-----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, N1nsTFRhQgrO9l1PQZs5zuYTEqaSwHxO+SH0bqEHmElzbYRokg4h4IDuQV1XKRBu /0eciqAK8RtI6+DqeRh20A== 0001047469-99-023698.txt : 19990615 0001047469-99-023698.hdr.sgml : 19990615 ACCESSION NUMBER: 0001047469-99-023698 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990401 ITEM INFORMATION: FILED AS OF DATE: 19990610 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: 8-K/A SEC ACT: SEC FILE NUMBER: 033-15435 FILM NUMBER: 99643923 BUSINESS ADDRESS: STREET 1: 2315 ADAMS LN STREET 2: BOX 40 CITY: HENDERSON STATE: KY ZIP: 42420 BUSINESS PHONE: 5028265000 8-K/A 1 FORM 8-K/A SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------- FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported): April 1,1999 Accuride Corporation - ------------------------------------------------------------------------------ (Exact Name of Registrant as Specified in Charter) Delaware 333-50239 61-1109077 - ------------------------------------------------------------------------------ (State or Other (Commission (IRS Employer Jurisdiction of Incorporation) File Number) Identification No.) 2315 Adams Lane, Henderson, Kentucky 42420 - ------------------------------------------------------------------------------ (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (502) 826-5000 - ------------------------------------------------------------------------------ (Former Name or Former Address, if Changed Since Last Report) This Current Report on Form 8-K/A amends the Registrant's Current Report on Form 8-K filed by the Registrant on April 12, 1999, and is being filed solely to add the financial statements of the business acquired required by Item 7(a) and the pro forma financial information required by Item 7(b). ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (a) Financial statements of business acquired beginning on page F-1. Balance sheets of AKW L.P. (the Partnership), a Delaware limited partnership, as of December 31, 1998 and 1997, and the related statements of income, partners' capital and cash flows for the year ended December 31, 1998, and the period from inception (May 1, 1997) through December 31, 1997. (b) Pro forma financial information beginning on page F-14. Unaudited pro forma consolidated condensed balance sheet as of December 31, 1998 and unaudited pro forma consolidated condensed statement of income for the year ended December 31, 1998 and the notes related thereto. (c) Exhibits
EXHIBIT NUMBER DESCRIPTION - -------------- ----------- 23.1 Consent of Arthur Andersen LLP
INDEX TO FINANCIAL STATEMENTS AND PRO FORMA FINANCIAL INFORMATION
Page Number ----------- FINANCIAL STATEMENTS: Report of Independent Public Accountants F-2 Balance Sheets - December 31, 1998 and 1997 F-3 Statements of Income For the Year Ended December 31, 1998, and the Period From Inception (May 1, 1997) Through December, 1997 F-4 Statements of Partners' Capital For the Year Ended December 31, 1998, and the Period From Inception (May 1, 1997) Through December 31, 1997 F-5 Statements of Cash Flows For the Year Ended December 31, 1998, and the Period From Inception (May 1, 1997) Through December 31, 1997 F-6 Notes to Financial Statements - December 31, 1998 F-7 PRO FORMA FINANCIAL INFORMATION Unaudited Pro Forma Consolidated Financial Information F-14 Unaudited Pro Forma Consolidated Balance Sheet as of December 31, 1998 F-15 Unaudited Pro Forma Consolidated Condensed Statement of Income For the Year Ended December 31, 1998 F-16 Notes to Unaudited Pro Forma Consolidated Financial Information F-17
AKW L.P. (A DELAWARE LIMITED PARTNERSHIP) FINANCIAL STATEMENTS AS OF DECEMBER 31, 1998 TOGETHER WITH AUDITORS' REPORT F-1 ARTHUR ANDERSEN LLP REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Partners, AKW L.P.: We have audited the accompanying balance sheets of AKW L.P. (the Partnership), a Delaware limited partnership, as of December 31, 1998 and 1997, and the related statements of income, partners' capital and cash flows for the year ended December 31, 1998, and the period from inception (May 1, 1997) through December 31, 1997. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of AKW L.P. as of December 31, 1998 and 1997, and the results of its operations and its cash flows for the year ended December 31, 1998, and the period from inception (May 1, 1997) through December 31, 1997, in conformity with generally accepted accounting principles. /s/ Arthur Andersen LLP Houston, Texas January 10, 1999 (except with respect to the matter discussed in Note 9, as to which the date is April 1, 1999) F-2 AKW L.P. (A Delaware Limited Partnership) BALANCE SHEETS--DECEMBER 31, 1998 AND 1997 (In Thousands)
