<PAGE>
Filed pursuant to Rules 424B5
Registration Nos. 333-49429
333-49429-1
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JUNE 26, 1998
PRESTOLITE ELECTRIC INCORPORATED
OFFER TO EXCHANGE ALL OF ITS OUTSTANDING UNREGISTERED
9 5/8% SENIOR NOTES DUE 2008
($350,000 IN AGGREGATE PRINCIPAL AMOUNT)
FULLY AND UNCONDITIONALLY GUARANTEED ON A SENIOR BASIS
BY PRESTOLITE ELECTRIC HOLDING, INC.
FOR ITS REGISTERED 9 5/8% SENIOR NOTES DUE 2008
FEBRUARY 25, 1999
THIS PROSPECTUS SUPPLEMENT SUPPLEMENTS THE PROSPECTUS DATED JUNE 26, 1998
(THE "PROSPECTUS") OF PRESTOLITE ELECTRIC INCORPORATED (THE "ISSUER") RELATING
TO THE OFFER BY THE ISSUER TO EXCHANGE $1,000 PRINCIPAL AMOUNT OF ITS
REGISTERED 9 5/8% SENIOR NOTES DUE 2008 FOR EACH $1,000 PRINCIPAL AMOUNT OF ITS
UNREGISTERED 9 5/8% SENIOR NOTES DUE 2008. CAPITALIZED TERMS USED IN THIS
PROSPECTUS SUPPLEMENT AND NOT OTHERWISE DEFINED HEREIN HAVE THE MEANING
SPECIFIED IN THE PROSPECTUS. THIS PROSPECTUS SUPPLEMENT IS DELIVERED TO HOLDERS
OF OUTSTANDING NOTES AND CONSTITUTES A RENEWED OFFER TO SUCH HOLDERS TO
EXCHANGE OUTSTANDING NOTES FOR EXCHANGE NOTES (THE "NEW EXCHANGE OFFER"). THIS
PROSPECTUS SUPPLEMENT SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS, AND
THIS PROSPECTUS SUPPLEMENT IS QUALIFIED BY REFERENCE TO THE PROSPECTUS EXCEPT
TO THE EXTENT THAT THE INFORMATION CONTAINED HEREIN SUPERSEDES THE INFORMATION
CONTAINED IN THE PROSPECTUS. (THE TERMS "EXCHANGE OFFER," "LETTER OF
TRANSMITTAL" AND "EXPIRATION DATE," AS THOSE TERMS ARE DEFINED IN THE
PROSPECTUS, SHALL REFER TO THE TERMS "NEW EXCHANGE OFFER," "NEW LETTER OF
TRANSMITTAL" AND "NEW EXPIRATION DATE" IN ALL RESPECTS EXCEPT AS SET FORTH IN
THIS PROSPECTUS SUPPLEMENT.) AS USED HEREIN THE TERM "PROSPECTUS SUPPLEMENT"
SHALL INCLUDE THE APPENDIXES HERETO.
Purpose and Effects
The Issuer is undertaking the New Exchange Offer as an accommodation to the
Holders of Outstanding Notes, but not under any obligation under that certain
Registration Rights Agreement, dated as of January 22, 1998, between the
Issuer, PEI and the initial purchasers of the Outstanding Notes (the
"Registration Rights Agreement"). The New Exchange Offer is designed to provide
to Holders of Outstanding Notes an opportunity to acquire Exchange Notes which,
unlike the Outstanding Notes, will be freely transferable at all times
(provided that the Holder is not an affiliate of the Issuer).
The Outstanding Notes were originally issued and sold on January 22, 1998, in
the principal amount of $125 million in a transaction exempt from the
registration requirements of the Securities Act. The Outstanding Notes may not
be reoffered, resold or transferred unless done so pursuant to a registration
statement filed pursuant to the Securities Act or unless an exemption from the
registration requirements of the Securities Act is available.
The Issuer is making the New Exchange Offer in reliance on the position of
the staff of the Commission as set forth in certain no-action letters addressed
to other parties in other transactions. However, the Issuer has not sought its
own no-action letter and there can be no assurance that the staff of the
Commission would make a similar determination with respect to the New Exchange
Offer as in such other circumstances. Based upon these interpretations by the
staff of the Commission, the Issuer believes that Exchange Notes issued
pursuant to this
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New Exchange Offer in exchange for Outstanding Notes may be offered for
resale, resold and otherwise transferred by a Holder thereof other than (i) a
broker-dealer who purchased such Outstanding Notes directly from the Issuer to
resell pursuant to Rule 144A under the Securities Act or any other available
exemption under the Securities Act or (ii) a person that is an "affiliate" (as
defined in Rule 405 under the Securities Act) of the Issuer or PEI without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such Exchange Notes are acquired in the ordinary
course of such Holder's business and that such Holder is not participating,
and has no arrangement or understanding with any person to participate, in the
distribution of such Exchange Notes. Holders of Outstanding Notes accepting
the New Exchange Offer for the purpose of participating in a distribution of
the Exchange Notes may not rely on the position of the staff of the Commission
as set forth in these no-action letters and would have to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transaction. A secondary resale
transaction in the United States by a Holder who is using the New Exchange
Offer to participate in the distribution of Exchange Notes must be covered by
a registration statement containing the selling securityholder information
required by Item 507 of Regulation S-K under the Securities Act.
The Exchange Notes will be freely transferable by the Holders thereof,
subject to the limitations described in the immediately preceding paragraphs.
The Exchange Notes will be identical in all material respects to the
Outstanding Notes for which they may be exchanged pursuant to this New
Exchange Offer except for certain transfer restrictions and registration
rights, if any, relating to the Outstanding Notes. Holders who do not exchange
their Outstanding Notes pursuant to this New Exchange Offer will continue to
hold Outstanding Notes which are subject to restrictions on transfer. See "--
Consequences of Failure to Exchange." The Issuer is undertaking the New
Exchange Offer as an accommodation to the Holders of Outstanding Notes, but
not under any obligation under the Registration Rights Agreement. The Issuer
does not intend to initiate exchange offers for additional Outstanding Notes
subsequent to the New Expiration Date.
Terms of the New Exchange Offer
Upon the terms and subject to the conditions set forth in this Prospectus
Supplement and the Prospectus, and in the New Letter of Transmittal with
respect to the New Exchange Offer (the "New Letter of Transmittal") (which
together constitute the New Exchange Offer), the Issuer will accept for
exchange Outstanding Notes which are properly tendered prior to 5:00 p.m., New
York City time, on the New Expiration Date.
For each $1,000 principal amount of Outstanding Notes validly tendered to
the Issuer pursuant to the New Exchange Offer, the Holder of such Outstanding
Notes will receive $1,000 principal amount of Exchange Notes. Interest on each
Exchange Note will accrue from the last interest payment date on which
interest was paid on the Outstanding Note surrendered in exchange therefor.
The Exchange Notes evidence the same debt as the Outstanding Notes and are
issued under and entitled to the same benefits under the Indenture as the
Outstanding Notes. In addition, the Exchange Notes and the Outstanding Notes
are treated as one series of securities under the Indenture.
As of February 24, 1999, $350,000 aggregate principal amount of Outstanding
Notes were outstanding. This Prospectus Supplement, the Prospectus and the New
Letter of Transmittal are being sent to all registered Holders of Outstanding
Notes. The Issuer has fixed the close of business on February 24, 1999 as the
record date for the New Exchange Offer for purposes of determining the persons
to whom the Prospectus, this Prospectus Supplement and the New Letter of
Transmittal will initially be sent. The Issuer believes that as of such date
there were two entities holding beneficial interests in Outstanding Notes,
registered in the name of DTC.
Tendering Holders of Outstanding Notes will not be required to pay brokerage
commissions or fees or, subject to the instructions in the New Letter of
Transmittal, transfer taxes with respect to the exchange of Outstanding Notes
pursuant to the New Exchange Offer. The Issuer will pay certain charges and
expenses, other than certain transfer taxes which may be imposed, in
connection with the Exchange Offer. See "--Fees and Expenses" and "--Transfer
Taxes."
Holders of Outstanding Notes do not have any appraisal or dissenters' rights
under the Delaware General Corporation Law in connection with the Exchange
Offer.
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Periods for Tendering Outstanding Notes
As used herein, the term "New Expiration Date" means 5:00 p.m., New York
City time, on March 24, 1999, unless the New Exchange Offer is extended by the
Issuer (but in no event to a date later than March 29, 1999); provided,
however, that the Issuer's obligation to accept Outstanding Notes for exchange
pursuant to the New Exchange Offer is subject to certain conditions set forth
under "--Certain Conditions to the New Exchange Offer" below.
The Issuer expressly reserves the right, at any time or from time to time,
to extend the period of time during which the New Exchange Offer is open, and
thereby delay acceptance of exchange of any Outstanding Notes, by giving oral
or written notice of such extension to the Holders thereof as described below.
During any such extension, all Outstanding Notes previously tendered will
remain subject to the New Exchange Offer and may be accepted for exchange by
the Issuer. Any Outstanding Notes not accepted for exchange for any reason
will be returned without expense to the tendering Holder thereof as promptly
as practicable after the expiration or termination of the Exchange Offer.
The Issuer expressly reserves the right to amend or terminate the New
Exchange Offer, and not to accept for exchange any Outstanding Notes not
theretofore accepted for exchange, upon the occurrence of any of the
conditions to the New Exchange Offer specified below under "--Certain
Conditions to the New Exchange Offer." The Issuer will give oral or written
notice of any extension, amendment, non-acceptance or termination to the
Holders of the Outstanding Notes as promptly as practicable, such notice in
the case of any extension to be issued by means of a press release or other
public announcement no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled New Expiration Date.
Procedures for Tendering Outstanding Notes
Except as set forth below in this section and under "--Book Entry Transfer,"
a Holder of Outstanding Notes who wishes to tender Outstanding Notes for
exchange pursuant to the New Exchange Offer must transmit a properly completed
and duly executed New Letter of Transmittal, including all other documents
required by such New Letter of Transmittal, to U.S. Bank Trust National
Association (the "Exchange Agent") at the address set forth below under "--
Exchange Agent" on or prior to the New Expiration Date. In addition, either
(i) certificates for such Outstanding Notes must be received by the Exchange
Agent, or (ii) a timely confirmation of a book-entry transfer (a "Book-Entry
Confirmation") of such Outstanding Notes into the Exchange Agent's account at
The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to
the procedure for book-entry transfer described below, must be received by the
Exchange Agent on or prior to the New Expiration Date, or (iii) the Holder of
Outstanding Notes must comply with the guaranteed delivery procedures
described below under "--Guaranteed Delivery Procedures."
Each exchanging Holder of Outstanding Notes will be required to represent in
the New Letter of Transmittal that such Holder is acquiring the Exchange Notes
in the ordinary course of business, is not engaged in, and does not intend to
engage in, a distribution of Exchange Notes and is not an affiliate of the
Issuer or PEI.
The method of delivery of Outstanding Notes, letters of transmittal and all
other required documents is at the election and risk of the Holder of
Outstanding Notes. If such delivery is by mail, it is recommended that
registered mail, properly insured, with return receipt requested, be used. In
all cases sufficient time should be allowed to assure timely delivery. No
letters of transmittal or Outstanding Notes should be sent to the Issuer or
PEI.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Outstanding Notes, where such Outstanding Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan of Distribution" in the
Prospectus.
Signatures on a New Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Outstanding Notes surrendered for
exchange pursuant thereto are tendered (i) by a registered Holder of the
Outstanding Notes who has not completed the box entitled "Special Issuance
Instructions" or "Special
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Delivery Instructions" on the New Letter of Transmittal or (ii) for the
account of an Eligible Institution (as defined below). In the event that
signatures on a New Letter of Transmittal are required to be guaranteed, such
guarantees must be made by a firm which is a member of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc. or by a commercial bank or trust company having an office or
correspondent in the United States (collectively, "Eligible Institutions"). If
Outstanding Notes are registered in the name of a person other than a signer
of the New Letter of Transmittal, the Outstanding Notes surrendered for
exchange must be endorsed by, or be accompanied by, a written instrument or
instruments of transfer or exchange, in satisfactory form as determined by the
Issuer in its sole discretion, duly executed by the registered Holder of
Outstanding Notes with the signature thereon guaranteed by an Eligible
Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Outstanding Notes tendered for exchange will be
determined by the Issuer in its sole discretion, which determination shall be
final and binding. The Issuer reserves the absolute right to reject any and
all tenders of any particular Outstanding Notes not properly tendered or to
not accept any particular Outstanding Notes which acceptance might, in the
judgment of the Issuer or its counsel, be unlawful. The Issuer also reserves
the absolute right to waive any defects or irregularities or conditions of the
New Exchange Offer as to any particular Outstanding Notes either before or
after the New Expiration Date. The interpretation of the terms and conditions
of the New Exchange Offer as to any particular Outstanding Notes either before
or after the New Expiration Date (including the New Letter of Transmittal and
the instructions thereto) by the Issuer shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with
tenders of Outstanding Notes for exchange must be cured within such reasonable
period of time as the Issuer shall determine. Neither the Issuer, the Exchange
Agent nor any other person shall be under any duty to give notification of any
defect or irregularity with respect to any tender of Outstanding Notes for
exchange, nor shall any of them incur any liability for failure to give such
notification. Tenders of Outstanding Notes received by the Exchange Agent that
are not properly tendered and as to which the irregularities have not been
cured or waived will be returned by the Exchange Agent to the tendering
Holder, unless otherwise provided in the New Letter of Transmittal, as soon as
practicable following the New Expiration Date.
If the New Letter of Transmittal is signed by a person or persons other than
the registered Holder or Holders of Outstanding Notes, such Outstanding Notes
must be endorsed or accompanied by appropriate powers of attorney, in either
case signed exactly as the name or names of the registered Holder or Holders
that appear on the Outstanding Notes.
If the New Letter of Transmittal or any Outstanding Notes or powers of
attorney are signed by trustees, executors, administrators, guardians,
attorneys-in- fact, officers of corporations or others acting in a fiduciary
or representative capacity, such persons should so indicate when signing, and,
unless waived by the Issuer, proper evidence satisfactory to the Issuer of
their authority to so act must be submitted.
In all cases, issuance of Exchange Notes for Outstanding Notes that are
accepted for exchange pursuant to the New Exchange Offer will be made only
after timely receipt by the Exchange Agent of certificates for such
Outstanding Notes or a timely Book-Entry Confirmation of such Outstanding
Notes in the Exchange Agent's account at the Book-Entry Transfer Facility, a
properly completed and duly executed New Letter of Transmittal and all other
required documents. If any tendered Outstanding Notes are not accepted for any
reason set forth in the terms and conditions of the New Exchange Offer or
Outstanding Notes are submitted for a greater principal amount than the Holder
thereof desires to exchange, such unaccepted or non-exchanged Outstanding
Notes will be returned without expense to the tendering Holder thereof (or, in
the case of Outstanding Notes tendered by book-entry transfer into the
Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the
book-entry procedures described below, such non-exchanged Outstanding Notes
will be credited to an account maintained with such Book-Entry Transfer
Facility) as promptly as practicable after the expiration or termination of
the New Exchange Offer.
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Book-Entry Transfer
The Exchange Agent will make a request to establish an account with respect
to the Outstanding Notes at the Book-Entry Transfer Facility for purposes of
the New Exchange Offer as promptly as practicable after the date of this
Prospectus Supplement, and any financial institution that is a participant in
the Book-Entry Transfer Facility's systems may make book-entry delivery of
Outstanding Notes by causing the Book-Entry Transfer Facility to transfer such
Outstanding Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility in accordance with such Book-Entry Transfer Facility's procedures for
transfer. However, although delivery of Outstanding Notes may be effected
through book-entry transfer at the Book-Entry Transfer Facility, except as set
forth in the next paragraph the New Letter of Transmittal (or a copy thereof),
with any required signature guarantees and any other required documents, must,
in any case, be transmitted to and received by the Exchange Agent at the
address set forth below under "--Exchange Agent" on or prior to the New
Expiration Date or the guaranteed delivery procedures described below must be
complied with.
DTC's Automated Tender Offer Program ("ATOP") is the only method of
processing exchange offers through DTC. To accept the New Exchange Offer
through ATOP, participants in DTC must send electronic instructions to DTC
through DTC's communication system instead of sending a signed, hard copy New
Letter of Transmittal. DTC is obligated to communicate those electronic
instructions to the Exchange Agent. To tender existing notes through ATOP, the
electronic instructions sent to DTC and transmitted by DTC to the Exchange
Agent must contain the participant's acknowledgment of its receipt of and
agreement to be bound by the New Letter of Transmittal for such Outstanding
Notes.
Acceptance of Outstanding Notes for Exchange; Delivery of Exchange Notes
For purposes of the Exchange Offer, the Issuer shall be deemed to have
accepted validly tendered Outstanding Notes when, as and if the Issuer has
given oral or written notice thereof to the Exchange Agent.
The Exchange Agent will act as agent for the tendering Holders of
Outstanding Notes for the purposes of receiving the Exchange Notes. Under no
circumstances will interest be paid by the Issuer or the Exchange Agent by
reason of any delay in making such payment or delivery.
The Issuer's acceptance for exchange of Outstanding Notes tendered pursuant
to the New Exchange Offer will constitute a binding agreement between the
tendering Holder and the Issuer upon the terms and subject to the conditions
of the New Exchange Offer.
