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, systems integrator 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, systems integrators 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 plastic molding, automated painting and assembly, and material and product testing and development. 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.
PRINCIPAL PRODUCTS
We design and produce injection, compression, injection compression, reaction injection ("RIM") and slush molded plastic parts primarily for OEMs and other Tier I suppliers. We also emphasize complex products and systems, such as instrument and door panel assemblies, which require the integration of multiple components into sub-assemblies and complete systems integration.
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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(a) Represents models for which we will produce and supply products in 2001 and, in most cases, future years beyond 2001.
(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 in the general retail automobile industry, or 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, giving us geographic diversity. 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, Supercart, Naschem, New Holland and Esswein. See Note 13 of Notes to Consolidated Financial Statements for a description of our North American and European segments.
The approximate percentage of net sales to our principal customers for the years ended December 31, 1998 through 2000 are shown below:
Our sales are made directly to the OEMs with marketing, management 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.
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, Meridian Automotive (formerly Cambridge Industries), the Textron Automotive division of Textron Corporation, Lear Corporation, The Budd Company plastic division, Johnson Controls, Inc., and Visteon Automotive, 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 Faurecia, in a group which includes Plastic Omnium, 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, Faurecia and Rehau.
EMPLOYEES
At December 31, 2000, we employed approximately 12,900 persons worldwide. In North America, we have 1,096 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. Our contract with Seabrook employees expires in June 2002, the Lancaster contract expires in June 2001 and Grand Blanc expires in May 2003. At our Conneaut, Ohio facility, 246 employees are represented by a collective bargaining agreement with the Teamsters Union which expires in August of 2003. Formal negotiations for the Lancaster contract expiring in June 2001 have not begun. We have not experienced any work stoppages in North America and consider our relations with our North American employees to be good. From time to time the Company is notified that labor unions are attempting to organize some of our remaining hourly work force but nothing official has happened.
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 international workforce is covered by collective bargaining agreements with the following workers unions:
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 (MDEQ) 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 entered into a consent decree with MDEQ in January of 2001. The $1.1 million payment was made in February of 2001. As required under the decree, we plan to make certain capital expenditures of approximately $8.5 million to the current Grand Blanc systems. We are obligated to complete and expect to complete the installation of the new abatement equipment by July of 2001. See "Item 3. Legal Proceedings."
In 1998 and 1999, the MDEQ 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. In late 2000, we filed suit against the MDEQ contesting some of these violations. In 2001, jointly with MDEQ, we have suspended any proceedings under this suit and are presently reviewing and discussing the alleged violations in an attempt to resolve this matter without further litigation, as it is possible that some of the violations may be the result of computation and reporting discrepancies. It is possible that the MDEQ 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 be the case.
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 be the case.
In December of 1999, MDEQ contacted the Grand Blanc facility relating to the classification of wastes leaving the facility. We have been discussing the issue with the MDEQ 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 MDEQ. In addition, we have changed materials and certain processes to remove the concern of the MDEQ. By changing the classification of the waste for disposal subsequent to the contact, we have 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 MDEQ regarding this matter. In light of the notice to Grand Blanc, we voluntarily undertook the same actions and clean up procedures at our Grand Rapids facility to minimize risk as the same procedures and methods were used at the Grand Rapids and Grand Blanc facilities. 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, 2000, we had a reserve of approximately $1.5 million, and at December 31, 1999, we had a reserve of $1.8 million to address the issues discussed above and for compliance monitoring activities. We periodically evaluate and revise estimates for 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, 2000, 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.
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 twenty plants in Europe, Mexico and Brazil. In addition, we have ten module centers located in four 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 2003 model year. As a result of business previously awarded by Ford Motor Company, we were required to acquire new facilities and equipment for the Ford Ranger program. We have been advised, by Ford Motor, that this program
has been cancelled, eliminating the need for the facilities and equipment. We are seeking cancellation costs from Ford in conjunction with this program.
The following table sets forth certain information concerning our principal facilities:
------------------------- (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 Nova Corporation, a business in which Mr. Winget has a significant equity interest. See "Item 13. Certain Relationships and Related Transactions."
ITEM 3.
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 execution of a consent decree all of which is subject to several conditions precedent. In January of 2001, upon the signing of a consent decree this action was jointly dismissed. See "Item 1. Business - Environmental" for the current status of events. As required under the decree, we plan to make certain capital expenditures of approximately $8.5 million to the current Grand Blanc systems. 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. We have not been advised what the U.S. Environmental Protection Agency will do in light of the consent decree with the State of Michigan. Upon our compliance with the consent decree, we expect no action from the U.S. Environmental Protection Agency, however we can offer no assurance that will happen.
In December of 2000, we filed suit against the State of Michigan and Michigan Department of Environmental Quality over notices of air pollution violations at our Grand Rapids facility. In February of 2001, those proceeding were jointly suspended while the parties work to find an acceptable solution to the issues. This may require the installation of new abatement equipment at the facility, however in light of production changes at the plant no new capital expenditures may be required. It is still too early in the process to assess what actions may be taken or required.
In late 2000, we were notified by Union Carbide Corporation that, based upon our usage of some paint application equipment at our Grand Blanc facility, we were obligated to pay certain royalties related to patent infringements. We are currently reviewing this matter with our attorney. At the present time, we have been unable to reach a conclusion as to possible infringements because of modifications we made, and the amount of any royalty that would be owed. We do use the Union Carbide equipment at our Seabrook facility, without the modifications and are paying the royalty at that location.
In addition to the 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Venture Holdings Company LLC is a limited liability company and 100% of our 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 our subsidiaries, except for certain of our joint ventures. There is no market for such capital stock or equity interests.
We did not pay any cash dividends during the past three 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.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated balance sheet data presented below as of December 31, 2000 and 1999 and the income statement data presented below for the years ended December 31, 2000, 1999 and 1998, 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 notes thereto included elsewhere herein. The selected consolidated balance sheet data presented below as of December 31, 1998, 1997 and 1996 and the income statement data presented below for the years ended December 31, 1997 and 1996, are derived from our audited consolidated financial statements not included herein.
-------------- (1) Venture Holdings Company LLC operates as a holding company and has no independent operations of our own. Separate financial statements for our 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 our subsidiaries from May 28, 1999.
