-----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, QXzfEgYXE2O6FOraYpRgWT9L8Kcg702jgsdeyca2CMqlnZ1osaXgBez/oX+jVyVK FmSe5X++OnqdmswOloX+pw== 0000912057-01-008262.txt : 20010327 0000912057-01-008262.hdr.sgml : 20010327 ACCESSION NUMBER: 0000912057-01-008262 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010326 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACCURIDE CORP CENTRAL INDEX KEY: 0000817979 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 611109077 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 033-15435 FILM NUMBER: 1579357 BUSINESS ADDRESS: STREET 1: 2315 ADAMS LN STREET 2: BOX 40 CITY: HENDERSON STATE: KY ZIP: 42420 BUSINESS PHONE: 5028265000 10-K405 1 a2042721z10-k405.txt FORM 10-K405 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000 [ ] 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 Incorporation or Organization) Identification No.) 7140 OFFICE CIRCLE, EVANSVILLE, INDIANA 47715 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (812) 962-5000 Securities registered pursuant to Section 12(b) of the Act: "None" Securities registered pursuant to Section 12(g) of the Act: "None" 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 / / Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. /X/ As of March 1, 2001, 24,796 shares of Accuride Corporation common stock, par value $.01 per share (the "Common Stock") were outstanding. The Common Stock is privately held and, to the knowledge of registrant, no shares have been sold in the past 60 days, therefore the company cannot make a determination regarding the market value of the Common Stock held by non-affiliates. DOCUMENTS INCORPORATED BY REFERENCE NONE ACCURIDE CORPORATION FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2000 PART I Item 1. Business Item 2. Properties Item 3. Legal Proceedings Item 4. Submission of Matters to a Vote of Security Holders PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters Item 6. Selected Consolidated Financial Data Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Item 7A. Quantitative and Qualitative Disclosure About Market Risk Item 8. Financial Statements and Supplementary Data Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure PART III Item 10. Directors and Executive Officers of the Registrant Item 11. Executive Compensation Item 12. Security Ownership of Certain Beneficial Owners and Management Item 13. Certain Relationships and Related Party Transactions PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K Signatures FINANCIAL STATEMENTS Independent Auditors' Report Consolidated Balance Sheets Consolidated Statements of Income Consolidated Statements of Stockholders' Equity (Deficiency) Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Financial Statement Schedules
PART I ITEM 1. BUSINESS GENERAL Accuride Corporation, a Delaware corporation ("Accuride" or the "Company"), manufactures and supplies wheels and rims ("Wheels") for heavy and medium commercial vehicles. Accuride offers the broadest product line in the North American Wheel market for heavy and medium trucks, buses, vans ("Heavy/Medium Trucks") and trailers ("Trailers"). Accuride is the only North American manufacturer and supplier of both steel and forged aluminum Wheels for Heavy/Medium Trucks and Trailers ("Heavy/Medium Wheels"). Accuride sells its Wheels primarily to Heavy/Medium Truck, Trailer and Light Truck (as defined) original equipment manufacturers ("OEMs"). Major customers include Ford Motor Company ("Ford"), Freightliner Corporation ("Freightliner"), General Motors Corporation ("General Motors"), Mack Trucks, Inc. ("Mack"), International Truck and Engine Corporation ("International"), Volvo Trucks North America ("Volvo") and Paccar, Inc. ("Paccar"). For over 10 years, Accuride's steel Wheels have been standard equipment at all North American Heavy/Medium Truck OEMs and at a number of North American Trailer OEMs. In addition, our steel Wheels are standard equipment at a majority of North America's largest trucking fleets, including Ruan Transportation Management Systems, J.B. Hunt Transport Services, Ryder Truck Rental, Inc., WPS, and Schneider Specialized Carriers, Inc. Accuride's aluminum Wheels are standard equipment at Volvo, International, and Freightliner. Approximately 25% of Accuride's sales are to Light Truck OEMs such as Ford and General Motors. The North American vehicle market served by Accuride can be divided into three categories: (i) Heavy/ Medium Trucks, (ii) Trailers and (iii) other vehicles such as light commercial trucks, pick-up trucks, sport utility vehicles and vans ("Light Trucks"). CORPORATE HISTORY Accuride and Accuride Canada Inc., a corporation formed under the laws of the province of Ontario, Canada and a wholly owned subsidiary of Accuride, were incorporated in November 1986 for the purpose of acquiring substantially all of the assets and assuming certain of the liabilities of Firestone Steel Products, a division of The Firestone Tire & Rubber Company. The respective acquisitions by the companies were consummated in December 1986. In 1988, the Company was purchased by Phelps Dodge Corporation ("Phelps Dodge"), the sole owner prior to the Recapitalization described below. See "The Recapitalization." THE RECAPITALIZATION On November 17, 1997, Accuride entered into a stock subscription agreement with Hubcap Acquisition L.L.C. ("Hubcap Acquisition") pursuant to which Hubcap Acquisition acquired control of the Company. Hubcap Acquisition is a Delaware limited liability company whose members are KKR 1996 Fund L.P. and KKR Partners II, L.P., which are affiliates of Kohlberg Kravis Roberts & Co. L.P. ("KKR"). The acquisition consisted of an equity investment in the Company (the "Equity Investment") together with approximately $363.7 million of aggregate proceeds from certain financings described below (collectively, the "Financings") which were collectively used to redeem shares of Common Stock of the Company ("Common Stock") owned by Phelps Dodge (the "Redemption") and obtain a non-competition agreement. The Equity Investment, Financings, and Redemption are collectively referred to as the "Recapitalization." Immediately after the closing of the Recapitalization, Hubcap Acquisition owned 90% of the Common Stock and Phelps Dodge owned 10% of the Common Stock. Shortly after the Recapitalization, Accuride sold additional shares of Common Stock and granted options to purchase Common Stock to senior management of the Company 1 representing, in the aggregate, approximately 10% of the fully diluted equity of the Company. Phelps Dodge subsequently sold its remaining interest in Accuride to RSTW Partners III, L.P. The Financings included (i) an aggregate of approximately $164.8 million of bank borrowings by the Company, including $135.0 million of borrowings under senior secured term loans (the "Term Loans") and $29.8 million of borrowings under a $140.0 million senior secured revolving credit facility (the "Revolver" and, together with the Term Loans, the "Credit Facility"), and (ii) $200.0 million aggregate principal amount of private notes ("Private Notes"). The Revolver is available for our working capital requirements and to facilitate future growth opportunities. The Private Notes were exchanged for public notes ("Exchange Notes") which were registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a registration statement on Form S-4 declared effective by the Securities and Exchange Commission (the "Commission") on July 23, 1998. The Exchange Notes evidence the same debt as the Private Notes (which they replace) and are entitled to the benefits of an indenture dated January 21, 1998 (the "Indenture"). The Private Notes and the Exchange Notes are sometimes collectively referred to herein as the "Notes." ACQUISITIONS ACCURIDE/KAISER WHEELS. On April 1, 1999, Accuride acquired Kaiser Aluminum & Chemical Corporation's ("Kaiser") 50% interest in AKW L.P., a Delaware limited partnership ("AKW"), pursuant to the terms of a Purchase Agreement by and among the Company, Kaiser and Accuride Ventures, Inc., a wholly owned subsidiary of Accuride. In connection with the acquisition, AKW and Kaiser amended and restated an existing lease agreement pursuant to which AKW leases certain property from Kaiser. AKW was formed in 1997 as a 50-50 joint venture between Accuride and Kaiser to design, manufacture, and sell heavy-duty forged aluminum Wheels. The acquisition gives us 100% ownership of AKW. Total consideration paid to Kaiser for the 50% interest was approximately $71 million. Accuride initially financed the acquisition through the Revolver which was subsequently replaced by permanent financing through the Amended and Restated Credit Facility described below in "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Capital Resources and Liquidity." The acquisition has been accounted for by the purchase method of accounting. The goodwill recorded in connection with the acquisition is being amortized on the straight-line method over 40 years. ACCURIDE DE MEXICO. On November 5, 1997, Accuride invested $4.9 million for a 51% interest in Accuride de Mexico, S.A. de C.V. ("AdM"), a venture with Industria Automotriz, S.A. de C.V. ("IaSa"), Mexico's only commercial vehicle Wheel manufacturer. On July 16, 1999, Accuride acquired IaSa's 49% interest in AdM, pursuant to the terms of a purchase agreement by and among the Company, IaSa and certain other parties. The acquisition gives Accuride 100% control of AdM. Total consideration paid was $7.4 million, consisting of a $7.3 million cash payment to IaSa for its 49% interest and $0.1 million paid to other parties for fees and expenses. Accuride expects to use AdM as a platform to supply the growing Latin American assembly operations of many of the Company's top customers, including Ford, Freightliner, General Motors, International, Paccar and Volvo. STRATEGIC ALLIANCES In September 2000, Accuride formed a strategic alliance with Gianetti Ruote S.p.A. ("Gianetti"), a major European steel Wheel manufacturer to truck, bus and trailer OEMs to provide worldwide sourcing of heavy Wheels to the commercial trucking industry and to exchange Wheel manufacturing technology. The formation of this alliance will create for Accuride a European base to better serve its core customers' increasing demands for a global supply source. In 1991, Accuride entered into a joint venture with The Goodyear Tire and Rubber Company ("Goodyear") to assemble Wheels and tires for International to strengthen our position in the worldwide Wheel industry. Accuride and Goodyear formed AOT, Inc. ("AOT") in June 1991 in order to assemble Wheels and tires for International near International's truck assembly operation in Springfield, Ohio. Accuride 2 and Goodyear each own 50% of AOT. In April 1998, Assembly On Time Canada Inc. (which subsequently changed its name to AOT Canada Ltd) was created as a wholly owned subsidiary of AOT to expand the AOT operations for International at a new facility in Talbotville, Ontario, Canada. INDUSTRY OVERVIEW The size of the steel and aluminum commercial vehicle Wheel industry for Heavy/Medium Trucks and Trailers in North America is approximately $0.5 billion. The size of the steel and aluminum commercial vehicle Wheel industry for Light Trucks in North America is approximately $1.5 billion. Wheels are produced for (i) Heavy/Medium Trucks, which are over-the-road vehicles designed to carry over 10,000 pounds such as large multi-axle rigs, buses and moving trucks; (ii) Trailers, which includes trailers and chassis; and (iii) Light Trucks, which are vehicles designed to carry under 10,000 pounds such as pick-up trucks, walk-in delivery vans and sport utility vehicles. Wheels and rims produced for Heavy/Medium Trucks and Trailers are larger and heavier dual type Wheels. Wheels produced for Light Trucks are generally smaller and lighter single or dual type Wheels requiring lower load requirements. The commercial Wheel industry may be categorized in three ways: (i) by vehicle category-Heavy/Medium Wheels and Light Truck Wheels, (ii) by production material-steel and aluminum Wheels, and (iii) by vehicle application-dual and single Wheels. HEAVY/MEDIUM WHEELS AND LIGHT TRUCK WHEELS. Heavy/Medium Wheels range in diameter from 17.5" to 24.5". Purchasers of Heavy/Medium Wheels consist primarily of Heavy/Medium Truck OEMs such as Freightliner, Paccar, International, Mack, and Volvo, and Heavy/Medium Trailer OEMs such as Great Dane Limited Partnership ("Great Dane"), Utility Trailer Manufacturing Company ("Utility") and Wabash National, Inc. ("Wabash"). The Heavy/Medium Wheel market is driven by the volume of Heavy/Medium Truck and Trailer manufacturing, which is tied to macroeconomic trends such as economic growth, fuel prices, interest rates, and insurance expense. In 2000, industry sales of Heavy/Medium Wheels in North America were approximately $0.5 billion. Light Truck Wheels range in diameter from 14" to 20". Purchasers of Light Truck Wheels consist primarily of Light Truck OEMs such as Ford and General Motors. The Light Truck Wheel market is driven by the volume of production of Light Trucks and performance automobiles as well as the trend toward the use of larger diameter Light Truck Wheels in smaller Light Trucks such as sport utility vehicles to improve styling and performance. In 2000, industry sales of Light Truck Wheels in North America were approximately $1.5 billion. STEEL AND ALUMINUM WHEELS. Steel Wheels are more resistant to damage and hold a substantial price advantage over aluminum Wheels. Aluminum Wheels are generally lighter in weight, more readily stylized and approximately 3.5 times more expensive than steel Wheels. The growth of aluminum Heavy/Medium Wheel and Light Truck Wheel sales is driven by the increasing importance of the aesthetic aspect of Wheels, particularly in the Light Truck Wheel market, and, to a lesser extent, reduced vehicle weight. DUAL AND SINGLE WHEELS. Dual Wheels, which carry higher load ratings, are used on Heavy/Medium Trucks, Trailers and Light Trucks. Dual Wheels may be mounted in tandem (i.e., side-by-side, two wheels on each end of an axle) or individually. Single Wheels are used on Light Trucks and passenger cars. The Company is the only producer of both dual and single steel Light Truck Wheels in North America. PRODUCTS AND SERVICES Accuride has the broadest product line in the North American Heavy/Medium Wheel industry. We also compete in the Light Truck Wheel market for larger (with diameters of 16" and over) steel Wheels for Light Trucks. Accuride offers steel and forged aluminum Wheels for Heavy/ Medium Trucks and Trailers, heavy-duty Wheels for the vocational vehicle industry and stylized steel Wheels for Light Trucks. We do not 3 produce smaller Wheels (with diameters under 16") or Wheels with diameters in excess of 24.5". Accuride distributes its products directly to OEMs and through independent distributors. CUSTOMERS Accuride's customers fall into four general categories: (i) Heavy/Medium Truck OEMs (which represented approximately 50% of the Company's 2000 net sales); (ii) Trailer OEMs (which represented approximately 19% of the Company's 2000 net sales); (iii) Light Truck OEMs (which represented approximately 22% of the Company's 2000 net sales); and (iv) aftermarket distributors and others (which represented approximately 9% of the Company's 2000 net sales). Accuride's major customers include Freightliner, Volvo, Mack, International and Paccar, which are Heavy/Medium Truck OEMs; Great Dane, Utility, Wabash, and Stoughton Trailers, Inc., which are Trailer OEMs; and Ford, DaimlerChrysler and General Motors, which are Light Truck OEMs. A large portion of our business consists of sales to Ford, Freightliner, and International, representing approximately 20.3%, 15.1% and 12.3% of 2000 net sales, respectively. The loss of a significant portion of sales to any of these OEMs could have a negative impact on our business. Accuride also serves the aftermarket through a broad network of distributors. Accuride's design engineers work closely with its customers to support the vehicle system design. Established contacts with OEM engineers enable us to track industry trends, including new features and styles, and to ensure that new products meet changing requirements for new vehicle systems. For example, over the last few years, we have responded to and worked with customers to complete significant new development programs in the areas of full- contoured styled Light Truck steel Wheels and styled-forged aluminum Wheels. In the Heavy/Medium Wheel industry, Wheels are designated as standard equipment by the OEM, although other Wheels may be selected by fleet managers as component parts for their fleets. Generally, OEMs will have one standard Wheel manufacturer for any given vehicle model. Because Accuride is the only standard Steel Wheel manufacturer at all North American Heavy/Medium Truck OEMs, each Heavy/Medium Truck produced in North America will have Accuride Wheels unless the end-purchaser of a particular Heavy/Medium Truck (or fleet of Heavy/Medium Trucks) specifically requests a Wheel produced by another supplier. Light Truck OEMs will ordinarily designate more than one Wheel option as standard for any particular vehicle model and one Wheel supplier to supply each option. Consequently, for any particular vehicle model, more than one supplier may have its Wheels designated as standard equipment. OEMs determine which of the standard Wheels to use on any one vehicle depending on factors such as marketing, consumer preference and cost. In some cases, an OEM will allow an end-consumer to select a Wheel option from the set of Wheels designated as standard. The process of being designated as a standard supplier of a particular Wheel generally takes more than two years from the time of initial design to first delivery. A potential supplier must first develop a Wheel design based on styling and engineering specifications provided by the OEM. After a comprehensive engineering and feasibility review, the OEM designates a specific supplier for a particular Wheel. The duration of the designation is dependent upon the life cycle of the vehicle model. A supplier that designs, engineers, manufactures and conducts quality control testing is generally referred to as a "Tier I" supplier. Accuride is a Tier I supplier for both Ford and General Motors and believes that its early involvement with the engineers from our customers affords us a competitive advantage. MANUFACTURING CONTINUOUS PRODUCTIVITY IMPROVEMENT. Accuride has developed and implemented a Cost Reduction and Productivity Program to continuously improve its operations and to modernize, upgrade and automate its manufacturing facilities. Since 1991, we have invested over $163 million to improve our facilities, including selected use of robotics and other automation, connection of the automated component lines to the assembly lines, and improvement in product quality through upgrading of key processes. The success of this program is reflected in improvements in operating results, cost-reduction, capacity, product quality and plant safety. The majority of recent expenditures targeted the Tubeless Heavy/Medium Wheel production processes at the Henderson, Kentucky, facility, the Ontario, Canada, facility, and the Erie, Pennsylvania, facility, and the Light 4 Truck Dual Wheel production process at the Ontario, Canada, facility and the Columbia, Tennessee, facility. We have budgeted approximately $7 million in 2001 (in addition to normal maintenance) for continued implementation of these productivity and capacity enhancement programs. Management believes that its emphasis on low-cost manufacturing will continue to yield significant operational improvements, although no assurance of such improvements can be given. MANUFACTURING PROCESS. Accuride's Wheels are made using seven primary manufacturing processes: stamping, spin forming, roll forming, welding, coating/finishing, forging and machining. Our steel Wheel products are produced by spin forming or stamping of the disc, roll forming of the rim, welding, coating and finishing. Our forged aluminum Wheels are made using forging, heat treating, spinning, machining and polishing processes. The following describes the major processes we use to produce Wheels: STAMPING. Accuride makes discs for single Light Truck Wheels using stamping, which is the most cost- effective way to produce single steel discs because it requires the lowest cycle time per part of any available process. Stamping allows for thinner gauge steel to be used to reduce weight without sacrificing strength. SPIN FORMING. Accuride makes discs for dual Wheels by using spin forming, which produces discs with variable wall thickness, thus reducing weight and enhancing the strength-to-weight ratio of the Wheel. Spin forming also provides a high-quality product with low raw material usage and waste. ROLL FORMING. Accuride makes Light and Heavy/Medium steel rims using roll forming (feeding coiled steel through equipment that forms it into a cylinder, welds it, then feeds it through rim rollers to shape the rim). We have developed an extensive roll forming expertise in the 40-plus years that we have used this process and believe that we have one of the industry's highest quality yields for rim rolling. WELDING. Accuride uses an arc welding process to permanently join together the manufactured rims and discs for Light and Heavy/Medium steel Wheels. The arc welding process is done after the rims and discs have been assembled and provides an efficient, high strength attachment method required to sustain Wheel service loads. A resistance butt welding process is used to join the opposing ends of the formed cylinder prior to the rollforming operation during the manufacture of steel rims. This rim butt welding process is the most cost effective metal joining technology for this application and provides a high quality, air tight seam required to maintain proper tire inflation pressure. COATING/FINISHING. Accuride pre-treats all steel Wheels in zinc phosphate, then applies an electro- disposition coating ("E-coat"), which is an acrylic, cathodic, gray or white base coating that provides resistance to corrosion. Subsequently, some customers may choose to have us add a topcoat over the E-coat for further protection. FORGING. Accuride makes Heavy/Medium aluminum Wheels by using forging, in which an aluminum billet is compressed into a basic Wheel shape using high amounts of pressure and energy. Forgings are formed into their final shape using spinning (in the rim area) and by machining the entire contour to create final mounting dimensions and appearance. Forgings can offer decisive performance advantages in heavy applications. MACHINING. Accuride uses machining processes at its Cuyahoga Falls, Ohio, and Erie, Pennsylvania, facilities to convert processed forgings into finished machined Wheels. Capital investments during 2000 have expanded Accuride's machining capability. We believe that the control of the final machined finish is essential to meet customer appearance standards. 5 SUPPLIER RELATIONSHIPS STEEL SUPPLIERS. Accuride has secured favorable pricing from a number of different suppliers by negotiating high- volume contracts with terms ranging from 1 to 3 years. While we believe that our supply contracts can be renewed on acceptable terms, there can be no assurance that such agreements can be renewed on such terms or at all. However, we do not believe that we are overly dependent on long-term supply contracts for our steel requirements as we have alternative sources available if need requires. ALUMINUM SUPPLIERS. Accuride obtains aluminum through third-party suppliers. We believe that aluminum is readily available from a variety of sources. We use commodity price swaps to partially hedge against changes in the market price of aluminum. SALES AND MARKETING Accuride has built its brand franchise with a targeted sales and marketing effort aimed at Heavy/Medium Truck OEMs, Trailer OEMs, Light Truck OEMs and independent distributors. We actively market to major end-users, including trucking fleets and dealers. Accuride positions its sales managers near major customers such as Ford and General Motors in Detroit, Michigan and Freightliner in Portland, Oregon. Additional field sales personnel are geographically located throughout North America to service other OEMs, independent distributors, trucking fleets and dealers. New emphasis is being placed on targeting end-users as we commercialize premium products and expand our aluminum product line. The majority of our core customers source their requirements either on annual contracts or standard sourcing contracts. Accuride has appointed independent distributors in every major market area in the United States, Canada, and Mexico. These distributors are mostly members of the National Wheel and Rim Association and serve aftermarket needs and small OEMs that we do not service directly. As a service to the aftermarket and small OEMs, we also provide order consolidation services from our warehouse in Taylor, Michigan. COMPETITION Accuride competes on the basis of price, delivery, quality, product line breadth and service. Our competitive advantages include long standing customer relationships, broad product lines in steel and aluminum, high quality products and low manufacturing costs. Due to the breadth of our product line, we compete with different companies in different markets. Our principal competitor in the dual steel Heavy/Medium Wheel and single steel Light Truck Wheel markets is Hayes Lemmerz International, Inc. ("Hayes"). Hayes has established a significant global presence and we believe Hayes is the market leader in the single Light Truck Wheel market and in the passenger car Wheel industry, which are more diversified markets than the other markets in which we compete. In the dual steel Light Truck Wheel industry, Accuride's principal competitor is ArvinMeritor Automotive, Inc. ("Meritor"). All of the dual Wheels sold by Meritor in North America are produced in Brazil. In the dual aluminum Heavy/Medium Wheel market, Accuride's principal competitor is Alcoa, Inc. ("Alcoa"), which we believe has the leading share in that market. Alcoa does not produce steel Wheels. AKW PRODUCT RECALL On April 17, 1998, AKW submitted a notice to the National Highway Safety Administration ("NHSA") of AKW's intent to recall approximately 47,800 aluminum truck wheels (the "Recalled Wheels"), because a defect may exist in the Recalled Wheels that relates to motor vehicle safety. Kaiser, the Company's former partner in AKW, manufactured several hundred of the Recalled Wheels during the period April 23, 1997 through April 30, 1997. During the period May 1, 1997 through February 28, 1998, AKW manufactured all of the remaining Recalled Wheels. The Recalled Wheels were designed by the Company. AKW initially estimated that the total costs of recalling and replacing all of the Recalled Wheels would be approximately $6.8 million, an amount which could vary depending on the level of customer response to the recall, among 6 other factors. Due to the our 50% ownership of AKW in 1998, we reflected a portion of the recall expenses ($3.4 million) as a reduction in "Equity in earnings of affiliates" in our consolidated financial statements. On April 1, 1999, we acquired Kaiser's 50% interest in AKW and thereby acquired 100% ownership of AKW. In 1999, the estimated cost of replacing the Recalled Wheels was re- evaluated and reduced by $3.0 million. Due to our 100% ownership of AKW, $3.0 million of the cost reduction was recorded in our consolidated statement of income. As of December 31, 2000, the total cost of replacing the Recalled Wheels is $3.9 million. We believe that the recall will not have a material adverse effect on our business. We are currently not aware of any product liability claims related to the Recalled Wheels. There can be no assurance, however, that no such claims will be made and that we will not experience any material product liability losses in the future. EMPLOYEES As of March 1, 2001, Accuride had 2,057 employees. The following facilities are currently unionized: Henderson, Kentucky, plant; London, Ontario, Canada, plant; Erie, Pennsylvania, plant; and Monterrey, Mexico, plant. Hourly employees at the Henderson, Kentucky, facility are represented by the International Union, Automobile, Aerospace, and Agriculture Implement Workers of America ("UAW") Local #2036. The Company's contract with the UAW expired in February 1998. Accuride was not able to negotiate a mutually acceptable agreement with the UAW, and a strike occurred at the Henderson, Kentucky, facility on February 20, 1998. Effective as of March 31, 1998, we began an indefinite lockout in order to provide security for plant personnel and equipment. The UAW has rejected all of our offers, and the parties continue to be unable to reach an agreement. We are continuing to operate with salaried employees and outside contractors. Currently, there is no, and we do not believe that there will be any, supply disruption to our customer base; however, there can be no assurance to that effect. A supply disruption to our customer base could have a material adverse effect on the Company. Management does not believe that the strike had any material affect on pre-tax earnings in 2000. Bargaining unit employees in the Ontario, Canada, facility are represented by National Automobile, Aerospace, Transportation, and General Workers Union of Canada ("CAW") Local #27. A 3-year collective bargaining agreement was ratified on December 8, 1999. The contract runs through March 13, 2003. Hourly employees at the Erie, Pennsylvania, facility are represented by the UAW Local # 1186. The existing contract was implemented in August 1998 and expires in August 2003. The Monterrey, Mexico, hourly employees are represented by "El Sindicato Industrial de Trabajadores de Nuevo Leon". The current contract has been in place since November 1997 and is subject to renegotiation on an annual basis. The AOT joint venture operations located in Springfield, Ohio, and Talbotville, Ontario, Canada, have 47 and 15 employees, respectively. RESEARCH AND DEVELOPMENT The Research and Development ("R&D") department is composed of 29 employees, 18 of whom are degreed engineers (nine with advanced degrees). The objectives of the R&D department are to design and develop new products, provide technical support and service to customers and to investigate and develop new process technology. Over the last few years, Accuride has completed significant new product and process development programs in the areas of full-faced styled steel Wheels, high strength, low alloy Wheels ("HSLA"), new designs in forged aluminum Wheels, cast aluminum Wheels for Heavy/Medium Truck applications in North America, and cladded wheels for Light Truck applications. Company-sponsored R&D costs for fiscal years 2000, 1999, and 1998 were approximately $6.3 million, $5.2 million and $2.9 million, 7 respectively. These costs were expensed and included in general and administration expenses during the period incurred. INTERNATIONAL SALES Sales to customers outside of the United States are considered international sales by the Company. International sales in 2000 were $73.9 million, or 15.5% of our 2000 sales volume. For additional information, see footnote 15 to the "Notes to Consolidated Financial Statements" included herein. PATENTS AND TRADEMARKS Accuride maintains an intellectual property estate, including patents and extensive proprietary knowledge of products and systems. We currently hold 9 patents and 9 patents pending relating to Wheel technology. Accuride has applied for federal and international trademark protection for numerous marks. Although we believe that the patents and trademarks associated with our various product lines are valuable, we do not consider any of them to be essential to our business. BACKLOG Accuride's production is based on firm customer orders and estimated future demand. Since firm orders generally do not extend beyond 15-45 days and we generally meet all requirements, backlog is not considered significant. CYCLICAL AND SEASONAL INDUSTRY The Heavy/Medium Wheel and Light Wheel industries are highly cyclical and, in large part, depend on the overall strength of the demand for Heavy/Medium Trucks, Trailers, and Light Trucks. These industries have historically experienced significant fluctuations in demand based on factors such as general economic conditions, interest rates, government regulations, and consumer confidence. The industry is in the midst of a major downturn. This significant decrease in overall consumer demand for Heavy/Medium Trucks, Trailers, and/or Light Trucks is having a negative impact on Accuride's business. In addition, Accuride's operations are typically seasonal as a result of regular customer maintenance and model changeover shutdowns, which typically occur in the third and fourth quarter of each calendar year. This seasonality may result in decreased net sales and profitability during the third and fourth fiscal quarters of each calendar year. ENVIRONMENTAL MATTERS Accuride's operations are subject to various federal, state and local requirements, including environmental laws. Under certain environmental laws, a current or previous owner or operator of property may be liable for the costs of removal or remediation of certain hazardous substances or petroleum products on, under or in such property, without regard to whether the owner or operator knew of, or caused, the presence of the contaminants, and regardless of whether the practices that resulted in the contamination were legal at the time they occurred. The presence of, or failure to remediate such substances properly, may adversely affect the ability to sell or rent such property or to borrow using such property as collateral. Persons who generate, arrange for the disposal or treatment of, or dispose of hazardous substances may be liable for the costs of investigation, remediation or removal of such hazardous substances at or from the disposal storage or treatment facility, regardless of whether such facility is owned or operated by such person. Additionally, the owner of a site may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from a site. Compliance with environmental laws, stricter interpretations of or amendments to any such laws, or more vigorous enforcement policies by regulatory agencies with respect to any of them may require material expenditures by the Company. There can be no assurance that future regulations will not require Accuride to modify its facilities to meet revised requirements of environmental laws. 8 The nature of Accuride's current and former operations and the history of industrial uses at our facilities expose us to the risk of liabilities or claims with respect to environmental and worker health and safety matters that could have a material adverse effect on our business. Phelps Dodge has indemnified Accuride with respect to environmental liabilities at the Henderson, Kentucky, facility and the Ontario, Canada, facility. The Phelps Dodge environmental indemnity, however, does not apply to liability or injury incurred or sustained by Accuride attributable to the handling of hazardous substances at any time after the Recapitalization or any failure after the Recapitalization of the Company to be in compliance with any applicable environmental law or environmental permit. In addition, the Phelps Dodge environmental indemnity does not apply to liability or injury arising out of or resulting from the investigation, assessment or remediation of a hazardous substance not required by or under an environmental law. Kaiser has indemnified Accuride with respect to environmental liabilities at the Erie, Pennsylvania, facilities except (i) Accuride shall be solely responsible for claims, losses and liabilities that are caused by or arise from any action by the Company or in connection with the conduct of the business by the Company, (ii) Kaiser and Accuride shall be responsible for their appropriate share of such claims, losses and liabilities associated with contamination due to the failure of the Company to maintain the pits at the Erie, Pennsylvania, facility which contain hydraulic presses, (iii) Kaiser and Accuride shall be responsible for their appropriate share of such claims, losses and liabilities that arise from both the actions of Kaiser and the Company, the conduct of the business by either of them or (iv) to the extent that any fines or penalties assessed or threatened against the Company during the period in which Kaiser is implementing an environmental compliance plan at the Erie, Pennsylvania, facility exceed $1,000,000. ITEM 2. PROPERTIES Accuride operates nine facilities in North America. Accuride owns manufacturing facilities in Henderson, Kentucky; Columbia, Tennessee; Monterrey, Mexico; and London, Ontario, Canada. Accuride also leases facilities in Erie, Pennsylvania and Cuyahoga Falls, Ohio, a distribution warehouse in Taylor, Michigan, a sales office in the greater Detroit area, and an office building in Evansville, Indiana. Accuride operates facilities in Springfield, Ohio, and Talbotville, Ontario, Canada, through its joint venture with Goodyear. Accuride believes its plants are adequate and suitable for the manufacturing of products for the markets in which it sells. In 2000, the London, Ontario facility operated near capacity while the other plants operated well below capacity during the second half of the year due to reduced OEM production schedules for Heavy/Medium Trucks. Accuride's corporate, manufacturing, sales, warehouse, and research facilities are as follows:
Square Owned/ Location Feet Use Leased -------- ------ --- ------ London, Ontario, Canada 462,993 Heavy/Medium Steel Wheels; steel Light Truck Wheels Owned Henderson, Kentucky 364,365 R&D; Heavy/Medium Steel Wheels Owned Taylor, Michigan (a) 75,000 Warehouse Leased Springfield, Ohio (b) 136,000 Wheel and tire assemblies for International Owned Talbotville, Ontario, Canada (c) 159,140 Wheel and tire assemblies for International Owned Erie, Pennsylvania (d) 126,000 Aluminum Wheels forging and machining Leased Cuyahoga Falls, Ohio (e) 131,700 Aluminum Wheels machining and polishing Leased Columbia, Tennessee 340,000 Steel Light Truck Wheels Owned Monterrey, Mexico 262,000 Light/Medium/Heavy Steel Wheels Owned Evansville, Indiana (f) 37,229 Corporate headquarters of the Company Leased Northville, Michigan (g) 4,334 Sales Office Leased
9 - ------------------- a) The warehouse is leased from The Package Company under a ten year lease at the rate of $21,587 per month. The lease expires in 2009. b) Owned by AOT, the joint venture with Goodyear. c) Owned by AOT Canada Ltd. (a subsidiary of AOT) as part of the joint venture with Goodyear. d) The building is leased by AKW under a ten-year lease from Kaiser at the rate of $1.00 per year. The initial term of the lease expires in 2007. e) The building is leased by AKW from The Bell Company. The building lease was renewed in June 1999 with monthly lease payments of $30,041. The lease expires in June 2001, with an option to renew. f) The building is leased from Woodward, LLC under a ten- year lease at the rate of $41,106 per month for the first 60 months of the lease and $45,232 per month thereafter. The Company moved into this office facility in November 1999. g) The building is leased from Northwood Corporate Park, LP under a five-year lease that began December 1, 1997 at a rate of $6,230 per month. The address of the Company's principal executive office is 7140 Office Circle, Evansville, Indiana 47715, and the Company's phone number is (812) 962-5000. ITEM 3. LEGAL PROCEEDINGS Neither Accuride 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 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS Not Applicable. 10 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Accuride's Common Stock is privately held and not listed for trading on any public market. As of March 1, 2001, there were approximately 46 record holders of the Company's Common Stock. DIVIDEND POLICY Accuride has not declared or paid cash dividends on its Common Stock. Accuride currently intends to retain any future earnings to finance the growth and development of its business and therefore does not anticipate paying any cash dividends in the foreseeable future. Any future determination to pay cash dividends will be made by the Board of Directors in light of the Company's earnings, financial position, capital requirements and such other factors as the Board of Directors deems relevant. The payment of dividends is restricted under the terms of the Credit Facility and the Indenture. See "Item 7-Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources." RECENT SALES OF UNREGISTERED SECURITIES During 2000 , Accuride issued 38.2 shares of the Company's Common Stock to certain members of management for aggregate consideration in cash and secured promissory notes of approximately $200,000. During such period, Accuride also issued options to purchase 94.52 shares of Common Stock to members of management. The exercise price of such options ranges from $5,000 to $5,250 per share. None of these securities were registered under the Securities Act. 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 either (i) did not involve a public offering within the meaning of Section 4(2) of the Securities Act or (ii) was offered and sold pursuant to a compensatory benefit plan within the meaning of Rule 701 of the Securities Act. 11 ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA The following financial data is an integral part of, and should be read in conjunction with the "Consolidated Financial Statements" and notes thereto. Information concerning significant trends in the financial condition and results of operations is contained in "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations." SELECTED HISTORICAL OPERATIONS DATA (In thousands)
Fiscal Year Ended December 31, ----------------------------------------------------------------------------- 2000 1999 1998 1997 1996 --------- --------- --------- --------- --------- OPERATING DATA: Net sales (a) ......................... $ 475,804 $ 505,854 $ 383,583 $ 332,966 $ 307,830 Gross profit (a)(b) ................... 82,572 115,078 82,554 65,994 61,723 Operating expenses (c) ................ 32,849 33,493 34,034 21,316 17,941 Income from operations(b) ............. 49,723 81,585 48,520 44,678 43,782 Interest income (expense), net ........ (38,742) (38,988) (32,311) 385 400 Equity in earnings of affiliates ...... 455 2,316 3,929 4,384 115 Other income (expense), net (d) ....... (6,157) (1,081) (2,904) 719 (381) Net income ............................ 2,513 25,331 7,951 27,837 26,466 OTHER DATA: Adjusted EBITDA (e) ................... $ 89,345 $ 111,682 $ 88,160 $ 76,888 $ 64,023 Adjusted EBITDA Margin (f) ............ 18.7% 21.6% 21.1% 21.8% 20.8% Net cash provided by (used in): Operating activities ......... 66,343 86,835 22,662 38,219 43,678 Investing activities ......... (51,688) (124,324) (44,669) (47,065) (9,370) Financing activities ......... (8,632) 66,511 18,060 9,953 (37,463) Cash interest expense (g) ............. 38,275 37,841 31,450 145 33 Depreciation and amortization ......... 32,279 29,784 24,926 20,726 20,126 Capital expenditures .................. 50,420 44,507 46,579 24,032 9,584 BALANCE SHEET DATA (END OF PERIOD): Cash and cash equivalents ............. $ 38,516 $ 32,493 $ 3,471 $ 7,418 $ 6,311 Working capital (h) ................... 2,977 40,492 49,628 27,416 38,608 Total assets .......................... 515,271 525,772 404,925 347,447 288,703 Total debt ............................ 448,886 460,561 393,200 16,040 Stockholders' equity (deficiency) ..... (29,200) (32,131) (58,096) 256,055 228,451
- ------------------- (a) Results of operations for the year ended December 31, 1997 (subsequent to May 1997) do not reflect net sales and gross profit for aluminum Wheels due to the formation of the AKW joint venture with Kaiser. Net sales and gross profit for aluminum Wheels were $19.1 million and $1.1 million, respectively, for the period beginning on January 1, 1997 and ending on April 30, 1997. Results of operations for the year ended December 31, 1999 are based on the Company's 50% ownership of AKW through March 31, 1999 and 100% ownership of AKW since April 1, 1999. Net sales and gross profit for aluminum wheels for the 9-month period from April 1, 1999 through December 31, 1999 were $76.1 million and $22.1 million, respectively. (b) Gross profit and income from operations for the year ended December 31, 1997 reflect $7.1 million of costs incurred in connection with the strike in early 1997 at the Company's facility in Ontario, Canada. Gross profit and income from operations for 1998 reflect $3.9 million of costs incurred in connection with the strike in 1998 at the Company's facility in Henderson, Kentucky, and $1.1 12 million of restructuring charges related to Accuride Canada, Inc. Gross profit and income from operations for 1999 reflect a reduction to cost of $3.0 million related to the favorable AKW recall adjustment. Gross profit for 2000 reflects $5.0 million of costs related to integration and restructuring charges at our Monterrey, Mexico, facility, and $0.2 million of cost related to restructuring charges related to our other facilities. (c) Operating expenses include selling, general and administrative plus (i) $3.3 million of start-up costs related to the Columbia, Tennessee, facility incurred during 1998, (ii) $1.9 million of management retention bonuses reimbursed by Phelps Dodge in 1998, and (iii) $2.2 million of Recapitalization professional fees recorded in 1998. (d) Other income (expense), net consists primarily of currency hedging and foreign exchange gains and losses related to the Company's Canadian and Mexican operations. (e) Adjusted EBITDA for 2000 represents income from operations plus depreciation and amortization, net of $2.3 million in amortization of deferred financing costs, plus equity in earnings of affiliates, plus (i) $3.2 million of costs related to aborted merger and acquisition activities, (ii) $5.4 million restructuring and integration costs related to operations in Monterrey, Mexico, and (iii) $0.6 million for restructuring costs in the United States. Adjusted EBITDA for 1999 represents income from operations plus depreciation and amortization, net of $1.9 million in amortization of deferred financing costs plus equity in earnings of affiliates, plus (i) $1.4 million of fees associated with merger and acquisition activities less (ii) $1.5 million associated with the AKW wheel recall adjustment. This $1.5 million represents 50% of the $3.0 million reduction in the AKW product recall reserve. See "Item 7-Management's Discussion and Analysis of Financial Condition and Results of Operations." Adjusted EBITDA for 1998 represents income from operations plus depreciation and amortization, net of $1.7 million in amortization of deferred financing costs plus equity in earnings of affiliates, plus (i) $1.1 million of estimated restructuring costs at the London, Ontario facility, (ii) $3.4 million representing the impact of the AKW wheel recall campaign implemented in 1998, (iii) $1.9 million of management retention bonuses reimbursed by Phelps Dodge in 1998, (iv) $2.2 million of Recapitalization professional fees and (v) $3.9 million of costs incurred in connection with the strike in 1998 at the Henderson, Kentucky, facility. In determining Adjusted EBITDA for 1997, income from operations has been increased by depreciation and amortization, equity in earnings of affiliates and $7.1 million representing the estimated impact of the strike at the London, Ontario, facility that occurred during the first quarter of 1997. Adjusted EBITDA is not intended to represent cash flows from operations as defined by generally accepted accounting principles ("GAAP") and should not be considered as an alternative to net income as an indicator of the Company's operating performance or to cash flows as a measure of liquidity. Adjusted EBITDA is included in this Annual Report as it is a basis upon which the Company assesses its financial performance and certain covenants in the Company's borrowing arrangements are tied to similar measures. (f) Represents Adjusted EBITDA before equity in earnings of affiliates and before the $3.4 million impact of the AKW wheel recall campaign implemented in 1998, as a percentage of net sales. (g) Cash interest expense represents interest expense exclusive of $2.3 million, $1.9 million and $1.7 million amortization of deferred financing costs for the years ended December 31, 2000, December 31, 1999, and December 31, 1998, respectively. (h) Working capital represents current assets less cash and current liabilities. 13 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW The following discussion should be read in conjunction with the "Selected Consolidated Financial Data" and the Company's Consolidated Financial Statements and the notes thereto, all included elsewhere herein. The information set forth in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" includes forward-looking statements that involve risks and uncertainties. Many factors could cause actual results to differ materially from those contained in the forward-looking statements below. See "Factors That May Affect Future Results." GENERAL NET SALES. Accuride derives a substantial portion of its net sales from the sale of steel and forged aluminum Wheels to North American Heavy/Medium Truck, Trailer OEMs, and sales of steel wheels to the Light Truck OEMs. In addition, Accuride supplies the aftermarket with replacement products. Revenues are recognized upon shipment to customers from the Company's production facilities and warehouses. In May 1997, Accuride invested $20.8 million for a 50% interest in AKW, a joint venture with Kaiser which acquired Kaiser's Wheel operations in Erie, Pennsylvania, and Cuyahoga Falls, Ohio. On April 1, 1999, Accuride acquired Kaiser's 50% interest in AKW for total compensation of approximately $71 million. Accuride's participation in AKW's earnings was recorded on an equity basis from the establishment of the joint venture through March 31, 1999. Subsequent to April 1, 1999, revenues of AKW were consolidated on a 100% basis for accounting purposes. In November, 1997, Accuride invested $4.9 million to establish AdM, a 51%-owned venture with IaSa, Mexico's only commercial vehicle Wheel manufacturer. On July 16, 1999, Accuride acquired IaSa's 49% interest in AdM, pursuant to the terms of a purchase agreement by and among the Company, IaSa and certain other parties. The acquisition gave Accuride 100% control of AdM. Total consideration paid was $7.4 million, consisting of a $7.3 million cash payment to IaSa for IaSa's 49% interest, and $0.1 million paid to other parties for fees and expenses. We expect to use AdM as a platform to supply the growing Latin American assembly operations of many of our top customers, including Ford, Freightliner, General Motors, International, Paccar and Volvo. Sales to customers outside of the United States are considered international sales by the Company. International sales in 2000 were $73.9 million, or 15.5% of the Company's 2000 sales volume. For additional information, see footnote 15 to the "Notes to Consolidated Financial Statements" included herein. GROSS PROFIT. Accuride continuously strives to improve productivity, increase quality and lower costs. Management has budgeted approximately $7.0 million in captial spending in 2001 for productivity and capacity initiatives (in addition to normal maintenance) and believes that Accuride's emphasis on low-cost manufacturing will continue to yield significant operational improvements. The $7.0 million productivity initiatives include the completion of our aluminum forging and machining capacity expansion and the completion of our new assembly process for light Wheels. Accuride believes that the experience of its labor force is a significant element in maintaining low-cost production. However, we have experienced two significant labor problems in the past few years. In the first quarter of 1997, we experienced a 53-day strike at the Ontario, Canada, facility. Accuride estimates that the strike at the Ontario, Canada facility negatively impacted 1997 gross profit by $7.1 million. Our contract with the UAW covering employees at the Henderson, Kentucky, facility expired in February 1998. We were 14 not able to negotiate a mutually acceptable agreement with the UAW, and a strike occurred at the Henderson, Kentucky, facility on February 20, 1998. Effective March 31, 1998, Accuride began an indefinite lockout in order to provide security for plant personnel and equipment. The UAW has rejected all of our offers and the parties continue to be unable to reach an agreement. Accuride is continuing to operate with its salaried employees and outside contractors. Currently there is, and we believe that there will be, no supply disruption to our customer base; however, there can be no assurance to that effect. A supply disruption to our customer base could have a material adverse effect on our business. Accuride estimates that the strike at the Henderson, Kentucky, facility negatively effected 1998 gross profit by $3.9 million; however, due to improved performance by the salaried employees and outside contractors at the Henderson, Kentucky, facility in 1999 and 2000, the strike had no adverse impact on 1999 or 2000 pre-tax earnings. OPERATING EXPENSES. Operating expenses are comprised of selling, general and administrative ("SG&A") fees associated with merger and acquisition activities, and various start up costs. SG&A is comprised of corporate overhead, such as marketing and sales, research and development, finance, human resources, and administrative as well as related professional consulting fees. EQUITY IN EARNINGS OF AFFILIATES. Equity in earnings of affiliates includes Accuride's income from (i) AKW, from its inception in May 1997 through March 31, 1999, and (ii) AOT, which provides International with Wheel/tire assembly services. Income from AKW and AOT was reported on the equity method, for the applicable periods, and represents Accuride's share of such joint ventures' net income. AKW total sales for the three-month period ended March 31, 1999 were $23.9 million. For the fiscal year ended December 31, 1998, AKW total sales were $86.9 million. AOT total sales were $8.1 million and $8.8 million for the fiscal years 2000 and 1999, respectively. ADJUSTED EBITDA. Adjusted EBITDA for 2000 represents income from operations plus depreciation and amortization, net of $2.3 million in amortization of deferred financing costs, plus equity in earnings of affiliates, plus (i) $3.2 million of costs related to aborted merger and acquisition activities, (ii) $5.4 million for restructuring and integration costs related to operations in Monterrey, Mexico, and (iii) $0.6 million for restructuring costs in the United States. Adjusted EBITDA for 1999 represents income from operations plus depreciation and amortization, net of $1.9 million in amortization of deferred financing costs, plus equity in earnings of affiliates, plus (i) $1.4 million of costs associated with merger and acquisition activities, less (ii) $1.5 million of costs associated with the AKW wheel recall campaign which were recovered in 1999. For additional information, see "AKW Product Recall"above. Adjusted EBITDA for 1998 represents income from operations plus depreciation and amortization, net of $1.7 million in amortization of deferred financing costs, plus equity in earnings of affiliates, plus (i) $1.1 million of restructuring charges, (ii) $3.4 million representing the impact of the AKW wheel recall campaign, (iii) $1.9 million of management retention bonuses reimbursed by Phelps Dodge, (iv) $2.2 million of Recapitalization professional fees and (v) $3.9 million of costs incurred in connection with the strike at the Henderson, Kentucky, facility. Adjusted EBITDA is not intended to represent cash flows from operations as defined by GAAP and should not be considered as an alternative to net income as an indicator of the Company's operating performance or to cash flows as a measure of liquidity. 15 RESULTS OF OPERATIONS COMPARISON OF FISCAL YEARS 2000 AND 1999 The following table sets forth certain income statement information of the Company for the fiscal years ended December 31, 2000 and December 31, 1999:
(Dollars in thousands) Fiscal 2000 Fiscal 1999 ----------- ----------- Net sales ........................ $ 475,804 100.0% $ 505,854 100.0% Gross profit ..................... 82,572 17.4% 115,078 22.7% Operating expenses ............... 32,849 6.9% 33,493 6.6% Income from operations ........... 49,723 10.5% 81,585 16.1% Equity in earnings of affiliates . 455 0.1% 2,316 0.5% Other income (expense) ........... (44,899) (9.4%) (40,069) (7.9%) Net income ....................... 2,513 0.5% 25,331 5.0% OTHER DATA: Adjusted EBITDA .................. 89,345 18.7%(a) 111,682 21.6%(a)
- ------------------- (a) Represents Adjusted EBITDA less adjusted equity in earnings of affiliates as a percent of sales. NET SALES. Net sales decreased by $30.1 million, or 5.9%, in 2000 to $475.8 million, compared to $505.9 million for 1999. The decrease in net sales is primarily attributable to the significant cyclical downturn of the entire Heavy/Medium commercial vehicle market. The cyclicality of this market is affected by a number of economic factors including inventory levels, interest rates, industrial production, fuel prices, driver shortages and general economic demand for consumer goods. During the latter half of 2000, the severe industry downturn caused most of our OEM customers to significantly cutback production levels. This reduction, coupled with continued softness in the aftermarket, significantly affected Accuride's sales volumes. We anticipate the demand for Heavy/Medium Trucks to continue to be depressed the first half of 2001 with gradual improvement beginning in the second half of the year. On a pro-forma basis reflecting the AKW acquisition effective April 1, 1999, sales for the twelve month period ended December 31, 2000 decreased by $54.0 million or 10.2% to $475.8 million from $529.8 million, as compared to the prior twelve-month period in 1999. GROSS PROFIT. Gross profit decreased by $32.5 million, or 28.2%, to $82.6 million for 2000 from $115.1 million for 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) loss of overhead absorption due to planned inventory reductions, (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 by $0.7 million, or 2.1% to $32.8 million for 2000 from $33.5 million for 1999. This decrease is primarily the result of cost containment efforts at the corporate level. EQUITY IN EARNINGS OF AFFILIATES. Equity in earnings of affiliates decreased by approximately $1.8 million to $0.5 million for 2000 from $2.3 million for 1999. The decrease is the direct result of the AKW acquisition on April 1, 1999 and the subsequent change in accounting from the equity method to reporting on a consolidated basis. OTHER INCOME (EXPENSE). Interest expense increased to $40.6 million for 2000 compared to $39.8 million for 1999 due to the increased debt incurred related to the acquisition of AKW on April 1, 1999 and higher interest rates. The increase in interest expense was partially offset by higher interest income. Other 16 expenses increased by $5.1 million to $6.2 million. The $5.1 million increase is primarily due to fluctuations in foreign currency rates that had a negative impact on hedging instruments resulting in realized and unrealized losses. ADJUSTED EBITDA. Adjusted EBITDA decreased by $22.4 million, or 20.1%, to $89.3 million for 2000 from $111.7 million for 1999 due to lower gross profit as described above. In determining Adjusted EBITDA for 2000, income from operations has been increased by depreciation and amortization (except for amortization of deferred financing costs), equity in earnings of affiliates, $3.2 million of costs related to aborted merger and acquisition activities, $5.4 million for restructuring and integration costs related to operations in Monterrey, Mexico, and $0.6 million for restructuring costs in the United States. In determining Adjusted EBITDA for 1999, income from operations has been increased by depreciation and amortization (except for amortization of deferred financing costs), equity in earnings of affiliates, $1.4 million of costs related to aborted merger and acquisition activities, and decreased by $1.5 million related to the re-evaluation of the AKW wheel recall campaign. NET INCOME. Net income decreased by $22.8 million, or 90.1 %, to $2.5 million for 2000 from $25.3 million for 1999 due to lower pretax earnings, as described above, and a resulting higher effective tax rate. The higher effective tax rate is attributable to permanent book to tax differences such as nondeductible goodwill amortization and taxable inflationary gains in Mexico in relation to lower pretax income. Of the $2.5 million of net income in 2000, $1.5 million relates to an extraordinary gain, net of bond issue expense and tax, resulting from the repurchase of $10.1 million principal amount of our Senior Subordinated Notes for $7.3 million. In response to the industry downturn, we have taken the following actions to better position the Company for the challenges facing us in the near term: - - Increased focus on reducing SG&A expenditures; - - Reduced capital spending; - - Intensified efforts to reduce working capital expenditures; - - Heightened focus on continuous improvement initiatives. COMPARISON OF FISCAL YEARS 1999 AND 1998 The following table sets forth certain income statement information of the Company for the fiscal years ended December 31, 1999 and December 31, 1998:
(Dollars in thousands) Fiscal 1999 Fiscal 1998 ----------- ----------- Net sales .......................... $ 505,854 100.0% $ 383,583 100.0% Gross profit ....................... 115,078 22.7% 82,554 21.5% Operating expenses ................. 33,493 6.6% 34,034 8.9% Income from operations ............. 81,585 16.1% 48,520 12.6% Equity in earnings of affiliates ... 2,316 0.5% 3,929 1.0% Other income (expense) ............. (40,069) (7.9%) (35,215) (9.2%) Net income ......................... 25,331 5.0% 7,951 2.1% OTHER DATA: Adjusted EBITDA .................... 111,682 21.6%(a) 88,160 21.1%(a)
- ------------------- (a) Represents Adjusted EBITDA less adjusted equity in earnings of affiliates as a percent of sales. NET SALES. Net sales increased by $122.3 million, or 31.9%, in 1999 to $505.9 million, compared to $383.6 million for 1998. The increase in net sales is primarily due to (i) including total sales from AKW with 17 the consolidated sales of the Company effective April 1, 1999, the date of the AKW acquisition, (ii) an increase in sales at the Columbia, Tennessee, facility and (iii) an increase in industry volumes for heavy/medium wheels. Sales from AKW in 1999 were $76.1 million compared to $0 in 1998 as AKW was previously accounted for on the equity method as "equity in earnings of affiliates" and was not consolidated prior to the acquisition. Excluding the $76.1 million in sales at AKW, net sales would have increased by $46.2 million, or 12.0%, in 1999 compared to 1998. Sales of products from the new Columbia, Tennessee, facility, which started operations in August 1998, were $34.5 million in 1999 compared to $10.3 million in 1998. The remaining increase in sales of $22.0 million is a result of an increase in industry volume. GROSS PROFIT. Gross profit increased by $32.5 million, or 39.3%, to $115.1 million for 1999 from $82.6 million for 1998. The $32.5 million increase in gross profit was due to (i) $22.1 million gross profit at AKW, which has been accounted for on a consolidated basis effective with the AKW acquisition on April 1, 1999, and (ii) an overall increase in industry Heavy/Medium Wheels sales volume. Partially offsetting this increase were lower gross profits at AdM. AdM's gross profit decreased $3.8 million from $8.9 million in 1998 to $5.1 million in 1999. The decrease in gross profit at AdM was due to a slowdown in the Latin American market and higher than anticipated ramp up costs of the new AdM facility. Gross profit percent for the total Company improved by 1.2% from 21.5% in 1998 to 22.7% in 1999. The increase in gross profit as a percentage of sales is primarily due to an overall increase in volume and resulting per unit cost reductions. The improvements were achieved by effectively controlling the costs associated with the labor strike at the Henderson, Kentucky, facility and a reduction in costs associated with the August 1998 start up of the Columbia, Tennessee, facility. OPERATING EXPENSES. Operating expenses decreased by $0.5 million, or 1.5% to $33.5 million for 1999 from $34.0 million for 1998. This decrease was due to one-time operating expenses of $3.3 million incurred in 1998 for start-up costs relating to the new Columbia, Tennessee, facility; professional fees of $2.2 million related to the Company's recapitalization; and the management retention bonuses of $1.9 million paid by Phelps Dodge Corporation, a previous principal stockholder in conjunction with the Company's recapitalization. Excluding the 1998 expenses for the Columbia, Tennessee, facility start- up costs, the professional fees related to the Recapitalization and the management retention bonuses, operating expenses increased by $6.9 million from $26.6 million in 1998 to $33.5 million in 1999. This increase was primarily due to (i) a $2.0 million increase in selling, general and administrative expense and research and development costs associated with AKW, which has been accounted for on a consolidated basis effective with the AKW acquisition on April 1, 1999, (ii) $1.0 million of goodwill associated with the acquisition of AKW, (iii) $1.4 million of costs related to aborted mergers and acquisitions activities, (iv) $1.5 million increase in research and development cost, and (v) $0.9 million increase in SG&A expenses related to increased stand-alone costs. EQUITY IN EARNINGS OF AFFILIATES. Equity in earnings of affiliates decreased by approximately $1.6 million to $2.3 million for 1999 from $3.9 million for 1998. The decrease is the direct result of the AKW acquisition on April 1, 1999 and the subsequent change in accounting from the equity method to reporting on a consolidated basis. OTHER INCOME (EXPENSE). Interest expense increased to $39.8 million for 1999 compared to $33.1 million for 1998 due to the increased debt incurred related to the acquisition of AKW on April 1, 1999. Other expenses decreased by $1.8 million to $0.3 million. The $0.3 million consists primarily of currency loss offset by interest income. ADJUSTED EBITDA. Adjusted EBITDA increased by $23.5 million, or 26.6%, to $111.7 million for 1999 from $88.2 million for 1998 due to higher steel product sales volume. In determining Adjusted EBITDA for 1999, income from operations has been increased by depreciation and amortization (except for amortization of deferred financing costs), equity in earnings of affiliates, $1.4 million of costs related to aborted merger and acquisition activities, and decreased by $1.5 million related to the re-evaluation of the AKW wheel recall campaign. In determining Adjusted EBITDA for 1998, income from operations has been increased by depreciation and amortization (except for amortization of deferred financing costs), equity in 18 earnings of affiliates and (i) an estimated $3.9 million of costs incurred in connection with the strike in 1998 at the Company's facility in Henderson, Kentucky, (ii) $1.9 million of management retention bonuses reimbursed by Phelps Dodge, a previous principal stockholder, in 1998, (iii) $2.2 million of Recapitalization professional fees, (iv) $3.4 million representing the impact of the AKW wheel recall campaign implemented in 1998 and (v) $1.1 million of estimated restructuring costs at the London, Ontario, facility. NET INCOME. Net income increased by $17.3 million, or 216 %, to $25.3 million for 1999 from $8.0 million for 1998. The increase was a result of higher pretax earnings in 1999, as described above, a lower effective tax rate, and a decrease in minority interest due to the acquisition of AdM on July 16, 1999. EFFECTS OF INFLATION. The effects of inflation were not considered material during fiscal years 2000, 1999 or 1998. CAPITAL RESOURCES AND LIQUIDITY Accuride's primary sources of liquidity are cash flow from operations and borrowing under the Revolver. Primary uses of cash are funding working capital, capital expenditures and debt service. As of December 31, 2000, Accuride had cash and short- term investments of $38.5 million compared to $32.5 million at the beginning of the year. Operating activities provided $66.3 million which were used to fund the financing activities of $8.6 million, investing activities of $51.7 million and an increase in cash and cash equivalents of $6.0 million. The $8.6 million of financing activities include the prepayment of $11.7 million in term loans, the repurchase of $10.1 million principal amount of our Senior Subordinated Notes for a net cash amount of $7.3 million, $0.3 million redemption of stock, offset by $10.0 million borrowed against the revolver and $0.7 million proceeds from stock subscriptions receivable. Investing activities during the year ended December 31, 2000 were $51.7 million compared to $124.3 million for the year ended December 31, 1999. The 2000 investing activities were capital expenditures of $2.5 million at AdM, $30.5 million at AKW, $5.0 million at Columbia, Tennessee and $13.7 million in the base business. In 1999, investing activities included the AdM Acquisition of $7.4 million and the AKW Acquisition of $71.1 million. Also included in the 1999 investing activities were capital expenditures at AdM of $15.2 million, at AKW of $8.8, at Columbia, Tennessee, of $1.8 million and capital spending for the base business of $20.0 million Cash flow from financing activities during the year ended December 31, 2000 was a use of $8.6 million compared to a source of $66.5 million for the year ended December 31, 1999. Accuride's capital expenditures in 2000 were $51.7 million. Accuride expects its capital expenditures to be approximately $19 million in 2001. It is anticipated that these expenditures will fund (i) investments in productivity and capacity expansion improvements in 2001 of approximately $7.0 million; (ii) maintenance of business expenditures of approximately $9.3 million; and (iii) quality improvements of approximately $2.9 million. Future investments in productivity improvements will focus on the completion of our aluminum forging and machining capacity expansion and the completion of our new assembly process for light wheels. ACCURIDE DE MEXICO CREDIT AGREEMENT. Accuride finalized a $32.5 million credit facility for AdM on July 9, 1998. This credit facility is comprised of a term loan of $25.0 million and a working capital facility of $7.5 million. Repayment of the term loan is to be made in eight substantially equal quarterly installments commencing June 25, 2001. The working capital facility terminates on July 9, 2001, unless extended for successive one-year periods at the option of the lenders. Interest on the term loan and working capital advances is based on the London interbank offered rate ("LIBOR") plus an applicable margin. Effective September 13, 1999 the AdM credit facility was amended to reflect a parent guaranty executed by Accuride, guaranteeing the repayment of the advances under this facility. Effective December 31, 1999, the AdM credit facility was amended to modify and delete certain covenants that were inconsistent and duplicative with similar covenants contained in Accuride's Amended and Restated Credit Agreement described below. 