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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
OR
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission File Number 0-22580
JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
INCORPORATED IN MICHIGAN IRS EMPLOYER IDENTIFICATION NUMBER 38-2958730
1030 DORIS ROAD, AUBURN HILLS, MI 48326-2613
(248) 232-1161
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
TITLE OF CLASS EXCHANGE ON WHICH REGISTERED
COMMON STOCK OTC BULLETIN BOARD
- --------------------------------------------------------------------------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Based on the closing price on March 31, 2002, the aggregate market value of the
Registrant's Common Stock held by non-affiliates of the Registrant was
approximately $46,022.
The number of shares of the Registrant's Common Stock outstanding at March 31,
2002 was 14,043,600.
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TABLE OF CONTENTS
ITEM PAGE
- ---- ----
PART I
1. Business 3
2. Properties 10
3. Legal Proceedings 10
4. Submission of Matters to a Vote of Security Holders 10
PART II
5. Market for Registrant's Common Equity and Related Stockholder Matters 11
6. Selected Financial Data 12
7. Management's Discussion and Analysis of Financial Condition and Results of Operations 14
7A. Quantitative and Qualitative Disclosures About Market Risk 19
8. Financial Statements and Supplementary Data 20
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 46
PART III
10. Directors and Executive Officers of the Registrant 47
11. Executive Compensation 49
12. Security Ownership of Certain Beneficial Owners and Management 54
13. Certain Relationships and Related Transactions 55
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 56
Signatures
FINANCIAL STATEMENT SCHEDULES
JPE, INC. (d/b/a ASCET INC and ASC Exterior Technologies) and Subsidiary Financial
Statement Schedule 58
Exhibits Index 60
2
PART I
ITEM 1. BUSINESS
FORWARD LOOKING INFORMATION
This Annual Report on Form 10-K contains, and from time to time the Company
expects to make, certain forward-looking statements regarding its business,
financial condition and results of operations. In connection with the "Safe
Harbor" provisions of the Private Securities Reform Act of 1995 (the "Reform
Act"), the Company intends to caution investors that there are several important
factors that could cause the Company's actual results to differ materially from
those projected in its forward-looking statements, whether written or oral, made
herein or that may be made from time to time by or on behalf of the Company.
Investors are cautioned that such forward-looking statements are only
predictions and that actual events or results may differ materially. The Company
undertakes no obligation to publicly release the results of any revisions to the
forward-looking statements to reflect events or circumstances or to reflect the
occurrence of unanticipated events.
The Company wishes to ensure that any forward-looking statements are accompanied
by meaningful cautionary statements in order to comply with the terms of the
safe harbor provided by the Reform Act. Accordingly, the Company has set forth a
list of important factors that could cause the Company's actual results to
differ materially from those expressed in forward-looking statements or
predictions made herein and from time to time by the Company. Specifically, the
Company's business, financial condition and results of operations could be
materially different from such forward-looking statements and predictions as a
result, among other things, of (i) customer pressures that could impact sales
levels and product mix, including customer sourcing decisions, customer
evaluation of market pricing on products produced by the Company and customer
cost-cutting programs; (ii) operational difficulties encountered during the
launch of major new Original Equipment Manufacturer's ("OEM") programs; (iii)
cyclical consumer demand for new vehicles; (iv) competition in pricing and new
product development from larger companies with substantial resources; (v) the
concentration of a substantial percentage of the Company's sales with a few
major OEM customers; and (vi) labor relations at the Company and its customers
and suppliers.
GENERAL AND RECENT INFORMATION
JPE, Inc. (together with its subsidiaries, the "Company"), through its five
operating subsidiaries in existence as of January 1, 1999, manufactured and
distributed automotive and truck components to OEMs and to the automotive
aftermarket. Through May 1999, the Company experienced financial difficulties
resulting in a strategy to sell certain subsidiaries, obtain additional capital
and restructure its debt.
During the period from August, 1998 through May, 1999, three of the Company's
operating subsidiaries, Plastic Trim, Inc. ("PTI"), Starboard Industries, Inc.
("Starboard") and JPE Canada Inc. ("JPEC"), were operating under court ordered
protection. On September 15, 1998, PTI and Starboard filed voluntary petitions
for relief under Chapter 11 of the Federal Bankruptcy Code in the United States
Bankruptcy Court for the Eastern District of Michigan. On August 27, 1998, the
Ontario Court (General Division) Commercial List issued an order to appoint an
Interim Receiver for JPEC pursuant to Section 47 of the Bankruptcy and
Insolvency Act of Canada. Collectively, these companies represented the
Company's Trim Group. The Company's two other operating subsidiaries, Dayton
Parts, Inc. ("DPI") and Industrial & Automotive Fasteners, Inc. ("IAF"), and the
parent company of all five operating subsidiaries, JPE, Inc., continued to
operate without court protection. On October 28, 1998, the Company completed the
sale of substantially all of the assets of its wholly-owned subsidiary,
Allparts, Inc. ("Allparts"), to R&B, Inc. for a total sales price of $11.6
million.
On February 8, 1999, under court order, the Company sold substantially all the
assets of JPEC for approximately Cdn. $21.0 million, to the Ventra Group, Inc.
Proceeds were used to pay Canadian bank debt and other secured debt provided by
a major customer. In conjunction with the sale of all of its assets, JPEC filed
an assignment in bankruptcy on February 8, 1999. JPEC had no assets to pay its
unsecured debt and, as such, JPEC was dissolved. The Company had provided an
unsecured guarantee not to exceed Cdn. $2.0 million for a portion of the JPEC
debt to the Canadian Bank. The proceeds of the sale were not sufficient to fully
pay such secured lender, and the Company was indebted to such lender under this
guarantee which was settled for Cnd. $86 thousand on October 25, 1999, pursuant
to an agreement dated September 24, 1999. In addition, the agreement required
the payment of
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approximately Cnd. $93 thousand by PTI, representing the satisfaction of 30% of
amounts payable to JPEC for unsecured claims, together with the assignment and
transfer to the Canadian Bank of all royalties payable by the Ventra Group for
the use of patented technology owned by the Company.
On March 26, 1999, the Company sold the stock of IAF for approximately $20
million. As part of this transaction, certain vendors of IAF agreed to accept a
30% payment for past due payables resulting in a gain on debt forgiveness of $2
million. The Company recognized a loss of approximately $2.5 million as a result
of the stock sale.
On February 25, 1999, the Company filed Plans of Reorganization for PTI and
Starboard with the United States Bankruptcy Court, pursuant to which those
companies would emerge from pending Chapter 11 bankruptcy proceedings. This
action was contingent on the consummation of an investment in the Company by ASC
Holdings LLC ("ASC") and Kojaian Holdings LLC ("Kojaian"), as described below,
which occurred on May 27, 1999. As a result, these reorganization plans were
confirmed by the Bankruptcy Court, and the unsecured creditors of PTI and
Starboard forgave 70% of their claims, totaling approximately $4.1 million. In
addition, on December 8, 1999, the Bankruptcy Court entered a Final Decree
discharging Starboard from bankruptcy proceedings and on May 12, 2000, the
Bankruptcy Court entered a Final Decree Discharging PTI from bankruptcy
proceedings.
On May 27, 1999, in accordance with the terms of an Investment Agreement among
JPE, Inc., and ASC and Kojaian dated April 28, 1999 (the "Investment Agreement")
the Company issued 1,952,352.19 shares of First Series Preferred Shares in equal
proportions to ASC and Kojaian for an aggregate purchase price of $16,413,274
payable in cash. Each First Series Preferred share possesses voting rights equal
to 50 Common Shares of the Company. In addition, the Investment Agreement
provided that the shareholders of record of JPE, Inc. common stock on June 11,
1999 were entitled to receive Warrants to purchase First Series Preferred Shares
(the "Warrants"). Each holder of Common Stock received .075 Warrants for each
share of common stock held on the record date, and each full Warrant entitles
the holder to purchase one First Series Preferred Share. The Warrants were
distributed as a dividend to such shareholders on June 12, 1999. The Warrants
carry an initial exercise price of $9.99 per First Series Preferred Share,
subject to price adjustments based on the Final Actual EBITDA (as defined in the
Investment Agreement) and the cost of certain environmental remediation for the
24 month period ending after the acquisition date. The Warrants are exercisable
for the 90 day period following the providing of notice by the Company to the
holders thereof of the Final Actual EBITDA.
In accordance with the Investment Agreement, the warrant exercise price was set
at $8.16 per First Series Preferred Share. On July 6, 2001, the Company notified
the warrant holders of their rights to exercise their warrants at $8.16 per
First Series Preferred Share. The warrants were exercisable for a 90 day period
commencing July 6, 2001 and expiring on October 4, 2001. At the expiration of
the warrant exercise period on October 4, 2001, none of the Warrant holders had
exercised their warrants.
In addition, on May 27, 1999 ASC and Kojaian (in equal proportions) subscribed
and paid for 9,441,420 newly issued shares of common stock of JPE, Inc. for an
aggregate purchase price of $1,986,726 payable in cash. These newly issued
shares of common stock were distributed to ASC and Kojaian on June 12, 1999.
As a precondition to consummation of the above transaction, the Company's then
existing bank lenders (the "Bank Group") agreed on May 27, 1999 to a $16.5
million forgiveness of the Company's existing bank debt. In consideration for
the debt forgiveness and pursuant to the Investment Agreement, the Company
issued 20,650.115 First Series Preferred Shares to the Bank Group on May 27,
1999 for $1,000 of consideration. In addition, the Company granted the Bank
Group 77,437.937 Warrants (which Warrants contain the same terms and conditions
as granted to the shareholders of common stock of the Company except the
exercise price per First Series Preferred Share is approximately $8.16).
The immediate effect of these transactions transferred (a) approximately 47.5%
of the voting securities of the Company to Kojaian, (b) approximately 47.5% of
the voting securities of the Company to ASC, and (c) approximately 1% of the
voting securities of the Company to the Bank Group. This transaction is
hereafter referred to as the "Investment Transaction." The remaining amount of
the voting securities continue to be held by the public shareholders of the
Company. Thus, as of December 29, 1999, ASC and Kojaian together beneficially
owned
4
approximately 95% of the voting securities of the Company, and if all of the
Warrants were exercised, would have beneficially owned approximately 80% of the
voting securities of the Company.
Pursuant to the terms of a separate letter agreement (the "Letter Agreement")
dated August 30, 1999 among ASC and the sole member of ASC (Heinz C. Prechter)
and Kojaian and the members of Kojaian (Mike Kojaian and C. Michael Kojaian),
Heinz C. Prechter agreed to purchase (through ASC or otherwise) 4,720,710 common
shares and 976,176.095 First Series Preferred Shares of JPE, Inc. from Kojaian
for $9.2 million. The Letter Agreement was subject to the conditions precedent
of (i) obtaining the consent of Comerica Bank, the Company's lender, and (ii)
the termination of the applicable waiting period under the Hart-Scott-Rodino
Act. On December 30, 1999, the last of the conditions precedent was fulfilled,
and on such date the Agreement was consummated.
As a result, ASC directly and the Heinz C. Prechter estate, indirectly through
ASC, own a total of 9,441,420 common shares and 1,952,352.19 First Series
Preferred Shares of JPE, Inc., constituting 95% of the beneficial interests of
JPE, Inc. as of December 31, 2001.
On July 1, 2000, the Company purchased the net assets and liabilities of MB
Associates, which was the Company's exclusive sales agency (Note 1). In
connection with this purchase, the Company issued 20,692 shares of First Series
Preferred shares as consideration to those former owners of MB Associates. These
shares were subsequently redeemed by the Company for cash consideration of $180
thousand on June 30, 2001.
After these transactions, the Company owns three operating subsidiaries, DPI,
PTI and Starboard. The Company is now operating under the assumed names of ASCET
INC and ASC Exterior Technologies and is hereinafter referred to as the
Successor Company. PTI now operates under the assumed names of ASC Exterior
Technologies - Dayton and ASC Exterior Technologies - Beavercreek. Starboard now
operates under the assumed name of ASC Exterior Technologies - East Tawas. New
financing in the amount of $33 million was arranged with Comerica Bank to repay
the indebtedness of the Company owed to the Bank Group (other than the debt
forgiveness described above) and provide for current working capital needs.
The following table sets forth information regarding the Company's sales for
only the operating subsidiaries it owned as of December 31, 2001 in certain
classes of similar products as percentages of net sales for the periods
indicated.
Percentage of Net Sales(1)
Year ended December 31,
-------------------------------------------
1999(2) 2000 2001
---- ---- ----
OEM (Original Equipment) Trim Products 64.4% 63.4% 54.7%
Aftermarket (truck and automotive replacement parts) 35.6% 36.6% 45.3%
------ ------- -------
100.0% 100.0% 100.0%
====== ======= =======
(1) See also Note 11, 13, and 15 of the Notes to Consolidated Financial
Statements for additional operating subsidiary information.
(2) Includes sales of PTI and Starboard which were carried on the equity
method from September 15, 1998 through May 27, 1999.
5
Original Equipment (OEM)
The Company's OEM group consisted of four operations during the first quarter of
1999: Starboard, PTI, JPEC and IAF. Starboard manufactures and supplies luster,
painted and co-extruded metallic decorative and functional exterior trim parts.
PTI manufactures and supplies decorative extruded plastic exterior trim. JPEC
manufactured, painted and supplied plastic injection-molded exterior trim.
Starboard, PTI and JPEC supply parts directly to OEMs and to suppliers which
sell to OEMs ("Tier 1 suppliers") in automotive and light truck applications.
These three companies, including JPEC prior to its divestiture on February 25,
1999, represent the Trim Products segment.
IAF manufactured and supplied decorative, specialty and standard wheel nuts for
domestic OEMs and certain Japanese transplants for use on automobiles and light
trucks. In addition, IAF used its proprietary process to manufacture stainless
steel capped wheel nuts. This business represented the Fastener segment prior to
its divestiture on March 26, 1999.
Aftermarket
The Company's aftermarket group consists of DPI. This business represents the
Truck and Automotive Replacement Parts segment. DPI manufactures and distributes
springs and spring-related products and distributes a variety of other
undercarriage replacement parts for trucks and trailers, consisting of
suspension, brake, wheel-end and steering products. Approximately 35% of DPI's
sales are related to products manufactured at its plant in Harrisburg,
Pennsylvania. Other products sold by DPI are purchased from third party
manufacturers. DPI sells products to the truck and trailer parts independent
aftermarket under the brand names "Stanley Springs," "Dayton Parts" and "BATCO."
MANUFACTURING OPERATIONS
Original Equipment
Starboard manufactures decorative and functional exterior components.
Starboard's primary manufacturing processes include roll forming, bending,
pierce and end forming, and co-extrusion of steel and PVC. Decorative and
functional parts produced by Starboard are often plated, painted or heat-treated
by third parties before final shipment to the customer. Starboard's decorative
products are utilized as fascias, body side moldings, window trim, pillar
appliques and wheel well trim. Functional parts are used as weather strip
retainers and roof rack components and air dams.
PTI manufactures extruded and injection molded plastic exterior trim products.
The extruded products are manufactured primarily from PVC plastic that is
extruded at high temperatures into parts of varying dimensions. The
injection-molded parts are produced utilizing TPO or PVC plastic compound that
is injected into a product mold at high temperatures. These parts are assembled
before being shipped to the customer. The parts are used primarily for
decorative and styling purposes in the production of passenger cars, light
trucks, minivans, and sport-utility vehicles. PTI manufactures four primary
products: (1) body side moldings, which serve aesthetic and functional purposes
and are affixed to the side of a vehicle; (2) reveal moldings, which surround a
vehicle's windshield and backlight glass and cover the gap between the edge of
the glass and the car body; (3) fascia moldings which are bright or colored
decorative inserts attached to plastic bumpers or claddings and are primarily
aesthetic in nature; and (4) roof ditch moldings, which cover the welded roof
joint, and are primarily aesthetic. During the second half of 1999, PTI
consolidated certain labor intensive finishing operations in-house, which were
previously performed by third-party subcontractors. Thereafter, the Company
discovered that these efforts resulted in a dramatic increase in scrap rates and
labor costs, and deteriorating quality standards, which resulted in the
Company's decision to reverse this consolidation during the first quarter of
2000.
There is no discussion of the manufacturing operations of JPEC and IAF as these
businesses were sold during 1999.
6
Aftermarket
DPI manufactures springs, spring assemblies and spring-related products for the
heavy-duty truck and trailer aftermarket. The Company has the capability of
producing more than 17,000 spring types. These products require heating,
trimming, bending and final heat treatment prior to assembly and painting. This
manufacturing process is similar to the methods used by the OEM spring
manufacturers.
MARKETING, DISTRIBUTION AND CUSTOMERS
Original Equipment
The Company's OEM business supplies products to domestic OEMs either directly or
through Tier 1 suppliers. For the year ended December 31, 2001, 54.7% of the
Company's net sales (for only the operating subsidiaries the Company owned as of
December 31, 2001) were to OEM or Tier 1 customers. Net sales (for only the
operating subsidiaries the Company owned as of December 31, 2001) to significant
customers for the year ending December 31, 2001 were as follows:
General Motors 31.1%
DaimlerChrysler Corporation 19.9%
No other OEM or Tier 1 customer accounts for more than 3% of the Company's net
sales.
Through June 30, 2000, the Company sold its exterior trim products through an
exclusive sales agency, MB Associates, Inc. (MB), that specialized in the
Company's products. On July 1, 2000, the Company paid $1,000, plus other
remuneration, described below, to purchase certain assets and liabilities of MB.
Prior to July 1, 2000, commission expenses were recorded by the Company's Trim
Products Group as selling, general and administrative expenses. In connection
with the purchase of MB, the Company entered into consulting and/or employment
agreements with certain former owners and key members of MB's management team.
Under the terms of these agreements, the Company paid an aggregate of $357,500
at closing and executed notes payable in the aggregate amount of $1,462,500.
These notes require three payments of $487,500 due on June 30 of each of 2001,
2002 and 2003. In addition, the Company issued 20,692 shares of First Series
Preferred Shares which shares were equal in value to $180,000 as a signing bonus
for the individuals who became employees of the Company. These shares were
subsequently redeemed by the Company for cash consideration of $180,000 on June
30, 2001.
The Company works directly with its customers, including the three major U.S.
automobile manufacturers, to design and develop products to satisfy market
demands. Most of the parts the Company produces have lead times of one to four
years from product award to production. The Company has been awarded new
business for each of the 2002-2004 1/2 model years. Because the Company's OEM
business supplies its customers on a "just-in-time" basis and ships its products
when orders are received in the aftermarket business, it does not currently
maintain a backlog.
Aftermarket
The Company distributes springs and spring-related products manufactured by DPI,
as well as other undercarriage replacement parts, including wheel-end products
(such as brake drums, cast spoke wheels, rotors and calipers), brake hardware,
suspension parts (such as hangers, bushings, shocks and suspension kits) and
steering components (such as king pin sets, ball joints, drag links and tie rod
ends).
DPI uses its own sales force to sell products for heavy and medium-duty trucks
and trailers throughout the continental United States, Mexico, Central America
and parts of Canada to approximately 1,200 customers. Although most of DPI's
products are for the repair and maintenance needs of heavy and medium-duty
trucks, trailers and mobile equipment, DPI also sells some products for
light-duty trucks. In addition to on-the-road trucks and trailers, DPI
distributes undercarriage replacement parts for specialty vehicles such as
garbage trucks, cement trucks, construction equipment and farm equipment.
7
DPI sells its products primarily to spring service shops, fleet distributors,
manufacturers of specialty vehicles, warehouse distributors and wheel and rim
distributors. These outlets in turn sell parts to local truck fleets,
redistribute parts to smaller outlets such as local repair garages or install
the parts themselves on the end-users' vehicles.
SEASONALITY
The OEM business experiences seasonal fluctuations that are consistent with
those of other OEM suppliers. The Company typically experiences decreased sales
and operating income from its OEM business during the second half of each year
due to OEM model changeovers and vacation periods.
