-----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, ByaNuYVRKqiG3cv843J1uqW2DRhMXZRfl/gK/CumOnqnRL/jR3hFyqG30EHwG+ic DRV1+PJe9UjNfJA+pnZ8dg== 0001047469-05-020168.txt : 20050728 0001047469-05-020168.hdr.sgml : 20050728 20050727210454 ACCESSION NUMBER: 0001047469-05-020168 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20050727 ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050728 DATE AS OF CHANGE: 20050727 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: 05978800 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: MASCOTECH INC DATE OF NAME CHANGE: 19930629 FORMER COMPANY: FORMER CONFORMED NAME: MASCO INDUSTRIES INC DATE OF NAME CHANGE: 19930629 8-K 1 a2161349z8-k.htm FORM 8-K
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 8-K

Current Report

Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

July 27, 2005

Date of Report (Date of earliest event reported)

METALDYNE CORPORATION
(Exact Name of Registrant as Specified in Its Charter)

Delaware (State or Other Jurisdiction of Incorporation)	001-12068 (Commission File Number)	38-2513957 (I.R.S. Employer 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)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

/: / Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
/: / Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
/: / Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
/: / Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 8.01 Other Events.

Effective January 3, 2005, and as previously disclosed, Metaldyne Corporation (the "Company") reorganized its company from three principal segments into two principal segments: Chassis and Powertrain. As a result of this reorganization, the Company changed the composition of its reportable segments beginning in the first quarter of 2005. Prior to the first quarter of 2005, the Company operated primarily in three segments: Driveline, Engine and Chassis.

In order to report the impact of the change in the Company's reportable segments, the Company has restated the amounts disclosed in the Company's consolidated financial statements for the years ended January 2, 2005, December 28, 2003 and December 29, 2002 relating to reportable segments solely to conform to the 2005 composition of reportable segments. No additional restatements have been made. The Company has attached as exhibits to this report:

•: Management's Discussion and Analysis of Financial Condition and Results of Operations for the three years ended January 2, 2005, December 28, 2003 and December 29, 2002 and the three months ended April 2, 2005 and March 28, 2004; and
•: The Company's audited restated consolidated financial statements as of January 2, 2005 and December 28, 2003 and for the three years ended January 2, 2005, December 28, 2003 and December 29, 2002.

Item 9.01 Financial Statements and Exhibits.

(c): Exhibits. The following exhibit is filed herewith:

Exhibit 23.1		Consent of PricewaterhouseCoopers LLP.
Exhibit 23.2		Consent of KPMG LLP.
Exhibit 99.1		Management's Discussion and Analysis of Financial Condition and Results of Operations for the three years ended January 2, 2005, December 28, 2003 and December 29, 2002 and the three months ended April 2, 2005 and March 28, 2004.
Exhibit 99.2		Audited restated consolidated financial statements as of January 2, 2005 and December 28, 2003 and for the three years ended January 2, 2005, December 28, 2003 and December 29, 2002.

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: July 27, 2005

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SIGNATURES
EX-23.1 2 a2161349zex-23_1.htm EX 23.1
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Exhibit 23.1

Consent of Independent Registered Accounting Firm

The Board of Directors
Metaldyne Corporation:

/s/ PricewaterhouseCoopers LLP
Detroit, Michigan
July 22, 2005

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Consent of Independent Registered Accounting Firm
EX-23.2 3 a2161349zex-23_2.htm EXHIBIT 23.2
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Exhibit 23.2

Consent of Independent Registered Accounting Firm

The Board of Directors
Metaldyne Corporation:

We consent to the incorporation by reference in the Registration Statements on Form S-3 (Registration Nos. 33-55837 and 333-66307), Form S-4 (Registration No. 333-99569), and Form S-8 (Registration Nos. 333-64531, 333-74875, and 333-86248) of Metaldyne Corporation of our report dated March 31, 2005 with respect to the consolidated balance sheets of Metaldyne Corporation as of January 2, 2005, and the related consolidated statements of operations, stockholders' equity and other comprehensive income, and cash flows for the year then ended, and the related financial statement schedule, and July 22, 2005 as to Note 15, which report appears in the January 2, 2005 annual report on Form 10-K of Metaldyne Corporation. Our report refers to the Company's change in method of accounting for its redeemable preferred stock to conform with Statement of Financial Accounting Standards No. 150, Accounting for Certain Instruments with Characteristics of Both Liabilities and Equity.

/s/ KPMG
Detroit, Michigan
July 22, 2005

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Consent of Independent Registered Accounting Firm
EX-99.1 4 a2161349zex-99_1.htm EXHIBIT 99.1
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Exhibit 99.1

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Executive Summary

We are a leading global manufacturer of highly engineered metal components for the global light vehicle market with 2004 sales of approximately $2 billion. We operate two segments focused on the global light vehicle market. The Chassis and Powertrain segments manufacture, design, engineer and assemble metal-formed and precision-engineered components and modular systems used in the transmissions, engines and chassis of vehicles. We serve approximately 200 automotive and industrial customers and our top ten customers represent approximately 67% of total 2004 sales. Prior to November 2000, we were a public company. Since we were acquired in November 2000 by a private investor group, we have actively pursued opportunities for internal growth and strategic acquisitions that were unavailable to us when the majority of our shares were publicly traded. Since November 2000, we have completed four acquisitions—Simpson in December 2000, GMTI effective January 2001, Dana Corporation's Greensboro, NC operation in May 2003, and DaimlerChrysler's New Castle operation at the beginning of our fiscal 2004. Each of these acquisitions has added to the full service, integrated metal supply capabilities of our automotive operations. Additionally, we split off our non-automotive operations, divesting our former TriMas subsidiary in June 2002, our Fittings operation in April 2003 and two aluminum die casting facilities in February 2004. In December 2004, we resumed a small operation at one of these two aluminum die casting facilities due to the independent investor's cessation of business in 2004.

In the first quarter of 2005 and each of the last three years we have experienced significant net losses. Our net losses for the first quarter of 2005 and for the years ended 2004, 2003 and 2002 were $3.5 million, $28.0 million, $75.3 million and $64.8 million, respectively. Our 2004 losses declined in part due to the results of our recent New Castle acquisition and benefits associated with our cost restructuring efforts, but were negatively impacted by a 2.6% decline in production from our three largest customers, an approximate $20 million net negative impact from material cost increases described below, approximately $18 million in fees and expenses related to the Independent Investigation and a $7.6 million non-cash loss on the disposition of two manufacturing facilities within our Powertrain segment. For additional discussion of these factors, see "—Results of Operations."

Key Factors Affecting our Reported Results

We operate in extremely competitive markets. Our customers select us based upon numerous factors including technology, quality and price. Supplier selection is generally finalized several years prior to the start of vehicle production and as a result, business that we win will generally not start production for two years or beyond. In addition, our results are heavily dependent on global vehicle production, and in particular the North American vehicle production of the Big 3 domestic manufacturers (GM, Ford, and DaimlerChrysler). Our customers generally require that we offer annual productivity and efficiency related price decreases on products we sell them. Critical factors to be successful in this market include global low cost production facilities, leading service and parts quality, and differentiated product and process technology. Accordingly, we focus on managing our global manufacturing presence in line with our customer needs and local market manufacturing cost differences, improving operating efficiency and production quality of our plants, fixing or eliminating unprofitable facilities and reducing our overall material costs. In addition, we spend considerable time and resources developing new technology and products to enhance performance and/or decrease cost of the products we sell to our customers. See "—Results of Operations" for more details as to the factors that affect year over year performance.

The rise in material costs, especially steel, continues to negatively impact our results. This and other increases in our raw material costs increased our cost of goods sold by approximately $42 million in the first quarter of 2005 (approximately $23 million related to steel increases) and by approximately $53 million for fiscal 2004 (approximately $35 million related to steel increases). Note that steel price increases primarily relate to our forgings operations within the Chassis segment while the remaining increases are spread across all of our other businesses and are related to numerous raw material increases such as molybdenum and casting components we purchase. However, we were able to recover approximately $32 million for the first quarter of 2005 and approximately $31 million for fiscal 2004 of this increase through negotiated or contractual price recovery from our customers, cost reductions, a decrease in our annual productivity/price reductions given to our customers, scrap sales and steel resourcing efforts. Our ability to fully execute this recovery on a going forward basis is not guaranteed. Additionally, it appears that raw material costs will continue to increase in 2005 and although we have initiatives in place to offset these expected increases, there is no guarantee that these efforts will be successful.

Our strategy is centered on growth through new business awards and acquisitions. We have a significant new project backlog and have completed several recent acquisitions that we believe will enable us to better serve our customer base and provide enhanced returns. In order to finance a large portion of this activity, we incurred significant new debt. As such, we have substantial leverage and are constrained by various covenant limitations (see "—Debt, Capitalization and Available Financing Sources" for more details surrounding these covenants). As we continue to invest in the resources to produce our new business backlog and thus grow our business, a significant portion of our operating cash flow will be used to buy new capital equipment, expand production capacity and invest in new technology in addition to servicing principal and interest payments on our debt obligations. Therefore, we are focused on our cash generation ability (we monitor this internally through "Adjusted EBITDA"; see the discussion below in "Key Indicators of Performance (Non-GAAP Financial Measures)" for further explanation), and working capital and fixed asset efficiency to assess our ability to favorably finance our new business backlog.

Our first quarter 2005 net sales were $579 million versus first quarter 2004 net sales of $481 million. The primary driver of the increase in our 2005 sales was $69 million in additional net new business related to new product launches and ramp-up of existing programs. The launch of several product lines (principally DaimlerChrysler for vehicle platforms pertaining to the 300C, Magnum and Grand Cherokee) within our Chassis segment contributed $45 million in the first quarter of 2005 of net new business. The Powertrain segment contributed $24 million in net new business from new product launches and ramp-up of existing programs. The above net new business numbers include the effect of the 9.3% decrease in North American vehicles production from our three largest customers (Ford, GM and DaimlerChrysler) during the first quarter of 2005. In addition, we had an approximately $32 million increase in sales to help offset rising material costs as well as a $4 million benefit from foreign exchange movements. However, these increases were partially offset by an approximately $4 million decrease related to our divestiture of two aluminum die casting facilities in the first quarter of 2004. Our gross profit was $52.9 million or 9.1% of net sales for 2005 compared to $52.2 million or 10.9% of net sales for 2004. The increase of $0.7 million was primarily due to the sales increase discussed above offset by three other factors that contributed to our decline in gross margin percentage. First, we did not intend to profit on material cost increases and in fact passed on less than 100% of our cost increases to our customers. We were able to offset the majority of the remaining material cost increase that we did not recover in pricing through cost reduction efforts in our business. The effect on gross margin was 0.6%. The second factor reducing gross margin was the costs associated with plant consolidation efforts in our Chassis segment, which amounted to approximately $1 million in the first quarter of 2005. The remaining reduction to gross margin was a $1.8 million increase in depreciation and amortization expense, a slightly negative product sales mix in the first quarter and higher operating costs such as tooling, scrap and repair and maintenance expenses in two of our

Chassis facilities. Operating profit increased from $13.2 million in 2004 to $23.9 million in 2005. In addition to the above factors, the increase in 2005 operating profit is primarily the result of a charge of $7.6 million that was taken in connection with our divestiture of two manufacturing facilities within our former Driveline segment in the first quarter of 2004 as well as a $2.5 million curtailment gain for retiree medical benefits in the first quarter of 2005. The remaining difference is primarily due to a $0.8 million unrealized gain on foreign exchange movements on working capital in the first quarter of 2005.

Net sales for 2004 were $2,004 million versus $1,508 million for 2003. The primary source of the increase in our 2004 sales was our New Castle acquisition, which contributed approximately $446 million for the year. In addition, we had approximately $81 million in additional volume related to new product launches and ramp-up of existing programs as well as a $29 million benefit from foreign exchange movements. However, these increases were partially offset by approximately $60 million related to the divestiture of two aluminum die casting facilities within our Powertrain segment and a 2.6% decrease in North American vehicles production from our three largest customers (Ford, GM and DaimlerChrysler). Operating profit increased to $29 million in 2004 from $20 million in 2003. The increase in 2004 operating profit is primarily the result of the New Castle acquisition, which contributed approximately $21 million for the year; an approximate $12 million decrease in fixed asset losses; an approximate $10 million decrease in restructuring charges; $5 million from foreign exchange movements; and an approximate $13 million increase in our Powertrain segment driven primarily by increased sales activity due to new product launches. Negatively offsetting these increases was approximately $18 million in fees and expenses related to the Independent Investigation, an approximate $19 million decline in our North American forging operations and a $7.6 million charge taken in connection with the divestiture of two manufacturing facilities within our Powertrain segment.

Key Indicators of Performance (Non-GAAP Financial Measures)

In evaluating our business, our management considers Adjusted EBITDA as a key indicator of financial operating performance and as a measure of cash generating capability.

We define Adjusted EBITDA as net income (loss) before cumulative effect of accounting change and before interest, taxes, depreciation, amortization, asset impairment, non-cash losses on sale-leaseback of property and equipment and non-cash restricted stock award expense. In evaluating Adjusted EBITDA, our management deems it important to consider the quality of our underlying earnings by separately identifying certain costs undertaken to improve our results, such as costs related to consolidating facilities and businesses in an effort to eliminate duplicative costs or achieve efficiencies, costs related to integrating acquisitions and restructuring costs related to expense reduction efforts. Although our consolidation, restructuring and integration efforts are continuing and driven in part by our acquisition activity, our management eliminates these costs to evaluate underlying business performance. Caution must be exercised in eliminating these items as they include substantially (but not necessarily entirely) cash costs and there can be no assurance that we will ultimately realize the benefits of these efforts. Moreover, even if the anticipated benefits are realized, they may be offset by other business performance or general economic issues.

Management believes that Adjusted EBITDA, is the best indicator (together with a careful review of the aforementioned items) of our ability to service and/or incur indebtedness as we are a highly leveraged company. We use Adjusted EBITDA as a key performance measure because we believe it facilitates operating performance comparisons from period to period and internally by backing out potential differences caused by variations in capital structures (affecting interest expense), tax positions (such as the impact on periods or companies of changes in effective tax rates or net operating losses), and the impact of purchase accounting and SFAS No. 142 (affecting depreciation and amortization expense). Because Adjusted EBITDA facilitates internal comparisons of our historical operating performance on a more consistent basis, we also use Adjusted EBITDA for business planning purposes,

to incentivize and compensate our management personnel, as a measure of segment performance, in measuring our performance relative to that of our competitors and in evaluating acquisition opportunities. In addition, we believe Adjusted EBITDA and similar measures are widely used by investors, securities analysts, rating agencies and other interested parties as a measure of financial performance and debt-service capabilities. Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

•: it does not reflect our cash expenditures for capital equipment or contractual commitments;
•: although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash requirements for such replacements;
•: it does not reflect changes in, or cash requirements for, our working capital needs;
•: it does not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our indebtedness;
•: it includes amounts resulting from matters we consider not to be indicative of underlying performance of our fundamental business operations, as discussed herein; and
•: other companies, including companies in our industry, may calculate these measures differently than we do, limiting their usefulness as a comparative measure.

Because of these limitations, Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA only supplementally. We carefully review our operating profit margins (operating profit as a percentage of net sales) at a segment level, which are discussed in detail in our year-to-year comparison of operating results.

The following is a reconciliation of our Adjusted EBITDA to net income (loss) for the three months ended April 3, 2005 and March 28, 2004:

	2005			2004
	(In thousands)
Net loss	$	(3,500	)	$	(5,250	)
Income tax benefit		(1,890	)		(240	)
Interest expense		22,600			20,100
Depreciation and amortization in operating profit		33,330			31,530
Non-cash stock award expense		—			230
Preferred stock dividend		5,440			4,260
Gain on maturity of interest rate arrangements		—			(6,590	)
Loss on disposition of manufacturing facilities		—			7,600
Equity (gain) loss from affiliates, net		(610	)		(1,460	)
Certain items within other, net(1)		2,470			2,350

Adjusted EBITDA	$	57,840		$	52,530

(1): Reconciliation of Other Expense

	2005			2004
	(In thousands)
Items excluded from Adjusted EBITDA (amortization of financing fees and A/R securitization fees)	$	2,470		$	2,350
Items included in Adjusted EBITDA (includes foreign currency, royalties and interest income)		(660	)		30

Total other, net	$	1,810		$	2,380

The following details certain items relating to our consolidation, restructuring and integration efforts and other charges not eliminated in determining Adjusted EBITDA, but that we would eliminate in evaluating the quality of our Adjusted EBITDA:

	2005			2004
	(In thousands)
Restructuring charges	$	(1,290	)	$	(190	)
Fixed asset disposal losses		(550	)		(320	)
Foreign currency gains (losses)		360			(430	)
Independent investigation fees		—			(1,170	)
FAS 87/106 curtailment gain		2,500			—

The following is a reconciliation of our Adjusted EBITDA to net loss for the three years ended January 2, 2005, December 28, 2003 and December 29, 2002:

		2004			2003			2002
		(In thousands)
Net loss		$	(27,990	)	$	(75,330	)	$	(64,760	)
Income tax benefit			(36,870	)		(8,660	)		(40,960	)
Interest expense			82,140			75,510			91,000
Depreciation and amortization in operating profit			132,100			106,350			107,430
Non-cash stock award expense			560			3,090			4,880
Preferred stock dividends and accretion			19,900			—			—
Non-cash gain on maturity of interest rate arrangements			(6,570	)		—			—
Loss on disposition of manufacturing facilities			7,600			—			—
Loss on repurchase of debentures and early retirement of term loans			—			—			68,860
Loss on interest rate arrangements upon early retirement of term loans			—			—			7,550
Asset impairment			—			4,870			—
Gain on disposition of TriMas and Saturn investments			(8,020	)		—			—
Cumulative effect of accounting change			—			—			36,630
Equity(gain) loss from affiliates, net			(1,450	)		20,700			1,410
Certain items within other, net(1)			9,270			7,470			10,590

	Total Company Adjusted EBITDA	$	170,670		$	134,000		$	222,630

(1): Reconciliation of Other Expense:

	2004			2003		2002
	(In thousands)
Items excluded from Adjusted EBITDA (amortization of financing fees and A/R securitization fees)	$	9,270		$	7,470	$	10,590
Items included in Adjusted EBITDA (includes foreign currency, royalties and interest income)		(1,000	)		610		(1,610	)

Total other, net	$	8,270		$	8,080	$	8,980

	2004			2003			2002
	(In thousands)
Restructuring charges	$	(2,750	)	$	(13,130	)	$	(3,470	)
Fixed asset disposal losses		(3,180	)		(14,870	)		(750	)
Foreign currency gains (losses)		(940	)		(1,010	)		(200	)
Independent investigation fees		(17,830	)		—			—

Functional and Divisional Realignments

In January 2005, we reorganized to streamline our operating efficiency and cost structure. Our operations were consolidated into two segments: Chassis segment and the Powertrain segment. The Chassis segment consists of our former Chassis operations plus a portion of our former Driveline operations, while the Powertrain segment consists of our former Engine operations combined with the

remainder of the former Driveline operations. Prior year amounts have been restated to reflect these changes for comparison purposes.

Results of Operations

Quarter Ended April 3, 2005 Versus March 28, 2004

Net Sales. Net sales by segment and in total for the three months ended April 3, 2005 and March 28, 2004 were:

Segment	Three Months Ended April 3, 2005		Three Months Ended March 28, 2004
	(In thousands)
Chassis Segment	$	338,450	$	267,360
Powertrain Segment		240,300		213,780

Total Company	$	578,750	$	481,140

Gross Profit. Gross profit by segment and in total for the three months ended April 3, 2005 and March 28, 2004 was:

Segment	Three Months Ended April 3, 2005			Three Months Ended March 28, 2004
	(In thousands)
Chassis Segment	$	22,290		$	25,920
Powertrain Segment		35,630			30,670
Corporate/centralized resources		(5,040	)		(4,380	)

Total Company	$	52,880		$	52,210

Our gross profit was $52.9 million or 9.1% of net sales for 2005 compared to $52.2 million or 10.9% of net sales for 2004. The increase of $0.7 million was primarily due to the sales increase discussed above offset by three other factors that contributed to our decline in gross margin percentage. First, we did not intend to profit on material cost increases and in fact passed on less than 100% of our cost increases to our customers. We were able to offset the majority of the remaining material cost increase that we did not recover in pricing through cost reduction efforts in our business. The effect on gross margin was 0.6%. The second factor reducing gross margin was the costs associated with plant consolidation efforts in our Chassis segment, which amounted to approximately $1 million in the first quarter of 2005. The remaining reduction to gross margin was a $1.8 million increase in depreciation and amortization expense, a slightly negative product sales mix in the first quarter and operational issues in two of our Chassis facilities.

Selling, General and Administrative. Selling, general and administrative expenses were $27.7 million or 4.8% of net sales for 2005 compared to $31.2 million or 6.5% of sales in 2004. The $3.5 million decrease from 2004 to 2005 is primarily explained by a $2.5 million post-retirement medical curtailment gain. The remaining difference is primarily due to a $0.7 million unrealized gain on foreign exchange movements on working capital. Selling, general and administrative expenses as a percentage of sales decreased due to the fact that we were able to increase our sales without adding additional resources.

Depreciation and Amortization. Depreciation and amortization expense by segment and in total for the three months ended April 3, 2005 and March 28, 2004 was:

Segment	Three Months Ended April 3, 2005		Three Months Ended March 28, 2004
	(In thousands)
Chassis Segment	$	18,700	$	16,560
Powertrain Segment		12,430		11,780
Corporate/centralized resources		2,200		3,190

Total Company	$	33,330	$	31,530

The net increase in depreciation and amortization of approximately $1.8 million is principally explained by capital spending exceeding our depreciation expense over the past several years. Thus, the additional capital spending accounts for the increase in depreciation expense.

Restructuring Charges. We incurred $1.3 million of additional restructuring charges in the first quarter of 2005 compared to $0.2 million incurred in the first quarter of 2004. The 2005 charges are primarily as a result of headcount reductions related to the consolidation of our operations into two segments. Net restructuring activity in the first quarter of 2005 is as follows:

	Severance Costs
	(In thousands)
Balance at January 2, 2005	$	3,930
Charges to expense		1,290
Cash payments		(1,950	)

Balance at April 3, 2005	$	3,270

Business Disposition. In connection with our sale of two aluminum die casting facilities in our Driveline segment, we incurred a $7.6 million charge in the first quarter of 2004. This charge represents a book value of approximately $12 million in fixed assets and deferred financing fees offset by the $4.1 million in cash consideration paid by Lester PDC for the assets.

Operating Profit. Operating profit was $23.9 million, or 4.1% of sales, for the first quarter of 2005 compared to $13.2 million, or 2.7% of sales, for the same period in 2004. The $7.6 million charge relating to the disposition of two manufacturing facilities discussed above represented 1.6% of sales. This resulting $3 million increase is principally explained by the factors discussed above, including additional sales volume, the post-retirement curtailment gain and other decreases in our selling, general and administrative expenses. The makeup of each of these differences is discussed in greater detail above. Operating profit by segment for the three months ended April 3, 2005 and March 28, 2004 is as follows:

Segment	Three Months Ended April 3, 2005			Three Months Ended March 28, 2004
	(In thousands)
Chassis Segment	$	8,990		$	13,350
Powertrain Segment		21,260			9,320
Corporate/centralized resources		(6,400	)		(9,470	)

Total Company	$	23,850		$	13,200

Adjusted EBITDA. Management reviews our segment operating results based upon the Adjusted EBITDA definition as discussed in the "Key Indicators of Performance (Non-GAAP Financial Measures)" section. Accordingly, we have separately presented such amounts in the table below. Adjusted EBITDA increased to $57.8 million in the first three months of 2005 from $52.5 million during the same period in 2004. The primary drivers of this increase are explained above in the operating profit and depreciation and amortization discussions, and will be further detailed in the

segment detail that follows. Additionally, in "—Segment Information" below, we provide a reconciliation between Adjusted EBITDA and operating profit.

Segment	Three Months Ended April 3, 2005			Three Months Ended March 28, 2004
	(In thousands)
Chassis Segment	$	27,690		$	29,910
Powertrain Segment		33,690			28,710
Corporate/centralized resources		(3,540	)		(6,090	)

Total Company	$	57,840		$	52,530

Memo: Additional amounts included in calculation of both operating profit and Adjusted EBITDA:
Restructuring charges	$	(1,290	)	$	(190	)
Fixed asset disposal losses		(550	)		(320	)
Foreign currency gains (losses)		360			(430	)
Independent investigation fees		—			(1,170	)
FAS 87/106 curtailment gain		2,500			—

Interest Expense. Interest expense increased from $20.1 million in the first quarter of 2004 to approximately $22.6 million in 2005. The increase is principally due to average interest rate increases of between 1% and 1.5% on our term loan and revolving credit facility borrowings during the first quarter of 2005 versus the prior year. An increase in the average outstanding balance on our revolving credit facility also contributed to an increase in interest expense in 2005 compared with the same period in 2004.

Equity Gain (Loss) from Affiliates. Equity gain (loss) from affiliates was $0.6 million in the first quarter of 2005. The decrease versus our first quarter 2004 gain of $1.5 million is due to the sale of our interest in Saturn Electronics & Engineering, Inc. in December 2004 and the sale of a portion of our investment in TriMas to Masco Corporation in November 2004.

Other, Net. Other, net decreased to $1.8 million in the first quarter of 2005 versus a loss of approximately $2.4 million in the first quarter of 2004. The primary reason for the decline is a $0.4 million gain in foreign currency in 2005 versus a $0.4 million loss in foreign currency in 2004.

Preferred Stock Dividends. Preferred stock dividends (including accretion of $0.3 million in 2005) were $5.4 million in the first quarter of 2005 as compared to $4.3 million for the same period in 2004. This increase is due to compounding interest on unpaid dividends.

Taxes. The provision for income taxes for the first quarter of 2005 was a benefit of $1.9 million as compared with a benefit of $0.2 million for the first quarter of 2004. The effective tax rate for the first quarter of 2005 was approximately 35% as compared with approximately 4% for the first quarter of 2004. The preferred stock dividends above are not deductible for tax purposes and accordingly, no tax benefits were taken for these dividends in either year. Elements accounting for the variation in the effective tax rate were the relationship of U.S. to non-U.S. income (loss) before income taxes in the first quarter of 2005 as compared to the first quarter of 2004 and the inclusion of unremitted earnings of a foreign subsidiary under APB No. 23 in the first quarter of 2004.

Segment Information

Chassis Segment. Sales for our Chassis segment increased in the first quarter of 2005 to $338.5 million versus $267.4 million in the prior period. The primary driver of the approximately $71 million increase in sales is the addition of approximately $45 million in net additional volume during the first quarter of 2005 including sales increases for several DaimlerChrysler vehicle platforms

such as the LX, WK and RS. There were approximately $23 million in sales increases to our customers associated with the recovery of approximately $30 million in material cost increases, approximately $4 million in additional sales from a facility that was transferred from the Powertrain segment and a $2 million benefit in foreign exchange fluctuations. Adjusted EBITDA for the segment decreased from $29.9 million in the first quarter of 2004 to $27.7 million in 2005. Incremental profit from the additional revenue discussed above was fully offset by profit on lost/attrition business and other economic cost increases in our business (such as wages, etc.). The decrease in Adjusted EBITDA is primarily explained by approximately $1 million in costs to consolidate manufacturing space and $1 million related to higher operating costs at two plant locations (which our management team is actively working to address). Unrecovered material cost increases of approximately $7 million were fully offset by cost reductions in the operations. Operating profit decreased by $4.4 million in the first quarter of 2005 due to the above factors as well as an increase of $2.1 million in depreciation and amortization expense.

Chassis Segment	Three Months Ended April 3, 2005			Three Months Ended March 28, 2004
	(In thousands)
Sales	$	338,450		$	267,360
Operating profit	$	8,990		$	13,350
Depreciation and amortization		18,700			16,560

Adjusted EBITDA	$	27,690		$	29,910

Memo: Additional amounts included in calculation of both operating profit and Adjusted EBITDA:
Restructuring charges	$	190		$	160
Fixed asset losses		310			30
Foreign currency (gains) losses		(30	)		30

Powertrain Segment. Sales for our Powertrain segment were $240.3 million in the first quarter of 2005 versus $213.8 million in 2004. Net sales increased approximately $26.5 million due to higher sales volume from existing customers and products launched in 2004 as well as an approximately $2 million benefit in foreign exchange fluctuations. In addition, there were approximately $9 million in sales increases associated with the recovery of material costs to our customers. This was offset by approximately $4 million related to the divestiture of two aluminum die casting facilities in January 2004 and approximately $4 million related to transferring a facility to the Chassis group in January 2005. Adjusted EBITDA for the segment increased to $33.7 million versus $28.7 million in the prior year. The increase is principally due to the incremental profit on the sales volume increase noted above. Operating profit increased from $9.3 million in 2004 to $21.3 million in 2005. In addition to the factors discussed above influencing Adjusted EBITDA, the increase in 2005 is primarily attributable to a $7.6 million charge in the first quarter of 2004 in connection with the disposition of two

manufacturing facilities, as well as an increase of $0.7 million in 2005 depreciation and amortization expense.

Powertrain Segment	Three Months Ended April 3, 2005			Three Months Ended March 30, 2004
	(In thousands)
Sales	$	240,300		$	213,780
Operating profit	$	21,260		$	9,320
Asset impairment		—			7,600
Depreciation and amortization		12,430			11,780

Adjusted EBITDA	$	33,690		$	28,700

Memo: Additional amounts included in calculation of both operating profit and Adjusted EBITDA:
Restructuring charges	$	110		$	30
Fixed asset losses		240			290
Foreign currency (gains) losses		(330	)		400

Corporate/Centralized Resources. Adjusted EBITDA for Corporate/Centralized Resources was a loss of $3.5 million in the first quarter of 2005 versus a loss of $6.1 million in same period in 2004. This decrease in expense is primarily attributable to $2.5 million related to the post-retirement medical curtailment gain in the first quarter of 2005. In addition, there were approximately $1.2 million of independent investigation fees in the first quarter of 2004. These were offset by an approximately $1 million increase in restructuring charges in the first quarter of 2005. Operating profit increased by $3.1 million in 2005 due to the factors discussed above as well as a decrease in depreciation and amortization.

Corporate/Centralized Resources	Three Months Ended April 3, 2005			Three Months Ended March 28, 2004
	(In thousands)
Operating profit	$	(6,400	)	$	(9,470	)
Non-cash stock award expense		—			230
Depreciation and amortization		2,200			3,190
Other, net		660			(30	)

Adjusted EBITDA	$	(3,540	)	$	(6,080	)

Memo: Additional amounts included in calculation of both operating profit and Adjusted EBITDA:
Restructuring charges	$	990		$	—
Independent investigation fees		—			1,170
FAS 87/106 curtailment gain		(2,500	)		—

2004 Versus 2003

Net Sales. Net sales by segment and in total for the years ended January 2, 2005 and December 28, 2003 were:

Segment	Year Ended January 2, 2005		Year Ended December 28, 2003
	(In thousands)
Chassis Segment	$	1,145,450	$	685,350
Powertrain Segment		858,810		822,850

Total Company	$	2,004,260	$	1,508,200

Net sales for fiscal 2004 were $2,004 million versus $1,508 million for fiscal 2003. The primary driver of the increase in our 2004 sales was our New Castle acquisition, which contributed approximately $446 million for the year. In addition, we had approximately $81 million in additional volume related to new product launches and ramp up of existing programs and a $29 million benefit from foreign exchange movements. There was also a net $5 million benefit to sales as the price increases to our customers related to increased material prices were not entirely offset by our productivity related price discounts offered to our customers. However, these increases were partially offset by approximately $60 million related to our divestiture of two aluminum die casting facilities within our Powertrain segment and a 2.6% decrease in North American vehicle production from our three largest customers (Ford, General Motors and DaimlerChrysler).