19 Effective March 31, 2000, the AdM credit facility was further amended to terminate Accuride's and AdM's obligations under a completion guaranty for the Monterrey, Mexico, facility. Effective December 14, 2000, the AdM credit facility was further amended to allow AdM to issue shares of capital stock to affiliates of Accuride. In August 2000, AdM elected to prepay the principal installments of the term facility due June 25, 2001, September 25, 2001 and December 25, 2001. The total amount prepaid was $9.3 million. As of December 31, 2000, $7.5 million was outstanding under the working capital facility and $15.6 million was outstanding under the term facility. AMENDED AND RESTATED CREDIT AGREEMENT. On April 16, 1999 Accuride entered into an amended and restated credit agreement (the "Amended Credit Agreement") with a syndicate of banks and other financial institutions (the "Lenders") led by Citicorp USA, Inc., as administrative agent (the "administrative agent"), Salomon Smith Barney, Inc., as arranger, Bankers Trust Company, as syndication agent, and Wells Fargo Bank N.A. as documentation agent. The Amended Credit Agreement provided for an additional $100.0 million term loan ("Term C") which matures on January 21, 2007. Term C was added to the previous term loans of (i) $60.0 million that matures on January 21, 2005 ("Term A") and (ii) $75.0 million that matures on January 21, 2006 ("Term B"). Accuride's Canadian subsidiary is the borrower under Term A, and Accuride has guaranteed the repayment of such borrowing under Term A and all other obligations of the Canadian subsidiary under the Amended Credit Agreement. Accuride also has a $140.0 million Revolver, which declines to $100.0 million on January 21, 2003 and matures on January 21, 2004. As of December 31, 2000, $10.0 million was outstanding under the Revolver. The Term A and B loans provide for 1% annual amortization prior to maturity and the Term C loan provides for 1% annual amortization through January 21, 2005, with the final two years each providing for 47% amortization. In October 1999 Accuride prepaid the mandatory principal payments on the term loans due on January 21, 2000 and January 21, 2001. In April 2000 Accuride prepaid the mandatory principal payments on the term loans due on January 21, 2002. Interest on the term loans and the Revolver is based on LIBOR plus an applicable margin. The loans are secured by, among other things, the shares of stock, partnership interests and limited liability company ownership interests of Accuride's subsidiaries. DESCRIPTION OF THE NOTES. In January 1998 Accuride issued the $200 million Notes pursuant to the Indenture. The Indenture is limited in aggregate principal amount to $300.0 million, of which $200.0 million were issued as Private Notes and subsequently exchanged for Exchange Notes, which exchange has been registered under the Securities Act of 1933, as amended. The Indenture provides certain restrictions on the payment of dividends by Accuride. The Indenture is subject to and governed by the Trust Indenture Act of 1939, as amended. The Notes are general unsecured obligations of Accuride and are subordinated in right of payment to all existing and future Senior Indebtedness (as defined in the Indenture). The Notes mature on February 1, 2008. Interest on the Notes accrues at the rate of 9.25% per annum and is due and payable semi-annually in arrears on February 1 and August 1, commencing on August 1, 1998, to holders of record of the Notes on the immediately preceding January 15 and July 15. During 2000, the Company repurchased $10.1 million principal amount of its Senior Subordinated Notes for $7.3 million resulting in a net $1.5 million extraordinary gain. Management believes that cash flow from operations and availability under the Revolver will provide adequate funds for Accuride's foreseeable working capital needs for the next twelve months, 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 on acceptable terms or at all. Accuride's ability to fund its working capital needs, planned capital expenditures and scheduled debt payments, 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 Accuride's control. RESTRICTIVE DEBT COVENANTS. Accuride's credit documents contain numerous financial and operating covenants that limit the discretion of management with respect to certain business matters. These covenants 20 place significant restrictions on, among other things, the ability to incur additional debt, to create liens, to make certain payments and investments and to sell or otherwise dispose of assets and merge or consolidate with other entities. Accuride is also required to meet certain financial ratios and tests including leverage ratio, interest coverage ratio, and fixed charge ratio. A failure to comply with the obligations contained in the credit documents could result in an event of default, and possibly the acceleration of the related debt and the acceleration of debt under other instruments evidencing indebtedness that may contain cross-acceleration or cross-default provisions. Accuride is currently in compliance with its financial covenants and ratios, although a continuation of recent negative sales trends could impact our future compliance with such covenants. NEW ACCOUNTING PRONOUNCEMENT. Statement of Financial Accounting Standards (SFAS) No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, is effective for all fiscal years beginning after June 15, 2000. SFAS 133, as amended, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. Under SFAS 133, certain contracts that were not formerly considered derivatives may now meet the definition of a derivative. The Company has adopted SFAS 133 effective January 1, 2001. Management does not expect the adoption of SFAS 133 to have a significant impact on the financial position, results of operations, or cash flows of the Company. INDUSTRY OUTLOOK Although the commercial vehicle industry has been strong in recent years, the industry is cyclical, and is currently in the midst of a severe cyclical downturn. Current industry forecasts by America's Commercial Transportation Publications, the Automotive Market Research Council, and Martin Labbe Associates (collectively referred to as "Analysts"), predict that the North American commercial vehicle industry will continue to be depressed for the first half of 2001 with gradual improvement beginning in the second half of the year. The commercial vehicle industry and the global vehicle industry in general are in a period of transition, marked by strengthening competition, geographic expansion of manufacturing, and consolidation at both vehicle manufacturer and supplier levels. These trends are expected to continue for the near future. Major OEM customers and their suppliers are consolidating and continue to extend their globalization efforts and emphasize their desire for global support through local production. These customers also continue to reduce the number of suppliers in their supply base. As a result of these developments and recognizing the importance of the customer to its business, we expect in the future to increasingly serve other global commercial and consumer wheel markets through either expansion, acquisition, or strategic alliances. In a further effort to reduce their number of suppliers, OEMs are also moving toward systems sourcing. This provides opportunity for Wheel makers to expand into related components such as hubs and drums, suspension systems, brake systems, and tire/Wheel assembly. In the light vehicle Wheel market in North America, Wheels are now considered to be more integral to styling, and the Company believes that styling and design innovation will continue to play a key role for both steel and aluminum Wheel suppliers in this market. Wheels for on-road vehicles, both consumer and commercial, are generally made of steel or aluminum, which offer vehicle OEMs a range of design options. Steel Wheels, which are heavier than aluminum Wheels, are generally lower cost, high volume production products. Aluminum Wheels are lighter in weight, more readily stylized and more expensive than steel Wheels. Market and general economic conditions can significantly impact the relative share of the two materials in both consumer and commercial Wheel markets, due to their large difference in cost and the elasticity of price and demand. 21 FACTORS THAT MAY AFFECT FUTURE RESULTS In this report, Accuride has made various statements regarding current expectations or forecasts of future events. These statements are "forward-looking statements" within the meaning of that term in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are also made from time-to-time in press releases and in oral statements made by Accuride's officers. Forward-looking statements are identified by the words "estimate," "project," "anticipate," "will continue," "will likely result," "expect," "intend," "believe," "plan," "predict" and similar expressions. Forward looking statements also include statements regarding the availability of working capital and additional capital to Accuride, continuation of operational improvements and sources of supply of raw materials, the lack of future supply disruption as a result of labor issues, and improvement in demand for our products and the expansion of our markets. Such forward- looking statements are based on assumptions and estimates, which although believed to be reasonable, may turn out to be incorrect. Therefore, undue reliance should not be placed upon these estimates and statements. Accuride cannot assure you that any of these statements or estimates will be realized and actual results may differ from those contemplated in these "forward-looking statements." Accuride undertakes no obligation to publicly update any forward- looking statements, whether as a result of new information, future events, or otherwise. You are advised to consult further disclosures Accuride may make on related subjects in its filings with the SEC. Accuride cannot assure you that its expectations, beliefs, or projections will result or be achieved or accomplished. In addition to other factors discussed in the report, some of the important factors that could cause actual results to differ materially from those discussed in the forward-looking statements include the following: SIGNIFICANT INDEBTEDNESS - ACCURIDE'S SIGNIFICANT DEBT COULD ADVERSELY AFFECT ITS FINANCIAL RESOURCES AND PREVENT IT FROM SATISFYING ITS DEBT SERVICE OBLIGATIONS. Accuride has a significant amount of indebtedness and may also incur additional indebtedness in the future. Accuride may not generate sufficient cash flow from operations, or have future borrowings available to it, sufficient to pay its debt. At December 31, 2000, total indebtedness was $448.9 million and its total stockholders' deficit was $29.2 million. Accuride's ability to make debt payments or refinance its indebtedness depends on future performance, which, to a certain extent, is subject to general economic, financial, competitive and other factors, some of which are beyond our control. Based upon Accuride's current level of operations and anticipated growth, management believes that available cash flow, together with available credit, will be adequate to meet its financial needs. There can be no assurance, however, that Accuride's business will generate sufficient cash flow from operations or that future borrowings will be available in an amount sufficient to enable it to pay its debts or to make necessary capital expenditures, or that any refinancing of debt would be available on commercially reasonable terms or at all. Accuride's substantial indebtedness could have important consequences including, but not limited to, the following: (i) the ability to obtain additional financing for acquisitions, working capital, capital expenditures, or other purposes may be impaired or unavailable; (ii) a substantial portion of cash flow will be used to pay interest expense and debt amortization, which will reduce the funds that would otherwise be available for operations and future business opportunities; (iii) a substantial decrease in net operating cash flows or an increase in expenses could make it difficult for Accuride to meet its debt service requirements and force it to modify operations; (iv) Accuride may be more highly leveraged than its competitors, which may place it at a competitive disadvantage; (v) Accuride's substantial indebtedness may make it more vulnerable to a downturn in its business or in the economy generally; and (vi) some of Accuride's existing debt contains financial and restrictive covenants that limit its ability to, among other things, borrow additional funds, dispose of assets, and pay cash dividends. A significant portion of our outstanding indebtedness bears interest at variable rates. While Accuride has attempted to limit its exposure to increases in interest rates by entering into interest rate protection agreements, such agreements will not eliminate completely the exposure to variable rates. Any increase in 22 interest rates will reduce funds available to Accuride for its operations and future business opportunities and will exacerbate the consequences of the leveraged capital structure. RESTRICTIVE DEBT COVENANTS - COVENANTS AND RESTRICTIONS IN ACCURIDE'S CREDIT DOCUMENTS LIMIT ITS ABILITY TO TAKE CERTAIN ACTIONS. Accuride's credit documents contain numerous significant financial and operating covenants that limit the discretion of management with respect to certain business matters. These covenants include, among others, significant restrictions on Accuride's ability to: - - declare dividends or redeem or repurchase capital stock; - - incur certain additional debt; - - create liens; - - make certain payments and investments; - - sell or otherwise dispose of assets; and u consolidate with other entities. Accuride must also meet certain financial ratios and tests. Failure to comply with the obligations contained in the credit documents could result in an event of default, and possibly the acceleration of the related debt and the acceleration of debt under other instruments evidencing debt that may contain cross-acceleration or cross-default provisions. Accuride is currently in compliance with its financial covenants, although a continuation of recent negative sales trends could impact our future compliance with such covenants. Should the need arise, Accuride will negotiate with its lender to modify and expand various financial covenants, however, no assurance can be given that such negotiations will result in modifications that will allow Accuride to continue to be in compliance or otherwise be acceptable to us. CYCLICAL AND SEASONAL INDUSTRY - THE WHEEL INDUSTRY IS CYCLICAL AND SEASONAL, RESULTING IN FLUCTUATIONS OF REVENUE AND INCOME. The Heavy/Medium Wheel and Light Wheel industries are highly cyclical and, in large part, depend on the overall strength of the demand for Heavy/Medium Trucks, Trailers, and Light Trucks. These industries have historically experienced significant fluctuations in demand based on factors such as general economic conditions, interest rates, government regulations, and consumer confidence. The industry is in the midst of a major downturn. This significant decrease in overall consumer demand for Heavy/Medium Trucks, Trailers, and/or Light Trucks is having a negative impact on Accuride's business. In addition, Accuride's operations are typically seasonal as a result of regular customer maintenance and model changeover shutdowns, which typically occur in the third and fourth quarter of each calendar year. This seasonality may result in decreased net sales and profitability during the third and fourth fiscal quarters of each calendar year. DEPENDENCE ON MAJOR CUSTOMERS - THE LOSS OF ONE OF ACCURIDE'S SIGNIFICANT CUSTOMERS COULD HAVE AN ADVERSE EFFECT ON ITS BUSINESS. Accuride derived approximately 20.3%, 15.1% and 12.3% of its 2000 net sales from Ford, Freightliner and International, respectively. Accuride has been a supplier to these customers for many years. Accuride is continuing to engage in efforts intended to improve and expand its relations with each of these customers. Accuride has supported its position with these customers through direct and active contact with end users, trucking fleets and dealers, and has located certain of its sales personnel in offices near these customers and most of its other major customers. Although Accuride believes that its relationship with these customers is good, Accuride cannot assure you that Accuride will maintain or improve these relationships, that these customers will continue to do business with Accuride as they have in the past, or that Accuride will be able to supply these customers or any of its other customers at current levels. The loss of a significant portion of Accuride's sales to Freightliner, Ford and/or International could have a material adverse effect on its business. In addition, the delay or cancellation of material orders from, or problems at, Freightliner, Ford and International or any of its other major customers could have a material adverse effect on its business. OEM SUPPLIER INDUSTRY - ACCURIDE DEPENDS ON ITS CUSTOMERS THAT ARE OEMS IN THE HEAVY/MEDIUM TRUCK, TRAILER AND LIGHT TRUCK INDUSTRIES. Accuride is a supplier to OEMs in the 23 Heavy/Medium Truck, Trailer and Light Truck industries, which are characterized by a small number of OEMs that are able to exert considerable pressure on suppliers to reduce costs, improve quality, and provide enhanced design and engineering capabilities. OEMs continue to demand and receive price reductions and measurable increases in quality through their use of competitive selection processes, rating programs, and various other arrangements. Although Accuride has been able to offset a portion of these price reductions through production cost savings, Accuride cannot assure you that it will be able to generate such cost savings in the future. The inability to generate sufficient production cost savings in the future to offset such price reductions provided to OEMs could adversely affect Accuride's profitability. Additionally, OEMs have generally required suppliers to provide more design engineering input at earlier stages of the product development process, the costs of which have, in some cases, been absorbed by the suppliers. Future price reductions, increased quality standards, or additional engineering capabilities required by OEMs could have a negative impact on our business. LABOR RELATIONS - THE MAJORITY OF ACCURIDE EMPLOYEES ARE MEMBERS OF LABOR UNIONS AND ANY LABOR DISPUTES COULD ADVERSELY AFFECT ITS BUSINESS. The majority of Accuride's employees are members of labor unions. As of March 1, 2001, approximately 87% of Accuride's employees at the Henderson, Kentucky, facility were represented by the UAW and approximately 81% of Accuride's employees at the Ontario, Canada, facility were represented by the CAW. The approximate percentage of employees at the Erie, Pennsylvania, and Monterrey, Mexico, facilities who are represented by the UAW and the El Sindicato Industrial de Trabajadores de Nuevo Leon is 75% and 81%, respectively. Accuride currently has a lockout at the Henderson, Kentucky, facility (See "Item 1 - Business - Employees"). Throughout the lockout period, operations have continued with salaried employees and outside contractors. There has not been, and Accuride believes that there will not be any supply disruption to its customer base; however, there can be no assurance to that effect. A supply disruption to Accuride's customer base could have a material adverse effect on its business. RAW MATERIALS - ACCURIDE IS VULNERABLE TO SIGNIFICANT PRICE INCREASES AND SHORTAGES. Accuride uses substantial amounts of raw steel and aluminum. Although steel is generally available from a number of sources, Accuride has obtained favorable sourcing by negotiating and entering into high-volume contracts with third parties with terms ranging from one to three years. Accuride obtains aluminum from various third-party suppliers. While Accuride believes that its supply contracts can be renewed on acceptable terms, Accuride cannot assure you that it will be successful in renewing these contracts on such favorable terms or at all. A substantial interruption in the supply of steel or aluminum or inability to obtain a supply of raw steel or aluminum on commercially desirable terms could have an adverse effect on Accuride's business. Although the price of steel has not been volatile in recent periods and Accuride has historically been able to pass through to its customers steel price increases, Accuride cannot assure you that rapid and significant changes in the price of steel will not occur in the near future or that it will be able to pass on any such cost increases to its customers. Aluminum prices have been volatile; however, Accuride has used commodity price swaps to hedge against the impact of these changes. STRONG COMPETITION - ACCURIDE OPERATES IN A HIGHLY COMPETITIVE ENVIRONMENT. Accuride's product line is broad and it competes with different companies in different markets. Accuride's markets are characterized by companies with substantial capital, established sales forces, extensive research and development facilities and personnel, and other resources. Several of Accuride's competitors have substantially greater financial or other resources and therefore may be more competitive. In addition, OEMs may expand their internal production of Wheels, shift sourcing to other suppliers or take other actions that could reduce the market for Accuride's products and have a negative impact on our business. Accuride may encounter increased competition in the future from existing competitors or new competitors. Also, market expansion and planned entry into additional markets may expose Accuride to an increasing number of well- capitalized competitors. ENVIRONMENTAL LIABILITIES - ACCURIDE MAY BE SUBJECT TO LIABILITY UNDER ENVIRONMENTAL LAWS. Accuride is subject to various foreign, federal, state and local environmental laws, ordinances, and regulations, 24 including those governing discharges into the air and water, the storage, handling and disposal of solid and hazardous wastes, the remediation of soil and groundwater contaminated by petroleum products or hazardous substances or wastes, and the health and safety of its employees. Under certain of these laws, ordinances or regulations, a current or previous owner or operator of property may be liable for the costs of removal or remediation of certain hazardous substances or petroleum products on, under, or in its property, without regard to whether the owner or operator knew of, or caused, the presence of the contaminants, and regardless of whether the practices that resulted in the contamination were legal at the time they occurred. The presence of, or failure to remediate properly such substances, may adversely affect the ability to sell or rent such property or to borrow using such property as collateral. Persons who generate, arrange for the disposal or treatment of, or dispose of hazardous substances may be liable for the costs of investigation, remediation or removal of these hazardous substances at or from the disposal or treatment facility, regardless of whether the facility is owned or operated by that person. Additionally, the owner of a site may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from a site. Accuride believes that it is in material compliance with environmental laws, ordinances and regulations and does not anticipate any material adverse effect on earnings or competitive position relating to environmental matters. It is possible that future developments could lead to material costs of environmental compliance. The nature of Accuride's current and former operations and the history of industrial uses at some of its facilities expose Accuride to the risk of liabilities or claims with respect to environmental and worker health and safety matters which could have a negative impact on its business. KEY MANAGEMENT - ACCURIDE DEPENDS ON KEY MANAGEMENT FOR THE SUCCESS OF ITS BUSINESS. Accuride's success depends largely upon the abilities and experience of certain key management personnel. The loss of the services of one or more of these key personnel, and in particular William P. Greubel, President and Chief Executive Officer, could have a negative impact on our business. Accuride does not maintain key-man life insurance policies on any of its executives. CONTROL BY KKR AFFILIATES - THE RIGHTS OF ACCURIDE'S SHAREHOLDERS COULD BE ADVERSELY AFFECTED BECAUSE OF THE CONCENTRATED CONTROL OF ITS STOCK. As of December 31, 2000, approximately 87% of Accuride's Common Stock was held by Hubcap Acquisition. Hubcap Acquisition is a Delaware limited liability company whose members are KKR 1996 Fund L.P. and KKR Partners II, L.P. KKR 1996 Fund L.P., which owns more than a 95% equity interest in Hubcap Acquisition, is a Delaware limited partnership whose sole general partner is KKR Associates 1996 L.P. KKR Associates 1996 L.P. is a Delaware limited partnership whose sole general partner is KKR 1996 GP L.L.C. KKR 1996 GP L.L.C. is a Delaware limited liability company whose members are also the members of the limited liability company that is the general partner of Kohlberg Kravis Roberts & Co. L.P. ("KKR"). Accordingly, affiliates of KKR control Accuride and have the power to elect all of its directors, appoint new management and approve any action requiring the approval of its shareholders, including adopting amendments to its Certificate of Incorporation and approving mergers or sales of substantially all of its assets. Accuride cannot give any assurance that the interests of KKR and its affiliates will not conflict with the interests of other holders of Accuride's securities. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK Accuride, 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. Accuride selectively uses derivative financial instruments to manage these risks. Accuride 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 December 31, 2000, Accuride had open foreign exchange forward contracts with a notional amount of $97.1 million. Foreign exchange forward contract maturities were from one to eleven months. 25 Accuride's hedging activities provide only limited protection against currency risks. Factors that could impact hedge program effectiveness 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. Accuride monitors its foreign currency cash flow transactions and executes contracts to hedge its foreign exchange exposures. The use of forward contracts protects 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 Accuride's foreign currency derivatives held at December 31, 2000, would have an impact of approximately $9.7 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 Accuride's foreign denominated assets, liabilities and firm commitments. Accuride 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 December 31, 2000:
(Dollars in Thousands) 2001 2002 2003 2004 2005 Thereafter Total Fair Value ---- ---- ---- ---- ---- ---------- ----- ---------- Long-term Debt: Fixed $ 189,900 $ 189,900 $ 131,031 Avg. Rate 9.25% 9.25% Variable $ 0 $ 12,500 $ 5,475 $ 2,350 $ 58,150 $ 163,750 $ 242,225 $ 242,225 Avg. Rate 8.38% 8.46% 8.57% 8.08% 8.74% 8.56%
Accuride has used an interest rate swap to alter interest rate exposures between fixed and floating rates on a portion of long-term debt. As of December 31, 2000, $98.0 million notional amount of interest rate swap was outstanding. On average during the year ended December 31, 2000, Accuride paid 5.75% as a fixed rate and received 6.45% on the interest rate swap. Under the terms of the interest rate swap, Accuride 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 notional principal amount. The interest rate swap matured in January 2001. Accuride also used an interest rate cap to set a ceiling on the maximum floating interest rate Accuride would incur on a portion of Accuride's long-term debt. As of December 31, 2000, $34.3 million notional amount of interest rate cap was outstanding. Under the terms of the interest rate cap, Accuride 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 matured in January 2001. Accuride 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. Accuride 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, commodity price swaps are used to hedge against changes in certain commodity prices. At December 31, 2000, Accuride had open commodity price swaps with a notional amount of $23.2 million. These commodity price swaps had maturities from one to twelve months. A 10% adverse change in commodity prices would have an impact of approximately $2.3 million on the fair value of these contracts. Accuride is exposed to credit related losses in the event of nonperformance by the counterparty to the commodity price swaps, although no such losses are expected as the counterparty is a financial institution having an investment grade credit rating. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Attached, beginning at page F-1. 26 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not Applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT DIRECTORS AND EXECUTIVE OFFICERS The directors and executive officers of the Company, and their ages as of December 31, 2000, are as follows: Name Age Position - ---- --- -------- William P. Greubel....................... 49 Director, President and Chief Executive Officer John R. Murphy........................... 50 Executive Vice President/Finance and Chief Financial Officer David K. Armstrong....................... 44 Senior Vice President and General Counsel Richard J. Giromini...................... 47 Senior Vice President/Technology and Continuous Improvement Elizabeth I. Hamme....................... 50 Senior Vice President/Human Resources Terrence J. Keating...................... 51 Senior Vice President and General Manager-Wheels Henry R. Kravis.......................... 56 Director George R. Roberts........................ 57 Director James H. Greene, Jr...................... 50 Director Todd A. Fisher........................... 35 Director Frederick M. Goltz....................... 29 Director
WILLIAM P. GREUBEL. Mr. Greubel has been a director and the Chief Executive Officer of the Company since January 21, 1998. Mr. Greubel has been president of the Company since 1994. He is also a director of AOT. Prior to joining the Company, from 1974 to 1994, Mr. Greubel held positions at AlliedSignal Corporation in sales, marketing and operations. His last two positions were Vice President and General Manager for the Environmental Catalysts and Engineering Plastics businesses. Mr. Greubel holds a B.A. in Economics and an M.B.A. from Rutgers University. JOHN R. MURPHY. Mr. Murphy joined the Company in March, 1998 as Vice President-Finance and Chief Financial Officer. He was promoted to Executive Vice President/Finance and Chief Financial Officer in November 1999. Prior to joining the Company, Mr. Murphy was the President and Chief Executive Officer of Falconite, Inc., a privately held rental equipment company. From 1994 to 1997, Mr. Murphy was Executive Vice President-Administration, Chief Financial Officer and Corporate Secretary of North American Stainless, Inc. Mr. Murphy also held the position of Vice President of Finance and Strategic Planning for Armco Advanced Materials Company, a stainless and electrical specialty steel manufacturing company. Mr. Murphy holds a B.S. in Accounting from the Pennsylvania State University and an M.B.A. from the University of Colorado. 27 DAVID K. ARMSTRONG. Mr. Armstrong joined the Company as Vice President and General Counsel in October 1998. He was promoted to Senior Vice President and General Counsel effective November 1999. Mr. Armstrong also serves as Corporate Secretary. Prior to joining the Company, Mr. Armstrong was a partner at the law firm of Snell & Wilmer L.L.P. where he worked from 1993 through 1998. Mr. Armstrong holds a B.S. and MAcc in Accounting and a Juris Doctorate, all from Brigham Young University. RICHARD J. GIROMINI. Mr. Giromini currently serves as Senior Vice President/Technology and Continuous Improvement. Mr. Giromini joined the Company, as Vice President/General Manager of AKW L.P. in April 1998 and served as President and CEO of AKW L.P. from August 1998 through April 1999. From 1996 to 1998, Mr. Giromini was a Director of Manufacturing of ITT Automotive Inc. From 1991 to 1996, Mr. Giromini held the positions of Vice President/Operations and Plant General Manager of Hayes Wheels International, Inc. Mr. Giromini holds a B.S. in Mechanical and Industrial Engineering and a M.S. in Industrial Management from Clarkson University. ELIZABETH I. HAMME. Ms. Hamme joined the Company, as Vice President/Human Resources in February 1995. She was promoted to Senior Vice President/Human Resources in November 1999. Prior to joining the Company, Ms. Hamme served as an independent consultant to the manufacturing and financial services sectors since 1991. From 1989 to 1991, Ms. Hamme held the positions of Division Human Resources Manager and Group Manager of Human Resources Development and Compensation with FMC Corporation (Chemical Products Group). Ms. Hamme holds a B.A. in Political Science and an M.A. in Adult Education from the George Washington University. TERRENCE J. KEATING. Mr. Keating currently serves as Senior Vice President and General Manager-Wheels. Mr. Keating also serves as President of Accuride Canada, Inc. Mr. Keating joined the Company in December, 1996 as Vice President-Operations. From 1995 to November, 1996, Mr. Keating was the manager of Indianapolis Diesel Engine Plant of International Truck and Engine Corporation, a division of Navistar International Company. From 1990 to 1995, Mr. Keating was Vice President of Operations of Peerless Pump, Inc. Mr. Keating holds a B.S. in Mechanical Engineering Technology from Purdue University and an M.B.A. in Operations from Indiana University. He is certified by the American Production and Inventory Control Society (APICS) as an inventory management professional. HENRY R. KRAVIS. Mr. Kravis is a director of the Company. He is a managing member of KKR & Co., L.L.C., the limited liability company which serves as the general partner of KKR. He is also a director of the following public companies: Amphenol Corporation, Borden, Inc., The Boyds Collection, Ltd., Evenflo Company, Inc. The Gillette Company, IDEX Corporation, KinderCare Learning Centers, Inc., KSL Recreation Corporation, Owens-Illinois, Inc., PRIMEDIA, Inc., Regal Cinemas, Inc., Sotheby's Holdings Inc., and Spalding Holdings Corporation. Mr. Kravis is a first cousin of Mr. Roberts. GEORGE R. ROBERTS. Mr. Roberts is a director of the Company. He is a managing member of KKR & Co., L.L.C., the limited liability company which serves as the general partner of KKR. He is also a director of the following public companies: Amphenol Corporation, Borden, Inc., The Boyds Collection, Ltd., Evenflo Company, Inc., IDEX Corporation, KinderCare Learning Center, Inc., KSL Recreation Corporation, PRIMEDIA, INC., Safeway, Inc., Spalding Holdings Corporation, and Dayton Power and Light Inc. Mr. Roberts is a first cousin of Mr. Kravis. JAMES H. GREENE, JR. Mr. Greene is a director of the Company. He is a member of KKR & Co., L.L.C., the limited liability company which serves as the general partner to KKR. He is also a director of the following public companies: Owens-Illinois, Inc., Safeway Inc., Birch Telecom, Inc., Cais Internet, Inc., and Intermedia Communications, Inc. TODD A. FISHER. Mr. Fisher is a director of the Company. He has been a member of KKR & Co., L.L.C. since January 1, 2001 and was an executive of KKR from June 1993 to December 31, 2000. From July 28 1992 to June 1993, Mr. Fisher was an associate at Goldman, Sachs & Co. Mr. Fisher also serves as a director of the following public companies: Layne Christensen Company, and TA1 Limited. FREDERICK M. GOLTZ. Mr. Goltz is a director of the Company. He has been an executive of KKR since 1995 with the exception of the period from July 1997 to July 1998 during which time he earned an MBA at INSEAD. Prior to 1995, he was with Furman Selz Incorporated in its Corporate Finance Department. 29 ITEM 11. EXECUTIVE COMPENSATION COMPENSATION OF DIRECTORS. Members of the Board of Directors employed by the Company do not receive any separate compensation for services performed as a director. Those members of the Board of Directors not otherwise employed by the Company receive a $30,000 annual retainer. There is no separate compensation for service on the compensation or audit committees. See also "Item 13-Certain Relationships and Related Transactions." SUMMARY COMPENSATION TABLE The following table sets forth information with respect to the compensation paid by the Company for services rendered during the year ended December 31, 2000 to the Chief Executive Officer and to each of the four other most highly compensated executive officers of the Company (the "Named Executive Officers").