The aftermarket business is subject to minor seasonal fluctuations, with demand
for aftermarket parts tending to be higher in the second and third quarters
because end-users tend to make more vehicle repairs at those times.
COMPETITION
Original Equipment
The OEM supplier industry is highly competitive and comprised of many companies
of various sizes. Demand for parts and components sold to OEMs is driven by the
demand for sales of new vehicles. The Company believes that the number of such
competitors will decrease in response to the OEMs' pressure for supplier
consolidation. The Company's largest competitors for exterior trim include Magna
International Inc.-Decoma Division, Guardian Industries Corp. and Cooper
Standard. Many of the Company's competitors are divisions or subsidiaries of
companies which are substantially larger and more diversified than the Company.
In addition, many of the Company's competitors have greater financial and other
resources than the Company.
The Company competes for new business both at the beginning of the development
of new models and upon the redesign of existing models. Competitive factors in
the market for the Company's OEM products include quality, reliability, cost,
timely delivery, technical expertise and development capability.
Aftermarket
The truck parts aftermarket in which DPI operates is highly competitive and has
numerous competitors. However, the product line of DPI is narrow and focuses on
specific markets. Some of the Company's more significant competitors are
Triangle Auto Spring Co. and Arvin/Meritor. In addition, some of the Company's
competitors are well-established truck or automotive suppliers which have
greater financial and other resources than the Company. Among the primary
competitive factors affecting this market are price, product fill rates, product
quality, breadth of product line and customer service.
SUPPLIERS AND RAW MATERIALS
The principal raw materials used by DPI and Starboard in their manufacturing
operations are various types and grades of steel, all of which are readily
available. The principal raw materials used by PTI are acrylic foam tape, paint,
PVC, and thermo plastic olefin (TPO) compounds, all of which are readily
available.
During 1998, DPI's primary supplier of heavy and medium-duty brake drums decided
to increase pricing significantly. Since the customers of DPI would not accept a
price increase and DPI will not sell these products at a loss, DPI had
temporarily discontinued the sale of these parts. These parts historically
represented approximately $10 million of annual sales. DPI has located a
replacement source for these parts and began reselling medium duty brake drums
in the first quarter of year 2000.
INTELLECTUAL PROPERTY
The Company has a number of patents and patent applications pending in both the
United States and certain foreign jurisdictions for processes related to its
plastic injection molded products. Notwithstanding its patent portfolio, the
8
Company believes that the design, quality and pricing of its products and its
relations with its customers are substantially more important to its business
than patent protection.
There can be no assurance that patents will be issued from any pending
applications or that any claims allowed from existing or pending patents will be
sufficiently broad to protect the Company's technology. The Company believes
that it is not dependent to any material extent upon any one patent or group of
patents.
GOVERNMENTAL REGULATIONS
The Company is subject to various federal, state, provincial and local laws and
regulations relating to the operation of its businesses and the manufacture of
its products, including those relating to product safety guidelines; generation,
handling and disposal of waste; discharge and emission controls; and protection
of health and the environment. These laws include the Clean Water Act, the Clean
Air Act, the Resource Conservation and Recovery Act ("RCRA") and the
Comprehensive Environmental Response, Compensation and Liability Act in the
United States, together with implementing regulations and similar state laws and
regulations. In part, these laws and regulations govern the manner in which the
Company handles various wastes, discharges, emissions and environmental
conditions at or attributable to its operations or facilities.
Operations at some of the Company's facilities have been and continue to be
sources of emissions and discharges of various materials, including air
emissions from coating and painting operations and discharges of process
wastewaters. For example, various Company facilities have been the sites of
releases of polychlorinated biphenyl-contaminated oil, mineral spirits, fuel and
quench oils and, possibly, other materials. Some of these materials remain at
and about the sites of these facilities. Some of DPI's Harrisburg, Pennsylvania
facilities are believed to be located on a former municipal landfill because
materials associated with municipal landfills have been found at these
facilities. Starboard and the Michigan Department of Environmental Quality have
engaged in discussions regarding groundwater contamination at one of Starboard's
East Tawas, Michigan facilities. While this matter is still pending, the Company
believes that the resolution of this issue would not result in a material
adverse effect on the Company. In addition, at various Company facilities,
substances have been and currently are used that are classified as hazardous
under RCRA or as pollutants, contaminants or hazardous, toxic or regulated
substances under other applicable laws. The parties from whom the Company
acquired its operations have, to various degrees, agreed to limited
indemnification of the Company against some environmental claims under the
various acquisition agreements with the Company, but there can be no assurance
that these indemnities will be adequate to cover all liabilities and expenses
that may arise. Although the Company does not know the amounts of any
liabilities or expenses it may incur in the future in connection with the
investigation or remediation of materials or conditions in connection with the
control of emissions and discharges at its facilities, it does not believe that
these liabilities and expenses will have a material adverse effect on its
financial condition or results of operations.
Developments with regard to laws, regulations and enforcement policies could
result in additional, presently unquantifiable, costs or liabilities to the
Company or might in the future restrict the Company in ways that could require
it to modify, supplement or replace existing equipment and facilities and to
change or cease present methods of operation. Furthermore, laws, regulations and
governmental policies are subject to change and no assurance can be given that
existing laws, regulations and policies will not be amended or that new laws,
regulations and policies will not be adopted that will impose more extensive
regulation, cost or liability on the Company in the future.
EMPLOYEES
The Company had a total of approximately 800 employees on December 31, 2001,
eight of which were located in Canada. Approximately 300 employees were
represented by labor unions, at the Company's PTI Beavercreek operations.
9
ITEM 2. PROPERTIES
The following list indicates by location the principal manufacturing,
distribution and administrative facilities of the Company following the sale of
the subsidiaries previously described. All owned U.S. facilities are subject to
liens under the Company's existing financing arrangement with Comerica Bank:
Building Size
(Approximate Owned or
Primary Use of the Facility Location Square Feet) Leased Segment
--------------------------- -------- ------------ ------ -------
Corporate headquarters Auburn Hills, MI 9,700 Leased Corporate
Corporate headquarters (subleased) Ann Arbor, MI 5,200 Leased Corporate
Manufacturing and administrative East Tawas, MI 100,000 Owned Trim Products
Manufacturing and administrative Beavercreek, OH 105,000 Owned Trim Products
Manufacturing Harrisburg, PA 100,000 Owned Replacement Parts
Distribution and administrative Harrisburg, PA 150,000 Leased Replacement Parts
Distribution and administrative Edmonton, Canada 5,000 Leased Replacement Parts
The Company's buildings, machinery and equipment are in adequate operating
condition, and are suitable and adequate for current production requirements.
The Company's prior Corporate Headquarters in Ann Arbor, Michigan was subleased
to an unrelated third party during April 2000.
ITEM 3. LEGAL PROCEEDINGS
Neither the Company nor any of its subsidiaries is a party to, nor are any of
its properties the subject of, any pending legal proceedings, other than certain
ordinary routine litigation incidental to their businesses, which in the opinion
of management is not material.
From time to time, the Company is subject to claims or litigation incidental to
its business. The Company is not currently involved in any legal proceedings
that indirectly or in the aggregate, are expected to have a material adverse
effect on its business, financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
10
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Through August 5, 1998, the Company's Common Stock traded on the Nasdaq National
Market tier of The Nasdaq Stock Market(SM) under the symbol "JPEI." From that
date forward the Company's Common Stock continues to trade on the OTC Bulletin
Board. The following table indicates the high and low sale prices for the
Company's Common Stock as reported on the OTC Bulletin Board for the last two
years. Such over-the-counter market quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions.
MARKET PRICE
===========================================
QUARTER 2000 2001
------- ---- ----
HIGH LOW HIGH LOW
---- --- ---- ---
First $0.78 $0.06 $0.09 $0.03
Second 0.53 0.13 0.07 0.02
Third 0.84 0.13 0.03 0.03
Fourth 0.17 0.03 0.03 0.01
On March 31, 2002, there were approximately 195 holders of record of the
Company's Common Stock.
The Company has never declared or paid any dividends on shares of Common Stock
or First Series Preferred Shares and, as required by its credit facility, has no
intention of declaring or paying any dividends on shares of Common Stock or
First Series Preferred Shares in the foreseeable future. The Company intends to
retain its earnings, if any, for the development of its business.
11
ITEM 6.
SELECTED FINANCIAL DATA (in thousands, except per share data)
The selected financial data presented below, as of and for the periods ended
December 31, 1997, 1998, May 27, 1999 and December 31, 1999, 2000 and 2001, are
derived from the Company's audited financial statements, and should be read in
conjunction with the Company's audited financial statements and notes thereto
included elsewhere in this Report on Form 10-K (the "Company's Financial
Statements"). The selected financial data set forth below should also be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included in Item 7 of this Report on Form 10-K.
PREDECESSOR COMPANY SUCCESSOR COMPANY
-------------------------------------- ---------------------------------------
JANUARY 1,
1999, MAY 28,
YEARS ENDED THROUGH 1999 YEARS ENDED
DECEMBER 31, MAY 27, THROUGH DECEMBER 31,
----------------------- 1999 DECEMBER 31, -----------------------
1997 1998 RESTATED 1999 2000 2001
--------- --------- --------- --------- --------- ---------
Income statement data:
Net Sales $ 247,539 $ 171,780 $ 24,044 $ 88,081 $ 138,709 $ 122,170
Cost of goods sold 211,120 151,802 17,716 73,448 121,278 108,380
--------- --------- --------- --------- --------- ---------
Gross profit 36,419 19,978 6,328 14,633 17,431 13,790
Selling, general and administrative expenses 26,983 25,583 5,538 12,137 20,236 17,281
Other expense (income) 618 1,886 682 (235) 1,009 1,765
Charge for subsidiaries under court ordered
protection -- 28,490 -- -- -- --
Discontinuance of stamping operations 2,164 -- -- -- -- --
Loss on sale of subsidiary -- 5,190 -- -- -- --
Affiliate companies' (income) loss -- 1,713(1) (8,680)(1) -- -- --
Interest expense, net 10,464 13,085 2,859 2,766 4,646 2,880
--------- --------- --------- --------- --------- ---------
Income (loss) from continuing operations
before income taxes and
extraordinary item (3,810) (55,969) 5,929 (35) (8,460) (8,136)
Income tax expense (benefit) (194) (1,035) 104 75 1,125 (61)
--------- --------- --------- --------- --------- ---------
Income (loss) from continuing operations
before extraordinary item (3,616) (54,934) 5,825 (110) (9,585) (8,075)
Discontinued operations:
Income (loss) from operations of IAF 1,473 1,364 214 -- -- --
Loss on sale of stock of IAF -- -- (2,321) -- -- --
Extraordinary Item:
Forgiveness of debt and liabilities -- -- 18,272 -- -- --
--------- --------- --------- --------- --------- ---------
Net income (loss) (2,143) (53,570) 21,990 (110) (9,585) (8,075)
12
Item 6. SELECTED FINANCIAL DATA (in thousands, except per share data)
PREDECESSOR COMPANY SUCCESSOR COMPANY
-------------------------------------- ----------------------------------------
JANUARY 1,
1999, MAY 28,
YEARS ENDED THROUGH 1999 YEARS ENDED
DECEMBER 31, MAY 27, THROUGH DECEMBER 31,
----------------------- 1999 DECEMBER 31, -----------------------
1997 1998 RESTATED 1999 2000 2001
--------- --------- --------- ----------- --------- ---------
Other comprehensive income (expense):
Foreign currency translation (271) (65) -- -- -- --
adjustment
Unrealized gain on available for sale
securities -- -- -- -- -- 76
--------- --------- --------- -------- -------- ---------
Comprehensive income (loss) $ (2,414) $ (53,635) $ 21,990 $ (110) $ (9,585) $ (7,999)
========= ========= ========= ======== ======== =========
Basic earnings (loss) per share from
continuing operations before
extraordinary item:
Common Shares $ (.79) $ (11.94) $ 1.27 $ -- $ (0.08) $ (0.07)
First Series Preferred Shares -- -- -- (0.05) (4.23) (3.58)
Earnings (loss) per share from
continuing operations before
extraordinary item assuming
dilution:
Common Shares $ (.79) $ (11.94) $ 1.25 $ -- $ (0.08) $ (0.07)
First Series Preferred Shares -- -- -- (0.05) (4.23) (3.58)
Basic earnings (loss) per share:
Common Shares $ (.47) $ (11.64) $ 4.78 $ -- $ (0.08) $ (0.07)
First Series Preferred Shares -- -- -- (0.05) (4.23) (3.58)
Earnings (loss) per share assuming dilution
Common Shares $ (.47) $ (11.64) $ 4.73 $ -- $ (0.08) $ (0.07)
First Series Preferred Shares -- -- -- (0.05) (4.23) (3.58)
Balance sheet data at end of period:
Working capital (deficit) $ (59,181)(2) $ (62,815)(2) $ (50,712)(2) $(12,805)(2) $ 24,500 $ 20,619
Total assets 193,215 76,974 79,498 78,905 67,595 58,372
Long-term debt (excluding current
maturities) 9,272(2) 50(2) 46(2) 246(2) 43,952 42,507
Total liabilities 159,721 97,115 77,084 59,753 57,848 56,804
Total shareholders' equity (deficit) 33,494 (20,141) 2,416 19,152 9,747 1,568
1. Effective in 1998, and through the date of the Investment Transaction, May
27, 1999, the Company has used the equity method of accounting for certain
subsidiaries from the dates of their respective bankruptcy filings. As
such, their assets and liabilities are netted in the balance sheet caption
"Investment in Affiliate Companies," which totaled $14,661 at December 31,
1998, and $37,561 as of May 27, 1999, the date of the Investment
Transaction. The results of operations during the bankruptcy period are
shown in the caption, "Affiliate companies' (income) loss."
2. Working capital and long-term debt reflect the classification of the
Company's outstanding debt as current in the amounts of $103,875, $84,492,
$66,261 and $45,774 at December 31, 1997, December 31, 1998, May 27, 1999
and December 31, 1999 respectively. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Liquidity
and Capital Resources."
13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the consolidated
financial statements and notes thereto to assist in understanding the Company's
results of operations, its financial position, cash flows, capital structure and
other relevant financial information.
RECENT INFORMATION
See discussion under "General and Recent Information" under "Item 1 - Business"
of this Form 10-K.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000
Net sales for business segments comprising the Company's operating locations for
the years ended December 31, 2001 and 2000 were as follows (in thousands):
2000 2001 $ Change % Change
---- ---- -------- --------
Trim Products $ 87,912 $ 66,791 $(21,121) (24.0)%
Replacements Parts 50,797 55,379 4,582 9.0
-------- -------- -------- ----
Total $138,709 $122,170 $(16,539) (11.9)%
The decrease in Trim Products sales of $21,121, or 24.0%, is related to the
completion of product programs for which the Company has not been awarded
replacement business, a decrease in customer orders on specific product programs
and the impact of customer negotiated price concessions. The increase in
Replacement Parts sales of $4,582, or 9.0%, is attributable to an increase in
heavy duty truck repair orders consistent with general market conditions in the
overall heavy duty aftermarket industry.
Gross profit for business segments comprising the Company's operating locations
for the years ended December 31, 2001 and 2000 was as follows (in thousands):
% of Applicable % of Applicable
--------------- ---------------
2000 Net Sales 2001 Net Sales
---- --------- ---- ---------
Trim Products $ 5,146 5.9% $ 723 1.1%
Replacements Parts 12,285 24.2 13,067 23.6
------- ---- ------- ----
Total $17,431 12.6% $13,790 11.3%
The gross profit percentage for the Trim Products segment was 1.1% and 5.9% for
the years ended December 31, 2001 and 2000, respectively. The decrease in gross
profit as a percentage of sales is the result of lower overhead burden
absorption due to lower sales and the impact of customer negotiated price
concessions.
The gross profit percentage for the Replacement Parts segment was 23.6% and
24.2% for the years ended December 31, 2001 and 2000, respectively. The decrease
in gross profit as a percentage of sales is the result of selling price
reductions required to meet competitive market pricing and sales of lower margin
products.
14
Selling, general and administrative expenses (SGA) for business segments
comprising the Company's operating locations were as follows (in thousands):
% of Applicable % of Applicable
--------------- ---------------
2000 Net Sales 2001 Net Sales
---- --------- ---- ---------
Trim Products $ 5,269 6.0% $ 1,889 2.8%
Replacements Parts 9,627 19.0 10,068 18.2
Corporate 5,340 3.8 5,324 4.4
------- ---- ------- ----
Total $20,236 14.6% $17,281 14.1%
SGA for the Trim Products segment was $1,889 or 2.8% of segment sales for 2001
and $5,269 or 6.0% of segment sales for 2000. The decrease in SGA is
attributable to the elimination of the sales commission to MB Associates of
$1,724 as a result of the purchase of its net assets during 2000, and the
subsequent inclusion of the salaries and administrative expenses of the former
MB Associates sales representatives as corporate SGA. The remaining decrease in
SGA is attributable to the headcount reductions and reduced spending at the
Beavercreek, Ohio operation.
SGA for the Replacements Parts segment was $10,068 or 18.2% of segment sales for
2001 and $9,627 or 19.0% of segment sales for 2000. The decrease in SGA as a
percentage of Replacement Parts segment sales is the result of increased sales
for Replacement Parts in 2001.
Corporate administrative costs were $5,324 or 4.4% of Company sales for 2001 and
$5,340 or 3.8% of Company sales for 2000. As a result of the purchase of the net
assets of MB Associates on July 1, 2000, corporate administrative costs for 2000
include six months of salaries and administrative expenses of the former MB
Associates sales representatives, while corporate administrative costs for 2001
include a full year of these salaries and administrative expenses. This increase
in corporate administrative costs in 2001 is, however, offset by headcount
reductions and reduced spending at the Company's Corporate Office. The increase
in corporate administrative costs as a percentage of Company sales is the result
of decreased Company sales in 2001.
Other expenses for 2001 were $1,765. During December 2001, due to unfavorable
operating results at the Beavercreek, Ohio operation, the Company assessed the
net book value of Beavercreek's long-lived assets for impairment. Based on the
assessment, the Company recorded a charge of $1,735, which eliminated all of the
goodwill associated with the Beavercreek operation. Also included in Other
expense for 2001 was the write-off of obsolete equipment at the Beavercreek
operation of $438. In November 2001, Beavercreek's health care provider
converted from a mutual insurance company to a stock insurance company. The
Company received common stock valued at $495 based on the market price on the
date of issuance, which is included as Other income.
Other expense for 2000 of $1,009 relates primarily to the write-off of obsolete
equipment at the Beavercreek operation.
Interest expense for 2001 was $2,880 compared to $4,646 for 2000. The reduction
in interest expense reflects lower borrowing costs of the new bank credit
facility executed during February 2001, as well as a reduction in total bank
borrowing due to the subordinated debt funding, which carries a lower interest
rate than bank borrowing.
Income tax expense (benefit) for 2001 and 2000 was $(61) and $1,125,
respectively. The income tax benefit for 2001 of $61 is due to the reversal of
state income taxes in 2000 of approximately $184.
Income tax expense for 2000 is attributable to the Company's inability to deduct
amortization of goodwill associated with the Investment Transaction as well as
an increase in the Company's valuation reserve of $1 million to eliminate
deferred taxes recorded at May 27, 1999, in connection with the Investment
Transaction.
15
YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999
Managements' discussion and analysis of the results of operations for the year
ended December 31, 2000 compared to the year ended December 31, 1999 has been
structured to compare the results of operations related only to the operating
locations that remain part of the Company at December 31, 2000. To facilitate
this discussion, the information shown below makes the following adjustments to
the Company's income (loss) from continuing operations before income taxes and
extraordinary item: (1) the sale of JPE Canada Inc. in February 1999, and (2)
the consolidation of entities that were previously accounted for under the
equity method (Plastic Trim, Inc. and Starboard Industries, Inc., from September
16, 1998 through May 27, 1999).
