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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, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the Transition Period from _____ to _____
COMMISSION FILE NUMBER 333-50239
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ACCURIDE CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 61-1109077
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
7140 OFFICE CIRCLE, EVANSVILLE, INDIANA 47715
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (812) 962-5000
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 such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No___
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/
As of March 1, 2000, 24,874 shares of Accuride Corporation common stock,
par value $.01 per share (the "Common Stock") were outstanding. The Common Stock
is privately held and, to the knowledge of registrant, no shares have been sold
in the past 60 days.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
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ACCURIDE CORPORATION
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1999
PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
Item 6. Selected Consolidated Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 7A. Quantitative and Qualitative Disclosure About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Item 13. Certain Relationships and Related Party Transactions
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
Signatures
FINANCIAL STATEMENTS
Independent Auditors' Report
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Stockholders' Equity (Deficiency)
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Financial Statement Schedules
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PART I
ITEM 1. BUSINESS
GENERAL
Accuride Corporation, a Delaware corporation ("Accuride" or the
"Company"), manufactures and supplies wheels and rims ("Wheels") for heavy and
medium commercial vehicles. The Company estimates that it has approximately a
66% share in the North American Wheel market for heavy and medium trucks, buses,
vans ("Heavy/Medium Trucks") and trailers ("Trailers"). The Company offers the
broadest product line in the North American Heavy/Medium Truck and Trailer Wheel
industry and is the only North American manufacturer and supplier of both steel
and aluminum Wheels for Heavy/Medium Trucks and Trailers ("Heavy/Medium
Wheels").
The Company sells its Wheels primarily to Heavy/Medium Truck, Trailer
and Light Truck (as defined) original equipment manufacturers ("OEMs"). Major
customers include Ford Motor Company ("Ford"), Freightliner Corporation
("Freightliner"), General Motors Corporation ("General Motors"), Mack Trucks,
Inc. ("Mack"), Navistar International Transportation Corporation ("Navistar"),
Volvo Trucks North America ("Volvo") and Paccar, Inc. ("Paccar"). For over 10
years, the Company's steel Wheels have been standard equipment at all North
American Heavy/Medium Truck OEMs and at a number of North American Trailer OEMs.
In addition, the Company's steel Wheels are standard equipment at a majority of
North America's largest trucking fleets, including Ruan Transportation
Management Systems, J.B. Hunt Transport Services, Ryder Truck Rental, Inc. and
Schneider Specialized Carriers, Inc.
The North American commercial vehicle industry may be divided into
three areas: (i)Heavy/Medium Trucks, (ii) Trailers and (iii) commercial and
other vehicles such as light commercial trucks, pick-up trucks, sport utility
vehicles and vans ("Light Trucks"). According to industry sources, new builds in
the North American Heavy/Medium Truck and Trailer markets have grown to 916,000
units in 1999 from 773,000 units in 1998 and from 455,000 units in 1992. Over
that same period, new builds in the North American Light Truck market have grown
to in excess of 8.7 million units from 7.6 million units in 1998 and from 4.2
million units in 1992. Management believes that the growth in the North American
Heavy/Medium Truck and Trailer markets has been driven by the sustained economic
growth in North America and shorter fleet trade-in cycles, while the growth in
the North American Light Truck market has been driven by the increase in the
popularity of sport utility vehicles and pick-up trucks, coupled with overall
sustained economic growth.
CORPORATE HISTORY
Accuride and Accuride Canada Inc., a corporation formed under the laws
of the province of Ontario, Canada and a wholly owned subsidiary of Accuride,
were incorporated in November 1986 for the purpose of acquiring substantially
all of the assets and assuming certain of the liabilities of Firestone Steel
Products, a division of The Firestone Tire & Rubber Company. The respective
acquisitions by the companies were consummated in December 1986. In 1988, the
Company was purchased by Phelps Dodge Corporation ("Phelps Dodge"), the sole
owner prior to the Recapitalization described below. See "The Recapitalization."
THE RECAPITALIZATION
On November 17, 1997, the Company entered into a stock subscription
agreement with Hubcap Acquisition L.L.C. ("Hubcap Acquisition") pursuant to
which Hubcap Acquisition acquired control of the Company. Hubcap Acquisition is
a Delaware limited liability company whose members are KKR 1996 Fund L.P. and
KKR Partners II, L.P., which are affiliates of Kohlberg Kravis Roberts & Co.
L.P. ("KKR"). The acquisition consisted of an equity investment in the Company
(the "Equity Investment") together with approximately $363.7 million of
aggregate proceeds from certain financings described below (collectively,
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the "Financings") which were collectively used to redeem shares of Common
Stock of the Company ("Common Stock") owned by Phelps Dodge (the
"Redemption") and obtain a non-competition agreement. The Equity Investment,
Financings, and Redemption are collectively referred to as the
"Recapitalization." Immediately after the closing of the Recapitalization,
Hubcap Acquisition owned 90% of the Common Stock and Phelps Dodge owned 10%
of the Common Stock. Shortly after the Recapitalization, the Company sold
additional shares of Common Stock and granted options to purchase Common
Stock to senior management of the Company representing, in the aggregate,
approximately 10% of the fully diluted equity of the Company. Phelps Dodge
subsequently sold its remaining interest in the Company to RSTW Partners III,
L.P.
The Financings included (i) an aggregate of approximately $164.8
million of bank borrowings by the Company, including $135.0 million of
borrowings under senior secured term loans (the "Term Loans") and $29.8 million
of borrowings under a $140.0 million senior secured revolving credit facility
(the "Revolver" and, together with the Term Loans, the "Credit Facility"), and
(ii) $200.0 million aggregate principal amount of private notes ("Private
Notes"). The Revolver is available for the Company's working capital
requirements and the implementation of the Company's growth strategy. The
Private Notes were exchanged for public notes ("Exchange Notes") which were
registered under the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to a registration statement on Form S-4 declared effective by the
Securities and Exchange Commission (the "Commission") on July 23, 1998. The
Exchange Notes evidence the same debt as the Private Notes (which they replace)
and are entitled to the benefits of an indenture dated January 21, 1998 (the
"Indenture"). The Private Notes and the Exchange Notes are sometimes
collectively referred to herein as the "Notes."
ACQUISITIONS
ACCURIDE/KAISER WHEELS. On April 1, 1999, the Company acquired Kaiser
Aluminum & Chemical Corporation's ("Kaiser") 50% interest in AKW L.P., a
Delaware limited partnership ("AKW"), pursuant to the terms of a Purchase
Agreement by and among the Company, Kaiser and Accuride Ventures, Inc., a wholly
owned subsidiary of Accuride. In connection with the acquisition, AKW and Kaiser
amended and restated an existing lease agreement pursuant to which AKW leases
certain property from Kaiser. AKW was formed in 1997 as a 50-50 joint venture
between Accuride and Kaiser to design, manufacture, and sell heavy-duty aluminum
Wheels. The acquisition gives the Company 100% ownership of AKW. Total
consideration paid to Kaiser for the 50% interest was approximately $71 million.
The Company initially financed the acquisition through the Company's Revolver
which was subsequently replaced by permanent financing through the Amended and
Restated Credit Facility described below in "Item 7 - Management's Discussion
and Analysis of Financial Condition and Results of Operations - Capital
Resources and Liquidity." The acquisition has been accounted for by the purchase
method of accounting. Goodwill recorded by the Company in connection with the
acquisition is being amortized on the straight-line method over 40 years.
ACCURIDE DE MEXICO. Most of the Company's Heavy/Medium Truck and Light
Truck customers either already produce vehicles in Mexico or plan to do so in
the near future. These customers have indicated that they will require local
sourcing as they expand their operations in Mexico. Historically, the Company
supplied OEMs in Mexico from its Henderson, Kentucky, facility and its Ontario,
Canada, facility. On November 5, 1997, the Company invested $4.9 million for a
51% interest in Accuride de Mexico, S.A. de C.V. ("AdM"), a venture with
Industria Automotriz, S.A. de C.V. ("IaSa"), Mexico's only commercial vehicle
Wheel manufacturer. On July 16, 1999, the Company acquired IaSa's 49% interest
in AdM, pursuant to the terms of a purchase agreement by and among the Company,
IaSa and certain other parties. The acquisition gives the Company 100% control
of AdM. Total consideration paid was $7.4 million, consisting of a $7.3 million
cash payment to IaSa for its 49% interest and $0.1 million paid to other parties
for fees and expenses. The Company expects to use AdM as a platform to supply
the growing Latin American assembly operations of many of the Company's top
customers, including Ford, Freightliner, General Motors, Navistar, Paccar and
Volvo.
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STRATEGIC ALLIANCES
The Company has implemented a joint venture with The Goodyear Tire and
Rubber Company ("Goodyear") to assemble Wheels and tires for Navistar to
strengthen the Company's position in the worldwide Wheel industry. The Company
and Goodyear formed AOT, Inc. ("AOT") in June 1991 in order to assemble Wheels
and tires for Navistar near Navistar's truck assembly operation in Springfield,
Ohio. The Company and Goodyear each own 50% of AOT. In April 1998 the Company
and Goodyear formed Assembly On Time Canada Inc. (which subsequently changed its
name to AOT Canada Ltd) as a wholly owned subsidiary of AOT to expand the AOT
operations for Navistar to a new facility in Talbotville, Ontario, Canada.
INDUSTRY OVERVIEW
The size of the steel and aluminum commercial vehicle Wheel industry
for Heavy/Medium Trucks and Trailers in North America is approximately $0.7
billion. The size of the steel and aluminum commercial vehicle Wheel industry
for Light Trucks in North America is approximately $1.4 billion. Wheels are
produced for (i) Heavy/Medium Trucks, which are over-the-road vehicles designed
to carry over 10,000 pounds such as large multi-axle rigs, buses and moving
trucks; (ii) Trailers, which includes trailers and chassis; and (iii) Light
Trucks, which are vehicles designed to carry under 10,000 pounds such as pick-up
trucks, walk-in delivery vans and sport utility vehicles. Wheels produced for
Heavy/Medium Trucks and Trailers are larger and heavier dual Wheels. Wheels
produced for Light Trucks are smaller and lighter single or dual Wheels.
The commercial Wheel industry may be categorized in three ways: (i) by
vehicle category-Heavy/Medium Wheels and Light Truck Wheels, (ii) by production
material-steel and aluminum Wheels, and (iii) by vehicle application-dual and
single Wheels.
HEAVY/MEDIUM WHEELS AND LIGHT TRUCK WHEELS. Heavy/Medium Wheels range
in diameter from 17.5" to 24.5". Purchasers of Heavy/Medium Wheels consist
primarily of Heavy/Medium Truck OEMs such as Freightliner, Paccar, Navistar,
Mack, and Volvo, and Heavy/Medium Trailer OEMs such as Great Dane Limited
Partnership ("Great Dane"), Utility Trailer Manufacturing Company ("Utility")
and Wabash National, Inc. ("Wabash"). The Heavy/Medium Wheel segment is driven
by the volume of Heavy/Medium Truck and Trailer manufacturing, which is tied to
macroeconomic trends such as economic growth and fuel prices. In 1999, industry
sales of Heavy/Medium Wheels in North America were approximately $0.7 billion.
Light Truck Wheels range in diameter from 14" to 19.5". Purchasers of
Light Truck Wheels consist primarily of Light Truck OEMs such as Ford and
General Motors. The Light Truck Wheel market is driven by the volume of
production of Light Trucks as well as the trend toward the use of larger
diameter Light Truck Wheels in smaller Light Trucks such as sport utility
vehicles to improve styling and performance. In 1999, industry sales of Light
Truck Wheels in North America were approximately $1.4 billion.
STEEL AND ALUMINUM WHEELS. Steel Wheels are more resistant to damage
and hold a substantial price advantage over aluminum Wheels. Aluminum Wheels are
generally lighter in weight, more readily stylized and approximately 3.5 times
more expensive than steel Wheels. The growth of aluminum Heavy/Medium Wheel and
Light Truck Wheel sales is driven by the increasing importance of the aesthetic
aspect of Wheels, particularly in the Light Truck Wheel segment, and, to a
lesser extent, reduced vehicle weight.
DUAL AND SINGLE WHEELS. Dual Wheels, which carry higher load ratings,
are used on Heavy/Medium Trucks, Trailers and Light Trucks. Dual Wheels may be
mounted in tandem (i.e., side-by-side, two wheels on each end of an axle) or
individually. Single Wheels are used on Light Trucks and passenger cars. The
Company is the only producer of both dual and single steel Light Truck Wheels in
North America.
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PRODUCTS AND SERVICES
The Company has the broadest product line in the North American
Heavy/Medium Wheel industry. The Company also competes in the Light Truck Wheel
market for larger (with diameters of 16" and over) steel Wheels for Light
Trucks. The Company offers steel and aluminum Wheels for Heavy/ Medium Trucks
and Trailers, heavy-duty Wheels for the construction industry and stylized steel
Wheels for Light Trucks. The Company does not produce smaller Wheels (with
diameters under 16") or Wheels with diameters in excess of 24.5".
The following table shows the size of each market served in 1999 and
the Company's estimated market share of each such market.
ACCURIDE'S SHARE OF THE
1999 NORTH AMERICAN HEAVY/MEDIUM WHEEL
AND LIGHT TRUCK WHEEL MARKETS
(EXCLUDES ADM)
<TABLE>
<CAPTION>
Dual Wheels Single Wheels Total
------------------- ------------------- --------------------
(dollars in millions) Size Share(1) Size Share(1) Size Share(1)
- --------------------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Heavy/Medium Wheels
Steel............................................ $362 77% -- -- $ 362 77%
Aluminum......................................... $337 29% -- -- $ 337 29%
---- ------
Total Heavy/Medium Wheels...................... $699 66% -- -- $ 699 66%
---- ------
Light Truck Wheels
Steel............................................ $ 49 87% $ 377 8% $ 426 14%
Aluminum......................................... $ 12 0% $ 932 0% $ 944 0%
---- ------ ------
Total Light Wheels............................. $ 61 79% $1,309 4% $1,370 7%
---- ------ ------
Total............................................ $760 $1,309 $2,069
==== ====== ======
</TABLE>
CUSTOMERS
The Company's customers fall into four general categories: (i)
Heavy/Medium Truck OEMs (which represented approximately 53% of the Company's
1999 net sales); (ii) Trailer OEMs (which represented approximately 18% of the
Company's 1999 net sales); (iii) Light Truck OEMs (which represented
approximately 20% of the Company's 1999 net sales); and (iv) aftermarket
distributors and others (which represented approximately 9% of the Company's
1999 net sales). Major customers include Freightliner, Volvo, Mack, Navistar and
Paccar, which are Heavy/Medium Truck OEMs; Great Dane, Utility, Wabash, and
Stoughton Trailers, Inc., which are Trailer OEMs; and Ford and General Motors,
which are Light Truck OEMs. A large portion of the Company's business consists
of sales to Ford, Freightliner, and Navistar, representing approximately 18.5%,
17.1% and 13.0% of 1999 net sales, respectively. The loss of a significant
portion of the Company's sales to any of these OEMs could have a material
adverse effect on the Company. The Company serves the aftermarket through a
broad network of distributors.
The Company's design engineers work closely with its customers to
support the vehicle system design. Established contacts with OEM engineers
enable the Company to track industry trends, including new features and styles,
and to ensure that new products meet changing requirements for new vehicle
systems. For example, over the last few years, the Company has responded to and
worked with customers to complete
- ----------------
(1) Share percentages have been calculated using a units sold basis.
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significant new development programs in the areas of full-contoured styled
Light Truck steel Wheels and styled-forged aluminum Wheels.
In the Heavy/Medium Wheel industry, Wheels are designated as standard
equipment by the OEM, although other Wheels may be selected by fleet managers as
component parts for their fleets. Generally, OEMs will have one standard Wheel
manufacturer for any given vehicle model. Because the Company is the only
standard Steel Wheel manufacturer at all North American Heavy/Medium Truck OEMs,
each Heavy/Medium Truck produced in North America will have Accuride Wheels
unless the end-purchaser of a particular Heavy/Medium Truck (or fleet of
Heavy/Medium Trucks) specifically requests a Wheel produced by another company.
Light Truck OEMs will ordinarily designate more than one Wheel option as
standard for any particular vehicle model and one Wheel supplier to supply each
option. Consequently, for any particular vehicle model, more than one supplier
may have its Wheels designated as standard equipment. OEMs determine which of
the standard Wheels to use on any one vehicle depending on factors such as
marketing, consumer preference and cost. In some cases, an OEM will allow an
end-consumer to select a Wheel option from the set of Wheels designated as
standard. The process of being designated as a standard supplier of a particular
Wheel can take more than two years from the time of initial design to first
delivery. A potential supplier must first develop a Wheel design based on
styling and engineering specifications provided by the OEM. After a
comprehensive engineering and feasibility review, the OEM designates a specific
supplier for a particular Wheel. The duration of the designation is dependent
upon the life cycle of the vehicle model. A supplier that designs, engineers,
manufactures and conducts quality control testing is generally referred to as a
"Tier I" supplier. The Company is a Tier I supplier for both Ford and General
Motors and believes that its early involvement with the engineers from its
customers affords it a competitive advantage.
MANUFACTURING
CONTINUOUS PRODUCTIVITY IMPROVEMENT. The Company has developed and
implemented a Cost Reduction and Productivity Program to continuously improve
its operations and to modernize, upgrade and automate its manufacturing
facilities. Since 1991, the Company has invested over $126 million to improve
its facilities, which included selected use of robotics and other automation,
connection of the automated component lines to the assembly lines, and
improvement in product quality through upgrading of key processes. The success
of this program is reflected in improvements in operating results,
cost-reduction, capacity, product quality and plant safety. The majority of
recent expenditures targeted the Tubeless Heavy/Medium Wheel production
processes at both the Henderson, Kentucky, facility and the Ontario, Canada,
facility, and the Erie, Pennsylvania, facility, and the Light Truck Dual Wheel
production process at the Ontario, Canada, facility and Columbia, Tennessee,
facility. The Company has budgeted approximately $37 million in 2000 (in
addition to normal maintenance) for continued implementation of these
productivity and capacity enhancement programs. See "Item 7-Management's
Discussion and Analysis of Financial Condition and Results of Operations
- -Liquidity and Capital Resources." Management believes that its emphasis on
low-cost manufacturing will continue to yield significant operational
improvements, although no assurance of such improvements can be given.
MANUFACTURING PROCESS. The Company's Wheels are made using seven
primary manufacturing processes: stamping, spin forming, roll forming, welding,
coating/finishing, forging and machining. The Company's steel Wheel products are
produced by spin forming or stamping of the disc, roll forming of the rim,
welding, coating and finishing. The Company's forged aluminum Wheels are made
using forging, heat treating, spinning, machining and polishing processes. The
following describes the major processes the Company uses to produce Wheels:
STAMPING. The Company makes discs for single Light Truck
Wheels using stamping, which is the most cost-effective way to produce
single steel discs because it requires the lowest cycle time per part
of any available process. Stamping allows for thinner gauge steel to be
used to reduce weight without sacrificing strength.
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SPIN FORMING. The Company makes discs for dual Wheels by using
spin forming, which produces discs with variable wall thickness, thus
reducing weight and enhancing the strength-to-weight ratio of the
Wheel. Spin forming also provides a high-quality product with low raw
material usage and waste.
ROLL FORMING. The Company makes Light and Heavy/Medium steel
rims using roll forming (feeding coiled steel through equipment that
forms it into a cylinder, welds it, then feeds it through rim rollers
to shape the rim). The Company has developed an extensive roll forming
expertise in the 40-plus years that it has used this process and
believes that it has one of the industry's highest quality yields for
rim rolling.
COATING/FINISHING. The Company pre-treats all steel Wheels in
zinc phosphate, then applies an electro-disposition coating ("E-coat"),
which is an acrylic, cathodic, gray or white base coating that provides
resistance to corrosion. Subsequently, some customers may choose to
have the Company add a topcoat over the E-coat for further protection.
FORGING. The Company makes Heavy/Medium aluminum Wheels by
using forging, in which an aluminum billet is compressed into a basic
Wheel shape using high amounts of pressure and energy. Forgings are
formed into their final shape using spinning (in the rim area) and by
machining the entire contour to create final mounting dimensions and
appearance. Forgings can offer decisive cost advantages, especially in
high-volume production runs.
MACHINING. The Company uses machining processes at its
UltraForge facility to convert processed forgings into finished
machined wheels. Capital investments during 2000 will expand the
UltraForge capability and add machining lines to the Erie facility. The
Company feels that the control of the final machined finish is
essential to meet customer appearance standards.
SUPPLIER RELATIONSHIPS
STEEL SUPPLIERS. The Company has secured favorable pricing from a
number of different suppliers by negotiating high-volume contracts with terms
ranging from 1 to 3 years. While the Company believes that its supply contracts
can be renewed on acceptable terms, there can be no assurance that such
agreements can be renewed on such terms or at all. However, the Company believes
that it is not dependent on long-term supply contracts for its steel
requirements and has alternative sources available.
ALUMINUM SUPPLIERS. The Company obtains aluminum through various
third-party suppliers. The Company believes that aluminum is readily available
from a variety of sources.
SALES AND MARKETING
The Company has built its brand franchise with a targeted sales and
marketing effort aimed at Heavy/Medium Truck OEMs, Trailer OEMs, Light Truck
OEMs and independent distributors. The Company actively markets to major end
users, including trucking fleets and dealers. The Company positions its sales
managers near major customers such as Ford and General Motors in Detroit,
Michigan and Freightliner in Portland, Oregon. Additional field sales
personnel are geographically located throughout North America to service
other OEMs, independent distributors, trucking fleets and dealers. New
emphasis is being placed on targeting end-users as the Company commercializes
premium products and expands its aluminum product line. The majority of the
Company's core customers source their requirements either on annual contracts
or standard sourcing contracts.
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The Company has appointed independent distributors in every major
market area. These distributors are mostly members of the National Wheel and Rim
Association and serve aftermarket needs and small OEMs not serviced directly by
the Company. As a service to the aftermarket and small OEMs, the Company also
provides order consolidation services from its warehouse in Taylor, Michigan.
COMPETITION
The Company competes on the basis of price, delivery, quality, product
line breadth and service. The Company's competitive advantages include long
standing customer relationships, broad product lines, high quality products and
low manufacturing costs. Due to the breadth of the Company's product line, the
Company competes with different companies in different markets. The Company's
principal competitor in the dual steel Heavy/Medium Wheel and single steel Light
Truck Wheel markets is Hayes Lemmerz International, Inc. ("Hayes"). Recently,
Hayes has been consolidating the operations of smaller participants in the dual
steel Heavy/Medium Wheel market. In addition, Hayes has established a
significant global presence through its acquisition of European wheel producer
Lemmerz Holding GmbH. The Company believes that Hayes is the market leader in
the single Light Truck Wheel market and in the passenger car Wheel industry,
which are more diversified markets than the other markets in which the Company
competes. In the dual steel Light Truck Wheel industry, the Company's principal
competitor is Meritor Automotive, Inc. ("Meritor"), which has a 13% share.
Meritor and the Company are the only suppliers of OEM steel dual Light Truck
Wheels in North America. All of the dual Wheels sold by Meritor in North America
are produced in Brazil. In the dual aluminum Heavy/Medium Wheel market,
Accuride's principal competitor is Alcoa Aluminum Corporation of America
("Alcoa"), which the Company believes has the leading share in that market.
Alcoa does not produce steel Wheels.
AKW PRODUCT RECALL
On April 17, 1998, AKW submitted a notice to the National Highway
Safety Administration ("NHSA") of AKW's intent to recall approximately 47,800
aluminum truck wheels (the "Recalled Wheels"), because a defect may exist in the
Recalled Wheels that relates to motor vehicle safety. Kaiser, the Company's
former partner in AKW, manufactured several hundred of the Recalled Wheels
during the period April 23, 1997 through April 30, 1997. During the period May
1, 1997 through February 28, 1998, AKW manufactured all of the remaining
Recalled Wheels. The Recalled Wheels were designed by the Company. AKW initially
estimated that the total costs of recalling and replacing all of the Recalled
Wheels would be approximately $6.8 million, an amount which could vary depending
on the level of customer response to the recall, among other factors. Due to the
Company's 50% ownership of AKW in 1998, the Company reflected a portion of the
recall expenses ($3.4 million) as a reduction in "Equity in earnings of
affiliates" in the Company's financial statements. On April 1, 1999, the Company
acquired Kaisers 50% interest in AKW and thereby acquired 100% ownership of AKW.
See "Item 1- Acquisitions - Accuride/Kaiser Wheels." In 1999, the estimated cost
of replacing the Recalled Wheels was re-evaluated and reduced by $3.0 million to
$3.8 million. Due to the Company's 100% ownership of AKW, $3.0 million of the
cost reduction was recorded in the Company's consolidated statement of income.
The Company believes that the recall will not have a material adverse effect on
the Company. The Company is currently not aware of any product liability claims
related to the Recalled Wheels. There can be no assurance, however, that no
such claims will be made and that the Company will not experience any material
product liability losses in the future.
EMPLOYEES
As of December 31, 1999, the Company had 2,234 employees. The following
facilities are currently unionized: Henderson, Kentucky, plant; London, Ontario,
Canada, plant; Erie, Pennsylvania, plant; and the Monterrey, Mexico, plant.
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Hourly employees at the Henderson, Kentucky, facility are
represented by the International Union, Automobile, Aerospace, and
Agriculture Implement Workers of America ("UAW") Local #2036. The Company's
contract with the UAW expired in February 1998. The Company was not able to
negotiate a mutually acceptable agreement with the UAW, and a strike occurred
at the Henderson, Kentucky, facility on February 20, 1998. Effective as of
March 31, 1998, the Company began an indefinite lockout in order to provide
security for plant personnel and equipment. The UAW has rejected all of the
Company's offers, and the parties continue to be unable to reach an
agreement. The Company is continuing to operate with its salaried employees
and outside contractors. Currently, there is, and the Company believes that
there will be, no supply disruption to the Company's customer base; however,
there can be no assurance to that effect. A supply disruption to the
Company's customer base could have a material adverse effect on the Company.
Due to the improved performance of the Henderson, Kentucky, facility,
management estimates that the strike has not affected pre-tax earnings in
1999. See "Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations - Overview."
Bargaining unit employees in the Ontario, Canada, facility are
represented by National Automobile, Aerospace, Transportation, and General
Workers Union of Canada ("CAW") Local #27. A new 3-year collective bargaining
agreement was ratified on December 8, 1999. The new contract runs through March
13, 2003.
Hourly employees at the Erie, Pennsylvania, facility are represented
by the UAW Local # 1186. The existing contract was implemented in August 1998
and expires in August 2003.
The Monterrey, Mexico, hourly employees are represented by El Sindicato
Industrial de Trabajadores de Nuevo Leon. The current contract has been in place
since November 1997 and is subject to renegotiation on an annual basis.
The AOT operations located in Springfield, Ohio, and Talbotville,
Ontario, Canada, have 58 and 28 employees, respectively.
RESEARCH AND DEVELOPMENT
The Research and Development ("R&D") department is composed of 32
employees, 18 who are degreed engineers (seven with advanced degrees). The
objectives of the R&D department are to design and develop new products,
provide technical support and service to customers and to investigate and
develop new process technology. Over the last few years, the Company has
completed significant new development programs in the areas of full-faced
styled steel Wheels, high strength, low alloy Wheels ("HSLA"), new designs in
forged aluminum Wheels, cast aluminum Wheels for Heavy/Medium Truck
applications in North America, and cladded wheels for Light Truck
applications. Company-sponsored R & D costs for fiscal years 1999, 1998, and
1997 were approximately $5.2 million, $2.9 million and $3.7 million,
respectively. These costs were expensed and included in general and
administration expenses during the period incurred.
INTERNATIONAL SALES
Sales to customers outside of the United States are considered
international sales by the Company. International sales in 1999 were $38.3
million, or 7.6% of the Company's 1999 sales volume. For additional information,
see footnote 15 to the "Notes to Consolidated Financial Statements" included
herein.
8
<PAGE>
PATENTS AND TRADEMARKS
Accuride maintains a intellectual property estate, including patents
and extensive proprietary knowledge of products and systems. The Company
currently holds 7 patents and 9 patents pending relating to Wheel technology.
The Company has applied for federal and international trademark protection
for numerous marks. Although management believes that the patents and
trademarks associated with the Company's various product lines are valuable
to the Company, it does not consider any of them to be essential to its
business.
BACKLOG
The Company's production is based on firm customer orders and estimated
future demand. Since firm orders generally do not extend beyond 15-45 days and
the Company generally meets all requirements, backlogs are not considered
significant.
SEASONALITY
The Company's operations are typically seasonal as a result of regular
customer maintenance and model changeover shutdowns, which normally occur in the
third and fourth quarter of each calendar year. At times, this may result in
decreased net sales and profitability during the Company's third and fourth
fiscal quarters.
ENVIRONMENTAL MATTERS
The Company's operations are subject to various federal, state and
local requirements, including environmental laws. Under certain environmental
laws, a current or previous owner or operator of property may be liable for the
costs of removal or remediation of certain hazardous substances or petroleum
products on, under or in such property, without regard to whether the owner or
operator knew of, or caused, the presence of the contaminants, and regardless of
whether the practices that resulted in the contamination were legal at the time
they occurred. The presence of, or failure to remediate properly such
substances, may adversely affect the ability to sell or rent such property or to
borrow using such property as collateral. Persons who generate, arrange for the
disposal or treatment of, or dispose of hazardous substances may be liable for
the costs of investigation, remediation or removal of such hazardous substances
at or from the disposal storage or treatment facility, regardless of whether
such facility is owned or operated by such person. Additionally, the owner of a
site may be subject to common law claims by third parties based on damages and
costs resulting from environmental contamination emanating from a site.
Compliance with environmental laws, stricter interpretations of or amendments to
any such laws, or more vigorous enforcement policies by regulatory agencies with
respect to any of them may require material expenditures by the Company. There
can be no assurance that future regulations will not require the Company to
modify its facilities to meet revised requirements of environmental laws.
The nature of the Company's current and former operations and the
history of industrial uses at its facilities expose the Company to the risk of
liabilities or claims with respect to environmental and worker health and safety
matters that could have a material adverse effect on the Company. Phelps Dodge
has indemnified the Company with respect to environmental liabilities at the
Henderson, Kentucky, facility and the Ontario, Canada, facility. The Phelps
Dodge environmental indemnity, however, does not apply to liability or injury
incurred or sustained by the Company attributable to the handling of hazardous
substances at any time after the Recapitalization or any failure after the
Recapitalization of the Company to be in compliance with any applicable
environmental law or environmental permit. In addition, the Phelps Dodge
environmental indemnity does not apply to liability or injury arising out of or
resulting from the investigation, assessment or remediation of a hazardous
substance not required by or under an environmental law. Kaiser
9
<PAGE>
has also indemnified the Company with respect to environmental liabilities at
the Erie, Pennsylvania, facilities except (i) the Company shall be solely
responsible for claims, losses and liabilities that are caused by or arise
from any action by the Company or in connection with the conduct of the
business by the Company, (ii) Kaiser and the Company shall be responsible for
their appropriate share of such claims, losses and liabilities associated
with contamination due to the failure of the Company to maintain the pits at
the Erie, Pennsylvania, facility which contain hydraulic presses, (iii)
Kaiser and the Company shall be responsible for their appropriate share of
such claims, losses and liabilities that arise from both the actions of
Kaiser and the Company, or the conduct of the business by either of them or
(iv) to the extent that any fines or penalties assessed or threatened against
the Company during the period in which Kaiser is implementing an
environmental compliance plan at the Erie, Pennsylvania, facility exceed
$1,000,000.
ITEM 2. PROPERTIES
The Company operates nine facilities in North America. The Company owns
manufacturing facilities in Henderson, Kentucky; Columbia, Tennessee; Monterrey,
Mexico; and London, Ontario, Canada. The Company also leases facilities in Erie,
Pennsylvania, Cuyahoga Falls, Ohio, a distribution warehouse in Michigan, a
sales office in the greater Detroit area, and an office building in Evansville,
Indiana. The Company operates facilities in Springfield, Ohio, and Talbotville,
Ontario, Canada, through its joint venture with Goodyear. The Company believes
that its plants are adequate and suitable for the manufacturing of products for
the markets in which it sells. The Henderson facility, Ontario facility, Erie
facility, and the joint venture facilities are operating at or near capacity.
The Company's corporate, manufacturing, sales, warehouse, and research
facilities are as follows:
<TABLE>
<CAPTION>
SQUARE OWNED/
LOCATION FEET USE LEASED
-------- ------ --- ------
<S> <C> <C> <C>
London, Ontario, Canada 462,993 Heavy/Medium Steel Wheels; steel Light Truck Owned
Wheels
Henderson, Kentucky (a) 364,365 R&D; Heavy/Medium Steel Wheels Owned/Leased
Taylor, Michigan (b) 75,000 Warehouse Leased
Springfield, Ohio (c) 136,000 Wheel and tire assemblies for Navistar Owned
Talbotville, Ontario, Canada (d) 159,140 Wheel and tire assemblies for Navistar Owned
Erie, Pennsylvania (e) 126,000 Aluminum Wheels forging Owned/Leased
Cuyahoga Falls, Ohio (f) 131,700 Aluminum Wheels machining Owned/Leased
Columbia, Tennessee (g) 340,000 Steel Light Truck Wheels Owned
Monterrey, Mexico (h) 262,000 Steel Wheels Owned
Evansville, Indiana (i) 37,229 Corporate headquarters of the Company Leased
Northville, Michigan (j) 4,334 Sales Office Leased
</TABLE>
- ----------
a) The land on which this facility is located is leased pursuant to an
industrial revenue financing arrangement. In February 1999, the initial
25-year term expired and the lease was renewed for an additional
25-year period with monthly lease payments of $1,333.00. At anytime
during the renewal period, the Company has the right to repurchase the
land for $1.00.
b) The warehouse is leased from The Package Company under a ten year lease
at the rate of $21,587 per month.
c) Owned by AOT, the joint venture with Goodyear. See "Item 1-Business -
-Strategic Alliances."