(3) Other (income) 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 (benefit) provision relates to Venture Holdings Corporation (which operates Bailey Corporation) and the Peguform 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 rental expense that management believes is representative of the interest component of rental expense. For the year ended December 31, 2000 and 1999, our earnings were insufficient to cover fixed charges by $2.2 million and $0.7 million, respectively. This calculation is not our fixed charge coverage calculation required under the credit agreement.
(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.
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; our ability 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, we 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.
YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999
Net sales increased $463.8 million for the year ended December 31, 2000, or 33.9%, to $1,829.9 million, compared to net sales of $1,366.2 million for the year ended December 31, 1999. This increase was mainly due to the addition of Peguform's net sales for twelve months in 2000 compared to seven months in 1999. On a proforma basis, sales decreased $96.6 million from 1999. $74.3 million of the decrease was due to Euro devaluation offset by net increases in European volumes. Domestically, sales decreased $22.4 million, or 3.7%, due to a general softening of the automotive market.
Gross profit for the year ended December 31, 2000 increased $76.9 million, or 51.0%, to $227.6 million compared to $150.7 million for the year ended December 31, 1999. As a percentage of net sales, gross profit increased from 11.0% for the year ended December 31, 1999 to 12.4% for the year ended December 31, 2000. This dollar increase was mainly due to the addition of Peguform's activity for twelve months in 2000 compared to seven months in 1999. Domestically, gross profit as a percent of sales increased 1.0% due to the implementation of lean manufacturing techniques despite sales reductions. Internationally, gross profit as a percent of sales increased 1.0% due to manufacturing efficiencies. We expect to continue to achieve manufacturing efficiencies in 2001. Effective January 1, 2001, we granted DaimlerChrysler Corporation in North America a 5% sales price reduction. We are attempting to recover all of this from either our suppliers or our own operating efficiencies. We may not be able to fully offset this reduction which could reduce margins.
Selling, general and administrative expense for the year ended December 31, 2000 increased by $21.2 million, or 19.4%, to $130.4 million compared to $109.2 million for the year ended December 31, 1999. As a percentage of net sales, selling, general and administrative expense decreased to 7.1% for the year ended December 31, 2000 as compared to 8.0% for the year ended December 31, 1999. The overall dollar increase was mainly due to the addition of Peguform's activity for twelve months in 2000 compared to seven months in 1999. The decrease as a percent of net sales is primarily attributable to Peguform's lower selling, general and administrative expense as a percentage of net sales, relative to Venture's. Venture Sales & Engineering (a related party) eliminated $2.6 million of management fees relating to sales commissions charged to us. This was done due to the slow down in the automotive industry and to ensure that we remained competitive.
As a result of the foregoing, income from operations for the year ended December 31, 2000 increased $54.8 million, or 132.9%, to $96.0 million, compared to $41.2 million for the year ended December 31, 1999. As a percentage of net sales, income from operations increased to 5.2% in fiscal 2000 from 3.0% in fiscal 1999.
Interest expense increased $29.9 million to $102.5 million in fiscal 2000 compared to $72.6 million in fiscal 1999. The increase is the result of incurring interest for twelve months in 2000 as opposed
to only seven months in 1999 related to the increased debt associated with the acquisition of Peguform and rising interest rates. $2.5 million of this expense is noncash amortization from the termination of interest rate swaps.
Other (income) expense is primarily comprised of $79.0 million of realized gains and $41.1 million of unrealized losses related to the termination of the cross-currency interest rate swap agreements and a portion of the foreign exchange collars. Other (income) expense was also comprised of unrealized currency losses of $41.9 million, which were offset, in part, by realized currency gains of $8.6 million. See note 7 of Notes to Consolidated Financial Statements.
For the year ended December 31, 2000, we reported a net tax benefit of $11.3 million. The tax benefit was generated as a result of finalizing the restructuring of the Peguform companies. $3.1 million was a reduction of the tax rates in Germany and $22.7 million was from the recognition of the benefit of NOL carryforwards. $14.5 million was income tax expense charged to the normal operations of Venture Holdings Corporation and the Peguform Group of companies.
Due to the foregoing, net income for the year ended December 31, 2000 was $9.0 million compared to a net loss of $14.5 million for year ended December 31, 1999.
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 had awarded us with a significant New Program (described below) but has subsequently cancelled this program.
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 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 7 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, we 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.
LIQUIDITY AND CAPITAL RESOURCES
Our consolidated working capital was $129.7 million at December 31, 2000 compared to $182.7 million at December 31, 1999, a decrease of $53.0 million. Our working capital ratio was 1.3x and 1.5x at December 31, 2000 and 1999, respectively. Net cash provided by operating activities was $61.3 million for the year ended December 31, 2000 compared to net cash provided by operations of $88.8 million for the year ended December 31, 1999. The decrease in cash provided by operations is due primarily to increases in inventory and other assets which are partially offset by increases in accounts payable and accrued expenses.
Capital expenditures were $85.7 million for the year ended December 31, 2000 compared to $53.2 million for the year ended December 31, 1999. We continue to upgrade machinery and equipment and paint lines at all facilities to handle expected increased volumes and general reconditioning of equipment. In 2000, we received $78.5 million from the termination of derivatives which resulted in a net use of cash of $6.5 million from investment activities. In 1999, $496.8 million was used primarily related to the Peguform acquisition.
In the ordinary course of business, we seek additional business with existing and new customers. We continue to compete for the right to supply new components which could be material to us and require substantial capital investment in machinery, equipment, tooling and facilities. As of the date hereof, however, we have no formal commitments with respect to any such material business.
In August 1999, we were awarded a letter of intent for a significant new program for the Ford Ranger (the "New Program") that had projected annual revenues of approximately $225 million with production that had been scheduled to start and ramp up in late 2002. As a result of this award, we would have been required to make capital expenditures in the range of $40.0 to $80.0 million payable over the next several years in addition to our normal capital expenditures. This program has now been cancelled and we no longer have any need to make these additional expenditures. We are seeking cancellation costs from Ford in connection with the termination of this program.
