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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________
COMMISSION FILE NUMBER 333-49011
[ADVANCED ACCESSORY SYSTEMS LOGO]
ADVANCED ACCESSORY SYSTEMS, LLC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C>
DELAWARE 13-3848156
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
12900 HALL ROAD, SUITE 200, STERLING HEIGHTS, MI 48313
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE: (810) 997-2900
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /x/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / /
The aggregate fair market value of the Registrant's Class A Units held
by non-affiliates of the Registrant as of March 15, 1999, based upon the good
faith determination of the Board of Managers was approximately $3,982,000. For
purposes of this disclosure, shares of Class A Units held by persons who hold
more than 5% of the outstanding Class A Units and Class A Units held by officers
and directors of the Registrant have been excluded because such persons may be
deemed to be affiliates. This determination of affiliate status is not
necessarily conclusive for other purposes.
The number of the Registrant's Class A Units, outstanding at March 15,
1999 was 16,450.
Documents Incorporated by Reference
None
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ADVANCED ACCESSORY SYSTEMS, LLC
FORM 10-K
YEAR ENDED DECEMBER 31, 1998
TABLE OF CONTENTS
PART I
Item 1. BUSINESS........................................................... 1
Item 2. PROPERTIES......................................................... 10
Item 3. LEGAL PROCEEDINGS.................................................. 10
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................ 10
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
MEMBERS' MATTERS................................................... 11
Item 6. SELECTED HISTORICAL FINANCIAL DATA................................. 12
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS................................ 14
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK......... 22
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA........................ 22
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE................................ 48
PART III
Item 10. MANAGERS AND EXECUTIVE OFFICERS OF THE REGISTRANT.................. 48
Item 11. EXECUTIVE COMPENSATION............................................. 49
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT......................................................... 51
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................... 52
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K........................................................... 53
SIGNATURES.................................................................. 55
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FORWARD-LOOKING STATEMENTS
THIS BUSINESS SECTION AND OTHER PARTS OF THIS ANNUAL REPORT ON FORM
10-K CONTAIN FORWARD LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES.
THE COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE RESULTS DISCUSSED
IN THE FORWARD-LOOKING STATEMENTS, AND SUCH DIFFERENCES MAY BE MATERIAL. FACTORS
THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE
DISCUSSED BELOW AND IN "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS."
PART I
ITEM 1. BUSINESS
GENERAL
Advanced Accessory Systems, LLC (together with its subsidiaries, the
"Company" or "AAS") is one of the world's largest suppliers of towing and rack
systems and related accessories for the automotive original equipment
manufacturer ("OEM") market and the automotive aftermarket. The Company's
products include a complete line of towing systems including accessories such as
trailer balls, ball mounts, electrical harnesses, safety chains and locking
hitch pins. The Company's broad offering of rack systems includes fixed and
detachable racks and accessories which can be installed on vehicles to carry
items such as bicycles, skis, luggage, surfboards and sailboards. The Company's
products are sold as standard accessories or options for a variety of light
vehicles. In 1998, the Company estimates that approximately 45% of its net sales
were generated from products sold for light trucks. For the year ended December
31, 1998, the Company's net sales and EBITDA, as adjusted, were $290.1 million
and $38.4 million, respectively.
In September 1995, the Company, through its SportRack, LLC subsidiary
("SportRack"), acquired substantially all of the net assets of the MascoTech
Accessories division (the "MascoTech Division") of MascoTech, Inc. ("MascoTech"
or the "Predecessor"). The MascoTech Division was a North American supplier of
rack systems and accessories to the automotive OEM market and aftermarket.
In October 1996, the Company acquired (the "Brink Acquisition") all of
the capital stock of Brink B.V., a private company with limited liability
incorporated under the laws of The Netherlands and a European supplier of towing
systems to the automotive OEM market and aftermarket. In December 1996,
ownership of Brink B.V. and its subsidiaries was transferred to a newly formed
subsidiary of the Company, Brink International B.V. ("Brink").
In August 1997, the Company formed Valley Industries, LLC ("Valley") to
acquire (the "Valley Acquisition") the net assets of Valley Industries, Inc.
("Valley Industries"), a North American supplier of towing systems to the
automotive OEM market and aftermarket.
Two smaller acquisitions were completed in July 1997 by SportRack
International, Inc. ("SportRack International"), a subsidiary of SportRack.
SportRack International acquired from Bell Sports Corporation ("Bell") the net
assets of its sportrack division, a Canadian supplier of rack systems and
accessories to the automotive aftermarket. Chase Capital Partners ("CCP"), an
affiliate of the Company, at that time was a significant equity investor in
Bell. SportRack International also acquired the capital stock of Nomadic Sports,
Inc. ("Nomadic"), a Canadian supplier of rack systems and accessories to the
automotive OEM market and aftermarket. The acquisitions of the sportrack
division of Bell and Nomadic are collectively referred to in this 10-K as the
"SportRack International Acquisition."
In January 1998, the Company through Brink International B.V., acquired
(the "Ellebi Acquisition") the net assets of the towbar segment of Ellebi S.p.A.
("Ellebi"). Ellebi is an Italian supplier of towing systems to the automotive
OEM market and aftermarket.
In February 1998, the Company through SportRack International, Inc.,
acquired (the "Tranfo-Rakzs Acquisition") the net assets of Transfo-Rakzs, Inc.
("Transfo-Rakzs"). Transfo-Rakzs is a Canadian supplier of rear hitch rack
carrying systems and related products to the automotive aftermarket.
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COMPETITIVE ADVANTAGES
Leading Global Market Position. Based on its knowledge of the industry, the
Company believes that it is one of the world's largest suppliers of towing
systems and one of the world's largest suppliers of rack systems. The Company
also believes, based on its knowledge of the industry, that it is the largest
supplier of towing systems in Europe, the largest supplier of towing systems to
automotive OEMs in North America and the second largest supplier of towing
systems to the aftermarket in North America. The Company also believes that it
is one of the two largest suppliers of rack systems sold to automotive OEMs in
North America. The Company has 25 engineering, manufacturing and distribution
facilities strategically located in North America and Europe. By virtue of its
size and global presence, the Company believes it benefits from several
competitive advantages, including the ability to (i) satisfy local design,
production, quality and timing requirements of global OEMs; (ii) provide
"one-stop shopping" for customers' product and service requirements; (iii)
optimize plant production; (iv) maximize its raw material purchasing power; (v)
spread its selling, administrative and product development expenses over a large
base of net sales; and (vi) develop and maintain state-of-the-art production
facilities.
Strong Relationships with Diverse Customer Base. The Company has an
established position as a Tier 1 supplier of towing and/or rack systems to most
of the OEMs manufacturing in North America and/or Europe including
DaimlerChrysler, General Motors, Toyota, Opel, Volvo, Isuzu, Ford, BMW, Subaru,
Fiat, Mitsubishi, Nissan, Volkswagen, SEAT, Skoda, Daewoo and Kia. The Company
supplies DaimlerChrysler with substantially all its North American towing
systems and rack systems and accessories. The Company also supplies
approximately 50% of the towing and rack system requirements of General Motors.
Tier 1 status and strong customer relationships are important elements in
achieving continued profitable growth because, as OEMs narrow their supplier
bases, well regarded, existing suppliers have an advantage in gaining new
contracts. The evolution of OEM relationships into strategic partnerships
provides a significant advantage to Tier 1 suppliers with system integration
capabilities (such as the Company) in retaining existing contracts as well as in
participating during the design phase for new vehicles, which is integral to
becoming a supplier for such new platforms. The Company is also a leading
supplier of towing and rack systems to automotive aftermarket wholesalers,
retailers and installers, such as U-Haul, Pep Boys, Balkamp, Advance Auto Parts,
Coast Distribution System, Discount Auto Parts, Ace Hardware, Norauto, Brezan,
Feuvert and Canadian Tire.
Comprehensive Product Line. The Company continues to position itself as a
leading supplier to its customers for a growing range of products and services.
Through its offering of over 2,000 towing system models, the Company's products
fit virtually every light vehicle produced in North America and Europe. The
Company is one of a limited number of European manufacturers with such a broad
product line that also satisfies European Community ("EC") regulatory safety
standards, even though such standards have not yet been adopted by each EC
member country. Competitors whose products do not satisfy such standards face
substantial design and testing costs to offer a comparable product line that
meets these safety standards. The Company has provided OEMs with fixed rack
systems for approximately half of the light truck models produced in North
America that utilize vehicle-specific fixed racks. The Company believes that its
broad product offerings also facilitate strategic partnerships with automotive
aftermarket wholesalers, retailers and installers.
Design and Engineering Expertise. The Company has an engineering and
research and development staff that develops new products and processing
technologies. The Company works directly with OEM designers to create innovative
solutions that simplify vehicle assembly and reduce vehicle cost and weight. The
Company is responsible for many industry innovations, including lighter, less
obtrusive, round tube towing hitches as well as push button and pull lever
stanchions on fixed rack systems. The Company believes its design and
engineering capabilities provide significant value to its customers by (i)
shortening OEM new product development cycles; (ii) lowering OEM manufacturing
costs; (iii) providing technical expertise; and (iv) permitting aftermarket
customers to maintain lower inventory levels. The Company also believes that its
design innovations have created value for end users by providing products that
are durable and easy to install and that enhance vehicle utility and appearance.
High Quality, Low Cost Manufacturing Position. The Company believes that it
is one of the highest quality, lowest cost suppliers of towing and rack systems
in North America and Europe. The Company has received numerous quality and
performance awards, including DaimlerChrysler's Gold Pentastar Award, Ford's Q-1
Award, Toyota's Distinguished Supplier Award and Nissan's Superior Supplier
Performance Award. Supplier quality systems are currently being standardized
across OEMs through the ISO-9000 and QS-9000 programs. The Company has achieved
ISO-9000 or QS-9000 certification for 11 of its 20 manufacturing and engineering
facilities and is in the process of obtaining certification for other of its
facilities. The Company's low cost position is a result of its strict cost
controls and continuous improvement programs designed to enhance productivity.
OEMs typically prefer stable suppliers who can generate productivity gains that
can be shared to reduce OEM costs. The Company's cost controls are closely
integrated with its quality driven manufacturing operations, thereby allowing it
to profitably deliver high quality, easy to install and competitively-priced
components on a just-in-time basis. The Company's focus on low cost
manufacturing also provides benefits when selling products to the less price
sensitive aftermarket.
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BUSINESS STRATEGY
The Company's objective is to strengthen its position as a leading global
supplier of automotive exterior accessories, thereby increasing revenue and cash
flow. In order to accomplish its goal, the Company intends to pursue the
following strategies.
Increase Global Market Share. The Company intends to capitalize on its
expanded presence in North America and Europe by marketing products to its
global automotive OEM customers. Through its past acquisitions of complementary
product lines, the Company is able to offer an expanded range of products and
services to its extended customer base. The Company also expects to secure new
customers by virtue of its expanded market presence and broad product and
service offerings. The Company believes its continued emphasis on new technology
(both product and process), will result in the development of more innovative,
high margin towing and rack system products which it expects to market to its
expanding customer base.
Maintain and Enhance Strong Customer Relationships. The Company intends to
strengthen and expand its relationships with global automotive OEMs and
aftermarket customers by (i) continuing its commitment to innovative design and
development of products during the early stages of vehicle design and redesign;
(ii) building on its position as a low cost supplier of quality accessory
products; (iii) offering new products in existing and new geographic areas by
taking advantage of existing OEM relationships; and (iv) working with
aftermarket customers to develop new products and marketing strategies.
Increase Operating Efficiencies. The Company believes there are
opportunities for improvement in margins and cash flow through intercompany
cooperation among its various acquired business units, including (i) realizing
economies of scale from the combined purchasing power of a larger company; (ii)
achieving production and other operating efficiencies through the implementation
of a "best practices" program; (iii) reducing certain selling, general and
administrative and product development expenses; and (iv) reducing capital and
operating expenditures from coordinated use of manufacturing resources.
Pursue Strategic Acquisitions. In response to the trend in the OEM market
toward systems suppliers, the Company is focused on making strategic
acquisitions that will enhance its ability to provide integrated systems (such
as a towing or rack system) or otherwise leverage its existing business by
providing additional product, manufacturing and service capabilities. The
Company also intends to pursue acquisitions which will expand its customer base
by providing an entree to new customers, including expansion into selected
geographic areas. The Company believes that such acquisitions should provide
additional opportunities for increased net sales and cash flow by enhancing the
Company's manufacturing and marketing capabilities.
AUTOMOTIVE OEM AND AFTERMARKET TRENDS
As automobile and light truck manufacturers have faced increased global
competition, they have sought to significantly improve quality, reduce costs and
shorten the development time required for new vehicle models. These changes have
altered the OEM/supplier relationship and benefited larger suppliers that have
strong product engineering and development capabilities, superior quality
products, lower unit costs and the ability to deliver products on a timely
basis. As a result, the Company believes that it has benefited and will continue
to benefit from the following automotive OEM and aftermarket trends.
Consolidation of Supplier Base by OEMs. Since the 1980's, OEMs have
significantly consolidated their supplier base in an effort to reduce their
procurement-related costs, ensure high quality and accelerate new model
development. As a result, many smaller, poorly capitalized suppliers with
limited product lines and engineering and design capabilities have been
eliminated as direct suppliers to OEMs. Consequently, larger suppliers with
broad product lines, in-house design and engineering capabilities and the
ability to effectively manage their own supplier bases, have been able to
significantly increase their market share.
The consolidation by OEMs has altered the typical structure of supplier
contracts. In the past, OEMs supplied all design, development and manufacturing
expertise for accessory parts and were responsible for consistency of quality
and reliability of delivery. On newer models, however, there has been a trend
toward involving potential suppliers earlier in the design and development
process to encourage suppliers to share design and development responsibility.
In some cases, sole-source supply contracts, which cover the life of a vehicle
or platform, are awarded. Both OEMs and suppliers benefit from the consolidation
trend. Suppliers are able to devote the resources necessary for proprietary
product development with the expectation that they will have the opportunity to
profit on such investment over the multi-year life of a contract. OEMs benefit
from shared manufacturing cost savings attributable to long, multi-year
production runs at high capacity utilization levels.
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Emergence of European Community Safety Standards. Trends within the European
towing systems market result primarily from emerging EC safety standards and the
corresponding legislative framework. Such standards provide that a towing system
must fit all the vehicle manufacturer's recommended fitting points, must not
interfere with the vision of the number plate when not in use and must meet
strict testing criteria for durability and safety. These standards have been
adopted by The Netherlands, Germany, Sweden, Italy, the United Kingdom and
Scandinavia. Other EC countries are expected to adopt the legislation within two
years. All of the Company's towing systems sold in Europe currently undergo
rigorous safety testing in order to satisfy these EC regulatory standards.
Increased Levels of Manufacturing in North America by Transplants. As a
result of the relative cost advantage of producing vehicles in North America,
many foreign automobile manufacturers with manufacturing operations in the
United States ("transplants") have increased their share of North American light
vehicle production from approximately 6% in 1986 to approximately 22% in 1998.
Industry sources forecast that this trend will continue. For example, BMW
commenced manufacturing in the U.S. in 1996. In addition, Toyota has announced
plans to build its T-100 pickup truck in Indiana by 1999, Honda has announced
plans to build its Odyssey minivan in North America by 1999, and BMW has
announced plans to build its E-53 SUV in North America by 1999. The Company
believes that increased levels of manufacturing of light trucks in North America
by transplants will benefit full service, high quality suppliers with North
American operations such as the Company.
Outsourcing by OEMs. In an effort to facilitate and enhance product design,
reduce costs and simplify manufacturing processes, automotive OEMs are
increasingly outsourcing the manufacture of many components that were previously
manufactured internally. This trend results from independent suppliers being
generally able to design, manufacture and deliver components at a lower cost
than OEMs as a result of (i) their significantly lower direct labor, fringe
benefit and overhead costs; (ii) their ability to spread research and
development and engineering costs over products provided to multiple OEMs; and
(iii) the economies of scale inherent in product specialization. Independent
suppliers such as the Company have benefited from outsourcing because the
aggregate number, complexity and value of components that they manufacture have
increased dramatically. OEMs, in turn, have benefited because outsourcing has
allowed them to reduce costs and to focus on overall vehicle design and consumer
marketing.
PRODUCTS
The principal product lines of the Company are towing systems and rack
systems and accessories. In 1998, towing systems constituted approximately 60%
and rack systems and accessories constituted approximately 40% of the Company's
net sales. The Company believes it offers a more comprehensive product line than
any of its competitors. The Company has devoted considerable resources to the
engineering and designing of its products and, as a result, considers itself a
market leader in the research and new product development of towing systems and
rack systems.
Towing Systems. The Company designs, manufactures and supplies towing
systems to automotive OEMs and the automotive aftermarket which fit virtually
every light vehicle produced in North America and Europe. In the aggregate, the
Company supplies over 2,000 different towing systems, including a complete line
of towing accessories.
The Company's towing systems sold in Europe are installed primarily on
passenger cars. The Company's primary product within the European market is the
fixed ball towbar that is specifically designed to be mounted on a particular
car model in accordance with the OEM's specified mounting points. The Company
also markets sophisticated detachable ball systems which are popular with owners
of more expensive cars or cars on which the license plate would otherwise be
blocked by a fixed ball towbar. The Company's towing system products sold in
Europe currently undergo rigorous safety testing in order to satisfy EC
regulatory standards. Competitors whose products do not satisfy such standards
face substantial design and testing costs to offer a comparable product line
that meets the safety standards.
The Company's towing systems sold in North America are installed primarily
on light trucks. Two of the Company's most innovative product designs have been
the tubular trailer hitch which is lighter in weight, less obtrusive and
stronger than the conventional hitch, and a device which ensures secure
attachment of a towing product to the vehicle. These product innovations have
enabled the Company to improve the functionality and safety of towing systems
while, at the same time, enhancing the overall appearance of vehicles utilizing
these towing products.
The Company offers a complete line of towing accessories, including trailer
balls, ball mounts, electrical harnesses, safety chains and locking hitch pins.
To capitalize on the strong growth trend in light trucks, the Company has
recently expanded its product line to include other products designed
specifically for this market, such as grille guards, brush guards and spare tire
carriers.
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Fixed Rack Systems. The Company supplies fixed roof rack systems for
individual vehicle models that are generally sold to the automotive OEMs for
installation at the factory or dealership. These rack systems typically remain
on a model for the life of its design, which generally ranges from four to six
years. The Company has been an industry leader in developing designs which not
only complement the styling themes of a particular vehicle, but also increase
the utility and functionality of the rack system.
Most of the fixed rack systems sold by the Company are composed of side
rails which run along both sides of the vehicle's roof, feet which mount the
side rails to the vehicle's roof, and cross rails which run between the side
rails. Cross rails, which are attached to the side rails with stanchions, are
typically movable and can be used to carry a load. The Company uses advanced
materials such as lightweight, high strength plastics and roll formed aluminum
to develop durable rack systems that optimize vehicle performance. Many of these
products incorporate innovative features such as push button and pull lever
stanchions, which allow easy movement of the cross rails to accommodate various
size loads. These rack systems are utilized on a large number of light trucks,
including Jeep Grand Cherokee and Cherokee, DaimlerChrysler minivans, GM
Suburban, Tahoe and Yukon and Mercedes Benz ML320.
Detachable Rack Systems. The Company supplies detachable roof and rear mount
rack systems for distribution in both the automotive and sporting accessory
aftermarkets. A detachable rack system typically consists of cross rails which
are attached to the roof of a vehicle by removable mounting clips. The Company
offers a full line of detachable rack systems, including the SportRack(R),
SnapRack(TM) and Mondial(R) rack systems.
Rack System Accessories. The Company designs and manufactures lifestyle
accessories for distribution in both the automotive and sporting accessory
aftermarkets. These accessories typically attach to the Company's rack systems
and are used for carrying items such as bicycles, skis, luggage, surfboards and
sailboards.
CUSTOMERS AND MARKETING
Management believes that the Company's strong and diverse industry
relationships are based on its reputation for high service levels, strong
technical support, innovative product development, high quality and competitive
pricing. Sales to OEM and aftermarket customers represented approximately 68%
and 32% of the Company's net sales, respectively, in 1998. In addition, sales to
DaimlerChrysler and General Motors were approximately 32% and 11%, respectively,
of the Company's aggregate net sales in 1998.
Automotive OEMs. The Company obtains most of its new orders through a
presourcing process by which the customer invites one or a few preferred
suppliers to manufacture and design a component or system that meets certain
price, timing, functional and aesthetic parameters. Upon selection at the
development stage, the Company and the customer typically agree to cooperate in
developing the product to meet the specified parameters. Upon completion of the
development stage and the award of the manufacturing business, the Company
receives a purchase order that covers parts to be supplied for a particular car
model. Such supply arrangements typically involve annual renewals of the
purchase order over the life of the model, which is generally four to six years.
In addition, the Company enters into long-term contracts with certain OEM
customers which require the Company to make annual price reductions. The Company
also competes to supply parts for successor models even though the Company may
currently supply parts on the predecessor model. Sales to OEMs are made directly
by the Company's internal sales staff of 52 individuals and 44 outside sales
representatives.
The Company sells its products to most of the automotive OEMs selling light
vehicles in North America and/or Europe, including DaimlerChrysler, General
Motors, Toyota, Opel, Volvo, Isuzu, Ford, BMW, Subaru, Fiat, Mitsubishi, Nissan,
Volkswagen, SEAT, Skoda, Daewoo and Kia. The Company supplies DaimlerChrysler
with substantially all of its North American towing systems and rack systems and
accessories. The Company also supplies approximately 50% of the towing system
and rack system requirements of General Motors. The following chart sets forth
information regarding vehicle models on which the Company's automotive products
are used or for which the Company has been awarded business.
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AWARDED BUSINESS ON
PRODUCT OEM CUSTOMER 1998 PRODUCTION(a) FUTURE PRODUCTION(b)
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Towing Systems DaimlerChrysler Cherokee, Grand Cherokee, Caravan, Cherokee, Plymouth
Voyager, Town & Country, Ram Prowler, Ram Van, 300M, Neon
Pick-up,
Dakota, Wrangler, Durango
General Motors Suburban, Yukon, Tahoe, Astro, Frontera, Corsa, Arena (van),
Safari, CK Pick-up, ML Van, S-10 Vectra
Blazer, APV Vans, Bravada, Jimmy,
Geo Tracker, Blazer, Corsa, Astra
(hatchback), Astra (Sedan),
</TABLE>
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<TABLE>
<CAPTION>
AWARDED BUSINESS ON
PRODUCT OEM CUSTOMER 1998 PRODUCTION(a) FUTURE PRODUCTION(b)
- --------------- ------------------ ------------------------------------ --------------------------
<S> <C> <C> <C>
Towing Systems General Motors Astra (Station wagon), Calibra, Vectra
(continued) (continued) (Hatchback), Vectra (Sedan), Vectra
(Station wagon), Omega (Sedan), Omega
(Station wagon), Campo, Frontera,
Monterey, Zafira
Ford Expedition, Explorer, Ranger, Explorer, Focus, Focus Wagon, Ranger,
Aerostar Minivan, Mercury Villager, Mondeo
Windstar Minivan, Navigator, Fiesta,
Escort (all models), Mondeo, Mondeo
(Wagon), Scorpio (Sedan), Scorpio
(Wagon), Maverick, Transit
Renault Laguna (Station wagon), Laguna, Twingo, Laguna, Clio
Megane, Twingo, Espace
Isuzu Rodeo, Trooper
Toyota 4-Runner, Land Cruiser, RAV4, Lexus, Corolla, Lexus LS200, Carina,
646T, 477T, 860T, Corolla, Carina, Carina Wagon, Yaris
Camry, Hi-Lux, Picnic, Previa,
Hi-Ace, Celica
Nissan Pathfinder, Pick-up, Quest, Infiniti Almera, Primera Wagon, Micra,
Vehicle, QW Truck, Micra, Sunny, Patrol, Terrano
Almera, Primera, Maxima, King Cab,
Terrano, Patrol
Mazda 121, MPV, Xedos-9, Xedos-6, 626, 323 626 Wagon, 323
Honda Passport PF Van, CRV
Mitsubishi Montero, Carisma, L200 Spacestar, Challenger
FIAT Almost all models
Alpha Romeo Almost all models
Lancia Almost all models
Subaru Outback 79V
Range Rover Range Rover, Land Rover
Volvo 900 series (Sedan), 900 series 900 series, S/V 70 series
(Station wagon), 850 (Sedan), 850
(Station wagon)
SAAB 9000 series, 900 series 900 series, 9000 series, 9000
station wagon, small car 9-3,
small car 9-5, small station wagon
Peugeot 106, 306, 406 (Sedan), 406 (Station 206, 206 Sport, 207, 306 Break
wagon), 406 (Coupe), 605, 806, J5
(Van), Boxer (Van)
Suzuki Wagon R. Grand Vitara
Daihatsu Sirion, More, Charade
SEAT Toledo
Skoda SK240
Volkswagen Gold Combi, Vento
Daewoo LD100
Rack Systems DaimlerChrysler Cherokee, Grand Cherokee, Caravan, Cherokee, Caravan,
Voyager, Town & Country, Durango Voyager, Town & Country, Neon PT,
Pronto, Mercedes ML320 BW 72
General Motors Suburban, Yukon, Tahoe, Astro, Safari Suburban, Yukon, Tahoe, Jimmy,
Escalade, Denali Blazer, Bravada
Honda Accord
Mitsubishi Montero
Subaru Outback, Impreza, Legacy
KIA Sportage
SEAT Vario GP99
Opel Astra
BMW E-53 (SUV)
</TABLE>
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(a) Represents models for which the Company produced products in 1998.
(b) The amount of products produced under these awards is dependent on the
number of vehicles manufactured by the OEMs. Many of the models are versions
of vehicles not yet in production. There can be no assurance that any of
these vehicles will be produced or that the Company will generate certain
revenues under these awards even if the models are produced.
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<PAGE> 9
Automotive Aftermarket. The Company sells its products directly into the
automotive aftermarket through a number of channels, including wholesalers,
retailers and installers, through its internal sales force and outside sales
representatives. The largest of the Company's aftermarket customers include
U-Haul, Pep Boys, Balkamp, Advance Auto Parts, Coast Distribution System,
Discount Auto Parts, Ace Hardware, Norauto, Brezan, Feuvert and Canadian Tire.
The Company believes that it has established a reputation as a highly reliable
aftermarket supplier able to meet its customers' requirements for on-time
deliveries while minimizing the carrying levels of inventory. For example,
Valley began supplying towing systems to U-Haul (which the Company believes,
based on its research, is the largest installer of towing systems in the United
States) in 1994 and for the year ended December 31, 1998, supplied approximately
50% of U-Haul's towing system requirements. The Company believes aftermarket
customers such as U-Haul represent opportunities to cross-sell existing products
such as rack systems and accessories.
MANUFACTURING PROCESS
The Company's manufacturing operations are directed toward achieving ongoing
quality improvements, reducing manufacturing and overhead costs, realizing
efficiencies and adding flexibility. The manufacturing operations utilized by
the Company include metal cutting, bending, cold forming, roll forming,
stamping, welding, plastic injection molding, painting, assembly and packaging.
The Company performs most manufacturing operations in-house but outsources
certain processes depending on the capabilities and capacities of individual
plants and cost considerations. For example, while some of the Company's towing
systems manufacturing facilities have painting capabilities, the Company has
chosen to outsource the painting of its rack systems.
In some cases, the Company develops special machinery to meet its particular
needs. For example, the hardware that accompanies certain towing systems is
selected automatically by special equipment and is then weighed and transferred
into the final package without human intervention. The Company has developed
specialized, computer operated machinery to enable it to efficiently perform
this operation. The Company has organized its production process to minimize the
number of manufacturing functions and the frequency of material handling,
thereby improving quality and reducing costs. In addition, the Company uses
cellular manufacturing which improves scheduling flexibility, productivity and
quality while reducing work in process and costs.
The Company has established quality procedures at each of its facilities and
strives to manufacture the highest quality product possible. The Company has
achieved ISO-9000 or QS-9000 certification for 11 of its 20 manufacturing and
engineering facilities and is in the process of obtaining certification for
other of its facilities. The Company has received numerous quality and
performance awards from its OEM customers, including DaimlerChrysler's Gold
Pentastar Award, Ford Q-1 Award, Toyota's Distinguished Supplier Award and the
Nissan Superior Supplier Performance Award.
PRODUCT DESIGN, DEVELOPMENT AND TESTING
The Company believes that it is a leader in the design of towing systems and
rack systems and accessories. The Company believes it offers products that
possess greater quality, reliability and performance than the products sold by
many of its competitors. The 94 members of the Company's engineering and design
staff possess strong technical skills. The Company currently holds more than 150
U.S. and foreign patents, and has numerous patent applications pending. The
expiration of such patents are not expected to have a material adverse effect on
the Company's operations.
The Company spent $9.6 million, $5.9 million and $3.5 million on
engineering, research and development in 1998, 1997 and 1996, respectively. The
Company works closely with OEMs to constantly improve design and manufacturing
technology and product functionality. When an OEM is in the process of
developing a new model, it typically approaches an established or incumbent
supplier with a request to supply the required towing system or rack system. The
Company is typically contacted two to four years prior to the start of
production of the new model. The Company's product development engineers then
work closely with the OEM to develop a product that satisfies the OEM's
aesthetic and functional requirements. This relationship also provides the
Company with a competitive advantage in the aftermarket because the Company
already possesses the knowledge to create a system compatible with new model
vehicles prior to release.
The Company has extensive testing capabilities which enable it to test and
certify its products. The Company subjects its products to tests which it
believes are more demanding than conditions which would occur during normal use.
The Company has specialized equipment which it has purchased or developed for
use in its testing laboratories.
7
<PAGE> 10
Since May 1994, six European countries enacted the new EC regulatory
standards which require that towing systems undergo significant safety testing
prior to gaining approval for sale. This safety testing requires that a towing
system be extensively tested for fatigue and includes subjecting a towing system
to upwards of two million high load pulses. The Company does its testing in its
own laboratory under the control of an independent institute that is authorized
by the EC to approve the towing systems for sale. The quality assurance system
is regularly audited by an independent institute and by the automotive OEMs
themselves. The Company has continually been awarded the highest distinction of
achievement by the independent institute.
RAW MATERIALS
The principal raw material used in the Company's products is steel,
which is purchased in sheets, rolls, bars or tubes and represents approximately
50% of the Company's raw material costs. The Company also purchases significant
amounts of aluminum and plastics. The Company has various suppliers globally and
has not had difficulties in procuring raw materials nor does it expect to have
any problems in the future. The Company is committed to supplier development and
long-term supplier relationships. However, most of the Company's raw material
demands are for commodities and, as such, can be purchased on the open market on
an as needed basis. The Company selects among available suppliers by comparing
cost, consistent quality and timely delivery as well as compliance with QS-9000
and ISO-9000 standards.
The Company customarily obtains its supplies through individual
purchase orders. In some instances, the Company will enter into short-term
contracts with its suppliers which generally run one year or less. However, the
Company has signed a long-term supply agreement which terminates in 2004 with
one of its painting suppliers, Crown Group, Inc. ("Crown"), under which Crown
opened a state-of-the-art paint line in a facility adjacent to the Company's
Port Huron, Michigan facility.
COMPETITION
The Company's industry is highly competitive. A large number of actual
or potential competitors exist, some of which are larger than the Company and
have substantially greater resources than the Company. The Company competes
primarily on the basis of product quality, cost, timely delivery, customer
service, engineering and design capabilities and new product innovation in both
the OEM market and the automotive aftermarket. The Company believes that as OEMs
continue to strive to reduce new model development cost and time, innovation and
design and engineering capabilities will become more important as a basis for
distinguishing competitors. The Company believes it has an outstanding
reputation in both of these areas. In the automotive aftermarket, the Company
believes that its wide range of product applications is a competitive advantage.
For example, the Company has developed towing systems to fit substantially all
the light vehicles produced in North America and Europe. The Company believes
its competitive advantage in the aftermarket is enhanced by its close
relationship with OEMs, allowing the Company access to automobile design at an
earlier time than its competitors.
In the towing systems market, the Company competes with Draw-Tite Inc.
and Reese Products Inc., both of which are subsidiaries of MascoTech, Bosal
Holding B.V., The Oris Group, Production Stamping Inc. and numerous smaller
competitors.
In the rack systems and accessories market, the Company's competitors
include JAC Holding Corp., Thule, which is a wholly-owned subsidiary of Eldon AB
(a Swedish company), Yakima Products, Inc., Barrecrafters, Graber Products Inc.
and several smaller competitors.
ENVIRONMENTAL REGULATION
The Company's operations are subject to foreign, state and local
environmental laws and regulations that limit the discharges into the
environment and establish standards for the handling, generation, emission,
release, discharge, treatment, storage, and disposal of certain materials,
substances and wastes. In many jurisdictions, these laws are complex, change
frequently and have tended to become stronger over time.
