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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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, 20002002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ------------ ------------____________
COMMISSION FILE NUMBER 333-49011
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[ADVANCED---------
(ADVANCED ACCESSORY SYSTEMS, LOGO]LLC LOGO)
ADVANCED ACCESSORY SYSTEMS, LLC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-3848156
-------- ----------- ------------------------------------------------ -------------------
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
12900 HALL ROAD, SUITE 200, STERLING HEIGHTS, MI 48313
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (810)(586) 997-2900
SECURITIES REGISTERED PURSUANT TO SECTION 12(B)12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G)12(g) OF THE ACT: NONE
Indicate by check mark whether the registrant: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]
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Act). Yes [ ] No [X]
The aggregate fair market value of the registrant's Class A and A-1
Units held by non-affiliates of the registrant as of March 19, 2001,June 30, 2002 (the last
business day of the registrant's most recently completed second fiscal quarter),
based upon the good faith determination of the Board of Managers, was
approximately $8,540,000.$8,946,000. For purposes of this disclosure, shares of Class A and
A-1 Units held by persons who hold more than 5% of the outstanding Class A and
A-1 Units and Class A and A-1 Units held by officers and directorsmanagers of the
registrant have been excluded because such persons may be deemed to be
affiliates. This determination of affiliate status is not necessarily conclusive
for other purposes.
The number of the registrant's Class A and A-1 Units, outstanding
at March 19, 200125, 2003 was 9,2369,226 and 5,133, respectively.
DOCUMENTS INCORPORATED BY REFERENCE
None
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ADVANCED ACCESSORY SYSTEMS, LLC
FORM 10-K
YEAR ENDED DECEMBER 31, 20002002
TABLE OF CONTENTS
PART I
Item 1. BUSINESS................................................................................1BUSINESS ......................................................... 1
Item 2. PROPERTIES..............................................................................10PROPERTIES ....................................................... 10
Item 3. LEGAL PROCEEDINGS.......................................................................10PROCEEDINGS ................................................ 10
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.....................................10HOLDERS .............. 11
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
MEMBERS' MATTERS........................................................................11MEMBER MATTERS ................................................... 11
Item 6. SELECTED FINANCIAL DATA.................................................................12DATA .......................................... 12
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.....................................................14OPERATIONS .............................. 14
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK..............................20RISK ............................................................. 21
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.............................................20DATA ...................... 24
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.....................................................48DISCLOSURE .............................. 52
PART III
Item 10. MANAGERS AND EXECUTIVE OFFICERS OF THE REGISTRANT.......................................48REGISTRANT ................ 52
Item 11. EXECUTIVE COMPENSATION..................................................................49COMPENSATION ........................................... 53
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT..............................................................................51MANAGEMENT ....................................................... 56
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..........................................52TRANSACTIONS ................... 58
Item 14. CONTROLS AND PROCEDURES .......................................... 58
PART IV
Item 14.15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K................................................................................53
SIGNATURES.......................................................................................568-K ......................................................... 59
SIGNATURES ................................................................ 62
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FORWARD-LOOKING STATEMENTS
THIS BUSINESS SECTION AND OTHER PARTS OF THIS ANNUAL REPORT ON FORM
10-K CONTAIN FORWARD LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES.
FORWARD LOOKING STATEMENTS GENERALLY CAN BE IDENTIFIED BY THE USE OF TERMS SUCH
AS "MAY," "WILL," "SHOULD," "EXPECT," "ANTICIPATE," "BELIEVE," "INTEND," "PLAN,"
"ESTIMATE," "PREDICT," "POTENTIAL," "FORECAST," "CONTINUE" OR VARIATIONS OF SUCH
TERMS, OR THE USE OF THESE TERMS IN THE NEGATIVE. THE COMPANY'S ACTUAL RESULTS
MAY DIFFER SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING
STATEMENTS, AND SUCH DIFFERENCES MAY BE MATERIAL. FACTORS THAT MIGHT CAUSE SUCH
A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED BELOW, ANDTHOSE
DISCUSSED IN "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS."OPERATIONS" AND THOSE SET FORTH UNDER THE CAPTION "RISK FACTORS"
BEGINNING ON PAGE 11 OF THE PROSPECTUS DATED APRIL 26, 2002 INCLUDED IN OUR
REGISTRATION STATEMENT ON FORM S-4 (FILE NO. 333-49011).
PART I
ITEM 1. BUSINESS
GENERAL
Advanced Accessory Systems, LLC (together with its subsidiaries, the
"Company" or "AAS") is one of the world's largest suppliers of towing and rack
systems and related accessories for the automotive original equipment
manufacturer ("OEM") market and the automotive aftermarket. The Company's
products include a comprehensive line of towing systems includingand related accessories,
such as trailer balls, ball mounts, electrical harnesses, safety chains and
locking hitch pins. The Company's broad offering of rack systems includes fixed
and detachable racks and accessories, which can be installed on vehicles to
carry items such as bicycles, skis, luggage, surfboards and sailboards. The
Company's products are sold as standard accessories or options for a variety of
light vehicles. In 2000,2002, the Company estimates that more than 50%65% of its net
sales were generated from products sold for light trucks. For the year ended
December 31, 2000,2002, the Company's net sales and EBITDA as adjusted, were $318.8$329.8 million and
$44.5$41.9 million, respectively. AAS is a Delaware limited liability company that
was formed on August 28, 1995 and commenced business on September 28, 1995.
In September 1995, the Company, through its SportRack, LLC subsidiary
("SportRack"), acquired substantially all of the net assets of the MascoTech
Accessories division (the "MascoTech Division") of MascoTech, Inc. ("MascoTech"
or the "Predecessor"). The MascoTech Division was a North American supplier of
rack systems and accessories to the automotive OEM market and aftermarket.
In October 1996, the Company acquired (the "Brink Acquisition") all of the
capital stock of Brink B.V., a private company with limited liability
incorporated under the laws of The Netherlands and a European supplier of towing
systems to the automotive OEM market and aftermarket. In December 1996,
ownership of Brink B.V. and its subsidiaries was transferred to a newly formed
subsidiary of the Company, Brink International B.V. ("Brink").
In August 1997, the Company formed Valley Industries, LLC ("Valley") to
acquire (the "Valley Acquisition") the net assets of Valley Industries, Inc.
("Valley Industries"), a North American supplier of towing systems to the
automotive OEM market and aftermarket.
Two smaller acquisitions were completed in July 1997 by SportRack
International,Accessories, Inc. ("SportRack International"Accessories" formerly SportRack International,
Inc.), a subsidiary of SportRack. SportRack InternationalAccessories acquired from Bell
Sports Corporation ("Bell") the net assets of its sportrack division, a Canadian
supplier of rack systems and accessories to the automotive aftermarket. An
affiliate of J.P. Morgan Partners, LLC ("JPMP") which is also an affiliate of
the Company, at that time was a significant equity investor in Bell. SportRack
InternationalAccessories also acquired the capital stock of Nomadic Sports, Inc. ("Nomadic"),
a Canadian supplier of rack systems and accessories to the automotive OEM market
and aftermarket. The acquisitions of the sportrack division of Bell and Nomadic
are collectively referred to in this Form 10-K as the "SportRack InternationalAccessories
Acquisition."
In January 1998, the Company, through Brink, acquired (the "Ellebi
Acquisition") the net assets of the towbar segment of Ellebi S.p.A. ("Ellebi").
Ellebi is an Italian supplier of towing systems to the automotive OEM market and
aftermarket.
In February 1998, the Company, through SportRack International,Accessories, acquired (the
"Tranfo-Rakzs"Transfo-Rakzs Acquisition") the net assets of Transfo-Rakzs, Inc.
("Transfo-Rakzs"). Transfo-Rakzs is a Canadian supplier of rear hitch rack
carrying systems and related products to the automotive aftermarket.
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In February 2000, the Company, through Valley, acquired (the "Titan
Acquisition") the net assets of Titan Industries, Inc. ("Titan"). Titan is a North
American Suppliersupplier of trailer balls and other towing related accessories to the
automotive aftermarket.
In September 2000, the Company, through SportRack International,Accessories, acquired (the
"Barrecrafters Acquisition") the net assets of the Wiswall Hill Corporation
("Wiswall Hill" or "Barrecrafters"). Wiswall Hill is a North American supplier
of rack systems and accessories to the automotive aftermarket under its popular
brand name, Barrecrafters.
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4As announced on March 14, 2003 the Company and Castle Harlan, Inc., a
private equity investment firm ("Castle Harlan"), are in the latter stages of
negotiations regarding the purchase of the Company by affiliates of Castle
Harlan. Consummation of the sale would be contingent upon satisfaction of
customary legal and business conditions, including, among other things, Castle
Harlan's obtaining sufficient third party debt financing to complete the
transaction. Any definitive transaction is expected to involve a redemption of
the Company's outstanding 9 3/4% Senior Subordinated Notes due 2007 at the
current optional redemption price of 104 7/8% of principal amount, plus accrued
interest.
PRODUCTS
The principal product lines of the Company are towing systems, rack systems
and related accessories. In 2000,2002, towing systems and towing accessories
constituted approximately 59%53% of the Company's net sales and rack systems and
rack accessories constituted approximately 41%47% of the Company's net sales. The
Company believes it offers a more comprehensive product line than most of its
competitors. The Company has devoted considerable resources to the engineering
and designing of its products and, as a result, considers itself a market leader
in the research and new product development of towing systems and rack systems.
Towing Systems. The Company designs, manufactures and supplies towing
systems to automotive OEMs and the automotive aftermarket which fit almost every
light vehicle used for towing in North America and Europe. In the aggregate, the
Company supplies over 2,000 different towing systems, as well as a line of
towing accessories.
The Company's towing systems sold in Europe are installed primarily on
passenger cars. The Company's primary product withinIn Europe, the European market is theCompany sells both fixed ball towbar that is specificallytowbars as well as
more sophisticated detachable ball systems. Fixed ball towbars are designed to
be mounted onpermanently attached to a particular
car model in accordance with the OEM's specified mounting points. The Company
also markets sophisticatedvehicle, while detachable ball systems which are designed
so that the towing ball can be easily removed when not in use. The detachable
ball systems are becoming increasingly popular especially with owners of more
expensive cars orand for cars on which the license plateplates would otherwise be
blocked by a fixed ball towbar. The Company's towing systems sold in Europe currently undergo rigorous safety testing in orderare
designed to satisfy European Community ("EC") regulatory standards and undergo
rigorous durability and safety testing in order to comply with these standards.
The Company's towing systems sold in North America are installed primarily
on light trucks. As new vehicles are introduced, the Company designs towing
systems to match the specific vehicle design. The Company has introduced many
innovative product designs such as the tubular trailer hitch which is lighter in
weight, less obtrusive and stronger than the conventional hitch. Many of the
Company's product innovations have enabled the Company to improve the
functionality and safety of towing systems while, at the same time, enhancing
the overall appearance of vehicles utilizing these towing products.
The Company also offers a line of towing accessories, including trailer
balls, ball mounts, electrical harnesses, safety chains and locking hitch pins.
Fixed Rack Systems. The Company supplies fixed roof rack systems for
individual vehicle models that are generally sold to the automotive OEMs for
installation at the factory or dealership. These rack systems are typically
installed on a model for the life of its design, which generally ranges from
four to six years. The Company has been an industry leader in developing designs
which not only complement the styling themes of a particular vehicle, but also
increase the utility and functionality of the rack system.
Most of the fixed rack systems sold by the Company are composed of side
rails which run along both sides of the vehicle's roof, feet which mountroof. In many cases, the side rails to the vehicle's roof, andrack
system includes cross rails which run between the side
rails. Cross rails, which are attached to the side rails with
stanchions, and are typically movable and can be used to carry a load. The
Company uses advanced materials such as lightweight, high strength plastics and
roll formed aluminum to develop durable rack systems that optimize vehicle
performance. Many of these products incorporate innovative features such as push
button and pull lever stanchions, which allow easy movement of the cross rails
to accommodate various size loads. These rack systems are utilized on a large
number of light trucks, including Jeep Grand Cherokee and Cherokee,Liberty,
DaimlerChrysler minivans, Dodge Durango, GMChevrolet Suburban, Tahoe and
Trailblazer, GMC Yukon and Envoy, Cadillac Escalade, Oldsmobile Bravada, Hummer
H2, Mercedes Benz M-Class and BMW X5.
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Detachable Rack Systems. The Company supplies a full line of detachable roof
rack systems for distribution in both the automotive and sporting accessory
aftermarkets. A detachable rack system typically consists of cross rails which
are attached to the roof of a vehicle by removable mounting clips.
Rack System Accessories. The Company designs and manufactures lifestyle
accessories for distribution in both the automotive and sporting accessory
aftermarkets. These accessories typically attach to the Company's towing systems
or rack systems and are used for carrying items such as bicycles, skis, luggage,
surfboards and sailboards.
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5
CUSTOMERS AND MARKETING
Management believes that the Company has strong and diverse industry
relationships which are based on its reputation for high service levels, strong
technical support, innovative product development, high quality and competitive
pricing. Sales to OEM and aftermarket customers represented approximately 68%
and 32% of the Company's net sales, respectively, in 2000.2002. In addition, sales to
DaimlerChrysler and General Motors were approximately 32%23% and 11%22%, respectively,
of the Company's aggregate net sales in 2000.2002.
Automotive OEMs. The Company obtains most of its new orders through a
presourcingsourcing process by which the customer invites one or a few preferred suppliers to
design and manufacture a component or system that meets certain price, timing,
functional and aesthetic parameters. Upon selection at the development stage,
the Company and the customer typically agree to cooperate in developing the
product to meet the specified parameters. Upon completion of the development
stage and the award of the manufacturing business, the Company receives a
purchase order that covers parts to be supplied for a particular car model. Such
supply arrangements typically involve annual renewals of the purchase order over
the life of the model, which is generally four to six years. In addition, the
Company enters into long-term contracts with certain OEM customers which require
the Company to make annual price reductions. The Company competes to supply
parts for successor models even though the Company may currently supply parts on
the predecessor model. Sales to OEMs are made directly by the Company's internal
sales staff and outside sales representatives.
The Company sells its products to most of the automotive OEMs selling light
vehicles in North America and/or Europe, including DaimlerChrysler, General
Motors, Toyota, Opel, Volvo, Isuzu, Ford, BMW, Subaru, Fiat, Mitsubishi, Nissan,
Volkswagen, SEAT, Skoda, Daewoo and Kia. The Company supplies DaimlerChrysler
with substantially all of its North American towing systems and rack systems and
accessories. The Company also supplies approximately 50% of the rack system
requirements of General Motors. The following chart sets forth
information regarding vehicle models on which the Company's products are used or
for which the Company has been awarded business.
AWARDED BUSINESS ON
PRODUCT OEM CUSTOMER 2000 PRODUCTION(A)2002 PRODUCTION(a) FUTURE PRODUCTION(b)
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Towing Systems Alpha Romeo 146, 147, 166, 156/156 Wagon, Spider-GTV 147 Sprint
Audi A6
Citroen C3, Evasion, Jumper, Jumpy Saxo
Daewoo Kalos, Lanos, Leganza, Mexia, Nubira Espero, Evanda, J-200 Hatchback, J 200
Hatchback, Nubira Notchback, Nubira Notchback, M200, Nubira
Wagon, Ssangyong Korando, Ssangyong Sedan/Hatchback/Wagon
Musso, Tacuma
Daihatsu Charade, Cuore, Gran Move, HiJet, HiJet- D02
Pick-up, Move, NCX Minivan, Rocky,
Sirion, Terios, Valera
DaimlerChrysler 300M, Dakota, Durango, Grand Cherokee, Grand Cherokee, Caravan, JeepLX
Liberty, Voyager, Town & Country, Dodge Ram
Pick-up, Dakota, Wrangler, Durango, Neon, Prowler, PT Cruiser,
Plymouth Prowler, Ram
Van, 300M,Sebring, Voyager, Stratus, SebringWrangler
FIAT Barchetta, Bravo, Cucato, Coble, Fiorino, Punto Facelift, Punto MPV
Marea, Multipla, Palio, Pando, Punto,
Seisento, Stilo, Strada178 Pick-up, Ulysse
Ford Connect, Econoline, Explorer, F Series, Moneo Wagon
Fiesta Courier, Focus Sedan/Wagon, Probe,
Ranger, Scorpio, Villager, Windstar
General Motors CK Pick-up, ML Van,Frontera, Gran Prix, G-Van, Movano, S-10,
Cavlier, Sunfire Frontera, Corsa, Arena (van),Saturn Vue, Sonoma, Suburban, Tracker,
U-Van, Vectra
Blazer, APV Vans, Bravada, Jimmy, Geo
Tracker, Blazer, Corsa, Astra, Grand Priz
(hatchback), Astra (Sedan), Cadilac Seville
Astra (Station wagon), Calibra, Vectra
(Hatchback), Vectra (Sedan), Vectra
(Station wagon), Omega (Sedan), Omega
(Station wagon), Campo, Frontera,
Monterey, Zafira, Chevrolet Malibu
Ford Explorer, Ranger, Focus Wagon, Ranger,
Windstar Minivan, Focus Mondeo, Explorer
Mondeo, Mondeo (Wagon),
Scorpio (Sedan), Scorpio
(Wagon), Maverick, Transit
Renault Laguna (Station wagon), Laguna, Laguna, Matra
Isuzu Rodeo, Trooper
Toyota 4-Runner, RAV4, Tacoma Pick-up, Seniena Landcrusier pick-up Previa, 355N
Minivan Sequoia SUV, Tundra Pick-up
Corolla, Corolla Wagon
Camry, Hi-Lux, Picnic, Previa, Carina
Hi-Ace, Celica, Yaris Verso
Nissan Pathfinder, Pick-up, Quest, Primera, Primera Wagon,
Infiniti, XTerra
Vehicle, QW Truck, Micra, Sunny, Patrol, Terrano, MPV, Micra
Frontier
Almera, Primera, Maxima, King Cab, Almera, Almera MPV, Tino MPV
Terrano, Mavric, Patrol, Serena,
Vanette
Mazda 121, MPV, J54, J16, 626, 323 626 Wagon, 323, Demio
Honda Passport, Accura MDX, CRV PF Van, Honda HP
Mitsubishi Montero, Montero Sport, Carisma, Pajero
L200
FIAT Almost all models
Alpha Romeo Almost all models
Lancia Almost all models
Subaru Outback, Legacy, Forester 79V
Range Rover Range Rover, Land Rover
Volvo 900 series (Sedan), 900 series 900 series, S/V 70 seriesMD
Hyundai Accent/Verna, Atos Prime/Spirit, Coupe, Accent, XG
Elantra, Excel/Accent, Excel/Pony, Getz,
H1 Strex, H1/H200, H1/Pick-up,
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AWARDED BUSINESS ON
PRODUCT OEM CUSTOMER 20002002 PRODUCTION(a) FUTURE PRODUCTION(b)
- -------------- --------------- ------------------ ---------------------------------------- -------------------------------------------------------------------- --------------------------------------
Towing Systems VolvoHyundai H100/H150, Lantra, Lantra Wagon, Matrix,
(continued) (Station wagon)(continued) Santa Fe, Scoupe
Jaguar X 400, X Type, XJ S-Type
KIA Carens, Carnival, Clarus Notchback, Clarus
Wagon, Joice, K-2700/Frontier, Magentis,
Pregio, Pride Wagon, Retona, Rio, Shuma
Mentor, Shuma Sephia, Sorento, Sportage
3/5, Sportage Wagon
Lancia Delta, Kappa, Lybra, Ypsilon Ypsilon
Mazda 121, 323, 626, B2500, Demio, E2000/2200, 3Series Fastbreak/Sedan, MPV (J16E)
E-Series, MPV, MX3, Premacy, Tribute,
Xedos-6, Xedos-9
Mitsubishi Carisma, Colt, Galant, Galant Wagon, L200, Airtreck NCC, Lancer Sedan, Lancer
Lancer Wagon, Pajero, Pajero Pini, Pajero Wagon, NQZ
Sport, Sigma Wagon, Space Gear, Space
Runner, Space Star, Space Wagon
Nissan Almera Hatchback, Almera Sedan, Almera Micra, WQW (X61), 850 (Sedan), 850
(continued) SAAB 9000 series, 900 series 900 series, 9000 series, 9000
station wagon, small car 9-3,
small car 9-5, small station
wagon
Hyundai Lantra, Sonata, Starex 4WD, Accent, Atos Trajet, Lantra, Joyce
VernaX-Trail
Tino, Almera Wagon, D22 Pick-up,
Frontier, Micra, Pathfinder, Primera
Hatchback, Primera Sedan, Primera Wagon,
Quest, Terrano II
Peugeot 106, 306,206, 806, 307 Estate, 406 (Sedan),Coupe, 406 (Station 206, 206 Sport, 207, 306 Break
wagon),407 Coupe/Break/Sedan, A08
Estate, 406 (Coupe), 605, 806, J5
(Van),Saloon, Boxer, (Van)
Suzuki Carry
Daihatsu Gran Move, Move LCX Mini Van
KIA Clarus, Frontiers, Carnivall
SEAT Toledo
Skoda SK240Expert
Range Rover 200, 400, 600, 800, 75 Estate, Rover 45 Defender, Discovery, RD60 Hatchback
Renault Espace, Trafic, Twingo Megane Hatchback
SAAB 900, 9000, 9-3 Sedan, 9-5 Sedan/Wagon
Toyota 4Runner, Avensis Sedan/Wagon/Verso, 050X, Avensis Hatchback/Notchback,
Camry, Celica, Corolla H-back, Corolla Avensis Wagon, Corolla Verso, Lexus
Sedan/Wagon/Veros, Dyna, Hi-ace, Hi-lux, 620N, Previa
Landcruiser, Lexus 200/300/430, Lite-ace,
Paseo, Previa, Rav4, Sequoia, Sienna, Yaris,
Yaris Verso
Volkswagen Golf 4, Caddy, Transporter, Polo, Euro
Daewoo Nubira U 100MiniVan
Volvo 200/P20, 854/P80, 855 S/V70, 900S/V90, P11/P12, XC90
S/V40, S/v70 AWD, S60, S80, XC70, XC90
Rack Systems DaimlerChrysler Caravan, Durango, Grand Cherokee, Durango, Grand Cherokee, Grand
Cherokee, Caravan, Jeep Liberty, Durango, CS
Voyager, Town & Country, Durango, Mercedes M-Class, PT Cruiser, BW 72Cherokee XK, M80, Pacifica, KJ
Town & Country, Voyager Renegade
Ford Freestyle
General Motors Astro, Avalanche, Bravada, Envoy, Astro, Escalade EXT, Hummer III
Escalade, Escalade XL, Hummer II, Safari, Hummer SUT, Safari
Saturn Vue, Suburban, Yukon, Tahoe, Astro, Hummer, Trans Port, Venture,
Safari Montana
Escalade, Denali, Avalanche, Z-71 Saturn SUV
SUV
Envoy, Trail Blazer,
Bravada
Ford D219Trail Blazer EXT, Yukon, Yukon Z-71
Honda Accura MDX Honda HPAccura GX
Isuzu Ascender
KIA Sedona
Mitsubishi Endeavor
Nissan Pathfinder, Infinity QX4, Toyota Tacoma
Mitsubishi Montero Sport
Subaru Outback, Impreza, Legacy, Forester
KIA Sportage Sadona
Hyundi Santa Fe, Alantra, Sanada, Accent
SEAT Vario GP99
Scoda OctaviaPathfinder Frontier, TT, WZW, Xterra, Pathfinder,
Titan
Opel Astra Vectra
AstraSkoda Octavia Octavia
SEAT Vario 359
Subaru Forester, Impreza, Legacy, Outback
Volkswagen Polo
BMW E-53 (SUV)X5 E-83
Toyota Sienna Tacoma
- -----------------------
(a) Represents models for which the Company produced products in 2000.2002.
(b) The amount of products produced under these awards is dependent on the
number of vehicles manufactured by the OEMs. Many of the models are versions
of vehicles not yet in production. There can be no assurance that any of
these vehicles will be produced or that the Company will generate certain
revenues under these awards even if the models are produced.
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Automotive Aftermarket. The Company sells its products directly into the
automotive aftermarket through a number of channels, including wholesalers,
retailers and installers, through its internal sales force and outside sales
representatives. The largest of the Company's aftermarket customers include
U-Haul, Pep Boys, Balkamp, Advance Auto Parts, Coast Distribution System, Discount Auto
Parts, Ace Hardware, Norauto, Brezan, Feuvert and Canadian Tire. The Company
believes that it has established a reputation as a highly reliable aftermarket
supplier able to meet its customers' requirements for on-time deliveries while
minimizing the carrying levels of inventory.
For example,
Valley began supplying towing systems to U-Haul (which the Company believes, is
the largest installer of towing systemsThe Company's sales in the United States)automotive aftermarket are seasonal. Historically
the highest sales have been in 1994the second quarter of each year and for
the year ended December 31, 2000, supplied approximately 50%second
highest sales have been in the first quarter of U-Haul's towing
system requirements.each year.
PRODUCT DESIGN, DEVELOPMENT AND TESTING
The Company believes that it is a leader in the design of towing systems and
rack systems and accessories. The Company believes it offers products that
possess greater quality, reliability and performance than the products sold by
many of its competitors. The 128approximately 135 members of the Company's
engineering and design staff possess strong technical skills. The Company
currently holds more than 125150 U.S. and foreign patents, and has numerousseveral patent
applications pending. The expiration of such patents are not expected to have a
material adverse effect on the Company's operations.
The Company spent $9.8$8.5 million, $10.3$9.4 million and $9.6$9.8 million on
engineering, research and development in 2000, 19992002, 2001 and 1998,2000, respectively. The
Company works closely with OEMs to constantly improve design and manufacturing technology
and product functionality. When an OEM is in the process of developing a new
model, it typically approaches an established or incumbent supplier with a
request to supply the required towing system or rack system. The Company is
typically contacted two to four years prior to the
4
7 start of production of the
new model. The Company's product development engineers then work closely with
the OEM to develop a product that satisfies the OEM's aesthetic and functional
requirements. This relationship also provides the Company with a competitive
advantage in the aftermarket because, in many cases, the Company already
possesses the knowledge to create a system compatible with new model vehicles
prior to release.
The Company has extensive testing capabilities which enable it to test and
certify its products. The Company subjects its products to tests which it
believes are more demanding than conditions which would occur during normal use.
The Company has specialized equipment which it has purchased or developed for
use in its testing laboratories.
Since May 1994, 1415 European countries enacted the new EC regulatory
standards which require that towing systems undergo significant safety testing
prior to gaining approval for sale. This safety testing requires that a towing
system be extensively tested for fatigue and includes subjecting a towing system
to upwards of two million high load pulses. The Company does its testing in its
own laboratory under the control of an independent institute that is authorized
by the EC to approve the towing systems for sale. The quality assurance system
is regularly audited by an independent institute and by the automotive OEMs
themselves. The Company has continuallyalways been awarded the highest distinction of
achievement by the independent institute.
MANUFACTURING PROCESS
The Company's manufacturing operations are directed toward achieving ongoing
quality improvements, reducing manufacturing and overhead costs, realizing
efficiencies and adding flexibility. The Company has organized its production
process to minimize the number of manufacturing functions and the frequency of
material handling, thereby improving quality and reducing costs. In addition,
the Company uses cellular manufacturing which improves scheduling flexibility,
productivity and quality while reducing work in process and costs.
The manufacturing operations utilized by the Company include metal cutting,
bending, cold forming, roll forming, stamping, welding, plastic injection
molding, painting, assembly and packaging. The Company performs most
manufacturing operations in-house but outsources certain processes depending on
the capabilities and capacities of individual plants and cost considerations.
For example, while some of the Company's towing systems manufacturing facilities
have painting capabilities, the Company has chosen to outsource the painting of
its rack systems.
The Company has established quality procedures at each of its facilities and
strives to manufacture the highest quality product possible. The Company has
achieved ISO-9000 or QS-9000 certification for 1317 of its 2123 manufacturing and
engineering facilities and is in the process of obtaining certification for
other of its facilities. The Company has received numerous quality and
performance awards from its OEM customers, including DaimlerChrysler's Gold
Award, General Motors's Supplier of the Year Award, Ford's Q-1
5
Award, Toyota's Distinguished Supplier Award, KIA's Preferred Supplier Award and
the Nissan Superior Supplier Performance Award.
RAW MATERIALS
The principal raw material used in the Company's products is steel, which is
purchased in sheets, rolls, bars or tubes and represents approximately 50%25% of
the Company's raw material costs. The Company also purchases significant amounts
of aluminum and plastics. The Company has various suppliers globally and has not
had difficulties in procuring raw materials nor does it expect to have any
problems in the future. The Company is committed to supplier development and
long-term supplier relationships. However, most of the Company's raw material
demands are for commodities and, as such, can be purchased on the open market on
an as needed basis. The Company selects among available suppliers by comparing
cost, consistent quality and timely delivery as well as compliance with QS-9000
and ISO-9000 standards.
The Company customarily obtains its supplies through individual purchase
orders. In some instances, the Company will enter into short-term contracts with
its suppliers which generally run one year or less. However, the Company has
signed a long-term supply agreement which terminates in 2004 with one of its
painting suppliers, Crown Group, Inc. ("Crown"), under which Crown opened a
state-of-the-art paint line in a facility adjacent to the Company's Port Huron,
Michigan facility.
5
8
NORTH AMERICAN AUTOMOTIVE INDUSTRY
During the later part of 2000, sales in the North American automotive
industry began to decline and some of the Company's major customers adjusted
production in the 4th quarter of 2000 to reduce their inventory of unsold
vehicles. This lowering of production negatively impacted the Company's sales
during the 4th quarter of 2000. This trend has continued during the early part
of 2001.
It is anticipated that U.S. auto sales for 2001 will be in the range of 15.5
million to 16.5 million vehicles, down from 17.4 million vehicles in 2000.
In addition, DaimlerChrysler, the Company's largest customer, incurred
substantial losses at its North American, Chrysler Group. During the first
quarter of 2001, DaimlerChrysler announced a restructuring plan to return the
Chrysler Group to profitability in 2002. This restructuring plan includes the
reduction of 26,000 employees and a 15% reduction in material cost by 2003.
Effective January 1, 2001, the Company agreed to reduce prices on products sold
to DaimlerChrysler and has been able to partially offset these price reductions
through reductions in its material costs. The Company continues to work with
DaimlerChrysler to help identify other potential cost savings.
AUTOMOTIVE OEM AND AFTERMARKET TRENDS
As automobile and light truck manufacturers have faced increased global
competition, they have sought to significantly improve quality, reduce costs and
shorten the development time required for new vehicle models. These changes have
altered the OEM/supplier relationship and benefited larger suppliers that have
strong product engineering and development capabilities, superior quality
products, lower unit costs and the ability to deliver products on a timely
basis. As a result,Following are some of the Company believes that it has benefited and will continue
to benefit fromsignificant trends impacting the following automotive OEM
market and aftermarket trends.automotive aftermarket.
Consolidation of Supplier Base by OEMs. The OEMs have significantly
consolidated their supplier base in an effort to reduce their
procurement-related costs, ensure high quality and accelerate new model
development. As a result, many smaller, poorly capitalized suppliers with
limited product lines and engineering and design capabilities have been
eliminated as direct suppliers to OEMs. Consequently, larger suppliers with
broad product lines, in-house design and engineering capabilities and the
ability to effectively manage their own supplier bases, have been able to
significantly increase their market share.
The consolidation by OEMs has altered the typical structure of supplier
contracts. In the past, OEMs supplied all design, development and manufacturing
expertise for accessory parts and were responsible for consistency of quality
and reliability of delivery. Today, however, the OEMs typically involve
potential suppliers earlier in the design and development process to encourage
suppliers to share design and development responsibility. In some cases,
sole-source supply contracts, which cover the life of a vehicle or platform, are
awarded. Both OEMs and suppliers benefit from the consolidation trend. Suppliers
are able to devote the resources necessary for proprietary product development
with the expectation that they will have the opportunity to profit on such
investment over the multi-year life of a contract. OEMs benefit from shared
manufacturing cost savings attributable to long, multi-year production runs at
high capacity utilization levels.
Pricing pressures. As a result of increased global competition, excess
capacity and recent recessionary trends, many automotive OEMs have increased the
pressures on suppliers to reduce selling prices. This pricing pressure in
conjunction with the need to increase investment in product engineering and
development capabilities has reduced the profitability of many tier one
automotive suppliers. The Company works closely with its customers to find ways
to reduce selling prices through design and engineering changes or to minimize
the impact of price reductions through internal cost reductions and
manufacturing efficiency gains. The Company believes that its design and
engineering capabilities and manufacturing expertise may allow it to offset much
of the mandated price reductions, while allowing the Company to increase
business as customers look to reduce costs.
Emergence of European Community Regulatory Standards. Trends within the
European towing systems market result primarily from EC regulatory standards and
the corresponding legislative framework. Such standards provide that a towing
system must fit all the vehicle manufacturer's recommended fitting points, must
not interfere with the vision of the number plate when not in use and must meet
strict testing criteria for durability and safety. These standards have been
adopted by The Netherlands, Germany, Sweden, Italy, the United Kingdom, France,
Belgium, Luxembourg, Spain, Austria, SwitzerlandGreece, Finland, Denmark, Ireland and
Scandinavia.Portugal. Other EC countries are expected to adopt the legislation. All of the
Company's towing systems sold in Europe currently undergo rigorous safety testing in orderare designed and tested to satisfy these
EC regulatory standards.
6
Increased Levels of Manufacturing in North America by Transplants. As a
result of the relative cost advantage of producing vehicles in North America,
many foreignForeign
automobile manufacturers with manufacturing operations in the United States
("transplants") have increased their share of North American light vehicle
production from approximately 6% in 1986 to approximately 24%21% in 2000.2002. Industry
sources forecast that this trend will continue. For example, BMW commenced
manufacturing in the U.S. in 1996 and launched production of its E-53 SUV in
1999. In addition, Toyota launched production of its Tundra pickup truck in Indiana during
1999 and launched production of its Sequoia SUV during 2000, and Honda began
production of its Odyssey minivan in North America during 1999 and began
production of its Acura MD SUV during 2000. During 2002, Nissan announced plans
to begin production of its Pathfinder, Frontier and XTerra models in a new
facility to be constructed in Canton, Mississippi and Hyundai announced its
intention to begin production of a new SUV in Alabama. The Company believes that
increased levels of manufacturing of light trucks in North America by
transplants will benefit full service, high quality suppliers with North
American operations such as the Company.
