<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended December 31, 1999.
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _______________ to
_______________.
Commission file number 333-34061.
---------
CAMBRIDGE INDUSTRIES, INC.
CE AUTOMOTIVE TRIM SYSTEMS, INC.
(EXACT NAMES OF REGISTRANTS AS SPECIFIED IN THEIR CHARTERS)
CAMBRIDGE--DELAWARE
CE-MICHIGAN
(State of other jurisdiction of
INCORPORATION OR ORGANIZATION)
CAMBRIDGE-38-3188000
CE-38-3173408
(I.R.S. Employer
Identification No.)
555 HORACE BROWN DRIVE
MADISON HEIGHTS, MICHIGAN
(Address of principal executive offices)
(248) 616-0500
(Registrant's telephone number,
INCLUDING AREA CODE)
48071
(ZipCode)
None
(Name of exchange on which registered)
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 (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 March 27, 2000, the aggregate market value of the registrants' Common
Stock held by non-affiliates of the Company was $0.00.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed
all documents and reports required to be filed by Section 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by a court. Yes [-] No [x]
APPLICABLE ONLY TO CORPORATE REGISTRANTS. As of March 27, 2000, the numbers
of shares outstanding of each of the classes of common stock of Cambridge
Industries Holdings, Inc., of which the Company is a wholly-owned subsidiary,
was 63,640.97 of Class A Common, 25,439.68 of Class L Common and 45,000.00 of
Class P Common.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K ((S)229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrants' 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[ - ]
<PAGE>
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report contains, and from time to time the Company expects to
make, certain forward-looking statements regarding its business, financial
condition and results of operations. In connection with the "Safe Harbor"
provisions of the Private Securities Reform Act of 1995 (the "Reform Act"), the
Company intends to caution readers that there are several important factors that
could cause the Company's actual results to differ materially from those
projected in its forward-looking statements, whether written or oral, made
herein or that may be made from time to time by or on behalf of the Company.
Readers are cautioned that such forward-looking statements are only predictions
and that actual events or results may differ materially. The Company undertakes
no obligation to publicly release the results of any revisions to the forward-
looking statements to reflect events or circumstances or to reflect the
occurrence of unanticipated events.
The Company wishes to ensure that meaningful cautionary statements accompany
any forward-looking statements in order to comply with the terms of the safe
harbor provided by the Reform Act. Accordingly, the Company has set forth a
list of important factors that could cause the Company's actual results to
differ materially from those expressed in forward-looking statements or
predictions made herein and from time to time by the Company. Specifically, the
Company's business, financial condition and results of operations could be
materially different from such forward-looking statements and predictions as a
result of (i) customer pressures that could impact sales levels and product mix,
including customer sourcing decisions, customer evaluation of market pricing on
products produced by the Company and customer cost-cutting programs; (ii) the
impact on the Company's operations and cash flows caused by labor strikes or
work stoppages at the Company's OEM customers; (iii) operational difficulties
encountered during the launch of major new OEM programs; (iv) the availability
of funds to the Company for capital investments to enhance existing production
and distribution capabilities; and (v) the ability of the Company, as well as
its vendors, and customers, to address year 2000 processing issues on a timely
basis.
<PAGE>
CROSS REFERENCE SHEET
AND
TABLE OF CONTENTS
PART I
------
ITEM 1. Business ............................................ 1
ITEM 2. Properties............................................ 19
ITEM 3. Legal proceedings..................................... 19
ITEM 4. Submission of matters to a vote of security holders... 20
PART II
-------
ITEM 5. Market for the Company's common stock and related
stockholder matters................................... 20
ITEM 6. Selected financial data............................... 20
ITEM 7. Management's discussion and analysis of financial
condition and results of operations................... 22
ITEM 8. Consolidated financial statements and supplementary
data.................................................. 31
ITEM 9. Changes in and disagreements with accountants on
accounting and financial disclosure................... 31
PART III
--------
ITEM 10. Directors and executive officers of the Company....... 32
ITEM 11. Executive compensation................................ 33
ITEM 12. Security ownership of certain beneficial owners and
management............................................ 36
ITEM 13. Certain relationships and related transactions........ 39
PART IV
-------
ITEM 14. Exhibits, financial statement schedules, and reports
on Form 8-K........................................... 41
<PAGE>
PART I
ITEM 1 -- BUSINESS
As used in this Annual Report, unless the context otherwise requires, the
''Company'' or ''Cambridge'' refers to Cambridge Industries, Inc. and its
wholly-owned subsidiaries, including the co-registrant, CE Automotive Trim
Systems, Inc. (''CE''). The Company is a wholly-owned subsidiary of Cambridge
Industries Holdings, Inc. (''Holdings'').
GENERAL
The Company is a leading Tier 1 supplier of plastic components and composite
systems with a 31% share of the total automotive composite market. Customers
include GM, Ford, DaimlerChrysler, Toyota, Honda, Mazda, Nissan, Volkswagen,
Freightliner, PACCAR, Mack Truck and Volvo Heavy Truck. As a Tier 1 supplier,
the Company is increasingly responsible for the design, engineering, validation
testing, manufacturing and quality control of parts and pre-assembled components
for original equipment manufacturers (''OEMs''). Within the transportation OEM
market for plastic products there are three distinct types of applications, all
of which the Company can provide: exterior, structural/functional/powertrain and
interior. The Company manufactures components, modules and systems for exterior
and structural/functional/powertrain applications and components and modules for
interior applications. In addition to products supplied to its automotive and
commercial truck OEM customers, the Company also manufactures a number of
products for non-automotive customers. The Company's production utilizes a wide
range of processes, including compression, injection, extrusion and blow
molding, and prime top coat painting capabilities at OEM Class A standards.
The Company has experienced rapid growth since 1991 due to increased plastic
usage by OEMs, five major acquisitions and significant new product
introductions. Additionally, the Company's average content per vehicle
(automobile, light truck and commercial truck) produced in North America has
increased from approximately $0.86 in 1991 to approximately $36.12 in 1999.
At February 29, 2000, the Company employed approximately 4,740 people.
DESCRIPTION OF BUSINESS BY OPERATING SEGMENT
Cambridge's businesses are organized, managed, and internally reported as three
operating segments. The operating segments, which are based on differences in
customers and products, technologies and services, are as follows:
Operating Segment Principal Products
- ----------------- ------------------
Automotive and Light Truck Molded engineered plastic components primarily for
automotive original equipment manufacturers
Commercial Truck Molded engineered plastic components primarily
for the commercial transportation industry, class
4 through class 8 commercial trucks
Industrial and
Non-automotive Various plastic components for the agricultural,
appliance, commercial construction, and recreational
transportation industries
Segment financial data for the years 1997 through 1999, including financial
information about export sales, is included in Note 18 of Notes to Consolidated
Financial Statements. Cambridge's three operating segments bridge together
common or related technologies, enhancing the development of innovative products
and services and providing for efficient sharing of business resources. Various
corporate assets and overhead expenses are not assigned to the segments.
AUTOMOBILE AND LIGHT TRUCK COMPONENTS INDUSTRY
1
<PAGE>
As automobile and light truck manufacturers have faced increased competitive
pressures, they have sought to significantly reduce costs, improve quality,
reduce weight, and shorten the development time required for new vehicle
platforms. These changes have altered the OEM/supplier relationship and
benefited larger suppliers, such as the Company, strong product engineering and
development capabilities, superior quality and the ability to deliver products
on a timely basis. The Company believes the following to be the primary trends
in the automotive and light truck components industry:
Increased Use of Plastics
The combined pressures of cost reduction, increased durability requirements
and rising fuel economy standards have caused OEMs to concentrate on developing
and employing lower cost, more durable and lighter weight materials. As a
result, the average plastic weight per passenger vehicle has increased by 71%,
from approximately 150 pounds in 1988 to approximately 257 pounds in 1999.
Total automotive composite usage is projected to increase by 55% between 1999
and 2009. While plastics historically have been used for many interior trim
components, they are now being used more extensively in such structural
components as grille opening reinforcements, floor panels, bumpers and support
beams, as well as in such nonstructural components as exterior trim panels,
grilles, duct systems, tail lights, fluid reservoirs, intake manifolds, valve
covers and drive train components. These trends toward the increased use of
plastics in exterior and structural/functional/powertrain components have been
driven by innovations in material, molding and painting technologies, which have
improved the performance and appearance of molded plastic components as well as
lowering their costs. Plastic's design freedom is also key to its increased use.
Not only does plastic allow for the manufacture of products that cannot be
manufactured with other materials, plastic makes it possible to combine several
parts, saving weight and cost. Additionally, recently introduced plastics that
can withstand the hot, corrosive environment of the engine compartment are
becoming more prevalent. For example, the Company has developed plastic rocker
arm covers for use on the high production volume Ford 3.0L and 4.6L engines.
Furthermore, according to industry sources, plastics usage in engine and
mechanical components is expected to increase by more than 38% from 1998 to
2009. Now light truck is converting pick-up boxes traditionally done in metal
composites.
Historically, plastic has generally had an advantage over steel in low volume
production runs due to lower upfront tooling costs. With its lower tooling
costs, the Company benefits from the increase in niche vehicles (such as the
DaimlerChrysler Viper and the GM Corvette), "mass customization" of high volume
vehicles such as the Ford Focus and the addition of flare fenders to the Ford
Ranger and Ford F-150 pick-ups and the use of optional accessories (such as
step-assists on certain sport utility vehicles such as GM's GMT800, and
DaimlerChrysler's Jeep Wrangler hard-top). For higher volume production runs
where tooling costs may be amortized over a larger number of units, steel
generally has an advantage, because it is usually a less expensive raw material
with lower finishing costs.
Increased Outsourcing by Domestic OEMs
In an effort to reduce costs, accelerate product design and simplify
manufacturing, domestic OEMs have outsourced the manufacture of many components,
systems and modules which were previously manufactured internally. Independent
suppliers generally are able to design, manufacture and deliver components at a
lower cost than the OEMs due to: (i) their significantly lower direct labor,
fringe benefit and overhead costs; (ii) the ability to spread R&D and
engineering costs over products provided to multiple OEMs; and (iii) the
economies of scale inherent in product specialization. The domestic OEMs have
benefited because outsourcing has allowed them to reduce costs and to focus on
overall vehicle design and consumer marketing.
Suppliers, such as the Company, have benefited from outsourcing because the
aggregate number and value of components which they manufacture have increased
dramatically. In addition, the outsourcing trend has increased the complexity of
components which are manufactured by independent suppliers and this has favored
low cost, full service, high quality suppliers, such as the Company, which can
develop modules and systems that OEMs can easily install.
Consolidation of Supplier Base by OEMs
2
<PAGE>
The OEMs have significantly consolidated their supplier bases in an effort to
reduce their procurement related costs and accelerate new platform development.
Many suppliers have either been eliminated or tiered (i.e., they supply other
suppliers) in order to minimize the number of direct supplier contacts the OEM
must maintain.
This consolidation has altered the typical structure of supplier contracts. In
the past, OEMs generally outsourced relatively simple parts under annual
contracts primarily on the basis of cost, and suppliers generally functioned as
contract manufacturers, with the OEM performing all development, design and
engineering related tasks. With the trend towards the outsourcing of
increasingly complex multicomponent systems, the basis of competition among
suppliers has shifted to one encompassing a broad range of additional criteria
including design capabilities, speed of development, materials and manufacturing
process expertise, consistency of quality and reliability of delivery. In many
cases, sole-source supply contracts cover the life of a vehicle or platform.
Suppliers benefit because this enables them to devote the resources necessary
for proprietary product development with the knowledge that they will have the
opportunity to earn an adequate return on such investment over the multiyear
life of a contract. In turn, the OEMs benefit because they share in the
manufacturing cost savings attributable to multiyear production runs at high
capacity utilization levels. As a result, smaller, poorly capitalized suppliers
with limited product lines, engineering and design capabilities have been and
will continue to be eliminated and lose market share. Larger suppliers, such as
the Company, with broad product lines, in-house design and engineering
capabilities and the ability to effectively manage their own supplier bases,
have increased their market share.
COMMERCIAL TRUCK COMPONENTS INDUSTRY
The commercial truck components industry has also experienced increased use of
plastics. Continuing consolidation of the domestic OEM's coupled with on-going
consolidation of the supplier base have served to increase levels of
manufacturing in North America. The increased use of plastics is particularly
pronounced in the commercial truck industry. Plastics allow for significant
weight savings and improved fuel economy relative to steel. For example, the
Company believes that a composite truck hood assembly made by the Company weighs
approximately 30% less than a comparable steel assembly. In addition, because of
low annual volumes of commercial truck production, lower up front tooling costs
give plastic an advantage over steel. Finally, in contrast to the automotive and
light truck component industry, the commercial truck industry historically has
not manufactured its own components, but rather has relied heavily on suppliers
for their design, engineering and manufacturing of components. These industry
characteristics favor suppliers like the Company, that have broad design and
engineering capabilities and extensive commercial truck component manufacturing
experience. The Company is a key supplier to Freightliner, Kenworth, GM, Volvo,
Sterling, Ford and Mack Truck.
INDUSTRIAL AND NON-AUTOMOTIVE COMPONENTS INDUSTRY
The industrial and non-automotive markets for the Company's manufacturing
processes include recreation, agriculture, transportation, construction, marine
and military industries. A substantial portion of the reinforced plastic
products supplied to these markets comes from sheet molded compound (''SMC''),
much of which is captively molded by companies such as General Electric, White
Westinghouse, Therma-Tru, Kohler, Rubbermaid, Xerox and RCA. The development of
business in this market typically comes from two areas of opportunity:
conversion from alternate materials and conversion from alternate composite
processes due to increased volume requirements.
BACKGROUND, ACQUISITION AND EXPANSION HISTORY
The Company has grown rapidly since its inception by capitalizing on both the
consolidation of the industry and the increase in plastic content per vehicle.
It has responded to the industry consolidation by building or acquiring full-
service design, engineering and manufacturing capabilities. The Company's
ability to offer a comprehensive range of processes and materials has given it a
strong competitive position among full-service OEM suppliers.
Since its initial formative acquisitions in 1988 and 1990, the Company's
management has consummated five major and four minor acquisitions over the past
nine years, implementing a focused strategy to enhance profitability and
reposition the acquired entities for growth. This strategy has included one or
more of the following steps designed to reduce costs, simplify manufacturing and
increase profitability: (i) placing strong managers in key positions in the
newly acquired company to implement changes; (ii) rationalizing raw materials
and components purchasing (the Company's largest single cost component) to
reduce costs of goods sold; (iii) redesigning manufacturing and material flow to
eliminate indirect costs,
3
<PAGE>
reduce inventories and shorten production cycle times; (iv) reducing headcount;
and (v) reducing overall administrative costs, including insurance, benefit
plans, and professional fees.
The following summarizes the Company's acquisition history:
1988 Nortec Precision Plastics
Precision functional parts manufacturer. Principal customer was
DaimlerChrysler.
1990 Wolf Engineering Corporation (''Wolf'')
Enhanced functional parts capabilities and added tool building
capability. Added GM as customer. Management improved manufacturing
material flow, improved labor productivity and reduced SG&A.
1993 Voplex Corporation (including Voplex Canada) (collectively, ''Voplex'')
Entered interior plastic trim market. Added blow-molding,
compression-molded fiber processing, extrusion, co-extrusion, paint
and large press capabilities. Added Canadian manufacturing
facilities. Management reduced manufacturing and supervisory
headcount, improved labor productivity, closed two facilities,
increased raw material yields and substantially increased sales to
GM.
1993 Troy Products
Added larger tonnage press capacity and structural foam technology.
1994 Rockwell Plastics ("Rockwell")
Added thermoset and compression molding technology. Enhanced
functional parts market position and added structural parts
capabilities. Added Honda, Mazda, Nissan and Suzuki to customer base
as well as significant Ford business. Added commercial truck OEMs as
customers. Management consolidated sales forces, renegotiated
insurance and benefit policies and reduced plant level administration
head-count.
1996 GenCorp RPD ("GenCorp RPD")
Substantially increased SMC capabilities, making the Company the
leading manufacturer of SMC. Added Volvo Heavy Truck and Kenworth to
customer base as well as significantly increased business with GM. To
date, management has re-negotiated insurance and benefit policies and
significantly reduced intercompany charges related to corporate level
administration.
1997 APX--PMC Division ("APX")
Added resin transfer molding ("RTM") technology and paint priming.
The acquisition also added in-house RTM tooling and prototype
capabilities and strengthened the Company's relationship with
DaimlerChrysler.
1997 Eagle-Picher--Plastics Division ("Eagle-Picher")
Improved painting capabilities by adding top coat painting which
meets OEM Class A standards. Added non-automotive product lines and
strengthen Transplant relationships. Added additional large tonnage
presses and open plant capacity and ability to consolidate SMC
production with other Company plants.
1997 Goodyear-Jackson--Engineered Composites Business ("Goodyear-Jackson")
Strengthened the Company's position as the leading SMC supplier to
medium and heavy truck OEMs and enhanced its relationship with Ford
and Freightliner. Added new products (grill opening panels &
retainers, air brake pistons) and manufacturing processes (SMC
injection molding). Increased SMC production capacity with the
addition of compression and injection molding presses.
4
<PAGE>
1997 Owens-Corning Brazil--Brazilian Molded Plastic and Pultrusion
Operations ("Brazil")
Added ability to manufacture components for Brazil-based customers
and Brazilian subsidiaries of North American OEMs.
1998 Livingston, Inc. ("Livingston")
Enhanced the Company's relationship with PACCAR (Kenworth) and
provided the Company with a Class 8 commercial truck component
assembly facility on the west coast of the United States.
MEXICAN FACILITY
The Company has recently completed formation under Mexican law, of Cambridge
Operations Mexico, S.A. a subsidiary owned one percent (1%) by Holdings and 99%
by the Company ("Cambridge Mexico"). Cambridge Mexico was formed to lease and
operate a production facility in Mexico to support the Ford (H-215) and GM
(GM250) programs. The manufacturing facility is anticipated to be approximately
70,000 square feet and commence operations during the fourth quarter of 2000.
The Mexico facility will position Cambridge Industries to take advantage of the
emerging requirements for resident Mexico plastic suppliers to the automotive
and commercial truck OEMs.
SENIOR SUBORDINATED NOTES DUE 2007
On July 10, 1997, the Company issued (the ''Offering'') its Senior
Subordinated Notes due 2007, Series A (the ''Series A Notes'') in the principal
amount of $100.0 million. On January 14, 1998, the Company completed an exchange
offer (the ''Exchange Offer'') pursuant to which $98.0 million principal amount
of Series A Notes were exchanged for the Company's Senior Subordinated Notes due
2007, Series B (the ''Series B Notes,'' together with the Series A Notes, the
''Notes''). The Notes bear interest at a rate of 10 1/4 % per annum, payable on
each January 15 and July 15, commencing January 15, 1998. The Notes will mature
on July 15, 2007. The Company may redeem the Notes on or after July 15, 2002.
The Notes are general unsecured obligations of the Company. The Notes are
guaranteed on a senior subordinated basis by the Company's only existing U.S.
subsidiary, CE, and all of the Company's future U.S. subsidiaries (the
''Guarantors''). The Guarantees are general unsecured obligations of the
Guarantors. The proceeds of the Offering, together with financing under the
Credit Agreement (as defined below), were used, in part, to finance the Eagle-
Picher and Goodyear-Jackson transactions.
As a result of the Exchange Offer, Section 13 of the Exchange Act required
that the Company file certain reports, including this Annual Report. However,
pursuant to Exchange Act Rule 15d-6, the Company filed a Form 15 with the
Securities and Exchange Commission before January 30, 1998, which suspended the
Company's duty to file Section 13 reports.
In connection with the issuance of the Notes, the Company agreed with Note
purchasers to prepare and distribute the reports specified by Section 13 to Note
holders and to submit those reports to the Securities and Exchange Commission
for filing under the Exchange Act. While the Company intends to comply with its
contractual obligations, the filing of Section 13 reports is no longer required
by the Exchange Act.
As a result of the Company's intention to sell its business to a qualified
buyer, announced previously by the Board of Directors described below, there can
be no assurance, if the buyer does not assume the Notes, that such sales process
will generate sufficient proceeds after payment of senior secured obligations of
the Company and transaction costs to pay the Notes in full. See, Management
Discussion and Analysis - Liquidity and Capital Resources.
CREDIT AGREEMENT
On July 10, 1997, the Company entered into a credit agreement with Bankers
Trust Company as agent (''Agent'') and other institutions (the "Banks")
providing loans up to $280.0 million, consisting of: $70.0 million in aggregate
principal amount of A Term Loans; $135.0 million in aggregate principal amount
of B Term Loans; and $75.0 million revolving credit
5
<PAGE>
facility. The Company used the A Term Loans and the B Term Loans to repay term
loans under a previous credit agreement. As of March 30, 2000, the Company had
drawn $65.0 million of the revolving credit facility.
The Credit Agreement contains restrictive covenants which, among other things,
limit the incurrence of additional indebtedness, dividends, transactions with
affiliates, asset sales, acquisitions, mergers and consolidations, prepayments
of other indebtedness, liens and encumbrances, capital expenditures and other
matters customarily restricted in such agreements. The covenants also require
the Company to meet minimum levels of EBITDA (earnings before interest, income
taxes, depreciation and amortization) and interest coverage, and establish a
maximum leverage ratio.
In September 1998, the Company entered into a Second Waiver and Amendment and
in January 1999 the Company entered into a Third Waiver and Amendment pursuant
to which certain restrictive covenants contained in the credit agreement were
waived and amended. On February 23, 1999, the Company entered into a Fourth
Waiver and Amendment to the credit agreement (together with the Second, Third,
and Fourth Waivers and Amendments, the "Credit Agreement") with the Agent and
other institutions, which is effective as of December 31, 1998 through and
including March 31, 2000, whereby the aggregate outstanding principal amount of
the revolving credit facility shall not at any time exceed $65 million, and
shall not exceed $50 million on the last day of any month. In addition, certain
restrictive covenants were waived and amended. Letters of Credit outstanding
under the Credit Agreement are limited to $5.3 million.
The amended Credit Agreement eliminated covenant requirements at December 31,
1998, and amended the covenants for periods through March 31, 2000.
In July 1999, the company entered into a Fifth Waiver and Amendment and in
December 1999, the Company entered into a Sixth Waiver and Amendment, pursuant
to which certain restrictive covenants contained in the Credit Agreement were
waived and amended. With respect to the Sixth Waiver and Amendment, the
Company's authority to pay the employment compensation or management fees (but
not reasonable out of pocket expenses) of certain affiliates was restricted. Any
such unpaid compensation or management fees continue to accrue. In addition,
with respect to the Sixth Waiver and Amendment, the Company agreed to cooperate
with and pay reasonable costs, fees and disbursements of the Banks legal counsel
and consultants to such legal counsel in connection with certain reporting and
analytical activity under the Credit Agreement related to the Company's business
operations and financial results therefrom.
As an inducement to the Banks agreeing to the Sixth Waiver and Amendment,
Holdings and the Company agreed to engage Morgan Stanley Dean Witter & Co.
("MSDW") for purposes of assisting Holdings and the Company with the sale of all
or a portion of the company's business or assets, to cooperate with MSDW in
connection with such sales activity, provided that such activity did not
materially reduce the value of any business or assets sold, and to pay certain
amendment fees to the Banks related to the outstanding balances of all
borrowings under the Credit Agreement.
Subsequent to the Company's 1999 year-end, in March 2000, the Company entered
into the Seventh Waiver and Amendment and the Eighth Waiver and Amendment. In
the Seventh Waiver and Amendment, the Banks eliminated for the month of February
2000, the requirement imposed in the Fourth Waiver and Amendment that the
outstanding principal amount of the Company's revolving credit facility under
the Credit Agreement not exceed $50 million on the last day of any month. In
the Eighth Waiver and Amendment the Company and the Banks agreed to several
waivers, revisions and amendments to certain restrictive covenants under the
Credit Agreement, including extending the date by which the Company's
outstanding principal amount of its revolving credit facility could not exceed
$65 million, and deferral of the Company's obligations relating to certain
mandatory prepayments of principal. As a condition to the Eighth Waiver and
Amendment becoming effective, the Company agreed to negotiate for and enter into
with its OEM customers certain agreements (the "Customer Agreements") whereby
the OEMs agree as long as the Company is in compliance with the Customer
Agreements (i) to provide accelerated payments of their accounts payable to the
Company, (ii) not to resource the production of the company's products, programs
or projects, and (iii) to waive set-off or payment abatement rights on certain
of the OEMs' accounts payable to the Company.
The Company has entered into such Customer Agreements as the Banks required.
In order to induce the Banks to enter into the Eighth Waiver and Amendment, the
Company (i) reaffirmed its commitment to the sale process contemplated by the
Sixth Waiver and Amendment for which MSDW was engaged, (ii) agreed to the
payment to the Banks of certain additional amendment fees related to the
outstanding principal balances of all borrowings under the Credit Agreement, and
(iii) agreed, along with Holdings and the Guarantor of the Credit
6
<PAGE>
Agreement, to release the Banks and their agents under and pursuant to the
Credit Agreement, from any and all claims, causes of action, or liabilities
which are in any manner related to it's Credit Agreement and any documents or
enforcement activities related thereto.
As a condition of entering into the Customer Agreements, the OEMs required
that the Company negotiate for and obtain standby financing commitments for
debtor-in-possession financing in the event of a Chapter 11 insolvency
proceeding involving the Company. The Company has obtained commitments for such
debtor-in-possession financing from the Banks who are signatories to its Credit
Agreement (the "DIP Financing").
BUSINESS STRATEGY
The Company's historic business strategy has been to capitalize on its
perceived competitive strengths (see ''Competition'') in order to enhance its
leadership position in the industry through a series of acquisitions of
complimentary manufacturers.
This strategy was designed to capitalize on increased plastic usage for
exterior and structural/functional components. The Company continues to seek
opportunities to increase plastic content per vehicle through the design,
development and manufacture of plastic components and systems which have been
historically fabricated in metal. For example, the Company generates significant
revenue from several products which were not historically fabricated in plastic,
such as the plastic rocker arm covers, the cross car beam and the step-assist.
The Company is now actively marketing these technologies to other OEMs for use
in other platforms. The Company has been awarded contracts from GM for a
composite pick-up truck bed that weighs less and has increased durability
compared to steelbeds currently in use. The Company expects plastic content per
vehicle for exterior and structural/functional/powertrain components to continue
to increase during the next several years.
SALE OF COMPANY OR ITS BUSINESS
Subsequent to the Company's 1999 year-end, the Company announced that for
various strategic reasons its board of directors had approved a decision to
solicit buyers for the Company. The demand for the Company's technology and
manufacturing abilities has resulted in the Company's being selected by its
customers for programs and projects that are critical to these customers' future
success. To satisfy such customer needs for assured performance and for the
Company to perform its obligations with respect to the increase in the
Company's business, the Company requires significant funding for new equipment
and facilities. These needs can best be met by the Company through the sale of
certain of its on-going business operations or, if the right opportunity
presents itself, all of the Company's assets and business operations to a
qualified buyer. To assist Management and the Board of Directors in achieving a
timely and competitive execution of this sales plan, the Company has engaged
MSDW as its investment banking firm and Wasserstein Perrella & Co., Inc., as its
financial advisor.
The Company anticipates that it will have substantially accomplished its
strategic goal of identifying a qualified buyer or buyers for its business
investments by the end of the first half of the year ending December 31, 2000.
The Company believes that as part of the sales process a buyer may require that
a Chapter 11 proceeding be commenced to facilitate such sale.
EXISTING JOINT VENTURES AND LICENSING ARRANGEMENTS
In order to leverage its competitive position to the greatest extent and
penetrate new markets, the Company has attempted to access new technologies
through joint ventures and licensing arrangements. The Company seeks to exploit
joint ventures, strategic alliances and licensing arrangements to develop new
products, materials and processing technologies that provide opportunities for
growth while limiting its investment risk. The Company currently has a strategic
alliance agreement with Menzolit Fibron, and a joint venture agreement with
Mexican Industries in Michigan, Inc. ("Mexican Industries") and a technical
licensing agreement with Moya.
The Company has established joint ventures and alliances in the United States
and in Europe to gain access to new materials, new processing technologies and
to open new markets. The forming of these joint ventures provide considerable
advantages to the Company over its traditional competitors.
7
<PAGE>
The Menzolit Fibron strategic alliance was established to give the Company
direct access to the European automakers and provide a mechanism to establish a
manufacturing presence while limiting capital spending. The Company believes
that Menzolit Fibron is one of Europe's largest SMC's suppliers. The Company
also has access to their material and processing technologies. This joint
alliance has resulted in the job award of a bumper beam support system from
Mercedes.
In May 1998, the Company entered into a joint venture with Mexican Industries
to assist domestic OEMs in meeting their minority content goals by supplying,
through the joint venture, interior trim products to the OEMs and industry
suppliers. The joint venture takes the form of a Michigan limited liability
company with the name Mexican and Cambridge, L.L.C., doing business as Dos Manos
Technologies ("Dos Manos"). In connection with the formation and operation of
the joint venture, Mexican Industries built a manufacturing and assembly
facility in Detroit, Michigan, which is being leased by Dos Manos. The facility
commenced operations in December 1998.
As a part of this announced business strategy, Management recently commenced
negotiations with Mexican Industries with a view to having Mexican Industries
acquire all of the Company's interest in Dos Manos for the present fair market
value of such interest.
Customers
The Company has a diverse customer base, including, among others, Ford, GM,
DaimlerChrysler, Honda, Mazda, Nissan, Volkswagen, Freightliner, PACCAR, Mack
Truck and Volvo Heavy Truck. The Company has close ties to the automobile
manufacturing industry and has integral components in some of the industry's
most popular vehicles. The Company currently has products in numerous high
volume vehicles, including long-lasting models sold in the United States such as
the Ford Explorer, Ranger, Taurus and F-150 truck, the GM Suburban and Astro
Minivan and the Honda Accord. The following chart highlights vehicles which use
products produced by the Company:
8
<PAGE>
1999 VEHICLE NAMEPLATES--AND SELECTED NON-AUTOMOTIVE CUSTOMERS
<TABLE>
<CAPTION>
Customers Models
- ------------------- -----------------------------------------------------------------------------------
<S> <C>
Automobile and
Light Truck:
DaimlerChrysler CHRYSLER DODGE PLYMOUTH JEEP/EAGLE
-------- ----- -------- ----------
Automobiles.... Intrepid
Neon
Viper Coupe
Viper Convertible
Light Trucks... Town & Country Caravan Voyager Cherokee
Dakota Grand Cherokee
Ram Van Wrangler
Ford FORD FORD LINCOLN MERCURY
---- ---- ------- -------
Automobiles.... Crown Victoria Mustang Mark VIII Grand Marquis
Thunderbird Taurus Continental
Town Car
Light Trucks... F-Series Pickup Ranger Villager
Econoline Explorer
Windstar
Aerostar Van
General Motors CHEVROLET BUICK OLDSMOBILE CADILLAC PONTIAC SATURN
--------- ----- ---------- -------- ------- ------
Automobiles.... Monte Carlo Le Sabre Intrigue Seville Firebird Saturn SL
Lumina Riviera Cadillac Eldorado Bonneville Saturn SC
Camaro Regal Cutlass Deville Grand Am
Corvette Park Avenue Aurora Catera
Century Alero Fleetwood
Light Trucks... CK Pickup Bravada Trans Sport
Tahoe/Yukon Silhouette Montana
Suburban
Astro/Safari
Blazer
Venture
Honda........... Accord Acura
Nissan.......... Quest
Volkswagen...... Jetta Golf
Toyota.......... Micro Bus Sierra Minivan
Subaru.......... Legacy Wagon Legacy Sedan
Isuzu........... Frontera
</TABLE>
9
<PAGE>
Mitsubishi............ Eclipse Eagle
CUSTOMER Models
- ---------------------- ---------------------------------------
Commercial Trucks:
Freightliner
GM
Ford
Volvo Heavy Truck
Mack Truck
Kenworth
Peterbilt
INDUSTRIAL AND
NON-AUTOMOTIVE:
Caradon............... Residential door skins
Pease................. Residential door skins
Premedoor............. Residential door skins
AM General............ Hummer Humvee
John Deere............ Tractors Combines
Kawasaki.............. Personal watercraft
Ford New Holland...... Tractors
U.S. Military......... Tank set
Polaris............... Personal watercraft
Toyota................ Lift Trucks
Mercury Marine........ Marine outboard
engines
Xerox................. Toner bottles
PRODUCTS
The Company's principal products include the exterior,
structural/functional/powertrain interior trim and industrial parts listed
below. The products manufactured by the Company are made from a variety of
powertrain and thermoplastic materials. The Company's product diversity
illustrated by the table below, positions the Company as a versatile source to
the automotive, truck and non-automotive industries.