10
<PAGE>
d) Owned by AOT Canada Ltd. (a subsidiary of AOT) as part of the joint
venture with Goodyear. See "Item 1-Strategic Alliances."
e) The equipment is owned by AKW, and the building is leased by AKW under
a ten-year lease from Kaiser at the rate of $1.00 per year. The initial
term of the lease expires in 2007. See "Item 1-Business Acquisitions -
Accuride/Kaiser Wheels."
f) The equipment is owned by AKW, and the building is leased by AKW from
The Bell Company. The building lease was renewed in June 1999 with
monthly lease payments of $30,041. The lease expires in June 2001,
with an option to renew. See "Item 1-Business -Acquisitions
-Accuride/Kaiser Wheels."
g) This facility began production in mid-1998.
h) This facility began production in July 1999.
i) The building is leased from Woodward, LLC under a ten-year lease at the
rate of $41,106 per month for the first 60 months of the lease and
$45,232 per month thereafter. The Company moved into this new office
facility in November 1999.
j) The building is leased from Northwood Corporate Park, LP under a
five-year lease that began December 1, 1997 at a rate of $6,230 per
month.
The address of the Company's principal executive office is 7140 Office
Circle, Evansville, Indiana 47715, and the Company's phone number is (812)
962-5000.
ITEM 3. LEGAL PROCEEDINGS
Neither the Company nor any of its subsidiaries is a party to any
material legal proceeding. However, the Company from time-to-time is involved in
ordinary routine litigation incidental to its business.
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
11
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock is privately held and not listed on any
public market. As of March 1, 2000, there were approximately 55 holders of the
Company's Common Stock.
DIVIDEND POLICY
The Company has not declared or paid cash dividends on its Common
Stock. The Company currently intends to retain any future earnings to finance
the growth and development of its business and therefore does not anticipate
paying any cash dividends in the foreseeable future. Any future determination to
pay cash dividends will be made by the Board of Directors in light of the
Company's earnings, financial position, capital requirements and such other
factors as the Board of Directors deems relevant. The payment of dividends is
restricted under the terms of the Credit Facility and the Indenture. See "Item
7- Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources."
RECENT SALES OF UNREGISTERED SECURITIES
During the 1999 fiscal year, the Company issued 116 shares of the
Company's Common Stock to certain members of management for aggregate
consideration in cash and secured promissory notes of approximately $0.6
million. During such period, the Company also issued options to purchase 221
shares of Common Stock to such members of management. The exercise price of such
options is $5,000 per share. None of these securities were registered under the
Securities Act. Such issuances of Common Stock and options to purchase Common
Stock were made pursuant to the 1998 Stock Purchase and Option Plan for
Employees of Accuride Corporation and Subsidiaries. In each of the above
instances, exemption from registration under the Securities Act was based upon
the grounds that the issuance of such securities either (i) did not involve a
public offering within the meaning of Section 4(2) of the Securities Act or (ii)
was offered and sold pursuant to a compensatory benefit plan within the meaning
of Rule 701 of the Securities Act. See "Item 11-Executive Compensation -
Employee Equity Arrangements."
12
<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following financial data is an integral part of, and should be read
in conjunction with the "Consolidated Financial Statements" and notes thereto.
Information concerning significant trends in the financial condition and results
of operations is contained in "Item 7 - Management's Discussion and Analysis of
Financial Condition and Results of Operations."
SELECTED HISTORICAL OPERATIONS DATA (In thousands, except per share data)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
FISCAL YEAR ENDED DECEMBER 31,
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales (a)......................... $505,854 $383,583 $332,966 $307,830 $357,802
Gross profit (b)...................... 115,078 82,554 65,994 61,723 64,549
Operating expenses (c)................ 33,493 34,034 21,316 17,941 16,869
Income from operations(b)............. 81,585 48,520 44,678 43,782 47,680
Interest income (expense), net........ (38,988) (32,311) 385 400 717
Equity in earnings of affiliates...... 2,316 3,929 4,384 115 300
Other income (expense), net (d)....... (1,081) (2,904) 719 (381) (1,375)
Net income............................ 25,331 7,951 27,837 26,466 26,592
Income from operations, per share..... _ _ _ _ _
OTHER DATA:
Adjusted EBITDA (e)................... $111,682 $88,160 $76,888 $64,023 $70,101
Adjusted EBITDA Margin (f)............ 21.6% 21.1% 21.8% 20.8% 19.5%
Net cash provided by (used in):
Operating activities............ 86,835 22,662 38,219 43,678 50,012
Investing activities............ (124,324) (44,669) (47,065) (9,370) (6,766)
Financing activities............ 66,511 18,060 9,953 (37,463) (57,718)
Cash interest expense (g)............. 37,841 31,450 145 33 35
Depreciation and amortization......... 29,784 24,926 20,726 20,126 21,121
Capital expenditures.................. 44,507 46,579 24,032 9,584 6,960
BALANCE SHEET DATA (END OF PERIOD):
Cash and cash equivalents............. $32,493 $3,471 $7,418 $6,311 $9,466
Working capital....................... 40,492 49,628 27,416 38,608 34,785
Total assets.......................... 525,772 404,925 347,447 288,703 298,900
Total debt............................ 460,561 393,200 16,040 _ _
Stockholders' equity (deficiency)..... (32,131) (58,096) 256,055 228,451 239,081
</TABLE>
- ----------
(a) Results of operations for the year ended December 31, 1997 (subsequent
to May 1997) do not reflect net sales and gross profit for aluminum
Wheels due to the formation of the AKW joint venture with Kaiser. Net
sales and gross profit for aluminum Wheels were $19.1 million and $1.1
million, respectively, for the period beginning on January 1, 1997 and
ending on April 30, 1997. Results of operations for the year ended
December 31, 1999 are based on the Company's 50% ownership of AKW
through March 31, 1999 and 100% ownership of AKW since April 1, 1999.
Net sales and gross profit for aluminum wheels for the 9-month period
from April 1, 1999 through December 31, 1999 were $76.1 million and
$22.1 million, respectively. See "Item 7-Management's Discussion and
Analysis of Financial Condition and Results of Operations."
13
<PAGE>
(b) Gross profit and income from operations for the year ended December 31,
1997 reflect $7.1 million of costs incurred in connection with the
strike in early 1997 at the Company's facility in Ontario, Canada.
Gross profit and income from operations for 1998 reflect $3.9 million
of costs incurred in connection with the strike in 1998 at the
Company's facility in Henderson, Kentucky, and $1.1 million of
restructuring charges related to Accuride Canada, Inc. Gross profit and
income from operations for 1999 reflect a reduction to cost of $3.0
million related to the favorable AKW recall adjustment. See "Item
7-Management's Discussion and Analysis of Financial Condition and
Results of Operations."
(c) Operating expenses include selling, general and administrative plus (i)
$3.3 million of start-up costs related to the Columbia, Tennessee,
facility incurred during 1998, (ii) $1.9 million of management
retention bonuses reimbursed by Phelps Dodge in 1998, and (iii) $2.2
million of Recapitalization professional fees recorded in 1998.
(d) Other income (expense), net consists of currency hedging and foreign
exchange gains and losses related to the Company's Canadian and Mexican
operations.
(e) Adjusted EBITDA for 1999 represents income from operations plus
depreciation and amortization, net of $1.9 million in amortization of
deferred financing costs plus equity in earnings of affiliates, plus
(i) $1.4 million of fees associated with merger and acquisition
activities less (ii) $1.5 million associated with the AKW wheel recall
adjustment. This $1.5 million represents 50% of the $3.0 million
reduction in the AKW product recall reserve. See "Item 7-Management's
Discussion and Analysis of Financial Condition and Results of
Operations." Adjusted EBITDA for 1998 represents income from operations
plus depreciation and amortization, net of $1.7 million in amortization
of deferred financing costs plus equity in earnings of affiliates, plus
(i) $1.1 million of estimated restructuring costs at the London,
Ontario facility, (ii) $3.4 million representing the impact of the AKW
wheel recall campaign implemented in 1998, (iii) $1.9 million of
management retention bonuses reimbursed by Phelps Dodge in 1998, (iv)
$2.2 million of Recapitalization professional fees and (v) $3.9 million
of costs incurred in connection with the strike in 1998 at the
Henderson, Kentucky, facility. In determining Adjusted EBITDA for 1997,
income from operations has been increased by depreciation and
amortization, equity in earnings of affiliates and $7.1 million
representing the estimated impact of the strike at the London, Ontario,
facility that occurred during the first quarter of 1997. Adjusted
EBITDA is not intended to represent cash flows from operations as
defined by generally accepted accounting principles ("GAAP") and should
not be considered as an alternative to net income as an indicator of
the Company's operating performance or to cash flows as a measure of
liquidity. Adjusted EBITDA is included in this Annual Report as it is a
basis upon which the Company assesses its financial performance and
certain covenants in the Company's borrowing arrangements are tied to
similar measures.
(f) Represents Adjusted EBITDA before equity in earnings of affiliates and
before the $3.4 million impact of the AKW wheel recall campaign
implemented in 1998, as a percentage of net sales.
(g) Cash interest expense represents interest expense exclusive of $1.9
million and $1.7 million amortization of deferred financing costs for
the years ended December 31, 1999 and December 31, 1998, respectively.
14
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The following discussion should be read in conjunction with the
"Selected Consolidated Financial Data" and the Company's Consolidated
Financial Statements and the notes thereto, all included elsewhere herein.
The information set forth in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations" includes forward-looking
statements that involve risks and uncertainties. Many factors could cause
actual results to differ materially from those contained in the
forward-looking statements below. See "Factors That May Affect Future
Results."
GENERAL
NET SALES. The Company derives a substantial portion of its net sales
from the sale of steel and aluminum Wheels to North American Heavy/Medium Truck,
Trailer OEMs, and sales of steel wheels to the Light Truck OEMs. In addition,
the Company supplies the aftermarket with replacement products. Revenues are
recognized upon shipment to customers from the Company's production facilities.
Prior to May 1997, the Company participated in the aluminum Wheel
market through a twenty-five year buy-and-resell agreement with Kaiser. Under
that agreement, aluminum Wheels were engineered and designed by the Company,
manufactured by Kaiser and sold through the Company's distribution channels
under the Accuride name. Therefore, the Company's results of operations
reflected revenues received from the sale of aluminum Wheels and the cost of
acquiring the Wheels from Kaiser. In May 1997, the Company invested $20.8
million for a 50% interest in AKW, a joint venture with Kaiser which acquired
Kaiser's Wheel operations in Erie, Pennsylvania, and Cuyahoga Falls, Ohio. On
April 1, 1999 the Company acquired Kaiser's 50% interest in AKW for total
compensation of approximately $71 million. Since its inception, AKW has
increased its capacity by over 50%. Despite this recent expansion, AKW
continues to operate at or near capacity and is in the process of increasing
capacity further to meet customer demand. The Company's participation in
AKW's earnings was recorded on an equity basis from the establishment of the
joint venture through March 31, 1999. Accordingly, during this period, the
Company's financial results are not directly comparable to periods prior to
May 1997. Subsequent to March 31, 1999, revenues of AKW were consolidated on
a 100% basis for accounting purposes.
In November, 1997, the Company invested $4.9 million to establish
AdM, a 51%-owned venture with IaSa, Mexico's only commercial vehicle Wheel
manufacturer. On July 16, 1999, the Company acquired IaSa's 49% interest in
AdM, pursuant to the terms of a purchase agreement by and among the Company,
IaSa and certain other parties. The acquisition gives the Company 100%
control of AdM. Total consideration paid was $7.4 million, consisting of a
$7.3 million cash payment to IaSa for IaSa's 49% interest, and $0.1 million
paid to other parties for fees and expenses. The Company expects to use AdM
as a platform to supply the growing Latin American assembly operations of
many of its top customers, including Ford, Freightliner, General Motors,
Navistar, Paccar and Volvo.
In order to expand its presence in the growing Light Wheel market, the
Company developed the Columbia, Tennessee, facility, which began production in
August 1998.
Sales to customers outside of the United States are considered
international sales by the Company. International sales in 1999 were $38.3
million, or 7.6% of the Company's 1999 sales volume. For additional information,
see footnote 15 to the "Notes to Consolidated Financial Statements" included
herein.
Steel Wheel sales volume for the fiscal year ended 1997 exceeded
1996 levels by 22%. Steel Wheel sales volume for the fiscal year ended 1998
exceeded 1997 levels by 22%. Steel Wheel sales volume for the fiscal year
ended 1999 exceeded 1998 levels by 12%.
15
<PAGE>
GROSS PROFIT. The Company continuously strives to improve productivity,
increase quality and lower costs. Management has budgeted approximately $37.0
million in 2000 for productivity and capacity initiatives (in addition to normal
maintenance) and believes that the Company's emphasis on low-cost manufacturing
will continue to yield significant operational improvements. The $37.0 million
productivity initiatives include investments to expand capacity, to automate and
reduce manual operations, to improve both material and labor efficiencies, and
to increase throughput on assembly lines, disc blankers and paint processes.
During 1999, steel costs were relatively constant, reflecting both
overall stability in the steel market as well as the Company's efforts to
improve its material efficiency and supply sources.
The Company believes that the experience of its labor force is a
significant element in maintaining low-cost production. However, the Company
has experienced two significant labor problems in the past few years. In the
first quarter of 1997, the Company experienced a 53-day strike at the
Ontario, Canada, facility. The Company estimates that the strike at the
Ontario, Canada facility negatively impacted 1997 gross profit by $7.1
million. The Company's contract with the UAW covering employees at the
Henderson, Kentucky, facility expired in February 1998. The Company was not
able to negotiate a mutually acceptable agreement with the UAW, and a strike
occurred at the Henderson, Kentucky, facility on February 20, 1998. Effective
March 31, 1998, the Company began an indefinite lockout in order to provide
security for plant personnel and equipment. The UAW has rejected all of the
Company's offers and the parties continue to be unable to reach an agreement.
The Company is continuing to operate with its salaried employees and outside
contractors. Currently there is, and the Company believes that there will be,
no supply disruption to the Company's customer base; however, there can be no
assurance to that effect. A supply disruption to the Company's customer base
could have a material adverse effect on the Company. The Company estimates
that the strike at the Henderson, Kentucky, facility negatively effected 1998
gross profit by $3.9 million; however, due to improved performance by the
salaried employees and outside contractors at the Henderson, Kentucky,
facility in 1999, the strike had no adverse impact on 1999 pre-tax earnings.
OPERATING EXPENSES. Operating expenses are comprised of selling,
general and administrative ("SG&A"), fees associated with merger and
acquisition activities, and various start up costs. SG&A is comprised of
corporate overhead, such as marketing and sales, research and development,
finance, human resources, and administrative as well as related professional
consulting fees. In an effort to support its growth initiatives and its
stand-alone status, the Company has invested in additional professional and
administrative resources, primarily in sales and marketing. These resource
additions resulted in increased SG&A for 1997, 1998 and 1999.
EQUITY IN EARNINGS OF AFFILIATES. Equity in earnings of affiliates
includes the Company's income from (i) AKW, from its inception in May 1997
through March 31, 1999, and (ii) AOT, which provides Navistar with Wheel/tire
assembly services. Income from AKW and AOT was reported on the equity method,
for the applicable periods, and represents the Company's share of such joint
ventures' net income. AKW total sales for the three-month period ended March 31,
1999 were $23.9 million. For the fiscal year ended December 31, 1998, AKW total
sales were $86.9 million. AOT total sales were $8.8 million and $7.8 million for
the fiscal years 1999 and 1998, respectively.
ADJUSTED EBITDA. Adjusted EBITDA for 1999 represents income from
operations plus depreciation and amortization, net of $1.9 million in
amortization of deferred financing costs, plus equity in earnings of
affiliates, plus (i) $1.4 million of costs associated with merger and
acquisition activities, less (ii) $1.5 million of costs associated with the
AKW wheel recall campaign which were recovered in 1999. For additional
information, see "AKW Product Recall" below. Adjusted EBITDA for 1998
represents income from operations plus depreciation and amortization, net of
$1.7 million in amortization of deferred financing costs in 1998 plus equity
in earnings of affiliates, plus (i) $1.1 million of restructuring charges
incurred in 1998, (ii) $3.4 million representing the impact of the AKW wheel
recall campaign implemented in 1998,
16
<PAGE>
(iii) $1.9 million of management retention bonuses reimbursed by Phelps Dodge
in 1998, (iv) $2.2 million of Recapitalization professional fees recorded in
1998 and (v) $3.9 million of costs incurred in connection with the strike in
1998 at the Henderson, Kentucky, facility. Adjusted EBITDA is not intended to
represent cash flows from operations as defined by GAAP and should not be
considered as an alternative to net income as an indicator of the Company's
operating performance or to cash flows as a measure of liquidity.
AKW PRODUCT RECALL
On April 17, 1998, AKW submitted a notice to the National Highway
Safety Administration ("NHSA") of AKW's intent to recall approximately 47,800
aluminum truck wheels (the "Recalled Wheels"), because a defect may exist in
the Recalled Wheels that relates to motor vehicle safety. Kaiser, the
Company's former partner in AKW, manufactured several hundred of the Recalled
Wheels during the period April 23, 1997 through April 30, 1997. During the
period May 1, 1997 through February 28, 1998, AKW manufactured all of the
remaining Recalled Wheels. The Recalled Wheels were designed by the Company.
AKW initially estimated that the total costs of recalling and replacing all
of the Recalled Wheels would be approximately $6.8 million, an amount which
could vary depending on the level of customer response to the recall, among
other factors. Due to the Company's 50% ownership of AKW in 1998, the Company
reflected a portion of the recall expenses ($3.4 million) as a reduction in
"Equity in earnings of affiliates" in the Company's financial statements. On
April 1, 1999, the Company acquired Kaiser's 50% interest in AKW and thereby
acquired 100% ownership of AKW. See "Item 1 - Accuride/Kaiser Wheels -
Acquisitions." In 1999, the estimated cost of replacing the Recalled Wheels
was re-evaluated and reduced by $3.0 million to $3.8 million. Due to the
Company's 100% ownership of AKW, $3.0 million of the cost reduction was
recorded in the Company's consolidated statement of income. The Company
believes that the recall will not have a material adverse effect on the
Company. The Company is currently not aware of any product liability claims
related to the Recalled Wheels. There can be no assurance, however, that no
such claims will be made and that the Company will not experience any
material product liability losses in the future. See "Item 1 - Acquisitions -
Accuride/Kaiser Wheels."
RESULTS OF OPERATIONS
COMPARISON OF FISCAL YEARS 1999 AND 1998
The following table sets forth certain income statement information of the
Company for the fiscal years ended December 31, 1999 and December 31, 1998:
<TABLE>
<CAPTION>
FISCAL 1999 FISCAL 1998
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales................................................. $505,854 100.0% $383,583 100.0%
Gross profit.............................................. 115,078 22.7% 82,554 21.5%
Operating expenses........................................ 33,493 6.6% 34,034 8.9%
Income from operations.................................... 81,585 16.1% 48,520 12.6%
Equity in earnings of affiliates.......................... 2,316 0.5% 3,929 1.0%
Other Expense............................................. (40,069) (7.9%) (35,215) (9.2%)
Net income................................................ 25,331 5.0% 7,951 2.1%
OTHER DATA:
Adjusted EBITDA........................................... 111,682 21.6%(a) 88,160 21.1%(a)
</TABLE>
- -----------
(a) Represents Adjusted EBITDA less adjusted equity in earnings of affiliates
as a percent of sales.
NET SALES. Net sales increased by $122.3 million, or 31.9%, in 1999 to
$505.9 million, compared to $383.6 million for 1998. The increase in net sales
is primarily due to (i) including total sales from AKW with the consolidated
sales of the Company effective April 1, 1999, the date of the AKW acquisition,
(ii) an
17
<PAGE>
increase in sales at Columbia, Tennessee, facility and (iii) an increase in
industry volumes for heavy/medium wheels. Sales from AKW in 1999 were $76.1
million compared to $0 in 1998 as AKW was previously accounted for on the
equity method as "equity in earnings of affiliates" and was not consolidated
prior to the acquisition. Excluding the $76.1 million in sales at AKW, net
sales would have increased by $46.2 million, or 12.0%, in 1999 compared to
1998. Sales of products from the new Columbia, Tennessee, facility, which
started operations in August 1998, were $34.5 million in 1999 compared to
$10.3 million in 1998. The remaining increase in sales of $22.0 million is a
result of an increase in industry volume.
GROSS PROFIT. Gross profit increased by $32.5 million, or 39.3%, to
$115.1 million for 1999 from $82.6 million for 1998. The $32.5 million
increase in gross profit was due to (i) $22.1 million gross profit at AKW,
which has been accounted for on a consolidated basis effective with the AKW
acquisition on April 1, 1999, and (ii) an overall increase in industry
medium/heavy wheels sales volume. Partially offsetting this increase were
lower gross profits at AdM. AdM's gross profit decreased $3.8 million from
$8.9 million in 1998 to $5.1 million in 1999. The decrease in gross profit at
AdM was due to a slowdown in the Latin American market and higher than
anticipated ramp up costs of the new AdM facility. Gross profit percent for
the total Company improved by 1.2% from 21.5% in 1998 to 22.7% in 1999. The
increase in gross profit as a percentage of sales is primarily due to an
overall increase in volume and resulting per unit cost reductions. The
improvements were achieved by effectively controlling the costs associated
with the labor strike at the Henderson, Kentucky, facility and a reduction in
costs associated with the August 1998 start up of the Columbia, Tennessee,
facility.
OPERATING EXPENSES. Operating expenses decreased by $0.5 million, or
1.5% to $33.5 million for 1999 from $34.0 million for 1998. This decrease was
due to one-time operating expenses of $3.3 million incurred in 1998 for start-up
costs relating to the new Columbia, Tennessee, facility; professional fees of
$2.2 million related to the Company's recapitalization; and the management
retention bonuses of $1.9 million paid by Phelps Dodge Corporation, a previous
principal stockholder in conjunction with the Company's recapitalization.
Excluding the 1998 expenses for the Columbia, Tennessee, facility start-up
costs, the professional fees related to the recapitalization and the management
retention bonuses, operating expenses increased by $6.9 million from $26.6
million in 1998 to $33.5 million in 1999. This increase was primarily due to (i)
a $2.0 million increase in selling, general and administrative expense and
research and development costs associated with AKW, which has been accounted for
on a consolidated basis effective with the AKW acquisition on April 1, 1999,
(ii) $1.0 million of goodwill associated with the acquisition of AKW, (iii) $1.4
million of costs related to aborted mergers and acquisitions activities, (iv)
$1.5 million increase in research and development cost, and (v) $0.9 million
increase in SG&A expenses related to increased stand-alone costs.
EQUITY IN EARNINGS OF AFFILIATES. Equity in earnings of affiliates
decreased by approximately $1.6 million to $2.3 million for 1999 from $3.9
million for 1998. The decrease is the direct result of the AKW acquisition on
April 1, 1999 and the subsequent change in accounting from the equity method to
reporting on a consolidated basis.
OTHER INCOME (EXPENSE). Interest expense increased to $39.8 million for
1999 compared to $33.1 million for 1998 due to the increased debt incurred
related to the acquisition of AKW on April 1, 1999. Other expenses decreased by
$1.8 million to $0.3 million. The $0.3 million consists primarily of currency
loss offset by interest income.
ADJUSTED EBITDA. Adjusted EBITDA increased by $23.5 million, or 26.6%,
to $111.7 million for 1999 from $88.2 million for 1998 due to higher steel
product sales volume. In determining Adjusted EBITDA for 1999, income from
operations has been increased by depreciation and amortization (except for
amortization of deferred financing costs), equity in earnings of affiliates,
$1.4 million of costs related to aborted merger and acquisition activities, and
decreased by $1.5 million related to the re-evaluation of the
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AKW wheel recall campaign. See "AKW Product Recall." In determining Adjusted
EBITDA for 1998, income from operations has been increased by depreciation
and amortization (except for amortization of deferred financing costs),
equity in earnings of affiliates and (i) an estimated $3.9 million of costs
incurred in connection with the strike in 1998 at the Company's facility in
Henderson, Kentucky, (ii) $1.9 million of management retention bonuses
reimbursed by Phelps Dodge, a previous principal stockholder, in 1998, (iii)
$2.2 million of Recapitalization professional fees, (iv) $3.4 million
representing the impact of the AKW wheel recall campaign implemented in 1998
and (v) $1.1 million of estimated restructuring costs at the London, Ontario,
facility.
NET INCOME. Net income increased by $17.3 million, or 216 %, to
$25.3 million for 1999 from $8.0 million for 1998. The increase was a result
of higher pretax earnings in 1999, as described above, a lower effective tax
rate, and a decrease in minority interest due to the acquisition of AdM on
July 16, 1999.
COMPARISON OF FISCAL YEARS 1998 AND 1997
The following table sets forth certain income statement information of the
Company for the fiscal years ended December 31, 1998 and December 31, 1997:
<TABLE>
<CAPTION>
FISCAL 1998 FISCAL 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales................................................. $383,583 100.0% $332,966 100.0%
Gross profit.............................................. 82,554 21.5% 65,994 19.8%
Operating expenses........................................ 34,034 8.9% 21,316 6.4%
Income from operations.................................... 48,520 12.6% 44,678 13.4%
Equity in earnings of affiliates.......................... 3,929 1.0% 4,384 1.3%
Other Income (expense).................................... (35,215) (9.2%) 1,104 0.3%
Net income................................................ 7,951 2.1% 27,837 8.4%
OTHER DATA:
Adjusted EBITDA........................................... 88,160 21.1%(a) $76,888 21.8%(a)
</TABLE>
- -----------
(a) Represents Adjusted EBITDA less adjusted equity in earnings of affiliates
as a percent of sales.
NET SALES. Net sales increased by $50.6 million, or 15.2%, in 1998
to $383.6 million, compared to $333.0 million for 1997. The increase in net
sales is primarily due to increased industry volume and sales by AdM, which
was formed in November, 1997. Sales of aluminum wheels prior to the formation
of the AKW joint venture in May, 1997, were reflected in the Company's net
sales and gross profit amounts through the former buy and resell agreement
between the Company and Kaiser. Earnings from the AKW joint venture are
currently reflected in other income as "equity in earnings of affiliates."
Excluding $19.1 million in net sales of aluminum products through the buy and
resell agreement for the four month period ended April 30, 1997, net sales
increased by $69.7 million, or 22.2%, to $383.6 million for 1998 compared to
$313.9 million for 1997.
GROSS PROFIT. Gross profit increased by $16.6 million, or 25.1%, to
$82.6 million for 1998 from $66.0 million for 1997. Gross profit as a
percentage of net sales increased to 21.5% for 1998 from 19.8% for 1997.
Production costs were higher for 1997 due to estimated incremental strike
costs of $7.1 million at the London, Ontario, facility, partially offset by
estimated incremental strike costs of $3.9 million at the Henderson,
Kentucky, facility in 1998. Additionally, 1997 included aluminum sales under
the buy and resell agreement, which had significantly lower margins than
steel wheel sales. Excluding strike costs in 1997 and 1998 and $1.1 million
in gross profit relating to sales of aluminum products through the buy and
resell agreement for the first four months of 1997, gross profit increased by
$14.5 million, or 20.1%, to $86.5 million for 1998 from $72.0 million for
1997.
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<PAGE>
OPERATING EXPENSES. Operating expenses increased by $12.7 million,
or 59.7% to $34.0 million for 1998 from $21.3 million for 1997. This increase
was primarily due to start-up costs of $3.3 million relating to the new
Tennessee light truck wheels facility, management retention bonuses of $1.9
million reimbursed by Phelps Dodge in conjunction with the Recapitalization,
professional fees related to the Recapitalization of $2.2 million and SG&A
expenses of AdM of $2.7 million. Excluding the expenses recorded for start-up
costs, management retention bonuses and Recapitalization professional fees
for 1998, operating expenses as a percentage of net sales increased to 6.9%
for 1998 from 6.4% for 1997 primarily due to stand alone costs associated
with operating as a separate company since the Recapitalization.
EQUITY IN EARNINGS OF AFFILIATES. Equity in earnings of affiliates
decreased by approximately $0.5 million to $3.9 million for 1998 from $4.4
million for 1997. The decrease was primarily due to the effect of a product
recall campaign implemented at AKW. Excluding the $3.4 million related to the
recall, equity in earnings of affiliates increased $2.9 million for 1998 to
$7.3 million from $4.4 million for 1997 due to increased equity earnings
related to the AKW joint venture. The AKW joint venture contributed $6.9
million (excluding the $3.4 million recall) of earnings for 1998 compared to
earnings of $4.2 million for 1997.
OTHER INCOME (EXPENSE). Interest expense increased to $33.1 million
for 1998 compared to $145,000 for 1997 due to the debt incurred related to
the Recapitalization on January 21, 1998. Other expenses increased by $3.6
million due to a $2.6 million loss on forward exchange contracts and $1.5
million of currency losses incurred at AdM, partially offset by $0.5 million
currency gains incurred at Accuride Canada, Inc.
ADJUSTED EBITDA. Adjusted EBITDA increased by $11.3 million, or
14.7%, to $88.2 million for 1998 from $76.9 million for 1997 due to higher
steel product sales volume. In determining Adjusted EBITDA for 1998, income
from operations has been increased by depreciation and amortization (except
for amortization of deferred financing costs), equity in earnings of
affiliates and (i) an estimated $3.9 million of costs incurred in connection
with the strike in 1998 at the Company's facility in Henderson, Kentucky,
(ii) $1.9 million of management retention bonuses reimbursed by Phelps Dodge,
a previous principal stockholder, in 1998, (iii) $2.2 million of
Recapitalization professional fees, (iv) $3.4 million representing the impact
of the AKW wheel recall campaign implemented in 1998 and (v) $1.1 million of
estimated restructuring costs at the London, Ontario, facility. In
determining Adjusted EBITDA for 1997, income from operations has been
increased by depreciation and amortization, equity in earnings of affiliates
and $7.1 million representing the estimated impact of the strike at the
London, Ontario, facility in the first quarter of 1997.
NET INCOME. Net income decreased by $19.8 million, or 71.2%, to
$8.0 million for 1998 from $27.8 million for 1997, due to lower pretax
earnings, as described above, and a higher effective tax rate.
EFFECTS OF INFLATION.
The effects of inflation were not considered material during fiscal
years 1999, 1998 or 1997.
CAPITAL RESOURCES AND LIQUIDITY
The Company's primary sources of liquidity are cash flow from
operations and borrowing under the Revolver. The Company's primary uses of cash
are funding working capital, capital expenditures under the Company's expansion
plans and debt service.
As of December 31, 1999, the Company had cash and short-term
investments of $32.5 million compared to $3.5 million at the beginning of the
year. The Company's operating activities provided $86.8 million and the
financing activities provided $66.5 million which were used to fund the
Company's investing activities of $124.3 million and an increase in cash and
cash equivalents of $29.0 million.
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<PAGE>
Investing activities during the year ended December 31, 1999 were
$124.3 million compared to $46.6 million for the year ended December 31,
1998. Included in the 1999 investing activities were the AdM Acquisition of
$7.4 million and the AKW Acquisition of $71.1 million. Also included in the
1999 investing activities were capital expenditures at AdM of $15.2 million,
at AKW of $8.8, at Columbia, Tennessee, of $1.8 million and capital spending
for the base business of $20.0 million. In 1998, investing activities
included capital expenditures for the new facilities at AdM of $16.7 million
and Columbia, Tennessee, of $15.8 million as well as capital spending for the
base business of $14.1 million.
Cash flow from financing activities during the year ended December
31, 1999 was $66.5 million compared to $18.1 million for the year ended
December 31, 1998.
The Company incurred capital expenditures in 1999 of $46.1 million.
The Company expects its capital expenditures to be in the $45 million to $50
million range in 2000. It is anticipated that these expenditures will fund
(i) approximately $2.4 million for technology advancement projects; (ii)
investments in productivity and capacity expansion improvements in 2000 of
approximately $37 million; (iii) maintenance of business expenditures of
approximately $10.1 million; and (iv) quality improvements of approximately
$1.8 million. Future investments in productivity improvements are expected to
be focused on capacity expansion, additional automation, shop floor and
engineering systems and improved coating capabilities.
The Company anticipates that AdM will require additional funding in
2000 to acquire equipment and to fund various start-up costs and working
capital needs of the Monterrey, Mexico, facility. The Monterrey, Mexico,
facility started operations in July 1999. Total project costs through 1999
were $33.7 million, of which $15.2 million was spent during the year ended
December 31, 1999. The Company finalized a $32.5 million credit facility for
AdM on July 9, 1998. This credit facility is comprised of a term loan of
$25.0 million and a working capital facility of $7.5 million. As of December
31, 1999 the credit facility was fully drawn. Repayment of the term loan is
to be made in eight substantially equal quarterly installments commencing
June 25, 2001. The working capital facility terminates on July 9, 2000,
unless extended for successive one-year periods at the option of the lenders.
