-----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, PrZCkfDrYjNcreKxnGBcMJhsUpy9YnQDOmzI1/db05Bh8X2xvyUd/BtiPgk2+rWE 6NPdmiJ4t4jaSq2U+957LA== /in/edgar/work/20000811/0000912057-00-036651/0000912057-00-036651.txt : 20000921 0000912057-00-036651.hdr.sgml : 20000921 ACCESSION NUMBER: 0000912057-00-036651 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACCURIDE CORP CENTRAL INDEX KEY: 0000817979 STANDARD INDUSTRIAL CLASSIFICATION: [3714 ] IRS NUMBER: 611109077 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-15435 FILM NUMBER: 694588 BUSINESS ADDRESS: STREET 1: 2315 ADAMS LN STREET 2: BOX 40 CITY: HENDERSON STATE: KY ZIP: 42420 BUSINESS PHONE: 5028265000 10-Q 1 a10-q.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 2000. OR [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from __________ to ___________. Commission file number 333-50239 ACCURIDE CORPORATION (Exact name of registrant as specified in its charter) Delaware 61-1109077 - -------- ---------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 7140 Office Circle Evansville, IN 47715 - ------------------ ------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (812) 962-5000 Indicate by check mark whether the registrant (1) has filed all reports required to filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- As of June 30, 2000, 24,833 shares of Accuride Corporation common stock, par value $.01 per share, were outstanding. ACCURIDE CORPORATION TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE Item 1. Financial Statements Consolidated Balance Sheets as of June 30, 2000 (Unaudited) and 3 December 31, 1999 Consolidated Statements of Income for the Six Months 4 Ended June 30, 2000 and 1999 (Unaudited) Consolidated Statement of Stockholders' Equity (Deficiency) for the 5 Six Months Ended June 30, 2000 (Unaudited) Consolidated Statements of Cash Flows for the Six Months Ended 6 June 30, 2000 and 1999 (Unaudited) Notes to Unaudited Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and 11 Results of Operations Item 3. Quantitative and Qualitative Disclosures about Market Risk 16 PART II. OTHER INFORMATION Item 1. Legal Proceedings 18 Item 2. Changes in Securities 18 Item 6. Exhibits and Reports on Form 8-K 18 Signatures 19
2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ACCURIDE CORPORATION CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
June 30, December 31, ASSETS 2000 1999 (Unaudited) ---------- ------------ CURRENT ASSETS: Cash and cash equivalents $ 47,307 $ 32,493 Customer receivables, net of allowance for doubtful accounts of $597 and $462 56,031 57,586 Other receivables 4,300 12,400 Inventories, net 47,487 41,143 Supplies 8,960 8,509 Income taxes receivable 1,940 2,957 Prepaid expenses 1,499 818 --------- --------- Total current assets 167,524 155,906 PROPERTY, PLANT AND EQUIPMENT, NET 223,565 212,693 OTHER ASSETS: Goodwill, net of accumulated amortization of $36,862 and $34,775 129,440 131,527 Investment in affiliates 2,974 2,735 Deferred financing costs, net of accumulated amortization of $2,883 and $1,835 10,903 12,147 Other $ 9,780 $ 10,764 --------- --------- TOTAL 544,186 525,772 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) CURRENT LIABILITIES: Accounts payable $ 49,481 $ 41,598 Current portion of long-term debt 3,125 -- Short term notes payable 7,500 7,500 Accrued payroll and compensation 7,910 11,556 Accrued interest payable 11,868 12,056 Deferred income taxes 290 598 Accrued and other liabilities 9,302 9,613 --------- --------- Total current liabilities 89,476 82,921 LONG-TERM DEBT, less current portion 447,641 453,061 DEFERRED INCOME TAXES 10,072 4,404 OTHER LIABILITIES 18,450 17,517 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY (DEFICIENCY): Preferred stock, $.01 par value; 5,000 shares authorized and unissued Common stock and additional paid in capital, $.01 par value; 45,000 shares authorized, 24,833 and 24,874 shares issued and outstanding in 2000 and 1999 24,888 24,738 Treasury Stock, 80 and 10 shares at cost in 2000 and 1999 (471) (51) Stock subscriptions receivable (858) (1,539) Retained earnings (deficit) (45,012) (55,279) --------- --------- Total stockholders' equity (deficiency) (21,453) (32,131) --------- --------- TOTAL $ 544,186 $ 525,772 ========= =========
See notes to unaudited consolidated financial statements. 3 ACCURIDE CORPORATION CONSOLIDATED STATEMENTS OF INCOME (DOLLARS IN THOUSANDS) (UNAUDITED)
Three Months Ended Six Months Ended June 30, June 30, ---------------------------- --------------------------- 2000 1999 2000 1999 --------- --------- --------- --------- NET SALES $ 136,956 $ 136,052 $ 280,324 $ 247,585 COST OF GOODS SOLD 109,376 104,826 221,002 190,267 --------- --------- --------- --------- GROSS PROFIT 27,580 31,226 59,322 57,318 OPERATING: Selling, general and administrative 9,915 7,695 18,315 14,174 --------- --------- --------- --------- INCOME FROM OPERATIONS 17,665 23,531 41,007 43,144 OTHER INCOME (EXPENSE): Interest income 469 165 852 230 Interest (expense) (10,097) (10,005) (20,655) (18,961) Equity in earnings of affiliates 113 11 239 2,326 Other (expense), net (3,142) (556) (3,743) (924) --------- --------- --------- --------- INCOME BEFORE INCOME TAXES AND MINORITY INTEREST 5,008 13,146 17,700 25,815 INCOME TAX PROVISION 2,102 5,522 7,433 10,843 MINORITY INTEREST -- 67 -- 91 --------- --------- --------- --------- NET INCOME $ 2,906 $ 7,557 $ 10,267 $ 14,881 ========= ========= ========= =========