6
9
COMPETITION
The Company's industry is highly competitive. AAlthough, the Company is one
of the world's largest suppliers of towing and rack systems, a large number of
actual or potential competitors exist, some of which are larger than the Company
and have substantially greater resources than the Company. The Company competes
primarily on the basis of product quality, cost, timely delivery, customer
service, engineering and design capabilities and new product innovation in both
the OEM market and the automotive aftermarket. The Company believes that as OEMs
continue to strive to reduce new model development cost and time, innovation and
design and engineering capabilities will become more important as a basis for
distinguishing competitors. The Company believes it has an outstanding
reputation in both of these areas. In the automotive aftermarket, the Company believes
that its wide range of product applications is a competitive advantage. For
example, the Company has developed towing systems to fit almost every light
vehicle used for towing in North America and Europe. The Company believes its
competitive advantage in the aftermarket is enhanced by its close relationshiprelationships
with OEMs, allowing the Company access to automobile design at an earlier time
than its competitors.
In the towing systems market, the Company competes with Draw-Tite Inc. and
Reese Products Inc., bothCequent, a division
of which are subsidiaries of MetaldyneTriMas Corporation, Bosal Holding B.V., The Oris Group, Production Stamping
Inc. and numerous smaller competitors.
In the rack systems and accessories market, the Company's competitors
include JAC Holding Corp., Thule International S.A., Yakima Products, Inc.,
Graber Products Inc. and several smaller competitors.
COMPETITIVE ADVANTAGES
Leading Global Market Position. Based on its knowledge of the industry, the
Company believes that it is one of the world's largest suppliers of towing
systems and one of the world's largest suppliers of rack systems. The Company
also believes, based on its knowledge of the industry, that it is the largest
supplier of towing systems in Europe and the second largest supplier of towing
systems in North America. The Company also believes that it is one of the two
largest suppliers of rack systems sold to automotive OEMs in North America. The
Company has 2728 facilities strategically located in North America and Europe. By
virtue of its size and global presence, the Company believes it benefits from
several competitive advantages, including the ability to (i) satisfy local
design, production, quality and timing requirements of global OEMs; (ii) provide
"one-stop shopping" for customers' product and service requirements; (iii)
optimize plant production; (iv) maximize its raw material purchasing power; (v)
spread its selling, administrative and product development expenses over a large
base of net sales; and (vi) develop and maintain state-of-the-artmodern production facilities.
Strong Relationships with Diverse Customer Base. The Company has an
established position as a Tier 1 supplier of towing and/or rack systems to most
of the OEMs manufacturing in North America and/or Europe including
DaimlerChrysler, General Motors, Toyota, Opel, Volvo, Isuzu, Ford, BMW, Subaru,
Fiat, Mitsubishi, Nissan, Volkswagen, SEAT, Skoda, Daewoo and Kia. The Company
supplies DaimlerChrysler with substantially all its North American towing
systems and rack systems and accessories. The Company also supplies
approximately 50% of the rack system requirements of General Motors. Tier 1 status
and strong customer relationships are important elements in achieving continued
profitable growth because, as OEMs narrow their supplier bases, well regarded,
existing suppliers have an advantage in gaining new contracts. The evolution of
OEM relationships into strategic partnerships provides a significant advantage
to Tier 1 suppliers with system integration capabilities (such as the Company)
in retaining existing contracts as well as in participating during the design
phase for new vehicles, which is integral to becoming a supplier for such new
platforms. The Company is also a leading supplier of towing and rack systems to
automotive aftermarket wholesalers, retailers and installers, such as U-Haul,
Pep Boys, Balkamp, Advance Auto Parts, Coast Distribution System, Discount Auto Parts, Ace
Hardware, Norauto, Brezan, Feuvert and Canadian Tire.
Comprehensive Product Line. The Company continues to position itself as a
leading supplier to its customers for a growing range of products and services.
Through its offering of over 2,000 towing system models, the Company's products
fit almost every light vehicle producedused for towing in North America and Europe. The
Company is one of a limited number of European manufacturers with
7
such a broad product line that also satisfies EC regulatory standards.
Competitors whose products do not satisfy such standards face substantial design
and testing costs to offer a comparable product line that meets these safety
standards. The Company has provided OEMs with fixed rack systems for
approximately half of the light truck models produced in North America that
utilize vehicle-specific fixed racks. The Company believes that its broad
product offerings also facilitate strategic partnerships with automotive
aftermarket wholesalers, retailers and installers.
7
10
Design and Engineering Expertise. The Company has an engineering and
research and development staff that develops new products and processing
technologies. The Company works directly with OEM designers to create innovative
solutions that simplify vehicle assembly and reduce vehicle cost and weight. The
Company is responsible for many industry innovations, including lighter, less
obtrusive, round tube towing hitches as well as push button and pull lever
stanchions on fixed rack systems. The Company believes its design and
engineering capabilities provide significant value to its customers by (i)
shortening OEM new product development cycles; (ii) lowering OEM manufacturing
costs; (iii) providing technical expertise; and (iv) permitting aftermarket
customers to maintain lower inventory levels. The Company also believes that its
design innovations have created value for end users by providing products that
are durable and easy to install and that enhance vehicle utility and appearance.
High Quality, Low Cost Manufacturing Position. The Company believes that it
is one of the highest quality, lowest cost suppliers of towing and rack systems
in North America and Europe. The Company has received numerous quality and
performance awards, including DaimlerChrysler's Gold Award, General Motor's
Supplier of the Year Award, Ford's Q-1 Award, Toyota's Distinguished Supplier
Award, Kia's Preferred Supplier Award and Nissan's Superior Supplier Performance
Award. Supplier quality systems are currently being standardized across OEMs
through the ISO-9000 and QS-9000 programs. The Company has achieved ISO-9000 or
QS-9000 certification for 1217 of its 2123 manufacturing and engineering facilities
and is in the process of obtaining certification for other of its facilities.
The Company's low cost position is a result of its strict cost controls and
continuous improvement programs designed to enhance productivity. OEMs typically
prefer stable suppliers who can generate productivity gains that can be shared
to reduce OEM costs. The Company's cost controls are closely integrated with its
quality driven manufacturing operations, thereby allowing it to profitably
deliver high quality, easy to install and competitively-priced components on a
just-in-time basis. The Company's focus on low cost manufacturing also provides
benefits when selling products to the automotive aftermarket.
BUSINESS STRATEGY
The Company's objective is to strengthen its position as a leading global
supplier of automotive exterior accessories, thereby increasing revenue and cash
flow. In order to accomplish its goal, the Company intends to pursue the
following strategies.
Increase Global Market Share. The Company intends to capitalize on its
expanded presence in North America and Europe by marketing products to its
global automotive OEM customers. Through its past acquisitions of complementary
product lines, the Company is able to offer an expanded range of products and
services to its extended customer base. The Company also expects to secure new
customers by virtue of its expanded market presence and broad product and
service offerings. The Company believes its continued emphasis on new technology
(both product and process), will result in the development of innovative, towing
and rack system products which it expects to market to its expanding customer
base.
Maintain and Enhance Strong Customer Relationships. The Company intends to
strengthen and expand its relationships with global automotive OEMs and
aftermarket customers by (i) continuing its commitment to innovative design and
development of products during the early stages of vehicle design and redesign;
(ii) building on its position as a low cost supplier of quality accessory
products; (iii) offering new products in existing and new geographic areas by
taking advantage of existing OEM relationships; and (iv) working with
aftermarket customers to develop new products and marketing strategies.
Pursue Strategic Acquisitions. In response to the trend in the OEM market
toward systems suppliers, the Company is focused on making strategic
acquisitions that will enhance its ability to provide integrated systems (such
as a towing or rack system) or otherwise leverage its existing business by
providing additional product, manufacturing and service capabilities. The
Company also intends to pursue acquisitions which will expand its customer base
by providing an entree to new customers, including expansion into selected
geographic areas. The Company believes that such acquisitions should provide
additional opportunities for increased net sales and cash flow by enhancing the
Company's manufacturing and marketing capabilities.
ENVIRONMENTAL REGULATION
The Company's operations are subject to foreign, state and local
environmental laws and regulations that limit the discharges into the
environment and establish standards for the handling, generation, emission,
release, discharge, treatment, storage, and disposal of
8
certain materials, substances and wastes. In many jurisdictions, these laws are
complex, change frequently and have tended to become stronger over time.
In jurisdictions such as the United States, such obligations, including but
not limited to those under the Comprehensive Environmental Response,
Compensation & Liability Act ("CERCLA"), may be joint and several and may apply
to conditions at properties presently or formerly owned or operated by an entity
or its predecessors, as well as to conditions at properties at which waste or
other contamination attributable to an entity or its predecessors have been sent
or otherwise come to be located. The
8
11 Company believes that its operations are in
substantial compliance with the terms of all applicable environmental laws and
regulations as currently interpreted. In addition, to the best of the Company's
knowledge, there are no existing or potential environmental claims against the
Company nor has the Company received any notification nor is there any current
investigation regarding, the disposal, release, or threatened release at any
location of any hazardous substance generated or transported by the Company.
However, the Company cannot predict with any certainty that it will not in the
future incur liability under environmental laws and regulations with respect to
contamination of sites currently or formerly owned or operated by the Company
(including contamination caused by prior owners and operators of such sites), or
the off-site disposal of hazardous substances.
While historically the Company has not had to make significant capital
expenditures for environmental compliance, the Company cannot predict with any
certainty its future capital expenditures for environmental compliance because
of continually changing compliance standards and technology. Future events, such
as changes in existing environmental laws and regulations or unknown
contamination of sites owned or operated by the Company (including contamination
caused by prior owners and operators of such sites), may give rise to additional
compliance costs which could have a material adverse effect on the Company's
financial condition. Furthermore, actions by foreign, federal, state and local
governments concerning environmental matters could result in laws or regulations
that could increase the cost of producing the products manufactured by the
Company or otherwise adversely affect the demand for its products. Additionally,
the Company does not currently have any insurance coverage for environmental
liabilities and does not anticipate obtaining such coverage in the future.
EMPLOYEES
At December 31, 2000,2002, the Company had approximately 2,2002,300 employees of whom
approximately 1,7001,780 are hourly employees and approximately 500520 are salaried
personnel. Approximately 150170 of the Company's employees in the United States at
the Port Huron, Michigan facility are represented by the Teamsters Union.
Collective bargaining agreements with the Teamsters Union affecting these
employees expire in April 2004. As is common in many European jurisdictions,
substantially all of the Company's employees in Europe are covered by
country-wide collective bargaining agreements. The Company believes that its
relations with its employees are good.
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS
For financial information about foreign and domestic operations of the
Company and net sales by product line, see "Note 14"12" of the Company's "Notes to
Consolidated Financial Statements". included in Item 8 of this report.
9
12
ITEM 2. PROPERTIES
The Company's executive offices are located in 14,550 square feet of leased
space in Sterling Heights, Michigan. The Company has 2728 facilities with a total
of 2,252,9542,197,678 square feet of space. The Company believes that substantially all
of its property and equipment is suitable for its needs and in good condition
and that it has sufficient capacity to meet its current and projected
manufacturing and distribution needs.
The Company's facilities are as follows:
SQUARE OWNED/ LEASE
LOCATION PRINCIPAL FUNCTIONS FEET LEASED EXPIRATION**
- --------------------------- ----------------------------- --------- --------- --------------------- ------ ------------
North America
North America
-------------
Shelby Township, Michigan* Manufacturing 74,800 Owned --
Shelby Township, Michigan* Manufacturing 13,000 Leased 2008
Port Huron, Michigan* Manufacturing 200,000216,000 Owned --
Sterling Heights, Michigan* Administration and engineering 14,550 Leased 2003
Sterling Heights, Michigan* Manufacturing 58,000 Leased 2006
Madison Heights, Michigan* Administration and 90,000 Leased 20022004
manufacturing
Madison Heights, Michigan* Engineering and manufacturing 18,000 Leased 2002
Shelburne,2004
Williston, Vermont Administration, manufacturing 73,000Warehousing 10,000 Leased 2001
and engineering
Wyandot,2006
Wyandotte, Michigan Manufacturing 5,000 Leased 20022004
Lodi, California Administration, manufacturing andengineering 150,000 Owned --
engineeringand manufacturing
Lodi, California Warehousing 77,760 Leased 20022005
Grove City, Ohio Warehousing 70,644 Leased 2006
Dallas, Texas Warehousing 23,800 Leased 2005
Granby, Quebec Administration, manufacturing and 88,200103,924 Leased 2003
and warehousing
Bromptonville, Quebec Manufacturing 2,0005,000 Leased 2000Month to Month
Hamer Bay, OntarioOntario* Manufacturing 15,000 Owned --
Barrie, Ontario Manufacturing and warehousing 5,200 Leased Month to Month
Europe
Sandhausen, Germany* Administration and engineering 5,000 Leased Month to Month
Barcelona, Spain Manufacturing 6,200 Leased Month to Month2004
Bakov nad Jizerou, Czech Manufacturing 6,00034,000 Leased Month to Month
Republic*
Staphorst, The Netherlands* Administration, engineering, 405,000 Owned --
manufacturing, and warehousing
Hoogeveen, The Netherlands* Manufacturing and warehousing 185,000 Owned --
Fensmark, Denmark* Manufacturing and warehousing 95,000 Owned --
Nuneaton, United Kingdom* Manufacturing and warehousing 75,000 Owned --
Vanersborg, Sweden* Manufacturing and warehousing 160,000 Leased 20042006
Wolsztyn, Poland Warehousing 5,000 Leased Month to Month
Reims, FranceFrance* Manufacturing and warehousing 115,000 Owned --151,000 Leased 2015
St. Victoria di Gualtieri, Italy Administration, engineering, 170,000 Leased 20032008
Italy* manufacturing and warehousing
St. Victoria di Gualtieri, Italy Manufacturing 110,000 Leased 2003
- ---------------------------
* QS 9000 and/or ISO 9000 certification.
** Gives effect to all renewal options.
ITEM 3. LEGAL PROCEEDINGS
FromGibbs v. Advanced Accessory Systems, LLC. In February 1996, the Company
commenced an action against two former employees alleging breach of contract
under the terms of an October 1992 Purchase Agreement and Employment Agreements
with the Predecessor of the Company. The individuals then filed a separate
lawsuit against the Company alleging breach of contract under the respective
Purchase and Employment agreements. On May 7, 1999 a jury in the United States
District Court for the Eastern District of Michigan reached a verdict against
the Company and awarded the individuals approximately $3.8 million plus interest
and reasonable attorney fees. The Company is currently pursuing an appeal in the
Sixth Circuit Court of Appeals. During 2002, the Company increased its estimated
accrual for this matter by $600,000 which charge is included in interest
expense. No amounts have been paid as of December 31, 2002.
In addition to the above, from time to time, the Company is subject to legal
proceedings and other claims arising in the ordinary course of its business.
The CompanyManagement believes that it isthe resolution of these matters will not presently a party to any litigation the outcome of which would have a
material adverse effect on itsthe Company's financial condition, or results of
operations.operations or cash flows. The Company maintains insurance coverage against
claims in an amount which it believes to be adequate.
10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
10
13
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED MEMBERS'MEMBER MATTERS
There is no established public trading market for the Company's Class A or
Class A-1 Units. At March 19, 2000,25, 2003, there were 19 holders of record of Class A
Units and one holder of record of Class A-1 Units. Except as set forth below
with respect to quarterly tax distributions to Members, the Company has never
declared or paid dividends (or made any other distributions) on the Class A
Units or the Class A-1 Units and does not anticipate doing so in the foreseeable
future. Under certain loan agreements, the Company is prohibited from declaring
or paying any cash dividend or making distributions thereon, except for
quarterly distributions to Members to the extent of any tax liability with
respect to the Class A Units and Class A-1 Units and except for repurchases of
Class A Units from employees upon a termination of their employment with the
Company pursuant to an Employment Agreement and the Operating Agreement.
Class A Units are convertible into Class A-1 Units by holders that are
regulated financial institutions. Class A-1 Units are convertible into Class A
Units provided such conversion is not in violation of certain governmental
regulations of the unit holder.
As listed below, since January 1, 1998,2000, the Company has issued unregistered
securities to investors and to certain other individuals.investors. Each such issuance was made in reliance upon the
exemption from the registration requirements of the Securities Act of 1933, as
amended, contained in Section 4(2) of the Securities Act on the basis that such
transactions did not involve a public offering.
1) On April 22, 1998 pursuant to their respective subscription
agreements, the Company issued an aggregate of 43 of its Class A Units
for an aggregate purchase price of approximately $150,000, to Gerrit
de Graaf and J. Wim Rengelink.
2) On May 18, 1999 pursuant to a subscription agreement, the Company
issued 25 of its Class A Units for an aggregate purchase price of
$100,000 to Bryan A Fletcher.
3) On January 1, 2000, the Company issued 3,655 of its Class A-1 Units to
J.P. Morgan Partners (23A SBIC), LLC in exchange for 3,655 Class A
Units.
4)2) On November 11, 2000 the Company issued 1,478 of its Class A-1 Units to
J.P. Morgan Partners (23A SBIC), LLC in exchange for 1,478 Class A
Units.
11
14
ITEM 6. SELECTED FINANCIAL DATA
The information below presents consolidated financial data of the Company
and includes (i) the operations of Brink subsequent to the Brink Acquisition on
October 30, 1996; (ii) the operations of the sportrack division of Bell and
Nomadic subsequent to the SportRack International Acquisition on July 2, 1997
and July 24, 1997, respectively, (iii) the operations of Valley subsequent to
the Valley Acquisition on August 5, 1997, (iv) the operations of Ellebi subsequent to the Ellebi Acquisition
on January 2, 1998, (v)(ii) the operations of Tranfo-RakzsTransfo-Rakzs subsequent to the
Tranfo-RakzsTransfo-Rakzs Acquisition on February 7, 1998, (vi)(iii) the operations of Titan
subsequent to the Titan Acquisition on February 22, 2000 and (vii)(iv) the operations
of Barrecrafters subsequent to the Barrecrafters Acquisition on September 5,
2000, and have been derived from the audited financial statements of the
Company. The following table should be read in conjunction with the consolidated
financial statements of the Company and notes thereto, and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this Form 10-K.
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
2000(4)-------------------------------------------------------------------
2002 2001 2000(2) 1999 1998(3) 1997(2) 1996(1)
------------ ------------ ------------ -------------- -----------1998(1)
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
Net sales ...................................................................... $ 329,782 $ 314,035 $ 318,817 $ 314,142 $ 292,145
$ 189,352 $ 81,466
Cost of sales(5) .............................sales(3) ........................... 250,516 239,583 239,090 227,889 215,441 136,230 53,607
--------- --------- --------- --------- ---------
Gross profit ............................................................ 79,266 74,452 79,727 86,253 76,704 53,122 27,859
Selling, administrative and product
development expenses(5) ....................expenses(3) .................. 49,309 44,769 45,527 50,258 50,839 31,350 13,413
Amortization of intangible assets ...................... 122 3,312 3,297 3,245 3,551
2,336 2,475
Impairment charge(5) .........................charge(3) ....................... -- -- -- -- 7,863
--------- --------- --------- --------- ---------
Operating income ......................... 29,835 26,371 30,903 32,750 14,451
Other (income) expense
Interest expense ......................... 15,907 17,684 17,950 17,453 18,633
Foreign currency (gain) loss(4) .......... (8,429) 4,948 5,386 7,912 (4,995)
Other, net ............................... 520 743 52 1,990 --
--------- --------- --------- --------- ---------
Income before cumulative effect of
accounting change and income taxes ..... 21,837 2,996 7,515 5,395 813
Cumulative effect of accounting change
for goodwill impairment(5) ............... (29,207) -- -- -- --
--------- --------- --------- --------- ---------
Operating income ........................... 30,903 32,750 14,451 19,436 11,971
Other (income) expense
Interest expense ........................... 17,950 17,453 18,633 12,627 4,312
Foreign currency (gain) loss(6) ............ 5,386 7,912 (4,995) 6,097 1,330
Other, net ................................. 52 1,990 -- -- (80)
--------- --------- --------- --------- ---------
Income (loss) before minority interest,
extraordinary charge and income taxes .................................... 7,515........ (7,370) 2,996 7,715 5,395 813 712 6,409
Provision (benefit) for income taxes(7) ...................................taxes(6) .... 4,252 602 (278) 417 903 (2,856) (491)
--------- --------- --------- --------- ---------
Income before minority interest and ........ 7,793 4,978 (90) 3,568 6,900
extraordinary charge
Minority interest ............................ -- -- -- 97 69
--------- --------- --------- --------- ---------
Income before extraordinary
charge ................................... 7,793 4,978 (90) 3,471 6,831
Extraordinary charge(8) ...................... -- -- -- 7,416 1,970
--------- --------- --------- --------- ---------
Net income (loss) .................................................. $ (11,622) $ 2,394 $ 7,793 $ 4,978 $ (90) $ (3,945) $ 4,861
========= ========= ========= ========= =========
OTHER DATA:
Cash flows fromprovided by operating
Activities .................................activities ............................... $ 21,004 $ 27,651 $ 21,416 $ 25,014 $ 21,879
$ 6,982 $ 9,917
EBITDA(9) ....................................Cash flows (used for) investing
activities ............................... (15,354) (7,580) (13,249) (11,775) (31,618)
Cash flows provided by (used for)
financing activities ..................... (5,526) (20,389) (14,982) (18,185) (8,367)
EBITDA(7) .................................. 41,892 40,252 44,546 46,539 38,364
27,916 16,448
Depreciation ................................................................ 11,299 10,569 10,346 10,418 10,857
6,144 2,002
Capital expenditures ................................................ 15,354 7,580 10,445 11,775 9,998 7,751 3,124
Ratio of EBITDA to interest expense .................. 2.63x 2.28x 2.48x 2.67x 2.06x 2.21x 3.81x
Ratio of earnings to fixed charges(10) .......charges(8) ...... 2.16x 1.15x 1.36x 1.29x 1.04x 1.06x 2.43x
BALANCE SHEET DATA (AT END OF PERIOD)
Cash ................................................................................ $ 2,653 $ 2,139 $ 3,315 $ 8,718 $ 11,240
$ 27,348 $ 2,514
Working capital .......................................................... 20,954 23,380 34,791 36,825 49,232
65,803 14,368
Total assets ................................................................ 224,155 228,290 242,497 251,213 258,981 265,558 148,359
Total debt, including current maturities ........ 154,947 156,649 175,635 178,498 187,524
197,126 93,142
Mandatorily redeemable warrants .......................... 5,250 5,130 5,010 4,810 4,409
3,507 3,498
Distributions to Members' ....................members ................... 3,356 801 6,090 4,720 195
2,945 3,692
Members' equity .......................................................... (6,388) 8,324 5,896 10,331 15,147 16,444 18,463
- --------------
(1) In October 1996, the Company acquired Brink. The Brink Acquisition has been
accounted for in accordance with the purchase method of accounting.
Accordingly, the operating results of Brink are included in the
consolidated operating results of the Company subsequent to October 30,
1996.
(2) The Company acquired the net assets of the sportrack division of Bell on
July 2, 1997, Nomadic on July 24, 1997, and the net assets of Valley
Industries on August 5, 1997. The SportRack International Acquisition and
Valley Acquisition have been accounted for in accordance with the purchase
method of accounting. Accordingly, the operating results of SportRack
International and Valley are included in the consolidated operating results
of the Company subsequent to the respective acquisition dates.
12
15
(3)- ----------
1) The Company acquired the towbar segment of Ellebi S.p.A. on January 2, 1998
and the net assets of Tranfo-RakzsTransfo-Rakzs on February 7, 1998. The Ellebi Acquisition
and Transfo-Rakzs Acquisition have been accounted for in accordance with the
purchase method of accounting. Accordingly, the operating results of Ellebi
and Tranfo-RakzsTransfo-Rakzs are included in the consolidated operating results of the
Company subsequent to the respective acquisition dates.
(4)2) The Company acquired the net assets of Titan Industries, Inc. on February 22,
2000 and the net assets of Barrecrafters on September 5, 2000. The Titan
Acquisition and Barrecrafters Acquisition have been accounted for in
accordance with the purchase method of accounting. Accordingly, the
operating results of Titan and Barrecrafters are included in the
consolidated operating results of the Company subsequent to the respective
acquisition dates.
(5)3) In June 1998, information became available that indicated that certain
assets acquired from Bell (accounts receivable, inventory and tooling) had a
fair value less than originally recorded. The SportRack InternationalAccessories purchase
was renegotiated and a $2.0 million reimbursement was received from Bell.
Accounts receivable, inventory and tooling were reduced by $6.5 million and
additional goodwill of $4.5 million, net of the $2.0 million reimbursement
from Bell, was recorded. During the second half of 1998, management further
reassessed the operations of SportRack International,Accessories, took actions to
restructure the operations, and recorded restructuring charges totaling $1.9
million. Restructuring charges have been included in cost of sales ($1.1
million) and in selling, administrative and product development expenses
($832,000) in the Company's consolidated statement of operations. All
restructuring costs have been incurred as of December 31, 1998. Concurrent
with the reassessment of the SportRack InternationalAccessories operations, management
reviewed the carrying value of goodwill and other intangible assets,
determined that future cash flows would not be sufficient to recover
recorded amounts, and recorded an impairment charge of $7.9 million.
(6)4) Primarily represents net currency gains and loss on indebtedness of the
Company's foreign subsidiaries denominated in currencies other than their
functional currency.
(7)5) On January 1, 2002, the Company adopted the accounting standards set forth
in Statement of Financial Accounting Standards No. 142, "Goodwill and other
Intangible Assets" ("SFAS 142") and Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets" ("SFAS 144"). SFAS 142 changed the methodology for assessing
goodwill impairments. The initial application of this statement resulted in
an impairment of goodwill of $29.2 million to write down goodwill related to
the Valley Industries Acquisition. The impairment was due solely to the
change in accounting standards and was reported as a cumulative effect of
accounting change. Under the new standard, impairment is determined by
comparing the carrying values of reporting units to the corresponding fair
values, which are determined based on the discounted estimated future cash
flows of the reporting units. As the impairment related to Valley
Industries, LLC for which taxable income accrues to the individual members,
no tax effect was recorded for this charge. Additionally, under the new
standard, goodwill is no longer amortized but is to be tested periodically
for impairment. The effect of no longer amortizing goodwill resulted in a
reduction of $3.0 million in amortization of intangible assets during 2002
as compared with each of 2001 and 2000. The adoption of SFAS 144 did not
have a material impact on the Company's financial position, results of
operations or cash flows.
6) The Company is a limited liability corporationcompany and, as such, the earnings of the
Company and its domestic subsidiaries, except for AAS Holdings, Inc. (a
holding company for Brink) which is a C corporation, are included in the
taxable income of the Company's unitholders and no federal income tax
provision is required. The Company's foreign and taxable domestic
subsidiaries provide for income taxes on their results of operations.
(8) In connection with the indebtedness extinguished as a result of the Brink
Acquisition, a prepayment penalty of $220,000 and unamortized deferred debt
issuance costs of $1.8 million were charged to operations during 1996. In
connection with indebtedness extinguished as a result of issuing the Notes
(as defined below), a prepayment penalty of $1.4 million, $3.1 million of
unamortized debt discount, and unamortized deferred debt issuance costs of
$3.2 million were charged to operations during 1997. The debt
extinguishment charges in 1997 were reduced by $365,000 representing the
income tax benefit recognized by Brink.
(9)7) EBITDA is defined as operating income plus depreciation and amortization
adjusted in 1998 for the non-cash portion of impairment and restructuring
charges ($9.5 million for the year ended December 31, 1998), which
definition may not be comparable to similarly titled measures reported by
other companies. EBITDA is presented because it is generally accepted as
providing useful information regarding a company's ability to service and/or
incur indebtedness. However, EBITDA should not be considered in isolation
from or as an alternative to net income, cash flows from operating
activities and other consolidated income or cash flow statement data
prepared in accordance with generally accepted accounting principles or as a
measure of profitability or liquidity. In addition, funds depicted by the
EBITDA measurement are not fully available for discretionary use because of
debt service requirements, expenditures for capital replacement and
expansion, and the need to conserve funds for other commitments and
uncertainties.
(10)8) For purposes of determining the ratio of earnings to fixed charges,
"earnings" are defined as income (loss) before minority interest,
extraordinary charge and income taxes, plus fixed charges. "Fixed charges"
consist of interest expense on all indebtedness (including amortization of
deferred debt issuance costs) and the component of operating lease rental
expense that management believes is representative of the interest component
of rent expense.
13
16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion of the results of operations and financial
condition of the Company should be read in conjunction with the financial
statements and notes thereto of the Company included elsewhere in this Form
10-K. This Form 10-K contains forward-looking statements. Discussions containing
such forward-looking statements may be found in the material set forth above, and
underin
the material set forth below, in the material set forth in Item 1. "Business,"
as well as in this Form 10-K generally. These may include statements projecting,
forecasting or estimating Company performance and industry trends. General risks
that may impact the achievement of such forecasts include, but are not limited
to, compliance with new laws and regulations, general economic conditions in the
markets in which the Company operates, fluctuation in demand for the Company's
products and in the production of vehicles for which the Company is a supplier,
significant raw material price fluctuations, labor disputes involving the
Company or its significant customers or suppliers, changes in consumer
preferences, dependence on significant automotive customers, the level of
competition in the automotive supply industry, pricing pressure from automotive
customers, the substantial leverage of the Company, limitations imposed by the
Company's debt facilities, changes in the popularity of particular vehicle
models or towing and rack systems, the loss of programs on particular vehicle
models, risks associated with conducting business in foreign countries and other
business factors. Any such forward-looking statements are not guarantees of
future performance and involve risks and uncertainties. Actual events or results
may differ materially from those discussed in the forward-looking statements.
All of these forward looking statements as a resultare based on estimates and assumptions
made by management of various factors
set forth in this Form 10-K generally.the Company which, although believed to be reasonable, are
inherently uncertain. The Company does not intend to update these
forward-looking statements.
GENERAL
An affiliate of JPMP and certain members of the Company's management formed
the Company in September 1995 to make strategic acquisitions of automotive
exterior accessory manufacturers and to integrate those acquisitions into a
global enterprise that would be a preferred supplier to the automotive industry.
RECENT ACQUISITIONS
In January 1998,On March 14, 2003 the Company through Brink International B.V., acquiredand Castle Harlan jointly announced that they
are in the net assetslatter stages of negotiations regarding the purchase of the towbar segment Ellebi S.p.A., an Italian supplierCompany
by affiliates of towing
systemsCastle Harlan. Consummation of the sale would be contingent
upon satisfaction of customary legal and business conditions, including, among
other things, Castle Harlan's obtaining sufficient third party debt financing to
complete the automotive OEM market and aftermarket.
In February 1998,transaction. Any definitive transaction is expected to involve a
redemption of the Company through SportRack International, Inc.,
acquiredCompany's outstanding 9 3/4% Senior Subordinated Notes due
2007 at the net assetscurrent optional redemption price of Transfo-Rakzs, a Canadian supplier104 7/8% of rear hitch rack
carrying systems and related products to the automotive aftermarket.principal amount,
plus accrued interest.
RECENT ACQUISITIONS
In February 2000, the Company through Valley, acquired the net assets of Titan
Industries, Inc. ("Titan"). Titan is a North American Supplier of trailer balls
and other towing related accessories to the automotive aftermarket.
In September 2000, the Company through SportRack International,Accessories, acquired the
net
assets of the Wiswall Hill Corporation ("Wiswall Hill" or "Barrecrafters").
Wiswall Hill is a North American supplier of rack systems and accessories to the
automotive aftermarket under its popular brand name, Barrecrafters.
14
SUMMARY RESULTS OF OPERATIONS
The following table presents the major components of the statement of
operations together with percentages of each component as a percentage of net
sales.
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------------------------------------------------------------------
2002 2001 2000
1999 1998
------------------------ ------------------------ ----------------------------------------- ----------------- -----------------
(DOLLARS IN THOUSANDS)
Net sales ........................................................... $ 329,782 100.0% $ 314,035 100.0% $ 318,817 100.0%
$ 314,142 100.0% $ 292,145 100.0%
Gross profit ................................................. 79,266 24.0% 74,452 23.7% 79,727 25.0% 86,253 27.5% 76,704 26.3%
Selling, administrative and product
development expenses.............expenses ..................... 49,309 15.0% 44,769 14.3% 45,527 14.3% 50,258 16.0% 50,839 17.4%
Amortization of intangible assets..assets .......... 122 0.0% 3,312 1.1% 3,297 1.0%
3,245Operating income ......................... 29,835 9.0% 26,371 8.4% 30,903 9.7%
Interest expense ........................... 15,907 4.8% 17,684 5.6% 17,950 5.6%
Foreign currency (gain) loss ............... (8,429) (2.6)% 4,948 1.6% 5,386 1.7%
Other expense .............................. 520 0.2% 743 1.2% 52 0.1%
Income before cumulative effect
of accounting change and income taxes .... 21,837 6.6% 2,996 1.0% 3,551 1.2%
Impairment charge .................7,515 2.4%
Cumulative effect of accounting
change for goodwill impairment ........... (29,207) (8.9)% -- -- -- --
7,863 2.7%
Operating income ................ 30,903 9.7% 32,750 10.4% 14,451 4.9%
Interest expense .................. 17,950 5.6% 17,453 5.6% 18,633 6.4%
Foreign currency (gain) loss ...... 5,386 1.7% 7,912 2.5% (4,995) (1.7%)
Income before income taxes ......................... (7,370) (2.2)% 2,996 1.0% 7,515 2.4% 5,395 1.7% 813 0.3%
Income tax provision (benefit) ............... 4,252 1.3% 602 0.2% (278) 0.1% 417 0.1% 903 0.3%(0.1)%
Net income (loss) .................................................. (11,622) (3.5)% 2,394 0.8% 7,793 2.4% 4,978 1.6% (90) 0.0%
14
17
RESULTS OF OPERATIONS
20002002 COMPARED TO 19992001
Net sales. Net sales for 20002002 were $318.8$329.8 million, representing an
increase of $4.7$15.7 million, or 1.5%5.0%, overcompared with net sales for 1999.2001. This
increase resulted primarily from increased sales to automotive OEMs of
approximately $14.5$12.9 million andprimarily resulting from increased salesproduction levels
of vehicles in North America compared to the aftermarket of $2.4 million. Partially offsettingprior year. Additionally, sales
were higher by $4.0 million due to an increase in average exchange rates for the
Company's increased sales volume was the effect of declining exchange ratesperiod between the U.S. Dollar and the currencies, primarily the European Euro,
used by the Company's foreign subsidiaries totaling $12.2subsidiaries. Partially offsetting these increases
was a decline in aftermarket sales of approximately $1.2 million. For example the average value of the
European Euro, the functional currency of Brink, as compared to the U.S. Dollar
declined by 13.4% during 2000 as compared to 1999 resulting in a similar
decrease in sales as reported in U.S. Dollars.
