-----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, NBZi8niyRJzb2WEYTtPd3tWm6z48xhpEylkJ4O4R4sb3YdGsO0NWNx1TuxB53x6q NYqBXod5BCSlHmdT9+DSTQ== 0000950136-01-501153.txt : 20010815 0000950136-01-501153.hdr.sgml : 20010815 ACCESSION NUMBER: 0000950136-01-501153 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: METALDYNE CORP CENTRAL INDEX KEY: 0000745448 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 382513957 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12068 FILM NUMBER: 1710373 BUSINESS ADDRESS: STREET 1: 21001 VAN BORN RD CITY: TAYLOR STATE: MI ZIP: 48180 BUSINESS PHONE: 3132747405 MAIL ADDRESS: STREET 1: 21001 VAN BORN ROAD CITY: TAYLOR STATE: MI ZIP: 48180 FORMER COMPANY: FORMER CONFORMED NAME: MASCO INDUSTRIES INC DATE OF NAME CHANGE: 19930629 FORMER COMPANY: FORMER CONFORMED NAME: MASCOTECH INC DATE OF NAME CHANGE: 19930629 10-Q 1 file001.txt QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR QUARTERLY PERIOD ENDED JUNE 30, 2001 COMMISSION FILE NUMBER 1-12068 METALDYNE CORPORATION - -------------------------------------------------------------------------------- (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 38-2513957 - -------------------------------------------------------------------------------- (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 47603 HALYARD DRIVE, PLYMOUTH, MICHIGAN 48170-2429 - -------------------------------------------------------------------------------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (734) 207-6200 - -------------------------------------------------------------------------------- (TELEPHONE NUMBER) 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, AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES [X] NO [ ] INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICAL DATE. SHARES OUTSTANDING AT CLASS JULY 31, 2001 ----- ------------- COMMON STOCK, PAR VALUE $1 PER SHARE 45,498,410 METALDYNE CORPORATION INDEX PAGE NO. -------- Part I. Financial Information Item 1. Financial Statements Consolidated Condensed Balance Sheet - June 30, 2001 and December 31, 2000 1 Consolidated Condensed Statements of Operations for the Three and Six Months Ended June 30, 2001 and 2000 2 Consolidated Condensed Statement of Cash Flows for the Six Months Ended June 30, 2001 and 2000 3 Notes to Consolidated Condensed Financial Statements 4-10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11-16 Part II. Other Information and Signature 17-18 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS METALDYNE CORPORATION CONSOLIDATED CONDENSED BALANCE SHEET JUNE 30, 2001 AND DECEMBER 31, 2000 (DOLLARS IN THOUSANDS)
JUNE 30, DECEMBER 31, ASSETS 2001 2000 ------ ---------- ------------ Current assets: Cash and cash investments $ 15,420 $ 26,320 Receivables 166,980 121,160 Inventories 178,960 199,490 Deferred and refundable income taxes 24,460 38,010 Prepaid expenses and other assets 36,460 48,540 ---------- ---------- Total current assets 422,280 433,520 Equity and other investments in affiliates 26,740 27,760 Property and equipment, net 888,190 901,300 Excess of cost over net assets of acquired companies 998,440 906,990 Notes receivable and other assets 107,160 93,920 ----------- ---------- Total assets $2,442,810 $2,363,490 ========== ========== LIABILITIES Current liabilities: Accounts payable $ 201,390 $ 155,020 Accrued liabilities 116,470 146,640 Current maturities, long-term debt 44,860 46,350 ---------- ---------- Total current liabilities 362,720 348,010 Subordinated debentures 305,000 305,000 Other long-term debt 1,175,130 1,180,940 Deferred income taxes 125,170 124,680 Other long-term liabilities 112,190 108,920 ---------- ---------- Total liabilities 2,080,210 2,067,550 ---------- ---------- Redeemable preferred stock, 545,154 shares Outstanding 52,700 33,370 Redeemable restricted common stock 44,720 43,420 Less: Restricted stock awards (28,190) _ (33,820) ---------- - -------- Total redeemable stock 69,230 42,970 ---------- ---------- SHAREHOLDERS' EQUITY Preferred stock (non-redeemable), $1 par: Authorized: 25 million; Outstanding: None --- --- Common stock, $1 par: Authorized: 250 million; Outstanding: 42.8 million and 38.7 million 42,840 38,670 Paid-in capital 61,510 --- Retained earnings 246,670 254,690 Accumulated other comprehensive loss (57,650) (40,390) ---------- ---------- Total shareholders' equity 293,370 252,970 ---------- ---------- Total liabilities, redeemable stock and shareholders' equity $2,442,810 $2,363,490 ========== ==========
The accompanying notes are an integral part of the consolidated condensed financial statements. 1 METALDYNE CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED SIX MONTHS ENDED --------------------- --------------------- JUNE 30 JUNE 30 --------------------- --------------------- 2001 2000 2001 2000 --------- --------- --------- --------- Net sales $ 572,780 $ 442,310 $1,128,910 $ 901,710 Cost of sales (453,770) (328,230) (899,620) (668,230) ---------- --------- ---------- --------- Gross profit 119,010 114,080 229,290 233,480 Selling, general and administrative expenses (66,920) (56,990) (136,460) (113,160) Charge on disposition of business (6,020) --- (6,020) --- --------- --------- ---------- ---------- Operating profit 46,070 57,090 86,810 120,320 --------- --------- --------- --------- Other income (expense), net: Interest expense (33,260) (21,970) (71,660) (43,780) Other, net (10,900) 8,130 (17,880) 9,390 ---------- --------- ---------- --------- (44,160) (13,840) (89,540) (34,390) ---------- --------- ---------- --------- Income (loss) before income taxes 1,910 43,250 (2,730) 85,930 Income taxes 2,510 17,070 2,950 33,930 --------- --------- --------- --------- Net income(loss) (600) 26,180 (5,680) 52,000 Preferred stock dividends 1,170 --- 2,340 --- --------- --------- --------- --------- Earnings (loss) attributable to common stock $ (1,770) $ 26,180 $ (8,020) $ 52,000 ========= ========= ========== ========= Basic earnings (loss) per share $(.04) $ .64 $(.19) $1.27 ===== ===== ===== ===== Diluted earnings (loss) per share $(.04) $ .51 $(.19) $1.02 ===== ===== ===== ===== Cash dividends declared per share $ -- $ .08 $ -- $ .16 ===== ===== ===== ===== Cash dividends paid per share $ -- $ .08 $ -- $ .16 ===== ===== ===== =====
The accompanying notes are an integral part of the consolidated condensed financial statements. 2 METALDYNE CORPORATION CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000 (DOLLARS IN THOUSANDS)
SIX MONTHS ENDED JUNE 30 ---------------------- 2001 2000 --------- --------- CASH FROM (USED FOR): OPERATIONS: Net cash from earnings $ 74,210 $ 103,860 Change in operating assets and liabilities, net 45,110 51,180 Other, net (2,670) (3,160) --------- --------- Net cash from operating activities 116,650 151,880 --------- --------- FINANCING: Payment of debt (76,780) (133,950) Increase in debt 69,490 40,460 Payment of stock dividends (1,610) (7,110) Proceeds from interest rate swap settlement -- 15,820 Other, net (400) (5,030) --------- --------- Net cash (used for) financing activities (9,300) (89,810) --------- --------- INVESTMENTS: Proceeds from sale and sale/leaseback of fixed assets 36,440 -- Capital expenditures (64,790) (53,970) Cash received from sale of businesses, net -- 3,200 Acquisition of businesses, net of cash acquired (83,320) (21,090) Other, net (6,580) 8,140 --------- --------- Net cash (used for) investing activities (118,250) (63,720) --------- --------- CASH AND CASH INVESTMENTS: (Decrease) for the six months (10,900) (1,650) At January 1 26,320 4,490 --------- --------- At June 30 $ 15,420 $ 2,840 ========= ========= SUPPLEMENTAL CASH FLOW INFORMATION: Net cash paid during the period for: Interest $ 72,710 $ 39,930 ========= ========= Income taxes $ (9,750) $ (3,910) ========= =========