Interest on the term loan and working capital advances is based on the
applicable London interbank offered rate ("LIBOR") plus an applicable margin.
Effective September 13, 1999 the AdM credit facility was amended to reflect a
parent guaranty executed by the Company, guaranteeing the repayment of the
advances under this facility. Effective December 31, 1999, the AdM credit
facility was further amended to modify and delete certain covenants that were
inconsistent and duplicative with similar covenants contained in the
Company's Amended and Restated Credit Agreement described below.
AMENDED AND RESTATED CREDIT AGREEMENT. On April 16, 1999 the Company
entered into an amended and restated credit agreement (the "Amended Credit
Agreement") with a syndicate of banks and other financial institutions (the
"Lenders") led by Citicorp USA, Inc., as administrative agent (the
"administrative agent"), Salomon Smith Barney, Inc., as arranger, Bankers
Trust Company, as syndication agent, and Wells Fargo Bank N.A. as
documentation agent. The Amended Credit Agreement provided for an additional
$100.0 million term loan ("Tranche C") which was added to the previous term
loans of (i) $60.0 million that matures on January 21, 2005 ("Tranche A") and
(ii) $75.0 million that matures on January 21, 2006 ("Tranche B"). The
Company's Canadian subsidiary is the borrower under Tranche A, and the
Company has guaranteed the repayment of such borrowing under Tranche A and
all other obligations of such Canadian subsidiary under the Amended Credit
Agreement. The Company also has a $140.0 million Revolver, which declines to
$100.0 million on January 21, 2003 and matures on January 21, 2004. As of
December 31, 1999, no amounts were outstanding under the Revolver. The
Tranche A and B term loans provide for 1% annual amortization prior to
maturity and the Tranche C term loan provides for 1% annual amortization
through January 21, 2005, with the final two years each providing for 47%
amortization. In October 1999 the Company prepaid the mandatory principal
payments on the term loans due on January 21, 2000 and January 21, 2001.
Interest on the term loans and the Revolver is based on the applicable LIBOR
rate plus an applicable margin. The loans are secured by, among other things,
the shares of stock, partnership interests and limited liability company
ownership interests of the Company's subsidiaries.
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<PAGE>
DESCRIPTION OF THE NOTES. In January 1998 the Company issued the
$200 million Notes pursuant to the Indenture. The Indenture is limited in
aggregate principal amount to $300.0 million, of which $200.0 million were
issued as Private Notes and subsequently exchanged for Exchange Notes, which
exchange has been registered under the Securities Act of 1933, as amended.
The Indenture provides certain restrictions on the payment of dividends by
the Company. The Indenture is subject to and governed by the Trust Indenture
Act of 1939, as amended. The Notes are general unsecured obligations of the
Company and are subordinated in right of payment to all existing and future
Senior Indebtedness (as defined in the Indenture) of the Company. The Notes
mature on February 1, 2008. Interest on the Notes accrues at the rate of
9.25% per annum and is due and payable semi-annually in arrears on February 1
and August 1, commencing on August 1, 1998, to holders of record of the Notes
on the immediately preceding January 15 and July 15.
Management believes that cash flow from operations and availability
under the Revolver will provide adequate funds for the Company's foreseeable
working capital needs for 2000, planned capital expenditures and debt service
obligations. Any future acquisitions, joint ventures or other similar
transactions will likely require additional capital, and there can be no
assurance that any such capital will be available to the Company on
acceptable terms or at all. The Company's ability to fund its working capital
needs, planned capital expenditures and scheduled debt payments, to implement
its expansion plans, to refinance indebtedness and to comply with all of the
financial covenants under its debt agreements, depends on its future
operating performance and cash flow, which in turn, are subject to prevailing
economic conditions and to financial, business and other factors, some of
which are beyond the Company's control.
RESTRICTIVE DEBT COVENANTS. The Company's credit documents contain
numerous financial and operating covenants that limit the discretion of the
Company's management with respect to certain business matters. These
covenants place significant restrictions on, among other things, the ability
of the Company to incur additional debt, to create liens, to make certain
payments and investments and to sell or otherwise dispose of assets and merge
or consolidate with other entities. The Company is also required to meet
certain financial ratios and tests. A failure to comply with the obligations
contained in the credit documents could result in an event of default, and
possibly the acceleration of the related debt and the acceleration of debt
under other instruments evidencing indebtedness that may contain
cross-acceleration or cross-default provisions.
YEAR 2000 COMPLIANCE
In 1997, a comprehensive project plan to address the Year 2000 issue
as it relates to the Company's operation was developed and implemented. The
scope of the plan included seven phases including awareness, identification,
impact analysis, risk evaluation, remediation, testing and contingency
planning. A project team that consisted of key members of the technology
staff, representatives of functional business units and senior management was
developed. The Company completed its Year 2000 readiness project prior to
December 31, 1999.
The Company has not incurred any material problems due to Year 2000
issues since January 1, 2000 and does not expect any material Year 2000
problems to arise in the future that may affect the Company's computer
systems.
The Company primarily used internal resources to implement its
readiness plan and to upgrade or replace and test systems affected by the
Year 2000 issue. During 1999, the Company incurred approximately $1.5 million
of direct and indirect costs for Company-owned systems and applications
related to Year 2000 remediation. The Company does not expect to incur any
material costs in the next twelve months associated with any Year 2000 issues.
22
<PAGE>
INDUSTRY OUTLOOK
The Company's primary market is Wheels for the North American
commercial vehicle industry. This industry and the global vehicle industry in
general are in a period of transition, marked by strengthening competition,
geographic expansion of manufacturing, and consolidation at both vehicle
manufacturer and supplier levels. These trends are expected to continue for
the near future. Major OEM customers and their suppliers are consolidating
and continue to extend their globalization efforts and emphasize their desire
for global support through local production. These customers also continue to
reduce the number of suppliers in their supply base. As a result of these
developments and recognizing the importance of the customer to its business,
the Company expects in the future to increasingly serve other global
commercial and consumer wheel markets. The Company aims to be a full line,
global wheel supplier. In a further effort to reduce their number of
suppliers, OEMs are also moving toward systems sourcing. This provides
opportunity for wheel makers to expand into related components such as hubs
and drums, suspension systems, brake systems, and tire/wheel assembly.
Current industry forecasts by America's Commercial Transportation
Publications, the Automotive Market Research Council, and Martin Labbe
Associates (collectively referred to as "Analysts"), predict that the North
American commercial vehicle industry will remain relatively strong by
historical standards, again in 2000, although it is not anticipated to be as
robust as in 1999. Although the commercial vehicle industry has been strong
in recent years, the industry is cyclical and the Analysts predict that the
industry will enter the downward portion of this cycle in terms of truck
builds, in the second quarter of 2000, with trailer builds remaining
relatively flat. On a global basis, the Company believes that the demand for
commericial and other on-highway vehicles will continue to grow. The North
American and European markets are expected to remain relatively stable and
experience modest growth rates, while South America and Asia are expected to
experience higher growth rates and be more volatile.
In the light vehicle Wheel market in North America, Wheels are now
considered to be more integral to styling, and the Company believes that
styling and design innovation will continue to play a key role for both steel
and aluminum wheel suppliers in this market.
Wheels for on-road vehicles, both consumer and commercial, are
generally made of steel or aluminum, which offer vehicle OEMs a range of
design options. Steel wheels, which are heavier than aluminum wheels, are
generally low cost, high volume production products. Aluminum wheels are
lighter in weight, more readily stylized and more expensive than steel
wheels. The Company's share of aluminum wheels on commercial vehicles in
North America is approximately 24%, and the Company believes that this share
will continue to grow modestly due to the value placed on reduced weight and
more attractive aesthetics. On light vehicles, aluminum wheels have an
approximate 45% share of the wheel market, and this share has apparently
reached a plateau as more highly styled and lighter weight steel wheels have
been developed. The Company believes the current share of aluminum light
wheels will decline modestly in the near future due to continued steel wheel
developments. Market and general economic conditions can also significantly
impact the relative share of the two materials in both consumer and
commercial wheel markets, due to their large difference in cost and the
elasticity of price and demand.
23
<PAGE>
FACTORS THAT MAY AFFECT FUTURE RESULTS
In this report, Accuride has made various statements regarding
current expectations or forecasts of future events. These statements are
"forward-looking statements" within the meaning of that term in Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Forward-looking statements are also made from time-to-time in press
releases and in oral statements made by Accuride's officers. Forward-looking
statements can be identified by the words "estimate," "project,"
"anticipate," "will continue," "will likely result," "expect," "intend,"
"believe," "plan," "predict" and similar expressions. Such forward-looking
statements are based on assumptions and estimates, which although are
believed to be reasonable, may turn out to be incorrect. Therefore, undue
reliance should not be placed upon these estimates and statements. Accuride
cannot assure you that any of these statements or estimates will be realized
and actual results may differ from those contemplated in these
"forward-looking statements." Accuride undertakes no obligation to publicly
update any forward-looking statements, whether as a result of new
information, future events, or otherwise. You are advised to consult further
disclosures Accuride may make on related subjects in its filings with the
SEC. Accuride cannot assure you that its expectations, beliefs, or
projections will result or be achieved or accomplished. In addition to other
factors discussed in the report, some of the important factors that could
cause actual results to differ materially from those discussed in the
forward-looking statements include the following:
SIGNIFICANT INDEBTEDNESS - ACCURIDE'S SIGNIFICANT DEBT COULD
ADVERSELY AFFECT ITS FINANCIAL RESOURCES AND PREVENT IT FROM SATISFYING ITS
DEBT SERVICE OBLIGATIONS. Accuride has a significant amount of indebtedness.
Accuride may also incur additional indebtedness in the future. Accuride may
not generate sufficient cash flow from operations, or have future borrowings
available to it, sufficient to pay its debt. At December 31, 1999, Accuride's
total indebtedness was $460.6 million and its total stockholders' deficit was
$32.1 million.
Accuride's ability to make debt payments or refinance its
indebtedness depends on future performance, which, to a certain extent, is
subject to general economic, financial, competitive and other factors, some
of which are beyond its control. Based upon Accuride's current level of
operations and anticipated growth, Accuride believes that available cash
flow, together with available credit, will be adequate to meet its financial
needs. There can be no assurance, however, that Accuride's business will
generate sufficient cash flow from operations or that future borrowings will
be available in an amount sufficient to enable it to pay its debts or to make
necessary capital expenditures, or that any refinancing of debt would be
available on commercially reasonable terms or at all. SEE "Item 7
- -Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources."
Accuride's substantial indebtedness could have important
consequences to you including, but not limited to, the following: (i)
Accuride's ability to obtain additional financing for acquisitions, working
capital, capital expenditures, or other purposes may be impaired or
unavailable; (ii) a substantial portion of Accuride's cash flow will be used
to pay its interest expense and debt amortization, which will reduce the
funds that would otherwise be available for its operations and future
business opportunities; (iii) a substantial decrease in net operating cash
flows or an increase in expenses could make it difficult for Accuride to meet
its debt service requirements and force it to modify operations; (iv)
Accuride may be more highly leveraged than its competitors, which may place
it at a competitive disadvantage; (v) Accuride's substantial indebtedness may
make it more vulnerable to a downturn in its business or in the economy
generally; and (vi) some of Accuride's existing debt contains financial and
restrictive covenants that limit its ability to, among other things, borrow
additional funds, dispose of assets, and pay cash dividends.
A significant portion of Accuride's outstanding indebtedness bears
interest at variable rates. While Accuride has attempted to limit its
exposure to increases in interest rates by entering into interest rate
protection agreements, such agreements will not eliminate completely the
exposure to variable rates. Any increase in the interest rates for its
indebtedness will reduce funds available to Accuride for its operations and
future business opportunities and will exacerbate the consequences of their
leveraged capital structure.
DEPENDENCE ON MAJOR CUSTOMERS - THE LOSS OF ONE OF ACCURIDE'S
SIGNIFICANT CUSTOMERS COULD HAVE A MATERIAL ADVERSE EFFECT ON ITS BUSINESS.
Accuride derived approximately 18.5%, 17.1% and 13.0% of its 1999 net sales
from Ford, Freightliner and Navistar, respectively. Accuride has been a
supplier to these customers for many years. Accuride is continuing to engage
in efforts intended to improve and expand its relations with each of these
customers. Accuride has supported its position with these customers through
direct and active contact with end users, trucking fleets and dealers, and
have located certain of its sales personnel in offices near these customers
and most of its other major customers. Although Accuride believes that its
relationship with these customers is good, Accuride cannot assure you that
Accuride will maintain or improve these relationships, that these
24
<PAGE>
customers will continue to do business with Accuride as they have in the
past, or that Accuride will be able to supply these customers or any of its
other customers at current levels. The loss of a significant portion of
Accuride's sales to Freightliner, Ford and/or Navistar could have a material
adverse effect on its business. In addition, the delay or cancellation of
material orders from, or problems at, Freightliner, Ford and Navistar or any
of its other major customers could have a material adverse effect of its
business. SEE "Item 1 - Business - Customers."
OEM SUPPLIER INDUSTRY - ACCURIDE DEPENDS ON ITS CUSTOMERS THAT ARE
OEMS IN THE HEAVY/MEDIUM TRUCK, TRAILER AND LIGHT TRUCK INDUSTRIES. Accuride
is a supplier to OEMs in the Heavy/Medium Truck, Trailer and Light Truck
industries, which are characterized by a small number of OEMs that are able
to exert considerable pressure on suppliers to reduce costs, improve quality,
and provide enhanced design and engineering capabilities. OEMs continue to
demand and receive price reductions and measurable increases in quality
through their use of competitive selection processes, rating programs, and
various other arrangements. Although Accuride has been able to offset a
portion of these price reductions through production cost savings, Accuride
cannot assure you that it will be able to generate such cost savings in the
future. The inability to generate sufficient production cost savings in the
future to offset such price reductions provided to OEMs could adversely
affect Accuride's profitability. Additionally, OEMs have generally required
suppliers to provide more design engineering input at earlier stages of the
product development process, the costs of which have, in some cases, been
absorbed by the suppliers. Future price reductions, increased quality
standards, or additional engineering capabilities required by OEMs could have
a material adverse effect on Accuride's business.
CYCLICAL AND SEASONAL INDUSTRY - THE WHEEL INDUSTRY IS CYCLICAL AND
SEASONAL, RESULTING IN FLUCTUATIONS OF REVENUE AND INCOME. The Heavy/Medium
Wheel and Light Wheel industries are highly cyclical and, in large part,
depend on the overall strength of the demand for Heavy/Medium Trucks,
Trailers, and Light Trucks. These industries have historically experienced
significant fluctuations in demand based on factors such as general economic
conditions, interest rates, government regulations, and consumer confidence.
It is likely that these industries will experience downturns at some time in
the future. A significant decrease in overall consumer demand for
Heavy/Medium Trucks, Trailers, and/or Light Trucks could have a material
adverse effect on Accuride's business. In addition, Accuride's operations are
typically seasonal as a result of regular customer maintenance and model
changeover shutdowns, which typically occur in the third and fourth quarter
of each calendar year. This seasonality may result in decreased net sales and
profitability during the third and fourth fiscal quarters of each calendar
year.
LABOR RELATIONS - THE MAJORITY OF ACCURIDE EMPLOYEES ARE MEMBERS OF
LABOR UNIONS AND ANY LABOR DISPUTES COULD MATERIALLY AND ADVERSELY AFFECT ITS
BUSINESS. The majority of Accuride's employees are members of labor unions.
As of December 31, 1999, approximately 83% of Accuride's employees at the
Henderson, Kentucky, facility were represented by the UAW and approximately
82% of Accuride's employees at the Ontario, Canada, facility were represented
by the CAW. The approximate percentage of employees at the Erie,
Pennsylvania, and Monterrey, Mexico, facilities who are represented by the
UAW and the El Sindicato Industrial de Trabajadores de Nuevo Leon is 80% and
83%, respectively. Accuride currently has a lockout at the Henderson,
Kentucky, facility (See "Item 1 - Business - Employees"). Throughout the
lockout period, operations have continued with salaried employees and outside
contractors. There has not been, and Accuride believes that there will not be
any supply disruption to its customer base; however, there can be no
assurance to that effect. A supply disruption to Accuride's customer base
could have a material adverse effect on its business.
RAW MATERIALS - ACCURIDE IS VULNERABLE TO SIGNIFICANT PRICE
INCREASES AND SHORTAGES. Accuride uses substantial amounts of raw steel and
aluminum. Although steel is generally available from a number of sources,
Accuride has obtained favorable sourcing by negotiating and entering into
high-volume contracts with third parties with terms ranging from one to three
years. AKW obtains aluminum from various third-party suppliers. While
Accuride believes that its supply contracts can be renewed on acceptable
terms, Accuride cannot assure you that it will be successful in renewing
these contracts on such favorable terms or at all. A substantial interruption
in the supply of steel or aluminum or an inability to obtain a supply of raw
steel or aluminum on commercially desirable terms could have a material
adverse effect on Accuride's business. Although the price of
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<PAGE>
steel has not been volatile in recent periods and Accuride has historically
been able to pass through to its customers steel price increases, Accuride
cannot assure you that rapid and significant changes in the price of steel
will not occur in the near future or that it will be able to pass on any such
cost increases to its customers. Aluminum prices have been volatile, however,
Accuride has used commodity price swaps to hedge against the impact of these
changes. See "Item 7A - Quantitative and Qualitative Disclosure About Market
Risk."
STRONG COMPETITION - ACCURIDE OPERATES IN A HIGHLY COMPETITIVE
ENVIRONMENT. Accuride's product line is broad and it competes with different
companies in different markets. Accuride's markets are characterized by
companies with substantial capital, established sales forces, extensive
research and development facilities and personnel, and other resources.
Several of Accuride's competitors have substantially greater financial or
other resources and therefore may be more competitive. In addition, OEMs may
expand their internal production of Wheels, shift sourcing to other suppliers
or take other actions that could reduce the market for Accuride's products
and have a material adverse effect on its business. Accuride may encounter
increased competition in the future from existing competitors or new
competitors. Also, market expansion and planned entry into additional markets
may expose Accuride to an increasing number of well-capitalized competitors.
ENVIRONMENTAL LIABILITIES - ACCURIDE MAY BE SUBJECT TO LIABILITY
UNDER ENVIRONMENTAL LAWS. Accuride is subject to various foreign, federal,
state and local environmental laws, ordinances, and regulations, including
those governing discharges into the air and water, the storage, handling and
disposal of solid and hazardous wastes, the remediation of soil and
groundwater contaminated by petroleum products or hazardous substances or
wastes, and the health and safety of its employees. Under certain of these
laws, ordinances or regulations, a current or previous owner or operator of
property may be liable for the costs of removal or remediation of certain
hazardous substances or petroleum products on, under, or in its property,
without regard to whether the owner or operator knew of, or caused, the
presence of the contaminants, and regardless of whether the practices that
resulted in the contamination were legal at the time they occurred. The
presence of, or failure to remediate properly such substances, may adversely
affect the ability to sell or rent such property or to borrow using such
property as collateral. Persons who generate, arrange for the disposal or
treatment of, or dispose of hazardous substances may be liable for the costs
of investigation, remediation or removal of these hazardous substances at or
from the disposal or treatment facility, regardless of whether the facility
is owned or operated by that person. Additionally, the owner of a site may be
subject to common law claims by third parties based on damages and costs
resulting from environmental contamination emanating from a site. Accuride
believes that it is in material compliance with environmental laws,
ordinances and regulations and does not anticipate any material adverse
effect on earnings or competitive position relating to environmental matters.
It is possible that future developments could lead to material costs of
environmental compliance. The nature of Accuride's current and former
operations and the history of industrial uses at some of its facilities
expose Accuride to the risk of liabilities or claims with respect to
environmental and worker health and safety matters which could have a
material adverse effect.
GROWTH STRATEGIES - ACCURIDE MAY NOT BE ABLE TO ACHIEVE ITS GROWTH
STRATEGIES. Accuride has developed growth strategies based on a review of its
operations and competitive position. Accuride plans to make significant
expenditures to:
- - Expand aluminum wheel production facilities in the United States;
- - Expand presence in the Light Wheel market; and
- - Form or acquire a global presence through joint ventures, alliances and
other business combinations.
Accuride may alter or discontinue certain aspects of these growth
strategies and may adopt alternative or additional strategies. Accuride may
not have the financial resources available to take advantage of opportunities
to pursue these growth strategies. In addition, Accuride cannot assure you that
its growth strategies, if implemented, will be successful or will improve its
operating results. Some of Accuride's growth strategies subject it to the
various risks associated with operating in foreign countries, including,
among others, the impact of foreign tax and other regulations, currency
fluctuations, and political and economic instability. As Accuride enters new
geographic
26
<PAGE>
and industry markets or attempts to increase its shares of existing markets,
it may encounter significant competitors, some of whom have substantially
greater resources. Accuride may encounter unforeseen conditions, such as
costs or expenses, or an economic downturn that may offset any improved
operating results that are attributable to growth strategies.
KEY MANAGEMENT - ACCURIDE DEPENDS ON KEY MANAGEMENT FOR THE SUCCESS
OF ITS BUSINESS. Accuride's success depends largely upon the abilities and
experience of certain key management personnel. The loss of the services of
one or more of these key personnel, and in particular William P. Greubel,
President and Chief Executive Officer, could have a material adverse effect
on Accuride's business. Accuride does not maintain key-man life insurance
policies on any of its executives.
CONTROL BY KKR AFFILIATES - THE RIGHTS OF ACCURIDE'S SHAREHOLDERS
COULD BE ADVERSELY AFFECTED BECAUSE OF THE CONCENTRATED CONTROL OF ITS STOCK.
As of December 31, 1999, approximately 87% of Accuride's Common Stock was
held by Hubcap Acquisition. Hubcap Acquisition is a Delaware limited
liability company whose members are KKR 1996 Fund L.P. and KKR Partners II,
L.P. KKR 1996 Fund L.P., which owns more than a 95% equity interest in Hubcap
Acquisition, is a Delaware limited partnership whose sole general partner is
KKR Associates 1996 L.P. KKR Associates 1996 L.P. is a Delaware limited
partnership whose sole general partner is KKR 1996 GP L.L.C. KKR 1996 GP
L.L.C. is a Delaware limited liability company whose members are also the
members of the limited liability company that is the general partner of
Kohlberg Kravis Roberts & Co. L.P. ("KKR"). Accordingly, affiliates of KKR
control Accuride and have the power to elect all of its directors, appoint
new management and approve any action requiring the approval of its
shareholders, including adopting amendments to its Certificate of
Incorporation and approving mergers or sales of substantially all of its
assets. Accuride cannot give any assurance that the interests of KKR and its
affiliates will not conflict with the interests of other holders of Accuride's
securities. SEE "Item 10-Directors and Executive Officers of the Company,"
"Item 12-Security Ownership of Certain Beneficial Owners and Management" and
"Item 13-Certain Relationships and Related Transactions."
RESTRICTIVE DEBT COVENANTS - COVENANTS AND RESTRICTIONS IN
ACCURIDE'S CREDIT DOCUMENTS LIMIT ITS ABILITY TO TAKE CERTAIN ACTIONS.
Accuride's credit documents contain numerous significant financial and
operating covenants that limit the discretion of its management with respect
to certain business matters. These covenants include, among others,
significant restrictions on Accuride's ability to:
- - declare dividends or redeem or repurchase capital stock;
- - incur certain additional debt;
- - create liens;
- - make certain payments and investments;
- - sell or otherwise dispose of assets; or
- - consolidate with other entities.
Accuride must also meet certain financial ratios and tests. Failure
to comply with the obligations contained in the credit documents could result
in an event of default, and possibly the acceleration of the related debt and
the acceleration of debt under other instruments evidencing debt that may
contain cross-acceleration or cross-default provisions.
YEAR 2000 COMPLIANCE - UNDISCOVERED YEAR 2000-RELATED COMPUTER
PROBLEMS COULD DISRUPT ACCURIDE'S OPERATIONS. Many currently installed
computer systems and software were written to accept and process only two
digit entry codes for the year when storing dates. Beginning with the year
2000, these entry codes will need to accept four digit entries to distinguish
21st century dates from 20th century dates. As a result, computer systems and
products may need to be upgraded to solve this problem to avoid incorrect or
lost data. Accuride utilizes a significant number of computer software
programs and operating systems across its entire organization, including
applications used in sales, shipping, financial business systems, and various
administrative functions. When the century changed, Accuride experienced no
disruption to its business operations and no product failures as a result of
year 2000 compliance issues or otherwise. If Accuride's suppliers, vendors or
distributors fail to timely and completely correct their own year 2000
software, firmware and hardware problems, or if any of them convert to a
system that is incompatible with Accuride's systems, Accuride's ability to
deliver its products and services could be disrupted.
27
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company, in the normal course of doing business, is exposed to
the risks associated with changes in foreign exchange rates, interest rates
and raw material prices. The Company selectively uses derivative financial
instruments to manage these risks. The Company uses foreign exchange
contracts to hedge foreign currency commitments. Specifically, these foreign
exchange contracts offset foreign currency denominated purchase commitments
to suppliers, accounts receivable from and future committed sales to
customers, and operating expenses. Management believes the use of foreign
currency financial instruments reduces the risks that arise from doing
business in international markets. At December 31, 1999, the Company had open
foreign exchange forward contracts and options with a notional amount of
$136.4 million. Foreign exchange forward contract maturities were from one to
eleven months, and option contract maturities were from two to eleven months.
The Company's hedging activities provide only limited protection
against currency risks. Factors that could impact the effectiveness of the
Company's hedging programs include accuracy of sales estimates, volatility of
currency markets and the cost and availability of hedging instruments. The
counterparty to the foreign exchange contracts is a financial institution
with an investment grade credit rating. The Company monitors its foreign
currency cash flow transactions and executes contracts to hedge its foreign
exchange exposures. The use of forward contracts and options protects the
Company's cash flows against unfavorable movements in exchange rates, to the
extent of the amount under contract. A 10% adverse change in currency
exchange rates for the Company's foreign currency derivatives held at
December 31, 1999, would have an impact of approximately $11.4 million on the
fair value of such instruments. This quantification of exposure to the market
risk associated with foreign exchange financial instruments does not take
into account the offsetting impact of changes in the fair value of the
Company's foreign denominated assets, liabilities and firm commitments.
The Company uses long-term debt as a primary source of capital in
its business. The following table presents the principal cash repayments and
related weighted average interest rates by maturity date for its long-term
fixed-rate debt and other types of long-term debt at December 31, 1999:
<TABLE>
<CAPTION>
(Dollars in Fair
Thousands) 2000 2001 2002 2003 2004 Thereafter Total Value
---- ---- ---- ---- ---- ---------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long-term Debt:
Fixed $200,000 $200,000 $184,000
Avg. Rate 9.25% 9.25%
Variable $0 $9,375 $14,850 $5,475 $2,350 $221,900 $253,950 $253,950
Avg. Rate 7.97% 8.00% 8.05% 8.15% 8.15% 8.13%
</TABLE>
The Company has used an interest rate swap to alter interest rate
exposures between fixed and floating rates on a portion of the Company's
long-term debt. As of December 31, 1999, $99.0 million notional amount of
interest rate swap was outstanding. On average during the year ended December
31, 1999, the Company paid 5.75% as a fixed rate and received 5.3155% on the
interest rate swap. Under the terms of the interest rate swap, the Company
agrees with the counterparty to exchange, at specified intervals, the
difference between the fixed rate and floating rate interest amounts
calculated by reference to the agreed notional principal amount. The interest
rate swap matures in January 2001. The Company also used an
28
<PAGE>
interest rate cap to set a ceiling on the maximum floating interest rate the
Company would incur on a portion of the Company's long-term debt. As of
December 31, 1999, $34.7 million notional amount of interest rate cap was
outstanding. Under the terms of the interest rate cap, the Company is
entitled to receive from the counterparty on a quarterly basis the amount, if
any, by which the three-month Eurodollar interest rate exceeds 7.5%. The
interest rate cap matures in January 2001. The Company is exposed to credit
related losses in the event of nonperformance by the counterparty to the
interest rate swap and interest rate cap, although no such losses are
expected as the counterparty is a financial institution having an investment
grade credit rating.
The Company relies upon the supply of certain raw materials in its
production processes and has entered into firm purchase commitments for steel
and aluminum. The exposures associated with these commitments are primarily
managed through the terms of its supply and procurement contracts.
Additionally, the Company uses commodity price swaps to hedge against changes
in certain commodity prices. At December 31, 1999, the Company had open
commodity price swaps with a notional amount of $27.4 million. These
commodity price swaps had maturities from one to twelve months. A 10% adverse
change in commodity prices would have an impact of approximately $2.7 million
on the fair value of these contracts. The Company is exposed to credit
related losses in the event of nonperformance by the counterparty to the
commodity price swaps and option contracts, although no such losses are
expected as the counterparty is a financial institution having an investment
grade credit rating.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Attached, beginning at page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
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<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company, and their ages as
of December 31, 1999, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
William P. Greubel........ 48 Director, President and Chief Executive Officer
John R. Murphy............ 49 Executive Vice President/Finance and Chief Financial Officer
David K. Armstrong........ 43 Senior Vice President and General Counsel
Richard J. Giromini....... 46 Senior Vice President and General Manager-Light Vehicle Operations
Elizabeth I. Hamme........ 49 Senior Vice President/Human Resources and Continuous Improvement
Terrence J. Keating....... 50 Senior Vice President and General Manager-Heavy Vehicle Operations
Birum G. Campbell......... 52 Vice President/Sales & Marketing - Light Vehicle Operations
Deepak Chaudhry........... 38 Vice President and Treasurer
Robert J. Fagerlin........ 53 Vice President and General Manager, AdM
William D. Noll........... 52 Vice President/Product Development and Technology
Bradford C. Schultz....... 57 Vice President/Sales & Marketing - Heavy Vehicle Operations
Henry L. Taylor........... 45 Vice President/Europe
Henry R. Kravis........... 55 Director
George R. Roberts......... 56 Director
James H. Greene, Jr....... 49 Director
Todd A. Fisher............ 34 Director
Frederick M. Goltz........ 28 Director
</TABLE>
WILLIAM P. GREUBEL. Mr. Greubel has been a director and the Chief
Executive Officer of the Company since January 21, 1998. Mr. Greubel has been
president of the Company since 1994. He is also a director of AOT. Prior to
joining the Company, from 1974 to 1994, Mr. Greubel held positions at
AlliedSignal Corporation in sales, marketing and operations. His last two
positions were Vice President and General Manager for the Environmental
Catalysts and Engineering Plastics businesses. Mr. Greubel holds a B.A. in
Economics and an M.B.A. from Rutgers University.
JOHN R. MURPHY. Mr. Murphy joined the Company in March, 1998 as Vice
President-Finance and Chief Financial Officer. He was promoted to Executive Vice
President/Finance and Chief Financial Officer in November 1999. Prior to joining
the Company, Mr. Murphy was the President and Chief Executive Officer of
Falconite, Inc., a privately held rental equipment company. From 1994 to 1997,
Mr. Murphy was Executive Vice President-Administration, Chief Financial Officer
and Corporate Secretary of North American Stainless, Inc. Mr. Murphy also held
the position of Vice President of Finance and Strategic Planning for Armco
Advanced Materials Company, a stainless and electrical specialty steel
manufacturing company. Mr. Murphy holds a B.S. in Accounting from the
Pennsylvania State University and an M.B.A. from the University of Colorado.
DAVID K. ARMSTRONG. Mr. Armstrong joined the Company as Vice President
and General Counsel in October 1998. He was promoted to Senior Vice President
and General Counsel effective November 1999. Mr. Armstrong also serves as
Corporate Secretary. Prior to joining the Company, Mr. Armstrong was a partner
at the law firm of Snell & Wilmer L.L.P. Mr. Armstrong holds a B.S. and MAcc in
Accounting and a Juris Doctorate, all from Brigham Young University.
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<PAGE>
RICHARD J. GIROMINI. Mr. Giromini joined the Company, as Vice
President/General Manager of AKW L.P. in April 1998 and served as President and
CEO of AKW L.P. from August 1998 through April 1999. He was promoted to Senior
Vice President and General Manager-Light Vehicle Operations in November 1999.
From 1996 to 1998, Mr. Giromini was the Director of Manufacturing of ITT
Automotive Inc. From 1991 to 1996, Mr. Giromini held the positions of Vice
President/Operations and Plant General Manager of Hayes Wheels International,
Inc. Mr. Giromini holds a B.S. in Mechanical and Industrial Engineering and a
M.S. in Industrial Management from Clarkson University.
ELIZABETH I. HAMME. Ms. Hamme joined the Company, as Vice
President/Human Resources in February 1995. She was promoted to Senior Vice
President/Human Resources and Continuous Improvement in November 1999. Prior to
joining the Company, Ms. Hamme served as an independent consultant to the
manufacturing and financial services sectors since 1991. From 1989 to 1991, Ms.
Hamme held the positions of Division Human Resources Manager and Group Manager
of Human Resources Development and Compensation with FMC Corporation (Chemical
Products Group). Ms. Hamme holds a B.A. in Political Science and an M.A. in
Adult Education from the George Washington University.
