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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
COMMISSION FILE NUMBER 1-12068
METALDYNE CORPORATION
(FORMERLY KNOWN AS MASCOTECH, INC.)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 38-2513957
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
47603 Halyard Drive, Plymouth, Michigan 48170-2429
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 734-207-6200
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- ---------------------------------------------------- --------------------------------
Common Stock, $1.00 par Value None
4 1/2% Convertible Subordinated Debentures Due 2003 New York Stock Exchange, Inc.
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
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, 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]
There is currently no public market for the Registrant's Common Stock.
Number of shares outstanding of the Registrant's Common Stock at
March 15, 2001:
41,425,674 shares of Common Stock, par value $1.00 per share
Portions of the Registrant's definitive Proxy Statement to be filed for
its 2001 Annual Meeting of Stockholders are incorporated by reference into
Part III of this Form 10-K.
TABLE OF CONTENTS
ITEM PAGE
- -------- ----------------------------------------------------------------------------- --------
PART I
1. Business...................................................................... 1
2. Properties.................................................................... 7
3. Legal Proceedings............................................................. 8
4. Submission of Matters to a Vote of Security Holders........................... 8
4A. Supplementary Item. Executive Officers of Registrant.......................... 9
PART II
5. Market for Registrant's Common Equity and Related Stockholder Matters ........ 10
6. Selected Financial Data....................................................... 12
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations.................................................................... 13
7A. Quantitative and Qualitative Disclosures about Market Risk.................... 20
8. Financial Statements and Supplementary Data................................... 21
9. Changes in and Disagreements with Accountants and Financial Disclosure ....... 47
PART III
10. Directors and Executive Officers of the Registrant............................ 47
11. Executive Compensation........................................................ 47
12. Security Ownership of Certain Beneficial Owners and Management ............... 47
13. Certain Relationships and Related Transactions................................ 47
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K ............. 47
Signatures.................................................................... 51
FINANCIAL STATEMENT SCHEDULES
Metaldyne Corporation Financial Statement Schedules........................... F-1
PART I
ITEM 1. BUSINESS.
Metaldyne Corporation (the "Company or "we) is a leading global
diversified industrial manufacturer of highly engineered products for
transportation, industrial and consumer markets. Our products include
metal-formed and precision-engineered components and modular systems used in
vehicle engine, transmission and driveline applications, specialty fasteners,
towing systems, packaging and sealing products and other industrial products.
We serve a broad range of over 150 automotive and industrial customers,
including Amoco, Bayer, BMW, Boeing, Dana, DaimlerChrysler, Dow Chemical,
Ford, Visteon, General Motors, Delphi, Honda, John Deere, Johns Manville, New
Venture Gear, TRW, U-Haul and Wal-Mart. We operate through two business
groups -our Metal Forming Group, which accounts for approximately
two-thirds of our sales, and our Diversified Industrial Product Group, which
accounts for the remaining one-third of our sales.
In November 2000, we were acquired by an investor group led by Heartland
Industrial Partners, L.P. ("Heartland") and Credit Suisse First Boston
("CSFB") in a recapitalization transaction. Heartland is a private equity
fund established to "buy, build and grow" industrial companies in sectors
with attractive consolidation opportunities. We believe the recapitalization
and Heartland's investment in us will allow us to aggressively pursue
internal growth opportunities and strategic acquisitions and to increase the
scale and profitability of our businesses. In our Metal Forming Group, an
important trend in our markets is that of automotive original equipment
manufacturers, or OEMs, seeking to outsource their metal component design,
engineering, fabrication and assembly functions. As a leading supplier of
highly engineered metal parts with strong machining, assembly and module
capabilities, we believe we are positioned to provide an integrated, full
service solution to the engine, transmission and driveline components and
module needs of our customers. We plan to add capabilities, through internal
investment and select acquisitions, in additional metals and processes (such
as ductile iron, aluminum and magnesium) to enhance our full service offering
We intend to also grow our diversified industrial products businesses through
internal investment and acquisitions of businesses that share key
characteristics with our existing diversified businesses. We believe our
diversified businesses share highly focused product strategies based on
proprietary capabilities, strong market share positions and high operating
margins.
OUR BUSINESS GROUPS
We operate through two business groups -- Metal Forming and Diversified
Industrial Products. Both groups have businesses with leading market shares,
state-of-the-art technologies and superior product quality.
METAL FORMING GROUP. Our Metal Forming Group manufactures a broad range of
engineered metal products used in automotive and industrial applications and
combines capabilities in engineering, design, machining and assembly. The
Metal Forming Group's sales are primarily to light vehicle OEMs and component
assemblers, but also include other customers in the aerospace, heavy truck,
construction, general industrial and consumer markets. The Metal Forming
Group's products include cold, warm and hot forged products, forged and
conventional powdered metal products and tubular fabricated products used in
engine, transmission and drivetrain components, assemblies and
sub-assemblies. In addition, the Metal Forming Group manufactures specialty
fasteners, compressed gas cylinders and other metal-formed products used in a
variety of industrial applications The Metal Forming group has the leading
North American market share in several of its key products, including hot
forgings, powder metal connecting rods, and forged shafts and is the second
largest independent "machining and assembly" supplier.
We have added strong capabilities in machining and sub-assembly and light
metals through the acquisition of Simpson Industries, Inc. ("Simpson") in
December 2000 and a strategic relationship with Global Metal Technologies,
Inc. ("GMTI"), which was acquired by Heartland in January 2001. As a result
of the Simpson acquisition, we add world class machining and assembly
capabilities and can offer OEM customers an integrated solution for their
needs by combining design, engineering, metal forming,
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machining and sub-assembly capabilities. Through our strategic relationship
with GMTI, which is a leading provider of precision aluminum die castings, we
have added forming capabilities in aluminum, which is experiencing strong
growth due to its lightweight characteristics. The Simpson acquisition and
the GMTI relationship will provide us with opportunities to reduce costs in
certain sales, marketing, administration and overhead functions and to
improve operational efficiency.
DIVERSIFIED INDUSTRIAL PRODUCT GROUP. Our Diversified Industrial Products
Group manufactures towing and related accessories as well as a broad range of
products used in industrial applications. The Diversified Industrial Product
Group's towing and accessories products include trailer hitches, hitch
mounted accessories, jacks, couplers and winches, roof racks and related
electrical products. These products are sold to customers such as Wal-Mart,
K-Mart and U-Haul. Specialty industrial products include closures and
dispensing products, gaskets, insulation products and precision cutting tools
for a wide variety of customers in the chemical, refining, container,
construction and other industries. Key customers include Dow, BASF, Bayer,
Pepsi, Sherwin Williams, Exxon Mobil, Lyondell, Chevron.
OUR BUSINESS STRATEGIES
Our goal in the Metal Forming Group is to become the leading supplier of
high quality, low cost metal formed components, assemblies and modules to the
global transportation industry. As a result of the competitive pressures on
automotive manufacturers to improve quality and reduce costs, time to market,
overhead and inventory, several trends have emerged which are important to
our strategy, including: (i) the desire of OEM's and certain Tier 1 suppliers
to outsource the design and manufacture of metal parts in engine,
transmission and driveline applications, (ii) increasing demand for
fully-integrated modular assemblies, and (iii) the globalization and
consolidation of the supply base. Our strategy to capitalize on these trends
includes the following elements:
o CAPITALIZE ON FULL-SERVICE, INTEGRATED SUPPLY OPPORTUNITIES. We
intend to leverage our strengths in forged steel and powder metal
components by adding metal capabilities in ductile iron foundry,
aluminum foundry and aluminum and magnesium die casting. By
offering a full complement of metal solutions we believe we will
be able to offer OEMs "one-stop" shopping to optimize weight,
cost, stress, durability, fatigue resistance and other metal
component attributes. With the largest North American market
shares in certain engineered forging and powder metal application,
and the second largest non-captive machining and assembly
capability, we believe we have a competitive advantage in becoming
a fully integrated supplier. Our capabilities in engineering,
design, machining and assembly, position us to capture a greater
share of the "value chain" and deliver customers finished
sub-assemblies and modules rather than independent parts. Recently
we have had opportunities to pursue new business opportunities
utilizing our integrated capabilities to supply a larger
percentage of the value added content of certain applications
which could result in significant increases in content per vehicle
on related programs.
o INVEST IN ENGINEERING, DESIGN AND INFORMATION TECHNOLOGY. We plan
to continue investing in technology and design capability to
support our products. We believe that in order to effectively
develop total metal component and assembly solutions it is
necessary to integrate research, development, and design elements
with product fabrication, machining, finishing and assembly. We
believe that our larger scale and broader product line relative to
several of our competitors will enable us to more efficiently
invest in information technology and develop a significant
competitive advantage. In addition, we plan to implement advanced
information technology systems to enable us to reduce overhead and
administrative expenses.
o PURSUE GLOBAL EXPANSION OPPORTUNITIES. Global expansion is an
important component of our growth strategy. A significant portion
of the global market for engineered metal parts is outside of
North America. Further, as OEM's continue to consolidate their
supply base, they are looking for global suppliers that can
provide seamless product delivery across geographic production
regions. We believe our size, strong market shares in North
America and customer relationships uniquely position us to
capitalize on this trend.
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o CAPTURE BENEFITS FROM ECONOMIES OF SCALE AND OPERATING
SYNERGIES. As we grow our businesses, we will seek to improve our
sourcing costs for key commodity inputs, such as primary and
secondary scrap, hot bar and rod and other key raw material
components for our Metal Forming Group. In addition, as a larger
company we will be able to spread our engineering and product
development costs over a larger sales base. Furthermore,
acquisitions and strategic relationships typically present
opportunities for cost reductions through operational efficiency.
Through the Simpson acquisition and the GMTI relationship, we have
already developed customer-based marketing teams, identified
overhead that can be shared and targeted opportunities for
restructuring and coordination of design, engineering,
administrative and raw material purchasing functions.
Our strategy in the Diversified Industrial Group is to aggressively pursue
internal growth opportunities and selected strategic acquisitions to create a
significant portfolio of industrial businesses that share common and
complementary characteristics, including proprietary technologies, market
leadership in niche industrial markets, strong brand names, high operating
margins, strong free cash flow generation and above average growth
opportunities. Several businesses have significant growth opportunities
related to new product development and expansion into new markets. In
addition, we believe there are significant opportunities to reduce overhead
and administrative costs across these businesses though the use of
information technology and shared services. We also believe we can reduce
operating costs by combining and rationalizing certain operations.
RECENT DEVELOPMENTS
THE RECAPITALIZATION. On November 28, 2000, we completed a
recapitalization transaction which resulted in an investor group led by
Heartland and CSFB acquiring control of our company. Pursuant to the
recapitalization, our publicly traded common stock was converted into the
right to receive $16.90 in cash plus additional cash amounts, if any, based
upon the net proceeds from any future disposition of the stock of Saturn
Electronics & Engineering Inc. owned by us. Only holders of our common stock
at the time of the recapitalization will be entitled to proceeds from any
disposition of our Saturn stock. Investors in the common stock offered hereby
will not be entitled to receive any Saturn proceeds. In connection with the
recapitalization, certain of our stockholders, primarily Masco Corporation
and Richard A. Manoogian and the related Richard and Jane Manoogian
Foundation, agreed to roll over a portion of their investment in us and
consequently remain as stockholders in Metaldyne.
The recapitalization, the repayment of certain of our existing
indebtedness and the payment of fees and expenses in connection with the
recapitalization was financed through approximately (1) $435 million in
equity financing provided by Heartland and its affiliates, investment funds
associated with CSFB, and other equity co-investors, (2) $123.8 million of
proceeds from the sale of certain equity investments owned by us, (3) $1,016
million from borrowings under our credit facility and (4) $118.5 million of
proceeds from the sale of accounts receivable pursuant to a new accounts
receivable facility.
SIMPSON ACQUISITION. On December 15, 2000, we acquired Simpson for total
consideration of approximately $365 million, including fees and expenses and
the assumption of indebtedness. Simpson is a designer and manufacturer of
precision-engineered automotive components and modular systems for passenger
and sport utility vehicles, light-and heavy-duty trucks and diesel engines.
We believe that Simpson will further enhance our vertical integration in the
metal forming industry. The acquisition of Simpson, the repayment of certain
indebtedness of Simpson and the payment of fees and expenses in connection
with the acquisition of Simpson was funded with approximately (1) $126
million in additional common equity financing provided by Heartland and other
equity co-investors, (2) $203 million from borrowings under our credit
facility ($200 million in term loans and $3 million in revolving credit
borrowings) and (3) $36 million from the sale of accounts receivable pursuant
to our accounts receivable facility. Subsequent to the acquisition of Simpson
we repaid approximately $50.0 million of term loans with the proceeds from
certain sale-leaseback transactions.
STRATEGIC RELATIONSHIP WITH GLOBAL METALS TECHNOLOGIES, INC. In January
2001, Heartland acquired GMTI, a leading supplier of aluminum die cast
components to the automotive industry. We intend to explore a range of
opportunities for realizing benefits from our affiliation with GMTI,
including a possible
3
merger of GMTI into our operations in the future. The timing and terms of any
such transaction are uncertain and we reserve the right not to pursue it. To
achieve the strategic value of our affiliation with GMTI, we entered into a
strategic services agreement with GMTI. Under this agreement, we and GMTI
provide one another with extensive support and services at cost and are
coordinating raw material and energy purchases. Our arrangements also include
joint sales and marketing programs and initiatives.
OPERATING SEGMENTS
The following table sets forth for the three years ended December 31, the
net sales and operating profit for our operating segments, (includes Simpson
Industries in the Metal Forming Group from date of acquisition, December 15,
2000).
NET SALES(1)
(IN THOUSANDS)
---------------------------------------
2000 1999 1998
------------ ------------ -----------
METAL FORMING GROUP
Specialty Metal Formed Products ........ $ 831,000 $ 817,000 $ 760,000
Specialty Fasteners..................... 215,000 241,000 226,000
DIVERSIFIED INDUSTRIAL PRODUCT GROUP
Towing Systems.......................... 276,000 260,000 238,000
Specialty Packaging and Sealing
Products............................... 220,000 216,000 223,000
Specialty Industrial Products........... 108,000 107,000 110,000
Companies Sold or Held for Sale ........ -- 39,000 115,000
------------ ------------ -----------
$1,650,000 $1,680,000 $1,672,000
============ ============ ===========
OPERATING PROFIT(2)(3)
---------------------------------------
2000 1999 1998
------------ ------------ -----------
METAL FORMING GROUP
Specialty Metal Formed Products ........ $110,000 $112,000 $106,000
Specialty Fasteners..................... 21,000 35,000 38,000
DIVERSIFIED INDUSTRIAL PRODUCT GROUP
Towing Systems.......................... 33,000 37,000 34,000
Specialty Packaging and Sealing
Products............................... 39,000 41,000 46,000
Specialty Industrial Products........... 6,000 14,000 16,000
Companies Sold or Held for Sale ........ -- 4,000 12,000
------------ ------------ -----------
$209,000 $243,000 $252,000
============ ============ ===========
- ------------
(1) The 1998 net sales amounts include TriMas Corporation sales occurring
before the acquisition of TriMas on January 22, 1998. These sales
amounted to approximately $36 million.
(2) Amounts are before General Corporate Expense.
(3) The 1998 operating profit amounts include TriMas operating profit
occurring before the acquisition date of January 22, 1998. This
operating profit amounted to approximately $5 million.
OUR PRODUCTS
Our product lines within our two primary operating groups, Metal Forming
Group and Diversified Industrial Product Group, are described below.
METAL FORMING GROUP
Specialty Metal Formed Products. We manufacture specialty metal formed
products for engine and drivetrain applications, including semi-finished
transmission shafts, drive gears, engine connecting rods, wheel spindles and
front wheel drive components. Our metal formed products are manufactured
using
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various process technologies, including cold, warm and hot forming, powder
metalworking, value-added machining and tubular steel fabricating. We believe
that our metal forming technologies provide cost-competitive,
high-performance, quality components required to meet the increasing demands
of the automotive and truck transportation markets.
Machining and Assembly. With the acquisition of Simpson, the Metal Forming
Group now designs and manufactures precision-engineered automotive components
and modular systems for passenger and sport utility vehicles, light-and
heavy-duty trucks and diesel engines. We also design and manufacture
torsional crankshaft dampers, which reduce and eliminate engine and
drivetrain noise and vibration. We produce integrated front engine cover
subassemblies that combine items such as the oil and water pumps, providing
OEMs with a simplified process by which to attach the water and oil pumps to
the front engine cover subsystem and lower assembly costs. Modular engine
products include oil pumps, front engine modular assemblies and water pumps,
all of which impact engine durability, reliability and life expectancy. We
also produce wheel spindles, steering knuckles and hub assemblies, all of
which are key components affecting the smoothness of a driver's ride and the
handling and safety of an automobile. We distribute and sell our machining
and assembly products principally to OEMs in North America and Europe through
our own sales force.
Specialty Fasteners and Other Metal Forming. Our specialty fasteners
products include standard-and custom-designed ferrous, nonferrous and special
alloy fasteners for the building construction, farm implement, medium-and
heavy-duty truck, appliance, aerospace, electronics and other industries. We
also provide metal treating services for manufacturers of fasteners and
similar products. Specialty fasteners are sold through our own sales
personnel and independent sales representatives to both distributors and
manufacturers in these industries.
DIVERSIFIED INDUSTRIAL PRODUCT GROUP
Towing Systems. We manufacture towing and trailering system products,
including vehicle hitches, trailer jacks, winches, couplers and related
accessories for the passenger car, light truck, recreational vehicle,
trailer, marine, agricultural and industrial markets. Towing systems products
are sold to independent installers, distributors, manufacturers and retailers
by our sales organization and independent sales representatives.
Specialty Packaging and Sealing Products. We manufacture specialty
packaging and sealing products, including industrial and consumer container
closures and dispensing products primarily for the chemical, agricultural,
refining, food, petrochemical and health care industries; and specialty
industrial gaskets for refining, petrochemical and other industrial
applications. Sales of specialty packaging and sealing products are made by
our own sales staff primarily to container manufacturers, industrial gas
producers, refineries and independent distributors.
Specialty Industrial Products. Our specialty industrial products include
flame-retardant facings and jacketings used in conjunction with fiberglass
insulation for commercial, industrial and residential construction
applications, pressure-sensitive specialty tape products and a variety of
specialty precision tools such as center drills, cutters, end mills and
gauges. These products are marketed to manufacturers and distributors by our
sales personnel and independent sales representatives.
CUSTOMERS
In 2000, approximately 44 percent of our sales were direct to original
equipment manufacturers. Sales to various divisions and subsidiaries of New
Venture Gear, Inc. accounted for approximately 11 percent of our net sales.
Except for these sales, no material portion of our business is dependent upon
any one customer, although we are subject to those risks inherent in having a
focus on automotive products generally.
MATERIALS AND SUPPLY ARRANGEMENTS
In general, raw materials required by us have been obtainable from various
sources and in the quantities desired.
