-----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, BNHFCEfv7hEtmvr0MCBcVfqpiWNVkH1K4nkryVMPx727S6FqPBuy/U3ScGlhgG5y gDo1ZrQaHH8PWDj0XS12ug== 0000950136-02-002658.txt : 20020913 0000950136-02-002658.hdr.sgml : 20020913 20020913165449 ACCESSION NUMBER: 0000950136-02-002658 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20020913 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20020913 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: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-12068 FILM NUMBER: 02764115 BUSINESS ADDRESS: STREET 1: 47659 HALYARD DRIVE CITY: PLYMOUTH STATE: MI ZIP: 48170 BUSINESS PHONE: 734-207-6200 MAIL ADDRESS: STREET 1: 47659 HALYARD DRIVE CITY: PLYMOUTH STATE: MI ZIP: 48170 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 8-K 1 file001.txt FORM 8-K ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1933 SEPTEMBER 13, 2002 Date of Report (Date of earliest event reported) METALDYNE CORPORATION (Exact name of registrant as specified in its charter)
DELAWARE 001-12068 38-2513957 (State or other jurisdiction of (Commission file number) (I.R.S. Employer incorporation or organization) Identification No.)
47659 HALYARD DRIVE, PLYMOUTH, MICHIGAN 48170 (Address of principal executive offices) (734) 207-6200 (Registrant's telephone number, including area code) NOT APPLICABLE (Former name or former address, if changed since last report) ================================================================================ ITEM 5. OTHER EVENTS. Attached hereto as Exhibits 99.1 and 99.2 is Metaldyne Corporation's financial statements and related notes for the fiscal year ended December 31, 2001 and period ended June 30, 2002, updated to include supplemental disclosure of 1) guarantor financial information for the subsidiaries of Metaldyne Corporation (collectively the "Subsidiary Guarantors") that have guaranteed Metaldyne's 11% Senior Subordinated Notes due 2012 and 2) transitional disclosures with respect to goodwill amortization as set forth in paragraph 61 of statement of Financial Accounting Standards No. 142 "Goodwill and Other Intangible Assets." ITEM 7. EXHIBITS (c) Exhibits. The following exhibits are filed herewith:
Exhibit No. Description 99.1 Metaldyne Corporation Audited Consolidated Financial Statements as of December 31, 2001. 99.2 Metaldyne Corporation Unaudited Consolidated Condensed Financial Statements as of June 30, 2002. 99.3 Consent of Independent Accountants.
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: September 13, 2002 METALDYNE CORPORATION By: /s/ William M. Lowe, Jr. ------------------------------- Name: William M. Lowe, Jr. Title: Executive Vice President and Chief Financial Officer EXHIBIT INDEX Exhibit No. Description 99.1 Metaldyne Corporation Audited Consolidated Financial Statements as of December 31, 2001. 99.2 Metaldyne Corporation Unaudited Consolidated Condensed Financial Statements as of June 30, 2002. 99.3 Consent of Independent Accountants. EX-99.1 3 file002.txt 10-K FINANCIALS EXHIBIT 99.1 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Metaldyne Corporation: In our opinion, the consolidated balance sheets and the related statements of operations, of shareholders' equity and of cash flows appearing in the accompanying financial statements as 'Post-acquisition Basis' present fairly, in all material respects, the financial position of Metaldyne Corporation and subsidiaries at December 31, 2001 and 2000, and the results of their operations and their cash flows for the year ended December 31, 2001 and the period from November 28, 2000 to December 31, 2000, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, 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 our opinion. In our opinion, the consolidated statements of operations, of shareholders' equity and of cash flows appearing in the accompanying financial statements as 'Pre-acquisition Basis' present fairly, in all material respects, the results of operations and cash flows of Metaldyne Corporation and subsidiaries for the period from January 1, 2000 to November 27, 2000 and the year ended December 31, 1999, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, 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 our opinion. As more fully described in Note 1 to the consolidated financial statements, effective November 28, 2000 the Company reflected a new basis of accounting for their assets and liabilities. As a result, the consolidated financial statements for the periods subsequent to November 27, 2000 reflect the post-acquisition basis of accounting and are not comparable to the consolidated financial statements prepared on a pre-acquisition basis. PricewaterhouseCoopers LLP Detroit, Michigan March 28, 2002, except for Note 27, as to which the date is June 20, 2002. 1 METALDYNE CORPORATION CONSOLIDATED BALANCE SHEET DECEMBER 31, 2001 AND 2000 (DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)
2001 2000 ---- ---- ASSETS Current assets: Cash and cash investments ....................................................... $ -- $ 26,320 Receivables, net ................................................................ 104,160 119,970 Inventories ..................................................................... 162,660 193,240 Deferred and refundable income taxes ............................................ 13,630 55,340 Prepaid expenses and other assets ............................................... 29,330 39,170 ----------- ----------- Total current assets .......................................................... 309,780 434,040 Equity and other investments in affiliates ........................................ 17,130 26,060 Property and equipment, net ....................................................... 921,440 960,790 Excess of cost over net assets of acquired companies .............................. 1,038,810 1,004,440 Deferred financing costs and other assets ......................................... 666,530 566,500 ----------- ----------- Total assets .................................................................. $ 2,953,690 $ 2,991,830 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable ................................................................ $ 169,160 $ 155,620 Accrued liabilities ............................................................. 188,840 196,740 Current maturities, long-term debt .............................................. 42,700 46,350 ----------- ----------- Total current liabilities ..................................................... 400,700 398,710 Other long-term debt .............................................................. 1,096,060 1,180,940 Subordinated debentures ........................................................... 262,860 245,360 Deferred income taxes ............................................................. 337,760 321,340 Other long-term liabilities ....................................................... 146,420 147,510 ----------- ----------- Total liabilities ............................................................. 2,243,800 2,293,860 ----------- ----------- Redeemable preferred stock ........................................................ 55,160 33,370 Redeemable restricted common stock ................................................ 32,760 45,900 Less: Restricted stock awards ..................................................... (12,060) (20,560) ----------- ----------- Total redeemable stock ........................................................ 75,860 58,710 ----------- ----------- Shareholders' equity: Preferred stock (non-redeemable), $1 par: Authorized: 25 million; Outstanding: None ............................................................. -- -- Common stock, $1 par: ............................................................. 42,570 38,670 Authorized: 250 million; Outstanding: 42.6 million and 38.7 million Paid-in capital ................................................................... 679,670 617,780 Accumulated deficit ............................................................... (76,440) (27,260) Accumulated other comprehensive income (loss) ..................................... (11,770) 10,070 ----------- ----------- Total shareholders' equity .................................................... 634,030 639,260 ----------- ----------- Total liabilities, redeemable stock and shareholders' equity .................. $ 2,953,690 $ 2,991,830 =========== ===========
The accompanying notes are an integral part of the consolidated financial statements. 2 METALDYNE CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
POST ACQUISITION BASIS PRE ACQUISITION BASIS ---------------------- --------------------- YEAR ENDED NOV 28, 2000 - JAN 1, 2000 - YEAR ENDED DEC 31, 2001 DEC 31, 2000 NOV 27, 2000 DEC 31, 1999 ------------ ------------ ------------ ------------ Net sales ...................................... $ 2,127,830 $104,770 $ 1,545,390 $ 1,679,690 Cost of sales .................................. (1,729,610) (93,610) (1,163,550) (1,246,660) ----------- -------- ----------- ----------- Gross profit ................................. 398,220 11,160 381,840 433,030 Selling, general and administrative expenses ... (257,190) (35,970) (191,890) (209,830) Gains (charge) on disposition of businesses, net -- -- 680 14,440 Legacy restricted stock award expense .......... (7,930) (1,220) (5,330) (4,700) Charge for asset impairment .................... -- -- -- (17,510) ----------- -------- ----------- ----------- Operating profit (loss) ...................... 133,100 (26,030) 185,300 215,430 ----------- -------- ----------- ----------- Other income (expense), net: Interest expense ............................. (148,160) (14,440) (78,510) (83,630) Equity and other income (loss) from affiliates (8,930) (1,000) 10,820 13,230 Gain (charge) from disposition of, or changes in, investments in equity affiliates ....... -- -- 27,520 (3,150) Income related to the termination of interest rate swap agreements ....................... -- -- 12,940 -- Other, net ..................................... (23,940) (1,130) (1,400) (2,410) ----------- -------- ----------- ----------- Other income (expense), net .................. (181,030) (16,570) (28,630) (75,960) ----------- -------- ----------- ----------- Income (loss) before income taxes and extraordinary charge ....................... (47,930) (42,600) 156,670 139,470 Income taxes (credit) .......................... (4,600) (15,730) 61,370 47,040 ----------- -------- ----------- ----------- Net income (loss) before extraordinary charge ..................................... (43,330) (26,870) 95,300 92,430 Extraordinary charge, net of taxes of $7,930 ... -- -- (36,330) -- ----------- -------- ----------- ----------- Net income (loss) ............................ (43,330) (26,870) 58,970 92,430 Preferred stock dividends .................... 5,850 390 -- -- ----------- -------- ----------- ----------- Earnings (loss) attributable to common stock ... $ (49,180) $(27,260) $ 58,970 $ 92,430 =========== ======== =========== ===========
YEAR ENDED NOVEMBER 28, 2000 TO JANUARY 1, 2000 TO YEAR ENDED DECEMBER 31, 2001 DECEMBER 31, 2000 NOVEMBER 27, 2000 DECEMBER 31, 1999 ----------------- -------------------- ------------------ ----------------- BASIC DILUTED BASIC DILUTED BASIC DILUTED BASIC DILUTED ----- ------- ----- ------- ----- ------- ----- ------- Earnings (loss) per common share: Income (loss) before extraordinary charge.......... $(1.16) $(1.16) $(.79) $(.79) $2.33 $1.89 $2.25 $1.84 Extraordinary charge............. -- -- -- -- (.89) (.66) -- -- ------ ------ ----- ----- ----- ----- ----- ----- Earnings (loss) attributable to common stock.................... $(1.16) $(1.16) $(.79) $(.79) $1.44 $1.23 $2.25 $1.84 ====== ====== ===== ===== ===== ===== ===== =====
The accompanying notes are an integral part of the consolidated financial statements. 3 METALDYNE CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS
POST ACQUISITION BASIS PRE ACQUISITION BASIS ---------------------- --------------------- NOV 28, 2000 JAN 1, 2000 YEAR ENDED TO TO YEAR ENDED (AMOUNTS IN THOUSANDS) DEC 31, 2001 DEC 31, 2000 NOV 27, 2000 DEC 31, 1999 - ---------------------- ------------ ------------ ------------ ------------ Cash flows from operating activities: Net income (loss) ........................................ $ (43,330) $ (26,870) $ 58,970 $ 92,430 Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities: Depreciation and amortization in operating profit ................................................ 153,370 10,990 72,530 75,870 Legacy stock award expense ............................. 7,930 1,220 5,330 4,700 Amortization expense in other income/expense ........... 11,610 550 4,490 2,730 Deferred income taxes .................................. 13,210 6,380 18,650 9,560 (Gain) charge on disposition of businesses, net ........ -- -- (680) (14,440) (Gain) charge from disposition or other changes in investments in equity affiliates ................... -- -- (27,520) 6,270 Equity (earnings) losses, net of dividends ............. 8,930 1,010 (11,980) (10,100) Gain on interest swap settlement ....................... -- -- (15,820) -- Interest accretion ..................................... 17,500 1,360 -- -- Charge for asset impairment ............................ -- 300 120 17,510 Extraordinary charge related to purchase accounting ............................................ -- -- 44,260 -- Other, net ............................................. (12,950) 23,270 (29,110) (9,260) Changes in current assets and liabilities: (Increase) decrease in accounts receivable ............. 31,870 38,310 (11,980) (3,500) Proceeds from accounts receivable sale ................. 16,860 36,000 118,500 -- (Increase) decrease in inventory ....................... 36,340 (2,020) 10,090 400 (Increase) decrease in prepaid expenses and other current assets .................................. 6,670 (220) (9,510) (14,390) Increase (decrease) in accounts payable and accrued expenses ...................................... (76,780) (95,160) 71,590 (5,150) --------- --------- ----------- --------- Net cash provided by (used for) operating activities ............................................ 171,230 (4,880) 297,930 152,630 --------- --------- ----------- --------- Cash flows from investing activities: Capital expenditures ................................... (118,020) (9,160) (97,850) (135,740) Proceeds from sale of businesses, net .................. -- -- 3,200 92,620 Acquisitions, net of cash acquired ..................... (83,320) (365,170) (21,330) (88,550) Proceeds from notes receivable ......................... 1,100 -- 1,260 2,180 Proceeds from sale of equity investments ............... -- -- 123,920 -- Proceeds from sale/leaseback of fixed assets ........... 84,660 43,590 7,500 10,320 Other, net ............................................. 3,960 -- (16,240) (8,260) --------- --------- ----------- --------- Net cash provided by (used for) investing activities ............................................ (111,620) (330,740) 460 (127,430) --------- --------- ----------- --------- Cash flows from financing activities: Proceeds from borrowings ............................... 126,970 271,470 1,043,120 28,540 Principal payments on borrowings ....................... (215,500) (52,600) (1,100,980) (40,150) Debt issuance costs .................................... -- -- (41,470) -- Investment from Heartland Investment Group ............. -- -- 435,220 -- Retirement of common stock ............................. -- -- (584,830) (19,530) Proceeds from issuance of common stocks ................ -- 126,110 -- -- Dividends paid ......................................... -- (390) (10,740) (13,470) Purchase accounting transaction costs .................. -- -- (39,580) -- Proceeds from interest rate swap settlement ............ -- -- 15,820 -- Other, net ............................................. 2,600 3,320 (5,410) (5,490) --------- --------- ----------- --------- Net cash provided by (used for) financing activities ............................................ (85,930) 347,910 (288,850) (50,100) --------- --------- ----------- --------- Net increase (decrease) in cash ........................... (26,320) 12,290 9,540 (24,900) Cash and cash equivalents, beginning of year .............. 26,320 14,030 4,490 29,390 --------- --------- ----------- --------- Cash and cash equivalents, end of year .................... $ -- $ 26,320 $ 14,030 $ 4,490 --------- --------- ----------- --------- Supplementary cash flow information: Cash paid (refunded) for income taxes, net ............. $ (15,380) $ 16,500 $ 1,500 $ 79,000 Cash paid for interest ................................. $ 133,120 $ 17,250 $ 76,160 $ 54,000 --------- --------- ----------- ---------
The accompanying notes are an integral part of the consolidated financial statements. 4 METALDYNE CORPORATION CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY FOR THE YEAR ENDED DECEMBER 31, 2001, THE 34 DAY PERIOD ENDED DECEMBER 31, 2000, THE 331 DAY PERIOD ENDED NOVEMBER 27, 2000, AND THE YEAR ENDED DECEMBER 31, 1999
PREFERRED COMMON PAID-IN RETAINED STOCK STOCK CAPITAL EARNINGS ----- ----- ------- -------- Balances, January 1, 1999.......................................... $45,780 $16,820 $245,860 Comprehensive income: Net income...................................................... 92,430 Foreign currency translation Minimum pension liability (net of tax, $450) Total comprehensive income Common stock dividends.......................................... (13,470) Retirement of common stock...................................... (1,280) (18,580) Exercise of stock options....................................... 140 1,760 (530) Restricted stock awards, net of common stock Common stock issued for acquisition Balances, December 31, 1999........................................ -- 44,640 -- 324,290 Comprehensive income: Net income...................................................... 58,970 Foreign currency translation Minimum pension liability (net of tax, $(2,800)) Total comprehensive income Common stock dividends.......................................... (10,740) Exercise of stock options....................................... 150 650 Retirement of shares, net....................................... (34,780) (650) (114,880) Issuance of shares Balances, November 27, 2000........................................ $-- $10,010 $257,640 === ======= ======== New basis beginning equity, 11/28/2000............................. -- $31,210 $496,210 -- Comprehensive income: Net loss........................................................ $(26,870) Foreign currency translation Total comprehensive income Preferred stock dividends....................................... (390) Issuance of shares.............................................. 7,460 121,570 ------- -------- Balances, December 31, 2000........................................ -- 38,670 617,780 (27,260) Comprehensive income: Net loss........................................................ (43,330) Foreign currency translation Interest rate arrangements Minimum pension liability (net of tax, (4,290)) Total comprehensive income Preferred stock dividends.......................................... (5,850) Issuance of shares................................................. 3,900 61,890 ----- ------ Balances, December 31, 2001........................................ $-- $42,570 $679,670 $(76,440) === ======= ======== ========
OTHER COMPREHENSIVE INCOME -------------------------- FOREIGN (IN THOUSANDS) CURRENCY MINIMUM RESTRICTED TOTAL TRANSLATION PENSION INTEREST RATE STOCK SHAREHOLDERS' AND OTHER LIABILITY ARRANGEMENTS AWARDS EQUITY --------- --------- ------------ ------ ------ Balances, January 1, 1999............................... $3,240 $(10,700) -- $(47,120) $253,880 Comprehensive income: Net income .......................................... 92,430 Foreign currency translation......................... (18,110) (18,110) Minimum pension liability (net of tax, $450)......... 700 700 --- Total comprehensive income ......................... 75,020 Common stock dividends .............................. (13,470) Retirement of common stock .......................... (19,860) Exercise of stock options ........................... 1,370 Restricted stock awards, net of common stock ........ 3,440 3,440 Common stock issued for acquisition ................. Balances, December 31, 1999............................. (14,870) (10,000) -- (43,680) 300,380 Comprehensive income: Net income .......................................... 58,970 Foreign currency translation......................... (20,690) (20,690) Minimum pension liability (net of tax, $(2,800))..... (4,900) (4,900) ------- Total comprehensive income ......................... 33,380 Common stock dividends .............................. (10,740) Exercise of stock options ........................... 800 Retirement of shares, net ........................... (150,310) Issuance of shares .................................. (180) (180) -------- -------- Balances, November 27, 2000............................. $(35,560) (14,900) $-- $(43,860) $173,330 ======== ======= === ========= ======== New basis beginning equity, 11/28/2000.................. -- -- -- -- $527,420 Comprehensive income: Net loss ............................................ (26,870) Foreign currency translation......................... $10,070 10,070 -------- Total comprehensive income ......................... (16,800) Preferred stock dividends ........................... (390) Issuance of shares .................................. 129,030 -------- Balances, December 31, 2000............................. 10,070 -- -- -- 639,260 Comprehensive income: Net loss ............................................ (43,330) Foreign currency translation......................... (4,370) (4,370) Interest rate arrangements........................... (5,870) (5,870) Minimum pension liability (net of tax, (4,290))......... (11,600) (11,600) -------- Total comprehensive income ........................... (65,170) Preferred stock dividends .............................. (5,850) Issuance of shares ..................................... 65,790 -------- Balances, December 31, 2001............................. $5,700 $(11,600) $(5,870) $ -- $634,030 ====== ======== ======= ========= ========
The accompanying notes are an integral part of the consolidated financial statements. 5 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. RECAPITALIZATION AND CHANGE IN ACCOUNTING BASIS: RECAPITALIZATION OF METALDYNE CORPORATION ("WE" OR THE "COMPANY") On November 28, 2000, a recapitalization of the Company was consummated in accordance with the terms of a recapitalization agreement as a result of which each issued and outstanding share of the Company's publicly traded common stock at the time of the recapitalization was converted into the right to receive $16.90 in cash (approximately $585 million in the aggregate) plus additional cash amounts, if any, based upon the net proceeds from any future disposition of the stock of Saturn Electronics & Engineering, Inc. ("Saturn") owned by the Company. In connection with the recapitalization, Masco Corporation, Richard A. Manoogian and certain of the Company's other stockholders agreed to roll over a portion of their investment in the Company and consequently remain as stockholders. As a result of the recapitalization, the Company is controlled by Heartland Industrial Partners L.P. ("Heartland") and its co-investors. The recapitalization was completed by a merger of the Company with Riverside Acquisition Corporation, with the Company being the surviving entity. At the same time, substantially all of the assets of the Company were contributed to a new wholly owned subsidiary entity, Metalync Company, LLC (now known as Metaldyne Company, LLC) ("LLC"), including operating assets and stock in subsidiaries. In addition, the LLC assumed the obligation to pay the principal and interest on the 41/2% debentures due in 2003, although the Company remains responsible. In connection with the recapitalization, Heartland, Credit Suisse First Boston Equity Partners, L.P., Masco Corporation, Richard A. Manoogian, their various affiliates and certain other stockholders of the Company, entered into a Shareholders' Agreement regarding their ownership of the Company's common stock. Owners of an aggregate of approximately 90% of the Company's outstanding common stock are party to the Shareholders' Agreement, which imposes certain restrictions on, and rights with respect to the transfer of, Company Common Stock. The Agreement also entitles the shareholders to certain rights regarding corporate governance of the Company. Prior to the completion of the acquisition and in connection with the recapitalization transaction under which our common stock became privately held, the Company agreed to pay approximately $44 million of transaction related costs. These costs were recorded as an extraordinary loss of $36 million, net of $8 million tax expense for the period ended November 28, 2000. CHANGE IN ACCOUNTING BASIS At the time of the recapitalization and in compliance with the provisions of Staff Accounting Bulletin 54 (Topic 5-J), we elected to account for the transaction on a carry-over basis, rather than as a purchase requiring that we establish a new basis in our assets and our liabilities, due to the continuing interest of certain of our former security holders and the continued listing of our subordinated debentures on the New York Stock Exchange (NYSE) which were registered under the Securities Exchange Act of 1934. In December 2001, our debentures were de-listed with the NYSE and de-registered under the Exchange Act. We have determined that the effect of these actions is to require that we retroactively adopt purchase accounting for the November 2000 recapitalization transaction during our fourth quarter 2001. On November 28, 2000, the Company was acquired by Heartland and its co-investors for approximately $435 million in cash and the assumption of $1,300 million in debt. In order to effect the acquisition, new common and preferred shares valued at $125 million were issued to Masco Corporation, Richard A. Manoogian and certain other continuing shareholders of the acquired company. Excess cost over net assets acquired of approximately $856 million are being amortized over 40 years. The pre-acquisition basis financial information for the periods prior to November 28, 2000 are reflected on the historical basis of accounting and all periods subsequent to November 28, 2000 are reflected on a purchase accounting basis. 