, sole-source supply contracts, which cover the life of a vehicle or platform, are awarded. Both OEMs and suppliers benefit from the consolidation trend. Suppliers are able to devote the resources necessary for proprietary product development with the expectation that they will have the opportunity to profit on such investment over the multi-year life of a contract. OEMs benefit from shared manufacturing cost savings attributable to long, multi-year production runs at high capacity utilization levels. 3 6 Emergence of European Community Safety Standards. Trends within the European towing systems market result primarily from emerging EC safety standards and the corresponding legislative framework. Such standards provide that a towing system must fit all the vehicle manufacturer's recommended fitting points, must not interfere with the vision of the number plate when not in use and must meet strict testing criteria for durability and safety. These standards have been adopted by The Netherlands, Germany, Sweden, Italy, the United Kingdom and Scandinavia. Other EC countries are expected to adopt the legislation within two years. All of the Company's towing systems sold in Europe currently undergo rigorous safety testing in order to satisfy these EC regulatory standards. Increased Levels of Manufacturing in North America by Transplants. As a result of the relative cost advantage of producing vehicles in North America, many foreign automobile manufacturers with manufacturing operations in the United States ("transplants") have increased their share of North American light vehicle production from approximately 6% in 1986 to approximately 22% in 1998. Industry sources forecast that this trend will continue. For example, BMW commenced manufacturing in the U.S. in 1996. In addition, Toyota has announced plans to build its T-100 pickup truck in Indiana by 1999, Honda has announced plans to build its Odyssey minivan in North America by 1999, and BMW has announced plans to build its E-53 SUV in North America by 1999. The Company believes that increased levels of manufacturing of light trucks in North America by transplants will benefit full service, high quality suppliers with North American operations such as the Company. Outsourcing by OEMs. In an effort to facilitate and enhance product design, reduce costs and simplify manufacturing processes, automotive OEMs are increasingly outsourcing the manufacture of many components that were previously manufactured internally. This trend results from independent suppliers being generally able to design, manufacture and deliver components at a lower cost than OEMs as a result of (i) their significantly lower direct labor, fringe benefit and overhead costs; (ii) their ability to spread research and development and engineering costs over products provided to multiple OEMs; and (iii) the economies of scale inherent in product specialization. Independent suppliers such as the Company have benefited from outsourcing because the aggregate number, complexity and value of components that they manufacture have increased dramatically. OEMs, in turn, have benefited because outsourcing has allowed them to reduce costs and to focus on overall vehicle design and consumer marketing. PRODUCTS The principal product lines of the Company are towing systems and rack systems and accessories. In 1998, towing systems constituted approximately 60% and rack systems and accessories constituted approximately 40% of the Company's net sales. The Company believes it offers a more comprehensive product line than any of its competitors. The Company has devoted considerable resources to the engineering and designing of its products and, as a result, considers itself a market leader in the research and new product development of towing systems and rack systems. Towing Systems. The Company designs, manufactures and supplies towing systems to automotive OEMs and the automotive aftermarket which fit virtually every light vehicle produced in North America and Europe. In the aggregate, the Company supplies over 2,000 different towing systems, including a complete line of towing accessories. The Company's towing systems sold in Europe are installed primarily on passenger cars. The Company's primary product within the European market is the fixed ball towbar that is specifically designed to be mounted on a particular car model in accordance with the OEM's specified mounting points. The Company also markets sophisticated detachable ball systems which are popular with owners of more expensive cars or cars on which the license plate would otherwise be blocked by a fixed ball towbar. The Company's towing system products sold in Europe currently undergo rigorous safety testing in order to satisfy EC regulatory standards. Competitors whose products do not satisfy such standards face substantial design and testing costs to offer a comparable product line that meets the safety standards. The Company's towing systems sold in North America are installed primarily on light trucks. Two of the Company's most innovative product designs have been the tubular trailer hitch which is lighter in weight, less obtrusive and stronger than the conventional hitch, and a device which ensures secure attachment of a towing product to the vehicle. These product innovations have enabled the Company to improve the functionality and safety of towing systems while, at the same time, enhancing the overall appearance of vehicles utilizing these towing products. The Company offers a complete line of towing accessories, including trailer balls, ball mounts, electrical harnesses, safety chains and locking hitch pins. To capitalize on the strong growth trend in light trucks, the Company has recently expanded its product line to include other products designed specifically for this market, such as grille guards, brush guards and spare tire carriers. 4 7 Fixed Rack Systems. The Company supplies fixed roof rack systems for individual vehicle models that are generally sold to the automotive OEMs for installation at the factory or dealership. These rack systems typically remain on a model for the life of its design, which generally ranges from four to six years. The Company has been an industry leader in developing designs which not only complement the styling themes of a particular vehicle, but also increase the utility and functionality of the rack system. Most of the fixed rack systems sold by the Company are composed of side rails which run along both sides of the vehicle's roof, feet which mount the side rails to the vehicle's roof, and cross rails which run between the side rails. Cross rails, which are attached to the side rails with stanchions, are typically movable and can be used to carry a load. The Company uses advanced materials such as lightweight, high strength plastics and roll formed aluminum to develop durable rack systems that optimize vehicle performance. Many of these products incorporate innovative features such as push button and pull lever stanchions, which allow easy movement of the cross rails to accommodate various size loads. These rack systems are utilized on a large number of light trucks, including Jeep Grand Cherokee and Cherokee, DaimlerChrysler minivans, GM Suburban, Tahoe and Yukon and Mercedes Benz ML320. Detachable Rack Systems. The Company supplies detachable roof and rear mount rack systems for distribution in both the automotive and sporting accessory aftermarkets. A detachable rack system typically consists of cross rails which are attached to the roof of a vehicle by removable mounting clips. The Company offers a full line of detachable rack systems, including the SportRack(R), SnapRack(TM) and Mondial(R) rack systems. Rack System Accessories. The Company designs and manufactures lifestyle accessories for distribution in both the automotive and sporting accessory aftermarkets. These accessories typically attach to the Company's rack systems and are used for carrying items such as bicycles, skis, luggage, surfboards and sailboards. CUSTOMERS AND MARKETING Management believes that the Company's strong and diverse industry relationships are based on its reputation for high service levels, strong technical support, innovative product development, high quality and competitive pricing. Sales to OEM and aftermarket customers represented approximately 68% and 32% of the Company's net sales, respectively, in 1998. In addition, sales to DaimlerChrysler and General Motors were approximately 32% and 11%, respectively, of the Company's aggregate net sales in 1998. Automotive OEMs. The Company obtains most of its new orders through a presourcing process by which the customer invites one or a few preferred suppliers to manufacture and design a component or system that meets certain price, timing, functional and aesthetic parameters. Upon selection at the development stage, the Company and the customer typically agree to cooperate in developing the product to meet the specified parameters. Upon completion of the development stage and the award of the manufacturing business, the Company receives a purchase order that covers parts to be supplied for a particular car model. Such supply arrangements typically involve annual renewals of the purchase order over the life of the model, which is generally four to six years. In addition, the Company enters into long-term contracts with certain OEM customers which require the Company to make annual price reductions. The Company also competes to supply parts for successor models even though the Company may currently supply parts on the predecessor model. Sales to OEMs are made directly by the Company's internal sales staff of 52 individuals and 44 outside sales representatives. The Company sells its products to most of the automotive OEMs selling light vehicles in North America and/or Europe, including DaimlerChrysler, General Motors, Toyota, Opel, Volvo, Isuzu, Ford, BMW, Subaru, Fiat, Mitsubishi, Nissan, Volkswagen, SEAT, Skoda, Daewoo and Kia. The Company supplies DaimlerChrysler with substantially all of its North American towing systems and rack systems and accessories. The Company also supplies approximately 50% of the towing system and rack system requirements of General Motors. The following chart sets forth information regarding vehicle models on which the Company's automotive products are used or for which the Company has been awarded business.
AWARDED BUSINESS ON PRODUCT OEM CUSTOMER 1998 PRODUCTION(a) FUTURE PRODUCTION(b) --------------- ------------------ ------------------------------------ -------------------------- Towing Systems DaimlerChrysler Cherokee, Grand Cherokee, Caravan, Cherokee, Plymouth Voyager, Town & Country, Ram Prowler, Ram Van, 300M, Neon Pick-up, Dakota, Wrangler, Durango General Motors Suburban, Yukon, Tahoe, Astro, Frontera, Corsa, Arena (van), Safari, CK Pick-up, ML Van, S-10 Vectra Blazer, APV Vans, Bravada, Jimmy, Geo Tracker, Blazer, Corsa, Astra (hatchback), Astra (Sedan),
5 8
AWARDED BUSINESS ON PRODUCT OEM CUSTOMER 1998 PRODUCTION(a) FUTURE PRODUCTION(b) - --------------- ------------------ ------------------------------------ -------------------------- Towing Systems General Motors Astra (Station wagon), Calibra, Vectra (continued) (continued) (Hatchback), Vectra (Sedan), Vectra (Station wagon), Omega (Sedan), Omega (Station wagon), Campo, Frontera, Monterey, Zafira Ford Expedition, Explorer, Ranger, Explorer, Focus, Focus Wagon, Ranger, Aerostar Minivan, Mercury Villager, Mondeo Windstar Minivan, Navigator, Fiesta, Escort (all models), Mondeo, Mondeo (Wagon), Scorpio (Sedan), Scorpio (Wagon), Maverick, Transit Renault Laguna (Station wagon), Laguna, Twingo, Laguna, Clio Megane, Twingo, Espace Isuzu Rodeo, Trooper Toyota 4-Runner, Land Cruiser, RAV4, Lexus, Corolla, Lexus LS200, Carina, 646T, 477T, 860T, Corolla, Carina, Carina Wagon, Yaris Camry, Hi-Lux, Picnic, Previa, Hi-Ace, Celica Nissan Pathfinder, Pick-up, Quest, Infiniti Almera, Primera Wagon, Micra, Vehicle, QW Truck, Micra, Sunny, Patrol, Terrano Almera, Primera, Maxima, King Cab, Terrano, Patrol Mazda 121, MPV, Xedos-9, Xedos-6, 626, 323 626 Wagon, 323 Honda Passport PF Van, CRV Mitsubishi Montero, Carisma, L200 Spacestar, Challenger FIAT Almost all models Alpha Romeo Almost all models Lancia Almost all models Subaru Outback 79V Range Rover Range Rover, Land Rover Volvo 900 series (Sedan), 900 series 900 series, S/V 70 series (Station wagon), 850 (Sedan), 850 (Station wagon) SAAB 9000 series, 900 series 900 series, 9000 series, 9000 station wagon, small car 9-3, small car 9-5, small station wagon Peugeot 106, 306, 406 (Sedan), 406 (Station 206, 206 Sport, 207, 306 Break wagon), 406 (Coupe), 605, 806, J5 (Van), Boxer (Van) Suzuki Wagon R. Grand Vitara Daihatsu Sirion, More, Charade SEAT Toledo Skoda SK240 Volkswagen Gold Combi, Vento Daewoo LD100 Rack Systems DaimlerChrysler Cherokee, Grand Cherokee, Caravan, Cherokee, Caravan, Voyager, Town & Country, Durango Voyager, Town & Country, Neon PT, Pronto, Mercedes ML320 BW 72 General Motors Suburban, Yukon, Tahoe, Astro, Safari Suburban, Yukon, Tahoe, Jimmy, Escalade, Denali Blazer, Bravada Honda Accord Mitsubishi Montero Subaru Outback, Impreza, Legacy KIA Sportage SEAT Vario GP99 Opel Astra BMW E-53 (SUV)
- ---------- (a) Represents models for which the Company produced products in 1998. (b) The amount of products produced under these awards is dependent on the number of vehicles manufactured by the OEMs. Many of the models are versions of vehicles not yet in production. There can be no assurance that any of these vehicles will be produced or that the Company will generate certain revenues under these awards even if the models are produced. 6 9 Automotive Aftermarket. The Company sells its products directly into the automotive aftermarket through a number of channels, including wholesalers, retailers and installers, through its internal sales force and outside sales representatives. The largest of the Company's aftermarket customers include U-Haul, Pep Boys, Balkamp, Advance Auto Parts, Coast Distribution System, Discount Auto Parts, Ace Hardware, Norauto, Brezan, Feuvert and Canadian Tire. The Company believes that it has established a reputation as a highly reliable aftermarket supplier able to meet its customers' requirements for on-time deliveries while minimizing the carrying levels of inventory. For example, Valley began supplying towing systems to U-Haul (which the Company believes, based on its research, is the largest installer of towing systems in the United States) in 1994 and for the year ended December 31, 1998, supplied approximately 50% of U-Haul's towing system requirements. The Company believes aftermarket customers such as U-Haul represent opportunities to cross-sell existing products such as rack systems and accessories. MANUFACTURING PROCESS The Company's manufacturing operations are directed toward achieving ongoing quality improvements, reducing manufacturing and overhead costs, realizing efficiencies and adding flexibility. The manufacturing operations utilized by the Company include metal cutting, bending, cold forming, roll forming, stamping, welding, plastic injection molding, painting, assembly and packaging. The Company performs most manufacturing operations in-house but outsources certain processes depending on the capabilities and capacities of individual plants and cost considerations. For example, while some of the Company's towing systems manufacturing facilities have painting capabilities, the Company has chosen to outsource the painting of its rack systems. In some cases, the Company develops special machinery to meet its particular needs. For example, the hardware that accompanies certain towing systems is selected automatically by special equipment and is then weighed and transferred into the final package without human intervention. The Company has developed specialized, computer operated machinery to enable it to efficiently perform this operation. The Company has organized its production process to minimize the number of manufacturing functions and the frequency of material handling, thereby improving quality and reducing costs. In addition, the Company uses cellular manufacturing which improves scheduling flexibility, productivity and quality while reducing work in process and costs. The Company has established quality procedures at each of its facilities and strives to manufacture the highest quality product possible. The Company has achieved ISO-9000 or QS-9000 certification for 11 of its 20 manufacturing and engineering facilities and is in the process of obtaining certification for other of its facilities. The Company has received numerous quality and performance awards from its OEM customers, including DaimlerChrysler's Gold Pentastar Award, Ford Q-1 Award, Toyota's Distinguished Supplier Award and the Nissan Superior Supplier Performance Award. PRODUCT DESIGN, DEVELOPMENT AND TESTING The Company believes that it is a leader in the design of towing systems and rack systems and accessories. The Company believes it offers products that possess greater quality, reliability and performance than the products sold by many of its competitors. The 94 members of the Company's engineering and design staff possess strong technical skills. The Company currently holds more than 150 U.S. and foreign patents, and has numerous patent applications pending. The expiration of such patents are not expected to have a material adverse effect on the Company's operations. The Company spent $9.6 million, $5.9 million and $3.5 million on engineering, research and development in 1998, 1997 and 1996, respectively. The Company works closely with OEMs to constantly improve design and manufacturing technology and product functionality. When an OEM is in the process of developing a new model, it typically approaches an established or incumbent supplier with a request to supply the required towing system or rack system. The Company is typically contacted two to four years prior to the start of production of the new model. The Company's product development engineers then work closely with the OEM to develop a product that satisfies the OEM's aesthetic and functional requirements. This relationship also provides the Company with a competitive advantage in the aftermarket because the Company already possesses the knowledge to create a system compatible with new model vehicles prior to release. The Company has extensive testing capabilities which enable it to test and certify its products. The Company subjects its products to tests which it believes are more demanding than conditions which would occur during normal use. The Company has specialized equipment which it has purchased or developed for use in its testing laboratories. 7 10 Since May 1994, six European countries enacted the new EC regulatory standards which require that towing systems undergo significant safety testing prior to gaining approval for sale. This safety testing requires that a towing system be extensively tested for fatigue and includes subjecting a towing system to upwards of two million high load pulses. The Company does its testing in its own laboratory under the control of an independent institute that is authorized by the EC to approve the towing systems for sale. The quality assurance system is regularly audited by an independent institute and by the automotive OEMs themselves. The Company has continually been awarded the highest distinction of achievement by the independent institute. RAW MATERIALS The principal raw material used in the Company's products is steel, which is purchased in sheets, rolls, bars or tubes and represents approximately 50% of the Company's raw material costs. The Company also purchases significant amounts of aluminum and plastics. The Company has various suppliers globally and has not had difficulties in procuring raw materials nor does it expect to have any problems in the future. The Company is committed to supplier development and long-term supplier relationships. However, most of the Company's raw material demands are for commodities and, as such, can be purchased on the open market on an as needed basis. The Company selects among available suppliers by comparing cost, consistent quality and timely delivery as well as compliance with QS-9000 and ISO-9000 standards. The Company customarily obtains its supplies through individual purchase orders. In some instances, the Company will enter into short-term contracts with its suppliers which generally run one year or less. However, the Company has signed a long-term supply agreement which terminates in 2004 with one of its painting suppliers, Crown Group, Inc. ("Crown"), under which Crown opened a state-of-the-art paint line in a facility adjacent to the Company's Port Huron, Michigan facility. COMPETITION The Company's industry is highly competitive. A large number of actual or potential competitors exist, some of which are larger than the Company and have substantially greater resources than the Company. The Company competes primarily on the basis of product quality, cost, timely delivery, customer service, engineering and design capabilities and new product innovation in both the OEM market and the automotive aftermarket. The Company believes that as OEMs continue to strive to reduce new model development cost and time, innovation and design and engineering capabilities will become more important as a basis for distinguishing competitors. The Company believes it has an outstanding reputation in both of these areas. In the automotive aftermarket, the Company believes that its wide range of product applications is a competitive advantage. For example, the Company has developed towing systems to fit substantially all the light vehicles produced in North America and Europe. The Company believes its competitive advantage in the aftermarket is enhanced by its close relationship with OEMs, allowing the Company access to automobile design at an earlier time than its competitors. In the towing systems market, the Company competes with Draw-Tite Inc. and Reese Products Inc., both of which are subsidiaries of MascoTech, Bosal Holding B.V., The Oris Group, Production Stamping Inc. and numerous smaller competitors. In the rack systems and accessories market, the Company's competitors include JAC Holding Corp., Thule, which is a wholly-owned subsidiary of Eldon AB (a Swedish company), Yakima Products, Inc., Barrecrafters, Graber Products Inc. and several smaller competitors. ENVIRONMENTAL REGULATION The Company's operations are subject to foreign, state and local environmental laws and regulations that limit the discharges into the environment and establish standards for the handling, generation, emission, release, discharge, treatment, storage, and disposal of certain materials, substances and wastes. In many jurisdictions, these laws are complex, change frequently and have tended to become stronger over time. In jurisdictions such as the United States, such obligations, including but not limited to those under the Comprehensive Environmental Response, Compensation & Liability Act ("CERCLA"), may be joint and several and may apply to conditions at properties presently or formerly owned or operated by an entity or its predecessors, as well as to conditions at properties at which waste or other contamination attributable to an entity or its predecessors have been sent or otherwise come to be located. The Company believes that its operations are in substantial compliance with the terms of all applicable environmental laws and regulations as currently interpreted. In addition, to the best of the Company's knowledge, there are no existing or potential environmental claims against the Company nor has the Company received any notification nor is there any current investigation regarding, the disposal, 8 11 release, or threatened release at any location of any hazardous substance generated or transported by the Company. However, the Company cannot predict with any certainty that it will not in the future incur liability under environmental laws and regulations with respect to contamination of sites currently or formerly owned or operated by the Company (including contamination caused by prior owners and operators of such sites), or the off-site disposal of hazardous substances. While historically the Company has not had to make significant capital expenditures for environmental compliance, the Company cannot predict with any certainty its future capital expenditures for environmental compliance because of continually changing compliance standards and technology. Future events, such as changes in existing environmental laws and regulations or unknown contamination of sites owned or operated by the Company (including contamination caused by prior owners and operators of such sites), may give rise to additional compliance costs which could have a material adverse effect on the Company's financial condition. Furthermore, actions by foreign, federal, state and local governments concerning environmental matters could result in laws or regulations that could increase the cost of producing the products manufactured by the Company or otherwise adversely affect the demand for its products. Additionally, the Company does not currently have any insurance coverage for environmental liabilities and does not anticipate obtaining such coverage in the future. EMPLOYEES At December 31, 1998, the Company had approximately 1,800 employees of whom approximately 1,500 are hourly employees and approximately 300 are salaried personnel. Approximately 160 of the Company's employees in the United States at the Port Huron, Michigan facility are represented by the Teamsters Union. Collective bargaining agreements with the Teamsters Union affecting these employees expire in April 2004. As is common in many European jurisdictions, substantially all of the Company's employees in Europe are covered by country-wide collective bargaining agreements. The Company believes that its relations with its employees are good. FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS For financial information about foreign and domestic operations of the Company, see "Note 12" of the Company's "Notes to Consolidated Financial Statements". 9 12 ITEM 2. PROPERTIES The Company's executive offices are located in 14,550 square feet of leased space in Sterling Heights, Michigan. The Company has 25 facilities with a total of 2,054,050 square feet of space. The Company believes that substantially all of its property and equipment is in good condition and that it has sufficient capacity to meet its current and projected manufacturing and distribution needs. The Company's facilities are as follows:
SQUARE OWNED/ LEASE LOCATION FUNCTION FEET LEASED EXPIRATION** - --------------------------- ----------------------------- --------- --------- -------------- North America - ------------- Shelby Township, Michigan* Manufacturing 42,800 Owned -- Shelby Township, Michigan* Manufacturing and warehousing 13,000 Leased 2008 Port Huron, Michigan* Manufacturing and warehousing 200,000 Owned -- Sterling Heights, Michigan* Administration and engineering 14,550 Leased 2003 Mt. Clemens, Michigan Warehousing 25,000 Leased Month to Month Lodi, California Administration, manufacturing, 150,000 Owned -- engineering and warehousing Lodi, California Warehousing 25,000 Leased Month to Month Auburn Hills, Michigan Warehousing 49,000 Leased 2005 Madison Heights, Michigan* Administration and 90,000 Leased 2002 manufacturing Madison Heights, Michigan* Engineering and manufacturing 18,000 Leased 2002 Granby, Quebec Administration, manufacturing 72,000 Leased 2001 and warehousing Granby, Quebec Warehousing 14,000 Leased Month to Month Bromptonville, Quebec Manufacturing 2,000 Leased 1999 Hamer Bay, Ontario Manufacturing and 7,500 Owned -- administration Europe - ------ Sandhausen, Germany Administration and engineering 5,000 Leased Month to Month Barcelona, Spain Manufacturing and 6,200 Leased 1999 administration Staphorst, The Netherlands* Administration, manufacturing, 405,000 Owned -- warehousing and engineering Hoogeveen, The Netherlands* Manufacturing and warehousing 185,000 Owned -- Fensmark, Denmark* Manufacturing and warehousing 95,000 Owned -- Nuneaton, United Kingdom* Manufacturing and warehousing 75,000 Owned -- Vanersborg, Sweden* Manufacturing, warehousing and 160,000 Leased 2004 engineering Wolsztyn, Poland Warehousing 5,000 Leased Month to Month Reims, France Manufacturing and warehousing 115,000 Owned -- St. Victoria di Gualtieri, Administration, manufacturing, 170,000 Leased 2003 Italy warehousing and engineering St. Victoria di Gualtieri, Manufacturing and warehousing 110,000 Leased 2003 Italy
- ---------- * QS 9000 and/or ISO 9000 certification. ** Gives effect to all renewal options. ITEM 3. LEGAL PROCEEDINGS From time to time, the Company is subject to legal proceedings and other claims arising in the ordinary course of its business. The Company believes that it is not presently a party to any litigation the outcome of which would have a material adverse effect on its financial condition or results of operations. The Company maintains insurance coverage against claims in an amount which it believes to be adequate. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 10 13 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED MEMBERS' MATTERS There is no established public trading market for the Company's Class A Units. At March 15, 1999, there were 22 holders of record of Class A Units. Except as set forth below with respect to quarterly tax distributions to Members, the Company has never declared or paid dividends (or made any other distributions) on the Class A Units and does not anticipate doing so in the foreseeable future. Under certain loan agreements, the Company is prohibited from declaring or paying any cash dividend or making distributions thereon, except for quarterly distributions to Members to the extent of any tax liability with respect to the Class A Units and except for repurchases of Class A Units from employees upon a termination of their employment with the Company pursuant to an Employment Agreement and the Operating Agreement. As listed below, since September 1995, the Company has issued unregistered securities to investors and to certain other individuals. Each such issuance was made in reliance upon the exemption from the registration requirements of the Securities Act of 1933, as amended, contained in Section 4(2) of the Securities Act on the basis that such transactions did not involve a public offering. 1) On September 28, 1995, pursuant to their respective subscription agreements, the Company issued an aggregate of 13,860 of its Class A Units for an aggregate purchase price of $13.9 million, to Chase Venture Capital Associates (an affiliate of CCP), F. Alan Smith, Barry Banducci, Richard Borghi, Marshall Gladchun and MascoTech. 2) On September 30, 1996 pursuant to their respective subscription agreements, the Company issued an aggregate of 279 of its Class A Units for an aggregate purchase price of $279,000, to Chase Venture Capital Associates (an affiliate of CCP), Marshall Gladchun, the Laverne A. Farris Trust, and certain employees of SportRack LLC. 3) On October 30, 1996 pursuant to an Agreement for the Sale and Purchase of Shares in Brink BV dated October 30, 1996, the Company issued an aggregate of 1,230 of its Class A Units for an aggregate purchase price of $4.3 million, to the former shareholders of Brink B.V. 4) On August 5, 1997 pursuant to an Asset Purchase Agreement among Valley Industries, LLC, Valley Industries, Inc., certain affiliates of Valley Industries, Inc., Robert L. Fisher and Roger T. Morgan dated August 5, 1997, the Company issued an aggregate of 802 of its Class A Units for an aggregate purchase price of $4.5 million, to Robert L. Fisher and Roger T. Morgan. 5) On October 31, 1997 pursuant to an Asset Purchase Agreement among Bell Sports Corp., Bell Sports Canada, Inc. and Advanced Accessory Systems Canada Inc./Les Systems d' Accessorie Advanced Canada Inc. dated as of July 2, 1997, the Company issued an aggregate of 100 of its Class A Units for an aggregate purchase price of $500,000 to Jean M. Maynard. 6) On December 31, 1997 the Company issued 140 of its Class A Units to CB Capital Investors, Inc. (an affiliate of CCP) in exchange for its 1% interest in SportRack. 7) On April 22, 1998 pursuant to their respective subscription agreements, the Company issued an aggregate of 43 of its Class A Units for an aggregate purchase price of approximately $150,000, to Gerrit de Graaf and J. Wim Rengelink. 11 14 ITEM 6. SELECTED HISTORICAL FINANCIAL DATA The information below presents historical financial data of the MascoTech Division ("Predecessor") for the year ended December 31, 1994 and the period from January 1, 1995 through September 27, 1995 (the period prior to the acquisition of the net assets of MascoTech Division by the Company). The data as of and for the year ended December 31, 1994 have been derived from the unaudited financial statements of the MascoTech Division and the data for the period from January 1, 1995 through September 27, 1995 have been derived from the audited financial statements of the MascoTech Division. The data as of and for the period from September 28, 1995 through December 31, 1995 and for the years ended December 31, 1996, 1997 and 1998 represent consolidated financial data of the Company subsequent to the acquisition of the MascoTech Division, and include (i) the operations of Brink subsequent to the Brink Acquisition on October 30, 1996; (ii) the operations of the sportrack division of Bell and Nomadic subsequent to the SportRack International Acquisition on July 2, 1997 and July 24, 1997, respectively, (iii) the operations of Valley subsequent to the Valley Acquisition on August 5, 1997, (iv) the operations of Ellebi subsequent to the Ellebi Acquisition on January 2, 1998, (v) the operations of Tranfo-Rakzs subsequent to the Tranfo-Rakzs Acquisition on February 7, 1998, and have been derived from the audited financial statements of the Company. The following table should be read in conjunction with the financial statements of the Company and notes thereto, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this Form 10-K.
