<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the quarterly period ended March 31, 1999.
OR
__TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _____________ to _________________
Commission File No. 333-11801-01 Trianon Industries Corp.
Commission File No. 333-11801 (Aetna Industries, Inc.)
TRIANON INDUSTRIES CORP.
(FORMERLY KNOWN AS MS ACQUISITION CORP.)
AETNA INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-337-9803/38-200-7550
- -----------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
(Address of principal executive offices) (Zip Code)
1, rue Thomas Edison, Quartier des Chenes
78056 St. Quentin en Yvelines, France
24331 Sherwood Avenue, P.O. Box 3067, Centerline, Michigan 48015-0067
Registrant's telephone number, including area code (33-1) 39-412000
(810) 759-2200
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
- -
As of May 14, 1999, there were 1,000 shares of Aetna Industries, Inc. common
stock outstanding and 3,902,498 shares of Trianon Industries Corp. common stock
outstanding.
1
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION PAGE
<S> <C> <C>
Item 1. FINANCIAL STATEMENTS OF TRIANON INDUSTRIES CORP.
Condensed Consolidated Balance Sheets -
March 31, 1999 and December 31, 1998 3
Consolidated Statements of Operations and
Comprehensive Income - three months ended March 31,
1999 and March 31, 1998 4
Condensed Consolidated Statements of Cash Flows -
three months ended March 31, 1999
and March 31, 1998 5
Notes to Consolidated Financial Statements 6
FINANCIAL STATEMENTS OF AETNA INDUSTRIES, INC.
Condensed Consolidated Balance Sheets -
April 2, 1999 and December 31, 1998 11
Consolidated Statements of Operations and
Comprehensive Income (Loss) - three months ended
April 2, 1999 and March 29, 1998 12
Condensed Consolidated Statements of Cash Flows -
three months ended April 2, 1999
and March 29, 1998 13
Notes to Consolidated Financial Statements 14
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 16
Item 3. Qualitative and Quantitative Disclosure About
Market Risk 23
Item 4. Submission of Matters to a Vote of Security Holders. 24
PART II OTHER INFORMATION 30
Description of Exhibits 31
Signatures 32
EXHIBIT INDEX
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TRIANON INDUSTRIES CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, 1999 DECEMBER 31, 1998
-------------- -----------------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and marketable securities $18,958 $26,092
Accounts receivable (less allowance for doubtful
accounts of $1,721 and $1,921 respectively) 174,126 181,375
Inventories 114,709 115,287
Other current assets 10,316 9,801
-------------- ------------
Total current assets 318,109 332,555
-------------- ------------
Property, plant and equipment, net 193,426 203,271
Deferred costs and other assets 24,720 22,969
Goodwill 64,454 65,367
-------------- ------------
TOTAL ASSETS $600,709 $624,162
============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $188,555 $173,517
Accrued expenses 48,639 82,250
Current portion of long term and short term debt (145,441) 157,004
-------------- ------------
Total current liabilities 377,433 412,771
-------------- ------------
Long-term debt, less current portion 182,125 167,477
Deferred income taxes and other long-term liabilities 18,717 19,370
Redeemable preferred stock 42,302 41,157
Series A - $100 stated value; 293,123 shares authorized;
142,424 shares issued and outstanding
Series B - $100 stated value; 270,000 shares authorized;
270,000 shares issued and outstanding
Stockholders' Equity (Deficit)
Class A, common stock - $.01 par value, 12,000,000
shares authorized, 3,902,498 shares issued and outstanding 39 39
Contributed paid-in capital 40,708 40,708
Retained earnings (accumulated deficit) (54,795) (54,910)
Accumulated other comprehensive income (loss) (5,820) (2,450)
-------------- ------------
TOTAL LIABILITIES, PREFERRED STOCK AND
SHAREHOLDER'S EQUITY (DEFICIT) $600,709 $624,162
============== ============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
TRIANON INDUSTRIES CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
MARCH 31, MARCH 31,
1999 1998
---- ----
(UNAUDITED)
<S> <C> <C>
Net sales $218,157 $136,873
Cost of sales 191,932 120,735
------------ -----------
Gross profit 26,225 16,138
Selling, general and administrative expenses and
research and development expenses 14,673 9,833
------------ -----------
Operating income (loss) 11,552 6,305
Interest expense, net 7,268 2,170
------------ -----------
Income (loss) before income taxes 4,284 4,135
Income tax provision (credit) 2,251 1,185
------------ -----------
Income (loss) before discontinued operations 2,033 2,950
Losses on discontinued operations, net of tax 772 0
------------ -----------
Net income (loss) before
preferred stock dividends 1,261 2,950
Preferred stock dividends 1,146 0
------------ -----------
Net income available for common stockholders $115 $2,950
============ ===========
Other comprehensive income (loss):
Foreign currency translation adjustment (3,370) 6,165
------------ -----------
Comprehensive income (loss) $ (3,255) $ 9,115
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE> 5
TRIANON INDUSTRIES CORP.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED
MARCH 31, MARCH 31,
1999 1998
---- ----
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 1,261 $ 2,950
Adjustments to reconcile net income to net cash
used for operating activities:
Depreciation and amortization 8,879 5,154
Deferred income taxes 411
Other non cash charges 100 753
Changes in other assets and liabilities (8,565) 3,493
----------- ------------
Net cash provided by (used for) operating activities 1,675 12,761
----------- ------------
Cash flows from investing activities
Additions to property, plant and equipment (7,485) (5,895)
Increase in other assets (2) (5)
----------- ------------
Net cash provided by (used for) investing activities (7,487) (5,900)
----------- ------------
Cash flows from financing activities
Net decrease in borrowings under line of credit (1,298) (1,138)
Repayment of long term debt (9,825) (3,608)
Borrowings of long term debt 11,776 --
----------- ------------
Net cash provided by (used for) financing activities 653 (4,746)
----------- ------------
Exchange Rate Variation (1,975) (548)
Net increase (decrease) in cash (7,134) 1,567
Cash - beginning of year 26,092 11,626
----------- ------------
Cash - end of period $18,958 $ 13,193
=========== ============
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE> 6
TRIANON INDUSTRIES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Effective May 12, 1999, MS Acquisition Corp changed its name to Trianon
Industries Corp.
Trianon Industries Corp. ("the Company") is the name of the group formed by
the combination of the activities of SOFEDIT S.A. and Trianon Industries
Corp.
Trianon Industries Corp. ("Trianon Industries"), through Aetna Industries
Inc. ("Aetna"), its wholly-owned subsidiary, is a leading direct supplier
of high quality modules, welded subassemblies and chassis parts used as
original equipment components in the North American automobile industry.
SOFEDIT S.A., ("Sofedit") a direct and indirect wholly-owned subsidiary of
the Company, is a leading direct supplier of welded subassemblies, body in
white parts, clutch, brake and accelerator pedal modules, fuel tanks and
crossmembers and chassis parts used as original equipment components by
manufacturers in the European automobile industry.
Trianon Industries and its direct and indirect wholly-owned United States
subsidiaries (i.e., Aetna Holdings, Inc., a Delaware corporation ("Aetna
Holdings"), Aetna Manufacturing Canada Ltd., a Michigan corporation ("Aetna
Canada"), and Aetna Export Sales Corp., a U.S. Virgin Islands corporation
("Export")) have fully and unconditionally guaranteed the 11 7/8% Senior
Notes due 2006 issued by Aetna in an aggregate principal amount of $85.0
million (the "Senior Notes"). Separate financial statements or other
disclosures relative to Aetna Holdings, Export or Aetna Canada have not
been presented as management has determined that such information is not
material to investors.