RESULTS OF OPERATIONS FOR ASCET OPERATING LOCATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
SUCCESSOR CONSOLIDATION OF
PREDECESSOR COMPANY ENTITIES
COMPANY AS REPORTED ON PREVIOUSLY
AS REPORTED ON FACE OF CARRIED ON ASCET
FACE OF FINANCIAL FINANCIAL DIVESTED EQUITY OPERATING
STATEMENT STATEMENT OPERATIONS (1) METHOD (2) LOCATIONS
--------- --------- -------------- ---------- ---------
Net Sales $ 24,044 $ 88,081 $ -- $ 44,781 $ 156,906
Cost of goods sold 17,716 73,448 -- 38,001 129,165
--------- --------- --------- --------- ---------
Gross profit 6,328 14,633 -- 6,780 27,741
Selling, general and administrative
expenses 5,538 12,137 -- 3,163 20,838
Other expense (income) 682 (235) -- 804 1,251
Affiliate companies' (income) loss (8,680) -- 2,620 6,060 --
Interest expense, net 2,859 2,766 -- 546 6,171
--------- --------- --------- --------- ---------
Income (loss) from continuing
operations before income taxes
and extraordinary item $ 5,929 $ (35) $ (2,620) $ (3,793) $ (519)
========= ========= ========= ========= =========
Net sales for business segments comprising the Company's operating locations for
the years ended December 31, 2000 and 1999 were as follows (in thousands):
1999 2000 $ Change % Change
---- ---- -------- --------
Trim Products $101,086 $ 87,912 $(13,174) (13.0)%
Replacements Parts 55,820 50,797 (5,023) (9.0)
-------- -------- -------- -----
Total $156,906 $138,709 $(18,197) (11.6)%
The decrease in Trim Products sales of $13,174 thousand or 13% is the result of
a revenue decrease related to the completion of product programs for which the
company has not been awarded replacement business. The sales decrease in the
Replacement Parts segment of $5,023 thousand or 9% is attributable to selling
price reductions required to meet competitive market pricing, and general market
conditions in the overall heavy duty aftermarket industry.
16
Gross profit for business segments comprising the Company's operating locations
for the years ended December 31, 2000 and 1999 was as follows (in thousands):
1999 % Net Sales 2000 % Net Sales
---- ----------- ---- -----------
Trim Products $13,359 13.2% $ 5,146 5.9%
Replacements Parts 14,382 25.8 12,285 24.2
------- ---- ------- ----
Total $27,741 17.7% $17,431 12.6%
Trim Products 2000 gross profit decline over 1999 results was attributable to
higher scrap rates, increased freight costs, third party quality inspection
costs and lower labor efficiencies at the Company's Beavercreek, Ohio location.
Management is continuing to address these issues by implementing manufacturing
process improvements, lean manufacturing concepts, staff restructuring and
intensive quality control measures. The 2000 gross profit decline over 1999
results for the Replacement Parts Segment is attributable to discounts offered
to customers to maintain market share in a declining industry.
Selling, general and administrative expenses (SGA) for business segments
comprising the Company's operating locations were as follows (in thousands):
1999 % Net Sales 2000 % Net Sales
---- ----------- ---- -----------
Trim Products $ 6,354 6.3% $ 5,269 6.0%
Replacements Parts 10,976 19.7 9,627 19.0
Corporate 3,508 2.2 5,340 3.8
------- ---- ------- ----
Total $20,838 13.3% $20,236 14.6%
SGA expense for the Trim Products Segment for 2000 was $5,269 thousand or 6% of
sales and $6,354 thousand or 6.3% of sales for 1999. The lower percentage for
2000 is primarily attributable to the elimination of the sales commission to MB
Associates of $1,157 thousand as a result of the sale of certain of its assets
and liabilities to the Company on July 1, 2000. Without this change, SGA expense
for the Trim Products Segment would have been $6,426 thousand or 7.3% of sales
for the year ended December 31, 2000. The increase in SG&A expense for 2000
reflects severance costs and additional salaried personnel at the Company's
Beavercreek location.
SGA expenses for the Replacement Parts Segment for 2000 was $9,627 thousand or
19% of sales, compared to $10,976 thousand or 19.7% of sales for 1999. In the
Replacement Parts Segment, management has reduced its SGA costs to keep pace
with the reduction in sales revenue due to the industry decline.
Corporate administrative costs increased $1,832 thousand or 52.2% over 1999
levels. This increase in corporate administrative costs reflect program
management fees and product development costs related to the Company's Trim
Products segment together with the addition of certain management positions
during 2000, as well as salaries and administrative costs resulting from the
purchase of certain assets and liabilities of MB Associates on July 1, 2000.
Other expense for 2000 of $1,009 or .7% of sales relates primarily to the
Company's write-off of obsolete equipment at the Beavercreek facility. This
compares with 1999 other expense of $1,251 thousand or .8% of sales, which
reflect costs associated with the bankruptcy filings and fees to legal,
professional and financial advisors.
Interest expense related to the Company's operating locations for the year ended
December 31, 2000, was $4,646 thousand compared to $6,171 thousand for 1999.
This lower level of interest expense is primarily attributable to lower
outstanding debt in 2000.
Income tax expense for 2000 and 1999 was $1,125 thousand and $179 thousand,
respectively. Income tax expense for 2000 is attributable to the Company's
inability to deduct amortization of goodwill associated with the Investment
Transaction as well as an increase in the Company's valuation reserve of $1
million to eliminate deferred taxes recorded at May 27, 1999, in connection with
the Investment Transaction. Income tax expense for 1999 relates primarily to
state income taxes applicable to the Company's profitable locations and the
Company's inability to deduct certain bankruptcy costs for U.S. Federal tax
purposes.
17
LIQUIDITY AND CAPITAL RESOURCES
Operating activities provided $4,909 in cash for the year ended December 31,
2001, primarily due to the net decrease of $6,527 in working capital. A decrease
in inventory and an increase in accounts payable were the primary reasons for
the net decrease in working capital. Investing activities used $798 in cash for
the year ended December 31, 2001, primarily due to capital expenditures of $972
offset by proceeds of $191 from the sale of assets. Financing activities used
$1,513 in cash, representing debt repayments.
Since May 27, 1999 and through February 7, 2001, the Company's principal source
of liquidity was a $56.3 million demand loan from Comerica Bank which was
available to fund daily working capital needs in excess of internally generated
funds. On February 7, 2001, the Company entered into a new $33 million revolving
credit facility with Comerica Bank (the "Comerica Facility") which matures
February 1, 2003. The $56.3 million demand loan from Comerica Bank was
terminated on February 7, 2001. Concurrent with the execution of the Comerica
Facility, the Company received a $15 million subordinated demand loan from ASC
Incorporated, an affiliate of the Company, which repaid $15 million of the
Company's $56.3 million demand loan from Comerica Bank.
In connection with the Comerica Facility, the Company signed a promissory note
in the amount of $33 million, providing for borrowing options at a prime based
rate or Eurodollar rate plus various interest rate margins dependent upon the
Company's financial performance beginning January 1, 2002. For 2001 and through
March 31, 2002, the Company's margin on prime based loans and Eurodollar loans
is 1/4% and 2 1/4%, respectively. Eurodollar borrowings for 1 month to 6 months
are permitted at the option of the Company. Advances under the Comerica Facility
are subject to a borrowing base restriction equal to 85% of eligible OEM trade
receivables, 80% of all other eligible trade receivables, 50% of eligible
inventory (up to $9 million), plus an overformula amount of $10 million. The
overformula amount decreases semiannually over a four year period. The initial
reduction of $1 million occurred on September 1, 2001. All advances are fully
secured by the Company's net assets.
Required covenants under the Comerica Facility include submission of monthly and
annual financial statements and annual financial projections during a prescribed
period. Quarterly financial covenants include an interest coverage ratio for
2001 to date performance commencing September 30, 2001, and a Senior Debt to
EBITDA ratio no greater than 5 to 1 as of December 31, 2001. Both covenants
exclude the effect of the $15 million subordinated demand note from ASC
Incorporated. In addition, the payment of dividends is prohibited by the terms
of the Comerica Facility.
As of September 30, 2001, the Company was not in compliance with the interest
coverage ratio covenant of the Comerica Facility. As of December 31, 2001, the
Company was not in compliance with both the interest coverage ratio covenant and
the Senior Debt to EBITDA ratio covenant of the Comerica Facility. On April 16
2002, the Company's Comerica Facility was amended, and the September 30, 2001
and December 31, 2001 defaults were waived. The Senior Debt to EBITDA ratio
covenant was removed and the interest coverage ratio covenant was reset for 2002
year to date performance with June 30, 2002 as the first measurement date.
Interest rates were reset based upon the interest coverage ratio using the
Company's financial performance beginning January 1, 2002. The revolving credit
commitment amount was decreased from $33 million to $30 million as the Company
believes $30 million is adequate for its liquidity requirements through the
remaining term of the loan. In consideration of the amendments and waivers, the
Company has agreed to pay Comerica Bank a nonrefundable amendment and waiver fee
of $187,500.
The Company's $15 million subordinated demand note to ASC Incorporated dated
February 7, 2001 is subordinated as to creditor rights and security to the
Comerica Facility. Interest is payable monthly commencing March 1, 2001 at ASC
Incorporated's cost of borrowing. ASC Incorporated has agreed not to call the
Note through at least January 1, 2003. Further, the Comerica Facilities
prohibits any payments to ASC Incorporated at non arm's length amounts, without
prior consent. The April 16, 2002 amendment to the Comerica Facility prohibits
the Company from paying interest to ASC Incorporated on the $15 million note.
Borrowings at December 31, 2001 under the Company's $33 million revolving credit
facility were $27 million, with unused borrowing capacity of $1.7 million (based
on the borrowing base advance restrictions).
On February 7, 2001, concurrent with the execution of the Comerica Facility, the
Company entered into a new $3 million Revolving Line of Credit Note with ASC
Incorporated. This Note is subordinated to the Company's borrowings and advances
under the Comerica Facility and bears interest at a rate equal to the cost of
borrowing of ASC Incorporated. As of December 31, 2001, there were no advances
made under this Note.
Together with internally generated cash flow, the Company believes the Comerica
Facility and notes with ASC Incorporated are adequate to provide working capital
funding during the course of the year, except in the event of a sustained
cyclical downturn in the automotive industry.
18
RECENTLY ISSUED STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS
In the first quarter of 2002, the Company will adopt FAS 141, Business
Combinations, and FAS 142, Goodwill and Other Intangible Assets. The adoption of
FAS 141 is expected to have no impact on the company as acquisitions have
typically been accounted for under purchase accounting. Under FAS 142, periodic
amortization of goodwill is not included as a deduction to arrive at net income,
which will result in the elimination of amortization charges of approximately
$132 (net of Beavercreek goodwill previously written-off) during fiscal 2002.
During 2002, the Company will perform the first of the impairment tests of
goodwill as of January 1, 2002. It has not been determined what effect, if any,
these tests will have on the earnings and financial position of the company.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
MARKET RISK
The Company's sales volumes have remained steady during the last quarter of 2001
and throughout the first quarter of 2002. Although most underlying fundamentals
remain strong, the impact of the OEM vehicle manufacturers to rebalance
inventories, the continuance of rebates and reduced customer financing rates and
the trend of retail sales and other uncertainties may adversely impact the
Company's 2002 financial performance.
Furthermore, in the normal course of business the Company is subject to market
exposures from changes in interest rates. The Company's variable interest
expense is sensitive to changes in the general level of United States and
European interest rates. The Company's Comerica Facility reduces its borrowing
costs for 2001 through March 31, 2002 to the bank's prime rate plus 1/4% or
Eurodollar rates plus 2 1/4%. As such, future borrowings under the Comerica
Facility are sensitive to changes in interest rates. At December 31, 2001, the
weighted average interest rate of the $43.0 million debt was 6.9% and the fair
value of the debt approximates its carrying value.
The Company had interest expense of $2.88 million for the year ended December
31, 2001. The potential increase in interest expense from a hypothetical 2%
adverse change, assuming the December 31, 2001 debt was outstanding for the
entire year, would be $840 thousand.
19
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
INDEX TO FINANCIAL STATEMENTS
-------------------
Page
----
Report of Independent Auditors 21
Consolidated Balance Sheets as of December 31, 2000 and 2001 22
Consolidated Statements of Operations 23
For the Years Ended December 31, 2000 and 2001 and the
Periods January 1, 1999 through May 27, 1999 (PREDECESSOR COMPANY)
and May 28, 1999 through December 31, 1999 (SUCCESSOR COMPANY)
Consolidated Statements of Shareholders' Equity 24
For the Years Ended December 31, 2000 and 2001 and the
Periods January 1, 1999 through May 27, 1999 (PREDECESSOR COMPANY)
and May 28, 1999 through December 31, 1999 (SUCCESSOR COMPANY)
Consolidated Statements of Cash Flows 26
For the Years Ended December 31, 2000 and 2001 and the
Periods January 1, 1999 through May 27, 1999 (PREDECESSOR COMPANY)
and May 28, 1999 through December 31, 1999 (SUCCESSOR COMPANY)
Notes to Consolidated Financial Statements 27
20
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Shareholders of JPE, Inc.
(d/b/a ASCET INC and ASC Exterior Technologies)
We have audited the accompanying consolidated balance sheets of JPE, Inc. (d/b/a
ASCET INC and ASC Exterior Technologies) as of December 31, 2001 and 2000, and
the related consolidated statements of operations, shareholders' equity, and
cash flows for the years ended December 31, 2001 and 2000 and for the period
from May 28, 1999 to December 31, 1999 and as to its predecessor (see Note 1)
for the period from January 1, 1999 to May 27, 1999. Our audits also included
the financial statement schedule listed in the index at Item 14(a). These
financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of JPE, Inc. (d/b/a
ASCET INC and ASC Exterior Technologies) at December 31, 2001 and 2000, and the
consolidated results of its operations and its cash flows for the years ended
December 31, 2001 and 2000 and for the period from May 28, 1999 to December 31,
1999 and the consolidated results of its predecessor's operations and its
predecessor's cash flows for the period from January 1, 1999 to May 27, 1999, in
conformity with accounting principles generally accepted in the United States.
Also, in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
As more fully described in the notes to the consolidated financial statements,
effective May 27, 1999, an investment was made in the Company in exchange for a
95% voting equity interest. The Company's assets, liabilities and capital
structure have been adjusted to reflect estimated fair value as of May 28, 1999.
As a result, the consolidated financial statements as of December 31, 2001 and
2000, and for the years ended December 31, 2001 and 2000 and for the period May
28, 1999 to December 31, 1999 are not comparable to the Company's predecessor's
consolidated financial statements.
/s/ Ernst & Young LLP
Detroit, Michigan
March 1, 2002
Except for note 6, as to
which the date is
April 16, 2002
21
JPE, INC. (D/B/A/ ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
CONSOLIDATED BALANCE SHEETS
at December 31,
(amounts in thousands, except share data)
--------------
ASSETS
2000 2001
-------- --------
Current assets:
Cash and cash equivalents $ 196 $ 2,794
Available for sale securities -- 571
Accounts receivable, net of allowance for doubtful accounts of $984
and $869 at December 31, 2000 and 2001, respectively 14,506 12,707
Inventory 22,269 17,788
Other current assets 1,405 1,056
-------- --------
Total current assets 38,376 34,916
Property, plant and equipment, net 23,582 20,675
Goodwill, net 3,630 1,626
Other assets 2,007 1,155
-------- --------
Total assets $ 67,595 $ 58,372
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 611 $ 543
Accounts payable 8,722 11,101
Accrued liabilities 4,319 2,606
Income taxes 224 47
-------- --------
Total current liabilities 13,876 14,297
Other liabilities 20 --
Long-term debt 43,952 42,507
-------- --------
Total liabilities 57,848 56,804
-------- --------
Shareholders' equity:
Warrants 293 --
First Series Preferred Shares, no par value, 50 votes per share,
3,000,000 authorized, 1,993,694 and 1,973,002 shares issued and
outstanding at December 31, 2000 and 2001, respectively. 16,770 16,590
Common stock, no par value, one vote per share, 15,000,000 authorized,
14,043,600 shares issued and outstanding at December 31, 2000 and
2001, respectively 2,379 2,672
Accumulated other comprehensive income -- 76
Accumulated deficit (9,695) (17,770)
-------- --------
Total shareholders' equity 9,747 1,568
-------- --------
Total liabilities and shareholders' equity $ 67,595 $ 58,372
======== ========
The accompanying notes are an integral part
of the consolidated financial statements.
22
JPE, INC. (D/B/A/ ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except share data)
--------------
PREDECESSOR
COMPANY SUCCESSOR COMPANY
------------ -----------------------------------------------------
JANUARY 1, MAY 28, 1999 FOR THE YEAR FOR THE YEAR
1999 THROUGH ENDED ENDED
THROUGH DECEMBER 31, DECEMBER 31, DECEMBER 31,
MAY 27, 1999 1999 2000 2001
------------ ---- ---- ----
Net sales $ 24,044 $ 88,081 $ 138,709 $ 122,170
Cost of goods sold 17,716 73,448 121,278 108,380
--------- --------- --------- ---------
Gross profit 6,328 14,633 17,431 13,790
Selling, general and administrative expenses 5,538 12,137 20,236 17,281
Other expense (income) 682 (235) 1,009 1,765
Affiliate companies' income (8,680) -- -- --
Interest expense, net 2,859 2,766 4,646 2,880
--------- --------- --------- ---------
Income (loss) from continuing operations before
income taxes and extraordinary item 5,929 (35) (8,460) (8,136)
Income tax expense (benefit) 104 75 1,125 (61)
--------- --------- --------- ---------
Income (loss) from continuing operations before
extraordinary item 5,825 (110) (9,585) (8,075)
Discontinued operations:
Income from operations of IAF 214 -- -- --
Loss on sale of stock of IAF (2,321) -- -- --
Extraordinary Item:
Forgiveness of debt and liabilities 18,272 -- -- --
--------- --------- --------- ---------
Net income (loss) $ 21,990 $ (110) $ (9,585) $ (8,075)
--------- --------- --------- ---------
Basic earnings (loss) per share from continuing
operations before extraordinary item:
Common Shares $ 1.27 $ -- $ (0.08) $ (0.07)
First Series Preferred Shares -- (0.05) (4.23) (3.58)
Earnings (loss) per share from continuing
operations before extraordinary item
assuming dilution:
Common Shares $ 1.25 $ -- $ (0.08) $ (0.07)
First Series Preferred Shares -- (0.05) (4.23) (3.58)
Basic earnings (loss) per share:
Common Shares $ 4.78 $ -- $ (0.08) $ (0.07)
First Series Preferred Shares -- (0.05) (4.23) (3.58)
Earnings (loss) per shares assuming dilution:
Common Shares $ 4.73 $ -- $ (0.08) $ (0.07)
First Series Preferred Shares -- (0.05) (4.23) (3.58)
The accompanying notes are an integral part
of the consolidated financial statements.
