<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period ended June 30, 2000
[ ] 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: 333-82617
VENTURE HOLDINGS COMPANY LLC
Michigan 38-3470015
VEMCO, INC.
Michigan 38-2737797
VENTURE INDUSTRIES CORPORATION
Michigan 38-2034680
VENTURE MOLD & ENGINEERING CORPORATION
Michigan 38-2556799
VENTURE LEASING COMPANY
Michigan 38-2777356
VEMCO LEASING, INC.
Michigan 38-2777324
VENTURE HOLDINGS CORPORATION
Michigan 38-2793543
VENTURE SERVICE COMPANY
Michigan 38-3024165
EXPERIENCE MANAGEMENT, LLC
Michigan 38-3382308
VENTURE EUROPE, INC.
Michigan 38-3464213
VENTURE EU CORPORATION
Michigan 38-3470019
(State or other (Exact name of registrant as
jurisdiction of specified in its charter) (I.R.S. Employer
incorporation or Identification
organization) Number)
------------------
33662 James J. Pompo
Fraser, Michigan 48026
(Address, including zip code of registrants' principal executive offices)
Registrants' telephone number, including area code:
(810) 294-1500
<PAGE> 2
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 .
---- ----
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION (UNAUDITED) PAGE #
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 2000,
December 31, 1999 and June 30, 1999 1
Consolidated Statements of Income and Comprehensive Income
for the Three Months and Six Months Ended June 30, 2000
and 1999 2
Consolidated Statements of Changes in Member's Equity
for the Three Months and Six Months Ended June 30, 2000
and 1999 3
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 2000 and 1999 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition 25
Item 3. Quantitative and Qualitative Disclosures About Market Risk 31
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 32
Item 6. Exhibits and Reports on Form 8-K 33
Signature 34
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VENTURE HOLDINGS COMPANY LLC
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
-----------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
June 30, June 30,
2000 December 31, 1999
ASSETS (Unaudited) 1999 (Unaudited)
------ ----------- ---- -----------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 5,147 $ 7,392 $ 40,295
Accounts receivable, net, includes related party
receivables of $91,959, $82,644 and $65,690 at
June 30, 2000, December 31, 1999 and June 30,
1999, (Note 6) 352,188 311,344 360,092
Inventories (Note 3) 160,765 154,620 172,081
Investments (Note 5) 21,054 40,501 25,875
Prepaid and other current assets 56,582 53,861 49,310
----------- ----------- -----------
Total current assets 595,736 567,718 647,653
Property, Plant and Equipment, Net 544,858 562,838 601,162
Intangible Assets, Net (Note 2) 143,349 172,090 59,398
Other Assets 79,395 82,504 54,756
Deferred Tax Assets 49,898 29,826 16,146
----------- ----------- -----------
Total Assets $ 1,413,236 $ 1,414,976 $ 1,379,115
=========== =========== ===========
LIABILITIES AND MEMBER'S EQUITY
Current Liabilities:
Accounts payable $ 208,191 $ 194,596 203,123
Accrued interest 13,855 13,403 5,816
Accrued expenses 119,295 108,653 85,891
Current portion of long term debt (Note 4) 27,520 68,368 10,502
----------- ----------- -----------
Total current liabilities 368,861 385,020 305,332
Pension Liabilities & Other 54,764 57,614 34,176
Deferred Tax Liabilities 70,021 59,431 19,859
Long Term Debt (Note 4) 854,597 852,008 950,819
----------- ----------- -----------
Total liabilities 1,348,243 1,354,073 1,310,186
Commitments and Contingencies -- -- --
Member's Equity:
Member's equity 73,104 63,340 92,457
Accumulated other comprehensive loss - minimum pension
liability in excess of unrecognized prior service -- -- (737)
cost, net of tax
Accumulated other comprehensive loss - cumulative
translation adjustments (8,111) (2,437) (22,791)
----------- ----------- ------------
Member's Equity 64,993 60,903 68,929
----------- ----------- ------------
Total Liabilities and Member's Equity $ 1,413,236 $ 1,414,976 $ 1,379,115
=========== =========== ============
</TABLE>
See notes to consolidated financial statements.
1
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VENTURE HOLDINGS COMPANY LLC
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited)
--------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES $ 483,200 $ 273,803 $ 963,706 $ 439,795
COST OF PRODUCT SOLD 421,249 246,686 831,997 379,756
---------- ---------- ---------- -----------
GROSS PROFIT 61,951 27,117 131,709 60,039
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSE 33,360 19,954 73,664 34,224
PAYMENTS TO BENEFICIARY IN
LIEU OF DISTRIBUTIONS 600 77 1,165 77
---------- ---------- ---------- -----------
INCOME FROM OPERATIONS 27,991 7,086 56,880 25,738
INTEREST EXPENSE (Note 5) 24,754 15,549 50,415 25,028
OTHER INCOME (Note 5) 1,749 19,900 1,964 19,900
---------- ---------- ---------- -----------
INCOME BEFORE TAXES 4,986 11,437 8,429 20,610
TAX PROVISION (BENEFIT) 586 (662) (1,815) 405
MINORITY INTEREST 210 29 480 29
---------- ---------- ---------- -----------
NET INCOME BEFORE
EXTRAORDINARY LOSS 4,190 12,070 9,764 20,176
EXTRAORDINARY LOSS ON EARLY
EXTINGUISHMENT OF DEBT -- 5,569 -- 5,569
---------- ---------- ---------- -----------
NET INCOME 4,190 6,501 9,764 14,607
OTHER COMPREHENSIVE INCOME (LOSS) -
Cumulative translation adjustments 504 (22,791) (5,674) (22,791)
---------- ---------- ---------- -----------
COMPREHENSIVE INCOME (LOSS) $ 4,694 $ (16,290) $ 4,090 $ (8,184)
========== ========== ========== ===========
</TABLE>
2
<PAGE> 5
VENTURE HOLDINGS COMPANY LLC
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBER'S EQUITY (Unaudited)
--------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
MEMBER'S EQUITY, BEGINNING
OF PERIOD $ 60,299 $ 85,219 $ 60,903 $ 77,113
COMPREHENSIVE INCOME (LOSS):
NET INCOME 4,190 6,501 9,764 14,607
OTHER COMPREHENSIVE INCOME (LOSS) 504 (22,791) (5,674) (22,791)
-------- -------- -------- --------
COMPREHENSIVE INCOME (LOSS) 4,694 (16,290) 4,090 (8,184)
-------- -------- -------- --------
MEMBER'S EQUITY, END OF PERIOD $ 64,993 $ 68,929 $ 64,993 $ 68,929
======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 6
VENTURE HOLDINGS COMPANY LLC
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
Six Months Ended
June 30,
2000 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 9,764 $ 14,607
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 47,012 26,031
Unrealized loss on currency exchange 46,742 --
Net extraordinary loss on early extinguishment of debt -- 5,569
Loss from the disposal of fixed assets 22 --
Change in accounts receivable (40,855) 6,897
Change in inventories (6,145) (4,224)
Change in prepaid and other current assets (3,036) (3,992)
Change in other assets 20,736 (15,240)
Change in accounts payable 13,594 20,333
Change in accrued expenses 11,093 369
Change in other liabilities (2,850) 1,461
Change in deferred taxes (9,553) (386)
---------- --------
Net cash provided by operating activities 86,524 51,425
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of subsidiaries, net of cash acquired -- (444,012)
Capital expenditures (41,439) (13,177)
Proceeds from sale of fixed assets 172 --
Unrealized gain on investments (3,511) (19,663)
---------- --------
Net cash used in investing activities (44,778) (476,852)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under revolving credit agreement 37,000 (58,500)
Net borrowings on bank debt -- 5,806
Net proceeds from issuance of debt -- 650,000
Debt issuance fees -- (26,981)
Payment for early extinguishment of debt -- (82,788)
Principal payments on debt (71,970) (19,949)
---------- --------
Net cash (used in) provided by financing activities (34,970) 467,588
Effect of exchange rate changes on cash and cash equivalents (9,021) (1,996)
NET (DECREASE) INCREASE IN CASH (2,245) 40,165
CASH AT BEGINNING OF PERIOD 7,392 130
---------- --------
CASH AT END OF PERIOD $ 5,147 $ 40,295
========== ========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for interest $ 49,215 $ 31,969
========== ========
Cash paid during the period for taxes $ 3,035 $ 35
========== ========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 7
VENTURE HOLDINGS COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
--------------------------------------------------------------------------------
1. FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in
the United States of America for interim financial information. The
consolidated financial statements include the accounts of Venture
Holdings Company LLC (hereinafter referred to as "Venture") and all of
Venture's domestic and foreign subsidiaries that are wholly-owned or
majority-owned (collectively referred to as the "Company"). The Company's
investment in a less than majority-owned business is accounted for under
the equity method. In the opinion of management, all adjustments
(consisting of only normal recurring items), which are necessary for a
fair presentation have been included. The results for interim periods are
not necessarily indicative of results which may be expected for any other
interim period or for the full year. For further information, refer to
the consolidated financial statements and notes thereto included in the
Company's 1999 Annual Report on Form 10-K filed with the Securities and
Exchange Commission.
2. ACQUISITIONS
On May 28, 1999, the Company purchased Peguform GmbH ("Peguform"), a
leading European supplier of high performance interior and exterior
plastic modules, systems and components to European OEMs (the "Peguform
Acquisition"), for approximately $463 million. During the second quarter
of 2000, an agreement was reached on post closing adjustments
related to the Peguform Acquisition reducing the consideration paid for
Peguform by $18 million to $445 million. The Company used the proceeds of
the final settlement to reduce its outstanding borrowings.
The excess of the purchase price over the fair market value of the net
assets acquired (goodwill) is approximately $108 million and is being
amortized on a straight-line basis over 30 years.
For further information, refer to Note 2 to the consolidated financial
statements included in the Company's 1999 Annual Report on Form 10-K.
The following unaudited pro forma financial data is presented to
illustrate the estimated effects of the Peguform Acquisition, as if the
transaction had occurred as of the beginning of the period presented.
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1999
----
<S> <C>
Net sales $ 991,651
Net income before extraordinary loss 22,883
Net income 17,314
</TABLE>
5
<PAGE> 8
3. INVENTORIES
<TABLE>
<CAPTION>
Inventories included the following (in thousands):
June 30, December 31, June 30,
2000 1999 1999
---- ---- ----
<S> <C> <C> <C>
Raw materials $ 75,406 $ 59,243 $ 56,061
Work-in-process - manufactured parts 14,880 17,623 17,824
Work-in-process - tools and molds 50,446 57,984 75,212
Finished goods 20,033 19,770 22,984
------------ ------------ -------------
Total $ 160,765 $ 154,620 $ 172,081
============ ============ =============
</TABLE>
4. DEBT
<TABLE>
<CAPTION>
Debt consisted of the following (in thousands):
June 30, December 31, June 30,
2000 1999 1999
---- ---- ----
<S> <C> <C> <C>
Credit agreement
Term loan A, with interest of 8.88%, Due 2004 $ 72,900 $ 73,950 $ 75,000
Term loan B, with interest of 9.38%, Due 2005 198,000 199,000 200,000
Interim term loan, with interest of 8.88%, Due 2000 83,000 125,000 125,000
Revolving credit outstanding, with interest of
10.25%, Due 2004 24,045 5,500 18,500
Bank debt payable with interest from 0.0% to 9.04%,
Due 2004 18,231 25,930 52,582
Senior notes payable, Due 2005
With interest at 9.5% 205,000 205,000 205,000
Senior notes payable, Due 2007
With interest at 11.0% 125,000 125,000 125,000
Senior subordinated notes payable, Due 2009
With interest at 12.0% 125,000 125,000 125,000
Capital leases with interest from 3.80%
to 11.70% 29,881 34,658 33,695
Installment notes payable with
Interest from 3.00% to 7.41% 1,060 1,338 1,544
---------- ---------- --------------
Total $ 882,117 $ 920,376 $ 961,321
========== ========== ==============
Less current portion of debt 27,520 68,368 10,502
========== ========== ==============
Total 854,597 852,008 950,819
========== ========== ==============
</TABLE>
On May 27, 1999, in connection with the Peguform Acquisition, the Company
entered into a new credit agreement, which was amended on June 4, 1999
and on June 29, 2000 (the "credit agreement"). The credit agreement
provides for borrowings of (1) up to $175 million under a revolving
credit facility, which, in addition to those matters described below, is
used for working capital and general corporate purposes; (2) $75 million
under a five-year term loan A; (3) $200 million under a six-year term
loan B; and (4) $125 million under an 18-month interim term loan. In
March 2000, the Company applied a prepayment of $42 million to the
18-month interim term loan. See Note 5 of Notes to Consolidated Financial
Statements. In July 2000, the Company applied additional $8 million and
$2 million prepayments to the 18-month interim term loan, reducing the
principal balance to $73 million. On June 29, 2000, the credit agreement
was amended for several purposes. First, the requirement that the Company
issue $125 million of securities that rank pari passu in right of payment
with, or are junior to, the Company's 12% senior subordinated notes due
2009, described below was extended from November 27, 2000 to March 31,
2002. Second, the credit agreement
6
<PAGE> 9
was amended to allow for a $100 million non-recourse factoring program.
