1
SECURITIES AND EXCHANGE COMMISSION
Washington,WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- --- ACT OF 1934 For the quarterly period ended June 28, 1998.March 31, 1999.
OR
TRANSITION__TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- --- ACT OF 1934
For the transition period from _____________ to ----------------- ----------------------_________________
Commission File No. 333-11801-01 Trianon Industries Corp.
Commission File No. 333-11801 (Aetna Industries, Inc.)
Commission File No. 333-11801-01 (MS Acquisition Corp.TRIANON INDUSTRIES CORP.
(FORMERLY KNOWN AS MS ACQUISITION CORP.)
AETNA INDUSTRIES, INC.
MS ACQUISITION CORP.
(Exact name of registrant as specified in its character)charter)
Delaware 38-200-7550/13-337-980313-337-9803/38-200-7550
- -----------------------------------------------------------------------------------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
24331 Sherwood Avenue, P.O. Box 3067, Centerline, Michigan 48015-0067(Address of principal executive offices) (Zip Code)
1, rue Thomas Edison, Quartier des Chenes
78056 St. Quentin en Yvelines, France
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)24331 Sherwood Avenue, P.O. Box 3067, Centerline, Michigan 48015-0067
Registrant's telephone number, including area code (33-1) 39-412000
(810) 759-2200
(33-1) 39-4120.00
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- ------ -
As of August 7, 1998,May 14, 1999, there were 1,000 shares of Aetna Industries, Inc. common
stock outstanding and 3,899,9983,902,498 shares of MS AcquisitionTrianon Industries Corp. Class A common stock
outstanding.
1
2
INDEX
PART I FINANCIAL INFORMATION PAGE
Item 1. FINANCIAL STATEMENTS OF AETNA INDUSTRIES, INC.
Condensed Consolidated Balance Sheets - 3
June 28, 1998 and December 28, 1997
Consolidated Statements of Operations - 4
three months and six months ended June 28, 1998
and June 29, 1997
Condensed Consolidated Statements of Cash Flows - 5
six months ended June 28, 1998
and June 29, 1997
Notes to Consolidated Financial Statements 6
FINANCIAL STATEMENTS OF MS ACQUISITION CORP.
Condensed Consolidated Balance Sheets - 8
June 30, 1998 and December 31, 1997
Consolidated Statements of Operations - 9
and six months ended June 30, 1998
and June 30, 1997
Condensed Consolidated Statements of Cash Flows - 10
six months ended June 30, 1998
and June 30, 1997
Notes to Consolidated Financial Statements 11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 16
Item 3. Quantitative and Qualitative Disclosures About 24
Market Risk
PART II OTHER INFORMATION 24
Signatures 25
Description of Exhibits 26
PART I FINANCIAL INFORMATION PAGE
Item 1. FINANCIAL STATEMENTS OF TRIANON INDUSTRIES CORP.
Condensed Consolidated Balance Sheets -
March 31, 1999 and December 31, 1998 3
Consolidated Statements of Operations and
Comprehensive Income - three months ended March 31,
1999 and March 31, 1998 4
Condensed Consolidated Statements of Cash Flows -
three months ended March 31, 1999
and March 31, 1998 5
Notes to Consolidated Financial Statements 6
FINANCIAL STATEMENTS OF AETNA INDUSTRIES, INC.
Condensed Consolidated Balance Sheets -
April 2, 1999 and December 31, 1998 11
Consolidated Statements of Operations and
Comprehensive Income (Loss) - three months ended
April 2, 1999 and March 29, 1998 12
Condensed Consolidated Statements of Cash Flows -
three months ended April 2, 1999
and March 29, 1998 13
Notes to Consolidated Financial Statements 14
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 16
Item 3. Qualitative and Quantitative Disclosure About
Market Risk 23
Item 4. Submission of Matters to a Vote of Security Holders. 24
PART II OTHER INFORMATION 30
Description of Exhibits 31
Signatures 32
EXHIBIT INDEX
27
2
3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AETNATRIANON INDUSTRIES INC.
(A WHOLLY-OWNED SUBSIDIARY OF
MS ACQUISITION CORP.)
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
JUNE 28,MARCH 31, 1999 DECEMBER 31, 1998
DECEMBER 28, 1997
--------------------------- -----------------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
ASSETS
CURRENT ASSETS:
Cash $ 215 $ 23and marketable securities $18,958 $26,092
Accounts receivable (less allowance for doubtful
accounts of $385$1,721 and $359,$1,921 respectively) 29,226 40,665174,126 181,375
Inventories 7,128 7,276
Tooling 30,270 11,410114,709 115,287
Other current assets 2,280 1,661
----------- -----------10,316 9,801
-------------- ------------
Total current assets 69,119 61,035
----------- -----------318,109 332,555
-------------- ------------
Property, plant and equipment, net 57,534 51,572193,426 203,271
Deferred costs and other assets 6,031 5,48924,720 22,969
Goodwill 24,572 24,973
----------- -----------
$ 157,256 $ 143,069
=========== ===========64,454 65,367
-------------- ------------
TOTAL ASSETS $600,709 $624,162
============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 37,376 $ 33,485$188,555 $173,517
Accrued expenses 10,034 9,508
Line48,639 82,250
Current portion of credit 25,981 13,530
----------- -----------long term and short term debt (145,441) 157,004
-------------- ------------
Total current liabilities 73,391 56,523
----------- -----------377,433 412,771
-------------- ------------
Long-term debt, 85,000 85,000less current portion 182,125 167,477
Deferred income taxes 7,431 7,432
Stockholder's equity
Commonand other long-term liabilities 18,717 19,370
Redeemable preferred stock 42,302 41,157
Series A - $100 stated value; 293,123 shares authorized;
142,424 shares issued and outstanding
Series B - $100 stated value; 270,000 shares authorized;
270,000 shares issued and outstanding
Stockholders' Equity (Deficit)
Class A, common stock - $.01 par value; 1,000value, 12,000,000
shares authorized, 3,902,498 shares issued and outstanding -- --39 39
Contributed paid-in capital 9,024 9,02440,708 40,708
Retained earnings (accumulated deficit) (54,795) (54,910)
Accumulated deficit (17,590) (14,910)
----------- -----------
(8,566) (5,886)
----------- -----------
$ 157,256 $ 143,069
=========== ===========other comprehensive income (loss) (5,820) (2,450)
-------------- ------------
TOTAL LIABILITIES, PREFERRED STOCK AND
SHAREHOLDER'S EQUITY (DEFICIT) $600,709 $624,162
============== ============
See accompanying notes to consolidated financial statements.
3
4
AETNATRIANON INDUSTRIES INC.
(A WHOLLY-OWNED SUBSIDIARY OF
MS ACQUISITION CORP.)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(DOLLARS IN THOUSANDS)
THREE MONTHS ENDED
SIX MONTHS ENDED
------------------
----------------
JUNE 28, JUNE 29, JUNE 28, JUNE 29,MARCH 31, MARCH 31,
1999 1998 1997 1998 1997
---- ---- ---- ----
(UNAUDITED)
(UNAUDITED)
Net sales $ 47,223 $ 48,692 $ 100,308 $ 103,789$218,157 $136,873
Cost of sales 43,405 42,712 88,379 89,687191,932 120,735
------------ ----------- ----------- ---------- ----------
Gross profit 3,818 5,980 11,929 14,10226,225 16,138
Selling, general and administrative expenses 4,940 3,963 9,426 7,792and
research and development expenses 14,673 9,833
------------ ----------- ----------- ---------- ----------
Operating income (loss) (1,122) 2,017 2,503 6,31011,552 6,305
Interest expense, net 3,187 2,709 6,053 5,2707,268 2,170
------------ ----------- ----------- ---------- ----------
Income (loss) before income taxes (4,309) (692) (3,550) 1,0404,284 4,135
Income tax provision (1,105) (252) (870) 417(credit) 2,251 1,185
------------ -----------
Income (loss) before discontinued operations 2,033 2,950
Losses on discontinued operations, net of tax 772 0
------------ ----------- ---------- ----------
Net income (loss) before
preferred stock dividends 1,261 2,950
Preferred stock dividends 1,146 0
------------ -----------
Net income available for common stockholders $115 $2,950
============ ===========
Other comprehensive income (loss):
Foreign currency translation adjustment (3,370) 6,165
------------ -----------
Comprehensive income (loss) $ (3,204)(3,255) $ (440) $ (2,680) $ 6239,115
============ =========== =========== ========== ==========
See accompanying notes to consolidated financial statements.statements
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5
AETNATRIANON INDUSTRIES INC.
(A WHOLLY-OWNED SUBSIDIARY OF
MS ACQUISITION CORP.)