Guaranteed Delivery Procedures
If a registered Holder of the Outstanding Notes desires to tender such
Outstanding Notes and the Outstanding Notes are not immediately available, or
time will not permit such Holder's Outstanding Notes or other required
documents to reach the Exchange Agent before the New Expiration Date, or the
procedure for book-entry transfer cannot be completed on a timely basis, a
tender may be effected if (i) the tender is made through an Eligible
Institution, (ii) prior to the New Expiration Date, the Exchange Agent
receives from such Eligible Institution a properly completed and duly executed
Notice of Guaranteed Delivery, substantially in the form provided by the
Issuer (mail, courier or hand delivery or by facsimile transmission), setting
forth the name and address of the Holder of Outstanding Notes, the certificate
number(s) of such Outstanding Notes (except in the case of book-entry tenders)
and the principal amount of Outstanding Notes tendered, stating that the
tender is being made thereby and guaranteeing that, within three New York
Stock Exchange ("NYSE") trading days after the New Expiration Date, the New
Letter of Transmittal (or a copy thereof) together with the certificates for
all physically tendered Outstanding Notes, in proper form for transfer, or a
Book- Entry Confirmation, as the case may be, and any other documents required
by the New Letter of Transmittal will be deposited by the Eligible Institution
with the Exchange Agent, and (iii) such properly completed and executed New
Letter of Transmittal (or a copy thereof) together with the certificates for
all physically tendered Outstanding Notes, in proper form for transfer, or a
Book-Entry Confirmation, as the case may be, and all other documents required
by the New Letter of Transmittal, are received by the Exchange Agent within
three NYSE trading days after the New Expiration Date.
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Withdrawal Rights
Tenders of Outstanding Notes may not be withdrawn.
Certain Conditions to the New Exchange Offer
Notwithstanding any other term of the New Exchange Offer, the Issuer shall
not be required to accept for exchange, or to issue Exchange Notes in exchange
for, any Outstanding Notes and may terminate or amend the New Exchange Offer
as provided herein before the acceptance of such Outstanding Notes, if:
(a) such acceptance or issuance would violate applicable law or any
applicable interpretation of the staff of the Commission;
(b) there shall be instituted or pending any action or proceeding by or
before any court or governmental agency with respect to the New Exchange
Offer which, in the Issuer's sole judgment, might impair the ability of the
Issuer to proceed with the Exchange Offer;
(c) any development involving the Issuer has occurred that the Issuer
determines, in its sole discretion, makes it necessary under law, and/or in
the best interests of the Issuer's stockholders, to terminate the New
Exchange Offer; or
(d) there shall have been proposed, adopted or enacted any law, statute,
rule or regulation which, in the sole judgment of the Issuer, might
materially impair the ability of the Issuer to proceed with the New
Exchange Offer.
The foregoing conditions are for the sole benefit of the Issuer and may be
asserted by the Issuer regardless of the circumstances giving rise to any such
condition or may be waived by the Issuer in whole or in part at any time and
from time to time in its sole discretion. The failure by the Issuer at any
time to exercise any of the foregoing rights shall not be deemed a waiver of
any such right and each such right shall be deemed an ongoing right which may
be asserted at any time and from time to time.
In addition, the Issuer will not accept for exchange any Outstanding Notes
tendered, and no Exchange Notes will be issued in exchange for any such
Outstanding Notes, if at such time any stop order shall be threatened or in
effect with respect to the Registration Statement of which the Prospectus, as
supplemented by this Prospectus Supplement, constitutes a part or the
qualification of the Indenture under the Trust Indenture Act of 1939.
Exchange Agent
U.S. Bank Trust National Association has been appointed as the Exchange
Agent for the New Exchange Offer. All executed New Letters of Transmittal
should be directed to the Exchange Agent at the address set forth below.
Questions and requests for assistance, requests for additional copies of the
Prospectus Supplement and the Prospectus or of the New Letter of Transmittal
and requests for Notices of Guaranteed Delivery should be directed to the
Exchange Agent, addressed as follows:
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By facsimile: By mail:
U.S. Bank Trust National Association U.S. Bank Trust National Association
(651) 244-1537 P.O. Box 64485
Attention: Flora Gomez (SPFT0414) St. Paul, Minnesota 55164-9549
Confirm by Telephone to: (651) 244-5011 Attention: Specialized Finance (SPFT0414)
By overnight courier and by
By hand before 5:00 p.m. (New York Time): registered/certified mail:
U.S. Bank Trust National Association U.S. Bank Trust National Association
100 Wall Street 180 East Fifth Street
20th Floor St. Paul, Minnesota 55101
New York, NY 10005 Attention: Specialized Finance (SPFT0414)
</TABLE>
DELIVERY OF OUTSTANDING NOTES TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA FAX TRANSMISSION OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
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Fees and Expenses
The Issuer will not make any payment to brokers, dealers, or others
soliciting acceptances of the New Exchange Offer.
The Issuer, Credit Suisse First Boston Corporation and Scudder Kemper
Investments have each agreed to equally pay the expenses to be incurred by the
Issuer in connection with the Exchange Offer, including certain fees and
expenses of the Exchange Agent and legal fees.
Transfer Taxes
Holders who tender their Outstanding Notes for exchange will not be
obligated to pay any transfer taxes in connection therewith. If however,
Exchange Notes and/or substitute Outstanding Notes not exchanged are to be
delivered to, or are to be registered or issued in the name of, any person
other than the registered Holder of the Outstanding Notes, or if tendered
Outstanding Notes are registered in the name of any person other than the
person signing a New Letter of Transmittal, or if a transfer tax is imposed
for any reason other than the transfer of Outstanding Notes to the Issuer or
its order pursuant to the New Exchange Offer, the amount of any such transfer
taxes (whether imposed on the registered Holder or any other persons) will be
payable by the tendering Holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted together with a New Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering Holder.
Consequences of Failure to Exchange
The Issuer is undertaking the New Exchange Offer as an accommodation to the
Holders of Outstanding Notes, but not under any obligation under the
Registration Rights Agreement. The Issuer does not intend to initiate exchange
offers for additional Outstanding Notes subsequent to the New Expiration Date.
Holders of Outstanding Notes who do not exchange their Outstanding Notes for
Exchange Notes pursuant to the New Exchange Offer will continue to be subject
to the restrictions on transfer of such Outstanding Notes as set forth in the
legend thereon as a consequence of the issuance of the Outstanding Notes
pursuant to exemptions from, or in transactions not subject to, the
registration requirements of the Securities Act and applicable state
securities laws. In general, the Outstanding Notes may not be offered or sold,
unless registered under the Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the Securities Act and applicable
state securities laws.
The Issuer does not currently anticipate that it will register Outstanding
Notes under the Securities Act. To the extent that Outstanding Notes are
tendered in connection with the New Exchange Offer, any trading market for
Outstanding Notes not tendered in connection with the New Exchange Offer could
be adversely affected. The tender of Outstanding Notes pursuant to the New
Exchange Offer may have an adverse effect upon, and increase the volatility
of, the market prices of the Outstanding Notes due to a reduction in
liquidity. See "Risk Factors--Consequences of Failure to Exchange" in the
Prospectus.
Subsequent Events and Additional Information
The following documents filed by PEI with the Commission are attached hereto
and form a part hereof. Attached hereto as Appendix A is a copy of the
Quarterly Report on Form 10-Q for the quarterly period ended July 4, 1998, and
as Appendix B is an amended and restated copy of the Quarterly Report on Form
10-Q for the quarterly period ended October 3, 1998, as amended by Quarterly
Reports on Form 10-Q/A filed on December 9, 1998 and January 27, 1999. On
February 23, 1999, the Issuer announced operating results for the year ended
December 31, 1998. Attached hereto as Appendix C is a copy of the press
release setting forth such results.
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APPENDIX A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark one)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarterly Period Ended July 4, 1998.
[_] 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 333-49429-01
PEI Holding, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 943142033
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2100 Commonwealth Blvd., Ste. 300, Ann Arbor, Michigan 48105
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(734) 913-6600
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
- --------------------------------------------------------------------------------
(Former name, address, and former fiscal year,
if changes since last report)
Indicate whether the registrant (1) has filed all reports required to be
filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceeding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to the filing
requirements for the past 90 days.
Yes No X
----- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
Number of common shares
Class: outstanding as of August 4, 1998
Common Stock 1,993,000
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FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Part I: Financial Information
<S> <C>
Item 1: Condensed Consolidated Balance Sheets 3
at July 4, 1998 (unaudited) and December 31, 1997
Condensed Consolidated Statements of Operations 4
Three months and six months ended July 4, 1998 (unaudited)
and July 5, 1997 (unaudited)
Condensed Consolidated Statements of Cash Flows 5
Six months ended July 4, 1998 (unaudited) and
July 5, 1997 (unaudited)
Notes to Condensed Consolidated Financial Statements 6
Item 2: Management's Discussion & Analysis of
Financial Condition and Results of Operations 11
Part II: Other Information 16
Signatures 17
</TABLE>
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PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
PEI HOLDING, INC. AND SUBSIDIARIES
(INCLUDING PRESTOLITE ELECTRIC INCORPORATED)
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
<TABLE>
<CAPTION>
July 4, December 31,
1998 1997
------------------ ------------------
(unaudited)
<S> <C> <C>
Assets
Current assets
Cash $ 7,819 $ 455
Accounts receivable, net of allowances 45,644 26,326
Inventories, net 49,978 24,687
Deferred tax asset, net 4,657 3,226
Prepaid and other current assets 4,256 965
------------------ ------------------
Total current assets 112,354 55,659
Property, plant and equipment, net 60,778 26,179
Investments 4,597 2,597
Other long term assets 7,155 1,416
Intangible assets 1,717 2,834
================== ==================
Total assets $ 186,601 $ 88,685
================== ==================
Liabilities
Current liabilities
Revolving credit $ 1,611 $ 3,052
Current portion of long-term debt and
capital lease obligations 1,719 1,144
Accounts payable 25,807 12,042
Accrued liabilities 36,604 12,029
------------------ ------------------
Total current liabilities 65,741 28,267
Senior notes 125,000 -
Other long term debt, net of current maturities 1,009 29,467
Subordinated debt, net - 9,267
Other non-current liabilities 3,478 1,034
Deferred tax liability, net 1,707 1,707
------------------ ------------------
Total liabilities 196,935 69,742
Minority interest in Argentina subsidiary 38 -
Stockholders' equity
Common stock, par value $.01, 5,000,000 shares authorized,
3,303,000 shares issued and outstanding at July 4, 1998
and December 31, 1997, respectively 2 2
Paid-in capital 16,623 16,623
Stock warrants - 3,239
Retained earnings (accumulated deficit) (1,441) (634)
Notes receivable, employees' stock purchase (559) (346)
Foreign currency translation adjustment (548) 379
Treasury stock, 1,310,000 and 32,000 shares on July 4, 1998
and December 31, 1997, respectively (24,449) (320)
------------------ ------------------
Total stockholders' equity (10,372) 18,943
------------------ ------------------
Total liabilities and stockholders' equity $ 186,601 $ 88,685
================== ==================
</TABLE>
The accompanying notes are an integral part of the
condensed consolidated financial statements.
3
<PAGE>
PEI HOLDING, INC. AND SUBSIDIARIES
(INCLUDING PRESTOLITE ELECTRIC INCORPORATED)
CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS
(in thousands, except share amounts)
<TABLE>
<CAPTION>
For the three months ended For the six months ended
-------------------------- ------------------------
July 4, July 5, July 4, July 5,
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 72,848 $ 43,216 $ 147,373 $ 87,518
Cost of goods sold 57,888 34,944 117,919 70,290
----------- ----------- ----------- -----------
Gross profit 14,960 8,272 29,454 17,228
Selling, general and administrative 9,832 5,832 19,638 11,461
Costs associated with option repurchase -- -- 2,101 --
Restructuring charge -- -- 980 --
----------- ----------- ----------- -----------
Operating income 5,128 2,440 6,735 5,767
Other expense (income) (436) (41) (522) (21)
Interest expense 3,245 1,403 6,526 2,836
----------- ----------- ----------- -----------
Income from continuing operations before
extraordinary loss and income taxes 2,319 1,078 731 2,952
Provision for income taxes 869 474 263 1,220
----------- ----------- ----------- -----------
Income from continuing operations 1,450 604 468 1,732
Income from discontinued operation, net -- 73 -- 98
Extraordinary loss, net of taxes of $716 -- -- 1,275 --
----------- ----------- ----------- -----------
Net income (loss) 1,450 677 (807) 1,830
Other comprehensive income (expense):
Foreign currency translation adjustment (968) 189 (927) (36)
----------- ----------- ----------- -----------
Comprehensive income (expense) $ 482 $ 866 $ (1,734) $ 1,794
=========== =========== =========== ===========
Basic earnings per common share
Income from continuing operations $ 0.73 $ 0.18 $ 0.22 $ 0.50
Discontinued operations -- 0.02 -- 0.03
Extraordinary item -- -- (0.59) --
----------- ----------- ----------- -----------
Net income (loss) $ 0.73 $ 0.20 $ (0.37) $ 0.53
=========== =========== =========== ===========
Diluted earnings per common share
Income from continuing operations $ 0.73 $ 0.17 $ 0.22 $ 0.47
Discontinued operations -- 0.02 -- 0.03
Extraordinary item -- -- (0.59) --
----------- ----------- ----------- -----------
Net income (loss) $ 0.73 $ 0.19 $ (0.37) $ 0.50
=========== =========== =========== ===========
Basic shares outstanding 1,993,000 3,450,740 2,160,774 3,450,740
Dilutive shares outstanding 2,103,860 3,655,180 2,284,495 3,655,180
</TABLE>
The accompanying notes are an integral part of the
condensed consolidated financial statements.
4
<PAGE>
PEI HOLDING, INC. AND SUBSIDIARIES
(INCLUDING PRESTOLITE ELECTRIC INCORPORATED)
CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
For the six months ended
------------------------
July 4, July 5,
1998 1997
---------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) $ (807) $ 1,830
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Cash provided by (used in) discontinued operations 1,548 (2,553)
Loss (gain) on sale of property, plant, and equipment (122) 14
Compensation expense related to options 2,101 -
Depreciation and amortization 5,877 2,741
Deferred taxes (1,431) 624
Loss on debt extinguishment 1,991 -
Changes in working capital items: 3,707 (4,396)
----------------- -----------------
Net cash provided by operating activities 12,864 (1,740)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (5,557) (2,155)
Proceeds from disposal of fixed assets 12 -
Investment in affiliates (1,500) -
Acquisition of Lucas businesses (48,209) -
----------------- -----------------
Net cash provided by investing activities (55,254) (2,155)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of senior notes 125,000 -
Debt repaid in acquisition of Lucas businesses 3,227 -
Net increase (decrease) in revolving credit (1,377) 9,026
Redemption of subordinated notes (10,000) -
Payments on acquisition payable to Hobart - (1,289)
Payments on long term debt (31,146) (3,565)
Purchase of stock and warrants (27,692) -
Payments on deferred compensation - (35)
Payments of capital lease obligations and other obligations (33) (115)
Purchase of treasury stock and options (2,203) -
Debt refinancing costs (5,785) -
----------------- -----------------
Net cash from financing activities 49,991 4,022
Effect of exchange rate changes on cash (237) (3)
----------------- -----------------
Net increase (decrease) in cash 7,364 124
Cash - beginning of period 455 1,203
================= =================
Cash - end of period $ 7,819 $ 1,327
================= =================
</TABLE>
The accompanying notes are an integral part of the
condensed consolidated financial statements.
5
<PAGE>
PEI HOLDING, INC. AND SUBSIDIARIES
(Including PRESTOLITE ELECTRIC INCORPORATED)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: GENERAL INFORMATION
PEI Holding, Inc. conducts all of its operations through its wholly-owned
principal subsidiary, Prestolite Electric Incorporated. There are no material
differences between the financial statements of PEI Holding, Inc. and Prestolite
Electric Incorporated (collectively, "the Company" or "Prestolite").
The unaudited condensed consolidated financial statements included herein have
been prepared by the Company in accordance with Rule 10-01 of Regulation S-X and
have been prepared on a consistent basis with the Company's audited financial
statements for the year ended December 31, 1997. These statements reflect all
adjustments, consisting only of items of a normal recurring nature, which are,
in the opinion of management, necessary for the fair statement of the
consolidated financial condition and consolidated results of operations for the
interim period presented.
Certain information and footnote disclosures normally included in the
consolidated financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These financial statements
and the related notes should be read in conjunction with the Company's audited
financial statements and notes thereto and other material included in the
Prospectus dated June 26, 1998 (the "Prospectus"). The year-end 1997 condensed
balance sheet data was derived from the Company's audited financial statements,
but does not include all information and footnotes required by generally
accepted accounting principles for complete financial statements. The results of
operations for the six- and three-month periods ended July 4, 1998 are not
necessarily indicative of the operating results that may be expected for the
full year or any other interim period.
The equity securities of PEI Holding, Inc. are held by Genstar Capital
Corporation and Company management.