On April 14, 1998, Trianon Industries completed a combination with Societe
Financiere de Developpement Industriel et Technologique S.A., a French
societe anonyme (Sofedit) (the Combination). In connection with the
Combination, Sofedit's former stockholders transferred the outstanding
capital stock of Sofedit to Trianon Industries in exchange for: (i)
promissory notes of Trianon Industries in the principal amount of $40.9
million; (ii) dividends in an amount of approximately $1.0 million; (iii)
270,000 shares of Series B Preferred stock ($27.0 million stated value) of
Trianon Industries; (iv) 3.0 million shares of Common Stock of Trianon
Industries, and (v) the assumption of approximately $12.0 million of debt
of such former stockholders. The Combination has been accounted for as a
reverse acquisition because the former owners of Sofedit own approximately
75% of the fully diluted outstanding Common Stock of Trianon Industries as
a result of the Combination. For accounting purposes, Sofedit is considered
to be the acquirer of, and the predecessor to, Trianon Industries.
As a result of the Combination being accounted for as a reverse
acquisition, the financial statements included herein for the three month
period ended March 31,1998 represent the historical information of Sofedit,
as predecessor. The consolidated balance sheet at March 31, 1999 represents
the consolidated financial position of Sofedit and Trianon Industries.
The accompanying unaudited condensed consolidated financial statements of
Trianon Industries have been prepared in accordance with Rule 10-01 of
Regulation S-X and do not include all the information and notes required by
generally accepted accounting principles for complete financial statements.
All adjustments, which include only normal recurring adjustments that are,
in the opinion of management, necessary for a fair presentation of the
results of the interim periods, have been made. The results of operations
for such interim periods are not necessarily indicative of results of
operations for a full year. The unaudited condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto for the year ended December 31, 1998.
The statements of operations and cash flows for the three months ended
March 31, 1999 represent the three month financial data of Sofedit plus
Trianon Industries. On a pro forma basis, Trianon Industries had net sales
of $189.9 million, and pre-tax income of $3.6 million, for the three
months ended March 31, 1998.
6
<PAGE> 7
TRIANON INDUSTRIES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
2. INVENTORIES
Inventories are comprised of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
---- ----
<S> <C> <C>
Raw materials $ 23,923 $ 27,131
Work-in-process 22,542 31,976
Finished goods 15,980 18,839
Tooling 55,691 40,724
------------ ---------------
Inventories, gross 118,136 118,670
Less valuation allowance (3,427) (3,383)
------------ ---------------
Total inventories $114,709 $115,287
------------ ---------------
</TABLE>
Tooling inventory at Sofedit is included in work in process at December 31, 1998
and has been included in tooling at March 31, 1999
3. STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL RETAINED OTHER TOTAL
CONTRIBUTED PAID IN EARNINGS COMPREHENSIVE STOCKHOLDER'S
CAPITAL CAPITAL (DEFICIT) ADJUSTMENT EQUITY (DEFICIT)
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1998 $39 $40,708 ($54,910) ($2,450) ($16,613)
Translation adjustment (3,370) (3,370)
Preferred Stock dividends (1,146) (1,146)
Net income (loss) 1,261 1,261
------------- -------------- ------------ ------------------- -----------------
Balance at March 31, 1999 $39 $40,708 $(54,795) ($5,820) $(19,868)
------------- -------------- ------------ ------------------- -----------------
</TABLE>
7
<PAGE> 8
TRIANON INDUSTRIES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
4. COMBINING FINANCIAL INFORMATION OF TRIANON INDUSTRIES
CORP BALANCE SHEET AS OF MARCH 31, 1999
<TABLE>
<CAPTION>
AETNA TRIANON
AETNA HOLDINGS INDUSTRIES SOFEDIT ELIMINATIONS TOTAL
<S> <C> <C> <C> <C> <C> <C>
Total current assets $ 82,720 $ - $ 5,789 $ 254,207 $ (24,607) $ 318,109
Property, plant and
equipment, net 70,744 6,552 116,130 193,426
Other long-term assets 32,372 8,247 131,745 21,781 (104,971) 89,174
-------- --------- --------- ---------- ---------- ---------
Total assets $185,836 $ 8,247 $ 144,086 $ 392,118 $ (129,578) $ 600,709
======== ========= ========= ========= ========== =========
Total current liabilities 104,859 (201) 46,114 235,100 (8,439) 377,433
Long-term debt 88,125 17,032 79,922 (12,031) 173,048
Junior subordinated notes 9,077 9,077
Deferred income taxes and
other long-term liabilities 5,496 3,478 9,743 18,717
Redeemable preferred stock 42,302 42,302
Class A, common stock -
$.01 par value,
12,000,000 shares
authorized, 3,902,498
outstanding 39 1,274 (1,274) 39
Additional paid-in capital 14,024 32,151 23,969 (29,436) 40,708
Retained earnings
(accumulated deficit) (26,494) (629) 2,970 47,740 (78,382) (54,795)
Cumulative translation -
adjustment (174) (5,630) (16) (5,820)
-------- --------- --------- --------- ---------- ---------
Total stockholders equity
(deficit) $(12,644) $ (629) $ 35,121 $ 67,079 $ (107,834) $ (19,907)
======== ========= ========= ========== ========== =========
Total liabilities and
shareholders equity
(deficit) $ 185,836 $ 8,247 $ 144,086 $ 392,118 $ (129,578) $ 600,709
========= ========= ========= ========= ========== =========
</TABLE>
8
<PAGE> 9
TRIANON INDUSTRIES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
4. COMBINING FINANCIAL INFORMATION OF TRIANON INDUSTRIES CORP. (CONTINUED)
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31,1999
<TABLE>
<CAPTION>
AETNA TRIANON
AETNA HOLDINGS INDUSTRIES SOFEDIT TOTAL
<S> <C> <C> <C> <C> <C>
Net sales $66,820 $ -- $ -- $151,337 $218,157
Cost of sales 58,704 182 133,046 191,932
------- ------- -------- -------- --------
Gross profit 8,116 -- (182) 18,291 26,225
Selling, general and administrative
expenses 4,560 204 9,499 14,263
Other expenses 411 -- -- (1) 410
------- ------- -------- -------- --------
Operating income (loss) 3,145 -- (386) 8,793 11,552
Net interest expense 3,815 245 837 2,371 7,268
------- ------- -------- -------- --------
Income (loss) before income taxes (670) (245) (1,223) 6,422 4,284
Income tax provision (credit) (126) (83) (415) 2,875 2,251
Income (loss) before discontinued
operations and preferred stock
dividend (544) (162) (808) 3,547 2,033
Discontinued Operations 772 772
Preferred stock dividend -- -- 1,146 -- 1,146
------- ------- -------- -------- --------
Net income available to common
stockholders $ (544) $ (162) $ (1,954) $ 2,775 $ 115
------- ------- -------- -------- --------
Other comprehensive income (loss):
Foreign currency translation
adjustment (174) -- -- (3,196) (3,370)
------- ------- -------- -------- --------
Comprehensive income (loss) ($718) ($162) ($1,954) $ (421) $ (3,255)
======= ======= ======== ======== ========
</TABLE>
9
<PAGE> 10
TRIANON INDUSTRIES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
4. COMBINING FINANCIAL INFORMATION OF TRIANON INDUSTRIES (CONTINUED)
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31,1999
<TABLE>
<CAPTION>
AETNA TRIANON
AETNA HOLDINGS INDUSTRIES SOFEDIT ELIM TOTAL
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by
operating activities $ 6,577 $(432) $ - $(4,470) - $ 1,675
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash used for investing activities (704) - (5,000) (6,783) 5,000 (7,487)
CASH FLOWS FROM FINANCING ACTIVITIES
Net cash provided by financing (7,100) 432 5,000 7,321 (5,000) 653
Net effect of exchange rate 70 (2,045) - (1,975)
Net increase in cash (1,157) - - (5,977) - (7,134)
Cash - beginning of year 1,185 - - 24,907 - 26,092
Cash - end of period $ 28 $ - $ - $18,930 $ - $18,958
</TABLE>
5. SEGMENT INFORMATION
The Company operates in one line of business, the design and manufacture of
highly engineered metal-formed components, complex modules and mechanical
assemblies for automotive OEM's in Europe and North America.
