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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
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SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
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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)
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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
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 .
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
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VENTURE HOLDINGS COMPANY LLC
FORM 10-K
TABLE OF CONTENTS
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PART I
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Item 1. Business 1
Item 2. Properties 11
Item 3. Legal Proceedings 14
Item 4. Submission of Matters to Vote of Security Holders 14
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholders Matters 14
Item 6. Selected Consolidated Financial Data 14
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations 16
Item 7a. Quantitative and Qualitative Disclosures about Market Risks 24
Item 8. Financial Statements and Supplementary Data 24
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure 53
PART III.
Item 10. Directors and Executive Officers of Registrant 53
Item 11. Executive Compensation 55
Item 12. Security Ownership of Certain Beneficial Owners and Management 57
Item 13. Certain Relationships and Related Transactions 57
PART IV.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 61
SIGNATURES 62
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PART I
ITEM 1. BUSINESS
GENERAL
Venture Holdings Company LLC, ("Venture") is the successor to Venture
Holdings Trust, which was established by Larry J. Winget in 1987. Venture
Holdings Company LLC owns, directly or indirectly, all of the outstanding
capital stock of, or equity interests in, each of its subsidiaries,
except for its 70% owned Mexican and 50% owned Spanish joint ventures. As
used in this report, unless otherwise stated, "our," "us," and "we" refer
to Venture Holdings Company LLC and its subsidiaries.
We are an industry leader and a worldwide full-service supplier and
manufacturer of plastic components, modules and systems, and an industry
leader in applying new design and engineering technology to develop
innovative products, create new applications and reduce product
development time. We rank among the largest designers and manufacturers
of interior and exterior plastic components and systems to the North
American and European automotive markets. We have the capability to
provide customers state-of-the-art design and advanced engineering
services 24 hours a day around the world. Our principal customers include
every major North American original equipment manufacture or OEM, eleven
of the twelve major European OEMs, several major Japanese OEMs, and
leading direct or "Tier I" suppliers. We operate 59 facilities in the
following 10 countries: the United States, Canada, Germany, Spain,
France, Hungary, the Czech Republic, Mexico, Netherlands, and Brazil. Our
comprehensive manufacturing capabilities include custom injection
molding, automated painting and assembly, and material and product
testing. We also have extensive tool making capabilities. Our engineering
focuses on anticipating actual production issues and integrating part
design with tool design to create an efficient manufacturing process. We
refer to this emphasis as "design for manufacture."
We emphasize the design and manufacture of components and integrated
systems as a sole-source supplier. We currently supply components or
systems on over 150 models. Interior products include such items as
instrument panel systems, door panels, airbag covers, side wall trim,
garnishment molding systems and consoles. Exterior products include front
and rear bumper fascias and systems, body side moldings, hatchback doors,
fenders, grille opening panels and reinforcements, farings, wheel lips,
and large body panels such as hoods, sunroofs, doors and convertible
hardtops.
Our principal executive offices are located at 33662 James J. Pompo
Drive, Fraser, Michigan 48026 and our telephone number is (810) 294-1500.
THE PEGUFORM ACQUISITION
A key element of our business strategy has been to increase our global
presence to meet our OEM customers' global needs. On May 28, 1999, we
acquired Peguform GmbH in furtherance of this strategy. Peguform has been
a leading international designer and manufacturer of complete interior
modules, door panels and dashboards and of exterior modules and other
structural plastic body parts, including bumper fascias and hatchback
doors. As a result of the Peguform acquisition, we acquired manufacturing
facilities in Germany, Spain, France, the Czech Republic, Mexico and
Brazil. Our manufacturing network is enhanced by 9 module centers across
Europe, serving as final assembly units located directly at, or very
close to, selected customers' car assembly plants. Peguform's proven
ability to gain development orders for new and successor models is
enhanced by its product engineering efforts, including such innovations
as thermoplastic bumpers, a proprietary slush molding process, a
thermoplastic hatchback door and painting technologies such as
electro-static painting and the use of water-based paint.
We now have an established and significant presence in Europe and South
America as a result of the Peguform acquisition, which complemented our
strengths in North America, giving us the ability to
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service our OEM customers much more broadly than either Venture or
Peguform could individually. Additionally, we believe that the Peguform
acquisition has enhanced the business in additional ways, representing
mutually beneficial synergies that go beyond the expansion of geographic
reach, including the following: expanded engineering capabilities;
complementary technology; strengthened and expanded customer
relationships; and operational efficiencies.
PRINCIPAL PRODUCTS
We design and produce injection molded, compression molded, injection
compression molded, reaction injection molding ("RIM") and slush molded
plastic parts primarily for OEMs and other Tier I suppliers. We also
emphasize complex products, such as instrument and door panel assemblies,
which require the integration of multiple components into complete
sub-assemblies.
The following sets forth information about our automotive products and
vehicle models on which they are used or for which we have been awarded
business.
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AWARDED BUSINESS ON
COMPONENT OEM/CUSTOMER CURRENT PRODUCTION (A) FUTURE PRODUCTION (B)
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<S> <C> <C> <C>
Interior Trim Audi A3, A4,TT, A8
DaimlerChrysler A Class, Vito, B Van, Breeze, Cirrus, B Van, Breeze, Cirrus,
Concorde, Eagle, Grand Cherokee, LHS, Neon, Stratus, PT
300M, Intrepid, Neon, Stratus, Wrangler, Cruiser, Wrangler
Viper, Actros
Finley Industries Beauville
Ford Continental, Escort, Mountaineer, Taurus
General Motors Achieva, Blazer, Cadillac, S5S, Camaro, Century, Regal, Envoy,
Cavalier, Century, Lumina, GMT 370, GMT 560,
Express/Savanna Van, Park Avenue, Regal, Malibu, Saturn
STS, Skylark, Sunfire, Suburban,
TransAm, Tahoe, CK Pickup
Nissan HM, Vanette
Opel Corsa
Porsche Boxster, 911
Renault Espace, Megane
Seat Ibiza, Inca, Cordoba, Toledo Inca
Skoda Felicia, Octavia
Volkswagen Polo, Passat, T4 Van Polo, VW611, D1
Instrument and Audi A2, A3, A4, A8, TT A4, A8
Door DaimlerChrysler A Class, B Van, Vito, V Class Jeep Cherokee
Panels/Assemblies General Motors Corvette, Express/Savanna
Nissan Terrano, Serena
Opel Corsa, Tigra
Porsche Boxster, 911 911
Seat Ibiza, Inca, Cordoba Cordoba
Skoda Felicia, Fabia
Volkswagen Passat, T4 Van, Caddy VW 611, Passat, D1
Airbag Covers Autoliv Accord, Alero Cobra, Caravan, Grand Am,
Grand Cherokee, Mazda 626, Mustang,
Merecedes, Navigator, S5S, Sable,
Subaru, Taurus, Town & Country,
Volkswagen Voyager
Breed Suzuki Tracker, Wrangler Chrysler RS, Chrysler
PT-44
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<TABLE>
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AWARDED BUSINESS ON
COMPONENT OEM/CUSTOMER CURRENT PRODUCTION (A) FUTURE PRODUCTION (B)
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<S> <C> <C> <C>
DaimlerChrysler A Class
TRW Breeze, Cirrus, Mustang, Neon, Stratus,
PN96, Town Car, Ranger
Cladding/Exterior Audi A3, A6
BMW 3 Series, 5 Series, 7 Series 7 Series
DaimlerChrysler Dakota, Dakota Quad, Durango, Eclipse,
Vito, V Class, Actros
Ford Escort, Explorer, Expedition, F-Series Ranger
Pickups, Mustang, Navigator, Nissan,
Quest, Ranger, Villager
General Motors Astro Van, Corvette, Denali, Escalade,
Express/Savanna Van, Firebird, Malibu, CK Pickup
Grand Am, Grand Am GT, Impala, Lumina,
Monte Carlo, Opel, Safari, Saturn,
Silhouette, Sonoma, S10, Suburban,
Sunfire, Tahoe, Transport, Yukon,
Venture
Nissan Terrano, Serena, Tino, Micra HS
Opel Vectra
PSA Peugeot Xantia, Xsara, Saxo, 306 806(V)
Renault Megane, Clio, Megane 4x4
Seat Ibiza, Toledo
Skoda Oktavia, Fabia
Volkswagen Polo, Beetle, Jetta Polo
Volvo V/S40
Fascias Audi A4, TT A4
BMW 3 Series, 5 Series 3 Series, 5 Series
DaimlerChrysler Vito, V Class, Sprinter
Ford F-Series Pick-up, Explorer,
General Motors Astro, DeVille, Eldorado, Extreme,
LeSabre, Montana, Seville, Safari,
Transport, Opel, STS, Venture
Isuzu Rodeo
Karmann Golf Cabrio
Mitsubishi Carisma, Spacestar
Opel Omega, Catera
PSA Peugeot 106, 206, 306, Xsara, Berlingo, Saxo,
806, Picasso
Porsche Boxster, 911 Boxster, 911
Renault Twingo, Clio, Megane, Master, Express,
Kangoo, Laguna
Skoda Felicia, Octavia, Fabia Octavia
Seat Ibiza, Inca, Cordoba, Toledo, Leon Ibiza, Inca
Volvo V/S 40 V/S 40
Volkswagen Passat, Golf, Polo, Jetta, Vento, Caddy, Polo, D1
Bora, Lupo, LT2, Utility
Functional DaimlerChrysler A Class, Vito
Components Ford Taurus, Contour, Escort, F-Series Econoline Van,
Pick-up, Econoline Van, Jaguar, Lincoln Thunderbird, Ranger,
LS, Mustang, Mystique, Navigator, Navigator, Expedition
Expedition, Ka
</TABLE>
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AWARDED BUSINESS ON
COMPONENT OEM/CUSTOMER CURRENT PRODUCTION (A) FUTURE PRODUCTION (B)
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<S> <C> <C> <C>
General Motors Blazer, Delphi-AC Spark Plug, G Van,
Express/Savanna Van, Seville, Skylark
Nissan Terrano, Serena, Tino, TK
Opel Astra, Corsa
PSA Peugeot Berlingo 306, Xanita, 806(V)
Renault Megane 4x4
Volvo V/S 40
Miscellaneous Club Car Golf Cart bodies
Non-Automotive Whirlpool Consumer white goods
Esswein Consumer white goods
Panasonic Television cases
Case Tractor MU7 Tractor Exterior
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(a) Represents models for which we will produce and supply products in
2000 and, in most cases, future years beyond 2000.
(b) The amount of products produced under these awards is dependent on
the number of vehicles manufactured by the OEMs. Many of the models are
versions of vehicles not yet in production. There can be no assurance
that any of these vehicles will be produced or that we will generate
certain revenues under these awards even if the models are produced.
CUSTOMERS AND MARKETING
We compete in the global OEM supplier industry, which is characterized by
a small number of OEMs, which are able to exert considerable pressure on
OEM suppliers. Sales to these customers consist of a large number of
different parts, tooling and other services, which are sold to separate
divisions and operating groups within each customer's organization. We
typically receive purchase orders from such customers that generally
provide for supplying the customer's requirements for a particular model
or model year rather than for manufacturing a specific quantity of
products. The loss of any one of such customers or purchase orders, or a
significant decrease in demand for certain models or a group of related
models sold by any of our major customers could have a material adverse
effect on us. In addition, our failure to obtain new business on new
models or to retain or increase business on redesigned existing models
could adversely affect us. OEM customers are also able to exert
considerable pressure on component and system suppliers to reduce costs,
finance tooling, improve quality and provide additional design and
engineering capabilities. There can be no assurance that the additional
costs of increased quality standards, price reductions or additional
engineering capabilities required by OEMs will not have a material
adverse effect on our financial condition or results of operations.
Our principal customers include every major North American OEM, eleven of
the twelve major European OEMs, several major Japanese OEMs, and leading
Tier 1 suppliers. We maintain diversity of volume among the various
divisions of the OEMs, and we are further diversified by our position as
a supplier for a number of high volume vehicle platforms manufactured by
those divisions. We continue to pursue new opportunities with North
American, European, and Japanese OEMs. Our non-automotive customers
include Club Car, Inc., Whirlpool, Case Tractor, Panasonic, and Esswein.
See Note 14 of Notes to Consolidated Financial Statements for a
description of our North American and European segments.
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The approximate percentage of net sales to our principal customers for
the years ended December 31, 1997 through 1999 are shown below:
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YEAR ENDED DECEMBER 31,
CUSTOMER 1999 1998 1997
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NORTH AMERICA:
General Motors 18% 38% 40%
Ford 11 23 27
DaimlerChrysler 7 15 8
Foreign OEM's 1 5 7
Tier 1 Suppliers to OEMs 6 15 13
Other Automotive 2
Non-Automotive 1 4 5
EUROPE:
Audi AG 13 -- --
Volkswagen AG 9 -- --
DaimlerChrysler AG 5 -- --
PSA Peugeot Citroen 4 -- --
Skoda Automobilova 3 -- --
Renault SA 2 -- --
Bayerische Motoren Werke AG (BMW) 3 -- --
Seat, S.A. 5 -- --
Porsche AG 2 -- --
Adam Opel AG 1 -- --
Other Automotive 5 -- --
Non-Automotive 1 -- --
OTHER:
Isuzu Motors Limited 1 -- --
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TOTAL 100% 100% 100%
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Our sales are made directly to the OEMs with marketing and customer
support assistance provided by an affiliated company, wholly owned by Mr.
Winget, and by other unaffiliated entities. See "Item 13. Certain
Relationships and Related Transactions."
RAW MATERIALS
Our manufacturing processes use a variety of raw materials, principally
engineered plastic resins such as nylon, polypropylene (including
thermoplastics), polycarbonate, acrylonitrile-butadiene-styrene,
fiberglass reinforced polyester, polyethylene terephthalate ("PET") and
thermoplastic polyurethane ("TPU"); a variety of ingredients (such as
fiberglass) used in compounding materials used in the compression molding
process; paint related products; and steel for production molds. Although
all of these materials are available from one or more suppliers, our
customers generally specify materials and suppliers to be used by us in
connection with a specific program. We procure most of our raw materials
by issuing annual purchase orders under which our annual needs for such
materials are estimated. Releases against such purchase orders are made
only upon our receipt of corresponding orders from our customers. We have
not experienced raw material shortages, although there can be no
assurance that we will not experience raw material shortages in the
future. We have, as a result of an increase in world oil prices and
pressures from competing industries, seen an increase in raw material
prices and we expect more in the future. We are working with our
customers and alternative suppliers to offset these increases, but there
can be no assurance that we can fully offset the effect of any increase
which may negatively impact our gross margin.
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COMPETITION
Our business is highly competitive, and competition generally occurs on
the basis of product groups. A large number of actual or potential
competitors exist, including the internal component operations of the
OEMs as well as independent suppliers, some of which are larger than us.
The competitive environment has been affected in recent years by supplier
consolidations resulting from OEM supplier optimization policies and the
spin-off by OEMs of formerly in-house plastics manufacturing facilities.
We believe these consolidations and divestitures could benefit our future
product pricing, as formerly marginal competitors are removed and
spun-off in-house manufacturing facilities are forced to compete
independently.
We compete primarily on the basis of quality, cost, timely delivery and
customer service and, increasingly, on the basis of design and
engineering capability, painting capability, new product innovation,
product testing capability and the ability to reduce the time from
concept to mass production, commonly referred to as "art to part." Some
of the OEMs have adopted supplier management policies, which designate
preferred future suppliers and, in some cases, encourage new suppliers to
supply selected product groups. We believe that as the OEMs continue to
strive to reduce new model development cost and timing; innovation, and
design and engineering capabilities will become more important as a basis
for distinguishing competitors. We believe that we have an outstanding
reputation among OEMs in these two areas which has been enhanced as a
result of the Peguform acquisition.
We believe that in both North America and Europe, our two largest
markets, we maintain a competitive advantage due to our position as a
full-service OEM supplier. Our major North American competitors include
Magna International, Cambridge Industries, Inc., the Textron Automotive
division of Textron Corporation, Lear Corporation, The Budd Company
plastic division, and Johnson Controls, Inc., plus a large number of
smaller competitors.
The European market is best described in terms of interior and exterior
products. Our market position is enhanced as a result of the considerable
synergies between interior and exterior modules and by our technological
leadership in injection molding. In interior products, we focus on
dashboard and door panel modules. In both of these fragmented product
markets we rank behind market leader Sommer-Allibert, in a group which
includes Plastic Omnium, Faurecia, Johnson Controls, Magna, Lear,
Visteon, and Textron. In exterior products, we focus on bumper systems,
and we have a favorable market position relative to Plastic Omnium,
Dynamit Nobel, Magna, Sommer-Allibert and Rehau.
EMPLOYEES
At December 31, 1999, we employed approximately 11,800 persons worldwide.
In North America, we have 1,163 hourly persons at our Seabrook, New
Hampshire; Lancaster, Ohio; and Grand Blanc, Michigan facilities who are
covered by collective bargaining agreements with the United Auto Workers.
The contract with Seabrook employees was recently renegotiated and
expires in June 2002, and the Lancaster contract expires in June 2001.
Negotiations regarding a new collective bargaining agreement at the Grand
Blanc facility have just recently begun and employees at our Conneaut,
Ohio facility have recently voted to be represented by the Teamsters
Union, for which negotiations are ongoing. We have not experienced any
work stoppages in North America and consider our relations with our North
American employees to be good.
For reasons of flexibility, part of our European workforce is employed on
short-term contracts. In addition, leased personnel are utilized in
Europe on a short-term basis to cover peak requirements.
The European workforce is covered by collective bargaining agreements
with the following workers unions:
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Germany: IG Bergbau, Chemie und Erden and IG Holz und Kunststoff
France: CFTC, CGC, CGT, CGT-FO and Syndicat National Autonome
des Plastiques
Spain: Comisiones Obreras, Union General Trabajadores and
Central Intersindical Galega
Czech Republic: KOVO
Although we have experienced several minor work stoppages in France in
the past, we believe that our relationships with the European workers
councils and unions are good.
PATENTS
We have the right to use various patents, which aid in maintaining our
competitive position. These patents begin to expire over the next 15
years. The expiration of such patents is not expected to have a material
adverse effect on our financial position or results of operations. See
"Item 13. Certain Relationships and Related Transactions."
ENVIRONMENTAL
Our operations are subject to numerous federal, state and local laws and
regulations pertaining to the generation and discharge of materials into
the environment. We have taken steps related to such matters in order to
minimize the risks of potentially harmful aspects of our operations on
the environment. However, from time to time, we have been subject to
claims asserted against us by regulatory agencies for environmental
matters relating to the generation and disposal of hazardous substances
and wastes. Some of these claims relate to properties or business lines
acquired by us after a release had occurred. In each known instance,
however, we believe that the claims asserted against us, or obligations
incurred by us, will not result in a material adverse effect upon our
financial position or results of operations. Nonetheless, there can be no
assurance that activities at these facilities or facilities acquired in
the future, or changes in environmental laws and regulations, will not
result in additional environmental claims being asserted against us or
additional investigations or remedial actions being required.
As previously reported, we have been involved in legal proceedings with
the Michigan Department of Environmental Quality concerning the emissions
from our 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 us 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, we applied for new permits for the installation of the equipment.
We are currently negotiating a consent decree with Michigan Department of
Environmental Quality and expect this to be completed by the third
quarter of 2000. During the fourth quarter of 1999, we established a
reserve in the amount of $1.1 million relating to this payment. See "Item
3. Legal Proceedings."
In 1998 and 1999, the Michigan Department of Environmental Quality issued
3 letters of violation to our Grand Rapids, Michigan facility, alleging
violations of certain emission limitations and coating solvent content
requirements of the facility's state air use permit. We are presently
reviewing and discussing the alleged violations with the Michigan
Department of Environmental Quality, and it is possible that some may be
the result of computation and reporting discrepancies. We are evaluating
alternative coatings that may address any unresolved violations. It is
possible that the Michigan Department of Environmental Quality may seek
administrative penalties in connection with the resolution of these
matters. We do not believe that the amount of those penalties, if any,
will have a material adverse effect on our operations, or that the
resolution of these matters will require material capital expenditures,
although there can be no assurance that this will not be the case.
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The New Hampshire Department of Environmental Services is currently
undertaking an evaluation of certain modifications made in the early
1990's to the paint lines at our Seabrook, New Hampshire facility to
determine whether those changes made that facility subject to new source
review. The outcome of that evaluation cannot reasonably be predicted or
estimated at this time. If the New Hampshire Department of Environmental
Services concludes that the facility is subject to new source review, it
would likely require the installation of emission control equipment and
potentially other capital and operational expenditures, and could
possibly give rise to enforcement proceedings against the facility. While
we do not believe that any of the foregoing would have a material adverse
effect on our operations, there can be no assurance that this will not be
the case.
In connection with the Peguform acquisition, Venture conducted an
environmental due diligence assessment of the 16 primary Peguform
manufacturing facilities in Europe, Mexico and South America. That
assessment identified various potential environmental compliance and
contamination issues that may require expenditures to satisfy and ensure
compliance with applicable regulatory standards and requirements, defined
as "Known Conditions" under the definitive agreement with Klockner
Mercator Maschinenbau GmbH. Under the terms of the definitive agreement
with Klockner Mercator Maschinenbau GmbH, they are obligated to indemnify
us, on a sliding, diminishing scale over a 7 year period, for certain
costs we incur in connection with the Known Conditions in excess of DEM
7.5 million, and in excess of DEM 6.0 million for environmental
conditions other than the Known Conditions. We do not believe that any
expenditures we may be required to make in connection with the Known
Conditions or other environmental issues arising out of the Peguform
acquisition will have a material adverse effect on our operations,
although there can be no assurance that this will not be the case.
We have been notified of our status as a potentially responsible party,
commonly referred to as a "PRP" at the ReSolve Superfund site in North
Dartmouth, Massachusetts, the Solvents Recovery Services site in
Southington, Connecticut, the Old Southington Landfill Superfund site in
Southington, Connecticut, the Spectron, Inc. site in Elkton, Maryland,
and the Hazardous Waste Disposal Inc. site in Farmingdale, New York. At
all 5 sites, Venture and all other PRPs are jointly and severally liable
for all remediation costs under applicable hazardous waste laws.
Therefore, our proportionate share is subject to increase upon the
insolvency of other PRPs.
Regarding the ReSolve site, we have been named, along with Bailey's
immediate predecessor, USM Corporation's Bailey division, in the name of
Emhart Corporation, as a PRP for wastes sent to the site during the
1970s. Recent estimates provided by the PRP group responsible for the
site's remediation indicate that our potential liability for clean-up
efforts at the site is approximately $0.4 million for which we are fully
reserved and have posted a letter of credit in favor of the PRP group.