10
<PAGE>
SEGMENTS
EXTERIOR Automotive and Light Truck Commercial Truck Industrial and Non
-------------------------- ---------------- ------------------
Automotive
----------
Hoods and hood assemblies Hoods and hood assemblies
Liftgates and doors Liftgates and doors
Roof and roof moldings Roof and roof moldings
Fenders Fenders
Bodyside moldings/rubstrips Fairings
Windshield surrounds Grill opening retainers
Deck lids Grill opening panels
Hatches Storage doors
Spoilers
Grill opening retainers
Grill opening panels
End gates
Truck pick-up boxes
STRUCTURAL/FUNCTIONAL/POWERTRAIN
Headlamp carriers Bumper beams
Engine shields/covers Battery trays
Structural beams Plenums (firewalls)
Bumper beams Air spring pistons
Structural component carriers
Load floors
Fuel tank shields
Seat pans
Fluid systems linkages
Rocker arm covers
Fan shrouds
Radiator support beams
Bearing cages
Steering yokes
Battery trays
Gears
Fuel valves
Plenums (firewalls)
INTERIOR Windshield cowls
Cross car beam
Cross members
Steering column bezels Garnish molding systems
Glove box door and assemblies Sleeper bunk
Instrument panel trim components Door modular system
Liftgate trim panels Head Liners
Door trim panels Engine Covers
Rear shelf panels "A" Pillars
Consoles/overhead
Seat backs/bases
Shift knobs
Garnish molding systems
Handles/assists straps
Electrical carriers
Sunshades
Knee bolsters
Door modular system
Rear package tray system
11
<PAGE>
Segments
<TABLE>
<CAPTION>
AUTOMOTIVE AND LIGHT TRUCK Commercial Truck Industrial and Non
-------------------------- ---------------- ------------------
Automotive
----------
<S> <C>
INDUSTRIAL AND
NON-AUTOMOTIVE Blow molded bottles
Forklift body panels
Residential door systems
Personal watercraft decks
& covers
Military vehicle hoods,
engine covers & seats
Tractor hoods,
shields/pans, consoles and
seats
Combine components
Lift truck hoods
Outboard engine cowls
</TABLE>
MANUFACTURING PROCESSES
The Company has a full range of equipment, including compression molding
presses from 50 to 4,400 tons, injection molding presses from 28 to 2,500 tons,
single and twin screw extrusion and co-extrusion machines and 7 to 90 ton blow-
molding machines. These capabilities allow the various operating divisions of
the Company extensive manufacturing flexibility. The Company is capable of
processing both thermosets and thermoplastics. Thermosets are glass reinforced
plastics that when heated and pressurized undergo a chemical change and
generally provide superior impact strength, dimensional stability and heat
resistance, as compared to other plastics. Thermoplastics are heated into a
liquid state and then formed through injection, blow-molding, extrusion or
compression processing techniques. Thermoplastics can be recycled to be used
again in conjunction with virgin materials.
The Company is a leading molder of a wide range of composites and a
manufacturer of Sheet Molding Compound (SMC), a thermoset material from which
large complex shaped automotive and commercial truck panels are manufactured.
SMC is experiencing extensive growth for automotive and commercial truck
applications. In 1999, 16 manufacturers used SMC for over 400 components on over
100 global passenger car and truck lines. The Company's Shelbyville, Indiana
facility is the newest State-of-the-Art facility producing SMC parts in the
industry. The use of SMC in the automotive and truck industry has increased
from 147 million pounds in 1992, to 257 million pounds in 1999. Projections for
the continued growth of SMC are for it to exceed 312 million pounds in the year
2009, all for applications in automotive and commercial truck industry. SMC is
particularly well suited for exterior and structural/functional/powertrain
components because it offers lower upfront tooling investment to customers and
weight savings over steel, and allows design and styling flexibility .
Management believes the Company is the leading manufacturer of SMC automotive
and commercial truck products in North America.
The Eagle-Picher transaction resulted in the Company's acquisition of 48
additional compression molding presses ranging up to 4,400 tons and also related
additional SMC production capacity. Further, the Eagle-Picher acquisition added
top coat paint lines, providing a capability to top coat paint automotive
components to Class A standards, which the Company did not previously have. In
1999, Cambridge re-opened the Huntington, Indiana facility (formerly Eagle-
Picher) to support the production of SRIM pickup boxes for a MYO1 General
Motors program.
The Company's automated paint systems acquired in the Eagle-Picher transaction
have high volume capabilities. The conveyor lines have adjustable speeds and can
handle parts in a variety of sizes (up to ten feet in length by five feet wide
and three feet in-depth). Related systems include prime and topcoat bake ovens
with high discharge rates; multi-stage power washers; and numerous waterfall
spray booths connected to prime and top coat bake ovens by conveyors.
The Goodyear-Jackson transaction resulted in the Company's acquisition of 16
compression molding presses ranging from 250 to 3,000 tons and 10
thermoset/thermoplastic injection molding presses ranging from 500 to 2,200 tons
and also related additional SMC-making production capacity.
12
<PAGE>
Quality throughout the manufacturing process is maintained through the
implementation of statistical process control (''SPC'') techniques. Typical
characteristics measured and controlled through SPC methods include material
properties such as viscosity, gel time, sheen or gloss color and other
quantifiable physical and appearance properties for exterior and interior
components. Characteristics for structural/functional/powertrain parts including
physical properties and dimensional stability at both the component and systems
level are monitored. SPC data provide the production operator with trend
information on the process, which allows for proactive measures to be
implemented to assure product specifications are maintained and to minimize
variation.
RAW MATERIALS AND SUPPLIERS
The Company's primary raw materials include thermoplastic resins (ABS,
Polypropylene, Nylon, ABS/PC, TPO, Nylon, HDPE, Polyster and other engineered
products) and thermoset resins (acrylic and polyester). Additionally, the
Company manufactures all of its own SMC. The Company's principal suppliers
include Bayer, Dow Chemical, A. Schulman and Prime Source Polymers for
thermoplastic resins. Ashland Chemical, Reichold and Alpha Owens Corning
provide SMC resins and Vetrotex, Owens Corning and PPG provide glass fibers for
the SMC and bulk molding composite ("BMC") process. Omnova, Siebert, and
Sherwin Williams provide coatings and paint. Ashland Chemical and Lord Adhesive
provide adhesive products. Historically, the vast majority of the Company's raw
materials have been available, and no serious shortages or delivery delays have
been encountered. Certain of the Company's suppliers must be pre-qualified by
the Company's customers. Management has devoted significant attention to its
relationships with its principal suppliers as a result of the announcement of
the decision to sell the Company's business and believes that such relationships
are stable. The Company has never experienced major disruptions in its flow of
raw materials or finished goods. The Company works with its strategic suppliers
to obtain long-term corporate contracts, shared technologies, resources and
cooperative working relationships.
ENGINEERING/RESEARCH AND DEVELOPMENT
The Company has the ability to design and engineer its products to meet its
customers' specific applications and needs through its dedicated engineering and
research and development staff of professionals. The Company utilizes advanced
quality planning techniques by coordinating manufacturing and engineering
personnel in development/launch teams that produce the most efficient, cost
competitive design for the customer using advanced techniques including
integrated CAD/CAM design systems. The Company has further extended its product
engineering and design capabilities by supporting each division with dedicated
expertise and equipment to address customer needs.
COMPETITION
The Company operates in a highly competitive environment. As a result of the
more demanding service requirements placed on suppliers by the OEMs, and the
resulting rationalization of the OEM supplier base, the automotive plastic parts
industry has consolidated many small entities into fewer, much larger entities.
In the automotive and light truck industry, the Company's major competitors in
the exterior and structural/functional/powertrain market segments include Budd,
Venture Holdings Trust and Core Materials Corp. The interior business is largely
consolidated around such suppliers as Magna International, Textron Automotive
Division, JCI, and Lear Corporation. Although the exterior and
structural/functional markets are still fragmented, the Company expects them to
consolidate along the lines of the interior markets.
The Company competes on the basis of cost, product quality, timely delivery,
design support, customer service, product mix and new product innovation. The
Company competes for new business both at the beginning of new model development
and upon the redesign of existing models by its major customers. New model
development generally begins two to five years prior to the marketing of such
models to the public. Once a supplier has been designated to supply parts to a
new program, an OEM will usually continue to purchase those parts from the
designated supplier for the life of the program, and generally the supplier has
an advantage in obtaining replacement business as the incumbent supplier.
The Company has significantly increased its size and enhanced its strategic
position, which to a considerable degree led to the Company's need to sell its
business in order to assure that adequate funding is available to meet customer
demands and expectations for the Company's products. Subsequent to 1999 year-
end, in March 2000, the Company entered into
13
<PAGE>
Customer Agreements with certain of its OEM customers to provide adequate
working capital and funds during the sale process for the Company's planned
capital expenditures related to specific product programs with such OEM
customers. While there can be no assurance that such Customer Agreements will
meet all of the Company's needs, Management believes that such needs are
substantially satisfied by reason of the Customer Agreements.
Management believes that the following are the Company's primary competitive
strengths:
TIER 1 STATUS AND STRONG RELATIONSHIPS WITH OEMS
The Company has established a position as a leading Tier 1 supplier of plastic
components and systems to Ford, General Motors, DaimlerChrysler, Toyota, Honda,
Mazda, Nissan, Volkswagen, Volvo Heavy Truck, Mack Truck, Kenworth and
Freightliner. Tier 1 status and strong customer relationships are important
elements in achieving continued profitable growth because as OEMs narrow their
supplier bases, well-regarded existing suppliers have an advantage in gaining
new contracts. The evolution of OEM relationships into strategic partnerships
provides a significant advantage to Tier 1 suppliers with systems integration
capabilities (such as the Company) in retaining existing contracts as well as in
participating during the design phase for new vehicles, which is integral to
becoming a supplier to such new platforms.
DIVERSE PROCESS AND MATERIAL MANUFACTURING CAPABILITIES
The Company utilizes a broad range of manufacturing processes including
compression molding, injection molding, blow molding, extrusion, pultrusion,
SRIM spray-up molding and RTM and is able to use a wide variety of materials
including SMC, BMC, glass mat thermoplastic (''GMT''), structural foam, glass
reinforced urethane, polyethylene, polypropylene, polyvinyl chloride, Azdel and
resinated natural fibers. The Company has secondary finishing capabilities
including painting, in-mold coating, ultrasonic and vibration welding, bonding
with urethane and epoxy adhesives and top coat painting capabilities sufficient
to meet OEM Class A standards. These capabilities give the Company the ability
to select a cost effective combination of materials and manufacturing methods
for a given component and to deliver a finished component which is ready for
installation. They also allow the Company to change its manufacturing techniques
as technological innovation allows in order to reduce costs and improve product
performance. Many competitors are dependent on fewer manufacturing processes and
are at a competitive disadvantage to the Company when changes in manufacturing
specifications by the OEM, or new technologies or materials emerge that favor
one raw material or manufacturing method over another. The Company believes its
diverse capabilities enhance its relationship with OEMs and further solidifies
its role as a Tier 1 supplier.
HIGH QUALITY MANUFACTURING POSITION
Management believes OEMs prefer stable suppliers who can generate productivity
gains that can be shared to reduce OEM costs. The Company's controls are closely
integrated with its high quality manufacturing operations, thereby allowing it
to deliver high quality, easy to install and competitively priced components on
a just-in-time basis. The Company has received numerous quality and performance
awards including Ford's Q1, General Motors' Targets of Excellence award, GM
Supplier of the Year (1995, 1996 and 1997), DaimlerChrysler's QE designation,
Honda's Quality, Plant & Delivery Award, and Mazda's Total Quality Excellence
award. Quality levels are currently being standardized across OEMs through the
QS 9000 program. The Company has achieved QS 9000 certification in its Lenoir,
NC, Newton, NC, Centralia, IL, Lapeer, MI, Canandaigua, NY, Dearborn, MI,
Grabill, IN, Woodstock, Ontario, Canada, Shelbyville, IN, Rushville, IN, Brazil
and Madison Heights, MI facilities. The Company has achieved ISO 9000
certification in its Jackson, OH facility. The Company is in the process of
obtaining QS 9000 certification in the remainder of its facilities. The Company
has achieved Ford Q1 certification status at its Lenoir, NC, Newton, NC,
Grabill, IN, Dearborn, MI, Lapeer, MI and Jackson, OH facilities.
STRONG DESIGN AND ENGINEERING EXPERTISE
The Company has an engineering and research and development staff that
develops new products, materials and processing technologies through computer-
aided design techniques. The Company works directly with OEM designers to create
innovative solutions that simplify vehicle assembly. For example, the Company
designed and is producing the tri-door for Ford's 2000 Excursion SUV in its
Centralia, IL facility. This unique door system weighs 15% less than sheet
metal doors
14
<PAGE>
and tooling costs are 75% less than for steel doors. The Company also designed,
engineered and now produces the cross car beam, a structural component for the
Ford Ranger/Explorer platform on which all of the instrument panel components
are mounted. This cross car beam eliminates approximately 20 separate metal and
plastic parts, weighs less and reduces noise and vibration by approximately 33%
compared to the steel structure it replaced. The Company is currently supplying
the step-assist on GM's GMT800 sport utility vehicle. The Company's step-assist
allowed design flexibility not possible with steel, and is 20% lighter than a
functionally similar steel step-assist. In addition, Cambridge will be producing
pick-up box components for the GMT800 truck to be launched in July, 2000. The
Company recently won a program on GM's H-car for a front-end system (headlamp
carrier) that, in comparison to traditional methods, consolidated five separate
parts into one, and reduced the weight of the system by 40%. The Company is
recognized as a leading designer of components for the commercial truck industry
as evidenced by completion of total design responsibility and finite element
validation for the Freightliner Century Program, Mack Vision 2000 Program and
the Ford H-215 program.
In January 2000, the Company began supplying fenders for Ford's new F150
SuperCrew pickup truck. Cambridge is also in the process of facilitizing to
produce components for the GMT805 and GMT250/257 programs. Original plans to
produce these parts in Mexico are on hold, although Cambridge continues to
support GMT program timing.
EMPLOYEES
As of February 29, 2000, the Company had approximately 4,740 employees, of
whom 695 are salaried employees. Approximately 4,045 employees are hourly and
approximately 2,232 are union members. The Company is a party to collective
bargaining agreements with respect to hourly employees at its Centralia, Lapeer,
Woodstock, Dearborn, Jackson, Stephenson Highway and Rio Claro facilities.
Labor contract expiration dates are as follows: Lapeer (UAW) expires Feb.,
2005; Dearborn (UAW) expires Sept., 2003; Centralia (UAW) expires Oct., 2003;
Jackson (USW) expires April, 2004; Stephenson Highway (UAW) expires Sept., 2004
and Woodstock (CAW) expires March, 2000. (Woodstock negotiations are in
process; there are no significant issues which would prevent a mutually
acceptable agreement prior to expiration).
The industry wide agreement at Rio Claro is negotiated each year with the
current agreement expiring on November 30, 2000. There do not appear to be any
significant issues which would prevent an adoption of a mutually acceptable
agreement in November, 2000. In November, 1999, the UAW was elected as the
bargaining representative of the production and maintenance employees at our
Canandaigua, New York facility. The collective bargaining process began in
February, 2000. Preliminary discussions indicate no major obstacles to reaching
an acceptable agreement.
Management believes its relationship with its employees is generally good.
In fact, the Company has received UAW and Steelworker cooperation and support
for its lean manufacturing/continuous improvement process. The Company has not
experienced significant work interruptions nor are there any current serious
labor disputes with its employees.
Subsequent to the Company's 1999 year-end, and in conjunction with the Board
of Directors decision to seek a qualified buyer for the Company's business, or
parts thereof, the Board of Directors adopted a program designed to retain key
employees during the sale process. The program has identified 46 of the
Company's key operations' , sales and management employees in its three primary
business units or lines of business and provided for both retention and
severance payments to them under various circumstances (the "Retention Bonus and
Severance Program"). The Retention Bonus and Severance Program is designed to
retain the identified key employees during the duration of the announced sales
process so as to maximize value of the Company's business units, lines of
business and assets and to minimize potential disruptions to such related
operations, sales and management activities by providing protection to these key
employees in the event that their employment is terminated as a result of the
sale of a business unit, line of business or all of the Company's business and
assets. Acquirers of the Company's business, or parts thereof, will be
obligated to assume the terms and obligations of the Retention Bonus and
Severence Program with respect to employees in the business unit, line of
business or the Company's business acquired for a period of at least six (6)
months after such an acquisition. The program does not require any payments to
an employee who refuses the offer of comparable employment by an acquirer or
buyer of the Company, or part of its business. The Retention Bonus and
Severence Program replaced the Company's then existing bonus program and
severence guidelines. The cost of the severence portion of the new program is
potentially approximately $900,000 greater than the potential cost under the
Company's previously existing severance guidelines and practices.
Management believes that the Retention Bonus and Severance Program is an
adequate and appropriate safeguard to the Company with respect to its announced
sales plan.
15
<PAGE>
PATENTS
The Company owns various patents which aid in maintaining its competitive
position, some of which remain in force over the next 17 to 20 years. The
expiration of any of the Company's patents is not expected to have a material
adverse effect on the Company's operations.
ENVIRONMENTAL MATTERS
Like similar companies, the Company's operations and properties are subject to
extensive federal, state, local and foreign regulation under environmental laws
and regulations concerning, among other things, emissions into the air,
discharges into the water, the remediation of contaminated soil and groundwater,
and the generation, handling, storage, transportation, treatment and disposal of
waste and other materials (collectively, ''Environmental Laws''). Inherent in
manufacturing operations and the Company's real estate ownership and occupance
activities is the risk of environmental liabilities as a result of both current
and past operations, which cannot be predicted with certainty. The Company has
incurred and will continue to incur costs associated with Environmental Laws in
its business. As is the case with manufacturers in general, if a release of
hazardous materials occurs on the Company's properties or at any off-site
disposal location utilized by the Company or its predecessors, the Company may
be held strictly, jointly and severally liable for response costs and natural
resource damages under the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended, and similar state and foreign laws
(collectively, ''Superfund''). While the Company devotes resources to ensuring
that its operations are conducted in a manner which reduces such risks, the
amount of such liability could be material.
The soil and groundwater at the Company's Brickyard Road facility, located in
Canandaigua, New York, contain hazardous materials in excess of applicable state
cleanup standards. The Company completed remediation of this impact and obtained
a "letter of closure" from the NYSDEC (State Environmental Regulatory Agency) in
1999. The cost of this activity is $25,000.
The soil and groundwater at the Company's 111 North Street facility, located
in Canandaigua, New York, contain hazardous materials in excess of applicable
state cleanup standards. The Company is currently remediating the facility
pursuant to a consent order entered into with the State of New York. The Company
has spent approximately $0.3 million to date and currently estimates that
remediation costs over the next four or five years should not exceed an
additional $0.3 million.
Each of these preliminary cost estimates is based upon currently available
information. The actual cost of further investigation or remediation could
differ materially from these projections.
Under the terms of the Company's acquisition of Rockwell Plastics, Rockwell
has indemnified the Company for past environmental liabilities (the ''Rockwell
Environmental Indemnity''), subject to a maximum aggregate contribution by the
Company of $0.6 million and to the survival period of Rockwell's environmental
representations and warranties, which expire July 2004. Since the time of the
Rockwell Plastics acquisition, Rockwell, pursuant to the Rockwell Environmental
Indemnity, has performed additional investigation and analyses of the facilities
acquired in that acquisition. These assessments verified some of the Company's
findings but disagreed with others. Rockwell has subsequently remediated certain
areas of the facilities. Rockwell and the Company are currently discussing the
remaining unremediated areas. Notwithstanding the Rockwell Environmental
Indemnity, the Company could be pursued in the first instance by governmental
authorities or third parties with respect to such matters, subject to its right
to seek indemnification from Rockwell. If Rockwell fails to honor its
obligations under the Rockwell Environmental Indemnity, the Company would be
required to bear the cost of bringing the former Rockwell facilities into
substantial compliance in which event the Company's total exposure could be
material. However, the Company has no reason to believe that Rockwell will not
honor its remediation commitments.
With respect to the facilities acquired in the Company's acquisition of
GenCorp RPD, the Company identified a number of permitting, contamination, off-
site liability, recordkeeping, reporting and hazardous waste regulation non-
compliance issues. Since that acquisition, the Company believes it has brought
the former GenCorp facilities into substantial compliance with applicable
Environmental Laws. Under the terms of the transaction, the Company did not
assume any liabilities arising from pre-existing violations of Environmental
Laws, pre-existing contamination at GenCorp RPD facilities or off-site disposal
of waste materials under Superfund. The Company is completely indemnified for
these non-assumed liabilities (the
16
<PAGE>
''GenCorp Indemnity''). Notwithstanding the GenCorp Indemnity, the Company could
be pursued in the first instance by governmental authorities or third parties
with respect to such matters, subject to its right to seek indemnification from
GenCorp, Inc. If GenCorp, Inc. fails to honor the GenCorp Indemnity, the
Company's total exposure for environmental matters arising from its acquisition
of GenCorp RPD could be material. However, the Company has no reason to believe
that GenCorp, Inc. will not honor the GenCorp Indemnity.
With respect to the facilities acquired in the acquisition of Eagle-Picher,
the Company identified a number of permitting, contamination, off-site
liability, recordkeeping, reporting and hazardous waste regulation non-
compliance issues. The Company has brought the Eagle-Picher facilities into
substantial compliance with applicable Environmental Laws as soon as possible.
Under the terms of the transaction, the Company did not assume any liabilities
arising from off-site disposal of waste materials under Superfund, and the
Company is completely indemnified for this potential Superfund liability by
Eagle-Picher. In addition, the Company is indemnified by Eagle-Picher against
any fines or penalties arising out of any pre-existing violations of
Environmental Laws. Subject to a maximum indemnification limit of $53.3 million,
the Company is also indemnified for any unidentified on-site contamination at,
on, under or about the former Eagle-Picher facilities and unidentified non-
compliance issues, provided the Company asserts an indemnification claim within
four years of the Eagle-Picher Acquisition. Finally, and in addition to its
indemnity obligations, Eagle-Picher covenanted to remediate identified
contamination as presently in place or as materially changed prior to 2003,
(subject to certain financial limitations in the event of change in clean-up
standards) at the former Eagle-Picher facilities pursuant to and in accordance
with applicable state industrial standards. Notwithstanding these Eagle-Picher
covenants and indemnification obligations, the Company could be pursued in the
first instance by governmental authorities or third parties with respect to such
matters, subject to its right to seek indemnification from Eagle-Picher. If
Eagle-Picher fails to honor those indemnities or covenants provided to the
Company, the Company's total exposure for environmental matters arising from the
Eagle-Picher transaction could be material. However the Company has no reason to
believe that Eagle-Picher will not honor the covenants or indemnities provided
to the Company in the Eagle-Picher transaction.
With respect to the facility acquired in the Goodyear-Jackson transaction, the
Company identified a number of contamination, off-site liability, recordkeeping,
hazardous waste regulation, underground storage tank, wastewater discharge and
permitting non-compliance issues. The Company has brought the Goodyear-Jackson
facility into substantial compliance with Environmental Laws as soon as
possible. Under the terms of the acquisition, the Company is indemnified for the
costs associated with rectifying identified violations of Environmental Laws.
The Company did not assume any liabilities arising from off-site disposal of
waste materials under Superfund, and the Company is fully indemnified for any
potential Superfund liability by Goodyear. In addition, the Company is
indemnified by Goodyear, subject to a maximum indemnification limit of $2.5
million and after bearing the first $0.3 million of claims and a cost-sharing
formula thereafter, against any unidentified pre-existing compliance issues
under Environmental Laws and any unidentified on-site contamination at, on,
under or about the former Goodyear-Jackson facility, provided the Company
asserts an indemnification claim within three years of the Goodyear-Jackson
Acquisition. In addition to its indemnity obligations, Goodyear covenanted to
remediate identified contamination in excess of applicable regulatory limits and
to make reasonable efforts to obtain a covenant not to sue under applicable
state laws. Before remediating, Goodyear agreed to reimburse the Company, up to
a maximum of $1.0 million, to investigate and repair the causes or sources of
the identified contamination. Notwithstanding these Goodyear covenants and
indemnification obligations, the Company could be pursued in the first instance
by governmental authorities or third parties with respect to such matters,
subject to its right to seek indemnification from Goodyear. If Goodyear refuses
to honor the indemnities or covenants provided to the Company, the Company's
total exposure for environmental matters arising from the Goodyear-Jackson
transaction could be material. However, the Company has no reason to believe
that Goodyear will not honor the covenants or indemnities provided to the
Company in connection with the Goodyear-Jackson transaction.
With respect to the facilities leased as a result of the Livingston
transaction, the Company did not assume any of the liabilities for violation of
environmental laws with respect to solid waste or hazardous materials
transported by or on behalf of Livingston for off-site disposal or any
liabilities of Livingston for the violation of environmental laws arising from
the operation of Livingston prior to the closing date, including, any fine or
penalty arising from any permit violation. Under the terms of the Livingston
Acquisition, Livingston must indemnify the Company for all liabilities not
assumed by the Company. However, Livingston's liability for all indemnity claims
(environmental and non-environmental) is capped at approximately $1.7 million.
A number of the Company's facilities are likely to be required to comply with
the provisions of the Federal Clean Air Act (''CAA''), including Titles III and
V of the CAA. Title III of the CAA includes provisions requiring the
implementation of Maximum Achievable Control Technology (''MACT'') to reduce
emissions of certain hazardous air pollutants, including
17
<PAGE>
styrene, at certain manufacturing facilities emitting designated quantities of
such pollutants. Air pollution controls to address styrene emissions could cost
approximately $1.0 million per facility and, if MACT is ultimately required in
connection with both the manufacture and use of this compound, may be required
at three to five of the Company's facilities. It is possible that the cost of
complying with the CAA could be material and the Company's failure to comply
with the CAA in the future would likely have a material adverse effect on the
Company.
Based upon the Company's experience to date, as well as the existence of
certain remediation and indemnification agreements obtained in connection with
those acquisitions described above, the Company believes that the future cost of
compliance with existing Environmental Laws (with the possible exception of the
cost of CAA compliance described above) and liability for identified
environmental claims will not have a material adverse effect on the Company's
business, results of operations or financial position. However, future events,
such as new information, more vigorous enforcement policies of regulatory
agencies, stricter or different interpretations of existing Environmental Laws,
changes in existing Environmental Laws or their interpretation, or the failure
of indemnitors to fulfill their contractual obligations, may give rise to
additional costs or claims that could have a material adverse effect on the
Company's business, results of operations, cash flows or financial condition.
The Company's accounting policy is to accrue for environmental claims which it
considers probable and reasonably estimable and to disclose a range of
reasonably possible claims. See Note 1 to the Company's consolidated financial
statements contained in Item 8 of this Annual Report.
18
<PAGE>
ITEM 2--PROPERTIES
The Company's executive offices are located in approximately 24,000 square
feet of owned space at 555 Horace Brown Drive, Madison Heights, Michigan. The
Company has 23 operating facilities with a total of approximately 2.9 million
square feet of space. Molding operations are located at all of its operating
facilities other than Rushville, Indiana, which is an assembly and warehouse
facility. The Company believes that substantially all of its property and
equipment are in good condition and that, together with the facility scheduled
to open in Mexico, described below, has sufficient capacity to meet its current
and projected manufacturing and distribution needs through the 2000 model year.
The following sets forth certain information concerning the Company's operating
facilities:
<TABLE>
<CAPTION>
LOCATION SQUARE FOOTAGE OWNED/LEASED OPERATING SEGMENT
- ---------------------------------------------- -------------- ------------ ----------------------------------
<S> <C> <C> <C>
Centralia, IL........................... 470,800 Owned Commercial Truck
Shelbyville, IN......................... 432,000 Owned Automotive and Light Truck
Canandaigua, NY (3 facilities).......... 180,000 Owned Automotive and Light Truck
Lapeer, MI ............................. 235,000 Owned Automotive and Light Truck
Grabill, IN............................. 222,000 Owned Automotive and Light Truck
Jackson, OH............................. 200,400 Leased Commercial Truck
Lenoir, NC (3 facilities)............... 240,000 Owned/Leased Automotive and Light Truck
Ashley, IN.............................. 123,000 Owned Industrial and Non-Automotive
Products
Huntington, IN.......................... 63,000 Owned Automotive Light Truck
Rushville, IN........................... 97,400 Leased Commerical Truck
Madison Heights, MI..................... 97,000 Leased Automotive and Light Truck
Dearborn, MI (2 facilities)............. 59,750 Owned Automotive and Light Truck
Auburn, WA (2 facilities)............... 98,600 Leased Commercial Truck
Rio Clara, Brazil....................... 226,000 Leased Industrial and Non-Automotive
Products
Portland, OR............................ 54,700 Leased
Newton, NC ............................. 75,000 Owned/Leased Automotive and Light Truck
Woodstock, Ontario, Canada.............. 55,200 Leased Automotive and Light Truck
---------
Total................................ 2,929,850
=========
</TABLE>
The Company's Mexican subsidiary, Cambridge Operations Mexico, S.A. is
anticipated to be 70,000 square feet when it opens in the fourth quarter of
2000.
The Company also owned property and improvements in Vassar, Michigan which has
been sold and Pittsford Township, New York, which was sold in October 1998, and
Dearborn, Michigan was sold in November 1999.
In addition, a 100,000 square foot facility is leased by Dos Manos
Technologies, a joint venture between the Company and Mexican Industries in
Michigan, Inc., in which the Company owns a 48% interest.
ITEM 3--LEGAL PROCEEDINGS
From time to time the Company is engaged in routine litigation arising in the
ordinary course of business; however, the Company is not party to any lawsuit or
proceeding which, individually or in the aggregate, in the opinion of
management, is likely to have a material adverse effect on the financial
condition, results of operations or cash flows of the Company.
Eagle-Picher, but not the Company, is a defendant in litigation commenced in
May 1997 by Caradon Doors and Windows Inc. (''Caradon''), in the U.S. District
Court, Northern District of Georgia. Caradon alleges that Eagle-Picher induced
it to buy door skins from Eagle-Picher, causing Caradon to infringe upon a
patent held by Therma-Tru Corporation, contrary to Eagle-Picher's
representations. The complaint alleges claims for damages exceeding $10 million.