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
SIXTHREE
MONTHS
ENDED
----------------
JUNE 28, JUNE 29,MARCH 31, MARCH 31,
1999 1998 1997
---- ----
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (2,680)1,261 $ 6232,950
Adjustments to reconcile net income to net cash
used for operating activitiesactivities:
Depreciation and amortization 4,927 3,7098,879 5,154
Deferred income taxes -- (209)411
Other non cash charges 100 753
Changes in other assets and liabilities (4,163) (3,921)
---------- ----------(8,565) 3,493
----------- ------------
Net cash provided by (used for) operating activities (1,916) 202
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES1,675 12,761
----------- ------------
Cash flows from investing activities
Additions to property, plant and equipment (9,389) (5,939)(7,485) (5,895)
Increase in other assets (954) (410)
---------- ----------
Net cash used for investing activities (10,343) (6,349)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in line of credit 12,451 2,176
---------- ----------(2) (5)
----------- ------------
Net cash provided by (used for) investing activities (7,487) (5,900)
----------- ------------
Cash flows from financing activities
12,451 2,176
---------- ----------Net decrease in borrowings under line of credit (1,298) (1,138)
Repayment of long term debt (9,825) (3,608)
Borrowings of long term debt 11,776 --
----------- ------------
Net cash provided by (used for) financing activities 653 (4,746)
----------- ------------
Exchange Rate Variation (1,975) (548)
Net increase (decrease) in cash 192 (3,971)(7,134) 1,567
Cash - beginning of year 23 4,011
---------- ----------26,092 11,626
----------- ------------
Cash - end of period $18,958 $ 215 $ 40
========== ==========13,193
=========== ============
See accompanying notes to consolidated financial statements.statements
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6
AETNATRIANON INDUSTRIES INC.
(A WHOLLY-OWNED SUBSIDIARY OF
MS ACQUISITION CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statementsEffective May 12, 1999, MS Acquisition Corp changed its name to Trianon
Industries Corp.
Trianon Industries Corp. ("the Company") is the name of the group formed by
the combination of the activities of SOFEDIT S.A. and Trianon Industries
Corp.
Trianon Industries Corp. ("Trianon Industries"), through Aetna Industries
Inc. (Aetna) have been prepared in accordance with Rule
10-01("Aetna"), its wholly-owned subsidiary, is a leading direct supplier
of Regulation S-Xhigh quality modules, welded subassemblies and do not include all the information and notes
required by generally accepted accounting principles for complete financial
statements. All adjustments, which include only normal recurring
adjustments that are,chassis parts used as
original equipment components in the opinion of management, necessary forNorth American automobile industry.
SOFEDIT S.A., ("Sofedit") a fair
presentationdirect and indirect wholly-owned subsidiary of
the resultsCompany, is a leading direct supplier of welded subassemblies, body in
white parts, clutch, brake and accelerator pedal modules, fuel tanks and
crossmembers and chassis parts used as original equipment components by
manufacturers in the interim periods,European automobile industry.
Trianon Industries and its direct and indirect wholly-owned United States
subsidiaries (i.e., Aetna Holdings, Inc., a Delaware corporation ("Aetna
Holdings"), Aetna Manufacturing Canada Ltd., a Michigan corporation ("Aetna
Canada"), and Aetna Export Sales Corp., a U.S. Virgin Islands corporation
("Export")) have been made. The
resultsfully and unconditionally guaranteed the 11 7/8% Senior
Notes due 2006 issued by Aetna in an aggregate principal amount of operations for such interim periods are not necessarily
indicative of results of operations for a full year. The unaudited
condensed consolidated$85.0
million (the "Senior Notes"). Separate financial statements should be read in conjunction
with Aetna's consolidated financial statements and notes thereto for the
year ended December 28, 1997.or other
disclosures relative to Aetna Holdings, Export or Aetna Canada have not
been presented as management has determined that such information is not
material to investors.
On April 14, 1998, Aetna's parent, MS Acquisition Corp.Trianon Industries completed a combination with Societe
Financiere d' Etude et de Developpement Industriel et Technologique S.A., a French
societe anonyme (Sofedit) (the Combination). In connection with the
Combination, Sofedit's former stockholders transferred the outstanding
capital stock of Sofedit to MS
AcquisitionTrianon Industries in exchange for: (i)
promissory notes of MS AcquisitionTrianon Industries in the principal amount of $40.9
million; (ii) dividends in an amount of approximately $1.0 million; (iii)
270,000 shares of Series B Preferred stock ($27.0 million stated value) of
MS Acquisition,Trianon Industries; (iv) 3.0 million shares of Common Stock of MS Acquisition,Trianon
Industries, and (v) the assumption of approximately $12.0 million of debt
of such former stockholders. The Combination has been accounted for as a
reverse acquisition because the former owners of Sofedit own approximately
75% of the fully diluted outstanding Common Stock of the CompanyTrianon Industries as
a result of the Combination. For accounting purposes, Sofedit is considered
to be the acquiroracquirer of, and the predecessor to, the Company.
2. INVENTORIES
Inventories are comprisedTrianon Industries.
As a result of the following:
JUNE 28, DECEMBER 28,
1998 1997
---- ----
Raw materials $ 531 $ 483
Work-in-process 1,503 3,134
Finished goods 2,694 1,500
Purchased parts and purchased labor 2,400 2,359
--------- ---------
7,128 7,476
--------- ---------
LIFO reserve -- (200)
--------- ---------
Total inventories $ 7,128 $ 7,276
========= =========
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7
AETNA INDUSTRIES, INC.
(A WHOLLY-OWNED SUBSIDIARY OF
MS ACQUISITION CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
3. STOCKHOLDER'S EQUITY
TOTAL
CONTRIBUTED ACCUMULATED STOCKHOLDER'S
CAPITAL DEFICIT EQUITY
----------- ----------- -------------
Balance at December 28, 1997 $ 9,024 $ (14,910) $ (5,886)
Net loss (2,680) (2,680)
---------- ----------- ---------
Balance at June 28, 1998 $ 9,024 $ (17,590) $ (8,566)
========== =========== =========
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8
MS ACQUISITION CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
JUNE 30, 1998 DECEMBER 31, 1997
------------- ------------------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash $ 22,925 $ 11,626
Accounts receivable (less allowance for doubtful
accounts of $1,797 and $1,293, respectively) 152,366 115,823
Inventories 66,020 64,013
Tooling 30,655 --
Other current assets 43,549 36,826
------------ ------------
Total current assets 315,515 228,288
------------ ------------
Property, plant and equipment, net 183,012 122,028
Deferred costs and other assets 11,597 5,430
Goodwill 65,795 6,166
------------ ------------
$ 575,919 $ 361,912
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 154,793 $ 109,876
Accrued expenses 78,873 52,849
Customer deposits and advances 7,614 8,448
Deferred income taxes 15,729 4,882
Short-term borrowings 55,537 43,778
------------ ------------
Total current liabilities 312,546 219,833
------------ ------------
Long-term debt 214,201 71,416
Junior subordinated notes 7,789 --
Deferred interest, junior subordinated notes 432 --
Deferred income taxes and other long-term liabilities 5,122 5,374
Redeemable preferred stock
Series A - $100 stated value; 293,123 shares authorized;
135,096 shares issued and outstanding 14,059 --
Series B - $100 stated value; 270,000 shares authorized;
270,000 shares issued and outstanding 27,000 --
Stockholders' Equity
Class A, common stock - $.01 par value, 12,000,000
shares authorized, 3,899,998 shares issued and outstanding 39 39
Additional paid-in capital 39,601 41,654
Retained earnings (accumulated deficit) (39,805) 28,138
Cumulative translation adjustment (5,065) (4,542)
------------ ------------
(5,230) 65,289
------------ ------------
$ 575,919 $ 361,912
============ ============
See accompanying notes toCombination being accounted for as a reverse
acquisition, the financial statements included herein for the three month
period ended March 31,1998 represent the historical information of Sofedit,
as predecessor. The consolidated balance sheet at March 31, 1999 represents
the consolidated financial statements.
8
9
MS ACQUISITION CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
SIX MONTHS ENDED
--------------------------
JUNE 30, JUNE 30,
1998 1997
---- ----
(UNAUDITED)
Net sales $ 322,251 $ 255,608
Cost of sales 285,951 220,941
----------- -------------
Gross profit 36,300 34,667
Selling, general and administrative expenses 18,168 14,004
Research and development expenses 4,234 4,042
Other expenses, net 1,560 2,108
----------- -------------
Operating income 12,338 14,513
Net interest expense 8,982 5,415
----------- -------------
Income before income taxes 3,356 9,098
Income tax provision 1,428 2,593
----------- -------------
Income before discontinued operations 1,928 6,505
----------- -------------
Share in net income of equity investees
and minority interest (155)
Losses on discontinued operations 1,490 1,374
----------- -------------
Net income before preferred stock dividends 438 $ 5,286
----------- =============
Preferred stock dividends (362)
-----------
Net income available for
common stockholders $ 76
===========
See accompanying notes to consolidated financial statements.
9
10
MS ACQUISITION CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
SIX MONTHS ENDED
--------------------------
JUNE 30, JUNE 30,
1998 1997
---- ----
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 438 $ 5,286
Equity income -- (12)
Adjustments to reconcile net income to net cash
used for operating activities
Depreciation and amortization 15,844 14,927
(Decrease) increase in other long-term
liabilities (45) 1,364
Changes in other assets and liabilities 15,027 (2,158)
----------- -----------
Net cash provided by operating activities 31,264 19,407
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (18,864) (7,877)
Disposal of property, plant and equipment 2,224 1,851
Additions to intangible assets and other, net (1,089) (4,228)
----------- -----------
Net cash used for investing activities (17,729) (10,254)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (2,377) (2,349)
Increase in long-term borrowings 4,508 5,818
Repayments of long-term debt (14,975) (13,772)
Net increase in line of credit 10,603 3,050
----------- -----------
Net cash used for financing (2,241) (7,253)
----------- -----------
Net effect of exchange rates and other 5 (1,330)
----------- -----------
Net increase in cash 11,299 570
Cash - beginning of year 11,626 11,336
----------- -----------
Cash - end of period $ 22,925 $ 11,906
=========== ===========
See accompanying notes to consolidated financial statements
10
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MS ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
1. BASIS OF PRESENTATIONposition of Sofedit and Trianon Industries.
The accompanying unaudited condensed consolidated financial statements of
MS AcquisitionTrianon Industries have been prepared in accordance with Rule 10-01 of
Regulation S-X and do not include all the information and notes required by
generally accepted accounting principles for complete financial statements.