Long Term Compensation --------------------------------------------------- Annual Compensation Awards Payouts ------------------------------------- ------------------------ ------------------------- Restricted Securities Name and Principal Other Annual Stock Underlying LTIP All Other Position Year Salary Bonus Compensation (a) Award(s) Options/SARs Payouts Compensation (b) - ------------------ ---- ------ ----- ---------------- ---------- ------------ ------- ---------------- William P. Greubel 2000 $375,000 $326,574 $ 14,867 -- -- -- $194,733 (President and Chief 1999 $275,040 $172,685 $ 16,349 -- -- -- $ 22,553 Executive Officer) 1998 $240,000 $117,700 $ 9,226 -- -- -- $776,468 John R. Murphy (c) 2000 $239,788 $239,309 $ 22,168 -- -- -- $ 88,427 (Executive Vice President/ 1999 $195,600 $102,175 $ 23,645 -- -- -- $ 8,239 Finance & CFO) 1998 $130,800 -- $ 9,707 -- -- -- $ 27,226 Terrence J. Keating 2000 $201,240 $130,448 $ 20,692 -- -- -- $ 79,444 (Senior Vice President and 1999 $167,040 $ 78,447 $ 26,228 -- -- -- $ 12,747 General Manager/Wheels) 1998 $143,100 $ 61,800 $ 22,399 -- -- -- $215,315 David K. Armstrong (c) 2000 $179,700 $146,340 $ 24,838 -- -- -- $ 43,116 (Senior Vice President and 1999 $156,000 $ 22,533 $ 28,296 -- -- -- $ 2,817 General Counsel) 1998 $ 37,500 -- -- -- -- -- $ 23,878 Richard J. Giromini (c) 2000 $178,808 $130,457 $ 18,479 -- -- -- $ 25,374 Senior Vice President/ 1999 $ 81,000 -- $ 13,809 -- -- -- $ 1,595 Technology and CI 1998 -- -- -- -- -- -- --
(a) Compensation includes financial planning service fees, vacation sold, gift certificate, imputed income, overseas travel incentive, and gross-ups on financial planning and gift certificate as follows:
Financial Planning Gift Service Certificate Overseas Fees Plus Vacation Plus Imputed Travel Year Gross-up Sold Gross-up Income Incentive ---- -------- -------- ----------- ------- --------- Mr. Greubel............... 2000 $ 11,944 $ 2,885 $ 38 -- -- 1999 $ 11,733 $ 4,616 -- -- -- 1998 $ 9,226 -- -- -- -- Mr. Murphy................ 2000 $ 11,944 $ 3,762 $ 38 -- $ 6,424
30 1999 $ 17,104 $ 6,541 -- -- -- 1998 $ 9,707 -- -- -- -- Mr. Keating............... 2000 $ 11,944 $ 6,951 $ 38 -- $ 1,759 1999 $ 21,274 $ 4,954 -- -- -- 1998 $ 11,115 $ 11,284 -- -- -- Mr. Armstrong............. 2000 $ 12,053 $ 3,058 $ 37 -- $ 9,690 1999 $ 21,083 $ 7,213 -- -- -- 1998 -- -- -- -- -- Mr. Giromini.............. 2000 $ 14,201 $ 3,115 -- -- $ 1,163 1999 $ 10,840 $ 2,885 -- $ 84 -- 1998 -- -- -- -- --
(b) Compensation includes distribution for Phelps Dodge non-qualified savings plan paid in connection with Recapitalization, restricted stock payments, non-qualified deferred liability, retention bonus, contributions made by the Company to the employees' non-qualified savings plan (company match and/or profit sharing), the Executive Life Insurance Plan (which provides employees with a bonus to pay for a universal life insurance policy that is fully owned by the employee), personal excess coverage, moving relocation expenses, and gross-ups on non-qualified deferred liability and personal excess coverage as set forth below:
Make Whole Umbrella Distribution Contrib. to Company Insurance from Phelps Restricted Supplemental Match & Premium Dodge Stock Savings Plan Retention Profit ELIP Plus Year NQ Plan Payment Plus Gross-Up Bonus Sharing Premiums Gross-up Relocation ---- ------------- ---------- ------------- --------- ------- -------- --------- ---------- Mr. Greubel......... 2000 -- -- $173,635 -- $19,445 -- $1,653 -- 1999 -- -- $ 54 -- $17,184 $5,315 -- -- 1998 $ 39,061 $ 312,368 $ 4,000 $400,000 $17,500 $3,539 -- -- Mr. Murphy.......... 2000 -- -- $ 72,945 -- $13,829 -- $1,653 -- 1999 -- -- $ 27 -- $ 5,610 $2,602 -- -- 1998 -- -- -- -- -- $1,658 -- 25,568 Mr. Keating......... 2000 -- -- $ 66,726 -- $11,810 -- $908 -- 1999 -- -- -- -- $10,246 $2,501 -- -- 1998 -- -- -- $202,500 $11,323 $1,492 -- -- Mr. Armstrong....... 2000 -- -- $ 31,170 -- $11,029 -- $ 917 -- 1999 -- -- -- -- $ 1,624 $1,193 -- -- 1998 -- -- -- -- -- $ 867 -- 23,011 Mr. Giromini........ 2000 -- -- $ 18,734 -- $ 5,727 -- $ 913 -- 1999 -- -- -- -- -- $1,595 -- -- 1998 -- -- -- -- -- -- -- --
(c) Mr. Murphy began employment on March 25, 1999; Mr. Armstrong began employment on October 1, 1998; Mr. Giromini transferred from AKW L.P. to Accuride Corporation effective July 1, 1999. The following table gives information for options exercised by each of the Named Executive Officers in 2000 and the value (stock price less exercise price) of the remaining options held by those executive officers at year end, using management's estimate of the Common Stock value on December 31, 2000. 31 AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES
Number of Securities Value of Unexercised Underlying Unexercised In-the-Money Options/SARs at Options/SARs at Shares Fiscal Year-End Fiscal Year-End(a) Acquired on Value --------------------------- ----------------------------- Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable ---- ----------- -------- ----------- ------------- ----------- ------------- William P. Greubel ...... 0 $0 247.5 202.5 -- -- John R. Murphy .......... 0 $0 96.3 78.7 -- -- Terrence Keating ........ 0 $0 44 36 -- -- David K. Armstrong ...... 0 $0 44 36 -- -- Richard J. Giromini ..... 0 $0 44 36 -- --
(a) The value of the shares underlying the options as of December 31, 2000 is not in excess of the base price. There is no established trading market for the Company's Common Stock. PENSION PLAN TABLE
Years of Service ------------------------------------------------------------------------------ Remuneration 15 20 25 30 35 40 - ------------ -- -- -- -- -- -- 125,000 20,666 26,481 31,966 37,029 42,524 47,477 150,000 25,374 32,581 39,415 45,767 52,661 58,932 175,000 30,081 38,681 46,864 54,504 62,799 70,388 200,000 34,788 44,781 54,313 63,241 72,936 81,844 225,000 39,495 50,881 61,763 71,979 83,073 93,299 250,000 44,202 56,982 69,212 80,716 93,210 104,755 275,000 48,910 63,082 76,661 89,454 103,347 116,210 300,000 53,617 69,182 84,110 98,191 113,485 127,666 400,000 72,446 93,583 113,907 133,141 154,033 173,488 500,000 91,274 117,983 143,704 168,090 194,582 219,311 600,000 110,103 142,384 173,501 203,040 235,131 265,133 700,000 128,932 166,785 203,297 237,990 275,680 310,955 800,000 147,761 191,186 233,094 272,939 316,229 356,778
The above table details estimated annual benefits for Accuride salaried employees retiring December 31, 2000 at age 65. The benefits were calculated assuming the current plan provisions had always been in effect. The Accuride Cash Balance Pension Plan (the "Retirement Plan") provides a member upon retirement at age 65 with a pension for life with five years of payments guaranteed. Under the Retirement Plan, compensation includes bonuses. Benefit service includes all periods of employment with Accuride. Benefits under the Retirement Plan are subject to certain limitations under the Internal Revenue Code of 1986, as amended, and to the extent the result of such limitations would be a benefit less than would otherwise be paid under such Retirement Plan, 32 the difference is provided under the supplementary retirement provisions of the Accuride Corporation Supplemental Retirement Plan (the "Supplemental Plan"). The formula for determining benefits payable under the Retirement Plan is based on the 2000 social security wage base. The expected credited years of benefit service at normal retirement for the President and each of the four other most highly compensated executive officers as of December 31, 2000 are as follows: Mr. Greubel, 22 years; Mr. Murphy, 17 years; Mr. Keating, 18 years; Mr. Armstrong, 21 years; and Mr. Giromini, 20 years. The years of service are based on normal retirement for all executive officers under the Retirement Plan and the applicable provisions of the Supplemental Plan. 1998 STOCK PURCHASE AND OPTION PLAN In early 1998, the Company adopted the 1998 Stock Purchase and Option Plan for Key Employees of Accuride Corporation and Subsidiaries (the "1998 Plan"). The 1998 Plan provides for the issuance of shares of authorized but unissued or reacquired shares of Common Stock, subject to adjustment to reflect certain events such as stock dividends, stock splits, recapitalizations, mergers or reorganizations of or by the Company. The 1998 Plan is intended to assist the Company in attracting and retaining employees of outstanding ability and to promote the identification of their interests with those of the stockholders of the Company. The 1998 Plan permits the issuance of Common Stock (the "Plan-Purchase Stock") and the grant of Non-Qualified Stock Options (the "Plan-Options") to purchase shares of Common Stock (the issuance of Plan- Purchase Stock and the grant of Plan-Options pursuant to the 1998 Plan being a "Plan Grant"). Unless sooner terminated by the Company's Board of Directors, the 1998 Plan will expire ten years after adoption. Such termination will not affect the validity of any Plan Grant outstanding on the date of the termination. The Compensation Committee of the Board of Directors will administer the Plan, including, without limitation, the determination of the employees to whom Plan Grants will be made, the number of shares of Common Stock subject to each Plan Grant, and the various terms of Plan Grants. The Compensation Committee of the Board of Directors may from time to time amend the terms of any Plan Grant, but, except for adjustments made upon a change in the Common Stock by reason of a stock split, spin-off, stock dividend, stock combination or reclassification, recapitalization, reorganization, consolidation, change of control, or similar event, such action shall not adversely affect the rights of any participant under the 1998 Plan with respect to the Plan- Purchase Stock and the Plan-Options without such participant's consent. The Board of Directors retains the right to amend, suspend or terminate the 1998 Plan. SEVERANCE AGREEMENTS The Company has entered into severance agreements with senior management employees, including the Named Executive Officers, pursuant to which in the event of any such employee's termination "without cause" or "for good reason" (as defined therein) the Company will pay such employee one year's base salary less any other severance payments to which the employee is entitled from the Company. EMPLOYEE EQUITY ARRANGEMENTS Pursuant to the 1998 Plan, the Company sold Plan- Purchase Stock and issued Plan-Options to selected employees, including the Named Executive Officers, which represent, in the aggregate, approximately 10% of the fully diluted Common Stock (of which the Named Executive Officers will hold approximately 47%). In connection with such arrangements, the Company and each such employee entered into an Employee Stockholders' Agreement and a Stock Option Agreement. In order to finance the stock purchases, certain employees also entered into secured Promissory Notes and Pledge Agreements. The Employee Stockholders' Agreement (i) places restrictions on each such employee's ability to transfer shares of Plan-Purchase Stock and Common Stock acquired upon exercise of the Plan-Options, including a right of first refusal in favor of the 33 Company, (ii) provides each such employee the right to participate pro rata in certain sales of Common Stock by Hubcap Acquisition or its affiliates and (iii) provides Hubcap Acquisition and its affiliates the right to require each such employee to participate pro rata in certain sales of Common Stock by Hubcap Acquisition or its affiliates. The Stockholders' Agreement also grants (subsequent to an initial public offering of the Common Stock) piggyback registration rights to each such employee pursuant to a registration rights agreement between Hubcap Acquisition and the Company. In addition, the Employee Stockholders' Agreement gives the Company the right to purchase shares and options held by each such employee upon termination of employment for any reason and permits each such employee to sell stock and options in the event of death, disability or retirement after turning 65 years of age. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION Messrs. Greene, Fisher, and Goltz, with Mr. Greene as Chairman, serve as the members of the Compensation Committee of the Board of Directors of the Company. Messrs. Greene and Fisher are managing members of KKR 1996 GP L.L.C., which beneficially owns 87% of Accuride, and members of KKR & Co., L.L.C., which serves as general partner of KKR. Mr. Goltz is an executive of KKR & Co., L.L.C. 34 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth the ownership of the Common Stock as of March 1, 2001 by each person known to be the owner of 5% or more of the Common Stock, by each person who is a director or Named Executive Officer of the Company and by all directors and executive officers of the Company as a group.
Common Stock Beneficially Owned (a) ---------------------- Name and Address Shares Percent - ---------------- ------ ------- KKR 1996 GP L.L.C. (b) c/o Kohlberg Kravis Roberts & Co. L.P. 9 West 57th Street New York, New York 10019 .......................... 21,600 87.11% Henry R. Kravis (b) ........................... -- -- George R. Roberts (b) ......................... -- -- James H. Greene, Jr. (b) ...................... -- -- Todd A. Fisher (b) ............................ -- -- Frederick M. Goltz (b) ........................ -- -- RSTW Partners III, L.P. (c) 5847 San Felipe Houston, TX 77057 ................................. 2,400 9.68% William P. Greubel (d) ............................ 398 1.60% John R. Murphy (e) ................................ 166 * Terrence J. Keating (f) ........................... 84 * David K. Armstrong (f) ............................ 84 * Richard J. Giromini (g) ........................... 68 * All executive officers and directors as a group ... 884 3.14%
- ------------------- * Less than one percent. (a) The amounts and percentage of Common Stock beneficially owned are reported on the basis of regulations of the Securities and Exchange Commission ("SEC") governing the determination of beneficial ownership of securities. Under the rules of the SEC, a person is deemed to be a "beneficial owner" of a security if that person has or shares "voting power," which includes the power to vote or to direct the voting of such security, or "investment power," which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days. Under these rules, more than one person may be deemed a beneficial owner of the same securities and a person may be deemed to be a beneficial owner of securities as to which he has no economic interest. The percentage of class outstanding is based on 24,796 shares of Common Stock outstanding as of March 1, 2001. (b) Shares of Common Stock shown as beneficially owned by KKR 1996 GP L.L.C. are held by Hubcap Acquisition. KKR 1996 GP L.L.C. is the sole general partner of KKR Associates 1996 L.P., which is the sole general partner of KKR 1996 Fund L.P. KKR 1996 Fund L.P. is one of two members of Hubcap Acquisition and owns more than a 95% equity interest in Hubcap Acquisition. KKR 1996 GP L.L.C. is a limited liability company, the managing members of which are Messrs. Henry R. Kravis and George R. Roberts, and the other members of which are Messrs. Paul E. Raether, Michael W. Michelson, James H. Greene, Jr., Michael T. Tokarz, Edward A. Gilhuly, Perry Golkin, Scott M. Stuart, Johannes P. Huth, Todd A. Fisher, Alexander Navab Jr., Neil A. Richardson and Robert I. MacDonnell. Messrs. Kravis, Roberts, Greene, and Fisher are directors of the Company. Each of such individuals may be deemed to share beneficial ownership of any shares beneficially owned by KKR 1996 GP L.L.C. Each of such individuals disclaims beneficial ownership. Mr. Frederick M. Goltz is 35 a director of the Company and is also an executive of KKR. Mr. Goltz disclaims that he is the beneficial owner of any shares beneficially owned by KKR Associates 1996 L.P. (c) RSTW Management, L.P. is the sole general partner of RSTW Partners III, L.P.; Rice Mezzanine Corporation ("RMC") is the general partner of RSTW Management, L.P. RMC is a subchapter S-Corporation, the shareholders of which are Messrs. Don K. Rice, Jeffrey P. Sangalis, Jeffrey A. Toole, and James P. Wilson. Each of such individuals may be deemed to share beneficial ownership of any shares beneficially owned by RSTW Partners III, L.P. Each of such individuals disclaims beneficial ownership. (d) Includes 247.5 shares, which are subject to an option to purchase such shares from the Company at $5,000 per share. (e) Includes 96.3 shares, which are subject to an option to purchase such shares from the Company at $5,000 per share. (f) Includes 44 shares, which are subject to an option to purchase such shares from the Company at $5,000 per share. (g) Includes 28 shares, which are subject to an option to purchase such shares from the Company at $5,000 per share. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS As of March 1, 2001, KKR 1996 GP L.L.C. beneficially owned approximately 87% of the Company's outstanding shares of Common Stock. See "Item 12-Security Ownership of Certain Beneficial Owners and Management." The managing members of KKR 1996 GP L.L.C. are Messrs. Henry R. Kravis and George R. Roberts and the other members of which are Messrs. Paul E. Raether, Michael W. Michelson, James H. Greene, Jr., Michael T. Tokarz, Edward A. Gilhuly, Perry Golkin, Scott M. Stuart, Johannes P. Huth, Todd A. Fisher, Alexander Navab Jr., Neil A. Richardson, and Robert I. MacDonnell. Messrs. Kravis, Roberts, Greene, and Fisher are also directors of the Company, as is Frederick M. Goltz, who is an executive of KKR & Co., L.L.C. Each of the members of KKR 1996 GP L.L.C. is also a member of KKR & Co., L.L.C, which serves as the general partner of KKR. KKR, an affiliate of Hubcap Acquisition, received a fee of $6.0 million in cash for negotiating the Recapitalization and arranging the financing therefor, plus the reimbursement of its expenses in connection therewith, and from time to time in the future, KKR may receive customary investment banking fees for services rendered to the Company in connection with divestitures, acquisitions, and certain other transactions. In addition, KKR has agreed to render management, consulting and financial services to the Company for an annual fee of $0.6 million. See "Item 10-Directors and Executive Officers of the Company" and "Item 12-Security Ownership of Certain Beneficial Owners and Management." Hubcap Acquisition has the right, under certain circumstances and subject to certain conditions, to require the Company to register under the Securities Act shares of Common Stock held by it pursuant to the registration rights agreement between Hubcap Acquisition and the Company and the stockholders agreement among Hubcap Acquisition, the Company, and Phelps Dodge. Such registration rights are generally available to Hubcap Acquisition until registration under the Securities Act is no longer required to enable it to resell the Common Stock owned by it. The registration rights agreement provides, among other things, that the Company will pay all expenses in connection with the first six demand registrations requested by Hubcap Acquisition and in connection with any registration commenced by the Company as a primary offering in which Hubcap Acquisition participates through piggyback registration rights granted under such agreement. Hubcap 36 Acquisition's exercise of its registration rights under the registration rights agreement is subject to the tag along and the drag along rights of certain other stockholders provided for in the stockholders agreement. During the 2000 fiscal year, the Company issued 38.2 shares of the Company's Common Stock to certain members of management for aggregate consideration in cash and secured promissory notes of approximately $200 thousand. During 2000, 76 shares of common stock were repurchased as treasury stock. 37 PART IV ITEM 14.EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) The following constitutes a list of Financial Statements, Financial Statement Schedules, and Exhibits required to be included in this report: 1. FINANCIAL STATEMENTS The following financial statements of the Registrant are filed herewith as part of this report: Independent Auditors' Report. Consolidated Balance Sheets - December 31, 2000 and December 31, 1999. Consolidated Statements of Income - Years ended December 31, 2000, December 31, 1999, and December 31, 1998. Consolidated Statements of Stockholders' Equity (Deficiency) - Years ended December 31, 2000, December 31, 1999, and December 31, 1998. Consolidated Statements of Cash Flows - Years ended December 31, 2000, December 31, 1999, and December 31, 1998. Notes to Consolidated Financial Statements - Years ended December 31, 2000, December 31, 1999, and December 31, 1998. 2. FINANCIAL STATEMENT SCHEDULES Schedule II - Valuation and Qualifying Accounts. Schedules other than those listed above are omitted because of the absence of conditions under which they are required or because the required information is presented in the Financial Statements or notes thereto. EXHIBITS (b) Reports on Form 8-K. The Company did not file any reports on Form 8-K during the last quarter of the 2000 fiscal year.
Exhibit No. Description - ----------- ----------- *2.1 Stock Subscription and Redemption Agreement, dated as of November 17, 1997, among the Company, Hubcap Acquisition L.L.C. and Phelps Dodge Corporation. *3.1 Certificate of Incorporation, as amended, of Accuride Corporation. *3.2 By-Laws of Accuride Corporation. *4.1 Indenture, dated as of January 21, 1998, between Accuride Corporation and U.S. Trust Company of California, N.A., as trustee, relating to $200,000,000 aggregate principal amount of 9.25% Senior Subordinated Notes due 2008. *4.2 Registration Rights Agreement, dated as of January 21, 1998, between Accuride Corporation, and BT Alex. Brown Incorporated, Citicorp Securities, Inc., and J.P. Morgan Securities Inc. *4.3 Specimen Certificate of 9.25% Senior Subordinated Notes due 2008, Series A (the "Private Notes").
38 *4.4 Specimen Certificate of 9.25% Senior Subordinated Notes due 2008, Series B (the "Exchange Notes"). *10.1 Stockholders' Agreement by and among Accuride Corporation, Phelps Dodge Corporation and Hubcap Acquisition L.L.C. *10.2 Registration Rights Agreement by and between Accuride Corporation and Hubcap Acquisition L.L.C. y*10.3 1998 Stock Purchase and Option Plan for Employees of Accuride Corporation and Subsidiaries. y*10.4 Form of Non-qualified Stock Option Agreement by and between Accuride Corporation and certain employees. y*10.5 Form of Repayment and Stock Pledge Agreement by and between Accuride and certain employees. *10.6 Form of Secured Promissory Note in favor of Accuride Corporation. *10.7 Form of Stockholders' Agreement by and among Accuride Corporation, certain employees and Hubcap Acquisition L.L.C. y*10.8 Form of Severance Agreement by and between Accuride Corporation and certain executives. *10.9 Contribution Agreement, dated as of May 1, 1997, among Accuride Corporation, Kaiser Aluminum & Chemical Corporation, AKW General Partner L.L.C. and AKW L.P. *10.10 Limited Partnership Agreement of AKW L.P., dated as of May 1, 1997, among AKW General Partner L.L.C., Accuride Ventures, Inc., Accuride Corporation and Kaiser Aluminum & Chemical Corporation. *10.11 Limited Liability Company Agreement of AKW General Partner L.L.C., dated as of May 1, 1997, among Accuride Ventures, Inc., Accuride Corporation and Kaiser Aluminum & Chemical Corporation. *10.12 Lease Agreement dated November 1, 1988, by and between Kaiser Aluminum & Chemical Corporation and The Bell Company regarding the property in Cuyahoga Falls, Ohio, as amended and extended. *10.13 Lease Agreement, dated as of February 1, 1974, by and between Henderson County and The Firestone Tire & Rubber Company. *10.14 Lease Amendment, dated as of December 19, 1986, by and between Henderson County and The Firestone Tire & Rubber Company. *10.15 Joint Venture Agreement, dated November 5, 1997, by and among the Company, Industria Automotriz, S.A. de C.V., Grupo Industrial Ramirez, S.A. and Accuride de Mexico, S.A. de C.V. *10.16 By-laws of Accuride de Mexico, S.A. de C.V. *10.17 Purchase and Sale Agreement, dated as of October 21, 1997, by and between Accuride Corporation and General Electric Company regarding property located in Columbia, Tennessee. *10.18 Purchase Supply and Assembly Agreement, dated as of January 15, 1998, between Accuride Corporation and Lacks Industries, Inc. *10.19 Purchase Agreement, dated as of January 15, 1998, between Accuride Corporation and BT Alex. Brown Incorporated, Citicorp Securities, Inc., and J.P. Morgan Securities Inc. +10.20 Lease Agreement dated October 26, 1998, by and between Accuride Corporation and Woodward, LLC. regarding the Evansville, Indiana, office space. ++10.21 Purchase Agreement dated April 1, 1999, between the Company, Accuride Ventures, Inc. (the Company's wholly-owned subsidiary) and Kaiser. ++10.22 Amended and Restated Lease Agreement dated April 1, 1999, between AKW, L.P. and Kaiser. +++10.23 Amended and Restated Credit Agreement, dated April 16, 1999, between the Company, Citicorp USA, Inc., as administrative agent, Salomon Smith Barney, Inc., as arranger, Bankers Trust Company as syndication agent, and Wells Fargo Bank, N.A. as the documentation agent. +++10.24 Amended and Restated Pledge Agreement dated April 16, 1999, between the Company, Accuride Canada, Inc., and Accuride Ventures, Inc. as pledgors and Citicorp USA, Inc., as administrative agent. x10.25 Purchase Agreement dated July 16, 1999 between the Company and Industria Automotriz, S.A. de C.V. x10.26 Amended and Restated Completion Guarantee dated July 16, 1999 between the Company, Accuride de Mexico, S.A. de C.V., Citibank Mexico, S.A. and Grupo Financiero Citibank. *10.27 Amendment dated December 31, 1999 between the Company, Accuride de Mexico, S.A. de C.V., Citibank Mexico, S.A. and Grupo Financiero Citibank. y*10.28 Amended and Restated Supplemental Savings Plan dated January 1, 1998. 10.29 Amendment dated March 31, 2000 between the Company, Accuride de Mexico, S.A. de C.V., Citibank Mexico, S.A. and Grupo Financiero Citibank. 10.30 Amendment dated December 14, 2000 between the Company, Accuride de Mexico, S.A. de C.V., Citibank Mexico, S.A. and Grupo Financiero Citibank.
39 10.31 Joint Marketing Agreement between the Company and Gianetti Ruote SpA. 10.32 Technology Cross License Agreement between the Company and Gianetti Ruote SpA. 21.1 Subsidiaries of Accuride Corporation. 23.1 Consent of Deloitte & Touche LLP.