6 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2. ACCOUNTING POLICIES: Principles of Consolidation. The consolidated financial statements include the accounts of the Company and all majority-owned subsidiaries. All significant intercompany transactions have been eliminated. Corporations that are 20 to 50 percent owned are accounted for by the equity method of accounting; ownership less than 20% is accounted for on the cost basis unless the Company exercises significant influence over the investee. Capital transactions by equity affiliates, which change the Company's ownership interest at amounts differing from the Company's carrying amount, are reflected in other income or expense and the investment in affiliates account. The preparation of financial statements in conformity with generally accepted accounting principles requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements. Such estimates and assumptions also affect the reported amounts of revenues and expenses during the reporting periods. Actual results may differ from such estimates and assumptions. Cash and Cash Investments. The Company considers all highly liquid debt instruments with an initial maturity of three months or less to be cash and cash investments. Derivative Financial Instruments. The Company has entered into interest rate protection agreements to limit the effect of changes in the interest rates on any floating rate debt. Instruments used as hedges must be effective at reducing the risks associated with the underlying exposure and must be designated as a hedge at the inception of the contract. Changes in the fair value of such instruments are recognized in the balance sheet as a component of accumulated other comprehensive income in common shareholders' equity. Effective January 1, 2001, the Company adopted the provisions of Statement of Financial Accounting Standard No. 133, "Accounting for Derivative Instruments and Hedging Activities." Pursuant to this statement, all derivative instruments are recognized as assets or liabilities on the balance sheet and measured at fair value. Changes in fair value are recognized currently in earnings unless the instrument qualifies for hedge accounting. Under hedge accounting, changes are recorded as a component of other comprehensive income to the extent the hedge is considered effective. Receivables. Receivables are presented net of allowances for doubtful accounts of approximately $5.4 million at December 31, 2001 and 2000. The Company conducts a significant amount of business with a number of individual customers in the transportation industry. The Company monitors its exposure for credit losses and maintains adequate allowances for doubtful accounts; the Company does not believe that significant credit risk exists. Trade accounts receivable of substantially all domestic business operations are sold, on an ongoing basis, to MTSPC, Inc., a wholly owned subsidiary of the Company. Inventories. Inventories are stated at the lower of cost or net realizable value, with cost determined principally by use of the first-in, first-out method. Property and Equipment, Net. Property and equipment additions, including significant betterments, are recorded at cost. Upon retirement or disposal of property and equipment, the cost and accumulated depreciation are removed from the accounts, and any gain or loss is included in income. Repair and maintenance costs are charged to expense as incurred. Depreciation and Amortization. Depreciation is computed principally using the straight-line method over the estimated useful lives of the assets. Annual depreciation rates are as follows: buildings and land improvements, 21/2 to 10%, and machinery and equipment, 62/3 to 331/3%. Deferred financing costs are amortized over the lives of the related debt securities. The excess of cost over net assets of acquired companies is amortized using the straight-line method over the period estimated to be benefited, not exceeding 40 years. At each balance sheet date, management assesses whether there has been a permanent impairment of the excess of cost over net assets of acquired companies by comparing 7 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) anticipated undiscounted future cash flows from operating activities with the carrying amount of the excess of cost over net assets of acquired companies (goodwill). The factors considered by management in performing this assessment include current operating results, business prospects, market trends, potential product obsolescence, competitive activities and other economic factors. Based on this assessment, there was no permanent impairment related to the excess of cost over net assets of acquired companies at December 31, 2001. At December 31, 2001 and 2000, accumulated amortization of the excess of cost over net assets of acquired companies and intangibles was approximately $67 million and $4 million, respectively. Total amortization expense, including amortization of stock awards and prepaid debenture expense, was approximately $83 million, $30 million and $28 million in 2001, eleven months of 2000, and 1999, respectively. Shipping and Handling Fees and Costs. A portion of shipping and handling fees is included in the selling, general and administrative expenses category in the Consolidated Statement of Income. Shipping and handling expenses included in selling, general and administrative accounts were $23.8 million, $19.9 million and $21.0 million in 2001, eleven months of 2000 and 1999, respectively. New Accounting Pronouncements and Reclassifications. 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 ended December 31, 2001 will not be amortized. The Company has recognized goodwill amortization expense of approximately $28, $19, and $20 million, respectively, for 2001, eleven months of 2000 and 1999. All goodwill and intangible assets will be tested for impairment in accordance with the provisions of the Statement. The Company is currently reviewing the provisions of SFAS 141 and 142 and assessing the impact of adoption. In June and August 2001, the Financial Accounting Standards Board approved Statements of Financial Accounting Standards No. 143 "Accounting for Asset Retirement Obligations" ("SFAS 143") and No. 144 "Accounting for the Impairment or Disposal of Long Lived Assets" ("SFAS 144") which are effective January 1, 2003 and January 1, 2002, respectively, for the Company. SFAS 143 requires that an existing legal obligation associated with the retirement of a tangible long-lived asset be recognized as a liability when incurred and the amount of the liability be initially measured at fair value. Under SFAS 144, a single accounting method was established for long-lived assets to be disposed of. SFAS 144 requires the Company to recognize an impairment loss only if the carrying amount of a long-lived asset is not recoverable from its undiscounted cash flows and the loss is the difference between carrying amount and fair value. The Company is currently reviewing the provisions of SFAS 143 and 144 and assessing the impact of adoption. 8 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 3. EARNINGS PER SHARE: The following are reconciliations of the numerators and denominators used in the computations of basic and diluted earnings per common share:
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS) 2001 11/28/00 -- 12/31/00 1/1/00 -- 11/27/00 1999 ---- -------------------- ------------------ ---- Weighted average number of shares outstanding ..... 42,570 34,670 40,970 41,110 ====== ====== ====== ====== Income (loss)before extraordinary item ............ $(43,330) $(26,870) $ 95,300 $ 92,430 -------- -------- -------- -------- Less: Preferred stock dividends ................... 5,850 390 -- -- -------- -------- -------- -------- Earnings(loss) used for basic earnings per share computation ...................................... $(49,180) $(27,260) $ 95,300 $ 92,430 ======== ======== ======== ======== Basic earnings per share .......................... $ (1.16) $ (.79) $ 2.33 $ 2.25 ======== ======== ======== ======== Total shares used for basic earnings per share computation ...................................... 42,570 34,670 40,970 41,110 Dilutive securities: Stock options ..................................... -- -- 380 530 Convertible debentures ............................ -- -- 9,840 9,840 Contingently issuable shares ...................... -- -- 3,740 3,720 -------- -------- -------- -------- Total shares used for diluted earnings per share computation ...................................... 42,570 34,670 54,930 55,200 ====== ====== ====== ====== Earnings (loss) used for basic earnings per share computation ...................................... $(49,180) $(27,260) $ 95,300 $ 92,430 Add back of debenture interest .................... -- -- 8,510 9,310 -------- -------- -------- -------- Earnings (loss) used for diluted earnings per share computation ...................................... $(49,180) $(27,260) $103,810 $101,740 ======== ======== ======== ======== Diluted earnings (loss) per share ................. $ (1.16) $ (.79) $ 1.89 $ 1.84 ======== ======== ======== ========
Diluted earnings per share reflect the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock. Contingently issuable shares, approximately 2.6 million restricted common shares, have an anti-dilutive effect on earnings per share for the periods ended December 31, 2001 and December 31, 2000 (one month). 4. SUPPLEMENTARY CASH FLOW INFORMATION: Significant transactions not affecting cash were: in 2001, the issuance of approximately $65.4 million and $18.5 of Company common stock and preferred stock, respectively, related to the acquisition of GMTI and in 2000, the issuance of approximately $8 million of Company common stock as additional consideration related to a 1998 acquisition; the issuance of $125 million new common and preferred stock in exchange for Company common stock; the issuance of approximately $9 million of Company common stock through the conversion of restricted stock awards as part of the Heartland acquisition; the acquisition of Simpson for cash and the assumption of approximately $215 million of liabilities. 9 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 5. ACQUISITIONS: 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. To effect the acquisition, the Company issued common and preferred shares valued at approximately $83.9 million. 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 tranche 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 excess of cost over net assets. 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. On December 15, 2000, the Company acquired Simpson Industries, Inc. for total consideration of $365 million, including fees and expenses and the assumption of indebtedness. The results for 2000 include Simpson sales and operating results since the date of acquisition. Simpson is a designer and manufacturer of precision-engineered automotive components and modular systems for passenger and sport utility vehicles, light and heavy-duty trucks and diesel engines. For the years ended December 31, 2000 and 1999, Simpson had approximate net sales of $515 million and $533 million, respectively, and approximate operating profit of $35.7 million and $38.9 million, respectively. The acquisition was accounted for as a purchase with excess purchase price over the estimated fair value of net assets acquired of approximately $85 million. During 1999, the Company acquired Windfall Products, Inc., a manufacturer of transportation-related components that utilizes powder metal technology, significantly expanding the Company's powder metal manufacturing capabilities. 2001 brought significant change to the Company as we worked to consolidate three acquisitions. Effectively, we launched a new Company, with a new name and a new operational mindset different than the acquired legacy companies. We undertook several initiatives in 2001 designed to integrate the three companies into the new vision, aligning the business units under our new operating structure and leadership team, and reformulating our cost structure to be more competitive in the marketplace. To facilitate these initiatives, we terminated hundreds of employees and closed unprofitable businesses and plants. These actions came at a cash cost to the Company, but we believe these actions will lower operating costs going forward. The majority of these actions were completed in 2001, but others will continue in 2002. At December 31, 2001, in addition to the amounts shown in the table below, the Company had an approximate $16 million accrual related to severance agreements with former Company management. The amounts reflected represent total estimated future costs. The following table summarizes the purchase accounting adjustments established relating to the three acquisitions:
(IN MILLIONS) UTILIZED -------- ORIGINAL ACCRUAL AT ADJUSTMENT CASH NON-CASH 12/31/01 ---------- ---- -------- -------- Severance ................................ $29,430 $(6,520) -- $22,910 Asset impairment ......................... 3,230 -- $(3,020) 210 Other closure costs ...................... 8,730 (1,880) -- 6,850 ------- ------- ------- ------- Total .................................... $41,390 $(8,400) $(3,020) $29,970 ======= ======= ======= =======
10 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 6. DISPOSITION OF BUSINESSES: In the second quarter of 1998, the Company recorded a non-cash charge aggregating approximately $41 million pre-tax (approximately $22 million after-tax) to reflect the write-down of certain long-lived assets principally related to the plan to dispose of certain businesses and to accrue exit costs of approximately $8 million. In April 1999, the Company completed the sale of these aftermarket-related and vacuum metalizing businesses for total proceeds aggregating approximately $105 million, including $90 million of cash which was applied to reduce the Company's indebtedness, a note receivable of $6 million and retained equity interests in the ongoing businesses which were subsequently sold in 2000. These transactions resulted in a 1999 pre-tax gain of approximately $26 million ($15 million after-tax). In 1999, management adopted a plan to sell its specialty tubing business which resulted in a pre-tax loss of approximately $7 million and an after-tax gain of approximately $5.5 million, due to the tax basis in the net assets of the businesses exceeding book carrying values. This business was sold in January 2000 for proceeds of approximately $6 million consisting of cash and notes. In addition, the Company recorded in the second quarter 1999 a non-cash pre-tax charge of approximately $17.5 million related to impairment of certain long-lived assets, which included its hydroforming equipment and related intellectual property. In the fourth quarter 1999, the Company announced the closure of a plant and recorded a non-cash pre-tax charge of approximately $4 million ($2 million after-tax) related principally to employee benefit costs and asset impairments. Accrued exit costs at December 31, 1999 were approximately $12 million, payments and adjustments to accrued estimates approximated $5 million and the ending accrual was approximately $7 million. 7. ACCOUNTS RECEIVABLE SECURITIZATION: 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 which amounted to a total of $8.1 million and $4.2 million in 2001 and 2000, respectively, and is included in other expense in the income statement. At December 31, 2001 and 2000, a total of approximately $167 million and $151 million, respectively, of receivables were sold and the Company retained a subordinated interest of approximately $34 million and $17 million, respectively, which was included in the receivables balance in the consolidated balance sheet. The proceeds from the sale of accounts receivable, net for the year ended December 31, 2001 was $16.9 million. The retained subordinated interest is discounted at a rate that approximates fair value given the short-term nature of the receivables balance. 8. INVENTORIES: (IN THOUSANDS) AT DECEMBER 31 -------------- 2001 2000 ---- ---- Finished goods......................... $81,540 $87,940 Work in process........................ 41,060 44,940 Raw material........................... 40,060 60,360 ------ ------ $162,660 $193,240 ======== ======== 11 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 9. EQUITY AND OTHER INVESTMENTS IN AFFILIATES: On November 28, 2000 as part of the Heartland transaction, the Company sold all of its equity investments, except its ownership in Saturn (Saturn Electronics & Engineering, Inc.), for approximately $124 million. The Company has a 36% common equity ownership in Saturn, a manufacturer of electromechanical and electronic automotive components. The Company's carrying value in the common stock of Saturn exceeded its equity in the underlying net book value by approximately $9 million at December 31, 2001. This excess is being amortized over 40 years. Although no disposition of the stock of Saturn was made prior to November 28, 2000, holders of common stock on this date will be entitled to certain net proceeds, if any, from any subsequent disposition of Saturn. The amount which will be paid to such former stockholders will equal the proceeds in excess of $18.0 million and less than or equal to $40.0 million, any proceeds in excess of $55.7 million and less than or equal to $56.7 million as well as 60% of any proceeds in excess of $56.7 million. Any other proceeds will be retained by the Company. The carrying amount of investments in affiliates at December 31, 2001 and 2000 was $17.1 million and $26.1 million, respectively. Approximate combined condensed financial data of the Company's equity affiliates (including all equity affiliates through the date of sale in November 2000) accounted for under the equity method, are as follows:
(IN THOUSANDS) AT DECEMBER 31 -------------- 2001 2000 ---- ---- Current assets .................................................................. $ 85,850 $ 131,320 Current liabilities ............................................................. (143,380) (66,800) --------- --------- Working capital ................................................................. (57,530) 64,520 Property and equipment, net ..................................................... 48,460 62,950 Excess of cost over net assets of acquired companies and other assets ........... 52,260 64,590 Long-term debt .................................................................. -- (107,840) Deferred income taxes and other long-term liabilities ........................... (12,650) (22,460) --------- --------- Shareholders' equity ............................................................ $ 30,540 $ 61,760 ========= =========
(IN THOUSANDS) FOR THE YEARS ENDED DECEMBER 31 ------------------------------- 2001 2000 1999 ---- ---- ---- Net sales...................................................... $347,480 $3,090,800 $3,304,610 ======== ========== ========== Operating profit............................................... $ 8,760 $ 186,680 $ 177,220 ======== ========== ========== Earnings attributable to common stock.......................... ($24,050) $ 33,220 $ 41,070 ======== ========== ==========
12 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Equity and other income from affiliates consists of the following:
(IN THOUSANDS) FOR THE YEARS ENDED DECEMBER 31 ------------------------------- 2001 2000(A) 1999 ---- ------- ---- The Company's equity in affiliates' earnings (loss) available for common shareholders..................................................... $(8,930) $5,790 $10,300 Interest and dividend income.............................................. -- 4,020 2,930 ------- ------ ------- Equity and other income (loss) from affiliates............................ $(8,930) $9,810 $13,230 ======= ====== =======
(a) For the period November 28-December 31, 2000, the Company recognized a $(1.0) million loss on equity in affiliate earnings. 10. PROPERTY AND EQUIPMENT, NET:
(IN THOUSANDS) AT DECEMBER 31 -------------- 2001 2000 ---- ---- COST: Land and land improvements.................................... $29,500 $33,150 Buildings..................................................... 282,590 146,130 Machinery and equipment....................................... 699,320 789,670 ------- ------- 1,011,410 968,950 Less: Accumulated depreciation................................ 89,970 8,160 ------ ----- $921,440 $960,790 ======== ========
Depreciation expense totaled approximately $90 million, $53 million and $55 million in 2001, eleven months of 2000 and 1999, respectively. 11. DEFERRED FINANCING AND OTHER ASSETS:
(IN THOUSANDS) AT DECEMBER 31 -------------- 2001 2000 ---- ---- Customer contracts............................................... 271,180 270,940 Trademarks/trade names........................................... 55,250 56,670 Technology and other intangibles................................. 204,900 150,320 Deferred financing costs......................................... 84,040 43,000 Other............................................................ 51,160 45,570 ------ ------ Total............................................................ $666,530 $566,500 ======== ========
Customer contracts are amortized over a period as little as six years and as large as 40 years depending upon the nature of the underlying contract. Trademarks/trade names are amortized over a 40 year period, while technology and other intangibles are amortized over a period between three and thirty years. The technology and other intangible category primarily represents patents and/or indepth process knowledge embedded within the Company. The Company reviews the carrying value of the impairment whenever events or changes in circumstance indicate. 13 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 12. ACCRUED LIABILITIES:
(IN THOUSANDS) AT DECEMBER 31 -------------- 2001 2000 ---- ---- Workers' compensation and self insurance................................. $37,350 $34,130 Reserve for plant closures............................................... 29,970 34,090 Salaries, wages and commissions.......................................... 8,630 15,500 Legacy restricted stock reserve.......................................... 14,520 13,750 Vacation, holiday and bonus.............................................. 22,690 15,610 Interest................................................................. 17,570 3,440 Property, payroll and other taxes........................................ 12,550 9,690 Pension.................................................................. 33,090 16,530 Other.................................................................... 12,470 54,000 -------- -------- $188,840 $196,740 ======== ========
13. LONG-TERM DEBT:
(IN THOUSANDS) AT DECEMBER 31 -------------- 2000 2001 (IN THOUSANDS) ---- -------------- 41/2% Convertible Subordinated Debentures, due 2003...................... $ 262,860 $ 245,360 Bank revolving credit agreement.......................................... -- 48,000 Bank term loans.......................................................... 1,112,450 1,150,190 Other.................................................................... 26,310 29,100 ---------- ---------- 1,401,620 1,472,650 Less: Current portion of long-term debt.................................. 42,700 46,350 ---------- ---------- Long-term debt........................................................... $1,358,920 $1,426,300 ========== ==========
In connection with the November 2000 recapitalization, the Company entered into a credit facility with the Chase Manhattan Bank, as administrative agent and collateral agent, Credit Suisse First Boston, as syndication agent, Comerica Bank, as documentation agent, First Union National Bank, as documentation agent, National City Bank, as documentation agent, Bank One, NA, as documentation agent, and the other lenders party thereto. The credit facility consists of a senior revolving credit facility and three senior term loan facilities. The revolving credit facility is comprised of loans in a total principal amount of up to $300 million. The tranche A, tranche B and tranche C facilities are comprised of loans in total principal amount of $449.0 million, $478 million and $185 million as of December 31, 2001. The revolving credit facility and the tranche A facility will mature on May 28, 2007, the tranche B facility will mature on November 28, 2008 and the tranche C facility matures on February 27, 2009. 14 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) As of December 31, 2001, the amortization of our bank term indebtedness is as follows (in millions): 2002.................. $37.4 2003.................. 71.5 2004.................. 81.3 2005.................. 81.3 2006.................. 91.1 2007.................. 263.1 2008.................. 370.2 2009.................. 116.5 The obligations under the credit facility are collateralized by substantially all of the Company's assets and are guaranteed by substantially all of the Company's domestic subsidiaries. Borrowings under the credit facility will bear interest, at our option, at either: o a base rate used by JP Morgan Chase Bank, plus an applicable margin; or o a eurocurrency rate on deposits for one, two, three or nine month periods (or nine or twelve month periods if, at the time of the borrowing, all lenders agree to make such a duration available), plus the applicable margin. The applicable margin on loans is subject to change depending on the leverage ratio. As of December 31, 2001, the applicable margins on our revolving loans and tranche A loans which are base rate loans was 2.75% and on eurocurrency loans was 3.75%; the applicable margin on tranche B loans which are base rate loans was 3.50% and on eurocurrency loans was 4.50%; the applicable margin on tranche C loans which are base rate loans was 3.50% and on eurocurrency loans was 4.50%. The interest rate applicable to the revolver and term loans are principally at alternative floating rates, which approximated 6% at December 31, 2001. We also pay the lenders a commitment fee on the unused commitments under the credit facility equal to 0.75% per annum if less than 50% of the revolving facility commitments are outstanding and 0.50% per annum is to be paid if 50% or more of the revolving facility commitments are outstanding, in each case, payable quarterly in arrears. The commitment fee is subject to reduction depending on the leverage ratio. Subject to exceptions for reinvestment of proceeds and other exceptions and materiality thresholds, we are required to prepay outstanding loans under the credit facility with excess cash flow, the net proceeds of certain asset dispositions, casualty and condemnation recovery events and incurrences of permitted debt. The credit facility contains negative and affirmative covenants and requirements affecting us and our subsidiaries. The credit facility contains the following negative covenants and restrictions, among others: restrictions on debt, liens, mergers, investments, loans, advances, guarantee obligations, acquisitions, asset dispositions, sale-leaseback transactions, hedging agreements, dividends and other restricted junior payments, stock repurchases, transactions with affiliates, restrictive agreements, amendments to charter, by-laws and other material documents and use of reserved funds. The credit facility also requires us and our subsidiaries to meet certain financial covenants and ratios computed quarterly. The credit facility requires us to maintain restricted cash either in escrow from the proceeds of certain debt financing or in the form of availability under our revolving credit facility and accounts receivable financing in increasing amounts at specified dates until the maturity of the convertible subordinated debentures. The restricted cash amounts are $70 million from November 28, 2000 to September 30, 2002; $100 million from October 2002 to December 2002; $125 million from January 2003 to March 2003; $150 million from April 2003 to June 2003; $175 million from July 2003 to September 2003; and $205 million from October 2003 to December 15, 2003. Such amounts are reduced to the extent that convertible subordinated debentures are repaid with certain debt proceeds, as well as equity proceeds, prior to maturity. 15 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The credit facility contains the following affirmative covenants, among others: mandatory reporting of financial and other information to the administrative agent, notice to the administrative agent upon the occurrence of certain events of default and other events, written notice of change of any information affecting the identity of the record owner or the location of collateral, preservation of existence and intellectual property, payment of obligations, maintenance of properties and insurance, notice of casualty and condemnation, access to properties and books by the lenders, compliance with laws, use of proceeds and letters of credit, additional subsidiaries, interest rate protection agreements, and maintenance of stated available funds. The credit facility specifies certain customary events of default, including, among others, non-payment of principal, interest or fees, violation of covenants, cross-defaults and cross-accelerations, inaccuracy of representations and warranties in any material respect, bankruptcy and insolvency events, change of control, failure to maintain security interests, specified ERISA events, default by Masco Corporation to make loans under subordinated loan agreement or such subordinated loan agreement shall cease or be asserted not to be in full force and effect, one or more judgments for the payment of money in an aggregate amount in excess of $15.0 million, the guarantees shall cease to be in full force and effect or the subordination provisions of any of our subordinated debt are found to be invalid. As of December 31, 2001, we have $305 million of 4 1/2% Convertible Subordinated Debentures due December 15, 2003 outstanding. In connection with the change in accounting basis described in Note #1, the convertible subordinated debentures have been adjusted to fair market value at the date of purchase, with a balance at December 31, 2001 of $262.8 million. The Company will accrete from the carrying value to the liquidation value of $305 million ratably until maturity in 2003. Each $1,000 principal amount of convertible debentures was convertible prior to the recapitalization into shares of our common stock at a conversion price of $31.00 a share. As a result of the recapitalization, the convertible debentures are convertible into the right to receive the merger consideration paid to common stockholders in the recapitalization at a conversion price of $31.00 per the consideration payable with respect to a share of common stock and are, accordingly, not expected to be converted. Interest at a rate of 4 1/2% is paid semi-annually on the convertible debentures on June 15 and December 15 to record holders of the convertible debentures on the preceding June 1 or December 1, respectively. The convertible debentures mature on December 15, 2003. The convertible debentures can be redeemed by us at any time, in whole or in part, upon not less than thirty days' nor more than sixty days' notice at a redemption price of 100.50% of the principal amount outstanding if such redemption is prior to December 15, 2002; and at 100.00% of the principal outstanding amount if such redemption is after December 15, 2002. These debentures are classified as long-term because the Company has the ability and intent to refinance on a long-term basis any amounts that might be required to be paid to debenture holders in the next year. Masco Corporation has agreed to purchase from the Company, at the Company's option, up to $100 million of a new issue of Metaldyne long-term subordinated debt, subject to certain conditions, on or prior to October 31, 2003. However, the credit agreement significantly restricts the Company's right to require Masco Corporation to purchase such long-term subordinated debt until such time as the convertible subordinated debt matures or is repaid from subordinated debt or equity proceeds prior to maturity. In addition and at December 31, 2001 the Company's revolving credit agreement has $70 million available for the payment of amounts demanded by debenture holders, which, together with the right of the Company to require Masco Corporation to purchase $100 million of long-term subordinated debt, results in available funds of $170 million. The $170 million is sufficient to satisfy the maximum amount that would be required if all debenture holders elect to convert their bonds into the $16.90 per share recapitalization cash consideration. Other debt includes borrowings by the Company's subsidiaries denominated in foreign currencies. At December 31, 2001, there was approximately $200 million unused and available under the revolving credit agreement. 