TERRENCE J. KEATING. Mr. Keating joined the Company in December, 1996
as Vice President-Operations. He was promoted to Senior Vice President and
General Manager-Heavy Vehicle Operations effective November 1999. Mr. Keating
also serves as President of Accuride Canada, Inc. From 1995 to November, 1996,
Mr. Keating was the manager of Indianapolis Diesel Engine Plant of Navistar
International Transportation Company. From 1990 to 1995, Mr. Keating was Vice
President of Operations of Peerless Pump, Inc. Mr. Keating holds a B.S. in
Mechanical Engineering Technology from Purdue University and an M.B.A. in
Operations from Indiana University. He is certified by the American Production
and Inventory Control Society (APICS) as an inventory management professional.
BIRUM G. CAMPBELL. Mr. Campbell joined the Company in his present
position in August 1996. Prior to joining the Company, Mr. Campbell spent over
26 years with Hayes Wheels (formerly Kelsey-Hayes) in a variety of functions,
including sales account management, materials management, general management
aftermarket, strategic and product directors positions and, finally, as
Director/Sales and Marketing for its aluminum Wheels business unit. Mr. Campbell
holds a B.S. in Industrial Economics from Purdue University.
DEEPAK CHAUDHRY. Mr. Chaudhry joined the Company as Director of
Treasury, Tax, and Insurance in February 1998. He was promoted to Vice President
and Treasurer in November 1999. Prior to joining the Company, Mr. Chaudhry was
Director of Finance with Acklands, a publicly held automotive and industrial
company, from 1995 to 1997. Mr. Chaudhry holds a B.S. in Economics from the
London School of Economics and is also a Certified Public Accountant.
ROBERT J. FAGERLIN. Mr. Fagerlin has been with Accuride/Firestone since
1976 and served as Vice President-General Manager of AdM from 1997 to December
1999. Prior to this, he served as Vice President of Business Development. Mr.
Fagerlin terminated his employment with the Company effective February 17, 2000.
Mr. Fagerlin holds a B.S. in Industrial Management from the University of Akron.
WILLIAM D. NOLL. Mr. Noll joined the Company in 1971. In 1991, Mr. Noll
was promoted to his current position. He is currently a member and company
representative for SAE on the Truck/Bus Council, a member and company
representative for The Maintenance Council of the American Trucking Association,
a member and past president of the Tire and Rim Association, the ISO
Representative for the United States for Truck Wheels and a member of ASME. Mr.
Noll holds a B.S. in Mechanical Engineering from the University of Detroit and
an M.B.A. and a M.S. in Engineering Management, both from the University of
Evansville.
BRADFORD C. SCHULTZ. Mr. Schultz joined Firestone Tire and Rubber
Company (the prior owner of the Company) in 1964 as a college class trainee and
has worked with the Company since that time. He assumed the position of Senior
Vice President/Sales in 1991. He began his current position, Vice
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<PAGE>
President/Sales and Marketing effective November 1999. Mr. Schultz is also a
director of AOT and serves as the Company's representative for the Truck Trailer
Manufacturers Association. Mr. Schultz holds a B.A. from Muskingum College, New
Concord, Ohio.
HENRY L. TAYLOR. Mr. Taylor joined the Company as Vice
President/Marketing and International Sales in April 1996. He assumed his new
position of Vice President/Europe effective November 1999. From 1988 to 1996, he
worked at Rockwell Automotive, in product management, marketing, international
business and business development. From 1980 to 1988, Mr. Taylor was employed by
AlliedSignal's Bendix Heavy Vehicle Systems Group, where he held positions in
operations management, field sales, product management and business development.
Mr. Taylor holds a B.S. in Marketing and Management from the University of
Nevada, Reno ("UNR") and has completed graduate courses in business at UNR, St.
Louis University and Case Western University.
HENRY R. KRAVIS. Mr. Kravis is a director of the Company. He is a
managing member of KKR & Co., L.L.C., the limited liability company which serves
as the general partner of KKR. He is also a director of Amphenol Corporation,
Borden, Inc., The Boyds Collection, Ltd., Evenflo Company, Inc. The Gillette
Company, IDEX Corporation, KinderCare Learning Centers, Inc., KSL Recreation
Corporation, Owens-Illinois, Inc., PRIMEDIA, Inc., Regal Cinemas, Inc., Safeway
Inc., Sotheby's Holdings Inc., Spalding Holdings Corporation, and TI Group, Plc.
Mr. Kravis is a first cousin of Mr. Roberts.
GEORGE R. ROBERTS. Mr. Roberts is a director of the Company. He is a
managing member of KKR & Co., L.L.C., the limited liability company which
serves as the general partner of KKR. He is also a director of Amphenol
Corporation, Borden, Inc., The Boyds Collection, Ltd., Evenflo Company, Inc.,
IDEX Corporation, KinderCare Learning Center, Inc., KSL Recreation
Corporation, Owens-Illinois Group, Inc., Owens-Illinois, Inc., PRIMEDIA,
INC., Safeway, Inc., Spalding Holdings Corporation, and DPL Inc. Mr. Roberts
is a first cousin of Mr. Kravis.
JAMES H. GREENE, JR. Mr. Greene is a director of the Company. He is
a member of KKR & Co., L.L.C., the limited liability company which serves as
the general partner to KKR. He is also a director of Owens-Illinois, Inc.,
Safeway Inc., Birch Telecom, Inc., Zhone Technologies, Inc., Cais Internet,
Inc., and Intermedia Communications, Inc.
TODD A. FISHER. Mr. Fisher is a director of the Company. He has been an
executive of KKR since 1993. From July 1992 to June 1993, Mr. Fisher was an
associate at Goldman, Sachs & Co. Mr. Fisher also serves as a director of Layne
Christensen Company, BRW Acquisition, Inc. and Trinity Acquisition, plc.
FREDERICK M. GOLTZ. Mr. Goltz is a director of the Company. He has been
an executive of KKR since 1995 with the exception of the period from July 1997
to July 1998 during which time he earned an MBA at INSEAD. Prior to 1995, he was
with Furman Selz Incorporated in its Corporate Finance Department.
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<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS. Members of the Board of Directors employed
by the Company do not receive any separate compensation for services performed
as a director. Those members of the Board of Directors not otherwise employed by
the Company receive a $30,000 annual retainer. There is no separate compensation
for service on the compensation or audit committees. See also "Item 13-Certain
Relationships and Related Transactions."
SUMMARY COMPENSATION TABLE
The following table sets forth information with respect to the
compensation paid by the Company for services rendered during the year ended
December 31, 1999 to the Chief Executive Officer and to each of the four other
most highly compensated executive officers of the Company (the "Named Executive
Officers").
<TABLE>
<CAPTION>
Long Term Compensation
------------------------
Annual Compensation Awards Payouts
-------------------------------- -------------------- -------------------
Restricted Securities
Name and Principal Other Annual Stock Underlying LTIP All Other
Position Year Salary Bonus Compensation (a) Award(s) Options/SARs Payouts Compensation (b)
- -------- ---- ------ ----- ---------------- -------- ------------ ------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William P. Greubel 1999 $275,040 $172,685 $11,787 -- -- -- $27,115
(President and Chief 1998 $240,000 $117,700 $13,226 -- -- -- $772,468
Executive Officer) 1997 $200,000 $78,900 $38,222 -- -- -- $24,434
John R. Murphy (c) 1999 $195,600 $102,175 $17,131 -- -- -- $14,753
(Executive Vice President/ 1998 $130,800 -- $9,707 -- -- -- $27,226
Finance & CFO) 1997 -- -- -- -- -- -- --
Terrence J. Keating 1999 $167,040 $78,447 $16,045 -- -- -- $17,701
(Senior Vice President and 1998 $143,100 $61,800 $11,115 -- -- -- $226,599
General Manager/HVO) 1997 $135,000 $12,701 $1,338 -- -- -- $22,793
Robert J. Fagerlin 1999 $147,000 $93,743 $2,830 -- -- -- $17,001
(Vice President and 1998 $129,575 $15,532 $11,447 -- -- -- $119,168
General Manager/AdM 1997 $108,590 $11,557 -- -- -- -- $10,859
Bradford C. Schultz 1999 $161,400 $85,975 $16,499 -- -- -- $14,958
(Vice President/Sales and 1998 $152,200 $70,100 $11,603 -- -- -- $237,308
Marketing/HVO) 1997 $144,900 $41,900 $7,899 -- -- -- $16,194
</TABLE>
(a) Compensation includes imputed income, medical reimbursements, financial
planning service fees, and gross-ups on financial planning, vested
liabilities, Phelps Dodge restricted dividends (for years prior to the
acquisition by KKR), and safety awards and spousal travel as follows:
33
<PAGE>
<TABLE>
<CAPTION>
Phelps
Financial Dodge
Planning Financial Restricted
Imputed Medical Service Planning Vested Stock Safety Spousal
Year Income Reimbursement Fees Gross-Up Liabilities Dividends Awards Travel
---- ------- ------------- --------- --------- ----------- ----------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mr. Greubel..... 1999 -- -- $6,400 $5,333 $54 -- -- --
1998 -- -- $5,088 $4,138 $4,000 -- -- --
1997 -- $80 $8,800 $6,333 $12,608 $10,000 $401 --
Mr. Murphy...... 1999 -- -- $9,330 $7,774 $27 -- -- --
1998 -- -- $6,130 $3,577 -- -- -- --
1997 -- -- -- -- -- -- -- --
Mr. Keating..... 1999 -- -- $9,330 $6,715 -- -- -- --
1998 -- -- $6,130 $4,985 -- -- -- --
1997 $574 $349 -- -- -- -- $415 --
Mr. Fagerlin.... 1999 -- -- $1,600 $1,229 $1 -- -- --
1998 -- -- $6,130 $5,317 -- -- -- --
1997 -- -- -- -- -- -- -- --
Mr. Schultz..... 1999 -- -- $9,330 $7,169 -- -- -- --
1998 -- $156 $6,130 $5,317 -- -- -- --
1997 -- -- -- -- $6,430 -- $411 $1,058
</TABLE>
(b) Compensation includes retention bonuses, restricted stock
payments, and distributions from the Phelps Dodge
non-qualified savings plan paid in connection with the
Recapitalization, vacation sold, contributions made by the
Company to the employees' qualified or non-qualified savings
plan (company match and/or profit sharing), the Executive Life
Insurance Plan (which provides employees with a bonus to pay
for a universal life insurance policy that is fully owned by
the employee), and moving relocation expenses, as set forth
below:
<TABLE>
<CAPTION>
Distribution Company
from Phelps Restricted Match &
Dodge Stock Retention Vacation Profit ELIP
Year NQ Plan Payment Bonus Sold Sharing Premiums Relocation
---- ------------ ---------- --------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mr. Greubel.... 1999 -- -- -- $4,616 $17,184 $5,315 --
1998 $39,061 $312,368 $400,000 $0 $17,500 $3,539 --
1997 -- -- -- $3,077 $18,996 $2,361 --
Mr. Murphy..... 1999 -- -- -- $6,541 $5,610 $2,602 --
1998 -- -- -- -- -- $1,658 $25,568
1997 -- -- -- -- -- -- --
Mr. Keating.... 1999 -- -- -- $4,954 $10,246 $2,501 --
1998 -- -- $202,500 $11,284 $11,323 $1,492 --
1997 -- -- -- -- -- $1,229 $21,564
Mr. Fagerlin... 1999 -- -- -- $5,387 $9,036 $2,578 --
1998 -- -- $106,100 -- $11,092 $1,976 --
1997 -- -- -- -- 10,859 -- --
34
<PAGE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mr. Schultz.... 1999 -- -- -- -- $10,897 $4,061 --
1998 -- -- $214,500 $5,855 $14,038 $2,915 --
1997 -- -- -- -- $13,794 $2,400 --
</TABLE>
(c) Mr. Murphy began employment on March 25, 1998.
The following table gives information concerning individual grants of
stock options made during 1999 to each of the Named Executive Officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation for
Individual Grants Option Term
- ------------------------------------------------------------------------ -----------------------------
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees in Base Price Expiration
Name Granted (1) Fiscal Year ($/Sh) Date 5(%)(2) 10(%)(2)
- ---- ----------- ----------- ------ ---- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Mr. Murphy 95 43% $5,000 Jan 21, 2008 $131,223 $289,992
</TABLE>
(1) One-half of the options granted become exercisable and vest over time
at the rate of 20% per year. The other half of the options granted
become exercisable and vest at the rate of 20% per year upon the
achievement of certain financial targets.
(2) The amounts shown under the columns are the result of calculations at
5% and 10% rates as required by the SEC and are not intended to
forecast future appreciation of the stock price of the Common Stock.
The following table gives information for options exercised by each of the
Named Executive Officers in 1999 and the value (stock price less exercise
price) of the remaining options held by those executive officers at year
end, using management's estimate of the Common Stock value on December 31,
1999.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/SARs at Fiscal Options/SARs at Fiscal
Year-End Year-End(1)
--------------------------- --------------------------
Shares
Acquired on Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------------------- ---------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William P. Greubel....... 0 $0 180 270 _ _
John R. Murphy........... 0 $0 70 105 _ _
Terrence Keating......... 0 $0 32 48 _ _
Robert J. Fagerlin....... 0 $0 32 48 _ _
Bradford C. Schultz...... 0 $0 32 48 _ _
</TABLE>
35
<PAGE>
(1) The value of the shares underlying the options as of December
31, 1999 is not in excess of the base price. There is no
established trading market for the Company's Common Stock.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
Remuneration YEARS OF SERVICE
----------------
15 20 25 30 35 40
-- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C>
125,000 20,045 25,184 29,927 34,176 38,779 42,757
150,000 24,390 30,574 36,284 41,402 46,946 51,740
175,000 28,736 35,965 42,641 48,628 55,112 60,723
200,000 33,082 41,356 48,998 55,854 63,279 69,706
225,000 37,428 46,747 55,356 63,080 71,445 78,689
250,000 41,774 52,137 61,713 70,306 79,612 87,672
275,000 46,119 57,528 68,070 77,532 87,779 96,655
300,000 50,465 62,919 74,427 84,758 95,945 105,638
400,000 67,848 84,482 99,856 113,662 128,611 141,570
500,000 85,232 106,044 125,285 142,566 161,277 177,502
600,000 102,615 127,607 150,714 171,470 193,944 213,434
</TABLE>
The above table details estimated annual benefits for Accuride salaried
employees retiring December 31, 1999 at age 65. The benefits were calculated
assuming the current plan provisions had always been in effect.
The Accuride Cash Balance Pension Plan (the "Retirement Plan") provides
a member upon retirement at age 65 with a pension for life with five years of
payments guaranteed. Under the Retirement Plan, compensation includes bonuses.
Benefit service includes all periods of employment with Accuride.
Benefits under the Retirement Plan are subject to certain limitations under the
Internal Revenue Code of 1986, as amended, and to the extent the result of such
limitations would be a benefit less than would otherwise be paid under such
Plan, the difference is provided under the supplementary retirement provisions
of the Accuride Corporation Supplemental Retirement Plan (the "Supplemental
Plan"). The formula for determining benefits payable under the Retirement Plan
is based on the 1999 social security wage base.
The expected credited years of benefit service at normal retirement for
the President and each of the four other most highly compensated executive
officers as of December 31, 1999 are as follows: Mr. Greubel, 22 years;
Mr. Murphy, 17 years; Mr. Keating, 18 years; Mr. Fagerlin, 35 years; and
Mr. Schultz, 36 years. The years of service are based on normal retirement for
all executive officers under the Retirement Plan and the applicable provisions
of the Supplemental Plan.
1998 STOCK PURCHASE AND OPTION PLAN
In early 1998, the Company adopted the 1998 Stock Purchase and Option
Plan for Key Employees of Accuride Corporation and Subsidiaries (the "1998
Plan").
The 1998 Plan provides for the issuance of shares of authorized but
unissued or reacquired shares of Common Stock, subject to adjustment to reflect
certain events such as stock dividends, stock splits, recapitalizations, mergers
or reorganizations of or by the Company. The 1998 Plan is intended to assist the
Company in attracting and retaining employees of outstanding ability and to
promote the identification of
36
<PAGE>
their interests with those of the stockholders of the Company. The 1998 Plan
permits the issuance of Common Stock (the "Plan Purchase Stock") and the
grant of Non-Qualified Stock Options (the "Plan Options") to purchase shares
of Common Stock (the issuance of Plan Purchase Stock and the grant of Plan
Options pursuant to the 1998 Plan being a "Plan Grant"). Unless sooner
terminated by the Company's Board of Directors, the 1998 Plan will expire ten
years after adoption. Such termination will not affect the validity of any
Plan Grant outstanding on the date of the termination.
The Compensation Committee of the Board of Directors will administer
the Plan, including, without limitation, the determination of the employees to
whom Plan Grants will be made, the number of shares of Common Stock subject to
each Plan Grant, and the various terms of Plan Grants. The Compensation
Committee of the Board of Directors may from time to time amend the terms of any
Plan Grant, but, except for adjustments made upon a change in the Common Stock
by reason of a stock split, spin-off, stock dividend, stock combination or
reclassification, recapitalization, reorganization, consolidation, change of
control, or similar event, such action shall not adversely affect the rights of
any participant under the 1998 Plan with respect to the Plan Purchase Stock and
the Plan Options without such participant's consent. The Board of Directors
retains the right to amend, suspend or terminate the 1998 Plan.
SEVERANCE AGREEMENTS
The Company has entered into severance agreements with senior
management employees, including the Named Executive Officers, pursuant to which
in the event of any such employee's termination "without cause" or "for good
reason" (as defined therein) the Company will pay such employee one year's base
salary less any other severance payments to which the employee is entitled from
the Company.
EMPLOYEE EQUITY ARRANGEMENTS
Pursuant to the 1998 Plan, the Company sold Plan Purchase Stock and
issued Plan Options to selected employees, including the Named Executive
Officers, which represent, in the aggregate, approximately 10% of the fully
diluted Common Stock (of which the Named Executive Officers will hold
approximately 47%). In connection with such arrangements, the Company and each
such employee entered into an Employee Stockholders' Agreement and a Stock
Option Agreement. In order to finance the stock purchases, certain employees
also entered into secured Promissory Notes and Pledge Agreements. The Employee
Stockholders' Agreement (i) places restrictions on each such employee's ability
to transfer shares of Plan Purchase Stock and Common Stock acquired upon
exercise of the Plan Options, including a right of first refusal in favor of the
Company, (ii) provides each such employee the right to participate pro rata in
certain sales of Common Stock by Hubcap Acquisition or its affiliates and (iii)
provides Hubcap Acquisition and its affiliates the right to require each such
employee to participate pro rata in certain sales of Common Stock by Hubcap
Acquisition or its affiliates. The Stockholders' Agreement also grants
(subsequent to an initial public offering of the Common Stock) piggyback
registration rights to each such employee pursuant to a registration rights
agreement between Hubcap Acquisition and the Company. In addition, the Employee
Stockholders' Agreement gives the Company the right to purchase shares and
options held by each such employee upon termination of employment for any reason
and permits each such employee to sell stock and options in the event of death,
disability or retirement after turning 65 years of age.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Greene and Fisher, with Mr. Greene as Chairman, serve as the
members of the Compensation Committee of the Board of Directors of the Company.
Mr. Goltz was named as a member of the Compensation Committee effective February
2000. See "Item 13-Certain Relationships and Related Transactions."
37
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the ownership of the Common Stock as of
March 1, 2000 by each person known to be the owner of 5% or more of the Common
Stock, by each person who is a director or Named Executive Officer of the
Company and by all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
COMMON STOCK BENEFICIALLY OWNED (a)
-----------------------------------
NAME AND ADDRESS SHARES PERCENT
- ---------------- ------ -------
<S> <C> <C>
KKR 1996 GP L.L.C. (b)
c/o Kohlberg Kravis Roberts & Co. L.P.
9 West 57th Street
New York, New York 10019............................................... 21,600 86.84%
Henry R. Kravis (b)................................................. _ _
George R. Roberts (b)............................................... _ _
James H. Greene, Jr. (b)............................................ _ _
Todd A. Fisher (b).................................................. _ _
Frederick M. Goltz (b).............................................. _ _
RSTW Partners III, L.P. (c)
5847 San Felipe
Houston, TX 77057...................................................... 2,400 9.65%
William P. Greubel (d)................................................. 330 1.32%
John R. Murphy (e)..................................................... 140 *
Terrence J. Keating (f)................................................ 72 *
Robert J. Fagerlin (f)(g).............................................. 72 *
Bradford C. Schultz (f)................................................ 72 *
All executive officers and directors as a group.................. 1,116 4.39%
</TABLE>
- -------------------
* Less than one percent.
(a) The amounts and percentage of Common Stock beneficially owned are
reported on the basis of regulations of the Securities and Exchange
Commission ("SEC") governing the determination of beneficial ownership
of securities. Under the rules of the SEC, a person is deemed to be a
"beneficial owner" of a security if that person has or shares "voting
power," which includes the power to vote or to direct the voting of
such security, or "investment power," which includes the power to
dispose of or to direct the disposition of such security. A person is
also deemed to be a beneficial owner of any securities of which that
person has a right to acquire beneficial ownership within 60 days.
Under these rules, more than one person may be deemed a beneficial
owner of the same securities and a person may be deemed to be a
beneficial owner of securities as to which he has no economic interest.
The percentage of class outstanding is based on 24,874 shares of Common
Stock outstanding as of March 1, 2000.
(b) Shares of Common Stock shown as beneficially owned by KKR 1996 GP
L.L.C. are held by Hubcap Acquisition. KKR 1996 GP L.L.C. is the sole
general partner of KKR Associates 1996 L.P., which is the sole general
partner of KKR 1996 Fund L.P. KKR 1996 Fund L.P. is one of two members
of Hubcap Acquisition and owns more than a 95% equity interest in
Hubcap Acquisition. KKR 1996 GP L.L.C. is a limited liability company,
the managing members of which are Messrs. Henry R. Kravis and George R.
Roberts, and the other members of which are Messrs. Paul E. Raether,
Michael W. Michelson, James H. Greene, Jr., Michael T. Tokarz,
Edward A. Gilhuly, Perry Golkin, Scott M. Stuart and Robert I.
MacDonnell. Messrs. Kravis, Roberts and Greene are directors of the
Company. Each of such individuals may be deemed to share beneficial
ownership of
38
<PAGE>
any shares beneficially owned by KKR 1996 GP L.L.C. Each of such
individuals disclaims beneficial ownership. Mr. Todd A. Fisher is a
director of the Company and is also an executive of KKR and a
limited partner of KKR Associates 1996 L.P. Mr. Fisher disclaims
that he is the beneficial owner of any shares beneficially owned by
KKR Associates 1996 L.P. Mr. Frederick M. Goltz is a director of the
Company and is also an executive of KKR. Mr. Goltz disclaims that he
is the beneficial owner of any shares beneficially owned by KKR
Associates 1996 L.P.
(c) RSTW Management, L.P. is the sole general partner of RSTW Partners III,
L.P.; Rice Mezzanine Corporation ("RMC") is the general partner of RSTW
Management, L.P. RMC is a subchapter S-Corporation, the shareholders of
which are Messrs. Don K. Rice, Jeffrey P. Sangalis, Jeffrey A. Toole,
and James P. Wilson. Each of such individuals may be deemed to share
beneficial ownership of any shares beneficially owned by RSTW Partners
III, L.P. Each of such individuals disclaims beneficial ownership.
(d) Includes 180 shares, which are subject to an option to purchase such
shares from the Company at $5,000 per share.
(e) Includes 70 shares, which are subject to an option to purchase such
shares from the Company at $5,000 per share.
(f) Includes 32 shares, which are subject to an option to purchase such
shares from the Company at $5,000 per share.
(g) Mr. Fagerlin terminated employment with the Company effective February
17, 2000.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As of March 1, 2000, KKR 1996 GP L.L.C. beneficially owned
approximately 87% of the Company's outstanding shares of Common Stock. See
"Item 12-Security Ownership of Certain Beneficial Owners and Management." The
managing members of KKR 1996 GP L.L.C. are Messrs. Henry R. Kravis and George
R. Roberts and the other members of which are Messrs. Paul E. Raether,
Michael W. Michelson, James H. Greene, Jr., Michael T. Tokarz, Edward A.
Gilhuly, Perry Golkin, Scott M. Stuart and Robert I. MacDonnell. Messrs.
Kravis, Roberts and Greene are also directors of the Company, as is Todd A.
Fisher and Frederick M. Goltz, who are executives of KKR & Co., L.L.C. Each
of the members of KKR 1996 GP L.L.C. is also a member of KKR & Co., L.L.C,
which serves as the general partner of KKR.
KKR, an affiliate of Hubcap Acquisition, received a fee of $6.0 million
in cash for negotiating the Recapitalization and arranging the financing
therefor, plus the reimbursement of its expenses in connection therewith, and
from time to time in the future, KKR may receive customary investment banking
fees for services rendered to the Company in connection with divestitures,
acquisitions, and certain other transactions. In addition, KKR has agreed to
render management, consulting and financial services to the Company for an
annual fee of $0.6 million. See "Item 10-Directors and Executive Officers of the
Company" and "Item 12-Security Ownership of Certain Beneficial Owners and
Management."
Hubcap Acquisition has the right, under certain circumstances and
subject to certain conditions, to require the Company to register under the
Securities Act shares of Common Stock held by it pursuant to the registration
rights agreement between Hubcap Acquisition and the Company and the stockholders
agreement among Hubcap Acquisition, the Company, and Phelps Dodge. Such
registration rights are generally available to Hubcap Acquisition until
registration under the Securities Act is no longer required to enable it to
resell the Common Stock owned by it. The registration rights agreement provides,
among other things, that
39
<PAGE>
the Company will pay all expenses in connection with the first six demand
registrations requested by Hubcap Acquisition and in connection with any
registration commenced by the Company as a primary offering in which Hubcap
Acquisition participates through piggyback registration rights granted under
such agreement. Hubcap Acquisition's exercise of its registration rights
under the registration rights agreement is subject to the tag along and the
drag along rights of certain other stockholders provided for in the
stockholders agreement.
During the 1999 fiscal year, the Company issued 116 shares of the
Company's Common Stock to certain members of management for aggregate
consideration in cash and secured promissory notes of approximately $0.6
million. During 1999, 10 shares were repurchased as treasury stock.
40
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following constitutes a list of Financial Statements, Financial
Statement Schedules, and Exhibits required to be included in this report:
1. FINANCIAL STATEMENTS
The following financial statements of the Registrant are filed herewith
as part of this report:
Independent Auditors' Report.
Consolidated Balance Sheets - December 31, 1999 and December 31, 1998.
Consolidated Statements of Income- Years ended December 31, 1999,
December 31, 1998, and December 31, 1997.
Consolidated Statements of Stockholders' Equity (Deficiency) - Years
ended December 31, 1999, December 31, 1998, and December 31, 1997.
Consolidated Statements of Cash Flows - Years ended December 31, 1999,
December 31, 1998, and December 31, 1997.
Notes to Consolidated Financial Statements - Years ended December 31,
1999, December 31, 1998, and December 31, 1997.
2. FINANCIAL STATEMENT SCHEDULES
Schedule II - Valuation and Qualifying Accounts.
Schedules other than those listed above are omitted because of the
absence of conditions under which they are required or because the
required information is presented in the Financial Statements or notes
thereto.
EXHIBITS
(b) Reports on Form 8-K. The Company did not file any Form 8-K during the
last quarter of the 1999 fiscal year.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ----------- -----------
<C> <S>
*2.1 Stock Subscription and Redemption Agreement, dated as of
November 17, 1997, among the Company, Hubcap Acquisition
L.L.C. and Phelps Dodge Corporation.
*3.1 Certificate of Incorporation, as amended, of Accuride
Corporation.
*3.2 By-Laws of Accuride Corporation.
*4.1 Indenture, dated as of January 21, 1998, between Accuride
Corporation and U.S. Trust Company of California, N.A., as
trustee, relating to $200,000,000 aggregate principal amount
of 9.25% Senior Subordinated Notes due 2008.
*4.2 Registration Rights Agreement, dated as of January 21, 1998,
between Accuride Corporation, and BT Alex. Brown
Incorporated, Citicorp Securities, Inc., and J.P. Morgan
Securities Inc.
41
<PAGE>
*4.3 Specimen Certificate of 9.25% Senior Subordinated Notes due
2008, Series A (the "Private Notes").
*4.4 Specimen Certificate of 9.25% Senior Subordinated Notes due
2008, Series B (the "Exchange Notes").
*10.1 Stockholders' Agreement by and among Accuride Corporation,
Phelps Dodge Corporation and Hubcap Acquisition L.L.C.
*10.2 Registration Rights Agreement by and between Accuride
Corporation and Hubcap Acquisition L.L.C.
*10.3 1998 Stock Purchase and Option Plan for Employees of
Accuride Corporation and Subsidiaries.
*10.4 Form of Non-qualified Stock Option Agreement by and between
Accuride Corporation and certain employees.
*10.5 Form of Repayment and Stock Pledge Agreement by and between
Accuride and certain employees.
*10.6 Form of Secured Promissory Note in favor of Accuride
Corporation.
*10.7 Form of Stockholders' Agreement by and among Accuride
Corporation, certain employees and Hubcap Acquisition L.L.C.
*10.8 Form of Severance Agreement by and between Accuride
Corporation and certain executives.
*10.9 Contribution Agreement, dated as of May 1, 1997, among
Accuride Corporation, Kaiser Aluminum & Chemical
Corporation, AKW General Partner L.L.C. and AKW L.P.
*10.10 Limited Partnership Agreement of AKW L.P., dated as of May
1, 1997, among AKW General Partner L.L.C., Accuride
Ventures, Inc., Accuride Corporation and Kaiser Aluminum &
Chemical Corporation.
*10.11 Limited Liability Company Agreement of AKW General Partner
L.L.C., dated as of May 1, 1997, among Accuride Ventures,
Inc., Accuride Corporation and Kaiser Aluminum & Chemical
Corporation.
*10.12 Lease Agreement dated November 1, 1988, by and between
Kaiser Aluminum & Chemical Corporation and The Bell Company
regarding the property in Cuyahoga Falls, Ohio, as amended
and extended.
*10.13 Lease Agreement, dated as of February 1, 1974, by and
between Henderson County and The Firestone Tire & Rubber
Company.
*10.14 Lease Amendment, dated as of December 19, 1986, by and
between Henderson County and The Firestone Tire & Rubber
Company.
*10.15 Joint Venture Agreement, dated November 5, 1997, by and
among the Company, Industria Automotriz, S.A. de C.V., Grupo
Industrial Ramirez, S.A. and Accuride de Mexico, S.A. de
C.V.
*10.16 By-laws of Accuride de Mexico, S.A. de C.V.
*10.17 Purchase and Sale Agreement, dated as of October 21, 1997,
by and between Accuride Corporation and General Electric
Company regarding property located in Columbia, Tennessee.
*10.18 Purchase Supply and Assembly Agreement, dated as of January
15, 1998, between Accuride Corporation and Lacks Industries,
Inc.
*10.19 Purchase Agreement, dated as of January 15, 1998, between
Accuride Corporation and BT Alex. Brown Incorporated,
Citicorp Securities, Inc., and J.P. Morgan Securities Inc.
+10.20 Lease Agreement dated October 26, 1998, by and between
Accuride Corporation and Woodward, LLC. regarding the
Evansville, Indiana, office space.
++10.21 Purchase Agreement dated April 1, 1999, between the Company,
Accuride Ventures, Inc. (the Company's wholly-owned
subsidiary) and Kaiser.
++10.22 Amended and Restated Lease Agreement dated April 1, 1999,
between AKW, L.P. and Kaiser.
+++10.23 Amended and Restated Credit Agreement, dated April 16, 1999,
between the Company, Citicorp USA, Inc., as administrative
agent, Salomon Smith Barney, Inc., as arranger, Bankers
Trust Company as syndication agent, and Wells Fargo Bank,
N.A. as the documentation agent.
42
<PAGE>
+++10.24 Amended and Restated Pledge Agreement dated April 16, 1999,
between the Company, Accuride Canada, Inc., and Accuride
Ventures, Inc. as pledgors and Citicorp USA, Inc., as
administrative agent.
++++10.25 Purchase Agreement dated July 16, 1999 between the Company
and Industria Automotriz, S.A. de C.V.
++++10.26 Amended and Restated Completion Guarantee dated July 16,
1999 between the Company, Accuride de Mexico, S.A. de C.V.,
Citibank Mexico, S.A. and Grupo Financiero Citibank.
10.27 Amended and Restated Credit Agreement dated December 31,
1999 between the Company, Accuride de Mexico, S.A. de C.V.,
Citibank Mexico, S.A. and Grupo Financiero Citibank.
10.28 Amended and Restated Supplemental Savings Plan dated January
1, 1998.
21.1 Subsidiaries of Accuride Corporation.
23.1 Consent of Deloitte & Touche LLP.
27.1 Financial Data Schedule.
</TABLE>
- ----------------------
* Previously filed as an exhibit to the Form S-4 effective July 23, 1998
(Reg. No. 333-50239) and incorporated herein by reference.
+ Previously filed as an exhibit to the Form 10-K filed on March 30, 1999
and incorporated herein by reference.
++ Previously filed as an exhibit to the Form 8-K filed on April 12, 1999
and incorporated herein by reference.
+++ Previously filed as an exhibit to the Form 10-Q for the quarterly
period ended March 31, 1999 and incorporated herein by reference.
++++ Previously filed as an exhibit to the Form 10-Q for the quarterly
period ended June 30, 1999 and incorporated herein by reference.
