1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended March 31,September 30, 1999.
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 No. 333-11801-01 Trianon Industries Corp. Commission File No.
333-11801 (Aetna Industries, Inc.)
TRIANON INDUSTRIES CORP.
(FORMERLY KNOWN AS MS ACQUISITION CORP.)
AETNA INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-337-9803/38-200-7550
- -------------------------------------------------------------------------------------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
(Address of principal executive offices) (Zip Code)
1, rue Thomas Edison, Quartier des Chenes 78056F-78056
St. Quentin en Yvelines, France
24331 Sherwood Avenue, P.O. Box 3067, Centerline, Michigan Mi 48015-0067
Registrant's telephone number, including area code (33-1) 39-412000(33) 1 39 41 20 00
(810) 759-2200759 22 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 No X
No
- ----------------
As of May 14,November 15, 1999, there were 1,000 shares of Aetna Industries, Inc.
common stock outstanding and 3,902,4983,904,998 shares of Trianon Industries Corp. common
stock outstanding.
1
2
INDEX
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 MarchPART I FINANCIAL INFORMATION PAGE
Item 1. FINANCIAL STATEMENTS OF TRIANON INDUSTRIES CORP.
Condensed Consolidated Balance Sheets -
September 30, 1999 and December 31, 1998 3
Consolidated Statements of Operations and
Comprehensive Income (Loss)-three and nine months ended September 30,
1999 and September 30, 1998 4
Condensed Consolidated Statements of Cash Flows -
nine months ended September 30, 1999
and September 30, 1998 5
Notes to Condensed Consolidated Financial Statements 6
FINANCIAL STATEMENTS OF AETNA INDUSTRIES, INC.
Condensed Consolidated Balance Sheets -
October 3, 1999 and December 31, 1998 14
Consolidated Statements of Operations and
Comprehensive Income (Loss) - three and nine months ended
October 3, 1999 and September 27, 1998 15
Condensed Consolidated Statements of Cash Flows -
nine months ended October 3, 1999 and September 27, 1998 16
Notes to Condensed Consolidated Financial Statements 17
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 19
Item 3. Qualitative and Quantitative Disclosure About
Market Risk 26
Item 4. Submission of Matters to a Vote of Security Holders. 26
PART II OTHER INFORMATION 27
Description of Exhibits 28
Signatures 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
2
3
EXHIBIT INDEX
PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS
TRIANON INDUSTRIES CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
MARCH 31,SEPTEMBER 30, 1999 DECEMBER 31, 1998
-------------------------------- -----------------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and marketable securities $18,958 $26,092$ 28,999 $ 26,092
Restricted cash 12,002 -
Accounts receivable (less allowance for doubtful
accounts of $1,721$3,196 and $1,921 respectively) 174,126178,574 181,375
Inventories 114,709111,118 115,287
Other current assets 10,31620,157 9,801
-------------- -------------------- ---------
Total current assets 318,109350,850 332,555
-------------- -------------------- ---------
Property, plant and equipment, net 193,426240,901 203,271
Deferred costs and other assets 24,72027,709 22,969
Goodwill 64,454145,720 65,367
-------------- -------------------- ---------
TOTAL ASSETS $600,709 $624,162
============== ============$765,180 $ 624,162
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $188,555 $173,517$192,660 $ 173,517
Accrued expenses 48,63973,318 82,250
Current portion of long term and short term debt (145,441)175,507 157,004
-------------- -------------------- ---------
Total current liabilities 377,433441,485 412,771
-------------- -------------------- ---------
Long-term debt, less current portion 182,125273,287 167,477
Deferred income taxes and other long-term liabilities 18,71732,276 19,370
Redeemable preferred stock 42,30243,100 41,157
Series A - $100 stated value; 293,123405,000 shares authorized;
142,424 shares issued and outstanding
Series B - $100 stated value; 270,000 shares authorized;
270,000 shares issued and outstanding
Minority interests 92 -
Commitments and Contingencies
Stockholders' Equity (Deficit)
Class A, common stock - $.01 par value, 12,000,00020,000,000
shares authorized, 3,904,998 shares and 3,902,498 shares,
respectively, issued and outstanding 39 39
Contributed paid-in capital 40,70841,661 40,708
Retained earnings (accumulated deficit) (54,795)(60,966) (54,910)
Accumulated other comprehensive income (loss) (5,820)(5,794) (2,450)
-------------- -------------------- ---------
Total shareholders' equity (deficit) (25,060) (16,613)
-------- ---------
TOTAL LIABILITIES, PREFERRED STOCK AND
SHAREHOLDER'S EQUITY (DEFICIT) $600,709 $624,162
============== ============$765,180 $ 624,162
======== =========
See accompanying notesfootnotes to consolidated financial statements.statements
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TRIANON INDUSTRIES CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(DOLLARS IN THOUSANDS)
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ MARCH 31, MARCH 31,-----------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
---- ---- ---- ----
(UNAUDITED) (UNAUDITED)
----------- -----------
Net sales $218,157 $136,873$ 210,412 $ 151,045 $ 636,222 $ 473,296
Cost of sales 191,932 120,735
------------ -----------178,999 141,095 551,980 427,295
--------- --------- --------- ---------
Gross profit 26,225 16,13831,413 9,950 84,242 46,001
Selling, general and administrative expenses
and research and development expenses 14,673 9,833
------------ -----------26,779 15,040 58,322 38,754
--------- --------- --------- ---------
Operating income (loss) 11,552 6,3054,634 (5,090) 25,920 7,247
Interest expense, net 7,268 2,170
------------ -----------9,051 6,662 23,728 15,644
--------- --------- --------- ---------
Income (loss) before income taxes 4,284 4,135(4,417) (11,752) 2,192 (8,397)
Income tax provision (credit) 2,251 1,185
------------ -----------274 (5,329) 4,673 (3,901)
--------- --------- --------- ---------
Income (loss) before share in net income (loss)
of equity investees and minority interest (4,691) (6,423) (2,481) (4,496)
Share in net income (loss) of equity investees
(160) -- (359) --
--------- --------- --------- ---------
Income (loss) before minority interests (4,851) (6,423) (2,840) (4,496)
Minority interests 180 -- 180 --
--------- --------- --------- ---------
Income (loss) before discontinued operations 2,033 2,950
Losses(4,671) (6,423) (2,660) (4,496)
Income (losses) on discontinued operations net of tax 772 0
------------ -----------1,141 (1,754) (17) (3,244)
--------- --------- --------- ---------
Net income (loss) before
preferred stock dividends 1,261 2,950(3,530) (8,177) (2,677) (7,740)
Preferred stock dividends 1,146 0
------------ -----------(1,077) (1,123) (3,379) (2,228)
--------- --------- --------- ---------
Net income (loss) available for common $ (4,607) $ (9,300) $ (6,056) $ (9,968)
stockholders
$115 $2,950
============ ===========--------- --------- --------- ---------
Other comprehensive income (loss):
Foreign currency translation adjustment (3,370) 6,165
------------ -----------1,651 4,999 (3,344) 4,476
--------- --------- --------- ---------
Comprehensive income (loss) $ (3,255)(2,956) $ 9,115
============ ===========(4,301) $ (9,400) $ (5,492)
========= ========= ========= =========
See accompanying notes to consolidated financial statements
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TRIANON INDUSTRIES CORP.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
THREENINE MONTHS ENDED
MARCH 31, MARCH 31,SEPTEMBER 30, SEPTEMBER 30,
1999 1998
---- ----
(UNAUDITED)
CASH FLOWSFLOW FROM OPERATING ACTIVITIES
Net income (loss) $ 1,261(2,677) $ 2,950(7,740)
Minority Interest (180) --
Adjustments to reconcile net income to net cash
used forprovided by (used for) operating activities:
Depreciation and amortization 8,879 5,15428,151 24,277
Deferred income taxes 411-- --
Other non cash charges 100 753(1,058) (1,384)
Changes in other assets and liabilities (8,565) 3,493
----------- ------------30,261 7,588
--------- --------
Net cash provided by (used for) operating activities 1,675 12,761
----------- ------------
Cash flows from investing activities54,497 22,741
--------- --------
CASH FLOW FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (7,485) (5,895)
Increase(30,762) (31,617)
Acquisitions, net of cash acquired (110,795) --
(Increase) decrease in other assets (2) (5)
----------- ------------(2,988) (9,984)
--------- --------
Net cash provided by (used for) investing activities (7,487) (5,900)
----------- ------------
Cash flows from financing activities(144,545) (41,601)
--------- --------
CASH FLOW FROM FINANCING ACTIVITIES
Dividends paid -- (2,396)
Net decreaseincrease (decrease) in borrowings under line of credit (1,298) (1,138)15,701 28,621
Repayment of long term debt (9,825) (3,608)(27,675) (22,678)
Borrowings of long term debt 11,776loan 122,284 12,943
Financing fees paid (3,890) --
----------- --------------------- --------
Net cash provided by (used for) financing activities 653 (4,746)
----------- ------------106,420 (16,490)
--------- --------
Exchange Rate Variation (1,975) (548)(1,463) 2,051
Net increase (decrease) in cash (7,134) 1,56714,909 (319)
Cash - beginning of year 26,092 11,626
----------- --------------------- --------
Cash - end of period $18,958 $ 13,193
=========== ============41,001 $ 11,307
========= ========
See accompanying notes to consolidated financial statements
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TRIANON INDUSTRIES CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Effective 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.Corp in April 1998.