- ------------------- * Previously filed as an exhibit to the Form S-4 effective July 23, 1998 (Reg. No. 333-50239) and incorporated herein by reference. + Previously filed as an exhibit to the Form 10-K filed on March 30, 1999 and incorporated herein by reference. ++ Previously filed as an exhibit to the Form 8-K filed on April 12, 1999 and incorporated herein by reference. +++ Previously filed as an exhibit to the Form 10-Q for the quarterly period ended March 31, 1999 and incorporated herein by reference. x Previously filed as an exhibit to the Form 10-Q for the quarterly period ended June 30, 1999 and incorporated herein by reference. y Management contract for compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K. 40 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of Accuride Corporation: We have audited the accompanying consolidated balance sheets of Accuride Corporation and subsidiaries as of December 31, 2000 and 1999, and the related consolidated statements of income, stockholders' equity (deficiency) and cash flows for each of the three years in the period ended December 31, 2000. Our audits also included the financial statement schedule listed in the Index at Item 14. These financial statements and the financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance 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, such consolidated financial statements present fairly, in all material respects, the financial position of Accuride Corporation and subsidiaries as of December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic 2000 consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. DELOITTE & TOUCHE LLP Indianapolis, Indiana February 26, 2001 F-1 ACCURIDE CORPORATION CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2000 AND 1999 (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS 2000 1999 CURRENT ASSETS: Cash and cash equivalents $ 38,516 $ 32,493 Customer receivables, net of allowance for doubtful accounts of $806 and $462 31,059 57,586 Other receivables 4,325 12,400 Inventories, net 37,484 41,143 Supplies 8,545 8,509 Deferred income taxes 5,175 Income taxes receivable 599 2,957 Prepaid expenses 941 818 --------- --------- Total current assets 126,644 155,906 PROPERTY, PLANT AND EQUIPMENT, NET 237,410 212,693 OTHER ASSETS: Goodwill, net of accumulated amortization of $38,949 and $34,775 127,353 131,527 Investment in affiliates 3,189 2,735 Deferred financing costs, net of accumulated amortization of $4,436 and $1,835 9,546 12,147 Pension benefit plan asset 9,678 7,183 Other 1,451 3,581 --------- --------- TOTAL $ 515,271 $ 525,772 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) CURRENT LIABILITIES: Accounts payable $ 38,231 $ 41,598 Short term notes payable 17,500 7,500 Accrued payroll and compensation 7,584 11,556 Accrued interest payable 11,830 12,056 Deferred income taxes 598 Accrued and other liabilities 10,006 9,613 --------- --------- Total current liabilities 85,151 82,921 LONG-TERM DEBT 431,386 453,061 OTHER POSTRETIREMENT BENEFIT PLAN LIABILITY 15,734 14,949 OTHER LIABILITIES 1,234 2,568 DEFERRED INCOME TAXES 10,966 4,404 COMMITMENTS AND CONTINGENCIES (Notes 13 and 14) 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, 24,923 and 24,884 shares issued; 24,837 and 24,874 outstanding in 2000 and 1999 24,939 24,738 Treasury stock, 86 shares and 10 shares at cost (505) (51) Stock subscriptions receivable (868) (1,539) Retained earnings (deficit) (52,766) (55,279) --------- --------- Total stockholders' equity (deficiency) (29,200) (32,131) --------- --------- TOTAL $ 515,271 $ 525,772 ========= =========
See notes to consolidated financial statements. F-2 ACCURIDE CORPORATION CONSOLIDATED STATEMENTS OF INCOME (DOLLARS IN THOUSANDS)
Years Ended December 31, ----------------------------------------- 2000 1999 1998 --------- --------- --------- NET SALES $ 475,804 $ 505,854 $ 383,583 COST OF GOODS SOLD 393,232 390,776 301,029 --------- --------- --------- GROSS PROFIT 82,572 115,078 82,554 OPERATING EXPENSES: Selling, general and administrative 32,849 33,493 26,607 Start-up costs 3,260 Management retention bonuses 1,927 Recapitalization professional fees 2,240 --------- --------- --------- INCOME FROM OPERATIONS 49,723 81,585 48,520 OTHER INCOME (EXPENSE): Interest income 1,824 798 773 Interest expense (40,566) (39,786) (33,084) Equity in earnings of affiliates 455 2,316 3,929 Other income (expense), net (6,157) (1,081) (2,904) --------- --------- --------- INCOME BEFORE INCOME TAXES, MINORITY INTEREST AND EXTRAORDINARY GAIN 5,279 43,832 17,234 INCOME TAX PROVISION 4,361 18,410 7,935 MINORITY INTEREST 91 1,348 --------- --------- --------- INCOME BEFORE EXTRAORDINARY GAIN 918 25,331 7,951 EXTRAORDINARY GAIN, NET OF TAX 1,595 --------- --------- --------- NET INCOME, AFTER EXTRAORDINARY GAIN $ 2,513 $ 25,331 $ 7,951 ========= ========= =========
See notes to consolidated financial statements F-3 ACCURIDE CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) (DOLLARS IN THOUSANDS)
Common Stock and Total Additional Stock Retained Stockholders' Paid in Treasury Subscriptions Earnings Equity Capital Stock Receivable (Deficit) (Deficiency) BALANCE AT JANUARY 1, 1998 $ 178,931 $ 77,124 $ 256,055 Net income 7,951 7,951 Issuance of shares 108,000 108,000 Redemption of shares (286,931) (165,685) (452,616) Issuance of shares 3,840 $ (3,840) Proceeds from stock subscriptions receivable 2,196 2,196 Increase in net deferred tax asset attributable to tax basis of assets 18,480 18,480 Bonuses paid by a previous principal stockholder 1,838 1,838 --------- --------- --------- --------- BALANCE AT DECEMBER 31, 1998 24,158 (1,644) (80,610) (58,096) Net income 25,331 25,331 Issuance of shares 580 (580) Purchase of treasury stock $ (51) 10 (41) Proceeds from stock subscriptions receivable 675 675 --------- --------- --------- --------- --------- BALANCE AT DECEMBER 31, 1999 24,738 (51) (1,539) (55,279) (32,131) Net income 2,513 2,513 Issuance of shares 201 (201) Purchase of treasury stock (454) 160 (294) Proceeds from stock subscriptions receivable 712 712 --------- --------- --------- --------- --------- BALANCE AT DECEMBER 31, 2000 $ 24,939 $ (505) $ (868) $ (52,766) $ (29,200) ========= ========= ========= ========= =========
See notes to consolidated financial statements. F-4 ACCURIDE CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
Years Ended December 31, ----------------------------------------- 2000 1999 1998 --------- --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 2,513 $ 25,331 $ 7,951 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 25,814 23,765 20,094 Amortization 6,465 6,019 4,832 Losses on disposal of assets 1,156 1,021 1,585 Gain on early retirement of debt (1,595) Bonuses payable by a previous principal stockholder 1,838 Deferred income taxes 789 12,947 1,232 Equity in earnings of affiliated companies (454) (2,316) (3,929) Minority interest 91 1,348 Changes in certain assets and liabilities (net of effects from purchase of AKW, L.P.): Receivables 34,602 8,924 (11,814) Inventories and supplies 3,623 1,903 (8,602) Prepaid expenses and other assets 2,068 (2,762) (4,534) Accounts payable (3,367) 8,959 7,771 Accrued and other liabilities (5,271) 2,953 4,890 --------- --------- --------- Net cash provided by operating activities 66,343 86,835 22,662 --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment (50,420) (44,507) (46,579) Capitalized interest (1,268) (1,565) (929) Payment for purchase of AdM (7,422) Payment for purchase of AKW L.P. (71,095) Net cash distribution from AKW L.P. 265 2,839 --------- --------- --------- Net cash used in investing activities (51,688) (124,324) (44,669) --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of long-term debt 102,711 356,185 Proceeds from issuance of short term notes payable 3,589 3,000 Payments on long-term debt (19,050) (6,050) Principal payments on short term notes payable (15,129) Net increase (decrease) in revolving credit advance 10,000 (33,000) 33,000 Deferred financing fees (1,373) (14,243) Proceeds from issuance of shares 108,000 Redemption of shares (294) (41) (454,949) Proceeds from stock subscriptions receivable 712 675 2,196 --------- --------- --------- Net cash provided (used in) by financing activities (8,632) 66,511 18,060 --------- --------- --------- Increase (decrease) in cash and cash equivalents 6,023 29,022 (3,947) Cash and cash equivalents, beginning of year 32,493 3,471 7,418 --------- --------- --------- Cash and cash equivalents, end of year $ 38,516 $ 32,493 $ 3,471 ========= ========= =========
See notes to consolidated financial statements. F-5 ACCURIDE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2000 (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF CONSOLIDATION - The accompanying consolidated financial statements include the accounts of Accuride Corporation (the "Company") and its wholly-owned subsidiaries, including Accuride Canada, Inc. ("Accuride Canada"), AKW L.P. ("AKW"), and Accuride de Mexico, S.A. de C.V. ("AdM"). All significant intercompany transactions have been eliminated. Investments in affiliated companies in which the Company does not have a controlling interest are accounted for using the equity method. Prior to the Recapitalization of the Company on January 21, 1998 (see Note 2), the Company was a wholly-owned subsidiary of Phelps Dodge Corporation ("PDC"). BUSINESS OF THE COMPANY - The Company is engaged primarily in the design, manufacture and distribution of wheels and rims for trucks, trailers and certain military and construction vehicles. The Company sells its products primarily within North America and Latin America to original equipment manufacturers and to the aftermarket. The Company's primary manufacturing facilities are located in Henderson, Kentucky; Columbia, Tennessee; Erie, Pennsylvania; Cuyahoga Falls, Ohio; London, Ontario, Canada and Monterrey, Mexico. MANAGEMENT'S ESTIMATES AND ASSUMPTIONS - The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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. REVENUE RECOGNITION - The Company records sales upon shipment and provides an allowance for estimated discounts associated with customer rebates. INVENTORIES - Inventories are stated at the lower of cost or market. Cost for substantially all inventories, except AdM, is determined by the last-in, first-out method (LIFO). AdM's inventories are stated at average cost. SUPPLIES - Supplies are stated at the lower of cost or market. Cost for substantially all supplies is determined by a moving-average method. The Company performs periodic evaluations of supplies and provides an allowance for obsolete items. PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are carried at cost. Expenditures for replacements and betterments are capitalized; maintenance and repairs are charged to operations as incurred. Buildings, machinery and equipment are depreciated using the straight-line method over estimated lives of 5 to 40 years. Tooling is generally depreciated over a 3 year life. DEFERRED FINANCING COSTS - Direct costs incurred in connection with the Recapitalization (see Note 2) and the Credit Agreement (see Note 9) have been deferred and are being amortized over the life of the related debt using the interest method. F-6 GOODWILL - Goodwill consists of costs in excess of the net assets acquired in connection with the PDC acquisition of the Company in March 1988 and the AKW and AdM acquisitions in April 1999 and July 1999, respectively. Goodwill is being amortized using the straight-line method over 40 years. LONG-LIVED ASSETS - The Company evaluates its long-lived assets to be held and used and its identifiable intangible assets for impairment when events or changes in economic circumstances indicate the carrying amount of such assets may not be recoverable. Long-lived assets to be disposed of are carried at the lower of cost or fair value less the costs of disposal. PENSION PLANS - The Company has trusteed, non-contributory pension plans covering substantially all U.S. and Canadian employees. For certain plans, the benefits are based on career average salary and years of service and, for other plans, a fixed amount for each year of service. The Company's funding policy provides that payments to the pension trusts shall be at least equal to the minimum legal funding requirements. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS - The Company has postretirement health care and life insurance benefit plans covering substantially all U.S. non-bargained and Canadian employees. The Company accounts for these benefits on an accrual basis and provides for the expected cost of such postretirement benefits accrued during the years employees render the necessary service. The Company's funding policy provides that payments to participants shall be at least equal to its cash basis obligation. POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS - The Company has certain postemployment benefit plans covering certain U.S. and Canadian employees which provide severance, disability, supplemental health care, life insurance or other welfare benefits. The Company accounts for these benefits on an accrual basis. The Company's funding policy provides that payments to participants shall be at least equal to its cash basis obligation. Liabilities associated with these benefits at the date of the Company's Recapitalization (see Note 2) were retained by PDC. INCOME TAXES - Deferred tax assets and liabilities are computed based on differences between financial statement and income tax bases of assets and liabilities using enacted income tax rates. Deferred income tax expense or benefit is based on the change in deferred tax assets and liabilities from period to period, subject to an ongoing assessment of realization of deferred tax assets. RESEARCH AND DEVELOPMENT COSTS - Expenditures relating to the development of new products and processes, including significant improvements and refinements to existing products, are expensed as incurred. The amounts charged against income in 2000, 1999 and 1998 totaled $6,264, $5,176, and $2,855, respectively. FOREIGN CURRENCY - The assets and liabilities of Accuride Canada and AdM that are receivable or payable in cash are converted at current exchange rates, and inventories and other non-monetary assets and liabilities are converted at historical rates. Revenues and expenses are converted at average rates in effect for the period. Accuride Canada's and AdM's functional currencies have been determined to be the U.S. dollar. Accordingly, gains and losses resulting from conversion of such amounts, as well as gains and losses on foreign currency transactions, are included in operating results as "Other income (expense), net." The Company had aggregate foreign currency gains (losses) of $74, $(5,544), and $(996), for the years ended December 31, 2000, 1999 and 1998, respectively. F-7 CONCENTRATIONS OF CREDIT RISK - Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash, cash equivalents, customer receivables, and derivative financial instruments. The Company places its cash and cash equivalents and executes derivatives with high quality financial institutions. Generally, the Company does not require collateral or other security to support customer receivables. DERIVATIVE FINANCIAL INSTRUMENTS - The Company has limited involvement with derivative financial instruments and does not use them for trading purposes. Derivative financial instruments are used to manage well-defined interest rate, foreign exchange, and commodity price risks. INTEREST RATE INSTRUMENTS - The Company entered into an interest rate swap agreement as a means of fixing the interest rate exposure on a portion of the Company's floating-rate debt. The Company also entered into an interest rate cap agreement to set a ceiling on the maximum interest rate the Company would incur on a portion of the Company's floating-rate debt. The premiums paid to enter into the interest rate cap agreement are payable quarterly and recorded as interest expense as incurred. These interest rate agreements are accounted for under the settlement method. Under this method, the differential to be paid or received on these agreements is recognized over the lives of the agreements in interest expense. Changes in market value of the interest rate swap and the interest rate cap accounted for under the settlement method are not reflected in the accompanying financial statements. FOREIGN EXCHANGE INSTRUMENTS - The Company entered into foreign currency forward contracts and options to limit foreign exchange risk on anticipated but not yet committed transactions expected to be denominated in Canadian dollars. The forward contracts and certain combination options (collars) are not considered hedges for financial reporting purposes and, accordingly, such forward contracts and combination options are carried in the financial statements at fair value, with realized and unrealized gains or losses reflected directly in income as "Other income (expense), net." The Company had aggregate realized losses and unrealized losses of $691 and $6,621, respectively, for the year ended December 31, 2000, realized gains and unrealized gains of $2,565 and $2,194, respectively, for the year ended December 31, 1999, and aggregate realized losses and unrealized gains of ($2,598) and $150, respectively, for the year end December 31, 1998. The total notional amount of outstanding forward contracts at December 31, 2000 and 1999 was $97,078 and $108,707, respectively. The total notional amount of foreign currency combination options outstanding at December 31, 1999 was $13,848. The Company also has purchased foreign currency call options that were considered hedges for financial reporting purposes. Gains and losses related to purchased foreign currency call options of anticipated transactions are deferred and recognized in income or as adjustments of carrying amounts when the hedged transaction occurs. Total option premiums paid for the year ended December 31, 1999 was $208, which was amortized over the life of the purchased call options. The total notional amount of purchased foreign currency call options outstanding at December 31, 1999 was $13,848. No foreign currency options were purchased during 2000 or outstanding at December 31, 2000. COMMODITY PRICE INSTRUMENTS - The Company entered into commodity price swap and option contracts to limit the exposure to changes in certain raw material prices. The premiums paid to enter into such option contracts are included in prepaid expenses and amortized using the straight-line method over the related term of the contracts. The commodity price swaps are accounted for under the settlement method. Under this method, the differential to be paid or received on these agreements is recognized over the lives of the agreements in raw material expense. Changes in the market value of the commodity price swap and option contracts are accounted for under the settlement method and are not reflected in the accompanying financial statements. The Company had aggregate realized gains of $1,477 for the year ended December 31, 2000, and aggregate realized gains of $193 for the year ended December 31, 1999. Total option premiums paid for the year ended December 31, 1999 was $38. The total notional amount of outstanding commodity price swaps at December 31, 2000 and 1999 was $23,246 and $27,431, respectively. No commodity options were purchased during 2000 or outstanding at December 31, 2000. F-8 NEW ACCOUNTING PRONOUNCEMENT - Statement of Financial Accounting Standards (SFAS) No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, is effective for all fiscal years beginning after June 15, 2000. SFAS 133, as amended, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. Under SFAS 133, certain contracts that were not formerly considered derivatives may now meet the definition of a derivative. The Company will adopt SFAS 133 effective January 1, 2001. Management does not expect the adoption of SFAS 133 to have a significant impact on the financial position, results of operations, or cash flows of the Company. RECLASSIFICATIONS - Certain amounts from prior year's financial statement have been reclassified to conform to the current year presentation. 2. RECAPITALIZATION OF ACCURIDE CORPORATION The Company entered into a stock subscription and redemption agreement dated November 17, 1997 (the "Agreement" or "Redemption"), with PDC and Hubcap Acquisition L.L.C. ("Hubcap Acquisition"), a Delaware limited liability company formed at the direction of KKR 1996 Fund L.P., a Delaware limited partnership affiliated with Kohlberg Kravis Roberts & Co., L.P. ("KKR"). Pursuant to the Agreement, effective January 21, 1998, Hubcap Acquisition acquired 90% of the common stock of the Company for an aggregate redemption price of $468,000 (the "Recapitalization"). In connection with the Recapitalization, Hubcap Acquisition made an equity investment in the Company of $108,000, and the Company issued $200,000 of 9.25% senior subordinated notes at 99.48% of principal value due 2008 and obtained $164,800 in bank borrowings, including $135,000 of borrowings under senior secured term loans due 2005 and 2006 with variable interest rates and $29,800 of borrowings under a $140,000 senior secured revolving line of credit expiring 2004 with a variable interest rate. Costs of $21,742 incurred in connection with the Recapitalization have been reflected (i) $14,243 as deferred financing costs, (ii) $5,259 as a component of the cost of the Redemption and (iii) $2,240 as a 1998 expense. Pursuant to the Agreement, $2,333 of certain pension, postretirement benefit liabilities and other liabilities were assumed by PDC and offset against the cost of the Redemption. Concurrent with the Redemption, the Company recorded a $55,440 deferred tax asset less a $36,960 valuation allowance related to the increase in the tax basis of assets with a corresponding credit to "Additional paid in capital" (See Note 11). Subsequent to the Recapitalization, effective September 30, 1998, PDC sold its remaining interest in the Company to an unrelated third party. 3. AKW AND ADM ACQUISITIONS AKW ACQUISITION - AKW was formed in 1997 as a 50-50 joint venture between Kaiser and the Company to design, manufacture, and sell heavy-duty aluminum wheels. On April 1, 1999, the Company acquired Kaiser's 50% interest in AKW. Total aggregate cost was $71,095 including fees and expenses. In connection with this acquisition, the fair value of assets acquired was $36,190 less liabilities assumed of $16,838. The cost exceeded the fair value of the net assets acquired by $51,743. The following unaudited pro forma financial data illustrates the estimated effects as if the AKW acquisition had been completed as of the beginning of the periods presented, 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. F-9
Years ended December 31 ----------------------- 1999 1998 -------- -------- Net Sales $529,800 $470,480 Net Income $ 25,632 $ 5,758
The pro forma results are not necessarily indicative of the actual results if the transactions had been in effect for the entire periods presented. In addition, they are not intended to be a projection of future results and do not reflect, among other things, any synergies that might have been achieved from combined operations. ADM ACQUISITION - AdM was formed on November 5, 1997 between the Company, IaSa, and certain other parties to produce, market and sell steel wheels, rims, side rings, lock rings, mounting rings, spacer bands and related components. On July 16, 1999, the Company acquired Industria Automotriz, S.A. de C.V.'s ("IaSa") 49% interest in AdM. The acquisition gives the Company 100% control of AdM. Total aggregate cost was $7.4 million, including fees and expenses. The cost exceeded the fair value of the net assets acquired by $301. The AdM and AKW acquisitions have been accounted for by the purchase method of accounting. Under purchase accounting, the total purchase price has been allocated to the tangible and intangible assets and liabilities of AdM and AKW, respectively, based upon their respective fair values as of the dates of the acquisitions based upon valuations and other studies. 4. CONSOLIDATED STATEMENTS OF CASH FLOWS For the purpose of preparing the Consolidated Statements of Cash Flows, the Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Interest paid (net of amounts capitalized of $1,268, $1,565 and $929) for the years ended December 31, 2000, 1999 and 1998 was $39,454, $37,029 and $23,277, respectively. Income taxes paid for the years ended December 31, 2000, 1999 and 1998 were $2,129, $8,114 and $7,238, respectively. Non-cash transactions that resulted from the Redemption in 1998 included the issuance of common stock and the related stock subscriptions receivable of $1,644, the assumption of $2,333 in liabilities offset against stockholders' equity and the increase in stockholders' equity and the net deferred tax asset in the amount of $18,480 from the increase in the tax basis of assets. 5. INVENTORIES Inventories at December 31 were as follows:
2000 1999 ------- ------- Raw materials $ 7,650 $ 6,451 Work in process 11,163 12,106 Finished manufactured goods 17,731 20,225 LIFO adjustment 940 2,361 ------- ------- Total inventories $37,484 $41,143 ======= =======
During 2000 and 1999, certain inventory quantities were reduced, which resulted in liquidations of LIFO inventory layers carried at lower costs which prevailed in prior years. The effect of the F-10 liquidation was to decrease cost of goods sold by $178 and to increase net income by $112 for the year ended December 31, 2000. In 1999, the liquidation decreased cost of goods sold by $193 and increased net income by $112. There were no significant liquidations of LIFO inventories in 1998. 6. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment at December 31 consist of the following:
2000 1999 -------- -------- Land and land improvements $ 7,016 $ 6,895 Buildings 61,090 40,877 Machinery and equipment 366,679 341,928 -------- -------- 434,785 389,700 Less accumulated depreciation 197,375 177,007 -------- -------- Property, plant and equipment, net $237,410 $212,693 ======== ========
7. INVESTMENTS IN AFFILIATES Included in the Company's "Equity in earnings of affiliates" is a 50% equity interest in AOT, Inc. ("AOT"), and from January 1, 1998 through March 31, 1999, a 50% equity interest in AKW. The following summarizes the Company's investments in affiliates. AOT - AOT is a joint venture between the Company and The Goodyear Tire & Rubber Company formed to provide sequenced wheel and tire assemblies for Navistar International Transportation Corporation. The Company's investment in AOT at December 31, 2000 and 1999 totaled $3,189 and $2,735, respectively. For the year ended December 31, 1999, the Company had one note receivable from AOT included in "Other assets" in the amount of $282, with an interest rate of 9.25%. Interest income earned on these notes receivable for 2000, 1999 and 1998 totaled $34, $92, and $161, respectively. The Company performs accounting, cash management, engineering and other technical, general and administrative services for AOT. Fees for these services totaled $90 for each of the three years in the period ended December 31, 2000, and are reported as a reduction in "Selling, general and administrative expenses". AKW L.P. - On May 1, 1997, the Company entered into a joint venture with Kaiser for the formation of AKW and accounted for the investment using the equity method. The Company performed all billing and collection functions, as well as calculation and notification of rebates, for AKW. Fees associated with those agreements totaled $63, and $250 for the two years ended December 31, 1999 and 1998, respectively, and are reported as a reduction in "Selling, general and administrative expenses". On April 1, 1999 the Company acquired Kaiser's 50% interest in AKW (see Note 3). F-11 8. SHORT-TERM NOTES PAYABLE Short-term debt at December 31 consists of the following:
2000 1999 ------- ------- Revolving Credit Advance $10,000 AdM Working Capital Advance 7,500 $ 7,500 ------- ------- Total $17,500 $ 7,500 ======= =======
BANK BORROWING - The revolving credit advance was issued pursuant to a credit agreement ("Credit Agreement") dated April 16, 1999 (see Note 9). Borrowings pursuant to the revolving credit facility are borrowed by Accuride Corporation ("U.S. Borrower"). The Company has the option to borrow under the Credit Agreement at either the Base Rate or Eurodollar Rate plus an Applicable Margin, as defined in the Credit Agreement. The Applicable Margin shall be adjusted upon the Company achieving certain leverage ratios and varies by type of borrowing. The Company's Bank Borrowing at December 31, 2000 was borrowed under the Eurodollar Rate option. At December 31, 2000, the Company had $10,000 outstanding under the revolving credit facility and the corresponding Eurodollar Rate was 6.563% and the Applicable Margin was 1.375%. ADM WORKING CAPITAL FACILITY - Effective July 9, 1998, AdM entered into a $32,500 amended credit agreement consisting of a $7,500 working capital facility and a $25,000 term facility (see Note 9) which is guaranteed by the Company. At December 31, 2000, the interest rate on the working capital facility was comprised of the Eurodollar rate of 6.875% plus the Applicable Margin of 1.625%. At December 31, 2000 and December 31, 1999, the Company had $7,500 outstanding under the working capital facility. 9. LONG-TERM DEBT Long-term debt at December 31 consists of the following:
2000 1999 -------- -------- Term A Advance $ 57,600 $ 58,200 Term B Advance 72,000 72,750 Term C Advance 97,000 98,000 Senior subordinated notes, net of $739 and $889 unamortized discount 189,161 199,111 AdM Term Advance 15,625 25,000 -------- -------- 431,386 453,061 Less current maturities (all current maturities prepaid as discussed below) -------- -------- Total $431,386 $453,061 ======== ========
BANK BORROWINGS - The Term A, B and C Advances were issued pursuant to the Credit Agreement. The Term B and C Advances were borrowed by the U.S. Borrower and the Term A Advance was borrowed by Accuride Canada ("Canadian Borrower"). The Credit Agreement consists of: (i) a $60,000 Term A Advance; (ii) a $75,000 Term B Advance; (iii) a $100,000 Term C Advance; and (iv) up to $140,000 under the revolving credit facility and trade letters of credit and standby letters of credit up to an aggregate sub-limit of $20,000. Letters of credit F-12 of $540 were outstanding at December 31, 2000. Swing line advances may be made up to the lesser of: (1) $10,000; or (2) the aggregate unused revolving credit commitment from time to time. The borrowings under the Term A Advance, Term B Advance and Term C Advance are collectively referred to as the "Bank Borrowings." The Company has the option to borrow under the Credit Agreement at either the Base Rate or Eurodollar Rate plus an Applicable Margin, as defined in the Credit Agreement. The Applicable Margin shall be adjusted upon the Company achieving certain leverage ratios and varies by type of borrowing. The Company's Bank Borrowings at December 31, 2000 were all borrowed under the Eurodollar Rate option. At December 31, 2000, the corresponding Eurodollar Rate was 6.8125% and the Applicable Margin ranged from 1.25% to 2.25%. Bank Borrowings and any unpaid interest thereon under; (i) the Term A Advance shall be repayable in six consecutive annual installments of $600 each, commencing on January 21, 1999, and the seventh installment shall be repayable on January 21, 2005 in the amount equal to the then outstanding principal balance of the Term A Advance; (ii) the Term B Advance shall be repayable in seven consecutive annual installments of $750 each, commencing on January 21, 1999, and the eighth installment shall be repayable on January 21, 2006 in the amount of the then outstanding principal balance of the Term B Advance; (iii) the Term C Advance shall be repayable in six consecutive annual installments of $1,000 each, commencing on January 21, 2000, and the seventh installment shall be repayable on January 21, 2006, in the amount of $47,000 and the eighth installment shall be repayable on January 21, 2007 in the amount of the then outstanding principal balance of the Term C Advance; and (iv) the revolving credit facility shall be reduced to a maximum of $100,000 on January 21, 2003 and be payable in full on January 21, 2004. In April 2000, the Company elected to prepay the principal installments due January 21, 2002 for the Term A Advance, the Term B Advance and the Term C Advance. The total amount prepaid was $2,350. As of December 31, 2000, $57,600 of Term A Advance, $72,000 of Term B Advance, and $97,000 of Term C Advance was outstanding pursuant to the Credit Agreement. As of December 31, 1999, $58,200 of Term A Advance, $72,750 of Term B Advance, and $98,000 of Term C Advance was outstanding. The Bank Borrowings are guaranteed by all domestic subsidiaries of the U.S. Borrower. The Term A Advance is guaranteed by the U.S. Borrower. The Bank Borrowings are collateralized by a valid and perfected first priority interest in 100% of the common stock of each first tier domestic subsidiary of the U.S. Borrower and of the Canadian Borrower, and 66% of all of the U.S. Borrower's current and future first tier foreign subsidiaries other than the Canadian Borrower. A negative pledge restricts the imposition of liens or other encumbrances on all of the assets of the Borrowers and their subsidiaries, subject to certain exceptions. SENIOR SUBORDINATED NOTES - Interest at 9.25% on the senior subordinated notes (the "Notes") is payable on February 1 and August 1 of each year, commencing on August 1, 1998. The Notes mature in full on February 1, 2008 and may be redeemed, at the option of the Company, in whole or in part, at any time on or after February 1, 2003 in cash at the redemption prices set forth in the indenture, plus interest. In addition, at any time prior to February 1, 2002 the Company may redeem up to 40% of the original aggregate principal amount of the Notes with the net proceeds of one or more Equity Offerings, as defined. The Notes are a general unsecured obligation of the Company ranking senior in right of payment to all existing and future subordinated indebtedness of the Company. The Notes are subordinated to all existing and future senior indebtedness of the Company including indebtedness incurred under the Credit Agreement. In September, November and December 2000, the Company elected to repurchase at market prices $10,100 in principal amount of Notes. The debt retirement resulted in an extraordinary gain of $2,512, net of $917 in tax expense. As of December 31, 2000 the aggregate principal amount of Notes outstanding is $189,900. ADM TERM FACILITY - At December 31, 2000 and December 31, 1999, respectively, AdM had term notes outstanding of $15,625 and $25,000 under its $25,000 term facility (see Note 8). Principal is F-13 payable quarterly from June 25, 2001 through March 25, 2003. At December 31, 2000, the interest rate on the term note was based on the Eurodollar rate of 6.875% plus the Applicable Margin of 1.50%. At December 31, 1999, the interest rates on the term notes were based on a range of Eurodollar rates of 6.125% - 6.25% plus the Applicable Margin of 1.75%. AdM's total assets have been assigned as collateral under the terms of the credit agreement. In August 2000, AdM elected to prepay the principal installments due June 25, 2001, September 25, 2001 and December 25, 2001. The total amount of principal prepaid was $9,375. Under the terms of the Company's credit agreement and AdM's credit agreement there are certain restrictive covenants that limit the payment of cash dividends and establish minimum financial ratios. INTEREST RATE INSTRUMENTS - Effective January 1998, the Company entered into an interest rate cap agreement to reduce the potential impact of increases in interest rates on a portion of its floating-rate long-term debt. At December 31, 2000, the Company was a party to a 7.5% interest rate cap agreement expiring in January 2001. The agreement entitles the Company to receive from the counterparty on a quarterly basis the amount, if any, by which the Company's interest payments on $34,300 of floating-rate long-term debt exceed 7.5% plus the Applicable Margin. As of December 31, 2000 and December 31, 1999 the interest rate cap had notional amounts of $34,300 and $34,650, respectively. Effective January 1998, the Company also entered into an interest rate swap agreement to manage its interest rate exposure on a portion of its floating-rate debt obligation. Under the interest rate swap agreement, the Company makes fixed rate payments at 5.75% and receives variable rate payments at the three-month Eurodollar rate. As of December 31, 2000 the interest rate swap agreement had a notional amount of $98,000, and the corresponding Eurodollar rate was 6.76%. As of December 31, 1999 the interest rate swap agreement had a notional amount of $99,000, and the corresponding Eurodollar rate was 6.20%. The maturity date of the interest rate swap agreement is January 2001. The Company is exposed to credit losses in the event of nonperformance by the counterparty to its interest rate cap and interest rate swap. The Company anticipates, however, that the counterparty will be able to fully satisfy its obligations under the contracts. The Company does not obtain collateral or other security to support financial instruments subject to credit risk but monitors the credit standing of each counterparty. Maturities of long-term debt based on minimum scheduled payments as of December 31, 2000, are as follows:
2001 $ 0 2002 12,500 2003 5,475 2004 2,350 2005 58,150 Thereafter 352,911 --------- $ 431,386 =========
10. PENSION PLANS AND OTHER POSTRETIREMENT BENEFIT PLANS The Company sponsors non-contributory employee defined benefit pension plans covering substantially all U.S. and Canadian employees (the "Plans"). Employees covered under the U.S. salaried plan are eligible to participate upon the completion of one year of service and benefits are based upon their cash balance account based on an allocation they earn each year. Employees covered under the Canadian salaried plan are eligible to participate upon the completion of two years of service and benefits are based upon career average salary and years of service. Employees covered under the hourly plans are generally eligible to participate at the time of employment and benefits are generally based on a fixed amount for each year of service. U.S. employees are vested in the plans after five years of service; Canadian hourly employees are vested after two years of service. F-14 The Company also sponsors postretirement benefit plans other than pension plans. Substantially all of the Company's U.S. non-bargained and Canadian employees who retire from active service on or after normal retirement age of 65 are eligible for life insurance benefits. The costs of such benefits are paid through an insurance contract. Health care insurance benefits also are provided for many employees retiring from active service. The coverage is provided on a non-contributory basis for certain groups of employees and on a contributory basis for other groups. The majority of these benefits are paid by the Company. The status of employee pension benefit plans and other postretirement benefit plans at December 31 are summarized below:
Pension Benefits Other Benefits ----------------------- ----------------------- 2000 1999 2000 1999 -------- -------- -------- -------- Change in benefit obligation: Benefit obligation at beginning of year $ 35,582 $ 33,957 $ 14,600 $ 9,751 Service cost 2,649 2,339 562 528 Interest cost 2,719 2,232 991 839 Amendments 1,130 Actuarial loss (gain) 2,316 (5,399) (56) (504) Acquisition 1,223 4,043 Currency translation adjustment (958) 1,414 (186) 265 Benefits paid (1,446) (1,314) (329) (322) -------- -------- -------- -------- Benefit obligation at end of year 40,862 35,582 15,582 14,600 -------- -------- -------- -------- Change in plan assets: Fair value of assets at beginning of year 37,798 32,385 Actual return on plan assets 3,833 2,194 Employer contribution 4,804 2,586 Acquisition 493 Currency translation adjustment (1,054) 1,454 Benefits paid (1,446) (1,314) -------- -------- -------- -------- Fair value of assets at end of year 43,935 37,798 -------- -------- -------- -------- Funded status 3,073 2,216 (15,582) (14,600) Unrecognized actuarial loss 3,626 1,950 2,225 1,401 Unrecognized prior service cost (benefit) 2,604 2,665 (2,377) (1,750) Unrecognized net obligation 321 352 -------- -------- -------- -------- Accrued benefit asset (cost) $ 9,678 $ 7,183 $(15,734) $(14,949) ======== ======== ======== ========
The pension plans were valued between December 1 and December 31 for both 2000 and 1999. The obligations were projected to and the assets were valued as of the end of 1999 and 1998. Effective April 1, 1999, two qualified plans were acquired in conjunction with the AKW acquisition. The plan assets are invested in a diversified portfolio of stocks, bonds and cash or cash equivalents. The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the pension plans with accumulated benefit obligations in excess of plan assets were $4,317, $4,100 and $3,019, respectively, as of December 31, 2000 and $3,099, $2,950 and $1,905, respectively, as of December 31, 1999. F-15 The components of net periodic pension cost and other postretirement benefit cost for the years ended December 31, were as follows:
Pension Benefits Other Benefits ----------------------------------- ----------------------------------- 2000 1999 1998 2000 1999 1998 ------- ------- ------- ------- ------- ------- Benefits earned during the year $ 2,649 $ 2,339 $ 1,759 $ 562 $ 528 $ 313 Interest accrued on projected benefit obligation 2,719 2,232 1,990 991 839 592 Return on plan assets (3,740) (3,350) (2,871) Net amortization 300 488 128 (224) (203) (203) Other 167 41 27 ------- ------- ------- ------- ------- ------- Net periodic cost $ 1,928 $ 1,709 $ 1,173 $ 1,329 $ 1,205 $ 729 ======= ======= ======= ======= =======
For 2000 measurement purposes, annual rates of increase in the per capita cost of covered health care benefits were assumed to average 14% for 2001 decreasing gradually to 5.5% by 2008 and remaining at that level thereafter. The health care cost trend rate assumption has a significant effect on the amounts reported. A one percentage point change in assumed health care cost trend rates would have the following effects:
1-Percentage- 1-Percentage- Point Increase Point Decrease Effect on total of service and interest cost components $ 261 $ (211) Effect on postretirement benefit obligation 1,938 (1,537)
Assumptions used to develop the net periodic pension cost and other postretirement benefit cost and to value pension obligations as of December 31 were as follows:
Pension Benefits Other Benefits ---------------- --------------- 2000 1999 2000 1999 ---- ---- ---- ---- Discount rate 7.75% 7.75% 7.75% 7.75% Rate of increase in future compensation levels 4.00% 4.00% 4.00% 4.00% Expected long-term rate of return on assets 9.50% 9.50% N/A N/A
The Company intends to fund at least the minimum amount required under the Employee Retirement Income Security Act of 1974, as amended, for U.S. plans, or in the case of Accuride Canada, the minimum legal requirements in Canada. The Company also sponsors certain defined contribution plans for substantially all U.S. salaried employees and the hourly employees at its Erie, Pennsylvania facility. Expense associated with these plans for the years ended December 31, 2000, 1999 and 1998 totaled $1,755, $1,183, and $1,045, respectively. F-16 11. INCOME TAXES The income tax provision (benefit) from continuing operations before extraordinary item for the years ended December 31 is as follows:
2000 1999 1998 -------- -------- -------- Current: Federal $ 367 $ 523 $ 222 State 845 981 597 Foreign 2,549 3,959 6,067 -------- -------- -------- 3,761 5,463 6,886 -------- -------- -------- Deferred: Federal 4,645 15,429 2,420 State (375) (2,691) (1,651) Foreign (3,670) 2,342 280 Valuation allowance (2,133) -------- -------- -------- 600 12,947 1,049 -------- -------- -------- Total $ 4,361 $ 18,410 $ 7,935 ======== ======== ========
A reconciliation of the U.S. statutory tax rate to the Company's effective tax rate for the years ended December 31, is as follows: Deferred income tax assets and liabilities comprised the following at December 31:
2000 1999 1998 ---- ---- ---- Statutory tax rate 35.0% 35.0% 35.0% Withholding tax on dividend of foreign subsidiary 0.3 0.6 State and local income taxes 2.6 2.2 (4.6) Incremental international tax 18.7 8.5 4.7 Goodwill 17.0 2.1 5.2 Change in state tax rates (4.1) Change in valuation allowance (4.9) Other items, net 9.3 2.9 5.1 ---- ---- ---- Effective tax rate 82.6% 42.0% 46.0% ==== ==== ====
F-17 Deferred income tax assets and liabilities comprised the following at December 31:
2000 1999 -------- -------- Deferred tax assets: Depreciation and amortization $ 34,574 $ 40,750 Postretirement and postemployment benefits 5,073 5,494 Other 6,038 1,720 Foreign tax credit 4,393 Alternative minimum tax credit 1,879 659 Net operating loss carryforward 9,392 3,830 Valuation allowance - tax basis of assets (23,050) (27,167) -------- -------- Total deferred tax assets 33,906 29,679 -------- -------- Deferred tax liabilities: Asset basis and depreciation 28,812 21,896 Pension costs 3,641 3,213 Inventories 677 1,896 Withholding tax on dividend of foreign subsidiary 128 128 Other 6,439 7,548 -------- -------- Total deferred tax liabilities 39,697 34,681 -------- -------- Net deferred tax assets (liabilities) (5,791) (5,002) Current deferred tax asset 5,175 Current deferred tax liability (598) -------- -------- Long-term deferred income tax asset (liability)-net $(10,966) $ (4,404) ======== ========
The Company's net operating loss and tax credit carryforwards available in various tax jurisdictions at December 31, 2000 expire in periods ranging from five to twenty years, except that the alternative minimum tax credit does not have a future expiration date. Realization of deferred tax assets is dependent upon taxable income within the carryforward periods available under the tax laws. Although realization of deferred tax assets in excess of deferred tax liabilities is not certain, management has concluded that it is more likely than not the Company will realize the full benefit of deferred tax assets. In 2000 and 1999, $15,197 and $11,080 of valuation allowance, initially established for certain deferred tax benefits resulting from the recapitalization, was recharacterized as deferred tax liability to the extent that related deductions had been taken on the Company's tax return. The increase in tax basis in assets was adjusted by $1,930 during the year ended December 31, 1999 due to a change in state tax rates. During 1999, it was determined that the Company would be able to fully utilize the foreign tax credits; therefore the 1998 valuation allowance of approximately $3,000 was reversed. The Company does not reinvest the undistributed earnings of Accuride Canada. However, no provision for U.S. income taxes has been made because, in management's opinion, such earnings will be remitted as dividends with taxes substantially offset by foreign tax credits. At December 31, 2000 AdM had no cumulative retained earnings for distribution. The Company previously treated undistributed earnings as permanently reinvested. Accordingly, no provision for U.S. income taxes has ever been made for such earnings. F-18 12. STOCK PURCHASE AND OPTION PLAN Effective January 21, 1998, the Company adopted the 1998 Stock Purchase and Option Plan for key employees of Accuride Corporation and subsidiaries (the "1998 Plan"). The 1998 Plan provides for the issuance of shares of authorized but unissued or reacquired shares of common stock subject to adjustment to reflect certain events such as stock dividends, stock splits, recapitalizations, mergers or reorganizations of or by the Company. The 1998 Plan is intended to assist the Company in attracting and retaining employees of outstanding ability and to promote the identification of their interests with those of the stockholders of the Company. The 1998 Plan permits the issuance of common stock (the "1998 Plan- Purchase Stock") and the grant of non-qualified stock options (the "1998 Plan-Options") to purchase shares of common stock (the issuance of 1998 Plan Purchase Stock and the grant of the 1998 Plan Options pursuant to the 1998 Plan being a "1998 Plan Grant"). Pursuant to the Plan, the Company can elect to grant performance options or time options, as defined in the Plan. Unless sooner terminated by the Company's Board of Directors, the 1998 Plan will expire ten years after adoption. Such termination will not affect the validity of any 1998 Plan Grant outstanding on the date of the termination. Pursuant to the 1998 Plan, 2,667 shares of common stock of the Company are reserved for issuance under such plan. 1998 PLAN-PURCHASE STOCK - At December 31, 2000, the Company had issued 922 shares of common stock under the 1998 Plan Purchase Stock totaling $4,621 under the terms of stock subscription agreements with various management personnel of the Company. During 2000 and 1999, respectively, 76 shares and 10 shares were repurchased as treasury stock at a cost of $454 and $51. The unpaid principal balance of $868 under the stock subscription agreements has been recorded as a reduction of stockholders' equity. 1998 PLAN-OPTIONS - The following is an analysis of stock option activity pursuant to the 1998 Plan for each of the last two years ended December 31 and the stock options outstanding at the end of the respective year:
Year ended December 31, --------------------------------------------- 2000 1999 -------------------- -------------------- Weighted Weighted Average Average Options Price Options Price ------- -------- ------- -------- Outstanding, beginning of year 1,669 $5,000 1,458 $5,000 Granted 95 $5,250 221 $5,000 Forfeited or expired (116) $5,000 (10) $5,000 ----- ----- Outstanding at end of year 1,648 $5,014 1,669 $5,000 ===== ===== Options exercisable at end of year 865 $5,010 626 $5,000
Time options vest in equal installments over a five year period from the date of the grant. Performance options vest after approximately eight years or vest at an accelerated rate if the Company meets certain performance objectives. As of December 31, 2000, options outstanding have an exercise price ranging between $5,000 and $5,250 per share and a weighted average remaining contractual life of 7.7 years. F-19 The Company applies APB Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and related interpretations in accounting for the plans; accordingly, since the grant price of the stock options was at least 100% of the fair value at the date of the grant, no compensation expense has been recognized by the Company in connection with the option grants. Had compensation cost for the plans been determined based on the fair value at the grant dates for awards under the plan consistent with the fair value method of SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, the Company's net income for the years ended December 31, 2000, 1999 and 1998 would have decreased from $2,513, $25,331 and $7,941 to the pro forma amounts of $2,496, $25,284 and $7,703, respectively. The weighted average fair value of options granted in 2000 and 1999 was $3,745 and $3,174, respectively. The fair value of the option grants is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions: dividend yield equaling 0%, risk-free interest rates ranging from 4.90% - 6.60%, expected volatilities assumed to be 0% and expected lives of approximately 7 years. The pro forma amounts are not representative of the effects on reported net income for future years. 13. COMMITMENTS Rent expense for the years ended December 31, 2000, 1999 and 1998 was $3,072, $2,371, and $1,566, respectively. Future minimum lease payments for all noncancelable operating leases having a remaining term in excess of one year at December 31, 2000 are as follows: 2001 $ 2,010 2002 1,650 2003 1,046 2004 834 2005 818 Thereafter 3,386 ------- Total $ 9,744 =======
14. CONTINGENCIES The Company is from time to time involved in various legal proceedings of a character normally incident to its past and present businesses. Management does not believe that the outcome of these proceedings will have a material adverse effect on the consolidated financial condition or results of operations of the Company. The Company's operations are subject to federal, state and local environmental laws, rules and regulations. Pursuant to the Recapitalization of the Company (see Note 2), the Company has been indemnified by PDC with respect to certain environmental liabilities at its Henderson and London facilities, subject to certain limitations. Pursuant to the AKW acquisition agreement (see Note 3), the Company has been indemnified by Kaiser with respect to certain environmental liabilities relating to the facilities leased by AKW. Management does not believe that the outcome of any environmental proceedings will have a material adverse effect on the consolidated financial condition or results of operations of the Company. F-20 15. 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 which are summarized below.
United 2000 States Canada Mexico Eliminations Combined --------- --------- --------- ------------ -------- Net sales: Sales to unaffiliated customers - domestic $ 398,369 $ 11,826 $ 31,499 $ 441,694 Sales to unaffiliated customers - export 29,853 4,257 34,110 --------- --------- --------- --------- Total $ 428,222 $ 11,826 $ 35,756 $ 475,804 ========= ========= ========= ========= Long-lived assets $ 383,060 $ 104,475 $ 46,113 $(145,021) $ 388,627
United 1999 States Canada Mexico Eliminations Combined --------- --------- --------- ------------ -------- Net sales: Sales to unaffiliated customers - domestic $ 430,722 $ 14,940 $ 20,604 $ 466,266 Sales to unaffiliated customers - export 30,331 9,257 39,588 --------- --------- --------- --------- Total $ 461,053 $ 14,940 $ 29,861 $ 505,854 ========= ========= ========= ========= Long-lived assets $ 337,621 $ 96,696 $ 48,413 $(112,864) $ 369,866
United 1998 States Canada Mexico Eliminations Combined --------- --------- --------- ------------ -------- Net sales: Sales to unaffiliated customers - domestic $ 316,867 $ 27,982 $ 27,804 $ 372,653 Sales to unaffiliated customers - export 4,511 791 5,628 10,930 --------- --------- --------- --------- Total $ 321,378 $ 28,773 $ 33,432 $ 383,583 ========= ========= ========= ========= Long-lived assets $ 174,998 $ 97,611 $ 33,311 $ (13,787) $ 292,133
Sales to three customers exceed 10% of total net sales for the years ended December 31, as follows:
2000 1999 1998 ---------------------- ---------------------- ---------------------- % of % of % of Amount Sales Amount Sales Amount Sales -------- ----- -------- ----- -------- ----- Customer one $ 96,518 20.3% $ 93,568 18.5% $ 66,220 17.3% Customer two 71,604 15.1% 86,327 17.1% 46,086 12.0% Customer three 58,488 12.3% 65,955 13.0% 41,116 10.7% -------- ---- -------- ---- -------- ---- $226,610 47.7% $245,850 48.6% $153,422 40.0% ======== ==== ======== ==== ======== ====
Each geographic segment made sales to all three major customers in 2000. F-21 16. FINANCIAL INSTRUMENTS The estimated fair value amounts of financial instruments have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have an effect on the estimated fair value amounts. CASH AND CASH EQUIVALENTS, CUSTOMER RECEIVABLES, ACCOUNTS PAYABLE AND SHORT-TERM NOTES PAYABLE - The carrying amounts approximate fair value because of the relatively short maturity of these instruments. LONG-TERM DEBT - The fair value of the Company's long- term debt has been determined on the basis of the specific securities issued and outstanding. All of the Company's long-term debt is at variable rates at December 31, 2000 and 1999 except for the senior subordinated notes which have a fixed interest rate of 9.25% (see Note 9). The principal amount of senior subordinated notes outstanding at December 31, 2000 and December 31, 1999 was $189,900, and $200,000, respectively. The carrying value of the variable rate debt approximates fair value. The fair value of the senior subordinated notes has been estimated to be $118,000 and $184,000 at December 31, 2000 and 1999, respectively. OFF BALANCE SHEET HEDGING INSTRUMENTS - The fair value of the purchased foreign currency options, commodity price swaps, and interest rate agreements have been estimated to be $0, $(882) and $250, respectively at December 31, 2000, and $161, $3,156 and $736, respectively at December 31, 1999. The fair value of these instruments is based on quoted market prices or dealer quotes. 17. LABOR RELATIONS The Company's prior contract with the United Auto Workers ("UAW") covering employees at the Henderson Facility expired in February 1998, and the Company was not able to negotiate a mutually acceptable agreement with the UAW. As a result, a strike occurred at the Henderson Facility on February 20, 1998. On March 31, 1998, the Company began an indefinite lock-out. The Company is continuing to operate with its salaried employees and contractors. 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. 18. RELATED PARTY TRANSACTIONS Effective January 21, 1998, the Company and KKR entered into a management agreement providing for the performance by KKR of certain management, consulting and financial services for the Company. The Company expensed approximately $600 in each of the three years ended December 31, 2000, pursuant to such management agreement. PDC, a previous principal stockholder of the Company, entered into retention agreements with certain executive management personnel to compensate them for service over a six-month period from the date of the Redemption. Such costs which have been paid by PDC were charged to expense by the Company over the terms of the retention agreements with a corresponding credit to "Additional Paid in Capital" for the year ended December 31, 1998. F-22 19. QUARTERLY DATA (UNAUDITED) The following table sets forth certain quarterly income statement information of the Company for the fiscal years ended December 31, 2000, 1999, and 1998:
2000 --------------------------------------------------------- (Dollars in Thousands) Q1 Q2 Q3 Q4 --------- --------- --------- --------- Net sales $ 143,368 $ 136,956 $ 104,403 $ 91,077 Gross profit 31,742 27,580 17,189 6,061 Operating expenses 8,400 9,915 6,435 8,099 Income (loss) from operations 23,342 17,665 10,754 (2,038) Equity earnings of affiliates* 126 113 118 98 Other expense (10,776) (12,770) (12,920) (8,433) Income (loss) before extraordinary gain (8,160) Net income (loss) 7,361 2,906 (1,189) (6,565)
1999 --------------------------------------------------------- (Dollars in Thousands) Q1 Q2 Q3 Q4 --------- --------- --------- --------- Net sales $ 111,533 $ 136,052 $ 129,422 $ 128,847 Gross profit 26,092 31,226 28,702 29,058 Operating expenses 6,479 7,695 7,608 11,711 Income from operations 19,613 23,531 21,094 17,347 Equity earnings of affiliates* 2,315 11 32 (42) Other expense (9,259) (10,396) (10,659) (9,755) Net income 7,324 7,557 6,071 4,379
1998 --------------------------------------------------------- (Dollars in Thousands) Q1 Q2 Q3 Q4 --------- --------- --------- --------- Net sales $ 93,908 $ 97,675 $ 93,954 $ 98,046 Gross profit 20,155 23,227 19,647 19,525 Operating expenses 9,636 8,247 7,911 8,240 Income from operations 10,519 14,980 11,736 11,285 Equity earnings of affiliates* (2,700) 2,155 2,362 2,112 Other expense (7,164) (8,289) (10,803) (8,959) Net income 480 4,798 1,104 1,568
*AKW was accounted for on the equity method until April 1, 1999 when the Company acquired 100% ownership. * * * * * * F-23 Schedule II ACCURIDE CORPORATION VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Balance at Charges to Balance at beginning costs and Write- end of period expenses Recoveries offs of period --------- ---------- ---------- ------ ---------- Reserves deducted in balance sheet from the asset to which Applicable: Accounts Receivable: December 31, 1998 967 (4) 150 (105) 1,008 December 31, 1999 1,008 61 21 (628) 462 December 31, 2000 462 293 79 (28) 806
F-24 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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: March 23, 2001 ACCURIDE CORPORATION BY: /s/ William P. Greubel --------------------------------- William P. Greubel CHIEF EXECUTIVE OFFICER Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ William P. Greubel President and Chief Executive March 23, 2001 - ------------------------ Officer (Principal Executive William P. Greubel Officer, Director) /s/ John R. Murphy Executive Vice President/Chief March 23, 2001 - ------------------------ Financial Officer, Secretary John R. Murphy and Chief Financial Officer (Principal Financial and Accounting Officer) Director March 23, 2001 - ------------------------ Henry R. Kravis /s/ George R. Roberts Director March 23, 2001 - ------------------------ George R. Roberts /s/ James H. Greene, Jr. Director March 23, 2001 - ------------------------ James H. Greene, Jr. Director March 23, 2001 - ------------------------ Todd A. Fisher /s/ Frederick M. Goltz Director March 23, 2001 - ------------------------ Frederick M. Goltz EX-10.29 2 a2042721zex-10_29.txt EXHIBIT 10.29 EXECUTION COPY AMENDMENT NO. 3 TO THE CREDIT AGREEMENT Dated as of March 31, 2000 AMENDMENT NO. 3 TO THE CREDIT AGREEMENT among ACCURIDE DE MEXICO, S.A. DE C.V., a corporation organized and existing under the laws of the United Mexican States (the "BORROWER"), ACCURIDE CORPORATION, a Delaware corporation ("ACCURIDE") and CITIBANK MEXICO, S.A., GRUPO FINANCIERO CITIBANK (the "LENDER"). PRELIMINARY STATEMENTS: (1) The Borrower and the Lender have entered into a Credit Agreement dated as of July 9, 1998, as amended by the Amendment No. 1 to the Credit Agreement dated as of September 13, 1999 and the Amendment No. 2 to the Credit Agrement dated as of December 31, 1999 (such Credit Agreement as so amended being the "CREDIT AGREEMENT"). Capitalized terms not otherwise defined in this Amendment have the same meanings as specified in the Credit Agreement. (2) Accuride Corporation, the Borrower and the Lender have entered into an Amended and Restated Completion Guaranty Agreement dated as of May 20, 1999 (the "COMPLETION GUARANTY"). (3) Accuride has entered into the Parent Guaranty and the Pledge Agreement in favor of the Lender. (4) The Lender has entered into a Participation Agreement with each of The Bank of Nova Scotia and Comerica Bank (the "PARTICIPANTS"). (5) The Borrower and Accuride have requested the termination of the Completion Guaranty, amendments to the Credit Agreement to reflect such termination, and an extension of the Working Capital Termination Date to July 9, 2001. (6) The Lender is, on the terms and conditions stated below, willing to grant such request and the Participants are willing to consent thereto. SECTION 1. TERMINATION OF THE COMPLETION GUARANTY. Effective as of the date hereof and subject to the satisfaction of the conditions precedent set forth in Section 4, the Completion Guaranty is hereby terminated and all the Obligations of the Borrower and Accuride under the Completion Guaranty are hereby terminated. SECTION 2. AMENDMENTS TO CREDIT AGREEMENT. The Credit Agreement is, effective as of the date hereof and subject to the satisfaction of the conditions precedent set forth in Section 4, hereby amended as follows: (a) The definitions of the terms "Completion", "Completion Date", "Completion Default" and "Completion Guaranty" contained in Section 1.01 of the Credit Agreement are deleted in their entirety, and the term "Completion Guaranty" is deleted from the definition of "Loan Documents" contained in Section 1.01 of the Credit Agreement. (b) Section 6.02 of the Credit Agreement is amended by deleting in their entirety subsections (m) and (r) of such Section 6.02. SECTION 3. WORKING CAPITAL COMMITMENT EXTENSION. The Lender hereby agrees that the current Working Capital Termination Date now in effect under the Credit Agreement shall, effective as of the date hereof and subject to the satisfaction of the conditions precedent set forth in Section 4, be automatically extended to July 9, 2001 pursuant to Section 2.12(a) of the Credit Agreement (except if any Default shall have occurred and be continuing on the 91st day prior to such current Working Capital Termination Date), and that it will not provide the written notice to the Borrower referred to in Section 2.12(b) of the Credit Agreement on or before the 90 days prior to such current Working Capital Termination Date. SECTION 4. CONDITIONS OF EFFECTIVENESS. (a) This Amendment shall become effective as of the date first above written when, and only when, the Lender shall have received (i) counterparts of this Amendment executed by the Borrower, Accuride and the Lender and (ii) counterparts of the Consent of the Participants attached hereto executed by the Participants and, in addition, (b) Sections 1, 2 and 3 hereof shall become effective when, and only when, the Borrower shall have paid to the Lender a fee equal to 0.25% of 1% of the sum of the Term Commitment (whether used or unused) and the Working Capital Commitment (whether used or unused). SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The Borrower represents and warrants as follows: (a) the representations and warranties contained in each Loan Document (as defined in the Credit Agreement as amended hereby) are correct in all material respects on and as of the date hereof as though made on and as of such date other than any such representations or warranties that, by their terms, refer to a specific date other than the date hereof, in which case as of such specific date; and 2 (b) no event has occurred and is continuing that constitutes a Default (as defined in the Credit Agreement as amended hereby). SECTION 6. REFERENCE TO AND EFFECT ON THE LOAN DOCUMENTS. (a) On and after the effectiveness of this Amendment, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof" or words of like import referring to the Credit Agreement, and each reference in the Notes and each of the other Loan Documents to "the Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement, as amended by this Amendment. (b) The Credit Agreement is and shall continue to be in full force and effect and is hereby in all respects ratified and confirmed. (c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Lender under any of the Loan Documents, nor constitute a waiver of, or a consent from, any of the terms and conditions of any of the Loan Documents. SECTION 7. ACCURIDE CONSENT. Accuride as Guarantor under the Parent Guaranty and as Pledgor under the Pledge Agreement hereby consents to this Amendment and hereby confirms and agrees that, notwithstanding the effectiveness of this Amendment, the Parent Guaranty and the Pledge Agreement are, and shall continue to be, in full force and effect and are hereby ratified and confirmed in all respects. SECTION 8. COSTS AND EXPENSES. The Borrower agrees to pay on demand all costs and expenses of the Lender in connection with the preparation, execution, delivery and administration, modification and amendment of this Amendment and the other documents to be delivered in connection herewith (including, without limitation, the reasonable fees and expenses of counsel for the Lender) in accordance with the terms of Section 7.04 of the Credit Agreement. SECTION 9. EXECUTION IN COUNTERPARTS. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. Delivery of an executed counterpart of a signature page to this Amendment by telecopier shall be effective as delivery of a manually executed counterpart of this Amendment. SECTION 10. GOVERNING LAW. This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York. 3 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. ACCURIDE DE MEXICO, S.A. DE C.V. By /s/ JUAN GERARDO VARELA -------------------------------- Name: Juan Gerardo Varela Title: Director General ACCURIDE CORPORATION By /s/ WILLIAM P. GREUBEL -------------------------------- Name: William P. Greubel Title: President CITIBANK MEXICO, S.A., GRUPO FINANCIERO CITIBANK By /s/ PEDRO CEDILLO -------------------------------- Name: Pedro Cedillo Title: Vice President CONSENT OF PARTICIPANTS Dated as of March 31, 2000 Reference is made to the Amendment No. 3 to the Credit Agreement dated as of March __, 2000 (the "AMENDMENT"; the terms defined in the Amendment or the Credit Agreement (as defined in the Amendment) being used herein as therein defined) among Accuride de Mexico, S.A. de C.V., a corporation organized and existing under the laws of the United Mexican States, Accuride Corporation, a Delaware corporation, and Citibank Mexico, S.A., Grupo Financiero Citibank (the "LENDER"). Each Participant named below as a party to a Participation Agreement with the Lender, hereby (a) consents to the Amendment and hereby confirms and agrees that, notwithstanding the effectiveness of the Amendment, the Participation Agreement to which such Participant is a party is, and shall continue to be, in full force and effect and is hereby ratified and confirmed in all respects, and (b) agrees that it will not deliver to the Lender the written notice (to the effect that such Participant does not agree to the extension of the Working Capital Termination Date) referred to in Section 6(c) of the Participation Agreement on or before 95 days prior to the current Working Capital Termination Date now in effect under the Credit Agreement. This Consent may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same Consent. Delivery of an executed counterpart of a signature page to this Consent by telecopier shall be effective as delivery of a manually executed counterpart of this Consent. This Consent shall be governed by, and construed in accordance with, the law of the State of New York. THE BANK OF NOVA SCOTIA By /s/ F.C.H. ASHBY -------------------------------- Name: F.C.H. Ashby Title: Senior Manager Loan Operations COMERICA BANK By /s/ NATASHA SPASOVSKI -------------------------------- Name: Natasha Spasovski Title: Assistant Vice President EX-10.30 3 a2042721zex-10_30.txt EXHIBIT 10.30 AMENDMENT NO. 4 TO THE CREDIT AGREEMENT Dated as of December 14, 2000 AMENDMENT NO. 4 TO THE CREDIT AGREEMENT among ACCURIDE DE MEXICO, S.A. DE C.V., a corporation organized and existing under the laws of the United Mexican States (the "BORROWER"), ACCURIDE CORPORATION, a Delaware corporation ("ACCURIDE") and CITIBANK MEXICO, S.A., GRUPO FINANCIERO CITIBANK (the "LENDER"). PRELIMINARY STATEMENTS: (1) The Borrower and the Lender have entered into a Credit Agreement dated as of July 9, 1998, as amended by the Amendment No. 1 to the Credit Agreement dated as of September 13, 1999, the Amendment No. 2 to the Credit Agreement dated as of December 31, 1999 and the Amendment No. 3 to the Credit Agreement dated as of March 31, 2000 (such Credit Agreement as so amended being the "CREDIT AGREEMENT"). Capitalized terms not otherwise defined in this Amendment have the same meanings as specified in the Credit Agreement. (2) The Lender has entered into the Participation Agreement with The Bank of Nova Scotia and Comerica Bank. (3) Accuride has entered into the Parent Guaranty and the Pledge Agreement in favor of the Lender, and has entered into the Guarantor Credit Agreement with the financial institutions party thereto as Lenders, Citibank, N.A. as Issuing Bank, Citicorp USA, Inc. as Swing Line Bank, Citicorp USA, Inc., as administrative agent, and Salomon Smith Barney Inc., as arranger. (4) The Borrower and Accuride have requested that certain covenants contained in the Credit Agreement be amended in order to allow the Borrower to issue capital stock to its Affiliates. (5) The Lender is, on the terms and conditions stated below, willing to grant such request. SECTION 1. AMENDMENTS TO CREDIT AGREEMENT. The Credit Agreement is, effective as of the date hereof and subject to the satisfaction of the conditions precedent set forth in Section 2, hereby amended as follows: (a) Section 5.02(f) is amended by adding to the end thereof the following new proviso: 1 "; PROVIDED that the Borrower may issue shares of its capital stock to any Affiliate of Accuride so long as such shares are duly pledged by such Affiliate under the Pledge Agreement in accordance with a pledge agreement supplement or similar document in form and substance satisfactory to the Lender (and supported by a favorable opinion of counsel of the Borrower, confirming the enforceability and perfection of such pledge, in form and substance satisfactory to the Lender) in favor of the Lender within 30 days of the issuance of such shares to such Affiliate." (b) Section 5.03(o) is amended by adding to the end thereof the following new proviso: "; PROVIDED that the Borrower shall furnish to the Lender no later than five Business Days after the execution thereof, a copy of any amendment or modification to the charter or bylaws if such amendment or modification is necessary solely for the issuance by the Borrower of its capital stock to its Affiliates pursuant to the proviso to Section 5.02(f)." SECTION 2. CONDITIONS OF EFFECTIVENESS. (a) This Amendment shall become effective as of the date first above written when, and only when, the Lender shall have received (i) counterparts of this Amendment executed by the Borrower, Accuride and the Lender and (ii) counterparts of the Consent of Participants attached hereto executed by those Participants that shall hold, together with the interest of the Lender, a majority in interest in the aggregate principal amount of the Advances then outstanding. SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The Borrower represents and warrants as follows: (a) the representations and warranties contained in each Loan Document (as defined in the Credit Agreement as amended hereby) are correct in all material respects on and as of the date hereof as though made on and as of such date other than any such representations or warranties that, by their terms, refer to a specific date other than the date hereof, in which case as of such specific date; and (b) no event has occurred and is continuing that constitutes a Default (as defined in the Credit Agreement as amended hereby). SECTION 4. REFERENCE TO AND EFFECT ON THE LOAN DOCUMENTS. (a) On and after the effectiveness of this Amendment, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof" or words of like import referring to the Credit Agreement, and each reference in the Notes and each of the other Loan Documents to "the Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement, as amended by this Amendment. (b) The Credit Agreement is and shall continue to be in full force and effect and is hereby in all respects ratified and confirmed. 2 (c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Lender under any of the Loan Documents, nor constitute a waiver of, or a consent from, any of the terms and conditions of any of the Loan Documents. SECTION 5. ACCURIDE CONSENT. Accuride as Guarantor under the Parent Guaranty and as Pledgor under the Pledge Agreement hereby consents to this Amendment and hereby confirms and agrees that, notwithstanding the effectiveness of this Amendment, the Parent Guaranty and the Pledge Agreement are, and shall continue to be, in full force and effect and are hereby ratified and confirmed in all respects. SECTION 6. COSTS AND EXPENSES. The Borrower agrees to pay on demand all costs and expenses of the Lender in connection with the preparation, execution, delivery and administration, modification and amendment of this Amendment and the other documents to be delivered in connection herewith (including, without limitation, the reasonable fees and expenses of counsel for the Lender) in accordance with the terms of Section 7.04 of the Credit Agreement. SECTION 7. EXECUTION IN COUNTERPARTS. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. Delivery of an executed counterpart of a signature page to this Amendment by telecopier shall be effective as delivery of a manually executed counterpart of this Amendment. SECTION 8. GOVERNING LAW. This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York. 3 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. ACCURIDE DE MEXICO, S.A. DE C.V. By /s/ DAVID K. ARMSTRONG -------------------------------- Name: David K. Armstrong Title: Authorized Agent ACCURIDE CORPORATION By /s/ WILLIAM P. GREUBEL -------------------------------- Name: William P. Greubel Title: President and CEO CITIBANK MEXICO, S.A., GRUPO FINANCIERO CITIBANK By /s/ PEDRO CEDILLO -------------------------------- Name: Pedro Cedillo Title: Vice President 4 CONSENT OF PARTICIPANTS Dated as of December 14, 2000 Reference is made to the Amendment No. 4 to the Credit Agreement dated as of December 14, 2000 (the "AMENDMENT"; the terms defined in the Amendment or the Credit Agreement (as defined in the Amendment) being used herein as therein defined) among Accuride de Mexico, S.A. de C.V., a corporation organized and existing under the laws of the United Mexican States, Accuride Corporation, a Delaware corporation, and Citibank Mexico, S.A., Grupo Financiero Citibank (the "LENDER"). Each Participant named below as a party to a Participation Agreement with the Lender, hereby consents to the Amendment and hereby confirms and agrees that, notwithstanding the effectiveness of the Amendment, the Participation Agreement to which such Participant is a party is, and shall continue to be, in full force and effect and is hereby ratified and confirmed in all respects, except that, on and after the effective date of the Amendment, each reference in such Participation Agreement to the Credit Agreement, "thereunder," "thereof", "therein" or words of like import referring to the Credit Agreement shall mean and be a reference to the Credit Agreement as amended by the Amendment. This Consent may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same Consent. Delivery of an executed counterpart of a signature page to this Consent by telecopier shall be effective as delivery of a manually executed counterpart of this Consent. This Consent shall be governed by, and construed in accordance with, the law of the State of New York. THE BANK OF NOVA SCOTIA By -------------------------------- Name: Title: COMERICA BANK By -------------------------------- Name: Title: 5 EX-10.31 4 a2042721zex-10_31.txt EXHIBIT 10.31 ----------------------------------------- JOINT MARKETING AGREEMENT ----------------------------------------- GIANETTI RUOTE SPA -and- ACCURIDE CORPORATION Dated: November 16, 2000 JOINT MARKETING AGREEMENT THIS JOINT MARKETING AGREEMENT (the "AGREEMENT") is made as of the 16th day of November, 2000 by and between GIANETTI RUOTE SPA, a corporation having its principal place of business at Via Stabilimenti 31, 20020 Ceriano Laghetto (Milano) Italy, ("GIANETTI RUOTE") and ACCURIDE CORPORATION, a Delaware corporation having its principal place of business at 7140 Office Circle, Evansville, Indiana, USA ("ACCURIDE") (Gianetti and Accuride are hereinafter referred to individually as a "party" and collectively as the "parties"). RECITALS (A) Gianetti Ruote is a leading O.E.M. (Original Equipment Manufacturer) of heavy vehicle steel wheels in Europe and Accuride is a leading O.E.M (Original Equipment Manufacturer) of heavy wheels in North America. (B) The parties have entered into a letter of understanding, dated as of August 4, 2000, which provides, among other things that the parties will enter into this Agreement. (C) The parties believe that this Agreement will provide opportunities for the more successful competitive marketing of their products worldwide to their mutual benefit, through enabling them, among other things, to provide a single source for their customers global needs. (D) In particular the parties believe that this Agreement will enable both companies to compete on a global basis in the o.e. (original equipment) market for heavy wheels and, in particular, to respond to the increasing number of global tenders for such product. (E) The parties intend to establish a Steering Committee to direct the joint marketing efforts contemplated by this Agreement. 1 NOW THEREFORE IT IS HEREBY AGREED AS FOLLOWS: 1. DEFINITIONS AND INTERPRETATION In this Agreement unless otherwise specified, reference to:- (a) "Steering Committee" shall mean the Committee established under clause 3.3 below; (b) the "Effective Date" means the date of this Agreement; (c) "OEM" means Original Equipment Manufacturers (d) "o.e." means original equipment. It shall be used in opposition to the word "A.M." (Aftermarket) to indicate the specific destination of the products, that is the market of original equipment products (o.e.) opposed to the market of spare parts (A.M.). (e) "A.M." means Aftermarket. It is used to indicate the destination of the products to the market of spare parts in opposition to the o.e. (original equipment) market (f) a party means a party to this Agreement and includes its permitted assignees and/or the successors in title to substantially the whole of its undertaking; (g) a person includes any person, individual, company, firm, corporation, government, state or agency of a state or any undertaking (whether or not having separate legal personality and irrespective of the jurisdiction in or under the law of which it was incorporated or exists); (h) reference to recitals, clauses, paragraphs or schedules are to recitals, clauses and paragraphs of and schedules to this Agreement. The recitals and schedules hereto form part of the operative provisions of this Agreement and references to this Agreement shall, unless the context otherwise requires, include references to the recitals and the schedules; (i) writing shall include typewriting, printing, lithography, photography and other modes of representing words in a legible form other than writing stored in electronic or magnetic form or displayed on an electronic or visual display screen or in other transitory form; (j) words denoting the singular shall include the plural and vice versa and words denoting any gender shall include all genders. The index to and the headings in this Agreement are for information only and are to be ignored in construing the same. 2 2. JOINT MARKETING UNDERTAKING 2.1 PURPOSE Each of Gianetti Ruote and Accuride agree to enter into mutually agreed upon activities in order to meet the global needs of their OEM and A.M. customers for heavy wheels and other agreed upon marketing objectives. The activities to be undertaken shall be determined by the Steering Committee as set forth in Section 3.3. 2.2 REASONABLE EFFORTS Each of Gianetti Ruote and Accuride shall carry out the respective tasks and discharge the respective responsibilities assigned to them as set out below in furtherance of this Agreement to be implemented by them under the auspices of this Agreement. Wherever the fulfilment or performance of any obligation undertaken by either or both of the parties is dependent on the decision of, or co-operation from, a third party none of the parties shall be liable to the other if each of the parties shall have used their respective best endeavours to secure a favourable decision from a such third party or, as the case may be, obtain the required co-operation. 3. MARKETING; JOINT BIDS; MANAGEMENT 3.1 MARKETING Each of the parties shall earnestly and diligently co- operate in the joint marketing, in such party's existing sales territory, of the other parties products, primarily with the goal of making joint global bids to OEM's who require heavy wheels. In that regard, each party will do the following: (a) develop a basic understanding of each other's services and products; (b) provide training to each other's personnel; (c) issue a joint press announcement describing this relationship; (d) seek joint or co-operative marketing opportunities, such as joint sales presentations, joint proposals and shared public relations; (e) exchange customer lists, including customer name, address, primary contact and telephone number; (f) identify and pre-qualify prospective customers, and determine the suitability of the parties' products for customers and prospective customers; (g) generate interest in prospective customers for their respective products; (h) visit prospective customers; 3 (i) introduce representatives of the other party to the decision- making executives of prospective customers; (j) participate in joint presentations and develop joint bids to customers and prospective customers for the supply of their respective products; (k) keep each other informed on progress with prospects, and on new services and products; (l) refer to the other's services or products in appropriate trade advertising, marketing literature, new product announcements and promotional materials; (m) use commercially reasonable efforts to develop or maintain a capacity to manufacture their respective products to satisfy demand; (n) appoint two (2) senior persons employed or engaged by them and with relevant industry experience to serve on the Steering Committee; and (o) perform its activities under this Agreement and conduct its business in a professional manner consistent with the business, good standing and reputation of both parties. 3.2 JOINT BIDS AND SALES RECEIPTS Each party shall be responsible for supplying products sold under contract, pursuant either to a joint or individual bid, in its respective Territory, and shall be entitled to the sales receipts therefrom without obligation to share such receipts with or otherwise compensate the other for such sales. 3.3 STEERING COMMITTEE MEETINGS AND FUNCTION The Steering Committee, by unanimous vote, shall agree upon the activities to be undertaken pursuant to this Agreement. The Steering Committee shall consist of two appointees of Gianetti and two appointees of Accuride, who may be appointed and removed by the will of the party appointing them. The Committee shall hold quarterly (or as otherwise agreed) meetings to discuss the business relationship at a location to be determined by the Committee. At these meetings, the parties will: (a) discuss issues related to marketing support and marketing communications; (b) discuss and evaluate each of the marketing tasks and objectives set forth in clause 3.1 of this Agreement; (c) determine the most efficient methods to service the sales, or potential sales, of the parties' products within and outside the existing sales territories of the parties; (d) schedule on-site visits of management and technical personnel in order to avoid or minimise disruption of business operations or production schedules; and (e) co-ordinate and schedule meetings of each party's technical personnel. 4 4. INDEMNIFICATION 4.1 INDEMNIFICATION OBLIGATION Each party shall be responsible for its own activity against any third party. In particular, each party shall be responsible for any losses, damages, liability or expense arising out of its products. As a result, each party (the "INDEMNITOR") shall indemnify, defend and hold harmless the other and its officers, directors, employees and agents and their respective successors, legal representatives, heirs and assigns (the "INDEMNITEES"), against any liability, damage, loss, or expense (including reasonable attorneys' fees and expenses of litigation) incurred by or imposed upon the Indemnitees or any one of them in connection with any third party claim, suits, actions, demands or judgements: (a) as a result of or in connection with the conduct of the Indemnitor's business, including actions taken or representations made by in connection with its performance of this Agreement; or (b) arising out of the condition, character or quality of any product or service sold by the Indemnitor, including those based in any theory of product liability, including, but not limited to, actions in the form of tort, warranty, or strict liability, concerning any of the Indemnitor's products or products made, used or sold by the Indemnitor, its Subsidiaries. 4.2 EXCEPTIONS The indemnification obligation under clause 4.1 shall not apply to any liability, damage, loss or expense to the extent that it is directly attributable to the gross negligence or wilful misconduct of the Indemnitees. 5. CONFIDENTIAL INFORMATION 5.1 CONFIDENTIAL INFORMATION Each party shall hold in confidence, and shall use solely for purposes of or provided in this Agreement any confidential or proprietary information ("CONFIDENTIAL INFORMATION") received by it from the other or derived from Confidential Information received from the other, and shall protect the confidentiality of such with the same degree of care that it exercises with respect to its own information of like import, but in no event less than reasonable care. This clause 5.1 shall survive termination of this Agreement for a period of 5 years. 5.2 EXCEPTIONS The obligations of clause 5.1 shall not apply to any portion of the Confidential Information which: (a) is now or which hereafter, through no act or failure to act on the part of the receiving party, becomes generally known in the heavy and/or light wheel industry; 5 (b) is hereafter furnished to the receiving party by a third party without obligation to keep such information confidential; (c) is independently developed by the receiving party without the use of the Confidential Information; (d) is required to be disclosed pursuant to a legal, judicial or administrative procedure or otherwise required by law; (e) is already in the possession of, or known to, the receiving party prior to its receipt; or (f) is approved for release or use without restriction by written authorization of an officer of the disclosing party. Subject to the requirements of clause 5.1, hereof, the receiving party may disclose appropriate portions of Confidential Information to its employees who have a need to know the specific information in question, and to subsidiaries, affiliates, representatives, agents, auditors, lenders and regulators having a need or right to know. No Confidential Information shall be disclosed to any third party by a receiving party without the prior written consent of the other party. 5.3 RETURNING CONFIDENTIAL INFORMATION In case of termination of this Agreement the parties shall immediately cease to use all the Confidential Information and within thirty (30) days shall return all materials of any kind containing Confidential Information of the other party to that party. 5.4 INJUNCTION Confidential Information has been and will continue to be of central importance to the business of a disclosing party and its disclosure to or use by others will cause immediate and irreparable injury to the disclosing party, which may not be adequately compensated by damages and for which there is no adequate remedy at law. In the event of any actual or threatened misappropriation or disclosure of Confidential Information, the receiving party agrees that the disclosing party will be entitled to an injunction prohibiting such misappropriation or disclosure, and to specific enforcement of the receiving party's obligations hereunder. The foregoing rights to an injunction and specific performance will be cumulative and in addition to every other remedy now or hereafter available to disclosing party in law or equity or by statute. 5.5 LIMITATION OF LIABILITY In no event shall either party be liable for any lost revenues or profits or other special, indirect, consequential or punitive damages arising out of this Agreement, even if that party has been advised of the possibility of such damages, and regardless of whether any remedy set forth herein fails of its essential purpose. 6 6. FEES AND EXPENSES Each party shall bear its own costs fees and expenses incurred in negotiating, entering into and implementing this Agreement. 7. DISPUTE RESOLUTION 7.1 DISPUTES All claims, disputes and other matters in controversy (herein called "DISPUTE") arising directly or indirectly out of or related to this Agreement, or the breach thereof, whether contractual or non-contractual, and whether during the term or after the termination of this Agreement, shall be resolved exclusively according to the procedures set forth in this clause 7. 7.2 RESOLUTION The parties shall attempt to settle any dispute, claim or controversy arising out of this Agreement through consultation and negotiation in good faith and in a spirit of mutual co-operation. The primary forum for the settlement of matters arising hereunder shall be through the Steering Committee provided for above which shall meet within fifteen (15) days of notification of a dispute by one of them. If the dispute is not resolved within five (5) days of such meeting (or sixteen (16) days should a meeting of such persons have not occurred for any reason), either party may refer the matter to the chief executives of each party. If the Steering Committee fails to produce a solution accepted by the parties affected by the matter in question then the following procedures shall be adhered to by the parties: (a) the respective chief executives of the affected parties shall attempt to resolve the dispute by meeting fully briefed on the issues and discussing the possible solutions and if possible agreeing on a solution or procedure for a solution (which may include one of the further steps set out below). The chief executives shall be obliged to meet for this purpose within thirty (30) days of notification of dispute; (b) if a meeting of chief executives does not lead to a solution. any one of such chief executives may require that the dispute shall be mediated by an international expert of standing and repute in the field of the subject matter of the dispute, selected from a panel of mediators proposed by the Centre for Dispute Resolution (CEDR) in the United Kingdom. The parties agree to co-operate and participate with the mediation process by making available, promptly and adequately resourced and available senior executives and adhering to the processes proposed by such mediator. Costs of the mediator shall be borne equally by the parties to the dispute; other costs shall be borne by the party incurring them. The mediator shall be selected by agreement, not to be delayed or withheld; (c) if agreement or solution is not reached within ninety (90) days of commencement of mediation process or if agreement is not reached on the selection of a mediator, the matter in dispute shall be referred for final solution by arbitration in London, England under the arbitration rules of the International Chamber of Commerce by a single arbitrator agreed between the parties or failing such agreement within thirty (30) days, by a panel of three arbitrators, of whom one shall be appointed by 7 Gianetti Ruote, one shall be appointed by Accuride, and the third shall be appointed by the other two, save that if no agreement is reached by them on the third within thirty (30) days, the third shall be appointed by the President (or equivalent officer) for the time being of the International Chamber of Commerce. 7.3 NO PUNITIVE DAMAGES, FEES Under no circumstances shall the arbitrator(s) have any authority to award punitive damages. Judgement on the arbitrator's award may then be entered in any court which has proper jurisdiction. The prevailing party shall be entitled to reimbursement of attorneys' and other fees incurred in satisfying its judgement. 7.4 RIGHTS OF PARTIES The use of any of the above procedures shall not be construed under the doctrine of laches, waiver or estoppel to affect adversely the right of either party, and nothing in this section shall prevent either party from resorting to judicial proceedings if: (a) good faith efforts to resolve the dispute under these procedures have been unsuccessful; or (b) interim relief from a court is necessary to prevent serious and irreparable injury to one party or to others. 8. COMMUNICATION AND NOTICES All communication between the parties shall be in English. All notices, requests, demands and other communications required or permitted hereunder shall be deemed to have been duly given if delivered or mailed by certified or registered airmail with postage prepaid or sent by telex, telegram, cable or facsimile or other electronic transmission (confirmed by such airmail, provided that the failure so to confirm shall not affect the validity of such communications) addressed as follows: IF TO GIANETTI RUOTE: Address: Via Stabilimenti 31 20020 Ceriano Laghetto (Milano) Italy Fax No: 39-011-959-3402 For the Francesco Giuliano, Deputy General attention of: Manager IF TO ACCURIDE: Address: 7140 Office Circle Evansville, IN 47715 Fax No: (812) 962-5470 For the David K. Armstrong attention of: Senior Vice President & General Counsel A party shall notify the other party to this Agreement of a change to its name, relevant addressee, address or fax number. 8 9. DURATION 9.1 INITIAL PERIOD This Agreement shall commence as of the Effective Date and expire upon the third (3rd) anniversary of the Effective Date ("INITIAL PERIOD"), unless sooner terminated as provided in clause 9.3. 9.2 EXTENSIONS This Agreement shall be automatically extended for additional two (2) year periods following the Initial Period. In the event that a party intends not to extend this Agreement at the end of the Initial Period or an extension of the Initial Period ("EXTENDED PERIOD"), it shall give the other party notice of such intention not later than three (3) months prior to the expiration of the Extended Period then in effect. 9.3 OTHER Either party may terminate this Agreement at any time by giving one hundred eighty (180) days advance notice of termination in writing to the other. 10. GENERAL 10.1 AGREEMENT The provisions of this Agreement shall be binding upon and shall survive for the benefit of the parties and their respective successors and permitted assigns, subject, however, to the provisions regarding assignment set out below. 10.2 SEVERABILITY In the event that any provision or any portion of any provision contained in this Agreement is unenforceable, the remaining provisions and, in the event that a portion of any provision is unenforceable, the remaining portion of such provision, shall nevertheless be carried into effect. 10.3 NO WAIVER The failure of either party to enforce at any time or for any period of time the provisions of this Agreement shall not be construed as a waiver of such provision or of the right of such party thereafter to enforce each and every such provision of this Agreement. 10.4 FURTHER ASSURANCES Each party shall perform all such acts and execute and deliver all such instruments, documents and writings as may be reasonable required to give full effect to this Agreement. 9 10.5 AMENDMENT Except as otherwise provided herein, this Agreement can only be modified by written agreement duly signed by persons authorized to sign agreements on behalf of Gianetti and Accuride. 10.6 ASSIGNMENT This Agreement shall be binding on the parties hereto, but shall not be assignable by either party without the consent of the other party, which consent shall not be unreasonably withheld, except that no consent shall be required in the event of a transfer of substantially the entire business of either party to which this Agreement pertains. 10.7 CHOICE OF LAW This Agreement is made under and shall be governed by and construed in accordance with the laws of the United Kingdom. 10.8 COUNTERPARTS This Agreement may be executed in one or more counterparts, each of which will be deemed an original, but all of which constitute but one and the same instrument. 10.9 ENTIRE AGREEMENT This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof, and supersedes and replaces all prior or contemporaneous understandings or agreements, written or oral, regarding such subject matter. This Agreement will be fairly interpreted in accordance with its terms and without any strict construction in favor of or against either party. 10.10 FORCE MAJEURE Neither party will be liable to the other for delays in or partial or total failure of performance due to causes beyond such party's reasonable control, including, but not limited to mandatory law, acts of God, acts or omissions of civil or military authority, any rule, regulation or orders issued by any governmental authority or by any officer, department, agency or instrumentality thereof, fires, floods, epidemics, war, embargo, riots or national company strikes or lockouts and other causes beyond the control of the affected party. 10.11 HEADINGS The headings and captions in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. 10.12 NO RIGHTS IN THIRD PARTIES This Agreement is made for the benefit of the parties, and not for the benefit of any third parties unless otherwise agreed to by the parties. 10 10.13 NOTICES All notices required hereunder must be in writing and delivered either in person or by a means evidenced by a delivery receipt, to the address first set forth above or as otherwise notified in writing. Such notice will be effective upon receipt. 10.14 RELATIONSHIP OF THE PARTIES No employees, consultants, contractors, or agents of one party are agents, employees, franchisees of the other party, nor do they have any authority to bind the other party by contract or otherwise to any obligation. No party will represent to the contrary, either expressly, implicitly, or otherwise. No partnership (as that term is understood in law) is or is intended to be created by this Agreement or as a result of its implementation. 10.15 TRANSLATION This Agreement may be translated into the Italian language for the convenience of the parties, provided, however, that in all events the English language text of this Agreement, as executed by or on behalf of each party hereto, shall constitute the governing text. 10.16 NON-EXCLUSIVE Nothing in this Agreement is intended to prevent or prohibit either of the parties from (i) entering into any commercial or other business relationship with any other person or entity which may conflict with the purposes of this Agreement, or (ii) expanding its or its Subsidiaries' existing sales territory of its products into the existing sales territory of the other party, or otherwise competing with the other party in the sale of heavy wheels or otherwise. IN WITNESS whereof this Agreement has been entered into the day and year first above written. GIANETTI RUOTE SPA By: /s/ G. Perris Magnetto -------------------------------- Its: Managing Director ACCURIDE CORPORATION By: /s/ William P. Greubel -------------------------------- Its: President 11 EX-10.32 5 a2042721zex-10_32.txt EXHIBIT 10.32 TECHNOLOGY CROSS LICENSE THIS TECHNOLOGY CROSS LICENSE ("AGREEMENT") is entered into as of November 16, 2000 (the "EFFECTIVE DATE"), by and between GIANETTI RUOTE SpA, a corporation having its principal place of business at via Stabilimenti 31, 20020 Ceriano Laghetto (Milano), Italy 13/15 ("GIANETTI RUOTE"), and ACCURIDE CORPORATION, a Delaware corporation having its principal place of business at 7140 Office Circle, Evansville, Indiana, US ("ACCURIDE") (Gianetti Ruote and Accuride are hereinafter referred to individually as a "party" and collectively as the "parties"). 1. PURPOSE AND DEFINITIONS 1.1 PURPOSE OF THIS AGREEMENT (a) Gianetti Ruote is a leading O.E.M. (Original Equipment Manufacturer) of heavy vehicle steel wheels in Europe, and has developed proprietary manufacturing and design technology in connection therewith. (b) Accuride is a leading O.E.M. (Original Equipment Manufacturer) of heavy wheels in North America, and has developed proprietary manufacturing and design technology in connection therewith. (c) The parties have agreed to the cross-licensing of their respective wheel production manufacturing and design technology. 