43
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of Accuride Corporation:
We have audited the accompanying consolidated balance sheets of Accuride
Corporation and subsidiaries as of December 31, 1999 and 1998, and the
related consolidated statements of income, stockholders' equity (deficiency)
and of cash flows for each of the three years in the period ended December
31, 1999. Our audits also included the financial statement schedule listed in
the Index at Item 14. These financial statements and the financial statement
schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and the
financial statement schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Accuride Corporation and
subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1999 in conformity with accounting principles generally
accepted in the United States of America. Also, in our opinion, such
financial statement schedule, when considered in relation to the basic 1999
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Indianapolis, Indiana
February 17, 2000
F-1
<PAGE>
ACCURIDE CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1999 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
ASSETS 1999 1998
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $32,493 $3,471
Customer receivables, net of allowance for doubtful accounts of $462 and $1,008 57,586 52,287
Other receivables 12,400 8,372
Inventories, net 41,143 36,980
Supplies 8,509 7,187
Deferred income taxes 611
Income taxes receivable 2,957 458
Prepaid expenses 818 139
--------- ---------
Total current assets 155,906 109,505
PROPERTY, PLANT AND EQUIPMENT, NET 212,693 159,826
OTHER ASSETS:
Goodwill, net of accumulated amortization of $34,775 and $30,942 131,527 83,317
Investment in affiliates 2,735 25,855
Deferred financing costs, net of accumulated amortization of $1,835 and $1,634 12,147 12,609
Deferred income taxes 3,287
Other 10,764 10,526
--------- ---------
TOTAL $525,772 $404,925
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Accounts payable $41,598 $26,583
Current portion of long-term debt 1,350
Short term notes payable 7,500 3,911
Accrued payroll and compensation 11,556 8,149
Accrued interest payable 12,056 9,807
Deferred income taxes 598
Accrued and other liabilities 9,613 6,606
-------- --------
Total current liabilities 82,921 56,406
LONG-TERM DEBT, less current portion 453,061 387,939
OTHER LIABILITIES 17,517 12,446
DEFERRED INCOME TAXES 4,404
MINORITY INTEREST 6,230
COMMITMENTS AND CONTINGENCIES (Notes 13 and 14)
STOCKHOLDERS' EQUITY (DEFICIENCY):
Preferred stock, $.01 par value; 5,000 shares authorized and unissued
Common stock and additional paid in capital, $.01 par value; 45,000 shares
authorized, 24,874 and 24,768 shares issued and outstanding in 1999 and 1998 24,738 24,158
Treasury stock, 10 shares at cost (51)
Stock subscriptions receivable (1,539) (1,644)
Retained earnings (deficit) (55,279) (80,610)
---------- ----------
Total stockholders' equity (deficiency) (32,131) (58,096)
---------- ----------
TOTAL $525,772 $404,925
========== ==========
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE>
ACCURIDE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31,
--------------------------------------
1999 1998 1997
<S> <C> <C> <C>
NET SALES $505,854 $383,583 $332,966
COST OF GOODS SOLD 390,776 301,029 266,972
-------- -------- --------
GROSS PROFIT 115,078 82,554 65,994
OPERATING EXPENSES:
Selling, general and administrative 33,493 26,607 21,316
Start-up costs 3,260
Management retention bonuses 1,927
Recapitalization professional fees 2,240
-------- -------- --------
INCOME FROM OPERATIONS 81,585 48,520 44,678
OTHER INCOME (EXPENSE):
Interest income 798 773 530
Interest expense (39,786) (33,084) (145)
Equity in earnings of affiliates 2,316 3,929 4,384
Other income (expense), net (1,081) (2,904) 719
--------- --------- --------
INCOME BEFORE INCOME TAXES AND MINORITY
INTEREST 43,832 17,234 50,166
INCOME TAX PROVISION 18,410 7,935 22,158
MINORITY INTEREST 91 1,348 171
-------- -------- --------
NET INCOME $25,331 $7,951 $27,837
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
ACCURIDE CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
COMMON
STOCK AND ACCUMULATED TOTAL
ADDITIONAL STOCK OTHER RETAINED STOCKHOLDERS'
COMPREHENSIVE PAID IN TREASURY SUBSCRIPTIONS COMPREHENSIVE EARNINGS EQUITY
INCOME CAPITAL STOCK RECEIVABLE INCOME (LOSS) (DEFICIT) (DEFICIENCY)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1997 $180,168 $(1,004) $49,287 $228,451
Net income $27,837 27,837 27,837
Net cash to parent (1,237) (1,237)
Other comprehensive income:
Minimum pension adjustment 1,004 1,004 1,004
--------
Comprehensive income $28,841
======== --------- -------- ------- -------- -------
BALANCE AT DECEMBER 31, 1997 178,931 77,124 256,055
Net income 7,951 7,951
Issuance of shares 108,000 108,000
Redemption of shares (286,931) (165,685) (452,616)
Issuance of shares 3,840 $(3,840)
Proceeds from stock
subscriptions receivable 2,196 2,196
Increase in net deferred
tax asset attributable
to tax basis of assets 18,480 18,480
Bonuses paid by a previous
principal stockholder 1,838 1,838
-------- ------- ------- ------- -------
BALANCE AT DECEMBER 31, 1998 24,158 (1,644) (80,610) (58,096)
Net income 25,331 25,331
Issuance of shares 580 (580)
Purchase of treasury stock $(51) 10 (41)
Proceeds from stock
subscriptions receivable 675 675
-------- ------- ------- -------- ------- -------
BALANCE AT DECEMBER 31, 1999 $24,738 $(51) $(1,539) $(55,279) $(32,131)
======== ======= ======= ======== ======= ========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
ACCURIDE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1999 1998 1997
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 25,331 $ 7,951 $ 27,837
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 23,765 20,094 17,870
Amortization 6,019 4,832 2,856
Losses on disposal of assets 1,021 1,585 801
Bonuses payable by a previous principal stockholder 1,838
Deferred income taxes 12,947 1,232 3,212
Equity in earnings of affiliated companies (2,316) (3,929) (4,384)
Minority interest 91 1,348 171
Changes in certain assets and liabilities
(net of effects from purchase of AKW, L.P.):
Receivables 8,924 (11,814) (17,448)
Inventories and supplies 1,903 (8,602) (646)
Prepaid expenses and other assets (2,762) (4,534) (1,670)
Accounts payable 8,959 7,771 680
Tooling deposit 5,261
Accrued and other liabilities 2,953 4,890 3,679
---------- ---------- ---------
Net cash provided by operating activities 86,835 22,662 38,219
---------- ---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (44,507) (46,579) (24,032)
Capitalized interest (1,565) (929)
Payment for purchase of AdM (7,422) (4,899)
Payment for purchase of AKW L.P. (71,095) (20,849)
Net cash distribution from AKW L.P. 265 2,839 2,482
Other 233
---------- ---------- ---------
Net cash used in investing activities (124,324) (44,669) (47,065)
---------- ---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 102,711 356,185
Proceeds from issuance of short term notes payable 3,589 3,000 16,040
Payments on long-term debt (6,050)
Principal payments on short term notes payable (15,129) (4,850)
Net increase (decrease) in revolving line of credit (33,000) 33,000
Deferred financing fees (1,373) (14,243)
Proceeds from issuance of shares 108,000
Redemption of shares (41) (454,949)
Proceeds from stock subscriptions receivable 675 2,196
Net cash (to) from Phelps Dodge Corporation (1,237)
---------- ---------- ---------
Net cash provided by financing activities 66,511 18,060 9,953
---------- ---------- ---------
Increase (decrease) in cash and cash equivalents 29,022 (3,947) 1,107
Cash and cash equivalents, beginning of year 3,471 7,418 6,311
---------- ---------- ---------
Cash and cash equivalents, end of year $32,493 $ 3,471 $ 7,418
========== ========== =========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
ACCURIDE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1999
(DOLLARS IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION - The accompanying consolidated financial
statements include the accounts of Accuride Corporation (the "Company")
and its wholly-owned subsidiaries, including Accuride Canada, Inc.
("Accuride Canada"), AKW L.P. ("AKW"), and Accuride de Mexico, S.A. de
C.V. ("AdM"). All significant intercompany transactions have been
eliminated. Investments in affiliated companies in which the Company does
not have a controlling interest are accounted for using the equity method.
Prior to the Recapitalization of the Company on January 21, 1998 (see Note
2), the Company was a wholly-owned subsidiary of Phelps Dodge Corporation
("PDC"). As a wholly-owned subsidiary of PDC, certain administrative
functions were performed by PDC on behalf of the Company. Such functions
included, but were not limited to, accounting, legal, treasury, tax, risk
management, and certain employee benefit related functions. Applicable
common expenses, incurred by PDC, have been allocated to the Company based
on a time allocation methodology and are reflected in the accompanying
financial statements for the year ended December 31, 1997.
BUSINESS OF THE COMPANY - The Company is engaged primarily in the design,
manufacture and distribution of wheels and rims for trucks, trailers and
certain military and construction vehicles. The Company sells its products
primarily within North America and Latin America to original equipment
manufacturers and to the aftermarket. The Company's primary manufacturing
facilities are located in Henderson, Kentucky; Columbia, Tennessee; Erie,
Pennsylvania; Cuyahoga Falls, Ohio; London, Ontario, Canada and Monterrey,
Mexico.
MANAGEMENT'S ESTIMATES AND ASSUMPTIONS - The preparation of financial
statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
REVENUE RECOGNITION - The Company records sales upon shipment and provides
an allowance for estimated discounts associated with customer rebates.
INVENTORIES - Inventories are stated at the lower of cost or market. Cost
for substantially all inventories is determined by the last-in, first-out
method (LIFO).
SUPPLIES - Supplies are stated at the lower of cost or market. Cost for
substantially all supplies is determined by a moving-average method. The
Company performs periodic evaluations of supplies and provides an
allowance for obsolete items.
F-6
<PAGE>
PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are carried
at cost. Expenditures for replacements and betterments are capitalized;
maintenance and repairs are charged to operations as incurred.
Buildings, machinery and equipment are depreciated using the
straight-line method over estimated lives of 5 to 40 years. Tooling is
generally depreciated over a 3 year life.
DEFERRED FINANCING COSTS - Direct costs incurred in connection with the
Recapitalization (see Note 2) and the Credit Agreement (see Note 9) have
been deferred and are being amortized over the life of the related debt
using the interest method.
GOODWILL - Goodwill consists of costs in excess of the net assets
acquired in connection with the PDC acquisition of the Company in March
1988 and the AKW and AdM acquisitions in April 1999 and July 1999,
respectively. Goodwill is being amortized using the straight-line method
over 40 years.
LONG-LIVED ASSETS - The Company evaluates for impairment its long-lived
assets to be held and used and its identifiable intangible assets when
events or changes in economic circumstances indicate the carrying amount
of such assets may not be recoverable. Long-lived assets to be disposed
of are carried at the lower of cost or fair value less the costs of
disposal.
PENSION PLANS - The Company has trusteed, non-contributory pension plans
covering substantially all U.S. and Canadian employees. For certain
plans, the benefits are based on career average salary and years of
service and, for other plans, a fixed amount for each year of service.
The Company's funding policy provides that payments to the pension trusts
shall be at least equal to the minimum legal funding requirements.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS - The Company has
postretirement health care and life insurance benefit plans covering
substantially all U.S. non-bargained and Canadian employees. The Company
accounts for these benefits on an accrual basis and provides for the
expected cost of such postretirement benefits be accrued during the years
employees render the necessary service. The Company's funding policy
provides that payments to participants shall be at least equal to its
cash basis obligation.
POSTEMPLOYMENT BENEFITS - The Company has certain postemployment benefit
plans covering certain U.S. and Canadian employees which provide
severance, disability, supplemental health care, life insurance or other
welfare benefits. The Company accounts for these benefits on an accrual
basis. The Company's funding policy provides that payments to
participants shall be at least equal to its cash basis obligation.
Liabilities associated with these benefits at the date of the Company's
Recapitalization (see Note 2) were retained by PDC.
INCOME TAXES - Deferred tax assets and liabilities are computed based on
differences between financial statement and income tax bases of assets and
liabilities using enacted income tax rates. Deferred income tax expense or
benefit is based on the change in deferred tax assets and liabilities from
period to period, subject to an ongoing assessment of realization of
deferred tax assets.
F-7
<PAGE>
STOCKHOLDERS' EQUITY (DEFICIENCY) - The Company accounted for amounts due
to/from PDC as adjustments to additional paid in capital since the
companies had a common treasury function prior to the Recapitalization of
the Company.
RESEARCH AND DEVELOPMENT COSTS- Expenditures relating to the development
of new products and processes, including significant improvements and
refinements to existing products, are expensed as incurred. The amounts
charged against income in 1999, 1998 and 1997 totaled $5,176, $2,855 and
$3,732, respectively.
FOREIGN CURRENCY - The assets and liabilities of Accuride Canada and AdM
that are receivable or payable in cash are converted at current exchange
rates, and inventories and other non-monetary assets and liabilities are
converted at historical rates. Revenues and expenses are converted at
average rates in effect for the period. Accuride Canada's and AdM's
functional currencies have been determined to be the U.S. dollar.
Accordingly, gains and losses resulting from conversion of such amounts,
as well as gains and losses on foreign currency transactions, are included
in operating results as "Other income (expense), net." The Company had
aggregate foreign currency gains (losses) of $(5,544), $(996), and $773,
for the years ended December 31, 1999, 1998 and 1997, respectively.
CONCENTRATIONS OF CREDIT RISK - Financial instruments that potentially
subject the Company to significant concentrations of credit risk consist
principally of cash, cash equivalents, customer receivables, and
derivative financial instruments. The Company places its cash and cash
equivalents and executes derivatives with high quality financial
institutions. Generally, the Company does not require collateral or other
security to support customer receivables.
DERIVATIVE FINANCIAL INSTRUMENTS - The Company has limited involvement
with derivative financial instruments and does not use them for trading
purposes. Derivative financial instruments are used to manage well-defined
interest rate, foreign exchange, and commodity price risks.
INTEREST RATE INSTRUMENTS - The Company entered into an interest rate swap
agreement as a means of fixing the interest rate exposure on a portion of
the Company's floating rate debt. The Company also entered into an
interest rate cap agreement to set a ceiling on the maximum interest rate
the Company would incur on a portion of the Company's floating-rate debt.
The premiums paid to enter into the interest rate cap agreement are
payable quarterly and recorded as interest expense as incurred. These
interest rate agreements are accounted for under the settlement method.
Under this method, the differential to be paid or received on these
agreements is recognized over the lives of the agreements in interest
expense. Changes in market value of the interest rate swap and the
interest rate cap accounted for under the settlement method are not
reflected in the accompanying financial statements.
FOREIGN EXCHANGE INSTRUMENTS - The Company entered into foreign currency
forward contracts and options to limit foreign exchange risk on
anticipated but not yet committed transactions expected to be denominated
in Canadian dollars. The forward contracts and certain combination options
(collars) are not considered hedges for financial reporting purposes and,
accordingly, such forward contracts and combination options are carried in
the financial statements at fair value, with realized and unrealized gains
or losses reflected directly in income as "Other income (expense), net."
The Company had aggregate realized
F-8
<PAGE>
gains and unrealized gains of $2,565 and $2,194, respectively, for the
year ended December 31, 1999, and realized losses and unrealized gains of
$(2,598) and $150, respectively, for the year ended December 31, 1998.
The total notional amount of outstanding forward contracts at December 31,
1999 was $108,707. The total notional amount of foreign currency
combination options outstanding at December 31, 1999 was $13,848.
The Company also has purchased foreign currency call options that are
considered hedges for financial reporting purposes. Gains and losses
related to purchased foreign currency call options of anticipated
transactions are deferred and recognized in income or as adjustments of
carrying amounts when the hedged transaction occurs. Total option premiums
paid for the year ended December 31, 1999 was $208, which is being
amortized over the life of the purchased call options. The total notional
amount of purchased foreign currency call options outstanding at December
31, 1999 was $13,848.
COMMODITY PRICE INSTRUMENTS - The Company entered into commodity price
swap and option contracts to limit the exposure to changes in certain raw
material prices. The premiums paid to enter into such option contracts are
included in prepaid expenses and amortized using the straight-line method
over the related term of the contracts. The commodity price swaps are
accounted for under the settlement method. Under this method, the
differential to be paid or received on these agreements is recognized over
the lives of the agreements in raw material expense. Changes in the market
value of the commodity price swap and option contracts are accounted for
under the settlement method and are not reflected in the accompanying
financial statements. The Company had aggregate realized gains of $193 for
the year ended December 31, 1999. Total option premiums paid for the year
ended December 31, 1999 was $38. The total notional amount of outstanding
commodity price swaps at December 31, 1999 was $27,431. No option
contracts were outstanding at December 31, 1999.
COMPREHENSIVE INCOME - There were no components of other comprehensive
income for the years ended December 31, 1999 and 1998. For the year ended
December 31, 1997, the Company recorded a minimum pension adjustment of
$1,673, less $669 in applicable income taxes.
NEW ACCOUNTING PRONOUNCEMENT - SFAS 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES, is effective for all fiscal quarters
of all fiscal years beginning after June 15, 2000. The Statement
establishes accounting and reporting standards for derivative instruments
and for hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
condition and measure those instruments at fair value. If certain
conditions are met, a derivative may be specifically designated as a fair
value hedge, a cash flow hedge, or a hedge of a foreign currency exposure.
The accounting for changes in the fair value of a derivative (that is,
gains and losses) depends on the intended use of the derivative and the
resulting designation. Management has not yet fully evaluated the effect
of the new standard on the financial statements.
RECLASSIFICATIONS - Certain amounts from prior years' financial statements
have been reclassified to conform to the current year presentation.
F-9
<PAGE>
2. RECAPITALIZATION OF ACCURIDE CORPORATION
The Company entered into a stock subscription and redemption agreement
dated November 17, 1997 (the "Agreement" or "Redemption"), with PDC and
Hubcap Acquisition L.L.C. ("Hubcap Acquisition"), a Delaware limited
liability company formed at the direction of KKR 1996 Fund L.P., a
Delaware limited partnership affiliated with Kohlberg Kravis Roberts &
Co., L.P. ("KKR").
Pursuant to the Agreement, effective January 21, 1998, Hubcap Acquisition
acquired 90% of the common stock of the Company for an aggregate
redemption price of $468,000 (the "Recapitalization"). In connection with
the Recapitalization, Hubcap Acquisition made an equity investment in the
Company of $108,000, and the Company issued $200,000 of 9.25% senior
subordinated notes at 99.48% of principal value due 2008 and obtained
$164,800 in bank borrowings, including $135,000 of borrowings under senior
secured term loans due 2005 and 2006 with variable interest rates and
$29,800 of borrowings under a $140,000 senior secured revolving line of
credit expiring 2004 with a variable interest rate.
Costs of $21,742 incurred in connection with the Recapitalization have
been reflected (i) $14,243 as deferred financing costs, (ii) $5,259 as a
component of the cost of the Redemption and (iii) $2,240 as a 1998
expense.
Pursuant to the Agreement, $2,333 of certain pension, postretirement
benefit liabilities and other liabilities were assumed by PDC and offset
against the cost of the Redemption. Concurrent with the Redemption, the
Company recorded a $55,440 deferred tax asset less a $36,960 valuation
allowance related to the increase in the tax basis of assets with a
corresponding credit to "Additional paid in capital".
Subsequent to the Recapitalization, effective September 30, 1998, PDC sold
its remaining interest in the Company to an unrelated third party.
3. AKW AND AdM ACQUISITIONS
AKW ACQUISITION - AKW was formed in 1997 as a 50-50 joint venture between
Kaiser and the Company to design, manufacture, and sell heavy-duty
aluminum wheels. On April 1, 1999, the Company acquired Kaiser's 50%
interest in AKW. The acquisition gives the Company 100% control of AKW.
Total aggregate cost paid was $71,095 including fees and expenses. In
connection with this acquisition, the fair value of assets acquired was
$36,190 less liabilities assumed of $16,838. The cost exceeded the fair
value of the net assets acquired by $51,743.
F-10
<PAGE>
The following unaudited pro forma financial data illustrates the estimated
effects as if AKW acquisition had been completed as of the beginning of
the periods presented, after including the impact of certain adjustments,
such as goodwill amortization, depreciation, interest expense, the
elimination of equity in earnings of affiliates arising from the Company's
50% interest in AKW owned prior to the acquisition, and the related income
tax effects.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------------
1999 1998 1997
<S> <C> <C> <C>
Net Sales $529,800 $470,480 $385,482
Net Income $ 25,632 $ 5,758 $ 26,875
</TABLE>
The pro forma results are not necessarily indicative of the actual results
if the transactions had been in effect for the entire periods presented.
In addition, they are not intended to be a projection of future results
and do not reflect, among other things, any synergies that might have been
achieved from combined operations.
AdM ACQUISITION - AdM was formed on November 5, 1997 between the Company,
IaSa, and certain other parties to produce, market and sell steel wheels,
rims, side rings, lock rings, mounting rings, spacer bands and related
components. On July 16, 1999, the Company acquired Industria Automotriz,
S.A. de C.V.'s ("IaSa") 49% interest in AdM. The acquisition gives the
Company 100% control of AdM. Total aggregate cost paid was $7.4 million,
including fees and expenses. The cost exceeded the fair value of the net
assets acquired by $301.
The AdM and AKW acquisitions have been accounted for by the purchase
method of accounting. Under purchase accounting, the total purchase price
has been allocated to the tangible and intangible assets and liabilities
of AdM and AKW, respectively, based upon their respective fair values as
of the dates of the acquisitions based upon valuations and other studies.
4. CONSOLIDATED STATEMENTS OF CASH FLOWS
For the purpose of preparing the Consolidated Statements of Cash Flows,
the Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents. Interest paid
(net of amounts capitalized of $1,565 and $929) for the years ended
December 31, 1999 and 1998 was $37,029 and $23,277, respectively. No
significant interest amounts were paid during 1997. Income taxes paid for
the years ended December 31, 1999 and 1998 were $8,114 and $7,238,
respectively. Non-cash transactions that resulted from the Redemption in
1998 included the issuance of common stock and the related stock
subscriptions receivable of $1,644, the assumption of $2,333 in
liabilities offset against stockholders' equity and the increase in
stockholders' equity and the net deferred tax asset in the amount of
$18,480 from the increase in the tax basis of assets. Net cash amounts due
to/from PDC were accounted for as capital distributions or contributions
and current income taxes were cleared through the PDC intercompany account
for the year ended December 31, 1997.
F-11
<PAGE>
The following supplemental cash flow information is provided for non-cash
transactions that resulted in connection with the formation of AdM on
November 5, 1997:
<TABLE>
<S> <C>
Inventory acquired $1,300
Property acquired 14,856
Current liabilities assumed 1,700
Short-term notes payable assumed 4,850
</TABLE>
5. INVENTORIES
Inventories at December 31 were as follows:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Raw materials $ 6,451 $ 8,920
Work in process 12,106 7,757
Finished manufactured goods 20,225 19,181
LIFO adjustment 2,361 1,122
------- -------
Inventories, net $41,143 $36,980
======= =======
</TABLE>
During 1999, certain inventory quantities were reduced, which resulted in
a liquidation of LIFO inventory layers carried at lower costs which
prevailed in prior years. The effect of the liquidation was to decrease
cost of goods sold by $193 and to increase net earnings by $112. There
were no significant liquidations of LIFO inventories in 1998 or 1997.
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31 consist of the following:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Land and land improvements $ 6,895 $ 6,768
Buildings 40,877 37,225
Machinery and equipment 341,928 273,345
-------- --------
389,700 317,338
Less accumulated depreciation 177,007 157,512
-------- --------
Property, plant and equipment, net $212,693 $159,826
======== ========
</TABLE>
7. INVESTMENTS IN AFFILIATES
Included in the Company's "Equity in earning of affiliates" is a 50%
equity interest in AOT, Inc. ("AOT"), and from May 1, 1997 through March
31, 1999, a 50% equity interest in AKW. The following summarizes the
Company's investments in affiliates.
AOT - AOT is a joint venture between the Company and The Goodyear Tire &
Rubber Company formed to provide sequenced wheel and tire assemblies for
Navistar International
F-12
<PAGE>
Transportation Corporation. The Company's investment in AOT at December
31, 1999 and 1998 totaled $2,735 and $2,644, respectively.
For the years ended December 31, 1999 and December 31, 1998, the
Company had one note receivable from AOT included in "Other assets" in
the amount of $282 and $1,092, with an interest rate of 9.25%. During
1997, the Company had two outstanding notes receivable from AOT
totaling $1,535 with interest rates ranging from 8.25% to 9.25%.
Interest income earned on these notes receivable for 1999, 1998 and
1997 totaled $92, $161 and $180, respectively.
The Company performs accounting, cash management, engineering and other
technical, general and administrative services for AOT. Fees for these
services totaled $360 for each of the three years in the period ended
December 31, 1999, and are reported as a reduction in "Selling, general
and administrative expenses".
AKW L.P. - On May 1, 1997, the Company entered into a joint venture with
Kaiser for the formation of AKW and accounted for the investment using the
equity method. The Company's investment in AKW at December 31, 1998
totaled $23,211. The Company performed all billing and collection
functions, as well as calculation and notification of rebates, for AKW.
"Other receivables" at December 31, 1998 include $2,378 which represents
amounts due from AKW for such transactions. Fees associated with those
agreements totaled $63, $250 and $167 for the years ended December 31,
1999 , 1998 and 1997, respectively, and are reported as a reduction in
"Selling, general and administrative expenses".
On April 1, 1999 the Company acquired Kaiser's 50% interest in AKW (see
Note 3).
8. SHORT-TERM NOTES PAYABLE
AdM entered into a $32,500 credit agreement consisting of a $7,500 working
capital facility and a $25,000 term facility (see Note 9) which is
guaranteed by the Company. At December 31, 1999, the interest rate on the
working capital facility was comprised of the Eurodollar rate of 6.13%
plus the Applicable Margin of 1.625%. At December 31, 1999 and December
31, 1998, respectively, the Company had $7,500 and $3,911 outstanding
under the working capital facility.
F-13
<PAGE>
9. LONG-TERM DEBT
Long-term debt at December 31 consists of the following:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Term A Advance $ 58,200 $ 60,000
Term B Advance 72,750 75,000
Term C Advance 98,000
Senior subordinated notes, net of $889 and $1,000
unamortized discount 199,111 199,000
AdM Term Advance 25,000 22,289
Revolving Credit Advance 33,000
-------- --------
453,061 389,289
Less current maturities (1,350)
-------- --------
Total $453,061 $387,939
======== ========
</TABLE>
BANK BORROWINGS - The revolving credit facility and the Term A, B and C
Advances were issued pursuant to a credit agreement ("Credit Agreement")
dated April 16, 1999. The revolving credit facility and the Term B and C
Advances were borrowed by Accuride Corporation ("U.S. Borrower") and the
Term A Advance was borrowed by Accuride Canada ("Canadian Borrower").
The Credit Agreement consists of: (i) a $60,000 Term A Advance; (ii) a
$75,000 Term B Advance; (iii) a $100,000 Term C Advance; and (iv) up to
$140,000 under the revolving credit facility and trade letters of credit
and standby letters of credit up to an aggregate sub-limit of $20,000.
Letters of credit of $300 were outstanding at December 31, 1999. Swing
line advances may be made up to the lesser of: (1) $10,000; or (2) the
aggregate unused revolving credit commitment from time to time. The
borrowings under the Term A Advance, Term B Advance and Term C Advance and
under the revolving credit facility are collectively referred to as the
"Bank Borrowings."
The Company has the option to borrow under the Credit Agreement at either
the Base Rate or Eurodollar Rate plus an Applicable Margin, as defined in
the Credit Agreement. The Applicable Margin shall be adjusted upon the
Company achieving certain leverage ratios and varies by type of borrowing.
The Company's Bank Borrowings at December 31, 1999 were all borrowed under
the Eurodollar Rate option. At December 31, 1999, the corresponding
Eurodollar Rate was 6.25% and the Applicable Margin ranged from 1.5% -
2.25%.
Bank Borrowings and any unpaid interest thereon under; (i) the Term A
Advance shall be repayable in six consecutive annual installments of
$600 each, commencing on January 21, 1999, and the seventh installment
shall be repayable on January 21, 2005 in the amount equal to the then
outstanding principal balance of the Term A Advance; (ii) the Term B
Advance shall be repayable in seven consecutive annual installments of
$750 each, commencing on January 21, 1999, and the eighth installment
shall be repayable on January 21, 2006 in the amount of the then
outstanding principal balance of the Term B Advance; (iii) the Term C
Advance shall be repayable in six consecutive annual installments of
$1,000 each, commencing on January 21, 2000, and the seventh installment
shall be repayable on January
F-14
<PAGE>
21, 2006, in the amount of $47,000 and the eighth installment shall be
repayable on January 21, 2007 in the amount of the then outstanding
principal balance of the Term C Advance; and (iv) the revolving credit
facility shall be reduced to a maximum of $100,000 on January 21, 2003
and be payable in full on January 21, 2004. In October 1999, the Company
elected to prepay the principal installments due January 21, 2000 and
January 21, 2001 for the Term A Advance, the Term B Advance and the Term
C Advance. The total amount prepaid was $4,700.
As of December 31, 1998, $60,000 of Term A Advance, $75,000 of Term B
Advance, and $33,000 of revolving credit advance was outstanding pursuant
to a credit agreement dated as of January 21, 1998. The Bank Borrowings
are guaranteed by all domestic subsidiaries of the U.S. Borrower. The Term
A Advance is guaranteed by the U.S. Borrower.
The Bank Borrowings are collateralized by a valid and perfected first
priority interest in 100% of the common stock of each first tier domestic
subsidiary of the U.S. Borrower and of the Canadian Borrower, and 66% of
all of the U.S. Borrower's current and future first tier foreign
subsidiaries other than the Canadian Borrower. A negative pledge restricts
the imposition of liens or other encumbrances on all of the assets of the
Borrowers and their subsidiaries, subject to certain exceptions.
SENIOR SUBORDINATED NOTES - Interest at 9.25% on the senior subordinated
notes (the "Notes") is payable on February 1 and August 1 of each year,
commencing on August 1, 1998. The Notes mature in full on February 1, 2008
and may be redeemed, at the option of the Company, in whole or in part, at
any time on or after February 1, 2003 in cash at the redemption prices set
forth in the indenture, plus interest. In addition, at any time prior to
February 1, 2002 the Company may redeem up to 40% of the original
aggregate principal amount of the Notes with the net proceeds of one or
more Equity Offerings, as defined. The Notes are a general unsecured
obligation of the Company ranking senior in right of payment to all
existing and future subordinated indebtedness of the Company. The Notes
are subordinated to all existing and future senior indebtedness of the
Company including indebtedness incurred under the Credit Agreement.
ADM TERM FACILITY - At December 31, 1999 and December 31, 1998,
respectively, AdM had term notes outstanding of $25,000 and $22,289 under
its $25,000 term facility (see Note 8). Principal is payable quarterly
from June 25, 2001 through March 25, 2003. At December 31, 1999, the
interest rates on the term notes were based on a range of Eurodollar rates
of 6.125% - 6.25% plus the Applicable Margin of 1.75%. AdM's total assets
have been assigned as collateral under the terms of the credit agreement.
Under the term's of the Company's credit agreement and AdM's credit
agreement there are certain restrictive covenants that limit the payment
of cash dividends and establish minimum financial ratios.
INTEREST RATE INSTRUMENTS - Effective January 1998, the Company entered
into an interest rate cap agreement to reduce the potential impact of
increases in interest rates on a portion of its floating-rate long-term
debt. At December 31, 1999, the Company was a party to a 7.5% interest
rate cap agreement expiring in January 2001. The agreement entitles the
Company to
F-15
<PAGE>
receive from the counterparty on a quarterly basis the amount, if any, by
which the Company's interest payments on $34,650 of floating-rate
long-term debt exceed 7.5% plus the Applicable Margin. As of December 31,
1999 the interest rate cap had a notional amount of $34,650. Effective
January 1998, the Company also entered into an interest rate swap
agreement to manage its interest rate exposure on a portion of its
floating-rate debt obligation. Under the interest rate swap agreement,
the Company makes fixed rate payments at 5.75% and receives variable rate
payments at the three-month Eurodollar rate. As of December 31, 1999 the
interest rate swap agreement had a notional amount of $99,000, and the
corresponding Eurodollar rate was 6.20%. The maturity date of the
interest rate swap agreement is January 2001.
The Company is exposed to credit losses in the event of nonperformance by
the counterparty to its interest rate cap and interest rate swap. The
Company anticipates, however, that the counterparty will be able to fully
satisfy its obligations under the contracts. The Company does not obtain
collateral or other security to support financial instruments subject to
credit risk but monitors the credit standing of counterparties.
Maturities of long-term debt based on minimum scheduled payments as of
December 31, 1999, are as follows:
<TABLE>
<CAPTION>
<S> <C>
2000 $ 0
2001 9,375
2002 14,850
2003 5,475
2004 2,350
Thereafter 421,011
--------
$453,061
========
</TABLE>
10. PENSION PLANS AND OTHER POSTRETIREMENT BENEFIT PLANS
The Company sponsors non-contributory employee defined benefit pension
plans covering substantially all U.S. and Canadian employees (the
"Plans"). Employees covered under the U.S. salaried plan are eligible to
participate upon the completion of one year of service and benefits are
based upon their cash balance account based on an allocation they earn
each year. Employees covered under the Canadian salaried plan are eligible
to participate upon the completion of two years of service and benefits
are based upon career average salary and years of service. Employees
covered under the hourly plans are generally eligible to participate at
the time of employment and benefits are generally based on a fixed amount
for each year of service. U.S. employees are vested in the plans after
five years of service; Canadian hourly employees are vested after two
years of service.