The discovery of the presence of contaminants in a form not currently
susceptible of short-term remediation, however, has created uncertainty
about the future scope and cost of clean-up efforts at this site, and a
possibility that the ultimate cost of remediation may be higher than
previously estimated. We are unable to predict what, if any, effect this
recent discovery may have on us.
On June 18, 1992, we received notice from the EPA that we were a PRP
under the federal Superfund law for the Solvents Recovery Services of New
England Site in Southington, Connecticut. Based upon a volumetric ranking
dated July 7, 1993, the waste allocated to us represented 0.11593% of the
total identified waste at the Southington site. Under the terms of a
settlement with Emhart, we agreed to assume liability for wastes sent to
the SRSNE Site by the Seabrook, New Hampshire facility and Emhart agreed
to assume liability for wastes sent by USM's Amesbury, Massachusetts
facility. The identified PRPs have organized a group to negotiate with
the EPA, and we have joined that group. The group has successfully
negotiated with the EPA to reduce the total estimated cost of the initial
removal action at the SRSNE Site from an original estimate of $14 million
down to a current estimate of approximately $4.0 million. The total
estimated cost of long-term remediation at the SRSNE Site is not yet
known.
In January 1994, we received a Notice of Potential Liability for the Old
Southington Landfill Superfund Site located in Southington, Connecticut.
We received notice, along with USM/Emhart,
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of liability for the share of Old Southington Landfill Superfund Site
costs allocated to USM Corporation, Amesbury, Massachusetts. We entered
into a settlement agreement with Emhart under which Emhart will assume
sole responsibility for all cleanup costs, imposed by the EPA, arising
out of the alleged liabilities of USM Corporation's Bailey division,
Amesbury, Massachusetts, for the Old Southington Landfill Superfund Site.
In June 1989, the EPA notified us that we were a PRP under the federal
Superfund law for the Spectron, Inc. site located in Elkton, Maryland. A
group of PRPs entered into agreements with the EPA to fund and conduct a
$2.8 million emergency response action to remove stored wastes at the
site and pay the government's past costs associated with the site,
approximately $635,000. There are several thousand PRPs at this site,
with most being small generators with low dollar exposure. In December
1989, nearly 800 entities, including Venture, that sent small quantities
of waste to the site participated on a cash-out basis in the settlement
for past costs and the removal action, and our allocated share was
approximately $8,100. Participation in the cash-out settlement gives us
protection against contribution claims from third parties for the first
phase, or Phase I of the site cleanup.
In August 1990, a separate PRP group was formed and negotiated an
agreement with the EPA to remediate contaminated seeps on the site and
perform a limited privately-funded remedial investigation/feasibility
study for the site, the so-called Phase II activities. We were not asked
to join this Phase II PRP group because that group determined that the
companies that paid for Phase I of the cleanup would not be asked to make
any financial contributions toward Phase II until the other customers
have paid out an amount per gallon equal to that paid by the Phase I
parties. An additional investigation was conducted as part of the Phase
II activities to determine the nature and extent of a new form of
contamination discovered on the site; additional design work will be
commenced soon.
In October 1995, we received a notice from the EPA that we were PRP that
has liability for conducting a Remedial Investigation/Feasibility Study
at the Spectron site. In connection with this, we may have an opportunity
to enter into a de minimis party cash out settlement with the EPA and the
other PRPs, the terms of which currently are being negotiated. No
estimate can be made at this time as to the amount of Venture's liability
at the Spectron site.
In 1995, the New York Department of Environmental Conservation notified
us, as well as a number of other parties, that we were named a
responsible party under the Environmental Conservation Law of the State
of New York for the Hazardous Waste Disposal, Inc. site located in
Farmingdale, New York. Based on available information, our involvement at
the site appears to be related to the shipment of 2 drums of waste
materials to the site, and consequently minimal. Additional
investigations have been undertaken to determine: (1) whether there are
any other entities that shipped wastes to the site; and (2) whether any
of the named parties actually shipped more than was originally attributed
to them. The results to date do not suggest that our ranking at the site
will change significantly. We have demanded that Emhart Corporation
assume the defense of this claim. Emhart Corporation has taken our demand
for a defense and indemnification under advisement. In doing so, Emhart
Corporation has taken the position that it did not receive "prompt
written notice" of the claim.
We also face the possibility of liability if we are deemed a successor to
TransPlastics for wastes generated and disposed of by TransPlastics when
it owned the Conneaut property. TransPlastics has been identified as a
PRP at the Millcreek site in Millcreek Township, Pennsylvania, and at the
New Lyme Site located in Dodgeville, Ashtabula County, Ohio, and at the
Huth Oil Site in Cleveland, Ohio, 3 sites currently undergoing
remediation. We also received notices from third parties regarding
potential claims in connection with the Huth Oil Site and the Millcreek
site. We did not agree to assume any environmental liabilities of
TransPlastics and, as a result, submitted claims for indemnification for
these matters to TransPlastics, which liabilities TransPlastics has
accepted. Under the terms of the Conneaut Acquisition agreement,
TransPlastics and its parent companies must indemnify us for any
liability arising out of any such claim. Nevertheless, there can be no
9
<PAGE> 12
assurance that TransPlastics and its parent companies will have
sufficient assets to satisfy our potential liability for the remediation
and any associated damage or cost caused by the contamination.
We also face potential liability at our Hillsdale, Michigan facility in
connection with the acquisition of The Boler Company by Bailey prior to
our acquisition of Bailey. An environmental site assessment completed by
Boler determined that the ground water at the Hillsdale facility was
contaminated with chlorinated solvents as a result of Boler's past site
activities. The ground water contamination plume has migrated onto
adjacent properties. In addition, the company from which Boler acquired
the Hillsdale site is listed as a PRP for a number of off-site disposal
locations. The Boler Purchase and Sale Agreement requires Boler to
indemnify us for any environmental liabilities which arise in connection
with use of the property prior to closing. In addition, Boler has
executed a remediation agreement in which it agreed to remediate, at its
own expense, the identified ground water contamination at the Hillsdale
facility. Boler is currently conducting the remediation at that facility.
If Boler has insufficient resources to complete remediation of any
contamination for which it has indemnified us or otherwise becomes
insolvent, we could incur successor liability for the costs of
remediation and any damages to third parties.
We also have potential liability in connection with contamination at
certain property in Cuba, Missouri, which had been leased by Bailey prior
to our acquisition of Bailey. The landlord has undertaken to remediate
this property at its own expense. We have negotiated the termination of
all of our obligations under the lease.
As a result of the environmental investigation conducted as part of its
due diligence during the acquisition of the three Premix/E.M.S. Inc.
facilities prior to our acquisition of Bailey, Bailey identified a number
of environmental concerns. Premix/E.M.S. Inc., as part of the acquisition
agreement, agreed to pursue and address these concerns, most of which it
has completed. Pursuant to the acquisition agreement, we performed
certain post-acquisition investigations which appeared to confirm the
presence of subsurface contamination, of which we have informed
Premix/E.M.S. Inc. Under the acquisition agreement, Premix/E.M.S. Inc. is
obligated to undertake necessary remediation of this problem, if in fact
any is required. Premix/E.M.S. Inc. is currently conducting the
remediation at the Portland, Indiana facility. Premix/E.M.S. Inc. has
entered into an Environmental Indemnification Agreement for our benefit.
There is a pending dispute with Premix/E.M.S., Inc. as to whether there
is a $3.0 million or $6.0 million limit on indemnification under this
agreement. The shareholders of Premix/E.M.S. Inc. have also severally
undertaken to reimburse us in certain limited circumstances, to the
extent of distributions received by them from Premix/E.M.S. Inc., and to
the extent that Premix/E.M.S. Inc. does not directly satisfy its
indemnification obligations.
In December of 1999, the Michigan Department of Environmental Quality
contacted the Grand Blanc facility relating to the classification of
wastes leaving the facility. We have been discussing the issue with the
Michigan Department of Environmental Quality and have been conducting
tests of the waste. As a result of the contact and to avoid future
liability, we have voluntarily changed the classification of the waste on
all subsequent disposals even though we disagree with Michigan Department
of Environmental Quality. In addition, we are 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, we limited our potential liability to
disposals prior to the contact. However, we may be exposed to some
liability for past disposal. On March 20, 2000 we received a notice of
warning from Michigan Department of Environmental Quality regarding this
matter. At the present time we are unable to quantify or qualify any
liability for these disposals.
Estimates of the future cost of these environmental matters are
necessarily imprecise due to numerous uncertainties, including the
enactment of new laws and regulations, the development and application of
new technologies, the identification of new sites for which we may have
remediation responsibility and the apportionment and collectibility of
remediation costs among responsible parties. We establish reserves for
these environmental matters when the loss is probable and reasonably
estimable. At December 31, 1999, Venture had a reserve of approximately
$1.8 million and at December 31, 1998 had a reserve of $1.3 million,
respectively, to address the issues discussed above and for compliance
monitoring activities. We periodically evaluate and revise estimates for
10
<PAGE> 13
environmental reserves based upon expenditures against established
reserves and the availability of additional information. It is possible
that final resolution of some of these matters may require us to make
expenditures in excess of established reserves, over an extended period
of time and in a range of amounts that cannot be reasonably estimated.
Although the ultimate cost of resolving these matters could not be
precisely determined at December 31, 1999, we believe, based on currently
known facts and circumstances, that the disposition of these matters will
not have a material adverse effect on our consolidated financial position
and results of operations.
ITEM 2. PROPERTIES
Our executive offices are located in Fraser, Michigan. Our North American
molding operations are conducted at fourteen facilities in Michigan,
Ohio, Kentucky, Indiana and New Hampshire. We also operate nineteen
plants in Europe, Mexico and Brazil. In addition, we have nine module
centers located in five European countries in order to meet our OEM's
requirements for just-in-time deliveries. The utilization and capacity of
our facilities may fluctuate based upon the mix of components we produce
and the vehicle models for which we are producing the components. We
believe that substantially all of our property and equipment is in good
condition and that we have sufficient capacity to meet our current
manufacturing and distribution needs through the 2002 model year. As a
result of our newly awarded business, we will have to locate new
facilities and equipment in St. Paul, Minnesota and in one other location
yet to be determined.
The following table sets forth certain information concerning our
principal facilities:
<TABLE>
<CAPTION>
SQUARE TYPE OF
LOCATION FOOTAGE INTEREST DESCRIPTION OF USE
-------- ------- -------- ------------------
<S> <C> <C> <C>
MICHIGAN
Masonic 178,000 Leased(1) Molding, Mold Fabrication and Repair
Malyn Leased(1) Molding
23,000 Leased(1) Molding
22,000 Owned Warehouse
18,000
Technical Center 56,000 Owned Headquarters, Laboratory, Tryout, Mold
Fabrication
Commerce 24,000 Leased(1) Mold Fabrication and Repair
Doreka Center 6,000 Leased Engineering and Sales
Service Center 6,000 Leased Administration
Grand Blanc 365,000 Owned Molding, Painting, Assembly
Grand Rapids 440,000 Leased Molding, Painting, Assembly
125,000 Leased Assembly Warehouse
Harper 180,000 Leased(1) Molding, Painting, Assembly
Groesbeck 128,000 Owned Molding
Design Center 20,000 Leased Design and Engineering
Flint 208,000 Leased(1) Assembly, Warehouse, Shipping
</TABLE>
11
<PAGE> 14
<TABLE>
<CAPTION>
SQUARE TYPE OF
LOCATION FOOTAGE INTEREST DESCRIPTION OF USE
-------- ------- -------- ------------------
<S> <C> <C> <C>
Almont 10,000 Leased(1) Mold Fabrication and Repair
10,000 Leased(1) Mold Fabrication and Repair
Troy Center 10,000 Leased Mold Fabrication
Hillsdale 119,000 Owned Molding, Painting, Assembly
25,000 Leased Warehouse
Redford 22,000 Leased(1) Mold Fabrication
KENTUCKY
Hopkinsville 104,000 Owned Molding, Painting, Assembly
113,400 Leased Warehouse
NEW HAMPSHIRE
Seabrook 390,000 Owned Molding, Painting, Assembly
12,100 Leased Assembly
OHIO
Conneaut 183,000 Leased Molding, Painting, Assembly
Lancaster 156,000 Owned Molding, Painting, Assembly
INDIANA
Madison 71,000 Owned Painting and Assembly (inactive)
Hartford City 116,000 Owned Molding and Assembly
Portland 120,000 Owned Molding and Painting (inactive)
WALLACEBURG, ONTARIO,
CANADA
Venture Canada 52,500 Owned Painting, Assembly, Warehouse
GERMANY
Botzingen 167,000 Owned Molding, Painting and R&D Center
415,000 Leased Molding, Painting and R&D Center
Gottingen 274,000 Owned(2) Molding and Painting
Mosel 67,000 Leased Module Center
Munchen 52,000 Leased Module Center
Neckarsulm 25,000 Leased Module Center
Neustadt 506,000 Owned Molding and Painting
Oldenburg 312,000 Owned Molding and Painting
Rastatt 65,000 Leased Module Center
Regensburg 75,000 Leased Module Center
FRANCE
Burnhaupt 127,000 Leased Molding and Painting
</TABLE>
12
<PAGE> 15
<TABLE>
<CAPTION>
SQUARE TYPE OF
LOCATION FOOTAGE INTEREST DESCRIPTION OF USE
-------- ------- -------- ------------------
<S> <C> <C> <C>
Noeux-les Mines 312,000 Leased Molding and Painting
Pouance 248,000 Leased Molding and Painting
54,000 Owned Molding and Painting
Rueil 2,300 Leased Module Center
Vernon 194,000 Leased Molding and Painting
HUNGARY
Gyor 26,000 Leased Module Center
SPAIN
Palencia 244,000 Owned Molding and Painting
Polinya 269,000 Owned Molding and Painting
Sant Esteve Sesrovires 107,000 Leased Molding
Vigo 133,000 Owned Molding and Painting
Zaragoza 267,000 Owned(3) Molding
THE CZECH REPUBLIC
Liban 118,000 Owned Molding
Liberec 543,000 Owned Molding and Painting
Mlada Boleslav 16,000 Leased Module Center
BRAZIL
Curtiba 215,000 Leased Molding and Painting
MEXICO
Puebla 66,000 Leased(4) Molding
NETHERLANDS
Sittard 95,000 Leased Module Center
</TABLE>
-------------------------
(1) Leased from an affiliate of Venture. See "Item 13. Certain
Relationships and Related Transactions."
(2) A portion of this facility is used on the basis of hereditary
building rights which expire in 2012.
(3) Operated by a joint venture in which we hold a 50% interest.
(4) Operated by a joint venture in which we hold a 70% interest.
In addition to the above facilities, we rely upon certain affiliated
companies, which are owned or controlled by Mr. Winget, to provide
facilities, machinery and equipment, technology and services that are
necessary for us to be a full-service supplier. Deluxe Pattern Company, a
company wholly owned by Mr. Winget's living trust, makes available to us
a 30,000 square foot advanced design and model building facility under a
usage agreement. In addition, we have subcontracted certain work to
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<PAGE> 16
Nova Corporation, a business in which Mr. Winget has a significant equity
interest. See "Item 13. Certain Relationships and Related Transactions."
ITEM 3. LEGAL PROCEEDINGS
On February 23, 1998, the Attorney General of the State of Michigan and
the Michigan Department of Environmental Quality instituted legal
proceedings in state court alleging that we have ongoing violations of
air pollution control laws, primarily related to the level of emissions
and odors discharged from our Grand Blanc paint facility. In October of
1999, the parties reached an agreement in principle to settle the case
by installation of full pollution abatement equipment at Grand Blanc,
the payment of $1.1 million, and negotiation and execution of a consent
decree all of which is subject to several conditions precedent. See
"Item 1. Business - Environmental" for the current status of events. We
plan to make capital expenditures of approximately $5.5 million to the
current Grand Blanc systems to respond to the complaints and to make
manufacturing improvements. During the first quarter of 1999, the U.S.
Environmental Protection Agency issued a notice of violation and has
taken an active role in monitoring these legal proceedings and may take
action separate and distinct from the legal proceedings begun by the
State of Michigan and the Michigan Department of Environmental Quality.
Currently, we intend on vigorously contesting any such legal
proceeding.
In addition to the environmental matters described above and under
"Item 1. Business -- Environmental," we are a party to several legal
proceedings incidental to the conduct of our business. We do not
believe that any of these actions, individually or in the aggregate,
will have a material adverse effect on our financial condition or
results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
PART II
ITEM 5. MARKET FOR THE REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Venture Holdings Company LLC is a limited liability company and 100% of
its membership interests are held by Venture Holdings Trust, of which Mr.
Winget is the sole beneficiary. There is no market for the interests of
Venture Holdings Company LLC. Venture Holdings Company LLC owns, directly
or indirectly, all of the outstanding capital stock of, or equity
interests in its subsidiaries, except for certain of its joint ventures.
There is no market for such capital stock or equity interests.
We did not pay any cash dividends during the past two years, and have no
current plan to pay any cash dividends in the near term other than for
the payment of the beneficiary's tax obligations resulting from the
activities of the Company. We are restricted in our ability to pay
dividends under various debt covenants.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated balance sheet data and income statement data
presented below as of December 31, 1999 and 1998 and for the years ended
December 31, 1999, 1998 and 1997, are derived from our consolidated
financial statements, audited by Deloitte & Touche LLP, independent
auditors, and should be read in conjunction with our audited consolidated
financial statements and
14
<PAGE> 17
notes thereto included elsewhere herein. The selected consolidated
balance sheet and income statement data presented below as of December
31, 1997, 1996 and 1995 and for the years ended December 31, 1996 and
1995, are derived from our audited consolidated financial statements not
included herein.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
INCOME STATEMENT DATA (1) (2):
<S> <C> <C> <C> <C> <C>
Net sales $ 1,366,170 $ 645,196 $ 624,113 $ 351,777 $ 251,142
Cost of products sold 1,215,472 532,809 521,361 302,940 211,262
Gross profit 150,698 112,387 102,752 48,837 39,880
Selling, general and
administrative expense 109,215 59,689 57,217 26,588 20,129
Payments to beneficiary in lieu
of taxes 259 535 472 666 577
Income from operations 41,224 52,163 45,063 21,583 19,174
Interest expense 72,606 36,641 30,182 19,248 15,032
Other (income) expense (3) (31,222) -- -- -- --
Net (loss) income before taxes (160) 15,522 14,881 2,335 4,142
Tax provision (4) 8,227 1,954 3,358 336 --
Minority interest 554 -- -- -- --
Net (loss) income before
extraordinary loss (8,941) 13,568 11,523 1999 4,142
Extraordinary loss on early
extinguishment of debt 5,569 -- -- 2,738 --
Net (loss) income (14,510) 13,568 11,523 (739) 4,142
Ratio of earnings to fixed
charges (5) 1.4X 1.5X 1.2X 1.3X
OTHER FINANCIAL DATA:
EBITDA (6) $ 120,462 $ 94,216 $ 80,391 $ 46,123 $ 37,001
Depreciation and amortization 75,996 39,320 32,147 22,628 16,068
Capital expenditures 53,176 24,706 33,012 64,593 20,339
Net cash provided by (used in):
Operating activities 129,312 (5,393) (13,058) 35,003 10,950
Investing activities (537,348) (24,706) (37,093) (121,547) (20,339)
Financing activities 416,854 28,752 36,192 82,976 (655)
BALANCE SHEET DATA
Working capital $ 182,698 $ 168,655 $ 125,101 $ 83,403 $ 74,354
Property, plant and equipment-net 562,838 200,544 205,765 201,035 116,299
Total assets 1,414,976 541,315 524,122 498,067 231,602
Total debt 920,376 364,939 336,188 299,996 152,463
Member's equity 60,903 77,113 64,282 52,759 53,498
</TABLE>
--------------
(1) Venture Holdings Company LLC operates as a holding company and has no
independent operations of its own. Separate financial statements of
Venture's subsidiaries have not been presented because we do not believe
that such information is material.
(2) The results for 1996 include the operations of Bailey Corporation
from August 26, 1996, and of AutoStyle from June 3, 1996. The 1999
results include the operations of Peguform GmbH and its subsidiaries from
May 28, 1999.
(3) Other (income) expense is comprised of unrealized and realized gains
and losses on currency exchange, unrealized and realized gains and losses
on investments and other miscellaneous non-operating items.
(4) This provision relates to Venture Holdings Corporation (which
operates Bailey Corporation) and its subsidiaries and Peguform GmbH and
its subsidiaries (see Note 2 above). Other significant subsidiaries of
Venture have elected "S" corporation status under the Code, or are
limited liability companies taxed as partnerships, and, consequently, do
not incur liability for federal and certain state income taxes.
(5) For purposes of calculating the ratio of earnings to fixed charges,
earnings consist of net income before extraordinary items and fixed
charges. Fixed charges consist of (i) interest, whether expensed or
capitalized; (ii) amortization of debt discount and debt financing costs;
and (iii) the portion of
15
<PAGE> 18
rental expense that management believes is representative of the interest
component of rental expense. For the year ended December 31, 1999, our
earnings were insufficient to cover fixed charges by $0.7 million.
(6) EBITDA represents net (loss) income before extraordinary loss, taxes
(including the Michigan single business tax), depreciation,amortization,
other non-cash items, interest and payment to beneficiary in lieu of
taxes, as defined in debt covenants. EBITDA is not presented as an
alternative to net income, as a measure of operating results or as an
indicator of our performance, nor is it presented as an alternative to
cash flow or as a measure of liquidity, but rather to provide additional
information related to debt service capacity. EBITDA should not be
considered in isolation or as a substitute for net income or cash flow
data prepared in accordance with generally accepted accounting principles
or as a measure of a company's profitability. EBITDA, while commonly
used, is not calculated uniformly by all companies and should not be used
as a comparative measure without further analysis, nor does EBITDA
necessarily represent funds available for discretionary use. See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results
of Operations" for a discussion of liquidity and operating results.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following discussion and analysis contains a number of "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 us to sustain, manage or forecast our growth; the
size, timing and mix of purchases of our 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 us; 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; control and the level of
affiliated transactions.
On May 28, 1999 the Company acquired Peguform GmbH, a leading
international designer and manufacturer of complete interior modules,
door panels and dashboards and of exterior modules and other structural
plastic body parts, including bumper fascias and hatchback doors.
The following table sets forth, for the periods indicated, our
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 notes thereto included
elsewhere herein.