See notes 4 and 5 to the Condensed Consolidated Financial Statements for
informations regarding acquisitions during 1999.
Trianon Industries Corp. ("Trianon Industries"), through Aetna Industries
Inc. ("Aetna"), and Zenith Industrial Corporation ("Zenith"), its
wholly-owned subsidiary,subsidiaries, is a leading direct supplier of high quality
modules, welded subassemblies and chassis parts used as original equipment
components in the North American automobile industry.
SOFEDIT S.A., ("Sofedit") a direct and indirect wholly-owned subsidiary of the Company,
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 European automobile industry.
Trianon Industries and certain of its direct and indirect wholly-owned United
States subsidiaries (i.e., Aetna Holdings, Inc., a Delaware corporation
("Aetna Holdings"), Aetna[Aetna Manufacturing Canada Ltd., a Michigan corporation
("Aetna Canada")], and Aetna Export Sales Corp., a U.S. Virgin Islands
corporation ("Export")) have fully and unconditionally guaranteed the 11 7/8%
Senior Notes due 2006 issued by Aetna in an aggregate principal amount of
$85.0 million (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, Trianon Industries completed a combination with Societe
Financiere 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 Trianon Industries in exchange for: (i)
promissory notes of Trianon 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
Trianon Industries; (iv) 3.0 million shares of Common Stock of 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 Trianon Industries as a result of
the Combination. For accounting purposes, Sofedit is considered to be the
acquirer of, and the predecessor to, Trianon Industries.
As a result of the Combination being accounted for as a reverse acquisition,
and as a result of the two companies stock purchases, the financial
statements included herein for the threenine month period ended March 31,1998September 30,1998
represent the historical information of Sofedit, as predecessor.predecessor and six
months of Trianon Industries. The consolidated balance sheet at March 31,September
30, 1999 represents the consolidated financial position of Trianon
Industries.
The statements of operations and cash flows for the nine months ended
September 30, 1998 represent the nine months financial data of Sofedit andplus
six months financial data of Trianon Industries.
The accompanying unaudited condensed consolidated financial statements of
Trianon 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, 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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TRIANON INDUSTRIES CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
2. INVENTORIES
Inventories are comprised of the following:
MARCH 31,SEPTEMBER 30, DECEMBER 31,
1999 1998
---- ----
Raw materials $ 23,92326,539 $ 27,131
Work-in-process 22,54226,594 31,976
Finished goods 15,98017,441 18,839
Tooling 55,69143,815 40,724
------------ ------------------------- ---------
Inventories, gross 118,136114,389 118,670
Less valuation allowance (3,427)(3,271) (3,383)
------------ ------------------------- ---------
Total inventories $114,709 $115,287
------------ ---------------$ 111,118 $ 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,September 30, 1999
3. STOCKHOLDERS' EQUITY (DEFICIT)
ACCUMULATED
ADDITIONAL RETAINED OTHER TOTAL
CONTRIBUTED PAID IN EARNINGSRETAINED COMPREHENSIVE STOCKHOLDER'S
CAPITAL CAPITAL EARNINGS (DEFICIT) ADJUSTMENTINCOME (LOSS) EQUITY (DEFICIT)
Balance at December 31, 1998 $39 $40,708 ($54,910) ($2,450) ($16,613)
December 31,1998
Reversal of Stock Offering Costs -- 950 -- -- 950
Stock Options Exercised -- 3 -- -- 3
Translation adjustment (3,370) (3,370)-- -- (3,344) (3,344)
Preferred Stock dividends (1,146) (1,146)-- -- (3,379) -- (3,379)
Net income (loss) 1,261 1,261-- -- (2,677) -- (2,677)
----------- --------- ----------------- ------------- -------------- ------------ ------------------- -----------------
Balance at March 31,September 30,
1999 $39 $40,708 $(54,795)$41,661 ($5,820) $(19,868)60,966) ($5,794) ($25,060)
----------- --------- ----------------- ------------- -------------- ------------ ------------------- -----------------
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TRIANON INDUSTRIES CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
4. ACQUISITION OF EMARC
The company acquired 20% of the outstanding share capital of EMARC in October
1998. Pursuant to a share purchase agreement dated May 21, 1999 and amended
on June 23, 1999, the Company agreed to pay an aggregate cash consideration
of approximately $15.8 million and to issue 192,800 shares of its common
stock to acquire the remaining 80% of the outstanding capital of EMARC.
Pursuant to the terms of the amended share purchase agreement, the Company
made a cash payment to acquire 10% of the outstanding capital of EMARC in
June,1999 and placed the remaining cash funds in an escrow account. In the
last quarter of 1999, the Company will issue 192,800 shares of its Common
Stock to EMARC's shareholders, and release the escrow funds to acquire the
remaining 70% of the share capital of EMARC. In addition, under the share
purchase agreement, the former EMARC shareholders have been granted the
option to require the Company to repurchase the 192,800 shares between June
15, 2001 and December 31, 2001, for approximately $15.7 million. Furthermore,
pursuant to the share purchase agreement, the Company has agreed to employ a
selling shareholder in a management position at the Company for a period of
five years beginning in 1999. The Company will also assume $40.6 million of
existing debt of EMARC.
5. ACQUISITIONS OF ZENITH AND MONTICH
Pursuant to a stock purchase agreement executed on May 10, 1999, the Company
acquired all of the outstanding shares of Zenith Industrial Corporation, a
Michigan corporation ("Zenith"), on July 13 1999 from its existing
shareholders ("the Zenith Acquisition"), for an initial purchase price of
$101.0 million. In addition to such initial purchase price, the Company has
agreed to make annual contingent payments to the former shareholders of
Zenith, based on income targets over a period of three years. Moreover, the
Company has agreed to pay to the former Zenith's shareholders additional
compensation of an aggregate amount of $ 6.0 million in three installments of
$2 million each over three years. On July 13, 1999, Zenith entered into a
five-year $125.0 million senior revolving credit facility. The revolving
credit facility is fully guaranteed by Trianon Industries Corp., Zenith and
Aetna Holdings Inc., a wholly-owned direct Delaware subsidiary of Trianon
Industries Corp. Zenith used the funds under this credit facility to finance
the $101.0 million initial purchase price and for ongoing general corporate
purposes.
Pursuant to a stock purchase executed on August 5, 1999, the Company
acquired 70% of the outstanding shares of Antonio R. Montich Y Cia. S.A., an
Argentinean company ("Montich") for an initial purchase price of
approximately $14.0 million. As part of this acquisition price, the Company
has agreed to contingent payments to the selling shareholders, based on
income targets to be paid out over a three-year period. In addition, the
Company has agreed to repurchase from the selling shareholders of Montich
all, but not less, than all, of their remaining 30% of the outstanding share
capital of Montich. The Montich shareholders can exercise this option, at
their discretion, at any time prior to May 2006.