The Company manages the business under two segments, Europe and North America.
The accounting policy of the reportable segments are the same as those described
in the summary of significant accounting policies in the Company's annual report
on form 10-K. The Company evaluates performance based on earnings before
interest, income taxes, net income of equity investees, minority interests and
discontinued operations (EBIT).
<TABLE>
<CAPTION>
MARCH 31, 1999 MARCH 31, 1998 DECEMBER 1998
-------------- -------------- -------------
OPERATING NORTH NORTH NORTH
SEGMENTS EUROPE AMERICA TOTAL EUROPE AMERICA TOTAL EUROPE AMERICA TOTAL
- --------- ------ ------- ----- ------ -------- ----- ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues 151,337 $ 66,820 $218,157 $136,873 $ - $136,673 $542,037 $168,809 $710,848
EBIT 8,793 2,759 11,552 6,305 - 6,305 19,255 7,569 26,824
Depreciation
and amortization 6,087 2,792 8,879 $ 5,154 - $ 5,154 23,405 8,438 31,843
Total assets $392,118 $208,591 $600,709 $355,602 - $355,602 $408,915 $215,249 $624,164
</TABLE>
6. COMMON STOCK AND PREFERRED STOCK
As of May 12, 1999 the capital structure of authorized shares of common stock
and preferred stock as amended in the Certificate of Amendment of Restated
Certification of Incorporation of Trianon Industries Corp are as follows:
Common Stock Shares: 20,000,000
Preferred Stock Shares:
SERIES A - 405,000
SERIES B - 270,000
New Preferred - 2,000,000
Any dividends accruing on shares of Series A preferred Stock may be paid, in
lieu of cash dividends, by the issuance of additional shares of Series A
Preferred Stock (including fractional shares) having an aggregate Stated Value
at the time of such payment equal to the amount of the dividend to be paid.
With respect to the Preferred Stock dividends, such dividends shall be payable
semi-annually on the 13th day of February and August of each year, commencing on
the date of issuance of such shares with respect to the Series A Preferred Stock
and April 14, 1999 with respect to the Series B Preferred Stock (each such date
hereinafter referred to as "Dividend Period"), except that if such date is not a
Business Day, then such dividend shall be payable to the next succeeding
Business Day, to the holders of record as they appear on the register of the
Corporation for the Shares.
10
<PAGE> 11
AETNA INDUSTRIES, INC.
(A WHOLLY-OWNED SUBSIDIARY OF
TRIANON INDUSTRIES CORP.)
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
APRIL 2, DECEMBER 31,
1999 1998
---- ----
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $28 $1,185
Accounts receivable (less allowance for doubtful
accounts of $424 and $411, respectively) 40,953 38,793
Inventories 47,444 47,764
Other current assets 3,310 3,390
--------------- ------------------
Total current assets 91,735 91,132
--------------- ------------------
Property, plant and equipment, net 70,744 71,922
Deferred costs and other assets 5,393 5,717
Goodwill 23,971 24,172
--------------- ------------------
Total Assets $191,843 $192,943
=============== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $50,971 $48,874
Accrued expenses 9,267 10,896
Current portion of long term and short term debt 44,620 56,720
--------------- ------------------
Total current liabilities 104,858 116,490
--------------- ------------------
Long-term debt, less current portion 94,131 88,125
Deferred income taxes 5,498 5,498
Stockholder's equity (deficit)
Common stock - $.01 par value; 1,000 shares
issued and outstanding - -
Contributed capital 14,024 9,024
Accumulated deficit (26,494) (25,950)
Accumulated other comprehensive income (174) (244)
--------------- ------------------
Total shareholder equity (12,644) (17,170)
--------------- ------------------
Total liabilities and shareholder equity (deficit) $191,843 $192,943
=============== ==================
</TABLE>
See accompanying notes to consolidated financial statements.
11
<PAGE> 12
AETNA INDUSTRIES, INC.
(A WHOLLY-OWNED SUBSIDIARY OF
TRIANON INDUSTRIES CORP.)
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
APRIL 2, MARCH 29,
1999 1998
---- ----
(UNAUDITED)
<S> <C> <C>
Net Sales $66,820 $53,085
Cost of Sales 58,704 44,974
------- -------
Gross Profit (loss) 8,116 8,111
Selling, general and administrative expenses 4,971 4,486
------- -------
Operating income (loss) 3,145 3,625
Interest expense, net 3,815 2,866
------- -------
Income (loss) before income taxes (670) 759
Income tax provision (credit) (126) 235
------- -------
Net income (loss) $ (544) $ 524
======= =======
Other Comprehensive income (loss):
Foreign currency translation adjustment (70) --
------- -------
Comprehensive income (loss) $ (474) $ 524
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
12
<PAGE> 13
AETNA INDUSTRIES, INC.
(A WHOLLY-OWNED SUBSIDIARY OF
TRIANON INDUSTRIES CORP.)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
APRIL 2, MARCH 29,
1999 1998
---- ----
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) (544) 524
Adjustments to reconcile net income to net cash
used for operating activities:
Depreciation and amortization 2,406 1,941
Deferred income taxes - -
Changes in other assets and liabilities 4,715 (4,285)
-------------- --------------
Net cash used for operating activities 6,577 (1,820)
Cash flows from investing activities
Increase in other assets (704) (3,214)
-------------- --------------
Net cash used for investing activities (704) (3,214)
Cash flows from financing activities -
-
Net (decrease) increase in borrowings under line
of credit (12,100) 5,275
Capital Contribution 5,000
-------------- --------------
Net cash provided by financing activities (7,100) 5,275
-------------- --------------
Exchange Rate Variation 70 -
Net increase (decrease) in cash (1,157) 241
Cash - beginning of year 1,185 23
-------------- --------------
Cash - end of period $ 28 $ 264
============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
13
<PAGE> 14
AETNA INDUSTRIES, INC.
(A WHOLLY-OWNED SUBSIDIARY OF
TRIANON INDUSTRIES CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
1. BASIS OF PRESENTATION
Aetna Industries, Inc. ("Aetna") is a wholly-owned indirect subsidiary of
Trianon Industries Corp. ("Trianon Industries") and is a wholly-owned
direct subsidiary of Aetna Holdings, Inc. ("Aetna Holdings") and has two
wholly-owned subsidiaries Aetna Export Sales Corp. ("Export") and Aetna
Manufacturing Canada Ltd ("Aetna Canada"). Trianon Industries is a holding
company that was formed for the sole purpose of purchasing Aetna and does
not have any significant operations, other than its investments in its
subsidiaries assets or liabilities, preferred stock and junior
subordinated debentures.
Trianon Industries, Holdings, Export and Canada have fully and
unconditionally guaranteed the 11 7/8% Senior Notes due 2006 issued by
Aetna in an aggregate principal amount of $85,000,000 (the "Senior Notes").
Separate financial statements or other disclosures relative to Aetna
Holdings, Export or Aetna Canada have not been presented as management has
determined that such information is not material to investors.
On April 14, 1998, Aetna's parent, Trianon Industries Corp. (Trianon
Industries) completed a combination with Societe Financiere de
Developpement Industriel et Technologique S.A., a French societe anonyme
(Sofedit) (the Combination). In connection with the Combination, Sofedit's
former stockholders transferred the outstanding capital stock of Sofedit to
Trianon Industries in exchange for: (i) promissory notes of Trianon
Industries in the principal amount of $40.9 million; (ii) dividends in an
amount of approximately $1.0 million; (iii) 270,000 shares of Series B
Preferred stock ($27.0 million stated value) of Trianon Industries; (iv)
3.0 million shares of Common Stock of Trianon Industries, and (v) the
assumption of approximately $12.0 million of debt of such former
stockholders. The Combination has been accounted for as a reverse
acquisition because the former owners of Sofedit own approximately 75% of
the fully diluted outstanding Common Stock of Trianon Industries as a
result of the Combination. For accounting purposes, Sofedit is considered
to be the acquirer of, and the predecessor to, Trianon Industries.