Third, certain restrictive covenants were amended to provide the Company
with additional flexibility in its stipulated financial ratios. The
Company intends to refinance the remaining principal balance of the
18-month interim term loan and has the ability to use proceeds under the
revolving credit facility to do so.
The revolving credit facility permits the Company to borrow up to the
lesser of a borrowing base computed as a percentage of accounts
receivable and inventory, or $175 million less the amount of any letters
of credit issued against the credit agreement. Pursuant to the borrowing
base formula as of June 30, 2000, the Company could have borrowed an
additional $148 million under the revolving credit facility. Obligations
under the credit agreement are jointly and severally guaranteed by
Venture's domestic subsidiaries and are secured by first priority
security interests in substantially all of the assets of Venture and its
domestic subsidiaries.
The credit agreement, the documents governing the Company's 9 1/2% senior
notes due 2005 (the "1997 Senior Notes"), and the documents governing the
Company's 11% unsecured senior notes (the "1999 Senior Notes") and 12%
unsecured senior subordinated notes (the "1999 Senior Subordinated Notes"
and together with the 1999 Senior Notes, the "1999 Notes"), contain
restrictive covenants relating to cash flow, fixed charges, debt,
member's equity, distributions, leases, and liens on assets. The
Company's debt obligations also contain various restrictive covenants
that require the Company to maintain stipulated financial ratios,
including a minimum consolidated net worth (adjusted yearly), fixed
charge coverage ratio, interest coverage ratio and total indebtedness
ratio. As of June 30, 2000, the Company was in compliance with all debt
covenants.
5. DERIVATIVE FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
During May 1999, and in connection with the issuance of debt to finance
the Peguform Acquisition, Venture entered into two five-year Euro dollar
cross-currency interest rate swap agreements and one three-year Euro
dollar cross-currency interest rate swap agreement.
Under the two five-year cross-currency interest rate swap agreements, the
Company received interest based on a fixed U.S. dollar interest rate of
11.5% and paid a fixed Euro dollar rate of 9.0% on the outstanding
notional principal amounts in U.S. dollars and Euro dollars,
respectively. If held to maturity, the Company would have paid 237
million Euro dollars in exchange for $250 million.
Under the three-year cross-currency interest rate swap agreement, the
Company received interest based on a fixed U.S. dollar interest rate of
9.5% and paid a fixed Euro dollar rate of 7.1% on the outstanding
notional principal amounts in U.S. dollars and Euro dollars,
respectively. If held to maturity, the Company would have paid 194
million Euro dollars in exchange for $205 million.
Each cross-currency interest rate swap agreement was originally comprised
of three separate financial instruments, consisting of two interest rate
swap agreements and a cross-currency swap agreement. When combined with
the underlying fixed U.S. dollar interest rate debt that they matched,
the debt was economically converted to fixed Euro dollar interest rate
debt.
In March 2000, the Company terminated its cross-currency swap agreements
within each of its three original cross-currency interest rate swap
agreements and realized a cash gain of $42.0 million. The entire cash
proceeds were applied as a prepayment of the Company's $125 million
interim term loan. At December 31, 1999, these financial instruments had
an estimated fair market value of $27.1 million which was recorded as an
investment on the balance sheet with a corresponding unrealized gain of
$27.1 million being recorded in other income. Accordingly, as a result of
the termination of the cross-currency swap agreements, the net impact on
earnings for the three months ended March 31, 2000 is an increase in
other income of $14.9 million, which is comprised of a realized gain of
$42.0 million, offset by an unrealized loss of $27.1 million.
7
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For each of the three and six months ended June 30, 1999, the non-cash
change in fair market value of the cross-currency swap agreements
resulted in $17.5 million of other income.
The cross-currency swap agreements were replaced with a twelve-month
foreign exchange collar. The collar is designed to reduce the economic
risk to the Company of Euro to US dollar exchange movements. The notional
amount is 500,000,000 Euros. The estimated fair market value of this
financial instrument is $3.8 million, and is recorded as an investment on
the balance sheet as of June 30, 2000. The corresponding $1.6 million and
$3.8 million non-cash change in estimated fair market value is recorded
in other income for three and six months ended June 30, 2000,
respectively. During July 2000, the Company terminated the put side of
its foreign currency exchange collar and received $10.9 million. The
Company used $2.7 million of the proceeds to purchase a replacement put
to protect against any large devaluations in the Euro to US dollar
exchange rate. The notional amount of the replacement put is 400,000,000
Euros. The Company applied $8.0 million of the net cash proceeds as a
prepayment of the 18-month interim term loan. See Note 4 of Notes to
Consolidated Financial Statements.
One of the interest rate swap agreements within each of the original
cross-currency interest rate swap agreements is accounted for using
settlement accounting. The cash flows from these interest rate swap
agreements are accounted for as adjustments to interest expense. For the
three and six months ended June 30, 2000, these interest rate swap
agreements resulted in an increase to interest expense of $0.3 million
and $0.5 million, respectively. For each of the three and six months
ended June 30, 1999, these interest rate swap agreements resulted in a
decrease to interest expense of $0.1 million. During July 2000, the
Company paid $14.9 million to terminate these financial instruments. This
amount will be capitalized and amortized into interest expense over the
terms of the original interest rate swap agreements.
The other interest rate swap agreements within each of the original
cross-currency interest rate swap agreements do not meet all the criteria
for settlement accounting under generally accepted accounting principles.
The cash flows from these interest rate swap agreements are included in
other income. The estimated fair market value of these financial
instruments of $16.9 million is recorded as an investment on the balance
sheet as of June 30, 2000. The corresponding $4.0 million and $3.5
million non-cash change in estimated fair market value is recorded in
other income for the three and six months ended June 30, 2000,
respectively. For each of the three and six months ended June 30, 1999,
the non-cash change in estimated fair market value of these financial
instruments of $2.0 million was recorded as other income. During July
2000, the Company terminated these financial instruments and realized a
cash gain of $16.9 million plus interest income of $0.1 million.
Accordingly, during the third quarter of 2000, the $16.9 million realized
gain will be offset by a corresponding unrealized loss of $16.9 million.
During July 2000, the Company applied $2.0 million of the net cash
proceeds from the terminations of the interest rate swap agreements as an
additional prepayment of the 18-month interim term loan. See Note 4 of
Notes to Consolidated Financial Statements.
The Company has also entered into interest rate swap agreements with a
notional value of $55 million to mitigate the risk associated with
changing interest rates on certain floating rate debt. These interest
rate swap agreements are accounted for using settlement accounting. The
impact of these interest rate swap agreements resulted in $0.2 million
and $0.5 million of additional interest expense for the six months ended
June 30, 2000 and 1999, respectively. The impact of these interest rate
swap agreements resulted in $0.1 million and $0.3 million of additional
interest expense for the three months ended June 30, 2000 and 1999,
respectively.
6. RELATED PARTY TRANSACTIONS
Venture Holdings Trust (the "Trust") is the sole member of Venture. The
Company has entered into various transactions with entities that the sole
beneficiary of the Trust owns or controls. These transactions include
leases of real estate, usage of machinery, equipment and facilities,
purchases and sales of inventory, performance of manufacturing related
services, administrative services, insurance activities, and payment and
receipt of sales commissions. In addition, employees of the Company are
made available to certain of these
8
<PAGE> 11
entities for services such as design, model and tool building. Since the
Company operates for the benefit of the sole beneficiary of the Trust,
the terms of these transactions are not the result of arms'-length
bargaining; however, the Company believes that such transactions are on
terms no less favorable to the Company than would be obtained if such
transactions or arrangements were arms'-length transactions with
non-affiliated persons.
The Company provides or arranges for others to provide certain related
parties with various administrative and professional services, including
employee group insurance and benefit coverage, property and other
insurance, financial and cash management and administrative services such
as data processing. The related parties are charged fees and premiums for
these services. Administrative services were allocated to the entity for
which they were incurred and certain entities were charged a management
fee. In connection with the above cash management services, the Company
pays the administrative and operating expenses on behalf of certain
related parties and charges them for the amounts paid which results in
receivables from these related parties.
The result of these related party transactions was a net receivable,
which was included in accounts receivable as follows:
<TABLE>
<CAPTION>
June 30, December 31, June 30,
2000 1999 1999
---- ---- ----
<S> <C> <C> <C>
Amounts receivable $ 112,730 $ 96,795 $ 76,607
Amounts payable 20,771 14,151 10,917
------------- ------------ -------------
Net amounts receivable $ 91,959 $ 82,644 $ 65,690
============= ============ =============
</TABLE>
7. SEGMENT REPORTING
Prior to the Peguform Acquisition on May 28, 1999, the Company was
organized and operated in one reporting segment. As a result of the
Peguform Acquisition, the Company is organized and managed based
primarily on geographic markets served. Under this organizational
structure, the Company's operating segments have been aggregated into two
reportable segments: North America (excluding Mexico) and International.
The following table presents net sales and other financial information by
business segment for the six months ended June 30, 2000 (in thousands):
<TABLE>
<CAPTION>
INCOME NET TOTAL
NET SALES FROM OPERATIONS INCOME (LOSS) ASSETS
--------- --------------- ------------- ------
<S> <C> <C> <C> <C>
NORTH AMERICA (Venture) $ 326,078 $ 18,918 $ 5,965 $ 1,003,159
INTERNATIONAL (Peguform) 641,092 37,962 3,799 410,077
ELIMINATIONS (3,464) -- -- --
------------- -------------- ------------ ------------
TOTAL 963,706 56,880 9,764 1,413,236
============= ============== ============ ============
</TABLE>
The following table presents net sales and other financial information by
business segment for the six months ended June 30, 1999 (in thousands):
<TABLE>
<CAPTION>
INCOME NET TOTAL
NET SALES FROM OPERATIONS INCOME (LOSS) ASSETS
--------- --------------- ------------- ------
<S> <C> <C> <C> <C>
NORTH AMERICA (Venture) $ 328,417 $ 24,631 $ 15,961 $ 1,077,803
INTERNATIONAL (Peguform) 111,378 1,107 (1,354) 301,312
ELIMINATIONS -- -- -- --
------------- -------------- ------------ ------------
TOTAL 439,795 25,738 14,607 1,379,115
============= ============== ============ ============
</TABLE>
9
<PAGE> 12
8. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
Venture, as the successor to Venture Holdings Trust, and certain of its
wholly-owned, domestic subsidiaries are jointly and severally liable for
the 1997 Senior Notes issued on July 9, 1997. On May 27, 1999, certain
wholly-owned, domestic subsidiaries of Venture became guarantors of the
1997 Senior Notes. These guarantees are full and unconditional, joint and
several. Venture issued the 1999 Notes on May 27, 1999 in connection with
the Peguform Acquisition, as a result of which Venture acquired certain
additional foreign subsidiaries. The 1999 Notes are guaranteed by each of
Venture's wholly-owned, domestic subsidiaries. The guarantees of these
wholly-owned, domestic subsidiaries are full and unconditional, joint and
several.