Gross Profit. Gross profit by segment and in total for the years ended January 2, 2005 and December 28, 2003 was:

Segment	Year Ended January 2, 2005			Year Ended December 28, 2003
	(in thousands)
Chassis Segment	$	81,240		$	72,670
Powertrain Segment		108,000			94,360
Corporate/centralized resources		(16,230	)		(11,500	)

Total Company	$	173,010		$	155,530

Our gross profit was $173 million or 8.6% of net sales for 2004 compared to $155.5 million or 10.3% of net sales for 2003. The increase of $17.5 million was primarily due to the $21 million contribution from the New Castle acquisition. In addition to the New Castle Acquisition, we also benefited from an approximate $12 million reduction in fixed asset losses, an approximate $11 million increase from our Powertrain operations driven primarily by additional sales volume and a $5 million benefit in foreign exchange fluctuations. Partially offsetting these increases was a $19 million decline in our Forgings operations (primarily related to a $30 million increase in steel costs during fiscal 2004 offset by approximately $15 million in price increases to our customers) and a $3 million one-time payment made to one of our customers relating to a new business award. Both of these items are further explained in the segment discussion that follows. In addition to these factors, we have also experienced net raw material cost increases (net of price increases associated with the recovery of material costs to our customers) across our other Chassis and Powertrain operations of approximately $7 million.

Selling, General and Administrative. Selling, general and administrative expense was $133.3 million or 6.6% of net sales for 2004, compared to $117.2 million or 7.8% of total net sales for 2003. The $16 million increase from 2003 to 2004 is primarily related to approximately $18 million of expense associated with the Independent Investigation. These expenses relate to fees paid to our bank group for waivers, professional fees and severance expense for individuals terminated as a result of the Independent Investigation. Selling, general and administrative expenses also benefited by an approximate $1.5 million pension curtailment gain related to the disposition of two manufacturing facilities discussed earlier and an approximate $0.5 million post-retirement curtailment gain related to the elimination of benefits for salaried employees not grandfathered by having obtained age 50 with five years of service or 20 years of services as of January 1, 2003. The reduction in selling, general and administrative expenses as a percentage of net sales reflects the benefits from restructuring efforts initiated in 2003 and the fact that New Castle was able to integrate into our operation without significant additional administrative investment.

Depreciation and Amortization. Depreciation and amortization expense by segment and in total for the years ended January 2, 2005 and December 28, 2003 and was:

Segment	Year Ended January 2, 2005		Year Ended December 28, 2003
	(In thousands)
Chassis Segment	$	71,530	$	48,260
Powertrain Segment		49,720		48,750
Corporate/centralized resources		10,850		9,340

Total Company	$	132,100	$	106,350

The net increase in depreciation and amortization of approximately $25.8 million is principally explained by $18.6 million of depreciation and amortization expense associated with our New Castle acquisition. Additionally, for the past several years capital spending has been in excess of our depreciation expense. Thus, the additional capital spending primarily accounts for the remaining increase in depreciation expense.

Restructuring Charges. We incurred approximately $2.8 million of restructuring costs in fiscal 2004 compared to $13.1 million incurred in fiscal 2003. Of the 2004 charges, approximately $1.7 million relates to our Chassis segment, where the majority of the charge relates to the closure of a facility in Europe and headcount reduction activities in our Forging operations. An additional $0.8 million relates to costs to reduce headcount in our Corporate center with the remaining amounts relating to headcount reductions in our Powertrain segment. Net restructuring activity for fiscal 2004 is as follows:

	Acquisition Related Severance Costs			2002 Additional Severance And Other Exit Costs			2003 Additional Severance And Other Exit Costs			2004 Additional Severance And Other Exit Costs			Total
	(In thousands)
Balance at December 28, 2003	$	1,380		$	360		$	7,310		$	—		$	9,050
Charges to expense		—			—			—			2,750			2,750
Cash payments		(310	)		(360	)		(4,600	)		(2,240	)		(7,510	)
Reversal of unutilized amounts		(360	)		—			—			—			(360	)

Balance at January 2, 2005	$	710		$	—		$	2,710		$	510		$	3,930

Asset Impairment. In our fiscal 2003 analysis, we recorded a $4.9 million charge in our Powertrain segment associated with two plants with negative operating performance in our fiscal 2003 financial results in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." Subsequent to December 28, 2003, these two facilities were sold to an independent third party. The sales price to this third party was used to determine the fair market value of the facilities for the SFAS No. 144 impairment analysis.

Disposition of Manufacturing Facilities. In connection with our sale of the two aluminum die casting facilities in our Powertrain segment discussed above, we incurred a $7.6 million loss for fiscal 2004. This loss represents a book value of approximately $12 million in fixed assets and deferred financing fees offset by the $4.1 million in cash consideration paid by Lester PDC for the assets. See Note 18, Disposition of Businesses, to the consolidated financial statements included herein for additional discussion.

Operating Profit. Operating profit was $29.4 million for 2004 compared to $20.3 million in 2003. The $9.1 million increase in operating profit is the result of the $17.5 million increase in gross profit, the $16 million increase in selling general and administrative expenses, the net change between the $7.6 million loss on disposition of manufacturing facilities recorded in 2004 and the $4.9 million asset impairment charge taken in 2003 and the reduction of approximately $10 million in restructuring charges year over year. The elements of each of these variations are discussed in greater detail above.

Segment	Year Ended January 2, 2005			Year Ended December 28, 2003
	(In thousands)
Chassis Segment	$	31,250		$	32,500
Powertrain Segment		45,760			27,340
Corporate/centralized resources		(47,600	)		(39,540	)

Total Company	$	29,410		$	20,300

Adjusted EBITDA. Management reviews our segment operating results based upon the Adjusted EBITDA definition as discussed in the "Key Indicators of Performance (Non-GAAP Financial Measures)" section. Accordingly, we have separately presented such amounts in the table below. Adjusted EBITDA increased to $170.7 million in 2004 from $134 million in 2003. The primary drivers of this increase are explained above in the operating profit discussion and will be further detailed in the segment detail that follows. Additionally, in the "Segment Information" below provides a reconciliation between Adjusted EBITDA and operating profit.

Segment	Year Ended January 2, 2005			Year Ended December 28, 2003
	(In thousands)
Chassis Segment	$	102,960		$	81,200
Powertrain Segment		103,080			80,960
Corporate/centralized resources		(35,370	)		(28,160	)

Total Company	$	170,670		$	134,000

Memo: Fixed asset losses included in the calculation of both operating profit and Adjusted EBITDA	$	(3,180	)	$	(14,870	)

Other, net (income) expense included in the calculation of Adjusted EBITDA	$	(1,000	)	$	610

Interest Expense. Interest expense increased by $6.6 million due to higher average debt levels in 2004 compared to 2003. This increase is principally due to $3.2 million in interest arising from the 10% senior subordinated notes from our New Castle acquisition, $13.2 million in interest arising from our 10% senior notes issued in October 2003 and approximately $7 million in interest arising from higher debt balances resulting from increased usage of our revolving credit and slightly increased borrowing rates on our senior debt facilities. These increases were offset by a decrease of $4.0 million in cash interest expense and $7.2 million of interest accretion related to the redemption of the $98.5 million outstanding balance on the 4.5% subordinated debentures that were paid off in December 2003 and $5.4 million in interest expense related to the maturity of our interest rate arrangements in February 2004.

Gain on the Maturity of Interest Rate Arrangements. In the first quarter of 2004, we recorded a $6.6 million non-cash gain on the maturity of these interest rate arrangements which is reflected as a "non-cash gain on maturity of interest rate arrangements" in our consolidated statement of operations incorporated herein. See the "Liquidity and Capital Resources" section below for additional discussion of our capital structure.

Equity Gain (Loss) from Affiliates, Net. Equity gain (loss) from affiliates, net increased from a loss of $20.7 million to a $1.5 million gain in 2004 due to the operating results of our equity affiliates.

Gain on the Sale of Investments in Saturn and TriMas. In addition to the equity earnings, we recognized a net gain of $8.0 million on the sale of our interest in Saturn Electronics, which was sold in December 2004, and a gain on the sale of a portion of our investment in TriMas to Masco Corporation which was sold in November 2004. Our equity earnings (loss) from affiliates reflect the change in ownership percentages based upon the date of the sales of the investments. See Note 6, Equity Investments and Receivables in Affiliates, to the Consolidated Balance Sheets at January 2, 2005 and December 28, 2003 included herein for additional discussion of the sale of both the Saturn and TriMas investment amounts.

Other, Net. Other, net increased by $0.2 million to a loss of $8.3 million in 2004 compared to a loss of $8.1 million in 2003. In conjunction with our 2004 credit facility amendment, $1.2 million of the unamortized balance related to the 2003 credit facility amendment was expensed in 2004. This increase in Other, net was partially offset by a gain on the disposition of a joint venture in Korea during the second quarter of 2004.

Preferred Stock Dividends. Preferred stock dividends (including accretion of $1.1 million in 2004) were $19.9 million in 2004 as compared to $9.3 million in 2003. This increase is due to the dividends on the $64.5 million of preferred stock issued in connection with the New Castle acquisition and compounded interest on preexisting preferred stock. Due to our adoption of SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity" as of the first quarter of 2004, preferred stock dividends are included in "other expense, net" on our consolidated statement of operations beginning in 2004.

Taxes. The provision for income taxes for 2004 was a benefit of $36.9 million as compared to a benefit of $8.7 million for 2003. The primary reasons for our effective tax rate being different from our statutory rate are non-deductible preferred stock dividends, reversal of a prior period contingent tax accrual, refunds, foreign losses for which tax benefits are not recognized and foreign tax rates below the U.S. rate as well as the provision for unremitted earnings of a foreign subsidiary. In addition, in July 2004, we received a $27 million tax refund from the IRS that resulted from a claim filed by us in 2002. This claim was based on a 2002 change in the U.S. Treasury Regulations, which permitted us to utilize a previously disallowed capital loss that primarily resulted from the sale of a subsidiary in 2000. The $7 million received in excess of the refund previously recorded was considered in the tax provision for fiscal 2004.

Segment Information

Chassis Segment. Sales for our Chassis segment increased to $1,145.5 million in 2004 as compared to $683.4 million in 2003. The primary drivers of the approximate $460 million increase in sales is a $446 million contribution from the New Castle acquisition, a $16 million benefit in foreign exchange fluctuations, and approximately $3 million in price increases (net of material cost recovery and productivity related price concessions to our customers) incurred in fiscal 2004 offset by a $6 million decrease due to the divestiture of our Fittings business in May 2003.

Chassis Segment	Year Ended January 2, 2005			Year Ended December 28, 2003
	(In thousands)
Sales	$	1,145,450		$	685,350
Operating profit	$	31,250		$	32,500
Depreciation and amortization		71,530			48,260
Legacy stock award expense		180			440

Adjusted EBITDA	$	102,960		$	81,200

Memo: Additional amounts included in calculation of both operating profit and Adjusted EBITDA
Restructuring charges	$	1,680		$	2,920
Fixed asset (gains) losses		(730	)		4,910
Foreign currency losses		70			260

Operating income decreased by approximately $1.3 million as cost savings and profits from new business were not able to fully offset the approximate $19 million year over year decline in the Forging operations (primary issue was an approximate $30 million increase in the price to procure steel during fiscal 2004 as compared to fiscal 2003 offset by approximately $15 million in price increases to our customers). However, the $21 million contribution from the New Castle acquisition (results are net of approximately $10 million in operating leases used to finance the acquisition), an increase in fixed asset gains over the prior year by approximately $5.6 million served to offset the negative effect of the Forging operations and a reduction in restructuring charges from 2003 of approximately $1.2 million. In addition, other items reducing operating profit included an increase of approximately $4.8 million in depreciation and amortization relating to Chassis entities other than New Castle, approximately $1.5 million from the divestiture of our Fittings operation, approximately $2 million in net raw material price increases in other non-forging operations and approximately $2 million in customer pricing concessions. Adjusted EBITDA increased by approximately $22 million in 2004 compared to 2003 due to the aforementioned explanations and an increase of approximately $23.3 million in depreciation and amortization primarily related to the New Castle acquisition.

Powertrain Segment. Sales for our Powertrain segment were $858.8 million in 2004 as compared to $822.9 million in 2003. The $35.9 million increase primarily reflects $82 million in additional volume from new product launches and an approximate $13 million benefit related to foreign exchange movements. These increases were offset by approximately $60 million related to the divestiture of two aluminum die casting facilities. Operating profit increased by $18.4 million due primarily to $13 million from increased sales volume on new programs, a decrease in fixed asset losses of approximately $5 million in 2004 versus 2003, a $6.6 million improvement from the disposition of two aluminum die casting manufacturing facilities, a reduction in restructuring charges from 2003 of approximately $4.1 million, and an approximate $1.3 million benefit related to foreign exchange movements. However, our Powertrain segment's operating margins were negatively impacted by a $7.6 million loss on the disposition of two aluminum die casting manufacturing facilities, approximately $5 million in raw material cost increases (net of price increases associated with the recovery of material costs to our

customers), a $3 million one-time payment made to one of our customers relating to a new business award and incremental depreciation and amortization expense of $1.0 million. Adjusted EBITDA increased by approximately $22.1 million in 2004 compared to 2003 due to the aforementioned reasons.

Powertrain Segment	Year Ended January 2, 2005		Year Ended December 28, 2003
	(In thousands)
Sales	$	858,810	$	822,850
Operating profit	$	45,760	$	27,340
Asset impairment		—		4,870
Loss on disposition of manufacturing facilities		7,600		—
Depreciation and amortization		49,720		48,750

Adjusted EBITDA	$	103,080	$	80,960

Memo: Additional amounts included in calculation of both operating profit and Adjusted EBITDA
Restructuring charges	$	240	$	4,380
Fixed asset losses		2,700		7,790
Foreign currency (gains) losses		870		(1,270	)

Corporate/Centralized Resources. Adjusted EBITDA for Corporate/Centralized Resources was a loss of $35.4 million in 2004 versus a loss of $28.2 million in 2003. We incurred approximately $18 million of expenses associated with our Independent Investigation. After considering for these expenses, corporate expenses decreased by approximately $11 million. The reduction is principally explained by a $5.0 reduction in restructuring charges in 2004, pension and post-retirement curtailment gains of approximately $2.0 million in 2004 and discussed further in Note 24, Employee Benefit Plans, to the consolidated financial statements included herein, a decrease in fixed asset losses of $1 million in 2004 and a decrease of $1.6 million in Other, Net. The remaining decrease in Corporate costs primarily relates to a reduction in overall expenses in part related to restructuring events initiated in 2003. Operating profit decreased by $8.1 million, which is also explained in the factors described above and a $1.5 million increase in depreciation and amortization and a $2.3 million decrease in stock award expense.

Corporate/Centralized Resources	Year Ended January 2, 2005			Year Ended December 28, 2003
	(In thousands)
Operating profit	$	(47,600	)	$	(39,540	)
Depreciation and amortization		10,850			9,340
Stock award expense		380			2,650
Other, net		1,000			(610	)

Adjusted EBITDA	$	(35,370	)	$	(28,160	)

Memo: Additional amounts included in calculation of both operating profit and Adjusted EBITDA
Restructuring charges	$	830		$	5,830
Fixed asset losses		1,210			2,170
Other, Net (income) expense		(1,000	)		610
Independent investigation fees		17,830			—

2003 Versus 2002

Due to the divestiture of our former TriMas subsidiary in June 2002, the 2002 and 2003 consolidated results are not comparable. Thus, for purposes of our discussion, we will exclude TriMas results, where applicable and quantifiable, and discuss the performance of our Automotive Group operations.

Net Sales. Net Sales by segment and in total for the years ended December 28, 2003 and December 29, 2002 were:

Segment		Year Ended December 28, 2003		Year Ended December 29, 2002
		(In thousands)
Chassis Segment		$	685,350	$	676,970
Powertrain Segment			822,850		786,650

	Automotive Group	$	1,508,200	$	1,463,620
TriMas Group			—		328,580

Total Company		$	1,508,200	$	1,792,200

Despite a 6.4% decrease in NAFTA production, sales increased $45 million, but were essentially flat after adjusting for a $44 million impact of exchange rate movement. The specific differences are further explained in the segment information section.

Gross Profit. Gross profit by segment and in total for the years ended December 28, 2003 and December 29, 2002 were:

Segment		Year Ended December 28, 2003			Year Ended December 29, 2002
		(In thousands)
Chassis Segment		$	72,670		$	100,380
Powertrain Segment			94,360			96,580
Corporate/centralized resources			(11,500	)		(4,100	)

	Automotive Group	$	155,530		$	192,860
TriMas Group			—			100,780

Total Company		$	155,530		$	293,640

Our gross profit was $155.5 million or 10.3% of net sales for 2003 compared to $192.9 million or 13.2% of net sales for 2002 after adjustment for TriMas. The decrease of $37.4 million was primarily due to incremental depreciation and amortization expense of approximately $14.9 million, increased steel prices of approximately $7 million, incremental losses on the sale and disposal of fixed assets of approximately $15 million and incremental lease expense of approximately $5 million associated with additional sale-leaseback transactions entered into in late 2002 and 2003. Offsetting these decreases was approximately $10.6 million of positive exchange movement primarily due to the appreciation of the euro relative to the dollar. The remaining difference is primarily explained by a reduction in our Driveline margin. This margin reduction is primarily explained by aggressive pricing given to our customers in response to their global sourcing initiatives.

Selling, General and Administrative. Selling, general and administrative expense was $117.2 million, 7.8% of net sales for 2003, compared to $126.8 million, 8.7% of total net sales for 2002 after adjustment of TriMas. Approximately $4 million of the decrease in selling, general and administrative costs include a $2.5 million curtailment gain recognized in conjunction with a pension plan amendment for our Bedford Heights, Ohio plant which was sold in February 2004 and $1.6 million in reduced

restricted stock award amortization. The remaining decrease in 2003 reflects the reduction in costs resulting from our shared services initiative that we undertook to centralize standardized processes and reduce redundant costs throughout 2001 and 2002 (e.g., capability in sales, procurement, IT infrastructure, finance expertise, etc), the restructuring benefits recognized from the Engine segment's 2002 and 2003 European and North American reorganization and 2003 restructuring activities in our Chassis segment. These initiatives have enabled us to streamline and better manage our administrative functions from a consolidated perspective.

Depreciation and Amortization. Depreciation and amortization expense by segment and in total for the years ended December 28, 2003 and December 29, 2002 was:

Segment		Year Ended December 28, 2003		Year Ended December 29, 2002
		(In thousands)
Chassis Segment		$	48,260	$	41,720
Powertrain Segment			48,750		39,720
Corporate/centralized resources			9,340		9,990

	Automotive Group	$	106,350	$	91,430
TriMas Group			—		16,000

Total Company		$	106,350	$	107,430

The net increase of Automotive Group depreciation and amortization of approximately $14.9 million is due to depreciation expense recorded on capital expenditures for the periods presented of $130.7 million for 2003 and $116.5 million for 2002. In the past several years, we have incurred capital spending in excess of our depreciation expense. Thus, the additional capital spending accounts for the increase in depreciation expense.

Restructuring Charges. In fiscal 2003, we entered into several restructuring actions whereby we incurred approximately $13.1 million of costs associated with severance and facility closures. These actions include the completion of the Powertrain segment's European operation reorganization that was initiated in fiscal 2002 and completed in the first quarter of 2003 ($2.0 million charge), other actions within the Powertrain Group to eliminate duplicate and administrative headcount ($2.4 million charge) and actions within our Chassis segment's forging operations and administrative departments to eliminate duplicative headcount and adjust costs to reflect the decline in our forging revenue in 2003 ($2.9 million charge). Also included in this charge are the severance costs to replace certain members of our executive management team, and the costs to restructure several departments in our corporate office including the sales, human resources and information technology departments ($5.8 million charge). We expect to realize additional savings from these restructuring actions in 2004, as reductions in employee related expenses are recognized in both cost of goods sold and selling, general and administrative expense.

	Acquisition Related
	Severance Costs			Exit Costs			2002 Severance And Other Exit Costs			2003 Severance And Other Exit Costs			Total
	(In thousands)
Balance at December 29, 2002	$	9,880		$	540		$	2,380		$	—		$	12,800
Charges to expense		—			—			—			13,130			13,130
Cash payments		(8,110	)		(540	)		(2,020	)		(5,820	)		(16,490	)
Reversal of unutilized amounts		(390	)		—			—			—			(390	)

Balance at December 28, 2003	$	1,380		$	—		$	360		$	7,310		$	9,050

Asset Impairment. As a result of our impairment analysis performed in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," we recorded a $4.9 million charge in our Powertrain segment associated with two plants with negative operating performance. Subsequent to December 28, 2003, these two facilities were sold to an independent third party. The sales price to this third party was used to determine the fair market value of the facilities for the SFAS No. 144 impairment analysis.

Operating Profit. Operating profit was $20.3 million for 2003 compared to $62.6 million in 2002 after adjustment for TriMas. The $42.3 million reduction in operating profit is the result of the $37 million reduction to gross profit, $10 million improvement in selling general and administrative expenses, the $4.9 million asset impairment charge and $10 million in incremental restructuring charges. The elements of each of these variations are discussed in greater detail above.

Segment		Year Ended December 28, 2003			Year Ended December 29, 2002
		(In thousands)
Chassis Segment		$	32,500		$	60,160
Powertrain Segment			27,340			35,730
Corporate/centralized resources			(39,540	)		(33,320	)

	Automotive Group	$	20,300		$	62,570
TriMas Group			—			46,140

Total Company		$	20,300		$	108,710

Adjusted EBITDA. Management reviews our segment operating results based upon the Adjusted EBITDA definition as discussed in the "Key Indicators of Performance (Non-GAAP Financial Measures)" section. Accordingly, we have separately presented such amounts in the table below. The primary drivers of this decline are explained above in the operating profit and depreciation and amortization discussions, and will be further detailed in the segment detail that follows. Additionally, and as explained earlier, 2003 is negatively impacted by an increase of approximately $15 million in fixed asset losses versus 2002. The "Segment Information" below provides a reconciliation between Adjusted EBITDA and operating profit.

Segment		Year Ended December 28, 2003			Year Ended December 29, 2002
		(In thousands)
Chassis Segment		$	81,200		$	102,260
Engine Segment			80,960			75,450
Corporate/centralized resources			(28,160	)		(17,480	)

	Automotive Group	$	134,000		$	160,230
TriMas Group			—			62,400

Total Company		$	134,000		$	222,630

Interest Expense. Interest expense decreased by $15.5 million due to lower average debt levels in 2003 compared to 2002. See the "Liquidity and Capital Resources" section below for additional discussion of our capital structure. In addition, we incurred a $68.9 million loss on the repurchase and retirement of debentures and term debt and a $7.5 million non-cash loss on interest rate arrangements in connection with the early retirement of our term loans in the second quarter of 2002. These losses are reflected as a "loss on repurchase of debentures and early retirement of term loans" and a "loss on interest rate arrangements upon early retirement of term loans" in our consolidated statement of operations incorporated herein.

Equity Gain (Loss) from Affiliates, Net. Equity (loss) from affiliates increased by approximately $19.3 million due to the operating results of our equity affiliates. As a result of the divestiture of our former TriMas subsidiary in June 2002, we recorded six months of equity in earnings (loss) from affiliates in 2002 versus twelve months of activity in 2003. In addition, our equity affiliate Saturn Electronics recorded a SFAS No. 142 intangible asset impairment resulting in an increase of approximately $12 million in equity loss in 2003 versus 2002.

Other, Net. Other, net decreased by $0.9 million to a loss of $8.1 million in 2003 compared to a loss of $9.0 million in 2002. This decrease is primarily due to the reduction of amortization of prepaid debt expense of approximately $2.3 million in 2003, which was offset by an increase in other miscellaneous expenses. For more detail of this expense see Note 19, Other Income (Expense), Net, to the Consolidated Balance Sheets at January 2, 2005 and December 28, 2003 included herein.

Taxes. The provision for income taxes for 2003 was a benefit of $8.7 million as compared to a benefit of $41.0 million for 2002. Our effective tax rate for 2003 was a benefit of 10% compared to a benefit of 59% for 2002. The lower effective tax rate of 10% results mostly from the inclusion of foreign dividends, partial repatriation of foreign earnings and the taxation of income in foreign jurisdictions at rates greater than the U.S. statutory rate. Federally taxable income inclusion items typically serve to increase a company's effective tax rate; however, since we incurred a pre-tax loss, the inclusion of foreign earnings results in a lesser U.S. tax benefit, which when compared to the pre-tax loss, results in a lower effective tax rate. Excluding the impact of these items, our effective tax rate would have been approximately 33%.

Preferred Stock Dividends. Preferred stock dividends were $9.3 million in 2003 as compared to $9.1 million in 2002. This increase is due to the compounded interest of previous year dividends not yet remitted to the shareholders.

Segment Information

Chassis Segment. Sales for our Chassis segment increased 1.2% or approximately $8.4 million in 2003 compared to 2002. Adjusting for the positive impact of currency movements of approximately $26 million, the incremental effect of our Dana Greensboro, North Carolina acquisition in 2003, the transfer of a manufacturing facility with 2003 sales of approximately $26.5 million from the Powertrain segment offset by the sale of our Fittings business in May 2003 and the June 2002 closure of a manufacturing facility, both of which resulted in an approximate $19.6 million sales reduction, sales declined by approximately $57 million, or 8.3%. This decrease is due to the 6.4% reduction in North American vehicle production and the loss of both volume and significant price reductions granted to several of our forging customers in response to a global sourcing initiatives from two of our largest customers.

Chassis Segment	Year Ended December 28, 2003		Year Ended December 29, 2002
	(In thousands)
Sales	$	685,350	$	676,970
Operating profit	$	32,500	$	60,160
Depreciation and amortization		48,260		41,720
Legacy stock award expense		440		380

Adjusted EBITDA	$	81,200	$	102,260

Memo: Additional amounts included in calculation of both operating profit and Adjusted EBITDA
Restructuring charges	$	2,920	$	—
Fixed asset losses		4,910		—
Foreign currency (gains) losses		260		1,080

Operating profit decreased by approximately $28 million primarily due to significant margin reduction within our North American forging operations. Our forging operations were subject to several global sourcing initiatives undertaken by our customers, which resulted in both lost volume and significant price reductions. In addition to the lost volume and price reductions, our Chassis segment's operating margins were negatively impacted by increased steel prices of approximately $7 million,, incremental fixed asset losses of $4.9 million, incremental restructuring charges of $2.9 million, incremental depreciation and amortization charges of approximately $6.5 million, the closure of the manufacturing facility resulting in approximately a $1.2 million reduction, and the sale of our Fittings business that resulted in approximately a $2.4 million reduction. These unfavorable variations from the prior year were offset by the positive impact of currency movements of $6.1 million, additional income associated with the Greensboro facility acquisition of approximately $5.4 million and additional profitability contributed by the transferred facility from the Powertrain segment. Adjusted EBITDA decreased by approximately $21 million in 2003 compared to 2002 due to the above reasons but excluding the incremental depreciation and amortization discussed above.

Powertrain Segment. Sales for our Powertrain segment increased 4.6% or approximately $36.2 million in 2003 compared to 2002. Adjusting for the transfer in 2003 of a manufacturing facility to the Chassis segment which resulted in an approximate $23 million decrease in sales in 2003 versus 2002 and a favorable change in exchange rates of approximately $17.8 million in 2003, sales for our Powertrain segment increased by 5.3% or $41.4 million primarily attributable to increased sales for new programs. Operating profit decreased by $8.4 million due primarily to incremental depreciation and amortization expense of approximately $9.0 million, incremental losses incurred on the disposal of fixed assets in 2003 of approximately $7.2 million and a non-cash $4.9 million asset impairment charge. These decreases were offset by increased sales on new programs, the positive impact of currency movements of $4.5 million, a $2.5 million curtailment gain associated with a pension plan amendment for our Bedford Heights plant that was sold in February 2004 and the recognition of costs savings resulting from restructuring efforts initiated in 2002. Adjusted EBITDA increased by approximately $5.5 million in 2003 compared to 2002 due to the aforementioned reasons but excluding the non-cash asset impairment charge recorded in 2003 and the incremental depreciation and amortization.

Powertrain Segment	Year Ended December 28, 2003			Year Ended December 29, 2002
	(In thousands)
Sales	$	822,850		$	786,650
Operating profit	$	27,340		$	35,730
Asset Impairment		4,870			—
Depreciation and amortization		48,750			39,720

Adjusted EBITDA	$	80,960		$	75,450

Memo: Additional amounts included in calculation of both operating profit and Adjusted EBITDA
Restructuring charges	$	4,380		$	3,470
Fixed asset losses		7,790			640
Foreign currency (gains) losses		(1,270	)		(810	)

Corporate/Centralized Resources. Adjusted EBITDA for Corporate/Centralized Resources was a loss of $28.2 million in 2003, or an increase of approximately $10.7 million over the loss in 2002. This increase in expense is primarily attributable to approximately $5.8 million of restructuring costs associated with an employee reduction and changes in management. In addition, we incurred approximately $1.8 million in costs to establish our Asian sales offices, and recognized an increase in professional fees associated with our acquisition, divestiture and audit activity, as well as an additional investment in our Corporate center to support our shared services effort that have allowed us to

remove costs from our operations. Further, we incurred approximately $2 million more in non-cash fixed asset losses and over $2 million of reductions in other income and expense (primarily related to foreign currency fluctuations).

Corporate/Centralized Resources	Year Ended December 28, 2003			Year Ended December 29, 2002
	(In thousands)
Operating profit	$	(39,540	)	$	(33,320	)
Depreciation and amortization		9,340			9,990
Legacy stock award expense		2,650			4,240
Other, net		(610	)		1,610

Adjusted EBITDA	$	(28,160	)	$	(17,480	)

Memo: Additional amounts included in calculation of both operating profit and Adjusted EBITDA
Restructuring charges	$	5,830		$	—
Fixed asset losses		2,170			110
Other, Net (income) expense		610			(1,610	)

Liquidity and Capital Resources

Overview. Our objective is to appropriately finance our business through a mix of long-term and short-term debt and to ensure that we have adequate access to liquidity. Our principal sources of liquidity are cash flow from operations, our revolving credit facility, our accounts receivable securitization facility and factoring agreements. As of April 3, 2005, we have unutilized capacity under our revolving credit facility that may be utilized for acquisitions, investments or capital expenditure needs. Our cash flows during the year are impacted by the volume and timing of vehicle production, which includes a shutdown in our North American customers for approximately two weeks in July and one week in December and reduced production in July and August for certain European customers. We believe that our liquidity and capital resources including anticipated cash flow from operations will be sufficient to meet debt service, capital expenditure and other short-term and long-term obligations and needs, but we are subject to unforeseeable events and the risk that we are not successful in implementing our business strategies.

To facilitate the collection of funds from operating activities, we have sold receivables under our accounts receivable facility and have entered into accelerated payment collection programs with certain customers. At April 3, 2005, we accelerated approximately $21 million outstanding under these programs. The majority of the accelerated payment collection programs were discontinued as of or prior to January 2, 2005. However, in addition to the above programs, we continue to collect approximately $22 million per month on an accelerated basis as a result of favorable payment terms that we have negotiated with one of our customers through agreements that will run contractually from the beginning of 2004 through fiscal 2006. These payments are received on average 20 days after shipment of product to our customer. While the impact of the discontinuance of the accelerated collection programs may be partially offset by a greater utilization of our accounts receivable securitization facility, we continue to examine other alternative programs in the marketplace, as well as enhanced terms directly from our customers.