5
COMPETITION
The major domestic and foreign markets for our products are highly
competitive. Competition is based primarily on price, product engineering,
performance, technology, quality and overall customer service, with the
relative importance of such factors varying among products. Our global
competitors include a large number of other well-established independent
manufacturers as well as certain customers who have their own internal
manufacturing and assembly capabilities. Although a number of companies of
varying size compete with us, no single competitor is in substantial
competition with us with respect to more than a few of our product lines and
services.
EMPLOYEES AND LABOR RELATIONS
As of December 31, 2000, we employed approximately 11,600 people, of which
approximately 27 percent were unionized (principally United Auto Workers).
Approximately 20 percent of our employees were located outside the U.S.
Employee relations have generally been satisfactory. A strike lasting from
July 1997 to June 1998 involved approximately 140 employees at the Fraser,
Michigan plant and was related to a planned significant reduction in
headcount, resulting from our desire to further automate our production
process. The strike was settled, resulting in the anticipated headcount
reduction and automation.
SEASONALITY; BACKLOG
Sales by our Towing Systems segment are generally stronger in the first
and second quarters, as distributors and retailers acquire product for the
spring selling season; no other operating segment experiences significant
seasonal fluctuation in its business. We do not consider backlog orders to be
a material factor in our operating segments.
ENVIRONMENTAL MATTERS
Our operations are subject to federal, state, local and foreign laws and
regulations pertaining to pollution and protection of the environment
governing among other things, emissions to air, discharge to waters and the
generation, handling, storage, treatment and disposal of waste and other
materials, and remediation of contaminated sites. Several of our subsidiaries
were named as potentially responsible parties in several sites requiring
clean-up based on the disposal of wastes they generated. We have entered into
consent decrees relating to two sites in California along with the many other
co-defendants in these matters. We have incurred expenses for all these sites
over a number of years, a portion of which has been covered by insurance. In
addition to the foregoing, our businesses have incurred expenses to clean up
company-owned or leased property. Such expenditures in the past have not had
a material adverse effect on our consolidated financial position, results of
operations or cash-flow.
We believe that our business, operations and facilities are being operated
in compliance in all material respects with applicable environmental and
health and safety laws and regulations, many of which provide for substantial
fines and criminal sanctions for violations. The operation of automotive
parts manufacturing plants entails risks in these areas, however, and there
can be no assurance that we will not incur material costs or liabilities in
the future. In addition, potentially significant expenditures could be
required in order to comply with evolving environmental and health and safety
laws, regulations or requirements that may be adopted or imposed in the
future.
PATENTS AND TRADEMARKS
We hold a number of patents, patent applications, licenses, trademarks and
trade names. We consider our patents, patent applications, licenses,
trademarks and trade names to be valuable, but do not believe that there is
any reasonable likelihood of a loss of such rights that would have a material
adverse effect on our operating segments or on our present business as a
whole.
INTERNATIONAL OPERATIONS
We have operations located in Australia, Brazil, Canada, Czech Republic,
England, France, Germany, Italy, Mexico and Spain. Products manufactured by
us outside of the United States include
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forged and machined parts products for automotive customers, powder metal
connecting rods, constant-velocity joints, specialty packaging and sealing
products and towing systems products.
Our foreign operations are subject to political, monetary, economic and
other risks attendant generally to international businesses. These risks
generally vary from country to country.
ITEM 2. PROPERTIES.
Our principal manufacturing facilities range in size from approximately
10,000 square feet to 420,000 square feet, substantially all of which are
owned by us, and many of which are subject to liens under our credit
facility. Our executive offices are located in Plymouth, Michigan. Our
buildings, machinery and equipment have been generally well maintained, are
in good operating condition and are adequate for current production
requirements.
The following list sets forth the location of our principal manufacturing
facilities and identifies the principal operating segment utilizing such
facilities.
California......... Commerce(4)
Illinois........... Wheeling(4) and Wood Dale(4)
Indiana............ Auburn(5), Bluffton(1), Elkhart(2)(2), Fort Wayne(1), Frankfort(4),
Freemont(1), Goshen(2), North Vernon(1) and Peru(2)
Louisiana.......... Baton Rouge(5)
Massachusetts...... Plymouth(3)
Michigan........... Canton(2), Detroit(1)(4), Farmington Hills(1), Fraser(1), Green Oak
Township(1), Hamburg(1), Litchfield(1), Livonia(4), Middleville(1),
Plymouth(1), Royal Oak(1), Troy(1), Warren(1)(3)(3)
New Jersey......... Edison(3) and Netcong(3)
North Carolina..... Greenville(1)
Ohio............... Canal Fulton(1), Edon(1), Lakewood(4), Minerva(1), Newburgh
Heights(4), Port Clinton(1) and Troy(1)
Oklahoma........... Tulsa(3)
Pennsylvania....... Ridgway(1) and St. Marys(1)
Tennessee.......... Memphis(1)
Texas.............. Houston(5) and Longview(5)
Wisconsin.......... Mosinee(2) and West Bend(2)
Australia.......... Hampton Park, Victoria(2), Rhodes, New South Wales(2) and Wakerley,
Queensland(2)
Brazil............. Cumbica-Guarulhos(1) and Sao Paulo(1)
Canada............. Fort Erie(5), Oakville(2), Sarnia(5) and Thamesville(1), Ontario
Czech Republic..... Oslavany(1)
England............ Halifax(1), Leicester(5) and Wolverhampton(1)
France............. Lyon(1)
Germany............ Neunkirchen(5), Nurnberg(1) and Zell am Harmersbach(1)
Italy.............. Poggio Rusco(1) and Valmadrera(5)
Mexico............. Iztapalapa(1), Mexico City(5) and Ramos Arispe(1)
Spain.............. Almusaffes(1) and Barcelona(1)
Operating segments in the preceding table are identified as follows: (1)
Specialty Metal Formed Products, (2) Towing Systems, (3) Specialty Industrial
Products, (4) Specialty Fasteners and (5) Specialty Packaging and Sealing
Products. Multiple footnotes to the same municipality denote separate
facilities in that location.
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ITEM 3. LEGAL PROCEEDINGS
Five purported stockholder class action lawsuits have been filed against
us, each of our directors and Masco Corporation, in the Delaware Court of
Chancery on behalf of our unaffiliated stockholders, in connection with the
recapitalization. The lawsuits, although not identical, allege, among other
things, that (1) the directors breached their fiduciary duties to our
stockholders through an unfair process of negotiating the recapitalization
agreement and unfair and inadequate consideration and (2) Heartland and the
continuing stockholders unfairly possessed nonpublic information when
negotiating the recapitalization agreement. The lawsuits further allege that
these actions by us prevented or could prevent our stockholders from
realizing the full and fair value of their stock.
On November 3, 2000, the parties to these lawsuits entered into a
Memorandum of Understanding concerning the terms of a proposed settlement of
these lawsuits. In connection with a proposed settlement, (a) we and
Riverside Company L.L.C. agreed to amend the recapitalization agreement to
provide, among other things, for a possible increase in the amount payable to
our stockholders from the proceeds of the disposition of Saturn stock, (b)
the special committee of the Board of Directors agreed that, as the members
of the adjustment committee (charged with the responsibility to dispose of
the Saturn stock) after the recapitalization merger, they will continue to
have fiduciary duties, as directors of the Delaware corporation, to our
stockholders entitled to receive any proceeds of the sale of the Saturn
stock, (c) the special committee agreed that the plaintiffs' counsel will
from time to time receive reports from the advisors to the adjustment
committee regarding such sale, and (d) MascoTech provided plaintiffs' counsel
with an opportunity to review and comment upon the disclosure provided to
MascoTech stockholders in the proxy statement that was mailed to our
stockholders on or about October 26, 2000. The proposed settlement is subject
to approval by the Delaware Court of Chancery.
A civil suit was filed in the United States District Court for the Central
District of California in April, 1983 by the United States of America and the
State of California against over 30 defendants, including a subsidiary of
ours, for alleged release into the environment of hazardous waste disposed of
at the Stringfellow Disposal Site in California. The plaintiffs have
requested, among other things, that the defendants clean up the contamination
at that site. A consent decree has been entered into by the plaintiffs and
the defendants, including us, providing that the consenting parties perform
partial remediation at the site. Another civil suit was filed in the United
States District Court for the Central District of California in December 1988
by the United States of America and the State of California against more than
180 defendants, including us, for alleged release into the environment of
hazardous waste disposed of at the Operating Industries, Inc. site in
California. This site served for many years as a depository for municipal and
industrial waste. The plaintiffs have requested, among other things, that the
defendants clean up the contamination at that site. Consent decrees have been
entered into by the plaintiffs and a group of the defendants, including us,
providing that the consenting parties perform certain remedial work at the
site and reimburse the plaintiffs for certain past costs incurred by the
plaintiffs at the site. Based upon our present knowledge and subject to
future legal and factual developments, we do not believe that any of this
litigation will have a material adverse effect on our consolidated financial
position, results of operations or cash flow.
We are subject to other claims and litigation in the ordinary course of
our business, but do not believe that any such claim or litigation will have
a material adverse effect on our consolidated financial position, results of
operations or cash flow.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At a Special Meeting held on November 28, 2000, the Company's shareholders
approved the merger of MascoTech Harbor Inc., a wholly owned subsidiary of
the Company with and into the Company for the purpose of effecting a repeal
of a provision in the Company's certificate of incorporation that required a
95 percent stockholder vote to approve business combinations involving
interested stockholders. This merger was approved by a vote of 34,944,912
shares in favor, 202,894 votes against and 147,925 shares abstaining.
Following the approval of this merger, the Company's stockholders voted, also
on Novem-
8
ber 28, 2000, to approve the merger of an affiliate of Heartland Industrial
Partners, L.P. with the Company resulting in a change of control of the
Company. The recapitalization merger was approved by a vote of 34,938,771
shares in favor, with 192,914 shares against and 164,046 shares abstaining.
ITEM 4A. SUPPLEMENTARY ITEM. EXECUTIVE OFFICERS OF REGISTRANT (PURSUANT TO
INSTRUCTION 3 TO ITEM 401(b) OF REGULATION S-K).
The following table sets forth certain information regarding our executive
officers.
NAME AGE POSITIONS OFFICER SINCE
- -------------------- ----- ---------------------------------------------------- ---------------
Timothy D. Leuliette 51 President and Chief Executive Officer of Metaldyne 2001
Corporation, President and Chief Executive Officer
of Metal Forming Group and Director
Grant H. Beard 40 President and Chief Executive Officer of Diversified 2001
Industrial Group
David B. Liner 45 Vice President and General Counsel and Assistant 1997
Secretary
Roy Parrott 60 Group President of Business Operations 2001
Leroy H. Runk 61 Group President of Forming Technologies 2001
James F. Tompkins 45 Vice President and Treasurer 1998
Timothy Wadhams 52 Executive Vice President, Finance and Administration 1984
and Chief Financial Officer
- ------------
TIMOTHY D. LEULIETTE. Mr. Leuliette was elected as one of our directors in
connection with the recapitalization and currently serves as our President
and Chief Executive Officer and the President and Chief Executive Officer,
Metal Forming Group. He is the former Vice Chairman of Detroit Diesel
Corporation and has spent 27 years in management of manufacturing and
services businesses and in the investment of private capital. Mr. Leuliette
joined the Penske Corporation as President and Chief Operating Officer in
1996 to address operational and strategic issues. From 1991 to 1996, Mr.
Leuliette served as President & Chief Executive Officer of ITT Automotive. He
also serves on a number of corporate and charitable boards, including serving
as a Chairman of The Federal Reserve of Chicago, Detroit Branch. Mr.
Leuliette is a Senior Managing Director and one of the co-founders of
Heartland Industrial Partners.
GRANT H. BEARD. Mr. Beard was appointed President of our Diversified
Industrial Group in February 2001. From September 2000 to February 2001, Mr.
Beard was president and Chief Executive Officer of HealthMedia and remains
its chairman of the board. From June 1997 to September 2000, he was President
of the Preferred Technical Group of Dana Corporation, a manufacturer of
tubular fluid routing products sold to vehicle manufacturers. He has also
served as Vice President of Sales, Marketing and Corporate Development for
Echlin, Inc., before the acquisition of Echlin by Dana in late 1998. Mr.
Beard has experience at three private equity/merchant banking groups (Bain
Capital, Anderson Group and Oxford Investment Group) where he was actively
involved in corporate development, strategy and operations management.
DAVID B. LINER. Mr. Liner has served as our Vice President and General
Counsel since September 1998. He joined MascoTech in February 1997 as Vice
President and Corporate Counsel. Previously he was employed by Masco
Corporation as Associate Corporate Counsel from December 1987.
ROY PARROTT. Mr. Parrott was recently named Group President of Business
Operations of Metaldyne. Prior to this, he was an officer and director of
Simpson Industries. Mr. Parrott joined Simpson in 1989 and served as both
President and a director and then in 1994, he was named chief executive
officer. Mr. Parrott is also currently a director of the Lear Corporation and
of Oakland University Meadowbrook and serves on the advisory board of
Michigan State's College of Natural Science.
9
LEROY H. RUNK. Mr. Runk joined Metaldyne, then MascoTech, in 1993 as Group
President of the Forming Technologies Group and was designated a Group
President of MascoTech in 1998. He holds the same title for what is now
Metaldyne. Prior to joining MascoTech, Mr. Runk was President and Chief
Operating Officer of Harvard Industries, an automotive parts supplier.
JAMES F. TOMPKINS. Mr. Tompkins was appointed a vice president in February
2001 and continues to serve as our Treasurer, which he has done since May
1998. He previously served as our Assistant Treasurer from August 1988 to May
1998.
TIMOTHY WADHAMS. Mr. Wadhams has served as our Executive Vice
President--Finance and Administration and Chief Financial Officer since
September 1998. He previously served as our Senior Vice President and Chief
Financial Officer from February 1998 until September 1998 and as Vice
President--Controller and Treasurer from June 1990 until February 1998.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
No trading market for the Company's common stock exists. The following
table sets forth common stock dividends declared for periods indicated:
DIVIDENDS
1999 DECLARED
- ---- -----------
First Quarter $ 07
Second Quarter .07
Third Quarter .08
Fourth Quarter .08
-----------
$.30
===========
DIVIDENDS
2000 DECLARED
- ---- -----------
First Quarter $.08
Second Quarter .08
Third Quarter .08
Fourth Quarter (through November 28) --
-----------
$.24
===========
The Company does not currently pay dividends on the common stock and it is
the current policy to retain earnings to repay debt and finance the Company's
operations and acquisition strategies. In addition, the Company's credit
facility restricts the payment of dividends on common stock. See the
discussion under "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Financial Position and Liquidity," included in
Item 7 of this Report and the Note to the Company's Consolidated Financial
Statements captioned "Long-Term Debt," included in Item 8 of this Report.
On March 15, 2001, there were approximately 600 holders of record of the
Company's Common Stock.
NONE OF OUR SECURITIES WHICH WERE NOT REGISTERED UNDER THE ACT HAVE BEEN
ISSUED OR SOLD BY US WITHIN THE PAST THREE YEARS EXCEPT AS FOLLOWS:
1. On August 6, 1998, we issued 1,006,974 shares of common stock plus cash
consideration to K-Tech Mfg., Inc. shareholders in exchange for all of their
outstanding common stock, pursuant to an agreement and plan of
reorganization, by and among us, K-Tech Mfg., Inc. and all of the K-Tech
Mfg., Inc. shareholders. In accordance with this agreement, as amended, we
issued 464,785 shares of common stock on December 1, 2000 to the former
K-Tech stockholders.
10
2. On November 28, 2000, we issued a total of 25,752,376 shares of common
stock to Heartland Industrial Partners, L.P., its affiliates and other equity
co-investors, at a price per share of $16.90 for a total value of
approximately $435 million, pursuant to the recapitalization agreement.
3. On December 15, 2000, we issued 7,455,619 shares of common stock to
Heartland Industrial Partners, L.P., its affiliates and other co-investors,
at a price per share of $16.90 in connection with the Simpson acquisition.
The issuance of the securities described above were exempt from registration
under the Securities Act in reliance on Section 4(2) of such Securities Act
as transactions by an issuer not involving any public offering. The
recipients of securities in each such transaction represented their
intentions to acquire the securities for investment only and not with a view
to or for sale in connection with any distribution thereof and appropriate
legends were affixed to the share certificates issued in such transactions.
All recipients had adequate access to information about us at the time of
their investment decision.
11
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth summary consolidated financial information
of the Company, for the years and dates indicated:
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
2000 1999 1998 1997 1996
------------ ------------ ------------ ------------ ------------
Net sales.................. $1,650,160 $1,679,690 $1,635,500 $ 922,130 $1,281,220
From continuing operations
before accounting change:
Income................... $ 56,020 $ 92,430 $ 97,470 $ 115,240 $ 39,920
Earnings per share....... $ 1.21 $ 1.84 $ 1.83 $ 2.12 $ .50
Dividends declared per
common share.............. $ .24 $ .30 $ .20 $ .28 $ .18
At December 31:
Total assets............. $2,363,490 $2,101,270 $2,090,540 $1,144,680 $1,202,840
Long-term debt........... $1,485,940 $1,372,890 $1,388,240 $ 592,000 $ 752,400
Results in 2000 include approximately $48 million of compensation expense
charges for severance costs and accelerated vesting of stock awards and stock
options related to the recapitalization of the Company.
Results in 2000 include a net pre-tax gain of approximately $28 million
related to the sale of the Company's equity investments, excluding Saturn
Electronics & Engineering, Inc.
Results in 2000 include a pre-tax gain of approximately $13 million
related to interest rate swap agreements that were terminated in June 2000.
Results in 1999 include the completion of the sale of the Company's
aftermarket-related and vacuum metalizing businesses which resulted in a
pre-tax gain of approximately $26 million.
Results in 1999 include a non-cash pre-tax charge of approximately $17.5
million related to impairment of certain long-lived assets, which included
its hydroforming equipment and related intellectual property.
Results in 1999 include pre-tax charges aggregating approximately $18
million, principally related to the closure of a plant, the sale of a
business and the decline in value of equity affiliates.
Results in 1998 include sales and operating profits from TriMas
Corporation, which was purchased in January 1998.
Results for 1998 include a pre-tax charge related to the disposition of
certain businesses aggregating approximately $41 million. In addition, the
Company recorded a pre-tax gain of approximately $25 million related to the
receipt of additional consideration based on the operating performance of the
Company's stamping businesses sold in 1996. Also, the Company recognized a
gain (deferred at time of sale pending receipt of cash) of $7 million pre-tax
related to the disposition of the Company's Technical Services Group in 1997.
Results for 1997 include pre-tax gains approximating $83 million
principally related to the sale by the Company of its common stock holdings
of an equity affiliate, gains from the Company's marketable securities
portfolio and income resulting from equity transactions by affiliates. These
gains were partially offset by costs and expenses of approximately $24
million pre-tax related to plant closure costs, the Company's share of
special charges recorded by equity affiliates, write-off of deferred charges
and employee termination and other expenses.
Results for 1996 include an after-tax charge of approximately $26 million
related to the sale of MascoTech Stamping Technologies, Inc. ("MSTI").