1998 1997 -------- -------- ASSETS CURRENT ASSETS: Cash $ - $ - Accounts receivable, trade 15,311 7,191 Accounts receivable, other- Kaiser 2,871 3,332 Other 663 539 Inventories 8,348 8,087 Prepaid expenses 95 89 ------- ------- Total current assets 27,288 19,238 PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of $3,510 and $1,305, 25,862 22,758 respectively GOODWILL, net of accumulated amortization of $1,545 and $632, respectively 12,140 13,053 ------- ------- Total assets $65,290 $55,049 ------- ------- ------- ------- LIABILITIES AND PARTNERS' CAPITAL CURRENT LIABILITIES: Accounts payable, trade $ 9,373 $ 7,212 Accounts payable, other 280 280 Wheel recall liability 4,728 4,600 Accrued liabilities, other 620 611 ------- ------- Total current liabilities 15,001 12,703 RETIREMENT AND OTHER LIABILITIES 3,861 3,240 PARTNERS' CAPITAL 46,428 39,106 ------- ------- Total liabilities and partners' capital $65,290 $55,049 ------- ------- ------- -------
The accompanying notes are an integral part of these financial statements. F-3 AKW L.P. (A Delaware Limited Partnership) STATEMENTS OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1998, AND THE PERIOD FROM INCEPTION (MAY 1, 1997) THROUGH DECEMBER 31, 1997 (In Thousands)
1998 1997 ------- ------- NET SALES $86,531 $52,516 COST OF GOODS SOLD 68,043 45,133 ------- ------- Gross profit 18,488 7,383 SELLING, GENERAL AND ADMINISTRATIVE 6,266 3,883 ------- ------- Operating income 12,222 3,500 OTHER EXPENSE - 348 ------- ------- NET INCOME $12,222 $ 3,152 ------- ------- ------- -------
The accompanying notes are an integral part of these financial statements. F-4 AKW L.P. (A Delaware Limited Partnership) STATEMENTS OF PARTNERS' CAPITAL FOR THE YEAR ENDED DECEMBER 31, 1998, AND THE PERIOD FROM INCEPTION (MAY 1, 1997) THROUGH DECEMBER 31, 1997 (In Thousands)
Kaiser AKW Aluminum Accuride General and Chemical Ventures, Partner Corporation Inc. L.L.C. Total ------------ --------- -------- ----- PARTNERSHIP FORMATION $ 40,828 $ - $ 870 $ 41,698 CONTRIBUTIONS, May 1, 1999 SALE OF PARTNERSHIP INTEREST (20,414) 20,414 - - CONTRIBUTIONS FROM PARTNERS 12,035 12,016 485 24,536 DISTRIBUTIONS TO PARTNERS (14,743) (14,724) (596) (30,063) PURCHASE PRICE ADJUSTMENT (107) (107) (3) (217) NET INCOME 1,544 1,544 64 3,152 -------- -------- -------- -------- BALANCE, December 31, 1997 19,143 19,143 820 39,106 CONTRIBUTIONS FROM PARTNERS 29,327 29,302 1,196 59,825 DISTRIBUTIONS TO PARTNERS (31,728) (31,703) (1,294) (64,725) NET INCOME 5,989 5,989 244 12,222 -------- -------- -------- -------- BALANCE, December 31, 1998 $ 22,731 $ 22,731 $ 966 $ 46,428 -------- -------- -------- -------- -------- -------- -------- --------
The accompanying notes are an integral part of these financial statements. F-5 AKW L.P. (A Delaware Limited Partnership) STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1998, AND THE PERIOD FROM INCEPTION (MAY 1, 1997) THROUGH DECEMBER 31, 1997 (In Thousands)
1998 1997 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 12,222 $ 3,152 Adjustments to reconcile net income to net cash provided by operating activities- Depreciation and amortization 3,118 1,937 Increase in receivables (7,783) (8,615) Increase in inventories (261) (1,251) Increase in prepaid expenses (6) (89) Increase in accounts payable 2,161 7,212 Increase in other accrued and other liabilities 758 5,504 -------- -------- Net cash provided by operating activities 10,209 7,850 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property, plant and equipment (5,309) (2,323) -------- -------- Net cash used in investing activities (5,309) (2,323) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Contributions from partners 59,825 24,536 Distributions to partners (64,725) (30,063) -------- -------- Net cash used in financing activities (4,900) (5,527) -------- -------- NET CHANGE IN CASH - - CASH AT BEGINNING OF PERIOD - - -------- -------- CASH AT END OF PERIOD $ - $ - -------- -------- -------- -------- SUPPLEMENTAL NONCASH INVESTING ACTIVITIES: Accounts receivable contributed $ - $ 2,447 Inventory contributed - 6,836 Property, plant and equipment contributed - 21,740 Goodwill contributed - 13,685 Liabilities assumed - (3,010) -------- -------- $ - $ 41,698 -------- -------- -------- --------