Our capital planning process is focused on ensuring that we use our cash flow generated from our operations in ways that enhance the value of our company. Historically, we have used our cash for a mix of activities focused on revenue growth, cost reduction and strengthening the balance sheet. In the first quarter of 2005, we used our cash primarily to service our debt obligations and to fund our capital expenditure requirements.

Liquidity. At April 3, 2005, we had approximately $72 million of undrawn and available commitments from our revolving credit facility. Approximately $57.8 million and $100.3 million were outstanding on our revolving credit facility and accounts receivable securitization facility, respectively, at April 3, 2005. Our access to these two facilities is limited by certain covenant restrictions (see "—Debt, Capitalization and Available Financing Sources" for further discussion on our debt covenants), but at April 3, 2005, we could have drawn the entire $72 million remaining undrawn on our revolving credit facility.

At April 3, 2005, our maximum debt capacity (including amounts drawn under our accounts receivable securitization program) is computed by multiplying our leverage ratio covenant of 5.25 by our bank agreement defined EBITDA, or approximately $214.5 million. Thus, our total debt capacity at April 3, 2005 is approximately $1,126 million. Our actual debt plus the accounts receivable securitization at April 3, 2005 approximated $964 million, or approximately $162 million less than our total capacity. However, our revolving credit and accounts receivable securitization availability only amounted to $72 million as of April 3, 2005. See Note 17, Subsequent Events, to our unaudited consolidated financial statements for additional information regarding our accounts receivable securitization facility.

TriMas Common Stock. We own 4.8 million shares of TriMas stock, or approximately 24% of the total outstanding shares of TriMas.

Debt, Capitalization and Available Financing Sources. In December 2004, we obtained an amendment of our credit facility to, among other things, modify certain negative covenants. Under this amendment, the applicable interest rate spreads on our term loan obligations increased from 4.25% to 4.50% over the current London Interbank Offered Rate ("LIBOR") and our leverage covenant was modified to be less restrictive.

On December 31, 2003, we issued $31.7 million of 10% senior subordinated notes due 2014 to DaimlerChrysler. These notes have a carrying amount of $27.3 million as of April 3, 2005. The notes were issued as part of the financing of the New Castle acquisition.

On October 27, 2003, we issued $150 million of 10% senior notes due 2013 in a private placement under Rule 144A and Regulation S of the Securities Act. As these notes were not registered within 210 days from the closing date, the annual interest rate increased by 1% and will remain so until the registration statement is declared effective. The net proceeds from this offering were used to redeem the balance of the $98.5 million aggregate principal amount of the outstanding 4.5% subordinated debentures ($91 million reflected on the balance sheet at December 29, 2002) that were due in December 2003, and to repay $46.6 million of term loan debt under our credit facility. As a result of this term loan repayment, our semi-annual principle installments on the term loan facility were decreased to $0.4 million with the remaining outstanding balance due December 31, 2009. In connection with this financing, we agreed with our banks to decrease our revolver facility from $250 million to $200 million.

The credit facility includes a term loan with $351 million outstanding and a revolving credit facility with a principal commitment of $200 million. The revolving credit facility matures on May 28, 2007 and the term loan facility matures on December 31, 2009. The obligations under the credit facility are collateralized by substantially all of our assets and of the assets of substantially all of our domestic

subsidiaries and are guaranteed by substantially all of our domestic subsidiaries on a joint and several basis.

		April 3, 2005			January 2, 2005
		(In thousands)
Senior credit facilities:
	Term loan	$	351,080		$	351,080
	Revolving credit facility		57,770			63,540

Total senior credit facility		$	408,850		$	414,620
11% senior subordinated notes, with interest payable semi-annually, due 2012			250,000			250,000
10% senior notes, with interest payable semi-annually, due 2013			150,000			150,000
10% senior subordinated notes, with interest payable semi-annually, due 2014 (face value $31.7 million)			27,250			27,180
Other debt (includes capital lease obligations)			22,740			25,900

Total		$	858,840		$	867,700
Less current maturities			(9,380	)		(12,250	)

Long-term debt		$	849,460		$	855,450

At April 3, 2005, we were contingently liable for standby letters of credit totaling $70.0 million issued on our behalf by financial institutions. These letters of credit are used for a variety of purposes, including meeting requirements to self-insure workers' compensation claims.

Our senior credit facility contains covenants and requirements affecting us and our subsidiaries, including a financial covenant requirement for an earnings before interest, taxes, depreciation and amortization ("EBITDA") to cash interest expense coverage ratio to exceed 2.10 through April 3, 2005, 2.15 through July 3, 2005 and 2.20 through October 2, 2005 and increasing to 2.30 for the quarters ending January 1, 2006 and April 2, 2006, and a debt to EBITDA leverage ratio not to exceed 5.25 through July 3, 2005, decreasing to 5.00 and 4.75 for the quarters ending October 2, 2005 and January 1, 2006, respectively. We were in compliance with the preceding financial covenants throughout the quarter.

Interest Rate Hedging Arrangements. The two interest rate collars expired in the first quarter of 2004, and accordingly we recognized a pre-tax non-cash gain of approximately $6.6 million, which reflects the reversal of the majority of the non-realized charge reflected in our 2002 results and recorded as a gain on maturity of interest rate arrangements in our consolidated statement of operations for the year ended January 2, 2005.. Prior to the expiration of these interest rate collars, we recognized approximately $1.1 million as additional interest expense in 2004. Prior to their maturity, $6.6 million was included in accumulated other comprehensive income related to these arrangements.

Foreign Currency Risk. We are subject to the risk of changes in foreign currency exchange rates due to our global operations. We manufacture and sell our products primarily in North America and Europe. As a result, our financial results could be significantly affected by factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets in which we manufacture and distribute our products. Our operating results are primarily exposed to changes in exchange rates between the U.S. dollar and European currencies.

As currency exchange rates change, translation of the statements of operations of our international businesses into U.S. dollars affects year-over-year comparability of operating results. We do not hedge operating translation risks because cash flows from international operations are generally reinvested locally. Changes in foreign currency exchange rates are generally reported as a component of stockholders' equity for our foreign subsidiaries reporting in local currencies and as a component of income for our foreign subsidiaries using the U.S. dollar as the functional currency. Our other comprehensive loss decreased to $12.7 million for the three months ended April 3, 2005 due to cumulative translation adjustments resulting primarily from changes in the U.S. dollar to the Euro.

As of April 3, 2005, January 2, 2005 and December 28, 2003, our net assets (defined as current assets less current liabilities) subject to foreign currency translation risk were $20 million, $14.3 million and $15.9 million, respectively. The potential decrease in net current assets from a hypothetical 10% adverse change in quoted foreign currency exchange rates would be $2 million, $1.4 million and $1.6 million, respectively. The sensitivity analysis presented assumes a parallel shift in foreign currency exchange rates. Exchange rates rarely move in the same direction. This assumption may overstate the impact of changing exchange rates on individual assets and liabilities denominated in a foreign currency.

Off-Balance Sheet Arrangements

Our Receivables Facility. As of April 3, 2005, we had an agreement to sell, on an ongoing basis, the trade accounts receivable of certain business operations to a bankruptcy-remote, special purposes subsidiary, MTSPC, Inc., wholly owned by us. MTSPC has from time to time sold an undivided fractional ownership interest in the pool of domestic receivables, up to approximately $150 million, to a third party multi-seller receivables funding company, or conduit. Upon sale to the conduit, MTSPC held a subordinated retained interest in the receivables. Under the terms of the agreement, new receivables were added to the pool as collections reduce previously sold receivables. We serviced, administered and collected the receivables on behalf of MTSPC and the conduit. The receivables facility resulted in net expense of $1.0 million in the first quarter of 2005.

The facility is subject to customary termination events, including, but not limited to, breach of representations or warranties, the existence of any event that materially adversely affects the collectibility of receivables or performance by a seller and certain events of bankruptcy or insolvency. At April 3, 2005, we had fully utilized the facility with $100.3 million outstanding. The proceeds of sale are less than the face amount of accounts receivable sold by an amount that approximates the purchaser's financing costs.

On April 29, 2005, we and our newly formed wholly owned special purpose subsidiary, MRFC, Inc., entered into a new accounts receivable facility with General Electric Capital Corporation. Concurrently with entering into the new facility, our former accounts receivable facility, MTSPC, was repaid in full and terminated. The terms of the new facility are generally consistent with those of the former facility, but include (a) a maturity date of January 1, 2007, (b) improved customer concentration limits, (c) increased program availability and (d) adjustments to certain default triggers. The new facility further provides that upon our entering into an intercreditor agreement with the agent under our credit facility, the terms of the new accounts receivable facility will be automatically amended to (a) further increase program availability and (b) increase the applicable margin on LIBOR based drawings from 1.5% to 1.75% (increasing further 0.25% thereafter each 90 days to a maximum of 2.25%) and increase the applicable margin on Base Rate base drawings from 0.5% to 0.75% (increasing further 0.25% thereafter each 90 days to a maximum of 2.25%). We entered into the intercreditor agreement on May 20, 2005.

On July 8, 2005 we amended and restated our accounts receivable facility to (a) extend the maturity date to July 8, 2010, (b) increase program availability, (c) adjust certain default triggers and (d) increase the applicable margin on LIBOR based drawings from 1.75% to 2.25%.

We have entered into agreements with international invoice factoring companies to sell customer accounts receivable of Metaldyne foreign locations in France, Germany, Spain, the United Kingdom and Mexico on a non-recourse basis. As of April 3, 2005, we had available approximately $72 million from these commitments, and approximately $60 million of receivables were sold under these programs. We pay a commission to the factoring company plus interest from the date the receivables are sold to the date of customer payment. Commission expense related to these agreements are recorded in other expense, net on our consolidated statement of operations.

Certain Other Commitments. We have other cash commitments not relating to debt as well, such as those in respect of leases and redeemable preferred stock.

Sale-Leaseback Arrangements. We have engaged in a number of sale-leaseback transactions, including one transaction during the first quarter of 2005 and five transactions in 2004. In February 2005, we entered into a sale-leaseback transaction for machinery and equipment with a third party lessor, and received $6.5 million cash as part of this transaction during the quarter ended April 3, 2005. Subsequent to the quarter ended April 3, 2005, we received an additional $2.2 million cash as part of this transaction, with $2.7 million additional cash expected during the second quarter of 2005.

In December 2004, we entered into two sale-leaseback transactions for machinery and equipment with third party lessors. We received $11.8 million and $7.2 million cash as part of these two transactions. On June 17, 2004, we entered into a sale-leaseback transaction for machinery and equipment whereby we received $7.5 million cash as part of this transaction. Each of these three sale-leasebacks is accounted for as an operating lease with combined annual lease expense of approximately $5 million. On December 31, 2003, we entered into a sale-leaseback with proceeds of approximately $4.5 million. This lease was accounted for as a capital lease and the present value of lease payments is therefore reflected in our debt balance. We also entered into a $65 million sale-leaseback on December 31, 2003, as part of our financing related to the purchase of New Castle. This lease for New Castle equipment is accounted for as an operating lease and the annual lease expense is approximately $10 million.

In March 2003, we entered into a sale-leaseback transaction with respect to certain manufacturing equipment for proceeds of approximately $8.5 million, and in October 2003, we entered into a sale-leaseback transaction for machinery and equipment for additional proceeds of $8.5 million. In July 2003, we entered into an approximate $10 million operating lease associated with the acquisition of our Greensboro, North Carolina facility. The proceeds from this lease were used to finance a portion of the acquisition of this facility from Dana Corporation. All of these leases are accounted for as operating leases. The sale-leasebacks initiated in 2003 contribute an additional $3.8 million in annualized lease expense.

At the time of the GMTI acquisition in June 2001, GMTI entered into sale-leasebacks with respect to certain manufacturing equipment and three real properties for proceeds of approximately $35 million and reduced the debt that we assumed as part of the acquisition by that amount. In June 2001, we entered into an approximate $25 million sale-leaseback related to manufacturing equipment. In December 2001 and January 2002, we entered into additional sale-leaseback transactions with respect to equipment and approximately 20 real properties for net proceeds of approximately $56 million and used the proceeds to repay a portion of our term debt under our credit facility. In December 2002, three additional sale-leaseback transactions were completed with respect to equipment for net proceeds of approximately $19 million. Of the $56 million in proceeds resulting from the December 2001 and January 2002 sale-leaseback transactions, approximately $21 million were from the sale of TriMas properties.

We continue to look to sale-leaseback and other leasing opportunities as a source of cash to finance capital expenditures and for debt reduction and other uses.

Redeemable Preferred Stock. We have outstanding $164.5 million in aggregate liquidation value ($109.2 million aggregate fair value as of April 3, 2005) of Series A, B and A-1 redeemable preferred stock in respect of which we have the option to pay cash dividends, subject to the terms of our debt instruments, at rates of 13%, 11.5% and 11%, respectively, per annum initially and to effect a mandatory redemption in December 2012, June 2013 and December 2013, respectively. For periods that we do not pay cash dividends on the Series A and Series A-1 preferred stock, an additional 2% per annum of dividends is accrued. No cash dividends were paid in 2003, 2004 or during the three months ended April 3, 2005. In the event of a change in control or certain qualified equity offerings,

we may be required to make an offer to repurchase our outstanding preferred stock. We may not be permitted to do so and may lack the financial resources to satisfy these obligations. Consequently, upon these events, it may become necessary to recapitalize our company or secure consents.

TriMas Receivables. We have recorded approximately $7.2 million as of April 3, 2005, consisting of receivables related to certain amounts from TriMas, $4.3 million of which is recorded in equity investments and receivables in affiliates in our consolidated balance sheet as of April 3, 2005. These amounts include TriMas' obligations resulting from tax net operating losses created prior to the disposition of TriMas of approximately $2.2 million, pension obligations of approximately $4.4 million and various invoices paid on TriMas' behalf of approximately $0.6 million.

Credit Rating. We are rated by Standard & Poor's and Moody's Ratings. As of March 31, 2005, we had long-term ratings from Standard & Poor's and Moody's of B/B2 on our senior credit facility, CCC+/B3 on our 10% senior notes due 2013 and CCC+/Caa1 on our 11% senior subordinated notes due 2012, respectively. Our goal is to decrease our total leverage and thus improve our credit ratings. We understand that our ratings may have been under review by Moody's since March 2004. In the event of a credit downgrade, we believe we would continue to have access to additional credit sources. However, our borrowing costs would further increase our ability to access certain financial markets may become limited, the perception of us in the view of our customers, suppliers and securityholders may worsen and as a result, we may be adversely affected.

Capital Expenditures. Our capital expenditure program promotes our growth-oriented business strategy by investing in our core areas, where efficiencies and profitability can be enhanced. Capital expenditures by product segment for the periods presented were:

		April 3, 2005		Jan 3, 2005		Dec 28, 2003
		(In thousands)
Capital Expenditures:
	Chassis	$	12,120	$	59,350	$	51,860
	Powertrain		14,640		91,560		64,240
	Corporate		140		1,530		14,620

	Total	$	26,900	$	152,440	$	130,720

We anticipate that our capital expenditure requirements for fiscal 2005 will be approximately $120 million.

Contractual Cash Obligations

Under various agreements, we are obligated to make future cash payments in fixed amounts. These include payments under our long-term debt agreements, rent payments required under lease

agreements and various severance obligations undertaken. The following table summarizes our fixed cash obligations over various future periods as of April 3, 2005.

	Total		Less Than One Year		1-3 Years		3-5 Years		After 5 Years
	(In millions)
	Payments Due by Periods
Long-term debt	$	532	$	26	$	109	$	397	$	—
11% senior subordinated notes due 2012		456		27		55		55		319
10% senior notes due 2013		283		15		30		30		208
10% senior subordinated notes due 2014		60		3		6		6		45
Other debt		15		6		1		8		—
Capital lease obligations		12		5		4		2		1
Operating lease obligations		354		41		102		77		134
Purchase obligations(1)		57		47		10		—		—
Redeemable preferred stock, including accrued dividends		456		14		49		65		328
Pension contributions (data available through 2006)		42		20		22		—		—
Contractual severance		4		3		1		—		—

Total contractual obligations(1)	$	2,271	$	207	$	389	$	640	$	1,035

(1): Total purchase obligations and contractual obligations exclude accounts payable and accrued liabilities.

Total contractual obligations at April 3, 2005 include interest expense and preferred stock dividend obligations based on the terms of each agreement or the rate as of April 3, 2005 for variable instruments.

At April 3, 2005, we were contingently liable for standby letters of credit totaling $70 million issued on our behalf by financial institutions. We are also contingently liable for future product warranty claims. We provide extensive warranties to our customers. As a result of these warranties, we may be responsible for costs associated with a product recall caused by a defect in a part that we manufacture. We continuously monitor potential warranty implications of new and current business.

Pension Plans and Post-Employment Benefits

We sponsor defined benefit pension plans covering certain active and retired employees in the United States, Canada and Europe. On December 28, 2003, the projected benefit obligation (calculated using a 6.11% discount rate) exceeded the market value of plan assets by $126.4 million. During 2004, we made contributions, including employee contributions and benefit payments made directly by Metaldyne, of $19.1 million to the defined benefit plans. The underfunded status at January 2, 2005 is $121.2 million (assuming a 5.99% discount rate). Under SFAS No. 87, "Employers' Accounting for Pensions," Metaldyne is required annually on September 30 to re-measure the present value of projected pension obligations as compared to plan assets at market value. Although this mark-to-market adjustment is required, we maintain a long-term outlook for developing a pension-

funding plan. In addition, we are in a period of very low interest rates, which results in a higher liability estimate.

	Underfunded Status (PBO Basis)
	(In thousands)
December 28, 2003	$	(126,400	)
Pension contributions		19,120
2004 asset returns		13,640
Impact of U.S. discount rate decrease by 12.5 basis points		(4,280	)
Interest and service cost		(20,580	)
Curtailments		1,470
Other		(4,210	)

January 2, 2005	$	(121,240	)

The discount rate that we utilize for determining future pension obligations is based on a review of long-term bonds, including published indices, which receive one of the two highest ratings given by recognized rating agencies. The discount rate determined on that basis decreased from 6.11% for 2003 to 5.99% for 2004. This 12 basis point decline in the discount rate had the effect of increasing the underfunded status of our U.S. pension plans by approximately $4.3 million.

For 2004, we have assumed a long-term asset rate of return on pension assets of 8.96%. We will utilize a 9% long-term asset rate of return assumption in 2005. In developing the 9% expected long-term rate of return assumption, we evaluated input from our third party pension plan asset managers, including a review of asset class return expectations and long-term inflation assumptions. At January 2, 2005, our actual asset allocation was consistent with our asset allocation assumption.

Our pension expense was $4.2 million and $2.1 million for 2004 and 2003, respectively. For 2005, we expect pension expense to be $6.4 million. As required by accounting rules, our pension expense for 2005 is determined at the end of September 2004. However, for purposes of analysis, the following table highlights the sensitivity of our pension obligations and expense to changes in assumptions:

Change in Assumptions	Impact on Pension Expense			Impact on PBO
	(In millions)
25 bp decrease in discount rate	$	0.6		$	10.3
25 bp increase in discount rate		(0.6	)		(10.2	)
25 bp decrease in long-term return on assets		(0.5	)		N/A
25 bp increase in long-term return on assets		(0.5	)		N/A

We expect to make contributions of approximately $24.0 million to the defined benefit pension plans for 2005.

On January 1, 2003, we replaced our existing combination of defined benefit plans and defined contribution plans for non-union employees with an age-weighted profit-sharing plan and a 401(k) plan. Defined benefit plan benefits will no longer accrue after 2002 for these employees. This change affected approximately 1,200 employees. The profit-sharing component of the new plan is calculated using allocation rates that are integrated with Social Security and that increase with age. Our 2005 defined contribution (profit-sharing and 401(k) matching contribution) expense will be approximately $10.6 million.

provide retiree drug benefits that exceed the value of the benefits that will be provided by Medicare Part D, and our eligible retirees generally pay a premium for this benefit that is less than the Part D premium. Therefore, we have concluded that these benefits are at least actuarially equivalent to the Part D program so that we will be eligible for the basic Medicare Part D subsidy.

In the second quarter of 2004, a Financial Accounting Standards Board (FASB) Staff Position (FSP FAS 106-2, "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug Improvement and Modernization Act of 2003") was issued providing guidance on the accounting for the effects of the Act for employers that sponsor post-retirement health care plans that provide prescription drug benefits. The FSP is effective for the first interim or annual period beginning after June 15, 2004. We estimate the federal subsidy reduced our post-retirement benefit obligation by approximately $7.0 million; this savings is reflected in the balance at January 2, 2005. For 2004, we recognized a net reduction in post-retirement expense of $0.9 million as a result of the subsidy.

In December 2004, we announced that we will discontinue retiree medical and life insurance coverage to our salaried and nonunion retirees and their beneficiaries effective January 1, 2006. This event has no impact on our 2004 annual results since the announcement occurred subsequent to the September 30, 2004 measurement date for post-retirement benefits. We will record an estimated curtailment gain of $2.5 million in the first quarter of 2005. We expect to reduce our 2005 SFAS No. 106 expense by $16.8 million and $1.4 million as a result of the curtailment and of FSP FAS 106-2, respectively.

Cash Flows

Operating Activities. Cash flows provided by operations were $23.5 million for the three months ended April 3, 2005 compared to $88.9 million in 2004. The reduction in the cash flows from operations of $65.3 million for the first quarter of 2005 as compared to 2004 is primarily the result of a $61.6 million decrease in net proceeds from the accounts receivable securitization facility. Working capital usage (excluding the accounts receivable securitization facility) was approximately $0.9 million higher than in the first quarter of 2005 as in 2004.

Cash flows provided by operations before changes in working capital were $84.5 million for the year ended January 2, 2005 compared to $60 million in 2003 and $158.6 million in 2002. This increase of $24.5 million was primarily due to the increased profitability resulting from the acquisition of New Castle and increased sales volumes in our Engine segment, Net cash provided by operating activities totaled $79.4 million for the year ended January 2, 2005, compared to $99.2 million provided in 2003 and $65.1 million used in 2002. Adjusting 2004 results by the $63 million increased use of the accounts receivable securitization facility, the 2004 operating cash flow would have approximated a $16.1 million inflow, or an approximate $83.1 million decrease versus a $17 million inflow from 2003 excluding refundable income taxes. The primary driver of this decline is an approximate $69 million increase in investment in working capital (excluding the accounts receivable securitization facility). This increase in working capital is explained by the 33% increase in sales in 2004 (driven largely by the New Castle acquisition as accounts receivable was not acquired) and higher inventory levels (largely driven by the increase in raw material pricing combined with higher safety stock to compensate for the decrease in supply). In addition, a $20 million reduction in cash versus 2003 resulted from the receipt of tax refunds in 2004.

Investing Activities. Cash flows used in investing activities totaled $14.7 million for the three months ended April 3, 2005 compared to $169.4 million in 2004. We acquired the remaining ownership of the New Castle facility in 2004 for approximately $204 million including fees and expenses (net of approximately $14 million in discounts on the $31.7 million subordinated debt and the $64.5 million preferred stock issued to fund the transaction). Offsetting the cost of the New Castle acquisition were proceeds from a sale-leaseback transaction of approximately $65 million on the acquired New Castle equipment. The resulting $15.8 million decrease in cash flows used in investing activities for the three months ended April 3, 2005 is primarily the result of a $3.1 million decrease in capital expenditures, $6.5 million in proceeds from a sale-leaseback transaction for equipment in 2005 compared with 2004 and a reduction of $5.8 million in our investment in New Castle resulting from reimbursement relating to equipment purchases. See Note 8, Acquisitions, for additional discussion of the reimbursement.

Cash flows used in investing activities totaled $230.2 million for the year ended January 2, 2005, compared to a use of cash of $98.8 million in 2003 and a source of cash of $775.7 million in 2002. We acquired the remaining ownership of the New Castle facility in 2004 for approximately $204 million including fees and expenses (net of approximately $14 million in discounts on the $31.7 million subordinated debt and the $64.5 million preferred stock issued to fund the transaction). Capital expenditures totaled $152.4 million in 2004 and were higher than 2003 by approximately $21.7 million primarily related to increased new business launch activity. Offsetting the cost of the New Castle acquisition were proceeds from a sale leaseback transaction of approximately $65 million on the acquired New Castle equipment. Proceeds from sale-leaseback transactions with respect to other equipment represented an additional source of cash of approximately $26.5 million in 2004 as compared to $17 million in 2003. In addition, we received proceeds from the sale of our equity investments and joint venture of $33.8 million and $1.3 million in 2004.

Financing Activities. Cash flows used in financing activities totaled $8.8 million for the three months ended April 3, 2005 compared with cash flows provided by financing activities of $112.3 million in 2004, or a $121.1 increase in cash used in financing activities in 2005. In 2004, we issued $82.3 million fair value in new debt and preferred stock to acquire New Castle. Adjusting for the New Castle transaction in 2004, financing cash flows decreased $38.8 million in 2005, primarily resulting from $32.9 million additional payments on the revolving credit facility and $5.0 million decrease in proceeds on the revolving credit facility.

Cash flows used in financing activities totaled $137 million for the year ended January 2, 2005, compared to a use of cash of $5.7 million in 2003 and $691.5 million in 2002. In 2004, we issued $82.2 million fair value in new debt and preferred stock to acquire New Castle and ended the year with approximately $63.5 million outstanding on our revolving credit and swingline facilities versus zero outstanding at December 28, 2003. In 2003, we secured proceeds of $150 million in a public debt offering, which was offset by repayment of $98.5 million of subordinated convertible debentures that became due in December 2003 and repayment of $47.6 million of term loan debt.

Outlook

Automotive vehicle production in 2005 is expected to be slightly above 2004 production levels in both North America and the global market. However, 2005 automotive vehicle production for the "Big 3" is expected to be approximately 4.5% below 2004 production levels. There are several factors that could alter this outlook, including a change in interest rates or an increase in vehicle incentives offered to consumers.

Our principal use of funds from operating activities and borrowings for the next several years are expected to fund interest and principal payments on our indebtedness, growth related capital expenditures and working capital increases, strategic acquisitions and lease expense. Management believes cash flow from operations and debt financing and refinancing from our accounts receivable securitization program will provide us with adequate sources of liquidity for the foreseeable future. However, our sources of liquidity may be inadequate if we are unable to achieve operating targets, which would cause us to seek covenant relief from existing lenders in the near future. In addition, due to an increasingly restrictive covenant structure under our loan agreements affecting future periods, we may need to seek additional covenant relief from our lending group. However, no assurance can be given that we will be successful in negotiating such relief. In addition, matters affecting the credit quality of our significant customers could adversely impact the availability of our receivables arrangements and our liquidity. On May 5, 2005, Standard & Poor's lowered its credit ratings of General Motors Corporation and Ford Motor Company, two of our largest customers. Due to our new accounts receivable securitization facility entered into on April 29, 2005, these rating downgrades did not have a material impact on our borrowing capacity. However, any further rating downgrade of our larger customers (namely the Big 3) could limit our borrowing capacity on our accounts receivable

securitization facility. We continue to explore other sources of liquidity, including additional debt, but existing debt instruments may limit our ability to incur additional debt, and we may be unable to secure equity or other financing.

Consistent with operating in the global vehicle industry, we anticipate significant competitive pressures and thus expect to face significant price reduction pressures from our customer base. In 2003 and 2004, though, we invested significantly in automation and underwent significant restructuring activities to help accommodate these pricing pressures. In addition, we are facing significant increases in the cost to procure certain materials utilized in our manufacturing processes such as steel, energy, molybdenum and nickel. In general, steel prices have risen over the past year by as much as 60-100% and have thus created significant tension between steel producers, suppliers and end customers. Based on current prices, our material costs could increase approximately $45 million in 2005 over 2004 levels. However, we anticipate several initiatives such as cost reductions in our operations, steel scrap sales, steel resourcing efforts, price recovery from several of our customers and reducing or eliminating 2005 scheduled price downs to our customers will offset approximately all of this expected cost increase. Additionally, we are actively working with our customers to 1) obtain additional business to help offset these prices through better utilization of our capacity, 2) negotiate a surcharge to reflect the increased material costs, and/or 3) resource certain of our products made unprofitable by these increases in material costs. We will actively work to mitigate the effect of these steel increases throughout 2005.

Critical Accounting Policies

The expenses and accrued liabilities or allowances related to certain policies are initially based on our best estimates at the time of original entry in our accounting records. Adjustments are recorded when our actual experience differs from the expected experience underlying the estimates. We make frequent comparisons of actual versus expected experience to mitigate the likelihood of material adjustments.

Goodwill. In June 2001, the Financial Accounting Standards Board ("FASB") approved Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets," which was effective for us on January 1, 2002. Under SFAS No. 142, we ceased the amortization of goodwill. Beginning in 2002, we test goodwill for impairment on an annual basis, unless conditions exist which would require a more frequent evaluation. In assessing the recoverability of goodwill, projections regarding estimated future cash flows and other factors are made to determine the fair value of the respective assets. We may be required to record impairment charges for goodwill if these estimates or related projections change in the future.

During 2002, 2003 and 2004, we determined that our goodwill was not impaired as fair values continue to exceed their carrying value. Fair value of our goodwill is determined based upon the discounted cash flows of the reporting units using a 9.5% discount. If the discount rate were to increase to 12%, or if anticipated operating profit were to decrease by approximately 1.6% of sales, we would be required to perform further analysis of goodwill impairment in our Chassis segment.

Receivables and Revenue Recognition. We recognize revenue when there is evidence of a sale, the delivery has occurred or services have been rendered, the sales price is fixed or determinable and the collectibility of receivables is reasonably assured. Consequently, sales are generally recorded upon shipment of product to customers and transfer of title under standard commercial terms. Such pricing accruals are adjusted as they are settled with our customers. Material surcharge pass through arrangements with customers are recognized as revenue when an agreement is reached, delivery of the goods or services has occurred and the amount of the pass through is determinable.

Valuation of Long-Lived Assets. We periodically evaluate the carrying value of long-lived assets to be held and used including intangible assets, when events or circumstances warrant such a review. The

carrying value of a long-lived asset to be held and used is considered impaired when the anticipated separately identifiable undiscounted cash flows from such an asset are less than the carrying value of the asset. In that event, a loss is recognized based on the amount by which the carrying value exceeds that fair value of the long-lived asset. Fair value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. Impairment losses on long-lived assets that are held for sale are determined in a similar manner, except that fair values are reduced for the cost to dispose of the assets.

Pension and Post-retirement Benefits Other Than Pensions. The determination of our obligation and expense for our pension and post-retirement benefits, such as retiree healthcare and life insurance, is dependent on our selection of certain assumptions used by actuaries in calculating such amounts. These assumptions are described in Note 24, Employee Benefit Plans, to the Consolidated Balance Sheets at January 2, 2005 and December 28, 2003, included elsewhere in this prospectus, which include, among others, discount rate, expected long-term rate of return on plan assets and rate of increase in compensation and health care costs. While we believe that our assumptions are appropriate, significant differences in our actual experience or assumptions may materially affect the amount of our pension and post-retirement benefits other than pension obligation and our future expense. Our actual return on pension plan assets was 8.2%, 6.5% and (5.75)% for the years ended January 2, 2005, December 28, 2003 and December 29, 2002, respectively. In comparison, our expected long-term return on pension plan assets was 8.96%, 8.96% and 8.97% for the years ended January 2, 2005, December 28, 2003 and December 29, 2002, respectively. The expected return on plan assets was established by analyzing the long-term returns for similar assets and, as such, no revisions have been made to adjust to actual performance of the plan assets.