During the fourth quarter of 2000, the Company's sales to North
American OEM's were lower than expected as a result of several temporary plant
shut-downs. The shut-downs were instituted by the OEM's as a measure to reduce
inventory levels which had increased as a result of lower automotive sales
during the period.
Gross profit. Gross profit for 20002002 was $79.7$79.3 million, representing a
decreasean
increase of $6.5$4.8 million, or 7.6%6.5%, from the gross profit for 1999.2001. This increase
resulted from the increase in sales and an increase in the gross margin
percentage. Gross profit as a percentage of net sales was 25.0%24.0% in 20002002 compared
to 27.5%23.7% in 1999.2001. The decreaseincrease in the gross margin percentage is attributable to decreased
productivity for the North American OEM towing business related to a
reorganization of the manufacturing facility in order to better meet customer
delivery and quality requirements. Additionally, higher costs were incurred
during the year at the same facility due to an increase in outsourcing of
component parts. Brink had higher material costs during the year attributable to
increased cost of steel during the year as compared with that of 1999. The gross
profit percentage was also reduced due to proportionately lower sales for Brink
which has a greater gross margin percentage as compared with the Company as a
whole. Reduced sales for Brink areprimarily
attributable to the declineeffects of spreading fixed costs over a higher sales base
and increased gross margin for North American towing products resulting from
increased productivity and cost cutting efforts. These increases were partially
offset by reduced gross margin resulting from a change in the exchange
rate betweenmix of products
sold being weighted more towards lower margin products and lower production
efficiency at Brink which restructured its Netherlands manufacturing facilities
during the Dutch Guilder and the U.S. Dollar for 2000 compared with 1999.first quarter of 2002.
Selling, administrative and product development expenses. Selling,
administrative and product development expenses for 20002002 were $45.5$49.3 million,
representing a decreasean increase of $4.7$4.5 million, or 9.4%10.1%, compared withfrom the selling,
administrative and product development expenses for 1999. Selling,2001. This increase was
primarily the result of a $3.0 million expense recorded for the recall of the G
3.0 model removable towbar system at Brink and unexecuted transaction costs of
$1.2 million. In early July 2002, three European automotive OEM customers of
Brink Sweden recalled in total approximately 41,000 towbars, which were supplied
by the Company. The recall affects vehicles fitted with the G 3.0 model
removable towbar system sold between January 1999 and March 2000. During the
fourth quarter of 2002, based upon information gathered concerning the costs of
the recall and from discussions with its customers management estimated and
recorded an expense of approximately $3.0 million for the recall. The unexecuted
transaction expenses are associated with the negotiations with Castle Harlan to
purchase the Company. Without the effects of the recall and unexecuted
transaction expenses, selling, administrative and product development expenses
would have been $45.1 million representing an increase of $310,000. Also before
the effects of the recall and unexecuted transaction costs, selling,
administrative and product development expenses as a percentage of net sales decreased towas
13.7% compared with 14.3% in 2000 from 16.0% in 1999.for 2001. This decrease is partly due to a
decrease of an estimated liability related to a contingent obligation to a
customer totaling $1.9 million. The reduction was alsoprimarily attributable to
reduced
corporate expenditures including severance compensation recordedthe effect of covering fixed costs with greater sales, the Company's ongoing
cost containment initiatives and the lack in 2002 of costs incurred to relocate
a warehouse operation during the first quarter of 1999 related to2001.
Amortization of intangible assets. Amortization of intangible assets
for 2002 was $122,000, representing a decrease of $3.2 million compared with
amortization of intangible assets, which included amortization of goodwill, for
2001. This decrease was the departureresult of a new accounting standard adopted on
January 1, 2002, which ceased the Company's former Presidentamortization of goodwill as of that date. See
"New Accounting Pronouncements".
15
Operating income. Operating income for 2002 was $29.8 million, an
increase of $3.5 million, or 13.1%, over operating income for 2001, reflecting
the increase in gross profit and Chief Executive Officer and proportionately lower salesthe decrease in amortization of Brink which has
greaterintangible
assets partially offset by the increase in selling, administrative and product
development expenses as a percentage
of sales as compared with the Company as a whole. Offsetting the lower percent
were legal and accounting costs of approximately $900,000 related to a potential
recapitalization of the Company's equity securities during the year.
Operating income. Operating income for 2000 was $30.9 million, a
decrease of $1.8 million, or 5.6%, compared with operating income for 1999.expenses. Operating income as a percentage of net sales decreasedincreased to
9.7%9.0% in 20002002 from 10.4%8.4% in 1999. This decrease reflects the decrease in gross profit, partially
offset by the decrease in selling, general and product development expenses as a
percentage of net sales.2001.
Interest expense. Interest expense for 20002002 was $18.0$15.9 million, an
increase of $497,000 fromwhich
was $1.8 million lower than interest expense for 1999.2001. The increase isdecrease was due to
interest costs totaling $450,000 recorded for an estimated contingent legal
liability which is more fully discussed below in the discussion of other
expense. The effect of reducedlower average borrowings during 2000 as compared with
1999 was offset by higher interest rates charged on the Company's variable rate indebtedness.indebtedness
and reduced average borrowings.
Foreign currency (gain) loss. Foreign currency lossgain in 20002002 was $5.4$8.4
million, compared to a foreign currency loss of $7.9$4.9 million in 1999.2001. The
Company's foreign currency lossgain is primarily related to Brink which has
indebtedness denominated in U.S. Dollars.Dollars, including intercompany debt and a
portion of the loans under the Company's Second Amended and Restated Credit
Agreement. During 20002002 the U.S. Dollar strengthenedweakened significantly in relation to the
European Euro, the functional currency of Brink. At December 31, 1999, the exchange rate of the European Euro toBrink, whereas during 2001, the U.S.
Dollar was 0.99:1, whereas at December 31, 2000 the exchange rate was 1.06:1, or
a 7.1% declinestrengthened in the relative value of the Euro during the period. In 1999, the
relationship between the two currencies was more volatile. At December 31, 1998,
the exchange rate ofrelation to the European Euro toEuro. This was partially offset
by the foreign currency loss of SportRack Accessories which has intercompany
indebtedness denominated in U.S. Dollars. During 2002 the U.S. Dollar
was 0.85:1, whereas at
December 31, 1999strengthened in relation to the exchange rate was 0.99:1, or a 16.5% decline inCanadian Dollar, the relative valuefunctional currency of
the Euro.
Other expense. In February 1996, the Company commenced an action
against certain individuals alleging breach of contract under the terms of an
October 1992 Purchase Agreement and Employment Agreement with the predecessor of
the Company. The individuals then filed a separate lawsuit against the Company
alleging breach of contract under the respective Purchase and Employment
agreements. On May 7, 1999, a jury in the United States District Court for the
Eastern District of Michigan reached a verdict against the Company and awarded
the individuals approximately $3.8 million plus interest and reasonable attorney
fees. The Company plans to file an appeal once a judgment is made by the court.
During the First quarter of 1999, the Company increased its estimated accrual
for this matter by $2.0 million which charge is included in other expense. No
amounts have been paid as of December 31, 2000.
15
18SportRack Accessories.
Provision (benefit) for income taxes. The Company and certain of its
domestic subsidiaries have elected to be taxed as limited liability companies
for federal income tax purposes. As a result of this election, the Company's
domestic taxable income accrues to the individual members. Certain of the
Company's domestic subsidiaries and foreign subsidiaries are subject to income
taxes in their respective jurisdictions. During 2000,2002, the Company recorded a tax
provision amounting to $263,000 related to an ongoing income tax audit in Italy
covering the periods 1998 to 2001. During 2002, the Company had a lossincome before
income taxes for its taxable subsidiaries totaling $3.0$8.1 million and recorded a
benefitprovision for income taxes of $278,000.$4.0 million exclusive of the $263,000 provision
related to the income tax audit. The effective tax rate differs from the U.S.
federal income tax rate primarily due to changes in valuation allowances on the
deferred tax assets of SportRack Accessories recorded during 2002 and
differences in the tax rates of foreign countries. During 1999,2001, the Company had
a loss before income taxes for its taxable subsidiaries totaling $5.6$3.2 million
and recorded a provision for income taxes of $403,000.
Net income.$602,000. The provision in 2001
resulted primarily from the pretax income of Brink which was offset by the
pretax losses of SportRack Accessories. The tax benefit of SportRack Accessories
was offset by the increase in the valuation allowance recorded against the tax
assets of the subsidiary.
Cumulative effect of accounting change. On January 1, 2002, the Company
adopted the accounting standards set forth in Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets" (SFAS 142). See "New
Accounting Pronouncements". As a result of this accounting change, the Company
recorded a loss totaling $29.2 million to write down goodwill recorded in
connection with the Valley Industries Acquisition.
Net income (loss). Net loss for 20002002 was $7.8$11.6 million, as compared to
net income of $5.0$2.4 million in 1999, an increase2001, a change of $2.8$14.0 million. The change in net
incomeloss is primarily attributable to decreasesthe cumulative effect of accounting change due
to the adoption of SFAS 142 and the increase in the provision for income taxes,
offset partially by the increase in operating expenses,income, lower interest expense and
the foreign currency losses and other expense offset by a decreasegain in gross profit.
Other. During the second quarter of 2000 one of the Company's
significant OEM customers recalled approximately 380,000 trucks to replace or
reinforce their trailer hitches, which were supplied by the Company. The recall
affects 1998-2000 model year vehicles built between January 1998 and September
1999. The Company worked2002 as compared with the customer to provide technical and other
supportforeign currency loss in
response to the recall. Management can not estimate at this time what
the financial impact will be to the Company, if any, as a result of the recall.
19992001.
2001 COMPARED TO 19982000
Net Sales.sales. Net sales for 19992001 were $314.1$314.0 million, representing an
increasea
decrease of $22.0$4.8 million, or 7.5%1.5%, overfrom net sales for 1998.2000. This increasedecrease
resulted from increaseddecreased sales to OEM'sOEMs of approximately $10.1$4.2 million and
increased aftermarket sales of $10.9 million. Increased OEM sales are
attributable to higher production volumes by the OEM's on the Company's existing
programs. Increases in aftermarket sales are primarily attributable to new
customers in the retail market and new business with an existing customer in the
installer business. Offsetting the Company's increased sales volume is a
decrease of approximately $3.1 million related to the
effect of declining exchange rates between the U.S. Dollar and the currencies
used by the Company's foreign subsidiaries.subsidiaries totaling $2.1 million. The North
American OEMs reduced vehicle production beginning in the fourth quarter of 2000
and continuing in 2001 in response to lower sales of new vehicles in the North
American automotive market, resulting in an approximately $9.0 million decrease
in sales. Sales were also reduced by approximately $6.0 million as a result of
price decreases given to the Company's OEM customers during 2001. Additionally,
in efforts to reduce overall vehicle cost, certain of the Company's customers
reduced or eliminated certain components of their vehicles, including products
manufactured by the Company, resulting in an approximately $6.0 million decrease
in sales. These decreases were partially offset by approximately $17.0 million
in sales of new products for new vehicles introduced during 2001 and higher
sales to the automotive aftermarket totaling $1.4 million
Gross Profit.profit. Gross profit for 19992001 was $86.3$74.5 million, representing an
increasea
decrease of $9.5$5.3 million, or 12.4%6.6%, overfrom the gross profit for 1998. This
increase resulted from the increase in net sales.2000. Gross profit
as a percentage of net sales was 27.5%23.7% in 19992001 compared to 26.3%25.0% in 1998.2000. The
increasedecrease in the gross margin percentage was primarily attributable to price
reductions given to the Company's largest customer which were only partially
offset by internal cost reductions. Additionally, the Company's North American
OEM towing business continued to experience reduced productivity during 2001.
The gross profit percent resulted primarily frompercentage was also reduced material costs, primarily
steel,due to proportionately lower sales
for Brink which has a greater gross margin percentage as compared with the
Company as a whole. Reduced sales for Brink are attributable to the decline in
the exchange rate between the European Euro and the effect of higher net sales on fixed overhead costs.U.S. Dollar for 2001
compared with 2000.
16
Selling, administrative and product development expenses. Selling,
administrative and product development expenses for 19992001 were $50.3$44.8 million,
representing a decrease of $581,000,$758,000, or 1.1%1.7%, overcompared with the selling,
administrative and product development expenses for 1998.2000. The decrease resulted
from an approximately $633,000 reduction in corporate administrative expenses,
lower sales at Brink, which has greater selling, administrative and product
development expenses as a percentage of sales compared to the Company as a
whole, and the lack of approximately $900,000 of legal and accounting costs
incurred in 2000 related to a potential recapitalization of the Company's equity
securities during the year, partially offset by the lack of the $1.9 million
benefit recognized in 2000 related to a contingent obligation to a customer.
Selling, administrative and product development expenses as a percentage of net
sales decreased to 16.0%was 14.3% in 1999
from 17.4%2001 and 2000.
Operating income. Operating income for 2001 was $26.4 million, a
decrease of $4.5 million, or 14.7%, compared with operating income for 2000. The
decrease in 1998. Thisoperating income reflects the decrease resulted primarily fromin gross profit partially
offset by the effect of higher
net sales on fixed costs, decreaseddecrease in selling, administrative and product development
expenses of SportRack International resulting from the restructuring
of the subsidiary's operations during the fourth quarter of 1998 and the
restructuring charges (as further discussed below) related to the operations of
SportRack Accessories incurred in 1998.
Operating income. Operating income for 1999 was $32.8 million, an
increase of $18.3 million, or 126.6%, over operating income for 1998. In
addition to the increase in net sales, this increase was due to an impairment
and restructuring charge in 1998. Excluding the impairment and restructuring
charges, operating income in 1998 would have been $24.2 million and there would
have been an increase in operating income during 1999 of $8.6.expenses. Operating income as a percentage of net sales increaseddecreased to 10.5%8.4% in
19992001 from 8.3%9.7% in 1998,
excluding2000 due primarily to the impairment and restructuring charge. This increase reflects the
increase in gross profit, and decrease in selling, general and product
development expenses as a percentage of net sales.the gross margin
percentage.
Interest expense. Interest expense for 19992001 was $17.5$17.7 million, a
decrease of $1.2 million, or 6.3%, compared to$266,000 from interest expense for 1998. The
decrease was primarily due to2000. Lower average indebtedness
and lower outstanding senior indebtedness attributable
to scheduled principal payments made during 1999 partially offset by higher
average line of credit borrowings during 1999 as compared with 1998, and higher interest rates on the Company's variable rate debt.debt were partially
offset by $342,000 of bank fees related to amending the Second Amended and
Restated Credit Agreement and $150,000 more interest recorded in 2001 than 2000
for an estimated contingent legal liability, see Item 3 "Legal Proceedings".
Foreign currency (gain) loss. Foreign currency loss in 19992001 was $7.9$4.9 million,
compared to a foreign currency gainloss of $5.0$5.4 million in 1998.2000. The Company's
foreign currency loss isduring 2001 was primarily related to Brink and SportRack
Accessories, each of which hashave indebtedness, including intercompany
indebtedness, denominated in U.S. Dollars. During 19992001 and 2000, the U.S. Dollar
strengthened significantly in relation to the European Euro, the functional
currency of Brink. At December 31, 1998, the exchange rate of the European Euro
toThe U.S. Dollar strengthening was less significant during
2001 than 2000. Additionally, the U.S. Dollar was 0.85:1, whereas at December 31, 1999strengthened significantly in
relation to the exchange rate
was 0.99:1, or a 16.5% decline inCanadian Dollar, the relative valuefunctional currency of SportRack
Accessories.
Other expense. Other expense for 2001 consists primarily of losses on
the Euro.
16
19disposal of property and equipment.
Provision (benefit) for income taxes. The Company and certain of its
domestic subsidiaries have elected to be taxed as limited liability companies
for federal income tax purposes. As a result of this election, most of the
Company's domestic taxable income accrues to the individual members. Certain of
the Company's domestic subsidiaries and foreign subsidiaries are subject to
income taxes in their respective jurisdictions. During 1999,2001, the Company had a
loss before income taxes for its taxable subsidiaries totaling $5.6$3.1 million andbut
recorded a provision for income taxes of $417,000.$602,000. The provision resulted
primarily from the pretax income of Brink which was offset by the pretax losses
of SportRack Accessories. The tax benefit for SportRack Accessories was offset
by the increase in the valuation allowance recorded against the tax assets of
the subsidiary. Additionally, the effective tax rate differs from the U.S.
federal income tax rate primarily due to changes in valuation allowances on
the deferred tax assets of SportRack International recorded during 1999,
non-deductible goodwill and differences in the tax rates of foreign
countries. During 1998,2000, the Company had a loss before income taxes for its
taxable subsidiaries totaling $9.2$3.0 million and recorded a provisionbenefit for income
taxes of $903,000.$278,000.
Net income. Net income for 19992001 was $5.0$2.4 million, as compared to net
income of $7.8 million in 2000, a net
lossdecrease of $90,000 in 1998, an increase of $5.1$5.4 million. The change in net
income is primarily attributable to increasedthe decrease in operating income decreased interest
expense and
decreased provision for incomeincreases in other expenses and taxes, partially offset by athe decrease in
foreign currency loss in 1999 compared with the foreign currency gain during 1998.
NORTH AMERICAN AUTOMOTIVE INDUSTRY
During the later part of 2000, sales in the North American automotive
industry began to decline and some of the Company's major customers adjusted
production in the 4th quarter of 2000 to reduce their inventory of unsold
vehicles. This lowering of production negatively impacted the Company's sales
during the 4th quarter of 2000. This trend has continued during the early part
of 2001.
It is anticipated that U.S. auto sales for 2001 will be in the range of 15.5
million to 16.5 million vehicles, down from 17.4 million vehicles in 2000.
In addition, DaimlerChrysler, the Company's largest customer, incurred
substantial losses at its North American, Chrysler Group. During the first
quarter of 2001, DaimlerChrysler announced a restructuring plan to return the
Chrysler Group to profitability in 2002. This restructuring plan includes the
reduction of 26,000 employees and a 15% reduction in material cost by 2003.
Effective January 1, 2001, the Company agreed to reduce prices on products sold
to DaimlerChrysler and has been able to partially offset these price reductions
through reductions in its material costs. The Company continues to work with
DaimlerChrysler to help identify other potential cost savings.losses.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal liquidity requirements are to service its debt and
meet its working capital and capital expenditure needs. The Company's
indebtedness at December 31, 20002001 was $175.6$154.9 million, including current
maturities of $11.8$18.2 million. The Company expects to be able to meet its
liquidity requirements through cash provided by operations and through
borrowings available under the Second Amended and Restated Credit Agreement
("U.S. Credit Facility"). or a replacement facility which the Company plans to
negotiate on or prior to October 30, 2003.
17
Working Capital and Cash Flows
Working capital and key elements of the consolidated statement of cash flows
are:
2002 2001 2000
1999 1998
------------------- ------------------- --------------------------- -------- --------
(IN THOUSANDS)
Working Capital................capital ...................... $ 34,79120,954 $ 36,82523,380 $ 46,37034,791
Cash flows provided by operating
activities...................activities ......................... 21,004 27,651 21,416 25,014 21,879
Cash flows (used for)used for investing
activities...................activities ......................... (15,354) (7,580) (13,249) (11,775) (31,618)
Cash flows provided by (used
for)used for financing
activities....activities ......................... (5,526) (20,389) (14,982) (18,185) (8,367)
Working Capital
Working capital decreased by $2.0$2.4 million to $34.7$21.0 million at December
31, 20002002 from $36.8$23.4 million at December 31, 19992001. This decrease was due
primarily to a decrease in inventory of $2.0 million, a change in current
deferred tax assets and liabilities of $1.5 million, an increase in accrued
liabilities of $6.2 million, an increase in accounts payable of $2.5 million, an
increase in the current portion of long term debt of $7.2 million and an
increase in mandatorily redeemable warrants of $120,000. These working capital
decreases were partially offset by an increase in cash and accounts receivable of $5.4$4.4
million, an increase of $8.5 million in other current assets, an increase in
cash of $514,000 and $3.4 million, respectively, and
decreases attributablean increase related to the decline of theforeign currency exchange rates between the
functional currenciesrate of
the Company's foreign subsidiariessubsidiaries' functional currencies against the U.S. Dollar totaling $400,000. These decreases were offset by increases in inventory
and other current assetsdollar of
$4.1$6.1 million
and $1.5 million, respectively, and
decreasesThe increase in accounts payable and accrued liabilities of $199,000 and $763,000,
respectively, and a decrease in the current maturities of long-term debt of
$638,000.
Cash decreased by $5.4 millionreceivable was attributable to $3.3 million at December 31, 2000 from
$8.7 million at December 31, 1999 primarily due to investing and financing
activities of $13.2 million and $15.0 million, respectively, offset by cash
provided by operating activities of
17
20
$21.0 million. Accounts receivable decreased primarily as a result of a
reduction inincreased sales
levels duringin the fourth quarter of 20002002 as compared with the fourth quarter of 1999. This2001
and to a difference in the timing of a payment from the Company's second largest
OEM customer. Differences in sales decline waslevels between the two quarters are partly
due to increased sales to automotive OEMs. Increases in accounts payable during
the quarter reflected increased purchasing activities to support the increased
sales volume. Inventory decreased primarily at Brink and Valley which sold
product out of inventory during a plant reorganization in the Netherlands.
Accrued liabilities increased as a result of an increase of $2.9 million in
accrued expenses for the G 3.0 recall, by $2.7 million in accrued income taxes
and by $1.0 million for accrued unexecuted transaction costs. Other current
assets increased primarily due to reduced sales toan increased amount of tooling costs
reimbursable from the Company's North American OEM's during the period as they reduced production schedules and
closed several plants on a temporary basis to correct for their growing
inventory levels and to adjust for a slowing automotive sales market. This trend
continued in the first quarter of 2001. The increase in inventory is primarilyOEM customers related to a greater quantity of hitches on hand to ensure timely delivery to
OEM and aftermarket customers and reflecting an increased cost per hitch
attributable to lower productivity levels. The increase in other current assets
is primarily related to increased investment in customer reimbursable tooling
reflecting a greater number of new
productsprograms currently under development as of December 31,
2000 as compared with 1999.and for advances receivable under an
operating lease at Brink.
Operating Activities
Cash flow provided by operating activities for 20002002 was $21.4$21.0 million,
compared to $25.0$27.7 million in 19992001 and $21.9$21.4 million in 1998. Cash flow for 2000
decreased from 1999 due to an increased investment in working capital and
non-current assets and the declining exchange rate between the U.S. Dollar and
the functional currency of the Company's foreign subsidiaries.2000. Cash flow provided
by operating activities increased in 1999for 2002 decreased from that of 19982001 primarily due to improved operating performance for the year and lowera smaller
decrease in working capital during 2002 and a net investment in noncurrent
assets in 2002 (compared to a decrease in noncurrent assets in 2001), partially
offset by higher income in 2002 (before depreciation and amortization, deferred
taxes, foreign currency gains and losses, loss on disposal of assets, and the
cumulative effect of the accounting change for the
year.goodwill impairment). Cash flow
for 2001 increased from 2000 primarily due to a net decrease in working capital
investment during 2001.
The Company's European and Canadian subsidiaries have income tax net
operating loss carryforwards ("NOLs") of approximately $7.3$1.6 million and $10.8$2.4
million, respectively, at December 31, 2000.2002. The European NOLs have no
expiration date and the Canadian NOLs expire in 20042005 through 2007.2008. Management
believes that it is more likely than not that a portion of the deferred tax
assets of the Canadian subsidiaries will not be realized and a valuation
allowance of $4.9$2.8 million has been recorded against such assets. No valuation
allowance has been recorded for the European NOLs as it is management's belief
that it is more likely than not that the related deferred tax asset will be
realized.
Investing Activities
Investing cash flows include acquisitions of property and equipment of $15.4
million, $7.6 million and $10.4 million $11.8in 2002, 2001 and 2000, respectively.
Capital expenditures for 2002 include approximately $9.0 million for a new
production facility constructed in France during the year. The facility replaced
a former factory also in France. The move from the old facility occurred in
October 2002 and $10.0 million in 2000, 1999 and 1998, respectively.the plant is currently ramping up to full production capacity.
The higherlower capital expenditures during 1999 was primarily due2001 reflected a reduced need to increase
production capacity and management's efforts to increase the expansionproductivity of
the Company's manufacturing facility in Shelby Township, Michigan to
accommodate increased manufacturing capacity needs for new and existing OEM roof
rack programs.equipment. The Company estimates that capital expenditures for 20012003
will be approximately $11.0 million, primarily for the expansion of capacity,
productivity and process improvements and maintenance. The Company's 20012003
capital expenditures are anticipated to be paid for from cash flow
18
provided by operating activities or borrowings against the Company's revolving
notes and include approximately $5.0$4.0 million for replacing and upgrading
existing equipment. The Company's ability to make capital expenditures is
subject to restrictions in the Amended and RestatedU.S. Credit Agreement,Facility, including a maximum of
$12.5 million of capital expenditures annually.annually plus the amount that capital
expenditures were less than $12.5 million in the preceding year. Maximum capital
expenditures for 2002 was $17.4 million.
Investing cash flows in 2000 and 1998 include $2.8 million and $22.8
million, respectively, for the acquisitions of
Titan and Barrecrafters during
2000Barrecrafters.
Financing Activities
During 2002, financing cash flows included payments of principal on the
Company's term indebtedness of $13.4 million, net borrowing of $5.6 million on
the Company's revolving line of credit, borrowing against a new capital lease
for the new plant in France of $5.6 million and distributions to members in
amounts sufficient to meet the acquisitionstax liability of the EllebiCompany's domestic taxable
income which accrues to individual members totaling $3.4 million.
During 2001, financing cash flows included payments of principal on the
Company's term indebtedness of $11.7 million, net payments of $8.3 million on
the Company's revolving line of credit and Tranfo-Rakzs during 1998.
Financing Activitiesdistributions to members in amounts
sufficient to meet the tax liability on the Company's domestic taxable income
which accrues to individual members totaling $801,000.
During 2000, financing cash flows included net borrowings on the Company's
revolving line of credit totaling $11.3 million offset by payments of principal
on the Company's term indebtedness of $13.9 million, distributions to members in
amounts sufficient to meet the tax liability on the Company's domestic taxable
income which accrues to individual members totaling $6.1 million and repurchase
of membership units of $6.4 million. Principal payments included $12.5 million
in scheduled repayments and a $1.4 million mandatory prepayment required as a
result of the Company having excess cash flows during 1999 as defined by the
Second Amended and RestatedU.S. Credit Agreement.
During 1999, financing cash flows included payments of principal on the
Company's term indebtedness of $9.3 million, distributions to members in amounts
sufficient to meet the tax liability on the Company's domestic taxable income
which accrues to individual members totaling $4.7 million and repurchase of
membership units of $4.3 million. Principal payments included $5.9 million in
scheduled repayments and a $3.4 million mandatory prepayment required as a
result of the Company having excess cash flows during 1998 as defined by the
Second Amended and Restated Credit Agreement. Repurchase of membership units
included repurchases from the Company's former Chief Executive Officer of $4.3
million.
During 1998, financing cash flows were primarily limited to scheduled
payments of principal on the Company's term indebtedness of $3.7 million and net
repayments of borrowings under the Company's revolving loans of $4.5 million.
18
21Facility.
Debt and Credit Sources
Borrowings under the Company's U.S. Credit Facility and the Company's First
Amended and Restated Credit Agreement ("Canadian Credit Facility") bear interest
at floating rates, which require interest payments on varying dates depending on
the interest rate option selected by the Company. Under the terms of these
credit facilities, the Company will be required to make principal payments
totaling approximately $11.8 million in 2001, $10.1 million in 2002, $20.5$17.6 million in 2003 and $8.7$6.4 million in 2004. On
December 15, 2001, the Company entered into Amendment No. 9 to the U.S. Credit
Facility which reset certain financial covenants for fiscal years 2001 and 2002
and provided the Company with additional liquidity by adding a conditional
supplemental revolving loan facility of up to $10.0 million which is available
until March 31, 2003. The Notes bear interest at 9.75% which is payable
semiannually in arrears. See "Note 4"3" to the Company's "Consolidated Financial
Statements" for additional information regarding the U.S. Credit Facility, the
Canadian Credit Facility and the Senior Subordinated Notes.
On October 30, 2003 the U.S. Credit Facility and the Canadian Credit
Facility will expire. The Company plans to negotiate a replacement facility on
or before that date.
The Company's indebtedness was $154.9 million at December 31, 2002. The
Company expects that its primary sources of cash will be from operating
activities and borrowings under the U.S. Credit Facility and Canadian Credit
Facility, each of which provide the Company with revolving notes. As of December
31, 2000,2002, the Company had $11.3$8.6 million borrowed under the revolving note of the
U.S. Credit Facility and had an outstanding letterletters of credit of $6.4 million.$8.3 million
issued to benefit plaintiffs in a lawsuit against the Company and $800,000
provided as security for the Company's workers compensation benefit program in
North America. For a description of the Company's contingent obligations with
respect to that lawsuit, see Item 3 "Legal Proceedings". After the above items,
the Company had $17.3 million of available borrowing capacity. No amounts were
borrowed under the revolving note of the Canadian Credit Facility.
Available borrowing capacity underFacility or the
conditional supplemental revolving notes was $7.3 million As of
December 31, 2000.note. Future acquisitions, if any, may
require additional third party financing and there can be no assurances that
such funds would be available on terms satisfactory to the Company, if at all.
As announced on March 14, 2003 the Company and Castle Harlan, a private
equity investment firm, are in the latter stages of negotiations regarding the
purchase of the Company by affiliates of Castle Harlan. Consummation of the sale
would be contingent upon satisfaction of customary legal and business
conditions, including, among other things, Castle Harlan's obtaining sufficient
third party debt financing to complete the transaction. Any definitive
transaction is expected to involve a redemption of the Company's outstanding
9 3/4% Senior Subordinated Notes due 2007 at the current optional redemption
price of 104 7/8% of principal amount, plus accrued interest.
19
The Company's ability to satisfy its debt obligations will depend upon its
future operating performance, which will be affected by prevailing economic
conditions and financial, business, and other factors, certain of which are
beyond its control, as well as the availability of revolving credit borrowings
under the AmendedU.S. Credit Facility and Restatedthe Canadian Credit AgreementFacility or a successor
facility.facilities. The Company anticipates that, based on current and expected levels
of operations, its operating cash flow, together with borrowings under the U.S.
Credit Facility and the Canadian Credit Facility, should be sufficient to meet
its debt service, working capital and capital expenditure requirements for the
foreseeable future, although no assurances can be given in this regard,
including as to the ability to increase revenues or profit margins. If the
Company is unable to service its indebtedness, it will be forced to take actions
such as reducing or delaying acquisitions and/or capital expenditures, selling
assets, restructuring or refinancing its indebtedness, or seeking additional
equity capital. There is no assurance that any of these remedies can be effected
on satisfactory terms, if at all, including, whether, and on what terms, the
Company could raise equity capital. See "Forward Looking Statements". and the
introductory paragraph of this Item 7.
The Company conducts operations in several foreign countries including
Canada, The Netherlands, Denmark, the United Kingdom, Sweden, France, Germany,
Poland, Spain, the Czech Republic and Italy. Net sales from international
operations during 20002002 were approximately $96.7$98.6 million, or 30.3%29.9% of the
Company's net sales. At December 31, 2000,2002, assets associated with these
operations were approximately 38.4%46.7% of total assets, and the Company had
indebtedness denominated in currencies other than the U.S. dollar of
approximately $7.5$1.9 million.
The Company's international operations may be subject to volatility because
of currency fluctuations, inflation and changes in political and economic
conditions in these countries. Most of the revenues and costs and expenses of
the Company's operations in these countries are denominated in the local
currencies. The financial position and results of operations of the Company's
foreign subsidiaries are measured using the local currency as the functional
currency. Certain of the Company's foreign subsidiaries have debt denominated in
currencies other than their functional currency. As the exchange rates between
the currency of the debt and the subsidiaries functional currency change, the
Company is subject to foreign currency gains and losses.
The Company may periodically use foreign currency forward option contracts
to offset the effects of exchange rate fluctuations on cash flows denominated in
foreign currencies. The Company has no outstanding foreign currency forward
options at December 31, 20002002 and does not use derivative financial instruments
for trading or speculative purposes.
CRITICAL ACCOUNTING POLICIES
The Company prepared its financial statements in conformity with accounting
principles generally accepted in the Unites States of America. In this process,
it is often necessary for management to select accounting policies and make
estimates about matters that are inherently uncertain. Estimates are developed
using various methods and by making certain assumptions and require management
to make subjective and complex judgments. Variations in these accounting
policies and estimates can significantly affect the amounts reported in the
consolidated financial statements and the attached notes. These methods and
assumptions have been developed based upon available information. However actual
results can differ from assumed and estimated amounts.
The significant accounting polices applied in preparing the Company's
financial statements are described in Note 1 to the financial statements.
Policies which are considered critical are described below.
Impairment of Long-Lived Assets. Management evaluates the potential
impairment of long-lived assets on an ongoing basis or whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. At that time, a comparison is made between estimated future cash
flows expected to result from the use of the asset and its eventual disposition
and the carrying value of the asset. Future cash flows are estimated using
current and forecasted revenues, projected profit margins and the current and
expected future economic environment. Impairments of long-lived assets may be
reported if the facts and circumstances surrounding assumptions made in
developing estimates of future cash flows were to change. The Company changed
its methodology for assessing goodwill impairments beginning on January 1, 2002,
see "New Accounting Pronouncements".