16
<PAGE> 19
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net sales 100.0 % 100.0 % 100.0 %
Cost of products sold 89.0 82.6 83.5
-------- ------- -------
Gross profit 11.0 17.4 16.5
Selling, general and administrative expense 8.0 9.2 9.2
Payments to beneficiary in lieu of distributions 0.0 0.1 0.1
-------- ------- -------
Income from operations 3.0 8.1 7.2
Interest expense 5.3 5.7 4.8
Other (income) expense (2.3) 0.0 0.0
-------- ------- -------
Income before taxes 0.0 2.4 2.4
Tax provision 0.6 0.3 0.5
Minority interest 0.0 0.0 0.0
-------- ------- -------
Net (loss) income before extraordinary loss (0.6) 2.1 1.9
Extraordinary loss on early extinguishment of debt 0.5 0.0 0.0
-------- ------- -------
Net (loss) income (1.1) % 2.1 % 1.9 %
======== ======= =======
</TABLE>
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
Net sales increased $721.0 million for the year ended December 31, 1999,
or 111.7%, to $1,366.2 million, compared to net sales of $645.2 million
for the year ended December 31, 1998. This increase was due to the
addition of Peguform's net sales since its acquisition in the second
quarter. Domestically, sales decreased $39.6 million, or 6.1%, due
primarily to lower tooling sales as compared to the prior year. Net sales
for the year were also reduced by a $6.4 million retroactive sales price
reduction negotiated with a major customer. This customer has awarded the
Company with a significant New Program (described below) with production
scheduled to begin in 2001.
Gross profit for the year ended December 31, 1999 increased $38.3
million, or 34.1%, to $150.7 million compared to $112.4 million for the
year ended December 31, 1998. As a percentage of net sales, gross profit
decreased from 17.4% for the year ended December 31, 1998 to 11.0% for
the year ended December 31, 1999. The decrease was in part due to the
contribution of Peguform's lower margin business being included in the
consolidated sales since its acquisition in the second quarter. However,
the primary reason for the reduction was a reduction in the gross profit
margin for domestic operations from 17.4% in 1998 to 9.5% in 1999. The
decrease in margin arose as a result of several items, including: (1)
lower tooling sales which historically have higher margins, (2) sales
price reductions as described above not offset by productivity
improvements at the manufacturing plants (3) establishment of a $1.1
million reserve during the fourth quarter relating to environmental costs
and (4) several significant new model launch problems sustained in the
third quarter. The new model launch problems also negatively impacted the
fourth quarter gross profit margin; however, the new model launch
problems were substantially resolved by year end.
Selling, general and administrative expense for the year ended December
31, 1999 increased by $49.5 million, or 83.0%, to $109.2 million compared
to $59.7 million for the year ended December 31, 1998. As a percentage of
net sales, selling, general and administrative expense decreased to 8.0%
for the year ended December 31, 1999 as compared to 9.2% for the year
ended December 31, 1998. The decrease is primarily attributable to
Peguform's lower selling, general and administrative expense as a
percentage of net sales, relative to Venture's, being included in the
operating results since our acquisition of Peguform in the second
quarter. Domestically, selling, general and administrative expense was
negatively impacted by $3.9 million for wage increases and bonuses
granted to management
17
<PAGE> 20
employees during the third quarter. The ongoing effect of the wage
increase on an annual basis will be approximately $1.2 million.
As a result of the foregoing, income from operations for the year ended
December 31, 1999 decreased $10.9 million, or 21.0%, to $41.2 million,
compared to income of $52.2 million for the year ended December 31, 1998.
As a percentage of net sales, income from operations decreased to 3.0% in
fiscal 1999 from 8.1% in fiscal 1998.
Interest expense increased $36.0 million to $72.6 million in fiscal 1999
compared to $36.6 million in fiscal 1998. The increase is the result of
the increased debt associated with the acquisition of Peguform, offset by
a reduced overall cost of capital under the new capital structure, after
consideration of cross-currency interest rate swap agreements.
Other (income) expense is primarily comprised of $40.5 million of
unrealized gains and $5.9 million of realized gains on portions of the
cross-currency interest rate swap agreements entered into during the
second quarter to economically hedge a portion of the Company's exposure
to foreign exchange and interest rate risk associated with the Peguform
Acquisition. These financial instruments serve to reduce the overall cost
of capital of the Company, while also providing an economic hedge to
fluctuations in foreign exchange rates. Other (income) expense was also
comprised of unrealized currency losses of $17.4 million which were
offset, in part, by realized currency gains of $2.7 million. On March 20,
2000, we terminated our three cross-currency swap agreements. See Note 16
of Notes to Consolidated Financial Statements.
In connection with the issuance of the 1999 Notes, we redeemed our 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 year ended December 31, 1999.
Due to the foregoing, the Company incurred a net loss for the year ended
December 31, 1999 of $14.5 million compared to net income of $13.6
million for year ended December 31, 1998.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Net sales increased $21.1 million for the year ended December 31, 1998,
or 3.4%, to $645.2 million, compared to net sales of $624.1 million for
the year ended December 31, 1997. The increase in net sales in 1998 is
primarily a result of increased volumes in the comparable business offset
by planned price reductions mandated by customers under sole-source
arrangements for product life cycles. Our productivity improvements for
these products partially offset the planned price reductions. Net sales
during the second and third quarters of 1998 were impacted negatively due
to strikes at certain General Motors plants. We believe that a portion of
these lost sales were recouped in the fourth quarter of 1998 as GM
accelerated production to refill its distribution channels.
Gross profit for the year ended December 31, 1998 increased $9.7 million,
or 9.4%, to $112.4 million compared to $102.7 million for the year ended
December 31, 1997. As a percentage of net sales, gross profit increased
from 16.5% to 17.4% for the year ended December 31, 1998, which was in
part due to the increased volumes associated with product
rationalizations among the facilities and continued cost cutting efforts.
During the fourth quarter of 1998, we resolved several commercial issues
which resulted in the recovery of gross profit lost during current and
prior years. The resolution of these issues resulted in an additional
$7.4 million of gross profit. Gross profits continue to be under pressure
attributable to selling price reductions, as OEMs continue to expect
annual productivity improvements on the part of their suppliers.
Selling, general and administrative expense for 1998 of $59.7 million, or
9.3% of net sales, is comparable with selling, general and administrative
expense of $57.2 million, or 9.2% of net sales, for 1997.
18
<PAGE> 21
As a result of the foregoing, income from operations in the year ended
December 31, 1998 increased $7.1 million, or 15.8%, to $52.2 million,
compared to $45.1 million in fiscal 1997. As a percentage of net sales,
income from operations increased to 8.1% in fiscal 1998 from 7.2% in
fiscal 1997.
Interest expense increased $6.4 million to $36.6 million in fiscal 1998
compared to $30.2 million in fiscal 1997. The increase is the result of
additional borrowing under our prior bank credit facility to fund
increased working capital needs.
Due to the foregoing, net income for the year ended December 31, 1998
increased $2.1 million, to $13.6 million compared to $11.5 million for
the year ended December 31, 1997.
LIQUIDITY AND CAPITAL RESOURCES
Our consolidated working capital was $182.7 million at December 31, 1999,
compared to $168.7 million at December 31, 1998, an increase of $14.0
million. Our working capital ratio decreased to 1.5x at December 31, 1999
from 3.1x at December 31, 1998. The decrease is due to an increase in
current liabilities, primarily accounts payable, accrued expenses and
current portion of long term debt not offset by a like increase in
current assets as a result of the acquisition of Peguform. Net cash
provided by operating activities was $129.3 million for the year ended
December 31, 1999 compared to net cash used in operations of $5.4 million
for the year ended December 31, 1998. The increase in cash provided by
operations is due primarily to collection of accounts receivable and
sales of inventories acquired in connection with the acquisition of
Peguform.
Capital expenditures were $53.2 million for the year ended December 31,
1999 compared to $24.7 million for the year ended December 31, 1998. 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
require 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.
19
<PAGE> 22
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 $100 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 $40.0 to $80.0 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 provided by financing activities was $416.9 million for the year ended
December 31, 1999 compared to net cash provided by financing activities of $28.8
million for the year ended December 31, 1998. The fluctuation relates to the
refinancing of certain existing debt and the issuance of new debt to make the
Peguform acquisition.
The aggregate purchase price of the Peguform acquisition was approximately DEM
850 million (approximately $463 million), subject to post-closing adjustments.
In addition to the purchase price, the Company had $31.6 million of fees and
expenses. The Company is still conducting a review of the post-closing
adjustments associated with the acquisition of Peguform and does not know how
this will be concluded, however, the Company does not expect this to have a
material impact on it operations or cash flows.
In connection with the acquisition of Peguform, the Company entered into a new
credit agreement (the "New Credit Agreement"). The New Credit Agreement provides
for borrowings of (1) up to $175.0 million under a Revolving Credit Facility,
which, in addition to those matters described below, will be used for working
capital and general corporate purposes; (2) $75.0 million under a five-year Term
Loan A; (3) $200.0 million under a six-year Term Loan B and (4) $125 million
under an 18-month Interim Term Loan. On March 20, 2000, the Company applied a
prepayment of $42 million to the 18-month Interim Term Loan. See Note 16 of
Notes to Consolidated Financial Statements. The New Credit Agreement requires
that the remaining $83.0 million principal amount outstanding with respect to
the 18-month Interim Term Loan be refinanced by November 27, 2000, using
proceeds from the sale 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. 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 New Credit Agreement. At
December 31, 1999 the Company had $5.5 million outstanding with $166.5 million
still available under the Revolving Credit Facility. The New Credit Agreement
and documents governing the Company's 9 1/2% senior notes due 2005, 11% senior
notes due 2007 and 12% senior subordinated notes due 2009 contain various
covenants. As of December 31, 1999, the Company was in compliance with all such
covenants.
At December 31, 1999 the Company's interest rates under the New Credit
Agreement are based on the London Interbank Offer Rate ("LIBOR"), or an
Alternate Base Rate ("ABR"), which is the larger of the bank's corporate base
rate of interest announced from time-to-time or the federal funds rate plus 1/2%
per annum, and, in the case of non-dollar denominated loans, a Euro currency
reference rate. Interest rates will be determined by reference to the relevant
interest rate option, plus an Applicable Margin (as defined) based on the
Company's Consolidated Ratio of Total Debt to EBITDA. Obligations under the New
Credit Agreement are to be 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 New Credit Agreement became effective May 27, 1999 contemporaneously with
the completion of the Peguform acquisition.
We also issued $125.0 million of unsecured senior notes due 2007 and $125.0
million of unsecured senior subordinated notes due 2009 on May 27, 1999.
Proceeds from the issuance of these notes, together with borrowings under the
New Credit Agreement were used to (1) fund cash consideration paid in the
acquisition; (2) redeem the Company's 9 3/4% senior subordinated notes due 2004
Peguform at the redemption price of 104.875%, plus accrued interest; (3)
refinance amounts outstanding under the Company's prior senior credit facility;
(4) pay certain fees and expenses related to the acquisition of Peguform and the
offering of the notes; and (5) fund working capital and other general corporate
purposes.
20
<PAGE> 23
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. See Note 16 of Notes
to Consolidated Financial Statements relating to termination of
cross-currency swap agreements.
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. See Note 16 of Notes
to Consolidated Financial Statements relating to termination of
cross-currency swap agreements.
Each cross-currency interest rate swap agreement was 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 match, the debt
was economically converted to fixed Euro dollar interest rate debt.
One of the interest rate swap agreements within each of the
cross-currency interest rate swap agreements was accounted for using
settlement accounting. The cash flows from these interest rate swap
agreements were accounted for as adjustments to interest expense. During
1999, these interest rate swap agreements resulted in a reduction to
interest expense of $0.9 million.
The other interest rate swap agreements within each of the cross-currency
interest rate swap agreements did not meet all the criteria for
settlement accounting under generally accepted accounting principles. The
cash flows from these interest rate swap agreements were included in
other income. During 1999, these interest rate swap agreements resulted
in a realized loss, or a reduction to other income, of $2.4 million. The
estimated fair market value of these financial instruments of $13.4
million is recorded as an investment on the balance sheet as of December
31, 1999. The corresponding $13.4 million non-cash change to estimated
fair market value is recorded in other income in 1999.
The cross-currency swap agreements within the cross-currency interest
rate swap agreements did not meet all of the criteria for hedge
accounting under generally accepted accounting principles. During 1999,
the cross-currency swap agreements resulted in a realized gain, or
increase to other income, of $8.3 million. The estimated fair market
value of these financial instruments of $27.1 million is recorded as an
investment on the balance sheet as of December 31, 1999. The
corresponding $27.1 million non-cash change in estimated fair market
value is recorded in other income in 1999.
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 $0.8 million
and $0.6 million of additional interest expense in 1999 and 1998,
respectively. The fair value of these financial instruments was estimated
at $0.2 million and $2.0 million at December 31, 1999 and 1998,
respectively.
The non-cash impact of the mark to market adjustments each quarter to
earnings and to current assets may be significant both positively and
negatively in the future depending on currency and interest rate
movements. See "Item 3. Quantitative and Qualitative Disclosure about
Market Risk" for a further discussion.
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 2000. The Company is obligated to refinance the
Interim Term Loan portion of the New Credit Agreement prior to the end of
2000 and the Company is exploring its options. 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 and may address this in connection with the
refinancing of the Interim Term Loan.
21
<PAGE> 24
YEAR 2000 COMPLIANCE
As is the case with most companies using computers in their operations,
we addressed the year 2000 problem. The year 2000 issue is the result of
computer programs being written using two digits rather than four digits
to define the applicable year. Any of our systems, equipment, or hardware
that had date sensitive software or embedded chips may recognize a date
using "00" as the year 1900 rather than year 2000. This could have
resulted in a system failure or miscalculations causing disruption of
operations, including among other things, a temporary inability to
properly manufacture products, process transactions, send invoices or
engage in similar normal business activities.
Based on our initial assessments, we determined that we needed to modify
or replace certain portions of our equipment, hardware, and software so
that affected systems would properly utilize dates beyond December 31,
1999. We presently believe that, with the modifications made and some
replacement of existing equipment, hardware and software, the year 2000
risk has been substantially reduced. To date we have had no significant
year 2000 issues which prevented us from operating normal business
activities.
All phases of our plan to resolve year 2000 issues, from inventory to
testing, were completed prior to December 31, 1999.
Our year 2000 inventory of potentially affected items is segregated into
four categories:
- business application (developed software, customized extensions to
purchased software and systems interfaces);
- tools and platforms (purchased commercial products, both hardware
and software);
- intelligent devices (manufacturing, laboratory, office and
facilities equipment); and
- external business partners (suppliers, customers and other service
providers).
Business applications and tools and platforms are considered information
technology ("IT") systems, while intelligent devices and external
business partners are considered non-IT systems.
Concerning IT systems, all applications have been upgraded to year 2000
compliant versions. For non-IT systems, we have dedicated resources to
assist in identifying potentially affected intelligent devices.
Determination of compliance status, remediation, and testing of these
devices has been more difficult than IT systems, as some of the
manufacturers of potentially affected equipment are no longer in
business; however, based on our assessment, non-IT systems appear to be
year 2000 compliant.
The external business partners category of potentially affected items
primarily includes the process of identifying and prioritizing critical
suppliers and customers, and communicating with them about their plans
and progress in addressing the year 2000 problem. We developed a
questionnaire that was used to obtain this information from key existing
business partners. We contacted 100% of our key existing business
partners and 85% responded, with 98% of those who responded indicating
that they were year 2000 compliant. Based on the responses to our
questionnaires and other alternative evidence obtained, we are not aware
of any problems that would materially impact results of operations,
liquidity, or capital resources. However, we have no means of ensuring
that these parties are year 2000 compliant. For key business partners,
the initial assessments were evaluated and, as deemed necessary,
follow-up assessments were made. We developed contingency plans to
address potential year 2000 exposure. These plans included the purchase
of addition supplies and raw materials before year end and the use of
pull systems that do not rely on computers.
22
<PAGE> 25
We utilized both internal and external resources to repair or replace,
test, and implement software and operating equipment for year 2000
modifications. We are unable to estimate with any certainty the total
cost of the year 2000 project. We have not, however, seen a significant
increase in our IT cost nor in the normal overhead cost associated with
our facilities. Primarily all of the costs of the year 2000 project were
expensed and were funded through normal operating cash flow or bank
borrowings.
The failure to remediate a material year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations, including our ability to produce or deliver products to our
customers. These failures could materially or adversely affect the
results of operations, liquidity, and financial condition. The year 2000
plan was designed to significantly reduce the level of uncertainty about
the year 2000 problem. We believe that by executing our year 2000 plan,
the possibility of significant interruptions to normal operations has
been reduced. We believe that our most reasonably likely worst case
scenario is that certain suppliers will not be able to supply us with key
materials, thus disrupting the manufacture and sale of products to
customers.
We have not experienced any significant year 2000 disruptions in our
operations and we have been able to process transactions and engage in
normal business activities. No issues have been encountered or are
anticipated that would have a material impact on us.
NEW ACCOUNTING STANDARDS
In April 1998, the Accounting Standards Executive committee published
accounting Statement of Position (SOP) 98-5, Reporting on the Costs of
Start-Up Activities. SOP 98-5 establishes standards for the financial
reporting of start-up costs and organization costs and requires such
costs to be expensed as incurred. We adopted SOP 98-5 as the provisions
of this SOP are applicable to us for our fiscal year beginning January 1,
1999. The adoption of this Standard did not have a material impact on our
financial position or results of operations.
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 our 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. We are currently analyzing the impact
of this Standard on our 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
December 31, 1999, other assets includes approximately $20.1 million of
program 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 our customers. We will
comply with the provisions of this consensus by expensing all program
costs incurred after December 31, 1999 that do not qualify for
capitalization.
23
<PAGE> 26
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS.
We are 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 selectively entered into a
variety of foreign exchange and interest rate financial instruments. A
discussion of the our 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 this report.
FOREIGN CURRENCY EXCHANGE RATE RISK. We have foreign currency exposures
related to buying, selling, and financing in currencies other than the
local currencies in which we operate. Our most significant foreign
currency exposures relate to Germany, Spain, France, the Czech Republic,
Mexico, Brazil and Canada. As of December 31, 1999, the net fair value
asset of financial instruments with exposure to foreign currency risk was
approximately $27.1 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 $50.2 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 our assets are based in our 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, our
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. We are subject to market risk from exposure to
changes in interest rates based on our financing, investing, and cash
management activities. We have 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
December 31, 1999, the net fair value asset of financial instruments with
exposure to interest rate risk was approximately $13.4 million. The
potential loss in fair value for such financial instruments from a
hypothetical 10% adverse shift in interest rates would be approximately
$6.4 million.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
VENTURE HOLDINGS COMPANY LLC
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Report of Independent Public Accountants........................................... 25
Consolidated Balance Sheets........................................................ 26
Consolidated Statements of Operations and Comprehensive Income..................... 27
Consolidated Statements of Changes in Member's Equity.............................. 28
Consolidated Statements of Cash Flow............................................... 29
Notes to Consolidated Financial Statements......................................... 30
</TABLE>
24
<PAGE> 27
INDEPENDENT AUDITORS' REPORT
Trustee of Venture Holdings Company LLC
Fraser, Michigan
We have audited the accompanying consolidated balance sheets of Venture
Holdings Company LLC as of December 31, 1999 and 1998, and the related
consolidated statements of operations, comprehensive income, member's equity and
cash flows for each of the three years in the period ended December 31, 1999.
Our audits also included the financial statement schedule listed in the Index at
Item 14. These financial statements and the financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and the financial statement schedule based
on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the consolidated financial position of Venture Holdings Company LLC as
of December 31, 1999 and 1998, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States of
America. Also, in our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.
Deloitte & Touche LLP
March 30, 2000
Detroit, Michigan
25
<PAGE> 28
VENTURE HOLDINGS COMPANY LLC
- ----------------------------
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
December 31, December 31,
ASSETS 1999 1998
------ ---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 7,392 $ 130
Accounts receivable, net, includes related party receivables
of $82,644 and $56,648 at December 31, 1999 and December 31,
1998, respectively (Notes 3 & 8) 311,344 190,135
Inventories (Note 4) 154,620 51,139
Investments (Notes 7 & 16) 40,501 --
Prepaid and other current assets (Notes 8 & 12) 53,861 8,870
---------------- -------------
Total current assets 567,718 250,274
Property, Plant and Equipment, Net (Notes 2 & 5) 562,838 200,544
Intangible Assets, Net (Note 2) 172,090 52,022
Other Assets (Note 1) 82,504 26,636
Deferred Tax Assets (Note 12) 29,826 11,839
---------------- -------------
Total Assets $ 1,414,976 $ 541,315
================ =============
LIABILITIES AND MEMBER'S EQUITY
-------------------------------
CURRENT LIABILITIES:
Accounts payable (Note 8) $ 194,596 $ 52,351
Accrued interest 13,403 13,387
Accrued expenses 108,653 14,316
Current portion of long term debt (Notes 6 & 16) 68,368 1,565
---------------- -------------
Total current liabilities 385,020 81,619
Pension Liabilities & Other (Note 11) 57,614 7,254
Deferred Tax Liabilities (Note 12) 59,431 11,955
Long Term Debt (Note 6) 852,008 363,374
---------------- -------------
Total liabilities 1,354,073 464,202
Commitments and Contingencies (Note 9) -- --
Member's Equity:
Member's equity 63,340 77,850
Accumulated other comprehensive income - minimum pension
liability in excess of unrecognized prior service cost,
net of tax -- (737)
Accumulated other comprehensive income - cumulative
translation adjustments (2,437) --
---------------- -------------
Member's Equity 60,903 77,113
---------------- -------------
Total Liabilities and Member's Equity $ 1,414,976 $ 541,315
================ =============
</TABLE>
See notes to consolidated financial statements.
26
<PAGE> 29
VENTURE HOLDINGS COMPANY LLC
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net Sales (Note 8 & 10) $ 1,366,170 $ 645,196 $ 624,113
Cost of Products Sold (Note 8) 1,215,472 532,809 521,361
------------ ----------- ----------
Gross Profit 150,698 112,387 102,752
Selling, General, and Administrative Expense
(Note 8) 109,215 59,689 57,217
Payments to Beneficiary in Lieu of
Distributions 259 535 472
------------ ----------- ----------
Income From Operations 41,224 52,163 45,063
Interest Expense (Note 6) 72,606 36,641 30,182
Other (Income) Expense (Note 7) (31,222) -- --
------------ ----------- ----------
(Loss) Income Before Taxes (160) 15,522 14,881
Tax Provision (Note 12) 8,227 1,954 3,358
Minority Interest 554 -- --
------------ ----------- ----------
Net (Loss) Income Before Extraordinary Loss (8,941) 13,568 11,523
Extraordinary Loss on Early Extinguishment
of Debt (Note 13) 5,569 -- --
------------ ----------- ----------
Net (Loss) Income (14,510) 13,568 11,523
Other Comprehensive Income - minimum pension
liability in excess of unrecognized prior
service cost, net of tax (Note 11) 737 (737) --
Other Comprehensive Income - cumulative
translation adjustments (2,437) -- --
------------ ----------- ----------
Comprehensive (Loss) Income $ (16,210) $ 12,831 $ 11,523
============ =========== ==========
</TABLE>
See notes to consolidated financial statements.