The accompanying notes are an integral part of the consolidated condensed financial statements. 3 METALDYNE CORPORATION NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 1. Metaldyne Corporation (the "Company" or "Metaldyne") is a leading global diversified industrial manufacturer of highly engineered products for the transportation, industrial and consumer markets. We operate through two business groups - Metal Forming, which accounts for approximately two-thirds of our sales, and Diversified Industrial Products, which accounts for the remaining one-third of our sales. Products include metal formed and precision-engineered components and modular systems used in vehicle engine, chassis and steering components, transmission and drivetrain applications, specialty fasteners, towing systems, packaging and sealing products and other industrial products. The Company serves a broad range of over 150 automotive and industrial customers. In the opinion of the Company, the accompanying unaudited consolidated condensed financial statements contain all adjustments, which are normal and recurring in nature, necessary to present fairly its financial position as at June 30, 2001 and the results of operations for the three and six months ended June 30, 2001 and 2000 and cash flows for the six months ended June 30, 2001 and 2000. Certain amounts for the period ended June 30, 2000 have been reclassified to conform to the presentation adopted in 2001. The results of operations for the three and six month periods ended June 30, 2001 are not necessarily indicative of the results for the full year. 2. On June 22, 2001, the Company purchased from its controlling shareholder, Heartland Industrial Partners ("Heartland"), Global Metal Technologies, Inc. ("GMTI"). GMTI is a fully integrated technology leader in aluminum die-casting with leading market positions in transmission, engine, chassis and steering components. In exchange for all of the shares held by Heartland in GMTI, the Company issued common shares valued at approximately $45.4 million, which was equal to Heartland's investment in GMTI on the date of transfer. Also as part of the transaction the Company issued common shares valued at $20 million and $18.5 million of redeemable Class B preferred stock in exchange for interests in GMTI held by its former shareholders. The redeemable Class B preferred shares issued are mandatorily redeemable on June 15, 2013. The series B preferred stockholders are entitled to receive, when, as and if declared by the Company's Board of Directors, cumulative semi-annual cash dividends at a rate of 11.5 percent per annum. In addition to securities issued, Metaldyne paid approximately $83 million, net of cash acquired, for the acquisition of GMTI. This acquisition was financed through a combination of borrowings under the Company's Term Loan C facility, revolving credit facility and proceeds from the sale of accounts receivable pursuant to the accounts receivable facility. GMTI was originally acquired by the Company's controlling shareholder, Heartland, on January 4, 2001 for a cash purchase price of $25 million, plus debt assumed. This transaction resulted in approximately $100 million of goodwill, which is being amortized over a period of 40 years. The purchase price allocations are preliminary, and as such are estimates. Such allocations could change upon the completion of asset valuations, which are on-going as of the date of this filing. Our June 22, 2001 acquisition of GMTI has been accounted for in a manner similar to a pooling of interests since these businesses were under common control. Our results of operations for 2001 have been adjusted to include GMTI from January 4, 2001 forward. The impact on previously reported amounts for the first quarter include sales of approximately $50 million and a loss before taxes of approximately $5 million. 4 METALDYNE CORPORATION NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED) 3. In June 1998, the Financial Accounting Standards Board ("FASB") issued the Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities." SFAS 133 requires that all derivatives be recognized as either assets or liabilities in the consolidated balance sheet and be measured at fair value, and changes in the fair value be recorded in earnings, unless they are designated as hedges of an underlying transaction. The Company adopted this standard, as amended by SFAS 137 and 138, effective January 1, 2001. The adoption of this standard did not have a material impact on the financial position or results of operations of the Company. During the first quarter of 2001, the Company entered into interest rate protection agreements with various financial institutions to hedge a portion of its interest rate risk related to its term loan borrowings under its Credit Facility. These agreements include two interest rate collars with a term of three years, a total notional amount of $200 million and an interest rate cap and floor of 7% and approximately 4.5%,respectively, and three interest rate caps at 7% with a total notional amount of $376 million. The agreements have been designated as cash flow hedging instruments and the effect of marking these contracts to fair value has been recorded in other comprehensive income as presented in Note 10. It is the policy of the Company not to enter into derivative instruments for speculative purposes. 4. In September 2000, the FASB issued the Statement of Financial Accounting Standards No. 140 ("SFAS 140"), "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities - a replacement of FASB Statement No. 125." The new standard carries forward some of the provisions of SFAS 125, but modifies the method of accounting for securitizations and other transfers of financial assets and collateral, in addition to requiring additional disclosures. SFAS 140 is effective for reporting periods after March 31, 2001, with the exception of certain collateral and disclosure provisions, which are effective for fiscal years ending after December 15, 2000. The Company adopted SFAS 140 at December 31, 2000. The adoption of SFAS 140 did not have a material impact on the financial position or results of operations of the Company. In 2000, the Company entered into an arrangement to sell, on an ongoing basis, the trade accounts receivable of substantially all domestic business operations to MTSPC, Inc. ("MTSPC") a wholly owned subsidiary of the Company. MTSPC from time to time may sell an undivided fractional ownership interest in the pool of receivables up to approximately $225 million to a third party multi-seller receivables funding company. The net proceeds of sale are less than the face amount of accounts receivable sold by an amount that approximates the purchaser's financing costs amounting to a total of $ 5.8 million in 2001 and is included in other expense in the income statement. At June 30, 2001, a total of approximately $195 million of receivables were sold and the Company retained a subordinated interest of approximately $59 million, which was included in the receivables balance. The proceeds from the sale of accounts receivable, net for the six months ended June 30, 2001 was $44.7 million. The retained subordinated interest is discounted at a rate that approximates fair value given the short-term nature of the receivables balance. 