New Accounting Pronouncements

In October 2004, the U.S. government enacted the American Jobs Creation Act of 2004 ("Act"). This Act provides for a special one-time tax deduction of 85% of certain foreign earnings that are repatriated to the U.S. provided certain criteria are met. We are currently analyzing the provisions of the Act and the feasibility of several alternative scenarios for the potential repatriation of a portion of the earnings of our non-U.S. subsidiaries. In general, it is our practice and intention to reinvest the earnings of our non-U.S. subsidiaries in those operations and therefore we do not currently anticipate repatriation of earnings under the Act.

In November 2004, the FASB issued SFAS No. 151, "Inventory Costs, an amendment of ARB No. 43, Chapter 4," to clarify that abnormal amounts of idle facility expense, freight, handling costs and wasted material (spoilage) should be recognized as current period charges, and that allocation of fixed production overheads to the costs of conversion be based on normal capacity of the production facilities. SFAS No. 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. Accordingly, we will adopt SFAS No. 151 for the fiscal year beginning January 2, 2006. We are currently in the process of evaluating whether the adoption of this pronouncement will have a significant impact on our results of operations or financial position.

In December 2004, the FASB issued SFAS No. 123 (revised 2004), "Share-Based Payment." This Statement is a revision of SFAS No. 123, "Accounting for Stock-Based Compensation" and supersedes APB No. 25, "Accounting for Stock Issued to Employees." SFAS No. 123 (revised 2004) requires that the compensation cost relating to stock options and other share-based compensation transactions be recognized at fair value in financial statements. Because we are a nonpublic entity as defined in SFAS No. 123 (revised 2004), this Statement is effective for us at the beginning of our fiscal year 2006. We will then be required to record any compensation expense using the fair value method in connection with option grants to employees after adoption. We are currently reviewing the provisions of this Statement and will adopt it no later than our fiscal year beginning January 2, 2006.

Fiscal Year

Effective in 2002, our fiscal year ends on the Sunday nearest to December 31.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
EX-99.2 5 a2161349zex-99_2.htm EXHIBIT 99.2
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Exhibit 99.2

Report of Independent Registered Public Accounting Firm

The Board of Directors
Metaldyne Corporation:

We have audited the accompanying consolidated balance sheets of Metaldyne Corporation as of January 2, 2005 and December 28, 2003, and the related consolidated statements of operations, shareholders' equity and other comprehensive income, and cash flows for the years then ended. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule as listed in the accompanying index. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Metaldyne Corporation as of January 2, 2005 and December 28, 2003, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

As discussed in Note 3, in March 2004, the Company changed its method of accounting for its redeemable preferred stock to conform with Statement of Financial Accounting Standards No. 150, Accounting for Certain Instruments with Characteristics of both Liabilities and Equity.

/s/ KPMG LLP

Detroit, Michigan
March 31, 2005, except as to Note 15, which is as of July 22, 2005.

Report of Independent Registered Public Accounting Firm

To the Board of Directors
and Shareholders of Metaldyne Corporation:

In our opinion, the accompanying statements of operations, of shareholders' equity and other comprehensive income and of cash flows of Metaldyne Corporation and its subsidiaries present fairly, in all material respects, the results of their operations and their cash flows for the year ended December 29, 2002 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the accompanying financial statement schedule presents fairly, in all material respects, the information set forth therein for the year ended December 29, 2002 when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audit. We conducted our audit of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards 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 audit provides a reasonable basis for our opinion.

As discussed in Note 8 to the consolidated financial statements, the Company changed its method of accounting for goodwill resulting from its adoption of Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," effective January 1, 2002.

/s/ PricewaterhouseCoopers LLP

Detroit, Michigan

March 11, 2003, except as to the effect of the matters described in Note 2 to the consolidated financial
    statements as filed in the Company's Form 10-K for the year ended December 28, 2003 not
    appearing herein, which is as of November 10, 2004, and except as to Note 15, which is as of July 22,
    2005.

METALDYNE CORPORATION
CONSOLIDATED BALANCE SHEET
January 2, 2005 and December 28, 2003

(Dollars in thousands except per share amounts)

				January 2, 2005			December 28, 2003
ASSETS
Current assets:
	Cash and cash equivalents			$	—		$	13,820
	Receivables, net:
		Trade, net of allowance for doubtful accounts			165,850			139,330
		TriMas			2,830			8,390
		Other			12,930			26,440

			Total receivables, net		181,610			174,160
	Inventories				127,020			83,680
	Deferred and refundable income taxes				18,470			9,110
	Prepaid expenses and other assets				36,650			36,280

		Total current assets			363,750			317,050
Equity investments and receivables in affiliates					107,040			155,790
Property and equipment, net					856,250			707,450
Excess of cost over net assets of acquired companies					626,240			584,390
Intangible and other assets					241,470			247,180

Total assets				$	2,194,750		$	2,011,860

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Accounts payable			$	286,590		$	201,240
	Accrued liabilities				117,050			136,840
	Current maturities, long-term debt				12,250			10,880

		Total current liabilities			415,890			348,960
Long-term debt					855,450			766,930
Deferred income taxes					88,910			121,520
Minority interest					650			800
Other long-term liabilities					142,700			153,760
Redeemable preferred stock (aggregate liquidation value $159.3 million) Authorized: 1,198,693 shares; Outstanding: 1,189,694 shares					149,190			—

		Total liabilities			1,652,790			1,391,970
Redeemable preferred stock (aggregate liquidation value $76.0 million) Authorized: 554,153 shares; Outstanding: 545,154 shares					—			73,980

Shareholders' equity:
Preferred stock (non-redeemable), $1 par, Authorized: 25 million; Outstanding: None					—			—
Common stock, $1 par, Authorized: 250 million; Outstanding: 42.8 million and 42.7 million, respectively					42,830			42,730
Paid-in capital					698,870			692,400
Accumulated deficit					(262,740	)		(234,750	)
Accumulated other comprehensive income					63,000			45,530

		Total shareholders' equity			541,960			545,910

		Total liabilities, redeemable stock and shareholders' equity		$	2,194,750		$	2,011,860

The accompanying notes are an integral part of the consolidated financial statements.

METALDYNE CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED JANUARY 2, 2005, DECEMBER 28, 2003 AND DECEMBER 29, 2002

(Dollars in thousands except per share amounts)

			January 2, 2005			December 28, 2003			December 29, 2002
Net sales			$	2,004,260		$	1,508,200		$	1,792,200
Cost of sales				(1,831,250	)		(1,352,670	)		(1,498,560	)

Gross profit				173,010			155,530			293,640
Selling, general and administrative expenses (Includes non-cash stock award expense of $0.6 million and $3.1 million in 2004 and 2003, respectively)				(133,250	)		(117,230	)		(181,460	)
Restructuring charges				(2,750	)		(13,130	)		(3,470	)
Loss on disposition of manufacturing facilities				(7,600	)		—			—
Asset impairment				—			(4,870	)		—

Operating profit				29,410			20,300			108,710

Other expense, net:
	Interest:
		Interest expense		(82,140	)		(75,510	)		(91,000	)
		Preferred stock dividends and accretion		(19,900	)		—			—
	Non-cash gain on maturity of interest rate arrangement			6,570			—			—
	Loss on repurchase of debentures and early retirement of term loans			—			—			(68,860	)
	Loss on interest rate arrangements upon early retirement of term loans			—			—			(7,550	)
	Equity gain (loss) from affiliates, net			1,450			(20,700	)		(1,410	)
	Gain on sale of equity investments, net			8,020			—			—
	Other, net			(8,270	)		(8,080	)		(8,980	)

		Other expense, net		(94,270	)		(104,290	)		(177,800	)

Loss before income taxes and cumulative effect of change in accounting principle				(64,860	)		(83,990	)		(69,090	)
Income tax benefit				(36,870	)		(8,660	)		(40,960	)

Loss before cumulative effect of change in accounting principle				(27,990	)		(75,330	)		(28,130	)
Cumulative effect of change in recognition and measurement of goodwill impairment				—			—			(36,630	)

Net loss				(27,990	)		(75,330	)		(64,760	)
Preferred stock dividends				—			9,260			9,120

Net loss attributable to common stock			$	(27,990	)	$	(84,590	)	$	(73,880	)

Basic and diluted loss per share:
	Before cumulative effect of change in accounting principle less preferred stock dividends		$	(0.65	)	$	(1.98	)	$	(0.87	)
	Cumulative effect of change in recognition and measurement of goodwill impairment			—			—			(0.86	)

	Net loss attributable to common stock		$	(0.65	)	$	(1.98	)	$	(1.73	)

Weighted average number of shares outstanding for basic and diluted loss per share				42,800			42,730			42,650

The accompanying notes are an integral part of the consolidated financial statements.

METALDYNE CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEARS ENDED JANUARY 2, 2005, DECEMBER 28, 2003 AND DECEMBER 29, 2002

(Dollars in thousands)

			January 2, 2005			December 28, 2003			December 29, 2002
Operating activities:
Net loss			$	(27,990	)	$	(75,330	)	$	(64,760	)
	Adjustments to reconcile net cash provided by (used for) operating activities:
		Depreciation and amortization		132,100			106,350			107,430
		Non-cash stock award expense		560			3,090			4,880
		Debt fee amortization		3,880			2,480			4,770
		Fixed asset (gains) losses		3,180			14,870			750
		Asset impairment		—			4,870			—
		Loss on disposition of manufacturing facilities		7,600			—			—
		Deferred income taxes		(37,730	)		(24,250	)		(21,040	)
		Preferred stock dividends and accretion		19,900			—			—
		Gain on sale of equity investments		(8,020	)		—			—
		Non-cash interest expense (interest accretion)		260			7,390			13,230
		Non-cash loss on interest rate arrangements		—			—			7,550
		Non-cash gain on maturity of interest rate arrangements		(6,570	)		—			—
		Equity (gain)loss from affiliates, net		(1,450	)		20,700			1,410
		Cumulative effect of change in recognition and measurement of goodwill impairment		—			—			36,630
		Loss on repurchase of debentures and early retirement of term loans		—			—			68,860
		Other, net		(950	)		280			(1,110	)
Changes in assets and liabilities, net of acquisition/disposition of business:
		Receivables, net		(64,170	)		10,790			(8,600	)
		Net proceeds of accounts receivable facility		63,260			—			(167,360	)
		Inventories		(30,440	)		(5,710	)		(4,870	)
		Refundable income taxes		—			21,750			(34,150	)
		Prepaid expenses and other assets		(40	)		2,940			(15,120	)
		Accounts payable and accrued liabilities		26,000			9,020			6,390

		Net cash provided by (used for) operating activities		79,380			99,240			(65,110	)

Investing activities:
		Capital expenditures		(152,440	)		(130,720	)		(116,450	)
		Disposition of businesses to a related party		—			22,570			840,000
		Acquisition of business, net of cash received		(203,870	)		(7,650	)		—
		Proceeds from sale-leaseback of fixed assets		91,520			16,970			52,180
		Disposition of manufacturing facilities		(500	)		—			—
		Proceeds from sale of equity investments		33,830			20,000			—
		Investment in joint venture		—			(20,000	)		—
		Proceeds on sale of joint venture		1,260			—			—

		Net cash provided by (used for) investing activities		(230,200	)		(98,830	)		775,730

Financing activities:
		Proceeds of term loan facilities		—			—			400,000
		Principal payments of term loan facilities		(1,320	)		(47,600	)		(1,112,450	)
		Proceeds of revolving credit facility		279,450			180,000			324,800
		Principal payments of revolving credit facility		(215,910	)		(180,000	)		(324,800	)
		Proceeds of senior subordinated notes, due 2012		—			—			250,000
		Proceeds of senior notes, due 2013		—			150,000			—
		Proceeds of senior subordinated notes, due 2014 (face value $31.7 million)		26,920			—			—
		Principal payments of convertible subordinated debentures, due 2003 (net of $1.2 million non- cash portion of repurchase).		—			(98,530	)		(205,290	)
		Proceeds of other debt		3,740			1,940			920
		Principal payments of other debt		(9,840	)		(9,180	)		(6,090	)
		Capitalization of debt refinancing fees		(1,380	)		(2,350	)		(12,100	)
		Issuance of Series A-1 preferred stock (face value $65.4 million)		55,340			—			—
		Penalties on early extinguishment of debt		—			—			(6,480	)

		Net cash provided by (used for) financing activities		137,000			(5,720	)		(691,490	)

Net increase (decrease) in cash				(13,820	)		(5,310	)		19,130
Cash and cash equivalents, beginning of year				13,820			19,130			—

Cash and cash equivalents, end of year			$	—		$	13,820		$	19,130

Supplementary cash flow information:
Cash refunded for income taxes, net			$	(8,340	)	$	(27,060	)	$	(2,900	)
Cash paid for interest			$	78,670		$	63,590		$	91,840
Noncash transactions—capital leases			$	6,700		$	5,140		$	6,330

The accompanying notes are an integral part of the consolidated financial statements.

METALDYNE CORPORATION

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

AND OTHER COMPREHENSIVE INCOME

FOR THE YEARS ENDED JANUARY 2, 2005, DECEMBER 28, 2003 AND DECEMBER 29, 2002

(In thousands)

												Other Comprehensive Income
			Preferred Stock		Common Stock		Paid-In Capital		Accumulated Deficit			Foreign Currency Translation and Other			Minimum Pension Liability			Interest Rate Arrangements			Total Shareholders Equity
Balances, December 31, 2001			$	—	$	42,570	$	679,670	$	(76,270	)	$	890		$	(7,310	)	$	(5,870	)	$	633,680
	Comprehensive income:
		Net loss								(64,770	)											(64,770	)
		Foreign currency translation											39,170									39,170
		Interest rate arrangements (net of tax, $(380))																	5,100			5,100
		Minimum pension liability (net of tax, $17,960)														(30,570	)					(30,570	)
		Increase in TriMas investment											2,500									2,500
		Impact of TriMas disposition											(1,910	)								(1,910	)

		Total comprehensive loss																				(50,480	)
		Preferred stock dividends								(9,120	)											(9,120	)
		Exercise of restricted stock awards						4,270														4,270
		Issuance of shares				80		930														1,010

Balances, December 29, 2002			$	—	$	42,650	$	684,870	$	(150,160	)	$	40,650		$	(37,880	)	$	(770	)	$	579,360
	Comprehensive income:
		Net loss								(75,330	)											(75,330	)
		Foreign currency translation											45,010									45,010
		Interest rate arrangements (net of tax $1,080)																	7,340			7,340
		Minimum pension liability (net of tax, $(9,450))														(16,080	)					(16,080	)
		Increase in TriMas investment											7,260									7,260

		Total comprehensive loss																				(31,800	)
		Preferred stock dividends								(9,260	)											(9,260	)
		Disposition of business to a related party						6,270														6,270
		Exercise of restricted stock awards				80		1,260														1,340

Balances, December 28, 2003			$	—	$	42,730	$	692,400	$	(234,750	)	$	92,920		$	(53,960	)	$	6,570		$	545,910
	Comprehensive income:
		Net loss								(27,990	)											(27,990	)
		Foreign currency translation											33,320									33,320
		Interest rate arrangements																	(6,570	)		(6,570	)
		Minimum pension liability (net of tax, $(3,870))														(6,610	)					(6,610	)
		Dissolution of foreign entity upon transfer of operations to other consolidated subsidiaries						5,330					(5,330	)								—
		Increase in TriMas investment											2,660									2,660

		Total comprehensive loss																				(5,190	)
		Restricted stock awards				100		1,140														1,240

Balances, January 2, 2005			$	—	$	42,830	$	698,870	$	(262,740	)	$	123,570		$	(60,570	)	$	—		$	541,960

The accompanying notes are an integral part of the consolidated financial statements.

METALDYNE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Business and Other Information

Metaldyne Corporation ("Metaldyne" or "the Company") is 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.

The Company maintains a fifty-two/fifty-three week fiscal year ending on the Sunday nearest to December 31. Fiscal year 2004 is comprised of fifty-three weeks and fiscal years 2003 and 2002 are comprised of fifty-two weeks and ended on January 2, 2005, December 28, 2003 and December 29, 2002, respectively. All year and quarter references relate to the Company's fiscal year and fiscal quarters unless otherwise stated.

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 percent is accounted for on the cost basis unless the Company exercises significant influence over the investee.

Use of Estimates. The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect amounts reported therein. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may differ from those estimates.

Revenue Recognition. The Company recognizes revenue when there is evidence of a sale, the delivery has occurred or services have been rendered, the sales price is fixed or determinable and the collectibility of receivables is reasonably assured. Consequently, sales are generally recorded upon shipment of product to customers and transfer of title under standard commercial terms. The Company has ongoing adjustments to its pricing arrangements with its customers based on the related content and cost of its products. The Company accrues for such amounts as its products are shipped to its customers. Such pricing accruals are adjusted as they are settled with the Company's customers. Material surcharge pass through arrangements with customers are recognized as revenue when an agreement is reached, delivery of the goods or services has occurred and the amount of the pass through is determinable.

Cash and Cash Equivalents. The Company considers all highly liquid debt instruments with an initial maturity of three months or less to be cash and cash equivalents.

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. 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. 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. Under hedge accounting, changes are recorded as a component of other comprehensive income to the extent the hedge is considered effective. The ineffective portion of the change in fair value of a derivative instrument that qualifies as a cash flow hedge is reported in earnings. The Company discontinues hedge accounting prospectively when it is determined that the derivative is no longer effective in offsetting

changes in the fair value or cash flows of the hedged item, the derivative expires or is sold, terminated or exercised, the derivative is de-designated as a hedging instrument, because it is unlikely that a forecasted transaction will occur, a hedged firm commitment no longer meets the definition of a firm commitment, or management determines that designation of the derivative as a hedging instrument is no longer appropriate.

Receivables. Receivables are presented net of allowances for doubtful accounts of approximately $2.7 million and $3.1 million at January 2, 2005 and December 28, 2003, respectively. The Company conducts a significant amount of business with a number of individual customers in the automotive industry. The allowance for doubtful accounts is the Company's best estimate of the amount of probable credit losses in the existing accounts receivable. Past due balances over 90 days and over a specified amount are reviewed individually for collectibility. Account balances are charged against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. 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. In accordance with the Company's accounts receivable securitization (see Note 4, Accounts Receivable Securitization and Factoring Agreements), 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. The Company secures one-year or longer-term supply contracts for most of its major raw material purchases to protect against inflation and to reduce its raw material cost structure. Therefore, any material savings or price increases (primarily material surcharges) are reflected in the Company's inventory cost.

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, Amortization and Impairment of Long-Lived Assets. 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, 3.33% to 10%, and machinery and equipment, 6.7% to 33.3%. Deferred financing costs are amortized over the lives of the related debt securities.

Deferred losses on sale-leasebacks are amortized over the life of the respective lease, which range from 3.5 years to 20 years. These losses were recorded as part of the sale-leaseback transactions and represent the difference between the carrying value of the assets sold and the proceeds paid at closing by the leasing companies. Fair value was equal to or in excess of the carrying value of these assets based on asset appraisal information provided by third party valuation firms. These deferred amounts are being amortized, instead of being currently recognized, on a straight-line basis over the lives of the respective leases as required under SFAS No. 28, "Accounting for Sales with Leasebacks" (an amendment of SFAS No. 13). Future amortization amounts relate to the remaining portion of the 2000 and 2001 sale-leaseback deferred losses. For sale-leaseback transactions entered into during 2002 and

forward, the Company negotiated more favorable terms for these transactions, resulting in proceeds that were at fair value.

Customer contracts are amortized over a period from 6 years to 14 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 3 years and 25 years. At January 2, 2005 and December 28, 2003, accumulated amortization of intangible assets was approximately $88 million and $66 million, respectively. Total amortization expense, including amortization of stock awards and deferred losses related to sale-leaseback transactions, was approximately $34 million in 2004 and 2003 and $44 million in 2002.

Goodwill. In 2001, the Financial Accounting Standards Board ("FASB") approved Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets," which was effective for the Company on January 1, 2002. Under SFAS No. 142, the Company ceased the amortization of goodwill. Beginning in 2002, it tested goodwill for impairment on an annual basis, unless conditions exist which would require a more frequent evaluation. In assessing the recoverability of goodwill, projections regarding estimated future cash flows and other factors are made to determine the fair value of the respective assets. The Company may be required to record impairment charges for goodwill if these estimates or related projections change in the future.

During 2002, 2003 and 2004, the Company determined that its goodwill was not impaired as fair values continued to exceed their carrying value. Fair value of our goodwill is determined based upon the discounted cash flows of the reporting units using a 9.5% discount. Assuming an increase in the discount rate to 11%, fair value would continue to exceed the respective carrying value of each automotive segment. At a 12% discount rate, however, the Company would have a goodwill impairment.

Stock-Based Compensation. The Company has a stock-based employee compensation plan and has issued equity-based incentives in various forms. The Company continues to account for stock-based employee compensation using the intrinsic value method under Accounting Principles Board ("APB") No. 25, "Accounting for Stock Issued to Employees," and related interpretations. No stock-based employee compensation cost is reflected in net income, as all options granted under this plan had an exercise price equal to the market value of the underlying common stock on the date of grant. See also Note 21, Stock Options and Awards, to the Company's audited consolidated financial statements.

The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," to stock-based employee compensation.

		January 2, 2005			December 28, 2003			December 29, 2002
		(In thousands, except per share amounts)
Net loss attributable to common stock, as reported		$	(27,990	)	$	(84,590	)	$	(73,880	)
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects			(420	)		(1,740	)		(1,950	)

Pro forma net loss attributable to common stock		$	(28,410	)	$	(86,330	)	$	(75,830	)

Earnings (loss) per share:
	Basic and diluted — as reported	$	(0.66	)	$	(1.98	)	$	(1.73	)

	Basic and diluted — pro forma for stock-based compensation	$	(0.66	)	$	(2.02	)	$	(1.78	)

Foreign Currency Translation. The financial statements of subsidiaries outside of the United States ("U.S.") located in non-highly inflationary economies are measured using the currency of the primary economic environment in which they operate as the functional currency, which for the most part represents the local currency. Transaction gains and losses are included in net earnings. When translating into U.S. dollars, income and expense items are translated at average monthly rates of exchange and assets and liabilities are translated at the rates of exchange at the balance sheet date. Translation adjustments resulting from translating the functional currency into U.S. dollars are deferred as a component of accumulated other comprehensive income (loss) in shareholders' equity. For subsidiaries operating in highly inflationary economies, non-monetary assets are translated into U.S. dollars at historical exchange rates. Translation adjustments for these subsidiaries are included in net earnings.

Comprehensive Income (Loss). Comprehensive income (loss) is defined as net income and other changes in shareholders' equity from transactions and other events from sources other than shareholders. The components of comprehensive income include foreign currency translation, minimum pension liability and interest rate arrangements. Total accumulated other comprehensive income was $63.0 million, $45.5 million and $2.0 million as of January 2, 2005, December 28, 2003 and December 29, 2002, respectively. Total annual tax effects included in comprehensive income (loss) were $3.9 million, $8.4 million and $18.3 million as of January 2, 2005, December 28, 2003 and December 29, 2002, respectively.

Income Taxes. Income taxes are accounted for using the asset and liability method under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Self-Insurance Reserves. The Company self-insures both a medical coverage program and a workers' compensation program for its employees. The determination of accruals and expenses for these benefits is dependent on claims experience and the selection of certain assumptions used by actuaries in evaluating incurred, but not yet reported amounts. Significant changes in actual experience under either program or significant changes in assumptions may affect self-insured medical or workers' compensation reserves and future experience. See also Note 24, Employee Benefit Plans.

Pension Plans and Post-retirement Benefits Other Than Pensions. Annual net periodic pension expense and benefit liabilities under defined benefit pension plans are determined on an actuarial basis. Assumptions used in the actuarial calculations have a significant impact on plan obligations and expense. Each September, the Company reviews the actual experience compared to the more significant assumptions used and make adjustments to the assumptions, if warranted. The healthcare trend rates are reviewed with the actuaries based upon the results of their review of claims experience. Discount rates are based upon an expected benefit payments duration analysis and the equivalent average yield rate for high-quality fixed-income investments. Pension benefits are funded through deposits with trustees and the expected long-term rate of return on fund assets is based upon actual historical returns modified for known changes in the market and any expected change in investment policy. Post-retirement benefits are not funded and it is the Company's policy to pay these benefits as they become due.

Environmental Matters. The Company is subject to the requirements of U.S. federal, state and local and non-U.S. environmental and safety health laws and regulations. These include laws regulating air emissions, water discharge and waste management. The Company recognizes environmental cleanup liabilities when a loss is probable and can be reasonably estimated. Such liabilities are generally not subject to insurance coverage.

Valuation of Long-Lived Assets. The Company periodically evaluates the carrying value of long-lived assets to be held and used, including intangible assets, when events or circumstances warrant such a review. The carrying value of a long-lived asset to be held and used is considered impaired when the anticipated separately identifiable undiscounted cash flows from such an asset are less than the carrying value of the asset. In that event, a loss is recognized based on the amount by which the carrying value exceeds that fair value of the long-lived asset. Fair value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. Impairment losses on long-lived assets held for sale are determined in a similar manner, except that fair values are reduced for the cost to dispose of the assets. Effective January 1, 2002, the Company adopted SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." See also Note 17, Asset Impairments and Restructuring Related Integration Actions.

Shipping and Handling Fees and Costs. Prior to 2003, a portion of shipping and handling fees were included in the selling, general and administrative expenses category in the consolidated statement of operations. Shipping and handling expense included in selling, general and administrative accounts was $17.6 million in 2002.

Reclassifications. Certain prior year amounts have been reclassified to reflect current year classification.

3. New Accounting Pronouncements

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." This Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. This Statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003, except for mandatorily redeemable financial instruments of nonpublic entities, for which it is effective for the first fiscal period beginning after December 15, 2003. Due to the Company being a nonpublic entity as defined in SFAS No. 150, the Company adopted this Statement effective for the quarter ended March 28, 2004. As a result of its adoption of SFAS No. 150, the Company's redeemable preferred stock is classified as a long-term liability on its consolidated balance sheet effective as of the quarter ended March 28, 2004, and preferred stock dividends associated with this redeemable preferred stock are classified as other expense, net on its consolidated statement of operations beginning with the quarter ended March 28, 2004.

On December 8, 2003, the Medicare Prescription Drug, Improvement and Modernization Act was signed into law. This law provides for a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to the benefit established by the law. The Company provides retiree drug benefits that exceed the value of the benefits that will be provided by Medicare Part D, and its eligible retirees generally pay a premium for this benefit that is less than the Part D premium. Therefore, the Company has concluded that these benefits are at least actuarially equivalent to the Part D program so that Metaldyne will be eligible for the basic Medicare Part D subsidy.

In the second quarter of 2004, a Financial Accounting Standards Board (FASB) Staff Position (FSP FAS 106-2, "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug Improvement and Modernization Act of 2003" ("FSP")) was issued providing guidance on the accounting for the effects of the Act for employers that sponsor post-retirement health care plans that provide prescription drug benefits. The FSP is effective for the first interim or annual period beginning after June 15, 2004. The Company estimates the federal subsidy included in the law resulted in an approximate $7.0 million reduction in its post-retirement benefit obligation. For 2004, the Company recognized a net reduction in post-retirement expense of $0.9 million as a result of the anticipated subsidiary.

In October 2004, the U.S. government enacted the American Jobs Creation Act of 2004 ("Act"). This Act provides for a special one-time tax deduction of 85% of certain foreign earnings that are repatriated to the U.S. provided certain criteria are met. The Company is analyzing the provisions of the Act and the feasibility of several alternative scenarios for the potential repatriation of a portion of the earnings of its non-U.S. subsidiaries. In general, it is the practice and intention of the Company to reinvest the earnings of its non-U.S. subsidiaries in those operations and therefore does not currently anticipate repatriation of earnings under the Act.

In November 2004, the FASB issued SFAS No. 151, "Inventory Costs, an amendment of ARB No. 43, Chapter 4," to clarify that abnormal amounts of idle facility expense, freight, handling costs and wasted material (spoilage) should be recognized as current period charges, and that allocation of fixed production overheads to the costs of conversion be based on normal capacity of the production facilities. SFAS No. 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. Accordingly, the Company will adopt SFAS No. 151 for the fiscal year beginning

January 2, 2006. The Company is currently in the process of evaluating whether the adoption of this pronouncement will have a significant impact on its results of operations or financial position.

In December 2004, the FASB issued SFAS No. 123 (revised 2004), "Share-Based Payment." This Statement is a revision of SFAS No. 123, "Accounting for Stock-Based Compensation," and supercedes APB No. 25, "Accounting for Stock Issued to Employees." SFAS No. 123 (revised 2004) requires that the compensation cost relating to stock options and other share-based compensation transactions be recognized at fair value in financial statements. Due to the Company being a nonpublic entity as defined in SFAS No. 123 (revised 2004), this Statement is effective for the Company at the beginning of its fiscal year 2006. The Company will then be required to record any compensation expense using the fair value method in connection with option grants to employees after adoption. Management is currently reviewing the provisions of this Statement and will adopt it effective at the beginning of the Company's fiscal year 2006.

4. Accounts Receivable Securitization and Factoring Agreements

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 $150 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 $2.9 million, $2.6 million and $2.8 million in 2004, 2003 and 2002, respectively, and is included in other expense, net in the Company's consolidated statement of operations. At January 2, 2005 and December 28, 2003, the Company's funding under the facility was $63.3 million and zero, respectively, with $15 million available but not utilized at January 2, 2005 and $73.3 million available but not utilized at December 28, 2003. The discount rate at January 2, 2005 was 3.35% compared with 2.14% at December 28, 2003. 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. This facility expires in November 2005. See Note 29, Subsequent Events.

The Company has entered into agreements with international invoice factoring companies to sell customer accounts receivable of Metaldyne foreign locations in France, Germany, Spain, the United Kingdom and Mexico on a non-recourse basis. As of January 2, 2005 and December 28, 2003, the Company had available $63.5 million and $54.8 million from these commitments, and approximately $53.1 million and $45.5 million of receivables were sold under these programs, respectively. The Company pays a commission to the factoring company plus interest from the date the receivables are sold to the date of customer payment. Commission expense related to these agreements is recorded in other expense, net on the Company's consolidated statement of operations.

To facilitate the collection of funds from operating activities, the Company has entered into accelerated payment collection programs with certain customers. At January 2, 2005, the Company received approximately $24 million under the accelerated collection programs. The majority of the accelerated payment collection programs were discontinued as of or prior to January 2, 2005. However, since the beginning of 2004, the Company continues to collect approximately $22 million per month on an accelerated basis as a result of favorable payment terms that it negotiated with one of its customers, and that will run contractually through fiscal 2006. These payments are received on average 20 days

after shipment of product to its customer. While the impact of the discontinuance of these programs may be partially offset by a greater utilization of the Company's accounts receivable securitization facility, the Company is examining other alternative programs in the marketplace, as well as enhanced terms directly from its customers.

5. Inventories

	January 2, 2005		December 28, 2003
	(In thousands)
Finished goods	$	42,310	$	25,710
Work in process		36,440		29,480
Raw material		48,270		28,490

	$	127,020	$	83,680

6. Equity Investments and Receivables in Affiliates

On December 22, 2004, the Company sold its 36% common equity investment in Saturn Electronics & Engineering, Inc. ("Saturn"), a privately held manufacturer of electromechanical and electronic automotive components, for gross consideration totaling $15 million. Holders of Metaldyne options with the exercise price below the November 2000 merger consideration and former holders of Metaldyne restricted stock were entitled to additional cash amounts from the proceeds of the disposition of Saturn stock in accordance with the recapitalization agreement. Pursuant to modified agreements with former holders of the Company's common stock as of November 28, 2000, such holders received a portion of the net proceeds from this disposition of Saturn. Total consideration paid to the former stock holders was $2.4 million. The initial agreements with the former stock holders that were modified upon the disposition of Saturn are now terminated with no additional obligations required by the Company. The gain recognized on the disposition of Saturn was $5.1 million and is included in gain on sale of equity investments, net on the Company's consolidated statement of operations as of January 2, 2005.