The acquisitions were accounted for under the purchase method, and
accordingly, the assets purchased and liabilities assumed in the
acquisitions are reflected in the accompanying consolidated balance sheet as
of September 30, 1999 and the operations since the date of acquisitions are
included in the accompanying consolidated statement of income and loss and
cash flows for the period ended September 30, 1999. Goodwill resulting from
this transaction is being amortized over a period of 40 years using a
straight-line method. The purchase price was allocated to the purchased
assets and liabilities as followed (in thousands).
Zenith Montich
---------- ---------
Cash consideration paid to sellers, net of cash acquired
of $3,192 and $1,013 respectively $ 103,487 $ 12,987
Fees and expenses 500
---------- ---------
Cost of acquisition, net of cash acquired 103,987 12,987
Accounts receivable, net $ 13,970 $ 3,566
Inventory, net 5,051 4,383
Property, plant & equipment 25,565 19,665
Accounts payables and accrued liabilities (11,962) (12,181)
Deferred taxes (4,371) 1,007
Other assets purchased and liabilities assumed, net 157 (10,545)
Minority interest (272)
Goodwill 75,577 7,364
---------- ---------
Total cost allocation $ 103,987 $ 12,987
========== =========
The purchase price and related allocations may be revised within one year
from the acquisitions based on revisions of preliminary estimates of fair
values and final working capital acquired made at the date of purchase. Such
changes are not expected to be significant.
On a proforma basis, Trianon Industries had net sales of $734.3 million and
$643.8 million, and pre-tax income (loss) of $10.3 million and $(6.9)
million, for the nine months ended September 30, 1999 and 1998, respectively.
6. SHORT TERM AND LONG TERM DEBT
In March, 1999, the Company entered into a revolving line of credit with its
principal bank for up to $10.0 million. The loans have been used to make
equity contributions to Aetna and for general corporate purposes, and may be
used to make additional contributions or, if permitted, subordination loans
to Aetna. The credit agreement provides that funds borrowed will bear
interest, (i) prior to July 30, 1999, at the Company's option at either (a)
the bank's prime rate or (b), .25% over LIBOR (as adjusted for reserve
requirements of the Federal reserve System) and (ii) after July 30, 1999 at
2% over the greater of the federal funds rate or the bank's prime rate. The
Company must also pay a commitment fee of 1/2% per annum on the unused amount
of the commitment. The loans are payable on December 31, 1999. As of
September 30, 1999, Trianon Industries had outstanding borrowings under the
credit agreement totaling $10.0 million. The credit agreement contains
certain restrictive covenants including covenants relating to financial
statement ratios.
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TRIANON INDUSTRIES CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
In May, 1999 the Company entered into a line of credit with its principal
bank for $41.3 million. The loans were used to finance the repurchase of
$40.968 million aggregate principal amount of the Company's promissory notes
and accrued interest thereon. The credit agreement provides that funds
borrowed will bear interest, (i) prior to July 30, 1999, at either (a) the
bank's prime rate or (b) a rate mutually agreed upon by Trianon Industries
and the bank and (ii) after July 30, 1999, at 2% over the greater of the
bank's prime rate or 1% over the federal funds rate. The loans are payable on
December 31, 1999. As of September 30, 1999, Trianon Industries had
outstanding borrowings under the credit agreement totaling $41.2 million. The
credit agreement contains restrictive covenants including covenants relating
to financial statement ratios.
9
10
TRIANON INDUSTRIES CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
7. COMBINING FINANCIAL INFORMATION OF TRIANON INDUSTRIES CORP BALANCE SHEET AS
OF MARCH 31,SEPTEMBER 30, 1999
AETNA TRIANON
AETNA HOLDINGS INDUSTRIES SOFEDITNON
ISSUER GUARANTORS GUARANTORS ELIMINATIONS TOTAL
Total current assets $102,075 $ 82,7204,301 $266,501 $ - $ 5,789 $ 254,207 $ (24,607) $ 318,109(22,027) $350,850
Property, plant and
equipment,Equipment, net 70,744 6,552 116,130 193,42672,201 6,188 162,512 -- 240,901
Other long-term assets 32,372 8,247 131,745 21,781 (104,971) 89,174
--------28,468 155,900 117,287 (128,226) 173,429
--------- --------- ------------------- ---------- ---------
Total assets $185,836 $ 8,247 $ 144,086 $ 392,118 $ (129,578) $ 600,709
======== ========= ========= ========= ========== =========$202,744 $166,389 $546,300 $(150,253) $765,180
--------- --------- --------- ---------- ---------
Total current liabilities 104,859 (201) 46,114 235,100 (8,439) 377,433126,611 60,033 266,489 (11,648) 441,485
Long-term debt 88,125 17,032 79,922 (12,031) 173,04886,875 12,032 176,910 (12,032) 263,785
Junior subordinated notes 9,077 9,077-- 9,502 -- -- 9,502
Deferred income taxes and
other long-term liabilities 5,496 3,478 9,743 18,7175,498 4,874 21,904 32,276
Redeemable preferred stock 42,302 42,302-- 43,100 -- -- 43,100
Minority interests -- -- (180) 272 92
Class A, common stock -
$.01 par value,
12,000,000 shares
authorized, 3,902,498
outstandingAuthorized, 3,904,998
Outstanding -- 39 1,274 (1,274)10,165 (10,165) 39
Additional paid-in capital 14,024 32,151 23,969 (29,436) 40,70817,024 40,751 23,603 (39,717) 41,661
Retained earnings
(accumulated deficit) (26,494) (629) 2,970 47,740 (78,382) (54,795)(33,308) (3,942) 42,965 (66,681) (60,966)
Cumulative translation
-
adjustment (174) (5,630) (16) (5,820)
--------Adjustment 44 -- 4,444 (10,282) (5,794)
--------- --------- --------- ---------- ---------
Total stockholdersshareholders equity (16,240) 36,848 81,177 (126,845) (25,060)
(deficit)
$(12,644) $ (629) $ 35,121 $ 67,079 $ (107,834) $ (19,907)
======== ========= ========= ========== ========== =========--------- --------- --------- ---------- ---------
Total liabilities and shareholders
equityEquity (deficit) $ 185,836 $ 8,247 $ 144,086 $ 392,118 $ (129,578) $ 600,709
=========$202,744 $166,389 $546,300 $(150,253) $765,180
========= ========= ========= ========== =========
810
911
TRIANON INDUSTRIES CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
4.7. COMBINING FINANCIAL INFORMATION OF TRIANON INDUSTRIES CORP. (CONTINUED)
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREENINE MONTHS ENDED
MARCH 31,1999SEPTEMBER 30, 1999
AETNA TRIANON
AETNA HOLDINGS INDUSTRIES SOFEDITNON
ISSUER GUARANTORS GUARANTORS ELIM. TOTAL
Net sales $66,820$193,964 $ --- $ -- $151,337 $218,157442,258 $ - $636,222
Cost of sales 58,704 182 133,046 191,932
------- -------173,355 - 378,625 - 551,980
-------- -------------------- ---------- ----- --------
Gross profit 8,116 -- (182) 18,291 26,22520,609 - 63,633 - 84,242
Selling, general and
administrative expenses 4,560 204 9,499 14,26319,143 2,588 33,149 - 54,880
Other expenses 411 -- -- (1) 410
------- -------income/(expenses) (1,160) (533) (1,749) - (3,442)
-------- -------------------- ---------- ----- --------
Operating income (loss) 3,145 -- (386) 8,793 11,552306 (3,121) 28,735 - 25,920
Net interest expense 3,815 245 837 2,371 7,268
------- -------11,320 3,776 8,632 - 23,728
-------- -------------------- ---------- ----- --------
Income (loss) before income
taxes (670) (245) (1,223) 6,422 4,284Taxes (11,014) (6,897) 20,103 - 2,192
Income tax provision (credit) (126) (83) (415) 2,875 2,251(3,657) (2,345) 10,675 - 4,673
-------- ------------ ---------- ----- --------
Income (loss) before discontinued
operations and preferred stock dividend (544) (162) (808) 3,547 2,033(7,357) (4,552) 9,428 - (2,481)
Share in net income of equity investees - - (359) - (359)