5 METALDYNE CORPORATION NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED) 5. As a result of the recapitalization in November 2000, the acquisition of Simpson Industries in December 2000 and the creation of a new executive management team and Board of Directors, the Company developed and implemented in 2001 a new operating and internal reporting structure. During the second quarter of 2001, the Company acquired GMTI and realigned its operating and internal reporting structure. Accordingly, the segment information for the prior year and 2001 has been restated to conform to the current structure. The Company has defined a segment as a component, with business activity resulting in revenue and expense, which has separate financial information evaluated regularly by the Company's chief operating decision maker in determining resource allocation and assessing performance. The Company operates in two operating groups - Metal Forming and Diversified Industrial Products. The Metal Forming Group consists of one operating segment which manufactures a broad range of engineered metal products used primarily in automotive applications that combines capabilities in engineering, design, machining and assembly. The Metal Forming Group's sales are primarily to light vehicle OEMs and component assemblers. The Metal Forming Group's products include cold, warm and hot forged products, powdered metal products, tubular fabricated products and light metal castings used in engines, transmissions and drivetrains. Our Diversified Industrial Products Group is comprised of three operating segments: TRANSPORTATION ACCESSORIES: Manufactures towing and related accessories. The towing and accessories products include trailer hitches, hitch mounted accessories, jacks, couplers and winches, roof racks and related electrical products. SPECIALTY FASTENERS: Manufactures standard and custom-designed ferrous, nonferrous and special alloy fasteners for the building construction, farm implement, medium-and heavy-duty truck, appliance, aerospace, electronics and other industries. Specialty fasteners are sold through our own sales personnel and independent sales representatives to both distributors and manufacturers in these industries. INDUSTRIAL PRODUCTS: Manufactures closures and dispensing products, gaskets, insulation products, compressed gas cylinders and precision cutting tools for a wide variety of customers in the chemical, refining, container, construction and other industries. 6 METALDYNE CORPORATION NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED) Segment activity for the three and six months ended June 30, 2001 and 2000 are as follows: Three Months Ended Six Months Ended June 30 June 30 ------------------- ------------------- 2001 2000 2001 2000 -------- -------- -------- -------- SALES - ----- Metal Forming Group $377,730 $221,250 $734,900 $457,510 -------- -------- -------- -------- Transportation Accessories 77,150 84,420 148,420 164,930 Industrial Products 79,750 84,230 166,120 171,350 Specialty Fasteners 38,150 52,410 79,470 107,920 -------- -------- -------- -------- Diversified Industrial Group 195,050 221,060 394,010 444,200 -------- -------- -------- -------- Total $572,780 $442,310 $1,128,910 $901,710 ======== ======== ========== ======== EBITDA - ------ Metal Forming Group $ 65,560 $ 39,680 $114,840 $ 85,400 --------- -------- -------- -------- Transportation Accessories 14,380 17,230 26,700 33,530 Industrial Products 14,840 17,620 32,780 37,910 Specialty Fasteners 4,360 9,290 9,230 18,440 -------- --------- -------- -------- Diversified Industrial Group 33,580 44,140 68,710 89,880 -------- -------- -------- -------- Total $ 99,140 $ 83,820 $183,550 $175,280 ======== ======== ======== ======== OPERATING PROFIT - ---------------- Total EBITDA for reportable segments $ 99,140 $ 83,820 $183,550 $175,280 Depreciation and amortization in operating profit (32,560) (22,070) (65,390) (43,970) Charge on disposition of business (6,020) --- (6,020) --- Other adjustments (14,490) (4,660) (25,330) (10,990) --------- -------- ------- ------- Total operating profit $ 46,070 $ 57,090 $ 86,810 $120,320 ======== ======== ======== ======== OTHER ADJUSTMENTS - ----------------- Other adjustments are general corporate costs and costs and expenses not allocated to segments for internal reporting purposes. In 2001, these include non-recurring costs associated with the integration of an acquisition and approximately $9.3 million of costs in respect of newly acquired Machining and Assembly operations which are not allocated to the specific segment for internal reporting purposes. 7 METALDYNE CORPORATION NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED) 6. The following are reconciliations of the numerators and denominators used in the computations of basic and diluted earnings (loss) per share: Three Months Ended Six Months Ended June 30 June 30 ------------------- ------------------- 2001 2000 2001 2000 -------- -------- -------- -------- Weighted average number of shares outstanding 42,840 41,000 42,840 41,000 ======== ======== ======== ======== Net income(loss) $ (600) $ 26,180 $ (5,680) $ 52,000 Less: Preferred stock dividends 1,170 --- 2,340 --- -------- -------- -------- -------- Earnings (loss) used for basic earnings per share computation $ (1,770) $ 26,180 $ (8,020) $ 52,000 ======== ======== ======== ======== Basic earnings (loss) per share $ (.04) $ .64 $ (.19) $ 1.27 ======== ======== ======== ======== Total shares used for basic earnings per share computation 42,840 41,000 42,840 41,000 Dilutive securities: Stock options --- 340 --- 360 Convertible debentures --- 9,840 --- 9,840 Contingently issuable shares --- 4,580 --- 4,550 -------- -------- -------- -------- Total shares used for diluted earnings per share computation 42,840 55,760 42,840 55,750 ======== ======== ======== ======== Earnings (loss) used for basic earnings per share computation $ (1,770) $ 26,180 $ (8,020) $ 52,000 Add back of debenture interest --- 2,340 --- 4,680 -------- -------- -------- -------- Earnings (loss)used for diluted earnings per share computation $ (1,770) $ 28,520 $ (8,020) $ 56,680 ========= ======== ========= ======== Diluted earnings (loss) per share $ (.04) $ .51 $ (.19) $ 1.02 ======== ======== ======== ======== Diluted earnings per share reflect the potential dilution that would occur if securities or other contracts to issue common stock were converted or exercised into common stock. Contingently issuable shares, approximately 2.6 million restricted common stock, did not have a dilutive effect on earnings per share at June 30, 2001. 7. In December 2000, the Company acquired Simpson Industries, Inc. The acquisition was accounted for as a purchase with excess purchase price over the estimated fair value of net assets acquired of approximately $150 million amortized over 40 years. The purchase price allocations are preliminary, and as such are estimates. Such allocations could change upon the completion of asset valuations, which are on-going as of the date of this filing. 8 METALDYNE CORPORATION NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONCLUDED) In June 2001 the Company acquired GMTI which has been accounted for in a manner similar to a pooling of interest since it was acquired from Heartland Industrial Partners, the Company's controlling shareholder and the controlling shareholder of GMTI. The following pro forma results of operations reflect these transactions as if they had occurred on January 1, 2000. The pro forma data does not purport to be indicative of the results that would actually have been reported if the transaction had occurred on such date (unaudited, in thousands). Three Months Ended Six Months Ended June 30, 2000 June 30, 2000 ------------------ ---------------- Net sales $641,550 $1,306,200 Operating profit $ 71,650 $ 149,480 Net income $ 29,320 $ 58,160 8. Inventories by component are as follows (in thousands): June 30, December 31, 2001 2000 -------- -------- Finished goods $ 72,980 $ 90,790 Work in process 49,230 46,390 Raw materials 56,750 62,310 -------- -------- $178,960 $199,490 ======== ======== 9. Property and equipment, net reflects accumulated depreciation of $398 million and $367 million as at June 30, 2001 and December 31, 2000, respectively. 10. The Company's total comprehensive income for the period was as follows (in thousands): Three Months Ended Six Months Ended June 30 June 30 ------------------ ------------------- 2001 2000 2001 2000 ------- ------- -------- -------- Net income(loss) $ (600) $26,180 $ (5,680) $ 52,000 Other comprehensive loss (3,780) (3,740) (17,260) (8,260) ------- ------- -------- -------- Total comprehensive (loss) income $(4,380) $22,440 $(22,940) $ 43,740 ======= ======= ======== ======== The majority of other comprehensive loss relates to foreign currency translation. 