On June 6, 2002, the Company sold 13.25 million shares of TriMas common stock to Heartland Industrial Partners ("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. 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. Consequently, as a result of this transaction, 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. TriMas is included in the Company's financial results through the date of this transaction. Effective June 6, 2002, the Company accounts for its retained interest in TriMas under the equity method of accounting. In April 2003, TriMas exercised its right to repurchase 1 million shares of its common stock from the Company for $20 per share, the same price that it was valued on June 6, 2002, the date of the Company's sale of TriMas.

On November 12, 2004, the Company sold approximately 924,000 shares of TriMas stock to Masco Corporation for $23 per share, or a total of $21.3 million. A gain on the sale of shares totaling $2.9 million was recognized and is included in gain on sale of equity investments, net on the Company's consolidated statement of operations as of January 2, 2005. As a result of this sale of shares to Masco in 2004, the repurchase of shares by TriMas in 2003 and acquisitions performed by TriMas in 2003, the Company's ownership in TriMas decreased to approximately 24%, or approximately 4.8 million shares, as of January 2, 2005. The carrying amount of the Company's investment in TriMas was approximately $102.8 million and $120 million as of January 2, 2005 and December 28, 2003, respectively. Masco Corporation owns approximately 6% of Metaldyne's outstanding shares. See also Note 28, Related Party Transactions.

In June 2004, the Company sold its interest in a Korean joint venture. A gain of $1.2 million was recognized in conjunction with this sale and is included with other, net in the Company's consolidated statement of operations as of January 2, 2005.

On December 8, 2002, the Company announced a Joint Venture Formation Agreement ("Agreement") with DaimlerChrysler Corporation ("DaimlerChrysler") to operate DaimlerChrysler's New Castle (Indiana) machining and forge facility. On January 2, 2003, the Company closed on this joint venture, known as NC-M Chassis Systems, LLC. In connection with the closing, DaimlerChrysler contributed substantially all of the assets of business conducted at this facility in exchange for 100% of the common and preferred interests in the joint venture. In addition, the joint venture assumed certain liabilities of the business from DaimlerChrysler. Immediately following the contribution, the Company purchased 40% of the common interests in the joint venture from DaimlerChrysler for $20 million in cash. This investment was accounted for under the equity method of accounting in 2003, due to the Company's investment representing greater than 20% but less than 50% of the interest in the joint venture. However, with respect to the Agreement, the Company did not recognize losses in the joint venture because DaimlerChrysler provided funding for the joint venture's operations and capital expenditures.

On December 31, 2003, the Company completed a transaction with DaimlerChrysler that transferred full ownership of the New Castle Machining and Forge manufacturing operations to Metaldyne. See also Note 16, Acquisitions.

The carrying amount of investments in affiliates at January 2, 2005 and December 28, 2003 was $103.1 million and $148.8 million, respectively. Approximate combined condensed financial data of the Company's equity affiliates accounted for under the equity method are as follows:

		January 2, 2005		December 28, 2003
		(In thousands)
Current assets		$	302,500	$	347,590

Long-term assets:
	Property and equipment, net		198,610		212,030
	Excess of cost over net assets of acquired companies		657,980		672,070
	Intangible and other assets		304,910		322,750
	Other assets		58,200		66,470

Total assets		$	1,522,200	$	1,620,910

Current liabilities		$	209,050	$	245,540

Long-term liabilities:
	Long-term debt		735,030		766,060
	Other long-term debt		172,960		195,010

	Total liabilities	$	1,117,040	$	1,206,610

	January 2, 2005			For The Years Ended December 28, 2003			December 29, 2002
				(In thousands)
Net sales	$	1,045,160		$	1,305,450		$	1,110,530

Operating profit	$	62,360		$	31,370		$	94,500

Net income (loss)	$	(2,190	)	$	(66,280	)	$	(27,570	)

7. Property and Equipment, Net

	January 2, 2005			December 28, 2003
	(In thousands)
Land and land improvements	$	17,370		$	15,120
Buildings		157,150			114,150
Machinery and equipment		976,670			779,360

		1,151,190			908,630
Less: Accumulated depreciation		(294,940	)		(201,180	)

Property and equipment, net	$	856,250		$	707,450

Depreciation expense totaled approximately $99 million, $76 million and $67 million in 2004, 2003 and 2002, respectively.

8. Excess of Cost over Net Assets of Acquired Companies and Intangible Assets

At January 2, 2005, the excess of cost over net assets of acquired companies ("goodwill") balance was approximately $626.2 million. For purposes of testing this goodwill for potential impairment, fair values were determined based upon the discounted cash flows of the reporting units using a 9.5% discount rate as of January 2, 2005. The initial assessment for the reporting units within the Automotive Group indicated that the fair value of these units exceeded their corresponding carrying value. This analysis was completed for the years ended January 2, 2005 and December 28, 2003, which indicated that the fair value of these units continued to exceed their carrying values. If the discount rate were to increase to 12%, or if anticipated operating profit were to decrease by approximately 1.6% of sales, the Company would be required to perform further analysis of goodwill impairment in the Company's Driveline segment.

The assessment for the Company's former TriMas Group indicated the carrying value of these units exceeded their fair value. A non-cash, after tax charge of $36.6 million was taken as of January 1, 2002, related to the industrial fasteners business of the former TriMas subsidiary. Sales, operating profits and cash flows for this TriMas owned business were lower than expected beginning in the first quarter of 2001, due to the overall economic downturn and cyclical declines in certain markets for industrial fastener products. Based on that trend, the earnings and cash flow forecasts for the next five years indicated the goodwill impairment loss. Consistent with the requirements of SFAS No. 142, the Company recognized this impairment charge as the cumulative effect of change in accounting principle as of January 1, 2002.

Acquired Intangible Assets

			As of January 2, 2005						As of December 28, 2003
			Gross Carrying Amount		Accumulated Amortization			Weighted Average Life	Gross Carrying Amount		Accumulated Amortization			Weighted Average Life
			(In thousands, except weighted average life)
Amortized Intangible Assets:
	Customer Contracts		$	127,600	$	(42,750	)	9.0 years	$	94,420	$	(31,050	)	8.2 years
	Technology and Other			163,920		(45,260	)	14.9 years		165,280		(35,290	)	14.9 years

		Total	$	291,520	$	(88,010	)	14.0 years	$	259,700	$	(66,340	)	13.6 years

Aggregate Amortization Expense
(Included in Cost of Sales):
	For the year ended December 29, 2002				$	27,670
	For the year ended December 28, 2003					21,630
	For the year ended January 2, 2005					24,160
Estimated Amortization Expense:
	For the year ending December 31, 2005					23,410
	For the year ending December 31, 2006					23,410
	For the year ending December 31, 2007					22,640
	For the year ending December 31, 2008					21,890
	For the year ending December 31, 2009					21,890

Goodwill

The carrying amounts of goodwill by segment for the years ended January 2, 2005 and December 28, 2003 are as follows:

	Chassis			Driveline			Engine			Total
				(In thousands)
Balance as of December 29, 2002	$	66,590		$	362,040		$	144,940			573,570
Exchange impact from foreign currency		—			9,190			6,740			15,930
Fittings disposition		(5,210	)		—			—			(5,210	)
Other		250			(220	)		70			100

Balance as of December 28, 2003		61,630			371,010			151,750		$	584,390
Exchange impact from foreign currency		—			9,860			3,750			13,610
New Castle acquisition		28,770			—			—			28,770
Other		—			(450	)		(80	)		(530	)

Balance as of January 2, 2005	$	90,400		$	380,420		$	155,420		$	626,240

9. Intangible and Other Assets

	January 2, 2005		December 28, 2003
	(In thousands)
Customer contracts, net	$	84,850	$	63,370
Technology and other intangibles, net		118,660		129,990
Deferred loss on sale-leaseback transactions		10,410		21,320
Deferred financing costs, net		16,360		18,420
Other		11,190		14,080

Total	$	241,470	$	247,180

The "technology and other intangibles, net" category represents primarily patents and/or in-depth process knowledge embedded within the Company.

10. Accrued Liabilities

	January 2, 2005		December 28, 2003
	(In thousands)
Workers' compensation and self insurance	$	17,240	$	17,070
Accrued exit and shutdown costs for plant closures		3,200		6,600
Salaries, wages and commissions		10,040		8,010
Legacy restricted common stock		—		17,170
Vacation, holiday and bonus		15,100		18,440
Interest		11,760		8,560
Property, payroll and other taxes		15,990		11,040
Pension		24,910		18,520
Other		18,810		31,430

Accrued liabilities	$	117,050	$	136,840

11. Long-Term Debt

Long-term debt consisted of the following:

		January 2, 2005			December 28, 2003
		(In thousands)
Senior credit facilities:
	Term loan	$	351,080		$	352,000
	Revolving credit facility		63,540			—

Total senior credit facility			414,620			352,000
11% senior subordinated notes, with interest payable semi-annually, due 2012			250,000			250,000
10% senior notes, with interest payable semi-annually, due 2013			150,000			150,000
10% senior subordinated notes, with interest payable semi-annually, due 2014 (face value $31.7 million)			27,180			—
Other debt (includes capital lease obligations)			25,900			25,810

Total		$	867,700		$	777,810
Less current maturities			(12,250	)		(10,880	)

Long-term debt		$	855,450		$	766,930

The maturities of the Company's total debt at January 2, 2005 during the next five years and beyond are as follows (in millions): 2005—$12; 2006—$4; 2007—$66; 2008—$2; 2009—$356; 2010 and beyond—$433.

The senior credit facility includes a term loan and revolving credit facility with a principal commitment of $200 million. The Company had $71 million of undrawn and available commitments from our revolving credit facility at January 2, 2005.

The revolving credit facility matures on May 28, 2007 and the term loan matures on December 31, 2009. The obligations under the senior credit facility are collateralized by substantially all of the

Company's and substantially all of its domestic subsidiaries' 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:

•: A base rate corresponding to the prime rate, plus an applicable margin; or
•: A eurocurrency rate on deposits, plus an applicable margin.

The applicable margin on revolving credit facility borrowings is subject to change depending on the Company's leverage ratio and is presently 3.25% on base rate loans and 4.25% on eurocurrency loans. The applicable margin on the term loan borrowing is dependent on the Company's leverage ratio and is currently 3.50% on base rate loans and 4.50% on eurocurrency loans. In December 2004, the Company obtained an amendment to its credit facility to, among other things, modify certain negative covenants. Under this amendment, the applicable interest rate spreads on the Company's term loan obligations increased from 4.25% to 4.50% over the current London Interbank Offered Rate ("LIBOR") and the leverage covenant was modified to be less restrictive. Prior to this, in July 2003, the Company obtained an amendment to its credit facility to, among other things, permit the $150 million offering of 10% senior subordinated notes and the use of proceeds to complete the December 31, 2003 acquisition of DaimlerChrysler's common and preferred interest in the New Castle joint venture and modify certain negative and affirmative covenants. Under this amendment, the applicable interest rate spreads on the Company's term loan obligations increased from 2.75% to 4.25% over LIBOR.

At January 2, 2005, the Company was contingently liable for standby letters of credit totaling $65 million issued on its behalf by financial institutions. These letters of credit are used for a variety of purposes, including meeting requirements to self-insure workers' compensation claims and for the completion of the Company's acquisition of the New Castle manufacturing operations on December 31, 2003.

The senior credit facility contains covenants and requirements affecting the Company and its subsidiaries, including a financial covenant requirement for an Earnings Before Interest Taxes Depreciation and Amortization ("EBITDA") to cash interest expense coverage ratio to exceed 2.10 through April 3, 2005, 2.15 through July 3, 2005, 2.20 through October 2, 2005, increasing to 2.30 through April 2, 2006; and a debt to EBITDA leverage ratio not to exceed 5.25 through July 3, 2005, decreasing to 5.00 and 4.75 for the quarters ending October 2, 2005 and January 1, 2006, respectively. The Company was in compliance with the preceding financial covenants throughout the year.

Other debt includes borrowings by the Company's subsidiaries denominated in foreign currencies and capital lease obligations.

On December 31, 2003, the Company issued $31.7 million of 10% senior subordinated notes due 2014 to DaimlerChrysler. These notes have a carrying amount of $27.2 million as of January 2, 2005. The notes were issued as part of the financing of the New Castle acquisition.

In October 2003, the Company issued $150 million of 10% senior notes due 2013 in a private placement under Rule 144A and Regulation S of the Securities Act of 1933, as amended. As these notes were not registered within 210 days after the closing date, the annual interest rate increased by 1% until the registration statement is declared effective. The net proceeds from this offering were used to redeem the balance of the $98.5 million aggregate principal amount of the outstanding 4.5% subordinated debentures ($91 million reflected on the balance sheet at December 29, 2002) that were

due December 15, 2003, and to repay $46.6 million of the term loan debt under the Company's credit facility. In connection with this financing, the Company agreed with its banks to decrease the revolving credit facility from $250 million to $200 million.

Certain of the Company's domestic wholly owned subsidiaries, as defined in the related bond indentures, (the "Guarantors") irrevocably and unconditionally fully guarantee the 11% senior subordinated and 10% senior notes. The condensed consolidating financial information included in Note 31 presents the financial position, results of operations and cash flows of the guarantors.

In connection with the Company's early retirement of its existing term debt and refinancing of its prior credit facility in 2002, it incurred one-time charges totaling $76.4 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. Of the total charges of $76.4 million, a loss of $7.5 million is reflected as a "loss on interest rate arrangements upon early retirement of term loans" in other expense, net in the Company's consolidated statement of operations for the year ended December 29, 2002 (see Note 14, Derivative Financial Instruments). In accordance with SFAS No. 145, the remaining $68.9 million of costs are reflected as a "loss on repurchase of debentures and early retirement of term loans" in other expense, net in the Company's consolidated statement of operations for the year ended December 29, 2002.

In 2004, the Company capitalized $1.4 million of debt issuance costs associated with the amended credit facility. In 2003, the Company capitalized $6.4 million and $2.3 million of debt issuance costs associated with the 10% senior subordinated notes due 2013 and the amended credit facility, respectively. As a result of the 2004 credit facility amendment, $1.2 million of the unamortized balance related to the 2003 credit facility amendment was expensed in 2004. These debt issuance costs consist of fees paid to representatives of the initial purchasers, legal fees and facility fees paid to the lenders. The $6.4 million of costs are being amortized based on the effective interest method over the 10-year term of the 10% senior notes due 2013, and the credit facility amendment costs are being amortized based on the effective interest method over the 6.5-year term of the term loan agreement. The unamortized balances of $5.6 million related to the senior notes and $2.0 related to the amended credit facility are included in "other assets" in the Company's consolidated balance sheet as of January 2, 2005.

12. Leases

The Company leases certain property and equipment under operating and capital lease arrangements that expire at various dates through 2023. 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. Rent expense was $49.5 million, $38.7 million and $38.2 million for the years ended January 2, 2005, December 28, 2003, and December 29, 2002, respectively.

The Company completed sale-leaseback financings from 2000 through 2004 relating to certain equipment and buildings, the proceeds of which were used to finance new capital purchases and to pay down the revolving credit and term loan facilities. Due to the sale-leaseback financings, the Company has significantly increased its commitment to future lease payments.

In December 2004, the Company entered into two sale-leaseback transactions for machinery and equipment with third party lessors. The Company received cash proceeds of $11.8 million and

$7.2 million as part of these two transactions. On June 17, 2004, the Company entered into a sale-leaseback transaction for machinery and equipment whereby it received cash proceeds of $7.5 million cash as part of this transaction. Each of these three sale-leasebacks is accounted for as an operating lease with combined annual lease expense of approximately $5 million which is included in the Company's financial results on a straight-line basis. On December 31, 2003, the Company entered into a sale-leaseback with proceeds of approximately $4.5 million. This lease was accounted for as a capital lease and is included in long-term debt in the Company's consolidated balance sheet as of January 2, 2005. The Company also entered into a $65 million sale-leaseback on December 31, 2003, as part of its financing related to the purchase of New Castle. This lease for New Castle equipment is accounted for as an operating lease and the annual lease expense is approximately $10 million.

In March 2003, the Company entered into a sale-leaseback transaction with respect to certain manufacturing equipment for proceeds of approximately $8.5 million, and in October 2003, the Company entered into a sale-leaseback transaction for machinery and equipment for additional proceeds of $8.5 million. All of these leases are accounted for as operating leases and the associated rent expense is included in the Company's financial results on a straight-line basis.

In December 2001 and January 2002, the Company entered into additional sale-leaseback transactions with respect to equipment and approximately 20 real properties for net proceeds of approximately $56 million and used the proceeds to repay a portion of its term debt under the credit facility. In December 2002, three additional sale-leaseback transactions were completed with respect to equipment for net proceeds of approximately $19 million. Of the $56 million in proceeds resulting from the December 2001 and January 2002 sale-leaseback transactions, approximately $21 million were from the sale of TriMas properties.

In June 2001, a subsidiary of the Company sold and leased back equipment under a synthetic sale-leaseback structure. At closing, 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 through 2007) 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.

Deferred losses are recorded as part of the sale-leaseback transactions, and represent the difference between the carrying value of the assets sold and proceeds paid at closing by the leasing companies. Fair value was equal to or in excess of the carrying value of these assets based on asset appraisal information provided by third party valuation firms. These deferred amounts are being amortized, instead of being currently recognized, on a straight-line basis over the lives of the respective leases as required under SFAS No. 28, "Accounting for Sales with Leasebacks." Future amortization amounts relate to the remaining portion of the 2000 and 2001 sale-leaseback deferred losses. Amortization expense of deferred losses on sale-leasebacks was $8.8 million and $8.9 million for the years ended January 2, 2005 and December 28, 2003, respectively, and is included in cost of sales. Unamortized deferred losses on sale-leasebacks are $10 million and $21 million at January 2, 2005 and December 28, 2003, respectively.

Future minimum lease payments under scheduled capital and operating leases that have initial or remaining noncancelable terms in excess of one year as of January 2, 2005 are as follows:

	Capital Leases			Operating Leases
	(In thousands)
2005	$	5,290		$	52,040
2006		2,400			49,620
2007		1,250			48,050
2008		840			40,260
2009		790			33,310
Thereafter		790			129,220

Total minimum payments	$	11,360		$	352,500

Amount representing interest		(1,270	)

Obligations under capital leases		10,090
Obligations due within 1 year		(5,290	)

Long-term obligations under capital leases	$	4,800

13. Redeemable Preferred Stock

The Company has outstanding 644,540 shares of $64.5 million in liquidation value ($56.2 million fair value as of January 2, 2005) of Series A-1 preferred stock par value $1 and authorized 644,540 shares to DaimlerChrysler Corporation. The Company will accrete from the fair value to the liquidation value ratable over the ten-year period. The preferred stock is mandatorily redeemable on December 31, 2013. Series A-1 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 11% per annum plus 2% per annum for any period for which there are any accrued and unpaid dividends.

The Company has outstanding 361,001 shares of $36.1 million in liquidation value ($34.3 million fair value as of January 2, 2005) of Series A preferred stock par value $1 and authorized 370,000 shares to Masco Corporation. The Company will accrete from the fair 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% per annum for periods ending on or prior to December 31, 2005 and 15% per annum for periods after December 31, 2005 plus 2% per annum for any period for which there are any accrued and unpaid dividends.

The Company has outstanding 184,153 shares with a fair value of $18.4 million of redeemable Series B preferred stock to Heartland. The redeemable Series B preferred shares issued are mandatory 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. Heartland Industrial Partners ("Heartland") purchased all of the outstanding shares of Series B preferred stock from former GMTI shareholders on December 31, 2003.

Preferred stock dividends (including accretion of $1.1 million in 2004) were $19.9 million and $9.3 million, while dividend cash payments were zero, for the years ended January 2, 2005 and

December 28, 2003, respectively. Thus, unpaid accrued dividends were $40.3 million and $21.4 million for the years ended January 2, 2005 and December 28, 2003, respectively. Redeemable preferred stock, consisting of outstanding shares and unpaid dividends, was $149.2 million and $74.0 million in the Company's consolidated balance sheet at January 2, 2005 and December 28, 2003, respectively.

14. Derivative Financial Instruments

In the past, the Company has managed 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 (loss) 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 included 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 included four interest rate caps at a three-month LIBOR interest rate of 7% with a total notional amount of $301 million as of December 28, 2003.

All of the Company's interest rate protection arrangements matured in February 2004 and, as a result of their maturity, a cumulative pre-tax non-cash gain of $6.6 million was recorded and is reflected as a non-cash gain on maturity of interest rate arrangements in the Company's consolidated statement of operations for the year ended January 2, 2005. Prior to their maturity, $6.6 million net of tax was included in accumulated other comprehensive income related to these arrangements. Prior to the expiration of these agreements, the Company recognized additional interest expense of $1.1 million and $6.5 million for the years ended January 2, 2005 and December 28, 2003, respectively.

15. 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 has established adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") as a key indicator of financial operating performance. The Company defines Adjusted EBITDA as net income (loss) before cumulative effect of accounting change and before interest, taxes, depreciation, amortization, asset impairment, non-cash losses on sale-leaseback of property and equipment and non-cash restricted stock award expense. Adjusted EBITDA is a non-GAAP measure and therefore caution must be exercised in using Adjusted EBITDA as an analytical tool and should not be used in isolation or as a substitute for analysis of our results as reported under GAAP. In evaluating Adjusted EBITDA, management deems it important to consider the quality of the Company's underlying earnings by separately identifying certain costs undertaken to improve the Company's results, such as costs related to consolidating facilities and businesses in an effort to eliminate duplicative costs or achieve efficiencies, costs related to integrating acquisitions and restructuring costs related to expense reduction efforts.

In January 2005, the Company reorganized to streamline its operating efficiency and cost structure. The Company's operations were consolidated into two segments: Chassis segment and the Powertrain segment. The Chassis segment consists of the former Chassis operations plus a portion of the former Driveline operations, while the Powertrain segment consists of the former Engine operations combined with the remainder of the former Driveline operations. As this change became effective in fiscal 2005, the Company Form 10-Q for the quarter ending April 3, 2005 will report operating results in these two segments along with restated results for the year ended January 2, 2005.

As discussed in Note 18, Disposition of Businesses, 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. Subsequent to June 6, 2002, the Company's equity investment in TriMas and equity share in TriMas' earnings (loss) is included in "Automotive/centralized resources ("Corporate")."

CHASSIS—Manufactures components, modules and systems used in a variety of engineered chassis applications, including precision shafts, hot and cold forgings, fittings, wheel-ends, axle shaft, 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.

POWERTRAIN—Manufactures a broad range of powertrain components, modules and systems, including sintered metal, powder metal, forged, tubular fabricated products, hydraulic controls and integrated program management used for a variety of applications. These applications include balance shaft modules, front cover assemblies, transmission and transfer case shafts and transmission valve bodies.

The Company's export sales approximated $333 million, $149 million and $174 million in 2004, 2003 and 2002, respectively. Intercompany sales for 2004 were $8 million and $3 million for the Driveline and Engine segments, respectively. Intercompany sales are recognized in accordance with the Company's revenue recognition policy and are eliminated in consolidation.

Segment activity for the years ended January 2, 2005, December 28, 2003 and December 29, 2002 is as follows:

			2004			2003			2002
			(In thousands)
Sales
Automotive Group
	Chassis		$	1,145,450		$	685,350		$	676,970
	Powertrain			858,810			822,850			786,650

		Automotive Group		2,004,260			1,508,200			1,463,620
TriMas Group				—			—			328,580

	Total Sales		$	2,004,260		$	1,508,200		$	1,792,200

Adjusted EBITDA
Automotive Group
	Chassis		$	102,960		$	81,200		$	102,260
	Powertrain			103,080			80,960			75,450
	Corporate/centralized resources			(35,370	)		(28,160	)		(17,480	)

		Automotive Group	$	170,670		$	134,000		$	160,230
TriMas Group				—			—			62,400

Total Adjusted EBITDA				170,670			134,000			222,630
Depreciation & amortization				(132,100	)		(106,350	)		(107,430	)
Legacy stock award expense				(560	)		(3,090	)		(4,880	)
Asset impairment				—			(4,870	)		—
Loss from operations due to sale of manufacturing facilities				(7,600	)		—			—
Non-cash charges				(1,000	)		610			(1,610	)

Operating profit			$	29,410		$	20,300		$	108,710

Income Taxes
Automotive Group
		Chassis	$	330		$	10,880		$	13,230
		Powetrain		3,240			5,220			2,770
		Corporate/centralized resources		(40,440	)		(24,760	)		(56,960	)

	Total		$	(36,870	)	$	(8,660	)	$	(40,960	)

Financial Summary by Segment:

				2004		2003		2002
				(In thousands)
Total Assets:
Automotive Group
	Chassis			$	1,085,630	$	897,310
	Powertrain				752,930		729,850
	Corporate/centralized resources				356,190		384,700

	Total			$	2,194,750	$	2,011,860

Capital Expenditures:
Automotive Group
		Chassis		$	59,350	$	51,860	$	38,830
		Powertrain			91,560		64,240		61,240
		Corporate/centralized resources			1,530		14,620		6,420

			Automotive Group		152,440		130,720		106,490
	TriMas Group				—		—		9,960

	Total			$	152,440	$	130,720	$	116,450

Depreciation and Amortization:
Automotive Group
		Chassis		$	71,530	$	48,260	$	41,720
		Powertrain			49,720		48,750		39,720
		Corporate/centralized resources			10,850		9,340		9,990

			Automotive Group		132,100		106,350		91,430
TriMas Group					—		—		16,000

	Total			$	132,100	$	106,350	$	107,430

The following table presents the Company's revenues for each of the years ended January 2, 2005, December 28, 2003 and December 29, 2002, and total assets and long lived assets (defined as equity investments and receivables in affiliates, net fixed assets, intangible and other assets and excess of cost over net assets of acquired companies) at each year ended January 2, 2005 and December 28, 2003, by geographic area, attributed to each subsidiary's continent of domicile (in thousands). Revenue and total

assets from no single foreign country were material to the consolidated revenues and net assets of the Company.

	2004						2003						2002
	Sales		Total Assets		Long Lived Assets		Sales		Total Assets		Long Lived Assets		Sales
	(In thousands)
Europe	$	334,780	$	435,500	$	364,270	$	296,540	$	400,420	$	339,950	$	247,370
Australia		—		—		—		—		—		—		10,850
Other North America		71,930		85,690		62,580		50,200		55,610		44,690		56,150
Other foreign		17,420		32,290		23,450		7,890		6,820		4,320		6,160

Total foreign	$	424,130	$	553,480	$	450,300	$	354,630	$	462,850	$	388,960	$	320,530

United States	$	1,580,130	$	1,641,270	$	1,380,700	$	1,153,570	$	1,549,010	$	1,305,850	$	1,471,670

A significant percentage of the Automotive Group's revenues is from four major customers. The following is a summary of the percentage of Automotive Group revenue from these customers for the fiscal year ended:

	January 2, 2005		December 28, 2003		December 29, 2002⁽¹⁾
Ford Motor Company	12.5	%	16.9	%	17.5	%
DaimlerChrysler Corporation	24.4	%	10.5	%	12.0	%
General Motors Corporation	7.2	%	10.3	%	12.0	%
New Venture Gear⁽²⁾	—		8.2	%	11.5	%

(1): Excludes net sales to TriMas prior to our June 6, 2002 divestiture.
(2): New Venture Gear, a joint venture between DaimlerChrysler and General Motors, was dissolved in 2003. Therefore, comparable 2004 sales are now split between DaimlerChrysler, General Motors and other Tier 1 customers.

16. Acquisitions

In the first quarter of 2004, effective December 31, 2003, the Company completed a transaction with DaimlerChrysler Corporation ("DaimlerChrysler") that transferred full ownership of the New Castle Machining and Forge ("New Castle") manufacturing operations to Metaldyne. From January 2003 until the transaction at December 31, 2003, New Castle was managed as a joint venture between Metaldyne and DaimlerChrysler; at December 28, 2003, the Company's investment in this joint venture was approximately $20 million (before fees and expenses of approximately $2 million). The New Castle facility manufactures suspension and powertrain components for Chrysler, Jeep and Dodge vehicles; additionally, Metaldyne has launched initiatives to expand the customer base beyond DaimlerChrysler. The New Castle manufacturing operations are part of the Company's Chassis segment.

principal amount of a new issue of its 10% senior subordinated notes; and $64.5 million (fair value of $55.3 million as of December 31, 2003) in aggregate liquidation preference of its Series A-1 preferred stock. Included in the $5 million fees and expenses is a $2.4 million transaction fee paid to Heartland Industrial Partners ("Heartland") pursuant to the acquisition of New Castle. The cash portion of the consideration was funded in part by the net cash proceeds of approximately $58 million from the sale-leaseback of certain machinery and equipment with a third-party lessor, with the remainder funded through Metaldyne's revolving credit facility.

The fair value of assets and liabilities of New Castle at December 31, 2003 consisted of the following (in thousands):

Current assets		$	13,370
Property and equipment, net			109,020
Intangible assets, customer contracts			32,880
Goodwill			28,770

	Total assets		184,040

	Total liabilities (including deferred taxes of $1,690)		15,800

	Net assets	$	168,240

In connection with the acquisition of New Castle, the Company recorded $33.6 million of tax deductible goodwill that is amortizable over a 15 year period. The tax deductible goodwill in excess of goodwill recorded in connection with the transaction for financial reporting purposes is attributable to the unamortized accretion, as of the issue date, of the 10% senior subordinated notes.

The following unaudited pro forma financial information summarizes the results of operations for the Company for the year ended December 28, 2003 assuming the New Castle acquisition had been completed as of the beginning of the period.

	Year Ended December 28, 2003
	(In thousands) (Unaudited)
Net sales	$	1,886.7
Net loss attributable to common stock		(108.1	)
Loss per share		(2.53	)

In addition to the purchase accounting adjustments, the pro forma results reflect a reduction in sales to contractual sales prices and a reduction in labor costs related to the employee agreement with DaimlerChrysler.

Historically revenue for the New Castle facility was determined based upon the sale of product to DaimlerChrysler assembly plants within North America and to third party customers not related to DaimlerChrysler based upon New Castle's standard cost of production. For pro forma presentation, an adjustment of $19 million has been made to reduce net sales based upon the contract with DaimlerChrysler.

The historical results reflect labor costs based upon existing labor agreements. For pro forma purposes, an adjustment of $54 million has been made to reflect the reduction in employee costs based upon the employee matters agreement with DaimlerChrysler.

On May 15, 2003, the Company acquired a facility in Greensboro, North Carolina, from Dana Corporation ("Dana") for approximately $7.7 million at closing and agreed to pay an additional $1.4 million in cash over a period of time ending on December 31, 2004. The Company may also be obligated to pay up to an additional $1.4 million in cash conditioned upon being awarded new business by June 30, 2005 valued at least at $1.4 million. The Greensboro facility became part of the Driveline segment's Transmission and Program Management division. The Greensboro operation, which employs approximately 140 people, machines cast iron and aluminum castings, including various steering knuckles and aluminum carriers for light truck applications. The results of operations of the facility have been included in the consolidated financial statements since that date.

In connection with the acquisition of the Greensboro location, the Company entered into a long-term lease agreement with a third party on the facility. This lease is accounted for as an operating lease with annual lease expense of approximately $1.1 million.