Contingent obligations and losses. The Company is subject to various
contingent obligations and losses including contingent legal obligations, see
Item 3. "Legal Proceedings". The Company establishes reserves for contingent
obligations and losses when information concerning an obligation or loss
indicates that it is probable that an asset had been impaired or a liability had
been incurred provided that the amount of the loss can be reasonably estimated.
Estimates of the cost are derived using known and assumed facts related to the
specific circumstances surrounding each obligation. Management reviews and
updates these estimates periodically. The ultimate cost of the Company's
contingent obligations may be greater or less than the established accruals and
could have a material impact upon the Company's financial position, results
of operations or cash flows.
20
Workers compensation expense. The Company establishes accruals for workers'
compensation claims utilizing actuarial methods to estimate the undiscounted
future cash payments that will be made to satisfy the claims. The estimates are
based both on historical experience, industry trends and current legal, economic
and regulatory factors. The ultimate cost of these claims may be greater than or
less than the established accrual and could have a material impact upon the
Company's financial position and results of operations.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998,November 2002, the Financial Accounting Standards Board issued
Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others (FIN 45).
FIN 45 provides guidance on the disclosures to be made by a guarantor in its
interim and annual financial statements about its obligations under certain
guarantees that it has issued and also clarifies that a guarantor is require to
recognize, at the inception for a guarantee, a liability for the fair value of
the obligation undertaken in issuing the guarantee. The recognition and
measurement provisions of FIN 45 are not expected to have a material effect on
the Company's financial position, results of operations or cash flows.
On January 1, 2002, the Company adopted the accounting standards set forth
in Statement of Financial Accounting Standards No. 133,142, "Goodwill and other
Intangible Assets" ("SFAS 142") and Statement of Financial Accounting Standards
No. 144, "Accounting for Derivative Instruments
and Hedging Activities"the Impairment or Disposal of Long-Lived Assets" ("FAS 133"SFAS
144"). SFAS 142 changed the methodology for assessing goodwill impairments. The
Company adoptedinitial application of this statement atresulted in an impairment of goodwill of
$29.2 million to write down goodwill related to the beginningValley Industries
Acquisition. The impairment was due solely to the change in accounting standards
and was reported as a cumulative effect of fiscal 2001. This pronouncementaccounting change. Under the new
standard, impairment is determined by comparing the carrying values of reporting
units to the corresponding fair values, which are determined based on the
discounted estimated future cash flows of the reporting units. As the impairment
related to Valley Industries, LLC for which taxable income accrues to the
individual members, no tax effect was recorded for this charge. Additionally,
under the new standard, goodwill is no longer amortized but is to be tested
periodically for impairment. The effect of no longer amortizing goodwill
resulted in a reduction of $3.0 million in amortization of intangible assets
during 2002 as compared with each of 2001 and 2000. The adoption of SFAS 144 did
not expected to have a material impact on the Company's financial position, results of
operations.
19
22operations or cash flows.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to certain market risks which exist as a part of its
ongoing business operations. Primary exposures include fluctuations in the value
of foreign currency investments in subsidiaries, volatility in the translation
of foreign currency earnings to U.S. Dollars, indebtedness, including
intercompany indebtedness, of foreign subsidiaries denominated in currencies
other then their functional currency and movements in Federal Funds rates and
the London Interbank Offered Rate ("LIBOR"). The Company, uses
derivative financial instruments, where appropriate, to manage these risks. The
Company, as a matter of policy,
does not engage in trading or speculative transactions.
The table below provides information about the Company's financial
instruments that are sensitive to changes in interest rates, which consist of
debt obligations. The table presents principal cash flows and related weighted
average interest rates by expected maturity dates. Intercompany indebtedness is
due on demand and is therefore shown as maturing in 2003. Weighted average
variable rates are based on current rates. The information is presented in U.S.
dollar equivalents, which is the Company's reporting currency. The instrument's
actual cash flows are denominated in U.S. dollars ($US) and Canadian dollars
($CAN), as indicated in parentheses.
21
DECEMBER 31, 2002
EXPECTED MATURITY DATE
------------------------------------------------------------------------
2003 2004 2005 2006 2007 THEREAFTER FAIR VALUE
-------- -------- -------- -------- -------- ---------- ----------
($US EQUIVALENT IN THOUSANDS)
Fixed Rate ($US) $ 54 $ 129 $ 64 $ 59 $ -- $125,000 $118,750
Average interest rate 7.0% 7.0% 7.0% 7.0% -- 9.75%
Fixed Rate (Euro) $ 286 $ 299 $ 299 $ 299 $ 299 $ 1,507 $ 2,989
Average interest rate 5.21% 5.21% 5.21% 5.21% 5.21% 5.21%
Variable Rate ($US) $ 15,595 $ 6,356 $ -- $ -- $ -- $ -- $ 21,951
Average interest rate 5.47% 5.47% -- -- -- --
Variable Rate (Euro) $ 286 $ 299 $ 299 $ 299 $ 299 $ 1,507 $ 2,989
Average interest rate 4.96% 4.96% 4.96% 4.96% 4.96% 4.96%
Variable Rate ($CAN) $ 1,946 $ -- $ -- $ -- $ -- $ -- $ 1,946
Average interest rate 5.25% -- -- -- -- --
Intercompany indebtedness
denominated in currency
other than the functional
currency (Euro) $ 76,548 $ -- $ -- $ -- $ -- $ -- 76,548
Average interest rate 4.25% -- -- -- -- --
Intercompany indebtedness
denominated in currency
other than the functional
currency ($CAN) $ 23,784 $ -- $ -- $ -- $ -- $ -- 23,784
Average interest rate 4.25% -- -- -- -- --
DECEMBER 31, 2001
EXPECTED MATURITY DATE
------------------------------------------------------------------------
2002 2003 2004 2005 2006 THEREAFTER FAIR VALUE
-------- -------- -------- -------- -------- ---------- ----------
($US EQUIVALENT IN THOUSANDS)
Fixed Rate ($US) $ 103 $ 102 $ 76 $ 62 $ 56 $125,000 $104,149
Average interest rate 7.0% 7.0% 7.0% 7.0% 7.0% 9.75%
Variable Rate ($US) $ 8,341 $ 10,073 $ 8,654 $ -- $ -- $ -- $ 27,041
Average interest rate 5.79% 5.79% 5.79% -- -- --
Variable Rate ($CAN) $ 2,579 $ 1,930 $ -- $ -- $ -- $ -- $ 4,509
Average interest rate 4.75% 4.75% -- -- -- --
Intercompany indebtedness
denominated in currency
other than the functional
currency (Euro) $ 30,650 $ -- $ -- $ -- $ -- $ -- $ 30,650
Average interest rate 7.08% -- -- -- -- --
Intercompany indebtedness
denominated in currency
other than the functional
currency ($CAN) $ 28,866 $ -- $ -- $ -- $ -- $ -- $ 28,866
Average interest rate 7.08%
The changes from 2001 to 2002 are primarily due to the Company's repayment
of approximately $13.4 million of term indebtedness, and net borrowings of
approximately $5.6 million of revolving loans and approximately $5.6 million
against a new capital lease financing in connection with the Company's new plant
in France.
The table below provides information about the Company's financial
instruments and foreign currency earnings by functional currency and presents
such information in U.S. dollar equivalents. The table summarizes information on
instruments, consisting of foreign currency investments in subsidiaries, and
foreign currency earnings that are sensitive to foreign currency exchange rates.
The Company has foreign currency investments in other currencies that are not
included in the table since they are not material. For foreign currency
investments, the table presents the amount invested (translated into U.S.
dollars at year-end exchange rates) and identifies the currency of the
investment and the exchange rate. For foreign currency earnings, the table
presents the amount of earnings (translated from the functional currency into
U.S. dollars at the average exchange rate for the year) and identifies the
functional currency and the exchange rate.
22
DECEMBER 31,
-----------------------
2002 2001
-------- --------
($US EQUIVALENT IN THOUSANDS)
Foreign Currency Investments In Subsidiaries
(U.S.$ functional currency)
Euro 10,660 8,949
Exchange Rate 1.05 0.89
$CAN 7,872 --
Exchange Rate 0.63 --
Foreign Currency Earnings (Losses)
Euro Functional Currency 8,340 349
Exchange Rate .94 0.89
$CAN Functional Currency (1,104) (4,082)
Exchange Rate .64 0.64
23
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Accountants........................................................................... 21Accountants ......................................... 25
Consolidated Balance Sheets -- December 31, 20002002 and 1999................................................... 222001 ................. 26
Consolidated Statements of Operations -- Years Ended December 31, 2002,
2001 and 2000 1999 and 1998....................... 23........................................................... 27
Consolidated Statements of Cash Flows -- Years Ended December 31, 2002,
2001 and 2000 1999 and 1998....................... 24........................................................... 28
Consolidated Statements of Changes in Members' Equity -- Years Ended
December 31, 2002, 2001 and 2000 1999 and 1998....... 25........................................ 29
Notes to Consolidated Financial Statements.................................................................. 26Statements ................................ 30
2024
23
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Managers
and Members of
Advanced Accessory Systems, LLC
In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects, the financial position of
Advanced Accessory Systems, LLC and its subsidiaries (the "Company") at December
31, 20002002 and 1999,2001, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 20002002 in conformity with
accounting principles generally accepted in the United States of America. In
addition, in our opinion, the financial statement schedule listed in the index
appearing under Item 14 15-(a)-(2) presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements. These financial statements and financial
statement schedule are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits. We conducted our audits of
these statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
On January 1, 2002, the Company adopted the provisions of Statement of Financial
Accounting Standard No. 142, "Goodwill and Intangible assets", which changed the
methodology for assessing goodwill impairments. The initial application of this
statement resulted in an impairment of goodwill of $29.2 million. The impairment
was due solely to the change in accounting standards, and was reported as a
cumulative effect of accounting change (See Note 1 "New accounting
pronouncements").
PricewaterhouseCoopers LLP
Detroit, Michigan
March 19, 2001
21February 28, 2003
25
24
ADVANCED ACCESSORY SYSTEMS, LLC
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
-----------------
2000 1999
---- --------------------------
2002 2001
--------- ---------
(DOLLAR AMOUNTS IN
THOUSANDS)
ASSETS
ASSETS
Current assets
Cash.....................................................Cash ...................................................... $ 3,3152,653 $ 8,7182,139
Accounts receivable, less reserves of $2,140$1,857 and
$4,997,
respectively.......................................... 42,942 46,918
Inventories.............................................. 42,094 38,437$1,788, respectively ................................... 51,526 44,790
Inventories ............................................... 40,682 39,432
Deferred income taxes.................................... 1,775 1,804taxes ..................................... 109 1,643
Other current assets..................................... 6,874 4,879
-------- --------assets ...................................... 13,370 4,133
--------- ---------
Total current assets................................ 97,000 100,756assets ................................. 108,340 92,137
Property and equipment, net................................ 58,232 59,316net ................................. 60,572 54,404
Goodwill, net.............................................. 77,391 80,674net ............................................... 47,308 73,394
Other intangible assets, net............................... 5,030 5,729net ................................ 3,635 4,685
Deferred income taxes...................................... 2,020 1,922taxes ....................................... 1,981 1,932
Other noncurrent assets.................................... 2,824 2,816
-------- --------
$242,497 $251,213
======== ========assets ..................................... 2,319 1,738
--------- ---------
$ 224,155 $ 228,290
========= =========
LIABILITIES AND MEMBERS' EQUITY
Current liabilities
Current maturities of long-term debt.....................debt ...................... $ 11,81118,215 $ 12,44911,023
Accounts payable......................................... 24,996 26,715payable .......................................... 33,159 29,051
Accrued liabilities...................................... 25,402 24,767
-------- --------liabilities ....................................... 30,762 23,553
Mandatorily redeemable warrants ........................... 5,250 5,130
--------- ---------
Total current liabilities........................... 62,209 63,931
-------- --------liabilities ............................ 87,386 68,757
--------- ---------
Noncurrent liabilities
Deferred income taxes.................................... 1,001 1,772taxes ..................................... 629 828
Other noncurrent liabilities............................. 4,557 4,320liabilities .............................. 5,796 4,755
Long-term debt, less current maturities.................. 163,824 166,049
-------- --------maturities ................... 136,732 145,626
--------- ---------
Total noncurrent liabilities........................ 169,382 172,141
-------- --------liabilities ......................... 143,157 151,209
--------- ---------
Commitments and contingencies (Note 12)
Mandatorily redeemable warrants............................ 5,010 4,810
-------- --------11)
Members' equity
Class A Units 25,000 authorized, 9,2369,226 and 15,8699,236 issued
at December 31, 20002002 and 1999, respectively............. 7,409 18,0832001, respectively .............. 7,348 7,348
Class A-1 Units 25,000 authorized, 5,133 issued at
December 31, 2000.......................................2002 and 2001, respectively ................. 4,117 --4,117
Class B Units, 2,000 authorized, no Units issued at
December 31, 20002002 and 1999..............................2001 ............................... -- --
Other comprehensive loss................................. (1,077) (1,496)income (loss) ......................... 85 (181)
Accumulated deficit...................................... (4,553) (6,256)
-------- --------
5,896 10,331
-------- --------
$242,497 $251,213
======== ========deficit ....................................... (17,938) (2,960)
--------- ---------
(6,388) 8,324
--------- ---------
$ 224,155 $ 228,290
========= =========
See accompanying notes to consolidated financial statements.
2226
25
ADVANCED ACCESSORY SYSTEMS, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED
DECEMBER 31,
----------------------------------------------------------------------------
2002 2001 2000
1999 1998
------------- ------------- ---------------------- --------- ---------
(DOLLAR AMOUNTS IN THOUSANDS)
Net sales...................................................sales .................................................. $ 329,782 $ 314,035 $ 318,817
$ 314,142 $ 292,145
Cost of sales...............................................sales .............................................. 250,516 239,583 239,090 227,889 215,441
--------- --------- ---------
Gross profit..............................................profit ............................................. 79,266 74,452 79,727 86,253 76,704
Selling, administrative and product
development expenses......................................expenses ..................................... 49,309 44,769 45,527 50,258 50,839
Amortization of intangible assets...........................assets .......................... 122 3,312 3,297 3,245 3,551
Impairment charge........................................... -- -- 7,863
--------- --------- ---------
Operating income..........................................income ......................................... 29,835 26,371 30,903 32,750 14,451
--------- --------- ---------
Other (income) expense
Interest expense..........................................expense ......................................... 15,907 17,684 17,950 17,453 18,633
Foreign currency (gain) loss..............................loss ............................. (8,429) 4,948 5,386
7,912 (4,995)
Other expense.............................................expense ............................................ 520 743 52
1,990--------- --------- ---------
Income before cumulative effect of accounting change and
income taxes ............................................. 21,837 2,996 7,515
Cumulative effect of accounting change for goodwill
impairment ............................................... (29,207) -- --
--------- --------- ---------
Income (loss) before income taxes..................................taxes .......................... (7,370) 2,996 7,515 5,395 813
Provision (benefit) for income taxes........................taxes ....................... 4,252 602 (278) 417 903
--------- --------- ---------
Net income (loss)........................................... .......................................... $ 7,793(11,622) $ 4,9782,394 $ (90)7,793
========= ========= =========
See accompanying notes to consolidated financial statements.
2327
26
ADVANCED ACCESSORY SYSTEMS, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED
DECEMBER 31,
---------------------------------------------------------------------
2002 2001 2000
1999 1998
---------- ---------- ------------------ -------- --------
(DOLLAR AMOUNTS IN THOUSANDS)
CASH FLOWS PROVIDED BY (USED FOR)
OPERATING ACTIVITIES
Net (loss) income (loss)................................................................................. $(11,622) $ 2,394 $ 7,793 $ 4,978 $ (90)
Adjustments to reconcile net (loss) income (loss) to
net cash provided by operating activities
Depreciation and amortization.........................amortization ............................ 13,054 14,599 14,304
14,065 15,093
Deferred taxes........................................ (908) (2,433) (688)
Impairment and restructuring charge...................Cumulative effect of accounting change for goodwill
impairment .............................................. 29,207 -- --
9,505Deferred taxes ........................................... 1,298 (161) (908)
Foreign currency (gain) loss..........................loss ............................. (8,190) 4,965 5,159
6,297 (4,948)
Loss (gain) on disposal of assets.....................assets ............................... 365 701 37 (13) 191
Changes in assets and liabilities net of acquisitions:
Accounts receivable................................receivable ................................... (4,411) (2,645) 3,425
(8,188) 5,873
Inventories........................................Inventories ........................................... 1,954 1,427 (4,055) 1,815 (1,457)
Other current assets...............................assets .................................. (8,530) 2,771 (1,546) (677) 1,513
Other noncurrent assets............................assets ............................... (996) 685 (346)
(56) (1,934)
Accounts payable...................................payable ...................................... 2,533 4,084 (199)
4,527 (3,032)
Accrued liabilities................................liabilities ................................... 6,210 (950) (763) 3,441 1,133
Other noncurrent liabilities.......................liabilities .......................... 132 (219) (1,485)
1,258 720
---------- ---------- ----------
NET CASH PROVIDED BY OPERATING
ACTIVITIES....................................-------- -------- --------
Net cash provided by operating
activities ....................................... 21,004 27,651 21,416
25,014 21,879
---------- ---------- ------------------ -------- --------
CASH FLOWS PROVIDED BY (USED FOR)
INVESTING ACTIVITIES
Acquisition of machinery and equipment..................equipment ..................... (15,354) (7,580) (10,445) (11,775) (9,998)
Amount due from sellers of Valley Industries,
Inc................................................... -- -- 1,150
Acquisition of subsidiaries, net of cash
acquired..............................................acquired ................................................. -- -- (2,804)
-- (22,770)
---------- ---------- ----------
NET CASH USED FOR INVESTING
ACTIVITIES....................................-------- -------- --------
Net cash used for investing
activities ....................................... (15,354) (7,580) (13,249)
(11,775) (31,618)
---------- ---------- ------------------ -------- --------
CASH FLOWS PROVIDED BY (USED FOR)
FINANCING ACTIVITIES
Increase (decrease) in revolving loan...................loan ...................... 5,572 (8,341) 11,343 -- (4,505)
Repayment of debt.......................................debt .......................................... (13,379) (11,706) (13,878) (9,270) (3,682)
Issuance of membership units............................ -- 50 29
Collections of membership notes receivable..............receivable ................. -- 59 65
29Borrowing of debt .......................................... 5,637 400 --
Repurchase of membership units..........................units ............................. -- -- (6,422) (4,274) (14)
Distributions to members................................members ................................... (3,356) (801) (6,090)
(4,720) (195)
---------- ---------- ----------
NET CASH USED FOR FINANCING
ACTIVITIES.....................................-------- -------- --------
Net cash used for financing
activities ........................................ (5,526) (20,389) (14,982)
(18,185) (8,367)
---------- ---------- ------------------ -------- --------
Effect of exchange rate changes.........................changes ............................ 390 (858) 1,412
2,424 1,998-------- -------- --------
Net increase (decrease) in cash.........................cash ............................ 514 (1,176) (5,403) (2,522) (16,108)
Cash at beginning of period.............................period ................................ 2,139 3,315 8,718
11,240 27,348
---------- ---------- ------------------ -------- --------
Cash at end of period...................................period ...................................... $ 2,653 $ 2,139 $ 3,315
$ 8,718 $ 11,240
========== ========== ================== ======== ========
Cash paid for interest..................................interest ..................................... $ 14,395 $ 16,304 $ 17,032
$ 16,809 $ 17,559
========== ========== ================== ======== ========
Cash paid for income taxes..............................taxes ................................. $ 362 $ 845 $ 1,763
$ 3,131 $ 934
========== ========== ================== ======== ========
See accompanying notes to consolidated financial statements.
2428
27
ADVANCED ACCESSORY SYSTEMS, LLC
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS' EQUITY
(DOLLAR AMOUNTS IN THOUSANDS)
OTHER RETAINED TOTAL
MEMBERS' COMPREHENSIVE EARNINGS MEMBERS'
CAPITAL INCOME (LOSS) (DEFICIT) EQUITY
--------- ----------------- ------------- --------- --------
Balance at December 31, 1997.................1999 ............. $ 23,16318,083 $ (490)(1,496) $ (6,229)(6,256) $ 16,444
Issuance of additional units................. 150 -- -- 150
Notes receivable for unit purchase........... (121) -- -- (121)
Repurchase of membership units............... (14) -- -- (14)
Accretion of membership warrants............. (902) -- -- (902)
Distributions to members..................... -- -- (195) (195)
Comprehensive loss:
Currency translation adjustment............ -- (125) -- --
Net loss for 1998.......................... -- -- (90) --
Total comprehensive loss................. -- -- -- (215)
--------- --------- --------- --------
Balance at December 31, 1998................. 22,276 (615) (6,514) 15,147
Issuance of additional units................. 970 -- -- 970
Notes receivable for unit purchase........... 380 -- -- 380
Repurchase of membership units............... (5,142) -- -- (5,142)
Accretion of membership warrants............. (401) -- -- (401)
Distributions to members..................... -- -- (4,720) (4,720)
Comprehensive income:
Currency translation adjustment............ -- (881) -- --
Net income for 1999........................ -- -- 4,978 --
Total comprehensive income............... -- -- -- 4,097
--------- --------- --------- --------
Balance at December 31, 1999................. 18,083 (1,496) (6,256) 10,331
Notes receivable for unit purchase...........purchase ....... 65 -- -- 65
Repurchase of membership units...............units ........... (6,422) -- -- (6,422)
Accretion of membership warrants.............warrants ......... (200) -- -- (200)
Distributions to members.....................members ................. -- -- (6,090) (6,090)
Comprehensive income:
Currency translation adjustment............adjustment ......... -- 419 -- --
Net income for 2000........................2000 ..................... -- -- 7,793
--
Total comprehensive income............... -- -- --income ........... 8,212
--------- --------- ----------------- -------- -------- --------
Balance at December 31, 2000.................2000 ............. 11,526 (1,077) (4,553) 5,896
Notes receivable for unit purchase ....... 59 -- -- 59
Accretion of membership warrants ......... (120) -- -- (120)
Distributions to members ................. -- -- (801) (801)
Comprehensive income:
Minimum pension liability adjustment ... -- (285) --
Currency translation adjustment ........ -- 1,181 --
Net income for 2001 .................... -- -- 2,394
Total comprehensive income ........... 3,290
-------- -------- -------- --------
Balance at December 31, 2001 ............. 11,465 (181) (2,960) 8,324
Distributions to members ................. -- -- (3,356) (3,356)
Comprehensive income:
Minimum pension liability adjustment ... -- (565) --
Currency translation adjustment ........ -- 831 --
Net loss for 2002 ...................... -- -- (11,622)
Total comprehensive income ........... (11,356)
-------- -------- -------- --------
Balance at December 31, 2002 ............. $ 11,52611,465 $ (1,077)85 $(17,938) $ (4,553) $ 5,896
========= ========= =========(6,388)
======== ======== ======== ========
See accompanying notes to consolidated financial statements.
2529
28
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
BUSINESS ACTIVITIES
Advanced Accessory Systems, LLC (the "Company") is engaged in the design,
manufacture and supply ofsupplies towing and rack
systems and related accessories for the automotive original equipment
manufacturer ("OEM") market and the automotive aftermarket. The Company's
business commenced on September 28, 1995, with the
acquisition1995. The Company's products include a
comprehensive line of certaintowing systems and rack systems including accessories. The
Company's towing systems products include fixed and detachable towing hitches
and accessories such as trailer balls, ball mounts, electrical harnesses, safety
chains and locking hitch pins. The Company's broad offering of the net assetsrack systems
includes fixed and detachable racks and accessories which can be installed on
vehicles to carry items such as bicycles, skis, luggage, surfboards and
sailboards. The Company's products are sold as standard accessories or options
for a variety of MascoTech Accessories (the
"Predecessor"), a division of MascoTech, Inc., through the Company's
majority-owned subsidiary, SportRack, LLC. As described in Note 2, in October
1996 the Company acquired Brink B.V., in July and August of 1997 acquired the
sportrack division of Bell Sports Corporation, Nomadic Sports, Inc. and certain
net assets of Valley Industries, Inc., in January and February 1998 acquired the
net assets of the towbar segment of Ellebi S.p.A. and the net assets of
Transfo-Rakzs, Inc. and in February and September 2000 acquired the net assets
of Titan Industries, Inc. and the Wiswall Hill Corporation.light vehicles.
PRINCIPLES OF CONSOLIDATION
The Company includes the accounts of the following:
SportRack, LLC .............................................................................................. 100% owned by Advanced Accessory Systems, LLC
SportRack Automotive, GmbH
and its consolidated subsidiaries ...................................................... A German corporation, 100% owned by SportRack, LLC
SportRack International,Accessories, Inc
and its consolidated subsidiary .............................................................. A Canadian corporation, 90% owned by the Advanced
Accessory Systems, LlC and 10% owned by SportRack, LLC
ValTek, LLC .......................................... 100% owned by SportRack, LLC
AAS Holdings, Inc. ...................................................................................... 100% owned by Advanced Accessory Systems, LLC
Brink International B.V and
its consolidated subsidiaries ............................................................. A Dutch corporation, 100% owned by AAS Holdings, Inc.
Valley Industries, LLC ............................................. 99%................................. 100% owned by Advanced Accessory Systems, LLC
and 1%
owned by SportRack, LLC
ValTek, LLC ........................................................ 99% owned by Advanced Accessory Systems, LLC and 1%
owned by SportRack, LLC
AAS Capital Corporation ............................................................................ 100% owned by Advanced Accessory Systems, LLC
All intercompany transactions have been eliminated in consolidation.
REVENUE RECOGNITION
Revenue and related cost of goods sold are recognized upon shipment of the
product to the customer. Sales allowances, discounts, rebates and other
adjustments are recorded or accrued in the period of the sale.
During 2000, the Company adopted the provisions of the EITF 00-10,
"Accounting for Shipping and Handling Revenues and Costs", which requires that
all amounts billed to customers related to shipping and handling costs be
classified as revenue. In prior years, these costs and the reimbursement of
these costs were netted in our financial statements. Accordingly, amounts billed
to customers are now included in net sales and the related costs are included in
cost of sales for all years presented. There was no impact on net income.
SIGNIFICANT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the fiscal period. Actual results could differ from those
estimates.
During the year ended December 31, 2000, management decreased an estimated
liability related to a contingent obligation to one of its customers. The
reduction resulted in a benefit to the Company of approximately $1,900 which was
included in selling, administrative and product development expenses.
26
29
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES --
(CONTINUED)
FINANCIAL INSTRUMENTS
Financial instruments at December 31, 20002002 and 1999,2001, including cash,
accounts receivable and accounts payable, are recorded at cost, which
approximates fair value due to the short-term maturities of these assets and
liabilities. The carrying value of the obligations under the bank agreements are
considered to approximate fair value as the agreements provide for interest rate
revisions based on changes in prevailing market rates or were entered into at
rates that approximate market rates at December 31, 20002002 and 1999.2001. The fair
value of the Notes (as defined below) as of December 31, 20002002 and 19992001 was
approximately $85,000$118,750 and $112,500,$103,750 respectively, based upon quoted prices in
the market in which the Notes are traded.
30
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
The Company is exposed to certain market risks which exist as a part of its
ongoing business operations. Primary exposures include fluctuations in the value
of foreign currency investments in subsidiaries, volatility in the translation
of foreign currency earnings to U.S. Dollars and movements in Federal Funds
rates and the London Interbank Offered Rate (LIBOR). The Company useswill use
derivative financial instruments, where appropriate, to manage these risks. The
Company, as a matter of policy, does not engage in trading or speculative
transactions.
CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all
highly-liquid investments with a maturity of three months or less from the date
of purchase to be cash equivalents.
CURRENCY TRANSLATION
The functional currency for the Company's foreign subsidiaries is the
applicable local currency. Assets and liabilities of foreign subsidiaries are
translated into U.S. dollars at the exchange rates in effect at the balance
sheet date; translation adjustments are reported as a separate component of
members' equity. Revenues, expenses and cash flows for foreign subsidiaries are
translated at average exchange rates during the period; foreign currency
transaction gains and losses are included in current earnings. The accompanying
consolidated statement of operations for the years ended December 31, 2000, 19992002, 2001
and 19982000 includes net currency gains (losses)(gains) and losses of $(5,386)$(8,429), $(7,912)$4,948 and
$4,995,$5,386, respectively, relating primarily to debt denominated in U.S. Dollars at
Brink International B.V., and SportRack Accessories, Inc. whose functional
currency was the Dutch Guilder through
December 31, 1998 andcurrencies are the European Euro during 1999 and 2000.Canadian Dollar, respectively. At December
31, 2000,2002, U.S. Dollar denominated debt recorded at Brink includes intercompany
debt and substantially all outstanding loansterm notes under the Company's Second
Amended and Restated Credit Agreement.
INVENTORIES
Inventories are stated at the lower of cost or market, with cost being
determined on the first-in, first-out (FIFO) method. Inventories are
periodically reviewed and reserves established for excess and obsolete items.
TOOLING
The Company incurs costs to related to new tooling used in the manufacture of
products sold to OEMs. Tooling costs that are reimbursed by customers as the
tooling is completed are included in other current assets. All other customer
owned tooling costs, which totaled $2,205$302 and $1,829$1,111 at December 31, 20002002 and
1999,2001, respectively, are included in other noncurrent assets and amortized over
the expected product life, generally three to six years. Company owned tooling
is included in property and equipment and depreciated over its expected useful
life, generally three to five years. Management periodically evaluates the
recoverability of tooling costs, based on estimated future cash flows, and makes
provisions for tooling costs that will not be recovered, if any, when such
amounts are known.
27
30
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES --
(CONTINUED)known and incurred.
PROPERTY AND EQUIPMENT
Property and equipment is stated at acquisition cost, which reflects the
fair market value of assets acquired at the acquisition date for all subsidiaries.
Property and equipment purchased other than through the acquisitions described
in Note 2 is stated at cost. Expenditures for normal repairs and maintenance are
charged to operations as incurred. Depreciation expense, which was $10,346, $10,418$11,299,
$10,569 and $10,857$10,445 for the years ended December 31, 2000, 19992002, 2001 and 1998,2000,
respectively, is computed using the straight-line method over the following
estimated useful lives:
YEARS
-----
Buildings and improvements............................................................improvements.............................. 5-50
Machinery, equipment and tooling......................................................tooling........................ 2-10
Furniture and fixtures................................................................fixtures.................................. 5-7
31
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
GOODWILL, LONG-LIVED ASSETS AND OTHER INTANGIBLE ASSETS
Goodwill of $77,391$47,308 and $80,674 (net of accumulated amortization of $14,032
and $11,194)$73,394 at December 31, 20002002 and 1999,2001, respectively,
represents the costs in excess of net assets acquired and, isuntil December 31,
2001, was amortized using the straight line method over periods of up to 30
years. Debt issuance costsBeginning in 2002, goodwill is no longer amortized, but is tested at
least annually for impairment. During 2002 Goodwill decreased by $29,207 for an
impairment charge resulting of $4,602the application of a new accounting standard and
$5,280, netincreased by $3,121 due to the effects of accumulated amortization atthe change in foreign currency rates
of the functional currencies of the Company's foreign subsidiaries between
December 31, 20002002 and 1999, respectively, are amortized over the terms of the
loan agreements, which are six to ten years. Debt issuance cost amortization of
$625, $589 and $587 for 2000, 1999 and 1998, respectively, has been included in
interest expense.
IMPAIRMENT OF GOODWILL AND LONG-LIVED ASSETS2001. See "New Accounting Pronouncements" below.
The Company evaluates the potential impairment of goodwill on an ongoing
basis and reviews long-lived assets and certain identifiable intangibles for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be fully recoverable. The Company determines
the impairment of long-lived assets by comparing the undiscounted future net
cash flows to be generated by the assets to their carrying value. Impairment
losses are then measured as the amount by which the carrying amount of the asset
exceeds the fair value of the asset.
In 1998, as describedDebt issuance costs net of accumulated amortization of $3,254 and $4,093 at
December 31, 2002 and 2001, respectively, are amortized over the terms of the
loan agreements, which are six to ten years. Debt issuance cost amortization of
$906, $677 and $625 for 2002, 2001 and 2000, respectively, has been included in
Note 3, the
Company determined that certain intangible assets of its subsidiary, SportRack
International, Inc. had been impaired.interest expense.
INCOME TAXES
The Company and certain of its domestic subsidiaries have elected to be
taxed as limited liability companies for federal income tax purposes. As a
result of this election, the Company's domestic taxable income accrues to the
individual members. Distributions are made to the members in amounts sufficient
to meet the tax liability on the Company's domestic taxable income accruing to
the individual members. Distributions to members of $6,090, $4,720$3,356, $801 and $195$6,090 were
made during 2000, 19992002, 2001 and 1998,2000, respectively.
Certain of the Company's domestic subsidiaries and foreign subsidiaries are
subject to income taxes in their respective jurisdictions. Income tax provisions
for these entities are based on the U.S. Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes". Deferred tax assets and
liabilities are provided for the expected future tax consequences of temporary
differences between the carrying amounts and the tax basis of such entities'
assets and liabilities. Deferred tax assets are reduced by a valuation allowance
for tax benefits that are not expected to be realized. The Company does not
provide for U.S. income taxes or foreign withholding taxes on the undistributed
earnings of foreign subsidiaries because of management's intent to permanently
reinvest in such operations.
The Company and certain subsidiaries are subject to taxes, including
Michigan Single Business Tax and Canadian capital tax, which are based primarily
on factors other than income. As such, these amounts are included in selling,
administrative and product development expenses in the accompanying consolidated
statements of operations. Deferred taxes related to Michigan Single Business Tax
are provided on the temporary differences resulting from capital acquisitions
and depreciation.
28RESEARCH, DEVELOPMENT AND ENGINEERING
Research, development and engineering costs are expensed as incurred and
aggregated approximately $8,490, $9,397 and $9,779 for the years ended December
31, 2002, 2001 and 2000, respectively.
32
31
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
RESEARCH, DEVELOPMENT AND ENGINEERING
Research, developmentNEW ACCOUNTING PRONOUNCEMENTS
In November 2002, the Financial Accounting Standards Board issued FASB
Interpretation No. 45, Guarantor's Accounting and engineering costs are expensed as incurredDisclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others (FIN 45).