Income from continuing operations before accounting change attributable to
common stock was $56.0 million, $92.4 million, $97.5 million, $109.0 million
and $27.0 million after preferred stock dividends in 2000, 1999, 1998, 1997
and 1996, respectively.
Earnings per common share, from continuing operations before accounting
change, are presented on a diluted basis. Basic earnings per common share,
from continuing operations before accounting change, were $1.38, $2.25,
$2.23, $2.70 and $.54 in 2000, 1999, 1998, 1997 and 1996, respectively.
12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
COMPANY OVERVIEW
The Company is a leading global diversified industrial manufacturer of
highly engineered products for the transportation, industrial and consumer
markets with pro forma 2000 sales of $2.2 billion. We operate through two
business groups -- Metal Forming, which accounts for approximately two-thirds
of our sales, and Diversified Industrial Products, which accounts for the
remaining one-third of our sales. Products include metal formed and
precision-engineered components and modular systems used in vehicle engine,
transmission and drivetrain applications, specialty fasteners, towing
systems, packaging and sealing products and other industrial products. The
Company serves a broad range of over 150 automotive and industrial customers,
including Amoco, Bayer, BMW, Boeing, Dana, DaimlerChrysler, Dow Chemical,
Ford, Visteon, General Motors, Delphi, Honda, John Deere, Johns Manville, New
Venture Gear, TRW, U-Haul and Wal-Mart.
RECENT DEVELOPMENTS
In January 2001, the Company changed its name to Metaldyne Corporation
from MascoTech, Inc.
On November 28, 2000, we were recapitalized in accordance with the terms
of a recapitalization agreement as a result of which each issued and
outstanding share of our publicly traded common stock at the time of the
recapitalization was converted into the right to receive $16.90 in cash plus
additional cash amounts, if any, based upon the net proceeds from any future
disposition of the stock of Saturn Electronics & Engineering Inc. owned by
us. In connection with the recapitalization, Masco Corporation, Richard A.
Manoogian and certain of our other stockholders agreed to roll over a portion
of their investment in us and consequently remain as stockholders.
The recapitalization, the repayment of certain of our existing
indebtedness and the payment of fees and expenses in connection with the
recapitalization was financed through approximately (1) $435 million in
equity financing provided by Heartland Industrial Partners, L.P. and its
affiliates as well as other equity co-investors, (2) $123.8 million of
proceeds from the sale of certain minority owned equity investments owned by
us described below, (3) $1,016 million from borrowings under our credit
facility and (4) $118.5 million with proceeds from the sale of accounts
receivable pursuant to a new accounts receivable facility, which replaced a
similar facility entered into in the second quarter of 2000. In connection
with the recapitalization, we disposed of our minority interests in each of
the following companies for approximately $123.8 million in aggregate:
Advanced Accessories Systems, LLC, Delco Remy International, Inc., Innovative
Coating Technologies, Inc., MSX International, Inc., Qualitor, Inc., Titan
International, Inc., and Tower Automotive, Inc.
ACQUISITION OF BUSINESSES
On December 15, 2000, we acquired Simpson Industries, Inc. for total
consideration of $365 million, including fees and expenses and the assumption
of indebtedness. The acquisition of Simpson, the repayment of certain
indebtedness of Simpson and the payment of fees and expenses in connection
with the acquisition of Simpson was funded with approximately (1) $126
million in additional common equity financing provided by Heartland and other
equity co-investors, (2) $203 million from borrowings under our credit
facility ($200 million in term loans and $3 million in revolving credit
borrowings) and (3) $36 million from the sale of accounts receivable pursuant
to our accounts receivable facility. We subsequently paid down approximately
$50 million in term loans incurred in connection with the Simpson acquisition
with the proceeds from sale/leaseback transactions.
Simpson is a designer and manufacturer of precision-engineered automotive
components and modular systems for passenger and sport utility vehicles,
light-and heavy-duty trucks and diesel engines. For the years ended December
31, 2000 and 1999, respectively, Simpson had net sales of approximately $515
million and $533 million, respectively, and operating profit of approximately
$35.7 million and $38.9 million, respectively.
13
During 1999, the Company acquired Windfall Products, Inc., a manufacturer
of transportation-related components that utilizes powder metal technology,
significantly expanding the Company's powder metal manufacturing
capabilities.
In January 1998, the Company completed the acquisition of TriMas
Corporation ("TriMas"), by purchasing all of the outstanding shares of TriMas
not already owned by the Company (approximately 63 percent) for approximately
$920 million.
DISPOSITION OF BUSINESSES
In mid-1998, the Company adopted a plan to sell certain
aftermarket-related businesses and its vacuum metalizing operation and
recorded a pre-tax loss of approximately $41 million. In early 1999, the
Company completed the sale of these businesses for total proceeds aggregating
approximately $105 million, consisting of cash of $90 million, a note
receivable of $6 million and retained equity interests in the ongoing
businesses which were subsequently sold in 2000. The Company recognized a
pre-tax gain of approximately $26 million related to the disposition of these
businesses.
The businesses sold contributed net sales of $39 million and $115 million
in 1999 and 1998, respectively, and operating profit of $4 million and $12
million in 1999 and 1998, respectively, to the Company's consolidated
results.
In 1999, the Company adopted a plan to sell its specialty tubing business,
resulting in a pre-tax loss of approximately $7 million and an after-tax gain
of approximately $5.5 million, due to the tax basis in the net assets of the
business exceeding book carrying values. This business, which had annual
sales of approximately $14 million, was sold in January 2000 for proceeds of
approximately $6 million.
EBITDA (EARNINGS BEFORE INTEREST TAXES DEPRECIATION AND AMORTIZATION):
The Company will use EBITDA in 2001 as an indicator of our operating
performance and as a measure of our cash generating capabilities. The Company
believes that adjusted EBITDA for the year 2000, which did not include the
results of Simpson, was approximately $310 million before charges related to
the sale of businesses and the recapitalization, costs associated with
launching certain new products and the opening of a new manufacturing
facility, costs from closing certain manufacturing facilities, costs
associated with a flood, certain other non-recurring charges, and an
adjustment relating to anticipated cost savings.
EBITDA does not represent and should not be considered as an alternative
to net income, operating income, net cash provided by operating activities or
any other measure for determining operating performance or liquidity that is
calculated in accordance with generally accepted accounting principles.
Further, EBITDA, as we calculate it, may not be comparable to calculations of
similarly titled measures by other companies.
GENERAL FINANCIAL ANALYSIS
2000 VERSUS 1999
Sales decreased approximately two percent in 2000 from 1999. Sales in 2000
as compared to 1999 were negatively impacted by dispositions, a plant
closure, foreign currency fluctuations and a decline in general economic
conditions in late 2000 which adversely impacted demand for certain of the
Company's products. These factors more than offset incremental sales from
acquisitions.
Net income in 2000 was $56 million. In addition to the decline in sales,
operating performance was negatively impacted by costs and expenses related
to the previously announced closure of a manufacturing facility, the launch
of certain new products and the opening of a new manufacturing facility. The
Company was adversely impacted by a flood at a manufacturing facility in the
Company's specialty insulation business. These costs and expenses were offset
by the positive outcome of certain issues related to businesses previously
disposed and the corresponding adjustment of certain expense accruals. In
addition, results were negatively impacted by reduced equity affiliate income
reflecting losses and restructuring charges at two of the Company's
affiliates. This reduction in affiliate income was offset by insurance
proceeds and reduced interest expense, which reflects the benefit of interest
rate swap agreements that
14
were terminated in June 2000. As a result of the recapitalization, results in
2000 include net gains of approximately $28 million related to the disposition
of certain equity affiliates and income of approximately $13 million related to
interest rate swap agreements that were terminated. This income was offset by
compensation expense charges of approximately $48 million related to severance
costs and the accelerated vesting of stock awards and stock options.
Net income in 1999 was $92.4 million. Results in 1999 include a net gain
of $14.4 million pre-tax related to the sale of the aftermarket-related and
vacuum metalizing businesses partially offset by charges related to the
disposition of certain other operations and a plant closure. In addition,
1999 results include charges of approximately $17.5 million pre-tax related
to the impairment of certain long-lived assets, which include the Company's
hydroforming equipment and related intellectual property. Other income and
expense was negatively impacted by pre-tax charges aggregating approximately
$5.2 million (net of $1 million of nonrecurring income) which were
principally related to equity affiliate investments. Excluding these gains
and the charges, net income in 1999 would have been approximately $89
million.
Sales for the Company's Specialty Metal Formed Products and Towing
Systems, aided by acquisitions, increased two and six percent, respectively,
as compared with 1999. Excluding the impact of acquisitions and dispositions,
Specialty Metal Formed Products sales would have decreased seven percent
while sales of Towing Systems would have approximated 1999 levels. Sales for
Specialty Fasteners decreased 11 percent as a result of the phase out of
certain products related to a plant closure and reduced demand for fastener
applications for heavy truck and off road markets. Specialty Packaging and
Sealing Product sales increased two percent as a result of improved sales of
specialty gaskets and related products. Sales of Specialty Industrial
Products increased two percent.
Operating margins, excluding unusual gains and charges, approximated 11.1
percent and 13.0 percent for the years ended December 31, 2000 and 1999,
respectively. Margins were negatively impacted by sales declines for certain
products and start-up costs related to the launch of new products and new
manufacturing facilities.
Operating margins in 2000 for all of the Company's segments declined as
compared to 1999. Specialty Metal Formed Products margins declined from 13.7
percent to 13.2 percent principally as a result of launch costs for new
products and the opening of a new manufacturing facility. Operating margins
for Specialty Fasteners declined from 14.5 percent in 1999 to 9.8 percent in
2000 primarily as a result of reduced sales and the cost of a plant closure.
Towing Systems margins declined to 12.0 percent in 2000 from 14.2 percent in
1999 as a result of costs incurred to rationalize logistics and distribution
systems and by operating inefficiencies. Specialty Packaging and Sealing
Product margins were down slightly from 1999. Margins for Specialty
Industrial Products declined from 13.1 percent in 1999 to 5.6 percent in 2000
principally as a result of a flood that impacted the Company's specialty
insulation business.
The unusual relationship in 1999 between income before taxes and income
taxes relates to the unusual gains and charges discussed above. Excluding the
impact of the unusual gains and charges, the effective tax rate for 1999
would have been approximately 40 percent.
Other income (expense), net in 2000 was expense of $44 million as compared
with $76 million of expense in 1999. Results for 2000 include net gains of
approximately $40 million related to the disposition of certain equity
affiliates and income recognized from interest rate swap agreements that were
terminated. In addition, 2000 was impacted by higher interest expense and
reduced earnings from equity affiliates. Results for 1999 include pre-tax
charges principally related to equity affiliate investments aggregating
approximately $5 million, net of $1 million of nonrecurring income.
1999 VERSUS 1998
Sales increased approximately three percent in 1999 from 1998. Sales,
excluding the impact of the sale of the aftermarket-related and vacuum
metalizing businesses, aided by acquisitions, would have increased
approximately eight percent in 1999 over 1998.
Net income in 1999 was $92.4 million or $1.84 per common share. Results in
1999 include a net gain of $14.4 million pre-tax related to the sale of the
aftermarket-related and vacuum metalizing businesses partially offset by charges
related to the disposition of certain other operations and a plant closure. In
15
addition, 1999 results include charges of approximately $17.5 million pre-tax
related to impairment of certain long-lived assets, which include the Company's
hydroforming equipment and related intellectual property. Other income and
expense was negatively impacted by pre-tax charges aggregating approximately $5
million (net of $1 million of nonrecurring income) which were principally
related to equity affiliate investments. Excluding these gains and the charges,
net income in 1999 would have been approximately $89 million or $1.78 per common
share.
Net income in 1998 was $97.5 million or $1.83 per common share. Results in
1998 include a charge related to the disposition of certain businesses
aggregating approximately $41 million pre-tax. In addition, the Company
recorded a pre-tax gain of approximately $25 million related to the receipt
of additional consideration based on the operating performance of the
Company's stamping businesses which were sold in 1996. Results in 1998 also
benefited from a gain (deferred at time of sale pending receipt of cash) of
$7 million pre-tax related to the disposition of the Company's Technical
Services Group in 1997 and gains from the Company's marketable securities
portfolio. Excluding these gains and the charge, net income in 1998 would
have been approximately $89 million or $1.68 per common share.
The following information is presented on a pro forma basis as though
TriMas was acquired on January 1, 1998 and excludes the unusual pre-tax
income and charges mentioned above.
Sales for the Company's Specialty Metal Formed Products, aided by
acquisitions, increased approximately eight percent in 1999 as compared to
1998. Towing Systems sales increased approximately nine percent. Sales of
Specialty Fasteners, aided by acquisitions, increased approximately seven
percent. Sales of Specialty Packaging and Sealing Products declined
approximately three percent as a 15 percent increase in sales of closures and
dispensing systems was offset by a 25 percent decline in sales of compressed
gas cylinders principally as a result of market conditions and an 11 percent
decline in sales of specialty gaskets and related products principally as a
result of reduced activity in the oil and gas industry. Sales of Specialty
Industrial Products declined approximately three percent from 1998 levels.
Operating margins approximated 13.0 percent and 13.5 percent for the years
ended December 31, 1999 and 1998, respectively. Margins were negatively
impacted by sales declines for certain products and start-up costs related to
the launch of new products and new manufacturing facilities.
Operating margins in 1999 for the Company's Specialty Metal Formed
Products and Towing Systems approximated 1998 levels. Operating margins for
Specialty Fasteners declined from 16.8 percent in 1998 to 14.5 percent in
1999 principally due to reduced sales for aerospace, agricultural,
off-highway and certain other fastener applications. Operating margins for
Specialty Packaging and Sealing Products declined from 20.6 percent in 1998
to 19.0 percent in 1999 due to sales declines resulting from decreased demand
for compressed gas cylinders and specialty gaskets as a result of depressed
market conditions. Specialty Industrial Products profit margins were down
slightly in 1999 versus 1998.
The unusual relationship between income before taxes and income taxes
relates to the unusual gains and charges discussed above. Excluding the
impact of the unusual gains and charges for the full year 1999 would result
in an effective tax rate of approximately 40 percent.
Other income (expense), net in 1999 was expense of $76 million as compared
with $62 million of expense in 1998. Results for 1999 include pre-tax charges
principally related to equity affiliate investments aggregating approximately
$5 million, net of $1 million of nonrecurring income. Results for 1998
benefited from a gain (deferred at time of sale pending receipt of cash) of
$7 million pre-tax related to the disposition of the Company's Technical
Services Group in 1997 and gains of approximately $3 million pre-tax from the
Company's marketable securities portfolio.
PROFIT MARGINS
Operating profit margins, excluding unusual gains and charges in 2000,
1999 and 1998, were approximately 11.1 percent in 2000, 13.0 percent in 1999
and 13.6 percent in 1998. Operating profit margin in 2000 was negatively
impacted by decreased sales for certain products and by higher than expected
costs associated with capacity expansions, launches of new product and
process capabilities and other growth initiatives.
16
CASH FLOWS
Net cash flows from operating activities increased to approximately $300
million in 2000 from approximately $153 million in 1999. In 2000, net cash
from operating activities included approximately $151 million from the
securitization of accounts receivable.
INVENTORIES
The Company's investment in inventories for its businesses increased to
approximately $199 million at December 31, 2000 as compared with $184 million
in 1999. The increase is principally the result of the acquisition of
Simpson.
LIQUIDITY AND CAPITAL RESOURCES
In connection with the recapitalization, the Company and its subsidiaries
entered into a new credit facility. The credit facility includes a $300
million revolving credit facility, a tranche A $500 million term loan
facility, a tranche B $500 million term loan facility and a tranche C $200
million term loan facility. To complete the recapitalization and the Simpson
acquisition, the Company utilized all of the tranche A, tranche B and tranche
C term loans and approximately $19 million of the revolving credit facility
commitments. The revolving credit balances fluctuate daily based upon the
Company's working capital and other ordinary course needs and the credit
facility is only available to a limited extent to fund future acquisitions.
The Company's other important source of liquidity is the new $225 million
accounts receivable financing arrangement, under which the Company has the
ability to sell eligible accounts receivable to a third party multi-seller
receivables funding company. In connection with the recapitalization and the
Simpson acquisition, the Company utilized $151 million of the accounts
receivable financing arrangement. The new credit facility and accounts
receivable arrangement replaced the Company's prior credit facility and
accounts receivable financing. In addition, the Company entered into two
sale/leaseback financings in December 2000 relating to certain equipment of
Simpson and the Simpson headquarters building to yield gross proceeds to the
Company of approximately $50 million. These proceeds were used to reduce the
$200 million tranche C term loan facility to $150 million. In addition to the
credit facility and the accounts receivable financing, the Company had
approximately $29.1 million of other indebtedness outstanding as of December
31, 2000. The Company also has a commitment from Masco Corporation, one of
our shareholders, to purchase up to $100 million of a new issue of Company
subordinated debt, subject to limited conditions, on or prior to October 31,
2003. The credit facility regulates how the Company draws upon this
commitment, as described below.
Debt includes $305 million principal amount of 4-1/2% convertible
subordinated debentures which mature in December 2003. As a result of the
recapitalization, these convertible subordinated debentures became
convertible into the cash merger consideration payable to common stockholders
in the recapitalization and, based upon the conversion price, are not
expected to be converted absent a material adverse development. The credit
facility imposes significant restrictions upon the use of the revolving
credit facility that are designed to ensure that the Company has the
necessary liquidity to repay the convertible subordinated debentures. The
Company must maintain restricted cash either in escrow from the proceeds of
other subordinated debt financings or equity financings or in the form of
availability under the revolving credit facility and accounts receivable
financing in increasing amounts up to $205 million at specified dates until
the maturity of the convertible subordinated debentures. These amounts are
reduced to the extent that convertible subordinated debentures are repaid
from subordinated debt or equity proceeds prior to maturity. In addition, the
Company is obligated by the credit facility to utilize the $100 million
subordinated loan commitment from Masco to satisfy the Company's obligations
in respect of the convertible subordinated debentures, upon maturity,
conversion or otherwise, to the extent that the Company has not raised other
subordinated debt or equity. By reason of the foregoing, the Company does not
expect to be able to utilize the full revolving credit facility commitments,
absent being able to raise additional junior financings.
17
The amortization of the Company's bank term indebtedness following the
recapitalization and the Simpson acquisition is as follows (in millions):
2001 ..................... $ 33
2002 ..................... 53
2003 ..................... 73
2004 ..................... 83
2005 ..................... 83
2006 ..................... 93
2007 ..................... 272
2008 ..................... 387
2009 ..................... 73
In addition to the bank term debt amortization, the Company's $305 million
of convertible subordinated debentures mature in 2003 and the Company has
approximately $29 million of other debt maturing at various dates. The
Company has other cash commitments not relating to debt as well. Immediately
following the recapitalization, the Company made restricted stock awards to
certain employees of approximately 3.7 million shares of Company common
stock. Under the terms of the recapitalization agreement, 25 percent of those
shares became free of restriction, or vested upon the closing of the
recapitalization and one quarter of the approximately 3.7 million shares will
vest on each January 14 of 2002, 2003 and 2004. Holders of restricted stock
are entitled to elect cash in lieu of 40 percent of their restricted stock
which vested at closing and 100 percent of their restricted stock on each of
the other dates with the shares valued at the initial $16.90 recapitalization
consideration, together with cash accruing at approximately 6 percent per
annum; to the extent that cash is not elected, additional common stock valued
at $16.90 per share is issuable in lieu of the 6 percent accretion. Assuming
restricted stock award holders elect to receive the maximum cash, the Company
estimates such cash obligations will aggregate approximately $57 million.