All adjustments, which include only normal recurring adjustments that are,
in the opinion of management, necessary for a fair presentation of the
results of the interim periods, have been made. The results of operations
for such interim periods are not necessarily indicative of results of
operations for a full year. The unaudited condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto for the year ended December 31, 1997.1998.
The statements of operations and cash flows for the three months ended
March 31, 1999 represent the three month financial data of Sofedit plus
Trianon Industries. On a pro forma basis, Trianon Industries had net sales
of $189.9 million, and pre-tax income of $3.6 million, for the three
months ended March 31, 1998.
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7
TRIANON INDUSTRIES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
2. INVENTORIES
Inventories are comprised of the following:
MARCH 31, DECEMBER 31,
1999 1998
---- ----
Raw materials $ 23,923 $ 27,131
Work-in-process 22,542 31,976
Finished goods 15,980 18,839
Tooling 55,691 40,724
------------ ---------------
Inventories, gross 118,136 118,670
Less valuation allowance (3,427) (3,383)
------------ ---------------
Total inventories $114,709 $115,287
------------ ---------------
Tooling inventory at Sofedit is included in work in process at December 31, 1998
and has been included in tooling at March 31, 1999
3. STOCKHOLDERS' EQUITY (DEFICIT)
ACCUMULATED
ADDITIONAL RETAINED OTHER TOTAL
CONTRIBUTED PAID IN EARNINGS COMPREHENSIVE STOCKHOLDER'S
CAPITAL CAPITAL (DEFICIT) ADJUSTMENT EQUITY (DEFICIT)
Balance at December 31, 1998 $39 $40,708 ($54,910) ($2,450) ($16,613)
Translation adjustment (3,370) (3,370)
Preferred Stock dividends (1,146) (1,146)
Net income (loss) 1,261 1,261
------------- -------------- ------------ ------------------- -----------------
Balance at March 31, 1999 $39 $40,708 $(54,795) ($5,820) $(19,868)
------------- -------------- ------------ ------------------- -----------------
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TRIANON INDUSTRIES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
4. COMBINING FINANCIAL INFORMATION OF TRIANON INDUSTRIES
CORP BALANCE SHEET AS OF MARCH 31, 1999
AETNA TRIANON
AETNA HOLDINGS INDUSTRIES SOFEDIT ELIMINATIONS TOTAL
Total current assets $ 82,720 $ - $ 5,789 $ 254,207 $ (24,607) $ 318,109
Property, plant and
equipment, net 70,744 6,552 116,130 193,426
Other long-term assets 32,372 8,247 131,745 21,781 (104,971) 89,174
-------- --------- --------- ---------- ---------- ---------
Total assets $185,836 $ 8,247 $ 144,086 $ 392,118 $ (129,578) $ 600,709
======== ========= ========= ========= ========== =========
Total current liabilities 104,859 (201) 46,114 235,100 (8,439) 377,433
Long-term debt 88,125 17,032 79,922 (12,031) 173,048
Junior subordinated notes 9,077 9,077
Deferred income taxes and
other long-term liabilities 5,496 3,478 9,743 18,717
Redeemable preferred stock 42,302 42,302
Class A, common stock -
$.01 par value,
12,000,000 shares
authorized, 3,902,498
outstanding 39 1,274 (1,274) 39
Additional paid-in capital 14,024 32,151 23,969 (29,436) 40,708
Retained earnings
(accumulated deficit) (26,494) (629) 2,970 47,740 (78,382) (54,795)
Cumulative translation -
adjustment (174) (5,630) (16) (5,820)
-------- --------- --------- --------- ---------- ---------
Total stockholders equity
(deficit) $(12,644) $ (629) $ 35,121 $ 67,079 $ (107,834) $ (19,907)
======== ========= ========= ========== ========== =========
Total liabilities and
shareholders equity
(deficit) $ 185,836 $ 8,247 $ 144,086 $ 392,118 $ (129,578) $ 600,709
========= ========= ========= ========= ========== =========
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9
TRIANON INDUSTRIES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
4. COMBINING FINANCIAL INFORMATION OF TRIANON INDUSTRIES CORP. (CONTINUED)
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31,1999
AETNA TRIANON
AETNA HOLDINGS INDUSTRIES SOFEDIT TOTAL
Net sales $66,820 $ -- $ -- $151,337 $218,157
Cost of sales 58,704 182 133,046 191,932
------- ------- -------- -------- --------
Gross profit 8,116 -- (182) 18,291 26,225
Selling, general and administrative
expenses 4,560 204 9,499 14,263
Other expenses 411 -- -- (1) 410
------- ------- -------- -------- --------
Operating income (loss) 3,145 -- (386) 8,793 11,552
Net interest expense 3,815 245 837 2,371 7,268
------- ------- -------- -------- --------
Income (loss) before income taxes (670) (245) (1,223) 6,422 4,284
Income tax provision (credit) (126) (83) (415) 2,875 2,251
Income (loss) before discontinued
operations and preferred stock
dividend (544) (162) (808) 3,547 2,033
Discontinued Operations 772 772
Preferred stock dividend -- -- 1,146 -- 1,146
------- ------- -------- -------- --------
Net income available to common
stockholders $ (544) $ (162) $ (1,954) $ 2,775 $ 115
------- ------- -------- -------- --------
Other comprehensive income (loss):
Foreign currency translation
adjustment (174) -- -- (3,196) (3,370)
------- ------- -------- -------- --------
Comprehensive income (loss) ($718) ($162) ($1,954) $ (421) $ (3,255)
======= ======= ======== ======== ========
9
10
TRIANON INDUSTRIES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
4. COMBINING FINANCIAL INFORMATION OF TRIANON INDUSTRIES (CONTINUED)
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31,1999
AETNA TRIANON
AETNA HOLDINGS INDUSTRIES SOFEDIT ELIM TOTAL
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by
operating activities $ 6,577 $(432) $ - $(4,470) - $ 1,675
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash used for investing activities (704) - (5,000) (6,783) 5,000 (7,487)
CASH FLOWS FROM FINANCING ACTIVITIES
Net cash provided by financing (7,100) 432 5,000 7,321 (5,000) 653
Net effect of exchange rate 70 (2,045) - (1,975)
Net increase in cash (1,157) - - (5,977) - (7,134)
Cash - beginning of year 1,185 - - 24,907 - 26,092
Cash - end of period $ 28 $ - $ - $18,930 $ - $18,958
5. SEGMENT INFORMATION
The Company operates in one line of business, the design and manufacture of
highly engineered metal-formed components, complex modules and mechanical
assemblies for automotive OEM's in Europe and North America.
The Company manages the business under two segments, Europe and North America.
The accounting policy of the reportable segments are the same as those described
in the summary of significant accounting policies in the Company's annual report
on form 10-K. The Company evaluates performance based on earnings before
interest, income taxes, net income of equity investees, minority interests and
discontinued operations (EBIT).
MARCH 31, 1999 MARCH 31, 1998 DECEMBER 1998
-------------- -------------- -------------
OPERATING NORTH NORTH NORTH
SEGMENTS EUROPE AMERICA TOTAL EUROPE AMERICA TOTAL EUROPE AMERICA TOTAL
- --------- ------ ------- ----- ------ -------- ----- ------ ------- -----
Revenues 151,337 $ 66,820 $218,157 $136,873 $ - $136,673 $542,037 $168,809 $710,848
EBIT 8,793 2,759 11,552 6,305 - 6,305 19,255 7,569 26,824
Depreciation
and amortization 6,087 2,792 8,879 $ 5,154 - $ 5,154 23,405 8,438 31,843
Total assets $392,118 $208,591 $600,709 $355,602 - $355,602 $408,915 $215,249 $624,164
6. COMMON STOCK AND PREFERRED STOCK
As of May 12, 1999 the capital structure of authorized shares of common stock
and preferred stock as amended in the Certificate of Amendment of Restated
Certification of Incorporation of Trianon Industries Corp are as follows:
Common Stock Shares: 20,000,000
Preferred Stock Shares:
SERIES A - 405,000
SERIES B - 270,000
New Preferred - 2,000,000
Any dividends accruing on shares of Series A preferred Stock may be paid, in
lieu of cash dividends, by the issuance of additional shares of Series A
Preferred Stock (including fractional shares) having an aggregate Stated Value
at the time of such payment equal to the amount of the dividend to be paid.
With respect to the Preferred Stock dividends, such dividends shall be payable
semi-annually on the 13th day of February and August of each year, commencing on
the date of issuance of such shares with respect to the Series A Preferred Stock
and April 14, 1999 with respect to the Series B Preferred Stock (each such date
hereinafter referred to as "Dividend Period"), except that if such date is not a
Business Day, then such dividend shall be payable to the next succeeding
Business Day, to the holders of record as they appear on the register of the
Corporation for the Shares.