In jurisdictions such as the United States, such obligations, including
but not limited to those under the Comprehensive Environmental Response,
Compensation & Liability Act ("CERCLA"), may be joint and several and may apply
to conditions at properties presently or formerly owned or operated by an entity
or its predecessors, as well as to conditions at properties at which waste or
other contamination attributable to an entity or its predecessors have been sent
or otherwise come to be located. The Company believes that its operations are in
substantial compliance with the terms of all applicable environmental laws and
regulations as currently interpreted. In addition, to the best of the Company's
knowledge, there are no existing or potential environmental claims against the
Company nor has the Company received any notification nor is there any current
investigation regarding, the disposal,
8
<PAGE> 11
release, or threatened release at any location of any hazardous substance
generated or transported by the Company. However, the Company cannot predict
with any certainty that it will not in the future incur liability under
environmental laws and regulations with respect to contamination of sites
currently or formerly owned or operated by the Company (including contamination
caused by prior owners and operators of such sites), or the off-site disposal of
hazardous substances.
While historically the Company has not had to make significant capital
expenditures for environmental compliance, the Company cannot predict with any
certainty its future capital expenditures for environmental compliance because
of continually changing compliance standards and technology. Future events, such
as changes in existing environmental laws and regulations or unknown
contamination of sites owned or operated by the Company (including contamination
caused by prior owners and operators of such sites), may give rise to additional
compliance costs which could have a material adverse effect on the Company's
financial condition. Furthermore, actions by foreign, federal, state and local
governments concerning environmental matters could result in laws or regulations
that could increase the cost of producing the products manufactured by the
Company or otherwise adversely affect the demand for its products. Additionally,
the Company does not currently have any insurance coverage for environmental
liabilities and does not anticipate obtaining such coverage in the future.
EMPLOYEES
At December 31, 1998, the Company had approximately 1,800 employees of whom
approximately 1,500 are hourly employees and approximately 300 are salaried
personnel. Approximately 160 of the Company's employees in the United States at
the Port Huron, Michigan facility are represented by the Teamsters Union.
Collective bargaining agreements with the Teamsters Union affecting these
employees expire in April 2004. As is common in many European jurisdictions,
substantially all of the Company's employees in Europe are covered by
country-wide collective bargaining agreements. The Company believes that its
relations with its employees are good.
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS
For financial information about foreign and domestic operations of the
Company, see "Note 12" of the Company's "Notes to Consolidated Financial
Statements".
9
<PAGE> 12
ITEM 2. PROPERTIES
The Company's executive offices are located in 14,550 square feet of leased
space in Sterling Heights, Michigan. The Company has 25 facilities with a total
of 2,054,050 square feet of space. The Company believes that substantially all
of its property and equipment is in good condition and that it has sufficient
capacity to meet its current and projected manufacturing and distribution needs.
The Company's facilities are as follows:
<TABLE>
<CAPTION>
SQUARE OWNED/ LEASE
LOCATION FUNCTION FEET LEASED EXPIRATION**
- --------------------------- ----------------------------- --------- --------- --------------
<S> <C> <C> <C> <C>
North America
- -------------
Shelby Township, Michigan* Manufacturing 42,800 Owned --
Shelby Township, Michigan* Manufacturing and warehousing 13,000 Leased 2008
Port Huron, Michigan* Manufacturing and warehousing 200,000 Owned --
Sterling Heights, Michigan* Administration and engineering 14,550 Leased 2003
Mt. Clemens, Michigan Warehousing 25,000 Leased Month to Month
Lodi, California Administration, manufacturing, 150,000 Owned --
engineering and warehousing
Lodi, California Warehousing 25,000 Leased Month to Month
Auburn Hills, Michigan Warehousing 49,000 Leased 2005
Madison Heights, Michigan* Administration and 90,000 Leased 2002
manufacturing
Madison Heights, Michigan* Engineering and manufacturing 18,000 Leased 2002
Granby, Quebec Administration, manufacturing 72,000 Leased 2001
and
warehousing
Granby, Quebec Warehousing 14,000 Leased Month to Month
Bromptonville, Quebec Manufacturing 2,000 Leased 1999
Hamer Bay, Ontario Manufacturing and 7,500 Owned --
administration
Europe
- ------
Sandhausen, Germany Administration and engineering 5,000 Leased Month to Month
Barcelona, Spain Manufacturing and 6,200 Leased 1999
administration
Staphorst, The Netherlands* Administration, manufacturing, 405,000 Owned --
warehousing and engineering
Hoogeveen, The Netherlands* Manufacturing and warehousing 185,000 Owned --
Fensmark, Denmark* Manufacturing and warehousing 95,000 Owned --
Nuneaton, United Kingdom* Manufacturing and warehousing 75,000 Owned --
Vanersborg, Sweden* Manufacturing, warehousing and 160,000 Leased 2004
engineering
Wolsztyn, Poland Warehousing 5,000 Leased Month to Month
Reims, France Manufacturing and warehousing 115,000 Owned --
St. Victoria di Gualtieri, Administration, manufacturing, 170,000 Leased 2003
Italy warehousing and engineering
St. Victoria di Gualtieri, Manufacturing and warehousing 110,000 Leased 2003
Italy
</TABLE>
- ----------
* QS 9000 and/or ISO 9000 certification.
** Gives effect to all renewal options.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company is subject to legal proceedings and other
claims arising in the ordinary course of its business. The Company believes that
it is not presently a party to any litigation the outcome of which would have a
material adverse effect on its financial condition or results of operations. The
Company maintains insurance coverage against claims in an amount which it
believes to be adequate.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
10
<PAGE> 13
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED MEMBERS' MATTERS
There is no established public trading market for the Company's Class A
Units. At March 15, 1999, there were 22 holders of record of Class A Units.
Except as set forth below with respect to quarterly tax distributions to
Members, the Company has never declared or paid dividends (or made any other
distributions) on the Class A Units and does not anticipate doing so in the
foreseeable future. Under certain loan agreements, the Company is prohibited
from declaring or paying any cash dividend or making distributions thereon,
except for quarterly distributions to Members to the extent of any tax liability
with respect to the Class A Units and except for repurchases of Class A Units
from employees upon a termination of their employment with the Company pursuant
to an Employment Agreement and the Operating Agreement.
As listed below, since September 1995, the Company has issued unregistered
securities to investors and to certain other individuals. Each such issuance was
made in reliance upon the exemption from the registration requirements of the
Securities Act of 1933, as amended, contained in Section 4(2) of the Securities
Act on the basis that such transactions did not involve a public offering.
1) On September 28, 1995, pursuant to their respective subscription
agreements, the Company issued an aggregate of 13,860 of its Class
A Units for an aggregate purchase price of $13.9 million, to Chase
Venture Capital Associates (an affiliate of CCP), F. Alan Smith,
Barry Banducci, Richard Borghi, Marshall Gladchun and MascoTech.
2) On September 30, 1996 pursuant to their respective subscription
agreements, the Company issued an aggregate of 279 of its Class A
Units for an aggregate purchase price of $279,000, to Chase Venture
Capital Associates (an affiliate of CCP), Marshall Gladchun, the
Laverne A. Farris Trust, and certain employees of SportRack LLC.
3) On October 30, 1996 pursuant to an Agreement for the Sale and
Purchase of Shares in Brink BV dated October 30, 1996, the Company
issued an aggregate of 1,230 of its Class A Units for an aggregate
purchase price of $4.3 million, to the former shareholders of Brink
B.V.
4) On August 5, 1997 pursuant to an Asset Purchase Agreement among
Valley Industries, LLC, Valley Industries, Inc., certain affiliates
of Valley Industries, Inc., Robert L. Fisher and Roger T. Morgan
dated August 5, 1997, the Company issued an aggregate of 802 of its
Class A Units for an aggregate purchase price of $4.5 million, to
Robert L. Fisher and Roger T. Morgan.
5) On October 31, 1997 pursuant to an Asset Purchase Agreement among
Bell Sports Corp., Bell Sports Canada, Inc. and Advanced Accessory
Systems Canada Inc./Les Systems d' Accessorie Advanced Canada Inc.
dated as of July 2, 1997, the Company issued an aggregate of 100 of
its Class A Units for an aggregate purchase price of $500,000 to
Jean M. Maynard.
6) On December 31, 1997 the Company issued 140 of its Class A Units to
CB Capital Investors, Inc. (an affiliate of CCP) in exchange for
its 1% interest in SportRack.
7) On April 22, 1998 pursuant to their respective subscription
agreements, the Company issued an aggregate of 43 of its Class A
Units for an aggregate purchase price of approximately $150,000, to
Gerrit de Graaf and J. Wim Rengelink.
11
<PAGE> 14
ITEM 6. SELECTED HISTORICAL FINANCIAL DATA
The information below presents historical financial data of the MascoTech
Division ("Predecessor") for the year ended December 31, 1994 and the period
from January 1, 1995 through September 27, 1995 (the period prior to the
acquisition of the net assets of MascoTech Division by the Company). The data as
of and for the year ended December 31, 1994 have been derived from the unaudited
financial statements of the MascoTech Division and the data for the period from
January 1, 1995 through September 27, 1995 have been derived from the audited
financial statements of the MascoTech Division. The data as of and for the
period from September 28, 1995 through December 31, 1995 and for the years ended
December 31, 1996, 1997 and 1998 represent consolidated financial data of the
Company subsequent to the acquisition of the MascoTech Division, and include (i)
the operations of Brink subsequent to the Brink Acquisition on October 30, 1996;
(ii) the operations of the sportrack division of Bell and Nomadic subsequent to
the SportRack International Acquisition on July 2, 1997 and July 24, 1997,
respectively, (iii) the operations of Valley subsequent to the Valley
Acquisition on August 5, 1997, (iv) the operations of Ellebi subsequent to the
Ellebi Acquisition on January 2, 1998, (v) the operations of Tranfo-Rakzs
subsequent to the Tranfo-Rakzs Acquisition on February 7, 1998, and have been
derived from the audited financial statements of the Company. The following
table should be read in conjunction with the financial statements of the Company
and notes thereto, and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
COMPANY PREDECESSOR
------------------------------------------------------------ -------------------------
PERIOD FROM PERIOD FROM
YEAR ENDED SEPTEMBER 28, TO JANUARY 1 TO
DECEMBER 31, DECEMBER 31, SEPTEMBER 27,
-----------------------------------------
1998(3) 1997(2) 1996(1) 1995 1995 1994
------------ ------------ ------------- ---------------- -------------- --------
(DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.......................... $290,139 $188,678 $ 81,466 $ 16,299 $ 48,698 $ 60,882
Cost of sales(4)................... 213,435 135,556 53,607 12,458 38,645 47,716
-------- -------- -------- --------- -------- --------
Gross profit..................... 76,704 53,122 27,859 3,841 10,053 13,166
Selling, administrative and product
development expenses(4).......... 50,839 31,350 13,413 1,472 6,107 7,313
Amortization of intangible assets.. 3,551 2,336 2,475 546 -- --
Impairment charge(4)............... 7,863 -- -- -- -- --
-------- -------- -------- --------- -------- -------
Operating income................. 14,451 19,436 11,971 1,823 3,946 5,853
Other (income) expense
Interest expense(5).............. 18,633 12,627 4,312 975 -- --
Foreign currency (gain) loss(6).. (4,995) 6,097 1,330 -- -- --
Other, net....................... -- -- (80) (22) 65 (105)
-------- -------- -------- --------- -------- --------
Income before minority interest,
extraordinary charge and income
taxes.......................... 813 712 6,409 870 3,881 5,958
Provision (benefit) for income
taxes(7)......................... 903 (2,856) (491) -- 1,324 2,114
-------- -------- -------- --------- -------- --------
Income before minority interest
and extraordinary charge....... (90) 3,568 6,900 870 2,557 3,844
Minority interest.................. -- 97 69 9 -- --
-------- -------- -------- --------- -------- -------
Income before extraordinary
charge......................... (90) 3,471 6,831 861 2,557 3,844
Extraordinary charge(8)............ -- 7,416 1,970 -- -- --
-------- -------- -------- --------- -------- -------
Net income (loss)................ $ (90) $ (3,945) $ 4,861 $ 861 $ 2,557 $ 3,844
======== ======== ======== ========= ======== ========
OTHER DATA:
Cash flows from operating
activities....................... $ 21,879 $ 6,982 $ 9,917 $ 1,390 $ 3,741 $ 1,165
EBITDA(9).......................... 38,364 27,916 16,448 2,651 4,735 6,773
Depreciation....................... 10,857 6,144 2,002 282 789 920
Capital expenditures............... 9,998 7,751 3,124 491 2,079 1,392
Ratio of EBITDA to interest 2.06x 2.21x 3.81x 2.72x -- --
expense(5)........................
Ratio of earnings to fixed 1.04x 1.06x 2.43x 1.89x -- --
charges(5)(10)....................
BALANCE SHEET DATA (AT END OF
PERIOD)
Cash.............................. $ 11,240 $ 27,348 $ 2,514 $ 1,637 $ 3 $ 8
Working capital................... 49,232 65,803 14,368 3,960 4,002 3,518
Total assets...................... 258,981 265,558 148,359 59,979 24,698 21,743
Total debt, including current 187,524 197,126 93,142 34,900 -- --
maturities(5)...................
Mandatorily redeemable warrants(5) 4,409 3,507 3,498 200 -- --
Members' equity................... 15,147 16,444 18,463 14,221 15,794 13,664
</TABLE>
- ----------
(1) In October 1996, the Company acquired Brink. The Brink Acquisition has been
accounted for in accordance with the purchase method of accounting.
Accordingly, the operating results of Brink are included in the consolidated
operating results of the Company subsequent to October 30, 1996.
12
<PAGE> 15
(2) The Company acquired the net assets of the sportrack division of Bell on
July 2, 1997, Nomadic on July 24, 1997, and the net assets of Valley
Industries on August 5, 1997. The SportRack International Acquisition and
Valley Acquisition have been accounted for in accordance with the purchase
method of accounting. Accordingly, the operating results of SportRack
International and Valley are included in the consolidated operating results
of the Company subsequent to the respective acquisition dates.
(3) The Company acquired the towbar segment of Ellebi S.p.A. on January 2, 1998
and the net assets of Tranfo-Rakzs on February 7, 1998. The Ellebi
Acquisition and Transfo-Rakzs Acquisition have been accounted for in
accordance with the purchase method of accounting. Accordingly, the
operating results of Ellebi and Tranfo-Rakzs are included in the
consolidated operating results of the Company subsequent to the respective
acquisition dates.
(4) In June 1998, information became available that indicated that certain
assets acquired from Bell (accounts receivable, inventory and tooling) had
a fair value less than originally recorded. The SportRack International
purchase was renegotiated and a $2.0 million reimbursement was received
from Bell. Accounts receivable, inventory and tooling were reduced by $6.5
million and additional goodwill of $4.5 million, net of the $2.0 million
reimbursement from Bell, was recorded. During the second half of 1998,
management further reassessed the operations of SportRack International,
took actions to restructure the operations, and recorded restructuring
charges totaling $1.9 million. Restructuring charges have been included in
cost of sales ($1.1 million) and in selling, administrative and product
development expenses ($832,000) in the Company's consolidated statement of
operations. Management believes that substantially all restructuring costs
have been incurred as of December 31, 1998. Concurrent with the
reassessment of the SportRack International operations, management reviewed
the carrying value of goodwill and other intangible assets, determined that
future cash flows would not be sufficient to recover recorded amounts, and
recorded an impairment charge of $7.9 million.
(5) Prior to its acquisition by the Company on September 28, 1995, the
Predecessor was a division of MascoTech and, accordingly, had no
outstanding indebtedness.
(6) Primarily represents net currency gains and loss on indebtedness of the
Company's foreign subsidiaries denominated in currencies other than their
functional currency.
(7) The Predecessor, as a division of MascoTech, was allocated a portion of the
consolidated income tax provision, which approximated the division's federal
income tax provision on a stand-alone basis. The Company is a limited
liability corporation and, as such, the earnings of the Company and its
domestic subsidiaries are included in the taxable income of the Company's
unitholders and no federal income tax provision is required. The Company's
foreign subsidiaries provide for income taxes on their results of
operations.
(8) In connection with the indebtedness extinguished as a result of the Brink
Acquisition, a prepayment penalty of $220,000 and unamortized deferred debt
issuance costs of $1.8 million were charged to operations during 1996. In
connection with indebtedness extinguished as a result of issuing the Notes
(as defined below), a prepayment penalty of $1.4 million, $3.1 million of
unamortized debt discount, and unamortized deferred debt issuance costs of
$3.2 million were charged to operations during 1997. The debt extinguishment
charges in 1997 were reduced by $365,000 representing the income tax benefit
recognized by Brink.
(9) EBITDA is defined as operating income plus depreciation and amortization
adjusted in 1998 for the non-cash portion of impairment and restructuring
charges ($9.5 million for the year ended December 31, 1998), which
definition may not be comparable to similarly titled measures reported by
other companies. EBITDA is presented because it is generally accepted as
providing useful information regarding a company's ability to service and/or
incur indebtedness. However, EBITDA should not be considered in isolation
from or as an alternative to net income, cash flows from operating
activities and other consolidated income or cash flow statement data
prepared in accordance with generally accepted accounting principles or as a
measure of profitability or liquidity. In addition, funds depicted by the
EBITDA measurement are not fully available for discretionary use because of
debt service requirement, expenditures for capital replacement and
expansion, and the need to conserve funds for other commitments and
uncertainties.
(10)For purposes of determining the ratio of earnings to fixed charges,
"earnings" are defined as income (loss) before minority interest,
extraordinary charge and income taxes, plus fixed charges. "Fixed charges"
consist of interest expense on all indebtedness (including amortization of
deferred debt issuance costs) and the component of operating lease rental
expense that management believes is representative of the interest component
of rent expense.
13
<PAGE> 16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion of the results of operations and financial
condition of the Company should be read in conjunction with the financial
statements and notes thereto of the Company included elsewhere in this Form
10-K. This Form 10-K contains forward-looking statements. Discussions containing
such forward-looking statements may be found in the material set forth below and
under "Business," as well as in this Form 10-K generally. Any such
forward-looking statements are not guarantees of future performance and involve
risks and uncertainties. Actual events or results may differ materially from
those discussed in the forward-looking statements as a result of various factors
set forth in this Form 10-K generally.
GENERAL
Chase Capital Partners ("CCP") and certain members of the Company's
management formed the Company in September 1995 to make strategic acquisitions
of automotive exterior accessory manufacturers and to integrate those
acquisitions into a global enterprise that would be a preferred supplier to the
automotive industry.
ACQUISITIONS
In September 1995, the Company, through its SportRack subsidiary, acquired
the MascoTech Division of MascoTech. The MascoTech Division was a North American
supplier of rack systems and accessories to the automotive OEM market and
aftermarket.
In October 1996, the Company consummated the Brink Acquisition by acquiring
all of the capital stock of Brink B.V., a private company with limited liability
incorporated under the laws of The Netherlands and a European supplier of towing
systems to the automotive OEM market and aftermarket. In December 1996,
ownership of Brink B.V. and its subsidiaries was transferred to Brink, a newly
formed subsidiary of the Company.
In August 1997, the Company formed Valley to effect the Valley Acquisition
by acquiring the net assets of Valley Industries, a North American supplier of
towing systems to the automotive OEM market and aftermarket.
Two smaller acquisitions were completed in July 1997 by SportRack
International. SportRack International acquired from Bell the net assets of its
sportrack division, a Canadian supplier of rack systems and accessories to the
automotive aftermarket. CCP at that time was a significant equity investor in
Bell. SportRack International also acquired the capital stock of Nomadic, a
Canadian supplier of rack systems and accessories to the automotive OEM market
and aftermarket. The acquisitions of the sportrack division of Bell and Nomadic
are collectively referred to in this 10-K as the "SportRack International
Acquisition."
In January 1998, the Company through Brink International B.V., acquired the
net assets of the towbar segment Ellebi S.p.A., an Italian supplier of towing
systems to the automotive OEM market and aftermarket.
In February 1998, the Company through SportRack International, Inc.,
acquired the net assets of Transfo-Rakzs, a Canadian supplier of rear hitch rack
carrying systems and related products to the automotive aftermarket.
14
<PAGE> 17
SUMMARY RESULTS OF OPERATIONS
The following table presents the major components of the statement of
operations together with percentages of each component as a percentage of net
sales.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
1998 1997 1996
---------------------- ---------------------- ---------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net sales ...................... $ 290,139 100.0% $ 188,678 100.0% $ 81,466 100.0%
Gross profit ................. 76,704 26.4% 53,122 28.2% 27,859 34.2%
Selling, administrative and
product development expenses ... 50,839 17.5% 31,350 16.6% 13,413 16.5%
Amortization of intangible
assets ....................... 3,551 1.2% 2,336 1.2% 2,475 3.0%
Impairment charge .............. 7,863 2.7% -- -- -- --
Operating income ............. 14,451 5.0% 19,436 10.3% 11,971 14.7%
Interest expense ............... 18,633 6.4% 12,627 6.7% 4,312 5.3%
Foreign currency (gain) loss ... (4,995) (1.7%) 6,097 3.2% 1,330 1.6%
Income before minority interest,
extraordinary charge and
income taxes ................. 813 0.3% 712 0.4% 6,409 7.9%
Income tax provision (benefit) . 903 0.4% (2,856) (1.5%) (491) (0.2%)
Extraordinary charge ........... -- -- 7,416 3.9% 1,970 2.4%
Net income (loss) .............. (90) 0.0% (3,945) (2.1%) 4,861 6.0%
</TABLE>
RESULTS OF OPERATIONS
1998 COMPARED TO 1997
Net sales. Net sales for 1998 were $290.1 million, representing an increase
of $101.5 million, or 53.8% over net sales for 1997. The increase resulted
primarily from the Ellebi Acquisition in January 1998, the Transfo-Rakzs
Acquisition in February 1998, the Valley Acquisition in August 1997 and the
SportRack International Acquisition in July 1997. The 1998 sales increase
resulting from these acquisitions was $80.1 million. The remaining sales
increase of $21.4 million resulted primarily from increased sales volumes of OEM
rack systems on existing programs and the effect of having a full year of sales
on new OEM rack system programs launched during 1997. On a pro forma basis, if
the net sales of Ellebi and Tranfo-Rakzs and the net sales of Valley and
SportRack International prior to acquisition were included with those of the
Company for 1997 net sales for 1997 would have been $268.5 million, as compared
to net sales of $290.1 million for 1998, an increase of $21.6 million, or 8.1%.
Gross profit. Gross profit for 1998 was $76.7 million, representing an
increase of $23.6 million, or 44.4%, over the gross profit for 1997. This
increase resulted from the increase in net sales offset by a decrease in the
gross margin. Gross profit as a percentage of net sales was 26.4% in 1998
compared to 28.2% in 1997. The decrease in gross margin resulted primarily from
lower gross margins of newly acquired businesses, lower gross profit margins
from sales of OEM rack systems resulting from increased sales of lower margin
programs and restructuring charges (as further discussed below) related to the
operations of SportRack International.
Selling, administrative and product development expenses. Selling,
administrative and product development expenses for 1998 were $50.8 million,
representing an increase of $19.5 million, or 62.2% over selling, administrative
and product development expenses for 1997, reflecting the increase in net sales.
Selling, administrative and product development expenses as a percentage of net
sales increased to 17.5% in 1998 from 16.6% in 1997. This increase is the result
of increased spending on research and development activities, higher selling,
administrative and product development expenses as a percentage of nets sales
for Ellebi, increased costs in the roof rack aftermarket as a percentage of net
sales and restructuring charges (as further discussed below) related to the
operations of SportRack International.
Impairment and restructuring charges. In June 1998, information became
available that indicated that certain assets acquired from Bell (accounts
receivable, inventory and tooling) had a fair value less than originally
recorded. The SportRack International purchase price was renegotiated and a $2.0
million reimbursement was received from Bell. Accounts receivable, inventory and
tooling were reduced by $6.5 million and additional goodwill of $4.5 million,
net of the $2.0 million reimbursement from Bell, was recorded.
During the second half of 1998, management further reassessed the operations
of SportRack International, and as a result took actions to restructure the
operations, rationalize the product offerings, customer and supplier base,
distribution channels and warehousing, and terminated 14 employees, including
certain members of SportRack International's senior management. A restructuring
charge totaling $1.9 million was recorded including cash expenditures made
during 1998 totaling $258,000 consisting of outside legal and accounting fees,
employee severance and costs to dispose of obsolete inventory. Non-cash expenses
included in the restructuring charge totaling $1.6 million included recording of
inventory reserves related to the product rationalization of $1.1 million
15
<PAGE> 18
and recording of customer allowances, bad debts and other items of $574,000. The
restructuring charge related to inventory ($1.1 million) has been included in
cost of sales and other restructuring costs ($832,000) have been included in
selling, administrative and product development expenses in the Company's
consolidated statement of operations.
Concurrent with the reassessment of SportRack International's operations,
management reviewed the revised carrying value of goodwill and other intangible
assets, determined that future cash flows would not be sufficient to recover
recorded amounts, and recorded an impairment charge of $7.9 million. No
impairment or restructuring charge was recorded during 1997.
Operating income. Operating income for 1998 was $14.5 million, a decrease of
$5.0 million, or 25.6%, compared to operating income for 1997. The decrease was
due primarily to an impairment and restructuring charge in 1998. Excluding the
impairment and restructuring charges, operating income in 1998 would have been
$24.2 million, representing an increase of $4.8 million, or 24.6% over operating
income for 1997. Excluding the impairment and restructuring charge, operating
income as a percentage of net sales decreased to 8.3% in 1998 from 10.3% in 1997
as a result of lower gross margins and higher selling, administrative and
product development expenses as a percentage of net sales in 1998.
Interest expense. Interest expense for 1998 was $18.6 million, an increase
of $6.0 million, or 47.6%, over interest expense for 1997. The increase was
primarily due to additional borrowings to finance (i) the SportRack
International Acquisition in July 1997, (ii) the Valley Acquisition in August
1997, (iii) the Ellebi Acquisition in January 1998, (iv) the Tranfo-Rakzs
Acquisition in February 1998, and (vi) the effect of the issuance of the Notes
(as defined below), of which a portion of the proceeds were used to repay debt
from the Valley Acquisition and other then existing debt. These increases were
partially offset by lower interest expense due to lower average line of credit
borrowings during the year and lower interest rates on the Company's variable
rate debt.
Foreign currency (gain) loss. Foreign currency gain in 1998 was $5.0
million. The foreign currency gain primarily relates to the debt of Brink (whose
functional currency was the Dutch Guilder through December 31, 1998) which is
denominated in U.S. Dollars including intercompany debt and substantially all
outstanding loans under the Company's Second Amended and Restated Credit
Agreement, except for Term note A (as defined below) which was changed from a
U.S. Dollar denominated loan to a Dutch Guilder denominated loan in October
1998. During 1998, the U.S. dollar weakened significantly in relation to the
Dutch Guilder. At December 31, 1997, the exchange rate of the Dutch Guilder to
the U.S. dollar was 2.02:1, whereas at December 31, 1998 the exchange rate was
1.89:1, or a 6.4% increase in the relative value of the Dutch Guilder.
Provision (benefit) for income taxes. The Company and certain of its
domestic subsidiaries have elected to be taxed as limited liability companies
for federal income tax purposes. As a result of this election, the Company's
domestic taxable income accrues to the individual members. Certain of the
Company's domestic subsidiaries and foreign subsidiaries are subject to income
taxes in their respective jurisdictions. During 1998, the Company had a loss
before income taxes for its taxable subsidiaries totaling $9.2 million and
recorded a provision for income taxes of $903,000. The effective tax rate
differs from the U.S. federal income tax rate primarily due to changes in
valuation allowances on the deferred tax assets of SportRack International
recorded during 1998 and differences in the tax rates of foreign countries.
During 1997, the Company had a loss before income taxes for its taxable
subsidiaries totaling $9.9 million and recorded a benefit for income taxes of
$3.2 million.
Extraordinary charge. There were no extraordinary charges incurred by the
Company during the year ended December 31, 1998. The extraordinary charge
resulting from debt extinguishment in 1997 was $7.4 million. In connection with
the issuance of $125 million aggregate principal amount of 9 3/4% Senior
Subordinated Promissory Notes due 2007 (the "Notes"), the Company repaid, in
full, its Senior Subordinated Debt and Junior Subordinated Guilder Note and
repaid a portion of certain term notes under the Amended and Restated Credit
Agreement. In connection with such debt extinguishments, the Company recorded an
extraordinary charge comprised of $1.4 million in prepayment penalties, $3.1
million of unamortized debt discount and $3.2 million of unamortized debt
issuance costs, less $365,000 of tax benefit.
Net income (loss). The net loss for 1998 was $90,000 as compared to a
net loss of $3.9 million in 1997, a decrease of $3.9 million. Operating income
for 1998 was $14.5 million, representing a decrease of $5.0 million, or 25.6%
compared to operating income for 1997. The decreased operating income, resulting
from the impairment and restructuring charges offset by the inclusion of Valley
and SportRack International's operating results for a full year in 1998 as
compared to five and six months, respectively, in 1997, the Ellebi acquisition
in January 1998 and the Tranfo-Rakzs acquisition in February 1998, and increased
interest expense ($6.0 million) was offset by the foreign currency gain in 1998
as compared with a foreign currency loss in 1997 related to Brink Acquisition
debt denominated in U.S. dollars ($11.1 million), and no extraordinary charge in
1998 compared with an extraordinary charge resulting from debt extinguishment in
1997 ($7.4 million), and reduced by the provision for income taxes in 1998 as
compared to an income tax benefit in 1997 ($3.8 million).
16
<PAGE> 19
1997 COMPARED TO 1996
Net sales. Net sales for 1997 were $188.7 million, representing an increase
of $107.2 million, or 131.6% over net sales for 1996. The increase was due
primarily to the Valley Acquisition in August 1997, $37.9 million (representing
net sales for the five month period ended December 31, 1997, the period of 1997
subsequent to acquisition), the SportRack International Acquisition in July
1997, $2.5 million (representing net sales for the six month period ended
December 31, 1997, the period 1997 subsequent to acquisition), and the full year
sales of Brink in 1997 as compared to two months in 1996 ($54.8 million
representing net sales for the ten month period ended October 31, 1997, the
period of 1997 comparable to the period prior to acquisition in 1996). In
addition, sales for SportRack increased $12.0 million because of increased sales
of rack systems to OEMs for installation on new light truck models and increased
OEM production of certain light truck models which use SportRack's systems. On a
pro forma basis, if the net sales of Valley and SportRack International, prior
to their respective acquisition dates, were included with those of the Company
for 1996 and 1997, and Brink sales, prior to its acquisition date, were included
with those of the Company for 1996, net sales for 1997 would have been $246.7
million, as compared to net sales of $233.5 million for 1996, an increase of
$13.2 million, or 5.7%.
Gross profit. Gross profit for 1997 was $53.1 million, representing an
increase of $25.3 million, or 90.7%, over the gross profit for 1996. This
increase resulted from the increase in net sales offset by a decrease in the
gross margin. Gross profit as a percentage of net sales was 28.2% in 1997
compared to 34.2% in 1996. The decrease in gross margin resulted from a lower
gross margin on sales contributed by Valley and a lower gross margin on sales of
rack systems to the OEMs due to (i) launch costs related to new programs, (ii)
lower margins on certain newly launched programs, and (iii) price givebacks on
certain OEM programs.
Selling, administrative and product development expenses. Selling,
administrative and product development expenses for 1997 were $31.4 million,
representing an increase of $17.9 million, or 133.7% over selling,
administrative and product development expenses for 1996, reflecting the
increase in net sales. Selling, administrative and product development expenses
as a percentage of net sales increased to 16.6% in 1997 from 16.5% in 1996.
Certain selling, administrative and product development expenses are relatively
fixed and do not increase proportionately with sales. The effect of these fixed
expenses was offset by higher expenses associated with the Company's European
expansion and new corporate headquarters. In addition, selling, administrative
and product development expenses were higher as a percentage of net sales for
Brink, which was acquired in October 1996, and SportRack International, which
was acquired in July 1997, than for the Company.
Operating income. Operating income for 1997 was $19.4 million, an increase
of $7.5 million, or 62.4%, over operating income for 1996. The increase was due
primarily to inclusion of Brink operating results for the full year in 1997 as
compared to two months in 1996 together with the increases from the SportRack
International and Valley Acquisitions in July and August of 1997, respectively.
Operating income as a percentage of net sales decreased to 10.3% in 1997 from
14.7% in 1996 reflecting a decrease in gross margins offset by reduced
amortization of intangible assets as a result of changing the goodwill
amortization period from 15 years to 30 years in 1997.
Interest expense. Interest expense for 1997 was $12.6 million, an increase
of $8.3 million, or 192.8%, over interest expense for 1996. The increase was
primarily due to additional borrowings to finance (i) the Brink Acquisition in
October 1996, (ii) the SportRack International Acquisition in July 1997, (iii)
the Valley Acquisition in August 1997, and (iv) the effect of the issuance of
the Notes (as defined below), of which a portion of the proceeds were used to
repay debt from the Valley Acquisition and the Brink Acquisition.