See notes to unaudited consolidated financial statements. 4 ACCURIDE CORPORATION CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY) (DOLLARS IN THOUSANDS) (UNAUDITED)
Common Stock and Total Additional Stock Retained Stockholders' Paid in Treasury Subscriptions Earnings Equity Capital Stock Receivable (Deficit) (Deficiency) ---------- --------- ------------- --------- ------------- BALANCE AT DECEMBER 31, 1999 $24,738 $ (51) $(1,539) $(55,279) $(32,131) Net income 10,267 10,267 Proceeds from stock subscriptions receivable 701 701 Issuance of Management Shares 150 (150) Redemption of shares -- (420) 130 -- (290) ------- -------- ------- -------- -------- BALANCE AT JUNE 30, 2000 $24,888 $ (471) $ (858) $(45,012) $(21,453) ======= ======== ======= ======== ========
See notes to unaudited consolidated financial statements. 5 ACCURIDE CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS) (UNAUDITED)
Six Months Ended June 30, -------- --------- 2000 1999 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 10,267 $ 14,881 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 13,373 11,120 Amortization 3,190 3,016 Losses on asset disposition 787 -- Deferred income taxes 5,360 6,284 Equity in earnings of affiliates (239) (2,326) Minority Interest -- 91 Changes in certain assets and liabilities: Receivables 9,655 (766) Inventories and supplies (6,795) (937) Prepaid expenses and other assets 1,516 (997) Accounts payable 7,883 8,576 Accrued and other liabilities (3,212) 37 -------- --------- Net cash provided by operating activities 41,785 38,979 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment (25,032) (21,364) Payment for purchase of AKW L.P. -- (70,591) Net cash distribution from AKW L.P. -- 265 Other -- (18) -------- --------- Net cash used in investing activities (25,032) (91,708) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of short-term notes payable -- 4,589 Decrease in revolving line of credit -- (32,638) Proceeds from issuance of long-term debt -- 100,000 Payments on long-term debt (2,350) -- Deferred financing costs -- (692) Proceeds from stock subscriptions receivable 701 600 Redemption of shares (290) -- -------- --------- Net cash (used in) provided by financing activities (1,939) 71,859 Increase in cash and cash equivalents 14,814 19,130 Cash and cash equivalents, beginning of period 32,493 3,471 -------- --------- Cash and cash equivalents, end of period $ 47,307 $ 22,601 ======== =========
See notes to unaudited consolidated financial statements. 6 ACCURIDE CORPORATION NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) AS OF JUNE 30, 2000 AND 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999 - -------------------------------------------------------------------------------- Note 1 - BASIS OF PRESENTATION - The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles, except that the unaudited consolidated financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. However, in the opinion of Accuride Corporation (the "Company"), all adjustments (consisting of normal recurring accruals) considered necessary to present fairly the consolidated financial statements have been included. The results of operations for the six months ended June 30, 2000 are not necessarily indicative of the results to be expected for the year ending December 31, 2000. The unaudited consolidated financial statements and notes thereto should be read in conjunction with the audited financial statements and notes thereto disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. MANAGEMENT'S ESTIMATES AND ASSUMPTIONS - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Note 2 - AKW ACQUISITION - On April 1, 1999, the Company acquired Kaiser Aluminum & Chemical Corporation's ("Kaiser") 50% interest in AKW, L.P. ("AKW"). Total consideration paid to Kaiser for the 50% interest was approximately $70 million. The following unaudited pro forma financial data illustrates the estimated effects as if the acquisition of Kaiser's 50% interest in AKW had been completed as of January 1, 1999, after including the impact of certain adjustments, such as goodwill amortization, depreciation, interest expense, the elimination of equity in earnings of affiliates arising from the Company's 50% interest in AKW owned prior to the acquisition, and the related income tax effects:
Six months ended June 30, 2000 1999 Net Sales $ 280,324 $ 271,531 Net Income $ 10,267 $ 15,182
7 Note 3 - INVENTORIES - Inventories were as follows:
June 30, December 31, 2000 1999 Raw Materials $14,678 $ 6,451 Work in Process 12,405 12,106 Finished manufactured goods 18,095 20,225 LIFO adjustment 2,309 2,361 ------- ------- Inventories, net $47,487 $41,143 ======= =======