27
<PAGE> 30
VENTURE HOLDINGS COMPANY LLC
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBER'S EQUITY
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Member's Equity, Beginning of Period $ 77,113 $ 64,282 $ 52,759
Comprehensive (Loss) Income:
Net (Loss) Income (14,510) 13,568 11,523
Other Comprehensive Income (1,700) (737) --
---------- ----------- ----------
Comprehensive (Loss) Income (16,210) 12,831 11,523
---------- ----------- ----------
Member's Equity, End of Period $ 60,903 $ 77,113 $ 64,282
========== =========== ==========
</TABLE>
See notes to consolidated financial statements.
28
<PAGE> 31
VENTURE HOLDINGS COMPANY LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (14,510) $ 13,568 $ 11,523
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 75,996 39,320 32,147
Unrealized loss on currency exchange 17,419 -- --
Loss from the disposal of fixed assets 181 -- --
Net extraordinary loss on early extinguishment of debt 5,569 -- --
Change in accounts receivable 53,004 (29,795) (31,489)
Change in inventories 23,900 1,477 (1,517)
Change in prepaid and other current assets (8,704) 2,147 2,329
Change in other assets (29,715) (7,045) (7,178)
Change in investments in associated company (723) -- --
Change in accounts payable 10,205 (17,696) (14,774)
Change in accrued expenses (13,645) (21) (5,588)
Change in other liabilities 4,499 (7,028) (1,630)
Change in deferred taxes 5,836 (320) 3,119
------------- ----------- -----------
Net cash provided by (used in) operating activities 129,312 (5,393) (13,058)
------------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of subsidiaries, net of cash acquired (444,061) -- (4,081)
Capital expenditures (53,176) (24,706) (33,012)
Proceeds from sale of fixed assets 390 -- --
Unrealized gain on investments (40,501) -- --
------------- ----------- -----------
Net cash used in investing activities (537,348) (24,706) (37,093)
------------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) borrowings under revolving credit agreement (71,571) 32,000 (46,000)
Debt issuance fees (27,066) -- --
Net proceeds from issuance of debt 650,000 -- 205,000
Payment for early extinguishment of debt (128,650) -- --
Principal payments on debt (5,859) (3,248) (122,808)
------------- ----------- -----------
Net cash provided by financing activities 416,854 28,752 36,192
------------- ----------- -----------
Effect of exchange rate changes on cash and cash
equivalents (1,556) -- --
NET INCREASE (DECREASE) IN CASH 7,262 (1,347) (13,959)
CASH AT BEGINNING OF PERIOD 130 1,477 15,436
------------- ----------- -----------
CASH AT END OF PERIOD $ 7,392 $ 130 $ 1,477
============= =========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for interest $ 72,129 $ 35,402 $ 22,628
============= =========== ===========
Cash paid during the period for taxes $ 4,337 $ 285 $ 140
============= =========== ===========
</TABLE>
See notes to consolidated financial statements.
29
<PAGE> 32
VENTURE HOLDINGS COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SUMMARY OF ACCOUNTING POLICIES
Organization - In 1987, the sole shareholder of the Venture Group of
companies contributed all of the common stock of the companies to Venture
Holdings Trust (the "Trust"). Simultaneously, certain property, plant,
and equipment was contributed by the sole shareholder to certain
companies owned by the Trust. In exchange, the shareholder was named the
sole beneficiary of the Trust. In May of 1999, the Trust effected a trust
contribution by contributing its assets, including the capital stock of
the companies owned by the Trust other than the membership interest in
Venture Holdings Company LLC ("Venture"), to Venture. Venture, a
wholly-owned subsidiary of the Trust, also assumed the obligations of the
Trust. The Trust is the sole member of Venture.
Principles of Consolidation - The consolidated financial statements
include the accounts of 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. All
intercompany accounts and transactions have been eliminated.
Estimates - The preparation of the Company's financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets
and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Cash and Cash Equivalents - Highly liquid investments with an initial
maturity of three months or less are classified as cash equivalents.
Inventories - Manufactured parts inventories are stated at the lower of
cost or market using the first-in, first-out method. Inventory also
includes costs associated with building molds under contract. Molds owned
by the Company and used in the Company's manufacturing operations are
transferred to tooling, in property, plant and equipment, when the molds
are operational.
Property and Depreciation - Property, plant, and equipment are recorded
at cost. Depreciation is computed by the straight-line method over the
estimated useful lives of the various classes of assets. Tooling is
amortized on a piece price or straight line basis over the related
production contract, generally 3 to 7 years. The principal estimated
useful lives are as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Building and improvements............................... 10-40
Machinery and equipment, and automobiles................ 3-20
</TABLE>
Leasehold improvements are amortized over the useful life or the term of
the lease, whichever is shorter. Expenditures for maintenance and repairs
are charged to expense as incurred.
Other Assets - Deferred financing costs are included in other assets and
are amortized over the life of the related financing arrangement. The
Company holds a 50% interest in Celulosa Fabril (Cefa) S.A.,
Zaragoza/Spain. This investment is accounted for under the equity method.
Program Costs - Certain costs incurred for the design of components to be
built for customers are recorded as deferred program costs which are
included in other assets. These costs are recovered based on units
produced in each year over the term of production contracts. See "Recent
Accounting Pronouncements."
30
<PAGE> 33
Intangible Assets - The purchase price of companies in excess of the fair
value of net identifiable assets acquired ("goodwill") is amortized over
30 years using the straight-line method. The amount of goodwill reported
at December 31, 1999 and 1998 was $168.4 million and $52.0 million,
respectively, which is net of accumulated amortization.
Long-Lived Assets and Long-Lived Assets to be Disposed of - Effective
January 1, 1996, Statement of Financial Accounting Standards ("SFAS") No.
121 "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of" was adopted. This Statement
establishes accounting standards for the impairment of long-lived assets,
and certain identifiable intangibles, and goodwill related to those
assets to be held and used and long-lived and certain identifiable
intangibles to be disposed of. The statement requires that long-lived
assets and certain identifiable intangibles to be held and used by an
entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. In addition, the Statement requires that certain long-lived
assets and identifiable intangibles to be disposed of be reported at the
lower of carrying amount or fair value less cost to sell. The Company
periodically evaluates the carrying value for impairment, such
evaluations are based principally on the undiscounted cash flows of the
operations to which the asset is related.
Derivative Financial Instruments - The Company is party to a number of
interest rate and cross-currency swap agreements.
The Company accounts for certain interest rate swap agreements using
settlement accounting as they alter the characteristics of the
liabilities to which they are matched. The cash flows from these interest
rate swap agreements are accounted for as adjustments to interest
expense.
Certain other interest rate swap agreements do not meet all of the
criteria for settlement accounting under accounting principles generally
accepted in the United States of America. The cash flows from these
interest rate swap agreements are included in other income. The estimated
fair market value of these financial instruments is recorded as an
investment on the balance sheet and the non-cash change in estimated fair
market value is recorded in other income.
The Company's cross-currency swap agreements do not meet all of the
criteria for hedge accounting under accounting principles generally
accepted in the United States of America. The cash flows from these
cross-currency swap agreements are included in other income. The
estimated fair market value of these financial instruments is recorded as
an investment on the balance sheet and the non-cash change in estimated
fair market value is recorded in other income.
See Note 7 - Derivative Financial Instruments and Risk Management. See
Note 16 - Subsequent Event.
Revenue Recognition - Revenue from the sale of manufactured parts is
recognized when the parts are shipped. Revenue from mold sales is
recognized using the completed contract method due to the reasonably
short build cycle. Accounts receivable includes unbilled receivables for
mold contracts that are substantially complete. The amounts are billed
when final approval has been received from the customer or in accordance
with contract terms. Provision for estimated losses on uncompleted
contracts, if any, is made in the period such losses are identified.
Income Taxes - Amounts in the financial statements relating to income
taxes relate to the subsidiaries that are not limited liability
companies or have not elected S corporation status and are calculated
using the Statement of Financial Accounting Standards Board No. 109,
"Accounting for Income Taxes" (SFAS 109).
Other significant subsidiaries have elected to be taxed as S corporations
or limited liability companies taxed as a partnership under the Internal
Revenue Code. The beneficiary of Venture Holdings Trust is required to
report all income, gains, losses, deductions, and credits of the S
corporations or limited liability companies included in the Trust on his
individual tax returns.
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<PAGE> 34
Foreign Currencies - Currency translation is based upon the Statement of
Financial Accounting Standards (SFAS) 52 "Foreign Currency Translation,"
whereby the assets and liabilities of foreign subsidiaries where the
functional currency is the local currency are generally translated using
period end exchange rates while the income statements are translated
using average exchange rates during the period. Differences arising from
the translation of assets and liabilities in comparison with the
translation of the previous periods are included as a separate component
of stockholders' equity.
Reclassifications - Certain reclassifications have been made to the 1998
financial statements in order to conform to the 1999 presentation.
Recent Accounting Pronouncements - In April 1998, the Accounting
Standards Executive committee published accounting Statement of Position
(SOP) 98-5, Reporting on the Costs of Start-Up Activities. SOP 98-5
establishes standards for the financial reporting of start-up costs and
organization costs and requires such costs to be expensed as incurred.
The Company adopted SOP 98-5 as the provisions of this SOP are applicable
to the Company for its fiscal year beginning January 1, 1999. The
adoption of this Standard did not have a material impact on the Company's
financial position or results of operations.
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 is effective
January 1, 2001. 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.
This consensus is effective for costs incurred after December 31, 1999.
At December 31, 1999, other assets includes approximately $20.1 million
of program 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.
Venture will comply with the provisions of this consensus by expensing
all program costs incurred after December 31, 1999 that do not qualify
for capitalization.
2. ACQUISITION
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. The consideration paid for
Peguform is subject to adjustment based upon a final negotiation of the
closing statements of Peguform.
The Peguform Acquisition was accounted for as a purchase, and
accordingly, the assets purchased and liabilities assumed in the
acquisition have been reflected in the accompanying consolidated balance
sheets at estimated fair market value and the operating results of
Peguform have been
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<PAGE> 35
included in the consolidated financial statements since the date of
acquisition. The preliminary purchase price and related allocation were
as follows (in millions):
<TABLE>
<S> <C>
Consideration paid to former owner, net of cash acquired of $18.8 million $444.1
Debt assumed (including capital leases) 110.8
---------
Cost of acquisition $554.9
=========
Property, plant and equipment $380.3
Net working capital 64.3
Other assets purchased and liabilities assumed (16.0)
Goodwill 126.3
---------
Total cost allocation $554.9
=========
</TABLE>
The excess of the purchase price over the fair market value of the net
assets acquired (goodwill) is estimated to be approximately $12.6 million
and is being amortized on a straight-line basis over 30 years.
Adjustments to the purchase price and related allocation may occur as a
result of obtaining more information regarding liabilities assumed, the
outcome of final negotiations with the former owner and revisions of
preliminary estimates of fair values made at the date of purchase. The
Company does not believe that any revisions to the original purchase
price allocation will be significant. Any uncertainties could result in
an adjustment to goodwill of up to $30 million. The net effect of the
adjustments described above will be reported as an adjustment to the
purchase price and related allocation described above.
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 periods presented.
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998
---- ----
<S> <C> <C>
Net sales $ 1,926,594 $ 1,306,418
Net income before extraordinary loss 12,150 15,942
Net income 6,581 10,373
</TABLE>
3. ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
Accounts receivable included the following (in thousands): December 31
1999 1998
---- ----
<S> <C> <C>
Accounts receivable (including related parties) $ 301,377 $ 172,759
Unbilled mold contract receivables 19,915 21,894
-------------- ---------------
321,292 194,653
Allowance for doubtful accounts (9,948) (4,518)
-------------- ---------------
Net accounts receivable $ 311,344 $ 190,135
============== ===============
</TABLE>
Excluding receivables from related parties, substantially all of the
receivables are from companies operating in the automobile industry.
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<PAGE> 36
4. INVENTORIES
Inventories included the following (in thousands):
<TABLE>
<CAPTION>
December 31,
1999 1998
---- ----
<S> <C> <C>
Raw materials $ 59,243 $ 25,169
Work-in-process - manufactured parts 17,623 2,965
Work-in-process - tools and molds 57,984 11,436
Finished goods 19,770 11,569
------------- -------------
Total $ 154,620 $ 51,139
============= =============
</TABLE>
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
1999 1998
---- ----
<S> <C> <C>
Land $ 27,181 $ 2,418
Building and improvements 216,359 64,459
Leasehold improvements 9,396 13,970
Machinery and equipment 415,134 225,687
Tooling/molds 12,520 12,026
Office and transportation equipment 13,286 5,963
Construction in progress 26,239 4,009
----------- -----------
720,115 328,532
Less accumulated depreciation and amortization 157,277 127,988
----------- -----------
Total $ 562,838 $ 200,544
=========== ===========
</TABLE>
Included in property, plant and equipment is equipment and buildings held
under capitalized leases. These assets had a cost basis of $57.5 million
and accumulated depreciation relating to these assets of $4.8 million at
December 31, 1999. As of December 31, 1998, these assets had a cost basis
of $9.4 million and accumulated depreciation of $2.6 million.
34
<PAGE> 37
6. DEBT
Debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
1999 1998
---- ----
<S> <C> <C>
Credit agreement
Term loan A, with interest of 8.93%, Due 2004 $ 73,950 $ --
Term loan B, with interest of 9.43%, Due 2005 199,000 --
Interim term loan, with interest of 8.93%, Due 2000 125,000 --
Revolving credit outstanding, with interest of 9.75%, 5,500 77,000
Due 2004
Bank debt payable with interest from 0.0% to 9.04%, 25,930 --
Due 2004
Senior notes payable, Due 2005 205,000 205,000
With interest at 9.5%
Senior notes payable, Due 2007 125,000 --
With interest at 11.0%
Senior subordinated notes payable, Due 2004 -- 78,940
With interest at 9.75%
Senior subordinated notes payable, Due 2009 125,000 --
With interest at 12.0%
Capital leases with interest from 3.80% 34,658 2,196
to 11.70%
Installment notes payable with 1,338 1,803
Interest from 3.00% to 7.41%
------------- ------------
Total 920,376 364,939
Less current portion of debt 68,368 1,565
------------- ------------
Total $ 852,008 $ 363,374
============= ============
</TABLE>
On May 27, in connection with the Peguform Acquisition, the Company
entered into a new credit agreement, which was amended on June 4, 1999
(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, will be 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. On March 20, 2000, the
Company applied a prepayment of $42 million to the 18-month interim term
loan. See Note 16 of Notes to Consolidated Financial Statements. 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 December
31, 1999, the Company could have borrowed an additional $166.5 million
under the revolving credit facility.
Interest rates under the credit agreement are based on the London
Interbank Offer Rate ("LIBOR"), or the Alternate Base Rate ("ABR"), which
is the larger of the bank's corporate base rate of interest announced
from time-to-time or the federal funds rate plus 1/2% per annum, and, in
the case of non-dollar denominated loans, a Euro currency reference rate.
Interest rates are determined by reference to the relevant interest rate
option, plus an Applicable Margin (as defined) based on the Company's
Consolidated Ratio of Total Debt to EBITDA. 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.
On May 27, 1999, Venture issued $125 million of 11% unsecured senior
notes (the "1999 Senior Notes") and $125 million of 12% unsecured senior
subordinated notes (the "1999 Senior Subordinated Notes" and, together
with the 1999 Senior Notes, the "1999 Notes"). The net proceeds of the
issuances of $243 million, together with borrowings under the credit
agreement were used to (1) fund the cash consideration of $463 million
paid in the Peguform Acquisition; (2) redeem the Company's 9 3/4% senior
subordinated notes due 2004 at the redemption price of 104.875% plus
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<PAGE> 38
accrued interest; (3) refinance amounts outstanding under previous credit
agreements; (4) pay certain fees and expenses related to the Peguform
Acquisition and the offering of the 1999 Notes; and (5) fund working
capital and other corporate purposes. See "Note 13 - Extraordinary Item"
for information related to the early extinguishment of debt.
The credit agreement, and documents governing the Company's 9 1/2% senior
notes due 2005 (the "1997 Senior Notes") and 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 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
December 31, 1999, the Company was in compliance with all debt covenants.
Scheduled maturities of debt at December 31, 1999 were as follows (in
thousands):
<TABLE>
<S> <C>
2000 68,368
2001 28,302
2002 29,360
2003 31,422
2004 115,138
Remaining years 647,786
----------------
Total $ 920,376
================
</TABLE>
Simultaneously with the issuance of the 1999 Notes, and to reduce the
Company's exposure to fluctuations in foreign exchange rates and reduce
the Company's overall cost of capital, the Company entered into various
financial instrument transactions. Refer to "Note 7 - Derivative
Financial Instruments and Risk Management." See "Note 16 - Subsequent
Event" related to the repayment of a portion of the interim term loan.
7. DERIVATIVE FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The carrying values of cash and cash equivalents, accounts receivable,
accounts payable and the credit agreement approximate fair market value
due to the short-term maturities of these instruments.
Debt Instruments
The estimated fair values of the Company's debt instruments have been
determined using available market information. However, considerable
judgment is required in interpreting market data to develop the estimates
of fair value. Accordingly, the estimates presented herein may not be
indicative of the amounts that the Company could realize in a current
market exchange. The use of different assumptions or valuation
methodologies may have a material effect on the estimated fair value
amounts. The fair value of long-term debt was estimated using quoted
market prices (in thousands).
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
Carrying Amount Fair Value Carrying Amount Fair Value
--------------- ---------- --------------- ----------
<S> <C> <C> <C> <C>
Debt $ 455,000 $ 419,675 $ 283,940 $ 282,126
</TABLE>
Derivative Financial Instruments
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.
36
<PAGE> 39
All agreements are executed with major international financial
institutions and, as such, the Company does not anticipate that these
institutions will fail to perform.
Under the two five-year cross-currency interest rate swap agreements, the
Company receives interest based on a fixed U.S. dollar interest rate of
11.5% and pays 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. See "Note 16 -
Subsequent Event" relating to termination of cross-currency swap
agreements.
Under the three-year cross-currency interest rate swap agreement, the
Company receives interest based on a fixed U.S. dollar interest rate of
9.5% and pays 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. See "Note 16 -
Subsequent Event" relating to termination of cross-currency swap
agreements.
Each cross-currency interest rate swap agreement is 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 match, the debt
is economically converted to fixed Euro dollar interest rate debt.
One of the interest rate swap agreements within each of the
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. During
1999, these interest rate swap agreements resulted in a reduction to
interest expense of $0.9 million.
The other interest rate swap agreements within each of the 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.
During 1999, these interest rate swap agreements resulted in a realized
loss, or a reduction to other income, of $2.4 million. The estimated fair
market value of these financial instruments of $13.4 million is recorded
as an investment on the balance sheet as of December 31, 1999. The
corresponding $13.4 million non-cash change to estimated fair market
value is recorded in other income in 1999.
The cross-currency swap agreements within the cross-currency interest
rate swap agreements do not meet all of the criteria for hedge accounting
under generally accepted accounting principles. During 1999, the
cross-currency swap agreements resulted in a realized gain, or increase
to other income, of $8.3 million. The estimated fair market value of
these financial instruments of $27.1 million is recorded as an investment
on the balance sheet as of December 31, 1999. The corresponding $27.1
million non-cash change in estimated fair market value is recorded in
other income in 1999.
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 $0.8 million
and $0.6 million of additional interest expense in 1999 and 1998,
respectively. The fair value of these financial instruments was estimated
at $0.2 million and $2.0 million at December 31, 1999 and 1998,
respectively.
8. RELATED PARTY TRANSACTIONS
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
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<PAGE> 40
addition, employees of the Company are made available to certain of these
entities for services such as design, model and tool building. Since the
Trust is the sole member of Venture Holdings Company LLC, 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 transaction 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.
In connection with the above mentioned 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 Company purchased from Pompo Insurance & Indemnity Company Ltd.
("Pompo"), a corporation indirectly owned by the sole beneficiary of the
Trust, insurance to cover certain medical claims by the Company's covered
employees and certain workers compensation claims. The Company remains an
obligor for any amounts in excess of insurance coverage or any amounts
not paid by Pompo under these coverages. If a liability is settled for
less than the amount of the premium a portion of the excess is available
as a premium credit on future insurance. The Company has accounted for
this arrangement using the deposit method wherein the full amount of the
estimated liability for such claims is recorded in other liabilities and
the premiums paid to Pompo are recorded in other assets until such time
that the claims are settled. The Company made additional payments of $0.8
million and $0.6 million to Pompo in 1999 and 1998, respectively, and no
payments in 1997. At December 31, 1999 and 1998, the Company had
approximately $3.7 million and $3.4 million, respectively, on deposit
with Pompo. A portion of this amount was invested on a short term basis
with a related party.
During 1999, the Company entered into an agreement to purchase vehicles
from Shelby American, Inc. ("Shelby"), an entity in which the sole
beneficiary of the Trust has a 75% ownership interest. Venture put a
deposit of $13 million on these vehicles and will pay an additional $10
million when the vehicles are complete. The Company intends to market
the vehicles to other parties. The deposit has been recorded in other
current assets as of December 31, 1999. In addition, the Company sold
certain parts to Shelby for use in the manufacturing of these vehicles
and performed engineering services. Sales to Shelby for the year ended
December 31, 1999 were $3.8 million.
The Company contracts with Deluxe Pattern Corporation ("Deluxe"), an
entity wholly owned by the sole beneficiary of the Trust, to provide the
Company with design, prototype, and fixture work. During the year ended
December 31, 1999, 1998, and 1997, the Company was charged $11.0
million, $6.6 million, and $9.2 million under this arrangement. A
majority of these amounts were capitalized in other assets and amortized
over the term of the respective program for which the Company has the
production contract. The remainder of these amounts were billed and
collected from outside third parties. In 2000, the Company may be
required to expense these costs as incurred due to a recently issued
accounting pronouncement. Deluxe also buys services from the Company,
principally labor and materials. During the years ended December 31,
1999, 1998, and 1997, Deluxe made purchases, and the Company recognized
revenue, in the amount of $12.9 million, $17.3 million, and $4.6
million. In addition to the above transactions, Deluxe also charged the
Company approximately $1.1 million during each of the years ended
December 31, 1999, 1998, and 1997 for equipment rental and other
services. The net effect of these transactions between Deluxe and the
Company was a receivable balance from Deluxe of $32.3 million and $20.0
million at December 31, 1999 and 1998, respectively.
During 1999, the Company advanced approximately $5.5 million to Venture
Africa, an entity wholly owned by the sole beneficiary of the Trust for
the construction and refurbishment of a paint line. This amount has
been included in receivables from related parties as of December 31,
1999.