Foreign currency (gain) loss. Foreign currency loss in 1997 was $6.1
million. The foreign currency loss primarily relates to the debt of Brink (whose
functional currency was the Dutch Guilder through December 31, 1998) which is
denominated in U.S. Dollars including intercompany debt and substantially all
outstanding loans under the Company's Second Amended and Restated Credit
Agreement. During 1997, the U.S. dollar strengthened significantly in relation
to the Dutch Guilder. At December 31, 1996, the exchange rate of the Dutch
Guilder to the U.S. dollar was 1.75:1, whereas at December 31, 1997 the exchange
rate was 2.02:1, or a 15.4% decline in the relative value of the Dutch Guilder.
Provision (benefit) for income taxes. The Company and certain of its
domestic subsidiaries have elected to be taxed as limited liability companies
for federal income tax purposes. As a result of this election, the Company's
domestic taxable income accrues to the individual members. Certain of the
Company's domestic subsidiaries and foreign subsidiaries are subject to income
taxes in their respective jurisdictions. During 1997, the Company had a loss
before income taxes for its taxable subsidiaries totaling $9.9 million and
recorded a benefit for income taxes of $3.2 million. During 1996, the Company
had a loss before income taxes for its taxable subsidiaries totaling $1.8
million and recorded a benefit for income taxes of $491,000.
17
<PAGE> 20
Extraordinary charge. The extraordinary charge resulting from debt
extinguishment in 1997 was $7.4 million. In connection with the issuance of $125
million aggregate principal amount of 9 3/4% Senior Subordinated Promissory
Notes due 2007 (the "Notes"), the Company repaid, in full, its Senior
Subordinated Debt and Junior Subordinated Guilder Note and repaid a portion of
certain term notes under the Amended and Restated Credit Agreement. In
connection with such debt extinguishments, the Company recorded an extraordinary
charge comprised of $1.4 million in prepayment penalties, $3.1 million of
unamortized debt discount and $3.2 million of unamortized debt issuance costs,
less $400,000 of tax benefit.
Net income (loss). The net loss for 1997 was $3.9 million as compared to net
income of $4.9 million in 1996, a decrease of $8.8 million. Operating income for
1997 was $19.4 million, representing an increase of $7.5 million, or 62.4% over
operating income for 1996. The increased operating income, resulting from
inclusion of Brink's operating results for a full year in 1997 as compared to
two months in 1996, the Valley Acquisition in August 1997, and the SportRack
International Acquisition in July 1997, was offset by increased interest costs
associated with such acquisitions ($8.3 million), increased foreign currency
loss related to Brink Acquisition debt denominated in U.S. dollars ($4.8
million), and an increase in an extraordinary charge resulting from debt
extinguishment ($5.4 million), collectively offset by an increase in the related
income tax benefit ($2.4 million).
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal liquidity requirements are to service its debt and
meet its working capital and capital expenditure needs. The Company's
indebtedness at December 31, 1998 was $187.5 million including current
maturities of $4.5 million. The Company expects to be able to meet its liquidity
requirements through cash provided by operations and through borrowings
available under the Second Amended and Restated Credit Agreement ("U.S. Credit
Facility").
Working Capital and Cash Flows
Working capital and key elements of the consolidated statement of cash flows
are:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- --------
<S> <C> <C> <C>
Working Capital ................ $ 49,232 $ 65,803 $ 14,368
Cash flows provided by operating
activities ................... 21,879 6,982 9,917
Cash flows (used for) investing
activities ................... (31,618) (79,733) (57,463)
Cash flows provided by (used
for) financing activities .... (8,367) 97,080 48,605
</TABLE>
Working capital
Working capital decreased by $16.6 million to $49.2 million at December 31,
1998 from $65.8 million at December 31, 1997 due to a decrease in cash of $16.1
million, a decrease of $5.7 million in working capital of SportRack
International related to the change in estimated fair value of accounts
receivable and inventory recorded in June 1998 and restructuring charges
recorded in 1998 (as discussed above) and a decrease in accounts receivable of
$5.9 million primarily related to the timing of collections of accounts
receivable from large customers, primarily OEMs. Offsetting these decreases are
increases in working capital of $9.7 million attributable to the Ellebi and
Tranfo-Rakzs acquisitions. Working capital increased by $51.4 million to $65.8
million at December 31, 1997 from $14.4 million at December 31, 1996 due to an
increase in cash of $24.8 million ($21.0 million of which was used to acquire
Ellebi on January 2, 1998), an increase of $17.6 million attributable to the
Valley and SportRack International acquisitions and an increase in accounts
receivable of $8.6 million primarily attributable to the timing of collections
of accounts receivable from large customers, primarily OEMs.
Cash decreased by $16.1 million to $11.2 million at December 31, 1998 from
$27.3 million at December 31, 1997 primarily due to cash used for investing and
financing activities of $31.6 million and $8.4 million, respectively, offset by
cash provided by operating activities of $21.9 million. Cash increased by $24.8
million to $27.3 million at December 31, 1997 from $2.5 million at December 31,
1996 primarily due to cash provided by operating and financing activities of
$7.0 million and $97.8 million (of which $21.0 million was borrowed to finance
the acquisition of Ellebi on January 2, 1998), respectively, offset by cash used
for investing activities of $79.7 million.
18
<PAGE> 21
Operating Activities
Cash flow provided by operating activities for 1998 was $21.9 million,
compared to $7.0 million in 1997 and $9.9 million in 1996. Cash flow for 1998
increased due to the cash flows provided by acquisitions completed in 1998,
including the Ellebi Acquisition and the Transfo-Rakzs Acquisition, and the full
year effect of acquisitions completed in 1997, including the Valley Acquisition
and the SportRack International Acquisition. Acquisition related increases in
operating cash flow totaled $4.0 million. The remaining increase in operating
cash flows is attributable to improved operating performance and lower working
capital of SportRack. SportRack's working capital decreased primarily as a
result of the timing of collections of accounts receivable from large customers,
primarily OEMs.
The Company's European and Canadian subsidiaries have income tax net
operating loss carryforwards ("NOLs") of approximately $1.3 million and $11.0
million, respectively, at December 31, 1998. The European NOLs have no
expiration date and the Canadian NOLs expire primarily in 2005. Management
believes that it is more likely than not that a portion of the deferred tax
assets of the Canadian subsidiaries will not be realized and a valuation
allowance of $4.2 million has been recorded against such assets. No valuation
allowance has been recorded for the European NOLs as it is management's belief
that it is more likely than not that the related deferred tax asset will be
realized.
Investing Activities
Investing cash flows include acquisitions of property and equipment of $10.0
million, $7.8 million, and $3.1 million in 1998, 1997 and 1996, respectively.
The increase in capital expenditures during 1998 was primarily attributable to
the capital expenditures of Ellebi and Transfo-Rakzs, which were acquired in
1998, and the increased capital expenditures of Valley and SportRack
International, which were acquired during 1997. The Company estimates that
capital expenditures for 1999 will be primarily for the expansion of capacity,
productivity and process improvements and maintenance. The Company's 1999
capital expenditures are anticipated to include approximately $5.0 million for
replacing and upgrading existing equipment. The Company's ability to make
capital expenditures is subject to restrictions in the Amended and Restated
Credit Agreement, including a maximum of $12.5 million of capital expenditures
annually.
Investing cash flows also include $22.8 million, $70.8 million, and $54.3
million in 1998, 1997, and 1996, respectively, for the acquisition of the Ellebi
and Tranfo-Rakzs (January and February 1998, respectively), SportRack
International and Valley (July and August 1997, respectively) and Brink (October
1996).
Financing Activities
During 1998, financing cash flows were primarily limited to scheduled
payments of principal on the Company's term indebtedness of $3.7 million and net
repayments of borrowing under the Company's revolving loans of $4.5 million.
Financing cash flows in 1997 and 1996 include borrowings of $90.5 million, and
$46.1 million, respectively for the acquisition of the SportRack International,
Valley and Ellebi (July, August and December 1997, respectively) and Brink
(October 1996). Although the Ellebi Acquisition was consummated in January 1998,
proceeds related to borrowing for the purchase were received in December 1997
and were included in the Company's cash at December 31, 1997. Debt issuance
costs in connection with such borrowings were $2.6 million in both 1997 and
1996. In October 1997 the Company issued the Notes (as defined below). Proceeds
from the issuance, which totaled $124.5 million, were used to reduce or
eliminate certain of the Company's outstanding senior and subordinated debt and
to pay $4.7 million in offering costs. Proceeds from the issuance of membership
units were not significant in 1998 and were $5.0 million, and $4.6 million in
1997, and 1996, respectively. Distributions to members, in amounts sufficient to
meet the tax liability on the Company's domestic taxable income which accrues to
individual members, were not significant in 1998 and were $2.9 million in 1997
and $3.7 million in 1996.
Debt and Credit Sources
Borrowings under the Company's U.S. Credit Facility and the Company's First
Amended and Restated Credit Agreement ("Canadian Credit Facility") bear interest
at floating rates which require interest payments on varying dates depending on
the interest rate option selected by the Company. Under the terms of these
credit facilities, the Company will be required to make principal payments
totaling approximately $4.5 million in 1999, $11.0 million in 2000, $11.8
million in 2001 and $11.8 million in 2002. The Company is also required to
purchase and maintain interest rate protection with respect to a portion of the
term loans for three years. The Notes bear interest at 9.75% which is payable
semiannually in arrears. See "Note 4" to the Company's "Consolidated Financial
Statements" for additional information regarding the U.S. Credit Facility, the
Canadian Credit Facility and the Senior Subordinated Notes.
19
<PAGE> 22
The Company is exposed to interest rate volatility with regard to variable
rate debt. The Company uses interest rate swaps to reduce interest rate
volatility. At December 31, 1998 and 1997 the notional value of interest rate
swaps was $18.5 million. Under the terms of the interest rate swap agreements,
the Company pays a fixed interest rate on the notional principal amount. The
effects of interest rate swaps are reflected in interest expense and are not
material.
The Company expects that its primary sources of cash will be from operating
activities and borrowings under the U.S. Credit Facility and Canadian Credit
Facility each of which provide the Company with revolving notes. As of December
31, 1998, the Company had no amounts borrowed under the revolving note of either
the U.S. Credit Facility or the Canadian Credit Facility and has $25.0 million
available borrowing capacity. As part of the U.S. Credit Facility, Chase and NBD
committed to provide a $22.0 million Acquisition Revolving Note to finance
acquisitions. On December 31, 1997, the Company borrowed $21.0 million under the
Acquisition Revolving Note and used such proceeds to acquire the net operating
assets of the towbar segment of Ellebi S.p.A. on January 2, 1998. Future
acquisitions, if any, may require additional third party financing and there can
be no assurances that such funds would be available on terms satisfactory to the
Company, if at all.
The Company's ability to satisfy its debt obligations will depend upon its
future operating performance, which will be affected by prevailing economic
conditions and financial, business, and other factors, certain of which are
beyond its control, as well as the availability of revolving credit borrowings
under the Amended and Restated Credit Agreement or a successor facility. The
Company anticipates that, based on current and expected levels of operations,
its operating cash flow, together with borrowings under the U.S. Credit Facility
and the Canadian Credit Facility, should be sufficient to meet its debt service,
working capital and capital expenditure requirements for the foreseeable future,
although no assurances can be given in this regard, including as to the ability
to increase revenues or profit margins. If the Company is unable to service its
indebtedness, it will be forced to take actions such as reducing or delaying
acquisitions and/or capital expenditures, selling assets, restructuring or
refinancing its indebtedness, or seeking additional equity capital. There is no
assurance that any of these remedies can be effected on satisfactory terms, if
at all, including, whether, and on what terms, the Company could raise equity
capital. See "Forward Looking Statements".
The Company conducts operations in several foreign countries including
Canada, The Netherlands, Denmark, the United Kingdom, Sweden, France, Germany,
Poland, Spain and, Italy. Net sales from international operations during 1998
were approximately $99.8 million, or 34.4% of the Company's net sales. At
December 31, 1998, assets associated with these operations were approximately
42.6% of total assets, and the Company had indebtedness denominated in
currencies other than the U.S. dollar of approximately $26.4 million.
The Company's international operations may be subject to volatility because
of currency fluctuations, inflation and changes in political and economic
conditions in these countries. Most of the revenues and costs and expenses of
the Company's operations in these countries are denominated in the local
currencies. The financial position and results of operations of the Company's
foreign subsidiaries are measured using the local currency as the functional
currency. Certain of the Company's foreign subsidiaries have debt denominated in
currencies other than their functional currency. As the exchange rates between
the currency of the debt and the subsidiaries functional currency change the
Company is subject to foreign currency gains and losses.
The Company may periodically use foreign currency forward option contracts
to offset the effects of exchange rate fluctuations on cash flows denominated in
foreign currencies. The Company has no outstanding foreign currency forward
options at December 31, 1998 and does not use derivative financial instruments
for trading or speculative purposes.
YEAR 2000
General
The "Year 2000 Issue" is the result of computer programs that were written
using two digits rather than four to define the applicable year. If the
Company's computer programs with date-sensitive functions are not Year 2000
compliant, they may recognize a date using "00" as the Year 1900 rather than the
Year 2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices or engage in similar normal business
activities.
The Company and each of its operating subsidiaries are in the process of
implementing Year 2000 readiness programs with the objective of having all of
their significant business systems, including those that affect facilities and
manufacturing activities, functioning properly with respect to the Year 2000
Issue before June 30, 1999. Each operating subsidiary is in a different stage of
Year 2000 readiness.
20
<PAGE> 23
Project
Generally each subsidiary's Year 2000 program is divided into three major
sections internal business software and hardware, internal non-financial
software and embedded chip technology and external compliance by customers and
suppliers. The general phases common to all sections are: (1) inventorying Year
2000 items; (2) assessing the Year 2000 compliance of identified items; (3)
repairing or replacing material items that are determined not to be Year 2000
compliant; (4) testing material items; and (5) designing and implementing
contingency and business continuation plans for each organization and company
location.
The internal business software and hardware section of the Company's Year
2000 plans vary by operating subsidiary and include either the conversion or
reprogramming of applications software that is not Year 2000 compliant, the
inclusion of acquired companies on the Company's existing Enterprise Resource
Planning System (ERP System) or, where available from the supplier, the
upgrading of such software to a Year 2000 compliant version. The Company
estimates that this phase is on schedule to be completed by June 1999.
The testing phase of this section, scheduled for completion by June 1999, is
ongoing. The Company does not currently have contingency plans in place for its
internal business software and hardware. Such contingency plans will be
developed in the second quarter of 1999 should the current implementation plans
fall behind schedule.
The total cost associated with required modifications to the Company's
internal business software and hardware to become Year 2000 compliant is not
expected to be material to the Company's financial position. The estimated total
cost of the Year 2000 program is approximately $935,000. The total amount
expended on the program through December 31, 1998, was $570,000, of which
approximately $170,000 related to the cost of software modification and
approximately $400,000 related to the cost of and upgrading existing software to
Year 2000 compliant versions. The estimated future cost of completing the Year
2000 program is estimated to be approximately $165,000 for reprogramming of
applications software and approximately $200,000 related to the cost of
including acquired companies on existing ERP Systems. Funds for the program are
provided from existing operating budgets for all items and are included in
operating expenses as incurred.
The Company has completed all phases of its Year 2000 plan related to
non-financial software, embedded chip technology, and its non-financial systems
such as manufacturing equipment, security equipment, etc. Few of these systems
have been identified as not being in compliance. Accordingly, the cost of
achieving Year 2000 compliance for these systems was minimal.
The Company has identified and contacted its critical suppliers, service
providers and contractors to determine the extent to which the Company's
interface systems are vulnerable to those third parties' failure to remedy their
own Year 2000 issues. Each of the suppliers contacted have indicated that they
are currently undergoing or have completed programs related to the Year 2000
problem within their organizations. Due to the satisfactory responses with its
critical suppliers, the Company does not intend to change suppliers, service
providers or contractors. The Company has not independently verified the status
of its critical suppliers, service providers and contractors Year 2000
readiness. Many of the Company's customers are large OEMs which are preparing
for the Year 2000 Issue and it is believed that they will be compliant by the
Year 2000. However, the Company does not currently have any formal information
concerning the Year 2000 compliance status of its customers, particularly in the
aftermarket, but has received indications that most of its customers are working
on Year 2000 compliance.
Risks
The failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
results of operations, liquidity and financial condition. Due to the general
uncertainty inherent in the Year 2000 problem, resulting in large part from the
uncertainty of the Year 2000 readiness of third-party suppliers and customers,
the Company is unable to determine at this time whether the consequences of Year
2000 failures will have a material impact on its results of operations,
liquidity or financial condition. The Year 2000 program is expected to
significantly reduce the Company's level of uncertainty about the Year 2000
problem and, in particular, about the Year 2000 compliance and readiness of its
material customers and suppliers. The Company believes that, with the
implementation of new business systems and completion of the program as
scheduled, the possibility of significant interruptions of normal operations
should be reduced.
21
<PAGE> 24
NEW ACCOUNTING PRONOUNCEMENTS
In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued SOP 98-1, "Accounting For the Costs of Computer Software
Developed For or Obtained For Internal Use" ("SOP 98-1"). SOP 98-1 is effective
for the Company beginning on January 1, 1999. SOP 98-1 will require the
capitalization of certain costs incurred after the date of adoption in
connection with developing or obtaining software for internal use. This
statement will be applied prospectively, however, the impact of this new
standard is not expected to have a significant effect on the Company's financial
position or results of operations.
In April 1998, the AICPA issued Statement of Position ("SOP 98-5"),
"Reporting the Costs of Start-up Activities" (SOP 98-5). SOP 98-5 is effective
beginning on January 1,1999, and requires that start-up costs capitalized prior
to January 1, 1999 be written off and any future start-up costs to be expensed
as incurred. The Company believes it is in compliance with the standards
established by SOP 98-5 and as such SOP 98-5 will not impact the Company's
future earnings or financial position.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities"("FAS 133"). The statement is effective for fiscal years
beginning after June 15, 1999. The Company plans to adopt this statement at the
beginning of fiscal 2000. The Company is completing an analysis of FAS 133 which
is not expected to have a material impact on the Company's results of
operations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to certain market risks which exist as a part of its
ongoing business operations. Primary exposures include fluctuations in the value
of foreign currency investments in subsidiaries, volatility in the translation
of foreign currency earnings to U.S. Dollars and movements in Federal Funds
rates and the London Interbank Offered Rate ("LIBOR"). The Company uses
derivative financial instruments, where appropriate, to manage these risks. The
Company, as a matter of policy, does not engage in trading or speculative
transactions.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<S> <C>
Report of Independent Accountants........................................................................... 23
Consolidated Balance Sheets -- December 31, 1998 and 1997................................................... 24
Consolidated Statements of Operations -- Years Ended December 31, 1998, 1997 and 1996....................... 25
Consolidated Statements of Cash Flows -- Years Ended December 31, 1998, 1997 and 1996....................... 26
Consolidated Statements of Changes in Members' Equity -- Years Ended December 31, 1998, 1997 and 1996....... 27
Notes to Consolidated Financial Statements.................................................................. 28
</TABLE>
22
<PAGE> 25
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Managers
and Members of
Advanced Accessory Systems, LLC
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) present fairly, in all material respects, the
financial position of Advanced Accessory Systems, LLC and its subsidiaries at
December 31, 1998 and 1997, and the results of their operations, their cash
flows and changes in members' equity for each of the three years in the period
ended December 31, 1998, in conformity with generally accepted accounting
principles. In addition, in our opinion, the financial statement schedule listed
in the index appearing under Item 14 (a) (2) presents fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements. These financial statements and
financial statement schedule are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Bloomfield Hills, Michigan
March 15, 1999
23
<PAGE> 26
ADVANCED ACCESSORY SYSTEMS, LLC
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1998 1997
--------- ---------
(DOLLAR AMOUNTS IN
THOUSANDS)
<S> <C> <C>
ASSETS
Current assets
Cash .................................................... $ 11,240 $ 27,348
Accounts receivable, less reserves of $2,766 and $1,699,
respectively ......................................... 40,727 43,523
Inventories ............................................. 43,087 34,408
Deferred income taxes ................................... 280 --
Other current assets .................................... 3,964 6,531
--------- ---------
Total current assets ............................... 99,298 111,810
Property and equipment, net ............................... 61,295 53,560
Goodwill, net ............................................. 87,079 85,889
Other intangible assets, net .............................. 6,592 9,963
Deferred income taxes ..................................... 1,933 3,626
Other noncurrent assets ................................... 2,784 710
--------- ---------
$ 258,981 $ 265,558
========= =========
LIABILITIES AND MEMBERS' EQUITY
Current liabilities
Current maturities of long-term debt .................... $ 4,536 $ 3,746
Accounts payable ........................................ 23,115 23,018
Accrued liabilities ..................................... 21,335 17,910
Deferred income taxes ................................... 1,080 1,333
--------- ---------
Total current liabilities .......................... 50,066 46,007
--------- ---------
Noncurrent liabilities
Deferred income taxes ................................... 1,790 3,545
Other noncurrent liabilities ............................ 4,581 2,675
Long-term debt, less current maturities ................. 182,988 193,380
--------- ---------
Total noncurrent liabilities ....................... 189,359 199,600
--------- ---------
Commitments and contingencies (Note 11)
Mandatorily redeemable warrants ........................... 4,409 3,507
--------- ---------
Members' equity
Class A Units 25,000 authorized, 16,450 and 16,411 issued
at December 31, 1998 and 1997, respectively............ 22,276 23,163
Class B Units, 2,000 authorized, no Units issued at
December 31, 1998 and 1997............................. -- --
Other comprehensive loss ................................ (615) (490)
Accumulated deficit ..................................... (6,514) (6,229)
--------- ---------
15,147 16,444
--------- ---------
$ 258,981 $ 265,558
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
24
<PAGE> 27
ADVANCED ACCESSORY SYSTEMS, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------------------------------
1998 1997 1996
--------- --------- ---------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Net sales ................................ $ 290,139 $ 188,678 $ 81,466
Cost of sales ............................ 213,435 135,556 53,607
--------- --------- ---------
Gross profit ........................... 76,704 53,122 27,859
Selling, administrative and product
development expenses ................... 50,839 31,350 13,413
Amortization of intangible assets ........ 3,551 2,336 2,475
Impairment charge ........................ 7,863 -- --
--------- --------- ---------
Operating income ....................... 14,451 19,436 11,971
--------- --------- ---------
Other (income) expense
Interest expense ....................... 18,633 12,627 4,312
Foreign currency (gain) loss ........... (4,995) 6,097 1,330
Other (income) expense ................. -- -- (80)
--------- --------- ---------
Income before minority interest,
extraordinary charge and income
taxes .................................. 813 712 6,409
Provision (benefit) for income taxes ..... 903 (2,856) (491)
--------- --------- ---------
Income (loss) before minority interest and
extraordinary charge ................... (90) 3,568 6,900
Minority interest ........................ -- 97 69
Extraordinary charge resulting from debt
extinguishment ......................... -- 7,416 1,970
--------- --------- ---------
Net income (loss) ........................ $ (90) $ (3,945) $ 4,861
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
25
<PAGE> 28
ADVANCED ACCESSORY SYSTEMS, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------------------------------
1998 1997 1996
--------- --------- ---------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS PROVIDED BY (USED FOR)
OPERATING ACTIVITIES ...................... $ (90) $ (3,945) $ 4,861
Net income (loss)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities
Depreciation and amortization ............. 15,093 9,360 4,689
Deferred taxes ............................ (688) (3,146) (363)
Impairment and restructuring charge ....... 9,505 -- --
Foreign currency (gain) loss .............. (4,948) 5,500 1,118
Loss on disposal of assets ................ 191 -- 10
Extraordinary charge resulting from debt
extinguishment ......................... -- 7,416 1,970
Changes in assets and liabilities:
Accounts receivable .................... 5,873 (8,661) (118)
Inventories ............................ (1,457) 582 (3,736)
Other current assets ................... 1,513 378 (1,742)
Other noncurrent assets ................ (1,934) (482) (67)
Accounts payable ....................... (3,032) (2,719) 1,995
Accrued liabilities .................... 1,133 2,819 3,144
Other noncurrent liabilities ........... 720 (217) (1,913)
Minority interest in consolidated
subsidiaries ......................... -- 97 69
--------- --------- ---------
NET CASH PROVIDED BY OPERATING
ACTIVITIES ........................ 21,879 6,982 9,917
--------- --------- ---------
CASH FLOWS PROVIDED BY (USED FOR)
INVESTING ACTIVITIES
Acquisition of machinery and equipment ...... (9,998) (7,751) (3,124)
Amount due from sellers of Valley Industries,
Inc ....................................... 1,150 (1,150) --
Acquisition of subsidiaries, net of cash
acquired .................................. (22,770) (70,832) (54,339)
--------- --------- ---------
NET CASH USED FOR INVESTING
ACTIVITIES ........................ (31,618) (79,733) (57,463)
--------- --------- ---------
CASH FLOWS PROVIDED BY (USED FOR)
FINANCING ACTIVITIES
Proceeds from issuance of debt .............. -- 215,050 88,842
Proceeds from issuance of warrants .......... -- -- 3,498
Increase (decrease) in revolving loan ....... (4,505) 504 4,300
Extinguishment of warrants .................. -- -- (1,600)
Repayment of debt ........................... (3,682) (113,248) (44,628)
Debt issuance costs ......................... -- (7,280) (2,643)
Issuance of membership units ................ 29 4,999 4,562
Repurchase of membership units .............. (14) -- --
Distributions to members .................... (195) (2,945) (3,726)
--------- --------- ---------
NET CASH PROVIDED BY (USED FOR)
FINANCING ACTIVITIES .............. (8,367) 97,080 48,605
--------- --------- ---------
Effect of exchange rate changes ............. 1,998 505 (182)
Net increase (decrease) in cash ............. (16,108) 24,834 877
Cash at beginning of period ................. 27,348 2,514 1,637
--------- --------- ---------
Cash at end of period ....................... $ 11,240 $ 27,348 $ 2,514
========= ========= =========
Cash paid for interest ...................... $ 17,559 $ 8,302 $ 4,215
========= ========= =========
Cash paid for income taxes .................. $ 934 $ 581 $ --
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
26
<PAGE> 29
ADVANCED ACCESSORY SYSTEMS, LLC
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS' EQUITY
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
OTHER RETAINED TOTAL
MEMBERS' COMPREHENSIVE EARNINGS MEMBERS'
CAPITAL INCOME (LOSS) (DEFICIT) EQUITY
-------- ------------ --------- ---------
<S> <C> <C> <C> <C>
Balance at December 31, 1995........................... $ 13,360 $ -- $ 861 $ 14,221
Issuance of additional units .......................... 4,562 -- -- 4,562
Accretion of membership warrants ...................... -- -- (1,400) (1,400)
Distributions to members, net of minority ............. -- -- (3,692) (3,692)
interest
Comprehensive income:
Currency translation adjustment ..................... -- (89) -- --
Net income for 1996 ................................. -- -- 4,861 --
Total comprehensive income ........................ -- -- -- 4,772
-------- -------- -------- --------
Balance at December 31, 1996 .......................... 17,922 (89) 630 18,463
Issuance of additional units .......................... 5,250 -- -- 5,250
Accretion of membership warrants ...................... (9) -- -- (9)
Distributions to members, net of minority ............. -- -- (2,914) (2,914)
interest
Comprehensive loss:
Currency translation adjustment ..................... -- (401) -- --
Net loss for 1997 ................................... -- -- (3,945) --
Total comprehensive loss .......................... -- -- -- (4,346)
-------- -------- -------- --------
Balance at December 31, 1997 .......................... 23,163 (490) (6,229) 16,444
Issuance of additional units .......................... 150 -- -- 150
Notes receivable for unit purchase..................... (121) -- -- (121)
Repurchase of membership units......................... (14) -- -- (14)
Accretion of membership warrants ...................... (902) -- -- (902)
Distributions to members .............................. -- -- (195) (195)
Comprehensive loss:
Currency translation adjustment ..................... -- (125) -- --
Net loss for 1998 ................................... -- -- (90) --
Total comprehensive loss .......................... -- -- -- (215)
-------- -------- -------- --------
Balance at December 31, 1998 .......................... $ 22,276 $ (615) $ (6,514) $ 15,147
======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
27
<PAGE> 30
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
BUSINESS ACTIVITIES
Advanced Accessory Systems, LLC (formerly AAS Holdings, LLC) (the "Company")
is engaged in the design, manufacture and supply of towing and rack systems and
accessories for the automotive original equipment manufacturer ("OEM") market
and the automotive aftermarket. The Company's business commenced on September
28, 1995, with the acquisition of certain of the net assets of MascoTech
Accessories (the "Predecessor"), a division of MascoTech, Inc., through the
Company's majority-owned subsidiary, SportRack, LLC. As described in Note 2, in
October 1996 the Company acquired Brink B.V., in July and August of 1997
acquired the sportrack division of Bell Sports Corporation, Nomadic Sports, Inc.
and Valley Industries, Inc. and in January and February 1998 acquired the net
assets of the towbar segment of Ellebi S.p.A. and the net assets of
Transfo-Rakzs, Inc.
PRINCIPLES OF CONSOLIDATION
The Company includes the accounts of the following:
<TABLE>
<S> <C>
SportRack, LLC................. 100% owned by Advanced Accessory Systems, LLC
SportRack Automotive, GmbH... A German corporation, 100% owned by SportRack, LLC
SportRack International,
Inc and its consolidated
subsidiary................. A Canadian corporation, 100% owned by SportRack, LLC
AAS Holdings, Inc.............. 100% owned by Advanced Accessory Systems, LLC
Brink International B.V and
its consolidated
subsidiaries................. A Dutch corporation, 100% owned by AAS Holdings,
Inc.
Valley Industries, LLC......... 99% owned by Advanced Accessory Systems, LLC and 1%
owned by SportRack, LLC
ValTek, LLC.................... 99% owned by Advanced Accessory Systems, LLC and 1%
owned by SportRack, LLC
AAS Capital Corporation........ 100% owned by Advanced Accessory Systems, LLC
</TABLE>
All intercompany transactions have been eliminated in consolidation.
REVENUE RECOGNITION
Revenue and related cost of goods sold are recognized upon shipment of the
product to the customer. Sales allowances, discounts, rebates and other
adjustments are recorded or accrued in the period of the sale.
SIGNIFICANT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the fiscal period. Actual results could differ from those
estimates.
FINANCIAL INSTRUMENTS
Financial instruments at December 31, 1998 and 1997, including cash,
accounts receivable and accounts payable, are recorded at cost, which
approximates fair value due to the short-term maturities of these assets and
liabilities. The carrying value of the obligations under the bank agreements are
considered to approximate fair value as the agreements provide for interest rate
revisions based on changes in prevailing market rates or were entered into at
rates that approximate market rates at December 31, 1998 and 1997. The carrying
value of the Notes (as defined below) approximate fair value based upon quoted
prices at December 31, 1998 in the market in which the Notes are traded.
28
<PAGE> 31
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
The Company is exposed to certain market risks which exist as a part of its
ongoing business operations. Primary exposures include fluctuations in the value
of foreign currency investments in subsidiaries, volatility in the translation
of foreign currency earnings to U.S. Dollars and movements in Federal Funds
rates and the London Interbank Offered Rate (LIBOR). The Company uses derivative
financial instruments, where appropriate, to manage these risks. The Company, as
a matter of policy, does not engage in trading or speculative transactions.
CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all
highly-liquid investments with a maturity of three months or less from the date
of purchase to be cash equivalents.
CURRENCY TRANSLATION
The functional currency for the Company's foreign subsidiaries is the
applicable local currency. Assets and liabilities of foreign subsidiaries are
translated into U.S. dollars at the exchange rates in effect at the balance
sheet date; translation adjustments are reported as a separate component of
members' equity. Revenues, expenses and cash flows for foreign subsidiaries are
translated at average exchange rates during the period; foreign currency
transaction gains and losses are included in current earnings. The accompanying
consolidated statement of operations for the years ended December 31, 1998, 1997
and 1996 includes net currency gains (losses) of $4,995, $(6,097) and $(1,330),
respectively, relating primarily to debt denominated in U.S. Dollars at Brink
International B.V., whose functional currency was the Dutch Guilder through
December 31, 1998. At December 31, 1998, U.S. Dollar denominated debt recorded
at Brink includes intercompany debt and substantially all outstanding loans
under the Company's Second Amended and Restated Credit Agreement, except for the
term A note (as defined below) which was changed from a U.S. Dollar denominated
loan to a Dutch Guilder denominated loan in October 1998.
INVENTORIES
Inventories are stated at the lower of cost or market, with cost being
determined on the first-in, first-out (FIFO) method. Inventories are
periodically reviewed and reserves established for excess and obsolete items.
TOOLING
The Company incurs costs to develop new tooling used in the manufacture of
products sold to OEMs. Tooling costs that are reimbursed by the OEMs as the
tooling is completed are included in other current assets. All other customer
tooling costs are included in other noncurrent assets and amortized over the
expected product life, generally four to six years. Company owned tooling is
included in property and equipment and depreciated over its expected useful
life, generally three to five years. Management periodically evaluates the
recoverability of tooling costs, based on estimated future cash flows, and makes
provisions for tooling costs that will not be recovered, if any, when such
amounts are known.