The accompanying unaudited condensed consolidated financial statements of
Aetna have been prepared in accordance with Rule 10-01 of Regulation S-X
and do not include all the information and notes required by generally
accepted accounting principles for complete financial statements. All
adjustments, which include only normal recurring adjustments that are, in
the opinion of management, necessary for a fair presentation of the results
of the interim periods, have been made. The results of operations for such
interim periods are not necessarily indicative of results of operations for
a full year. The unaudited condensed consolidated financial statements
should be read in conjunction with Aetna's consolidated financial
statements and notes thereto for the year ended December 31, 1998.
14
<PAGE> 15
AETNA INDUSTRIES, INC.
(A WHOLLY-OWNED SUBSIDIARY OF
TRIANON INDUSTRIES CORP.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
2. INVENTORIES
Inventories are comprised of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
Raw materials $ 1,048 $ 881
Work-in-process 2,668 2,333
Finished goods 1,441 1,670
Tooling 39,463 40,724
------------ ------------
Inventories valued at FIFO 44,620 45,608
LIFO Reserve (200) (200)
------------ ------------
46,420 45,408
Purchased parts and purchased labor 3,024 2,356
------------ ------------
Total inventories $ 47,444 $ 47,764
============ ============
</TABLE>
3. STOCKHOLDER'S EQUITY (DEFICIT)
<TABLE>
<CAPTION>
CUMULATIVE TOTAL
CONTRIBUTED ACCUMULATED TRANSLATION STOCKHOLDER'S
CAPITAL DEFICIT ADJUSTMENT EQUITY
(DEFICIT)
<S> <C> <C> <C> <C>
Balance at December 31,1998 $ 9,024 $ (25,950) $ (244) $ (17,170)
Translation adjustment - - 70 70
Capital Contribution 5,000 5,000
Net loss (544) - (544)
----------- -------------- ----------- ---------------
Balance at March 31, 1999 $ 14,024 $ (26,494) $ (174) $ (12,644)
----------- -------------- ----------- ---------------
</TABLE>
15
<PAGE> 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
TRIANON INDUSTRIES
RESULTS OF OPERATIONS
On April 14, 1998, Trianon Industries completed a combination with Societe
Financiere de Developpement Industriel et Technologique S.A., a French societe
anonyme (Sofedit) (the Combination). In connection with the Combination,
Sofedit's former stockholders transferred the outstanding capital stock of
Sofedit to Trianon Industries in exchange for: (i) promissory notes of Trianon
Industries in the principal amount of $40.9 million; (ii) dividends in an amount
of approximately $1.0 million; (iii) 270,000 shares of Series B Preferred stock
($27.0 million stated value) of Trianon Industries; (iv) 3.0 million shares of
Common Stock of Trianon Industries, and (v) the assumption of approximately
$12.0 million of debt of such former stockholders. The Combination has been
accounted for as a reverse acquisition because the former owners of Sofedit own
approximately 75% of the fully diluted outstanding Common Stock of Trianon
Industries as a result of the Combination. For accounting purposes, Sofedit is
considered to be the acquirer of, and predecessor of Trianon Industries.
As a result of the Combination being accounted for as a reverse acquisition, the
statements of operations and cash flows included herein for the three month
period ended March 31, 1998 represent the historical information of Sofedit, as
predecessor. The consolidated balance sheet at March 31, 1999 and December 31,
1998 represents the consolidated financial position of Sofedit and Trianon
Industries. The statements of operations and cash flows for the three months
ended March 31, 1999 represent the consolidated three month financial data of
Sofedit and Trianon Industries.
The following table sets forth, for the periods indicated, Trianon Industries's
statement of operations expressed as a percentage of net sales for three months
ended March 31, 1999 and proforma statement of operations for the three months
ended March 31, 1998. This table and subsequent discussions should be read in
conjunction with the condensed consolidated financial statements and related
notes thereto of Trianon Industries included elsewhere herein.
16
<PAGE> 17
AS A PERCENTAGE OF NET SALES
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED
MARCH 31, MARCH 31,
1999 1998
---- ----
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of sales 88.0% 87.3%
------------- -------------
Gross profit 12.0% 12.7%
Selling, general and
administrative expenses 6.8% 7.6%
------------- -------------
Operating income (loss) 5.2% 5.1%
Interest expense, net 3.3% 3.2%
------------- -------------
Income (loss) before
income taxes 1.9% 1.9%
------------- -------------
Income tax provision (credit) 1.0% 0.4%
Net income 0.0% 1.0%
============= =============
</TABLE>
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998
NET SALES: Net sales were $218.1 million, up 14.8 % from the $189.9 million for
the three months ended March 31, 1999. Net sales in North America was 25.9%
higher in the first three months in 1999 than 1998. Net sales in Europe were up
10.5% in the first quarter 1999 from 1998, or 6.0% excluding the effects of
foreign exchange. The increase in European sales was due to both a general
growth in the car market and to the launch of the Renault Clio II, Peugeot 20,
and the Mercedes Class S in 1998 which reach full production in 1999.
GROSS PROFIT: Gross profit was $26.2 million, or 12.0% of net sales, for the
three months ended March 31, 1999 compared to $24.1 million, or 12.7% of net
sales, for the same period in 1998. In North America, gross profit was $8.1
million for three months ended 1999 and 1998. In Europe, gross profit reached
$18.3 million or 12.1% of net sales, versus $16.1 million or 11.8% of net sales
in 1998. The increase in European gross margin is mainly due to reducing launch
and project costs and to the first effect of cost saving plan implemented at
several production facilities.
SELLING, GENERAL AND ADMINISTRATIVE ("SG&A") EXPENSES: SG&A expenses for the
three months ended March 31,1999 were $14.7 million, or 6.8 % of net sales,
compared to $14.5 million, or 7.6% of net sales, for the same period in 1998.
Increased costs were due to increased project team activity and the
reinforcement of the current management structure.
INTEREST EXPENSE: Interest expense for the three months ended March 31, 1999 was
$7.3 million, or 3.3% of net sales, compared to $6.1 million, or 3.2% of net
sales in the same period in the prior
17
<PAGE> 18
year. The increase in interest expense is due principally to a sharp increase
in tooling inventory relating to two major projects in North America. In
Europe, interest expense was $2.4 million or 1.6% of sales, versus $2.2 million
for the same period in 1998. Excluding the effect of exchange rate
fluctuations, interest expense in Europe raised by 4.7%. The increase is mainly
due to a $7.3 million increase in medium and short term debt.
INCOME TAXES: The income tax for the three months ended March 31, 1999 was $2.3
million with an effective tax rate of 52.5% as compared to a provision of $1.0
million with an effective tax rate of 28.5% for the same period in the prior
year. The change in the effective tax rate is mainly due to loss incurred in
North America and to reduced research and development tax credit in France.
LIQUIDITY AND CAPITAL RESOURCES
Trianon Industries's primary sources of liquidity are cash generated from
operations and short-term and long-term debt, including the sale of receivables.
Trianon Industries's principal use for these funds is to finance working capital
needs, debt payments and planned maintenance and expansion activities. The
Company's liquidity is affected by both the cyclical nature of its business and
its level of net sales. The Company believes that operating cash flow and its
line of bank credit will be sufficient to cover its short-term and long-term
capital expenditures and debt payment obligations. Nevertheless, Trianon
Industries's ability to meet these liquidity demands will depend upon future
operating performance, which will be affected by prevailing economic conditions
and financial, business and other factors, certain of which are beyond Trianon
Industries's control.