Eagle-Picher intends to vigorously defend the claims in the complaint. The
Company does not anticipate being named as a defendant in the litigation.
19
<PAGE>
The litigation commenced in September 1997 by Therma-Tru Corporation against
the Company and Pease Industries, Inc. alleging patent infringement under 35
U.S.C. (S) 271 and related claims, based upon substantially the same facts as in
the Caradon case described above was settled in June 1999 at no cost to the
Company other than its own costs of defense.
ITEM 4--SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
In lieu of a special meeting of the shareholders of Holdings, by written
consent dated April 15, 1999, the holders of 97% of the voting securities of
Holdings approved an amendment to Holding's and the Company's Bylaws each
providing that a quorum to hold a meeting of the Boards of Directors requires
the presence of at least five of the six directors and that all actions require
the affirmative vote of at least five directors.
PART II
ITEM 5--MARKET FOR THE COMPANY'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
There is no established public trading market for the Company's or Holdings'
common stock.
The number of holders of each class of common equity of Holdings' is as follows:
Class A Common: 14
Class L Common: 15
Class P Common: 1
Preference: 1
There were no cash dividends paid during the two most recent fiscal years.
The Credit Agreement imposes certain restrictions on the payment of dividends,
and the indenture governing the Notes prohibits the declaration of dividends.
The Company has no intention to pay cash dividends in the foreseeable future.
Seven key employees hold an aggregate of 1,454.55 shares of Holdings' Class A
Common Stock and 363.92 shares of Holdings' Class L Common Stock, purchased as
of December 31, 1997, payable pursuant to promissory notes with an aggregate
original principal amount of approximately $.48 million. As and when such notes
are paid, the proceeds from the notes are used for general working capital
purposes. To date, an aggregate of $0.15 million has been paid on such notes.
ITEM 6--SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with the
Financial Statements included elsewhere in this Form 10-K. See ''Management's
Discussion and Analysis of Financial Condition and Results of Operations.'' The
selected consolidated balance sheet and statement of operations data presented
below, as of December 31, 1999 and 1998, and for the years ended December 31,
1999, 1998 and 1997, are derived from the Company's audited consolidated
financial statements included elsewhere in this Form 10-K. The selected balance
sheet data and the selected statement of operations data as of December 31,
1997, 1996 and 1995 and for the years ended December 31, 1996 and 1995,
were derived from audited financial statements, not presented herein.
20
<PAGE>
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------------------------------
1995 1996 (1) 1997(2) 1998(3) 1999
----------- ------------ -------------- -------------- ------------
Results of Operations Data:
<S> <C> <C> <C> <C> <C>
Sales.......................................... $297,746 $346,026 $426,094 $487,184 $ 541,103
Cost of sales.................................. 253,893 294,742 367,037 432,720 484,679
-------- -------- -------- -------- ---------
Gross profit................................... 43,853 51,284 59,057 54,464 56,424
Selling, general and administrative expenses... 17,678 26,240 31,742 40,776 44,527
-------- -------- -------- -------- ---------
Income from operations......................... 26,175 25,044 27,315 13,688 11,897
Interest expense............................... 12,388 23,190 28,036 31,974 35,687
Equity Loss in Joint Venture 150 2,199
Other (income) expense......................... (746) 180 (56) (705) (427)
-------- -------- -------- -------- ---------
Income (loss) before income taxes,
extraordinary item and cumulative effect
of accounting change ........................ 14,533 1,674 (665) (17,731) (25,562)
Income tax expense (benefit)(5)................ 5,410 565 (238) 625 2
-------- -------- -------- -------- ---------
Income (loss) before extraordinary item and
cumulative effect of accounting change....... 9,123 1,109 (427) (18,356) (30,014)
Extraordinary item(5).......................... 4,426 - 9,788 - 311
-------- -------- -------- -------- ---------
Net income (loss).............................. $ 4,697 $ 1,109 $(10,215) $(18,356) $ (30,325)
======== ======== ======== ======== =========
Other Data:
Depreciation and amortization.................. $ 16,715 $ 21,319 $ 24,082 $ 28,032 30,916
Capital expenditures........................... 10,646 9,630 17,509 21,940 29,221
<CAPTION>
Years Ended December 31,
-----------------------------------------------------------------------
1995 1996 (2) 1997 1998 1999
----------- ------------ -------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data (at period end):
Working capital................................ $ 25,544 $ 37,529 $ 48,377 $ 26,678 $(206,546)
Total assets................................... 175,115 262,230 369,484 363,822 343,768
Property, plant & equipment.................... 109,864 177,556 263,102 283,242 309,797
Accumulated depreciation....................... (25,006) (44,232) (66,452) (89,904) (117,476)
Long-term debt, less current portion........... 177,133 224,112 314,789 315,029 102,386
Total stockholder's deficit.................... (63,839) (62,141) (72,494) (90,822) (120,395)
</TABLE>
- --------------
(1) In March 1996, the Company acquired GenCorp RPD for a purchase price of $32
million. The operating results of GenCorp RPD are included in the
consolidated operating results from March 1, 1996.
(2) In February 1997, the Company acquired APX for a purchase price of $2.4
million. The operating results of APX are included in the Company's
consolidating operating results from February 1, 1997. In July 1997, the
Company completed the Goodyear-Jackson Acquisition and the Eagle-Picher
Acquisition. The results of acquired Eagle-Picher and Goodyear-Jackson
operations are included in the Company's consolidated operating results from
July 1, 1997.
(3) In January 1998, the Company acquired Livingston for a purchase price of
$2.15 million plus the assumption of certain debt instruments. The operating
results of Livingston are included in the Company's consolidated operating
results from January 1, 1998.
(4) As part of the refinancing which occurred in 1995, a prepayment premium of
$3.7 million was incurred, and approximately $3.4 million in deferred
financing costs were charged against operations, net of certain tax benefits
of $2.7 million. The extraordinary item for 1997 reflects the write-off of
existing financing costs, remaining original issue discount and expense on
early extinguishment of debt, net of tax, in connection with the Offering
and borrowings under the Credit Agreement, and application of the proceeds
thereof.
ITEM 7--MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
21
<PAGE>
OVERVIEW
The Company is a leading designer, developer, and manufacturer of plastic
components and systems to original equipment manufacturers ("OEM's") of
passenger cars, light trucks, and heavy (commercial) trucks. The Company also
operates to a lesser extent, in the industrial and non-automotive components
industry. As such, the Company's businesses are organized, managed, and
internally reported as three segments. The segments, which are based on
differences in customers and products, technologies and services, are Automotive
and Light Truck, Commercial Truck, and Industrial and Non-Automotive. The
Automotive and Light Truck Segment produces molded engineered plastic components
for automotive original equipment manufacturers. This segment primarily
supplies components for automotive interiors, exteriors, and structural support
and power train systems. The Commercial Truck Segment produces molded-
engineered plastics for the commercial transportation industry. The segment
primarily supplies external body panel components for Class 4 through Class 8
commercial trucks. The Industrial and Non-Automotive Segment produces various
plastic components for the agricultural, appliance, commercial construction, and
recreational transportation industries. The Company's segment operating results
are discussed in the Segment Review and Note 18 of Notes to Consolidated
Financial Statements.
Net loss of the Company was $30.3 million and $18.4 million in fiscal 1999
and 1998, respectively.
The Company's Financial Statements and Notes to Consolidated Financial
Statements on pages F-3 through F-35 should be read as an integral part of this
discussion and analysis.
RESULTS OF OPERATIONS
(AS A PERCENT OF SALES)
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------
1997 1998 1999
------------ ------------ ------------
% of sales % OF SALES % OF SALES
------------ ------------ ------------
<S> <C> <C> <C>
Sales......................................... 100.0% 100.0% 100.0%
Gross profit.................................. 13.9 11.2 10.4
Selling, general and administrative expenses.. 7.4 8.4 8.2
Income (loss) before extraordinary item....... (0.1) (3.8) (5.5)
Extraordinary item and cumulative effect
of accounting change........................ 2.3 -- ---
Net income (loss)............................. (2.4) (3.8) (5.6)
</TABLE>
SALES REVENUE - 1999 VERSUS 1998
Sales increased by $53.9 million, or 11.1% to $541.1 million in 1999, compared
to $487.2 million in 1998. The increase in sales primarily reflects new product
launches during the year, which contributed approximately $50.4 million in
additional sales. The Company also benefited from strong demand in the
commercial truck market as the industry achieved historical highs for unit sales
during 1999. In addition, the increase in sales in 1999 over 1998 reflects the
unfavorable impact on 1998 of a General Motors work stoppage that affected the
United States, Canada and Mexico. These increases were partially offset by
programs that were built out in 1999.
OPERATING PERFORMANCE - 1999 VERSUS 1998
Gross profit increased by $1.9 million or 3.6%, to $56.4 million for 1999,
compared to $54.5 million for 1998. Gross margin as a percent of sales
decreased to 10.4% in 1999 from 11.2% in 1998. The increase in gross profit
reflects higher sales volumes associated with new product launches and increased
commercial truck sales. The favorable volume impact was partially offset by
increased production costs incurred during the year to support the new program
launches and production inefficiencies associated with capacity constraints
resulting from increased commercial truck sales.
Selling, general and administrative expenses (''SG&A'') increased by 9.2% to
$44.5 million, or 8.2% of sales for 1999, compared to $40.8 million, or 8.4% of
sales for 1998. The increase in SG&A expenses was due to the Company's
continuing expenditures required to manage future awarded business.
22
<PAGE>
The Company recorded a net loss of $30.3 million in 1999, compared to a net
loss of $18.4 million in 1998. This decrease was the result of the items
mentioned above, an increase in interest expense of $3.7 million, the Company's
portion of a start-up loss incurred at its joint venture of $2.2 million, and
$4.5 million valuation allowance recorded against a deferred tax asset. The
increase in interest expense for 1999 was primarily attributable to higher
borrowings on revolving debt and slightly higher interest rates throughout the
year. The valuation allowance was recorded against the deferred tax asset due
to the uncertainty of realizing the deferred tax asset.
SALES REVENUE - 1998 VERSUS 1997
Sales increased by $61.1 million, or 14.3% to $487.2 million in 1998, compared
to $426.1 million in 1997. The increase in sales was primarily the result of
the acquisitions of Goodyear-Jackson and Eagle-Picher in July 1997, Owens-
Corning Brazil in September 1997 and Livingston in January 1998 (collectively
the "Acquisitions"). The Acquisitions added incremental sales in 1998 of
approximately $82.1 million. Sales at the existing Company's operations
decreased $21.0 million, or 5.9%, due in part to the adverse impact of the
General Motors work stoppages in the United States, Canada, and Mexico, and
changes in product mix.
OPERATING PERFORMANCE - 1998 VERSUS 1997
Gross profit decreased by $4.6 million or 7.8%, to $54.5 million for 1998,
compared to $59.1 million for 1997. The decrease was due in part to the
Acquisitions whose gross profit decreased $1.4 million, or 14.9%, to $8.2
million, compared to $9.6 million for 1997. The decrease in acquisitions gross
profit primarily reflects $1.6 million in mothball costs for the Huntington
facility. Gross profit at the existing Company's facilities decreased $3.2
million or 6.4%, to $46.3 million compared to $49.5 million for 1997. Gross
margin decreased from 13.9% in 1997 to 11.2% in 1998. The decline in gross
margin resulted primarily from the following: the adverse impact of the General
Motors work stoppages in the United States, Canada and Mexico, costs associated
with realignment of products among the Company's divisions, costs associated
with plant consolidations and certain changes in the Company's product mix.
Selling, general and administrative expenses (''SG&A'') increased 28.5% to
$40.8 million, or 8.4% of sales for 1998, compared to $31.7 million, or 7.4% of
sales for 1997. The increase in SG&A of $9.0 million reflects the full year
impact of the Acquisitions, which added incremental SG&A costs of $3.6 million.
The remaining increase in SG&A expenses is primarily due to the continuing
investment in program management necessary to manage newly awarded programs.
The Company recorded a net loss of $18.4 million in 1998, compared to a net
loss, before extraordinary item, of $0.4 million in 1997. This decrease was the
result of the items mentioned above, an increase in interest expense of $3.9
million and the recognition of a $5.5 million valuation allowance due to the
uncertainty of realizing certain deferred income tax assets. The increase in
interest expense for 1998 was primarily attributable to higher borrowings on
revolving debt and a full year of expense on debt outstanding related to the
Goodyear-Jackson, Eagle-Picher, APX, Owens-Corning Brazil, and Livingston
acquisitions.
<TABLE>
<CAPTION>
BUSINESS SEGMENT INFORMATION
Year Automotive Commercial Industrial Corporate and Total Company
Truck Unallocated
---- -------- -------- ------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Net Sales 1999 $296,160 $223,492 $21,451 $541,103
1998 252,398 203,068 31,718 487,184
1997 248,438 163,647 14,009 426,094
Operating 1999 19,559 11,752 (2,792) (16,622) 11,897
Income* 1998 19,517 9,688 (325) (15,192) 13,688
1997 30,251 12,826 1,478 (17,240) 27,315
Equity in loss 1999 2,199 2,199
of Joint Venture 1998 150 150
EBITDA** 1999 34,261 23,793 (1,341) (15,672) 41,041
1998 33,358 21,936 1,015 (14,034) 42,275
1997 42,543 23,426 1,832 (16,348) 51,453
</TABLE>
23
<PAGE>
* Operating income includes unallocated corporate overhead expenses.
** Earnings before interest, income taxes, depreciation, and amortization
expense.
1999 COMPARED TO 1998
AUTOMOTIVE AND LIGHT TRUCK revenues increased $43.8 million, or 17.3%, to $296.2
million, compared to $252.4 in 1998. The increase reflects incremental sales
from products launched during 1999, a full year impact of products launched in
1998, strong demand in the automotive and light duty truck segments and reduced
volumes in 1998 due to the General Motors strike. These increases were
partially offset by sales volume decreases due to product line build outs. The
significant product launches in 1999 included the new Monte Carlo, Impala and
Suburban/Tahoe platforms. The Company also launched new products with higher
plastic content for the Aurora, LeSabre and Bonneville that replaced products on
these platforms that were built out during the year. In addition, the Company
benefited from a full year of sales on the Voyager/Caravan spoilers as well as
4.6/5.4 liter engine covers that were launched in 1998.
Operating income was unchanged at $19.5 million. Operating income was favorably
impacted by sales volume increases that were substantially offset by product
launch costs, lower tooling profits and unfavorable product mix. The mix change
reflects the build out of higher margin programs such as the Mustang and Lumina
spoilers, Grand Cherokee louver and the Windstar cargo panels, which balanced
out during 1999, lower volumes on higher margin programs such as the
Taurus/Sable wagon load floors and Blazer/Jimmy interior straps, as well as the
higher volumes on low margin programs such as the Aurora and LeSabre platforms,
all of which negatively impacted operating income. Higher volumes on such
programs as Dodge Viper and higher application rates on the Cambridge fenders
offered as an option on the Ford F-series pick-up partially offset the negative
impact on operating income.
EBITDA decreased $.9 million, or 2.7%, to $34.3 million, compared to $33.4
million in 1998. EBITDA margin decreased from 13.2% in 1998 to 11.6% in 1997.
COMMERCIAL TRUCK revenues increased $20.4 million, or 10.1%, to $223.5 million
in 1999, compared to $203.1 million in 1998. The increase in revenues resulted
from a full year production of the Freightliner HN80 platform and strong demand
in the commercial truck market leading to increased sales to all of the
Company's significant commercial truck customers.
Operating income increased $2.1 million, or 21.3%, to $11.7 million, compared to
$9.7 million in 1998. Operating income as a percent of sales increased from 4.8%
in 1998 to 5.3% in 1999. The increase in operating income resulted from
increased volume as discussed above, improved product mix and lower depreciation
expense compared to 1998. The favorable volume impact was partially offset by
increased production costs incurred during the year to support the new program
launches and production inefficiencies associated with capacity constraints
resulting from increased commercial truck sales.
EBITDA increased $1.9 million, or 8.5%, to $23.8 million, compared to $21.9
million in 1998. EBITDA margin decreased from 10.8% in 1998 to 10.6% in 1999.
INDUSTRIAL AND NON-AUTOMOTIVE revenues decreased $10.3 million, or 32.4%, to
$21.5 million, compared to $31.7 million in 1998. Lower volumes are primarily
due to weakness in the agricultural market and softness in the Brazilian
economy. Additionally, certain automotive platforms were transferred from
Industrial facilities to automotive facilities.
Operating income decreased $2.5 million to a loss of $2.8 million, compared to a
1998 operating loss of $0.3 million. The decrease in operating income primarily
reflects lower sales volumes as addressed above, partially offset by headcount
and other cost reductions implemented during the year at the industrial and Non-
Automotive facilities.
1999 EBITDA decreased $2.4 million to an EBITDA loss of $1.3 million compared to
1998 EBITDA of $1.0 million. 1999 EBITDA margin decreased to (6.3%) compared to
3.2% for 1998.
1998 COMPARED TO 1997
AUTOMOTIVE AND LIGHT TRUCK revenues increased $4.0 million, or 1.6%, to $252.4
million, compared to $248.4 in 1997. The increase was due in part due to the
acquisition of Eagle-Picher in July 1997, which added one plant to the
automotive segment and incremental sales in 1998 of approximately $37.0 million
including higher volumes related to the Dodge Ram
24
<PAGE>
and Voyager, GMT600, and Chrysler Neon. Sales at the Company's existing
operations decreased $33.1 million, due in part to the adverse impact of the
General Motors work stoppages in the United States, Canada and Mexico and
changes in product mix: the build out of such programs as Mazda and Honda Accord
bumpers and Ford Aerostar liftgates, partially offset by full year volumes of
GMX 130, and Cadillac S5S, which were launched in late 1997, and lower volumes
on the Dodge Viper and Jeep Grand Cherokee, Volkswagen Golf, and Ford
Taurus/Sable wagon load floors. These decreases were offset, in part, by
increases in volumes on GM (strike adjusted) C-5 Corvette and GMX 170, Ford
Ranger and Mustang, as well as higher engine cover volumes.
Operating income decreased $10.7 million, or 35.5%, to $19.5 million (7.7% of
sales), compared to $30.3 million (12.2% of sales) in 1997. Operating income
for the automotive acquisition above decreased as a percent of sales from 6.7%
in 1997 to 4.8% in 1998. Operating income at the Company's existing operations
decreased as a percent of sales from 12.6% in 1997 to 8.5% in 1998. The decline
in operating income resulted primarily from the following: the adverse impact of
the General Motors work stoppages in the United States, Canada and Mexico, costs
associated with realignment of products among the Company's divisions, increases
in allocated corporate expenses relating to sales and program management, and
certain changes in the Company's product mix. The mix change includes the build
out of higher margin programs such as Mazda and Honda bumpers and Ford Aerostar
liftgates, which balanced out in 1997, lower volumes on higher margin programs
such as the Taurus/Sable wagon load floors, DaimlerChrysler Jeep louver, Dodge
Viper, Volkswagen Golf, as well as the higher volumes on low margin programs
such as the GMX 130 and 170, GMT 600, and Cadillac S5S, all of which negatively
impacted operating income. Higher volumes on such programs as GM Corvette C-5,
Ford Ranger and Mustang, Dodge Voyager (launched in 1998), and Chrysler Neon,
partially offset the negative impact on operating income.
EBITDA decreased $9.2 million, or 21.6%, to $33.4 million, compared to $42.6
million in 1997. EBITDA Margin decreased from 13.2% in 1998 to 11.6% in 1999.
COMMERCIAL TRUCK revenues increased $39.4 million, or 24.1%, to $203.1 million
in 1998, compared to $163.6 million in 1997. The increase in sales was
primarily the result of the acquisitions of Goodyear-Jackson and Eagle-Picher in
July 1997, which added one plant to the Commercial Truck segment, and Livingston
in January 1998. These acquisitions added incremental sales in 1998 of
approximately $27.3 million. Sales at the Company's existing facilities
increased $12.1 million due to higher volumes for Kenworth, Freightliner, Volvo,
and service parts.
Operating income decreased $3.1 million, or 24.5%, to $9.7 million (4.8% of
sales), compared to $12.8 million (7.8% of sales) in 1997. Operating income for
the acquisitions above decreased as a percent of sales from 18.1% in 1997 to
3.1% in 1998. This decrease was due in part to the impact of plant
consolidations, unrealized plant synergies after the Livingston acquisition, and
low volumes due to a delayed launch of the Ford H215 program. Operating income
at the Company's existing operations, before allocation of corporate expenses,
increased as a percent of sales from 6.5% in 1997 to 8.2% in 1998. Allocated
expenses increased $1.1 million due to investments in sales support and program
management.
EBITDA decreased $1.5 million, or 6.4%, to $21.9 million, compared to $23.4
million in 1997. The significant factors attributable to the decrease have been
discussed in the preceding paragraphs.
INDUSTRIAL AND NON-AUTOMOTIVE revenues increased $17.7 million, or 126.4%, to
$31.7 million, compared to $14.0 million in 1997. The increase in sales was
primarily the result the of the acquisitions of Eagle-Picher in July 1997, which
added one plant to the Industrial segment, and Owens-Corning Brazil in September
1997. These acquisitions added incremental sales of approximately $17.7
million.
Operating income decreased $1.8 million to a loss of $0.3 million, compared to
income of $1.5 million in 1997. The decrease was due in part to reduced volumes
and launch delays of many of Brazilian products, and increases in allocated
expenses related to sales support and program management.
EBITDA decreased $0.8 million, or 45.0%, to $1.0 million, compared to $1.8
million in 1997. The primary reasons for the decrease have been discussed in
the preceding paragraphs.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary cash needs historically have been for operating
expenses, working capital and capital expenditures. Acquisitions have been
financed through debt facilities collateralized by the Company's assets and cash
flows.
25
<PAGE>
Management expects future cash will be required for capital expenditures
and to fund working capital as the Company continues to expand its operations.
Management expects capital expenditures to be approximately $64.7 million in
2000.
Due to the Company's current liquidity position and capital expenditure
requirements the Company's shareholders have decided to sell the Company. In
order to provide sufficient liquidity to conclude the sale process, management
completed a financial arrangement with its banks and selected customers. Under
the terms of the arrangement, selected customers will provide additional funding
through advanced trade payments and the bank syndicate that is party to the
Company's current credit agreement will provide additional liquidity by
deferring the required principal payment due in March 2000 until the sale of the
Company is consummated.
Pursuant to the terms of the Company's current credit agreement, as amended,
the Company has $233.8 million in revolving credit facility, A Term and B Term
Loans. The A Term Loans and B Term Loans mature in June 2002 and June 2005,
respectively, and will require annual principal payments (payable in quarterly
installments) totaling approximately $16.4 million in 2000, $21.4 million in
2001, $34.0 million in 2002, $35.0 million in 2003, $40.0 million in 2004 and
$37.1 million in 2005. The revolving credit portion of the credit agreement
matures in June 2002. The interest rate under the credit agreement is based on
the Eurodollar rate plus the applicable Eurodollar margin. Amortization payments
were suspended until June 30, 2000.
In September 1998, the Company entered into a Second Waiver and Amendment and
in January 1999 the Company entered into a Third Waiver and Amendment pursuant
to which certain restrictive covenants contained in the credit agreement were
waived and amended. On February 23, 1999, the Company entered into a Fourth
Waiver and Amendment to the credit agreement (together with the Second, Third,
and Fourth Waivers and Amendments, the "Credit Agreement") with the Agent and
other institutions, which is effective as of December 31, 1998 through and
including March 31, 2000, whereby the aggregate outstanding principal amount of
the revolving credit facility shall not at any time exceed $65 million, and
shall not exceed $50 million on the last day of any month. In addition, certain
restrictive covenants were waived and amended. Letters of Credit outstanding
under the Credit Agreement are limited to $5.3 million.
The amended Credit Agreement eliminated covenant requirements at December 31,
1998, and amended the covenants for periods through March 31, 2000.
In July 1999, the Company entered into a Fifth Waiver and Amendment and in
December 1999, the Company entered into a Sixth Waiver and Amendment, pursuant
to which certain restrictive covenants contained in the Credit Agreement were
waived and amended. With respect to the Sixth Waiver and Amendment, the
Company's authority to pay, but not the accrual of the obligation, without
consent pursuant to the Credit Agreement, employment compensation or management
fees (but not reasonable out of pocket expenses) of certain affiliates was
restricted. In addition, with respect to the Sixth Waiver and Amendment, the
Company agreed to cooperate with and pay reasonable costs, fees and
disbursements of the Banks legal counsel and consultants to such legal counsel
in connection with certain reporting and analytical activity under the Credit
Agreement related to the Company's business operations and financial results
therefrom.
As an inducement to the Banks agreeing to the Sixth Waiver and Amendment,
Holdings and the Company agreed to engage Morgan Stanley Dean Witter & Co.
("MSDW") for purposes of assisting Holdings and the Company with the sale of all
or a portion of the company's business or assets, to cooperate with MSDW in
connection with such sales activity, provided that such activity did not
materially reduce the value of any business or assets sold, and to pay certain
amendment fees to the Banks related to the outstanding balances of all
borrowings under the Credit Agreement.
Subsequent to the Company's 1999 year-end, in March 2000, the Company entered
into the Seventh Waiver and Amendment and the Eighth Waiver and Amendment. In
the Seventh Waiver and Amendment, the Banks eliminated, for the month of
February 2000, the requirement imposed in the Fourth Waiver and Amendment that
the outstanding principal amount of the Company's revolving credit facility
under the Credit Agreement not exceed $50 million on the last day of any month.
In the Eighth Waiver and Amendment the Company and the Banks agreed to several
waivers, revisions and amendments to certain restrictive covenants under the
Credit Agreement, including extending the date by which the Company's
outstanding principal amount of its revolving credit facility could not exceed
$65,000,000, and deferral of the Company's obligations relating to certain
mandatory prepayments of principal. As a condition to the Eighth Waiver and
Amendment becoming effective, the Company agreed to negotiate for and enter into
with its OEM customers certain agreements (the "Customer Agreements") whereby
the OEMs agree as long as the Company is in compliance with the
26
<PAGE>
Customer Agreements (i) to provide accelerated payments of their accounts
payable to the Company, (ii) not to resource the production of the company's
products, programs or projects, and (iii) to waive set-off or payment abatement
rights on certain of the OEMs' accounts payable to the Company.
The Company has entered into such Customer Agreements as the Banks required.
In order to induce the Banks to enter into the Eighth Waiver and Amendment, the
Company, (i) re-affirmed its commitment to the sale process contemplated by the
Sixth Waiver and Amendment for which MSDW has been engaged, (ii) agreed to the
payment to the Banks of cerain additional amendment fees related to the
outstanding principal balances of all borrowings under the Credit Agreement, and
(iii) agreed, along with Holdings and the Guarantor of the Credit Agreement, to
release the Banks and their agents under and pursuant to the Credit Agreement,
from any and all claims, causes of action, or liabilities which are in any
manner related to it's Credit Agreement and any documents or enforcement
activities related thereto.
As a condition of entering into the Customer Agreements, the OEMs required
that the Company negotiate for and obtain standby financing commitments for
debtor-in-possession financing which the Company did and has obtained from the
Banks who are signatories to its Credit Agreement (the "DIP Financing").
The Company believes that, based on current levels of operations and
anticipated growth, its cash from operations together with other available
sources of liquidity, including borrowings under the Credit Agreement and its
arrangements with OEMs under the Customer Agreements, will be sufficient to
permit anticipated capital expenditures and fund working capital requirements
while the Company attempts to complete the announced sales process in a timely
fashion. In the event that such payment arrangements, cash from operations, and
borrowing availabilities are not sufficient to meet the Company's liquidity
needs, the Company would expect to seek the protection of Chapter 11 of the
United States Bankruptcy Code and to utilize the Company's DIP financing to
assist in the completion of its strategic sales plan.
Net cash provided by operating activities for 1999 was $30.1 million,
comprising net loss of $30.3 million with non-cash items such as depreciation
and amortization of $30.9 million, charges of $3.1 million and $2.2 million to
income for postretirement benefits and equity losses in joint venture,
respectively and a deferred income tax provision of $5.5 million. Changes in
working capital components generated $18.6 million, primarily as a result of
completing several major tooling programs for Ford and General Motors during the
year.
The Company repaid $13.9 million of long-term debt obligations in fiscal 1999
under the Company's Credit Agreement.
Net cash provided by operating activities for 1998 was $19.6 million, comprising
net loss of $18.4 million with non-cash items such as depreciation and
amortization of $28.0 million, a charge of $2.8 million to income for
postretirement benefits and a deferred income tax benefit of $2.9 million.
Changes in working capital components generated $10.0 million, primarily as a
result of timing of collections on trade accounts receivable, and the payment of
trade payables and accrued liabilities.
The Company repaid $9.1 million of long-term debt obligations in fiscal 1998
under the Company's Credit Agreement.
Net cash provided by operating activities for 1997 was $15.8 million,
comprising net loss before extraordinary item for 1997 of $0.4 million with non-
cash adjustments of $23.2 million. The non-cash items consisted of depreciation
and amortization of $24.1 million, a non-cash charge to income for
postretirement benefits of $2.2 million and deferred income tax benefit of $3.1
million. Changes in working capital components used $6.9 million, primarily as
a result of timing of collections on trade accounts receivable, including billed
reimbursable tooling.
The Company had capital expenditures of approximately $29.7 million in 1999,
in comparison to approximately $21.9 million in 1998. Expenditures in 1999
relate primarily to the GMT-800 Step Assist, the GMT-800 Truck Box Program, the
GMT-805 Mid-Gate and End-Gate program, the Ford P225 Fender program, and the
Ford U-137 Dutch Door Program.
Cash used for acquisitions of $0.3 million in 1998 relates to Livingston
Molded Products; acquisitions of $72.4 million in 1997 relates to Goodyear-
Jackson, Eagle-Picher, APX and Owens Corning-Brazil.
27
<PAGE>
QUARTERLY FINANCIAL DATA
The following table sets forth a summary of the quarterly results of
operations for the years ended December 31, 1999 and 1998 (dollars in
thousands).
<TABLE>
<CAPTION>
1999
-----------------------------------------------------------------------------
Three Months Ended
-----------------------------------------------------------------------------
March 31 June 30 September 30 December 31
----------------- ----------------- ------------------- ------------------
<S> <C> <C> <C> <C>
Net sales $126,030 $144,617 $129,275 $141,181
Gross profit 13,893 19,394 8,950 14,187
Net income (loss) (4,281) (735) (11,022) (14,287)
</TABLE>
<TABLE>
<CAPTION>
1998
-----------------------------------------------------------------------------
Three Months Ended
-----------------------------------------------------------------------------
March 31 June 30 September 30 December 31
----------------- ----------------- ------------------- ------------------
<S> <C> <C> <C> <C>
Net sales $121,141 $119,719 $112,097 $134,227
Gross profit 11,983 15,664 9,407 17,410
Net income (loss) (3,312) (551) (4,532) (9,961)
</TABLE>
During the fourth quarter of 1998, the Company recorded significant
adjustments that impacted reported results for the first three quarters. These
adjustments corrected the treatment of amounts applied against purchase
accounting reserves and charged them against operating expenses. The effect of
these adjustments was to reduce gross profit by $1.3 million, $.2 million and
$1.2 million and increase net loss by $1.2 million, $.1 million and $.7 million
for the quarters ended March 31, June 30 and September 30, respectively. The
data above for 1998 reflect the impact of those adjustments.