Condensed consolidating financial information for the three months ended
March 31, 1999 are not presented because prior to May 27, 1999 the
non-guarantors and the non-issuers of the 1997 Senior Notes and the
non-guarantors of the 1999 Notes during those periods were
inconsequential, individually and in aggregate, to the consolidated
financial statements. Management does not believe that separate financial
statements of the issuer subsidiaries or guarantor subsidiaries are
material to investors in the 1997 Senior Notes or the 1999 Notes.
The principal elimination entries in the condensed consolidating
financial information set forth below eliminate investments in
subsidiaries and intercompany balances and transactions.
10
<PAGE> 13
1997 SENIOR NOTES:
The following condensed consolidating financial information presents:
(1) Condensed consolidating financial statements as of June 30, 2000,
December 31, 1999 and June 30, 1999 and for the three and six
month period ended June 30, 2000 and June 30, 1999, of (a)
Venture, as a co-issuer of the 1997 senior notes (b) the
subsidiaries that are co-issuers of the 1997 Senior Notes, (c) the
guarantor subsidiaries, (d) the nonguarantor subsidiaries and (e)
the Company on a consolidated basis, and
(2) Elimination entries necessary to consolidate Venture, the other
issuers and the guarantor subsidiaries with the nonguarantor
subsidiaries.
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATING BALANCE SHEET (Unaudited)
AS OF JUNE 30, 2000
---------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
OTHER GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE ISSUERS SUBSIDIARIES SUBSIDIARIES TOTAL
------- ------- ------------ ------------ -----
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ -- $ -- $ -- $ 5,147 $ 5,147
Accounts receivable, net -- 204,670 140 147,378 352,188
Inventories -- 54,557 -- 106,208 160,765
Investments 20,670 -- -- 384 21,054
Prepaid and other current assets -- 29,897 310 26,375 56,582
---------- --------- ---------- ------------ -------------
Total current assets 20,670 289,124 450 285,492 595,736
Property, Plant and Equipment, Net -- 191,077 12 353,769 544,858
Intangible Assets, Net -- 49,195 -- 94,154 143,349
Other Assets -- 60,100 -- 19,295 79,395
Deferred Tax Asset -- 10,196 -- 39,702 49,898
Net Investment in and advances to (from)
subsidiaries & affiliates 888,684 (534,794) 25,656 (379,546) --
---------- --------- ---------- ------------ -------------
Total Assets $ 909,354 $ 64,898 $ 26,118 $ 412,866 $ 1,413,236
========== ========= ========== ============ =============
LIABILITIES AND MEMBER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ -- $ 56,448 $ 881 $ 150,862 $ 208,191
Accrued interest 13,479 -- -- 376 13,855
Accrued expenses -- 9,408 3,146 106,741 119,295
Current portion of long term debt 15,500 966 -- 11,054 27,520
---------- --------- ---------- ------------ -------------
Total current liabilities 28,979 66,822 4,027 269,033 368,861
Pension Liabilities & Other -- 6,228 -- 48,536 54,764
Deferred Tax Liabilities -- 11,687 -- 58,334 70,021
Long Term Debt 817,148 1,341 -- 36,108 854,597
---------- --------- ---------- ------------ -------------
Total liabilities 846,127 86,078 4,027 412,011 1,348,243
Member's Equity:
Member's equity 63,227 (21,180) 22,091 8,966 73,104
Accumulated other comprehensive loss-
cumulative translation adjustments -- -- -- (8,111) (8,111)
---------- --------- ---------- ------------ -------------
Member's Equity 63,227 (21,180) 22,091 855 64,993
---------- --------- ---------- ------------ -------------
Total Liabilities and Member's Equity $ 909,354 $ 64,898 $ 26,118 $ 412,866 $ 1,413,236
========== ========= ========== ============ =============
</TABLE>
11
<PAGE> 14
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 1999
----------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
OTHER GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE ISSUERS SUBSIDIARIES SUBSIDIARIES TOTAL
------- ------- ------------ ------------ -----
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ -- $ 26 $ -- $ 7,366 $ 7,392
Accounts receivable, net -- 188,763 153 122,428 311,344
Inventories -- 48,936 -- 105,684 154,620
Investments 40,501 -- -- -- 40,501
Prepaid and other current assets -- 20,051 -- 33,810 53,861
------- -------- ------ -------- ----------
Total current assets 40,501 257,776 153 269,288 567,718
Property, Plant and Equipment, Net -- 193,199 15 369,624 562,838
Intangible Assets, Net -- 50,140 -- 121,950 172,090
Other Assets -- 64,620 -- 17,884 82,504
Deferred Tax Assets -- 11,711 -- 18,115 29,826
Net Investment in and advances to (from)
subsidiaries & affiliates 873,454 (476,391) 12,083 (409,146) --
------- -------- ------ -------- ----------
Total Assets $913,955 $ 101,055 $ 12,251 $ 387,715 $ 1,414,976
======= ======== ====== ======== ==========
LIABILITIES AND MEMBER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ -- $ 57,388 $ 512 $ 136,696 $ 194,596
Accrued interest 13,228 -- -- 175 13,403
Accrued expenses -- 15,395 2,365 90,893 108,653
Current portion of long term debt 51,800 1,021 -- 15,547 68,368
------- -------- ------ -------- ----------
Total current liabilities 65,028 73,804 2,877 243,311 385,020
Pension Liabilities & Other -- 6,239 -- 51,375 57,614
Deferred Tax Liabilities -- 12,054 -- 47,377 59,431
Long Term Debt 806,650 1,496 -- 43,862 852,008
------- -------- ------ -------- ----------
Total liabilities 871,678 93,593 2,877 385,925 1,354,073
Commitments and Contingencies -- -- -- -- --
Member's Equity:
Member's equity 42,277 7,458 9,374 4,231 63,340
Accumulated other comprehensive income-
cumulative translation adjustments -- 4 -- (2,441) (2,437)
------- -------- ------ -------- ----------
Member's Equity 42,277 7,462 9,374 1,790 60,903
------- -------- ------ -------- ----------
Total Liabilities and Member's Equity $913,955 $ 101,055 $ 12,251 $ 387,715 $ 1,414,976
======= ======== ====== ======== ==========
</TABLE>
12
<PAGE> 15
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF JUNE 30, 1999
----------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
OTHER GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE ISSUERS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------- ------------ ------------ ------------ -----
<S> <C> <C> <C> <C> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ -- $ 5,929 $ -- $ 34,366 $ -- $ 40,295
Accounts receivable, net -- 212,392 88 147,612 -- 360,092
Inventories -- 52,101 -- 119,980 -- 172,081
Investments 19,522 -- -- 6,353 -- 25,875
Prepaid and other current assets -- 10,451 -- 39,964 (1,105) 49,310
-------- -------- -------- ---------- ---------- -----------
Total current assets 19,522 280,873 88 348,275 (1,105) 647,653
Property, Plant and Equipment, Net -- 194,808 17 406,337 -- 601,162
Intangible Assets, Net -- 51,082 -- 8,316 -- 59,398
Other Assets -- 519,444 -- 4,513 (469,201) 54,756
Deferred Tax Assets -- 11,969 -- 4,177 -- 16,146
Net Investment in and advances to (from)
subsidiaries & affiliates 876,892 (891,013) 14,121 -- -- --
-------- -------- -------- ---------- ---------- -----------
Total Assets $896,414 $167,163 $ 14,226 $ 771,618 $ (470,306) $ 1,379,115
======== ======== ======== ========== ========== ===========
LIABILITIES AND MEMBER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ -- $ 67,161 $ 844 $ 135,118 $ -- $ 203,123
Accrued interest 5,816 -- -- 1,105 (1,105) 5,816
Accrued expenses -- 14,209 2,917 68,765 -- 85,891
Current portion of long term debt 5,102 -- -- 11,787 (6,387) 10,502
-------- -------- -------- ---------- ---------- -----------
Total current liabilities 10,918 81,370 3,761 216,775 (7,492) 305,332
Pension Liabilities & Other -- 5,647 -- 28,529 -- 34,176
Deferred Tax Liabilities -- 11,784 -- 8,075 -- 19,859
Long Term Debt 871,249 -- -- 496,103 (416,533) 950,819
------- -------- ------ -------- -------- ----------
Total liabilities 882,167 98,801 3,761 749,482 (424,025) 1,310,186
Commitments and Contingencies -- -- -- -- -- --
Member's Equity:
Member's equity 14,247 69,099 10,465 44,927 (46,281) 92,457
Accumulated other comprehensive income-
minimum pension liability in excess
of unrecognized prior service cost,
net of tax -- (737) -- -- -- (737)
Accumulated other comprehensive income-
cumulative translation adjustments -- -- -- (22,791) -- (22,791)
-------- -------- -------- ---------- ---------- -----------
Member's Equity 14,247 68,362 10,465 22,136 (46,281) 68,929
-------- -------- -------- ---------- ---------- -----------
Total Liabilities and Member's Equity $896,414 $167,163 $ 14,226 $ 771,618 $ (470,306) $ 1,379,115
======== ======== ======== ========== ========== ===========
</TABLE>
13
<PAGE> 16
CONDENSED CONSOLIDATING STATEMENTS OF INCOME (Unaudited)
FOR THE SIX MONTHS ENDED JUNE 30, 2000
-------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
OTHER GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE ISSUERS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------- ------------ ------------ ------------ -----
<S> <C> <C> <C> <C> <C> <C>
NET SALES $ -- $ 353,392 $ 82,978 $ 644,012 $(116,676) $ 963,706
COST OF PRODUCT SOLD -- 308,230 81,730 558,713 (116,676) 831,997
--------- --------- ----------- ----------- --------- ---------
GROSS PROFIT -- 45,162 1,248 85,299 -- 131,709
SELLING, GENERAL & ADMINISTRATIVE
EXPENSE -- 27,416 -- 46,248 -- 73,664
PAYMENTS TO BENEFICIARY IN LIEU
OF TAXES 1,165 -- -- -- -- 1,165
--------- --------- ----------- ----------- --------- ---------
(LOSS) INCOME FROM OPERATIONS (1,165) 17,746 1,248 39,051 -- 56,880
INTEREST EXPENSE 45,832 -- -- 4,583 -- 50,415
INTERCOMPANY INTEREST ALLOCATION (45,832) 45,832 (13,013) 13,013 -- --
OTHER (INCOME) EXPENSE (22,115) 583 1,543 18,025 -- (1,964)
--------- --------- ----------- ----------- --------- ---------
INCOME (LOSS) BEFORE TAXES 20,950 (28,669) 12,718 3,430 -- 8,429
TAX BENEFIT -- 31 -- 1,784 -- 1,815
MINORITY INTEREST -- -- -- 480 -- 480
--------- --------- ----------- ----------- --------- ---------
NET INCOME (LOSS) $ 20,950 $ (28,638) $ 12,718 $ 4,734 $ -- $ 9,764
========= ========= =========== =========== ========= =========
</TABLE>
CONDENSED CONSOLIDATING STATEMENTS OF INCOME (Unaudited)
FOR THE THREE MONTHS ENDED JUNE 30, 2000
-------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