The accompanying notes are an integral part of these financial statements. F-6 AKW L.P. (A Delaware Limited Partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1998 (In Thousands) 1. GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: GENERAL AKW L.P. (AKW or the Partnership) is a Delaware limited partnership formed on May 1, 1997, to design, commercialize, manufacture, market, sell and service aluminum wheels and tire molds primarily for medium and heavy-duty trucks, trailers and buses. Kaiser Aluminum and Chemical Corporation (Kaiser), a wholly owned subsidiary of Kaiser Aluminum Corporation, and Accuride Ventures, Inc. (AVI), a wholly owned subsidiary of Accuride Corporation (Accuride), are the limited partners of AKW (the Partners). The general partner is AKW General Partner L.L.C. (the GP), a Delaware limited liability company which is owned equally by Kaiser and Accuride. The Partnership was formed with initial capital contributions from the GP of $870 (consisting of contributed inventory), representing a 2 percent interest in the Partnership, and contributions from Kaiser at an agreed-upon value of $40,828, representing a 98 percent interest in the Partnership. The contribution from Kaiser consisted primarily of machinery, equipment and inventory, net of certain employee-related liabilities. Simultaneously with the initial capital contribution by Kaiser, Accuride remitted $20,414 in cash to Kaiser in exchange for half of Kaiser's 98 percent interest in the Partnership and contributed certain customer contracts to the Partnership. Based on the allocation of fair value to the assets and liabilities contributed by the Partners, goodwill of $13,685 was recognized. USE OF ESTIMATES The preparation of financial statements in accordance with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and expenses during the reporting period. Uncertainties, with respect to such estimates and assumptions, are inherent in the preparation of the Partnership's financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions, which could have a material effect on the reported amounts of the Partnership's financial position and results of operations. INVENTORIES Inventories are valued at the lower of cost or market. Inventory costs have been determined by the first-in, first-out (FIFO) method. The cost of products manufactured includes raw materials, direct labor and operating expenses. REVENUE RECOGNITION The Partnership recognizes product sales revenues upon delivery to the customer. All product sales revenues are presented net of customer volume rebate, if applicable. F-7 GOODWILL Goodwill, which represents the excess of cost over the fair value of net assets contributed by the Partners, is amortized on a straight-line basis over 15 years. AKW regularly evaluates whether subsequent events or circumstances have occurred that indicate the remaining useful life of goodwill may warrant revision or that the remaining balance of goodwill may not be recoverable. Management believes that there have been no events or circumstances which warrant revision to the remaining useful life or which affect the recoverability of goodwill. CASH The Partnership considers cash equivalents to include all highly liquid investments with maturities of three months or less when purchased. The Partnership maintains a consolidation bank account for receipts and disbursements, which is administered by the bank on behalf of the partners, who are advised daily of the net activity. Cash requirements are funded by, and cash surplus is transferred to, the partners equally. Such funding and transfer activity is reflected in the respective partners' capital accounts. DEPRECIATION Depreciation is computed by the straight-line method at rates based on the estimated useful lives of the various classes of assets. The estimated useful lives of leasehold improvements, tooling, machinery and equipment, and furniture and fixtures are two to 15 years. Reclassification Certain reclassifications have been made to amounts previously reported to conform with the current-year presentation. 2. INVENTORIES: Inventory components at December 31, 1998 and 1997, were as follows:
1998 1997 ------- ------- Raw materials and supplies $ 2,071 $ 3,068 Work in process 2,330 2,421 Finished goods 3,947 2,598 ------- ------- $ 8,348 $ 8,087 ------- ------- ------- -------
F-8 3. PROPERTY, PLANT AND EQUIPMENT: The components of property, plant and equipment at December 31, 1998 and 1997, were as follows:
1998 1997 -------- -------- Leasehold improvements $ 690 $ 549 Machinery and equipment 24,019 22,032 Furniture and fixtures 180 169 Construction in progress 4,483 1,313 -------- -------- 29,372 24,063 Less- Accumulated depreciation (3,510) (1,305) -------- -------- Property, plant and equipment, net $ 25,862 $ 22,758 -------- -------- -------- --------
4. INCOME TAXES: A provision for income taxes is not made in the accounts of the Partnership since such taxes are liabilities of the partners and depend upon their respective tax situations. 5. RETIREMENT PLANS AND EMPLOYEE BENEFITS: Retirement plans are noncontributory for salaried and hourly employees and generally provide for benefits based on a formula which considers length of service and earnings during years of service. Employer contributions to the plan were $189 and $195 for the year ended December 31, 1998, and the period from inception to December 31, 1997, respectively. No retirement benefits were paid under the plans during the year ended December 31, 1998, or the period from inception to December 31, 1997. The following table sets forth the plan's funded status and amounts recognized in the Partnership's balance sheet at December 31, 1998 and 1997:
1998 1997 ------- ------- Actuarial present value of- Accumulated benefit obligation, including vested benefits of $256 and $201, respectively $ 501 $ 325 ------- ------- ------- ------- Projected benefit obligation $ 1,046 $ 702 Plan assets at fair value (418) (2) ------- ------- Projected benefit obligation in excess of plan assets 628 700 Unrecognized net gain 3 7 Unrecognized prior service cost (110) (118) ------- ------- Accrued pension cost $ 521 $ 589 ------- ------- ------- -------
F-9 Pension costs for the year ended December 31, 1998, and the period from inception through December 31, 1997, included the following components:
1998 1997 ----- ----- Service cost on benefits earned during the period $ 273 $ 168 Interest cost on projected benefit obligation 50 24 Expected return on plan assets (14) - Amortization of unrecognized gain (2) (3) Prior service cost 8 8 ----- ----- Net periodic pension cost $ 315 $ 197 ----- ----- ----- -----
Assumptions used to value obligations at year-end and to determine the net periodic pension cost in the subsequent year are as follows:
1998 1997 ----- ----- Discount rate 7.00% 7.25% Expected long-term rate of return on assets 9.00 9.00 Rate of increase in compensation levels 4.00 4.00
6. POSTRETIREMENT BENEFITS: The Partnership provides certain healthcare benefits for retired employees. This component of the postretirement benefit gives rise to a liability for the Partnership. No payments for these healthcare benefits were made to retired employees during the year ended December 31, 1998, or the period from inception to December 31, 1997. The following table sets forth the plan's unfunded status reconciled with amounts shown in the Partnership's balance sheet at December 31, 1998 and 1997:
1998 1997 ------- ------- Accumulated postretirement benefit obligation- Retirees $ - $ - Actives 3,921 3,287 Plan assets at fair value - - ------- ------- Accumulated postretirement benefit obligation 3,921 3,287 Unrecognized net loss (922) (770) ------- ------- Accrued postretirement benefit obligation $ 2,999 $ 2,517 ------- ------- ------- -------
Postretirement benefit expense recognized in the statement of income for the year ended December 31, 1998, and the period from inception through December 31, 1997, is summarized as follows:
1998 1997 ---- ---- Service cost $206 $126 Interest cost on accumulated postretirement benefit obligation 238 118 Amortization of unrecognized loss 38 - ---- ---- Postretirement benefit expense $482 $244 ---- ---- ---- ----
F-10 The healthcare cost trend rate assumption can have a significant effect on the amounts reported. For measurement purposes, the plan assumes a 5.25 percent annual rate of increase in the per capita cost of covered healthcare benefits for 1998 and 1997, respectively. An increase or decrease of 1 percent in the healthcare cost trend rate would increase or decrease the accumulated postretirement benefit obligation and the aggregate of the service and interest cost components of the postretirement benefits expense by $817 or $(670) and $104 or $(84), respectively. The weighted average discount rate used in determining the accumulated postretirement benefit obligation for 1998 and 1997 was 7.00 percent and 7.25 percent, respectively. 7. TRANSACTIONS WITH PARTNERS AND RELATED PARTIES: Kaiser and Accuride provide administrative and technical services to AKW consisting of treasury, legal, sales and marketing support, and product design and testing. Pursuant to the AKW formation agreements, Accuride performs all billing and collection functions, as well as calculation and notification of rebates. For the year ended December 31, 1998, and the period from inception through December 31, 1997, AKW incurred $1,762 and $2,683, respectively, related to these services. Additionally, Kaiser and Accuride provide general liability insurance coverage for claims that exceed $11,000. As of December 31, 1998, AKW had no claims which exceeded this threshold. AKW has transactions in the normal course of its business with Kaiser for the purchase of metal used in its operations and the sale of scrap. For the year ended December 31, 1998, and the period from inception through December 31, 1997, AKW purchased metal at market prices totaling $17,201 and $2,090, respectively, from Kaiser and had sales of scrap at market prices to Kaiser totaling $14,061 and $8,103, respectively. AKW leases the Erie, Pennsylvania, facility from Kaiser and shares certain site services with Kaiser. The initial term of the lease is for 10 years at a below-market rate, after which the lease can