YEAR 2000 COMPLIANCE
General
The "Year 2000 Issue" is the result of computer programs that were written
using two digits rather than four to define the applicable year. If the
Company's computer programs with date-sensitive functions are not Year 2000
compliant, they may recognize a date using "00" as the Year 1900 rather than the
Year 2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices or engage in similar normal business
acitivities.
During 1998 and 1999, the company and each of its operating subsidiaries
implemented Year 2000 readiness programs with the objective of having all of
their significant business systems, including those that affect facilities and
manufacturing activities, funcitoning properly with respect to the Year 2000
Issue before December 31, 1999.
The Company's transition into the year 2000 has, to date, been considered
uneventful and successful and did not result in any noteworthy events with the
Company or its suppliers. However, the potential for future disruptions
resulting from Year 2000 issues exists. Accordingly, the company will continue
to monitor its operations.
Prior to January 1, 2000, the Company completed extensive programs to assess
and address any "Year 2000" problems relating to its computer systems. This
activity covered manufacturing, applications software, production systems,
barcoding systems, plant floor equipment operations, financial and manufacturing
reporting systems, building and utility systems and systems of the Company's
material suppliers.
All remediation expenditures totalling approximately $1.4 million ($0.8
million of which was expended in 1999) were funded through normal operating cash
flows.
28
<PAGE>
The company has not experienced nor does it anticipate experiencing any
material failures or disruptions with regard to any of the company's computer
systems or the systems of any material supplier to the company.
NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("FAS 133"). The statement is effective for fiscal years
beginning after June 15, 2000. The Company will adopt FAS 133 at the beginning
of 2001. The Company is completing an analysis of FAS 133 which is not expected
to have a material impact on the Company's results of operations.
In September 1999, the Emerging Issues Task Force issued ("EITF") Issue
No. 99-5, "Accounting for Pre-Production Costs Related to Long-Term Supply
Arrangements". EITF Issue No. 99-5 will require company to expense design and
development costs related to long term supply arrangements as incurred unless
the customer contractually guarantees reimbursement and capitalize molds, tools
and dies for which title is held by the supplier, subject to an impairment test.
Additionally, molds, tools and dies for which title is held by the customer are
to be expensed as incurred unless the long term supply arrangement explicitly
provides the suppler with the non-cancelable right to use such molds, tools and
dies during the course of the supply arrangement. This pronouncement is
effective on a prospective basis for costs incurred after December 31, 1999. The
Company is completing an analysis of the issue which is not expected to have a
material impact on the Company's results of operations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to certain market risks which exist as a part of its
ongoing business operations. Primary exposures include fluctuations in the value
of foreign currency investments in subsidiaries, volatility in the translation
of foreign currency earnings to U.S. Dollars and movements in Federal Funds
rates and the London Interbank Offered Rate ("LIBOR"). The Company uses
derivative financial instruments, where appropriate, to manage these risks. The
Company, as a matter of policy, does not engage in trading or speculative
transactions.
CERTAIN RISK FACTORS
All forward-looking statements contained in this Annual Report reflect the
Company's current views with respect to future events and financial performance,
but are subject to many uncertainties and factors relating to the Company's
operations and business environment, specifically including but not limited to
the following important factors, all of which may cause the actual results of
the Company to be materially different from any future results expressed or
implied by such forward-looking statements.
In addition to the factors described below, the Company faces the liquidity
risk that the arrangements and agreements, described above, that it has with its
vendors, suppliers and OEM customers in order to operate in the ordinary course
during the sales process, if not performed by such parties as agreed or
contemplated, could prevent the Company from having sufficient working capital
and other required funding for the operations of the Company. In such event, the
Company has in place its standby DIP Financing that it can use in a Chapter 11
proceeding to support its operations while attempting to complete the sales
process.
INDUSTRY CONDITIONS
The Company's business is tied to the North American vehicle industry which is
highly cyclical and dependent on consumer spending and general economic
conditions in North America. There can be no assurance that North American
automotive production will not decline in the future or that the Company will be
able to utilize any additional capacity it adds in the future. Economic factors
adversely affecting automotive sales and production and consumer spending could
adversely impact the Company's sales and it operating results. See ''Business--
Automotive and Light Truck Components Industry.'' In addition, the growing trend
among OEMs to reduce their supplier base and to reduce costs while increasing
quality control places great pressure on suppliers such as the Company.
Many OEMs and their suppliers have unionized work forces. Work stoppages or
slow-downs experienced by OEMs or their suppliers could result in slow-downs or
closures of assembly plants where the Company's products are included in
assembled vehicles. These events could have a material adverse effect on the
Company's results of operations.
INDUSTRY CONSOLIDATION
The automotive plastic component supply industry has undergone, and is likely
to continue to experience, consolidation. See ''Business--Automotive and Light
Truck Components Industry--Consolidation of Supplier Base by OEMs.'' As part of
its announced business strategy, Management believes that it is necessary to
find a qualified buyer or buyers for the Company's business to obtain the
necessary capital to support the Company's new business. There can be no
assurance, however, that it will be successful in consummating such sale without
adversely affecting the Company's financial position or results of operations.
COMPETITION
The Company's industry is highly competitive. A large number of actual or
potential competitors exist, including the internal component operations of the
OEMs as well as independent suppliers, some of which are larger than the Company
and have substantially greater resources. There can be no assurance that the
Company's business will not be adversely affected by increased competition in
the market in which it currently operates or in markets in which it will operate
in the future, or that the Company will be able to improve or maintain its
profit margins on sales to OEMs. In addition, the Company principally competes
for new business both at the beginning of the development of new models and upon
the redesign of existing models by its major customers. New model development
generally begins two to five years prior to the marketing of such models to the
public. Although the Company has been successful in obtaining significant new
business on new models, there can be no assurance that the Company or any buyer
of the Company or its assets will continue to be able to obtain such new
business. Certain of the Company's competitors are larger, have greater
operating flexibility and have greater financial resources than the Company. See
''Business--Competition.''
RELIANCE ON MAJOR CUSTOMERS
For the year ended December 31, 1999, approximately 25% of the Company's sales
were to General Motors, approximately 25% of the Company's sales were to Ford,
approximately 8% of the Company's sales were to DaimlerChrysler, and
approximately 12% of the Company's sales were to Freightliner. Sales to these
customers consist of a
29
<PAGE>
large number of different parts, tooling and other services, which are sold to
separate divisions and operating groups within each customer's organization.
Although the Company believes that its overall relations with customers are
good, there can be no assurance that such customers will continue to purchase
the Company's products, continue with a particular vehicle program or purchase
the Company's products for any successor vehicle program. The loss of any one of
such customers, or a significant decrease in demand for certain models or a
group of related models sold by any of its major customers, could have a
material adverse effect on the Company. The failure of the Company to obtain new
business for new models or to retain or increase business on redesigned existing
models could have a material adverse effect on the Company. A decline in the
production of new North American vehicles, due to reductions in North American
vehicle demand or an increase in the share of the North American vehicle market
by foreign OEMs manufacturing in their home countries, could have a material
adverse effect on the Company. Moreover, because sales are typically secured
during the two to five year vehicle model development period prior to marketing
to the public, there can be no assurance that efforts to replace any lost sales,
if successful, would yield cash revenues in time to prevent a material adverse
effect on the Company. See ''Business--Customers.''
Automotive suppliers are under constant pressure to reduce product prices.
General Motors, Ford and DaimlerChrysler have established policies which do not
permit price increases, even though underlying material or other costs may have
increased due to circumstances beyond a supplier's control. Most of the
Company's products are manufactured using petroleum-based plastic resins. The
price of petroleum, while relatively stable in recent years, increased
significantly over the past six months. In the short-term, the Company's
material costs have remained stable due to contracts with suppliers which for
the material prices over certain time frames. However, over time significant
increases in the price of petroleum could result in increased cost of the
Company's principal raw materials which, if not recoverable from the Company's
customers, could have a material adverse effect on the Company's results of
operations.
At the same time, OEMs continue to pressure suppliers, such as the Company, to
reduce costs, increase quality control and, in some cases, share cost savings
with them through a reduction of parts prices. Although the Company believes
that its prices will remain competitive, there can be no assurance that it will
be able to improve or maintain its profit margins on sales to OEMs.
30
<PAGE>
ITEM 8--FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
Page
------
<S> <C>
Index to Financial Statements
Financial Statements:
Report of Independent Accountants...................................................................... F-1
Independent Auditor's Report........................................................................... F-2
Consolidated Balance Sheets at December 31, 1999 and 1998.............................................. F-3
Consolidated Statements of Operations for each of three years in the period ended December 31,
1999................................................................................................ F-4
Consolidated Statements of Cash Flows for each of the three years in the period ended December
31, 1999............................................................................................ F-5
Consolidated Statements of Changes in Stockholder's Deficit for each of three years in the period
ended December 31, 1999............................................................................. F-6
Notes to Consolidated Financial Statements............................................................. F-7
Financial Statement Schedule:
Report of Independent Accountants on Financial Statement Schedule...................................... F-35
Schedule II--Valuation and Qualifying Accounts for each of the three years in the period ended
December 31, 1999.................................................................................. F-37
</TABLE>
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
ITEM 9--CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
PREVIOUS INDEPENDENT ACCOUNTANTS
On October 16, 1997, the Company dismissed Deloitte & Touche LLP as its
independent accountants. The reports of Deloitte & Touche LLP on the Company's
financial statements for the years ended December 31, 1996 contained no adverse
opinion or disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope or accounting principle. The Company's Board of
Directors participated in and approved the decision to change independent
accountants. In connection with its audit for the most recent fiscal year and
through October 16, 1997, there were no disagreements with Deloitte & Touche LLP
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements if not resolved
to the satisfaction of Deloitte & Touche LLP would have caused them to make
reference thereto in their report on the financial statements for such years.
During the year ended December 31, 1996 and through October 16, 1997, there
were no reportable events (as defined in Regulations S-K Item 304(a)(l)(v)).
NEW INDEPENDENT ACCOUNTANTS
The Company engaged PricewaterhouseCoopers LLP as its new independent
accountants as of October 17, 1997. During the most recent fiscal year prior to
and through October 17, 1997, the Company has not consulted with
PricewaterhouseCoopers LLP regarding either (i) the application of accounting
principles to a specific transaction either completed or proposed; or the type
of audit opinion that might be rendered on the Company's financial statements,
and either a written report was provided to the Company or oral advice was
provided that PricewaterhouseCoopers LLP concluded was an important factor
considered by the Company in reaching a decision as to the accounting, auditing
or financial reporting issue; or (ii) any matter that was either the subject of
a disagreement, as that term is defined in Item 304(a)(l)(iv) of Regulation S-K
and the related instructions to Item 304 of Regulation S-K, or a reportable
event, as that term is defined in Item 304(a)(l)(v) of Regulation S-K.
31
<PAGE>
PART III
ITEM 10--DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below are the names, ages as of March 1, 1999 and a brief account of
the business experience of each person who is a director, executive officer or
other significant employee of the Company or Holdings.
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------- ----- ----------------------------------------------------------------------
<S> <C> <C>
Richard S. Crawford....... 53 Chairman of the Board
Lawrence Kazanowski....... 58 President and Chief Executive Officer
Donald C. Campion......... 51 Chief Financial Officer, Secretary, and Treasurer
Kevin J. Alder............ 42 Chief Operating Officer and President
Donald B. Hutchins........ 51 Controller
Alan M. Swiech............ 41 Vice President--Human Resources
Donald Makie.............. 48 Executive Vice President Manufacturing Leadership
Richard H. Frank.......... 60 Vice President Business Development and International Operations
Ira J. Jaffe.............. 60 Director
Robert C. Gay............. 48 Director
Edward W. Conard.......... 43 Director
Ronald P. Mika............ 39 Director
</TABLE>
RICHARD S. CRAWFORD founded a predecessor of the Company in 1988. Mr. Crawford
was President, Chief Executive Officer and director of the Company, Holdings and
its predecessors from their inception to March 1996 when he became Chief
Executive Officer and Chairman of the Board of the Company and Holdings. In 1999
upon the election of Lawrence Kazanowski, Mr. Crawford became Chairman of the
Board. Prior to founding the Company, Mr. Crawford founded a real estate,
construction and marketing firm, the Lakeside Investment Company. He has also
been active as a real estate developer, financial investor and merger and
acquisition specialist.
LAWRENCE KAZANOWSKI was named Chief Executive Officer and President of
Cambridge Industries in April, 1999. Mr. Kazanowski spent 34 years as a Ford
executive, where he was Director of Corporate Strategy, Vice President of
International Business and Development, Manager of Exterior Systems and General
Manager of Plastics. Most recently, he served at Ford as Vice President of
Business Strategy at Visteon Automotive Systems. Mr. Kazanowski graduated from
Massachusetts Institute of Technology (MIT) with a B.S. in Engineering and
received his MBA from Stanford University.
DONALD C. CAMPION joined Cambridge Industries as Chief Financial Officer in
May, 1999. Prior to that, he served as Senior Vice President and Chief Financial
Officer at Oxford Automotive. From 1996-97 he was Senior Vice President and
Chief Financial Officer at Delco Electronics Corp. Mr. Campion spent more than
30 years with General Motors Corporation where he helped create New United Motor
Manufacturing (NUMMI), a joint venture between GM and Toyota. He also spent
three years overseas as a member of Isuzu's Board of Directors and as Executive
Vice President of GM-Japan. He was later promoted to Finance Director at the
automaker's North American headquarters and subsequently as Finance Director at
the company's Service Parts Operations. Mr. Campion graduated from the
University of Michigan with B.S. in Applied Mathematics and an MBA.
KEVIN J. ALDER joined the Company in November 1996. Mr. Alder possesses 17
years of industrial experience varying from Engineering to Operations
Management. From 1993 until joining the Company, Mr. Alder was the Vice
President Operations & Sales at Magna Interior Systems Group. In addition, he
held the position of Vice President Operations at Textron, President and Chief
Operating Officer at US Farathane Corporation and Vice President Operations
(General Plants Manager) at Johnson Controls and Engineer/Quality Engineer at
John Deere.
DONALD B. HUTCHINS assumed the responsibilities of Controller of the Company
in July 1999. Mr. Hutchins is also currently the President of Paradigm
Management, Inc. - a management consulting company which he founded in 1992.
Previously Mr. Hutchins was the Vice President and Controller of Computer Land.
Prior to Computer Land, Mr. Hutchins spent 10 years with the Firestone Tire and
Rubber Company in various Senior Financial Executive positions, including its
Corporate Controller. Mr. Hutchins also served as an Audit Manager with Coopers
& Lybrand. Mr. Hutchins is a graduate of the University of Michigan with a
BA and an MBA.
32
<PAGE>
ALAN M. SWIECH joined the Company in August, 1996. Prior to joining the
company Mr. Swiech served as Employee & Industrial Relations Manager at United
Technologies Automotive since 1993. He was previously with Pratt & Whitney
Aircraft (United Technologies Corporation), an aerospace manufacturer, from May,
1982 until July, 1993 where he held various management positions within the
human resources organization. Mr. Swiech has over 18 years experience in the
area of labor relations and human resource management.
DONALD MAKIE joined the company in September, 1998 as Executive Vice President
Continuous Improvement and Lean Manufacturing. Mr. Makie was previously the Vice
President Compass (Lean Manufacturing System) at Lear Corporation responsible
for 175 manufacturing facilities in 28 countries. Prior to that, he was with
Colgate Palmolive and Freudenburg where he held appointments in manufacturing
and quality assurance. Don is a graduate of the University of Massachusetts
Dartmouth where he received his degree in engineering.
RICHARD H. FRANK joined the Company in 1994 upon the consummation of the
Company's acquisition of Rockwell Plastics, where he had been employed for 18
years. Prior to joining Rockwell, Mr. Frank was employed for 18 years in
various positions by General Motors. Mr. Frank is a member of the Industrial
Development Research Council, the Society of Plastic Engineers and the Project
Management Institute.
IRA J. JAFFE has been a director of the Company and Holdings since February
27, 1996. Mr. Jaffe has been a member of the law firm of Jaffe, Raitt, Heuer &
Weiss, Professional Corporation since 1968, which provides legal services to
Holdings and the Company.
ROBERT C. GAY became a director of the Company and Holdings on November 17,
1995. Mr. Gay has been a Managing Director of Bain Capital, Inc. since April
1993 and has been a general partner of Bain Venture Capital since 1989. Mr. Gay
is a director of IHF Capital, Inc., parent of ICON Health and Fitness, Inc.,
Physio-Control International Corporation, GT Bicycles, Inc., GS Technologies
Operating Co., Inc. and American Pad & Paper Company.
EDWARD W. CONARD became a director of the Company and Holdings on November 17,
1995. Mr. Conard has been a Managing Director of Bain Capital, Inc. since April
1993. From 1990 to 1993, Mr. Conard was a director of Wasserstein Perella, an
investment banking firm that specializes in mergers and acquisitions.
Previously, he was a Vice President at Bain & Company, where he headed the
firm's operations practice area. Mr. Conard is a director of Waters Corporation
and Medical Specialties Group, Inc.
RONALD P. MIKA became a director of the Company and Holdings in March 1996.
Mr. Mika has been a Managing Director of Bain Capital, Inc. since January 1997
and, prior to that time, had been a principal of Bain Capital, Inc. since
December 1992. Mr. Mika is a director of IHF Capital, Inc., parent of ICON
Health and Fitness, Inc.
DIRECTORS' COMPENSATION POLICY
Directors currently receive no directors' compensation.
ITEM 11--EXECUTIVE COMPENSATION
The following information is set forth concerning the compensation for Mr.
Crawford, the Company's Chairman and the four other most highly compensated
executive officers in each year presented.
33
<PAGE>
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION Compensation
- ------------------------------------------------------------------------------------------------------------------------
Other
Name and Fiscal Annual Stock
Principal Position Year Salary Bonus Compensation(3) Related (4)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Richard S. Crawford 1999 $478,200 $ - $ 765
Director, Chairman 1998 475,000 500,000 765 -
1997 475,000 370,833 765 10,267
- ------------------------------------------------------------------------------------------------------------------------
Lawence M. Kazanowski 1999 250,100 - - 12,870
Director, President, CEO
- ------------------------------------------------------------------------------------------------------------------------
Kevin J. Alder 1999 276,300 - 15,892
COO 1998 275,000 190,000 19,050
1997 275,000 148,582 7,624 7,025
- ------------------------------------------------------------------------------------------------------------------------
Donald C. Campion 1999 149,300 50,000 - 10,012
CFO
- ------------------------------------------------------------------------------------------------------------------------
Donald M. Makie 1999 177,400 - - 17,210
EVP - Mfg. Leadership
- ------------------------------------------------------------------------------------------------------------------------
Thomas N. Paisley 1999 154,400 - 15,161 -
Retired President-Auto Div. 1998 200,000 75,000 14,060 -
1997 200,000 44,585 8,820 18,020
- ------------------------------------------------------------------------------------------------------------------------
Patrick Pavelka 1999 175,300 - 15,252
President-Industrial Products 1998 175,000 75,000 10,080
1997 175,000 54,585 8,325 8,325
- ------------------------------------------------------------------------------------------------------------------------
John Colainne 1999 113,500 - 10,040 -
Retired CFO 1998 180,000 75,000 13,160 -
1997 151,458 84,585 7,403 16,208
- ------------------------------------------------------------------------------------------------------------------------
Richard E. Warnick
Retired COO (1) 1997 218,750 - - 9,500
- ------------------------------------------------------------------------------------------------------------------------
Donald Holton
Director, President (2) 1997 475,000 - - -
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) In connection with the 1995 Transaction, Holdings purchased Mr. Warnick's
20% interest in Holdings (actually held by R&C Warnick, L.L.C., a limited
liability company owned by Mr. Warnick and his wife (the ''Warnick LLC''),
for $10 million, pursuant to a Stock Purchase Agreement dated as of November
17, 1995 in which the Warnick LLC and Mr. Warnick agreed to a five-year
covenant not to compete. Simultaneously, Mr. Warnick and the Company entered
into an Employment Agreement pursuant to which Mr. Warnick agreed to provide
transitional assistance to the Company for a period of two years. Under the
Employment Agreement, Mr. Warnick received an annual salary of $218,750 in
1997.
(2) Effective December 4, 1996, the employment of Donald Holton as President
and a Director of the Company was terminated by mutual agreement of the
Company and Mr. Holton. The Company and Mr. Holton have negotiated terms
34
<PAGE>
of an agreement, but a written agreement has not yet been concluded. The
negotiated terms include: (i) the purchase by Mr. Holton of shares of Class
A and Class L Common Stock of Holdings for an aggregate purchase price of
approximately $1 million to be paid by application of approximately
$350,000 of salary and bonus earned by Mr. Holton during 1996, a promissory
note from Mr. Holton in the amount of $500,000 and approximately $150,000
in cash; (ii) full vesting of 2,000 Tranche 1 option shares of Holdings
previously granted to Mr. Holton; (iii) payments of severance benefits of
approximately $42,000; (iv) continuation of Mr. Holton's non-solicitation
agreement until no later than December 31, 1998; and (v) Mr. Holton's
agreement not to sue Holdings and the Company. There can be no assurance
that an agreement with Mr. Holton will be concluded or that if concluded,
it will include these terms.
(3) Total prerequisites and other personal benefits for each of the named
executive officers do not exceed the threshold amounts specified in the
regulations promulgated by the Securities and Exchange Commission.
(4) As of December 1, 1997, certain key employees purchased shares of Holdings
Class A Common Stock and shares of Holdings Class L Common Stock and
certain key employees and were issued options to purchase Holdings Class A
Common Stock. The Company believes all stock purchased by such key
employees during 1997 was purchased at fair market value. The Company also
believes that the options for Holdings Class A Common Stock are exercisable
at fair market value as of the date of grant and that current values of
shares subject to options are at or below exercise prices. See ''Stock
Option Grants in Last Fiscal Year'' table, ''Aggregated Option/SAR
Exercises in Last Fiscal Year and FY-End Option/SAR Values'' table and
''Business--Stock Purchase and Stock Option Agreements'' below.
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES*
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES ACQUIRED VALUE REALIZED UNDERLYING UNEXERCISED IN-THE-MONEY
Name ON EXERCISE (#) ($) OPTIONS AT FY-END (#) OPTIONS AT FY-END ($)
- ------------------------- --------------- -------------- ---------------------- ----------------------
EXERCISABLE/ EXERCISABLE/
UNEXERCISABLE UNEXERCISABLE
---------------------- ----------------------
<S> <C> <C> <C> <C>
Richard S. Crawford(1).... -0- -0- 7,922.5/7,922.5 -0-
Kevin J. Alder............ -0- -0- 1500/1000 -0-
Thomas N. Paisley......... -0- -0- -0- -0-
Patrick Pavelka........... -0- -0- 270/180 -0-
John M. Colaianne......... -0- -0- -0- -0-
Richard Warnick........... -0- -0- -0- -0-
Donald Holton............. -0- -0- -0- -0-
</TABLE>
* Table summarizes Holdings options.
(1) Consists of 7,922.54 at $3.30/sh, 3,961.27 at $312.13/sh, and 3,961.27 at
$642.13/sh.
EMPLOYMENT AGREEMENTS
In connection with the 1995 Transaction, Mr. Crawford entered into an
employment agreement with the Company, pursuant to which Mr. Crawford receives
an annual base salary in the amount of $475,000 and an annual performance based
bonus for an amount not to exceed 50% of his base salary. In addition, Mr.
Crawford was paid a $412,500 consulting fee in connection with the Company's
acquisition of GenCorp RPD. A December 31, 1997 amendment to Mr. Crawford's
employment agreement provides that at the closing of each acquisition of an
additional business the Company will pay Mr. Crawford a fee in the amount of
three quarters of one percent (0.75%). Mr. Crawford's employment agreement also
provides for a severance payment equal to three months of his base salary in the
event his employment is terminated for any reason other than resignation. The
employment agreement provides that Mr. Crawford will not directly or indirectly
compete with the Company for two years following termination of his employment
with the Company.
In connection with the Company's employment of Mr. Kazanowski as President and
Chief Executive Officer, Mr. Kazanowski entered into an employment agreement
with the Company as of April 15, 1999. Pursuant to the agreement, Mr.
Kazanowski receives an annual base salary of $350,000. In addition, Mr.
Kazanowski is entitled to certain bonuses if the Company achieves certain
performance targets. No bonuses were paid to Mr. Kazanowski in 1999. Pursuant
to the terms of the employment agreement, Mr. Kazanowski also received options
for 6,606.53 shares of Holding's Class A Common Stock
35
<PAGE>
exercisable for $3.30 per share, which options vest over five years. Mr.
Kazanowski's employment agreement also provides for a three-year noncompete and
12-month severance following termination of employment with the Company.
In connection with the employment of Mr. Campion as Executive Vice President
and Chief Financial Officer, Secretary and Treasurer of the Company, Mr. Campion
entered into an employment agreement with the Company as of May 18, 1999,
pursuant to which Mr. Campion receives an annual base salary $250,000.
Additionally, Mr. Campion was entitled to receive a guaranteed bonus of $50,000
for 1999, which was paid by the Company, and has the potential for future
bonuses if certain performance targets are met. Pursuant to the terms of the
employment agreement, Mr. Campion received options for 1,000 shares of Holdings
Class A Common stock exercisable at $3.30 per share and he was also granted his
choice of (x) the purchase of an aggregate of 380 shares of Class A and Class L
Common Stock for an aggregate purchase price of $100,000 and options for 310
shares of Class A Common Stock at $642.13 per share and 310 shares of Class A
Common Stock at $972.13 per share, or (y) the award of only options for 500
shares of Class A Common Stock at $642.13 per share and 500 shares of Class A
Common Stock at $972.13 per share. Mr. Campion elected the options only
alternative. The options vest over five years. Mr. Campion's employment
agreement also contains a 12-month noncompete and 12-month severance following
termination of employment with the Company.
In addition, pursuant to the Retention Bonus and Severence Program, Messrs.
Kazanowski and Campion are eligible for certain bonus payments equal to one
year's base salary for each, which payments are timed to be made at the closing
of significant sales transactions depending upon whether the Company's business
is sold in one transaction or a series of transactions for business unit.
STOCK PURCHASE AND STOCK OPTION AGREEMENTS
In addition to Messrs. Crawford, Kazanowski and Campion, the Company has
outstanding Stock Purchase and Stock Option Agreements with 7 of its key
employees. Pursuant to those agreements, each such employee purchased shares of
Holdings' Class A Common Stock and Holdings' Class L Common Stock (the
''Purchased Shares''), at a per share price of $3.30 and $1,306.80,
respectively, and some Holdings' employees were granted options (the
''Options'') to purchase additional shares of Holdings' Class A Common Stock
(the ''Option Shares'', and together with the Purchased Shares, the ''Shares'').
The consideration for the Purchased Shares was paid as follows: (i) at least
fifty percent in cash or pursuant to a short-term 8.5% full recourse promissory
note, to be repaid out of the employee's bonuses for 1997 and 1998, with any
remaining balance originally being due on May 1, 1999; (the due date for this
payment was extended when Management determined not to pay employee bonuses for
fiscal year 1998). and (ii) the balance in the form of a five-year 8.5% full
recourse promissory note, with interest-only payments being required on an
annual basis. Both notes were secured by a pledge of the Purchased Shares.
So long as the employee remains employed by the Company, the Purchased Shares
vest over a five year period, beginning on the later of November 17, 1995 or the
date the employee first became employed by the Company.
The Options also vest over the same five year period, so long as the employee
remains employed by the Company, although the occurrence of certain
''acceleration events'' may cause the Options to become fully vested.
In order to exercise the Options, the employee must so notify the Company
within thirty days after the earlier of the termination of the employee's
employment with the Company or the end of the fifth year after the date the
Option first became exercisable. Fifty percent of an employee's Options are
exercisable at a price of $3.30 per share, twenty-five percent are exercisable
at a price of $642.13 per share, and the balance are exercisable at a price of
$972.13 per share.
The employee may not transfer any of the Shares, except to a charitable
remainder trust or certain family members, or under other, limited
circumstances.
On termination of the employee's employment with the Company, Holdings and its
shareholders may purchase all or a portion of the Shares. The purchase price for
vested Shares will be their fair market value, if the employee's employment was
terminated for any reason other than cause. In all other circumstances, the
repurchase price for the Shares, vested or unvested, will be the lower of fair
market value or the original purchase price paid for the Shares. Holdings must
exercise the repurchase right within one year following termination of the
employee's employment, unless Holdings is legally or
36
<PAGE>
contractually prohibited from exercising such right during such period, in which
case Holdings shall be entitled to defer such purchase until all such
restrictions have been removed.
Several employee stockholders have left the employment of the Company.
Pursuant to the terms of their respective Stock Purchase and Stock Option
Agreements, Holdings has repurchased their respective shares of the Holdings'
Common Stock for the original purchase price.
Each employee is subject to non-compete, non-solicitation and confidentiality
provisions which are set forth in the agreements.
The following employee, named in the preceding compensation tables, purchased
shares of Holdings' Class A Common Stock and Holdings' Class L Common Stock and
were granted options for Class A Common Stock, which stock and options remain
outstanding:
<TABLE>
<CAPTION>
CLASS A CLASS L SHORT-TERM EMPLOYEE
NAME SHARES SHARES PURCHASE PRICE NOTE AMOUNT NOTE AMOUNT
- --------------------- ------------- ------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Kevin J. Alder....... 757.58 189.39 $249,994.87 $124,997.44 $124,997.44
</TABLE>
ITEM 12--SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The Company is a wholly owned subsidiary of Cambridge Industries Holdings,
Inc. (''Holdings''). The capital stock of Holdings consists of preference stock,
par value $.01 per share (''Preference Stock''), Class A common stock, par value
$0.01 per share (''Class A Common''), Class L common stock, par value $0.01 per
share (''Class L Common''), and Class P common stock, par value $0.01 per share
(''Class P Common'' and collectively with the Class A Common and Class L Common,
''Common Stock''). The Preference Stock is senior in right of payment to the
Common Stock; the Class L Common is senior in right of payment to the Class A
Common and Class P Common; and the Class P Common is senior in right of payment
to the Class A Common. All of the issued and outstanding shares of Preference
Stock are owned by Crawford Investment Group L.L.C. (''Crawford LLC''). Holders
of Preference Stock have no voting rights except as required by law. The holders
of Common Stock are entitled to one vote per share on all matters to be voted
upon by the stockholders of Holdings, including the election of directors. The
Bain Funds and Crawford LLC, own approximately 57% and 44%, respectively, of the
voting stock and are parties to a stockholder agreement regarding the ownership
(including the voting) of such stock. By virtue of such stock ownership and
agreement, the Bain Funds and Crawford LLC will have the power to control all
matters submitted to a vote of stockholders, including election of directors of
Holdings and, indirectly, to elect all directors of the Company.
The following tables set forth certain information as of January 13, 2000
regarding the beneficial ownership of (i) voting common stock by each person
(other than directors and executive officers of the Company) known to the
Company to own more than 5% of the outstanding voting common stock of Holdings
and (ii) voting and non-voting common stock by each director of the Company,
each named executive officer and all of the Company's directors and executive
officers as a group. To the knowledge of the Company, each of such stockholders
has sole voting and investment power as to the shares shown unless otherwise
noted.
37
<PAGE>
<TABLE>
<CAPTION>
Number and NUMBER AND NUMBER AND NUMBER AND
PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF
OUTSTANDING OUTSTANDING OUTSTANDING OUTSTANDING
---------------------- -------------------- ------------- --------------
SHARES OF SHARES OF SHARES OF SHARES OF
CLASS A CLASS L CLASS P PREFERENCE
COMMON(1) COMMON(1) COMMON(1) STOCK
---------------------- -------------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Bain Funds(1)....................... 61,333.28 96.84% 15,333.32(5) 56.61% --0-- 0% --0-- 0%
c/o Bain Capital, Inc.