10
11
AETNA INDUSTRIES, INC.
(A WHOLLY-OWNED SUBSIDIARY OF
TRIANON INDUSTRIES CORP.)
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
APRIL 2, DECEMBER 31,
1999 1998
---- ----
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash $28 $1,185
Accounts receivable (less allowance for doubtful
accounts of $424 and $411, respectively) 40,953 38,793
Inventories 47,444 47,764
Other current assets 3,310 3,390
--------------- ------------------
Total current assets 91,735 91,132
--------------- ------------------
Property, plant and equipment, net 70,744 71,922
Deferred costs and other assets 5,393 5,717
Goodwill 23,971 24,172
--------------- ------------------
Total Assets $191,843 $192,943
=============== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $50,971 $48,874
Accrued expenses 9,267 10,896
Current portion of long term and short term debt 44,620 56,720
--------------- ------------------
Total current liabilities 104,858 116,490
--------------- ------------------
Long-term debt, less current portion 94,131 88,125
Deferred income taxes 5,498 5,498
Stockholder's equity (deficit)
Common stock - $.01 par value; 1,000 shares
issued and outstanding - -
Contributed capital 14,024 9,024
Accumulated deficit (26,494) (25,950)
Accumulated other comprehensive income (174) (244)
--------------- ------------------
Total shareholder equity (12,644) (17,170)
--------------- ------------------
Total liabilities and shareholder equity (deficit) $191,843 $192,943
=============== ==================
See accompanying notes to consolidated financial statements.
11
12
AETNA INDUSTRIES, INC.
(A WHOLLY-OWNED SUBSIDIARY OF
TRIANON INDUSTRIES CORP.)
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
THREE MONTHS
ENDED
APRIL 2, MARCH 29,
1999 1998
---- ----
(UNAUDITED)
Net Sales $66,820 $53,085
Cost of Sales 58,704 44,974
------- -------
Gross Profit (loss) 8,116 8,111
Selling, general and administrative expenses 4,971 4,486
------- -------
Operating income (loss) 3,145 3,625
Interest expense, net 3,815 2,866
------- -------
Income (loss) before income taxes (670) 759
Income tax provision (credit) (126) 235
------- -------
Net income (loss) $ (544) $ 524
======= =======
Other Comprehensive income (loss):
Foreign currency translation adjustment (70) --
------- -------
Comprehensive income (loss) $ (474) $ 524
======= =======
See accompanying notes to consolidated financial statements.
12
13
AETNA INDUSTRIES, INC.
(A WHOLLY-OWNED SUBSIDIARY OF
TRIANON INDUSTRIES CORP.)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
THREE MONTHS
ENDED
APRIL 2, MARCH 29,
1999 1998
---- ----
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) (544) 524
Adjustments to reconcile net income to net cash
used for operating activities:
Depreciation and amortization 2,406 1,941
Deferred income taxes - -
Changes in other assets and liabilities 4,715 (4,285)
-------------- --------------
Net cash used for operating activities 6,577 (1,820)
Cash flows from investing activities
Increase in other assets (704) (3,214)
-------------- --------------
Net cash used for investing activities (704) (3,214)
Cash flows from financing activities -
-
Net (decrease) increase in borrowings under line
of credit (12,100) 5,275
Capital Contribution 5,000
-------------- --------------
Net cash provided by financing activities (7,100) 5,275
-------------- --------------
Exchange Rate Variation 70 -
Net increase (decrease) in cash (1,157) 241
Cash - beginning of year 1,185 23
-------------- --------------
Cash - end of period $ 28 $ 264
============== ==============
See accompanying notes to consolidated financial statements.
13
14
AETNA INDUSTRIES, INC.
(A WHOLLY-OWNED SUBSIDIARY OF
TRIANON INDUSTRIES CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
1. BASIS OF PRESENTATION
Aetna Industries, Inc. ("Aetna") is a wholly-owned indirect subsidiary of
Trianon Industries Corp. ("Trianon Industries") and is a wholly-owned
direct subsidiary of Aetna Holdings, Inc. ("Aetna Holdings") and has two
wholly-owned subsidiaries Aetna Export Sales Corp. ("Export") and Aetna
Manufacturing Canada Ltd ("Aetna Canada"). Trianon Industries is a holding
company that was formed for the sole purpose of purchasing Aetna and does
not have any significant operations, other than its investments in its
subsidiaries assets or liabilities, preferred stock and junior
subordinated debentures.
Trianon Industries, Holdings, Export and Canada have fully and
unconditionally guaranteed the 11 7/8% Senior Notes due 2006 issued by
Aetna in an aggregate principal amount of $85,000,000 (the "Senior Notes").
Separate financial statements or other disclosures relative to Aetna
Holdings, Export or Aetna Canada have not been presented as management has
determined that such information is not material to investors.
On April 14, 1998, MS AcquisitionAetna's parent, Trianon Industries Corp. (Trianon
Industries) completed a combination with Societe Financiere d'Etude et de
Developpement Industriel et Technologique S.A., a French societe anonyme
(Sofedit) (the Combination). In connection with the Combination, Sofedit's
former stockholders transferred the outstanding capital stock of Sofedit to
MS AcquisitionTrianon Industries in exchange for: (i) promissory notes of MS AcquisitionTrianon
Industries in the principal amount of $40.9 million; (ii) dividends in an
amount of approximately $1.0 million; (iii) 270,000 shares of Series B
Preferred stock ($27.0 million stated value) of MS Acquisiton;Trianon Industries; (iv)
3.0 million shares of Common Stock of MS Acquisition,Trianon Industries, and (v) the
assumption of approximately $12.0 million of debt of such former
stockholders. The Combination has been accounted for as a reverse
acquisition because the former owners of Sofedit own approximately 75% of
the fully diluted outstanding Common Stock of the CompanyTrianon Industries as a
result of the Combination. For accounting purposes, Sofedit is considered
to be the acquiroracquirer of, and the predecessor to, Trianon Industries.
The accompanying unaudited condensed consolidated financial statements of
Aetna have been prepared in accordance with Rule 10-01 of Regulation S-X
and do not include all the Company.
Asinformation and notes required by generally
accepted accounting principles for complete financial statements. All
adjustments, which include only normal recurring adjustments that are, in
the opinion of management, necessary for a resultfair presentation of the Combination being accountedresults
of the interim periods, have been made. The results of operations for assuch
interim periods are not necessarily indicative of results of operations for
a reverse
acquisition, thefull year. The unaudited condensed consolidated financial statements
included hereinshould be read in conjunction with Aetna's consolidated financial
statements and notes thereto for the year ended December 31, 1997
and for the six month period ended June 30,1997 represent the historical
information of Sofedit, as predecessor. The consolidated balance sheet at
June 30, 1998 represents the consolidated financial position of Sofedit and
MS Acquisition. The statements of operations and cash flows for the six
months ended June 30, 1998 represent the six month financial data of
Sofedit, plus three months of financial data of MS Acquisition (from
April 1, 1998). On a pro forma basis, MS Acquisition had net sales of
$375.3 million and $359.4 million, and pre-tax income of $5.3 million and
$9.9 million, for the six months ended June 30, 1998 and 1997,
respectively.
The acquisition was accounted for using the purchase method. Therefore, the
purchase price was allocated to the identifiable assets and liabilities of
MS Acquisition, based upon independent appraisals and management estimates.
The excess of the purchase price over the fair market value of assets and
liabilities aggregated $60,091 and has been recorded as goodwill and is
being amortized over forty years.
111998.
14
12
MS ACQUISITION15
AETNA INDUSTRIES, INC.