23
JPE, INC. (D/B/A/ ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the periods ended
(amounts in thousands, except share data)
--------------
PREDECESSOR COMPANY
FOR THE PERIOD JANUARY 1, 1999 THROUGH MAY 27, 1999
----------------------------------------------------------------------------------------
NET INCOME
BALANCE AT FOREIGN ISSUANCE FOR THE PERIOD BALANCES AT
JANUARY 1, CURRENCY TO THE JANUARY 1 TO MAY 27,
1999 TRANSLATION BANK GROUP MAY 27, 1999 1999
---- ----------- ---------- ------------ ----
Warrants:
Warrants Outstanding -- 77,438 77,438
Amount -- $ 54 $ 54
First Series Preferred Shares:
Shares Outstanding -- 20,650 20,650
Amount -- $ 177 $ 177
Common Stock:
Shares Outstanding 4,602,180 4,602,180
Amount $ 28,051 $ 28,051
Accumulated Other Comprehensive Loss $ (336) $ 336 --
Accumulated (Deficit) $ (47,856) $ $ $ 21,990 $ (25,866)
------------ ----------- --------- ----------- -----------
Total Shareholders' Equity $ (20,141) $ 336 $ 231 $ 21,990 $ 2,416
============ =========== ========= =========== ===========
SUCCESSOR COMPANY
FOR THE PERIOD MAY 28, 1999 THROUGH DECEMBER 31, 1999
----------------------------------------------------------------------------------------
NET LOSS
BALANCE AT INVESTMENT SHAREHOLDERS FOR THE PERIOD BALANCES AT
MAY 28, FROM NEW BASIS MAY 28 TO DECEMBER 31,
1999 SHAREHOLDERS CHANGE DECEMBER 31, 1999 1999
---- ------------ ------ ----------------- ----
Warrants:
Warrants Outstanding 77,438 345,163 422,601
Amount $ 54 $ 239 $ 293
First Series Preferred Shares:
Shares Outstanding 20,650 1,952,352 1,973,002
Amount $ 177 $ 16,413 $ 16,590
Common Stock:
Shares Outstanding 4,602,180 9,441,420 14,043,600
Amount $ 28,051 $ 2,287 $ (27,959) $ 2,379
Accumulated (Deficit) $ (25,866) $ 25,866 $ (110) $ (110)
------------ ----------- --------- ----------- -----------
Total Shareholders' Equity $ 2,416 $ 18,700 $ (1,854) $ (110) $ 19,152
============ =========== ========= =========== ===========
24
JPE, INC. (D/B/A/ ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the periods ended
(amounts in thousands, except share data)
--------------
SUCCESSOR COMPANY
FOR THE YEAR ENDED DECEMBER 31, 2000
----------------------------------------------------------------------------------------
NET LOSS
BALANCE AT INVESTMENT SHAREHOLDERS FOR THE PERIOD BALANCES AT
JANUARY 1, FROM NEW BASIS ENDED DECEMBER DECEMBER 31,
2000 SHAREHOLDERS CHANGE 31, 2000 1999
---- ------------ ------ ----------------- ----
Warrants:
Warrants Outstanding 422,601 422,601
Amount $ 293 $ 293
First Series Preferred Shares:
Shares Outstanding 1,973,002 20,692 1,993,694
Amount $ 16,590 $ 180 $ 16,770
Common Stock:
Shares Outstanding 14,043,600 14,043,600
Amount $ 2,379 $ 2,379
Accumulated (Deficit) $ (110) $ (9,585) $ (9,695)
------------ ----------- --------- ----------- -----------
Total Shareholders' Equity $ 19,152 $ 180 $ 0 $ (9,585) $ 9,747
============ =========== ========= =========== ===========
SUCCESSOR COMPANY
FOR THE YEAR ENDED DECEMBER 31, 2001
-------------------------------------------------------------------------------
NET LOSS
REDEMPTION FOR THE PERIOD UNREALIZED BALANCE AT
BALANCE AT OF ENDED GAIN ON DECEMBER
JANUARY 1, SHAREHOLDER EXPIRATION DECEMBER 31, AVAILABLE FOR 31,
2001 INTERESTS OF WARRANTS 2001 SALE SECURITIES 2001
---- --------- ----------- ---- --------------- ----
Warrants:
Warrants Outstanding 422,601 (422,601)
Amount $ 293 (293)
First Series Preferred Shares:
Shares Outstanding 1,993,694 (20,692) 1,973,002
Amount $ 16,770 $ (180) $ 16,590
Common Stock:
Shares Outstanding 14,043,600 14,043,600
Amount $ 2,379 $ 293 $ 2,672
Accumulated Other
Comprehensive Income $ -- $ 76 $ 76
Accumulated (Deficit) $ (9,695) $ (8,075) $ (17,770)
------------ ----------- --------- ----------- -------- ------------
Total Shareholders' Equity $ 9,747 $ (180) $ 0 $ (8,075) $ 76 $ 1,568
============ =========== ========= =========== ======== ============
The accompanying notes are an integral part
of the consolidated financial statements.
25
JPE, INC. (D/B/A/ ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the periods ended
(amounts in thousands)
------------
PREDECESSOR
COMPANY SUCCESSOR COMPANY
------------ --------------------------------------------
MAY 28, 1999 FOR THE FOR THE
JANUARY 1, THROUGH YEAR ENDED YEAR ENDED
1999 THROUGH DECEMBER 31, DECEMBER 31, DECEMBER 31,
MAY 27, 1999 1999 2000 2001
------------ ---- ---- ----
Cash flows from operating activities:
Net income (loss) $ 21,990 $ (110) $ (9,585) $ (8,075)
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities:
Extraordinary items, forgiveness of debt and liabilities (18,272) -- -- --
Depreciation and amortization 1,250 2,045 3,514 3,963
Loss on sale of subsidiary 2,549 -- -- --
Write-down of subsidiaries' assets -- -- 1,009 772
Affiliate companies' income (8,680) -- -- --
Charge for impairment of Goodwill -- -- -- 1,735
Other 98 -- (16) (13)
Changes in operating assets and liabilities:
Available for sale securities -- -- -- (571)
Accounts receivable (2,204) 1,283 5,699 1,799
Inventory 657 (1,675) 320 4,481
Other current assets 422 1,420 (9) 349
Accounts payable 2,065 (1,425) 416 2,379
Accrued liabilities and income taxes (570) (805) 1,017 (1,910)
Deferred income taxes 2 (101) 1,000 --
-------- -------- -------- --------
Net cash provided by (used for) operating activities (693) 632 3,365 4,909
-------- -------- -------- --------
Cash flows from investing activities:
Purchase of property and equipment (238) (1,569) (1,392) (972)
Purchase of MB Associates -- -- (1) --
Other -- (50) 8 (17)
Cash proceeds from sale of property and equipment -- -- 600 191
Cash proceeds from sale of subsidiary 20,000 -- -- --
Cash loaned to equity investees (13,980) -- -- --
-------- -------- -------- --------
Net cash provided by (used for) investing activities 5,782 (1,619) (785) (798)
-------- -------- -------- --------
Cash flows from financing activities:
Borrowing of demand loan from affiliate -- -- -- 15,000
Repayment of demand loan to Bank -- -- -- (15,000)
Net borrowings (repayments) of revolving credit facility -- 45,774 (2,900) (874)
Repayments of other debt (6) (73) (123) (639)
Net repayments under revolving loan (1,742) (66,257) -- --
Issuance of First Series Preferred Shares 1 16,413 -- --
Issuance of Common Stock -- 2,033 -- --
-------- -------- -------- --------
Net cash provided by (used for) financing activities (1,747) (2,110) (3,023) (1,513)
-------- -------- -------- --------
Cash and cash equivalents:
Net increase (decrease) in cash 3,342 (3,097) (443) 2,598
Cash, beginning of period 394 3,736 639 196
-------- -------- -------- --------
Cash, end of period $ 3,736 $ 639 $ 196 $ 2,794
======== ======== ======== ========
The accompanying notes are an integral part
of the consolidated financial statements
26
JPE, INC. (D/B/A/ ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
---------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
FINANCIAL STATEMENT PRESENTATION - The preparation of financial
statements in conformity with accounting principles generally accepted
in the United States requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
RESTRUCTURING OF JPE, INC. - On May 27, 1999 in accordance with the
terms of an Investment Agreement (the "Investment Agreement") among
JPE, Inc., ASC Holdings LLC ("ASC") and Kojaian Holdings LLC
("Kojaian") dated April 28, 1999 the Company issued 1,952,352.19 shares
of First Series Preferred Shares on May 27, 1999 (the "Closing Date"),
in equal proportions to ASC and Kojaian for an aggregate purchase price
of $16,413 payable in cash. Each First Series Preferred Share possesses
voting and equity rights equal to 50 shares of common stock of the
Company. In addition, the Investment Agreement provided that the
shareholders of record of JPE, Inc. common stock on June 11, 1999 (the
"Record Date") were entitled to receive warrants to purchase First
Series Preferred Shares (the "Warrants"). Each holder of common stock
received .075 Warrants for each share of common stock held on the
record date, and each full Warrant entitled the holder to purchase one
First Series Preferred Share. The Warrants were distributed as a
dividend to such shareholders. The Warrants carried an initial exercise
price of $9.99 per First Series Preferred Share, subject to price
adjustments based on the Final Actual EBITDA and the cost of certain
environmental remediation for a 24 month period beginning on the
closing date of the Investment Transaction, as defined below. The
Warrants were exercisable for the 90 day period following the providing
of notice by the Company to the holders thereof of the Final Actual
EBITDA.
In accordance with the Investment Agreement, the warrant exercise price
was set at $8.16 per First Series Preferred Share. On July 6, 2001, the
Company notified the warrant holders of their rights to exercise their
warrants at $8.16 per First Series Preferred Share. The warrants were
exercisable for a 90 day period commencing July 6, 2001 and expiring on
October 4, 2001. At the expiration of the warrant exercise period on
October 4, 2001, none of the Warrant holders had exercised their
warrants.
In addition, on May 27, 1999 ASC and Kojaian (in equal proportions)
subscribed and paid for 9,441,420 newly issued shares of common stock
for an aggregate purchase price of $1,987 payable in cash. These newly
issued shares of common stock were distributed to ASC and Kojaian on
June 12, 1999.
As a precondition to consummation of the above transaction, the
Company's existing bank lenders (the "Bank Group") agreed on May 27,
1999 to a $16.5 million forgiveness of the Company's existing bank
debt, under the terms of the Company's Forbearance Agreement dated
August 10, 1998, as amended. In consideration for the debt forgiveness
and pursuant to the Investment Agreement, the Company issued 20,650.115
shares of First Series Preferred Shares to the Bank Group on May 27,
1999 for $1 of consideration (see Note 15). In addition, the Company
granted the existing bank lenders 77,437.937 Warrants (which Warrants
contain the same terms and conditions as granted to the shareholders of
common stock of the Company on the Record Date), except the exercise
price for each First Series Preferred Share is approximately $8.16 per
share.
The immediate effect of these transactions transferred (a)
approximately 47.5% of the voting securities of the Company to Kojaian,
(b) approximately 47.5% of the voting securities of the Company to ASC,
and (c) approximately 1% of the voting securities of the Company to the
Bank Group (these transactions are hereafter referred to as the
"Investment Transaction"). The remaining amount of the voting
securities continues to be held by the public shareholders of the
Company. Thus, as of December 29, 1999 ASC and Kojaian together
beneficially owned approximately 95% of the voting securities of the
Company, and
27
JPE, INC. (D/B/A/ ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
---------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:
assuming the exercise of all of the Warrants, would have beneficially
owned approximately 80% of the voting securities of the Company.
Pursuant to the terms of a letter agreement (the "Letter Agreement")
dated August 30, 1999 among ASC and the sole member of ASC (Heinz C.
Prechter) and Kojaian and the members of Kojaian (Mike Kojaian and C.
Michael Kojaian), Heinz C. Prechter agreed to purchase (through ASC or
otherwise) 4,720,710 common shares and 976,176.095 First Series
Preferred Shares of JPE, Inc. from Kojaian for $9.2 million. The Letter
Agreement was subject to the conditions precedent of (i) obtaining the
consent of Comerica Bank, the Company's lender, and (ii) the
termination of the applicable waiting period under the
Hart-Scott-Rodino Act. On December 30, 1999, the last of the conditions
precedent was fulfilled, and on such date the Letter Agreement was
consummated.
Upon consummation of the Letter Agreement, ASC directly and Heinz C.
Prechter, indirectly through ASC, owned a total of 9,441,420 common
shares and 1,952,353.19 First Series Preferred Shares of JPE, Inc.,
constituting approximately 95% of the beneficial interests of the
Company. In addition, the Shareholders Agreement dated May 27, 1999
which included provisions, addressing among other things, the
nomination, election, and voting of members to the Board of Directors
was terminated upon the execution of the Letter Agreement.
In connection with the closing of the Investment Transaction on May 27,
1999, the Company entered into a Consulting Services Agreement with ASC
which requires payment of $250 annually, payable monthly, for
consulting services provided by ASC with respect to various business,
operating, management, and financial matters. In addition, the Company
is required to pay ASC an additional fee equal to 2% of the excess of
the final EBITDA over the targeted EBITDA, (both defined in the
Investment Agreement) for the 24 month period ending after the closing
date of the Investment Transaction.
PRINCIPLES OF CONSOLIDATION - The accompanying consolidated financial
statements include the accounts of JPE, Inc. (the "Company"), and its
wholly-owned subsidiaries, Dayton Parts, Inc. ("Dayton Parts"),
Allparts, Inc. ("Allparts"), SAC Corporation ("Starboard"), Industrial
& Automotive Fasteners, Inc. ("IAF"), Plastic Trim, Inc. ("PTI") and
JPE Canada Inc. ("JPEC"). The stock of the Company's IAF subsidiary
was sold March 26, 1999, as more fully described in Note 13. During the
third quarter of 1998, three of the Company's subsidiaries were placed
under court ordered protection. On September 15, 1998, PTI and
Starboard filed voluntary petitions for relief under Chapter 11 of the
Federal Bankruptcy Code in the United States Bankruptcy Court for the
Eastern Division of Michigan. On August 27, 1998, the Ontario Court
(General Division) Commercial List issued an order to appoint an
Interim Receiver for JPEC pursuant to Section 47 of the Bankruptcy and
Insolvency Act of Canada. On February 8, 1999, the net assets of JPEC
were sold, to the Ventra Group, as more fully described in Note 11.
Under these conditions, generally accepted accounting principles do not
allow the Company to consolidate these subsidiaries from the dates of
their respective filings. The Company has utilized the equity method of
accounting in preparing the financial statements for that portion of
the 1999 year beginning January 1, 1999 and ending May 27, 1999, the
date of the Investment Transaction. The remaining subsidiaries were
included in the Company's Investment Transaction, as more fully
described above. All significant intercompany accounts and transactions
with the consolidated subsidiaries have been eliminated in the
preparation of the consolidated financial statements.
On July 1, 2000 the Company paid $1 plus other remuneration described
below, to purchase certain assets and liabilities of MB Associates,
Inc. ("MB"). MB was the exclusive sales representative for the
Company's Trim Products Group. Prior to July 1, 2000, commission
expenses were recorded by the
28
JPE, INC. (D/B/A/ ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
---------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:
Company's Trim Products Group as selling, general and administrative
expenses. In connection with the purchase of MB, the Company entered
into consulting and/or employment agreements with certain former owners
and key members of MB's management team. Under the terms of these
agreements, the Company paid an aggregate of $358 at closing and
executed notes payable in the aggregate amount of $1,463. These notes
require three payments of $488 due on June 30 of each of 2001, 2002 and
2003. In addition, the Company issued First Series Preferred Shares
which shares are equal in value to $180 as a signing bonus for the
individuals who became employees of the Company. The transaction was
accounted for as a purchase.
Due to the events described above and the Investment Transaction, which
resulted in the Company's assets, liabilities, and new capital
structure being adjusted to reflect estimated fair values as of May 28,
1999, the consolidated financial statements of the Successor Company
are not comparable to the consolidated financial statements of the
Predecessor Company.
BUSINESS - JPE, Inc. (d/b/a ASCET INC and d/b/a ASC Exterior
Technologies) is a manufacturer and distributor of automotive and truck
components for the original equipment manufacturers and the replacement
parts markets principally in North America. Total sales for the year
ended December 31, 2001 were approximately 54.7% for trim products, and
45.3% for the replacement parts markets. The Company's fastener
business, IAF was sold during 1999, and as such is accounted for as a
discontinued operation.
REVENUE RECOGNITION - The Company recognizes sales revenue upon passage
of title which is generally upon shipment of products to customers.
SHIPPING AND HANDLING COSTS -- The Company classifies such costs as
cost of sales.
CONCENTRATION OF CREDIT RISK - Accounts receivable of the Company,
which represent the principal concentration of credit risk, result from
sales to companies in the automotive, light truck and heavy duty truck
original equipment and aftermarket industries. Credit is extended based
upon an evaluation of the customer's financial condition and collateral
is not required from customers.
AVAILABLE FOR SALE SECURITIES -- Securities are stated at fair market
value at December 31, 2001. Unrealized gains on these securities, which
are recorded in Accumulated Other Comprehensive Income, aggregate $76.
Comprehensive loss for the year ended December 31, 2001 was $7,999.
INVENTORY - Inventory is valued at the lower of cost or market using
the first-in, first-out ("FIFO") method.
PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION - Property, plant and
equipment are recorded at cost. As a result of the May 27, 1999
Investment Transaction change in control, costs were assigned to
property, plant, and equipment based on the fair value of such assets
on the date of the change in control. Improvements are capitalized, and
expenditures for maintenance and repairs are charged to operations as
incurred. Gains or losses on sales and retirements of properties are
included in the determination of the results of operations. Provisions
for depreciation of property, plant, and equipment have been computed
using the straight-line method based on estimated useful lives of the
related assets.
GOODWILL - Goodwill was recorded as of the date of the Investment
Transaction to adjust to the fair value of the Company's assets and is
amortized over a 15 year life. Accumulated amortization at December 31,
29
JPE, INC. (D/B/A/ ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
---------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued:
2000 and 2001 was $430 and $2,434, respectively. The recoverability of
goodwill is evaluated each year to include an assessment of conditions
that would result in an impairment charge, which include loss of major
customers, lower margin business, labor issues, and customer sourcing
and cost cutting issues. During December 2001, due to unfavorable
operating results at the Beavercreek, Ohio operation (a Trim product
segment), the Company assessed the net book value of long-lived assets
for impairment. Based on this assessment, the Company recorded a charge
of $1,735, which eliminated all of the goodwill associated with the
Beavercreek operation. This impairment charge was determined based on
an estimate of the discounted cash flows from the assets at the
Beavercreek operation and is included within "other expenses (income)"
in the accompanying statement of operations.
EARNINGS PER SHARE - The issuance of the First Series Preferred Shares
resulted in the Successor Company having a participating security. In
accordance with Statement of Financial Accounting Standards No. 128-
Earnings per Share, the "two class" method is used for computing
earnings per share. Under this method, an earnings allocation formula
is used to determine the amount of earnings allocated to each class of
stock. Based on the participating rights of the First Series Preferred
Shares approximately 87.5% of the earnings will be allocated to these
shares and 12.5% of earnings to the Common Stock. For the periods ended
December 31, 2000 and 2001, shares outstanding for the computation of
basic earnings per share were 14,043,600 common shares and weighted
average shares outstanding for the First Series Preferred Shares were
1,983,433.04 and 1,973,002.305, respectively. Earnings per share
assuming dilution requires the Company to use the treasury method for
stock options and warrants. The Common Stock options outstanding for
the periods presented had exercise prices that were in excess of the
market price and therefore had no effect on the computation assuming
dilution. The warrants for the First Series Preferred Shares which
would have had the effect of increasing the denominator in the earnings
per share calculation by 39,672 shares, for the year ended December 31,
2000, were excluded because the effect is anti-dilutive. These warrants
expired unexercised during the year ended December 31, 2001. Earnings
per share for the period January 1, 1999 through May 27, 1999 was
computed based on 4,602,180 shares outstanding and 43,296 equivalent
shares related to stock options having a dilutive effect
STOCK BASED COMPENSATION - Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation," encourages, but
does not require companies to record compensation cost for stock-based
employee compensation plans at fair value. The Company has elected to
continue to measure compensation costs using the intrinsic value method
prescribed in Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," and related Interpretations.
Accordingly, compensation cost for stock options is measured as the
excess of the quoted market price of the Company's stock at the date of
grant over the amount an employee must pay to acquire the stock.
CASH AND CASH EQUIVALENTS - Cash and cash equivalents include
investments in highly liquid instruments with a maturity of three
months or less.
