-----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, O+igDmc/jeqP+tAGEhnYlaSkm+eMT6+6MAeDQVl7cP3TRVCnMok2gQSBZBfr31VG a9F7XvB558bm0D12ohNRfw== /in/edgar/work/0000912057-00-047559/0000912057-00-047559.txt : 20001108 0000912057-00-047559.hdr.sgml : 20001108 ACCESSION NUMBER: 0000912057-00-047559 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001107 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: 754407 BUSINESS ADDRESS: STREET 1: 2315 ADAMS LN STREET 2: BOX 40 CITY: HENDERSON STATE: KY ZIP: 42420 BUSINESS PHONE: 5028265000 10-Q 1 a2029725z10-q.txt 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 September 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 be 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 November 3, 2000, 24,843 shares of Accuride Corporation common stock, par value $.01 per share, were outstanding. ACCURIDE COPORATION TABLE OF CONTENTS
PAGE PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets as of September 30, 2000 (Unaudited) and 3 December 31, 1999 Consolidated Statements of Income for the Nine Months 4 Ended September 30, 2000 and 1999 (Unaudited) Consolidated Statement of Stockholders' Equity (Deficiency) for the 5 Nine Months Ended September 30, 2000 (Unaudited) Consolidated Statements of Cash Flows for the Nine Months Ended 6 September 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)
SEPTEMBER 30, DECEMBER 31, 2000 1999 (UNAUDITED) ----------------------------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 25,522 $ 32,493 Customer receivables, net of allowance for doubtful accounts of $666 and $462 43,360 57,586 Other receivables 4,498 12,400 Inventories, net 47,851 41,143 Supplies 9,036 8,509 Income taxes receivable 1,042 2,957 Prepaid expenses 1,390 818 Deferred income taxes 4,657 - --------- --------- 137,356 155,906 Total current assets PROPERTY, PLANT AND EQUIPMENT, NET 234,696 212,693 OTHER ASSETS: Goodwill, net of accumulated amortization of $37,906 and $34,775 128,396 131,527 Investment in affiliates 3,092 2,735 Deferred financing costs, net of accumulated amortization of $3,713 and $1,835 10,269 12,147 Other 10,990 10,764 --------- --------- TOTAL $ 524,799 $ 525,772 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) CURRENT LIABILITIES: Accounts payable $ 45,055 $ 41,598 Short term notes payable 7,500 7,500 Accrued payroll and compensation 6,323 11,556 Accrued interest payable 7,104 12,056 Deferred income taxes - 598 Accrued and other liabilities 11,177 9,613 --------- --------- Total current liabilities 77,159 82,921 LONG-TERM DEBT, less current portion 439,419 453,061 DEFERRED INCOME TAXES 12,696 4,404 OTHER LIABILITIES 18,143 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, 24,843 and 24,874 shares issued and outstanding in 2000 and 1999 24,939 24,738 Treasury Stock, 80 and 10 shares at cost in 2000 and 1999 (471) (51) Stock subscriptions receivable (885) (1,539) Retained earnings (deficit) (46,201) (55,279) --------- --------- Total stockholders' equity (deficiency) (22,618) (32,131) --------- --------- TOTAL $ 524,799 $ 525,772 ========= =========
See notes to unaudited consolidated financial statements. 3 ACCURIDE CORPORATION CONSOLIDATED STATEMENTS OF INCOME (DOLLARS IN THOUSANDS) (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------------ ------------------------ 2000 1999 2000 1999 NET SALES $ 104,403 $ 129,422 $ 384,727 $ 377,007 COST OF GOODS SOLD 87,214 100,720 308,216 290,987 --------- --------- --------- --------- GROSS PROFIT 17,189 28,702 76,511 86,020 OPERATING: Selling, general and administrative 6,435 7,608 24,750 21,782 --------- --------- --------- --------- INCOME FROM OPERATIONS 10,754 21,094 51,761 64,238 OTHER INCOME (EXPENSE): Interest income 596 174 1,448 404 Interest (expense) (10,842) (10,152) (31,497) (29,113) Equity in earnings of affiliates 118 32 357 2,358 Other (expense), net (2,674) (681) (6,417) (1,605) --------- --------- --------- --------- INCOME BEFORE INCOME TAXES AND MINORITY INTEREST (2,048) 10,467 15,652 36,282 INCOME TAX PROVISION (859) 4,396 6,574 15,239 MINORITY INTEREST - - - 91 --------- --------- --------- --------- NET INCOME (LOSS) $ (1,189) $ 6,071 $ 9,078 $ 20,952 ========= ========= ========= =========
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 9,078 9,078 Proceeds from stock subscriptions receivable 725 725 Issuance of Management Shares 201 (201) Redemption of shares - (420) 130 - (290) ---------- -------- ---------- ---------- ----------- BALANCE AT SEPTEMBER 30, 2000 $ 24,939 $ (471) $ (885) $ (46,201) $ (22,618) ========== ======== ========== ========== ===========