COMPANY PREDECESSOR ------------------------------------------------------------ ------------------------- PERIOD FROM PERIOD FROM YEAR ENDED SEPTEMBER 28, TO JANUARY 1 TO DECEMBER 31, DECEMBER 31, SEPTEMBER 27, ----------------------------------------- 1998(3) 1997(2) 1996(1) 1995 1995 1994 ------------ ------------ ------------- ---------------- -------------- -------- (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS) STATEMENT OF OPERATIONS DATA: Net sales.......................... $290,139 $188,678 $ 81,466 $ 16,299 $ 48,698 $ 60,882 Cost of sales(4)................... 213,435 135,556 53,607 12,458 38,645 47,716 -------- -------- -------- --------- -------- -------- Gross profit..................... 76,704 53,122 27,859 3,841 10,053 13,166 Selling, administrative and product development expenses(4).......... 50,839 31,350 13,413 1,472 6,107 7,313 Amortization of intangible assets.. 3,551 2,336 2,475 546 -- -- Impairment charge(4)............... 7,863 -- -- -- -- -- -------- -------- -------- --------- -------- ------- Operating income................. 14,451 19,436 11,971 1,823 3,946 5,853 Other (income) expense Interest expense(5).............. 18,633 12,627 4,312 975 -- -- Foreign currency (gain) loss(6).. (4,995) 6,097 1,330 -- -- -- Other, net....................... -- -- (80) (22) 65 (105) -------- -------- -------- --------- -------- -------- Income before minority interest, extraordinary charge and income taxes.......................... 813 712 6,409 870 3,881 5,958 Provision (benefit) for income taxes(7)......................... 903 (2,856) (491) -- 1,324 2,114 -------- -------- -------- --------- -------- -------- Income before minority interest and extraordinary charge....... (90) 3,568 6,900 870 2,557 3,844 Minority interest.................. -- 97 69 9 -- -- -------- -------- -------- --------- -------- ------- Income before extraordinary charge......................... (90) 3,471 6,831 861 2,557 3,844 Extraordinary charge(8)............ -- 7,416 1,970 -- -- -- -------- -------- -------- --------- -------- ------- Net income (loss)................ $ (90) $ (3,945) $ 4,861 $ 861 $ 2,557 $ 3,844 ======== ======== ======== ========= ======== ======== OTHER DATA: Cash flows from operating activities....................... $ 21,879 $ 6,982 $ 9,917 $ 1,390 $ 3,741 $ 1,165 EBITDA(9).......................... 38,364 27,916 16,448 2,651 4,735 6,773 Depreciation....................... 10,857 6,144 2,002 282 789 920 Capital expenditures............... 9,998 7,751 3,124 491 2,079 1,392 Ratio of EBITDA to interest 2.06x 2.21x 3.81x 2.72x -- -- expense(5)........................ Ratio of earnings to fixed 1.04x 1.06x 2.43x 1.89x -- -- charges(5)(10).................... BALANCE SHEET DATA (AT END OF PERIOD) Cash.............................. $ 11,240 $ 27,348 $ 2,514 $ 1,637 $ 3 $ 8 Working capital................... 49,232 65,803 14,368 3,960 4,002 3,518 Total assets...................... 258,981 265,558 148,359 59,979 24,698 21,743 Total debt, including current 187,524 197,126 93,142 34,900 -- -- maturities(5)................... Mandatorily redeemable warrants(5) 4,409 3,507 3,498 200 -- -- Members' equity................... 15,147 16,444 18,463 14,221 15,794 13,664
- ---------- (1) In October 1996, the Company acquired Brink. The Brink Acquisition has been accounted for in accordance with the purchase method of accounting. Accordingly, the operating results of Brink are included in the consolidated operating results of the Company subsequent to October 30, 1996. 12 15 (2) The Company acquired the net assets of the sportrack division of Bell on July 2, 1997, Nomadic on July 24, 1997, and the net assets of Valley Industries on August 5, 1997. The SportRack International Acquisition and Valley Acquisition have been accounted for in accordance with the purchase method of accounting. Accordingly, the operating results of SportRack International and Valley are included in the consolidated operating results of the Company subsequent to the respective acquisition dates. (3) The Company acquired the towbar segment of Ellebi S.p.A. on January 2, 1998 and the net assets of Tranfo-Rakzs on February 7, 1998. The Ellebi Acquisition and Transfo-Rakzs Acquisition have been accounted for in accordance with the purchase method of accounting. Accordingly, the operating results of Ellebi and Tranfo-Rakzs are included in the consolidated operating results of the Company subsequent to the respective acquisition dates. (4) In June 1998, information became available that indicated that certain assets acquired from Bell (accounts receivable, inventory and tooling) had a fair value less than originally recorded. The SportRack International purchase was renegotiated and a $2.0 million reimbursement was received from Bell. Accounts receivable, inventory and tooling were reduced by $6.5 million and additional goodwill of $4.5 million, net of the $2.0 million reimbursement from Bell, was recorded. During the second half of 1998, management further reassessed the operations of SportRack International, took actions to restructure the operations, and recorded restructuring charges totaling $1.9 million. Restructuring charges have been included in cost of sales ($1.1 million) and in selling, administrative and product development expenses ($832,000) in the Company's consolidated statement of operations. Management believes that substantially all restructuring costs have been incurred as of December 31, 1998. Concurrent with the reassessment of the SportRack International operations, management reviewed the carrying value of goodwill and other intangible assets, determined that future cash flows would not be sufficient to recover recorded amounts, and recorded an impairment charge of $7.9 million. (5) Prior to its acquisition by the Company on September 28, 1995, the Predecessor was a division of MascoTech and, accordingly, had no outstanding indebtedness. (6) Primarily represents net currency gains and loss on indebtedness of the Company's foreign subsidiaries denominated in currencies other than their functional currency. (7) The Predecessor, as a division of MascoTech, was allocated a portion of the consolidated income tax provision, which approximated the division's federal income tax provision on a stand-alone basis. The Company is a limited liability corporation and, as such, the earnings of the Company and its domestic subsidiaries are included in the taxable income of the Company's unitholders and no federal income tax provision is required. The Company's foreign subsidiaries provide for income taxes on their results of operations. (8) In connection with the indebtedness extinguished as a result of the Brink Acquisition, a prepayment penalty of $220,000 and unamortized deferred debt issuance costs of $1.8 million were charged to operations during 1996. In connection with indebtedness extinguished as a result of issuing the Notes (as defined below), a prepayment penalty of $1.4 million, $3.1 million of unamortized debt discount, and unamortized deferred debt issuance costs of $3.2 million were charged to operations during 1997. The debt extinguishment charges in 1997 were reduced by $365,000 representing the income tax benefit recognized by Brink. (9) EBITDA is defined as operating income plus depreciation and amortization adjusted in 1998 for the non-cash portion of impairment and restructuring charges ($9.5 million for the year ended December 31, 1998), which definition may not be comparable to similarly titled measures reported by other companies. EBITDA is presented because it is generally accepted as providing useful information regarding a company's ability to service and/or incur indebtedness. However, EBITDA should not be considered in isolation from or as an alternative to net income, cash flows from operating activities and other consolidated income or cash flow statement data prepared in accordance with generally accepted accounting principles or as a measure of profitability or liquidity. In addition, funds depicted by the EBITDA measurement are not fully available for discretionary use because of debt service requirement, expenditures for capital replacement and expansion, and the need to conserve funds for other commitments and uncertainties. (10)For purposes of determining the ratio of earnings to fixed charges, "earnings" are defined as income (loss) before minority interest, extraordinary charge and income taxes, plus fixed charges. "Fixed charges" consist of interest expense on all indebtedness (including amortization of deferred debt issuance costs) and the component of operating lease rental expense that management believes is representative of the interest component of rent expense. 13 16 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of the results of operations and financial condition of the Company should be read in conjunction with the financial statements and notes thereto of the Company included elsewhere in this Form 10-K. This Form 10-K contains forward-looking statements. Discussions containing such forward-looking statements may be found in the material set forth below and under "Business," as well as in this Form 10-K generally. Any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual events or results may differ materially from those discussed in the forward-looking statements as a result of various factors set forth in this Form 10-K generally. GENERAL Chase Capital Partners ("CCP") and certain members of the Company's management formed the Company in September 1995 to make strategic acquisitions of automotive exterior accessory manufacturers and to integrate those acquisitions into a global enterprise that would be a preferred supplier to the automotive industry. ACQUISITIONS In September 1995, the Company, through its SportRack subsidiary, acquired the MascoTech Division of MascoTech. The MascoTech Division was a North American supplier of rack systems and accessories to the automotive OEM market and aftermarket. In October 1996, the Company consummated the Brink Acquisition by acquiring all of the capital stock of Brink B.V., a private company with limited liability incorporated under the laws of The Netherlands and a European supplier of towing systems to the automotive OEM market and aftermarket. In December 1996, ownership of Brink B.V. and its subsidiaries was transferred to Brink, a newly formed subsidiary of the Company. In August 1997, the Company formed Valley to effect the Valley Acquisition by acquiring the net assets of Valley Industries, a North American supplier of towing systems to the automotive OEM market and aftermarket. Two smaller acquisitions were completed in July 1997 by SportRack International. SportRack International acquired from Bell the net assets of its sportrack division, a Canadian supplier of rack systems and accessories to the automotive aftermarket. CCP at that time was a significant equity investor in Bell. SportRack International also acquired the capital stock of Nomadic, a Canadian supplier of rack systems and accessories to the automotive OEM market and aftermarket. The acquisitions of the sportrack division of Bell and Nomadic are collectively referred to in this 10-K as the "SportRack International Acquisition." In January 1998, the Company through Brink International B.V., acquired the net assets of the towbar segment Ellebi S.p.A., an Italian supplier of towing systems to the automotive OEM market and aftermarket. In February 1998, the Company through SportRack International, Inc., acquired the net assets of Transfo-Rakzs, a Canadian supplier of rear hitch rack carrying systems and related products to the automotive aftermarket. 14 17 SUMMARY RESULTS OF OPERATIONS The following table presents the major components of the statement of operations together with percentages of each component as a percentage of net sales.
YEAR ENDED DECEMBER 31, --------------------------------------------------------------------------- 1998 1997 1996 ---------------------- ---------------------- --------------------- (DOLLARS IN THOUSANDS) Net sales ...................... $ 290,139 100.0% $ 188,678 100.0% $ 81,466 100.0% Gross profit ................. 76,704 26.4% 53,122 28.2% 27,859 34.2% Selling, administrative and product development expenses ... 50,839 17.5% 31,350 16.6% 13,413 16.5% Amortization of intangible assets ....................... 3,551 1.2% 2,336 1.2% 2,475 3.0% Impairment charge .............. 7,863 2.7% -- -- -- -- Operating income ............. 14,451 5.0% 19,436 10.3% 11,971 14.7% Interest expense ............... 18,633 6.4% 12,627 6.7% 4,312 5.3% Foreign currency (gain) loss ... (4,995) (1.7%) 6,097 3.2% 1,330 1.6% Income before minority interest, extraordinary charge and income taxes ................. 813 0.3% 712 0.4% 6,409 7.9% Income tax provision (benefit) . 903 0.4% (2,856) (1.5%) (491) (0.2%) Extraordinary charge ........... -- -- 7,416 3.9% 1,970 2.4% Net income (loss) .............. (90) 0.0% (3,945) (2.1%) 4,861 6.0%
RESULTS OF OPERATIONS 1998 COMPARED TO 1997 Net sales. Net sales for 1998 were $290.1 million, representing an increase of $101.5 million, or 53.8% over net sales for 1997. The increase resulted primarily from the Ellebi Acquisition in January 1998, the Transfo-Rakzs Acquisition in February 1998, the Valley Acquisition in August 1997 and the SportRack International Acquisition in July 1997. The 1998 sales increase resulting from these acquisitions was $80.1 million. The remaining sales increase of $21.4 million resulted primarily from increased sales volumes of OEM rack systems on existing programs and the effect of having a full year of sales on new OEM rack system programs launched during 1997. On a pro forma basis, if the net sales of Ellebi and Tranfo-Rakzs and the net sales of Valley and SportRack International prior to acquisition were included with those of the Company for 1997 net sales for 1997 would have been $268.5 million, as compared to net sales of $290.1 million for 1998, an increase of $21.6 million, or 8.1%. Gross profit. Gross profit for 1998 was $76.7 million, representing an increase of $23.6 million, or 44.4%, over the gross profit for 1997. This increase resulted from the increase in net sales offset by a decrease in the gross margin. Gross profit as a percentage of net sales was 26.4% in 1998 compared to 28.2% in 1997. The decrease in gross margin resulted primarily from lower gross margins of newly acquired businesses, lower gross profit margins from sales of OEM rack systems resulting from increased sales of lower margin programs and restructuring charges (as further discussed below) related to the operations of SportRack International. Selling, administrative and product development expenses. Selling, administrative and product development expenses for 1998 were $50.8 million, representing an increase of $19.5 million, or 62.2% over selling, administrative and product development expenses for 1997, reflecting the increase in net sales. Selling, administrative and product development expenses as a percentage of net sales increased to 17.5% in 1998 from 16.6% in 1997. This increase is the result of increased spending on research and development activities, higher selling, administrative and product development expenses as a percentage of nets sales for Ellebi, increased costs in the roof rack aftermarket as a percentage of net sales and restructuring charges (as further discussed below) related to the operations of SportRack International. Impairment and restructuring charges. In June 1998, information became available that indicated that certain assets acquired from Bell (accounts receivable, inventory and tooling) had a fair value less than originally recorded. The SportRack International purchase price was renegotiated and a $2.0 million reimbursement was received from Bell. Accounts receivable, inventory and tooling were reduced by $6.5 million and additional goodwill of $4.5 million, net of the $2.0 million reimbursement from Bell, was recorded. During the second half of 1998, management further reassessed the operations of SportRack International, and as a result took actions to restructure the operations, rationalize the product offerings, customer and supplier base, distribution channels and warehousing, and terminated 14 employees, including certain members of SportRack International's senior management. A restructuring charge totaling $1.9 million was recorded including cash expenditures made during 1998 totaling $258,000 consisting of outside legal and accounting fees, employee severance and costs to dispose of obsolete inventory. Non-cash expenses included in the restructuring charge totaling $1.6 million included recording of inventory reserves related to the product rationalization of $1.1 million 15 18 and recording of customer allowances, bad debts and other items of $574,000. The restructuring charge related to inventory ($1.1 million) has been included in cost of sales and other restructuring costs ($832,000) have been included in selling, administrative and product development expenses in the Company's consolidated statement of operations. Concurrent with the reassessment of SportRack International's operations, management reviewed the revised carrying value of goodwill and other intangible assets, determined that future cash flows would not be sufficient to recover recorded amounts, and recorded an impairment charge of $7.9 million. No impairment or restructuring charge was recorded during 1997. Operating income. Operating income for 1998 was $14.5 million, a decrease of $5.0 million, or 25.6%, compared to operating income for 1997. The decrease was due primarily to an impairment and restructuring charge in 1998. Excluding the impairment and restructuring charges, operating income in 1998 would have been $24.2 million, representing an increase of $4.8 million, or 24.6% over operating income for 1997. Excluding the impairment and restructuring charge, operating income as a percentage of net sales decreased to 8.3% in 1998 from 10.3% in 1997 as a result of lower gross margins and higher selling, administrative and product development expenses as a percentage of net sales in 1998. Interest expense. Interest expense for 1998 was $18.6 million, an increase of $6.0 million, or 47.6%, over interest expense for 1997. The increase was primarily due to additional borrowings to finance (i) the SportRack International Acquisition in July 1997, (ii) the Valley Acquisition in August 1997, (iii) the Ellebi Acquisition in January 1998, (iv) the Tranfo-Rakzs Acquisition in February 1998, and (vi) the effect of the issuance of the Notes (as defined below), of which a portion of the proceeds were used to repay debt from the Valley Acquisition and other then existing debt. These increases were partially offset by lower interest expense due to lower average line of credit borrowings during the year and lower interest rates on the Company's variable rate debt. Foreign currency (gain) loss. Foreign currency gain in 1998 was $5.0 million. The foreign currency gain primarily relates to the debt of Brink (whose functional currency was the Dutch Guilder through December 31, 1998) which is denominated in U.S. Dollars including intercompany debt and substantially all outstanding loans under the Company's Second Amended and Restated Credit Agreement, except for Term note A (as defined below) which was changed from a U.S. Dollar denominated loan to a Dutch Guilder denominated loan in October 1998. During 1998, the U.S. dollar weakened significantly in relation to the Dutch Guilder. At December 31, 1997, the exchange rate of the Dutch Guilder to the U.S. dollar was 2.02:1, whereas at December 31, 1998 the exchange rate was 1.89:1, or a 6.4% increase in the relative value of the Dutch Guilder. Provision (benefit) for income taxes. The Company and certain of its domestic subsidiaries have elected to be taxed as limited liability companies for federal income tax purposes. As a result of this election, the Company's domestic taxable income accrues to the individual members. Certain of the Company's domestic subsidiaries and foreign subsidiaries are subject to income taxes in their respective jurisdictions. During 1998, the Company had a loss before income taxes for its taxable subsidiaries totaling $9.2 million and recorded a provision for income taxes of $903,000. The effective tax rate differs from the U.S. federal income tax rate primarily due to changes in valuation allowances on the deferred tax assets of SportRack International recorded during 1998 and differences in the tax rates of foreign countries. During 1997, the Company had a loss before income taxes for its taxable subsidiaries totaling $9.9 million and recorded a benefit for income taxes of $3.2 million. Extraordinary charge. There were no extraordinary charges incurred by the Company during the year ended December 31, 1998. The extraordinary charge resulting from debt extinguishment in 1997 was $7.4 million. In connection with the issuance of $125 million aggregate principal amount of 9 3/4% Senior Subordinated Promissory Notes due 2007 (the "Notes"), the Company repaid, in full, its Senior Subordinated Debt and Junior Subordinated Guilder Note and repaid a portion of certain term notes under the Amended and Restated Credit Agreement. In connection with such debt extinguishments, the Company recorded an extraordinary charge comprised of $1.4 million in prepayment penalties, $3.1 million of unamortized debt discount and $3.2 million of unamortized debt issuance costs, less $365,000 of tax benefit. Net income (loss). The net loss for 1998 was $90,000 as compared to a net loss of $3.9 million in 1997, a decrease of $3.9 million. Operating income for 1998 was $14.5 million, representing a decrease of $5.0 million, or 25.6% compared to operating income for 1997. The decreased operating income, resulting from the impairment and restructuring charges offset by the inclusion of Valley and SportRack International's operating results for a full year in 1998 as compared to five and six months, respectively, in 1997, the Ellebi acquisition in January 1998 and the Tranfo-Rakzs acquisition in February 1998, and increased interest expense ($6.0 million) was offset by the foreign currency gain in 1998 as compared with a foreign currency loss in 1997 related to Brink Acquisition debt denominated in U.S. dollars ($11.1 million), and no extraordinary charge in 1998 compared with an extraordinary charge resulting from debt extinguishment in 1997 ($7.4 million), and reduced by the provision for income taxes in 1998 as compared to an income tax benefit in 1997 ($3.8 million). 16 19 1997 COMPARED TO 1996 Net sales. Net sales for 1997 were $188.7 million, representing an increase of $107.2 million, or 131.6% over net sales for 1996. The increase was due primarily to the Valley Acquisition in August 1997, $37.9 million (representing net sales for the five month period ended December 31, 1997, the period of 1997 subsequent to acquisition), the SportRack International Acquisition in July 1997, $2.5 million (representing net sales for the six month period ended December 31, 1997, the period 1997 subsequent to acquisition), and the full year sales of Brink in 1997 as compared to two months in 1996 ($54.8 million representing net sales for the ten month period ended October 31, 1997, the period of 1997 comparable to the period prior to acquisition in 1996). In addition, sales for SportRack increased $12.0 million because of increased sales of rack systems to OEMs for installation on new light truck models and increased OEM production of certain light truck models which use SportRack's systems. On a pro forma basis, if the net sales of Valley and SportRack International, prior to their respective acquisition dates, were included with those of the Company for 1996 and 1997, and Brink sales, prior to its acquisition date, were included with those of the Company for 1996, net sales for 1997 would have been $246.7 million, as compared to net sales of $233.5 million for 1996, an increase of $13.2 million, or 5.7%. Gross profit. Gross profit for 1997 was $53.1 million, representing an increase of $25.3 million, or 90.7%, over the gross profit for 1996. This increase resulted from the increase in net sales offset by a decrease in the gross margin. Gross profit as a percentage of net sales was 28.2% in 1997 compared to 34.2% in 1996. The decrease in gross margin resulted from a lower gross margin on sales contributed by Valley and a lower gross margin on sales of rack systems to the OEMs due to (i) launch costs related to new programs, (ii) lower margins on certain newly launched programs, and (iii) price givebacks on certain OEM programs. Selling, administrative and product development expenses. Selling, administrative and product development expenses for 1997 were $31.4 million, representing an increase of $17.9 million, or 133.7% over selling, administrative and product development expenses for 1996, reflecting the increase in net sales. Selling, administrative and product development expenses as a percentage of net sales increased to 16.6% in 1997 from 16.5% in 1996. Certain selling, administrative and product development expenses are relatively fixed and do not increase proportionately with sales. The effect of these fixed expenses was offset by higher expenses associated with the Company's European expansion and new corporate headquarters. In addition, selling, administrative and product development expenses were higher as a percentage of net sales for Brink, which was acquired in October 1996, and SportRack International, which was acquired in July 1997, than for the Company. Operating income. Operating income for 1997 was $19.4 million, an increase of $7.5 million, or 62.4%, over operating income for 1996. The increase was due primarily to inclusion of Brink operating results for the full year in 1997 as compared to two months in 1996 together with the increases from the SportRack International and Valley Acquisitions in July and August of 1997, respectively. Operating income as a percentage of net sales decreased to 10.3% in 1997 from 14.7% in 1996 reflecting a decrease in gross margins offset by reduced amortization of intangible assets as a result of changing the goodwill amortization period from 15 years to 30 years in 1997. Interest expense. Interest expense for 1997 was $12.6 million, an increase of $8.3 million, or 192.8%, over interest expense for 1996. The increase was primarily due to additional borrowings to finance (i) the Brink Acquisition in October 1996, (ii) the SportRack International Acquisition in July 1997, (iii) the Valley Acquisition in August 1997, and (iv) the effect of the issuance of the Notes (as defined below), of which a portion of the proceeds were used to repay debt from the Valley Acquisition and the Brink Acquisition. Foreign currency (gain) loss. Foreign currency loss in 1997 was $6.1 million. The foreign currency loss primarily relates to the debt of Brink (whose functional currency was the Dutch Guilder through December 31, 1998) which is denominated in U.S. Dollars including intercompany debt and substantially all outstanding loans under the Company's Second Amended and Restated Credit Agreement. During 1997, the U.S. dollar strengthened significantly in relation to the Dutch Guilder. At December 31, 1996, the exchange rate of the Dutch Guilder to the U.S. dollar was 1.75:1, whereas at December 31, 1997 the exchange rate was 2.02:1, or a 15.4% decline in the relative value of the Dutch Guilder. Provision (benefit) for income taxes. The Company and certain of its domestic subsidiaries have elected to be taxed as limited liability companies for federal income tax purposes. As a result of this election, the Company's domestic taxable income accrues to the individual members. Certain of the Company's domestic subsidiaries and foreign subsidiaries are subject to income taxes in their respective jurisdictions. During 1997, the Company had a loss before income taxes for its taxable subsidiaries totaling $9.9 million and recorded a benefit for income taxes of $3.2 million. During 1996, the Company had a loss before income taxes for its taxable subsidiaries totaling $1.8 million and recorded a benefit for income taxes of $491,000. 17 20 Extraordinary charge. The extraordinary charge resulting from debt extinguishment in 1997 was $7.4 million. In connection with the issuance of $125 million aggregate principal amount of 9 3/4% Senior Subordinated Promissory Notes due 2007 (the "Notes"), the Company repaid, in full, its Senior Subordinated Debt and Junior Subordinated Guilder Note and repaid a portion of certain term notes under the Amended and Restated Credit Agreement. In connection with such debt extinguishments, the Company recorded an extraordinary charge comprised of $1.4 million in prepayment penalties, $3.1 million of unamortized debt discount and $3.2 million of unamortized debt issuance costs, less $400,000 of tax benefit. Net income (loss). The net loss for 1997 was $3.9 million as compared to net income of $4.9 million in 1996, a decrease of $8.8 million. Operating income for 1997 was $19.4 million, representing an increase of $7.5 million, or 62.4% over operating income for 1996. The increased operating income, resulting from inclusion of Brink's operating results for a full year in 1997 as compared to two months in 1996, the Valley Acquisition in August 1997, and the SportRack International Acquisition in July 1997, was offset by increased interest costs associated with such acquisitions ($8.3 million), increased foreign currency loss related to Brink Acquisition debt denominated in U.S. dollars ($4.8 million), and an increase in an extraordinary charge resulting from debt extinguishment ($5.4 million), collectively offset by an increase in the related income tax benefit ($2.4 million). LIQUIDITY AND CAPITAL RESOURCES The Company's principal liquidity requirements are to service its debt and meet its working capital and capital expenditure needs. The Company's indebtedness at December 31, 1998 was $187.5 million including current maturities of $4.5 million. The Company expects to be able to meet its liquidity requirements through cash provided by operations and through borrowings available under the Second Amended and Restated Credit Agreement ("U.S. Credit Facility"). Working Capital and Cash Flows Working capital and key elements of the consolidated statement of cash flows are:
1998 1997 1996 --------- --------- -------- Working Capital ................ $ 49,232 $ 65,803 $ 14,368 Cash flows provided by operating activities ................... 21,879 6,982 9,917 Cash flows (used for) investing activities ................... (31,618) (79,733) (57,463) Cash flows provided by (used for) financing activities .... (8,367) 97,080 48,605
Working capital Working capital decreased by $16.6 million to $49.2 million at December 31, 1998 from $65.8 million at December 31, 1997 due to a decrease in cash of $16.1 million, a decrease of $5.7 million in working capital of SportRack International related to the change in estimated fair value of accounts receivable and inventory recorded in June 1998 and restructuring charges recorded in 1998 (as discussed above) and a decrease in accounts receivable of $5.9 million primarily related to the timing of collections of accounts receivable from large customers, primarily OEMs. Offsetting these decreases are increases in working capital of $9.7 million attributable to the Ellebi and Tranfo-Rakzs acquisitions. Working capital increased by $51.4 million to $65.8 million at December 31, 1997 from $14.4 million at December 31, 1996 due to an increase in cash of $24.8 million ($21.0 million of which was used to acquire Ellebi on January 2, 1998), an increase of $17.6 million attributable to the Valley and SportRack International acquisitions and an increase in accounts receivable of $8.6 million primarily attributable to the timing of collections of accounts receivable from large customers, primarily OEMs. Cash decreased by $16.1 million to $11.2 million at December 31, 1998 from $27.3 million at December 31, 1997 primarily due to cash used for investing and financing activities of $31.6 million and $8.4 million, respectively, offset by cash provided by operating activities of $21.9 million. Cash increased by $24.8 million to $27.3 million at December 31, 1997 from $2.5 million at December 31, 1996 primarily due to cash provided by operating and financing activities of $7.0 million and $97.8 million (of which $21.0 million was borrowed to finance the acquisition of Ellebi on January 2, 1998), respectively, offset by cash used for investing activities of $79.7 million. 18 21 Operating Activities Cash flow provided by operating activities for 1998 was $21.9 million, compared to $7.0 million in 1997 and $9.9 million in 1996. Cash flow for 1998 increased due to the cash flows provided by acquisitions completed in 1998, including the Ellebi Acquisition and the Transfo-Rakzs Acquisition, and the full year effect of acquisitions completed in 1997, including the Valley Acquisition and the SportRack International Acquisition. Acquisition related increases in operating cash flow totaled $4.0 million. The remaining increase in operating cash flows is attributable to improved operating performance and lower working capital of SportRack. SportRack's working capital decreased primarily as a result of the timing of collections of accounts receivable from large customers, primarily OEMs. The Company's European and Canadian subsidiaries have income tax net operating loss carryforwards ("NOLs") of approximately $1.3 million and $11.0 million, respectively, at December 31, 1998. The European NOLs have no expiration date and the Canadian NOLs expire primarily in 2005. Management believes that it is more likely than not that a portion of the deferred tax assets of the Canadian subsidiaries will not be realized and a valuation allowance of $4.2 million has been recorded against such assets. No valuation allowance has been recorded for the European NOLs as it is management's belief that it is more likely than not that the related deferred tax asset will be realized. Investing Activities Investing cash flows include acquisitions of property and equipment of $10.0 million, $7.8 million, and $3.1 million in 1998, 1997 and 1996, respectively. The increase in capital expenditures during 1998 was primarily attributable to the capital expenditures of Ellebi and Transfo-Rakzs, which were acquired in 1998, and the increased capital expenditures of Valley and SportRack International, which were acquired during 1997. The Company estimates that capital expenditures for 1999 will be primarily for the expansion of capacity, productivity and process improvements and maintenance. The Company's 1999 capital expenditures are anticipated to include approximately $5.0 million for replacing and upgrading existing equipment. The Company's ability to make capital expenditures is subject to restrictions in the Amended and Restated Credit Agreement, including a maximum of $12.5 million of capital expenditures annually. Investing cash flows also include $22.8 million, $70.8 million, and $54.3 million in 1998, 1997, and 1996, respectively, for the acquisition of the Ellebi and Tranfo-Rakzs (January and February 1998, respectively), SportRack International and Valley (July and August 1997, respectively) and Brink (October 1996). Financing Activities During 1998, financing cash flows were primarily limited to scheduled payments of principal on the Company's term indebtedness of $3.7 million and net repayments of borrowing under the Company's revolving loans of $4.5 million. Financing cash flows in 1997 and 1996 include borrowings of $90.5 million, and $46.1 million, respectively for the acquisition of the SportRack International, Valley and Ellebi (July, August and December 1997, respectively) and Brink (October 1996). Although the Ellebi Acquisition was consummated in January 1998, proceeds related to borrowing for the purchase were received in December 1997 and were included in the Company's cash at December 31, 1997. Debt issuance costs in connection with such borrowings were $2.6 million in both 1997 and 1996. In October 1997 the Company issued the Notes (as defined below). Proceeds from the issuance, which totaled $124.5 million, were used to reduce or eliminate certain of the Company's outstanding senior and subordinated debt and to pay $4.7 million in offering costs. Proceeds from the issuance of membership units were not significant in 1998 and were $5.0 million, and $4.6 million in 1997, and 1996, respectively. Distributions to members, in amounts sufficient to meet the tax liability on the Company's domestic taxable income which accrues to individual members, were not significant in 1998 and were $2.9 million in 1997 and $3.7 million in 1996. Debt and Credit Sources Borrowings under the Company's U.S. Credit Facility and the Company's First Amended and Restated Credit Agreement ("Canadian Credit Facility") bear interest at floating rates which require interest payments on varying dates depending on the interest rate option selected by the Company. Under the terms of these credit facilities, the Company will be required to make principal payments totaling approximately $4.5 million in 1999, $11.0 million in 2000, $11.8 million in 2001 and $11.8 million in 2002. The Company is also required to purchase and maintain interest rate protection with respect to a portion of the term loans for three years. The Notes bear interest at 9.75% which is payable semiannually in arrears. See "Note 4" to the Company's "Consolidated Financial Statements" for additional information regarding the U.S. Credit Facility, the Canadian Credit Facility and the Senior Subordinated Notes. 