The Company also sponsors postretirement benefit plans. Substantially all
of the Company's U.S. non-bargained and Canadian employees who retire from
active service on or after normal retirement age of 65 are eligible for
life insurance benefits. The costs of such benefits are paid through an
insurance contract. Health care insurance benefits also are provided for
many employees retiring from active service. The coverage is provided on a
non-contributory basis
F-16
<PAGE>
for certain groups of employees and on a contributory basis for other
groups. The majority of these benefits are paid by the Company.
The status of employee pension benefit plans and other postretirement
benefit plans at December 31 are summarized below:
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $33,957 $39,899 $9,751 $9,564
Benefit obligation assumed by PDC (9,951) (883)
Service cost 2,339 1,759 528 313
Interest cost 2,232 1,990 839 592
Amendments 1,130
Actuarial loss (gain) (5,399) 1,343 (504) 468
Acquisition 1,223 4,043
Currency translation adjustment 1,414 265
Benefits paid (1,314) (1,083) (322) (303)
------- ------- -------- --------
Benefit obligation at end of year 35,582 33,957 14,600 9,751
------- ------- -------- --------
Change in plan assets:
Fair value of assets at beginning of year 32,385 37,564
Fair value of assets assumed by PDC (7,768)
Actual return on plan assets 2,194 2,385
Employer contribution 2,586 1,287
Acquisition 493
Currency translation adjustment 1,454
Benefits paid (1,314) (1,083)
------- ------- -------- --------
Fair value of assets at end of year 37,798 32,385
------- ------- -------- --------
Funded status 2,216 (1,572) (14,600) (9,751)
Unrecognized actuarial loss 1,950 6,223 1,401 1,473
Unrecognized prior service cost 2,665 1,501 (1,750) (1,953)
Unrecognized net obligation 352 349
------- ------- -------- --------
Accrued benefit asset (cost) $7,183 $6,501 $(14,949) $(10,231)
======= ======= ======== ========
</TABLE>
The pension plans were valued between December 1 and December 31 for both
1999 and 1998. The obligations were projected to and the assets were
valued as of the end of 1999 and 1998. Effective April 1, 1999, two
qualified plans were acquired in conjunction with the AKW acquisition. The
plan assets are invested in a diversified portfolio of stocks, bonds and
cash or cash equivalents.
The projected benefit obligation, accumulated benefit obligation, and fair
value of plan assets for the pension plans with accumulated benefit
obligations in excess of plan assets were $3,099, $2,950 and $1,905,
respectively, as of December 31, 1999 and $9,519, $9,390 and $8,513,
respectively, as of December 31, 1998.
F-17
<PAGE>
The components of net periodic pension cost and other postretirement
benefit cost for the years ended December 31, were as follows:
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
---------------------- ----------------------
1999 1998 1997 1999 1998 1997
<S> <C> <C> <C> <C> <C> <C>
Benefits earned during the year $2,339 $1,759 $1,336 $ 528 $ 313 $ 283
Interest accrued on projected benefit obligation 2,232 1,990 2,489 839 592 656
Return on plan assets (3,350) (2,871) (3,054)
Net amortization 488 128 165 (203) (203) (200)
Other 167 41 27
------ ------ ------ ------ ------ ------
Net periodic cost $1,709 $1,173 $ 936 $1,205 $ 729 $ 739
====== ====== ====== ====== ====== ======
</TABLE>
For 1999 measurement purposes, annual rates of increase in the per capita
cost of covered health care benefits were assumed to average 11% for 2000
decreasing gradually to 5.5% by 2008 and remaining at that level
thereafter. The health care cost trend rate assumption has a significant
effect on the amounts reported. A one percentage point change in assumed
health care cost trend rates would have the following effects:
<TABLE>
<CAPTION>
1-PERCENTAGE- 1-PERCENTAGE-
POINT INCREASE POINT DECREASE
------------------------------------------
<S> <C> <C>
Effect on total of service and interest cost components $ 168 $ (142)
Effect on postretirement benefit obligation 1,439 (1,226)
</TABLE>
Assumptions used to develop the net periodic pension cost and other
postretirement benefit cost and to value pension obligations as of
December 31 were as follows:
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
---------------- --------------
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Discount rate 7.75 % 7.00 % 7.75 % 7.00 %
Rate of increase in future compensation levels 4.00 % 4.00 % 4.00 % 4.00 %
Expected long-term rate of return on assets 9.50 % 9.50 % N/A N/A
</TABLE>
The Company intends to fund at least the minimum amount required under the
Employee Retirement Income Security Act of 1974, as amended, for U.S.
plans, or in the case of Accuride Canada, the minimum legal requirements
in Canada.
The Company also sponsors certain defined contribution plans for
substantially all U.S. salaried employees and the hourly employees at its
Erie, Pennsylvania facility. Expense associated with these plans for the
years ended December 31, 1999, 1998 and 1997 totaled $1,183, $1,045 and
$1,062, respectively.
F-18
<PAGE>
11. INCOME TAXES
For the year ended December 31, 1997, the Company was included in the PDC
consolidated income tax returns and PDC allocated income taxes as if the
Company filed on a separate company basis. The Company cleared income
taxes with PDC through the intercompany account.
The income tax provision (benefit) for the years ended December 31 is as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Current:
Federal $ 523 $ 222 $ 7,760
State 981 597 1,109
Foreign 3,959 6,067 10,077
------- ------ -------
5,463 6,886 18,946
------- ------ -------
Deferred:
Federal 15,429 2,420 3,319
State (2,691) (1,651) 474
Foreign 2,342 280 (581)
Valuation allowance (2,133)
------- ------ -------
12,947 1,049 3,212
------- ------ -------
Total $18,410 $7,935 $22,158
======= ====== =======
</TABLE>
A reconciliation of the U.S. statutory tax rate to the Company's effective
tax rate for the years ended December 31, is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Statutory tax rate 35.0 % 35.0 % 35.0 %
Withholding tax on dividend of foreign subsidiary 0.3 0.6 6.0
State and local income taxes 2.2 (4.6) 1.4
Incremental international tax 8.5 4.7 0.2
Goodwill 2.1 5.2 1.8
Change in state tax rates (4.1)
Change in valuation allowance (4.9)
Other items, net 2.9 5.1 (0.1)
------ ------ ------
Effective tax rate 42.0 % 46.0 % 44.3 %
====== ====== ======
</TABLE>
F-19
<PAGE>
Deferred income tax assets and liabilities comprised the following at
December 31:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Deferred tax assets:
Depreciation $ 40,750 $ 50,226
Postretirement and postemployment benefits 5,494 3,850
Other 1,720 3,012
Foreign tax credit 4,393 3,420
Valuation allowance-foreign tax credit (3,420)
Alternative minimum tax credit 659 158
Net operating loss carryforward 3,830 1,861
Valuation allowance - tax basis of assets (38,247) (36,960)
-------- -------
Total deferred tax assets 18,599 22,147
-------- -------
Deferred tax liabilities:
Depreciation 10,816 12,224
Pension costs 3,213 2,410
Inventories 1,896 318
Withholding tax on dividend of foreign subsidiary 128 22
Other 7,548 3,275
-------- -------
Total deferred tax liabilities 23,601 18,249
-------- -------
Net deferred tax assets (liabilities) (5,002) 3,898
Current deferred tax asset 611
Current deferred tax liability (598)
-------- -------
Long-term deferred income tax asset (liability)-net $ (4,404) $ 3,287
======== =======
</TABLE>
The Company's net operating loss and tax credit carryforwards available in
various tax jurisdictions at December 31, 1999 expire in periods ranging
from five to twenty years, except that the alternative minimum tax credit
does not have a future expiration date. Realization of deferred tax assets
is dependent upon taxable income within the carryforward periods available
under the tax laws. Although realization of deferred tax assets in excess
of deferred tax liabilities is not certain, management has concluded that
it is more likely than not the Company will realize the full benefit of
deferred tax assets, except for a $38,247 valuation allowance recorded
related to the $57,370 increase in the tax basis of assets. The increase
in tax basis of assets was adjusted by $1,930 during the year ended
December 31, 1999 due to a change in state tax rates. During 1999, it was
determined that the Company would be able to fully utilize the foreign tax
credits; therefore the 1998 valuation allowance was reversed. The Company
does not reinvest the undistributed earnings of Accuride Canada and
accordingly, has recorded a provision for the applicable income taxes.
At December 31, 1999 and 1998, consolidated retained earnings included
undistributed earnings of AdM totaling approximately $304 and $1,581,
respectively. These earnings are permanently invested and are not
considered available for distribution to the Company. Accordingly, no
provision has been made for U.S. income taxes that may be payable upon
remittance of such earnings for the three years in the period ended
December 31, 1999.
F-20
<PAGE>
12. STOCK PURCHASE AND OPTION PLAN
Effective January 21, 1998, the Company adopted the 1998 Stock Purchase
and Option Plan for key employees of Accuride Corporation and subsidiaries
(the "1998 Plan").
The 1998 Plan provides for the issuance of shares of authorized but
unissued or reacquired shares of common stock subject to adjustment to
reflect certain events such as stock dividends, stock splits,
recapitalizations, mergers or reorganizations of or by the Company. The
1998 Plan is intended to assist the Company in attracting and retaining
employees of outstanding ability and to promote the identification of
their interests with those of the stockholders of the Company. The 1998
Plan permits the issuance of common stock (the "1998 Plan Purchase Stock")
and the grant of non-qualified stock options (the "1998 Plan Options") to
purchase shares of common stock (the issuance of 1998 Plan Purchase Stock
and the grant of the 1998 Plan Options pursuant to the 1998 Plan being a
"1998 Plan Grant"). Pursuant to the Plan, the Company can elect to grant
performance options or time options, as defined in the Plan. Unless sooner
terminated by the Company's Board of Directors, the 1998 Plan will expire
ten years after adoption. Such termination will not affect the validity of
any 1998 Plan Grant outstanding on the date of the termination.
Pursuant to the 1998 Plan, 2,667 shares of common stock of the Company
are reserved for issuance under such plan.
1998 PLAN PURCHASE STOCK - At December 31, 1999, the Company had issued
884 shares of common stock under the 1998 Plan Purchase Stock totaling
$4,420 under the terms of stock subscription agreements with various
management personnel of the Company. During 1999, 10 shares were
repurchased as treasury stock at a cost of $51. The unpaid principal
balance of $1,539 under the stock subscription agreements has been
recorded as a reduction of stockholders' equity.
1998 PLAN OPTIONS - The following is an analysis of stock option activity
pursuant to the 1998 Plan for each of the last two years ended December
31, 1999 and the stock options outstanding at the end of the respective
year:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1999 1998
WEIGHTED WEIGHTED
AVERAGE AVERAGE
SHARES PRICE SHARES PRICE
<S> <C> <C> <C> <C>
Outstanding, beginning of year 1,458 $5,000
Granted 221 $5,000 1,458 $5,000
Forfeited or expired (10) $5,000
-------- -----
Outstanding at end of year 1,669 $5,000 1,458 $5,000
-------- -----
Options exercisable at end of year 626 $5,000 313 $5,000
</TABLE>
F-21
<PAGE>
At December 31, 1998, all 1998 Plan Options were unexercised. Time options
vest in equal installments over a five year period from the date of the
grant. Performance options vest after approximately eight years or vest at
an accelerated rate if the Company meets certain performance objectives.
As of December 31, 1999, options outstanding have an exercise price of
$5,000 per share and a weighted average remaining contractual life of 8.6
years.
The Company applies APB Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO
EMPLOYEES, and related interpretations in accounting for the plans;
accordingly, since the grant price of the stock options was at least 100%
of the fair value at the date of the grant, no compensation expense has
been recognized by the Company in connection with the option grants. Had
compensation cost for the plans been determined based on the fair value at
the grant dates for awards under the plan consistent with the fair value
method of SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, the
Company's net income for the years ended December 31,1999 and December 31,
1998 would have decreased from $25,331 and $7,941 to the pro forma amounts
of $25,284 and $7,703 respectively.
The weighted average fair value of options granted was $3,174 and $3,423
for those issued in 1999 and 1998, respectively. The fair value of the
option grants is estimated on the date of grant using the Black-Scholes
option pricing model with the following assumptions: dividend yield
equaling 0%, risk-free interest rates ranging from 5.00% - 6.60%, expected
volatilities assumed to be 0% and expected lives of approximately 7 years.
The pro forma amounts are not representative of the effects on reported
net income for future years.
13. COMMITMENTS
Rent expense for the years ended December 31, 1999, 1998 and 1997 was
$2,371, $1,566 and $1,566, respectively. Future minimum lease payments for
all noncancelable operating leases having a remaining term in excess of
one year at December 31, 1999 are as follows:
<TABLE>
<S> <C>
2000 $2,191
2001 1,942
2002 1,624
2003 1,085
2004 805
------
Total $7,647
======
</TABLE>
14. CONTINGENCIES
The Company is from time to time involved in various legal proceedings of
a character normally incident to its past and present businesses.
Management does not believe that the outcome of these proceedings will
have a material adverse effect on the consolidated financial condition or
results of operations of the Company.
The Company's operations are subject to federal, state and local
environmental laws, rules and regulations. Pursuant to the
Recapitalization of the Company (see Note 2), the Company has been
indemnified by PDC with respect to certain environmental liabilities at
its Henderson and London facilities, subject to certain limitations.
Pursuant to the AKW acquisition agreement (see Note 3), the Company has
been indemnified by Kaiser with respect to certain
F-22
<PAGE>
environmental liabilities relating to the facilities leased by AKW.
Management does not believe that the outcome of any environmental
proceedings will have a material adverse effect on the consolidated
financial condition or results of operations of the Company.
15. SEGMENT REPORTING
The Company operates in one business segment: the design, manufacture
and distribution of wheels and rims for trucks, trailers, and other
vehicles.
GEOGRAPHIC SEGMENTS - The Company has operations in the United States,
Canada, and Mexico which are summarized below.
<TABLE>
<CAPTION>
UNITED
1999 STATES CANADA MEXICO ELIMINATIONS COMBINED
<S> <C> <C> <C> <C> <C>
Net sales:
Sales to unaffiliated customers - domestic $459,074 $14,940 $20,604 $494,618
Sales to unaffiliated customers - export 1,979 9,257 11,236
-------- ------- ------- --------
Total $461,053 $14,940 $29,861 $505,854
======== ======= ======= ========
Long-lived assets $337,621 $96,696 $48,413 $(112,864) $369,866
</TABLE>
<TABLE>
<CAPTION>
UNITED
1998 STATES CANADA MEXICO ELIMINATIONS COMBINED
<S> <C> <C> <C> <C> <C>
Net sales:
Sales to unaffiliated customers - domestic $319,579 $27,982 $27,804 $375,365
Sales to unaffiliated customers - export 1,799 791 5,628 8,218
-------- ------- ------- --------
Total $321,378 $28,773 $33,432 $383,583
======== ======= ======= ========
Long-lived assets $174,998 $97,611 $33,311 $ (13,787) $292,133
</TABLE>
<TABLE>
<CAPTION>
UNITED
1997 STATES CANADA MEXICO ELIMINATIONS COMBINED
<S> <C> <C> <C> <C> <C>
Net sales:
Sales to unaffiliated customers - domestic $175,805 $28,565 $ 4,242 $208,612
Sales to unaffiliated customers - export 918 122,567 869 124,354
-------- ------- ------- --------
Total $176,723 $151,132 $5,111 $332,966
======== ======= ======= ========
Long-lived assets $157,059 $100,496 $16,465 $(18,550) $255,470
</TABLE>
F-23
<PAGE>
Sales to three customers exceed 10% of total net sales for the years ended
December 31, as follows:
<TABLE>
<CAPTION>
1999 1998 1997
% OF % OF % OF
AMOUNT SALES AMOUNT SALES AMOUNT SALES
<S> <C> <C> <C> <C> <C> <C>
Customer one $ 93,568 18.5% $ 66,220 17.3% $ 62,838 18.9%
Customer two 86,327 17.1% 46,086 12.0% 55,231 16.6%
Customer three 65,955 13.0% 41,116 10.7% 50,699 15.2%
-------- ---- -------- ---- -------- ----
$245,850 48.6% $153,422 40.0% $168,768 50.7
======== ==== ======== ==== ======== ====
</TABLE>
Each geographic segment made sales to all three major customers in 1999.
16. FINANCIAL INSTRUMENTS
The estimated fair value amounts of financial instruments have been
determined by the Company using available market information and
appropriate valuation methodologies. However, considerable judgment is
required in interpreting market data to develop the estimates of fair
value. Accordingly, the estimates presented herein are not necessarily
indicative of the amounts that the Company could realize in a current
market exchange. The use of different market assumptions and/or
estimation methodologies may have an effect on the estimated fair value
amounts.
CASH AND CASH EQUIVALENTS, CUSTOMER RECEIVABLES, ACCOUNTS PAYABLE AND
SHORT-TERM NOTES PAYABLE - The carrying amounts approximate fair value
because of the relatively short maturity of these instruments.
AOT NOTES RECEIVABLE - The carrying amount of the notes receivable from
AOT approximates fair value because of the at or near market interest rate
pricing provisions.
LONG-TERM DEBT - The fair value of the Company's long-term debt has been
determined on the basis of the specific securities issued and outstanding.
All of the Company's long-term debt is at variable rates at December 31,
1999 and 1998 except for the $200,000 senior subordinated notes which have
a fixed interest rate of 9.25% (see Note 9). The carrying value of the
variable rate debt approximates fair value. The fair value of the senior
subordinated notes has been estimated to be $184,000 and $200,000 at
December 31, 1999 and 1998, respectively.
OFF BALANCE SHEET HEDGING INSTRUMENTS - The fair value of the purchased
foreign currency options, commodity price swaps, and interest rate
agreements have been estimated to be $161, $3,156 and $736, respectively,
at December 31, 1999 and $0, $0 and $(1,525), respectively, at December
31, 1998. The fair value of these instruments are based on quoted market
prices or dealer quotes.
F-24
<PAGE>
17. LABOR RELATIONS
The Company's prior contract with the United Auto Workers ("UAW")
covering employees at the Henderson Facility expired in February 1998
and the Company was not able to negotiate a mutually acceptable
agreement with the UAW. Therefore, a strike occurred at the Henderson
Facility on February 20, 1998. The Company is continuing to operate
with its salaried employees and contractors. On March 31, 1998, the
Company began an indefinite lock-out. Currently, there is, and the
Company believes that there will be, no supply disruption to the
Company's customer base; however, there can be no assurance to that
effect.
18. RELATED PARTY TRANSACTIONS
Effective January 21, 1998, the Company and KKR entered into a
management agreement providing for the performance by KKR of certain
management, consulting and financial services for the Company. The
Company expensed approximately $600 in each of the two years ended
December 31, 1999, pursuant to such management agreement.
PDC, a previous principal stockholder of the Company, entered into
retention agreements with certain executive management personnel to
compensate them for service over a six-month period from the date of
the Redemption. Such costs which have been paid by PDC were charged to
expense by the Company over the terms of the retention agreements with
a corresponding credit to "Additional Paid in Capital" for the year
ended December 31, 1998.
F-25
<PAGE>
Schedule II
ACCURIDE CORPORATION
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>
Balance at Charges to Balance at
beginning costs and Write- end
of period expenses Recoveries offs of period
--------- ---------- ---------- ------ -----------
<S> <C> <C> <C> <C> <C>
Reserves deducted in balance
sheet
from the asset to which
applicable:
Accounts Receivable:
December 31, 1997 1,595 (110) 92 (610) 967
December 31, 1998 967 (4) 150 (105) 1,008
December 31, 1999 1,008 61 21 (628) 462
</TABLE>
F-26
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: March 23, 2000
ACCURIDE CORPORATION
BY:
/s/ William P. Greubel
----------------------
William P. Greubel
CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities and Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ William P. Greubel President and Chief Executive Officer (Principal Executive
---------------------- Officer, Director) March 23, 2000
William P. Greubel
/s/ John R. Murphy Executive Vice President/Chief Financial Officer,
---------------------- Secretary and Chief Financial Officer (Principal Financial March 23, 2000
John R. Murphy and Accounting Officer)
/s/ Henry R. Kravis
----------------------
Henry R. Kravis Director March 23, 2000
/s/ George R. Roberts
----------------------
George R. Roberts Director March 23, 2000
/s/ James H. Greene, Jr.
----------------------
James H. Greene, Jr. Director March 23, 2000
/s/ Todd A. Fisher
----------------------
Todd A. Fisher Director March 23, 2000
/s/ Frederick M. Goltz
----------------------
Frederick M. Goltz Director March 23, 2000
</TABLE>
F-27
<PAGE>
AMENDMENT NO. 2 TO THE
CREDIT AGREEMENT
Dated as of December 31, 1999
AMENDMENT NO. 2 TO THE CREDIT AGREEMENT among ACCURIDE DE
MEXICO, S.A. DE C.V., a corporation organized and existing under the laws of the
United Mexican States (the "BORROWER"), ACCURIDE CORPORATION, a Delaware
corporation ("ACCURIDE") and CITIBANK MEXICO, S.A., GRUPO FINANCIERO CITIBANK
(the "LENDER").
PRELIMINARY STATEMENTS:
(1) The Borrower and the Lender have entered into Credit
Agreement dated as of July 9, 1998, as amended by Amendment No. 1 dated as of
September 13, 1999 (such Credit agreement as so amended being the "CREDIT
AGREEMENT"). Capitalized terms not otherwise defined in this Amendment have the
same meanings as specified in the Credit Agreement.
(2) The Lender has entered into the Participation Agreement
with The Bank of Nova Scotia and Comerica Bank.
(3) Accuride has entered into the Parent Guaranty, the
Completion Guaranty and the Pledge Agreement in favor of the Lender, and has
entered into the Guarantor Credit Agreement with the financial institutions
party thereto as Lenders, Citibank, N.A. as Issuing Bank, Citicorp USA, Inc. as
Swing Line Bank, Citicorp USA, Inc., as administrative agent, and Salomon Smith
Barney Inc., as arranger.
(4) The Borrower and Accuride have requested that certain
covenants contained in the Credit Agreement be deleted by reason of the
existence of corresponding covenants contained in the Guarantor Credit Agreement
and have requested that the Lender amend the Credit Agreement to such effect.
(5) The Lender is, on the terms and conditions stated below,
willing to grant such request.
SECTION 1. AMENDMENTS TO CREDIT AGREEMENT. The Credit
Agreement is, effective as of the date hereof and subject to the satisfaction of
the conditions precedent set forth in Section 2, hereby amended as follows:
(a) The definition of "Applicable Margin" in Section 1.01 is
amended to delete in its entirety the current definition and to
substitute in place of such definition a new definition to read as
follows:
<PAGE>
"APPLICABLE MARGIN" means, for Advances outstanding
under each of the Term Facility and the Working Capital
Facility and subject to the final paragraph of this
definition, a percentage per annum determined by reference to
the Performance Level as set forth for each such Facility
below:
<TABLE>
<CAPTION>
=================================== ===================================== ================================
Performance Level Term Facility Working Capital Facility
=================================== ===================================== ================================
<S> <C> <C>
I 1.500% 1.125%
=================================== ===================================== ================================
II 1.500% 1.375%
=================================== ===================================== ================================
III 1.750% 1.625%
=================================== ===================================== ================================
IV 2.000% 1.875%
=================================== ===================================== ================================
V 2.375% 2.250%
=================================== ===================================== ================================
VI 2.625% 2.500%
=================================== ===================================== ================================
</TABLE>
For outstanding Advances under each of the Facilities, the
Applicable Margin for each Advance shall be determined by
reference to the Performance Level in effect on the first day
of each Interest Period for such Advance. Changes in the
Applicable Margin resulting from changes in the Performance
Level shall become effective (for purposes of this definition
only, the date of such effectiveness being the "EFFECTIVE
DATE") as of the first day following the last day of the most
recent Fiscal Quarter or Fiscal Year for which (A) financial
statements are delivered to the Lender pursuant to Section
7(e)(ii) or (iii) of the Parent Guaranty and (B) a certificate
of the chief financial officer of the Guarantor is delivered
by the Guarantor to the Lender setting forth, with respect to
such financial statements, the then-applicable Performance
Level and the basis of the calculations therefor, and shall
remain in effect until the next change to be effected pursuant
to this definition; PROVIDED that, (i) if the Borrower shall
have made any payments in respect of interest during the
period (for purposes of this definition only, the "INTERIM
PERIOD") from and including the Effective Date to the day on
which any change in Performance Level is determined as
provided above, then the amount of the next such payment of
interest due by the Borrower on or after such day shall be
increased or decreased by an amount equal to any underpayment
or overpayment so made by the Borrower during such Interim
Period and (ii) each determination of the Performance Level
pursuant to this definition shall be made with respect to the
Measurement Period ending at the end of the fiscal period
covered by the relevant financial statements.
Anything in this definition or elsewhere in this
Agreement to the contrary notwithstanding, if the "Applicable
Margin" at any "Performance Level" for "Eurodollar Rate
Advances" outstanding under either (i) the "Term A Facility"
or (ii) the "Revolving Credit Facility" under, and as defined
in, the Guarantor Credit Agreement, is increased by any
amendment or other modification to the Guarantor Credit
Agreement, the corresponding Applicable
<PAGE>
Margin under this Agreement shall be increased to be equal
to the sum of such "Applicable Margin" as so increased plus
0.250% per annum, it being understood for purposes of
determining the corresponding Applicable Margin under this
Agreement, that the Applicable Margin for Advances
outstanding under the Term Facility corresponds to the
"Applicable Margin" for "Eurodollar Rate Advances" under
the "Term A Facility" under, and as defined in, the
Guarantor Credit Agreement, that the Applicable Margin for
Advances outstanding under the Working Capital Facility
corresponds to the "Applicable Margin" for "Eurodollar Rate
Advances" under the "Revolving Credit Facility" under, and
as defined in, the Guarantor Credit Agreement, and that the
Performance Level I, Performance Level II, Performance
Level III, Performance Level IV, Performance Level V and
Performance Level VI under this Agreement correspond to
"Performance Level I", "Performance Level II", "Performance
Level III", "Performance Level IV", "Performance Level V"
and "Performance Level VI", respectively, under and as
defined in the Guarantor Credit Agreement. Any such
increase in the Applicable Margin at any Performance Level
for any outstanding Advance under this Agreement resulting
from an increase of the corresponding "Applicable Margin"
under and as defined in the Guarantor Credit Agreement
shall become effective as of the effective date of such
increase under the Guarantor Credit Agreement, and shall
remain in effect until such Applicable Margin is further
increased as a result of the further increase, if any, of
the corresponding "Applicable Margin" under and as defined
in the Guarantor Credit Agreement.
(b) The following new definitions are added in Section 1.01 in
appropriate alphabetical order:
"AMENDMENT NO. 2" means Amendment No. 2 to the Credit
Agreement dated as of December 31, 1999 among the Borrower,
Accuride and the Lender.
"MAJORITY LENDER PARTIES" means such number of Lender
Parties (excluding, for purposes of determining this number of
consenting Lender Parties, any sub-participant) as shall hold
those aggregate interests in the aggregate principal amount of
the Advances outstanding or, if no Advances shall be
outstanding, the total amount of the Commitments, as shall
comprise a majority in interest in such aggregate principal
amount of the Advances outstanding or the total amount of the
Commitments, as applicable, such majority in interest to be
determined in accordance with the second sentence of Section
6(b) of the Participation Agreement.
"PERFORMANCE LEVEL" means, in respect of Advances
outstanding under the Term Facility and the Working Capital
Facility, Performance Level I, Performance Level II,
Performance Level III, Performance Level IV, Performance Level
V or Performance Level VI, as the context may require.
<PAGE>
(c) Section 5.02(a) is amended (i) to delete immediately
before the first proviso of clause (iv) thereof the phrase "in respect
of Capital Expenditures permitted pursuant to section 5.02(o)" and (ii)
to substitute therefor the phrase "in respect of Capital Expenditures
permitted pursuant to the provisions of the Guarantor Credit
Agreement."
(d) Section 5.02 is amended (i) to delete subsection (o)
thereof and (ii) to reletter the existing subsection (p) thereof as
subsection (o).
(e) Section 5.03(b) is amended (i) to delete the phrase "in
any event within 45 days" in the first and second lines thereof and to
substitute therefor the new phrase "in any event within 60 days", (ii)
to delete the entire clause (ii) of Section 5.03(b) and the word "and"
prior to such clause and (iii) to delete the numeral "(i)" in the
fourth last line thereof.
(f) Section 5.03(c) is amended (i) to delete entire clause
(ii) of Section 5.03(c) and (ii) to renumber the existing clause (iii)
thereof as clause (ii).
(g) Section 5.04 is amended to delete in its entirety the
current Section 5.04 and to substitute in place of such Section 5.04 a
new Section 5.04 to read as follows:
"SECTION 5.04. FINANCIAL COVENANTS. So long as any Advance
shall remain unpaid or the Lender shall have any Commitment hereunder, the
Borrower will, within 90 days after either (i) any term, covenant or agreement
contained in Section 5.02(j), 5.04(a), 5.04(b) or 5.04(c) of the Guarantor
Credit Agreement shall be amended, deleted, waived, or otherwise modified
without the consent of the Majority Lender Parties or (ii) the Guarantor Credit
Agreement shall be discharged, refinanced, refunded or otherwise terminated,
enter into an amendment with the Majority Lender Parties of Sections 5.02 and
5.04 of this Agreement to add back to this Agreement the terms, covenants and
agreements deleted by Section 1(c), (d), (e), (f) and (g) of Amendment No. 2,
with such changes to such terms, covenants and agreements as shall be mutually
agreeable to the Borrower and the Majority Lender Parties, it being understood
and agreed that, if the Borrower and the Majority Lender Parties shall not enter
into such amendment within such 90 days, an Event of Default shall occur and be
continuing hereunder pursuant to Section 6.02(c)."
(h) Section 6.02 is amended (i) to delete the punctuation "."
at the end of subsection (r) thereof and to substitute therefor the new
language "; or" and (ii) to add to the end of such Section 6.02 the
following new subsection (s):
"(s) Accuride shall fail to perform or observe any
term, covenant or agreement contained in Section 5.02 (j),
5.04 (a), 5.04 (b) or 5.04 (c) of the Guarantor Credit
Agreement."
SECTION 2. CONDITIONS OF EFFECTIVENESS. This Amendment shall
become effective as of the date first above written when, and only when, the
Lender shall have
<PAGE>
received (i) counterparts of this Amendment executed by the Borrower, Accuride
and the Lender and (ii) counterparts of the Consent of Participants attached
hereto executed by those Participants that shall hold, together with the
interest of the Lender, a majority in interest in the aggregate principal amount
of the Advances then outstanding.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The
Borrower represents and warrants as follows:
(a) The Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction
indicated in the recital of parties to this Amendment.
(b) The execution, delivery and performance by the Borrower of
this Amendment are within the Borrower's corporate powers, have been
duly authorized by all necessary corporate action and do not (i)
contravene the Borrower's charter or by-laws, (ii) violate any
Applicable Law or any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award rendered or promulgated
under or pursuant to such Applicable Law or (iii) conflict with or
result in the breach of, or constitute a default under, any contract,
loan agreement, indenture, mortgage, deed of trust, lease or other
financial instrument, or any other material contract or agreement,
binding on or affecting the Borrower, any of its Subsidiaries or any of
their properties.
(c) No authorization or approval (including exchange control
approval) or other action by, and no notice to or filing with, any
governmental authority or regulatory body or any other third party is
required for the due execution, delivery or performance by the Borrower
of this Amendment.
(d) This Amendment has been duly executed and delivered by the
Borrower. This Amendment is legal, valid and binding obligation of the
Borrower, enforceable against the Borrower in accordance with its
terms.
(e) There is no action, suit, investigation, litigation or
proceeding affecting the Borrower or any of its Subsidiaries,
including, without limitation, any Environmental Action, pending or
threatened before any court, governmental agency or arbitrator that (i)
could have a Material Adverse Effect or (ii) purports to affect the
legality, validity or enforceability of this Amendment or any of the
other Loan Documents, as amended hereby.
SECTION 4. REFERENCE TO AND EFFECT ON THE LOAN DOCUMENTS. (a)
On and after the effectiveness of this Amendment, each reference in the Credit
Agreement to "this Agreement", "hereunder", "hereof" or words of like import
referring to the Credit Agreement, and each reference in the Notes and each of
the other Loan Documents to "the Credit Agreement", "thereunder", "thereof" or
words of like import referring to the Credit Agreement, shall mean and be a
reference to the Credit Agreement, as amended by this Amendment.
<PAGE>
(b) The Credit Agreement, as specifically amended by this
Amendment, is and shall continue to be in full force and effect and is hereby in
all respects 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 Lender under any of the Loan Documents, nor
constitute a waiver of, or a consent from, any of the terms and conditions of
any of the Loan Documents.
SECTION 5. ACCURIDE CONSENT. Accuride as Guarantor under the
Completion Guaranty and the Parent Guaranty and as Pledgor under the Pledge
Agreement hereby consents to this Amendment and hereby confirms and agrees that,
notwithstanding the effectiveness of this Amendment, the Completion Guaranty,
the Parent Guaranty and the Pledge Agreement are, and shall continue to be, in
full force and effect and are hereby ratified and confirmed in all respects.