See notes to unaudited consolidated financial statements. 5 ACCURIDE CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS) (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, ---------------------------- 2000 1999 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 9,078 $ 20,952 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 19,649 17,331 Amortization 4,896 4,449 Losses on asset disposition 931 905 Gain on early retirement of debt (320) - Deferred income taxes 3,037 8,173 Equity in earnings of affiliates (357) (2,358) Minority Interest - 91 Changes in certain assets and liabilities: Receivables 22,128 4,319 Inventories and supplies (7,235) (5,866) Prepaid expenses and other assets 1,313 (1,883) Accounts payable 3,457 11,267 Accrued and other liabilities (7,995) (4,546) ------------ ------------ Net cash provided by operating activities 48,582 52,834 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment (42,583) (31,993) Payment for purchase of AdM (7,300) Payment for purchase of AKW L.P. - (70,591) Net cash distribution from AKW L.P. - 253 Other - (18) ------------ ------------ Net cash used in investing activities (42,583) (109,649) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of short-term notes payable - 3,589 Decrease in revolving line of credit - (31,638) Proceeds from issuance of long-term debt - 100,000 Payments on long-term debt (13,405) - Deferred financing costs - (692) Proceeds from stock subscriptions receivable 725 675 Redemption of shares (290) - ------------ ------------ Net cash (used in) provided by financing activities (12,970) 71,934 Increase (decrease) in cash and cash equivalents 15,119 (6,971) Cash and cash equivalents, beginning of period 32,493 3,471 ------------ ------------ Cash and cash equivalents, end of period $ 25,522 $ 18,590 ============ ============
See notes to unaudited consolidated financial statements. 6 ACCURIDE CORPORATION NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) AS OF SEPTEMBER 30, 2000 AND 1999 AND FOR THE NINE MONTHS ENDED SEPTEMBER 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 nine months ended September 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:
Nine months ended September 30, 2000 1999 ---- ---- Net Sales $ 384,727 $ 400,953 Net Income $ 9,078 $ 21,253
7 Note 3 - INVENTORIES - Inventories were as follows:
September 30, December 31, 2000 1999 Raw Materials $ 8,899 $ 6,451 Work in Process 16,407 12,106 Finished manufactured goods 19,995 20,225 LIFO adjustment 2,550 2,361 -------- -------- Inventories, net $ 47,851 $ 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 nine months ended September 30, 2000 and 1999, the Company paid $34,489 and $30,492 for interest and $1,622 and $6,851 for income taxes, respectively. Note 6 - NEW ACCOUNTING PRONOUNCEMENT - In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities". In June 2000, the FASB issued SFAS No. 138, which amends certain provisions of SFAS 133 to clarify four areas causing difficulties in implementation. The amendment included expanding the normal purchase and sale exemption for supply contracts, permitting the offsetting of certain intercompany foreign currency derivatives and thus reducing the number of third party derivatives, permitting hedge accounting for foreign-currency denominated assets and liabilities, and redefining interest rate risk to reduce sources of ineffectiveness. The Company has appointed a team to implement SFAS 133 on a global basis. This team has been implementing an SFAS 133 compliant risk management policy, globally educating both financial and non-financial personnel, inventorying derivatives and addressing various other SFAS 133 related issues. The Company will adopt SFAS 133 and the corresponding amendment under SFAS 138 on January 1, 2001. SFAS 133, as amended by SFAS 138, is not expected to have a material impact on the Company's consolidated comprehensive income, financial position or cash flows. 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's operations in the United States, Canada, and Mexico, for the three and nine months ended September 30, 2000 and 1999, respectively, are summarized below. Sales between geographic areas are made at negotiated selling prices.