From time to time, the Company makes certain employees available to the
sole beneficiary of the Trust for purposes of performing services for a
golf club owned by companies controlled by the beneficiary and for
performing construction services at his personal residence. The
beneficiary was indebted to the Company in the amount of $0.5 million and
$0.9 million at December 31, 1999 and 1998.
During 1999, the Company contracted with M&M Flow Through Systems, LLC
("M&M"), an entity owned by the son of the sole beneficiary of the Trust,
to manufacture certain machinery and equipment used at the Company's
Grand Blanc facility. The Company purchased three different machines
from M&M at an approximate cost of $965,000. In addition, the Company
contracts M&M to dispose of scrap parts that have previously been
rejected by the automotive original equipment manufacturers. The
Company's sales of these parts to M&M for the year December 31, 1999 were
approximately $200,000, which approximates a recovery of the material
cost of producing the parts.
The Company leases buildings and machinery and equipment that have a book
value of approximately $0.5 million to an entity in which the sole
beneficiary of the Trust owns a significant equity interest. During 1999,
1998 and 1997, the Company received $0.2 million per year, in connection
with this agreement.
Venture Sales and Engineering (VS&E) and Venture Foreign Sales
Corporation, corporations wholly owned by the sole beneficiary of the
Trust, serve as the Company's sales representatives. The Company pays
Venture Sales and Engineering and Venture Foreign Sales Corporation, in
the aggregate, a sales commission of 3% on all production sales. VS&E has
conducted sales and marketing activities around the world for the Company
and has been advanced certain funds in order to carry on that work on
behalf of the Company. These activities result in a net receivable from
VS&E.
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<PAGE> 41
The Company provided management services to Venture Asia Pacific Pty.
Ltd. (VAP) and its subsidiaries and corporations wholly owned by the sole
beneficiary. The Company billed management fees and commissions totaling
$4.5, $4.5 and $4.0 million to VAP in 1999, 1998 and 1997, respectively.
In addition, VAP is also liable to the Company for expenditures made on
its behalf including tooling costs associated with a long-term program
which was launched in 1999. The Company expects to receive payment on
these receivables during 2000 as production under the long-term program
increases to anticipated volumes.
The following is a summary of transactions with all related parties at
December 31, 1999, 1998 and 1997 (in thousands):
<TABLE>
<CAPTION>
December 31,
Revenue for: 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Materials sold, tooling sales,
sales commission and rent charged $ 17,618 $ 18,974 $ 17,349
Insurance and benefit premiums -- -- 166
Management fees 4,476 4,533 4,028
Subcontracted services -- 2,324 2,686
Manufacturing related services and
inventory purchased 15,557 8,084 10,213
Rent expense paid 2,599 2,180 3,195
Machine and facility usage fees paid 6,340 4,158 3,748
Commission expense paid 10,929 10,391 7,269
Litigation, workers compensation and
medical insurance premiums 766 613 --
Property, plant and equipment purchased 965 40 --
Deposit, paid for vehicles 13,268 -- --
</TABLE>
The result of these related party transactions was a net receivable,
which was included in accounts receivable as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
1999 1998
---- ----
<S> <C> <C>
Amounts receivable $ 96,795 $ 65,755
Amounts payable 14,151 9,107
-------------- -------------
Net amounts receivable $ 82,644 $ 56,648
============== =============
</TABLE>
9. COMMITMENTS AND CONTINGENCIES
Operating Leases - The Company leases certain machinery and equipment
under operating leases which have initial or remaining terms of one year
or more at December 31, 1999. Future minimum lease commitments, including
related party leases, are as follows (in thousands):
39
<PAGE> 42
<TABLE>
<CAPTION>
Related Party Other Operating
Operating Leases Leases
---------------- ------
<S> <C> <C>
Years:
2000 $ 370 $ 7,830
2001 133 6,559
2002 -- 4,122
2003 -- 3,407
2004 -- 2,711
Remaining years -- 12,158
------------------- ----------------
Total $ 503 $ 36,787
=================== ================
</TABLE>
Rent expense for operating leases and other agreements with a term of
greater than one month, including amounts paid to related parties, was
$10.9 million, $5.5 and $6.3 million for the years ended December 31,
1999, 1998, and 1997, respectively. Usage fees paid based on monthly
usage of certain machinery and equipment and facilities were $6.7, $4.0,
and $3.6 million for the years ended December 31, 1999, 1998 and 1997,
respectively. With the exception of $0.3 million paid during 1999, all
usage fees were paid to related parties.
Litigation - In December of 1997, the Company settled litigation with the
contractor that built the paint line at Vemco, Inc. for $2.0 million. Of
this amount, $0.8 million was recorded as a reduction to the carrying
value of the paint line and $1.2 million was recorded as miscellaneous
income.
Resolution of Commercial Issues - During the fourth quarter of 1998, the
Company resolved several commercial issues which resulted in the recovery
of gross profit lost during current and prior years. The resolution of
these issues resulted in an additional $7.4 million of gross profit.
Environmental Costs - The Company is subject to potential liability under
government regulations and various claims and legal actions which are
pending or may be asserted against the Company concerning environmental
matters. Estimates of future costs of such environmental matters are
necessarily imprecise due to numerous uncertainties, including the
enactment of new laws and regulations, the development and application of
new technologies, the identification of new sites for which the Company
may have remediation responsibility and the apportionment and
collectibility of remediation costs among responsible parties. The
Company establishes reserves for these environmental matters when a loss
is probable and reasonably estimable. The Company's reserves for these
environmental matters totaled $1.8 million at December 31, 1999 and $1.3
million at December 31, 1998.
The Company has been involved in legal proceedings with the Michigan
Department of Environmental Quality concerning the emissions from our
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 us 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
Michigan Department of Environmental Quality and expects this to be
completed by the third quarter of 2000. During the fourth quarter of
1999, we established a reserve in the amount of $1.1 million relating to
this payment.
In December of 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 have 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 Michigan Department of Environmental Quality. In addition,
40
<PAGE> 43
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
Michigan Department of Environmental Quality regarding this matter. At
the present time the Company is unable to quantify or qualify any
liability for these disposals.
The Company is party to various contractual, legal and environmental
proceedings, some of which assert claims for large amounts. Although the
ultimate cost of resolving these matters could not be precisely
determined at December 31, 1999, management believes, based on currently
known facts and circumstances, that the disposition of these matters will
not have a material adverse effect on the Company's consolidated
financial position and results of operations. These matters are subject
to many uncertainties, and the outcome of individual matters is not
predictable with assurance. It is more than remote but less than likely
that the final resolution of these matters may require the Company to
make expenditures, in excess of established reserves, over an extended
period of time and in a range of amounts that cannot be reasonably
estimated. The Company's reserves have been set based upon a review of
costs that may be incurred after considering the creditworthiness of
guarantors and/or indemnification from third parties which the Company
has received. The Company is not covered by insurance for any unfavorable
environmental outcomes, but relies on the established reserves,
guarantees and indemnifications it has received.
10. CONCENTRATIONS
The Company's sales to General Motors Corporation ("GM"), Ford Motor
Company ("Ford") and DaimlerChrysler Corporation ("DaimlerChrysler"),
expressed as a percentage of sales, were 40%, 27% and less than 10%,
respectively, in 1997. During 1998, the percentages were 38%, 23% and 15%
for GM, Ford and DaimlerChrysler, respectively. During 1999, the
percentages were 18%, 13%, 12%, 11% and 9% for GM, Audi, DaimlerChrysler,
Ford and Volkswagen, respectively. Many of the Company's automotive
industry customers are unionized and work stoppages or slow-downs
experienced by them, and their employee relations policies could have an
adverse effect on the Company's results of operations. Net sales during
the second and third quarters of 1998 were impacted negatively due to
strikes at certain General Motors plants. The Company believes that a
portion of these lost sales were recouped in the fourth quarter of 1998
as GM accelerated production to refill its distribution channels.
Approximately 30% of the Company's North American workforce is covered by
collective bargaining agreements. A portion of the European workforce is
covered by collective bargaining agreements.
11. PENSIONS, PROFIT-SHARING AND SALARY REDUCTION PLAN
North America
The Company sponsors profit-sharing and salary reduction 401(k) plans
which cover substantially all North American employees. The plans provide
for the Company to contribute a discretionary amount each year.
Contributions were $2.3, $2.3 and $2.2 million for the years ended
December 31, 1999, 1998 and 1997, respectively.
Venture Holdings Corporation, into which Bailey Corporation ("Bailey")
was merged in July 1997, has various retirement plans covering
substantially all North American employees, including three defined
benefit pension plans covering full-time hourly and salaried employees.
The benefits payable under the plans are generally determined based on
the employees' length of service and earnings. For all these plans the
funding policy is to make at least the minimum annual contributions
required by Federal law and regulation.
41
<PAGE> 44
The change in benefit obligation for the years ended December 31, 1999
and 1998 was as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
1999 1998
---- ----
<S> <C> <C>
Benefit obligation at beginning of year $ 18,230 $ 15,980
Service cost 589 543
Interest cost 1,234 1,120
Curtailment gain -- (648)
Amendments 638 --
Actuarial (gain) loss (2,856) 1,771
Benefits paid (594) (536)
------------ ------------
Benefit obligation at end of year $ 17,241 $ 18,230
============ ============
</TABLE>
The change in the market value of plan assets for the years ended
December 31, 1999 and 1998 was as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
1999 1998
---- ----
<S> <C> <C>
Market value of plan assets at
beginning of year $ 14,255 $ 14,026
Actual return on plan assets 1,606 105
Employer contribution 715 660
Benefits paid (594) (536)
------------ ------------
Market value of plan assets at
end of year $ 15,982 $ 14,255
============ ============
</TABLE>
The funded status of the defined benefit plans at December 31, 1999 was
as follows (in thousands):
<TABLE>
<CAPTION>
Assets Exceed Accumulated Benefits
Accumulated Benefits Exceed Assets
-------------------- -------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits $ 5,841 $ 11,261
Nonvested benefits 18 121
--------------------- -----------------------
Accumulated benefit obligation 5,859 11,382
Projected benefit obligation 5,859 11,382
Market value of plan assets 7,673 8,309
--------------------- -----------------------
Excess (deficiency) of assets over projected benefit
obligation 1,814 (3,073)
Unrecognized net (gain) (1,558) (1,403)
Unrecognized prior service cost -- 1,067
--------------------- -----------------------
Prepaid (Accrued) pension cost $ 256 $ (3,409)
===================== =======================
</TABLE>
42
<PAGE> 45
The funded status of the defined benefit plans at December 31, 1998 was
as follows (in thousands):
<TABLE>
<CAPTION>
Assets Exceed Accumulated Benefits
Accumulated Benefits Exceed Assets
-------------------- -------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits $ 3,017 $ 15,078
Nonvested benefits 33 102
--------------------- -----------------------
Accumulated benefit obligation 3,050 15,180
Projected benefit obligation 3,050 15,180
Market value of plan assets 3,891 10,364
--------------------- -----------------------
Excess (deficiency) of assets over projected benefit
obligation 841 (4,816)
Unrecognized net (gain) loss (928) 1,232
Unrecognized prior service cost -- 519
Additional minimum liability -- (1,751)
--------------------- -----------------------
Accrued pension cost $ (87) $ (4,816)
===================== =======================
</TABLE>
Net periodic pension expense (benefit) for the years ended December
31,1999 and 1998 included the following components (in thousands):
<TABLE>
<CAPTION>
December 31,
1999 1998
---- ----
<S> <C> <C>
Service cost benefit during the year $ 589 $ 543
Interest cost on projected benefit obligation 1,234 1,120
Expected return on plan assets (1,196) (1,174)
Net amortization and deferral 89 (52)
Curtailment gain -- (648)
----------------- -----------------------
Net periodic pension expense (benefit) $ 716 $ (211)
================= =======================
</TABLE>
The date used to measure plan assets and liabilities is as of September
30 each year.
The weighted-average assumed discount rate was 7.75% and 6.5% for 1999
and 1998, respectively. The assumed rate of return on plan assets was
8.5% for 1999 and 1998, respectively. For salary based plans, the
expected rate of increase in compensation levels was 0.0% (as all
salaried plans have been frozen) and 5.5% for 1999 and 1998,
respectively.
Plan assets consist principally of cash and cash equivalents, listed
common stocks, debentures, and fixed income securities.
A salaried pension plan has been frozen since 1992, and no further
service liability will accrue under the plan. During 1998, an additional
salaried pension plan and an hourly pension plan were frozen, and no
further service liability will accrue under these plans. The freezing of
the salaried pension plan resulted in a curtailment gain of approximately
$648,000 and has been included in the calculation of the net periodic
pension benefit for the year ended December 31, 1998. The freezing of the
hourly plan did not result in a curtailment gain or loss since the
accumulated and projected benefit obligation for this plan are equal.
Effective January 1, 1999, the three frozen plans were merged into one
plan. The merged plan will eventually be terminated.
43
<PAGE> 46
Europe
------
Peguform GmbH maintains one defined benefit pension plan covering all its
full-time hourly and salaried employees plus some individual defined
benefit pension agreements for managers and members of the board. The
benefits payable under the plans are generally determined based on the
employees' length of service and earnings. These benefit plans are not
funded.
The change in benefit obligation for the year ended December 31, 1999 was
as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
1999
----
<S> <C>
Benefit obligation at beginning of year $ 25,919
Service cost 1,029
Interest cost 1,092
Actuarial (gain) (2,175)
Benefits paid (610)
------------
Benefit obligation at end of year $ 25,255
============
</TABLE>
The funded status of the defined benefit plans at December 31, 1999 was
as follows (in thousands):
<TABLE>
<CAPTION>
Accumulated Benefits
Exceed Assets
-------------
<S> <C>
Actuarial present value of benefit obligations:
Vested benefits $ 21,117
Nonvested benefits 3,613
---------------------
Accumulated benefit obligation 24,730
Projected benefit obligation 25,255
Market value of plan assets --
---------------------
(Deficiency) of assets over projected benefit
obligation (25,255)
Unrecognized net (gain) (2,175)
---------------------
Accrued pension cost $ (27,430)
=====================
</TABLE>
Net periodic pension (benefit) expense for the year ended December
31, 1999 included the following components (in thousands):
<TABLE>
<CAPTION>
December 31,
1999
----
<S> <C>
Service cost benefit during the year $ 1,029
Interest cost on projected benefit obligation 1,092
------------------
Net periodic pension (benefit) expense $ 2,121
==================
</TABLE>
The date used to measure plan assets and liabilities was as of December
31, 1999.
The weighted-average assumed discount rate was 6.0% for 1999. For salary
based plans, the expected rate of increase in compensation levels was
1.5% for 1999.
44
<PAGE> 47
12. INCOME TAXES
Amounts in the financial statements related to income taxes are for the
operations of Venture Holdings Corporation and Peguform GmbH. The other
significant Subsidiaries have elected S corporation or flow through tax
status under the Internal Revenue Code and will incur no domestic or
foreign income tax. The beneficiary is required to report all income,
gains, losses, deductions, and credits of the S corporations and other
flow through entities included in the Trust on his individual tax
returns.
The provision for income tax expense for the period ended (in thousands):
<TABLE>
<CAPTION>
December 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Currently Payable
United States $ (351) $ 80 $ --
State and Local -- -- 239
Foreign 2,941 16 --
---------- -------- -----------
Total 2,590 96 239
========== ======== ===========
Deferred
United States $ 1,994 $ 1,618 $ 2,716
State and Local 297 240 403
Foreign 3,346 -- --
---------- -------- -----------
Total $ 5,637 1,858 3,119
========== ======== ===========
</TABLE>
The Company does not provide for U.S. income taxes or foreign withholding
taxes on cumulative undistributed earnings of foreign subsidiaries which
are considered to be permanently reinvested outside the U.S.
The effective tax rate of Venture Holdings Corporation on pretax income
was 65.27% for the year ended December 31, 1999, of which 24.17% relates
to permanent differences not deductible for income taxes (primarily
goodwill amortization) and 5.2% for state and local income taxes, net of
the federal tax benefit. The effective tax rate of Peguform GmbH on
pre-tax income was 36.8% for the year ended December 31, 1999. The
effective tax rate on pretax income was 70.4% for the year ended December
31, 1998, of which 29.9% relates to permanent differences not deductible
for income taxes and 5.2% for state and local income taxes, net of the
federal tax benefit. The effective tax rate on pretax income was 58.3%
for the year ended December 31, 1997, of which 18.1% relates to permanent
differences not deductible for income taxes and 5.2% for state and local
income taxes, net of the federal tax benefit.
The tax-effected temporary differences and carryforwards which comprised
deferred assets and liabilities were as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
1999 1998
---- ----
<S> <C> <C>
Deferred tax assets:
Accrued expenses and reserves $ 13,487 $ 7,372
Net operating loss carryforward 16,556 9,750
Minimum tax credit carryforward 764 844
Other 9,784 750
------------ -----------
Total deferred tax assets $ 40,591 $ 18,716
------------ -----------
Deferred tax liabilities:
Depreciation $ 59,277 $ 11,931
Other 1,396 24
------------ -----------
Total deferred tax liabilities $ 60,673 $ 11,955
------------ -----------
Net deferred tax (liability) asset $ (20,082) $ 6,761
============ ===========
</TABLE>
45
<PAGE> 48
The current portion of deferred tax assets, $10.7 and $6.9 million is
included in prepaid expense and other at December 31, 1999 and 1998,
respectively. The current portion of deferred tax liabilities of $1.2
million is included in accrued expenses at December 31, 1999. Venture
Holdings Corporation U.S. net operating loss carryforwards, which totaled
$30.8 and $26.4 million at December 31, 1999 and 1998, begin to expire in
the year 2011. Peguform France has net operating loss carryfowards of
approximately $16 million at December 31, 1999, which have an unlimited
expiration period. Alternative minimum tax credit carryforwards totaled
$764 thousand at December 31, 1999 and have no expiration date.
Management believes the net operating loss carryforwards at December 31,
1999 are realizable based on forecasted earnings and available tax
planning strategies.
13. EXTRAORDINARY ITEM
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).
14. 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 reported into two
reportable segments: North America and Europe. The following table
presents net sales and other financial information by business segment
for the twelve months ended December 31, 1999 (in thousands):
<TABLE>
<CAPTION>
INCOME NET (LOSS) TOTAL
NET SALES FROM OPERATIONS INCOME ASSETS
<S> <C> <C> <C> <C>
NORTH AMERICA (Venture) $ 605,637 $ 6,666 $ (24,702) $ 1,029,332
EUROPE (Peguform) 760,533 34,558 10,192 385,644
ELIMINATIONS
--------------- -------------- ------------- -------------
TOTAL 1,366,170 41,224 (14,510) 1,414,976
=============== ============== ============= =============
</TABLE>
15. 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 periods prior to
June 30, 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 eliminate investments in subsidiaries
and intercompany balances and transactions.
46
<PAGE> 49
1997 SENIOR NOTES:
- ------------------
The following condensed consolidating financial information presents:
(1) Condensed consolidating financial statements for twelve months ended
December 31, 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.
