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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2000.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934.
COMMISSION FILE NUMBER 333-49429-01
PRESTOLITE ELECTRIC HOLDING, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-3142033
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2311 GREEN RD., STE B, ANN ARBOR, MICHIGAN 48105
(Address of principal executive offices) (Zip Code)
(734) 913-6600
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, address, and former fiscal year, if changed since last report)
Indicate 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 the filing requirements for
the past 90 days.
Yes X No ____
As of March 29, 2001, there were 1,985,000 shares of the registrant's
common stock outstanding. There is no public market for the registrant's common
stock.
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This annual report on Form 10-K of Prestolite Electric Holding, Inc.
(formerly known as PEI Holding, Inc.) includes forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. All
statements other than statements of historical fact included in this report may
contain forward-looking statements. Forward-looking statements generally can be
identified by the use of forward-looking terminology such as "may," "will,"
"expect," "intend," "estimate," "anticipate," "believe" or "continue" or the
negative thereof or variations thereon or similar terminology. Such
forward-looking statements are based upon information currently available in
which our management shares its knowledge and judgment about factors that they
believe may materially affect our performance. We make the forward-looking
statements in good faith and believe them to have a reasonable basis. However,
such statements are speculative, speak only as of the date made and are subject
to certain risks, uncertainties and assumptions. Should one or more of these
risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results could vary materially from those anticipated,
estimated or expected. Factors that might cause actual results to differ
materially from those in such forward-looking statements include, but are not
limited to, those discussed in Item 1. "Business -- Risk Factors" and Item 7.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." All subsequent written and oral statements that we make are
qualified in their entirety by these factors.
Readers are urged to carefully review and consider disclosures made in this
and other reports that we file with the Securities and Exchange Commission that
discuss factors germane to our business.
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PART I
ITEM 1. BUSINESS
We are a global manufacturer and distributor of alternators and starter
motors for heavy duty, automotive, defense and industrial markets. We sell our
products primarily to the aftermarket and original equipment manufacturers
("OEMs"). On January 22, 1998, we acquired three businesses from a subsidiary of
LucasVarity plc. As a result of the Lucas acquisition, we consolidated a
leadership position in our primary markets, expanded our global reach and
improved our aftermarket distribution capabilities. We conduct our business
through our operating subsidiary Prestolite Electric Incorporated and its
subsidiaries.
We believe that our position in our primary markets can be attributed to
the following factors:
Product Quality and Brand Recognition. We believe our products are
generally recognized by our customers as superior based on their advanced
technology, reliability, durability and quality.
Attractive Aftermarket/Original Equipment Balance. In 2000 approximately
44% of our net sales were to OEM customers and 56% to aftermarket customers. The
aftermarket is generally a more stable source of sales and generates higher
margins than sales to our OEM customers. See "-- Risk Factors -- We depend on
original equipment manufacturers, whose businesses are cyclical." We believe
that our aftermarket and original equipment businesses are complementary and
provide us with a competitive advantage in meeting customer needs and in
maintaining the high levels of expertise necessary to compete successfully in
both markets. The engineering and manufacturing capabilities necessary to meet
the requirements for original equipment technology and quality are transferable
to our aftermarket operations. The use of our products as original components in
OEM products is a major factor in generating aftermarket demand. Further, the
understanding of replacement activity gained through the aftermarket enhances
our understanding of the needs of OEMs. See "-- Market Dynamics."
Applied Technological and Engineering Capabilities. We have built an
engineering team with in-depth design and application experience, which allows
us to introduce innovative new products and applications. Product design,
development and application are performed by dedicated engineering teams, which
work closely with customers to design products and systems that meet each
customer's specifications.
International Presence. We currently conduct business in the United States,
the United Kingdom, South Africa and Argentina. Approximately 57% of our net
sales in 2000 were to customers outside of North America. As our original
equipment customers expand their manufacturing operations in foreign countries,
we expect that these customers will increasingly turn to suppliers who can
support their locally-manufactured OEM products and aftermarket requirements.
See "-- Risk Factors -- We have risks because of foreign operations."
PRODUCTS
We manufacture and distribute alternators and starter motors, primarily for
use in heavy duty vehicles and automobiles. Our products are also used in a
broad range of industrial applications.
Alternators. We manufacture alternators and regulators primarily for heavy
duty applications, generally under the Leece-Neville or Prestolite brand names,
and for automotive applications. Alternators are electric generators that
produce rectified direct current. Alternator output is directly related to frame
size, or diameter. We manufacture alternators in sizes ranging from 5 inches to
8 9/16 inches for use in off-road vehicles, refrigerated trucks, trucks,
generator sets, military vehicles, buses and special purpose vehicles such as
ambulances. We produce smaller alternators for a wide variety of cars, light to
medium trucks and agricultural vehicles.
Starter Motors. We manufacture a full line of starter motors which includes
products designed for the lower-end and mid-size segments of the market. In the
United Kingdom, we manufacture a range of heavy duty starter motors which are
sold primarily for trucks, buses and generator sets. Through the Lucas
acquisition we added starter motors for automobiles and light commercial
vehicles.
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Other Products. Other products we manufacture include ignition
distributors, the TrekStar line of speedometers and odometers, in-line diesel
pumps, and Thermostart brand pre-heaters for diesel engines. We also
redistribute in Argentina and South Africa a wide range of automotive products
manufactured by third parties.
MARKETS
Market Dynamics
Aftermarket. The aftermarket consists of the production and sale of both
new and remanufactured parts used in the maintenance and repair of vehicles. Our
aftermarket distribution channels consist of:
- the aftermarket arms of original equipment suppliers;
- independent distributors, who supply repair shops, dealers and retailers;
and
- government agencies that directly purchase our aftermarket products.
Our newly-manufactured aftermarket products compete with remanufactured
products, which consist of used components that are reassembled into finished
products. Distribution through independent distributors is an additional
important element of the aftermarket. Although the distributors' share of the
North American and European aftermarket has declined in recent years,
independent distributors remain an important distribution channel for us.
Original Equipment. The original equipment market consists of the
production and sale of new component parts for use in the manufacture of new
vehicles or equipment. Original equipment sales are generally made to the
vehicle OEM, although some sales may be to another component manufacturer which
in turn supplies the OEM. In response to pressure to improve product quality,
shorten design cycles and reduce capital spending, production and inventory
costs, OEMs are increasingly outsourcing design and production of non-strategic
components. The original equipment market has been impacted by recent
fundamental changes in OEM sourcing strategies. OEMs are consolidating their
supplier base and are seeking suppliers which can, among other things, meet
their shorter product design cycles, bring products to market on an expedited
basis, lower product and system costs and pass cost savings on to the OEM. As a
result, we believe that OEMs generally prefer to purchase components from a
small group of preferred suppliers. OEMs are becoming increasingly global. OEMs
are in turn requiring their preferred suppliers to establish global production
capabilities to meet their original equipment needs as they expand
internationally, and establish global distribution networks to provide
aftermarket support.
Markets Served
We sell our products to a variety of markets, including:
Heavy Duty. The heavy duty market includes heavy duty trucks, school and
shuttle buses, emergency vehicles, off-road and special purpose vehicles,
refrigerated trucks and generator sets. Our heavy duty products are designed
primarily for use with diesel engines, generally 2.5 liters or larger.
Automotive. Products sold to automobile OEMs are primarily starter motors
and alternators in Argentina and South Africa.
Defense. Our products sold to the defense market include alternators and
starter motors for use in military vehicles.
Industrial, Marine and Other Applications. These sales include starter
motors and alternators for marine and other applications.
Independent Distribution. A portion of sales to each of our markets are
through independent distributors. About half of our automotive sales through
these distribution networks represents products manufactured by third parties
and purchased by us for resale.
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CUSTOMERS AND COMPETITION
Most of our products are component parts used on diesel or gasoline
engines. Vehicle components often do not last for the entire life of the
vehicle. As a result, sales are made to both aftermarket and original equipment
customers. Our sales to OEM customers represented approximately 44% of our 2000
net sales, with the remaining sales derived from aftermarket customers.
No single customer individually accounts for more than ten percent of our
consolidated revenues.
We operate in highly competitive markets. While no single competitor
competes with us in all of our product lines, we face significant competition in
each of our product lines. In addition, we are under constant pressure from our
major OEM customers to reduce product costs. We believe that our experience in
engineering and implementing cost reduction programs and our ability to develop
new and improved products and to control manufacturing and development costs
should allow our products and prices to remain competitive. See "-- Risk
Factors -- We face substantial competition."
Delco Remy International Inc. is our principal competitor in the North
American market for truck alternators and starter motors in both the OEM and
aftermarket segments. Some national and many local remanufacturers also compete
in the aftermarket segment. Our principal competitor in the North American
transportation refrigeration and off-road portions of the market for heavy duty
alternators is Bosch. Bosch is also our principal competitor in the European
market for truck and bus alternators and starters. Our principal competitors in
the South African and Argentine OEM market include Bosch and other international
corporations that import into those markets. C.E. Niehoff is our major
competitor in the North American market for military alternators. Our principal
competitors in the market for high-amperage (165 to 320 ampere) commercial
alternators are Lestek and Powerline. At the lower end of the heavy duty
alternator market, automotive-based designs and foreign competitors are a
significant factor.
DISCONTINUED OPERATIONS
In August of 2000 we sold our direct current motor business, switch
business and battery charger business. As discussed in Note 2 of our audited
financial statements, these businesses generated approximately $71.3 million of
sales in 1999 and $44.0 million of sales during the seven months of our
ownership in 2000. We treat these as "discontinued operations" in the financial
statements. Consequently, they are not included in the discussion above and the
sales of these businesses are not included in the $172 million of consolidated
sales shown in our financial statements.
Products of our discontinued businesses include:
- Material handling motors, 5 to 13 inches in diameter, generally designed
for a specific forklift truck model.
- Pump and winch motors, 4.5 inches in diameter, generally used in
hydraulic pump operations.
- Motors, 3.3 inches in diameter, used for back-up braking systems on
school busses and other applications.
- Battery chargers, sold under the Hobart brand name, generally used in the
material handling market.
- Switches, sold to a wide variety of markets, including material handling
and automotive.
We sold these businesses for a total contract price of $62.0 million, less
certain receivables and subject to certain adjustments. We estimate that the
adjusted sale price will be approximately $57.4 million.
SEASONALITY, RAW MATERIALS AND BACKLOG
Our sales to OEMs accounted for approximately 44% of our net sales for the
year ended December 31, 2000. As a result, a significant portion of our sales
are related to the overall level of domestic and foreign vehicle production. New
vehicle sales and production are cyclical and can be affected by the strength of
the economy generally or in specific regions, by prevailing interest rates and
other factors which may have an
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effect on our sales. In addition, strikes, lock-outs, work stoppages or other
production interruptions in the vehicle industries may adversely affect the
demand for our products. The balance of our aftermarket and OEM sales, as well
as the diversity of our OEM markets served (both in terms of end-use and
geography), help stabilize our revenues. However, a decline in the demand for or
production of new vehicles could have a materially adverse effect on our results
of operations. See Item 7. "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Principal raw materials for our business include copper, aluminum, steel
and electronic components. All materials are readily available from a number of
suppliers, and we do not foresee any difficulty in obtaining adequate inventory
supplies.
The majority of our products are not on a backlog status. They are produced
from readily available materials and have a relatively short manufacturing
cycle.
PATENTS, TRADEMARKS AND LICENSES
We hold various patents and trademarks related to our products. No single
patent or trademark is currently of material importance to our operations. We
have applied for U.S. patents for our self-diagnostic alternator and for the use
of a conductive bearing to replace brushes in alternators and other rotating
machines.
We have the exclusive right to use the "Prestolite Electric" trade name for
use with alternator and starter motors. "Prestolite Wire", "Prestolite
Batteries", "Prestolite Motors", and "Prestolite Switches" are sold by unrelated
companies. We formerly had the right to the "Prestolite Electric" name under a
perpetual, royalty-free license from AlliedSignal Corporation (now Honeywell
Incorporated). At the end of 1999, we formed a limited liability company which
acquired the rights to the "Prestolite" name from AlliedSignal. Lucas Industries
plc retained all rights to the "Lucas" trade name and logo and certain other
trademarks following the Lucas acquisition. We are permitted for a transition
period to brand products sold by us in Argentina and South Africa with certain
Lucas trademarks.
On April 8, 1998, we entered into an agreement with Hitachi, Ltd., a
Japanese corporation, for a seven-year non-exclusive, non-transferable license
to manufacture and sell certain starter motors and alternators utilizing
Hitachi's proprietary technology in exchange for a one-time fee of Y30.0 million
(approximately $0.2 million as of that date) and royalty payments based on the
net sales of such products.
EMPLOYEES
We had approximately 2,000 employees as of December 31, 2000. There are no
collective bargaining agreements in effect with respect to any of our United
States employees. All of the employees at our Leyland, England facility and all
of the hourly and some of the salaried employees at the five facilities acquired
in the Lucas acquisition are members of unions. We have not experienced a strike
or work stoppage at any of our facilities, except in South Africa as part of
nationwide, industry-wide actions that included our facility. We can not assure
you that a strike or work stoppage will not occur in the future at any of our
facilities.
RISK FACTORS
In addition to other information in this annual report on Form 10-K,
readers evaluating us and our business should carefully consider the following
risk factors for our company as a whole. These risks may impair our results of
operations and business prospects. The risks set forth below and elsewhere in
this annual report on Form 10-K could cause actual results to differ materially
from those that we project.
We depend on original equipment manufacturers, whose businesses are cyclical.
Our sales to OEMs accounted for approximately 44% of our net sales for the
year ended December 31, 2000. As a result, a significant portion of our sales
are related to the overall level of domestic and foreign vehicle production. New
vehicle sales and production are cyclical and can be affected by the strength of
the economy generally or in specific regions, by prevailing interest rates and
other factors. In addition, strikes,
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lock-outs, work stoppages or other production interruptions in the vehicle or
material handling industries may adversely affect the demand for our products. A
decline in the demand for or production of new vehicles could materially
adversely affect our results of operations. In addition, we are under increasing
pressure from our major OEM customers to reduce product costs. See Item 7.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
We have risks because of our foreign operations.
We currently conduct business in the United States, the United Kingdom,
South Africa and Argentina. Approximately 57% of our net sales in 2000 were to
customers outside of North America. We intend to expand our international
presence. Adverse results from our foreign operations could adversely affect our
results of operations. The success of our international operations will depend
on numerous factors, many of which are beyond our control, including economic
and political conditions in the countries in which we operate. In particular,
Argentina and South Africa have historically been less economically and
politically stable than the United States and the United Kingdom. International
operations may also increase our exposure to certain risks inherent in doing
business outside the United States, including slower payment cycles, unexpected
changes in regulatory requirements, potentially adverse tax consequences,
restrictions on the repatriation of profits and assets and compliance with
foreign laws and standards.