Minority interests - - 180 - 180
Discontinued Operations 772 772- - (17) - (17)
Preferred stock dividend -- -- 1,146 -- 1,146
------- -------- (3,379) - (3,379)
-------- -------------------- ---------- ----- --------
Net income available to common
stockholdersStockholders $ (544) $ (162) $ (1,954) $ 2,775 $ 115
------- -------(7,357) (7,931) 9,232 - (6,056)
-------- -------------------- ---------- ----- --------
Other comprehensive income (loss):
Foreign currency translation
adjustment (174) -- -- (3,196) (3,370)
------- -------Adjustment 288 - (3,632) - (3,344)
-------- -------------------- ---------- ----- --------
Comprehensive income (loss) ($718) ($162) ($1,954) $ (421)(7,069) $ (3,255)
======= =======(7,931) $ 5,600 $ - $(9,400)
======== ==================== ========== ===== ========
911
10
TRIANON INDUSTRIES CORP.12
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
4.7. COMBINING FINANCIAL INFORMATION OF TRIANON INDUSTRIES (CONTINUED)
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE THREENINE MONTHS ENDED
MARCH 31,1999SEPTEMBER 30, 1999
AETNA TRIANON
AETNA HOLDINGS INDUSTRIES SOFEDIT ELIMNON
ISSUER GUARANTORS GUARANTORS ELIM. TOTAL
CASH FLOWSFLOW FROM OPERATING ACTIVITIES:ACTIVITIES
Net cash provided (used in) by operating
activities $ 6,577 $(432)(4,046) $ (2,386) $ 60,929 $ - $(4,470) - $ 1,67554,497
CASH FLOWSFLOW FROM INVESTING ACTIVITIES
Net cash used for(used for) provided by investing
activities (704) - (5,000) (6,783) 5,000 (7,487)(6,537) (16,570) (137,438) 16,000 (144,545)
CASH FLOWSFLOW FROM FINANCING ACTIVITIES
Net cash provided by financing (7,100) 432 5,000 7,321 (5,000) 6539,390 19,727 93,303 (16,000) 106,420
Net effect of exchange rate 70 (2,045)292 - (1,975)(1,755) - (1,463)
Net increase (decrease) in cash (1,157)(901) 771 15,039 - - (5,977) - (7,134)14,909
Cash - beginning of year 1,185 - - 24,907 - 26,092
Cash - end of period $ 28284 $ 771 $ 39,946 $ - $ - $18,930 $ - $18,95841,001
5.12
13
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
8. 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.Americas.
The Company manages the business under two segments, Europe and North America.Americas. 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
formForm 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,September 30, 1999 MARCHSeptember 30, 1998 December 31, 1998
DECEMBER 1998
-------------- -------------- ------------------------------- ------------------ -----------------
OPERATING
NORTH NORTH NORTH
SEGMENTS EUROPE AMERICA TOTAL EUROPE AMERICA TOTAL EUROPE AMERICA TOTAL
- ---------Europe Americas Total Europe Americas Total Europe Americas Total
-------- ------ --------------- ----- ------ -------- ----- ------ --------------- -----
Revenues 151,337$407,311 $228,911 $636,222 $ 66,820 $218,157 $136,873393,765 $ - $136,673 $542,037 $168,809 $710,84879,531 $ 473,296 $ 542,037 $ 168,809 $ 710,846
EBIT 8,793 2,759 11,552 6,305 - 6,30522,054 3,866 25,920 14,145 (6,898) 7,247 19,255 7,569 26,824(7,569) 11,686
Depreciation and
amortization 6,087 2,792 8,879 $ 5,154 - $ 5,15417,729 10,422 28,151 18,914 5,363 24,277 23,405 8,438 31,843
Total assets $392,118 $208,591 $600,709 $355,602 - $355,602 $408,915 $215,249 $624,164$369,741 $395,439 $765,180 $ 221,749 $375,688 $ 597,437 $ 408,915 $ 215,247 $ 624,162
6.9. 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 respect10. RESTRICTED CASH
On June 23, 1999, the Company deposited $11.5 million in relation to the
Preferred Stock dividends, such dividends shallacquisition of EMARC SpA. This amount will 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 respecttransferred 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 holdersshareholders
of record as they appearEmarc upon closing, which will occur on the registerNovember 30, 1999.
As part of the CorporationZenith Acquisition, the Company has deposited 0.5 million in a
restricted cash account, for certain change of control payments.
11. CONSENT SOLICITATION
The Company requested a waiver of the Shares.
10financial information filing obligation
from the bondholders of the Aetna senior notes due 2006. The cost, including
consent fee, agent fee, and miscellaneous expenses is estimated to be $5.2
million before tax, and was accrued as of September 30, 1999.
13
1114
AETNA INDUSTRIES, INC.
(A WHOLLY-OWNED SUBSIDIARY OF
TRIANON INDUSTRIES CORP.)
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
APRIL 2,OCTOBER 3, DECEMBER 31,
1999 1998
---- ----
(UNAUDITED)
ASSETS (UNAUDITED)
CURRENT ASSETS:
Cash $28 $1,185$ 284 $ 1,185
Accounts receivable (less allowance for doubtful
accounts of $424$356 and $411, respectively) 40,95361,820 38,793
Inventories 47,44432,768 47,764
Other current assets 3,3107,203 3,390
--------------- --------------------------- ---------
Total current assets 91,735102,075 91,132
--------------- --------------------------- ---------
Property, plant and equipment, net 70,74472,201 71,922
Deferred costs and other assets 5,3934,897 5,717
Goodwill 23,97123,571 24,172
--------------- --------------------------- ---------
Total Assets $191,843 $192,943
=============== ==================$ 202,744 $ 192,943
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $50,971 $48,874$ 51,994 $ 48,874
Accrued expenses 9,26715,257 10,896
Current portion of long term and short term debt 44,62059,360 56,720
--------------- --------------------------- ---------
Total current liabilities 104,858126,611 116,490
--------------- --------------------------- ---------
Long-term debt, less current portion 94,13186,875 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 14,02417,024 9,024
Accumulated deficit (26,494)(33,308) (25,950)
Accumulated other comprehensive income (174)Cumulative translation adjustment 44 (244)
--------------- --------------------------- ---------
Total shareholdershareholders' equity (12,644)(deficit) (16,240) (17,170)
--------------- --------------------------- ---------
Total liabilities and shareholder equity (deficit) $191,843 $192,943
=============== ==================$ 202,744 $ 192,943
========= =========
See accompanying notes to consolidated financial statements.
11statements
14
1215
AETNA INDUSTRIES, INC.
(A WHOLLY-OWNED SUBSIDIARY OF
TRIANON INDUSTRIES CORP.)
CONSOLIDATED STATEMENTS OF OPERATIONS & COMPREHENSIVE INCOME (LOSS)
(DOLLARS IN THOUSANDS)
THREE MONTHS ENDED APRIL 2, MARCH 29,NINE MONTHS ENDED
------------------ -----------------
OCTOBER 3, SEPTEMBER 27, OCTOBER 3, SEPTEMBER 27,
---------- ------------- ---------- -------------
1999 1998 1999 1998
---- ---- ---- ----
(UNAUDITED) (UNAUDITED)
Net Sales $66,820 $53,085$ 61,484 $ 32,308 $ 193,964 $ 132,616
Cost of Sales 58,704 44,974
------- -------57,218 32,541 173,355 121,206
--------- --------- --------- ---------
Gross Profit (loss) 8,116 8,1114,266 (233) 20,609 11,410
Selling, general and administrative expenses 4,971 4,486
------- -------9,483 4,553 20,303 13,693
--------- --------- --------- ---------
Operating income (loss) 3,145 3,625(5,217) (4,786) 306 (2,283)
Interest expense, net 3,815 2,866
------- -------3,660 3,623 11,320 9,676
--------- --------- --------- ---------
Income (loss) before income taxes (670) 759(8,877) (8,409) (11,014) (11,959)
Income tax provision (credit) (126) 235
------- -------(2,997) (3,157) (3,656) (4,027)
--------- --------- --------- ---------
Net income (loss) $ (544)(5,880) $ 524
======= =======(5,252) $ (7,358) $ (7,932)
========= ========= ========= =========
Other Comprehensive income (loss):
Foreign currency translation adjustment (70) --
------- -------31 (181) 288 (181)
--------- --------- --------- ---------
Comprehensive income (loss) $ (474)(5,849) $ 524
======= =======(5,433) $ (7,070) $ (8,113)
========= ========= ========= =========
See accompanying notes to consolidated financial statements.