Two Copley Place
Boston, MA 02116
Richard S. Crawford(2).............. 7,922.54(3) 11.12% 11,250.00 44.35% 45,000 100% 1,000 100%
Cambridge Industries, Inc.
555 Horace Brown Drive
Madison Heights, MI 48071
Robert C. Gay....................... 61,333.28 96.84% 15,333.32(5) 56.61% --0-- 0% --0-- 0%
c/o Bain Capital, Inc.
Two Copley Place
Boston, MA 02116
Edward Conard....................... 61,333.28 96.84% 15,333.32(5) 56.61% --0-- 0% --0-- 0%
c/o Bain Capital, Inc.
Two Copley Place
Boston, MA 02116
Ronald P. Mika...................... 61,333.28 96.84% 15,333.32(5) 56.61% --0-- 0% --0-- 0%
c/o Bain Capital, Inc.
Two Copley Place
Boston, MA 02116
Ira J. Jaffe........................ -0- 0% -0- 0% --0-- 0% --0-- 0%
Lawrence M. Kazanowski.............. -0- 0% -0- 0% --0-- 0% --0-- 0%
Kevin J. Alder...................... 2,257.58(4) 3.48% 189.39 .75% --0-- 0% --0-- 0%
Donald M. Makie..................... 40 .06% -0- 0% --0-- 0% --0-- 0%
Donald C. Campion................... -0- 0% -0- 0% --0-- 0% --0-- 0%
Thomas M. Paisley................... -0- 0% -0- 0% --0-- 0% --0-- 0%
Patrick T. Pavelka.................. -0- 0% -0- 0% --0-- 0% --0-- 0%
All Directors and Executive Officers
as a Group
(12 persons)(1)(2)................. 72,067.95 98.31% 26,999.99 98.86% 45,000 100% 1,000 100%
</TABLE>
(1) Amounts shown represent the aggregate number of shares of Class A Common
(including warrants to obtain Class A Common) and Class L Common (including
warrants to obtain Class L Common) held by Bain Capital Fund V, L.P., Bain
Capital Fund V-B, L.P., Bain Capital Fund IV, L.P., Bain Capital Fund IV-B,
L.P., BCIP Associates, BCIP Trust Associates, L.P. and Bain Capital V
Mezzanine Fund, L.P. (collectively, the ''Bain Funds''). Messrs. Gay, Conard
and Mika are directors of the Company and Holdings and are managing directors
of Bain Capital Investors, Inc. (''BCI'') and Bain Capital Investors V, Inc.
(''BCI-V''). BCI is the general partner of Bain Capital Partners IV (''BCP-
IV''), BCI-V is the general partner of Bain Capital Partners V (''BCP-V'') and
Bain Capital V Mezzanine Partners, L.P. (''BCMP-V''). Messrs. Gay and Conard
are also limited partners of BCP-IV and BCP-V and Mr. Mika is a limited
partner of BCP-V. BCP-IV is the general partner of Bain Capital Fund IV, L.P.
and Bain Capital Fund IV-B, L.P. BCP-V is the general partner of Bain Capital
Fund V, L.P. and Bain Capital Fund V-B, L.P. BCMP-V is the general partner of
Bain Capital V Mezzanine Fund, L.P. Messrs. Gay, Conard and Mika are general
partners of BCIP Associates and BCIP Trust Associates, L.P. Accordingly,
Messrs. Gay, Conard and Mika may be deemed to beneficially own shares owned by
the Bain Funds; although Messrs. Gay, Conard and Mika disclaim beneficial
ownership of any such shares.
38
<PAGE>
(2) Includes 45,000 shares of Class P Common and 11,250 shares of Class L
Common and 1,000 shares of Preferred Stock beneficially owned by Richard S.
Crawford through Crawford Investment Group LLC, formerly known as 22708-12
Harper L.L.C., owned 45% by Mr. Crawford, 45% by the 1994 Richard Crawford
Qualified Annuity Trust u/a/d December 22, 1994, 5% by Elizabeth T.
Crawford, his wife, and 5% by the 1994 Elizabeth T. Crawford Qualified
Annuity Trust u/a/d December 23, 1994.
(3) Comprised of 7,922.54 shares of Class A Common issueable upon the exercise
of options exerciseable currently or within 60 days from January 13, 2000.
(4) Comprised of 757.58 shares of Class A Common currently held, by Mr. Alder
and 1500 shares of Class A Common issueable upon the exercise of options
excerciseable currently or within 60 days from January 13, 2000.
(5) Comprised of 13,612.50 shares of Class L Common currently held by Bain
Funds and 1720.82 shares of Class L Common issueable upon the exercise of
warrants currently or within 60 days from January 13, 2000.
ITEM 13--CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
THE 1995 TRANSACTION
In November 1995, Holdings was recapitalized (the ''1995 Transaction''), the
terms of which included: (i) the purchase of Holdings' common stock for
approximately $18 million by the Bain Funds; (ii) the repurchase by Holdings of
shares of its common stock (the ''Redeemed Shares'') (a) from Crawford LLC for
$23.25 million, (b) from an affiliate of Richard E. Warnick for $10.0 million,
(c) from an affiliate of John D. Craft, an officer and former director of the
Company and a former principal stockholder of Holdings, for $16 million and (d)
from DLJ Merchant Banking, Inc. for $21.3 million; and (iii) the exchange of
shares of Holdings' common stock (the ''Exchanged Shares'') held by Crawford LLC
for newly issued shares of Holdings' capital stock. The Exchanged Shares and the
Redeemed Shares represented all of the outstanding stock of Holdings prior to
the 1995 Transaction. As a result, the newly issued capital stock of Holdings
referred to above represents all of the capital stock of Holdings. See
''Security Ownership.''
STOCKHOLDERS AGREEMENT AND REGISTRATION RIGHTS AGREEMENT
Pursuant to a stockholders agreement which was last amended as of April 15,
1999 (the ''Stockholders Agreement''), Holdings, Crawford LLC, the Bain Funds
and certain other investors have agreed that until certain designated events
occur, such parties will vote for three of Bain's nominees and two of Crawford
LLC's nominees to the Company's and Holdings' boards of directors. The
Stockholders Agreement and both the Company's and Holdings' By-Laws require that
five of the six Directors be present in person or by proxy to constitute a
quorum for voting purposes; the affirmative vote of five of the six Directors is
required to approve a proposal voted upon. The Stockholders Agreement also
contains restrictions (with certain exceptions) on the transfer of the common
stock by a party thereto, including rights of first offer of Holdings and other
stockholders of Holdings and establishes drag-along and preemptive rights in
certain events. The parties to the Stockholders Agreement have also entered into
a registration rights agreement providing certain registration rights relating
to their shares of Common Stock.
STOCK OPTION AGREEMENT
At the time of the 1995 Transaction, Holdings entered into a stock option
agreement with Mr. Crawford (the ''Stock Option Agreement'') which grants him
options to acquire 15,845.08 shares of Class A Common in the following tranches:
(i) a three year straight-line vested option to purchase up to 7,922.54 shares
of Class A Common for $3.30 per share; and (ii) options to purchase up to
3,961.27 shares of Class A Common at an exercise price of $312.13 per share and
up to 3,961.27 shares of Class A Common at $642.13 per share, exercisable after
the Company has achieved earnings before interest and taxes of at least $32
million. All three tranches expire on the earlier of the November 17, 2005, the
termination of Mr. Crawford's employment by the Company or Holdings or the
occurrence of certain transactions resulting in Holdings becoming a public
company or otherwise undergoing a change of control. The Stock Option Agreement
also includes restrictions on transfer and the right of Holdings to repurchase
the options or shares upon termination of Mr. Crawford's employment with
Holdings and the Company. Holdings may in the future enter into additional stock
option agreements with other members of management.
39
<PAGE>
MANAGEMENT SERVICES AGREEMENT
The Company is party to a five year management services agreement with Bain
Capital, Inc. (''Bain''), dated as of November 17, 1995, amended as of March 1,
1996, and further amended as of December 31, 1997, pursuant to which the Company
is obligated to pay Bain (i) at the closing of each acquisition of an additional
business an amount equal to three-quarters of one percent (.75%) of the
transaction value of such acquisition and (ii) an annual fee of $950,000 per
year, plus out-of-pocket expenses. Pursuant to the management services
agreement, the Company paid Bain fees of approximately $937,000 during 1996 and
fees of $950,000 in 1998 and $655,000 of its accrued $950,000 in 1999.
AIRCRAFT LEASE
As of March 27, 1998, Mack Aviation acquired a Westwind 2 aircraft, a larger
plane than the Lear 35A, which it previously had leased to the Company. The new
lease, together with a services agreement (collectively, the "Current Aircraft
Lease"), both entered into by Mack Aviation, L.L.C. and the Company as of
January 1, 1999, provide that the Company will use the Westwind 2 aircraft a
minimum of 200 hours per year at a cost of $1,950 per hour, which includes the
cost of the pilots, fuel, insurance, maintenance and taxes, but does not include
the costs of catering, landing fees or special needs. While the Company believes
that the Current Aircraft Lease reflects currently available market terms and
rates for similar aircraft, the Company has advised Mack Aviation that it
intends to renegotiate arrangements for the use of the Westwind 2. There can be
no assurance that this renegotiation will be successful.
HOLDINGS SERVICES AGREEMENT
The Company and Holdings have entered into a ten year services agreement dated
as of July 1, 1997, pursuant to which Holdings provides the Company with
management services and personnel necessary to perform such services. Under such
agreement, the Company must reimburse Holdings for: (i) reasonable out-of-pocket
expenses actually paid to unaffiliated third parties in connection with such
services; and (ii) other expenses of Holdings of up to $500,000 per year
incurred in connection with such services.
LEGAL SERVICES
Ira J. Jaffe, a director of the Company, practices law with, and is a
shareholder of, the law firm of Jaffe, Raitt, Heuer & Weiss, Professional
Corporation (''JRH&W''). JRH&W has served as general counsel to Holdings and the
Company since their inceptions and has represented them in a variety of legal
matters, including the 1995 Transaction, the acquisitions of GenCorp RPD, APX,
Eagle-Picher, the Goodyear-Jackson, Brazil and Livingston. The Company and
Holdings paid JRH&W legal fees of approximately $0.7 million and $1.0 million,
respectively, for the years ending December 31, 1999 and 1998.
SUBORDINATED NOTES AND WARRANT AGREEMENTS
In connection with the 1995 Transaction, the Company obtained a bridge loan in
the aggregate principal amount of $11.9 million from Bankers Trust. On December
14, 1995, the notes evidencing this bridge loan were repurchased from Bankers
Trust by the Company using, inter alia, the proceeds received from issuance of
the Company's senior subordinated notes to two of the Bain Funds, Bain Capital V
Mezzanine Fund, L.P. and BCIP Trust Associates, L.P. (collectively the ''Bain
MezFunds''). These notes were paid in full in connection with the Company's July
10, 1997 credit agreement.
40
<PAGE>
In connection with the issuance of the Company's senior subordinated notes,
Holdings entered into a warrant agreement with the Bain MezFunds pursuant to
which the Bain MezFunds purchased warrants exercisable for an aggregate of
4,723.01 shares of Class A Common at an exercise price of $3.30 per share and
1,180.75 shares of Class L Common at an exercise price of $1,306.80 per share.
The warrants are exercisable immediately, provide for anti-dilution rights upon
the occurrence of certain events and are entitled to all dividends distributed
by Holdings on an as if exercised basis.
In connection with the Company's acquisition of GenCorp RPD, Holdings issued
the Holdings' Junior Subordinated Notes in the aggregate principal amount of
$5.1 million to the Bain MezFunds and Crawford LLC. Crawford LLC subsequently
sold its notes to the Bain MezFunds. The terms of these notes are substantially
similar to the terms of those issued under the Company's senior subordinated
notes, but they are subordinated to indebtedness under the Credit Agreement,
Holdings' senior subordinated notes and the Company's senior subordinated notes.
In connection with the issuance of Holdings' junior subordinated notes,
Holdings entered into a warrant agreement with the Bain MezFunds and Crawford
LLC pursuant to which the Bain MezFunds and Crawford LLC purchased warrants
exercisable for an aggregate of 2,160.27 shares of Class A Common at an exercise
price of $3.30 per share and 540.07 shares of Class L Common at an exercise
price of $1,306.80 per share. The warrants are exercisable immediately, provide
for anti-dilution rights upon the occurrence of certain events and are entitled
to all dividends distributed by Holdings on an as if exercised basis. Crawford
LLC subsequently sold its warrants to the Bain MezFunds in connection with the
sale of its Holdings' Junior Subordinated Notes to the Bain MezFunds. In 1998,
the Baine MezFunds excercised the warrants for all 6,883.28 shares of Class A
Common for an approximate aggregate purchase price of $22,700.
ITEM 14--EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Annual Report.
1. Financial Statements referred to in Item 8.
2. Financial Statement Schedules referred to in Item 8.
3. The exhibits listed on the ''Index to Exhibits'' on pages I-1 and I-2
are filed with this Annual Report or incorporated by reference as set
forth below.
(b) The following reports on Form 8-K were filed during the quarter ended
December 31, 1998.
None.
(c) The exhibits listed on the ''Index to Exhibits'' on pages I-1 and I-2 are
filed with this Annual Report or incorporated by reference as set forth
below.
(d) Additional Financial Statement Schedules.
None.
41
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholder of Cambridge Industries, Inc.:
In our opinion, based on our audits and the report of other auditors, the
accompanying consolidated balance sheets and the related consolidated statements
of operations, of cash flows and of changes in stockholder's deficit present
fairly, in all material respects, the financial position of Cambridge
Industries, Inc. and its subsidiaries at December 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1999 in conformity with accounting principles
generally accepted in the United States. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We did not audit the
financial statements of Mexican and Cambridge, L.L.C. (doing business as Dos
Manos Technologies), an entity 48% owned by the Company, which financial
statements reflect a loss of $4,366,672 for the year ended December 31, 1999.
Those statements were audited by other auditors whose report thereon has been
furnished to us, and our opinion expressed herein, insofar as it relates to the
1999 loss from equity investment of $2,199,000 included for Dos Manos
Technologies, is based solely on the report of the other auditors. We conducted
our audits of these statements in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits and the report of other auditors provide a reasonable
basis for the opinion expressed above.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has been unable to arrange sufficient long-
term financing to meet its operating needs, which raises substantial doubt about
its ability to continue as a going concern. Management's plans in regard to
these matters are also described in Note 2. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
PricewaterhouseCoopers LLP
Detroit, Michigan
March 30, 2000
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Mexican and Cambridge, L.L.C.
d/b/a Dos Manos Technologies
Detroit, Michigan
We have audited the accompanying balance sheet of MEXICAN AND CAMBRIDGE, L.L.C.
D/B/A DOS MANOS TECHNOLOGIES as of December 31, 1999, and the related statements
of operations and member's deficit and cash flows for the year then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to in the first paragraph
present fairly, in all material respects, the financial position of MEXICAN AND
CAMBRIDGE, L.L.C. D/B/A DOS MANOS at December 31, 1999 and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The additional information is presented
for the purpose of additional analysis and is not a required part of the basic
financial statements. Such information, has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
PERRIN, FORDREE & COMPANY, P.C.
Troy, Michigan
February 4, 2000
F-2
<PAGE>
CAMBRIDGE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash................................................................................... $ 12,214 $ 4,474
Receivables............................................................................ 76,399 80,516
Inventories............................................................................ 27,330 25,625
Reimbursable tooling costs............................................................. 6,908 22,914
Deferred income taxes, prepaid expenses and other...................................... 1,514 5,788
--------- ---------
Total current assets............................................................... 124,365 139,317
Property, plant and equipment, net............................................................. 192,321 193,338
Other assets................................................................................... 27,082 31,167
--------- ---------
Total assets................................................................................... $ 343,768 $ 363,822
========= =========
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities:
Current portion of long-term debt...................................................... $ 236,086 $ 17,272
Accounts payable....................................................................... 69,958 65,227
Accrued liabilities.................................................................... 27,153 30,140
--------- ---------
Total current liabilities.......................................................... 333,197 112,639
Noncurrent liabilities:
Long-term debt, less current portion................................................... 102,836 315,029
Postretirement healthcare benefits..................................................... 26,484 23,431
Other noncurrent liabilities........................................................... 1,646 3,545
--------- ---------
Total liabilities.................................................................. 464,163 454,644
--------- ---------
Commitments and contingencies (Note 17)
Stockholder's deficit:
Common stock, $.01 par value, 3,000 shares authorized, 1,000 shares issued and
outstanding........................................................................ -- --
Paid-in capital........................................................................ 17,737 17,808
Accumulated other comprehensive income................................................. 357 (466)
Accumulated deficit.................................................................... (138,489) (108,164)
--------- ---------
Total stockholder's deficit........................................................ (120,395) (90,822)
--------- ---------
Total liabilities and stockholder's deficit........................................ $ 343,768 $ 363,822
========= =========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
CAMBRIDGE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998 1997
------------- ------------- ------------
<S> <C> <C> <C>
Net sales.................................................................... $541,103 $487,184 $426,094
Cost of sales................................................................ 484,679 432,720 367,037
-------- -------- --------
Gross profit................................................................. 56,424 54,464 59,057
Selling, general and administrative expenses................................. 44,527 40,776 31,742
-------- -------- --------
Income from operations....................................................... 11,897 13,688 27,315
Other expense (income):
Interest expense..................................................... 35,687 31,974 28,036
Equity loss in joint venture......................................... 2,199 150 -
Other, net........................................................... (427) (705) (56)
-------- -------- --------
Loss before income tax, extraordinary item and cumulative effect of
accounting change......................................................... (25,562) (17,731) (665)
Income tax expense (benefit)................................................. 4,452 625 (238)
-------- -------- --------
Loss before extraordinary item and cumulative effect of accounting change.... (30,014) (18,356) (427)
Extraordinary loss, net of income tax benefit of $5,465...................... - - 9,788
Cumulative effect of accounting change....................................... 311 - -
-------- -------- --------
Net loss..................................................................... $(30,325) $(18,356) $(10,215)
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
CAMBRIDGE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Loss before extraordinary item................................................... $(30,325) $(18,356) $ (427)
Adjustments to reconcile loss before extraordinary item to net
cash provided by (used in) operating activities:
Depreciation and amortization............................................ 30,916 28,032 24,082
Postretirement benefit expenses, net of cash payments.................... 3,053 2,762 2,229
Deferred income tax provision (benefit).................................. 5,460 (2,859) (3,148)
Equity loss in joint venture............................................. 2,199 150
Cumulative effect of accounting change................................... 311 -
Net changes in assets and liabilities, excluding the effect of
acquisitions:
Receivables...................................................... 1,473 2,357 (23,723)
Inventories...................................................... (1,705) (186) 2,351
Reimbursable tooling costs....................................... 16,006 (4,885) 7,297
Accounts payable and accrued liabilities......................... 1,740 9,041 11,192
Other............................................................ 1,019 3,564 (4,046)
-------- -------- ---------
Net cash provided by operating activities................ 30,147 19,620 15,807
-------- -------- ---------
Cash Flows from Investing Activities:
Acquisitions, net of cash acquired............................................. - (340) (72,434)
Proceeds on sale of property, plant and equipment.............................. 956 -
Purchases of property, plant and equipment..................................... (29,740) (21,940) (17,509)
-------- -------- ---------
Net cash used in investing activities.................... (28,784) (22,280) (89,943)
-------- -------- ---------
Cash Flows from Financing Activities:
Net borrowings from revolving debt............................................. 26,000 12,500 11,500
Repayment of long-term debt.................................................... (18,055) (9,069) (233,712)
Principal payments on capital lease obligations................................ (202) (227) (244)
Proceeds from issuance of long-term debt....................................... - - 305,000
Cost of debt and equity financing.............................................. (1,365) - (16,424)
Contribution from (payments to) stockholder.................................... (71) 269 -
-------- -------- ---------
Net cash provided by financing activities................ 6,307 3,473 66,120
-------- -------- ---------
Effect of foreign currency rate fluctuations on cash............................. 70 (127) (138)
-------- -------- ---------
Increase (decrease) in cash...................................................... 7,740 686 (8,154)
Cash at beginning of the year.................................................... 4,474 3,788 11,942
-------- -------- ---------
Cash at end of the year.......................................................... $ 12,214 $ 4,474 $ 3,788
======== ======== =========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
CAMBRIDGE INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S DEFICIT
YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON ACCUMULATED
STOCK OTHER
COMPREHENSIVE $0.01 PAR PAID-IN COMPREHENSIVE ACCUMULATED
INCOME (LOSS) VALUE CAPITAL INCOME DEFICIT TOTAL
------------- ----------- -------- ------------ ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
December 31, 1996.... $ - $17,539 $ (87) $ (79,593) $ (62,141)
Net loss.................. $(10,215) (10,215) (10,215)
Foreign currency
translation adjustment,
net of tax of $77....... (138) (138) (138)
--------
Comprehensive
income(loss).......... $(10,353)
======== ---------- ------- ----- --------- ---------
December 31, 1997.... - 17,539 (225) (89,808) (72,494)
Capital contribution.... 269 269
Net loss.................. $(18,356) (18,356) (18,356)
Foreign currency
translation adjustment,
net of tax of $57....... (93) (93) (93)
Minimum pension
liability adjustment,
net of tax of $91....... (148) (148) (148)
--------
Comprehensive
Income (loss)........... $(18,597)
======== ---------- ------- ----- --------- ---------
December 31, 1998 $ - $17,808 $(466) $(108,164) $ (90,822)
Repurchase of equity
interest................. (71) (71)
Net loss.................. $(30,325) (30,325) (30,325)
Foreign currency
translation adjustment 675 675 675
Minimum pension liability
adjustment, net of tax
of $91.................. 148 - - 148 - 148
-------- ---------- ------- ----- --------- ---------
Comprehensive loss $(29,502)
========
December 31, 1999 $ - $17,737 $ 357 $(138,489) $(120,395)
========== ======= ===== ========= =========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
CAMBRIDGE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL
Cambridge Industries, Inc. and its subsidiaries (collectively, the Company)
are engaged primarily in the manufacture of plastic molded systems and
subassemblies for the North American transportation industry. The Company
operates facilities in the United States, Canada and Brazil. The Company is
wholly-owned by Cambridge Industries Holdings, Inc. (Holdings), which has no
significant assets other than its investment in the Company.
CONSOLIDATION
The accompanying consolidated financial statements include the accounts and
balances of the Company and its wholly-owned subsidiaries. All significant
intercompany balances and transactions have been eliminated. The Company's
investment in Dos Manos Technologies, a 48% owned joint venture in the United
States, is accounted for under the equity method.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include bank deposits and short-term, highly-liquid
investments with original maturities of 90 days or less when purchased.
FOREIGN CURRENCY TRANSLATION
The financial statements of the Company's foreign subsidiaries have been
translated in accordance with Statement of Financial Accounting Standards (SFAS)
No. 52. Current rates of exchange are used to translate the balance sheets of
these entities, while the average exchange rate of each fiscal year is used for
the translation of income and expense accounts. The resulting unrealized gains
and losses are recorded as a component of other comprehensive income.
REVENUE AND ACCOUNTS RECEIVABLE
Sales, net of estimated returns and allowances, and costs of sales are
recorded upon shipment of product to customers and transfer of title under
standard commercial terms.
All of the Company's accounts receivable are due from a limited number of
customers in the automotive and truck manufacturing industry. Consistent with
industry practice, such receivables are not collateralized.
CONCENTRATION OF CREDIT RISK
The Company manufactures plastic components and composite systems for the
North American transportation industry. Financial instruments which potentially
subject the Company to concentrations of credit risk are primarily accounts
receivable. The Company performs ongoing credit evaluations of its customers'
financial condition and limits the amount of credit extended when deemed
necessary but generally requires no collateral. The allowance for uncollectible
accounts receivable is based on the expected collectibility of all accounts
receivable.
INVENTORIES
Inventories are stated at standard cost, which approximates the lower of cost
or market, as determined under the first-in, first-out method.
F-7
<PAGE>
CAMBRIDGE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
REIMBURSABLE TOOLING COSTS
Reimbursable tooling costs are stated at amounts which management expects to
recover under customer agreements. Unrecoverable tooling costs are charged to
cost of sales when estimated aggregate costs exceed amounts considered
collectible. Excess reimbursements on tooling projects are recognized as income
when the tooling project is substantially complete.
PROPERTY AND EQUIPMENT
Property, plant and equipment is stated at cost and is depreciated under the
straight-line method over the estimated useful lives of such assets. Estimated
service lives are as follows:
Leasehold improvements 5-13 years
Buildings 5-40 years
Machinery and equipment 3-11 years
Company-owned tooling 3-5 years
Furniture and fixtures 2-11 years
Significant renewals and betterments are capitalized, while maintenance and
repair expenditures are charged against operations as incurred.
GOODWILL AND OTHER INTANGIBLE ASSETS
The Company recognizes goodwill on purchase business combinations for the
amount by which the purchase price exceeds the fair value of the assets acquired
and liabilities assumed. Goodwill is amortized on a straight-line basis over 15-
25 years.
Debt issuance costs of $10,713 and $11,655, net of accumulated amortization
at December 31, 1999 and 1998, respectively, are amortized over the terms of the
loan agreements. Debt issue cost amortization of $2,347, $1,955 and $978 for
1999, 1998 and 1997, respectively, has been included in interest expense.
IMPAIRMENT OF ASSETS
The Company evaluates the potential impairment of goodwill on an ongoing basis
and reviews property, plant, equipment, and certain identified intangibles for
impairment whenever events or changes in circumstances indicate that their
carrying amounts may not be recoverable. In performing the review for
recoverability, the Company estimates the future undiscounted cash flows
expected to result from the use of the assets and their eventual disposition.
Any impairment loss recognized is measured as the amount by which the carrying
amount of the asset exceeds its fair value. As of December 31, 1999 and 1998, no
significant impairment exists.
F-8
<PAGE>
CAMBRIDGE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(dollars in thousands, except per share data)
ACCRUED COMMITMENTS UNDER LOSS CONTRACTS
Accrued commitments under loss contracts are recorded based on management's
estimate of the future profitability of sales contracts. The Company evaluates
the profitability of its sales contracts on a vehicle platform basis. A vehicle
platform represents one or more vehicles produced by one manufacturer utilizing
common basic engineering and design features and common components. The Company
records a reserve for loss contracts when management's estimate of expected
costs exceeds the related estimated revenues. During 1999, the Company recorded
a provision of $1,100 pursuant to this policy.
WORKERS' COMPENSATION
The Company was self-insured for workers' compensation claims for periods
ending before April 1, 1998. The Company recorded as workers' compensation
expense the estimated cost, not reimbursable under insurance contracts, of
settling such claims. Accruals for workers' compensation claims for which the
Company was self-insured were estimated from historical claims experience using
computations of the estimated ultimate settlement cost, including claims
incurred but not reported. During the fourth quarter of 1998, the Company
entered into a contract to fully insure all workers' compensation claims
incurred in periods prior to April 1, 1998. For all periods subsequent to March
31, 1998, the Company utilizes third party insurance for workers' compensation
claims.
INCOME TAXES
The Company provides deferred taxes on temporary differences between the book
and tax bases of assets and liabilities. The Company assesses the realizability
of deferred tax assets and records a valuation allowance when realization of
deferred tax assets is not considered more likely than not. Income tax expense
includes United States, foreign and state income taxes, exclusive of taxes on
the undistributed income of foreign subsidiaries where it is the intention of
the Company to have those subsidiaries reinvest the income locally.
FINANCIAL INSTRUMENTS
The Company carries its financial instruments, which include accounts
receivable, accounts payable, indebtedness and an interest rate swap agreement,
at cost which approximates fair value, except for certain indebtedness and the
interest rate swap. The estimated gain on the swap contract at December 31, 1999
approximated $209 based upon estimated cash flows using December 31, 1999
interest rate information. The estimated fair value of the Company's senior
subordinated notes at December 31, 1999 approximated $38,000, based on quoted
market prices.
ENVIRONMENTAL CLAIMS
The Company periodically evaluates the existence of contingent obligations
related to environmental claims and clean-up costs, including claims related to
Superfund sites where it may be identified as a potentially responsible party.
Accruals are established whenever such obligations are considered probable,
which would normally occur when a specific claim is asserted and a preliminary
investigation is performed. The Company's accruals for environmental claims
were not significant at December 31, 1999 and 1998.
F-9
<PAGE>
CAMBRIDGE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation expense using the intrinsic
value method of APB No. 25, ''Accounting for Stock Issued to Employees.'' The
Company has adopted the disclosure-only provisions of Statement of Financial
Accounting Standards (SFAS) No. 123, ''Accounting for Stock-Based
Compensation,'' which defines a fair value method of accounting for stock
options and other equity instruments. In determining the fair value of stock
options issued, the Company uses a risk-free rate, which approximates the rate
on U.S. Treasury obligations with similar duration, and expected lives based on
the provisions of the option agreements. As Holdings' stock currently does not
include a dividend, dividend payments are not included in fair value
determinations.
CAPITALIZED SOFTWARE COSTS
The Company capitalizes costs associated with the development and
implementation of software obtained or developed for internal use. Capitalized
costs include internal payroll and payroll-related costs for employees who are
directly associated with implementation programs and related external costs.
Upon project completion, capitalized costs are amortized over a three-year
useful life.
BUSINESS PROCESS REENGINEERING COSTS
In November 1997, the Company changed its accounting for business process
reengineering costs, as required by the consensus of the Emerging Issues Task
Force on issue 97-13. During 1997, the Company recorded a pre-tax charge of $483
to write-off previously capitalized reengineering costs to recognize the
cumulative effect of this change in accounting principle. The Company has
included this charge in selling, general and administrative expenses.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
SUPPLEMENTAL CASH FLOW DISCLOSURES
Income taxes paid totaled $280 and $1,340, in 1998 and 1997, respectively;
interest payments totaled $33,557, $33,419 and $20,113 in 1999, 1998 and 1997,
respectively. There were no taxes paid in 1999.
In 1997, the Company entered into a capital lease covering certain computer
equipment and assumed capital lease obligations in conjunction with an
acquisition. These obligations totaled $898. The Company also issued a note
payable of $5,400 to the sellers in connection with its purchase of OC-Brazil
(as defined). In 1998, the Company issued notes payable of $3,643 to insurance
companies to fully insure all workers' compensation claims incurred in periods
before April 1, 1998. The Company also issued a note payable of $1,550 to the
seller in connection with its purchase of Livingston, Inc. in 1998.
F-10
<PAGE>
CAMBRIDGE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
RECLASSIFICATIONS
Certain prior-year amounts have been reclassified to conform to 1999
presentation in the consolidated financial statements.
CHANGE IN ACCOUNTING PRINCIPLE
The Company's adopted Statement of Position 98-5, "Reporting on the Costs of
Start-Up Activities", in the first quarter of 1999. This statement requires
companies to expense all previously captialized start-up costs upon adoption and
requires all future start-up costs to be treated as period costs. In accordance
with the provisions of the statement in the first quarter of 1999 the Company
wrote off $311 of start-up costs associated with its Dos Manos Technologies
joint venture.