FIN 45 provides guidance on the disclosures to be made by a guarantor in its
interim and aggregated approximately $9,779, $10,302annual financial statements about its obligations under certain
guarantees that it has issued and $9,611also clarifies that a guarantor is require to
recognize, at the inception for a guarantee, a liability for the years ended December
31, 2000, 1999fair value of
the obligation undertaken in issuing the guarantee. In addition, FIN 45 requires
additional disclosures about the guarantees that an entity has issued including
those related to product warranties (See Note 11). The recognition and
1998, respectively.
NEW ACCOUNTING PRONOUNCEMENT
Duringmeasurement provisions of FIN 45 are not expected to have a material effect on
the first quarterCompany's financial position, results of 2001,operations or cash flows.
On January 1, 2002, the Company has adopted the accounting standards set forth
in Statement of Financial Accounting Standards No. 133,142, "Goodwill and other
Intangible Assets" ("SFAS 142") and Statement of Financial Accounting Standards
No. 144, "Accounting for Derivatives Instruments
and Hedging Activities"the Impairment or Disposal of Long-Lived Assets" ("SFAS
144"). This pronouncement isThe adoption of SFAS 144 did not expected the have a significantmaterial impact on the Company's
financial position, results of operations or financial position.cash flows. SFAS 142 changed the
methodology for assessing goodwill impairments. The initial application of this
statement resulted in an impairment of goodwill of $29,207 to write down
goodwill related to the Valley Industries Acquisition. The impairment was due
solely to the change in accounting standards and was reported as a cumulative
effect of accounting change in 2002. Under SFAS 142, impairment is determined by
comparing the carrying values of reporting units to the corresponding fair
values, which are determined based on the discounted estimated future cash flows
of the reporting units. As the impairment related to Valley Industries, LLC for
which taxable income accrues to the individual members, no tax effect was
recorded for this charge. Additionally, under the new standard, goodwill is no
longer amortized but is to be tested at least annually for impairment. The
effect of no longer amortizing goodwill resulted in a reduction in amortization
of intangible assets during 2002 as compared with 2001 and 2000 of $2,996 and
$2,998, respectively. The following table presents net income (loss) for 2001
and 2000 as adjusted for the non-amortization provisions of SFAS 142.
Year Ended December 31,
-------------------------------------
2002 2001 2000
-------- -------- --------
Reported net income (loss) .......... $(11,622) $ 2,394 $ 7,793
Add back: Goodwill amortization ..... -- 2,996 2,998
-------- -------- --------
Adjusted net income (loss) .......... $(11,622) $ 5,390 $ 10,791
======== ======== ========
Other intangible assets at December 31, 2002 and 2001 consist of deferred
financing costs, a defined benefit pension asset and patents and licenses.
Aggregate amortization expense related to other intangible assets for each
of the five succeeding fiscal years is as follows:
2003................................................................ $807
2004................................................................ 567
2005................................................................ 608
2006................................................................ 653
2007................................................................ 689
For the year ended December 31, 2002, the carrying amount of goodwill
decreased by $29,207 as a result of the impairment write down discussed above
and increased by $3,121 as a result of the change in exchange rates between the
U.S. Dollar and the European Euro, the functional currency of Brink
International B.V.
Effective June 30, 2001, the Company adopted Emerging Issues Task Force
(EITF) Consensus 00-19, "Determination of Whether Share Settlement is Within the
Control of the Issuer for Purposes of Applying Issue No. 96-13, 'Accounting for
Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Company's Own Stock'". Accordingly, based upon the terms of the warrants, the
Company has reclassified the mandatorily redeemable warrants to a component of
current liabilities. Accretion is included in the determination of net income or
loss for each reporting period.
33
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
2. ACQUISITIONS
Acquisitions of the Company from inceptionJanuary 1, 2000 through December 31, 20002002
are as follows:
PURCHASE GOODWILL
ACQUIRED COMPANY ACQUISITION DATE PRICE RECORDED LOCATION PRODUCT LINES
- ----------------------------------------- ------------------ -------- --------- ------------------- ------------- --------------
MascoTech Accessories.................... September 28, 1995 $46,050 $32,781 United States Rack systems
Brink B.V................................ October 30, 1996 54,339 27,730 Europe Towing systems
Sportrack division of Bell Sports........ July 2, 1997 13,505 1,198 Canada Rack systems
Nomadic Sports, Inc...................... July 24, 1997 849 433 Canada Rack systems
Valley Industries, Inc................... August 5, 1997 56,478 32,891 United States Towing systems
Towbar segment of Ellebi S.p.A........... January 2, 1998 21,938 5,645 Italy Towing systems
Tranfo-Rakzs, Inc........................ February 7, 1998 1,040 902 Canada Rack systems
Titan Industries, Inc.................... February 22, 2000 1,525 1,237 United States Towing systems
Wiswall Hill Corporation................. September 5, 2000 1,200 -- United States Rack systems
The above acquisitions have each been accounted for in accordance with the
purchase method of accounting. Accordingly, the respective purchase price of
each acquisition has been allocated to assets acquired and liabilities assumed
based upon their estimated fair values at the acquisition date. The excess of
the aggregate purchase price over the estimated fair value of the net assets
acquired has been recorded as goodwill. The operating results of these entities
have been included in the Company's consolidated financial statements since the
date of each acquisition. Each acquisition represented the purchase of the
net
assets of the respective company with the exceptions of Brink B.V. and Nomadic
Sports, Inc. which were purchases of the outstanding shares. Eacheach acquired company was purchased for
cash except for Brink B.V. which was purchased for $54,339 in cash
and a 12,500 Junior Subordinated Note denominated in Dutch Guilders ($7,340), to
Brink Holdings, B.V.cash.
Pro forma results have not been presented as they are substantially the same
as the Company's actual results.
3. IMPAIRMENT AND RESTRUCTURING CHARGES
In July 1997, the Company acquired the net assets of the sportrack division
of Bell Sports Corporation ("Bell") for approximately $13,500 and recorded
goodwill of approximately $1,200, representing the excess of the purchase price
over the then estimated fair value of net assets acquired. In June 1998
information became available which indicated that certain assets acquired from
Bell (accounts receivable, inventory, and tooling) had a fair value less than
originally recorded. The SportRack International purchase was renegotiated and a
$2,000 reimbursement was received from Bell. Accounts receivable, inventory and
tooling were reduced by $6,500 and additional goodwill of $4,500, net of the
$2,000 reimbursement from Bell, was recorded.
29
32
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
3. IMPAIRMENT AND RESTRUCTURING CHARGE -- (CONTINUED)
During the second half of 1998, management further reassessed the operations
of SportRack International, and as a result took actions to restructure the
operations and rationalize the product offerings, customer and supplier base,
distribution channels and warehousing, and terminated 14 employees, including
certain members of SportRack International's senior management. Concurrent with
the reassessment of SportRack International's operations, management reviewed
the revised carrying value of goodwill and other intangible assets, determined
that future cash flows would not be sufficient to recover recorded amounts, and
recorded an impairment charge of $7,863.
The SportRack International impairment and restructuring charges are
comprised of the following:
Impairment of:
Goodwill..................................... $ 6,116
Other intangible assets...................... 1,747 $ 7,863
--------
Restructuring charges for:
Product rationalization...................... 1,068
Other costs.................................. 832 1,900
-------- --------
$ 9,763
========
The restructuring charge related to inventory has been included in cost of
sales and other costs have been included in selling, administrative and product
development expenses in the accompanying 1998 consolidated statement of
operations. All restructuring costs have been incurred as of December 31, 1998,
including cash expenditures during 1998 of $258.
Sales for SportRack International during the year ended December 31, 1998
were approximately $4,000 and total assets as of December 31, 1998 were
approximately $7,100 after the impairment charge.
4. LONG-TERM DEBT
Long-term debt is comprised of the following:
OUTSTANDING AT
INTEREST RATE AT DECEMBER 31,
DECEMBER 31, ------------------------
2000 2000 1999
---------- ---------- -------------------------------
2002 2002 2001
---------------- -------- --------
Senior Subordinated Notes, less discount of $367$283
and $403
respectively...........................................$327 respectively ............................ 9.75% $ 124,633 $ 124,597$124,717 $124,673
Second Amended and Restated Credit Agreement
(U.S. Credit Facility)
Term note A......................................... 8.89% 5,326 9,082A ................................... -- -- 1,794
Term note B......................................... 9.39% 12,370 13,494B ................................... 5.42% 9,489 12,079
Acquisition note .............................. 4.92% 3,937 9,188
Revolving line of credit note....................... 8.85% 11,343note ................. 5.78% 8,574 3,002
Supplemental revolving loan note .............. -- Acquisition revolving note.......................... 8.88% 14,438 21,000-- --
First Amended and Restated Credit Agreement
(Canadian Credit Facility)
Canadian term note.................................. 8.25% 7,525 10,325note ............................ 5.25% 1,946 4,509
Canadian revolving line of credit note..............note ........ -- -- --
--------- ---------
175,635 178,498Capital lease obligations .......................... 5.09% 6,284 399
Other .............................................. -- -- 1,005
-------- --------
154,947 156,649
Less -- current portion.................................. 11,811 12,449
--------- ---------
$ 163,824 $ 166,049
========= =========portion ............................ 18,215 11,023
-------- --------
$136,732 $145,626
======== ========
30
33
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
4. LONG-TERM DEBT -- (CONTINUED)
SENIOR SUBORDINATED NOTES
Borrowings under the Company's Series B Senior Subordinated Notes (the
"Notes"), due October 1, 2007, are unsecured and are subordinated in right of
payment to all existing and future senior indebtedness of the Company, including
the loans under the U.S. and Canadian Credit Agreements described below. The
Company, at its option, may redeem the Notes, in whole or in part, together with
accrued and unpaid interest subsequent to October 1, 2002 at certain redemption prices as set forth by the
indenture under which the Notes have been issued. Upon the occurrence of a
change of control of the Company, as defined by the indenture, the Company is
required to make an offer to repurchase the Notes at a price equal to 101% of
the principal amount of the Notes. The indenture places certain limits on the
Company, the most restrictive of which include the restrictions on the
incurrence of additional indebtedness by the Company, the payment of dividends
on and redemption of capital of the Company, the redemption of, certain
subordinated obligations, investments, sales of assets and stock of certain
subsidiaries, transactions with affiliates, consolidations, mergers and
transfers of all or substantially all of the Company's assets. Interest on the
Notes is payable semi-annually in arrears on April 1 and October 1 of each year.
34
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
3. LONG-TERM DEBT -- (CONTINUED)
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
The Company's Second Amended and Restated Credit Agreement ("U.S. Credit
Facility"), which is administered by Bank One (formerly First Chicago NBD Bank) and The Chase Manhattan Bank
("Chase"), is secured by substantially all the assets of the Company and places
certain restrictions on the Company related to indebtedness, sales of assets,
investments, capital expenditures, dividend payments, management fees, and
members' equity transactions. In addition, the agreement subjects the Company to
certain restrictive covenants, including the attainment of designated operating
ratios and minimum net worth levels. The Company, at its election, may make
prepayments of the term notes under the credit agreement on a pro-rata basis.
Additionally, mandatory prepayments of the term notes are required in the event
of sales of assets meeting certain criteria, as set forth by the agreement, or
based upon periodic calculations of excess cash flows, as defined by the
agreement. On December 15, 2001, the Company entered into Amendment No. 9 to the
U.S. Credit Facility which reset certain financial covenants for fiscal years
2001 and 2002 and provided the Company with additional liquidity by adding a
conditional supplemental revolving loan facility of up to $10.0 million which is
available until March 31, 2003.
The U.S. Credit Facility provides for two term notes (Term note A and Term
note B), a revolving line of credit note, and an acquisition note and a supplemental
revolving loan note. Loans under each of the term notes and the revolving notenotes
can be converted, at the election of the Company, in whole or in part, into Base
Rate Loans or Eurocurrency Loans. Interest is payable in arrears quarterly on
Base Rate Loans, and in arrears in one, two or three months on Eurocurrency
Loans, as determined by the length of the Eurocurrency Loan, as selected by the
Company. Interest is charged at an adjustable rate plus the applicable margin.
The applicable margin is based upon the Company's Senior DebtLeverage Ratio, as defined by
the Credit Agreement. Eurocurrency Loans under each of the term notes can be
made in U.S. dollars or certain other currencies, at the option of the Company.
The U.S. Credit Facility also provides for a Letter of Credit Facility. At
December 31, 20002002 and 2001, the companyCompany had an irrevocable letterletters of credit
outstanding in the amount of $6,350, see$9,125 and $8,041, respectively (see Note 12. At December 31, 1999, no letters of credit were outstanding.11).
Term note A
On October 30, 1996, the Company borrowed $65,000 under Term note A. On October
1, 1997, the Company made a mandatory prepayment totaling $43,475 in connection
with the issuance of the Notes. Mandatory prepayments of $518$29 and $1,597$518 were made
in June 2000August 2001 and June 1999,2000, respectively, for the excess cash flows of the
Company as defined by the Credit Agreement. The applicable margin
for Term note A ranges from 1.25% to 2.5% for Base Rate Loans and from 2.25% to
3.5% for Eurocurrency Loans. RepaymentsNo amounts remain outstanding under
the note are required in the
following installments:
QUARTERLY
---------
March 31, 2001 through June 30, 2002................................................. $ 883
Final installment on September 30, 2002.............................................. 28
as of December 31, 34
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
4. LONG-TERM DEBT -- (CONTINUED)2002.
Term note B
On August 5, 1997, the Company borrowed $55,000 under Term note B. On
October 1, 1997, the Company made a mandatory prepayment totaling $39,044 in
connection with the issuance of the Notes. Mandatory prepayments of $833$2,299 and
$1,806$833 were made in June 2000August 2002 and June 1999,2000, respectively, for the excess cash
flows of the Company as defined by the Credit Agreement. TheAt December 31, 2002,
the applicable margin for Term note B ranges from 1.75%2.75% to 3.0%3.75% for Base Rate
Loans and from 2.75%3.50% to 4.0%4.50% for Eurocurrency Loans. Repayments under Term note
B are required in the following installments:
March 31, 20012003 through September 30, 2003 (quarterly)............................................... $ 73
December 31, 2003....................................................................2003................................................... 2,914
March 30, 2004 and31, 2004...................................................... 3,764
June 30, 2004..................................................... 3,764
October 30, 2004..................................................................... 1,1252004....................................................... 2,592
35
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
3. LONG-TERM DEBT -- (CONTINUED)
Acquisition note
On December 31, 1997, the Company borrowed $21,000 under its acquisition
note. The proceeds were used to acquire the assets of Ellebi on January 2, 1998.
At December 31, 2002, the applicable margin for acquisition note ranges from
2.25% to 3.25% for Base Rate Loans and from 3.00% to 4.00% for Eurocurrency
Loans. Repayments under the acquisition note are due in equal quarterly
installments of $1,312 through September 30, 2003.
Revolving line of credit note
The Company has the ability to borrow up to $25,000 under the revolving line
of credit, which expires on October 30, 2003. Available borrowings, however, are
limited to a defined borrowing base amount equal to 85% of eligible domestic
accounts receivable and 80% of certain eligible foreign accounts receivable. The
base borrowing amount is increased by the lesser of the sum of 50% of domestic
eligible inventory and 40% to 50% of certain eligible foreign inventory or
$10,000. Available borrowings are reduced by amounts outstanding under the
Canadian revolving line of credit note described below and outstanding letters
of credit. TheAt December 31, 2002, $7,301 was available for borrowing on the note.
At December 31, 2002, the applicable margin for the revolving line of credit note
ranges from 1.25%2.25% to 2.5%3.25% for Base Rate Loans and from 2.25%3.00% to 3.5%4.00% for
Eurocurrency Loans. A commitment fee of 0.5% to 0.625% is charged on the unused
balance based on the Company's Senior Leverage Ratio, as defined.
Supplemental revolving loan note
When the availability under the revolving line of credit note reaches zero,
the Company has the ability to borrow up to $10,000 under the supplemental
revolving loan note. Available borrowings are limited to the same borrowing base
as the revolving line of credit note to the extent the borrowing base exceeds
$25,000. At December 31, 2000, $7,307 was2002, $10,000 in borrowings were available underon the facility.
Acquisition note
Onnote.
At December 31, 1997,2002, the Company borrowed $21,000 under its acquisition
note. The proceeds were used to acquire the net assets of Ellebi on January 2,
1998, as discussed in Note 2. The applicable margin for the acquisitionsupplemental revolving note
ranges from 1.25%2.25% to 2.5%3.25% for Base Rate Loans and from 2.25%3.00% to 3.5%4.00% for
Eurocurrency Loans. RepaymentsA commitment fee of 0.5% to 0.625% is charged on the unused
balance based on the Company's Senior Leverage Ratio, as defined. A mandatory
prepayment of all outstanding loans under the acquisition note areis due in equal
quarterly installmentsif the Company reports
Earnings Before Interest, Taxes, Depreciation and Amortization ('EBITDA'), as
defined by the agreement, of $1,313 through September 30,less than $32,000 on a trailing four quarter basis
at the end of any fiscal quarter. The note expires on March 31, 2003.
FIRST AMENDED AND RESTATED CREDIT AGREEMENT
The Company's First Amended and Restated Credit Agreement ("Canadian Credit
Facility"), which is administered by Bank One and The Chase Manhattan Bank of
Canada ("Chase Canada"), is secured by substantially all of the assets of the
Company's Canadian subsidiaries and is guaranteed by the Company.
The Canadian Credit Facility provides for a C$20,000 term note and a C$4,000
revolving note, (U.S. $13,332$12,662 and U.S. $2,666)$2,532, respectively at December 31,
2000,
respectively.2002). Loans under each of the notes can be converted at the election of the
Company, in whole or in part, into Floating Rate advances, U.S. Base Rate
advances or LIBOR advances. Floating rate advances are denominated in Canadian
dollars and bear interest at a variable rate based on the bank's prime lending
rate plus a variable margin. U.S. Base Rate advances are denominated in U.S.
dollars and bear interest at the bank's prime lending rate plus a variable
margin. LIBOR advances are denominated in U.S. dollars and bear interest at
LIBOR plus a variable margin. The variable margin is based upon the Company's
Senior Debt Ratio, as defined by the Canadian Credit Facility and ranges from
0.5% to 1.75% for Floating Rate advances and U.S. Base Rate advances and from
1.5% to 2.75% for LIBOR advances.
3236
35
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
4.3. LONG-TERM DEBT -- (CONTINUED)
Canadian term note
Repayments under the Canadian term note are required in the following
installments:
QUARTERLY
---------
March 31, 20012003 through June 30, 2003................................................... $ 6842003................................. $650
Final installment on October 30, 2003.................................................. 6842003................................ 646
Canadian revolving line of credit note
A commitment fee of 0.5% is charged on the unused balance of the Canadian
revolving line of credit note.
SENIOR SUBORDINATED LOANS
On October 30, 1996, the Company borrowed $20,000 under its Senior
Subordinated Note Purchase Agreement ("Senior Subordinated Loans") with J.P.
Morgan Partners (23A SBIC), LLC, an affiliate of J.P. Morgan Partners, LLC, and
International Mezzanine. The Senior Subordinated Loans were repaid in full on
October 1, 1997 with the proceeds of the Notes discussed above.
In connection with the issuance of the Senior Subordinated Loans, the
Company issued warrants to purchase 1,002 membership units. The warrants have an
exercise price of one cent per warrant, are exercisable immediately, and expire
October 30, 2004. As provided in the Warrant Agreement, the warrant holder can
put the warrants and membership units acquired through the exercise of the
warrants back to the Company after October 30, 2001 or upon occurrence of a
Triggering Event, as defined, but prior tobefore the earlier of October 30, 2004 orand the
consummation of a Qualified Public Offering for an amount equal to Fair Market
Value, as defined. Additionally, as provided in the Warrant Agreement, the
Company may call the warrants and membership units acquired through the exercise
of the warrants at any time after the sixth anniversary of the Closing Date, but
prior to the earlier of October 30, 2004 or a Qualified Public Offering for an
amount equal to Fair Market Value, as defined. At the date of issuance, the
proceeds from the Senior Subordinated Loans were allocated between the Senior
Subordinated Loans and the warrants based upon their estimated relative fair
market value.
The warrants are beingwere accreted to their estimated redemption value through
periodic charges against Members' Equity through the earlier of October 30, 2001 or the time
redemption first becomes available. Thereafter the warrants will beare being recorded
at the then estimated redemption value. The aforementioned warrants have been
presented as mandatorily redeemable warrants in the accompanying balance sheets.
CAPITAL LEASES
During 2002, the Company borrowed Euro 5,702 (U.S. $5,978 as of December 31,
2002) under a Euro 6,850 ($7,183 as of December 31, 2002) 12 year lease for a
new manufacturing plant in France. The remaining amount available under the
lease will be borrowed by the Company in the first quarter of 2003. Repayments
under the lease are due in 48 equal quarterly installments of Euro 143 (U.S.
$150 as of December 31, 2002) plus interest and commence on March 31, 2003.
Interest accrues at a fixed rate of 5.21% on half of the outstanding loan
balance and accrues on the balance of the outstanding loan balance at an
adjustable rate, which is determined each quarter by reference to the three
month Euribor rate plus a margin of 0.85%.
The Company also has entered into various other capital lease arrangements
for certain machinery and equipment. These leases generally require monthly
payments of principal and interest and have terms from three to five years. At
December 31, 2002 the present value of the remaining payments outstanding under
these other capital leases totaled $306.
37
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
3. LONG-TERM DEBT -- (CONTINUED)
SCHEDULED MATURITIES
The aggregate scheduled annual principal payments due in each of the years
ending December 31, is as follows:
2001......................................................................................2003............................................................ $ 11,811
2002...................................................................................... 10,073
2003...................................................................................... 20,463
2004...................................................................................... 8,655
2005...................................................................................... --
thereafter................................................................................ 125,000
---------
176,00218,215
2004............................................................ 7,083
2005............................................................ 662
2006............................................................ 658
2007............................................................ 125,599
Thereafter...................................................... 3,013
--------
155,230
Less -- discount.......................................................................... (367)
---------
$ 175,635
=========discount................................................ (283)
--------
$154,947
========
33
36
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
5.4. MEMBERS' EQUITY
Holders of Class A Units are eligible to vote in elections of Managers of
the Company and other matters as set fourthforth in the Company's Operating Agreement
and By-Laws and are convertible to Class A-1 Units by holders that are regulated
financial institutions. Class A-1 Units are non-voting but are otherwise
entitled to the identical rights as holders of Class A Units and are convertible
to Class A units provided such conversion is not in violation of certain
governmental regulations of the unit holder.
Holders of Class B Units are entitled to such rights as designated by the
Board of Managers upon the original issuance of any Class B Units provided,
however, that those rights shall not be senior to the rights of the holders of
Class A units as to allocations of net profits and as to distributions without
the consent of a majority in interest of Class A Members. There were no Class B
Units issued as of December 31, 20002002 or 1999.2001.
Effective January 1, 2000, the Company issued 3,655 of its Class A-1 Units
in exchange for an equal amount of Class A Units.
Effective November 11, 2000, the Company issued 1,478 of its Class A-1
Units in exchange for an equal amount of Class A Units.
6.5. INCOME TAXES
The Company's C corporation subsidiaries and taxable foreign subsidiaries
account for income taxes in accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes". The Company and certain
domestic subsidiaries are limited liability corporations;companies; as such, the Company's
earnings are included in the taxable income of the Company's members. Income
(loss) before minority interest and income taxes were attributable to the following sources:
YEAR ENDED
DECEMBER 31,
------------------------------------------------------------------------------------
2002 2001 2000
1999 1998
----------- ----------- ------------------ -------- --------
United States.............................................. $10,491 $10,925 $10,002
Foreign....................................................States ............ $(15,475) $ 6,160 $ 10,491
Foreign .................. 8,105 (3,164) (2,976)
(5,530) (9,189)
------- ------- --------------- -------- --------
$ (7,370) $ 3,002 $ 7,515
$ 5,395 $ 813
======= ======= =============== ======== ========
38
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
5. INCOME TAXES -- (CONTINUED)
The provision (benefit) for income taxes is comprised of the following:
YEAR ENDED
DECEMBER 31,
---------------------------------------------------------------------------------
2002 2001 2000
1999 1998
----------- ----------- ----------------- ------- -------
CURRENTLY PAYABLE
United States............................................States ............. $ 5 $ 26 $ --
$ 14 $ --
Foreign..................................................Foreign ................... 2,972 737 630 2,836 1,591
------- ------- -------
2,977 763 630 2,850 1,591
------- ------- -------
DEFERRED
United States............................................States ............. -- -- --
Foreign..................................................Foreign ................... 1,275 (161) (908) (2,433) (688)
------- ------- -------
1,275 (161) (908) (2,433) (688)
------- ------- -------
$ (278)4,252 $ 417602 $ 903(278)
======= ======= =======
The effective tax rates differ from the U.S. federal income tax rate as
follows:
YEAR ENDED
DECEMBER 31,
-------------------------------------------------------------------------
2002 2001 2000
1999 1998
----------- ----------- ----------------- ------- -------
Income tax provision (benefit) at U.S. statutory rate (35%)...... .... $(2,580) $ 1,051 $ 2,630
$ 1,887 $ 286
U.S.U. S. income taxes attributable to members........................members ..................... 5,416 (2,147) (3,674) (3,823) (3,502)
Change in valuation allowance....................................allowance .................................. (2,817) 841 (86)
854 4,225Deemed forgiveness of subsidiary intercompany debt ............. 2,884 -- --
Nondeductible foreign goodwill...................................goodwill ................................. 212 391 224 369 270
Foreign rate differences and other, net..........................net ........................ 1,137 466 628 1,130 (376)
------- ------- -------
$ (278)4,252 $ 417602 $ 903(278)
======= ======= =======
34
37
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
6. INCOME TAXES -- (CONTINUED)
Deferred tax assets and liabilities, related primarily to the Company's
foreign subsidiaries, comprise the following:
DECEMBER 31,
--------------------
2000 1999
------- -------------------------------------
2002 2001
------------- -------------
DEFERRED TAX ASSETS
Net operating loss carryforwards of foreign subsidiaries.....................subsidiaries $ 6,6601,472 $ 7,2596,229
Fixed assets................................................................. 2,738 2,918
Goodwill..................................................................... 480 573
Inventory.................................................................... 83 133
Other........................................................................ 1,561 1,642
------- -------
11,522 12,525
------- -------assets 2,356 2,169
Goodwill 541 452
Inventory 54 52
Other 2,260 2,369
------------- -------------
6,683 11,271
------------- -------------
DEFERRED TAX LIABILITIES
Fixed assets................................................................. (2,492) (3,938)
Inventory.................................................................... (862) (889)
Employee benefits............................................................ -- (177)
Other........................................................................ (429) (309)
------- -------
(3,783) (5,313)assets (1,272) (1,565)
Inventory (849) (783)
Goodwill (192) (194)
Other (110) (243)
------------- -------------
(2,423) (2,785)
Valuation allowance.......................................................... (4,945) (5,258)
------- -------allowance (2,799) (5,739)
------------- -------------
Net deferred tax asset (liability)........................................... $ 2,7941,461 $ 1,954
======= =======2,747
============= =============
The net operating loss carryforwards of the Company's European subsidiaries
approximate $7,257$1,554 at December 31, 20002002 and have no expiration date. The net
operating loss carryforwards of the Company's Canadian subsidiaries approximate
$10,765$2,425 at December 31, 20002002 and expire primarily in 2005 through 2009.2008. As of
December 31, 20002002 and 1999,2001, respectively, the Company recorded a valuation
allowance of $4,945$2,799 and $5,258$5,739 based upon management's current assessment of the
likelihood of realizing the Canadian subsidiaries' deferred tax assets.
Management believes that it is more likely than not that the related deferred
tax assets recorded for its other subsidiaries will be realized and no valuation
allowance has been provided against such amounts as of December 31, 2000.2002. If
certain substantial changes in the Company's ownership should occur, there could
be an annual limit on the amount of certain carryforwards which can be utilized.
7.39
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
6. RELATED PARTY TRANSACTIONS AND ALLOCATIONS
A portion of the Company's U.S. Credit Facility, Canadian Credit Facility
and Senior Subordinated Loans, as described in Note 4, is with Chase and Chase
Canada, and J.P. Morgan Partners (23ASBIC), LLC, respectively, which are each affiliates of a member of the Company.Company, and J.P. Morgan
Partners (23A SBIC), LLC, respectively.
Charges to operations related to consulting services provided to the
Company by certain members of the Company aggregated approximately $406, $400$100, $361
and $386$406 for the years ended December 31, 2000, 19992002, 2001 and 1998,2000, respectively.
Certain employees and consultants of the Company hold Class A Units of the
Company.
During the year ended December 31, 1999, the Company acquired the
equity instruments owned by its former president for $4,250.
8.7. OPTION PLAN
The Company adopteduses the disclosure requirements of Financial Accounting
Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based Compensation". The
Company, however, has elected to continue to measure compensation cost using the
intrinsic value method, in accordance with APB Opinion 25 ("APB 25"),
"Accounting for Stock Issued to Employees".
The Company has issued options to purchase Class A Units which are
outstanding under the Company's 1995 Option Plan ("the Plan"(the "Plan"). As of December
31, 20002002 and 1999,2001, the Company was authorized under the Plan to issue options to
purchase up to 4,200 Class A Units to officers, directors and employees of the
Company and its subsidiaries. At December 31, 2000,2002, there were 179184 options that
remained available for grant under the Plan.
35
38
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
8. OPTION PLAN -- (CONTINUED)
Information concerning options to purchase Class A Units is as follows:
2002 2001 2000
1999 1998
----------------------- ---------------------- ------------------------------------------------- --------------------------- ---------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
NUMBER OF EXERCISE NUMBER OF EXERCISE NUMBER OF EXERCISE
UNITS PRICE UNITS PRICE UNITS PRICE
-------- -------- --------- -------- --------- -------------------- ------------ ------------ ------------ ------------ ------------
Outstanding at January 1............... 2,4051 2,264 $ 1,499 3,971 $ 1,343 3,903 $ 1,415
Options granted........................ -- -- 50 $ 4,000 280 $ 3,135
Options exercised...................... -- -- 696 $ 1,251 -- --
Options cancelled...................... 47 $ 5,610 920 $ 1,150 212 $ 5,035
----- ------- -------
Outstanding at December 31.............1,247 2,358 $ 1,417 2,405 $ 1,499
3,971Options cancelled 5 $ 1,343
===== ======= =======4,000 94 $ 5,524 47 $ 5,610
------------ ------------ ------------
Outstanding at December 31 2,259 $ 1,240 2,264 $ 1,247 2,358 $ 1,417
============ ============ ============
Exercisable at December 31.............31 1,563 $ 1,309 1,247 $ 1,282 1,581 $ 1,515
1,282 $ 1,532 1,665 $ 1,398
===== ======= =================== ============ ============
All options granted have terms of 15 years and vest as follows:
WEIGHTED
AVERAGE
NUMBER OF EXERCISE
UNITS PRICE VESTING PERIOD
- --------- --------- ----------------------------------------------------------------------------------------------------------------------------------------------------
129 $ 3,029 Options vest immediately.
1,3791,290 $ 1,4691,183 Options vest over periods, generally up to ten years,
as determined by the Option Committee. Vesting may be
accelerated based on the results of a Liquidity Event, as
defined in the Plan, or based upon the achievement of
certain operating results of the Company or its subsidiaries.
275 $ 1,000 Options vest based on the results of a Liquidity Event, as
defined in the Plan.
575565 $ 1,1301,080 Options vest based upon achievement of certain operating
results of the Company.
The Company has elected to continue applying the provisions of APB 25 and
accordingly, recognized compensation costexpense of $450 $400 and $558 for the yearsyear ended December
31, 2000, 1999 and 1998, respectively.2000. No compensation expense was recognized during 2002 or 2001 as no
options vested during those years. If compensation cost and the fair value of
options granted had been determined based upon the fair value method in
accordance with SFAS 123, the pro forma net (loss) income (loss) of the Company would
have been $8,047, $5,258$(11,676), $2,256 and ($290) the years ended December 31,
2000, 1999 and 1998, respectively. The weighted average fair value of options
granted per unit was $2,300 and $2,400$8,047 for the years ended December 31, 19992002,
2001 and 1998,2000, respectively.
Options granted in 1999 and 1998 had exercise prices below
market value at the date of grant.40
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
7. OPTION PLAN -- (CONTINUED)
The fair value of options granted and related pro forma compensation cost
were estimated using the Black-Scholes option-pricing model with an expected
volatility of zero and the following assumptions:
1999
1998
---- ----
Dividend yield............................ 0.0%yield........................... 0.0%
Risk-free rate of return..................return................. 6.0% 5.5%
Expected option term (in years)........... 8.......... 8
36
39
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
8. OPTION PLANS -- (CONTINUED)
The following table summarizes the status of the Company's options
outstanding and exercisable at December 31, 2000:2002:
OPTIONS OUTSTANDING
-----------------------------------------------------------------------------
WEIGHTED
AVERAGE
REMAINING
EXERCISE CONTRACTUAL OPTIONS
PRICES UNITS LIFE EXERCISABLE
--------- --------- ------------- ------------
$ 1,000 2,025 10 1,3098 1,959
$ 3,029 129 1210 129
$ 3,485 65 12 3910 65
$ 4,000 50 13 15
$ 5,610 8940 12 8925
9.8. PENSION PLANS
The Company has a defined benefit pension plan covering substantially all
of SportRack, LLC's domestic employees covered under a collective bargaining
agreement. An employee's monthly pension benefit is determined by multiplying a
defined dollar amount by the years of credited service earned. Plan assets are
comprised principally of marketable equity securities and short-term
investments. The Company's funding policy is to contribute annually the amounts
necessary to comply with ERISA funding requirements.