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 1999
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
OTHER GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE ISSUERS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------- ------------ ------------ ------------ -----
<S> <C> <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 (456,809) (6,971) (409,674) - -
----------- --------- -------- ----------- ------- -----------
Total Assets $ 913,955 $ 120,637 $ (6,803) $ 387,187 $ - $ 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 - 16,161 1,599 90,893 - 108,653
Current portion of long term debt 51,800 1,021 - 15,547 - 68,368
----------- --------- -------- ----------- ------- -----------
Total current liabilities 65,028 74,570 2,111 243,311 - 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 94,359 2,111 385,925 1,354,073
Commitments and Contingencies - - - - - -
Member's Equity:
Member's equity 42,277 26,274 (8,914) 3,703 - 63,340
Accumulated other comprehensive income-
minimum pension liability in excess of
unrecognized prior service cost, net of tax - - - - - -
Accumulated other comprehensive income- - 4 - (2,441) - (2,437)
cumulative translation adjustment
----------- --------- -------- ----------- ------- ----------
Member's Equity 42,277 26,278 (8,914) 1,262 - 60,903
----------- --------- -------- ----------- ------- ----------
Total Liabilities and Member's Equity $ 913,955 $ 120,637 $ (6,803) $ 387,187 $ - $1,414,976
=========== ========= ======== =========== ======= ==========
</TABLE>
47
<PAGE> 50
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 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 $ - $ 599,434 $ 157,376 $ 766,685 $ (157,325) $ 1,366,170
COST OF PRODUCT SOLD - 550,273 149,598 672,926 (157,325) 1,215,472
---------- ----------- ----------- ------------ ----------- -------------
GROSS PROFIT - 49,161 7,778 93,759 - 150,698
SELLING, GENERAL & ADMINISTRATIVE
EXPENSE - 50,629 - 58,586 - 109,215
PAYMENTS TO BENEFICIARY IN LIEU OF
TAXES 259 - - - - 259
---------- ----------- ----------- ------------ ----------- -------------
(LOSS) INCOME FROM OPERATIONS (259) (1,468) 7,778 35,173 - 41,224
INTEREST EXPENSE 67,271 171 - 5,164 - 72,606
INTERCOMPANY INTEREST ALLOCATION (67,271) 47,767 - 19,504 - -
OTHER EXPENSE (INCOME) (48,105) (514) 16,800 597 - (31,222)
---------- ----------- ----------- ------------ ----------- -------------
(LOSS) INCOME BEFORE TAXES 47,846 (48,892) (9,022) 9,908 - (160)
TAX (BENEFIT) PROVISION - 1,940 - 6,287 - 8,227
MINORITY INTEREST - - - 554 - 554
---------- ----------- ----------- ------------ ----------- -------------
NET (LOSS) INCOME BEFORE
EXTRAORDINARY LOSS 47,846 (50,832) (9,022) 3,067 - (8,941)
EXTRAORDINARY LOSS ON EARLY
EXTINGUISHMENT OF DEBT 5,569 - - - - 5,569
---------- ----------- ----------- ------------ ----------- -------------
NET (LOSS) INCOME $ 42,277 $ (50,832) $ (9,022) $ 3,067 $ - $ (14,510)
========== =========== =========== ============ =========== =============
</TABLE>
48
<PAGE> 51
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
OTHER GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE ISSUERS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------- ------------ ------------ ------------ -----
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 42,277 $ (50,832) $ (9,022) $ 3,067 $ - $ (14,510)
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities:
Depreciation and amortization - 49,824 4 26,168 - 75,996
Unrealized loss on currency exchange - (411) 17,830 - - 17,419
Loss from the disposal of fixed assets - - - 181 - 181
Net extraordinary loss on early 5,569 - - - - 5,569
extinguishment of debt
Change in accounts receivable - 419 (61) 52,646 - 53,004
Change in inventories - 1,834 - 22,066 - 23,900
Change in prepaid and other current assets - (13,834) - 5,130 - (8,704)
Change in other assets - (29,884) - 169 - (29,715)
Change in investments in associated company - - - (723) - (723)
Change in accounts payable - 6,113 (489) 4,581 - 10,205
Change in accrued expenses (97) 3,921 (516) (16,953) - (13,645)
Change in pension liabilities and other - 736 - 3,763 - 4,499
Change in deferred taxes - 2,371 - 3,465 - 5,836
---------- ---------- -------- ----------- ------- -----------
Net cash provided by (used in) operating 47,749 (29,743) 7,746 103,560 - 129,312
activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of subsidiaries, net of cash
acquired - - (75,531) (368,530) - (444,061)
Capital expenditures - (23,740) - (29,436) - (53,176)
Net activity in investments in and advances to
(from) subsidiaries & affiliates (502,960) 84,078 67,785 351,097 - -
Proceeds from sale of fixed assets - - 390 - 390
Unrealized gain on investments (40,501) - - - (40,501)
---------- ---------- -------- ----------- ------- -----------
Net cash used in investing activities (543,461) 60,338 (7,746) (46,479) - (537,348)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) borrowings under revolving (71,500) - - (71) - (71,571)
credit facility
Debt issuance fees - (27,066) - - - (27,066)
Net proceeds from issuance of debt 650,000 - - - - 650,000
Payment for early extinguishment of debt (82,788) - - (45,862) - (128,650)
Principal payments on debt - (3,532) - (2,327) - (5,859)
---------- ---------- -------- ----------- ------- -----------
Net cash (used in) provided by financing 495,712 (30,598) - (48,260) - 416,854
activities
Effect of exchange rate changes on cash and cash - - - (1,556) - (1,556)
equivalents
NET INCREASE IN CASH - (3) - 7,265 - 7,262
CASH AT BEGINNING OF PERIOD - 29 - 101 - 130
---------- ---------- -------- ----------- ------- -----------
CASH AT END OF PERIOD $ - $ 26 $ - $ 7,366 $ - $ 7,392
========== ========== ======== =========== ======= ===========
</TABLE>
49
<PAGE> 52
1999 NOTES:
- -----------
The following condensed consolidating financial information presents:
(1) Condensed consolidating financial statements for the year ended
December 31, 1999, of 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
AS OF DECEMBER 31, 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 $ - $ 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 (463,780) (409,674) - -
----------- ------------ ---------------- ------------ -------------
Total Assets $ 913,955 $ 113,834 $ 387,187 $ - $ 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 17,360 3,703 - 63,340
Accumulated other comprehensive income- - - - - -
minimum pension liability in excess of
unrecognized prior service cost, net
of tax
Accumulated other comprehensive income-
cumulative translation adjustment - 4 (2,441) - (2,437)
----------- ------------ ---------------- ------------ -------------
Member's Equity 42,277 17,364 1,262 - 60,903
----------- ------------ ---------------- ------------ -------------
Total Liabilities and Member's Equity $ 913,955 $ 113,834 $ 387,187 $ - $ 1,414,976
=========== ============ ================ ============ =============
</TABLE>
50
<PAGE> 53
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------------ ------------ ------------ -----
<S> <C> <C> <C> <C> <C>
NET SALES $ - $ 756,810 $ 766,685 $ (157,325) $ 1,366,170
COST OF PRODUCT SOLD - 699,871 672,926 (157,325) 1,215,472
----------- ------------- -------------- ------------ ------------
GROSS PROFIT - 56,939 93,759 - 150,698
SELLING, GENERAL & ADMINISTRATIVE - 50,629 58,586 - 109,215
EXPENSE
PAYMENTS TO BENEFICIARY IN LIEU OF 259 - - - 259
TAXES
----------- ------------- -------------- ------------ ------------
(LOSS) INCOME FROM OPERATIONS (259) 6,310 35,173 - 41,224
INTEREST EXPENSE 67,271 171 5,164 - 72,606
INTERCOMPANY INTEREST ALLOCATION (67,271) 47,767 19,504 - -
OTHER EXPENSE (INCOME) (48,105) 16,286 597 - (31,222)
----------- ------------- -------------- ------------ ------------
(LOSS) INCOME BEFORE TAXES 47,846 (57,914) 9,908 - (160)
TAX (BENEFIT) PROVISION - 1,940 6,287 - 8,227
MINORITY INTEREST - - 554 - 554
----------- ------------- -------------- ------------ ------------
NET (LOSS) INCOME BEFORE
EXTRAORDINARY LOSS 47,846 (59,854) 3,067 - (8,941)
EXTRAORDINARY LOSS ON EARLY
EXTINGUISHMENT OF DEBT 5,569 - - - 5,569
----------- ------------- -------------- ------------ ------------
NET (LOSS) INCOME $ 42,277 $ (59,854) $ 3,067 $ - $ (14,510)
=========== ============= ============== ============ ============
</TABLE>
51
<PAGE> 54
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR NONGUARANTOR CONSOLIDATED
VENTURE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------------ ------------ ------------ -----
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 42,277 $ (59,854) $ 3,067 $ -- $ (14,510)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization -- 49,828 26,168 -- 75,996
Unrealized loss on currency exchange -- 17,419 -- -- 17,419
Loss from the disposal of fixed assets -- -- 181 -- 181
Net extraordinary loss on early
extinguishment of debt 5,569 -- -- -- 5,569
Change in accounts receivable -- 358 52,646 -- 53,004
Change in inventories -- 1,834 22,066 -- 23,900
Change in prepaid and other current assets -- (13,834) 5,130 -- (8,704)
Change in other assets -- (29,884) 169 -- (29,715)
Change in investments in associated company -- -- (723) -- (723)
Change in accounts payable -- 5,624 4,581 -- 10,205
Change in accrued expenses (97) 3,405 (16,953) -- (13,645)
Change in pension liabilities and other -- 736 3,763 -- 4,499
Change in deferred taxes -- 2,371 3,465 -- 5,836
--------- --------- --------- --------- ---------
Net cash provided by (used in) operating 47,749 (21,997) 103,560 -- 129,312
activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of subsidiaries, net of cash acquired -- (75,531) (368,530) -- (444,061)
Capital expenditures -- (23,740) (29,436) -- (53,176)
Net activity in investments in and advances to
(from) subsidiaries & affiliates (502,960) 151,863 351,097 -- --
Proceeds from sale of fixed assets -- 390 -- 390
Unrealized gain on investments (40,501) -- -- (40,501)
--------- --------- --------- --------- ---------
Net cash used in investing activities (543,461) 52,592 (46,479) -- (537,348)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) borrowings under revolving
credit facility (71,500) -- (71) -- (71,571)
Debt issuance fees -- (27,066) -- -- (27,066)
Net proceeds from issuance of debt 650,000 -- -- 650,000
Payment for early extinguishment of debt (82,788) (45,862) -- (128,650)
Principal payments on debt -- (3,532) (2,327) -- (5,859)
--------- --------- --------- --------- ---------
Net cash (used in) provided by financing
activities 495,712 (30,598) (48,260) -- 416,854
Effect of exchange rate changes on cash and cash
equivalents -- -- (1,556) -- (1,556)
NET INCREASE IN CASH -- (3) 7,265 -- 7,262
CASH AT BEGINNING OF PERIOD 29 101 130
========= ========= ========= ========= =========
CASH AT END OF PERIOD $ -- $ 26 $ 7,366 $ -- $ 7,392
========= ========= ========= ========= =========
</TABLE>
52
<PAGE> 55
16. SUBSEQUENT EVENT
On March 20, 2000, the Company terminated its three cross-currency swap
agreements and realized a cash gain of $42 million. The entire cash
proceeds were applied as a prepayment of the Company's $125 million
interim term loan. The cross-currency swap agreements were replaced with
a twelve-month foreign exchange collar.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The following individuals are the Executive Officers of the Company,
having the operational titles set forth opposite their names. Venture
Holdings Trust is the sole member of Venture Holdings Company LLC. Larry
J. Winget is the sole manager of the Venture Holdings Company LLC and
exercises the management powers of Venture Holdings Company LLC in his
capacity as Special Advisor, as defined in the Amended and Restated
Operating Agreement of Venture Holdings Company LLC. Messrs. Winget,
Schutz and Torakis serve as the directors of each Subsidiary, other than
Venture Canada. Mr. Winget and Stephen M. Cheifetz serve as the directors
of Venture Canada. Mr. Butler is a director of Venture Holdings
Corporation only.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Larry J. Winget 57 Chairman and Chief Executive Officer
Larry J. Winget, Jr. 39 Chairman of Peguform GmbH and Executive Vice President
A. James Schutz 55 Executive Vice Chairman
Michael G. Torakis 43 President and Chief Operating Officer of Venture Holdings
Company LLC and Peguform GmbH
James E. Butler, Jr. 47 Chief Financial Officer, Executive Vice President,
Secretary
and Treasurer of Venture Holdings Company LLC
Gary Woodall 57 President - North American Manufacturing
Charles Hunter 45 President - Engineering
Michael Juras 58 Executive Vice President - Advanced Engineering
Patricia A. Stephens 53 Executive Vice President - Purchasing
Joseph R. Tignanelli 38 Executive Vice President - Interior Operations
David Voita 59 Executive Vice President - Manufacturing
Warren Brown 56 Vice President - Composite Operations
Werner Deggim 49 Senior Vice President - Peguform GmbH
Dieter Belle 44 Vice President - Finance, Controlling, and Human
Resources - Peguform GmbH
</TABLE>
Larry J. Winget was one of the five original founders and shareholders of
Venture Industries Corporation and is the only one still involved with
us. Since 1987 he has owned 100% of Venture and is currently the sole
beneficiary of Venture Holdings Trust, which is the sole member of
Venture.
Larry J. Winget, Jr., Larry J. Winget's son, has been employed by us in
various positions since 1976, including Molding Plant Manager of
53
<PAGE> 56
Vemco, Inc. from 1988 until 1990, Assistant Manager of Vemco, Inc. from
1990 until 1993, and Vice President and General Manager of Vemco, Inc.
until being named to the position of Vice President -- Manufacturing in
April of 1995. In December of 1997 he assumed the additional role of
leading all manufacturing operations and on May 28, 1999 became Chairman
of Peguform.
A. James Schutz assumed the position of Vice Chairman in October 1997 and
had been Executive Vice President since 1987. He has been in the
injection molding business for 25 years.
Michael G. Torakis joined us in 1985 and has been President since 1995.
He previously served as Treasurer and Chief Financial Officer and in
various other capacities with Venture, including Executive Vice
President. On May 28, 1999, Mr. Torakis became President of Peguform.
James E. Butler became Chief Financial Officer of Venture in 1999. He
joined us in 1994 and assumed the position of Executive Vice President --
Finance and Secretary in April of 1995. From 1981 until joining Venture,
Mr. Butler was employed by Coopers & Lybrand L.L.P., a certified public
accounting firm.
Gary Woodall joined us on April 1, 1999 as Vice President of Interior
Operations and General Motors Customer Executive. Late in 1999 Gary
assumed the role of President of North American Manufacturing. Mr.
Woodall had previously been employed by General Motors Corporation for
over 35 years. Mr. Woodall's last position with General Motors was as
General Director of Products, Manufacturing and Process Engineering.
Prior to holding that position, Mr. Woodall served as General Director of
Operations, and was responsible for General Motors' North American
interior automotive component manufacturing.
Charles Hunter has been with us since 1989 and has held a number of
different positions with us involving mold building, design engineering
and prototype operations. In 1999 he was appointed President of Venture
Engineering and oversees worldwide design, tooling and advanced
engineering operations.
Michael Juras joined us in his current position in January 1997. Prior to
joining us, Mr. Juras had spent 30 years in various product and
manufacturing positions with General Motors, with his last position as
Director of Engineering Mid-Size Cars.
Patricia A. Stephens joined us in 1993 and has held positions involving
program management, contract administration and purchasing. She
previously had been employed for 23 years by General Motors, her last
position being purchasing agent.
Joseph R. Tignanelli, Larry J. Winget's son-in-law, has been employed by
us in several positions since 1980, including Molding Manager for Venture
Industries Corporation -- Groesbeck plant from 1985 until 1990, Assistant
Manager of Venture Industries Corporation from 1990 until 1993, Vice
President of Venture Industries until October of 1995, and Executive Vice
President -- Customer Services until December 1997, when he assumed his
current position.
David Voita has been employed by us in various manufacturing positions
since 1995, after a 33-year career with Ford Motor Company. Mr. Voita's
last position at Ford was that of Plant Manager for the Plastic and Trim
Division, where he managed a 1.2 million square foot, 1,300 employee
facility.
Warren Brown joined us in 1993 as Vice President -- Mergers and
Acquisitions and assumed his current position in 1999. Prior to joining
us, Mr. Brown was employed for eight years as Chief Operating Officer of
Autodie Corporation. He has over 30 years experience in the automotive
supplier industry.
Werner Deggim became a member of the Management Board of Peguform GmbH in
1994, in charge of Sales, Development and Research, until being named to
his present position in 1998. For 5 years
54
<PAGE> 57
prior to joining Peguform Mr. Deggim was President of Kautex North
America, located in Windsor, Ontario Canada.
Dieter Belle joined Peguform GmbH as Vice President -- Finance,
Controlling and Purchasing in 1995. In April 1998 he assumed
responsibility for human resources. Prior to joining Peguform, Mr. Belle
served as Director of Controlling for Felten & Guilleaume from 1990 to
1995.
Stephen M. Cheifetz, 44, is a partner of Corrent and Macri and has served
as partner of this firm for less than 1 year. Prior to joining his
current firm, he was a partner with Wilson, Walker, Hochberg, Slopen, a
Windsor, Ontario law firm, and served as a partner of that firm for over
five years.
ITEM 11. EXECUTIVE COMPENSATION
The following Summary Compensation Tables sets forth compensation paid
for the years ended December 31, 1999, 1998 and 1997, respectively, to
those persons who were, at such date, the chief executive officer of
Venture and the other four most highly compensated executive officers.
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
Other Annual All Other
Name and Principal Position Year Salary ($) (2) Bonus ($) Compensation (3) Compensation (4)
--------------------------- ---- -------------- --------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Larry J. Winget 1999 $ 528,618 $ 500,000 $ 262,779 $ 504,400
Chairman and 1998 526,503 ---- 542,872 366,063
Chief Executive Officer 1997 527,657 ---- 478,945 277,347
Michael G. Torakis 1999 $ 340,164 $ 187,500 $ ---- $ 5,100
President 1998 268,834 ---- ---- 5,100
1997 263,819 250,000 ---- 4,800
Larry J. Winget, Jr. 1999 $ 281,165 $ 250,000 $ ---- $ 5,100
Executive Vice President 1998 219,224 ---- ---- 5,100
1997 220,938 ---- ---- 4,275
Charles Hunter 1999 $ 280,869 $ 400,000 $ ---- $ 2,120
President - Engineering 1998 181,634 ---- ---- 2,120
1997 169,047 ---- ---- 2,155
James E. Butler 1999 $ 237,062 $ 150,000 $ ---- $ 5,100
Chief Financial Officer, 1998 140,108 ---- ---- 4,233
Executive Vice President, 1997 135,867 ---- ---- 4,200
Secretary and Treasurer
of Venture Holdings
Company, LLC
</TABLE>
- --------------------------------------------------------------------------------
(1) The compensation described in this table does not include benefits
under group plans which do not discriminate in scope, terms or operation
in favor of the officers listed and that are generally available to all
salaried employees, and certain perquisites and personal benefits
received by the officers listed, where these perquisites do not exceed
the lesser of $50,000 or 10% of the officer's salary and bonus.
(2) Includes salary reductions made under Venture's 401(k) Plan and
Venture's Cafeteria Benefit Plan.
(3) The amount indicated for Mr. Winget represents compensation in lieu
of a distribution of Trust principal, equal to taxes
55
<PAGE> 58
incurred by the beneficiary as a result of activities of Venture Holdings
Trust's subsidiaries which have elected "S" corporation status under the
Internal Revenue Code or are limited liability companies (taxed as
partnerships).
(4) "All Other Compensation" is comprised of: (1) a contribution made by
Venture to the accounts of each of the officers listed under Venture's
401(k) Plan; (2) the incremental cost to Venture of additional premiums
for term life insurance benefits for the officers listed which are not
generally available to the other salaried employees of Venture, and (3)
for Mr. Winget, the portion of the premium paid by Venture under a
reverse split dollar life insurance policy attributable to the build-up
of the cash surrender value of the policy, which aggregated $2,172,005,
$1,672,705 and $1,311,742 at December 31, 1999, 1998 and 1997,
respectively, and is owned by Mr. Winget. The beneficiary of the term
insurance portion of the reverse split dollar policy is Venture, which
pays all premiums due under the policy and is entitled to receive a $20.0
million benefit in the event of Mr. Winget's death. Mr. Winget has the
right to designate the distribution of the cash surrender value and may,
prior to his death, surrender the policy in cancellation thereof and
receive the benefit of the cash surrender value.
See the table below for complete details concerning all other
compensation.
<TABLE>
<CAPTION>
Reverse Split
Name and Year 401 (k) Term Life Dollar Policy Total
------------- ------- ---------- ------------- -----
Insurance
---------
<S> <C> <C> <C> <C>
Winget
1999 $ 4,800 $ 300 $ 499,300 $ 504,400
1998 4,800 300 360,963 366,063
1997 4,500 300 272,547 277,347
Torakis
1999 $ 4,800 $ 300 $ -- $ 5,100
1998 4,800 300 -- 5,100
1997 4,500 300 -- 4,800
Winget, Jr.
1999 $ 4,800 $ 300 $ -- $ 5,100
1998 4,800 300 -- 5,100
1997 3,975 300 -- 4,275
Hunter
1999 $ 1,820 $ 300 $ -- $ 2,120
1998 1,820 300 -- 2,120
1997 1,855 300 -- 2,155
Butler
1999 $ 4,800 $ 300 $ -- $ 5,100
1998 3,933 300 -- 4,233
1997 3,900 300 -- 4,200
</TABLE>
COMPENSATION OF DIRECTORS
Mr. Winget serves as the Special Advisor to Venture, Messrs. Winget,
Schutz and Torakis serve as the directors of each guarantor of the Notes,
and Mr. Butler serves as director of Venture Holdings Company LLC. None
receive any additional compensation or fees for their service in these
capacities. Mr. Cheifetz does not receive compensation for acting as a
director of Venture Canada; however, the law firm of which he is a
partner acts as counsel to Venture Canada.
56
<PAGE> 59
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
All of the compensation for each of the officers listed in the Summary
Compensation Table above for the year ended December 31, 1999 was paid by
Experience Management LLC. Messrs. Winget and Torakis, in their
capacities as directors, participated in the deliberations concerning
executive compensation. In addition, some of the officers listed in the
Summary Compensation Table above have engaged in certain transactions
with Venture. See "Item 13. Certain Relationships and Related
Transactions."
OPTIONS
None of the officers listed in the Summary Compensation Table above hold
any options to acquire any interest in Venture or to acquire stock of the
subsidiaries of Venture or were granted any such options in the 1999
fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Venture owns, directly or indirectly, all of the outstanding capital
stock of, or equity interests in, its subsidiaries, except for its
70%-owned Mexican and 50%-owned Spanish joint ventures. Venture Holdings
Trust is the sole member of Venture, and Mr. Winget is the sole
beneficiary of Venture Holdings Trust. Mr. Winget's address is c/o
Venture Holdings Company LLC, 33662 James J. Pompo Drive, Fraser,
Michigan 48026.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In addition to making distributions to Mr. Winget, either directly as
sole beneficiary of Venture Holdings Trust before the trust contribution
by Venture Holdings Trust to Venture, or indirectly through distributions
to Venture Holdings Trust the sole member of Venture after the trust
contribution, and also compensating him in his capacity as an Executive
Officer of Venture, Venture has maintained business relationships and
engaged in certain transactions with Mr. Winget and certain companies
owned or controlled by him (each an "affiliate" and collectively, the
"affiliates") as described below. Since Mr. Winget is the sole
beneficiary of the Venture Holdings Trust, which is the sole member of
Venture, the terms of these transactions are not the result of
arms'-length bargaining; however, we believe that these transactions are
on terms no less favorable to us than would be obtained if these
transactions or arrangements were arms'-length transactions with
non-affiliated persons.
Pursuant to the indentures governing the 11% Senior Notes due 2007 and
12% Senior Subordinated Notes due 2009 issued in 1999 and the indenture
governing the 1997 senior notes, Venture, each issuer of the 1997 senior
notes and each guarantor of each of the 1997 senior notes and the 1999
notes is required to maintain a Fairness Committee, at least one of whose
members is independent, which approves the terms and conditions of
certain transactions between Venture and our affiliates and participates
in decisions concerning whether certain corporate opportunities will be
pursued by us. The indentures also contain restrictions on distributions
to Mr. Winget and other restrictions on transactions with affiliates,
including the Corporate Opportunity Agreement. The Corporate Opportunity
Agreements require Mr. Winget to offer to us certain corporate
opportunities which relate to our business before he may pursue these
opportunities outside Venture.
FACILITIES AND EQUIPMENT
We lease, or have arranged for the usage of, certain facilities,
machinery and equipment that are owned by affiliates, as set forth below.
We believe that the lease and usage agreements are based on the fair
market value of the facilities, machinery and equipment at the inception
of the agreements. Venture has made significant capital improvements to
these properties. Venture has accounted for
57
<PAGE> 60
these improvements as leasehold improvements. At the conclusion of the
applicable lease or usage agreement, the benefits of these improvements
inure to the benefit of the lessor.
Venture Real Estate, Inc., a corporation wholly owned by Mr. Winget's
living trust since 1988, leases two separate injection molding buildings
to us in our Malyn Complex, and our Commerce Mold Shop. Starting in 1996,
the Redford facility, and in 1998 the Almont II facility, were also
leased to us by Venture Real Estate, Inc. Amounts paid to Venture Real
Estate, Inc. and a predecessor affiliate were approximately $1.0 million,
$0.8 million and $0.8 million for the years ended December 31, 1997, 1998
and 1999, respectively.
Harper Properties of Clinton Township Limited Partnership leases its
Harper facility to us on a month-to-month basis. Realven Corporation also
leases the machinery and equipment located at the Harper facility to us
on a month-to-month basis. Harper Properties is a limited partnership in
which the living trusts of Mr. Winget and his wife, Alicia, and an
affiliated company are the general partners and Mr. Winget, members of
his family, A. James Schutz, an Executive Officer of Venture, and Michael
G. Torakis, an Executive Officer of Venture, are the limited partners.
Realven is a corporation wholly owned by Mr. Winget and his wife, Alicia.
The Harper lease provides for semi-annual lease payments. Harper
Properties and Realven have the right to require us to enter into
negotiations regarding an increase in the lease payments under the Harper
lease and the Realven lease, so that lease payments under these leases
will reflect all expenses to Harper Properties, Realven and their owners.