2. GOING CONCERN
The Company's consolidated financial statements for the year ended December
31, 1999 have been prepared on a going concern basis which contemplates the
realization of assets and the settlement of liabilities and commitments in the
normal course of business. The Company has been unable to comply with its
debt covenants and has been unable to secure sufficient long-term financing to
meet its operating needs. At December 31, 1999, current liabilities exceeded
current assets by $208,832. The aforementioned conditions raise substantial
doubt about the Company's ability to continue as a going concern. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
The Board of Directors of the Company has engaged advisors to facilitate
the sale of the Company to a qualified buyer. Preliminary indications of
interest have been obtained and prospective buyer due diligence activities are
in progress. The Company's lenders have extended credit on a temporary basis
to facilitate the sale process. Management is uncertain if proceeds from the
expected sale of the Company will be sufficient to pay all creditors. The
Company currently contemplates that if a Chapter 11 proceeding has not
commenced prior to such sale, a buyer may require that a Chapter 11 proceeding
be commenced to facilitate such sale. See Note 10 for additional information
regarding the status of the Company's long-term debt and other matters at
December 31, 1999.
3. INVESTMENT IN DOS MANOS TECHNOLOGIES
At December 31, 1999, the Company's investments included a 48% ownership in
Mexican and Cambridge, L.L.C. (doing business as Dos Manos Technologies ("Dos
Manos")), a minority business enterprise which produces interior trim parts
for automotive OEMs. The Company accounts for its investment on the equity
method. The Company's original investment in Dos Manos was $48. During 1999,
the Company paid approximately $2,700 of costs on behalf of Dos Manos and
recorded its share of operating losses of $2,199. The original investment and
advances, net of the Company's share of operating losses recognized, is
included in other long-term assets.
Dos Manos began operations in late 1998. The table below sets forth
summarized financial information for Dos Manos:
December 31, 1999
-----------------
Current assets $10,247
Noncurrent assets 2,763
Current liabilities 10,065
Noncurrent liabilities 7,660
F-11
<PAGE>
CAMBRIDGE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Year Ended December 31, 1999
----------------------------
Net sales $ 21,570
Operating loss (3,430)
Net loss (4,367)
At December 31, 1999, the Company had trade receivables due from Dos Manos of
approximately $870 and trade payables due to Dos Manos of $500. In addition,
the Company recorded $415 of management fee income relating to Dos Manos during
1999.
The Company has leased equipment under an operating lease with a seven year
term expiring in 2005 with annual payments approximating $555. The equipment is
being used by Dos Manos. In addition, the Company has provided a guarantee with
respect to $245 of Dos Manos bank debt.
4. ACQUISITIONS
Effective January 1, 1998, the Company acquired substantially all of the
operating assets of Livingston, Inc. (Livingston) for $2,150 and the assumption
of certain debt of $1,554. The Company accounted for this acquisition under the
purchase method. The Company's operating results include Livingston from
January 1, 1998. The acquired assets and operating results of Livingston are
not material to the accompanying consolidated financial statements.
Effective July 1, 1997, the Company acquired certain net assets of the
engineered composite business (Goodyear-Jackson) of The Goodyear Tire & Rubber
Company, and certain net assets of the plastics division (Eagle-Picher) of
Eagle-Picher Industries, Inc., for $38,219 and $32,035, respectively, including
acquisition costs. The Company accounted for these acquisitions under the
purchase method. The Company's operating results include Goodyear-Jackson and
Eagle-Picher from July 1, 1997.
F-12
<PAGE>
CAMBRIDGE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(dollars in thousands, except per share data)
A summary of the Company's purchase price allocation for the Goodyear-Jackson
and Eagle-Picher acquisitions follows:
<TABLE>
<CAPTION>
Goodyear-Jackson EAGLE- PICHER
------------------ -----------------
<S> <C> <C>
Receivables................................ $ 41 $ 9,027
Inventories................................ 1,796 4,328
Reimbursable tooling costs (advances)...... 8,131 (421)
Deferred income taxes and other assets..... 2,115 5,026
Property, plant and equipment.............. 26,520 33,634
Other assets............................... 3,823
Goodwill................................... 5,362
Accounts payable........................... (2,678) (2,458)
Accrued liabilities........................ (6,891) (12,477)
Deferred income tax liability.............. (4,624)
------- --------
Net assets acquired..................... $38,219 $ 32,035
======= ========
</TABLE>
During 1997, the Company also completed acquisitions of certain net assets of
the production molded composites division of Aero-Detroit, Inc. (PMC), and the
molded plastics and pultrusion operations of a Brazilian subsidiary of Owens-
Corning (OC-Brazil), for aggregate purchase price of approximately $8,000,
including acquisition costs. The Company accounted for these acquisitions using
the purchase method. The operating results and acquired assets of PMC and OC-
Brazil are not material.
The following unaudited pro forma information presents certain operating data
calculated to give pro forma effect to the acquisitions of PMC, Goodyear-
Jackson, Eagle-Picher, and OC-Brazil, as if the acquisitions had taken place at
the beginning of such period. The proforma impact of Livingston has been
excluded as it is not significant.
<TABLE>
<CAPTION>
Year ended
-----------
DECEMBER 31,
------------
1997
----
(unaudited)
-----------
<S> <C>
Sales.................................. $499,427
Income (loss) before extraordinary
item........................... (100)
Net income (loss)...................... (9,922)
</TABLE>
Such pro forma data do not purport to represent what actual operating results
would have been if the acquisitions had been consummated on the dates indicated
or what such results will be for any future period.
F-13
<PAGE>
CAMBRIDGE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
5. RECEIVABLES
A summary of receivables at December 31 follows:
<TABLE>
<CAPTION>
1999 1998
----------- ----------
<S> <C> <C>
Trade accounts.................................................................. $80,887 $81,558
Other.......................................................................... 845 1,362
------- -------
Total........................................................................ 81,732 82,920
Less--allowance for doubtful accounts........................................... (5,333) (2,404)
------- -------
Receivables, net........................................................... $76,399 $80,516
======= =======
</TABLE>
6. INVENTORIES
A summary of inventories at December 31 follows:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Finished goods.................................................................. $ 4,079 $ 4,890
Work-in-process................................................................. 8,764 8,106
Raw materials................................................................... 14,277 11,946
Supplies........................................................................ 1,670 1,571
------- -------
Total........................................................................ 28,790 26,513
Less--allowance for obsolescence and lower of cost or market reserve............ (1,460) (888)
------- -------
Inventories, net............................................................. $27,330 $25,625
======= =======
</TABLE>
7. PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant and equipment at December 31 follows:
<TABLE>
<CAPTION>
1999 1998
------------ -----------
<S> <C> <C>
Land and land improvements...................................................... $ 5,746 $ 5,675
Buildings and building improvements............................................. 54,907 54,845
Machinery, equipment and tooling................................................ 223,581 203,408
Furniture and fixtures.......................................................... 5,705 5,785
Construction in progress........................................................ 19,858 13,529
--------- --------
Total........................................................................ 309,797 283,242
Less--accumulated depreciation.................................................. (117,476) (89,904)
--------- --------
Property, plant and equipment, net........................................... $ 192,321 $193,338
========= ========
</TABLE>
F-14
<PAGE>
CAMBRIDGE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
8. OTHER ASSETS
A summary of other assets at December 31 follows:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Deferred financing costs (net of accumulated amortization of $5,280 and $2,933)......... $10,713 $11,655
Goodwill (net of accumulated amortization of $2,218 and $1,623)......................... 8,721 9,816
Deferred tax asset...................................................................... - 1,682
Favorable lease agreement (net of accumulated amortization of $473 and 282)............. 3,350 3,541
Intangible pension assets............................................................... 1,001 1,642
Capitalized software costs (net of accumulated amortization of $616 and $123)........... 986 1,357
Other................................................................................... 2,311 1,474
------- -------
Other assets......................................................................... $27,082 $31,167
======= =======
</TABLE>
9. ACCRUED LIABILITIES
A summary of accrued liabilities at December 31 follows:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Payroll and employee benefit related................................................... $12,405 $10,687
Accrued commitments under customer contracts........................................... 2,883 4,895
Accrued interest....................................................................... 5,128 4,862
Other.................................................................................. 6,737 9,696
------- -------
Accrued liabilities.................................................................. $27,153 $30,140
======= =======
</TABLE>
10. LONG-TERM DEBT
Long-term debt at December 31 consisted of the following:
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Revolving lines of credit............................................................... $ 50,000 $ 24,000
Term loans.............................................................................. 183,800 197,650
Senior subordinated notes............................................................... 100,000 100,000
Notes payable for acquisitions.......................................................... 3,422 6,581
Notes payable to insurance companies.................................................... 1,475 3,643
Capital leases.......................................................................... 225 427
--------- --------
Total................................................................................ 338,922 332,301
Less--current portion................................................................... (236,086) (17,272)
--------- --------
Long-term debt, less current portion................................................. $ 102,836 $315,029
========= ========
</TABLE>
On July 10, 1997, the Company retired all previously outstanding debt with
the proceeds from the issuance of $100,000 in senior subordinated notes (the
"Notes") and borrowings under a new credit agreement, comprising $205,000 in
term loans and $2,500 in draws under a revolving line of credit. As a result of
the refinancing, the Company recorded an extraordinary item of $9,788 (net of
tax), reflecting the write-off of deferred financing costs, unamortized discount
and other costs upon early extinguishment of debt.
F-15
<PAGE>
CAMBRIDGE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1999 1998 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The original July 10, 1997 credit agreement provided for maximum borrowings of
$280,000, consisting of $205,000 in two term loans (in principal amounts of
$70,000 and $135,000) and $75,000 under a revolving credit facility. The term
loans mature on the fifth and eighth anniversaries of the credit agreement,
respectively, and the revolving credit facility matures on the fifth anniversary
of the credit agreement. Interest on borrowings under the credit agreement are
calculated at an increment over a defined base rate. At December 31, 1999, the
interest rate on $70,000 of the term debt was 9.75%; 10.25% on $135,000 of the
term debt and a weighted average of 9.95% on the revolving line of credit. The
line of credit includes a commitment fee on the average unused balance, which
varies based on the Company's leverage ratio. The original July 10, 1997 credit
agreement with Bankers Trust Company as the Agent and other institutions,
together with subsequent amendments one through eight constitute the "Credit
Agreement".
Indebtedness under the Credit Agreement is collateralized by substantially all
assets of the Company, a pledge of intercompany notes and a pledge of certain
stock of the Company's subsidiaries.
The Credit Agreement includes restrictive covenants which, among other things,
require the Company to maintain (i) minimum levels of consolidated EBITDA
(earnings before interest, taxes, depreciation and amortization), (ii) minimum
interest coverage ratios, and (iii) maximum leverage ratios. The Credit
Agreement also contains covenants limiting capital expenditures, additional
indebtedness, dividends, transactions with affiliates, acquisitions and asset
sales, prepayments of indebtedness, letters of credit amounts and liens.
In September 1998, the Company entered into a Second Waiver and Amendment and
in January 1999 the Company entered into a Third Waiver and Amendment pursuant
to which certain restrictive covenants contained in the Credit Agreement were
waived and amended. On February 23, 1999, the Company entered into a Fourth
Waiver and Amendment to the Credit Agreement ("Fourth Amendment"). The Fourth
Amendment provided for borrowings under the revolving line of credit of up to
$65,000 throughout each month, with a maximum of $50,000 at any month end. The
Fourth Amendment also limited letters of credit to $5,300 from the effective
date of the amendment. The Fourth Amendment waived restrictive covenants as of
December 31, 1998 and amended the covenants for periods through March 31, 2000.
At various times during 1999, the Company entered into the Fifth and Sixth
Waivers and Amendments to the Credit Agreement pursuant to which certain
restrictive covenants contained in the Credit Agreement were waived and amended.
As an inducement to the banks agreeing to the Sixth Waiver and Amendment,
Holdings and the Company agreed to engage Morgan Stanley Dean Witter & Co.
("MSDW") for purposes of assisting Holdings and the Company with the sale of
all or a portion of the Company's business or assets and to pay certain
amendment fees related to the outstanding balances of all borrowings under the
Credit Agreement. During March 2000, the Company entered into the Seventh Waiver
and Amendment pursuant to which the Fourth Amendment requirement to reduce the
month end revolving line of credit balance to $50,000 was waived for the month
of February 2000.
Also during March 2000, the Company entered into the Eighth Waiver and
Amendment to the Credit Agreement ("Eighth Amendment") pursuant to which the
Company and the Banks agreed to several waivers, revisions and amendments to
certain restrictive covenants under the Credit Agreement, including the deferral
of the Company's mandatory prepayments of principal. Certain restrictive
covenants contained in the Credit Agreement were waived and amended through June
30,2000. As a condition to the Eighth Amendment becoming effective, the Company
agreed to negotiate for and enter into agreements with certain of its OEM
customers (the "Customer Agreements") whereby the OEMs agree as long as the
Company is in compliance with the Customer Agreements (i) to provide accelerated
payments of their accounts payable to the Company, (ii) not to resource the
production of the Company's programs (iii) to waive set-off or payment abatement
rights on certain of the OEM's accounts payable to the Company. The Company has
entered into such Customer Agreements as required by the Banks. As a condition
to entering into the Customer Agreement, the OEMs required the Company to obtain
a standby financing commitment for debtor-in-possession financing in the event
of a Chapter 11 insolvency proceeding involving the Company.
In addition, to induce the Banks to enter into the Eighth Amendment, the
Company (i) agreed to additional fees for the waiver (ii)reaffirmed its
commitment to the sale process contemplated by the Sixth Amendment, and (iii)
agreed, along with Holdings and the Guarantor of the Credit Agreement, to
release the Banks and their agents under and pursuant to the Credit Agreement,
from any and all claims, causes of action, or liabilities which are in any
manner related to the Credit Agreement and any documents or enforcement
activities related thereto.
It is probable that the Company will be unable to meet the restrictive
covenants subsequent to the waiver period, and accordingly, the outstanding debt
under the Credit Agreement has been classified as current in the accompanying
consolidated balance sheet at December 31, 1999. At February 29, 2000, the
Company had drawn $65,000 under the revolving credit facility.
The Notes are guaranteed by the Company's parent and the Company's domestic
subsidiaries (see Note 19). The Notes are subordinated to the Company's
obligations under the Credit Agreement. The Notes contain provisions such that a
default in the Credit Agreement which is caused by a failure to pay amounts due
at their stated maturity date or which results in the debt holders causing such
amounts to be due prior to its final maturity, if not waived, would allow the
Notes to be callable. The Notes bear interest at 10.25% and mature in 2007.
They are required to be repurchased in the event of a change in control, as
defined in the Notes agreement.
Notes payable for acquisitions at December 31, 1999 represent amounts due to
former owners of OC-Brazil and Livingston. A substantial portion of the notes
payable due to OC-Brazil bear interest at a variable rate (LIBOR plus 3%) and is
payable in installments that are calculated based on the earnings of OC-Brazil.
The remaining notes outstanding are non-interest bearing and are payable in
equal amounts each quarter through September 2000. The Company did not make all
scheduled principal payments with respect to these notes during 1999, which
accelerated the due date with respect to approximately $600 at December 31,
1999. The total amount outstanding with respect to these agreements, net of
unamortized discount of approximately $700 at December 31, 1999, is $3,400.
F-16
<PAGE>
CAMBRIDGE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The notes payable to insurance companies represent amounts due from contracts
entered into during 1998 to fully insure all workers' compensation claims
incurred in periods before April 1, 1998. The notes are unsecured obligations
of the Company. The notes bear interest at 8.25% and mature in July 2000. The
terms of the notes require monthly principal and interest payments of $217.
The Company entered into a three year interest rate swap agreement in
accordance with the terms described in the Credit Agreement. At December 31,
1999, the Company had an interest rate swap with a notional amount of $50
million. Under the swap agreement, the Company will pay the counter-party
interest at a rate of 5.75% and the counter-party will pay the Company interest
at the three month LIBOR adjusted quarterly. If the three-month LIBOR equals or
exceeds 6.75%, the Company will pay the counter-party at the three-month LIBOR.
The maximum rate of interest the Company can pay under this agreement is 9.0%.
The annual maturities of long-term debt, including principal payments on
capital leases, at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
<S> <C>
2000 ........................................................................................ $236,086
2001 ........................................................................................ 2,812
2002 ........................................................................................ 10
2003 ........................................................................................ 10
2004 ........................................................................................ 4
Thereafter .................................................................................. 100,000
--------
$338,922
========
</TABLE>
11. OTHER LIABILITIES
A summary of other liabilities at December 31 follows:
<TABLE>
<CAPTION>
1999 1998
------ ------
<S> <C> <C>
Accrued commitments under acquired contracts................ $1,646 $1,664
Minimum pension liability................................... - 1,881
------ -----
Other liabilities......................................... $1,646 $3,545
====== ======
</TABLE>
12. EMPLOYEE RETIREMENT BENEFITS
Employee Retirement Plan
The Company has two noncontributory defined benefit pension plans
covering eligible employees at two of its plants. Pension benefits are based on
participants' years of credited service. The Company's policy is to fund the
minimum required annual contribution to the plans.
F-17
<PAGE>
CAMBRIDGE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(dollars in thousands, except per share data)
POSTRETIREMENT HEALTH CARE BENEFITS
The Company provides postretirement healthcare and prescription drug benefits
to a limited number of current retirees. Certain active hourly employees and
their covered dependents may become eligible for these benefits, although the
Company does not necessarily have a legal obligation to provide benefits to all
such participants. The Company recognizes the estimated cost of providing such
benefits over the service lives of the covered employees. Postretirement
benefits provided by the Company are funded as claims are incurred.
EMPLOYEE RETIREMENT BENEFIT EXPENSE
The Company's expense for pensions and postretirement health care was as
follows:
<TABLE>
<CAPTION>
PENSION BENEFITS POSTRETIREMENT BENEFITS
------------------------ -------------------------
Costs Recognized in Income 1999 1998 1997 1999 1998 1997
-------- ------ ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Service cost.............................. $ 968 $ 795 $ 930 $1,723 $1,396 $1,188
Interest cost............................. 467 378 143 2,056 1,855 1,582
Expected return on plan assets............ (435) (342) (272) - - -
Amount of recognized (gain) loss.......... (4) 4 231 145 162
Amount of prior service cost recognized... 120 120 - - - -
------ ----- ----- ------ ------ ------
Net pension/postretirement expense........ $1,120 $ 947 $ 805 $4,010 $3,396 $2,932
====== ===== ===== ====== ====== ======
</TABLE>
In connection with the recognition of the minimum liability as required by SFAS
No. 87, "Employer's Accounting for Pensions", during 1998 the Company has
recorded an intangible asset of $1,642 included in Other Assets in the
accompanying balance sheet, a $1,881 additional minimum liability included in
Other Liabilities, and an equity reduction of $148 (net of related tax benefit
of $91). Such amounts were not required at December 31, 1999.
<TABLE>
<CAPTION>
PENSION BENEFITS POSTRETIREMENT BENEFITS
----------------- -----------------------
Change in Benefit Obligation 1999 1998 1999 1998
------------ -------------- --------------- --------------
<S> <C> <C> <C> <C>
Benefit obligation at Jan. 1............................... $ 6,025 $3,043 $31,264 $26,072
Service cost............................................. 968 795 1,723 1,396
Interest cost............................................ 467 378 2,056 1,855
Amendments............................................... - 1,752 - -
Benefits paid............................................ (270) (56) (957) (415)
Actuarial (gains) losses................................. (1,176) 113 (5,414) 2,356
------- ------ ------- -------
Benefit obligation at Dec. 31 $ 6,014 $6,025 $28,672 $31,264
------- ------ ------- -------
</TABLE>
F-18
<PAGE>
CAMBRIDGE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PENSION BENEFITS POSTRETIREMENT BENEFITS
---------------- -----------------------
Change in Plan Assets 1999 1998 1999 1998
-------------- --------------- --------------- ------------
<S> <C> <C> <C> <C>
Fair value of plan assets at Jan. 1...................... $4,129 $ 3,335 - $ -
Actual return on plan assets............................. 228 455 - -
Company contribution..................................... 1,845 394 957 415
Benefits paid............................................ (270) (55) (957) (415)
------ ------- -------- --------
Fair value of plan assets at Dec. 31..................... $5,932 $ 4,129 $ - $ -
------ ------- -------- --------
Funded Status of Plan
Plan assets in excess of (less than) projected
benefits............................................ $ (82) $(1,896) $(28,672) $(31,264)
Unamortized net transition liability.................. 1,642 1,642
Unrecognized prior service cost....................... (120) -
Unrecognized net actuarial (gain) loss................ (707) 239 2,188 7,833
------ ------- -------- --------
Net asset (liability) recognized...................... $ 733 $ (15) $(26,484) $(23,431)
------ ------- -------- --------
Amounts recognized in the balance sheet
Other assets......................................... $1,001 $ - $ - $ -
Deferred tax asset................................... - 91 - -
Intangible asset..................................... - 1,642 - -
Accrued liabilities.................................. (268) (15) (26,484) $(23,431)
Additional minimum liability......................... - (1,881) -
Accumulated other comprehensive income............... - 148 - -
------ ------- -------- --------
Net amount recognized................................ $ 733 $ (15) $(26,484) $(23,431)
====== ======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
PENSION BENEFITS POSTRETIREMENT BENEFITS
------------------------------ ------------------------------
Assumptions as of December 31 1999 1998 1999 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Discount rate.................................. 7.75% 6.75% 7.75% 6.75%
Expected return on assets...................... 10.00% 10.00%
Health care cost trend rate.................... 5.00% 5.00%
</TABLE>
A one percentage point increase each year in the assumed healthcare cost trend
rate would increase the accumulated postretirement obligation at December 31,
1999 by 13.1% and the service and interest cost components of net periodic
postretirement benefit cost for 1999 by 13.7%.
DEFINED CONTRIBUTION PLAN
The Company sponsors 401(k) retirement plans for substantially all of its
employees, which allow employees to contribute up to a specified percentage of
their compensation into tax deferred accounts. The Company recorded expense for
its contributions to these plans of $1,772, $780, and $932 in 1999, 1998, and
1997, respectively.
F-19
<PAGE>
CAMBRIDGE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
13. INCOME TAXES
The income tax provision (benefit) for 1999, 1998 and 1997 consists of the
following components:
1999 1998 1997
---------- ----------- -----------
Current provision (benefit)....... $(1,008) $ 3,484 $ 2,910
Deferred provision (benefit)...... 5,460 (2,859) (3,148)
------- ------- -------
Income tax expense (benefit)...... $ 4,452 $ 625 $ (238)
======= ======= =======
A reconciliation of the Company's statutory and effective income tax rates
follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- --------
<S> <C> <C> <C>
Applicable statutory tax rate ......................... (35)% (34)% (34)%
State income taxes .................................... ( 4) (6) (2)
Permanent differences................................... 2 4
Foreign tax rate difference............................. ( 1) 2
Valuation allowance..................................... 59 31
Other, net.............................................. (4) 7 -
----- ---- ----
Effective tax rate .................................... 17% 4% (36)%
==== ==== ====
</TABLE>
The components of the Company's deferred tax assets and liabilities at
December 31 are as follows:
<TABLE>
<CAPTION>
1999 1998
---------------------------- -----------------------------
DEFERRED DEFERRED DEFERRED DEFERRED
------------ -------------- ------------ ---------------
INCOME TAX INCOME TAX INCOME TAX INCOME TAX
------------ -------------- ------------ ---------------
LIABILITY ASSET LIABILITY ASSET
------------ -------------- ------------ ---------------
<S> <C> <C> <C> <C>
Property, plant and equipment, net ...... $28,215 $ - $25,036 $ -
Accrued liabilities ..................... 7,324 5,336
Postretirement health care benefits ..... 9,363 8,526
Alternative minimum tax credit
carryforwards ......................... 2,739 2,774
Foreign tax credit carryforwards.......... 690 690
Net operating loss carryforwards ........ 24,839 14,743
Other..................................... 6,217 3,888
Less valuation allowance.................. - (22,957) (5,460)
------- -------- ------------ -------
Total..................................... $28,215 $ 28,215 $25,036 $30,497
======= ======== ============ =======
</TABLE>
The Company has net operating loss carryforwards with potential future tax
benefits of $ 24,839 for federal income tax purposes and $ 2,462 for state
income tax purposes at December 31, 1999. The federal net operating losses
expire during the years 2012 through 2019 and the state net operating losses
expire during the years 2013 through 2019. In addition, the Company has
alternative minimum tax credit carryforwards aggregating $2,739 at December 31,
1999, which can be carried forward indefinitely. The Company also has $690 of
foreign tax credit carryforwards. A valuation allowance has been established due
to the uncertainty of realizing deferred income tax assets.
F-20
<PAGE>
CAMBRIDGE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
If the Company experiences a change in ownership within the meaning of Section
382 of the Internal Revenue Code, an annual limitation could be placed upon the
Company's ability to realize the benefits of its net operating loss
carryforwards.
14. STOCKHOLDER'S DEFICIT
Each of the 1,000 shares of the Company's outstanding common stock is owned by
Holdings. The following summarizes the rights of the various classes of the
Holdings' preference and common stock.
PREFERENCE STOCK
Preference stock, which is nonvoting, contains a liquidation premium equal to
$18,150 per share, plus a yield equal to 9.1% per year of such liquidation
amount, measured from December 1995. Such liquidation amount is payable upon
liquidation, sale of the Company, or upon the completion of an initial public
offering of Holdings' common stock. There were 1,000 shares of preference stock
outstanding at December 31, 1999 and 1998.
CLASS P COMMON STOCK
Class P common stock is voting stock, which includes a liquidation preference
equal to $250 per share, if the Company's net sales exceed $505,000 for any
previous year or $125 per share, if the Company's net sales exceed $405,000 for
any previous year. Class P common stock has no liquidation preference if neither
of these conditions is achieved. There were 45,000 shares of Class P common
stock outstanding at December 31, 1999 and 1998.
CLASS L COMMON STOCK
Class L common stock is voting stock, which includes a liquidation preference
equal to $1,307 per share plus a 10% yield per year on such liquidation amount
measured from December 1995. There were 25,439 shares and 25,591 shares of Class
L common stock issued and outstanding at December 31, 1999 and 1998,
respectively.
CLASS A COMMON STOCK
Class A common stock is voting stock, but contains no liquidation preference.
There were 63,640 and 64,247 shares of Class A common stock issued and
outstanding at December 31, 1999 and 1998, respectively.
F-21
<PAGE>
CAMBRIDGE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The rights and obligations of the holders of these classes of stock are
governed by a stockholders' agreement, which provides for the election of
directors and officers, a right of first refusal in the sales of shares, and
other provisions which allow particular groups of shareholders to require a sale
of the Company after March 31, 1998.
During 1997, Holdings entered into agreements with certain officers and key
employees of the Company pursuant to which the employees purchased 2,667 shares
and 667 shares of Class A and Class L common stock, respectively, for an
aggregate purchase price of $880. The employees executed full recourse
promissory notes for the purchase price of the stock. Shares purchased under
these agreements vest in 20% increments annually. Upon termination of
employment, the Company, at its option, may repurchase vested shares for fair
value and unvested shares for the lower of original cost or fair value.
In 1996, warrants were issued to certain shareholders and lenders to acquire
2,160 shares of Holdings' Class A common stock at $3.30 per share and 540 shares
of Holdings' Class L common stock at $1,307 per share. The warrants are
exercisable through November 2005. The fair value of the warrants was recorded
as an increase to additional paid-in capital during 1996.
ACCUMULATED OTHER COMPREHENSIVE INCOME
A summary of components of accumulated other comprehensive income follows:
<TABLE>
<CAPTION>
TOTAL
FOREIGN ACCUMULATED
CURRENCY MINIMUM OTHER
TRANSLATION PENSION COMPREHENSIVE
ADJUSTMENT LIABILITY INCOME
---------- --------- -------------
<S> <C> <C> <C>
December 31, 1998........................................... $(318) $(148) $(466)
1999 Change 675 148 823
----- ----- -----
December 31, 1999........................................... $ 357 $ - $ 357
===== ===== =====
</TABLE>
15. STOCK-BASED COMPENSATION
Holdings is authorized to grant options to the Company's executive officers at
the discretion of the Board of Directors up to the authorized number of shares
for Holdings. The exercise price, vesting schedule and maximum term of options
granted are set by the Board of Directors. The Company recognizes compensation
cost (if any) for options and other stock-based compensation granted by Holdings
to the Company's employees. The Company's compensation cost with respect to
grants under the stock-based compensation program was not significant;
compensation cost calculated in accordance with SFAS 123 is also not material.
For purposes of SFAS 123 disclosures, the Company estimates the fair value of
each option grant on the date of grant using the minimum value option-pricing
method with the following weighted-average assumptions used for grants in 1999
and 1998: zero volatility, dividend yield rate of zero, as Holdings does not pay
dividends on its common stock, risk-free interest rates of approximately 6.0%,
representing rates on U.S. Treasury obligations with similar duration, and an
expected life of 5 years. Options granted in 1999 had exercise prices in excess
of market value at the date of grant.
F-22
<PAGE>
CAMBRIDGE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
A summary of option activity for 1999, 1998 and 1997, follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------------- ----------------- -------------------
WEIGHTED- WEIGHTED- WEIGHTED-
--------- --------- ---------
AVERAGE AVERAGE AVERAGE
------- --------- ---------
EXERCISE EXERCISE EXERCISE
-------- -------- --------
SHARES PRICE SHARES PRICE SHARES PRICE
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year ......... 20,145 $275.43 20,145 $275.43 15,845 $240.21
Granted .................................. 9,107 91.57 4,300 405.22
Exercised .................................
Forfeited or expired ..................... (900) 405.22 - -
------ ------- ------ ------- ------ -------
Outstanding at end of year ............... 28,352 $212.26 20,145 $275.43 20,145 $275.43
====== ====== ======
Exercisable at year end .................. 9,553 9,914 6,439
Weighted average fair value of options
granted during the year ............... $ - $ - $ 0.81
</TABLE>
The following table summarizes information about stock options outstanding at
December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------------- ------------------------
WEIGHTED
--------
AVERAGE EXERCISE WEIGHTED WEIGHTED
--------------- --------- --------
RANGE OF NUMBER REMAINING AVERAGE NUMBER AVERAGE
-------- ------ --------- --------- -------- ---------
EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
--------------- ----------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$ 3.30 17,729 6.8 $ 3.30 8,737 $ 3.30
312.13 3,961 6.0 312.13 - 312.13
642.13 5,312 6.0 642.13 408 642.13
972.13 1,350 5.9 972.13 408 972.13
</TABLE>
16. RELATED PARTY TRANSACTIONS
Management and advisory services are provided by an affiliate of certain
shareholders of Holdings, under an agreement which requires an annual fee of
$950, plus certain other contingent fees. Total fees charged to the Company by
such affiliate during 1999, 1998, and 1997 were approximately $1,173, $1,015
and $6,475 respectively. As of December 31, 1999 and 1998 the Company owed $295
and $249, respectively to such affiliate. The Company also leases certain
equipment from an affiliate of Holdings; total fees charged to the Company by
such affiliate were approximately $393, $386 and $250 in 1999, 1998 and 1997,
respectively. The Company has a $250 minimum commitment for such services in
2000. Another affiliate of Holdings was paid $20 in 1999 for various
services.
Certain legal services were provided by an affiliate of a director of the
Company. Total fees charged to the Company by such affiliate were approximately
$729, $1,175 and $1,900 in 1999, 1998 and 1997, respectively. As of December
31, 1999 and 1998 the Company owed $75 and $670 , respectively.