30
JPE, INC. (D/B/A/ ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
---------
2. INVENTORY:
Inventory, net of reserves, consisted of the following at December 31:
2000 2001
------- -------
Raw materials $ 5,413 $ 4,957
Work in process and components 1,698 1,356
Finished goods 12,148 10,119
Tooling 3,010 1,356
------- -------
$22,269 $17,788
======= =======
3. INVESTMENT IN U.S. AFFILIATE COMPANIES:
JPE's subsidiaries, PTI and Starboard were debtors-in-possession under
Chapter 11 of the Federal Bankruptcy Code. Under these conditions,
generally accepted accounting principles do not allow the Company to
consolidate these subsidiaries from the date of filing their voluntary
petitions with the Bankruptcy Court through the date of the Investment
Transaction, May 27, 1999. On February 25, 1999, both subsidiaries
filed a Plan of Reorganization and Disclosure Statement with the Court,
which was confirmed by the Bankruptcy Court on April 16, 1999. As a
result, these two subsidiaries emerged from Chapter 11 on that date,
contingent upon the closing of the Investment Transaction on May 27,
1999. Note 1 describes details of the Investment Transaction.
The results of operations for these subsidiaries since their filing
date have been recorded on the equity method through the date of the
Investment Transaction. Summarized statements of operations from
January 1, 1999 to May 27, 1999 are as follows (amounts in thousands):
January 1, 1999 to May 27, 1999: Starboard PTI Total
--------- --- -----
Net sales $11,109 $33,672 $44,781
Cost of sales 8,409 29,592 38,001
------- ------- -------
Gross profit 2,700 4,080 6,780
Selling, general and administrative expense 591 2,572 3,163
Other reorganization expenses 180 624 804
------- ------- -------
Income (loss) before interest and taxes 1,929 884 2,813
Interest expense 107 439 546
------- ------- -------
Income (loss) before extraordinary item 1,822 445 2,267
Extraordinary item forgiveness of debt and liability 808 2,985 3,793
------- ------- -------
Net income $ 2,630 $ 3,430 $ 6,060
======= ======= =======
31
JPE, INC. (D/B/A/ ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
---------
4. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consisted of the following at December
31:
2000 2001
-------- --------
Land $ 706 $ 706
Buildings 5,496 5,513
Machinery and equipment 20,871 21,154
Furniture and fixtures 1,372 1,397
-------- --------
28,445 28,770
Less accumulated depreciation (4,863) (8,095)
-------- --------
$ 23,582 $ 20,675
======== ========
Provisions for depreciation of property, plant and equipment have been
computed using the straight-line method based on 25 year lives for
buildings, 5-7 year lives for machinery and equipment, and 3-7 year
lives for furniture and fixtures.
5. ACCRUED LIABILITIES:
Accrued liabilities consisted of the following at December 31:
2000 2001
------ ------
Accrued compensation $ 496 $ 285
Accrued interest 359 94
Accrued employee benefits 1,609 1,205
Accrued taxes 1,041 414
Other 814 608
------ ------
$4,319 $2,606
====== ======
6. DEBT:
Debt consisted of the following at December 31, 2000 and 2001:
2000 2001
------- -------
Demand loan-Comerica Bank $42,874 $ --
Revolving Credit Facility-Comerica Bank -- 27,000
Notes Payable-MB purchase 1,464 975
Capitalized lease obligations 193 55
Subordinated demand note -- 15,000
Other 32 20
------- -------
$44,563 $43,050
Less: Current portion 611 543
------- -------
$43,952 $42,507
======= =======
Since May 27, 1999 and through February 7, 2001, the Company's source
of funding was a $56.3 million demand loan from Comerica Bank. On
February 7, 2001, the Company entered into a new $33 million revolving
credit facility with Comerica Bank (the "Comerica Facility") which
matures February 1, 2003. The $56.3 million demand loan from Comerica
Bank was terminated on February 7, 2001. Concurrent with the execution
of the Comerica Facility, the Company received a $15 million
subordinated demand loan from ASC Incorporated, an affiliate of the
Company, which repaid $15 million of the Company's $56.3 million demand
loan from Comerica Bank.
32
JPE, INC. (D/B/A/ ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
---------
6. DEBT, continued:
The new Comerica Facility provides for borrowing options at a prime
based rate or Eurodollar rate plus various interest rate margins
dependent upon the Company's financial performance beginning January 1,
2002. Advances are subject to a borrowing base restriction equal to 85%
of eligible OEM trade receivables, 80% of all other eligible trade
receivables, 50% of eligible inventory (up to $9 million), plus an
overformula amount of $10 million. The overformula amount decreases
semiannually over a four year period. The initial reduction of $1
million occurred on September 1, 2001. All advances are fully secured
by the Company's net assets.
Required covenants under the Comerica Facility include submission of
monthly and annual financial statements and annual financial
projections during a prescribed period. Quarterly financial covenants
include an interest coverage ratio for 2001 to date performance
commencing September 30, 2001, and a Senior Debt to EBITDA ratio of no
greater than 5 to 1 as of December 31, 2001. Both covenants exclude the
effect of the $15 million subordinated demand note from ASC
Incorporated. In addition, the payment of dividends is prohibited by
the terms of the Comerica Facility.
As of September 30, 2001, the Company was not in compliance with the
interest coverage ratio covenant of the Comerica Facility. As of
December 31, 2001, the Company was not in compliance with both the
interest coverage ratio covenant and the Senior Debt to EBITDA ratio
covenant of the Comerica Facility. On April 16, 2002, the Company's
Comerica Facility was amended, and the September 30, 2001 and December
31, 2001 defaults were waived. The Senior Debt to EBITDA ratio covenant
was removed and the interest coverage ratio covenant was reset for 2002
year to date performance with June 30, 2002 as the first measurement
date. Interest rates were reset based upon the interest coverage ratio
using the Company's financial performance beginning January 1, 2002.
The revolving credit commitment amount was decreased from $33 million
to $30 million as the Company believes $30 million is adequate for its
liquidity requirements through the remaining term of the loan. In
consideration of the amendments and waivers, the Company has agreed to
pay Comerica Bank a nonrefundable amendment and waiver fee of $187,500.
The Company's $15 million subordinated demand note to ASC Incorporated
dated February 7, 2001 is subordinated as to creditor rights and
security to the Comerica Facility. Interest is payable monthly
commencing March 1, 2001 at ASC Incorporated's cost of borrowing. ASC
Incorporated has agreed not to call the note through at least January
1, 2003. Further, the Comerica Facility prohibits any payments to ASC
Incorporated at non-arm's length amounts without prior consent. On
February 7, 2001, concurrent with the execution of the Comerica
Facility, the Company entered into a new $3 million Revolving Line of
Credit Note with ASC Incorporated. This Note is subordinated to the
Company's borrowings and advances under the Comerica Facility and bears
interest at a rate equal to the cost of borrowing of ASC Incorporated.
As of December 31, 2001, there were no advances made under this Note.
In addition, notes payable of the Company includes $975 due to the
former owner of MB Associates, executed in connection with the purchase
of MB Associates on July 1, 2000 (see Note 1). These notes payable
require two payments of $488 on June 30 of 2002 and 2003. The notes
payable are non-interest bearing and are guaranteed by ASC.
Maturities of debt for the years succeeding December 31, 2001 are $543
for 2002, $42,494 for 2003, $3 for 2004, $4 for 2005, and $6,
thereafter.
The Company's average effective borrowing rate was approximately 11%
for the period ended May 27, 1999, 8.57% for the period ended December
31, 1999, 10.1% for the year ended December 31, 2000 and 6.9% for the
year ended December 31, 2001. Both Comerica Bank facilities provide for
a facility fee which is payable quarterly in arrears. Facility and
amendment fees amounted to $33 for the period ended May 27, 1999, $421
for the period ended December 31, 1999, $329 for the year ended
December 31, 2000 and $19 for the year ended December 31, 2001, and are
included in interest expense.
33
JPE, INC. (D/B/A/ ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
---------
7. INCOME TAXES:
Income tax expense (benefit) for the periods January 1, 1999 through
May 27, 1999 and May 28, 1999 through December 31, 1999, and for the
years ended December 31, 2000 and 2001 is as follows:
JANUARY 1, 1999 MAY 28, 1999
THROUGH THROUGH
MAY 27, 1999 DECEMBER 31, 1999 2000 2001
------------ ----------------- ---- ----
Income (loss) before income tax:
U.S $ 22,254 $ (135) $ (8,531) $ (8,227)
Foreign (160) 100 71 91
-------- -------- -------- --------
$ 22,094 $ (35) $ (8,460) $ (8,136)
======== ======== ======== ========
Current income taxes:
Federal $ -- $ 10 $ -- $ --
State 88 64 90 (107)
Foreign 16 (16) 35 46
-------- -------- -------- --------
Total current income taxes 104 58 125 (61)
-------- -------- -------- --------
Deferred income taxes:
Federal -- -- 1,000 --
State -- 17 -- --
Foreign -- -- -- --
-------- -------- -------- --------
Total deferred income taxes -- 17 1,000 --
-------- -------- -------- --------
Total income tax expense (benefit) $ 104 $ 75 $ 1,125 $ (61)
======== ======== ======== ========
The provision for income taxes differs from the amount of income taxes
determined by applying the statutory U. S. federal income tax rate to
pretax income as a result of the following:
January 1, May 28, 1999
1999 through Year ended
through December 31, December 31,
May 27, 1999 1999 2000 2001
------------ ---- ---- ----
Statutory U.S. federal tax rate 34% (34%) (34%) (34%)
State taxes, net of federal tax benefit -- 151 1 (2)
Goodwill amortization and other permanent -- 153 3 2
Nondeductible bankruptcy and other expenses -- 85 -- --
Foreign tax rate in excess of below U.S. -- (143) -- --
federal tax rate
Increase/(decrease) in valuation reserve (34) -- 43 39
All other -- 2 -- (5)
---- ---- ---- ----
Effective tax rate --% 214% 13% 0%
==== ==== ==== ====
Deferred income taxes reflect the estimated future tax effect of
temporary differences between the amount of the assets and liabilities
for financial reporting purposes and such amounts as measured by tax
laws and regulations. As of May 27, 1999, the date of the Investment
Transaction, the Company had approximately $23 million of taxable net
operating loss carryovers. Of this amount, approximately $22 million
was used to offset taxable income for the period January 1, 1999
through May 27, 1999, including income associated with the bank debt
forgiveness and vendor liability settlements resulting from the
Investment Transaction. The remaining taxable loss carryovers are
34
JPE, INC. (D/B/A/ ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
---------
7. INCOME TAXES, continued:
subject to certain limitations as a result of the Investment Agreement
and utilization is dependent on the Company's future profitability. As
such, the Company recorded a valuation reserve related to the tax
benefits associated with such losses. In addition, the Company
sustained further net operating losses of $1.2 million for the period
May 28, 1999 through December 31, 1999, $9.1 million for the year ended
December 31, 2000 and $8.1 million for the year ended December 31,
2001. Because of the magnitude of these additional losses, the Company
believes it may be unable to utilize these loss carryovers against
future earnings, and as such, has increased its valuation reserve by $1
million.
Deferred tax assets of approximately $13.5 million have been reduced by
$10.6 million valuation reserve, and deferred tax liabilities of $2.9
million have been recorded at December 31, 2001.
At December 31, 2000 and 2001, deferred tax assets and liabilities are
as follows:
Deferred tax assets: 2000 2001
-------- --------
Goodwill $ 3,268 $ 2,881
Inventory 1,163 811
Allowance for doubtful accounts 375 301
Employee benefits 251 190
AMT tax credit 78 78
Net operating losses 4,451 8,447
All other 716 789
-------- --------
Total deferred tax assets 10,302 13,497
-------- --------
Deferred tax liabilities:
Property and equipment 2,170 2,741
Prepaid pension 125 134
-------- --------
Total deferred tax liabilities 2,295 2,875
-------- --------
Net deferred tax assets 8,007 10,622
Valuation reserve (8,007) (10,622)
-------- --------
Net deferred tax assets $ -- $ --
======== ========
8. WARRANTS TO ACQUIRE PREFERRED STOCK:
The Investment Agreement provided that the shareholders of record of
JPE, Inc. common stock on June 11, 1999 (the "Record Date") were
entitled to receive warrants (the "Warrants") entitling the holder with
the right to purchase .075 First Series Preferred Shares of the Company
for each share of common stock held on the Record Date. The Warrants
carried an initial exercise price of $9.99 per First Series Preferred
Share, subject to price adjustments based on the final actual EBITDA
and the cost of certain environmental remediation for the 24 month
period from the date of the Investment Transaction. The Warrants were
exercisable for a 90 day period following the providing of notice by
the Company to the holders thereof of the Final Actual EBITDA (as
defined in the Investment Agreement). In addition, the Company granted
the Company's former bank group 77,437.937 Warrants (which Warrants
contain the same terms and
35
JPE, INC. (D/B/A/ ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
---------
8. WARRANTS TO ACQUIRE PREFERRED STOCK, continued:
conditions as granted to the shareholders of common stock of the
Company which adjusted the exercise price per First Series Preferred
Share to approximately $8.16).
Based on the initial exercise price of the Warrants, the Company has
assigned a fair value based on the difference between the exercise
price and the present value of the exercise price for the 24 month
period at a cost of capital discount rate. The fair value assigned was
$239. The warrants expired, unexercised, on October 4, 2001 and the
fair value assigned at the time of issuance was reclassified to Common
Stock.
9. COMMON STOCK OPTIONS AND WARRANTS:
Prior to the date of the Investment Transaction, May 27, 1999, the
Company granted certain officers, directors, key employees and
consultants stock options under the 1993 Stock Incentive Plan for Key
Employees of JPE, Inc. and the JPE, Inc. Director Stock Option Plan.
The options granted under these plans gave the bearer the right to
purchase stock at a fixed price, determined at the date of grant. On
November 22, 2000, the Company's Board of Directors voted to terminate
the JPE, Inc. Director Stock Option Plan.
Under the JPE Stock Incentive Plan for Key Employees (the "Plan"), the
total number of shares of common stock that may be granted is 500,000
shares, pursuant to an amendment ratified by the Company's Board of
Directors on November 22, 2000. The Company's Board of Directors also
opted to terminate this plan no later than October 6, 2010. These
amendments received shareholder approval on July 19, 2001. The Plan
provides that shares granted come from the Company's authorized but
unissued common stock and that the price of the options granted
qualifying as incentive options will not be less than 100 percent of
the higher of the fair market value of the shares on the date of the
original grant or the fair market value of the shares on November 22,
2000. Substantially all options that have been granted under the Plan
vest equally over a four year period and expire on various dates,
typically ten years after the date of grant.
Information regarding the Plan, and the JPE Director Stock Option Plan
(prior to its termination on November 22, 2000) for 1999, 2000 and 2001
is as follows:
Weighted Average Options Weighted Average
Shares Exercise Price Exercisable Exercise Price
------ -------------- ----------- --------------
Balance, January 1, 1999 532,500 $ 3.58 187,188 $ 6.86
Options exercised -- --
Options terminated and expired (480,750) $ 3.20
Options granted -- --
---------
Balance, December 31, 1999 51,750 $ 7.25 41,126 $ 7.25
Options exercised -- --
Options terminated and expired -- --
Options granted -- --
---------
Balance, December 31, 2000 51,750 $ 7.25 48,313 $ 7.25
---------
Options exercised --
Options terminated and expired --
Options granted --
---------
Balance, December 31, 2001 51,750 $ 7.25 51,750 $ 7.25
---------
36
JPE, INC. (D/B/A/ ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
---------
9. STOCK OPTIONS AND WARRANTS, continued:
1999 2000 2001
----------- ----------- -----------
Options available for grant at end of year 680,858 448,250 448,250
Option price range at end of year $6.63-$8.00 $6.63-$8.00 $6.63-$8.00
Weighted average remaining life 6.3 years 5.3 years 4.3 years
During 1994, in connection with the purchase of Starboard, the Company
granted warrants to purchase 100,000 shares of common stock at $9.50
per share to the former owners and key employees of that subsidiary.
The warrants were exercisable on the grant date and expire ten years
from the date of grant.
The Company has elected to adopt the disclosure-only provisions of
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock Based Compensation." Accordingly, no compensation cost has been
recognized for the stock option plan. Had compensation cost for the
Company's plan been determined based on the fair value at the grant
date for awards in 1998 consistent with the provisions of SFAS No. 123,
the Company's net loss and loss per share would have changed to the pro
forma amounts indicated below:
January 1, May 28, 1999 Year Ended Year Ended
1999 through through December 31, December 31,
May 27, 1999 December 31, 1999 2000 2001
------------ ----------------- ---- ----
Net income/(loss) - as reported $ 21,990 $(110) $ (9,585) $ (8,075)
Net income/(loss) - pro forma $ 21,974 $(125) $ (9,600) $ (8,075)
Income/(loss) per share assuming dilution:
As reported $ 4.73 $ -- $ (0.08) $ (0.07)
Pro forma $ 4.73 $ -- $ (0.08) $ (0.07)
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following
weighted-average assumptions used for grants in 1998: dividend yield of
0%; expected volatility of 56%; risk-free interest rate of 6.3%; and
expected lives of 6 years.
The pro forma disclosures may not be representative of the effects on
reported net income and earnings per share because only stock options
granted beginning in 1995 are reflected in the pro forma amounts. Other
factors that may impact pro forma disclosures in future years include
the vesting period of stock options, timing of additional grants and
number of additional shares granted.
10. EMPLOYEE BENEFIT PLANS:
401K PLAN
The Company has several different defined contribution plans consisting
of a 401(k) plan and profit sharing plans which cover substantially all
U.S. based non-union employees. The Company's matching 401(k) and
profit sharing contributions are discretionary and were suspended July
1, 1998. On June 25, 1999, the Company's matching 401(k) and profit
sharing contributions were reinstated retroactive to January 1, 1999.
The Company's Board of Directors opted to discontinue profit sharing
contributions effective January 1, 2002. The charges to operations for
the 1999 Predecessor and Successor periods were $213 and $518,
respectively. The charge to operations for the years ended December 31,
2000 and 2001 were $960 and $945, respectively.
37
JPE, INC. (D/B/A/ ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
---------
10. EMPLOYEE BENEFIT PLANS, continued:
PENSION PLAN
The Company maintains a defined benefit pension plan for its hourly
employees at the Beavercreek, Ohio operation. Eligibility includes all
hourly employees at the time of hire and employees must participate in
the Union. Benefits for employees covered by the plan are based on
years of service. Plan funding strategies are actuarially determined
based on census data and a measurement date of January 1 each year to
calculate the prepaid pension at December 31, 2001 and 2000. Plan
assets consist of money market investments, bonds and equity
securities. Employees do not earn any vesting until the completion of
five years employment at which time they become fully vested.