16 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) In February 2001, the Company entered into interest rate protection agreements with various financial institutions to hedge a portion of its interest rate risk related to the 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 a three month LIBOR interest rate cap and floor of 7% and approximately 4.5%, respectively. The agreements also include four interest rate caps at a three month LIBOR interest rate of 7% with a total notional amount of $376 million. Neither the Company nor the counterparties are required to collateralize their respective obligations under these agreements. The maturities of our total debt at December 31, 2001 during the next five years are as follows (in millions): 2002 -- $43; 2003 -- $383; 2004 -- $85; and 2005 - -- $84 and 2006 -- $850. Subsequent to December 31, 2001, the Company made a prepayment of approximately $33 million on the tranche term loan facilities, from the net proceeds of two sale-leaseback agreements entered into January 2002. 14. LEASES: The Company leases certain property and equipment under operating and capital lease arrangements that expire at various dates through 2021. Most of the operating leases provide the Company with the option, after the initial lease term, either to purchase the property or renew its lease at the then fair value. Certain assets have been pledged as collateral for one of the operating lease arrangements. Rent expense was $27.1, $8.0 and $8.1 million for the years ended December 31, 2001, eleven months of 2000, and 1999, respectively. The Company completed sale/leaseback financings in 2001 and 2000 relating to certain equipment and buildings, the proceeds of which were used to pay down the term loan facilities. Due to the sale/leaseback financings, the Company has significantly increased its commitment to future lease payments. In June 2001, a subsidiary of the Company sold and leased back equipment under a synthetic sale/leaseback structure. At closing, fair market value of the equipment sold was $24.9 million for which the Company provided a guarantee of all obligations of its subsidiary under the lease. At the end of the lease (including the expiration of all renewal options) the Company has the option of either purchasing all of the equipment for approximately $10 million or returning the equipment to the lessor under the lease. In the event the equipment is returned, the Company and lessor shall arrange for the disposition of the equipment. At such time the Company is obligated to pay approximately $10 million to the lessor and is entitled to receive from the lessor a residual value equal to approximately $1.4 million plus proceeds from the disposition of the equipment for the extent such proceeds exceed $1.4 million. 17 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Future minimum lease payments under scheduled capital and operating leases that have initial or remaining noncancelable terms in excess of one year as of December 31, 2001 are as follows: (AMOUNTS IN THOUSANDS) CAPITAL LEASES OPERATING LEASES - ---------------------- -------------- ---------------- 2002........................................ $ 2,920 $ 32,620 2003........................................ 2,760 29,650 2004........................................ 1,870 27,900 2005........................................ 980 21,300 2006........................................ 140 18,960 Thereafter.................................. -- 92,260 ------- -------- Total minimum payments...................... $ 8,670 $222,690 ------- -------- Amount representing interest................ $(2,630) ------- Obligations under capital leases............ 6,040 Obligations due within 1 year............... (1,710) ------- Long-term obligations under capital leases.. $ 4,330 ======= 15. REDEEMABLE PREFERRED STOCK: The Company issued in 2000 361,001 shares of $36.1 million in liquidation value ($33 million estimated fair value for accounting purposes) of Series A preferred stock par value $1 and authorized 370,000 shares to Masco Corporation. The Company will accrete from the carrying value to the liquidation value ratably over the twelve-year period. The preferred stock is mandatorily redeemable on December 31, 2012. Series A preferred stockholders are entitled to receive, when, as and if declared by the Company's board of directors, cumulative quarterly cash dividends at a rate of 13 percent per annum for periods ending on or prior to December 31, 2005 and 15 percent per annum for periods after December 31, 2005 plus 2% per annum for any period for which there are any accrued and unpaid dividends ("Recapitalization and Change in Accounting Basis" footnote). The Company issued 184,153 shares valued at $18.5 million of redeemable Series B preferred stock in exchange for interests in GMTI held by its former shareholders. The redeemable Series 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% per annum. 16. SHAREHOLDERS' EQUITY: The Company repurchased and retired approximately 1.3 million shares of its common stock in 1999 and 3.6 million shares of its common stock in 1998, pursuant to Board of Directors' authorized repurchase programs. 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 in June 2001. Also as part of the transaction the Company issued common shares valued at $20 million in exchange for interests in GMTI held by its former shareholders. On the basis of amounts paid (declared), cash dividends per common share were $0.24 ($0.24) in 2000 (eleven month period) and $0.30 ($0.30) in 1999. 17. STOCK OPTIONS AND AWARDS: Prior to the recapitalization, the Company's Long Term Stock Incentive Plan provided for the issuance of stock-based incentives. The Company granted long-term stock awards, net, for 401,000 and 18 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 622,000 shares of Company Common Stock during 2000 (prior to the recapitalization) and 1999, respectively, to key employees of the Company. The weighted average fair value per share of long-term stock awards granted during 2000 and 1999 on the date of grant was $13 and $14, respectively. Compensation expense for the vesting of long-term stock awards was approximately $7.9, $6.5 and $4.7 million in 2001, eleven months of 2000 and 1999, respectively. Prior to the recapitalization merger, the unamortized value of unvested stock awards were generally amortized over a ten-year vesting period and were recorded in the financial statements as a deduction from shareholders' equity. As part of the recapitalization, the Company cancelled outstanding stock awards and made new restricted stock awards to certain employees of approximately 3.7 million shares of Company Common Stock. Under the terms of the recapitalization agreement, those shares become free of restriction, or vest, as to one-quarter upon the closing of the recapitalization merger and one-quarter in each of January 2002, 2003 and 2004. Holders of restricted stock were entitled to elect cash in lieu of 40% of their respective stock, which vested at the closing of the recapitalization merger. On each of the subsequent vesting dates, holders of restricted stock may elect to receive all of the installment in common shares, 40% in cash and 60% in common shares, or 100% of the installment in cash. The number of shares to be received will increase by 6% per annum and any cash to be received will increase by 6% per annum from the $16.90 per share recapitalization consideration. As a result of the ability of the holder to elect a partial or full cash option, the restricted shares have been classified as redeemable restricted common stock. There were approximately 2.6 million restricted shares outstanding at December 31, 2001. At December 31, 2001 holders of unvested awards had elected the cash option for approximately $14.3 million of the January 14, 2002 vesting. As a result, $14.3 million has been reclassified to current liabilities. Under the terms of the Company's credit facility, the Company was limited in its ability to redeem the restricted stock award vesting in January 2002. As a result approximately $8.3 million of deferred payments will accrue interest at 12% until paid. As part of the recapitalization, holders of options with an exercise price below the merger consideration were entitled to cash equal to the difference between such merger consideration and the exercise price for such options. A payment for this excess was made in January 2001 totaling approximately $14 million. This liability was recognized in 2000 and is included in other accrued liabilities. In addition, $14 million was held in an escrow account and is included in "Prepaid expense and other assets." Holders of options with the exercise price below the merger consideration and former holders of restricted stock will also be entitled to additional cash amounts from the proceeds of the disposition of Saturn stock, if any, in accordance with the recapitalization agreement. Options with an exercise price exceeding the merger consideration were cancelled. Subsequent to the recapitalization, a new Long Term Equity Incentive Plan (the "Plan") was adopted in 2001, which provides for the issuance of equity-based incentives in various forms. During 2001, the Company granted stock options for 2,855,000 shares at a price of $16.90 per share to key employees of the company. These options have a ten year option period and vest ratably over a three year period from date of grant. However, the options exercisability is limited in the circumstances of a public offering whereby the shares are required to be held and exercised after the elapse of certain time periods. The weighted average fair value of long-term stock awards granted in 2001 was $16.90 per share. 19 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) A summary of the status of the Company's stock options granted under the new Plan or prior plans for the three years ended December 31 is as follows: (SHARES IN THOUSANDS) 2001 2000 1999 ---- ---- ---- Option shares outstanding, January 1 ............ -- 3,880 3,950 Weighted average exercise price ................. -- $ 14 $ 14 Option shares granted ........................... 2,855 30 180 Weighted average exercise price ................. $16.90 $ 12 $ 14 Option shares exercised ......................... -- (150) (140) Weighted average exercise price ................. -- $ 5 $ 5 Option shares cancelled due to forfeitures ...... -- (10) (110) Weighted average exercise price ................. -- $ 11 $ 18 Option shares cancelled due to recapitalization . -- (3,750) -- Option shares outstanding, December 31 .......... 2,855 -- 3,880 Weighted average exercise price ................. $16.90 -- $ 14 Weighted average remaining option term (in years) 9.5 -- 5.9 Option shares exercisable, December 31 .......... -- -- 1,200 Weighted average exercise price ................. -- -- $ 9 A combined total of approximately 4.9, 7.2 and 3.5 million shares of Company Common Stock were available for the granting of options and incentive awards under the above plans in 2001, 2000 and 1999, respectively. The increase in available options and stock awards from 1999 to 2000 is the result of the cancellation of options as a result of the recapitalization. The Company has elected to continue to apply the provisions of Accounting Principles Board Opinion No. 25 and, accordingly, no stock option compensation expense is included in the determination of net income in the statement of income. The weighted average fair value on the date of grant of options granted was $3.80, not applicable and $3.60 in 2001, 2000 and 1999, respectively. Had stock option compensation expense been determined pursuant to the methodology of SFAS No. 123, "Accounting for Stock-Based Compensation," the pro forma effects on the Company's earnings per share would have been a reduction of approximately $.04 in 2001, no impact in 2000, and $.04 in 1999. The fair value of the options was estimated at the date of grant using the minimum value method for 2001 and the Black-Scholes option pricing model for 1999, with the following weighted average assumptions: 2001 2000 1999 ---- ---- ---- Risk-free interest rate........................... 4.4% -- 5.1% Dividend yield.................................... -- -- 1.9% Volatility factor................................. -- -- 26.2% Expected option life (in years)................... 5.5 -- 5.5 18. EMPLOYEE BENEFIT PLANS: Pension and Profit-Sharing Benefits. Substantially all employees participate in noncontributory profit-sharing and/or contributory defined contribution plans, to which payments are approved annually by the Board of Directors. Aggregate charges to income under defined contribution plans were $6 million in 2001, $6 million in 2000 (eleven month period) and $8 million in 1999. In addition, the Company sponsors defined benefit pension plans for most of its employees. Net periodic pension cost for the Company's defined benefit pension plans includes the following components for the years ended December 31, 2001, eleven months of 2000, and 1999: 20 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS) 2001 2000 1999 ---- ---- ---- Service cost ..................................................... $7,880 $6,460 $7,590 Interest cost .................................................... 18,080 13,250 12,640 Expected return on assets ........................................ (15,170) (9,450) (9,670) Amortization of transition obligation ............................ -- 110 130 Amortization of prior-service cost ............................... 10 680 650 Amortization of net loss ......................................... -- 780 1,440 ------- ------- ------- Net periodic pension cost ........................................ $10,800 $11,830 $12,780 ======= ======= =======
Major assumptions used in accounting for the Company's defined benefit pension plans at September 30 are as follows:
(IN THOUSANDS) 2001 2000 1999 ---- ---- ---- Discount rate for obligations .................................... 7.625 7.75% 7.75% Rate of increase in compensation levels .......................... 4.00% 4.00% 5.00% Expected long-term rate of return on plan assets ................. 9.00% 9.00% 9.00%
The following provides a reconciliation of the changes in the defined-benefit pension plans' projected benefit obligations and fair value of assets for each of the two years ended December 31, and the funded status as of December 31, 2001 and 2000:
(IN THOUSANDS) 2001 2000 ---- ---- CHANGES IN PROJECTED BENEFIT OBLIGATIONS Benefit obligations at January 1 ................................. $(226,840) $(173,770) Acquisitions ................................................... (7,130) (39,440) Service cost ................................................... (7,880) (5,800) Interest cost .................................................. (18,080) (13,240) Employee contributions ......................................... (310) -- Plan amendments ................................................ (480) (450) Actuarial gain (loss) .......................................... 220 (2,080) Benefit payments ............................................... 11,730 7,660 Change in foreign currency ..................................... 1,550 280 --------- --------- Projected benefit obligations at December 31 ..................... $(247,220) ($226,840) ========= ========= CHANGES IN PLAN ASSETS Fair value of plan assets at January 1 ........................... $156,510 $101,260 Acquisitions ................................................... 2,050 50,980 Actual return on plan assets ................................... (14,310) (1,370) Contributions .................................................. 27,650 13,820 Benefit payments ............................................... (11,730) (7,470) Expenses/Other ................................................. (1,110) (710) --------- --------- Fair value of plan assets at December 31 ......................... $159,060 $156,510 ======== ======== FUNDED STATUS Plan assets less than projected benefits at December 31 .......... $(88,160) $(70,330) Unamortized prior-service cost ................................. 480 -- Unamortized net loss ........................................... 29,700 -- --------- --------- Net liability recognized at December 31 .......................... $(57,980) $(70,330) ======== ========
21 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The following provides the amounts related to the plans at December 31, 2001 and 2000: (IN THOUSANDS) 2001 2000 ---- ---- Prepaid benefit cost.............................. $ 4,550 $ -- Accrued benefit liability......................... (74,530) (70,330) Intangible asset.................................. 400 -- Accumulated other comprehensive income............ 11,600 -- -------- -------- Net liability recognized.......................... $(57,980) $(70,330) ======== ======== Effective November 28, 2000, adjustments of $9,360 and $5,740 were made to decrease projected benefit obligations and increase fair value of plan assets, respectively, for the defined benefit plans as part of stating the pension liabilities at fair value. The net adjustment has been included as a component of other long-term liabilities in the Consolidated Balance Sheet. Postretirement Benefits. The Company provides postretirement medical and life insurance benefits, none of which are funded, for certain of its active and retired employees. Net periodic postretirement benefit cost includes the following components for the years ended December 31, 2001, eleven months of 2000, and 1999: (IN THOUSANDS) 2001 2000 1999 ---- ---- ---- Service cost ............................ $ 760 $ 300 $ 400 Interest cost ........................... 3,080 1,400 1,200 Net amortization ........................ -- 500 500 ------ ------ ------ Net periodic postretirement benefit cost $3,840 $2,200 $2,100 ====== ====== ====== The following provides a reconciliation of the changes in the postretirement benefit plans' benefit obligations for each of the two years ended December 31 and the status as of December 31, 2001 and 2000: (IN THOUSANDS) 2001 2000 ---- ---- CHANGES IN BENEFIT OBLIGATIONS Benefit obligations at January 1 ........... $(40,670) $(18,200) Acquisitions ............................. -- (19,470) Service cost ............................. (760) (300) Interest cost ............................ (3,080) (1,400) Employee contributions ................... -- (100) Actuarial gain (loss) .................... (190) (2,600) Benefit payments ......................... 1,990 1,400 -------- -------- Benefit obligations at December 31 ......... $(42,710) $(40,670) ======== ======== STATUS Benefit obligations at December 31 ......... $(42,710) $(40,670) Unrecognized net gain ...................... 190 -- -------- -------- Net liability at December 31 ............... $(42,520) $(40,670) ======== ======== The discount rate used in determining the accumulated postretirement benefit obligation was 7.625% and 7.75% in 2001 and 2000, respectively. The assumed health care cost trend rate in 2001 was 11%, 22 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) decreasing to an ultimate rate of 5% over twelve years. If the assumed medical cost trend rates were increased by one percent, the accumulated postretirement benefit obligations would increase by $3.2 million and the aggregate of the service and interest cost components of net periodic postretirement benefit obligations cost would increase by $.3 million. If the assumed medical cost trend rates were decreased by one percent, the accumulated postretirement benefit obligations would decrease by $2.9 million and the aggregate of the service and interest cost components of net periodic postretirement benefit cost would decrease by $.2 million. Effective November 28, 2000, an adjustment of $6.2 million was made to increase benefit obligations for the postretirement medical and life insurance plans. The adjustment has been included as a component of other long-term liabilities in the Consolidated Balance Sheet. 19. SEGMENT INFORMATION: The Company has defined a segment as a component, with business activity resulting in revenue and expense, that 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 -- Automotive and TriMas. The Automotive Group consists of one operating segment which manufactures a broad range of engineered metal products used primarily in automotive applications and which combines capabilities in engineering, design, machining and assembly. The Automotive Group's sales are primarily to light vehicle OEM's and component assemblers. The Automotive 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 TriMas Group is comprised of three operating segments: TRANSPORTATION ACCESSORIES -- Manufacturers towing, trailer 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 -- manufacturers standard 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 SPECIALTIES -- Manufacturers 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. The Company's export sales approximated $137 million, $131 million and $143 million in 2001, 2000, and 1999, respectively. The Company acquired Simpson Industries, Inc. on December 15, 2000. December 31 balance sheet data for 2000 includes Simpson and income statement data includes Simpson activity for the period December 15, 2000 through December 31, 2000. 23 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Segment activity for the twelve months ended December 31, 2001, 2000 and 1999 is as follows (except as indicated):
(IN THOUSANDS) 11 MONTHS ENDED 2001 11/28/00 1999 ---- -------- ---- SALES Automotive Group ............................................. $ 1,403,410 $ 813,180 $ 873,150 ----------- ----------- ----------- Transportation Accessories ................................... 259,030 260,900 260,370 Industrial Specialties ....................................... 321,690 304,240 323,370 Specialty Fasteners .......................................... 143,700 167,070 183,980 ----------- ----------- ----------- TriMas Group ............................................... 724,420 732,210 767,720 Companies Sold or Held for Sale .............................. -- -- 38,820 ----------- ----------- ----------- Total ..................................................... $ 2,127,830 $ 1,545,390 $ 1,679,690 =========== =========== =========== EBITDA Automotive Group ............................................. $ 200,710 $ 131,450 $ 153,140 ----------- ----------- ----------- Transportation Accessories ................................... 38,730 41,160 44,270 Industrial Specialties ....................................... 62,650 63,660 71,220 Specialty Fasteners .......................................... 21,310 32,560 39,530 ----------- ----------- ----------- TriMas Group ............................................... 122,690 137,380 155,020 Companies Sold or Held for Sale .............................. -- -- 5,800 Corporate overhead/centralized resources ..................... (29,000) (5,670) (17,960) ----------- ----------- ----------- Total EBITDA ................................................. 294,400 263,160 296,000 Depreciation &amortization ................................... (153,370) (72,530) (75,870) Legacy stock award expense ................................... (7,930) (5,330) (4,700) ----------- ----------- ----------- Operating profit .......................................... $ 133,100 $ 185,300 $ 215,430 =========== =========== ===========
Note: The one-month period ended December 31, 2000 had sales of $105 million and EBITDA of $(14) million. 24 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) FINANCIAL SUMMARY BY SEGMENT:
(IN THOUSANDS) 12 MONTHS ENDED 2001 12/31/00 1999 ---- -------- ---- NET ASSETS: Automotive Group ............................................. $ 890,050 $ 844,530 $ 639,330 ---------- ---------- ---------- Transportation Accessories ................................... 360,400 421,330 289,530 Industrial Specialties ....................................... 611,960 689,760 564,620 Specialty Fasteners .......................................... 331,010 371,860 305,440 ---------- ---------- ---------- TriMas Group ............................................... 1,303,370 1,482,950 1,159,590 Corporate .................................................... 359,570 265,640 73,950 ---------- ---------- ---------- Total ...................................................... $2,552,990 $2,593,120 $1,872,870 ========== ========== ========== CAPITAL EXPENDITURES: Automotive Group ............................................. $ 96,730 $ 79,910 $ 88,890 ---------- ---------- ---------- Transportation Accessories ................................... 5,350 9,470 9,190 Industrial Specialties ....................................... 7,250 10,380 25,910 Specialty Fasteners .......................................... 6,090 2,950 7,220 ---------- ---------- ---------- TriMas Group ............................................... 18,690 22,800 42,320 Corporate .................................................... 2,600 4,300 4,530 ---------- ---------- ---------- Total ...................................................... $ 118,020 $ 107,010 $ 135,740 ========== ========== ========== DEPRECIATION & AMORTIZATION: 1/1 -- 11/27 2000 ---- Automotive Group ............................................. $ 86,670 $ 34,730 $ 36,280 ---------- ---------- ---------- Transportation Accessories ................................... 17,640 10,610 10,070 Industrial Specialties ....................................... 30,020 17,910 18,390 Specialty Fasteners .......................................... 15,210 10,420 10,600 ---------- ---------- ---------- TriMas Group ............................................... 62,870 38,940 39,060 Corporate .................................................... 23,370 8,670 7,960 ---------- ---------- ---------- Total ...................................................... $ 172,910 $ 82,340 $ 83,300 ========== ========== ==========
The following table presents the Company's revenues for each of the years ended December 31 and net assets at each year ended December 31 by geographic area, attributed to each subsidiary's continent of domicile. Revenue and net assets from no single foreign country was material to the consolidated revenues and net assets of the Company.