OTHER GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE ISSUERS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------- ------------ ------------ ------------ -----
<S> <C> <C> <C> <C> <C> <C>
NET SALES $ -- $ 165,325 $ 40,502 $ 328,524 $ (51,151) $ 483,200
COST OF PRODUCT SOLD -- 144,107 41,097 287,196 (51,151) 421,249
--------- --------- ----------- ----------- --------- ----------
GROSS PROFIT -- 21,218 (595) 41,328 -- 61,951
SELLING, GENERAL & ADMINISTRATIVE
EXPENSE -- 10,129 -- 23,231 -- 33,360
PAYMENTS TO BENEFICIARY IN LIEU
OF TAXES 600 -- -- -- -- 600
--------- --------- ----------- ----------- --------- ----------
(LOSS) INCOME FROM OPERATIONS (600) 11,089 (595) 18,097 -- 27,991
INTEREST EXPENSE 22,759 -- 1,995 -- 24,754
INTERCOMPANY INTEREST ALLOCATION (22,759) 22,759 (6,065) 6,065 -- --
OTHER (INCOME) EXPENSE (4,551) 123 1,138 1,541 -- (1,749)
--------- --------- ----------- ----------- --------- ----------
INCOME (LOSS) BEFORE TAXES 3,951 (11,793) 4,332 8,496 -- 4,986
TAX PROVISION (BENEFIT) -- 1,595 -- (1,009) -- 586
MINORITY INTEREST -- -- -- 210 -- 210
--------- --------- ----------- ----------- --------- ----------
NET INCOME (LOSS) $ 3,951 $ (13,388) $ 4,332 $ 9,295 $ -- $ 4,190
========= ========= =========== =========== ========= ==========
</TABLE>
14
<PAGE> 17
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1999
-------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
OTHER GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE ISSUERS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------- ------------ ------------ ------------ -----
<S> <C> <C> <C> <C> <C> <C>
NET SALES $ -- $ 252,179 $ 76,238 $ 111,378 $ -- $ 439,795
COST OF PRODUCT SOLD -- 204,281 72,580 102,895 -- 379,756
--------- --------- ----------- ----------- ----------- -----------
GROSS PROFIT -- 47,898 3,658 8,483 -- 60,039
SELLING, GENERAL & ADMINISTRATIVE
EXPENSE -- 26,848 -- 7,376 -- 34,224
PAYMENTS TO BENEFICIARY IN LIEU
OF TAXES 77 -- -- -- -- 77
--------- --------- ----------- ----------- ---------- ----------
(LOSS) INCOME FROM OPERATIONS (77) 21,050 3,658 1,107 -- 25,738
INTEREST EXPENSE 24,206 -- -- 1,927 (1,105) 25,028
INTERCOMPANY INTEREST ALLOCATION (24,206) 24,206 -- -- -- --
OTHER (INCOME) EXPENSE (19,893) (1,356) -- 244 1,105 (19,900)
--------- --------- ----------- ----------- ---------- ----------
INCOME (LOSS) BEFORE TAXES 19,816 (1,800) 3,658 (1,064) -- 20,610
TAX PROVISION -- 144 -- 261 -- 405
MINORITY INTEREST -- -- -- 29 -- 29
--------- --------- ----------- ----------- ---------- ----------
NET INCOME (LOSS) BEFORE
EXTRAORDINARY LOSS 19,816 (1,944) 3,658 (1,354) -- 20,176
--------- --------- ----------- ----------- ---------- ----------
EXTRAORDINARY LOSS ON EARLY
EXTINGUISHMENT OF DEBT 5,569 -- -- -- -- 5,569
--------- --------- ----------- ----------- ---------- ----------
NET INCOME (LOSS) $ 14,247 $ (1,944) $ 3,658 $ (1,354) $ -- $ 14,607
========= ========= =========== =========== ========== ==========
</TABLE>
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 1999
-------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
OTHER GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE ISSUERS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------- ------------ ------------ ------------ -----
<S> <C> <C> <C> <C> <C> <C>
NET SALES $ -- $ 123,982 $ 38,443 $ 111,378 $ -- $ 273,803
COST OF PRODUCT SOLD -- 107,294 36,497 102,895 -- 246,686
--------- ---------- ------------ ------------ ----------- -----------
GROSS PROFIT -- 16,688 1,946 8,483 -- 27,117
SELLING, GENERAL & ADMINISTRATIVE
EXPENSE -- 12,578 -- 7,376 -- 19,954
PAYMENTS TO BENEFICIARY IN LIEU
OF TAXES 77 -- -- -- -- 77
--------- ---------- ------------ ------------ ---------- ----------
(LOSS) INCOME FROM OPERATIONS (77) 4,110 1,946 1,107 -- 7,086
INTEREST EXPENSE 14,727 -- -- 1,927 (1,105) 15,549
INTERCOMPANY INTEREST ALLOCATION (14,727) 14,727 -- -- -- --
OTHER (INCOME) EXPENSE (19,893) (1,356) -- 244 1,105 (19,900)
--------- ---------- ------------ ------------ ---------- ----------
INCOME (LOSS) BEFORE TAXES 19,816 (9,261) 1,946 (1,064) -- 11,437
TAX (BENEFIT) PROVISION -- (923) -- 261 -- (662)
MINORITY INTEREST -- -- -- 29 -- 29
--------- ---------- ------------ ------------ ---------- ----------
NET INCOME (LOSS) BEFORE
EXTRAORDINARY LOSS 19,816 (8,338) 1,946 (1,354) -- 12,070
--------- ---------- ------------ ------------ ---------- ----------
EXTRAORDINARY LOSS ON EARLY
EXTINGUISHMENT OF DEBT 5,569 -- -- -- -- 5,569
--------- ---------- ------------ ------------ ---------- ----------
NET INCOME (LOSS) $ 14,247 $ (8,338) $ 1,946 $ (1,354) $ -- $ 6,501
========= ========== ============ ============ ========== ==========
</TABLE>
15
<PAGE> 18
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (Unaudited)
FOR THE SIX MONTHS ENDED JUNE 30, 2000
-------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
OTHER GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE ISSUERS SUBSIDIARIES SUBSIDIARIES TOTAL
------- ------- ------------ ------------ -----
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 20,950 $ (28,638) $ 12,718 $ 4,734 $ 9,764
Adjustments to reconcile net
income to net cash provided
by (used in) operating activities:
Depreciation and amortization -- 23,272 2 23,738 47,012
Unrealized loss on currency -- 23,926 2,348 20,468 46,742
exchange
Loss from the disposal of -- -- -- 22 22
fixed assets
Change in accounts receivable -- (15,918) 13 (24,950) (40,855)
Change in inventories -- (5,621) -- (524) (6,145)
Change in prepaid and other -- (9,197) (310) 6,471 (3,036)
current assets
Change in other assets -- (2,349) -- 23,085 20,736
Change in accounts payable -- (941) 369 14,166 13,594
Change in accrued expenses 251 (5,995) 780 16,057 11,093
Change in pension liabilities -- (11) -- (2,839) (2,850)
and other
Change in deferred taxes -- (31) -- (9,522) (9,553)
---------- ----------- ----------- ----------- -----------
Net cash provided by (used 21,201 (21,503) 15,920 70,906 86,524
in) operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures -- (13,334) -- (28,105) (41,439)
Net activity in investments in and
advances to (from) subsidiaries
and affiliates 8,321 35,395 (13,572) (30,144) --
Proceeds from sale of fixed assets -- -- -- 172 172
Unrealized gain on investments (3,511) -- -- -- (3,511)
---------- ----------- ----------- ----------- -----------
Net cash provided by (used in) 4,810 22,061 (13,572) (58,077) (44,778)
investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under
revolving credit facility 37,000 -- -- -- 37,000
Principal payments on debt (63,011) -- -- (8,959) (71,970)
---------- ----------- ----------- ----------- -----------
Net cash used in financing (26,011) -- -- (8,959) (34,970)
activities
Effect of exchange rate changes on
cash and cash Equivalents -- (584) (2,348) (6,089) (9,021)
NET DECREASE IN CASH -- (26) -- (2,219) (2,245)
CASH AT BEGINNING OF PERIOD $ -- $ 26 $ -- $ 7,366 $ 7,392
========== =========== =========== =========== ===========
CASH AT END OF PERIOD $ -- $ -- $ -- $ 5,147 $ 5,147
========== =========== =========== =========== ===========
</TABLE>
16
<PAGE> 19
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
FOR THE SIX MONTHS ENDED JUNE 30, 1999
-------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
OTHER GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE ISSUERS SUBSIDIARIES SUBSIDIARIES TOTAL
------- ------- ------------ ------------ -----
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 14,247 $ (1,944) $ 3,658 $ (1,354) $ 14,607
Adjustments to reconcile net
income to net
cash provided by (used in)
operating activities:
Depreciation and amortization -- 21,538 2 4,491 26,031
Net extraordinary loss on
early extinguishment of debt 5,569 -- -- -- 5,569
Change in accounts receivable -- (22,609) (3) 29,509 6,897
Change in inventories -- (962) -- (3,262) (4,224)
Change in perepaid and other current -- (2,095) -- (1,897) (3,992)
assets
Change in other assets -- (11,309) -- (3,931) (15,240)
Change in accounts payable -- 15,812 (158) 4,679 20,333
Change in accrued expenses (7,571) 2,006 803 5,131 369
Change in pension liabilities -- (1,606) -- 3,067 1,461
and other Change in deferred taxes -- 214 -- (600) (386)
-------- --------- ---------- -------- ----------
Net cash provided by (used
in) operating activities 12,245 (955) 4,302 35,833 51,425
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of subsidiaries, net of -- (462,814) -- 18,802 (444,012)
cash acquired
Capital expenditures -- (8,040) -- (5,137) (13,177)
Net activity in investments in
and advances to (from) (474,454) 478,756 4,302) -- --
subsidiaries and affiliates
Unrealized gain on investments (19,522) -- -- (141) (19,663)
--------- --------- --------- ----------- ----------
Net cash (used in) provided by (493,976) 7,902 (4,302) 13,524 (476,852)
investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) borrowings under
revolving credit facility (58,500) -- -- -- (58,500)
Net borrowings on bank debt -- -- -- 5,806 5,806
Net proceeds from issuance of debt 650,000 -- -- -- 650,000
Payment for early extinguishment (82,788) -- -- -- (82,788)
of debt
Debt issuance fees (26,981) -- -- -- (26,981)
Principal payments on debt -- (1,148) -- (18,801) (19,949)
-------- --------- --------- ------------ -----------
Net cash provided by (used in) 481,731 (1,148) -- (12,995) 467,588
financing activities
Effect of exchange rate changes on
cash and cash Equivalents -- -- -- (1,996) (1,996)
NET INCREASE IN CASH -- 5,799 -- 34,366 40,165
CASH AT BEGINNING OF PERIOD $ -- $ 130 $ -- $ -- $ 130
-------- --------- -------- ------------ -----------
CASH AT END OF PERIOD $ -- $ 5,929 $ -- $ 34,366 $ 40,295
======== ========= ======== =========== ===========
</TABLE>
17
<PAGE> 20
1999 NOTES:
The following condensed consolidating financial information presents:
(1) Condensed consolidating financial statements as of June 30, 2000,
December 31, 1999 and June 30, 1999 and for the three and six month
period ended June 30, 2000 and June 30, 1999, of (a) Venture, the
sole issuer of the 1999 Notes, (b) the guarantor subsidiaries, (c)
the nonguarantor subsidiaries and (d) the Company on a consolidated
basis, and
(2) Elimination entries necessary to consolidate Venture and the
guarantor subsidiaries with the nonguarantor subsidiaries.