Net cash used in financing activities was $43.4 million for the year ended December 31, 2000 compared to net cash provided by financing activities of $416.9 million for the year ended December 31, 1999. 1999 reflects debt incurred for the Peguform acquisition. 2000 reflects the scheduled paydown of debt.
Our senior credit facility provides for borrowings of (1) up to $175.0 million under a revolving credit facility, which, in addition to those matters described below, used for working capital and general corporate purposes; (2) $75.0 million under a five year term loan A; and (3) $200.0 million
under a six year term loan B. The credit facility also originally provided for a $125.0 million 18 month interim term loan. Through October 2000, we applied payments of $61.2 million to the 18 month interim term loan. In November of 2000, the Company repaid the remaining principal of $63.8 primarily with proceeds from the revolving credit agreement. The senior credit facility was amended in 2000 and now requires that we issue $125 million principal amount of securities that rank pari passu in right of payment with, or are junior to, our 12% senior subordinated notes due 2009, described below, by March 31, 2002. The amendment to the senior credit facility also added a $100 million non-recourse factoring program and amended various restrictive covenants to provide us with additional flexibility in our stipulated financial ratios. See Note 6 of Notes to consolidated Financial Statements.
The revolving credit facility permits us 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, 2000, we could have borrowed an additional $54.0 million under the revolving credit facility. Obligations under the credit agreement are jointly and severally guaranteed by our domestic subsidiaries and are secured by first priority security interests in substantially all of our assets and our domestic subsidiaries.
The senior credit agreement, the documents governing our $205 million of 9 1/2% senior notes due 2005 (the "1997 Senior Notes"), and the documents governing our $125 million of 11% unsecured senior notes (the "1999 Senior Notes") and 12% unsecured senior subordinated notes (the "1999 Senior Subordinated Notes" and together with the 1999 Senior Notes, the "1999 Notes"), contain restrictive covenants relating to cash flow, fixed charges, debt, member's equity, distributions, leases, and liens on assets. Our debt obligations also contain various restrictive covenants that require us 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, 2000, we were in compliance with all debt covenants.
In connection with the senior credit facility and the 1999 Notes, we 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.
In March 2000, we terminated our cross-currency swap agreements within each of the three original cross-currency interest rate swap agreements and realized a cash gain of $42.0 million. The entire cash proceeds were applied as a prepayment of our $125 million interim term loan. At December 31, 1999, these financial instruments had an estimated fair market value of $27.1 million which was recorded as an investment on the balance sheet with a corresponding unrealized gain of $27.1 million being recorded in other income. Accordingly, as a result of the termination of the cross-currency swap agreements, the net impact on earnings for the twelve months ended December 31, 2000 is an increase in other income of $14.9 million, which is comprised of a realized gain of $42.0 million, offset by an unrealized loss of $27.1 million.
The cross-currency swap agreements were replaced with a twelve-month zero-cost foreign exchange collar. The collar was originally designed to reduce the economic risk to us of Euro to US dollar exchange movements. The notional amount of each of the put and call sides of the foreign currency exchange collar was originally 500,000,000 Euros. During July 2000, we terminated the put side of the foreign currency exchange collar and received $10.9 million. We used $2.7 million of the proceeds to purchase a replacement put to protect against additional devaluations in the Euro to US dollar exchange rate and applied $8.0 million of the net cash proceeds as a prepayment of the 18-month interim term loan. The notional amount of the replacement put was 400,000,000 Euros. During November 2000, we again terminated the put side of the foreign currency exchange collar and received $9.2 million. We used these proceeds, along with additional borrowings under the revolving credit agreement to repay the remaining portion of the 18-month interim term loan. At December 31, 2000, only the original call side of the foreign currency exchange collar remains outstanding. The estimated fair market value of this financial instrument is $(0.6) million and is recorded as an investment on the balance sheet as of December 31, 2000. Accordingly, as a result of
these foreign exchange collar transactions, the net impact on earnings for the twelve months ended December 31, 2000 is an increase in other income of $19.5 million, which is comprised of a realized gain of $20.1 million, offset by an unrealized loss of $0.6 million. On March 16, 2001, the original call side of the foreign currency exchange collar expired unexercised. We currently have no foreign currency derivative transactions in place to protect us from currency movements. We are continuing to review the situation and will take actions when it is deemed proper.
One of the interest rate swap agreements within each of the original 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 2000, these interest rate swap agreements resulted in an increase to interest expense of $0.5 million. During 1999, these interest rate swap agreements resulted in a reduction to interest expense of $0.9 million. During July 2000, we paid $14.9 million to terminate these financial instruments. This amount has been capitalized and will be amortized into interest expense over the terms of the original interest rate swap agreements. During 2000, interest expense includes $2.5 million of this deferred interest asset amortization.
The other interest rate swap agreements within each of the original 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 are included in other income. During 2000 and 1999, these interest rate swap agreements resulted in a realized loss, or a reduction to other (expense) income, of $0.3 million and $2.4 million, respectively. The estimated fair market value of these financial instruments as of December 31, 1999 of $13.4 million was recorded as an investment on the balance sheet. The corresponding $13.4 million non-cash change to estimated fair market value was recorded in other income in 1999. During July 2000, we terminated these financial instruments and realized a cash gain of $16.9 million plus interest income of $0.1 million. Accordingly, as a result of the termination of these interest rate swap agreements, the net impact on earnings during 2000 is an increase in other income of $3.6 million, which is comprised of a realized gain of $16.9 million and interest income of $0.1 million, offset by an unrealized loss of $13.4 million.
During July 2000, we applied $2.0 million of the net cash proceeds from the terminations of the interest rate swap agreements as an additional prepayment of the 18-month interim term loan.
We have also entered into interest rate swap agreements with a total notional value of $55 million to mitigate the risk associated with changing interest rates on certain floating rate debt. During 2000, certain of these interest rate swaps agreements with a notional value of $25 million expired. All of these interest rate swap agreements are accounted for using settlement accounting. The impact of these interest rate swap agreements resulted in $0.1 million and $0.8 million of additional interest expense during 2000 and 1999, respectively.
We believe that our existing cash balances, operating cash flow, borrowings under our 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 our existing business through the end of 2002. During 2001, we may seek new or amended credit arrangements to address our currency exposure related to the existing financing structure and also deal with the need to issue new debt as required under the current credit agreement as outlined above.