NOTE 2: ACQUISITION, SHARE REPURCHASE, AND REFINANCING
On January 22, 1998 Prestolite acquired three business units from a subsidiary
of Lucas Varity, plc. ("the Lucas Acquisition") for approximately $41.3 million
in cash, the assumption of approximately $7.1 million in debt and certain future
payments, some of which are contingent. On the same day, Prestolite Electric
Incorporated completed the offering of $125 million of 9.625% Senior Notes due
2008 (the "Notes"). The proceeds of the Notes were used to fund the Lucas
Acquisition, to repay approximately $42 million of outstanding indebtedness, and
to pay approximately $29.7 million for the repurchase of PEI Holding, Inc.
common stock plus warrants and options to purchase common stock. These
transactions are more fully described in the Prospectus.
6
<PAGE>
In conjunction with these transactions, the Company recorded expense of
$2,101,000 for the repurchase of options and an extraordinary item of $1,275,000
net-of-tax benefit in the first quarter of 1998. The extraordinary item
covered, on a pre-tax basis, $728,000 of fees associated with the prepayment of
previously-existing debt; $335,000 for the write-off of unamortized financing
costs; $733,000 to write off the unamortized discount on subordinated debt; and
$195,000 related to the repurchase of warrants. As described in Note 6, the
Company recorded a $980,000 restructuring charge in the first quarter related to
costs anticipated to be incurred at the Company's existing facilities as a
result of the Lucas Acquisition.
In the second quarter, the Company finalized the purchase price adjustments with
Lucas Varity, plc in connection with the Lucas Acquisition. The adjustment
resulted in a reduction in the purchase price of $1.9 million, with $0.5 million
of this adjustment applied to the amount payable in August 1998 upon the
exercise of an option to purchase substantially all the remaining shares of the
acquired Lucas business unit in Argentina. Professional fees and associated
costs incurred in connection with the Lucas Acquisition in the first half of
1998 were $2.1 million.
Results for the first half of 1998 are recorded as though the Lucas Acquisition
was completed on January 1, 1998, and an imputed interest cost of $213,000 was
charged to interest expense for the period from January 1 to January 22. The
Lucas Acquisition has been accounted for as a purchase and a preliminary
allocation of the purchase price has been made in accordance with Accounting
Principals Board Opinion 16. The purchase price allocation will be completed by
the end of the year and will likely change from that included in the
accompanying statements.
Pro forma unaudited consolidated operating results for the Company for the
second quarter and first six months of 1997 as though the Lucas Acquisition had
been consummated on January 1, 1997 are summarized below. Pro forma adjustments
include only the addition of the results of the acquired business units and do
not reflect anticipated efficiencies in operations. These results are not
necessarily indicative of future results of operations nor are they indicative
of the results of historical operations had the acquisitions been consummated as
of the assumed dates. These results also reflect the 20-for-one stock split
effective March 31, 1998.
<TABLE>
<CAPTION>
Second Quarter First Six Months
--------------------- -----------------
<S> <C> <C>
Net Sales, in thousands $ 78,734 $ 153,255
Net Income, in thousands $ 540 $ 106
Earnings (Loss) per Share
Basic $0.16 $0.03
Diluted $0.15 $0.03
</TABLE>
NOTE 3: INVENTORIES
Inventories are summarized as follows (in thousands of dollars):
7
<PAGE>
<TABLE>
<CAPTION>
As of As of
July 4, December 31,
1998 1997
---------------- ---------------
<S> <C> <C>
Raw Material $ 14,533 $ 9,027
Work in Process 16,397 6,096
Finished Goods 19,048 9,564
---------------- ---------------
Total $ 49,978 $ 24,687
================ ===============
</TABLE>
NOTE 4: PROPERTY, PLANT AND EQUIPMENT
Property, Plant and Equipment consists of the following (in thousands of
dollars):
<TABLE>
<CAPTION>
As of As of
July 4, December 31,
1998 1997
---------------- ---------------
<S> <C> <C>
Land & Buildings $ 22,544 $ 13,611
Machinery & Equipment 60,748 31,461
Construction in Progress 2,502 1,276
---------------- ---------------
Total, at Cost 85,794 46,348
Accumulated Depreciation (25,016) (20,169)
---------------- ---------------
Net $ 60,778 $ 26,179
================ ===============
</TABLE>
NOTE 5: DEBT
In connection with the Lucas Acquisition, share repurchase, and refinancing
discussed in Note 2, Prestolite Electric Incorporated issued $125 million of
9.625% Senior Notes due 2008 (the "Notes"). The Notes pay interest semi-
annually and mature on February 1, 2008 but may be redeemed earlier at the
Company's option under conditions specified in the indenture pursuant to which
the Notes were issued. The notes are senior unsecured obligations of Prestolite
Electric Incorporated, are fully and unconditionally guaranteed on a senior
basis by PEI Holding, Inc., and are subordinated to secured credit facilities
(to the extent of the value of the assets securing such indebtedness) of
Prestolite Electric Incorporated, including its existing credit facility
referred to below, and are structurally subordinated to indebtedness of any
subsidiary of Prestolite Electric Incorporated, including indebtedness of its
United Kingdom subsidiary. The Notes are more fully described in the
Prospectus.
On January 22, 1998 Prestolite Electric Incorporated entered into a new
financing agreement with the U.S. bank that had previously been Prestolite
Electric Incorporated's U.S. senior debt provider for up to $23 million of
borrowings at the bank's prime rate, secured by the U.S. receivables and
inventory of Prestolite Electric Incorporated. On January 28, the Company's
United Kingdom subsidiary entered into an interim borrowing agreement with an
affiliate of the U.K. bank that had previously been the Company's U.K. debt
provider. On April 21 that interim agreement was replaced with an agreement
providing for up to (Pounds)7 million (approximately $11.6 million based on
exchange rates of 1.657 $/Pound) of borrowings at the U.K. bank's base rate plus
1.75%,
8
<PAGE>
secured by the receivables of the United Kingdom subsidiary. In addition, the
Company's Argentina subsidiary has borrowing arrangements with several banks
secured by certain assets of the Company's Argentina subsidiary.
Debt is summarized as follows (in thousands of dollars):
<TABLE>
<CAPTION>
As of As of
July 4, December 31,
1998 1997
---------------- ----------------
<S> <C> <C>
U.S. Bank Debt $ 1,488 $ 28,588
U.K. Bank Debt 169 3,785
Argentine Bank Debt 1,400 -
Senior Notes 125,000 -
Subordinated Debt - 10,000
Unamortized Discount on Subordinated Debt - (733)
Capital Lease Obligations 985 942
Other Debt 297 348
---------------- ----------------
Total 129,339 42,930
Current Maturities 3,330 4,196
---------------- ----------------
Long Term Debt $ 126,009 $ 38,734
================ ================
</TABLE>
NOTE 6: RESTRUCTURING
During 1997, the Company's board of directors approved a restructuring plan for
the Company's facility in Leyland, England, contingent upon completion of the
Lucas Acquisition. This plan was announced during the first quarter of 1998 and
includes moving production of certain products from the Leyland facility to a
facility in the United Kingdom acquired as part of the Lucas Acquisition. A
restructuring charge of $980,000 for employee severance costs was accrued and
charged to operations during the first quarter of 1998. During the first half
of 1998, the Company charged $353,000 against this accrual. The entire amount
is expected to be spent by the end of 1998.
As of the date of the Lucas Acquisition, management had begun to assess and
formulate restructuring plans related to operations acquired in the Lucas
Acquisition. These plans will include employee reductions and may include a
plant closure. Not all portions of the plan have been completed and approved as
of July 4, 1998. An accrual of $8,220,000 was established as a purchase
accounting adjustment related to these restructuring actions. Severance
payments of $2.3 million were made to employees and charged to this accrual
during the first half of 1998. Completion and approval of the restructuring
plans for these operations are expected by the end of 1998. The accrual will be
adjusted accordingly as a purchase price adjustment.
NOTE 7: INVESTMENTS
On June 24, 1998, the Company agreed to license certain alternator technology
from Ecoair Corp. ("Ecoair"). In addition, the Company purchased 66,667 shares
of Ecoair common stock for $1 million, and agreed to purchase an additional
33,333 shares for $500,000 on each of December 24, 1998 and June 24, 1999.
Prior to the Prestolite purchase, Ecoair had 1,347,646 shares and
9
<PAGE>
options to purchase 500,758 shares outstanding. The Company also received an
option to increase its ownership of Ecoair to 20% at varying prices through
June, 2000.
On July 2, 1998, the Company agreed to form a joint venture with Daewoo Heavy
Industries Ltd. ("Daewoo"). The joint venture, to be owned 50% by Prestolite
and 50% by Daewoo, is expected to produce material handling motors at a plant in
Inchon, South Korea. Daewoo is required to contribute to the joint venture
$500,000 of cash plus certain equipment currently used by Daewoo to produce
material handling motors. Prestolite is required to contribute $500,000 of cash
and to provide certain technology to the joint venture. In addition, Prestolite
and Daewoo have each agreed to provide loans of up to $700,000 to the joint
venture or to guarantee loans of that amount made by the joint venture if such
borrowings are deemed necessary by the joint venture. Daewoo has agreed to
purchase from the joint venture substantially all of the material handling
motors required by its Industrial Vehicle division, located in South Korea.
10
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
PEI Holding, Inc., through its operating subsidiary Prestolite Electric
Incorporated, manufactures alternators, starter motors, direct current motors,
battery chargers, and switching devices. These are supplied under the
Prestolite, Leece-Neville, Hobart, Lucas, and Butec brand names for original
equipment and aftermarket application on a variety of vehicles and industrial
equipment. "Hobart" is used under license from a subsidiary of Illinois Tool
Works, Inc. "Lucas" is used under license from a subsidiary of LucasVarity plc.
Most of the Company's products are component parts used on diesel engines,
automobiles and electric vehicles. These components are sold to both aftermarket
and original equipment ("OEM") customers. The Company sells its products to a
variety of markets, in terms of both end-use and geography.
In January 1998, Prestolite acquired three businesses from a subsidiary of
LucasVarity plc. These businesses operate in England, South Africa, and
Argentina (collectively, the "Lucas Acquisition"). As summarized in Note 2 to
the financial statements and described more fully in the Prospectus, these
businesses were purchased for approximately $41.3 million in cash, the
assumption of $7.1 million in debt, and certain future obligations. Those
future obligations include an anticipated payment of $766,000 in August, 1998;
payments of approximately $2 million during 1998 for inventory and transition
assistance in the United Kingdom; and up to $19 million contingent on certain
events in Argentina. Including the sales of the acquired businesses, more than
half of the Company's sales are outside the United States.
The acquisition was financed from the sale of $125 million of 9.625% senior
notes due 2008, issued under Rule 144A of the Securities Act of 1933, as
amended. Proceeds from the 144A offering were also used to repay existing debt
in the United States and United Kingdom, to repurchase all of the warrants
issued to holders of the Company's subordinated debt, to repurchase 40% of the
common stock held by Genstar Capital Corporation, to repurchase 8.5% of the
common stock and 40% of the options held by management. The total cost
associated with the repurchase of these securities was approximately $29.7
million.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JULY 4, 1998 COMPARED TO THREE MONTHS ENDED JULY 5, 1997.
Net sales for the three months ended July 4, 1998 were $72.8 million, an
increase of $29.6 million or 68.6% from the $43.2 million recorded in the second
quarter of 1997. The Lucas Acquisition was responsible for an increase in net
sales of $30.4 million, more than the total net sales increase. Compared to pro
forma results including the Lucas Acquisition for the second quarter of 1997,
net sales declined by $5.9 million, approximately 7.5%. Sales of military
alternators in North America declined by $1.9 million; sales in the U.K.
declined by $2.9 million; and sales in Argentina declined by $2.4 million from
the second quarter of 1997. Sales in most other product and geographic markets
were about equal to or slightly above 1997 second quarter levels.
11
<PAGE>
Gross profit was $15.0 million in the second quarter of 1998 or 20.5% of net
sales. This compares to $8.3 million or 19.1% of net sales recorded for the
second quarter of 1997. On a pro forma basis to include the Lucas Acquisition,
gross profit in the second quarter of 1997 was $14.5 million or 18.5% of net
sales. Lower material costs, improved labor productivity, and a shift in sales
toward higher margin products all contributed to the improvement from the second
quarter 1997 gross profit percentage, both as reported and as pro forma to
include the Lucas Acquisition.
Selling, general, and administrative expense was $9.8 million or 13.5% of net
sales for the second quarter of 1998, an increase of 69% from the $5.8 million
or 13.5% of net sales recorded in the second quarter of 1997, but a decrease of
$523,000 from $10.4 million or 13.2% of net sales in the second quarter of 1997
on a pro forma basis to include the Lucas Acquisition. Reductions in selling,
general, and administrative expenses in the second quarter of 1998 as compared
with the pro forma results reflect the initial benefits of the integration of
the Lucas Acquisition.
As the result of the factors discussed above, operating income in the second
quarter of 1998 was $5.1 million, or 7.0% of net sales, versus $2.4 million, or
6.0% of net sales, recorded in the second quarter of 1997 and $4.0 million, or
5.1% of net sales, in the second quarter of 1997 on a pro forma basis to include
the Lucas Acquisition. Other income was $436,000 in the second quarter of 1998
versus $41,000 recorded in the second quarter of 1997. For the second quarter of
1998 other income consisted primarily of interest income, a workers compensation
refund, and the proceeds from the sale of certain emissions credits, partly
offset by loss on the sale of fixed assets and pension expense for inactive
defined benefit pension plans. For the pro forma second quarter of 1997, other
income consisted primarily of interest income.
Interest expense was $3.2 million in the second quarter of 1998 compared to $1.4
million recorded in the second quarter of 1997. The increase in interest
expense resulted from the increase in debt caused by the offering of $125.0
million of senior notes in January 1998, the proceeds of which were used to
finance the Lucas Acquisition and the repurchase of shares, options, and
warrants in the first quarter of 1998. Interest expense for the second quarter
of 1997, pro forma as though the issuance of the senior notes and the use of
proceeds as described above had occurred at the beginning of 1997, was also
$3.2 million.
The provision for income taxes was $869,000 for the second quarter of 1998,
37.4% of income from continuing operations before taxes and the extraordinary
item. This compares to $474,000 of income taxes recorded in the second quarter
of 1997, 44% of income from continuing operations before the extraordinary item.
The recorded 1997 tax rate was higher because of the fixed component of taxes
and certain U.S. state taxes. On a pro forma basis, the provision for income
taxes was $467,000 or 50% of income from continuing operations before taxes and
the extraordinary item. The pro forma provision for income taxes does not
include any tax benefit related to the Argentina loss of that period.
SIX MONTHS ENDED JULY 4, 1998 COMPARED TO SIX MONTHS ENDED JULY 5, 1997
Net sales for the six months ended July 4, 1998 were $147.4 million, an increase
of $59.9 million or 68.4% from the $87.5 million recorded in the first half of
1997. The Lucas Acquisition was responsible for an increase in net sales of
approximately $63 million, more than the total net sales increase. Compared to
pro forma results including the Lucas Acquisition for the first half of 1997,
net
12
<PAGE>
sales declined by $5.9 million, approximately 3.8%. Sales of military
alternators in North America declined by $4.0 million; sales in the United
Kingdom declined by $1.9 million; and sales in Argentina declined by $1.8
million from the first half of 1997. These declines were partly offset by a $1.3
million increase in original equipment commercial alternator sales and a $1.0
million increase in battery charger sales, both in North America.
Gross profit was $29.5 million in the first half of 1998 or 20.0% of net sales.
This compares to $17.2 million or 19.7% of net sales recorded for the first half
of 1997. On a pro forma basis to include the Lucas Acquisition, gross profit in
the first six months of 1997 was $28.7 million or 18.7% of net sales. Lower
material costs, improved labor productivity, and a shift in sales toward higher
margin products all contributed to the improvement from the first half of 1997
gross profit percentage both as reported and as pro forma to include the Lucas
Acquisition.
Selling, general, and administrative expense was $19.6 million or 13.3% of net
sales for the first half of 1998, an increase of 71.2% from the $11.5 million or
13.1% of net sales recorded in the first half of 1997, but a decrease of
$1,516,000 from $21.2 million or 13.8% of net sales in the first half of 1997
on a pro forma basis to include the Lucas Acquisition. Reductions in selling,
general, and administrative expenses in the first half of 1998 as compared with
the pro forma results reflect the initial benefits of the integration of the
Lucas Acquisition.
As discussed in notes 2 and 6 to the condensed consolidated financial
statements, the Company recorded a $2.1 million charge in the first quarter of
1998 to record the repurchase of 40% of the stock options outstanding. The
Company also recorded a charge of $980,000 to cover restructuring activities at
the existing Prestolite facility in Leyland, England. This charge relates to
severance costs to be paid in conjunction with the transfer of certain
activities from the existing Prestolite facility in Leyland, England, to a
facility acquired as part of the Lucas Acquisition. The Leyland facility will
remain in operation with employment levels lower than those that previously
existed; the severance costs are expected to be paid by the end of 1998. Pro
forma results for 1997 include redundancy costs of $455,000 incurred by the
former Lucas operations in England and Argentina.