Note 4 - LABOR RELATIONS - The Company's contract with the International Union, Automobile, Aerospace, and Agriculture Implement Workers of America ("UAW") covering employees at the Henderson, Kentucky, facility expired in February 1998, and the Company was not able to negotiate a mutually acceptable agreement with the UAW. Therefore, a strike occurred at the Henderson, Kentucky, facility on February 20, 1998. Effective as of March 31, 1998, the Company began an indefinite lockout in order to provide security for plant personnel and equipment. The UAW has rejected all of the Company's offers for a new contract, and the parties have not been able to reach an agreement. The Company is continuing to operate with its outside contractors and salaried employees. Currently, there is, and the Company believes that there will be, no supply disruption to the Company's customer base; however, there can be no assurance to that effect. Note 5 - SUPPLEMENTAL CASH FLOW DISCLOSURE - During the six months ended June 30, 2000 and 1999, the Company paid $19,740 and $16,331 for interest and $1,057 and $4,205 for income taxes, respectively. Note 6 - NEW ACCOUNTING PRONOUNCEMENT - Statement of Financial Standards No. 133 ("SFAS 133"), "ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES," was issued in June 1998 and was amended by Statement of Financial Standards No. 137 ("SFAS 137"), "ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - - DEFERRAL OF THE EFFECTIVE DATE OF SFAS 133" and Statement of Financial Standards No. 138 ("SFAS 138"), "ACCOUNTING FOR CERTAIN DERIVATIVE AND CERTAIN HEDGING ACTIVITIES." SFAS 133, as amended by SFAS 137 and SFAS 138, is effective for the Company beginning January 1, 2001. The Statement establishes accounting and reporting standards for derivative instruments and for hedging activities. Management has not yet fully evaluated the effect of these new accounting standards on the financial statements. 8 Note 7 - SEGMENT REPORTING - The Company operates in one business segment - the design, manufacture and distribution of wheels and rims for trucks, trailers and other vehicles. GEOGRAPHIC SEGMENTS - The Company has operations in the United States, Canada, and Mexico, for the three and six months ended June 30, 2000 and 1999, respectively, which are summarized below. Sales between geographic areas are made at negotiated selling prices.
United States Canada Mexico Eliminations Combined -------- ------- ------- ------------ -------- THREE MONTHS ENDED JUNE 30, 2000 Net Sales: Sales to unaffiliated customers-Domestic $123,988 $ 3,235 $ 7,386 $ 134,609 Sales to unaffiliated customers-Export 791 1,556 2,347 -------- ------- ------- --------- Total $124,779 $ 3,235 $ 8,942 $ 136,956 ======== ======= ======= ========= Long lived assets: $361,827 $95,663 $46,817 $(127,645) $ 376,662 THREE MONTHS ENDED JUNE 30, 1999 Net Sales: Sales to unaffiliated customers-Domestic $123,061 $ 4,319 $ 5,806 $ 133,186 Sales to unaffiliated customers-Export 811 2,055 2,866 -------- ------- ------- --------- Total $123,872 $ 4,319 $ 7,861 $ 136,052 ======== ======= ======= ========= Long lived assets: $331,783 $97,483 $42,070 $(109,550) $361,786 SIX MONTHS ENDED JUNE 30, 2000 Net Sales: Sales to unaffiliated customers-Domestic $255,195 $ 6,800 $14,063 $ 276,058 Sales to unaffiliated customers-Export 1,532 2,734 4,266 -------- ------- ------- --------- Total $256,727 $ 6,800 $16,797 $ 280,324 ======== ======= ======= ========= Long lived assets: $361,827 $95,663 $46,817 $(127,645) $ 376,662 SIX MONTHS ENDED JUNE 30, 1999 Net Sales: Sales to unaffiliated customers-Domestic $224,184 $ 8,219 $10,325 $ 242,728 Sales to unaffiliated customers-Export 1,201 30 3,626 4,857 -------- ------- ------- --------- Total $225,385 $ 8,249 $13,951 $ 247,585 ======== ======= ======= ========= Long lived assets: $331,783 $97,483 $42,070 $(109,550) $ 361,786
9 Sales to three customers exceeded 10% of total net sales for the three and six months ended June 30, as follows:
Customer Customer Customer One Two Three Total -------- -------- -------- --------- THREE MONTHS ENDED JUNE 30, 2000 Sales dollars: $ 28,007 $ 20,879 $ 16,362 $ 65,248 Percentage of total sales: 20.4% 15.2% 11.9% 47.6% THREE MONTHS ENDED JUNE 30, 1999 Sales dollars: $ 23,045 $ 23,780 $ 18,432 $ 65,257 Percentage of total sales: 16.9% 17.5% 13.5% 47.9% SIX MONTHS ENDED JUNE 30, 2000 Sales dollars: $ 52,436 $ 46,927 $ 36,969 $ 136,332 Percentage of total sales: 18.7% 16.7% 13.2% 48.6% SIX MONTHS ENDED JUNE 30, 1999 Sales dollars: $ 50,839 $ 36,706 $ 30,142 $ 117,687 Percentage of total sales: 20.5% 14.8% 12.2% 47.5%
Each geographic segment made sales to all three major customers in the three and six months ended June 30, 2000 and 1999. 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion should be read in conjunction with the consolidated financial statements and notes included in Item 1 of Part 1 of this report on Form 10-Q. Except for the historical information contained herein, this report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. The Company's actual results may differ materially from those indicated by such forward-looking statements. RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 1999. The following table sets forth certain income statement information of the Company for the three months ended June 30, 2000 and June 30, 1999:
June 30, 2000 June 30, 1999 ------------- ------------- Net sales .............................. $ 136,956 100.0% $ 136,052 100.0% Gross profit ........................... 27,580 20.1%(b) 31,226 23.0% Operating expenses ..................... 9,915 7.2% 7,695 5.7% Income from operations ................. 17,665 12.9% 23,531 17.3% Equity in earnings of affiliates ....... 113 0.1% 11 0.0% Other income (expense) ................. (12,770) (9.3%) (10,396) (7.6%) Net income ............................. 2,906 2.1% 7,557 5.6% OTHER DATA: Adjusted EBITDA ........................ $ 31,371 22.8%(a) $ 30,792 22.6%(a)