9 METALDYNE CORPORATION NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED) 11. In June 2001, the Financial Accounting Standards Board approved Statements of Financial Accounting Standards No. 141 "Business Combinations" ("SFAS 141") and No. 142 "Goodwill and Other Intangible Assets" ("SFAS 142") which are effective July 1, 2001 and January 1, 2002, respectively, for the Company. SFAS 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. Under SFAS 142, amortization of goodwill, including goodwill recorded in past business combinations, will discontinue upon adoption of this standard. In addition, goodwill recorded as a result of business combinations completed during the six-month period ending December 31, 2001 will not be amortized. All goodwill and intangible assets will be tested for impairment in accordance with the provisions of the Statement. The Company is currently reviewing the provision of SFAS 141 and 142 and assessing the impact of adoption. 12. The Company announced the closure of its heat treating facility in the second quarter 2001 resulting in a pre-tax charge of approximately $6 million principally related to the impairment of long-lived assets and severance costs. Accrued costs for severance related to the recapitalization of the Company at January 1,2001 were approximately $13 million. Payments and adjustments to accrued estimates approximated $3 million and the ending accrual was approximately $10 million. 10 METALDYNE CORPORATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The Company has established Earnings Before Interest Taxes Depreciation and Amortization ("EBITDA") as an indicator of our operating performance and as a measure of our cash generating ability. EBITDA does not represent and should not be considered as an alternative to net income, operating income, net cash provided by operating activities or any other measure for determining operating performance or liquidity that is calculated in accordance with generally accepted accounting principles. Further, EBITDA, as we calculate it, may not be comparable to calculations of similarly titled measures by other companies. On June 22, 2001 we completed the acquisition of Global Metal Technologies, Inc. ("GMTI"). GMTI is a fully integrated technology leader in aluminum die-casting with leading market positions in transmission, engine, chassis and steering components and is also the largest independent thin walled casting company in North America. The acquisition of GMTI has been accounted for in a manner similar to a pooling of interests since it was acquired from Heartland Industrial Partners, our controlling shareholder and the controlling shareholder of GMTI. The results of operations for 2001 include GMTI from January 4, 2001. Prior years have not been restated. The combination with Machining and Assembly and the anticipated acquisition of GMTI has resulted in a number of corporate initiatives aimed at integrating the combined entity around a new strategic direction. The activities include combining operating entities in both the Specialty Fastener and Transportation Accessories segments, closure of non-core operations and staffing reductions. Additionally, we have undertaken several projects aimed at integrating the three companies financial and information technology systems. These actions while expected to offer future benefits, resulted in one-time costs of approximately $8 million in the second quarter of 2001 including approximately $6 million related to a facility closure. QUARTER ENDED JUNE 30, 2001 COMPARED WITH QUARTER ENDED JUNE 30, 2000 Metaldyne sales for the second quarter of 2001 increased 29.6 percent to approximately $573 million as compared with approximately $442 million for the same period last year. This increase was due to our acquisition of Simpson Industries (referred to as "Machining and Assembly") in December 2000 and the aforementioned acquisition of GMTI. These two acquisitions accounted for $173 million of sales in the second quarter. The increase was partially offset by a sales decline of approximately $17 million related to our Metal Formed Products, which was principally the result of lower levels of domestic vehicle production and the mix of light truck versus passenger car production. In addition, the Transportation Accessories, Specialty Fastener and Industrial Products segments experienced a sales decline of approximately $26 million related to softness in their respective markets. 11 METALDYNE CORPORATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Gross profit increased to approximately $119 million for the quarter ended June 30, 2001 as compared to $114 million for the quarter ended June 30, 2000. This increase was the result of the acquisition of Machining and Assembly and GMTI which contributed approximately $23 million of gross profit offset by an approximate decrease of $18 million related to Metal Forming, Transportation Accessories, Specialty Fasteners and Industrial Products segments. The gross profit margin decreased from 25.8% in the year ago quarter to 20.8% in the quarter ended June 30, 2001. This decrease was partially caused by the inclusion of GMTI and Machining and Assembly, which had lower margins as a percent of 2001 sales than the margins of Metaldyne in the year ago quarter. In addition, the decrease in sales volume in most of the Company's businesses resulted in a larger percentage impact on margins (gross margin, operating margin and EBITDA margin), as a result of fixed costs not decreasing proportionately with sales. This effect is referred to below as the contribution margin effect. EBITDA for our Metal Forming Group segment was approximately $66 million in second quarter 2001 as compared to approximately $40 million in 2000. The change is the result of an approximate $25 million increase in segment EBITDA from the Machining and Assembly and GMTI acquisitions. The Transportation Accessories segment experienced a 17 percent decline in EBITDA from the comparable quarter in 2000 as a result of an 8.6 percent decline in sales. The decrease in EBITDA approximated the contribution margin effect of the sales decline, as the Transportation Accessories segment has a higher contribution margin than the Metal Forming Group segment. EBITDA for the Specialty Fasteners segment was approximately $4 million in the second quarter 2001 as compared to approximately $9 million in 2000. This decrease is the result of the $14 million reduction in sales, and costs and expenses, of approximately $1 million, associated with corporate initiatives to streamline operations. EBITDA for the Industrial Products segment declined by 16 percent to approximately $15 million in the second quarter of 2001 as compared to approximately $18 million in second quarter 2000. This decrease in EBITDA is a result of the $4 million sales decline and a change in product mix as compared with the prior year. Selling, general and administrative costs as a percent of sales was 11.7 percent in the second quarter 2001 as compared with 12.9 percent in the same period last year. The decline in selling, general and administrative costs as a percent of sales was impacted by the acquisition of Machining and Assembly and GMTI which have lower selling, general and administrative costs as a percent of sales than the Company. SIX MONTHS ENDED JUNE 30, 2001 COMPARED WITH SIX MONTHS ENDED JUNE 30, 2000 Metaldyne sales for the six months ended June 30, 2001 increased 25.2 percent to $1.13 billion as compared with $902 million in 2000. This increase was due to our acquisition of Machining and Assembly and GMTI which accounted for approximately $334 million of sales in the first six months of 2001. This increase was partially offset by a sales decline of $57 million related to our Metal Forming Group, which was principally the result of lower levels of domestic vehicle production and the mix of light-truck versus passenger car production. In addition, the Transportation Accessories, Specialty Fasteners and Industrial Products segments experienced a sales decline of approximately $50 million including approximately $7 million related to a plant closure in 2000 in the Specialty Fasteners segment. 