PROPERTY AND EQUIPMENT
Property and equipment is stated at acquisition cost, which reflects the
fair market value of assets acquired at the acquisition date for all
subsidiaries. Property and equipment purchased other than through the
acquisitions described in Note 2 is stated at cost. Expenditures for normal
repairs and maintenance are charged to operations as incurred. Depreciation is
computed using the straight-line method over the following estimated useful
lives:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Buildings and improvements................................. 5-50
Machinery, equipment and tooling........................... 2-10
Furniture and fixtures..................................... 5-7
</TABLE>
29
<PAGE> 32
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill of $87,079 and $85,889 (net of accumulated amortization of $8,400
and $5,251) at December 31, 1998 and 1997, respectively, represents the costs in
excess of net assets acquired and is amortized using the straight line method
over periods of up to 30 years.
Debt issuance costs of $5,958 and $6,467, net of accumulated amortization at
December 31, 1998 and 1997, respectively, are amortized over the terms of the
loan agreements, which are six to ten years. Debt issuance cost amortization of
$587, $551 and $212 for 1998, 1997 and 1996, respectively, has been included in
interest expense.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company reviews long-lived assets and certain identifiable intangibles
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be fully recoverable. The Company determines
the impairment of long-lived assets by comparing the undiscounted future net
cash flows to be generated by the assets to their carrying value. Impairment
losses are then measured as the amount by which the carrying amount of the asset
exceeds the fair value of the asset. In 1998, as described in Note 3, the
Company determined that certain intangible assets of its subsidiary, SportRack
International, Inc. had been impaired.
INCOME TAXES
The Company and certain of its domestic subsidiaries have elected to be
taxed as limited liability companies for federal income tax purposes. As a
result of this election, the Company's domestic taxable income accrues to the
individual members. Distributions are made to the members in amounts sufficient
to meet the tax liability on the Company's domestic taxable income accruing to
the individual members. Distributions to members, net of minority interest, of
$195, $2,914 and $3,692 were made during 1998, 1997 and 1996, respectively.
Certain of the Company's domestic subsidiaries and foreign subsidiaries are
subject to income taxes in their respective jurisdictions. Income tax provisions
for these entities are based on the U.S. Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes". Deferred tax assets and
liabilities are provided for the expected future tax consequences of temporary
differences between the carrying amounts and the tax basis of such entities'
assets and liabilities. Deferred tax assets are reduced by a valuation allowance
for tax benefits that are not expected to be realized. The Company does not
provide for U.S. income taxes or foreign withholding taxes on the undistributed
earnings of foreign subsidiaries because of management's intent to permanently
reinvest in such operations.
The Company and certain subsidiaries are subject to taxes, including
Michigan Single Business Tax and Canadian capital tax, which are based primarily
on factors other than income. As such, these amounts are included in selling,
administrative and product development expenses in the accompanying consolidated
statements of income. Deferred taxes related to Michigan Single Business Tax are
provided on the temporary differences resulting from capital acquisitions and
depreciation.
RESEARCH, DEVELOPMENT AND ENGINEERING
Research, development and engineering costs are expensed as incurred and
aggregated approximately $9,611, $5,860 and $3,548 for the years ended December
31, 1998, 1997 and 1996, respectively, for the Company.
RECLASSIFICATIONS
Certain amounts from the 1997 financial statements have been reclassified to
conform with the 1998 financial statement presentation.
30
<PAGE> 33
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
2. ACQUISITIONS
Acquisitions of the Company from inception through December 31, 1998 are as
follows:
<TABLE>
<CAPTION>
PURCHASE GOODWILL
ACQUIRED COMPANY ACQUISITION DATE PRICE RECORDED LOCATION PRODUCT LINES
----------------------------------------- ------------------ -------- ---------- ----------- --------------
<S> <C> <C> <C> <C> <C>
MascoTech Accessories.................... September 28, 1995 $46,050 $32,781 United Rack systems
States
Brink B.V................................ October 30, 1996 54,339 27,730 Europe Towing systems
Sportrack division of Bell Sports........ July 2, 1997 13,505 1,198 Canada Rack systems
Nomadic Sports, Inc...................... July 24, 1997 849 433 Canada Rack systems
Valley Industries, Inc................... August 5, 1997 56,478 32,891 United Towing systems
States
Towbar segment of Ellebi S.p.A........... January 2, 1998 21,938 5,645 Italy Towing systems
Tranfo-Rakzs, Inc........................ February 7, 1998 1,040 902 Canada Rack systems
</TABLE>
The above acquisitions have each been accounted for in accordance with the
purchase method of accounting. Accordingly, the respective purchase price of
each acquisition has been allocated to assets acquired and liabilities assumed
based upon their estimated fair values at the acquisition date. The excess of
the aggregate purchase price over the estimated fair value of the net assets
acquired has been recorded as goodwill. The operating results of these entities
have been included in the Company's consolidated financial statements since the
date of each acquisition. Each acquisition represented the purchase of the net
assets of the respective company with the exceptions of Brink B.V. and Nomadic
Sports, Inc. which were purchases of the outstanding shares. Each company was
purchased for cash except for Brink B.V. which was purchased for $54,339 in cash
and a 12,500 Junior Subordinated Note ($7,340) denominated in Dutch Guilders, to
Brink Holdings, B.V.
Pro Forma Data
The following unaudited pro forma consolidated results of operations have
been prepared as if the Valley, SportRack International, Inc., Ellebi and
Tranfo-Rakzs, Inc. acquisitions had occurred on January 1, 1997.
<TABLE>
<CAPTION>
1997
----
<S> <C>
Net sales........................................... $ 268,489
Income before extraordinary charge.................. 2,015
Net loss............................................ (5,401)
</TABLE>
Pro forma results for 1998 have not been presented as they are substantially
the same as the Company's actual results. The pro forma data is not intended to
be a projection of future results.
The pro forma data included above includes adjustments to historical results
of operations for increased depreciation expense, intangible asset amortization
and interest expense, net of the related tax benefits.
3. IMPAIRMENT AND RESTRUCTURING CHARGES
In July 1997, the Company acquired the net assets of the sportrack division
of Bell Sports Corporation ("Bell") for approximately $13,500 and recorded
goodwill of approximately $1,200, representing the excess of the purchase price
over the then estimated fair value of net assets acquired. In June 1998
information became available which indicated that certain assets acquired from
Bell (accounts receivable, inventory, and tooling) had a fair value less than
originally recorded. The SportRack International purchase was renegotiated and a
$2,000 reimbursement was received from Bell. Accounts receivable, inventory and
tooling were reduced by $6,500 and additional goodwill of $4,500, net of the
$2,000 reimbursement from Bell, was recorded.
During the second half of 1998, management further reassessed the operations
of SportRack International, and as a result took actions to restructure the
operations and rationalize the product offerings, customer and supplier base,
distribution channels and warehousing, and terminated 14 employees, including
certain members of SportRack International's senior management. Concurrent with
the reassessment of the SportRack International's operations, management
reviewed the revised carrying value of goodwill and other intangible assets,
determined that future cash flows would not be sufficient to recover recorded
amounts, and recorded an impairment charge of $7,863.
31
<PAGE> 34
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
3. IMPAIRMENT AND RESTRUCTURING CHARGE -- (CONTINUED)
The SportRack International impairment and restructuring charges are
comprised of the following:
<TABLE>
<S> <C> <C>
Impairment of:
Goodwill ............... $6,116
Other intangible assets 1,747 $7,863
------
Restructuring charges for:
Product rationalization 1,068
Other costs ............ 832 1,900
------ ------
$9,763
======
</TABLE>
The restructuring charge related to inventory has been included in cost of
sales and other costs have been included in selling, administrative and product
development expenses in the accompanying 1998 consolidated statement of
operations. Management believes that substantially all restructuring costs have
been incurred as of December 31, 1998, including cash expenditures during 1998
of $258.
Sales for SportRack International during the year ended December 31, 1998
were approximately $4,000 and total assets as of December 31 1998 were
approximately $7,100 after the impairment charge.
4. LONG-TERM DEBT
Long-term debt is comprised of the following:
<TABLE>
<CAPTION>
OUTSTANDING AT
INTEREST RATE AT DECEMBER 31,
DECEMBER 31, ---------------------
1998 1998 1997
--------------- ---------- --------
<S> <C> <C> <C>
Senior Subordinated Notes, less discount of $435
and $464, respectively ....................... 9.75% $124,565 $124,536
Second Amended and Restated Credit Agreement
(U.S. Credit Facility)
Term note A ............................... 5.09% 14,777 17,065
Term note B ............................... 7.54% 15,592 15,883
Revolving line of credit note ............. -- -- 1,900
Acquisition revolving note ................ 7.09% 21,000 21,000
First Amended and Restated Credit Agreement
(Canadian Credit Facility)
Canadian term note ........................ 7.50% 11,590 13,952
Canadian revolving line of credit note .... -- -- 2,790
-------- --------
187,524 197,126
Less -- current portion ........................ 4,536 3,746
-------- --------
$182,988 $193,380
======== ========
</TABLE>
During 1998, the Company exchanged 100% of its Senior Subordinated Notes
(the "Old Notes") for a new series of notes issued under a registration
statement having terms substantially identical to the Old Notes.
32
<PAGE> 35
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
4. LONG-TERM DEBT -- (CONTINUED)
SENIOR SUBORDINATED NOTES
Borrowings under the Company's Series B Senior Subordinated Notes (the
"Notes"), due October 1, 2007, are unsecured and are subordinated in right of
payment to all existing and future senior indebtedness of the Company, including
the loans under the U.S. and Canadian Credit Agreements described below. The
Company, at its option, may redeem the Notes, in whole or in part, together with
accrued and unpaid interest subsequent to October 1, 2002 at certain redemption
prices as set forth by the indenture, under which the Notes have been issued. In
addition, at any time on or prior to October 1, 2000, the Company may redeem up
to 35% of the aggregate principal amount of the Notes with the net cash proceeds
of one or more public equity offerings at a redemption price equal to 109.75% of
the principal amount to be redeemed. Upon the occurrence of a change of control
of the Company, as defined by the indenture, the Company is required to make an
offer to repurchase the Notes at a price equal to 101% of the principal amount
of the notes. The indenture places certain limits on the Company, the most
restrictive of which include, the incurrence of additional indebtedness by the
Company, the payment of dividends on, and redemption of capital of the Company,
the redemption of certain subordinated obligations, investments, sales of assets
and stock of certain subsidiaries, transactions with affiliates, consolidations,
mergers and transfers of all or substantially all of the Company's assets.
Interest on the Notes is payable semi-annually in arrears on April 1 and October
1 of each year.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
The Company's Second Amended and Restated Credit Agreement ("U.S. Credit
Facility"), which is administered by First Chicago NBD Bank ("NBD") and The
Chase Manhattan Bank ("Chase"), is secured by substantially all the assets of
the Company and places certain restrictions on the Company related to
indebtedness, sales of assets, investments, capital expenditures, dividend
payments, management fees, and members' equity transactions. In addition, the
agreement subjects the Company to certain restrictive covenants, including the
attainment of designated operating ratios and minimum net worth levels. The
Company, at its election, may make prepayments of the term notes under the
credit agreement on a pro-rata basis. Additionally, mandatory prepayments of the
term notes are required in the event of sales of assets meeting certain
criteria, as set forth by the agreement, or based upon periodic calculations of
excess cash flows, as defined by the agreement.
The U.S. Credit Facility provides for two term notes (Term note A and Term
note B), a revolving line of credit note and an acquisition revolving note.
Loans under each of the term notes and the revolving note can be converted, at
the election of the Company, in whole or in part, into Base Rate Loans or
Eurocurrency Loans. Interest is payable in arrears quarterly on Base Rate Loans,
and in arrears in one, two or three months on Eurocurrency Loans, as determined
by the length of the Eurocurrency Loan, as selected by the Company. Interest is
charged at an adjustable rate plus the applicable margin. The applicable margin
is based upon the Company's Senior Debt Ratio, as defined by the Credit
Agreement. Eurocurrency Loans under the Term A note can be made in U.S. dollars
or certain other currencies, at the option of the Company. The U.S. Credit
Facility also provides for a Letter of Credit Facility. At December 31, 1998, no
letters of credit were outstanding.
Term note A
On October 30, 1996 the Company borrowed $65,000 under Term note A. On
October 1, 1997 the Company made a mandatory prepayment totaling $43,475 in
connection with the issuance of the Old Notes. In October 1998, the loan under
Term note A, which was denominated in U.S. Dollars, was exchanged for a loan
denominated in Dutch Guilders. All other provisions of Term note A were
unchanged. At December 31, 1998 the principal balance of Term note A was 27,913
Dutch Guilders. The applicable margin for Term note A ranges from .75% to 2.0%
for Base Rate Loans and from 1.75% to 3.0% for Eurocurrency Loans. Repayments
under the note are required in the following installments:
<TABLE>
<CAPTION>
QUARTERLY
------------------------------------------
<S> <C>
March 31, 1999 through September 30, 1999...................... $ 552
December 31, 1999 through September 30, 2000................... 736
December 31, 2000 through June 30, 2003........................ 883
Final installment on October 30, 2003.......................... 464
</TABLE>
33
<PAGE> 36
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
4. LONG-TERM DEBT -- (CONTINUED)
Term note B
On August 5, 1997, the Company borrowed $55,000 under Term note B. On
October 1, 1997 the Company made a mandatory prepayment totaling $39,044 in
connection with the issuance of the Old Notes. The applicable margin for Term
note B ranges from 1.25% to 2.5% for Base Rate Loans and from 2.25% to 3.5% for
Eurocurrency Loans. Repayments under Term note B are required in the following
installments:
<TABLE>
<S> <C>
March 31, 1999 through September 30, 2003 (quarterly)................................ $ 73
December 31, 2003.................................................................... 2,912
March 30, 2004, June 30, 2004 and October 30, 2004................................... 3,764
</TABLE>
Revolving line of credit note
The Company has the ability to borrow up to $25,000 under the revolving line
of credit which expires on October 30, 2003. Available borrowings, however, are
limited to a defined borrowing base amount equal to 85% eligible domestic
accounts receivable and 80% of certain eligible foreign accounts receivable. The
base borrowing amount is increased by the lesser of the sum of 50% of domestic
eligible inventory and 40% to 50% of certain eligible foreign inventory or
$10,000. Available borrowings are reduced by amounts outstanding under the
Canadian revolving line of credit note described below. The applicable margin
for the revolving line of credit ranges from .75% to 2.0% for Base Rate Loans
and from 1.75% to 3.0% for Eurocurrency Loans. A commitment fee of .375% to .5%
is charged on the unused balance based on the Company's Senior Leverage Ratio,
as defined. At December 31, 1998, $25,000 was available under the facility.
Acquisition revolving note
On December 31, 1997, the Company borrowed $21,000 under its $22,000
acquisition revolving note. The proceeds were used to acquire the net assets of
Ellebi on January 2, 1998, as discussed in Note 2. The note is available to the
Company on a revolving credit basis until September 24, 1999 at which time the
outstanding principal balance will convert to a term loan which will amortize in
sixteen equal quarterly installments with a final maturity of October 30, 2003.
The applicable margin for the acquisition revolving note ranges from .75% to
2.0% for Base Rate Loans and from 1.25% to 3.0% for Eurocurrency Loans. A
commitment fee of .375% to .5% is charged on the unused balance based on the
Company's Senior Leverage Ratio, as defined.
FIRST AMENDED AND RESTATED CREDIT AGREEMENT
The Company's First Amended and Restated Credit Agreement ("Canadian Credit
Facility"), which is administered by NBD and Chase, is secured by substantially
of all the assets of the Company's Canadian subsidiaries and is guaranteed by
the Company.
The Canadian Credit Facility provides for a C$20,000 term note and a C$4,000
revolving note, (U.S. $13,068 and U.S. $2,614) at December 31, 1998,
respectively. Loans under each of the notes can be converted at the election of
the company, in whole or in part, into Floating Rate advances, U.S. Base Rate
advances or LIBOR advances. Floating rate advances are denominated in Canadian
dollars and bear interest at a variable rate based on the bank's prime lending
rate plus a variable margin. U.S. Base Rate advances are denominated in U.S.
dollars and bear interest at the bank's prime lending rate plus a variable
margin. LIBOR advances are denominated in U.S. dollars and bear interest at
LIBOR plus a variable margin. The variable margin is based upon the Company's
Senior Debt Ratio, as defined by the Canadian Credit Facility and ranges from
.5% to 1.75% for U.S. Base Rate advances and from 1.5% to 2.75% for LIBOR
advances.
34
<PAGE> 37
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
4. LONG-TERM DEBT -- (CONTINUED)
Canadian term note
Repayments under the Canadian term note are required in the following
installments:
<TABLE>
<CAPTION>
QUARTERLY
------------------------------------------
<S> <C>
March 31, 1999 through September 30, 1999.......................... $ 430
December 31, 1999 through September 30, 2000....................... 563
December 31, 2000 through June 30, 2003............................ 671
Final installment on October 30, 2003.............................. 667
</TABLE>
Canadian revolving line of credit note
A commitment fee of .5% is charged on the unused balance of the Canadian
revolving line of credit note.
SENIOR SUBORDINATED LOANS
On October 30, 1996, the Company borrowed $20,000 under its Senior
Subordinated Note Purchase Agreement ("Senior Subordinated Loans") with CB
Capital and International Mezzanine. The Senior Subordinated Loans were repaid
in full on October 1, 1997 with the proceeds of the Notes discussed above.
Interest on the Senior Subordinated Loans was payable in arrears semiannually
and accrued at a rate of 12.5% per annum. The Senior Subordinated Loans provided
for a prepayment penalty if the Senior Subordinated Loans were paid prior to
October 30, 2002. Under this provision, a prepayment penalty totaling $1,400 was
paid in 1997 and is included in the extraordinary charge resulting from debt
extinguishment.
In connection with the issuance of the Senior Subordinated Loans, the
Company issued warrants to purchase 1,002 membership units. The warrants have an
exercise price of one cent per warrant, are exercisable immediately, and expire
October 30, 2004. As provided in the Warrant Agreement, the warrant holder can
put the warrants and membership units acquired through the exercise of the
warrants back to the Company after October 30, 2001 or upon occurrence of a
Triggering Event, as defined, but prior to the earlier of October 30, 2004 or
the consummation of a Qualified Public Offering for an amount equal to Fair
Market Value, as defined. Additionally, as provided in the Warrant Agreement,
the Company may call the warrants and membership units acquired through the
exercise of the warrants at any time after the sixth anniversary of the Closing
Date, but prior to the earlier of October 30, 2004 or a Qualified Public
Offering for an amount equal to Fair Market Value, as defined.
At the date of issuance, the proceeds from the Senior Subordinated Loans
were allocated between the Senior Subordinated Loans and the warrants based upon
their estimated relative fair market value; accordingly, the Senior Subordinated
Loans were recorded at a discount of $3,498, which was partially amortized prior
to repayment on October 1, 1997. The remaining unamortized balance of $3,145 was
charged to 1997 operations as part of the extraordinary charge resulting from
debt extinguishment.
The warrants are being accreted to their redemption value through periodic
charges against Members' Equity through the earlier of October 30, 2001 or the
time redemption first becomes available. Thereafter the warrants will be
recorded at redemption value. The aforementioned warrants have been presented as
mandatorily redeemable warrants in the accompanying balance sheets.
JUNIOR SUBORDINATED NOTE
On October 30, 1996, the Company issued a 12,500 Junior Subordinated Note
("Junior Note"), denominated in Dutch Guilders, to Brink Holdings B.V. as part
of the consideration paid for the purchase of Brink B.V. The Junior Note was due
April 30, 2005, but was repaid in full on October 1, 1997 with the proceeds of
the Old Notes discussed above. The Junior Note accrued interest at a rate of 7%
per annum, payable semi-annually in arrears.
35
<PAGE> 38
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
4. LONG-TERM DEBT -- (CONTINUED)
EXTINGUISHMENT OF DEBT
1997 Extinguishments
As discussed above, on October 1, 1997 the Company repaid, in full, its
Senior Subordinated Loans and Junior Note and prepaid a portion of the term
notes under the U.S. Credit Facility. In connection with this extinguishment,
the Company recorded an extraordinary charge of $7,416, net of a tax benefit of
$365. The extinguishment charge is comprised of $1,400 prepayment penalties,
$3,145 of unamortized debt discount and $3,236 of unamortized debt issuance
costs.
1996 Extinguishments
On October 30, 1996, the Company prepaid all amounts outstanding under a
$30,000 credit agreement and a prior $11,000 senior subordinated loan agreement.
In connection with these extinguishments, the Company recorded an extraordinary
charge of $1,970. The extinguishment charge is comprised of prepayment penalties
totaling $220, unamortized debt discount totaling $150 and debt issuance costs
of $1,600.
In connection with the issuance of the prior senior subordinated loan, the
Company issued warrants to purchase 617 membership units. The proceeds from the
issuance were allocated based on the estimated relative fair market values;
accordingly, the notes were recorded at a discount of $200. As part of the
extinguishment of the prior senior subordinated loan, the Company paid $1,600 to
redeem the warrants.
INTEREST RATE RISK
The Company is exposed to interest rate volatility with regard to variable
rate debt. The Company uses interest rate swaps to reduce interest rate
volatility. At December 31, 1998 and 1997, the notional value of interest rate
swaps was $18,500. Under the terms of the interest rate swap agreements, the
Company pays a fixed interest rate on debt equal to the notional value. The
effects of interest rate swaps are reflected in interest expense.
SCHEDULED MATURITIES
The aggregate scheduled annual principal payments due in each of the years
ending December 31, is as follows:
<TABLE>
<S> <C>
1999............................................................ $ 4,536
2000............................................................ 10,994
2001............................................................ 11,757
2002............................................................ 11,757
2003............................................................ 12,623
2004 and thereafter............................................. 136,292
---------
187,959
Less -- discount................................................ 435
---------
$ 187,524
=========
</TABLE>
36
<PAGE> 39
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
5. INCOME TAXES
The Company's C corporation subsidiaries and taxable foreign subsidiaries
account for income taxes in accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes". The Company and certain
domestic subsidiaries are limited liability corporations; as such, the Company's
earnings are included in the taxable income of the Company's members. Income
(loss) before minority interest, income taxes and the pre-tax charge resulting
from debt extinguishment were attributable to the following sources:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
United States .................. $ 10,002 $ 2,872 $ 6,283
Foreign ........................ (9,189) (9,941) (1,844)
-------- -------- --------
$ 813 $ (7,069) $ 4,439
======== ======== ========
</TABLE>
The provision (benefit) for income taxes, including $365 of income tax
benefit allocated to the extraordinary charge in 1997, is comprised of the
following:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
CURRENTLY PAYABLE (REFUNDABLE)
United States .............. $ -- $ -- $ --
Foreign .................... 1,591 290 (128)
------- ------- -------
1,591 290 (128)
------- ------- -------
DEFERRED
United States .............. -- -- --
Foreign .................... (688) (3,511) (363)
------- ------- -------
903 (3,511) (363)
------- ------- -------
$ 903 $(3,221) $ (491)
======= ======= =======
</TABLE>
The effective tax rates differ from the U.S. federal income tax rate as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------------------------
1998 1997 1996
----------- ----------- -------
<S> <C> <C> <C>
Income tax provision (benefit) at U.S. statutory rate (35%) $ 286 $(2,474) $ 1,554
U. S. income taxes attributable to members................. (3,502) (1,005) (2,200)
Change in valuation allowance.............................. 4,225 -- --
Nondeductible foreign goodwill............................. 270 229 102
Foreign rate differences and other, net.................... (376) 29 53
------- ------- -------
$ 903 $(3,221) $ (491)
======= ======= =======
</TABLE>
Deferred tax assets and liabilities, related primarily to the Company's
foreign subsidiaries, comprise the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1997
------- -------
<S> <C> <C>
DEFERRED TAX ASSETS
Net operating loss carryforwards of foreign subsidiaries..................... $ 4,689 $ 3,255
Fixed assets................................................................. 5,185 296
Goodwill..................................................................... 621 --
Inventory.................................................................... 150 --
Other........................................................................ 427 75
------- -------
11,072 3,626
------- -------
DEFERRED TAX LIABILITIES
Fixed assets................................................................. (5,816) (3,296)
Inventory.................................................................... (1,363) (1,244)
Employee benefits and other.................................................. (159) (176)
Other........................................................................ (166) (162)
------- -------
(7,504) (4,878)
Valuation allowance.......................................................... (4,225) --
------- ------
Net deferred tax liability................................................... $ (657) $(1,252)
======= =======
</TABLE>
37
<PAGE> 40
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
5. INCOME TAXES -- (CONTINUED)
The net operating loss carryforwards of the Company's European subsidiaries
approximate $1,300 at December 31, 1998 and have no expiration date. The net
operating loss carryforwards of the Company's Canadian subsidiaries approximate
$11,000 at December 31, 1998 and expire primarily in 2005. During 1998, the
Company recorded a valuation allowance of $4,225 based upon management's current
assessment of the likelihood of realizing the Canadian subsidiaries' deferred
tax assets. Management believes that it is more likely than not that the related
deferred tax assets recorded for its other subsidiaries will be realized and no
valuation allowance has been provided against such amounts as of December 31,
1998. If certain substantial changes in the Company's ownership should occur,
there could be an annual limit on the amount of certain carryforwards which can
be utilized.
6. RELATED PARTY TRANSACTIONS AND ALLOCATIONS
In connection with the acquisition of Brink B.V., the Company entered into
the Junior Note Agreement, with Brink Holdings B.V., as described in Note 4 to
the financial statements. Concurrent with this acquisition, owners of Brink
Holdings B.V. purchased 1,230 membership units of the Company for cash of $4,286
($3,485 per unit).
A portion of the Company's U.S. Credit Facility and $20,000 Senior
Subordinated Loans, as described in Note 4, is with Chase and CB Capital
Investors, Inc., respectively, affiliates of certain members of the Company.
Charges to operations related to consulting services provided to the Company
by certain members of the Company aggregated approximately, $386, $350 and $243
for the years ended December 31, 1998, 1997 and 1996, respectively.
Certain employees and consultants of the Company hold Class A Units of the
Company.
7. OPTION PLAN
The Company adopted the disclosure requirements of Financial Accounting
Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based Compensation". The
Company, however, has elected to continue to measure compensation cost using the
intrinsic value method, in accordance with APB Opinion 25 ("APB 25"),
"Accounting for Stock Issued to Employees".
The Company has issued options to purchase Class A Units which are
outstanding under the Company's 1995 Option Plan ("the Plan"). As of December
31, 1998 and 1997, the Company was authorized under the Plan to issue options to
purchase up to 4,200 Class A Units to officers, directors and employees of the
Company and its subsidiaries. At December 31, 1998, there were 229 options that
remained available for grant under the Plan.
Information concerning options to purchase Class A Units is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------------------ ------------------------ -----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
NUMBER OF EXERCISE NUMBER OF EXERCISE NUMBER OF EXERCISE
UNITS PRICE UNITS PRICE UNITS PRICE
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at January 1.............. 3,903 $ 1,415 3,525 $ 1,000 2,925 $ 1,000
Options granted....................... 280 $ 3,135 378 $ 5,287 600 $ 1,000
Options exercised..................... -- -- -- -- -- --
Options cancelled..................... 212 $ 5,035 -- -- -- --
----- ------- -------
Outstanding at December 31............ 3,971 $ 1,343 3,903 $ 1,415 3,525 $ 1,000
===== ======= =======
Exercisable at December 31............ 1,654 $ 1,367 938 $ 1,000 480 $ 1,000
===== ======= =======
</TABLE>
38
<PAGE> 41
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
7. OPTION PLAN -- (CONTINUED)
Options granted vest as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER OF EXERCISE
UNITS PRICE VESTING PERIOD
--------- --------- ---------------------------------------------------
<S> <C> <C>
215 $ 3,029 Options vest immediately.
2,854 $ 1,200 Options vest over periods, generally up to ten years, as determined by the Option
Committee. Vesting may be accelerated based on the results of a Liquidity Event, as
defined in the Plan, or based upon the achievement of certain operating results of
the Company or its subsidiaries.
275 $ 1,000 Options vest based on the results of a Liquidity Event, as defined in the Plan.
627 $ 1,566 Options vest based upon achievement of certain operating results of the Company.
</TABLE>
The Company has elected to continue applying the provisions of APB 25 and
accordingly, recognized compensation cost of $558, $263 and $332 for the years
ended December 31, 1998, 1997 and 1996, respectively. If compensation cost and
the fair value of options granted had been determined based upon the fair value
method in accordance with SFAS 123, the pro forma net income (loss) of the
Company would have been ($290), ($3,985) and $4,846 the years ended December 31,
1998, 1997 and 1996, respectively. The weighted average fair value of options
granted was $2.4, $0.2 and $0.4 for the years ended December 31, 1998, 1997 and
1996, respectively.
The fair value of options granted and related pro forma compensation cost
were estimated using the Black-Scholes option-pricing model with the following
assumptions:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- ------
<S> <C> <C> <C>
Dividend yield ................ 0.0% 0.0% 0.0%
Risk-free rate of return ...... 5.50% 6.12% 6.21%
Expected option term (in years) 8 8 8
</TABLE>
The following table summarizes the status of the Company's options
outstanding and exercisable at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-----------------------------
WEIGHTED
AVERAGE
REMAINING
EXERCISE CONTRACTUAL OPTIONS
PRICES UNITS LIFE EXERCISABLE
------ ----- ---- -----------
<S> <C> <C> <C>
$1,000 3,525 12 1,396
$3,029 215 14 215
$3,485 65 14 13
$5,610 166 14 30
</TABLE>
8. PENSION PLANS
The Company has a defined benefit pension plan covering substantially all of
SportRack, LLC's domestic employees covered under a collective bargaining
agreement. An employee's monthly pension benefit is determined by multiplying a
defined dollar amount by the years of credited service earned. Plan assets are
comprised principally of marketable equity securities and short-term
investments. The Company's funding policy is to contribute annually the amounts
necessary to comply with ERISA funding requirements.
39
<PAGE> 42
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
8. PENSION PLANS -- (CONTINUED)
The following table sets forth the change in the plan's benefit obligations
and plan assets, and the funded status of the plan as of and for the years ended
December 31, 1998 and 1997:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1998 1997
--------- -------
<S> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year.................................... $ 1,929 $ 1,637
Benefits earned during the year............................................ 99 76
Interest on projected benefit obligation................................... 140 124
Actuarial loss............................................................. 202 217
Benefits paid.............................................................. (69) (125)
------ ------
Benefit obligation at end of year.......................................... 2,301 1,929
------ ------
Change in plan assets:
Market value of assets at beginning of year................................ 1,586 1,308
Actual return on plan assets............................................... 167 303
Employer contributions..................................................... 147 100
Benefits paid.............................................................. (69) (125)
------- -------
Market value of assets at end of year...................................... 1,831 1,586
------- -------
Funded status................................................................. (470) (343)
Unrecognized prior service cost............................................... 9 11
Unrecognized net (gain) loss.................................................. 49 (133)
------- -------
Accrued pension cost.......................................................... $ (412) $ (465)
======= =======
</TABLE>
The weighted average discount rate used in determining the actuarial present
value of the accumulated benefit obligation was 6.75% and 7.00% at December 31,
1998 and 1997, respectively. The expected long-term rate of return on plan
assets was 9.00% at December 31, 1998 and 1997.
The Company has various defined contribution retirement plans for its
domestic and certain foreign subsidiaries, including 401(k) plans, whereby
participants can contribute a portion of their salary up to certain maximums
established by the related plan documents. The Company makes matching
contributions, which are based upon the amounts contributed by employees. The
Company's matching contributions charged to operations aggregated $306, $229 and
$130 in 1998, 1997 and 1996, respectively.
Substantially all of the employees of Brink International B.V. are covered
by a union-sponsored, collectively-bargained, multi-employer defined benefit
plan. Pension expense was $1,302, $660 and $118 for the years ended December 31,
1998 and 1997 and for the two-month period from November 1, 1996 through
December 31, 1996, respectively.
9. OPERATING LEASES
The Company leases certain equipment under leases expiring on various dates
through 2004. Future minimum annual lease payments required under leases that
have a noncancellable lease term in excess of one year at December 31, 1998 are
as follows:
<TABLE>
<S> <C>
1999.................................................................................. $ 2,927
2000.................................................................................. 2,332
2001.................................................................................. 1,924
2002.................................................................................. 1,478
2003 and thereafter................................................................... 868
-------
$ 9,529
=======
</TABLE>
Rental expense charged to operations was approximately $3,947, $2,252 and
$669 for the years ended December 31, 1998, 1997 and 1996, respectively.