The following table sets forth the change in the plan's benefit obligations
and plan assets, and the funded status of the plan as of and for the years ended
December 31, 20002002 and 1999:2001:
DECEMBER 31,
----------------------
2000 1999
--------- --------------------------
2002 2001
------- -------
Change in benefit obligation:
Benefit obligation at beginning of year........................year ........................... $ 2,4913,080 $ 2,3012,703
Benefits earned during the year................................ 124 110year ................................... 149 136
Interest on projected benefit obligation....................... 182 151
Increase as a result in plan amendment......................... -- 363obligation .......................... 217 201
Actuarial loss (gain).......................................... (7) (362) ............................................. 90 133
Benefits paid.................................................. (87) (72)
------ ------paid ..................................................... (93) (93)
------- -------
Benefit obligation at end of year.............................. 2,703 2,491
------ ------year ................................. 3,443 3,080
------- -------
Change in plan assets:
Market value of assets at beginning of year.................... 2,190 1,831year ....................... 2,610 2,424
Actual return on plan assets................................... 84 147assets ...................................... (235) (79)
Employer contributions......................................... 238 284contributions ............................................ 196 358
Benefits paid.................................................. (87) (72)
------ ------paid ..................................................... (93) (93)
------- -------
Market value of assets at end of year.......................... 2,425 2,190
------ ------year ............................. 2,478 2,610
------- -------
Funded status..................................................... (278) (301)status ........................................................ (965) (470)
Unrecognized prior service cost................................... 345 371cost ...................................... 292 318
Unrecognized net (gain) loss...................................... (160) (284)
------ ------
Accrued pension cost.............................................. $ (93) $ (214)
====== ======
YEAR ENDED DECEMBER 31,
-------------------------------------
2000 1999 1998
--------- --------- ----------
Components of net periodic benefit cost:
Service cost.................................................. $ 124 $ 110 $ 99
Interest cost................................................. 182 151 140
Expected return on plan assets................................ (205) (175) (147)
Recognized net actuarial gain................................. (10) -- --
Amortization of prior service cost............................ 27 1 1
-------loss ......................................... 850 285
------- -------
Net periodic Benefit cost........................................amount recognized ................................................ $ 118177 $ 87133
======= =======
Amounts recognized in the statement of financial position consist
of:
Accrued benefit liability ......................................... $ 93
=======(965) $ (470)
Intangible asset .................................................. 292 318
Accumulated other comprehensive income adjustment ................. 850 285
------- -------
Net amount recognized ............................................. $ 177 $ 133
======= =======
3741
40
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
9.8. PENSION PLANS -- (CONTINUED)(continued)
YEAR ENDED DECEMBER 31,
--------------------------------------
2002 2001 2000
---------- ---------- ----------
Components of net periodic benefit cost:
Service cost ........................... $ 149 $ 136 $ 124
Interest cost .......................... 217 201 182
Expected return on plan assets ......... (240) (232) (205)
Recognized net actuarial gain .......... -- -- (10)
Amortization of prior service cost ..... 27 27 27
---------- ---------- ----------
Net periodic benefit cost ................. $ 153 $ 132 $ 118
========== ========== ==========
The weighted average discount rate used in determining the actuarial
present value of the accumulated benefit obligation was 7.50%7.00%, 7.75%7.25%, and 6.75%7.50%
at December 31, 2000, 19992002, 2001 and 1998,2000, respectively. The expected long-term rate
of return on plan assets was 9.00% at December 31, 2000, 19992002, 2001 and 1998.2000.
The Company has various defined contribution retirement plans for its
domestic and certain foreign subsidiaries, including 401(k) plans, whereby
participants can contribute a portion of their salary up to certain maximums
established by the related plan documents. The Company makes matching
contributions, which are based upon the amounts contributed by employees. The
Company's matching contributions charged to operations aggregated $375, $296 and
$369 $334in 2002, 2001 and $306 in 2000, 1999 and 1998, respectively.
Substantially all of the employees of Brink International B.V. are covered
by a union-sponsored, collectively-bargained, multi-employer defined benefit
plan. Pension expense was $1,270, $1,271$1,302, $1,086 and $1,302$1,270 for the years ended December
31, 2002, 2001 and 2000, 1999 and 1998, respectively.
10.9. OPERATING LEASES
The Company leases certain equipment under leases expiring on various dates
through 2004.2007. Future minimum annual lease payments required under leases that
have a noncancellable lease term in excess of one year at December 31, 20002002 are
as follows:
2001....................................................................................2003.................................................................................... $ 3,542
2002.................................................................................... 2,870
2003.................................................................................... 1,9422,571
2004.................................................................................... 1,4311,986
2005.................................................................................... 7621,276
2006.................................................................................... 431
2007.................................................................................... 13
-------
$10,547
=======$ 6,277
Rental expense charged to operations was approximately $4,066, $4,169$4,399, $4,069 and
$3,947$4,066 for the years ended December 31, 2002, 2001 and 2000, 1999 and 1998, respectively.
11.42
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
10. ACCOUNT BALANCES
Account balances included in the consolidated balance sheets are comprised
of the following:
DECEMBER 31,
-----------------------
2000 1999
--------- --------------------------------------
2002 2001
------------- -------------
INVENTORIES
Raw materials.............................................................. $17,746 $13,068
Work-in-process............................................................ 7,910 9,871materials ....................................... $ 14,631 $ 14,689
Work-in-process ..................................... 9,893 10,323
Finished goods............................................................. 18,978 18,715
Reserves................................................................... (2,540) (3,217)
------- -------
$42,094 $38,437
======= =======goods ...................................... 19,068 17,248
Reserves ............................................ (2,910) (2,828)
------------- -------------
$ 40,682 $ 39,432
============= =============
PROPERTY AND EQUIPMENT
Land, buildings and improvements........................................... $23,751 $23,694improvements .................... $ 26,570 $ 23,138
Land, buildings and improvements under capital leases 7,183 --
Furniture, fixtures and computer hardware.................................. 11,346 9,891hardware ........... 15,497 11,582
Machinery, equipment and tooling........................................... 54,219 47,565
Construction-in-progress................................................... 1,579 2,820
------- -------
90,895 83,970tooling .................... 65,468 57,994
Machinery and equipment under capital leases ........ 409 409
Construction-in-progress ............................ 1,557 2,262
------------- -------------
116,684 95,385
Less -- accumulated depreciation........................................... (32,663) (24,654)
------- -------
$58,232 $59,316
======= =======depreciation .................... (56,112) (40,981)
------------- -------------
$ 60,572 $ 54,404
============= =============
ACCRUED LIABILITIES
Compensation and benefits.................................................. $12,400 $12,350
Interest................................................................... 3,148 3,367
Other...................................................................... 9,854 9,050
------- -------
$25,402 $24,767
======= =======benefits ........................... $ 15,387 $ 13,594
Interest ............................................ 3,078 2,983
Other ............................................... 12,297 6,976
------------- -------------
$ 30,762 $ 23,553
============= =============
38
41
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
12.11. COMMITMENTS AND CONTINGENCIES
In February 1996, the Company commenced an action against certain
individuals alleging breach of contract under the terms of an October 1992
Purchase Agreement and Employment Agreements with the predecessor of the
Company. The individuals then filed a separate lawsuit against the Company
alleging breach of contract under the respective Purchase and Employment
agreements. On May 7, 1999 a jury in the United States District Court for the
Eastern District of Michigan reached a verdict against the Company and awarded
the individuals approximately $3,800 plus interest and reasonable attorney fees.
The Company plans to fileis currently pursuing an appeal oncein the court enters a judgment, which is
expected during the second quarterSixth Circuit Court of
2001.Appeals. During 2000,2002 and 2001, the Company increased its estimated accrual for
this matter by $450$600 and $600, respectively, representing accrued interest for
the year which charge is included in interest expense. During 1999, the Company
increased its estimated accrual for this matter by $2,000 which charge is
included in other expense. At December 31, 20002002, the
Company had an outstanding irrevocable letter of credit totaling $6,350$8,325
benefiting the individuals. No amounts have been paid as of December 31, 1999.
During2002.
The Company offers warranties to its customers depending upon the second quarterspecific
product and terms of 2000 onethe customer purchase agreement. The majority of the
Company's product warranties are customer specific. A typical warranty program
requires that the Company replace defective products within a specified time
period from the date of sale. The Company records and estimate for future
warranty related costs based on actual historical return rates. The Company has
not experienced significant costs related to its warranties.
In early July 2002, three European automotive OEM customers of Brink Sweden
recalled in total approximately 380,000 trucks to replace or reinforce their
trailer hitches,41,000 towbars which were supplied by the
Company. The recall affects 1998-2000vehicles fitted with the G 3.0 model year vehicles builtremovable
towbar system sold between January 19981999 and September 1999.March 2000. The Company workedis in the
process of working with the customerits customers to provide technical and other support in
response to the recall. Management can not estimate at this time whatDuring the financial impact will be tofourth quarter of 2002, based upon
information gathered concerning the Company, if any, as a resultcosts of the recall and from discussions
with its customers during the fourth quarter, management estimated and recorded
an expense of approximately $3,000 for the recall. The expense is included in
selling, administrative and product development expenses. At December 31, 2002
the unpaid liability for the recall totaling $2,854 was included in accrued
liabilities.
In addition to the above, the Company is party to various claims, lawsuits
and administrative proceedings related to matters arising out of the normal
course of business. Management believes that the resolution of these matters
will not have a material adverse effect on the financial position, results of
operations or cash flows of the Company.
13.43
12. SEGMENT INFORMATION
The Company operates in one reportable segment, providing towing and rack
systems and related accessories to the automotive OEM and aftermarket. All sales
are to unaffiliated customers. Revenues by geographic area, accumulated by the
geographic area where the revenue originated, revenues by product line and
long-lived assets, which include net property and equipment and net goodwill and
debt issuance costs, by geographic area are as follows:
YEAR ENDED
DECEMBER 31,
-------------------------------------------------------------------------
2002 2001 2000
1999 1998
----------- ----------- --------------------- --------- ---------
REVENUES
United States....................................................States................................................. $ 231,133 $ 223,662 $ 222,159
$ 211,167 $ 192,306
The Netherlands..................................................Netherlands............................................... 35,177 31,768 32,344
35,647 35,543
Italy............................................................Italy......................................................... 16,437 15,788 15,725
19,211 19,900
Other foreign....................................................foreign................................................. 47,035 42,817 48,589 48,117 44,396
--------- --------- ---------
$ 318,817329,782 $ 314,142314,035 $ 292,145318,817
========= ========= =========
YEAR ENDED
DECEMBER 31,
-------------------------------------------------------------------------
2002 2001 2000
1999 1998
----------- ----------- --------------------- --------- ---------
REVENUES
Towing systems..................................................systems................................................ $ 175,348 $ 173,327 $ 186,753
$ 187,276 $ 175,236
Rack systems....................................................systems.................................................. 154,434 140,708 132,064 126,866 116,909
--------- --------- ---------
$ 318,817329,782 $ 314,142314,035 $ 292,145318,817
========= ========= =========
DECEMBER 31,
-------------------------------------------------------------------------
2002 2001 2000
1999 1998
----------- ----------- --------------------- --------- ---------
LONG-LIVED ASSETS
United States........................................................ $34,830States................................................. $ 32,01362,489 $ 28,41693,068 $ 96,201
The Netherlands...................................................... 11,494 13,080 16,258
Italy................................................................ 3,044 4,619 6,435Netherlands............................................... 24,978 22,326 24,197
Italy......................................................... 4,214 4,705 6,280
Other foreign........................................................ 8,864 9,604 10,186
------- -------- --------
$58,232foreign................................................. 19,834 12,384 13,975
--------- --------- ---------
$ 59,316111,515 $ 61,295
======= ======== ========132,483 $ 140,653
========= ========= =========
39
42
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
13. SEGMENT INFORMATION -- (CONTINUED)
The Company has two significant customers in the automotive OEM industry.
Sales to these customers represented 32%23% and 11%22% of total Company sales for the
year ended December 31, 2000, 36%2002, 28% and 12%17% for the year ended December 31, 1999,2001,
and 32% and 11% for the year ended December 31, 1998.2000. Accounts receivable from
these customers represented 30%21% and 11%18% of the Company's trade accounts
receivable at December 31, 2000,2002, and 35%27% and 5%10% at December 31, 1999,2001,
respectively.
Although the Company is directly affected by the economic well being of the
industries and customers referred to above, management does not believe
significant credit risk exists at December 31, 2000.2002. Consistent with industry
practice, the Company does not require collateral to reduce such credit risk.
14.13. CONDENSED CONSOLIDATING INFORMATION
The Notes have been issued byOn October 1, 1997, the Company and its wholly-owned subsidiary, AAS
Capital Corporation, issued and sold $125,000 of its 9 3/4% Senior Subordinated
Notes due 2007. The Notes are guaranteed on a full, and unconditional and joint and
several basis, by all of the Company's direct and indirect wholly-owned domestic
subsidiaries. The following condensed consolidating financial information for
2000, 19992002, 2001 and 19982000 presents the financial position, results of operations and
cash flows of (i) the Company as parent, as if it accounted for its subsidiaries
on the equity method, and AAS Capital Corporation as issuers; (ii) guarantor
subsidiaries which are domestic, wholly-owned subsidiaries and include SportRack
LLC, AAS Holdings, Inc., Valley Industries, LLC, and ValTek LLC; and (iii) the
non-guarantor subsidiaries which are foreign, wholly-owned subsidiaries and
include Brink International B.V., and its subsidiaries, SportRack International,Accessories,
Inc., and its subsidiary, and SportRack Automotive, GmbH.GmbH and its subsidiaries.
The operating results of the guarantor and non-guarantor subsidiaries include
management fees of $1,407 and $320, respectively, for the year ended December
31, 2002, $1,416 and $310,respectively, for the year ended December 31, 2001 and
$1,410 and $330, respectively, for the year ended December 31, 2000, $1,410 and $320, respectively, for the year ended
December 31, 1999 and $1,198 and $318 for the year ended December 31, 1998, in
addition to having been charged interest on their intercompany balances.2000. Since its
formation in September 1997, AAS Capital Corporation has had no operations and
has no assets or liabilities at December 31, 2000.
402002.
44
43
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
14.13. CONDENSED CONSOLIDATING INFORMATION -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 20002002
GUARANTOR NON-GUARANTOR ELIMINATIONS/
ISSUERS SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
------- ------------ ------------ ----------- -------------------------- -------------- -------------- -------------- --------------
ASSETS
Current assets
Cash .................................. $ 1,153440 $ 24677 $ 1,9162,136 $ -- $ 3,3152,653
Accounts receivable ................... -- 28,309 14,63331,920 19,606 -- 42,94251,526
Inventories ........................... -- 19,148 22,94616,810 23,872 -- 42,09440,682
Deferred income taxes and other
current assets ....................... 7 5,180 3,46280 6,836 6,563 -- 8,649
--------- --------- --------- --------- ---------13,479
-------------- -------------- -------------- -------------- --------------
Total current assets ............. 1,160 52,883 42,957520 55,643 52,177 -- 97,000
--------- --------- --------- --------- ---------108,340
Property and equipment, net ............. -- 34,830 23,40233,433 27,139 -- 58,23260,572
Goodwill, net ........................... 1,025 56,144 20,222985 24,729 21,594 -- 77,39147,308
Other intangible assets, net ............ 3,968 234 8282,971 371 293 -- 5,0303,635
Deferred income taxes and other
noncurrent assets ..................... 93 2,385 2,366794 3,413 -- 4,8444,300
Investment in subsidiaries .............. 57,61578,872 9,955 -- (67,570)(88,827) --
Intercompany notes receivable ........... 91,69559,487 3,591 -- (63,078) --
(91,695) --
--------- --------- --------- --------- ----------------------- -------------- -------------- -------------- --------------
Total assets ..................... $ 155,556142,928 $ 156,431128,516 $ 89,775 $(159,265)104,616 $ 242,497
========= ========= ========= ========= =========(151,905) $ 224,155
============== ============== ============== ============== ==============
LIABILITIES AND MEMBERS'
EQUITY
Current liabilities
Current maturities of long-term debt .. $ --8,574 $ 54 $ 9,587 $ -- $ 11,811 $ -- $ 11,81118,215
Accounts payable ...................... -- 16,689 8,30722,346 10,813 -- 24,99633,159
Accrued liabilities and deferred
income taxes ........................ 6,799 8,027 10,5768,060 7,846 14,856 -- 25,402
--------- --------- --------- --------- ---------30,762
Mandatorily redeemable warrants ....... 5,250 -- -- -- 5,250
-------------- -------------- -------------- -------------- --------------
Total current liabilities ........ 6,799 24,716 30,69421,884 30,246 35,256 -- 62,209
--------- --------- --------- --------- ---------87,386
Deferred income taxes and other
noncurrent liabilities ................ 2,003 343 3,2121,391 3,031 -- 5,5586,425
Long-term debt, less current maturities . 135,976124,717 252 11,763 -- 27,848 -- 163,824136,732
Intercompany debt ....................... -- 46,064 45,631 (91,695) -- Mandatorily redeemable warrants ......... 5,01063,078 (63,078) -- -- -- 5,010
Members' equity ......................... 5,768 85,308 (17,610) (67,570) 5,896
--------- --------- --------- --------- ---------(5,676) 96,627 (8,512) (88,827) (6,388)
-------------- -------------- -------------- -------------- --------------
Total liabilities and members'
equity .................................................... $ 155,556142,928 $ 156,431128,516 $ 89,775 $(159,265)104,616 $ 242,497
========= ========= ========= ========= =========(151,905) $ 224,155
============== ============== ============== ============== ==============
4145
44
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
14.13. CONDENSED CONSOLIDATING INFORMATION -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 19992001
GUARANTOR NON-GUARANTOR ELIMINATIONS/
ISSUERS SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
------- ------------ ------------ ----------- ------------------------- ------------- ------------- ------------- -------------
ASSETS
Current assets
Cash ....................................................................... $ 334 $ 2 $ 1,803 $ -- $ 5,469 $ 3,249 $ -- $ 8,7182,139
Accounts receivable ......................................... -- 32,087 14,83129,094 15,696 -- 46,91844,790
Inventories ......................................................... -- 16,361 22,07615,603 23,829 -- 38,43739,432
Deferred income taxes and other
current assets ....................... 13 3,724 2,946.......................... 7 2,326 3,443 -- 6,683
--------- --------- --------- --------- ---------5,776
------------- ------------- ------------- ------------- -------------
Total current assets ............. 13 57,641 43,102................ 341 47,025 44,771 -- 100,756
--------- --------- --------- --------- ---------92,137
Property and equipment, net ............................. -- 32,014 27,30234,071 20,333 -- 59,31654,404
Goodwill, net ........................... 1,065 57,100 22,509.............................. 985 53,930 18,479 -- 80,67473,394
Other intangible assets, net ............ 4,423 390 916............... 3,670 412 603 -- 5,7294,685
Deferred income taxes and other
noncurrent assets ............................................. 93 1,988 2,6571,340 2,237 -- 4,7383,670
Investment in subsidiaries .............. 43,065................. 70,323 9,955 -- (53,020)(80,278) --
Intercompany notes receivable ........... 99,537.............. 74,601 -- -- (99,537)(74,601) --
--------- --------- --------- --------- ---------------------- ------------- ------------- ------------- -------------
Total assets ............................................. $ 148,196150,013 $ 159,088146,733 $ 96,486 $(152,557)86,423 $ 251,213
========= ========= ========= ========= =========(154,879) $ 228,290
============= ============= ============= ============= =============
LIABILITIES AND MEMBERS'
EQUITY
Current liabilities
Current maturities of long-term debt ....... $ -- $ --1,108 $ 12,4499,915 $ -- $ 12,44911,023
Accounts payable ............................................... -- 18,090 8,62519,562 9,489 -- 26,71529,051
Accrued liabilities and deferred
income taxes ........................ 5,524 9,231 10,012........................... 6,731 7,804 9,018 -- 24,767
--------- --------- --------- --------- ---------23,553
Mandatorily redeemable warrants ............ 5,130 -- -- -- 5,130
------------- ------------- ------------- ------------- -------------
Total current liabilities ........ 5,524 27,321 31,086........... 11,861 28,474 28,422 -- 63,931
--------- --------- --------- --------- ---------68,757
Deferred income taxes and other
noncurrent liabilities ................ 1,553 608 3,931................... 2,003 719 2,861 -- 6,0925,583
Long-term debt, less current maturities . 124,597.... 127,675 297 17,654 -- 41,452 -- 166,049145,626
Intercompany debt ................................................. -- 64,189 35,348 (99,537)16,920 57,681 (74,601) --
Mandatorily redeemable warrants ......... 4,810 -- -- -- 4,810
Members' equity ......................... 11,712 66,970 (15,331) (53,020) 10,331
--------- --------- --------- --------- ---------............................ 8,474 100,323 (20,195) (80,278) 8,324
------------- ------------- ------------- ------------- -------------
Total liabilities and members'
equity ....................................................... $ 148,196150,013 $ 159,088146,733 $ 96,486 $(152,557)86,423 $ 251,213
========= ========= ========= ========= =========(154,879) $ 228,290
============= ============= ============= ============= =============
4246
45
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
14.13. CONDENSED CONSOLIDATING INFORMATION -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2002
GUARANTOR NON-GUARANTOR ELIMINATIONS/
ISSUERS SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
------------- ------------- ------------- ------------- -------------
Net sales .............................. $ -- $ 231,133 $ 98,649 $ -- $ 329,782
Cost of sales .......................... -- 180,421 70,095 -- 250,516
------------- ------------- ------------- ------------- -------------
Gross profit ......................... -- 50,712 28,554 -- 79,266
Selling, administrative and product
development expenses ................. 1,088 23,817 24,404 -- 49,309
Amortization of intangible assets ...... 109 13 -- 122
------------- ------------- ------------- ------------- -------------
Operating income (loss) .............. (1,088) 26,786 4,137 -- 29,835
Interest expense ....................... 11,310 316 4,281 -- 15,907
Equity in net (income) of subsidiaries . (776) -- -- 776 --
Foreign currency (gain) ................ -- -- (8,429) -- (8,429)
Other expense .......................... -- 340 180 -- 520
------------- ------------- ------------- ------------- -------------
Income before cumulative effect of
accounting change and income taxes .. 11,622 26,130 8,105 (776) 21,837
Cumulative effect of accounting change
for goodwill impairment ............. -- (29,207) -- -- (29,207)
------------- ------------- ------------- ------------- -------------
Income (loss) before income taxes ...... (11,622) (3,077) 8,105 (776) (7,370)
Provision for income taxes ............. -- -- 4,252 -- 4,252
------------- ------------- ------------- ------------- -------------
Net income (loss) ...................... $ (11,622) $ (3,077) $ 3,853 $ (776) $ (11,622)
============= ============= ============= ============= =============
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2001
GUARANTOR NON-GUARANTOR ELIMINATIONS/
ISSUERS SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
------------- ------------- ------------- ------------- -------------
Net sales .............................. $ -- $ 223,662 $ 90,373 $ -- $ 314,035
Cost of sales .......................... -- 178,092 61,491 -- 239,583
------------- ------------- ------------- ------------- -------------
Gross profit ......................... -- 45,570 28,882 -- 74,452
Selling, administrative and product
development expenses ................. 247 24,822 19,700 -- 44,769
Amortization of intangible assets ...... 40 2,372 900 -- 3,312
------------- ------------- ------------- ------------- -------------
Operating income (loss) .............. (287) 18,376 8,282 -- 26,371
Interest expense ....................... 8,853 2,533 6,298 -- 17,684
Equity in net (income) of subsidiaries . (11,534) -- -- (11,534) --
Foreign currency loss .................. -- -- 4,948 -- (4,948)
Other expense .......................... -- 543 200 -- 743
------------- ------------- ------------- ------------- -------------
Income (loss) before income taxes ...... 2,394 15,300 (3,164) (11,534) 2,996
Provision for income taxes ............. -- -- 602 -- 602
------------- ------------- ------------- ------------- -------------
Net income (loss) ...................... $ 2,394 $ 15,300 $ (3,766) $ (11,534) $ 2,394
============= ============= ============= ============= =============
47
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
13. CONDENSED CONSOLIDATING INFORMATION -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000
GUARANTOR NON-GUARANTOR ELIMINATIONS/
ISSUERS SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
------- ------------ ------------ ----------- ------------------------- ------------- ------------- ------------- -------------
Net sales................................sales .............................. $ -- $ 222,159 $ 96,658 $ -- $ 318,817
Cost of sales............................sales .......................... -- 173,230 65,860 -- 239,090
---------- ---------- ----------- ---------- ----------------------- ------------- ------------- ------------- -------------
Gross profit...........................profit ......................... -- 48,929 30,798 -- 79,727
Selling, administrative and product
development expenses...................expenses ................. 1,780 23,450 20,297 -- 45,527
Amortization of intangible assets........assets ...... 40 2,347 910 -- 3,297
---------- ---------- ----------- ---------- ----------------------- ------------- ------------- ------------- -------------
Operating income (loss)................ .............. (1,820) 23,132 9,591 -- 30,903
Interest expense.........................expense ....................... 6,027 4,433 7,490 -- 17,950
Equity in net income (loss)(income) of subsidiaries........................... 15,640subsidiaries . (15,640) -- -- (15,640)15,640 --
Foreign currency gain (loss).............loss .................. -- -- (5,386)5,386 -- (5,386)5,386
Other income (expense)...................(income) expense ................. -- (361) 309361 (309) -- (52)
---------- ---------- ----------- ---------- ----------52
------------- ------------- ------------- ------------- -------------
Income (loss) before income taxes........taxes ...... 7,793 18,338 (2,976) (15,640) 7,515
Benefit for income taxes.................taxes ............... -- -- 278 -- 278
---------- ---------- ----------- ---------- ----------------------- ------------- ------------- ------------- -------------
Net income (loss)........................ ...................... $ 7,793 $ 18,338 $ (2,698) $ (15,640) $ 7,793
========== ========== =========== ========== ======================= ============= ============= ============= =============
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
GUARANTOR NON-GUARANTOR ELIMINATIONS/
ISSUERS SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
------- ------------ ------------ ----------- ------------
Net sales................................ $ -- $ 211,265 $ 102,877 $ -- $ 314,142
Cost of sales............................ -- 158,691 69,198 -- 227,889
---------- ---------- ----------- ---------- ----------
Gross profit........................... -- 52,574 33,679 -- 86,253
Selling, administrative and product
development expenses................... 1,624 25,141 23,493 -- 50,258
Amortization of intangible assets........ 40 2,326 879 -- 3,245
---------- ---------- ----------- ---------- ----------
Operating income (loss)................ (1,664) 25,107 9,307 -- 32,750
Interest expense......................... 4,933 5,559 6,961 -- 17,453
Equity in net income (loss) of
subsidiaries........................... 13,575 -- -- (13,575) --
Foreign currency gain (loss)............. -- -- (7,912) -- (7,912)
Other income (expense)................... (2,000) 10 -- -- (1,990)
---------- ---------- ----------- ---------- ----------
Income (loss) before income taxes........ 4,978 19,558 (5,566) (13,575) 5,395
Provision for income taxes............... -- 14 403 -- 417
---------- ---------- ----------- ---------- ----------
Net income (loss)........................ $ 4,978 $ 19,544 $ (5,969) $ (13,575) $ 4,978
========== ========== =========== ========== ==========
4348
46
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
14.13. CONDENSED CONSOLIDATING INFORMATION -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONSCASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 19982002
GUARANTOR NON-GUARANTOR ELIMINATIONS/
ISSUERS SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
------- ------------ ------------ ----------- ------------------------- ------------- ------------- ------------- -------------
Net sales................................cash provided by (used for) operating
activities ............................. $ (10,224) $ 27,238 $ 3,990 $ -- $ 192,30621,004
------------- ------------- ------------- ------------- -------------
Cash flows from investing activities:
Acquisition of property and
equipment ............................ -- (5,554) (9,800) -- (15,354)
Investment in Subsidiary ............... (7,000) -- -- 7,000 --
------------- ------------- ------------- ------------- -------------
Net cash used for investing activities (7,000) (5,554) (9,800) 7,000 (15,354)
------------- ------------- ------------- ------------- -------------
Cash flows provided by (used for)
financing activities:
Change in intercompany debt ............ 15,114 (20,510) 5,396 -- --
Net increase in revolving loan ......... 5,572 -- -- -- 5,572
Repayment of debt ...................... -- (1,099) (12,280) -- (13,379)
Borrowing of debt ...................... -- -- 5,637 -- 5,637
Issuance of Membership Units ........... -- -- 7,000 (7,000) --
Distributions to members ............... (3,356) -- -- -- (3,356)
------------- ------------- ------------- ------------- -------------
Net cash provided by (used for)
financing activities ............... 17,330 (21,609) 5,753 (7,000) (5,526)
------------- ------------- ------------- ------------- -------------
Effect of exchange rate changes .......... -- -- 390 -- 390
------------- ------------- ------------- ------------- -------------
Net increase (decrease) in cash .......... 106 75 333 -- 514
Cash at beginning of period .............. 334 2 1,803 -- 2,139
------------- ------------- ------------- ------------- -------------
Cash at end of period .................... $ 99,839440 $ 77 $ 2,136 $ -- $ 292,145
Cost of sales............................ -- 144,162 71,279 -- 215,441
---------- ---------- ----------- ---------- ----------
Gross profit........................... -- 48,144 28,560 -- 76,704
Selling, administrative and product
development expenses................... 1,560 23,631 25,648 -- 50,839
Amortization of intangible assets........ 40 2,314 1,197 -- 3,551
Impairment charge -- -- 7,863 -- 7,863
---------- ---------- ----------- ---------- ----------
Operating income (loss)................ (1,600) 22,199 (6,148) -- 14,451
Interest expense......................... 3,700 6,888 8,045 -- 18,633
Equity in net income (loss) of
subsidiaries........................... 5,210 -- -- (5,210) --
Foreign currency gain.................... -- -- 4,995 -- 4,995
---------- ---------- ----------- ---------- ----------
Income (loss) before income taxes........ (90) 15,311 (9,198) (5,210) 813
Provision for income taxes............... -- -- 903 -- 903
---------- ---------- ----------- ---------- ----------
Net income (loss)........................ $ (90) $ 15,311 $ (10,101) $ (5,210) $ (90)
========== ========== =========== ========== ==========2,653
============= ============= ============= ============= =============
4449
47
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
14.13. CONDENSED CONSOLIDATING INFORMATION -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2001
GUARANTOR NON-GUARANTOR ELIMINATIONS/
ISSUERS SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
------------ ------------ ------------- ------------- ------------
Net cash provided by (used for) operating
activities .................................... $ (8,830) $ 32,749 $ 3,732 $ -- $ 27,651
------------ ------------ ------------ ------------ ------------
Cash flows from investing activities:
Acquisition of property and
equipment ................................... -- (4,249) (3,331) -- (7,580)
------------ ------------ ------------ ------------ ------------
Net cash used for investing activities ...... -- (4,249) (3,331) -- (7,580)
------------ ------------ ------------ ------------ ------------
Cash flows provided by (used for)
financing activities:
Change in intercompany debt ................... 17,094 (29,144) 12,050 -- --
Net decrease in revolving loan ................ (8,341) -- -- -- (8,341)
Repayment of debt ............................. -- -- (11,706) -- (11,706)
Collection on members notes receivable ........ 59 -- -- -- 59
Borrowing of debt ............................. -- 400 -- -- 400
Distributions to members ...................... (801) -- -- (801)
------------ ------------ ------------ ------------ ------------
Net cash provided by (used for)
financing activities ...................... 8,011 (28,744) 344 -- (20,389)
------------ ------------ ------------ ------------ ------------
Effect of exchange rate changes ................. -- -- (858) -- (858)
------------ ------------ ------------ ------------ ------------
Net decrease in cash ............................ (819) (244) (113) -- (1,176)
Cash at beginning of period ..................... 1,153 246 1,916 -- 3,315
------------ ------------ ------------ ------------ ------------
Cash at end of period ........................... $ 334 $ 2 $ 1,803 $ -- $ 2,139
============ ============ ============ ============ ============
50
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
13. CONDENSED CONSOLIDATING INFORMATION -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2000
GUARANTOR NON-GUARANTOR ELIMINATIONS/
ISSUERS SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
------- ------------ ------------ ----------- ------------------------- ------------- ------------- ------------- -------------
Net cash provided by (used for) operating
activities..................................activities ............................. $ (5,585) $ 22,146 $ 4,855 $ -- $ 21,416
----------- --------- ---------- ---------- ----------------------- ------------- ------------- ------------- -------------
Cash flows from investing activities:
Acquisition of property and
equipment.................................equipment ............................ -- (7,699) (2,746) -- (10,445)
Acquisition of subsidiaries, net of cash
acquired..................................acquired ............................. -- (1,545) (1,259) -- (2,804)
---------- --------- ---------- ---------- ---------------------- ------------- ------------- ------------- -------------
Net cash used for investing activities....activities -- (9,244) (4,005) -- (13,249)
---------- ---------- ---------- ---------- ---------------------- ------------- ------------- ------------- -------------
Cash flows provided by (used for)
financing activities:
Change in intercompany debt.................debt ............ 7,842 (18,125) 10,283 -- --
Net increase in revolving loan..............loan ......... 11,343 -- -- -- 11,343
Repayment of debt...........................debt ...................... -- -- (13,878) -- (13,878)
Repurchase of membership units..............units ......... (6,422) -- -- -- (6,422)
Collection on members notes receivable......receivable . 65 -- -- -- 65
Distributions to members....................members ............... (6,090) -- -- -- (6,090)
---------- --------- ---------- ---------- ----------------------- ------------- ------------- ------------- -------------
Net cash provided by (used for)
financing activities....................activities ............... 6,738 (18,125) (3,595) -- (14,982)
---------- --------- ---------- ---------- ----------------------- ------------- ------------- ------------- -------------
Effect of exchange rate changes...............changes .......... -- -- 1,412 -- 1,412
---------- --------- ---------- ---------- ---------------------- ------------- ------------- ------------- -------------
Net increase (decrease) in cash...............cash .......... 1,153 (5,223) (1,333) -- (5,403)
Cash at beginning of period...................period .............. -- 5,469 3,249 -- 8,718
---------- --------- ---------- ---------- ----------------------- ------------- ------------- ------------- -------------
Cash at end of period.........................period .................... $ 1,153 $ 246 $ 1,916 $ -- $ 3,315
========== ========= ========== ========== ======================= ============= ============= ============= =============
4551
48
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
14. CONDENSED CONSOLIDATING INFORMATION -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999
GUARANTOR NON-GUARANTOR ELIMINATIONS/
ISSUERS SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
------- ------------ ------------ ----------- ------------
Net cash provided by (used for) operating
activities................................... $ (5,953) $ 26,715 $ 4,252 $ -- $ 25,014
----------- --------- ---------- ---------- ----------
Cash flows from investing activities:
Acquisition of property and
equipment.................................. -- (8,000) (3,775) -- (11,775)
---------- --------- ---------- ---------- ---------
Net cash used for investing activities..... -- (8,000) (3,775) -- (11,775)
---------- ---------- ---------- ---------- ---------
Cash flows provided by (used for)
financing activities:
Change in intercompany debt.................. 10,148 (14,162) 4,014 -- --
Repayment of debt............................ -- -- (9,270) -- (9,270)
Issuance of membership units................. 50 -- -- -- 50
Repurchase of membership units............... (4,274) -- -- -- (4,274)
Collection on members notes receivable....... 29 -- -- -- 29
Distributions from subsidiaries.............. 4,720 -- -- (4,720) --
Distributions to members..................... (4,720) (4,720) -- 4,720 (4,720)
---------- --------- ---------- ---------- ----------
Net cash provided by (used for)
financing activities..................... 5,953 (18,882) (5,256) -- (18,185)
---------- --------- ---------- ---------- ----------
Effect of exchange rate changes................ -- -- 2,424 -- 2,424
---------- --------- ---------- ---------- ---------
Net increase (decrease) in cash................ -- (167) (2,355) -- (2,522)
Cash at beginning of period.................... -- 5,636 5,604 -- 11,240
---------- --------- ---------- ---------- ----------
Cash at end of period.......................... $ -- $ 5,469 $ 3,249 $ -- $ 8,718
========== ========= ========== ========== ==========
46
49
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
14. CONDENSED CONSOLIDATING INFORMATION -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
GUARANTOR NON-GUARANTOR ELIMINATIONS/
ISSUERS SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
------- ------------ ------------ ----------- ------------
Net cash provided by (used for) operating
activities.................................. $ (4,216) $ 18,479 $ 7,616 $ -- $ 21,879
----------- --------- ---------- ---------- ----------
Cash flows from investing activities:
Acquisition of property and
equipment................................. -- (4,358) (5,640) -- (9,998)
Amount due from sellors of Valley
Industries, Inc........................... -- 1,150 -- -- 1,150
Acquisition of subsidiaries, net of cash
acquired.................................. -- -- (22,770) -- (22,770)
---------- --------- ---------- ---------- ----------
Net cash used for investing activities.... -- (3,208) (28,410) -- (31,618)
---------- ---------- ---------- ---------- ----------
Cash flows provided by (used for)
financing activities:
Change in intercompany debt................. 6,101 (11,657) 5,556 -- --
Net reduction in revolving loan............. (1,900) -- (2,605) -- (4,505)
Repayment of debt........................... -- -- (3,682) -- (3,682)
Issuance of membership units................ 29 -- -- -- 29
Repurchase of membership units.............. (14) -- -- -- (14)
Distributions from subsidiaries............. 195 -- -- (195) --
Distributions to members.................... (195) (195) -- 195 (195)
---------- --------- ---------- ---------- ----------
Net cash provided by (used for)
financing activities.................... 4,216 (11,852) (731) -- (8,367)
---------- --------- ---------- ---------- ----------
Effect of exchange rate changes............... -- -- 1,998 -- 1,998
---------- --------- ---------- ---------- ---------
Net increase (decrease) in cash............... -- 3,419 (19,527) -- (16,108)
Cash at beginning of period................... -- 2,217 25,131 -- 27,348
---------- --------- ---------- ---------- ----------
Cash at end of period......................... $ -- $ 5,636 $ 5,604 $ -- $ 11,240
========== ========= ========== ========== ==========
47
50
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. MANAGERS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the names and ages of each of the
individuals that currently serve as a member (each, a "Board Member") of the
Company's board of managers (the "Board of Managers"), or as an executive
officers and other significant
employees of the Company.