(IN THOUSANDS) 2001 2000 1999 ---- ---- ---- NET NET NET SALES ASSETS SALES ASSETS SALES ASSETS ----- ------ ----- ------ ----- ------ Europe ............................ $250,850 $290,000 $164,000 $193,880 $165,000 $182,000 Australia ......................... 22,030 11,000 23,000 15,000 23,000 14,000 Other North America ............... 71,670 57,000 24,000 56,200 12,000 18,000 -------- -------- -------- -------- -------- -------- Total foreign ..................... $344,550 $358,000 $211,000 $265,080 $200,000 $214,000 ======== ======== ======== ======== ======== ========
25 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) A significant percentage of the Automotive Group's revenues are from four major customers. The following is a summary of the percentage of Automotive Group revenue from these customers for the fiscal years ended December 31:
2001 2000 1999 ---- ---- ---- Ford Motor Company....................................... 16.6% 14.6% 16.2% General Motors Corporation............................... 12.9% 3.2% 4.2% New Venture Gear......................................... 11.7% 20.7% 22.8% DaimlerChrysler.......................................... 10.4% 9.8% 11.5%
The information that the chief operating decision maker utilizes includes total net assets as presented in the table above. Total net assets are defined by the Company as total assets less current liabilities. 20. OTHER INCOME (EXPENSE), NET:
11/28 -- 12/31 1/1 -- 11/27 2001 2000 2000 1999 ---- ---- ---- ---- Other, net: Interest income ........................... $ 1,110 $ 230 $ 1,310 $ 2,170 Debt fee amortization ..................... (11,620) (550) (4,490) (2,730) A/R securitization financing fees ......... (8,140) (940) (3,270) -- Other, net ................................ (5,290) 130 5,050 (1,850) -------- ------- ------- ------- Total other, net ......................... $(23,940) $(1,130) $(1,400) $(2,410) ======== ======= ======= =======
21. INCOME TAXES:
(IN THOUSANDS) 11/28 -- 12/31 1/1 -- 11/27 2001 2000 2000 1999 ---- ---- ---- ---- INCOME (LOSS) BEFORE INCOME TAXES: Domestic .................................. $(82,830) $ (41,710) $ 128,030 $123,610 Foreign ................................... 34,900 (890) 28,640 15,860 -------- --------- --------- -------- $(47,930) $ (42,600) $ 156,670 $139,470 ======== ========= ========= ======== PROVISION FOR INCOME TAXES: Currently payable: Federal ................................. $(17,290) $ (18,580) $ 26,500 $ 26,810 State and local ......................... 2,020 (1,070) 4,770 5,450 Foreign ................................. (2,540) (2,460) 11,450 5,220 Deferred: Federal ................................. (4,220) 4,740 19,220 7,390 Foreign ................................. 17,430 1,640 (570) 2,170 -------- --------- --------- -------- Income taxes ............................ $ (4,600) $ (15,730) $ 61,370 $ 47,040 ======== ========= ========= ========
26 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The components of deferred taxes at December 31, 2001 and 2000 are as follows:
(IN THOUSANDS) 2001 2000 ---- ---- DEFERRED TAX ASSETS: Inventories .................................................................... $ 4,720 $ 3,510 Accrued liabilities and other long-term liabilities ............................ 76,860 68,620 Expected capital loss benefit from disposition of businesses ................... 3,610 5,030 Alternative minimum tax ........................................................ -- 430 Net operating losses ........................................................... 7,000 -- -------- -------- 92,190 77,590 -------- -------- DEFERRED TAX LIABILITIES: Property and equipment ......................................................... 206,170 153,610 Intangible assets .............................................................. 184,530 171,230 Debt ........................................................................... 15,230 24,130 Other, principally investments ................................................. 10,380 16,540 -------- -------- 416,310 365,510 -------- -------- Net deferred tax liability ....................................................... $324,120 $287,920 ======== ========
The following is a reconciliation of tax computed at the U.S. federal statutory rate to the provision for income taxes allocated to income before income taxes:
(IN THOUSANDS) 11/28 -- 12/31 1/1 -- 11/30 2001 2000 2000 1999 ---- ---- ---- ---- U.S. federal statutory rate ......................... 35% 35% 35% 35% Tax at U.S. federal statutory rate .................. $(16,780) $(14,900) $ 54,830 $ 48,810 State and local taxes, net of federal tax benefit ... 1,310 (700) 3,100 3,540 Higher effective foreign tax rate ................... 2,670 (500) 3,060 1,840 Change in German tax rate ........................... -- -- (2,200) -- Disposition of businesses ........................... -- -- (960) (7,870) Amortization in excess of tax, net .................. 7,110 500 4,680 2,950 Redemption cost ..................................... -- -- -- -- Other, net .......................................... 1,090 (130) (1,140) (2,230) -------- -------- -------- -------- Income taxes ........................................ $ (4,600) $(15,730) $ 61,370 $ 47,040 ======== ======== ======== ========
As of December 31, 2001,the Company has unused U.S. net operating loss (NOL) carryforwards of approximately $20 million. These losses will expire in 2021. A provision has not been made at December 31, 2001 for U.S. or additional foreign withholding taxes on approximately $157 million of undistributed earnings of foreign subsidiaries as those earnings are intended to be permanently reinvested. Generally, such earnings become subject to U.S. tax upon the remittance of dividends and under certain other circumstances. It is not practicable to estimate the amount of deferred tax liability on such undistributed earnings. Tax expense for the period January 1, 2000 through November 28, 2000 is shown before the extraordinary item of $36,330, net of tax benefit of $7,930. The tax benefit of the extraordinary item was reduced by $7,560 as a result of such cost being non-deductible redemption cost for tax purposes. 22. FAIR VALUE OF FINANCIAL INSTRUMENTS: In accordance with Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments," the following methods were used to estimate the fair value of each class of financial instruments: 27 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) CASH AND CASH INVESTMENTS The carrying amount reported in the balance sheet for cash and cash investments approximates fair value. ACCOUNTS RECEIVABLE, NOTES RECEIVABLE AND OTHER ASSETS Fair values of financial instruments included in accounts receivable, notes receivable and other assets were estimated using various methods including quoted market prices and discounted future cash flows based on the incremental borrowing rates for similar types of investments. In addition, for variable-rate notes receivable that fluctuate with the prime rate, the carrying amounts approximate fair value. LONG-TERM DEBT The carrying amount of bank debt and certain other long-term debt instruments approximates fair value as the floating rates applicable to this debt reflect changes in overall market interest rates. The fair values of the Company's subordinated debt instruments were based on quoted market prices until December 2001 when the debt no longer traded on a public exchange. The fair values of certain other debt instruments at December 31, 2001 are estimated by discounting future cash flows based on the Company's incremental borrowing rate for similar types of debt instruments. DERIVATIVES The Company manages its exposure to changes in interest rates through the use of interest rate protection agreements. These interest rate derivatives are designated as cash flow hedges. The effective portion of each derivative's gain or loss is initially reported as a component of other comprehensive income and subsequently reclassified into earnings when the forecasted transaction affects earnings. The Company does not use derivatives for speculative purposes. In February 2001, the Company entered into interest rate protection agreements with various financial institutions to hedge a portion of its interest rate risk related to the 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 a 3-month LIBOR interest rate cap and floor of 7% and approximately 4.5%, respectively. The agreements also include four interest rate caps at a 3-month LIBOR interest rate of 7% with a total notional amount of $376 million. Neither the Company nor the counterparties are required to collateralize their respective obligations under these agreements. The fair value of the Company's interest rate protection agreements approximated $(4.6) million at December 31, 2001. The $(4.6) million has been recognized as a liability at December 31, 2001 and the change in fair value is included in other comprehensive income. $(2.7) million of the liability is classified as current based on the maturity dates of the derivatives and is included in accrued liabilities. The remaining $(1.9) million is considered long-term and is included in other long-term liabilities. Under these agreements, the Company recognized additional interest expense of $1.4 million during the year ended December 31, 2001. The Company expects to reclassify a portion of the $(4.6) million currently included in other comprehensive income into earnings as quarterly interest payments are made. Assuming interest rates remain constant, the Company expects to recognize $2.7 million as additional expense during the year ended December 31, 2002. Interest rate swap agreements covering a notional amount of $400 million of the Company's floating rate debt were entered into in 1998 at an aggregate interest rate of approximately six percent before the addition of the borrowing margin in the underlying bank agreement. The fair value of the swap agreements, $13 million at December 31, 1999, was not recognized in the consolidated financial statements since they are accounted for as hedges of the floating rate exposure. These swap agreements expired or 28 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) were terminated in June 2000 at a gain, and the Company received proceeds of approximately $15.8 million. The cash proceeds were used for the reduction of long-term debt. The Company recognized a pre-tax gain of approximately $13 million in November 2000 related to the interest rate swap agreements as a result of the repayment of the related debt due to the recapitalization. The carrying amounts and fair values of the Company's financial instruments at December 31, 2001 and 2000 are as follows:
(IN THOUSANDS) 2001 2000 ---- ---- CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE ------ ----- ------ ----- Cash and cash investments ............................ -- -- $ 26,320 $ 26,320 Accounts receivable, notes receivable and other assets ............................................. $ 106,170 $ 106,170 $ 121,580 $ 121,450 Interest rate arrangement ............................ $ (4,550) $ (4,550) -- -- Long-term debt: Bank debt .......................................... $1,075,010 $1,075,010 $1,165,190 $1,165,190 41/2% convertible subordinated debentures .......... $ 262,860 $ 262,860 $ 245,360 $ 245,360 Other long-term debt ............................... $ 21,040 $ 21,030 $ 15,750 $ 15,660
23. COMMITMENTS AND CONTINGENCIES A civil suit was filed in the United States District Court for the Central District of California in April 1983 by the United States of America and the State of California under the Federal Superfund law against over 30 defendants, including a subsidiary of ours, for alleged release into the environment of hazardous substances disposed of at the Stringfellow Disposal Site in California. The plaintiffs have requested, among other things, that the defendants clean up the contamination at that site. A consent decree has been entered into by the plaintiffs and the defendants, including us, providing that the consenting parties perform partial remediation at the site. The State has agreed to take over clean-up of the site, as well as responsibility for governmental entities' past response costs, and will continue to do so unless the interim accord between it and the other defendants is terminated on or before April 1, 2002, in which case the extent of the State's responsibility could be subject to future litigation. Additionally, we and approximately 60 other entities including the State are defendants in a toxic tort suit brought in the Superior Court of the State of California in May 1998 by various persons residing in the area of the site and seeking damages for alleged person injuries claimed to arise from exposure to contaminants from the site. The case is still in the discovery state but we believe there are good defenses to the claims against us. Another civil suit was filed in the United States District Court for the Central District of California in December 1988 by the United States of America and the State against more than 180 defendants, including us, for alleged release into the environment of hazardous substances disposed of at the Operating Industries, Inc. site in California. This site served for many years as a depository for municipal and industrial waste. The plaintiffs have requested, among other things, that the defendants clean up the contamination at that site. Consent decrees have been entered into by the plaintiffs and a group of the defendants, including us, providing that the consenting parties perform certain remedial work at the site and reimburse the plaintiffs for certain past costs incurred by the plaintiffs at the site. While based upon our present knowledge and subject to future legal and factual developments, we do not believe that any of these litigations will have a material adverse effect on our consolidated financial position, results of operations or cash flow, there can be no assurance that future legal and factual developments will not result in materially adverse expenditures. Additionally, the Company is party to approximately 546 pending cases involving an aggregate of approximately 4,424 claimants alleging personal injury from exposure to asbestos containing materials 29 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) formerly used in gaskets (both encapsulated and otherwise) manufactured or distributed by certain of our subsidiaries for use in the petrochemical refining and exploration industries. There were three types of gaskets that we manufactured and we ceased the use of asbestos in our products at various dates in the 1980's and 1990's. We believe that many of our pending cases relate to locations which none of our gaskets were distributed or used. In addition, we acquired various companies to distribute our products that distributed gaskets of other manufacturers prior to acquisition. Approximately 264 cases involving 2,285 claimants (which are not included in the pending cases noted above) that have been either dismissed for lack of product identification or otherwise or been settled or made subject to agreements to settle. Our total settlement costs for all such cases, some of which were filed over 12 years ago, have been approximately $1.2 million. Based upon our experience to date and other available information, we do not believe that these cases will have a material adverse effect on our financial condition or results of operation. However, we cannot assure you that we will not be subjected to significant additional claims in the future or that the cost of settling cases in which product identification can be made will not increase or that we will not be subjected to further claims in respect of the former activities of our acquired gasket distributors. The Company is subject to other claims and litigation in the ordinary course of our business, but do not believe that any such claim or litigation will have a material adverse effect on our financial position or results of operations. 24. INTERIM AND OTHER SUPPLEMENTAL FINANCIAL DATA (UNAUDITED):
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS) FOR THE QUARTERS ENDED DECEMBER SEPTEMBER JUNE MARCH 31ST 30TH 30TH 31ST ---- ---- ---- ---- 2001: Net sales............................... $484,630 $514,290 $572,780 $556,130 Gross profit............................ $ 70,380 $102,950 $118,550 $106,340 Net (loss).............................. $(23,000) $ (6,420) $ (710) $(13,200) Per common share: Basic................................. $ (0.58) $ (0.19) $ (0.04) $ (0.37) Diluted............................... $ (0.58) $ (0.19) $ (0.04) $ (0.37) 11/28 /2000 -- 12/31/2000: Net sales............................... $104,770 Gross profit............................ $ 11,160 Net (loss).............................. $(26,870) Per common share: Basic................................. $ (.79) Diluted............................... $ (.79) 1/1/2000 -- 11/27/2000: Net sales............................... $249,910 $393,770 $442,310 $459,400 Gross profit............................ $ 52,950 $ 95,410 $114,080 $119,400 Net income (loss)....................... $(10,890) $ 17,860 $ 26,180 $ 25,820 Per common share: Basic................................. $ (0.27) $ 0.44 $ 0.64 $ 0.63 Diluted............................... $ (0.27) $ 0.37 $ 0.51 $ 0.51 MARKET PRICE PER COMMON SHARE: High.................................. $ 171/8(a) $ 165/8 $ 147/16 $ 149/16 Low................................... $ 153/16(a) $ 101/2 $1013/16 $ 113/8
(a) As a result of the recapitalization on November 28, 2000, the Company's stock no longer has a public market. Prices are based upon public market transactions through November 28, 2000. 30 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONCLUDED) In the fourth quarter 2000, the Company recognized a pre-tax gain of approximately $13 million related to the interest rate swap agreements that terminated in June 2000 due to the repayment of the related debt. The 2001 and 2000 income (loss) per common share amounts for the quarters do not total to the full year amounts due to the purchase and retirement of shares throughout the year. 25. RELATED PARTY TRANSACTIONS In November 2000, we were acquired by an investor group led by Heartland Industrial Partners, L.P. ("Heartland") and Credit Suisse First Boston ("CSFB") in a recapitalization transaction. Heartland is a private equity fund established to "buy, build and grow" industrial companies in sectors with attractive consolidation opportunities. We believe the recapitalization and Heartland's investment in us will allow us to aggressively pursue internal growth opportunities and strategic acquisitions and to increase the scale and profitability of our businesses. In addition, the Company entered into a monitoring agreement with Heartland for an annual fee of $4 million plus additional fees for financings and acquisitions under certain circumstances. Total fees paid to Heartland in 2001 were approximately $4 million. The Heartland monitoring agreement is based on a percentage of assets calculation and Heartland has the option of taking the greater of the calculated fee or $4 million. Effective January 23, 2001, the Company changed its name to Metaldyne Corporation from MascoTech, Inc. The Company has a corporate services agreement with Masco Corporation, which at December 31, 2001 owned approximately 5.5 percent of the Company's common stock. Under the terms of the agreement, the Company pays fees to Masco Corporation for various corporate staff support and administrative services, research and development and facilities. Such fees aggregated approximately $.4 million in 2001, $2.9 million, net in 2000 and $6.4 million in 1999. In addition, Metaldyne received an additional one-time reimbursement in 2001 related to certain post-acquisition costs. The Company and Masco have agreed that Masco will continue to provide certain services, on a reduced basis through 2002. 26. GOODWILL Effective January 1, 2002, we adopted Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets" and ceased the amortization of goodwill. At January 1, 2002, our unamortized goodwill balance was approximately $1,039 million. The Company's Step 1 test as required by SFAS No. 142 indicated a carrying value in excess of fair value relating to the TriMas reporting units at January 1, 2002. The Company will be completing the more detailed Step 2 analysis and recording the required adjustment, if any, by the end of fiscal 2002. Additionally, we have completed our assessment for the Automotive Group which has indicated that the fair value of these units exceed their corresponding carrying value which we have determined based upon the discounted estimated future cash flows of the reporting units. The following table summarizes the effect on net income (loss) and basic and diluted earnings (loss) per share as a result of excluding amortization expense related to goodwill that is no longer being amortized for the year ended December 31, 2001, the eleven months ended November 28, 2000, the one month period ended December 31, 2000 and the year ended December 31, 1999.