- ------------------- (a) Represents Adjusted EBITDA less equity in earnings of affiliates as a percent of sales. (b) Includes one time restructuring adjustment for AdM of $3.3 million. NET SALES. Net sales increased by $0.9 million, or 0.7%, for the three months ended June 30, 2000 to $137.0 million, compared to $136.1 million for the three months ended June 30, 1999. The increase is the result of increased sales volume at the Erie, Pennsylvania, and Monterrey, Mexico, facilities and increased light truck wheel orders, offset by softer sales to heavy truck OEM's. The Company anticipates heavy truck market demand to soften in the second half of this year. An excess of new and used trucks currently in inventory, lower valuation of used trucks, significant fuel price increases, rising interest rates, and higher driver recruiting costs will all contribute to lower sales for class 8 trucks. GROSS PROFIT. Gross profit decreased $3.6 million, or 11.5%, to $27.6 million for the three months ended June 30, 2000 from $31.2 million for the three months ended June 30, 1999. The $3.6 million decrease in gross profit was primarily due to lower gross profit at Accuride de Mexico, S.A. de C.V. ("AdM"), a wholly owned subsidiary of the Company. The decrease in gross profit at AdM was due principally to high start-up production costs, and a one time restructuring adjustment associated with the transition to the new facility in Monterrey, Mexico. This one time restructuring adjustment is included in the $3.3 million EBITDA adjustment as discussed below. The Company anticipates that these transition issues will be resolved in the second half of 2000. Gross profit as a percentage of sales decreased 2.9%, to 20.1% for the three months ended June 30, 2000 from 23.0% for the three months ended June 30, 1999. As explained above, AdM was the principal cause for the deterioration in gross profit as a percentage of sales. Excluding AdM, gross profit as a percentage of sales showed improvement due to an increase in light wheel and aluminum wheel sales offset by an increase in aluminum prices and an unfavorable change in the Canadian/U.S. exchange rate. 11 OPERATING EXPENSES. Operating expenses increased $2.2 million, or 28.6%, to $9.9 million for the three months ended June 30, 2000 from $7.7 million for the three months ended June 30, 1999. This increase is the result of expenses attributable to aborted merger and acquisition costs. These one time non-operating costs are included in the $2.7 million EBITDA adjustment as discussed below. Of the $2.7 million EBITDA adjustment, $0.5 million was incurred during the three month period ended March 31, 2000 while $2.2 million was incurred during the three month period ended June 30, 2000. Excluding the $2.2 million of aborted merger and acquisition costs incurred during the three month period ended June 30, 2000, operating expenses remained constant for both periods. OTHER INCOME (EXPENSE). Other expense increased by $2.4 million, or 23.1%, to $12.8 million for the three month period ended June 30, 2000 compared to $10.4 million for the three months ended June 30, 1999, due primarily to fluctuations in foreign currency rates that had a negative impact on hedging instruments and resulted in unrealized losses. Interest expense remained constant. ADJUSTED EBITDA. Adjusted EBITDA increased by $0.6 million, or 1.9%, to $31.4 million for the three months ended June 30, 2000 from $30.8 million for the three months ended June 30, 1999. In determining Adjusted EBITDA for the three months ended June 30, 2000, income from operations has been adjusted by (i) depreciation and amortization (except for amortization of deferred financing costs), (ii) equity in earnings of affiliates, (iii) $2.7 million of aborted merger and acquisition costs, and (iv) a $3.3 million adjustment for restructuring costs related to operations at the Monterrey, Mexico, facility . In determining Adjusted EBITDA for the three months ended June 30, 1999, income from operations has been adjusted by (i) depreciation and amortization (except for amortization of deferred financing costs) and (ii) equity in earnings of affiliates. NET INCOME. Net income decreased 61.8% to $2.9 million for the three months ended June 30, 2000 from $7.6 million for the three months ended June 30, 1999 due to lower pretax earnings, as described above. SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1999. The following table sets forth certain income statement information of the Company for the six months ended June 30, 2000 and June 30, 1999:
June 30, 2000 June 30, 1999 ------------- ------------- Net sales .............................. $ 280,324 100.0% $ 247,585 100.0% Gross profit ........................... 59,322 21.2%(b) 57,318 23.2% Operating expenses ..................... 18,315 6.5% 14,174 5.7% Income from operations ................. 41,007 14.6% 43,144 17.4% Equity in earnings of affiliates ....... 239 0.1% 2,326 0.9% Other Income (expense) ................. (23,546) (8.4%) (19,655) (8.0%) Net income ............................. 10,267 3.7% 14,881 6.0% OTHER DATA: Adjusted EBITDA ........................ $ 62,708 22.3%(a) $ 58,648 22.7%(a)