In addition, most of our employees outside of the United States are
represented by labor unions. We cannot assure you that a strike or work stoppage
will not occur or that actions taken by us will not adversely affect our
relations with our unionized employees.
We have risks related to currency fluctuations.
Due to our operations outside of the United States we experience foreign
currency exchange gains and losses. Fluctuations between the United States
dollar and other currencies may adversely affect our results of operations.
While we may engage in foreign currency hedging transactions which may moderate
the overall effect of such currency exchange rate fluctuations, we expect that
we will be affected by such fluctuations, and we cannot assure you that we will
be successful in any hedging activities. We also cannot assure you that such
exchange rate fluctuations will not cause significant fluctuations in quarterly
results of operations. See Item 7. "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
We face substantial competition.
We operate in highly competitive markets. While no single company competes
with us in all of our product lines, we face significant competition in each of
our product lines. Many of our competitors are significantly larger and have
substantially greater financial and other resources, and we cannot assure you
that our products will continue to compete successfully.
We may have exposure under our warranties.
We warrant to our customers that our products are defect-free and meet
certain specifications. These customers in turn often offer warranties to their
customers on the products they sell, including products of our OEM customers
which include our products as component parts. As a result, we receive claims
and requests for payment from our customers to remedy complaints made by the
ultimate consumers. We cannot assure you that additional warranty claims or
requests for payment would not materially adversely affect our results of
operations. See Item 7. "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
We depend on our key personnel.
Our performance depends in part upon the continued service of our executive
officers, including P. Kim Packard, our chief executive officer. The loss of the
services of any of our key employees could materially adversely affect our
results of operations. We do not maintain a "key man" life insurance policy on
any of our executives or employees. Our future success also depends on the
ability to identify, hire, train, and retain other
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highly qualified technical and managerial personnel. Competition for qualified
personnel is intense, and we cannot assure you that we will be able to attract
or retain necessary personnel in the future. Failure to attract and retain the
necessary technical and managerial personnel could materially adversely affect
our results of operations.
We face environmental risks.
Our operations and properties are subject to various environmental laws.
The nature of our operations exposes us to the risk that we will be liable for
environmental matters, including off-site disposal matters. We cannot assure you
that we will not incur material costs in connection with environmental
liabilities or that the contractual indemnities provided by the sellers of the
acquired businesses will be applicable or available.
We believe that we comply with all relevant environmental laws and that we
have properly recorded the costs related to any known environmental claims
related to our properties. Based upon our experience to date, we believe that
the future cost of compliance with existing environmental laws (or liability for
known environmental claims) will not materially adversely affect our results of
operations. However, future events may give rise to additional compliance costs
or liabilities that could have a materially adverse affect on our results of
operations. We may be required in the future to spend material amounts to comply
with more stringent laws, as well as more vigorous enforcement policies of
regulatory agencies or stricter or different interpretations of existing laws.
We are highly leveraged and have significant debts which we may be unable to
pay.
We have a significant amount of debt. As a result, we are highly leveraged
and have significant interest expense. In addition, subject to the restrictions
contained in the Indenture governing our senior notes and in our bank credit
facilities, we may incur additional debt from time to time to pay for
acquisitions or capital expenditures or for other purposes. As of December 31,
2000, we had $113 million of consolidated indebtedness outstanding and our
stockholders' deficit was approximately $7.1 million.
Our ability to make scheduled payments of principal or interest on, or to
refinance, our debt will depend on future operating performance and cash flow.
Our operating performance and cash flow are subject to prevailing economic
conditions, prevailing interest rate levels and financial, competitive, business
and other factors which may be beyond our control. The degree to which we are
leveraged could have important consequences to holders of our senior notes,
including, but not limited to, those discussed below under "-- Our debt
agreements have restrictive covenants and limitations" and:
- our ability to obtain additional financing may be impaired;
- a substantial portion of our cash flow from operations must be dedicated
to paying interest on our debt which reduces funds available to us for
other purposes;
- we are substantially more leveraged than certain of our competitors which
may place us at a competitive disadvantage;
- we may be hindered in our ability to adjust rapidly to changing market
conditions;
- our substantial degree of leverage may affect certain suppliers'
willingness to give us favorable payment terms; and
- our substantial leverage could make us more vulnerable in the event of an
economic downturn.
We cannot assure you that our future cash flow will be sufficient to meet
our obligations and commitments. If we cannot generate sufficient cash flow from
operations to service our debt and to meet our other obligations and
commitments, we might be required to refinance our debt or to sell assets to
obtain the funds we need. We cannot assure you that refinancing or asset sales
could be completed on a timely basis or on satisfactory terms, if at all, or
would be permitted by the terms of our credit facilities or the Indenture. In
the event that we are unable to refinance our credit facilities or raise funds
through asset sales, sales of equity
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securities or otherwise, our ability to pay principal of, and interest on, our
senior notes would be adversely affected.
Our debt agreements have restrictive covenants and limitations.
Our credit facilities in the United States and United Kingdom include
certain negative covenants and restrictions on our actions including, without
limitation, restrictions on:
- making investments, loans and advances and paying of dividends and other
restricted payments;
- incurring additional debt;
- granting most liens;
- entering into mergers, consolidations and sales of all or a substantial
part of our business or property;
- selling receivables or repaying other debt; and
- guaranteeing certain obligations.
Our credit facilities also require us to meet certain financial covenants,
including maintaining minimum fixed charge coverage ratios and funded debt
ratios. These restrictive covenants may restrict our ability to expand or to
pursue our business strategies. A breach of any of these covenants could result
in a default under our credit facilities, in which case, debt under our credit
facilities could be declared due and payable. If we were unable to repay
borrowings, the lender could proceed against the collateral granted to it to
secure that debt.
We may not be able to repurchase our senior notes upon a change of control.
Upon the occurrence of a change of control (as defined in the Indenture),
each holder of our senior notes may require us to purchase its senior notes at
101% of their principal amount, plus accrued and unpaid interest, if any, to the
date of repurchase. If we did not purchase our senior notes we would default
under the Indenture. This would permit the trustee under the Indenture or the
holders of at least 25% in principal amount of the outstanding senior notes to
declare the principal and accrued but unpaid interest to be due and payable.
We are controlled by Genstar Capital Corporation.
As of December 31, 2000, Genstar Capital Corporation owned approximately
96.7% (82.7% on a fully-diluted basis) of our common stock. Consequently,
Genstar has the ability to control our business and affairs by virtue of its
ability to elect a majority of our board of directors and its voting power with
respect to actions requiring stockholder approval. See Item 12. "Security
Ownership of Certain Beneficial Owners and Management."
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ITEM 2. PROPERTIES
Our corporate headquarters are located at 2311 Green Road, Ann Arbor,
Michigan 48105, which we lease. The phone number at that location is (734)
913-6600. The following table sets forth certain information regarding the major
facilities we operated as of December 31, 2000:
SQUARE OWNED/LEASED (LEASE
LOCATION USE FEET EXPIRATION DATE)
-------- --- ------ -------------------
Ann Arbor, MI............................. Headquarters 8,000 Leased (Dec. 2003)
Arcade, NY................................ Manufacturing 342,800 Owned
Florence, KY.............................. Warehouse 108,800 Leased (June 2004)
Garfield, NJ.............................. Manufacturing 42,000 Leased (month to month)
Leyland, U.K. ............................ Manufacturing 250,000 Leased (April 2006)
Acton, U.K. .............................. Manufacturing 368,000 Owned
Johannesburg, South Africa................ Manufacturing 118,400 Owned
Buenos Aires, Argentina................... Manufacturing 159,000 Owned
San Lorenzo, Argentina.................... Manufacturing 76,676 Owned
San Luis, Argentina....................... Manufacturing 30,800 Owned
We continually evaluate our facility requirements and believe that suitable
additional space, if needed, will be available on commercially reasonable terms.
We believe that we comply with all relevant environmental regulations related to
our properties.
ITEM 3. LEGAL PROCEEDINGS
From time to time we are involved in various litigation matters arising in
the ordinary course of our business. Management believes that none of the
matters in which we are currently involved, either individually or in the
aggregate, is or will be material to our future financial condition or results
of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Market Information
There is no established public trading market for our common stock.
As of March 22, 2001, there were 1,985,000 shares of our common stock
outstanding, held by eight holders. As of March 22, 2001, there were employee
held options outstanding to purchase up to an additional 332,660 shares of our
common stock.
Dividends
From time to time we may pay dividends from funds that are legally
available to pay dividends. Our ability to declare and pay dividends on our
common stock is restricted by certain covenants. We intend to retain all of our
earnings to finance the development and growth of our business. Accordingly, we
do not anticipate that any dividends will be declared on our common stock for
the foreseeable future. Future payments of cash dividends, if any, will depend
on the financial condition, results of operations, business conditions, capital
requirements, restrictions contained in agreements, future prospects and other
factors deemed relevant by our board of directors.
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ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth our selected consolidated historical
financial data as of and for the periods indicated. The statements of operations
data for each of the fiscal years in the three-year period ended December 31,
2000 and the balance sheet data as of December 31, 1999 and 2000 have been
derived from our audited financial statements included elsewhere in this annual
report on Form 10-K, and are restated to account for the discontinuance of
businesses, as discussed above and in Note 2 to our audited financial
statements. The statements of operations data for each of the fiscal years in
the two year period ended December 31, 1997 and the balance sheet data as of
December 31, 1996, 1997 and 1998 have been derived from our audited financial
statements not included in this annual report on Form 10-K, restated to account
for the discontinuance of businesses, as discussed above. The information in the
table should be read in conjunction with Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our Consolidated
Financial Statements, including the notes thereto, included elsewhere in this
annual report on Form 10-K.
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT RATIOS, SHARE AND PER SHARE AMOUNTS)
(RESTATED)
STATEMENT OF OPERATIONS DATA:
Net sales............................... $ 88,469 $ 96,223 $ 208,999 $ 187,874 $ 171,890
Cost of goods sold...................... 72,018 79,814 167,453 151,613 139,641
Selling, general and administrative
expenses.............................. 15,015 14,786 29,444 28,462 24,713
Costs associated with option
repurchase............................ -- -- 2,101 2 173
Charge related to two specialty
alternators........................... -- -- -- -- 3,450
Severance............................... 56 -- 711 450 2,226
--------- --------- --------- --------- ---------
Operating income........................ 1,380 1,623 9,290 7,347 1,687
Other expense (income)(a)............... 142 264 (88) (1,024) (618)
Unrealized loss on foreign exchange..... -- -- -- -- 1,121
Interest expense........................ 5,313 5,384 13,494 15,816 15,025
--------- --------- --------- --------- ---------
Income (loss) from continuing operations
before income taxes and extraordinary
items................................. $ (4,075) $ (4,025) $ (4,116) $ (7,445) $ (13,841)
Provision for (benefit of) income
taxes................................. (3,299) 950 (693) (715) (4,485)
--------- --------- --------- --------- ---------
Income (loss) from continuing operations
before extraordinary items............ $ (776) $ (4,975) $ (3,423) $ (6,730) $ (9,356)
========= ========= ========= ========= =========
Net earnings (loss) per common share
from continuing operations before
extraordinary items(b):
Basic and diluted.................. $ (0.22) $ (1.44) $ (1.62) $ (3.38) $ (4.71)
Shares used in computing earnings per
share(b):
Basic and diluted.................. 3,454,740 3,446,740 2,111,812 1,993,000 1,985,000
BALANCE SHEET DATA (at end of period):
Working Capital (excluding debt)........ $ 12,389 $ 13,780 $ 37,060 $ 47,844 $ 52,931
Total assets............................ 91,139 86,609 181,567 179,604 144,319
Total debt.............................. 46,514 42,930 140,752 151,126 113,035
Stockholders' equity (deficit).......... 18,018 18,943 (8,918) (16,292) (7,083)
OTHER DATA:
EBITDA(c): ............................. $ 4,991 $ 4,696 $ 21,342 $ 18,388 $ 16,878
Cash flow from operating activities: ... 692 4,178 (4,021) (1,107) (5,334)
Cash flow from investing activities: ... (6,524) 5,054 (53,262) (10,847) 44,943
Cash flow from financing activities: ... 8,032 (9,582) 57,557 10,418 (31,650)
Ratio of earnings to fixed
charges(d): .......................... -- -- -- -- --
9
12
- -------------------------
(a) Other expense (income) in 2000 and 1999 consists primarily of pension
expense for inactive United States defined benefit pension plans, gains on
the sale of fixed assets, interest income, foreign currency exchange losses,
royalty expenses, and South Africa trademark expense. Other expense (income)
in 1998 consists primarily of pension expense for inactive United States
defined benefit pension plans, gains on the sale of fixed assets, interest
income, and in all other years consists primarily of operating costs of idle
facilities.
(b) Earnings per common share and shares used in the computation reflect the
20-for-1 stock split effective March 25, 1998.
(c) EBITDA for any period is calculated as the sum of income (loss) from
continuing operations plus the following to the extent deducted in
calculating such net income:
- minority interest;
- interest expense;
- income tax expense;
- depreciation expense;
- amortization expense;
- unrealized foreign exchange losses, and;
- extraordinary items, restructuring charges, and charges associated with
the repurchase of stock options, and in 2000 charges associated with two
specialty alternator projects.
We consider EBITDA to be a widely used financial indicator of a company's
ability to service debt, fund capital expenditures and expand its business;
however, EBITDA is not calculated the same by all companies and is not a
measurement required by generally accepted accounting principles. EBITDA
should not be considered by an investor as an alternative to net income, as
an indicator of our operating performance or as an alternative to cash flow
(as defined in accordance with generally accepted accounting principles) as
a measure of liquidity.
(d) For purposes of computing the ratio of earnings to fixed charges, earnings
include income before income taxes, discontinued operations and
extraordinary items plus fixed charges. Fixed charges consist of interest
expense and 33% of rental expense (deemed by management to be representative
of the interest factor of rental payments). Earnings were insufficient to
cover fixed charges in 2000 by approximately $13.8 million, in 1999 by $7.4
million, in 1998 by $4.0 million, in 1997 by $4.0 million and in 1996 by
$4.0 million.
10
13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
We manufacture alternators, starter motors and other items for heavy duty,
automotive, defense and industrial markets. These are supplied under the
"Prestolite," "Leece-Neville," "Lucas," and "Indiel" brand names for original
equipment and aftermarket application on a variety of vehicles and industrial
equipment. "Lucas" is used under license from a subsidiary of TRW, Inc. Most of
our products are component parts used on diesel engines and automobiles, sold to
both aftermarket customers and original equipment manufacturers. We sell our
products to a variety of markets, in terms of both end-use and geography.