The following table summarizes the change in plan assets:
PENSION BENEFITS
-------------------------
2000 2001
------- -------
Fair value of plan assets at beginning of the year $ 2,170 $ 2,172
Actual return on plan assets (154) (89)
Employer contributions 203 363
Benefits paid (47) (71)
------- -------
Fair value of plan assets at end of the year $ 2,172 $ 2,375
======= =======
The following table summarizes the change in benefit obligation:
PENSION BENEFITS
-------------------------
2000 2001
------- -------
Benefit obligation at beginning of the year $ 2,079 $ 2,361
Service cost 218 223
Interest cost 160 174
Actuarial (gain)/loss (35) 91
Benefits paid (47) (71)
------- -------
Benefit obligation at end of the year $ 2,375 $ 2,778
======= =======
The following table summarizes the components of net benefit costs:
Pension Benefits
----------------------------------------------------------
May 27, 1999
January 1, through
1999 through December 31,
May 27, 1999 1999 2000 2001
------------ ---- ---- ----
Service cost $ 63 $ 88 $ 218 $ 223
Interest cost 59 83 160 174
Expected return on plan assets (67) (94) (177) (184)
----- ----- ----- -----
Benefit cost $ 55 $ 77 $ 201 $ 213
===== ===== ===== =====
38
JPE, INC. (D/B/A/ ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
---------
10. EMPLOYEE BENEFIT PLANS, continued:
The following table summarizes the funded status of employee benefit
plans and the related amounts that were recognized in the accompanying
balance sheets:
PENSION BENEFITS
--------------------------
2000 2001
------- -------
Benefit obligation $ 2,375 $ 2,778
Plan assets at fair value 2,172 2,375
------- -------
Funded status (203) (403)
Unrecognized net gain 248 596
======= =======
Prepaid pension cost $ 45 $ 193
======= =======
Significant actuarial assumptions are as follows:
PENSION BENEFITS
--------------------------
2000 2001
------- -------
Discount Rate 7.5% 7.25%
Expected long-term rate of return on assets 8.0% 8.0%
11. SALE OF JPE CANADA INC.:
At December 31, 1998, JPE Canada Inc. ("JPEC") was under the control of
an Interim Receiver appointed pursuant to Section 47 of the Bankruptcy
and Insolvency Act of Canada. The duties of the Interim Receiver
included commencing the process of realizing value of the assets for
the benefit of The Bank of Nova Scotia, the secured lender. On December
8, 1998, The Bank of Nova Scotia, the Interim Receiver, General Motors
Corporation and General Motors of Canada Limited entered into an
agreement to sell substantially all the assets of JPEC to the Ventra
Group, Inc. This agreement required that JPEC make an assignment in
bankruptcy prior to closing. On February 8, 1999, JPEC filed an
assignment in bankruptcy with the Ontario Court (General Division)
Commercial List and substantially all the assets of JPEC were sold for
approximately $13.7 million. The secured bank loans of JPEC were
approximately $14.8 million at closing. The balance sheet and income
statement for JPEC have been recorded on the equity method from the
appointment of the Interim Receiver on August 27, 1998. The unpaid
liabilities of JPEC at closing were eliminated through the bankruptcy
proceeding, resulting in a gain of approximately $2.9 million which was
recognized by the predecessor company in the first quarter of 1999.
The following is a summary of JPEC's Statement of Operations for the
period January 1, 1999 through the date of divestiture, February 8,
1999:
39
JPE, INC. (D/B/A/ ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
---------
Net sales $ 4,066
Cost of sales 3,857
-------
Gross profit 209
Selling, general and administrative expenses 134
Other expense 242
-------
Loss before interest, income taxes and
extraordinary item (167)
Interest expense 94
-------
Loss before income taxes and extraordinary item (261)
Income Taxes --
-------
Loss before extraordinary item (261)
Extraordinary item, forgiveness of
debt and liabilities, net of income taxes 2,881
-------
Net income $ 2,620
=======
12. FORGIVENESS OF BANK DEBT:
As a precondition to consummation of the Investment Agreement, the
Company's existing bank lenders (the "Bank Group") agreed on May 27,
1999 to a $16.5 million forgiveness of the Company's existing bank
debt. In consideration for the debt forgiveness and pursuant to the
Investment Agreement, the Company issued 20,650.115 First Series
Preferred Shares to the Bank Group on May 27, 1999 for $1 of
consideration. In addition, the Company granted the existing bank
lenders warrants to purchase 77,437.937 First Series Preferred Shares
(which contain the same terms and conditions as granted to the
shareholders of common stock of the Company on the Record Date which
adjusted the exercise price per First Series Preferred Share to
approximately $8.16).
The Company determined the fair value of the First Series Preferred
Shares issued to the Bank Group to be $177.5 based on the same price
per share paid by ASC. The Warrants issued to the Bank Group have a
fair value of $53.6 computed in the same method used for shareholders
of record. These amounts reduce the forgiveness of the bank debt,
resulting in an extraordinary item of $16.3 million or $3.53 per share.
The Company utilized its net operating loss carryforward to offset the
taxable income from the forgiveness of debt and liabilities.
13. DISCONTINUED OPERATIONS AND SALE OF INDUSTRIAL & AUTOMOTIVE FASTENERS,
INC.
On March 26, 1999, the Company sold the stock of Industrial &
Automotive Fasteners, Inc. ("IAF"), its fastener segment, to MacLean
Acquisition Company for approximately $20 million. The sales agreement
required certain vendors to compromise their accounts receivable from
IAF to 30% of the outstanding balance which resulted in an
extraordinary gain of $2.0 million or $.44 per share. The net proceeds
of $19.2 million from this sale were used to pay down U.S. Bank debt.
The measurement date for discontinued operation was February 5, 1999,
the date that the Board of Directors and the lenders approved the
letter of intent. IAF's income from operations prior to the measurement
date was $214, or $.05 per share. The loss on sale was $2.5 million,
offset by income from operations after the measurement date of $200,
resulting in a net loss of $2.3 million, or $.50 per share.
Revenue for IAF for the three month period ended March 31, 1999 was
$10.0 million.
40
JPE, INC. (D/B/A/ ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
---------
14. SUPPLEMENTAL CASH FLOW INFORMATION:
Selected cash payments and noncash activities, for the periods ended
May 27, 1999 and December 31, 1999, and for the years ended December
31, 2000 and 2001 were as follows:
JANUARY 1,
1999 MAY 28,
THROUGH MAY THROUGH
27, DECEMBER 31,
1999 1999 2000 2001
---- ---- ---- ----
Cash paid for interest $ 4,692 $ 2,077 $ 4,194 $ 2,991
Cash paid for income taxes 44 115 299 65
15. SEGMENT INFORMATION:
In 1998, the Company adopted FAS 131, "Disclosures about Segments of an
Enterprise and Related Information." The Company manages and reports
its operating activities under three segments: Trim Products,
Fasteners, and Truck and Automotive Replacement Parts. The Trim
Products segment consists of decorative and functional exterior trim
sold to Original Equipment Manufacturers ("OEM's"). Fasteners are
decorative, specialty and standard wheel nuts sold to the OEM's and to
the replacement market. The Truck and Automotive Replacement Parts
segment consists of heavy-duty vehicle undercarriage parts and brake
systems for the automotive industry. In 1999, the Company also sold a
portion of its Trim Products segment (see Note 11). Information for the
Fastener segment has been excluded as it is accounted for as
discontinued operations as it was sold by the Company on March 26, 1999
(see Note 13).
The accounting policies for the segments are the same as those
presented in Note 1. There are no inter-segment sales and management
does not allocate interest or corporate expenses to the segments. The
Company evaluates the performance of its segments and allocates
resources to them based on Operating Income. Segment profit (loss) is
defined as sales minus cost of goods sold and selling, general and
administrative expenses. Other items relate to non-recurring
transactions, such as obsolete equipment write offs, bankruptcy-related
transactions, or sales of portions of segments.
Information by operating segment is summarized below:
Trim Replacement
Products Parts Total
-------- ----- -----
Sales to unaffiliated customers
2001 $ 66,791 $ 55,379 $ 122,170
2000 87,912 50,797 138,709
1999 Successor Company 56,305 31,776 88,081
1999 Predecessor Company -- 24,044 24,044
Segment profit (loss)
2001 $ (1,166) $ 2,999 $ 1,833
2000 (123) 2,658 2,535
1999 Successor Company 2,938 2,166 5,104
1999 Predecessor Company -- 1,240 1,240
41
JPE, INC. (D/B/A/ ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
---------
15. SEGMENT INFORMATION, continued:
Trim Replacement
Products Parts Total
-------- ----- -----
Other charges (income)
2001 $ 1,678 $ 87 $ 1,765
2000 1,009 -- 1,009
1999 Successor Company (126) (173) (299)
1999 Predecessor Company -- 81 81
Affiliate companies' losses
2001 $ -- $ -- $ --
2000 -- -- --
1999 Successor Company -- -- --
1999 Predecessor Company (8,680) -- (8,680)
Depreciation and amortization
2001 $ 2,618 $ 914 $ 3,532
2000 2,471 851 3,322
1999 Successor Company 1,515 451 1,966
1999 Predecessor Company -- 785 785
Segment assets
2001 $ 31,127 $ 23,448 $ 54,575
2000 39,392 25,870 65,262
Expenditures for segment assets
2001 $ 744 $ 179 $ 923
2000 $ 902 $ 368 $ 1,270
1999 Successor Company 1,320 249 1,569
1999 Predecessor Company -- 132 132
A reconciliation of segment profit (loss) for reportable segments to
consolidated profit (loss) from continuing operations before income
taxes and extraordinary item is as follows:
PREDECESSOR SUCCESSOR
1999 1999 2000 2001
---- ---- ---- ----
Segment profit (loss) $ 1,240 $ 5,104 $ 2,535 $ 1,833
Other (charges) income (81) 299 (1,009) (1,765)
Equity income 8,680 -- -- --
Corporate expense (1,051) (2,672) (5,340) (5,324)
Interest expense (2,859) (2,766) (4,646) (2,880)
------- ------- ------- -------
Income (loss) from continuing
operations before income taxes
and extraordinary item $ 5,929 $ (35) $(8,460) $(8,136)
======= ======= ======= =======
42
JPE, INC. (D/B/A/ ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
---------
15. SEGMENT INFORMATION, continued:
A reconciliation of segment assets to consolidated assets is as
follows:
2000 2001
------- -------
Segment Assets $65,262 $54,575
Corporate Assets 2,333 3,797
------- -------
$67,595 $58,372
======= =======
The Company's sales to individual customers in excess of 10% of total
revenue were:
SUCCESSOR COMPANY
------------------------------
1999 2000 2001
---- ---- ----
General Motors Corporation 36% 35% 31%
DaimlerChrysler Corporation 23% 25% 20%
The successor Company had export sales of approximately $22.3 million,
$17.5 million and $17.8 million principally to Canada, Mexico, and
Central America, for 1999, 2000 and 2001 respectively. The Company
operates in the North American geographic area.
16. FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amounts reported in the balance
sheet for cash and cash equivalents approximates fair value.
Available for sale securities: Are recorded at market prices quoted on
national stock exchanges on the balance sheet date.
Accounts receivable and accounts payable: The carrying amounts reported
in the balance sheet for accounts receivable and accounts payable
approximate fair value.
Long-and short-term debt: The carrying amounts of the Company's
borrowings under its revolving credit arrangement and its long-term
debt approximate fair values, as the interest rates float with short
term rates.
17. COMMITMENTS
The Company maintains long-term operating leases covering office
equipment, vehicles, and real estate. Commitments related to these
leases are $1,649, $1,025, $860, $633, and $579, for the years 2002 -
2006, respectively. Rent expense for the Company for 1999, 2000 and
2001 was $1,343, $1,295 and $2,267 respectively.
43
JPE, INC. (D/B/A/ ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
---------
18. RELATED PARTY TRANSACTIONS
During 2001 and 2000, transactions between the Company and ASC include
payments of $208 and $250, respectively, to ASC for consulting services
rendered to the Company with respect to operating, management, legal
and financial matters.
In addition, the Company has paid ASC Incorporated $193 during 2001 to
cover technical, quality control and information technology services
rendered by ASC Incorporated to the Company, and has received
reimbursement of $170 for costs incurred by the Company for services
rendered by the Company's senior management to ASC Incorporated.
During 2001, interest expense of $677 was paid by the Company to ASC
Incorporated in connection with the Company's $15 million and $3
million subordinated demand notes to ASC Incorporated. During 2000,
interest expense of $9 was paid by the Company to ASC Incorporated in
connection with the Company's $3 million subordinated demand note to
ASC Incorporated.
19. QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarterly Financial Data for the years ended December 31, 2000 and 2001
is as follows:
FOR THE QUARTER ENDED
--------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
2000 2000 2000 2000
---- ---- ---- ----
Net Sales $ 37,727 $ 38,298 $ 32,842 $ 29,842
Cost of Goods Sold 30,922 33,734 28,744 27,878
Gross Profit 6,805 4,564 4,098 1,964
Net income (loss) 339 (1,661) (2,399) (5,864)
Earnings (loss) per share amounts are as follows:
Basic earnings (loss) per share:
Common Shares $ 0.00 $ (0.01) $ (0.02) $ (0.05)
First Series Preferred Shares 0.15 (0.74) (1.06) (2.58)
Earnings (loss) per share assuming dilution:
Common Shares $ 0.00 $ (0.01) $ (0.02) $ (0.05)
First Series Preferred Shares 0.15 (0.74) (1.06) (2.58)
44
JPE, INC. (D/B/A/ ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
---------
19. QUARTERLY FINANCIAL DATA (UNAUDITED), continued:
FOR THE QUARTER ENDED
-------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
2001 2001 2001 2001
---- ---- ---- ----
Net Sales $ 30,379 $ 34,491 $ 28,753 $ 28,547
Cost of Goods Sold 27,267 29,472 26,280 25,361
Gross Profit 3,112 5,019 2,473 3,186
Net loss (2,244) (583) (2,520) (2,728)
Basic loss per share:
Common Shares $ (0.02) $ (0.01) $ (0.02) $ (0.02)
First Series Preferred Shares (0.99) (0.26) (1.12) (1.21)
Loss per share assuming dilution:
Common Shares $ (0.02) $ (0.01) $ (0.02) $ (0.02)
First Series Preferred Shares (0.99) (0.26) (1.12) (1.21)
During the quarter ended December 31, 2000, the Company recorded a
write down of $1,009 related to fixed assets at the Company's
Beavercreek operation which were no longer being used.
In addition, operating performance at that location continued to
deteriorate during the quarter ended December 31, 2000, and additional
operating losses of $4.7 million were incurred. This resulted in an
assessment by the Company's management that future tax benefits
associated with utilizing the Company's accumulated net operating
losses against future taxable income will not occur. As a result, the
Company increased its valuation reserve for future tax benefits (which
was recorded at the date of the Investment Transaction), by $1 million
during the quarter ended December 31, 2000. This is reflected as
additional income tax expense in the quarter, in accordance with FAS
109, Accounting for Income Taxes.
During the quarter ended December 31, 2001, due to unfavorable
operating results at the Beavercreek, Ohio operation, the Company
assessed the net book value of Beavercreek's long-lived assets for
impairment. Based on the assessment, the Company recorded a charge of
$1,735, which eliminated all of the goodwill associated with the
Beavercreek operation. Also recorded during the quarter ended December
31, 2001 was the write-off of obsolete equipment at the Beavercreek
operation of $438. In November 2001, Beavercreek's health care provider
converted from a mutual insurance company to a stock insurance company.
The Company received common stock valued at $495 based on the market
price on the date of issuance, which is included in the results for the
quarter ended December 31, 2001.
20. EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS
In the first quarter of 2002, the Company will adopt FAS 141, Business
Combinations, and FAS 142, Goodwill and Other Intangible Assets. The
adoption of FAS 141 is expected to have no impact on the company as
acquisitions have typically been accounted for under purchase
accounting. Under FAS 142, periodic amortization of goodwill is not
included as a deduction to arrive at net income, which will result in
the elimination of amortization charges of approximately $132 (net of
Beavercreek goodwill previously written-off) during fiscal 2002. During
2002, the Company will perform the first of the impairment tests of
goodwill as of January 1, 2002. It has not been determined what
effect, if any, these tests will have on the earnings and financial
position of the company.
21. SUBSEQUENT EVENT (UNAUDITED)
Subsequent to December 31, 2001, the Company signed a letter of intent
with an unrelated third party for the sale of 100% of the equity of the
Company. However, the Company has not signed a definitive sale
agreement as of March 29, 2002.
45
JPE, INC. (D/B/A/ ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share data)
---------
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
NONE
46
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
CURRENT DIRECTORS:
Certain information regarding the current directors of the Company is set forth
below. The Company's bylaws provide that the Board of Directors is divided into
three classes, each class serving staggered three-year terms. The Board of
Directors currently consists of four directors, all appointed June 14, 2000
pursuant to a written consent executed on that date by the holders of 95% of the
Company's Common and First Series Preferred Shares. Each director will hold
office until the annual meeting of the stockholders for the year within which
their term expires, or, in each case, until his successor is elected and
qualified. Vacancies existing in the Board may be filled by a majority vote of
the remaining directors.
The members of the Board of Directors as of the date of this Annual Report are
as follows:
Name Age Position Term to Expire:
---- --- -------- ---------------
David L. Treadwell 47 Chairman of the Board and Company and 2003
Chief Executive Officer
Scott K. Koepke 52 President and Chief Operating Officer 2003
Lawrence P. Doyle 55 Director 2002
C. Michael Kojaian 42 Director 2004
Following each director's name is a brief account of his business experience
during the past five years.
DAVID L. TREADWELL
Mr. Treadwell became Chairman of the Company and the Company's Board of
Directors on May 27, 1999. He also serves as Chairman of ASC Incorporated, and
is the President and Chief Executive Officer of Prechter Holdings, Inc., a
conglomerate of all companies owned by the estate of Heinz C. Prechter. These
companies include ASC Incorporated, an automotive systems company specializing
in open air and specialty vehicle systems; Heritage Development Corporation, a
real estate and development activity; Heritage International Investments, Inc.,
an investment firm. He is also a director of Acceptance Insurance Companies.
SCOTT K. KOEPKE
Mr. Koepke was elected President and Chief Operating Officer of the Company on
April 24, 2000. He also has served as President of the Composite Systems Group
for ASC Incorporated, an affiliate of ASC Holdings, LLC, since his appointment
in October 1999. Prior to joining ASC Incorporated, Mr. Koepke was a plastics
industry consultant from 1997 to 1999, and spent 20 years with Owens Corning in
both new product development and international operations.
Mr. Koepke became a director of the Company in August of 2001, to fill the
vacancy of the Board resulting from the death of Mr. Heinz C. Prechter.
47
LAWRENCE P. DOYLE
Mr. Doyle is currently President and Chief Executive Officer of ASC
Incorporated, an affiliate of ASC Holdings LLC, since 1997. Prior to joining ASC
Incorporated, he was Chief Executive Officer at Group Dekko from 1994 to 1996, a
manufacturing conglomerate with multi-plant facilities.
C. MICHAEL KOJAIAN
Mr. Kojaian is Executive Vice President and Director of the Kojaian Companies, a
Midwestern based multi-faceted real estate development and asset management
organization. Mr. Kojaian is a Director and a major shareholder of Grubb &
Ellis, one of the nation's largest publicly traded full-service commercial real
estate firms with nearly 3,000 salespeople and staff. Mr. Kojaian serves on
numerous boards of private organizations and participates in various charitable
and civic organizations.
EXECUTIVE OFFICERS
The Company's Executive Officers are identified below and serve at the
discretion of the Board of Directors.
Name Age Position
---- --- --------
David L. Treadwell 47 Chairman of the Board and Company and
Chief Executive Officer
Scott K. Koepke 52 President and Chief Operating Officer
Robert A. Naglick 44 Vice President, Chief Financial Officer and Treasurer
Joseph Z. Kwapisz 55 Vice President - Sales and Marketing
Gary Smalley 52 General Manager - Dayton Parts, Inc.
Brian M. Smith 28 Secretary
Following each executive officer's name is a brief account of his business
experience during the past five years.
DAVID L. TREADWELL
Mr. Treadwell became Chairman of ASC Exterior Technologies in May of 1999 upon
ASC Holdings, Inc.'s acquisition of a controlling interest in JPE, Inc. He also
serves as Chairman of ASC Incorporated, and is the President and Chief Executive
Officer of Prechter Holdings, Inc., a conglomerate of all companies owned by the
estate of Heinz C. Prechter. These companies include ASC Incorporated, an
automotive systems company specializing in open air and specialty vehicle
systems; Heritage Development Corporation, a real estate and development
activity; and Heritage International Investments, Inc., an investment firm. He
is also a director of Acceptance Insurance Companies.
SCOTT K. KOEPKE
Mr. Koepke was elected President and Chief Operating Officer of the Company on
April 24, 2000. He also has served as President of the Composite Systems Group
for ASC Incorporated, an affiliate of ASC Holdings, LLC, since his appointment
in October 1999. Prior to joining ASC Incorporated, Mr. Koepke was a plastics
industry consultant from 1997 to 1999, and spent 20 years with Owens Corning in
both new product development and international operations.
48
ROBERT A. NAGLICK
Mr. Naglick was appointed Vice President and Chief Financial Officer of the
Company on August 16, 2000. He was also appointed as Treasurer in August 2001.