- ------------------- (a) Represents Adjusted EBITDA less equity in earnings of affiliates as a percent of sales. (b) Includes one time restructuring adjustment for AdM of $3.3 million. 12 NET SALES. Net sales increased by $32.7 million, or 13.2%, for the six months ended June 30, 2000 to $280.3 million, compared to $247.6 million for the six months ended June 30, 1999. The increase in net sales is primarily due to including total sales from AKW with the consolidated sales of the Company effective April 1, 1999, the date of the acquisition of Kaiser's 50% interest in AKW (the "AKW Acquisition"). Prior to the AKW Acquisition, AKW sales were accounted for on the equity method and not included in the consolidated net sales. Excluding the $29.5 million in sales at AKW during the first quarter of 2000, net sales would have increased by $3.2 million, or 1.3%, for the six months ended June 30, 2000 to $250.8 million, compared to $247.6 million for the six months ended June 30, 1999. The increase is the result of increased sales volume at the AKW and AdM facilities and increased light truck wheel orders, offset by softer sales to heavy truck OEM's. The Company anticipates heavy truck market demand to soften in the second half of 2000. An excess of new and used trucks currently in inventory, lower valuation of used trucks, significant fuel price increases, rising interest rates, and higher driver recruiting costs will all contribute to lower sales for class 8 trucks. GROSS PROFIT. Gross profit increased by $2.0 million, or 3.5%, to $59.3 million for the six months ended June 30, 2000 from $57.3 million for the six months ended June 30, 1999. The $2.0 million increase in gross profit was primarily due to (1) the inclusion of gross profit at AKW in the first quarter of 2000, (2) improved gross profit at AKW in the second quarter of 2000 compared to the second quarter of 1999 due to increased sales, (3) continued cost savings at the Henderson, Kentucky, facility, offset by (4) lower gross profit at AdM. The decrease in gross profit at AdM was due principally to high start-up production costs and a one time restructuring adjustment associated with the transition to the new facility in Monterrey, Mexico. This one time restructuring adjustment is included in the $3.3 million EBITDA adjustment as discussed below. The Company anticipates that these transition issues will be resolved in the second half of 2000. Gross profit as a percentage of sales decreased 2.0%, to 21.2% for the six months ended June 30, 2000 from 23.2% for the six months ended June 30, 1999. As explained above, AdM was the principal cause for the deterioration in gross profit as a percentage of sales. Excluding AdM, gross profit as a percentage of sales showed improvement due to an increase in light wheel and aluminum wheel sales offset by an increase in aluminum prices and an unfavorable change in the Canadian/U.S. exchange rate. OPERATING EXPENSES. Operating expenses increased by $4.1 million, or 28.9%, to $18.3 million for the six months ended June 30, 2000 from $14.2 million for the six months ended June 30, 1999. This increase was due to (1) an increase in selling, general and administrative expense and research and development costs associated with AKW, and (2) expenses attributable to aborted merger and acquisition costs which are included in the $2.7 million EBITDA adjustment as discussed below. On a pro forma basis adjusting for the AKW acquisition on April 1, 1999, and excluding the one time non-operating costs associated with aborted merger and acquisition activities, operating expenses increased by $0.2 million, or 1.3%, to $15.6 million for the six months ended June 30, 2000 from $15.4 million for the six months ended June 30, 1999. OTHER INCOME (EXPENSE). Interest expense increased by $1.7 million, or 8.9%, to $20.7 million for the six month period ended June 30, 2000 compared to $19.0 million for the six months ended June 30,1999, due primarily to the interest costs related to the new debt incurred for the AKW Acquisition on April 1, 1999. Realized and unrealized losses related to foreign currency rate changes increased $2.9 million to $3.8 million for the six month period ended June 30, 2000 compared to $0.9 million for the six months ended June 30, 1999. These expenses were offset by an increase in interest income of $0.7 million for the first six months of 2000 due to higher cash balances. Equity in earnings of affiliates decreased by $2.1 million to $0.2 million for the six months ended June 30, 2000 from $2.3 million for the six months ended June 30, 1999. The decrease was due to the AKW Acquisition and the resultant change in accounting to begin consolidating the results of AKW effective April 1, 1999. 13 ADJUSTED EBITDA. Adjusted EBITDA increased by $4.1 million, or 7.0%, to $62.7 million for the six months ended June 30, 2000 from $58.6 million for the six months ended June 30, 1999 due to the inclusion of 100% of AKW's earnings offset by the lower gross profit at AdM . In determining Adjusted EBITDA for the six months ended June 30, 2000, income from operations has been adjusted by (i) depreciation and amortization (except for amortization of deferred financing costs), (ii) equity in earnings of affiliates, (iii) $2.7 million of aborted merger and acquisition costs, and (iv) a $3.3 million adjustment for restructuring costs related to operations at the Monterrey, Mexico, facility. In determining Adjusted EBITDA for the six months ended June 30, 1999, income from operations has been adjusted by (i) depreciation and amortization (except for amortization of deferred financing costs), and (ii) equity in earnings of affiliates. NET INCOME. Net income decreased 30.9% to $10.3 million for the six months ended June 30, 2000 from $14.9 million for the six months ended June 30, 1999 due to lower pretax earnings, as described above. CHANGES IN FINANCIAL CONDITION At June 30, 2000, the Company's total assets amounted