19 22 The Company is exposed to interest rate volatility with regard to variable rate debt. The Company uses interest rate swaps to reduce interest rate volatility. At December 31, 1998 and 1997 the notional value of interest rate swaps was $18.5 million. Under the terms of the interest rate swap agreements, the Company pays a fixed interest rate on the notional principal amount. The effects of interest rate swaps are reflected in interest expense and are not material. The Company expects that its primary sources of cash will be from operating activities and borrowings under the U.S. Credit Facility and Canadian Credit Facility each of which provide the Company with revolving notes. As of December 31, 1998, the Company had no amounts borrowed under the revolving note of either the U.S. Credit Facility or the Canadian Credit Facility and has $25.0 million available borrowing capacity. As part of the U.S. Credit Facility, Chase and NBD committed to provide a $22.0 million Acquisition Revolving Note to finance acquisitions. On December 31, 1997, the Company borrowed $21.0 million under the Acquisition Revolving Note and used such proceeds to acquire the net operating assets of the towbar segment of Ellebi S.p.A. on January 2, 1998. Future acquisitions, if any, may require additional third party financing and there can be no assurances that such funds would be available on terms satisfactory to the Company, if at all. The Company's ability to satisfy its debt obligations will depend upon its future operating performance, which will be affected by prevailing economic conditions and financial, business, and other factors, certain of which are beyond its control, as well as the availability of revolving credit borrowings under the Amended and Restated Credit Agreement or a successor facility. The Company anticipates that, based on current and expected levels of operations, its operating cash flow, together with borrowings under the U.S. Credit Facility and the Canadian Credit Facility, should be sufficient to meet its debt service, working capital and capital expenditure requirements for the foreseeable future, although no assurances can be given in this regard, including as to the ability to increase revenues or profit margins. If the Company is unable to service its indebtedness, it will be forced to take actions such as reducing or delaying acquisitions and/or capital expenditures, selling assets, restructuring or refinancing its indebtedness, or seeking additional equity capital. There is no assurance that any of these remedies can be effected on satisfactory terms, if at all, including, whether, and on what terms, the Company could raise equity capital. See "Forward Looking Statements". The Company conducts operations in several foreign countries including Canada, The Netherlands, Denmark, the United Kingdom, Sweden, France, Germany, Poland, Spain and, Italy. Net sales from international operations during 1998 were approximately $99.8 million, or 34.4% of the Company's net sales. At December 31, 1998, assets associated with these operations were approximately 42.6% of total assets, and the Company had indebtedness denominated in currencies other than the U.S. dollar of approximately $26.4 million. The Company's international operations may be subject to volatility because of currency fluctuations, inflation and changes in political and economic conditions in these countries. Most of the revenues and costs and expenses of the Company's operations in these countries are denominated in the local currencies. The financial position and results of operations of the Company's foreign subsidiaries are measured using the local currency as the functional currency. Certain of the Company's foreign subsidiaries have debt denominated in currencies other than their functional currency. As the exchange rates between the currency of the debt and the subsidiaries functional currency change the Company is subject to foreign currency gains and losses. The Company may periodically use foreign currency forward option contracts to offset the effects of exchange rate fluctuations on cash flows denominated in foreign currencies. The Company has no outstanding foreign currency forward options at December 31, 1998 and does not use derivative financial instruments for trading or speculative purposes. YEAR 2000 General The "Year 2000 Issue" is the result of computer programs that were written using two digits rather than four to define the applicable year. If the Company's computer programs with date-sensitive functions are not Year 2000 compliant, they may recognize a date using "00" as the Year 1900 rather than the Year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices or engage in similar normal business activities. The Company and each of its operating subsidiaries are in the process of implementing Year 2000 readiness programs with the objective of having all of their significant business systems, including those that affect facilities and manufacturing activities, functioning properly with respect to the Year 2000 Issue before June 30, 1999. Each operating subsidiary is in a different stage of Year 2000 readiness. 20 23 Project Generally each subsidiary's Year 2000 program is divided into three major sections internal business software and hardware, internal non-financial software and embedded chip technology and external compliance by customers and suppliers. The general phases common to all sections are: (1) inventorying Year 2000 items; (2) assessing the Year 2000 compliance of identified items; (3) repairing or replacing material items that are determined not to be Year 2000 compliant; (4) testing material items; and (5) designing and implementing contingency and business continuation plans for each organization and company location. The internal business software and hardware section of the Company's Year 2000 plans vary by operating subsidiary and include either the conversion or reprogramming of applications software that is not Year 2000 compliant, the inclusion of acquired companies on the Company's existing Enterprise Resource Planning System (ERP System) or, where available from the supplier, the upgrading of such software to a Year 2000 compliant version. The Company estimates that this phase is on schedule to be completed by June 1999. The testing phase of this section, scheduled for completion by June 1999, is ongoing. The Company does not currently have contingency plans in place for its internal business software and hardware. Such contingency plans will be developed in the second quarter of 1999 should the current implementation plans fall behind schedule. The total cost associated with required modifications to the Company's internal business software and hardware to become Year 2000 compliant is not expected to be material to the Company's financial position. The estimated total cost of the Year 2000 program is approximately $935,000. The total amount expended on the program through December 31, 1998, was $570,000, of which approximately $170,000 related to the cost of software modification and approximately $400,000 related to the cost of and upgrading existing software to Year 2000 compliant versions. The estimated future cost of completing the Year 2000 program is estimated to be approximately $165,000 for reprogramming of applications software and approximately $200,000 related to the cost of including acquired companies on existing ERP Systems. Funds for the program are provided from existing operating budgets for all items and are included in operating expenses as incurred. The Company has completed all phases of its Year 2000 plan related to non-financial software, embedded chip technology, and its non-financial systems such as manufacturing equipment, security equipment, etc. Few of these systems have been identified as not being in compliance. Accordingly, the cost of achieving Year 2000 compliance for these systems was minimal. The Company has identified and contacted its critical suppliers, service providers and contractors to determine the extent to which the Company's interface systems are vulnerable to those third parties' failure to remedy their own Year 2000 issues. Each of the suppliers contacted have indicated that they are currently undergoing or have completed programs related to the Year 2000 problem within their organizations. Due to the satisfactory responses with its critical suppliers, the Company does not intend to change suppliers, service providers or contractors. The Company has not independently verified the status of its critical suppliers, service providers and contractors Year 2000 readiness. Many of the Company's customers are large OEMs which are preparing for the Year 2000 Issue and it is believed that they will be compliant by the Year 2000. However, the Company does not currently have any formal information concerning the Year 2000 compliance status of its customers, particularly in the aftermarket, but has received indications that most of its customers are working on Year 2000 compliance. Risks The failure to correct a material Year 2000 problem could result in an interruption in, or a failure of, certain normal business activities or operations. Such failures could materially and adversely affect the Company's results of operations, liquidity and financial condition. Due to the general uncertainty inherent in the Year 2000 problem, resulting in large part from the uncertainty of the Year 2000 readiness of third-party suppliers and customers, the Company is unable to determine at this time whether the consequences of Year 2000 failures will have a material impact on its results of operations, liquidity or financial condition. The Year 2000 program is expected to significantly reduce the Company's level of uncertainty about the Year 2000 problem and, in particular, about the Year 2000 compliance and readiness of its material customers and suppliers. The Company believes that, with the implementation of new business systems and completion of the program as scheduled, the possibility of significant interruptions of normal operations should be reduced. 21 24 NEW ACCOUNTING PRONOUNCEMENTS In March 1998, the American Institute of Certified Public Accountants ("AICPA") issued SOP 98-1, "Accounting For the Costs of Computer Software Developed For or Obtained For Internal Use" ("SOP 98-1"). SOP 98-1 is effective for the Company beginning on January 1, 1999. SOP 98-1 will require the capitalization of certain costs incurred after the date of adoption in connection with developing or obtaining software for internal use. This statement will be applied prospectively, however, the impact of this new standard is not expected to have a significant effect on the Company's financial position or results of operations. In April 1998, the AICPA issued Statement of Position ("SOP 98-5"), "Reporting the Costs of Start-up Activities" (SOP 98-5). SOP 98-5 is effective beginning on January 1,1999, and requires that start-up costs capitalized prior to January 1, 1999 be written off and any future start-up costs to be expensed as incurred. The Company believes it is in compliance with the standards established by SOP 98-5 and as such SOP 98-5 will not impact the Company's future earnings or financial position. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities"("FAS 133"). The statement is effective for fiscal years beginning after June 15, 1999. The Company plans to adopt this statement at the beginning of fiscal 2000. The Company is completing an analysis of FAS 133 which is not expected to have a material impact on the Company's results of operations. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to certain market risks which exist as a part of its ongoing business operations. Primary exposures include fluctuations in the value of foreign currency investments in subsidiaries, volatility in the translation of foreign currency earnings to U.S. Dollars and movements in Federal Funds rates and the London Interbank Offered Rate ("LIBOR"). The Company uses derivative financial instruments, where appropriate, to manage these risks. The Company, as a matter of policy, does not engage in trading or speculative transactions. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Report of Independent Accountants........................................................................... 23 Consolidated Balance Sheets -- December 31, 1998 and 1997................................................... 24 Consolidated Statements of Operations -- Years Ended December 31, 1998, 1997 and 1996....................... 25 Consolidated Statements of Cash Flows -- Years Ended December 31, 1998, 1997 and 1996....................... 26 Consolidated Statements of Changes in Members' Equity -- Years Ended December 31, 1998, 1997 and 1996....... 27 Notes to Consolidated Financial Statements.................................................................. 28
22 25 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Managers and Members of Advanced Accessory Systems, LLC In our opinion, the consolidated financial statements listed in the index appearing under Item 14(a)(1) present fairly, in all material respects, the financial position of Advanced Accessory Systems, LLC and its subsidiaries at December 31, 1998 and 1997, and the results of their operations, their cash flows and changes in members' equity for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 14 (a) (2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP Bloomfield Hills, Michigan March 15, 1999 23 26 ADVANCED ACCESSORY SYSTEMS, LLC CONSOLIDATED BALANCE SHEETS
DECEMBER 31, ----------------------- 1998 1997 --------- --------- (DOLLAR AMOUNTS IN THOUSANDS) ASSETS Current assets Cash .................................................... $ 11,240 $ 27,348 Accounts receivable, less reserves of $2,766 and $1,699, respectively ......................................... 40,727 43,523 Inventories ............................................. 43,087 34,408 Deferred income taxes ................................... 280 -- Other current assets .................................... 3,964 6,531 --------- --------- Total current assets ............................... 99,298 111,810 Property and equipment, net ............................... 61,295 53,560 Goodwill, net ............................................. 87,079 85,889 Other intangible assets, net .............................. 6,592 9,963 Deferred income taxes ..................................... 1,933 3,626 Other noncurrent assets ................................... 2,784 710 --------- --------- $ 258,981 $ 265,558 ========= ========= LIABILITIES AND MEMBERS' EQUITY Current liabilities Current maturities of long-term debt .................... $ 4,536 $ 3,746 Accounts payable ........................................ 23,115 23,018 Accrued liabilities ..................................... 21,335 17,910 Deferred income taxes ................................... 1,080 1,333 --------- --------- Total current liabilities .......................... 50,066 46,007 --------- --------- Noncurrent liabilities Deferred income taxes ................................... 1,790 3,545 Other noncurrent liabilities ............................ 4,581 2,675 Long-term debt, less current maturities ................. 182,988 193,380 --------- --------- Total noncurrent liabilities ....................... 189,359 199,600 --------- --------- Commitments and contingencies (Note 11) Mandatorily redeemable warrants ........................... 4,409 3,507 --------- --------- Members' equity Class A Units 25,000 authorized, 16,450 and 16,411 issued at December 31, 1998 and 1997, respectively............ 22,276 23,163 Class B Units, 2,000 authorized, no Units issued at December 31, 1998 and 1997............................. -- -- Other comprehensive loss ................................ (615) (490) Accumulated deficit ..................................... (6,514) (6,229) --------- --------- 15,147 16,444 --------- --------- $ 258,981 $ 265,558 ========= =========
See accompanying notes to consolidated financial statements. 24 27 ADVANCED ACCESSORY SYSTEMS, LLC CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, --------------------------------------- 1998 1997 1996 --------- --------- --------- (DOLLAR AMOUNTS IN THOUSANDS) Net sales ................................ $ 290,139 $ 188,678 $ 81,466 Cost of sales ............................ 213,435 135,556 53,607 --------- --------- --------- Gross profit ........................... 76,704 53,122 27,859 Selling, administrative and product development expenses ................... 50,839 31,350 13,413 Amortization of intangible assets ........ 3,551 2,336 2,475 Impairment charge ........................ 7,863 -- -- --------- --------- --------- Operating income ....................... 14,451 19,436 11,971 --------- --------- --------- Other (income) expense Interest expense ....................... 18,633 12,627 4,312 Foreign currency (gain) loss ........... (4,995) 6,097 1,330 Other (income) expense ................. -- -- (80) --------- --------- --------- Income before minority interest, extraordinary charge and income taxes .................................. 813 712 6,409 Provision (benefit) for income taxes ..... 903 (2,856) (491) --------- --------- --------- Income (loss) before minority interest and extraordinary charge ................... (90) 3,568 6,900 Minority interest ........................ -- 97 69 Extraordinary charge resulting from debt extinguishment ......................... -- 7,416 1,970 --------- --------- --------- Net income (loss) ........................ $ (90) $ (3,945) $ 4,861 ========= ========= =========
See accompanying notes to consolidated financial statements. 25 28 ADVANCED ACCESSORY SYSTEMS, LLC CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, --------------------------------------- 1998 1997 1996 --------- --------- --------- (DOLLAR AMOUNTS IN THOUSANDS) CASH FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES ...................... $ (90) $ (3,945) $ 4,861 Net income (loss) Adjustments to reconcile net income (loss) to net cash provided by operating activities Depreciation and amortization ............. 15,093 9,360 4,689 Deferred taxes ............................ (688) (3,146) (363) Impairment and restructuring charge ....... 9,505 -- -- Foreign currency (gain) loss .............. (4,948) 5,500 1,118 Loss on disposal of assets ................ 191 -- 10 Extraordinary charge resulting from debt extinguishment ......................... -- 7,416 1,970 Changes in assets and liabilities: Accounts receivable .................... 5,873 (8,661) (118) Inventories ............................ (1,457) 582 (3,736) Other current assets ................... 1,513 378 (1,742) Other noncurrent assets ................ (1,934) (482) (67) Accounts payable ....................... (3,032) (2,719) 1,995 Accrued liabilities .................... 1,133 2,819 3,144 Other noncurrent liabilities ........... 720 (217) (1,913) Minority interest in consolidated subsidiaries ......................... -- 97 69 --------- --------- --------- NET CASH PROVIDED BY OPERATING ACTIVITIES ........................ 21,879 6,982 9,917 --------- --------- --------- CASH FLOWS PROVIDED BY (USED FOR) INVESTING ACTIVITIES Acquisition of machinery and equipment ...... (9,998) (7,751) (3,124) Amount due from sellers of Valley Industries, Inc ....................................... 1,150 (1,150) -- Acquisition of subsidiaries, net of cash acquired .................................. (22,770) (70,832) (54,339) --------- --------- --------- NET CASH USED FOR INVESTING ACTIVITIES ........................ (31,618) (79,733) (57,463) --------- --------- --------- CASH FLOWS PROVIDED BY (USED FOR) FINANCING ACTIVITIES Proceeds from issuance of debt .............. -- 215,050 88,842 Proceeds from issuance of warrants .......... -- -- 3,498 Increase (decrease) in revolving loan ....... (4,505) 504 4,300 Extinguishment of warrants .................. -- -- (1,600) Repayment of debt ........................... (3,682) (113,248) (44,628) Debt issuance costs ......................... -- (7,280) (2,643) Issuance of membership units ................ 29 4,999 4,562 Repurchase of membership units .............. (14) -- -- Distributions to members .................... (195) (2,945) (3,726) --------- --------- --------- NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES .............. (8,367) 97,080 48,605 --------- --------- --------- Effect of exchange rate changes ............. 1,998 505 (182) Net increase (decrease) in cash ............. (16,108) 24,834 877 Cash at beginning of period ................. 27,348 2,514 1,637 --------- --------- --------- Cash at end of period ....................... $ 11,240 $ 27,348 $ 2,514 ========= ========= ========= Cash paid for interest ...................... $ 17,559 $ 8,302 $ 4,215 ========= ========= ========= Cash paid for income taxes .................. $ 934 $ 581 $ -- ========= ========= =========
See accompanying notes to consolidated financial statements. 26 29 ADVANCED ACCESSORY SYSTEMS, LLC CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS' EQUITY (DOLLAR AMOUNTS IN THOUSANDS)
OTHER RETAINED TOTAL MEMBERS' COMPREHENSIVE EARNINGS MEMBERS' CAPITAL INCOME (LOSS) (DEFICIT) EQUITY -------- ------------ --------- --------- Balance at December 31, 1995........................... $ 13,360 $ -- $ 861 $ 14,221 Issuance of additional units .......................... 4,562 -- -- 4,562 Accretion of membership warrants ...................... -- -- (1,400) (1,400) Distributions to members, net of minority ............. -- -- (3,692) (3,692) interest Comprehensive income: Currency translation adjustment ..................... -- (89) -- -- Net income for 1996 ................................. -- -- 4,861 -- Total comprehensive income ........................ -- -- -- 4,772 -------- -------- -------- -------- Balance at December 31, 1996 .......................... 17,922 (89) 630 18,463 Issuance of additional units .......................... 5,250 -- -- 5,250 Accretion of membership warrants ...................... (9) -- -- (9) Distributions to members, net of minority ............. -- -- (2,914) (2,914) interest Comprehensive loss: Currency translation adjustment ..................... -- (401) -- -- Net loss for 1997 ................................... -- -- (3,945) -- Total comprehensive loss .......................... -- -- -- (4,346) -------- -------- -------- -------- Balance at December 31, 1997 .......................... 23,163 (490) (6,229) 16,444 Issuance of additional units .......................... 150 -- -- 150 Notes receivable for unit purchase..................... (121) -- -- (121) Repurchase of membership units......................... (14) -- -- (14) Accretion of membership warrants ...................... (902) -- -- (902) Distributions to members .............................. -- -- (195) (195) Comprehensive loss: Currency translation adjustment ..................... -- (125) -- -- Net loss for 1998 ................................... -- -- (90) -- Total comprehensive loss .......................... -- -- -- (215) -------- -------- -------- -------- Balance at December 31, 1998 .......................... $ 22,276 $ (615) $ (6,514) $ 15,147 ======== ======== ======== ========
See accompanying notes to consolidated financial statements. 27 30 ADVANCED ACCESSORY SYSTEMS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA) 1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES BUSINESS ACTIVITIES Advanced Accessory Systems, LLC (formerly AAS Holdings, LLC) (the "Company") is engaged in the design, manufacture and supply of towing and rack systems and accessories for the automotive original equipment manufacturer ("OEM") market and the automotive aftermarket. The Company's business commenced on September 28, 1995, with the acquisition of certain of the net assets of MascoTech Accessories (the "Predecessor"), a division of MascoTech, Inc., through the Company's majority-owned subsidiary, SportRack, LLC. As described in Note 2, in October 1996 the Company acquired Brink B.V., in July and August of 1997 acquired the sportrack division of Bell Sports Corporation, Nomadic Sports, Inc. and Valley Industries, Inc. and in January and February 1998 acquired the net assets of the towbar segment of Ellebi S.p.A. and the net assets of Transfo-Rakzs, Inc. PRINCIPLES OF CONSOLIDATION The Company includes the accounts of the following: SportRack, LLC................. 100% owned by Advanced Accessory Systems, LLC SportRack Automotive, GmbH... A German corporation, 100% owned by SportRack, LLC SportRack International, Inc and its consolidated subsidiary................. A Canadian corporation, 100% owned by SportRack, LLC AAS Holdings, Inc.............. 100% owned by Advanced Accessory Systems, LLC Brink International B.V and its consolidated subsidiaries................. A Dutch corporation, 100% owned by AAS Holdings, Inc. Valley Industries, LLC......... 99% owned by Advanced Accessory Systems, LLC and 1% owned by SportRack, LLC ValTek, LLC.................... 99% owned by Advanced Accessory Systems, LLC and 1% owned by SportRack, LLC AAS Capital Corporation........ 100% owned by Advanced Accessory Systems, LLC
All intercompany transactions have been eliminated in consolidation. REVENUE RECOGNITION Revenue and related cost of goods sold are recognized upon shipment of the product to the customer. Sales allowances, discounts, rebates and other adjustments are recorded or accrued in the period of the sale. SIGNIFICANT ESTIMATES The preparation of 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 at the date of the financial statements and the reported amounts of revenues and expenses during the fiscal period. Actual results could differ from those estimates. FINANCIAL INSTRUMENTS Financial instruments at December 31, 1998 and 1997, including cash, accounts receivable and accounts payable, are recorded at cost, which approximates fair value due to the short-term maturities of these assets and liabilities. The carrying value of the obligations under the bank agreements are considered to approximate fair value as the agreements provide for interest rate revisions based on changes in prevailing market rates or were entered into at rates that approximate market rates at December 31, 1998 and 1997. The carrying value of the Notes (as defined below) approximate fair value based upon quoted prices at December 31, 1998 in the market in which the Notes are traded. 28 31 ADVANCED ACCESSORY SYSTEMS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA) 1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) The Company is exposed to certain market risks which exist as a part of its ongoing business operations. Primary exposures include fluctuations in the value of foreign currency investments in subsidiaries, volatility in the translation of foreign currency earnings to U.S. Dollars and movements in Federal Funds rates and the London Interbank Offered Rate (LIBOR). The Company uses derivative financial instruments, where appropriate, to manage these risks. The Company, as a matter of policy, does not engage in trading or speculative transactions. CASH EQUIVALENTS For purposes of the statement of cash flows, the Company considers all highly-liquid investments with a maturity of three months or less from the date of purchase to be cash equivalents. CURRENCY TRANSLATION The functional currency for the Company's foreign subsidiaries is the applicable local currency. Assets and liabilities of foreign subsidiaries are translated into U.S. dollars at the exchange rates in effect at the balance sheet date; translation adjustments are reported as a separate component of members' equity. Revenues, expenses and cash flows for foreign subsidiaries are translated at average exchange rates during the period; foreign currency transaction gains and losses are included in current earnings. The accompanying consolidated statement of operations for the years ended December 31, 1998, 1997 and 1996 includes net currency gains (losses) of $4,995, $(6,097) and $(1,330), respectively, relating primarily to debt denominated in U.S. Dollars at Brink International B.V., whose functional currency was the Dutch Guilder through December 31, 1998. At December 31, 1998, U.S. Dollar denominated debt recorded at Brink includes intercompany debt and substantially all outstanding loans under the Company's Second Amended and Restated Credit Agreement, except for the term A note (as defined below) which was changed from a U.S. Dollar denominated loan to a Dutch Guilder denominated loan in October 1998. INVENTORIES Inventories are stated at the lower of cost or market, with cost being determined on the first-in, first-out (FIFO) method. Inventories are periodically reviewed and reserves established for excess and obsolete items. TOOLING The Company incurs costs to develop new tooling used in the manufacture of products sold to OEMs. Tooling costs that are reimbursed by the OEMs as the tooling is completed are included in other current assets. All other customer tooling costs are included in other noncurrent assets and amortized over the expected product life, generally four to six years. Company owned tooling is included in property and equipment and depreciated over its expected useful life, generally three to five years. Management periodically evaluates the recoverability of tooling costs, based on estimated future cash flows, and makes provisions for tooling costs that will not be recovered, if any, when such amounts are known. PROPERTY AND EQUIPMENT Property and equipment is stated at acquisition cost, which reflects the fair market value of assets acquired at the acquisition date for all subsidiaries. Property and equipment purchased other than through the acquisitions described in Note 2 is stated at cost. Expenditures for normal repairs and maintenance are charged to operations as incurred. Depreciation is computed using the straight-line method over the following estimated useful lives:
YEARS ----- Buildings and improvements................................. 5-50 Machinery, equipment and tooling........................... 2-10 Furniture and fixtures..................................... 5-7
29 32 ADVANCED ACCESSORY SYSTEMS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA) 1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill of $87,079 and $85,889 (net of accumulated amortization of $8,400 and $5,251) at December 31, 1998 and 1997, respectively, represents the costs in excess of net assets acquired and is amortized using the straight line method over periods of up to 30 years. Debt issuance costs of $5,958 and $6,467, net of accumulated amortization at December 31, 1998 and 1997, respectively, are amortized over the terms of the loan agreements, which are six to ten years. Debt issuance cost amortization of $587, $551 and $212 for 1998, 1997 and 1996, respectively, has been included in interest expense. IMPAIRMENT OF LONG-LIVED ASSETS The Company reviews long-lived assets and certain identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. The Company determines the impairment of long-lived assets by comparing the undiscounted future net cash flows to be generated by the assets to their carrying value. Impairment losses are then measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset. In 1998, as described in Note 3, the Company determined that certain intangible assets of its subsidiary, SportRack International, Inc. had been impaired. INCOME TAXES The Company and certain of its domestic subsidiaries have elected to be taxed as limited liability companies for federal income tax purposes. As a result of this election, the Company's domestic taxable income accrues to the individual members. Distributions are made to the members in amounts sufficient to meet the tax liability on the Company's domestic taxable income accruing to the individual members. Distributions to members, net of minority interest, of $195, $2,914 and $3,692 were made during 1998, 1997 and 1996, respectively. Certain of the Company's domestic subsidiaries and foreign subsidiaries are subject to income taxes in their respective jurisdictions. Income tax provisions for these entities are based on the U.S. Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes". Deferred tax assets and liabilities are provided for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of such entities' assets and liabilities. Deferred tax assets are reduced by a valuation allowance for tax benefits that are not expected to be realized. The Company does not provide for U.S. income taxes or foreign withholding taxes on the undistributed earnings of foreign subsidiaries because of management's intent to permanently reinvest in such operations. The Company and certain subsidiaries are subject to taxes, including Michigan Single Business Tax and Canadian capital tax, which are based primarily on factors other than income. As such, these amounts are included in selling, administrative and product development expenses in the accompanying consolidated statements of income. Deferred taxes related to Michigan Single Business Tax are provided on the temporary differences resulting from capital acquisitions and depreciation. RESEARCH, DEVELOPMENT AND ENGINEERING Research, development and engineering costs are expensed as incurred and aggregated approximately $9,611, $5,860 and $3,548 for the years ended December 31, 1998, 1997 and 1996, respectively, for the Company. RECLASSIFICATIONS Certain amounts from the 1997 financial statements have been reclassified to conform with the 1998 financial statement presentation. 30 33 ADVANCED ACCESSORY SYSTEMS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA) 2. ACQUISITIONS Acquisitions of the Company from inception through December 31, 1998 are as follows:
PURCHASE GOODWILL ACQUIRED COMPANY ACQUISITION DATE PRICE RECORDED LOCATION PRODUCT LINES ----------------------------------------- ------------------ -------- ---------- ----------- -------------- MascoTech Accessories.................... September 28, 1995 $46,050 $32,781 United Rack systems States Brink B.V................................ October 30, 1996 54,339 27,730 Europe Towing systems Sportrack division of Bell Sports........ July 2, 1997 13,505 1,198 Canada Rack systems Nomadic Sports, Inc...................... July 24, 1997 849 433 Canada Rack systems Valley Industries, Inc................... August 5, 1997 56,478 32,891 United Towing systems States Towbar segment of Ellebi S.p.A........... January 2, 1998 21,938 5,645 Italy Towing systems Tranfo-Rakzs, Inc........................ February 7, 1998 1,040 902 Canada Rack systems
The above acquisitions have each been accounted for in accordance with the purchase method of accounting. Accordingly, the respective purchase price of each acquisition has been allocated to assets acquired and liabilities assumed based upon their estimated fair values at the acquisition date. The excess of the aggregate purchase price over the estimated fair value of the net assets acquired has been recorded as goodwill. The operating results of these entities have been included in the Company's consolidated financial statements since the date of each acquisition. Each acquisition represented the purchase of the net assets of the respective company with the exceptions of Brink B.V. and Nomadic Sports, Inc. which were purchases of the outstanding shares. Each company was purchased for cash except for Brink B.V. which was purchased for $54,339 in cash and a 12,500 Junior Subordinated Note ($7,340) denominated in Dutch Guilders, to Brink Holdings, B.V. Pro Forma Data The following unaudited pro forma consolidated results of operations have been prepared as if the Valley, SportRack International, Inc., Ellebi and Tranfo-Rakzs, Inc. acquisitions had occurred on January 1, 1997.