SECTION 6. COSTS AND EXPENSES. The Borrower agrees to pay on
demand all costs and expenses of the Lender in connection with the preparation,
execution, delivery and administration, modification and amendment of this
Amendment and the other documents to be delivered in connection herewith
(including, without limitation, the reasonable fees and expenses of counsel for
the Lender) in accordance with the terms of Section 7.04 of the Credit
Agreement.
SECTION 7. EXECUTION IN COUNTERPARTS. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute but one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Amendment by telecopier shall be effective as delivery of a manually executed
counterpart of this Amendment.
<PAGE>
SECTION 8. GOVERNING LAW. This Amendment shall be governed by,
and construed in accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
ACCURIDE DE MEXICO, S.A. DE C.V.
By __________________________
Name:
Title:
ACCURIDE CORPORATION
By __________________________
Name:
Title:
CITIBANK MEXICO, S.A., GRUPO
FINANCIERO CITIBANK
By __________________________
Name:
Title:
<PAGE>
CONSENT OF
PARTICIPANTS
Dated as of December 31, 1999
Reference is made to the Amendment No. 2 to the Credit
Agreement dated as of December 31, 1999 (the "AMENDMENT"; the terms defined in
the Amendment or the Credit Agreement (as defined in the Amendment) being used
herein as therein defined) among Accuride de Mexico, S.A. de C.V., a corporation
organized and existing under the laws of the United Mexican States, Accuride
Corporation, a Delaware corporation, and Citibank Mexico, S.A., Grupo Financiero
Citibank (the "LENDER").
Each Participant named below as a party to a Participation
Agreement with the Lender, hereby consents to the Amendment and hereby confirms
and agrees that, notwithstanding the effectiveness of the Amendment, the
Participation Agreement to which such Participant is a party is, and shall
continue to be, in full force and effect and is hereby ratified and confirmed in
all respects, except that, on and after the effective date of the Amendment,
each reference in such Participation Agreement to the Credit Agreement,
"thereunder," "thereof", "therein" or words of like import referring to the
Credit Agreement shall mean and be a reference to the Credit Agreement as
amended by the Amendment.
This Consent may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute but one and the same Consent. Delivery of an executed counterpart of
a signature page to this Consent by telecopier shall be effective as delivery of
a manually executed counterpart of this Consent.
This Consent shall be governed by, and construed in accordance
with, the law of the State of New York.
THE BANK OF NOVA SCOTIA
By __________________________
Name:
Title:
COMERICA BANK
By __________________________
Name:
Title:
<PAGE>
ACCURIDE CORPORATION
SUPPLEMENTAL SAVINGS PLAN
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1998)
<PAGE>
ACCURIDE CORPORATION
SUPPLEMENTAL SAVINGS PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I PREAMBLE 1.....................................................................................1
ARTICLE II DEFINITIONS....................................................................................1
2.1 DEFINITIONS....................................................................................1
2.2 CONSTRUCTION...................................................................................5
ARTICLE III ELIGIBILITY....................................................................................5
3.1 SELECTION OF PARTICIPANTS......................................................................5
3.2 PARTICIPATION ELECTIONS........................................................................5
3.3 REVISED ELECTIONS..............................................................................6
3.4 DISCONTINUANCE OF PARTICIPATION................................................................7
3.5 ADOPTION BY AFFILIATES.........................................................................7
3.6 CHANGE IN AFFILIATE STATUS.....................................................................7
3.7 SPECIAL ARRANGEMENTS...........................................................................7
ARTICLE IV CONTRIBUTIONS...................................................................................8
4.1 PARTICIPANT CONTRIBUTIONS......................................................................8
4.2 MATCHING CONTRIBUTIONS.........................................................................8
4.3 PROFIT SHARING CONTRIBUTIONS...................................................................9
4.4 CASH BALANCE CONTRIBUTIONS.....................................................................9
4.5 CHANGE OF CONTROL CONTRIBUTIONS...............................................................11
ARTICLE V IN-SERVICE DISTRIBUTIONS AND WITHDRAWALS.......................................................11
5.1 SPECIAL PURPOSE DEFERRAL CONTRIBUTIONS........................................................11
5.2 HARDSHIP......................................................................................12
5.3 ACCELERATION OF BENEFITS......................................................................12
5.4 LIMITATION ON DISTRIBUTIONS...................................................................13
ARTICLE VI CREDITING OF CONTRIBUTIONS AND EARNINGS........................................................13
6.1 TRANSFER TO TRUSTEE; ALLOCATION OF CONTRIBUTIONS..............................................13
-i-
<PAGE>
6.2 INVESTMENT EARNINGS OR LOSSES.................................................................14
6.3 INVESTMENT DIRECTION..........................................................................14
6.4 FORFEITURES...................................................................................15
ARTICLE VII VESTING.......................................................................................15
7.1 VESTING.......................................................................................15
ARTICLE VIII PAYMENT OF BENEFITS...........................................................................16
8.1 PAYMENT.......................................................................................16
8.2 METHOD OF PAYMENT.............................................................................17
8.3 BENEFICIARY DESIGNATIONS......................................................................17
8.4 LIMITATION ON DISTRIBUTIONS...................................................................17
ARTICLE IX ADMINISTRATION OF THE PLAN......................................................................18
9.1 ADOPTION OF TRUST.............................................................................18
9.2 POWERS OF THE PLAN ADMINISTRATOR..............................................................18
9.3 CREATION OF COMMITTEE.........................................................................18
9.4 CHAIRMAN AND SECRETARY........................................................................19
9.5 APPOINTMENT OF AGENTS.........................................................................19
9.6 MAJORITY VOTE AND EXECUTION OF INSTRUMENTS....................................................19
9.7 ALLOCATION OF RESPONSIBILITIES................................................................19
9.8 CONFLICT OF INTEREST..........................................................................19
9.9 ACTION TAKEN BY COMPANY.......................................................................20
9.10 DELEGATIONS OF AUTHORITY......................................................................20
9.11 INDEMNIFICATION...............................................................................20
ARTICLE X CLAIMS REVIEW PROCEDURE.........................................................................20
10.1 CLAIMS........................................................................................20
10.2 APPEALS.......................................................................................21
ARTICLE XI LIMITATION ON ASSIGNMENT; PAYMENTS TO LEGALLY INCOMPETENT DISTRIBUTEE; CORRECTIONS.............22
11.1 ANTI-ALIENATION CLAUSE........................................................................22
11.2 PERMITTED ARRANGEMENTS........................................................................22
11.3 PAYMENT TO MINOR OR INCOMPETENT...............................................................22
-ii-
<PAGE>
11.4 UNDERPAYMENT OR OVERPAYMENT OF BENEFITS.......................................................22
ARTICLE XII AMENDMENT, MERGER AND TERMINATION.............................................................23
12.1 AMENDMENT.....................................................................................23
12.2 MERGER OR CONSOLIDATION OF COMPANY............................................................23
12.3 TERMINATION OF PLAN OR DISCONTINUANCE OF CONTRIBUTIONS........................................23
ARTICLE XIII GENERAL PROVISIONS............................................................................24
13.1 LIMITATION ON PARTICIPANTS' RIGHTS............................................................24
13.2 STATUS OF PARTICIPANTS AS UNSECURED CREDITORS.................................................24
13.3 CANCELLATION OR REDUCTION OF ACCOUNTS.........................................................24
13.4 EXCEPTION TO CONTRIBUTION RULE................................................................24
13.5 STATUS OF TRUST FUND..........................................................................24
13.6 FUNDING UPON A CHANGE OF CONTROL..............................................................25
13.7 UNIFORM ADMINISTRATION........................................................................25
13.8 HEIRS AND SUCCESSORS..........................................................................25
13.9 NO LIABILITY FOR ACCELERATION OF PAYMENTS.....................................................25
</TABLE>
-iii-
<PAGE>
ACCURIDE CORPORATION
SUPPLEMENTAL SAVINGS PLAN
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1998)
ARTICLE I
PREAMBLE
Accuride Corporation (the "Company") previously adopted the Accuride
Corporation Supplemental Savings Plan (the "Plan"), effective January 1, 1998.
The Company now wishes to amend and restate the Plan, as of the Plan's original
effective date, to provide for an additional cash balance contribution to the
Plan.
The purpose of this Plan is to provide a select group of management or
highly compensated employees of the Company and certain of its affiliates with
the opportunity to defer a portion of their compensation and to receive various
contributions from their employers. As a result, the Plan shall be considered
to be a "top hat plan", exempt from many of the requirements of the Employee
Retirement Income Security Act of 1974 ("ERISA"). This Plan is not intended to
"qualify" for favorable tax treatment pursuant to Section 401(a) of the
Internal Revenue Code of 1986 (the "Code") or any successor section or statute.
ARTICLE II
DEFINITIONS
2.1 DEFINITIONS.
When a word or phrase appears in this Plan with the initial letter
capitalized, and the word or phrase does not begin a sentence, the word or
phrase shall generally be a term defined in this Section 2.1 or in the
Preamble. In certain circumstances, capitalized words or phrases will have a
special purpose definition in a section of the Plan for use only in the
specific section of this Plan. The following words and phrases used in the Plan
with the initial letter capitalized shall have the meanings set forth in this
Section 2.1, unless a clearly different meaning is required by the context in
which the word or phrase is used:
(a) "ACCOUNT" OR "ACCOUNTS" means the accounts which may be
maintained by the Plan Administrator to reflect the interest of a Participant
under the Plan.
(b) "AFFILIATE" means (1) a corporation which is a member of the same
controlled group of corporations (within the meaning of Section 414(b) of the
Code) as is the Company, (2) any other trade or business (whether or not
incorporated) controlling, controlled by, or under common control with the
Company (within the meaning of Section 414(c) of the Code), and (3) any other
corporation, partnership, or other organization which is a member of an
affiliated service group (within the meaning of Section 414(m) of the Code)
with the Company or which is otherwise required to be aggregated with the
Company pursuant to Section 414(o) of the Code.
<PAGE>
(c) "BASE SALARY" means the total regular salary paid by an Employer
to a Participant during the Plan Year, determined prior to any deferrals made
by the Employee under this Plan, the Savings Plan or a cafeteria plan within
the meaning of Code Section 125. "Base Salary" excludes commissions, bonuses,
overtime, living or other allowances, contributions by an Employer under this
Plan or any other employee benefit plan of the Employer or other extra,
incentive, premium, contingent, supplemental, or additional compensation, all
as determined and defined by the Plan Administrator in the exercise of its
discretion. For purposes of Sections 4.2 and 4.3, only the Base Salary paid to
the Participant during the portion of the Plan Year in which the Participant is
an "eligible Participant" pursuant to Section 4.2 or Section 4.3, as
applicable, will be considered.
(d) "BENEFICIARY" means the person or trust that a Participant, in
his most recent written designation filed with the Plan Administrator, shall
have designated to receive his Accounts under the Plan in the event of his
death.
(e) "BOARD OF DIRECTORS" means the Board of Directors of the Company.
(f) "CASH BALANCE CONTRIBUTIONS" means the contributions made by an
Employer on behalf of a Participant pursuant to Section 4.4.
(g) "CASH BALANCE CONTRIBUTIONS ACCOUNT" means the Account maintained
to record the Cash Balance Contributions, if any, made by an Employer on behalf
of a Participant pursuant to Section 4.4.
(h) "CASH BALANCE PLAN" means the Accuride Cash Balance Pension Plan,
as in effect and as amended from time to time.
(i) "CHANGE OF CONTROL" For purposes of this Plan, a "Change of
Control" shall be deemed to have taken place at the time: (1) when any "person"
or "group" of persons (as such terms are used in Sections 13 and 14 of the
Securities Exchange Act of 1934, as amended from time to time (the "Exchange
Act")), other than the Company or any employee benefit plan sponsored by the
Company, becomes the "beneficial owner" (as such term is used in Section 13 of
the Exchange Act) of 25% or more of the total number of the Company's common
shares at the time outstanding; (2) of the approval by the vote of the
Company's stockholders holding at least 50% (or such greater percentage as may
be required by the Certificate of Incorporation or By-Laws of the Company or by
law) of the voting stock of the Company of any merger, consolidation, sale of
assets, liquidation or reorganization in which the Company will not survive as
a publicly owned company; or (3) when the individuals who, at the beginning of
any period of two years or less, constituted the Board of Directors of the
Company cease, for any reason, to constitute at least a majority thereof,
unless the election or nomination for election of each new director was
approved by the vote of at least two-thirds of the directors then still in
office who were directors at the beginning of such period.
(j) "COMPENSATION" means the sum of a Participant's Base Salary and
Incentive Compensation.
-2-
<PAGE>
(k) "DEFERRAL CONTRIBUTIONS" means the Regular and Special Purpose
Deferral Contributions made by a Participant pursuant to Section 4.1.
(l) "DEFERRAL CONTRIBUTIONS ACCOUNT" means the Account maintained to
record the Deferral Contributions made by a Participant pursuant to Section
4.1. The Deferral Contributions Account shall be divided into as many
subaccounts as the Plan Administrator deems necessary to distinguish between
the different types of Deferral Contributions and the dates on which they are
to be distributed.
(m) "DISABILITY." For purposes of this Plan, a Participant shall be
conclusively presumed to be under Disability only during the period of time
that the Participant qualifies to receive, without considering any offsets,
long term disability payments under his Employer's Long Term Disability
Insurance Plan.
(n) "DISTRIBUTION DATE" means the date or dates selected by the
Participant and agreed to by the Plan Administrator on the form prescribed by
the Plan Administrator as the date or dates on which the Participant's Special
Purpose Deferral Contributions are to be distributed to the Participant.
(o) "EARNINGS" shall have the same meaning as provided under the Cash
Balance Plan.
(p) "EMPLOYEE" means any individual classified by his Employer as a
common law employee of the Employer. For this purpose, the classification that
is relevant is the classification in which such individual is placed by the
Employer for purposes of this Plan and the classification of such individual
for any other purpose (e.g., employment tax or withholding purposes) shall be
irrelevant. If an individual is characterized as a common law employee of the
Employer by a governmental agency or court but not by the Employer, such
individual shall be treated as an employee who has not been designated for
participation in this Plan.
(q) "EMPLOYER" means the Company and any Affiliate that has adopted
this Plan pursuant to Section 3.5.
(r) "EMPLOYER CONTRIBUTIONS ACCOUNTS" means the Cash Balance
Contributions Account, the Profit Sharing Contributions Account and the
Matching Contributions Account maintained for a Participant.
(s) "INCENTIVE COMPENSATION" means the amount awarded to any
Participant in any year under the Accuride Corporation Annual Incentive
Compensation Plan or under any other incentive or bonus program adopted by his
Employer.
(t) "INVESTMENT FUND" means the investment fund or funds established
by the Plan Administrator pursuant to Section 6.3.
(u) "MATCHING CONTRIBUTIONS" means the contributions made by an
Employer on behalf of a Participant or all Participants pursuant to Section
4.2.
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(v) "MATCHING CONTRIBUTIONS ACCOUNT" means the Account maintained to
record the Matching Contributions, if any, made by an Employer on a
Participant's behalf pursuant to Section 4.2.
(w) "NORMAL RETIREMENT AGE" shall have the same meaning as provided
under the Cash Balance Plan.
(x) "PARTICIPANT" means any Employee selected for participation
pursuant to Section 3.1. Depending on the context, the term Participant also
may refer to a current or former Employee who no longer is making contributions
to the Plan but who has not received a distribution of all amounts to which he
is entitled.
(y) "PLAN ADMINISTRATOR" means the committee designated by the
Company to carry out its responsibilities under the Plan as set forth in
Section 9.3.
(z) "PLAN YEAR" means the 12 month period beginning on each January 1
and ending on the next following December 31.
(aa) "PROFIT SHARING CONTRIBUTIONS" means the contributions made by an
Employer on behalf of a Participant pursuant to Section 4.3.
(bb) "PROFIT SHARING CONTRIBUTIONS ACCOUNT" means the Account
maintained to record the Profit Sharing Contributions made on behalf of a
Participant pursuant to Section 4.3.
(cc) "REGULAR DEFERRAL CONTRIBUTION" means a Deferral Contribution
that may only be distributed following a Participant's termination of
employment.
(dd) "SAVINGS PLAN" means the Accuride Employee Savings Plan, as in
effect and amended from time to time.
(ee) "SPECIAL PURPOSE DEFERRAL CONTRIBUTION" means a Deferral
Contribution that will become distributable upon a Distribution Date designated
by the Participant on the form prescribed by the Plan Administrator.
(ff) "TRUST AGREEMENT" means that certain trust agreement established
pursuant to the Plan between the Company and the Trustee or any trust agreement
hereafter established, the provisions of which are incorporated herein by
reference.
(gg) "TRUSTEE" means the Trustee under the Trust Agreement.
(hh) "TRUST FUND" means all assets of whatsoever kind or nature held
from time to time by the Trustee pursuant to the Trust Agreement, without
distinction as to income and principal and without regard to source, (i.e.,
Employer or Participant contributions, earnings or forfeitures).
(ii) "VALUATION DATE" means each day on which the New York Stock
Exchange is open for trading.
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2.2 CONSTRUCTION.
The masculine gender, where appearing in the Plan, shall include the
feminine gender (and vice versa), and the singular shall include the plural,
unless the context clearly indicates to the contrary. Headings and subheadings
are for the purpose of reference only and are not to be considered in the
construction of this Plan. If any provision of this Plan is determined to be
for any reason invalid or unenforceable, the remaining provisions shall
continue in full force and effect. All of the provisions of this Plan shall be
construed and enforced in accordance with the laws of the State of Indiana, to
the extent not preempted by ERISA.
ARTICLE III
ELIGIBILITY
3.1 SELECTION OF PARTICIPANTS.
(a) GENERAL RULE. For purposes of Title I of ERISA, the Plan is
intended to be an unfunded plan of deferred compensation covering a select
group of management or highly compensated employees. As a result, participation
in the Plan shall be limited to Employees who are properly included in one or
both of these categories. From such group, the Plan Administrator shall select
Employees for participation in the Plan. The Plan Administrator's selections
shall be made in its discretion and shall be final and binding for all purposes
under this Plan.
(b) NO WAITING PERIODS. A Participant need not complete any
particular period of service in order to be eligible to make Deferral
Contributions. In order to receive allocations of Cash Balance Contributions, a
Participant must also be eligible to participate in the Cash Balance Plan for
that Plan Year, as determined in accordance with the provisions of the Cash
Balance Plan. In order to receive allocations of Matching Contributions, a
Participant must also be eligible to receive matching contributions under the
Savings Plan for that Plan Year, as determined in accordance with the
provisions of the Savings Plan. In order to receive allocations of Profit
Sharing Contributions, a Participant must also be eligible to receive profit
sharing contributions under the Savings Plan for that Plan Year, as determined
in accordance with the provisions of the Savings Plan.
(c) LIMITATION OF PARTICIPATION. The Plan Administrator, in the
exercise of its discretion, may exclude an Employee who otherwise meets the
requirements of this Section 3.1 from participation in the Plan.
3.2 PARTICIPATION ELECTIONS.
Each Participant shall make an election to participate in the Plan on
such form or forms and at such time as the Plan Administrator shall require. In
the election, the Participant shall select the amount or rate of Deferral
Contributions to be made for the following Plan Year and shall characterize the
Deferral Contributions as either Regular or Special Purpose Deferral
Contributions. If Special Purpose Deferral Contributions are being made, the
Participant also
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shall select a Distribution Date or Distribution Dates for such Contributions.
If Regular Deferral Contributions are being made, the Participant shall select
the manner in which distributions are to be made from the Participant's
Accounts and whether distributions are to commence immediately following the
Participant's termination of employment or whether they are to be postponed
until the later of termination of employment or a specified date. If the
Participant elects to make any type of Deferral Contributions, the Participant
shall authorize the reduction of the Participant's Compensation in an amount
equal to his Deferral Contributions. The election form or forms also may set
forth such other information as the Plan Administrator shall require. If a
Participant's initial election form is executed and delivered within 30 days of
the day on which the Participant is notified that he is eligible to participate
in the Plan, the Participant's Deferral Contributions may be determined with
reference to Compensation earned on or after the first day of the first full
payroll period next following receipt of the election form by the Plan
Administrator or as of such other uniform date (not earlier than the first day
of the next full payroll period) as may be designated by the Plan
Administrator. If the Participant does not execute and deliver an initial
election form within the initial 30 day period, the Participant's Deferral
Contributions may be determined with reference to Compensation earned on or
after the first day of the first payroll period in any later Plan Year if the
Participant executes and delivers the appropriate form or forms to the Plan
Administrator at least 30 days (or such other period specified by the Plan
Administrator pursuant to rules of uniform application) prior to the first day
of such Plan Year.
3.3 REVISED ELECTIONS.
A Participant must file a new election form prior to the beginning
of each Plan Year which shall set forth the amount or rate of his Deferral
Contributions for the new Plan Year and also shall characterize the Deferral
Contributions as either Regular or Special Purpose Deferral Contributions. If
Special Purpose Deferral Contributions are being made, the new election form
also shall set forth the Distribution Date or Distribution Dates for such
Contributions. The new amount or rate of Deferral Contributions will only apply
to Deferral Contributions made for the relevant Plan Year and the new form must
be filed at least 30 days (or such other period specified by the Plan
Administrator pursuant to rules of uniform application) before the first day of
such Plan Year. A Participant may change the method of distributions or the
timing of the commencement of distributions of Regular Deferral Contributions
at any time by filing the appropriate form as prescribed by the Plan
Administrator. The new election will be honored only if the appropriate form is
filed at least one (1) year prior to the Participant's termination of
employment. A Participant may not change the Distribution Date for Special
Purpose Deferral Contributions that are made prior to the date on which a new
election form is effective. In a new election form, however, the Participant
may designate a different or additional Distribution Date for Special Purpose
Deferral Contributions to be made in the future.
3.4 DISCONTINUANCE OF PARTICIPATION.
Once an individual is designated as a Participant, he will continue
as such for all future Plan Years unless and until the Plan Administrator
specifically acts to discontinue his participation or the Participant's
participation is suspended pursuant to Section 5.3(c). The Plan Administrator
may discontinue a Participant's participation in the Plan at any time for any
or no
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reason. If a Participant's participation is discontinued, he will no longer be
eligible to make Deferral Contributions or to receive Cash Balance, Matching or
Profit Sharing Contributions. The Participant will not be entitled to receive a
distribution, however, until the occurrence of one of the events listed in
Articles V or VIII, unless the Plan Administrator, in the exercise of its
discretion, directs that a distribution be made as of an earlier date, in which
case the Participant's Accounts shall be distributed on the same basis as if
the Participant's employment had been terminated.
3.5 ADOPTION BY AFFILIATES.
Any Affiliate of the Company may adopt this Plan with the approval
of the Plan Administrator. Any Affiliate that permits an Employee to make
Deferral Contributions pursuant to Section 4.1 shall be deemed to have adopted
this Plan without any further action. At the request of the Plan Administrator,
however, the Affiliate shall evidence its adoption of the Plan by an
appropriate resolution of its Board of Directors or in such other manner as may
be authorized by the Plan Administrator. By adopting this Plan, the Affiliate
shall be deemed to have agreed to make the contributions called for by Article
IV, agreed to comply with all of the other terms and provisions of this Plan,
delegated to the Plan Administrator the power and responsibility to administer
this Plan with respect to the Affiliate's Employees, and delegated to the
Company the full power to amend or terminate this Plan with respect to the
Affiliate's Employees.
3.6 CHANGE IN AFFILIATE STATUS.
If an Affiliate that has adopted this Plan ceases to be an Affiliate
of the Company, that Affiliate shall no longer be an Employer and all
Participants employed by that Affiliate on the date the Affiliate ceases to be
an Affiliate shall be deemed to have terminated employment on such date.
3.7 SPECIAL ARRANGEMENTS.
The Company has the discretion to enter into special arrangements
with individuals which allow such individuals to receive benefits on some basis
other than pursuant to the provision of ARTICLES III, IV and V. All such
special arrangements shall be set forth in writing. The remaining provisions of
this Plan may apply to any such individual if the Company and the individual so
agree; provided, however, that if any provision of this Plan conflicts with a
provision included in the written document that describes the special
arrangement, the provision of the written document shall control.
ARTICLE IV
CONTRIBUTIONS
4.1 PARTICIPANT CONTRIBUTIONS.
(a) GENERAL RULE. For any Plan Year, a Participant may elect to defer
a portion of the Base Salary or Incentive Compensation otherwise payable to
him. Any such deferrals
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shall be expressed in whole percentages or as a specific dollar amount, as
specified in the Participant's election form. Except as otherwise provided in
Section 13.4, amounts deferred shall be transferred by the Company or the
appropriate Affiliate to the Trust.
(b) REGULAR OR SPECIAL PURPOSE DEFERRAL CONTRIBUTIONS. As provided in
Sections 3.2 and 3.3, in each election form filed by a Participant, the
Participant shall characterize his Deferral Contributions as Regular Deferral
Contributions or Special Purpose Deferral Contributions. Pursuant to Article V,
Regular Deferral Contributions are only distributable following the
Participant's termination of employment. Special Purpose Deferral Contributions
become distributable upon the Distribution Date specified by the Participant.
Unless the Plan Administrator adopts rules limiting the number of Distribution
Dates that a Participant may specify, the Participant may designate any number
of Distribution Dates.
(c) LIMITATIONS ON DEFERRALS. The Plan Administrator may limit a
Participant's Deferral Contributions in accordance with such uniform rules as
it may adopt from time to time.
(d) CHANGE IN CONTRIBUTIONS. As provided in Section 3.3, a Participant
must file a new election form prior to each new Plan Year to select the amount
or rate of Deferral Contributions for the following Plan Year. If a Participant
does not file a new election form at such time, no Deferral Contributions will
be withheld from the Participant's Compensation during the following Plan Year.
(e) SUSPENSION OF DEFERRAL CONTRIBUTIONS. A Participant may suspend
the Deferral Contributions being made from his Base Salary at any time by so
notifying the Plan Administrator in writing and in accordance with such rules
of uniform application as the Plan Administrator may adopt from time to time.
If a Participant suspends his Deferral Contributions with respect to Base
Salary, the Participant may not file a new election form electing to make
Deferral Contributions with respect to Base Salary until the December 1 of the
year following the year in which such suspension occurred. The Deferral
Contributions made pursuant to such new election form may then commence in
accordance with the provisions of Section 3.3. A Participant may not suspend
the Deferral Contributions being made from his Incentive Compensation.
4.2 MATCHING CONTRIBUTIONS.
Each Employer shall make a Matching Contribution on behalf of each
of its "eligible Participants". For this purpose, a Participant is an "eligible
Participant" if (i) the Participant is eligible to receive a matching
contribution under the Savings Plan, and (ii) the Participant has made Salary
Pre-Tax Deferral Contributions (as such term is defined in the Savings Plan) to
the Savings Plan in an amount equal to the lesser of the maximum elective
deferrals permitted by Section 402(g) of the Code or any other limitation
imposed by the Savings Plan. The Matching Contribution due for each eligible
Participant shall equal the difference between (i) 2.5% of the Participant's
Base Salary and (ii) the Company matching contribution for such eligible
Participant under the Savings Plan. Except as otherwise provided in Section
13.4, the Matching Contributions shall be transmitted to the Trust following
the end of the Plan Year for which such
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Matching Contributions are due. The Matching Contributions shall be allocated
to the Matching Contributions Accounts of the eligible Participants. If a
Participant was eligible to receive a matching contribution under the Savings
Plan for only a part of a Plan Year, only the Base Salary paid in such part of
the Plan Year will be considered for purposes of this Section 4.2.
4.3 PROFIT SHARING CONTRIBUTIONS.
(a) ELIGIBILITY. For each year in which an Employer makes a "Company
Profit Sharing Contribution" (as such term is defined in the Savings Plan) to
the Savings Plan, such Employer shall make a Profit Sharing Contribution on
behalf of each of its "eligible Participants" to this Plan, subject to the
limitations set forth below. For purposes of this Section, a Participant will
be considered to be an "eligible Participant" only if (i) the Participant is
also a Participant in the Savings Plan, and (ii) the Participant is eligible,
generally, to receive a Company Profit Sharing Contribution.
(b) AMOUNT. The Profit Sharing Contribution to which each eligible
Participant is entitled pursuant to Section 4.3(a) shall be equal to: (i) the
Participant's "eligible Base Salary" multiplied by the "applicable percentage"
for that Plan Year; less (ii) the Company Profit Sharing Contribution allocated
to the Participant under the Savings Plan for that Plan Year. For this purpose,
the "applicable percentage" is the percentage contributed to the accounts of
the participants in the Savings Plan as a Company Profit Sharing Contribution
in the Plan Year, as adjusted to reflect all limitations and carryovers called
for by Section 3.6 of the Savings Plan (or any modified or replacement section
of the Savings Plan). A Participant's "eligible Base Salary" is the Base Salary
earned by the Participant for the portion of the Plan Year during which the
Participant is eligible to receive a Company Profit Sharing Contribution under
the Savings Plan.
(c) SPECIAL SITUATIONS. The Plan Administrator shall have the
discretion to allow a Participant to receive a Profit Sharing Contribution if
the Participant otherwise satisfies all requirements for receiving a Company
Profit Sharing Contribution under the Savings Plan but does not receive such
contribution because the Participant is employed by an Employer that does not
make Company Profit Sharing Contributions to the Savings Plan.
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4.4 CASH BALANCE CONTRIBUTIONS.
(a) ELIGIBILITY. An Employer shall make a Cash Balance Contribution
to this Plan on behalf of each of its "eligible Participants" as of the last
day of each Plan Year, subject to the limitations set forth below. For purposes
of this Section, a Participant will be considered to be an "eligible
Participant" for a Plan Year only if (i) the Participant is also a Participant
in the Cash Balance Plan, and (ii) the Participant is eligible to receive a
credit under the Cash Balance Plan for that Plan Year.
(b) AMOUNT. As of the last day of each Plan Year, each "eligible
Participant's" Cash Balance Contributions Account will be credited with an
amount equal to the Base Earnings Contribution described in Section 4.4(b)(1),
plus the Excess Earnings Contribution described in Section 4.4(b)(2), and minus
the Qualified Plan Credit described in Section 4.4(b)(3).
(1) BASE EARNINGS CONTRIBUTION. The Base Earnings Contribution
shall be equal to the "Applicable Percentage" of the eligible Participant's
Earnings for the Plan Year, as determined in accordance with the following
schedule:
<TABLE>
<CAPTION>
APPLICABLE PERCENTAGE
-------------------------------------------------------------------------------
THOSE EMPLOYEES WHO
WERE PARTICIPANTS IN THE PLAN ON JANUARY 21,
1998, AND, AS OF SUCH DATE, HAD ATTAINED NORMAL
PARTICIPANT'S AGE RETIREMENT AGE, HAD ATTAINED AGE 55 WITH TEN
ON LAST DAY YEARS OF SERVICE, OR HAD COMPLETED 25 YEARS OTHER
OF PLAN YEAR: OF SERVICE REGARDLESS OF AGE: PARTICIPANTS:
------------- ----------------------------- -------------
<S> <C> <C>
20-29 2% 2%
30-39 3% 3%
40-44 4% 4%
45-49 8.5% 5%
50-54 9.5% 6%
55-59 11.5% 8%
60 and over 11.5% 10%
</TABLE>
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For this purpose, a Participant's age will be the Participant's age on
the Participant's birthday that falls in the Plan Year. For purposes of this
paragraph, the Participant's Earnings for the entire Plan Year will be taken
into account even if the Participant first becomes a "Participant" during the
Plan Year.
(2) EXCESS EARNINGS CONTRIBUTION. The Excess Earnings
Contribution shall be equal to 2% of the Participant's "excess Earnings." For
this purpose, a Participant's "excess Earnings" shall equal the Participant's
Earnings for the Plan Year less the Social Security Taxable Wage Base for the
calendar year that coincides with the Plan Year.
(3) QUALIFIED PLAN CREDIT. The Qualified Plan Credit shall be
equal to the amount credited to the eligible Participant pursuant to Sections
3.1(b) and (c) of the Cash Balance Plan.
(c) SPECIAL SITUATIONS. The Plan Administrator shall have the
discretion to allow a Participant to receive a Cash Balance Contribution if the
Participant otherwise satisfies all requirements for receiving a cash balance
credit under the Cash Balance Plan but does not receive such credit because the
Participant is employed by an Employer that does not participate in the Cash
Balance Plan.
ARTICLE V
IN-SERVICE DISTRIBUTIONS AND WITHDRAWALS
5.1 SPECIAL PURPOSE DEFERRAL CONTRIBUTIONS.
A Participant may designate a Distribution Date for Special Purpose
Deferral Contributions in his initial or any subsequent election form. If the
Participant makes such an election, the subaccount in the Participant's
Deferral Contributions Account that is maintained in order to record the
Special Purpose Deferral Contributions that are to be distributed as of that
Distribution Date will be distributed to the Participant as of the Distribution
Date in one lump sum payment. The Distribution Date election shall apply only
to subaccounts attributable to Special Purpose Deferral Contributions and no
amounts attributable to Regular Deferral Contributions subaccounts or Employer
Contributions Accounts will be distributed pursuant to a Distribution Date
election. As a general rule, the death, Disability, or other termination of
employment of a Participant shall not have any impact on the timing of the
distribution of Special Purpose Deferral Contribution subaccounts, which will
be distributed to the Participant (or the Participant's Beneficiary in the case
of death) as of the originally selected Distribution Date even though the
Participant is no longer employed by an Employer. In the exercise of its
discretion, however, the Plan Administrator may order the distribution of all
or any of said subaccounts at any time following the Participant's death,
Disability or other termination of employment and prior to the designated
Distribution Date.