40
<PAGE> 43
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
10. ACCOUNT BALANCES
Account balances included in the consolidated balance sheets are comprised
of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1998 1997
--------- ------
<S> <C> <C>
INVENTORIES
Raw materials.............................................................. $12,805 $13,744
Work-in-process............................................................ 12,707 5,040
Finished goods............................................................. 17,575 15,624
------- -------
$43,087 $34,408
======= =======
PROPERTY AND EQUIPMENT
Land, buildings and improvements........................................... $22,552 $20,966
Furniture, fixtures and computer hardware.................................. 8,137 6,299
Machinery, equipment and tooling........................................... 46,003 32,458
Construction-in-progress................................................... 1,984 1,985
------- -------
78,676 61,708
Less -- accumulated depreciation........................................... (17,381) (8,148)
------- -------
$61,295 $53,560
======= =======
ACCRUED LIABILITIES
Compensation and benefits.................................................. $ 9,239 $ 8,900
Interest................................................................... 3,256 3,154
Income taxes............................................................... 1,692 646
Other taxes................................................................ 766 478
Other...................................................................... 6,382 4,732
------- -------
$21,335 $17,910
======= =======
</TABLE>
11. COMMITMENTS AND CONTINGENCIES
The Company is party to various claims, lawsuits and administrative
proceedings related to matters arising out of the normal course of business.
Management believes that the resolution of these matters will not have a
material adverse effect on the financial position, results of operations or cash
flows of the Company.
12. SEGMENT INFORMATION
The Company operates in one reportable segment, providing towing and rack
systems and related accessories to the automotive OEM and aftermarket. All sales
are to unaffiliated customers. Revenues by geographic area, accumulated by the
geographic area where the revenue originated, revenues by product line and
long-lived assets, which include net property and equipment and net goodwill and
debt issuance costs, by geographic area are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------------------------
1998 1997 1996
----------- ----------- --------
<S> <C> <C> <C>
REVENUES
United States.................................................... $ 190,300 $ 122,294 $73,895
The Netherlands.................................................. 35,543 36,268 2,791
Italy............................................................ 19,900 -- --
Other foreign.................................................... 44,396 30,116 4,780
--------- --------- -------
$ 290,139 $ 188,678 $81,466
========= ========= =======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------------------------
1998 1997 1996
----------- ----------- --------
<S> <C> <C> <C>
REVENUES
Towing systems.................................................. $ 175,236 $ 100,293 $ 7,571
Rack systems.................................................... 114,903 88,385 73,895
--------- --------- ---------
$ 290,139 $ 188,678 $ 81,466
========= ========= =========
</TABLE>
41
<PAGE> 44
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
12. SEGMENT INFORMATION -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1998 1997
----------- ---------
<S> <C> <C>
LONG-LIVED ASSETS
United States........................................................ $ 93,628 $ 94,931
The Netherlands...................................................... 33,432 32,508
Italy................................................................ 10,774 --
Other foreign........................................................ 16,511 20,845
-------- --------
$154,345 $148,284
======== ========
</TABLE>
The Company has two significant customers in the automotive OEM industry.
Sales to these customers represented 32% and 11% for the year ended December 31,
1998, 29% and 13% for the year ended December 31, 1997 and 60% and 21% for the
year ended December 31, 1996. Accounts receivable from these customers
represented 42% and 6% of the Company's trade accounts receivable at December
31, 1998, and 33% and 8% at December 31, 1997, respectively.
Although the Company is directly affected by the economic well being of the
industries and customers referred to above, management does not believe
significant credit risk exists at December 31, 1998. Consistent with industry
practice, the Company does not require collateral to reduce such credit risk.
13. CONDENSED CONSOLIDATING INFORMATION
The Notes have been issued by the Company and its wholly-owned subsidiary,
AAS Capital Corporation and are guaranteed on a full and unconditional and joint
and several basis, by all of the Company's wholly-owned domestic subsidiaries.
The following condensed consolidating financial information for 1998 and 1997
presents the financial position, results of operations and cash flows of (i) the
Company as parent, as if it accounted for its subsidiaries on the equity method,
and AAS Capital Corporation as issuers; (ii) guarantor subidiaries which are
domestic, wholly-owned subidiaries and include SportRack LLC, AAS Holdings,
Inc., Valley Industries, LLC, and ValTek LLC; and (iii) the non-guarantor
subsidiaries which are foreign, wholly-owned subsidiaries and include Brink
International B.V., SportRack International, Inc., and SportRack Automotive,
GmbH. The financial position and operating results of the guarantor and
non-guarantor subsidiaries for the year ended December 31, 1998 include a
management fee of $1,198 and $318, respectively, in addition to having been
charged interest on their intercompany balances. For the year ended December 31,
1997 the financial position and operating results of the guarantor and
non-guarantor subsidiaries do not include any allocation of overhead or similar
charges except that certain foreign subsidiaries were charged interest on their
intercompany debt balance. Separate financial statements of the guarantor
subsidiaries are not presented because management has determined that the
separate financial statements are not material to investors. Since its formation
in September 1997, AAS Capital Corporation has had no operations and has no
assets or liabilities at December 31, 1998.
Guarantor subsidiaries for 1996 include SportRack LLC and AAS Holdings, Inc.
and their financial statements are substantially those of the Company and
include Brink, a non-guarantor subsidiary acquired October 30, 1996. The 1996
consolidated results of operations include Brink for the two months ended
December 31, 1996 and reflect Brink's net sales of $7,571 and a net loss of
$1,353. At December 31, 1996, Brink's total assets and total liabilities were
$86,348 and $75,574, respectively. ValTek, LLC was formed in November 1997 and
is not significant.
42
<PAGE> 45
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
13. CONDENSED CONSOLIDATING INFORMATION -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR ELIMINATIONS/
ISSUERS SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
------------ ----------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash................................... $ -- $ 5,636 $ 5,604 $ -- $ 11,240
Accounts receivable.................... -- 28,437 12,290 -- 40,727
Inventories............................ -- 15,630 27,457 -- 43,087
Deferred income taxes and other
current assets........................ 4 2,687 1,553 -- 4,244
----------- ----------- ----------- ----------- ----------
Total current assets.............. 4 52,390 46,904 -- 99,298
----------- ----------- ----------- ----------- ----------
Property and equipment, net.............. -- 28,416 32,879 -- 61,295
Goodwill, net............................ 1,105 59,261 26,713 -- 87,079
Other intangible assets, net............. 4,846 300 1,446 -- 6,592
Deferred income taxes and other
noncurrent assets...................... 28 2,285 2,404 -- 4,717
Investment in subsidiaries............... 34,373 10,022 -- (44,395) --
Intercompany notes receivable............ 109,300 -- -- (109,300) --
------------ ----------- ----------- ------------ ---------
Total assets...................... $ 149,656 $ 152,674 $ 110,346 $ (153,695) $ 258,981
============ =========== =========== =========== ==========
LIABILITIES AND MEMBERS'
EQUITY
Current liabilities
Current maturities of long-term debt... $ -- $ -- $ 4,536 $ -- $ 4,536
Accounts payable....................... -- 14,260 8,855 -- 23,115
Accrued liabilities and deferred
income taxes......................... 3,702 6,995 11,718 -- 22,415
------------ ----------- ----------- ----------- ----------
Total current liabilities......... 3,702 21,255 25,109 -- 50,066
------------ ----------- ----------- ----------- ----------
Deferred income taxes and other
noncurrent liabilities................. 1,153 1,255 3,963 -- 6,371
Long-term debt, less current maturities.. 124,565 -- 58,423 -- 182,988
Intercompany debt........................ -- 77,951 31,349 (109,300) --
Mandatorily redeemable warrants.......... 4,409 -- -- -- 4,409
Members' equity.......................... 15,827 52,213 (8,498) (44,395) 15,147
------------ ----------- ----------- ----------- ----------
Total liabilities and members'
equity............................ $ 149,656 $ 152,674 $ 110,346 $ (153,695) $ 258,981
============ =========== =========== ========== ==========
</TABLE>
43
<PAGE> 46
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
13. CONDENSED CONSOLIDATING INFORMATION -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1997
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR ELIMINATIONS/
ISSUERS SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash................................... $ -- $ 2,217 $ 25,131 $ -- $ 27,348
Accounts receivable.................... -- 31,649 11,874 -- 43,523
Inventories............................ -- 14,835 19,573 -- 34,408
Other current assets................... -- 4,912 1,619 -- 6,531
----------- ----------- ----------- ----------- ----------
Total current assets.............. -- 53,613 58,197 -- 111,810
----------- ----------- ----------- ----------- ----------
Property and equipment, net.............. -- 28,009 25,551 -- 53,560
Goodwill, net............................ 1,145 61,431 23,313 -- 85,889
Other intangible assets, net............. 5,558 722 3,683 -- 9,963
Deferred income taxes and other
noncurrent assets...................... -- 384 3,952 -- 4,336
Investment in subsidiaries............... 26,500 10,022 -- (36,522) --
Intercompany notes receivable............ 115,056 -- -- (115,056) --
------------ ----------- ----------- ----------- ---------
Total assets...................... $ 148,259 $ 154,181 $ 114,696 $ (151,578) $ 265,558
============ =========== =========== =========== ==========
LIABILITIES AND MEMBERS'
EQUITY
Current liabilities
Current maturities of long-term debt... $ -- $ -- $ 3,746 $ -- $ 3,746
Accounts payable....................... -- 19,053 3,965 -- 23,018
Accrued liabilities and deferred
income taxes......................... 3,607 7,180 8,456 -- 19,243
----------- ----------- ----------- ----------- ----------
Total current liabilities......... 3,607 26,233 16,167 -- 46,007
------------ ----------- ----------- ----------- ----------
Deferred income taxes and other
noncurrent liabilities................. 595 1,318 4,307 -- 6,220
Long-term debt, less current maturities.. 126,436 -- 66,944 -- 193,380
Intercompany debt........................ -- 89,218 25,838 (115,056) --
Mandatorily redeemable warrants.......... 3,507 -- -- -- 3,507
Members' equity.......................... 14,114 37,412 1,440 (36,522) 16,444
------------ ----------- ----------- ----------- ----------
Total liabilities and members'
equity............................ $ 148,259 $ 154,181 $ 114,696 $ (151,578) $ 265,558
============ =========== =========== =========== ==========
</TABLE>
44
<PAGE> 47
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
13. CONDENSED CONSOLIDATING INFORMATION -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR ELIMINATIONS/
ISSUERS SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net sales................................ $ -- $ 190,300 $ 99,839 $ -- $ 290,139
Cost of sales............................ -- 142,156 71,279 -- 213,435
---------- ---------- ----------- ---------- ----------
Gross profit........................... -- 48,144 28,560 -- 76,704
Selling, administrative and product
development expenses................... 1,560 23,631 25,648 -- 50,839
Amortization of intangible assets........ 40 2,314 1,197 -- 3,551
Impairment charge -- -- 7,863 -- 7,863
---------- ---------- ----------- ---------- ----------
Operating income (loss)................ (1,600) 22,199 (6,148) -- 14,451
Interest expense......................... 3,700 6,888 8,045 -- 18,633
Equity in net income (loss) of
subsidiaries 5,024 -- -- (5,024) --
Foreign currency gain.................... -- -- 4,995 -- 4,995
---------- ---------- ----------- ---------- ----------
Income (loss) before income taxes........ (276) 15,311 (9,198) (5,024) 813
Provision for income taxes............... -- -- 903 -- 903
---------- ---------- ----------- ---------- ----------
Net income (loss)........................ $ (276) $ 15,311 $ (10,101) $ (5,024) $ (90)
========== ========== =========== ========== ==========
</TABLE>
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR ELIMINATIONS/
ISSUERS SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net sales................................ $ -- $ 122,294 $ 66,384 $ -- $ 188,678
Cost of sales............................ -- 89,647 45,909 -- 135,556
---------- ---------- ----------- ---------- ----------
Gross profit........................... -- 32,647 20,475 -- 53,122
Selling, administrative and product
development expenses................... 721 14,685 15,944 -- 31,350
Amortization of intangible assets........ 53 1,571 712 -- 2,336
---------- ---------- ----------- ---------- ----------
Operating income (loss)................ (774) 16,391 3,819 -- 19,436
Interest expense......................... 3,348 3,760 5,519 -- 12,627
Equity in net income (loss) of
subsidiaries........................... 5,169 -- -- (5,169) --
Foreign currency gain (loss)............. 1,041 -- (7,138) -- (6,097)
---------- ---------- ----------- ---------- ----------
Income (loss) before minority interest
and income taxes...................... 2,088 12,631 (8,838) (5,169) 712
Provision (benefit) for income taxes..... -- -- (2,856) -- (2,856)
---------- ---------- ----------- ---------- -----------
Income (loss) before minority
interest............................. 2,088 12,631 (5,982) (5,169) 3,568
Minority interest........................ -- 97 -- -- 97
---------- ---------- ---------- ---------- ----------
Extraordinary charge resulting from debt
extinguishment....................... 6,153 525 738 -- 7,416
---------- ---------- ----------- ---------- ----------
Net income (loss)........................ $ (4,065) $ 12,009 $ (6,720) $ (5,169) $ (3,945)
========== ========== =========== ========== ===========
</TABLE>
45
<PAGE> 48
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
13. CONDENSED CONSOLIDATING INFORMATION -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR ELIMINATIONS/
ISSUERS SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net cash provided by (used for) operating
activities.............................. $ (4,216) $ 18,479 $ 7,616 $ -- $ 21,879
----------- --------- ---------- ---------- ----------
Cash flows from investing activities:
Acquisition of property and
equipment............................. -- (4,358) (5,640) -- (9,998)
Amount due from sellors of Valley
Industries, Inc....................... -- 1,150 -- -- 1,150
Acquisition of subsidiaries, net of cash
acquired.............................. -- -- (22,770) -- (22,770)
---------- --------- ---------- ---------- ----------
Net cash used for investing activities -- (3,208) (28,410) -- (31,618)
---------- ---------- ---------- ---------- ----------
Cash flows provided by (used for)
financing activities:
Change in intercompany debt............. 6,101 (11,657) 5,556 -- --
Net reduction in revolving loan......... (1,900) -- (2,605) -- (4,505)
Repayment of debt....................... -- -- (3,682) -- (3,682)
Issuance of membership units............ 29 -- -- -- 29
Repurchase of membership units (14) -- -- -- (14)
Distributions from subsidiaries......... 195 -- -- (195) --
Distributions to members................ (195) (195) -- 195 (195)
---------- --------- ---------- ---------- ----------
Net cash provided by (used for)
financing activities................ 4,216 (11,852) (731) -- (8,367)
---------- --------- ---------- ---------- ----------
Effect of exchange rate changes........... -- -- 1,998 -- 1,998
---------- --------- ---------- ---------- ---------
Net increase (decrease) in cash........... -- 3,419 (19,527) -- (16,108)
Cash at beginning of period............... -- 2,217 25,131 -- 27,348
---------- --------- ---------- ---------- ----------
Cash at end of period..................... $ -- $ 5,636 $ 5,604 $ -- $ 11,240
========== ========= ========== ========== ==========
</TABLE>
46
<PAGE> 49
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
13. CONDENSED CONSOLIDATING INFORMATION -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR ELIMINATIONS/
ISSUERS SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net cash provided by (used for ) operating
activities.............................. $ 3,522 $ 5,092 $ (1,632) $ -- $ 6,982
---------- --------- ---------- ---------- ----------
Cash flows from investing activities:
Acquisition of property and
equipment............................. -- (6,005) (1,746) -- (7,751)
Amount due from sellors of Valley
Industries, Inc. -- (1,150) -- -- (1,150)
Acquisition of subsidiaries, net of cash
acquired.............................. -- (56,478) (14,354) -- (70,832)
---------- --------- ---------- ---------- ----------
Net cash used for investing activities -- (63,633) (16,100) -- (79,733)
---------- ---------- ---------- ---------- ----------
Cash flows provided by (used for)
financing activities:
Change in intercompany debt............. (99,971) 76,412 23,559 -- --
Proceeds from issuance of debt.......... 124,529 55,000 35,521 -- 215,050
Increase (decrease) in revolving loan... 1,900 (4,300) 2,904 -- 504
Repayment of debt....................... (27,699) (63,500) (22,049) -- (113,248)
Debt issuance costs..................... (7,280) -- -- -- (7,280)
Issuance of membership units............ 4,999 -- -- -- 4,999
Distributions from subsidiaries......... 2,915 -- -- (2,915) --
Distributions to members................ (2,915) (2,945) -- 2,915 (2,945)
---------- --------- ---------- ---------- ----------
Net cash provided by (used for)
financing activities................ (3,522) 60,667 39,935 -- 97,080
----------- --------- ---------- ---------- ----------
Effect of exchange rate changes........... -- -- 505 -- 505
---------- --------- ---------- ---------- ---------
Net increase in cash...................... -- 2,126 22,708 -- 24,834
Cash at beginning of period............... -- 91 2,423 -- 2,514
---------- --------- ---------- ---------- ----------
Cash at end of period..................... $ -- $ 2,217 $ 25,131 $ -- $ 27,348
========== ========= ========== ========== ==========
</TABLE>
47
<PAGE> 50
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. MANAGERS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the names and ages of each of the individuals
that currently serves as a member (each, a "Board Member") of the Company's
board of managers (the "Board of Managers"), executive officer and other
significant employee of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
--------------------- ---- -----------------------------------------------
<S> <C> <C>
F. Alan Smith........ 67 Chairman of the Board of Managers of the Company
Marshall D. Gladchun. 51 President and Chief Executive Officer of the
Company and SportRack; Board Member
Roger T. Morgan...... 54 President and Chief Executive Officer of Valley;
Board Member
Gerrit de Graaf...... 35 General Manager and Chief Executive Officer of
Brink; Board Member
Terence C. Seikel.... 42 Vice President of Finance and Administration and
Chief Financial Officer of the Company and SportRack
Richard E. Borghi.... 52 Executive Vice President and Chief Operating
Officer of SportRack
J. Wim Rengelink..... 44 Managing Director of Brink
Gary K. Houston...... 45 Vice President of OEM Operations of Valley
Bryan A. Fletcher.... 39 Vice President of Aftermarket Operations of Valley
Donald J. Hofmann, Jr 41 Board Member, Vice President and Secretary of the Company
Barry Banducci....... 63 Board Member
Gerard J. Brink...... 55 Board Member
</TABLE>
F. Alan Smith has served in the automotive industry for 37 years and has
been Chairman of the Board of Managers of the Company since its formation in
September 1995. He served in various assignments at General Motors from 1956 to
1992, including President of GM Canada from 1978 to 1980. He was a member of the
Board of Directors of General Motors from 1981 to 1992 and Chief Financial
Officer of General Motors from 1981 to 1988. Mr. Smith is a director of The
Minnesota Mining and Manufacturing Corporation ("3M"), TransPro, Inc.
("TransPro").
Marshall D. Gladchun has served in the automotive industry for 25 years and
has been President and Chief Executive Officer of the Company and SportRack
since September 1995. From 1986 to 1995, he held various senior management
positions with MascoTech, and was President and Chief Operating Officer of the
MascoTech Division at the time of its acquisition by the Company.
Roger T. Morgan has served in the automotive industry for 36 years and has
been President and Chief Executive Officer of Valley since June 1990. Prior to
joining Valley, he worked for General Motors for 12 years and Rockwell
International Automotive Group as Vice President --Operations for 14 years.
Gerrit de Graaf has been General Manager and Chief Executive Officer of
Brink since November 1996. From 1989 to 1996, Mr. de Graaf worked for Philips
Medical Systems as a consultant and most recently as Philips' Marketing Manager
in the United States.
Terence C. Seikel has served in the automotive industry for 15 years and has
been Vice President of Finance and Administration and Chief Financial Officer of
the Company and SportRack since January 1996. From 1985 to 1996, Mr. Seikel was
employed by Larizza Industries, a publicly held supplier of interior trim to the
automotive industry, in various capacities including Chief Financial Officer.
Richard E. Borghi has served in the automotive industry for 31 years and has
been Executive Vice President of Operations and Chief Operating Officer of
SportRack since 1995. From 1988 to 1995, Mr. Borghi held various senior
management positions with MascoTech, and was the Executive Vice President of
Operations of the MascoTech Division at the time of its acquisition by the
Company.
J. Wim Rengelink has served in the automotive industry for 12 years and has
been Managing Director of Brink since 1995. From 1988 to 1995 he worked in
Brink's internal audit department.
48
<PAGE> 51
Gary K. Houston has served in the automotive industry for 25 years and has
been Vice President of OEM Operations of Valley since 1995. From 1991 to 1995 he
was Vice President of Manufacturing of Valley. Prior thereto, Mr. Houston worked
for Rockwell International for 18 years, most recently as a manufacturing
manager.
Bryan A. Fletcher has served in the automotive industry for 10 years and has
been Vice President of Aftermarket Operations of Valley since 1991.
Donald J. Hofmann, Jr. has been a Board Member, Vice President and Secretary
of the Company since October 1995. Mr. Hofmann has been a General Partner of CCP
since 1992. Prior to joining CCP, Mr. Hofmann held positions in the Acquisition
Finance Division of Manufacturers Hanover and at Smith Barney. Mr. Hofmann is a
director of Penske Corporation and Berry Plastics.
Barry Banducci has been a Board Member of the Company since October 1995.
Since September 1995, Mr. Banducci has been the Chairman of TransPro. Prior
thereto, Mr. Banducci served in various capacities at Equion Corporation, a
supplier of automotive components, from 1983 to 1995, including President, Chief
Executive Officer and Vice Chairman. Mr. Banducci is a director of TransPro and
Aristotle Corporation.
Gerard J. Brink has been a Board Member of the Company since October 1996.
Mr. Brink was General Manager of Brink from 1965 to 1996.
BOARD MEMBER COMPENSATION
The Board Members do not currently receive compensation for their service on
the Board of Managers or any committee thereof but are reimbursed for their
out-of-pocket expenses. In addition, Messrs. Smith and Banducci have consulting
agreements with the Company. See "Executive Compensation - Consulting
Agreements."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Managers has an Audit Committee consisting of Messrs. Banducci
and Brink, and a Compensation Committee consisting of Messrs. Hofmann and Smith.
The Audit Committee reviews the scope and results of audits and internal
accounting controls and all other tasks performed by the independent public
accountants of the Company. The Compensation Committee determines compensation
for executive officers of the Company and administers the Company's 1995 Option
Plan.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation for
1998 and 1997 for the chief executive officer of the Company and the four next
most highly compensated executive officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------------------- ----------------
OTHER
ANNUAL SECURITIES ALL OTHER
FISCAL SALARY BONUS COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) OPTIONS(#) ($)
- ------------------------------------ -------- ------------- ------------- ----------------- ----------------- -----------
<S> <C> <C> <C> <C> <C> <C>
F. Alan Smith....................... 1998 217,000 105,000 -- 32 --
Chairman of the Company........... 1997 200,000 100,000 -- -- --
Marshall D. Gladchun................ 1998 382,300 200,000 -- 86 --
President and Chief Executive 1997 362,500 195,000 -- -- --
Officer of the Company and SportRack
Terence C. Seikel................... 1998 215,000 95,000 -- 65 --
Vice President of Finance and 1997 200,600 94,000 -- -- --
Administration and Chief Financial
Officer of the Company and SportRack
Roger T. Morgan..................... 1998 250,000 87,500 -- -- --
President and Chief Executive 1997 107,220 73,000 -- 178 --
Officer of Valley
Richard E. Borghi................... 1998 219,965 115,000 -- 32 --
Executive Vice President and Chief 1997 206,500 94,000 -- -- --
Operating Officer of SportRack
</TABLE>
49
<PAGE> 52
OPTION GRANTS IN 1998
The following tables set forth information with respect to membership unit
options pursuant to the 1995 Option Plan granted to the named executive officers
of the Company during 1998. All options were granted at an exercise price less
than the fair market value per share of Class A Units on the date of grant.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
------------------------------------------------------------------------ AT ASSUMED ANNUAL RATES
NUMBER OF OF CLASS A UNIT PRICE
SECURITIES PERCENT OF TOTAL EXERCISE APPRECIATION FOR OPTION
UNDERLYING OPTIONS GRANTED OR BASE TERM($)(1)
OPTIONS TO EMPLOYEES IN PRICE EXPIRATION --------------------------------
NAME GRANTED(#) 1998(%) ($/SH) DATE 5% 10%
- -------------------- --------------- ---------------------- ---------------- ---------------- ---------------- --------------
<S> <C> <C> <C> <C> <C> <C>
F. Alan Smith....... 32 11.4 3,029 7/1/13 $ 105,000 $ 308,000
Marshall D. Gladchun 86 30.7 3,029 7/1/13 281,000 818,000
Terence C. Seikel... 65 23.2 3,029 7/1/13 212,000 626,000
Roger T. Morgan..... -- -- -- -- -- --
Richard E. Borghi... 32 11.4 3,029 7/1/13 105,000 308,000
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT YEAR END(#) AT YEAR END($)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
-------------------- -------------------- --------------- ------------------------- --------------------
<S> <C> <C> <C> <C>
F. Alan Smith....... -- -- 218/264 741,000/ 833,000
Marshall D. Gladchun -- -- 696/890 2,366,000/ 2,852,000
Terence C. Seikel... -- -- 265/400 901,000/ 1,228,000
Roger T. Morgan..... -- -- 72/106 --/ --
Richard E. Borghi... -- -- 276/356 938,000/ 1,145,000
</TABLE>
- ----------
(1) Potential realizable value is based on the assumption that the price of the
Company's Class A Units appreciate at the annual rate shown, compounded
annually, from the date of grant until the end of the 15-year option term.
The values are calculated in accordance with rules promulgated by the
Securities and Exchange Commission and do not reflect the Company's
estimate of future Class A Unit price appreciation.
EMPLOYMENT AGREEMENTS
Each of Marshall D. Gladchun, Roger T. Morgan, Terence C. Seikel, Richard E.
Borghi and Gerrit de Graaf has entered into an employment agreement
(collectively, the "Employment Agreements") with the Company. Mr. Gladchun's
Employment Agreement provides for an annual base salary of $277,304, subject to
increases at the sole discretion of the Board of Managers, a bonus in the range
of 50-70% of his base salary, and a one-time bonus of $400,000 on the earlier of
(i) September 20, 2002, (ii) his termination date, and (iii) a sale of the
Company (any such bonus an "Ending Bonus"). Mr. Morgan's Employment Agreement
provides for an annual base salary of $250,000, subject to increases at the sole
discretion of the Board of Managers, and a bonus in the range of 50% to 70% of
his base salary. Mr. Seikel's Employment Agreement provides for an annual base
salary of $165,000 subject to increases at the sole discretion of the Board of
Managers, and a bonus in the range of 30-50% of his base salary. Mr. Borghi's
Employment Agreement provides for an annual base salary of $161,200, subject to
increases at the sole discretion of the Board of Managers, a bonus in the range
of 30-50% of his base salary, and an Ending Bonus of $100,000. Mr. de Graaf's
Employment Agreement provides for an annual base salary of NLG 170,000, subject
to increases at the sole discretion of the Board of Managers, and a bonus in the
range of 30% to 50% of his base salary. The Employment Agreements also provide
for twelve months of severance pay to the executive officer in the event such
officer is terminated without cause (as defined in the Employment Agreement.)
The Employment Agreements expire at various times between June 30, 2000 and
December 31, 2000 (except that Gerrit de Graaf's Employment Agreement may be
terminated by either party upon three month's prior written notice) but
automatically extend for successive two-year terms unless terminated by the
Company upon 30 days notice prior to the expiration of the current term. Each
Employment Agreement prohibits the executive officer from disclosing non-public
information about the Company. The Employment Agreements also require the
executive officers to assign to the Company any designs, inventions and other
related items and intellectual property rights developed or acquired by the
executive officer during the term of his employment. In addition, for a period
of five years after termination of employment (two years if the termination is
without cause) each executive officer has agreed, in his
50
<PAGE> 53
respective Employment Agreement, not to (i) engage in any Competitive Business
(as defined in the Employment Agreements), (ii) interfere with or disrupt any
relationship between the Company and its customers, suppliers and employees and
(iii) induce any employee of the Company to terminate his or her employment with
the Company or engage in any Competitive Business.
CONSULTING AGREEMENTS
F. Alan Smith and Barry Banducci, both members of the Board of Managers,
have each entered into consulting agreements (the "Consulting Agreements") with
the Company dated as of September 28, 1995. Mr. Smith's Consulting Agreement
provides for an annual consulting fee of $150,000 subject to increases at the
sole discretion of the Board of Managers, and a performance based bonus in the
range of 30-50% of the annual consulting fee. Mr. Banducci's Consulting
Agreement provides for an annual consulting fee of $50,000. The initial term of
the Consulting Agreements expired on March 28, 1997. The Consulting Agreements
automatically extend for successive six-month periods unless terminated by the
Company upon 30 days notice prior to the expiration of the then current term.
The Consulting Agreements prohibit Messrs. Smith and Banducci from disclosing
non-public information about the Company.
MEMBERS' AGREEMENT
Pursuant to the Second Amended and Restated Members' Agreement dated as of
August 5, 1997 (the "Members' Agreement") among the Company and certain of the
holders of outstanding units (the "Units") of the Company, affiliates of CCP
have the ability to appoint a majority of the members of the Company's Board of
Managers.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of March 15, 1999, the outstanding membership interests of the Company
consisted of 16,450 Units. The following table sets forth certain information
regarding the beneficial ownership of the Units by (i) each person known by the
Company to own more than 5% of the Units, (ii) each named director, (iii) each
named executive officer and (iv) all of the Company's directors and executive
officers treated as a group. To the knowledge of the Company, each of such
holders of Units has sole voting and investment power as to the Units owned
unless otherwise noted.
<TABLE>
<CAPTION>
PERCENTAGE
NAME AND ADDRESS(1) UNITS OWNED OWNERSHIP(2)
------------------------------------------- ----------- ------------
<S> <C> <C>
CB Capital Investors, L.P.(3).............. 10,251 60.47%
380 Madison Avenue, 12th Floor
New York, New York 10017
MascoTech, Inc............................. 1,500 9.12
275 Rex Boulevard
Auburn Hills, Michigan 48326
Celerity Partners.......................... 1,500 9.12
C/o Mark Benham
300 Sand Hill Road
Building 4, Suite 230
Menlo Park, California 94025
F. Alan Smith(4)........................... 518 3.11
Marshall D. Gladchun(5).................... 1,196 6.98
Roger T. Morgan(6)......................... 119 0.72
Gerrit de Graaf(7)......................... 34 0.21
Terence C. Seikel(8)....................... 505 3.01
Richard E. Borghi(9)....................... 476 2.85
Barry Banducci(10)......................... 405 2.44
59 Old Quarry Road
Guildford, Connecticut 06437
Gerard J. Brink............................ 410 2.49
Lijsterbeslaan 10
B-2950 Kapellen
Belgium
All directors and executive officers as a
group (nine persons)....................... 3,694 20.33
</TABLE>
- ----------
(1) Unless otherwise indicated, address is c/o Advanced Accessory Systems, LLC,
12900 Hall Road, Suite 200, Sterling Heights, Michigan 48313.
(2) Beneficial ownership is determined in accordance with the rules of the
Commission and includes voting and investment power
51
<PAGE> 54
with respect to the Units. Units subject to options or warrants currently
exercisable or exercisable within 60 days of March 15, 1999 are deemed
outstanding for purposes of computing the percentage ownership of the person
holding such options or warrants, but are not deemed outstanding for
purposes of computing the percentage of any other person.
(3) CB Capital Investors, L.P. is an affiliate of CCP. Includes 501 Units
subject to warrants exercisable within 60 days.
(4) Includes 218 Units subject to options exercisable within 60 days. 300 Units
are owned by the F. Alan Smith Family Limited Partnership.
(5) Includes 696 Units subject to options exercisable within 60 days.
(6) Includes 30 Units subject to options exercisable within 60 days.
(7) Includes 8 Units subject to options exercisable within 60 days.
(8) Includes 305 Units subject to options exercisable within 60 days.
(9) Includes 276 Units subject to options exercisable within 60 days.
(10) Includes 155 Units subject to options exercisable within 60 days. All Units
are owned by the Banducci Family, LLC.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Chase Securities Inc. ("CSI"), The Chase Manhattan Bank ("Chase"), The Chase
Manhattan Bank of Canada ("Chase Canada") and CCP are affiliates of CB Capital
Investors, L.P., which owns approximately 47.8% of the Company's issued and
outstanding voting securities on a fully diluted basis. CSI acted as an Initial
Purchaser in connection with the Offering, for which it received customary fees.
Chase is agent bank and a lender to the Company under the Amended and Restated
Credit Agreement and has received customary fees and reimbursement of expenses
in such capacities. Chase Canada is agent bank and a lender to the Company under
the Canadian Credit Agreement and has received customary fees and reimbursement
of expenses in such capacities. Chase received its proportionate share, $6.0
million, of the repayment by the Company of $90.0 million under the Amended and
Restated Credit Agreement from the proceeds of the Offering. An affiliate of CCP
and CSI held a portion of the Senior Subordinated Debt and received its
proportionate share, $10.7 million, including prepayment penalties of $700,000,
of the repayment by the Company of such debt from the proceeds of the Offering.
As a result of the Offering, such affiliate was relieved of its obligation to
provide up to an additional $20.0 million of senior subordinated debt financing.
In addition, an affiliate of CSI and CCP purchased a portion of the Notes in
connection with the Offering. Donald J. Hofmann, Jr., a general partner of CCP,
is a member of the Board of Managers of the Company. In addition, CSI, Chase and
their affiliates participate on a regular basis in various investment banking
and commercial banking transactions for the Company and its affiliates.