In January 1998, we acquired three businesses from a subsidiary of
LucasVarity plc., now known as TRW, Inc. These businesses operate in England,
South Africa, and Argentina. We purchased these businesses for approximately
$44.3 million in cash, net of cash acquired and including the assumption of $3.2
million in debt, plus certain future obligations, as described in Note 4 to the
financial statements.
We financed the Lucas acquisition from the sale of $125.0 million of 9.625%
senior notes due 2008 issued under Rule 144A of the Securities Act of 1933, as
amended. We also used proceeds from the offering of our senior notes to repay
existing debt in the United States and United Kingdom, to repurchase all the
warrants issued to holders of the Company's subordinated debt, to repurchase 40%
of the common stock held by Genstar Capital Corporation, to repurchase 8.5% of
the common stock held by management and to repurchase 40% of the options held by
management. The total cost associated with the repurchase of these securities
was approximately $29.7 million.
We have organized our business into two divisions. While each division
bears the name of its principal markets, no division sells exclusively into its
target market. Further, each division has some sales into the target markets of
the other division.
The Heavy Duty Systems Division produces alternators, starter motors,
inline pumps, control boxes and other products, primarily for installation on
diesel engines used in the heavy duty, defense, marine and industrial markets.
The division's major facilities are in Arcade, NY; Florence, KY; Garfield, NJ;
Acton, England; and Leyland, England.
The Automotive Systems Division manufactures automotive components,
primarily alternators and starter motors. The division's facilities are in South
Africa and Argentina. The Argentina operation also manufactures distributors. In
both South Africa and Argentina more than half of our sales are to the
automotive aftermarket, and about half of those aftermarket sales are products
purchased for resale.
RESULTS OF OPERATIONS
Year Ended December 31, 2000 Compared to Year Ended December 31, 1999
Sales from continuing operations were $171.9 million in 2000, a decrease of
$16.0 million, or 8.5%, from $187.9 million in 1999. These results exclude the
sales of the discontinued businesses of $43.9 million in 2000 and $71.3 million
in 1999 due to the sale of these businesses. The decrease in sales is mostly
attributable to the Heavy Duty Systems Division, where United Kingdom sales
declined $7.5 million, or 14.6%, primarily due to reduced military sales, but
also due to the reduced exchange rates in 2000. In the United States, Heavy Duty
sales declined $9.6 million, or 11.7%, primarily due to reduced aftermarket
sales to our OEM customers. Offsetting these declines in the Heavy Duty Systems
Division was a $2.6 million increase in the sales of Roberts Remanufacturing.
Also contributing to the sales decline was the Automotive Systems Division sales
decline of $1.5 million, or 3.0%. The Automotive Systems decline was due to a
$1.7 million, or 13.9%, decline in South Africa mostly due to exchange rate
fluctuations in 2000. The reduced South Africa sales were offset by an increase
in Argentina sales of $0.2 million.
Gross profit was $32.2 million in 2000, or 18.8% of sales. This compares to
gross profit of $36.3 million, or 19.3% of sales, in 1999. The decrease in gross
profit as a percent of sales is a result of lower sales volume, a shift in mix
toward products with lower profit margins and inventory reduction.
11
14
Selling, general, and administrative expense was $24.7 million, or 14.4% of
sales in 2000, a decrease of $3.7 million, or 13.2%, from $28.5 million, or
15.2% of sales, in 1999. Reduction in selling, general, and administrative
expense is partially attributable to cost savings recognized from prior and
continuing programs. In conjunction with those cost reductions, we recorded a
$2.2 million charge in 2000 to reflect the cost of severance payments to
terminated employees. The employees in question were terminated or given notice
of termination of employment prior to September 30, 2000. We recorded a charge
in 1999 of $0.5 million to cover severance payments related to restructuring in
Argentina and in the Corporate Tech Center in Ann Arbor, Michigan.
In 2000, we recorded a charge of $3.5 million to write off the investment
and costs of two specialty alternator projects. We also recorded $0.2 million in
costs associated with the repurchase of options to purchase our stock from
departed employees.
Operating income in 2000 was $1.7 million, or 1.0% of sales, a decrease of
$5.7 million, or 77.0%, from the $7.3 million, or 3.9% of sales in 1999. This
was due to the factors discussed above.
Other income was $0.6 million in 2000 versus $1.0 in 1999. This consists of
export rebate income, gain on the sale of fixed assets, interest income, and
miscellaneous income. These were partially offset by pension expense for
inactive defined benefit pension plans associated with United States facilities
that have been closed, royalty expenses, and trademark expense.
Interest expense was $15.0 million in 2000, a decrease of $0.8 million, or
5.0%, compared to $15.8 million in 1999. This decrease is a result of decreases
in bank debt and senior notes beginning in the third quarter of 2000. Senior
notes with a face value of $23.1 million were purchased and retired in the
second half of 2000.
The benefit from income taxes was $4.5 million on the $13.8 million loss
from continuing operations before taxes and extraordinary items for 2000. This
compares to a benefit from income taxes of $715,000 for 1999 on a $7.4 million
loss from continuing operations before taxes and an extraordinary item.
Extraordinary income of $4.1 million, net of taxes, was recorded in 2000
related to the gain on the repurchase of the senior notes.
Discontinued Businesses -- 2000 compared to 1999
During 1999, we announced our intention to sell two business segments, the
direct current electric motor business ("DC motors") and the battery charger
business. In conjunction with that decision, we recorded a charge of $2.3
million ($3,561,000 less a tax benefit of $1,261,000) to recognize the expected
loss on the sale of the net assets (including estimated losses through the
disposal date) of one of these business segments.
Effective August 4, 2000, we sold those two businesses plus our switch
business to Ametek, Inc. The $62 million contractual price of this asset sale
will be adjusted for changes in net operating assets from a target amount and
for the sales to a key customer during a three month period of 2001. We estimate
that the adjusted sale price will be approximately $57.4 million, including $7.0
million in escrow at December 31, 2000.
We also committed to provide Ametek with certain services at no charge for
periods of six to twelve months following closing. After providing for the
no-charge services and for other costs related to the transaction, we recorded a
gain on disposition of $23.3 million pretax and $14.5 million after tax.
In our financial statements we treat the DC motor, battery charger, and
switch businesses as discontinued operations. Prior year financial statements,
including 1999 and 1998 earnings per share, have been restated to reflect these
businesses as discontinued operations.
Sales from discontinued operations were $44.0 million in the seven months
of operation in 2000, while sales of these operations were $71.3 million in
1999. Operating and other income (before income tax) in the seven months of 2000
was $3.6 million, while operating income for 1999 was $4.5 million.
Provision for income taxes of $1.3 million for the seven months of 2000 and
$1.6 million for 1999 resulted in after tax income from discontinued operations
of $2.3 million in 2000 and $2.8 million in 1999.
12
15
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
Sales from continuing operations were $187.9 million in 1999, a decrease of
$21.1 million, or 10.1%, from $209.0 million in 1998. These results exclude the
sales of the discontinued businesses of $71.3 million in 1999 and $73.8 million
in 1998. The decrease in sales is mostly attributable to the Automotive
Division, where Argentina sales declined $18.7 million, or 33.4%, and South
Africa sales declined $0.5 million, or 4.4%. Also contributing to the sales
decline was the Heavy Duty Systems decline of $1.9 million, or 1.4%. The Heavy
Duty Systems decline was due to a $9.5 million, or 15.5%, decline in the U.K.
This decline was partly offset by $5.1 million of sales at the Roberts
Remanufacturing facility and by other U.S. Heavy Duty sales increases of $2.5
million or 3.1%.
Gross profit was $36.3 million in 1999, a decrease of $5.3 million, or
12.7%, from $41.5 million in 1998. Ongoing cost cutting measures in the United
Kingdom and Argentina have reduced overhead costs. The benefit of these
reductions was offset by declining volume and a shift in sales to lower margin
products at some locations. The Roberts Remanufacturing business in the United
States has higher margins than the company average, mitigating some of the
decline.
Selling, general, and administrative expense was $28.5 million in 1999, a
decrease of $1.0 million, or 3.3%, from $29.4 million in 1998. Reduction in
selling, general, and administrative expense in our international locations
continued to reflect the cost control benefits of the integration of the
businesses acquired in the Lucas acquisition. This reduction was offset in part
by the increased selling, general, and administrative expense in U.S. Heavy Duty
Systems due to the Roberts acquisition.
We recorded a $2.1 million charge in January of 1998 to reflect our
repurchase from management of 40% of then-outstanding options to purchase our
common stock. We also recorded a charge in 1998 of $0.7 million to cover
severance payments related to restructuring activities at our facilities in
Leyland, England and Decatur, Alabama.
Operating income in 1999 was $7.3 million, a decrease of $2.0 million, or
20.1%, from the $9.3 million in 1998 due to the factors discussed above.
Operating income as a percentage of sales was 3.9% in 1999 compared to 4.4% in
1998.
Other income was $1.0 million in 1999 versus $88,000 in 1998. This consists
of export rebate income, gain on the sale of fixed assets, interest income, and
miscellaneous income. These were partially offset by pension expense for
inactive defined benefit pension plans associated with United States facilities
that have been closed, royalty expenses, and trademark expense.
Interest expense was $15.8 million in 1999, an increase of $2.3 million, or
17.2%, compared to $13.5 million in 1998. This increase was due to increases in
bank debt in the United States, United Kingdom and South Africa, as well as
increases in capital leases, as compared to levels of debt in 1998.
The provision for income taxes was $715,000 in 1999 compared to $693,000 in
1998. The increase in income taxes resulted from an increase in income from
continuing operations, before income taxes.
In conjunction with the incurrence of additional debt, the refinancing of
our existing debt and repurchase of warrants, we recorded an extraordinary item
of $1.3 million net-of-tax in 1998. On a pretax basis this charge covered
$728,000 in debt prepayment fees, $335,000 for the write-off of unamortized
financing costs, $733,000 to write off the unamortized discount on subordinated
debt and $195,000 related to the repurchase of warrants.
Discontinued Businesses -- 1999 compared to 1998
As previously noted, the discontinued businesses were sold, effective
August 4, 2000. Sales from these discontinued operations were $71.3 million in
1999, a decrease of $2.5 million from the 1998 sales of $73.8 million.
Operating income in 1999 was $4.5 million, a decrease of $2.8 million from
the 1998 operating income of $7.3 million. Provisions for income taxes of $1.6
million in 1999 and $1.7 million in 1998 resulted in our reporting net income
from discontinued operations of $2.8 million and $4.9 million for 1999 and 1998
respectively.
13
16
LIQUIDITY AND CAPITAL RESOURCES
Cash used by continuing operating activities in 2000 was $6.7 million
compared to cash used by continuing operations in 1999 of $5.5 million. Cash
used by discontinued operations in 2000 of $2.9 million compares to cash
provided by discontinued operations in 1999 of $6.2 million. Capital spending in
2000, net of discontinued businesses, was $6.4 million, a $0.3 million reduction
from 1999 capital spending of $6.7 million. Capital spending in the U.S. was
$3.1 million in 2000 compared to $3.0 million in 1999, a $0.1 million increase.
Capital spending in the U.K. was $1.0 million in 2000 compared to $1.3 million
in 1999, a reduction of $0.3 million. Capital spending in Argentina and South
Africa was $1.6 million and $0.7 million, respectively, in 2000. These compare
to 1999 capital spending of $1.9 million in Argentina and $0.4 million in South
Africa. Capital expenditures for 2001 are expected to be approximately $6.0
million. Planned expenditures include expenditures to enable us to manufacture
new product designs and replace existing equipment.
In connection with the acquisition of our Argentina operations from Lucas
in January 1998, we agreed to certain future obligations to Lucas. Remaining
obligations include post-closing payments to Lucas of up to $3.0 million upon
the collection of certain receivables and up to $4.9 million contingent upon the
collection of certain fully-reserved receivables. Aggregate payments in 2000
totaled $0.3 million and in 1999 $0.1 million for receivables collected. These
contingent payments are expected to be paid from the collection of the
receivables.
Debt, net of cash, decreased to $102.9 million at December 31, 2000 from
$150.7 million at December 31, 1999. The decrease was due, in part, to the
purchase and retirement of Senior Note debt in 2000 as well as to the sale of
the discontinued operations. We had revolving credit facilities with banks in
the United States and United Kingdom under which additional borrowings of $6.0
million and $3.7 million were available based on the December 31, 2000 levels of
receivables (United States and United Kingdom) and inventory (United States
only) which are pledged to support that debt. In Argentina and South Africa, we
have arrangements with several banks permitting discounting or borrowing against
receivables. Total net additional credit available in Argentina and South Africa
as of December 31, 2000 was $1.4 million. The Company was in violation of
certain covenants to the credit agreements during 1999 and at December 31, 1999,
which were cured as a result of amending the credit agreement.
We expect our liquidity needs to consist primarily of working capital needs
and scheduled payments of principal and interest on our indebtedness. We expect
our short-term liquidity needs to be provided by operating cash flows and
borrowings under our revolving credit facilities. We expect to fund our long
term liquidity needs from our operating cash flows, the issuance of debt and/or
equity securities, or from bank borrowings. We believe that cash flows from
operations, our existing cash balances and amounts available under the various
revolving credit facilities will provide adequate funds for on going operations,
planned capital expenditures, investments, and debt service for at lease the
next twelve months. Estimates as to working capital needs and other expenditures
may be materially affected if the foregoing sources are not available or do not
otherwise provide sufficient funds to meet our obligations.
INFLATION
We believe that the relatively moderate inflation over the last few years
has not has a significant impact on our revenues or profitability and that we
have been able to offset the effects of inflation by increasing prices or by
realizing improvements in operating efficiency.
NEW ACCOUNTING PRONOUNCEMENTS
We are required to adopt the provisions of Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities", effective January 1, 2001. Pursuant to this statement, all
derivative instruments are recognized as assets or liabilities on the balance
sheet and measured at fair value. This statement is not expected to have an
impact on the financial results of the Company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
14
17
PRESTOLITE ELECTRIC HOLDING, INC. AND SUBSIDIARIES
PAGE(S)
-------
REPORT OF INDEPENDENT ACCOUNTANTS........................... 2
FINANCIAL STATEMENTS
Consolidated Balance Sheet.................................. 3
Consolidated Statement of Operations........................ 4
Consolidated Statement of Stockholders' Equity (Deficit).... 5
Consolidated Statement of Cash Flows........................ 6
Notes to Consolidated Financial Statements.................. 7-22
F-1
18
PRESTOLITE ELECTRIC HOLDING, INC. AND SUBSIDIARIES
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Prestolite Electric Holding, Inc.