In addition, the Company signed a seven-year supply agreement with Dana covering all existing business at Greensboro, including a right of last refusal on successor programs, as well as a commitment to award $20 million of new forging business to the Company. Dana has also issued purchase orders, to be satisfied at other of the Company's facilities, for incremental other tube, gear and carrier business for a number of platforms.

17. Asset Impairments and Restructuring Related Integration Actions

In 2004, the Company entered into several restructuring arrangements whereby it incurred approximately $2.8 million of costs associated with severance for the year ended January 2, 2005. Charges incurred by segment are as follows: Chassis Group $0.1 million relating to headcount reduction initiatives; Driveline Group $1.8 million primarily relating to charges associated with the closure of a facility in Europe; Engine Group $0.1 million relating to headcount reduction initiatives; and Corporate $0.8 million primarily relating to headcount reductions. In fiscal 2003, the Company entered into several restructuring arrangements whereby it incurred approximately $13.1 million of costs associated with severance and facility closures. These actions include the completion of the Engine segment's European operation reorganization that was initiated in fiscal 2002 and completed in the first quarter of 2003 and actions within the Driveline segment's forging operations and administrative departments to eliminate redundant headcount and adjust costs to reflect the decline in the Company's forging revenue in 2003. Also included in this charge were severance costs to replace certain members of the Company's executive management team and the costs to restructure several departments in the Company's corporate office, including the sales, human resources and information technology departments. The Company expects to realize additional savings from the 2004 and 2003 restructuring actions, described above, in 2005 as reductions in employee-related expenses recognized in both cost of goods sold and selling, general and administrative expense.

In June 2002, the Company announced the reorganization of its Engine segment's European operations, to streamline the engineering, manufacturing and reporting structure of its European operations. This restructuring includes the closure of a manufacturing facility in Halifax, England. In

addition, the Company announced the closure of a small manufacturing location in Memphis, Tennessee and management restructuring within its North American engine operations.

The following table summarizes the activity for the accruals established relating to the three acquisitions, as well as additional restructuring activities in 2002, and 2003 and 2004. Adjustments to previously recognized acquisition related severance and exit costs were reversed to goodwill.

	Acquisition Related						2002 Additional Severance And Other Exit Costs			2003 Additional Severance And Other Exit Costs			2004 Additional Severance And Other Exit Costs
	Severance Costs			Exit Costs			2002 Additional Severance And Other Exit Costs			2003 Additional Severance And Other Exit Costs			2004 Additional Severance And Other Exit Costs			Total
	(In thousands)
Balance at December 29, 2002	$	9,880		$	540		$	2,380		$	—		$	—		$	12,800
Charges to expense		—			—			—			13,130			—			13,130
Cash payments		(8,110	)		(540	)		(2,020	)		(5,820	)		—			(16,490	)
Reversal of unutilized amounts		(390	)		—			—			—			—			(390	)

Balance at December 28, 2003	$	1,380		$	—		$	360		$	7,310		$	—		$	9,050
Charges to expense		—			—			—			—			2,750			2,750
Cash payments		(310	)		—			(360	)		(4,600	)		(2,240	)		(7,510	)
Reversal of unutilized amounts		(360	)		—			—			—			—			(360	)

Balance at January 2, 2005	$	710		$	—		$	—		$	2,710		$	510		$	3,930

The above amounts represent total estimated cash payments, of which $3.2 million and $6.5 million are recorded in accrued liabilities, with $0.7 million (which will primarily be paid out in fiscal 2006) and $2.6 million recorded in other long-term liabilities in the Company's consolidated balance sheet at January 2, 2005 and December 28, 2003, respectively.

18. Disposition of Businesses

On February 1, 2004, the Company completed an asset sale pursuant to which substantially all of the business associated with two of the aluminum die casting facilities in its Driveline segment was sold to Lester PDC, Ltd, a Kentucky-based aluminum die casting and machining company. The Company retained an interest in approximately $5.6 million in working capital (principally accounts receivable). Cash paid in the transaction to buy out the remaining portion of the equipment that had previously been sold under an operating lease arrangement by the Company was approximately $6.1 million, net of proceeds from Lester PDC of $4.1 million. The buyer also agreed to lease the Bedford Heights, Ohio and sub-lease the Rome, Georgia facilities from the Company for total annual lease payment of approximately $0.6 million. In addition, Lester PDC and Metaldyne entered into a supply agreement. These facilities had 2003 combined sales of approximately $62 million and an operating loss of approximately $14 million. Both manufacturing operations were part of the Company's Driveline segment. In connection with the disposition of these manufacturing facilities, the Company recognized a charge of $7.6 million on the Company's consolidated statement of operations for the year ended January 2, 2005. The charge represents the book value of approximately $12 million in fixed assets and deferred financing fees offset by the $4.1 million in cash consideration paid by Lester PDC for the assets.

In November 2004, Lester PDC discontinued operations at the Bedford Heights facility and the supply agreement and lease agreement between Lester PDC and Metaldyne were terminated. As a result, Metaldyne assumed production of some of the products at the Bedford Heights facility that were subject to the terminated supply agreement. One of these product lines is currently being manufactured at the Bedford Heights facility and the remaining products have been moved to other Metaldyne facilities. The lease agreement represented annual lease revenue to Metaldyne of approximately $0.2 million.

On May 9, 2003, the Company sold its Chassis segment's Fittings division to TriMas Corporation ("TriMas") for $22.6 million plus the assumption of an operating lease. This transaction was accounted for as a sale of entities under common control, due to common ownership between TriMas and the Company. Therefore, the proceeds, in excess of the book value, amounting to $6.3 million were recorded as "equity and other investments in affiliates" in the Company's consolidated balance sheet. The Fittings division, which is a leading manufacturer of specialized fittings and cold-headed parts used in automotive and industrial applications, became part of the TriMas Fastening Systems Group.

19. Other Income (Expense), Net

	2004			2003			2002
	(In thousands)
Other, net:
Interest income	$	1,390		$	470		$	1,140
Debt fee amortization		(3,880	)		(2,480	)		(4,770	)
Accounts receivable securitization financing fees		(2,950	)		(2,630	)		(2,840	)
Foreign currency gains (losses)		(940	)		(1,010	)		(200	)
Other, net		(1,890	)		(2,430	)		(2,310	)

Total other, net	$	(8,270	)	$	(8,080	)	$	(8,980	)

20. Supplementary Cash Flow Information

Significant transactions not affecting cash were: in 2004, the $7.6 million loss on the disposition of manufacturing facilities as a result of the sale of Bedford Heights, Ohio and Rome, Georgia facilities, the $6.6 million gain on the maturity of interest rate arrangements in February 2004, the $1.5 million equity earnings from affiliates and the $3.2 million loss on disposal of fixed assets; in 2003, the asset impairment of $4.9 million from discontinued operations as a result of the sale of the Bedford Heights, Ohio and Rome, Georgia manufacturing facilities completed in February 2004, the $15 million loss on disposal of fixed assets and the $21 million loss from the Company's equity affiliates; and in 2002, the cumulative effect of change in recognition and measurement of goodwill impairment of $36.6 million, the loss on early extinguishment of debt of $68.9 million and the $7.5 million loss on interest rate arrangements. Also refer to Note 18, Disposition of Businesses, for the impact of the TriMas disposition on cash flows.

21. Stock Options and Awards

The Company has a stock-based employee compensation plan and has issued equity-based incentives in various forms. At January 2, 2005, the Company has stock options and units outstanding to key employees of the Company for approximately 0.9 million shares at a price of $16.90 per share, 1.0 million shares at a price of $8.50 per share and 0.8 million shares at a price of $6.50 per share. However, these options and units are required to be held and cannot be exercised until the elapse of a certain time period after a public offering.

Beginning in 2004, the Company offered eligible employees the opportunity to participate in a new Voluntary Stock Option Exchange Program (the "Program"), to exchange all of their outstanding options to purchase shares of the Company's common stock granted under the Plan for new stock options and restricted stock units to be granted under the Plan. Participation in the Program is voluntary; however, elections were required to be received by January 14, 2004, with new stock options to be granted on or after July 15, 2004 and restricted stock units granted on January 15, 2004. Non-eligible participants in the existing Plan and those eligible employees not electing to participate in the new Program will continue to be eligible to participate in the existing Plan. Stock compensation expense for the year ended January 2, 2005 was $0.6 million.

Prior to November 2001, 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 approximately 0.4 million shares of Company common stock during 2000 (prior to the recapitalization) to key employees of the Company. The weighted average fair value per share of long-term stock awards granted during 2000 on the date of grant was $13. Compensation expense for the vesting of long-term stock awards was approximately $3.1 million and $4.9 million in 2003 and 2002, respectively, and is included with selling, general and administrative expenses in the Company's consolidated statement of operations. 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 were classified as redeemable restricted common stock on the Company's consolidated balance sheet. There were approximately 0.8 million restricted shares outstanding at December 28, 2003. At December 28, 2003, holders of unvested awards had elected the cash option for approximately $16.0 million of the January 14, 2004 vesting. A portion of this obligation belongs to the Company's former TriMas subsidiary, but the Company must continue to record TriMas' portion of the redeemable restricted common stock recognized on its consolidated balance sheet. The entire portion of the January 14, 2004 vesting amount of $17.2 million was recorded as accrued liabilities on the Company's

consolidated balance sheet as of December 28, 2003. TriMas' portion, consisting of approximately 45% of total obligations, is included in the above restricted stock amounts as of December 28, 2003.

A summary of the status of the Company's stock options and units granted under the Plan for the three years ended 2004, 2003 and 2002 is as follows:

	2004			2003			2002
	(Shares in thousands)
Option shares outstanding, beginning of year		2,661			2,539			2,855
Weighted average exercise price	$	16.90		$	16.90		$	16.90
Option and unit shares granted		1,983			306			153
Weighted average exercise price	$	7.58		$	16.90		$	16.90
Option and unit shares exercised		—			—			—
Weighted average exercise price		—			—			—
Option and unit shares cancelled due to forfeitures		(109	)		(184	)		(469	)
Option shares exchanged for units		(1,799	)		—			—
Weighted average exercise price	$	16.90		$	16.90		$	16.90
Option and unit shares outstanding, end of year		2,736			2,661			2,539
Weighted average exercise price	$	10.57		$	16.90		$	16.90
Weighted average remaining option term (in years)		6.5			7.5			8.5
Option and unit shares exercisable, end of year		—			—			—
Weighted average exercise price		—			—			—

The weighted average exercise price of long-term stock awards is $10.57 per share at January 2, 2005. A combined total of approximately 4.9 million shares of Company common stock was available for the granting of options and incentive awards under the above plans in 2004, 2003 and 2002.

The weighted average fair value on the date of grant of options granted was zero in 2004, 2003 and 2002. Had stock option compensation expense been determined pursuant to the methodology of SFAS No. 123, the pro forma effects on the Company's basic earnings per share would have been no effect in 2004 and a reduction of approximately $0.04 in each of 2003 and 2002. The fair value of the Company's stock at the date of grant was $4.80 (assuming the removal of the lack of marketability and minority discount applied for purposes of this stock valuation, the value would range between $8.50 and $9.00 per share), $8.50 and $11.32 in 2004, 2003 and 2002, respectively.

The fair value of the options was estimated at the date of grant using the minimum value method for 2004, 2003 and 2002, with no assumed dividends or volatility, a weighted average risk-free interest rate of 3.67% in 2004 and 3.36% in 2003, and an expected option life of 5.5 years in both 2004 and 2003.

22. Loss Per Share

The following provides a reconciliation of the numerators and denominators used in the computations of basic and diluted loss per common share:

	2004			2003			2002
	(In thousands except per share amounts)
Weighted average number of shares outstanding for basic and diluted		42,800			42,730			42,650

Loss before cumulative effect of change in accounting	$	(27,990	)	$	(75,330	)	$	(28,130	)
Cumulative effect of change in recognition and measurement of goodwill impairment		—			—			(36,630	)

Net loss		(27,990	)		(75,330	)		(64,760	)
Less: Preferred stock dividends		—			9,260			9,120

Loss used for basic and diluted earnings per share computation	$	(27,990	)	$	(84,590	)	$	(73,880	)

Basic and diluted loss per share:
Before cumulative effect of change in accounting principle less preferred stock	$	(0.65	)	$	(1.98	)	$	(0.87	)
Cumulative effect of change in recognition and measurement of goodwill impairment		—			—			(0.86	)

Net loss attributable to common stock	$	(0.65	)	$	(1.98	)	$	(1.73	)

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 stock options representing 2.69 million and 2.66 million of common shares as they are anti-dilutive at January 2, 2005 and December 28, 2003, respectively.

Contingently issuable shares, representing approximately 0.05 million, 0.9 million and 1.7 million restricted common shares, have an anti-dilutive effect on earnings per share for the years ended January 2, 2005, December 28, 2003 and December 29, 2002, respectively.

23. Income Taxes

		2004			2003			2002
		(In thousands)
Income (loss) before income taxes:
	Domestic	$	(114,050	)	$	(122,690	)	$	(104,740	)
	Foreign		49,190			38,700			35,650

		$	(64,860	)	$	(83,990	)	$	(69,090	)

Provision for income taxes:
Currently payable:
	Federal	$	(5,910	)	$	—		$	(44,830	)
	Foreign		4,900			15,130			8,820
	State and local		1,870			410			(1,060	)

			860			15,540			(37,070	)
Deferred:
	Federal		(30,380	)		(24,230	)		(11,110	)
	Foreign		(1,330	)		970			7,180
	State and local		(6,020	)		(940	)		40

			(37,730	)		(24,200	)		(3,890	)

Income taxes		$	(36,870	)	$	(8,660	)	$	(40,960	)

The components of deferred taxes at January 2, 2005 and December 28, 2003 are as follows:

	2004			2003
	(In thousands)
Deferred tax assets:
Inventories	$	570		$	—
Accrued liabilities and other long-term liabilities		60,850			65,370
Net operating losses		72,970			43,950
Investment in subsidiary		2,980			6,700

		137,370			116,020
Valuation allowance		(12,220	)		(11,260	)

		125,150			104,760

Deferred tax liabilities:
Property and equipment		143,330			153,060
Intangible assets		48,080			51,880
Other, principally investments		9,730			10,650

		201,140			215,590

Net deferred tax liability	$	75,990		$	110,830

The net deferred tax liability resides in the following components of the balance sheet:

	2004		2003
	(In thousands)
Assets:
Deferred and refundable income taxes	$	12,920	$	9,110
Intangible and other assets		—		5,390

		12,920		14,500
Liabilities:
Accrued liabilities		—		3,810
Deferred income taxes		88,910		121,520

		88,910		125,330

Total net deferred tax liability	$	75,990	$	110,830

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:

	2004			2003			2002
	(In thousands)
U.S. federal statutory rate		35	%		35	%		35	%
Tax at U.S. federal statutory rate	$	(22,710	)	$	(29,400	)	$	(24,180	)
State and local taxes, net of federal tax benefit		(1,070	)		(340	)		(1,220	)
Change in valuation allowance for state income taxes		(2,700	)		—			—
Higher (lower) effective foreign tax rate		(4,400	)		2,560			2,600
Foreign dividends		510			5,990			1,070
Refunds received in excess of prior recorded amounts		(7,070	)		—			—
Preferred stock dividends		6,590			—			—
Change in accrual for tax contingencies		(6,250	)		—			—
Valuation allowance on equity earnings		—			1,980			—
Undistributed foreign earnings		750			10,200			—
Change in valuation allowance as a result of utilization of capital losses		—			—			(20,000	)
Other, net		(520	)		350			770

Income taxes	$	(36,870	)	$	(8,660	)	$	(40,960	)

As of January 2, 2005, the Company had unused U.S. net operating loss ("NOL") carryforwards of approximately $173 million. $0.4 million of these losses will expire in 2020; $25 million will expire in 2021; $1.2 million will expire in 2022; $54 million will expire in 2023; and $92 million will expire in 2024. The Company has also recognized a deferred tax asset for unused state NOL carryforwards in the current year totaling $2.7 million. These NOL carryforwards expire in various years beginning in 2024.

A provision has been made for U.S. or additional foreign withholding taxes on approximately $11 million and $10 million of the undistributed earnings of one foreign subsidiary at January 2, 2005 and December 28, 2003, respectively. A provision for such taxes has not been made on approximately

$368 million and $285 million of the undistributed earnings of the Company's other foreign subsidiaries for the years ended January 2, 2005 and December 28, 2003, respectively, as the Company intends to permanently reinvest the earnings of these entities. Generally, such earnings become subject to U.S. taxation 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 year ended December 29, 2002 is shown before the cumulative effect of change in recognition and measurement of goodwill impairment of $36.6, for which no tax benefit is available.

In June 2002, the Company completed its analysis of the impact related to the U.S. Department of Treasury's recently issued regulations that replaced the loss disallowance rules applicable to the sale of stock of a subsidiary member of a consolidated tax group. These regulations permit the Company to utilize a previously disallowed capital loss that primarily resulted from the sale of a subsidiary in 2000. In the year ended December 29, 2002, the Company filed an amended tax return to claim a refund relating to the previously disallowed loss and recorded a tax benefit of $20 million relating to the refund claim. In July 2004, the Company received a $27 million refund relating to the claim. The difference in the amount of benefit recorded in 2002 and the refund received in 2004, $7 million, has been recorded as a benefit in the current tax provision.

FASB Statement No. 109, Income Taxes, requires recognition of a valuation allowance when it is "more likely than not that some portion or all of the deferred tax assets will not be realized." The ultimate realization of deferred tax assets depends on Metaldyne's ability to generate sufficient taxable income in the future. The valuation allowance principally relates to the uncertainty of future utilization of certain foreign and state net operating losses, and the excess of the Company's tax cost basis over net book value of TriMas stock, where it is not anticipated that the Company will generate enough capital gain income to offset any capital loss that may occur upon the sale of its shares in future years. The net increase (decrease) in the valuation allowance for the years ending January 2, 2005 and December 28, 2003 was $1 million and ($4.3) million, respectively.

Included in the state deferred tax expense for January 2, 2005 is a benefit of $2.7 million that is attributable to a reduction in a valuation allowance previously established against deferred tax assets for certain net operating loss carryforwards that the Company has determined is no longer warranted.

24. Employee Benefit Plans

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 $8.8 million in 2004, $9.3 million in 2003 and $4 million in 2002. Anticipated 2005 contributions to the defined contribution plans will be approximately $10.6 million.

As of January 1, 2003, the Company replaced its existing combination of defined benefit plans and defined contribution plans for non-union employees with an age-weighted profit-sharing plan and a 401(k) plan. Defined benefit plan benefits no longer accrue after 2002 for these employees. This change affected approximately 1,200 employees. The profit-sharing component of the new plan is calculated using allocation rates that are integrated with Social Security and that increase with age. As a result of the disposition of TriMas on June 6, 2002, the Company is not responsible for TriMas' net periodic pension cost subsequent to this date. However, the Company must continue to record TriMas' portion of the net liability recognized on the Company's consolidated balance sheet.

The Company also provides other post-retirement medical and life insurance benefit plans, none of which are funded, for certain of its active and retired employees. The health care plans are contributory with participants' contributions adjusted annually. As a result of the disposition of TriMas on June 6, 2002, the Company is not responsible for TriMas' net periodic post-retirement benefit cost, benefit obligations and net liability subsequent to this date.

The Company uses a September 30 measurement date for all of its plans. The straight-line method is used to amortize prior service amounts and unrecognized net gains and losses for all pension and post-retirement benefit plans. The below includes all of the Company's domestic and foreign pension and other post-retirement benefit plans.

Obligations and funded status at January 2, 2005 and December 28, 2003:

	Pension Benefits						Other Benefits
	2004			2003			2004			2003
				(In thousands)
Change in Benefit Obligation
Benefit obligation at beginning of year	$	289,120		$	260,750		$	53,340		$	45,410
Service cost		3,070			3,220			1,330			1,020
Interest cost		17,320			17,100			2,970			3,010
Plan participants' contributions		190			240			450			—
Amendments		230			1,890			—			—
Actuarial loss		6,930			17,820			1,440			7,040
Benefits paid		(13,950	)		(14,060	)		(3,290	)		(3,140	)
Change in foreign currency		2,740			4,870			—			—
Change due to amendment/settlement/spin-off		—			—			(1,980	)		—
Change due to curtailment		(1,470	)		(2,710	)		—			—

Benefit obligation at end of year		304,180			289,120			54,260			53,340

Change in Plan Assets
Fair value of plan assets at beginning of year		162,720			148,660			—			—
Actual return on plan assets		13,640			9,790			—			—
Employer contribution		18,930			16,380			2,840			3,140
Plan participants' contributions		190			—			450			—
Benefits paid		(13,950	)		(14,060	)		(3,290	)		(3,140	)
Expenses/other		1,410			1,950			—			—

Fair value of plan assets at end of year		182,940			162,720			—			—

Net Amount Recognized
Funded status		(121,240	)		(126,400	)		(54,260	)		(53,340	)
Unrecognized net actuarial loss		101,390			92,510			14,810			13,840
Unrecognized prior service cost (benefit)		2,160			2,060			(2,580	)		(1,370	)

Net amount recognized	$	(17,690	)	$	(31,830	)	$	(42,030	)	$	(40,870	)

Amounts Recognized in the Statement of Financial Position
Accrued benefit cost	$	(115,980	)	$	(119,540	)	$	(42,030	)	$	(40,870	)
Intangible assets		2,160			2,060			—			—
Accumulated other comprehensive income		96,130			85,650			—			—

Net amount recognized	$	(17,690	)	$	(31,830	)	$	(42,030	)	$	(40,870	)

Projected benefit obligation		304,180			289,120			N/A			N/A
Accumulated benefit obligation		298,850			280,810			N/A			N/A
Fair value of plan assets		182,940			162,720			N/A			N/A

The increase in accumulated other comprehensive income to $96.1 million ($60.6 million net of tax) at January 2, 2005 primarily reflects the excess of the accumulated benefit obligation over the fair value of the plan assets.

The Company expects to make contributions of approximately $24.0 million to the defined benefit pension plans for 2005.

	Pension Benefits									Other Benefits
	2004			2003			2002			2004			2003			2002
	(In thousands)
Components of Net Periodic Benefit Cost
Service cost	$	3,070		$	3,210		$	6,410		$	1,330		$	1,020		$	1,040
Interest cost		17,320			17,100			18,340			2,970			3,010			3,010
Expected return on plan assets		(17,220	)		(16,570	)		(15,710	)		—			—			—
Amortization of prior service cost		140			110			40			(290	)		(120	)		—
Recognized (gain) loss due to curtailments/ settlements		(1,470	)		(2,450	)		1,280			(480	)		—			—
Amortization of net (gain) loss		2,370			700			30			470			280			(20	)

Net periodic benefit cost	$	4,210		$	2,100		$	10,390		$	4,000		$	4,190		$	4,030

Additional Information
Increase in minimum liability included in other comprehensive income (before tax)	$	10,480		$	25,530		$	48,520			N/A			N/A			N/A
Assumptions
Weighted-average assumptions used to determine benefit obligations at January 2, 2005, December 28, 2003 and December 29, 2002:
Discount rate		5.99	%		6.11	%		6.73	%		6.00	%		6.13	%		6.75	%
Rate of compensation increase		3.62	%		3.59	%		4.01	%		N/A			N/A			N/A
Weighted-average assumptions used to determine net periodic benefit cost for years ended January 2, 2005, December 28, 2003 and December 29, 2002:
Discount rate		6.11	%		6.73	%		7.51	%		6.13	%		6.75	%		7.625	%
Expected long-term return on plan assets		8.96	%		8.96	%		8.97	%		N/A			N/A			N/A
Rate of compensation increase		3.59	%		4.01	%		4.03	%		N/A			N/A			N/A
Assumed health care cost trend rates at January 2, 2005, December 28, 2003 and December 29, 2002:
Health care cost trend rate assumed for next year		N/A			N/A			N/A			9.50	%		10.00	%		10.50	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)		N/A			N/A			N/A			5.00	%		5.00	%		5.00	%
Year that the rate reaches the ultimate trend rate		N/A			N/A			N/A			2013			2013			2013

Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects:

	1-Percentage- Point Increase		1-Percentage- Point Decrease
	(In thousands)
Effect on total of service and interest cost	$	310	$	(250	)
Effect on post-retirement benefit obligation		3,770		(3,010	)

Plan Assets

The Company's pension plans' and other post-retirement benefit plans' weighted-average asset allocations at January 2, 2005 and December 28, 2003, by asset category, are as follows:

		Pension Benefits Plan Assets At
		January 2, 2005		December 28, 2003
Asset Category
Equity securities		65	%	56	%
Debt securities		33	%	36	%
Other (Cash)		2	%	8	%

	Total	100	%	100	%

Cash Flows

The following pension benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

	Pension Benefits January 2, 2005
2005	$	12,010
2006	$	12,240
2007	$	12,880
2008	$	13,600
2009	$	14,340
2010 - 2014	$	85,890

Investment Policy and Strategy

The policy, established by the Retirement Plan Administrative Committee, is to provide for growth of capital with a moderate level of volatility by investing assets per the target allocations stated above. The asset allocation and the investment policy will be reviewed on a semi-annual basis, to determine if the policy should be changed.

Determination of Expected Long-Term Rate of Return

The expected long-term rate of return for the plan's total assets is based on the expected return of each of the above categories, weighted based on the target allocation for each class. Equity securities are expected to return 10% to 11% over the long-term, while debt securities are expected to return between 4% and 7%. The Retirement Plan Administrative Committee expects that the plans' asset manager will provide a modest (0.5% to 1.0% per annum) premium to the respective market benchmark indices.

Medicare Prescription Drug, Improvement and Modernization Act

On December 8, 2003, the Medicare Prescription Drug, Improvement and Modernization Act was signed into law. This law provides for a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to the benefit established by the law. The Company provides retiree drug benefits that exceed the value of the benefits that will be provided by Medicare Part D, and the Company's eligible retirees generally pay a premium for this benefit that is less than the Part D premium. Therefore, the Company has concluded that these benefits are at least actuarially equivalent to the Part D program so that Metaldyne will be eligible for the basic Medicare Part D subsidy.

In the second quarter of 2004, a Financial Accounting Standards Board (FASB) Staff Position (FSP FAS 106-2, "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug Improvement and Modernization Act of 2003") was issued providing guidance on the accounting for the effects of the Act for employers that sponsor post-retirement health care plans that provide prescription drug benefits. The FSP is effective for the first interim or annual period beginning after June 15, 2004. The Company estimates the federal subsidy included in the law will ultimately result in an approximate $7.0 million reduction in Metaldyne's post-retirement benefit obligation. For 2004, the Company recognized a net reduction in post-retirement expense of $0.9 million as a result of the anticipated subsidiary.

Post-retirement Medical and Life Insurance Benefit Plans

In December 2004, the Company announced that it will discontinue retiree medical and life insurance coverage to its salaried and nonunion retirees and their beneficiaries effective January 1, 2006. This event has no impact on the Company's 2004 annual results since the announcement occurred subsequent to the September 30, 2004 measurement date for post-retirement benefits. The Company will record an estimated curtailment gain of $2.5 million in the first quarter of 2005 pursuant to the announcement. The Company expects to reduce its 2005 SFAS No. 106 expense by $16.8 million and $1.4 million as a result of the curtailment and of FSP FAS 106-2, respectively.

25. 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:

Cash and Cash Equivalents

The carrying amount reported in the balance sheet for cash and cash equivalents approximates 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.

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.

All of the Company's interest rate protection agreements matured in February 2004 and, as a result of their maturity, a cumulative pre-tax non-cash gain of $6.6 million was recorded and is reflected as a non-cash gain on maturity of interest rate arrangements in the Company's consolidated statement of operations for the year ended January 2, 2005. See also Note 14, Derivative Financial Instruments.

The carrying amounts and fair values of the Company's financial instruments at January 2, 2005 and December 28, 2003 are as follows:

		2004				2003
		Carrying Amount		Fair Value		Carrying Amount			Fair Value
		(In thousands)
Cash and cash investments		$	—	$	—	$	13,820		$	13,820
Receivables		$	182,410	$	182,410	$	175,020		$	175,020
Interest rate arrangements		$	—	$	—	$	(4,540	)	$	(4,540	)
Long-term debt:
	Bank debt	$	413,730	$	413,730	$	351,080		$	351,080
	11% senior subordinated notes, due 2012	$	250,000	$	210,000	$	250,000		$	230,000
	10% senior notes, due 2013	$	150,000	$	144,750	$	150,000		$	150,000
	10% senior subordinated notes, due 2014	$	31,750	$	27,180	$	—		$	—
	Other long-term debt	$	14,540	$	14,540	$	15,850		$	15,850

26. Interim and Other Supplemental Financial Data (Unaudited)

		For the Quarters Ended
		January 2^nd			October 3^rd			June 27^th			March 28^th
		(In thousands except per share amounts)
2004:
Net sales		$	499,550		$	501,680		$	521,890		$	481,140
Gross profit		$	34,230		$	34,180		$	52,390		$	52,210
Net loss		$	(2,200	)	$	(17,370	)	$	(3,170	)	$	(5,250	)
Per common share:
	Basic and diluted	$	(0.05	)	$	(0.41	)	$	(0.07	)	$	(0.12	)

		For the Quarters Ended
		December 28^th			September 28^th			June 29^th			March 30^th
		(In thousands except per share amounts)
2003:
Net sales		$	389,060		$	346,680		$	390,540		$	381,920
Gross profit		$	31,410		$	33,420		$	49,830		$	41,040
Net income (loss)		$	(54,990	)	$	(10,340	)	$	1,060		$	(11,060	)
Per common share:
	Basic and diluted	$	(1.35	)	$	(0.29	)	$	(0.03	)	$	(0.31	)

The 2004 results include the adoption of SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." As a result, the 2004 net loss and basic and diluted loss per share include $19.9 million of preferred stock dividends (including accretion of $1.1 million in 2004). Additionally, fourth quarter results include a $8.0 million gain on the sale of Saturn and TriMas common stock.

In the fourth quarter of 2003, the Company incurred several significant charges, including a $4.9 million asset impairment, $15 million fixed asset disposal loss, $6.1 million restructuring charge and $20.7 million equity loss of affiliates. See Note 6, Equity Investments and Receivables in Affiliates, and Note 17, Asset Impairments and Restructuring Related Integration Actions.

27. Commitments and Contingencies

The Company is subject to claims and litigation in the ordinary course of its business, but does not believe that any such claim or litigation will have a material adverse effect on its financial position or results of operation.

There are no material pending legal proceedings, other than ordinary routine litigation incidental to the Company's business, to which it is aware that would have a material adverse effect on the Company's financial position or results of operations.

28. Related Party Transactions

In November 2000, the Company was acquired by an investor group led by 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. In addition to TriMas (see Note 6, Equity Investments and Receivables in Affiliates), Heartland has equity interests in other industrial companies. The recapitalization and Heartland's

investment have allowed the Company to continue to aggressively pursue internal growth opportunities and strategic acquisitions, and to increase the scale and future profitability of the Company. At January 2, 2005, Heartland and CSFB owned approximately 45% and 23% of the Company's common stock, respectively.

The Company maintains a monitoring agreement with Heartland for an annual fee of $4 million plus additional fees for financings and acquisitions under certain circumstances. 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 (which would have totaled $5.3 million for 2004) or $4 million. Total monitoring fees paid to Heartland were $4 million for each of the years ended January 2, 2005, December 28, 2003 and December 29, 2002. Additionally, the Company recorded $0.2 million in 2004 and $0.7 million in both 2003 and 2002 for expense reimbursements to Heartland in the ordinary course of business.