1997 ---- Net sales........................................... $ 268,489 Income before extraordinary charge.................. 2,015 Net loss............................................ (5,401)
Pro forma results for 1998 have not been presented as they are substantially the same as the Company's actual results. The pro forma data is not intended to be a projection of future results. The pro forma data included above includes adjustments to historical results of operations for increased depreciation expense, intangible asset amortization and interest expense, net of the related tax benefits. 3. IMPAIRMENT AND RESTRUCTURING CHARGES In July 1997, the Company acquired the net assets of the sportrack division of Bell Sports Corporation ("Bell") for approximately $13,500 and recorded goodwill of approximately $1,200, representing the excess of the purchase price over the then estimated fair value of net assets acquired. In June 1998 information became available which indicated that certain assets acquired from Bell (accounts receivable, inventory, and tooling) had a fair value less than originally recorded. The SportRack International purchase was renegotiated and a $2,000 reimbursement was received from Bell. Accounts receivable, inventory and tooling were reduced by $6,500 and additional goodwill of $4,500, net of the $2,000 reimbursement from Bell, was recorded. During the second half of 1998, management further reassessed the operations of SportRack International, and as a result took actions to restructure the operations and rationalize the product offerings, customer and supplier base, distribution channels and warehousing, and terminated 14 employees, including certain members of SportRack International's senior management. Concurrent with the reassessment of the SportRack International's operations, management reviewed the revised carrying value of goodwill and other intangible assets, determined that future cash flows would not be sufficient to recover recorded amounts, and recorded an impairment charge of $7,863. 31 34 ADVANCED ACCESSORY SYSTEMS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA) 3. IMPAIRMENT AND RESTRUCTURING CHARGE -- (CONTINUED) The SportRack International impairment and restructuring charges are comprised of the following: Impairment of: Goodwill ............... $6,116 Other intangible assets 1,747 $7,863 ------ Restructuring charges for: Product rationalization 1,068 Other costs ............ 832 1,900 ------ ------ $9,763 ======
The restructuring charge related to inventory has been included in cost of sales and other costs have been included in selling, administrative and product development expenses in the accompanying 1998 consolidated statement of operations. Management believes that substantially all restructuring costs have been incurred as of December 31, 1998, including cash expenditures during 1998 of $258. Sales for SportRack International during the year ended December 31, 1998 were approximately $4,000 and total assets as of December 31 1998 were approximately $7,100 after the impairment charge. 4. LONG-TERM DEBT Long-term debt is comprised of the following:
OUTSTANDING AT INTEREST RATE AT DECEMBER 31, DECEMBER 31, --------------------- 1998 1998 1997 --------------- ---------- -------- Senior Subordinated Notes, less discount of $435 and $464, respectively ....................... 9.75% $124,565 $124,536 Second Amended and Restated Credit Agreement (U.S. Credit Facility) Term note A ............................... 5.09% 14,777 17,065 Term note B ............................... 7.54% 15,592 15,883 Revolving line of credit note ............. -- -- 1,900 Acquisition revolving note ................ 7.09% 21,000 21,000 First Amended and Restated Credit Agreement (Canadian Credit Facility) Canadian term note ........................ 7.50% 11,590 13,952 Canadian revolving line of credit note .... -- -- 2,790 -------- -------- 187,524 197,126 Less -- current portion ........................ 4,536 3,746 -------- -------- $182,988 $193,380 ======== ========
During 1998, the Company exchanged 100% of its Senior Subordinated Notes (the "Old Notes") for a new series of notes issued under a registration statement having terms substantially identical to the Old Notes. 32 35 ADVANCED ACCESSORY SYSTEMS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA) 4. LONG-TERM DEBT -- (CONTINUED) SENIOR SUBORDINATED NOTES Borrowings under the Company's Series B Senior Subordinated Notes (the "Notes"), due October 1, 2007, are unsecured and are subordinated in right of payment to all existing and future senior indebtedness of the Company, including the loans under the U.S. and Canadian Credit Agreements described below. The Company, at its option, may redeem the Notes, in whole or in part, together with accrued and unpaid interest subsequent to October 1, 2002 at certain redemption prices as set forth by the indenture, under which the Notes have been issued. In addition, at any time on or prior to October 1, 2000, the Company may redeem up to 35% of the aggregate principal amount of the Notes with the net cash proceeds of one or more public equity offerings at a redemption price equal to 109.75% of the principal amount to be redeemed. Upon the occurrence of a change of control of the Company, as defined by the indenture, the Company is required to make an offer to repurchase the Notes at a price equal to 101% of the principal amount of the notes. The indenture places certain limits on the Company, the most restrictive of which include, the incurrence of additional indebtedness by the Company, the payment of dividends on, and redemption of capital of the Company, the redemption of certain subordinated obligations, investments, sales of assets and stock of certain subsidiaries, transactions with affiliates, consolidations, mergers and transfers of all or substantially all of the Company's assets. Interest on the Notes is payable semi-annually in arrears on April 1 and October 1 of each year. SECOND AMENDED AND RESTATED CREDIT AGREEMENT The Company's Second Amended and Restated Credit Agreement ("U.S. Credit Facility"), which is administered by First Chicago NBD Bank ("NBD") and The Chase Manhattan Bank ("Chase"), is secured by substantially all the assets of the Company and places certain restrictions on the Company related to indebtedness, sales of assets, investments, capital expenditures, dividend payments, management fees, and members' equity transactions. In addition, the agreement subjects the Company to certain restrictive covenants, including the attainment of designated operating ratios and minimum net worth levels. The Company, at its election, may make prepayments of the term notes under the credit agreement on a pro-rata basis. Additionally, mandatory prepayments of the term notes are required in the event of sales of assets meeting certain criteria, as set forth by the agreement, or based upon periodic calculations of excess cash flows, as defined by the agreement. The U.S. Credit Facility provides for two term notes (Term note A and Term note B), a revolving line of credit note and an acquisition revolving note. Loans under each of the term notes and the revolving note can be converted, at the election of the Company, in whole or in part, into Base Rate Loans or Eurocurrency Loans. Interest is payable in arrears quarterly on Base Rate Loans, and in arrears in one, two or three months on Eurocurrency Loans, as determined by the length of the Eurocurrency Loan, as selected by the Company. Interest is charged at an adjustable rate plus the applicable margin. The applicable margin is based upon the Company's Senior Debt Ratio, as defined by the Credit Agreement. Eurocurrency Loans under the Term A note can be made in U.S. dollars or certain other currencies, at the option of the Company. The U.S. Credit Facility also provides for a Letter of Credit Facility. At December 31, 1998, no letters of credit were outstanding. Term note A On October 30, 1996 the Company borrowed $65,000 under Term note A. On October 1, 1997 the Company made a mandatory prepayment totaling $43,475 in connection with the issuance of the Old Notes. In October 1998, the loan under Term note A, which was denominated in U.S. Dollars, was exchanged for a loan denominated in Dutch Guilders. All other provisions of Term note A were unchanged. At December 31, 1998 the principal balance of Term note A was 27,913 Dutch Guilders. The applicable margin for Term note A ranges from .75% to 2.0% for Base Rate Loans and from 1.75% to 3.0% for Eurocurrency Loans. Repayments under the note are required in the following installments:
QUARTERLY ------------------------------------------ March 31, 1999 through September 30, 1999...................... $ 552 December 31, 1999 through September 30, 2000................... 736 December 31, 2000 through June 30, 2003........................ 883 Final installment on October 30, 2003.......................... 464
33 36 ADVANCED ACCESSORY SYSTEMS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA) 4. LONG-TERM DEBT -- (CONTINUED) Term note B On August 5, 1997, the Company borrowed $55,000 under Term note B. On October 1, 1997 the Company made a mandatory prepayment totaling $39,044 in connection with the issuance of the Old Notes. The applicable margin for Term note B ranges from 1.25% to 2.5% for Base Rate Loans and from 2.25% to 3.5% for Eurocurrency Loans. Repayments under Term note B are required in the following installments: March 31, 1999 through September 30, 2003 (quarterly)................................ $ 73 December 31, 2003.................................................................... 2,912 March 30, 2004, June 30, 2004 and October 30, 2004................................... 3,764
Revolving line of credit note The Company has the ability to borrow up to $25,000 under the revolving line of credit which expires on October 30, 2003. Available borrowings, however, are limited to a defined borrowing base amount equal to 85% eligible domestic accounts receivable and 80% of certain eligible foreign accounts receivable. The base borrowing amount is increased by the lesser of the sum of 50% of domestic eligible inventory and 40% to 50% of certain eligible foreign inventory or $10,000. Available borrowings are reduced by amounts outstanding under the Canadian revolving line of credit note described below. The applicable margin for the revolving line of credit ranges from .75% to 2.0% for Base Rate Loans and from 1.75% to 3.0% for Eurocurrency Loans. A commitment fee of .375% to .5% is charged on the unused balance based on the Company's Senior Leverage Ratio, as defined. At December 31, 1998, $25,000 was available under the facility. Acquisition revolving note On December 31, 1997, the Company borrowed $21,000 under its $22,000 acquisition revolving note. The proceeds were used to acquire the net assets of Ellebi on January 2, 1998, as discussed in Note 2. The note is available to the Company on a revolving credit basis until September 24, 1999 at which time the outstanding principal balance will convert to a term loan which will amortize in sixteen equal quarterly installments with a final maturity of October 30, 2003. The applicable margin for the acquisition revolving note ranges from .75% to 2.0% for Base Rate Loans and from 1.25% to 3.0% for Eurocurrency Loans. A commitment fee of .375% to .5% is charged on the unused balance based on the Company's Senior Leverage Ratio, as defined. FIRST AMENDED AND RESTATED CREDIT AGREEMENT The Company's First Amended and Restated Credit Agreement ("Canadian Credit Facility"), which is administered by NBD and Chase, is secured by substantially of all the assets of the Company's Canadian subsidiaries and is guaranteed by the Company. The Canadian Credit Facility provides for a C$20,000 term note and a C$4,000 revolving note, (U.S. $13,068 and U.S. $2,614) at December 31, 1998, respectively. Loans under each of the notes can be converted at the election of the company, in whole or in part, into Floating Rate advances, U.S. Base Rate advances or LIBOR advances. Floating rate advances are denominated in Canadian dollars and bear interest at a variable rate based on the bank's prime lending rate plus a variable margin. U.S. Base Rate advances are denominated in U.S. dollars and bear interest at the bank's prime lending rate plus a variable margin. LIBOR advances are denominated in U.S. dollars and bear interest at LIBOR plus a variable margin. The variable margin is based upon the Company's Senior Debt Ratio, as defined by the Canadian Credit Facility and ranges from .5% to 1.75% for U.S. Base Rate advances and from 1.5% to 2.75% for LIBOR advances. 34 37 ADVANCED ACCESSORY SYSTEMS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA) 4. LONG-TERM DEBT -- (CONTINUED) Canadian term note Repayments under the Canadian term note are required in the following installments:
QUARTERLY ------------------------------------------ March 31, 1999 through September 30, 1999.......................... $ 430 December 31, 1999 through September 30, 2000....................... 563 December 31, 2000 through June 30, 2003............................ 671 Final installment on October 30, 2003.............................. 667
Canadian revolving line of credit note A commitment fee of .5% is charged on the unused balance of the Canadian revolving line of credit note. SENIOR SUBORDINATED LOANS On October 30, 1996, the Company borrowed $20,000 under its Senior Subordinated Note Purchase Agreement ("Senior Subordinated Loans") with CB Capital and International Mezzanine. The Senior Subordinated Loans were repaid in full on October 1, 1997 with the proceeds of the Notes discussed above. Interest on the Senior Subordinated Loans was payable in arrears semiannually and accrued at a rate of 12.5% per annum. The Senior Subordinated Loans provided for a prepayment penalty if the Senior Subordinated Loans were paid prior to October 30, 2002. Under this provision, a prepayment penalty totaling $1,400 was paid in 1997 and is included in the extraordinary charge resulting from debt extinguishment. In connection with the issuance of the Senior Subordinated Loans, the Company issued warrants to purchase 1,002 membership units. The warrants have an exercise price of one cent per warrant, are exercisable immediately, and expire October 30, 2004. As provided in the Warrant Agreement, the warrant holder can put the warrants and membership units acquired through the exercise of the warrants back to the Company after October 30, 2001 or upon occurrence of a Triggering Event, as defined, but prior to the earlier of October 30, 2004 or the consummation of a Qualified Public Offering for an amount equal to Fair Market Value, as defined. Additionally, as provided in the Warrant Agreement, the Company may call the warrants and membership units acquired through the exercise of the warrants at any time after the sixth anniversary of the Closing Date, but prior to the earlier of October 30, 2004 or a Qualified Public Offering for an amount equal to Fair Market Value, as defined. At the date of issuance, the proceeds from the Senior Subordinated Loans were allocated between the Senior Subordinated Loans and the warrants based upon their estimated relative fair market value; accordingly, the Senior Subordinated Loans were recorded at a discount of $3,498, which was partially amortized prior to repayment on October 1, 1997. The remaining unamortized balance of $3,145 was charged to 1997 operations as part of the extraordinary charge resulting from debt extinguishment. The warrants are being accreted to their redemption value through periodic charges against Members' Equity through the earlier of October 30, 2001 or the time redemption first becomes available. Thereafter the warrants will be recorded at redemption value. The aforementioned warrants have been presented as mandatorily redeemable warrants in the accompanying balance sheets. JUNIOR SUBORDINATED NOTE On October 30, 1996, the Company issued a 12,500 Junior Subordinated Note ("Junior Note"), denominated in Dutch Guilders, to Brink Holdings B.V. as part of the consideration paid for the purchase of Brink B.V. The Junior Note was due April 30, 2005, but was repaid in full on October 1, 1997 with the proceeds of the Old Notes discussed above. The Junior Note accrued interest at a rate of 7% per annum, payable semi-annually in arrears. 35 38 ADVANCED ACCESSORY SYSTEMS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA) 4. LONG-TERM DEBT -- (CONTINUED) EXTINGUISHMENT OF DEBT 1997 Extinguishments As discussed above, on October 1, 1997 the Company repaid, in full, its Senior Subordinated Loans and Junior Note and prepaid a portion of the term notes under the U.S. Credit Facility. In connection with this extinguishment, the Company recorded an extraordinary charge of $7,416, net of a tax benefit of $365. The extinguishment charge is comprised of $1,400 prepayment penalties, $3,145 of unamortized debt discount and $3,236 of unamortized debt issuance costs. 1996 Extinguishments On October 30, 1996, the Company prepaid all amounts outstanding under a $30,000 credit agreement and a prior $11,000 senior subordinated loan agreement. In connection with these extinguishments, the Company recorded an extraordinary charge of $1,970. The extinguishment charge is comprised of prepayment penalties totaling $220, unamortized debt discount totaling $150 and debt issuance costs of $1,600. In connection with the issuance of the prior senior subordinated loan, the Company issued warrants to purchase 617 membership units. The proceeds from the issuance were allocated based on the estimated relative fair market values; accordingly, the notes were recorded at a discount of $200. As part of the extinguishment of the prior senior subordinated loan, the Company paid $1,600 to redeem the warrants. INTEREST RATE RISK The Company is exposed to interest rate volatility with regard to variable rate debt. The Company uses interest rate swaps to reduce interest rate volatility. At December 31, 1998 and 1997, the notional value of interest rate swaps was $18,500. Under the terms of the interest rate swap agreements, the Company pays a fixed interest rate on debt equal to the notional value. The effects of interest rate swaps are reflected in interest expense. SCHEDULED MATURITIES The aggregate scheduled annual principal payments due in each of the years ending December 31, is as follows: 1999............................................................ $ 4,536 2000............................................................ 10,994 2001............................................................ 11,757 2002............................................................ 11,757 2003............................................................ 12,623 2004 and thereafter............................................. 136,292 --------- 187,959 Less -- discount................................................ 435 --------- $ 187,524 =========
36 39 ADVANCED ACCESSORY SYSTEMS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA) 5. INCOME TAXES The Company's C corporation subsidiaries and taxable foreign subsidiaries account for income taxes in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes". The Company and certain domestic subsidiaries are limited liability corporations; as such, the Company's earnings are included in the taxable income of the Company's members. Income (loss) before minority interest, income taxes and the pre-tax charge resulting from debt extinguishment were attributable to the following sources:
YEAR ENDED DECEMBER 31, ------------------------------------ 1998 1997 1996 -------- -------- -------- United States .................. $ 10,002 $ 2,872 $ 6,283 Foreign ........................ (9,189) (9,941) (1,844) -------- -------- -------- $ 813 $ (7,069) $ 4,439 ======== ======== ========
The provision (benefit) for income taxes, including $365 of income tax benefit allocated to the extraordinary charge in 1997, is comprised of the following:
YEAR ENDED DECEMBER 31, --------------------------------- 1998 1997 1996 ------- ------- ------- CURRENTLY PAYABLE (REFUNDABLE) United States .............. $ -- $ -- $ -- Foreign .................... 1,591 290 (128) ------- ------- ------- 1,591 290 (128) ------- ------- ------- DEFERRED United States .............. -- -- -- Foreign .................... (688) (3,511) (363) ------- ------- ------- 903 (3,511) (363) ------- ------- ------- $ 903 $(3,221) $ (491) ======= ======= =======
The effective tax rates differ from the U.S. federal income tax rate as follows:
YEAR ENDED DECEMBER 31, -------------------------------------- 1998 1997 1996 ----------- ----------- ------- Income tax provision (benefit) at U.S. statutory rate (35%) $ 286 $(2,474) $ 1,554 U. S. income taxes attributable to members................. (3,502) (1,005) (2,200) Change in valuation allowance.............................. 4,225 -- -- Nondeductible foreign goodwill............................. 270 229 102 Foreign rate differences and other, net.................... (376) 29 53 ------- ------- ------- $ 903 $(3,221) $ (491) ======= ======= =======
Deferred tax assets and liabilities, related primarily to the Company's foreign subsidiaries, comprise the following:
DECEMBER 31, -------------------- 1998 1997 ------- ------- DEFERRED TAX ASSETS Net operating loss carryforwards of foreign subsidiaries..................... $ 4,689 $ 3,255 Fixed assets................................................................. 5,185 296 Goodwill..................................................................... 621 -- Inventory.................................................................... 150 -- Other........................................................................ 427 75 ------- ------- 11,072 3,626 ------- ------- DEFERRED TAX LIABILITIES Fixed assets................................................................. (5,816) (3,296) Inventory.................................................................... (1,363) (1,244) Employee benefits and other.................................................. (159) (176) Other........................................................................ (166) (162) ------- ------- (7,504) (4,878) Valuation allowance.......................................................... (4,225) -- ------- ------ Net deferred tax liability................................................... $ (657) $(1,252) ======= =======
37 40 ADVANCED ACCESSORY SYSTEMS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA) 5. INCOME TAXES -- (CONTINUED) The net operating loss carryforwards of the Company's European subsidiaries approximate $1,300 at December 31, 1998 and have no expiration date. The net operating loss carryforwards of the Company's Canadian subsidiaries approximate $11,000 at December 31, 1998 and expire primarily in 2005. During 1998, the Company recorded a valuation allowance of $4,225 based upon management's current assessment of the likelihood of realizing the Canadian subsidiaries' deferred tax assets. Management believes that it is more likely than not that the related deferred tax assets recorded for its other subsidiaries will be realized and no valuation allowance has been provided against such amounts as of December 31, 1998. If certain substantial changes in the Company's ownership should occur, there could be an annual limit on the amount of certain carryforwards which can be utilized. 6. RELATED PARTY TRANSACTIONS AND ALLOCATIONS In connection with the acquisition of Brink B.V., the Company entered into the Junior Note Agreement, with Brink Holdings B.V., as described in Note 4 to the financial statements. Concurrent with this acquisition, owners of Brink Holdings B.V. purchased 1,230 membership units of the Company for cash of $4,286 ($3,485 per unit). A portion of the Company's U.S. Credit Facility and $20,000 Senior Subordinated Loans, as described in Note 4, is with Chase and CB Capital Investors, Inc., respectively, affiliates of certain members of the Company. Charges to operations related to consulting services provided to the Company by certain members of the Company aggregated approximately, $386, $350 and $243 for the years ended December 31, 1998, 1997 and 1996, respectively. Certain employees and consultants of the Company hold Class A Units of the Company. 7. OPTION PLAN The Company adopted the disclosure requirements of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based Compensation". The Company, however, has elected to continue to measure compensation cost using the intrinsic value method, in accordance with APB Opinion 25 ("APB 25"), "Accounting for Stock Issued to Employees". The Company has issued options to purchase Class A Units which are outstanding under the Company's 1995 Option Plan ("the Plan"). As of December 31, 1998 and 1997, the Company was authorized under the Plan to issue options to purchase up to 4,200 Class A Units to officers, directors and employees of the Company and its subsidiaries. At December 31, 1998, there were 229 options that remained available for grant under the Plan. Information concerning options to purchase Class A Units is as follows:
1998 1997 1996 ------------------------ ------------------------ ----------------------- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE NUMBER OF EXERCISE NUMBER OF EXERCISE NUMBER OF EXERCISE UNITS PRICE UNITS PRICE UNITS PRICE --------- -------- --------- -------- --------- -------- Outstanding at January 1.............. 3,903 $ 1,415 3,525 $ 1,000 2,925 $ 1,000 Options granted....................... 280 $ 3,135 378 $ 5,287 600 $ 1,000 Options exercised..................... -- -- -- -- -- -- Options cancelled..................... 212 $ 5,035 -- -- -- -- ----- ------- ------- Outstanding at December 31............ 3,971 $ 1,343 3,903 $ 1,415 3,525 $ 1,000 ===== ======= ======= Exercisable at December 31............ 1,654 $ 1,367 938 $ 1,000 480 $ 1,000 ===== ======= =======
38 41 ADVANCED ACCESSORY SYSTEMS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA) 7. OPTION PLAN -- (CONTINUED) Options granted vest as follows:
WEIGHTED AVERAGE NUMBER OF EXERCISE UNITS PRICE VESTING PERIOD --------- --------- --------------------------------------------------- 215 $ 3,029 Options vest immediately. 2,854 $ 1,200 Options vest over periods, generally up to ten years, as determined by the Option Committee. Vesting may be accelerated based on the results of a Liquidity Event, as defined in the Plan, or based upon the achievement of certain operating results of the Company or its subsidiaries. 275 $ 1,000 Options vest based on the results of a Liquidity Event, as defined in the Plan. 627 $ 1,566 Options vest based upon achievement of certain operating results of the Company.