In our opinion, based on our audits and the report of other auditors, the
accompanying consolidated balance sheets and the related consolidated statements
of operations, shareholders' equity (deficit), and of cash flows present fairly,
in all material respects, the financial position of Prestolite Electric Holding,
Inc. and its subsidiaries at December 31, 2000 and 1999, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2000, in conformity with accounting principles
generally accepted in the United States of America. In addition, in our opinion,
the financial statement schedule listed in the accompanying index presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. These financial
statements and financial statement schedule are the responsibility of the
Company's management; our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on our
audits. We did not audit the financial statements of Prestolite Indiel Argentina
S.A., a wholly owned subsidiary, which statements reflect total assets of
$42,042,000 and $46,029,000 as of December 31, 2000 and 1999, respectively, and
total revenues of $40,785,000, $39,366,000 and $56,711,000 for each of the three
years in the period ended December 31, 2000. Those statements were audited by
other auditors whose report thereon has been furnished to us, and in our opinion
expressed herein, insofar as it relates to the amounts for Prestolite Indiel
Argentina S.A., is based solely on the report of the other auditors. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors provide a reasonable
basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
February 26, 2001
Detroit, Michigan
F-2
19
PRESTOLITE ELECTRIC HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2000 AND 1999
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
2000 1999
---- ----
ASSETS
CURRENT ASSETS
Cash........................................................ $ 10,181 $ 432
Accounts receivable, net of allowance for doubtful accounts
of $2,447 and $2,369 at December 31, 2000 and 1999,
respectively.............................................. 31,098 34,162
Inventories, net............................................ 42,293 44,608
Deferred tax asset.......................................... 377 6,429
Prepaid and other current assets............................ 2,561 2,999
-------- --------
Total current assets................................. 86,510 88,630
-------- --------
Property, plant and equipment
Land, building and improvements........................... 21,249 20,926
Machinery and equipment................................... 44,823 44,591
Construction in progress.................................. 3,435 2,772
-------- --------
69,507 68,289
Less -- accumulated depreciation..................... (31,990) (27,144)
-------- --------
37,517 41,145
Deferred tax asset.......................................... 528 --
Investments................................................. 577 3,152
Intangible assets, net...................................... 7,970 10,908
Long-term receivables and pension assets.................... 5,224 4,706
Net assets related to discontinued operations............... 5,993 31,063
-------- --------
TOTAL ASSETS......................................... $144,319 $179,604
======== ========
LIABILITIES
CURRENT LIABILITIES
Revolving credit............................................ $ 5,747 $ 19,214
Current portion of long-term debt........................... 555 666
Accounts payable............................................ 18,744 22,442
Accrued liabilities......................................... 14,835 18,344
-------- --------
Total current liabilities............................ 39,881 60,666
Long-term debt.............................................. 106,733 131,246
Other non-current liabilities............................... 2,321 1,845
Deferred tax liabilities.................................... 2,467 2,139
-------- --------
Total liabilities.................................... 151,402 195,896
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, par value $.01; 5,000,000 shares authorized;
1,985,000 and 1,993,000 shares issued and outstanding at
December 31, 2000 and 1999, respectively.................. 2 2
Paid-in capital............................................. 16,623 16,623
Retained earnings (accumulated deficit)..................... 4,890 (6,595)
Notes receivable, employees' stock purchase, 7.74% due
2002...................................................... (446) (513)
Foreign currency translation adjustment..................... (3,527) (1,360)
Treasury stock, 1,318,000 and 1,310,000 shares at December
31, 2000 and 1999, respectively........................... (24,625) (24,449)
-------- --------
Total stockholders' equity (deficit)................. (7,083) (16,292)
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)........................................... $144,319 $179,604
======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
20
PRESTOLITE ELECTRIC HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2000 1999 1998
---- ---- ----
Net sales................................................... $171,890 $187,874 $208,999
Cost of goods sold.......................................... 139,641 151,613 167,453
-------- -------- --------
Gross profit.............................................. 32,249 36,261 41,546
Selling, general and administrative expenses................ 24,713 28,462 29,444
Costs associated with option repurchase..................... 173 2 2,101
Charge and write-down related to two specialty alternator
projects.................................................. 3,450 -- --
Severance................................................... 2,226 450 711
-------- -------- --------
Operating income.......................................... 1,687 7,347 9,290
Interest expense............................................ 15,025 15,816 13,494
Unrealized loss on foreign exchange......................... 1,121 -- --
Other expense (income)...................................... (618) (1,024) (88)
-------- -------- --------
Income (loss) from continuing operations, before
extraordinary item and income taxes.................... (13,841) (7,445) (4,116)
Benefit from income taxes................................... (4,485) (715) (693)
-------- -------- --------
Income (loss) from continuing operations before
extraordinary item..................................... (9,356) (6,730) (3,423)
Income from discontinued operations, net of taxes........... 2,290 2,839 4,928
Gain (loss) on sale of discontinued operations, net of
taxes..................................................... 14,488 (2,300) --
Extraordinary item -- gain (loss) on senior note
transactions, net of taxes................................ 4,063 -- (1,275)
-------- -------- --------
Net income (loss)......................................... $ 11,485 $ (6,191) $ 230
======== ======== ========
Basic and diluted earnings per common share
Income (loss) from continuing operations.................. $ (4.71) $ (3.38) $ (1.62)
Income from discontinued operations, including gain (loss)
on sale of discontinued operations..................... 8.45 0.27 2.33
Extraordinary item........................................ 2.05 -- (0.60)
-------- -------- --------
Net income (loss)......................................... $ 5.79 $ (3.11) $ 0.11
======== ======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
21
PRESTOLITE ELECTRIC HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(IN THOUSANDS)
RETAINED NOTES FOREIGN
EARNINGS RECEIVABLE CURRENCY
COMMON TREASURY COMMON PAID-IN STOCK (ACCUMULATED EMPLOYEE TRANSLATION
STOCK STOCK STOCK CAPITAL WARRANTS DEFICIT) STOCK ADJUSTMENT
------ -------- ------ ------- -------- ------------ ---------- -----------
SHARES (IN THOUSANDS)
--------------------------
Balance, January 1, 1998......... 3,303 32 $2 $16,623 $ 3,239 $ (634) $(346) $ 379
Net income....................... 230
Translation adjustment........... (510)
Comprehensive loss.............
Purchase of stock warrants....... (3,239)
Common stock sold................ (16) (251)
Common stock repurchased and
other.......................... 1,294 38
----- ----- -- ------- ------- ------- ----- -------
Balance, December 31, 1998..... 3,303 1,310 2 16,623 -- (404) (559) (131)
Net loss......................... (6,191)
Translation adjustment........... (1,229)
Comprehensive loss.............
Common stock repurchased and
other.......................... 46
----- ----- -- ------- ------- ------- ----- -------
Balance, December 31, 1999..... 3,303 1,310 2 16,623 -- (6,595) (513) (1,360)
Net income....................... 11,485
Translation adjustment........... (2,167)
Comprehensive income...........
Common stock repurchased and
other.......................... 8 67
----- ----- -- ------- ------- ------- ----- -------
Balance, December 31, 2000..... 3,303 1,318 $2 $16,623 $ -- $ 4,890 $(446) $(3,527)
===== ===== == ======= ======= ======= ===== =======
TREASURY COMPREHENSIVE
STOCK TOTAL INCOME
-------- ----- -------------
Balance, January 1, 1998......... $ (320) $ 18,943 $ --
Net income....................... 230 230
Translation adjustment........... (510) (510)
-------
Comprehensive loss............. -- (280)
-------
Purchase of stock warrants....... (3,239)
Common stock sold................ 251 --
Common stock repurchased and
other.......................... (24,380) (24,342)
-------- --------
Balance, December 31, 1998..... (24,449) (8,918)
Net loss......................... (6,191) (6,191)
Translation adjustment........... (1,229) (1,229)
-------
Comprehensive loss............. (7,420)
-------
Common stock repurchased and
other.......................... 46
-------- --------
Balance, December 31, 1999..... (24,449) (16,292)
Net income....................... 11,485 11,485
Translation adjustment........... (2,167) (2,167)
-------
Comprehensive income........... -- 8,282
-------
Common stock repurchased and
other.......................... (176) (109)
-------- --------
Balance, December 31, 2000..... $(24,625) $ (7,083)
======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
22
PRESTOLITE ELECTRIC HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
2000 1999 1998
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) from continuing operations, including
extra ordinary gain....................................... $ (5,293) $ (6,730) $ (4,698)
Adjustments to reconcile net income (loss) to net cash (used
in) provided by operating activities
Gain on senior note purchase.............................. (4,063) -- --
Loss on debt refinancing.................................. -- -- 1,275
Option repurchase......................................... 173 2 2,101
Write-off of specialty alternators........................ 3,450 -- --
Deferred gain on sale and leaseback....................... (389) (233) (233)
Depreciation.............................................. 7,329 7,946 8,015
Amortization.............................................. 1,395 1,619 1,137
Loss on sale of property, plant and equipment............. 125 15 112
Deferred taxes............................................ (3,696) (1,668) (748)
Changes in operating assets and liabilities
Accounts receivable..................................... 2,136 4,703 (5,796)
Inventories............................................. 1,430 (5,434) (1,674)
Prepaid and other current assets........................ (80) (627) 1,911
Accounts payable........................................ (3,348) 1,361 (4,444)
Accrued liabilities..................................... (4,021) (8,214) (4,973)
-------- -------- --------
Net cash provided by (used in) continuing operating
activities.............................................. (4,855) (7,260) (8,015)
Net cash provided by (used in) discontinued operations.... (2,890) 6,153 3,994
-------- -------- --------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES....... (7,745) (1,107) (4,021)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures........................................ (6,385) (6,661) (7,353)
Proceeds from disposal of property, plant and equipment..... 2,558 122 21
Proceeds from sale of discontinued operations/assets held
for disposal.............................................. 51,613 --
Acquisitions of
Roberts Remanufacturing................................... -- (2,924) --
Lucas businesses, net of cash acquired of $2,858.......... -- -- (42,629)
Other..................................................... -- -- (668)
Investment in affiliates.................................... 5 (1,384) (2,633)
-------- -------- --------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES..... 47,791 (10,847) (53,262)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in revolving line of credit......... (13,848) 3,840 (7,663)
Payments on long-term debt.................................. (1,020) (52) (22,824)
Proceeds from borrowings.................................... -- 6,461 125,000
Costs related to new borrowings, including loss on
refinancing of $1,991..................................... -- -- (7,416)
Purchase of treasury stock, options and warrants, employee
stock receivable.......................................... (282) 44 (29,358)
Borrowings (payments) on capital leases..................... 457 153 (200)
Senior note purchase........................................ (15,865) -- --
Other financing costs, net.................................. (26) (28) 18
-------- -------- --------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES....................................... (30,584) 10,418 57,557
-------- -------- --------
Effect of exchange rate changes on cash..................... 287 1,072 167
-------- -------- --------
Net increase (decrease) in cash............................. 9,749 (464) 441
Cash beginning of year...................................... 432 896 455
-------- -------- --------
Cash, end of year........................................... $ 10,181 $ 432 $ 896
======== ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid............................................... $ 15,803 $ 13,358 $ 9,010
======== ======== ========
Taxes paid.................................................. $ 1,725 $ 1,328 $ 494
======== ======== ========
NONCASH FINANCING TRANSACTIONS
Debt assumed in acquisition of Lucas businesses............. $ 3,227
========
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
23
PRESTOLITE ELECTRIC HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL INFORMATION
Prestolite Electric Holding, Inc. ("PEI" "We", "Us" or the "Company"), a
subsidiary of Genstar Capital Corporation ("Genstar" or the "Parent") was formed
in 1991 to acquire substantially all of the assets and assume certain
liabilities of Prestolite Electric Incorporated and its wholly owned
subsidiaries ("Prestolite"). PEI changed its name from "PEI Holdings, Inc." to
"Prestolite Electric Holding, Inc." on December 31, 1998. PEI includes the
wholly-owned subsidiaries Prestolite Electric Incorporated and Prestolite
Electric of Michigan, Inc. The wholly-owned subsidiaries of Prestolite Electric
Incorporated include Prestolite Electric Limited, a U.K. corporation; Prestolite
Electric (Pty) Ltd., a South Africa corporation; and Prestolite Indiel Argentina
S.A., an Argentina corporation. Operations are generally conducted as Prestolite
Electric Incorporated. There are no material differences between the financial
statements of PEI and Prestolite. Separate financial statements of Prestolite
have not been presented because management has determined that they would not be
material to investors. Summary financial information of Prestolite is presented
in Note 19.
We manufacture and distribute alternators, starter motors, and other
electrical components for aftermarket and original equipment applications in the
heavy duty vehicle, automotive, defense, material handling, marine, and other
industries. Two manufacturing facilities and one distribution warehouse are
located in the United States; two manufacturing facilities are located in the
United Kingdom; one manufacturing facility is located in South Africa; and three
manufacturing facilities are located in Argentina.
2. DISCONTINUED OPERATIONS
During 1999, we announced our intention to sell two business segments, the
direct current electric motor business ("DC motors") and the battery charger
business. In conjunction with that decision, we recorded a charge of $2.3
million ($3.6 million less a tax benefit of $1.3 million) to recognize the
expected loss on the sale of the net assets (including estimated losses through
the disposal date) of one of these business segments.
Effective August 4, 2000, we sold those two businesses plus our switch
businesses to Ametek, Inc. The $62.0 million contractual price of this asset
sale will be adjusted for changes in net operating assets from a target amount
and for the sales to a key customer during a three month period of 2001. We
estimate that the adjusted sale price will be approximately $57.4 million,
including $7.0 million in escrow at December 31, 2000.
We also committed to provide Ametek with certain services at no charge for
periods of six to twelve months following closing. After providing for the
no-charge services and for other costs related to the transaction, we recorded a
gain on disposition of $23.3 million before tax and $14.5 million after tax.
In the accompanying statements we treated the DC motor, battery charger,
and switch businesses as discontinued operations. Prior year financial
statements, including 1998 and 1999 diluted earnings per share, have been
restated to reflect these businesses as discontinued operations.
F-7
24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. DISCONTINUED OPERATIONS -- (CONTINUED)
Summary financial information related to the discontinued operations is
presented below (in thousands). Amounts for 2000 are through August 4, 2000.