The Company is a party to the Consulting Agreements with F. Alan Smith, the
Chairman of the Company, and Barry Banducci, a Board Member of the Company. See
"Executive Compensation -- Consulting Agreements."
In connection with the acquisition of the MascoTech Division by the Company,
the Company loaned Messrs. Gladchun and Borghi $400,000 and $100,000,
respectively, to enable them to make their initial equity investments in the
Company. The loans bear interest at 6.2% and mature in September 2002.
52
<PAGE> 55
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Form 10-K:
1. Financial Statements:
A list of the Consolidated Financial Statements, related notes and
Reports of Independent Accountants is set forth in Item 8 of this
report on Form 10-K.
2. Financial Statement Schedules:
Schedule II - Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulations of the Commission are not required under
the related instructions, are inapplicable or not material, or the
information called for thereby is otherwise included in the
financial statements and therefore have been omitted.
3. Index to Exhibits:
EXHIBIT
NUMBER DESCRIPTION
------ -----------------------------------------------
3.1 Amended and Restated Certificate of Formation of AAS.
Incorporated by reference to Exhibit 3.1 to AAS'
Registration Statement on Form S-4 (File
No.333-49011).
3.2 Second Amended and Restated Operating Agreement of
AAS. Incorporated by reference to Exhibit 3.2 to AAS'
Registration Statement on Form S-4 (File No.
333-49011).
3.3 Amended Bylaws of AAS Incorporated by reference to
Exhibit 3.3 to AAS' Registration Statement on Form
S-4 (File No. 333-49011).
4.1 Indenture dated as of October 1, 1997 for the Notes
(including the form of New Note attached as Exhibit B
thereto) among the Issuers, the Guarantors named
therein and First Union National Bank, as Trustee
Incorporated by reference to Exhibit 4.1 to AAS'
Registration Statement on Form S-4 (File No.
333-49011).
10.1 Asset Purchase Agreement among MascoTech Automotive
Systems Group, Inc., MascoTech Accessories, Inc. and
Advanced Accessory Systems, LLC dated as of September
28, 1995 Incorporated by reference to Exhibit 10.1 to
AAS' Registration Statement on Form S-4 (File No.
333-49011).
10.2 Agreement for the Sale and Purchase of Shares in
Brink BV dated October 30, 1996 among AAS Holdings,
Inc., AAS Holdings, LLC, Brink Holding BV and Brink
BV Incorporated by reference to Exhibit 10.2 to AAS'
Registration Statement on Form S-4 (File No.
333-49011).
10.3 Asset Purchase Agreement among Bell Sports Corp.,
Bell Sports Canada, Inc. and Advanced Accessory
Systems Canada Inc./Les Systemes d'Accessoire
Advanced Canada Inc. dated as of July 2, 1997
Incorporated by reference to Exhibit 10.3 to AAS'
Registration Statement on Form S-4 (File No.
333-49011).
10.4 Stock Purchase Agreement dated July 24, 1997 among
Robert Boulard and Alan Hamer and Advanced Accessory
Systems Canada Inc. / Les Systems d'Accessoire
Advanced Canada Inc. Incorporated by reference to
Exhibit 10.4 to AAS' Registration Statement on Form
S-4 (File No. 333-49011).
10.5 Asset Purchase Agreement among Valley Industries,
LLC, Valley Industries, Inc., certain affiliates of
Valley Industries, Inc., Robert L. Fisher and Roger
T. Morgan dated as of August 5, 1997 Incorporated by
reference to Exhibit 10.5 to AAS' Registration
Statement on Form S-4 (File No. 333-49011).
10.6 Preliminary Agreement for the Transfer of a Business
dated December 16, 1997 between Ellebi S.p.A. and
Brink Italia S.r.1. and Brink International B.V.
Incorporated by reference to Exhibit 10.6 to AAS'
Registration Statement on Form S-4 (File No.
333-49011).
10.7 Second Amended and Restated Credit Facility among
AAS, SportRack, LLC, Brink International BV, Brink BV
and Valley Industries, LLC, as Borrowers, NBD Bank as
Administrative Agent and Documentation and Collateral
Agent and The Chase Manhattan Bank as
Co-Administrative Agent and Syndication Agent dated
August 5, 1997. Incorporated by reference to Exhibit
10.7 to AAS' Registration Statement on Form S-4 (File
No. 333-49011).
10.7(a) Amendment No 1. Dated as of September 5, 1997 to
Second Amended and Restated Credit Agreement Dated as
of August 5, 1997 and Security Agreements Dated as of
October 5, 1996.
10.7(b) Amendment No.2 Dated as of September 24, 1997 to
Second Amended and Restated Credit Agreement Dated as
of August 5, 1997.
10.7(c) Amendment No. 3 Dated as of December 29, 1997 to
Second Amended and Restated Credit Agreement dated as
of August 5, 1997.
10.7(d) Amendment No. 4 Dated as of December 31, 1997 to
Second Amended and restated Credit Agreement Dated as
of August 5, 1997.
53
<PAGE> 56
10.7(e) Amendment No. 5 and Waiver Dated as of December 31,
1998 to Second Amended and Restated Credit Agreement
Dated as of August 5, 1997.
10.8 First Amended and Restated Credit Agreement among
SportRack International, Inc. and First Chicago NBD
Bank, Canada, The Chase Manhattan Bank of Canada and
The Bank of Nova Scotia dated as of March 19, 1998.
Incorporated by reference to Exhibit 10.8 to AAS'
Registration Statement on Form S-4 (File No.
333-49011).
10.9 Employment Agreement between AAS and Richard Borghi
dated September 28, 1995. Incorporated by reference
to Exhibit 10.9 to AAS' Registration Statement on
Form S-4 (File No. 333-49011).
10.10 Employment Agreement between AAS and Marshall
Gladchun dated September 28, 1995. Incorporated by
reference to Exhibit 10.10 to AAS' Registration
Statement on Form S-4 (File No. 333-49011).
10.11 Management Consulting Agreement between AAS and Barry
Banducci dated September 28, 1995. Incorporated by
reference to Exhibit 10.11 to AAS' Registration
Statement on Form S-4 (File No. 333-49011).
10.12 Management Consulting Agreement between AAS and F.
Alan Smith dated September 28, 1995. Incorporated by
reference to Exhibit 10.12 to AAS' Registration
Statement on Form S-4 (File No. 333-49011).
10.13 Employment Agreement between AAS and Terence C.
Seikel dated January 22, 1996. Incorporated by
reference to Exhibit 10.13 to AAS' Registration
Statement on Form S-4 (File No. 333-49011).
10.14 Employment Agreement between AAS and Roger T. Morgan
dated August 5, 1997. Incorporated by reference to
Exhibit 10.14 to AAS' Registration Statement on Form
S-4 (File No. 333-49011).
10.15 Employment Agreement between Brink B.V. and Gerrit de
Graaf dated November 1, 1996. Incorporated by
reference to Exhibit 10.15 to AAS' Registration
Statement on Form S-4 (File No. 333-49011).
10.17 Lease dated as of January 24, 1997 between Valley
Industries Realty, L.P. and Valley Industries, Inc.
Incorporated by reference to Exhibit 10.17 to AAS'
Registration Statement on Form S-4 (File No.
333-49011).
10.18 Addendum to Sublease dated as of July 2, 1997 between
Bell Sports Canada, Inc. and SportRack International,
Inc. (formerly known as Advanced Accessory Systems
Canada Inc./ Les Systems d'Accessoire Advanced Canada
Inc.). Incorporated by reference to Exhibit 10.18 to
AAS' Registration Statement on Form S-4 (File No.
333-49011).
10.19 Lease dated May 25, 1994 between VBG Towbars AB and
VBG Produkter AB. Incorporated by reference to
Exhibit 10.19 to AAS' Registration Statement on Form
S-4 (File No. 333-49011).
10.20 Lease Agreement for commercial use between Ellebi
S.p.A. and Brink Italia S.r.l. Incorporated by
reference to Exhibit 10.20 to AAS' Registration
Statement on Form S-4 (File No. 333-49011).
10.21 Registration Rights Agreement dated September 25,
1997 by and among Advanced Accessory Systems, LLC,
AAS Capital Corporation, the Guarantors named therein
and Chase Securities, Inc. and First Chicago Capital
Markets, Inc. Incorporated by reference to Exhibit
10.21 to AAS' Registration Statement on Form S-4
(File No. 333-49011).
12.1 Statement Re: Computation of ratios
24.1 Marshall D. Gladchun Power of Attorney
24.2 F. Alan Smith Power of Attorney
24.3 Barry Banducci Power of Attorney
24.4 Gerard Jacobus Brink Power of Attorney
24.5 Donald J. Hofmann Power of Attorney
24.6 Roger T. Morgan Power of Attorney
24.7 Gerrit de Graaf Power of Attorney
21.1 Subsidiaries of the Registrant Incorporated by
reference to Exhibit 21.1 to AAS' Registration
Statement on Form S-4 (File No. 333-49011).
27.1 Financial Data Schedule
(b) Reports of form 8-K:
None
- ----------
54
<PAGE> 57
SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly authorized.
Advanced Accessory Systems, LLC
By: /s/ TERENCE C. SEIKEL
---------------------------------------------
Terence C. Seikel
Vice President, Finance and Administration
-Chief Financial Officer
(Chief Accounting Officer and Authorized
Signatory)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed on the 26th day of March, 1999, by the following
persons on behalf of the registrant and in the capacities as indicated.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
* President, Chief Executive Officer and
- ------------------------------ Director (Principal Executive Officer)
Marshall D. Gladchun
/s/ TERENCE C. SEIKEL Vice President of Finance and Administration and
- ------------------------------ Chief Financial Officer (Principal Financial and
Terence C. Seikel Accounting Officer)
* Chairman of the Board of Managers
- ------------------------------
F. Alan Smith
* Manager
- ------------------------------
Barry Banducci
* Manager
- ------------------------------
Gerard Jacobus Brink
* Manager
- ------------------------------
Donald J. Hofmann
* Manager
- ------------------------------
Roger T. Morgan
* Manager
- ------------------------------
Gerrit de Graaf
*By: /s/ TERENCE C. SEIKEL
- ------------------------------
Terence C. Seikel, Attorney-in-Fact
</TABLE>
55
<PAGE> 58
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE ACT.
Other than this annual report filed on Form 10-K, none.
56
<PAGE> 59
ADVANCED ACCESSORY SYSTEMS, LLC-
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996,
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
------------------------
BALANCE AT CHARGED TO CHARGED BALANCE
BEGINNING OF COSTS AND TO OTHER AT END OF
YEAR EXPENSES ACCOUNTS (1) WRITE-OFFS YEAR
----------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
For the year ended December 31,
1998 ................................. $1,699 $2,413 $ 523 $1,869 $2,766
1997 ................................. 605 458 734 98 1,699
1996 ................................. 368 54 268 85 605
ALLOWANCE FOR INVENTORY AND
LOWER OF COST OR MARKET RESERVE
For the year ended December 31,
1998 ................................. $2,590 $4,735 $ 15 $3,423 $3,917
1997 ................................. 1,579 423 1,303 715 2,590
1996 ................................. 564 70 1,173 228 1,579
ALLOWANCE FOR REIMBURSABLE TOOLING
For the year ended December 31,
1998 ................................. $ 890 $ 294 $ -- $ 860 $ 324
1997 ................................. 368 195 493 166 890
1996 ................................. 257 300 -- 189 368
</TABLE>
- ----------
(1) Charges to other accounts includes amounts related to acquired companies
and the effects of changing foreign currency exchange rates for the Company's
foreign subsidiaries.
57
<PAGE> 60
EXHIBIT INDEX
NUMBER DESCRIPTION
------ -----------------------------------------------
3.1 Amended and Restated Certificate of Formation of AAS.
Incorporated by reference to Exhibit 3.1 to AAS'
Registration Statement on Form S-4 (File
No.333-49011).
3.2 Second Amended and Restated Operating Agreement of
AAS. Incorporated by reference to Exhibit 3.2 to AAS'
Registration Statement on Form S-4 (File No.
333-49011).
3.3 Amended Bylaws of AAS Incorporated by reference to
Exhibit 3.3 to AAS' Registration Statement on Form
S-4 (File No. 333-49011).
4.1 Indenture dated as of October 1, 1997 for the Notes
(including the form of New Note attached as Exhibit B
thereto) among the Issuers, the Guarantors named
therein and First Union National Bank, as Trustee
Incorporated by reference to Exhibit 4.1 to AAS'
Registration Statement on Form S-4 (File No.
333-49011).
10.1 Asset Purchase Agreement among MascoTech Automotive
Systems Group, Inc., MascoTech Accessories, Inc. and
Advanced Accessory Systems, LLC dated as of September
28, 1995 Incorporated by reference to Exhibit 10.1 to
AAS' Registration Statement on Form S-4 (File No.
333-49011).
10.2 Agreement for the Sale and Purchase of Shares in
Brink BV dated October 30, 1996 among AAS Holdings,
Inc., AAS Holdings, LLC, Brink Holding BV and Brink
BV Incorporated by reference to Exhibit 10.2 to AAS'
Registration Statement on Form S-4 (File No.
333-49011).
10.3 Asset Purchase Agreement among Bell Sports Corp.,
Bell Sports Canada, Inc. and Advanced Accessory
Systems Canada Inc./Les Systemes d'Accessoire
Advanced Canada Inc. dated as of July 2, 1997
Incorporated by reference to Exhibit 10.3 to AAS'
Registration Statement on Form S-4 (File No.
333-49011).
10.4 Stock Purchase Agreement dated July 24, 1997 among
Robert Boulard and Alan Hamer and Advanced Accessory
Systems Canada Inc. / Les Systems d'Accessoire
Advanced Canada Inc. Incorporated by reference to
Exhibit 10.4 to AAS' Registration Statement on Form
S-4 (File No. 333-49011).
10.5 Asset Purchase Agreement among Valley Industries,
LLC, Valley Industries, Inc., certain affiliates of
Valley Industries, Inc., Robert L. Fisher and Roger
T. Morgan dated as of August 5, 1997 Incorporated by
reference to Exhibit 10.5 to AAS' Registration
Statement on Form S-4 (File No. 333-49011).
10.6 Preliminary Agreement for the Transfer of a Business
dated December 16, 1997 between Ellebi S.p.A. and
Brink Italia S.r.1. and Brink International B.V.
Incorporated by reference to Exhibit 10.6 to AAS'
Registration Statement on Form S-4 (File No.
333-49011).
10.7 Second Amended and Restated Credit Facility among
AAS, SportRack, LLC, Brink International BV, Brink BV
and Valley Industries, LLC, as Borrowers, NBD Bank as
Administrative Agent and Documentation and Collateral
Agent and The Chase Manhattan Bank as
Co-Administrative Agent and Syndication Agent dated
August 5, 1997. Incorporated by reference to Exhibit
10.7 to AAS' Registration Statement on Form S-4 (File
No. 333-49011).
10.7(a) Amendment No 1. Dated as of September 5, 1997 to
Second Amended and Restated Credit Agreement Dated as
of August 5, 1997 and Security Agreements Dated as of
October 5, 1996.
10.7(b) Amendment No.2 Dated as of September 24, 1997 to
Second Amended and Restated Credit Agreement Dated as
of August 5, 1997.
10.7(c) Amendment No. 3 Dated as of December 29, 1997 to
Second Amended and Restated Credit Agreement dated as
of August 5, 1997.
10.7(d) Amendment No. 4 Dated as of December 31, 1997 to
Second Amended and restated Credit Agreement Dated as
of August 5, 1997.
58
<PAGE> 61
10.7(e) Amendment No. 5 and Waiver Dated as of December 31,
1998 to Second Amended and Restated Credit Agreement
Dated as of August 5, 1997.
10.8 First Amended and Restated Credit Agreement among
SportRack International, Inc. and First Chicago NBD
Bank, Canada, The Chase Manhattan Bank of Canada and
The Bank of Nova Scotia dated as of March 19, 1998.
Incorporated by reference to Exhibit 10.8 to AAS'
Registration Statement on Form S-4 (File No.
333-49011).
10.9 Employment Agreement between AAS and Richard Borghi
dated September 28, 1995. Incorporated by reference
to Exhibit 10.9 to AAS' Registration Statement on
Form S-4 (File No. 333-49011).
10.10 Employment Agreement between AAS and Marshall
Gladchun dated September 28, 1995. Incorporated by
reference to Exhibit 10.10 to AAS' Registration
Statement on Form S-4 (File No. 333-49011).
10.11 Management Consulting Agreement between AAS and Barry
Banducci dated September 28, 1995. Incorporated by
reference to Exhibit 10.11 to AAS' Registration
Statement on Form S-4 (File No. 333-49011).
10.12 Management Consulting Agreement between AAS and F.
Alan Smith dated September 28, 1995. Incorporated by
reference to Exhibit 10.12 to AAS' Registration
Statement on Form S-4 (File No. 333-49011).
10.13 Employment Agreement between AAS and Terence C.
Seikel dated January 22, 1996. Incorporated by
reference to Exhibit 10.13 to AAS' Registration
Statement on Form S-4 (File No. 333-49011).
10.14 Employment Agreement between AAS and Roger T. Morgan
dated August 5, 1997. Incorporated by reference to
Exhibit 10.14 to AAS' Registration Statement on Form
S-4 (File No. 333-49011).
10.15 Employment Agreement between Brink B.V. and Gerrit de
Graaf dated November 1, 1996. Incorporated by
reference to Exhibit 10.15 to AAS' Registration
Statement on Form S-4 (File No. 333-49011).
10.17 Lease dated as of January 24, 1997 between Valley
Industries Realty, L.P. and Valley Industries, Inc.
Incorporated by reference to Exhibit 10.17 to AAS'
Registration Statement on Form S-4 (File No.
333-49011).
10.18 Addendum to Sublease dated as of July 2, 1997 between
Bell Sports Canada, Inc. and SportRack International,
Inc. (formerly known as Advanced Accessory Systems
Canada Inc./ Les Systems d'Accessoire Advanced Canada
Inc.). Incorporated by reference to Exhibit 10.18 to
AAS' Registration Statement on Form S-4 (File No.
333-49011).
10.19 Lease dated May 25, 1994 between VBG Towbars AB and
VBG Produkter AB. Incorporated by reference to
Exhibit 10.19 to AAS' Registration Statement on Form
S-4 (File No. 333-49011).
10.20 Lease Agreement for commercial use between Ellebi
S.p.A. and Brink Italia S.r.l. Incorporated by
reference to Exhibit 10.20 to AAS' Registration
Statement on Form S-4 (File No. 333-49011).
10.21 Registration Rights Agreement dated September 25,
1997 by and among Advanced Accessory Systems, LLC,
AAS Capital Corporation, the Guarantors named therein
and Chase Securities, Inc. and First Chicago Capital
Markets, Inc. Incorporated by reference to Exhibit
10.21 to AAS' Registration Statement on Form S-4
(File No. 333-49011).
12.1 Statement Re: Computation of ratios
24.1 Marshall D. Gladchun Power of Attorney
24.2 F. Alan Smith Power of Attorney
24.3 Barry Banducci Power of Attorney
24.4 Gerard Jacobus Brink Power of Attorney
24.5 Donald J. Hofmann Power of Attorney
24.6 Roger T. Morgan Power of Attorney
24.7 Gerrit de Graaf Power of Attorney
21.1 Subsidiaries of the Registrant Incorporated by
reference to Exhibit 21.1 to AAS' Registration
Statement on Form S-4 (File No. 333-49011).
27.1 Financial Data Schedule
59
<PAGE> 1
Exhibit 10.7(a)
AMENDMENT NO. 1
Dated as of September 5, 1997
to
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of August 5, 1997
and
SECURITY AGREEMENTS
Dated as of October 5, 1996
THIS AMENDMENT NO. 1 ("Amendment") is made as of September 5,
1997 by and among AAS Holdings, LLC, Advanced Accessory Systems, LLC, Valley
Industries, LLC, Brink International BV and Brink BV (the "Borrowers"), the
financial institutions listed on the signature pages hereof (the "Lenders") and
NBD Bank, as Administrative Agent and Documentation and Collateral Agent, and
The Chase Manhattan Bank, as Co-Administrative Agent and Syndication Agent (the
"Agents"), under that certain Second Amended and Restated Credit Agreement dated
as of August 5, 1997 by and among the Borrowers, the Lenders and the Agents (the
"Credit Agreement"). Defined terms used herein and not otherwise defined herein
shall have the respective meanings given to them in the Credit Agreement.
WHEREAS, the Borrowers, the Lenders and the Agents have agreed
to amend the Credit Agreement and certain of the Security Agreements on the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises set forth
above, the terms and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Borrowers, the Lenders and the Agents have agreed to the following amendments to
the Credit Agreement.
1. Amendments to Credit Agreement and Security Agreements.
Effective as of the Effective Date (as defined below) and subject to the
satisfaction of the condition precedent set forth in Section 3 below:
1.1 Schedule 5.8 to the Credit Agreement is amended by
deleting the existing Schedule 5.8 in its entirety and substituting therefor
Amended Schedule 5.8 attached hereto.
1.2 Section 5(a) of the Security Agreement executed by
Holdings in favor of the Documentation and Collateral Agent is amended by
deleting the first sentence thereof in its entirety and substituting therefor
the following:
The correct name of Grantor is "Advanced Accessory Systems,
LLC".
1.3 Section 5(a) of the Security Agreement executed by AAS in
favor of the Documentation and Collateral Agent is amended by deleting the first
sentence thereof in its entirety and substituting therefor the following:
The correct name of Grantor is "SportRack, LLC".
2. Consent. The Lenders hereby consent to the amendment by
Holdings and AAS of their respective organizational documents to effect changes
in their names to "Advanced Accessory Systems, LLC" and "SportRack, LLC",
respectively.
<PAGE> 2
3. Condition of Effectiveness. The effectiveness of this
Amendment is subject to the condition precedent that the Administrative Agent
shall have received counterparts of this Amendment duly executed by the
Borrowers, the Required Lenders and the Agents. Upon the satisfaction of the
foregoing condition precedent, this Amendment shall become effective (i) with
respect to the consent set forth in Section 2 above, as of the date hereof, and
(ii) with respect to the amendments set forth in Section 1 above, as of the date
on which appropriate amendments effecting the name changes are filed with the
Secretary of State of Delaware and copies thereof are delivered to the
Administrative Agent (the "Effective Date").
4. Representations and Warranties of the Borrowers. Each
Borrower hereby represents and warrants as follows:
(a) This Amendment and the Credit Agreement as amended hereby
constitute legal, valid and binding obligations of the Borrowers and are
enforceable against the Borrowers in accordance with their terms.
(b) As of the Effective Date, (i) there exists no Default or
Unmatured Default and (ii) the representations and warranties contained in
Article V of the Credit Agreement, as amended hereby, are true and correct in
all material respects, except for representations and warranties made with
reference to a specific date which representations and warranties are true and
correct in all material respects as of such date.
5. Reference to and Effect on the Credit Agreement and
Security Agreements.
(a) Upon the effectiveness of Section 1 hereof, each reference
in any Loan Document to such Loan Document or any other Loan Document shall mean
and be a reference to the applicable Loan Document as amended hereby.
(b) Except as specifically amended above, the Credit Agreement
and all other documents, instruments and agreements executed and/or delivered in
connection therewith shall remain in full force and effect and are hereby
ratified and confirmed.
(c) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as a waiver of
any right, power or remedy of the Agents or the Lenders, nor constitute a waiver
of any provision of the Credit Agreement or any other documents, instruments and
agreements executed and/or delivered in connection therewith.
6. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
7. Headings. Section headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.
8. Counterparts. This Amendment may be executed by one or more
of the parties hereto on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
-2-
<PAGE> 3
IN WITNESS WHEREOF, this Amendment has been duly executed as
of the day and year first above written.
AAS HOLDINGS, LLC
as a Borrower
By: /s/ Terence C. Seikel
-----------------------------
Name: Terence C. Seikel
Title: Vice President
ADVANCED ACCESSORY SYSTEMS, LLC
as a Borrower
By: AAS HOLDINGS, LLC
Its Manager
By: /s/ Terence C. Seikel
-----------------------------
Name: Terence C. Seikel
Title: Vice President
VALLEY INDUSTRIES, LLC
as a Borrower
By: AAS HOLDINGS, INC.
Its Manager
By: /s/ Terence C. Seikel
-----------------------------
Name: Terence C. Seikel
Title: Vice President
BRINK INTERNATIONAL BV
as a Borrower
By: /s/ Terence C. Seikel
-----------------------------
Name: Terence C. Seikel
Title: Attorney-In-Fact
BRINK BV
as a Borrower
By: /s/ Terence C. Seikel
-----------------------------
Name: Terence C. Seikel
Title: Attorney-In-Fact
-3-
<PAGE> 4
NBD BANK
as the Administrative Agent and
the Documentation and Collateral
Agent, and as a Lender
By: /s/ William Canney
-----------------------------
Name: William Canney
Title: Vice President
THE CHASE MANHATTAN BANK
as the Co-Administrative Agent and
the Syndication Agent, and as a
Lender
By: /s/ Thomas H. Kozlark
-----------------------------
Name: Thomas H. Kozlark
Title: Vice President
FIRST UNION NATIONAL BANK (f/k/a
First Union National Bank of North
Carolina)
as a Lender
By: /s/ MARK M. Harden
-----------------------------
Name: MARK M. Harden
Title: Vice President
THE BANK OF NOVA SCOTIA
as a Lender
By: /s/ F.C.B. Ashby
-----------------------------
Name: F.C.B. Ashby
Title: Senior Manager Loan Operations
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK
B.A., "RABOBANK NEDERLAND",
NEW YORK BRANCH
as a Lender
By: /s/ Dana W. Hemenway
-----------------------------
Name: Dana W. Hemenway
Title: Vice President
By: /s/ Ian Reece
-----------------------------
Name: Ian Reece
Title: Senior Credit Officer
-4-
<PAGE> 5
LASALLE NATIONAL BANK
as a Lender
By: /s/ Thomas J. Ranville
-----------------------------
Name: Thomas J. Ranville
Title: Vice President
MICHIGAN NATIONAL BANK
as a Lender
By: /s/ Mark W. Smits
-----------------------------
Name: Mark W. Smits
Title: Relationship Manager
NATIONAL CITY BANK (CLEVELAND)
as a Lender
By: /s/ Carlton M. Faison
-----------------------------
Name: Carlton M. Faison
Title: Vice President
COMERICA BANK
as a Lender
By: /s/ Beth A. Brockmann
-----------------------------
Name: Beth A. Brockmann
Title: Vice President
VAN KAMPEN AMERICA CAPITAL
PRIME RATE INCOME TRUST
as a Lender
By: /s/ Jeffrey W. Maillet
-----------------------------
Name: Jeffrey W. Maillet
Title: Sr. Vice Pres.-Portfolio Mgr.
DEBT STRATEGIES FUND, INC.
as a Lender
By:
-----------------------------
Name:
Title:
-5-
<PAGE> 6
SENIOR HIGH INCOME PORTFOLIO, INC.
as a Lender
By:
-----------------------------
Name:
Title:
DEEPROCK & CO.
By: Eaton Vance Management
as Investment Advisor
By: /s/ Payson F. Swaffield
-----------------------------
Name: Payson F. Swaffield
Title: Vice President
SENIOR DEBT PORTFOLIO
By: Boston Management and Research
as Investment Advisor
By: /s/ Payson F. Swaffield
-----------------------------
Name: Payson F. Swaffield
Title: Vice President
-6-
<PAGE> 7
AMENDED SCHEDULE 5.8
Subsidiaries
Attached.
-7-
<PAGE> 8
SCHEDULE 5.8
Subsidiaries
Advanced Accessory Systems, LLC, a Delaware limited liability company
("Holdings"), owns 99% of the outstanding membership interests of SportRack,
LLC, a Delaware limited liability company ("Borrower"), and Chase Venture
Capital Associates, L.P. owns 1% of the outstanding membership interests of
Borrower. The capitalization and ownership of Holdings is as set forth on
Exhibit 1 to this Schedule 5.8. Each of Holdings, Borrower and Valley
Industries, LLC, a Delaware limited liability company ("Valley") is qualified
to transact business in Michigan.
Holdings owns 100% of the issued and outstanding capital stock of AAS
Capital Corporation, a Delaware corporation.
Borrower owns 100% of the capital stock of SportRack International, Inc., a
corporation formed under the laws of Canada ("SportRack International").
AAS Holdings, Inc. ("Holdings Inc.") owns 100% of the issued capital stock
of Brink International BV, a limited liability company formed under the laws of
The Netherlands.
Brink International BV owns 100% of the issued capital stock of Brink BV,
a limited liability company formed under the laws of The Netherlands.
Brink BV owns 100% of the stock of Brink Trekhaken BV, a company formed
under the laws of The Netherlands.
Brink International BV owns 100% of the stock of Brink Sverige AB, a
company formed under the laws of Sweden.
Brink International BV owns 100% of the stock of Brink U.K. Limited, a
company formed under the laws of England.
Brink International BV owns 100% of the stock of Nordisk Komponent Holding
A/S, a company formed under the laws of Denmark ("Nordisk Komponent").
Brink International BV owns 100% of the stock of Brink France SarL, a
company formed under the laws of France.
Brink International BV owns 100% of the stock of Brink Italia Srl, a
company formed under the laws of Italy.
-1-
<PAGE> 9
Nordisk Komponent owns 100% of the stock of Brink A/S, a company formed
under the laws of Denmark.
Brink France SarL owns 99.8% of the stock of SFEA SA, a company formed
under the laws of France. The remaining 0.2% is held by Brink BV and certain
individuals as nominees.
Brink France SarL owns 100% of the stock of SCI L'Elmontaise, a company
formed under the laws of France.
Borrower owns 100% of the stock of AAS GmbH a company formed under the
laws of Germany.
SportRack International owns 100% of the stock of Nomadic Sport Inc., a
corporation existing under the laws of Canada.
Holdings owns 99% of the outstanding membership interests of Valley.
Borrower owns 1% of the outstanding membership interests of Valley.
-2-
<PAGE> 1
Exhibit 10.7(b)
AMENDMENT NO. 2
Dated as of September 24, 1997
to
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of August 5, 1997
THIS AMENDMENT NO. 2 ("Amendment") is made as of September 24,
1997 by and among Advanced Accessory Systems, LLC (formerly known as AAS
Holdings, LLC), Sportrack, LLC (formerly known as Advanced Accessory Systems,
LLC), Valley Industries, LLC, Brink International BV and Brink BV (the
"Borrowers"), the financial institutions listed on the signature pages hereof
(the "Lenders") and NBD Bank, as Administrative Agent and Documentation and
Collateral Agent, and The Chase Manhattan Bank, as Co-Administrative Agent and
Syndication Agent (the "Agents"), under that certain Second Amended and Restated
Credit Agreement dated as of August 5, 1997 by and among the Borrowers, the
Lenders and the Agents (as amended, the "Credit Agreement"). Defined terms used
herein and not otherwise defined herein shall have the respective meanings given
to them in the Credit Agreement.
WHEREAS, the Borrowers, the Lenders and the Agents have agreed
to amend the Credit Agreement on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises set forth
above, the terms and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Borrowers, the Lenders and the Agents have agreed to the following amendments to
the Credit Agreement.
1. Amendments to Credit Agreement. Effective as of September
24, 1997 and subject to the satisfaction of the conditions precedent set forth
in Section 2 below, the Credit Agreement is hereby amended as follows:
1.1 Article I of the Credit Agreement is hereby amended to add
alphabetically the following defined terms:
"ACQUISITION FACILITY COMMITMENT" means, for each Lender, the
obligation of such Lender to make Acquisition Facility Loans not exceeding the
amount set forth on Exhibit B to this Agreement opposite its name thereon under
the heading "Acquisition Facility Commitment" or in the Assignment Agreement by
which it became a Lender, as such amount may be modified from time to time
pursuant to the terms of this Agreement or to give effect to any applicable
assignment and acceptance.
"ACQUISITION FACILITY LOAN" is defined in Section 2.2A hereof.
"ACQUISITION FACILITY NOTE" means a note in substantially the
form of Exhibit C-1 hereto duly executed by the applicable Borrower and payable
to the order of a Lender in the amount of its Acquisition Facility Commitment,
including any amendment, restatement, modification, renewal or replacement of
such Acquisition Facility Note.
<PAGE> 2
"AGGREGATE ACQUISITION FACILITY COMMITMENT" means the
aggregate of the Acquisition Facility Commitments of all the Lenders, as reduced
from time to time pursuant to the terms hereof. The initial Aggregate
Acquisition Facility Commitment is Twenty Two Million Dollars ($22,000,000).
1.2 Article I of the Credit Agreement is hereby amended to add
the following phrase immediately after the phrase "Tranche B Term Loans" in the
definition of "Applicable Base Rate Margin":
"or Acquisition Facility Loans".
1.3 Article I of the Credit Agreement is hereby amended to add
the following phrase immediately after the phrase "Tranche B Term Loans" in the
definition of "Applicable Eurocurrency Margins":
"or Acquisition Facility Loans".