to $544.2 million, as compared to $525.8 million at December 31, 1999. The $18.4 million or 3.5% increase in total assets during the six months ended June 30, 2000 was primarily the result of an increase in net property, plant and equipment of $10.9 million, an increase in cash and cash equivalents of $14.8 million, an increase in inventory of $6.9 million, a $0.6 million increase in prepaid expenses, and an increase in investment of affiliates of $0.3 million, offset by a decrease of $9.7 million in net receivables, a $2.1 million decrease in goodwill, a $1.0 million decrease in income taxes receivable, a $1.2 million decrease in deferred financing costs, and a $1.1 million decrease in other assets. The increase in net property, plant and equipment was primarily due to investments in the Company's expansion project in Erie, Pennsylvania. Cash and cash equivalents increased as a result of changes in working capital. Inventory increased due to implementing an aluminum tolling program coupled with an inventory build related to the capital expansion in Erie, Pennsylvania and an advance purchase of steel at favorable terms at the Henderson, Kentucky, facility. Prepaid expenses increased due to the timing of payments. Net receivables decreased due to new distributor payment terms and an overall improvement in the collection cycle, the receipt of several large business tax refunds, and the elimination of the aluminum scrap receivable via implementing the tolling program. Income taxes receivable decreased due to the receipt of a federal income tax refund. At June 30, 2000, the Company's total liabilities amounted to $565.6 million, as compared to $557.9 million at December 31, 1999. The $7.7 million or 1.4% increase in total liabilities was primarily due to a $7.9 million increase in accounts payable, a $5.7 million increase in deferred income taxes payable, a $0.1 million net change in other liabilities, offset by a $2.3 million decrease in debt, and a $3.7 million decrease in accrued payroll and compensation. The increase in accounts payable is related to the expansion project in Erie, Pennsylvania, along with the advance purchase of steel at the Henderson, Kentucky, facility. Long term debt decreased as the Company prepaid principal installments on its senior secured A, B, and C term loans due on or before January 21, 2002. Accrued payroll and compensation decreased as 1999 management bonuses and employee profit sharing were paid in 2000. CAPITAL RESOURCES AND LIQUIDITY The Company's primary sources of liquidity are cash flow from operations and borrowing under the Company's working capital facility ("Revolver"). The Company's primary uses of cash are funding working capital, capital expenditures under the Company's expansion plans and debt service. 14 As of June 30, 2000, the Company had cash and cash equivalents of $47.3 million compared to $32.5 million at December 31, 1999. The Company's operating activities for the six months ended June 30, 2000 provided $41.8 million compared to $39.0 million for the six months ended June 30, 1999. The Company's financing activities used $1.9 million during the six months ended June 30, 2000. Cash flow from financing activities provided $71.9 million for the six months ended June 30, 1999. The Company's investing activities for the six months ended June 30, 2000 used $25.0 million compared to $91.7 million for the six months ended June 30, 1999. During the six month period ended June 30, 2000, the Company repurchased 70 shares of the Company's common stock from former management employees for approximately $0.4 million. The Company incurred capital expenditures in the year ended December 31, 1999 of $46 million. The Company expects its capital expenditures to be approximately $50 million in the year 2000. It is anticipated that these expenditures will fund (i) approximately $2 million for technology advancement projects; (ii) investments in productivity and capacity expansion improvements in 2000 of approximately $36 million; (iii) maintenance of business expenditures of approximately $10 million; and (iv) quality improvements of approximately $2 million. Capital expenditures in the second half of 2000 will focus on completing the capacity expansion project which is currently underway at the Erie, Pennsylvania facility. Management believes that cash flow from operations and availability under the Revolver will provide adequate funds for the Company's foreseeable working capital needs for 2000, planned capital expenditures and debt service obligations. Any future acquisitions, joint ventures or other similar transactions will likely require additional capital, and there can be no assurance that any such capital will be available to the Company on acceptable terms or at all. The Company's ability to fund its working capital needs, planned capital expenditures and scheduled debt payments, to implement its expansion plans, to refinance indebtedness and to comply with all of the financial covenants under its debt agreements, depends on its future operating performance and cash flow, which in turn, are subject to prevailing economic conditions and to financial, business and other factors, some of which are beyond the Company's control. FACTORS AFFECTING FUTURE RESULTS The factors discussed below, among others, could cause actual results to differ materially from those contained in forward-looking statements made in this report, including, without