12statements
15
1316
AETNA INDUSTRIES, INC.
(A WHOLLY-OWNED SUBSIDIARY OF
TRIANON INDUSTRIES CORP.)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
THREENINE MONTHS ENDED
APRIL 2, MARCH 29,OCTOBER 3, SEPTEMBER 27,
1999 1998
---- ----
(UNAUDITED)
CASH FLOWSFLOW FROM OPERATING ACTIVITIES
Net income (loss) (544) 524$ (7,358) $ (7,932)
Adjustments to reconcile net income to net cash
used forProvided by (used for) operating activities:
Depreciation and amortization 2,406 1,9417,671 7,304
Deferred income taxes - (53)
Other non cash charges -
Changes in other assets and liabilities 4,715 (4,285)
-------------- --------------(4,359) (16,668)
--------- -------
Net cash used forprovided by (used for) operating activities 6,577 (1,820)
Cash flows from investing activities
Increase(4,046) (17,349)
--------- -------
CASH FLOW FORM INVESTING ACTIVITIES
Additions to property, plant and equipment (7,145) (13,270)
(Increase) decrease in other assets (704) (3,214)
-------------- --------------608 (4,859)
--------- -------
Net cash used forprovided by (used for) investing activities (704) (3,214)
Cash flows from financing activities -
-(6,537) (18,129)
--------- -------
CASH FLOW FROM FINANCING ACTIVITIES
Net increase (decrease) increase in borrowings under line of credit (12,100) 5,2752,015 34,340
Debt repayments (625) -
Capital Contribution 5,000
-------------- --------------contribution 8,000 -
(Increase) decrease in other assets - 1,156
--------- -------
Net cash provided by (used for) financing activities (7,100) 5,275
-------------- --------------9,390 35,496
--------- -------
Exchange Rate Variation 70 -292 --
Net increase (decrease) in cash (1,157) 241(901) 18
Cash - beginning of year 1,185 23
-------------- ----------------------- -------
Cash - end of period $ 28284 $ 264
============== ==============41
========= =======
See accompanying notes to consolidated financial statements
See accompanying notes to consolidated financial statements.
1316
1417
AETNA INDUSTRIES, INC.
(A WHOLLY-OWNED SUBSIDIARY OF
TRIANON INDUSTRIES CORP.)
NOTES TO CONDENSED 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, Aetna Holdings, Aetna Export and Aetna 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, Aetna's parent, Trianon Industries Corp. (Trianon
Industries) completed a combination with Societe Financiere 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 Trianon
Industries in exchange for: (i) promissory notes of Trianon 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 Trianon Industries; (iv) 3.0 million shares
of Common Stock of 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 Trianon Industries as a result of the
Combination. For accounting purposes, Sofedit is considered to be the
acquirer 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 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 Aetna's consolidated financial statements and notes thereto
for the year ended December 31, 1998.
1417
1518
AETNA INDUSTRIES, INC.
(A WHOLLY-OWNED SUBSIDIARY OF
TRIANON INDUSTRIES CORP.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
2. INVENTORIES
Inventories are comprised of the following:
MARCH 31,OCTOBER 3, DECEMBER 31,
1999 1998
------------ ---------------- ----
(UNAUDITED)
Raw materials $ 1,0481,191 $ 881
Work-in-process 2,6682,558 2,333
Finished goods 1,4414,224 1,670
Tooling 39,46320,624 40,724
------------ -------------------- -----------
Inventories valued at FIFO 44,62028,597 45,608
LIFO Reserve (201) (200)
(200)
------------ ------------
46,420-------- -----------
28,396 45,408
Purchased parts and purchased labor 3,0244,372 2,356
------------ -------------------- -----------
Total inventories $ 47,44432,768 $ 47,764
============ ============
3. STOCKHOLDER'S EQUITY (DEFICIT)
CUMULATIVEACCUMULATED TOTAL
OTHER STOCKHOLDER'S
CONTRIBUTED ACCUMULATED TRANSLATION STOCKHOLDER'SCOMPREHENSIVE EQUITY
CAPITAL DEFICIT ADJUSTMENT EQUITYINCOME (LOSS) (DEFICIT)
Balance at December 31,1998 $ 9,024 $ (25,950) $ (244) $ (17,170)
Translation adjustment - - 70 70-- -- 288 288
Capital Contribution 5,000 5,0008,000 -- -- 8,000
Net loss (544) - (544)
----------- ---------------- (7,358) -- (7,358)
--------------- ----------- --------------- -------------
Balance at March 31,October 3, 1999 $ 14,02417,024 $ (26,494)(33,308) $ (174)44 $ (12,644)(16,240)
--------------- ----------- -------------- ----------- --------------- -------------
1518
1619
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
TRIANON INDUSTRIES
RESULTS OF OPERATIONS
On April 14, 1998, Trianon Industries (The Company) completed a combination with
Societe Financiere 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 Trianon Industries in exchange for: (i) promissory notes of Trianon
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 Trianon Industries; (iv) 3.0 million shares of
Common Stock of 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 Trianon
Industries as a result of the Combination. For accounting purposes, Sofedit is
considered to be the acquirer of, and predecessor of Trianon Industries.
As a result of the Combination being accounted for as a reverse acquisition, the
statements of operations and cash flows included hereinelsewhere for the threenine month
period ended March 31,September 30, 1998 represent the historical information of Sofedit,
as predecessor.predecessor and six months of Trianon Industries. The consolidated balance
sheet at March 31,September 30, 1999 and December 31, 1998 represents the consolidated
financial position of Sofedit and Trianon Industries. The statements of
operations and cash flows for the threenine months ended March 31,September 30, 1999 represent
the unaudited consolidated threenine month financial data of Sofedit and Trianon
Industries.
In June, 1999, the Company acquired 10% of the outstanding shares of EMARC SpA,
an Italian company, increasing its investment to 30%.
On July 13, 1999, the Company purchased all of the outstanding shares of Zenith
Industrial Corporation, a Michigan corporation ("Zenith"). On August 5, 1999,
the Company purchased 70% of the outstanding shares of Antonio R. Montich Y Cia,
an Argentinean company ("Montich").
The following table sets forth, for the periods indicated, Trianon Industries'sIndustries'
unaudited consolidated proforma statement of operations expressed as a
percentage of net sales for the three and nine months ended March 31,September 30, 1999
and unaudited consolidated proforma statement of operations for the three and
nine months ended March 31,September 30, 1998. This table and subsequent discussions
should be read in conjunction with the condensed consolidated financial
statements and related notes thereto of Trianon Industries included elsewhere
herein.
1619
1720
AS A PERCENTAGE OF NET SALES
PROFORMA THREE MONTHS ENDED MARCH 31, MARCH 31,PROFORMA NINE MONTHS ENDED
---------------- ----------------- ----------------- -----------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1999 1998 ---- ----1999 1998
---------------- ----------------- ----------------- -----------------
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 88.0% 87.3%
------------- -------------85.2 87.3 84.3 85.1
---------------- ----------------- ----------------- -----------------
Gross profit 12.0% 12.7%14.8 12.7 15.7 14.9
Selling, general and administrative expenses 6.8% 7.6%
------------- -------------15.2 13.1 10.1 11.6
---------------- ----------------- ----------------- -----------------
Operating income (loss) 5.2% 5.1%-0.4 -0.4 5.6 3.3
Interest expense, net 3.3% 3.2%
------------- -------------4.6 4.9 4.2 4.3
---------------- ----------------- ----------------- -----------------
Income (loss) before income taxes 1.9% 1.9%
------------- --------------5.0 -5.3 1.4 -1.1
Income tax provision (credit) 1.0% 0.4%-0.9 -2.6 1.2 -0.5
Share in net income of equity
investees and minority interests -0.1 - -0.1 -
Losses on discontinued operations 0.5 - - 0.5
---------------- ----------------- ----------------- -----------------
Net income 0.0% 1.0%
============= =============(loss) before preferred stock dividends -3.7% -2.7% 0.1% -1.1%
================ ================= ================= =================
PROFORMA THREE MONTHS ENDED MARCH 31,SEPTEMBER 30, 1999 COMPARED TO PROFORMA THREE MONTHS
ENDED MARCH 31,SEPTEMBER 30, 1998
NET SALES: Net sales were $218.1 million, up 14.8 % from the $189.9$215.9 million, for the three months ended March 31,September
30, 1999, compared to $192.1 million for the same period in 1998. Net sales in
the Americas were 39.0% higher in the third quarter in 1999 than 1998. The
increase in the Americas sales was due to the Grand Cherokee reaching full
production volumes and the launch of the Suzuki Grand Vitara and the new
Saturn LS. Net sales in Europe were down by 4.0% in the third quarter 1999 from
1998, or up 1.6% excluding the effects of foreign exchange. The decrease in
tooling sales were more than matched by the increase in production sales.