Heartland is also entitled to a 1% transaction fee in exchange for negotiating, contracting and executing certain transactions on behalf of Metaldyne, including transactions for sale-leaseback arrangements and other financings. These fees totaled approximately $1.0 and $1.9 million for the years ended January 2, 2005 and December 28, 2003, respectively. Similar fees through 2002 totaled approximately $1.9 million. Total fee and expense reimbursements paid in 2004 and 2003 were approximately $0.2 million and $2 million, respectively, and amounts not remitted to Heartland total approximately $2.8 million and $1.8 million as of January 2, 2005 and December 28, 2003, respectively. These amounts are recorded as accounts payable in the Company's consolidated balance sheet as of the year ended January 2, 2005.

On December 31, 2003, Heartland purchased all of the outstanding shares of Series B preferred stock from the Company's former GMTI shareholders. See Note 13, Redeemable Preferred Stock.

Effective January 23, 2001, the Company changed its name to Metaldyne Corporation from MascoTech, Inc. The Company had a corporate service agreement through 2002 with Masco Corporation ("Masco"), which at January 2, 2005 owned approximately 6% of the Company's common stock. Under the terms of the agreement, the Company paid fees to Masco for various staff support and administrative services, research and development and facilities. Such fees aggregated zero in 2004 and 2003 and $0.5 million in 2002. Total fee and expense reimbursements not yet remitted to Masco total $0.9 million and $1.0 million as of January 2, 2005 and December 28, 2003, respectively, and are recorded as accounts payable in the Company's consolidated balance sheet as of the year ended January 2, 2005.

On June 6, 2002, the Company sold 66% of its former TriMas subsidiary to Heartland and other investors. The Company's current ownership percentage in TriMas is approximately 24%. The Company has a corporate services agreement with TriMas, which requires the Company to provide corporate staff support and administrative services to TriMas subsequent to the divestiture of TriMas. Under the terms of the agreement, the Company receives fees from TriMas, which aggregated approximately $0.4 million, $2.5 million and $0.3 million in 2004, 2003 and 2002, respectively. TriMas also reimburses Metaldyne for expense reimbursements in the ordinary course of business. The Company has recorded $7.1 million due from TriMas, consisting of tax net operating losses created prior to the disposition of TriMas, pension obligations and other expense reimbursements in the ordinary course of business, of which $2.8 million is recorded as receivables from TriMas and $4.3 million is recorded as equity

investments and receivables in affiliates in the Company's consolidated balance sheet as of January 2, 2005.

On November 12, 2004, the Company sold approximately 924,000 shares of its TriMas stock to Masco for $23 per shares, or a total of $21.3 million. A gain on the sale of shares totaling $2.9 million was recognized and is included in equity (gain) loss from affiliates, net on the Company's consolidated statement of operations as of January 2, 2005. See Note 6, Equity Investments and Receivables in Affiliates.

29. Subsequent Events

In January 2005, the Company reorganized to streamline its operating efficiency and cost structure. The Company's operations were consolidated into two segments: Chassis segment and the Powertrain segment. The Chassis segment consists of the former Chassis operations plus a portion of the former Driveline operations, while the Powertrain segment consists of the former Engine operations combined with the remainder of the former Driveline operations. As this change became effective in fiscal 2005, the Company's Form 10-Q for the quarter ending April 3, 2005 will report operating results in these two segments along with restated results for the year ended January 2, 2005.

On February 4, 2005, the Company entered into a sale-leaseback transaction for machinery and equipment with a third party lessor. The Company received $6.5 million cash as part of this transaction.

Metaldyne entered into a Commitment Letter with General Electric Capital Corporation ("GECC") dated as of March 31, 2005 related to its existing accounts receivable securitization facility (the "Existing Agreement"). The Commitment Letter provides for (i) an initial amendment to the Existing Agreement (the Existing Agreement as so amended, the "Amended Agreement"), (ii) an "Extension Facility" that will further amend the Amended Agreement and (iii) a "New Facility" that is expected to eventually replace the Extension Facility.

The Amended Agreement is expected to (a) change the maturity date of the facility to January 1, 2007, (b) install GECC as the new Administrative Agent, (c) improve customer concentration limits, (d) increase program availability and (e) adjust certain default triggers (clauses (c), (d) and (e) together the "Operative Amendments").

The Extension Facility is expected to (i) improve advance rates relative to the Amended Agreement, (ii) change the margins applicable to advances based on LIBOR to 1.75% for the first 90 days, 2.00% for the next 90 days, and 2.25% thereafter, and (iii) change the maximum financing from $150 million to $175 million. The Extension Facility will also address various administrative and technical matters.

The New Facility is expected to (i) increase the facility size to $225 million, (ii) improve advance rates relative to the Extension Facility, and (iii) provide a term of the agreement for up to five years.

If the Company has not entered into an intercreditor agreement with its lending agent within 60 days subsequent to the date of the Amended Agreement, then the Operative Amendments will cease to be effective until such intercreditor agreement is entered into. Further, such intercreditor agreement is a condition precedent to the Extension Facility and the New Facility. GECC's commitment under the letter agreement to enter into the Amended Agreement expires on May 15, 2005. GECC's commitment to provide the Extension Facility expires on January 1, 2007. GECC's

commitment to provide the New Facility expires on August 15, 2005. There can be no assurance that Metaldyne will reach a definitive agreement with GECC on these terms.

The Commitment Letter and related term sheet are filed herewith as Exhibit 10.3.1. Additionally, the Company has financed several lease transactions with GECC, and GECC beneficially owns approximately 1.4% of the Company's common stock.

30. Condensed Consolidating Financial Statements of Guarantors of Senior Subordinated Notes

The following condensed consolidating financial information presents:

(1): Condensed consolidating financial statements as of January 2, 2005 and December 28, 2003, and for the years ended January 2, 2005, December 28, 2003 and December 31, 2002 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.

Guarantor/Non-Guarantor
Condensed Consolidating Balance Sheet
January 2, 2005

			Parent			Guarantor		Non-Guarantor		Eliminations			Consolidated
			(In thousands)
Assets
Current assets:
	Cash and cash equivalents		$	—		$	—	$	—	$	—		$	—
	Total receivables, net			—			128,230		53,380		—			181,610
	Inventories			—			84,570		42,450		—			127,020
	Deferred and refundable income taxes			—			14,500		3,970		—			18,470
	Prepaid expenses and other assets			—			28,830		7,820		—			36,650

		Total current assets		—			256,130		107,620		—			363,750
Equity investments and receivables in affiliates				107,040			—		—		—			107,040
Property and equipment, net				—			580,780		275,470		—			856,250
Excess of cost over net assets of acquired companies				—			472,050		154,190		—			626,240
Investment in subsidiaries				584,110			232,280		—		(816,390	)		—
Intangible and other assets				—			222,380		19,090		—			241,470

		Total assets	$	691,150		$	1,763,620	$	556,370	$	(816,390	)	$	2,194,750

Liabilities and Shareholders' Equity
Current liabilities:
	Accounts payable		$	—		$	199,710	$	86,880	$	—		$	286,590
	Accrued liabilities			—			92,000		25,050		—			117,050
	Current maturities, long-term debt			—			3,630		8,620		—			12,250

		Total current liabilities		—			295,340		120,550		—			415,890
Long-term debt				427,180			426,320		1,950		—			855,450
Deferred income taxes				—			61,940		26,970		—			88,910
Minority interest				—			—		650		—			650
Other long-term liabilities				—			135,310		7,390		—			142,700
Redeemable preferred stock				149,190			—		—		—			149,190
Intercompany accounts, net				(427,180	)		256,340		170,840		—			—

		Total liabilities		149,190			1,175,250		328,350		—			1,652,790

Shareholders' equity:
	Preferred stock			—			—		—		—			—
	Common stock			42,830			—		—		—			42,830
	Paid-in capital			698,870			—		—		—			698,870
	Accumulated deficit			(262,740	)		—		—		—			(262,740	)
	Accumulated other comprehensive income			63,000			—		—		—			63,000
	Investment by Parent/Guarantor			—			588,370		228,020		(816,390	)		—

		Total shareholders' equity		541,960			588,370		228,020		(816,390	)		541,960

	Total liabilities and shareholders' equity		$	691,150		$	1,763,620	$	556,370	$	(816,390	)	$	2,194,750

Guarantor/Non-Guarantor

Condensed Consolidating Balance Sheet

December 28, 2003

			Parent			Guarantor		Non-Guarantor		Eliminations			Consolidated
			(In thousands)
Assets
Current assets:
	Cash and cash equivalents		$	—		$	10,750	$	3,070	$	—		$	13,820
	Total receivables, net			—			144,980		29,180		—			174,160
	Inventories			—			54,080		29,600		—			83,680
	Deferred and refundable income taxes			—			7,900		1,210		—			9,110
	Prepaid expenses and other assets			—			27,880		8,400		—			36,280

		Total current assets		—			245,590		71,460		—			317,050
Equity investments and receivables in affiliates				155,790			—		—		—			155,790
Property and equipment, net				—			478,760		228,690		—			707,450
Excess of cost over net assets of acquired companies				—			441,920		142,470		—			584,390
Investment in subsidiaries				464,100			236,550		—		(700,650	)		—
Intangible and other assets				—			225,400		21,780		—			247,180

		Total assets	$	619,890		$	1,628,220	$	464,400	$	(700,650	)	$	2,011,860

Liabilities and Shareholders' Equity
Current liabilities:
	Accounts payable		$	—		$	128,960	$	72,280	$	—		$	201,240
	Accrued liabilities			—			96,040		40,800		—			136,840
	Current maturities, long-term debt			—			4,820		6,060		—			10,880

		Total current liabilities		—			229,820		119,140		—			348,960
Long-term debt				400,000			360,740		6,190		—			766,930
Deferred income taxes				—			95,530		25,990		—			121,520
Minority interest				—			—		800		—			800
Other long-term liabilities				—			148,620		5,140		—			153,760
Intercompany accounts, net				(400,000	)		322,450		77,550		—			—

		Total liabilities		—			1,157,160		234,810		—			1,391,970

	Redeemable preferred stock			73,980			—		—		—			73,980

Shareholders' equity:
	Preferred stock			—			—		—		—			—
	Common stock			42,730			—		—		—			42,730
	Paid-in capital			692,400			—		—		—			692,400
	Accumulated deficit			(234,750	)		—		—		—			(234,750	)
	Accumulated other comprehensive income			45,530			—		—		—			45,530
	Investment by Parent/Guarantor			—			471,060		229,590		(700,650	)		—

		Total shareholders' equity		545,910			471,060		229,590		(700,650	)		545,910

		Total liabilities, redeemable stock and shareholders' equity	$	619,890		$	1,628,220	$	464,400	$	(700,650	)	$	2,011,860

Guarantor/Non-Guarantor
Condensed Consolidating Statement of Operations
Year Ended January 2, 2005

			Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
			(In thousands)
Net sales			$	—		$	1,580,100		$	424,160		$	—		$	2,004,260
Cost of sales				—			(1,491,350	)		(339,900	)		—			(1,831,250	)

	Gross profit			—			88,750			84,260			—			173,010
Selling, general and administrative expenses				—			(110,690	)		(22,560	)		—			(133,250	)
Restructuring charges				—			(1,370	)		(1,380	)		—			(2,750	)
Loss on disposition of manufacturing facilities				—			(7,600	)		—			—			(7,600	)

Operating profit (loss)				—			(30,910	)		60,320			—			29,410

Other expense, net:
	Interest expense			—			(79,280	)		(2,860	)		—			(82,140	)
	Preferred stock dividends and accretion			(19,900	)		—			—			—			(19,900	)
	Non-cash gain on maturity of interest rate arrangements			—			6,570			—			—			6,570
	Equity gain (loss) from affiliates, net			1,450			—			—			—			1,450
	Gain on sale of equity investments			8,020			—			—			—			8,020
	Other, net			—			(6,340	)		(1,930	)		—			(8,270	)

		Other expense, net		(10,430	)		(79,050	)		(4,790	)		—			(94,270	)

Income (loss) before income taxes				(10,430	)		(109,960	)		55,530			—			(64,860	)
Income tax expense (benefit)				—			(40,640	)		3,770			—			(36,870	)
Equity in net income of subsidiaries				(17,560	)		51,760			—			(34,200	)		—

Earnings (loss) attributable to common stock			$	(27,990	)	$	(17,560	)	$	51,760		$	(34,200	)	$	(27,990	)

Guarantor/Non-Guarantor
Condensed Consolidating Statement of Operations
Year Ended December 28, 2003

			Parent			Guarantor			Non-Guarantor			Eliminations		Consolidated
			(In thousands)
Net sales			$	—		$	1,154,470		$	353,730		$	—	$	1,508,200
Cost of sales				—			(1,060,220	)		(292,450	)		—		(1,352,670	)

	Gross profit			—			94,250			61,280			—		155,530
Selling, general and administrative expenses				—			(99,360	)		(17,870	)		—		(117,230	)
Restructuring charges				—			(11,550	)		(1,580	)		—		(13,130	)
Asset impairment				—			(4,870	)		—			—		(4,870	)

Operating profit (loss)				—			(21,530	)		41,830			—		20,300

Other expense, net:
	Interest expense			—			(69,640	)		(5,870	)		—		(75,510	)
	Equity gain (loss) from affiliates, net			(20,700	)		—			—			—		(20,700	)
	Other, net			—			(11,690	)		3,610			—		(8,080	)

		Other expense, net		(20,700	)		(81,330	)		(2,260	)		—		(104,290	)

Income (loss) before income taxes				(20,700	)		(102,860	)		39,570			—		(83,990	)
Income tax expense (benefit)				—			(27,440	)		18,780			—		(8,660	)
Equity in net income of subsidiaries				(54,630	)		20,790			—			33,840		—

Net income (loss)				(75,330	)		(54,630	)		20,790			33,840		(75,330	)
Preferred stock dividends				9,260			—			—			—		9,260

Earnings (loss) attributable to common stock			$	(84,590	)	$	(54,630	)	$	20,790		$	33,840	$	(84,590	)

Guarantor/Non-Guarantor
Condensed Consolidating Statement of Operations
Year Ended December 29, 2002

			Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
			(In thousands)
Net sales			$	—		$	1,165,130		$	627,070		$	—		$	1,792,200
Cost of sales				—			(1,029,500	)		(469,060	)		—			(1,498,560	)

	Gross profit			—			135,630			158,010			—			293,640
Selling, general and administrative expenses				—			(106,070	)		(75,390	)		—			(181,460	)
Restructuring charges				—			(3,470	)		—			—			(3,470	)

Operating profit				—			26,090			82,620			—			108,710

Other expense, net:
	Interest expense			—			(87,280	)		(3,720	)		—			(91,000	)
	Loss on repurchase of debentures and early retirement of term loans			—			(68,860	)		—			—			(68,860	)
	Loss on interest rate arrangements upon early retirement of term loans			—			(7,550	)		—			—			(7,550	)
	Equity gain from affiliates, net			(1,410	)		—			—			—			(1,410	)
	Other, net			—			(10,670	)		1,690			—			(8,980	)

		Other expense, net		(1,410	)		(174,360	)		(2,030	)		—			(177,800	)

Income (loss) before income taxes				(1,410	)		(148,270	)		80,590			—			(69,090	)
Income tax expense (benefit)				—			(56,970	)		16,010			—			(40,960	)
Equity in net income of subsidiaries				(63,350	)		64,580			—			(1,230	)		—

Net income (loss) before cumulative effect of change in accounting principle				(64,760	)		(26,720	)		64,580			(1,230	)		(28,130	)
Cumulative effect of change in recognition And measurement of goodwill impairment				—			(36,630	)		—			—			(36,630	)

Net income (loss)				(64,760	)		(63,350	)		64,580			(1,230	)		(64,760	)
Preferred stock dividends				9,120			—			—			—			9,120

Earnings (loss) attributable to common stock			$	(73,880	)	$	(63,350	)	$	64,580		$	(1,230	)	$	(73,880	)

Guarantor/Non-Guarantor
Condensed Consolidating Statement of Cash Flows
Year Ended January 2, 2005

		Parent			Guarantor			Non-Guarantor			Eliminations		Consolidated
		(In thousands)
Cash flows from operating activities:
	Net cash provided by operating activities	$	—		$	37,250		$	42,130		$	—	$	79,380

Cash flows from investing activities:
	Capital expenditures		—			(112,160	)		(40,280	)		—		(152,440	)
	Acquisition of business, net of cash received		—			(203,870	)		—			—		(203,870	)
	Proceeds from sale-leaseback of fixed assets		—			91,520			—			—		91,520
	Disposition of manufacturing facilities		—			(500	)		—			—		(500	)
	Proceeds from sale of equity investments		33,830			—			—			—		33,830
	Proceeds on sale of joint venture		—			1,260			—			—		1,260

	Net cash provided by (used for) investing activities		33,830			(223,750	)		(40,280	)		—		(230,200	)
Cash flows from financing activities:
	Principal payments of term loan facilities		—			(1,320	)		—			—		(1,320	)
	Proceeds of revolving credit facility		—			279,450			—			—		279,450
	Principal payments of revolving credit facility		—			(215,910	)		—			—		(215,910	)
	Proceeds of senior subordinated notes, due 2014		26,920			—			—			—		26,920
	Proceeds of other debt		—			—			3,740			—		3,740
	Principal payments of other debt		—			(4,530	)		(5,310	)		—		(9,840	)
	Capitalization of debt financing fees		—			(1,380	)		—			—		(1,380	)
	Issuance of Series A-1 preferred stock		55,340			—			—			—		55,340

	Net cash provided by (used for) financing activities		82,260			56,310			(1,570	)		—		137,000
	Change in intercompany accounts		(116,090	)		119,440			(3,350	)		—		—

Net increase (decrease) in cash			—			(10,750	)		(3,070	)		—		(13,820	)
Cash and cash equivalents, beginning of period			—			10,750			3,070			—		13,820

Cash and cash equivalents, end of period		$	—		$	—		$	—		$	—	$	—

METALDYNE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Guarantor/Non-Guarantor
Condensed Consolidating Statement of Cash Flows
Year Ended December 28, 2003

		Parent			Guarantor			Non-Guarantor			Eliminations		Consolidated
		(In thousands)
Cash flows from operating activities:
	Net cash provided by (used for) operating activities	$	—		$	(61,410	)	$	160,650		$	—	$	99,240

Cash flows from investing activities:
	Capital expenditures		—			(104,580	)		(26,140	)		—		(130,720	)
	Disposition of businesses to a related party		—			—			22,570			—		22,570
	Acquisition of business, net of cash received		—			(7,650	)		—			—		(7,650	)
	Proceeds from sale-leaseback of fixed assets		—			16,970			—			—		16,970
	Proceeds from sale of TriMas shares		20,000			—			—			—		20,000
	Investment in joint venture		—			(20,000	)		—			—		(20,000	)

	Net cash provided by (used for) investing activities		20,000			(115,260	)		(3,570	)		—		(98,830	)
Cash flows from financing activities:
	Principal payments of term loan facilities		—			(47,600	)		—			—		(47,600	)
	Proceeds of revolving credit facility		—			180,000			—			—		180,000
	Principal payments of revolving credit facility		—			(180,000	)		—			—		(180,000	)
	Proceeds of senior notes, due 2013		150,000			—			—			—		150,000
	Principal payments of convertible subordinated debentures, due 2003		(98,530	)		—			—			—		(98,530	)
	Proceeds of other debt		—			—			1,940			—		1,940
	Principal payments of other debt		—			(4,080	)		(5,100	)		—		(9,180	)
	Capitalization of debt financing fees		—			(2,350	)		—			—		(2,350	)

	Net cash provided by (used for) financing activities		51,470			(54,030	)		(3,160	)		—		(5,720	)
Change in intercompany accounts			(71,470	)		226,840			(155,370	)		—		—

Net increase (decrease) in cash			—			(3,860	)		(1,450	)		—		(5,310	)
Cash and cash equivalents, beginning of period			—			14,610			4,520			—		19,130

Cash and cash equivalents, end of period		$	—		$	10,750		$	3,070		$	—	$	13,820

METALDYNE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Concluded)

Guarantor/Non-Guarantor
Condensed Consolidating Statement of Cash Flows
Year Ended December 29, 2002

			Parent			Guarantor			Non-Guarantor			Eliminations		Consolidated
									(In thousands)
Cash flows from operating activities:
	Net cash provided by (used for) operating activities		$	—		$	(79,380	)	$	14,270		$	—	$	(65,110	)

Cash flows from investing activities:
	Capital expenditures			—			(82,970	)		(33,480	)		—		(116,450	)
	Disposition of businesses to a related party			—			—			840,000			—		840,000
	Proceeds from sale-leaseback of fixed assets			—			52,180			—			—		52,180

	Net cash provided by (used for) investing activities			—			(30,790	)		806,520			—		775,730
Cash flows from financing activities:
	Proceeds of term loan facilities			—			400,000			—			—		400,000
	Principal payments of term loan facilities			—			(671,850	)		(440,600	)		—		(1,112,450	)
	Proceeds of revolving credit facility			—			324,800			—			—		324,800
		Principal payments of revolving credit facility		—			(324,800	)		—			—		(324,800	)
	Proceeds of senior subordinated notes, due 2012			250,000			—			—			—		250,000
	Principal payments of convertible subordinated debentures, due 2003 (net of $1.2 million non-cash portion of repurchase)			—			(205,290	)		—			—		(205,290	)
	Proceeds of other debt			—			—			920			—		920
	Principal payments of other debt			—			(2,130	)		(3,960	)		—		(6,090	)
	Capitalization of debt financing fees			—			(12,100	)		—			—		(12,100	)
	Penalties on early extinguishment of debt			—			(6,480	)		—			—		(6,480	)
	Change in intercompany accounts			(250,000	)		622,550			(372,550	)		—		—

Net cash provided by (used for) financing activities				—			124,700			(816,190	)		—		(691,490	)

Net increase (decrease) in cash				—			14,530			4,600			—		19,130
Cash and cash equivalents, beginning of period				—			—			—			—		—

Cash and cash equivalents, end of period			$	—		$	14,530		$	4,600		$	—	$	19,130

METALDYNE CORPORATION

CONSOLIDATED BALANCE SHEET

April 3, 2005 and January 2, 2005

(Dollars in thousands except per share amounts)

				April 3, 2005			January 2, 2005
				(Unaudited)
ASSETS
Current assets:
	Cash and cash equivalents			$	—		$	—
	Receivables, net:
		Trade, net of allowance for doubtful accounts			154,530			165,850
		TriMas			2,930			2,830
		Other			16,190			12,930

			Total receivables, net		173,650			181,610
		Inventories			135,000			127,020
		Deferred and refundable income taxes			17,640			18,470
		Prepaid expenses and other assets			39,130			36,650

			Total current assets		365,420			363,750
	Equity investments and receivables in affiliates				106,810			107,040
Property and equipment, net					844,290			856,250
Excess of cost over net assets of acquired companies					614,120			626,240
Intangible and other assets					233,450			241,470

			Total assets	$	2,164,090		$	2,194,750

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Accounts payable			$	287,670		$	286,590
	Accrued liabilities				123,710			117,050
	Current maturities, long-term debt				9,380			12,250

			Total current liabilities		420,760			415,890
Long-term debt					849,460			855,450
Deferred income taxes					76,960			88,910
Minority interest					670			650
Other long-term liabilities					136,790			142,700
Redeemable preferred stock (aggregate liquidation value $164.5 million and $159.3 million at April 3, 2005 and January 2, 2005, respectively), Authorized: 1,198,693 shares; Outstanding: 1,189,694 shares					154,630			149,190

Total liabilities					1,639,270			1,652,790

Preferred stock (non-redeemable), $1 par, Authorized: 25 million;
	Outstanding: None				—			—
Common stock, $1 par, Authorized: 250 million;
	Outstanding: 42.8 million shares				42,840			42,830
Paid-in capital					698,870			698,870
Accumulated deficit					(266,240	)		(262,740	)
Accumulated other comprehensive income					49,350			63,000

Total shareholders' equity					524,820			541,960

Total liabilities and shareholders' equity				$	2,164,090		$	2,194,750

See accompanying notes to the consolidated financial statements.

METALDYNE CORPORATION

CONSOLIDATED STATEMENT OF OPERATIONS

(Dollars in thousands except per share amounts)

			Three Months Ended
			April 3, 2005			March 28, 2004
			(Unaudited)
Net sales			$	578,750		$	481,140
Cost of sales				(525,870	)		(428,930	)

	Gross profit			52,880			52,210
Selling, general and administrative expenses				(27,740	)		(31,220	)
Restructuring charges				(1,290	)		(190	)
Loss on disposition of manufacturing facilities				—			(7,600	)

	Operating profit			23,850			13,200

Other expense, net:
	Interest:
		Interest expense		(22,600	)		(20,100	)
		Preferred stock dividends and accretion		(5,440	)		(4,260	)
	Non-cash gain on maturity of interest rate arrangements			—			6,590
	Equity gain from affiliates, net			610			1,460
	Other, net			(1,810	)		(2,380	)

		Other expense, net		(29,240	)		(18,690	)

Loss before income taxes				(5,390	)		(5,490	)
Income tax benefit				(1,890	)		(240	)

Net loss			$	(3,500	)	$	(5,250	)

Basic and diluted loss per share			$	(0.08	)	$	(0.12	)

Weighted average number of shares outstanding for basic and diluted loss per share				42,840			42,800

See accompanying notes to the consolidated financial statements.

METALDYNE CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS

(Dollars in thousands)

		Three Months Ended
		April 3, 2005			March 28, 2004
		(Unaudited)
Operating activities:
Net loss		$	(3,500	)	$	(5,250	)
	Adjustments to reconcile net loss to net cash provided by (used for) operating activities:
	Depreciation and amortization		33,330			31,530
	Non-cash stock award expense		—			230
	Debt fee amortization		780			670
	Fixed asset losses		550			320
	Loss on disposition of manufacturing facilities		—			7,600
	Deferred income taxes		(10,210	)		20
	Preferred stock dividends and accretion		5,440			4,260
	Non-cash interest expense (interest accretion)		70			—
	Non-cash gain on maturity of interest rate arrangements		—			(6,590	)
	Equity gain from affiliates, net		(610	)		(1,460	)
	Other, net		880			70
Changes in assets and liabilities, net of acquisition/disposition of business:
	Receivables, net		(32,230	)		(60,280	)
	Net proceeds of accounts receivable facility		37,020			98,580
	Inventories		(9,290	)		(11,310	)
	Prepaid expenses and other assets		(3,390	)		(3,650	)
	Accounts payable and accrued liabilities		4,690			34,110

	Net cash provided by operating activities		23,530			88,850

Investing activities:
	Capital expenditures		(26,900	)		(29,990	)
	Proceeds from sale-leaseback of fixed assets		6,490			64,960
	Disposition of manufacturing facilities		—			(500	)
	(Payments for) reimbursement from acquisition of business, net of cash received		5,750			(203,870	)

	Net cash used for investing activities		(14,660	)		(169,400	)

Financing activities:
	Principal payments of term loan facilities		—			(440	)
	Proceeds of revolving credit facility		65,000			70,000
	Principal payments of revolving credit facility		(70,770	)		(37,900	)
	Proceeds of senior subordinated notes due 2014 (face value $31.7 million)		—			26,920
	Proceeds of other debt		1,570			630
	Principal payments of other debt		(4,620	)		(2,260	)
	Issuance of Series A-1 preferred stock (face value $65.4 million)		—			55,340

	Net cash provided by (used for) financing activities		(8,820	)		112,290
Effect of exchange on cash			(50	)		(60	)

Net increase in cash			—			31,680
Cash and cash equivalents, beginning of period			—			13,820

Cash and cash equivalents, end of period		$	—		$	45,500

Supplementary cash flow information:
	Cash paid for income taxes, net	$	2,930		$	1,510
	Cash paid for interest	$	11,430		$	8,090
	Noncash transactions—capital leases	$	250		$	4,980

See accompanying notes to the consolidated financial statements.

METALDYNE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Business and Other Information

Metaldyne Corporation ("Metaldyne" or "the Company") is a leading global manufacturer of highly engineered metal components for the global light vehicle market. The Company's products include metal-formed and precision-engineered components and modular systems used in vehicle transmission, engine and chassis applications.

The Company maintains a fifty-two/fifty-three week fiscal year ending on the Sunday nearest to December 31. Fiscal year 2005 is comprised of fifty-two weeks and fiscal year 2004 is comprised of fifty-three weeks and ends on January 1, 2006 and January 2, 2005, respectively. All year and quarter references relate to the Company's fiscal year and fiscal quarters unless otherwise stated.

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 January 2, 2005 (the "2004 Form 10-K"). The results of operations for the period ended April 3, 2005 are not necessarily indicative of the results for the full year.

Certain prior year amounts have been reclassified to reflect current year classifications.

2. Stock Options and Awards

The Company has a stock-based employee compensation plan and has issued equity-based incentives in various forms. The Company continues to account for stock-based employee compensation using the intrinsic value method under Accounting Principles Board ("APB") No. 25, "Accounting for Stock Issued to Employees," and related interpretations. No stock-based employee compensation cost is reflected in net loss, as all options granted under this plan had an exercise price equal to the market value of the underlying common stock on the date of grant.

The following table illustrates the effect on net loss and loss per share if the Company had applied the fair value recognition provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," to stock-based employee compensation.

		Three Months Ended
		April 3, 2005			March 28, 2004
		(In thousands except per share amounts)
Net loss, as reported		$	(3,500	)	$	(5,250	)
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects			—			(120	)

Pro forma net loss		$	(3,500	)	$	(5,370	)

Earnings (loss) per share:
	Basic and diluted—as reported	$	(0.08	)	$	(0.12	)

	Basic and diluted—pro forma for stock-based compensation	$	(0.08	)	$	(0.12	)

Beginning in 2004, the Company offered eligible employees the opportunity to participate in a new Voluntary Stock Option Exchange Program (the "Program"), to exchange all of their outstanding options to purchase shares of the Company's common stock granted under the Long Term Equity Incentive Plan (the "Plan") for new stock options and restricted stock units to be granted under the Plan. Participation in the Program is voluntary. Elections were required to be received by January 14, 2004, with new stock options to be granted on or after July 15, 2004 and restricted stock units granted on January 15, 2004. Non-eligible participants in the existing Plan and those eligible employees not electing to participate in the new Program will continue to be eligible to participate in the existing Plan. There was no stock compensation expense for the quarter ended April 3, 2005.

3. Accounts Receivable Securitization and Factoring Agreements

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 $150 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 $1.0 million and $0.7 million for the three months ended April 3, 2005 and March 28, 2004, respectively, and is included in other expense, net in the Company's consolidated statement of operations. At April 3, 2005, the Company's funding under the facility was $100.3 million with no additional amounts available. The discount rate at April 3, 2005 was 3.78% compared to 3.35% at January 2, 2005. 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.

The Company has entered into a Commitment Letter with General Electric Capital Corporation ("GECC") dated as of March 31, 2005 related to its existing accounts receivable securitization facility, which provides for amendments of the current facility and the eventual transition to a new accounts receivable securitization facility. The new facility is expected to increase the facility size to $225 million, improve advance rates and provide a term of the agreement for up to five years. See also Note 17, Subsequent Events.

The Company has entered into agreements with international invoice factoring companies to sell customer accounts receivable of Metaldyne foreign locations in France, Germany, Spain, the United Kingdom and Mexico on a non-recourse basis. As of April, 3, 2005, the Company had available approximately $72 million from these commitments, and approximately $60 million of receivables were sold under these programs. The Company pays a commission to the factoring company plus interest from the date the receivables are sold to the date of customer payment. Commission expense of $0.4 million related to these agreements for the three months ended April 3, 2005 is recorded in other expense, net on the Company's consolidated statement of operations.