FINANCIAL CONDITION
At March 31, 1999, Trianon Industries had available cash, cash equivalents and
marketable securities totaling $19.0 million, compared to $26.1 million at
December 31, 1998. At March 31, 1999, Trianon Industries had current assets of
$318.1 million, compared to $377.4 million in current liabilities, giving it
negative working capital of $59.3 million, compared to $80.2 million at
December 31, 1998.
At March 31, 1999, Trianon Industries had $16.5 million available under its
Amended and Restated Credit Agreement among Aetna, Trianon Industries, Aetna
Holdings, Aetna Export Sales Co., Aetna Canada and NBD Bank (the "Senior
Revolving Credit Facility"). Restricted cash of $10.7 million at March 31, 1999
represents cash held by Sofedit in a mutual fund until June 1999 to warranty
an additional line of credit for Aetna Industries.
On March 31, 1999, short-term debt consisted of $13.0 million of bank overdraft,
$56.7 million of line of credit, $30.9 million bank borrowing, promissory notes
of $40.9 million. Long-term debt consisted of Senior notes of $85.0 million,
long-term bank loans of $60.5 million, leasing contracts of $27.5 million and
junior debt of $9.1 million.
CASH FLOWS
Net cash provided by operating activities was $1.6 million compared to $10.9
million in the same period of the prior year. The principal reason for the
decrease in cash provided by operating activities is attributable to lower net
income, tooling inventory increases, partially offset by increased depreciation
and amortization.
Net cash used for investing activities was $7.5 million and $9.0 million for the
three months ended March 31, 1999 and 1998, respectively. The change was due
principally to decreased capital expenditures in North America. Capital
expenditures in Europe reached $6.8 million for the three months ended March 31,
1999, compared to $5.9 million for the same period in 1998.
18
<PAGE> 19
Net cash provided by financing was $0.7 million compared to cash provided of
$0.5 million for the three months ended March 31, 1999 and 1998 respectively.
This change was principally due to an increase in medium term loans in Europe
in 1999.
EUROPEAN MONETARY UNION
Since substantial portions of Trianon Industries's activities are carried out in
Europe, Trianon Industries is actively preparing for the introduction of a
single European currency. After January 1, 1999, Trianon Industries will be
required, upon the request of any party with which it transacts to use the euro
as a currency of payment in its European commercial activities in certain
financial transactions and in dealings with administrative bodies. On the basis
of currently available information, Trianon Industries does not expect that
expenses to be incurred in connection with the introduction of the euro as a
currency of payment for Trianon Industries will have a material adverse effect
on the results of operations or financial position of Trianon Industries.
YEAR 2000
Trianon Industries has conducted a review of its computer systems to identity
those areas that may not be Year 2000 compliant and is developing a plan to
resolve the issue. Trianon Industries believes that by modifying existing
software and obtaining new releases of licensed software, the Year 2000
transition can be carried out without significant operational expenses or
significant investments in computer systems improvements. On the basis of
currently available information, Trianon Industries does not expect that
expenses be incurred in connection with the continuing identification of systems
which are not Year 2000 compliant and with their replacement or upgrade will
have a material adverse impact on the results of operations or financial
position of Trianon Industries. There can be, however, no assurances of the
absence of any disruptions in Trianon Industries's own systems or those of its
customers and suppliers. Trianon Industries considers that sufficient resources
have been dedicated to address these issues in a timely manner.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June, 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative
Instruments and Hedging Activities". SFAS 133 addresses the accounting for
derivative instruments. This statement is not expected to have a material effect
on Trianon Industries's financial position or results of operations.
In April 1998, the Accounting Standards Executive Committee issued Statement of
Position 98-5 ("SOP") 98-5), "Reporting on the Costs of Start-up Activities.
This statement prescribes accounting treatment for start-up activities and is
effective for fiscal years beginning after December 15, 1998. The adoption of
this statement did not have a material effect on Trianon Industries's financial
position or result of operations.
19
<PAGE> 20
FUTURE OPERATING RESULTS
With the exception of historical matters, the matters discussed in this
Quarterly Report on Form 10-Q are forward-looking statements that involve risks
and uncertainties, including, but not limited to, factors related to the highly
competitive nature of the automotive supplier industry and its sensitivity to
changes in general economic conditions, the results of financing efforts and
other factors discussed in Aetna's or Trianon Industries's filings with the
Securities and Exchange Commission. Such factors could cause Trianon
Industries's actual results during the remainder of 1999 and beyond to differ
materially from those expressed in any forward-looking statement made by or on
behalf of Aetna or Trianon Industries. There can be no assurance that
additional sources of financing will not be required during the next twelve
months as a result of unanticipated cash demands or opportunities for expansion
or acquisition, changes in growth strategy or adverse operating results. There
can be no assurance that any additional funds required, whether within the next
twelve months or thereafter, will be available to Aetna or Trianon Industries
on satisfactory terms.
AETNA
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, Aetna's statement of
operations expressed as a percentage of net sales. This table and subsequent
discussions should be read in conjunction with the condensed consolidated
financial statements and related notes thereto of Aetna included elsewhere
herein.
20
<PAGE> 21
AS A PERCENTAGE OF NET SALES
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, MARCH 31,
1999 1998
---- ----
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of sales 87.9% 84.7%
------------- -------------
Gross profit 12.1% 15.3%
Selling, general and
administrative expenses 7.4% 8.5%
------------- -------------
Operating income (loss) 4.7% 6.8%
Interest expense, net 5.7% 5.4%
------------- -------------
Income (loss) before
income taxes (1.0%) 1.4%
------------- -------------
Income tax provision (credit) (0.2%) 0.4%
Net loss (0.8%) 1.0%
============= =============
</TABLE>
NET SALES: Net sales for the first quarter of 1999 were $66.8 million, or 25.9%
higher than first quarter 1998 sales of $53.1 million. Production sales of $58.8
million in the first quarter of 1999 were up $6.3 million from $52.5 million in
the first quarter of 1998, due to Daimler Chrysler Jeep Grand Cherokee and the
Cami Grand Vitara. Tooling and prototype sales were up $ 7.7 million for the
same period.
GROSS PROFIT: Gross profit was 8.1 million, or 12.1% of net sales, for the first
quarter of 1999 compared to $ 8.1 million, or 15.3 % of net sales, for the same
period in 1998. The decrease in gross profit was primarily the result of higher
tooling sales with little or no associated margin and the loss of higher margin
products such as Daimler Chrysler's mini-van.
SELLING, GENERAL AND ADMINISTRATIVE ("SG&A") EXPENSES: SG&A expenses for the
first quarter of 1999 were $5.0 million, or 7.4% of net sales, compared to $ 4.5
million, or 8.5% of net sales, for the same period in 1998. As a percent of net
sales, the decrease was a result of launch expense that is no longer being
incurred.
INTEREST EXPENSE: Interest expense for the first quarter of 1999 was $3.8
million, or 5.7% of net sales, compared to $2.9 million or 5.4% of net sales for
the same period in 1998. Interest expense was impacted by higher levels of
short-term debt used to finance the launch of the Saturn and WJ programs, and
other working platform capital requirements.
INCOME TAXES: The income tax credit in the first quarter of 1999 was $0.1
million as compared to income tax of $ 0.2 million for the same period in 1998.
21
<PAGE> 22
LIQUIDITY AND CAPITAL RESOURCES
Aetna's principal capital requirements are to fund working capital needs, to
meet required debt payments and to complete planned maintenance and expansion
expenditures.
At March 31, 1999 there was $16.5 million available under the Senior Revolving
Credit Facility. Management currently anticipates that its operating cash flow,
together with available borrowings under the Senior Revolving Credit Facility,
will be sufficient to meet working capital requirements, capital expenditure
requirements, and interest requirements on debt obligations.