1.4 Article I of the Credit Agreement is hereby amended to add
the following phrase immediately after the phrase "Tranche A Term Loan
Commitment" in the definition of "Commitment":
", Acquisition Facility Commitment,".
1.4(A) Article I of the Credit Agreement is hereby amended to
add the following phrase immediately after the phrase "principal amount of" in
the definition of "High Yield Note Agreement":
"not less than".
1.5 Article I of the Credit Agreement is hereby amended to add
the following phrase immediately after the phrase "Term Loans" in the definition
of "Loans":
", Acquisition Facility Loans"
and to add the following immediately after the reference to "Section 2.2" in
such definition"
"or Section 2.2A".
1.6 Article I of the Credit Agreement is hereby amended to add
the following phrase immediately after the phrase "Revolving Loan Commitment" in
(ii)(A) of the definition of "Pro Rata Share":
"and Acquisition Facility Commitment (or, after December 31, 1999, the
outstanding principal balance of such Lender's Acquisition Facility
Loans)"
and to add the following immediately after the phrase "Aggregate Revolving Loan
Commitment" in (ii)(B) of such definition:
-2-
<PAGE> 3
"and the Aggregate Acquisition Facility Commitment (or after December
31, 1999, the outstanding principal balance of such Lender's
Acquisition Facility Loans)"
and to add the following immediately after the phrase "such Lender's Term Loans"
in (x) of such definition:
", Acquisition Facility Loans"
and to add the following immediately after the phrase "all Term Loans" in (y)
of such definition:
", Acquisition Facility Loans".
1.7 Article I of the Credit Agreement is hereby amended to add
the following phrase immediately after the phrase "Pro Rata Share of any
Revolving Loan" in the definition of "Required Lenders":
"or Acquisition Facility Loan"
and to add the following phrase immediately after the phrase "Pro Rata Shares of
such Revolving Loans" in such definition:
"or Acquisition Facility Loans".
1.8 Article I of the Credit Agreement is hereby amended to add
the following phrase immediately after the phrase "Tranche B Term Loans" in the
definition of "Term Loans":
"and, after December 31, 1999, the Acquisition Facility Loans".
1.9 Article I of the Credit Agreement is hereby amended
to add the following definition of "Term Notes":
"Term Notes means, collectively, the Tranche A Term Notes, the Tranche
B Term Notes, and, after December 31, 1999, the Acquisition Facility Notes".
1.10 Article I of the Credit Agreement is hereby amended to
delete the definition of "Tranche A Pro Rata Share" now contained therein and to
substitute the following therefor:
"'TRANCHE A PRO RATA SHARE' shall mean, at any particular time and with
respect to any Lender, a fraction (expressed as a percentage), the
numerator of which shall be the then aggregate amount of such Lender's
Revolving Credit Commitment (or, if such Commitment has been
terminated, the outstanding principal balance of such Lender's
Revolving Loans) and Acquisition Facility Commitment (or, after
December 31, 1999 or if such Commitment has been terminated, the
outstanding principal balance of such Lender's Acquisition Facility
Loans) plus the outstanding principal balance of such Lender's Tranche
A Term Loans and the denominator of which shall be the then aggregate
amount of all Revolving Credit Commitments (or, if such Commitments
have been terminated, the outstanding principal balance of all
Revolving Loans), Acquisition Facility Commitments (or, after December
31, 1999 or if such
-3-
<PAGE> 4
Commitments have been terminated, the outstanding principal balance of
all Acquisition Facility Loans) and the outstanding principal balance
of the Tranche A Term Loans."
1.11 Article II of the Credit Agreement is hereby amended by
adding the following new Section 2.2A immediately after Section 2.2 and before
Section 2.3:
"2.2A Acquisition Facility. Upon the satisfaction of the
conditions precedent set forth in Sections 4.1 and 4.2, from and
including the date of this Agreement and prior to December 31, 1999,
each Lender severally and not jointly agrees, on the terms and
conditions set forth in this Agreement, to make revolving loans, in
Dollars only, to the applicable Borrower from time to time in an amount
not to exceed such Lender's Acquisition Facility Commitment (each
individually, an '"ACQUISITION FACILITY LOAN" and collectively, the
"ACQUISITION FACILITY LOANS"). Each Advance under this Section 2.2A
shall consist of Acquisition Facility Loans made by each Lender ratably
in proportion to such Lender's respective Tranche A Pro Rata Share.
Subject to the terms of this Agreement, the Borrowers may borrow, repay
and reborrow Acquisition Facility Loans at any time prior to December
31, 1999. On December 31, 1999, the Borrower's option to borrow and
reborrow Acquisition Facility Loans shall terminate, the Aggregate
Acquisition Facility Commitment shall be reduced to zero and the
outstanding principal balance of the Acquisition Facility Loans shall
be repaid in sixteen (16) equal consecutive quarterly installments of
principal, payable on the last Business Day of each fiscal quarter of
the Borrower, commencing on December 31, 1999 and continuing thereafter
until the Tranche A Term Loan Termination Date, and the Acquisition
Facility Loans shall be permanently reduced by the amount of each
installment on the date payment thereof is made hereunder.
Notwithstanding the foregoing, the final installment shall be in the
amount of the then outstanding principal balance of the Acquisition
Facility Loans. In addition, the then outstanding principal balance of
all Acquisition Facility Loans, if any, shall be due and payable on the
Tranche A Term Loan Termination Date."
1.12 Section 2.5(B)(i)(d)(I) of the Credit Agreement is hereby
amended to insert the following phrase immediately after the phrase "Tranche B
Term Loans":
"and, after December 31, 1999, the Acquisition Facility Loans".
1.13 Section 2.5(B)(i)(e) of the Credit Agreement is hereby
amended to insert the following phrase immediately after the reference to
"Tranche A Term Loans":
"and, after December 31, 1999, the Acquisition Facility Loans".
1.14 Section 2.6 of the Credit Agreement is hereby amended to
insert the following phrase after the first reference to "Aggregate Revolving
Loan Commitment":
"or the Aggregate Acquisition Facility Commitment",
-4-
<PAGE> 5
and to insert at the end of the first sentence the following:
"and the amount of the Aggregate Acquisition Facility Commitment may
not be reduced below the aggregate principal amount of the outstanding
Acquisition Facility Loans".
1.15 Section 2.7 of the Credit Agreement is hereby amended to
insert the following phrase immediately after the phrase "Revolving Loan or
Loans":
"or Acquisition Facility Loan or Loans".
and to insert immediately after each use of the phrase "Revolving Loans" the
following:
", Acquisition Facility Loans".
1.16 Section 2.8(b)(i) of the Credit Agreement shall be
amended to insert immediately after the reference to "Tranche A Term Loans and
Revolving Loans" in the pricing grid a reference to the following:
"and Acquisition Facility Loans".
1.17 Section 2.9 of the Credit Agreement is hereby amended to
insert the following phrase immediately after the phrase "Aggregate Revolving
Loan Commitment":
"or the unused Aggregate Acquisition Facility Commitment".
1.18 Section 2.15(C) of the Credit Agreement is hereby amended
to add the following phrase immediately after the phrase "Aggregate Revolving
Loan Commitment" in (i)(A):
"plus the Aggregate Acquisition Facility Commitment (prior to December
31, 1999)"
and to insert immediately after the phrase "Revolving Credit Obligations" in
(i)(B) the following:
"plus, prior to December 31, 1999, the outstanding principal balance of
the Acquisition Facility Loans".
1.19 Section 2.22 of the Credit Agreement is hereby amended to
add the following immediately after the end thereof:
"Notwithstanding the foregoing, Comerica Bank may issue commercial
Letters of Credit up to an aggregate amount at any one time outstanding
of $75,000 for its own account with respect to which the participation
provisions of this Section 2.22 shall not apply."
1.20 Section 2.25 of the Credit Agreement is hereby amended to
add the following immediately after the end thereof:
-5-
<PAGE> 6
"Notwithstanding the foregoing, the Letter of Credit Fee prescribed in
this Section 2.25 shall not apply to the commercial letters of credit
issued by Comerica Bank for its own account as described in Section
2.22 and Comerica Bank and the Borrowers shall negotiate separate fee
arrangements with respect to such letters of credit and such fees shall
be for the account of Comerica Bank."
1.21 Section 6.3(D) of the Credit Agreement is hereby amended
to add the following new subsection (xii) ad the end thereof:
"(xii) Investments made in Permitted Acquisitions".
1.22 Section 6.3(G) of the Credit Agreement is here by amended
to delete Section 6.3(G)(2) now contained therein and to substitute the
following therefor:
"prior to each such acquisition, Holdings shall deliver to the
Administrative Agent a certificate from one of Holdings' Authorized
Officers demonstrating to the satisfaction of the Administrative Agent
that after giving effect to the transaction or transactions on a pro
forma basis using pro forma historical audited and reviewed unaudited
financial statements (or other financial statements reasonably
acceptable to the Administrative Agent) obtained from the seller on an
unadjusted basis (other than one-time adjustments agreed to by the
Administrative Agent, such agreement not to be unreasonable withheld)
as if the acquisition had occurred in the first day of the twelve-month
period ending on the last day of Holdings' most recently completed
fiscal quarter, Holdings and its Subsidiaries (a) would have been in
compliance with all provisions of Section 6.4 at all times during such
twelve-month period and would have maintained a Leverage Ratio at all
times prior to January 1, 1998 of less than 5.50 to 1.0; and (b) will
be in compliance, based on projections deemed reasonable by the
Administrative Agent, with all provisions of Section 6.4 through the
first anniversary of such acquisition;"
and is further amended to delete the language now contained in Section
6.3(G)(5)(B) and substitute the following therefor:
"with respect to acquisitions other than the acquisition of Ellebi,
S.A., $5,000,000 if the sources for such purchases are other than as
set forth in clause (A) above, unless such acquisition is approved by
the Required Lenders"
and is further amended to add a new subsection (6) immediately following
subsection (5):
"(6) if the acquisition is a stock acquisition, the acquisition shall
result in a transfer of 100% of the common stock of the company being
acquired".
1.23 Section 8.2(vi) of the Credit Agreement is hereby amended
to insert immediately after each reference to "Revolving Loan Commitment" the
following:
"or its Acquisition Facility Commitment".
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<PAGE> 7
1.24 Section 8.3(iv) of the Credit Agreement is hereby amended
to insert immediately after the phrase "Revolving Loan Commitment" the
following:
"or Acquisition Facility Commitment".
1.25 Section 10.9 of the Credit Agreement is hereby amended to
insert immediately after the phrase "Revolving Loan Commitment" the following:
"its Acquisition Facility Commitment".
1.26 Section 12.2 of the Credit Agreement is hereby amended to
insert immediately after each reference to the phrase "Revolving Loan
Commitment" the following:
"or any Acquisition Facility Commitment".
1.27 Section 12.3 of the Credit Agreement is hereby amended to
insert immediately after each reference to the phrase "Revolving Loan
Commitment" the following:
"or Acquisition Facility Commitment",
and to insert immediately after the phrase "Aggregate Revolving Loan Commitment"
the following:
", the Aggregate Acquisition Facility Commitment".
2. Conditions of Effectiveness. The effectiveness of this
Amendment is subject to the conditions precedent that (a) the Administrative
Agent shall have received counterparts of this Amendment duly executed by the
Borrowers, the Required Lenders and the Agents, (b) the Borrowers shall have
raised $100,000,000 through an offering of subordinated notes containing terms
substantially identical to those set forth in the Preliminary Offering
Memorandum dated September 8, 1997, and (c) the Borrowers shall have paid any
fees due and payable pursuant to any applicable fee letter. Upon the
satisfaction of the foregoing conditions precedent, this Amendment shall become
effective with respect to the amendments set forth in Section 1 above.
3. Representations and Warranties of the Borrowers. Each
Borrower hereby represents and warrants as follows:
(a) This Amendment and the Credit Agreement as amended hereby
constitute legal, valid and binding obligations of the Borrowers and are
enforceable against the Borrowers in accordance with their terms.
(b) As of September 24, 1997, (i) there exists no Default or
Unmatured Default and (ii) the representations and warranties contained in
Article V of the Credit Agreement, as amended hereby, are true and correct in
all material respects, except for representations and warranties made with
reference to a specific date which representations and warranties are true and
correct in all material respects as of such date.
4. Reference to and Effect on the Credit Agreement and
Security Agreements.
-7-
<PAGE> 8
(a) Upon the effectiveness of Section 1 hereof, each reference
in any Loan Document to such Loan Document or any other Loan Document shall mean
and be a reference to the applicable Loan Document as amended hereby.
(b) Except as specifically amended above, the Credit Agreement
and all other documents, instruments and agreements executed and/or delivered in
connection therewith shall remain in full force and effect and are hereby
ratified and confirmed.
(c) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as a waiver of
any right, power or remedy of the Agents or the Lenders, nor constitute a waiver
of any provision of the Credit Agreement or any other documents, instruments and
agreements executed and/or delivered in connection therewith.
5. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
6. Headings. Section headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.
7. Counterparts. This Amendment may be executed by one or more
of the parties hereto on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
-8-
<PAGE> 9
IN WITNESS WHEREOF, this Amendment has been duly executed as
of the day and year first above written.
ADVANCED ACCESSORY SYSTEMS, LLC
as a Borrower
By: /s/ Terence C. Seikel
-----------------------------
Name: Terence C. Seikel
Title: Vice President
SPORTRACK, LLC
as a Borrower
By: ADVANCED ACCESSORY SYSTEMS, LLC
Its Manager
By: /s/ Terence C. Seikel
-----------------------------
Name: Terence C. Seikel
Title: Vice President
VALLEY INDUSTRIES, LLC
as a Borrower
By: ADVANCED ACCESSORY SYSTEMS, LLC
Its Manager
By: /s/ Terence C. Seikel
-----------------------------
Name: Terence C. Seikel
Title: Vice President
BRINK INTERNATIONAL BV
as a Borrower
By: /s/ Terence C. Seikel
-----------------------------
Name: Terence C. Seikel
Title: Attorney-in-Fact
BRINK BV
as a Borrower
By: /s/ Terence C. Seikel
-----------------------------
Name: Terence C. Seikel
Title: Attorney-in-Fact
-9-
<PAGE> 10
NBD BANK
as the Administrative Agent and
the Documentation and Collateral
Agent, and as a Lender
By: /s/ William H. Canney
-----------------------------
Name: William H. Canney
Title: Vice President
THE CHASE MANHATTAN BANK
as the Co-Administrative Agent and
the Syndication Agent, and as a
Lender
By: /s/ Thomas H. Kozlack
-----------------------------
Name: Thomas H. Kozlack
Title: Vice President
FIRST UNION NATIONAL BANK (f/k/a
First Union National Bank of North
Carolina)
as a Lender
By: /s/ Mark M. Harden
-----------------------------
Name: Mark M. Harden
Title: Vice President
THE BANK OF NOVA SCOTIA
as a Lender
By: /s/ F.C.H. Ashby
-----------------------------
Name: F.C.H. Ashby
Title: Senior Manager Loan Operations
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK
B.A., "RABOBANK NEDERLAND",
NEW YORK BRANCH
as a Lender
By:
-----------------------------
Name:
Title:
By:
-----------------------------
Name:
Title:
-10-
<PAGE> 11
LASALLE NATIONAL BANK
as a Lender
By: /s/ Thomas J. Bieke
-----------------------------
Name: Thomas J. Bieke
Title: Senior Vice President
MICHIGAN NATIONAL BANK
as a Lender
By:
-----------------------------
Name:
Title:
NATIONAL CITY BANK (CLEVELAND)
as a Lender
By: /s/ Carlton M. Faison
-----------------------------
Name: Carlton M. Faison
Title: Vice President
COMERICA BANK
as a Lender
By: /s/ Beth A. Brockmann
-----------------------------
Name: Beth A. Brockmann
Title: Vice President
VAN KAMPEN AMERICA CAPITAL
PRIME RATE INCOME TRUST
as a Lender
By: /s/ Jeffrey W. Maillet
-----------------------------
Name: Jeffrey W. Maillet
Title: Senior Vice President &
Director
DEBT STRATEGIES FUND, INC.
as a Lender
By: /s/ Gilles Marchand
-----------------------------
Name: Gilles Marchand
Title: Vice President
-11-
<PAGE> 12
SENIOR HIGH INCOME PORTFOLIO, INC.
as a Lender
By: /s/ Gilles Marchand
-----------------------------
Name: Gilles Marchand
Title: Vice President
DEEPROCK & CO.
By: Eaton Vance Management
as Investment Advisor
By:
-----------------------------
Name:
Title:
SENIOR DEBT PORTFOLIO
By: Boston Management and Research
as Investment Advisor
By:
-----------------------------
Name:
Title:
MERRILL LYNCH DEBT STRATEGIES
PORTFOLIO
By: Merrill Lynch Asset Management,L.P.,
as Investment Advisor
By: /s/ Gilles Marchand
-----------------------------
Name: Gilles Marchand
Title: Vice President
MERRILL LYNCH PRIME RATE PORTFOLIO
By: Merrill Lynch Asset Management,
L.P.,
as Investment Advisor
By: /s/ Gilles Marchand
-----------------------------
Name: Gilles Marchand
Title: Vice President
-12-
<PAGE> 13
EXHIBIT B
TO
CREDIT AGREEMENT
Commitments
<TABLE>
<CAPTION>
Amount of Revolving
Lender Loan Commitment
------ ---------------
<S> <C> <C>
NBD Bank $3,041,795.49
The Chase Manhattan Bank $3,041,795.49
First Union National Bank $3,041,795.49
The Bank of Nova Scotia $3,041,795.49
Rabobank Nederland (New York) $3,041,795.49
LaSalle National Bank $3,041,795.49
Michigan National Bank $3,041,795.49
National City Bank (Cleveland) $1,734,375.00
Comerica Bank $1,973,056.57
-------------
TOTAL REVOLVING LOAN COMMITMENTS $25,000,000
<CAPTION>
Amount of Tranche A
Lender Term Loan Commitment
------ --------------------
<S> <C>
NBD Bank $7,051,043.75
The Chase Manhattan Bank $7,051,043.75
First Union National Bank $7,051,043.75
The Bank of Nova Scotia $7,051,043.75
Rabobank Nederland (New York) $7,051,043.75
</TABLE>
<PAGE> 14
<TABLE>
<S> <C> <C>
LaSalle National Bank $7,051,043.75
Michigan National Bank $7,051,043.75
National City Bank (Cleveland) $7,051,043.75
Comerica Bank $4,573,650.00
-------------
TOTAL TRANCHE A TERM LOAN COMMITMENTS $60,982,000
<CAPTION>
Amount of Tranche B
Lender Term Loan Commitment
------ --------------------
<S> <C> <C>
Debt Strategies Fund, Inc. $5,000,000
Deeprock & Company $1,000,000
NBD Bank $15,000,000
Senior High Income Portfolio, Inc. $5,000,000
The Chase Manhattan Bank $15,000,000
Van Kampen American Capital
Prime Rate Income Trust $14,000,000
-----------
TOTAL TRANCHE B TERM LOAN COMMITMENTS $55,000,000
<CAPTION>
Amount of Acquisition
Lender Facility Commitment
------ -------------------
<S> <C>
NBD Bank $2,487,519.62
The Chase Manhattan Bank $2,487,519.62
First Union National Bank $2,487,519.62
The Bank of Nova Scotia $2,487,519.62
LaSalle National Bank $2,487,519.62
</TABLE>
<PAGE> 15
<TABLE>
<S> <C> <C>
Michigan National Bank $1,500,000.00
National City Bank (Cleveland) $3,794,940.10
Comerica Bank $4,267,461.80
--------------------
TOTAL ACQUISITION FACILITY COMMITMENTS $22,000,000
------------
TOTAL COMMITMENTS $162,982,000
============
</TABLE>
<PAGE> 16
EXHIBIT C-1
TO
CREDIT AGREEMENT
Form of Acquisition Facility Note
ACQUISITION FACILITY NOTE
U.S. $_________ New York, New York
[Date]
FOR VALUE RECEIVED, the undersigned, [INSERT NAME OF APPLICABLE
BORROWER], a [Delaware limited liability company][insert alternative
organizational information] (the "Borrower"), HEREBY UNCONDITIONALLY PROMISES TO
PAY to the order of [INSERT NAME OF LENDER] (the "Lender") the principal sum of
[_____________] AND NO/100 DOLLARS ($[____]), or, if less, the aggregate unpaid
amount of all Acquisition Facility Loans made by the Lender to such Borrower
pursuant to the "Credit Agreement" (as defined below), on the Termination Date
or on such earlier date as may be required by the terms of the Credit Agreement.
Capitalized terms used herein and not otherwise defined herein are as defined in
the Credit Agreement.
The Borrower promises to pay interest on the unpaid principal amount of
each Acquisition Facility Loan made to it from the date of such Acquisition
Facility Loan until such principal amount is paid in full at a rate or rates per
annum determined in accordance with the terms of the Credit Agreement. Interest
hereunder is due and payable at such times and on such dates as set forth in the
Credit Agreement.
Both principal and interest are payable in lawful money of the United
States of America if the applicable Acquisition Facility Loan was made in
Dollars or in the applicable Agreed Currency if made in an Agreed Currency to
the "Administrative Agent" (as defined below), to such account as the
Administrative Agent may designate, in same day funds. At the time of each
Acquisition Facility Loan, and upon each payment or prepayment of principal of
each Acquisition Facility Loan, the Lender shall make a notation either on the
schedule attached hereto and made a part hereof, or in such Lender's own books
and records, in each case specifying the amount of such Acquisition Facility
Loan, the respective Interest Period thereof, in the case of Eurocurrency Rate
Loans, the applicable currency, in the case of Eurocurrency Rate Loans or the
amount of principal paid or prepaid with respect to such Acquisition Facility
Loan, as the case may be; provided that the failure of the Lender to make any
such recordation or notation shall not affect the Obligations of the Borrower
hereunder or under the Credit Agreement.
This Acquisition Facility Note (this "Note") is one of the "Acquisition
Facility Notes" referred to in, and is entitled to the benefits of, the Second
Amended and Restated Credit
<PAGE> 17
Agreement dated as of August 5, 1997 (as amended, restated, supplemented or
otherwise modified from time to time, the "Credit Agreement") among AAS
Holdings, LLC, Advanced Accessory Systems, LLC, Valley Industries, LLC, Brink
International BV, Brink BV, certain borrowing subsidiaries from time to time
parties thereto, the financial institutions from time to time parties thereto,
NBD Bank, as the Administrative Agent and the Documentation and Collateral Agent
(herein, the "Administrative Agent"), and The Chase Manhattan Bank, as the
Co-Administrative Agent. The Credit Agreement, among other things, (i) provides
for the making of Acquisition Facility Loans by the Lender to the Borrower and
the other Borrowers under the Credit Agreement from time to time in an aggregate
amount not to exceed at any time outstanding the U.S. Dollar amount first above
mentioned, the indebtedness of the Borrower resulting from each such Acquisition
Facility Loan to it being evidenced by this Note, and (ii) contains provisions
for acceleration of the maturity hereof upon the happening of certain stated
events and also for prepayments of the principal hereof prior to the maturity
hereof upon the terms and conditions therein specified.
Demand, presentment, protest and notice of nonpayment and protest are
hereby waived by the Borrower.
Whenever in this Note reference is made to the Administrative Agent,
the Co-Administrative Agent, the Documentation and Collateral Agent, the Lender
or the Borrower, such reference shall be deemed to include, as applicable, a
reference to their respective successors and assigns. The provisions of this
Note shall be binding upon and shall inure to the benefit of said successors and
assigns. The Borrower's successors and assigns shall include, without
limitation, a receiver, trustee or debtor in possession of or for the Borrower.
This Note shall be interpreted, and the rights and liabilities of the
parties hereto determined, in accordance with the laws of the State of New York.
[Name of Applicable Borrower]
By:
--------------------------
Name:
Title:
<PAGE> 18
SCHEDULE OF ACQUISITION FACILITY LOANS AND PAYMENTS OR PREPAYMENTS
<TABLE>
<CAPTION>
Amount of Unpaid
Amount Type Interest Principal Paid Principal Notation
Date of Loan of Loan Period/Rate Currency or Prepaid Balance Made By
- ---- ------- ------- ----------- -------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE> 1
Exhibit 10.7(c)
EXECUTION COPY
AMENDMENT NO. 3
Dated as of December 29, 1997
to
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of August 5, 1997
THIS AMENDMENT NO. 3 ("Amendment") is made as of December 29,
1997 by and among Advanced Accessory Systems, LLC (formerly known as AAS
Holdings, LLC), SportRack, LLC (formerly known as Advanced Accessory Systems,
LLC), Valley Industries, LLC, Brink International BV and Brink BV (the
"Borrowers"), the financial institutions listed on the signature pages hereof
(the "Lenders") and NBD Bank, as Administrative Agent and Documentation and
Collateral Agent, and The Chase Manhattan Bank, as Co-Administrative Agent and
Syndication Agent (the "Agents"), under that certain Second Amended and Restated
Credit Agreement dated as of August 5, 1997 by and among the Borrowers, the
Lenders and the Agents (as amended, the "Credit Agreement"). Defined terms used
herein and not otherwise defined herein shall have the respective meanings given
to them in the Credit Agreement.
WHEREAS, the Borrowers, the Lenders and the Agents have agreed
to amend the Credit Agreement on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises set forth
above, the terms and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Borrowers, the Lenders and the Agents have agreed to the following amendments to
the Credit Agreement.
1. Amendments to Credit Agreement. Effective as of December
29, 1997 and subject to the satisfaction of the conditions precedent set forth
in Section 2 below, the Credit Agreement is hereby amended as follows:
1.1 Article I of the Credit Agreement is hereby amended to
delete the definition of "AAS" now contained therein and to substitute therefor
the following definition:
"'AAS' means SportRack, LLC, a Delaware limited liability
company (formerly known as Advanced Accessory Systems, LLC), and its
successors and assigns, including a debtor-in-possession on behalf of
AAS."
1.2 Article I of the Credit Agreement is hereby amended to
delete the definition of "Holdings" now contained therein and to substitute
therefor the following:
"'HOLDINGS' means Advanced Accessory Systems, LLC, a Delaware
limited liability company (formerly known as AAS Holdings, LLC), and
its successors and assigns, including a debtor-in-possession on behalf
of Holdings."
1.3 Section 6.3(A)(f) of the Credit Agreement is hereby
amended to add a new subsection (5) at the end thereof:
"and (5) Brink BV or Brink International to Brink Italia S.r.l. in an
amount not to exceed $22,000,000 or the Equivalent Amount thereof,
provided that if such
<PAGE> 2
Indebtedness is evidenced by a note, such note is pledged to the
Documentation and Collateral Agent to secure payment of Advances made
to non-U.S. Subsidiaries."
1.4 Section 6.3(D) of the Credit Agreement is hereby amended
to add a new subsection (xiii) at the end thereof:
(xiii) Investments made through a purchase of equity or as a
contribution to capital by Brink BV or Brink International in Brink
Italia S.r.l. provided that any such Investment shall not exceed
$10,000,000 or the Equivalent Amount thereof."
1.5 Section 6.4(A) of the Credit Agreement is hereby amended
to add the following as a new last sentence at the end of the definition of
"Capital Expenditures":
"No portion of the purchase of assets by Brink Italia S.r.l. from
Ellebi S.p.A. shall be deemed to be a Capital Expenditure."
1.6 Schedule 5.8 of the Credit Agreement is hereby amended to
add immediately at the end thereof the following:
"Brink Italia S.r.l., an Italian corporation."
2. Conditions of Effectiveness. The effectiveness of this
Amendment is subject to the conditions precedent that the Administrative Agent
shall have received counterparts of this Amendment duly executed by the
Borrowers, the Required Lenders and the Agents. Upon the satisfaction of the
foregoing conditions precedent, this Amendment shall become effective with
respect to the amendments set forth in Section 1 above.
3. Representations and Warranties of the Borrowers. Each
Borrower hereby represents and warrants as follows:
(a) This Amendment and the Credit Agreement as amended hereby
constitute legal, valid and binding obligations of the Borrowers and are
enforceable against the Borrowers in accordance with their terms.
(b) As of December 29, 1997, (i) there exists no Default or
Unmatured Default and (ii) the representations and warranties contained in
Article V of the Credit Agreement, as amended hereby, are true and correct in
all material respects, except for representations and warranties made with
reference to a specific date which representations and warranties are true and
correct in all material respects as of such date.
4. Reference to and Effect on the Credit Agreement and
Security Agreements.
(a) Upon the effectiveness of Section 1 hereof, each reference
in any Loan Document to such Loan Document or any other Loan Document shall mean
and be a reference to the applicable Loan Document as amended hereby.
-2-
<PAGE> 3
(b) Except as specifically amended above, the Credit Agreement
and all other documents, instruments and agreements executed and/or delivered in
connection therewith shall remain in full force and effect and are hereby
ratified and confirmed.
(c) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as a waiver of
any right, power or remedy of the Agents or the Lenders, nor constitute a waiver
of any provision of the Credit Agreement or any other documents, instruments and
agreements executed and/or delivered in connection therewith.
5. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
6. Headings. Section headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.
7. Counterparts. This Amendment may be executed by one or more
of the parties hereto on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
-3-
<PAGE> 4
IN WITNESS WHEREOF, this Amendment has been duly executed as
of the day and year first above written.
ADVANCED ACCESSORY SYSTEMS, LLC
as a Borrower
By: /s/ Terence C. Seikel
-----------------------------
Name: Terence C. Seikel
Title: Attorney-in-Fact
SPORTRACK, LLC
as a Borrower
By: ADVANCED ACCESSORY SYSTEMS, LLC
Its Manager
By: /s/ Terence C. Seikel
-----------------------------
Name: Terence C. Seikel
Title: Attorney-in-Fact
VALLEY INDUSTRIES, LLC
as a Borrower
By: ADVANCED ACCESSORY SYSTEMS, LLC
Its Manager
By: /s/ Terence C. Seikel
-----------------------------
Name: Terence C. Seikel
Title: Attorney-in-Fact
BRINK INTERNATIONAL BV
as a Borrower
By: /s/ Terence C. Seikel
-----------------------------
Name: Terence C. Seikel
Title: Attorney-in-Fact
BRINK BV
as a Borrower
By: /s/ Terence C. Seikel
-----------------------------
Name: Terence C. Seikel
Title: Attorney-in-Fact
-4-
<PAGE> 5
NBD BANK
as the Administrative Agent and
the Documentation and Collateral
Agent, and as a Lender
By: /s/ William Canney
-----------------------------
Name: William Canney
Title: Vice President
THE CHASE MANHATTAN BANK
as the Co-Administrative Agent and
the Syndication Agent, and as a
Lender
By: /s/ Thomas H. Kozlark
-----------------------------
Name: Thomas H. Kozlark
Title: Vice President
FIRST UNION NATIONAL BANK
as a Lender
By: /s/ Mark M. Harden
-----------------------------
Name: Mark M. Harden
Title: Vice President
THE BANK OF NOVA SCOTIA
as a Lender
By: /s/ F.C.H. Ashby
-----------------------------
Name: F.C.H. Ashby
Title: Senior Manager Loan Operations
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK
B.A., "RABOBANK NEDERLAND",
NEW YORK BRANCH
as a Lender
By:
-----------------------------
Name:
Title:
By:
-----------------------------
Name:
Title:
-5-
<PAGE> 6
LASALLE NATIONAL BANK
as a Lender
By: /s/ Thomas J. Ranville
-----------------------------
Name: Thomas J. Ranville
Title: Vice President
MICHIGAN NATIONAL BANK
as a Lender
By: /s/ Mark W. Smits
-----------------------------
Name: Mark W. Smits
Title: Relationship Manager
NATIONAL CITY BANK (CLEVELAND)
as a Lender
By:
-----------------------------
Name:
Title:
COMERICA BANK
as a Lender
By: /s/ Beth A. Brockmann
-----------------------------
Name: Beth A. Brockmann
Title: Vice President
VAN KAMPEN AMERICA CAPITAL
PRIME RATE INCOME TRUST
as a Lender
By: /s/ Jeffrey W. Maillet
-----------------------------
Name: Jeffrey W. Maillet
Title: Sr. Vice Pres. & Director
DEBT STRATEGIES FUND, INC.
as a Lender
By: /s/ Gilles Marchand
-----------------------------
Name: Gilles Marchand, CFA
Title: Authorized Signatory
-6-
<PAGE> 7
SENIOR HIGH INCOME PORTFOLIO, INC.
as a Lender
By: /s/ Gilles Marchand
-----------------------------
Name: Gilles Marchand, CFA
Title: Authorized Signatory
DEEPROCK & CO.