Venture has made several improvements to the Harper facility and the
machinery and equipment leased from Realven, and has accounted for them
as leasehold improvements. At the termination of the Harper and Realven
leases, Harper Properties and Realven, respectively, will retain the
value, if any, of the leasehold improvements. Venture paid Harper
Properties $1.7 million in each of the years ended December 31, 1997,
1998 and 1999, respectively, under the Harper lease. Venture paid Realven
$0.4 million in each of the years ended December 31, 1997, 1998 and 1999,
respectively, under the Realven lease.
Mr. Winget has since 1991 allowed Venture to use approximately 12 molding
machines pursuant to the terms of usage agreements. In January of 1994,
Mr. Winget leased 28 additional injection molding machines to Venture as
part of the expansions of the Harper and Groesbeck facilities. Mr. Winget
also leases certain injection molding equipment to us. In February of
1995, Mr. Winget contributed and assigned his interests in the leases to
the various injection molding machines and equipment to a new entity,
Venture Heavy Machinery Limited Liability Company. Venture paid Venture
Heavy Machinery Limited Liability Company $1.8 million in each of the
years ended December 31, 1997, 1998 and 1999, respectively, under the
usage agreements.
Venture Real Estate Acquisition Company and Venture Equipment Acquisition
Company, each wholly owned by Mr. Winget's living trust, acquired a
176,000 square foot injection molding facility and the machinery and
equipment located in the facility, including 35 molding machines, on
February 4, 1994. Venture entered into usage agreements for this
facility, the Masonic facility, machinery and equipment, the terms of
which were reviewed and approved by the Fairness
58
<PAGE> 61
Committee. During 1997, 1998 and 1999 Venture paid $1.3 million in each
year to Venture Real Estate Acquisition Company and Venture Equipment
Acquisition Company pursuant to these agreements.
BUSINESS RELATIONSHIPS
We maintain ongoing business relationships with affiliates, as set forth
below:
Nova Corporation is a corporation in which Windall Industries, a
corporation in which Mr. Winget owns a 49% equity interest and a former
Executive Manager of Venture owns the controlling 51% interest. Nova is a
successor to Windall Industries' business. Nova supplies us with certain
small parts or components of large assemblies that are sold to our
customers. Venture paid Nova $1.0 million, $1.5 million and $2.1 million
for the years ended December 31, 1997, 1998 and 1999, respectively. In
connection with this relationship, Venture has provided Nova with various
raw materials at cost and received commission income, for which Nova paid
Venture $0.3 million, $0.4 million and $0.3 million in the years ended
December 31, 1997, 1998 and 1999, respectively. Nova sells products to
other customers besides us, and has and will compete with us for certain
contracts. Nova paid Venture $0.2 million each year pursuant to machinery
and equipment operating leases for each of the years ended December 31,
1997, 1998 and 1999. Venture paid Windall Industries usage fees of $0.1
million in each of the years ended December 31, 1997, 1998 and 1999.
Venture Sales and Engineering and Venture Foreign Sales Corporation,
corporations wholly owned by Mr. Winget, serve as our outside sales
agencies for sales of manufactured products. Currently, we pay Venture
Sales and Venture Foreign Sales, in the aggregate, a sales commission of
3% on all production sales. Venture paid Venture Sales, $7.3 million,
$10.4 million and $10.9 million in the years ended December 31, 1997,
1998 and 1999, respectively. Venture made no payments to Venture Foreign
Sales in the years ended December 31, 1997, 1998 and 1999. Venture Sales
has conducted sales and marketing activities around the world for us and
has been advanced certain funds in order to carry on that work on our
behalf.
Venture Automotive Corp. has, since 1991, performed sequencing and
value-added assembly of parts manufactured at our Grand Blanc facility.
Beginning October 1, 1996 the manufacturing services previously provided
by Venture Automotive Corp. have been contracted to MAST Services LLC, a
company in which N. Matthew Winget, Mr. Winget's son, owned a minority
interest until the fourth quarter of 1998. Effective January 1, 1999, the
Grand Blanc facility took over all operations of this facility and pays
rent and operating expenses for this facility. Services for the periods
ending December 31, 1997, 1998 and 1999 were $2.7, $2.3 and $1.5 million,
respectively.
During 1999, we entered into an agreement to purchase vehicles from
Shelby American, Inc. ("Shelby"), an entity in which Mr. Winget has a
75% ownership interest. We put a deposit of $13 million on these vehicles
and will pay an additional $10 million when the vehicles are complete.
We intend to market the vehicles to other parties. In addition, we sold
certain parts to Shelby for use in the manufacturing of these vehicles
and performed engineering services. Sales to Shelby for the year ended
December 31, 1999 were $3.8 million.
We contract with Deluxe Pattern Corporation ("Deluxe"), an entity wholly
owned by Mr. Winget, to provide us with design, prototype, and fixture
work. During the years ended December 31, 1999, 1998, and 1997, we were
charged $11.0 million, $6.6 million, and $9.2 million, respectively,
under this arrangement. Deluxe also buys services from us principally
labor and materials. During the years ended December 31, 1999, 1998, and
1997, Deluxe made purchases, and we recognized revenue, in the amount of
$12.9 million, $17.3 million, and $4.6 million, respectively. In addition
to the above transactions, Deluxe also charged us approximately $1.1
million during each of the years ended December 31, 1999, 1998, and 1997
for equipment rental and other services. The net effect of these
transactions was a receivable balance from Deluxe of $32.3 million and
$20.0 million at December 31, 1999 and 1998, respectively.
During 1999, we contracted with M&M Flow Through Systems, LLC ("M&M"), an
entity owned by Mr. Winget's son, to manufacture certain machinery and
equipment used at our Grand Blanc facility. We purchased three different
machines from M&M at an approximate cost of $965,000. In addition, we
contract M&M to dispose of scrap parts that have previously been rejected
by the automotive original equipment manufacturers. Our sales of these
parts to M&M for the year ended December 31, 1999 were approximately
$200,000, which approximates a recovery of the material cost of producing
the parts.
MANAGEMENT SERVICES
Venture Service Company provides administrative services and insurance to
Deluxe, Windall Industries, Venture Sales and Venture Automotive Corp.
Deluxe, Windall Industries, Venture Sales and Venture Automotive Corp.
paid us $0.2 million for the year ended December 31, 1997. No amounts
were paid in 1998 and 1999.
Venture provided Venture Asia Pacific Pty. Ltd. and its subsidiaries with
management and sales services, for which they paid Venture $4.0 million,
$4.5 million and $4.5 million for 1997, 1998 and 1999, respectively. In
addition, Venture Asia Pacific also reimbursed Venture for certain other
expenditures made on its behalf and assigned certain tooling contracts to
Venture.
Pompo Insurance & Indemnity Company Ltd., a Barbados corporation
indirectly wholly owned by Mr. Winget, was incorporated in 1992 under the
Barbados Exempt Insurance Act. We purchase insurance from Pompo Insurance
to cover certain medical claims by our employees and certain workers
compensation claims. Venture has accounted for this arrangement using the
deposit method wherein the full amount of the estimated liability for
these claims is recorded in other liabilities and the premiums paid to
Pompo are recorded in other assets until such time that the claims are
settled.
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We remain primarily liable for any amounts in excess of insurance
coverage or any amounts not paid by Pompo Insurance under these
coverages. If a liability is settled for less than the amount of the
premium paid to Pompo, a portion of the excess is available as a premium
credit on future insurance. In 1999, Venture paid Pompo Insurance $0.8
million in premiums and utilized premium credits of $0.2 million. In
1998, Venture paid Pompo Insurance $0.6 million in premiums and utilized
premium credits of $0.7 million. No amounts were paid in 1997 and no
premium credits were utilized.
OTHER
From time to time, we pay certain expenses on behalf of Mr. Winget which
he is obligated to repay to us. These amounts payable by Mr. Winget do
not bear interest and are payable on demand. Mr. Winget was not indebted
to Venture for these expenses at December 31, 1997. Mr. Winget's
indebtedness to Venture for these expenses was $0.9 million and $0.5
million for the years ended December 31, 1998 and 1999, respectively. The
highest amount of this indebtedness outstanding at any one time during
these periods was $0.9 million. In addition, from time to time we make
certain employees available to Mr. Winget for purposes of performing
services for a golf club owned by companies controlled by Mr. Winget and
for performing construction services at his personal residence.
Mr. Winget and his wife, Alicia, own the Acropolis Resort, which consists
of several separate units and a lodge near Gaylord, Michigan, a resort
community north of Detroit. We lease this facility from Mr. Winget
primarily for use by our employees, who are permitted to use the facility
on an availability basis. Cumulative leasehold improvements to this
facility through December 31, 1999 aggregate $0.3 million. Our lease
obligation to Mr. Winget is based upon the actual use of the facility by
our employees, provided that we are required to pay for the use of 500
room nights per calendar year, approximately $25,000, whether or not
these rooms are rented. Venture paid Mr. Winget $50,000, $90,000 and
$90,000 in the years ended December 31, 1997, 1998 and 1999,
respectively, under this arrangement.
Farm and Country Real Estate Company, a corporation wholly owned by Mr.
Winget, leases to us approximately 84 acres of undeveloped land adjacent
to our Grand Blanc facility on a month-to-month basis. This lease
provides for monthly rental payments of $16,100. Rent paid in 1997, 1998
and 1999 was $0.2 million in each year.
Mr. Winget and Patent Holdings, Inc., a corporation wholly owned by Mr.
Winget, have granted to us non-exclusive, royalty free licenses to
certain patents which have been issued under applications filed by Mr.
Winget, as assignee. Mr. Winget and the affiliated companies also
generally permit us to utilize proprietary technologies or processes,
such as reverse engineering automated process for rapid prototyping,
which are developed by Deluxe and the affiliated companies. The licenses
are perpetual, but provide that the licensor may negotiate a reasonable
royalty in the event that Mr. Winget or an Excluded Person, as defined in
the indenture relating to the 1997 senior notes, no longer owns at least
80% of the beneficial interest of Venture Holdings Company LLC.
On July 1, 1996, Venture Industries Corporation and its affiliated
companies, not including Venture Holdings Company LLC or Venture Canada,
along with VIC Management, LLC, a limited liability company wholly owned,
directly or indirectly, by Mr. Winget, entered into an agreement
guaranteeing up to $3.5 million of the obligations of Atlantic Automotive
Components, LLC to RIC Management Corp. This guarantee is one of a series
of transactions whereby VIC Management acquired RIC Management's minority
interest in Atlantic Automotive. Deluxe agreed to fully indemnify the
Venture entities for all amounts paid under the guarantee.
In 1999, we agreed to a number of corporate and non-resident golf
memberships for certain of our employees in a golf club owned by
companies Mr. Winget controls. The aggregate initial fee for these
memberships is approximately $1.5 million, and the annual dues will be
approximately $0.3 million. The initial fees are refundable upon
termination, over various periods. We will no longer pay dues for these
employees in other clubs to which they may belong.
During 1999 we advanced approximately $5.5 million to Venture Africa, an
entity wholly owned by Mr. Winget, for the construction and
refurbishment of a paint line.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements
Financial Statements filed as part of this Form 10-K are listed
under Part II, Item 8.
2. Financial Statement Schedules
Valuation and qualifying accounts for the years ended December 31,
1999, 1998 and 1997.
3. Exhibits.
A list of the exhibits required to be filed as part of this Form
10-K is included under the heading "Exhibit Index" in this Form 10-K
and incorporated herein by reference.
(b) The Company did not file any reports on Form 8-K during the quarter
ended December 31, 1999.
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SIGNATURES
Pursuant to the requirements of section 13 or 15(d) 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,
Date: March 30, 2000 By: /s/ LARRY J. WINGET
---------------------------------
LARRY J. WINGET, Chairman
VEMCO, INC., VENTURE INDUSTRIES
CORPORATION, VENTURE MOLD &
ENGINEERING CORPORATION, VENTURE
LEASING COMPANY, VEMCO LEASING,
INC.,VENTURE SERVICE COMPANY,
VENTURE HOLDINGS CORPORATION,
EXPERIENCE MANAGEMENT LLC,
VENTURE EUROPE, INC., VENTURE
EU CORPORATION
Date: March 30, 2000 By: /s/ MICHAEL G. TORAKIS
---------------------------------
MICHAEL G. TORAKIS, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons in the capacities
indicated and on March 30, 2000.
<TABLE>
<CAPTION>
SIGNATURES TITLE
- ---------- -----
<S> <C>
/s/ Larry J. Winget Chairman and Principal Executive Officer and
- ------------------------------------------------------ Special Advisor to Venture, and Director of each
Larry J. Winget other registrant
/s/ Michael G. Torakis President and Principal Executive Officer and
- ------------------------------------------------------ Director of each other registrant
Michael G. Torakis
/s/ A. James Schutz Director of each registrant other than Venture
- ------------------------------------------------------
A. James Schutz
/s/ James E. Butler, Jr. Principal Financial Officer and Principal
- ------------------------------------------------------ Accounting Officer of each registrant and a
James E. Butler, Jr. Director of Venture Holdings Corporation
</TABLE>
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INDEX TO EXHIBITS
2.1 Share Purchase and Transfer Agreement between Klockner Mercator
Maschinenbau GmbH, on the one hand, and Venture Beteiligungs GmbH
and Venture Holdings Trust, on the other hand, dated March 8,
1999, filed as Exhibit 2.1 to the Issuer's Annual Report on Form
10-K for the year ended December 31, 1998 (File No. 333-34475) and
incorporated herein by reference. Schedules to the Agreement,
listed on the last two pages of the Agreement, were not filed, but
will be provided to the Commission supplementally upon request.
2.2 Share Purchase and Transfer Agreement among Neptuno
Verwaltungs-und-Treuhand-Gesellschaft mbH, and Venture Verwaltungs
GmbH and Venture Holdings Trust, dated March 8, 1999, filed as
Exhibit 2.2 to Venture's Current Report on Form 8-K on June 11,
1999 (File No. 333-34475) and incorporated herein by reference.
2.3 Trust Contribution Agreement, made as of the 27th day of May,
1999, by and between Venture Holdings Trust and Venture Holdings
Company LLC, filed as Exhibit 2.3 to Venture's Current Report on
Form 8-K on June 11, 1999 (File No. 333-34475) and incorporated
herein by reference.
3.1 Restated Articles of Organization of Venture Holdings Company LLC,
filed as Exhibit 3.1 to Venture's Registration Statement on Form
S-4, effective October 21, 1999 (Registration No.
333-82617) and incorporated herein by reference.
3.2 Restated Articles of Incorporation of Vemco, Inc., filed as
Exhibit 3.1 to Venture's Registration Statement on Form S-4,
effective October 27, 1997 (Registration No. 333-34475), and
incorporated herein by reference.
3.3 Restated Articles of Incorporation of Venture Industries
Corporation, filed as Exhibit 3.2 to Venture's Registration
Statement on Form S-4, effective October 27, 1997 (Registration
No. 333-34475), and incorporated herein by reference.
3.4 Restated Articles of Incorporation of Venture Mold & Engineering
Corporation, filed as Exhibit 3.3 to Venture's Registration
Statement on Form S-4, effective October 27, 1997 (Registration
No. 333-34475), and incorporated herein by reference.
3.5 Restated Articles of Incorporation of Venture Leasing Company,
filed as Exhibit 3.4 to Venture's Registration Statement on Form
S-4, effective October 27, 1997 (Registration No. 333-34475), and
incorporated herein by reference.
3.6 Restated Articles of Incorporation of Vemco, Leasing, Inc., filed
as Exhibit 3.5 to Venture's Registration Statement on Form S-4,
effective October 27, 1997 (Registration No. 333-34475), and
incorporated herein by reference.
3.7 Restated Articles of Incorporation of Venture Holdings
Corporation, filed as Exhibit 3.6 to Venture's Registration
Statement on Form S-4, effective October 27, 1997 (Registration
No. 333-34475), and incorporated herein by reference.
3.8 Restated Articles of Incorporation of Venture Service Company,
filed as Exhibit 3.7 to Venture's Registration Statement on Form
S-4, effective October 27, 1997 (Registration No. 333-34475), and
incorporated herein by reference.
3.9 Articles of Organization of Experience Management LLC, filed as
Exhibit 3.9 to Venture's Registration Statement on Form S-4,
effective October 21, 1999 (Registration No. 333-82617) and
incorporated herein by reference.
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3.10 Articles of Incorporation of Venture Europe, Inc., filed as
Exhibit 3.10 to Venture's Registration Statement on Form S-4,
effective October 21, 1999 (Registration No. 333- 82617) and
incorporated herein by reference.
3.11 Articles of Incorporation of Venture EU Corporation, filed as
Exhibit 3.1 to Venture's Registration Statement on Form S-4,
effective October 21, 1999 (Registration No. 333- 82617) and
incorporated herein by reference.
3.12 Amended and Restated Operating Agreement of Venture Holdings
Company LLC, filed as Exhibit 3.12 to Venture's Registration
Statement on Form S-4, effective October 21, 1999 (Registration
No. 333-82617) and incorporated herein by reference.
3.13 Bylaws of Vemco, Inc., filed as Exhibit 3.9 to Venture's
Registration Statement on Form S-1, effective February 8, 1994
(Registration No. 33-72826), and incorporated herein by reference.
3.14 Bylaws of Venture Industries Corporation, filed as Exhibit 3.10 to
Venture's Registration Statement on Form S-1, effective February
8, 1994 (Registration No. 33-72826), and incorporated herein by
reference.
3.15 Bylaws of Venture Mold & Engineering Corporation, filed as Exhibit
3.11 to Venture's Registration Statement on Form S-1, effective
February 8, 1994 (Registration No. 33-72826) and incorporated
herein by reference.
3.16 Bylaws of Venture Leasing Company, filed as Exhibit 3.12 to
Venture's Registration Statement on Form S-1, effective February
8, 1994 (Registration No. 33-72826), and incorporated herein by
reference.
3.17 Bylaws of Vemco Leasing, Inc., filed as Exhibit 3.13 to Venture's
Registration Statement on Form S-1, effective February 8, 1994
(Registration No. 33-72826), and incorporated herein by reference.
3.18 Bylaws of Venture Holdings Corporation, filed as Exhibit 3.14 to
Venture's Registration Statement on Form S-1, effective February
8, 1994 (Registration No. 33-72826), and incorporated herein by
reference.
3.19 Bylaws of Venture Service Company, filed as Exhibit 3.15 to
Venture's Registration Statement on Form S-1, effective February
8, 1994 (Registration No. 33-72826), and incorporated herein by
reference.
3.20 Operating Agreement of Experience Management LLC, filed as Exhibit
3.20 to Venture's Registration Statement on Form S-4, effective
October 21, 1999 (Registration No. 333-82617) and incorporated
herein by reference.
3.21 Bylaws of Venture Europe, Inc., filed as Exhibit 3.21 to
Venture's Registration Statement on Form S-4, effective October
21, 1999 (Registration No. 333-82617) and incorporated herein by
reference.
3.22 Bylaws of Venture EU Corporation, filed as Exhibit 3.22 to
Venture's Registration Statement on Form S-4, effective October
21, 1999 (Registration No. 333-82617) and incorporated herein by
reference.
4.1 Indenture, dated as of May 27, 1999, between Venture Holdings
Trust and The Huntington National Bank, as Trustee, regarding 11%
Senior Notes due 2007 (including form of Notes), filed as Exhibit
4.1 to Venture's Registration Statement on Form S-4, effective
October 21, 1999 (Registration No. 333-82617) and incorporated
herein by reference.
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4.1.1 First Supplemental Indenture to the Indenture incorporated herein
as Exhibit 4.1, made as of the 27th day of May, 1999, by and among
Venture Holdings Trust and The Huntington National Bank, as
Trustee, filed as Exhibit 4.1.1 to Venture's Registration
Statement on Form S-4, effective October 21, 1999 (Registration
No. 333-82617) and incorporated herein by reference.
4.2 Indenture, dated as of May 27, 1999, between Venture Holdings
Trust and The Huntington National Bank, as Trustee, regarding 12%
Senior Subordinated Notes due 2009 (including form of Notes), and
filed as Exhibit 4.2 to Venture's Registration Statement on Form
S-4, effective October 21, 1999 (Registration No. 333-82617) and
incorporated herein by reference.
4.2.1 First Supplemental Indenture to the Indenture filed as Exhibit
4.2, made as of the 27th day of May, 1999, by and among Venture
Holdings Trust and The Huntington National Bank, as Trustee, and
filed as Exhibit 4.2.1 to Venture's Registration Statement on Form
S-4, effective October 21, 1999 (Registration No. 333-82617) and
incorporated herein by reference.
4.3 Indenture for 9 1/2% Senior Notes due 2005 (including form of
Notes) filed as Exhibit 4.1 to Venture's Registration Statement on
Form S-4, effective October 27, 1997 (Registration No.
333-34475), and incorporated herein by reference.
4.3.1 First Amendment to the Indenture incorporated by reference as
Exhibit 4.3, by and among Venture Holdings Trust, Vemco, Inc.
Vemco Leasing, Inc., Venture Industries Corporation, Venture
Holdings Corporation, Venture Leasing Company, Venture Mold &
Engineering Corporation and Venture Service Company, as Issuers,
and The Huntington National Bank, as Trustee, made as of the 27th
day of May, 1999, and filed as Exhibit 4.3.1 to Venture's
Registration Statement on Form S-4, effective October 21, 1999
(Registration No. 333-82617) and incorporated herein by reference.
4.3.2 First Supplemental Indenture to the Indenture incorporated by
reference as Exhibit 4.3, by and among Venture Holdings Trust,
Vemco, Inc. Vemco Leasing, Inc., Venture Industries Corporation,
Venture Holdings Corporation, Venture Leasing Company, Venture
Mold & Engineering Corporation and Venture Service Company, as
Issuers, Venture Holdings Company LLC, Experience Management LLC,
Venture Europe, Inc. and Venture EU Corporation, as Guarantors,
and The Huntington National Bank, as Trustee, made as of May 27,
1999, and filed as Exhibit 4.3.2 to Venture's Registration
Statement on Form S-4, effective October 21, 1999 (Registration
No. 333-82617) and incorporated herein by reference.
4.3.3 Second Amendment to the Indenture incorporated by reference as
Exhibit 4.3, by and among Venture Holdings Trust, Vemco, Inc.
Vemco Leasing, Inc., Venture Industries Corporation, Venture
Holdings Corporation, Venture Leasing Company, Venture Mold &
Engineering Corporation and Venture Service Company, as Issuers,
and The Huntington National Bank, as Trustee, made as of May 27,
1999, and filed as Exhibit 4.3.3 to Venture's Registration
Statement on Form S-4, effective October 21, 1999 (Registration
No. 333-82617) and incorporated herein by reference.