12 METALDYNE CORPORATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Gross profit decreased to $229 million for the six months ended June 30, 2001 as compared with $233 million for the comparable period in 2000. The acquisition of Machining and Assembly and GMTI contributed approximately $37 million which was offset by an approximate $15 million decline in gross profit related to Metal Forming. In addition, Transportation Accessories, Specialty Fasteners and Industrial Products had an approximate combined $24 million decline in gross profit related to softness in their respective markets. The gross profit margin decreased from 25.9% in the six months ended June 30, 2000 to 20.3% in the six months ended June 30, 2001. This decrease was partially caused by the inclusion of Machining and Assembly and GMTI, which have lower margins as a percent of 2001 sales than the margins of Metaldyne one year ago. In addition, the decrease in sales volume in most of the Company's businesses resulted in a larger percentage impact on margins. EBITDA for our Metal Forming Group segment was approximately $115 for the six months ended June 30, 2001 as compared to approximately $85 million in 2000. The change is comprised of an approximate $42 million increase in segment EBITDA from the Machining and Assembly and GMTI acquisitions and an approximate $12 million decline principally as a result of the $57 million decline in sales noted above. The EBITDA decline approximated the contribution margin effect of the sales decline. The Transportation Accessories segment experienced a 20 percent decline in EBITDA from the comparable six month period in 2000 as a result of the $17 million sales decline. The decrease in EBITDA approximated the contribution margin effect of the sales decline, as the Transportation Accessories segment has a higher contribution margin than the Metal Forming Group segment. EBITDA for the Specialty Fasteners segment was approximately $9 million for the six months ended June 30, 2001 compared to $18 million for the same six month period in 2000. This decrease is the result of the $28 million reduction in sales and approximates the contribution margin effect of the sales decline and costs and expenses associated with corporate initiatives to streamline operations. EBITDA for the Industrial Products segment declined by 14 percent to approximately $33 million for the six months ended June 30, 2001 compared with 2000. This decrease in EBITDA is a result of the sales decline in this segment and a change in product mix as compared to prior year. Selling, general and administrative costs as a percent of sales was 12.1% for the six months ended June 30, 2001 as compared with 12.6 percent for the six months ended June 30, 2000. The decline in selling, general and administrative costs as a percent of sales was impacted by the acquisition of Machining and Assembly and GMTI which have lower selling, general and administrative costs as a percent of sales than the Company. For the quarter and for the six months ended June 30, 2001 interest expense was $33 million and $72 million, respectively. Interest expense for the comparable quarter and six months in 2000 was approximately $22 million and $44 million, respectively. The increase in interest expense is the result of debt incurred to finance the recapitalization of the Company in November 2000 and the acquisition of Machining and Assembly and GMTI. The debt also carries increased interest rates under our credit facilities. Other expense for the quarter and six months ended June 30, 2001 was approximately $11 million and $18 million respectively as compared to other income of approximately $8 million and $9 million, respectively for the comparable period in 2000. The change was principally the result of expenses in connection with the receivables securitization and the elimination of equity income from affiliates due to the sale of all our equity affiliates, except one, in connection with the recapitalization and higher amortization of deferred financing expense. 13 METALDYNE CORPORATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) The provision for income taxes in the second quarter was $2.5 million as compared to $17.1 million for the quarter ended June 30, 2000. The provision for the six months ended June 30, 2001 is $3.0 million as compared to $33.9 million for the comparable period in 2000. The June 30, 2001 provision was computed under the discrete method of accounting due to the variance between the second quarter earnings and the projected earnings for the year. The tax provision in both periods reflects the impact of non-deductible goodwill from acquisitions, with the impact of this item more pronounced in the current year due to the lower level of pre-tax income. The expense is also impacted by foreign operations which contribute a higher proportion of pre-tax income in the current year than in 2000 which is taxed at higher rates than the U.S. Statutory rates. LIQUIDITY AND FINANCIAL CONDITION Cash provided by operating activities for the first six months of 2001 was $117 million as compared with $152 million in 2000. Capital expenditures were $65 million for the first six months of 2001 as compared with $54 million in 2000. The reduction in net income for the six months ended June 30, 2001 was the principal reason for the reduction in net cash from earnings in 2001 compared to the prior year. Receivables increased more in 2001 than in the comparable period of 2000, principally as the result of the inclusion of Machining and Assembly and GMTI sales in the current quarter. This increase was partially offset by the sale of additional receivables pursuant to a receivables securitization program in 2001. Prepaid expenses and accrued liabilities were each impacted by the payment of approximately $14 million in 2001 relating to options cancelled as part of the recapitalization in which the required cash was escrowed and included in prepaid assets at December 31, 2000, and the corresponding liability included in accrued liabilities. Cash flow also benefited from the collection of approximately $15 million of tax refunds in the first six months of 2001 compared to approximately $10 million of tax refunds in the comparable period ended June 30, 2000. Capital expenditures increased $11 million compared to 2000, principally due to the inclusion of capital expenditures of the Machining and Assembly and GMTI operations. The Company achieved a net reduction in debt from March 31, 2001 of approximately $31 million net of $58 million in borrowings related to GMTI acquisition. As a result of the recapitalization and the Machining and Assembly and GMTI acquisitions, we are highly leveraged and we have significantly increased our interest expense relative to historical levels. We will need to dedicate significant portions of cash flow to debt service obligations. In addition, we expect that capital expenditure requirements in calendar year 2001 will be approximately $133 million. We may incur material amounts of additional debt and further burden cash flow in pursuit of acquisition strategies. Capital expenditures in calendar year 2000 were approximately $107 million. We believe that our liquidity and capital resources including anticipated cash flow from operations will be sufficient to meet debt service, capital expenditure and other short-term and long-term obligations and needs, but we are subject to unforeseeable events and the risk that we are not successful in implementing our business strategies. We will also seek to extend the average maturities of debt through the issuance of long-term debt securities to the extent market conditions permit us to increase our financial flexibility and ability to pursue our business strategies. 