Prior to joining the Company, Mr. Naglick was Director-Operations Finance for
ASC Incorporated and held various finance positions with ASC since 1996.
JOSEPH Z. KWAPISZ
Mr. Kwapisz was appointed Vice President of Sales and Marketing on July 1, 2000.
Prior to his appointment, Mr. Kwapisz was with the Company's exclusive sales
agency, MB Associates, Inc., as Vice President of Sales and Marketing from 1992
through June of 2000.
GARY A. SMALLEY
Mr. Smalley has served as General Manager of Dayton Parts, Inc., one of the
Company's subsidiaries, since August 1996. Prior to joining Dayton Parts, Inc.,
Mr. Smalley was Vice President and General Manager of Allparts, Inc. from July
1995 to August 1996, a former subsidiary of the Company.
BRIAN M. SMITH
Mr. Smith was appointed Secretary of the Company in August 2001. Mr. Smith also
serves as Corporate Counsel of ASC Incorporated and Prechter Holdings, Inc.,
since his appointment to these positions in February, 2000. Mr. Smith was an
attorney with Evans and Luptak during 1999. Mr. Smith was a law clerk with ASC
Incorporated and Prechter Holdings, Inc. from 1996 through 1998.
SECTION 16 (a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934 generally requires the
Company's Directors and Executive Officers and persons who own more than 10% of
a registered class of the Company's equity securities ("10% owners") to file
with the Securities and Exchange Commission initial reports of ownership and
reports of changes in ownership of common shares of the Company. Directors,
Executive Officers and 10% owners are required by Securities and Exchange
Commission regulation to furnish the Company with copies of all Section 16(a)
forms they file. To the Company's knowledge, based solely on review of copies of
such reports furnished to the Company and written representations that no other
reports were required to be filed during the 2001 fiscal year, all Section 16(a)
filing requirements applicable to its Directors, Executive Officers and 10%
owners were met.
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Each director of the Company who was not an officer or employee of the Company
is entitled to receive a semi-annual director's fee of $3,000 and is reimbursed
for expenses of attending Board of Directors and committee meetings. The
Company's Director Stock Option Plan was terminated by the Company's Board of
Directors on November 22, 2000.
Of the current non-officer directors of the Company, Mr. Doyle opted not to
receive compensation for his services as a director of the Company during 2001
due to the existence of the Consulting Service Agreement with ASC Holdings LLC,
dated May 27, 1999 (see "Certain Relationships and Related Transactions"). Mr.
C. Michael Kojaian received $6,000 during 2001 for his services as a director of
the Company.
49
SUMMARY COMPENSATION TABLE OF EXECUTIVE OFFICERS
The following table sets forth information for the fiscal years ended December
31, 2001, 2000 and 1999 concerning compensation of the Company's Chief Executive
Officer and each of the Company's executive officers whose total annual salary
and bonus exceeded $100,000 in 2001.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
-----------------------------------------
FISCAL OTHER ANNUAL ALL OTHER
NAME AND POSITION YEAR SALARY (1) BONUS COMPENSATION (2) COMPENSATION
- ----------------- ---- ---------- ----- ---------------- ------------
David L. Treadwell (3) 2001 - - - -
Chairman of the Board 2000 - - - -
and Chief Executive Officer 1999 - - - -
Scott K. Koepke (4) 2001 $190,000 (4) $66,680 - $9,800 (6)
President and 2000 120,000 (4) 75,000 - 7,200 (6)
Chief Operating Officer 1999 - - - -
Robert A. Naglick (5) 2001 128,646 (5) 7,624 - 8,859 (6)
Vice President, Chief 2000 50,240 (5) 19,000 - 2,500 (6)
Financial Officer and Treasurer 1999 - - - -
Joseph Z. Kwapisz (7) 2001 175,000 35,000 - 9,800 (6)
Vice President-Sales & 2000 87,500 17,500 - 6,300 (6)
Marketing 1999 - - - -
Gary Smalley (8) 2001 135,000 - - 6,210 (6)
General Manager 2000 135,000 - - 8,100 (6)
Dayton Parts, Inc. 1999 135,000 - - 56,128 (8)
(1) Amounts represent the dollar value of base salary earned by the named
executive officer during the fiscal year covered as reported on the
officer's W-2.
(2) The dollar value of perquisites provided to each of the named executive
officers does not exceed the lesser of $50,000 or 10% of the total of
annual salary and bonus reported for the named executive officer.
(3) Mr. Treadwell does not receive compensation for his services directly from
the Company. His services are provided to the Company pursuant to a
Consulting Services Agreement with ASC Holdings LLC dated May 27, 1999.
Payments made by the Company under this agreement for the year ended
December 31, 2001 were $208,333, for the year ended 2000 were $250,000 and
for the period from May 27, 1999 through December 31, 1999 were $146,000
(see Certain Relationships and Related Transactions).
(4) Mr. Koepke was appointed President and Chief Operating Officer on April
24, 2000. Total salary and other compensation paid to Mr. Koepke
represents amounts paid by the Company, of which $32,141 and $24,376 were
reimbursed by ASC Incorporated, an affiliate of the Company, for 2001 and
2000, respectively, for services rendered by Mr. Koepke to ASC
Incorporated.
(5) Mr. Naglick was appointed Vice President and Chief Financial Officer on
August 16, 2000. Total salary and other compensation paid to Mr. Naglick
represents amounts paid by the Company, of which $26,318 and $8,523 were
reimbursed by ASC Incorporated, an affiliate of the Company, for 2001 and
2000, respectively, for services rendered by Mr. Naglick to ASC
Incorporated.
(6) Represents the amount contributed by the Company to the employee's account
under the Company's 401(k) Savings Plan.
50
(7) Mr. Kwapisz was appointed Vice President-Sales and Marketing on July 1,
2000.
(8) The amount listed includes payments made to Mr. Smalley as follows: (a)
Cooperation Bonus of $50,000 paid May 27, 1999 in connection with the
execution of the Investment Agreement, and (b) contributions of $6,128
made by the Company to Mr. Smalley's account under the Company's 401(k)
Savings Plan.
51
AGGREGATE OPTION EXERCISE IN THE LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
The following table sets forth information concerning the value of unexercised
stock options held by each named Executive Officer of the Company as of December
31, 2001.
Value of Unexercised
Number of Unexercised In-the-Money Options
Options at December 31, 2001 at December 31, 2001
Name Exercisable/Unexercisable Exercisable/Unexercisable (1)
---- ------------------------- -----------------------------
David L. Treadwell 0/0 $0/0
Scott K. Koepke 0/0 0/0
Robert A. Naglick 0/0 0/0
Joseph Z. Kwapisz 0/0 0/0
Gary Smalley 25,000/0 0/0
Brian M. Smith 0/0 0/0
(1) In calculating the value of unexercised in-the-money options at December
31, 2001, the Company used a market value of $0.01 per share, the closing
price of shares of Common Shares on the OTC Bulletin Board on December 31,
2001.
OPTION GRANTS IN LAST FISCAL YEAR
There were no stock options exercised or granted during the fiscal year ended
December 31, 2001.
TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION
During 1993, Section 162(m) of the Internal Revenue Code was enacted to limit
the corporate deduction for compensation paid to each of the five most highly
compensated executive officers of a publicly-held corporation to $1 million per
year, unless certain requirements are met. The Compensation Committee has
reviewed the impact of this legislation on the Company's executive compensation
plans and concluded that this legislation should not apply to limit the
deduction for executive compensation paid by the Company in 2001.
REPORT OF COMPENSATION COMMITTEE
The report of the Compensation Committee shall not be deemed incorporated by
reference by any general statement incorporating by reference this Form 10-K
into any filing under the Securities Act of 1933 or under the Securities
Exchange Act of 1934, except to the extent the Company specifically incorporated
this information by reference, and shall not be deemed filed under such Acts.
Introduction and Organization
The current members of the Compensation Committee are C. Michael Kojaian and
David L. Treadwell. The duties of the Compensation Committee include review and
develop compensation programs for key management, evaluate executive
performance, administer the Company's compensation programs and make
recommendations as to compensation matters to the Board of Directors.
General Policies
The Compensation Committee's overall compensation policy with regard to
executive officers is to provide a compensation package that is intended to
attract and retain qualified executives and to provide incentives to achieve the
Company's goals and increase shareholder value. The Compensation Committee
implements this policy through base salaries, bonuses and, from time to time,
grants of stock options, stock appreciation rights and restricted stock.
52
Base Salaries
Base salary is determined for each of the Company's key executives by the
Compensation Committee based upon recommendations of the Company's Chief
Executive Officer. Factors affecting executive salary determinations include
experience, leadership, the Company's performance and achievements, individual
initiative, performance and achievements and an evaluation of the
responsibilities of the position held by the executive. No specific weighting of
factors is used.
Bonuses
The Company awards its executive officers discretionary bonuses deemed
appropriate by the Compensation Committee. Bonuses are intended to provide
incentives to achieve the Company's financial and operational goals and increase
shareholder value, as well as to recognize an executive's individual
contributions to the Company. Factors affecting executive bonus determinations
include an evaluation of the Company's results and the executive's initiative,
performance and achievements, and the executive's salary. The Compensation
Committee does not use any specific weighting of factors. The Compensation
Committee obtains recommendations from the Chief Executive Officer as to
executive officer bonuses based on an evaluation of each individual executive's
performance during the year.
Long-Term Incentives
Under the Company's 1993 Stock Option Incentive Plan for Key Employees, as
amended, awards under the 1993 Stock Incentive Plan are available to provide
participants with an increased incentive to make significant contributions to
the long-term performance and growth of the Company and to attract and retain
key employees of exceptional ability. Prior to the date of the Investment
Transaction, May 27, 1999, the Company granted certain key management
individuals stock options under this plan. On November 22, 2000, the Company's
Board of Directors opted to amend the Plan to limit the maximum number of shares
available for grant under the plan to 500,000 shares, and to terminate the plan
no later than October 6, 2010. These amendments received shareholder approval on
July 19, 2001. The options qualifying as incentive options will not be less than
100 percent of the higher of the fair market value of the shares on the date of
the original grant or the fair market value of the shares on November 22, 2000.
Since May 27, 1999, no further options have been granted under this plan.
Other Compensation
The Company has adopted certain employee benefit plans, including its 401(k)
savings plan and health benefit plans, in which executive officers have been
permitted to participate. Benefits under these plans are not directly or
indirectly tied to the Company's performance.
Chief Executive Officer Compensation
David L. Treadwell, Chief Executive Officer, does not receive compensation for
his services directly from the Company. His services are provided to the Company
pursuant to a Consulting Service Agreement with ASC Holdings LLC dated May 27,
1999 (see Certain Relationships and Related Transactions).
By the Compensation Committee
David L. Treadwell
C. Michael Kojaian
53
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Kojaian is not or never has been an officer or employee of the Company or
any of its subsidiaries. Mr. Treadwell does not receive compensation for his
services directly from the Company; but Companies of which Mr. Treadwell is an
officer and director receive consulting payments from, and are lenders to, the
Company (see Item 13 of the Report).
STOCK PERFORMANCE GRAPH
The following table compares the cumulative return since December 31, 1995 on a
hypothetical investment in JPE, Inc. (JPEI), the Nasdaq National Market (U.S.)
Index and other motor vehicle equipment manufacturers and distributors. The
stock price performance shown on the graph is not necessarily indicative of
future price performance.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG JPE, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND A PEER GROUP
[PERFORMANCE GRAPH]
Cumulative Total Return
---------------------------------------------------------------
12/96 12/97 12/98 12/99 12/00 12/01
ASCET, INC. 100.00 78.07 7.02 0.88 0.42 0.14
NASDAQ STOCK MARKET (U.S.) 100.00 122.48 172.68 320.89 193.01 153.15
PEER GROUP 100.00 134.60 159.60 98.80 57.60 73.20
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Set forth below is information relating to the beneficial ownership of
outstanding shares of Common Shares and First Series Preferred Shares of the
Registrant by each person who is known to the Company to be the beneficial owner
of more than 5% of the outstanding shares of Common Shares and First Series
Preferred Shares as of March 31, 2002.
SHARES BENEFICIALLY OWNED
NAME AND ADDRESS --------------------------------------
OF BENEFICIAL OWNER FIRST SERIES PERCENT OF
- ------------------- COMMON SHARES PREFERRED SHARES VOTING POWER (2)
-------------- ----------------- ----------------
Estate of Heinz C. Prechter 9,441,420 (1) 1,952,352.19 (1) 8.4% Common Shares
1030 Doris Road
Auburn Hills, MI 48326 86.6% First Series
_____ Preferred Shares
95.0% Total
1. Consists of shares owned directly by ASC Holdings LLC, of which Mr.
Prechter's estate is the sole member.
2. Each share of Common Stock possesses one vote per share and each First
Series Preferred Share possesses 50 votes per share.
54
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with the consummation of the Investment Agreement on May 27, 1999,
the Company entered into a Consulting Services Agreement with ASC Holdings LLC
which requires payment of $250,000 annually, payable monthly, for consulting
services provided by ASC Holdings LLC with respect to various business,
operating, management, legal and financial matters. As of December 31, 2001,
$208 thousand was paid to ASC Holdings and $42 thousand was accrued and payable
to ASC Holdings.
In connection with the rendering of services by the Company's executive officers
and other key management personnel to ASC Incorporated, the Company received
reimbursement of $170 thousand for actual costs incurred by the Company during
2001. In addition, the Company paid $193 thousand during 2001 to ASC
Incorporated for technical and quality control services, and information
technology support.
The Company's $15 million and $3 million subordinated demand notes to ASC
Incorporated require interest at ASC Incorporated's cost of borrowing. As of
December 31, 2001, $677 thousand of interest was paid to ASC Incorporated and
$105 thousand of interest was accrued and payable to ASC Incorporated.
55
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) LISTING OF DOCUMENTS
(1) Financial Statements
The Company's Consolidated Financial Statements
included in Item 8 hereof, as required at
December 31, 2000 and 2001, and for the years
ended December 31, 2000 and 2001, and for the
periods January 1, 1999 through May 27, 1999 and
May 28, 1999 through December 31, 1999, consist
of the following:
- Reports of Independent Auditors
- Consolidated Balance Sheets
- Consolidated Statements of Operations
- Consolidated Statements of Shareholders'
Equity
- Consolidated Statements of Cash Flows
- Notes to Consolidated Financial Statements
(2) Financial Statement Schedule
The financial statement schedule of the Company
appended hereto, as required for the years ended
December 31, 1999, 2000 and 2001, consists of the
following:
II. Valuation and Qualifying Accounts
(3) Exhibits
See Exhibit Index.
(b) REPORTS ON FORM 8-K
None.
56
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf on April 22, 2002 by the undersigned, thereunto duly authorized.
JPE, INC.
By: /s/ David L. Treadwell
---------------------------------------
David L. Treadwell
Chairman of the Board and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
/s/ David L. Treadwell Chairman of the Board April 22, 2002
- ----------------------------------- Chief Executive Officer
David L. Treadwell
/s/ Scott K. Koepke President April 22, 2002
- ----------------------------------- Chief Operating Officer
Scott K. Koepke
/s/ Robert A. Naglick Vice President April 22, 2002
- ----------------------------------- Chief Financial Officer
Robert A. Naglick Principal Accounting Officer
/s/ C. Michael Kojaian Director April 22, 2002
- -----------------------------------
C. Michael Kojaian
/s/ Lawrence P. Doyle Director April 22, 2002
- -----------------------------------
Lawrence P. Doyle
57
JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
FINANCIAL STATEMENT SCHEDULES
PURSUANT TO ITEM 14(a)(2) OF FORM 10-K
ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
The schedule, as required, for the years ended December 31, 2000 and 2001 and
for the periods January 1, 1999 through May 27, 1999 and May 28, 1999 through
December 31, 1999:
PAGE
----
II. Valuation and Qualifying Accounts 58
58
JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the periods ended
-----------------
Column A Column B Column C Column D Column E
- -------- ---------- ---------------------------- ----------- ----------
Balance at Charges to Charges Balance
Beginning Costs and to Other at End
Description of Period Expenses Accounts Deductions of Period
- ----------- ----------- ----------- ----------- ----------- -----------
Accounts receivable,
allowance for doubtful
accounts:
January 1, 1999 through
May 27, 1999 $ 684,000 $ 750,000 $ 1,363,000 $(1,770,000) $ 1,027,000
=========== =========== =========== =========== ===========
May 28, 1999 through
December 31, 1999 $ 1,027,000 $ 326,000 $ -- $ (300,000) $ 1,053,000
=========== =========== =========== =========== ===========
January 1, 2000 through
December 31, 2000 $ 1,053,000 $ 469,000 $ -- $ (538,000) $ 984,000
=========== =========== =========== =========== ===========
January 1, 2001 through
December 31, 2001 $ 984,000 $ 618,000 $ -- $ (733,000) $ 869,000
=========== =========== =========== =========== ===========
Inventory, reserve for
obsolescence:
January 1, 1999 through
May 27, 1999 $ 2,900,000 $ 75,000 $ -- $(1,105,926) $ 1,869,074
=========== =========== =========== =========== ===========
May 28, 1999 through
December 31, 1999 $ 1,869,074 $ 175,000 $ -- $ (274,080) $ 1,769,994
=========== =========== =========== =========== ===========
January 1, 2000 through
December 31, 2000 $ 1,769,994 $ 533,928 $ -- $ (662,635) $ 1,641,287
=========== =========== =========== =========== ===========
January 1, 2001 through
December 31, 2001 $ 1,641,287 $ 665,779 $ -- $(1,026,294) $ 1,280,772
=========== =========== =========== =========== ===========
59
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------ -----------
2.1 Asset Purchase Agreement dated December 31, 1992, among
Varity Corporation, a subsidiary of Varity Corporation
formerly known as Dayton Parts, Inc., the Registrant and
JPE Acquisition I, Inc., incorporated by reference to
Exhibit 2 to the Registrant's Registration Statement on
Form S-1 (File No. 33-68544).
2.2 Stock Purchase Agreement dated December 13, 1994 by and
among JPE, Inc. and the Shareholders of SAC Corporation,
incorporated by reference to Registrant's Current Report
on Form 8-K dated December 28, 1994.
2.3 Asset Purchase Agreement dated February 28, 1995 among JPE
Acquisition II, Inc., Key Manufacturing Group Limited
Partnership and TTD Management, Inc., incorporated by
reference to Exhibit 2 to Registrant's Current Report on
Form 8-K dated March 14, 1995.
2.4 Acquisition Agreement dated as of April 6, 1995 among JPE,
Inc., PTI Acquisition Corp. and Plastic Trim, Inc.,
incorporated by reference to Exhibit 2 to Registrant's
Current Report on Form 8-K dated April 24, 1995.
2.5 Agreement of Purchase and Sale dated November 15, 1996
between JPE, Inc., in trust for 1203462 Ontario Inc., and
Pebra Inc., incorporated by reference to Registrant's
Current Report on Form 8-K dated January 6, 1997.
2.6 Stock Purchase Agreement dated April 16, 1997 among JPE,
Inc., Dayton Parts, inc. and the Stockholders of Brake,
Axle and Tandem Company, incorporated by reference to
Registrant's Current Report on Form 8-K dated April 30,
1997.
2.7 Asset Purchase Agreement, dated as of August 28, 1998, by
and between R&B, Inc. and Allparts, Inc., incorporated by
reference to Exhibit 2.1 to Registrant's Current Report on
Form 8-K dated November 12, 1998.
2.8 Amendment No. 1, dated October 15, 1998, to Asset Purchase
Agreement, dated as of August 28, 1998, by and between
R&B, Inc. and Allparts, Inc., incorporated by reference to
Exhibit 2.2 to Registrant's Current Report on Form 8-K
dated November 12, 1998.
2.9 Agreement dated December 8, 1998 between The Bank of Nova
Scotia, Ventra Group Inc., General Motors Corporation,
General Motors of Canada Limited and Grant Thornton
Limited, incorporated by reference to Exhibit 2.9 to the
Registrant's Annual Report on Form 10-K dated April 15,
1999.