2000 1999 1998
---- ---- ----
NET SALES
DC motors.......................................... $16,828 $27,442 $27,621
Battery chargers................................... 10,885 17,778 18,090
Switches........................................... 16,238 26,108 28,091
------- ------- -------
Total....................................... 43,951 71,328 73,802
OPERATING AND OTHER INCOME (LOSS)
DC motors.......................................... (275) (1,308) 399
Battery chargers................................... 1,728 2,647 3,015
Switches........................................... 2,174 3,122 4,052
------- ------- -------
Total....................................... 3,627 4,461 7,466
Provision for income taxes......................... 1,337 1,622 2,538
------- ------- -------
Income from discontinued operations.............. 2,290 2,839 4,928
Depreciation and amortization (included in
determining operating income above)
DC motors........................................ 549 1,106 1,018
Battery chargers................................. 502 842 801
Switches......................................... 497 926 815
------- ------- -------
Total....................................... $ 1,548 $ 2,874 $ 2,634
======= ======= =======
2000 1999
---- ----
Net assets
DC Motors and Switches................................... $ -- $24,477
Decatur facility held for sale........................... 3,576 3,781
Escrow and receivable.................................... 7,750 --
Accrued transaction costs and estimated sale price
reductions............................................ (5,582) --
Battery chargers......................................... -- 6,092
Welding equipment........................................ 249 274
Writedown-loss on property, plant and equipment held
for disposal.......................................... -- (3,561)
------- -------
Total............................................... $ 5,993 $31,063
======= =======
The net assets of the discontinued operations at December 31, 1999 consist
primarily of accounts receivable, inventory, fixed assets, investments in
unconsolidated affiliates and intangible assets net of certain accounts payable
and accrued liabilities related to these businesses. The net assets of welding
equipment consist of receivables related to the proceeds of a business we sold
in 1997. The tax rate used for recording discontinued operations is 38%, which
includes 4% for state taxes.
3. CHARGES RELATED TO CERTAIN SPECIALTY ALTERNATORS
During 1998 and 1999 we committed to a $2.6 million investment for a 9%
interest in the equity of Ecoair Corp. We also purchased a license for $570
thousand covering a specialty alternator patented by Ecoair, and we acquired
approximately $100 thousand in equipment and inventory related to the production
of the Ecoair alternator. Production of the Ecoair alternator proved to be far
more difficult than originally anticipated. In addition, Ecoair Corp. must
secure new investment if it is to continue as a going concern. We do not intend
to
F-8
25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. CHARGES RELATED TO CERTAIN SPECIALTY ALTERNATORS -- (CONTINUED)
invest further in Ecoair Corp. and accordingly recorded a $3.2 million charge in
2000 to write off all our assets related to Ecoair. We also recorded a $250
thousand charge in 2000 as the result of settling a lawsuit related to the
development and manufacture of a special regulator used in certain alternators.
4. ACQUISITIONS AND INVESTMENTS
On January 15, 1999, we acquired a remanufacturing business unit from
Roberts Generator for $2.9 million. This business unit operates as Roberts
Remanufacturing and rebuilds alternators and starter motors for specialty
applications. This acquisition was accounted for under the purchase method.
Goodwill recorded for this acquisition was $1.1 million.
On January 22, 1998, we acquired the heavy-duty products division of Lucas
Industries, plc. (a United Kingdom corporation), Lucas South Africa and Lucas
Indiel Argentina S. A. (collectively referred to as "the Lucas Businesses"). The
Lucas Businesses primarily manufacture alternators and starter motors for the
truck, bus and automotive markets in the United Kingdom, continental Europe,
South America and South Africa. The purchase price was as follows (in
thousands):
Fair value of assets acquired............................... $ 86,052
Fair value of liabilities acquired.......................... (44,852)
Goodwill (excluding acquisition costs)...................... 2,744
--------
Purchase price, including repayment of $3,393 of debt..... 43,944
Cash acquired............................................... (2,858)
--------
Purchase price, net of cash acquired...................... 41,086
--------
Assumption of Lucas Argentina debt.......................... 3,227
--------
Total purchase price........................................ $ 44,313
========
In addition, we purchased $1.4 million of inventory from Lucas during 1998
and agreed to pay up to $4.1 million for certain accounts receivable as they are
collected ($396,000 and $187,000 collected in 2000 and 1999, respectively, and
$2.4 million and $2.8 million due Lucas as of December 31, 2000 and December 31,
1999 respectively). We also agreed to pay Lucas up to $4.9 million if certain
fully-reserved receivables are collected.
The 1998 consolidated statement of operations includes a full year of
operating results of the Lucas Businesses.
Investments at December 31, 2000 consist of a 4% interest, recorded at
cost, in Auto Ignition, Ltd., an Indian corporation.
5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of PEI and all
subsidiaries in which we have financial and operating control. All intercompany
accounts and transactions are eliminated in consolidation.
FOREIGN CURRENCY TRANSLATION
The assets and liabilities of foreign subsidiaries have been translated
from their functional currencies into U.S. dollars at the rates of exchange
existing as of the balance sheet date. Revenues and expenses have been
translated at the average monthly exchange rates. Translation adjustments are
recorded as a separate component of stockholders' equity. Foreign exchange gains
and losses related to the transactions of inter-company obligations expected to
be repaid are recorded in income when they occur.
F-9
26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
INVENTORIES
Inventories are stated at the lower of cost or market with cost being
established by the last-in, first-out ("LIFO") method for substantially all
United States inventory and by the first-in, first-out ("FIFO") method for all
inventory located outside the United States. Approximately $24,680,000 and
$28,712,000 of net inventories at December 31, 2000 and 1999, respectively, have
been valued based on FIFO cost.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Costs of maintenance and
repairs are charged to operations when incurred; costs of renewals, betterment,
and additions are capitalized. The cost and accumulated depreciation applicable
to assets retired or sold are removed from the accounts, and the gain or loss on
disposition is recognized as income.
Depreciation is computed on a straight-line basis over the estimated useful
lives of the buildings and improvements (11 to 31) years and the machinery and
equipment (3 to 10 years).
INTANGIBLE ASSETS
Intangible assets are primarily comprised of financing costs and goodwill.
At each balance sheet date, management assesses whether there has been
impairment in the carrying value of intangible assets. This assessment is based
on comparing amortization to anticipated undiscounted cash flows and operating
income.
PRODUCT WARRANTY COSTS AND SERVICE RETURNS
Anticipated costs related to product warranty and service returns are
provided for based upon management's estimate of such costs, after consideration
of historical trends and sales of products to which such costs relate.
ENGINEERING EXPENSES
Engineering costs are expensed as incurred and are included in selling,
general, and administrative expenses. Total engineering expenses, including
expenses of the discontinued businesses, for the years ended December 31, 2000,
1999 and 1998 were $5,630,000, $6,583,000 and $6,793,000, respectively. Included
in these engineering expenses are research and development costs (as defined by
Statement of Financial Accounting Standards No. 2) for the years ended December
31, 2000, 1999 and 1998 of $3,677,000, $4,986,000 and $5,415,000.
EARNINGS PER SHARE
Basic earnings per share is calculated by dividing net income by the
weighted average number of common shares outstanding. Diluted earnings per share
is calculated by dividing net income by the weighted average number of common
shares outstanding and potentially issuable common shares. Common stock
equivalents are excluded from the diluted earnings per share calculation if a
net loss is incurred for the period, as they would be anti-dilutive.
FINANCIAL INSTRUMENTS
The carrying amount of our financial instruments, which includes cash,
accounts receivable, accounts payable, and debt other than senior unsecured
notes approximates their fair value at December 31, 2000 and 1999. The fair
value of the senior unsecured notes was approximately $58 million at December
31, 2000. Fair values have been determined based on management estimates and
information from market sources.
F-10
27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
REVENUE RECOGNITION
We recognize revenues on the sale of our products, net of estimated costs
of returns, allowances and sales incentives, when product title transfers to the
customer, primarily upon shipment. We generally sell our products on open
account under credit terms customary to the region of distribution. We perform
ongoing credit evaluation of our customers and generally do not require
collateral to secure our customers' receivables.
COMPREHENSIVE INCOME
Comprehensive income, a measure that reflect all non-owner changes in
equity in addition to net income, consists of net income and foreign currency
translation adjustments and is presented in the statement of stockholders'
equity.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
6. EARNINGS PER SHARE ("EPS")
In computing income available to common stockholders, no adjustments were
required to the amounts reported in the statement of income. Shares of common
stock available and potentially issuable used in the computation are comprised
of the following:
2000 1999 1998
---- ---- ----
Average number of shares of common stock used
in computing basic and dilutive EPS......... 1,985,000 1,993,000 2,111,812
For 2000 and 1999, stock options were not considered in calculating
dilutive earnings per share since the effect of inclusion would be anti-dilutive
to earnings per common share from continuing operations.
7. INVENTORIES
Inventories consist of the following at December 31 (in thousands of U.S.
dollars):
2000 1999
---- ----
FIFO cost
Raw materials............................................ $18,051 $19,121
Work in process.......................................... 6,621 6,554
Finished goods........................................... 21,249 22,756
------- -------
Total FIFO cost..................................... 45,921 48,431
Adjustment to LIFO cost.................................... 601 640
Reserves for excess and obsolescence....................... (4,229) (4,463)
------- -------
$42,293 $44,608
======= =======
F-11
28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. INTANGIBLE ASSETS
Intangible assets consist of the following at December 31 (in thousands):
2000 1999
---- ----
Goodwill (five to ten-year amortization)................... $ 6,750 $ 7,099
Financing costs (ten-year amortization).................... 4,697 5,473
License fees (five-year amortization)...................... 200 770
------- -------
11,647 13,342
Less -- accumulated amortization........................... 3,677 2,434
------- -------
$ 7,970 $10,908
======= =======
9. ACCRUED LIABILITIES
Accrued liabilities consist of the following at December 31 (in thousands):
2000 1999
---- ----
Accrued compensation....................................... $ 1,240 $ 1,350
Accrued warranty........................................... 1,860 3,418
Accrued restructuring...................................... 28 517
Accrued interest........................................... 4,091 5,160
Amount due to Lucas........................................ 2,439 2,835
Other accrued liabilities.................................. 5,177 5,064
------- -------
$14,835 $18,344
======= =======
10. DEBT
Debt consists of the following at December 31 (in thousands):
2000 1999
---- ----
North America
Revolving credit....................................... $ -- $ 12,091
Senior unsecured notes, 9.625%......................... 101,883 125,000
-------- --------
Total............................................. 101,883 137,091
-------- --------
United Kingdom
Overdraft facility..................................... 2,160 2,593
Term loan.............................................. 4,904 6,409
South Africa Bank Debt................................... 1,126 269
Argentina Bank Debt...................................... 1,356 3,160
-------- --------
Total............................................. 9,546 12,431
-------- --------
Total term, revolving credit and senior notes..... 111,429 149,522
Capital lease obligations................................ 1,376 1,348
Other.................................................... 230 256
-------- --------
Consolidated total................................ 113,035 151,126
Less -- current maturities.......................... 6,302 19,880
-------- --------
Consolidated long-term debt....................... $106,733 $131,246
======== ========
On January 22, 1998, we issued $125 million of 9.625% (interest payable
semiannually) unsecured senior notes. The senior notes are guaranteed on a
senior unsecured basis by PEI. The proceeds were used to
F-12
29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. DEBT -- (CONTINUED)
refinance existing debt, fund the acquisition of the Lucas businesses and to
repurchase certain PEI securities. The notes mature on February 1, 2008, and are
redeemable at the our option, in whole or in part, beginning on February 1, 2003
at amounts from 104.8125% to 100% of the principal plus accrued and unpaid
interest to the redemption date with the net proceeds of a public equity
offering.
As a result of this refinancing, we recorded an extraordinary item of
$1,275,000 (net of taxes of $716,000), consisting of prepayment penalties, the
write-off of unamortized financing costs related to the refinanced debt and the
write-off of the unamortized discount on the subordinated debt.
During 2000, we purchased and retired Senior Notes with a face value of
$23.1 million for $15.9 million plus accrued interest. After writing off $0.7 of
the unamortized financing cost associated with the Senior Notes, we recorded a
$6.6 million extraordinary pretax gain ($4.1 million after tax) on these
transactions.
In 2000 we re-negotiated our U.S. and U.K. bank credit agreements. The
present U.S. facility consists of revolving credit facilities totaling $6.5
million with interest payable at the bank's prime rate (9.5% at December 31,
2000) and a $2 million letter of credit facility with a fee equal to 2% of
amounts drawn. The U.S. facility is collateralized by eligible accounts
receivable. On December 31, 2000 none of the revolving credit facility was drawn
and $1.8 million of the letter of credit facility was used.
The revised U. K. agreement consists of a L2.0 million fixed rate term
loan, a L2.0 million floating rate term loan, a L1.4 million floating rate term
loan and a L2.8 million overdraft facility. On December 31, 2000, U.K. term loan
borrowings were L3.3 million; the L1.4 million term loan was not drawn. Revolver
borrowings were L1.4 million. Interest on the fixed rate term loan 8.144% while
interest on the floating-rate term loans and the overdraft facilities are at
1.375% above the bank's base rate (6.0% at December 31, 2000). The term loans
are repayable in sixty monthly payments through January 2004 (fixed rate),
November 2003 and January 2005. The U. K. loans are collateralized by eligible
receivables and fixed assets in the United Kingdom.
In Argentina and South Africa, we have arrangements with several banks
which allow our subsidiaries in these countries to discount or borrow against
accounts receivable, generally at the prime rates of the banks involved. Those
rates ranged from 14.5% to 19.0% at December 31, 2000.
Based on the revised U. S. and U. K. agreements, at December 31, 2000 we
could have borrowed an additional $6.0 million in the U.S. and $3.7 million
(L2.0 million, translated at 1.457 dollars to pounds sterling) in the U. K.
The senior notes mentioned above contain various covenants including the
maintenance of certain financial ratios and limits on (a) issuance of additional
debt or preferred stock; (b) the payment of dividends and purchases, redemptions
or retirements of common stock; (c) investments; (d) sale of assets and capital
stock of subsidiaries; and (e) certain consolidations, mergers, transfers of
assets and certain other transactions with affiliates. The foreign facilities
contain covenants that pertain to the foreign operations.