14 METALDYNE CORPORATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) MARKET TRENDS Our sales for use in the OEM segments of the automotive industry accounted for approximately one-half of our annual 2000 net sales. The automotive industry is highly cyclical, is dependent on consumer spending, interest rates and consumer confidence and is subject to, among other things, general economic conditions and the impact of international trade. There are signs of increasing weakness in the economy generally. In addition, recently reported results from North American automotive manufacturers reflect weakness in demand for their products which may continue throughout 2001 and beyond. In addition, a portion of net sales are derived from sales of our products manufactured for SUV's and light trucks, which have recently reversed their positive sales trends of the past several years. There can be no assurance that sales of these vehicles will not continue to decline or that pricing pressure from customers or competitors will not have an impact on future performance. FORWARD-LOOKING STATEMENTS This discussion and other sections of this report contain statements reflecting the Company's views about its future performance and constitute "forward-looking statements." These views involve risks and uncertainties that are difficult to predict and may cause the Company's actual results to differ significantly from the results discussed in such forward-looking statements. Readers should consider that various factors may affect our ability to attain the projected performance, including: o Leverage; Ability to Service Debt - We may not be able to manage our business as we might otherwise do so due to our high degree of leverage. o Liquidity and Capital Resources - If we are unable to raise junior capital, our liquidity and business strategies will be adversely impacted. o Challenges of Acquisition Strategy - We may not be able to identify attractive acquisition candidates, successfully integrate our acquired operations or realize the intended benefits of our acquisitions. o Substantial Capital Expenditure Requirements - If we are unable to meet future capital requirements, our business will be adversely affected. o Substantial Restrictions and covenants - Restrictions in our credit facility limit our ability to take certain actions. o Dependence on Automotive Industry and Industry Cyclicality - The industries in which we operate are dependent upon the economy and are cyclical. o Dependence on Third-Party Suppliers and Manufacturers - The loss of a substantial number of our suppliers could affect our financial health. o Our Industries are Highly Competitive - Recent trends among our customers will increase competitive pressures in our businesses. 15 METALDYNE CORPORATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONCLUDED) o Dependence on Key Personnel and Relationships - We depend on the services of certain key individuals and relationships, the loss of which would materially harm us. o Labor Relations - A portion of our workforce is unionized. o Labor Stoppages Affecting OEMs - Slowdowns, strikes or similar actions could have a material adverse effect on our results of operations. o International Sales - A growing portion of our revenue may be derived from international sources, which presents separate uncertainty for us. o Product Liability - Our businesses expose us to product liability risks that could materially and adversely impact us. o Environmental Matters - We have been and may be subject in the future to potential exposure to environmental liabilities. o Government Regulation - Fastener Quality Act. o Control by Principal Stockholder - We are controlled by Heartland Industrial Partners, whose interests in our business may be different than yours. o Terms of Shareholders Agreement - Provisions of a shareholders agreement impose significant operating and financial restrictions on our business. All statements, other than statements of historical fact included in this quarterly report, regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this quarterly report, the words, "will," "believe," "anticipate," "intend," "estimate," "expect," "project" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. All forward-looking statements speak only as of the date of this quarterly report. You should not place undue reliance on these forward-looking statements. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make in this quarterly report are reasonable, we can give no assurance that these plans, intentions or expectations will be achieved. The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. 16 PART II. OTHER INFORMATION METALDYNE CORPORATION Items 1, 2, 3 and 5 are not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The annual meeting of stockholders was held on May 2, 2001 at which the stockholders voted upon the election of thirteen nominees for Directors; approval of the Company's 2001 long term Equity Incentive Plan; approval of the Company's Executive Officers annual Value Creation Plan; and ratification of the selection of PricewaterhouseCoopers LLP as independent auditors for the Company for 2001. The following is a tabulation of the votes. Election of Directors --------------------- Against/ For Withheld Non-Vote Gary M. Banks 22,385,640 17,505 18,935,079 Marshall Cohen 22,385,640 17,505 18,935,079 Lee M. Gardner 22,379,033 24,112 18,935,079 Cynthia L. Hess 22,385,640 17,505 18,935,079 Timothy D. Leuliette 22,385,640 17,505 18,935,079 Perry J. Lewis 22,385,640 17,505 18,935,079 J. Michael Losh 22,385,640 17,505 18,935,079 Richard A. Manoogian 22,384,650 18,495 18,935,079 David I. Margolis 22,385,640 17,505 18,935,079 Thomas T. Stallkamp 22,385,640 17,505 18,935,079 David A. Stockman 22,385,640 17,505 18,935,079 Daniel P. Tredwell 22,385,640 17,505 18,935,079 Samuel Valenti III 22,384,650 18,495 18,935,079 Approval of the Company's 2001 Long Term Equity Incentive Plan -------------------------------------------------------------- For Against Abstentions Non-Votes 22,392,031 3,391 7,183 18,935,079 Approval of the Company's Executive Officers annual Value Creation ------------------------------------------------------------------- Plan ---- For Against Abstentions Non-Votes 22,359,433 36,061 7,651 18,935,079 Approval of the appointment of PricewaterhouseCoopers LLP as ------------------------------------------------------------ independent auditors of the Company for 2001 -------------------------------------------- For Against Abstentions Non-Votes 22,378,255 19,373 5,517 18,935,079 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) EXHIBITS: Exhibit 12 Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends Exhibit 99.1 Incremental Term Loan Activation's Notice dated December 15, 2000 Exhibit 99.2 Incremental Term Loan Activation's Notice dated June 21, 2001 (B) REPORTS ON FORM 8-K: None. 17 SIGNATURE --------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. METALDYNE CORPORATION --------------------- (REGISTRANT) DATE: AUGUST 14, 2001 BY: /S/ WILLIAM M. LOWE, JR. ---------------------------- -------------------------- William M. Lowe, Jr. Executive Vice President and Chief Financial Officer Chief Accounting Officer and Authorized Signatory 18 METALDYNE CORPORATION EXHIBIT INDEX EXHIBIT - ------- Exhibit 12 Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends Exhibit 99.1 Incremental Term Loan Activation's Notice dated December 15, 2000 Exhibit 99.2 Incremental Term Loan Activation's Notice dated June 21, 2001 19 EXHIBIT 12 METALDYNE CORPORATION COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS (DOLLARS IN THOUSANDS)