Assuming restricted stock award holders elect to receive 100 percent in
shares, the Company would issue approximately 3.7 million shares. The Company
also has outstanding $36.1 million in liquidation value of preferred stock in
respect of which the Company is required to pay cash dividends initially at a
rate of 13 percent per annum and to effect a mandatory redemption in December
2012.
In November 2000, the Company entered into an agreement to sell, on an
ongoing basis, the trade accounts receivable of certain business operations
to a bankruptcy-remote, special purpose subsidiary, or MTSPC, wholly owned by
the Company. MTSPC has sold and, subject to certain conditions, may from time
to time sell, an undivided fractional ownership interest in the pool of
domestic receivables, up to approximately $225 million, to a third party
multi-seller receivables funding company, or conduit. Upon sale to the
conduit, MTSPC holds a subordinated retained interest in the receivables.
Under the terms of the agreement, new receivables are added to the pool as
collections reduce previously sold receivables. The Company services,
administers and collects the receivables on behalf of MTSPC and the conduit.
The proceeds of sale are less than the face amount of accounts receivable
sold by an amount that approximates the purchaser's financing costs.
Approximately $118.5 million of the proceeds of the facility were used in
order to consummate the recapitalization and $36.3 million were used to
consummate the Simpson acquisition.
As a result of the recapitalization and the Simpson acquisition, the
Company is highly leveraged and has significantly increased interest expense
relative to historical levels. The Company will need to dedicate significant
portions of cash flow to debt service obligations. In addition, the Company
expects that capital expenditure requirements in 2001 will be approximately
$133 million, of which approximately $22 million are expected to be
maintenance-related. The Company may incur material amounts of additional
debt and further burden cash flow in pursuit of acquisition strategies.
Capital expenditures in 2000 were approximately $107 million. The Company
believes that its liquidity and capital resources, including anticipated cash
flow from operations, will be sufficient to meet debt service, capital
expenditure and other short-term and long-term obligations and needs, but the
Company is subject to unforeseeable events
18
and the risk that it will not be successful in implementing its business
strategies. The Company will also seek to extend the average maturities of
debt through the issuance of long-term debt securities to the extent market
conditions permit us to increase our financial flexibility and ability to
pursue our business strategies.
OTHER MATTERS
YEAR 2000
The Company did not experience any significant disruptions to its
operating systems or lose any revenues as a result of the date change to year
2000.
The cost of Year 2000 compliance for the Company approximated $12 million,
including: replacement costs of $7 million which are normal and recurring;
upgrades of $2 million which are normal and recurring; repair/programming
costs of $2 million; and other costs of $1 million, which are not material to
the Company's consolidated results of operations, financial position or cash
flow. The majority of the replacement and upgrade costs would have been
incurred by the Company over time as part of its regular information system
replacement process.
FORWARD-LOOKING STATEMENTS
This discussion and other sections of this report contain statements
reflecting the Company's views about its future performance and constitute
"forward-looking statements." These views involve risks and uncertainties
that are difficult to predict and may cause the Company's actual results to
differ significantly from the results discussed in such forward-looking
statements. Readers should consider that various factors may affect our
ability to attain the projected performance, including:
o Leverage; Ability to Service Debt -- We may not be able to manage our
business as we might otherwise do so due to our high degree of
leverage.
o Liquidity and Capital Resources -- If we are unable to raise junior
capital, our liquidity and business strategies will be adversely
impacted.
o Challenges of Acquisition Strategy -- We may not be able to identify
attractive acquisition candidates, successfully integrate our acquired
operations or realize the intended benefits of our acquisitions.
o Substantial Capital Expenditure Requirements -- If we are unable to
meet future capital requirements, our business will be adversely
affected.
o Substantial Restrictions and Covenants -- Restrictions in our credit
facility limit our ability to take certain actions.
o Dependence on Automotive Industry and Industry Cyclicality -- The
industries in which we operate are dependent upon the economy and are
cyclical.
o Dependence on Third-Party Suppliers and Manufacturers -- The loss of a
substantial number of our suppliers could affect our financial health.
o Our Industries Are Highly Competitive -- Recent trends among our
customers will increase competitive pressures in our businesses.
o Dependence on Key Personnel and Relationships -- We depend on the
services of other key individuals and relationships, the loss of which
would materially harm us.
o Labor Relations -- A portion of our workforce is unionized.
o Labor Stoppages Affecting OEMs -- Slowdowns, strikes or similar actions
could have a material adverse effect on our results of operations.
o International Sales -- A growing portion of our revenue may be derived
from international sources, which presents separate uncertainty for us.
19
o Product Liability -- Our businesses expose us to product liability
risks that could materially and adversely impact us.
o Environmental Matters -- We have been and may be subject in the future
to potential exposure to environmental liabilities.
o Government Regulation -- Fastener Quality Act.
o Control by Principal Stockholder -- We are controlled by Heartland,
whose interests in our business may be different than yours.
o Terms of Shareholders Agreement -- Provisions of the shareholders
agreement impose significant operating and financial restrictions on
our business.
All statements, other than statements of historical fact included in this
annual report, regarding our strategy, future operations, financial position,
estimated revenues and losses, projected costs, prospects, plans and
objectives of management are forward-looking statements. When used in this
annual report, the words "will," "believe," "anticipate," "intend,"
"estimate," "expect," "project" and similar expressions are intended to
identify forward-looking statements, although not all forward-looking
statements contain such identifying words. All forward-looking statements
speak only as of the date of this annual report. You should not place undue
reliance on these forward-looking statements. Although we believe that our
plans, intentions and expectations reflected in or suggested by the
forward-looking statements we make in this annual report are reasonable, we
can give no assurance that these plans, intentions or expectations will be
achieved. The Company undertakes no obligation to update publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
In the normal course of business, we are exposed to market risk associated
with fluctuations in foreign exchange rates. We are also subject to interest
risk as it relates to long-term debt. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- General
Financial Analysis" for details about our primary market risks, and the
objectives and strategies used to manage these risks. Also see "Long-Term
Debt" in the financial statement notes for additional information.
20
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of Metaldyne Corporation:
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) present fairly, in all material respects, the
financial position of Metaldyne Corporation and its subsidiaries at December
31, 2000 and 1999, and the results of their operations and their cash flows
for each of the three years in the period ended December 31, 2000, in
conformity with accounting principles generally accepted in the United States
of America. In addition, in our opinion, the financial statement schedules
listed in the index appearing under Item 14(a)(2)(i) present fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements. These financial
statements and financial statement schedules are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements and financial statement schedules based on our audits.
We conducted our audits of these statements in accordance with auditing
standards generally accepted in the United States of America, which require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
Detroit, Michigan
March 16, 2001
21
METALDYNE CORPORATION CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2000 AND 1999
ASSETS
2000 1999
-------------- --------------
Current assets:
Cash and cash investments.................................. $ 26,320,000 $ 4,490,000
Receivables ............................................... 121,160,000 218,960,000
Inventories ............................................... 199,490,000 183,600,000
Deferred and refundable income taxes ...................... 38,010,000 46,750,000
Prepaid expenses and other assets ......................... 48,540,000 16,320,000
-------------- --------------
Total current assets ..................................... 433,520,000 470,120,000
Equity and other investments in affiliates ................. 27,760,000 110,730,000
Property and equipment, net ................................ 901,300,000 722,680,000
Excess of cost over net assets of acquired companies ...... 906,990,000 759,330,000
Deferred financing and other assets ........................ 93,920,000 38,410,000
-------------- --------------
Total assets ............................................. $2,363,490,000 $2,101,270,000
============== ==============
LIABILITIES and SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable .......................................... $ 155,020,000 $ 107,720,000
Accrued liabilities ....................................... 146,640,000 113,910,000
Current maturities, long-term debt ........................ 46,350,000 6,770,000
-------------- --------------
Total current liabilities ................................ 348,010,000 228,400,000
Subordinated debentures .................................... 305,000,000 305,000,000
Other long-term debt ....................................... 1,180,940,000 1,067,890,000
Deferred income taxes ...................................... 124,680,000 100,680,000
Other long-term liabilities ................................ 108,920,000 98,920,000
-------------- --------------
Total liabilities ........................................ 2,067,550,000 1,800,890,000
-------------- --------------
Redeemable preferred stock, 361,001 shares outstanding .... 33,370,000 --
Redeemable restricted common stock.......................... 43,420,000 --
Less: Restricted stock awards .............................. (33,820,000) --
-------------- --------------
Total redeemable stock ................................... 42,970,000 --
-------------- --------------
Shareholders' equity:
Preferred stock (non-redeemable), $1 par:
Authorized: 25 million;
Outstanding: None......................................... -- --
Common stock, $1 par:
Authorized: 250 million;
Outstanding: 38.7 million and 44.6 million ............... 38,670,000 44,640,000
Paid-in capital ........................................... -- --
Retained earnings.......................................... 254,690,000 324,290,000
Accumulated other comprehensive loss....................... (40,390,000) (24,870,000)
Less: Restricted stock awards.............................. -- (43,680,000)
-------------- --------------
Total shareholders' equity................................ 252,970,000 300,380,000
-------------- --------------
Total liabilities, redeemable stock and shareholders'
equity................................................... $2,363,490,000 $2,101,270,000
============== ==============
The accompanying notes are an integral part of the consolidated financial
statements.
22
METALDYNE CORPORATION
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
2000 1999 1998
--------------- --------------- ---------------
Net sales........................................ $ 1,650,160,000 $ 1,679,690,000 $ 1,635,500,000
Cost of sales.................................... (1,247,500,000) (1,246,660,000) (1,208,930,000)
--------------- --------------- ---------------
Gross profit.................................... 402,660,000 433,030,000 426,570,000
Selling, general and administrative expenses .... (219,120,000) (214,530,000) (204,180,000)
Gains (charge) on disposition of businesses,
net............................................. 680,000 14,440,000 (15,580,000)
Charges related to the recapitalization ........ (47,660,000) -- --
Charge for asset impairment ..................... -- (17,510,000) --
--------------- --------------- ---------------
Operating profit ............................... 136,560,000 215,430,000 206,810,000
--------------- --------------- ---------------
Other income (expense), net:
Interest expense ............................... (91,590,000) (83,630,000) (83,840,000)
Equity and other income from affiliates ....... 9,810,000 13,230,000 10,150,000
Gain (charge) from disposition of, or changes
in, investments in equity affiliates .......... 27,520,000 (3,150,000) 7,000,000
Income related to the termination of interest
rate swap agreements .......................... 12,940,000 -- --
Other, net ..................................... (2,520,000) (2,410,000) 4,400,000
--------------- --------------- ---------------
(43,840,000) (75,960,000) (62,290,000)
--------------- --------------- ---------------
Income before income taxes ..................... 92,720,000 139,470,000 144,520,000
Income taxes .................................... 36,700,000 47,040,000 47,050,000
--------------- --------------- ---------------
Net income ..................................... 56,020,000 92,430,000 97,470,000
Preferred stock dividends ...................... 390,000 -- --
--------------- --------------- ---------------
Earnings attributable to common stock ......... $ 55,630,000 $ 92,430,000 $ 97,470,000
=============== =============== ===============
BASIC DILUTED BASIC DILUTED BASIC DILUTED
------- ------- ------- ------- ------- -------
Earnings per common share:
Earnings attributable to common stock........... $1.38 $1.21 $2.25 $1.84 $2.23 $1.83
======= ======= ======= ======= ======= =======
The accompanying notes are an integral part of the consolidated financial
statements.
23
METALDYNE CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
2000 1999 1998
--------------- --------------- ---------------
CASH FROM (USED FOR):
OPERATING ACTIVITIES:
Net income .................................... $ 56,020,000 $ 92,430,000 $ 97,470,000
Adjustments to reconcile net income to net
cash provided by operating activities:
(Gains) charge on disposition of businesses,
net ......................................... (680,000) (14,440,000) 15,580,000
(Gains) charges from disposition or other
changes in investments in equity affiliates (27,520,000) 6,270,000 (7,000,000)
Gain on interest swap settlement ............. (15,820,000) -- --
Charge for asset impairment .................. -- 17,510,000 --
Depreciation and amortization ................ 106,460,000 83,300,000 83,640,000
Equity earnings, net of dividends ............ (5,590,000) (10,100,000) (6,080,000)
Deferred income taxes ........................ 24,020,000 9,560,000 (110,000)
Decrease in marketable securities, net ...... -- -- 45,970,000
Proceeds from accounts receivable sale ...... 150,500,000 -- --
Decrease (increase) in receivables ........... 26,810,000 (3,500,000) (6,700,000)
Decrease (increase) in inventories ........... 6,910,000 400,000 (19,640,000)
(Increase) decrease in prepaid
expenses and other current assets ........... (3,570,000) (14,390,000) 1,240,000
Decrease in accounts payable and accrued
liabilities ................................. (13,570,000) (5,150,000) (6,060,000)
Other, net ................................... (9,550,000) (9,260,000) 2,290,000
--------------- --------------- ---------------
Net cash from operating activities ......... 294,420,000 152,630,000 200,600,000
--------------- --------------- ---------------
FINANCING ACTIVITIES:
Increase in debt .............................. 1,251,430,000 28,540,000 1,162,670,000
Payment of debt ............................... (1,090,430,000) (40,150,000) (410,660,000)
Retirement of Company Common Stock ............ (626,850,000) (19,530,000) (63,550,000)
Payment of dividends .......................... (10,740,000) (13,470,000) (12,240,000)
Issuance of Company Common Stock .............. 561,220,000 -- --
Debt issue fees ............................... (41,470,000) -- --
Proceeds from swap termination ................ 15,820,000 -- --
Other, net .................................... (4,360,000) (5,490,000) (13,480,000)
--------------- --------------- ---------------
Net cash (used for) from financing
activities.................................. 54,620,000 (50,100,000) 662,740,000
--------------- --------------- ---------------
INVESTING ACTIVITIES:
Cash received from sale of businesses, net ... 3,200,000 92,620,000 25,020,000
Acquisition of businesses, net of cash
acquired ..................................... (386,260,000) (88,550,000) (879,370,000)
Capital expenditures .......................... (106,740,000) (135,740,000) (106,300,000)
Receipt of cash from notes receivable ........ 1,260,000 2,180,000 4,880,000
Proceeds from redemptions of debt by
affiliates ................................... -- -- 80,500,000
Proceeds from sale of equity investments ..... 123,920,000 -- --
Proceeds from sale and sale/leaseback of fixed
assets ....................................... 51,090,000 10,320,000 15,190,000
Other, net .................................... (13,680,000) (8,260,000) (14,980,000)
--------------- --------------- ---------------
Net cash (used for) investing activities ... (327,210,000) (127,430,000) (875,060,000)
--------------- --------------- ---------------
CASH AND CASH INVESTMENTS:
Increase (decrease) for the year .............. 21,830,000 (24,900,000) (11,720,000)
At January 1 .................................. 4,490,000 29,390,000 41,110,000
--------------- --------------- ---------------
At December 31 .............................. $ 26,320,000 $ 4,490,000 $ 29,390,000
=============== =============== ===============
The accompanying notes are an integral part of the consolidated financial
statements.
24
METALDYNE CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(IN
OTHER COMPREHENSIVE INCOME THOUSANDS)
---------------------------
FOREIGN CURRENCY MINIMUM RESTRICTED TOTAL
PREFERRED COMMON PAID-IN RETAINED TRANSLATION PENSION STOCK SHAREHOLDERS'
STOCK STOCK CAPITAL EARNINGS AND OTHER LIABILITY AWARDS EQUITY
--------- -------- --------- --------- ---------------- --------- ---------- -------------
Balances, January 1, 1998...... $-- $ 47,250 $ 41,060 $ 157,790 $ (2,560) $ -- $(32,880) $ 210,660
Comprehensive income:
Net income................... 97,470 97,470
Foreign currency translation 6,410 6,410
Minimum pension liability
(net of tax benefit
$(6,700))................... (10,700) (10,700)
Unrealized gain (loss) on
securities (net of tax
benefit, $(420))............ (610) (610)
-------------
Total comprehensive income . 92,570
Common stock dividends ...... (9,400) (9,400)
Retirement of common stock .. (3,640) (60,170) (63,810)
Exercise of stock options.... 1,160 14,750 15,910
Restricted stock awards, net
of amortization............. (14,240) (14,240)
Common stock issued for
acquisition of business..... 1,010 21,180 22,190
--------- -------- --------- --------- ---------------- --------- ---------- -------------
Balances, December 31, 1998.... -- 45,780 16,820 245,860 3,240 (10,700) (47,120) 253,880
Comprehensive income:
Net income................... 92,430 92,430
Foreign currency translation. (18,110) (18,110)
Minimum pension liability
(net of tax, $450).......... 700 700
-------------
Total comprehensive income.. 75,020
Common stock dividends....... (13,470) (13,470)
Retirement of common stock... (1,280) (18,580) (19,860)
Exercise of stock options.... 140 1,760 (530) 1,370
Restricted stock awards, net
of amortization............. 3,440 3,440
--------- -------- --------- --------- ---------------- --------- ---------- -------------
Balances, December 31, 1999.... -- 44,640 -- 324,290 (14,870) (10,000) (43,680) 300,380
Comprehensive income:
Net income................... 56,020 56,020
Foreign currency translation. (10,620) (10,620)
Minimum pension liability
(net of tax, $(2,800))...... (4,900) (4,900)
-------------
Total comprehensive income.. 40,500
Common stock dividends........ (10,740) (10,740)
Preferred stock dividends..... (390) (390)
Exercise of stock options..... 150 650 800
Retirement of shares.......... (40,360) (544,060) (114,490) 43,680 (655,230)
Issuance of shares............ 34,240 543,410 577,650
--------- -------- --------- --------- ---------------- --------- ---------- -------------
Balances, December 31, 2000.... -- $ 38,670 $ -- $ 254,690 $(25,490) $(14,900) $ -- $ 252,970
========= ======== ========= ========= ================ ========= ========== =============
The accompanying notes are an integral part of the consolidated financial
statements.
25
METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
RECAPITALIZATION:
On November 28, 2000, a recapitalization of the Company was consummated in
accordance with the terms of a recapitalization agreement as a result of
which each issued and outstanding share of the Company's publicly traded
common stock at the time of the recapitalization was converted into the right
to receive $16.90 in cash (approximately $585 million in the aggregate) plus
additional cash amounts, if any, based upon the net proceeds from any future
disposition of the stock of Saturn Electronics & Engineering, Inc. ("Saturn")
owned by the Company. In connection with the recapitalization, Masco
Corporation, Richard A. Manoogian and certain of the Company's other
stockholders agreed to roll over a portion of their investment in the Company
and consequently remain as stockholders. As a result of the recapitalization,
the Company is controlled by Heartland Industrial Partners L.P. ("Heartland")
and its co-investors.