Maturities of debt obligations at December 31 are as follows (in thousands):
YEAR
- ----
2001...................................................... $ 6,302
2002...................................................... 1,615
2003...................................................... 1,344
2004...................................................... 1,279
2005...................................................... 589
Thereafter................................................ 101,906
--------
$113,035
========
F-13
30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. INCOME TAXES
Income (loss) from continuing operations, before income taxes, consists of
the following (in thousands):
2000 1999 1998
---- ---- ----
United States.................................... $(11,391) $(8,238) $(10,832)
Foreign.......................................... (2,450) 793 6,716
-------- ------- --------
$(13,841) $(7,445) $ (4,116)
======== ======= ========
The components of income tax related to continuing operations are as
follows (in thousands):
2000 1999 1998
---- ---- ----
United States
Current.......................................... $(4,348) $ (359) $ 400
Deferred......................................... (1,205) (2,440) (4,052)
Increase in valuation reserve.................... 154 -- --
Foreign
Current.......................................... 599 1,134 1,737
Deferred......................................... -- 752 747
Increase in valuation reserve.................... -- -- 138
State and local.................................... 315 198 337
------- ------- -------
$(4,485) $ (715) $ (693)
======= ======= =======
A reconciliation of the U.S. statutory tax rate to the effective tax rate
is as follows:
2000 1999 1998
---- ---- ----
Statutory rate............................................ 34.0% 34.0% 34.0%
Change in valuation reserve............................... (1.1) 0.0 (3.3)
State and local, net of federal benefit................... (2.3) (2.6) (5.4)
Difference in foreign tax rates........................... 4.0 2.5 (2.8)
Permanent different....................................... (0.7) (2.6) (2.8)
NOLs not benefited........................................ (8.1) (20.2) 0.0
Other..................................................... 6.6 (1.5) (2.9)
----- ----- ----
Effective tax rate........................................ 32.4% 9.6% 16.8%
===== ===== ====
The major components of deferred taxes (stated on an after tax basis) on
the balance sheet are as follows (in thousands):
2000 1999
---- ----
Accrued tax benefit carryforwards........................ $ 13,901 $ 17,087
Assets of discontinued operations........................ 1,304 1,214
Current liabilities...................................... (245) 1,585
Accounts receivable...................................... 283 724
Inventories.............................................. (463) (688)
Property, plant and equipment............................ (3,048) (1,984)
Pension liability........................................ 87 (561)
Other.................................................... 810 1,840
Valuation reserve........................................ (14,191) (14,927)
-------- --------
$ (1,562) $ 4,290
======== ========
F-14
31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. INCOME TAXES -- (CONTINUED)
Our Argentina subsidiary has NOL carryforwards at December 31, 2000 of
approximately $36.0 million, which expire in 2001 through 2004. The valuation
reserve represents a full reserve against the net deferred tax asset position of
the Argentina operation and a reserve against the U.S. foreign tax credit, as
management believes that realization of these benefits is not probable.
12. EMPLOYEE BENEFIT PLANS
We have a retirement savings plan for substantially all of our United
States employees. This plan has a deferred salary arrangement and matching
contributions by the Company. Our matching contributions to this plan were
$475,000, $635,000 and $653,000 for 2000, 1999 and 1998, respectively, including
contributions for employees associated with the operations sold in 2000.
We also have defined benefit plans that cover certain former United States
employees. Benefits under these defined plans are based on years of service. Our
funding policy is to meet the minimum funding requirements of the Employee
Retirement Income Security Act of 1974, as amended. Our subsidiaries in the
United Kingdom and South Africa provide retirement benefits based on the
employee's earnings. Our funding policy is to meet the minimum funding
requirements imposed by current statutes or tax regulations.
F-15
32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. EMPLOYEE BENEFIT PLANS -- (CONTINUED)
The following table provides a reconciliation of benefit obligations, plan
assets and funded status of the United States defined benefit plans at December
31, 2000 and 1999, based upon most recent actuarial valuations (December 31,
2000 and 1999), (in thousands):
2000 1999
---- ----
Change in benefit obligation
Benefit obligation at beginning of year................... $2,785 $3,079
Service cost.............................................. 12 12
Interest cost............................................. 226 218
Actuarial (gain) loss..................................... (44) (330)
Benefits paid............................................. (153) (194)
------ ------
Benefit obligation at end of year...................... 2,826 2,785
------ ------
Change in plan assets
Fair value of plan assets at beginning of year............ 3,058 2,685
Actual return on plan assets.............................. 115 307
Employer contribution..................................... -- 260
Benefits paid............................................. (153) (194)
------ ------
Fair value of Plan assets at end of year............... 3,020 3,058
------ ------
Funded status............................................... 194 273
Unrecognized net actuarial gain............................. (401) (484)
------ ------
Accrued benefit cost................................... $ (207) $ (211)
====== ======
Weighted-average assumptions as of December 31
Discount rate............................................. 8.40% 8.40%
Expected return on plan assets............................ 8.00% 8.00%
Rate of compensation increase............................. -- --
PENSION BENEFITS
-----------------------
2000 1998 1999
---- ---- ----
Components of net periodic benefit cost
Service cost......................................... $ 12 $ 12 $ 12
Interest cost........................................ 226 218 211
Expected return on plan assets....................... (236) (222) (195)
Amortization of net (gain) loss...................... (6) -- --
----- ----- -----
Net periodic benefit cost......................... $ (4) $ 8 $ 28
===== ===== =====
F-16
33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. EMPLOYEE BENEFIT PLANS -- (CONTINUED)
The following provides a reconciliation of benefit obligations, plan assets
and funded status of the U.K. and South Africa defined benefit plans at December
31, 2000 and 1999, based upon the most recent actuarial valuations (December 31,
2000 and 1999), (in thousands):
2000 1999
---- ----
Change in benefit obligation
Benefit obligation at beginning of year.......... $ 33,162 $ 15,618
Service cost..................................... 2,164 2,254
Interest cost.................................... 2,071 1,824
Plan participants' contributions................. 1,034 1,081
Actuarial (gain) loss............................ 602 (308)
Acquisition...................................... -- 13,594
Benefits paid.................................... (1,155) (901)
Cost of insurance................................ (47) --
Change in currency............................... (4,145) --
------------ ------------
Benefit obligation at end of year............. 33,686 33,162
------------ ------------
Change in plan assets
Fair value of plan assets at beginning of year... 38,104 17,425
Actual return on plan assets..................... 3,165 5,357
Acquisition...................................... -- 13,594
Employer contribution............................ 1,570 1,677
Plan participants' contributions................. 1,034 1,084
Benefits paid.................................... (1,155) (901)
Cost of insurance................................ (47) --
Administration expenses.......................... (240) (132)
Change in currency............................... (4,885) --
------------ ------------
Fair value of Plan assets at end of year...... 37,546 38,104
------------ ------------
Funded status...................................... 3,860 4,942
Unrecognized transition asset...................... (700) (828)
Unrecognized prior-service cost.................... 252 391
Unrecognized actuarial (gain)/loss................. (1,776) (3,085)
------------ ------------
Prepaid benefit cost.......................... $ 1,636 $ 1,420
============ ============
Weighted-average assumptions as of December 31
Discount rate.................................... 5.5 - 12% 5.5 - 12%
Expected return on plan assets................... 5.5 - 12% 5.5 - 12%
Rate of compensation increase.................... 3.5 - 10.5% 3.5 - 10.5%
PENSION BENEFITS
--------------------------
2000 1999 1998
---- ---- ----
Components of net periodic benefit cost
Service cost........................................ $2,159 $2,254 $1,992
Interest cost....................................... 2,071 1,824 998
Expected return on plan assets...................... (2,821) (2,154) (1,482)
Amortization of transition (asset) obligation....... (129) (129) (129)
Amortization of prior-service cost.................. 53 53 53
Recognized net actuarial loss....................... (65) (62) (89)
------ ------ ------
Net periodic benefit cost........................ $1,268 $1,786 $1,343
====== ====== ======
F-17
34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. LEASES
We lease certain office and manufacturing facilities, data processing
equipment and automobiles under long-term operating lease agreements. In the
current year, we entered into capital leases for certain manufacturing and
engineering equipment and improvements related to real property. The leases
expire on various dates through 2006. Future minimum lease payments for
operating and capital leases (with terms in excess of one year) at December 31,
2000 were (in thousands):
OPERATING LEASES
----------------
2001........................................................ $1,070
2002........................................................ 923
2003........................................................ 724
2004........................................................ 213
2005........................................................ 52
Thereafter.................................................. --
------
$2,982
======
Rent expense for the operating leases of continuing operations was
$1,168,815, $1,330,750 and $1,630,460 for the years ended December 31, 2000,
1999 and 1998, respectively.
Scheduled payments on capital leases as of December 31, 2000 were (in
thousands):
CAPITAL LEASES (YEAR ENDED DECEMBER 31)
---------------------------------------
2001........................................................ $ 535
2002........................................................ 339
2003........................................................ 234
2004........................................................ 169
2005........................................................ 99
Thereafter.................................................. --
------
Total minimum lease payments........................... 1,376
Less -- imputed interest.................................. 340
------
Present value of net minimum lease payments............ $1,036
======
The book value, as of December 31, 2000, of equipment under capital leases
was $1,596,139, which is net of amortization of $678,576.
14. STOCK OPTIONS AND WARRANTS
PEI has a stock option plan for certain employees. We have reserved 350,280
shares for the plan. Options issued have exercise prices of $5.00 to $22.00 per
share, and no options have been exercised. Options generally vest 20 percent per
year over five years but may not be exercised until 90 days following the
effective date of a registration statement under the Securities Act of 1933 or
upon receipt by PEI of a legal opinion that registration is not required. The
exercise date may be accelerated upon a change of control. The options expire 10
years from the date of grant.
F-18
35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. STOCK OPTIONS AND WARRANTS -- (CONTINUED)
The changes in stock options outstanding for the years ended December 31,
2000, 1999 and 1998 are as follows:
OPTIONS PRICE
------- -----
Outstanding at January 1, 1998............................. 309,900 $ 6.25
Granted.................................................... 95,500 18.86
Forfeited.................................................. (12,100) 7.80
Repurchased................................................ (123,960) 5.31
--------
Outstanding at December 31, 1998........................... 269,340 11.10
Granted.................................................... 51,000 22.00
Forfeited.................................................. (4,900) 20.46
Repurchased................................................ (600) 18.86
--------
Outstanding at December 31, 1999........................... 314,840 12.71
Granted.................................................... 53,000 22.00
Forfeited.................................................. (15,120) 20.71
Repurchased................................................ (17,060) 10.82
--------
Outstanding at December 31, 2000........................... 335,660 13.92
========
Exercisable at December 31, 2000........................... --
========
Vested at December 31, 2000................................ 188,680 $ 9.50
========
Information with respect to stock options outstanding at December 31, 2000
follows:
AVERAGE
OPTIONS REMAINING
EXERCISE OUTSTANDING AT CONTRACTUAL
PRICE DECEMBER 31, 2000 LIFE (YEARS)
-------- ----------------- ------------
$5.00............................................... 58,760 1.3
$6.25............................................... 20,400 3.0
$8.25............................................... 83,800 4.6
$18.86.............................................. 76,700 7.3
$22.00.............................................. 96,000 9.2
-------
Total.......................................... 335,660
=======
We continue to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock issued to Employees" ("APB 25") in accounting for our
stock option plan.
Under APB 25, we do not recognize compensation expense on the issuance of
our stock options because the option terms are fixed and the exercise price
equals the fair value of the underlying stock on the grant date.
As required by SFAS 123, we have determined the pro-forma information as if
the Company had accounted for stock options granted since January 1, 1995, under
the fair value method of SFAS 123.
Principal assumptions used in calculating the pro forma information were as
follows:
2000 1999 1998
---- ---- ----
Risk-free interest rates.............................. 6.01% 5.90% 4.73%
Expected life, in years............................... 7.00 7.00 7.00
Expected volatility................................... 0.00% 0.00% 0.00%
Expected dividend yield............................... 0.00% 0.00% 0.00%
Weighted average fair value of options granted........ $22.00 $22.00 $18.86
F-19
36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. STOCK OPTIONS AND WARRANTS -- (CONTINUED)
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the option's vesting period. Pro forma
information follows (in thousands except for earnings per share information):
2000 1999 1998
---- ---- ----
Net income (loss), as reported....................... $11,485 $(6,191) $ 230
Net income, pro forma................................ 11,331 (6,415) 145
Earnings per common share, as reported
Basic and diluted.................................. $ 5.79 $ (3.11) $0.11
Earnings per common share, pro forma
Basic and diluted.................................. $ 5.71 $ (3.22) $0.07
The pro forma effect on net income for 2000, 1999, and 1998 is not
representative of the pro forma effect on net income in future years because it
does not take into consideration pro forma compensation expense related to
grants made prior to 1995.
15. RELATED PARTY TRANSACTIONS
We have a management consulting agreement with Genstar Investment
Corporation ("GIC"), an affiliate of Genstar. Under the agreement, we pay GIC a
management consulting fee. For the years ended December 31, 2000, 1999 and 1998,
$825,000, $900,000 and $900,000, respectively, were charged to operations under
this agreement. At December 31, 2000 and 1999, $150,000 and $225,000 of these
fees were accrued and unpaid.
16. LITIGATION AND CLAIMS
Various legal actions and claims are pending or may be instituted or
asserted in the future against us. The outcome of individual matters is not
predictable at this time. The potential aggregate amount of liability at
December 31, 2000 and 1999 with respect to these matters cannot be ascertained;
however, we believe that any resulting unrecorded liability would not materially
affect our future consolidated financial statements.
We record a liability for environmental remediation costs when a clean-up
program becomes probable and the costs can be reasonably estimated. The extent
and amounts of the liabilities can change substantially due to factors such as
the nature or extent of contamination, changes in remedial requirements and
technological improvements.
17. SEVERANCE
During 2000, we announced and implemented fixed cost reduction involving
employee cutbacks. During 1999, we announced restructuring plans related
primarily to our operations in Argentina and the U.S. Technical Center in Ann
Arbor, Michigan. All costs related to the plans are for employee severance. The
following is a summary of the severance charges and outlays (in thousands):
2000 1999
---- ----
Beginning balance.......................................... $ 517 $ 2,980
Severance cost charged to operations....................... 2,226 450
Payments................................................... (2,715) (2,913)
------- -------
Ending balance........................................ $ 28 $ 517
======= =======
F-20
37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
18. SEGMENT REPORTING
We operate in four principal geographic areas. Sales from South Africa and
Argentina consist largely of products for the automotive market while sales of
products from the United States and United Kingdom consist largely of products
for non-automotive application. Sales between geographic segments and between
operating segments are priced at cost plus a standard markup.
Sales are as follows (in thousands):
UNITED UNITED SOUTH
STATES KINGDOM ARGENTINA AFRICA OTHER TOTAL
------ ------- --------- ------ ----- -----
Sales to external customers, based on
country of domicile
2000............................ $79,648 $44,205 $37,519 $10,518 $ -- $171,890
1999............................ 86,622 51,733 37,299 12,220 187,874
1998............................ 79,065 61,260 55,993 12,681 208,999
Long-lived assets
2000............................ $12,648 $16,312 $ 6,741 $ 1,816 $ 37,517
1999............................ 14,125 17,573 7,333 2,114 41,145
1998............................ 13,336 18,943 8,296 2,160 42,735
Sales to external customers, based on
location of customers
2000............................ $73,889 $39,199 $37,366 $10,771 $10,665 $171,890
1999............................ 82,417 50,526 38,104 9,997 6,830 187,874
1998............................ 75,914 58,939 55,765 10,624 7,757 208,999
We manage on the basis of two business units (Heavy Duty Systems, and
Automotive Systems) and evaluate the performance of our segments based on
earnings before interest expense, taxes, depreciation and amortization and
excluding restructuring and option repurchase charges ("EBITDA"). Corporate
overhead and certain other charges are not allocated to the business units. The
operating segments reported below are our segments for which separate financial
information is available and for which operating income amounts are evaluated
regularly by executive management. The accounting policies of the business
segments are the same as those described in the summary of significant
accounting policies in Note 5. We sold three businesses previously reported as
part of Electric Systems Vehicle Division during 2000. We now manage those
portions of Electrical Vehicle Systems Division not sold as part of Heavy Duty
Systems Division. Prior period results for the Heavy Duty Division are restated
below. Segment assets are not currently broken out in the normal course of
managing segment operations; accordingly, such information is not available for
disclosure.