be renewed for three additional five-year periods at the then fair market value. AKW provides volume rebates to its significant customers. Based on the nature of the billing arrangements described above, Accuride determines the amount of the rebates due, provides these rebates to the customers and passes the costs on to AKW. AKW's machining and finishing operations are performed under a converter contract with an unrelated entity (the contractor) that provides services solely to the Partnership. Under the terms of the contract, AKW provides the building and equipment used by the contractor and is charged a fixed fee for each wheel that is processed. Additionally, AKW participates in a cost-sharing arrangement with the contractor wherein AKW receives a rebate from the contractor if its payments for machining and finishing operations exceed the costs incurred by the contractor. Conversely, if costs exceed payments or if contractor is able to meet certain performance incentives, AKW is obligated to make additional payments to the contractor. For the year ended December 31, 1998, and the period from inception through December 31, 1997, the net effect of AKW's cost-sharing arrangement with the contractor resulted in a $1,855 and a $641 reduction to cost of sales, respectively. In addition to the transactions discussed above, Kaiser has provided certain environmental guarantees on behalf of the Partnership (see Note 8). F-11 8. COMMITMENTS AND CONTINGENCIES: CONCENTRATIONS OF RISK The Partnership's revenues are derived predominantly from sales to customers in the heavy-truck manufacturing industry. This industry concentration has the potential to impact the Partnership's exposure to credit risk, either positively or negatively, because customers may be similarly affected by changes in economic or other conditions. The creditworthiness of this customer base is strong, and the Partnership has not experienced significant credit losses on receivables; therefore, no provision for bad debt is provided. The Partnership's machining and finishing operations are performed by an unrelated contractor (see Note 7). The Partnership's production activities are dependent upon the contractor's ability to perform machining and finishing operations which satisfy AKW's volume and quality requirements. Events which impair the contractor's ability to perform these services may have an unfavorable impact on the Partnership's operations. COMMITMENTS Rental agreements under operating leases at December 31, 1998, are as follows:
Year ending December 31- 1999 $ 743 2000 706 2001 627 2002 543 2003 500 Thereafter - -------- $ 3,119 -------- --------
Rental expenses were $678 and $417 for the year ended December 31, 1998, and for the period from inception through December 31, 1997, respectively. The Partnership has entered into an unconditional purchase contract with one of its partners (Kaiser). Under the contract, the Company is obligated to take delivery of materials to be used in its normal production activities. The contract expires on December 31, 1999, and minimum payments during the year are $13,103. ENVIRONMENTAL CONTINGENCIES The Partnership is subject to a number of environmental laws, to fines or penalties assessed for alleged breaches of the environmental laws, and to claims and litigation based upon such laws in connection with its leased production facility from Kaiser. However, as a condition of the Partnership agreement, Kaiser retained responsibility for certain capital expenditures for environmental projects totaling approximately $1,287. Additionally, Kaiser has agreed to indemnify the Partnership with respect to substantially all environmental matters at the Erie site existing at the date the Partnership was formed. WHEEL RECALL CAMPAIGN In April 1998, the Partnership submitted notice to the National Highway Safety Administration of its intent to recall approximately 47,800 wheels for a defect related to potential motor vehicle safety. These wheels were produced and shipped during the period from April 23, 1997, through February 28, 1998. F-12 From the initiation of the recall through December 31, 1998, a total of $1,972 has been paid by the Partnership. Remaining costs are expected to be incurred by the end of 1999. The recall is not anticipated to have a material adverse impact on the Partnership's financial condition or liquidity. YEAR 2000 ISSUE The Partnership recognizes the need to ensure its operations will not be adversely impacted by year 2000 software or hardware failures. Software or hardware failures due to processing errors potentially arising from calculations using the year 2000 date are a known risk. The Partnership is addressing this risk to the availability and integrity of financial systems and the reliability of operational systems. The Partnership has established processes for evaluating and managing the risks and costs associated with this problem. The computing portfolio was identified, and an initial assessment has been completed. The cost of achieving year 2000 compliance is estimated to be immaterial to the Partnership's operations. OTHER CONTINGENCIES The Partnership was named in a National Labor Relations Board charge by the United Auto Workers union at the Erie facility in connection with Kaiser's decision to close its separate operations in the same facility. The charge was settled in August 1998 with no financial impact on the Partnership. 