Twelve Months One Month Ended Eleven Months Twelve Months Ended Ended Ended December 31, December 31, November 28, December 31, 2001 2000 2000 1999 ---- ---- ---- ---- Income (loss) before extraordinary items ...................... $(43,330) $(26,870) $ 95,300 $ 92,430 Extraordinary items, net of income taxes ...................... -- -- (36,330) -- ------- -------- -------- -------- Net Income (loss) ............................................. (43,330) (26,870) 58,970 92,430 Add back: goodwill amortization .............................. 25,780 1,610 18,100 18,600 ------- -------- -------- -------- Net income (loss) as adjusted ................................. (17,550) (25,260) 77,070 111,030 Less: Preferred stock dividends .............................. 5,850 390 -- -- ------- -------- -------- -------- Net income (loss) attributable to common stock, as adjusted ... (23,400) (25,650) 77,070 111,030 ======= ======== ======== ======== Basic earnings (loss) per share, as adjusted .................. $ (0.55) $ (0.74) $ 1.88 $ 2.70 ======= ======== ======== ======== Diluted earnings (loss) per share, as adjusted ................ $ (0.55) $ (0.74) $ 1.40 $ 2.01 ======= ======== ======== ========
31 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 27. SUBSEQUENT EVENTS Issuance of Senior Subordinated Notes: On June 20, 2002, the Company (the "Parent") issued $250 million of 11% Senior Subordinated Notes due 2012 (the "11% Notes). Certain of the Company's domestic wholly owned subsidiaries, as defined in the related bond indenture, (the "Guarantors") irrevocably and unconditionally fully guarantee the 11% Notes. Set forth below, the condensed consolidating financial information presents the financial position, results of operations and cash flows of the guarantors. Trimas Divestiture: On June 6, 2002, the Company sold TriMas Corporation ("TriMas") common stock to Heartland Industrial Partners, L.P. ("Heartland") and other investors amounting to approximately 66% of the fully diluted common equity of TriMas. The Company retained approximately 34% of the fully diluted common equity of TriMas in the form of common stock and a presently exercisable warrant to purchase shares of TriMas common stock at a nominal exercise price. Consequently, as a result of the investment and the other transactions, the Company (1) received $840 million in the form of cash, debt reduction of approximately $496 million and reduced receivables facility balances by approximately $136 million and (2) received or retained common stock and a warrant in TriMas representing the Company's 34% retained interest. As Heartland is the Company's controlling shareholder, this transaction was accounted for as a reorganization of entities under common control and accordingly no gain or loss has been recognized. 32 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Post-acquisition Basis Condensed Consolidating Financial Information The following condensed consolidating financial information presents: (1) Condensed consolidating financial statements as of December 31, 2001 and 2000, and for the year ended December 31, 2001, the one month ended December 31, 2000 of (a) Metaldyne Corporation, the parent and issuer, (b) the guarantor subsidiaries, (c) the non-guarantor subsidiaries and (d) the Company on a consolidated basis, and (2) Elimination entries necessary to consolidate Metaldyne Corporation, the parent, with guarantor and non-guarantor subsidiaries. The condensed consolidating financial statements are presented on the equity method. Under this method, the investments in subsidiaries are recorded at cost and adjusted for the Company's share of the subsidiaries' cumulative results of operations, capital contributions, distributions and other equity changes. The principal elimination entries eliminate investments in subsidiaries and intercompany balances and transactions. METALDYNE CORPORATION GUARANTOR/NON-GUARANTOR CONDENSED CONSOLIDATING BALANCE SHEETS DECEMBER 31, 2001 $ IN THOUSANDS
PARENT GUARANTOR NON-GUARANTOR ELIMINATIONS CONSOLIDATED ------ --------- ------------- ------------ ------------ ASSETS Current assets: Cash and cash investments $ - $ (12,930) $ 12,930 $ - $ - Receivables, net - 7,320 96,840 - 104,160 Inventories - 44,850 117,810 - 162,660 Deferred and refundable income taxes - 12,500 1,130 - 13,630 Prepaid expenses and other current assets - 18,850 10,480 - 29,330 ---------- ---------- ---------- ----------- ---------- Total current assets - 70,590 239,190 - 309,780 Equity and other investments in affiliates - - 17,130 - 17,130 Property and equipment, net - 494,530 426,910 - 921,440 Excess of cost over net assets of acquired companies - 503,970 534,840 - 1,038,810 Investment in subsidiaries 712,350 423,070 - (1,135,420) - Deferred financing costs and other assets - 330,840 335,690 - 666,530 ---------- ---------- ---------- ----------- ---------- Total assets $ 712,350 $1,823,000 $1,553,760 $(1,135,420) $2,953,690 ========== ========== ========== =========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ - $ 91,750 $ 77,410 $ - $ 169,160 Accrued liabilities - 132,240 56,600 - 188,840 Current maturities, long-term debt - 9,340 33,360 - 42,700 ---------- ---------- ---------- ----------- ---------- Total current liabilities - 233,330 167,370 - 400,700 Other long-term debt - 672,770 423,290 - 1,096,060 Subordinated debentures - 262,860 - - 262,860 Deferred income taxes - 148,270 189,490 - 337,760 Other long-term liabilities - 128,360 18,060 - 146,420 Intercompany accounts, net 2,460 (317,810) 315,350 - - ---------- ---------- ---------- ----------- ---------- Total liabilities $ 2,460 $1,127,780 $1,113,560 $ - $2,243,800 ---------- ---------- ---------- ----------- ---------- Redeemable preferred stock 55,160 - - - 55,160 Redeemable restricted common stock 32,760 - - - 32,760 Less: Restricted stock awards (12,060) - - - (12,060) ---------- ---------- ---------- ----------- ---------- Total redeemable stock 75,860 - - - 75,860 ---------- ---------- ---------- ----------- ---------- Shareholders' equity: Preferred stock - - - - Common stock 42,570 - - - 42,570 Paid-in capital 679,670 - - - 679,670 Accumulated deficit (76,440) - - - (76,440) Accumulated other comprehensive income (loss) (11,770) - - - (11,770) Less: Restricted stock awards - - - - - Investment by Parent/Guarantor - 695,220 440,200 (1,135,420) - ---------- ---------- ---------- ----------- ---------- Total shareholders' equity $ 634,030 $ 695,220 $ 440,200 $(1,135,420) $ 634,030 ---------- ---------- ---------- ----------- ---------- Total liabilities, redeemable stock and shareholders' equity $ 712,350 $1,823,000 $1,553,760 $(1,135,420) $2,953,690 ========== ========== ========== =========== ==========
33 METALDYNE CORPORATION GUARANTOR/NON-GUARANTOR CONDENSED CONSOLIDATING BALANCE SHEETS DECEMBER 31, 2000 $ IN THOUSANDS
PARENT GUARANTOR NON-GUARANTOR ELIMINATIONS CONSOLIDATED ------ --------- ------------- ------------ ------------ ASSETS Current assets: Cash and cash investments $ - $ (1,210) $ 27,530 $ - $ 26,320 Receivables, net - 33,580 86,390 - 119,970 Inventories - 63,060 130,180 - 193,240 Deferred and refundable income taxes - 53,970 1,370 - 55,340 Prepaid expenses and other current assets - 31,250 7,920 - 39,170 ---------- ---------- ---------- ----------- ---------- Total current assets - 180,650 253,390 - 434,040 Equity and other investments in affiliates - - 26,060 - 26,060 Property and equipment, net - 578,350 382,440 - 960,790 Excess of cost over net assets of acquired companies - 420,200 584,240 - 1,004,440 Investment in subsidiaries 724,030 423,070 - (1,147,100) - Deferred financing costs and other assets - 383,020 183,480 - 566,500 ---------- ---------- ---------- ----------- ---------- Total assets $ 724,030 $1,985,290 $1,429,610 $(1,147,100) $2,991,830 ========== ========== ========== =========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ - $ 93,030 $ 62,590 $ - $ 155,620 Accrued liabilities - 102,940 93,800 - 196,740 Current maturities, long-term debt - 5,410 40,940 - 46,350 ---------- ---------- ---------- ----------- ---------- Total current liabilities - 201,380 197,330 - 398,710 Other long-term debt - 740,860 440,080 - 1,180,940 Subordinated debentures - 245,360 - - 245,360 Deferred income taxes - 153,820 167,520 - 321,340 Other long-term liabilities - 107,640 39,870 - 147,510 Intercompany accounts, net 26,060 (161,740) 135,680 - - ---------- ---------- ---------- ----------- ---------- Total liabilities $ 26,060 $1,287,320 $ 980,480 $ - $2,293,860 ---------- ---------- ---------- ----------- ---------- Redeemable preferred stock 33,370 - - - 33,370 Redeemable restricted common stock 45,900 - - - 45,900 Less: Restricted stock awards (20,560) - - - (20,560) ---------- ---------- ---------- ----------- ---------- Total redeemable stock 58,710 - - - 58,710 ---------- ---------- ---------- ----------- ---------- Shareholders' equity: Preferred stock - - - - Common stock 38,670 - - - 38,670 Paid-in capital 617,780 - - - 617,780 Accumulated deficit (27,260) - - - (27,260) Accumulated other comprehensive income (loss) 10,070 - - - 10,070 Less: Restricted stock awards - - - - - Investment by Parent/Guarantor - 697,970 449,130 (1,147,100) - ---------- ---------- ---------- ----------- ---------- Total shareholders' equity $ 639,260 $ 697,970 $ 449,130 $(1,147,100) $ 639,260 ---------- ---------- ---------- ----------- ---------- Total liabilities, redeemable stock and shareholders' equity $ 724,030 $1,985,290 $1,429,610 $(1,147,100) $2,991,830 ========== ========== ========== =========== ==========
34 METALDYNE CORPORATION GUARANTOR/NON-GUARANTOR CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 2001 $ IN THOUSANDS
PARENT GUARANTOR NON-GUARANTOR ELIMINATIONS CONSOLIDATED ------ --------- ------------- ------------ ------------ Net sales $ - $1,137,190 $ 992,130 $(1,490) $ 2,127,830 Cost of sales - (989,060) (742,040) 1,490 (1,729,610) ---------- ---------- ---------- ------- ----------- Gross profit - 148,130 250,090 - 398,220 Selling, general and administrative expenses - (109,400) (147,790) - (257,190) Legacy restricted stock award expense - (7,930) - - (7,930) ---------- ---------- ---------- ------- ----------- Operating profit - 30,800 102,300 - 133,100 ---------- ---------- ---------- ------- ----------- Other income (expense),net: Interest expense - (76,980) (71,180) - (148,160) Equity and other income (loss) from affiliates - - (8,930) - (8,930) Intercompany income (expense), net - 12,670 (12,670) - - Other, net - (21,210) (2,730) - (23,940) ---------- ---------- ---------- ------- ----------- Other income (expense), net - (85,520) (95,510) - (181,030) ---------- ---------- ---------- ------- ----------- Income (loss) before income taxes - (54,720) 6,790 - (47,930) Income (taxes) credit - 13,450 (8,850) - 4,600 Equity in net income of subsidiaries (43,330) 6,870 - 36,460 - ---------- ---------- ---------- ------- ----------- Net income (loss) $ (43,330) $ (34,400) $ (2,060) $36,460 $ (43,330) Preferred stock dividends (5,850) - - - (5,850) ---------- ---------- ---------- ------- ----------- Earnings (loss) attributable to common stock $ (49,180) $ (34,400) $ (2,060) $36,460 $ (49,180) ========== ========== ========== ======= ===========
35 METALDYNE CORPORATION GUARANTOR/NON-GUARANTOR CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS ONE MONTH ENDED DECEMBER 31, 2000 $ IN THOUSANDS
PARENT GUARANTOR NON-GUARANTOR ELIMINATIONS CONSOLIDATED ------ --------- ------------- ------------ ------------ Net sales $ - $ 46,210 $ 58,630 $ (70) $104,770 Cost of sales - (54,110) (39,570) 70 (93,610) -------- -------- -------- -------- -------- Gross profit - (7,900) 19,060 - 11,160 Selling, general and administrative expenses - (14,940) (21,030) - (35,970) Legacy restricted stock award expense - (1,220) - - (1,220) Charge for asset impairment - - - - - -------- -------- -------- -------- -------- Operating loss - (24,060) (1,970) - (26,030) -------- -------- -------- -------- -------- Other income (expense),net: Interest expense - (9,960) (4,480) - (14,440) Equity and other income (loss) from affiliates - - (1,000) - (1,000) Intercompany income (expense), net - (1,560) 1,560 - - Other, net - (7,850) 6,720 - (1,130) -------- -------- -------- -------- -------- Other income (expense), net - (19,370) 2,800 - (16,570) -------- -------- -------- -------- -------- Income (loss) before income taxes - (43,430) 830 - (42,600) Income (taxes) credit - 15,570 160 - 15,730 Equity in net income of subsidiaries (26,870) 1,990 - 24,880 - -------- -------- -------- -------- -------- Net income (loss) $(26,870) $(25,870) $ 990 $ 24,880 $(26,870) Preferred stock dividends (390) - - - (390) -------- -------- -------- -------- -------- Earnings (loss) attributable to common stock $(27,260) $(25,870) $ 990 $ 24,880 $(27,260) ======== ======== ======== ======== ========
36 METALDYNE CORPORATION GUARANTOR/NON-GUARANTOR CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 2001 $ IN THOUSANDS
PARENT GUARANTOR NON-GUARANTOR ELIMINATIONS CONSOLIDATED ------ --------- ------------- ------------ ------------ Cash flows from operating activities: Net cash provided by operating activities $ 23,600 $287,890 $(140,260) $ - $171,230 -------- -------- --------- ------- -------- Cash flows from investing activities: Captial expenditures - (77,840) (40,180) - (118,020) Acquisitions, net of cash acquired - (83,320) - - (83,320) Proceeds from notes receivable - 630 470 - 1,100 Proceeds from sale/leaseback of fixed assets - 73,590 11,070 - 84,660 Other, net - 4,230 (270) - 3,960 -------- -------- --------- ------- -------- Net cash used for investing activities - (82,710) (28,910) - (111,620) -------- -------- --------- ------- -------- Cash flows from financing activities: Proceeds from borrowings - 115,890 11,080 - 126,970 Principal payments on borrowings - (179,320) (36,180) - (215,500) Change in intercompany accounts (23,600) (156,070) 179,670 - - Other, net - 2,600 - - 2,600 -------- -------- --------- ------- -------- Net cash provided by (used for) financing activities (23,600) (216,900) 154,570 - (85,930) -------- -------- --------- ------- -------- Net increase (decrease) in cash - (11,720) (14,600) - (26,320) Cash and cash equivalents, beginning of year - (1,210) 27,530 - 26,320 -------- -------- --------- ------- -------- Cash and cash equivalents, end of year $ - $(12,930) $ 12,930 $ - $ - ======== ======== ========= ======= ========
37 METALDYNE CORPORATION GUARANTOR/NON-GUARANTOR CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS ONE MONTH ENDED DECEMBER 31, 2000 $ IN THOUSANDS
PARENT GUARANTOR NON-GUARANTOR ELIMINATIONS CONSOLIDATED ------ --------- ------------- ------------ ------------ Cash flows from operating activities: Net cash provided by (used for) operating activities $ 77,600 $(113,310) $ 30,830 $ - $ (4,880) --------- --------- --------- -------- -------- Cash flows from investing activities: Captial expenditures - (2,260) (6,900) - (9,160) Acquisitions, net of cash acquired - (365,170) - - (365,170) Proceeds from sale/leaseback of fixed assets - 51,290 (7,700) - 43,590 Other, net - - - - - --------- --------- --------- -------- -------- Net cash provided by (used for) investing activities - (316,140) (14,600) - (330,740) --------- --------- --------- -------- -------- Cash flows from financing activities: Proceeds from borrowings - 259,870 11,600 - 271,470 Principal payments on borrowings - (41,000) (11,600) - (52,600) Proceeds from issuance of common stocks - 126,110 - - 126,110 Dividends paid (390) - - - (390) Change in intercompany accounts (77,210) 80,010 (2,800) - - Other, net - 3,340 (20) - 3,320 --------- --------- --------- -------- -------- Net cash provided by financing activities (77,600) 428,330 (2,820) - 347,910 --------- --------- --------- -------- -------- Net increase (decrease) in cash - (1,120) 13,410 - 12,290 Cash and cash equivalents, beginning of year - (90) 14,120 - 14,030 --------- --------- --------- -------- -------- Cash and cash equivalents, end of year $ - $ (1,210) $ 27,530 $ - $ 26,320 ========= ========= ========= ======== ========
Pre-acquisition Basis Condensed Consolidating Financial Information As discussed in Note 1., on November 2000, a recapitalization of the Company was consummated in accordance with the terms of a recapitalization agreement. Subsequently, the Company retroactively adopted purchase accounting for the November 2000 recapitalization transaction. The pre-acquisition basis financial information for the periods prior to November 28, 2000 are reflected on the historical basis of accounting and all periods subsequent to November 28, 2000 are reflected on a purchase accounting basis. As a result the pre-acquisition basis condensed consolidating financial information is not comparable to the post-acquisition basis condensed consolidating financial information. The following condensed consolidating financial information presents: (1) Condensed consolidating financial statements for the eleven months ended November 30, 2000 and the year ended December 31, 1999 of (a) Metaldyne Corporation, the parent and issuer, (b) the guarantor subsidiaries, (c) the non-guarantor subsidiaries and (d) the Company on a consolidated basis, and (2) Elimination entries necessary to consolidate Metaldyne Corporation, the parent, with guarantor and non-guarantor subsidiaries. The condensed consolidating financial statements are presented on the equity method. Under this method, the investments in subsidiaries are recorded at cost and adjusted for the Company's share of the subsidiaries' cumulative results of operations, capital contributions, distributions and other equity changes. The principal elimination entries eliminate investments in subsidiaries and intercompany balances and transactions. 38 METALDYNE CORPORATION GUARANTOR/NON-GUARANTOR CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS ELEVEN MONTHS ENDED NOVEMBER 27, 2000 $ IN THOUSANDS
PARENT GUARANTOR NON-GUARANTOR ELIMINATIONS CONSOLIDATED ------ --------- ------------- ------------ ------------ Net sales $429,650 $257,520 $859,860 $ (1,640) $ 1,545,390 Cost of sales (352,890) (203,070) (609,230) 1,640 (1,163,550) -------- -------- -------- --------- ----------- Gross profit 76,760 54,450 250,630 -- 381,840 Selling, general and administrative expenses (56,960) 410 (135,340) -- (191,890) Gains on disposition of businesses, net 680 -- -- -- 680 Legacy restricted stock award expense (5,330) -- -- -- (5,330) -------- -------- -------- --------- ----------- Operating profit 15,150 54,860 115,290 -- 185,300 -------- -------- -------- --------- ----------- Other income (expense),net: Interest expense (39,350) (30) (39,130) -- (78,510) Equity and other income from affiliates 10,820 -- -- -- 10,820 Gain from disposition of, or changes in investments in equity affiliates 27,520 -- -- -- 27,520 Intercompany income (expense), net 21,700 (4,270) (17,430) -- -- Income related to termination of interest rate swap agreements 12,940 -- -- -- 12,940 Other, net (3,730) (360) 2,690 -- (1,400) -------- -------- -------- --------- ----------- Other income (expense), net 29,900 (4,660) (53,870) -- (28,630) -------- -------- -------- --------- ----------- Income (loss) before income taxes and extraordinary charge 45,050 50,200 61,420 -- 156,670 Income (taxes) credit (31,470) (2,610) (27,290) -- (61,370) -------- -------- -------- --------- ----------- Net income (loss) before extraordinary charge 13,580 47,590 34,130 -- 95,300 Extraordinary charge, net of taxes of $7,930 (36,330) -- -- -- (36,330) Equity in net income of subsidiaries 81,720 1,530 -- (83,250) -- -------- -------- -------- --------- ----------- Net income (loss) $ 58,970 $ 49,120 $ 34,130 $ (83,250) $ 58,970 Preferred stock dividends -- -- -- -- -- -------- -------- -------- --------- ----------- Earnings (loss) attributable to common stock $ 58,970 $ 49,120 $ 34,130 $ (83,250) $ 58,970 ======== ======== ======== ========= ===========
39 METALDYNE CORPORATION GUARANTOR/NON-GUARANTOR CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1999 $ IN THOUSANDS
PARENT GUARANTOR NON-GUARANTOR ELIMINATIONS CONSOLIDATED ------ --------- ------------- ------------ ------------ Net sales $ 506,740 $ 237,440 $ 938,310 $(2,800) $1,679,690 Cost of sales (418,420) (188,830) (642,210) 2,800 (1,246,660) ---------- ---------- ---------- ------- ---------- Gross profit 88,320 48,610 296,100 - 433,030 Selling, general and administrative expenses (60,740) 590 (149,680) - (209,830) Gains on disposition of businesses, net 14,440 - - - 14,440 Legacy restricted stock award expense (4,700) - - - (4,700) Charge for asset impairment - (8,000) (9,510) - (17,510) ---------- ---------- ---------- ------- ---------- Operating profit 37,320 41,200 136,910 - 215,430 ---------- ---------- ---------- ------- ---------- Other income (expense), net: Interest expense (31,020) (40) (52,570) - (83,630) Equity and other income from affiliates 13,230 - - - 13,230 Gain (charge) from dispoistion of, or changes in investments in equity affiliates (3,150) - - - (3,150) Intercompany income (expense), net 8,490 (4,170) (4,320) - - Other, net (2,860) (1,040) 1,490 - (2,410) ---------- ---------- ---------- ------- ---------- Other income (expense), net (15,310) (5,250) (55,400) - (75,960) ---------- ---------- ---------- ------- ---------- Income (loss) before income taxes 22,010 35,950 81,510 - 139,470 Income (taxes) credit (9,670) (3,540) (33,830) - (47,040) Equity in net income of subsidiaries 80,090 1,590 - (81,680) - ---------- ---------- ---------- ------- ---------- Net income (loss) $ 92,430 $ 34,000 $ 47,680 $(81,680) $ 92,430 Preferred stock dividends - - - - - ---------- ---------- ---------- ------- ---------- Earnings (loss) attributable to common stock $ 92,430 $ 34,000 $ 47,680 $(81,680) $ 92,430 ========== ========== ========== ======= ==========
40 METALDYNE CORPORATION GUARANTOR/NON-GUARANTOR CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS ELEVEN MONTHS ENDED NOVEMBER 27, 2000 $ IN THOUSANDS