In accordance with generally accepted accounting principles, the
recapitalization resulted in no adjustment of assets or liabilities and the
payment for shares of common stock was treated as a treasury stock
transaction.
The recapitalization, the repayment of certain of the Company's existing
indebtedness and the payment of fees and expenses in connection with the
recapitalization was financed through approximately (1) $435 million in
equity financing provided by Heartland and other equity co-investors, (2)
$124 million of proceeds from the sale of certain equity investments owned by
the Company, (3) $1,016 million from borrowings under the Company's new
credit facility and (4) $119 million of proceeds from the sale of accounts
receivable pursuant to a new accounts receivable facility, which replaced a
similar but smaller facility entered into in the second quarter of 2000.
In conjunction with the recapitalization, the Company incurred
approximately $48 million of compensation expense related to severance costs
and accelerated vesting of stock awards and options. These costs are
classified as "Charges related to the recapitalization."
The recapitalization was completed by a merger of the Company with
Riverside Acquisition Corporation, with the Company being the surviving
entity. At the same time, substantially all of the assets of the Company were
contributed to a new wholly owned subsidiary entity, Metalync Company, LLC
(now known as Metaldyne Company, LLC) ("LLC"), including operating assets and
stock in subsidiaries. In addition, the LLC assumed the obligation to pay the
principal and interest on the 4-1/2% debentures due in 2003, although the
Company remains responsible.
In connection with the recapitalization, Heartland, Credit Suisse First
Boston Equity Partners, L.P., Masco Corporation, Richard A. Manoogian, their
various affiliates and certain other stockholders of the Company, entered
into a Shareholders' Agreement regarding their ownership of the Company's
common stock. Owners of an aggregate of approximately 90 percent of the
Company's outstanding common stock are party to the Shareholders' Agreement
which imposes certain restrictions on, and rights with respect to the
transfer of, Company Common Stock. The Agreement also entitles the
shareholders to certain rights regarding corporate governance of the Company.
ACCOUNTING POLICIES:
Principles of Consolidation. The consolidated financial statements include
the accounts of the Company and all majority-owned subsidiaries. All
significant intercompany transactions have been eliminated. Corporations that
are 20 to 50 percent owned are accounted for by the equity method of
accounting; ownership less than 20 percent is accounted for on the cost basis
unless the Company exercises significant influence over the investee. Capital
transactions by equity affiliates, which change the Company's ownership
interest at amounts differing from the Company's carrying amount, are
reflected in other income or expense and the investment in affiliates
account.
Effective January 23, 2001, the Company changed its name to Metaldyne
Corporation from MascoTech, Inc.
26
METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company has a corporate services agreement with Masco Corporation,
which at December 31, 2000 owned approximately six percent of the Company's
common stock. Under the terms of the agreement, the Company pays fees to
Masco Corporation for various corporate staff support and administrative
services, research and development and facilities. Such fees aggregated
approximately $2.9 million, net in 2000, $6.4 million in 1999 and $8.7
million in 1998. The Company and Masco have agreed that Masco will continue
to provide certain services, on a reduced basis and for significantly lower
fees, through 2002. During 2000, in connection with the recapitalization
agreement and the acquisition of Simpson, the Company incurred financing and
other fees (principally merger and acquisition related) of $24 million to
Heartland. In addition, the Company entered into a monitoring agreement with
Heartland for an annual fee of $4 million plus additional fees for financings
and acquisitions under certain circumstances.
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Company to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements. Such estimates and assumptions also affect the reported
amounts of revenues and expenses during the reporting periods. Actual results
may differ from such estimates and assumptions.
Cash and Cash Investments. The Company considers all highly liquid debt
instruments with an initial maturity of three months or less to be cash and
cash investments.
Marketable Securities and Derivative Financial Instruments. In prior
years, the Company had marketable equity securities holdings which were
categorized as trading and, as a result, were stated at fair value. Changes
in the fair value of trading securities were recognized in earnings. The
Company may enter into interest rate swap agreements to limit the effect of
changes in the interest rates on any floating rate debt. For interest rate
instruments that effectively hedge interest rate exposures, the net cash
amounts paid or received on the agreements are recognized as an adjustment to
interest expense. At December 31, 2000, the Company had no marketable
security holdings or derivative financial instruments.
Receivables. Receivables are presented net of allowances for doubtful
accounts of approximately $5.4 million and $4.3 million at December 31, 2000
and 1999, respectively. The Company conducts a significant amount of business
with a number of individual customers in the transportation industry. The
Company monitors its exposure for credit losses and maintains adequate
allowances for doubtful accounts; the Company does not believe that
significant credit risk exists.
Inventories. Inventories are stated at the lower of cost or net realizable
value, with cost determined principally by use of the first-in, first-out
method.
Property and Equipment, Net. Property and equipment additions, including
significant betterments, are recorded at cost. Upon retirement or disposal of
property and equipment, the cost and accumulated depreciation are removed
from the accounts, and any gain or loss is included in income. Repair and
maintenance costs are charged to expense as incurred.
Depreciation and Amortization. Depreciation is computed principally using
the straight-line method over the estimated useful lives of the assets.
Annual depreciation rates are as follows: buildings and land improvements,
2-1/2 to 10 percent, and machinery and equipment, 6 2/3 to 33 1/3 percent.
Deferred financing costs are amortized over the lives of the related debt
securities. The excess of cost over net assets of acquired companies is
amortized using the straight-line method over the period estimated to be
benefited, not exceeding 40 years. At each balance sheet date, management
assesses whether there has been a permanent impairment of the excess of cost
over net assets of acquired companies by comparing anticipated undiscounted
future cash flows from operating activities with the carrying amount of the
excess of cost over net assets of acquired companies. The factors considered
by management in performing this assessment include current operating
results, business prospects, market trends, potential product obsolescence,
competitive activities and other economic factors. Based on this assessment,
there was no permanent impairment related to the excess of cost over net
assets of acquired companies at December 31, 2000.
27
METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
At December 31, 2000 and 1999, accumulated amortization of the excess of
cost over net assets of acquired companies and patents was $93.8 million and
$68.5 million, respectively. Amortization expense was $47.6 million (which
includes $14.5 million of amortization expense related to the accelerated
vesting of stock awards), $28.4 million and $31.8 million in 2000, 1999 and
1998, respectively.
Shipping and Handling Fees and Costs. Shipping and handling fees are
included in the selling, general and administrative expenses category in the
Consolidated Statement of Income. Shipping and handling expense was $21.7
million, $21.0 million and $21.1 million in 2000, 1999 and 1998,
respectively.
New Accounting Pronouncements and Reclassifications. Financial Accounting
Standards Board ("FASB") SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities," as amended by SFAS 137 and 138, requires that all
derivative instruments be recorded on the balance sheet at fair value.
Changes in the fair value of derivatives are recorded each period in current
earnings or other comprehensive income, depending on whether a derivative is
designated as part of a hedge transaction and, if it is, the type of hedge
transaction. The effective adoption date of these pronouncements is January
1, 2001. The Company entered into interest rate derivatives in 2001 to
satisfy requirements under its bank facilities. The Company does not expect
the initial adoption of these pronouncements to have a significant impact on
the financial statements.
In October 2000, FASB issued SFAS No. 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities -a
Replacement of FASB Statement No. 125." SFAS No. 140 revised the standards
for accounting and disclosures for securitizations and other transfers of
financial assets, but it has carried over most of Statement 125's provisions
without reconsideration. The Company is currently evaluating the impact SFAS
No. 140 will have on its financial statements, if any.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin Number 101, "Revenue Recognition in Financial Statements"
(SAB 101), effective in the fourth quarter of 2000. The adoption of SAB 101
did not have an impact on the Company's financial statements.
The FASB Emerging Issues Task Force reached consensus on Issue 99-5,
"Accounting for Pre-Production Costs Related to Long-Term Supply
Arrangements." Issue 99-5 addresses the capitalization of pre-production
design and development tooling costs under long-term supply arrangements.
This guidance is effective for costs incurred after December 31, 1999. The
Company has determined that this issue did not have a significant impact on
the Company's financial statements.
28
METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
EARNINGS PER SHARE:
The following are reconciliations of the numerators and denominators used
in the computations of basic and diluted earnings per common share:
(IN THOUSANDS EXCEPT PER SHARE
AMOUNTS)
2000 1999 1998
--------- ---------- ----------
Weighted average number of shares outstanding ... 40,170 41,110 43,630
========= ========== ==========
Net income....................................... $56,020 $ 92,430 $ 97,470
Less: Preferred stock dividends.................. 390 -- --
--------- ---------- ----------
Earnings used for basic earnings per share
computation................................... $55,630 $ 92,430 $ 97,470
========= ========== ==========
Basic earnings per share...................... $ 1.38 $ 2.25 $ 2.23
========= ========== ==========
Total shares used for basic earnings per share
computation..................................... 40,170 41,110 43,630
Dilutive securities:
Stock options................................... 340 530 1,060
Convertible debentures.......................... 8,950 9,840 10,000
Contingently issuable shares.................... 3,650 3,720 3,830
--------- ---------- ----------
Total shares used for diluted earnings per
share computation............................. 53,110 55,200 58,520
========= ========== ==========
Earnings used for basic earnings per share
computation..................................... $55,630 $ 92,430 $ 97,470
Add back of debenture interest................... 8,510 9,310 9,530
--------- ---------- ----------
Earnings used for diluted earnings per share
computation................................... $64,140 $101,740 $107,000
========= ========== ==========
Diluted earnings per share.................... $ 1.21 $ 1.84 $ 1.83
========= ========== ==========
Diluted earnings per share reflect the potential dilution that would occur
if securities or other contracts to issue common stock were exercised or
converted into common stock.
SUPPLEMENTARY CASH FLOWS INFORMATION:
Significant transactions not affecting cash were: in 2000, the issuance of
approximately $8 million of Company common stock as additional consideration
related to a 1998 acquisition; the issuance of $36.1 liquidation value
preferred stock in exchange for Company common stock; the acquisition of
Simpson for cash and the assumption of approximately $215 million of
liabilities; and in 1999, the assumption of approximately $10 million of
liabilities in an acquisition; and in 1998, the issuance of $22 million of
Company common stock in partial exchange for the assets of an acquired
company; the acquisition of TriMas for cash and the assumption of liabilities
of approximately $179 million.
Income taxes paid were $18 million, $54 million and $38 million in 2000,
1999 and 1998, respectively. Interest paid was $93 million, $79 million and
$79 million in 2000, 1999 and 1998, respectively.
ACQUISITIONS:
On December 15, 2000, the Company acquired Simpson Industries, Inc. for
total consideration of $365 million, including fees and expenses and the
assumption of indebtedness. The results for 2000 include
29
METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Simpson sales and operating results since the date of acquisition. The
acquisition was accounted for as a purchase with excess purchase price over
the estimated fair value of net assets acquired of approximately $150 million
amortized over 40 years. The purchase price allocations are preliminary, and
as such are estimates. Such allocations could change upon the completion of
asset valuations, which are on-going as of the date of this filing.
Simpson is a designer and manufacturer of precision-engineered automotive
components and modular systems for passenger and sport utility vehicles,
light-and heavy-duty trucks and diesel engines. For the years ended December
31, 2000 and 1999, Simpson had approximate net sales of $515 million and $533
million, respectively, and approximate operating profit of $35.7 million and
$38.9 million, respectively. Had the Simpson acquisition occurred effective
January 1, 2000 (1999), the following unaudited pro forma consolidated net
sales, operating profit and net income for the years ended December 31, 2000
(1999) would have been approximately $2.2 billion ($2.2 billion), $169
million ($252 million) and $46 million ($102 million), respectively. The
unaudited pro forma data does not purport to be indicative of the results
which would actually have been reported if the transaction had occurred on
such date.
During 1999, the Company acquired Windfall Products, Inc., a manufacturer
of transportation-related components that utilizes powder metal technology,
significantly expanding the Company's powder metal manufacturing
capabilities.
In January 1998, the Company completed the acquisition of TriMas
Corporation ("TriMas"), by purchasing all of the outstanding shares of TriMas
not already owned by the Company (approximately 63 percent) for approximately
$920 million.
DISPOSITIONS OF BUSINESSES:
The Company received approximately $30 million of contingent consideration
($5 million in 1997 and $25 million in 1998) based on the subsequent
operating performance of certain businesses sold in 1996. This gain, which is
non-taxable, is included in the caption "gains (charge) on disposition of
businesses, net" in the consolidated statement of income.
On January 3, 1997, the Company sold its Technical Services Group
(comprised of the Company's engineering and technical business services
units) to MSX International, Inc. In January 1998, the Company received $48
million of cash from MSX International, Inc. in payment of subordinated
debentures and other amounts due MascoTech, resulting in a realized gain in
the first quarter 1998 of $7 million.
In the second quarter of 1998, the Company recorded a non-cash charge
aggregating approximately $41 million pre-tax (approximately $22 million
after-tax) to reflect the write-down of certain long-lived assets principally
related to the plan to dispose of certain businesses and to accrue exit costs
of approximately $8 million. In April 1999, the Company completed the sale of
these aftermarket-related and vacuum metalizing businesses for total proceeds
aggregating approximately $105 million, including $90 million of cash which
was applied to reduce the Company's indebtedness, a note receivable of $6
million and retained equity interests in the ongoing businesses which were
subsequently sold in 2000. These transactions resulted in a 1999 pre-tax gain
of approximately $26 million ($15 million after-tax).
In 1999, management adopted a plan to sell its specialty tubing business
which resulted in a pre-tax loss of approximately $7 million and an after-tax
gain of approximately $5.5 million, due to the tax basis in the net assets of
the businesses exceeding book carrying values. This business was sold in
January 2000 for proceeds of approximately $6 million consisting of cash and
notes.
In addition, the Company recorded in the second quarter 1999 a non-cash
pre-tax charge of approximately $17.5 million related to impairment of
certain long-lived assets, which included its hydroforming equipment and
related intellectual property.
30
METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In the fourth quarter 1999, the Company announced the closure of a plant
and recorded a non-cash pre-tax charge of approximately $4 million ($2
million after-tax) related principally to employee benefit costs and asset
impairments. Accrued exit costs at January 1, 2000 were approximately $12
million, payments and adjustments to accrued estimates approximated $5
million and the ending accrual was approximately $7 million.
ACCOUNTS RECEIVABLE SECURITIZATION:
During June 2000, the Company entered into an agreement to sell, on an
ongoing basis, approximately $50 million of trade accounts receivable of
certain business operations to a wholly owned, bankruptcy-remote, special
purpose subsidiary ("MTSPC") of the Company.
The June 2000 accounts receivable facility was replaced in November 2000
with a similar facility which allows the Company to sell the trade accounts
receivable of substantially all domestic business operations to MTSPC. MTSPC
has sold and, subject to certain conditions, may from time to time sell, an
undivided fractional ownership interest in the pool of receivables up to
approximately $225 million to a third party multi-seller receivables funding
company, or conduit. Upon sale to the conduit, MTSPC holds a subordinated
retained interest in the receivables. Under the terms of the agreement, new
receivables are added to the pool as collections reduce previously sold
receivables. The Company services, administers and collects the receivables
on behalf of MTSPC and the conduit. The net proceeds of sale are less than
the face amount of accounts receivable sold by an amount that approximates
the purchaser's financing costs amounting to a total of $4.2 million in 2000
and is included in other expense in the income statement. At December 31,
2000 a total of approximately $151 million of receivables were sold and the
Company retained a subordinated interest of approximately $17 million, which
was included in the receivables balance. The retained subordinated interest
is discounted at a rate that approximates fair value given the short-term
nature of the receivables balance.
INVENTORIES:
(IN THOUSANDS)
AT DECEMBER 31
---------------------
2000 1999
---------- ---------
Finished goods.............................. $ 90,790 $ 86,240
Work in process............................. 46,390 45,940
Raw material................................ 62,310 51,420
---------- ---------
$199,490 $183,600
========== =========
EQUITY AND OTHER INVESTMENTS IN AFFILIATES:
On November 28, 2000, the Company sold all of its equity investments,
except Saturn, for approximately $124 million resulting in a net pre-tax gain
of approximately $28 million.
The Company has a 36 percent common equity ownership in Saturn, a
manufacturer of electromechanical and electronic automotive components. The
Company's carrying value in the common stock of Saturn exceeded its equity in
the underlying net book value by approximately $9 million at December 31,
2000. This excess is being amortized over 40 years. Although no disposition
of the stock of Saturn was made prior to the recapitalization, holders of
common stock on the date of the recapitalization will be entitled to certain
net proceeds, if any, from any subsequent disposition of Saturn. The amount
which will be paid to such former stockholders will equal the proceeds in
excess of $18.0 million and less than or equal to $40.0 million, any proceeds
in excess of $55.7 million and less than or equal to $56.7 million as well as
60 percent of any proceeds in excess of $56.7 million. Any other proceeds
will be retained by the Company.
31
METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The carrying amount of investments in affiliates at December 31, 2000 and
1999 was $27.8 million and $110.7 million, respectively.
Approximate combined condensed financial data of the Company's equity
affiliates (including TriMas through the date of acquisition in early 1998,
and through the date of sale of all the equity investments except Saturn in
November 2000) accounted for under the equity method, are as follows:
(IN THOUSANDS)
AT DECEMBER 31
--------------------------
2000 1999
----------- -------------
Current assets........................................ $ 131,320 $ 1,180,990
Current liabilities................................... (66,800) (708,150)
----------- -------------
Working capital...................................... 64,520 472,840
Property and equipment, net........................... 62,950 632,530
Excess of cost over net assets of acquired companies
and other assets..................................... 64,590 499,040
Long-term debt........................................ (107,840) (1,087,650)
Deferred income taxes and other long-term
liabilities.......................................... (22,460) (70,250)
----------- -------------
Shareholders' equity................................ $ 61,760 $ 446,510
=========== =============
(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31
----------------------------------------
2000 1999 1998
------------ ------------ ------------
Net sales ........................................... $3,090,800 $3,304,610 $2,764,860
============ ============ ============
Operating profit ..................................... $ 186,680 $ 177,220 $ 125,730
============ ============ ============
Earnings attributable to common stock ................ $ 33,220 $ 41,070 $ 32,480
============ ============ ============
Equity and other income from affiliates consists of the following:
(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31
----------------------------------------
2000 1999 1998
------------ ------------ ------------
The Company's equity in affiliates' earnings
available for common shareholders.................... $5,790 $10,300 $ 7,340
Interest and dividend income.......................... 4,020 2,930 2,810
------------ ------------ ------------
Equity and other income from affiliates............... $9,810 $13,230 $10,150
============ ============ ============
PROPERTY AND EQUIPMENT, NET:
(IN THOUSANDS)
AT DECEMBER 31
------------------------
2000 1999
----------- -----------
Cost:
Land and land improvements .......................... $ 33,150 $ 30,650
Buildings ........................................... 220,750 184,170
Machinery and equipment ............................. 1,013,960 830,400
----------- -----------
1,267,860 1,045,220
Less: Accumulated depreciation ....................... 366,560 322,540
----------- -----------
$ 901,300 $ 722,680
=========== ===========
32
METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Depreciation expense totaled $59 million, $55 million and $52 million in
2000, 1999 and 1998, respectively.