4.3.4 Second Supplemental Indenture to the Indenture incorporated by
reference as Exhibit 4.3, by and among Venture Holdings Trust,
Vemco, Inc. Vemco Leasing, Inc., Venture Industries Corporation,
Venture Holdings Corporation, Venture Leasing Company, Venture
Mold & Engineering Corporation and Venture Service Company, as
Issuers, Venture Holdings Company LLC, and The Huntington National
Bank, as Trustee, made as of May 27, 1999, and filed as Exhibit
4.3.4 to Venture's Registration Statement on Form S-4, effective
October 21, 1999 (Registration No. 333-82617) and incorporated
herein by reference.
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4.3.5 Guarantee executed by Venture Holdings Company LLC on the 27th day
of May, 1999, pursuant to the terms of the Indenture incorporated
by reference as Exhibit 4.3, including Trustee's Certificate of
Authorization, and filed as Exhibit 4.3.5 to Venture's
Registration Statement on Form S-4, effective October 21, 1999
(Registration No. 333-82617) and incorporated herein by reference.
4.3.6 Guarantee executed by Experience Management LLC on the 27th day of
May, 1999, pursuant to the terms of the Indenture incorporated by
reference as Exhibit 4.3, including Trustee's Certificate of
Authorization, and filed as Exhibit 4.3.6 to Venture's
Registration Statement on Form S-4, effective October 21, 1999
(Registration No. 333-82617) and incorporated herein by reference.
4.3.7 Guarantee executed by Venture Europe, Inc. on the 27th day of May,
1999, pursuant to the terms of the Indenture incorporated by
reference as Exhibit 4.3, including Trustee's Certificate of
Authorization.
4.3.8 Guarantee executed by Venture EU Corporation on the 27th day of
May, 1999, pursuant to the terms of the Indenture incorporated by
reference as Exhibit 4.3, including Trustee's Certificate of
Authorization, and filed as Exhibit 4.3.8 to Venture's
Registration Statement on Form S-4, effective October 21, 1999
(Registration No. 333-82617) and incorporated herein by reference.
4.4 Registrant Rights Agreement, made and entered into as of May 27,
1999, among Venture Holdings Trust, Vemco, Inc., Vemco Leasing,
Inc., Venture Industries Corporation, Venture Holdings
Corporation, Venture Leasing Company, Venture Mold & Engineering
Corporation, Venture Service Company, Venture Europe, Inc.,
Venture EU Corporation, Experience Management LLC and Venture
Holdings Company LLC, as Issuers, and Banc One Capital Markets,
Inc. and Goldman Sachs & Co., as Initial Purchasers, and filed as
Exhibit 4.4 to Venture's Registration Statement on Form S-4,
effective October 21, 1999 (Registration No. 333-82617) and
incorporated herein by reference.
10.1 Credit Agreement, dated as of May 27, 1999, among Venture Holdings
Trust, the Lenders (as defined therein) and The First National
Bank of Chicago, as Administrative Agent, and filed as Exhibit
10.1 to Venture's Registration Statement on Form S-4, effective
October 21, 1999 (Registration No.
333-82617) and incorporated herein by reference.
10.1.1 First Amendment, dated June 4, 1999, to the Credit Agreement
incorporated by reference as Exhibit 10.1, and filed as Exhibit
10.1.1 to Venture's Registration Statement on Form S-4, effective
October 21, 1999 (Registration No. 333-82617) and incorporated
herein by reference.
10.2 ISDA Master Agreement, dated May 27, 1999, between Venture
Holdings Company LLC and The First National Bank of Chicago, and
filed as Exhibit 10.2 to Venture's Registration Statement on Form
S-4, effective October 21, 1999 (Registration No. 333-82617) and
incorporated herein by reference.
10.2.1 Schedules to the Agreement incorporated by reference as Exhibit
10.2, filed as Exhibit 10.2.1 to Venture's Registration Statement
on Form S-4, effective October 21, 1999 (Registration No.
333-82617) and incorporated herein by reference.
10.3 Corporate Opportunity Agreement, made and entered into on the 27th
day of May, 1999, by and between Larry J. Winget and The
Huntington National Bank, as Indenture Trustee, filed as Exhibit
10.3 to Venture's Registration Statement on Form S-4, effective
October 21, 1999 (Registration No. 333-82617) and incorporated
herein by reference.
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10.4 Corporate Opportunity Agreement, dated February 16, 1994, by and
between Larry J. Winget and Comerica Bank, as Indenture Trustee,
filed as Exhibit 10.3 to Venture's Registration Statement on Form
S-4, effective October 27, 1997 (Registration No. 333-34475), and
incorporated herein by reference.
10.4.1 Agreement, dated October 21, 1997, by Larry J. Winget to be bound
by the terms of the Corporate Opportunity Agreement, filed as
Exhibit 10.3, for the benefit of the holders of the Issuers' 91/2%
Senior Notes due 2005 filed as Exhibit 10.3.1 to Venture's
Registration Statement on Form S-4, effective October 27, 1997
(Registration No. 333-34475), and incorporated herein by
reference.
10.5 Service Agreement, dated as of January 1, 1992, by and between
Venture Industries Corporation, Vemco, Inc., Venture Mold &
Engineering Corporation, Venture Leasing Company, Vemco Leasing,
Inc., Deluxe Pattern Corporation, Venture Automotive Corp.,
Venture Sales & Engineering Corp. and Venture Service Company,
filed as Exhibit 10.11 to Venture's Registration Statement on Form
S-1, effective February 8, 1994 (Registration No. 33-72826), and
incorporated herein by reference.
10.6 Lease, dated as of November 1, 1990, by and among Venture
Industries Corporation, Venture Technical Development Company,
Venture Mold & Engineering Corporation, Vemco, Inc., Deluxe
Pattern Company, Venture Automotive Corp., Larry J. Winget and
Alicia Winget (Acropolis Resort), filed as Exhibit 10.14 to
Venture's Registration Statement on Form S-1, effective February
8, 1994 (Registration No. 33-72826), and incorporated herein by
reference.
10.7 Real Estate Lease Agreement, dated December 7, 1988, by and
between Harper Properties of Clinton Township Limited Partnership
and Venture Industries Corporation (Harper Lease), filed as
Exhibit 10.15 to Venture's Registration Statement on Form S-1,
effective February 8, 1994 (Registration No. 33-72826), and
incorporated herein by reference.
10.7 First amendment to Real Estate Lease Agreement, dated December 30,
1993, by and between Harper Properties of Clinton Township Limited
Partnership and Venture Industries Corporation (Harper Lease),
filed as Exhibit 10.15.1 to Venture's Registration Statement on
Form S-1, effective February 8, 1994 (Registration No. 33-72826),
and incorporated herein by reference.
10.8 Machinery and Equipment Lease Agreement, dated as of December 7,
1988, by and between Realven Corporation and Venture Industries
Corporation (Realven Lease), filed as Exhibit 10.16 to Venture's
Registration Statement on Form S-1, effective February 8, 1994
(Registration No. 33-72826), and incorporated herein by reference.
10.8.1 First Amendment to Machinery and Equipment Lease Agreement, dated
December 30, 1993, by and between Realven Corporation and Venture
Industries Corporation (Realven Lease), filed as Exhibit 10.16.1
to Venture's Registration Statement on Form S-1, effective
February 8, 1994 (Registration No. 33-72826), and incorporated
herein by reference.
10.9 Real Estate Lease Agreement, dated as of January 27, 1989, by and
between Venture Real Estate, Inc. and Venture Mold & Engineering
Corporation (Commerce Road facility), filed as Exhibit 10.17 to
Venture's Registration Statement on Form S-1, effective February
8, 1994 (Registration No. 33-72826), and incorporated herein by
reference.
10.10 Real Estate Lease Agreement, dated as of August 1, 1992, by and
between Venture Real Estate, Inc. and Venture Industries
Corporation (17400 Malyn), filed as Exhibit 10.18 to Venture's
Registration Statement on Form S-1, effective February 8, 1994
(Registration No. 33-72826), and incorporated herein by reference.
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10.11 Real Estate Lease Agreement, dated as of August 1, 1992, by and
between Venture Real Estate, Inc. and Venture Industries
Corporation (17350 Malyn), filed as Exhibit 10.19 to Venture's
Registration Statement on Form S-1, effective February 8, 1994
(Registration No. 33-72826), and incorporated herein by reference.
10.12 Farm and Country Real Estate Company and Vemco, Inc. Real Estate
Availability and Usage Agreement, dated April 24, 1992, filed as
Exhibit 10.20 to Venture's Registration Statement on Form S-1,
effective February 8, 1994 (Registration No. 33-72826), and
incorporated herein by reference.
10.13 Sales Representation Agreement by and between Vemco, Inc. and
Venture Sales & Engineering Corporation, filed as Exhibit 10.21 to
Venture's Registration Statement on Form S-1, effective February
8, 1994 (Registration No. 33-72826), and incorporated herein by
reference.
10.13.1 Sales Representation Agreement by and between Venture Industries
Corporation and Venture Sales & Engineering Corporation, filed as
Exhibit 10.21.1 to Venture's Registration Statement on Form S-1,
effective February 8, 1994 (Registration No. 33-72826), and
incorporated herein by reference.
10.14 Manufacturing Agreement by and between Venture Automotive Corp.
and Vemco, Inc., filed as Exhibit 10.22 to Venture's Registration
Statement on Form S-1, effective February 8, 1994 (Registration
No. 33-72826), and incorporated herein by reference.
10.15 Machinery Usage Agreements between Larry J. Winget Living Trust
and Venture Industries Corporation, filed as Exhibit 10.23 to
Venture's Registration Statement on Form S-1, effective February
8, 1994 (Registration No. 33-72826), and incorporated herein by
reference.
10.15.1 Machinery Usage Agreement between Larry J. Winget Living Trust and
Vemco, Inc., filed as Exhibit 10.23.1 to Venture's Registration
Statement on Form S-1, effective February 8, 1994 (Registration
No. 33-72826), and incorporated herein by reference.
10.16 Machinery Usage Agreement between Deluxe Pattern Corporation and
Venture Mold & Engineering, filed as Exhibit 10.24 to Venture's
Registration Statement on Form S-1, effective February 8, 1994
(Registration No. 33-72826), and incorporated herein by reference.
10.17 Form of Machinery and Equipment Lease Agreement between Venture
Industries Corporation and Nova Industries, Inc., filed as Exhibit
10.25 to Venture's Registration Statement on Form S-1, effective
February 8, 1994 (Registration No. 33-72826), and incorporated
herein by reference.
10.18 Form of Machinery and Equipment Lease Agreement between Venture
Industries Corporation and Nova Industries, Inc., filed as Exhibit
10.26 to Venture's Registration Statement on Form S-1, effective
February 8, 1994 (Registration No. 33-72826), and incorporated
herein by reference.
10.19 Indemnification Agreement between the Company and Larry J. Winget
filed as Exhibit 10.19 to Venture's Registration Statement on
Form S-4, effective October 21, 1999 (Registration No. 333-82617)
and incorporated herein by reference.
10.20 Indemnification Agreement between the Company and Michael G.
Torakis filed as Exhibit 10.20 to Venture's Registration Statement
on Form S-4, effective October 21, 1999 (Registration No.
333-82617) and incorporated herein by reference.
10.21 Indemnification Agreement between the Company and A. James Schutz
filed as Exhibit 10.21 to Venture's Registration Statement on Form
S-4, effective October 21, 1999 (Registration No. 333-82617) and
incorporated herein by reference.
10.22 Insurance Policies issued by Pompo Insurance & Indemnity Company
Ltd. to the Registrants and affiliated companies, filed as Exhibit
10.32 to Venture's Registration Statement on Form S-1, effective
February 8, 1994 (Registration No. 33-72826), and incorporated
herein by reference.
68
<PAGE> 71
10.23 Real Estate Usage Agreement between Venture Real Estate
Acquisition Company and Venture Industries Corporation, dated
February 15, 1995, filed as Exhibit 10.23 to Venture's
Registration Statement on Form S-4, effective October 27, 1997
(Registration No. 333-34475), and incorporated herein by
reference.
10.24 Machinery Usage Agreement between Venture Equipment Acquisition
Company and Venture Industries Corporation, dated February 15,
1995, filed as Exhibit 10.24 to Venture's Registration Statement
on Form S-4, effective October 27, 1997 (Registration No.
333-34475), and incorporated herein by reference.
10.25 Venture Industries Group Participation Agreement between Venture
Industries Corporation and Venture Asia Pacific Pty Ltd. filed as
Exhibit 10.29 to Venture's Registration Statement on Form S-4,
effective October 27, 1997 (Registration No. 333-34475), and
incorporated herein by reference.
10.26 License Agreement as to Proprietary Technologies and Processes,
dated July 2, 1997, between Larry J. Winget and Venture Industries
Corporation, Vemco, Inc., Venture Mold & Engineering Corporation,
Venture Industries Canada Ltd., Vemco Leasing, Inc., Venture
Leasing Company, Venture Service Company, Venture Holdings
Corporation and Venture Holdings Trust filed as Exhibit 10.30 to
Venture's Registration Statement on Form S-4, effective October
27, 1997 (Registration No. 333-34475), and incorporated herein by
reference.
10.27 License Agreement as to Patents, dated July 2, 1997, between Larry
J. Winget and Venture Industries Corporation, Vemco, Inc., Venture
Mold & Engineering Corporation, Venture Industries Canada Ltd.,
Vemco Leasing, Inc., Venture Leasing Company, Venture Service
Company, Venture Holdings Corporation and Venture Holdings Trust
filed as Exhibit 10.31 to Venture's Registration Statement on Form
S-4, effective October 27, 1997 (Registration No. 333-34475), and
incorporated herein by reference.
10.28 Purchase Agreement, dated May 25, 1999, relating to $125,000,000
11% Senior Notes due 2007 and $125,000,000 12% Senior Subordinated
Notes due 2009, filed as Exhibit 10.4 to Venture's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1999 (File No.
333-34475), and incorporated herein by reference.
10.29 Purchase Agreement, entered into to be effective as of the 15th
day of October, 1999, by and among Venture Mold & Engineering
Corporation and Shelby American, Inc.
12.1 Statement Regarding Computation of Ratio of Earnings to Fixed
Charges.
21.1 Subsidiaries of the Registrants, filed as Exhibit 21.1 to
Venture's Registration Statement on Form S-4, effective October
21, 1999 (Registration No. 333-82617) and incorporated herein by
reference.
27.1 Financial Data Schedule.
69
<PAGE> 1
EXHIBIT 10.29
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT, entered into to be effective as of the 15th day of
October, 1999, by and among VENTURE MOLD & ENGINEERING CORPORATION
("Purchaser"), and SHELBY AMERICAN, INC.("Seller").
RECITALS
A. Seller is in the business of assembling specialty automobiles and has
a principal plant in Las Vegas, Nevada.
B. Purchase is in the global business of designing, engineering and
manufacturing automobile parts, assemblies and specialty vehicles.
C. Purchaser desires to purchase, and Seller desires to sell automobiles
assembled by the Seller, subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties agree as follows:
1. Purchase of Vehicles. Seller hereby agrees to sell to Purchaser the
"Vehicles", which shall be TWO HUNDRED THIRTEEN (213) Shelby Series One
automobiles to be further identified by serial number on Schedule 1 attached
hereto.
2. Purchase Price.
(A) In consideration of Seller's sale of the Vehicles to Purchaser, Seller
shall receive consideration equal to the price tentatively determined to
be SEVENTY FOUR THOUSAND DOLLARS ($74,000.00) per Vehicle from Purchaser
(the "Purchase Price"). It is agreed that this price fairly reflects the
following factors:
(i) as of the Effective Date, the protected cost of production of the
Vehicles ($79,000) -- provided, however, that this price shall be
increased to reflect price increases imposed on other customers
pursuant to their agreements to adjust the Vehicle purchase price to
reflect changes related to final certification and commencement of
production;
(ii) a reduction equal to twenty thousand dollars ($20,000) from the
advertised customer price to account for the fact that Seller will
not have to pay any sales commissions; and
(iii) a reduction of five thousand dollars ($5,000) to account for the
fact that (x) Seller will have reduced marketing costs; (y) there is
an elimination of the sales risk to Seller on the Vehicles and (z)
the cost of capital to Purchaser for the progress payments made by
it.
The parties agree that the Purchase Price shall be adjusted by the
agreement of the parties, or if the parties cannot agree, in an amount equal to
the amount of any changes in price
1
<PAGE> 2
impose on other customers. In no case shall the Purchase Price exceed the
averaged price (less commission) charged to buyers of cars number 100 through
287 of the Shelby Series One.
3. Payment.
(A) (i) A total of fifty percent (50%) of the Purchase Price for each
Vehicle shall be paid no later than five (5) days after notice of commencement
of production (including acquisition of components) of such Vehicle.
(ii) The remainder of the Purchase Price for each Vehicle shall be made
by Purchaser as requested by Seller based on the stage of completion (including
acquisition of components) of each of the Vehicles; provided, that Purchaser
shall have the option to make earlier payments. In any case, the entire Purchase
Price for each Vehicle shall be payable no later than upon completion of the
Vehicle.
(B) Payment credits shall reflect (i) progress payments towards the
Vehicles and (ii), at Venture's option, amounts owed by Shelby to Venture under
purchase orders for goods and services. From time to time, the parties may
acknowledge such credits by reflecting the same on the attached Schedule 2,
"PAYMENT CREDITS FOR PURCHASE OF VEHICLES".
3. Representation and Warranties of Seller. Seller hereby represents and
warrants to Purchaser that (i) the Vehicles will contain the same warranties
as to other customers and shall be transferable; and (ii) Seller will convey
to Purchaser good and marketable title to each of the Vehicles, free of all
liens and other encumbrances and claims, and (iii) Seller shall have the
right to transfer and assign to Purchaser all of the Vehicles to be sold and
transferred pursuant to this Agreement free of all liens and encumbrances.
4. Security Interest. Seller shall grant to Purchaser a security interest in
all of its assets (and Seller agrees to execute appropriate instruments
perfecting the same) to secure the progress payments which have been made by
Purchaser for each of the Vehicles, until delivery of the completed Vehicles
to Purchaser.
5. Transfer of Ownership. Title to each of the Vehicles shall vest in
Purchaser on the commencement of production of each such Vehicle.
6. Purchaser's Option to Cancel. Purchaser shall have the option to terminate
this Agreement and receive a return of its consideration in the case of:
(i) Filing of bankruptcy or other similar action regarding Seller;
(ii) As to any Vehicle that becomes subject to a lien of any of
Seller's creditors;
(iii) As to any Vehicle which is substantially damaged or destroyed,
unless repair or replacement is made within 30 days.
6. Entire Agreement. This Agreement (including the schedules attached hereto)
represents the entire understanding and agreement among the parties with
respect to the subject matter hereof, and supercedes any prior
understandings and agreements among such parties with
2
<PAGE> 3
respect to such subject matter. This Agreement can be amended,
supplemented, or changed only by an instrument in writing which makes
specific references to this Agreement and which is signed by each of the
parties to this Agreement.
7. Applicable Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Michigan without
regard to its conflict of law rules.
8. Amendments: No Waivers.
(a) Any provision of this Agreement may be amended or waived if, and
only if, such amendment or waiver is in writing and signed, in the case of an
amendment, by Purchaser and Seller, or in the case of a waiver, by the party
against whom the waiver is to be effective.
(b) No failure or delay by either party exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any single
or partial exercise thereof preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. The rights and remedies
herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
IN WITNESS WHEREOF, the parties hereto have caused this Purchase Agreement to
be duly executed and delivered as of the day and year first above written.
SHELBY AMERICAN, INC.
("SELLER")
By: /s/ Wayne Stocker
--------------------------------------
Its: Director Administration and Finance
-------------------------------------
VENTURE MOLD & ENGINEERING CORPORATION
("PURCHASER")
By: /s/ James E. Butler
--------------------------------------
Its: Executive Vice President
-------------------------------------
3
<PAGE> 1
EXHIBIT 12.1
VENTURE HOLDINGS COMPANY LLC
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Earnings from continuing operations ( 8,941) 13,568 11,523 1,999 4,142
Add back:
Taxes on Income 8,227 2,489 3,830 1,002 577
Fixed Charges 80,072 40,651 34,204 21,899 16,704
Amortization of previously
capitalized interest -- 224 295 285 285
Deduct:
Capitalized Interest -- -- -- 108 --
----------------------------------------------------------------
Earnings available for fixed charges 79,358 56,932 49,852 25,077 21,708
================================================================
Fixed charges of Venture Holdings
Company LLC:
Interest expense 72,606 36,641 30,182 19,248 15,032
Capitalized interest -- -- -- 108 --
Amortization of debt expense
and debt discount 4,572 2,160 1,934 885 556
Interest portion of rent expense 2,894 1,850 2,088 1,658 1,116
------------ ------------ ------------ ------------ ------------
80,072 40,651 34,204 21,899 16,704
============ ============ ============ ============ ============
Ratio of earning to fixed charges 0.99 1.40 1.46 1.15 1.30
</TABLE>
<PAGE> 2
VENTURE HOLDINGS COMPANY LLC
VALUATION AND QUALIFYING ACCOUNTS
(THOUSANDS OF DOLLARS)
For the years ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
Column A Column B Column C Additions Column D Column E
-------- -------- -------- --------- -------- --------
Balance at Charged to Charged to
Allowance for Doubtful Accounts Beginning Costs and other accounts Deductions Balance at
For the year ended December 31, of year expenses described described end of year
------------------------------- ---------- ---------- -------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
1999 $ 4,518 $ 4,869 $ 5,964 $ (5,403) $ 9,948
1998 3,572 3,226 -- (2,280) 4,518
1997 2,781 1,635 -- (844) 3,572
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF VENTURE HOLDINGS COMPANY LLC FOR THE YEAR
ENDED DECEMBER 31, 1999.
</LEGEND>
<CIK> 0001088341
<NAME> VENTURE HOLDINGS COMPANY LLC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 7,392
<SECURITIES> 0
<RECEIVABLES> 321,292
<ALLOWANCES> (9,948)
<INVENTORY> 154,620
<CURRENT-ASSETS> 567,718
<PP&E> 720,115
<DEPRECIATION> (157,277)
<TOTAL-ASSETS> 1,414,976
<CURRENT-LIABILITIES> 385,020
<BONDS> 920,376
0
0
<COMMON> 0
<OTHER-SE> 60,903
<TOTAL-LIABILITY-AND-EQUITY> 1,414,976
<SALES> 1,366,170
<TOTAL-REVENUES> 1,366,170
<CGS> 1,215,472
<TOTAL-COSTS> 1,324,946
<OTHER-EXPENSES> (31,222)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 72,606
<INCOME-PRETAX> (160)
<INCOME-TAX> 8,227
<INCOME-CONTINUING> (8,941)
<DISCONTINUED> 0
<EXTRAORDINARY> 5,569
<CHANGES> 0
<NET-INCOME> (14,510)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