1.2 DEFINITIONS "ACCURIDE means technology, information and data not claimed in the KNOW-HOW" Accuride Patents, but nevertheless proprietary, valuable, trade secrets, inventions, discoveries, know-how, processes, procedures, methods, protocols, formulas, techniques, software, designs, drawings, technical and clinical data, or other valuable technical information embodied in the Accuride Licensed Inventions or in other Accuride patents and useful in the development, manufacture, use or sale of Accuride Licensed Products or Accuride Licensed Process(es); "ACCURIDE means the design and manufacture of o.e. heavy steel wheels LICENSED FIELD" and equipment therefor; "ACCURIDE means the Invention(s) described in Exhibit B; LICENSED INVENTION(S)" "ACCURIDE means the processes, methods or procedures in the Accuride LICENSED Licensed Field covered by one or more claims of the Accuride PROCESS(ES)" Patents or utilizing or incorporating Accuride Know-how and described in Exhibit B; 1 "ACCURIDE means product(s) in the Accuride Licensed Field covered by LICENSED one or more claims of the Accuride Licensed Patents or PRODUCTS" produced by a method covered by one or more claims of such Patents or utilizing or incorporating Accuride Know-how and described in Exhibit B; "ACCURIDE means all classes or types of patents, utility models and PATENT(S)" design patents (including, without limitation, originals, divisions, continuations, continuations-in-part, extensions or reissues, or substitutes therefore, or extensions thereof, or patents of addition, and any incidental Know-how for practicing the same), and applications for these classes or types of patent rights granted or filed in the Gianetti Ruote Territories claiming all or a portion of the Accuride Licensed Invention(s), which are listed in Exhibit B and that are owned or controlled by Accuride or any of its Subsidiaries, to the extent that they have the right to grant licenses within and of the scope set forth herein without the requirement to pay consideration to any third party (other than employees of Accuride or its Subsidiaries) for the grant of a license under this Agreement; "ACCURIDE means the Accuride Patents, Accuride Know-how and Accuride TECHNOLOGY" Licensed Process(es); "CONFIDENTIAL Means information (i) disclosed in tangible form that is INFORMATION" clearly marked or identified as confidential or proprietary at the time of disclosure or (ii) disclosed in non-tangible form, identified as confidential or proprietary at the time of disclosure, and summarized sufficiently for identification and designated as confidential in a written memorandum sent to the receiving party within thirty (30) days after disclosure. Confidential Information includes, without limitation, the Licensed Technology. Confidential Information does not include information (a) in the possession of or known to receiving party prior to its receipt from disclosing party; (b) which is or becomes a matter of general public knowledge through no fault of receiving party; "INTELLECTUAL means all world-wide patents, patent rights, copyrights, PROPERTY copyright registrations, moral rights, trade secrets, trade RIGHTS" marks, service marks, trade mark and service mark registrations, and goodwill pertaining to trade marks and service marks; "INVENTION(S)" means any idea, design, concept, technique, invention, discovery or improvement, whether or not patentable; "O.E.M." Means Original Equipment Manufacturer; 2 "o.e." Means original equipment and it shall be used in opposition to the word "AM" (Aftermarket) to indicate the specific destination of the products, that is the market of original equipment products (o.e.)) opposed to the market of spare parts ("AM"); "AM" means Aftermarket. It is used to indicate the destination of the products to the market of spare parts in opposition to the o.e. (original equipment) market; "GIANETTI means technology, information and data not claimed in the RUOTE Gianetti Ruote Patents, but nevertheless proprietary, KNOW-HOW" valuable, trade secrets, inventions, discoveries, know-how, processes, procedures, methods, protocols, formulas, techniques, software, designs, drawings, technical and clinical data, or other valuable technical information embodied in the Gianetti Ruote Licensed Inventions or in other Gianetti Ruote patents and useful in the development, manufacture, use or sale of Gianetti Ruote Licensed Products or Gianetti Ruote Licensed Process(es); "GIANETTI means the design and manufacture of o.e. heavy steel wheels RUOTE and equipment therefor; LICENSED FIELD" "GIANETTI means the Invention(s) described in Exhibit A; RUOTE LICENSED INVENTION(S)" "GIANETTI means the processes, methods or procedures in the Gianetti RUOTE Ruote Licensed Field covered by one or more claims of the LICENSED Gianetti Ruote Patents or utilizing or incorporating PROCESS(ES)" Gianetti Ruote Know-how and described in Exhibit A; "GIANETTI means product(s) in the Gianetti Ruote Licensed Field RUOTE covered by one or more claims of the Gianetti Ruote Licensed LICENSED Patents or produced by a method covered by one or more PRODUCTS" claims of such Patents or utilizing or incorporating Gianetti Ruote Know-how and described in Exhibit A; "GIANETTI means all classes or types of patents, utility models and RUOTE design patents (including, without limitation, originals, PATENT(S)" divisions, continuations, continuations-in-part, extensions or reissues, or substitutes therefore, or extensions thereof, or patents of addition, and any incidental Know-how for practicing the same), and applications for these classes or types of patent rights granted or filed in the Accuride Territories claiming all or a portion of the Gianetti Ruote Licensed Invention(s), which are listed in Exhibit A and that 3 are owned or controlled by Gianetti Ruote or any of its Subsidiaries, to the extent that they have the right to grant licenses within and of the scope set forth herein without the requirement to pay consideration to any third party (other than employees of Gianetti Ruote or any of its Subsidiaries) for the grant of a license under this Agreement; "GIANETTI Means the Gianetti Ruote Patents, Gianetti Ruote Know-how RUOTE and Gianetti Ruote Licensed Process(es); TECHNOLOGY" "KNOW-HOW" Means either the Gianetti Ruote Know-how or the Accuride Know-how; "LICENSE TERM" Is defined in clause 2; "LICENSED Means either Gianetti Ruote Licensed Inventions or INVENTION(S)" Accuride Licensed Inventions; "LICENSED means either the Gianetti Ruote Licensed Field or the FIELD" Accuride Licensed Field; LICENSED means either the Gianetti Ruote Licensed Process(es) or the PROCESS(ES)" Accuride Licensed Process(es); "LICENSED means either Gianetti Ruote Licensed Products or Accuride PRODUCTS" Licensed Products; "LICENSED means either the Gianetti Ruote Technology or the TECHNOLOGY" Accuride Technology; "LICENSEE" means a party in its capacity as the grantee of a license hereunder; "LICENSOR" means a party in its capacity as the grantor of a license hereunder; "PATENT(S)" means either the Gianetti Ruote Patent(s) or the Accuride Patent(s); "SUBSIDIARY" means any corporation, partnership or other entity, now or hereafter, (i) at least fifty percent (50%) of whose outstanding shares or securities entitled to vote for the election of directors or similar managing authority is directly or indirectly owned or controlled by a party hereto, or (ii) that does not have outstanding shares or securities but at least fifty percent (50%) of whose ownership interest representing the right to make the decisions for such entity is directly or indirectly owned or controlled by a party hereto; provided, however, that in each case such corporation, partnership or other entity shall be deemed to be a 4 Subsidiary only so long as such ownership or control exists and is at least fifty percent (50%); "TERRITORY" means (i) as to Gianetti Ruote, the European Economic Area including: Austria, Belgium, Croatia, Czechoslovakia Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Liechtenstein, Luxembourg, the Netherlands, Norway, Poland, Portugal, Romania, Slovenia, Spain, Sweden, Turkey United Kingdom, and Egypt;, and (ii) as to Accuride, the United States, Mexico and Canada. 2. DURATION 2.1 INITIAL LICENSE TERM The initial License Term shall begin on the Effective Date and expire upon the third (3rd) anniversary of the Effective Date, unless sooner terminated as provided in clause 2.3. 2.2 EXTENSIONS The License Term shall be automatically extended for additional two (2) year periods following the initial License Term. In the event that a party intends not to extend this Agreement at the end of the initial or an extension License Term, it shall give the other party notice of such intention not later than three (3) months prior to the expiration of the License Term then in effect. 2.3 TERMINATION This Agreement is closely connected to the Joint Marketing Agreement of the same date: the conclusion of the Joint Marketing Agreement will immediately and automatically terminate this Agreement. Either party may terminate this Agreement by giving one hundred and eighty (180) days advance notice of termination in writing to the other. 3. TECHNOLOGY LICENSE 3.1 LICENSE GRANT FROM GIANETTI RUOTE TO ACCURIDE Gianetti Ruote hereby grants to Accuride, and Accuride accepts, a nonexclusive royalty free license under and to practice the Gianetti Ruote Technology, and to make, for it's use, and directly or indirectly sell, offer to sell or otherwise dispose within the limits of Gianetti Ruote Licensed Products, and to practice and exploit the Gianetti Ruote Licensed Process(es), during the License Term, within and not beyond the o.e. market, the Accuride Territory and in the Gianetti Ruote Licensed Field. 5 3.2 LICENSE GRANT FROM ACCURIDE TO GIANETTI RUOTE Accuride hereby grants to Gianetti Ruote, and Gianetti Ruote accepts, a nonexclusive royalty free license under and to practice the Accuride Technology, and to make, for it's use, and directly or indirectly sell, offer to sell or otherwise dispose of Accuride Licensed Products, and to practice and exploit the Accuride Licensed Process(es), during the License Term, within and not beyond the o.e. market, the Gianetti Ruote Territory and in the Accuride Licensed Field. 3.3 IMPROVEMENTS BY LICENSOR Licensor agrees to grant, and does hereby grant, Licensee, free of payment of any additional royalty, for and exclusively during the duration of this Agreement, a license commensurate in scope with that provided in clauses 3.1 and 3.2 to practice any and all improvements and inventions related to the Licensed Product(s) or Licensed Process(es), or any method or apparatus of making the same, under any patent filed, obtained, or acquired by the Licensor or under which the Licensor shall have the right to grant such a license. To this purpose, the Licensor will give immediate notice to the Licensee of any of such improvements, inventions, methods or apparatus obtained. 3.4 IMPROVEMENTS BY LICENSEE The Licensor will have the sole and exclusive property of any and all improvements and inventions related to the Licensed Product(s) or Licensed Process(es) or any method or apparatus of making the same, under any patent filed, obtained or acquired by the Licensee during the duration of this Agreement, either patentable or no patentable. The Licensor will be entitled to register and use in any way such improvements, inventions, methods and apparatus. The Licensee will keep the right to use those improvements in the same extent and within the same limits provided in clauses 3.1 and 3.2. To this purpose, the Licensee will give immediate notice to the Licensor of any of such improvements, inventions, methods or apparatus obtained. 3.5 NO OTHER RIGHTS No other rights are granted hereunder, by implication, estoppel, statute or otherwise, except as expressly provided herein. Specifically, nothing in the licenses granted hereunder or otherwise contained in this Agreement shall expressly or by implication, estoppel or otherwise give either party any right to license the other party's Patents, Know-how, Licensed Products or Licensed Processes to others. 4. KNOW-HOW 4.1 AGREEMENT TO PROVIDE Licensor agrees to furnish Licensee for and exclusively the duration of the present Agreement with all the Know-how, to the full extent available to Licensor, necessary or anyway useful to enable to manufacture and sell the Licensed Product(s) or use the Licensed Process(es), and anyway all the Know-how hold by the Licensor and related to 6 his Licensed Patents and Processes and to any of his patents. In particular, Licensor will furnish Licensee with the technical information and services listed on Exhibit A for Gianetti Ruote and Exhibit B for Accuride. 4.2 LANGUAGE Licensor shall furnish to Licensee the Know-how described in clause 4.1 in the English language and in English units. All such Know-how furnished during the term of this Agreement shall be and remain the sole property of Licensor and shall not be used by Licensee other than under the terms and conditions hereof. Upon the termination or cancellation of this Agreement, all such Know-how, including all copies and translations thereof, in the possession or control of Licensee, shall be promptly returned to Licensor, and Licensee shall not thereafter make any use or disclosure whatsoever of the aforesaid Know-how. 4.3 NO SPECIAL SERVICES Nothing contained in this Agreement shall be construed to require Licensor to specifically prepare technical information or data for Licensee, except by reproduction, nor to engage in any special engineering or technical studies on behalf of Licensee, nor to provide technical information or data until that information or data has reached a stage of development which, in Licensor's sole discretion, renders the technical information or data suitable for use by Licensee. 4.4 EXCLUSIONS Anything in this Agreement to the contrary notwithstanding, Licensor shall not be required to disclose to Licensee any Know-how: (a) regarding patentable information or data for which no patent application has been filed in the Territory; or (b) which Licensor is prevented from disclosing to Licensee by any governmental rule, practice or regulation. 4.5 REIMBURSEMENT Licensee will reimburse Licensor for Licensor's actual direct costs in reproducing and providing copies of drawings, specifications, manuals, designs, and other data, and for its cost in furnishing any equipment, fixtures, or tooling. 5. EXPORT This Agreement is subject to all present and future regulations and restrictions of the United States Government and Italian Governments, or other Government having jurisdictional authority over the relevant parties and the respective departments and agencies thereof. Each party agrees that neither it nor any of its sub-licensees will ship or divert for use in any country or countries any of the Licensed Product(s) or Licensed Process(es) or 7 technical data or information with respect thereto in contravention of the laws and regulations of the United States, Italian or other such Government and the respective departments and agencies thereof, or cause or permit such shipping or diversion without appropriate license or approval of the United States, Italian or other such Government and the respective departments and agencies thereof. 6. EQUIPMENT All equipment furnished a party by the other shall remain the property of the furnishing party and shall be returned to such party following the term or termination of this Agreement. 7. QUALITY STANDARDS AND CONTROLS 7.1 USE OF KNOW-HOW Licensee covenants and agrees that, except as Licensor may otherwise consent in writing, Licensee will not directly or indirectly use the Know-how furnished to Licensee hereunder in the manufacture, use, or sale of any products or goods, or any intermediate components or parts of products or goods manufactured, used, or sold by Licensee, except in connection with the manufacture, use, or sale within the limits of OEM market of Licensed Product(s) or Licensed Process(es), in accordance with terms and conditions of this Agreement. 7.2 MANUFACTURING PRACTICES Licensee agrees to manufacture the Licensed Product(s) or use the Licensed Process(es) in accordance with good manufacturing practices and in compliance with applicable laws, rules and regulations. 7.3 INSPECTION Licensor or its designee shall have the right (but not the obligation) at all reasonable times to inspect the operations of Licensee, and to review the engineering, drafting and manufacturing efforts of Licensee hereunder with a view to insuring that the Licensed Product(s) or Licensed Process(es) meet appropriate performance and quality standards. 7.4 REMEDIATION Should Licensor notify Licensee that aspects or features of the Licensed Product(s) or Licensed Process(es) fail to comply with the aforementioned standards and specifications, Licensee shall promptly proceed to correct such defects in accordance with Licensor's instructions thereto. 7.5 LOCAL CERTIFICATIONS Licensee shall have the responsibility to ensure, at its expense, that all Licensed Products or Licensed Process(es), to the extent required, are approved, inspected, certified or licensed by the appropriate regulatory agencies, boards, or departments. 8 8. OWNERSHIP OF LICENSED TECHNOLOGY AND IMPROVEMENTS 8.1 OWNERSHIP OF LICENSED TECHNOLOGY As between the parties, Licensor owns and will retain all rights, title, and interests, including but not limited to Intellectual Property Rights, in and to the Licensed Technology. 8.2 OWNERSHIP OF MODIFICATIONS AND IMPROVEMENTS As between the parties, Licensor shall own all rights, title, and interests, including but not limited to Intellectual Property Rights, in and to any modifications and improvements to Licensed Technology created or developed by or for Licensee. 9. INDEMNIFICATION 9.1 INDEMNIFICATION OBLIGATION Each party shall be responsible of its own activity against any third party. In particular, each party shall be the sole responsible for any and all activities related and connected to the use and exploitation of the other party's Licensed Technology. Each party (the "INDEMNITOR") shall indemnify, defend and hold harmless the other and its officers, directors, employees and agents and their respective successors, legal representatives, heirs and assigns (the "INDEMNITEES"), against any liability, damage, loss, or expense (including reasonable attorneys' fees and expenses of litigation) incurred by or imposed upon the Indemnitees or any one of them in connection with any third party claims, suits, actions, demands or judgments: (a) as a result of or in connection with the conduct of the Indemnitor's business, including actions taken or representations made by in connection with its performance of this Agreement; or (b) arising out of the condition, character or quality of any product or service sold or licensed by the Indemnitor, including those based on any theory of product liability (including, but not limited to, actions in the form of tort, warranty, or strict liability) concerning any Licensed Product(s) or Licensed Process(es) made, used or sold by the Indemnitor, its Subsidiaries or any sub-licensees pursuant to any right or license granted under this Agreement. 9.2 EXCEPTIONS The indemnification obligation under clause 9 shall not apply to any liability, damage, loss or expense to the extent that it is directly attributable to the gross negligence or willful misconduct of the Indemnitees. 9 10. CONFIDENTIAL INFORMATION 10.1 CONFIDENTIAL INFORMATION Each party shall hold in confidence, and shall use solely for purposes of or as provided in this Agreement, any Confidential Information received by it from the other or derived from Confidential Information received from the other, and shall protect the confidentiality of such with the same degree of care that it exercises with respect to its own information of like import, but in no event less than reasonable care, for the whole period of duration of the present Agreement and of the Joint Marketing Agreement. 10.2 EXCEPTIONS The obligations of clause 10.1 shall not apply to any portion of the Confidential Information which: (a) is required to be disclosed pursuant to a legal, judicial, or administrative procedure or otherwise required by law; (b) is now or which hereafter, through no act or failure to act on the part of the receiving party, becomes generally known in the heavy and light wheel industry; (c) is already in the possession of, or known to, the receiving party prior to its receipt; or (d) is approved for release or use without restriction by written authorization of an officer of the disclosing party. Subject to the requirements of clause 10 hereof, a receiving Party may disclose appropriate portions of Confidential Information to its employees who have a need to know the specific information in question, and to subsidiaries, affiliates, representatives, agents, auditors, lenders, and regulators having a need or right to know. No Confidential Information shall be disclosed to any third party by a receiving party without the prior written consent of the other party. 10.3 RETURNING CONFIDENTIAL INFORMATION In case of termination of this Agreement and of the Joint Marketing Agreement, the parties shall immediately cease to use all the Confidential Information and within thirty (30) days shall return all materials of any kind containing Confidential Information of the other party to that party. 10.4 INJUNCTION Confidential Information has been and will continue to be of central importance to the business of a disclosing party and its disclosure to or use by others will cause immediate and irreparable injury to the disclosing party, which may not be adequately compensated by damages and for which there is no adequate remedy at law. In the event of any actual 10 or threatened misappropriation or disclosure of Confidential Information, the receiving party agrees that the disclosing party will be entitled to an injunction prohibiting such misappropriation or disclosure, and to specific enforcement of the receiving party's obligations hereunder. The foregoing rights to an injunction and specific performance will be cumulative and in addition to every other remedy now or hereafter available to disclosing party in law or equity or by statute. 11. LIMITED WARRANTY; DISCLAIMER Each party represents and warrants that it has the authority to enter into this Agreement and license the Licensed Technology as contemplated herein. Except as so provided, the Licensed Technology is licensed "AS IS," WITHOUT WARRANTY OF ANY KIND. 12. LIMITATION OF LIABILITY In no event shall either party be liable for any lost revenues or profits or other special, indirect, consequential, or punitive damages arising out of this Agreement, even if that party has been advised of the possibility of such damages, and regardless whether any remedy set forth herein fails of its essential purpose. 13. DISPUTE RESOLUTION 13.1 DISPUTES All claims, disputes and other matters in controversy (herein called "DISPUTE") arising directly or indirectly out of or related to this Agreement, or the breach thereof, whether contractual or non-contractual, and whether during the term or after the termination of this Agreement, shall be resolved exclusively according to the procedures set forth in this clause 13. 13.2 RESOLUTION The parties shall attempt to settle any dispute, claim or controversy arising out of this Agreement through consultation and negotiation in good faith and in a spirit of mutual co-operation. The primary forum for the settlement of matters arising hereunder shall be through the Steering Committee provided for above which shall meet within fifteen (15) days of notification of a dispute by one of them. If the dispute is not resolved within five (5) days of such meeting (or sixteen (16) days should a meeting of the such persons have not occurred for any reason), either party may refer the matter to the chief executives of each party. If the Committee fails to produce a solution accepted by the parties affected by the matter in question then the following procedures shall be adhered to by the parties:- (a) the respective chief executives of the affected parties shall attempt to resolve the dispute by meeting fully briefed on the issues, and discussing the possible solutions and if possible agreeing on a solution or procedure for a solution (which may include one of the further steps set out below). The chief executives shall be obliged to meet for this purpose within thirty (30) days of notification of dispute; 11 (b) if a meeting of chief executives does not lead to a solution, any one of such chief executives may require that the dispute shall be mediated by an international expert of standing and repute in the field of the subject matter of the dispute, selected from a panel of mediators proposed by the Centre for Dispute Resolution (CEDR) in the United Kingdom. The parties agree to co-operate and participate with the mediation process by making senior executives available and adhering to the processes proposed by such mediator. Costs of the mediator shall be borne equally by the parties to the dispute; other costs shall be borne by the party incurring them. The mediator shall be selected by agreement, not to be delayed or withheld; (c) if agreement or solution is not reached within ninety (90) days of commencement of mediation process or if agreement is not reached on the selection of a mediator, the matter in dispute shall be referred for final solution by arbitration in London, England under the arbitration rules of the International Chamber of Commerce by a single arbitrator agreed between the parties or failing such agreement within thirty (30) days, by a panel of three arbitrators, of whom one shall be appointed by Gianetti Ruote, one shall be appointed by Accuride, and the third shall be appointed by the other two, save that if no agreement is reached by them on the third within thirty (30) days, the third shall be appointed by the President (or equivalent officer) for the time being of the International Chamber of Commerce. 13.3 NO PUNITIVE DAMAGES, FEES Under no circumstances shall the arbitrator(s) have any authority to award punitive damages. Judgement on the arbitrator's award may then be entered in any court which has proper jurisdiction. The prevailing party shall be entitled to reimbursement of attorneys' and other fees incurred in satisfying its judgement. 13.4 RIGHTS OF PARTIES The use of any of the above procedures shall not be construed under the doctrine of laches, waiver or estoppel to affect adversely the right of either party, and nothing in this section shall prevent either party from resorting to judicial proceedings if: (a) good faith efforts to resolve the dispute under these procedures have been unsuccessful; or (b) interim relief from a court is necessary to prevent serious and irreparable injury to one party or to others. 14. GENERAL 14.1 IMPLEMENTATION (a) The parties shall promptly execute and file any documents that may be required to comply with the requirements of any applicable law for the formation and operation of this License Agreement. 12 (b) The parties agree to jointly ensure that any third party under their respective control implements any documents in accordance with the terms of this Agreement. 14.2 AGREEMENT The provisions of this Agreement shall be binding upon and shall survive for the benefit of the parties and their respective successors and assigns, subject, however, to the provisions regarding assignment set out below. 14.3 SEVERABILITY In the event that any provision or any portion of any provision contained in this Agreement is unenforceable, the remaining provisions and, in the event that a portion of any provision is unenforceable, the remaining portion of such provision, shall nevertheless be carried into effect. 14.4 NO WAIVER The failure of either party to enforce at any time or for any period of time the provisions of this Agreement shall not be construed as a waiver of such provision or of the right of such party thereafter to enforce each and every such provision of this Agreement. 14.5 FURTHER ASSURANCES Each party shall perform all such acts and execute and deliver all such instruments, documents and writings as may be reasonable required to give full effect to this Agreement. 14.6 NO WARRANTY No warranty or representation of any kind is given or made expressly or implied by any party hereto as to the extent or otherwise of the success as a commercial venture of this Agreement and the Joint Marketing Agreement and each party hereby agrees that it shall not seek to hold the other liable in this respect in the event of any losses sustained by reason of this Agreement and the Joint Marketing Agreement not proving to be a success as a commercial venture. 14.7 AMENDMENT Except as otherwise provided herein, this Agreement can only be modified by written agreement duly signed by persons authorized to sign agreements on behalf of Gianetti Ruote and Accuride. 14.8 ASSIGNMENT This Agreement shall be binding on the parties hereto, but shall not be assignable by either party without the consent of the other party, which consent shall not be 13 unreasonably withheld except in the event of a transfer of substantially the entire business of either party to which this Agreement pertains. 14.9 CHOICE OF LAW This Agreement is made under and shall be governed by and construed in accordance with the laws of England and Wales. the United Kingdom. 14.10 COUNTERPARTS This Agreement may be executed in one or more counterparts, each of which will be deemed an original, but all of which constitute but one and the same instrument. 14.11 ENTIRE AGREEMENT This Agreement, including the Exhibits hereto, constitutes the entire agreement between the Parties with respect to the subject matter hereof, and supersedes and replaces all prior or contemporaneous understandings or agreements, written or oral, regarding such subject matter. This Agreement will be fairly interpreted in accordance with its terms and without any strict construction in favor or against either Party. Unless otherwise provided herein, this Agreement may not be modified, amended, rescinded, or waived, in whole or in part, except by a written instrument signed by the duly authorized representatives of both Parties. 14.12 FORCE MAJEURE Neither party will be liable to the other for delays in or partial or total failure of performance due to causes beyond such party's reasonable control, including, but not limited to mandatory law, acts of God, acts or omissions of civil or military authority, any rule, regulation or orders issued by any governmental authority or by any officer, department, agency or instrumentality thereof, fires, floods, epidemics, war, embargo, riots or national company strikes or lockouts and other causes beyond the control of the affected party. 14.13 HEADINGS The headings and captions in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. 14.14 NO RIGHTS IN THIRD PARTIES This Agreement is made for the benefit of the Parties, and not for the benefit of any third parties unless otherwise agreed to by the Parties. 14.15 NOTICES All notices required hereunder must be in writing and delivered either in person or by a means evidenced by a delivery receipt, to the address first set forth above or as otherwise notified in writing. Such notice will be effective upon receipt. 14 14.16 RELATIONSHIP OF THE PARTIES No employees, consultants, contractors, or agents of one Party are agents, employees, franchisees, of the other Party, nor do they have any authority to bind the other Party by contract or otherwise to any obligation. No Party will represent to the contrary, either expressly, implicitly, or otherwise. No partnership (as that term is understood in law) is or is intended to be created by this Agreement or as a result of its implementation. 14.17 TRANSLATION This Agreement may be translated into the Italian language for the convenience of the parties, provided, however, that in all events the English language text of this Agreement, as executed by or on behalf of each party hereto, shall constitute the governing text. 15. THIRD PARTY COMMITMENTS The commitments of the parties under this Agreement shall not affect in any way any existing arrangements which either party has in place with third parties, including technology licenses, patent licenses, support or assistance agreements or other agreements concerning the disclosure or exchange of proprietary information. The parties agree, however, that with respect to any contracts for Licensed Products which they may be awarded in the future for which territorial production assistance may be required within the Territory described in this Agreement, they will first seek such assistance from each other before approaching any third party wheel manufacturer. Further, the parties agree that during the term and within the Territory described in this Agreement, and except to the extent permitted by this clause 15 they will not enter into a mutual co-operation agreement similar to this Agreement with any third party without prior notification to the other party. To ensure that each party will continue to abide by this commitment and to avoid any confusion or dispute, the parties shall disclose to each other any existing or future co-operation agreements with companies engaged in the design, development or manufacture of Licensed Products to the extent such disclosure is not restricted or prohibited by prior agreement. Initial disclosure shall occur within thirty days of the signing of this agreement. IN WITNESS WHEREOF the parties have caused this Agreement to be executed by their duly authorized officers as of the Effective Date. GIANETTI RUOTE SPA By: /s/ G. PERRIS MAGNETTO ------------------------------ Its: MANAGING DIRECTOR ACCURIDE CORPORATION By: /s/ WILLIAM P. GREUBEL ------------------------------ Its: PRESIDENT 15 EXHIBIT A GIANETTI RUOTE TECHNOLOGY DETAILED SPECIFICATION A-1 Gianetti Ruote Licensed Inventions A-2 Gianetti Ruote Licensed Patents A-3 Gianetti Ruote Licensed Know-how FEA knowledge Biaxial Test Knowledge Welding techniques Heavy truck design High volume wheel manufacturing techniques HSLA and future generation steel design knowledge and manufacturing techniques for heavy wheels Stamped disc knowledge as it applies to dual commercial heavy wheels A-4 Gianetti Ruote Licensed Products A-5 Gianetti Ruote Licensed Processes 16 EXHIBIT B ACCURIDE TECHNOLOGY DETAILED SPECIFICATION B-1 Accuride Licensed Inventions B-2 Accuride Licensed Patents B-3 Accuride Licensed Know-how FEA knowledge Disc Spinning technology Heavy wheel design theory Accuride proprietary spinner design Knowledge of gas shielded welding Wheel manufacturing technology Gianetti plan modernization B-4 Accuride Licensed Products B-5 Accuride Licensed Processes 17 EX-21.1 6 a2042721zex-21_1.txt EXHIBIT 21.1 EXHIBIT 21.1 ACCURIDE CORPORATION LIST OF SUBSIDIARIES
Subsidiary Jurisdiction of Incorporation - ---------- ----------------------------- Accuride Canada, Inc. Canada Accuride Texas, Inc. Delaware Accuride Kentucky Holding Company Delaware Accuride Ventures, Inc. Delaware Accuride Tennessee Holding Company Delaware Accuride Henderson Facilities Management Corporation Delaware Accuride Henderson Limited Liability Company Delaware Accuride Columbia Facilities Management Corporation Delaware Accuride Columbia General Partnership Delaware AKW, L.P. Delaware AKW General Partner, L.L.C. Delaware Accuride de Mexico, S.A. de C.V. Mexico Accuride Cuyahoga Falls, Inc. Delaware
EX-23.1 7 a2042721zex-23_1.txt EXHIBIT 23.1 EXHIBIT 23.1 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement No. 333-68227 of Accuride Corporation on Form S-8 of our report dated February 26, 2001, appearing in this Annual Report on Form 10-K of Accuride Corporation for the year ended December 31, 2000. DELOITTE & TOUCHE LLP Indianapolis, Indiana March 21, 2001 -----END PRIVACY-ENHANCED MESSAGE-----