PARENT GUARANTOR NON-GUARANTOR ELIMINATIONS CONSOLIDATED ------ --------- ------------- ------------ ------------ Cash flows from operating activities: Net cash provided by operating activities $ 272,590 $ 12,850 $ 12,490 $ - $ 297,930 ----------- ---------- ---------- --------- ---------- Cash flows from investing activities: Captial expenditures (34,990) (28,970) (33,890) - (97,850) Proceeds from sale of businesses, net 3,200 - - - 3,200 Acquisitions, net of cash acquired - - (21,330) - (21,330) Proceeds from notes receivable (220) - 1,480 - 1,260 Proceeds from sale of equity investments 123,920 - - - 123,920 Proceeds from sale/leaseback of fixed assets (3,420) 9,870 1,050 - 7,500 Other, net (16,480) - 240 - (16,240) ----------- ---------- ---------- --------- ---------- Net cash provided by (used for) investing activities 72,010 (19,100) (52,450) - 460 ----------- ---------- ---------- --------- ---------- Cash flows from financing activities: Proceeds from borrowings 1,000,290 - 42,830 - 1,043,120 Principal payments on borrowings (1,033,830) - (67,150) - (1,100,980) Debt issuance costs (41,470) - - - (41,470) Investment from Heartland Investment Group 435,220 - - - 435,220 Retirement of common stock (584,830) - - - (584,830) Dividends paid (10,740) - - - (10,740) Purchase accounting transaction costs (39,580) - - - (39,580) Proceeds from interest rate swap settlement 15,820 - - - 15,820 Change in intercompany accounts (58,770) 7,130 51,640 - - Other, net (4,570) - (840) - (5,410) ----------- ---------- ---------- --------- ---------- Net cash used for financing activities (322,460) 7,130 26,480 - (288,850) ----------- ---------- ---------- --------- ---------- Net increase (decrease) in cash 22,140 880 (13,480) - 9,540 Cash and cash equivalents, beginning of year (22,300) (810) 27,600 - 4,490 ----------- ---------- ---------- --------- ---------- Cash and cash equivalents, end of year $ (160) $ 70 $ 14,120 $ - $ 14,030 =========== ========== ========== ========= ==========
41 METALDYNE CORPORATION GUARANTOR/NON-GUARANTOR CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 1999 $ IN THOUSANDS
PARENT GUARANTOR NON-GUARANTOR ELIMINATIONS CONSOLIDATED ------ --------- ------------- ------------ ------------ Cash flows from operating activities: Net cash provided by (used for) operating activities $ 85,250 $(98,430) $ 165,810 $ - $ 152,630 --------- -------- --------- -------- --------- Cash flows from investing activities: Captial expenditures (24,640) (45,990) (65,110) - (135,740) Proceeds from sale of businesses, net 92,620 - - - 92,620 Acquisitions, net of cash acquired (88,550) - - - (88,550) Proceeds from notes receivable 20 - 2,160 - 2,180 Proceeds from sale/leaseback of fixed assets 350 6,430 3,540 - 10,320 Other, net (29,810) - 21,550 - (8,260) --------- -------- --------- -------- --------- Net cash provided by (used for) investing activities (50,010) (39,560) (37,860) - (127,430) --------- -------- --------- -------- --------- Cash flows from financing activities: Proceeds from borrowings 24,000 - 4,540 - 28,540 Principal payments on borrowings (20,660) (460) (19,030) - (40,150) Retirement of common stock (19,530) - - - (19,530) Dividends paid (13,470) - - - (13,470) Change in intercompany accounts (30,180) 137,610 (107,430) - - Other, net 12,150 - (17,640) - (5,490) --------- -------- --------- -------- --------- Net cash provided by (used for) financing activities (47,690) 137,150 (139,560) - (50,100) --------- -------- --------- -------- --------- Net increase (decrease) in cash (12,450) (840) (11,610) - (24,900) Cash and cash equivalents, beginning of year (9,850) 30 39,210 - 29,390 --------- -------- --------- -------- --------- Cash and cash equivalents, end of year $ (22,300) $ (810) $ 27,600 $ - $ 4,490 ========= ======== ========= ======== =========
42 EX-99.2 4 file003.txt 10-Q FINANCIALS Exhibit 99.2 METALDYNE CORPORATION CONSOLIDATED CONDENSED BALANCE SHEETS JUNE 30, 2002 AND DECEMBER 31, 2001 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED) DECEMBER 31, JUNE 30, 2002 2001 ------------- ---- ASSETS Current assets: Cash and cash investments............................................................. $10,760 $-- Receivables, net...................................................................... 232,070 104,160 Inventories........................................................................... 74,050 162,660 Deferred and refundable income taxes.................................................. 4,060 13,630 Prepaid expenses and other assets..................................................... 56,250 29,330 ---------- ---------- Total current assets................................................................ $377,190 309,780 Restricted cash......................................................................... 77,000 -- Equity and other investments in affiliates.............................................. 186,160 17,130 Property and equipment, net............................................................. 662,880 921,440 Excess of cost over net assets of acquired companies.................................... 522,270 1,038,810 Intangibles and other assets............................................................ 298,130 666,530 ---------- ---------- Total assets....................................................................... $2,123,630 $2,953,690 ========== ========== LIABILITIES Current liabilities: Accounts payable...................................................................... $167,100 $169,160 Accrued liabilities................................................................... 82,360 188,840 Current maturities, long-term debt.................................................... 4,350 42,700 ---------- ---------- Total current liabilities........................................................... $253,810 $400,700 Long-term debt.......................................................................... 418,140 1,096,060 Subordinated debentures................................................................. 407,910 262,860 Deferred income taxes................................................................... 168,510 337,760 Other long-term liabilities............................................................. 117,200 146,420 ---------- ---------- Total liabilities.................................................................. $1,365,570 $2,243,800 ---------- ---------- Redeemable preferred stock, 545,154 shares outstanding.................................. 58,670 55,160 Redeemable restricted common stock, 1.7 million and 2.6 million shares outstanding respectively.............................................................. 32,640 32,760 Less: Restricted unamortized stock awards............................................... (4,690) (12,060) ---------- ---------- Total redeemable stock............................................................. $86,620 75,860 ---------- ---------- SHAREHOLDERS' EQUITY Preferred stock (non-redeemable), $1 par: Authorized 25 million; Outstanding: None.............................................. -- -- Common stock, $1 par: Authorized: 250 million; Outstanding: 42.6 million.................................... 42,650 42,570 Paid-in capital......................................................................... 681,050 679,670 Accumulated deficit..................................................................... (85,090) (76,440) Accumulated other comprehensive income (loss)........................................... 32,830 (11,770) ---------- ---------- Total shareholders' equity......................................................... 671,440 634,030 ---------- ---------- Total liabilities, redeemable stock and shareholders' equity....................... $2,123,630 $2,953,690 ========== ==========
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, 2002 AND 2001 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 (UNAUDITED) (UNAUDITED) 2002 2001 2002 2001 ---- ---- ---- ---- Net sales.................................................. $530,460 $572,780 $1,090,330 $1,128,910 Cost of sales.............................................. (424,110) (454,230) (872,530) (904,020) --------- --------- ---------- ---------- Gross profit........................................... 106,350 118,550 217,800 224,890 Selling, general and administrative expenses............... (59,270) (67,580) (125,670) (138,870) Legacy restricted stock award expense...................... (1,080) (1,760) (3,160) (3,530) --------- -------- ---------- ---------- Operating profit....................................... 46,000 49,210 88,970 82,490 Other expense, net: Interest expense......................................... (28,500) (37,570) (56,620) (80,140) Loss on interest rate arrangements upon early retirement of term loans............................... (7,550) -- (7,550) -- Equity gain (loss) from affiliates, net.................. 2,780 (440) 2,330 (1,020) Other, net............................................... (7,270) (9,120) (12,300) (15,230) --------- -------- ---------- ---------- Other expense, net..................................... (40,540) (47,130) (74,140) (96,390) --------- -------- ---------- ---------- Income (loss) before income taxes and extraordinary item....................................... 5,460 2,080 14,830 (13,900) Income taxes (credit)...................................... (17,720) 2,790 (14,210) (620) --------- -------- ---------- ---------- Income (loss) before extraordinary item.................... 23,180 (710) 29,040 (13,280) Extraordinary loss on repurchase of debentures and early retirement of term loans, net of taxes of $21,920............................................... (34,290) -- (34,290) -- --------- -------- ---------- ---------- Net loss................................................... (11,110) (710) (5,250) (13,280) Preferred stock dividends.................................. 1,700 1,170 3,400 2,340 --------- -------- ---------- ---------- Loss attributable to common stock........................ $(12,810) $(1,880) $(8,650) $(15,620) ========= ======== ========== ========== Basic earnings (loss) per share: Before extraordinary loss less preferred stock........... $.50 $(.04) $.60 $(.37) Extraordinary loss....................................... (.80) -- (.80) -- --------- -------- ---------- ---------- Net loss attributable to common stock.................... $(.30) $(.04) $(.20) $(.37) ========= ======== ========== ========== Diluted earnings (loss) per share: Before extraordinary loss less preferred stock........... $.48 $(.04) $.58 $(.37) Extraordinary loss....................................... (.77) -- (.77) -- --------- -------- ---------- ---------- Net loss attributable to common stock.................... $(.29) $(.04) $(.19) $(.37) ========= ======== ========== ==========
The accompanying notes are an integral part of the consolidated condensed financial statements. 2 METALDYNE CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001 (DOLLARS IN THOUSANDS)
SIX MONTHS ENDED JUNE 30 ------- (UNAUDITED) 2002 2001 ---- ---- OPERATING ACTIVITIES: Income before extraordinary item..................................................... $29,040 $(13,280) Adjustments to arrive at cash provided by (used for) operating activities: Depreciation and amortization in operating profit.................................. 58,930 82,320 Legacy stock award expense......................................................... 3,160 3,530 Debt fee amortization.............................................................. 3,410 3,600 Deferred income taxes.............................................................. 3,040 (5,230) Non-cash interest expense (interest accretion)..................................... 8,900 8,350 Loss on interest rate arrangements upon early retirement of debt................... 7,550 -- Tax refund receivable.............................................................. (20,000) -- Other, net......................................................................... 860 2,600 Changes in current assets and liabilities: Accounts receivable............................................................... (71,230) (56,140) Net proceeds from and repayments of accounts receivable sale...................... (167,360) 44,730 Inventory......................................................................... (3,400) 26,390 Prepaid expenses and other current assets......................................... (3,090) 31,470 Accounts payable and accrued expenses............................................. 32,440 (14,690) --------- ------- Total change in current assets and liabilities.................................. (212,640) 31,760 --------- ------- Net cash provided by (used for) operating activities................................. (117,750) 113,650 --------- ------- INVESTING ACTIVITIES: Capital expenditures................................................................. (57,210) (64,790) Acquisition of business, net of cash received........................................ -- (83,320) Disposition of business.............................................................. 840,000 -- Proceeds from sale/leaseback of fixed assets......................................... 33,370 36,440 Other, net........................................................................... (500) (3,580) --------- ------- Net cash provided by (used for) investing activities................................. 815,660 (115,250) --------- ------- FINANCING ACTIVITIES: Proceeds from borrowings............................................................. 925,400 69,490 Principal payments on borrowings..................................................... (1,519,950) (76,780) Restricted cash related to the convertible subordinated notes........................ (77,000) -- Capitalization of debt refinancing fees.............................................. (11,590) -- Issuance of common stock............................................................. 1,270 -- Penalties on early extinguishment of debt............................................ (6,480) -- Other, net........................................................................... 1,200 (2,010) --------- ------- Net cash used for financing activities............................................... (687,150) (9,300) --------- ------- Net increase (decrease) in cash........................................................ 10,760 (10,900) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD......................................... -- 26,320 --------- ------- CASH AND CASH EQUIVALENTS, END OF PERIOD............................................... $10,760 $15,420 ========= ======= Supplementary cash flow information: Cash paid (refunded) for income taxes, net........................................... 9,200 (9,750) Cash paid for interest............................................................... 65,420 72,710
The accompanying notes are an integral part of the consolidated condensed financial statements. 3 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BUSINESS AND OTHER INFORMATION We ("Metaldyne" or the "Company") are a leading global manufacturer of highly engineered metal components for the global light vehicle market. Our products include metal-formed and precision-engineered components and modular systems used in vehicle transmission, engine and chassis applications. In the opinion of Company management, the unaudited financial statements contain all adjustments, including adjustments of a normal recurring nature, necessary to present fairly the financial position, results of operations and cash flows for the periods presented. These statements should be read in conjunction with the Company's financial statements included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2001 (the "2001 Form 10K"). The results of operations for the six-month period ended June 30, 2002 are not necessarily indicative of the results for the full year. The Company's fiscal year ends on the Sunday nearest December 31. The Company's fiscal quarters end on the Sundays nearest March 31, June 30, and September 30. All year and quarter references relate to the Company's fiscal year and fiscal quarters unless otherwise stated. As described in Note 1 to our financial statements included in our 2001 Form 10K, we had a change in accounting basis relating to our November 2000 Recapitalization. The three months and six months ended June 30, 2001 financial information included herein, reflect the retroactively adopted effect of this change in accounting basis. Certain prior period amounts have been reclassified to conform with current period presentation. 2. DISPOSITION OF BUSINESS On June 6, 2002, the Company sold TriMas Corporation ("TriMas") common stock to Heartland Industrial Partners, L.P. ("Heartland") and other investors amounting to approximately 66% of the fully diluted common equity of TriMas. The Company retained approximately 34% of the fully diluted common equity of TriMas in the form of common stock and a presently exercisable warrant to purchase shares of TriMas common stock at a nominal exercise price. Pursuant to the terms of a stock purchase agreement, Heartland and the other investors invested approximately $265 million in cash in TriMas to acquire the 66% interest. In connection with the investment, TriMas entered into a senior credit facility and a receivables facility and issued senior subordinated notes due 2012. TriMas used borrowings under the senior credit facility and proceeds from the issuance of the notes to repay borrowings made by its subsidiaries under the Company's credit agreement, to repay certain debt that was owed to the Company and to repurchase TriMas originated receivables balances under the Company's receivables facility. In addition, prior to the closing, TriMas declared and paid a cash dividend to the Company equal to the difference between $840 million and the aggregate amount of such debt repayment and receivables repurchase. Consequently, as a result of the investment and the other transactions, the Company (1) received $840 million in the form of cash, debt reduction and reduced receivables facility balances and (2) received or retained common stock and a warrant in TriMas representing the Company's 34% retained interest. As Heartland is the Company's controlling shareholder, this transaction was accounted for as a reorganization of entities under common control and accordingly no gain or loss has been recognized. The equity investment in TriMas recorded at June 30, 2002 may be adjusted to reflect finalization of certain estimates on the date of closing. 4 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The assets and liabilities of TriMas at June 6, 2002 consisted of the following (of which the Company retained a 34% interest) (in thousands): Current assets.................................... $249,970 Property and equipment, net....................... 240,480 Goodwill.......................................... 527,820 Intangibles and other assets...................... 320,300 ---------- Total assets...................................... $1,338,570 Current liabilities............................... $148,330 Non-current liabilities........................... 611,100 ---------- Total liabilities................................. $759,430 Net assets........................................ $579,140 ========== TriMas is included in the Company's financial results through the date of this transaction. Going forward, the Company will account for its 34% retained interest in TriMas under the equity method of accounting. The combined results of operations for the six months ended June 30, 2002 for Saturn Electronics & Engineering, Inc. and the one month ended June 30, 2002 for TriMas and financial position of TriMas and Saturn, the Company's equity-basis investments in affiliated companies, are summarized below at June 30, 2002 (in thousands): Results of Operations information: Net Sales........................ $250,600 Gross Profit..................... 65,450 Net Income....................... 6,850 Financial position information: Current assets.................................... $338,650 Non-current assets................................ 1,211,300 Current liabilities............................... 277,460 Non-current liabilities........................... 833,960 Net assets........................................ $438,540 The purpose of the TriMas divestiture was to allow the Company to repay some of its debt maturing in 2003, defer some of its credit facility amortization by repaying term debt with the proceeds in forward order of maturity, enhance its liquidity and allow it to focus on its core automotive businesses while retaining an interest in TriMas. As a result of the transaction, after payment of expenses, the Company or TriMas repaid approximately $496 million of term debt under Metaldyne's senior credit facility, repurchased approximately $128 million of its 4.5% convertible subordinated debentures due 2003, and reduced outstanding balances under the Company's receivables facility by approximately $136 million (of which approximately $86 million relates to the elimination of the TriMas receivables base). Using additional proceeds from the TriMas transaction, the Company recently announced a tender offer to purchase up to approximately $78 million aggregate principal amount of its 4.5% convertible subordinated debentures due 2003. Upon completion of this offering, we expect to incur an approximate $8 million extraordinary loss on the extinguishment of this debt. Approximately $77 million of the proceeds has been designated as restricted at June 30, 2002 (this represents excess available cash from the TriMas divestiture to satisfy the above tender offer). The Company expects to complete this tender offer in the third quarter, and expects the remaining outstanding face value of these 4.5% subordinated notes to approximate $100 million after that time. 5 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 3. DEBT REFINANCING On June 20, 2002, the Company entered into two arrangements to refinance its long-term debt. In the first arrangement, the Company issued $250 million of 11% senior subordinated notes due 2012 in a private placement under Rule 144A of the Securities Act of 1933, as amended. In connection with the 11% senior subordinated notes offering described above, the Company also amended and restated its credit facility to replace its original tranche A, B and C term loans with a new $400 million tranche D term loan payable in semi-annual installments of $0.5 million with the remaining outstanding balance due December 31, 2009. In addition to the term loan, the credit facility also includes a revolving credit facility with a total principal amount commitment of $250 million. Both the senior revolving credit facility and the senior term loan facility mature December 31, 2009. The obligations under the credit facility are collateralized by substantially all of the Company's assets and are guaranteed by substantially all of the Company's domestic subsidiaries. In conjunction with the above senior subordinated debt offering and the amended credit agreement, the Company repaid the outstanding balance on its tranche A, B and C term loan facilities. The Company's long-term debt is summarized below.