6 MONTHS ENDED FOR THE YEARS ENDED DECEMBER 31 JUNE 30, ------------------------------------------------ 2001 2000 1999 1998 1997 1996 -------- -------- -------- -------- -------- -------- EARNINGS (LOSS) BEFORE INCOME TAXES AND FIXED CHARGES: Income (loss) from continuing operations before income taxes and cumulative effect of accounting change, net................ $ (2,730) $ 92,720 $139,470 $144,520 $190,290 $ 77,220 Deduct equity in undistributed earnings of less-than-fifty percent owned companies.... 1,020 (9,180) (9,800) (8,530) (46,030) (31,650) Add interest on indebtedness, net.......... 71,920 91,730 83,470 83,620 36,650 30,350 Add amortization of debt expense.................... 3,600 5,030 2,740 3,250 900 1,490 Estimated interest factor for rentals................ 3,510 3,480 3,710 3,620 2,100 6,350 -------- -------- ------- -------- -------- -------- Earnings before income taxes and fixed charges.... $ 77,320 $183,780 $219,590 $226,480 $183,910 $ 83,760 ======== ======== ======== ======== ======== ======== FIXED CHARGES: Interest on indebtedness, net........................ $ 71,850 $ 91,990 $ 83,760 $ 84,080 $ 36,770 $ 30,590 Amortization of debt expense.................... 3,600 5,030 2,740 3,250 900 1,490 Estimated interest factor for rentals................ 3,510 3,480 3,710 3,620 2,100 6,350 -------- -------- -------- -------- -------- -------- Total fixed charges...... 78,960 100,500 90,210 90,950 39,770 38,430 -------- -------- -------- -------- -------- -------- Preferred stock dividend requirement (a)............ 3,900 650 --- --- 10,300 21,570 -------- -------- -------- -------- -------- -------- Combined fixed charges and preferred stock dividends.. $ 82,860 $101,150 $ 90,210 $ 90,950 $ 50,070 $ 60,000 ======== ======== ======== ======== ======== ======== RATIO OF EARNINGS TO FIXED CHARGES................ ---(b) 1.8 2.4 2.5 4.6 2.2 === === === === === === RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS.............. ---(c) 1.8 2.4 2.5 3.7 1.4 === === === === === ===
(a) Represents amount of income before provision for income taxes required to meet the preferred stock dividend requirements of the Company and its 50% owned companies. (b) First half 2001 results of operations are inadequate to cover fixed charges by $1,640. (c) First half 2001 results of operations are inadequate to cover combined fixed charges and preferred stock dividends by $5,540. EX-99.1 3 file002.txt INCREMENTAL TERM LOAN ACTIVATION NOTICE EXHIBIT 99.1 ------------ December 15, 2000 INCREMENTAL TERM LOAN ACTIVATION NOTICE To: The Chase Manhattan Bank, as Administrative Agent under the Credit Agreement referred to below Reference is hereby made to the Credit Agreement dated as of November 28, 2000 (as amended, amended and restated, supplemented or otherwise modified from time to time, the "Credit Agreement") among Metalync Company LLC (the "Parent Borrower"), MascoTech, Inc., the Subsidiary Term Borrowers, the Foreign Subsidiary Borrowers party thereto, the lenders from time to time party thereto (the "Lenders"), The Chase Manhattan Bank, as administrative agent for the Lenders, Collateral Agent, swingline lender and issuing bank and the other banks party thereto. Terms defined in the Credit Agreement and not defined herein are used herein as defined in the Credit Agreement. This notice is the Incremental Term Loan Activation Notice referred to in the Credit Agreement, and the Parent Borrower and each of the Lenders signatory hereto (the "Incremental Lenders") hereby notify you that: 1. The Incremental Term Loan Amount of each Incremental Lender is set forth opposite such Incremental Lender's name on the signature pages hereto under the caption "Incremental Term Loan Amount". The total Incremental Term Loan Amount is $200,000,000. 2. The Incremental Term Loan Effective Date is December 15, 2000. 3. The Incremental Maturity Date is February 27, 2009. 4. Each Incremental Lender may elect to decline all or any portion of any prepayment pursuant to Section 2.11(h) of the Credit Agreement. 5. Prepayments made after March 31, 2001 will be subject to premium payments pursuant to Section 2.11(g). Each of the Incremental Lenders and the Parent Borrower hereby agree that (a) the amortization schedule relating to this Incremental Term Loan (the "Initial Incremental -2- Term Loan") is set forth in Annex A attached hereto and (b) the Applicable Rate for this Initial Incremental Term Loan shall be for any day (i) from and including December 15, 2000 through and including March 31, 2001, (A) 2.75% per annum, in the case of an ABR Loan, or (B) 3.75% per annum, in the case of a Eurocurrency Loan, (ii) from and including April 1, 2001 through and including December 31, 2001, (A) 3.00% per annum, in the case of an ABR Loan, or (B) 4.00% per annum, in the case of the Eurocurrency Loan, and (iii) thereafter (A) 3.25% per annum, in the case of an ABR Loan, or (B) 4.25% per annum, in the case of a Eurocurrency Loan, provided, that if and for so long as the Applicable Rate with respect to any Incremental Term Loan that is not an Initial Incremental Term Loan (a "Subsequent Incremental Term Loan") is greater than 0.25% per annum in excess of the then existing Applicable Rate for the Initial Incremental Term Loan, the Applicable Rate for the Initial Incremental Term Loan shall be increased automatically for such period so that the Applicable Rate for any Subsequent Incremental Term Loan is no greater than 0.25% per annum in excess of the Applicable Rate for the Initial Incremental Term Loan. In addition, the making of the Initial Incremental Term Loan shall be subject to, among other conditions agreed to between the Parent Borrower and the Incremental Lenders hereby, the condition that (a) Holdings has received a contribution in the form of common equity of not less than $126,000,000 and (b) Holdings contributes such entire amount to the Parent Borrower in the form of common equity. -3- METALYNC COMPANY LLC, By: /s/ David B. Liner ------------------------------- Name: David B. Liner Title: Vice President Incremental Term Loan Amount THE CHASE MANHATTAN BANK, $95,000,000 By: /s/ Deborah Davey ------------------------------- Name: Deborah Davey Title: Managing Director Incremental Term Loan Amount CREDIT SUISSE FIRST BOSTON, $95,000,000 By: /s/ William B. Lutkins ------------------------------- Name: William B. Lutkins Title: Vice President By: /s/ Robert Hetu ------------------------------- Name: Robert Hetu Title: Vice President Incremental Term Loan Amount NATIONAL CITY BANK, $10,000,000 By: /s/ Jeffrey Tengel ------------------------------- Name: Jeffrey Tengel Title: Senior Managing Director -4- CONSENTED TO: THE CHASE MANHATTAN BANK, as Administrative Agent By: /s/ Deborah Davey ---------------------------------- Name: Deborah Davey Title: Managing Director -5- ANNEX A Amortization Schedule Date Amount - ---- ------ June 30, 2001 $ 1,000,000.00 December 31, 2001 $ 1,000,000.00 June 30, 2002 $ 1,000,000.00 December 31, 2002 $ 1,000,000.00 June 30, 2003 $ 1,000,000.00 December 31, 2003 $ 1,000,000.00 June 30, 2004 $ 1,000,000.00 December 31, 2004 $ 1,000,000.00 June 30, 2005 $ 1,000,000.00 December 31, 2005 $ 1,000,000.00 June 30, 2006 $ 1,000,000.00 December 31, 2006 $ 1,000,000.00 June 30, 2007 $ 1,000,000.00 December 31, 2007 $ 1,000,000.00 June 30, 2008 $ 1,000,000.00 September 30, 2008 $ 61,700,000.00 Incremental Maturity Date $ 123,300,000.00 EX-99.2 4 file003.txt INCREMENTAL TERM LOAN ACTIVATION NOTICE EXHIBIT 99.2 ------------ June 21, 2001 INCREMENTAL TERM LOAN ACTIVATION NOTICE To: The Chase Manhattan Bank, as Administrative Agent under the Credit Agreement referred to below Reference is hereby made to the Credit Agreement dated as of November 28, 2000 (as amended, amended and restated, supplemented or otherwise modified from time to time, the "Credit Agreement") among Metaldyne Company LLC, formerly known as Metalync Company LLC (the "Parent Borrower"), Metaldyne Corporation, formerly known as Masco Tech, Inc. ("Holdings"), the Subsidiary Term Borrowers party thereto, the Foreign Subsidiary Borrowers party thereto, the lenders from time to time party thereto (the "Lenders"), The Chase Manhattan Bank, as administrative agent for the Lenders, Collateral Agent, swingline lender and issuing bank, and the other banks party thereto. Terms defined in the Credit Agreement and not defined herein are used herein as defined in the Credit Agreement. This notice is the Incremental Term Loan Activation Notice referred to in the Credit Agreement, and the Parent Borrower and each of the Lenders signatory hereto (the "Incremental Lenders") hereby notify you that: 1. The Incremental Term Loan Amount of each Incremental Lender is set forth opposite such Incremental Lender's name on the signature pages hereto under the caption "Incremental Term Loan Amount." The total Incremental Term Loan Amount is $45,000,000. 