The terms of the indenture pursuant to which the Senior Notes were issued
contains certain restrictive covenants which include restrictions on the ability
of Aetna, Aetna Canada and Export from paying dividends or making certain other
payments to Aetna Holdings or Trianon Industries.
CASH FLOWS
Net cash flows provided by (used for) operations for the three months ended
March 31, 1999 aggregated $6.6 million. This compares to net cash used for
operations of $ 1.8 million for the same period in 1998. The increase is due
primarily to decrease in tooling inventory and increased depreciation and
amortization expenses.
Net cash flows provided by (used for) investing activities aggregated $0.7
million for the three months ended March 31, 1999 as compared to $3.2 million
for the same period in 1998 and consists principally of capital expenditures.
The major capital projects during 1999 have been the purchase of robots for the
Saturn Innovate launch, equipment to support Aetna's development lab for 3
dimensional remote welding, and the purchase and installation of robots to
support increased volume requirements for the GM rear suspension assembley.
Net cash flows provided by (used for) financing aggregated $7.1 million for the
three months ended March 31, 1999 as compared to $5.3 million for the same
period in the prior year and in both cases represented increases in the Senior
Revolving Credit Facility.
Item 4. Submission of Matters to a Vote of Security Holders
Pursuant to a Consent in Lieu of Special Meeting of the
Stockholders of Trianon which was distributed to its stockholders on December
17, 1998, the Board of Directors proposed an amendment to Tiranon's Restated
Certificate of Incorporation to (i) change the name of the corporation from MS
Acquisition Corp. to Trianon Industries Corp., (ii) increase the number of
authorized shares of Trianon's Series A Preferred Stock from 293,123 shares to
405,000 shares and (iii) provide Trianon's Board of Directors the election to
pay dividends accruing on shares of Series A Preferred Stock, in lieu of cash
dividends, in additional shares of Series A Preffered Stock. The amendment is
attached to this Quarterly Report on Form 10-Q as exhibit 3(i).
The proposal was adopted by the votes indicated (which
constituted the affirmative vote of more than one-half of the shares voting for
each class and series of stock).
<TABLE>
<CAPTION>
Common Stock Preferred Stock
------------------------------------- ------------------------
Series A-1 Series A-2 Series A-3 Series A Series B
---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
For the Proposal: 1,391,193 1,235,507 885,213 112,760.18 235,169
Against the Proposal: 0 0 0 0 0
Abstaining: 282,525 90,775 17,285 2,207.20 34,831
</TABLE>
22
<PAGE> 23
ITEM 5. DISCLOSURE OF QUANTITATIVE AND QUALITATIVE INFORMATION ABOUT MARKET
RISKS
The financial condition and results of operations of the Company's operating
entities are reported in various foreign currencies (principally Euro and
British pounds sterling) and then translated into U.S. dollars at the applicable
exchange rate for inclusion in the Company's financial statements. As a result,
an appreciation of the dollar against these foreign currencies will have a
negative impact on the reported sales and operating profit of the Company.
Conversely, depreciation of the dollar against these foreign currencies will
have a positive impact. In addition, the Company incurs currency transaction
risk whenever it or one of its subsidiaries enters into either a purchase or
sale transaction using a different currency than the relevant entity's
functional currency. However, the nature of the Company's business results in
the Company generally matching revenues and expenses of the same currency.
Therefore, the Company does not currently use financial instruments to limit its
exposure to foreign transaction exposure risk. The Company does not currently
use financial instruments to limit its exposure to interest rate variations. The
portion of the company's outstanding debt obligations tied to variable interest
rates totals $125.9 million as of December 31, 1998.
23
<PAGE> 24
PART II. OTHER INFORMATION
ITEM 1. NOT APPLICABLE
ITEM 2. NOT APPLICABLE
ITEM 3. NOT APPLICABLE
ITEM 4. SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS
ITEM 5. NOT APPLICABLE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
24
<PAGE> 25
EXHIBIT NO. DESCRIPTION OF EXHIBITS
3.1(i) Amendment to Trianon Industries Corp. Restated Certificate of
Incorporation filed with the Delaware Secretary of State on May 12,
1999.
4.1 Fifth Amendment to Credit Agreement dated as of February 12, 1999, by
and among Aetna Industries, Inc., the Guarantors party thereto, the
lenders, NBD Bank as the agent.
27.1 Financial Data Schedule for Aetna Industries, Inc. (EDGAR Filing Only)
27.2 Financial Data Schedule for Trianon Industries Corp. (EDGAR Filing Only)
(b) Reports on Form 8-K
None
30
<PAGE> 26
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
The signatory hereby acknowledges and adopts the typed form of his name in the
electronic filing of this document with the Securities and Exchange Commission.
Aetna Industries, Inc.
Date: May 14, 1999 By: s/ Harold A. Brown
-------------------
Harold A. Brown
Secretary, Vice President, Finance
and Chief Financial Officer
Trianon Industries Corp.
Date: May 14, 1999
By: s/ Harold A. Brown
-------------------
Harold A. Brown
Secretary, Vice President North America
31
<PAGE> 27
EXHIBIT INDEX
Exhibit No. Description of Exhibits
- ----------- -----------------------
3.1(i) Amendment to Trianon Industries Corp. Restated Certificate of
Incorporation filed with the Delaware Secretary of State on May
12, 1999.
4.1 Fifth Amendment to Credit Agreement dated as of February 12,
1999, by and among Aetna Industries, Inc., the Guarantors party
thereto, the lenders, NBD Bank as the agent.
27.1 Financial Data Schedule for Aetna Industries, Inc.
27.2 Financial Data Schedule for Trianon Industries Corp.
32
<PAGE> 1
EXHIBIT 3(I)
MS ACQUSITION CORP.
AMENDMENTS TO RESTATED CERTIFICATE OF INCORPORATION
1. Article FIRST of the Restated Certificate of Incorporation is amended
to read in its entirety as follows:
"The name of the corporation is Trianon Industries Corp. (hereinafter
the "Corporation")."
2. The first sentence of Article FOURTH of the Restated Certificate of
Incorporation is amended to read in its entirety as follows:
"The total number of shares of capital stock which the Corporation
shall have authority to issue is 22,675,000 shares, consisting of
20,000,000 shares of Common Stock, par value $.01 per share (the
"Common Stock"); and 2,675,000 shares of Preferred Stock, par value
$.01 per share (the "Preferred Stock")."
3. The fifth sentence of Article FOURTH of the Restated Certificate of
Incorporation is amended to read in its entirety as follows:
"The Preferred Stock will consist of:
(a) 405,000 shares of a class of Preferred Stock
constituting Series A Preferred Stock, par value $.01 per share (the
"Series A Preferred Stock");
(b) 270,000 shares of a class of Preferred Stock
constituting Series B Preferred Stock, par value $.01 per share (the
"Series B Preferred Stock"); and
(c) 2,000,000 shares of a class of Preferred Stock
constituting New Preferred Stock, par value $.01 per share, in one or
more series, the terms of which may be set forth by resolution of the
Board of Directors, as provided by Section 1(b) of Part III of Article
FOURTH (the "New Preferred Stock")."
4. The second sentence of Section 1(a) of Part III of ARTICLE FOURTH of
the Restated Certificate of Incorporation is amended to read in its entirety as
follows:
"The Corporation is authorized to issue a class of Preferred Stock
designated as "Series A Preferred Stock" consisting of 405,000 shares
and a class of Preferred Stock designated as "Series B Preferred Stock"
consisting of 270,000 shares."