NEW ACCOUNTING STANDARDS
In June 1998, the FASB approved SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. This Standard was to apply in the first quarter of 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 analyzed the impact of this Standard on our financial position and results of operations for 2001, and the effect was to record a liability of $0.2 million. This adjustment will be recorded as a cumulative effect of change in accounting principle.
ITEM 7A.
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, we have selectively entered into a variety of foreign exchange and interest rate financial instruments. A discussion of 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
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, 2000, the net fair value asset of financial instruments with exposure to foreign currency risk was approximately $(0.6) 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 $57,000. The model assumes a parallel shift in the foreign exchange 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 have exposure to interest rate risk on a portion of our debt obligations. A one percent change in interest rates on floating rate debt would result in approximately $3.8 million change in earnings.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
VENTURE HOLDINGS COMPANY LLC INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Public Accountants................................ 21 Consolidated Balance Sheets............................................. 22 Consolidated Statements of Operations and Comprehensive Income.......... 23 Consolidated Statements of Changes in Member's Equity................... 24 Consolidated Statements of Cash Flow.................................... 25 Notes to Consolidated Financial Statements.............................. 26
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, 2000 and 1999, 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, 2000. 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 Venture'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, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000, 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, present fairly in all material respects the information set forth therein.
Deloitte & Touche LLP
March 31, 2001 Detroit, Michigan
VENTURE HOLDINGS COMPANY LLC
CONSOLIDATED BALANCE SHEETS ------------------------------------------------------------------------- (DOLLARS IN THOUSANDS)
See notes to consolidated financial statements.
VENTURE HOLDINGS COMPANY LLC
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME ------------------------------------------------------------------------- (DOLLARS IN THOUSANDS)
See notes to consolidated financial statements.
VENTURE HOLDINGS COMPANY LLC
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBER'S EQUITY ------------------------------------------------------------------------- (DOLLARS IN THOUSANDS)
See notes to consolidated financial statements.
VENTURE HOLDINGS COMPANY LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS ------------------------------------------------------------------------- (DOLLARS IN THOUSANDS)
See notes to consolidated financial statements.
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 were 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:
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.
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, 2000 and 1999 was $119.3 million and $168.4 million, respectively, which is net of accumulated amortization. (See Note 12)
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 was party to a number of interest rate, collar 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 did 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 did 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.
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 SFAS No. 109, "Accounting for Income Taxes".
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.
Foreign Currencies - Currency translation is based upon the 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 1999 financial statements in order to conform to the 2000 presentation.
Recent Accounting Pronouncements - 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 analyzed the impact of this Standard on its financial position and results of operations for 2001, and the effect was to record an additional liability of $0.2 million. This adjustment will be recorded as a cumulative effect of change in accounting principle.
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. During the second quarter of 2000, an agreement was reached on post closing adjustments related to the Peguform Acquisition reducing the consideration paid for Peguform by $18 million to $445 million. The Company used the proceeds of the final settlement to reduce its outstanding borrowings.
The 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.
3. ACCOUNTS RECEIVABLE
Excluding receivables from related parties, substantially all of the receivables are from companies operating in the automobile industry.
4. INVENTORIES
Inventories included the following (in thousands):
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following (in thousands):
Included in property, plant and equipment is equipment and buildings held under capitalized leases. These assets had a cost basis of $39.1 million and accumulated depreciation relating to these assets of $5.9 million at December 31, 2000. As of December 31, 1999, these assets had a cost basis of $39.1 million and accumulated depreciation of $4.8 million.
6. DEBT
Debt consisted of the following (in thousands):
In March 2000, the Company applied a prepayment of $42 million to the 18-month interim term loan which matured November 27, 2000. In July 2000, the Company applied an additional $8 million and $2 million prepayments to the 18-month interim term loan, reducing the principal balance to $73 million. During November 2000, the Company repaid the remaining principal balance of the 18-month interim term loan with $9.2 million received from termination of the put side of its foreign exchange collar and proceeds under the revolving credit facility.
On June 29, 2000, the credit agreement was amended for several purposes. First, the requirement that the Company issue $125 million of securities that rank pari passu in right of payment with, or are junior to, the Company's 12% senior subordinated notes due 2009, described below was extended from November 27, 2000 to March 31, 2002. Second, the credit agreement was amended to allow for a $100 million non-recourse factoring program. Third, certain restrictive covenants were amended to provide the Company with additional flexibility in its stipulated financial ratios.
The 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, 2000, the Company could have borrowed an additional $54.0 million under the revolving credit facility. Obligations under the credit agreement are jointly and severally guaranteed by Venture's domestic subsidiaries and are secured by first priority security interests in substantially all of the assets of Venture and its domestic subsidiaries.
The credit agreement, the documents governing the Company's 9 1/2% senior notes due 2005 (the "1997 Senior Notes"), and the documents governing the Company's 11% unsecured senior notes (the "1999 Senior Notes") and 12% unsecured senior subordinated notes (the "1999 Senior Subordinated Notes" and together with the 1999 Senior Notes, the "1999 Notes"), contain restrictive covenants relating to cash flow, fixed charges, debt, member's equity, distributions, leases, and liens on assets. The Company's debt obligations also contain various restrictive covenants that require the Company to maintain stipulated financial ratios, including a minimum consolidated net worth
(adjusted yearly), fixed charge coverage ratio, interest coverage ratio and total indebtedness ratio. As of December 31, 2000, the Company was in compliance with all debt covenants.
Scheduled maturities of debt at December 31, 2000 were as follows (in thousands):
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).
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.
In March 2000, the Company terminated its cross-currency swap agreements within each of its three original cross-currency interest rate swap agreements and realized a cash gain of $42.0 million. The entire cash proceeds were applied as a prepayment of the Company's $125 million interim term loan. At December 31, 1999, these financial instruments had an estimated fair market value of $27.1 million which was recorded as an investment on the balance sheet with a corresponding unrealized gain of $27.1 million being recorded in other income. Accordingly, as a result of the termination of the cross-currency swap agreements, the net impact on earnings for the twelve months ended December 31, 2000 is an increase in other income of $14.9 million, which is comprised of a realized gain of $42.0 million, offset by an unrealized loss of $27.1 million.