NAME AGE POSITION --------------------------- ----- ------------------------------------------------------------MANAGER OR OFFICER SINCE
------------------------ ---- ------------------------------------------------ ------------------------
F. Alan Smith.............. 69Smith........... 71 Chairman of the Board of Managers of the Company September 1995
Terence C. Seikel.......... 44Seikel....... 45 President and Chief Executive Officer of the January 1996
Company; Board Member
Richard E. Borghi.......... 54Borghi....... 56 President and Chief Operating Officer of September 1995
SportRack; Board Member
Gerrit de Graaf............ 37Graaf......... 39 General Manager and Chief Executive Officer of October 1996
Brink; Board Member
Bryan A. Fletcher.......... 41Fletcher....... 43 President and Chief Operating Officer of Valley August 1997
Aftermarket (a division of Valley Industries,
LLC), Board Member
Barry G. Steele............ 30 Corporate Controller of the CompanySteele......... 32 Chief Financial Officer June 1999
J. Wim Rengelink........... 46Rengelink........ 48 Finance Director of Brink October 1996
Donald J. Hofmann, Jr...... 43Jr... 45 Board Member, Vice President and Secretary of the September 1995
Company
Barry Banducci............. 65Banducci.......... 67 Board Member September 1995
Gerard J. Brink............ 57Brink......... 59 Board Member October 1996
F. Alan Smith has served in the automotive industry for 3941 years and has
been Chairman of the Board of Managers of the Company since its formation in
September 1995. He served in various assignments at General Motors from 1956 to
1992, including President of GM Canada from 1978 to 1980. He was a member of the
Board of Directors of General Motors from 1981 to 1992 and Chief Financial
Officer of General Motors from 1981 to 1988. Mr. Smith is a director of
The
Minnesota Mining and Manufacturing Corporation ("3M"), TransPro, Inc.
("TransPro").
Terence C. Seikel has served in the automotive industry for 1719 years and
has been President and Chief Executive Officer of the Company since April 15,
1999. From 1996 until April 15, 1999, Mr. Seikel served as Vice President of
Finance and Administration and Chief Financial Officer of the Company and
SportRack. From 1985 to 1996, Mr. Seikel was employed by Larizza Industries, a
publicly held supplier of interior trim to the automotive industry, in various
capacities including Chief Financial Officer.
Richard E. Borghi has served in the automotive industry for 3335 years and
has been President and Chief Operating Officer of SportRack since April 15,
1999. From 1995 until April 15, 1999, Mr. Borghi, served as Executive Vice
President of Operations and Chief Operating Officer of SportRack. From 1988 to
1995, Mr. Borghi held various senior management positions with MascoTech, and
was the Executive Vice President of Operations of the MascoTech Division at the
time of its acquisition by the Company.
Gerrit de Graaf has been General Manager and Chief Executive Officer of
Brink since November 1996. From 1989 to 1996, Mr. de Graaf worked as a
consultant for Philips Medical Systems as(a division of Philips Electronics), a
consultantcompany engaged in the distribution of electronic medical equipment, and most
recently as Philips' Marketing Manager in the United States.
Bryan A. Fletcher has served in the automotive industry for 1214 years and
has been President and Chief Operating Officer of Valley Aftermarket (a division
of Valley Industries, LLC) since July 2000. From 1991 until July 2000 Mr.
Fletcher served as Vice President of Aftermarket Operations of Valley.
Barry G. Steele has been Chief Financial Officer since April 1, 2002. Prior
to that Mr. Steele served as Corporate Controller and Treasurer since July 2001.
From June 1999 to July 2001 Mr. Steele was Corporate Controller of the Company since June
1999.Company.
From 1997 until June 1999, Mr. Steele served as Manager of Financial Reporting
of the Company. From 1993 to 1997, Mr. Steele was employed by Price Waterhouse
LLP.
J. Wim Rengelink has served in the automotive industry for 1416 years and has
been Finance Director of Brink since 1995. From 1988 to 1995 he worked in
Brink's internal audit department.
4852
51
Donald J. Hofmann, Jr. has been a Board Member, Vice President and
Secretary of the Company since October 1995. Since January 2003, Mr. Hofmann has beenis
a Senior Advisor of J.P. Morgan Partners and was a partner of J.P. Morgan
Partners, LLC, or its predecessor Chase Capital Partners a global general
partnership with over $20.0 billion under management since 1992. J.P. Morgan
Partnersfrom 1992 to January, 2003.
JPMP provides equity and mezzanine debt financing for management buyouts and
recapitalizations, growth equity and venture capital. Mr. HofmannJPMP is also an executive officer of the managing member ofinvestment
advisor to J.P. Morgan Partners (23A SBIC), LLC, a member of the Company, which is advised by J.P. Morgan Partners, LLC.Company. Mr.
Hofmann is also a director of BPC Holding Corporation, Barry Plastics
Corporation, Pliant Corporation and United Auto Group, Inc.Corporation.
Barry Banducci has been a Board Member of the Company since October 1995.
Since September 1995, Mr. Banducci has been the Chairman of TransPro.TransPro, Inc., a
supplier to the automotive OEM market and aftermarket. Prior thereto, Mr.
Banducci served in various capacities at Equion Corporation, a supplier of
automotive components, from 1983 to 1995, including President, Chief Executive
Officer and Vice Chairman. Mr. Banducci is a director of TransPro.TransPro, Inc.
Gerard J. Brink has been a Board Member of the Company since October 1996.
Mr. Brink has been retired since October 1996 prior to that he was General
Manager of Brink from 1965 to 1996.
Each member of the Board of Managers holds office until his successor is
elected and qualified, or until his earlier death, resignation or removal. The
Company's officers serve at the discretion of the Board of Managers.
See the disclosures in Item 12. under the caption "Members' Agreement" for
a description of arrangements to elect Messrs. Seikel, Borghi, Smith, Banducci,
Brink, Fletcher and Hofmann as managers of the Company. See the disclosures in
Item 11. under the caption "Employment Agreements" for a description of
agreements with each of Messrs. Seikel, Borghi, de Graaf and Fletcher pursuant
to which they are required to be appointed to the executive positions they
currently hold.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation for
2000 through 2002 for the chief executive officer of the Company and the four
next most highly compensated executive officers of the Company.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------------------- -------------------------------
OTHER
ANNUAL SECURITIES ALL OTHER
FISCAL SALARY BONUS COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) OPTIONS(#) ($)
- ------------------------------------ -------- ------------- ------------- ----------------- ----------------- ------------
Terence C. Seikel................... 2002 265,000 175,000 -- -- 4,506
President and Chief Executive 2001 265,000 115,000 -- -- 5,100
Officer of the Company and 2000 265,000 175,000 -- -- 5,100
SportRack
Barry G. Steele..................... 2002 134,105 42,000 -- -- 4,013
Chief Financial Officer of the 2001 106,950 20,000 -- -- 2,506
Company 2000 95,270 20,000 -- -- 3,120
Richard E. Borghi................... 2002 306,419 125,000 -- -- 4,494
President and Chief Operating 2001 324,964 105,000 -- -- 2,100
Officer of SportRack 2000 279,798 125,000 -- -- 4,439
Gerrit de Graaf..................... 2002 165,168 38,899 -- -- --
General Manager and Chief Executive 2001 151,577 41,250 -- -- --
Officer of Brink 2000 154,000 65,000 -- -- --
Bryan Fletcher...................... 2002 151,316 50,000 -- -- 400
President and Chief Operating 2001 142,000 57,200 -- -- 400
Officer of Valley Aftermarket 2000 132,664 40,500 -- 50 400
- ----------
OPTION GRANTS IN 2002 AND OPTION VALUES AT YEAR END
During 2002, there were no options granted to the named executive officers.
The following table sets forth information regarding outstanding membership unit
options issued to the chief executive officer of the Company and the four next
most highly compensated executive officers.
53
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT YEAR END(#) AT YEAR END($)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
- -------------------- ----------- ----------- -------------------- ---------------------
F. Alan Smith....... -- -- 332/150 1,743,000/788,000
Terence C. Seikel... -- -- 465/200 2,441,000/1,050,000
Richard E. Borghi... -- -- 432/200 2,268,000/1,050,000
Gerrit de Graaf..... -- -- 39/- 205,000/--
Bryan Fletcher...... -- -- 20/20 105,000/105,000
- ----------
BOARD MEMBER COMPENSATION
The Board Members do not currently receive compensation for their service
on the Board of Managers or any committee thereof but are reimbursed for their
out-of-pocket expenses. In addition, Messrs. Smith and Banducci have consulting
agreements with the Company. See "Executive Compensation - Consulting"Consulting Agreements."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Managers has an Audit Committee consisting of Messrs. Banducci
and Brink, and a Compensation Committee consisting of Messrs. Hofmann and Smith.
The Audit Committee reviews the scope and results of audits and internal
accounting controls and all other tasks performed by the independent public
accountants of the Company. The Compensation Committee determines compensation
for executive officers of the Company and administers the Company's 1995 Option
Plan.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation for
1998 through 2000 for the chief executive officer of the Company and the four
next most highly compensated executive officers of the Company.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------------------- ----------------
OTHER
ANNUAL SECURITIES ALL OTHER
FISCAL SALARY BONUS COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) OPTIONS(#) ($)
- ------------------------------------ -------- ------------- ------------- ----------------- ----------------- -----------
F. Alan Smith ......................... 2000 228,000 114,000 -- -- --
Chairman of the Company 1999 228,000 114,000 -- -- --
1998 217,000 105,000 -- 32 --
Terence C. Seikel ..................... 2000 265,000 175,000 -- -- --
President and Chief Executive Officer 1999 245,000 175,000 -- -- --
of the Company and SportRack 1998 215,000 95,000 -- 65 --
Roger T. Morgan ....................... 2000 179,892 -- -- -- --
Former President and Chief Executive 1999 263,000 100,000 -- -- --
Officer of Valley 1998 250,000 87,500 -- -- --
Richard E. Borghi ..................... 2000 279,798 125,000 -- -- --
President and Chief Operating Officer 1999 261,897 125,000 -- -- --
of SportRack 1998 219,965 115,000 -- 32 --
Gerrit de Graaf ....................... 2000 154,000 65,000 -- -- --
General Manager and Chief Executive 1999 164,830 68,660 -- -- --
Officer of Brink 1998 154,425 45,414 -- 39 --
Bryan Fletcher ........................ 2000 132,664 40,500 -- -- --
President and Chief Operating 1999 133,170 64,050 -- -- --
Officer of Valley Aftermarket 1998 115,015 41,000 -- -- --
- ------------------
49
52
OPTION GRANTS IN 2000
During 2000, there were no options granted to the named executive officers.
The following table sets forth information regarding outstanding membership unit
options issued to the chief executive officer of the Company and the four next
most highly compensated executive officers.
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT YEAR END(#) AT YEAR END($)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
-------------------- -------------------- --------------- ------------------------- --------------------
F. Alan Smith....... -- -- 332/150 1,660,000/ 750,000
Terence C. Seikel... -- -- 465/200 2,325,000/ 1,000,0000
Roger T. Morgan..... -- -- --/ 89 --/ --
Richard E. Borghi... -- -- 432/200 2,160,000/ 1,000,000
Gerrit de Graaf..... -- -- 24/15 120,000/ 75,000
Bryan Fletcher...... -- -- 10/35 50,000/ 175,000
- -------------------
EMPLOYMENT AGREEMENTS
Each of Terence C. Seikel, Richard E. Borghi, Gerrit de Graaf and Bryan
Fletcher have eachhas entered into an employment agreement (collectively, the "Employment
Agreements") with the Company. Mr. Seikel's Employment Agreement provides for an
annual base salary of $250,000, subject to increases at the sole discretion of
the Board of Managers, and a bonus in the range of 50-70% of his base salary.
Mr. Borghi's Employment Agreement provides for an annual base salary of
$250,000, subject to increases at the sole discretion of the Board of Managers,
a bonus in the range of 30-50% of his base salary, and he is entitled to a one
time bonus of $100,000 onat his convenience or the earlier of (i) September 30, 2002, (ii) his termination
date, and (iii)or a sale of the Company. Mr. de Graaf's Employment Agreement provides for
an annual base salary of NLG 170,000, subject to increases at the sole
discretion of the Board of Managers, and a bonus in the range of 30% to 50% of
his base salary. Mr. Fletcher's Employment Agreement provides for an annual base
salary of $150,000, subject to increases at the sole discretion of the Board of
Managers, and a bonus in the range of 30% to 50% of his base salary. The
Employment Agreements also provide for twelve months of severance pay to the
executive officer in the event such officer is terminated without cause (as
defined in the Employment Agreement). The Employment Agreements for Messrs
Seikel, Borghi and Fletcher provided for an increase in the severance pay period
to 18 months upon a change in control of the Company, as defined in the
Employment Agreement.
The Employment Agreements expire December 31, 2003 for MessrsMessrs. Seikel,
Borghi and Fletcher and automatically extend for successive two-year terms
unless terminated by the Company upon 30 days notice prior to the expiration of
the current term. The Employment Agreement for Mr. de Graaf may be terminated by
either party upon three month's prior written notice. Each Employment Agreement
prohibits the executive officer from disclosing non-public information about the
Company. The Employment Agreements also require the executive officers to assign
to the Company any designs, inventions and other related items and intellectual
property rights developed or acquired by the executive officer during the term
of his employment. In addition, for a period of five years after termination of
employment (two years if the termination is without cause) each executive
officer has agreed, in his respective Employment Agreement, not to (i) engage in
any Competitive Business (as defined in the Employment Agreements), (ii)
interfere with or disrupt any relationship between the Company and its
customers, suppliers and employees and (iii) induce any employee of the Company
to terminate his or her employment with the Company or engage in any Competitive
Business.
CONSULTING AGREEMENTS
F. Alan Smith and Barry Banducci, both members of the Board of Managers,
have each entered into consulting agreements (the "Consulting Agreements") with
the Company dated as of September 28, 1995. Mr. Smith's2001. The Consulting Agreement
provides for an annual consulting fee of $150,000 subject to increases at the
sole discretion of the Board of Managers, and a performance based bonus in the
range of 30-50% of the annual consulting fee. Mr. Banducci's Consulting
Agreement providesAgreements each
provide for an annual consulting fee of $50,000. The initial term ofEither party can terminate the
Consulting Agreements expiredupon 10 days notice. Following the termination date and
for so long as the consultant shall continue to serve on March 28, 1997. The Consulting Agreements
automatically extend for successive six-month periods unless terminated bythe Board of Managers
of the Company, upon 30 days notice prior to the expirationconsultant will receive an annual board fee of no less than
10% of the then current term.aggregate purchase price for all Units of the Company acquired by
him, currently $30,000 for Mr. Smith and $25,000 for Mr. Banducci. The
Consulting Agreements prohibit Messrs. Smith and Banducci from disclosing
non-public information about the Company.
5054
53
MEMBERS' AGREEMENT
PursuantCOMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Managers has an Audit Committee consisting of Messrs. Banducci
and Smith, and a Compensation Committee consisting of Messrs. Hofmann and Smith.
Prior to August 2002, the Third AmendedAudit Committee consisted of Messrs. Banducci and
Restated Members' Agreement dated asBrink. The Audit Committee reviews the scope and results of September 30, 1999 (the "Members' Agreement") amongaudits and internal
accounting controls and all other tasks performed by the independent public
accountants of the Company. The Compensation Committee determines compensation
for executive officers of the Company and certain
holdersadministers the Company's 1995 Option
Plan. None of outstanding units (the "Units")the members of the Compensation Committee was, during 2002, an
officer or employee of the Company such holdersor any of its subsidiaries or was formerly an
officer of the Units shall vote all Units held by them for electionCompany or any of a majorityits subsidiaries, except that Mr. Smith has
been the Company's Chairman of the Board of Managers consisting of Terence C. Seikel and Richard E. Borghi (so long as
each is employed by the Company),Mr. Hofmann has been
Vice President and F. Alan Smith, Barry Banducci, Gerard J.
Brink and Roger T. Morgan (so long as each is a holder of a certain number of
Units) (the "Enumerated Managers"). J.P. Morgan Partners (23A SBIC), LLC, an
affiliate of JPMP, has the ability to appoint up to 5 additional membersSecretary of the Board of Managers. Pursuant to the voting provisionCompany since its formation in September
1995. None of the Members' Agreement,
J.P. Morgan Partners (23A SBIC), LLC hasCompensation Committee members had any relationship with the
right, under certain circumstances,
including breachCompany requiring disclosure by the Company pursuant to Securities and Exchange
Commission rules regarding disclosure of certain covenants, to replacerelated-party transactions, except that
Mr. Hofmann and Mr. Smith had the Enumerated
Managers.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of March 19, 2001, the outstanding membership interests ofrelationships with the Company consisted of 14,369 Units. The following table sets forth certain information
regarding the beneficial ownership of the Units by (i) each person known by the
Company to own more than 5% of the Units, (ii) each named director, (iii) each
named executive officer and (iv) all of the Company's directors and executive
officers treated as a group. To the knowledge of the Company, each of such
holders of Units has sole voting and investment power as to the Units owned
unless otherwise noted.
PERCENTAGE
NAME AND ADDRESS(1) UNITS OWNED OWNERSHIP(2)
------------------------------------------- --------------- --------------
J.P. Morgan Partners (23A SBIC), LLC (3)... 10,251 68.94%
1221 Avenue of the Americas
New York, New York 10020
Celerity Partners.......................... 1,500 10.44
C/o Mark Benham
300 Sand Hill Road
Building 4, Suite 230
Menlo Park, California 94025
F. Alan Smith(4)........................... 632 4.30
Terence C. Seikel(5)....................... 665 4.48
Richard E. Borghi(6)....................... 632 4.27
Gerrit de Graaf(7)......................... 50 0.35
Bryan Fletcher(8).......................... 35 0.24
Barry Banducci(9).......................... 500 3.42
59 Old Quarry Road
Guilford, Connecticut 06437
Gerard J. Brink............................ 410 2.85
Lijsterbeslaan 10
B-2950 Kapellen
Belgium
Donald J. Hoffman (10)..................... 10,251 68.94
All directors and executive officers as a
group (nine persons)...................... 2,924 18.41
- ----------------
(1) Unless otherwise indicated, address is c/o Advanced Accessory Systems, LLC,
12900 Hall Road, Suite 200, Sterling Heights, Michigan 48313.
(2) Beneficial ownership is determined in accordance with the rules of the
Commission and includes voting and investment power with respect to the
Units. Units subject to options or warrants currently exercisable or
exercisable within 60 days of March 17, 2000 are deemed outstanding for
purposes of computing the percentage ownership of the person holding such
options or warrants, but are not deemed outstanding for purposes of
computing the percentage of any other person.
(3) CB Capital Investors, L.P. is an affiliate of CCP. Includes 501 Units
subject to warrants exercisable within 60 days.
(4) Includes 332 Units subject to options exercisable within 60 days. 300 Units
are owned by the F. Alan Smith Family Limited Partnership.
(5) Includes 465 Units subject to options exercisable within 60 days.
(6) Includes 432 Units subject to options exercisable within 60 days.
(7) Includes 24 Units subject to options exercisable within 60 days.
(8) Includes 10 Units subject to options exercisable within 60 days.
(9) Includes 250 Units subject to options exercisable within 60 days. All Units
are owned by the Banducci Family, LLC.
(10) Such person may be deemed the beneficial owner of the Units held by J.P.
Morgan Partners (23A SBIC), LLC due to his status as an executive officer
of J.P. Morgan Partners (23A SBIC Manager), Inc. the managing member of
J.P. Morgan Partners (23A SBIC), LLC.
51
54
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONSdescribed
below:
Chase Securities Inc. ("CSI"), Chase, Chase Canada and JPMP are affiliates
of J.P. Morgan Partners (23A SBIC), LLC, which owns approximately 49.98%34.44% of the
Company's issued and outstanding voting securities on a fully diluted basis.and currently beneficially
owns 69.0% of the Company's equity securities. CSI acted as an Initial Purchaser
in connection with the Offering,offering of Notes, for which it received customary fees.
Chase is agent bank and a lender to the Company under the Amended and RestatedU.S. Credit AgreementFacility
and has received customary fees and reimbursement of expenses in such
capacities. Chase Canada is agent bank and a lender to the Company under the
Canadian Credit Agreement and has received customary fees and reimbursement of
expenses in such capacities. Chase received its proportionate share, $6.0
million, of the repayment by the Company of $90.0 million under the Amended and RestatedU.S. Credit
AgreementFacility from the proceeds of the Offering.offering of Notes. J.P. Morgan Partners (23A
SIBC)SBIC), LLC, an affiliate of JPMP and CSI, held a portion of the Senior
Subordinated Debt and received its proportionate share, $10.7 million, including
prepayment penalties of $700,000, of the repayment by the Company of such debt
from the proceeds of the Offering.offering of Notes. As a result of the Offering,offering of
Notes, such affiliate was relieved of its obligation to provide up to an
additional $20.0 million of senior subordinated debt financing. In addition, an
affiliate of CSI and JPMP purchased a portion of the Notes in connection with
the Offering.offering of Notes. Donald J. Hofmann, Jr., a Senior Advisor and former
partner of JPMP, is a member of the Board of Managers of the Company. In
addition, CSI, Chase and their affiliates participate on a regular basis in
various investment banking and commercial banking transactions for the Company
and its affiliates.
On January 1, 2000, the Company issued 3,655 of its Class A-1 Units to J.P.
Morgan Partners (23A SBIC), LLC, in exchange for 3,655 Class A Units.
On November 11, 2000 the Company issued 1,478 of its Class A-1 Units to
J.P. Morgan Partners (23A SBIC), LLC, in exchange for 1,478 Class A Units.
The Company is a party to a Consulting Agreement with F. Alan Smith, the
Chairman of the Company. See "Consulting Agreements."
55
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED MEMBER MATTERS
As of March 25, 2003, the outstanding membership interests of the Company
consisted of 14,359 Units, including 9,226 Class A Units and 5,133 Class A-1
Units. The following table sets forth certain information regarding the
beneficial ownership of the Units by (i) each person known by the Company to
beneficially own more than 5% of the Units, (ii) each manager, (iii) each
executive officer named in the Summary Compensation Table in Item 11. of this
report, and (iv) all of the Company's managers and executive officers treated as
a group. To the knowledge of the Company, each of such holders of Units has sole
voting and investment power as to the Units owned unless otherwise noted.
PERCENTAGE
NAME AND ADDRESS(1) UNITS OWNED OWNERSHIP(2)
- ------------------------------------------- --------------- --------------
J.P. Morgan Partners (23A SBIC), LLC (3)... 10,251 69.0%
1221 Avenue of the Americas
New York, New York 10020
Celerity Partners.......................... 1,500 10.5
c/o Mark Benham
300 Sand Hill Road
Building 4, Suite 230
Menlo Park, California 94025
F. Alan Smith(4)........................... 632 4.3
Terence C. Seikel(5)....................... 665 4.5
Richard E. Borghi(6)....................... 632 4.3
Gerrit de Graaf(7)......................... 59 0.4
Bryan A. Fletcher(8)....................... 50 0.4
Barry Banducci(9).......................... 500 3.4
Gerard J. Brink............................ 410 2.9
Donald J. Hofmann, Jr. (10)................ 10,251 69.0
All managers and executive officers as a
group (nine 13,238 80.5
persons) (11)............................
(1) Addresses are provided only for persons beneficially owning more than
five percent of the Units.
(2) Beneficial ownership is determined in accordance with the rules of the
Commission and includes voting and investment power with respect to the
Units. Units subject to options or warrants currently exercisable or
exercisable within 60 days of March 25, 2002 are deemed outstanding for
purposes of computing the percentage ownership of the person holding
such options or warrants, but are not deemed outstanding for purposes
of computing the percentage of any other person.
(3) J.P. Morgan Partners(23A SBIC), LLC is an affiliate of JPMP. Includes
501 Units subject to warrants exercisable within 60 days. Includes
5,133 Class A-1 non voting Units that are immediately convertible into
Class A voting Units.
(4) Includes 332 Units subject to options exercisable within 60 days. 300
Units are owned by the F. Alan Smith Family Limited Partnership.
(5) Includes 465 Units subject to options exercisable within 60 days.
(6) Includes 432 Units subject to options exercisable within 60 days.
(7) Includes 39 Units subject to options exercisable within 60 days.
(8) Includes 25 Units subject to options exercisable within 60 days.
(9) Includes 250 Units subject to options exercisable within 60 days. 250
Units are owned by the Banducci Family, LLC.
(10) Such person may be deemed the beneficial owner of the Units held by
J.P. Morgan Partners (23A SBIC), LLC due to his status as Senior
Advisor to JPMP and Attorney-in-Fact for J.P. Morgan Partners (23A
SBIC), LLC and its majority member, of J.P. Morgan Partners (23A SBIC
Manager), Inc. Mr. Hofmann disclaims beneficial ownership of the Units
held by J.P. Morgan Partners (23A SBIC), LLC except to the extent of
his pecuniary interest therein which is not readily determinable
because it is subject to several variables including without limitation
the internal rates of return and vesting of interest in J.P. Morgan
Partners (23A SBIC), LLC.
(11) Includes 2,044 Units subject to options exercisable within 60 days.
For a description of a potential change in control of the Company, see Item
1 "Business - General".
MEMBERS' AGREEMENT
As of September 30, 1999, the Company and the members entered into the
Third Amended and Restated Members' Agreement, setting forth the relative voting
rights of the members in the election of the Board of Managers. The Board of
Managers consists of between six and eleven members, as designated by persons
holding more than fifty percent of the voting Units held by J.P. Morgan Partners
(23A SBIC), LLC, an affiliate of JPMP and its affiliates (defined in the Third
Amended and Restated Members' Agreement as the "Chase Members"). The voting
provisions apportion the Board of Managers among the Chase Members and all other
members in the following way:
56
o for so long as Terence C. Seikel and Richard E. Borghi are employed by
the Company, each shall be a manager;
o as to each of F. Alan Smith and Barry Banducci, for so long as their
respective affiliates, as defined in the Third Amended and Restated
Members' Agreement, continue to hold 80% of the Units they acquired on
September 28, 1995, each shall be a manager;
o so long as Gerard Jacobus Brink, Koop Brink and Jan Willem Brink, along
with certain affiliated persons or entities, continue to own at least
80% of the Units they acquired on October 30, 1996, persons controlling
a majority of their voting Units may designate a manager from among the
Brinks or their affiliates, who is currently Gerard J. Brink;
o so long as Robert L. Fisher and Roger T. Morgan, along with certain
affiliated persons or entities, continue to own at least 80% of the
Units they acquired on August 5, 1997, persons controlling a majority
of their voting Units may designate one manager, who is currently Bryan
A. Fletcher; and
o the Chase Members designate the remaining managers, one of which shall
be a representative of J.P. Morgan Partners (23A SBIC), LLC, who is
currently Donald J. Hofmann, Jr.
J.P. Morgan Partners (23A SBIC), LLC has the right to remove any or all of the
members of the Board of Managers if:
o it reasonably believes circumstances exist that require it to assume
control of the Company in order to protect its investment in the
Company;
o in its reasonable opinion, the Company shall have committed a breach or
be in default of any covenant, obligation, agreement, representation or
warranty given or made by the Company in certain agreements or
contracts;
o in its reasonable opinion, there has been a substantial change in the
Company's operations, products or prospects during the two-year period
prior to such determination; and
o it determines that it is permitted under any applicable law to take
control of the Company and determines that it is in its best interests
to do so.
EQUITY COMPENSATION PLAN INFORMATION
The following information is provided as of December 31, 2002 with
respect to compensation plans, including individual compensation arrangements,
under with our equity securities are authorized for issuance:
(c)
NUMBER OF SECURITIES
(a) (b) REMAINING AVAILABLE FOR
NUMBER OF SECURITIES TO BE WEIGHTED-AVERAGE FUTURE ISSUANCE UNDER
ISSUED UPON EXERCISE OF EXERCISE PRICE OF EQUITY COMPENSATION PLANS
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS (EXCLUDING SECURITIES
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS REFLECTED IN COLUMN (a))
- ------------------------------ ---------------------------- -------------------------- --------------------------
Equity compensation plans
approved by security holders(1)....... 3,256 $ 859 184
Equity compensation plans not
approved by security holders.......... 0 0 0
----------- ------------ -----------
Total .................................. 3,256 $ 859 184
=========== ============ ===========
- ----------
(1) These plans consists of (1) the Advanced Accessory Systems LLC 1995 Option
Plan, and (2) warrants granted to J.P. Morgan Partners (23A SBIC), LLC and
International Mezzanine Capital, B.V.
57
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See Item 11. under the caption "Compensation Committee Interlocks and
Insider Participation" for a description of transactions between the Company and
entities with which Donald J. Hofmann, Jr., a manager of the Company, and Senior
Advisor of J.P. Morgan Partners (23A SBIC), LLC, a member beneficially owning
69.0% of our Units, are affiliated.
The Company is a party to the Consulting Agreements with F. Alan Smith, the
Chairman of the Company, and Barry Banducci, a Board Membermanager of the Company. See Item
11. "Executive Compensation -- Consulting Agreements."
In connection with the acquisition of the MascoTech Division by the
Company, the Company loaned Mr. Borghi, the President and Chief Operating
Officer of SportRack and a manager of the Company, $100,000 to enable him to
make his initial equity investments in the Company. The loan bears interest at
6.2% and maturesis due on demand.
ITEM 14. CONTROLS AND PROCEDURES
Under the supervision and with the participation of management, including
our principal executive officer and principal financial officer, the Company has
evaluated the effectiveness of the design and operation of its disclosure
controls and procedures within 90 days of the filing date of this annual report,
and based on their evaluation, the principal executive officer and principal
financial officer have concluded that these controls and procedures are
effective. There were no significant changes in September 2002.
52internal controls or in other
factors that could significantly affect these controls subsequent to the date of
their evaluation.
Disclosure controls and procedures are the Company's controls and other
procedures that are designed to ensure that information required to be disclosed
by the Company in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported, within the time periods specified
in the Securities and Exchange Commission's rules and forms. Disclosure controls
and procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed in the reports that the Company
files under the Exchange Act is accumulated and communicated to management,
including the principal executive officer and principal financial officer, as
appropriate to allow timely decisions regarding required disclosure.
58
55
PART IV
ITEM 14.15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Form 10-K:
1. Financial Statements:
A list of the Consolidated Financial Statements, related notes and
ReportsReport of Independent Accountants is set forth in Item 8 of this report on Form
10-K.
2. Financial Statement Schedules:
Schedule II - Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulations of the Commission are not required under the related
instructions, are inapplicable, orare not material, or the information called for
thereby is otherwise included in the financial statements and, therefore, have
been omitted.
3. Index to Exhibits:
EXHIBIT
NUMBER DESCRIPTION
------- -----------
3.1 Amended and Restated Certificate of Formation of
AAS. Incorporated by referenceEach management contract or compensatory plan or arrangement filed as
an exhibit to Exhibit 3.1this report is identified in this index to AAS' Registration Statement on Form S-4 (File No.