<PAGE> 2
5. The following sentence is added to Section 1(d) of Part III of ARTICLE
FOURTH of the Restated Certificate of Incorporation as the fourth sentence
thereof:
"Notwithstanding the foregoing, the Corporation may pay dividends on
the Series A Preferred, in lieu of cash dividends thereon, by the
issuance of additional shares of Series A Preferred Stock pursuant to
Section 2 of this Part III."
6. Section 2 of Part III of ARTICLE FOURTH of the Restated Certificate of
Incorporation is amended to read in its entirety as follows:
"Dividends.
(a) When, as and if declared by the Board of Directors, to the
extent funds are legally available therefor, dividends will be payable
on each Share, in cash, as provided herein. Dividends on the Shares
will be payable at a rate per annum equal to eleven percent (11%) of
the Stated Value thereof (the "Dividend Rate"). Such dividends shall be
payable semi-annually on the 13th day of February and August of each
year, commencing on February 13, 1997 with respect to the Series A
Preferred Stock and on the first 13th day of February or August to
occur subsequent to the Series B Accrual Date with respect to the
Series B Preferred Stock (each such date hereinafter referred to as a
"Dividend Payment Date" and each such dividend period hereinafter
referred to as a "Dividend Period"), except that if such date is not a
Business Day, then such dividend shall be payable on the next
succeeding Business Day, to the holders of record as they appear on the
register of the Corporation for the Shares.
(b) In the sole discretion of the Board of Directors, any
dividends accruing on shares of Series A Preferred Stock may be paid,
in lieu of cash dividends, by the issuance of additional shares of
Series A Preferred Stock (including fractional shares) having an
aggregate Stated Value at the time of such payment equal to the amount
of the dividend to be paid (a "PIK Dividend Payment"); provided that if
the Corporation pays less than the total amount of dividends then
accrued on the Series A Preferred Stock in the form of additional
shares of Series A Preferred Stock, such payment in shares shall be
made pro rata to the holders of Series A Preferred Stock based upon the
aggregate accrued but unpaid dividends on the shares of Series A
Preferred Stock held by such holder."
7. The first sentence of Section 3(b) of Part III of ARTICLE FOURTH of the
Restated Certificate of Incorporation is amended to read in its entirety as
follows:
"To the extent not paid on any Dividend Payment Date, all dividends
which have accrued on any Shares then outstanding during the period
from and including the preceding Dividend Payment Date (or from and
including the Date of Issuance or
2
<PAGE> 3
the Series B Accrual Date, as the case may be, for such Shares in the
case of the initial Dividend Payment Date for such Shares) to (but
excluding) such Dividend Payment Date shall be added on such Dividend
Payment Date to the Preferred Liquidation Value of such Shares (so
that, without limitation, dividends shall thereafter accrue in respect
of the amount of such accrued but unpaid dividends) and shall remain a
part thereof until (but only until) such dividends are paid including
payment pursuant to a PIK Dividend Payment."
8. Section 3(c) of Part III of ARTICLE FOURTH of the Restated Certificate
of Incorporation is amended to read in its entirety as follows:
"Priority for Shares. For so long as any Shares shall be outstanding,
no dividend or distribution, whether in cash, stock or other property,
shall be paid, declared and set apart for payment or made on any date
on or in respect to the Common Stock, or any other class or series of
stock of the Corporation ranking junior to the Shares (together with
the Common Stock, a "Junior Stock") as to dividends or distributions of
assets upon liquidation, dissolution or winding-up, and no payment on
account of the redemption, purchase or other acquisition or retirement
for value by the Corporation of shares of Common Stock or any other
Junior Stock shall be made on any date unless, in each case, the full
amount of unpaid dividends accrued on all outstanding Shares shall have
been paid or contemporaneously are declared and paid and all Shares
issued as a PIK Dividend Payment are redeemed by the Corporation
pursuant to Section 4 of Part III; provided, however, that the
foregoing provisions of this sentence shall not prohibit (i) a dividend
payable solely in shares of Common Stock or any other Junior Stock,
(ii) the acquisition of any shares of any Common Stock or any other
Junior Stock upon conversion or exchange thereof into or for any shares
of any other class of Common Stock or other Junior Stock or (iii) the
acquisition of any shares of Common Stock pursuant to the Stockholders
Agreement."
9. The second sentence of Section 4(a) of Part III of ARTICLE FOURTH of
the Restated Certificate of Incorporation is amended to read in its entirety as
follows:
"On any Business Day, the Corporation, at its option, may redeem at the
Redemption Price therefor all of the issued and outstanding Shares
issued as a PIK Dividend Payment and on any Business Day prior to
February 13, 2007, the Corporation, at its option, may redeem at the
Redemption Price therefor all of the issued and outstanding Shares."
3
<PAGE> 1
Exhibit 4.1
FIFTH AMENDMENT TO CREDIT AGREEMENT
THIS FIFTH AMENDMENT TO CREDIT AGREEMENT, dated as of February 12,
1999 (this "Amendment"), is among AETNA INDUSTRIES, INC., a Delaware corporation
(the "Company"), the guarantors set forth on the signature pages hereof
(collectively, the "Guarantors"), the Lenders set forth on the signature pages
hereof (collectively, the "Lenders") and NBD BANK, a Michigan banking
corporation, as agent for the Lenders (in such capacity, the "Agent").
RECITALS
A. The Company, the Guarantors, the Agent and the Lenders are
parties to an Amended and Restated Credit Agreement dated as of April 10, 1998
(as now and hereafter amended, the "Credit Agreement").
B. The Company and the Guarantors desire to amend the Credit
Agreement, and the Agent and the Lenders are willing to do so in accordance with
the terms hereof.
TERMS
In consideration of the premises and of the mutual agreements
herein contained, the parties agree as follows:
ARTICLE I. AMENDMENTS. Upon fulfillment of the conditions set
forth in Article III hereof, the Credit Agreement shall be amended as follows:
1.1 Each reference in (a) the definition of Borrowing Base in
Section 1.1 and (b) Section 2.11 to "February 15, 1999" shall be deleted and "15
days prior to the expiration or termination of the SOFEDIT Letter of Credit"
shall be substituted in each place thereof.
1.2 Section 5.2(b) is restated as follows:
(b) Fixed Charge Coverage Ratio. Permit or suffer the
Fixed Charge Coverage Ratio to be less than: (i) 1.00:1.00 from and including
the Effective Date through and including July 30, 1998; (ii) 0.75:1.00 from and
including July 31, 1998 through and including August 30, 1998; (iii) 0.55:1.00
from and including August 31, 1998 through and including December 30, 1998; (iv)
0.60:1.00 from and including December 31, 1998 through and including May 30,
1999; (v) 0.75:1.00 from and including May 31, 1999 through and including June
29, 1999; (vi) 1.10:1.00 from and including June 30, 1999 through and including
September 29, 1999; (vii) 1.30:1.00 from and including September 30, 1999
through and including December 30, 1999; and (viii) 1.60:1.00 at any time
thereafter.
1.3 Section 5.2(c) is restated as follows:
(c) Senior Secured Funded Debt Ratio. Permit or suffer the
Senior Secured Funded Debt Ratio of the Company and Subsidiaries to exceed at
any time: (i) 3.00:1.00 from and including the Effective Date through and
including July 30, 1998; (ii) 4.50:1.00 from
25
<PAGE> 2
and including July 31, 1998 through and including August 30, 1998; (iii)
5.25:1.00 from and including August 31, 1998 through and including September 29,
1998; (iv) 9.00:1.00 from and including September 30, 1998 through and including
October 30, 1998; (v) 8.50:1.00 from and including October 31, 1998 through and
including December 30, 1998; (vi) 9.00:1.00 from and including December 31, 1998
through and including February 27, 1999; (vii) 7.50:1.00 from and including
February 28, 1999 through and including June 29, 1999; (viii) 5.00:1.00 from and
including June 30, 1999 through and including July 30, 1999; (ix) 3.50 :1.00
from and including July 31, 1999 through and including August 30, 1999; (x)
2.00:1.00 at any time thereafter.