United States Canada Mexico Eliminations Combined - ------------------------------------------------------------------------------------------------------------- THREE MONTHS ENDED SEPTEMBER 30, 2000 Net Sales: Sales to unaffiliated customers-Domestic $ 91,597 $ 2,610 $ 8,923 $ 103,130 Sales to unaffiliated customers-Export 399 874 1,273 --------------------------------- --------- Total $ 91,996 $ 2,610 $ 9,797 $ 104,403 ================================= ========= Long lived assets: $ 381,686 $ 95,536 $ 47,241 $(137,020) $ 387,443 - ------------------------------------------------------------------------------------------------------------- THREE MONTHS ENDED SEPTEMBER 30, 1999 Net Sales: Sales to unaffiliated customers-Domestic $ 117,239 $ 3,299 $ 5,216 $ 125,754 Sales to unaffiliated customers-Export 925 2,743 3,668 --------------------------------- --------- Total $ 118,164 $ 3,299 $ 7,959 $ 129,422 ================================= ========= Long lived assets: $ 340,268 $ 96,530 $ 45,585 $(116,850) $ 365,533 - ------------------------------------------------------------------------------------------------------------- NINE MONTHS ENDED SEPTEMBER 30, 2000 Net Sales: Sales to unaffiliated customers-Domestic $ 346,659 $ 9,410 $ 22,980 $ 379,049 Sales to unaffiliated customers-Export 2,065 3,613 5,678 --------------------------------- --------- Total $ 348,724 $ 9,410 $ 26,593 $ 384,727 ================================= ========= Long lived assets: $ 381,686 $ 95,536 $ 47,241 $(137,020) $ 387,443 - ------------------------------------------------------------------------------------------------------------- NINE MONTHS ENDED SEPTEMBER 30, 1999 Net Sales: Sales to unaffiliated customers-Domestic $ 341,423 $ 11,518 $ 15,541 $ 368,482 Sales to unaffiliated customers-Export 2,126 30 6,369 8,525 --------------------------------- --------- Total $ 343,549 $ 11,548 $ 21,910 $ 377,007 ================================= ========= Long lived assets: $ 340,268 $ 96,530 $ 45,585 $(116,850) $ 365,533 - -------------------------------------------------------------------------------------------------------------
9 Sales to three customers exceeded 10% of total net sales for the three and nine months ended September 30, as follows:
Customer Customer Customer One Two Three Total - --------------------------------------------------------------------------------------------------------------------- THREE MONTHS ENDED SEPTEMBER 30, 2000 Sales dollars: $ 22,180 $ 14,295 $ 12,204 $ 48,679 Percentage of total sales: 21.2% 13.7% 11.7% 46.6% - --------------------------------------------------------------------------------------------------------------------- THREE MONTHS ENDED SEPTEMBER 30, 1999 Sales dollars: $ 19,098 $ 24,565 $ 16,226 $ 59,889 Percentage of total sales: 14.8% 19.0% 12.5% 46.3% - --------------------------------------------------------------------------------------------------------------------- NINE MONTHS ENDED SEPTEMBER 30, 2000 Sales dollars: $ 75,323 $ 59,403 $ 49,118 $ 183,844 Percentage of total sales: 19.6% 15.4% 12.8% 47.8% - --------------------------------------------------------------------------------------------------------------------- NINE MONTHS ENDED SEPTEMBER 30, 1999 Sales dollars: $ 69,937 $ 61,271 $ 46,368 $ 177,576 Percentage of total sales: 18.6% 16.3% 12.3% 47.2% - ---------------------------------------------------------------------------------------------------------------------
Each geographic segment made sales to all three major customers in the three and nine months ended September 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 SEPTEMBER 30, 2000 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 1999. The following table sets forth certain income statement information of the Company for the three months ended September 30, 2000 and September 30, 1999:
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999 -------------------- -------------------- Net sales...................................... $104,403 100.0% $129,422 100.0% Gross profit................................... 17,189 16.5% 28,702 22.2% Operating expenses............................. 6,435 6.2% 7,608 5.9% Income from operations......................... 10,754 10.3% 21,094 16.3% Equity in earnings of affiliates............... 118 0.1% 32 0.0% Other income (expense)......................... (12,920) (12.4)% (10,659) (8.2)% Net income (loss).............................. (1,189) (1.1)% 6,071 4.7% OTHER DATA: Adjusted EBITDA................................ $ 18,191 17.3%(a) $ 28,276 21.8%(a)