As the result of the factors discussed above, operating income in the first half
of 1998 was $6.7 million, or 4.6% of net sales, versus $5.8 million, or 6.6% of
net sales, recorded in the first half of 1997 and $7.0 million, or 4.6% of net
sales, in the first half of 1997 on a pro forma basis to include the Lucas
Acquisition. Other income was $522,000 in the first half of 1998 versus $21,000
recorded in the first half of 1997. For the first half of 1998 other income
consisted primarily of interest income, a workers compensation refund, and the
proceeds from the sale of certain emissions credits, partly offset by loss on
the sale of fixed assets and pension expense for inactive defined benefit
pension plans. For the pro forma first half of 1997, other income consisted
primarily of interest income.
Interest expense was $6.5 million in the first half of 1998 compared to $2.8
million recorded in the first half of 1997. The increase in interest expense
resulted from the increase in debt caused by the offering of $125.0 million of
senior notes in January 1998, the proceeds of which were used to finance the
Lucas Acquisition and the repurchase of shares, options, and warrants in the
first quarter of 1998. Interest expense for the first half of 1997, pro forma
as though the issuance of the senior notes and the use of proceeds as described
above had occurred at the beginning of 1997, was $6.4 million.
13
<PAGE>
The net provision for income taxes was $263,000 for the first half of 1998,
36.0% of income from continuing operations before taxes and the extraordinary
item. This compares to $1.2 million of income taxes recorded in the first half
of 1997, 41.4% of income from continuing operations before taxes and the
extraordinary item. The recorded 1997 tax rate was higher because of the fixed
component of taxes and certain U.S. state taxes. On a pro forma basis, the
provision for income taxes was $880,000 or 99% of income from continuing
operations before taxes and the extraordinary item. The pro forma provision for
income taxes does not include any tax benefit related to the Argentina loss of
that period.
In conjunction with the refinancing and repurchase of shares, options, and
warrants, Prestolite recorded an extraordinary item of $1.3 million net-of-tax
in the first quarter of 1998. On a pre-tax basis this charge covered $728,000
in debt prepayment fees, $335,000 for the write-off of unamortized financing
costs, $733,000 to write-off the unamortized discount on subordinated debt, and
$195,000 related to the repurchase of the warrants.
LIQUIDITY AND CAPITAL RESOURCES
Cash generated from operating activities during the first half of 1998 was $12.8
million (including $2.7 million spent on redundancy costs during the period and
charged to the reserve established in connection with the Lucas Acquisition).
For the second quarter of 1998, capital spending totaled $2.9 million, as
compared with total capital spending of $2.5 million in the second quarter of
1997. Capital spending at the Company's North American locations was $2.3
million in the second quarter of 1998 as compared to $1.2 million in the second
quarter of 1997, an increase of $1.0 million. Capital spending at the ongoing
Prestolite United Kingdom facilities was $0.3 million in the second quarter of
1998, an increase of $0.1 million from the $0.2 million spent at those locations
in 1997. Capital spending at the locations acquired during the Lucas Acquisition
was $0.3 million for the second quarter of 1998, compared to $1.1 million for
the second quarter 1997. Capital spending in the first half of 1998 was $5.6
million, as compared with total capital spending of $4.5 million in the first
half of 1997. Capital spending at the ongoing Prestolite facilities was $4.2
million, an increase of $2.0 million from the $2.2 million spent in the first
half of 1997. Capital spending at the facilities acquired in the Lucas
Acquisition was $1.4 million in the first half of 1998, compared to $2.3
million for the first half of 1997. Capital expenditures for the remainder of
1998 are expected to be approximately $5.4 million. Planned capital expenditures
consist primarily of expenditures to reduce costs through automation, replace
existing equipment and enable the Company to manufacture new products, and
expenditures related to improving the Company's manufacturing infrastructure in
connection with realignment of certain manufacturing operations of the business
acquired in the Lucas Acquisition.
Debt, net of cash, increased from $42.4 million at December 31, 1997 to $121.5
million at July 4, 1998 (a decrease of $3.5 million from the April 4, 1998 level
of $125.0 million). That increase, partially offset by the positive cash flow
from operations of $12.8 million (net of $2.7 million spent for redundancy costs
during the first half of 1998 and charged to the reserve established in
connection with the Lucas Acquisition), was due to the issuance of 125.0 million
of senior notes on January 22, 1998 and the use of part of the proceeds of such
offering to effect the Lucas Acquisition, refinance existing indebtedness, and
repurchase securities from holders and management. As of July 4, 1998 additional
debt outstanding in Argentina and the United Kingdom was offset by cash balances
in South Africa and the United States. The Company had revolving credit
facilities with banks in the United States and United Kingdom under which
additional
14
<PAGE>
borrowings of $18.5 million and $8.3 million ((Pounds)5.0 million) were
available based on the July 4, 1998 levels of receivables (U.S. and U.K.) and
inventory (U.S. only) which are pledged to support that debt.
The Company's liquidity needs are expected to consist primarily of working
capital needs and scheduled payments of principal and interest on its
indebtedness, including the senior notes and any indebtedness that may be
outstanding from time to time under its U.S. and U.K. revolving credit
facilities. The Company's short-term liquidity needs, including a portion of the
one-time costs associated with the Lucas Acquisition and joint venture
agreements, are expected to be provided by: (i) existing cash balances; (ii)
operating cash flows; and (iii) borrowings under the Company's U.S. and U.K.
revolving credit facilities. The Company expects to fund its long term liquidity
needs from its operating cash flows, the issuance of debt and/or equity
securities and bank borrowings. The Company believes that cash flows from
operations, its existing cash balances and amounts available under its U.S. and
U.K. revolving credit facilities will be adequate to meet the Company's
anticipated requirements for working capital, planned capital expenditures,
investments, and principal and interest payments on debt for at least the next
twelve months. Estimates as to working capital needs and other expenditures may
be materially affected if the foregoing sources are not available or do not
otherwise provide sufficient funds to meet the Company's obligations.
FORWARD-LOOKING STATEMENTS
This Form 10-Q contains, in addition to historical information, forward-looking
statements that involve certain risks and uncertainties. These risks include,
but are not limited to, risks associated with the uncertainty of future
financial results, acquisitions, additional financing requirements, development
of new products and services, the effect of competitive products or pricing, the
effect of economic conditions and other uncertainties detailed in the Company's
other filings with the Securities and Exchange Commission. The Company
undertakes no obligation to publicly release any revisions to any forward-
looking statements contained herein to reflect events or circumstances occurring
after the date of this Form 10-Q. The Company's actual results may differ
materially from those projected in forward-looking statements made by, or on
behalf of, the Company.
15
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
The Company has not filed any reports on Form 8-K during
the quarterly period ended July 4, 1998.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 13, 1998 By: /s/ KENNETH C. CORNELIUS
--------------- ------------------------
Kenneth C. Cornelius
Senior Vice President and
Chief Financial Officer
(principal financial and
accounting officer)
17
<PAGE>
APPENDIX B
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarterly Period Ended October 3, 1998.
[ ] 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 333-49429-01
PEI Holding, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 943142033
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2100 Commonwealth Blvd., Ste. 300, Ann Arbor, Michigan 48105
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(734) 913-6600
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
- --------------------------------------------------------------------------------
(Former name, address, and former fiscal year,
if changes since last report)
Indicate whether the registrant (1) has filed all reports required to be
filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceeding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to the filing
requirements for the past 90 days.
Yes No X
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Number of common shares
Class: outstanding as of November 11, 1998
Common Stock 1,993,000
1
<PAGE>
EXPLANATORY NOTE TO AMENDED AND RESTATED FORM 10-Q
This amended and restated quarterly report on Form 10-Q sets forth the Company's
quarterly report on Form 10-Q for the quarter ended October 3, 1998, as filed
with the Securities and Exchange Commission on November 13, 1998, as amended on
Form 10-Q/A-1 as filed on December 9, 1998, which included amendment of the
condensed consolidated balance sheets contained in Item 1 by transferring
$152,000 from the line item "Other non-current liabilities" to the line item
"Other long-term debt, net of current maturities," and as amended on
Form 10-Q/A-2 as filed on January 27, 1999, which included amendment of
Management's Discussion and Analysis and Results of Operations contained in Item
2 by including additional disclosure related to Year 2000 issues.
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Part I: Financial Information
Item 1: Condensed Consolidated Balance Sheets
at October 3, 1998 (unaudited) and December 31, 1997 3
Condensed Consolidated Statements of Operations 4
Three months and nine months ended October 3, 1998 (unaudited)
and October 4, 1997 (unaudited)
Condensed Consolidated Statements of Cash Flows 5
Nine months ended October 3, 1998 (unaudited) and
October 4, 1997 (unaudited)
Notes to Condensed Consolidated Financial Statements 6
Item 2: Management's Discussion & Analysis of
Financial Condition and Results of Operations 11
Part II: Other Information 16
Signatures 17
</TABLE>
2
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
PEI HOLDING, INC. AND SUBSIDIARIES
(INCLUDING PRESTOLITE ELECTRIC INCORPORATED)
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
<TABLE>
<CAPTION>
October 3, December 31,
1998 1997
(unaudited)
----------- -------------
<S> <C> <C>
Assets
Current assets
Cash $ 2,119 $ 455
Accounts receivable, net of allowances 49,311 26,326
Inventories, net 47,954 24,687
Deferred tax asset, net 4,588 3,226
Prepaid and other current assets 2,905 965
-------- -------
Total current assets 106,877 55,659
Property, plant and equipment, net 61,049 26,179
Investments 5,137 2,597
Other long term assets 7,048 1,416
Intangible assets 2,406 2,834
======== =======
Total assets $182,517 $88,685
======== =======
Liabilities
Current liabilities
Revolving credit $ 5,978 $ 3,052
Current portion of long-term debt and
capital lease obligations 694 1,144
Accounts payable 25,795 12,042
Accrued liabilities 27,058 12,029
-------- -------
Total current liabilities 59,525 28,267
Senior notes 125,000 -
Other long term debt, net of current maturities 1,314 29,467
Subordinated debt, net - 9,267
Other non-current liabilities 3,761 1,034
Deferred tax liability, net 1,707 1,707
-------- -------
Total liabilities 191,307 69,742
Minority interest in Argentina subsidiary 38 -
Stockholders' equity
Common stock, par value $.01, 5,000,000 shares authorized,
3,303,000 shares issued and outstanding at July 4, 1998
and December 31, 1997, respectively 2 2
Paid-in capital 16,623 16,623
Stock warrants - 3,239
Retained earnings (accumulated deficit) (762) (634)
Notes receivable, employees' stock purchase (559) (346)
Foreign currency translation adjustment 317 379
Treasury stock, 1,310,000 and 32,000 shares on July 4, 1998
and December 31, 1997, respectively (24,449) (320)
-------- -------
Total stockholders' equity (8,828) 18,943
-------- -------
Total liabilities and stockholders' equity $182,517 $88,685
======== =======
</TABLE>
The accompanying notes are an integral part of the
condensed consolidated financial statements.
3
<PAGE>
PEI HOLDING, INC. AND SUBSIDIARIES
(INCLUDING PRESTOLITE ELECTRIC INCORPORATED)
CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS
(in thousands, except share amounts)
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
--------------------------- ---------------------------
October 3, October 4, October 3, October 4,
1998 1997 1998 1997
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Net sales $70,450 $41,516 $217,823 $129,034
Cost of goods sold 56,198 33,802 174,117 107,092
------------ ------------ ------------ -----------
Gross profit 14,252 7,714 43,706 24,942
Selling, general and administrative 9,732 6,112 29,370 17,573
Costs associated with option repurchase -- -- 2,101 --
Restructuring charge -- -- 980 --
------------ ------------ ------------ -----------
Operating income 4,520 1,602 11,255 7,369
Other expense (income) 47 338 (475) 317
Interest expense 3,425 1,378 9,951 4,214
------------ ------------ ------------ -----------
Income from continuing operations before
extraordinary loss and income taxes 1,048 (114) 1,779 2,838
Provision for income taxes 369 (240) 632 981
------------ ------------ ------------ -----------
Income from continuing operations 679 126 1,147 1,857
Income from discontinued operation, net -- (1,771) -- (1,672)
Extraordinary loss, net of taxes of $716 -- -- 1,275 --
------------ ------------ ------------ -----------
Net income (loss) 679 (1.645) (128) 185
Other comprehensive income (expense):
Foreign currency translation adjustment 865 (251) (62) (287)
------------ ------------ ------------ -----------
Comprehensive income (expense) $ 1,544 $(1,896) $ (190) $ (102)
============ ============ ============ ===========
Basic earnings per common share
Income from continuing operations $ 0.34 $ 0.04 $ 0.54 $ 0.54
Discontinued operations -- (0.51) -- (0.48)
Extraordinary item -- -- (0.59) --
------------ ------------ ------------ -----------
Net income (loss) $ 0.34 $(0.47) $ (0.07) $ 0.06
============ ============ ============ ===========
Diluted earnings per common share
Income from continuing operations $ 0.34 $ 0.03 $ 0.54 $ 0.51
Discontinued operations -- (0.48) -- (0.46)
Extraordinary item -- -- (0.61) --
------------ ------------ ------------ -----------
Net income (loss) $ 0.34 $(0.45) $ (0.07) $ 0.05
============ ============ ============ ===========
Basic shares outstanding 1,993,000 3,450,740 2,105,052 3,450,740
Dilutive shares outstanding 2,103,860 3,655,180 2,224,501 3,655,180
</TABLE>
The accompanying notes are an integral part of the
condensed consolidated financial statements.
4
<PAGE>
PEI HOLDING, INC. AND SUBSIDIARIES
(INCLUDING PRESTOLITE ELECTRIC INCORPORATED)
CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
For the nine months ended
--------------------------------
October 3, October 4,
1998 1997
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (128) $ 185
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Cash provided by (used in) discontinued operations 1,603 (1,331)
Loss (gain) on sale of property, plant, and equipment (236) 1,879
Compensation expense related to options 2,101 -
Depreciation and amortization 9,015 4,115
Deferred taxes (1,431) (100)
Loss on debt extinguishment 1,991 -
Changes in working capital items: (4,239) (5,516)
-------- --------
Net cash provided by operating activities 8,676 (768)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (7,806) (4,321)
Proceeds from disposal of fixed assets 18 1,144
Net proceeds from disposal of discontinued operations - 7,224
Investment in affiliates (2,640) -
Acquisition of Lucas businesses (49,943) -
-------- --------
Net cash provided by investing activities (60,371) 4,047
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of senior notes 125,000 -
Debt repaid in acquisition of Lucas businesses 3,227 -
Net increase (decrease) in revolving credit 2,990 7,275
Redemption of subordinated notes (10,000) -
Payments on acquisition payable to Hobart - (4,175)
Payments on long term debt (32,146) (5,920)
Purchase of stock and warrants (27,692) -
Payments on deferred compensation - (155)
Payments of capital lease obligations and other obligations (173) (63)
Purchase of treasury stock and options (2,203) (54)
Debt refinancing costs (5,785) -
-------- --------
Net cash from financing activities 53,218 (3,092)
Effect of exchange rate changes on cash 141 23
-------- --------
Net increase (decrease) in cash 1,664 210
Cash - beginning of period 455 794
======== ========
Cash - end of period $ 2,119 $ 1,004
======== ========
</TABLE>
The accompanying notes are an integral part of the
condensed consolidated financial statements.
5
<PAGE>
PEI HOLDING, INC. AND SUBSIDIARIES
(Including PRESTOLITE ELECTRIC INCORPORATED)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: GENERAL INFORMATION
PEI Holding, Inc. conducts all of its operations through its wholly-owned
principal subsidiary, Prestolite Electric Incorporated. There are no material
differences between the financial statements of PEI Holding, Inc. and Prestolite
Electric Incorporated (collectively, "the Company" or "Prestolite").
The unaudited condensed consolidated financial statements included herein have
been prepared by the Company in accordance with Rule 10-01 of Regulation S-X and
have been prepared on a consistent basis with the Company's audited financial
statements for the year ended December 31, 1997. These statements reflect all
adjustments, consisting only of items of a normal recurring nature, which are,
in the opinion of management, necessary for the fair statement of the
consolidated financial condition and consolidated results of operations for the
interim period presented. Prior period amounts have been reclassified where
necessary to conform to current presentation.
Certain information and footnote disclosures normally included in the
consolidated financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These financial statements
and the related notes should be read in conjunction with the Company's audited
financial statements and notes thereto and other material included in the
Prospectus dated June 26, 1998 (the "Prospectus"). The year-end 1997 condensed
balance sheet data was derived from the Company's audited financial statements,
but does not include all information and footnotes required by generally
accepted accounting principles for complete financial statements. The results of
operations for the nine- and three-month periods ended October 3, 1998 are not
necessarily indicative of the operating results that may be expected for the
full year or any other interim period.
The equity securities of PEI Holding, Inc. are held by Genstar Capital
Corporation and Company management.
NOTE 2: ACQUISITION, SHARE REPURCHASE, AND REFINANCING
On January 22, 1998 Prestolite acquired three business units from a subsidiary
of LucasVarity plc ("the Lucas Acquisition") for approximately $40.0 million
in cash, the assumption of approximately $7.1 million in debt, deferred payments
of approximately $1.4 million, and future contingent payments of up to $19
million based upon the performance of Lucas Argentina. No liability has been
recorded for the contingent liability payment as payment is not considered
probable. Any future payments will be charged to goodwill. On the same day,
Prestolite Electric Incorporated completed the offering of $125 million of
9.625% Senior Notes due 2008 (the "Notes"). The proceeds of the Notes were used
to fund the Lucas Acquisition, to repay approximately $42 million of outstanding
indebtedness, and to pay approximately $29.7 million for the repurchase of PEI
Holding, Inc. common stock plus warrants and options to purchase common stock.