ACCRUED LIABILITIES:
(IN THOUSANDS)
AT DECEMBER 31
--------------------------
2000 1999
------------ ------------
Insurance............................... $ 27,210 $ 24,130
Severance and stock option accrual ..... 19,850 --
Salaries, wages and commissions......... 15,500 8,800
Vacation, holiday and bonus............. 15,610 18,550
Income taxes............................ 7,040 3,940
Interest................................ 3,440 5,250
Property, payroll and other taxes ...... 9,690 5,380
Pension................................. 16,530 20,850
Other................................... 31,770 27,010
------------ ------------
$146,640 $113,910
============ ============
LONG-TERM DEBT:
(IN THOUSANDS)
AT DECEMBER 31
--------------------------
2000 1999
------------ ------------
4 1/2% Convertible Subordinated
Debentures,
due 2003............................... $ 305,000 $ 305,000
Bank revolving credit agreement......... 48,000 606,000
Bank term loans......................... 1,150,190 383,000
Other................................... 29,100 85,660
------------ ------------
1,532,290 1,379,660
Less: Current portion of long-term
debt................................... 46,350 6,770
------------ ------------
Long-term debt.......................... $1,485,940 $1,372,890
============ ============
In connection with the recapitalization in late 2000 (see
"Recapitalization" note), the Company entered into a new $1.5 billion credit
facility, which replaced our prior credit facility. The new facility includes
a $300 million revolving credit facility due in 2007, a tranche A $500
million term loan facility, a tranche B $500 million term loan facility and a
tranche C $200 million term loan facility of which $50 million was repaid
from the proceeds of the sale/leaseback of certain assets. The amortization
of the term loans is as follows: 2001 -- $33 million; 2002 -- $53 million;
2003 -- $73 million; 2004 -- $83 million; 2005 -- $83 million; 2006 -- $93
million; 2007 -- $272 million; 2008 -- $387 million; and 2009 -- $73 million.
Other debt includes borrowings by the Company's subsidiaries denominated
in foreign currencies. At December 31, 2000, there was approximately $170
million unused and available under the revolving credit agreement.
The interest rates applicable to the revolver and term loans are
principally at alternative floating rates which approximated ten percent at
December 31, 2000.
Interest rate swaps covering a notional amount of $400 million of the
Company's floating rate debt were entered into in 1998 at an aggregate
interest rate of approximately six percent before the addition
33
METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
of the borrowing margin in the underlying bank agreement. These swap
agreements expired or were terminated in June 2000 and the Company received
proceeds of approximately $16 million. The cash proceeds were used for the
reduction of long-term debt. The Company recognized a pre-tax gain of
approximately $12.9 million in November 2000 related to the disposition of
the swap agreements.
The credit facility is secured by substantially all domestic assets
(except for the investment in Saturn and the subordinated retained interest
of securitized receivables) and by a portion of the stock of foreign
operations.
The bank debt is an obligation of subsidiaries of the Company. The bank
debt includes limitations on the distribution of funds from the LLC, the
principal subsidiary to the Company. These include limitations on the ability
of the Company to redeem the restricted stock awards (see Stock Options and
Awards footnote) if the result of such redemption would give rise to a
default under the credit agreement. The new credit facility contains other
negative and affirmative covenants and requirements affecting the Company and
its subsidiaries, including restrictions on debt, liens, mergers,
investments, acquisitions and capital expenditures, asset dispositions,
sale/leaseback transactions, the ability to pay common stock dividends and
transactions with affiliates. The new credit facility also requires the
Company and its subsidiaries to meet certain financial covenants and ratios
to be computed quarterly commencing on December 31, 2000. The credit facility
presently requires the Company to maintain $70 million available under the
revolving credit facility and accounts receivable facility in order to have
funds available to make payments when necessary for the convertible
subordinated debentures. This required availability increases to $205 million
in 2003 when the convertible subordinated debentures mature.
Masco Corporation has agreed to purchase from the Company, at the
Company's option, up to $100 million of a new issue of Metaldyne long-term
subordinated debt, subject to certain conditions, on or prior to October 31,
2003. However, the credit agreement significantly restricts the Company's
right to require Masco Corporation to purchase such long-term subordinated
debt until such time as the convertible subordinated debt matures or is
repaid from subordinated debt or equity proceeds prior to maturity.
The 4-1/2% convertible debentures due 2003 were formerly convertible into
an aggregate approximate 9.8 million shares of Company common stock. The
effect of the recapitalization is that the holders of these debentures may
convert the bonds into the amount of consideration received per share by the
common shareholders of the Company in the recapitalization, $16.90 per share
plus the right to receive certain proceeds from the sale of Saturn, if any.
As a result, the debenture holders have the right to convert at any time for
approximately $166 million in cash and the right to receive future
consideration upon the sale of Saturn. Alternatively, holders of the
debentures may retain the debentures until maturity, but are no longer
entitled to convert them into common shares of the Company.
These debentures are classified as long-term because the Company has the
ability and intent to refinance on a long-term basis any amounts that might
be required to be paid to debenture holders in the next year. The Company's
revolving credit agreement has $70 million available for the payment of
amounts demanded by debenture holders, which together with the right of the
Company to require Masco Corporation to purchase $100 million of long-term
subordinated debt, results in available funds of $170 million. The $170
million is sufficient to satisfy the maximum amount that would be required if
all debenture holders elect to convert their bonds into the $16.90 per share
recapitalization cash consideration.
The maturities of debt as at December 31, 2000 during the next five years
are as follows (in millions): 2001 -- $46; 2002 -- $55; 2003 -- $380; 2004 --
$84; and 2005 -- $84
34
METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COMMITMENTS AND CONTINGENCIES:
The Company leases certain equipment and plant facilities under
noncancellable operating leases. Rental expense for the Company totaled
approximately $8.7 million, $8.2 million and $9.2 million during 2000, 1999
and 1998, respectively.
In December 2000, the Company completed sale/leaseback financings relating
to certain equipment of Simpson and the Simpson headquarters building to
yield gross proceeds to the Company of approximately $50 million. These
proceeds were used to pay down the $200 million tranche C term loan facility.
Due to the sales/leaseback financings, the Company has significantly
increased its commitment to future lease payments. Minimum payments for
operating leases having initial or remaining noncancellable lease terms in
excess of one year at December 31, 2000 are summarized below:
YEAR ENDING DECEMBER 31: (IN THOUSANDS)
- -------------------------------------------- --------------
2001........................................ $ 14,100
2002........................................ 12,300
2003........................................ 11,030
2004........................................ 10,390
2005........................................ 9,530
Thereafter ................................. 42,900
--------------
Total ...................................... $100,250
==============
REDEEMABLE PREFERRED STOCK:
The Company issued $36.1 million in liquidation value ($33 million
estimated fair value for accounting purposes) of Series A preferred stock par
value $1 and authorized 370,000 shares to Masco Corporation. The Company will
accrete from the carrying value to the liquidation value ratably over the
twelve-year period. The preferred stock is mandatorily redeemable on December
31, 2012. Series A preferred stockholders are entitled to receive, when, as
and if declared by the Company's board of directors, cumulative quarterly
cash dividends at a rate of 13 percent per annum for periods ending on or
prior to December 31, 2005 and 15 percent per annum for periods after
December 31, 2005 plus 2 percent per annum for any period for which there are
any accrued and unpaid dividends ("Recapitalization" footnote).
SHAREHOLDERS' EQUITY:
The Company repurchased and retired approximately 1.3 million shares of
its common stock in 1999 and 3.6 million shares of its common stock in 1998,
pursuant to Board of Directors' authorized repurchase programs.
On the basis of amounts paid (declared), cash dividends per common share
were $.24 ($.24) in 2000, $.30 ($.30) in 1999 and $.26 ($.20) in 1998.
STOCK OPTIONS AND AWARDS:
The Company's Long Term Stock Incentive Plan (the "Plan") provides for the
issuance of stock-based incentives in various forms. At December 31, 2000,
outstanding stock-based incentives are in the form of restricted long-term
stock awards.
Pursuant to the Plan, the Company granted long-term stock awards, net, for
401,000, 622,000 and 908,000 shares of Company Common Stock during 2000
(prior to the recapitalization), 1999 and 1998, respectively, to key
employees of the Company. The weighted average fair value per share of
long-term stock awards granted during 2000, 1999 and 1998 on the date of
grant was $13, $14 and $19, respectively.
35
METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Compensation expense for the vesting of long-term stock awards was
approximately $21.0 million, $4.7 million and $5.2 million in 2000, 1999 and
1998, respectively. Prior to the recapitalization merger, the unamortized
value of unvested stock awards were generally amortized over a ten-year
vesting period and were recorded in the financial statements as a deduction
from shareholders' equity.
As part of the recapitalization, the Company cancelled outstanding stock
awards and made new restricted stock awards to certain employees of
approximately 3.7 million shares of Company Common Stock. Under the terms of
the recapitalization agreement, those shares become free of restriction, or
vest, as to one-quarter upon the closing of the recapitalization merger and
one-quarter in each of January 2002, 2003 and 2004. Holders of restricted
stock were entitled to elect cash in lieu of 40 percent of their respective
stock which vested at the closing of the recapitalization merger. On each of
the subsequent vesting dates, holders of restricted stock may elect to
receive all of the installment in common shares, 40 percent in cash and 60
percent in common shares, or 100 percent of the installment in cash. The
number of shares to be received will increase by six percent per annum and
any cash to be received will increase by six percent per annum from the
$16.90 per share recapitalization consideration. As a result of the ability
of the holder to elect a partial or full cash option, the restricted shares
have been classified as redeemable restricted common stock. There were
2,751,374 restricted shares outstanding at December 31, 2000.
As part of the recapitalization, holders of options with an exercise price
below the merger consideration were entitled to cash equal to the difference
between such merger consideration and the exercise price for such options. A
payment for this excess was made in January 2001 totaling approximately $14
million. This liability was recognized in 2000 and is included in expense as
a "Charge related to the recapitalization" and in other accrued liabilities.
In addition, $14 million was held in an escrow account and is included in
"Prepaid expense and other assets." Holders of options with the exercise
price below the merger consideration and former holders of restricted stock
will also be entitled to additional cash amounts from the proceeds of the
disposition of Saturn stock, if any, in accordance with the recapitalization
agreement. Options with an exercise price exceeding the merger consideration
were cancelled.
A summary of the status of the Company's stock options granted under the
Plan or prior plans for the three years ended December 31, 2000 is presented
below.
(SHARES IN THOUSANDS)
2000 1999 1998
--------- ------- ---------
Option shares outstanding, January 1 ............ 3,880 3,950 3,770
Weighted average exercise price ................ $14 $14 $10
Option shares granted ........................... 30 180 1,480
Weighted average exercise price ................ $12 $14 $19
Option shares exercised ......................... (150) (140) (1,160)
Weighted average exercise price ................ $5 $5 $10
Option shares cancelled due to forfeitures ..... (10) (110) (140)
Weighted average exercise price ................ $11 $18 $15
Option shares cancelled due to recapitalization (3,750) -- --
Option shares outstanding, December 31 ......... -- 3,880 3,950
Weighted average exercise price ................ -- $14 $14
Weighted average remaining option term (in
years) ........................................ -- 5.9 6.6
Option shares exercisable, December 31 ......... -- 1,200 750
Weighted average exercise price ................ -- $9 $9
36
METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A combined total of approximately 7.2 million shares and 3.5 million shares
in 2000 and 1999, respectively, and 3.8 million shares in 1998 of Company Common
Stock were available for the granting of options and incentive awards under the
above plans. The increase in available options and stock awards from 1999 to
2000 is the result of the cancellation of options as a result of the
recapitalization.
The Company has elected to continue to apply the provisions of Accounting
Principles Board Opinion No. 25 and, accordingly, no stock option
compensation expense is included in the determination of net income in the
statement of income. The weighted average fair value on the date of grant of
options granted was $3.60 and $6.30 in 1999 and 1998, respectively. Had stock
option compensation expense been determined pursuant to the methodology of
SFAS No. 123, "Accounting for Stock-Based Compensation," the pro forma
effects on the Company's earnings per share would have been a reduction of
approximately $.04 in both 1999 and 1998.
The fair value for these options was estimated at the date of grant using
a Black-Scholes option pricing model with the following weighted average
assumptions:
1999 1998
------- -------
Risk-free interest rate ...................... 5.1% 5.5%
Dividend yield ............................... 1.9% 1.3%
Volatility factor ............................ 26.2% 28.8%
Expected option life (in years) .............. 5.5 5.5
EMPLOYEE BENEFIT PLANS:
Pension and Profit-Sharing Benefits. The Company sponsors defined-benefit
pension plans for most of its employees. In addition, substantially all
salaried employees participate in noncontributory profit-sharing plans, to
which payments are approved annually by the Board of Directors. Aggregate
charges to income under these plans were $18 million in 2000, $21 million in
1999 and $15 million in 1998.
Net periodic pension cost for the Company's defined-benefit pension plans
includes the following components for the three years ended December 31,
2000:
(IN THOUSANDS)
2000 1999 1998
--------- --------- ----------
Service cost ................................ $ 6,460 $ 7,590 $ 6,470
Interest cost ............................... 13,250 12,640 11,380
Expected return on assets ................... (9,450) (9,670) (11,430)
Amortization of transition obligation
(asset) .................................... 110 130 (170)
Amortizaton of prior-service cost ........... 680 650 750
Amortization of net loss .................... 780 1,440 670
--------- --------- ----------
Net periodic pension cost ................... $11,830 $12,780 $ 7,670
========= ========= ==========
Major assumptions used in accounting for the Company's defined-benefit
pension plans are as follows:
2000 1999 1998
------- ------- -------
Discount rate for obligations .................. 7.75% 7.75% 6.75%
Rate of increase in compensation levels ....... 4.00% 5.00% 5.00%
Expected long-term rate of return on plan
assets ........................................ 9.00% 9.00% 11.00%
37
METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following provides a reconciliation of the changes in the
defined-benefit pension plans' projected benefit obligations and fair value
of assets for each of the two years ended December 31, 2000, and the funded
status as of December 31, 2000 and 1999:
(IN THOUSANDS)
2000 1999
------------ ------------
CHANGES IN PROJECTED BENEFIT OBLIGATIONS
Benefit obligations at January 1 ..................... $(173,770) $(184,030)
Acquisitions ........................................ (48,800) --
Service cost ........................................ (5,800) (7,130)
Interest cost ....................................... (13,240) (12,640)
Plan amendments ..................................... (450) (1,460)
Actuarial gain (loss) ............................... (2,080) 22,830
Benefit payments .................................... 7,660 8,660
Change in foreign currency .......................... 280 --
------------ ------------
Projected benefit obligations at December 31 ........ $(236,200) $(173,770)
============ ============
CHANGES IN PLAN ASSETS
Fair value of plan assets at January 1 ............... $ 101,260 $ 110,760
Acquisitions ........................................ 45,240 --
Actual return on plan assets ........................ (1,370) (12,110)
Contributions ....................................... 13,820 11,520
Benefit payments .................................... (7,470) (8,480)
Expenses/Other ...................................... (710) (430)
------------ ------------
Fair value of plan assets at December 31 ............. $ 150,770 $ 101,260
============ ============
FUNDED STATUS
Plan assets less than projected benefits at December
31 .................................................. $ (85,430) $ (72,510)
Unamortized transition obligation ................... 80 270
Unamortized prior-service cost ...................... 7,140 7,500
Unamortized net loss ................................ 41,490 29,340
------------ ------------
Net liability recognized at December 31 .............. $ (36,720) $ (35,400)
============ ============
The following provides the amounts related to the plans at December 31,
2000 and 1999:
(IN THOUSANDS)
2000 1999
------------ ------------
Accrued benefit liability ............................ $(66,760) $(56,650)
Intangible asset ..................................... 15,140 11,250
Accumulated other comprehensive income ............... 14,900 10,000
------------ ------------
Net liability recognized ........................... $(36,720) $(35,400)
============ ============
38
METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Postretirement Benefits. The Company provides postretirement medical and
life insurance benefits, none of which are funded, for certain of its active
and retired employees. Net periodic postretirement benefit cost includes the
following components for the years ended December 31, 2000, 1999 and 1998:
(IN THOUSANDS)
2000 1999 1998
-------- -------- -------
Service cost ........................... $ 300 $ 400 $ 300
Interest cost .......................... 1,400 1,200 1,200
Net amortization ....................... 500 500 (100)
-------- -------- -------
Net periodic postretirement benefit
cost .................................. $2,200 $2,100 $1,400
======== ======== =======
The following provides a reconciliation of the changes in the
postretirement benefit plans' benefit obligations for each of the two years
ended December 31, 2000 and the status as of December 31, 2000 and 1999:
(IN THOUSANDS)
2000 1999
----------- -----------
CHANGES IN BENEFIT OBLIGATIONS
Benefit obligations at January 1 ............ $(18,200) $(18,900)
Acquisitions ............................... (13,300) --
Service cost ............................... (300) (400)
Interest cost .............................. (1,400) (1,200)
Employee contributions ..................... (100) (100)
Actuarial gain (loss) ...................... (2,600) 1,000
Benefit payments ........................... 1,400 1,300
Curtailment ................................ -- 100
----------- -----------
Benefit obligations at December 31 .......... $(34,500) $(18,200)
=========== ===========
STATUS
Benefit obligations at December 31 .......... $(34,500) $(18,200)
Unamortized transition obligation .......... 7,600 8,400
Unrecognized prior-service cost ............ 400 400
Unrecognized net gain ...................... (3,700) (6,700)
----------- -----------
Net liability at December 31 ................ $(30,200) $(16,100)
=========== ===========
The discount rate used in determining the accumulated postretirement
benefit obligation was 7.75 percent in 2000 and 1999. The assumed health care
cost trend rate in 2000 was nine percent, decreasing to an ultimate rate in
the year 2008 of five percent. If the assumed medical cost trend rates were
increased by one percent, the accumulated postretirement benefit obligations
would increase by $2.9 million and the aggregate of the service and interest
cost components of net periodic postretirement benefit obligations cost would
increase by $.1 million. If the assumed medical cost trend rates were
decreased by one percent, the accumulated postretirement benefit obligations
would decrease by $2.1 million and the aggregate of the service and interest
cost components of net periodic postretirement benefit cost would decrease by
$.1 million.
39
METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEGMENT INFORMATION:
The Company has defined a segment as a component, with business activity
resulting in revenue and expense, that has separate financial information
evaluated regularly by the Company's chief operating decision maker in
determining resource allocation and assessing performance. The Company has
five operating segments involving the manufacture and sale of the following:
SPECIALTY METAL FORMED PRODUCTS -- Precision products, principally
engine and drivetrain components and subassemblies, generally produced
using advanced metalworking technologies with significant proprietary
content for the transportation industry.