- -------- (a) Represents Adjusted EBITDA less equity in earnings of affiliates as a percent of sales. NET SALES. Net sales decreased by $25.0 million, or 19.3%, for the three months ended September 30, 2000 to $104.4 million, compared to $129.4 million for the three months ended September 30, 1999. The decrease is primarily attributable to the cyclical downturn of the entire medium and heavy commercial vehicle market. The Company anticipates the demand for medium and heavy trucks to remain soft the remainder of 2000 and throughout 2001 due to an excess of new and used trucks currently in inventory, lower valuation of used trucks, higher driver recruiting costs, high fuel prices, and other unfavorable general economic conditions. GROSS PROFIT. Gross profit decreased $11.5 million, or 40.1%, to $17.2 million for the three months ended September 30, 2000 from $28.7 million for the three months ended September 30, 1999. The principal cause for the decrease in gross profit was the decrease in sales volume. In addition to the sales volume related margin loss, gross profit decreased because of (1) lower production levels and an inventory reduction at the AKW facility, resulting in a loss of overhead absorption, (2) an unfavorable change in the Canadian/U.S. exchange rate, and (3) operating inefficiencies and increased depreciation expense at the Monterrey, Mexico, facility. OPERATING EXPENSES. Operating expenses decreased $1.2 million, or 15.8%, to $6.4 million for the three months ended September 30, 2000 from $7.6 million for the three months ended September 30, 1999. This decrease is the result of cost containment efforts at the corporate level. 11 OTHER INCOME (EXPENSE). Other expense increased $2.2 million, or 20.6%, to $12.9 million for the three-month period ended September 30, 2000 compared to $10.7 million for the three months ended September 30, 1999, due primarily to fluctuations in foreign currency rates that had a negative impact on hedging instruments resulting in unrealized losses. Interest expense increased $0.7 million over the prior year quarter due to higher market rates. The increase in interest expense was partially offset by higher interest income. ADJUSTED EBITDA. Adjusted EBITDA decreased $10.1 million, or 35.7%, to $18.2 million for the three months ended September 30, 2000 from $28.3 million for the three months ended September 30, 1999 due to the lower gross profit as described above. In determining Adjusted EBITDA for the three months ended September 30, 2000 and September 30, 1999, income from operations has been adjusted by (1) depreciation and amortization (except for amortization of deferred financing costs), and (2) equity in earnings of affiliates. NET INCOME (LOSS). Net income (loss) decreased 119.7% to ($1.2) million for the three months ended September 30, 2000 from $6.1 million for the three months ended September 30, 1999 due to lower pretax earnings, as described above. NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 1999. The following table sets forth certain income statement information of the Company for the nine months ended September 30, 2000 and September 30, 1999:
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999 -------------------- -------------------- Net sales...................................... $384,727 100.0% $377,007 100.0% Gross profit................................... 76,511 19.9% (b) 86,020 22.8% Operating expenses............................. 24,750 6.4% 21,782 5.8% Income from operations......................... 51,761 13.5% 64,238 17.0% Equity in earnings of affiliates............... 357 0.1% 2,358 0.6% Other income (expense)......................... (36,466) (9.5%) (30,314) (8.0%) Net income..................................... 9,078 2.4% 20,952 5.6% OTHER DATA: Adjusted EBITDA................................ $ 80,898 20.9% (a) $ 86,924 22.4% (a)
- -------- (a) Represents Adjusted EBITDA less equity in earnings of affiliates as a percent of sales. (b) Includes a one-time restructuring adjustment for AdM of $3.3 million. NET SALES. Net sales increased $7.7 million, or 2.0%, for the nine months ended September 30, 2000 to $384.7 million, compared to $377.0 million for the nine months ended September 30, 1999. The increase in net sales is 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's sales were accounted for on the equity method and not included in the consolidated net sales. Including the $23.9 million in sales at AKW during the first quarter of 1999, net sales would have decreased by $16.2 million, or 4.3% for the nine months ended September 30, 2000 to $384.7 million, compared to $400.9 million for the nine months ended September 30, 1999. This decrease in sales is attributable to the cyclical downturn of the entire medium and heavy commercial vehicle market. The Company anticipates the demand for medium and heavy trucks to remain soft the remainder of 2000 and throughout 2001 due to an excess of new and used trucks currently in inventory, lower valuation of used trucks, higher driver recruiting costs, high fuel prices, and other unfavorable general economic conditions. 