(In millions) JUNE 30, DECEMBER 31, 2002 2001 ---- ---- Senior credit facilities: Tranche A term loan facility...................................................... -- $449 Tranche B term loan facility...................................................... -- 478 Tranche C term loan facility...................................................... -- 185 Tranche D term loan facility...................................................... $400 -- Revolving credit facility......................................................... -- -- ---- ------ Total senior credit facility........................................................ $400 $1,112 11% senior subordinated notes, due 2012........................................... 250 -- 4.5% convertible subordinated debentures, due 2003................................ 158 263 Other debt........................................................................ 22 27 ---- ------ Total debt.......................................................................... 830 1,402 Less current maturities............................................................. (4) (43) ---- ------ Long-term debt...................................................................... $826 $1,359 Cash and cash equivalents........................................................... 11 -- Restricted cash..................................................................... 77 -- ---- ------ Net long-term debt.................................................................. $738 $1,359 ==== ======
As a result of the refinancing described above, the Company cancelled its $100 million subordinated loan commitment from Masco Corporation. This commitment had been established for use in the event that funds were not otherwise available to satisfy principal obligations under the 4.5% convertible subordinated debentures at maturity. As a result of the large prepayment of this obligation, the commitment from Masco Corporation was deemed unnecessary. Borrowings under the credit facility will bear interest, at our option, at either: o A base rate used by JPMorgan Chase Bank, plus an applicable margin; or o A eurocurrency rate on deposits for one, two, three or nine month periods (or nine or twelve month periods if, at the time of the borrowing, all lenders agree to make such a duration available), plus the applicable margin. 6 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The applicable margin on loans is subject to change depending on the Company's leverage ratio and is presently 2.75% on base rate loans and 3.75% on eurocurrency loans. The credit facility contains negative and affirmative covenants and requirements affecting us and our subsidiaries, including, among other things, restrictions on incurring new debt, capital expenditures, investments and asset sales, and maintenance of certain financial ratios. The Company was in compliance with these covenants at June 30, 2002. In connection with the Company's early retirement and refinancing of its prior credit facility, it incurred one-time charges totaling $63.6 million, including prepayment penalties, write-offs of capitalized debt issuance costs, a write-off of the unamortized discount on the 4.5% subordinated debenture and losses realized on interest rate arrangements associated with the term loans. A loss of $7.5 million is reflected as a "Loss on interest rate arrangements upon early retirement of term loans" in the Company's consolidated statement of operations for the six months ended June 30, 2002 (see Note 4). The remaining $56.1 million of costs are reflected, net of the associated tax benefit of $21.9 million, as an "Extraordinary loss on repurchase of debentures and early retirement of term loans" in the Company's consolidated statement of operations. The Company capitalized $9.1 million and $2.4 million of debt issuance costs associated with the 11% senior subordinated notes due 2012 and the amended and restated credit facility, respectively. These debt issuance costs consist primarily of legal fees and facility fees paid to the lenders. The $9.1 million and $2.4 million of costs are being amortized based on the effective interest method over the 10-year term of the 11% senior subordinated notes due 2012 and the 7 1/2-year term of the term loan agreement, respectively. The unamortized balances of $9.1 million related to the senior subordinated notes and $2.4 million related to the amended and restated credit facility are included in "Other assets" in the Company's consolidated balance sheet as of June 30, 2002. 4. DERIVATIVE FINANCIAL INSTRUMENTS The Company manages its exposure to changes in interest rates through the use of interest rate protection agreements. These interest rate derivatives are designated as cash flow hedges. The effective portion of each derivative's gain or loss is initially reported as a component of other comprehensive income and subsequently reclassified into earnings when the forecasted transaction affects earnings. The Company does not use derivatives for speculative purposes. The Company has entered into interest rate protection agreements with various financial institutions to hedge a portion of its interest rate risk related to the 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 a three month LIBOR interest rate cap and floor of 7% and approximately 4.5%, respectively. The agreements also include four interest rate caps at a three month LIBOR interest rate of 7% with a total notional amount of $348 million. As a result of the Company's early retirement of its term loans in June 2002 (see Note 3), a cumulative non-cash loss of $7.5 million was recorded in the second quarter and is reflected as a "Loss on interest rate arrangements upon early retirement of term loans" in the Company's consolidated statement of operations for the six months ended June 30, 2002. The two interest rate collars and two of the interest rate caps totaling $200 million were immediately redesignated to the Company's new tranche D term note in June 2002, resulting in a cumulative unrealized gain of $1 million as of June 30, 2002 which is included in other comprehensive income in the Company's consolidated balance sheet. The remaining two interest rate caps totaling $148 million no longer qualify for hedge accounting. Therefore, any unrealized gain or loss is recorded as other income or expense in the consolidated statement of operations beginning June 20, 2002. 7 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 5. ACCOUNTS RECEIVABLE SECURITIZATION The Company has 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, which amounted to a total of $3.3 million for the six months ended June 30, 2002, and is included in other expense in the Company's consolidated statement of operations. At June 30, 2002, the Company's funding under the facility was zero with $102 million available but not utilized. At December 31, 2001, the Company funded approximately $167 million under the facility. The discount rate at June 19, 2002 was 2.85% compared to 3.02% at December 31, 2001. The usage fee under the facility is 1.5%. In addition, the Company is required to pay a fee of 0.5% on the unused portion of the facility. 6. NEW ACCOUNTING PRONOUNCEMENTS GOODWILL AND OTHER INTANGIBLE ASSETS Effective January 1, 2002, we adopted Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets" and ceased the amortization of goodwill. At June 30, 2002, our unamortized goodwill balance was approximately $522 million. The Company's Step 1 test as required by SFAS No. 142 indicated a carrying value in excess of fair value relating to the TriMas reporting units at January 1, 2002. The Company will be completing the more detailed Step 2 analysis and recording the required adjustment, if any, by the end of fiscal 2002. Additionally we have completed our assessment for the Automotive Group which has indicated that the fair value of these units exceed their corresponding carrying value which we have determined based upon the discounted estimated future cash flows of the reporting units. The following table summarizes the effect on net loss and basic and diluted loss per share as a result of excluding amortization expense related to goodwill that is no longer being amortized for the three and six months ended June 30, 2001. The three and six months ended June 30, 2002 are included for comparison purposes.
(In thousands) THREE MONTHS SIX MONTHS ENDED JUNE 30 ENDED JUNE 30 ------------- ------------- 2002 2001 2002 2001 ---- ---- ---- ---- Income (loss) before extraordinary item ..................... $ 23,180 $ (710) $ 29,040 $(13,280) Loss on early extinguishment of debt, net of income taxes ...................................................... (34,290) -- (34,290) -- -------- -------- -------- -------- Net loss .................................................... (11,110) (710) (5,250) (13,280) -------- -------- -------- -------- Add back: goodwill amortization ............................. -- 11,650 -- 19,110 -------- -------- -------- -------- Net income (loss), as adjusted .............................. (11,110) 10,940 (5,250) 5,830 Less: Preferred stock dividends ............................. 1,700 1,170 3,400 2,340 -------- -------- -------- -------- Net income (loss) attributable to common stock, as adjusted ................................................... $(12,810) $ 9,770 $ (8,650) $ 3,490 ======== ======== ======== ======== Basic earnings (loss) per share, as adjusted ................ $ (0.30) $ (0.23) $ (0.20) $ 0.08 ======== ======== ======== ======== Diluted earnings (loss) per share, as adjusted .............. $ (0.29) $ (0.23) $ (0.19) $ 0.08 ======== ======== ======== ========
Except for the divestiture of TriMas, there has been no significant change in amortizable intangible assets disclosed in the Company's 2001 Form 10K. Amortization expense of $17 million was reported during the six months ended June 30, 2002. 8 Acquired Intangible Assets As of June 30, 2002 ------------------------------------ Gross Carrying Accumulated Amount Amortization -------------- ------------ Amortized intangible assets Customer Contracts 91,000 (15,900) Technology and Other 159,150 (18,080) -------- ------- Total 250,150 (33,980) ======== ======= Aggregate Amortization Expense: For the six months ended June 30, 2002 16,650 Estimated Amortization Expense: For the year ended December 31, 2002 27,380 For the year ended December 31, 2003 21,460 For the year ended December 31, 2004 21,460 For the year ended December 31, 2005 21,060 For the year ended December 31, 2006 21,060 Goodwill The changes in the carrying amount of goodwill for the six months ended June 30, 2002 are as follows:
Chassis Driveline Engine TriMas Total ------- --------- ------ ------ ----- Balance as of January 1, 2002 71,600 277,600 147,740 541,870 1,038,810 Exchange impact from foreign currency 25,330 25,330 TriMas divestiture - - - (541,870) (541,870) ------- --------- ------- ------- ------- Balance as of June 30, 2002 71,600 302,930 147,740 - 522,270 ======= ========= ======= ======= =======
9 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) ACCOUNTING FOR ASSET RETIREMENT OBLIGATIONS The Financial Accounting Standards Board approved the issuance of SFAS No. 143, "Accounting for Asset Retirement Obligations" in June 2001, which is effective January 1, 2003. SFAS No. 143 requires that an existing legal obligation associated with the retirement of a tangible long-lived asset be recognized as a liability when incurred and the amount of the liability be initially measured at fair value. The Company is currently reviewing the provisions of SFAS No. 143 and assessing the impact of adoption. ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG LIVED ASSETS On January 1, 2002, we adopted SFAS No. 144, "Accounting for the Impairment or Disposal of Long Lived Assets." Under SFAS No. 144, a single accounting method was established for long-lived assets to be disposed. SFAS No. 144 requires the Company to recognize an impairment loss only if the carrying amount of a long-lived asset is not recoverable from its undiscounted cash flows and the loss is the difference between the carrying amount and fair value. The adoption of this Statement did not have any impact on the financial position and results of operations of the Company. ACCOUNTING FOR EXTRAORDINARY ITEMS, INTANGIBLE ASSETS AND LEASES In April 2002, the Financial Accounting Standards Board issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections." With the rescission of SFAS No. 4 and 64, only gains and losses from extinguishments of debt that meet the criteria of APB Opinion No. 30 would be classified as extraordinary items. This statement also rescinds SFAS No. 44, "Accounting for Intangible Assets of Motor Carriers." This statement amends SFAS No. 13, "Accounting for Leases," to eliminate the inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. SFAS No. 145 also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings or describe their applicability under changed conditions. SFAS No. 145 is effective for fiscal years beginning after May 15, 2002. The Company is currently reviewing the provisions of this Statement and will adopt it effective with the Company's 2003 fiscal year end. 10 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 7. EARNINGS PER SHARE The following are reconciliations of the numerators and denominators used in the computations of basic and diluted earnings per common share:
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS) THREE MONTHS ENDED JUNE 30 SIX MONTHS ENDED JUNE 30 ------- ------------------------ 2002 2001 2002 2001 ---- ---- ---- ---- Weighted average number of shares outstanding................ 42,650 42,550 42,650 42,550 ======== ======= ======= ======== Income (loss) before extraordinary item...................... $23,180 $(710) $29,040 $(13,280) Loss on early extinguishment of debt, net of income taxes....................................................... (34,290) -- (34,290) -- -------- ------- ------- -------- Net loss..................................................... (11,110) (710) (5,250) (13,280) Less: Preferred stock dividends.............................. 1,700 1,170 3,400 2,340 -------- ------- ------- -------- Loss used for basic and diluted earnings per share computation................................................. $(12,810) $(1,880) $(8,650) $(15,620) ======== ======= ======= ======== Basic earnings (loss) per share: Before extraordinary loss less preferred stock.............. $0.50 $(0.04) $0.60 $(0.37) Extraordinary loss.......................................... (.80) -- (0.80) -- -------- ------- ------- -------- Net loss attributable to common stock....................... $(0.30) $(0.04) $(0.20) $(0.37) ======== ======= ======= ======== Total shares used for basic earnings per share computation................................................. 42,650 42,550 42,650 42,550 Contingently issuable shares................................. 1,760 -- 1,760 -- -------- ------- ------- -------- Total shares used for diluted earnings per share computation................................................. 44,410 42,550 44,410 42,550 ======== ======= ======= ======== Diluted earnings (loss) per share: Before extraordinary loss less preferred stock.............. $0.48 $(0.04) $0.58 $(0.37) Extraordinary loss.......................................... (0.77) -- (0.77) -- -------- ------- ------- -------- Net loss attributable to common stock....................... $(0.29) $(0.04) $(0.19) $(0.37) ======== ======= ======= ========
Diluted earnings per share reflect the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock. Excluded from the calculation of diluted earnings per share are 2,490,000 of stock options as they had no dilutive effect at June 30, 2002 and 2001. 8. IMPACT OF NEW TAX REGULATION During the quarter ended June 30, 2002, the Company completed its analysis of the impact related to the U.S. Department of Treasury's recently issued regulation replacing the loss disallowance rules applicable to the sale of stock of a subsidiary member of a consolidated tax group. These regulations permit us to utilize a previously disallowed tax capital loss that primarily resulted from the sale of a subsidiary in 2000. Accordingly, we recorded a tax benefit of $20 million in the three months ended June 30, 2002. We expect our effective tax rate for the remaining two quarters of fiscal 2002, to be approximately 39% of earnings before income taxes and extraordinary losses. 11 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 9. INVENTORIES Inventories by component are as follows:
(In Thousands) JUNE 30, 2002 DECEMBER 31, 2001 ------------- ----------------- Finished goods......................... $21,030 $ 81,540 Work in process........................ 30,050 41,060 Raw materials.......................... 22,970 40,060 ------- -------- $74,050 $162,660 ======= ========
10. PROPERTY AND EQUIPMENT, NET Property and equipment, net reflects accumulated depreciation of $106 million and $90 million as of June 30, 2002 and December 31, 2001, respectively. In December 2001 and January 2002, the Company entered into sale-leaseback transactions with respect to equipment and approximately 20 parcels of real property with total net proceeds of approximately $56 million. Proceeds of approximately $23 million and $33 million were received in December 2001 and January 2002, respectively. 11. COMPREHENSIVE INCOME The Company's total comprehensive income for the period was as follows:
(In Thousands) THREE MONTHS SIX MONTHS ENDED JUNE 30 ENDED JUNE 30 ------------- ------------- 2002 2001 2002 2001 ---- ---- ---- ---- Income (loss) before extraordinary item............ $23,180 $(710) $29,040 $(13,280) Loss on early extinguishment of debt, net of income taxes.............................. (34,290) -- (34,290) -- ------- ------ ------- -------- Net loss........................................... (11,110) (710) (5,250) (13,280) Other comprehensive income (loss): Impact of TriMas disposition on foreign currency translation................... (1,910) -- (1,910) -- Foreign currency translation adjustment..................................... 47,630 7,290 39,660 (6,190) Interest rate agreements......................... 5,200 (1,000) 6,850 (1,000) ------- ------ ------- -------- Total other comprehensive income (loss)........................................... 50,920 6,290 44,600 (7,190) ------- ------ ------- -------- Total comprehensive income (loss).................. $39,810 $5,580 $39,350 $(20,470) ======= ====== ======= ========
12. COMMITMENTS AND CONTINGENCIES The commitments and contingencies disclosed in our 2001 Form 10K relate to potential obligations of our former TriMas subsidiary. As a result of the June 2002 disposition of this business, these potential obligations are the responsibility of TriMas and are no longer commitments and contingencies of Metaldyne. The Company is subject to claims and litigation in the ordinary course of our business, but does not believe that any such claim or litigation will have a material adverse effect on our financial position or results of operation. 12 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 13. ACQUISITION RELATED INTEGRATION ACTIONS In 2001, the Company began to implement plans to integrate the three acquired legacy companies into the Company's new vision, align the business units under our new operating structure and leadership team, and reformulate our cost structure to be more competitive in the marketplace. To facilitate these initiatives, we terminated hundreds of employees and closed unprofitable businesses and plants. The majority of these actions were completed in 2001, but some are ongoing as of June 30, 2002. At June 30, 2002, in addition to the amounts shown in the table below, the Company had an approximate $10 million accrual related to severance agreements with former Company management. The amounts reflected represent total estimated cash payments. The following table summarizes the recent activity for the purchase accounting adjustments established relating to the three acquisitions. As discussed in Note 2, the Company completed a divestiture of its former TriMas subsidiary on June 6, 2002.