The cross-currency swap agreements were replaced with a twelve-month zero-cost foreign exchange collar. The collar was originally designed to reduce the economic risk to the Company of Euro to US dollar exchange movements. The notional amount of each of the put and call sides of the foreign currency exchange collar was originally 500,000,000 Euros. During July 2000, the Company terminated the put side of its foreign currency exchange collar and received $10.9 million. The Company used $2.7 million of the proceeds to purchase a replacement put to protect against additional devaluations in the Euro to US dollar exchange rate and applied $8.0 million of the net cash proceeds as a prepayment of the 18-month interim term loan. The notional amount of the replacement put was 400,000,000 Euros. During November 2000, the Company again terminated
the put side of its foreign currency exchange collar and received $9.2 million. The Company used these proceeds, along with additional borrowings under its revolving credit agreement to repay the remaining portion of the 18-month interim term loan. At December 31, 2000, only the original call side of the foreign currency exchange collar remains outstanding. The estimated fair market value of this financial instrument is $(0.6) million and is recorded as an investment on the balance sheet as of December 31, 2000. Accordingly, as a result of these foreign exchange collar transactions, the net impact on earnings for the twelve months ended December 31, 2000 is an increase in other income of $19.5 million, which is comprised of a realized gain of $20.1 million, offset by an unrealized loss of $0.6 million. On March 16, 2001, the original call side of the foreign currency exchange collar expired unexercised. The Company currently has no foreign currency derivative transactions in place to protect itself from currency movements. The Company is continuing to review the situation and will take actions when it deems proper.
One of the interest rate swap agreements within each of the original 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 2000, these interest rate swap agreements resulted in an increase to interest expense of $0.5 million. During 1999, these interest rate swap agreements resulted in a reduction to interest expense of $0.9 million. During July 2000, the Company paid $14.9 million to terminate these financial instruments. This amount has been capitalized and will be amortized into interest expense over the terms of the original interest rate swap agreements. During 2000, interest expense includes $2.5 million of this deferred interest asset amortization.
The other interest rate swap agreements within each of the original 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 are included in other income. During 2000 and 1999, these interest rate swap agreements resulted in a realized loss, or a reduction to other (expense) income, of $0.3 million and $2.4 million, respectively. The estimated fair market value of these financial instruments as of December 31, 1999 of $13.4 million was recorded as an investment on the balance sheet. The corresponding $13.4 million non-cash change to estimated fair market value was recorded in other income in 1999. During July 2000, the Company terminated these financial instruments and realized a cash gain of $16.9 million plus interest income of $0.1 million. Accordingly, as a result of the termination of these interest rate swap agreements, the net impact on earnings during 2000 is an increase in other income of $3.6 million, which is comprised of a realized gain of $16.9 million and interest income of $0.1 million, offset by an unrealized loss of $13.4 million.
During July 2000, the Company applied $2.0 million of the net cash proceeds from the terminations of the interest rate swap agreements as an additional prepayment of the 18-month interim term loan.
The Company has also entered into interest rate swap agreements with a total notional value of $55 million to mitigate the risk associated with changing interest rates on certain floating rate debt. During 2000, certain of these interest rate swaps agreements with a notional value of $25 million expired. All of these interest rate swap agreements are accounted for using settlement accounting. The impact of these interest rate swap agreements resulted in $0.1 million and $0.8 million of additional interest expense during 2000 and 1999, 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 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 transactions with non-affiliated persons.
The Company provides or arranges for others to provide certain related parties with various administrative and professional services, including employee group insurance and benefit coverage, property and other insurance, financial and cash management and administrative services such as data processing. The related parties are charged fees and premiums for these services. Administrative services were allocated to the entity for which they were incurred and certain entities were charged a management fee. In connection with the above cash management services, the Company pays the administrative and operating expenses on behalf of certain related parties and charges them for the amounts paid which results in receivables from these related parties.
The 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 $0.9 million, $0.8 million and $0.6 million to Pompo in 2000, 1999 and 1998, respectively. At December 31, 2000, 1999 and 1998, the Company had approximately $3.7 million, $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 in 1999 and 1998.
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 made deposits of approximately $13 million for each of the years ended December 31, 2000 and 1999 on these vehicles. The Company intends to market the vehicles to other parties. However, sales results to date have proven more difficult to achieve than had been anticipated due to quality and pricing issues. The Company is currently addressing these issues and has an updated marketing plan for selling the vehicles. The Company has a secured interest in the assets of Shelby, if the vehicles are not sold as planned. The Company believes the deposit of $26 million is fully recoverable. The deposit has been recorded in other assets as of December 31, 2000 and 1999. During 1999, 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 years ended December 31, 2000, 1999, and 1998, the Company was charged $18.9 million $11.0 million, and $6.6 million under this arrangement. A majority of these amounts for 1999 and 1998 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 expensed certain design costs as incurred due to a recently issued accounting pronouncement. While Deluxe will continue to provide design, prototype and fixture work, Deluxe will now be paid in accordance with standard contract terms. In accordance with these terms at December 31, 2000, the Company had made progress payments to Deluxe of $9.9 million through a reduction of the related party receivable.
Deluxe also buys services from the Company, principally labor and materials, however, these services will be significantly reduced in 2001 and the future. During the years ended December 31, 2000, 1999, and 1998, Deluxe made purchases, and the Company recognized revenue, in the amount of $9.1 million, $12.9 million, and $17.3 million. In addition to the above transactions, Deluxe also charged the Company approximately $1.1 million during each of the years ended December 31, 2000, 1999, and 1998 for equipment rental and other services. These charges ceased at the end of 2000. The net effect of these transactions between Deluxe and the Company was a receivable balance from Deluxe of $30.2 million and $32.3 million at December 31, 2000 and 1999, respectively, of which $3.3 million is recorded as a long term receivable in other assets as of December 31, 2000.