333-49011).
3.2 Third Amended and Restated Operating Agreement of
AAS. Incorporated by reference to Exhibit 3.2 to
AAS' Quarterly Report forexhibits with an
asterisk before the quarterly period
ended September 30, 1999 on Form 10-Q (File No.
333-49011).
3.3 Amended Bylaws of AAS. Incorporated by reference
to Exhibit 3.3 to AAS' Quarterly Report for the
quarterly period ended September 30, 1999 on Form
10-Q (File No. 333-49011).
3.4 Third Amended and Restated Members' Agreement
Dated as of September 30, 1999 among Advanced
Accessory Systems, LLC, and the Members that are
parties hereto. Incorporated by reference to
Exhibit 3.4 to AAS' Quarterly Report for the
quarterly period ended September 30, 1999 on Form
10-Q (File No. 333-49011).
3.6 Unit Redemption Agreement dated as of October 26,
2000 between MascoTech, Inc. and Advanced
Accessory Systems, LLC.
4.1 Indenture dated as of October 1, 1997 for the
Notes (including the form of New Note attached as
Exhibit B thereto) among the Issuers, the
Guarantors named therein and First Union National
Bank, as Trustee. Incorporated by reference to
Exhibit 4.1 to AAS' Registration Statement on Form
S-4 (File No. 333-49011).
10.1 Asset Purchase Agreement among MascoTech
Automotive Systems Group, Inc., MascoTech
Accessories, Inc. and Advanced Accessory Systems,
LLC dated as of September 28, 1995. Incorporated
by reference to Exhibit 10.1 to AAS' Registration
Statement on Form S-4 (File No. 333-49011).
10.2 Agreement for the Sale and Purchase of Shares in
Brink BV dated October 30, 1996 among AAS
Holdings, Inc., AAS Holdings, LLC, Brink Holding
BV and Brink BV. Incorporated by reference to
Exhibit 10.2 to AAS' Registration Statement on
Form S-4 (File No. 333-49011).
10.3 Asset Purchase Agreement among Bell Sports Corp.,
Bell Sports Canada, Inc. and Advanced Accessory
Systems Canada Inc./Les Systemes d'Accessoire
Advanced Canada Inc. dated as of July 2, 1997.
Incorporated by reference to Exhibit 10.3 to AAS'
Registration Statement on Form S-4 (File No.
333-49011).
10.4 Stock Purchase Agreement dated July 24, 1997 among
Robert Boulard and Alan Hamer and Advanced
Accessory Systems Canada Inc./Les Systems
d'Accessoire Advanced Canada Inc. Incorporated by
reference to Exhibit 10.4 to AAS' Registration
Statement on Form S-4 (File No. 333-49011).
10.5 Asset Purchase Agreement among Valley Industries,
LLC, Valley Industries, Inc., certain affiliates
of Valley Industries, Inc., Robert L. Fisher and
Roger T. Morgan dated as of August 5, 1997.
Incorporated by reference to Exhibit 10.5 to AAS'
Registration Statement on Form S-4 (File No.
333-49011).
10.6 Preliminary Agreement for the Transfer of a
Business dated December 16, 1997 between Ellebi
S.p.A. and Brink Italia S.r.1. and Brink
International B.V. Incorporated by reference to
Exhibit 10.6 to AAS' Registration Statement on
Form S-4 (File No. 333-49011).
10.7 Second Amended and Restated Credit Facility among
AAS, SportRack, LLC, Brink International BV, Brink
BV and Valley Industries, LLC, as Borrowers, NBD
Bank as Administrative Agent and Documentation and
Collateral Agent and The Chase Manhattan Bank as
Co-Administrative Agent and Syndication Agent
dated August 5, 1997. Incorporated by reference to
Exhibit 10.7 to AAS' Registration Statement on
Form S-4 (File No. 333-49011).
53
56
EXHIBIT
NUMBER DESCRIPTION
------- -----------exhibit number.
EXHIBIT
NUMBER DESCRIPTION
------- -------------------------------------------------------------
3(i) Amended and Restated Certificate of Formation of AAS.
Incorporated by reference to Exhibit 3.1 to AAS' Registration
Statement on Form S-4 (File No. 333-49011), filed March 31,
1998.
3(ii).1 Third Amended and Restated Operating Agreement of AAS.
Incorporated by reference to Exhibit 3.2 to AAS' Quarterly
Report for the quarterly period ended September 30, 1999 on
Form 10-Q (File No. 333-49011).
3(ii).2 Amended Bylaws of AAS. Incorporated by reference to Exhibit
3.3 to AAS' Quarterly Report for the quarterly period ended
September 30, 1999 on Form 10-Q (File No. 333-49011).
4.1 Indenture dated as of October 1, 1997 for the Notes (including
the form of New Note attached as Exhibit B thereto) among the
Issuers, the Guarantors named therein and First Union National
Bank, as Trustee. Incorporated by reference to Exhibit 4.1 to
AAS' Registration Statement on Form S-4 (File No. 333-49011),
filed March 31, 1998.
4.2 See Exhibits 10.2 through 10.7(i) and 10.8 Advanced Accessory
Systems, LLC agrees to furnish to the Commission upon request
in accordance with Item 601(b)(4)(iii)(A) of Regulation S-K
copies of instruments defining the rights of holders of
long-term debt of Advanced Accessory Systems, LLC or any of
its subsidiaries, which debt does not exceed 10% of the total
assets of Advanced Accessory Systems, LLC and its subsidiaries
on a consolidated basis.
10.1 Asset Purchase Agreement among Valley Industries, LLC, Valley
Industries, Inc., certain affiliates of Valley Industries,
Inc., Robert L. Fisher and Roger T. Morgan dated as of August
5, 1997. Incorporated by reference to Exhibit 10.5 to AAS'
Registration Statement on Form S-4 (File No. 333-49011), filed
March 31, 1998.
10.2 Second Amended and Restated Credit Facility among AAS,
SportRack, LLC, Brink International BV, Brink BV and Valley
Industries, LLC, as Borrowers, NBD Bank as Administrative
Agent and Documentation and Collateral Agent and The Chase
Manhattan Bank as Co-Administrative Agent and Syndication
Agent dated August 5, 1997. Incorporated by reference to
Exhibit 10.7 to AAS' Registration Statement on Form S-4 (File
No. 333-49011), filed March 31, 1998.
10.7(a) Amendment No 1. Dated as of September 5, 1997 to Second
Amended and Restated Credit Agreement Dated as of August 5,
1997 and Security Agreements Dated as of October 5, 1996.
Incorporated by reference to Exhibit 10.7(a) to AAS' Annual
Report on Form 10-K (File No. 333-49011) for the fiscal year
ended December 31, 1998.
10.7(b) Amendment No.2 Dated as of September 24, 1997 to Second
Amended and Restated Credit Agreement Dated as of August 5,
1997. Incorporated by reference to Exhibit 10.7(b) to AAS'
Annual Report on Form 10-K (File No. 333-49011) for the fiscal
year ended December 31, 1998.
10.7(c) Amendment No. 3 Dated as of December 29, 1997 to Second
Amended and Restated Credit Agreement dated as of August 5,
1997. Incorporated by reference to Exhibit 10.7(c) to AAS'
Annual Report on Form 10-K (File No. 333-49011) for the fiscal
year ended December 31, 1998.
10.7(d) Amendment No. 4 Dated as of December 31, 1997 to Second
Amended and restated Credit Agreement Dated as of August 5,
1997. Incorporated by reference to Exhibit 10.7(d) to AAS'
Annual Report on Form 10-K (File No. 333-49011) for the fiscal
year ended December 31, 1998.
10.7(e) Amendment No. 5 and Waiver Dated as of December 31, 1998 to
Second Amended and Restated Credit Agreement Dated as of
August 5, 1997. Incorporated by reference to Exhibit 10.7(e)
to AAS' Annual Report on Form 10-K (File No. 333-49011) for
the fiscal year ended December 31, 1998.
59
EXHIBIT
NUMBER DESCRIPTION
------- -------------------------------------------------------------
10.7(f) Amendment No. 6 Dated as of August 10, 1999 to Second Amended
and Restated Credit Agreement Dated as of August 5, 1997.
Incorporated by reference to Exhibit 10.7 (f) to AAS' Annual
Report on Form 10-K (File No. 333-49011) for the fiscal year
ended December 31, 1999.
10.7(g) Amendment No. 7 Dated as of September 30, 2000 to Second
Amended and Restated Credit Agreement Dated as of August 5,
1997. Incorporated by reference to Exhibit 10.7 (g) to AAS'
Quarterly Report on Form 10-Q (File No. 333-49011) for the
nine months ended September 30, 2000.
10.7(h) Amendment No. 8 dated as of June 30, 2001 to Second Amended
and Restated Credit Agreement Dated as of August 5, 1997.
Incorporated by reference to Exhibit 10.7(h) to AAS' Quarterly
Report on Form 10-Q (File No. 333-49011) for the six months
ended June 30, 2001.
10.7(i) Amendment No. 9 dated as of December 14, 2001 to Second
Amended and Restated Credit Agreement Dated as of August 5,
1997. Incorporated by reference to Exhibit 10.7(i) to AAS'
Current Report on Form 8-K (File No. 333-49011).
10.8 First Amended and Restated Credit Agreement among SportRack
International, Inc. and First Chicago NBD Bank, Canada, The
Chase Manhattan Bank of Canada and The Bank of Nova Scotia
dated as of March 19, 1998. Incorporated by reference to
Exhibit 10.8 to AAS' Registration Statement on Form S-4 (File
No. 333-49011), filed March 31, 1998.
*10.9 Amended and Restated Employment Agreement between AAS and
Richard Borghi dated September 30, 1999. Incorporated by
reference to Exhibit 10.9 to AAS' Quarterly Report on Form
10-Q for the quarterly period ended September 30, 1999 (File
No. 333-49011).
*10.9(a) Amendment No. 1 to the Amended and Restated Employment
Agreement dated August 1, 2000 between SportRack, LLC and
Richard Borghi, incorporated by reference to Exhibit 10.9(a)
to the Company's Annual Report on Form 10-K for the year ended
December 31, 2000 (File No. 333-49011).
*10.11 Management Consulting Agreement between AAS and Barry Banducci
dated September 28, 2001. Incorporated by reference to Exhibit
10.11 to the Company's Annual Report on Form 10-K for the year
ended December 31, 2001 (File No. 333-49011).
*10.12 Management Consulting Agreement between AAS and F. Alan Smith
dated September 28, 2001. Incorporated by reference to Exhibit
10.12 to the Company's Annual Report on Form 10-K for the year
ended December 31, 2001 (File No. 333-49011).
*10.13 Amended and Restated Employment Agreement between AAS and
Terence C. Seikel dated September 30, 1999. Incorporated by
reference to Exhibit 10.13 to AAS' Registration Statement on
Form S-4 (File No. 333-49011), filed March 31, 1998.
*10.13(a) Amendment No. 1 to the Amended and Restated Employment
Agreement dated August 1, 2000 between Advanced Accessory
Systems, LLC and Terence C. Seikel, incorporated by reference
to Exhibit 10.13(a) to the Company's Annual Report on Form
10-K for the year ended December 31, 2000 (File No.
333-49011).
*10.15 Employment Agreement between Brink B.V. and Gerrit de Graaf
dated November 1, 1996. Incorporated by reference to Exhibit
10.15 to AAS' Registration Statement on Form S-4 (File No.
333-49011), filed March 31, 1998.
10.17 Lease dated as of January 24, 1997 between Valley Industries
Realty, L.P. and Valley Industries, Inc. Incorporated by
reference to Exhibit 10.17 to AAS' Registration Statement on
Form S-4 (File No. 333-49011), filed March 31, 1998.
10.18 Addendum to Sublease dated as of July 2, 1997 between Bell
Sports Canada, Inc. and SportRack International, Inc.
(formerly known as Advanced Accessory Systems Canada Inc./ Les
Systems d'Accessoire Advanced Canada Inc.). Incorporated by
reference to Exhibit 10.18 to AAS' Registration Statement on
Form S-4 (File No. 333-49011), filed March 31, 1998.
10.18(a) Sublease Amending Agreement made as of the 1st day of January,
2000, between Bell Sports Canada Inc. and SportRack
Accessories Inc. (previously known as SportRack
International). Incorporated by reference to Exhibit 10.7 (f)
to AAS' Annual Report on Form 10-K for the fiscal year ended
December 31, 1999 (File No. 333-49011).
10.19 Lease dated May 25, 1994 between VBG Towbars AB and VBG
Produkter AB. Incorporated by reference to Exhibit 10.19 to
AAS' Registration Statement on Form S-4 (File No. 333-49011),
filed March 31, 1998.
10.20 Lease Agreement for commercial use between Ellebi S.p.A. and
Brink Italia S.r.l. Incorporated by reference to Exhibit 10.20
to AAS' Registration Statement on Form S-4 (File No.
333-49011), filed March 31, 1998.
10.21 Registration Rights Agreement dated September 25, 1997 by and
among Advanced Accessory Systems, LLC, AAS Capital
Corporation, the Guarantors named therein and Chase
Securities, Inc. and First Chicago Capital Markets, Inc.
Incorporated by reference to Exhibit 10.21 to AAS'
Registration Statement on Form S-4 (File No. 333-49011), filed
March 31, 1998.
*10.22 Amended and Restated Employment Agreement dated as of March
14, 2001 between Valley Industries, LLC, and Bryan Fletcher,
incorporated by reference to Exhibit 10.22 to the Company's
Annual Report on Form 10-K for the year ended December 31,
2000 (File No. 333-49011).
10.23 Multi-Tenant Industrial Triple Net Lease effective January 1,
2001 between Santa Fe Bayfront Venture, a California general
partnership and Valley Industries, LLC a Delaware limited
liability company, incorporated by reference to Exhibit 10.23
to the Company's Annual Report on Form 10-K for the year ended
December 31, 2000 (File No. 333-49011).
10.24 Third Amended and Restated Members' Agreement dated as of
September 30, 1999 among Advanced Accessory Systems, LLC, and
the Members that are parties hereto. Incorporated by reference
to Exhibit 3.4 to AAS' Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 1999 on (File No.
333-49011).
10.9 Amended and Restated Employment Agreement between
AAS and Richard Borghi dated September 30, 1999.
Incorporated by reference to Exhibit 10.9 to AAS'
Quarterly Report for the quarterly period ended
September 30, 1999 on Form 10-Q (File No.
333-49011).
10.9(a) Amendment No. 1 to the Amended and Restated
Employment Agreement dated August 1,
60
EXHIBIT
NUMBER DESCRIPTION
------- -------------------------------------------------------------
10.25 Unit Redemption Agreement dated as of October 26, 2000 between
MascoTech, Inc. and Advanced Accessory Systems, LLC,
incorporated by reference to Exhibit 10.25 to the Company's
Annual Report on Form 10-K for the year ended December 31,
2000 between
SportRack, LLC and Richard Borghi.
10.11 Management Consulting Agreement between AAS and
Barry Banducci dated September 28, 1995.
Incorporated by reference to Exhibit 10.11 to AAS'
Registration Statement on Form S-4 (File No.
333-49011).
10.12 Management Consulting Agreement between AAS and F.
Alan Smith dated September 28, 1995. Incorporated
by reference to Exhibit 10.12 to AAS' Registration
Statement on Form S-4 (File No. 333-49011).
10.13 Amended and Restated Employment Agreement between
AAS and Terence C. Seikel dated September 30,
1999. Incorporated by reference to Exhibit 10.13
to AAS' Registration Statement on Form S-4 (File
No. 333-49011).
10.13(a) Amendment No. 1 to the Amended and Restated
Employment Agreement dated August 1, 2000 between
Advanced Accessory Systems, LLC and Terence C.
Seikel.
10.15 Employment Agreement between Brink B.V. and Gerrit
de Graaf dated November 1, 1996. Incorporated by
reference to Exhibit 10.15 to AAS' Registration
Statement on Form S-4 (File No. 333-49011).
10.17 Lease dated as of January 24, 1997 between Valley
Industries Realty, L.P. and Valley Industries,
Inc. Incorporated by reference to Exhibit 10.17 to
AAS' Registration Statement on Form S-4 (File No.
333-49011).
10.18 Addendum to Sublease dated as of July 2, 1997
between Bell Sports Canada, Inc. and SportRack
International, Inc. (formerly known as Advanced
Accessory Systems Canada Inc./Les Systems
d'Accessoire Advanced Canada Inc.). Incorporated
by reference to Exhibit 10.18 to AAS' Registration
Statement on Form S-4 (File No. 333-49011).
10.18(a) Sublease Amending Agreement made as of the 1st day
of January, 2000, between Bell Sports Canada Inc.
and SportRack Accessories Inc. (previously known
as SportRack International). Incorporated by
reference to Exhibit 10.7 (f) to AAS' Annual
Report on Form 10-K (File No. 333-49011) for the
fiscal year ended December 31, 1999.
10.19 Lease dated May 25, 1994 between VBG Towbars AB
and VBG Produkter AB. Incorporated by reference to
Exhibit 10.19 to AAS' Registration Statement on
Form S-4 (File No. 333-49011).
10.20 Lease Agreement for commercial use between Ellebi
S.p.A. and Brink Italia S.r.l. Incorporated by
reference to Exhibit 10.20 to AAS' Registration
Statement on Form S-4 (File No. 333-49011).
10.21 Registration Rights Agreement dated September 25,
1997 by and among Advanced Accessory Systems, LLC,
AAS Capital Corporation, the Guarantors named
therein and Chase Securities, Inc. and First
Chicago Capital Markets, Inc. Incorporated by
reference to Exhibit 10.21 to AAS' Registration
Statement on Form S-4 (File No. 333-49011).
10.22 Amended and Restated Employment Agreement dated as
of March 14, 2001 between Valley Industries, LLC,
and Bryan Fletcher.
54
57
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.23 Multi-Tenant Industrial Triple Net Lease effective
January 1, 2001 between Santa Fe Bayfront Venture,
a California general partnership and Valley
Industries, LLC a Delaware limited liability
company.
12.1 Statement Re: Computation of ratios
21.1 Subsidiaries of the Registrant Incorporated by
reference to Exhibit 21.1 to AAS' Registration
Statement on Form S-4 (File No. 333-49011).
*10.26 Advanced Accessory Systems, LLC 1995 Option Plan. Incorporated
by reference to Exhibit 10.26 to the Company's Annual Report
on Form 10-K for the year ended December 31, 2001 (File No.
333-49011).
10.27 Real Property Lease by Sogefimur and Auxicomi to SFEA dated
October 21, 2002.
10.28 Operational lease between Amstel Lease and SFEA.
12.1 Statement Re: Computation of ratios
21.1 Subsidiaries of the Registrant Incorporated by reference to
Exhibit 21.1 to AAS' Registration Statement on Form S-4 (File
No. 333-49011), filed March 31, 1998.
24.1 Power of Attorney
99.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350, As Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
99.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, As Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
(b) Reports of form 8-K:
None
--------------------
55On March 14, 2003, the Company filed a report on Form 8-K to announce
that it was in the late stages of negotiations for the sale of the Company to
Castle Harlan, Inc.
- ----------
61
58
SIGNATURES
Pursuant to the requirements of the 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. Advanced Accessory
Systems, LLC
Date: March 25, 2003 By: /s/ TERENCE C. SEIKEL
----------------------------------------------------------------------------------
Terence C. Seikel
President and Chief Executive Officer
(Principal Executive Officer and Authorized(Authorized Signatory)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed on the 22nd day of March, 2001,below, by the following persons on behalf of the
registrant and in the capacities asand on the dates indicated.
Signature Title
--------- -----
/s/ TERENCE C. SEIKEL
----------------------------------------- President, Chief Executive Officer and
Terence C. Seikel Manager (Principal Executive and Financial Officer)
Dated: March 25, 2003
/s/ BARRY G. STEELE
----------------------------------------- Corporate ControllerChief Financial Officer (Principal Accounting
Barry G. Steele AccountingOfficer and Principal Financial Officer)
Dated: March 25, 2003
*
----------------------------------------- Chairman of the Board of Managers
-----------------------------------------
F. Alan Smith
* Manager
----------------------------------------- Manager
Barry Banducci
* Manager
----------------------------------------- Manager
Gerard Jacobus Brink
* Manager
----------------------------------------- Manager
Donald J. Hofmann, Jr.
* Manager
-----------------------------------------
Manager
Richard E. Borghi
* Manager
-----------------------------------------
Manager
Bryan A. Fletcher
* Manager
-----------------------------------------
Manager
Gerrit de Graaf
*By: /s/ TERENCE C. SEIKEL
-----------------------------------------
Terence C. SEIKEL
-----------------------------------------
Terence C. Seikel, Attorney-in-Fact
Dated: March 25, 2003
5662
59CERTIFICATIONS
I, Terence C. Seikel, certify that:
1. I have reviewed this annual report on Form 10-K of Advanced Accessory
Systems, LLC;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this annual
report whether there were significant changes in internal controls or in other
factors that could significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: March 25, 2003
/s/ Terence C. Seikel
-----------------------------------
Terence C. Seikel, President and
Chief Executive Officer
63
CERTIFICATIONS
I, Barry G. Steele, certify that:
1. I have reviewed this annual report on Form 10-K of Advanced Accessory
Systems, LLC;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this annual
report whether there were significant changes in internal controls or in other
factors that could significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: March 25, 2003
/s/ Barry G. Steele
-----------------------------------
Barry G. Steele, Chief
Financial Officer
64
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE ACT.
Other than this annual report filed on Form 10-K, none.
57no annual report or proxy
material has been sent to security holders.
65
60
ADVANCED ACCESSORY SYSTEMS, LLC-
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 19992002, 2001 AND 1998,2000,
(DOLLAR AMOUNTS IN THOUSANDS)
ADDITIONS
-----------------------------------------------------
BALANCE AT CHARGED TO CHARGED BALANCE
BEGINNING OF COSTS AND TO OTHER AT END OF
YEAR EXPENSES ACCOUNTS (1) WRITE-OFFS YEAR
------------ ---------- ------------ ---------- --------------------- ------------ ------------
ALLOWANCE FOR DOUBTFUL ACCOUNTS
-------------------------------
For the year ended December 31,
2000........................................2002 ................................. $ 1,788 $ 245 $ 120 $ 296 $ 1,857
2001 ................................. 2,140 818 (41) 1,129 1,788
2000 ................................. 4,997 $ (1,887) $ (41) $ 929 $ 2,140
1999........................................ 2,766 2,670 (67) 372 4,997
1998........................................ 1,699 2,413 523 1,869 2,766
ALLOWANCE FOR INVENTORY AND
LOWER OF COST OR MARKET RESERVE
-------------------------------
For the year ended December 31,
2000........................................2002 ................................. $ 2,828 $ 1,284 $ 157 $ 1,359 $ 2,910
2001 ................................. 2,540 1,688 (140) 1,260 2,828
2000 ................................. 3,217 $ 1,021 $ 173 $ 1,871 $ 2,540
1999........................................ 3,917 573 (136) 1,137 3,217
1998........................................ 2,590 4,735 15 3,423 3,917
ALLOWANCE FOR REIMBURSABLE TOOLING
----------------------------------
For the year ended December 31,
2000........................................2002 ................................. $ 541816 $ 260672 $ -- $ (100) $ 1,588
2001 ................................. 414 1,063 -- 661 816
2000 ................................. 541 266 -- 393 $ 414
1999........................................ 324 230 -- 13 541
1998........................................ 890 294 -- 860 324
ALLOWANCE FOR DEFERRED TAX ASSETS
-----------------------------
2000........................................2002 ................................. $ 5,2585,739 $ (86)(2,970) $ (227)30 $ -- $ 2,799
2001 ................................. 4,945 1999........................................ 4,225 854 1791,023 (229) -- 5,739
2000 ................................. 5,258 1998........................................(86) (227) -- 4,225 -- -- 4,2254,945
- -------------------------
(1) Charges to other accounts include amounts related to acquired companies
and the effects of changing foreign currency exchange rates for the Company's
foreign subsidiaries.
58
61
Exhibit Index
EXHIBIT
NUMBER DESCRIPTION
------- -----------
3.1 Amended and Restated Certificate of Formation of
AAS. Incorporated by reference to Exhibit 3.1 to
AAS' Registration Statement on Form S-4 (File No.
333-49011).
3.2 Third Amended and Restated Operating Agreement of
AAS. Incorporated by reference to Exhibit 3.2 to
AAS' Quarterly Report for the quarterly period
ended September 30, 1999 on Form 10-Q (File No.
333-49011).
3.3 Amended Bylaws of AAS. Incorporated by reference
to Exhibit 3.3 to AAS' Quarterly Report for the
quarterly period ended September 30, 1999 on Form
10-Q (File No. 333-49011).
3.4 Third Amended and Restated Members' Agreement
Dated as of September 30, 1999 among Advanced
Accessory Systems, LLC, and the Members that are
parties hereto. Incorporated by reference to
Exhibit 3.4 to AAS' Quarterly Report for the
quarterly period ended September 30, 1999 on Form
10-Q (File No. 333-49011).
3.6 Unit Redemption Agreement dated as of October 26,
2000 between MascoTech, Inc. and Advanced
Accessory Systems, LLC.
4.1 Indenture dated as of October 1, 1997 for the
Notes (including the form of New Note attached as
Exhibit B thereto) among the Issuers, the
Guarantors named therein and First Union National
Bank, as Trustee. Incorporated by reference to
Exhibit 4.1 to AAS' Registration Statement on Form
S-4 (File No. 333-49011).
10.1 Asset Purchase Agreement among MascoTech
Automotive Systems Group, Inc., MascoTech
Accessories, Inc. and Advanced Accessory Systems,
LLC dated as of September 28, 1995. Incorporated
by reference to Exhibit 10.1 to AAS' Registration
Statement on Form S-4 (File No. 333-49011).
10.2 Agreement for the Sale and Purchase of Shares in
Brink BV dated October 30, 1996 among AAS
Holdings, Inc., AAS Holdings, LLC, Brink Holding
BV and Brink BV. Incorporated by reference to
Exhibit 10.2 to AAS' Registration Statement on
Form S-4 (File No. 333-49011).
10.3 Asset Purchase Agreement among Bell Sports Corp.,
Bell Sports Canada, Inc. and Advanced Accessory
Systems Canada Inc./Les Systemes d'Accessoire
Advanced Canada Inc. dated as of July 2, 1997.
Incorporated by reference to Exhibit 10.3 to AAS'
Registration Statement on Form S-4 (File No.
333-49011).
10.4 Stock Purchase Agreement dated July 24, 1997 among
Robert Boulard and Alan Hamer and Advanced
Accessory Systems Canada Inc./Les Systems
d'Accessoire Advanced Canada Inc. Incorporated by
reference to Exhibit 10.4 to AAS' Registration
Statement on Form S-4 (File No. 333-49011).
10.5 Asset Purchase Agreement among Valley Industries,
LLC, Valley Industries, Inc., certain affiliates
of Valley Industries, Inc., Robert L. Fisher and
Roger T. Morgan dated as of August 5, 1997.
Incorporated by reference to Exhibit 10.5 to AAS'
Registration Statement on Form S-4 (File No.
333-49011).
10.6 Preliminary Agreement for the Transfer of a
Business dated December 16, 1997 between Ellebi
S.p.A. and Brink Italia S.r.1. and Brink
International B.V. Incorporated by reference to
Exhibit 10.6 to AAS' Registration Statement on
Form S-4 (File No. 333-49011).
10.7 Second Amended and Restated Credit Facility among
AAS, SportRack, LLC, Brink International BV, Brink
BV and Valley Industries, LLC, as Borrowers, NBD
Bank as Administrative Agent and Documentation and
Collateral Agent and The Chase Manhattan Bank as
Co-Administrative Agent and Syndication Agent
dated August 5, 1997. Incorporated by reference to
Exhibit 10.7 to AAS' Registration Statement on
Form S-4 (File No. 333-49011).
62
EXHIBIT
NUMBER DESCRIPTION
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10.7(a) Amendment No 1. Dated as of September 5, 1997 to
Second Amended and Restated Credit Agreement Dated
as of August 5, 1997 and Security Agreements Dated
as of October 5, 1996. Incorporated by reference
to Exhibit 10.7(a) to AAS' Annual Report on Form
10-K (File No. 333-49011) for the fiscal year
ended December 31, 1998.
10.7(b) Amendment No.2 Dated as of September 24, 1997 to
Second Amended and Restated Credit Agreement Dated
as of August 5, 1997. Incorporated by reference to
Exhibit 10.7(b) to AAS' Annual Report on Form 10-K
(File No. 333-49011) for the fiscal year ended
December 31, 1998.
10.7(c) Amendment No. 3 Dated as of December 29, 1997 to
Second Amended and Restated Credit Agreement dated
as of August 5, 1997. Incorporated by reference to
Exhibit 10.7(c) to AAS' Annual Report on Form 10-K
(File No. 333-49011) for the fiscal year ended
December 31, 1998.
10.7(d) Amendment No. 4 Dated as of December 31, 1997 to
Second Amended and restated Credit Agreement Dated
as of August 5, 1997. Incorporated by reference to
Exhibit 10.7(d) to AAS' Annual Report on Form 10-K
(File No. 333-49011) for the fiscal year ended
December 31, 1998.
10.7(e) Amendment No. 5 and Waiver Dated as of December
31, 1998 to Second Amended and Restated Credit
Agreement Dated as of August 5, 1997. Incorporated
by reference to Exhibit 10.7(e) to AAS' Annual
Report on Form 10-K (File No. 333-49011) for the
fiscal year ended December 31, 1998.
10.7(f) Amendment No. 6 Dated as of August 10, 1999 to
Second Amended and Restated Credit Agreement Dated
as of August 5, 1997. Incorporated by reference to
Exhibit 10.7 (f) to AAS' Annual Report on Form
10-K (File No. 333-49011) for the fiscal year
ended December 31, 1999.
10.7(g) Amendment No. 7 Dated as of September 30, 2000 to
Second Amended and Restated Credit Agreement Dated
as of August 5, 1997. Incorporated by reference to
Exhibit 10.7 (g) to AAS' Quarterly Report on Form
10-Q (File No. 333-49011) for the nine months
ended September 30, 2000.
10.8 First Amended and Restated Credit Agreement among
SportRack International, Inc. and First Chicago
NBD Bank, Canada, The Chase Manhattan Bank of
Canada and The Bank of Nova Scotia dated as of
March 19, 1998. Incorporated by reference to
Exhibit 10.8 to AAS' Registration Statement on
Form S-4 (File No. 333-49011).
10.9 Amended and Restated Employment Agreement between
AAS and Richard Borghi dated September 30, 1999.
Incorporated by reference to Exhibit 10.9 to AAS'
Quarterly Report for the quarterly period ended
September 30, 1999 on Form 10-Q (File No.
333-49011).
10.9(a) Amendment No. 1 to the Amended and Restated
Employment Agreement dated August 1, 2000 between
SportRack, LLC and Richard Borghi.
10.11 Management Consulting Agreement between AAS and
Barry Banducci dated September 28, 1995.
Incorporated by reference to Exhibit 10.11 to AAS'
Registration Statement on Form S-4 (File No.
333-49011).
10.12 Management Consulting Agreement between AAS and F.
Alan Smith dated September 28, 1995. Incorporated
by reference to Exhibit 10.12 to AAS' Registration
Statement on Form S-4 (File No. 333-49011).
10.13 Amended and Restated Employment Agreement between
AAS and Terence C. Seikel dated September 30,
1999. Incorporated by reference to Exhibit 10.13
to AAS' Registration Statement on Form S-4 (File
No. 333-49011).
10.13(a) Amendment No. 1 to the Amended and Restated
Employment Agreement dated August 1, 2000 between
Advanced Accessory Systems, LLC and Terence C.
Seikel.
10.15 Employment Agreement between Brink B.V. and Gerrit
de Graaf dated November 1, 1996. Incorporated by
reference to Exhibit 10.15 to AAS' Registration
Statement on Form S-4 (File No. 333-49011).
10.17 Lease dated as of January 24, 1997 between Valley
Industries Realty, L.P. and Valley Industries,
Inc. Incorporated by reference to Exhibit 10.17 to
AAS' Registration Statement on Form S-4 (File No.
333-49011).
10.18 Addendum to Sublease dated as of July 2, 1997
between Bell Sports Canada, Inc. and SportRack
International, Inc. (formerly known as Advanced
Accessory Systems Canada Inc./Les Systems
d'Accessoire Advanced Canada Inc.). Incorporated
by reference to Exhibit 10.18 to AAS' Registration
Statement on Form S-4 (File No. 333-49011).
10.18(a) Sublease Amending Agreement made as of the 1st day
of January, 2000, between Bell Sports Canada Inc.
and SportRack Accessories Inc. (previously known
as SportRack International). Incorporated by
reference to Exhibit 10.7 (f) to AAS' Annual
Report on Form 10-K (File No. 333-49011) for the
fiscal year ended December 31, 1999.
10.19 Lease dated May 25, 1994 between VBG Towbars AB
and VBG Produkter AB. Incorporated by reference to
Exhibit 10.19 to AAS' Registration Statement on
Form S-4 (File No. 333-49011).
10.20 Lease Agreement for commercial use between Ellebi
S.p.A. and Brink Italia S.r.l. Incorporated by
reference to Exhibit 10.20 to AAS' Registration
Statement on Form S-4 (File No. 333-49011).
10.21 Registration Rights Agreement dated September 25,
1997 by and among Advanced Accessory Systems, LLC,
AAS Capital Corporation, the Guarantors named
therein and Chase Securities, Inc. and First
Chicago Capital Markets, Inc. Incorporated by
reference to Exhibit 10.21 to AAS' Registration
Statement on Form S-4 (File No. 333-49011).
10.22 Amended and Restated Employment Agreement dated as
of March 14, 2001 between Valley Industries, LLC,
and Bryan Fletcher.
63
EXHIBIT
NUMBER DESCRIPTION
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10.23 Multi-Tenant Industrial Triple Net Lease effective
January 1, 2001 between Santa Fe Bayfront Venture,
a California general partnership and Valley
Industries, LLC a Delaware limited liability
company.
12.1 Statement Re: Computation of ratios
21.1 Subsidiaries of the Registrant Incorporated by
reference to Exhibit 21.1 to AAS' Registration
Statement on Form S-4 (File No. 333-49011).
24.1 Power of Attorney66