12 GROSS PROFIT. Gross profit decreased $9.5 million, or 11.1%, to $76.5 million for the nine months ended September 30, 2000 from $86.0 million for the nine months ended September 30, 1999. The $9.5 million decrease in gross profit was primarily the result of 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. Gross profit as a percent of sales decreased from 22.8% for the nine months ended September 30, 1999, to 19.9% for the nine months ended September 30, 2000. This decrease was primarily due to lower gross profit at AdM as discussed above. Gross profit as a percent of sales excluding AdM, decreased from 22.8% for the nine months ended September 30, 1999, to 22.6% for the nine months ended September 30, 2000. Other items contributing to the decrease in gross profit include (1) sales volume related margin loss, (2) an unfavorable change in the Canadian/U.S. exchange rate, and (3) lower production levels and an inventory reduction at the AKW facility, resulting in a loss of overhead absorption. These decreases were partially offset by the inclusion of gross profit at AKW in the first quarter of 2000. OPERATING EXPENSES. Operating expenses increased by $3.0 million, or 13.8%, to $24.8 million for the nine months ended September 30, 2000 from $21.8 million for the nine months ended September 30, 1999. This increase is due to (1) the inclusion of AKW's selling, general and administrative expenses and research and development costs which have been accounted for on a consolidated basis since the AKW acquisition on April 1, 1999, and (2) expenses attributable to aborted merger and acquisition costs which are included in the $2.7 million EBITDA adjustment as discussed below. OTHER INCOME (EXPENSE). Interest expense increased by $2.4 million, or 8.3%, to $31.5 million for the nine-month period ended September 30, 2000 compared to $29.1 million for the nine months ended September 30, 1999, due to the interest costs related to the new debt incurred for the AKW Acquisition on April 1, 1999 and higher market rates. Unrealized losses related to foreign currency rate changes increased $5.3 million to $6.8 million for the nine-month period ended September 30, 2000 compared to $1.5 million for the nine months ended September 30, 1999. These expenses were offset by an increase in interest income of $1.0 million due to a higher cash balance in 2000. Equity in earnings of affiliates decreased by $2.0 million to $0.4 million for the nine months ended September 30, 2000 from $2.4 million for the nine months ended September 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. ADJUSTED EBITDA. Adjusted EBITDA decreased by $6.0 million, or 6.9%, to $80.9 million for the nine months ended September 30, 2000 from $86.9 million for the nine months ended September 30, 1999 due to the lower gross margin as described above. In determining Adjusted EBITDA for the nine months ended September 30, 2000, income from operations has been adjusted by (1) depreciation and amortization (except for amortization of deferred financing costs), (2) equity in earnings of affiliates, (3) $2.7 million of aborted merger and acquisition costs, and (4) a $3.3 million adjustment for restructuring costs related to operations at the Monterrey, Mexico, facility. In determining Adjusted EBITDA for the nine months ended September 30, 1999, income from operations has been adjusted by (1) depreciation and amortization (except for amortization of deferred financing costs), and (2) equity in earnings of affiliates. NET INCOME. Net income decreased 56.7% to $9.1 million for the nine months ended September 30, 2000 from $21.0 million for the nine months ended September 30, 1999 due to lower pretax earnings, as described above. 13 CHANGES IN FINANCIAL CONDITION At September 30, 2000, the Company's total assets amounted to $524.8 million, as compared to $525.8 million at December 31, 1999. The $1.0 million or 0.2% decrease in total assets during the nine months ended September 30, 2000 was primarily the result of an increase in net property, plant and equipment of $22.0 million and an increase in inventory and supplies of $7.2 million, offset by a decrease of $22.1 million in net receivables and a $7.0 million decrease in cash. The increase in net property, plant and equipment was primarily due to investments in the Company's expansion project in Erie, Pennsylvania. Inventory increased due to implementing an aluminum tolling program coupled with an inventory build related to the capital expansion in Erie, Pennsylvania and surplus purchases of steel at the Monterrey, Mexico, facility due to raw steel commitments. Net receivables decreased due to lower sales volumes, the receipt of several large business tax refunds, and the elimination of the aluminum scrap receivable via implementing the tolling program. At September 30, 2000, the Company's total liabilities amounted to $547.4 million, as compared to $557.9 million at December 31, 1999. Total liabilities decreased primarily as a result of a $13.8 million reduction in long term debt. The Company paid down $2.4 million on its senior secured A, B, and C term loans due on January 21, 2002, $9.4 million on its AdM term loan, and the Company repurchased $2.0 million of its $200.0 million principal amount of 9.25% Senior Subordinated Notes due 2008. 