CONDENSED CONSOLIDATING BALANCE SHEET (Unaudited)
AS OF JUNE 30, 2000
-------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE SUBSIDIARIES SUBSIDIARIES TOTAL
------- ------------ ------------ -----
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ -- $ -- $ 5,147 $ 5,147
Accounts receivable, net -- 204,810 147,378 352,188
Inventories -- 54,557 106,208 160,765
Investments 20,670 -- 384 21,054
Prepaid and other current assets -- 30,207 26,375 56,582
---------- --------- ------------- -------------
Total current assets 20,670 289,574 285,492 595,736
Property, Plant and Equipment, Net -- 191,089 353,769 544,858
Intangible Assets, Net -- 49,195 94,154 143,349
Other Assets -- 60,100 19,295 79,395
Deferred Tax Asset -- 10,196 39,702 49,898
Net Investment in and advances to (from)
subsidiaries & affiliates 888,684 (509,138) (379,546) --
---------- --------- ------------- -------------
Total Assets $ 909,354 $ 91,016 $ 412,866 $ 1,413,236
========== ========= ============= =============
LIABILITIES AND MEMBER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ -- $ 57,329 $ 150,862 $ 208,191
Accrued interest 13,479 -- 376 13,855
Accrued expenses -- 12,554 106,741 119,295
Current portion of long term debt 15,500 966 11,054 27,520
---------- -------- ------------- ------------
Total current liabilities 28,979 70,849 269,033 368,861
Pension Liabilities & Other -- 6,228 48,536 54,764
Deferred Tax Liabilities -- 11,687 58,334 70,021
Long Term Debt 817,148 1,341 36,108 854,597
---------- --------- ------------- ------------
Total liabilities 846,127 90,105 412,011 1,348,243
Member's Equity:
Member's equity 63,227 911 8,966 73,104
Accumulated other comprehensive loss-
cumulative translation adjustment $ -- -- (8,111) (8,111)
---------- --------- ------------- ------------
Member's Equity 63,227 911 855 64,993
---------- --------- ------------- ------------
Total Liabilities and Member's Equity $ 909,354 $ 91,016 $ 412,866 $ 1,413,236
========== ========= ============= ============
18
</TABLE>
<PAGE> 21
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 1999
-------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE SUBSIDIARIES SUBSIDIARIES TOTAL
------- ------------ ------------ -----
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ -- $ 26 $ 7,366 $ 7,392
Accounts receivable, net -- 188,916 122,428 311,344
Inventories -- 48,936 105,684 154,620
Investments 40,501 -- -- 40,501
Prepaid and other current assets -- 20,051 33,810 53,861
-------- --------- ---------- ---------
Total current assets 40,501 257,929 269,288 567,718
Property, Plant and Equipment, Net -- 193,214 369,624 562,838
Intangible Assets, Net -- 50,140 121,950 172,090
Other Assets -- 64,620 17,884 82,504
Deferred Tax Assets -- 11,711 18,115 29,826
Net Investment in and advances to (from)
subsidiaries & affiliates 873,454 (464,308) (409,146) --
-------- --------- ---------- ---------
Total Assets $ 913,955 $ 113,306 $ 387,715 $1,414,976
======== ========= ========== =========
LIABILITIES AND MEMBER'S EQUITY
-------------------------------
CURRENT LIABILITIES:
Accounts payable $ -- $ 57,900 $ 136,696 $ 194,596
Accrued interest 13,228 -- 175 13,403
Accrued expenses -- 17,760 90,893 108,653
Current portion of long
term debt 51,800 1,021 15,547 68,368
-------- --------- ---------- ---------
Total current
liabilities 65,028 76,681 243,311 385,020
Pension Liabilities & Other -- 6,239 51,375 57,614
Deferred Tax Liabilities -- 12,054 47,377 59,431
Long Term Debt 806,650 1,496 43,862 852,008
-------- --------- ---------- ---------
Total liabilities 871,678 96,470 385,925 1,354,073
Commitments and Contingencies -- -- -- --
Member's Equity:
Member's equity 42,277 16,832 4,231 63,340
Accumulated other
comprehensive income-
cumulative translation
adjustments -- 4 (2,441) (2,437)
-------- --------- ---------- ---------
Member's Equity 42,277 16,836 1,790 60,903
-------- --------- ---------- ---------
Total Liabilities and Member's Equity $ 913,955 $ 113,306 $ 387,715 1,414,976
======== ========= ========== =========
</TABLE>
19
<PAGE> 22
CONDENSED CONSOLIDATING BALANCE SHEET
-------------------------------------------------------------------------
AS OF JUNE 30, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------------ ------------ ------------ -----
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ -- $ 5,929 $ 34,366 $ -- $ 40,295
Accounts receivable, net -- 212,480 147,612 -- 360,092
Inventories -- 52,101 119,980 -- 172,081
Investments 19,522 -- 6,353 -- 25,875
Prepaid and other current assets -- 10,451 39,964 (1,105) 49,310
---------- --------- ----------- --------- ----------
Total current assets 19,522 280,961 348,275 (1,105) 647,653
Property, Plant and Equipment, Net -- 194,825 406,337 -- 601,162
Intangible Assets, Net -- 51,082 8,316 -- 59,398
Other Assets -- 519,444 4,513 (469,201) 54,756
Deferred Tax Assets -- 11,969 4,177 -- 16,146
Net Investment in and advances to (from)
subsidiaries & affiliates 876,892 (876,892) -- -- --
---------- --------- ----------- --------- ----------
Total Assets $ 896,414 $ 181,389 $ 771,618 $(470,306) $ 1,379,115
========== ========= =========== ========= ==========
LIABILITIES AND MEMBER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ -- $ 68,005 $ 135,118 $ -- $ 203,123
Accrued interest 5,816 -- 1,105 (1,105) 5,816
Accrued expenses -- 17,126 68,765 -- 85,891
Current portion of long
term debt 5,102 -- 11,787 (6,387) 10,502
---------- --------- ----------- --------- ----------
Total current liabilities 10,918 85,131 216,775 (7,492) 305,332
Pension Liabilities & Other -- 5,647 28,529 -- 34,176
Deferred Tax Liabilities -- 11,784 8,075 -- 19,859
Long Term Debt 871,249 -- 496,103 (416,533) 950,819
---------- --------- ----------- --------- ----------
Total liabilities 882,167 102,562 749,482 (424,025) 1,310,186
Commitments and Contingencies -- -- -- -- --
Member's Equity:
Member's equity 14,247 79,564 44,927 (46,281) 92,457
Accumulated other comprehensive income-
minimum pension liability in excess of
unrecognized prior -- (737) -- -- (737)
service cost, net of tax
Accumulated other comprehensive income-
cumulative translation adjustments -- -- (22,791) -- (22,791)
---------- --------- ----------- --------- ----------
Member's Equity 14,247 78,827 22,136 (46,281) 68,929
---------- --------- ----------- --------- ----------
Total Liabilities and Member's Equity $ 896,414 $ 181,389 $ 771,618 $(470,306) $ 1,379,115
========== ========= =========== ========= ==========
</TABLE>
20
<PAGE> 23
CONDENSED CONSOLIDATING STATEMENTS OF INCOME (Unaudited)
FOR THE SIX MONTHS ENDED JUNE 30, 2000
--------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------------ ------------ ------------ -----
<S> <C> <C> <C> <C> <C>
NET SALES $ -- $ 436,370 $ 644,012 $ (116,676) $ 963,706
COST OF PRODUCT SOLD -- 389,960 558,713 (116,676) 831,997
---------- ------------ ------------- ---------- -----------
GROSS PROFIT -- 46,410 85,299 -- 131,709
SELLING, GENERAL & ADMINISTRATIVE
EXPENSE -- 27,416 46,248 -- 73,664
PAYMENTS TO BENEFICIARY IN LIEU OF
TAXES 1,165 -- -- -- 1,165
---------- ------------ ------------- ----------- -----------
(LOSS) INCOME FROM OPERATIONS (1,165) 18,994 39,051 -- 56,880
INTEREST EXPENSE 45,832 -- 4,583 -- 50,415
INTERCOMPANY INTEREST ALLOCATION (45,832) 32,819 13,013 -- --
OTHER (INCOME) EXPENSE (22,115) 2,126 18,025 -- (1,964)
---------- ------------ ------------- ----------- -----------
INCOME (LOSS) BEFORE TAXES 20,950 (15,951) 3,430 -- 8,429
TAX BENEFIT -- 31 1,784 -- 1,815
MINORITY INTEREST -- -- 480 -- 480
---------- ------------ ------------- ----------- -----------
NET INCOME (LOSS) $ 20,950 $ (15,920) $ 4,734 $ -- $ 9,764
========== ============ ============= =========== ===========
</TABLE>
CONDENSED CONSOLIDATING STATEMENTS OF INCOME (Unaudited)
FOR THE THREE MONTHS ENDED JUNE 30, 2000
--------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------------ ------------ ------------ -----
<S> <C> <C> <C> <C> <C>
NET SALES $ -- $ 205,827 $ 328,524 $ (51,151) $ 483,200
COST OF PRODUCT SOLD -- 185,204 287,196 (51,151) 421,249
---------- ------------ ------------ ----------- -----------
GROSS PROFIT -- 20,623 41,328 -- 61,951
SELLING, GENERAL & ADMINISTRATIVE
EXPENSE -- 10,129 23,231 -- 33,360
PAYMENTS TO BENEFICIARY IN LIEU
OF TAXES 600 -- -- -- 600
---------- ------------ ------------- ------------ -----------
(LOSS) INCOME FROM OPERATIONS (600) 10,494 18,097 -- 27,991
INTEREST EXPENSE 22,759 -- 1,995 -- 24,754
INTERCOMPANY INTEREST ALLOCATION (22,759) 16,694 6,065 -- --
OTHER (INCOME) EXPENSE (4,551) 1,261 1,541 -- (1,749)
---------- ------------ ------------- ------------ -----------
INCOME (LOSS) BEFORE TAXES 3,951 (7,461) 8,496 -- 4,986
TAX PROVISION (BENEFIT) -- 1,595 (1,009) -- 586
MINORITY INTEREST -- -- 210 -- 210
---------- ----------- ------------- ----------- ------------
NET INCOME (LOSS) $ 3,951 $ (9,056) $ 9,295 $ -- $ 4,190
========== =========== ============= =========== ============
</TABLE>
21
<PAGE> 24
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1999
----------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------------ ------------- ------------ -----
<S> <C> <C> <C> <C> <C>
NET SALES $ -- $ 328,417 $ 111,378 $ -- $ 439,795
COST OF PRODUCT SOLD -- 276,861 102,895 -- 379,756
---------- ------------ ------------ ----------- -----------
GROSS PROFIT -- 51,556 8,483 -- 60,039
SELLING, GENERAL & ADMINISTRATIVE
EXPENSE -- 26,848 7,376 -- 34,224
PAYMENTS TO BENEFICIARY IN LIEU OF
OF TAXES 77 -- -- -- 77
---------- ------------ ------------- ------------ ------------
(LOSS) INCOME FROM OPERATIONS (77) 24,708 1,107 -- 25,738
INTEREST EXPENSE 24,206 -- 1,927 (1,105) 25,028
INTERCOMPANY INTEREST ALLOCATION (24,206) 24,206 -- -- --
OTHER (INCOME) EXPENSE (19,893) (1,356) 244 1,105 (19,900)
---------- ------------ ------------- ------------ ------------
INCOME (LOSS) BEFORE TAXES 19,816 1,858 (1,064) -- 20,610
TAX PROVISION -- 144 261 -- 405
MINORITY INTEREST -- -- 29 -- 29
---------- ------------ ------------- ------------ ------------
NET INCOME (LOSS) BEFORE 19,816 1,714 (1,354) -- 20,176
EXTRAORDINARY LOSS
---------- ------------ ------------- ------------ ------------
EXTRAORDINARY LOSS ON EARLY
EXTINGUISHMENT OF DEBT 5,569 -- -- -- 5,569
---------- ------------ ------------- ------------ ------------
NET INCOME (LOSS) $ 14,247 $ 1,714 $ (1,354) $ -- $ 14,607