9. SUBSEQUENT EVENT (UNAUDITED): On April 1, 1999, Accuride purchased Kaiser's 50 percent interest in the Partnership which is composed of a 49 percent limited partner interest and a 1 percent interest owned indirectly through AKW General Partner L.L.C. The transaction is not expected to have a material impact on the Partnership. F-13 UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION The following unaudited pro forma consolidated condensed financial statements have been derived from the application of pro forma adjustments to the audited historical consolidated financial statements of Accuride Corporation (the "Company") and AKW L.P. ("AKW") included elsewhere in this Form 8-K. The unaudited pro forma consolidated condensed balance sheet as of December 31, 1998 gives effect to the acquisition of the 50% interest in AKW from Kaiser Aluminum and Chemical Corporation ("Kaiser") for $70 million (the "Acquisition") , the $0.9 million purchase of equipment from Kaiser (the "Equipment Purchase") and the $100 million additional term loan ("Loan") borrowed pursuant to the acquisition as if such transactions had occurred on December 31, 1998. The unaudited pro forma consolidated condensed statement of income for the year ended December 31, 1998 gives effect to the Acquisition, the Equipment Purchase and the Loan as if the transactions had occurred on January 1, 1998. The adjustments are described in the accompanying notes. The pro forma consolidated condensed financial statements should not be considered indicative of actual results that would have been achieved if the Acquisition, the Equipment Purchase and the Loan had been consummated on the date or for the periods indicated and do not purport to indicate results of operations as of any future date or for any future period. The pro forma consolidated condensed financial statements should be read in conjunction with the Company's historical consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1998. F-14 UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET AS OF DECEMBER 31, 1998 (DOLLARS IN THOUSANDS)
HISTORICAL HISTORICAL ACQUISITION PRO FORMA ACCURIDE AKW ADJUSTMENTS COMBINED -------- --- ----------- -------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 3,471 $ 1 $100,000(a) $ 3,472 (71,250)(b) (28,750)(j) Customer receivables, net of allowance for doubtful accounts 52,287 15,311 67,598 Other receivables 8,372 3,534 (2,246)(i) 9,660 Inventories, net 36,980 8,348 887(c) 46,215 Supplies 7,187 - 7,187 Deferred income taxes 611 - 611 Income taxes receivable 458 - 458 Prepaid expenses 139 95 234 --------- --------- -------- --------- Total current assets 109,505 27,289 (1,359) 135,435 PROPERTY, PLANT AND EQUIPMENT, NET 159,826 25,862 900(b) 186,588 OTHER ASSETS: Goodwill, net of accumulated amortization 83,317 12,140 59,075(c) 142,392 (12,140)(c) Investment in affiliates 25,855 (23,214)(c) 2,641 Deferred financing costs, net of accumulated amortization 12,609 12,609 Deferred income taxes 3,287 (172)(c) 3,115 Other 10,526 10,526 --------- --------- -------- --------- TOTAL $ 404,925 $ 65,291 $ 23,090 $ 493,306 --------- --------- -------- --------- --------- --------- -------- --------- LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) CURRENT LIABILITIES: Accounts payable $ 27,008 $ 9,654 $ (2,246)(i) $ 34,416 Current portion of long-term debt 1,350 - 1,350 Short-term notes payable 3,911 - 3,911 Accrued payroll and compensation 8,149 - 8,149 Accrued interest payable 9,807 - 9,807 Wheel recall liability - 4,728 4,728 Accrued and other liabilities 6,606 620 7,226 --------- --------- -------- --------- Total current liabilities 56,831 15,002 (2,246) 69,587 LONG-TERM DEBT, less current portion 387,939 - 100,000(a) 459,189 (28,750)(j) DEFERRED INCOME TAXES OTHER LIABILITIES 12,021 3,861 514(c) 16,396 MINORITY INTEREST 6,230 - 6,230 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY (DEFICIENCY) Preferred stock, $.01 par value; 5,000 shares authorized and unissued Common stock and additional paid-in capital, $.01 par value; 45,000 shares authorized, 24,768 and 24,000 shares issued and outstanding in 1998 and 1997 24,158 - 24,158 Stock subscriptions receivable (1,644) (1,644) Retained earnings (deficit) (80,610) 46,428 (46,428)(c) (80,610) --------- --------- -------- --------- Total stockholders' equity (deficiency) (58,096) 46,428 (46,428) (58,096) --------- --------- -------- --------- TOTAL $ 404,925 $ 65,291 $ 23,090 $ 493,306 --------- --------- -------- --------- --------- --------- -------- ---------