GROSS PROFIT: Gross profit was $31.9 million, or 14.8% of net sales, for the
three months ended September 30, 1999 compared to $24.5 million, or 12.7% of net
sales, for the same period in 1998. In the Americas, gross profit was $16.0
million for the three months ended September 30, 1999, or 15.7% of net sales,
versus $14.1 million, or 19.2% of net sales for the same period in 1998. The
decrease of gross margin is due to the decline in the Argentinean market. In
Europe, gross profit reached $16.0 million, or 14.0% of net sales, versus $10.4
million, or 8.7% of net sales in 1998. The increase in European gross margin is
mainly due to reducing launch costs and the effect of cost saving plans
implemented at several production facilities.
RESEARCH AND DEVELOPMENT EXPENSES, SELLING, GENERAL AND ADMINISTRATIVE ("SG&A")
EXPENSES AND OTHER EXPENSES: Expenses for the three months ended September 30,
1999, were $32.8 million, or 15.2% of net sales, compared to $25.2 million, or
13.1% of net sales, for the same period in 1998. 1999 expenses included non-
recurring expenses relating to : (i) the acquisition of Zenith, mainly change of
control payments, and legal counsel fees amounting to $6.7 million, (ii) the
failed bond issuance (approximately $2 million) and (iii) the consent fee, agent
fee and miscellaneous expenses amounting to $5.2 million due to the Company's
efforts to obtain a waiver of the financial information filing obligation from
the bondholders of the Aetna senior notes due 2006. In 1998, expenses included
non-recurring expenses amounting to $6 million.
INTEREST EXPENSE: Interest expense for the three months ended September 30, 1999
was $9.8 million, or 4.6% of net sales, compared to $9.6 million, or 4.9% of net
sales in the same period in the prior year. The increase in interest expense is
due principally to a sharp increase in tooling inventory relating to two major
projects in the Americas. In Europe, interest expense was $1.4 million or 1.2%
of sales, versus $2.0 million, or 1.6% of net sales for the same period in 1998.
Excluding the effect of exchange rate fluctuations, interest expense in Europe
decreased by 24.0%. The decrease is mainly due to a decrease in medium and long
term debt, and reduced interest rates.
20
21
INCOME TAXES: The income taxes for the three months ended September 30, 1999
were a credit of $1.9 million with an effective tax rate of 17.5% as compared to
a credit of $5.1 million with an effective tax rate of 49.6% for the same period
in the prior year. The change in the effective tax rate is mainly due to loss
incurred in the Americas, reduced research and development tax credit in France,
and the non-capitalization of loss carry-forwards in the United Kingdom and
Argentina.
PROFORMA NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO PROFORMA NINE MONTHS
ENDED SEPTEMBER 30, 1998
NET SALES: Net sales were $734.3 million, up 14.1 % from the $643.8 million for
the nine months ended September 30, 1999. Net sales in North America was 25.9%the Americas were 30.8 %
higher in the first threenine months in 1999 than 1998. The increase in the Americas
sales was due to DaimlerChrysler Jeep Grand Cherokee and the Cami Grand Vitara
ramp-up, the launch of the new Saturn LS, and an increase in tooling and
prototype sales. Net sales in Europe were up 10.5%3.4% in the first quarternine months 1999 from
1998, or 6.0%4.8% excluding the effects of foreign exchange. The increase in
European sales was due to both a general growth in the car market and to the launch
of the Renault Clio II, the Peugeot 20,206, and the Mercedes Class S in 1998 which
reachreached full production level in 1999.
GROSS PROFIT: Gross profit was $26.2$114.9 million, or 12.0%15.7% of net sales, for the
threenine months ended March 31,September 30, 1999 compared to $24.1$95.7 million, or 12.7%14.9% of net
sales, for the same period in 1998. In North America,the Americas, gross profit was $8.1$62.5
million for threethe nine months ended 1999 and $52.5 for the same period in 1998. In
Europe, gross profit reached $18.3$52.5 million or 12.1%12.9% of net sales, versus $16.1$43.2
million or 11.8%11.0% of net sales in 1998. The increase in European gross margin is
mainly due to reducing launch and project costs and to the first effect of cost saving
planplans implemented at several production facilities.
SELLING, GENERAL AND ADMINISTRATIVE ("SG&A") EXPENSES AND OTHER EXPENSES:
SG&A expensesExpenses for the threenine months ended March 31,1999September 30, 1999 were $14.7$73.5 million, or
6.8 %10.0% of net sales, compared to $14.5$74.7 million, or 7.6%11.6% of net sales, for the
same period in 1998. Increased costs after non-recurring expenses were due to
increased project team activity and the reinforcement in the period of
management structure. 1999 expenses included non-recurring expenses relating to
: (i) the acquisition of Zenith, mainly change of control payments and legal
counsel fees amounting to $6.7 million, (ii) the failed bond issuance
approximately $2 million, (iii) restructuring costs in Europe amounting to $1
million and (iv) the consent fee, agent fee and miscellaneous expenses amounting
to $5.2 million, due to the Company's efforts to obtain a waiver of the
current management structure.financial information filing obligation from the bondholders. 1998 expenses
included non-recurring compensation amounting to $17.5 million.
INTEREST EXPENSE: Interest expense for the threenine months ended March 31,September 30, 1999
was $7.3$31.1 million, or 3.3%4.2% of net sales, compared to $6.1$27.9 million, or 3.2%4.3% 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.the Americas. In Europe, interest expense was $2.4$6.1 million or
1.6%1.5% of sales, versus $2.2$6.7 million or 1.7% of net sales for the same period in
1998. Excluding the effect of exchange rate fluctuations, interest expense in
Europe raiseddecreased by 4.7%7.3%. The increasedecrease is mainly due to a $7.3 million increasedecrease in medium and
shortlong term debt.
INCOME TAXES: The income taxtaxes for the threenine months ended March 31,September 30, 1999 was $2.3were
$8.9 million with an effective tax rate of 52.5%86.0% as compared to a provisioncredit of $1.0$3.1
million with an effective tax rate of 28.5%44.8% for the same period in the prior
year. Losses were credit by recording an NOL, then reserved through the
recording of a valuation allowance. The change in the effective tax rate is
mainly due to loss incurred in North America andthe Americas to reduced research and development
tax credit in France.France, and the non- capitalization of loss carry-forwards in the
United Kingdom and Argentina.
21
22
LIQUIDITY AND CAPITAL RESOURCES
Trianon Industries's primary sources of liquidity are cash generated from
operations and short-term and long-term debt, including the sale of receivables.
Trianon Industries's principal use for these funds is to finance working capital
needs, expected earn-out payments, 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, Trianon 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 Trianon Industries's control.
FINANCIAL CONDITION
At March 31,September 30, 1999, Trianon Industries had available cash, cash equivalents,
and
marketable securities and restricted cash totaling $19.0$41.0 million, compared to
$26.1 million at December 31, 1998. At March 31,September 30, 1999, Trianon Industries
had current assets of $318.1$350.9 million, compared to $377.4$441.5 million in current
liabilities, giving it negative working capital of $59.3$90.6 million, compared to
negative $80.2 million at December 31, 1998.