========= ============ ============= ============ ============
</TABLE>
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 1999
----------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------------ ------------- ------------ -----
<S> <C> <C> <C> <C> <C>
NET SALES $ -- $ 162,425 $ 111,378 $ -- $ 273,803
COST OF PRODUCT SOLD -- 143,791 102,895 -- 246,686
-------- --------- ---------- --------- ---------
GROSS PROFIT -- 18,634 8,483 -- 27,117
SELLING, GENERAL & ADMINISTRATIVE
EXPENSE -- 12,578 7,376 -- 19,954
PAYMENTS TO BENEFICIARY IN LIEU
OF TAXES 77 -- -- -- 77
-------- --------- ---------- --------- ---------
(LOSS) INCOME FROM OPERATIONS (77) 6,056 1,107 -- 7,086
INTEREST EXPENSE 14,727 -- 1,927 (1,105) 15,549
INTERCOMPANY INTEREST ALLOCATION (14,727) 14,727 -- -- --
OTHER (INCOME) EXPENSE (19,893) (1,356) 244 1,105 (19,900)
-------- --------- ---------- --------- ---------
INCOME (LOSS) BEFORE TAXES 19,816 (7,315) (1,064) -- 11,437
TAX (BENEFIT) PROVISION -- (923) 261 -- (662)
MINORITY INTEREST -- -- 29 -- 29
-------- --------- ---------- --------- ---------
NET INCOME (LOSS) BEFORE
EXTRAORDINARY LOSS 19,816 (6,392) (1,354) -- 12,070
-------- --------- ---------- --------- ---------
EXTRAORDINARY LOSS ON EARLY
EXTINGUISHMENT OF DEBT 5,569 -- -- -- 5,569
-------- --------- ---------- --------- ---------
NET INCOME (LOSS) $ 14,247 $ (6,392) $ (1,354) $ -- $ 6,501
======== ========== =========== ========== =========
</TABLE>
22
<PAGE> 25
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (Unaudited)
FOR THE SIX MONTHS ENDED JUNE 30, 2000
--------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE SUBSIDIARIES SUBSIDIARIES TOTAL
-------- ------------ ------------ -----
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 20,950 $ (15,920) $ 4,734 $ 5,879
Adjustments to reconcile net
income to net
cash provided by (used in)
operating activities:
Depreciation and amortization -- 23,274 23,738 47,012
Unrealized loss on currency -- 26,274 20,468 46,742
exchange
Loss from the disposal of -- -- 22 22
fixed assets
Change in accounts receivable -- (15,905) (24,950) (40,855)
Change in inventories -- (5,621) (524) (6,145)
Change in prepaid and other -- (9,507) 6,471 (3,036)
current assets
Change in other assets -- (2,349) 23,085 20,736
Change in accounts payable -- (572) 14,166 13,594
Change in accrued expenses 251 (5,215) 16,057 11,093
Change in pension liabilities -- (11) (2,839) (2,850)
and other
Change in deferred taxes -- (31) (9,522) (9,553)
-------- --------- ---------- ---------
Net cash provided by (used
in) operating activities 21,201 (5,583) 70,906 86,524
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures -- (13,334) (28,105) (41,439)
Net activity in investments in
and advances to (from) 8,321 21,823 (30,144) --
subsidiaries and affiliates
Proceeds from sale of fixed assets -- -- 172 172
Unrealized gain on investments (3,511) -- -- (3,511)
-------- --------- ---------- ---------
Net cash provided by (used in) 4,810 8,489 (58,077) (44,778)
investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under
revolving credit facility 37,000 -- -- 37,000
Principal payments on debt (63,011) -- (8,959) (71,970)
-------- --------- ---------- ----------
Net cash used in financing (26,011) -- (8,959) (34,970)
activities
Effect of exchange rate changes on
cash and cash -- (2,932) (6,089) (9,021)
Equivalents
NET DECREASE IN CASH -- (26) (2,219) (2,245)
CASH AT BEGINNING OF PERIOD $ -- $ 26 $ 7,366 $ 7,392
-------- --------- ---------- ---------
CASH AT END OF PERIOD $ -- $ -- $ 5,147 $ 5,147
======== ========= ========== =========
</TABLE>
23
<PAGE> 26
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE SUBSIDIARIES SUBSIDIARIES TOTAL
------- ------------ ------------ -----
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 14,247 $ 1,714 $ (1,354) $ 14,607
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Depreciation and amortization -- 21,540 4,491 26,031
Net extraordinary loss on
early extinguishment of debt 5,569 -- -- 5,569
Change in accounts receivable -- (22,612) 29,509 6,897
Change in inventories -- (962) (3,262) (4,224)
Change in prepaid and other
current assets -- (2,095) (1,897) (3,992)
Change in other assets -- (11,309) (3,931) (15,240)
Change in accounts payable -- 15,654 4,679 20,333
Change in accrued expenses (7,571) 2,809 5,131 369
Change in pension liabilities
and other -- (1,606) 3,067 1,461
Change in deferred taxes -- 214 (600) (386)
-------- --------- ---------- ----------
Net cash provided by
operating activities 12,245 3,347 35,833 51,425
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of subsidiaries, net of
cash acquired -- (462,814) 18,802 (444,012)
Capital expenditures -- (8,040) (5,137) (13,177)
Net activity in investments in
and advances to (from)
subsidiaries and affiliates (474,454) 474,454 -- --
Unrealized gain on investments (19,522) -- (141) (19,663)
-------- --------- ---------- ----------
Net cash (used in) provided by
investing activities (493,976) 3,600 13,524 (476,852)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) borrowings under
revolving credit facility (58,500) -- -- (58,500)
Net borrowings on bank debt -- -- 5,806 5,806
Net proceeds from issuance of debt 650,000 -- -- 650,000
Payment for early extinguishment
of debt (82,788) -- -- (82,788)
Debt issuance fees (26,981) -- -- (26,981)
Principal payments on debt -- (1,148) (18,801) (19,949)
-------- --------- ---------- ---------
Net cash provided by (used in)
financing activities 481,731 (1,148) (12,995) 467,588
Effect of exchange rate changes on
cash and cash Equivalents -- -- (1,996) (1,996)
NET INCREASE IN CASH -- 5,799 34,366 40,165
CASH AT BEGINNING OF PERIOD $ -- $ 130 $ -- $ 130
-------- --------- ---------- ---------
CASH AT END OF PERIOD $ -- $ 5,929 $ 34,366 $ 40,295
======== ========= ========== =========
</TABLE>
24
<PAGE> 27
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following management's discussion and analysis of results of
operations and financial condition ("MD&A") should be read in conjunction
with the MD&A included in the Company's 1999 Annual Report on Form 10-K
filed with the Securities and Exchange Commission.
RESULTS OF OPERATIONS (UNAUDITED)
The following table sets forth, for the periods indicated, the Company's
consolidated statements of income expressed as a percentage of net sales.
This table and the subsequent discussion should be read in conjunction
with the consolidated financial statements and related notes.
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of products sold 87.2 90.1 86.3 86.3
-------- ---------- ---------- -------
Gross profit 12.8 9.9 13.7 13.7
Selling, general and administrative expense 6.9 7.3 7.7 7.8
Payments to beneficiary in lieu of taxes 0.1 0.0 0.1 0.0
-------- ---------- ---------- -------
Income from operations 5.8 2.6 5.9 5.9
Interest expense 5.1 5.7 5.2 5.7
Other income 0.4 7.3 0.2 4.5
-------- ---------- ---------- -------
Income before taxes 1.1 4.2 0.9 4.7
Tax provision (benefit) 0.1 (0.2) (0.2) 0.1
Minority interest 0.0 0.0 0.1 0.0
-------- ---------- ---------- -------
Net income before extraordinary loss 1.0 4.4 1.0 4.6
Extraordinary loss on early extinguishment of debt 0.0 2.0 0.0 1.3
-------- ---------- ---------- -------
Net income 1.0 % 2.4 1.0 % 3.3 %
======== ========== ========== =======
</TABLE>
THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE MONTHS ENDED JUNE 30, 1999
NET SALES. Net sales for the second quarter of 2000 increased $209.4
million, or 76.5%, from the second quarter of 1999. This increase was due
to the addition of Peguform's sales of $326.9 million for the second
quarter of 2000 compared to one month of sales, or $111.4 million, for
the second quarter of 1999. Domestically, sales decreased $6.1 million,
or 3.8%, due primarily to lower tooling sales as compared to the
comparable period in the prior year.
GROSS PROFIT. Gross profit for the second quarter of 2000 increased $34.8
million to $62.0 million compared to $27.1 million for the second quarter
of 1999. As a percentage of net sales, gross profit increased to 12.8%
for the second quarter of 2000 from 9.9% for the second quarter of 1999.
The increase was largely due to an improvement in Peguform's gross profit
margin to 12.5% in the second quarter 2000, from 7.6% in the second
quarter of 1999. The increase in gross profit margin for Peguform is
primarily attributable to increased manufacturing productivity as
compared to the prior year. Domestically, there was an increase in the
gross profit margin to 13.5%, from a gross profit margin of 11.5% in the
second quarter of 1999. The domestic gross profit margin was lower in
the second quarter of 1999 due to a $3.0 million retroactive sales price
adjustment. The Company has now realized productivity gains to offset the
price reductions.
25
<PAGE> 28
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expense for the second quarter of 2000 increased $13.4
million, or 67.2%, to $33.4 million compared to $20.0 million for the
first quarter of 1999 primarily due to the addition of Peguform's
selling, general and administrative expense during the second quarter of
2000 compared to Peguform's selling, general and administrative expense
for only the month of June during 1999. As a percentage of net sales,
selling, general and administrative expense decreased to 6.9% for the
second quarter of 2000 as compared to 7.3% for the second quarter of
1999. The decrease is primarily attributable to the impact of Peguform's
lower selling, general and administrative expense as a percentage of net
sales, relative to Venture's, being included in the operating results for
the entire second quarter in 2000 as opposed to one month during the
second quarter of 1999.
INCOME FROM OPERATIONS. As a result of the foregoing, income from
operations for the second quarter of 2000 increased $20.9 million, or
295.0%, to $28.0 million, compared to income from operations of $7.1
million for the second quarter of 1999. As a percentage of net sales,
income from operations increased to 5.8% for the second quarter of 2000
from 2.6% for the second quarter of 1999.
INTEREST EXPENSE. Second quarter interest expense increased $9.2 million,
or 59.2%, to $24.8 million in 2000 as compared to interest expense of
$15.5 million in 1999. The increase is the result of the increased debt
associated with the acquisition of Peguform.