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. This amount was substantially settled in early 2001. In 2000, the Company began selling raw material to South Africa amounting to $10.3 million under established repayment terms. At December 31, 2000 and 1999, the amount outstanding was $16.0 million and $5.5 million, respectively,
From time to time, the Company makes certain employees available to the sole beneficiary of the Trust for purposes of performing services for 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 $1.1 million and $0.5 million at December 31, 2000 and 1999, respectively. These amounts were repaid in early 2001
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 leased buildings and machinery and equipment to an entity in which the sole beneficiary of the Trust owns a significant equity interest. During 1999 and 1998, 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 and management representatives. The Company pays Venture Sales and Engineering and Venture Foreign Sales Corporation, in the aggregate, a sales management commission of 3% on all production sales. The Company entered into an amendment to these agreements with VS&E to allow the Company flexibility to reduce this expense with the cooperation of VS&E. VS&E eliminated approximately $2.6 million of management fees relating to sales commissions for the fourth quarter of 2000. This was done due to the slowing of the automotive industry and to ensure the Company remained competitive. 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 of $25.5 million and $24.2 million at December 31, 2000 and 1999, respectively, of which $15.5 million is recorded as a long term receivable in other assets at December 31, 2000.
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 $4.9, $4.5, and $4.5 million to VAP in 2000, 1999, and 1998, respectively. These fees and commissions ceased as of December 31, 2000. In addition, VAP reimbursed Venture for certain other expenditures made on its behalf and assigned certain tooling contracts to Venture. These arrangements will continue. As a result of negotiations with an Australian customer, Venture Asia Pacific was granted an increased piece price to cover excess tooling and other program associated costs. This agreement has facilitated repayment terms between the Company and Venture Asia Pacific for the outstanding accounts receivable balance related to management fees, commissions, tooling and other expenditures. In conjunction with this agreement, $14.7 million of the $20.3 million has been reclassified from a current receivable to a long-term receivable in other assets.
The following is a summary of transactions with all related parties at December 31, 2000, 1999 and 1998 (in thousands):
The total of these related party transactions is as follows (in thousands):
During 2000, the company reassessed the collectibility and classification of the related party receivables. Based on the assessment and finalization of certain repayment agreements, $33.6 million of the amount was reclassed to other assets. The amounts are generally from entities wholly owned by the sole beneficiary of the Company and management believes that the amounts are fully recoverable.
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, 2000. Future minimum lease commitments, including related party leases, are as follows (in thousands):
Rent expense for operating leases and other agreements with a term of greater than one month, including amounts paid to related parties, was $17.4 million, $10.9 and $5.5 million for the years ended December 31, 2000, 1999, and 1998, respectively. Usage fees paid based on monthly usage of certain machinery and equipment and facilities were $7.0, $6.7, and $4.0 million for the years ended December 31, 2000, 1999 and 1998, respectively. With the exception of $0.3 million paid during 2000 and 1999, all usage fees were paid to related parties.
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 in 1998.
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 $1.5 million at December 31, 2000 and $1.8 million at December 31, 1999.
The Company has been involved in legal proceedings with the Michigan Department of Environmental Quality (MDEQ) 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 entered into a consent decree in January of 2001 to settle this matter. During the fourth quarter of 1999, the Company established a reserve in the amount of $1.1 million relating to this payment and made the payment in February of 2001. As required under the decree, the Company plans to make certain capital expenditures of approximately $8.5 million to the current Grand Blanc systems.
In December of 1999, the MDEQ contacted the Grand Blanc facility relating to the classification of waste leaving the facility. The Company has been discussing the issue with the MDEQ 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 MDEQ. In addition, the Company has changed materials and certain processes to remove the concern of the MDEQ. 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 MDEQ regarding this matter. As a result of the notice received for the Grand Blanc facility the Company voluntarily undertook the same actions at the Grand Rapids facility to reduce risk of potential damage claims as the same procedures and methods were used at the Grand Rapids and Grand Blanc facilities. At the present time the Company is unable to quantify any liability for these disposals.
In late 2000, the Company was notified by Union Carbide Corporation that, based upon the usage of some paint application equipment at the Grand Blanc facility, the Company was obligated to pay certain royalties related to patent infringements. The Company is currently reviewing this matter with an attorney. At the present time, the Company has been unable to reach a conclusion as to possible infringements because of modifications we made, and the amount of any royalty that would be owed. The Company does use the Union Carbide equipment at our Seabrook facility, without the modifications and are paying the royalty at that location.
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, 2000, 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 38%, 23% and 15%, respectively, in 1998. During 1999, the percentages were 18%, 13%, 12%, 11% and 9% for GM, Audi, DaimlerChrysler, Ford and Volkswagen, respectively. During 2000, the percentages were 14%, 13%, 11% and 11% for Audi, General Motors, DaimlerChrysler and Volkswagon, 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 35% 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. The UAW contract at the Lancaster facility expires in June 2001 and formal negotiations have not begun.
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 million for the years ended December 31, 2000, 1999 and 1998.
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.
The change in benefit obligation for the years ended December 31, 2000 and 1999 was as follows (in thousands):
The change in the market value of plan assets for the years ended December 31, 2000 and 1999 was as follows (in thousands):
The funded status of the defined benefit plans at December 31, 2000 was as follows (in thousands):
The funded status of the defined benefit plans at December 31, 1999 was as follows (in thousands):
Net periodic pension expense (benefit) for the years ended December 31, 2000 and 1999 included the following components (in thousands):
The date used to measure plan assets and liabilities is as of September 30 each year.
The weighted-average assumed discount rate was 8.0% and 7.75% for 2000 and 1999, respectively. The assumed rate of return on plan assets was 8.5% for 2000 and 2001, respectively. For salary based plans, the expected rate of increase in compensation levels was 0.0% (as all salaried plans have been frozen).
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.
Effective January 1, 1999, the three frozen plans were merged into one plan. The merged plan was terminated in 2000.
Europe
Peguform Germany 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, 2000 and 1999 was as follows (in thousands):
The funded status of the defined benefit plans at December 31, 2000 was as follows (in thousands):
The funded status of the defined benefit plans at December 31, 1999 was as follows (in thousands):
Net periodic pension expense for the year ended December 31, 2000 and 1999 included the following components (in thousands):
The date used to measure plan assets and liabilities was as of December 31, 2000 and 1999.
The weighted-average assumed discount rate was 6.0% for 2000 and 1999. For salary based plans, the expected rate of increase in compensation levels was 2.0% and 1.5% for 2000 and 1999, respectively.