SPECIALTY FASTENERS -- Cold formed fasteners and related metallurgical
processing.
TOWING SYSTEMS -- Vehicle hitches, jacks, winches, couplers and related
towing accessories.
SPECIALTY PACKAGING AND SEALING PRODUCTS -- Principally industrial
container closures and metallic and nonmetallic gaskets.
SPECIALTY INDUSTRIAL PRODUCTS -- Specialty drills, cutters and
specialized metal finishing services, and flame-retardant facings and
jacketings and pressure-sensitive tapes.
The Company purchased TriMas in January 1998 and the segment data for 1998
reflects TriMas as though the transaction had occurred on January 1, 1998,
consistent with the Company's internal management reporting.
Included in the Specialty Metal Formed Products segment are sales to one
customer of $176 million, $197 million and $184 million in 2000, 1999 and
1998, respectively.
The Company's export sales approximated $131 million, $143 million and
$142 million in 2000, 1999 and 1998, respectively.
Net assets for 2000 reflect the sale of accounts receivable principally in
the metalforming group through the securitization program.
40
METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Intersegment transactions represent principally transactions occurring in
the ordinary course of business.
(IN THOUSANDS)
SPECIALTY COMPANIES
SPECIALTY PACKAGING SPECIALTY SOLD
METAL FORMED SPECIALTY TOWING AND SEALING INDUSTRIAL OR HELD
2000 PRODUCTS FASTENERS SYSTEMS PRODUCTS PRODUCTS FOR SALE TOTAL
- --------------------------- -------------- ----------- ----------- ------------- ------------ ----------- ------------
Revenue from external
customers ................. $822,000 $215,000 $276,000 $220,000 $108,000 $ -- $1,641,000
Intersegment revenue ...... 10,000 2,000 9,000 -- 1,000 -- 22,000
Depreciation and
amortization .............. 39,000 13,000 12,000 15,000 6,000 -- 85,000
Segment operating profit ... 109,000 21,000 33,000 39,000 6,000 -- 208,000
Segment net assets ......... 561,000 310,000 277,000 356,000 122,000 -- 1,626,000
Capital expenditures ....... 75,000 5,000 9,000 9,000 2,000 -- 100,000
1999
- ---------------------------
Revenue from external
customers ................. $817,000 $241,000 $260,000 $216,000 $107,000 $ 39,000 $1,680,000
Intersegment revenue ....... 9,000 4,000 8,000 -- 1,000 1,000 23,000
Depreciation and
amortization .............. 35,000 12,000 10,000 13,000 5,000 2,000 77,000
Segment operating profit ... 112,000 35,000 37,000 41,000 14,000 4,000 243,000
Segment net assets ......... 602,000 329,000 289,000 422,000 140,000 -- 1,782,000
Capital expenditures ....... 87,000 12,000 9,000 19,000 7,000 -- 134,000
1998
- ---------------------------
Revenue from external
customers ................. $760,000 $226,000 $238,000 $223,000 $110,000 $115,000 $1,672,000
Intersegment revenue ....... 5,000 3,000 6,000 -- 1,000 3,000 18,000
Depreciation and
amortization .............. 34,000 10,000 9,000 11,000 5,000 6,000 75,000
Segment operating profit ... 106,000 38,000 34,000 46,000 16,000 12,000 252,000
Segment net assets ......... 494,000 328,000 281,000 423,000 140,000 102,000 1,768,000
Capital expenditures ....... 63,000 14,000 8,000 16,000 4,000 3,000 108,000
The following table presents the Company's revenues for each of the years
ended December 31 and net assets at each year ended December 31 by geographic
area, attributed to each subsidiary's continent of domicile. Revenue and net
assets from no single foreign country was material to the consolidated
revenues and net assets of the Company.
(IN THOUSANDS)
2000 1999 1998
------------------------ ------------------------- -------------------------
SALES NET ASSETS SALES NET ASSETS SALES NET ASSETS
---------- ------------ ----------- ------------ ----------- ------------
Europe ..................... $164,000 $163,000 $165,000 $182,000 $149,000 $171,000
Australia .................. 23,000 15,000 23,000 14,000 18,000 10,000
Other North America ........ 24,000 56,000 12,000 18,000 16,000 12,000
---------- ------------ ----------- ------------ ----------- ------------
Total foreign ............. $211,000 $234,000 $200,000 $214,000 $183,000 $193,000
========== ============ =========== ============ =========== ============
41
METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following is a reconciliation of reportable segment revenue from
external customers, segment operating profit and segment net assets to the
Company's consolidated totals:
(IN THOUSANDS)
REVENUE FROM EXTERNAL CUSTOMERS 2000 1999 1998
- ---------------------------------------------- ------------ ------------ ------------
Revenue from external customers for
reportable segments ......................... $1,641,000 $1,680,000 $1,672,000
TriMas sales prior to acquisition ............. -- -- (36,000)
Simpson Industries ........................... 9,000 -- --
------------ ------------ ------------
Total net sales ............................ $1,650,000 $1,680,000 $1,636,000
============ ============ ============
(IN THOUSANDS)
OPERATING PROFIT 2000 1999 1998
- ---------------------------------------------- ----------- ----------- -----------
Total operating profit for reportable
segments ..................................... $208,000 $243,000 $252,000
General corporate expense ..................... (25,000) (24,000) (24,000)
Gain (loss) on disposition of businesses, net 1,000 14,000 (16,000)
Charges related to the recapitalization ...... (48,000) -- --
Charge for asset impairment ................... -- (18,000) --
TriMas operating profit prior to acquisition . -- -- (5,000)
Simpson Industries ............................ 1,000 -- --
----------- ----------- -----------
Total operating profit ...................... $137,000 $215,000 $207,000
=========== =========== ===========
(IN THOUSANDS)
NET ASSETS AT DECEMBER 31 2000 1999 1998
- ---------------------------------------------- ------------ ------------ ------------
Total net operating assets for reportable
segments ..................................... $1,626,000 $1,782,000 $1,768,000
Simpson Industries ............................ 124,000 -- --
Corporate net assets .......................... 265,000 91,000 72,000
------------ ------------ ------------
Total net assets ............................ $2,015,000 $1,873,000 $1,840,000
============ ============ ============
The Company acquired Simpson Industries, Inc. on December 15, 2000.
December 31 balance sheet data for 2000 includes Simpson and income statement
data includes Simpson activity for the period December 15, 2000 through
December 31, 2000.
The information that the chief operating decision maker utilizes includes
total net assets as presented in the table above. Total net assets is defined
by the Company as total assets less current liabilities. Included in
corporate net assets for 2000 were capital expenditures of $3 million.
OTHER SIGNIFICANT ITEMS
(IN THOUSANDS)
DEPRECIATION AND AMORTIZATION 2000 1999 1998
- ---------------------------------------------- ---------- ---------- ----------
Segment totals ............................... $ 85,000 $77,000 $75,000
Adjustments .................................. 20,000 6,000 9,000
Simpson Industries ........................... 1,000 -- --
---------- ---------- ----------
Consolidated totals ........................ $106,000 $83,000 $84,000
========== ========== ==========
42
METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The preceding adjustments to depreciation and amortization are principally
the result of compensation expense related to stock award amortization and
prepaid debenture expense amortization.
OTHER INCOME (EXPENSE), NET:
(IN THOUSANDS)
2000 1999 1998
----------- ----------- ---------
Other, net:
Interest income ................. $ 1,540 $ 2,170 $ 4,180
Net realized and unrealized
gains from marketable
securities .................... -- -- 3,330
Other, net ....................... (4,060) (4,580) (3,110)
----------- ----------- ---------
$ (2,520) $ (2,410) $ 4,400
=========== =========== =========
INCOME TAXES:
(IN THOUSANDS)
2000 1999 1998
---------- ----------- -----------
Income before income taxes:
Domestic ....................... $64,970 $123,610 $115,630
Foreign ........................ 27,750 15,860 28,890
---------- ----------- -----------
$92,720 $139,470 $144,520
========== =========== ===========
Provision for income taxes:
Currently payable:
Federal ....................... $ (10) $ 26,810 $ 28,210
State and local ................ 3,700 5,450 3,950
Foreign ....................... 8,990 5,220 15,000
Deferred:
Federal ....................... 22,950 7,390 590
Foreign ....................... 1,070 2,170 (700)
---------- ----------- -----------
Income taxes ................... $36,700 $ 47,040 $ 47,050
========== =========== ===========
The components of deferred taxes at December 31, 2000 and 1999 are as
follows:
(IN THOUSANDS)
2000 1999
----------- ---------
Deferred tax assets:
Inventories ............................................... $ 1,370 $ 2,920
Accrued liabilities and other long-term liabilities ...... 50,960 47,880
Expected capital loss benefit from disposition of
businesses................................................ -- 8,900
Alternative minimum tax.................................... 430 --
----------- ---------
52,760 59,700
=========== =========
Deferred tax liabilities:
Property and equipment .................................... 140,700 111,680
Other, including equity investments in affiliates ........ 24,060 26,710
----------- ---------
164,760 138,390
----------- ---------
Net deferred tax liability ................................. $112,000 $ 78,690
=========== =========
43
METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following is a reconciliation of tax computed at the U.S. federal
statutory rate to the provision for income taxes allocated to income before
income taxes:
(IN THOUSANDS)
2000 1999 1998
--------- --------- ---------
U.S. federal statutory rate ....................... 35% 35% 35%
--------- --------- ---------
Tax at U.S. federal statutory rate ................ $32,450 $48,810 $50,580
State and local taxes, net of federal tax benefit 2,410 3,540 2,570
Higher effective foreign tax rate ................. 2,550 1,840 4,210
Change in German tax rate ......................... (2,200) -- --
Non-taxable additional consideration from
previously sold business ......................... -- -- (8,190)
Disposition of businesses ......................... (960) (7,870) (2,400)
Amortization in excess of tax, net ................ 5,110 2,950 1,390
Other, net ........................................ (2,660) (2,230) (1,110)
--------- --------- ---------
Income taxes ..................................... $36,700 $47,040 $47,050
========= ========= =========
A provision has not been made at December 31, 2000 for U.S. or additional
foreign withholding taxes on approximately $137.5 million of undistributed
earnings of foreign subsidiaries as those earnings are intended to be
permanently reinvested. Generally, such earnings become subject to U.S. tax
upon the remittance of dividends and under certain other circumstances. It is
not practicable to estimate the amount of deferred tax liability on such
undistributed earnings.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
In accordance with Statement of Financial Accounting Standards No. 107,
"Disclosures about Fair Value of Financial Instruments," the following
methods were used to estimate the fair value of each class of financial
instruments:
CASH AND CASH INVESTMENTS
The carrying amount reported in the balance sheet for cash and cash
investments approximates fair value.
ACCOUNTS RECEIVABLE, NOTES RECEIVABLE AND OTHER ASSETS
Fair values of financial instruments included in accounts receivable,
notes receivable and other assets were estimated using various methods
including quoted market prices and discounted future cash flows based on the
incremental borrowing rates for similar types of investments. In addition,
for variable-rate notes receivable that fluctuate with the prime rate, the
carrying amounts approximate fair value.
LONG-TERM DEBT
The carrying amount of bank debt and certain other long-term debt
instruments approximate fair value as the floating rates applicable to this
debt reflect changes in overall market interest rates. The fair values of the
Company's subordinated debt instruments are based on quoted market prices.
The fair values of certain other debt instruments are estimated by
discounting future cash flows based on the Company's incremental borrowing
rate for similar types of debt instruments.
DERIVATIVES
The Company has limited involvement with derivative financial instruments,
and does not use derivatives for trading purposes. The derivatives,
principally consisting of interest rate swap agreements, are intended to
reduce the market risk associated with the Company's floating rate debt.
44
METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Interest rate swap agreements covering a notional amount of $400 million
of the Company's floating rate debt were entered into in 1998 at an aggregate
interest rate of approximately six percent before the addition of the
borrowing margin in the underlying bank agreement. The fair value of the swap
agreements, $13 million at December 31, 1999, was not recognized in the
consolidated financial statements since they are accounted for as hedges of
the floating rate exposure. These swap agreements expired or were terminated
in June 2000 at a gain, and the Company received proceeds of approximately
$15.8 million. The cash proceeds were used for the reduction of long-term
debt. The Company recognized a pre-tax gain of approximately $13 million in
November 2000 related to the interest rate swap agreements as a result of the
repayment of the related debt due to the recapitalization.
The carrying amounts and fair values of the Company's financial
instruments at December 31, 2000 and 1999 are as follows:
(IN THOUSANDS)
2000 1999
-------------------------- --------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
------------ ------------ ------------ ------------
Cash and cash investments ...................... $ 26,320 $ 26,320 $ 4,490 $ 4,490
Accounts receivable, notes receivable and other
assets ........................................ $ 122,770 $ 122,640 $ 223,140 $ 223,520
Long-term debt:
Bank debt ..................................... $1,165,190 $1,165,190 $1,039,890 $1,039,890
4 1/2% Convertible Subordinated Debentures ... $ 305,000 $ 178,430 $ 305,000 $ 225,700
Other long-term debt .......................... $ 15,750 $ 15,660 $ 28,000 $ 27,850
INTERIM AND OTHER SUPPLEMENTAL FINANCIAL DATA (UNAUDITED):
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
FOR THE QUARTERS ENDED
---------------------------------------------------------------
DECEMBER SEPTEMBER JUNE MARCH
31ST 30TH 30TH 31ST
--------------- ------------- ------------- -------------
2000:
- ----
Net sales .................... $ 354,680 $ 393,770 $ 442,310 $ 459,400
Gross profit ................. $ 73,770 $ 95,410 $ 114,080 $ 119,400
Net income (loss) ............ $ (13,840) $ 17,860 $ 26,180 $ 25,820
Per common share:
Basic .................. $(.38) $ .44 $ .64 $ .63
Diluted ................ $(.38) $ .37 $ .51 $ .51
Market price per common share:
High ...................... $17 1/8(a) $16 5/8 $14 7/16 $14 9/16
Low ....................... $15 3/16(a) $10 1/2 $10 13/16 $11 3/8
1999:
- ----
Net sales .................... $ 395,220 $ 399,300 $ 436,510 $ 448,660
Gross profit ................. $ 103,980 $ 99,340 $ 113,690 $ 116,020
Net income ................... $ 22,260 $ 20,200 $ 26,110 $ 23,860
Per common share:
Basic .................. $ .54 $ .49 $ .64 $ .58
Diluted ................ $ .45 $ .41 $ .51 $ .47
Market price per common share:
High ...................... $17 1/16 $17 11/16 $17 3/4 $17
Low ....................... $10 5/8 $15 9/16 $15 1/8 $14
(a) As a result of the recapitalization on November 28, 2000, the
Company's stock no longer has a public market. Prices are based upon
public market transactions through November 28, 2000.
45
METALDYNE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONCLUDED)
In the fourth quarter 2000, the Company incurred approximately $48 million
of compensation expense related to severance costs and accelerated vesting of
stock awards and stock options related to the recapitalization of the
Company.
In the fourth quarter 2000, the Company recognized a net pre-tax gain of
approximately $28 million related to the sale of the Company's equity
investments, excluding Saturn.
In the fourth quarter 2000, the Company recognized a pre-tax gain of
approximately $13 million related to the interest rate swap agreements that
terminated in June 2000 due to the repayment of the related debt.
In the first quarter and second quarter of 1999, the Company recognized
non-cash charges aggregating approximately $6 million pre-tax to reflect the
other than temporary decline in value of equity affiliates of the Company.
In 1999, the Company completed the sale of its aftermarket-related and
vacuum metalizing businesses. These transactions resulted in a pre-tax gain
of approximately $26 million, of which approximately $10 million was
recognized in the first quarter 1999 and approximately $16 million in the
second quarter 1999.
In the second quarter 1999, the Company recorded a non-cash pre-tax charge
of approximately $17.5 million related to impairment of certain long-lived
assets, which included its hydroforming equipment and related intellectual
property.
In the fourth quarter 1999, the Company recognized pre-tax charges
aggregating approximately $12 million, principally related to the closure of
a plant and the sale of a business.
The 2000 income (loss) per common share amounts for the quarters do not
total to the full year amounts due to the purchase and retirement of shares
throughout the year.
46
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL
DISCLOSURE.
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information regarding executive officers required by this Item is set
forth as a Supplementary Item at the end of Part I hereof (pursuant to
Instruction 3 to Item 401(b) of Regulation S-K). Other information required
by this Item will be contained in the Company's definitive Proxy Statement
for its 2001 Annual Meeting of Stockholders, to be filed on or before April
29, 2001, and such information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
Information required by this Item will be contained in the Company's
definitive Proxy Statement for its 2001 Annual Meeting of Stockholders, to be
filed on or before April 29, 2001, and such information is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information required by this Item will be contained in the Company's
definitive Proxy Statement for its 2001 Annual Meeting of Stockholders, to be
filed on or before April 29, 2001, and such information is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information required by this Item will be contained in the Company's
definitive Proxy Statement for its 2001 Annual Meeting of Stockholders, to be
filed on or before April 29, 2001, and such information is incorporated
herein by reference.
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 1999,
and for the years ended December 31, 2000, 1999 and 1998, consist of
the following:
Consolidated Balance Sheet
Consolidated Statement of Income
Consolidated Statement of Cash Flows
Consolidated Statement of Shareholders' Equity
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules.
Financial Statement Schedules of the Company appended hereto, as required
for the years ended December 31, 2000, 1999 and1998, consists of the
following:
Condensed Financial Information of Parent Company Only
Valuation and Qualifying Accounts
47
(3) Exhibits.
EXHIBIT
NUMBER DESCRIPTION
- ----------- ---------------------------------------------------------------------------------------------
2.1 Recapitalization Agreement dated as of August 1, 2000 between MascoTech, Inc. (now known as
Metaldyne Corporation) and Riverside Company LLC, as amended.(7) Amendment No. 1 to the
Recapitalization Agreement, dated October 23, 2000(7) and Amendment No. 2 to the
Recapitalization Agreement, dated November 28, 2000.(7)
3.1 Restated Certificate of Incorporation of MascoTech, Inc.
3.2 Bylaws of Metaldyne Corporation, as amended.(7)
4.1 Indenture dated as of November 1, 1986 between Masco Industries, Inc. (now known as Metaldyne
Corporation) and Morgan Guaranty Trust Company of New York, as Trustee; Agreement of
Appointment and Acceptance of Successor Trustee dated as of August 4, 1994 among MascoTech,
Inc., (now known as Metaldyne Corporation) Morgan Guaranty Trust Company of New York and The
First National Bank of Chicago; Supplemental Indenture dated as of August 5, 1994, between
MascoTech, Inc. (now known as Metaldyne Corporation) and The First National Bank of Chicago,
as Trustee; Directors' resolutions establishing the Company's 4-1/2% Convertible Subordinated
Debentures Due 2003; (3) and Form of Note.(4)
4.2 Supplemental Indenture No. 2 dated November 28, 2000 to the Indenture dated as of November 1,
1986 between Masco Industries (now known as Metaldyne Corporation) and Morgan Guaranty Trust
Company of New York.(7)
4.3 Supplemental Indenture No. 3 dated November 28, 2000 to the Indenture dated as of November 1,
1986 between Masco Industries (now known as Metaldyne Corporation) and Morgan Guaranty Trust
Company of New York.(7)
4.4 Shareholders Agreement by and among MascoTech, Inc. (now known as Metaldyne Corporation),
Masco Corporation, Richard Manoogian, certain of their respective affiliates and other
co-investors a party thereto, dated as of November 28, 2000.(7)
10.1 Credit Agreement dated as of November 28, 2000 among MascoTech, Inc. (now known as Metaldyne
Corporation), Metalync Company LLC (now known as Metaldyne Company LLC), the subsidiary term
borrowers party thereto, the foreign subsidiary borrowers party thereto, the lenders party
thereto and Chase Manhattan Bank, as administrative agent.(7)
10.2 Subordinated Loan Agreement dated as of November 28, 2000 between MascoTech, Inc. (now known
as Metaldyne Corporation) and Masco Corporation.(7)
10.3 Assumption and Indemnification Agreement dated as of May 1, 1984 between Masco Corporation
and Masco Industries, Inc. (now known as Metaldyne Corporation).