ARTICLE II. REPRESENTATIONS. The Company and each Guarantor
represent and warrant to the Agent and the Lenders that:
2.1 The execution, delivery and performance of this Amendment is
within its powers, has been duly authorized and is not in contravention of any
statute, law or regulation known to it or of any terms of its Articles of
Incorporation or By-laws, or of any material agreement or undertaking to which
it is a party or by which it is bound.
2.2 This Amendment is the legal, valid and binding obligation of
the Company and each Guarantor enforceable against each in accordance with the
terms hereof.
2.3 After giving effect to the amendments contained herein, the
representations and warranties contained in Article IV of the Credit Agreement
are true on and as of the date hereof with the same force and effect as if made
on and as of the date hereof.
2.4 After giving effect to the amendments contained herein, no
Event of Default or Default exists or has occurred and is continuing on the date
hereof. Without limiting the foregoing, no event of default or event or
condition which may become an event of default under the Senior Note Documents
has occurred or will be caused by this Amendment or any of the transactions
contemplated hereby.
ARTICLE III. CONDITIONS OF EFFECTIVENESS. This Amendment shall not
become effective until each of the following conditions is satisfied:
3.1 The Company, the Guarantors and the Required Lenders shall
have signed this Amendment.
3.2 The Company and the Guarantors shall have delivered such
resolutions, officer's certificates and legal opinions as the Agent may
reasonably request.
3.3 The Company shall have delivered to the Agent such other
documents and satisfied such other conditions, if any, as reasonably requested
by the Agent.
ARTICLE IV. MISCELLANEOUS.
4.1 The Company has informed the Lenders and the Agent that
Events of Default have occurred due to a breach of Sections 5.2(b) and 5.2(c)
(the "Existing Defaults"), and
26
<PAGE> 3
the Company has requested that the Lenders and the Agent waive the Existing
Defaults subject to this Amendment becoming effective pursuant to Article III
hereof and the terms and conditions set forth herein. Pursuant to such request,
the Lenders and the Agent hereby waive the Existing Defaults for the period
prior to the effectiveness of this Amendment. The Company acknowledges and
agrees that the waiver contained herein is a limited waiver, limited to the
specific one time waiver described above. Such limited waiver (a) shall not
modify or waive any other term, covenant or agreement of the Loan Documents, and
(b) shall not be deemed to have prejudiced any present or future right or rights
which the Agent or the Lenders now have or may have under the Loan documents.
Without limiting the foregoing, it is acknowledged and agreed that any breach of
Sections 5.2(b) or (c) is not waived at any time after the date hereof.
4.2 References in the Credit Agreement or in any other Loan
Document to the Credit Agreement shall be deemed to be references to the Credit
Agreement as amended hereby and as further amended from time to time.
4.3 The Company agrees to pay and to save the Agent harmless for
the payment of all reasonable documented costs and expenses arising in
connection with this Amendment, including the reasonable documented fees of
counsel to the Agent in connection with preparing this Amendment and the related
documents.
4.4 The Company and each Guarantor acknowledge and agree that,
to the best of their knowledge, the Agent and the Lenders have fully performed
all of their obligations under all documents executed in connection with the
Credit Agreement. The Company and each Guarantor represent and warrant that they
are not aware of any claims or causes of action against the Agent or any Lender.
4.5 Except as expressly amended hereby, the Company and each
Guarantor agree that the Credit Agreement, the Notes, the Security Documents and
all other documents and agreements executed by the Company in connection with
the Credit Agreement in favor of the Agent or any Lender are ratified and
confirmed, as amended hereby, and shall remain in full force and effect in
accordance with their terms and that they are not aware of any set off,
counterclaim or defense with respect to any of the foregoing. Terms used but not
defined herein shall have the respective meanings ascribed thereto in the Credit
Agreement. This Amendment may be signed upon any number of counterparts with the
same effect as if the signatures thereto and hereto were upon the same
instrument, and telecopied signatures shall be effective as originals.
27
<PAGE> 4
IN WITNESS WHEREOF, the parties signing this Amendment have caused
this Amendment to be executed and delivered as of the day and year first above
written.
AETNA INDUSTRIES, INC.
By:/s/ Harold A. Brown
--------------------------------------------
Harold A. Brown
Its: Secretary, Vice President/Finance and
Chief Financial Officer
Guarantor
AETNA HOLDINGS, INC.
By: :/s/ Harold A. Brown
--------------------------------------------
Harold A. Brown
Its: Secretary, Vice President/Finance and
Chief Financial Officer
Guarantor
AETNA EXPORT SALES CORP.
By: :/s/ Harold A. Brown
--------------------------------------------
Harold A. Brown
Its: Treasurer and Secretary
Guarantor
TRIANON INDUSTRIES CORP.
By: :/s/ Harold A. Brown
--------------------------------------------
Harold A. Brown
Its: Secretary and Vice President North
America
Guarantor
AETNA MANUFACTURING CANADA LTD.
By: :/s/ Harold A. Brown
--------------------------------------------
Harold A. Brown
Its: Treasurer and Secretary
28
<PAGE> 5
NBD BANK, as a Lender and as Agent
By: /s/ Thomas A. Gamm
-------------------
Its:Vice President
--------------
PNC BANK, NATIONAL ASSOCIATION.
By: /s/ Terry H. Bell
------------------
Its:Assistant Vice President
------------------------
NATIONAL BANK OF CANADA
By: /s/ Angus White
----------------
Its:Vice President
----------------------------------
And
By: /s/ Anne K. Kedred
-------------------
Its:Vice President
--------------
MICHIGAN NATIONAL BANK
By: /s/ Eric L. Johnson
--------------------
Its:Relationship Manager
--------------------
29
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF OPERATIONS AND THE CONSOLIDATED BALANCE SHEETS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001022657
<NAME> AETNA INDUSTRIES
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-QUARTER-END> APR-02-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> APR-02-1999
<CASH> 28
<SECURITIES> 0
<RECEIVABLES> 34,464
<ALLOWANCES> 424
<INVENTORY> 7,981
<CURRENT-ASSETS> 85,729
<PP&E> 121,395
<DEPRECIATION> 50,652
<TOTAL-ASSETS> 185,837
<CURRENT-LIABILITIES> 104,858
<BONDS> 88,125
0
0
<COMMON> 0
<OTHER-SE> (12,644)
<TOTAL-LIABILITY-AND-EQUITY> 185,837
<SALES> 66,820
<TOTAL-REVENUES> 66,820
<CGS> 58,703
<TOTAL-COSTS> 58,703
<OTHER-EXPENSES> 4,972
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,815
<INCOME-PRETAX> (670)
<INCOME-TAX> (126)
<INCOME-CONTINUING> (544)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (544)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF OPERATIONS AND THE CONSOLIDATED BALANCE SHEETS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001021907
<NAME> TRIANON INDUSTRIES CORP.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 18,958
<SECURITIES> 0
<RECEIVABLES> 174,125
<ALLOWANCES> 423
<INVENTORY> 114,710
<CURRENT-ASSETS> 318,109
<PP&E> 372,419
<DEPRECIATION> 178,992
<TOTAL-ASSETS> 600,709
<CURRENT-LIABILITIES> 377,433
<BONDS> 88,125
0
42,302
<COMMON> 39
<OTHER-SE> (19,907)
<TOTAL-LIABILITY-AND-EQUITY> 600,709
<SALES> 218,157
<TOTAL-REVENUES> 218,157
<CGS> 191,932
<TOTAL-COSTS> 191,932
<OTHER-EXPENSES> 14,673
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,268
<INCOME-PRETAX> 11,552
<INCOME-TAX> 2,251
<INCOME-CONTINUING> 2,033
<DISCONTINUED> (772)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,261
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