In accordance with SFAS No. 131, the operating results for the years ended
December 31, 2000, 1999 and 1998 are summarized by operating segment (in
thousands of U.S. dollars) below:
HEAVY DUTY AUTOMOTIVE
SYSTEMS SYSTEMS UNALLOCATED
DIVISION DIVISION COSTS TOTAL
---------- ---------- ----------- -----
Sales to external customers
2000.............................. $123,853 $48,037 $ -- $171,890
1999.............................. 138,355 49,519 -- 187,874
1998.............................. 140,190 68,809 -- 208,999
EBITDA
2000.............................. $ 17,782 $ 3,023 $(3,927) $ 16,878
1999.............................. 20,249 3,081 (4,942) 18,388
1998.............................. 21,408 6,437 (6,503) 21,342
F-21
38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
18. SEGMENT REPORTING -- (CONTINUED)
A reconciliation of EBITDA to income from continuing operations before
income taxes follows (in thousands of U.S. dollars):
2000 1999 1998
---- ---- ----
EBITDA for reporting segments..................... $ 16,878 $18,388 $21,342
Depreciation and amortization..................... 8,724 9,565 9,152
Severance, option repurchase costs and special
alternator charges.............................. 5,849 452 2,812
Unrealized loss on foreign exchange............... 1,121 -- --
Interest expense.................................. 15,025 15,816 13,494
-------- ------- -------
Income (loss) from continuing operations before
extraordinary item and income taxes.......... $(13,841) $(7,445) $(4,116)
======== ======= =======
19. SUMMARY OF PRESTOLITE ELECTRIC, INCORPORATED
Summary consolidated financial information of Prestolite Electric
Incorporated follows (in thousands):
2000 1999 1998
---- ---- ----
STATEMENT OF OPERATIONS
Net sales....................................... $171,890 $187,874 $208,999
Gross profit.................................... 32,249 36,261 41,546
Income (loss) from continuing operations before
extraordinary loss............................ (9,398) (6,773) (3,461)
Net income...................................... 11,443 (6,234) 192
BALANCE SHEET
Current assets.................................. 86,510 88,630 92,906
Noncurrent assets............................... 57,809 90,974 90,867
Current liabilities............................. 39,881 60,666 56,247
Noncurrent liabilities.......................... 111,521 135,230 136,506
Stockholders' equity............................ (7,083) (16,292) (8,980)
F-22
39
PRESTOLITE ELECTRIC HOLDING, INC. AND SUBSIDIARIES
SCHEDULE II
PRESTOLITE ELECTRIC HOLDING, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
ADDITIONS
-----------------------------------
BALANCE AT RESERVES CHARGE TO CHARGED BALANCE AT
BEGINNING ADDED W/ COSTS AND TO OTHER END
OF PERIOD ACQUISITIONS EXPENSES ACCOUNTS DEDUCTIONS(1) OF PERIOD
---------- ------------ --------- -------- ------------- ----------
Allowance for Doubtful Accounts:
Year ended December 31, 2000...... $2,369 $1,550 $1,472 $2,447
Year ended December 31, 1999...... $2,933 $1,356 $1,920 $2,369
Year ended December 31, 1998...... $1,969 $1,042 $1,639 $1,717 $2,933
Reserve for Inventory
Obsolescence:
Year ended December 31, 2000...... $4,463 $ (276) $1,456 $1,414 $4,229
Year ended December 31, 1999...... $4,258 $ (712) $2,230 $1,313 $4,463
Year ended December 31, 1998...... $2,986 $2,204 $1,279 $2,211 $4,258
- -------------------------
(1) Deductions related to the allowance for doubtful accounts relate to the
write-off of uncollectable accounts and to changes to the reserves for the
return of used parts. Deductions related to inventory obsolescence relate
primarily to the disposal of obsolete inventory.
F-23
40
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
None.
F-24
41
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information as of December 31, 2000
with respect to our executive officers and directors:
NAME AGE POSITION
---- --- --------
P. Kim Packard............................ 62 President, Chief Executive Officer and
Director
Kenneth C. Cornelius...................... 56 Senior Vice President, Chief Financial
Officer and Secretary
Dennis P. Chelminski...................... 48 Controller, Treasurer and Assistant
Secretary
Michael Lea............................... 57 Vice President and Division President,
Heavy Duty Products Division
I. Conrad Schwab.......................... 59 Vice President and Division President,
Electric Vehicles Systems Division
John Jenkins.............................. 42 Managing director, Heavy Duty Europe
Peter J. Corrigan......................... 42 Vice President Marketing and Sales
Richard D. Paterson (a)(b)................ 58 Chairman of the Board and Director
Ross J. Turner (b)........................ 70 Director
John A. West (a)(b)....................... 73 Director
- -------------------------
(a) Member of audit committee
(b) Member of compensation committee
Kim Packard began service as our President, Chief Executive Officer and a
director in December 1991. Previously, Mr. Packard was President and Chief
Operating Officer of Hobart Brothers Company of Troy, Ohio for six years and
prior to that President of Warner & Swasey and an officer or executive of
various divisions of Allied/Bendix. He also served in various marketing, sales
and executive capacities with GTE Sylvania. Mr. Packard holds a B.S. in
electrical engineering from Pennsylvania State University and an M.S. from the
Massachusetts Institute of Technology, where he was a Sloan Fellow. He is also a
director of Kurz-Kasch Corporation, Dayton, Ohio.
Kenneth C. Cornelius began service as our Vice President and Chief
Financial Officer in August 1992 and has been our Secretary since 1993.
Previously, he was Chief Financial Officer with M-C Industries for three years
after spending 17 years with Maremont Corporation in various financial
positions, including eight years as Vice President and Chief Financial Officer.
Mr. Cornelius holds a B.A. from Carleton College and an M.B.A. from the
University of Michigan.
Dennis P. Chelminski began service as our Controller, Treasurer and
Assistant Secretary in February 1992. He held the position of our Chief
Accounting Officer from October 1991 to February 1992 and was our Manager of
Financial Analysis under our prior ownership. Prior to 1986, he held various
financial positions with Eltra Corporation and AlliedSignal Corporation. Mr.
Chelminski holds a B.S. in accounting from the University of Toledo and is a
C.P.A.
Michael Lea began service as our Vice President and Managing Director of
our United Kingdom subsidiary in December 1993. He had previously been Sales and
Marketing Director of Polypenco Ltd. From 1977 to 1990 he served in various
positions with GKN, leading to Managing Director of GKN Composites Ltd. Mr. Lea
is a Chartered Engineer holding Bachelor of Technology in Metallurgy and Doctor
of Philosophy in Engineering degrees from Brunel University in West London,
England.
I. Conrad Schwab served an officer of Prestolite Electric Incorporated
through February 12, 2001, at which time he resigned his office due to personal
reasons.
Peter J. Corrigan came to Prestolite in 1992 as Director of Quality
Assurance in the Corporate Office. Subsequently he was promoted to Vice
President of Engineering, Vice President of Operations and most
F-25
42
recently, Corporate Vice President of Sales and Marketing. Mr. Corrigan holds a
BA in Physics from Wake Forest University and an MBA from Case Western Reserve
University.
John Jenkins came to Prestolite as Finance Manager in South Africa, as a
result of the Lucas Varity acquisition in January of 1998. He was promoted to
Managing Director of the South African operation. He was subsequently promoted
to Managing Director of Heavy Duty Systems, Europe and is located in Acton,
England.
Richard D. Paterson has been a director and Chairman of the board of
directors since 1991. Mr. Paterson has been Executive Vice President and a
director of Genstar Investment Corporation, an affiliate of Genstar Capital
Corporation, since 1987 and was a director of Genstar Capital Corporation from
1988 through August 1995. In addition, he is currently a director of a number of
privately held corporations.
Ross J. Turner has been a director since 1991. Mr. Turner has been Chairman
of the board of directors of Genstar Investment Corporation since 1987 and was a
director of Genstar Capital Corporation from 1988 through August 1995. Mr.
Turner is a director of Rio Algom Limited in Canada and Blue Shield of
California in the United States. In addition, he is currently a director of a
number of privately held corporations.
John A. West has been a director since 1991. Mr. West has been Executive
Vice President and a director of Genstar Investment Corporation, an affiliate of
Genstar Capital Corporation, since 1987 and was a director of Genstar Capital
Corporation from 1988 through August 1995. In addition, he is currently a
director of a number of privately held corporations.
Directors are elected annually to serve until the next annual meeting of
shareholders or until their successors have been elected and qualified.
Executive officers are appointed by, and serve at the discretion of, our board
of directors. None of the executive officers or directors is related by blood,
marriage or adoption to any other executive officer or director.
ITEM 11. EXECUTIVE COMPENSATION
The following table summarizes all compensation paid for the years ended
December 31, 2000, 1999 and 1998 to the Chief Executive Officer and the four
other highest compensated executive officers who were serving executive officers
at December 31, 2000:
OTHER ANNUAL LONG-TERM ALL OTHER
NAME AND COMPENSATION COMPENSATION COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($)(A) ($)(B) AWARDS(C) ($)(D)
------------------ ---- --------- ----------- ------------ ------------ ------------
P. Kim Packard.............. 2000 405,002 70,000 -- -- 13,450
President and 1999 405,000 -- -- -- 16,192
Chief Executive Officer 1998 377,192 185,000 -- -- 1,339,628
Kenneth C. Cornelius........ 2000 192,000 38,000 -- -- 9,678
Senior Vice President 1999 192,054 -- -- -- 9,507
Chief Financial Officer 1998 184,354 65,300 -- -- 205,121
I. Conrad Schwab............ 2000 163,341 20,000 -- -- 4,762
Vice President and 1999 157,027 -- -- -- 5,165
Division President 1998 155,388 51,600 -- -- 47,420
Michael Lea................. 2000 150,000 -- -- -- 22,144
Vice President and 1999 150,577 -- -- -- 14,785
Division President 1998 125,021 55,900 -- -- 161,941
Dennis P. Chelminski........ 2000 112,000 15,000 -- -- 7,160
Treasurer/Controller 1999 112,038 -- -- -- 7,626
1998 105,585 22,400 -- -- 119,274
- -------------------------
(a) Amounts in 2000 and 1998 reflect bonuses earned during 2000 and 1998 but
paid during 2001 and 1999 respectively. No payments were made during 2000
for amounts earned in 1999.
F-26
43
(b) Other annual compensation in the form of perquisites and other personal
benefits has been omitted where aggregate amount of such perquisites and
other personal benefits constituted the lesser of $50,000 or 10% of the
total annual salary and bonus for the officer for the year.
(c) The company did not make any long-term incentive awards to any of these
officers in 2000, 1999 or 1998.
(d) Amounts in 2000, 1999 and 1998 reflect premiums paid for life insurance
coverage in excess of $50,000 and contributions by us pursuant to our 401(k)
and one other pension plan. Also includes for Messrs. Packard, Cornelius and
Chelminski in 2000, 1999 and 1998 interest on deferred compensation (Mr.
Packard -- $7,500; Mr. Cornelius -- $2,500; Mr. Chelminski -- $3,500)
payable pursuant to a Deferred Compensation Agreement between us and each of
Messrs. Packard, Cornelius and Chelminski. In 1998 the amounts shown also
reflect payments in connection with a repurchase of shares and options to
purchase shares. See Item 13. "Certain Relationships and Related
Transactions -- The Recapitalization."
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning the grant of
stock options during the fiscal year.
POTENTIAL REALIZATION
VALUE AT ASSUMED
RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(B)
OPTIONS EMPLOYEES PRICE EXPIRATION ----------------------
NAME GRANTED IN 2000 PER SHARE(A) DATE 5% 10%
---- ---------- ---------- ------------ ---------- -- ---
P. Kim Packard................ 14,000 26.4% $22.00 10/3/2010 193,700 490,873
Kenneth C. Cornelius.......... 5,000 9.4 22.00 10/3/2010 69,178 175,312
I. Conrad Schwab(c)........... 3,000 5.7 22.00 10/3/2010 41,507 105,187
Michael Lea................... 4,000 7.5 22.00 10/3/2010 55,343 140,249
Dennis P. Chelminski.......... 3,000 5.7 22.00 10/3/2010 41,507 105,187
- -------------------------
(a) The exercise price was equal to the fair market value of the common stock on
the date of the grant, as determined by our board of directors and based
upon our historical and projected financial performance.
(b) The 5% and 10% assumed rates are prescribed by the rules and regulations of
the Securities and Exchange Commission and do not represent our estimate or
projection of the future trading price of our common stock. We cannot assure
that any of the values reflected in this table will be achieved. Actual
gains, if any, on stock option exercises are dependent on numerous factors,
including our future performance, overall conditions and the option holder's
continued employment throughout the entire vesting period and option term,
which factors are not reflected in this table.
(c) Mr. Schwab resigned his office effective February 12, 2001 due to personal
reasons.
F-27
44
AGGREGATED OPTION EXERCISES IN
LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table summarizes the exercise of options during the year
ended December 31, 2000 and number and value of all unexercised options held by
certain executive officers as of December 31, 2000.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED VALUE OPTIONS AT FY-END (#) AT FY-END ($)(A)
ON EXERCISE REALIZED ---------------------------- ----------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
P. Kim Packard.............. -- -- 126,300 41,600 1,228,054 682,036
Kenneth C. Cornelius........ -- -- 26,940 11,160 323,311 232,458
I. Conrad Schwab(b)......... -- -- 11,140 7,560 166,080 157,654
Michael Lea................. -- -- 20,980 9,320 261,240 195,243
Dennis P. Chelminski........ -- -- 13,260 4,740 137,013 99,758
- -------------------------
(a) Value is based upon the fair market value of our common stock as of December
31, 2000 determined by our board of directors, minus the exercise price.
Fair market value was determined by our board of directors and was based
upon our historical and projected financial performance.
(b) Mr. Schwab resigned his office effective February 12, 2001 due to personal
reasons.
COMPENSATION OF DIRECTORS
Our directors do not receive any compensation for their services as
directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the compensation committee of our board of directors
are Messrs. Richard A. Paterson, chairman, Ross J. Turner and John A. West. Each
is an executive officer and currently a director of Genstar Investment
Corporation and was a director of Genstar Capital Corporation at various times
from 1988 through August 1995.