(A WHOLLY-OWNED SUBSIDIARY OF
TRIANON INDUSTRIES CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
2. INVENTORIES
Inventories are comprised of the following:
JUNE 30,MARCH 31, DECEMBER 31,
1999 1998
1997
---- ---------------- ------------
Raw materials $ 21,8551,048 $ 19,189881
Work-in-process 29,150 30,2142,668 2,333
Finished goods 17,570 16,819
----------- -----------
68,575 66,222
Reserves (2,555) (2,209)
----------- -----------1,441 1,670
Tooling 39,463 40,724
------------ ------------
Inventories valued at FIFO 44,620 45,608
LIFO Reserve (200) (200)
------------ ------------
46,420 45,408
Purchased parts and purchased labor 3,024 2,356
------------ ------------
Total inventories $ 66,02047,444 $ 64,013
=========== ===========47,764
============ ============
3. STOCKHOLDERS'STOCKHOLDER'S EQUITY (DEFICIT)
ADDITIONAL CUMULATIVE TOTAL
CONTRIBUTED ACCUMULATED TRANSLATION STOCKHOLDER'S
CAPITAL PAID-IN RETAINED TRANSLATION STOCKHOLDERS'
STOCK CAPITAL EARNINGSDEFICIT ADJUSTMENT EQUITY
----- ------- -------- ---------- ------(DEFICIT)
Balance at December 31, 199731,1998 $ 399,024 $ 41,654(25,950) $ 28,138(244) $ (4,542) $ 65,289
Dividends paid (2,053) (68,381) (70,434)(17,170)
Translation adjustment (523) (523)- - 70 70
Capital Contribution 5,000 5,000
Net income 438 438
---------- ---------- --------- ------------- ----------loss (544) - (544)
----------- -------------- ----------- ---------------
Balance at June 30, 1998March 31, 1999 $ 3914,024 $ 39,601(26,494) $ (39,805)(174) $ (5,065) $ (5,230)
========== ========== ========= ============= ==========(12,644)
----------- -------------- ----------- ---------------
12
13
4. COMBINING FINANCIAL INFORMATION OF THE COMPANY
BALANCE SHEET AS OF JUNE 30, 1998
AETNA MS
AETNA HOLDINGS ACQUISITION SOFEDIT ELIMINATIONS TOTAL
----- -------- ----------- ------- ------------ -----
Total current assets $ 69,119 $ 7,631 $ 13,949 $ 245,692 $ (20,876) $ 315,515
Property, plant and
equipment, net 57,534 7,098 118,380 183,012
Other long-term
assets 30,603 641 142,378 8,770 (105,000) 77,392
----------- --------- ----------- ----------- ---------- -----------
Total assets $ 157,256 $ 8,272 $ 163,425 $ 372,842 $ (125,876) $ 575,919
=========== ========= =========== =========== ========== ===========
Total current liabilities $ 73,391 $ 316 $ 51,329 $ 227,815 $ 7,431 $ 312,546
Long-term debt 85,000 3,593 77,872 214,201
Junior subordinated
notes 7,789 7,789
Deferred interest,
junior subordinated notes 432 432
Deferred income taxes and
other long-term liabilities 7,431 5,122 (7,431) 5,122
Redeemable preferred stock
Series A 14,059 14,059
Series B 27,000 27,000
Class A, common stock -
$.01 par value,
12,000,000 shares
authorized, 3,899,998
shares issued and
outstanding 39 39
Additional paid-in capital 9,024 (575) 52,028 (20,876) 39,601
Retained earnings
(accumulated deficit) (17,590) 310 15,377 67,098 (105,000) (39,805)
Cumulative translation
adjustment (5,065) (5,065)
----------- --------- ----------- ----------- ---------- -----------
(8,566) (265) 67,444 (60,326) 26,726 (5,230)
----------- --------- ----------- ----------- ---------- -----------
$ 157,256 $ 8,272 $ 163,425 $ 372,842 $ (125,876) $ 575,919
=========== ========= =========== =========== ========== ===========
13
14
4. COMBINING FINANCIAL INFORMATION OF THE COMPANY (CONTINUED)
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED
JUNE 30, 1998
AETNA MS
AETNA HOLDINGS ACQUISITION SOFEDIT ELIMINATIONS TOTAL
----- -------- ----------- ------- ------------ -----
Net sales $ 47,223 $ -- $ -- $ 275,028 $ -- $ 322,251
Cost of sales 43,405 407 242,139 285,951
--------- -------- ---------- ----------- ------------ -----------
Gross profit 3,818 (407) 32,899 36,300
Selling, general and
administrative expenses 4,740 -- 206 13,222 18,168
Research and development
expenses 4,234 4,234
Other expense, net 200 1,360 1,560
--------- -------- ---------- ----------- ------------ -----------
Operating income (loss) (1,122) (614) 14,073 12,338
Net interest expense 3,187 432 837 4,742 (216) 8,982
--------- -------- ---------- ----------- ------------ -----------
Income (loss) before income
taxes (4,309) (432) (1,451) 9,331 216 3,356
Income tax provision (1,105) 54 (419) 3,006 (757) 1,428
--------- -------- ---------- ----------- ------------ -----------
Income (loss) before
discontinued operations $ (3,204) $ (378) $ (1,032) $ 6,325 $ 216 $ 1,928
========= ======== ========== =========== ============ ===========
14
15
4. COMBINING FINANCIAL INFORMATION OF THE COMPANY (CONTINUED)
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED
JUNE 30, 1998.
AETNA MS
AETNA HOLDINGS ACQUISITION SOFEDIT TOTAL
----- -------- ----------- ------- -----
Net cash provided by
operating activities $ (1,916) $ -- $ -- $ 33,180 $ 31,264
--------- -------- ---------- --------- -----------
Net cash used for
investing activities (10,343) -- -- (7,386) (17,729)
--------- -------- ---------- --------- -----------
Net cash provided by
financing 12,451 -- -- (14,692) (2,241)
--------- -------- ---------- --------- -----------
Net effect of exchange
rates and others 5 5
--------- -------- ---------- ---------- -----------
Net increase in cash 192 11,107 11,299
Cash - beginning of year 23 11,603 11,626
--------- -------- ---------- --------- -----------
Cash - end of period $ 215 $ -- $ -- $ 22,710 $ 22,925
========= ======== ========== ========= ===========
16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
AETNA
- ----------------------
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, Aetna's statement of
operations expressed as a percentage of net sales. This table and subsequent
discussions should be read in conjunction with the condensed consolidated
financial statements and related notes thereto of Aetna included elsewhere
herein.
AS A PERCENTAGE OF NET SALES
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------------------ ----------------------------------
JUNE 28, 1998 JUNE 29, 1997 JUNE 28, 1998 JUNE 29, 1997
------------- ------------- ------------- -------------
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 91.9 87.7 88.1 86.4
----- ----- ----- -----
Gross profit 8.1 12.3 11.9 13.6
Selling, general and
administrative expenses 10.5 8.1 9.4 7.5
----- ----- ----- -----
Operating income (2.4) 4.1 2.5 6.1
Net interest expense 6.7 5.6 6.0 5.1
----- ----- ----- -----
Income (loss) before
income taxes (9.1) (1.4) (3.5) 1.0
Income tax provision (2.3) (0.5) (0.9) 0.4
----- ----- ----- -----
Net loss (6.8)% (0.9)% (2.7)% 0.6%
===== ===== ===== =====
THREE MONTHS ENDED JUNE 28, 1998 COMPARED TO THREE MONTHS ENDED JUNE 29, 1997
NET SALES: Net sales for the second quarter of 1998 were $47.2 million, or 3.1%,
lower than second quarter 1997 sales of $48.7 million. Production sales of $42.2
million in the second quarter of 1998 were down $4.8 million from $47.0 million
in the second quarter of 1997, while tooling and prototype sales were up $3.3
million for the same period.
GROSS PROFIT: Gross profit was $3.8 million, or 8.1% of net sales, for the
second quarter of 1998 compared to $6.0 million, or 12.3% of net sales, for the
same period in 1997. The decrease in gross profit was primarily the result of
the negative impact of the General Motors (GM) strike in June and the balance
out of the Grand Cherokee production in May.
SELLING, GENERAL AND ADMINISTRATIVE ("SG&A") EXPENSES: SG&A expenses for the
second quarter of 1998 were $4.9 million, or 10.5% of net sales, compared to
$4.0 million, or 8.1% of net sales, for the same period in 1997. The increase is
due principally to ongoing launch costs for Saturn, WJ and CAMI platforms, and
costs incurred relative to quote preparation for a significant OEM platform with
worldwide launch planned for model year 2002.
16
17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
INTEREST EXPENSE: Interest expense for the second quarter of 1998 was $3.2
million, or 6.7% of net sales, compared to $2.7 million or 5.6% of net sales for
the same period in 1997. Interest expense was impacted by higher levels of
short-term borrowings outstanding.
INCOME TAXES: The income tax credit in the second quarter of 1998 was $1.1
million with an effective tax rate of 25.6% as compared to a provision of $0.3
million with an effective tax rate of 36.4% for the same period in 1997.
SIX MONTHS ENDED JUNE 28, 1998 COMPARED TO SIX MONTHS ENDED JUNE 29,1997
NET SALES: Net sales for the second half of 1998 were $100.3 million, down from
the $103.8 million reported for the six months ended June 30, 1997. Production
sales of $94.8 million in the second half of 1998 were down $6.0 million from
$100.8 million in the second quarter of 1997, while tooling and prototype sales
increased $2.5 million for the same period.
GROSS PROFIT: Gross profit was $11.9 million, or 11.9% of net sales, for the six
months ended June 28, 1998 compared to $14.1 million, or 13.6% of net sales, for
the same period in 1997. The decline in gross profit in the first half of 1998
was related principally to two events which occurred in the second quarter
including the balance out of production of the Grand Cherokee and the GM strike.
SELLING, GENERAL AND ADMINISTRATIVE ("SG&A") EXPENSES: SG&A expenses for the six
months ended June 28, 1998 were $9.4 million, or 9.4% of net sales, compared to
$7.8 million, or 7.5% of net sales, for the same period in 1997. The increase is
due principally to ongoing launch costs for Saturn, WJ and CAMI platforms, and
costs incurred relative to quote preparation for a significant OEM platform with
worldwide launch planned for model year 2002.
INTEREST EXPENSE: Interest expense for the six months ended June 28,1998 was
$6.1 million, or 6.0% of net sales, compared to $5.3 million or 5.1% of net
sales for the same period in the prior year. Interest expense was impacted by
higher levels of debt outstanding.
INCOME TAXES: The income tax credit for the six months ended June 28,1998 was
$0.9 million with an effective tax rate of 24.5% as compared to a provision of
$0.4 million with an effective tax rate of 40.1% for the same period in the
prior year.
LIQUIDITY AND CAPITAL RESOURCES
Aetna's principal capital requirements are to fund working capital needs, to
meet required debt payments and to complete planned maintenance and expansion
expenditures.
17
18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
At June 28, 1998 there was $24.3 million available under the Senior Revolving
Credit Facility.