At March 31,September 30, 1999, Trianon Industries had $16.5$2.0 million available under its
Amended and Restated Credit Agreement among Aetna, Trianon Industries, Aetna
Holdings, Aetna Export Sales Co., Aetna Canada and NBD Bank One (the "Senior
Revolving Credit Facility"). Restricted cash of $10.7Additionally, Trianon had $20.8 million at March 31, 1999
represents cash held by Sofedit in a mutual fund untilavailable
under its Zenith senior revolving credit facility.
On September June 1999 to warranty
an additional line of credit for Aetna Industries.
On March 31,30, 1999, short-term debt consisted of $13.0$13.5 million of bank
overdraft, $56.7$108.1 million of line of credit, $30.9and $53.9 million bank borrowing, promissory notes
of $40.9 million.borrowings.
Long-term debt consisted of Senior notes of $85.0 million, long-term bank loans
of $60.5$151.7 million (including $104.3 million of Senior revolving credit ("Zenith
Credit Agreement"), leasing contracts of $27.5$27.1 million and junior debt of $9.1$9.5
million.
CASH FLOWS
Net cash provided by operating activities was $1.6$54.5 million compared to $10.9$22.7
million in the same period of the prior year. The principal reason for the
decreaseincrease in cash provided by operating activities is attributable to lowera decrease
in net income, tooling inventory increases, partially offset by increased depreciationloss and amortization.a decrease in working capital.
Net cash used for investing activities was $7.5$144.5 million and $9.0$41.6 million for
the threenine months ended March 31,September 30, 1999 and 1998, respectively. The change was
due principally to decreased capital expenditures in North America. Capital
expenditures in Europe reached $6.8the Zenith Acquisition and Montich acquisition.
Net cash provided by financing was $106.4 million for the threenine months ended
March 31,September 30, 1999 compared to $5.9cash used for financing activities of $16.5
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 respectively.
This change was principally due to an increase in medium term loansthe
Zenith acquisition and Montich acquisition financing.
EUROPEAN MONETARY UNION
A single currency called the Euro was introduced in Europe inon January 1, 1999.
EUROPEAN MONETARY UNION
Since substantial portions of Trianon Industries's activitiesoperations are carried out in Europe,
Trianon Industries ishas actively preparingprepared for the introduction of a
single European currency. Afterthe Euro. Since
January 1, 1999, Trianon Industries will beis required, upon the request of any party
with which it transacts, to use the euroEuro as a currency of paymentpayments in its
European commercial activities in certain financial transactions and in
dealings with administrative bodies. On the basis of currently available
information, Trianon Industries does not expectbelieves that expenses incurred or to be
incurred in connection with the introduction of the euroEuro as a currency of
payment for Trianon Industries willhave not and are not expected to have a material adverse effect on the results
of operations or financial position of Trianon Industries.
YEAR 2000
Trianon Industries is working diligently to ensure that its information
technology systems and non-information technology systems are Year 2000
compliant. Trianon Industries has conductedinitiated a comprehensive Year 2000
compliance program in Europe and North America.
22
23
to identify and address potential Year 2000 problems and non-compliant
operations. The program is divided into two main sections: production facility
systems, which include software managing presses, robots, and other production
means, and information systems, which include production planning, sales
reporting, accounting and other administrative software.
Trianon Industries's program for ensuring Year 2000 compliance is managed
separately for its European and North American operations. In Europe, Trianon
Industries has established a central task force in charge of supervising and
reviewing Year 2000 compliance of each subsidiary's operations. The central task
force has hired a specialized consultant firm in charge of reviewing and
assessing the implementation of the Year 2000 program in the operating
subsidiaries. In North America, Trianon Industries has appointed a Year 2000
coordinator to review and implement Year 2000 compliance. Trianon Industries has
been during the 2nd quarter 1999 audited by independent consulting firms hired
by the Company's major U.S. customers, and certain European customers, to assess
the state of Year 2000 compliance of their suppliers. These audits have assessed
that the Trianon Industries's operations are generally low-risk.
Trianon Industries has upgraded or is in the process of upgrading its software
systems to versions or releases which are certified by their vendors as being
Year 2000 compliant. In North America, such upgrades are completed and are
currently being tested. Testing is expected to be concluded soon. In Europe,
most of upgrades are completed as well. For those information systems, which
were, developed internally, the Company's European information systems staff has
completed its review and is concluding repair or replacement of its computerprincipal
systems. Trianon Industries tests all system prior to redeployment of upgraded
systems into production, and has substantially completed all of such testing.
The central team is monitoring progress of these activities to identity
those areasidentify any
potential difficulties, which may prevent deployment, and to ensure remedial
action when appropriate.
Trianon Industries estimates that may notcosts to update its internal information
systems will be Year 2000 compliantapproximately $0.2 million in North America and is developing a plan$0.3 million in
Europe. Trianon Industries expects to resolve the issue.fund such expenses through its operating
cash flow.
Trianon Industries believes that by modifying existing
software and obtaining new releases of licensed software,it will manage the transition to the Year 2000
transition can be carried out without significant operational expensesexperiencing any material adverse effect on its financial conditions or
significant investments in computer systems improvements. Onresults of operations. Given the basissignificance of currently available information, Trianon Industries does not expect that
expenses be incurred in connection with the continuing identificationpotential consequences of systems
which are nota
failure to resolve Year 2000 compliant and with their replacement or upgradeproblems, there cannot, however, be any assurance
that any failure to address a particular Year 2000 program will not have a
material adverse impacteffect on theTrianon Industries business of financial condition.
The actual results of operations or financial
positionTrianon Industries's Year 2000 program will be affected
by a variety of factors, not all of which are within the control of Trianon
Industries. There can be, however, no assurancesSuch factors include the ability to identify and solve computer
software and hardware problems, the ability of contractor and suppliers to
adequately prepare for the absencetransition of any disruptions inYear 2000 and the cooperation of
customers. It is important to note that the description of Trianon Industries's
own systems orcompliance efforts contain forward-looking statements which are subject to risks
and uncertainties which could cause actual results to differ materially from
those of its
customersprojected. This description necessarily involves estimates and suppliers. Trianon Industries considers that sufficient resources
have been dedicatedprojections
with respect to address these issuesactivities required in a timely manner.the future. These estimates and
projections are subject to changes as work continues, and such changes may be
substantial.
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 a material effect
on Trianon 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. The adoption of
this statement did not have a material effect on Trianon Industries's financial
position or result of operations.
19
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 Aetna's or Trianon Industries's filings with the
Securities and Exchange Commission. Such factors could cause Trianon
Industries's actual results during the remainder of 1999 and beyond to differ
materially from those expressed in any forward-looking statement made by or on
behalf of 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 Aetna or Trianon Industries on
satisfactory terms.
23
24
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 NINE MONTHS ENDED
------------------ -----------------
OCTOBER 3, SEPTEMBER 27, OCTOBER 3, SEPTEMBER 27,
1999 1998 1999 1998
---- ---- ---- ----
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 93.1 100.7 89.4 91.4
----- ----- ----- -----
Gross profit 6.9 (0.7) 10.6 8.6
Selling, general and
administrative expenses 15.4 14.1 10.5 10.3
----- ----- ----- -----
Operating income (loss) (8.5) (14.8) 0.1 (1.7)
Interest expense, net 6.0 11.2 5.8 7.3
----- ----- ----- -----
Income (loss)before income tax (14.5) (26.0) (5.7) (9.0)
Income tax provision (credit) (4.9) (9.8) (1.9) (3.0)
Foreign currency translation - - 0.1 -
Adjustment
Net loss (9.6)% (16.2)% (3.7)% (6.0)%
THREE MONTHS ENDED MARCH 31,OCTOBER 3, 1999 COMPARED TO THREE MONTHS ENDED
MARCH 31,SEPTEMBER 27, 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 firstthird quarter of 1999 were $66.8$61.5 million, or 25.9%90.4
percent higher than firstthird quarter 1998 sales of $53.1$32.3 million. Production sales
of $58.8$58.4 million in the firstthird quarter of 1999 were up $6.3$30.8 million from $52.5$27.6
million in the firstthird quarter of 1998, due to Daimler ChryslerDaimlerChrysler Jeep Grand
Cherokee, General Motors Saturn, and the Cami Grand Vitara. Tooling and prototype
sales were up $ 7.7down $1.6 million for the same period.