12. INCOME TAXES
Amounts in the financial statements related to income taxes are for the operations of Venture Holdings Corporation, and Peguform subsidiaries. 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 member is required to report all income, gains, losses, deductions, and credits of the S corporations and other flow through entities included in the LLC on his individual tax returns.
The provision for income tax (benefit) expense for the period ended (in thousands):
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 rate of Venture Holdings Corporation on pre-tax income was (7.4)% for the year ended December 31, 2000, of which 32.8% relates to permanent differences not deductible for income taxes (primarily goodwill amortization) and 5.2% for state and local income taxes, net of federal tax benefit. The effective rate of foreign entities on pre-tax income was 95.2% for the year ended December 31, 2000. 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 foreign entities 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 tax benefits were generated during 2000 primarily as a result of finalizing the restructuring of the Peguform group of companies, a reduction of tax rates in Germany and the recognition of the benefit of NOL carryforwards. The tax-effected temporary differences and carryforwards which comprised deferred assets and liabilities were as follows (in thousands):
The current portion of deferred tax assets, $9.2 and $10.7 million is included in prepaid expense and other at December 31, 2000 and 1999, respectively. The current portion of deferred tax liabilities of $0.5 million and $1.2 million is included in accrued expenses at December 31, 2000 and 1999, respectively. As a result of restructuring the Peguform Group of companies, deferred tax liabilities and goodwill have both been reduced by $21.9 million at December 31, 2000. Venture Holdings Corporation U.S. net operating loss carryforwards, which totaled $33.4 and $30.8 million at December 31, 2000 and 1999, respectively, begin to expire in the year 2011. Peguform France has net operating loss carryforwards of approximately $11.9 and $16 million at December 31, 2000 and 1999, respectively, which have an unlimited expiration period. Peguform Brazil has net operating loss carryforwards of approximately $9.5 million at December 31, 2000 and have an unlimited expiration period. Venture Germany has net operating loss carryforwards of approximately $62.2 million at December 31, 2000 and an unlimited expiration period. Alternative minimum tax credit carryforwards totaled $824 thousand at December 31, 2000 and have no expiration date. Management believes the net operating loss carryforwards at December 31, 2000 are realizable based on forecasted earnings and available tax planning strategies.
13. 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 divided 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, 2000 (in thousands):
The following table presents net sales and other financial information by business segment for the twelve months ended December 31, 1999 (in thousands):
14. 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 100%-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 100%-owned, domestic subsidiaries. The guarantees of these 100%-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 minor subsidiaries, individually and in the aggregate. 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.
1997 SENIOR NOTES:
The following condensed consolidating financial information presents:
(1) Condensed consolidating financial statements for years ended December 31, 2000 and 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, 2000 ------------------------------------------------------------------------- (DOLLARS IN THOUSANDS)
CONDENSED CONSOLIDATING STATEMENTS OF INCOME FOR THE YEAR ENDED DECEMBER 31, 2000 ------------------------------------------------------------------------- (DOLLARS IN THOUSANDS)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2000 - -------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS)
CONDENSED CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 1999 - -------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS)
CONDENSED CONSOLIDATING STATEMENTS OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1999 - -------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1999 - -------------------------------------------------------------------------------- (DOLLARS IN THOUSANDS)
1999 NOTES:
The following condensed consolidating financial information presents:
(1) Condensed consolidating financial statements for the years ended December 31, 2000 and 1999, of (a) Venture, the sole issuer of the 1999 Notes, (b) the guarantor subsidiaries, (c) the nonguarantor subsidiaries and (d) the Company on a consolidated basis, and
(2) Elimination entries necessary to consolidate Venture and the guarantor subsidiaries with the nonguarantor subsidiaries.
CONDENSED CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 2000 ------------------------------------------------------------------------- (DOLLARS IN THOUSANDS)
CONDENSED CONSOLIDATING STATEMENTS OF INCOME FOR THE YEAR ENDED DECEMBER 31, 2000 ------------------------------------------------------------------------- (DOLLARS IN THOUSANDS)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2000 ------------------------------------------------------------------------- (DOLLARS IN THOUSANDS)
CONDENSED CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 1999 ------------------------------------------------------------------------- (DOLLARS IN THOUSANDS)
CONDENSED CONSOLIDATING STATEMENTS OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1999 ------------------------------------------------------------------------- (DOLLARS IN THOUSANDS)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1999 ------------------------------------------------------------------------- (DOLLARS IN THOUSANDS)
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10.
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.
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 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 Vice President since 1987. He has been in the injection molding business for 25 years.
Fred L. Hubacker joined Venture in January 2001 as Vice Chairman responsible for business development worldwide including all joint ventures and all financial activities. He previously served as President and CEO of New Venture Gear, Inc. Prior to that position, he was President and COO of Textron Automotive Company and a Group Vice President of Textron Inc. Mr. Hubacker
had previously been employed over 25 years with Chrysler Corporation in a variety of senior operational and financial management positions.
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.
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.
Ray Kolehmainen joined us in August 1999 as General Manager of the Grand Blanc and Flint operations. Since September 2000, he has held the position of Vice President - Exterior Operations. Ray was employed by General Motors Corporation for over 30 years where he held various manufacturing positions including Manager of Industrial Engineering and his last position being Manager of Fuel Tank Operations.
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.
Thomas Gougherty joined us in his current position in December 1999. From 1977 to 1999, Mr. Gougherty held a variety of Finance and Information Technology positions at Ford Motor Company.
Stephen M. Cheifetz, 45, is a partner of Corrent and Macri and has served as partner of this firm since 1999. 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.
ITEM 11. EXECUTIVE COMPENSATION
The following Summary Compensation Tables sets forth compensation paid for the years ended December 31, 2000, 1999 and 1998, 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)
- -------------------------------------------------------------------------------- (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 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 us to the accounts of each of the officers listed under Venture's 401(k) Plan; (2) the incremental cost to us 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 us under a reverse split dollar life insurance policy attributable to the build-up of the cash surrender value of the policy, which aggregated $2,318,745, $2,172,005 and $1,672,705 at December 31, 2000, 1999 and 1998, respectively, and is owned by Mr. Winget. We are the beneficiary of the term insurance portion of the reverse split dollar policy, of which we pay all premiums due under the policy and are 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.
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.