2. The Incremental Term Loan Effective Date is June 22, 2001. 3. The Incremental Maturity Date is February 27, 2009. 4. Each Incremental Lender may elect to decline all or any portion of any prepayment pursuant to Section 2.11(h) of the Credit Agreement. 5. Prepayments will be subject to premium payments pursuant to Section 2.11(g). Each of the Incremental Lenders and the Parent Borrower hereby agree that (a) the amortization schedule relating to this Incremental Term Loan (the "Incremental Term Loan") is set forth in Annex A attached hereto and (b) the Applicable Rate for this Incremental Term Loan shall be for any day (i) from and including April 1, 2001 through and including December 31, 2001, (A) 3.00% per annum, in the case of an ABR Loan, or (B) 4.00% per annum, in the case of a Eurocurrency Loan, and (ii) thereafter (A) 3.25% per annum, in the case of an ABR Loan, or (B) 4.25% per annum, in the case of a Eurocurrency Loan, provided that if and for so long as the Applicable Rate -2- with respect to any subsequent Incremental Term Loan (a "Subsequent Incremental Term Loan") is greater than 0.25% per annum in excess of the then existing Applicable Rate for the Incremental Term Loan, the Applicable Rate for the Incremental Term Loan shall be increased automatically for such period so that the Applicable Rate for any Subsequent Incremental Term Loan is no greater than 0.25% per annum in excess of the Applicable Rate for the Incremental Term Loan. In addition, the making of the Incremental Term Loan shall be subject to, among other conditions agreed to between the Parent Borrower and the Incremental Lenders hereby, (a) the conditions to borrowing set forth in Section 4.02 of the Credit Agreement and (b) the condition that the transactions contemplated by (i) the Contribution Agreement dated as of June, 2001 by and among Holdings, the Parent Borrower and Heartland Industrial Partners, L.P. and certain of its affiliates and (ii) the Exchange Agreement dated as of June, 2001 by and among Holdings, Woodfield Financial Consortium, L.P. and the sellers named in Exhibit A thereto, in each case have been consummated or shall be consummated simultaneously with the borrowing of the Incremental Term Loan in accordance with applicable law, the Contribution Agreement and the Exchange Agreement, as applicable, and all other related documentation (without giving effect to any material amendments or waivers to or of any of the conditions precedent in such documentation not approved by the Lenders). The proceeds of the Incremental Term Loan will be used, together with other financial resources available to the Parent Borrower to repay, simultaneously with the borrowing of the Incremental Term Loan, all amounts outstanding under the Amended and Restated Credit Agreement dated as of January 4, 2001 by and among Global Metal Technologies, Inc., the lenders party thereto and Canadian Imperial Bank of Commerce, as agent. -3- METALDYNE COMPANY LLC By /s/ James Tompkins ------------------------------------- Name: James Tompkins Title: Vice President and Treasurer Incremental Term Loan Amount CIBC, INC. - ---------------------------- $6,115,970.40 By /s/ Willam J. Kaslo, Jr. ------------------------------------- Name: William J. Kaslo, Jr. Title: Managing Director Incremental Term Loan Amount THE CIT GROUP/EQUIPMENT FINANCING INC. - ---------------------------- $3,630,884.86 By /s/ Mike Hampton ------------------------------------- Name: Mike Hampton Title: Assistant Vice President Incremental Term Loan Agreement THE BANK OF NOVA SCOTIA - ------------------------------- $3,232,262.51 By /s/ F.C.H. Ashby ------------------------------------- Name: F.C.H. Ashby Title: Senior Manager Loan Operations Incremental Term Loan Amount FLEET CAPITAL CORPORATION - ---------------------------- $4,040,328.14 By /s/ Robert J. Lund ------------------------------------- Name: Robert J. Lund Title: Senior Vice President -4- Incremental Term Loan Amount BANK ONE, N.A. - ---------------------------- $4,040,328.14 By /s/ Richard H. Huttenlocher ------------------------------------- Name: Richard H. Huttenlocher Title: Senior Vice President Incremental Term Loan Amount DRESDNER BANK AG, NEW YORK AND GRAND - ---------------------------- CAYMAN BRANCHES $5,444,511.24 By /s/ Feraaz Kamran ------------------------------------- Name: Feraaz Kamran Title: Asst. Vice President By /s/ Gabriela Fields ------------------------------------- Name: Gabriela Fields Title: Associate Incremental Term Loan Amount ING CAPITAL SENIOR SECURED HIGH INCOME - ---------------------------- FUND HOLDINGS, LTD. $1,314,670.26 By /s/ Michael J. Campbell ------------------------------------- Name: Michael J. Campbell Title: Managing Director Incremental Term Loan Amount KZH-ING-1 LLC - ---------------------------- $496,794.83 By /s/ Kimberly Rowe ------------------------------------- Name: Kimberly Rowe Title: Authorized Agent -5- Incremental Term Loan Amount KZH-ING-2 LLC - ---------------------------- $2,722,255.62 By /s/ Kimberly Rowe ------------------------------------- Name: Kimberly Rowe Title: Authorized Agent Incremental Term Loan Amount KZH-ING-3 LLC - ---------------------------- $910,790.52 By /s/ Kimberly Rowe ------------------------------------- Name: Kimberly Rowe Title: Authorized Agent Incremental Term Loan Amount THE NATIONAL BANK OF CANADA - ---------------------------- $4,040,328.14 By /s/ Thomas W. Buda, Jr. ------------------------------------- Name: Thomas W. Buda, Jr. Title: Vice President By /s/ Duane K. Bedard ------------------------------------- Name: Duane K. Bedard Title: Vice President and Manager Incremental Term Loan Amount PILGRIM AMERICA PRIME RATE TRUST - ---------------------------- $3,629,674.16 By: ING Pilgrim Investments, as its Investment Manager By /s/ Mark F. Haak ------------------------------------- Name: Mark F. Haak Title: Assistant Vice President -6- Incremental Term Loan Amount VAN KAMPEN - ---------------------------- PRIME RATE INCOME TRUST $5,381,201.19 By: Van Kampen Investment Advisory Corp. By /s/ Darvin D. Pierce ----------------------------------- Name: Darvin D. Pierce Title: Principal -7- CONSENTED TO: THE CHASE MANHATTAN BANK as Administrative Agent By: /s/ Richard Duker ----------------------------------- Name: Richard Duker Title: Vice President -8- ANNEX A Amortization Schedule Date Amount - ---- ------ December 31, 2001 $ 225,000.00 June 30, 2002 $ 225,000.00 December 31, 2002 $ 225,000.00 June 30, 2003 $ 225,000.00 December 31, 2003 $ 225,000.00 June 30, 2004 $ 225,000.00 December 31, 2004 $ 225,000.00 June 30, 2005 $ 225,000.00 December 31, 2005 $ 225,000.00 June 30, 2006 $ 225,000.00 December 31, 2006 $ 225,000.00 June 30, 2007 $ 225,000.00 December 31, 2007 $ 225,000.00 June 30, 2008 $ 225,000.00 September 30, 2008 $ 13,956,975.00 Incremental Maturity Date $ 27,893,025.00 -----END PRIVACY-ENHANCED MESSAGE-----