These transactions are more fully described in the Prospectus.
6
<PAGE>
In conjunction with these transactions, during the first quarter of 1998 the
Company charged operations for $2.1 million for the repurchase of options and
recorded an extraordinary charge of $1.275 million, net-of-tax benefit related
to the debt refinancing. As described in Note 6, the Company also recorded a
$0.98 million restructuring charge in the first quarter related to costs
anticipated to be incurred at the Company's existing facilities as a result of
the Lucas Acquisition.
Results for the first nine months of 1998 are recorded as though the Lucas
Acquisition was completed on January 1, 1998. An imputed interest cost of
$213,000 was charged to interest expense for the period from January 1 to
January 22. The Lucas Acquisition has been accounted for as a purchase and a
preliminary allocation of the purchase price has been made in accordance with
Accounting Principals Board Opinion 16. The purchase price allocation will be
completed by the end of the year and will likely change from that included in
the accompanying statements.
Pro forma unaudited consolidated operating results for the Company for the third
quarter and first nine months of 1997 as though the Lucas Acquisition had been
consummated on January 1, 1997 are summarized below. Pro forma adjustments
include only the addition of the results of the acquired business units and do
not reflect anticipated efficiencies in operations. These results are not
necessarily indicative of future results of operations nor are they indicative
of the results of historical operations had the acquisitions been consummated as
of the assumed dates. These results also reflect the 20-for-one stock split
effective March 26, 1998.
<TABLE>
<CAPTION>
Third Quarter First Nine Months
-------------- ------------------
<S> <C> <C>
Net Sales, in thousands $75,284 $228,539
Net Income, in thousands $(2,979) $ (2,871)
Earnings (Loss) per Share
Basic $ (0.86) $ (0.83)
Diluted $ (0.82) $ (0.79)
</TABLE>
7
<PAGE>
NOTE 3: INVENTORIES
Inventories are summarized as follows (in thousands of dollars):
<TABLE>
<CAPTION>
As of As of
October 3, December 31,
1998 1997
---------- ------------
<S> <C> <C>
Raw Material $15,228 $ 9,027
Work in Process 15,233 6,096
Finished Goods 17,493 9,564
------- -------
Total $47,954 $24,687
======= =======
</TABLE>
NOTE 4: PROPERTY, PLANT AND EQUIPMENT
Property, Plant and Equipment consists of the following (in thousands of
dollars):
<TABLE>
<CAPTION>
As of As of
October 3, December 31,
1998 1997
---------- ------------
<S> <C> <C>
Land & Buildings $ 25,500 $ 13,611
Machinery & Equipment 60,854 31,461
Construction in Progress 3,183 1,276
---------- ------------
Total, at Cost 89,537 46,348
Accumulated Depreciation (28,488) (20,169)
---------- ------------
Net $ 61,049 $ 26,179
========== ============
</TABLE>
NOTE 5: DEBT
In connection with the Lucas Acquisition, share repurchase, and refinancing
discussed in Note 2, Prestolite Electric Incorporated issued $125 million of
9.625% Senior Notes due 2008 (the "Notes"). The Notes pay interest semi-
annually and mature on February 1, 2008 but may be redeemed earlier at the
Company's option under conditions specified in the indenture pursuant to which
the Notes were issued. The notes are senior unsecured obligations of Prestolite
Electric Incorporated, are fully and unconditionally guaranteed on a senior
basis by PEI Holding, Inc., and are subordinated to secured credit facilities
(to the extent of the value of the assets securing such indebtedness) of
Prestolite Electric Incorporated, including its existing credit facility
referred to below, and are structurally subordinated to indebtedness of any
subsidiary of Prestolite Electric Incorporated, including indebtedness of its
United Kingdom subsidiary. The Notes are more fully described in the
Prospectus.
On January 22, 1998 Prestolite Electric Incorporated entered into a new
financing agreement with the U.S. bank that had previously been Prestolite
Electric Incorporated's U.S. senior debt provider for up to $23 million of
borrowings at the bank's prime rate, secured by the U.S. receivables and
inventory of Prestolite Electric Incorporated. On January 28, the Company's
United Kingdom subsidiary entered into an interim borrowing agreement with an
affiliate of the U.K. bank that had previously been the Company's U.K. debt
provider. On April 21 that interim agreement was replaced with an agreement
providing for up to (Pounds)7 million (approximately $11.6 million based on
exchange rates of 1.657 $/Pound as of such date) of borrowings at the U.K.
bank's base rate plus 1.75%,
8
<PAGE>
secured by the receivables of the United Kingdom subsidiary. In addition, the
Company's Argentina subsidiary has borrowing arrangements with several banks
secured by certain assets of the Company's Argentina subsidiary.
Debt is summarized as follows (in thousands of dollars):
<TABLE>
<CAPTION>
As of As of
October 3, December 31,
1998 1997
---------- ------------
<S> <C> <C>
U.S. Bank Debt $ 4,772 $28,588
U.K. Bank Debt 1,206 3,785
Argentine Bank Debt 400 -
Senior Notes 125,000 -
Subordinated Debt - 10,000
Unamortized Discount on Subordinated Debt - (733)
Capital Lease Obligations 1,315 942
Other Debt 293 348
---------- ------------
Total 132,834 42,930
Current Maturities 6,672 4,196
---------- ------------
Long Term Debt $126,314 $38,734
========== ============
</TABLE>
NOTE 6: RESTRUCTURING
During 1997, the Company's board of directors approved a restructuring plan for
the Company's facility in Leyland, England, contingent upon completion of the
Lucas Acquisition. This plan was announced during the first quarter of 1998 and
includes moving production of certain products from the Leyland facility to a
facility in the United Kingdom acquired as part of the Lucas Acquisition. A
restructuring charge of $980,000 for employee severance costs was accrued and
charged to operations during the first quarter of 1998. During the first nine
months of 1998, the Company charged $568,000 against this accrual. The entire
amount is expected to be spent by the end of 1998.
As of the date of the Lucas Acquisition, management had begun to assess and
formulate restructuring plans related to operations acquired in the Lucas
Acquisition. These plans will include employee reductions and may include a
plant closure. Not all portions of the plan have been completed and approved as
of October 3, 1998. An accrual of $8,220,000 was established as a purchase
accounting adjustment related to these restructuring actions. Severance
payments of $3.9 million were made to employees and charged to this accrual
during the first nine months of 1998. Completion and approval of the
restructuring plans for these operations are expected by the end of 1998. The
accrual will be adjusted accordingly as a purchase price adjustment.
NOTE 7: INVESTMENTS
On June 24, 1998, the Company agreed to license certain alternator technology
from Ecoair Corp. ("Ecoair"). In addition, the Company purchased 66,667 shares
of Ecoair common stock for $1 million, and agreed to purchase an additional
33,333 shares for $500,000 on each of December 24, 1998 and June 24, 1999. Prior
to the Prestolite purchase, Ecoair had 1,347,646 shares and
9
<PAGE>
options to purchase 500,758 shares outstanding. The Company also received an
option to increase its ownership of Ecoair to 20% at varying prices through
June, 2000.
On July 2, 1998, the Company agreed to form a joint venture with Daewoo Heavy
Industries Ltd. ("Daewoo"). The joint venture, owned 50% by Prestolite and 50%
by Daewoo, began operations producing material handling motors at a plant in
Inchon, South Korea on August 31, 1998. Daewoo's contribution to the joint
venture consisted of $540,000 of cash plus certain equipment previously used by
Daewoo to produce material handling motors. Prestolite contributed $540,000 of
cash and is providing certain technology to the joint venture. In addition,
Prestolite and Daewoo have each agreed to provide loans of up to $700,000 to the
joint venture or to guarantee loans of that amount made by the joint venture if
such borrowings are deemed necessary by the joint venture. Daewoo has agreed to
purchase substantially all of the material handling motors required by its
Industrial Vehicle division, located in South Korea, from the joint venture.
10
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Prestolite Electric Holding, Inc. (formerly known as PEI Holding, Inc.), through
its operating subsidiary Prestolite Electric Incorporated, manufactures
alternators, starter motors, direct current motors, battery chargers, and
switching devices. These are supplied under the Prestolite, Leece-Neville,
Hobart, Lucas, and Butec brand names for original equipment and aftermarket
application on a variety of vehicles and industrial equipment. "Hobart" is used
under license from a subsidiary of Illinois Tool Works, Inc. "Lucas" is used
under license from a subsidiary of LucasVarity plc.
Most of the Company's products are component parts used on diesel engines,
automobiles and electric vehicles. These components are sold to both aftermarket
and original equipment ("OEM") customers. The Company sells its products to a
variety of markets, in terms of both end-use and geography.
In January 1998, Prestolite acquired three businesses from a subsidiary of
LucasVarity plc. These businesses operate in England, South Africa, and
Argentina (collectively, the "Lucas Acquisition"). As summarized in Note 2 to
the financial statements and described more fully in the Prospectus, these
businesses were purchased for approximately $40.0 million in cash, the
assumption of $7.1 million in debt, and certain future obligations. Those
future obligations include a payment of $766,000 made in August, 1998; payments
of approximately $2 million during 1998 for inventory and transition assistance
in the United Kingdom; and up to $19 million contingent on certain events in
Argentina. Including the sales of the acquired businesses, more than half of
the Company's sales are outside the United States.
The acquisition was financed from the sale of $125 million of 9.625% senior
notes due 2008, issued under Rule 144A of the Securities Act of 1933, as
amended. Proceeds from the 144A offering were also used to repay existing debt
in the United States and United Kingdom, to repurchase all of the warrants
issued to holders of the Company's subordinated debt, to repurchase 40% of the
common stock held by Genstar Capital Corporation, and to repurchase 8.5% of
the common stock and 40% of the options held by management. The total cost
associated with the repurchase of these securities was approximately $29.7
million.
RESULTS OF OPERATIONS
THREE MONTHS ENDED OCTOBER 3, 1998 COMPARED TO THREE MONTHS ENDED OCTOBER 4,
1997.
Net sales for the three months ended October 3, 1998 were $70.5 million, an
increase of $28.9 million or 69.7% from the $41.5 million recorded in the third
quarter of 1997. The Lucas Acquisition was responsible for an increase in net
sales of $27.4 million. Compared to pro forma results including the Lucas
Acquisition for the third quarter of 1997, net sales declined by $4.8 million,
approximately 6.4%. Defense sales in North America declined by $2.6 million and
total sales in the U.K. declined by $2.1 million, while Argentina sales declined
by $2.8 million and South Africa sales declined by $1.0 million. These declines
were offset by increases in non-defense original equipment and original
equipment service sales in North America of approximately $4.0 million. Sales in
most other product and geographical markets were about equal to or slightly
above 1997 third quarter levels.
11
<PAGE>
Gross profit was $14.3 million in the third quarter of 1998 or 20.2% of net
sales. This compares to $7.7 million or 18.6% of net sales recorded for the
third quarter of 1997. On a pro forma basis to include the Lucas Acquisition,
gross profit in the third quarter of 1997 was $13.1 million or 17.5% of net
sales. Lower material costs, improved labor productivity, and a shift in sales
toward higher margin products all contributed to the improvement from the third
quarter 1997 gross profit percentage, both as reported and as pro forma to
include the Lucas Acquisition.
Selling, general, and administrative expense was $9.7 million or 13.8% of net
sales for the third quarter of 1998, an increase of 59.2% from the $6.1 million
or 14.7% of net sales recorded in the third quarter of 1997, but a decrease of
$1.3 million from $11.0 million or 14.6% of net sales in the third quarter of
1997 on a pro forma basis to include the Lucas Acquisition. Reductions in
selling, general, and administrative expenses in the third quarter of 1998 as
compared with the pro forma results continue to reflect the benefits of the
integration of the Lucas Acquisition.
As the result of the factors discussed above, operating income in the third
quarter of 1998 was $4.5 million, or 6.4% of net sales, versus $1.6 million, or
3.9% of net sales, recorded in the third quarter of 1997 and $1.6 million, or
2.1% of net sales, in the third quarter of 1997 on a pro forma basis to include
the Lucas Acquisition. Other expense was $47,000 in the third quarter of 1998
versus $338,000 recorded in the third quarter of 1997. For the third quarter of
1998 other expense consisted primarily of trademark expense, pension expense for
inactive defined benefit pension plans and other miscellaneous expenses offset
by interest income and export rebates. For the pro forma third quarter of 1997,
other expense consisted primarily of miscellaneous expenses offset by interest
income.
Interest expense was $3.4 million in the third quarter of 1998 compared to $1.4
million recorded in the third quarter of 1997. The increase in interest expense
resulted from the increase in debt caused by the offering of $125.0 million of
senior notes in January 1998, the proceeds of which were used to finance the
Lucas Acquisition and the repurchase of shares, options, and warrants in the
first quarter of 1998. Interest expense for the third quarter of 1997, pro
forma as though the issuance of the senior notes and the use of proceeds as
described above had occurred at the beginning of 1997, was $3.3 million.
The provision for income taxes was $369,000 for the third quarter of 1998, 35.2%
of income from continuing operations before taxes and the extraordinary item.
This compares to $240,000 of income tax benefit recorded in the third quarter of
1997, 210.5% of loss from continuing operations before the extraordinary item.
The recorded 1997 tax rate was higher because of the fixed component of taxes
and certain U.S. state taxes. On a pro forma basis, the provision for income
taxes was a $691,000 benefit or 36.4% of loss from continuing operations before
taxes and the extraordinary item. The pro forma provision for income taxes does
not include any tax benefit related to the Argentina loss of that period.
NINE MONTHS ENDED OCTOBER 3, 1998 COMPARED TO NINE MONTHS ENDED OCTOBER 4, 1997
Net sales for the nine months ended October 3, 1998 were $217.8 million, an
increase of $88.8 million or 68.8% from the $129.0 million recorded in the first
nine months of 1997. The Lucas Acquisition was responsible for an increase in
net sales of approximately $88.9 million, slightly more than the total net sales
increase. Compared to pro forma results including the Lucas Acquisition for the
first nine months of 1997, net sales declined by $10.7 million, approximately
12
<PAGE>
4.7%. Sales of military alternators in North America declined by $5.2 million;
sales in the United Kingdom declined by $1.8 million; sales in South Africa
declined by $0.9 million; and sales in Argentina declined by $4.7 million from
the first nine months of 1997. These declines were partly offset by a $2.4
million increase in original equipment commercial alternator sales and a $1.6
million increase in battery charger sales, both in North America.
Gross profit was $43.7 million in the first nine months of 1998 or 20.1% of net
sales. This compares to $24.9 million or 19.3% of net sales recorded for the
first nine months of 1997. On a pro forma basis to include the Lucas
Acquisition, gross profit in the first nine months of 1997 was $41.8 million or
18.3% of net sales. Lower material costs, improved labor productivity, and a
shift in sales toward higher margin products all contributed to the improvement
from the first nine months of 1997 gross profit percentage both as reported and
as pro forma to include the Lucas Acquisition.
Selling, general, and administrative expense was $29.4 million or 13.5% of net
sales for the first nine months of 1998, an increase of 67.1% from the $17.6
million or 13.6% of net sales recorded in the first nine months of 1997, but a
decrease of $2.8 million from $32.2 million or 14.1% of net sales in the first
nine months of 1997 on a pro forma basis to include the Lucas Acquisition.
Reductions in selling, general, and administrative expenses in the first nine
months of 1998 as compared with the pro forma results continue to reflect the
benefits of the integration of the Lucas Acquisition.
As discussed in notes 2 and 6 to the condensed consolidated financial
statements, the Company recorded a $2.1 million charge in the first quarter of
1998 to record the repurchase of 40% of the stock options outstanding. The
Company also recorded a charge of $980,000 to cover restructuring activities at
the existing Prestolite facility in Leyland, England. This charge relates to
severance costs to be paid in conjunction with the transfer of certain
activities from the existing Prestolite facility in Leyland, England, to a
facility acquired as part of the Lucas Acquisition. The Leyland facility will
remain in operation with employment levels lower than those that previously
existed; the severance costs are expected to be paid by the end of 1998. Pro
forma results for 1997 include redundancy costs of $455,000 incurred by the
former Lucas operations in England and Argentina.
As the result of the factors discussed above, operating income in the first nine
months of 1998 was $11.3 million, or 5.2% of net sales, versus $7.4 million, or
5.7% of net sales, recorded in the first nine months of 1997 and $8.6 million,
or 3.8% of net sales, in the first nine months of 1997 on a pro forma basis to
include the Lucas Acquisition. Other income was $475,000 in the first nine
months of 1998 versus an expense of $317,000 recorded in the first nine months
of 1997. For the first nine months of 1998 other income consisted primarily of
interest income, a workers compensation refund, and the proceeds from the sale
of certain emissions credits, partly offset by loss on the sale of fixed assets
and pension expense for inactive defined benefit pension plans. For the pro
forma first nine months of 1997, other income consisted primarily of interest
income.