F-23
<PAGE>
CAMBRIDGE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
17. COMMITMENTS AND CONTINGENCIES
During 1999 and 1998, the Company entered into equipment leases which are
classified as capital leases. Assets under capital leases at December 31, 1999
are as follows:
<TABLE>
<S> <C>
Equipment................................................................................ $1,000
Accumulated amortization................................................................. (798)
------
$ 202
======
</TABLE>
The Company leases certain equipment and plant facilities under noncancellable
operating leases. Rental expense for the Company totaled approximately, $6,905,
$5,965 and $4,383 during 1999, 1998 and 1997, respectively.
Minimum payments for operating leases having initial or remaining
noncancellable lease terms in excess of one year at December 31, 1999 are
summarized below:
YEAR ENDING
-----------
DECEMBER 31
-----------
2000................................ $ 5,630
2001................................ 4,515
2002................................ 2,966
2003................................ 2,214
2004................................ 2,065
Thereafter.......................... 1,834
-------
Total............................ $19,224
-------
The Company has letters of credit outstanding of $4,650 at December 31, 1999.
The Company is also subject to other lawsuits and claims pending or asserted
with respect to matters arising in the ordinary course of business. Management
does not believe that the outcome of these uncertainties will have a material
adverse effect on the consolidated financial position, results of operations or
cash flows of the Company.
F-24
<PAGE>
CAMBRIDGE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
18. BUSINESS SEGMENTS
Effective January 1, 1998, the Company adopted SFAS No. 131, "Disclosure
about Segments of an Enterprise and Related Information." SFAS No. 131
establishes new standards for segment reporting which are based on the way
management organizes segments within a company for making operating decisions
and assessing performance. Prior period amounts have been restated to conform
to the requirements of this statement.
The Company's businesses are organized, managed, and internally reported as
three segments. The segments, which are based on differences in customers and
products, technologies and services, as determined by the primary product of the
related facility, are Automotive and Light Truck, Commercial Truck, and
Industrial and Non-Automotive. The Automotive and Light Truck Industry Segment
produces molded engineered plastic components for automotive original equipment
manufacturers. This segment primarily supplies components for automotive
interiors, exteriors, and power trains. The Commercial Truck Industry Segment
produces molded-engineered plastics for the commercial transportation industry.
The segment primarily supplies external body panel components for class 4
through class 8 commercial trucks. The Industrial and Non-Automotive Segment
produces various plastic components for the agricultural, appliance, commercial
construction, and recreational transportation industries. Net sales by segment
exclude inter-segment sales. Operating income consists of net sales less
applicable operating costs and expenses related to those sales. The Company's
general corporate expenses are excluded from segment operating income. Earnings
before interest, taxes, depreciation and amortization ("EBITDA") by segment
consists of operating income, other expense (income) net, adjusted for interest,
taxes, depreciation, and amortization. Identifiable assets by segment are those
assets that are used in the operations of each segment. General corporate
assets are those not identifiable with the operations of a segment. The Company
is not dependent on any single product or market.
The Company's major customers include automotive and commercial truck
original equipment manufacturers. The percentage of sales of each of these
major customers to total consolidated sales for the three year periods 1999,
1998, and 1997, respectively, are as follows: Ford, 25.4%, 25.9%, and 27.2%;
General Motors, 25.3%, 21.9% and 21.7%, DaimlerChrysler, 11.8%, 10.0% and
11.2%; and Freightliner, 13.1%, 8.8 % and 9.8%.
F-25
<PAGE>
CAMBRIDGE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
BUSINESS SEGMENT INFORMATION
<TABLE>
<CAPTION>
Commercial Corporate and
----------------- ----------------
Year Automotive Truck Industrial Unallocated Total Company
--------- ------------- ----------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Net sales 1999 $296,160 $223,492 $21,451 $ - $541,103
1998 252,398 203,068 31,718 487,184
1997 248,438 163,647 14,009 426,094
Operating income* 1999 19,559 11,752 (2,792) (16,622) 11,897
1998 19,517 9,688 (325) (15,192) 13,688
1997 30,251 12,826 1,478 (17,240) 27,315
Equity in loss of
joint venture 1999 2,199 2,199
1998 150 150
EBITDA** 1999 34,261 23,793 (1,341) (15,672) 41,041
1998 33,358 21,936 1,015 (14,034) 42,275
1997 42,543 23,426 1,832 (16,348) 51,453
Assets *** 1999 212,703 102,366 18,021 10,678 343,768
1998 189,370 127,194 16,213 31,045 363,822
1997 195,436 127,100 9,776 37,172 369,484
Depreciation and 1999 16,074 12,081 1,451 1,310 30,916
amortization 1998 13,193 12,826 1,385 628 28,032
1997 12,580 10,457 354 691 24,082
Capital expenditures 1999 18,029 7,813 3,850 48 29,740
1998 14,782 6,332 463 363 21,940
1997 11,261 5,027 1,221 17,509
</TABLE>
*Operating income includes unallocated corporate overhead expenses.
** EBITDA includes operating income, other expense (income) net, adjusted for
interest, taxes, depreciation, and amortization.
***Segment assets primarily include accounts receivable; inventory, property,
plant and equipment - net, goodwill and other miscellaneous assets. Assets
included in Corporate and Unallocated principally are cash and cash equivalents,
deferred financing costs, deferred income taxes, unallocated goodwill, certain
investments, other assets, and certain unallocated property, plant and
equipment, net of unapplied accounts receivable credits.
The following table reconciles EBITDA to pretax loss:
<TABLE>
<CAPTION>
1999 1998 1997
----------------- ---------------- ----------------
<S> <C> <C> <C>
EBITDA $ 41,041 $ 42,275 $51,453
Less:
Depreciation and amortization 30,916 28,032 24,082
Interest expense 35,687 31,974 28,036
---------- -------- -------
Pretax income (loss) $ (25,562) $(17,731) $ (665)
========== ======== =======
</TABLE>
F-26
<PAGE>
CAMBRIDGE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
GEOGRAPHIC AREAS
Export sales and certain income and expense items are reported within the
geographic area where the final sales to customers are made.
<TABLE>
<CAPTION>
GEOGRAPHIC INFORMATION
Year United States Canada Mexico Other Total Company
--------- ----------------- ------------- --------------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Net sales 1999 $443,754 $78,015 $13,338 $ 5,996 $541,103
1998 406,914 58,850 10,967 10,453 487,184
1997 375,907 41,907 3,922 4,358 426,094
Operating 1999 9,630 1,816 311 140 11,897
income 1998 11,433 1,653 308 294 13,688
1997 24,098 2,686 251 280 27,315
EBITDA 1999 33,714 5,873 1,004 450 41,041
1998 35,310 5,107 952 906 42,275
1997 45,393 5,060 474 526 51,453
Identifiable 1999 332,228 4,508 3,627 3,405 343,768
assets 1998 355,789 2,345 - 5,688 363,822
1997 357,961 4,379 - 7,144 369,484
</TABLE>
19. CONDENSED CONSOLIDATING INFORMATION
The Notes are guaranteed by CE Automotive Trim Systems, Inc. (CE), a wholly-
owned consolidated subsidiary of the Company, but are not guaranteed by the
Company's other consolidated subsidiaries, Voplex of Canada and the Brazilian
subsidiary. The guarantee of the Notes by CE is full and unconditional. The
following condensed consolidated financial information presents the financial
position, results of operations and cash flows of (i) the Company, as parent, as
if it accounted for its subsidiaries on the equity method; (ii) CE, the
guarantor subsidiary, and (iii) Voplex of Canada and the Brazilian subsidiary,
as non-guarantor subsidiaries. The financial position and operating results of
the non-guarantor subsidiaries do not include any allocation of overhead or
other similar charges.
Separate financial statements of CE are not presented herein, as management
does not believe that such statements would be material. CE was formed in 1994
as a joint venture with an unrelated entity. The Company accounted for its 50%
interest in CE as an equity investment as of December 31, 1996; the Company's
equity investment in CE at that date was $0. In 1997, the Company purchased the
other entity's interest in CE for an immaterial amount, and CE became a
consolidated subsidiary of the Company. CE had no revenues or operations during
the periods presented.
F-27
<PAGE>
CAMBRIDGE INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1999
<TABLE>
<CAPTION>
NON-GUARANTOR GUARANTOR ELIMINATIONS/
------------- ------------ --------------
PARENT SUBSIDIARIES SUBSIDIARY ADJUSTMENTS CONSOLIDATED
---------- ------------- ------------ -------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash..................................... $ 10,793 $ 1,421 $ - $ - $ 12,214
Receivables ............................ 74,672 5,033 - (3,306) 76,399
Inventories ............................ 25,723 1,607 - - 27,330
Reimbursable tooling costs ............. 6,388 520 - - 6,908
Prepaid expenses and other ............. 1,430 84 - - 1,514
--------- ------- ------------ ------- ---------
Total current assets ........... 119,006 8,665 - (3,306) 124,365
Property, plant and equipment, net ............. 189,831 2,490 - - 192,321
Other long-term assets ......................... 27,018 64 - - 27,082
Investment in consolidated subsidiaries ........ 5,675 - - (5,675) -
--------- ------- ------------ ------- ---------
Total assets ................... $ 341,530 $11,219 $ - $(8,981) $ 343,768
========= ======= ============ ======= =========
Liabilities and stockholder's equity (deficit)
Current liabilities
Current portion of long-term debt ...... $ 235,386 $ 700 $ - $ - $ 236,086
Accounts payable ....................... 71,964 1,300 - (3,306) 69,958
Accrued liabilities .................... 26,688 465 - - 27,153
--------- ------- ------------ ------- ---------
Total current liabilities ...... 334,038 2,465 - (3,306) 333,197
Noncurrent liabilities
Long-term debt ......................... 100,114 2,722 - - 102,836
Postretirement healthcare benefits ..... 26,484 - - - 26,484
Other liabilities ...................... 1,646 - - - 1,646
--------- ------- ------------ ------- ---------
Total liabilities .............. 462,282 5,187 - (3,306) 464,163
--------- ------- ------------ ------- ---------
Stockholder's equity (deficit)
Common stock ........................... - - - - -
Paid-in capital ........................ 17,737 5,257 - (5,257) 17,737
Accumulated other comprehensive income... - 357 - - 357
Retained earnings (accumulated deficit).. (138,489) 418 - (418) (138,489)
--------- ------- ------------ ------- ---------
Total stockholder's equity
(deficit) ..................... (120,752) 6,032 - (5,675) (120,395)
--------- ------- ------------ ------- ---------
Total liabilities and equity
(deficit)........................ $ 341,530 $11,219 $ - $(8,981) $ 343,768
========= ======= ============ ======= =========
</TABLE>
F-28
<PAGE>
CAMBRIDGE INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
<CAPTION>
NON-GUARANTOR GUARANTOR ELIMINATIONS/
-------------- ------------ --------------
PARENT SUBSIDIARIES SUBSIDIARY ADJUSTMENTS CONSOLIDATED
--------- ------------- ----------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash..................................... $ 4,141 $ 333 $ - $ - $ 4,474
Receivables ............................ 74,310 6,206 - - 80,516
Inventories ............................ 23,745 1,880 - - 25,625
Reimbursable tooling costs ............. 22,590 324 - - 22,914
Deferred income taxes and other ........ 5,703 85 - - 5,788
--------- ------- ------------ --------------- ---------
Total current assets ........... 130,489 8,828 - - 139,317
Property, plant and equipment, net ............. 189,559 3,779 - - 193,338
Other long-term assets ......................... 31,080 87 - - 31,167
Investment in consolidated subsidiaries ........ 6,395 - - (6,395) -
--------- ------- ------------ --------------- ---------
Total assets ................... $ 357,523 $12,694 $ - $(6,395) $ 363,822
========= ======= ============ =============== =========
Liabilities and stockholder's equity (deficit)
Current liabilities
Current portion of long-term debt ...... $ 16,729 $ 543 $ - $ - $ 17,272
Accounts payable ....................... 64,073 1,154 - - 65,227
Accrued liabilities .................... 29,739 401 - - 30,140
--------- ------- ------------ --------------- ---------
Total current liabilities ...... 110,541 2,098 - - 112,639
Noncurrent liabilities
Long-term debt ......................... 310,510 4,519 - - 315,029
Workers' compensation .................. - - - - -
Postretirement healthcare benefits ..... 23,431 - - - 23,431
Other liabilities ...................... 3,545 - - - 3,545
--------- ------- ------------ --------------- ---------
Total liabilities .............. 448,027 6,617 - - 454,644
--------- ------- ------------ --------------- ---------
Stockholder's equity (deficit)
Common stock ........................... - - - - -
Paid-in capital ........................ 17,808 5,257 - (5,257) 17,808
Accumulated other comprehensive income... (148) (318) - - (466)
Retained earnings (accumulated deficit).. (108,164) 1,138 - (1,138) (108,164)
--------- ------- ------------ --------------- ---------
Total stockholder's equity
(deficit) ..................... (90,504) 6,077 - (6,395) (90,822)
--------- ------- ------------ --------------- ---------
Total liabilities and equity
(deficit)........................ $ 357,523 $12,694 $ - $(6,395) $ 363,822
========= ======= ============ =============== =========
</TABLE>
F-29
<PAGE>
CAMBRIDGE INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
NON-GUARANTOR GUARANTOR ELIMINATIONS/
PARENT SUBSIDIARIES SUBSIDIARY ADJUSTMENTS CONSOLIDATED
---------- ---------------- ------------- ------------------ -------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Sales..................................... $529,587 $11,516 $ - $ - $541,103
Cost of sales ........................... 474,215 10,464 - - 484,679
-------- ------- ------------- ------------------ --------
Gross profit ............................ 55,372 1,052 - - 56,424
Selling, general and administrative
expenses ........................... 42,937 1,590 - - 44,527
------ ------- ------------- ------------------ --------
Income from operations .................. 12,435 (538) - - 11,897
Other expense (income)
Interest expense ...................... 35,112 575 - - 35,687
Equity loss in joint venture .......... 2,199 2,199
Other, net ............................ (427) - - - (427)
-------- ------- ------------- ------------------ --------
Loss before income tax and cumulative..... - -
effect of cumulative effect of
accounting change ...................... (24,449) (1,113) (25,562)
Income tax expense ...................... 4,352 100 - - 4,452
-------- ------- ------------- ------------------ --------
Loss before cumulative effect of
accounting change........................ (28,801) (1,213) (30,014)
Cumulative effect of accounting
change................................... 311 - - - 311
-------- ------- ------------- ------------------ --------
Loss before equity in income of
consolidated subsidiaries .............. (29,112) (1,213) - - (30,325)
Equity in loss of consolidated
subsidiaries............................. (1,213) - - 1,213 -
-------- ------- ------------- ------------------ --------
Net loss ................................ $(30,325) $(1,213) $ - $ 1,213 $(30,325)
======== ======= ============= ================== ========
</TABLE>
F-30
<PAGE>
CAMBRIDGE INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
NON-GUARANTOR GUARANTOR ELIMINATIONS/
PARENT SUBSIDIARIES SUBSIDIARY ADJUSTMENTS CONSOLIDATED
---------- ------------- ----------- ------------------ -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Sales................................... $470,931 $16,253 $ - $ - $487,184
Cost of sales ......................... 418,245 14,475 - - 432,720
-------- ------- ------------- ------------------ --------
Gross profit .......................... 52,686 1,778 - - 54,464
Selling, general and administrative
expenses........................... 39,152 1,624 - - 40,776
------ ------- ------------- ------------------ --------
Income from operations ................ 13,534 154 - - 13,688
Other expense (income)
Interest expense .................... 31,710 264 - - 31,974
Other, net .......................... (553) (2) - - (555)
-------- ------- ------------- ------------------ --------
Loss before income tax ................ (17,623) (108) - - (17,731)
Income tax expense .................... 328 297 - - 625
-------- ------- ------------- ------------------ --------
Loss before equity in income of
consolidated subsidiaries ............ (17,951) (405) - - (18,356)
Equity in loss of consolidated
subsidiaries........................... (405) - - 405 -
-------- ------- ------------- ------------------ --------
Net loss .............................. $(18,356) $ (405) $ - $ 405 $(18,356)
======== ======= ============= ================== ========
</TABLE>
F-31
<PAGE>
CAMBRIDGE INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
NON-GUARANTOR GUARANTOR ELIMINATIONS/
PARENT SUBSIDIARIES SUBSIDIARY ADJUSTMENTS CONSOLIDATED
------ -------------- ------------ ------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Sales.......................................... $413,536 $12,558 $ - $ - $426,094
Cost of sales ................................ 357,439 9,598 - - 367,037
-------- ------- --------- ------- --------
Gross profit ................................. 56,097 2,960 - - 59,057
Selling, general and administrative
expenses...................................... 31,239 957 - (454) 31,742
-------- ------- ---------- ------- --------
Income from operations ....................... 24,858 2,003 - 454 27,315
Other expense (income)
Interest expense ........................... 27,941 95 28,036
Other, net ................................. (431) (79) - 454 (56)
-------- ------- ---------- ------- --------
Income (loss) before income tax .............. (2,652) 1,987 - - (665)
Income tax expense (benefit) ................. (951) 713 - - (238)
-------- ------- ---------- ------- --------
Income (loss) before extraordinary item ...... (1,701) 1,274 - - (427)
Extraordinary loss ........................... 9,788 9,788
-------- ------- ---------- ------- --------
Income (loss) before equity in income of
consolidated subsidiaries ................... (11,489) 1,274 - - (10,215)
Equity in income of consolidated
subsidiaries ................................ 1,274 - - (1,274) -
-------- ------- ------------ ------- --------
Net income (loss) ............................ $(10,215) $ 1,274 $ - $(1,274) $(10,215)
======== ======= ============ ======= ========
</TABLE>
F-32
<PAGE>
CAMBRIDGE INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
NON-GUARANTOR GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARY CONSOLIDATED
------ ------------- ---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net cash provided by (used in) operating activities ... $ 30,454 $ (307) $ - $ 30,147
Cash flows from investing activities
Proceeds on sale of property, plant and equipment ..... 956 956
Purchases of property, plant and equipment ............ (29,383) (357) - (29,740)
-------- ------ ------------- --------
Net cash used in investing activities ............... (28,427) (357) - (28,784)
-------- ------ ------------- --------
Cash flows from financing activities
Net borrowings from revolving debt .................... 26,000 - - 26,000
Repayment of long-term debt and capital leases ......... (18,597) 340 - (18,257)
Cost of debt and equity financing ..................... (1,365) - - (1,365)
Payments to stockholder ............................... (71) - - (71)
-------- ------ ------------- --------
Net cash provided by financing activities ........... 5,967 340 - 6,307
-------- ------ ------------- --------
Effect of foreign currency rate fluctuations on cash.... 70 - - 70
....................................................... -------- ------ ------------- --------
Net increase in cash .................................. 8,064 (324) 7,740
Cash at beginning of period ........................... 3,431 1,043 - 4,474
-------- ------ ------------- --------
Cash at end of period ................................. $ 11,495 $ 719 $ - $ 12,214
======== ====== ============= ========
</TABLE>
F-33
<PAGE>
CAMBRIDGE INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
NON-GUARANTOR GUARANTOR
PARENT SUBSIDIARY SUBSIDIARY CONSOLIDATED
------ ------------- ------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net cash provided by (used in) operating activities ...... $ 20,834 $ (1,214) $ - $ 19,620
Cash flows from investing activities
Acquisitions, net of cash required ....................... (340) - - (340)
Purchases of property, plant and equipment ............... (21,602) (338) - (21,940)
-------- -------- ------------- --------
Net provided by (cash used) in investing
activities ...................................... (21,942) (338) - (22,280)
-------- -------- ------------- --------
Cash flows from financing activities
Net borrowings from revolving debt ....................... 12,500 - - 12,500
Repayment of long-term debt .............................. (8,939) (130) - (9,069)
Principal payments on capital lease obligations .......... (227) - - (227)
Contribution by stockholders ............................. 269 - - 269
-------- -------- ------------- --------
Net cash provided by (used in) financing
activities ..................................... 3,603 (130) - 3,473
-------- -------- ------------- --------
Effect of foreign currency rate fluctuations on cash ..... - (127) - (127)
-------- -------- ------------- --------
Net increase (decrease) in cash .......................... 2,495 (1,809) - 686
Cash at beginning of period .............................. 1,646 2,142 - 3,788
-------- -------- ------------- --------
Cash at end of period .................................... $ 4,141 $ 333 $ - $ 4,474
======== ======== ============= ========
</TABLE>
F-34
<PAGE>
CAMBRIDGE INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
NON-GUARANTOR GUARANTOR
PARENT SUBSIDIARY SUBSIDIARY CONSOLIDATED
------ ------------- ---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net cash provided by (used in) operating activities ..... $ 17,663 $ (1,856) $ - $ 15,807
--------- --------- ----------- ---------
Cash flows from investing activities
Acquisitions, net of cash acquired ...................... (72,434) (72,434)
Purchases of property, plant and equipment .............. (17,498) (11) (17,509)
--------- --------- ----------- ---------
Net cash used in investing activities ................. (89,932) (11) - (89,943)
--------- --------- ----------- ---------
Cash flows from financing activities
Net borrowings from revolving debt ...................... 11,500 11,500
Repayment of long-term debt ............................. (233,712) (233,712)
Principal payments on capital lease obligations ......... (244) (244)
Proceeds from issuance of long-term debt ................ 305,000 305,000
Cost of debt and equity financing ....................... (16,424) (16,424)
--------- --------- ----------- ---------
Net cash provided by financing activities ............. 66,120 - - 66,120
--------- --------- ----------- ---------
Effect of foreign currency rate fluctuations on cash .... (138) (138)
--------- --------- ----------- ---------
Net decrease in cash .................................... (6,149) (2,005) - (8,154)
Cash at beginning of period ............................. 7,795 4,147 11,942
--------- --------- ----------- ---------
Cash at end of period ................................... $ 1,646 $ 2,142 $ $ 3,788
========= ========= =========== =========
Supplemental disclosure of noncash financing transaction:
Notes payable issued in connection with acquisition ..... $ - $ 5,400 $ - $ 5,400
========= ========= =========== =========
</TABLE>
F-35
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
To the Board of Directors and Stockholder of
Cambridge Industries, Inc.
Our audits of the consolidated financial statements of Cambridge Industries,
Inc. and subsidiaries as of December 31, 1999 and 1998, and for each of the
three years in the period ended December 31, 1999 referred to in our report
dated March 30, 2000 appearing on page F-1 of this Annual Report on Form 10-K
also included an audit of the accompanying financial statement schedule. In our
opinion, this financial statement schedule presents fairly, in all material
respects, the information set forth therein as of December 31, 1999 and 1998,
and for each of the three years in the period ended December 31, 1999 when read
in conjunction with the related consolidated financial statements.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has been unable to arrange sufficient long-
term financing to meet its operating needs, which raises substantial doubt about
its ability to continue as a going concern. Management's plans in regard to
these matters are also described in Note 2. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
PricewaterhouseCoopers LLP
Detroit, Michigan
March 30, 2000
F-36
<PAGE>
CAMBRIDGE INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
-----------------
CHARGED
BALANCE AT TO COSTS CHARDED BALANCE
BEGINNING OF AND TO OTHER WRITE-AT AT END OF
YEAR EXPENSES ACCOUNTS OFFS YEAR
------------- ----------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts
For the year ended December 31,
1999.................................................. $2,408 $5,285 $ - $(2,360) $5,333
1998 ................................................ $3,054 $ 706 $ - $(1,356) $2,404
1997 ................................................ $3,921 $ 642 $ - $(1,509) $3,054
Allowance for inventory obsolescence and lower of cost or
market reserve
For the year ended December 31,
1999.................................................. $ 888 $2,000 $ - $(1,428) $1,460
1998 ................................................ $1,223 $ 473 $ 40 $ (848) $ 888
1997 ................................................ $1,150 $ - $ 405 $ (332) $1,223
Allowance for reimbursable tooling
For the year ended December 31,
1999.................................................. $ - $ 200 $ - $ - $ 200
1998 ................................................ $4,100 $ - $ - $(4,100) $ -
1997 ................................................ $4,100 $ - $ - $ - $4,100
</TABLE>
F-37
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, CAMBRIDGE INDUSTRIES, INC. and CE AUTOMOTIVE TRIM SYSTEMS, INC.
have duly caused this Report to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Madison Heights, State of Michigan, on
March 30, 2000.
Cambridge Industries, Inc.
/s/ Lawrence M. Kazanowski
By:
LAWRENCE M. KAZANOWSKI
President and Chief Executive Officer
March 30, 2000
CE Automotive Trim Systems, Inc.
/s/ Lawrence M. Kazanowski
By:
LAWRENCE M. KAZANOWSKI
President
March 30, 2000
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
ANNUAL REPORT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON
THE DATES INDICATED:
CAMBRIDGE INDUSTRIES, INC.
Signature
----------
Title
------
Date
-----
/s/ Lawrence M. Kazanowski
LAWRENCE M. KAZANOWSKI
President and Chief Executive Officer
(Principal Executive Officer)
March 30, 2000
/s/ Donald C. Campion
DONALD C. CAMPION
Executive Vice President and Chief Financial
Officer
(Principal Financial and Accounting Officer)
March 30, 2000
<PAGE>
CAMBRIDGE INDUSTRIES, INC.
Directors Signatures
--------------------
/s/ Edward W. Conard
EDWARD W. CONARD
Director
March 29, 2000
/s/ Richard S. Crawford
RICHARD S. CRAWFORD
Director
March 30, 2000
/s/ Robert C. Gay
ROBERT C. GAY
Director
March 29, 2000
/s/ Ira J. Jaffe
IRA J. JAFFE
Director
March 30, 2000
/s/ Lawrence M. Kazanowski
LAWRENCE M. KAZANOWSKI
Director
March 30, 2000
/s/ Ronald P. Mika
RONALD P. MIKA
Director
March 29, 2000
<PAGE>
CE AUTOMOTIVE TRIM SYSTEMS, INC.
Directors Signatures
--------------------
/s/ Richard S. Crawford
RICHARD S. CRAWFORD
Chairman of the Board and Director
March 30, 2000
/s/ Lawrence M. Kazanowski
LAWRENCE M. KAZANOWSKI
President and Director
March 30, 2000
/s/ Donald C. Campion
DONALD C. CAMPION
Chief Financial Officer
(Principal Financial and Accounting Officer)
March 30, 2000
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Exhibit
- ---------- ------------------------------------------------------------------
3.1 Amended and Restated Certificate of Incorporation of Cambridge
Industries, Inc.*
3.2 Amended and Restated Bylaws of Cambridge Industries, Inc.*
3.3 Articles of Incorporation of CE Automotive Trim Systems, Inc.*
3.4 Bylaws of CE Automotive Trim System, Inc.*
10.1 Employment Agreement, dated as of November 17, 1995, between
Richard S. Crawford and Cambridge Industries, Inc.*/
10.2 Amendment to Employment Agreement, dated as of March 1, 1996,
between Richard S. Crawford and Cambridge Industries, Inc.*/
10.3 Employment Agreement, dated as of November 17, 1995, between
Richard E. Warnick and Cambridge Industries, Inc.*
10.4 Employment Agreement, dated as of November 17, 1995, between
John D. Craft and Cambridge Industries, Inc.*/
10.5 Management Services Agreement, dated as of November 17, 1995 and
amended as of March 1, 1996, between Cambridge Industries, Inc.
and Bain Capital, Inc.*/
10.6 Warrant Agreement dated as of November 17, 1995 between
Cambridge Industries Holdings, Inc. and Bankers Trust Company.*/
10.7 Amendment to Warrant Agreement between Cambridge Industries
Holdings, Inc. and Bankers Trust Company, dated as of
December 12, 1995.*/
10.8 Warrant Agreement dated as of December 14, 1995 among Bain Capital
V Mezzanine Fund, L.P., BCIP Trust Associates, L.P. and
Cambridge Industries Holdings, Inc.*/
10.9 Class A Warrant Certificate No. W-A1, Date of Issuance:
December 14, 1995.*
10.10 Class A Warrant Certificate No. W-A2, Date of Issuance:
December 14, 1995.*
10.11 Class L Warrant Certificate No. W-L1, Date of Issuance:
December 14, 1995.*
10.12 Class L Warrant Certificate No. W-L2, Date of Issuance:
December 14, 1995.*
10.13 Warrant Agreement, dated as of March 1, 1996, among Cambridge
Holdings Industries, Inc., Bein Capital V Mezzeine Fund, L.P.,
BCIP Trust Associates, L.P. and Crawford Investment Group,
L.L.C.*
10.14 Class A Warrant Certificate No. W-A3, Date of Issuance:
March 1, 1996.*
10.15 Class A Warrant Certificate No. W-A4, Date of Issuance:
March 1, 1996.*
10.16 Class A Warrant Certificate No. W-A5, Date of Issuance:
March 1, 1996.*
10.17 Class A Warrant Certificate No. W-A6, Date of Issuance:
March 1, 1996.*
10.18 Class A Warrant Certificate No. W-A7, Date of Issuance:
March 1, 1996.*
10.19 Class A Warrant Certificate No. W-L3, Date of Issuance:
March 1, 1996.*
10.20 Class A Warrant Certificate No. W-L4, Date of Issuance:
March 1, 1996.*
10.21 Class A Warrant Certificate No. W-L5, Date of Issuance:
March 1, 1996.*
10.22 Class A Warrant Certificate No. W-L6, Date of Issuance:
March 1, 1996.*
10.23 Class A Warrant Certificate No. W-L7, Date of Issuance:
March 1, 1996.*
10.24 Asset Purchase Agreement, dated as of March 1, 1996,
among GenCorp. Inc., Cambridge Industries Holdings, Inc. and
Cambridge Industries, Inc.*
10.25 Management Agreement with Donald I. Holton, dated as of
October 15, 1996.*/
10.26 Holdings Services Agreement, dated as of July 1, 1997, between
Cambridge Industries, Inc. and Cambridge Industries Holdings, Inc.*
10.27 Credit Agreement, dated as of July 10, 1997, among Cambridge
Industries Holdings, Inc., Cambridge Industries, Inc., various
lending institutions, and Bankers Trust Company, as Agent.*
10.28 Subsidiary Guaranty, dated as of July 10, 1997.*
10.29 Pledge Agreement, dated as of July 10, 1997, among Cambridge
Industries Holdings, Inc., Cambridge Industries, Inc., various
lending institutions, and Bankers Trust Company, as Agent.*
I-1
<PAGE>
EXHIBIT
NUMBER EXHIBIT
- ---------- ---------------------------------------------------------------
10.30 Security Agreement, dated as of July 10, 1997, among Cambridge
Industries Holdings, Inc., Cambridge Industries, Inc., various
lending institutions, and Bankers Trust Company, as Agent.*
10.31 Asset Purchase Agreement, dated as of July 9, effective as of
June 30, 1997, between Eagle-Picher Industries, Inc. and
Cambridge Industries, Inc.*
10.32 Agreement, dated as of July 8, 1997, between Cambridge Industries,
Inc. and the Goodyear Tire & Rubber Company.*
10.33 Stock Purchase Agreement, dated as of April 25, 1997 between
Erpe Ernst Pelz Vertriebs GmbH and Cambridge Industries, Inc.*
10.34 Joint Venture Agreement, dated as of March 4, 1994, among
Cambridge Industries, Inc., Empe Ernst Pelz GmbH & Co. and
Erpe Ernst Pelz Vertriebs GmbH (the ''Empe-Erpe JV Agreement'').*
10.35 Purchase Election, dated as of March 13, 1997 by Cambridge
Industries, Inc. in relation to the Empe-Erpe JV Agreement.*
10.36 Acceptance of Empe-Erpe JV Agreement Purchase Election, dated as
of March 28, 1997.*
10.37 Election to Terminate the Empe-Erpe JV Agreement, dated as of
February 6, 1997.*
10.38 Amendment to Stockholders Agreement, dated December 31, 1997,
among Holdings, Richard S. Crawford, certain individual members
of the Bain Group, Bankers Trust Company and each other Bank
Holder which becomes a party to the Stockholders Agreement./**
10.39 Second Amendment to Employment Agreement, dated December 31, 1997,
effective January 1, 1998, between the Company and
Richard S. Crawford./**
10.40 Second Amendment to Management Services Agreement, dated
December 31, 1997, effective January 1, 1998, between the Company
and Bain Capital, Inc./**
10.41 Aircraft Lease, dated January 1, 1998, between Mack L.L.C. and the
Company.**
10.42 Aircraft Lease, dated January 1, 1998, between the Company and
Richard S. Crawford.**
10.43 Asset Purchase Agreement, dated as of January 1, 1999, between
Livingston, Inc. and Cambridge Industries, Inc.