(IN THOUSANDS) UTILIZED --------------------- ACCRUAL AT OBLIGATIONS ACCRUAL AT 12/31/01 CASH NON-CASH ASSUMED BY TRIMAS 6/30/02 -------- ---- -------- ----------------- ------- Severance........................... $22,910 $(1,350) -- $(13,310) $8,250 Other closure costs................. 6,850 (70) -- (3,390) 3,390 ------- ------- -- -------- ------- Total............................... $29,760 $(1,420) -- $(16,700) $11,640 ======= ======== == ======== =======
14. SEGMENT INFORMATION The Company has defined a segment as a component, with business activity resulting in revenue and expense that 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 three segments: Chassis, Driveline and Engine. 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 capabilities. The Company defines EBITDA as operating profit plus depreciation and amortization plus legacy stock award expense (contractual obligation from November 2000 acquisition, which will runoff completely by 2003). In the second quarter of 2002, the Company modified its organizational structure. As a result, the Company is now comprised of three reportable segments: Chassis, Driveline and Engine. Accordingly, the Company has restated sales for all prior periods to reflect this change. However, EBITDA cannot be meaningfully restated to reflect the new segment structure, and is therefore presented in total for the entire Company for periods prior to 2002. EBITDA is presented using the Company's modified segment structure beginning in 2002. As discussed in Note 2, the Company completed a divestiture of a portion of its TriMas Group on June 6, 2002. The TriMas Group is presented at the group level, rather than by segment, for all periods presented. CHASSIS -- Manufactures components, modules and systems used in a variety of engineered chassis applications, including fittings, wheel-ends, axle shafts, knuckles and mini-corner assemblies. This segment utilizes a variety of processes including hot, warm and cold forging, powder metal forging and machinery and assembly. DRIVELINE -- Manufactures components, modules and systems, including precision shafts, hydraulic controls, hot and cold forgings and integrated program management used in a broad range of transmission applications. These applications include transmission and transfer case shafts, transmission valve bodies, cold extrusion and Hatebur hot forgings. 13 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) ENGINE -- Manufactures a broad range of engine components, modules and systems, including sintered metal, powder metal, forged and tubular fabricated products used for a variety of applications. These applications include balance shaft modules and front cover assemblies. Segment activity for the three months ended June 30, 2002 and 2001 is as follows:
(in Thousands) THREE MONTHS ENDED JUNE 30 SIX MONTHS ENDED JUNE 30 -------------------------- ------------------------ SALES 2002 2001 2002 2001 ----- ---- ---- ---- ---- Automotive Group Chassis................................................. $47,510 $42,180 $89,090 $81,800 Driveline............................................... 217,940 214,570 421,270 417,620 Engine.................................................. 127,370 120,980 251,390 235,480 -------- -------- ---------- ---------- Automotive Group...................................... 392,820 377,730 761,750 734,900 TriMas Group.............................................. 137,640 195,050 328,580 394,010 -------- -------- ---------- ---------- Total Sales........................................... $530,460 $572,780 $1,090,330 $1,128,910 ======== ======== ========== ========== EBITDA Automotive Group Chassis................................................. $5,630 $9,710 Driveline............................................... 28,450 51,650 Engine.................................................. 18,730 36,270 -------- ---------- Automotive Group...................................... 52,810 $56,420 97,630 $97,520 TriMas Group.............................................. 26,240 35,530 62,420 71,970 -------- -------- ---------- ---------- Corporate/unallocated/centralized resources............... (4,110) (2,050) (8,990) (6,140) -------- -------- ---------- ---------- Total EBITDA.............................................. 74,940 89,900 151,060 163,350 Depreciation & amortization............................... (27,860) (38,930) (58,930) (77,330) Legacy stock award expense................................ (1,080) (1,760) (3,160) (3,530) -------- -------- ---------- ---------- Operating profit.......................................... $46,000 $49,210 $88,970 $82,490 ======== ======== ========== ==========
15. SUBSEQUENT EVENTS Goodwill impairment: As discussed in Note 6 and as part of its implementation of the new accounting standard for goodwill (SFAS 142), the Company is finalizing its step 2 analysis needed to measure the amount of goodwill impairment. The preliminary step 2 analysis indicates a goodwill impairment of up to $40 million. In accordance with SFAS 142 this adjustment, which is expected to be finalized during the third quarter, will be recorded as a cumulative effect of a change in accounting principle as of January 1, 2002. Intent to form Joint Venture: On July 18, 2002, the Company and DaimlerChrysler Corporation announced their intention to form a joint venture to operate the New Castle Machining Forge facility presently owned by DaimlerChrysler in New Castle, Indiana. It is presently contemplated that formation of the joint venture would involve an initial cash investment by the Company of approximately $20-30 million for a minority investment and a contribution of assets by DaimlerChrysler. The DaimlerChrysler New Castle Machining Forge operation manufactures suspension components, as well as engine and transmission components for Chrysler, Jeep and Dodge vehicles, and employs approximately 1,350 salaried and hourly workers. Tender Offer for Debentures: On August 21, 2002, the Company completed an offer to purchase up to, and subsequently accepted for purchase, $78.2 million aggregate principal amount of our outstanding 4 1/2% convertible subordinated debentures due 2003. After giving effect to the purchase, there is $100.0 million aggregate principal amount of debentures outstanding. We utilized cash specifically retained from the June 6, 2002 divestiture of our former TriMas subsidiary to fund the debenture purchase. In addition, the Company paid approximately $1.1 million in accrued interest, fees and expenses in connection with the tender offer. We recognized approximately an $8 million extraordinary loss on the extinguishment of this debt. As a result of the November 2000 acquisition, the convertible subordinated debentures are no longer convertible into our common stock. Issuance of Senior Subordinated Notes: On June 20, 2002, the Company (the "Parent") issued $250 million of 11% Senior Subordinated Notes due 2012 (the "11% Notes). Certain of the Company's domestic wholly owned subsidiaries, as defined in the related bond indenture, (the "Guarantors") irrevocably and unconditionally fully guarantee the 11% Notes. Set forth below, the condensed consolidating financial information presents the financial position, results of operations and cash flows of the guarantors. 14 METALDYNE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The following condensed consolidating financial information presents: (1) Condensed consolidating financial statements as of June 30, 2002 and December 31, 2001, and for the three and six months ended June 30, 2002 and 2001 of (a) Metaldyne Corporation, the parent and issuer, (b) the guarantor subsidiaries, (c) the non-guarantor subsidiaries and (d) the Company on a consolidated basis, and (2) Elimination entries necessary to consolidate Metaldyne Corporation, the parent, with guarantor and non-guarantor subsidiaries. The condensed consolidating financial statements are presented on the equity method. Under this method, the investments in subsidiaries are recorded at cost and adjusted for the Company's share of the subsidiaries' cumulative results of operations, capital contributions, distributions and other equity changes. The principal elimination entries eliminate investments in subsidiaries and intercompany balances and transactions. METALDYNE CORPORATION GUARANTOR/NON-GUARANTOR CONDENSED CONSOLIDATING BALANCE SHEETS JUNE 30, 2002 $ IN THOUSANDS
PARENT GUARANTOR NON-GUARANTOR ELIMINATIONS CONSOLIDATED -------- ----------- --------------- ------------ -------------- ASSETS Current assets: Cash and cash investments $ -- $ 10,510 $ 250 $ -- $ 10,760 Receivables, net -- 166,020 66,050 -- 232,070 Inventories -- 52,820 21,230 -- 74,050 Deferred and refundable income taxes -- 3,090 970 -- 4,060 Prepaid expenses and other current assets -- 49,500 6,750 -- 56,250 -------- ---------- -------- ----------- ---------- Total current assets -- 281,940 95,250 -- 377,190 Restricted cash -- 77,000 -- -- 77,000 Equity and other investments in affiliates -- -- 186,160 -- 186,160 Property and equipment, net -- 480,890 181,990 -- 662,880 Excess of cost over net assets of acquired companies -- 410,970 111,300 -- 522,270 Investment in subsidiaries 944,220 242,830 -- (1,187,050) -- Deferred financing costs and other assets -- 284,800 13,330 -- 298,130 -------- ---------- -------- ----------- ---------- Total assets $944,220 $1,778,430 $588,030 $(1,187,050) $2,123,630 ======== ========== ======== =========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ -- $ 119,860 $ 47,240 $ -- $ 167,100 Accrued liabilities -- 61,440 20,920 -- 82,360 Current maturities, long-term debt -- 2,300 2,050 -- 4,350 -------- ---------- -------- ----------- ---------- Total current liabilities -- 183,600 70,210 -- 253,810 Other long-term debt -- 406,600 11,540 -- 418,140 Subordinated debentures 250,000 157,910 -- -- 407,910 Deferred income taxes -- 140,020 28,490 -- 168,510 Other long-term liabilities -- 102,090 15,110 -- 117,200 Intercompany accounts, net (63,840) 30,140 33,700 -- -- -------- ---------- -------- ----------- ---------- Total liabilities $186,160 $1,020,360 $159,050 $ -- $1,365,570 -------- ---------- -------- ----------- ---------- Redeemable preferred stock 58,670 -- -- -- 58,670 Redeemable restricted common stock 32,640 -- -- -- 32,640 Less: Restricted stock awards (4,690) -- -- -- (4,690) -------- ---------- -------- ----------- ---------- Total redeemable stock 86,620 -- -- -- 86,620 -------- ---------- -------- ----------- ---------- Shareholders' equity: Preferred stock -- -- -- -- -- Common stock 42,650 -- -- -- 42,650 Paid-in capital 681,050 -- -- -- 681,050 Accumulated deficit (85,090) -- -- -- (85,090) Accumulated other comprehensive income (loss) 32,830 -- -- -- 32,830 Less: Restricted stock awards -- -- -- -- -- Investment by Parent/Guarantor -- 758,070 428,980 (1,187,050) -- -------- ---------- -------- ----------- ---------- Total shareholders' equity $671,440 $ 758,070 $428,980 $(1,187,050) $ 671,440 -------- ---------- -------- ----------- ---------- Total liabilities, redeemable stock and shareholders' equity $944,220 $1,778,430 $588,030 $(1,187,050) $2,123,630 ======== ========== ======== =========== ==========
15 METALDYNE CORPORATION GUARANTOR/NON-GUARANTOR CONDENSED CONSOLIDATING BALANCE SHEETS DECEMBER 31, 2001 $ IN THOUSANDS
NON- PARENT GUARANTOR GUARANTOR ELIMINATIONS CONSOLIDATED -------- --------- --------- ------------ ----------- ASSETS Current assets: Cash and cash investments $ - $ (12,930) $ 12,930 $ - $ - Receivables, net - 7,320 96,840 - 104,160 Inventories - 44,850 117,810 - 162,660 Deferred and refundable income taxes - 12,500 1,130 - 13,630 Prepaid expenses and other current assets - 18,850 10,480 - 29,330 ----------- ---------- ---------- ---------- ---------- Total current assets - 70,590 239,190 - 309,780 Equity and other investments in affiliates - - 17,130 - 17,130 Property and equipment, net - 494,530 426,910 - 921,440 Excess of cost over net assets of acquired companies - 503,970 534,840 - 1,038,810 Investment in subsidiaries 712,350 423,060 - (1,135,410) - Deferred financing costs and other assets - 330,840 335,690 - 666,530 ----------- ---------- ---------- ---------- ---------- Total assets $ 712,350 $1,822,990 $1,553,760 $(1,135,410) $2,953,690 =========== ========== ========== ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ - $ 91,750 $ 77,410 $ - $ 169,160 Accrued liabilities - 132,240 56,600 - 188,840 Current maturities, long-term debt - 9,340 33,360 - 42,700 ----------- ---------- ---------- ---------- ---------- Total current liabilities - 233,330 167,370 - 400,700 Other long-term debt - 672,770 423,290 - 1,096,060 Subordinated debentures - 262,860 - - 262,860 Deferred income taxes - 148,270 189,490 - 337,760 Other long-term liabilities - 128,360 18,060 - 146,420 Intercompany accounts, net 2,460 (317,810) 315,350 - - ----------- ---------- ---------- ---------- ---------- Total liabilities $ 2,460 $1,127,780 $1,113,560 $ - $2,243,800 ----------- ---------- ---------- ---------- ---------- Redeemable preferred stock 55,160 - - - 55,160 Redeemable restricted common stock 32,760 - - - 32,760 Less: Restricted stock awards (12,060) - - - (12,060) ----------- ---------- ---------- ------------ ---------- Total redeemable stock 75,860 - - - 75,860 ----------- ---------- ---------- ------------ ---------- Shareholders' equity: Preferred stock - - - - - Common stock 42,570 - - - 42,570 Paid-in capital 679,670 - - - 679,670 Accumulated deficit (76,440) - - - (76,440) Accumulated other comprehensive income (loss) (11,770) - - - (11,770) Less: Restricted stock awards - - - - - Investment by Parent/Guarantor - 695,210 440,200 (1,135,410) - ----------- ---------- ---------- ------------ ---------- Total shareholders' equity $ 634,030 $ 695,210 $ 440,200 $ (1,135,410) $ 634,030 ----------- ---------- ---------- ------------ ---------- Total liabilities, redeemable stock and shareholders' equity $ 712,350 $1,822,990 $1,553,760 $ (1,135,410) $2,953,690 =========== ========== ========== ============ ==========
16 METALDYNE CORPORATION GUARANTOR/NON-GUARANTOR CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS THREE MONTHS ENDED JUNE 30, 2002 $ IN THOUSANDS
NON- PARENT GUARANTOR GUARANTOR ELIMINATIONS CONSOLIDATED ------ --------- --------- ------------ ------------ Net sales $ - $ 318,490 $212,180 $ (210) $530,460 Cost of sales - (266,770) (157,550) 210 (424,110) -------- --------- -------- -------- -------- Gross profit - 51,720 54,630 - 106,350 Selling, general and administrative expenses - (34,650) (24,620) - (59,270) Legacy restricted stock award expense - (1,080) - - (1,080) -------- --------- -------- -------- -------- Operating profit - 15,990 30,010 - 46,000 -------- --------- -------- -------- -------- Other income (expense), net: Interest expense - (28,220) (280) - (28,500) Loss on interest rate arrangements upon early retirement of term loans - (7,550) - - (7,550) Equity and other income from affiliates - - 2,780 - 2,780 Intercompany income (expense), net - (280) 280 - - Other, net - (4,930) (2,340) - (7,270) -------- --------- -------- -------- -------- Other income (expense), net - (40,980) 440 - (40,540) -------- --------- -------- -------- -------- Income (loss) before income taxes and extraordinary charge - (24,990) 30,450 - 5,460 Income (taxes) credit - 29,370 (11,650) - 17,720 -------- --------- -------- -------- -------- Net income (loss) before extraordinary charge - 4,380 18,800 - 23,180 Extraordinary loss on repurchase of debentures and early retirement of term loans, net of tax of $21,920 - (34,290) - - (34,290) Equity in net income of subsidiaries (11,110) 16,050 - (4,940) - -------- --------- -------- -------- -------- Net income (loss) $(11,110) $ (13,860) $ 18,800 $ (4,940) $(11,110) Preferred stock dividends (1,700) - - - (1,700) -------- --------- -------- -------- -------- Earnings (loss) attributable to common stock $(12,810) $ (13,860) $ 18,800 $ (4,940) $(12,810) ======== ========= ======== ======== ========
17 METALDYNE CORPORATION GUARANTOR/NON-GUARANTOR CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS THREE MONTHS ENDED JUNE 30, 2001 $ IN THOUSANDS
NON- PARENT GUARANTOR GUARANTOR ELIMINATIONS CONSOLIDATED ------ --------- --------- ------------ ------------ Net sales $ - $309,560 $263,620 $ (400) $ 572,780 Cost of sales - (267,200) (187,430) 400 (454,230) -------- -------- -------- -------- --------- Gross profit - 42,360 76,190 - 118,550 Selling, general and administrative expenses - (27,420) (40,160) - (67,580) Legacy restricted stock award expense - (1,760) - - (1,760) -------- -------- -------- -------- --------- Operating profit - 13,180 36,030 - 49,210 -------- -------- -------- -------- --------- Other income (expense), net: Interest expense - (39,380) 1,810 - (37,570) Equity and other income (loss) from affiliates - - (440) - (440) Intercompany income (expense), net - 4,010 (4,010) - - Other, net - (9,330) 210 - (9,120) -------- -------- -------- -------- --------- Other income (expense), net - (44,700) (2,430) - (47,130) -------- -------- -------- -------- --------- Income (loss) before income taxes - (31,520) 33,600 - 2,080 Income (taxes) credit - 11,640 (14,430) - (2,790) Equity in net income of subsidiaries (710) 19,630 - (18,920) - -------- -------- -------- -------- --------- Net income (loss) $ (710) $ (250) $ 19,170 $(18,920) $ (710) Preferred stock dividends (1,170) - - - (1,170) -------- -------- -------- -------- --------- Earnings (loss) attributable to common stock $ (1,880) $ (250) $ 19,170 $(18,920) $ (1,880) ======== ======== ======== ======== =========
18 METALDYNE CORPORATION GUARANTOR/NON-GUARANTOR CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2002 $ IN THOUSANDS
NON- PARENT GUARANTOR GUARANTOR ELIMINATIONS CONSOLIDATED ------ --------- --------- ------------ ------------ Net sales $ - $ 620,760 $ 469,950 $ (380) $1,090,330 Cost of sales - (530,170) (342,740) 380 (872,530) -------- --------- --------- -------- ---------- Gross profit - 90,590 127,210 - 217,800 Selling, general and administrative expenses - (61,420) (64,250) - (125,670) Legacy restricted stock award expense - (3,160) - - (3,160) -------- --------- --------- -------- ---------- Operating profit - 26,010 62,960 - 88,970 -------- --------- --------- -------- ---------- Other income (expense),net: Interest expense (55,960) (660) (56,620) Loss on interest rate arrangements upon early retirement of - term loans - (7,550) - - (7,550) Equity and other income (loss) from affiliates - - 2,330 - 2,330 Intercompany income (expense), net - (50) 50 - - Other, net - (11,270) (1,030) - (12,300) -------- --------- --------- -------- ---------- Other income (expense), net - (74,830) 690 - (74,140) -------- --------- --------- -------- ---------- Income (loss) before income taxes and extraordinary charge - (48,820) 63,650 - 14,830 Income (taxes) credit - 38,720 (24,510) - 14,210 -------- --------- --------- -------- ---------- Net income (loss) before extraordinary charge - (10,100) 39,140 - 29,040 Extraordinary loss on repurchase of debentures and early retirement of term loans, net of tax of $21,920 - (34,290) - - (34,290) Equity in net income of subsidiaries (5,250) 36,820 - (31,570) - -------- --------- --------- -------- ---------- Net income (loss) $ (5,250) $ (7,570) $ 39,140 $(31,570) $ (5,250) Preferred stock dividends (3,400) - - - (3,400) -------- --------- --------- -------- ---------- Earnings (loss) attributable to common stock $ (8,650) $ (7,570) $ 39,140 $(31,570) $ (8,650) ======== ========= ========= ======== ==========
19 METALDYNE CORPORATION GUARANTOR/NON-GUARANTOR CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2001 $ IN THOUSANDS
NON- PARENT GUARANTOR GUARANTOR ELIMINATIONS CONSOLIDATED ------ --------- --------- ------------ ------------ Net sales $ - $ 598,560 $ 531,220 $ (870) $1,128,910 Cost of sales - (521,660) (383,230) 870 (904,020) -------- --------- --------- -------- ---------- Gross profit - 76,900 147,990 - 224,890 Selling, general and administrative expenses - (57,340) (81,530) - (138,870) Legacy restricted stock award expense - (3,530) - - (3,530) -------- --------- --------- -------- ---------- Operating profit - 16,030 66,460 - 82,490 -------- --------- --------- -------- ---------- Other income (expense), net: Interest expense - (78,880) (1,260) - (80,140) Equity and other income (loss) from affiliates - - (1,020) - (1,020) Intercompany income (expense), net - 7,250 (7,250) - - Other, net - (14,440) (790) - (15,230) -------- --------- --------- -------- ---------- Other income (expense), net - (86,070) (10,320) - (96,390) -------- --------- --------- -------- ---------- Income (loss) before income taxes - (70,040) 56,140 - (13,900) Income (taxes) credit - 25,850 (25,230) - 620 Equity in net income of subsidiaries (13,280) 31,940 - (18,660) - -------- --------- --------- -------- ---------- Net income (loss) $(13,280) $ (12,250) $ 30,910 $(18,660) $ (13,280) Preferred stock dividends (2,340) - - - (2,340) -------- --------- --------- -------- ---------- Earnings (loss) attributable to common stock $(15,620) $ (12,250) $ 30,910 $(18,660) $ (15,620) ======== ========= ========= ======== ==========
20 METALDYNE CORPORATION GUARANTOR/NON-GUARANTOR CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS SIX MONTHS ENDED JUNE 30, 2002 $ IN THOUSANDS
NON- PARENT GUARANTOR GUARANTOR ELIMINATIONS CONSOLIDATED ------ ----------- --------- ------------ ------------ Cash flows from operating activities: Net cash provided by (used for) operating activities $(183,710) $ 179,730 $(113,780) $ - $(117,750) --------- ---------- --------- -------- --------- Cash flows from investing activities: Capital expenditures - (34,640) (22,570) - (57,210) Disposition of business - - 840,000 - 840,000 Proceeds from sale/leaseback of fixed assets - 33,370 - - 33,370 Other, net - (2,010) 1,510 - (500) ------- ---------- --------- ------- --------- Net cash provided by (used for) investing activities - (3,280) 818,940 - 815,660 ------- ---------- --------- ------- --------- Cash flows from financing activities: Proceeds from borrowings 250,000 675,400 - - 925,400 Principal payments on borrowings - (1,078,590) (441,360) - (1,519,950) Restricted cash related to subordinated notes - (77,000) - - (77,000) Capitalization of debt financing fees - (11,590) - - (11,590) Proceeds from issuance of common stocks - 1,270 - - 1,270 Penalties on early extinguishment of debt - (6,480) - - (6,480) Change in intercompany accounts (66,290) 347,950 281,650 - - Other, net - (3,980) 5,180 - 1,200 ------- ---------- --------- ------- --------- Net cash provided by (used for) financing activities 183,710 153,020 (717,830) - (687,150) ------- ---------- --------- ------- --------- Net increase (decrease) in cash - 23,440 (12,680) - 10,760 Cash and cash equivalents, beginning of period - (12,930) 12,930 - - ------- ---------- --------- ------- --------- Cash and cash equivalents, end of period $ - $ 10,510 $ 250 $ - $ 10,760 ======= ========== ========= ======= =========
21 METALDYNE CORPORATION GUARANTOR/NON-GUARANTOR CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS SIX MONTHS ENDED JUNE 30, 2001 $ IN THOUSANDS
NON- PARENT GUARANTOR GUARANTOR ELIMINATIONS CONSOLIDATED ------ --------- --------- ------------ ------------ Cash flows from operating activities: Net cash provided by (used for) operating activities $ 2,630 $ 189,910 $ (78,890) $ - $113,650 -------- --------- --------- -------- -------- Cash flows from investing activities: Captial expenditures - (24,690) (40,100) - (64,790) Acquisitions, net of cash acquired - (83,320) - - (83,320) Proceeds from sale/leaseback of fixed assets - 35,840 600 - 36,440 Other, net - (19,530) 15,950 - (3,580) -------- --------- --------- -------- -------- Net cash used for investing activities - (91,700) (23,550) - (115,250) -------- --------- --------- -------- -------- Cash flows from financing activities: Proceeds from borrowings - 69,490 - - 69,490 Principal payments on borrowings - (64,030) (12,750) - (76,780) Change in intercompany accounts (1,020) (109,790) 110,810 - - Other, net (1,610) (400) - - (2,010) -------- --------- --------- -------- -------- Net cash provided by (used for) financing activities (2,630) (104,730) 98,060 - (9,300) -------- --------- --------- -------- -------- Net increase (decrease) in cash - (6,520) (4,380) - (10,900) Cash and cash equivalents, beginning of period - (1,210) 27,530 - 26,320 -------- --------- --------- -------- -------- Cash and cash equivalents, end of period $ - $ (7,730) $ 23,150 $ - $ 15,420 ======== ========= ========= ======= ========
22 EX-99.3 5 file004.txt CONSENT OF INDEPENDENT ACCOUNTANTS Exhibit 99.3 CONSENT OF INDEPENDENT ACCOUNTANTS ----------------------------------- We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (Registration Nos. 33-59222 and 33-55837) and Form S-8 (Registration Nos. 33-42230 and 333-64531) of Metaldyne Corporation of our report dated March 28, 2002 (except for Note 27, as to which the date is June 20, 2002) relating to the financial statements, which appears in the Current Report on Form 8-K of Metaldyne Corporation dated September 13, 2002. PricewaterhouseCoopers LLP Detroit, Michigan September 13, 2002 -----END PRIVACY-ENHANCED MESSAGE-----