The Company has elected to continue applying the provisions of APB 25 and accordingly, recognized compensation cost of $558, $263 and $332 for the years ended December 31, 1998, 1997 and 1996, respectively. If compensation cost and the fair value of options granted had been determined based upon the fair value method in accordance with SFAS 123, the pro forma net income (loss) of the Company would have been ($290), ($3,985) and $4,846 the years ended December 31, 1998, 1997 and 1996, respectively. The weighted average fair value of options granted was $2.4, $0.2 and $0.4 for the years ended December 31, 1998, 1997 and 1996, respectively. The fair value of options granted and related pro forma compensation cost were estimated using the Black-Scholes option-pricing model with the following assumptions:
1998 1997 1996 ------- ------- ------ Dividend yield ................ 0.0% 0.0% 0.0% Risk-free rate of return ...... 5.50% 6.12% 6.21% Expected option term (in years) 8 8 8
The following table summarizes the status of the Company's options outstanding and exercisable at December 31, 1998:
OPTIONS OUTSTANDING ----------------------------- WEIGHTED AVERAGE REMAINING EXERCISE CONTRACTUAL OPTIONS PRICES UNITS LIFE EXERCISABLE ------ ----- ---- ----------- $1,000 3,525 12 1,396 $3,029 215 14 215 $3,485 65 14 13 $5,610 166 14 30
8. PENSION PLANS The Company has a defined benefit pension plan covering substantially all of SportRack, LLC's domestic employees covered under a collective bargaining agreement. An employee's monthly pension benefit is determined by multiplying a defined dollar amount by the years of credited service earned. Plan assets are comprised principally of marketable equity securities and short-term investments. The Company's funding policy is to contribute annually the amounts necessary to comply with ERISA funding requirements. 39 42 ADVANCED ACCESSORY SYSTEMS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA) 8. PENSION PLANS -- (CONTINUED) The following table sets forth the change in the plan's benefit obligations and plan assets, and the funded status of the plan as of and for the years ended December 31, 1998 and 1997:
DECEMBER 31, --------------------- 1998 1997 --------- ------- Change in benefit obligation: Benefit obligation at beginning of year.................................... $ 1,929 $ 1,637 Benefits earned during the year............................................ 99 76 Interest on projected benefit obligation................................... 140 124 Actuarial loss............................................................. 202 217 Benefits paid.............................................................. (69) (125) ------ ------ Benefit obligation at end of year.......................................... 2,301 1,929 ------ ------ Change in plan assets: Market value of assets at beginning of year................................ 1,586 1,308 Actual return on plan assets............................................... 167 303 Employer contributions..................................................... 147 100 Benefits paid.............................................................. (69) (125) ------- ------- Market value of assets at end of year...................................... 1,831 1,586 ------- ------- Funded status................................................................. (470) (343) Unrecognized prior service cost............................................... 9 11 Unrecognized net (gain) loss.................................................. 49 (133) ------- ------- Accrued pension cost.......................................................... $ (412) $ (465) ======= =======
The weighted average discount rate used in determining the actuarial present value of the accumulated benefit obligation was 6.75% and 7.00% at December 31, 1998 and 1997, respectively. The expected long-term rate of return on plan assets was 9.00% at December 31, 1998 and 1997. The Company has various defined contribution retirement plans for its domestic and certain foreign subsidiaries, including 401(k) plans, whereby participants can contribute a portion of their salary up to certain maximums established by the related plan documents. The Company makes matching contributions, which are based upon the amounts contributed by employees. The Company's matching contributions charged to operations aggregated $306, $229 and $130 in 1998, 1997 and 1996, respectively. Substantially all of the employees of Brink International B.V. are covered by a union-sponsored, collectively-bargained, multi-employer defined benefit plan. Pension expense was $1,302, $660 and $118 for the years ended December 31, 1998 and 1997 and for the two-month period from November 1, 1996 through December 31, 1996, respectively. 9. OPERATING LEASES The Company leases certain equipment under leases expiring on various dates through 2004. Future minimum annual lease payments required under leases that have a noncancellable lease term in excess of one year at December 31, 1998 are as follows: 1999.................................................................................. $ 2,927 2000.................................................................................. 2,332 2001.................................................................................. 1,924 2002.................................................................................. 1,478 2003 and thereafter................................................................... 868 ------- $ 9,529 =======
Rental expense charged to operations was approximately $3,947, $2,252 and $669 for the years ended December 31, 1998, 1997 and 1996, respectively. 40 43 ADVANCED ACCESSORY SYSTEMS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA) 10. ACCOUNT BALANCES Account balances included in the consolidated balance sheets are comprised of the following:
DECEMBER 31, ---------------------- 1998 1997 --------- ------ INVENTORIES Raw materials.............................................................. $12,805 $13,744 Work-in-process............................................................ 12,707 5,040 Finished goods............................................................. 17,575 15,624 ------- ------- $43,087 $34,408 ======= ======= PROPERTY AND EQUIPMENT Land, buildings and improvements........................................... $22,552 $20,966 Furniture, fixtures and computer hardware.................................. 8,137 6,299 Machinery, equipment and tooling........................................... 46,003 32,458 Construction-in-progress................................................... 1,984 1,985 ------- ------- 78,676 61,708 Less -- accumulated depreciation........................................... (17,381) (8,148) ------- ------- $61,295 $53,560 ======= ======= ACCRUED LIABILITIES Compensation and benefits.................................................. $ 9,239 $ 8,900 Interest................................................................... 3,256 3,154 Income taxes............................................................... 1,692 646 Other taxes................................................................ 766 478 Other...................................................................... 6,382 4,732 ------- ------- $21,335 $17,910 ======= =======
11. COMMITMENTS AND CONTINGENCIES The Company is party to various claims, lawsuits and administrative proceedings related to matters arising out of the normal course of business. Management believes that the resolution of these matters will not have a material adverse effect on the financial position, results of operations or cash flows of the Company. 12. SEGMENT INFORMATION The Company operates in one reportable segment, providing towing and rack systems and related accessories to the automotive OEM and aftermarket. All sales are to unaffiliated customers. Revenues by geographic area, accumulated by the geographic area where the revenue originated, revenues by product line and long-lived assets, which include net property and equipment and net goodwill and debt issuance costs, by geographic area are as follows:
YEAR ENDED DECEMBER 31, ---------------------------------- 1998 1997 1996 ----------- ----------- -------- REVENUES United States.................................................... $ 190,300 $ 122,294 $73,895 The Netherlands.................................................. 35,543 36,268 2,791 Italy............................................................ 19,900 -- -- Other foreign.................................................... 44,396 30,116 4,780 --------- --------- ------- $ 290,139 $ 188,678 $81,466 ========= ========= =======
YEAR ENDED DECEMBER 31, ---------------------------------- 1998 1997 1996 ----------- ----------- -------- REVENUES Towing systems.................................................. $ 175,236 $ 100,293 $ 7,571 Rack systems.................................................... 114,903 88,385 73,895 --------- --------- --------- $ 290,139 $ 188,678 $ 81,466 ========= ========= =========
41 44 ADVANCED ACCESSORY SYSTEMS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA) 12. SEGMENT INFORMATION -- (CONTINUED)
DECEMBER 31, ------------------------ 1998 1997 ----------- --------- LONG-LIVED ASSETS United States........................................................ $ 93,628 $ 94,931 The Netherlands...................................................... 33,432 32,508 Italy................................................................ 10,774 -- Other foreign........................................................ 16,511 20,845 -------- -------- $154,345 $148,284 ======== ========
The Company has two significant customers in the automotive OEM industry. Sales to these customers represented 32% and 11% for the year ended December 31, 1998, 29% and 13% for the year ended December 31, 1997 and 60% and 21% for the year ended December 31, 1996. Accounts receivable from these customers represented 42% and 6% of the Company's trade accounts receivable at December 31, 1998, and 33% and 8% at December 31, 1997, respectively. Although the Company is directly affected by the economic well being of the industries and customers referred to above, management does not believe significant credit risk exists at December 31, 1998. Consistent with industry practice, the Company does not require collateral to reduce such credit risk. 13. CONDENSED CONSOLIDATING INFORMATION The Notes have been issued by the Company and its wholly-owned subsidiary, AAS Capital Corporation and are guaranteed on a full and unconditional and joint and several basis, by all of the Company's wholly-owned domestic subsidiaries. The following condensed consolidating financial information for 1998 and 1997 presents the financial position, results of operations and cash flows of (i) the Company as parent, as if it accounted for its subsidiaries on the equity method, and AAS Capital Corporation as issuers; (ii) guarantor subidiaries which are domestic, wholly-owned subidiaries and include SportRack LLC, AAS Holdings, Inc., Valley Industries, LLC, and ValTek LLC; and (iii) the non-guarantor subsidiaries which are foreign, wholly-owned subsidiaries and include Brink International B.V., SportRack International, Inc., and SportRack Automotive, GmbH. The financial position and operating results of the guarantor and non-guarantor subsidiaries for the year ended December 31, 1998 include a management fee of $1,198 and $318, respectively, in addition to having been charged interest on their intercompany balances. For the year ended December 31, 1997 the financial position and operating results of the guarantor and non-guarantor subsidiaries do not include any allocation of overhead or similar charges except that certain foreign subsidiaries were charged interest on their intercompany debt balance. Separate financial statements of the guarantor subsidiaries are not presented because management has determined that the separate financial statements are not material to investors. Since its formation in September 1997, AAS Capital Corporation has had no operations and has no assets or liabilities at December 31, 1998. Guarantor subsidiaries for 1996 include SportRack LLC and AAS Holdings, Inc. and their financial statements are substantially those of the Company and include Brink, a non-guarantor subsidiary acquired October 30, 1996. The 1996 consolidated results of operations include Brink for the two months ended December 31, 1996 and reflect Brink's net sales of $7,571 and a net loss of $1,353. At December 31, 1996, Brink's total assets and total liabilities were $86,348 and $75,574, respectively. ValTek, LLC was formed in November 1997 and is not significant. 42 45 ADVANCED ACCESSORY SYSTEMS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA) 13. CONDENSED CONSOLIDATING INFORMATION -- (CONTINUED) CONDENSED CONSOLIDATING BALANCE SHEET DECEMBER 31, 1998
GUARANTOR NON-GUARANTOR ELIMINATIONS/ ISSUERS SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED ------------ ----------- ----------- ------------ --------- ASSETS Current assets Cash................................... $ -- $ 5,636 $ 5,604 $ -- $ 11,240 Accounts receivable.................... -- 28,437 12,290 -- 40,727 Inventories............................ -- 15,630 27,457 -- 43,087 Deferred income taxes and other current assets........................ 4 2,687 1,553 -- 4,244 ----------- ----------- ----------- ----------- ---------- Total current assets.............. 4 52,390 46,904 -- 99,298 ----------- ----------- ----------- ----------- ---------- Property and equipment, net.............. -- 28,416 32,879 -- 61,295 Goodwill, net............................ 1,105 59,261 26,713 -- 87,079 Other intangible assets, net............. 4,846 300 1,446 -- 6,592 Deferred income taxes and other noncurrent assets...................... 28 2,285 2,404 -- 4,717 Investment in subsidiaries............... 34,373 10,022 -- (44,395) -- Intercompany notes receivable............ 109,300 -- -- (109,300) -- ------------ ----------- ----------- ------------ --------- Total assets...................... $ 149,656 $ 152,674 $ 110,346 $ (153,695) $ 258,981 ============ =========== =========== =========== ========== LIABILITIES AND MEMBERS' EQUITY Current liabilities Current maturities of long-term debt... $ -- $ -- $ 4,536 $ -- $ 4,536 Accounts payable....................... -- 14,260 8,855 -- 23,115 Accrued liabilities and deferred income taxes......................... 3,702 6,995 11,718 -- 22,415 ------------ ----------- ----------- ----------- ---------- Total current liabilities......... 3,702 21,255 25,109 -- 50,066 ------------ ----------- ----------- ----------- ---------- Deferred income taxes and other noncurrent liabilities................. 1,153 1,255 3,963 -- 6,371 Long-term debt, less current maturities.. 124,565 -- 58,423 -- 182,988 Intercompany debt........................ -- 77,951 31,349 (109,300) -- Mandatorily redeemable warrants.......... 4,409 -- -- -- 4,409 Members' equity.......................... 15,827 52,213 (8,498) (44,395) 15,147 ------------ ----------- ----------- ----------- ---------- Total liabilities and members' equity............................ $ 149,656 $ 152,674 $ 110,346 $ (153,695) $ 258,981 ============ =========== =========== ========== ==========
43 46 ADVANCED ACCESSORY SYSTEMS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA) 13. CONDENSED CONSOLIDATING INFORMATION -- (CONTINUED) CONDENSED CONSOLIDATING BALANCE SHEET DECEMBER 31, 1997
GUARANTOR NON-GUARANTOR ELIMINATIONS/ ISSUERS SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED ----------- ----------- ----------- ----------- ---------- ASSETS Current assets Cash................................... $ -- $ 2,217 $ 25,131 $ -- $ 27,348 Accounts receivable.................... -- 31,649 11,874 -- 43,523 Inventories............................ -- 14,835 19,573 -- 34,408 Other current assets................... -- 4,912 1,619 -- 6,531 ----------- ----------- ----------- ----------- ---------- Total current assets.............. -- 53,613 58,197 -- 111,810 ----------- ----------- ----------- ----------- ---------- Property and equipment, net.............. -- 28,009 25,551 -- 53,560 Goodwill, net............................ 1,145 61,431 23,313 -- 85,889 Other intangible assets, net............. 5,558 722 3,683 -- 9,963 Deferred income taxes and other noncurrent assets...................... -- 384 3,952 -- 4,336 Investment in subsidiaries............... 26,500 10,022 -- (36,522) -- Intercompany notes receivable............ 115,056 -- -- (115,056) -- ------------ ----------- ----------- ----------- --------- Total assets...................... $ 148,259 $ 154,181 $ 114,696 $ (151,578) $ 265,558 ============ =========== =========== =========== ========== LIABILITIES AND MEMBERS' EQUITY Current liabilities Current maturities of long-term debt... $ -- $ -- $ 3,746 $ -- $ 3,746 Accounts payable....................... -- 19,053 3,965 -- 23,018 Accrued liabilities and deferred income taxes......................... 3,607 7,180 8,456 -- 19,243 ----------- ----------- ----------- ----------- ---------- Total current liabilities......... 3,607 26,233 16,167 -- 46,007 ------------ ----------- ----------- ----------- ---------- Deferred income taxes and other noncurrent liabilities................. 595 1,318 4,307 -- 6,220 Long-term debt, less current maturities.. 126,436 -- 66,944 -- 193,380 Intercompany debt........................ -- 89,218 25,838 (115,056) -- Mandatorily redeemable warrants.......... 3,507 -- -- -- 3,507 Members' equity.......................... 14,114 37,412 1,440 (36,522) 16,444 ------------ ----------- ----------- ----------- ---------- Total liabilities and members' equity............................ $ 148,259 $ 154,181 $ 114,696 $ (151,578) $ 265,558 ============ =========== =========== =========== ==========
44 47 ADVANCED ACCESSORY SYSTEMS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA) 13. CONDENSED CONSOLIDATING INFORMATION -- (CONTINUED) CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998
GUARANTOR NON-GUARANTOR ELIMINATIONS/ ISSUERS SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED ---------- ---------- ----------- ---------- ---------- Net sales................................ $ -- $ 190,300 $ 99,839 $ -- $ 290,139 Cost of sales............................ -- 142,156 71,279 -- 213,435 ---------- ---------- ----------- ---------- ---------- Gross profit........................... -- 48,144 28,560 -- 76,704 Selling, administrative and product development expenses................... 1,560 23,631 25,648 -- 50,839 Amortization of intangible assets........ 40 2,314 1,197 -- 3,551 Impairment charge -- -- 7,863 -- 7,863 ---------- ---------- ----------- ---------- ---------- Operating income (loss)................ (1,600) 22,199 (6,148) -- 14,451 Interest expense......................... 3,700 6,888 8,045 -- 18,633 Equity in net income (loss) of subsidiaries 5,024 -- -- (5,024) -- Foreign currency gain.................... -- -- 4,995 -- 4,995 ---------- ---------- ----------- ---------- ---------- Income (loss) before income taxes........ (276) 15,311 (9,198) (5,024) 813 Provision for income taxes............... -- -- 903 -- 903 ---------- ---------- ----------- ---------- ---------- Net income (loss)........................ $ (276) $ 15,311 $ (10,101) $ (5,024) $ (90) ========== ========== =========== ========== ==========
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997
GUARANTOR NON-GUARANTOR ELIMINATIONS/ ISSUERS SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED ---------- ---------- ----------- ---------- ---------- Net sales................................ $ -- $ 122,294 $ 66,384 $ -- $ 188,678 Cost of sales............................ -- 89,647 45,909 -- 135,556 ---------- ---------- ----------- ---------- ---------- Gross profit........................... -- 32,647 20,475 -- 53,122 Selling, administrative and product development expenses................... 721 14,685 15,944 -- 31,350 Amortization of intangible assets........ 53 1,571 712 -- 2,336 ---------- ---------- ----------- ---------- ---------- Operating income (loss)................ (774) 16,391 3,819 -- 19,436 Interest expense......................... 3,348 3,760 5,519 -- 12,627 Equity in net income (loss) of subsidiaries........................... 5,169 -- -- (5,169) -- Foreign currency gain (loss)............. 1,041 -- (7,138) -- (6,097) ---------- ---------- ----------- ---------- ---------- Income (loss) before minority interest and income taxes...................... 2,088 12,631 (8,838) (5,169) 712 Provision (benefit) for income taxes..... -- -- (2,856) -- (2,856) ---------- ---------- ----------- ---------- ----------- Income (loss) before minority interest............................. 2,088 12,631 (5,982) (5,169) 3,568 Minority interest........................ -- 97 -- -- 97 ---------- ---------- ---------- ---------- ---------- Extraordinary charge resulting from debt extinguishment....................... 6,153 525 738 -- 7,416 ---------- ---------- ----------- ---------- ---------- Net income (loss)........................ $ (4,065) $ 12,009 $ (6,720) $ (5,169) $ (3,945) ========== ========== =========== ========== ===========
45 48 ADVANCED ACCESSORY SYSTEMS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA) 13. CONDENSED CONSOLIDATING INFORMATION -- (CONTINUED) CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1998
GUARANTOR NON-GUARANTOR ELIMINATIONS/ ISSUERS SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED ---------- ---------- ----------- ---------- ---------- Net cash provided by (used for) operating activities.............................. $ (4,216) $ 18,479 $ 7,616 $ -- $ 21,879 ----------- --------- ---------- ---------- ---------- Cash flows from investing activities: Acquisition of property and equipment............................. -- (4,358) (5,640) -- (9,998) Amount due from sellors of Valley Industries, Inc....................... -- 1,150 -- -- 1,150 Acquisition of subsidiaries, net of cash acquired.............................. -- -- (22,770) -- (22,770) ---------- --------- ---------- ---------- ---------- Net cash used for investing activities -- (3,208) (28,410) -- (31,618) ---------- ---------- ---------- ---------- ---------- Cash flows provided by (used for) financing activities: Change in intercompany debt............. 6,101 (11,657) 5,556 -- -- Net reduction in revolving loan......... (1,900) -- (2,605) -- (4,505) Repayment of debt....................... -- -- (3,682) -- (3,682) Issuance of membership units............ 29 -- -- -- 29 Repurchase of membership units (14) -- -- -- (14) Distributions from subsidiaries......... 195 -- -- (195) -- Distributions to members................ (195) (195) -- 195 (195) ---------- --------- ---------- ---------- ---------- Net cash provided by (used for) financing activities................ 4,216 (11,852) (731) -- (8,367) ---------- --------- ---------- ---------- ---------- Effect of exchange rate changes........... -- -- 1,998 -- 1,998 ---------- --------- ---------- ---------- --------- Net increase (decrease) in cash........... -- 3,419 (19,527) -- (16,108) Cash at beginning of period............... -- 2,217 25,131 -- 27,348 ---------- --------- ---------- ---------- ---------- Cash at end of period..................... $ -- $ 5,636 $ 5,604 $ -- $ 11,240 ========== ========= ========== ========== ==========
46 49 ADVANCED ACCESSORY SYSTEMS, LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA) 13. CONDENSED CONSOLIDATING INFORMATION -- (CONTINUED) CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1997
GUARANTOR NON-GUARANTOR ELIMINATIONS/ ISSUERS SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED ---------- --------- ---------- ---------- ---------- Net cash provided by (used for ) operating activities.............................. $ 3,522 $ 5,092 $ (1,632) $ -- $ 6,982 ---------- --------- ---------- ---------- ---------- Cash flows from investing activities: Acquisition of property and equipment............................. -- (6,005) (1,746) -- (7,751) Amount due from sellors of Valley Industries, Inc. -- (1,150) -- -- (1,150) Acquisition of subsidiaries, net of cash acquired.............................. -- (56,478) (14,354) -- (70,832) ---------- --------- ---------- ---------- ---------- Net cash used for investing activities -- (63,633) (16,100) -- (79,733) ---------- ---------- ---------- ---------- ---------- Cash flows provided by (used for) financing activities: Change in intercompany debt............. (99,971) 76,412 23,559 -- -- Proceeds from issuance of debt.......... 124,529 55,000 35,521 -- 215,050 Increase (decrease) in revolving loan... 1,900 (4,300) 2,904 -- 504 Repayment of debt....................... (27,699) (63,500) (22,049) -- (113,248) Debt issuance costs..................... (7,280) -- -- -- (7,280) Issuance of membership units............ 4,999 -- -- -- 4,999 Distributions from subsidiaries......... 2,915 -- -- (2,915) -- Distributions to members................ (2,915) (2,945) -- 2,915 (2,945) ---------- --------- ---------- ---------- ---------- Net cash provided by (used for) financing activities................ (3,522) 60,667 39,935 -- 97,080 ----------- --------- ---------- ---------- ---------- Effect of exchange rate changes........... -- -- 505 -- 505 ---------- --------- ---------- ---------- --------- Net increase in cash...................... -- 2,126 22,708 -- 24,834 Cash at beginning of period............... -- 91 2,423 -- 2,514 ---------- --------- ---------- ---------- ---------- Cash at end of period..................... $ -- $ 2,217 $ 25,131 $ -- $ 27,348 ========== ========= ========== ========== ==========
47 50 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. MANAGERS AND EXECUTIVE OFFICERS OF THE REGISTRANT The following table sets forth the names and ages of each of the individuals that currently serves as a member (each, a "Board Member") of the Company's board of managers (the "Board of Managers"), executive officer and other significant employee of the Company.
NAME AGE POSITION --------------------- ---- ----------------------------------------------- F. Alan Smith........ 67 Chairman of the Board of Managers of the Company Marshall D. Gladchun. 51 President and Chief Executive Officer of the Company and SportRack; Board Member Roger T. Morgan...... 54 President and Chief Executive Officer of Valley; Board Member Gerrit de Graaf...... 35 General Manager and Chief Executive Officer of Brink; Board Member Terence C. Seikel.... 42 Vice President of Finance and Administration and Chief Financial Officer of the Company and SportRack Richard E. Borghi.... 52 Executive Vice President and Chief Operating Officer of SportRack J. Wim Rengelink..... 44 Managing Director of Brink Gary K. Houston...... 45 Vice President of OEM Operations of Valley Bryan A. Fletcher.... 39 Vice President of Aftermarket Operations of Valley Donald J. Hofmann, Jr 41 Board Member, Vice President and Secretary of the Company Barry Banducci....... 63 Board Member Gerard J. Brink...... 55 Board Member
F. Alan Smith has served in the automotive industry for 37 years and has been Chairman of the Board of Managers of the Company since its formation in September 1995. He served in various assignments at General Motors from 1956 to 1992, including President of GM Canada from 1978 to 1980. He was a member of the Board of Directors of General Motors from 1981 to 1992 and Chief Financial Officer of General Motors from 1981 to 1988. Mr. Smith is a director of The Minnesota Mining and Manufacturing Corporation ("3M"), TransPro, Inc. ("TransPro"). Marshall D. Gladchun has served in the automotive industry for 25 years and has been President and Chief Executive Officer of the Company and SportRack since September 1995. From 1986 to 1995, he held various senior management positions with MascoTech, and was President and Chief Operating Officer of the MascoTech Division at the time of its acquisition by the Company. Roger T. Morgan has served in the automotive industry for 36 years and has been President and Chief Executive Officer of Valley since June 1990. Prior to joining Valley, he worked for General Motors for 12 years and Rockwell International Automotive Group as Vice President --Operations for 14 years. Gerrit de Graaf has been General Manager and Chief Executive Officer of Brink since November 1996. From 1989 to 1996, Mr. de Graaf worked for Philips Medical Systems as a consultant and most recently as Philips' Marketing Manager in the United States. Terence C. Seikel has served in the automotive industry for 15 years and has been Vice President of Finance and Administration and Chief Financial Officer of the Company and SportRack since January 1996. From 1985 to 1996, Mr. Seikel was employed by Larizza Industries, a publicly held supplier of interior trim to the automotive industry, in various capacities including Chief Financial Officer. Richard E. Borghi has served in the automotive industry for 31 years and has been Executive Vice President of Operations and Chief Operating Officer of SportRack since 1995. From 1988 to 1995, Mr. Borghi held various senior management positions with MascoTech, and was the Executive Vice President of Operations of the MascoTech Division at the time of its acquisition by the Company. J. Wim Rengelink has served in the automotive industry for 12 years and has been Managing Director of Brink since 1995. From 1988 to 1995 he worked in Brink's internal audit department. 48 51 Gary K. Houston has served in the automotive industry for 25 years and has been Vice President of OEM Operations of Valley since 1995. From 1991 to 1995 he was Vice President of Manufacturing of Valley. Prior thereto, Mr. Houston worked for Rockwell International for 18 years, most recently as a manufacturing manager. Bryan A. Fletcher has served in the automotive industry for 10 years and has been Vice President of Aftermarket Operations of Valley since 1991. Donald J. Hofmann, Jr. has been a Board Member, Vice President and Secretary of the Company since October 1995. Mr. Hofmann has been a General Partner of CCP since 1992. Prior to joining CCP, Mr. Hofmann held positions in the Acquisition Finance Division of Manufacturers Hanover and at Smith Barney. Mr. Hofmann is a director of Penske Corporation and Berry Plastics. Barry Banducci has been a Board Member of the Company since October 1995. Since September 1995, Mr. Banducci has been the Chairman of TransPro. Prior thereto, Mr. Banducci served in various capacities at Equion Corporation, a supplier of automotive components, from 1983 to 1995, including President, Chief Executive Officer and Vice Chairman. Mr. Banducci is a director of TransPro and Aristotle Corporation. Gerard J. Brink has been a Board Member of the Company since October 1996. Mr. Brink was General Manager of Brink from 1965 to 1996. BOARD MEMBER COMPENSATION The Board Members do not currently receive compensation for their service on the Board of Managers or any committee thereof but are reimbursed for their out-of-pocket expenses. In addition, Messrs. Smith and Banducci have consulting agreements with the Company. See "Executive Compensation - Consulting Agreements." COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Board of Managers has an Audit Committee consisting of Messrs. Banducci and Brink, and a Compensation Committee consisting of Messrs. Hofmann and Smith. The Audit Committee reviews the scope and results of audits and internal accounting controls and all other tasks performed by the independent public accountants of the Company. The Compensation Committee determines compensation for executive officers of the Company and administers the Company's 1995 Option Plan. ITEM 11. EXECUTIVE COMPENSATION The following table sets forth information concerning the compensation for 1998 and 1997 for the chief executive officer of the Company and the four next most highly compensated executive officers of the Company. SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION ANNUAL COMPENSATION AWARDS ----------------------------------------------- ---------------- OTHER ANNUAL SECURITIES ALL OTHER FISCAL SALARY BONUS COMPENSATION UNDERLYING COMPENSATION NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) OPTIONS(#) ($) - ------------------------------------ -------- ------------- ------------- ----------------- ----------------- ----------- F. Alan Smith....................... 1998 217,000 105,000 -- 32 -- Chairman of the Company........... 1997 200,000 100,000 -- -- -- Marshall D. Gladchun................ 1998 382,300 200,000 -- 86 -- President and Chief Executive 1997 362,500 195,000 -- -- -- Officer of the Company and SportRack Terence C. Seikel................... 1998 215,000 95,000 -- 65 -- Vice President of Finance and 1997 200,600 94,000 -- -- -- Administration and Chief Financial Officer of the Company and SportRack Roger T. Morgan..................... 1998 250,000 87,500 -- -- -- President and Chief Executive 1997 107,220 73,000 -- 178 -- Officer of Valley Richard E. Borghi................... 1998 219,965 115,000 -- 32 -- Executive Vice President and Chief 1997 206,500 94,000 -- -- -- Operating Officer of SportRack
49 52 OPTION GRANTS IN 1998 The following tables set forth information with respect to membership unit options pursuant to the 1995 Option Plan granted to the named executive officers of the Company during 1998. All options were granted at an exercise price less than the fair market value per share of Class A Units on the date of grant.
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE ------------------------------------------------------------------------ AT ASSUMED ANNUAL RATES NUMBER OF OF CLASS A UNIT PRICE SECURITIES PERCENT OF TOTAL EXERCISE APPRECIATION FOR OPTION UNDERLYING OPTIONS GRANTED OR BASE TERM($)(1) OPTIONS TO EMPLOYEES IN PRICE EXPIRATION -------------------------------- NAME GRANTED(#) 1998(%) ($/SH) DATE 5% 10% - -------------------- --------------- ---------------------- ---------------- ---------------- ---------------- -------------- F. Alan Smith....... 32 11.4 3,029 7/1/13 $ 105,000 $ 308,000 Marshall D. Gladchun 86 30.7 3,029 7/1/13 281,000 818,000 Terence C. Seikel... 65 23.2 3,029 7/1/13 212,000 626,000 Roger T. Morgan..... -- -- -- -- -- -- Richard E. Borghi... 32 11.4 3,029 7/1/13 105,000 308,000
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS SHARES AT YEAR END(#) AT YEAR END($) ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/ NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE -------------------- -------------------- --------------- ------------------------- -------------------- F. Alan Smith....... -- -- 218/264 741,000/ 833,000 Marshall D. Gladchun -- -- 696/890 2,366,000/ 2,852,000 Terence C. Seikel... -- -- 265/400 901,000/ 1,228,000 Roger T. Morgan..... -- -- 72/106 --/ -- Richard E. Borghi... -- -- 276/356 938,000/ 1,145,000
- ---------- (1) Potential realizable value is based on the assumption that the price of the Company's Class A Units appreciate at the annual rate shown, compounded annually, from the date of grant until the end of the 15-year option term. The values are calculated in accordance with rules promulgated by the Securities and Exchange Commission and do not reflect the Company's estimate of future Class A Unit price appreciation. EMPLOYMENT AGREEMENTS Each of Marshall D. Gladchun, Roger T. Morgan, Terence C. Seikel, Richard E. Borghi and Gerrit de Graaf has entered into an employment agreement (collectively, the "Employment Agreements") with the Company. Mr. Gladchun's Employment Agreement provides for an annual base salary of $277,304, subject to increases at the sole discretion of the Board of Managers, a bonus in the range of 50-70% of his base salary, and a one-time bonus of $400,000 on the earlier of (i) September 20, 2002, (ii) his termination date, and (iii) a sale of the Company (any such bonus an "Ending Bonus"). Mr. Morgan's Employment Agreement provides for an annual base salary of $250,000, subject to increases at the sole discretion of the Board of Managers, and a bonus in the range of 50% to 70% of his base salary. Mr. Seikel's Employment Agreement provides for an annual base salary of $165,000 subject to increases at the sole discretion of the Board of Managers, and a bonus in the range of 30-50% of his base salary. Mr. Borghi's Employment Agreement provides for an annual base salary of $161,200, subject to increases at the sole discretion of the Board of Managers, a bonus in the range of 30-50% of his base salary, and an Ending Bonus of $100,000. Mr. de Graaf's Employment Agreement provides for an annual base salary of NLG 170,000, subject to increases at the sole discretion of the Board of Managers, and a bonus in the range of 30% to 50% of his base salary. The Employment Agreements also provide for twelve months of severance pay to the executive officer in the event such officer is terminated without cause (as defined in the Employment Agreement.) The Employment Agreements expire at various times between June 30, 2000 and December 31, 2000 (except that Gerrit de Graaf's Employment Agreement may be terminated by either party upon three month's prior written notice) but automatically extend for successive two-year terms unless terminated by the Company upon 30 days notice prior to the expiration of the current term. Each Employment Agreement prohibits the executive officer from disclosing non-public information about the Company. The Employment Agreements also require the executive officers to assign to the Company any designs, inventions and other related items and intellectual property rights developed or acquired by the executive officer during the term of his employment. In addition, for a period of five years after termination of employment (two years if the termination is without cause) each executive officer has agreed, in his 50 53 respective Employment Agreement, not to (i) engage in any Competitive Business (as defined in the Employment Agreements), (ii) interfere with or disrupt any relationship between the Company and its customers, suppliers and employees and (iii) induce any employee of the Company to terminate his or her employment with the Company or engage in any Competitive Business. CONSULTING AGREEMENTS F. Alan Smith and Barry Banducci, both members of the Board of Managers, have each entered into consulting agreements (the "Consulting Agreements") with the Company dated as of September 28, 1995. Mr. Smith's Consulting Agreement provides for an annual consulting fee of $150,000 subject to increases at the sole discretion of the Board of Managers, and a performance based bonus in the range of 30-50% of the annual consulting fee. Mr. Banducci's Consulting Agreement provides for an annual consulting fee of $50,000. The initial term of the Consulting Agreements expired on March 28, 1997. The Consulting Agreements automatically extend for successive six-month periods unless terminated by the Company upon 30 days notice prior to the expiration of the then current term. The Consulting Agreements prohibit Messrs. Smith and Banducci from disclosing non-public information about the Company. MEMBERS' AGREEMENT Pursuant to the Second Amended and Restated Members' Agreement dated as of August 5, 1997 (the "Members' Agreement") among the Company and certain of the holders of outstanding units (the "Units") of the Company, affiliates of CCP have the ability to appoint a majority of the members of the Company's Board of Managers. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT As of March 15, 1999, the outstanding membership interests of the Company consisted of 16,450 Units. The following table sets forth certain information regarding the beneficial ownership of the Units by (i) each person known by the Company to own more than 5% of the Units, (ii) each named director, (iii) each named executive officer and (iv) all of the Company's directors and executive officers treated as a group. To the knowledge of the Company, each of such holders of Units has sole voting and investment power as to the Units owned unless otherwise noted.