Interest expense was $9.9 million in the first nine months of 1998 compared to
$4.2 million recorded in the first nine months of 1997. The increase in
interest expense resulted from the increase in debt caused by the offering of
$125.0 million of senior notes in January 1998, the proceeds of which were used
to finance the Lucas Acquisition and the repurchase of shares, options, and
warrants in the first quarter of 1998. Interest expense for the first nine
months of 1997, pro forma as though the issuance of the senior notes and the use
of proceeds as described above had occurred at the beginning of 1997, was $9.6
million.
13
<PAGE>
The net provision for income taxes was $632,000 for the first nine months of
1998, 35.5% of income from continuing operations before taxes and the
extraordinary item. This compares to $981,000 of income taxes recorded in the
first nine months of 1997, 34.6% of income from continuing operations before
taxes and the extraordinary item. On a pro forma basis, the provision for income
taxes was $189,000 or 18.7% of loss from continuing operations before taxes and
the extraordinary item. The pro forma provision for income taxes does not
include any tax benefit related to the $1.6 million Argentina loss of that
period.
In conjunction with the refinancing and repurchase of shares, options, and
warrants, Prestolite recorded an extraordinary item of $1.3 million net-of-tax
in the first quarter of 1998. On a pre-tax basis this charge covered $728,000
in debt prepayment fees, $335,000 for the write-off of unamortized financing
costs, $733,000 to write-off the unamortized discount on subordinated debt, and
$195,000 related to the repurchase of the warrants.
LIQUIDITY AND CAPITAL RESOURCES
Cash generated from operating activities during the first nine months of 1998
was $8.7 million (including $4.5 million spent on redundancy costs during the
period and charged to the reserve established in connection with the Lucas
Acquisition). For the third quarter of 1998, capital spending totaled $1.9
million, as compared with total capital spending of $1.1 million in the third
quarter of 1997. Capital spending at the Company's North American locations was
$1.2 million in the third quarter of 1998 as compared to $1.0 million in the
third quarter of 1997, an increase of $0.2 million. Capital spending at the
ongoing Prestolite United Kingdom facilities was $0.6 million in the third
quarter of 1998, an increase of $0.5 million from the $0.1 million spent at
those locations in 1997. Capital spending at the locations acquired during the
Lucas Acquisition was $0.8 million for the third quarter of 1998, compared to
$2.2 million for the third quarter 1997. Capital spending in the first nine
months of 1998 was $7.8 million, as compared with total capital spending of $8.5
million in the first nine months of 1997 on a pro forma basis to include the
Lucas Acquisition. Capital spending at the ongoing Prestolite facilities was
$6.1 million, an increase of $2.2 million from the $3.9 million spent in the
first nine months of 1997. Capital spending at the facilities acquired in the
Lucas Acquisition was $1.7 million in the first nine months of 1998, compared to
$4.5 million for the first nine months of 1997. Capital expenditures for the
remainder of 1998 are expected to be approximately $3.2 million. Planned capital
expenditures consist primarily of expenditures to reduce costs through
automation, replace existing equipment and enable the Company to manufacture new
products, and expenditures related to improving the Company's manufacturing
infrastructure in connection with realignment of certain manufacturing
operations of the business acquired in the Lucas Acquisition.
Debt, net of cash, increased from $42.4 million at December 31, 1997 to $130.7
million at October 3, 1998, an increase of $9.2 million from the July 4, 1998
level of $121.5 million. That increase, partially offset by the positive cash
flow from operations of $8.7 million (net of $4.5 million spent for redundancy
costs during the first nine months of 1998 and charged to the reserve
established in connection with the Lucas Acquisition), was due to the issuance
of 125.0 million of senior notes on January 22, 1998 and the use of part of the
proceeds of such offering to effect the Lucas Acquisition, refinance existing
indebtedness, and repurchase securities from holders and management. As of
October 3, 1998 additional debt outstanding in Argentina and the United Kingdom
was offset by cash balances in South Africa and the United States. The Company
had revolving credit facilities with banks in the United States and United
14
<PAGE>
Kingdom under which additional borrowings of $13.3 million and $8.5 million
((Pounds)5.0 million) were available based on the October 3, 1998 levels of
receivables (U.S. and U.K.) and inventory (U.S. only) which are pledged to
support that debt.
The Company's liquidity needs are expected to consist primarily of working
capital needs and scheduled payments of principal and interest on its
indebtedness, including the senior notes and any indebtedness that may be
outstanding from time to time under its U.S. and U.K. revolving credit
facilities. The Company's short-term liquidity needs, including a portion of the
one-time costs associated with the Lucas Acquisition and joint venture
agreements, are expected to be provided by: (i) existing cash balances; (ii)
operating cash flows; and (iii) borrowings under the Company's U.S. and U.K.
revolving credit facilities. The Company expects to fund its long term liquidity
needs from its operating cash flows, the issuance of debt and/or equity
securities and bank borrowings. The Company believes that cash flows from
operations, its existing cash balances and amounts available under its U.S. and
U.K. revolving credit facilities will be adequate to meet the Company's
anticipated requirements for working capital, planned capital expenditures,
investments, and principal and interest payments on debt for at least the next
twelve months.
Estimates as to working capital needs and other expenditures may be materially
affected if the foregoing sources are not available or do not otherwise provide
sufficient funds to meet the Company's obligations.
YEAR 2000
Currently, many automated systems and software products are coded to accept only
two digit entries in the date code field. These date code fields will need to
accept four digit entries or otherwise be modified to distinguish 21st century
dates from 20th century dates. As a result, many companies' information systems
and software need to be upgraded or replaced in order to function correctly
after December 31, 1999.
The Company has completed its Year 2000 assessments of its information
technology and embedded systems, and is continuing its efforts to prepare its
systems and applications for the Year 2000 as part of a larger, general program
to enhance all of its computer systems. The Year 2000 element of these efforts
consists primarily of installing or upgrading enterprise resource planning
systems to be Year 2000 compliant at the Company's United States, United Kingdom
and Argentina facilities, and ensuring compliance by an outside service bureau
utilized by the Company's South African facility. Remediation efforts in the
United States are more than 80% complete as of October 3, 1998 and all actions
are expected to be completed and all systems are expected to be updated by early
1999. Because the majority of the Company's operations outside of the Unites
States were acquired in early 1998 and these operations were not Year 2000
compliant, the Company's efforts to deal with the Year 2000 issue outside the
United States are further from completion than the Company's domestic programs.
In Argentina a new system has been selected and installation begun. In the
United Kingdom a system used in two locations is being replaced, while the
system in use at a third location is being upgraded for Year 2000 compliance.
All of the Company's efforts outside the United States are expected to be
completed and tested by July 31, 1999. It is expected that the material aspects
of system upgraded and remediation efforts at all of the Company's facilities
will be completed and accordingly will be Year 2000 compliant prior to December
31, 1999. In addition, the Company has reviewed its product base and believes
that the Company's products will not be affected by the Year 2000 issues.
In connection with the overall computer enhancement program, including Year 2000
compliance, the Company expects to incur aggregate internal and third-party
costs of approximately $3.0 million, of which approximately $1.7 million had
been incurred as of October 3, 1998. These costs include approximately $0.5
million related to in-house efforts to enhance the performance of the Company's
United States warehousing systems, approximately $1.0 million for each of the
United Kingdom and Argentina software conversions and approximately $0.5 million
related to ancillary Year 2000 remediation efforts.
The Company relies on third party vendors and service providers for certain
products and services, including certain data processing capabilities. The
Company is communicating with its principal vendors and service providers to
assess the Year 2000 readiness of their products and services. Responses
indicate that the significant providers currently have compliant versions
available or are well into the renovation and testing phases with completion
scheduled prior to December 31, 1999. However, the Company can give no guarantee
that the systems of these vendors and service providers on which the Company
relies will be timely Year 2000 compliant.
The Company's contingency planning for Year 2000 issues relates primarily to
securing backup vendors (which have been identified for most purchased products)
and the possibility of stockpiling raw materials. Contingency planning will
continue throughout 1999 and the Company's plans will be modified base upon the
progress of its remediation efforts, system updates and installations and based
upon its communications with selected suppliers.
While management believes that the estimated cost of becoming Year 2000
compliant will not be significant to the Company's result of operations,
financial position or cash flows, failure to complete all the work in a timely
manner could result in a material adverse effect on the Company's results of
operations, financial position or cash flows. While management expects all
planned work to be completed, there can be no guarantee that all systems will be
in compliance by the Year 2000, the systems of suppliers and other companies and
government agencies on which the Company relies will be converted in a timely
manner, or that the Company's contingency planning will be able to fully address
all potential interruptions. Therefore, date-related issues could cause delays
in the Company's ability to produce or ship its products, process transactions
or otherwise conduct business in any of its markets.
FORWARD-LOOKING STATEMENTS
This Form 10-Q contains, in addition to historical information, forward-looking
statements that involve certain risks and uncertainties. These risks include,
but are not limited to, risks associated with the uncertainty of future
financial results, acquisitions, additional financing requirements, development
of new products and services, the effect of competitive products or pricing, the
effect of economic conditions and other uncertainties detailed in the Company's
other filings with the Securities and Exchange Commission. The Company
undertakes no obligation to publicly release any revisions to any forward-
looking statements contained herein to reflect events or circumstances occurring
after the date of this Form 10-Q. The Company's actual results may differ
materially from those projected in forward-looking statements made by, or on
behalf of, the Company.
15
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
The Company has not filed any reports on Form 8-K during
the quarterly period ended October 3, 1998.
16
<PAGE>
APPENDIX C
[PRESTOLITE LOGO]
Prestolite Electric Incorporated Financial Information Contacts:
Corporate Headquarters Ken Cornelius, Vice President & CFO, or
2100 Commonwealth Boulevard Dennis Chelminski, Controller
Ann Arbor, Michigan 48105 734-913-6600
www.prestolite.com
Prestolite Electric Reports Record Results for 1998
Ann Arbor, Michigan (February 23, 1999) - Prestolite Electric
Incorporated and its parent, Prestolite Electric Holding, Inc., today
announced that consolidated 1998 net sales of $282.8 million had generated
earnings before interest, taxes, depreciation, amortization and special
charges (EBITDA) of $31.4 million. Both were at record levels for the
company. Net sales increased 65% from 1997 while EBITDA rose more than 96%.
Operating income for 1998 was $16.8 million, producing net income of $0.2
million.
The net sales increase resulted from Prestolite's January 1998
acquisition of three business units (located in the United Kingdom,
Argentina, and South Africa) from LucasVarity. With the acquired operations
included on a pro forma basis, 1997 net sales, EBITDA, and net income would
have been $300.3 million, $24.8 million, and a $4.0 million loss,
respectively. Net sales declined 5.8% from pro forma results for 1997, while
EBITDA increased 26.7%. An improved gross margin and reduced selling,
general and administrative expense both contributed to the profit
improvement.
Net income for the year totaled $3.3 million before three one-time
adjustments. Those include a pretax charge of $2.1 million related to the
repurchase of options, a pre-tax charge of $0.7 million for restructuring and
an after-tax charge of $1.3 million associated with the first quarter debt
refinancing. Net income for the year after those three items was $0.2
million.
<PAGE>
Prestolite Electric Announces 1998 Results
Page 2
Company President Kim Packard commented, "We are pleased with our results
for 1998. In addition to our record sales and profit performance, EBITDA
before special items was 11.1% of sales, also a record for the company. With
the integration of the Lucas acquisition generally finished and a number of
exciting product development efforts nearing completion, we look forward to
an excellent year in 1999."
Prestolite Electric Incorporated manufactures alternators, starter motors,
direct current motors, battery chargers and switching devices. These are
supplied under the Prestolite, Leece-Neville, and Butec brand names for
original equipment and aftermarket application on a variety of vehicles and
industrial equipment. Genstar Capital Corporation and management own the
equity of the company.
Prestolite Electric Holding, Inc. changed its name from "PEI Holding,
Inc." on December 31, 1998.
EBITDA is a widely accepted financial indicator of a company's ability to
service debt, but is not calculated the same by all companies. EBITDA should
not be considered by an investor as an alternative to net income as an
indicator of a company's operating performance or as an alternative to cash
flow as a measure of liquidity. This release contains forward-looking
statements that involve risks and uncertainties regarding the anticipated
financial and operating results of the Company. The Company undertakes no
obligation to publicly release any revisions to any forward-looking
statements contained herein to reflect events or circumstances occurring
after the date of this release. The Company's actual results may differ
materially from those projected in forward-looking statements made by, or on
behalf of, the Company.
<PAGE>
Prestolite Electric Holding, Inc.
Consolidated Unaudited Financial Highlights
(In thousands of dollars)
<TABLE>
<CAPTION>
1997
1997 Pro 1998
Actual Forma Actual
-------------- -------------- ---------------
<S> <C> <C> <C>
Statement of Operations
Sales $171,700 $300,287 $282,801
Cost of goods sold 137,792 246,649 224,561
-------------- -------------- ---------------
Gross profit 33,908 53,638 58,240
Selling, general & administrative 23,188 40,992 38,648
Costs associated with option repurchase - - 2,101
Restructuring and redundancy - 1,656 711
-------------- -------------- ---------------
Operating income 10,720 10,990 16,780
Other income (expense) (210) 454 197
Income (loss) from unconsolidated affiliates - - (133)
Interest expense 5,384 12,642 13,494
-------------- -------------- ---------------
Income from continuing operations before
income taxes and extraordinary item 5,126 (1,198) 3,350
Provision for income taxes 2,303 1,159 1,845
-------------- -------------- ---------------
Income from continuing operations 2,823 (2,357) 1,505
Income from discontinued operation, net (1,673) (1,673) -
Extraordinary item - - (1,275)
-------------- -------------- ---------------
Net income (loss) $ 1,150 $ (4,030) $ 230
============== ============== ===============
Operating income $10,720 $10,990 $16,780
Other income (expense) (210) 454 197
Income (loss) from unconsolidated affiliates - - (133)
Depreciation 4,930 11,225 10,316
Amortization 571 518 1,470
-------------- -------------- ---------------
16,011 23,187 28,630
Costs associated with option repurchase - - 2,101
Restructuring and redundancy - 1,656 711
-------------- -------------- ---------------
EBITDA $16,011 $24,843 $31,442
============== ============== ===============
</TABLE>
<PAGE>
EXHIBIT 99.1
NEW LETTER OF TRANSMITTAL
FOR TENDERS OF
$350,000 AGGREGATE PRINCIPAL AMOUNT OF
9 5/8% SENIOR NOTES DUE 2008
OF
PRESTOLITE ELECTRIC INCORPORATED
FULLY AND UNCONDITIONALLY GUARANTEED ON A SENIOR BASIS BY PRESTOLITE ELECTRIC
HOLDING, INC.
PURSUANT TO THE PROSPECTUS DATED JUNE 26, 1998 AND PROSPECTUS SUPPLEMENT DATED
FEBRUARY 25, 1999
OF PRESTOLITE ELECTRIC INCORPORATED
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON
MARCH 24, 1999, (THE "NEW EXPIRATION DATE") UNLESS THE NEW
EXCHANGE OFFER IS EXTENDED (BUT IN NO EVENT TO A DATE LATER
THAN MARCH 29, 1999). TENDERED SECURITIES MAY NOT BE
WITHDRAWN.
TO: U.S. BANK TRUST NATIONAL ASSOCIATION, EXCHANGE AGENT
By Facsimile: By Mail:
U.S. Bank Trust National Association
U.S. Bank Trust National Association P.O. Box 64485
(651) 244-1537 St. Paul, Minnesota 55164-9549
Attention: Flora Gomez (SPFT0414) Attention: Specialized Finance
Confirm by Telephone to: (651) 244- (SPFT0414)
5011
By Overnight Courier and by
By Hand Before 5:00 p.m. (New York Registered/Certified Mail:
Time):
U.S. Bank Trust National Association
U.S. Bank Trust National Association 180 East Fifth Street
100 Wall Street St. Paul, Minnesota 55101
20th Floor Attention: Specialized Finance
New York, NY 10005 (SPFT0414)
DELIVERY OF THIS NEW LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION
VIA FACSIMILE, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY. THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE
THIS NEW LETTER OF TRANSMITTAL IS COMPLETED.
PLEASE READ THIS ENTIRE NEW LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX
List below the Outstanding Notes to which this New Letter of Transmittal
relates. If the space provided below is inadequate, the certificate numbers
and principal amount of Outstanding Notes should be listed on a separate
signed schedule affixed hereto.
DESCRIPTION OF OUTSTANDING NOTES
(See Instructions 2, 3 and 8)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Name(s) and Address(es) of Registered Holder(s) Outstanding Note(s) Tendered
(Please fill in, if blank) (Attach additional signed list if necessary)
- ------------------------------------------------------------------------------------------------------------
Title of Securities Aggregate Principal Amount of
and Certificate Principal Amount Outstanding Notes
Number(s)(1) of Outstanding Note Tendered(2)
<S> <C> <C> <C>
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
Total
- --------------------------------------------------------------------------------------------------------
</TABLE>
(1) Certificate numbers not required if Outstanding Notes are being
tendered by book-entry transfer.
(2) Unless otherwise indicated in this column, a holder will be deemed to
have tendered the entire principal amount represented by the
Outstanding Note indicated in column 2. Outstanding Notes tendered
hereby must be in denominations of $1,000 and any integral multiple
thereof. See Instruction 1.