OTHER INCOME. Other income for the second quarter of 2000 is primarily
composed of $4.0 million non-cash, mark-to-market adjustments on various
interest rate swap agreements; $1.6 million non-cash, mark-to-market
adjustments on a foreign exchange collar; and $1.4 million of interest
income offset by $5.3 million of unrealized currency exchange losses. The
interest rate swap agreements were entered into during the second quarter
of 1999 to economically hedge a portion of the Company's exposure to
interest rate risk associated with the debt incurred related to the
Peguform Acquisition. During the first quarter of 2000, the Company
terminated the three cross-currency swap agreements that were a part of
the overall cross-currency interest rate swap agreements and entered into
a foreign exchange collar. The foreign exchange collar had an estimated
fair market value of $3.8 million at June 30, 2000 which was recorded as
an investment on the balance sheet. See Note 5 of Notes to Consolidated
Financial Statements.
Other income during the second quarter of 1999 was primarily composed of
$19.5 million non-cash, mark-to-market adjustments on various currency
and interest rate swaps entered into during the second quarter of 1999 to
economically hedge the Company's exposure to foreign exchange and
interest rate risk associated with the Peguform Acquisition. These cross
currency and interest rate swaps served to reduce the overall cost of
capital of the Company, while also providing an economic hedge to
fluctuations in foreign exchange rates.
TAX PROVISION (BENEFIT). The tax provision of $0.6 million for the
quarter ended June 30, 2000 is primarily the result of the Company's
European operations which generated taxable income for the respective
period. The tax benefit of $0.7 million for the second quarter of 1999
was composed of a tax benefit of $0.9 million relating to Venture
Holdings Corporation offset by a tax provision of $0.2 million for the
Peguform operations.
EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT OF DEBT. In connection with
the issuance of the 1999 Notes, the Company redeemed its 9 3/4% senior
subordinated notes due 2004 at the redemption price of 104.875% plus
accrued interest which resulted in an extraordinary loss of $5.6 million
($3.8 million prepayment penalty plus unamortized deferred financing
costs of $1.8 million) for the three months ended June 30, 1999.
NET INCOME. Due to the foregoing, the net income for the second quarter
of 2000 decreased to $4.2 million compared to net income of $6.5 million
for the second quarter of 1999.
26
<PAGE> 29
SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO SIX MONTHS ENDED JUNE 30, 1999
NET SALES. Net sales for the first six months of 2000 increased $523.9
million, or 119.1%, from the first six months of 1999. This increase was
largely due to the addition of Peguform's sales during the first six
months of 2000 compared to Peguform's sales for only the month of June
during 1999. Domestically, sales decreased $2.3 million, or 0.7%, due
primarily to lower tooling sales as compared to the comparable period in
the prior year.
GROSS PROFIT. Gross profit for the first six months of 2000 increased
$71.7 million to $131.7 million compared to $60.0 million for the first
six months of 1999. As a percentage of net sales, gross profit was
comparable with the prior year.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expense for the first six months of 2000 increased $39.4
million, or 115.2%, to $73.7 million compared to $34.2 million for the
first six months of 1999. As a percentage of net sales, selling, general
and administrative expense decreased to 7.7% for the first six months of
2000 as compared to 7.8% for the first six months of 1999. The decrease
is attributable to the impact of Peguform's lower selling, general and
administrative expense as a percentage of net sales, relative to
Venture's, being included in the operating results for the first six
months of 2000.
INCOME FROM OPERATIONS. As a result of the foregoing, income from
operations for the first six months of 2000 increased $31.1 million, or
121.0%, to $56.9 million, compared to $25.7 million for the first six
months of 1999. As a percentage of net sales, income from operations
remained consistent from the first six months of 2000 compared to the
first six months of 1999.
INTEREST EXPENSE. Interest expense for the first six months of 2000
increased $25.4 million, or 101.4%, to $50.4 million in 2000 as compared
to $25.0 million for the first six months of 1999. The increase is the
result of the increased debt associated with the Peguform Acquisition
offset by a reduced overall cost of capital under the new capital
structure, after consideration of interest rate swaps.
OTHER INCOME. Other income for the first six months of 2000 is composed
of $41.6 million of realized gains and $23.6 million of unrealized losses
on portions of the cross-currency interest rate swap agreements entered
into during the second quarter of 1999 to economically hedge a portion of
the Company's exposure to foreign exchange and interest rate risk
associated with the Peguform Acquisition. During the first quarter, the
Company terminated the three cross-currency swap agreements that were a
part of the cross-currency overall interest rate swap agreements and
entered into a foreign exchange collar. The foreign exchange collar had
an estimated fair market value of $3.8 million which was recorded as an
investment on the balance sheet with a corresponding unrealized gain of
$3.8 million being recorded in other income for the first six months of
2000. See Note 5 of Notes to Consolidated Financial Statements. Other
income was also comprised of unrealized currency losses of $23.2 million
which were offset, in part, by interest income of $2.3 million and
realized currency gains of $1.6 million.
For the first six months of 1999, other income was primarily composed of
$19.5 million non-cash, mark-to-market adjustments on various currency
and interest rate swaps entered into during the second quarter of 1999 to
economically hedge the Company's exposure to foreign exchange and
interest rate risk associated with the Peguform Acquisition. These cross
currency and interest rate swaps served to reduce the overall cost of
capital of the Company, while also providing an economic hedge to
fluctuations in foreign exchange rates.
TAX PROVISION (BENEFIT). The tax benefit of $1.8 million for the six
months ended June 30, 2000 is primarily the result of the Company's
European operations which generated taxable loss for the respective
period. The tax provision of $0.4 million for the second quarter of 1999
was composed of a tax provision of $0.1 million relating to Venture
Holdings Corporation and a tax provision of $0.3 million for the Peguform
operations.
27
<PAGE> 30
EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT OF DEBT. In connection with
the issuance of the 1999 Notes, the Company redeemed its 9 3/4% senior
subordinated notes due 2004 at the redemption price of 104.875% plus
accrued interest which resulted in an extraordinary loss of $5.6 million
($3.8 million prepayment penalty plus unamortized deferred financing
costs of $1.8 million) for the six months ended June 30, 1999.
NET INCOME. Due to the foregoing, net income for the first six months of
2000 decreased $4.8 million to $9.8 million compared to $14.6 million for
the first six months of 1999.
LIQUIDITY AND CAPITAL RESOURCES (UNAUDITED)
The Company's consolidated working capital was $226.9 million at June 30,
2000, compared to $342.3 million at June 30, 1999, a decrease of $115.4
million. The Company's working capital ratio decreased to 1.62x at June
30, 2000 from 2.12x at June 30, 1999. The decrease is due to (1) an
increase in current liabilities, primarily accrued expenses and current
portion of long term debt, and (2) a decrease in current assets,
primarily cash and cash equivalents and inventories. Net cash provided by
operating activities was $86.5 million for the year ended June 30, 2000
compared to $51.4 million for the six months ended June 30, 1999. The
increase in cash provided by operations is largely due to a realized $42
million gain on the termination of cross-currency swap agreements.
Capital expenditures were $41.4 million for the six months ended June 30,
2000 compared to $13.2 million for the same period in 1999. The Company
continues to upgrade machinery and equipment and paint lines at all
facilities to handle expected increased volumes and general
reconditioning of equipment.
In the ordinary course of business, the Company seeks additional business
with existing and new customers. The Company continues to compete for the
right to supply new components which could be material to the Company and
requires substantial capital investment in machinery, equipment, tooling
and facilities. As of the date hereof, however, the Company has no formal
commitments with respect to any such material business, except as noted
below.
In August 1999, the Company was awarded a letter of intent for a
significant new program for one of its major customers (the "New
Program") with projected annual revenues of approximately $175 million
and production scheduled to start and ramp up in late 2001. As a result
of this award, the Company may be required to make capital expenditures
in the range of $30.0 to $60.0 million payable over the next several
years in addition to its normal capital expenditures. The size and scope
of the expenditures associated with the New Program are still being
defined.
Net cash used in financing activities was $35.0 million for the six
months ended June 30, 2000 compared to net cash provided by financing
activities of $467.6 million for the same period in 1999. The fluctuation
primarily relates to the refinancing of certain existing debt and the
issuance of new debt to make the Peguform acquisition during the second
quarter of 1999 and the payments made during the six months ended June
30, 2000 to reduce outstanding borrowings.
On May 27, 1999, in connection with the Peguform Acquisition, the Company
entered into a new credit agreement, which was amended on June 4, 1999
and on June 29, 2000 (the "credit agreement"). The credit agreement
provides for borrowings of (1) up to $175 million under a revolving
credit facility, which, in addition to those matters described below, is
used for working capital and general corporate purposes; (2) $75 million
under a five-year term loan A; (3) $200 million under a six-year term
loan B; and (4) $125 million under an 18-month interim term loan. In
March 2000, the Company applied a prepayment of $42 million to the
18-month interim term loan. In July 2000, the Company applied additional
$8 million and $2 million prepayments to the 18-month interim term loan,
reducing the principal balance to $73 million. See Notes 4 and 5 of Notes
to Consolidated Financial Statements.
The credit agreement was amended for several purposes. First, the
requirement that the Company issue $125 million of securities that rank
pari passu in right of payment with, or are junior to, the Company's 12%
senior subordinated notes due 2009 was extended from November 27,
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2000 to March 31, 2002. Second, the credit agreement was amended to allow
for a $100 million non-recourse factoring program. Third, certain
restrictive covenants were amended to provide the Company with additional
flexibility in its stipulated financial ratios.
The 18-month interim term loan matures on November 27, 2000. The Company
intends to refinance the remaining principal balance of the 18-month
interim term loan and has the ability to use proceeds under the revolving
credit facility to do so.
The revolving credit facility permits the Company to borrow up to the
lesser of a borrowing base computed as a percentage of accounts
receivable and inventory, or $175.0 million less the amount of any
letters of credit issued against the credit agreement. At June 30, 2000
the Company had $27 million outstanding with $148 million still available
under the revolving credit facility. The credit agreement and documents
governing the Company's $205 million in principal amount of 9 1/2% senior
notes due 2005, $125 million in principal amount of 11% senior notes due
2007 and $125 million in principal amount of 12% senior subordinated
notes due 2009 contain various covenants. As of June 30, 2000, the
Company was in compliance with all such covenants.
Obligations under the credit agreement are jointly and severally
guaranteed by the Company's domestic subsidiaries and are secured by
first priority security interests in substantially all of the assets of
the Company and its domestic subsidiaries. The credit agreement became
effective May 27, 1999, contemporaneously with the completion of the
Peguform Acquisition.
During May 1999, and in connection with the issuance of debt to finance
the Peguform Acquisition, Venture entered into two five-year Euro dollar
cross-currency interest rate swap agreements and one three-year Euro
dollar cross-currency interest rate swap agreement.
Under the two five-year cross-currency interest rate swap agreements, the
Company received interest based on a fixed U.S. dollar interest rate of
11.5% and paid a fixed Euro dollar rate of 9.0% on the outstanding
notional principal amounts in U.S. dollars and Euro dollars,
respectively. If held to maturity, the Company would have paid 237
million Euro dollars in exchange for $250 million.
Under the three-year cross-currency interest rate swap agreement, the
Company received interest based on a fixed U.S. dollar interest rate of
9.5% and paid a fixed Euro dollar rate of 7.1% on the outstanding
notional principal amounts in U.S. dollars and Euro dollars,
respectively. If held to maturity, the Company would have paid 194
million Euro dollars in exchange for $205 million.
Each cross-currency interest rate swap agreement was originally comprised
of three separate financial instruments, consisting of two interest rate
swap agreements and a cross-currency swap agreement. When combined with
the underlying fixed U.S. dollar interest rate debt that they matched,
the debt was economically converted to fixed Euro dollar interest rate
debt.