Management currently anticipates that its operating cash flow, together with
available borrowings under the Senior Revolving Credit Facility, will be
sufficient to meet working capital requirements, capital expenditure
requirements, and interest requirements on debt obligations.
Net cash flow used for operations for the six months ended June 28, 1998
aggregated $1.9 for Aetna. This compares to net cash provided by operations of
$0.2 million for the same period in 1997. The decrease is due primarily to lower
net income and increase in tooling inventory, partially offset by increased
depreciation and amortization expenses and changes in deferred income taxes.
Net cash flow used for investing activities aggregated $10.3 million for the six
months ended June 28, 1998 as compared to $6.3 million for the same period in
1997 and consists principally of capital expenditures. The major capital
projects during 1998 have been the renovation of Plant 7 which will be used to
stamp the majority of the new Saturn LS jobs and the purchase of equipment for
the start up of the Aetna Manufacturing Canada plant in London, Ontario serving
CAMI's J II platform.
Net cash flows provided by financing aggregated $12.5 million for the six months
ended June 28, 1998 as compared to $2.2 million for the same period in the prior
year and in both cases represented increases in the Senior Revolving Credit
Facility.
FUTURE OPERATING RESULTS
With the exception of historical matters, the matters discussed in this
Quarterly Report on Form 10-Q are forward-looking statements that involve risks
and uncertainties, including, but not limited to, factors related to the highly
competitive nature of the automotive supplier industry and its sensitivity to
changes in general economic conditions, the results of financing efforts and
other factors discussed in filings with the Securities and Exchange Commission.
Such factors could affect actual results during the remainder of 1998 and beyond
to differ materially from those expressed in any forward-looking statement made
by or on behalf of the Company. There can be no assurance that additional
sources of financing will not be required during the next twelve months as a
result of unanticipated cash demands or opportunities for expansion or
acquisition, changes in growth strategy or adverse operating results. There can
be no assurance that any additional funds required by the Company, whether
within the next twelve months or thereafter, will be available to Aetna on
satisfactory terms.
MS ACQUISITION
- --------------TRIANON INDUSTRIES
RESULTS OF OPERATIONS
On April 14, 1998, MS AcquisitionTrianon Industries completed a combination with Societe
Financiere d'Etude et de Developpement Industriel et Technologique S.A., a French societe
anonyme (Sofedit) (the Combination). In connection with the Combination,
Sofedit's former stockholders transferred the outstanding capital stock of
Sofedit to MS AcquisitionTrianon Industries in exchange for: (i) promissory notes of MS AcquisitionTrianon
Industries in the principal amount of $40.9 million; (ii) dividends in an amount
of approximately $1.0 million; (iii) 270,000 shares of Series B Preferred stock
($27.0 million stated value) of MS Acquisiton;Trianon Industries; (iv) 3.0 million shares of
Common Stock of MS Acquisition,Trianon Industries, and (v) the assumption of approximately
$12.0 million of debt of such former stockholders. The Combination has been
accounted for as a reverse acquisition because the former owners of Sofedit own
approximately 75% of the fully diluted outstanding Common Stock of the CompanyTrianon
Industries as a result of the Combination. For accounting purposes, Sofedit is
considered to be the acquiror to,acquirer of, and predecessor to the Company.
18
19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)of Trianon Industries.
As a result of the Combination being accounted for as a reverse acquisition, the
financial statements of operations and cash flows included herein for December 31, 1997 and for the sixthree month
period ended June 30,1997March 31, 1998 represent the historical information of Sofedit, as
predecessor. The consolidated balance sheet at June 30,March 31, 1999 and December 31,
1998 represents the consolidated financial position of Sofedit and MS Acquisition.Trianon
Industries. The statements of operations and cash flows for the sixthree months
ended June 30, 1998March 31, 1999 represent the sixconsolidated three month financial data of
Sofedit plus three months of financial data of MS
Acquisition (from April 1,1998).and Trianon Industries.
The following table sets forth, for the periods indicated, MS Acquisition'sTrianon Industries's
statement of operations expressed as a percentage of net sales.sales for three months
ended March 31, 1999 and proforma statement of operations for the three months
ended March 31, 1998. This table and subsequent discussions should be read in
conjunction with the condensed consolidated financial statements and related
notes thereto of MS AcquisitionTrianon Industries included elsewhere herein.
16
17
AS A PERCENTAGE OF NET SALES
SIX
THREE
MONTHS
ENDED
----------------
JUNE 30,MARCH 31, MARCH 31,
1999 1998
JUNE 30, 1997
------------- ----------------- ----
Net sales 100.0% 100.0%
Cost of sales 88.7 86.4
----- -----88.0% 87.3%
------------- -------------
Gross profit 11.3 13.612.0% 12.7%
Selling, general and
administrative expenses 5.6 5.5
Research and development
expenses 1.3 1.6
Other expenses, net 0.5 0.8
----- -----6.8% 7.6%
------------- -------------
Operating income 3.8 5.7(loss) 5.2% 5.1%
Interest expense, net 2.8 2.1
----- -----3.3% 3.2%
------------- -------------
Income (loss) before
income taxes 1.0 3.61.9% 1.9%
------------- -------------
Income tax provision 0.4 1.0
Share in net income of equity
investees and minority interests -- (0.1)
Losses in discontinued
operations 0.6 0.5
----- -----(credit) 1.0% 0.4%
Net income before preferred
stock dividends 0.1% 2.1%
===== =====0.0% 1.0%
============= =============
19
20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
SIXTHREE MONTHS ENDED JUNE 28, 1998MARCH 31, 1999 COMPARED TO SIXTHREE MONTHS ENDED JUNE 29, 1997MARCH 31, 1998
NET SALES: Net sales was $322.3were $218.1 million, up 14.8 % from the $255.6 million for the six
months ended June 30, 1997. The increase in net sales is primarily attributable
to the Combination with MS Acquisition, which had sales of $47.2$189.9 million for
the three months sinceended March 31, 1999. Net sales in North America was 25.9%
higher in the datefirst three months in 1999 than 1998. Net sales in Europe were up
10.5% in the first quarter 1999 from 1998, or 6.0% excluding the effects of
Combination.foreign exchange. The remaining increase in European sales was due to both a general
growth in the car market and to the launch of $19.5
million is due primarily to increased sales at Sofedit, partially offset by the negative effect of currency fluctuation.Renault Clio II, Peugeot 20,
and the Mercedes Class S in 1998 which reach full production in 1999.
GROSS PROFIT: Gross profit was $36.3$26.2 million, or 11.3%12.0% of net sales, for the
sixthree months ended June 30, 1998March 31, 1999 compared to $34.7$24.1 million, or 13.6%12.7% of net
sales, for the same period in 1997. The1998. In North America, gross profit decrease, as a percentagewas $8.1
million for three months ended 1999 and 1998. In Europe, gross profit reached
$18.3 million or 12.1% of net sales, is
due primarily to (i) a significant steel priceversus $16.1 million or 11.8% of net sales
in 1998. The increase in Europe; (ii) a change
in sales mix leadingEuropean gross margin is mainly due to increased purchases of components; (iii) approximately
$2.0 million in non-recurring charges relatedreducing launch
and project costs and to the bankruptcyfirst effect of an equipment
supplier.cost saving plan implemented at
several production facilities.
SELLING, GENERAL AND ADMINISTRATIVE ("SG&A") EXPENSES: SG&A expenses for the
sixthree months ended June 30,1998March 31,1999 were $18.2$14.7 million, or 5.6%6.8 % of net sales,
compared to $14.0$14.5 million, or 5.5%7.6% of net sales, for the same period in 1997.1998.
Increased costs were due to increased project team activity and the
reinforcement of the current management structure.
INTEREST EXPENSE: Interest expense for the sixthree months ended June 30, 1998March 31, 1999 was
$9.0$7.3 million, or 2.8%3.3% of net sales, compared to $5.4$6.1 million, or 2.1%3.2% of net
sales in the same period in the prior
17
18
year. The increase in interest expense is due principally to a sharp increase
in tooling inventory relating to two major projects in North America. In
Europe, interest expense was $2.4 million or 1.6% of sales, versus $2.2 million
for the Combination.same period in 1998. Excluding the effect of exchange rate
fluctuations, interest expense in Europe raised by 4.7%. The increase is mainly
due to a $7.3 million increase in medium and short term debt.
INCOME TAXES: The income tax provision for the sixthree months ended June 30, 1998March 31, 1999 was $ 1.4$2.3
million with an effective tax rate of 42.5%52.5% as compared to a provision of $2.6$1.0
million with an effective tax rate of 28.5% for the same period in the prior
year. The change in the effective tax rate is mainly due to loss incurred in
North America and to reduced research and development tax credit in France.
LIQUIDITY AND CAPITAL RESOURCES
The Company'sTrianon Industries's primary sources of liquidity are cash generated from
operations and short-term and long-term debt, including the sale of receivables.
The
Company'sTrianon Industries's principal use for these funds is to finance working capital
needs, debt payments and planned maintenance and expansion activities. The
Company's liquidity is affected by both the cyclical nature of its business and
its level of net sales. The Company believes that operating cash flow and its
line of bank credit will be sufficient to cover its short-term and long-term
capital expenditures and debt payment obligations. Nevertheless, the Company'sTrianon
Industries's ability to meet these liquidity demands will depend upon future
operating performance, which will be affected by prevailing economic conditions
and financial, business and other factors, certain of which are beyond the Company'sTrianon
Industries's control.