<PAGE>
This New Letter of Transmittal is to be completed by a holder of Outstanding
Notes either if certificates are to be forwarded herewith or if a tender of
certificates for Outstanding Notes, if available, is to be made by book-entry
transfer to the account maintained by the Exchange Agent at The Depository
Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures
set forth in "--Procedures for Tendering Outstanding Notes" and "--Book-Entry
Transfer" sections of the Prospectus Supplement. Holders of Outstanding Notes
whose certificates are not immediately available, or who are unable to deliver
their certificates or confirmation of the book-entry tender of their
Outstanding Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility (a "Book-Entry Confirmation") and deliver all other documents
required by this New Letter of Transmittal to the Exchange Agent on or prior
to the New Expiration Date, may tender their Outstanding Notes according to
the guaranteed delivery procedures set forth in the Prospectus Supplement
under the section entitled "--Guaranteed Delivery Procedures."
Holders who wish to tender their Outstanding Notes must complete this New
Letter of Transmittal in its entirety.
[_] CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-
ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: ______________________
Account Number: _____________________________________
Transaction Code Number: ____________________________
[_] CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s): ____________________
Window Ticket Number (if any): ______________________
Date of Execution of Notice of Guaranteed Delivery: _
[_] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS SUPPLEMENT AND THE PROSPECTUS AND 10 COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO.
Name: _______________________________________________
Address: ____________________________________________
_____________________________________________
_____________________________________________
2
<PAGE>
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE EXCHANGE NOTES FOR THEIR
OUTSTANDING NOTES PURSUANT TO THE NEW EXCHANGE OFFER MUST VALIDLY TENDER THEIR
OUTSTANDING NOTES TO THE EXCHANGE AGENT PRIOR TO THE NEW EXPIRATION DATE.
The undersigned acknowledges that it has received and reviewed the
Prospectus dated June 26, 1998 and Prospectus Supplement dated February 25,
1999 (together, the "Prospectus"), of Prestolite Electric Incorporated (the
"Issuer"), and this New Letter of Transmittal (the "New Letter of
Transmittal"), which together constitute the Issuer's offer (the "New Exchange
Offer") to exchange an aggregate principal amount of up to $350,000 of its 9
5/8% Senior Notes Due 2008 (the "Exchange Notes"), for a like principal amount
of the Issuer's issued and outstanding 9 5/8% Senior Notes Due 2008 (the
"Outstanding Notes").
The term "New Expiration Date" shall mean 5:00 p.m., New York City time, on
March 24, 1999, unless the Issuer, in its sole discretion, extends the New
Exchange Offer (but in no event to a date later than March 29, 1999). The
Issuer reserves the right, at any time or from time to time, to extend the
period of time during which the New Exchange Offer is open at its sole
discretion, in which event the term "New Expiration Date" shall mean the time
and date when the New Exchange Offer as so extended shall expire. During any
such extension, all Outstanding Notes previously tendered will remain subject
to the New Exchange Offer and may be accepted for exchange by the Issuer. Any
Outstanding Notes not accepted for exchange for any reason will be returned
without expense to the tendering holder thereof as promptly as practicable
after the expiration or termination of the New Exchange Offer.
The Issuer expressly reserves the right to amend or terminate the New
Exchange Offer, and not to accept for exchange any Outstanding Notes not
theretofore accepted for exchange, upon the occurrence of any of the
conditions of the New Exchange Offer specified in the Prospectus Supplement
under the section entitled "--Certain Conditions to the New Exchange Offer."
The Issuer shall notify the holders of the Outstanding Notes of any
extension, amendment, non-acceptance or termination by means of a press
release or other public announcement not later than 9:00 a.m., New York City
time, on the next business day after the previously scheduled New Expiration
Date.
The Exchange Notes will bear interest from the last interest payment date on
which interest was paid on the Outstanding Notes surrendered in exchange
therefor or, if no interest has been paid on such Outstanding Notes, from the
date of original issue of the Outstanding Notes at the same rate and upon the
same terms as the Outstanding Notes. Holders whose Outstanding Notes are
accepted for exchange will not receive interest on such Outstanding Notes for
any period subsequent to the last interest payment date of the Outstanding
Notes to occur prior to the issue date of the Exchange Notes and will be
deemed to have waived the right to receive any payment in respect of interest
on the Outstanding Notes accrued from and after such interest payment date.
The New Exchange Offer is not conditioned upon any minimum principal amount
of Outstanding Notes being tendered for exchange. However, the New Exchange
Offer is subject to certain conditions. Please see the Prospectus Supplement
under the section entitled "--Certain Conditions to the New Exchange Offer."
The New Exchange Offer is not being made to, nor will tenders be accepted
from or on behalf of, holders of Outstanding Notes in any jurisdiction in
which the making or acceptance of the New Exchange Offer would not be in
compliance with the laws of such jurisdiction.
Based upon no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission") to third parties, the Issuer believes
that Exchange Notes issued pursuant to the New Exchange Offer in exchange for
Outstanding Notes may be offered for resale, resold and otherwise transferred
by a holder thereof other than (i) a broker-dealer who purchased such
Outstanding Notes directly from the Issuer to resell pursuant to Rule 144A
under the Securities Act of 1933, as amended (the "Securities Act") or any
other available exemption under the Securities Act or (ii) a person that is an
"affiliate" (as defined in Rule 405 under the Securities Act) of the Issuer or
Prestolite Electric Holding, Inc. ("PEI") without compliance with the
registration and prospectus delivery provisions of the Securities Act,
provided that such Exchange Notes are acquired in the ordinary course of such
holder's business and that such holder is not participating, and has no
arrangement or understanding with any person to participate, in the
distribution of such Exchange Notes.
3
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE
ACCOMPANYING INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the New Exchange Offer, the
undersigned hereby tenders to the Issuer the aggregate principal amount of
Outstanding Notes indicated above. The undersigned has completed, executed and
delivered this New Letter of Transmittal to indicate the action the
undersigned desires to take with respect to the New Exchange Offer.
Subject to, and effective upon, the acceptance for exchange of the
Outstanding Notes tendered hereby, the undersigned hereby sells, assigns and
transfers to, or upon the order of, the Issuer all right, title and interest
in and to such Outstanding Notes as are being tendered hereby. The undersigned
hereby irrevocably constitutes and appoints the Exchange Agent its agent and
attorney-in-fact (with full knowledge that the Exchange Agent also acts as the
agent of the Issuer with respect to the tendered Outstanding Notes) with full
power of substitution to (i) deliver certificates for such Outstanding Notes
to the Issuer and deliver all accompanying evidences of transfer and
authenticity to, or upon the order of, the Issuer, (ii) present such
Outstanding Notes for transfer on the books of the Issuer and (iii) receive
for the account of the Issuer all benefits and otherwise exercise all rights
of the beneficial ownership of such Outstanding Notes, all in accordance with
the terms of the New Exchange Offer. The power of attorney granted in this
paragraph shall be deemed to be irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Outstanding Notes
tendered hereby and that the Issuer will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances
and not subject to any adverse claim when the same are accepted by the Issuer.
The undersigned hereby further represents that (i) any Exchange Notes acquired
in exchange for Outstanding Notes tendered hereby will have been acquired in
the ordinary course of business of the person receiving such Exchange Notes,
whether or not such person is the undersigned, (ii) neither the holder nor any
such other person has an arrangement or understanding with any person to
participate in the distribution of such Exchange Notes and (iii) neither the
holder nor any such other person is an "affiliate", as described in Rule 405
under the Securities Act of the Issuer or PEI.
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of the
Exchange Notes. If the undersigned is a broker-dealer that will receive
Exchange Notes for its own account in exchange for Outstanding Notes, it
represents that the Outstanding Notes to be exchanged for Exchange Notes were
acquired by it as a result of market-making activities or other trading
activities and acknowledges that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such
Exchange Notes pursuant to the New Exchange Offer; however, by so
acknowledging and by delivering a prospectus, the undersigned will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Issuer to be necessary or
desirable to complete the assignment, transfer and sale of the Outstanding
Notes tendered hereby. All authority conferred or agreed to be conferred in
this New Letter of Transmittal and every obligation of the undersigned
hereunder shall be binding upon the successors, assigns, heirs, executors,
administrators, trustees in bankruptcy and legal representatives of the
undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. This tender may not be withdrawn.
For the purposes of the New Exchange Offer, the Issuer shall be deemed to
have accepted validly tendered Outstanding Notes when, as and if the Issuer
has given oral or written notice thereof to the Exchange Agent.
If any tendered Outstanding Notes are not accepted for exchange pursuant to
the New Exchange Offer for any reason, certificates for any such unaccepted
Outstanding Notes will be returned (or, in the case of Outstanding Notes
tendered by book-entry transfer through the Book-Entry Transfer Facility, will
be credited to an account maintained at the Book-Entry Transfer Facility),
without expense, to the undersigned at the address shown below or at a
different address as may be indicated herein under the "Special Delivery
Instructions" as promptly as practicable after the New Expiration Date.
4
<PAGE>
The undersigned understands that tenders of Outstanding Notes pursuant to
the procedures described under the section entitled "--Procedures for
Tendering Outstanding Notes" in the Prospectus Supplement and in the
instructions hereto will constitute a binding agreement between the
undersigned and the Issuer upon the terms and subject to the conditions of the
New Exchange Offer.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, please deliver the Exchange Notes (and, if applicable,
substitute certificates representing Outstanding Notes for any Outstanding
Notes not exchanged) in the name(s) of the undersigned or, in the case of a
book-entry delivery of Outstanding Notes, please credit the account indicated
above maintained at the Book-Entry Transfer Facility. Similarly, unless
otherwise indicated under the box entitled "Special Delivery Instructions"
below, please send the Exchange Notes (and, if applicable, substitute
certificates representing Outstanding Notes for any Outstanding Notes not
exchanged) to the undersigned at the address shown above in the box entitled
"Description of Outstanding Notes." In the event that both "Special Issuance
Instructions" and "Special Delivery Instructions" are completed, please issue
the certificates representing the Exchange Notes issued in exchange for the
Outstanding Notes accepted for exchange in the name(s) of, and return any
certificates for Outstanding Notes not tendered or not exchanged to, the
person(s) so indicated. The undersigned understands that the Issuer has no
obligation pursuant to the "Special Issuance Instructions" and "Special
Delivery Instructions" to transfer any Outstanding Notes from the name of the
registered holder(s) thereof if the Issuer does not accept for exchange any of
the Outstanding Notes so tendered.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OUTSTANDING
NOTES" ABOVE AND SIGNING THIS NEW LETTER OF TRANSMITTAL, WILL BE DEEMED TO
HAVE TENDERED THE OUTSTANDING NOTES AS SET FORTH IN SUCH BOX ABOVE.
5
<PAGE>
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(Complete accompanying Substitute Form W-9)
_________________________________________________ ____________________, 1999
_________________________________________________ ____________________, 1999
_________________________________________________ ____________________, 1999
Signature(s) of Owner(s) Date
If a holder is tendering any Outstanding Notes, this New Letter of
Transmittal must be signed by the registered holder(s) as the name(s)
appear(s) on the certificates for the Outstanding Notes or on a security
position listing or by any person(s) authorized to become registered
holder(s) by endorsements and documents transmitted herewith. If signature is
by a trustee, executor, administrator, guardian, officer or other person
acting in a fiduciary or representative capacity, please set forth full
title. See Instruction 4.
Name(s):______________________________________________________________________
_______________________________________________________________________
(Please Type or Print)
Capacity:_____________________________________________________________________
Address:______________________________________________________________________
_______________________________________________________________________
(Including Zip Code)
SIGNATURE GUARANTEE
(If required by Instruction 4)
Signature(s) Guaranteed by
an Eligible Institution: _____________________________________________________
(Authorized Signature)
______________________________________________________________
(Title)
______________________________________________________________
(Name of Firm)
Dated: ___________________________, 1999
6
<PAGE>
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 4 and 5) (See Instructions 4 and 5)
To be completed ONLY if certifi- To be completed ONLY if certifi-
cates for Outstanding Notes not cates for Outstanding Notes not
exchanged and/or Exchange Notes exchanged and/or Exchange Notes
are to be issued in the name of are to be sent to someone other
and sent to someone other than than the person or persons whose
the person or person(s) whose signature(s) appear(s) on this
signature(s) appear(s) on this New Letter of Transmittal above
New Letter of Transmittal above, or to such person or persons at
or if Outstanding Notes delivered an address other than shown in
by book-entry transfer which are the box entitled "Description of
not accepted for exchange are to Outstanding Notes" on this New
be returned by credit to an ac- Letter of Transmittal above.
count maintained at the Book-En-
try Transfer Facility other than
the account indicated above.
Mail Exchange Notes and/or Out-
standing Notes to:
Issue Exchange Notes and/or Out- Name(s)___________________________
standing Notes to: (Please Type or Print)
__________________________________
Name(s) __________________________ (Please Type or Print)
(Please Type or Print)
__________________________________ Address __________________________
(Please Type or Print)
__________________________________
Address __________________________ (Including Zip Code)
__________________________________
(Including Zip Code)
(Complete accompanying Substi-
tute Form W-9)
Credit unexchanged Outstanding
Notes delivered by book-entry
transfer to the Book-Entry Trans-
fer Facility account set forth
below:
__________________________________
(Book-Entry Transfer Facility
Account Number, if Applicable)
PLEASE READ THIS ENTIRE NEW LETTER OF TRANSMITTAL CAREFULLY
BEFORE COMPLETING ANY BOX ABOVE.
THIS NEW LETTER OF TRANSMITTAL MUST BE USED TO FORWARD, AND MUST ACCOMPANY, ALL
CERTIFICATES FOR OUTSTANDING NOTES TENDERED PURSUANT TO THE NEW EXCHANGE OFFER.
7
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE NEW EXCHANGE OFFER
1. Delivery of this New Letter of Transmittal and Certificates. This New
Letter of Transmittal is to be completed by holders if certificates are to be
forwarded herewith or if tenders are to be made pursuant to the procedures for
delivery by book-entry transfer set forth in "--Procedures for Tendering
Outstanding Notes" and "--Book-Entry Transfer" sections of the Prospectus
Supplement. Certificates for all physically tendered Outstanding Notes, or
Book-Entry Confirmation, as the case may be, as well as a properly completed
and duly executed New Letter of Transmittal (or a copy hereof) and any other
documents required by this New Letter of Transmittal, must be received by the
Exchange Agent at the address set forth herein on or prior to the New
Expiration Date, or the tendering holder must comply with the guaranteed
delivery procedures set forth below. Outstanding Notes tendered hereby must be
in denominations of $1,000 or integral multiples thereof.
The method of delivery of this New Letter of Transmittal, the Outstanding
Notes and all other required documents is at the election and risk of the
tendering holders, but the delivery will be deemed made only when actually
received or confirmed by the Exchange Agent. If Outstanding Notes are sent by
mail, it is suggested that the mailing be made sufficiently in advance of the
New Expiration Date to permit delivery to the Exchange Agent prior to the New
Expiration Date. No New Letter of Transmittal or Outstanding Notes should be
sent to the Issuer.
Holders who wish to tender their Outstanding Notes and (i) whose Outstanding
Notes are not immediately available, (ii) cannot deliver their Outstanding
Notes, this New Letter of Transmittal or any other documents required hereby
to the Exchange Agent prior to the New Expiration Date or (iii) who cannot
comply with the procedures for book entry tender on a timely basis must tender
their Outstanding Notes according to the guaranteed delivery procedures set
forth in the Prospectus Supplement. Pursuant to such procedures: (x) such
tender must be made through an Eligible Institution (as defined below); (y)
prior to the New Expiration Date, the Exchange Agent must have received from
the Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by mail, courier or hand delivery or transmitted via
facsimile) setting forth the name and address of the holder, the certificate
number(s) of the Outstanding Notes to be tendered (except in the case of book-
entry tenders) and the principal amount of Outstanding Notes to be tendered,
stating that the tender is being made thereby and guaranteeing that, within
three NYSE (as defined in the Prospectus) trading days after the New
Expiration Date, this New Letter of Transmittal (or a copy hereof) together
with the certificate(s) representing the Outstanding Notes (except in the case
of book-entry tender(s)) and any other required documents will be deposited by
the Eligible Institution with the Exchange Agent; and (z) such properly
completed and executed New Letter of Transmittal (or a copy thereof), as well
as all other documents required by this New Letter of Transmittal and the
certificate(s) representing all tendered Outstanding Notes (except in the case
of book-entry tender(s)) in proper form for transfer or a Book-Entry
Confirmation with respect to such Outstanding Notes, must be received by the
Exchange Agent within three NYSE trading days after the New Expiration Date,
all as provided in the Prospectus Supplement under the section entitled "--
Guaranteed Delivery Procedures." Any holder who wishes to tender its
Outstanding Notes pursuant to the guaranteed delivery procedures described
above must ensure that the Exchange Agent receives the Notice of Guaranteed
Delivery prior to the New Expiration Date. As used in this New Letter of
Transmittal, "Eligible Institution" shall mean a firm which is a member of a
registered national securities exchange or a member of the National
Association of Securities Dealers, Inc., or a commercial bank or trust company
having an office or correspondent in the United States.