10.44 Second, Third and Fourth Amendments to the Credit Agreement among
Cambridge Holdings, Inc., Cambridge Industries, Inc., various
lending institutions, and Bankers Trust Company, as Agent
10.45 Aircraft lease, dated January 1, 1999, between Mack L.L.C. and the
Company
10.46 Fifth, Sixth, Seventh and Eighth Waiver and Amendments to the
Credit Agreement among Cambridge Industries Holdings, Inc.,
Cambridge Industries, Inc., Various lending institutions, and
Bankers Trust Company, as Agent
10.47 Accomodation Agreement dated March 22, 2000 (under separate cover).
10.48 Access Agreement dated March 22, 2000 (under separate cover).
16.1 Letter regarding Change in Independent Accountants.*
21.1 List of All Subsidiaries.*
27.1 Financial Data Schedule//
* Incorporated by reference to the Company's Registration Statement on
Form S-4 effective as of December 10, 1997.
** Previously filed with the Company's Annual Report on Form 10-K on
March 31, 1998.
/ Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Annual Report.
// This exhibit was the subject of a Form 12b-25 and is included herein.
I-2
<PAGE>
EXHIBIT 10.46
FIFTH AMENDMENT TO CREDIT AGREEMENT
FIFTH AMENDMENT (this "Amendment"), dated as of July 1, 1999, among
Cambridge Industries Holdings, Inc. ("Holdings"), Cambridge Industries, Inc.
(the "Borrower:), the lenders party to the Credit Agreement referred to below
(the "Banks"), and Bankers Trust Company, as agent (in such capacity, the
"Agent"). All capitalized terms used herein nd not otherwise defined herein
shall have the respective meanings provided such terms in the Credit Agreement
referred to below.
WITNESSETH:
WHEREAS, Holdings, the Borrower, the Banks and the Agent are parties to a
Credit Agreement, dated as of July 10, 1997 (as amended, modified or
supplemented through the date hereof, the "Credit Agreement"), and
WHEREAS, the parties to the Credit Agreement wish to amend the Credit
Agreement as herein provided.
NOW, THEREFORE, it is agreed:
1. Section 8.10 of the Credit Agreement is hereby amended by deleting the
ratios "1.4:l.0.", "1.8:l.0" and "2.0:1.0" opposite the dates "September 30,
1999", December 31, 1999" and "March 31, 2000" and inserting the ratios
"1.3:1.0", "1.6:1.0" and "1.8:1.0", respectively, in lieu thereof.
2. This Amendment is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Credit
Agreement or any other Credit Document.
3. In order to induce the Banks to enter into this Amendment, each of
Holdings and the Borrower hereby represents and warrants that (x) no Default or
Event of Default exists on the Fifth Amendment Effective Date both before and
after giving effect to this Amendment and (y) all of the representations and
warranties contained in the Credit Amendment Effective Date both before and
after giving effect to this Amendment with the same effect as though such
representations and warranties had been made on and as of the Fifth Amendment
Effective Date (it being understood that any representation or warranty made as
of a specific date shall be true and correct in all material respects as of such
specific date).
4. This Amendment may be executed in any number of counterparts and by
the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A complete set of
counterparts shall be lodged with the Borrower and the Agent.
5. This Amendment and the rights and obligations of the parties hereunder
shall be construed in accordance with and governed by the law of the State of
New York.
<PAGE>
6. This Amendment shall become effective as of July 1, 1999 on the date
(the "Fifth Amendment Effective Date") when each of Holdings, the Borrower and
the Required Banks shall have signed a counterpart hereof (whether the same or
different counterparts) and shall have delivered (including by way of
telecopier) the same to the Agent at its Notice Office. The Agent shall promptly
notify the Borrower and the Banks in writing of the Fifth Amendment Effective
Date.
7. From and after the Fifth Amendment Effective Date, all references in
the Credit Agreement and each of the other Credit Documents to the Credit
Agreement shall be deemed to be references to the Credit Agreement after giving
effect to the Amendment.
-----------------------------------Blank--------------------------------
-2-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of
this Waiver to be duly executed and delivered as of the date hereof.
CAMBRIDGE INDUSTRIES HOLDINGS, INC.
By: /s/ John M. Colaianne
-------------------------------------------
Name: John M. Colaianne
Title:CFO
CAMBRIDGE INDUSTRIES, INC.
By: /s/ John M. Colaianne
-------------------------------------------
Name: John M. Colaianne
Title: CFO
6
<PAGE>
BANKERS TRUST COMPANY,
Individually and as Agent
By: /s/ Mary Kay Coyle
--------------------------------------
Title: Managing Director
<PAGE>
SIXTH WAIVER AND AMENDMENT TO CREDIT AGREEMENT
SIXTH WAIVER AND AMENDMENT (this "Waiver"), dated as of December 30, 1999,
among Cambridge Industries Holdings, Inc. ("Holdings"), Cambridge Industries,
Inc. (the "Borrower"), the lenders party to the Credit Agreement referred to
below (the "Bank"), and Bankers Trust Company, as Agent (in such capacity, the
"Agent"). All capitalized terms used herein and not otherwise defined herein
shall have the respective meanings provided such terms in the Credit Agreement
referred to below.
WITNESSETH:
WHEREAS, Holdings, the Borrower, the Banks and the Agent are parties to a
Credit Agreement dated as of July 10, 1997 (as amended, modified or supplemented
through the date hereof, the "Credit Agreement"); and
WHEREAS, the Borrower has requested that the Banks amend the Credit
Agreement and provide the Waiver provided for herein and the Banks have agreed
to make such am amendments and to provide such Waiver on the terms and
conditions set forth herein;
NOW, THEREFORE, it is agreed:
1. Section 8.04 of the Credit Agreement is amended by (i) deleting the
word "and" appearing at the end of clause (m) thereof, (ii) inserting the
following immediately following clause (m) thereof:
"(n) Indebtedness of Cambridge Industrial do Brazil, LDTA ("Cambridge
Brazil") in an aggregate principal amount not to exceed 3,549,650.00
Brazilian Reais plus accrued interest added to principal, representing
the balance of the purchase price owing to Owens-Corning Fiberglas A.S.,
Ltd ("Owens-Corning") pursuant to the purchase agreement dated as of
August 27, 1997 between Cambridge Brazil and Owens-Corning; and"
and (iii) redesignating Section 8.04(n) as Section 8.04(o).
2. Section 9 of the fourth Waiver and Amendment to Credit Agreement dated
as of February 23, 1999 is amended by the deletion of the phrase "(y) by not
later than five (5) Business Days after the last day of any month exceed
$50,000,000."
3. Notwithstanding anything to the contrary in Section 8.07 of the Credit
Agreement or otherwise in the Credit Documents, Holdings may accrue but will
not, and will not permit any of its Subsidiaries without the consent of the
Required Banks to pay, any employment compensation or management fees (but not
including any reasonable out of pocket expenses) of Bain Capital, any Bain
Affiliate, Richard Crawford or any of their respective affiliates.
4. For the period commencing on the Sixth Amendment Effective Date and
ending March 31, 2000, the Banks waive Borrower's compliance with the provisions
of
<PAGE>
Sections 8.08, 8.09, 8.l0 and 8.11 of the Credit Agreement for the period ending
December 31, 1999.
5. The Banks agree that they shall use their best efforts to reach an
agreement with Comerica Bank on mutually acceptable terms under which Comerica
Bank will receive a security interest in Borrower's Collateral to secure its
exposure for overdrafts, etc. in the Borrower's cash management functions in an
amount not to exceed $9.2 million.
6. The parties hereto acknowledge that Hopkins & Sutter, as counsel to
the Agent, has retained Policano & Manzo, L.L.C. (the "Consultant") to perform
certain consulting services in connection with the Credit Agreement on behalf of
the Agent and the Banks. The Borrower hereby agrees to pay all reasonable costs,
fees nd disbursements of Hopkins & Sutter and of the Consultant (collectively,
the "Professionals") in connection with this engagement. Each of the Banks
acknowledges that to the extent the Borrower does not pay such costs, fees and
disbursements, each Bank shall pay its pro rata share of such unpaid costs, fees
and disbursement in accordance with Section 11.07 of the Credit Agreement. In
connection with the engagement, Holdings, the Borrower and each of the Banks
understands and agrees to the following: (i) the Consultant shall submit to the
Agent and the Banks evaluations and analyses in periodic oral or written reports
which shall be confidential and subject to the attorney-client privilege, (ii)
prior to submitting such reports to the Agent and the Banks, the Consultant may
wish to review (which may be done on site) certain information with management
of Holdings and any of its Subsidiaries for accuracy and validity, (iii) written
reports shall not be given to the Borrower or Holdings without the Agent's prior
written approval, (iv) any reports or analyses generated by the Consultant are
not the property of Holdings or any of its Subsidiaries, and neither Holdings
nor any of its Subsidiaries shall assert any claim to any of the Consultant's
reports and analyses and (v) Holdings and its Subsidiaries shall permit the
Consultant's personnel to have access to their books, records, reports and other
data and have discussions with their management and employees and shall
cooperate with the Consultant's personnel in respect of such review. The
Borrower will supply the Consultant and the Agent with the information listed on
Schedule A in accordance with the deadlines listed therein.
7. In order to induce the Banks to enter into this Waiver, each of
Holdings and the Borrower hereby represents and warrants that: (a) they have
engaged Morgan Stanley & Co. ("Morgan Stanley") for the purposes of assisting
Holdings and the Borrower in the sale of all or a portion of the Borrower's
business and thAT each shall: (x) cooperate fully with Morgan Stanley to meet
with the Consultant not later than January 15, 2000 nd from time to time
thereafter as reasonably requested by the Consultant and to provide all
information reasonable requested by the Consultant; and (b) they shall use
commercially reasonable efforts to sell all or a portion of the Borrower's
assets including, without limitation, the Borrower's "commercial truck" and
"interior trim" lines of business. Such sales shall be made as quickly as may be
practicable without materially reducing the price of the assets sold and shall
be made on terms acceptable to those Banks as may be required under Section
12.12 of the Credit Agreement.
2
<PAGE>
8. In order to induce the BAnks to enter into this Waiver, each of
Holdings and Borrower hereby represents and warrants that (x) no Default or
Event of Default exists on the Sixth Amendment Effective Date after giving
effect to this Waiver, (y) all of the representations and warranties contained
in the Credit Documents shall be true and correct in all material respects on
the Sixth Amendment Effective Date both before and after giving effect to this
Waiver with the same effect as though such representations and warranties had
been made on and as of the Sixth Amendment Effective Date (it being understood
that any representation or warranty made as of a specific date shall be true and
correct in all material respects as of such specific date) and (z) Borrower and
Holdings each have delivered, or as soon as reasonably practicable, will
deliver, all documents and undertakings required to company with Sections 7.11
and 7.14 of the Credit Agreement and the Security Documents with regard to all
of Borrower's or Holding's Foreign Subsidiaries, including, but not limited to,
any Foreign Subsidiary established under Mexican Law.
9. This Waiver is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Credit
Agreement or any other Credit Document.
10. Provided that Holdings and the Borrower remain in compliance with this
Waiver to an including march 31, 2000, the Waiver provisions contained in
paragraph 4 herein shall expire on March 31, 2000, unless otherwise extended by
agreement of the parties; provided, however, that should Borrower be in full
compliance with Sections 8.08, 8.09, 8.10 and 8.11 of the Credit Agreement on
March 31, 2000, Banks agree that the fact the Borrower was not in compliance
with the foregoing covenants on December 31, 1999 will not be deemed Events of
Default.
11. This Waiver may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, each of which counterparts
when executed and delivered shall be an original, but all of which shall
together constitute one and the same instrument. A complete set of counterparts
shall be lodged with the Borrower and the Agent.
12. This Waiver and the rights and obligations of the parties hereunder
shall be construed in accordance with the governed by the law of the State of
New York.
13. In order to induce the Banks to enter into this Waiver, the Borrower
shall pay to the Agent for distribution to each Bank which shall have executed
and delivered a copy of this Waiver prior to January 13, 2000 an amendment fee
equal to one quarter of one percent (1/4 of 1%) of the Revolving Loan Commitment
and outstanding A Term Loans and/or B Term Loans of each Bank as in effect on
the Sixth Amendment Effective Date (the "Sixth Amendment Fee").
14. This Waiver shall become effective on the date (the "Sixth Amendment
Effective Date") when (i) the Required Banks, Holdings and the Borrower shall
have executed a counterpart hereof (whether the same or different counterparts)
and shall have delivered (including by way of facsimile transmission) the same
to counsel for the Agent, Richard G. Smolev, Hopkins & Sutter, Three First
National Plaza, Chicago, Illinois 60602-4205; Telephone: (312)558-6432;
Facsimile: (312) 558-5190, (ii) each
3
<PAGE>
Bank shall have received that portion of the Sixth Amendment Fee due it pursuant
to paragraph 13 herein not later than two (2) Business Days after compliance
with subsection (i) of this paragraph 14, (iii) CE Automotive Trim Systems, Inc.
shall have delivered a Reaffirmation of Subsidiary Guaranty to the Agent in form
and substance acceptable to Agent, and (iv) the Agent shall have received the
sum of $150,000.00 from the Borrower as a retainer for the fees and expenses of
the Professionals retained by the Agent, $75,000 of which already has been paid
and received.
15. From and after the Sixth Amendment Effective Date, all references in
the Credit Agreement and each of the other Credit Documents to the Credit
Agreement shall be deemed to be references to the Credit Agreement after giving
effect to this Waiver.
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of
this Agreement to be duly executed and delivered as of the date hereof.
[The remainder of this page is blank]
4
<PAGE>
Schedule A
Cambridge Industries, Inc.
Documentation Requirements
Dated as of January 7, 2000
WEEKLY INFORMATION
1. Weekly cash flow variance analysis substantially in the format and
containing the information attached hereto as Schedule 1. This shall be
provided to the Agent and P&M no later than Wednesday of the week
subsequent to the period covered by the report.
2. Cash Receipts by Customer listing substantially in the format and
containing the information attached hereto as Schedule 2. This shall be
provided to the Agent and P&M no later than Wednesday of the week
subsequent to the period covered by the report.
3. Customer Backlog Report substantially in the format and containing the
information attached hereto as Schedule 3. This shall be provided to the
Agent and P&M no later than Wednesday of the week subsequent to the period
covered by the report.
MONTHLY INFORMATION
1. Monthly MD*A Analysis and Financial Statements, including the consolidated
balance sheet, P&L and cash flow statement, currently prepared by
management in the format currently prepared by the Company, attached hereto
as Schedule 4. This report should be provided to the Agent and P&M no later
than the end of the month subsequent to the period covered by the report.
2. Monthly A/R report summary in the format attached hereto as Schedule 5.
This information shall be provided to the Agent and P&M no later than
twenty-one calendar days after the end of each month.
3. Monthly A/P report summary in the format attached hereto as Schedule 6.
This information shall be provided to the Agent and P&M no later than
twenty-one calendar days after the end of each month.
5
<PAGE>
REAFFIRMATION OF SUBSIDIARY GUARANTY
CE Automotive Trim Systems, as guarantor of the above Borrower pursuant to
its Subsidiary Guaranty dated as of July 10, 1997 (the "Guaranty"), acknowledges
the terms and conditions set forth in that certain Sixth Waiver and Amendment to
Credit Agreement of even date herewith and ratifies and reaffirms its guaranty
obligations as set forth in the Guaranty, as reaffirmed.
DATED: As of December 30, 1999
CE AUTOMOTIVE TRIM SYSTEMS, INC.
Name: /s/ Donald C. Campion
------------------------------
Title:
-----------------------------
[The remainder of this page is blank - signature pages follow]
<PAGE>
CAMBRIDGE INDUSTRIES HOLDINGS, INC.
Name: /s/ Donald C. Campion
------------------------------
Title:
-----------------------------
[The remainder of this page is blank - signature pages follow]
7
<PAGE>
CAMBRIDGE INDUSTRIES INC.
Name: /s/ Donald C. Campion
------------------------------
Title: CHIEF FINANCIAL OFFICER
-----------------------------
[The remainder of this page is blank - signature pages follow]
8
<PAGE>
BANKERS TRUST COMPANY
Name: /s/ Mary Kay Coyle
----------------------------
Title: MANAGING DIRECTOR
----------------------------
[The remainder of this page is blank - signature pages follow]
9
<PAGE>
CLEANDOWN WAIVER ONLY
SEVENTH WAIVER AND AMENDMENT TO CREDIT AGREEMENT
SEVENTH WAIVER AND AMENDMENT (This "Waiver"), dated as of ________________
_____, 2000, among Cambridge Industries Holdings, Inc. ("Holdings"), Cambridge
Industries, Inc. (the "Borrower"), the lenders party to the Credit Agreement
referred to below (the "Banks"), and Bankers Trust Company, as Agent (in such
capacity, the "Agent"). All capitalized terms used herein and not otherwise
defined herein shall have the respective meanings provided such terms in the
Credit Agreement referred to below.
WITNESSETH:
WHEREAS, Holdings, the Borrower, the Banks and the Agent are parties to a
Credit Agreement dated as of July 10, 1997 (as amended, modified or supplemented
through the date hereof, the "Credit Agreement"); and
WHEREAS, the Borrower has requested that the Banks amend the Credit
Agreement and provide the Waiver provided for herein and the Banks have agreed
to make such amendments and to provide such Waiver on the terms and conditions
set forth herein;
NOW, THEREFORE, it is agreed:
1. Section 9 of the Fourth Waiver and Amendment to Credit Agreement dated
as of February 23, 1999 and as amended by the Sixth Waiver and Amendment to
Credit Agreement dated as of December 30, 1999 is amended by the deletion of the
phrase (y) "by not later than five (5) Business Days after the last day of any
month exceed $50,000,000" but only with respect to the period ending February
29, 2000 and not for any subsequent time periods.
2. In order to induce the Banks to enter into this Waiver, each of
Holdings and the Borrower hereby represents and warrants that (x) no Default or
Event of Default exists on the Seventh Amendment Effective Date after giving
effect to this Waiver, (y) all of the representations and warranties contained
in the Credit Documents shall be true and correct in all material respects on
the Seventh Amendment Effective Date both before and after giving effect to this
Waiver with the same effect as though such representations and warranties had
been made on and as of the Seventh Amendment Effective Date (it being understood
that any representation or warranty made as of a specific date shall be true and
correct in all material respects as of such specific date) and (z) Borrower and
Holdings each have delivered, or as soon as reasonably practicable, will
deliver, all documents and undertakings required to comply with Sections 7.11
and 7.14 of the Credit Agreement and the Security Documents with regard to all
of Borrower's or Holding's Foreign Subsidiaries, including, but not limited to,
any Foreign Subsidiary established under Mexican Law.
3. This Waiver is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Credit
Agreement or any other Credit Document.
<PAGE>
4. This Waiver may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, each of which counterparts
when executed and delivered shall be an original, but all of which shall
together constitute one and the same instrument. A complete set of counterparts
shall be lodged with the Borrower and the Agent.
5. This Waiver and the rights and obligations of the parties hereunder
shall be construed in accordance with and governed by the law of the State of
New York.
6. This Waiver shall become effective on the date (the "Seventh Amendment
Effective Date") when (i) the Required Banks, Holdings and the Borrower shall
have executed a counterpart hereof (whether the same or different counterparts)
and shall have delivered (including by way of facsimile transmission) the same
to counsel for the Agent, Richard G. Smolev, Hopkins & Sutter, Three First
National Plaza, Chicago, Illinois 60602-4205; Telephone: (312) 558-6432;
Facsimile: (312) 558-5190, and (ii) CE Automotive Trim Systems, Inc. shall have
delivered a Reaffirmation of Subsidiary Guaranty to the Agent in form and
substance acceptable to Agent.
7. From and after the Seventh Amendment Effective Date, all references in
the Credit Agreement and each of the other Credit Documents to the Credit
Agreement shall be deemed to be references to the Credit Agreement after giving
effect to this Waiver
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of
this Agreement to be duly executed and delivered as of the date hereof.
[The remainder of this page is blank]
2
<PAGE>
EIGHTH WAIVER AND AMENDMENT TO CREDIT AGREEMENT
EIGHTH WAIVER AND AMENDMENT (this "Waiver"), dated as of March 15, 2000,
among Cambridge Industries Holdings, Inc. ("Holdings"), Cambridge Industries,
Inc. (the "Borrower"), the lenders party to the Credit Agreement referred to
below (the "Banks"), and Bankers Trust Company, as Agent (in such capacity, the
"Agent"). All capitalized terms used herein and not otherwise defined herein
shall have the respective meanings provided such terms in the Credit Agreement
referred to below.
WITNESSETH:
WHEREAS, Holdings, the Borrower, the Banks and the Agent are parties to a
Credit Agreement dated as of July 10, 1997 (as amended, modified or supplemented
through the date hereof, the "Credit Agreement"); and
WHEREAS, the Borrower has requested that the Banks amend the Credit
Agreement and provide the Waiver provided for herein and the Banks have agreed
to make such amendments and to provide such Waiver on the terms and conditions
set forth herein;
NOW, THEREFORE, it is agreed:
1. Section 9 of the Fourth Waiver and Amendment to Credit Agreement dated
as of February 23, 1999 and as amended by the Sixth Waiver and Amendment to
Credit Agreement dated as of December 30, 1999 is amended by: (x) the deletion
of the phrase "March 31, 2000" and the substitution of the phrase "June 30,
2000" therefor; (y) the deletion of the phrase "(x)"; and (z) the deletion of
the phrase (y) "by not later than five (5) Business Days after the last day of
any month exceed $50,000,000."
2. The Banks waive Borrower's compliance with the provisions of Sections
8.08, 8.09, 8.10 and 8.11 of the Credit Agreement for the period commencing on
December 31, 1999 and ending on June 30, 2000.
3. The Banks defer until June 30, 2000 Borrower's compliance with the
provisions of Section 4.02 of the Credit Agreement relating to Mandatory
Prepayments for the Scheduled A Repayment Date and Scheduled B Repayment Date
due on the last Business Day in March, 2000.
4. The Banks covenant and agree that they shall consent to the delivery of
certain machinery and equipment now under construction to Borrower's facility in
Mexico so long as Borrower grants the Agent on behalf of the Banks a first
priority security interest in all such equipment and otherwise complies with the
Credit Agreement.
5. Section 8.04 of the Credit Agreement is amended by deleting clause (i)
and inserting the following new clause (i):
"(i) Indebtedness consisting of guaranties (x) by the Borrower of
Indebtedness and leases permitted to be incurred by Foreign and Wholly-
Owned Domestic Subsidiaries of the Borrower, (y) by Domestic
Subsidiaries of the Borrower of Indebtedness and leases Permitted to
be incurred by the Borrower or other Foreign and Wholly-Owned Domestic
Subsidiaries of the Borrower and (z) by Foreign Subsidiaries of
Indebtedness and leases Permitted to be incurred by other Wholly-Owned
Foreign Subsidiaries of the Borrower."
6. Prior to the Eighth Amendment Effective Date and as a condition
precedent to this Waiver, Holdings and Borrower shall deliver an agreement or
agreements acceptable in form and substance to the Agent and the Required Banks
from General Motors Corporation and DaimlerChrysler Corporation (i) waiving
setoff or abatement rights on accounts payable due borrower (except for
defective product, short shipments, premium freight, non-conforming product and
billing errors and reasonable professional fees.]; (ii) covenanting and agreeing
not to resource Borrower's projects; and (iii) accelerating the payment of
accounts receivable due from each such customer (collectively, the "Customer
Agreements").
<PAGE>
7. Not later than ten (10) days after the Eighth Amendment Effective Date,
and as a condition precedent to the Banks' accommodations provided hereunder,
Borrower shall deliver to the Agent a Customer Agreement with Ford Motor
Company.
8. In order to induce the Banks to enter into this Waiver, each of
Holdings and Borrower agrees to comply with the following schedule regarding the
timing of the sale process relating to Holding's, Guarantor's and Borrower's
assets: Holdings, Borrower and Guarantor shall obtain a letter of intent from a
buyer or buyers of all or substantially all of Borrower's assets at a price and
on terms acceptable to the Banks by _________________ and an executed asset
purchase agreement or agreements acceptable to the Banks by _________________
(the "Sale Schedule").
9. In order to induce the Banks to enter into this Waiver, each of
Holdings and the Borrower hereby represents and warrants that (x) no Default or
Event of Default exists on the Eighth Amendment Effective Date after giving
effect to this Waiver, (y) all of the representations and warranties contained
in the Credit Documents shall be true and correct in all material respects on
the Eighth Amendment Effective Date both before and after giving effect to this
Waiver with the same effect as though such representations and warranties had
been made on and as of the Eighth Amendment Effective Date (it being understood
that any representation or warranty made as of a specific date shall be true and
correct in all material respects as of such specific date) and (z) Borrower and
Holdings each have delivered, or as soon as reasonably practicable, will
deliver, all documents and undertakings required to comply with Sections 7.11
and 7.14 of the Credit Agreement and the Security Documents with regard to all
of Borrower's or Holding's Foreign Subsidiaries, including, but not limited to,
any Foreign Subsidiary established under Mexican law.
10. This Waiver is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Credit
Agreement or any other Credit Document.
11. Provided the Holdings and the Borrower remain in compliance with this
Waiver to and including June 30, 2000, the Waiver provisions contained in
paragraph 2 herein shall expire on June 30, 2000, unless otherwise extended by
agreement of the parties; provided, however, that should Borrower be in full
compliance with Sections 8.08, 8.09, 8.10 and 8.11 of the Credit Agreement on
June 30, 2000, Banks agree that the fact that the Borrower was not in compliance
with the foregoing covenants on any prior Test Period will not be deemed Events
of Default.
12. (a) Holdings, the Borrower and CE Automotive Trim Systems,
Inc. ("Guarantor") each hereby unconditionally and irrevocably remise, acquit,
and fully and forever release and discharge the Agent and the Banks and all
respective affiliates and subsidiaries of the Agent and the Banks, their
respective officers, servants, employees, agents, attorneys, principals,
directors, and shareholders, and their respective heirs, legal representatives,
successors and assigns (collectively, the "Released Bank Parties") from any and
all claims, demands, causes of action, obligations, remedies, suits, damages and
liabilities (collectively, the "Borrower Claims") of any nature whatsoever,
whether now known, suspected or claimed, whether arising under common law, in
equity or under statute, which Holdings, the Borrower or Guarantor ever had or
now has against the Released Bank Parties which may have arisen at any time on
or prior to the date of this Waiver and which were in any manner related to any
of the Credit Documents or the enforcement or attempted enforcement by the Agent
or the Banks of rights, remedies or recourses related thereto.
(b) Each of Holdings, the Borrower and Guarantor covenants
and agrees never to commence, voluntarily aid in any way, prosecute or
cause to be commenced or prosecuted against any of the Released Bank
Parties any action or other proceeding based upon any of the Borrower
Claims which may have arisen at a time on or prior to the date of this
Waiver and were in any manner related to any of the Credit Documents.
(c) The agreements of Holdings, the Borrower and Guarantor
set forth in this Paragraph 10 shall survive termination of this Waiver and
the other Credit Agreements.
13. This Waiver may be executed in any number of counterparts and by the
different parties hereto on
2
<PAGE>
separate counterparts, each of which counterparts when executed and delivered
shall be an original, but all of which shall together constitute one and the
same instrument. A complete set of counterparts shall be lodged with the
Borrower and Agent.
14. This Waiver and the rights and obligations of the parties hereunder
shall be construed in accordance with and governed by the law of the State of
New York.
15. In order to induce the Banks to enter into this Waiver, the Borrower
shall pay to the Agent for distribution to each Bank which shall have executed
and delivered a copy of this Waiver prior to March 20, 2000 an amendment fee
equal to one-quarter percent (1/4%) of the Revolving Loan Commitment and
outstanding A Term Loans and/ or B Term Loans of each Bank as in effect on the
Eighth Amendment Effective Date (the "Eighth Amendment Fee"), payable out of
first proceeds received from the sale of Borrower's assets in accordance with
the Sale Schedule.
16. This Waiver shall become effective on the date (the "Eighth Amendment
Effective Date") when (i) the Required Banks, the Supermajority Banks of each
Facility, Holdings and the Borrower shall have executed a counterpart hereof
(whether the same or different counterparts) and shall have delivered (including
by way of facsimile transmission) the same to counsel for the Agent, Richard G.
Smolev, Hopkins & Sutter, Three First National Plaza, Chicago, Illinois 60602-
4205; Telephone: (312) 558-6432; Facsimile: (312) 558-5190; (ii) CE Automotive
Trim Systems, Inc. shall have delivered a Reaffirmation of Subsidiary Guaranty
to the Agent in form and substance acceptable to Agent; and (iii) GM and
DaimlerChrysler shall have delivered the Customer Agreements.
17. From and after the Eighth Amendment Effective Date, all references in
the Credit Agreement and each of the other Credit Documents to the Credit
Agreement shall be deemed to be references to the Credit Agreement after giving
effect to this Waiver.
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of
this Agreement to be duly executed and delivered as of the date hereof.
3
<PAGE>
REAFFIRMATION OF SUBSIDIARY GUARANTY
CE Automotive Trim Systems, as guarantor of the above Borrower pursuant
to its Subsidiary Guaranty dated as of July 10, 1997 (the "Guaranty"),
acknowledges the terms and conditions set forth in that certain Eighth Waiver
and Amendment to Credit Agreement of even date herewith and ratifies and
reaffirms its guaranty obligations as set forth in the Guaranty, as reaffirmed.
DATED: As of ___________________, ______, 2000
CE AUTOMOTIVE TRIM SYSTEMS, INC.
Name:
---------------------------------
Title:
---------------------------------
4
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 12,214
<SECURITIES> 0
<RECEIVABLES> 81,732
<ALLOWANCES> (5,333)
<INVENTORY> 27,330
<CURRENT-ASSETS> 124,365
<PP&E> 309,797
<DEPRECIATION> (117,476)
<TOTAL-ASSETS> 343,768
<CURRENT-LIABILITIES> 333,197
<BONDS> 100,000
0
0
<COMMON> 0
<OTHER-SE> (120,395)
<TOTAL-LIABILITY-AND-EQUITY> 343,768
<SALES> 541,103
<TOTAL-REVENUES> 541,103
<CGS> 484,679
<TOTAL-COSTS> 529,206
<OTHER-EXPENSES> 1,772
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 35,687
<INCOME-PRETAX> (25,562)
<INCOME-TAX> 4,452
<INCOME-CONTINUING> (30,014)
<DISCONTINUED> 0
<EXTRAORDINARY> 311
<CHANGES> 0
<NET-INCOME> (30,325)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>