10.4 Receivables Purchase Agreement dated as of November 28, 2000 among MascoTech, Inc. (now known
as Metaldyne Corporation) the Sellers named therein and MTSPC, Inc. as Purchaser.(7).
10.5 Receivables Transfer Agreement dated as of November 28, 2000 by and among MTSPC, Inc.,
MascoTech, Inc. (now known as Metaldyne Corporation), The Chase Manhattan Bank, and the other
parties named therein.(7).
10.6 Amendment No. 1 to Receivables Transfer Agreement dated as of December 15, 2000 to the
Receivables Transfer Agreement.
10.7 Master Lease Agreement dated as of December 21, 2000 between General Electric Capital
Corporation and Simpson Industries, Inc.
48
EXHIBIT
NUMBER DESCRIPTION
- ----------- ---------------------------------------------------------------------------------------------
10.8 Change of Control Agreement with William T. Anderson, dated September 21, 2000.(6)
10.9 Change of Control Agreement with David B. Liner, dated September 21, 2000.(6)
10.10 Change of Control Agreement with Leroy H. Runk, dated September 21, 2000.(6)
10.11 Change of Control Agreement with James F. Tompkins, dated September 21, 2000.(6)
10.12 Release and Consulting Agreement with Frank Hennessey, dated November 22, 2000.(6)
10.13 Employment, Release and Consulting Agreement with Lee M. Gardner, dated November 22, 2000.
10.14 Employment, Release and Consulting Agreement with Timothy Wadhams, dated November 22, 2000.
10.15 MascoTech, Inc. (now known as Metaldyne Corporation) 1991 Long Term Stock Incentive Plan
(Restated July 15, 1998)(3).
10.16 MascoTech, Inc. (now known as Metaldyne Corporation) Supplemental Executive Retirement and
Disability Plan (4).
10.17 Description of the MascoTech, Inc. (now known as Metaldyne Corporation) program for Estate,
Financial Planning and Tax Assistance(2).
10.18 Corporate Services Agreement and Annex dated as of January 1, 1987 between Masco Industries,
Inc. (now known as Metaldyne Corporation) and Masco Corporation, Amendment No. 1 dated as of
October 31, 1996 and related letter agreements dated January 22, 1998 and June 17,
1998.(4)Amendment No. 2 to the Corporate Services Agreement dated November 28, 2000.(7)
10.19 Corporate Opportunities Agreement dated as of May 1, 1984 between Masco Corporation and Masco
Industries, Inc. (now known as Metaldyne Corporation) and Amendment No. 1 dated as of October
31, 1996(1). Amendment No. 2 to the Corporate Opportunities Agreement dated November 28,
2000.(7)
10.20 Strategic Cooperation Agreement dated as of January 23, 2001 among Metalync Company LLC (now
known as Metaldyne Company LLC), Metaldyne Corporation and Global Metal Technologies, Inc.
12.1 Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends.
21.1 Subsidiaries of Metaldyne Corporation.
23.1 Consent of PricewaterhouseCoopers LLP.
- ------------
(1) Incorporated by reference to the Exhibits filed with MascoTech
,Inc.'s (now known as Metaldyne Corporation) Current Report on Form
8-K filed November 14, 1996.
(2) Incorporated by reference to the Exhibits filed with MascoTech,
Inc.'s (now known as Metaldyne Corporation) Annual Report on Form
10-K for the year ended December 31, 1997.
(3) Incorporated by reference to the Exhibits filed with MascoTech,
Inc.'s (now known as Metaldyne Corporation) Annual Report on Form
10-K for the year ended December 31, 1998.
(4) Incorporated by reference to the Exhibits filed with MascoTech,
Inc.'s (now known as Metaldyne Corporation) Annual Report on form
10-K for the year ended December 31, 1999.
(5) Incorporated by reference to the Exhibits filed with MascoTech,
Inc.'s (now known as Metaldyne Corporation) Current Report on Form
8-K filed August 7, 2000.
49
(6) Incorporated by reference to the Exhibits filed with MascoTech,
Inc.'s (now known as Metaldyne Corporation) Quarterly Report on Form
10-Q for the period ended September 30, 2000.
(7) Incorporated by reference to the Exhibits filed with MascoTech,
Inc.'s (now known as Metaldyne Corporation) Registration Statement on
Form S-1 filed December 27, 2000.
THE COMPANY WILL FURNISH ANY OF ITS STOCKHOLDERS A COPY OF ANY OF THE
ABOVE EXHIBITS NOT INCLUDED HEREIN UPON THE WRITTEN REQUEST OF SUCH
STOCKHOLDER AND THE PAYMENT TO THE COMPANY OF THE REASONABLE EXPENSES
INCURRED BY THE COMPANY IN FURNISHING SUCH COPY OR COPIES.
(b) REPORTS ON FORM 8-K.
(1) A Current Report on Form 8-K dated November 28, 2000 reporting under
Item 1, "Change of Control of Registrant," the merger of an affiliate of
Heartland Industrial Partners, L.P. with and into the Registrant.
(2) A Current Report on Form 8-K dated December 15, 2000 reporting under
Item 5, "Other Events," the merger of a subsidiary of the Company with
Simpson Industries, Inc.
(3) A Current Report on Form 8-K/A dated December 27, 2000 reporting under
Item 2, "Acquisition or Disposition of Assets," the acquisition of Simpson
Industries, Inc. by the Company and indicating under Item 7, "Financial
Statements and Exhibits," that the financial statements required by Item 7(a)
and the pro forma financial information required by Item 7(b) would be filed
by amendment to the Form 8-K/A no later than 60 days after December 15, 2000.
50
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 by the undersigned, thereunto duly authorized.
METALDYNE CORPORATION
By: /s/ Timothy Wadhams
-----------------------------------------
TIMOTHY WADHAMS
Executive Vice President--Finance and
Administration
(Chief Accounting Officer and authorized
signatory)
March 30, 2001
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 date indicated.
SIGNATURE TITLE DATE
- ---------------------------- ----------------------------------------- ------------------
/s/ Timothy D. Leuliette Chief Executive Officer and Director March 30, 2001
- ----------------------------- (Principal Executive Officer)
Timothy D. Leuliette
/s/ Timothy Wadhams Executive Vice President--Finance and March 30, 2001
- ----------------------------- Administration (Chief Accounting
Timothy Wadhams Officer)
/s/ J. Michael Losh Chairman of the Board of Directors March 30, 2001
- -----------------------------
J. Michael Losh
/s/ Gary M. Banks Director March 30, 2001
- -----------------------------
Gary M. Banks
/s/ Marshall A. Cohen Director March 30, 2001
- -----------------------------
Marshal A. Cohen
/s/ Lee M. Gardner Director March 30, 2001
- -----------------------------
Lee M. Gardner
/s/ Cynthia L Hess Director March 30, 2001
- -----------------------------
Cynthia L. Hess
/s/ Perry J. Lewis Director March 30, 2001
- -----------------------------
Perry J. Lewis
/s/ Richard A. Manoogian Director March 30, 2001
- -----------------------------
Richard A. Manoogian
51
SIGNATURE TITLE DATE
- ---------------------------- ----------------------------------------- ------------------
/s/ David I. Margolis Director March 30, 2001
- -----------------------------
David I. Margolis
/s/ Thomas Stallkamp Director March 30, 2001
- -----------------------------
Thomas Stallkamp
/s/ David A. Stockman Director March 30, 2001
- -----------------------------
David A. Stockman
/s/ Daniel P. Tredwell Director March 30, 2001
- -----------------------------
Daniel P. Tredwell
/s/ Samuel Valenti, III Director March 30, 2001
- -----------------------------
Samuel Valenti, III
52
METALDYNE CORPORATION
FINANCIAL STATEMENT SCHEDULES
PURSUANT TO ITEM 14(a)(2) OF FORM 10-K
ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
FOR THE YEAR ENDED DECEMBER 31, 2000
Schedules, as required for the years ended December 31, 2000, 1999 and 1998
PAGE
--------
I.Condensed Financial Information of Parent Company only .... F-2
II.Valuation and Qualifying Accounts......................... F-3
F-1
METALDYNE CORPORATION
SCHEDULE I. CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY ONLY
CONDENSED BALANCE SHEET
DECEMBER 31, 2000
(DOLLARS IN THOUSANDS)
Assets
Equity and other investments in Saturn Electronics & Engineering, Inc $ 27,760
Equity and other investments in Metaldyne Company, LLC................ 268,180
----------
$295,940
==========
Liabilities and Shareholders' Equity*
Total redeemable stock................................................ $ 42,970
Shareholders' Equity.................................................. 252,970
----------
$295,940
==========
- ------------
* Excludes $305 million of 4-1/2% debentures due in 2003, assumed by
Metaldyne Company, LLC, although the Company remains responsible.
CONDENSED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 2000
(DOLLARS IN THOUSANDS)
Equity and other income from affiliates .............................. $ 9,810
Gain from disposition of investments in equity affiliates ........... 27,520
Equity in undistributed income from Metaldyne Company, LLC ........... 18,690
----------
Net income .......................................................... 56,020
Redeemable preferred stock dividends ................................. 390
----------
Earnings attributable to common stock................................ $55,630
==========
CONDENSED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 2000
(DOLLARS IN THOUSANDS)
Operating activities:
Net income............................................................ $ 56,020
(Gains) from disposition of investments in equity affiliates ......... (27,520)
Equity earnings, net of dividends..................................... (5,590)
Less undistributed income of subsidiaries and partially owned
affiliates........................................................... (18,690)
----------
Net cash provided by operating activities ........................... 4,220
----------
Financing activities:
Payment of dividends................................................. (10,740)
Retirement of Company Common Stock................................... (626,850)
Issuance of Company Common Stock..................................... 561,220
----------
Net cash used by financing activities............................... (76,370)
----------
Investing Activities:
Investment in Metaldyne Company, LLC................................. (51,770)
Proceeds from sale of equity investments............................. 123,920
----------
Net cash provided by investing activities............................ $ 72,150
==========
Cash and cash increase (decrease) for the year........................ --
At January 1.......................................................... --
----------
At December 31....................................................... $ --
==========
F-2
METALDYNE CORPORATION
SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ------------------------ ------------ ---------------------------- ------------ ---------------
ADDITIONS
----------------------------
CHARGED
BALANCE AT CHARGED (CREDITED)
BEGINNING TO COSTS TO OTHER BALANCE AT
DESCRIPTION OF PERIOD AND EXPENSES ACCOUNTS DEDUCTIONS END OF PERIOD
- ------------------------ ------------ -------------- ------------ ------------ ---------------
(A) (B)
Allowance for doubtful
accounts, deducted
from accounts
receivable
in the balance sheet:
2000 ................... $4,290,000 $2,440,000 $ 10,000 $1,320,000 $5,420,000
============ ============== ============ ============ ===============
1999 ................... $3,410,000 $1,080,000 $ 20,000 $ 220,000 $4,290,000
============ ============== ============ ============ ===============
1998 ................... $1,180,000 $ 750,000 $2,590,000 $1,110,000 $3,410,000
============ ============== ============ ============ ===============
NOTES:
(A) Allowance of companies acquired, and other adjustments, net.
(B) Deductions, representing uncollectible accounts written off, less
recoveries of accounts written off in prior years.
F-3
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ----------- ----------------------------------------------------------------------------------------
2.1 Recapitalization Agreement dated as of August 1, 2000 between MascoTech, Inc. (now known
as Metaldyne Corporation) and Riverside Company LLC, as amended.(7) Amendment No. 1 to
the Recapitalization Agreement, dated October 23, 2000 (7) and Amendment No. 2 to the
Recapitalization Agreement, dated November 28, 2000.(7)
3.1 Restated Certificate of Incorporation of MascoTech, Inc.
3.2 Bylaws of Metaldyne Corporation, as amended.(7)
4.1 Indenture dated as of November 1, 1986 between Masco Industries, Inc. (now known as
Metaldyne Corporation) and Morgan Guaranty Trust Company of New York, as Trustee;
Agreement of Appointment and Acceptance of Successor Trustee dated as of August 4, 1994
among MascoTech, Inc., (now known as Metaldyne Corporation) Morgan Guaranty Trust
Company of New York and The First National Bank of Chicago; Supplemental Indenture dated
as of August 5, 1994, between MascoTech, Inc. (now known as Metaldyne Corporation) and
The First National Bank of Chicago, as Trustee; Directors' resolutions establishing the
Company's 4-1/2% Convertible Subordinated Debentures Due 2003; (3) and Form of Note.(4)
4.2 Supplemental Indenture No. 2 dated November 28, 2000 to the Indenture dated as of
November 1, 1986 between Masco Industries (now known as Metaldyne Corporation) and
Morgan Guaranty Trust Company of New York.(7)
4.3 Supplemental Indenture No. 3 dated November 28, 2000 to the Indenture dated as of
November 1, 1986 between Masco Industries (now known as Metaldyne Corporation) and
Morgan Guaranty Trust Company of New York.(7)
4.4 Shareholders Agreement by and among MascoTech, Inc. (now known as Metaldyne
Corporation), Masco Corporation, Richard Manoogian, certain of their respective
affiliates and other co-investors a party thereto, dated as of November 28, 2000.(7)
10.1 Credit Agreement dated as of November 28, 2000 among MascoTech, Inc. (now known as
Metaldyne Corporation), Metalync Company LLC (now known as Metaldyne Company LLC), the
subsidiary term borrowers party thereto, the foreign subsidiary borrowers party thereto,
the lenders party thereto and Chase Manhattan Bank, as administrative agent.(7)
10.2 Subordinated Loan Agreement dated as of November 28, 2000 between MascoTech, Inc. (now
known as Metaldyne Corporation) and Masco Corporation.(7)
10.3 Assumption and Indemnification Agreement dated as of May 1, 1984 between Masco
Corporation and Masco Industries, Inc. (now known as Metaldyne Corporation).
10.4 Receivables Purchase Agreement dated as of November 28, 2000 among MascoTech, Inc. (now
known as Metaldyne Corporation) the Sellers named therein and MTSPC, Inc. as
Purchaser.(7)
10.5 Receivables Transfer Agreement dated as of November 28, 2000 by and among MTSPC, Inc.,
MascoTech, Inc. (now known as Metaldyne Corporation), The Chase Manhattan Bank, and the
other parties named therein.(7)
10.6 Amendment No. 1 to Receivables Transfer Agreement dated as of December 15, 2000 to the
Receivables Transfer Agreement.
10.7 Master Lease Agreement dated as of December 21, 2000 between General Electric Capital
Corporation and Simpson Industries, Inc.
10.8 Change of Control Agreement with William T. Anderson, dated September 21, 2000.(6)
10.9 Change of Control Agreement with David B. Liner, dated September 21, 2000.(6)
10.10 Change of Control Agreement with Leroy H. Runk, dated September 21, 2000.(6)
EXHIBIT
NUMBER DESCRIPTION
- ----------- ----------------------------------------------------------------------------------------
10.11 Change of Control Agreement with James F. Tompkins, dated September 21, 2000.(6)
10.12 Release and Consulting Agreement with Frank Hennessey, dated November 22, 2000.
10.13 Employment, Release and Consulting Agreement with Lee M. Gardner, dated November 22,
2000.
10.14 Employment, Release and Consulting Agreement with Timothy Wadhams, dated November 22,
2000.
10.15 MascoTech, Inc. (now known as Metaldyne Corporation) 1991 Long Term Stock Incentive Plan
(Restated July 15, 1998)(3)
10.16 MascoTech, Inc. (now known as Metaldyne Corporation) Supplemental Executive Retirement
and Disability Plan (4)
10.17 Description of the MascoTech, Inc. (now known as Metaldyne Corporation) program for
Estate, Financial Planning and Tax Assistance(2)
10.18 Corporate Services Agreement and Annex dated as of January 1, 1987 between Masco
Industries, Inc. (now known as Metaldyne Corporation) and Masco Corporation, Amendment
No. 1 dated as of October 31, 1996 and related letter agreements dated January 22, 1998
and June 17, 1998.(4)Amendment No. 2 to the Corporate Services Agreement dated November
28, 2000.(7)
10.19 Corporate Opportunities Agreement dated as of May 1, 1984 between Masco Corporation and
Masco Industries, Inc. (now known as Metaldyne Corporation) and Amendment No. 1 dated
as of October 31, 1996(1). Amendment No. 2 to the Corporate Opportunities Agreement
dated November 28, 2000.(7)
10.20 Strategic Cooperation Agreement dated as of January 23, 2001 among Metalync Company LLC
(now known as Metaldyne Company LLC), Metaldyne Corporation and Global Metal
Technologies, Inc.
12.1 Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock
Dividends.
21.1 Subsidiaries of Metaldyne Corporation.
23.1 Consent of PricewaterhouseCoopers LLP.
- ------------
(1) Incorporated by reference to the Exhibits filed with MascoTech ,Inc.'s
(now known as Metaldyne Corporation) Current Report on Form 8-K filed
November 14, 1996.
(2) Incorporated by reference to the Exhibits filed with MascoTech, Inc.'s
(now known as Metaldyne Corporation) Annual Report on Form 10-K for the
year ended December 31, 1997.
(3) Incorporated by reference to the Exhibits filed with MascoTech, Inc.'s
(now known as Metaldyne Corporation) Annual Report on Form 10-K for the
year ended December 31, 1998.
(4) Incorporated by reference to the Exhibits filed with MascoTech, Inc.'s
(now known as Metaldyne Corporation) Annual Report on form 10-K for the
year ended December 31, 1999.
(5) Incorporated by reference to the Exhibits filed with MascoTech, Inc.'s
(now known as Metaldyne Corporation) Current Report on Form 8-K filed
August 7, 2000.
(6) Incorporated by reference to the Exhibits filed with MascoTech, Inc.'s
(now known as Metaldyne Corporation) Quarterly Report on Form 10-Q for
the period ended September 30, 2000.
(7) Incorporated by reference to the Exhibits filed with MascoTech, Inc.'s
(now known as Metaldyne Corporation) Registration Statement on Form S-1
filed December 27, 2000.