FINANCIAL CONDITION
At June 30, 1998 the CompanyMarch 31, 1999, Trianon Industries had available cash, cash equivalents and
marketable securities totaling $22.9$19.0 million, compared to $11.6$26.1 million at
December 31.31, 1998. At June 30, 1998 the CompanyMarch 31, 1999, Trianon Industries had current assets of
$315.5$318.1 million, compared to $312.5$377.4 million in current liabilities, giving it
anegative working capital $3.0of $59.3 million, compared to $8.5$80.2 million at
December 31, 1997.
20
21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
FINANCIAL CONDITION (CONTINUED)1998.
At June 30, 1998, the Company was committed to capital expenditures of
approximately $11.4 million through the end of 1998 for welding and assembly
machinery and press automation. The Company expects to cover these commitments
through cash flows from operating activities and leasing contracts.
At June 30, 1998, the CompanyMarch 31, 1999, Trianon Industries had $24.3$16.5 million available under its
Amended and Restated Credit Agreement among Aetna, the Company,Trianon Industries, Aetna
Holdings, Aetna Export Sales Co., Aetna Canada and NBD Bank (the "Senior
Revolving Credit Facility"). In addition, the Company had outstanding,Restricted cash of $10.7 million at March 31, 1999
represents cash held by Sofedit in a mutual fund until June 30, 1998, $55.51999 to warranty
an additional line of credit for Aetna Industries.
On March 31, 1999, short-term debt consisted of $13.0 million under a receivables sales program.of bank overdraft,
$56.7 million of line of credit, $30.9 million bank borrowing, promissory notes
of $40.9 million. Long-term debt consisted of Senior notes of $85.0 million,
long-term bank loans of $60.5 million, leasing contracts of $27.5 million and
junior debt of $9.1 million.
CASH FLOWS
Net cash provided by operating activities was $31.3$1.6 million compared to $19.4$10.9
million in the same period of the prior year. The principal reason for the
increasedecrease in cash provided by operating activities is attributable to improvements in working capital accounts, particularly sales
of receivables.lower net
income, tooling inventory increases, partially offset by increased depreciation
and amortization.
Net cash used for investing activities was $17.7$7.5 million and $10.3$9.0 million for the
sixthree months ended June 30,March 31, 1999 and 1998, and 1997, respectively. The increase ischange was due
principally to increaseddecreased capital expenditures.
Net cash used for financing was $2.2 million and $7.3expenditures in North America. Capital
expenditures in Europe reached $6.8 million for the sixthree months ended June 30,March 31,
1999, compared to $5.9 million for the same period in 1998.
18
19
Net cash provided by financing was $0.7 million compared to cash provided of
$0.5 million for the three months ended March 31, 1999 and 1998 and 1997.respectively.
This decreasechange was principally due to a higheran increase in line of credit borrowings in 1998 as compared to 1997.
The Company had net outstanding debt of $278.0 million, including $55.5 million
in short-term debt and $222.5 million in long-term debt. Short-term debt
consisted primarily of short-term bank loans and borrowings under the Senior
Revolving Credit Facility plus $15.3 million in bank overdrafts. Long-term debt
consisted of $85.0 million under the 11 7/8% Senior Notes of Aetna plus $109.6
million in long-term bank loans and $27.9 million amounts due under
leasing contracts.
OTHER BANK DEBT OF THE COMPANY
On June 30,1998, the Company and its subsidiaries had approximately $56.5
million of bankmedium term loans outstanding and $31.5 million remaining outstanding
under leasings. These loans and leasings contain terms and conditions which are
standard in France and the United States.
21
22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)Europe
in 1999.
EUROPEAN MONETARY UNION
Since a substantial portionportions of the Company'sTrianon Industries's activities are carried out in
Europe, the CompanyTrianon Industries is actively preparing for the introduction of a
single European currency. After January 1, 1999, the CompanyTrianon Industries will be
required, upon the request of any party with which it transacts to use the euro
as a currency of payment in its European commercial activities in certain
financial transactions and in dealings with administrative bodies. On the basis
of currently available information, the CompanyTrianon Industries does not expect that
expenses to be incurred in connection with the introduction of the euro as a
currency of payment for the CompanyTrianon Industries will have a material adverse effect
on the results of operations or financial position of the Company.Trianon Industries.
YEAR 2000
The CompanyTrianon Industries has conducted a review of its computer systems to identity
those areas that may not be Year 2000 compliant and is developing a plan to
resolve the issue. The CompanyTrianon Industries believes that by modifying existing
software and obtaining new releases of licensed software, the Year 2000
transition can be carried out without significant operational expenses or
significant investments in computer systems improvements. On the basis of
currently available information, the CompanyTrianon Industries does not expect that
expenses be incurred in connection with the continuing identification of systems
which are not Year 2000 compliant and with their replacement or upgrade will
have a material adverse impact on the results of operations or financial
position of the Company.Trianon Industries. There can be, however, no assurances of the
absence of any disruptions in the Company'sTrianon Industries's own systems or those of its
customers and suppliers. The CompanyTrianon Industries considers that sufficient resources
have been dedicated to address these issues in a timely manner.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June, 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative
Instruments and Hedging Activities". SFAS 133 addresses the accounting for
derivative instruments. This statement is not expected to have anya material effect
on the
Company'sTrianon Industries's financial position or results of operations.
In April 1998, the Accounting Standards Executive Committee issued Statement of
Position 98-5 ("SOP") 98-5), "Reporting on the Costs of Start-up Activities:.Activities.
This statement prescribes accounting treatment for start-up activities and is
effective for fiscal years beginning after December 15, 1998. ThisThe adoption of
this statement isdid not expected to have a material effect on the Company'sTrianon Industries's financial
position or result of operations.
In February, 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 132 ("SFAS 132"), "Employers' Disclosure
about Pension and Other post-Retirement Benefits." SFAS 132 revises employers'
disclosures about pension and other post-retirement benefit plans but does not
change the measurement or recognition of those plans. This statement is not
expected to have a material effect on the Company's financial position or
results of operation.
2219
23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)20
FUTURE OPERATING RESULTS
With the exception of historical matters, the matters discussed in this
Quarterly Report on Form 10-Q are forward-looking statements that involve risks
and uncertainties, including, but not limited to, factors related to the highly
competitive nature of the automotive supplier industry and its sensitivity to
changes in general economic conditions, the results of financing efforts and
other factors discussed in MS Acquisition'sAetna's or Trianon Industries's filings with the
Securities and Exchange Commission. Such factors could affect MS Acquisition'scause Trianon
Industries's actual results during the remainder of 19981999 and beyond to differ
materially from those expressed in any forward-looking statement made by or on
behalf of MS
Acquisition.Aetna or Trianon Industries. There can be no assurance that
additional sources of financing will not be required during the next twelve
months as a result of unanticipated cash demands or opportunities for expansion
or acquisition, changes in growth strategy or adverse operating results. There
can be no assurance that any additional funds required, whether within the next
twelve months or thereafter, will be available to MS AcquisitionAetna or Trianon Industries
on satisfactory terms.
AETNA
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, Aetna's statement of
operations expressed as a percentage of net sales. This table and subsequent
discussions should be read in conjunction with the condensed consolidated
financial statements and related notes thereto of Aetna included elsewhere
herein.
20
21
AS A PERCENTAGE OF NET SALES
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998
THREE MONTHS ENDED
MARCH 31, MARCH 31,
1999 1998
---- ----
Net sales 100.0% 100.0%
Cost of sales 87.9% 84.7%
------------- -------------
Gross profit 12.1% 15.3%
Selling, general and
administrative expenses 7.4% 8.5%
------------- -------------
Operating income (loss) 4.7% 6.8%
Interest expense, net 5.7% 5.4%
------------- -------------
Income (loss) before
income taxes (1.0%) 1.4%
------------- -------------
Income tax provision (credit) (0.2%) 0.4%
Net loss (0.8%) 1.0%
============= =============
NET SALES: Net sales for the first quarter of 1999 were $66.8 million, or 25.9%
higher than first quarter 1998 sales of $53.1 million. Production sales of $58.8
million in the first quarter of 1999 were up $6.3 million from $52.5 million in
the first quarter of 1998, due to Daimler Chrysler Jeep Grand Cherokee and the
Cami Grand Vitara. Tooling and prototype sales were up $ 7.7 million for the
same period.
GROSS PROFIT: Gross profit was 8.1 million, or 12.1% of net sales, for the first
quarter of 1999 compared to $ 8.1 million, or 15.3 % of net sales, for the same
period in 1998. The decrease in gross profit was primarily the result of higher
tooling sales with little or no associated margin and the loss of higher margin
products such as Daimler Chrysler's mini-van.
SELLING, GENERAL AND ADMINISTRATIVE ("SG&A") EXPENSES: SG&A expenses for the
first quarter of 1999 were $5.0 million, or 7.4% of net sales, compared to $ 4.5
million, or 8.5% of net sales, for the same period in 1998. As a percent of net
sales, the decrease was a result of launch expense that is no longer being
incurred.
INTEREST EXPENSE: Interest expense for the first quarter of 1999 was $3.8
million, or 5.7% of net sales, compared to $2.9 million or 5.4% of net sales for
the same period in 1998. Interest expense was impacted by higher levels of
short-term debt used to finance the launch of the Saturn and WJ programs, and
other working platform capital requirements.