See Notes to Unaudited Pro Forma Consolidated Financial Information. F-15 UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1998 (Dollars in Thousands)
HISTORICAL HISTORICAL ACQUISITION PRO FORMA ACCURIDE AKW ADJUSTMENTS COMBINED -------- --- ----------- -------- Net sales $ 383,583 $ 86,897 $ 470,480 Cost of goods sold 301,029 68,409 4,700(h) 375,025 887(l) --------- --------- ------- --------- Gross profit 82,554 18,488 (5,587) 95,455 Operating expenses 34,034 6,266 1,173(e) 41,602 129(g) --------- --------- ------- --------- Income from operations 48,520 12,222 (6,889) 53,853 Other income (expense): Interest income (expense), net (32,311) - (5,657)(f) (38,220) (252)(k) Equity in earnings of affiliates 3,929 - (3,486)(m) 443 Other income (expense), net (2,904) - (2,904) --------- --------- ------- --------- Income before income taxes and minority interest 17,234 12,222 (16,284) 13,172 Income tax provision (benefit) 7,935 - (1,604)(n) 6,066 (265)(o) Minority Interest 1,348 - 1,348 --------- --------- ------- --------- Net income (loss) $ 7,951 $ 12,222 $ (14,415) $ 5,758 --------- --------- ------- --------- --------- --------- ------- ---------
See Notes to Unaudited Pro Forma Consolidated Financial Information. F-16 NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION (a) Reflects an additional $100 million term loan borrowed under the credit facility for the Acquisition. The Company used $71.25 million for the cost of the Acquisition and Equipment Purchase and $28.75 million to pay down existing indebtedness. Also, see Notes b and j below. (b) Reflects net cost of Acquisition and Equipment Purchase, as follows: Purchase price .......................................... $70,000 Acquisition costs ....................................... 350 ------- Net Acquisition Cost ............................... 70,350 Purchase of Kaiser equipment ............................ 900 ------- Total cash outlay .................................. $71,250 ------- -------
(c) Reflects excess of costs over estimated net fair value of assets acquired and liabilities assumed in the Acquisition at December 31, 1998, as follows: Net cost of Acquisition (b) .................................................. $70,350 Less AKW shareholder's equity. .............................................................. (46,428) Adjustment to eliminate Accuride's share of AKW Equity previously owned ..................... 23,214 Adjustment to eliminate AKW unamortized goodwill ............................................ 12,140 ------- Net Assets Acquired .......................................................... (11,074) ------- Estimated excess consideration over book value ............................... $59,276 ------- ------- Adjustments to reflect fair value: Step up Inventory to fair value ......................................... 1,774 Increase in pension and postretirement liabilities due to the excess of the projected benefit obligation over plan assets ........ (1,029) ------- Total step up in assets and liabilities ................................. 745 Adjusted by Accuride's previous ownership percentage of 50% to eliminate Accurides's share prior to the purchase of AKW of the step up in assets and liabilities ........................... 373 Tax effect of above adjustments ......................................... (172) (d) ------- Total fair value adjustments ............................................ 201 ------- Total goodwill .......................................................... $59,075 ------- -------
The acquisition will be accounted for by the purchase method of accounting. Under purchase accounting, the total purchase price will be allocated to the tangible and intangible assets and liabilities of AKW based upon their respective fair values as of the date of the Acquisition based upon valuations and other studies that have not yet been completed. A preliminary allocation of the purchase price has been made to major categories of assets and liabilities based on available information. The actual allocation of purchase price and the resulting effect on income from operations may differ significantly from the pro forma amounts included herein. (d) Adjustment reflects the net deferred tax asset attributable to purchase accounting adjustments associated with the Acquisition at the Company's 1998 combined effective federal and state rate of 46%. F-17 (e) Adjustment reflects one year of amortization expense (straight-line basis over 40 years) on the incremental amount of goodwill arising from the acquisition (estimated to be $46,935) as follows: Excess consideration over book value (see Note c) ................... $59,075 Less AKW unamortized goodwill at December 31, 1998 .................. 12,140 ------- Resultant incremental goodwill arising from acquisition ............. $46,935 ------- -------