GROSS PROFIT: Gross profit was 8.1$4.3 million, or 12.1%6.9% of net sales, for the firstthird
quarter of 1999 compared to $ 8.1$(0.2) million, or 15.3 (0.7)% of net sales, for the same
period in 1998. The decreaseincrease in gross profitmargin was primarily the result of higher
toolingan
increase in production sales with little or no associated margin andof the loss of higher margin
products such as Daimler Chrysler's mini-van.DaimlerChrysler Jeep Grand Cherokee.
SELLING, GENERAL AND ADMINISTRATIVE ("SG&A") EXPENSES: SG&A expenses for the
firstthird quarter of 1999 were $5.0$9.5 million, or 7.4%15.4% of net sales, compared to $ 4.5$4.6
million, or 8.5%14.1% of net sales, for the same period in 1998. As a percent of net
sales, the increase was a result of the consent fee, agent fee and miscellaneous
expenses amounting to $5.2 million due to the Company's efforts to obtain a
waiver of the financial information filing obligation from the bondholders,
partially offset by launch expense that are no longer being incurred and
increased production sales.
INTEREST EXPENSE: Interest expense for the third quarter of 1999 was
$3.7 million, or 6.0% of net sales, compared to $3.6 million or 11.2% 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 programs.
24
25
INCOME TAXES: The income tax credit in the third quarter of 1999 was $3.0
million as compared to an income tax credit of $3.2 million for the same period
in 1998.
NINE MONTHS ENDED OCTOBER 3, 1999 COMPARED TO NINE MONTHS ENDED SEPTEMBER 27,
1998
NET SALES: Net sales for the nine months of 1999 were $194.0 million, or 46.3%
higher than nine months 1998 sales of $132.6 million. Production sales of $178.7
million for the nine months ended 1999 were up $56.3 million from $122.4 million
for the nine months ended 1998, due to DaimlerChrysler Jeep Grand Cherokee,
General Motors Saturn Innovate and the Cami Vitara. Tooling and prototype sales
were up $5.1 million for the same period.
GROSS PROFIT: Gross profit was $20.6 million, or 10.6% of net sales, for the
nine months ended 1999 compared to $11.4 million, or 8.6 % of net sales, for the
same period in 1998. The increase in gross profit was primarily the result of
uninterrupted production sales and decreased launch expenses.
SELLING, GENERAL AND ADMINISTRATIVE ("SG&A") EXPENSES: SG&A expenses for the
nine months ended 1999 were $20.3 million, or 10.5% of net sales, compared to
$13.7 million, or 10.3% of net sales, for the same period in 1998. As a percent
of net sales, the decrease was a result of the consent fee, agent fee and
miscellaneous expenses amounting to $5.2 million due to the Company's efforts to
obtain a waiver of the financial information filing obligation from the
bondholders, partially offset by launch expense that isare no longer being
incurred.
INTEREST EXPENSE: Interest expense for the first quarter ofnine months ended 1999 was $3.8$11.3
million, or 5.7%5.8% of net sales, compared to $2.9$9.7 million or 5.4%7.3% 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 infor the first quarter ofnine months ended 1999 was $0.1$3.7
million as compared to an income tax credit of $ 0.2$4.0 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 and interest payments and to complete planned maintenance and
expansion expenditures.
At March 31,October 3, 1999 there was $16.5$2.0 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
and financing facilities of the parent, 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)used for operations for the threenine months ended March 31,October 3, 1999
aggregated $6.6$4.0 million. This compares to net cash used for operations of $ 1.8$17.4
million for the same period in 1998. The increase is due primarily to decrease
in tooling inventory and increased depreciation and
amortization expenses.inventory.
Net cash flows provided by (used for)used for investing activities aggregated $0.7$6.5 million for the
threenine months ended March 31,October 3, 1999 as compared to $3.2$18.1 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.assembly.
Net cash flows provided by (used for) financing aggregated $7.1$9.4 million for the threenine months
ended March 31,October 3, 1999 as compared to $5.3cash provided by financing of $35.5
million for the same period in the prior yearyear. 1999 included a $8.0 million
capital contribution from Trianon, and an increase in both casesthe Senior Revolving
Credit Facility of $2.0 million offset by $0.6 million of debt repayment, while
1998 represented increasesan increase 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
2225
2326
ITEM 5.3. DISCLOSURE OF QUANTITATIVE AND QUALITATIVE INFORMATION ABOUT MARKET
RISKS
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.
23ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NOT APPLICABLE
26
2427
PART II. OTHER INFORMATION
ITEM 1. NOT APPLICABLE
ITEM 2. NOT APPLICABLE
ITEM 3. NOT APPLICABLE
ITEM 4. SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERSNOT APPLICABLE
ITEM 5. NOT APPLICABLE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
2427
2528
EXHIBIT NO. DESCRIPTION OF EXHIBITS
3.1(i) Amendment to Trianon Industries- ---------------------------------------------------------
10.1 Agreement ["Zenith Credit Agreement"] dated as of July 13, 1999 by and
among 2020 Corp. Restated Certificate of
Incorporation filed with70, the Delaware Secretary of State on May 12,
1999.
4.1 FifthLenders and Bank One, Michigan, formerly known
as NBD Bank, as the Agent.
10.2 Sixth Amendment to Credit Agreement dated as of February 12,June 30, 1999, by and
among Aetna Industries, Inc., the Guarantors party thereto, the lenders,Lenders,
and Bank One, Michigan, formerly known as NBD Bank, as the agent.Agent.
10.3 Seventh Amendment to Credit Agreement, dated as of August 31, 1999, by
and among Aetna Industries, Inc., the Guarantors party thereto, the
Lenders, and Bank One, Michigan, formerly known as NBD Bank, as the
Agent.
10.4 Eighth Amendment to Credit Agreement, dated as of September 30, 1999 by
and among Aetna Industries, Inc., the Guarantors, party thereto, the
Lenders, and Bank One, Michigan, formerly known as 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 Corp.
(EDGAR Filing Only)
(b) Reports on Form 8-K
None
30The Company filed a current report on form 8-K, dated July 28, 1999.
28
2629
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: May 14,November 22, 1999 By: //s// Harold A. Brown
--------------------------------------------------
Harold A. Brown
Secretary, Vice President, Finance
and Chief Financial Officer
Trianon Industries Corp.
Date: May 14,November 22, 1999 By: //s// Harold A. Brown
-------------------------------------------------------
Harold A. Brown
Secretary, Vice President North America
3129
2730
EXHIBIT INDEX
Exhibit No. Description of Exhibits
- ----------- -----------------------
3.1(i) Amendment to Trianon Industries10.1 Agreement ["Zenith Credit Agreement"] dated as of July 13, 1999 by
and among 2020 Corp. Restated Certificate of
Incorporation filed with70, the Delaware Secretary of State on May
12, 1999.
4.1 FifthLenders and Bank One, Michigan,
formerly known as NBD Bank, as the Agent.
10.2 Sixth Amendment to Credit Agreement dated as of February 12,June 30, 1999, by
and among Aetna Industries, Inc., the Guarantors party thereto,
the lenders,Lenders, and Bank One, Michigan, formerly known as NBD Bank,
as the agent.Agent.
10.3 Seventh Amendment to Credit Agreement, dated as of August 31,
1999, by and among Aetna Industries, Inc., the Guarantors party
thereto, the Lenders, and Bank One, Michigan, formerly known as
NBD Bank, as the Agent.
10.4 Eighth Amendment to Credit Agreement, dated as of September 30,
1999 by and among Aetna Industries, Inc., the Guarantors, party
thereto, the Lenders, and Bank One, Michigan, formerly known as
NBD Bank, as the Agent.
27.1 Financial Data Schedule for Aetna Industries, Inc.
27.2 Financial Data Schedule for Trianon Industries Corp.
3230