EMPLOYMENT AGREEMENTS
We have entered into agreements with each of Messrs. Packard, Cornelius,
Lea and Chelminski. The agreements provide that if the employee's employment is
terminated for any reason other than by the employee voluntarily except in the
event of a substantial diminution in responsibilities, for cause (as defined in
the respective employment agreements) or as a result of death or disability, the
terminated individual shall receive for a period of one year following the date
of termination the then-current salary and benefits that the employee would
otherwise have been entitled to receive (except for Mr. Packard who would
receive two years salary and benefits).
Each of the agreements provides that if the employee's employment is
terminated within twelve months following a change of control (as defined in the
respective employment agreements) for any reason other than for cause, the
respective individual would be entitled to receive an additional one year period
of salary and benefits following the expiration of the salary and benefits the
employee is entitled to receive in the event of termination for any other
reason.
Any benefits payable under the agreements, absent mutual agreement of the
parties, will be payable at such time and in such manner as if the employee
remained employed, and such benefits, if any, shall continue notwithstanding
re-employment and/or death of the employee following termination of employment.
1991 OPTION PLAN
In 1991, the PEI Holding, Inc. Management Stock Option Plan was adopted.
The Management Stock Option Plan is designed to provide an incentive to those
designated employees to continue in their employment and to increase their
efforts for our success. The designated employees are selected in the sole
F-28
45
discretion of the compensation committee of our board of directors. As of
December 31, 2000, an aggregate of 350,280 shares of our common stock were
reserved for issuance under the Management Stock Option Plan.
The purchase price of each share of common stock subject to the options is
the fair market price of our common stock on the date of the grant as determined
by our board of directors. All options granted are subject to the terms of an
agreement entered into by the recipient of the options.
Each agreement entered into requires the recipient of the options to be
bound by the terms of any stockholders' agreement entered into between us and
certain of our stockholders. Options vest beginning on January 1 of the first
calendar year following granting of the option (or on the first anniversary of
the date of grant if granted in connection with hiring) and vest at a rate of
20% per year on each subsequent January 1. Options are not transferable by the
recipient other than by will or by the laws of descent and distribution and are
exercisable during the recipient's lifetime only by the recipient. All options
terminate on the tenth anniversary of the date of grant. Options are exercisable
within 90 days after a registration statement pertaining to our common stock has
been filed with (and declared effective by) the Securities and Exchange
Commission under the Securities Act of 1933, as amended, or when we otherwise
determine in our sole discretion.
If the recipient is terminated without cause (as defined in the agreement)
or for permanent disability or death then all unvested options are terminated
and canceled on the date of termination. Within 30 days of termination we may
make a cash payment to the recipient in the amount of the excess of the fair
market value of the common stock subject to such options over the exercise price
for such shares, or make such other decisions with respect to such options as in
our sole discretion. If the recipient is terminated for cause then all options,
both vested and unvested, are canceled.
In the event of a merger or consolidation (subsequent to which our present
stockholders own less than 50% of the voting stock of the surviving entity), a
sale of all or substantially all of our assets to an entity not affiliated with
Genstar Capital Corporation or our dissolution or liquidation, then the plan
administrator may provide for the vesting of up to all options outstanding
within 30 days of such event or authorize a cash payment to each option holder
equal to the excess of the fair market value of the shares of common stock
subject to such holder's option over the applicable exercise price. The options
are subject to anti-dilution provisions in the event of a change in our capital
structure.
As of December 31, 2000, options to purchase an aggregate of 335,660 shares
of Common Stock at prices from $5.00 to $22.00 were outstanding under the
Management Stock Option Plan.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth certain information regarding beneficial
ownership of our common stock as of March 15, 2001 by each person or entity
known by us to own beneficially 5% of more of our common stock,
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46
each director and certain of our executives officers and all executive officers
and directors as a group. As of March 15, 2001, there were 1,985,000 shares of
our common stock outstanding.
NAME NUMBER(A) PERCENT(A)
---- --------- ----------
Genstar Capital Corporation(b).............................. 1,920,000 96.7
Scotia Plaza, Suite 4900
40 King Street West
Toronto, Ontario M54 4AA Canada
P. Kim Packard(c)........................................... 143,300 6.8
c/o Prestolite Electric Incorporated
2100 Commonwealth Blvd
Ann Arbor, Michigan 48105
Kenneth C. Cornelius(d)..................................... 34,940 1.7
Dennis P. Chelminski(e)..................................... 21,260 1.1
Michael Lea(f).............................................. 28,980 1.4
John Jenkins(g)............................................. 2,700 *
Peter J. Corrigan(h)........................................ 20,060 1.0
Richard D. Paterson(i)...................................... 89,280 4.5
Ross J. Turner(i)........................................... 89,280 4.5
John A. West(i)............................................. 89,280 4.5
All executive officers and directors as a group (9
persons)(j)............................................... 340,520 15.6
- -------------------------
* Less than 1%
(a) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of common stock subject
to options or warrants currently exercisable or convertible, or exercisable
or convertible within 60 days of March 15, 2001, are deemed outstanding for
computing the percentage of the person holding such option or warrant but
are not deemed outstanding for computing the percentage of any other person.
Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, the persons named in the table have sole
voting and investment power with respect to all shares of common stock
beneficially owned.
(b) Genstar Capital Corporation's shares are held of record by The Royal Trust
Company, a licensed trust company in Canada, that holds the shares for the
benefit of Genstar Capital Corporation, its preferred shareholders and
Genstar Investment Corporation.
(c) Consists of 17,000 shares of common stock and 126,300 shares issuable upon
exercise of options that are currently exercisable or exercisable within 60
days of March 15, 2001. Does not include 41,600 shares issuable upon
exercise of options which vest more than 60 days after March 15, 2001.
(d) Consists of 8,000 shares of common stock and 26,940 shares issuable upon
exercise of options that are currently exercisable or exercisable within 60
days of March 15, 2001. Does not include 11,160 shares issuable upon
exercise of options which vest more than 60 days after March 15, 2001.
(e) Consists of 8,000 shares of common stock and 13,260 shares issuable upon
exercise of options that are currently exercisable or exercisable within 60
days of March 15, 2001. Does not include 4,740 shares issuable upon exercise
of options which vest more than 60 days after March 15, 2001.
(f) Consists of 8,000 shares of common stock owned by Mrs. Rhonda Lea, Mr. Lea's
wife, as to which Mr. Lea may be deemed to be beneficial owner and 20,980
shares issuable upon exercise of options that are currently exercisable or
exercisable within 60 days of March 15, 2001. Does not include 9,320 shares
issuable upon exercise of options which vest more than 60 days after March
15, 2001.
(g) Consists of 2,700 shares issuable upon exercise of options that are
currently exercisable or exercisable within 60 days of March 15, 2001. Does
not include 4,800 shares issuable upon exercise of options which vest more
than 60 days after March 15, 2001.
(h) Consists of 8,000 shares of common stock and 12,060 shares issuable upon
exercise of options that are currently exercisable or exercisable within 60
days of March 15, 2001. Does not include 5,140 shares issuable upon exercise
of options which vest more than 60 days after March 15, 2001.
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(i) Consists of 89,280 shares of common stock indirectly owned by Genstar
Investment Corporation by virtue of Genstar Investment Corporation's
ownership in Genstar Capital Corporation, as to which Messrs. Paterson,
Turner and West may be deemed to be beneficial owners. Excludes the
remaining shares of Common Stock owned by Genstar Capital Corporation as to
which Messrs. Paterson, Turner and West disclaim beneficial ownership. See
Item 13. "Certain Relationships and Related Transactions-GIC Management
Agreement." Genstar Capital Corporation owns approximately 83.8% of our
common stock on a fully-diluted basis.
(j) Amount shown includes an aggregate of 202,240 shares of common stock
issuable upon the exercise of options exercisable within 60 days of March
15, 2001. Does not include an aggregate of 76,760 shares issuable upon
exercise of options which vest more than 60 days after March 15, 2001.
Note: Mr. I. Conrad Schwab resigned his office effective February 12, 2001 for
personal reasons.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Set forth below is a summary of certain agreements and arrangements, as
well as other transactions with related parties that took place during the 1998
fiscal year.
THE RECAPITALIZATION
In connection with the offering of our senior notes in January 1998, we
effected a series of transactions that resulted in our recapitalization,
including the purchase of our securities from our security holders for an
aggregate purchase price of approximately $29.7 million. Shares of common stock
were purchased by a limited liability company affiliated with us, and options to
purchase common stock were purchased by us. Purchase prices were equal to $18.86
per share of common stock and a price per option equal to $18.86 per share of
common stock issuable upon exercise of such option minus the applicable exercise
price. The exercise price of options ranged from $5.00 to $8.25 per share. Total
amounts received for such purchases were as follows: Genstar Capital Corporation
($24,145,408); P. Kim Packard ($1,325,188); Kenneth C. Cornelius ($196,996); I.
Conrad Schwab ($41,470); Dennis P. Chelminski ($111,722); Michael Lea
($139,831); and five additional employees ($345,266 as a group). Amounts paid to
management included payments to compensate for less favorable tax treatment with
respect to purchased options.
Three of our directors, Messrs. Paterson, Turner and West, are executive
officers of Genstar Investment Corporation. Messrs. Paterson, Turner and West
are also shareholders of Genstar Investment Corporation. Genstar Investment
Corporation holds approximately 4.65% of the outstanding preferred shares of
Genstar Capital Corporation, and, as a result, was entitled to approximately
4.65% of the proceeds distributed to Genstar Capital Corporation and/or its
preferred shareholders in connection with the recapitalization. Genstar
Investment Corporation acts as the advisor to Genstar Capital Corporation, and
is entitled to certain fees and reimbursement of expenses from Genstar Capital
Corporation for services rendered to Genstar Capital Corporation. To the extent
that Genstar Investment Corporation collects fees and expenses directly from
portfolio companies of Genstar Capital Corporation, such as us, Genstar Capital
Corporation's obligation to pay these fees and expenses to Genstar Investment
Corporation is reduced.
GIC MANAGEMENT AGREEMENT
Our principal operating subsidiary, Prestolite Electric Incorporated,
entered into a management agreement with Genstar Investment Corporation
terminating on December 31, 2002, under which Genstar Investment Corporation has
agreed to provide Prestolite with ongoing management and financial advisory
services. Prestolite has agreed to pay Genstar Investment Corporation a fee of
$900,000 or .03% of Prestolite's annual sales as compensation for services
rendered by Genstar Investment Corporation under the agreement, plus all
out-of-pocket costs and expenses. Effective October 1, 2000, this management
agreement was revised with the annual management and financial advisory services
fee being reduced to $600,000 per annum. Payments are made quarterly. In 1998,
1999 and 2000 Prestolite paid management and advisory fees of $900,000, in each
case plus out-of-pocket expenses, to Genstar Investment Corporation.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS OF FORM 8-K
(a) Financial Statements
Consolidated Balance Sheet as of December 31, 2000 and
1999...................................................... Part II, Item 8
Consolidated Statement of Operations for each of the years
in the three year period ended December 31, 2000.......... Part II, Item 8
Consolidated Statement of Stockholders' (Deficit) Equity for
each of the years in the three year period ended December
31, 2000.................................................. Part II, Item 8
Consolidated Statement of Cash Flows for each of the years
in the three year period ended December 31, 2000.......... Part II, Item 8
Notes to Consolidated Financial Statements.................. Part II, Item 8
Independent Accountants' Report............................. Part II, Item 8
Schedule II -- Valuation and Qualifying Accounts............ Part II, Item 8
Reports on form 8-K.
None.
(b) Exhibits
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.1 Letter agreement between Prestolite Electric Incorporated
and Comerica Bank dated December 26, 2000 relating to the
$3,500,000 Master Revolving Note.
10.2 Letter agreement between Prestolite Electric Incorporated
and Comerica Bank dated December 26, 2000 relating to the
$5,000,000 Master Revolving Note.
10.3 Letter agreement between Prestolite Electric Incorporated
and Comerica Bank dated December 26, 2000 rescinding the
letter agreement of termination dated September 29, 2000 and
amending said agreements.
10.4 Master Revolving Note between Prestolite Electric
Incorporated and Comerica Bank in the amount of $3,500,000
dated December 26, 2000.
10.5 Commercial Variable Rate Loan between Prestolite Electric
Limited and National Westminster Bank in the amount of
L1,400,000 (British pounds sterling) dated December 27,
2000.
10.6 Base Rate Loan Facility between Prestolite Electric Limited
and National Westminster Bank in the amount of L2,800,000
(British pounds sterling) dated December 27, 2000.
(On-demand revolver facility.)
10.7 Argentina Financial Statements and Notes for Balance Sheets
dated December 31, 2000 and 1999 and Operating Statements
for the three years ended December 31, 2000.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Prestolite Electric Holding, Inc. has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Ann Arbor, State of Michigan on the 30th day of March, 2001.
PRESTOLITE ELECTRIC HOLDING, INC.
By: /s/ P. KIM PACKARD
------------------------------------
P. Kim Packard
Director, President, and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of Prestolite Electric
Holding, Inc. and in the capacities and on the dates indicated.
SIGNATURES TITLE DATE
---------- ----- ----
/s/ P. KIM PACKARD President, Chief Executive Officer March 28, 2001
- ------------------------------------- (principal executive officer)
P. Kim Packard Director
/s/ RICHARD D. PATERSON Chairman of the Board, Director March 28, 2001
- -------------------------------------
Richard D. Paterson
/s/ KENNETH C. CORNELIUS Senior Vice President, Chief March 28, 2001
- ------------------------------------- Financial Officer (principal
Kenneth C. Cornelius accounting and financial officer) and
Secretary
/s/ ROSS J. TURNER Director March 28, 2001
- -------------------------------------
Ross J. Turner
/s/ JOHN A. WEST Director March 28, 2001
- -------------------------------------
John A. West
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.1 Letter agreement between Prestolite Electric Incorporated
and Comerica Bank dated December 26, 2000 relating to the
$3,500,000 Master Revolving Note.
10.2 Letter agreement between Prestolite Electric Incorporated
and Comerica Bank dated December 26, 2000 relating to the
$5,000,000 Master Revolving Note.
10.3 Letter agreement between Prestolite Electric Incorporated
and Comerica Bank dated December 26, 2000 rescinding the
letter agreement of termination dated September 29, 2000 and
amending said agreements.
10.4 Master Revolving Note between Prestolite Electric
Incorporated and Comerica Bank in the amount of $3,500,000
dated December 26, 2000.
10.5 Commercial Variable Rate Loan between Prestolite Electric
Limited and National Westminster Bank in the amount of
L1,400,000 (British pounds sterling) dated December 27,
2000.
10.6 Base Rate Loan Facility between Prestolite Electric Limited
and National Westminster Bank in the amount of L2,800,000
(British pounds sterling) dated December 27, 2000.
(On-demand revolver facility.)
10.7 Argentina Financial Statements and Notes for Balance Sheets
dated December 31, 2000 and 1999 and Operating Statements
for the three years ended December 31, 2000.