To facilitate the collection of funds from operating activities, the Company has entered into accelerated payment collection programs with certain customers. At April 3, 2005, the Company received approximately $21 million under the accelerated collection programs. The majority of the accelerated payment collection programs were discontinued as of or prior to January 2, 2005. However, in addition to the above programs, the Company continues to collect approximately $22 million per month on an accelerated basis as a result of favorable payment terms that it negotiated with one of its

customers, through agreements that run contractually from the beginning of 2004 through fiscal 2006. These payments are received on average 20 days after shipment of product to its customer. While the impact of the discontinuance of the accelerated collection programs may be partially offset by a greater utilization of the Company's accounts receivable securitization facility, the Company continues to examine other alternative programs in the marketplace, as well as enhanced terms directly from its customers.

4. Inventories

Inventories by component are as follows:

	April 3, 2005		January 2, 2005
	(In thousands)
Finished goods	$	43,690	$	42,310
Work in process		39,620		36,440
Raw materials		51,690		48,270

	$	135,000	$	127,020

5. Excess of Cost over Net Assets of Acquired Companies and Intangible Assets

At April 3, 2005, the excess of cost over net assets of acquired companies ("goodwill") balance was approximately $614 million. For purposes of testing this goodwill for potential impairment, fair values were determined based upon the discounted cash flows of the reporting units using a 9.5% discount rate. This assessment was completed for the year ended January 2, 2005. The assessment was performed again in the first quarter of 2005 in connection with the formation of the new reporting units pursuant to the change in operating segments. The assessment for the quarter ended April 3, 2005 indicated that the fair value of these units exceeded their carrying values.

For purposes of recognizing and measuring impairment of goodwill, the Company evaluates assets by operating segment, as this is the lowest level of independent cash flows ascertainable to evaluate impairment. Prior to 2005, the Company evaluated assets by reporting segment.

Acquired Intangible Assets

The change in the gross carrying amount of acquired intangible assets is primarily attributable to the exchange impact from foreign currency.

			As of April 3, 2005						As of January 2, 2005
			Gross Carrying Amount		Accumulated Amortization			Weighted Average Life	Gross Carrying Amount		Accumulated Amortization			Weighted Average Life
			(In thousands, except weighted average life)
Amortized Intangible Assets:
	Customer Contracts		$	127,310	$	(45,700	)	9.0 years	$	127,600	$	(42,750	)	9.0 years
	Technology and Other			163,560		(48,390	)	14.9 years		163,920		(45,260	)	14.9 years

		Total	$	290,870	$	(94,090	)	14.0 years	$	291,520	$	(88,010	)	14.0 years

Aggregate Amortization Expense (Included in Cost of Sales):
	For the three months ended April 3, 2005				$	6,080
Estimated Amortization Expense:
	For the year ending December 31, 2005					23,410
	For the year ending December 31, 2006					23,410
	For the year ending December 31, 2007					22,640
	For the year ending December 31, 2008					21,890
	For the year ending December 31, 2009					21,890

Goodwill

The changes in the carrying amount of goodwill for the three months ended April 3, 2005 are as follows:

	Chassis			Powertrain			Total
	(In thousands)
Balance as of January 2, 2005	$	332,300		$	293,940		$	626,240
Exchange impact from foreign currency		(4,980	)		(1,390	)		(6,370	)
New Castle adjustment		(5,750	)		—			(5,750	)

Balance as of April 3, 2005	$	321,570		$	292,550		$	614,120

As a result of its reorganization in January 2005, the Company consolidated its operations into two segments: the Chassis segment and the Powertrain segment. This resulted in a change in the underlying reporting units and necessitated a reallocation of goodwill to the new reporting units based on relative fair values. The reallocation did not indicate an impairment of goodwill for the new reporting units based on expected future cash flows discounted at a 9.5% rate. However, if the discount rate were to increase to approximately 13% or if expected future operating margins were to decrease by approximately 12.5%, further goodwill impairment analysis would be necessary for one of the Company's reporting units.

6. Derivative Financial Instruments

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 as of December 28, 2003 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 $301 million as of December 28, 2003.

All of the Company's interest rate protection arrangements matured in February 2004 and, as a result of their maturity, a cumulative non-cash pre-tax gain of $6.6 million was recorded and is reflected as a gain on maturity of interest rate arrangements in the Company's consolidated statement of operations for the three months ended March 28, 2004. Prior to the expiration of these agreements, the Company recognized additional interest expense of $1.1 million during the three months ended March 28, 2004.

7. 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 and its board of directors in determining resource allocation and assessing performance.

The Company has established adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") as a key indicator of financial operating performance. The Company defines Adjusted EBITDA as net income (loss) before cumulative effect of accounting change and before interest, taxes, depreciation, amortization, asset impairment, non-cash losses on sale-leaseback of property and equipment and non-cash restricted stock award expense. Adjusted EBITDA is a non-GAAP measure and therefore caution must be exercised in using Adjusted EBITDA as an analytical tool and it should not be used in isolation or as a substitute for analysis of our results as reported under GAAP. In evaluating Adjusted EBITDA, management deems it important to consider the quality of the Company's underlying earnings by separately identifying certain costs undertaken to improve the Company's results, such as costs related to consolidating facilities and businesses in an effort to eliminate duplicative costs or achieve efficiencies, costs related to integrating acquisitions and restructuring costs related to expense reduction efforts.

In January 2005, the Company reorganized and consolidated its operations into two segments: the Chassis segment and the Powertrain segment. The Chassis segment consists of the former Chassis operations plus a portion of the former Driveline operations, while the Powertrain segment consists of the former Engine operations combined with the remainder of the former Driveline operations. The prior year amounts have been restated to reflect these changes for comparison purposes.

CHASSIS—Manufactures components, modules and systems used in a variety of engineered chassis applications, including fittings, wheel-ends, axle shaft, 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.

POWERTRAIN—Manufactures a broad range of engine components, modules and systems, including sintered metal, powder metal, hydraulic controls, precision shafts, forged and tubular fabricated products used for a variety of applications. These applications include balance shaft modules and front cover assemblies. This segment also includes integrated program management used in a broad range of transmission applications. These applications include transmission and transfer case shafts and transmission valve bodies.

Segment activity for the three months ended April 3, 2005 and March 28, 2004 is as follows:

			Three Months Ended
			April 3, 2005			March 28, 2004
			(In thousands)
SALES
	Chassis		$	338,450		$	267,360
	Powertrain			240,300			213,780

		Total sales	$	578,750		$	481,140

Adjusted EBITDA
	Chassis		$	27,690		$	29,910
	Powertrain			33,690			28,710

		Operating EBITDA		61,380			58,620
	Centralized resources ("Corporate")			(3,540	)		(6,090	)

	Total Adjusted EBITDA			57,840			52,530
	Depreciation & amortization			(33,330	)		(31,530	)
	Loss on sale of manufacturing facilities			—			(7,600	)
	Non-cash stock award expense			—			(230	)
	Other, net included in Adjusted EBITDA			(660	)		30

	Operating profit		$	23,850		$	13,200

			April 3, 2005		January 2, 2005
			(In thousands)
Total Assets
	Chassis		$	1,008,780	$	1,085,630
	Powertrain			746,370		752,930
	Corporate			408,940		356,190

		Total assets	$	2,164,090	$	2,194,750

			Three Months Ended
			April 3, 2005		March 28, 2004
Capital Expenditures
	Chassis		$	12,120	$	14,990
	Powertrain			14,640		13,210
	Corporate			140		1,790

		Total capital expenditures	$	26,900	$	29,990

8. Acquisitions

As part of the New Castle transaction, Metaldyne acquired Class A and Class B units representing DaimlerChrysler's entire joint venture interest in New Castle. In exchange, Metaldyne delivered to DaimlerChrysler $215 million (before fees and expenses of approximately $3 million), comprised of $118.8 million in cash; $31.7 million in aggregate principal amount of a new issue of its 10% senior subordinated notes; and $64.5 million (fair value of $55.3 million as of December 31, 2003) in aggregate liquidation preference of its Series A-1 preferred stock. Included in the $5 million fees and expenses is a $2.4 million transaction fee paid to Heartland Industrial Partners ("Heartland") pursuant to the acquisition of New Castle. The cash portion of the consideration was funded in part by the net cash proceeds of approximately $58 million from the sale-leaseback of certain machinery and equipment with a third-party lessor, with the remainder funded through Metaldyne's revolving credit facility.

The consolidated statement of cash flows for the three months ended March 28, 2004 has been adjusted to reflect the final purchase price allocation of the New Castle acquisition.

Also, in conjunction with the purchase agreement for the acquisition of New Castle, DaimlerChrysler agreed to reimburse the Company for potential equipment purchases related to production capacity for a specific product line. As reimbursement is received from DaimlerChrysler, the Company has recognized this as a reduction to the initial goodwill recorded at the time of this acquisition. The Company anticipates total reimbursement of $8.3 million, of which approximately $5.8 million has been received as of April 3, 2005.

9. Asset Impairments and Restructuring-Related Integration Actions

Restructuring costs incurred for the three months ended April 3, 2005 were $1.3 million and primarily reflect headcount reductions related to the consolidation of the Company's operations into two segments. Costs incurred for the three months ended March 30, 2004 were $0.2 million and primarily reflect headcount reductions in the Company's Forging operations.

The Company expects to realize additional savings in 2005 from the 2004 restructuring actions as reductions in employee-related expenses recognized in both cost of goods sold and selling, general and administrative expense.

	Acquisition Related Severance Costs		2003 Additional Severance and Other Exit Costs			2004 Additional Severance and Other Exit Costs			2005 Additional Severance and Other Exit Costs			Total
	(In thousands)
Balance at January 2, 2005	$	710	$	2,710		$	510		$	—		$	3,930
Charges to expense		—		(240	)		—			1,530			1,290
Cash payments		—		(910	)		(180	)		(860	)		(1,950	)

Balance at April 3, 2005	$	710	$	1,560		$	330		$	670		$	3,270

The above amounts represent total estimated cash payments, of which $2.6 million and $5.0 million are recorded in accrued liabilities, with $0.7 million (which will primarily be paid out in fiscal 2006) and $2.0 million recorded in other long-term liabilities in the Company's consolidated balance sheet at April 3, 2005 and March 28, 2004, respectively.

10. Dispositions

On February 1, 2004, the Company completed an asset sale pursuant to which substantially all of the business associated with two of the aluminum die casting facilities in its Driveline segment was sold to Lester PDC, Ltd, a Kentucky-based aluminum die casting and machining company. The Company retained an interest in approximately $5.6 million in working capital (principally accounts receivable). Cash paid in the transaction to buy out the remaining portion of the equipment that had previously been sold under an operating lease arrangement by the Company was approximately $6.1 million, net of proceeds from Lester PDC of $4.1 million. The buyer also agreed to lease the Bedford Heights, Ohio and sublease the Rome, Georgia facilities from the Company for total annual lease payment of approximately $0.6 million. In addition, Lester PDC and Metaldyne entered into a supply agreement. In connection with the disposition of these manufacturing facilities, the Company recognized a charge of $7.6 million on the Company's consolidated statement of operations as of March 28, 2004. The charge represents the book value of approximately $12 million in fixed assets and deferred financing fees offset by the $4.1 million in cash consideration paid by Lester PDC for the assets.

11. Redeemable Preferred Stock

The Company has outstanding 644,540 shares of $64.5 million in liquidation value ($56.4 million fair value as of April 3, 2005) of Series A-1 preferred stock par value $1 and authorized 644,540 shares to DaimlerChrysler. The Company will accrete from the fair value to the liquidation value ratably over the ten-year period. The preferred stock is mandatorily redeemable on December 31, 2013. Series A-1 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 11% per annum plus 2% per annum for any period for which there are any accrued and unpaid dividends.

The Company has outstanding 361,001 shares of $36.1 million in liquidation value ($34.4 million fair value as of April 3, 2005) of Series A preferred stock par value $1 and authorized 370,000 shares to Masco Corporation. The Company will accrete from the fair 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% per annum for periods ending on or prior to December 31, 2005 and 15% per annum for periods after December 31, 2005 plus 2% per annum for any period for which there are any accrued and unpaid dividends.

The Company has outstanding 184,153 shares with a fair value of $18.4 million of redeemable Series B preferred stock to Heartland. The redeemable Series B preferred shares issued are mandatory 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.

Preferred stock dividends (including accretion of $0.3 million in 2005) were $5.4 million and $4.3 million, while dividend cash payments were zero, for the three months ended April 3, 2005 and March 28, 2004, respectively. Unpaid accrued dividends were $45.4 million and $40.3 million at April 3, 2005 and January 2, 2005, respectively. Redeemable preferred stock, consisting of outstanding shares and unpaid dividends, was $154.6 million and $149.2 million in the Company's consolidated balance sheet at April 3, 2005 and January 2, 2005, respectively.

12. Loss per Share

The following reconciles the numerators and denominators used in the computations of basic and diluted earnings per common share:

	Three Months Ended
	April 3, 2005			March 28, 2004
	(In thousands except per share amounts)
Weighted average number of shares outstanding for basic and diluted		42,840			42,800

Loss used for basic and diluted earnings per share computation	$	(3,500	)	$	(5,250	)

Basic and diluted loss per share	$	(0.08	)	$	(0.12	)

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 stock options representing 2.7 million and 0.9 million common shares as they are anti-dilutive at April 3, 2005 and March 28, 2004, respectively.

Contingently issuable shares, representing approximately 0.05 million restricted common shares, have an anti-dilutive effect on earnings per share for the three months ended April 3, 2005 and March 28, 2004.

13. Comprehensive Income (Loss)

The Company's total comprehensive income (loss) for the period was as follows:

		Three Months Ended
		April 3, 2005			March 28, 2004
		(In thousands)
Net loss		$	(3,500	)	$	(5,250	)
	Other comprehensive income (loss):
	Foreign currency translation adjustment		(12,740	)		(4,950	)
	Change in the Company's portion of TriMas' currency translation adjustment		(910	)		—
	Interest rate agreements fair value adjustments (realized in 2004)		—			(6,590	)

	Total other comprehensive income (loss)		(13,650	)		(11,540	)

Total comprehensive loss		$	(17,150	)	$	(16,790	)

14. Employee Benefit Plans

	Pension Benefits						Other Benefits
	For the Three Months Ended						For the Three Months Ended
	April 3, 2005			March 28, 2004			April 3, 2005			March 28, 2004
	(In thousands)
Components of Net Periodic Benefit Cost:
Service cost	$	760		$	780		$	570		$	300
Interest cost		4,490			4,340			800			780
Expected return on plan assets		(4,600	)		(4,350	)		—			—
Amortization of prior service cost		40			40			(90	)		(60	)
Recognized gain due to curtailments/settlements		—			—			(2,490	)		—
Amortization of net loss		900			620			170			140

Net periodic benefit (gain) cost	$	1,590		$	1,430		$	(1,040	)	$	1,160

Employer Contributions

Metaldyne previously disclosed in its financial statements for the year ended January 2, 2005 that it expected to contribute $24.0 million to its defined benefit pension plans in 2005. As of April 3, 2005, approximately $4.2 million of contributions have been made.

The Company also disclosed in its financial statements for the year ended January 2, 2005 that it expected to contribute approximately $10.6 million to its defined contribution (profit-sharing and 401(k) matching contribution) plans in 2005. The Company contributed approximately $2.9 million to its defined contribution plans as of April 3, 2005.

In December 2004, the Company announced that it will discontinue retiree medical and life insurance coverage to its salaried and nonunion retirees and their beneficiaries effective January 1, 2006. The Company recorded a curtailment gain of $2.5 million for the three months ended April 3, 2005 pursuant to this announcement, and it is included in selling, general and administrative expenses in the Company's consolidated statement of operations.

15. Commitments and Contingencies

The Company is subject to claims and litigation in the ordinary course of its business but does not believe that any such claim or litigation will have a material adverse effect on its financial position or results of operations.

There are no material pending legal proceedings, other than ordinary routine litigation incidental to the Company's business, of which it is aware that would have a material adverse effect on the Company's financial position or results of operations.

16. New Accounting Pronouncements

In October 2004, the U.S. government enacted the American Jobs Creation Act of 2004 ("Act"). This Act provides for a special one-time tax deduction of 85% of certain foreign earnings that are repatriated to the U.S. provided certain criteria are met. The Company is analyzing the provisions of the Act and the feasibility of several alternative scenarios for the potential repatriation of a portion of the earnings of its non-U.S. subsidiaries. In general, it is the practice and intention of the Company to reinvest the earnings of its non-U.S. subsidiaries in those operations and therefore the Company does not currently anticipate repatriation of earnings under the Act.

In November 2004, the FASB issued SFAS No. 151, "Inventory Costs, an amendment of ARB No. 43, Chapter 4," to clarify that abnormal amounts of idle facility expense, freight, handling costs and wasted material (spoilage) should be recognized as current period charges, and that allocation of fixed production overheads to the costs of conversion be based on normal capacity of the production facilities. SFAS No. 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. Accordingly, the Company will adopt SFAS No. 151 for the fiscal year beginning January 2, 2006. The Company is currently in the process of evaluating whether the adoption of this pronouncement will have a significant impact on its results of operations or financial position.

the compensation cost relating to stock options and other share-based compensation transactions be recognized at fair value in financial statements. Due to the Company being a nonpublic entity as defined in SFAS No. 123 (revised 2004), this Statement is effective for the Company at the beginning of its fiscal year 2006. The Company will then be required to record any compensation expense using the fair value method in connection with option grants to employees after adoption. Management is currently reviewing the provisions of this Statement and will adopt it no later than its fiscal year beginning January 2, 2006.

17. Subsequent Events

On April 22, 2005, the Company entered into a sale-leaseback transaction for machinery and equipment with a third party lessor. The Company received $4.9 million cash as part of this transaction.

On April 29, 2005, the Company and its newly formed wholly owned special purpose subsidiary, MRFC, Inc., entered into a new accounts receivable financing facility with General Electric Capital Corporation ("GECC"). Concurrently with entering into the new facility, the Company's former accounts receivable financing facility with JPMorgan Chase Bank, N.A. (the "Former Facility") was repaid in full and terminated. The terms of the new facility are generally consistent with those of the Former Facility, but include (a) a maturity date of January 1, 2007, (b) improved customer concentration limits, (c) increased program availability and (d) adjustments to certain default triggers. The new facility further provides that upon the Company entering into an intercreditor agreement with the agent under its senior secured credit facilities, the Receivables Transfer Agreement will be automatically amended to (a) further increase program availability and (b) increase the applicable margin on LIBOR based drawings from 1.5% to 1.75% (increasing a further 0.25% thereafter each 90 days to a maximum of 2.25%) and increase the applicable margin on Base Rate base drawings from 0.5% to 0.75% (increasing further 0.25% thereafter each 90 days to a maximum of 2.25%). If the Company has not entered into an intercreditor agreement with the agent under its senior secured credit facilities within 60 days, then the improved terms of the new facility related to certain default triggers and certain customer concentration limits will revert back to the terms under the Former Facility.

On May 5, 2005, Standard & Poor's lowered its credit ratings of General Motors Corporation and Ford Motor Company, two of the Company's largest customers. As a result, the concentration limit under the Company's new accounts receivable financing facility for each of these two customers was adversely affected and program availability would have been correspondingly reduced by approximately $13 million as of the first reporting period after the downgrades. The Company received a temporary amendment from GECC to reverse the impact of the downgrades on the Company's liquidity. The amendment expires on May 31, 2005 if GECC has not entered into an intercreditor agreement with JPMorgan Chase Bank, N.A., as administrative agent under the Company's senior credit facility. The intercreditor agreement requires the approval of a majority of the lenders under the Company's senior credit facility. If the amendment expires without the intercreditor agreement being entered into, the Company's accounts receivable program availability will be reduced. Any such reduction may adversely affect the Company's liquidity. Any further downgrades of the Company or its largest customers may have a further adverse effect on its liquidity.

18. Condensed Consolidating Financial Statements of Guarantors of Senior Subordinated Notes

The following condensed consolidating financial information presents:

(1): Condensed consolidating financial statements as of April 3, 2005 and January 2, 2005, and for the three months ended April 3, 2005 and March 28, 2004, 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.

All investments in non-domestic subsidiaries are held directly at Metaldyne Company LLC, a wholly owned subsidiary of Metaldyne Corporation and the guarantor subsidiaries. Equity in non-domestic subsidiary investees is included in the guarantor column of the accompanying consolidating financial information.

Guarantor/Non-Guarantor
Condensed Consolidating Balance Sheet April 3, 2005
(Unaudited)

			Parent			Guarantor		Non-Guarantor		Eliminations			Consolidated
			(In thousands)
Assets
Current assets:
	Cash and cash equivalents		$	—		$	—	$	—	$	—		$	—
	Total receivables, net			—			120,460		53,190		—			173,650
	Inventories			—			94,430		40,570		—			135,000
	Deferred and refundable income taxes			—			14,560		3,080		—			17,640
	Prepaid expenses and other assets			—			29,320		9,810		—			39,130

		Total current assets		—			258,770		106,650		—			365,420
Equity investments and receivables in affiliates				106,810			—		—		—			106,810
Property and equipment, net				—			573,290		271,000		—			844,290
Excess of cost over net assets of acquired companies				—			466,280		147,840		—			614,120
Investment in subsidiaries				572,640			239,890		—		(812,530	)		—
Intangible and other assets				—			213,650		19,800		—			233,450

Total assets			$	679,450		$	1,751,880	$	545,290	$	(812,530	)	$	2,164,090

Liabilities and Shareholders' Equity
Current liabilities:
	Accounts payable		$	—		$	226,150	$	61,520	$	—		$	287,670
	Accrued liabilities			—			99,390		24,320		—			123,710
	Current maturities, long-term debt			—			3,320		6,060		—			9,380

		Total current liabilities		—			328,860		91,900		—			420,760
Long-term debt				427,250			420,290		1,920		—			849,460
Deferred income taxes				—			50,380		26,580		—			76,960
Minority interest				—			—		670		—			670
Other long-term liabilities				—			129,310		7,480		—			136,790
Redeemable preferred stock				154,630			—		—		—			154,630
Intercompany accounts, net				(427,250	)		231,690		195,560		—			—

Total liabilities				154,630			1,160,530		324,110		—			1,639,270

Shareholders' equity:
	Preferred stock			—			—		—		—			—
	Common stock			42,840			—		—		—			42,840
	Paid-in capital			698,870			—		—		—			698,870
	Accumulated deficit			(266,240	)		—		—		—			(266,240	)
	Accumulated other comprehensive income			49,350			—		—		—			49,350
	Investment by Parent/Guarantor			—			591,350		221,180		(812,530	)		—

		Total shareholders' equity		524,820			591,350		221,180		(812,530	)		524,820

		Total liabilities and shareholders' equity	$	679,450		$	1,751,880	$	545,290	$	(812,530	)	$	2,164,090

Guarantor/Non-Guarantor
Condensed Consolidating Balance Sheet January 2, 2005

			Parent			Guarantor		Non-Guarantor		Eliminations			Consolidated
			(In thousands)
Assets
Current assets:
	Cash and cash equivalents		$	—		$	—	$	—	$	—		$	—
	Total receivables, net			—			128,230		53,380		—			181,610
	Inventories			—			84,570		42,450		—			127,020
	Deferred and refundable income taxes			—			14,500		3,970		—			18,470
	Prepaid expenses and other assets			—			28,830		7,820		—			36,650

		Total current assets		—			256,130		107,620		—			363,750
Equity investments and receivables in affiliates				107,040			—		—		—			107,040
Property and equipment, net				—			580,780		275,470		—			856,250
Excess of cost over net assets of acquired companies				—			472,050		154,190		—			626,240
Investment in subsidiaries				584,110			232,280		—		(816,390	)		—
Intangible and other assets				—			222,380		19,090		—			241,470

		Total assets	$	691,150		$	1,763,620	$	556,370	$	(816,390	)	$	2,194,750

Liabilities and Shareholders' Equity
Current liabilities:
	Accounts payable		$	—		$	199,710	$	86,880	$	—		$	286,590
	Accrued liabilities			—			92,000		25,050		—			117,050
	Current maturities, long-term debt			—			3,630		8,620		—			12,250

		Total current liabilities		—			295,340		120,550		—			415,890
Long-term debt				427,180			426,320		1,950		—			855,450
Deferred income taxes				—			61,940		26,970		—			88,910
Minority interest				—			—		650		—			650
Other long-term liabilities				—			135,310		7,390		—			142,700
Redeemable preferred stock				149,190			—		—		—			149,190
Intercompany accounts, net				(427,190	)		256,340		170,840		—			—

Total liabilities				149,190			1,175,250		328,350		—			1,652,790

Shareholders' equity:
Preferred stock				—			—		—		—			—
Common stock				42,830			—		—		—			42,830
Paid-in capital				698,870			—		—		—			698,870
Accumulated deficit				(262,740	)		—		—		—			(262,740	)
Accumulated other comprehensive income				63,000			—		—		—			63,000
Investment by Parent/Guarantor				—			588,370		228,020		(816,390	)		—

		Total shareholders' equity		541,960			588,370		228,020		(816,390	)		541,960

		Total liabilities and shareholders' equity	$	691,150		$	1,763,620	$	556,370	$	(816,390	)	$	2,194,750

Guarantor/Non-Guarantor
Condensed Consolidating Statement of Operations
Three Months Ended April 3, 2005
(Unaudited)

	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
	(In thousands)
Net sales	$	—		$	450,860		$	127,890		$	—		$	578,750
Cost of sales		—			(422,680	)		(103,190	)		—			(525,870	)

Gross profit		—			28,180			24,700			—			52,880
Selling, general and administrative expenses		—			(21,800	)		(5,940	)		—			(27,740	)
Restructuring charges		—			(1,070	)		(220	)		—			(1,290	)

Operating profit (loss)		—			5,310			18,540			—			23,850
Other expense, net:
Interest expense		—			(21,880	)		(720	)		—			(22,600	)
Preferred stock dividends and accretion		(5,440	)		—			—			—			(5,440	)
Equity gain (loss) from affiliates, net		610			—			—			—			610
Other, net		—			(2,870	)		1,060			—			(1,810	)

Other expense, net		(4,830	)		(24,750	)		340			—			(29,240	)

Income (loss) before income taxes		(4,830	)		(19,440	)		18,880			—			(5,390	)
Income tax expense (benefit)		—			(7,740	)		5,850			—			(1,890	)
Equity in net income of subsidiaries		1,330			13,030			—			(14,360	)		—

Earnings (loss) attributable to common stock	$	(3,500	)	$	1,330		$	13,030		$	(14,360	)	$	(3,500	)

Guarantor/Non-Guarantor
Condensed Consolidating Statement of Operations
Three Months Ended March 28, 2004
(Unaudited)

	Parent			Guarantor			Non-Guarantor			Eliminations			Consolidated
	(In thousands)
Net sales	$	—		$	378,510		$	102,630		$	—		$	481,140
Cost of sales		—			(346,560	)		(82,370	)		—			(428,930	)

Gross profit		—			31,950			20,260			—			52,210
Selling, general and administrative expenses		—			(25,730	)		(5,490	)		—			(31,220	)
Restructuring charges		—			(190	)		—			—			(190	)
Loss on disposition of manufacturing facilities		—			(7,600	)		—			—			(7,600	)

Operating profit (loss)		—			(1,570	)		14,770			—			13,200
Other expense, net:
Interest expense		—			(17,990	)		(2,110	)		—			(20,100	)
Preferred stock dividends and accretion		(4,260	)		—			—			—			(4,260	)
Non-cash gain on maturity of interest rate arrangements		—			6,590			—			—			6,590
Equity gain (loss) from affiliates, net		1,460			—			—			—			1,460
Other, net		—			190			(2,570	)		—			(2,380	)

Other expense, net		(2,800	)		(11,210	)		(4,680	)		—			(18,690	)

Income (loss) before income taxes		(2,800	)		(12,780	)		10,090			—			(5,490	)
Income tax expense (benefit)		—			(3,360	)		3,120			—			(240	)
Equity in net income of subsidiaries		(2,450	)		6,970			—			(4,520	)		—

Earnings (loss) attributable to common stock	$	(5,250	)	$	(2,450	)	$	6,970		$	(4,520	)	$	(5,250	)

Guarantor/Non-Guarantor
Condensed Consolidating Statement of Cash Flows
Three Months Ended April 3, 2005
(Unaudited)

	Parent		Guarantor			Non-Guarantor			Eliminations		Consolidated
	(In thousands)
Cash flows from operating activities:
Net cash provided by (used for) operating activities	$	—	$	28,640		$	(5,110	)	$	—	$	23,530

Cash flows from investing activities:
Capital expenditures		—		(19,190	)		(7,710	)		—		(26,900	)
Proceeds from sale-leaseback of fixed assets		—		6,490			—			—		6,490
Reimbursement from acquisition of business, net of cash received		—		5,750			—			—		5,750

Net cash used for investing activities		—		(6,950	)		(7,710	)		—		(14,660	)

Cash flows from financing activities:
Proceeds of revolving credit facility		—		65,000			—			—		65,000
Principal payments of revolving credit facility		—		(70,770	)		—			—		(70,770	)
Proceeds of other debt		—		—			1,570			—		1,570
Principal payments of other debt		—		(820	)		(3,800	)		—		(4,620	)

Net cash used for financing activities		—		(6,590	)		(2,230	)		—		(8,820	)
Effect of exchange on cash		—		—			(50	)		—		(50	)
Change in intercompany accounts		—		(15,100	)		15,100			—		—

Net increase in cash		—		—			—			—		—
Cash and cash equivalents, beginning of period		—		—			—			—		—

Cash and cash equivalents, end of period	$	—	$	—		$	—		$	—	$	—

Guarantor/Non-Guarantor
Condensed Consolidating Statement of Cash Flows
Three Months Ended March 28, 2004
(Unaudited)

	Parent			Guarantor			Non-Guarantor			Eliminations		Consolidated
	(In thousands)
Cash flows from operating activities:
Net cash provided by (used for) operating activities	$	—		$	122,970		$	(34,120	)	$	—	$	88,850

Cash flows from investing activities:
Capital expenditures		—			(24,500	)		(5,490	)		—		(29,990	)
Proceeds from sale-leaseback of fixed assets		—			64,960			—			—		64,960
Acquisition of business, net of cash received		—			(203,870	)		—			—		(203,870	)
Disposition of manufacturing facilities		—			(500	)		—			—		(500	)

Net cash used for investing activities		—			(163,910	)		(5,490	)		—		(169,400	)

Cash flows from financing activities:
Principal payments of term loan facilities		—			(440	)		—			—		(440	)
Proceeds of revolving credit facility		—			70,000			—			—		70,000
Principal payments of revolving credit facility		—			(37,900	)		—			—		(37,900	)
Proceeds of senior subordinated notes due 2014		26,920			—			—			—		26,920
Proceeds of other debt		—			—			630			—		630
Principal payments of other debt		—			(1,300	)		(960	)		—		(2,260	)
Issuance of Series A-1 preferred stock		55,340			—			—			—		55,340

Net cash provided by (used for) financing activities		82,260			30,360			(330	)		—		112,290
Effect of exchange on cash		—						(60	)		—		(60	)
Change in intercompany accounts		(82,260	)		42,830			39,430			—		—

Net increase (decrease) in cash		—			32,250			(570	)		—		31,680
Cash and cash equivalents, beginning of period		—			10,750			3,070			—		13,820

Cash and cash equivalents, end of period	$	—		$	43,000		$	2,500		$	—	$	45,500

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METALDYNE CORPORATION

/s/ JEFFREY M. STAFEIL

Jeffrey M. Stafeil

Executive Vice President
and Chief Financial Office