PERCENTAGE NAME AND ADDRESS(1) UNITS OWNED OWNERSHIP(2) ------------------------------------------- ----------- ------------ CB Capital Investors, L.P.(3).............. 10,251 60.47% 380 Madison Avenue, 12th Floor New York, New York 10017 MascoTech, Inc............................. 1,500 9.12 275 Rex Boulevard Auburn Hills, Michigan 48326 Celerity Partners.......................... 1,500 9.12 C/o Mark Benham 300 Sand Hill Road Building 4, Suite 230 Menlo Park, California 94025 F. Alan Smith(4)........................... 518 3.11 Marshall D. Gladchun(5).................... 1,196 6.98 Roger T. Morgan(6)......................... 119 0.72 Gerrit de Graaf(7)......................... 34 0.21 Terence C. Seikel(8)....................... 505 3.01 Richard E. Borghi(9)....................... 476 2.85 Barry Banducci(10)......................... 405 2.44 59 Old Quarry Road Guildford, Connecticut 06437 Gerard J. Brink............................ 410 2.49 Lijsterbeslaan 10 B-2950 Kapellen Belgium All directors and executive officers as a group (nine persons)....................... 3,694 20.33
- ---------- (1) Unless otherwise indicated, address is c/o Advanced Accessory Systems, LLC, 12900 Hall Road, Suite 200, Sterling Heights, Michigan 48313. (2) Beneficial ownership is determined in accordance with the rules of the Commission and includes voting and investment power 51 54 with respect to the Units. Units subject to options or warrants currently exercisable or exercisable within 60 days of March 15, 1999 are deemed outstanding for purposes of computing the percentage ownership of the person holding such options or warrants, but are not deemed outstanding for purposes of computing the percentage of any other person. (3) CB Capital Investors, L.P. is an affiliate of CCP. Includes 501 Units subject to warrants exercisable within 60 days. (4) Includes 218 Units subject to options exercisable within 60 days. 300 Units are owned by the F. Alan Smith Family Limited Partnership. (5) Includes 696 Units subject to options exercisable within 60 days. (6) Includes 30 Units subject to options exercisable within 60 days. (7) Includes 8 Units subject to options exercisable within 60 days. (8) Includes 305 Units subject to options exercisable within 60 days. (9) Includes 276 Units subject to options exercisable within 60 days. (10) Includes 155 Units subject to options exercisable within 60 days. All Units are owned by the Banducci Family, LLC. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Chase Securities Inc. ("CSI"), The Chase Manhattan Bank ("Chase"), The Chase Manhattan Bank of Canada ("Chase Canada") and CCP are affiliates of CB Capital Investors, L.P., which owns approximately 47.8% of the Company's issued and outstanding voting securities on a fully diluted basis. CSI acted as an Initial Purchaser in connection with the Offering, for which it received customary fees. Chase is agent bank and a lender to the Company under the Amended and Restated Credit Agreement and has received customary fees and reimbursement of expenses in such capacities. Chase Canada is agent bank and a lender to the Company under the Canadian Credit Agreement and has received customary fees and reimbursement of expenses in such capacities. Chase received its proportionate share, $6.0 million, of the repayment by the Company of $90.0 million under the Amended and Restated Credit Agreement from the proceeds of the Offering. An affiliate of CCP and CSI held a portion of the Senior Subordinated Debt and received its proportionate share, $10.7 million, including prepayment penalties of $700,000, of the repayment by the Company of such debt from the proceeds of the Offering. As a result of the Offering, such affiliate was relieved of its obligation to provide up to an additional $20.0 million of senior subordinated debt financing. In addition, an affiliate of CSI and CCP purchased a portion of the Notes in connection with the Offering. Donald J. Hofmann, Jr., a general partner of CCP, is a member of the Board of Managers of the Company. In addition, CSI, Chase and their affiliates participate on a regular basis in various investment banking and commercial banking transactions for the Company and its affiliates. The Company is a party to the Consulting Agreements with F. Alan Smith, the Chairman of the Company, and Barry Banducci, a Board Member of the Company. See "Executive Compensation -- Consulting Agreements." In connection with the acquisition of the MascoTech Division by the Company, the Company loaned Messrs. Gladchun and Borghi $400,000 and $100,000, respectively, to enable them to make their initial equity investments in the Company. The loans bear interest at 6.2% and mature in September 2002. 52 55 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) The following documents are filed as part of this Form 10-K: 1. Financial Statements: A list of the Consolidated Financial Statements, related notes and Reports of Independent Accountants is set forth in Item 8 of this report on Form 10-K. 2. Financial Statement Schedules: Schedule II - Valuation and Qualifying Accounts All other schedules for which provision is made in the applicable accounting regulations of the Commission are not required under the related instructions, are inapplicable or not material, or the information called for thereby is otherwise included in the financial statements and therefore have been omitted. 3. Index to Exhibits: EXHIBIT NUMBER DESCRIPTION ------ ----------------------------------------------- 3.1 Amended and Restated Certificate of Formation of AAS. Incorporated by reference to Exhibit 3.1 to AAS' Registration Statement on Form S-4 (File No.333-49011). 3.2 Second Amended and Restated Operating Agreement of AAS. Incorporated by reference to Exhibit 3.2 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 3.3 Amended Bylaws of AAS Incorporated by reference to Exhibit 3.3 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 4.1 Indenture dated as of October 1, 1997 for the Notes (including the form of New Note attached as Exhibit B thereto) among the Issuers, the Guarantors named therein and First Union National Bank, as Trustee Incorporated by reference to Exhibit 4.1 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 10.1 Asset Purchase Agreement among MascoTech Automotive Systems Group, Inc., MascoTech Accessories, Inc. and Advanced Accessory Systems, LLC dated as of September 28, 1995 Incorporated by reference to Exhibit 10.1 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 10.2 Agreement for the Sale and Purchase of Shares in Brink BV dated October 30, 1996 among AAS Holdings, Inc., AAS Holdings, LLC, Brink Holding BV and Brink BV Incorporated by reference to Exhibit 10.2 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 10.3 Asset Purchase Agreement among Bell Sports Corp., Bell Sports Canada, Inc. and Advanced Accessory Systems Canada Inc./Les Systemes d'Accessoire Advanced Canada Inc. dated as of July 2, 1997 Incorporated by reference to Exhibit 10.3 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 10.4 Stock Purchase Agreement dated July 24, 1997 among Robert Boulard and Alan Hamer and Advanced Accessory Systems Canada Inc. / Les Systems d'Accessoire Advanced Canada Inc. Incorporated by reference to Exhibit 10.4 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 10.5 Asset Purchase Agreement among Valley Industries, LLC, Valley Industries, Inc., certain affiliates of Valley Industries, Inc., Robert L. Fisher and Roger T. Morgan dated as of August 5, 1997 Incorporated by reference to Exhibit 10.5 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 10.6 Preliminary Agreement for the Transfer of a Business dated December 16, 1997 between Ellebi S.p.A. and Brink Italia S.r.1. and Brink International B.V. Incorporated by reference to Exhibit 10.6 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 10.7 Second Amended and Restated Credit Facility among AAS, SportRack, LLC, Brink International BV, Brink BV and Valley Industries, LLC, as Borrowers, NBD Bank as Administrative Agent and Documentation and Collateral Agent and The Chase Manhattan Bank as Co-Administrative Agent and Syndication Agent dated August 5, 1997. Incorporated by reference to Exhibit 10.7 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 10.7(a) Amendment No 1. Dated as of September 5, 1997 to Second Amended and Restated Credit Agreement Dated as of August 5, 1997 and Security Agreements Dated as of October 5, 1996. 10.7(b) Amendment No.2 Dated as of September 24, 1997 to Second Amended and Restated Credit Agreement Dated as of August 5, 1997. 10.7(c) Amendment No. 3 Dated as of December 29, 1997 to Second Amended and Restated Credit Agreement dated as of August 5, 1997. 10.7(d) Amendment No. 4 Dated as of December 31, 1997 to Second Amended and restated Credit Agreement Dated as of August 5, 1997. 53 56 10.7(e) Amendment No. 5 and Waiver Dated as of December 31, 1998 to Second Amended and Restated Credit Agreement Dated as of August 5, 1997. 10.8 First Amended and Restated Credit Agreement among SportRack International, Inc. and First Chicago NBD Bank, Canada, The Chase Manhattan Bank of Canada and The Bank of Nova Scotia dated as of March 19, 1998. Incorporated by reference to Exhibit 10.8 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 10.9 Employment Agreement between AAS and Richard Borghi dated September 28, 1995. Incorporated by reference to Exhibit 10.9 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 10.10 Employment Agreement between AAS and Marshall Gladchun dated September 28, 1995. Incorporated by reference to Exhibit 10.10 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 10.11 Management Consulting Agreement between AAS and Barry Banducci dated September 28, 1995. Incorporated by reference to Exhibit 10.11 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 10.12 Management Consulting Agreement between AAS and F. Alan Smith dated September 28, 1995. Incorporated by reference to Exhibit 10.12 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 10.13 Employment Agreement between AAS and Terence C. Seikel dated January 22, 1996. Incorporated by reference to Exhibit 10.13 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 10.14 Employment Agreement between AAS and Roger T. Morgan dated August 5, 1997. Incorporated by reference to Exhibit 10.14 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 10.15 Employment Agreement between Brink B.V. and Gerrit de Graaf dated November 1, 1996. Incorporated by reference to Exhibit 10.15 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 10.17 Lease dated as of January 24, 1997 between Valley Industries Realty, L.P. and Valley Industries, Inc. Incorporated by reference to Exhibit 10.17 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 10.18 Addendum to Sublease dated as of July 2, 1997 between Bell Sports Canada, Inc. and SportRack International, Inc. (formerly known as Advanced Accessory Systems Canada Inc./ Les Systems d'Accessoire Advanced Canada Inc.). Incorporated by reference to Exhibit 10.18 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 10.19 Lease dated May 25, 1994 between VBG Towbars AB and VBG Produkter AB. Incorporated by reference to Exhibit 10.19 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 10.20 Lease Agreement for commercial use between Ellebi S.p.A. and Brink Italia S.r.l. Incorporated by reference to Exhibit 10.20 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 10.21 Registration Rights Agreement dated September 25, 1997 by and among Advanced Accessory Systems, LLC, AAS Capital Corporation, the Guarantors named therein and Chase Securities, Inc. and First Chicago Capital Markets, Inc. Incorporated by reference to Exhibit 10.21 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 12.1 Statement Re: Computation of ratios 24.1 Marshall D. Gladchun Power of Attorney 24.2 F. Alan Smith Power of Attorney 24.3 Barry Banducci Power of Attorney 24.4 Gerard Jacobus Brink Power of Attorney 24.5 Donald J. Hofmann Power of Attorney 24.6 Roger T. Morgan Power of Attorney 24.7 Gerrit de Graaf Power of Attorney 21.1 Subsidiaries of the Registrant Incorporated by reference to Exhibit 21.1 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 27.1 Financial Data Schedule (b) Reports of form 8-K: None - ---------- 54 57 SIGNATURES Pursuant to the requirements of the Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Advanced Accessory Systems, LLC By: /s/ TERENCE C. SEIKEL --------------------------------------------- Terence C. Seikel Vice President, Finance and Administration -Chief Financial Officer (Chief Accounting Officer and Authorized Signatory) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed on the 26th day of March, 1999, by the following persons on behalf of the registrant and in the capacities as indicated.
Signature Title --------- ----- * President, Chief Executive Officer and - ------------------------------ Director (Principal Executive Officer) Marshall D. Gladchun /s/ TERENCE C. SEIKEL Vice President of Finance and Administration and - ------------------------------ Chief Financial Officer (Principal Financial and Terence C. Seikel Accounting Officer) * Chairman of the Board of Managers - ------------------------------ F. Alan Smith * Manager - ------------------------------ Barry Banducci * Manager - ------------------------------ Gerard Jacobus Brink * Manager - ------------------------------ Donald J. Hofmann * Manager - ------------------------------ Roger T. Morgan * Manager - ------------------------------ Gerrit de Graaf *By: /s/ TERENCE C. SEIKEL - ------------------------------ Terence C. Seikel, Attorney-in-Fact
55 58 SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT. Other than this annual report filed on Form 10-K, none. 56 59 ADVANCED ACCESSORY SYSTEMS, LLC- SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996, (DOLLAR AMOUNTS IN THOUSANDS)
ADDITIONS ------------------------ BALANCE AT CHARGED TO CHARGED BALANCE BEGINNING OF COSTS AND TO OTHER AT END OF YEAR EXPENSES ACCOUNTS (1) WRITE-OFFS YEAR ----------- ---------- ----------- ----------- ----------- ALLOWANCE FOR DOUBTFUL ACCOUNTS For the year ended December 31, 1998 ................................. $1,699 $2,413 $ 523 $1,869 $2,766 1997 ................................. 605 458 734 98 1,699 1996 ................................. 368 54 268 85 605 ALLOWANCE FOR INVENTORY AND LOWER OF COST OR MARKET RESERVE For the year ended December 31, 1998 ................................. $2,590 $4,735 $ 15 $3,423 $3,917 1997 ................................. 1,579 423 1,303 715 2,590 1996 ................................. 564 70 1,173 228 1,579 ALLOWANCE FOR REIMBURSABLE TOOLING For the year ended December 31, 1998 ................................. $ 890 $ 294 $ -- $ 860 $ 324 1997 ................................. 368 195 493 166 890 1996 ................................. 257 300 -- 189 368
- ---------- (1) Charges to other accounts includes amounts related to acquired companies and the effects of changing foreign currency exchange rates for the Company's foreign subsidiaries. 57 60 EXHIBIT INDEX NUMBER DESCRIPTION ------ ----------------------------------------------- 3.1 Amended and Restated Certificate of Formation of AAS. Incorporated by reference to Exhibit 3.1 to AAS' Registration Statement on Form S-4 (File No.333-49011). 3.2 Second Amended and Restated Operating Agreement of AAS. Incorporated by reference to Exhibit 3.2 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 3.3 Amended Bylaws of AAS Incorporated by reference to Exhibit 3.3 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 4.1 Indenture dated as of October 1, 1997 for the Notes (including the form of New Note attached as Exhibit B thereto) among the Issuers, the Guarantors named therein and First Union National Bank, as Trustee Incorporated by reference to Exhibit 4.1 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 10.1 Asset Purchase Agreement among MascoTech Automotive Systems Group, Inc., MascoTech Accessories, Inc. and Advanced Accessory Systems, LLC dated as of September 28, 1995 Incorporated by reference to Exhibit 10.1 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 10.2 Agreement for the Sale and Purchase of Shares in Brink BV dated October 30, 1996 among AAS Holdings, Inc., AAS Holdings, LLC, Brink Holding BV and Brink BV Incorporated by reference to Exhibit 10.2 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 10.3 Asset Purchase Agreement among Bell Sports Corp., Bell Sports Canada, Inc. and Advanced Accessory Systems Canada Inc./Les Systemes d'Accessoire Advanced Canada Inc. dated as of July 2, 1997 Incorporated by reference to Exhibit 10.3 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 10.4 Stock Purchase Agreement dated July 24, 1997 among Robert Boulard and Alan Hamer and Advanced Accessory Systems Canada Inc. / Les Systems d'Accessoire Advanced Canada Inc. Incorporated by reference to Exhibit 10.4 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 10.5 Asset Purchase Agreement among Valley Industries, LLC, Valley Industries, Inc., certain affiliates of Valley Industries, Inc., Robert L. Fisher and Roger T. Morgan dated as of August 5, 1997 Incorporated by reference to Exhibit 10.5 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 10.6 Preliminary Agreement for the Transfer of a Business dated December 16, 1997 between Ellebi S.p.A. and Brink Italia S.r.1. and Brink International B.V. Incorporated by reference to Exhibit 10.6 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 10.7 Second Amended and Restated Credit Facility among AAS, SportRack, LLC, Brink International BV, Brink BV and Valley Industries, LLC, as Borrowers, NBD Bank as Administrative Agent and Documentation and Collateral Agent and The Chase Manhattan Bank as Co-Administrative Agent and Syndication Agent dated August 5, 1997. Incorporated by reference to Exhibit 10.7 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 10.7(a) Amendment No 1. Dated as of September 5, 1997 to Second Amended and Restated Credit Agreement Dated as of August 5, 1997 and Security Agreements Dated as of October 5, 1996. 10.7(b) Amendment No.2 Dated as of September 24, 1997 to Second Amended and Restated Credit Agreement Dated as of August 5, 1997. 10.7(c) Amendment No. 3 Dated as of December 29, 1997 to Second Amended and Restated Credit Agreement dated as of August 5, 1997. 10.7(d) Amendment No. 4 Dated as of December 31, 1997 to Second Amended and restated Credit Agreement Dated as of August 5, 1997. 58 61 10.7(e) Amendment No. 5 and Waiver Dated as of December 31, 1998 to Second Amended and Restated Credit Agreement Dated as of August 5, 1997. 10.8 First Amended and Restated Credit Agreement among SportRack International, Inc. and First Chicago NBD Bank, Canada, The Chase Manhattan Bank of Canada and The Bank of Nova Scotia dated as of March 19, 1998. Incorporated by reference to Exhibit 10.8 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 10.9 Employment Agreement between AAS and Richard Borghi dated September 28, 1995. Incorporated by reference to Exhibit 10.9 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 10.10 Employment Agreement between AAS and Marshall Gladchun dated September 28, 1995. Incorporated by reference to Exhibit 10.10 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 10.11 Management Consulting Agreement between AAS and Barry Banducci dated September 28, 1995. Incorporated by reference to Exhibit 10.11 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 10.12 Management Consulting Agreement between AAS and F. Alan Smith dated September 28, 1995. Incorporated by reference to Exhibit 10.12 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 10.13 Employment Agreement between AAS and Terence C. Seikel dated January 22, 1996. Incorporated by reference to Exhibit 10.13 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 10.14 Employment Agreement between AAS and Roger T. Morgan dated August 5, 1997. Incorporated by reference to Exhibit 10.14 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 10.15 Employment Agreement between Brink B.V. and Gerrit de Graaf dated November 1, 1996. Incorporated by reference to Exhibit 10.15 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 10.17 Lease dated as of January 24, 1997 between Valley Industries Realty, L.P. and Valley Industries, Inc. Incorporated by reference to Exhibit 10.17 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 10.18 Addendum to Sublease dated as of July 2, 1997 between Bell Sports Canada, Inc. and SportRack International, Inc. (formerly known as Advanced Accessory Systems Canada Inc./ Les Systems d'Accessoire Advanced Canada Inc.). Incorporated by reference to Exhibit 10.18 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 10.19 Lease dated May 25, 1994 between VBG Towbars AB and VBG Produkter AB. Incorporated by reference to Exhibit 10.19 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 10.20 Lease Agreement for commercial use between Ellebi S.p.A. and Brink Italia S.r.l. Incorporated by reference to Exhibit 10.20 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 10.21 Registration Rights Agreement dated September 25, 1997 by and among Advanced Accessory Systems, LLC, AAS Capital Corporation, the Guarantors named therein and Chase Securities, Inc. and First Chicago Capital Markets, Inc. Incorporated by reference to Exhibit 10.21 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 12.1 Statement Re: Computation of ratios 24.1 Marshall D. Gladchun Power of Attorney 24.2 F. Alan Smith Power of Attorney 24.3 Barry Banducci Power of Attorney 24.4 Gerard Jacobus Brink Power of Attorney 24.5 Donald J. Hofmann Power of Attorney 24.6 Roger T. Morgan Power of Attorney 24.7 Gerrit de Graaf Power of Attorney 21.1 Subsidiaries of the Registrant Incorporated by reference to Exhibit 21.1 to AAS' Registration Statement on Form S-4 (File No. 333-49011). 27.1 Financial Data Schedule 59 EX-10.7(A) 2 AMENDMENT NO. 1 DATED AS OF SEPTEMBER 5, 1997 1 Exhibit 10.7(a) AMENDMENT NO. 1 Dated as of September 5, 1997 to SECOND AMENDED AND RESTATED CREDIT AGREEMENT Dated as of August 5, 1997 and SECURITY AGREEMENTS Dated as of October 5, 1996 THIS AMENDMENT NO. 1 ("Amendment") is made as of September 5, 1997 by and among AAS Holdings, LLC, Advanced Accessory Systems, LLC, Valley Industries, LLC, Brink International BV and Brink BV (the "Borrowers"), the financial institutions listed on the signature pages hereof (the "Lenders") and NBD Bank, as Administrative Agent and Documentation and Collateral Agent, and The Chase Manhattan Bank, as Co-Administrative Agent and Syndication Agent (the "Agents"), under that certain Second Amended and Restated Credit Agreement dated as of August 5, 1997 by and among the Borrowers, the Lenders and the Agents (the "Credit Agreement"). Defined terms used herein and not otherwise defined herein shall have the respective meanings given to them in the Credit Agreement. WHEREAS, the Borrowers, the Lenders and the Agents have agreed to amend the Credit Agreement and certain of the Security Agreements on the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrowers, the Lenders and the Agents have agreed to the following amendments to the Credit Agreement. 1. Amendments to Credit Agreement and Security Agreements. Effective as of the Effective Date (as defined below) and subject to the satisfaction of the condition precedent set forth in Section 3 below: 1.1 Schedule 5.8 to the Credit Agreement is amended by deleting the existing Schedule 5.8 in its entirety and substituting therefor Amended Schedule 5.8 attached hereto. 1.2 Section 5(a) of the Security Agreement executed by Holdings in favor of the Documentation and Collateral Agent is amended by deleting the first sentence thereof in its entirety and substituting therefor the following: The correct name of Grantor is "Advanced Accessory Systems, LLC". 1.3 Section 5(a) of the Security Agreement executed by AAS in favor of the Documentation and Collateral Agent is amended by deleting the first sentence thereof in its entirety and substituting therefor the following: The correct name of Grantor is "SportRack, LLC". 2. Consent. The Lenders hereby consent to the amendment by Holdings and AAS of their respective organizational documents to effect changes in their names to "Advanced Accessory Systems, LLC" and "SportRack, LLC", respectively. 2 3. Condition of Effectiveness. The effectiveness of this Amendment is subject to the condition precedent that the Administrative Agent shall have received counterparts of this Amendment duly executed by the Borrowers, the Required Lenders and the Agents. Upon the satisfaction of the foregoing condition precedent, this Amendment shall become effective (i) with respect to the consent set forth in Section 2 above, as of the date hereof, and (ii) with respect to the amendments set forth in Section 1 above, as of the date on which appropriate amendments effecting the name changes are filed with the Secretary of State of Delaware and copies thereof are delivered to the Administrative Agent (the "Effective Date"). 4. Representations and Warranties of the Borrowers. Each Borrower hereby represents and warrants as follows: (a) This Amendment and the Credit Agreement as amended hereby constitute legal, valid and binding obligations of the Borrowers and are enforceable against the Borrowers in accordance with their terms. (b) As of the Effective Date, (i) there exists no Default or Unmatured Default and (ii) the representations and warranties contained in Article V of the Credit Agreement, as amended hereby, are true and correct in all material respects, except for representations and warranties made with reference to a specific date which representations and warranties are true and correct in all material respects as of such date. 5. Reference to and Effect on the Credit Agreement and Security Agreements. (a) Upon the effectiveness of Section 1 hereof, each reference in any Loan Document to such Loan Document or any other Loan Document shall mean and be a reference to the applicable Loan Document as amended hereby. (b) Except as specifically amended above, the Credit Agreement and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect and are hereby ratified and confirmed. (c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Agents or the Lenders, nor constitute a waiver of any provision of the Credit Agreement or any other documents, instruments and agreements executed and/or delivered in connection therewith. 6. Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of New York. 7. Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose. 8. Counterparts. This Amendment may be executed by one or more of the parties hereto on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. -2- 3 IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above written. AAS HOLDINGS, LLC as a Borrower By: /s/ Terence C. Seikel ----------------------------- Name: Terence C. Seikel Title: Vice President ADVANCED ACCESSORY SYSTEMS, LLC as a Borrower By: AAS HOLDINGS, LLC Its Manager By: /s/ Terence C. Seikel ----------------------------- Name: Terence C. Seikel Title: Vice President VALLEY INDUSTRIES, LLC as a Borrower By: AAS HOLDINGS, INC. Its Manager By: /s/ Terence C. Seikel ----------------------------- Name: Terence C. Seikel Title: Vice President BRINK INTERNATIONAL BV as a Borrower By: /s/ Terence C. Seikel ----------------------------- Name: Terence C. Seikel Title: Attorney-In-Fact BRINK BV as a Borrower By: /s/ Terence C. Seikel ----------------------------- Name: Terence C. Seikel Title: Attorney-In-Fact -3- 4 NBD BANK as the Administrative Agent and the Documentation and Collateral Agent, and as a Lender By: /s/ William Canney ----------------------------- Name: William Canney Title: Vice President THE CHASE MANHATTAN BANK as the Co-Administrative Agent and the Syndication Agent, and as a Lender By: /s/ Thomas H. Kozlark ----------------------------- Name: Thomas H. Kozlark Title: Vice President FIRST UNION NATIONAL BANK (f/k/a First Union National Bank of North Carolina) as a Lender By: /s/ MARK M. Harden ----------------------------- Name: MARK M. Harden Title: Vice President THE BANK OF NOVA SCOTIA as a Lender By: /s/ F.C.B. Ashby ----------------------------- Name: F.C.B. Ashby Title: Senior Manager Loan Operations COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH as a Lender By: /s/ Dana W. Hemenway ----------------------------- Name: Dana W. Hemenway Title: Vice President By: /s/ Ian Reece ----------------------------- Name: Ian Reece Title: Senior Credit Officer -4- 5 LASALLE NATIONAL BANK as a Lender By: /s/ Thomas J. Ranville ----------------------------- Name: Thomas J. Ranville Title: Vice President MICHIGAN NATIONAL BANK as a Lender By: /s/ Mark W. Smits ----------------------------- Name: Mark W. Smits Title: Relationship Manager NATIONAL CITY BANK (CLEVELAND) as a Lender By: /s/ Carlton M. Faison ----------------------------- Name: Carlton M. Faison Title: Vice President COMERICA BANK as a Lender By: /s/ Beth A. Brockmann ----------------------------- Name: Beth A. Brockmann Title: Vice President VAN KAMPEN AMERICA CAPITAL PRIME RATE INCOME TRUST as a Lender By: /s/ Jeffrey W. Maillet ----------------------------- Name: Jeffrey W. Maillet Title: Sr. Vice Pres.-Portfolio Mgr. DEBT STRATEGIES FUND, INC. as a Lender By: ----------------------------- Name: Title: -5- 6 SENIOR HIGH INCOME PORTFOLIO, INC. as a Lender By: ----------------------------- Name: Title: DEEPROCK & CO. By: Eaton Vance Management as Investment Advisor By: /s/ Payson F. Swaffield ----------------------------- Name: Payson F. Swaffield Title: Vice President SENIOR DEBT PORTFOLIO By: Boston Management and Research as Investment Advisor By: /s/ Payson F. Swaffield ----------------------------- Name: Payson F. Swaffield Title: Vice President -6- 7 AMENDED SCHEDULE 5.8 Subsidiaries Attached. -7- 8 SCHEDULE 5.8 Subsidiaries Advanced Accessory Systems, LLC, a Delaware limited liability company ("Holdings"), owns 99% of the outstanding membership interests of SportRack, LLC, a Delaware limited liability company ("Borrower"), and Chase Venture Capital Associates, L.P. owns 1% of the outstanding membership interests of Borrower. The capitalization and ownership of Holdings is as set forth on Exhibit 1 to this Schedule 5.8. Each of Holdings, Borrower and Valley Industries, LLC, a Delaware limited liability company ("Valley") is qualified to transact business in Michigan. Holdings owns 100% of the issued and outstanding capital stock of AAS Capital Corporation, a Delaware corporation. Borrower owns 100% of the capital stock of SportRack International, Inc., a corporation formed under the laws of Canada ("SportRack International"). AAS Holdings, Inc. ("Holdings Inc.") owns 100% of the issued capital stock of Brink International BV, a limited liability company formed under the laws of The Netherlands. Brink International BV owns 100% of the issued capital stock of Brink BV, a limited liability company formed under the laws of The Netherlands. Brink BV owns 100% of the stock of Brink Trekhaken BV, a company formed under the laws of The Netherlands. Brink International BV owns 100% of the stock of Brink Sverige AB, a company formed under the laws of Sweden. Brink International BV owns 100% of the stock of Brink U.K. Limited, a company formed under the laws of England. Brink International BV owns 100% of the stock of Nordisk Komponent Holding A/S, a company formed under the laws of Denmark ("Nordisk Komponent"). Brink International BV owns 100% of the stock of Brink France SarL, a company formed under the laws of France. Brink International BV owns 100% of the stock of Brink Italia Srl, a company formed under the laws of Italy. -1- 9 Nordisk Komponent owns 100% of the stock of Brink A/S, a company formed under the laws of Denmark. Brink France SarL owns 99.8% of the stock of SFEA SA, a company formed under the laws of France. The remaining 0.2% is held by Brink BV and certain individuals as nominees. Brink France SarL owns 100% of the stock of SCI L'Elmontaise, a company formed under the laws of France. Borrower owns 100% of the stock of AAS GmbH a company formed under the laws of Germany. SportRack International owns 100% of the stock of Nomadic Sport Inc., a corporation existing under the laws of Canada. Holdings owns 99% of the outstanding membership interests of Valley. Borrower owns 1% of the outstanding membership interests of Valley. -2- EX-10.7(B) 3 AMENDMENT NO. 2 DATED AS OF SEPTEMBER 24, 1997 1 Exhibit 10.7(b) AMENDMENT NO. 2 Dated as of September 24, 1997 to SECOND AMENDED AND RESTATED CREDIT AGREEMENT Dated as of August 5, 1997 THIS AMENDMENT NO. 2 ("Amendment") is made as of September 24, 1997 by and among Advanced Accessory Systems, LLC (formerly known as AAS Holdings, LLC), Sportrack, LLC (formerly known as Advanced Accessory Systems, LLC), Valley Industries, LLC, Brink International BV and Brink BV (the "Borrowers"), the financial institutions listed on the signature pages hereof (the "Lenders") and NBD Bank, as Administrative Agent and Documentation and Collateral Agent, and The Chase Manhattan Bank, as Co-Administrative Agent and Syndication Agent (the "Agents"), under that certain Second Amended and Restated Credit Agreement dated as of August 5, 1997 by and among the Borrowers, the Lenders and the Agents (as amended, the "Credit Agreement"). Defined terms used herein and not otherwise defined herein shall have the respective meanings given to them in the Credit Agreement. WHEREAS, the Borrowers, the Lenders and the Agents have agreed to amend the Credit Agreement on the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrowers, the Lenders and the Agents have agreed to the following amendments to the Credit Agreement. 