(f) The pro forma adjustment to interest expense assumes a weighted average interest rate of 7.94% per annum (LIBOR + 2.5%) on $71.25 million of additional indebtedness under the Credit Facility (see also Note a). (g) Adjustment reflects one year of depreciation expense (straight-line basis over 7 years for equipment) on the $0.9 million in property, plant and equipment obtained in the Equipment Purchase. (h) Adjustment reflects the increase in cost of goods sold attributable to the AKW Wheel Recall Campaign. AKW had previously recorded $4,700 of the total $6,800 Wheel Recall liability in their 1997 financial statements; however, Accuride recorded their 50% portion of the entire Wheel Recall liability in its statement of income for the year ended December 31, 1998, as a decrease to equity in earnings of affiliates (see Note m). Excluding the $6,800 AKW Wheel Recall Campaign expense, income before income taxes and minority interest in the 1998 unaudited pro forma consolidated condensed statement of income would have been $19,972. (i) Adjustment reflects the elimination of intercompany receivables and payables, which consists of $2.2 million miscellaneous receivables and payables. (j) Adjustment reflects the $28.75 million portion of the $100 million term loan used to pay down existing indebtedness under Accuride's revolving credit facility (the "Revolver") (see Note a). (k) Adjustment reflects incremental interest expense incurred as a result of $28.75 million of indebtedness borrowed as a term loan under the credit facility at LIBOR plus 2.5% and used to pay down the existing indebtedness under the Revolver borrowed at LIBOR plus 1.625% (see Notes a, f, and j). (l) Adjustment reflects the increase in cost of goods sold attributable to the step up in fair value of inventory (see Note c). This amount has been recorded under the assumption that the inventory purchased will turnover during the first year of operation. F-18 (m) Reflects the elimination of the 1998 equity in earnings of affiliates arising from Accuride's 50% interest in AKW owned prior to the Acquisition. Amount reported by Accuride in its Consolidated Statement of Income for the Year ended December 31, 1998, is calculated as follows: 50% of AKW Net Income for the year ended December 31, 1998 .............. $ 6,111 Less: 50% of the AKW Wheel Recall Campaign recorded by Accuride in 1998 ($6,800) reduced by 50% of the amount AKW recorded in 1998 ($2,100). AKW had previously recorded the remainder in their 1997 financial statements .................. (2,350) 50% of miscellaneous audit and purchase price adjustments recorded by Accuride in 1998. AKW had previously recorded 100% of these amounts in their 1997 financial statements ...... (275) ------- Total Equity in AKW Earnings reported by Accuride in 1998 ............... $ 3,486 ------- -------
(n) Adjustment to eliminate income taxes on equity in earnings previously recorded in Accuride's income tax provision: Total equity in AKW earnings reported by Accuride ....................... $3,486 1998 effective tax rate ...................................... 46% ------ Income tax provision on affiliate earnings of AKW to be eliminated ... $1,604 ------ ------
(o) Adjustment to record income tax provision on AKW's income and related tax effect of Acquisition Adjustments, calculated as follows: Historical AKW income ................................. $ 12,222 Acquisition Adjustments: AKW Wheel Recall (see Note h) ............... (4,700) Step up in Inventory (see Note l) ........... (887) Interest expense (see Notes f and k) ........ (5,909) Depreciation expense (see Note g) ........... (129) Amortization expense (see Note e) ........... (1,173) -------- Pro Forma adjusted AKW pre-tax loss ......... (576) 1998 effective tax rate ............................... 46% -------- Income tax benefit .................................... $ (265) -------- --------
F-19 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. ACCURIDE CORPORATION Dated: June 10, 1999 By: /s/ William P. Greubel --------------------------------- William P. Greubel President and Chief Executive Officer EX-23.1 2 EXHIBIT 23.1 ARTHUR ANDERSEN LLP Exhibit 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports included in this Form 8-K into the Company's previously filed Registration Statement File No. 333-68227. /s/ Arthur Andersen LLP Houston, Texas June 10, 1999 -----END PRIVACY-ENHANCED MESSAGE-----