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. As of September 30, 2000, the Company had cash and cash equivalents of $25.5 million compared to $32.5 million at December 31, 1999. The Company's operating activities for the nine months ended September 30, 2000 provided $48.6 million of cash compared to $52.8 million of cash for the nine months ended September 30, 1999. The Company's financing activities used $13.0 million during the nine months ended September 30, 2000. Cash flow from financing activities provided $71.9 million for the nine months ended September 30, 1999. The Company's investing activities for the nine months ended September 30, 2000 used $42.6 million compared to $109.6 million for the nine months ended September 30, 1999. During the nine-month period ended September 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 (1) approximately $2 million for technology advancement projects; (2) investments in productivity and capacity expansion improvements in 2000 of approximately $36 million; (3) maintenance of business expenditures of approximately $10 million; and (4) quality improvements of approximately $2 million. Capital expenditures for the remainder of 2000 will focus on completing the on-going capacity expansion project at the Erie, Pennsylvania, facility. The Company anticipates its 2001 capital spending to be below the 2000 spending level. 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 14 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 and medium 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 available for operations and business opportunities or limitations 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; - - 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; - - 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; - - 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. 15 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 September 30, 2000, the Company had open foreign exchange forward contracts and options of $160.4 million. Foreign exchange forward contract maturities are from one to fourteen months, and option contracts mature in two 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 September 30, 2000, would have an impact of approximately $15.6 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. 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 September 30, 2000:
(Dollars in Fair Thousands) 2000 2001 2002 2003 2004 Thereafter Total Value ---- ---- ---- ---- ---- ---------- ----- ----- Long-term Debt: Fixed $198,000 $198,000 $167,310 Avg. Rate 9.25% 9.25% Variable $0 $0 $12,500 $5,475 $2,350 $221,900 $242,225 $242,225 Avg. Rate 8.19% 8.32% 8.50% 8.50% 8.48%
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 September 30, 2000, an interest rate swap of $98.0 million was outstanding. On average during the nine months ended September 30, 2000, the Company paid 5.75% as a fixed rate and received 6.3417% 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 September 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 16 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 September 30, 2000, the Company had open commodity price swaps of $29.0 million. These commodity price swaps had maturities from one to fifteen months. A 10% adverse change in commodity prices would have an impact of approximately $2.9 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 September 30, 2000, the Company issued 9.55 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 $50,138. During such period, the Company also issued options to purchase 19.325 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. 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 nine-month period ended September 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 /s/ William P. Greubel Dated: November 3, 2000 - ------------------------------- ---------------- William P. Greubel President and Chief Executive Officer /s/ John R. Murphy Dated: November 3, 2000 - ------------------------------- ---------------- John R. Murphy Executive Vice President - Finance and Chief Financial Officer Principal Accounting Officer
19 EX-27 2 a2029725zex-27.txt EXHIBIT 27
5 THE 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. 9-MOS DEC-31-2000 SEP-30-2000 25,522 0 42,694 666 47,851 137,356 425,740 191,044 524,799 77,159 0 0 0 24,939 (47,557) 524,799 384,727 384,727 308,216 24,750 6,417 0 31,497 15,652 6,574 9,078 0 0 0 9,078 365 356
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