In March 2000, the Company terminated its cross-currency swap agreements
within each of its three original cross-currency interest rate swap
agreements and realized a cash gain of $42.0 million. The entire cash
proceeds were applied as a prepayment of the Company's $125 million
18-month interim term loan. At December 31, 1999, these financial
instruments had an estimated fair market value of $27.1 million which was
recorded as an investment on the balance sheet with a corresponding
unrealized gain of $27.1 million being recorded in other income.
Accordingly, as a result of the termination of the cross-currency swap
agreements, the net impact on earnings for the six months ended June 30,
2000 is an increase in other income of $14.9 million, which is comprised
of a realized gain of $42.0 million, offset by an unrealized loss of
$27.1 million. For the six months ended June 30, 1999, the non-cash
change in fair market value of the cross-currency swap agreements
resulted in $17.5 million of other income.
The cross-currency swap agreements were replaced with a twelve-month
foreign exchange collar. The collar is designed to reduce the economic
risk to the Company of Euro to US dollar exchange movements. The notional
amount is 500,000,000 Euros. The estimated fair market value of this
financial instrument is $3.8
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million, and is recorded as an investment on the balance sheet as of June
30, 2000. The corresponding $1.6 million and $3.8 million non-cash change
in estimated fair market value is recorded in other income for three and
six months ended June 30, 2000, respectively. During July 2000, the
Company terminated the put side of its foreign currency exchange collar
and received $10.9 million. The Company used $2.7 million of the proceeds
to purchase a replacement put to protect against any large devaluations
in the Euro to US dollar exchange rate. The notional amount of the
replacement put is 400,000,000 Euros. The Company applied $8.0 million of
the net cash proceeds as a prepayment of the 18-month interim term loan.
See Note 4 of Notes to Consolidated Financial Statements.
One of the interest rate swap agreements within each of the original
cross-currency interest rate swap agreements is accounted for using
settlement accounting. The cash flows from these interest rate swap
agreements are accounted for as adjustments to interest expense. For the
six months ended June 30, 2000, these interest rate swap agreements
resulted in an increase to interest expense of $0.5 million. For the six
months ended June 30, 1999, these interest rate swap agreements resulted
in a decrease to interest expense $0.1 million. During July 2000, the
Company paid $14.9 million to terminate these financial instruments. This
amount will be capitalized and amortized into interest expense over the
terms of the original interest rate swap agreements.
The other interest rate swap agreements within each of the original
cross-currency interest rate swap agreements do not meet all the criteria
for settlement accounting under generally accepted accounting principles.
The cash flows from these interest rate swap agreements are included in
other income. The estimated fair market value of these financial
instruments of $16.9 million is recorded as an investment on the balance
sheet as of June 30, 2000. The corresponding $3.5 million non-cash change
in estimated fair market value is recorded in other income for the six
months ended June 30, 2000. For the six months ended June 30, 1999, the
non-cash change in estimated fair market value of these financial
instruments of $2.0 million was recorded as other income. During July
2000, the Company terminated these financial instruments and realized a
cash gain of $16.9 million plus interest income of $0.1 million.
Accordingly, during the third quarter of 2000, the $16.9 million realized
gain will be offset by a corresponding unrealized loss of $16.9 million.
During July 2000, the Company applied $2.0 million of the net cash
proceeds from the terminations of the interest rate swap agreements as an
additional prepayment of the 18-month interim term loan. See Note 4 of
Notes to Consolidated Financial Statements.
The Company has also entered into interest rate swap agreements with a
notional value of $55 million to mitigate the risk associated with
changing interest rates on certain floating rate debt. These interest
rate swap agreements are accounted for using settlement accounting. The
impact of these interest rate swap agreements resulted in $0.2 million
and $0.5 million of additional interest expense for the six months ended
June 30, 2000 and 1999, respectively.
The Company believes that its existing cash balances, operating cash
flow, borrowings under its bank credit facility and other short term
arrangements will be sufficient to fund working capital needs and normal
capital expenditures required for the operation of its existing business
through the end of 2001. As the scope of the New Program, defined above,
is further defined, the Company may seek new or amended credit
arrangements to fund these capital expenditures and working capital
requirements.
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NEW ACCOUNTING STANDARDS
In June 1998, the FASB approved SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and
reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging
activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and
measure those instruments at fair value. This Standard was to apply in
the first quarter of the Company's fiscal year beginning January 1, 2000.
In July 1999 the FASB approved SFAS No. 137, which delayed the
implementation date for SFAS No. 133 for one year. The Company is
currently analyzing the impact of this Standard on its financial position
and results of operations.
In September 1999, the Emerging Issues Task Force (EITF) reached a
consensus on Issue 99-5, "Accounting for Pre-Production Costs related to
Long-Term Supply Arrangements." The Issue addresses pre-production costs
incurred by OEM suppliers to perform certain services related to the
design and development of the parts they will supply to the OEM as well
as the design and development costs to build molds, dies and other tools
that will be used in producing the parts. The consensus generally
requires all design and development costs for products to be sold under
long-term supply arrangements to be expensed unless there is a
contractual guarantee that provides for specific required payments for
design and development costs.
The Task Force concluded that the provisions of this consensus may be
applied prospectively for costs incurred after December 31, 1999. At June
30, 2000, other assets includes approximately $16.9 million of design and
development costs for which customer reimbursement is anticipated but not
contractually guaranteed. These costs will continue to be amortized over
the future periods as they are reimbursed by the Company's customers. The
Company has adopted the provisions of this consensus by expensing all
design and development costs incurred after December 31, 1999.
In December 1999, the SEC released Staff Accounting Bulletin (SAB) No.
101 entitled Revenue Recognition. The SAB provides guidance on the
recognition, presentation and disclosure of revenue in financial
statements. The SAB also discusses the basic criteria that should be met
before registrants can record revenue. The Company is required to adopt
SAB No. 101 by the beginning of the fourth quarter of 2000. Management of
the Company has not yet determined the impact of adopting this SAB on its
financial position or results of operations.
* * * * * * *
The foregoing discussion in MD&A includes forward-looking statements
within the meaning of the Securities Exchange Act of 1934 and are subject
to a number of risks and uncertainties. Such factors include, among
others, the following: international, national and local general economic
and market conditions; demographic changes; the size and growth of the
automobile market or the plastic automobile component market; the ability
of the Company to sustain, manage or forecast its growth; the size,
timing and mix of purchases of the Company's products; new product
development and introduction; existing government regulations and changes
in, or the failure to comply with, government regulations; adverse
publicity; dependence upon original equipment manufacturers; liability
and other claims asserted against the Company; competition; the loss of
significant customers or suppliers; fluctuations and difficulty in
forecasting operating results; changes in business strategy or
development plans; business disruptions; product recalls; warranty costs;
the ability to attract and retain qualified personnel; the ability to
protect technology; retention of earnings; and control and the level of
affiliated transactions.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company is exposed to various market risks, including changes in
foreign currency exchange rates and interest rates. In order to manage
the risk arising from these exposures, Venture has entered into a variety
of foreign exchange and interest rate financial instruments. A discussion
of the Company's accounting policies for derivative financial instruments
can be found in the Organization and Summary of Significant Accounting
Policies and Financial Instruments footnotes to the financial statements
found in Item 8 of the Company's 1999 Annual Report on Form 10-K.
FOREIGN CURRENCY EXCHANGE RATE RISK. The Company has foreign currency
exposures related to buying, selling, and financing in currencies other
than the local currencies in which it operates. The Company's most
significant foreign currency exposures relate to Germany, Spain, France,
the United Kingdom, the Czech Republic, Mexico, Brazil and Canada. As of
June 30, 2000, the net fair value asset of financial instruments
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with exposure to foreign currency risk was approximately $3.8 million.
The potential loss in fair value for such financial instruments from a
hypothetical 10% adverse change in quoted foreign currency exchange rates
would be approximately $22.6 million. The model assumes a parallel shift
in the foreign currency exchange rates. Exchange rates rarely move in the
same direction. The assumption that exchange rates change in a parallel
fashion may overstate the impact of changing exchange rates on assets and
liabilities denominated in a foreign currency.
A portion of the Company's assets are based in its foreign operations and
are translated into U. S. dollars at foreign currency exchange rates in
effect as of the end of each period, with the effect of such translation
reflected as a separate component of member's equity. Accordingly, the
Company's consolidated member's equity will fluctuate depending upon the
weakening or strengthening of the U. S. dollar against the respective
foreign currency.
INTEREST RATE RISK. The Company is subject to market risk from exposure
to changes in interest rates based on its financing, investing, and cash
management activities. Venture has entered into various financial
instrument transactions to maintain the desired level of exposure to the
risk of interest rate fluctuations and to minimize interest expense. As
of June 30, 2000, the net fair value asset of financial instruments with
exposure to interest rate risk was approximately $16.9 million. The
potential loss in fair value for such financial instruments from a
hypothetical 10% adverse shift in interest rates would be approximately
$11.6 million.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company has been involved in legal proceedings with the Michigan
Department of Environmental Quality concerning the emissions from its
Grand Blanc paint facility. In October 1999, the parties to the
litigation reached an agreement in principle to settle the case by the
installation of full pollution abatement equipment at the Grand Blanc
facility and payment by the Company of $1.1 million. The agreement was
subject to several conditions, primarily rezoning of the property. In
January of 2000, rezoning approval was granted for the new equipment. In
February of 2000, the Company applied for new permits for the
installation of the equipment. The Company is currently negotiating a
consent decree with the Michigan Department of Environmental Quality and
expects this to be completed in the third quarter of 2000.
In December 1999, the Michigan Department of Environmental Quality
contacted the Grand Blanc facility relating to the classification of
wastes leaving the facility. The Company has been discussing the issue
with the Michigan Department of Environmental Quality and has been
conducting tests of the waste. As a result of the contact and to avoid
future liability, the Company has voluntarily changed the classification
of the waste on all subsequent disposals even though the Company
disagrees with the Michigan Department of Environmental Quality. In
addition, the Company is changing materials and certain processes to
remove the concern of the Michigan Department of Environmental Quality.
By changing the classification of the waste for disposal subsequent to
the contact, the Company has limited its potential liability to disposals
prior to the contact. However, the Company may be exposed to some
liability for past disposal. On March 20, 2000 the Company received a
notice of warning from the Michigan Department of Environmental Quality
regarding this matter. On August 2, 2000, the Company received a letter
from the Michigan Department of Environmental Quality agreeing with the
Company that current waste may be classified at the original lower
levels. At the present time the Company is unable to quantify or qualify
any liability for prior disposals but is working with the Michigan
Department of Environmental Quality to resolve this issue.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits. A list of the exhibits required to be filed as
part of this Form 10-Q is included under the heading
"Exhibit Index" in this Form 10-Q and incorporated herein
by reference.
(b) The Company did not file any reports on Form 8-K during the
quarter ended March 31, 2000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VENTURE HOLDINGS COMPANY LLC, VEMCO, INC.,
VENTURE INDUSTRIES CORPORATION, VENTURE
MOLD & ENGINEERING CORPORATION, VENTURE
LEASING COMPANY, VEMCO LEASING, INC.,
VENTURE HOLDINGS CORPORATION, VENTURE
SERVICE COMPANY, EXPERIENCE MANAGEMENT
LLC, VENTURE EUROPE, INC., AND VENTURE EU
CORPORATION
Date: August 8, 2000 /s/ James E. Butler
-----------------------------------
James E. Butler
Chief Financial Officer
Signing on behalf of each registrant and
as principal financial officer of each
registrant.
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EXHIBIT INDEX
Exhibit No. Description
----------- -----------
10.1 Second Amendment to Credit
Agreement, dated as of June 29, 2000
among Venture Holdings Company LLC,
the Lenders (as defined therein) and
Bank One, NA, as Administrative
Agent.
27.1 Financial Data Schedule.
35