By: Eaton Vance Management
as Investment Advisor
By: /s/ Payson F. Swaffield
-------------------------
Name: Payson F. Swaffield
Title: Vice President
SENIOR DEBT PORTFOLIO
By: Boston Management and Research
as Investment Advisor
By: /s/ Payson F. Swaffield
-------------------------
Name: Payson F. Swaffield
Title: Vice President
MERRILL LYNCH DEBT STRATEGIES
PORTFOLIO
By: Merrill Lynch Asset Management,
L.P., as Investment Advisor
By: /s/ Gilles Marchand
-----------------------------
Name: Gilles Marchand, CFA
Title: Authorized Signatory
MERRILL LYNCH PRIME RATE PORTFOLIO
By: Merrill Lynch Asset Management,
L.P., as Investment Advisor
By: /s/ Gilles Marchand
-----------------------------
Name: Gilles Marchand, CFA
Title: Authorized Signatory
-7-
<PAGE> 8
SENIOR HIGH INCOME PORTFOLIO, INC.
as a Lender
By: /s/ Gilles Marchand
-----------------------------
Name: Gilles Marchand, CFA
Title: Authorized Signatory
DEEPROCK & CO.
By: Eaton Vance Management
as Investment Advisor
By: /s/ Payson F. Swaffield
-------------------------
Name: Payson F. Swaffield
Title: Vice President
SENIOR DEBT PORTFOLIO
By: Boston Management and Research
as Investment Advisor
By: /s/ Payson F. Swaffield
-------------------------
Name: Payson F. Swaffield
Title: Vice President
MERRILL LYNCH DEBT STRATEGIES
PORTFOLIO
By: Merrill Lynch Asset Management,
L.P., as Investment Advisor
By: /s/ Gilles Marchand
-------------------------
Name: Gilles Marchand, CFA
Title: Authorized Signatory
MERRILL LYNCH PRIME RATE PORTFOLIO
By: Merrill Lynch Asset Management,
L.P., as Investment Advisor
By: /s/ Gilles Marchand
-------------------------
Name: Gilles Marchand, CFA
Title: Authorized Signatory
-8-
<PAGE> 1
Exhibit 10.7(d)
EXECUTION COPY
AMENDMENT NO. 4
Dated as of December 31, 1997
to
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of August 5, 1997
THIS AMENDMENT NO. 4 ("Amendment") is made as of December 31,
1997 by and among Advanced Accessory Systems, LLC (formerly known as AAS
Holdings, LLC), SportRack, LLC (formerly known as Advanced Accessory Systems,
LLC), Valley Industries, LLC, Brink International BV and Brink BV (the
"Borrowers"), the financial institutions listed on the signature pages hereof
(the "Lenders") and NBD Bank, as Administrative Agent and Documentation and
Collateral Agent, and The Chase Manhattan Bank, as Co-Administrative Agent and
Syndication Agent (the "Agents"), under that certain Second Amended and Restated
Credit Agreement dated as of August 5, 1997 by and among the Borrowers, the
Lenders and the Agents (as amended, the "Credit Agreement"). Defined terms used
herein and not otherwise defined herein shall have the respective meanings given
to them in the Credit Agreement.
WHEREAS, the Borrowers, the Lenders and the Agents have agreed
to amend the Credit Agreement on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises set forth
above, the terms and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Borrowers, the Lenders and the Agents have agreed to the following amendments to
the Credit Agreement.
1. Amendments to Credit Agreement. Effective as of December
31, 1997 and subject to the satisfaction of the conditions precedent set forth
in Section 2 below, the Credit Agreement is hereby amended as follows:
1.1 Section 6.4(E) of the Credit Agreement is hereby amended
to add the following immediately at the end thereof:
"and provided further that for the fiscal quarter ending
December 31, 1997, the Leverage Ratio shall be calculated
including EBITDA for the business acquired by Ellebi S.r.l.
from Ellebi S.p.A for the four quarter period ending on such
day calculated on a pro forma basis using historical audited
and reviewed unaudited financial statements obtained from
Ellebi S.p.A."
2. Conditions of Effectiveness. The effectiveness of this
Amendment is subject to the conditions precedent that the Administrative Agent
shall have received counterparts of this Amendment duly executed by the
Borrowers, the Required Lenders and the Agents. Upon the satisfaction of the
foregoing conditions precedent, this Amendment shall become effective with
respect to the amendments set forth in Section 1 above.
3. Representations and Warranties of the Borrowers. Each
Borrower hereby represents and warrants as follows:
<PAGE> 2
(a) This Amendment and the Credit Agreement as amended hereby
constitute legal, valid and binding obligations of the Borrowers and are
enforceable against the Borrowers in accordance with their terms.
(b) As of December 31, 1997, (i) there exists no Default or
Unmatured Default under the Credit Agreement, as amended hereby, and (ii) the
representations and warranties contained in Article V of the Credit Agreement,
as amended hereby, are true and correct in all material respects, except for
representations and warranties made with reference to a specific date which
representations and warranties are true and correct in all material respects as
of such date.
4. Reference to and Effect on the Credit Agreement and
Security Agreements.
(a) Upon the effectiveness of Section 1 hereof, each reference
in any Loan Document to such Loan Document or any other Loan Document shall mean
and be a reference to the applicable Loan Document as amended hereby.
(b) Except as specifically amended above, the Credit Agreement
and all other documents, instruments and agreements executed and/or delivered in
connection therewith shall remain in full force and effect and are hereby
ratified and confirmed.
(c) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as a waiver of
any right, power or remedy of the Agents or the Lenders, nor constitute a waiver
of any provision of the Credit Agreement or any other documents, instruments and
agreements executed and/or delivered in connection therewith.
5. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
6. Headings. Section headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.
7. Counterparts. This Amendment may be executed by one or more
of the parties hereto on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
-2-
<PAGE> 3
IN WITNESS WHEREOF, this Amendment has been duly executed as
of the day and year first above written.
ADVANCED ACCESSORY SYSTEMS, LLC
as a Borrower
By: /s/ Terence C. Seikel
----------------------------
Name: Terence C. Seikel
Title: Vice President
SPORTRACK, LLC
as a Borrower
By: ADVANCED ACCESSORY SYSTEMS, LLC
Its Manager
By: /s/ Terence C. Seikel
----------------------------
Name: Terence C. Seikel
Title: Vice President
VALLEY INDUSTRIES, LLC
as a Borrower
By: ADVANCED ACCESSORY SYSTEMS, LLC
Its Manager
By: /s/ Terence C. Seikel
----------------------------
Name: Terence C. Seikel
Title: Vice President
BRINK INTERNATIONAL BV
as a Borrower
By: /s/ Terence C. Seikel
----------------------------
Name: Terence C. Seikel
Title: Vice President
BRINK BV
as a Borrower
By: /s/ Terence C. Seikel
----------------------------
Name: Terence C. Seikel
Title: Vice President
-3-
<PAGE> 4
NBD BANK
as the Administrative Agent and
the Documentation and Collateral
Agent, and as a Lender
By: /s/ William J. Maxbauer
-----------------------------
Name: William J. Maxbauer
Title: Vice President
THE CHASE MANHATTAN BANK
as the Co-Administrative Agent and
the Syndication Agent, and as a
Lender
By: /s/ Andris G. Kalnins
-----------------------------
Name: Andris G. Kalnins
Title: Vice President
FIRST UNION NATIONAL BANK
as a Lender
By: /s/ Mark B. Felke
-----------------------------
Name: Mark B. Felke
Title: Senior Vice President
THE BANK OF NOVA SCOTIA
as a Lender
By: /s/ F.C.H. Ashby
-----------------------------
Name: F.C.H. Ashby
Title: Senior Manager Loan Operations
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK
B.A., "RABOBANK NEDERLAND",
NEW YORK BRANCH
as a Lender
By: /s/ W. Jeffrey Vollack
-----------------------------
Name: W. Jeffrey Vollack
Title: Senior Credit Officer
Senior Vice President
By: /s/ M. Christina Debler
-----------------------------
Name: M. Christina Debler
Title: Vice President
-4-
<PAGE> 5
LASALLE NATIONAL BANK
as a Lender
By: /s/ Thomas J. Ranville
-----------------------------
Name: Thomas J. Ranville
Title: Vice President
MICHIGAN NATIONAL BANK
as a Lender
By:
-----------------------------
Name:
Title:
NATIONAL CITY BANK (CLEVELAND)
as a Lender
By: /s/ Marybeth S. Howe
-----------------------------
Name: Marybeth S. Howe
Title: Vice President
COMERICA BANK
as a Lender
By: /s/ Mark B. Grover
-----------------------------
Name: Mark B. Grover
Title: Vice President
VAN KAMPEN AMERICA CAPITAL
PRIME RATE INCOME TRUST
as a Lender
By:
-----------------------------
Name:
Title:
DEBT STRATEGIES FUND, INC.
as a Lender
By:
-----------------------------
Name:
Title:
-5-
<PAGE> 1
EXHIBIT 10.7(e)
AMENDMENT NO. 5 AND WAIVER
Dated as of December 31, 1998
to
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of August 5, 1997
THIS AMENDMENT NO. 5 ("Amendment") is made as of December 31,
1998 by and among Advanced Accessory Systems, LLC (formerly known as AAS
Holdings, LLC), SportRack, LLC (formerly known as Advanced Accessory Systems,
LLC), Valley Industries, LLC, Brink International BV and Brink BV (the
"Borrowers"), the financial institutions listed on the signature pages hereof
(the "Lenders") and NBD Bank, as Administrative Agent and Documentation and
Collateral Agent, and The Chase Manhattan Bank, as Co-Administrative Agent and
Syndication Agent (the "Agents"), under that certain Second Amended and Restated
Credit Agreement dated as of August 5, 1997 by and among the Borrowers, the
Lenders and the Agents (as amended, the "Credit Agreement"). Defined terms used
herein and not otherwise defined herein shall have the respective meanings given
to them in the Credit Agreement.
WHEREAS, the Borrowers, the Lenders and the Agents have agreed
to amend the Credit Agreement on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises set forth
above, the terms and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Borrowers, the Lenders and the Agents have agreed to the following amendments to
the Credit Agreement.
1. Amendments to Credit Agreement. Effective as of December
31, 1998 and subject to the satisfaction of the conditions precedent set forth
in Section 3 below, the Credit Agreement is hereby amended as follows:
1.1. Section 1.1 of the Credit Agreement is hereby amended to
insert in the definition of "Agreed Currencies" the following immediately after
the reference to "Dutch Guilders" the following:
"and the euro for so long as the euro is and shall remain an
Eligible Currency".
1.2. Section 1.1 of the Credit Agreement is hereby amended to
insert in the definition of "Swing Line Lender" immediately after the phrase
"other Lender" the following:
"or any affiliate of such Lender".
1.3. Section 1.1 of the Credit Agreement is hereby amended to
add alphabetically the following defined terms:
"ELIGIBLE CURRENCY" means any currency other than Dollars with
<PAGE> 2
respect to which the Agent has not given notice in accordance
with Section 2.28 and that is readily available, freely
traded, in which deposits are customarily offered to banks in
the London interbank market, convertible into Dollars in the
international interbank market and as to which an Equivalent
Amount may be readily calculated.
"'EURO' means the lawful currency of the member states of the
European Community that adopted the single currency in
accordance with the third stage of the Economic and Monetary
Union in accordance with the treaty establishing the European
Community as amended by the Treaty on European Union."
"'NATIONAL CURRENCY UNIT' means the unit of currency (other
than a euro unit) of each member state of the European Union
that participates in the third stage of Economic and Monetary
Union."
"'YEAR 2000 ISSUES' means, with respect to any Person,
anticipated costs, problems and uncertainties associated with
the inability of certain computer applications and imbedded
systems to effectively handle data, including dates, prior to,
on and after January 1, 2000, as it affects the business,
operations, and financial condition of such Person, and such
Person's customers, suppliers and vendors."
1.4. Section 2.2 of the Credit Agreement is hereby amended by
adding immediately at the end of the first sentence thereof, the following:
"provided that each such Revolving Loan shall be made in the
euro if such Revolving Loan would be capable of being made in
the euro or the National Currency Unit requested by the
applicable Borrower, unless otherwise consented to by the
Agent."
1.5. Section 2.2.A of the Credit Agreement is hereby amended
to delete the phrase "in Dollars only, to the applicable Borrower from time to
time in an amount not to exceed" and to substitute therefor the following:
"in an Agreed Currency, to the applicable Borrower from time
to time in a Dollar Amount not to exceed".
1.6. Section 2.6 of the Credit Agreement is hereby amended to
delete the phrase "The amount of the Aggregate Acquisition Facility Commitment"
and to substitute therefor the following:
"The Dollar Amount of the Aggregate Acquisition Facility
Commitment".
1.7. Section 2.8(b) of the Credit Agreement is hereby amended
to replace the pricing grid now contained therein with the following:
-2-
<PAGE> 3
<TABLE>
<CAPTION>
APPLICABLE BASE APPLICABLE BASE APPLICABLE EUROCURRENCY APPLICABLE APPLICABLE
SENIOR DEBT RATIO RATE MARGIN FOR RATE MARGIN FOR MARGIN FOR TRANCHE A TERM EUROCURRENCY COMMITMENT
TRANCHE A TERM TRANCHE B TERM LOANS AND REVOLVING LOANS MARGIN FOR FEE
LOANS AND LOANS AND APPLICABLE LETTER OF TRANCHE B
REVOLVING LOANS CREDIT FEE TERM LOANS
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GREATER THAN OR
EQUAL TO 4.0 TO 2.00% 2.50% 3.00% 3.50% 0.50%
1.0
- ------------------------------------------------------------------------------------------------------------------------------
LESS THAN 4.0 TO
1.0 AND GREATER
THAN OR EQUAL TO 1.75% 2.25% 2.75% 3.25% 0.50%
3.5 TO 1.0
- ------------------------------------------------------------------------------------------------------------------------------
LESS THAN 3.5 TO
1.0 AND GREATER
THAN OR EQUAL TO 1.50% 2.00% 2.50% 3.00% 0.50%
3.0 TO 1.0
- ------------------------------------------------------------------------------------------------------------------------------
LESS THAN 3.0 TO
1.0 AND GREATER
THAN OR EQUAL TO 1.25% 1.75% 2.25% 2.75% 0.50%
2.5 TO 1.0
- ------------------------------------------------------------------------------------------------------------------------------
LESS THAN 2.5 TO
1.0 AND GREATER
THAN OR EQUAL TO 1.00% 1.50% 2.00% 2.50% 0.50%
2.0 TO 1.0
- ------------------------------------------------------------------------------------------------------------------------------
LESS THAN 2.0 TO
1.0 0.75% 1.25% 1.75% 2.25% 0.375%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1.8. Article V of the Credit Agreement is hereby amended to
add a new Section 5.27 as follows:
"5.27. Year 2000 Issues. The Borrowers have made a reasonable
assessment of the Year 2000 Issues with respect to the
Borrowers and have a program for remediating such Year 2000
Issues on a timely basis. Based on this assessment and
program, the Borrowers do not anticipate any Material Adverse
Effect on the Borrowers' operations, business or financial
condition as a result of Year 2000 Issues."
1.9. Section 6.2 of the Credit Agreement is hereby amended to
add a new Section O as follows:
"(O) Year 2000 Issues. The Borrowers shall, and shall cause
each of their
-3-
<PAGE> 4
respective Subsidiaries to, take all actions reasonably
necessary to ensure that the Year 2000 Issues will not have a
Material Adverse Effect. The Borrowers shall provide the Agent
and each of the Lenders information regarding the Borrower's
and its Subsidiaries' program to address Year 2000 Issues. The
Borrower shall advise the Agent if any Year 2000 Issues will
have or would reasonably be expected to have a Material
Adverse Effect."
1.10. Section 6.3(D)(xi) of the Credit Agreement is hereby
amended to delete the reference to "C $2,500,000" and to substitute therefor the
following:
"U.S. $5,500,000".
1.11. Section 6.3(E)(vi) of the Credit Agreement is hereby
amended to delete the reference to "$500,000" and to substitute therefor the
following:
"$1,000,000".
1.12. Section 6.3(E)(viii) o the Credit Agreement is hereby
amended to insert immediately after the reference to "AAS" the following:
"and Valley".
1.13. Section 6.4(B) of the Credit Agreement is hereby amended
to delete the reference to "$4,000,000" now contained therein and to substitute
therefor:
"$4,500,000".
1.14. Section 6.4(C) of the Credit Agreement is hereby amended
to delete the phrase: "(5) 1.50 to 1.00 for each fiscal quarter thereafter until
the Tranche B Loan Termination Date" and to substitute the following therefor:
"(5) 1.20 to 1.00 for the fiscal quarters ending
December 31, 1998 and March 31, 1999;
"(6) 1.35 to 1.00 for the fiscal quarters ending June
30, 1999, September 30, 1999 and December 31, 1999; and
"(7) 1.50 to 1.00 for each fiscal quarter thereafter
until the Tranche B Loan Termination Date."
1.15. Section 6.4(E) of the Credit Agreement is hereby amended
to delete the ratios listed on the table now contained therein for December 31,
1998 through December 31, 1999 and to substitute the following therefor for the
periods ending on the dates set forth below:
-4-
<PAGE> 5
<TABLE>
<CAPTION>
"Period Ending Maximum Leverage Ratio
---------------- ------------------------
<S> <C>
December 31, 1998 5.00 to 1.00
March 31, 1999 5.00 to 1.00
June 30, 1999 4.75 to 1.00
September 30, 1999 4.50 to 1.00
December 31, 1999 4.50 to 1.00"
</TABLE>
1.16. Section 6.4(F) of the Credit Agreement is hereby amended
to delete the reference to "$10,000,000" now contained therein and to substitute
therefor the following:
"$12,500,000".
2. Waiver. The Borrowers have advised the Administrative Agent
that the Borrowers may not have been in compliance with Section 6.3(D)(xi) of
the Credit Agreement prior to the effective date of this Amendment and,
accordingly, have requested that the Required Lenders waive any Default that
would otherwise result from such noncompliance. By executing this Amendment No.
5 and Waiver, each Lender doing so hereby confirms its agreement to waive such
noncompliance.
3. Conditions of Effectiveness. The effectiveness of this
Amendment is subject to the conditions precedent that the Administrative Agent
shall have received counterparts of this Amendment duly executed by the
Borrowers, the Required Lenders and the Agents and payment of an amendment fee
of 0.125% of the current Revolving Loan Commitment and the current outstanding
balance of the Term Loans of each Lender that approves this Amendment and
delivers a copy of its signed signature page of this Amendment to the
Administrative Agent or its counsel by 5:00 p.m. (Chicago time), Friday, March
19, 1999. Upon the satisfaction of the foregoing conditions precedent, this
Amendment shall become effective with respect to the amendments set forth in
Section 1 above.
4. Representations and Warranties of the Borrowers. Each
Borrower hereby represents and warrants as follows:
(a) This Amendment and the Credit Agreement as amended hereby
constitute legal, valid and binding obligations of the Borrowers and are
enforceable against the Borrowers in accordance with their terms.
(b) As of December 31, 1998, (i) there exists no Default or
Unmatured Default under the Credit Agreement, as amended hereby, and (ii) the
representations and warranties contained in Article V of the Credit Agreement,
as amended hereby, are true and correct in all material respects, except for
representations and warranties made with reference to a specific date which
representations and warranties are true and correct in all material respects as
of such date.
-5-
<PAGE> 6
5. Reference to and Effect on the Credit Agreement and
Security Agreements.
(a) Upon the effectiveness of Section 1 hereof, each reference
in any Loan Document to such Loan Document or any other Loan Document shall mean
and be a reference to the applicable Loan Document as amended hereby.
(b) Except as specifically amended above, the Credit Agreement
and all other documents, instruments and agreements executed and/or delivered in
connection therewith shall remain in full force and effect and are hereby
ratified and confirmed.
(c) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as a waiver of
any right, power or remedy of the Agents or the Lenders, nor constitute a waiver
of any provision of the Credit Agreement or any other documents, instruments and
agreements executed and/or delivered in connection therewith.
6. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
7. Headings. Section headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.
8. Counterparts. This Amendment may be executed by one or more
of the parties hereto on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
IN WITNESS WHEREOF, this Amendment has been duly executed as
of the day and year first above written.
ADVANCED ACCESSORY SYSTEMS, LLC
as a Borrower
By: /s/ Terence C. Seikel
-------------------------------
Name: Terence C. Seikel
Title: Vice President
SPORTRACK, LLC
as a Borrower
By: ADVANCED ACCESSORY SYSTEMS, LLC
Its Manager
By: /s/ Terence C. Seikel
-------------------------------
Name: Terence C. Seikel
Title: Vice President
-6-
<PAGE> 7
VALLEY INDUSTRIES, LLC
as a Borrower
By: ADVANCED ACCESSORY SYSTEMS, LLC
Its Manager
By: /s/ TERENCE C. SEIKEL
-------------------------------
Name: TERENCE C. SEIKEL
Title: Vice President
BRINK INTERNATIONAL BV
as a Borrower
By: /s/ TERENCE C. SEIKEL
-------------------------------
Name: TERENCE C. SEIKEL
Title: Vice President
BRINK BV
as a Borrower
By: /s/ TERENCE C. SEIKEL
-------------------------------
Name: TERENCE C. SEIKEL
Title: Vice President
NBD BANK
as the Administrative Agent and the
Documentation and Collateral Agent,
and as a Lender
By: /s/ WILLIAM H. CANNEY
-------------------------------
Name: WILLIAM H. CANNEY
Title: Vice President
THE CHASE MANHATTAN BANK
as the Co-Administrative Agent and
the Syndication Agent, and as a
Lender
By: /s/ ANDRIS G. KALNINS
-------------------------------
Name: ANDRIS G. KALNINS
Title: Vice President
FIRST UNION NATIONAL BANK
as a Lender
By: /s/ KENT J. DAVIS
-------------------------------
Name: KENT J. DAVIS
Title: Vice President
----------------------------
THE BANK OF NOVA SCOTIA
as a Lender
By: /s/ F. C. H. ASHBY
-------------------------------
Name: F. C. H. ASHBY
Title: Senior Manager
Loan operations
-7-
<PAGE> 8
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK
B.A., "RABOBANK NEDERLAND",
NEW YORK BRANCH
as a Lender
By:
-------------------------------
Name:
Title:
----------------------------
By:
-------------------------------
Name:
Title:
LASALLE NATIONAL BANK
as a Lender
By:
-------------------------------
Name:
Title:
MICHIGAN NATIONAL BANK
as a Lender
By:
-------------------------------
Name:
Title:
NATIONAL CITY BANK (CLEVELAND)
as a Lender
By: /s/ JOSHUA R. SOSLAND
-------------------------------
Name: JOSHUA R. SOSLAND
Title: Account Officer
COMERICA BANK
as a Lender
By: /s/ NICHOLAS G. MESTER
-------------------------------
Name: NICHOLAS G. MESTER
Title: Vice President
-8-
<PAGE> 9
VAN KAMPEN PRIME RATE INCOME TRUST
as a Lender
By: /s/ JEFFEREY W. MAILLER
-------------------------------
Name: JEFFEREY W. MAILLER
Title: Senior Vice President
and Director
DEBT STRATEGIES FUND, INC.
as a Lender
By:
-------------------------------
Name:
Title:
SENIOR HIGH INCOME PORTFOLIO, INC.
as a Lender
By:
-------------------------------
Name:
Title:
DEEPROCK & CO.
By: Eaton Vance Management
as Investment Advisor
By:
---------------------------
Name:
Title:
SENIOR DEBT PORTFOLIO
By: Boston Management and Research
as Investment Advisor
By: /s/ SCOTT H. PATE
---------------------------
Name: SCOTT H. PATE
Title: Vice President
MERRILL LYNCH DEBT STRATEGIES
PORTFOLIO
By: Merrill Lynch Asset Management,
L.P., as Investment Advisor
By: /s/ PAUL TRAVERS
---------------------------
NAME: PAUL TRAVERS
-9- Title: Authorized Signatory
<PAGE> 10
MERRILL LYNCH PRIME RATE PORTFOLIO
By: Merrill Lynch Asset Management,
L.P., as Investment Advisor
By: /s/ PAUL TRAVERS
---------------------------
Name: PAUL TRAVERS
Title: Authorized Signatory
-10-
<PAGE> 1
ADVANCED ACCESSORY SYSTEMS, LLC
EXHIBIT 12.1 - STATEMENT REGARDING COMPUTATION OF RATIOS -
FIXED CHARGE COVERAGE RATIO
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
1998 1997 1996
-------- --------- -------
<S> <C> <C> <C>
Pre-tax income (loss) from
continuing operations .............. $ 813 $ 712 $ 6,409
Minority interest in the income of
subsidiary with fixed charges ...... -- 97 69
------- ------- -------
813 809 6,478
------- ------- -------
Fixed Charges:
Interest expense and amortization
of debt discount and premium on all
indebtedness ...................... 18,633 12,627 4,312
Rentals (1) .......................... 1,317 751 223
------- ------- -------
Total fixed charges .................. 19,950 13,378 4,535
------- ------- -------
Earnings before income taxes,
minority interest and fixed charges $20,763 $14,187 $11,013
======= ======= =======
Ratio of earnings to fixed charges ... 1.04x 1.06x 2.43x
======= ======= =======
</TABLE>
- ----------
(1) Amount included in fixed charges for rentals is considered by management to
be a reasonable approximation of the interest factor.
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, THAT THE UNDERSIGNED CONSTITUTES AND APPOINTS
TERENCE C. SEIKEL HIS TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT, WITH FULL
POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND
STEAD, IN ANY AND ALL CAPACITIES, TO SIGN: (i) FORM 10-K BEING FILED ON OR ABOUT
THE DATE HEREOF BY ADVANCED ACCESSORY SYSTEMS, LLC, (THE "COMPANY"), (ii) ANY OR
ALL AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) TO THE COMPANY'S
REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND
DECLARED EFFECTIVE ON OR ABOUT JUNE 10, 1998, AND TO FILE THE SAME, WITH ALL
EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH (INCLUDING ANY
AMENDMENTS THERETO), WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO
SAID ATTORNEY-IN-FACT AND AGENT FULL POWER AND AUTHORITY TO DO AND PERFORM EACH
AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE AS FULLY TO ALL
INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND
CONFIRMING ALL THAT SAID ATTORNEY-IN-FACT AND AGENT OR HIS SUBSTITUTE OR
SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
/s/ Marshall D. Gladchun
-----------------------------
Name: Marshall D. Gladchun
Dated: March 12, 1999
<PAGE> 1
EXHIBIT 24.2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, THAT THE UNDERSIGNED CONSTITUTES AND APPOINTS
TERENCE C. SEIKEL HIS TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT, WITH FULL
POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND
STEAD, IN ANY AND ALL CAPACITIES, TO SIGN: (i) FORM 10-K BEING FILED ON OR ABOUT
THE DATE HEREOF BY ADVANCED ACCESSORY SYSTEMS, LLC, (THE "COMPANY"), (ii) ANY OR
ALL AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) TO THE COMPANY'S
REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND
DECLARED EFFECTIVE ON OR ABOUT JUNE 10, 1998, AND TO FILE THE SAME, WITH ALL
EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH (INCLUDING ANY
AMENDMENTS THERETO), WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO
SAID ATTORNEY-IN-FACT AND AGENT FULL POWER AND AUTHORITY TO DO AND PERFORM EACH
AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE AS FULLY TO ALL
INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND
CONFIRMING ALL THAT SAID ATTORNEY-IN-FACT AND AGENT OR HIS SUBSTITUTE OR
SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
/s/ F. Alan Smith
--------------------------
Name: F. Alan Smith
Dated: March 15, 1999
<PAGE> 1
EXHIBIT 24.3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, THAT THE UNDERSIGNED CONSTITUTES AND APPOINTS
TERENCE C. SEIKEL HIS TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT, WITH FULL
POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND
STEAD, IN ANY AND ALL CAPACITIES, TO SIGN: (i) FORM 10-K BEING FILED ON OR ABOUT
THE DATE HEREOF BY ADVANCED ACCESSORY SYSTEMS, LLC, (THE "COMPANY"), (ii) ANY OR
ALL AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) TO THE COMPANY'S
REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND
DECLARED EFFECTIVE ON OR ABOUT JUNE 10, 1998, AND TO FILE THE SAME, WITH ALL
EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH (INCLUDING ANY
AMENDMENTS THERETO), WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO
SAID ATTORNEY-IN-FACT AND AGENT FULL POWER AND AUTHORITY TO DO AND PERFORM EACH
AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE AS FULLY TO ALL
INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND
CONFIRMING ALL THAT SAID ATTORNEY-IN-FACT AND AGENT OR HIS SUBSTITUTE OR
SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
/s/ Barry Banducci
--------------------------
Name: Barry Banducci
Dated: March 12, 1999
<PAGE> 1
EXHIBIT 24.4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, THAT THE UNDERSIGNED CONSTITUTES AND APPOINTS
TERENCE C. SEIKEL HIS TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT, WITH FULL
POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND
STEAD, IN ANY AND ALL CAPACITIES, TO SIGN: (i) FORM 10-K BEING FILED ON OR ABOUT
THE DATE HEREOF BY ADVANCED ACCESSORY SYSTEMS, LLC, (THE "COMPANY"), (ii) ANY OR
ALL AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) TO THE COMPANY'S
REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND
DECLARED EFFECTIVE ON OR ABOUT JUNE 10, 1998, AND TO FILE THE SAME, WITH ALL
EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH (INCLUDING ANY
AMENDMENTS THERETO), WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO
SAID ATTORNEY-IN-FACT AND AGENT FULL POWER AND AUTHORITY TO DO AND PERFORM EACH
AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE AS FULLY TO ALL
INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND
CONFIRMING ALL THAT SAID ATTORNEY-IN-FACT AND AGENT OR HIS SUBSTITUTE OR
SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
/s/ Gerard Jacobus Brink
---------------------------
Name: Gerard Jacobus Brink
Dated: March 24, 1999
<PAGE> 1
EXHIBIT 24.5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, THAT THE UNDERSIGNED CONSTITUTES AND APPOINTS
TERENCE C. SEIKEL HIS TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT, WITH FULL
POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND
STEAD, IN ANY AND ALL CAPACITIES, TO SIGN: (i) FORM 10-K BEING FILED ON OR ABOUT
THE DATE HEREOF BY ADVANCED ACCESSORY SYSTEMS, LLC, (THE "COMPANY"), (ii) ANY OR
ALL AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) TO THE COMPANY'S
REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND
DECLARED EFFECTIVE ON OR ABOUT JUNE 10, 1998, AND TO FILE THE SAME, WITH ALL
EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH (INCLUDING ANY
AMENDMENTS THERETO), WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO
SAID ATTORNEY-IN-FACT AND AGENT FULL POWER AND AUTHORITY TO DO AND PERFORM EACH
AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE AS FULLY TO ALL
INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND
CONFIRMING ALL THAT SAID ATTORNEY-IN-FACT AND AGENT OR HIS SUBSTITUTE OR
SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
/s/ Donald J. Hofmann
--------------------------
Name: Donald J. Hofmann
Dated: March 15, 1999
<PAGE> 1
EXHIBIT 24.6
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, THAT THE UNDERSIGNED CONSTITUTES AND APPOINTS
TERENCE C. SEIKEL HIS TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT, WITH FULL
POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND
STEAD, IN ANY AND ALL CAPACITIES, TO SIGN: (i) FORM 10-K BEING FILED ON OR ABOUT
THE DATE HEREOF BY ADVANCED ACCESSORY SYSTEMS, LLC, (THE "COMPANY"), (ii) ANY OR
ALL AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) TO THE COMPANY'S
REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND
DECLARED EFFECTIVE ON OR ABOUT JUNE 10, 1998, AND TO FILE THE SAME, WITH ALL
EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH (INCLUDING ANY
AMENDMENTS THERETO), WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO
SAID ATTORNEY-IN-FACT AND AGENT FULL POWER AND AUTHORITY TO DO AND PERFORM EACH
AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE AS FULLY TO ALL
INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND
CONFIRMING ALL THAT SAID ATTORNEY-IN-FACT AND AGENT OR HIS SUBSTITUTE OR
SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
/s/ Roger T. Morgan
--------------------------
Name: Roger T. Morgan
Dated: March 23, 1999
<PAGE> 1
EXHIBIT 24.7
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, THAT THE UNDERSIGNED CONSTITUTES AND APPOINTS
TERENCE C. SEIKEL HIS TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT, WITH FULL
POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND
STEAD, IN ANY AND ALL CAPACITIES, TO SIGN: (i) FORM 10-K BEING FILED ON OR ABOUT
THE DATE HEREOF BY ADVANCED ACCESSORY SYSTEMS, LLC, (THE "COMPANY"), (ii) ANY OR
ALL AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) TO THE COMPANY'S
REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND
DECLARED EFFECTIVE ON OR ABOUT JUNE 10, 1998, AND TO FILE THE SAME, WITH ALL
EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH (INCLUDING ANY
AMENDMENTS THERETO), WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO
SAID ATTORNEY-IN-FACT AND AGENT FULL POWER AND AUTHORITY TO DO AND PERFORM EACH
AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE AS FULLY TO ALL
INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND
CONFIRMING ALL THAT SAID ATTORNEY-IN-FACT AND AGENT OR HIS SUBSTITUTE OR
SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
/s/ Gerrit de Graaf
--------------------------
Name: Gerrit de Graaf
Dated: March 25, 1999
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0
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