All questions as to the validity, eligibility (including time of receipt),
acceptance and withdrawal of tendered Outstanding Notes will be determined by
the Issuer in its sole discretion, which determination will be final and
binding. The Issuer reserves the absolute right to reject any and all
Outstanding Notes not properly tendered or any Outstanding Notes the Issuer's
acceptance of which would, in the opinion of counsel for the Issuer, be
unlawful. The Issuer also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Outstanding Notes. The
Issuer's interpretation of the terms and conditions of the New Exchange Offer
(including the instructions in this New Letter of Transmittal) shall be final
and binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Outstanding Notes must be cured within such time as
the Issuer shall determine. Neither the Issuer, the Exchange Agent nor any
other person shall be under any duty to give notification of defects or
irregularities with respect to tenders of Outstanding Notes, nor shall any of
them incur any liability for failure to give such notification. Tenders of
Outstanding Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Outstanding Notes received by
the
8
<PAGE>
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering holders, unless otherwise provided in this New Letter
of Transmittal, as soon as practicable following the New Expiration Date.
2. Tender by Holder. Only a registered holder of Outstanding Notes may
tender such Outstanding Notes in the New Exchange Offer. Any beneficial owner
whose Outstanding Notes are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and who wishes to tender
should contact the registered holder promptly and instruct such registered
holder to tender on behalf of such beneficial owner. If such beneficial owner
wishes to tender on such owner's own behalf, such owner must, prior to
completing and executing this New Letter of Transmittal and delivering such
owner's Outstanding Notes, either make appropriate arrangements to register
ownership of the Outstanding Notes in such owner's name or obtain a properly
completed bond power from the registered holder. The transfer of registered
ownership may take considerable time.
3. Partial Tenders and Withdrawals. Tenders of Outstanding Notes will be
accepted only in denominations of $1,000 and integral multiples thereof. If
less than all of the Outstanding Notes represented by a certificate or owned
by a holder are to be tendered, the tendering holder(s) should fill in the
aggregate principal amount of Outstanding Notes to be tendered in the box
above entitled "Description of Outstanding Notes--Principal Amount of
Outstanding Notes Tendered." A reissued certificate representing the balance
of non-tendered Outstanding Notes will be sent to such tendering holder
(except in the case of book-entry tenders), unless otherwise provided in the
appropriate box on this New Letter of Transmittal, promptly after the New
Expiration Date. All of the Outstanding Notes delivered to the Exchange Agent
will be deemed to have been tendered unless otherwise indicated.
Any holder who has tendered Outstanding Notes may not withdraw the tender.
See "--Withdrawal Rights" in the Prospectus Supplement.
4. Signatures on this New Letter of Transmittal; Bond Powers and
Endorsements; Guarantee of Signature. If this New Letter of Transmittal is
signed by the registered holder of the Outstanding Notes tendered hereby, the
signature must correspond exactly with the name as written on the face of the
certificates (if applicable) without any change whatsoever.
If any tendered Outstanding Notes are owned of record by two or more joint
owners, all such owners must sign this New Letter of Transmittal.
If any tendered Outstanding Notes are registered in different names on
several certificates, it will be necessary to complete, sign and submit as
many separate copies of this New Letter of Transmittal as there are different
registrations of certificates.
When this New Letter of Transmittal is signed by the registered holder or
holders of the Outstanding Notes specified herein and tendered hereby, no
endorsements of certificates or separate bond powers are required. If,
however, the Exchange Notes are to be issued, or any untendered Outstanding
Notes are to be reissued, to a person other than the registered holder, then
endorsements of any certificates transmitted hereby or separate bond powers
are required.
If this New Letter of Transmittal is signed by a person other than the
registered holder or holders of any certificate(s) specified herein, such
certificate(s) must be endorsed or accompanied by appropriate bond powers, in
either case signed exactly as the name or names of the registered holder(s)
appear(s) on the certificate(s).
If this New Letter of Transmittal or any certificates or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
the Issuer, proper evidence satisfactory to the Issuer of their authority to
so act must be submitted.
Endorsements on certificates for Outstanding Notes or signatures on bond
powers required by this Instruction 4 must be guaranteed by an Eligible
Institution.
9
<PAGE>
Signatures on this New Letter of Transmittal need not be guaranteed by an
Eligible Institution, provided the Outstanding Notes are tendered: (i) by a
registered holder of such Outstanding Notes (which term, for purposes of the
New Exchange Offer, includes any participant in the Book-Entry Transfer
Facility system whose name appears on a security position listing as the
holder of such Outstanding Notes) who has not completed the box entitled
"Special Issuance Instructions" on this New Letter of Transmittal; or (ii) for
the account of an Eligible Institution.
5. Special Issuance and Delivery Instructions. Tendering holders of
Outstanding Notes should indicate in the applicable box the name and address
in or to which Exchange Notes issued pursuant to the New Exchange Offer and/or
substitute certificates evidencing Outstanding Notes not exchanged are to be
issued or sent, if different from the name or address of the person signing
this New Letter of Transmittal. In the case of issuance in a different name,
the employer identification or social security number of the person named must
also be indicated. Holders tendering Outstanding Notes by book-entry transfer
may request that Outstanding Notes not exchanged be credited to such account
maintained at the Book-Entry Transfer Facility as such holder may designate
hereon. If no such instructions are given, such Outstanding Notes not
exchanged will be returned to the name or address of the person signing this
New Letter of Transmittal.
6. Transfer Taxes. The Issuer will pay all transfer taxes, if any,
applicable to the transfer of Outstanding Notes to it or its order pursuant to
the New Exchange Offer. If however, Exchange Notes and/or substitute
Outstanding Notes not exchanged are to be delivered to, or are to be
registered or issued in the name of, any person other than the registered
holder of the Outstanding Notes tendered hereby, or if tendered Outstanding
Notes are registered in the name of any person other than the person signing
this New Letter of Transmittal, or if a transfer tax is imposed for any reason
other than the transfer of Outstanding Notes to the Issuer or its order
pursuant to the New Exchange Offer, the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be
payable by the tendering holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted herewith, the amount of such
transfer taxes will be billed directly to such tendering holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Outstanding Notes specified in this
New Letter of Transmittal.
7. Waiver of Conditions. Subject to the terms and conditions set forth in
the Prospectus Supplement, the Issuer reserves the absolute right to waive
satisfaction of any or all conditions enumerated in the Prospectus Supplement.
8. No Conditional Tenders. No alternative, conditional, irregular or
contingent tenders will be accepted. All tendering holders of Outstanding
Notes, by execution of this New Letter of Transmittal, shall waive any right
to receive notice of the acceptance of their Outstanding Notes for exchange.
Neither the Issuer nor any other person is obligated to give notice of
defects or irregularities in any tender, nor shall any of them incur any
liability for failure to give any such notice.
9. Mutilated, Lost, Stolen or Destroyed Outstanding Notes. Any holder whose
Outstanding Notes have been mutilated, lost, stolen or destroyed should
contact the Exchange Agent at the address indicated above for further
instructions.
10. Requests for Assistance or Additional Copies. Questions relating to the
procedure for tendering, as well as requests for additional copies of the
Prospectus, the Prospectus Supplement and this New Letter of Transmittal, may
be directed to the Exchange Agent, at the address indicated on the first page
of this New Letter of Transmittal or by telephone at (651) 244-5011.
10
<PAGE>
IMPORTANT TAX INFORMATION
Under U.S. federal income tax laws, a registered holder of Outstanding Notes
or Exchange Notes is required to provide the Trustee (as payor) with such
holder's correct Taxpayer Identification Number ("TIN") on Substitute Form W-9
below or otherwise establish a basis for exemption from backup withholding. If
such holder is an individual, the TIN is his or her social security number. If
the Trustee is not provided with the correct TIN, a $50 penalty may be imposed
by the Internal Revenue Service, and payments made to such holder with respect
to Outstanding Notes or Exchange Notes may be subject to backup withholding.
Certain holders (including, among others, all corporations and certain
foreign persons) are not subject to these backup withholding and reporting
requirements. Exempt holders should indicate their exempt status on Substitute
Form W-9. A foreign person may qualify as an exempt recipient by submitting to
the Trustee a properly completed Internal Revenue Service Form W-8, signed
under penalties of perjury, attesting to that holder's exempt status. A Form
W-8 can be obtained from the Trustee.
If backup withholding applies, the Trustee is required to withhold 31% of
any payments made to the holder or other payee. Backup withholding is not an
additional U.S. federal income tax. Rather, the U.S. federal income tax
liability of persons subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the Internal Revenue Service.
Purpose of Substitute Form W-9. To prevent backup withholding on payments
made with respect to Outstanding Notes or Exchange Notes the holder is
required to provide the Trustee with: (i) the holder's correct TIN by
completing the form below, certifying that the TIN provided on Substitute Form
W-9 is correct (or that such holder is awaiting a TIN) and that (A) such
holder is exempt from backup withholding, (B) the holder has not been notified
by the Internal Revenue Service that the holder is subject to backup
withholding as a result of failure to report all interest or dividends or (C)
the Internal Revenue Service has notified the holder that the holder is no
longer subject to backup withholding and (ii) if applicable, an adequate basis
for exemption.
11
<PAGE>
TO BE COMPLETED BY ALL TENDERING HOLDERS (see "Important Tax Information"
above)
PAYER'S NAME: U.S. BANK TRUST NATIONAL ASSOCIATION
- -------------------------------------------------------------------------------
SUBSTITUTE Part I -- PLEASE PROVIDE SOCIAL SECURITY NUMBER
Form W-9 YOUR TIN IN THE BOX AT OR EMPLOYER IDENTIFI-
RIGHT AND CERTIFY BY CATION NUMBER
SIGNING AND DATING BELOW.
DEPARTMENT OF THE
TREASURY ----------------------
Part II -- Certification -- Part III -- Awaiting
Under Penalties of TIN [_]
Perjury, I certify that:
INTERNAL REVENUE --------------------------------------------------------
SERVICE
(1) The number shown on
PAYER'S REQUEST FOR this form is my correct
TAXPAYER Taxpayer Identification
IDENTIFICATION NUMBER Number (or I am waiting
(TIN) for a number to be
issued to me) and
(2) I am not subject to
backup withholding
either because I have
not been notified by
the Internal Revenue
Service ("IRS") that I
am subject to backup
withholding as a result
of failure to report
all interest or
dividends, or the IRS
has notified me that I
am no longer subject to
backup withholding.
--------------------------------------------------------
Certificate Instructions -- You must cross out item
(2) in Part 2 above if you have been notified by the
IRS that you are subject to backup withholding
because of underreporting interest or dividends on
your tax return. However, if after being notified by
the IRS that you were subject to backup withholding
you received another notification from the IRS
stating that you are no longer subject to backup
withholding, do not cross out item (2).
- -------------------------------------------------------------------------------
SIGNATURE __________________________ DATE _______________________________
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO HOLDERS OF EXCHANGE NOTES
PURSUANT TO THE NEW EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 3 OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number within
60 days, 31% of all payments made to me thereafter will be withheld until I
provide a number.
____________________________________ ____________________________________
Signature Date
12
<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR
9 5/8% SENIOR NOTES DUE 2008
OF
PRESTOLITE ELECTRIC INCORPORATED
FULLY AND UNCONDITIONALLY GUARANTEED ON A SENIOR BASIS BY PRESTOLITE ELECTRIC
HOLDING, INC.
As set forth in the Prospectus dated June 26, 1998 and Prospectus Supplement
dated February 25, 1999 (together, the "Prospectus") of Prestolite Electric
Incorporated (the "Issuer") and in the accompanying New Letter of Transmittal
and instructions thereto (the "New Letter or Transmittal"), this form or one
substantially equivalent hereto must be used to accept the Issuer's exchange
offer (the "New Exchange Offer") to purchase all of its outstanding 9 5/8%
Senior Notes Due 2008 (the "Outstanding Notes") if (i) certificates
representing the Outstanding Notes to be tendered for exchange pursuant to the
New Exchange Offer are not lost but are not immediately available, (ii) time
will not permit the New Letter of Transmittal, certificates representing such
Outstanding Notes or other required documents to reach the Exchange Agent
prior to the New Expiration Date or (iii) the procedures for book-entry
transfer cannot be completed prior to the New Expiration Date. This form may
be delivered by an Eligible Institution by mail, courier or hand delivery, or
transmitted via facsimile (receipt confirmed by telephone), to the Exchange
Agent as set forth below. All capitalized terms used herein but not defined
herein shall have the meanings ascribed to them in the Prospectus.
- -------------------------------------------------------------------------------
THE NEW EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
MARCH 24, 1999 (THE "NEW EXPIRATION DATE") UNLESS THE NEW EXCHANGE
OFFER IS EXTENDED (BUT IN NO EVENT TO A DATE LATER THAN MARCH 29,
1999). TENDERS OF OUTSTANDING NOTES MAY NOT BE WITHDRAWN.
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TO: U.S. BANK TRUST NATIONAL ASSOCIATION, EXCHANGE AGENT
By Facsimile: By Mail:
U.S. Bank Trust National Association
U.S. Bank Trust National Association P.O. Box 64485
(651) 244-1537 St. Paul, Minnesota 55164-9549
Attention: Flora Gomez (SPFT0414) Attention: Specialized Finance
Confirm by Telephone to: (651) 244- (SPFT0414)
5011
By Hand Before 5:00 p.m. (New York By Overnight Courier and by
Time): Registered/Certified Mail:
U.S. Bank Trust National Association
100 Wall Street U.S. Bank Trust National Association
20th Floor 180 East Fifth Street
New York, NY 10005 St. Paul, Minnesota 55101
Attention: Specialized Finance
(SPFT0414)
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION VIA FACSIMILE,
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on the
New Letter of Transmittal is required to be guaranteed by an "Eligible
Institution" under the instructions thereto, such signature guarantee must
appear in the applicable space provided in the signature box on the New Letter
of Transmittal.
LADIES AND GENTLEMEN:
The undersigned hereby tender(s) to the Issuer, upon the terms and subject
to the conditions set forth in the Prospectus, the Prospectus Supplement and
the New Letter of Transmittal, receipt of which are hereby acknowledged, the
aggregate principal amount of Outstanding Notes set forth below pursuant to
the guaranteed delivery procedures set forth in the Prospectus Supplement
under the caption "--Guaranteed Delivery Procedures."
The undersigned understands that tenders of Outstanding Notes will be
accepted only in principal amounts equal to $1,000 or integral multiples
thereof. The undersigned understands that tenders of Outstanding Notes
pursuant to the New Exchange Offer may not be withdrawn.
<PAGE>
All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death or incapacity of the undersigned,
and every obligation of the undersigned under this Notice of Guaranteed
Delivery shall be binding upon the heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives of the undersigned.
PLEASE COMPLETE AND SIGN
Signature(s) of Registered Other(s) or Authorized Signatory:
Name(s) of Registered Holder(s):
____________________________________________ ______________________________
____________________________________________ ______________________________
____________________________________________
____________________________________________ Address:_______________________
____________________________________________ _______________________________
Principal Amount of Outstanding Notes Tendered: Area Code and Telephone No.:
____________________________________________ _______________________________
____________________________________________ If outstanding Notes will be
delivered by book-entry
transfer at The Depository
Certificate No(s). of Outstanding Trust Company, insert
Notes (if available): Depository Trust Account No.:
____________________________________________ _______________________________
____________________________________________
Date: ____________________________________
This Notice of Guaranteed Delivery must be signed by the registered
holder(s) of Outstanding Notes exactly as its (their) name(s) appear on
certificates for Outstanding Notes or on a security position listing as the
owner of Outstanding Notes, or by person(s) authorized to become registered
holder(s) by endorsements and documents transmitted with this Notice of
Guaranteed Delivery. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information.
Name(s): ______________________________________________________________________
_______________________________________________________________________________
Capacity: _____________________________________________________________________
Address(es): __________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
Do not send Outstanding Notes with this form. Outstanding Notes should be
sent to the Exchange Agent together with a properly completed and duly
executed New Letter of Transmittal.
2
<PAGE>
The undersigned, a member firm of a registered national securities exchange
or of the National Association of Securities Dealers, Inc. or a commercial
bank or trust company having an office or a correspondent in the United
States, hereby (a) represents that each holder of Outstanding Notes on whose
behalf this tender is being made "own(s)" the Outstanding Notes covered hereby
within the meaning of Rule 14e-4 under the Securities Exchange Act of 1934, as
amended, (b) represents that such tender of Outstanding Notes complies with
such Rule 14e-4, and (c) guarantees that, within three NYSE (as defined in the
Prospectus) trading days after the New Expiration Date, a properly completed
and duly executed New Letter of Transmittal (or a copy thereof), together with
the certificate(s) representing the Outstanding Notes covered hereby in proper
form for transfer (or confirmation of the book-entry transfer of such
Outstanding Notes into the Exchange Agent's account at The Depository Trust
Company, pursuant to the procedure for book-entry transfer set forth in the
Prospectus Supplement) and any other required documents will be deposited by
the undersigned with the Exchange Agent.
The undersigned acknowledges that it must deliver the New Letter of
Transmittal and Outstanding Notes tendered hereby to the Exchange Agent within
the time period set forth above and that failure to do so could result in
financial loss to the undersigned.
______________________________________ ______________________________________
Name of Firm Authorized Signature
Address: _____________________________ ______________________________________
Name
______________________________________
______________________________________ ______________________________________
Area Code and Telephone No. Title
______________________________________
Date
3