INCOME TAXES: The income tax credit in the first quarter of 1999 was $0.1
million as compared to income tax of $ 0.2 million for the same period in 1998.
21
22
LIQUIDITY AND CAPITAL RESOURCES
Aetna's principal capital requirements are to fund working capital needs, to
meet required debt payments and to complete planned maintenance and expansion
expenditures.
At March 31, 1999 there was $16.5 million available under the Senior Revolving
Credit Facility. Management currently anticipates that its operating cash flow,
together with available borrowings under the Senior Revolving Credit Facility,
will be sufficient to meet working capital requirements, capital expenditure
requirements, and interest requirements on debt obligations.
The terms of the indenture pursuant to which the Senior Notes were issued
contains certain restrictive covenants which include restrictions on the ability
of Aetna, Aetna Canada and Export from paying dividends or making certain other
payments to Aetna Holdings or Trianon Industries.
CASH FLOWS
Net cash flows provided by (used for) operations for the three months ended
March 31, 1999 aggregated $6.6 million. This compares to net cash used for
operations of $ 1.8 million for the same period in 1998. The increase is due
primarily to decrease in tooling inventory and increased depreciation and
amortization expenses.
Net cash flows provided by (used for) investing activities aggregated $0.7
million for the three months ended March 31, 1999 as compared to $3.2 million
for the same period in 1998 and consists principally of capital expenditures.
The major capital projects during 1999 have been the purchase of robots for the
Saturn Innovate launch, equipment to support Aetna's development lab for 3
dimensional remote welding, and the purchase and installation of robots to
support increased volume requirements for the GM rear suspension assembley.
Net cash flows provided by (used for) financing aggregated $7.1 million for the
three months ended March 31, 1999 as compared to $5.3 million for the same
period in the prior year and in both cases represented increases in the Senior
Revolving Credit Facility.
Item 4. Submission of Matters to a Vote of Security Holders
Pursuant to a Consent in Lieu of Special Meeting of the
Stockholders of Trianon which was distributed to its stockholders on December
17, 1998, the Board of Directors proposed an amendment to Tiranon's Restated
Certificate of Incorporation to (i) change the name of the corporation from MS
Acquisition Corp. to Trianon Industries Corp., (ii) increase the number of
authorized shares of Trianon's Series A Preferred Stock from 293,123 shares to
405,000 shares and (iii) provide Trianon's Board of Directors the election to
pay dividends accruing on shares of Series A Preferred Stock, in lieu of cash
dividends, in additional shares of Series A Preffered Stock. The amendment is
attached to this Quarterly Report on Form 10-Q as exhibit 3(i).
The proposal was adopted by the votes indicated (which
constituted the affirmative vote of more than one-half of the shares voting for
each class and series of stock).
Common Stock Preferred Stock
------------------------------------- ------------------------
Series A-1 Series A-2 Series A-3 Series A Series B
---------- ---------- ---------- -------- --------
For the Proposal: 1,391,193 1,235,507 885,213 112,760.18 235,169
Against the Proposal: 0 0 0 0 0
Abstaining: 282,525 90,775 17,285 2,207.20 34,831
22
23
24
ITEM 3.5. DISCLOSURE OF QUANTITATIVE AND QUALITATIVE DISCLOSUREINFORMATION ABOUT MARKET
RISK
NotRISKS
The financial condition and results of operations of the Company's operating
entities are reported in various foreign currencies (principally Euro and
British pounds sterling) and then translated into U.S. dollars at the applicable
exchange rate for inclusion in the Company's financial statements. As a result,
an appreciation of the dollar against these foreign currencies will have a
negative impact on the reported sales and operating profit of the Company.
Conversely, depreciation of the dollar against these foreign currencies will
have a positive impact. In addition, the Company incurs currency transaction
risk whenever it or one of its subsidiaries enters into either a purchase or
sale transaction using a different currency than the relevant entity's
functional currency. However, the nature of the Company's business results in
the Company generally matching revenues and expenses of the same currency.
Therefore, the Company does not currently use financial instruments to limit its
exposure to foreign transaction exposure risk. The Company does not currently
use financial instruments to limit its exposure to interest rate variations. The
portion of the company's outstanding debt obligations tied to variable interest
rates totals $125.9 million as of December 31, 1998.
23
24
PART II. OTHER INFORMATION
ITEM 1. NOT APPLICABLE.APPLICABLE
ITEM 2. Changes in Securities and Use of Proceeds.
On April 14, 1998, Aetna's parent, MS Acquisition Corp. completed a
combination with Societe Financiere de Development Industrial et
Technologique S.A., a French societe anonyme (Sofedit) (the
Combination). In connection with the Combination, Sofedit's former
stockholders transferred the outstanding capital stock of Sofedit to
MS Acquisition in exchange for: (i) promissory notes of MS
Acquisition in the principal amount of $40.9 million; (ii) dividends
in an amount of approximately $1.0 million; (iii) 270,000 shares of
Series B Preferred stock ($27.0 million stated value) of MS
Acquisiton; (iv) shares of Common Stock of MS Acquisition, and (v)
the assumption of approximately $12.0 million of debt of former
stockholders. The Combination has been accounted for as a reverse
acquisition because the former owners of Sofedit own approximately
75% of the fully diluted outstanding Common Stock of the Company as
a result of the Combination. Ms Acquisition relied on the private
offering exemption of Section 4(2) of the Securities Act of 1933
with respect to the issuance of Shares of Common Stock and Series B
Preferred Stock.NOT APPLICABLE
ITEM 3. NOT APPLICABLE
ITEM 4. SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS
A unanimous written consent of Stockholders dated April 14, 1998,
consented to and approved the Restated Certificate of Incorporation
filed with the Secretary of State of the State of Delaware on April
14, 1998. The Restated Certificate was filed in connection with the
consummation of the Combination. A copy of the Restated Certificate
was filed as an exhibit to MS Acquisition Corp.'s Current Report on
Form 8-K dated April 14, 1998 and filed April 29, 1998 with the
Securities and Exchange Commission.
ITEM 5. NOT APPLICABLE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
24
25
EXHIBIT NO. DESCRIPTION OF EXHIBITS
4.1 AmendedEXHIBIT NO. DESCRIPTION OF EXHIBITS
3.1(i) Amendment to Trianon Industries Corp. Restated Certificate of
Incorporation filed with the Delaware Secretary of State on May 12,
1999.
4.1 Fifth Amendment to Credit Agreement dated as of February 12, 1999, by
and Restated Credit Agreement dated April 10, 1998 among Aetna Industries, Inc., the Guarantors party thereto, the
lenders, NBD Bank as the agent.
27.1 Financial Data Schedule for Aetna Industries, Inc. (EDGAR Filing Only)
27.2 Financial Data Schedule for Trianon Industries Inc., the Guarantors
party thereto, the lenders party thereto and NBD Bank
4.2 First Amendment to Credit Agreement May 20, 1998 among Aetna Industries, Inc., the Guarantors party
thereto, the lenders party thereto and NBD Bank
27.1 Financial Data Schedule for Aetna Industries, Inc. (EDGAR Filing Only)
27.2 Financial Data Schedule for MS Acquisition Corp. (EDGAR Filing Only)
27.3 Amended Financial Data Schedule for MS Acquisition Corp. (EDGAR Filing Only)
(b) Reports on Form 8-K.
(1) No reports on Form 8-K
were filed by Aetna during the three months
ended June 28, 1998
(2) MS Acquisition Corp. Current Report on Form 8-K dated April 14, 1998
and filed April 29, 1998 reporting Item 5 - Other Events with respect
to the Combination.
(3) MS Acquisition Corp. Amended Current Report on Form 8-K/A dated April
14, 1998 and filed June 29, 1998 reporting financial statements of
Sofedit, SA and pro forma financial statements.
25None
30
26
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
The signatory hereby acknowledges and adopts the typed form of his name in the
electronic filing of this document with the Securities and Exchange Commission.
Aetna Industries, Inc.
Date: August 11, 1998May 14, 1999 By: /s/s/ Harold A. Brown
-------------------
Harold A. Brown
Secretary, Vice President, Finance
and Secretary
(PrincipalChief Financial and Accounting
Officer)
MS AcquisitionOfficer
Trianon Industries Corp.
Date: August 11, 1998May 14, 1999
By: /s/s/ Harold A. Brown
---------------------------------------
Harold A. Brown
Secretary, Vice President Finance and Secretary
(Principal Financial and Accounting
Officer)
26North America
31
27
EXHIBIT INDEX
Exhibit No. Description of Exhibits
- ----------- -----------------------
3.1(i) Amendment to Trianon Industries Corp. Restated Certificate of
Incorporation filed with the Delaware Secretary of State on May
12, 1999.
4.1 Amended and RestatedFifth Amendment to Credit Agreement dated April 10, 1998as of February 12,
1999, by and among Aetna Industries, Inc., the Guarantors party
thereto, the lenders, party thereto and NBD Bank.
4.2 First Amendment to Credit Agreement May 20, 1998
among Aetna Industries, Inc.,Bank as the Guarantors party thereto, the
lenders party thereto and NBD Bank.agent.
27.1 Financial Data Schedule for Aetna Industries, Inc.
27.2 Financial Data Schedule form MS Acquisitionfor Trianon Industries Corp.
27.3 Amended Financial Data Schedule for MS Acquisition Corp.
32