5.2 HARDSHIP.
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In the event of an unforeseeable financial emergency, a Participant
may make a written request to the Plan Administrator for a hardship withdrawal
from his Deferral Contributions Account or his Employer Contributions Accounts.
The maximum hardship withdrawal shall be the balance of the Account or Accounts
to which such hardship withdrawal is charged. For purposes of this Plan, an
"unforeseeable financial emergency" is defined as a severe financial hardship
to the Participant resulting from a sudden and unexpected illness or accident
of the Participant or a dependent (as such term is defined in Section 152(a) of
the Code) of the Participant, loss of the Participant's property due to
casualty, or other similar extraordinary and unforeseeable circumstances
arising as a result of events beyond the control of the Participant. The
granting of a Participant's request for a hardship withdrawal shall be left to
the absolute, unfettered discretion of the Plan Administrator and the Plan
Administrator may deny such request even if an unforeseeable financial
emergency clearly exists. A request for a hardship withdrawal must be made in
writing at least 30 days in advance, on a form provided by the Plan
Administrator, and must be expressed as a specific dollar amount. The amount of
a hardship withdrawal may not exceed the lesser of the amount required to meet
the Participant's unforeseeable financial emergency or the maximum withdrawal
referred to above. A hardship withdrawal will not be permitted to the extent
that the hardship is or may be relieved through reimbursement or compensation
by insurance or otherwise, liquidation of the Participant's assets to the
extent that such liquidation would not itself cause a severe financial
hardship, by the cessation of Deferral Contributions, or by a loan from the
Savings Plan.
5.3 ACCELERATION OF BENEFITS.
(a) GENERAL. A Participant may elect to receive an accelerated
withdrawal from his Deferral Contributions Account (but not his Employer
Contributions Accounts) by filing an election with the Plan Administrator on
such forms as may be prescribed from time to time by the Plan Administrator. If
a Participant who is a current Employee makes such an election, except as
otherwise provided below, the Participant shall receive a single lump sum
payment equal to 90% of the Participant's Deferral Contributions Account
balance. If a Participant who is no longer an Employee makes such an election,
except as otherwise provided below, the Participant shall receive a single lump
sum payment equal to 80% of the Participant's Deferral Contributions Account
balance. For purposes of determining the amount to be distributed, the
Participant's Deferral Contributions Account shall be valued as of the
effective date of the withdrawal. The accelerated withdrawal shall be paid as
soon as reasonably possible following the effective date.
(b) FORFEITURE. A Participant who is a current Employee shall forfeit
the remaining 10% of his Deferral Contributions Account as of the day on which
the accelerated withdrawal is distributed to the Participant. A participant who
is a former Employee shall forfeit the remaining 20% or his Deferral
Contributions Account as of the day on which the accelerated withdrawal is
distributed to the Participant.
(c) SUSPENSION OF PARTICIPATION. If a Participant elects to receive
an accelerated withdrawal, the Participant's right to make Deferral
Contributions shall be suspended for 12 months from the date the accelerated
withdrawal is paid to the Participant. Upon expiration of the 12 month
suspension period, the Participant shall be permitted to execute a new
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election form and to begin making Deferral Contributions as of the first day of
the first payroll period in any subsequent Plan Year.
5.4 LIMITATION ON DISTRIBUTIONS.
To the extent that any payment under this Article, when combined
with all other payments received during the year that are subject to the
limitations on deductibility under Section 162(m) of the Code, exceeds the
limitations on deductibility under Section 162(m) of the Code, such payment
shall, in the discretion of the Plan Administrator, be deferred to a later
calendar year. Such deferred amounts shall be paid in the next succeeding
calendar year, provided that such payment, when combined with any other
payments subject to the Section 162(m) limitations received during the year,
does not exceed the limitations on deductibility under Section 162(m) of the
Code.
ARTICLE VI
CREDITING OF CONTRIBUTIONS AND EARNINGS
6.1 TRANSFER TO TRUSTEE; ALLOCATION OF CONTRIBUTIONS.
All Cash Balance Contributions, Deferral Contributions, Profit
Sharing Contributions, and Matching Contributions shall be transmitted to the
Trustee by the Company and the adopting Affiliates as soon as reasonably
practicable. The Cash Balance Contributions, Deferral Contributions, Profit
Sharing Contributions and Matching Contributions made on behalf of a
Participant shall be credited to the Cash Balance Contributions Account,
Deferral Contributions Account, Profit Sharing Contributions Account, or
Matching Contributions Account maintained for that Participant. The Plan
Administrator shall maintain a separate subaccount within the Deferral
Contributions Account to record the Special Purpose Deferral Contributions (and
any investment earnings or losses attributable to those Special Purpose
Deferral Contributions) that are to be distributed as of each Distribution Date
selected by a Participant. The Plan Administrator also may maintain such other
subaccounts as it deems necessary or desirable. All payments from an Account
between Valuation Dates shall be charged against the Account as of the
preceding Valuation Date. The Accounts are bookkeeping accounts only and the
Plan Administrator is not in any way obligated to segregate assets for the
benefit of any Participant.
6.2 INVESTMENT EARNINGS OR LOSSES.
As of each Valuation Date, the Plan Administrator will determine the
positive or negative earnings for each of the Investment Funds available
pursuant to Section 6.3(c). The Plan Administrator then will determine the
portion of the "adjusted balance" of each of the Participant's Accounts that is
invested in each of the Investment Funds and will allocate the positive or
negative earnings to Participant Accounts in proportion to the "adjusted
balance" for that Account and that Investment Fund. For this purpose, the
"adjusted balance" of an Account will be the balance of the Account as of the
preceding Valuation Date less all withdrawals, distributions and other amounts
chargeable against the Account pursuant to any other provisions
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of this Plan since the prior Valuation Date. The earnings adjustments allocated
to any Account shall be allocated among the subaccounts of that Account in the
same manner.
6.3 INVESTMENT DIRECTION.
(a) INVESTMENT FUNDS. The Plan Administrator shall designate two or
more Investment Funds in which each Participant shall direct the investment of
amounts credited to his Accounts. Any of the Investment Funds may be changed
from time to time by the Plan Administrator.
(b) PARTICIPANT DIRECTIONS.
(1) GENERAL. Upon becoming a Participant in the Plan, each
Participant may direct that all of the amounts attributable to his Accounts be
invested in a single Investment Fund or may direct fractional (percentage)
increments of his Accounts to be invested in such Investment Fund or Investment
Funds as he shall desire, in accordance with such procedures, if any, as may be
established by the Plan Administrator. Notwithstanding the foregoing, for
purposes of crediting earnings for the 1999 Plan Year, a Participant's Cash
Balance Contributions Account will be deemed to have been invested in the
default investment designated under Section 6.3(b)(2). As of each Valuation
Date, a Participant may change his designations with respect to future
contributions and direct transfers among Investment Funds by making an election
in accordance with such procedures as may be established by the Plan
Administrator. The designation will continue until changed in accordance with
such procedures.
(2) DEFAULT SELECTION. In the absence of any designation, a
Participant will be deemed to have directed the investment of all of his
Accounts in the Investment Fund that is most equivalent to the default
investment fund in effect for purposes of the Savings Plan (currently, the
American Century Strategic Allocation: Conservative).
(3) IMPACT OF ELECTION. The Participant's selection of
Investment Funds shall serve only as a measurement of the value of the Accounts
of said Participant pursuant to Section 6.2 and Section 6.3(c) and the Plan
Administrator and the Trustee are not required to invest a Participant's
Accounts in accordance with the Participant's selections.
(c) RATE OF RETURN. As soon as possible after each Valuation Date,
the Plan Administrator shall determine the rate of return, positive or
negative, experienced on each of the Investment Funds. The rate of return
determined by the Plan Administrator in good faith and in its discretion
pursuant to this Section shall be binding and conclusive on the Participant,
the Participant's Beneficiary and all parties claiming through them. The Plan
Administrator may delegate the responsibility for calculating the rate of
return and the calculation and allocation of the investment earnings
adjustments to the Accounts to a third party.
(d) CHARGES. In the exercise of its discretion, the Plan
Administrator may charge one or more of the Participant's Accounts for the
reasonable expenses of carrying out investment instructions directly related to
the Accounts, as the Plan Administrator deems appropriate.
6.4 FORFEITURES.
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The amount forfeited pursuant to Sections 5.3 and 8.1(c) shall
reduce the amounts that the Company would otherwise contribute to the Plan
pursuant to Sections 4.2, 4.3 and 4.4.
ARTICLE VII
VESTING
7.1 VESTING.
Subject to Section 13.3, a Participant shall have a fully vested and
nonforfeitable interest in his Deferral Contributions Account, Matching
Contributions Account, and Profit Sharing Contributions Account at all times.
Subject to Section 13.3, a Participant who has completed five "Years of
Service" (as such term is defined in the Cash Balance Plan) shall have a fully
vested nonforfeitable interest in his Cash Balance Contributions Account. The
Cash Balance Contributions Account of a Participant who is credited with less
than five Years of Service for purposes of the Cash Balance Plan on the date of
his termination of employment with the Company and all Affiliates shall be
forfeited. Notwithstanding the foregoing sentence, in the event of a Change of
Control, the Cash Balance Contributions Accounts of all Participants shall be
fully vested and nonforfeitable. In addition, the Plan Administrator, in its
sole and absolute discretion, may credit a Participant with such additional
service as may be necessary to achieve full vesting of the Participant's Cash
Balance Contributions Account.
ARTICLE VIII
PAYMENT OF BENEFITS
8.1 PAYMENT.
(a) TIMING. With the exception of the distribution or withdrawal of
amounts pursuant to Article V and the distribution of amounts pursuant to
Section 8.1(b), no distributions will be made to a Participant prior to the
Participant's death or termination of employment with the Company and all
Affiliates. Subject to the provisions of Section 5.1, which deals with the
distribution of the Special Purpose Deferral Contributions subaccounts in a
Participant's Deferral Contributions Account, following the Participant's death
or termination of employment, distributions normally will be made as soon as
possible and in any event shall commence within 60 days following the end of
the Plan Year in which the Participant dies or terminates employment. As
provided in Section 3.2 and Section 3.3, a Participant may elect in his initial
or any revised election form to defer the receipt of distributions until the
later of termination of employment or a specified date. If such an election has
been made (and, if the election was made in a revised election form, the
election form has been in effect for the requisite period of time provided in
Section 3.3), distributions to the Participant (or the Participant's
Beneficiary in the case of death) shall be postponed to the extent necessary to
honor such election.
(b) AMOUNT. When the Participant is eligible to receive a
distribution pursuant to Section 8.1(a), he shall be entitled to a distribution
(in the form provided in accordance with
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Section 8.2) of the amounts credited to his Deferral Contributions Account,
his Matching Contributions Account, his Profit Sharing Contributions Account,
and, if vested pursuant to Section 7.1, his Cash Balance Contributions
Account.
(c) FORFEITURE. If a Participant's Cash Balance Contributions Account
is not vested pursuant to Section 7.1 at the time the Participant is eligible to
receive a distribution pursuant to Section 8.1(a), his Cash Balance
Contributions Account shall be forfeited.
(d) SPECIAL PAYMENT PROVISIONS APPLICABLE ON SALE OF AFFILIATE. A
Participant who is employed by an Affiliate as of the date that the Affiliate
ceases to be an Affiliate for purposes of this Plan shall receive a distribution
of his or her accounts as soon as possible following such date, regardless of
any prior election made by the Participant to defer the receipt of benefits
pursuant to Section 3.2 and Section 3.3.
8.2 METHOD OF PAYMENT.
Any payments from a Participant's Accounts shall be made either in a
lump sum in cash, or in cash payments in substantially equal annual installments
over a period certain not exceeding 10 years, such method of payment to be
elected by the Participant in his initial election form or in any revised
election form that has been in effect for the requisite period of time specified
in Section 3.3. If installment payments are made, the provisions of Sections 6.2
and 6.3 shall continue to apply to the unpaid balance. Unless a Participant has
affirmatively elected to receive payments in installments over a period of 10
years or less, the Participant's Accounts shall be distributed in one lump sum.
If a Participant is married at the time an election form or a revised election
form is filed, an election to receive payments in other than a lump sum shall be
ineffective unless the Participant's spouse consents to such election on a form
prescribed by or acceptable to the Plan Administrator for that purpose.
8.3 BENEFICIARY DESIGNATIONS.
In the event of the death of the Participant, the Participant's
interest in his Accounts shall be paid to the Participant's Beneficiary. Each
Participant shall have the right to designate, on forms supplied by and
delivered to the Plan Administrator, a Beneficiary or Beneficiaries to receive
his benefits hereunder in the event of the Participant's death. If the
Participant is married at the time the Beneficiary Designation is filed, the
designation will be ineffective unless the designation names the spouse as the
Beneficiary of at least 50% of the Participant's Accounts or the Participant's
spouse consents to the designation. If a Participant marries after a Beneficiary
Designation is filed, the designation will no longer be effective. Subject to
the spousal consent requirements noted above, each Participant may change his
Beneficiary designation from time to time in the manner described above. Upon
receipt of such designation by the Plan Administrator, such designation or
change of designation shall become effective as of the date of the notice,
whether or not the Participant is living at the time the notice is received.
There shall be no liability on the part of the Employer, the Plan Administrator
or the Trustee with respect to any payment authorized by the Plan Administrator
in accordance with the most recent valid Beneficiary designation of the
Participant in its possession before receipt of a more recent and valid
Beneficiary designation. If no designated Beneficiary is living when benefits
become
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payable, or if there is no validly designated Beneficiary, the Beneficiary
shall be the Participant's estate. If the designated Beneficiary dies after
the payment of benefits begin, then the Beneficiary for the remainder of the
benefits payable shall be the estate of the Beneficiary.
8.4 LIMITATION ON DISTRIBUTIONS.
Distributions made under this Article shall be subject to the same
limitations set forth in Section 5.4 of the Plan.
ARTICLE IX
ADMINISTRATION OF THE PLAN
9.1 ADOPTION OF TRUST.
The Company shall enter into a Trust Agreement with the Trustee,
which Trust Agreement shall form a part of this Plan and is hereby incorporated
herein by reference.
9.2 POWERS OF THE PLAN ADMINISTRATOR.
(a) GENERAL POWERS OF PLAN ADMINISTRATOR. The Plan Administrator shall
have the power and discretion to perform the administrative duties described in
this Plan or required for proper administration of the Plan and shall have all
powers necessary to enable it to properly carry out such duties. Without
limiting the generality of the foregoing, the Plan Administrator shall have the
power and discretion to construe and interpret this Plan, to hear and resolve
claims relating to the Plan and to decide all questions and disputes arising
under the Plan. The Plan Administrator shall determine, in its discretion, the
service credited to the Participants, the status and rights of a Participant,
and the identity of the Beneficiary or Beneficiaries entitled to receive any
benefits payable on account of the death of a Participant.
(b) PARTICIPATION. The Plan Administrator also shall have the
discretion to exclude employees from participation in the Plan and to
discontinue a Participant's participation in the Plan.
(c) DISTRIBUTIONS. All benefit disbursements by the Trustee shall be
made upon the instructions of the Plan Administrator.
(d) DECISIONS CONCLUSIVE. The decisions of the Plan Administrator upon
all matters within the scope of its authority shall be binding and conclusive
upon all persons.
(e) REPORTING. The Plan Administrator shall file all reports and forms
lawfully required to be filed by the Plan Administrator and shall distribute any
forms, reports or statements to be distributed to Participants and others.
(f) INVESTMENTS. The Plan Administrator shall keep itself advised with
respect to the investment of the Trust Fund.
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<PAGE>
(g) ELECTRONIC ADMINISTRATION. The Plan Administrator shall have the
authority to employ alternative means (including, but not limited to,
electronic, internet, intranet, voice response, or telephonic) by which
Participants may submit their elections and forms required for participation in,
and the administration of, this Plan.
9.3 CREATION OF COMMITTEE.
A committee shall perform the Company's duties as Plan Administrator.
The committee shall consist of at least two members, and they shall hold office
during the pleasure of the Board of Directors. Unless and until the Company
appoints other individuals to serve on this committee, the committee members
shall be the members of the Company's Benefits Administration Committee as they
may change from time to time. The committee members shall serve without
compensation but shall be reimbursed for all expenses by the Company. The
committee shall conduct itself in accordance with the provisions of this Section
9. The members of the committee may resign with 30 days notice in writing to the
Company and may be removed immediately at any time by written notice from the
Company.
9.4 CHAIRMAN AND SECRETARY.
The committee shall elect a chairman from among its members and shall
select a secretary who is not required to be a member of the committee and who
may be authorized to execute any document or documents on behalf of the
committee. The secretary of the committee or his designee shall record all acts
and determinations of the committee and shall preserve and retain custody of all
such records, together with such other documents as may be necessary for the
administration of this Plan or as may be required by law.
9.5 APPOINTMENT OF AGENTS.
The committee may appoint such other agents, who need not be members
of the committee, as it may deem necessary for the effective performance of its
duties, whether ministerial or discretionary, as the committee may deem
expedient or appropriate. The compensation of any agents who are not employees
of the Company shall be fixed by the committee within any limitations set by the
Board of Directors.
9.6 MAJORITY VOTE AND EXECUTION OF INSTRUMENTS.
In all matters, questions and decisions, the action of the committee
shall be determined by a majority vote of its members. They may meet informally
(which may include attendance by conference call) or take any ordinary action
without the necessity of meeting as a group. All instruments executed by the
committee shall be executed by a majority of its members or by any member of the
committee designated to act on its behalf. The committee may adopt such bylaws
and regulations as it deems desirable for the conduct of its affairs.
9.7 ALLOCATION OF RESPONSIBILITIES.
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The committee may allocate responsibilities among its members or
designate other persons to act on its behalf. Any allocation or designation,
however, must be set forth in writing and must be retained in the permanent
records of the committee.
9.8 CONFLICT OF INTEREST.
No member of the committee who is a Participant shall take any part
in any action in connection with his participation as an individual. Such action
shall be voted or decided by the remaining members of the committee.
9.9 ACTION TAKEN BY COMPANY.
Any action to be taken by the Company shall be taken by resolution
adopted by the Board of Directors; provided, however, that by resolution the
Board of Directors may delegate to any committee of the Board, any committee of
officers or other employees, or any officer of the Company the authority to take
any actions hereunder.
9.10 DELEGATIONS OF AUTHORITY.
All delegations of responsibility set forth in this document
regarding the determination of benefits and the interpretation of the terms of
the Plan confer discretionary authority upon the Plan Administrator; provided,
however, that the Plan Administrator shall not retain any such discretionary
authority after a Change of Control occurs.
9.11 INDEMNIFICATION.
To the extent permitted by law, the Company shall and does hereby
jointly and severally indemnify and agree to hold harmless the employees,
officers and directors of it and its Affiliates who serve in fiduciary or other
capacities with respect to the Plan from all loss, damage, or liability, joint
or several, including payment of expenses in connection with defense against any
such claim, for their acts, omissions and conduct, and for the acts, omissions
or conduct of their duly appointed agents, which acts, omissions or conduct
constitute or are alleged to constitute a breach of such individual's fiduciary
or other responsibilities under the Act or any other law, except for those acts,
omissions, or conduct resulting from his own willful misconduct, willful failure
to act, or gross negligence; provided, however, that if any party would
otherwise be entitled to indemnification hereunder in respect of any liability
and such party shall be insured against loss as a result of such liability by
any insurance contract or contracts, such party shall be entitled to
indemnification hereunder only to the extent by which the amount of such
liability shall exceed the amount thereof payable under such insurance contract
or contracts.
ARTICLE X
CLAIMS REVIEW PROCEDURE
10.1 CLAIMS.
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(a) FILING OF CLAIM. A Participant or Beneficiary entitled to benefits
need not file a written claim to receive benefits. If a Participant, Beneficiary
or any other person is dissatisfied with the determination of his benefits,
eligibility, participation or any other right or interest under this Plan, such
person may file a written statement setting forth the basis of the claim with
the Plan Administrator in a manner prescribed by the Plan Administrator. In
connection with the determination of a claim, or in connection with review of a
denied claim, the claimant may examine this Plan and any other pertinent
documents generally available to Participants relating to the claim and may
submit comments in writing.
(b) NOTICE OF DECISION. A written notice of the disposition of any such
claim shall be furnished to the claimant within 60 days after the claim is filed
with the Plan Administrator, provided that the Plan Administrator may have an
additional period to decide the claim if it advises the claimant in writing of
the need for an extension and the date on which it expects to decide the claim.
The notice of disposition of a claim shall refer, if appropriate, to pertinent
provisions of this Plan, shall set forth in writing the reasons for denial of
the claim if the claim is denied (including references to any pertinent
provisions of this Plan), and where appropriate shall explain how the claimant
can perfect the claim.
10.2 APPEALS.
(a) REVIEW. If the claim is denied, in whole or in part, the claimant
shall also be notified in writing that a review procedure is available.
Thereafter, within 90 days after receiving the written notice of the Plan
Administrator's disposition of the claim, the claimant may request in writing,
and shall be entitled to, a review meeting with the Plan Administrator to
present reasons why the claim should be allowed. The claimant shall be entitled
to be represented by counsel at the review meeting. The claimant also may submit
a written statement of his claim and the reasons for granting the claim. Such
statement may be submitted in addition to, or in lieu of, the review meeting
with the Plan Administrator. The Plan Administrator shall have the right to
request and receive from a claimant such additional information, documents or
other evidence as the Plan Administrator may reasonably require. If the claimant
does not request a review meeting within 90 days after receiving written notice
of the Plan Administrator's disposition of the claim, the claimant shall be
deemed to have accepted the Plan Administrator's written disposition, unless the
claimant shall have been physically or mentally incapacitated so as to be unable
to request review within the 90 day period.
(b) DECISION FOLLOWING REVIEW. A decision on review shall be rendered
in writing by the Plan Administrator ordinarily not later than 60 days after
review, and a written copy of such decision shall be delivered to the claimant.
If special circumstances require an extension of the ordinary period, the Plan
Administrator shall so notify the claimant. In any event, if a claim is not
determined within 120 days after submission for review, it shall be deemed to be
denied.
(c) DECISIONS FINAL; PROCEDURES MANDATORY. To the extent permitted by
law, a decision on review by the Plan Administrator shall be binding and
conclusive upon all persons whomsoever. To the extent permitted by law,
completion of the claims procedures described in this Section shall be a
mandatory precondition that must be complied
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with prior to commencement of a legal or equitable action in connection with
the Plan by a person claiming rights under the Plan or by another person
claiming rights through such a person. The Plan Administrator may, in its
sole discretion, waive these procedures as a mandatory precondition to such
an action.
ARTICLE XI
LIMITATION ON ASSIGNMENT; PAYMENTS TO LEGALLY INCOMPETENT
DISTRIBUTEE; CORRECTIONS
11.1 ANTI-ALIENATION CLAUSE.
No benefit which shall be payable under the Plan to any person shall
be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge, and any attempt to anticipate,
alienate, sell, transfer, assign, pledge, encumber, charge or otherwise dispose
of the same shall be void. No benefit shall in any manner be subject to the
debts, contracts, liabilities, engagements or torts of any person, nor shall it
be subject to attachment or legal process for or against any person, except to
the extent as may be required by law.
11.2 PERMITTED ARRANGEMENTS.
Section 11.1 shall not preclude arrangements for the withholding of
taxes from benefit payments, arrangements for the recovery of benefit
overpayments, or arrangements for direct deposit of benefit payments to an
account in a bank, savings and loan association or credit union (provided that
such arrangement is not part of an arrangement constituting an assignment or
alienation).
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11.3 PAYMENT TO MINOR OR INCOMPETENT.
Whenever any benefit which shall be payable under the Plan is to be
paid to or for the benefit of any person who is then a minor or determined by
the Plan Administrator to be incompetent by qualified medical advice, the Plan
Administrator need not require the appointment of a guardian or custodian, but
shall be authorized to cause the same to be paid over to the person having
custody of the minor or incompetent, or to cause the same to be paid to the
minor or incompetent without the intervention of a guardian or custodian, or to
cause the same to be paid to a legal guardian or custodian of the minor or
incompetent if one has been appointed or to cause the same to be used for the
benefit of the minor or incompetent.
11.4 UNDERPAYMENT OR OVERPAYMENT OF BENEFITS.
In the event that, through mistake or computational error, benefits
are underpaid or overpaid, there shall be no liability for any more than the
correct amount of benefits under the Plan. Overpayments may be deducted from
future payments under the Plan, and underpayment may be added to future payments
under the Plan. In lieu of receiving reduced benefits under the Plan, a
Participant or Beneficiary may elect to make a lump sum repayment of any
overpayment.
ARTICLE XII
AMENDMENT, MERGER AND TERMINATION
12.1 AMENDMENT.
The Company shall have the right at any time, by an instrument in
writing duly executed, acknowledged and delivered to the Plan Administrator, to
modify, alter or amend this Plan, in whole or in part, prospectively or
retroactively; provided, however, that the duties and liabilities of the Plan
Administrator and the Trustee hereunder shall not be substantially increased
without its written consent; and provided further that the amendment shall not
reduce any Participant's interest in the Plan, calculated as of the date on
which the amendment is adopted. The agreements referred to in Section 13.3(a)
and the offsets referred to in Section 13.3(b) shall not be deemed to violate
the last clause of the preceding sentence.
12.2 MERGER OR CONSOLIDATION OF COMPANY.
The Plan shall not be automatically terminated by the Company's
acquisition by or merger into any other employer, but the Plan shall be
continued after such acquisition or merger if the successor employer elects and
agrees to continue the Plan. All rights to amend, modify, suspend, or terminate
the Plan shall be transferred to the successor employer, effective as of the
date of the merger. If an Employer other than the Company is acquired by or
merged into any organization other than an Affiliate, the Plan shall be
terminated as to the acquired Employer unless the Company and the acquiror agree
otherwise in writing.
12.3 TERMINATION OF PLAN OR DISCONTINUANCE OF CONTRIBUTIONS.
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<PAGE>
It is the expectation of the Company and each of the Employers that
this Plan and the payment of contributions hereunder will be continued
indefinitely. However, continuance of the Plan is not assumed as a contractual
obligation of the Company or any other Employer, and the right is reserved at
any time to terminate this Plan or to reduce, temporarily suspend or discontinue
contributions hereunder. If the Plan is terminated or contributions are reduced,
temporarily suspended, or discontinued with respect to all Employers or any one
or more Employers, the Accounts of the affected Participants will continue to be
held pursuant to the Plan until the date or dates on which such Accounts would
have become distributable had the Plan not been terminated or had contributions
not been reduced, temporarily suspended, or discontinued. In the exercise of its
discretion, however, the Plan Administrator may direct that the Accounts of any
Participant affected by the termination of the Plan as to all Employers or a
particular Employer, or the reduction, temporary suspension, or discontinuance
of contributions, be distributed as of an earlier date or dates.
ARTICLE XIII
GENERAL PROVISIONS
13.1 LIMITATION ON PARTICIPANTS' RIGHTS.
Participation in the Plan shall not give any Participant the right to
be retained in the employ of the Company or any Affiliate or any right or
interest in the Trust Fund other than as herein provided. The Company and each
Affiliate reserves the right to dismiss any Participant without any liability
for any claim either against the Trust Fund, except to the extent herein
provided, or against the Company, or Affiliate.
13.2 STATUS OF PARTICIPANTS AS UNSECURED CREDITORS.
Each Participant is an unsecured creditor of the Company or the
Affiliate that employs the Participant and, except for the Deferral
Contributions, Cash Balance Contributions, and Profit Sharing Contributions or
Matching Contributions placed in the Trust Fund as provided in this Plan, no
assets of the Company or any Affiliate will be segregated from the general
assets of the Company or any Affiliate for the payment of benefits under this
Plan. If the Company or any Affiliate acquires any insurance policies or other
investments to assist it in meeting its obligations to Participants, those
policies or other investments will nonetheless remain part of the general assets
of the Company or Affiliate.
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13.3 CANCELLATION OR REDUCTION OF ACCOUNTS.
An Employer and one of its Participants may agree from time to time
to reduce (but not below zero) the amount credited to the Participant's Account
under this Plan. Any such agreement must be in writing, must be signed by the
Participant and the Employer, shall relate only to amounts credited to the
Participant's Account and shall not circumvent the provisions of Sections 3.3,
8.1, or 8.2 regarding the timing or manner of distributions from this Plan.
13.4 EXCEPTION TO CONTRIBUTION RULE.
Neither the Company nor any other Employer shall have any obligation
to transfer Deferral Contributions made by the Participants, Cash Balance,
Matching or Profit Sharing Contributions due from the Company or such Employer,
or any other amounts to the Trust Fund, if and so long as the assets of the
Trust Fund exceed the aggregate Account Balances of all Participants. The
provisions of this Section 13.4 supersede the provisions of Sections 4.1, 4.2,
4.3, or any other provision of this Plan that purports to require the Company or
any other Employer to transfer amounts to the Trust Fund.
13.5 STATUS OF TRUST FUND.
The Trust Fund is being established to assist the Company and the
adopting Affiliates in meeting their obligations to the Participants and to
provide the Participants with a measure of protection in certain limited
instances. In certain circumstances described in the Trust Agreement, the assets
of the Trust Fund may be used for the benefit of the Company's or an Affiliate's
creditors and, as a result, the Trust Fund is considered to be part of the
Company's and adopting Affiliate's general assets. Benefit payments due under
this Plan shall either be paid from the Trust Fund or from the Company's or
Affiliate's general assets as directed by the Plan Administrator. Despite the
establishment of the Trust Fund, it is intended that the Plan be considered to
be "unfunded" for purposes of the Act and the Code.
13.6 FUNDING UPON A CHANGE OF CONTROL.
Prior to the day on which a Change of Control occurs, if for any
reason the assets of the Trust Fund are less than the aggregate Account Balances
of all Participants, the Company shall transfer an amount equal to the
deficiency to the Trustee of the Trust. If it is discovered at any time that the
amount initially transferred is less than the total amount called for by the
preceding sentence, the shortfall shall be transferred to the Trustee
immediately upon the discovery of such error.
13.7 UNIFORM ADMINISTRATION.
Whenever in the administration of the Plan any action is required by
the Plan Administrator, such action shall be uniform in nature as applied to all
persons similarly situated.
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13.8 HEIRS AND SUCCESSORS.
All of the provisions of this Plan shall be binding upon all persons
who shall be entitled to any benefits hereunder, and their heirs and legal
representatives.
13.9 NO LIABILITY FOR ACCELERATION OF PAYMENTS.
Under the Plan, Participants are allowed, to a certain extent, to
designate the dates on which distributions are to be made to them. The Plan
Administrator, however, also has the right, in the exercise of its discretion,
to accelerate payments. By accepting the benefits offered by the Plan, each
Participant (and each Beneficiary claiming through a Participant) acknowledges
that the Plan Administrator may override the Participant's elections and agrees
that neither the Participant nor any Beneficiary shall have any claim against
the Plan Administrator, the Trustee, or any Employer if distributions are made
earlier than anticipated by the Participant due to the Plan Administrator's
exercise of its discretion to accelerate payments.
To signify its adoption of this restated Plan document, the Company
has caused this restatement of the Plan to be executed by a duly authorized
officer of the Company on this _____ day of _________, 1999.
ACCURIDE CORPORATION
By_________________________________
Its________________________________
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Schedule 21.1
ACCURIDE CORPORATION
LIST OF SUBSIDIARIES
Accuride Canada, Inc.
Accuride Texas, Inc.
Accuride Kentucky Holding Company
Accuride Ventures, Inc.
Accuride Tennessee Holding Company
Accuride Henderson Facilities Management Corporation
Accuride Henderson Limited Liability Company
Accuride Columbia Facilities Management Corporation
Accuride Columbia General Partnership
AKW, L.P.
AKW General Partner, L.L.C.
Accuride de Mexico, S.A. de C.V.
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
333-68227 of Accuride Corporation on Form S-8 of our report dated February 17,
2000, appearing in this Annual Report on Form 10-K of Accuride Corporation for
the year ended December 31, 1999.
DELOITTE & TOUCHE LLP
Indianapolis, Indiana
March 20, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF ACCURIDE CORPORATION AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> 32,493 3,471
<SECURITIES> 0 0
<RECEIVABLES> 58,048 53,295
<ALLOWANCES> 462 1,008
<INVENTORY> 41,143 36,980
<CURRENT-ASSETS> 155,906 109,505
<PP&E> 389,700 317,338
<DEPRECIATION> 177,007 157,512
<TOTAL-ASSETS> 525,772 404,925
<CURRENT-LIABILITIES> 82,921 56,406
<BONDS> 453,061 387,939
0 0
0 0
<COMMON> 24,738 24,158
<OTHER-SE> (56,869) (82,254)
<TOTAL-LIABILITY-AND-EQUITY> 525,772 404,925
<SALES> 505,854 383,583
<TOTAL-REVENUES> 505,854 383,583
<CGS> 390,776 301,029
<TOTAL-COSTS> 33,493 34,034
<OTHER-EXPENSES> 1,081 2,904
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 39,786 33,084
<INCOME-PRETAX> 43,741 15,886
<INCOME-TAX> 18,410 7,935
<INCOME-CONTINUING> 25,331 7,951
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 25,331 7,951
<EPS-BASIC> 1,018 321
<EPS-DILUTED> 954 303
</TABLE>