1. Amendments to Credit Agreement. Effective as of September 24, 1997 and subject to the satisfaction of the conditions precedent set forth in Section 2 below, the Credit Agreement is hereby amended as follows: 1.1 Article I of the Credit Agreement is hereby amended to add alphabetically the following defined terms: "ACQUISITION FACILITY COMMITMENT" means, for each Lender, the obligation of such Lender to make Acquisition Facility Loans not exceeding the amount set forth on Exhibit B to this Agreement opposite its name thereon under the heading "Acquisition Facility Commitment" or in the Assignment Agreement by which it became a Lender, as such amount may be modified from time to time pursuant to the terms of this Agreement or to give effect to any applicable assignment and acceptance. "ACQUISITION FACILITY LOAN" is defined in Section 2.2A hereof. "ACQUISITION FACILITY NOTE" means a note in substantially the form of Exhibit C-1 hereto duly executed by the applicable Borrower and payable to the order of a Lender in the amount of its Acquisition Facility Commitment, including any amendment, restatement, modification, renewal or replacement of such Acquisition Facility Note. 2 "AGGREGATE ACQUISITION FACILITY COMMITMENT" means the aggregate of the Acquisition Facility Commitments of all the Lenders, as reduced from time to time pursuant to the terms hereof. The initial Aggregate Acquisition Facility Commitment is Twenty Two Million Dollars ($22,000,000). 1.2 Article I of the Credit Agreement is hereby amended to add the following phrase immediately after the phrase "Tranche B Term Loans" in the definition of "Applicable Base Rate Margin": "or Acquisition Facility Loans". 1.3 Article I of the Credit Agreement is hereby amended to add the following phrase immediately after the phrase "Tranche B Term Loans" in the definition of "Applicable Eurocurrency Margins": "or Acquisition Facility Loans". 1.4 Article I of the Credit Agreement is hereby amended to add the following phrase immediately after the phrase "Tranche A Term Loan Commitment" in the definition of "Commitment": ", Acquisition Facility Commitment,". 1.4(A) Article I of the Credit Agreement is hereby amended to add the following phrase immediately after the phrase "principal amount of" in the definition of "High Yield Note Agreement": "not less than". 1.5 Article I of the Credit Agreement is hereby amended to add the following phrase immediately after the phrase "Term Loans" in the definition of "Loans": ", Acquisition Facility Loans" and to add the following immediately after the reference to "Section 2.2" in such definition" "or Section 2.2A". 1.6 Article I of the Credit Agreement is hereby amended to add the following phrase immediately after the phrase "Revolving Loan Commitment" in (ii)(A) of the definition of "Pro Rata Share": "and Acquisition Facility Commitment (or, after December 31, 1999, the outstanding principal balance of such Lender's Acquisition Facility Loans)" and to add the following immediately after the phrase "Aggregate Revolving Loan Commitment" in (ii)(B) of such definition: -2- 3 "and the Aggregate Acquisition Facility Commitment (or after December 31, 1999, the outstanding principal balance of such Lender's Acquisition Facility Loans)" and to add the following immediately after the phrase "such Lender's Term Loans" in (x) of such definition: ", Acquisition Facility Loans" and to add the following immediately after the phrase "all Term Loans" in (y) of such definition: ", Acquisition Facility Loans". 1.7 Article I of the Credit Agreement is hereby amended to add the following phrase immediately after the phrase "Pro Rata Share of any Revolving Loan" in the definition of "Required Lenders": "or Acquisition Facility Loan" and to add the following phrase immediately after the phrase "Pro Rata Shares of such Revolving Loans" in such definition: "or Acquisition Facility Loans". 1.8 Article I of the Credit Agreement is hereby amended to add the following phrase immediately after the phrase "Tranche B Term Loans" in the definition of "Term Loans": "and, after December 31, 1999, the Acquisition Facility Loans". 1.9 Article I of the Credit Agreement is hereby amended to add the following definition of "Term Notes": "Term Notes means, collectively, the Tranche A Term Notes, the Tranche B Term Notes, and, after December 31, 1999, the Acquisition Facility Notes". 1.10 Article I of the Credit Agreement is hereby amended to delete the definition of "Tranche A Pro Rata Share" now contained therein and to substitute the following therefor: "'TRANCHE A PRO RATA SHARE' shall mean, at any particular time and with respect to any Lender, a fraction (expressed as a percentage), the numerator of which shall be the then aggregate amount of such Lender's Revolving Credit Commitment (or, if such Commitment has been terminated, the outstanding principal balance of such Lender's Revolving Loans) and Acquisition Facility Commitment (or, after December 31, 1999 or if such Commitment has been terminated, the outstanding principal balance of such Lender's Acquisition Facility Loans) plus the outstanding principal balance of such Lender's Tranche A Term Loans and the denominator of which shall be the then aggregate amount of all Revolving Credit Commitments (or, if such Commitments have been terminated, the outstanding principal balance of all Revolving Loans), Acquisition Facility Commitments (or, after December 31, 1999 or if such -3- 4 Commitments have been terminated, the outstanding principal balance of all Acquisition Facility Loans) and the outstanding principal balance of the Tranche A Term Loans." 1.11 Article II of the Credit Agreement is hereby amended by adding the following new Section 2.2A immediately after Section 2.2 and before Section 2.3: "2.2A Acquisition Facility. Upon the satisfaction of the conditions precedent set forth in Sections 4.1 and 4.2, from and including the date of this Agreement and prior to December 31, 1999, each Lender severally and not jointly agrees, on the terms and conditions set forth in this Agreement, to make revolving loans, in Dollars only, to the applicable Borrower from time to time in an amount not to exceed such Lender's Acquisition Facility Commitment (each individually, an '"ACQUISITION FACILITY LOAN" and collectively, the "ACQUISITION FACILITY LOANS"). Each Advance under this Section 2.2A shall consist of Acquisition Facility Loans made by each Lender ratably in proportion to such Lender's respective Tranche A Pro Rata Share. Subject to the terms of this Agreement, the Borrowers may borrow, repay and reborrow Acquisition Facility Loans at any time prior to December 31, 1999. On December 31, 1999, the Borrower's option to borrow and reborrow Acquisition Facility Loans shall terminate, the Aggregate Acquisition Facility Commitment shall be reduced to zero and the outstanding principal balance of the Acquisition Facility Loans shall be repaid in sixteen (16) equal consecutive quarterly installments of principal, payable on the last Business Day of each fiscal quarter of the Borrower, commencing on December 31, 1999 and continuing thereafter until the Tranche A Term Loan Termination Date, and the Acquisition Facility Loans shall be permanently reduced by the amount of each installment on the date payment thereof is made hereunder. Notwithstanding the foregoing, the final installment shall be in the amount of the then outstanding principal balance of the Acquisition Facility Loans. In addition, the then outstanding principal balance of all Acquisition Facility Loans, if any, shall be due and payable on the Tranche A Term Loan Termination Date." 1.12 Section 2.5(B)(i)(d)(I) of the Credit Agreement is hereby amended to insert the following phrase immediately after the phrase "Tranche B Term Loans": "and, after December 31, 1999, the Acquisition Facility Loans". 1.13 Section 2.5(B)(i)(e) of the Credit Agreement is hereby amended to insert the following phrase immediately after the reference to "Tranche A Term Loans": "and, after December 31, 1999, the Acquisition Facility Loans". 1.14 Section 2.6 of the Credit Agreement is hereby amended to insert the following phrase after the first reference to "Aggregate Revolving Loan Commitment": "or the Aggregate Acquisition Facility Commitment", -4- 5 and to insert at the end of the first sentence the following: "and the amount of the Aggregate Acquisition Facility Commitment may not be reduced below the aggregate principal amount of the outstanding Acquisition Facility Loans". 1.15 Section 2.7 of the Credit Agreement is hereby amended to insert the following phrase immediately after the phrase "Revolving Loan or Loans": "or Acquisition Facility Loan or Loans". and to insert immediately after each use of the phrase "Revolving Loans" the following: ", Acquisition Facility Loans". 1.16 Section 2.8(b)(i) of the Credit Agreement shall be amended to insert immediately after the reference to "Tranche A Term Loans and Revolving Loans" in the pricing grid a reference to the following: "and Acquisition Facility Loans". 1.17 Section 2.9 of the Credit Agreement is hereby amended to insert the following phrase immediately after the phrase "Aggregate Revolving Loan Commitment": "or the unused Aggregate Acquisition Facility Commitment". 1.18 Section 2.15(C) of the Credit Agreement is hereby amended to add the following phrase immediately after the phrase "Aggregate Revolving Loan Commitment" in (i)(A): "plus the Aggregate Acquisition Facility Commitment (prior to December 31, 1999)" and to insert immediately after the phrase "Revolving Credit Obligations" in (i)(B) the following: "plus, prior to December 31, 1999, the outstanding principal balance of the Acquisition Facility Loans". 1.19 Section 2.22 of the Credit Agreement is hereby amended to add the following immediately after the end thereof: "Notwithstanding the foregoing, Comerica Bank may issue commercial Letters of Credit up to an aggregate amount at any one time outstanding of $75,000 for its own account with respect to which the participation provisions of this Section 2.22 shall not apply." 1.20 Section 2.25 of the Credit Agreement is hereby amended to add the following immediately after the end thereof: -5- 6 "Notwithstanding the foregoing, the Letter of Credit Fee prescribed in this Section 2.25 shall not apply to the commercial letters of credit issued by Comerica Bank for its own account as described in Section 2.22 and Comerica Bank and the Borrowers shall negotiate separate fee arrangements with respect to such letters of credit and such fees shall be for the account of Comerica Bank." 1.21 Section 6.3(D) of the Credit Agreement is hereby amended to add the following new subsection (xii) ad the end thereof: "(xii) Investments made in Permitted Acquisitions". 1.22 Section 6.3(G) of the Credit Agreement is here by amended to delete Section 6.3(G)(2) now contained therein and to substitute the following therefor: "prior to each such acquisition, Holdings shall deliver to the Administrative Agent a certificate from one of Holdings' Authorized Officers demonstrating to the satisfaction of the Administrative Agent that after giving effect to the transaction or transactions on a pro forma basis using pro forma historical audited and reviewed unaudited financial statements (or other financial statements reasonably acceptable to the Administrative Agent) obtained from the seller on an unadjusted basis (other than one-time adjustments agreed to by the Administrative Agent, such agreement not to be unreasonable withheld) as if the acquisition had occurred in the first day of the twelve-month period ending on the last day of Holdings' most recently completed fiscal quarter, Holdings and its Subsidiaries (a) would have been in compliance with all provisions of Section 6.4 at all times during such twelve-month period and would have maintained a Leverage Ratio at all times prior to January 1, 1998 of less than 5.50 to 1.0; and (b) will be in compliance, based on projections deemed reasonable by the Administrative Agent, with all provisions of Section 6.4 through the first anniversary of such acquisition;" and is further amended to delete the language now contained in Section 6.3(G)(5)(B) and substitute the following therefor: "with respect to acquisitions other than the acquisition of Ellebi, S.A., $5,000,000 if the sources for such purchases are other than as set forth in clause (A) above, unless such acquisition is approved by the Required Lenders" and is further amended to add a new subsection (6) immediately following subsection (5): "(6) if the acquisition is a stock acquisition, the acquisition shall result in a transfer of 100% of the common stock of the company being acquired". 1.23 Section 8.2(vi) of the Credit Agreement is hereby amended to insert immediately after each reference to "Revolving Loan Commitment" the following: "or its Acquisition Facility Commitment". -6- 7 1.24 Section 8.3(iv) of the Credit Agreement is hereby amended to insert immediately after the phrase "Revolving Loan Commitment" the following: "or Acquisition Facility Commitment". 1.25 Section 10.9 of the Credit Agreement is hereby amended to insert immediately after the phrase "Revolving Loan Commitment" the following: "its Acquisition Facility Commitment". 1.26 Section 12.2 of the Credit Agreement is hereby amended to insert immediately after each reference to the phrase "Revolving Loan Commitment" the following: "or any Acquisition Facility Commitment". 1.27 Section 12.3 of the Credit Agreement is hereby amended to insert immediately after each reference to the phrase "Revolving Loan Commitment" the following: "or Acquisition Facility Commitment", and to insert immediately after the phrase "Aggregate Revolving Loan Commitment" the following: ", the Aggregate Acquisition Facility Commitment". 2. Conditions of Effectiveness. The effectiveness of this Amendment is subject to the conditions precedent that (a) the Administrative Agent shall have received counterparts of this Amendment duly executed by the Borrowers, the Required Lenders and the Agents, (b) the Borrowers shall have raised $100,000,000 through an offering of subordinated notes containing terms substantially identical to those set forth in the Preliminary Offering Memorandum dated September 8, 1997, and (c) the Borrowers shall have paid any fees due and payable pursuant to any applicable fee letter. Upon the satisfaction of the foregoing conditions precedent, this Amendment shall become effective with respect to the amendments set forth in Section 1 above. 3. Representations and Warranties of the Borrowers. Each Borrower hereby represents and warrants as follows: (a) This Amendment and the Credit Agreement as amended hereby constitute legal, valid and binding obligations of the Borrowers and are enforceable against the Borrowers in accordance with their terms. (b) As of September 24, 1997, (i) there exists no Default or Unmatured Default and (ii) the representations and warranties contained in Article V of the Credit Agreement, as amended hereby, are true and correct in all material respects, except for representations and warranties made with reference to a specific date which representations and warranties are true and correct in all material respects as of such date. 4. Reference to and Effect on the Credit Agreement and Security Agreements. -7- 8 (a) Upon the effectiveness of Section 1 hereof, each reference in any Loan Document to such Loan Document or any other Loan Document shall mean and be a reference to the applicable Loan Document as amended hereby. (b) Except as specifically amended above, the Credit Agreement and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect and are hereby ratified and confirmed. (c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Agents or the Lenders, nor constitute a waiver of any provision of the Credit Agreement or any other documents, instruments and agreements executed and/or delivered in connection therewith. 5. Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of New York. 6. Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose. 7. Counterparts. This Amendment may be executed by one or more of the parties hereto on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. -8- 9 IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above written. ADVANCED ACCESSORY SYSTEMS, LLC as a Borrower By: /s/ Terence C. Seikel ----------------------------- Name: Terence C. Seikel Title: Vice President SPORTRACK, LLC as a Borrower By: ADVANCED ACCESSORY SYSTEMS, LLC Its Manager By: /s/ Terence C. Seikel ----------------------------- Name: Terence C. Seikel Title: Vice President VALLEY INDUSTRIES, LLC as a Borrower By: ADVANCED ACCESSORY SYSTEMS, LLC Its Manager By: /s/ Terence C. Seikel ----------------------------- Name: Terence C. Seikel Title: Vice President BRINK INTERNATIONAL BV as a Borrower By: /s/ Terence C. Seikel ----------------------------- Name: Terence C. Seikel Title: Attorney-in-Fact BRINK BV as a Borrower By: /s/ Terence C. Seikel ----------------------------- Name: Terence C. Seikel Title: Attorney-in-Fact -9- 10 NBD BANK as the Administrative Agent and the Documentation and Collateral Agent, and as a Lender By: /s/ William H. Canney ----------------------------- Name: William H. Canney Title: Vice President THE CHASE MANHATTAN BANK as the Co-Administrative Agent and the Syndication Agent, and as a Lender By: /s/ Thomas H. Kozlack ----------------------------- Name: Thomas H. Kozlack Title: Vice President FIRST UNION NATIONAL BANK (f/k/a First Union National Bank of North Carolina) as a Lender By: /s/ Mark M. Harden ----------------------------- Name: Mark M. Harden Title: Vice President THE BANK OF NOVA SCOTIA as a Lender By: /s/ F.C.H. Ashby ----------------------------- Name: F.C.H. Ashby Title: Senior Manager Loan Operations COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH as a Lender By: ----------------------------- Name: Title: By: ----------------------------- Name: Title: -10- 11 LASALLE NATIONAL BANK as a Lender By: /s/ Thomas J. Bieke ----------------------------- Name: Thomas J. Bieke Title: Senior Vice President MICHIGAN NATIONAL BANK as a Lender By: ----------------------------- Name: Title: NATIONAL CITY BANK (CLEVELAND) as a Lender By: /s/ Carlton M. Faison ----------------------------- Name: Carlton M. Faison Title: Vice President COMERICA BANK as a Lender By: /s/ Beth A. Brockmann ----------------------------- Name: Beth A. Brockmann Title: Vice President VAN KAMPEN AMERICA CAPITAL PRIME RATE INCOME TRUST as a Lender By: /s/ Jeffrey W. Maillet ----------------------------- Name: Jeffrey W. Maillet Title: Senior Vice President & Director DEBT STRATEGIES FUND, INC. as a Lender By: /s/ Gilles Marchand ----------------------------- Name: Gilles Marchand Title: Vice President -11- 12 SENIOR HIGH INCOME PORTFOLIO, INC. as a Lender By: /s/ Gilles Marchand ----------------------------- Name: Gilles Marchand Title: Vice President DEEPROCK & CO. By: Eaton Vance Management as Investment Advisor By: ----------------------------- Name: Title: SENIOR DEBT PORTFOLIO By: Boston Management and Research as Investment Advisor By: ----------------------------- Name: Title: MERRILL LYNCH DEBT STRATEGIES PORTFOLIO By: Merrill Lynch Asset Management,L.P., as Investment Advisor By: /s/ Gilles Marchand ----------------------------- Name: Gilles Marchand Title: Vice President MERRILL LYNCH PRIME RATE PORTFOLIO By: Merrill Lynch Asset Management, L.P., as Investment Advisor By: /s/ Gilles Marchand ----------------------------- Name: Gilles Marchand Title: Vice President -12- 13 EXHIBIT B TO CREDIT AGREEMENT Commitments
Amount of Revolving Lender Loan Commitment ------ --------------- NBD Bank $3,041,795.49 The Chase Manhattan Bank $3,041,795.49 First Union National Bank $3,041,795.49 The Bank of Nova Scotia $3,041,795.49 Rabobank Nederland (New York) $3,041,795.49 LaSalle National Bank $3,041,795.49 Michigan National Bank $3,041,795.49 National City Bank (Cleveland) $1,734,375.00 Comerica Bank $1,973,056.57 ------------- TOTAL REVOLVING LOAN COMMITMENTS $25,000,000 Amount of Tranche A Lender Term Loan Commitment ------ -------------------- NBD Bank $7,051,043.75 The Chase Manhattan Bank $7,051,043.75 First Union National Bank $7,051,043.75 The Bank of Nova Scotia $7,051,043.75 Rabobank Nederland (New York) $7,051,043.75
14 LaSalle National Bank $7,051,043.75 Michigan National Bank $7,051,043.75 National City Bank (Cleveland) $7,051,043.75 Comerica Bank $4,573,650.00 ------------- TOTAL TRANCHE A TERM LOAN COMMITMENTS $60,982,000
Amount of Tranche B Lender Term Loan Commitment ------ -------------------- Debt Strategies Fund, Inc. $5,000,000 Deeprock & Company $1,000,000 NBD Bank $15,000,000 Senior High Income Portfolio, Inc. $5,000,000 The Chase Manhattan Bank $15,000,000 Van Kampen American Capital Prime Rate Income Trust $14,000,000 ----------- TOTAL TRANCHE B TERM LOAN COMMITMENTS $55,000,000 Amount of Acquisition Lender Facility Commitment ------ ------------------- NBD Bank $2,487,519.62 The Chase Manhattan Bank $2,487,519.62 First Union National Bank $2,487,519.62 The Bank of Nova Scotia $2,487,519.62 LaSalle National Bank $2,487,519.62
15 Michigan National Bank $1,500,000.00 National City Bank (Cleveland) $3,794,940.10 Comerica Bank $4,267,461.80 -------------------- TOTAL ACQUISITION FACILITY COMMITMENTS $22,000,000 ------------ TOTAL COMMITMENTS $162,982,000 ============
16 EXHIBIT C-1 TO CREDIT AGREEMENT Form of Acquisition Facility Note ACQUISITION FACILITY NOTE U.S. $_________ New York, New York [Date] FOR VALUE RECEIVED, the undersigned, [INSERT NAME OF APPLICABLE BORROWER], a [Delaware limited liability company][insert alternative organizational information] (the "Borrower"), HEREBY UNCONDITIONALLY PROMISES TO PAY to the order of [INSERT NAME OF LENDER] (the "Lender") the principal sum of [_____________] AND NO/100 DOLLARS ($[____]), or, if less, the aggregate unpaid amount of all Acquisition Facility Loans made by the Lender to such Borrower pursuant to the "Credit Agreement" (as defined below), on the Termination Date or on such earlier date as may be required by the terms of the Credit Agreement. Capitalized terms used herein and not otherwise defined herein are as defined in the Credit Agreement. The Borrower promises to pay interest on the unpaid principal amount of each Acquisition Facility Loan made to it from the date of such Acquisition Facility Loan until such principal amount is paid in full at a rate or rates per annum determined in accordance with the terms of the Credit Agreement. Interest hereunder is due and payable at such times and on such dates as set forth in the Credit Agreement. Both principal and interest are payable in lawful money of the United States of America if the applicable Acquisition Facility Loan was made in Dollars or in the applicable Agreed Currency if made in an Agreed Currency to the "Administrative Agent" (as defined below), to such account as the Administrative Agent may designate, in same day funds. At the time of each Acquisition Facility Loan, and upon each payment or prepayment of principal of each Acquisition Facility Loan, the Lender shall make a notation either on the schedule attached hereto and made a part hereof, or in such Lender's own books and records, in each case specifying the amount of such Acquisition Facility Loan, the respective Interest Period thereof, in the case of Eurocurrency Rate Loans, the applicable currency, in the case of Eurocurrency Rate Loans or the amount of principal paid or prepaid with respect to such Acquisition Facility Loan, as the case may be; provided that the failure of the Lender to make any such recordation or notation shall not affect the Obligations of the Borrower hereunder or under the Credit Agreement. This Acquisition Facility Note (this "Note") is one of the "Acquisition Facility Notes" referred to in, and is entitled to the benefits of, the Second Amended and Restated Credit 17 Agreement dated as of August 5, 1997 (as amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement") among AAS Holdings, LLC, Advanced Accessory Systems, LLC, Valley Industries, LLC, Brink International BV, Brink BV, certain borrowing subsidiaries from time to time parties thereto, the financial institutions from time to time parties thereto, NBD Bank, as the Administrative Agent and the Documentation and Collateral Agent (herein, the "Administrative Agent"), and The Chase Manhattan Bank, as the Co-Administrative Agent. The Credit Agreement, among other things, (i) provides for the making of Acquisition Facility Loans by the Lender to the Borrower and the other Borrowers under the Credit Agreement from time to time in an aggregate amount not to exceed at any time outstanding the U.S. Dollar amount first above mentioned, the indebtedness of the Borrower resulting from each such Acquisition Facility Loan to it being evidenced by this Note, and (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events and also for prepayments of the principal hereof prior to the maturity hereof upon the terms and conditions therein specified. Demand, presentment, protest and notice of nonpayment and protest are hereby waived by the Borrower. Whenever in this Note reference is made to the Administrative Agent, the Co-Administrative Agent, the Documentation and Collateral Agent, the Lender or the Borrower, such reference shall be deemed to include, as applicable, a reference to their respective successors and assigns. The provisions of this Note shall be binding upon and shall inure to the benefit of said successors and assigns. The Borrower's successors and assigns shall include, without limitation, a receiver, trustee or debtor in possession of or for the Borrower. This Note shall be interpreted, and the rights and liabilities of the parties hereto determined, in accordance with the laws of the State of New York. [Name of Applicable Borrower] By: -------------------------- Name: Title: 18 SCHEDULE OF ACQUISITION FACILITY LOANS AND PAYMENTS OR PREPAYMENTS
Amount of Unpaid Amount Type Interest Principal Paid Principal Notation Date of Loan of Loan Period/Rate Currency or Prepaid Balance Made By - ---- ------- ------- ----------- -------- ---------- ------- -------
EX-10.7(C) 4 AMENDMENT NO. 3 DATED AS OF DECEMBER 29, 1997 1 Exhibit 10.7(c) EXECUTION COPY AMENDMENT NO. 3 Dated as of December 29, 1997 to SECOND AMENDED AND RESTATED CREDIT AGREEMENT Dated as of August 5, 1997 THIS AMENDMENT NO. 3 ("Amendment") is made as of December 29, 1997 by and among Advanced Accessory Systems, LLC (formerly known as AAS Holdings, LLC), SportRack, LLC (formerly known as Advanced Accessory Systems, LLC), Valley Industries, LLC, Brink International BV and Brink BV (the "Borrowers"), the financial institutions listed on the signature pages hereof (the "Lenders") and NBD Bank, as Administrative Agent and Documentation and Collateral Agent, and The Chase Manhattan Bank, as Co-Administrative Agent and Syndication Agent (the "Agents"), under that certain Second Amended and Restated Credit Agreement dated as of August 5, 1997 by and among the Borrowers, the Lenders and the Agents (as amended, the "Credit Agreement"). Defined terms used herein and not otherwise defined herein shall have the respective meanings given to them in the Credit Agreement. WHEREAS, the Borrowers, the Lenders and the Agents have agreed to amend the Credit Agreement on the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrowers, the Lenders and the Agents have agreed to the following amendments to the Credit Agreement. 1. Amendments to Credit Agreement. Effective as of December 29, 1997 and subject to the satisfaction of the conditions precedent set forth in Section 2 below, the Credit Agreement is hereby amended as follows: 1.1 Article I of the Credit Agreement is hereby amended to delete the definition of "AAS" now contained therein and to substitute therefor the following definition: "'AAS' means SportRack, LLC, a Delaware limited liability company (formerly known as Advanced Accessory Systems, LLC), and its successors and assigns, including a debtor-in-possession on behalf of AAS." 1.2 Article I of the Credit Agreement is hereby amended to delete the definition of "Holdings" now contained therein and to substitute therefor the following: "'HOLDINGS' means Advanced Accessory Systems, LLC, a Delaware limited liability company (formerly known as AAS Holdings, LLC), and its successors and assigns, including a debtor-in-possession on behalf of Holdings." 1.3 Section 6.3(A)(f) of the Credit Agreement is hereby amended to add a new subsection (5) at the end thereof: "and (5) Brink BV or Brink International to Brink Italia S.r.l. in an amount not to exceed $22,000,000 or the Equivalent Amount thereof, provided that if such 2 Indebtedness is evidenced by a note, such note is pledged to the Documentation and Collateral Agent to secure payment of Advances made to non-U.S. Subsidiaries." 1.4 Section 6.3(D) of the Credit Agreement is hereby amended to add a new subsection (xiii) at the end thereof: (xiii) Investments made through a purchase of equity or as a contribution to capital by Brink BV or Brink International in Brink Italia S.r.l. provided that any such Investment shall not exceed $10,000,000 or the Equivalent Amount thereof." 1.5 Section 6.4(A) of the Credit Agreement is hereby amended to add the following as a new last sentence at the end of the definition of "Capital Expenditures": "No portion of the purchase of assets by Brink Italia S.r.l. from Ellebi S.p.A. shall be deemed to be a Capital Expenditure." 1.6 Schedule 5.8 of the Credit Agreement is hereby amended to add immediately at the end thereof the following: "Brink Italia S.r.l., an Italian corporation." 2. Conditions of Effectiveness. The effectiveness of this Amendment is subject to the conditions precedent that the Administrative Agent shall have received counterparts of this Amendment duly executed by the Borrowers, the Required Lenders and the Agents. Upon the satisfaction of the foregoing conditions precedent, this Amendment shall become effective with respect to the amendments set forth in Section 1 above. 3. Representations and Warranties of the Borrowers. Each Borrower hereby represents and warrants as follows: (a) This Amendment and the Credit Agreement as amended hereby constitute legal, valid and binding obligations of the Borrowers and are enforceable against the Borrowers in accordance with their terms. (b) As of December 29, 1997, (i) there exists no Default or Unmatured Default and (ii) the representations and warranties contained in Article V of the Credit Agreement, as amended hereby, are true and correct in all material respects, except for representations and warranties made with reference to a specific date which representations and warranties are true and correct in all material respects as of such date. 4. Reference to and Effect on the Credit Agreement and Security Agreements. (a) Upon the effectiveness of Section 1 hereof, each reference in any Loan Document to such Loan Document or any other Loan Document shall mean and be a reference to the applicable Loan Document as amended hereby. -2- 3 (b) Except as specifically amended above, the Credit Agreement and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect and are hereby ratified and confirmed. (c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Agents or the Lenders, nor constitute a waiver of any provision of the Credit Agreement or any other documents, instruments and agreements executed and/or delivered in connection therewith. 5. Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of New York. 6. Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose. 7. Counterparts. This Amendment may be executed by one or more of the parties hereto on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. -3- 4 IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above written. ADVANCED ACCESSORY SYSTEMS, LLC as a Borrower By: /s/ Terence C. Seikel ----------------------------- Name: Terence C. Seikel Title: Attorney-in-Fact SPORTRACK, LLC as a Borrower By: ADVANCED ACCESSORY SYSTEMS, LLC Its Manager By: /s/ Terence C. Seikel ----------------------------- Name: Terence C. Seikel Title: Attorney-in-Fact VALLEY INDUSTRIES, LLC as a Borrower By: ADVANCED ACCESSORY SYSTEMS, LLC Its Manager By: /s/ Terence C. Seikel ----------------------------- Name: Terence C. Seikel Title: Attorney-in-Fact BRINK INTERNATIONAL BV as a Borrower By: /s/ Terence C. Seikel ----------------------------- Name: Terence C. Seikel Title: Attorney-in-Fact BRINK BV as a Borrower By: /s/ Terence C. Seikel ----------------------------- Name: Terence C. Seikel Title: Attorney-in-Fact -4- 5 NBD BANK as the Administrative Agent and the Documentation and Collateral Agent, and as a Lender By: /s/ William Canney ----------------------------- Name: William Canney Title: Vice President THE CHASE MANHATTAN BANK as the Co-Administrative Agent and the Syndication Agent, and as a Lender By: /s/ Thomas H. Kozlark ----------------------------- Name: Thomas H. Kozlark Title: Vice President FIRST UNION NATIONAL BANK as a Lender By: /s/ Mark M. Harden ----------------------------- Name: Mark M. Harden Title: Vice President THE BANK OF NOVA SCOTIA as a Lender By: /s/ F.C.H. Ashby ----------------------------- Name: F.C.H. Ashby Title: Senior Manager Loan Operations COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH as a Lender By: ----------------------------- Name: Title: By: ----------------------------- Name: Title: -5- 6 LASALLE NATIONAL BANK as a Lender By: /s/ Thomas J. Ranville ----------------------------- Name: Thomas J. Ranville Title: Vice President MICHIGAN NATIONAL BANK as a Lender By: /s/ Mark W. Smits ----------------------------- Name: Mark W. Smits Title: Relationship Manager NATIONAL CITY BANK (CLEVELAND) as a Lender By: ----------------------------- Name: Title: COMERICA BANK as a Lender By: /s/ Beth A. Brockmann ----------------------------- Name: Beth A. Brockmann Title: Vice President VAN KAMPEN AMERICA CAPITAL PRIME RATE INCOME TRUST as a Lender By: /s/ Jeffrey W. Maillet ----------------------------- Name: Jeffrey W. Maillet Title: Sr. Vice Pres. & Director DEBT STRATEGIES FUND, INC. as a Lender By: /s/ Gilles Marchand ----------------------------- Name: Gilles Marchand, CFA Title: Authorized Signatory -6- 7 SENIOR HIGH INCOME PORTFOLIO, INC. as a Lender By: /s/ Gilles Marchand ----------------------------- Name: Gilles Marchand, CFA Title: Authorized Signatory DEEPROCK & CO. By: Eaton Vance Management as Investment Advisor By: /s/ Payson F. Swaffield ------------------------- Name: Payson F. Swaffield Title: Vice President SENIOR DEBT PORTFOLIO By: Boston Management and Research as Investment Advisor By: /s/ Payson F. Swaffield ------------------------- Name: Payson F. Swaffield Title: Vice President MERRILL LYNCH DEBT STRATEGIES PORTFOLIO By: Merrill Lynch Asset Management, L.P., as Investment Advisor By: /s/ Gilles Marchand ----------------------------- Name: Gilles Marchand, CFA Title: Authorized Signatory MERRILL LYNCH PRIME RATE PORTFOLIO By: Merrill Lynch Asset Management, L.P., as Investment Advisor By: /s/ Gilles Marchand ----------------------------- Name: Gilles Marchand, CFA Title: Authorized Signatory -7- 8 SENIOR HIGH INCOME PORTFOLIO, INC. as a Lender By: /s/ Gilles Marchand ----------------------------- Name: Gilles Marchand, CFA Title: Authorized Signatory DEEPROCK & CO. By: Eaton Vance Management as Investment Advisor By: /s/ Payson F. Swaffield ------------------------- Name: Payson F. Swaffield Title: Vice President SENIOR DEBT PORTFOLIO By: Boston Management and Research as Investment Advisor By: /s/ Payson F. Swaffield ------------------------- Name: Payson F. Swaffield Title: Vice President MERRILL LYNCH DEBT STRATEGIES PORTFOLIO By: Merrill Lynch Asset Management, L.P., as Investment Advisor By: /s/ Gilles Marchand ------------------------- Name: Gilles Marchand, CFA Title: Authorized Signatory MERRILL LYNCH PRIME RATE PORTFOLIO By: Merrill Lynch Asset Management, L.P., as Investment Advisor By: /s/ Gilles Marchand ------------------------- Name: Gilles Marchand, CFA Title: Authorized Signatory -8- EX-10.7(D) 5 AMENDMENT NO. 4 DATED AS OF DECEMBER 31, 1997 1 Exhibit 10.7(d) EXECUTION COPY AMENDMENT NO. 4 Dated as of December 31, 1997 to SECOND AMENDED AND RESTATED CREDIT AGREEMENT Dated as of August 5, 1997 THIS AMENDMENT NO. 4 ("Amendment") is made as of December 31, 1997 by and among Advanced Accessory Systems, LLC (formerly known as AAS Holdings, LLC), SportRack, LLC (formerly known as Advanced Accessory Systems, LLC), Valley Industries, LLC, Brink International BV and Brink BV (the "Borrowers"), the financial institutions listed on the signature pages hereof (the "Lenders") and NBD Bank, as Administrative Agent and Documentation and Collateral Agent, and The Chase Manhattan Bank, as Co-Administrative Agent and Syndication Agent (the "Agents"), under that certain Second Amended and Restated Credit Agreement dated as of August 5, 1997 by and among the Borrowers, the Lenders and the Agents (as amended, the "Credit Agreement"). Defined terms used herein and not otherwise defined herein shall have the respective meanings given to them in the Credit Agreement. WHEREAS, the Borrowers, the Lenders and the Agents have agreed to amend the Credit Agreement on the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrowers, the Lenders and the Agents have agreed to the following amendments to the Credit Agreement. 1. Amendments to Credit Agreement. Effective as of December 31, 1997 and subject to the satisfaction of the conditions precedent set forth in Section 2 below, the Credit Agreement is hereby amended as follows: 1.1 Section 6.4(E) of the Credit Agreement is hereby amended to add the following immediately at the end thereof: "and provided further that for the fiscal quarter ending December 31, 1997, the Leverage Ratio shall be calculated including EBITDA for the business acquired by Ellebi S.r.l. from Ellebi S.p.A for the four quarter period ending on such day calculated on a pro forma basis using historical audited and reviewed unaudited financial statements obtained from Ellebi S.p.A." 2. Conditions of Effectiveness. The effectiveness of this Amendment is subject to the conditions precedent that the Administrative Agent shall have received counterparts of this Amendment duly executed by the Borrowers, the Required Lenders and the Agents. Upon the satisfaction of the foregoing conditions precedent, this Amendment shall become effective with respect to the amendments set forth in Section 1 above. 3. Representations and Warranties of the Borrowers. Each Borrower hereby represents and warrants as follows: 2 (a) This Amendment and the Credit Agreement as amended hereby constitute legal, valid and binding obligations of the Borrowers and are enforceable against the Borrowers in accordance with their terms. (b) As of December 31, 1997, (i) there exists no Default or Unmatured Default under the Credit Agreement, as amended hereby, and (ii) the representations and warranties contained in Article V of the Credit Agreement, as amended hereby, are true and correct in all material respects, except for representations and warranties made with reference to a specific date which representations and warranties are true and correct in all material respects as of such date. 4. Reference to and Effect on the Credit Agreement and Security Agreements. (a) Upon the effectiveness of Section 1 hereof, each reference in any Loan Document to such Loan Document or any other Loan Document shall mean and be a reference to the applicable Loan Document as amended hereby. (b) Except as specifically amended above, the Credit Agreement and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect and are hereby ratified and confirmed. (c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Agents or the Lenders, nor constitute a waiver of any provision of the Credit Agreement or any other documents, instruments and agreements executed and/or delivered in connection therewith. 5. Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of New York. 6. Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose. 7. Counterparts. This Amendment may be executed by one or more of the parties hereto on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. -2- 3 IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above written. ADVANCED ACCESSORY SYSTEMS, LLC as a Borrower By: /s/ Terence C. Seikel ---------------------------- Name: Terence C. Seikel Title: Vice President SPORTRACK, LLC as a Borrower By: ADVANCED ACCESSORY SYSTEMS, LLC Its Manager By: /s/ Terence C. Seikel ---------------------------- Name: Terence C. Seikel Title: Vice President VALLEY INDUSTRIES, LLC as a Borrower By: ADVANCED ACCESSORY SYSTEMS, LLC Its Manager By: /s/ Terence C. Seikel ---------------------------- Name: Terence C. Seikel Title: Vice President BRINK INTERNATIONAL BV as a Borrower By: /s/ Terence C. Seikel ---------------------------- Name: Terence C. Seikel Title: Vice President BRINK BV as a Borrower By: /s/ Terence C. Seikel ---------------------------- Name: Terence C. Seikel Title: Vice President -3- 4 NBD BANK as the Administrative Agent and the Documentation and Collateral Agent, and as a Lender By: /s/ William J. Maxbauer ----------------------------- Name: William J. Maxbauer Title: Vice President THE CHASE MANHATTAN BANK as the Co-Administrative Agent and the Syndication Agent, and as a Lender By: /s/ Andris G. Kalnins ----------------------------- Name: Andris G. Kalnins Title: Vice President FIRST UNION NATIONAL BANK as a Lender By: /s/ Mark B. Felke ----------------------------- Name: Mark B. Felke Title: Senior Vice President THE BANK OF NOVA SCOTIA as a Lender By: /s/ F.C.H. Ashby ----------------------------- Name: F.C.H. Ashby Title: Senior Manager Loan Operations COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH as a Lender By: /s/ W. Jeffrey Vollack ----------------------------- Name: W. Jeffrey Vollack Title: Senior Credit Officer Senior Vice President By: /s/ M. Christina Debler ----------------------------- Name: M. Christina Debler Title: Vice President -4- 5 LASALLE NATIONAL BANK as a Lender By: /s/ Thomas J. Ranville ----------------------------- Name: Thomas J. Ranville Title: Vice President MICHIGAN NATIONAL BANK as a Lender By: ----------------------------- Name: Title: NATIONAL CITY BANK (CLEVELAND) as a Lender By: /s/ Marybeth S. Howe ----------------------------- Name: Marybeth S. Howe Title: Vice President COMERICA BANK as a Lender By: /s/ Mark B. Grover ----------------------------- Name: Mark B. Grover Title: Vice President VAN KAMPEN AMERICA CAPITAL PRIME RATE INCOME TRUST as a Lender By: ----------------------------- Name: Title: DEBT STRATEGIES FUND, INC. as a Lender By: ----------------------------- Name: Title: -5- EX-10.7(E) 6 AMENDMENT NO. 5 AND WAIVER DATED AS OF 12/31/98 1 EXHIBIT 10.7(e) AMENDMENT NO. 5 AND WAIVER Dated as of December 31, 1998 to SECOND AMENDED AND RESTATED CREDIT AGREEMENT Dated as of August 5, 1997 THIS AMENDMENT NO. 5 ("Amendment") is made as of December 31, 1998 by and among Advanced Accessory Systems, LLC (formerly known as AAS Holdings, LLC), SportRack, LLC (formerly known as Advanced Accessory Systems, LLC), Valley Industries, LLC, Brink International BV and Brink BV (the "Borrowers"), the financial institutions listed on the signature pages hereof (the "Lenders") and NBD Bank, as Administrative Agent and Documentation and Collateral Agent, and The Chase Manhattan Bank, as Co-Administrative Agent and Syndication Agent (the "Agents"), under that certain Second Amended and Restated Credit Agreement dated as of August 5, 1997 by and among the Borrowers, the Lenders and the Agents (as amended, the "Credit Agreement"). Defined terms used herein and not otherwise defined herein shall have the respective meanings given to them in the Credit Agreement. WHEREAS, the Borrowers, the Lenders and the Agents have agreed to amend the Credit Agreement on the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrowers, the Lenders and the Agents have agreed to the following amendments to the Credit Agreement. 1. Amendments to Credit Agreement. Effective as of December 31, 1998 and subject to the satisfaction of the conditions precedent set forth in Section 3 below, the Credit Agreement is hereby amended as follows: 1.1. Section 1.1 of the Credit Agreement is hereby amended to insert in the definition of "Agreed Currencies" the following immediately after the reference to "Dutch Guilders" the following: "and the euro for so long as the euro is and shall remain an Eligible Currency". 1.2. Section 1.1 of the Credit Agreement is hereby amended to insert in the definition of "Swing Line Lender" immediately after the phrase "other Lender" the following: "or any affiliate of such Lender". 1.3. Section 1.1 of the Credit Agreement is hereby amended to add alphabetically the following defined terms: "ELIGIBLE CURRENCY" means any currency other than Dollars with 2 respect to which the Agent has not given notice in accordance with Section 2.28 and that is readily available, freely traded, in which deposits are customarily offered to banks in the London interbank market, convertible into Dollars in the international interbank market and as to which an Equivalent Amount may be readily calculated. "'EURO' means the lawful currency of the member states of the European Community that adopted the single currency in accordance with the third stage of the Economic and Monetary Union in accordance with the treaty establishing the European Community as amended by the Treaty on European Union." "'NATIONAL CURRENCY UNIT' means the unit of currency (other than a euro unit) of each member state of the European Union that participates in the third stage of Economic and Monetary Union." "'YEAR 2000 ISSUES' means, with respect to any Person, anticipated costs, problems and uncertainties associated with the inability of certain computer applications and imbedded systems to effectively handle data, including dates, prior to, on and after January 1, 2000, as it affects the business, operations, and financial condition of such Person, and such Person's customers, suppliers and vendors." 1.4. Section 2.2 of the Credit Agreement is hereby amended by adding immediately at the end of the first sentence thereof, the following: "provided that each such Revolving Loan shall be made in the euro if such Revolving Loan would be capable of being made in the euro or the National Currency Unit requested by the applicable Borrower, unless otherwise consented to by the Agent." 1.5. Section 2.2.A of the Credit Agreement is hereby amended to delete the phrase "in Dollars only, to the applicable Borrower from time to time in an amount not to exceed" and to substitute therefor the following: "in an Agreed Currency, to the applicable Borrower from time to time in a Dollar Amount not to exceed". 1.6. Section 2.6 of the Credit Agreement is hereby amended to delete the phrase "The amount of the Aggregate Acquisition Facility Commitment" and to substitute therefor the following: "The Dollar Amount of the Aggregate Acquisition Facility Commitment". 1.7. Section 2.8(b) of the Credit Agreement is hereby amended to replace the pricing grid now contained therein with the following: -2- 3
APPLICABLE BASE APPLICABLE BASE APPLICABLE EUROCURRENCY APPLICABLE APPLICABLE SENIOR DEBT RATIO RATE MARGIN FOR RATE MARGIN FOR MARGIN FOR TRANCHE A TERM EUROCURRENCY COMMITMENT TRANCHE A TERM TRANCHE B TERM LOANS AND REVOLVING LOANS MARGIN FOR FEE LOANS AND LOANS AND APPLICABLE LETTER OF TRANCHE B REVOLVING LOANS CREDIT FEE TERM LOANS - ------------------------------------------------------------------------------------------------------------------------------ GREATER THAN OR EQUAL TO 4.0 TO 2.00% 2.50% 3.00% 3.50% 0.50% 1.0 - ------------------------------------------------------------------------------------------------------------------------------ LESS THAN 4.0 TO 1.0 AND GREATER THAN OR EQUAL TO 1.75% 2.25% 2.75% 3.25% 0.50% 3.5 TO 1.0 - ------------------------------------------------------------------------------------------------------------------------------ LESS THAN 3.5 TO 1.0 AND GREATER THAN OR EQUAL TO 1.50% 2.00% 2.50% 3.00% 0.50% 3.0 TO 1.0 - ------------------------------------------------------------------------------------------------------------------------------ LESS THAN 3.0 TO 1.0 AND GREATER THAN OR EQUAL TO 1.25% 1.75% 2.25% 2.75% 0.50% 2.5 TO 1.0 - ------------------------------------------------------------------------------------------------------------------------------ LESS THAN 2.5 TO 1.0 AND GREATER THAN OR EQUAL TO 1.00% 1.50% 2.00% 2.50% 0.50% 2.0 TO 1.0 - ------------------------------------------------------------------------------------------------------------------------------ LESS THAN 2.0 TO 1.0 0.75% 1.25% 1.75% 2.25% 0.375% - ------------------------------------------------------------------------------------------------------------------------------
1.8. Article V of the Credit Agreement is hereby amended to add a new Section 5.27 as follows: "5.27. Year 2000 Issues. The Borrowers have made a reasonable assessment of the Year 2000 Issues with respect to the Borrowers and have a program for remediating such Year 2000 Issues on a timely basis. Based on this assessment and program, the Borrowers do not anticipate any Material Adverse Effect on the Borrowers' operations, business or financial condition as a result of Year 2000 Issues." 1.9. Section 6.2 of the Credit Agreement is hereby amended to add a new Section O as follows: "(O) Year 2000 Issues. The Borrowers shall, and shall cause each of their -3- 4 respective Subsidiaries to, take all actions reasonably necessary to ensure that the Year 2000 Issues will not have a Material Adverse Effect. The Borrowers shall provide the Agent and each of the Lenders information regarding the Borrower's and its Subsidiaries' program to address Year 2000 Issues. The Borrower shall advise the Agent if any Year 2000 Issues will have or would reasonably be expected to have a Material Adverse Effect." 1.10. Section 6.3(D)(xi) of the Credit Agreement is hereby amended to delete the reference to "C $2,500,000" and to substitute therefor the following: "U.S. $5,500,000". 1.11. Section 6.3(E)(vi) of the Credit Agreement is hereby amended to delete the reference to "$500,000" and to substitute therefor the following: "$1,000,000". 1.12. Section 6.3(E)(viii) o the Credit Agreement is hereby amended to insert immediately after the reference to "AAS" the following: "and Valley". 1.13. Section 6.4(B) of the Credit Agreement is hereby amended to delete the reference to "$4,000,000" now contained therein and to substitute therefor: "$4,500,000". 1.14. Section 6.4(C) of the Credit Agreement is hereby amended to delete the phrase: "(5) 1.50 to 1.00 for each fiscal quarter thereafter until the Tranche B Loan Termination Date" and to substitute the following therefor: "(5) 1.20 to 1.00 for the fiscal quarters ending December 31, 1998 and March 31, 1999; "(6) 1.35 to 1.00 for the fiscal quarters ending June 30, 1999, September 30, 1999 and December 31, 1999; and "(7) 1.50 to 1.00 for each fiscal quarter thereafter until the Tranche B Loan Termination Date." 1.15. Section 6.4(E) of the Credit Agreement is hereby amended to delete the ratios listed on the table now contained therein for December 31, 1998 through December 31, 1999 and to substitute the following therefor for the periods ending on the dates set forth below: -4- 5
"Period Ending Maximum Leverage Ratio ---------------- ------------------------ December 31, 1998 5.00 to 1.00 March 31, 1999 5.00 to 1.00 June 30, 1999 4.75 to 1.00 September 30, 1999 4.50 to 1.00 December 31, 1999 4.50 to 1.00"
1.16. Section 6.4(F) of the Credit Agreement is hereby amended to delete the reference to "$10,000,000" now contained therein and to substitute therefor the following: "$12,500,000". 2. Waiver. The Borrowers have advised the Administrative Agent that the Borrowers may not have been in compliance with Section 6.3(D)(xi) of the Credit Agreement prior to the effective date of this Amendment and, accordingly, have requested that the Required Lenders waive any Default that would otherwise result from such noncompliance. By executing this Amendment No. 5 and Waiver, each Lender doing so hereby confirms its agreement to waive such noncompliance. 3. Conditions of Effectiveness. The effectiveness of this Amendment is subject to the conditions precedent that the Administrative Agent shall have received counterparts of this Amendment duly executed by the Borrowers, the Required Lenders and the Agents and payment of an amendment fee of 0.125% of the current Revolving Loan Commitment and the current outstanding balance of the Term Loans of each Lender that approves this Amendment and delivers a copy of its signed signature page of this Amendment to the Administrative Agent or its counsel by 5:00 p.m. (Chicago time), Friday, March 19, 1999. Upon the satisfaction of the foregoing conditions precedent, this Amendment shall become effective with respect to the amendments set forth in Section 1 above. 4. Representations and Warranties of the Borrowers. Each Borrower hereby represents and warrants as follows: (a) This Amendment and the Credit Agreement as amended hereby constitute legal, valid and binding obligations of the Borrowers and are enforceable against the Borrowers in accordance with their terms. (b) As of December 31, 1998, (i) there exists no Default or Unmatured Default under the Credit Agreement, as amended hereby, and (ii) the representations and warranties contained in Article V of the Credit Agreement, as amended hereby, are true and correct in all material respects, except for representations and warranties made with reference to a specific date which representations and warranties are true and correct in all material respects as of such date. -5- 6 5. Reference to and Effect on the Credit Agreement and Security Agreements. (a) Upon the effectiveness of Section 1 hereof, each reference in any Loan Document to such Loan Document or any other Loan Document shall mean and be a reference to the applicable Loan Document as amended hereby. (b) Except as specifically amended above, the Credit Agreement and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect and are hereby ratified and confirmed. (c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Agents or the Lenders, nor constitute a waiver of any provision of the Credit Agreement or any other documents, instruments and agreements executed and/or delivered in connection therewith. 6. Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of New York. 7. Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose. 8. Counterparts. This Amendment may be executed by one or more of the parties hereto on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above written. ADVANCED ACCESSORY SYSTEMS, LLC as a Borrower By: /s/ Terence C. Seikel ------------------------------- Name: Terence C. Seikel Title: Vice President SPORTRACK, LLC as a Borrower By: ADVANCED ACCESSORY SYSTEMS, LLC Its Manager By: /s/ Terence C. Seikel ------------------------------- Name: Terence C. Seikel Title: Vice President -6- 7 VALLEY INDUSTRIES, LLC as a Borrower By: ADVANCED ACCESSORY SYSTEMS, LLC Its Manager By: /s/ TERENCE C. SEIKEL ------------------------------- Name: TERENCE C. SEIKEL Title: Vice President BRINK INTERNATIONAL BV as a Borrower By: /s/ TERENCE C. SEIKEL ------------------------------- Name: TERENCE C. SEIKEL Title: Vice President BRINK BV as a Borrower By: /s/ TERENCE C. SEIKEL ------------------------------- Name: TERENCE C. SEIKEL Title: Vice President NBD BANK as the Administrative Agent and the Documentation and Collateral Agent, and as a Lender By: /s/ WILLIAM H. CANNEY ------------------------------- Name: WILLIAM H. CANNEY Title: Vice President THE CHASE MANHATTAN BANK as the Co-Administrative Agent and the Syndication Agent, and as a Lender By: /s/ ANDRIS G. KALNINS ------------------------------- Name: ANDRIS G. KALNINS Title: Vice President FIRST UNION NATIONAL BANK as a Lender By: /s/ KENT J. DAVIS ------------------------------- Name: KENT J. DAVIS Title: Vice President ---------------------------- THE BANK OF NOVA SCOTIA as a Lender By: /s/ F. C. H. ASHBY ------------------------------- Name: F. C. H. ASHBY Title: Senior Manager Loan operations -7- 8 COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH as a Lender By: ------------------------------- Name: Title: ---------------------------- By: ------------------------------- Name: Title: LASALLE NATIONAL BANK as a Lender By: ------------------------------- Name: Title: MICHIGAN NATIONAL BANK as a Lender By: ------------------------------- Name: Title: NATIONAL CITY BANK (CLEVELAND) as a Lender By: /s/ JOSHUA R. SOSLAND ------------------------------- Name: JOSHUA R. SOSLAND Title: Account Officer COMERICA BANK as a Lender By: /s/ NICHOLAS G. MESTER ------------------------------- Name: NICHOLAS G. MESTER Title: Vice President -8- 9 VAN KAMPEN PRIME RATE INCOME TRUST as a Lender By: /s/ JEFFEREY W. MAILLER ------------------------------- Name: JEFFEREY W. MAILLER Title: Senior Vice President and Director DEBT STRATEGIES FUND, INC. as a Lender By: ------------------------------- Name: Title: SENIOR HIGH INCOME PORTFOLIO, INC. as a Lender By: ------------------------------- Name: Title: DEEPROCK & CO. By: Eaton Vance Management as Investment Advisor By: --------------------------- Name: Title: SENIOR DEBT PORTFOLIO By: Boston Management and Research as Investment Advisor By: /s/ SCOTT H. PATE --------------------------- Name: SCOTT H. PATE Title: Vice President MERRILL LYNCH DEBT STRATEGIES PORTFOLIO By: Merrill Lynch Asset Management, L.P., as Investment Advisor By: /s/ PAUL TRAVERS --------------------------- NAME: PAUL TRAVERS -9- Title: Authorized Signatory 10 MERRILL LYNCH PRIME RATE PORTFOLIO By: Merrill Lynch Asset Management, L.P., as Investment Advisor By: /s/ PAUL TRAVERS --------------------------- Name: PAUL TRAVERS Title: Authorized Signatory -10- EX-12.1 7 STATEMENT RE: COMPUTATION OF RATIOS 1 ADVANCED ACCESSORY SYSTEMS, LLC EXHIBIT 12.1 - STATEMENT REGARDING COMPUTATION OF RATIOS - FIXED CHARGE COVERAGE RATIO FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (DOLLAR AMOUNTS IN THOUSANDS)
DECEMBER 31, 1998 1997 1996 -------- --------- ------- Pre-tax income (loss) from continuing operations .............. $ 813 $ 712 $ 6,409 Minority interest in the income of subsidiary with fixed charges ...... -- 97 69 ------- ------- ------- 813 809 6,478 ------- ------- ------- Fixed Charges: Interest expense and amortization of debt discount and premium on all indebtedness ...................... 18,633 12,627 4,312 Rentals (1) .......................... 1,317 751 223 ------- ------- ------- Total fixed charges .................. 19,950 13,378 4,535 ------- ------- ------- Earnings before income taxes, minority interest and fixed charges $20,763 $14,187 $11,013 ======= ======= ======= Ratio of earnings to fixed charges ... 1.04x 1.06x 2.43x ======= ======= =======
- ---------- (1) Amount included in fixed charges for rentals is considered by management to be a reasonable approximation of the interest factor. EX-24.1 8 POWER OF ATTORNEY 1 EXHIBIT 24.1 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, THAT THE UNDERSIGNED CONSTITUTES AND APPOINTS TERENCE C. SEIKEL HIS TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT, WITH FULL POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND STEAD, IN ANY AND ALL CAPACITIES, TO SIGN: (i) FORM 10-K BEING FILED ON OR ABOUT THE DATE HEREOF BY ADVANCED ACCESSORY SYSTEMS, LLC, (THE "COMPANY"), (ii) ANY OR ALL AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) TO THE COMPANY'S REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND DECLARED EFFECTIVE ON OR ABOUT JUNE 10, 1998, AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH (INCLUDING ANY AMENDMENTS THERETO), WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID ATTORNEY-IN-FACT AND AGENT FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE AS FULLY TO ALL INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEY-IN-FACT AND AGENT OR HIS SUBSTITUTE OR SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF. /s/ Marshall D. Gladchun ----------------------------- Name: Marshall D. Gladchun Dated: March 12, 1999 EX-24.2 9 POWER OF ATTORNEY 1 EXHIBIT 24.2 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, THAT THE UNDERSIGNED CONSTITUTES AND APPOINTS TERENCE C. SEIKEL HIS TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT, WITH FULL POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND STEAD, IN ANY AND ALL CAPACITIES, TO SIGN: (i) FORM 10-K BEING FILED ON OR ABOUT THE DATE HEREOF BY ADVANCED ACCESSORY SYSTEMS, LLC, (THE "COMPANY"), (ii) ANY OR ALL AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) TO THE COMPANY'S REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND DECLARED EFFECTIVE ON OR ABOUT JUNE 10, 1998, AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH (INCLUDING ANY AMENDMENTS THERETO), WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID ATTORNEY-IN-FACT AND AGENT FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE AS FULLY TO ALL INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEY-IN-FACT AND AGENT OR HIS SUBSTITUTE OR SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF. /s/ F. Alan Smith -------------------------- Name: F. Alan Smith Dated: March 15, 1999 EX-24.3 10 POWER OF ATTORNEY 1 EXHIBIT 24.3 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, THAT THE UNDERSIGNED CONSTITUTES AND APPOINTS TERENCE C. SEIKEL HIS TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT, WITH FULL POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND STEAD, IN ANY AND ALL CAPACITIES, TO SIGN: (i) FORM 10-K BEING FILED ON OR ABOUT THE DATE HEREOF BY ADVANCED ACCESSORY SYSTEMS, LLC, (THE "COMPANY"), (ii) ANY OR ALL AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) TO THE COMPANY'S REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND DECLARED EFFECTIVE ON OR ABOUT JUNE 10, 1998, AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH (INCLUDING ANY AMENDMENTS THERETO), WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID ATTORNEY-IN-FACT AND AGENT FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE AS FULLY TO ALL INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEY-IN-FACT AND AGENT OR HIS SUBSTITUTE OR SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF. /s/ Barry Banducci -------------------------- Name: Barry Banducci Dated: March 12, 1999 EX-24.4 11 POWER OF ATTORNEY 1 EXHIBIT 24.4 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, THAT THE UNDERSIGNED CONSTITUTES AND APPOINTS TERENCE C. SEIKEL HIS TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT, WITH FULL POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND STEAD, IN ANY AND ALL CAPACITIES, TO SIGN: (i) FORM 10-K BEING FILED ON OR ABOUT THE DATE HEREOF BY ADVANCED ACCESSORY SYSTEMS, LLC, (THE "COMPANY"), (ii) ANY OR ALL AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) TO THE COMPANY'S REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND DECLARED EFFECTIVE ON OR ABOUT JUNE 10, 1998, AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH (INCLUDING ANY AMENDMENTS THERETO), WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID ATTORNEY-IN-FACT AND AGENT FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE AS FULLY TO ALL INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEY-IN-FACT AND AGENT OR HIS SUBSTITUTE OR SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF. /s/ Gerard Jacobus Brink --------------------------- Name: Gerard Jacobus Brink Dated: March 24, 1999 EX-24.5 12 POWER OF ATTORNEY 1 EXHIBIT 24.5 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, THAT THE UNDERSIGNED CONSTITUTES AND APPOINTS TERENCE C. SEIKEL HIS TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT, WITH FULL POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND STEAD, IN ANY AND ALL CAPACITIES, TO SIGN: (i) FORM 10-K BEING FILED ON OR ABOUT THE DATE HEREOF BY ADVANCED ACCESSORY SYSTEMS, LLC, (THE "COMPANY"), (ii) ANY OR ALL AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) TO THE COMPANY'S REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND DECLARED EFFECTIVE ON OR ABOUT JUNE 10, 1998, AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH (INCLUDING ANY AMENDMENTS THERETO), WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID ATTORNEY-IN-FACT AND AGENT FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE AS FULLY TO ALL INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEY-IN-FACT AND AGENT OR HIS SUBSTITUTE OR SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF. /s/ Donald J. Hofmann -------------------------- Name: Donald J. Hofmann Dated: March 15, 1999 EX-24.6 13 POWER OF ATTORNEY 1 EXHIBIT 24.6 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, THAT THE UNDERSIGNED CONSTITUTES AND APPOINTS TERENCE C. SEIKEL HIS TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT, WITH FULL POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND STEAD, IN ANY AND ALL CAPACITIES, TO SIGN: (i) FORM 10-K BEING FILED ON OR ABOUT THE DATE HEREOF BY ADVANCED ACCESSORY SYSTEMS, LLC, (THE "COMPANY"), (ii) ANY OR ALL AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) TO THE COMPANY'S REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND DECLARED EFFECTIVE ON OR ABOUT JUNE 10, 1998, AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH (INCLUDING ANY AMENDMENTS THERETO), WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID ATTORNEY-IN-FACT AND AGENT FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE AS FULLY TO ALL INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEY-IN-FACT AND AGENT OR HIS SUBSTITUTE OR SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF. /s/ Roger T. Morgan -------------------------- Name: Roger T. Morgan Dated: March 23, 1999 EX-24.7 14 POWER OF ATTORNEY 1 EXHIBIT 24.7 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, THAT THE UNDERSIGNED CONSTITUTES AND APPOINTS TERENCE C. SEIKEL HIS TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT, WITH FULL POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND STEAD, IN ANY AND ALL CAPACITIES, TO SIGN: (i) FORM 10-K BEING FILED ON OR ABOUT THE DATE HEREOF BY ADVANCED ACCESSORY SYSTEMS, LLC, (THE "COMPANY"), (ii) ANY OR ALL AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) TO THE COMPANY'S REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND DECLARED EFFECTIVE ON OR ABOUT JUNE 10, 1998, AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH (INCLUDING ANY AMENDMENTS THERETO), WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID ATTORNEY-IN-FACT AND AGENT FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE AS FULLY TO ALL INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEY-IN-FACT AND AGENT OR HIS SUBSTITUTE OR SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF. /s/ Gerrit de Graaf -------------------------- Name: Gerrit de Graaf Dated: March 25, 1999 EX-27.1 15 FINANCIAL DATA SCHEDULE
5 1,000 YEAR DEC-31-1998 JAN-01-1998 DEC-31-1998 11,240 0 40,727 2,766 43,087 99,298 61,295 17,381 258,981 50,066 187,524 0 0 0 15,147 258,981 290,139 290,139 213,435 275,688 0 294 18,633 813 903 (90) 0 0 0 (90) 0 0
-----END PRIVACY-ENHANCED MESSAGE-----