2.10 Stock Purchase Agreement dated as of March 26, 1999 by and
among JPE, Inc., Industrial & Automotive Fasteners, Inc.
and MacLean Acquisition Company, incorporated by reference
to Exhibit 2.10 to the Registrant's Annual Report on Form
10-K dated April 15, 1999.
3.1 Articles of Incorporation, incorporated by reference to
Exhibit 3.1 to the Registrant's Registration Statement on
Form S-1 (File No. 33-68544).
3.2 Bylaws, adopted as of May 28, 1999, incorporated by
reference to Exhibit 3.2 to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1999.
4 Form of Certificate for Shares of the Common Stock,
incorporated by reference to Exhibit 4 to the Registrant's
Registration Statement on Form S-1 (File No. 33-68544).
4.1 Form of Certificate for Shares of Preferred Stock,
incorporated by reference to Exhibit 4.1 to the
Registrant's Current Report on Form 8-K dated May 27,
1999.
4.2 Form of Preferred Stock Warrant issued to Bank Group,
incorporated by reference to Exhibit 4.2 to the
Registrant's Current Report on Form 8-K dated May 27,
1999.
4.3 Form of Preferred Stock Warrant to be issued to share
holder of record of JPE, Inc. Common Stock as of June 11,
1999, incorporated by reference to Exhibit 4.2 to the
Registrant's Current Report on Form 8-K dated May 27,
1999.
10.1 Shareholder Agreement (Conformed Copy), incorporated by
reference to Exhibit 10.6 to the Registrant's Registration
Statement on Form S-1 (File No. 33-68544).
60
10.2 Indemnification Agreement dated September 1, 1993, between
the Registrant and Dr. John Psarouthakis, incorporated by
reference to Exhibit 10.7 to the Registrant's Registration
Statement on Form S-1 (File No. 33-68544).
10.3 Indemnification Agreement dated September 1, 1993, between
the Registrant and Dr. Otto Gago, incorporated by
reference to Exhibit 10.8 to the Registrant's Registration
Statement on Form S-1 (File No. 33-68544).
10.4 Indemnification Agreement dated September 1, 1993, between
the Registrant and John F. Daly, incorporated by reference
to Exhibit 10.9 to the Registrant's Registration Statement
on Form S-1 (File No. 33-68544).
10.5 Indemnification Agreement dated September 1, 1993, between
the Registrant and Donald R. Mandich, incorporated by
reference to Exhibit 10.10 to the Registrant's
Registration Statement on Form S-1 (File No. 33-68544).
10.6 JPE, Inc. Warrant to Purchase Common Stock issued by the
Registrant in favor of Roney & Co., incorporated by
reference to Exhibit 10.11 to the Registrant's
Registration Statement on Form S-1 (File No. 33-68544).
Pursuant to its terms, the foregoing Warrant was
surrendered and exchanged for substitute Warrants
identical to the foregoing Warrant in all respects except
for the name of the substitute Warrant holder and the
number of shares of the Registrant's Common Stock for
which the substitute Warrants are exercisable, which terms
are as follows:
Number of Shares
of Common Stock for
Warrant Holder which Warrant is Exercisable
-------------- ----------------------------
Roney & Co. 10,000
John C. Donnelly 6,250
James C. Penman 6,250
Dan B. French, Jr. 2,500
10.7 Exclusive Distributor Agreement dated December 31, 1992,
between Dayton Walther Corporation ("DWC") and Dayton
Parts, incorporated by reference to Exhibit 10.14 to the
Registrant's Registration Statement on Form S-1 (File No.
33-68544).
10.8 Exclusive Distributor Agreement dated December 31, 1992,
between DWC and Dayton Parts, incorporated by reference to
Exhibit 10.15 to the Registrant's Registration Statement
on Form S-1 (File No. 33-68544).
10.9 Letter Agreement dated December 31, 1992, from
Kelsey-Hayes Company to JPE Acquisition I, Inc. (now known
as Dayton Parts), incorporated by reference to Exhibit
10.16 to the Registrant's Registration Statement on Form
S-1 (File No. 33-68544).
10.10 Lease Agreement dated May 3, 1993, between Central Storage
& Transfer Company of Harrisburg, Inc. ("CSTCH") and
Dayton Parts, as amended by First Addendum to Lease dated
May 3, 1993, between CSTCH and Dayton Parts, incorporated
by reference to Exhibit 10.17 to the Registrant's
Registration Statement on Form S-1 (File No. 33-68544).
10.11 JPE, Inc. 1993 Stock Incentive Plan for Key Employees, as
amended, incorporated by reference to Exhibit 28 to the
Registrant's Registration Statement on Form S-8 (File No.
33-92236).
10.12 Form of JPE, Inc. Warrant to purchase an aggregate of
100,000 shares of Common Stock at $9.50 per share issued
by the Registrant in favor of the sellers of SAC
Corporation, incorporated by reference to Exhibit 4.a. to
the Registrant's Form 8-K dated December 28, 1994.
10.13 Third Amendment to JPE, Inc. 1993 Stock Incentive Plan for
Key Employees, incorporated by reference to Exhibit 10.14
to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1995.
* 10.14 JPE, Inc. Director Stock Option Plan, incorporated by
reference to Exhibit 28 to the Registrant's Registration
Statement on Form S-8 (File No. 33-93328).
10.15 Form of Indemnification Agreement dated February 8, 1995,
between the Registrant and Donna L. Bacon, incorporated by
reference to Exhibit 10.1 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1995.
61
10.16 Form of Indemnification Agreement between the Registrant
and James J. Fahrner, incorporated by reference to Exhibit
10.3 to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1995.
10.17 Form of Indemnification Agreement between Registrant and
C. William Mercurio, incorporated by reference to Exhibit
10.19 to Registrant's Annual Report on Form 10-K for the
year ended December 31, 1996.
10.18 Third Amended and Restated Credit Agreement dated as of
December 31, 1996, by and among Comerica Bank, other
participants and JPE, Inc. (the "Credit Agreement"),
incorporated by reference to Exhibit 10.20 to Registrant's
Annual Report on Form 10-K for the year ended December 31,
1996.
10.19 Credit Agreement dated as of December 20, 1996 between JPE
Canada Inc. and The Bank of Nova Scotia, incorporated by
reference to Exhibit 10.21 to Registrant's Annual Report
on Form 10-K for the year ended December 31, 1996.
10.20 Form of Indemnification Agreement between the Registrant
and David E. Cole, filed, incorporated by reference to
Exhibit 10.22 to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1997.
10.21 Amendment 1 dated April 16, 1997 to the Credit Agreement,
incorporated by reference to Exhibit 10.23 to Registrant's
Annual Report on Form 10-K for the year ended December 31,
1997.
10.22 Amendment 2 dated August 14, 1997, effective June 30,
1997, to the Credit Agreement, incorporated by reference
to Exhibit 10.1 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1997.
10.23 Amendment 3 dated February 13, 1998 to the Credit
Agreement, incorporated by reference to Exhibit 10.25 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1997.
10.24 Amendment 4 and Limited Waiver, dated as of May 15, 1998,
to the Credit Agreement, incorporated by reference to
Exhibit 10.4 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1998.
10.25 Letter Agreement (the "Forbearance Agreement"), dated
August 10, 1998 among the Banks, Comerica Bank, as Agent,
JPE, Inc. and its subsidiaries, incorporated by reference
to Exhibit 10.1 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1998.
10.26 First Amendment dated August 31, 1998 to Forbearance
Agreement, incorporated by reference to Exhibit 10.1 to
the Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998.
10.27 Second Amendment dated September 4, 1998 to Forbearance
Agreement, incorporated by reference to Exhibit 10.2 to
the Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998.
10.28 Third Amendment dated September 16, 1998 to Forbearance
Agreement, incorporated by reference to Exhibit 10.3 to
the Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998.
10.29 Fourth Amendment dated October 1, 1998 to Forbearance
Agreement, incorporated by reference to Exhibit 10.4 to
the Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998.
10.30 Final Order Authorizing Postpetition Financing and
Providing Adequate Protection for Plastic Trim, Inc. dated
October 29, 1998, incorporated by reference to Exhibit
10.5 to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1998.
10.31 Final Order Authorizing Postpetition Financing and
Providing Adequate Protection for Starboard Industries,
Inc. dated October 29, 1998, incorporated by reference to
Exhibit 10.6 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 1998.
* 10.32 Executive Severance Agreement dated February 20, 1998
between Registrant and Donna L. Bacon, incorporated by
reference to Exhibit 10.1 to Registrant's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1998.
* 10.33 Amendment No. 1, dated May 21, 1998, to Executive
Severance Agreement between Registrant and Donna L. Bacon,
incorporated by reference to Exhibit 10.2 to Registrant's
Quarterly Report on Form 10-Q for the quarter ended June
30, 1998.
62
* 10.34 Executive Severance Agreement dated February 20, 1998
between Registrant and James J. Fahrner, incorporated by
reference to Exhibit 10.2 to Registrant's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1998.
* 10.35 Amendment No. 1, dated May 21, 1998, to Executive
Severance Agreement between Registrant and James J.
Fahrner, incorporated by reference to Exhibit 10.3 to
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1998.
* 10.36 Stay Bonus Agreement, dated as of September 1, 1998,
between JPE, Inc. and Donna L. Bacon, incorporated by
reference to Exhibit 10.7 to Registrant's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1998.
* 10.37 Stay Bonus Agreement, dated as of September 21, 1998,
between JPE, Inc. and James J. Fahrner, incorporated by
reference to Exhibit 10.8 to Registrant's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1998.
* 10.38 Stay Bonus Agreement, dated as of September 30, 1998,
between JPE, Inc. and Karen A. Radtke, incorporated by
reference to Exhibit 10.9 to Registrant's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1998.
10.39 Fifth Amendment, dated December 1, 1998, to Forbearance
Agreement, incorporated by reference to Exhibit 10.39 to
the Registrant's Annual Report on Form 10-K dated April
15, 1999.
10.40 Sixth Amendment, dated March 26, 1999, to Forbearance
Agreement, incorporated by reference to Exhibit 10.40 to
the Registrant's Annual Report on Form 10-K dated April
15, 1999.
10.41 Form of Indemnification Agreement, dated as of September
30, 1998, between the Registrant and Richard P. Eidswick,
incorporated by reference to Exhibit 10.41 to the
Registrant's Annual Report on Form 10-K dated April 15,
1999.
10.42 Form of Indemnification Agreement, dated as of November 9,
1998, between the Registrant and Richard R. Chrysler,
incorporated by reference to Exhibit 10.42 to the
Registrant's Annual Report on Form 10-K dated April 15,
1999.
10.43 Form of letter dated November 28, 1998 from Dr. John
Psarouthakis terminating Shareholder Agreement,
incorporated by reference to Exhibit 10.43 to the
Registrant's Annual Report on Form 10-K dated April 15,
1999.
* 10.44 Letter dated February 5, 1999 amending terms of Stay Bonus
Agreement between the Registrant and James J. Fahrner,
incorporated by reference to Exhibit 10.44 to the
Registrant's Annual Report on Form 10-K dated April 15,
1999.
* 10.45 Letter dated February 5, 1999 amending terms of Stay Bonus
Agreement between the Registrant and Karen A. Radtke,
incorporated by reference to Exhibit 10.45 to the
Registrant's Annual Report on Form 10-K dated April 15,
1999.
10.46 Investment Agreement dated April 28, 1999 among ASC
Holdings LLC, Kojaian Holdings LLC and JPE, Inc.,
incorporated by reference to Exhibit 10.4 to the
Registrant's Annual Report on Form 10-K dated May 27,
1999.
10.47 Tenth Amendment dated May 21, 1999, to forbearance
Agreement, incorporated by reference to Exhibit 10.2 to
the Registrant's Annual Report on Form 10-K dated May 27,
1999.
10.48 Letter Agreement, dated May 26, 1999, among Comerica Bank
as Agent, JPE, Inc. and its subsidiaries, incorporated by
reference to Exhibit 10.3 to the Registrant's Current
Report on Form 8-K dated May 27, 1999
10.49 Letter Agreement, dated May 27, 1999, among Comerica Bank,
JPE, Inc. and its subsidiaries, incorporated by reference
to Exhibit 10.4 to the Registrant's Current Report on Form
8-K dated May 27, 1999.
10.50 Form of Promissory Note dated May 27, 1999 in the
principal amount of $20,000,000 executed by JPE, Inc. and
its subsidiaries, incorporated by reference to Exhibit
10.5 to the Registrant's Current Report on Form 8-K dated
May 27, 1999
10.51 Form of Promissory Note dated May 27, 1999 in the
principal amount of $6,300,000 executed by JPE, Inc. and
its subsidiaries, incorporated by reference to Exhibit
10.6 to the Registrant's Current Report on Form 8-K dated
May 27, 1999
63
10.52 Form of Promissory Note dated May 27, 1999 in the
principal amount of $30,000,000 executed by JPE, Inc. and
its subsidiaries, incorporated by reference to Exhibit
10.7 to the Registrant's Current Report on Form 8-K dated
May 27, 1999
10.53 Advance Formula Agreement, dated May 27, 1999 between JPE,
Inc. and its subsidiaries and Comerica Bank, incorporated
by reference to Exhibit 10.8 to the Registrant's Current
Report on Form 8-K dated May 27, 1999.
10.54 Form of Security Agreement (All Assets), dated as of May
27, 1999, executed by JPE, Inc. and each of its
subsidiaries, incorporated by reference to Exhibit 10.9 to
the Registrant's Current Report on Form 8-K dated May 27,
1999
10.55 Patent and Trademark Security Agreement, dated as of May
27, 1999 made by JPE, Inc. in favor of Comerica Bank,
incorporated by reference to Exhibit 10.10 to the
Registrant's Current Report on Form 8-K dated May 27, 1999
10.56 Security Agreement (Negotiable Collateral), dated as of
May 27, 1999, executed by each of ASC Holdings LLC,
Kojaian Holdings, JPE, Inc. and its wholly-owned
subsidiary, SAC Corporation, incorporated by reference to
Exhibit 10.11 to the Registrant's Current Report on Form
8-K dated May 27, 1999
10.57 Guaranty, dated as of May 27, 1999, executed by ASC
Holdings LLC, Kojaian Holdings LLC, API/JPE, Inc. and SAC
Corporation, incorporated by reference to Exhibit 10.12 to
the Registrant's Current Report on Form 8-K dated May 27,
1999
10.58 Letter Agreement, dated May 27, 1999, among Heinz C.
Prechter, Mike Kojaian and C. Michael Kojaian,
incorporated by reference to Exhibit 10.13 to the
Registrant's Current Report on Form 8-K dated May 27, 1999
10.59 Shareholders Agreement dated May 27, 1999 between ASC
Holdings LLC and Kojaian Holdings LLC, incorporated by
reference to Exhibit 10.14 to the Registrant's Current
Report on Form 8-K dated May 27, 1999
10.60 Employment Agreement, dated May 27, 1999, between Richard
R. Chrysler and JPE, Inc., incorporated by reference to
Exhibit 10.15 to the Registrant's Current Report on Form
8-K dated May 27, 1999
10.61 Termination Agreement and Release of All Liability, dated
May 27, 1999, between Richard C. Chrysler and JPE, Inc.,
incorporated by reference to Exhibit 10.16 to the
Registrant's Current Report on Form 8-K dated May 27,
1999.
10.62 Termination Agreement and Release of All Liability, dated
May 27, 1999, between Richard P. Eidswick and JPE, Inc.,
incorporated by reference to Exhibit 10.17 to the
Registrant's Current Report on Form 8-K dated May 27,
1999.
10.63 Letter Agreement among GMAC Business Credit LLC, Comerica
Bank and Plastic Trim, Inc., incorporated by reference to
Exhibit 10.18 to the Registrant's Current Report on Form
8-K dated May 27, 1999.
10.64 Letter Agreement among GMAC Business Credit LLC, Comerica
Bank and Starboard Industries, Inc., incorporated by
reference to Exhibit 10.19 to the Registrant's Current
Report on Form 8-K dated May 27, 1999.
10.65 Letter Agreement, dated August 30, 1999, among Mike
Kojaian, C. Michael Kojaian, Kojaian Holdings LLC, Heinz
C. Prechter and ASC Holdings LLC, incorporated by
reference to Exhibit 10.1 to the Registrant's Current
Report on Form 8-K dated December 30, 1999.
10.66 Release of Guarantor (Kojaian Holdings LLC) from Guaranty
dated May 27, 1999, incorporated by reference to Exhibit
10.2 to the Registrant's Current Report on Form 8-K dated
December 30, 1999.
10.67 Agreement dated September 24, 1999 between Registrant and
The Bank Of Nova Scotia releasing the Registrant of the
Guarantee made on behalf of JPE Canada Inc., incorporated
by reference to Exhibit 10.67 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1999.
10.68 Subordinated Demand Revolving Credit Note for $1,500,000,
dated January 24, 2001, between the Registrant and ASC
Incorporated, incorporated by reference to Exhibit 10.68
to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 2000.
64
10.69 Credit Agreement dated February 7, 2001 between the
Registrant and Comerica Bank, incorporated by reference to
Exhibit 10.69 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 2000.
10.70 Form of Revolving Credit Note dated February 7, 2001 to
Comerica Bank in the principal amount of $33,000,000
executed by the Registrant, incorporated by reference to
Exhibit 10.70 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 2000.
10.71 Advance Formula Agreement, dated February 7, 2001 between
the Registrant and Comerica Bank, incorporated by
reference to Exhibit 10.71 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 2000.
10.72 Subordination Agreement dated February 7, 2001 between ASC
Incorporated, Comerica Bank and the Registrant,
incorporated by reference to Exhibit 10.72 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 2000.
10.73 Revolving Line of Credit Note for $3,000,000 dated
February 7, 2001, between the Registrant and ASC
Incorporated, incorporated by reference to Exhibit 10.73
to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 2000.
10.74 Subordinated Demand Business Loan Rate for $15,000,000,
dated February 7, 2001, between the Registrant and ASC
Incorporated, incorporated by reference to Exhibit 10.74
to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 2000.
10.75 Subordinated Security Agreement, executed by the
Registrant on February 7, 2001, incorporated by reference
to Exhibit 10.75 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 2000.
10.76 First Amendment to the JPE, Inc. 1993 Stock Incentive Plan
for Key Employees dated November 22, 2000, incorporated by
reference to Exhibit 10.76 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 2000.
10.77 Amendment No. 1 to Credit Agreement and Waiver dated April
16, 2002 between the Registrant and Comerica Bank,
incorporated by reference to Exhibit 10.77 to the
Registrant's Annual Report on Form 10-K for the year
ended December 31, 2001.
10.78 Amendment to Subordination Agreement dated April 16, 2002
between ASC Incorporated, Comerica Bank and the
Registrant, incorporated by reference to Exhibit 10.78 to
the Registrant's Annual Report on Form 10-K for the year
ended December 31, 2001.
16 Letter dated June 29, 1999 from PricewaterhouseCoopers
LLP, the former independent accountants for the
Registrant, incorporated by reference to the Registrant's
Current Report on Form 8-K dated June 25, 1999.
20 Press Release dated July 1, 1999 announcing promotion of
Richard R. Chrysler to Vice Chairman, incorporated by
reference to Exhibit 20 to the Registrant's Current Report
on Form 8-K dated July 1, 1999.
20.1 Press Release dated December 30, 1999 announcing ASC
Holdings LLC becomes majority owner of Registrant,
incorporated by reference to Exhibit 20.1 to the
Registrant's Current Report on Form 8-K dated December 30,
1999.
21 Subsidiaries of the Registrant, incorporated by reference
to Exhibit 10.39 to the Registrant's Annual Report on Form
10-K dated April 15, 1999.
23 Consent of PricewaterhouseCoopers LLP, incorporated by
reference to Exhibit 23 to the Registrant's Annual Report
on Form 10-K dated April 15, 1999.
23.1 Consent of Ernst & Young LLP, filed with this report.
* Indicates management contract or compensatory plan or arrangement
65