limitation, in "Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Company's related press release and in oral statements made by authorized officers of the Company. When used in this report, any press releases or oral statements, the words "estimate," "project," "anticipate," "expect," "intend," "believe," and similar expressions are intended to identify forward-looking statements. All of these forward-looking statements are based on estimates and assumptions made by management of the Company, which, although believed to be reasonable, are inherently uncertain. Therefore, undue reliance should not be placed upon such estimates and statements. No assurance can be given that any of such statements or estimates will be realized, and actual results will differ from those contemplated by such forward-looking statements. Accordingly, the Company hereby identifies the following important factors which could cause the Company's financial results to differ materially from any such results which might be projected, forecast, estimated or budgeted by the Company in forward-looking statements: - - the decrease in general market demand for the Company's products due to high inventory levels of heavy trucks and other general economic conditions could be greater than the Company anticipates; - - significant indebtedness of the Company may have important consequences, including, but not limited to, impairment of the Company's ability to obtain additional financing, reduction of funds 15 available for operations and business opportunities or limitation on the Company's ability to dispose of assets; - - the Company's ability to service its indebtedness is dependent upon operating cash flow; - - loss of a major customer could have material adverse effect on the Company's business; - - original equipment manufacturers' demands for price reduction may adversely affect profitability; - - interruption in supply of steel or aluminum could reduce the Company's ability to obtain favorable sourcing of such raw materials; - - the Company may encounter increased competition in the future from existing competitors or new competitors; - - potential liability of the Company for environmental matters and the costs of compliance with certain governmental regulations could have a material adverse effect on the Company's financial condition and may adversely affect the Company's ability to sell or rent such property or to borrow using such property as collateral; - - unanticipated additional material operating costs at AdM could adversely effect AdM's 2000 earnings and impair the Company's ability to compete in the Latin American market; - - labor strike may disrupt the Company's supply to its customer base; - - the Company may have difficulty in achieving growth strategies and there is no assurance that such strategies will be successful or will improve operating results; - - continued service of key management personnel is not guaranteed; and - - interests of the principal stockholder of the Company may conflict with the interests of the holders of securities of the Company. For further information, refer to the business description and additional risk factors sections included in the Company's Form 10-K for the year ended December 31, 1999, as filed with the SEC. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK The Company, in the normal course of doing business, is exposed to the risks associated with changes in foreign exchange rates, interest rates and raw material prices. The Company selectively uses derivative financial instruments to manage these risks. The Company uses foreign exchange contracts to hedge foreign currency commitments. Specifically, these foreign exchange contracts offset foreign currency denominated purchase commitments to suppliers, accounts receivable from, and future committed sales to, customers, and operating expenses. Management believes the use of foreign currency financial instruments reduces the risks that arise from doing business in international markets. At June 30, 2000, the Company had open foreign exchange forward contracts and options of $192.6 million. Foreign exchange forward contract maturities were from one to seventeen months, and option contract maturities were from two to five months. The Company's hedging activities provide only limited protection against currency risks. Factors that could impact the effectiveness of the Company's hedging programs include accuracy of sales estimates, volatility of currency markets and the cost and availability of hedging instruments. The counterparties to the foreign exchange contracts are financial institutions with investment grade credit ratings. The Company monitors its foreign currency cash flow transactions and executes contracts to hedge its foreign exchange exposures. The use of forward contracts and options protects the Company's cash flows against unfavorable movements in exchange rates, to the extent of the amount under contract. A 10% adverse change in currency exchange rates for the Company's foreign currency derivatives held at June 30, 2000, would have an impact of approximately $18.3 million on the fair value of such instruments. This quantification of exposure to the market risk associated with foreign exchange financial instruments does not take into account the offsetting impact of changes in the fair value of the Company's foreign denominated assets, liabilities and firm commitments. 16 The Company uses long-term debt as a primary source of capital in its business. The following table presents the principal cash repayments and related weighted average interest rates by maturity date for its long-term fixed-rate debt and other types of long-term debt at June 30, 2000:
(Dollars in Thousands) Fair 2000 2001 2002 2003 2004 Thereafter Total Value ---- ---- ---- ---- ---- ---------- ----- ----- Long-term Debt: Fixed $200,000 $200,000 $168,000 Avg. Rate 9.25% 9.25% Variable $0 $6,250 $12,500 $5,475 $2,350 $221,900 $248,475 $248,475 Avg. Rate 8.38% 8.38% 8.31% 8.21% 8.21% 8.23%
The Company has used an interest rate swap to alter interest rate exposures between fixed and floating rates on a portion of the Company's long-term debt. As of June 30, 2000, an interest rate swap of $98.0 million was outstanding. On average during the six months ended June 30, 2000, the Company paid 5.75% as a fixed rate and received 6.1891% on the interest rate swap. Under the terms of the interest rate swap, the Company agrees with the counterparty to exchange, at specified intervals, the difference between the fixed rate and floating rate interest amounts calculated by reference to the agreed principal amount. The interest rate swap matures in January 2001. The Company also used an interest rate cap to set a ceiling on the maximum floating interest rate the Company would incur on a portion of the Company's long-term debt. As of June 30, 2000, an interest rate cap of $34.3 million was outstanding. Under the terms of the interest rate cap, the Company is entitled to receive from the counterparty on a quarterly basis the amount, if any, by which the three-month Eurodollar interest rate exceeds 7.5%. The interest rate cap matures in January 2001. The Company is exposed to credit related losses in the event of nonperformance by the counterparty to the interest rate swap and interest rate cap, although no such losses are expected as the counterparty is a financial institution having an investment grade credit rating. The Company relies upon the supply of certain raw materials in its production processes and has entered into firm purchase commitments for steel and aluminum. The exposures associated with these commitments are primarily managed through the terms of its supply and procurement contracts. Additionally, the Company uses commodity price swaps to hedge against changes in certain commodity prices. At June 30, 2000, the Company had open commodity price swaps of $35.5 million. These commodity price swaps had maturities from one to eighteen months. A 10% adverse change in commodity prices would have an impact of approximately $3.6 million on the fair value of these contracts. The Company is exposed to credit related losses in the event of nonperformance by the counterparty to the commodity price swaps and option contracts, although no such losses are expected as the counterparty is a financial institution having an investment grade credit rating. 17 PART II. OTHER INFORMATION Item 1. Legal Proceedings Neither the Company nor any of its subsidiaries is a party to any material legal proceeding. However, the Company from time to time is involved in ordinary routine litigation incidental to its business. Item 2. Changes in Securities During the thirteen weeks ended June 30, 2000, the Company issued 29 shares of the Company's common stock, par value $.01 per share ("Common Stock") to certain members of management for aggregate consideration in cash and secured promissory notes of approximately $150,413. During such period, the Company also issued options to purchase 75 shares of Common Stock to such members of management, which options vest over a 3 to 8 year period and must be exercised within a 10 year period. The exercise price of such options was $5,250 per share. None of these securities were registered under the Securities Act of 1933, as amended. In addition, the Company repurchased 30 shares of the Company's common stock from former management employees for approximately $0.2 million Such issuances of Common Stock and options to purchase Common Stock were made pursuant to the 1998 Stock Purchase and Option Plan for Employees of Accuride Corporation and Subsidiaries. In each of the above instances, exemption from registration under the Securities Act was based upon the grounds that the issuance of such securities did not involve a public offering within the meaning of Section 4(2) of the Securities Act. Item 6. Exhibits and Reports on Form 8-K a. Exhibits:
Exhibit No Description ---------- ----------- 27.1 Financial Data Schedule
b. Form 8-K: No reports on Form 8-K have been filed during the six month period ended June 30, 2000. 18 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. ACCURIDE CORPORATION - ------------------------------- Dated: August 10, 2000 William P. Greubel President and Chief Executive Officer - ------------------------------- Dated: August 10, 2000 John R. Murphy Executive Vice President - Finance and Chief Financial Officer Principal Accounting Officer 19 EX-27.1 2 ex-27_1.txt EXHIBIT 27.1
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF ACCURIDE CORPORATION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS DEC-31-2000 JUN-30-2000 47,307 0 56,628 597 47,487 167,524 406,900 183,335 544,186 89,476 447,641 0 0 24,888 (46,341) 544,186 280,324 280,324 221,002 18,315 3,743 0 20,655 17,700 7,433 10,267 0 0 0 10,267 413 403
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