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, 2000 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 2000 fiscal year.
ITEM 12.
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.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In addition to making distributions to Mr. Winget, either directly as sole beneficiary of Venture Holdings Company LLC before the trust contribution by Venture Holdings Trust to Venture, or indirectly through distributions to Venture Holdings Company LLC as 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 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 $0.8 million, $0.8 million and $0.7 million for the years ended December 31, 1998, 1999 and 2000, 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, 1998, 1999 and 2000, respectively, under the Harper lease. Venture paid Realven $0.4 million in each of the years ended December 31, 1998, 1999 and 2000 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, 1998, 1999 and 2000, 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 Committee. During 1998, 1999 and 2000 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 $1.5 million, $2.1 million and $1.8 million for the years ended December 31, 1998, 1999 and 2000, 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 $0.4 million, $0.3 million and $0.2 million in the years ended December 31, 1998, 1999 and 2000 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, 1998 and 1999. Venture paid Windall Industries usage fees of $0.1 million in each of the years ended December 31, 1998, 1999 and 2000.
Venture Sales and Engineering and Venture Foreign Sales Corporation, corporations wholly owned by Mr. Winget, serve as our outside sales management agencies for sales of manufactured products. Generally, we pay Venture Sales and Venture Foreign Sales, in the aggregate, a sales commission of 3% on all production sales. Venture paid Venture Sales, $10.4 million, $10.9 million and $8.2 million in the years ended December 31, 1998, 1999 and 2000, respectively. We entered into an amendment to these agreements with VS&E to allow us flexibility to reduce this expense with the cooperation of VS&E. We were allowed to reduce the expense by approximately $2.6 million for the fourth quarter of 2000. This reduction was limited to the fourth quarter of 2000 only and resumed at the original rate January 2001. Venture made no payments to Venture Foreign Sales in the years ended December 31, 1998, 1999 and 2000. 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 performed by MAST for the period ending December 31, 1998 were $2.3 million. Rent paid to Venture Automotive Corp for the periods ending December 31, 1999 and 2000 was $1.5 million.
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 made deposits of approximately $13 million for each of the years ended December 31, 2000 and 1999 on these vehicles. We intend to market the vehicles to other parties. However, sales results to date have proven more difficult to achieve than had been anticipated due to quality and pricing issues. We are currently addressing these issues and have an updated marketing plan for selling the vehicles. We have a secured interest in the assets of Shelby, if the vehicles are not sold as planned. We believe the deposit of $26 million is fully recoverable. During 1999, 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, 2000, 1999 and 1998, we were charged $18.9 million, $11.0 million and $6.6 million, respectively, under this arrangement. While Deluxe will continue to provide design, prototype and fixture work, Deluxe will now be paid in accordance with standard contract terms. In accordance with these terms at December 31, 2000, we have made progress payments to Deluxe of $9.9 million through a reduction of the related party receivable.
Deluxe also buys services from us, principally, labor and materials, however, these services will be significantly reduced in 2001 and the future. During the years ended December 31, 2000, 1999 and 1998, Deluxe made purchases, and we recognized revenue, in the amount of $9.1 million, $12.9 million and $17.3 million, respectively. In addition to the above transactions, Deluxe also charged us approximately $1.1 million during each of the years ended December 31, 2000, 1999, and 1998 for equipment rental and other services. These charges ceased at the end of 2000. The net effect of these transactions was a receivable balance from Deluxe of $30.2 million and $32.3 million at December 31, 2000 and 1999, respectively, of which $3.3 million is recorded as a long term receivable in other assets as of December 31, 2000.
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 provided Venture Asia Pacific Pty. Ltd. and its subsidiaries with management and sales services, for which they paid Venture $4.5 million, $4.5 million and $4.9 million for 1998, 1999 and 2000, respectively. These fees and commissions ceased as of December 31, 2000. These fees ceased as of December 31, 2000. In addition, Venture Asia Pacific also reimbursed Venture for certain other expenditures made on its behalf and assigned certain tooling contracts to Venture. These arrangements will continue. As a result of negotiations with an Australian customer, Venture Asia Pacific was granted an increased piece price to cover excess tooling and other program associated costs. This agreement has facilitated repayment terms between us and Venture Asia Pacific for the outstanding accounts receivable balance related to management fees, commissions, tooling and other expenditures. In conjunction with this agreement, $14.7 million of the $20.3 million has been reclassified from a current receivable to a long-term receivable in other assets.
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.
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 2000, Venture paid Pompo Insurance $0.9 million in premiums and utilized premium credits of $0.4 million. 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.
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's indebtedness to Venture for these expenses was $0.5 million and $1.1 million for the years ended December 31, 1999 and 2000, respectively. The highest amount of this indebtedness outstanding at any one time during these periods was $1.1 million. In addition, from time to time we make certain employees available to Mr. Winget for purposes of performing services for other companies owned by and 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 $90,000, $90,000 and $73,000 in the years ended December 31, 1998, 1999 and 2000, 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 1998, 1999 and 2000 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. This amount was substantially repaid in 2001. In 2000, we began selling raw material to South Africa amounting to $10.3 million under established repayment terms. At December 31, 2000 and 1999, the amount outstanding was $16.0 million and $5.5 million, respectively.
PART IV
ITEM 14.
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 under Part II, Item 8.
2. Financial Statement Schedules Valuation and qualifying accounts for the years ended December 31, 2000, 1999 and 1998.
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, 2000.
SIGNATURES
Pursuant to the requirements of section 13 or 15 (d) of the Securities 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: April 2, 2001 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: April 2, 2001 By: /s/ MICHAEL G. TORAKIS ----------------------------------------- MICHAEL G. TORAKIS, President
Pursuant to the requirements of the Securities Act of 1934, this report has been signed by the following persons on behalf of each registrant in the capacities indicated on April 2, 2001.
SIGNATURES TITLE - ---------- -----
/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
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.
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.
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.
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, and filed as Exhibit 4.3.7 to Venture's Registration statement on Form S-4, effective October 21, 1999 (Registration No. 333-82617) and incorporated herein by reference.
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.
10.1.2 Second Amendment, dated June 29, 2000, to the Credit Agreement incorporated by reference as Exhibit 10.1, and filed as Exhibit 10.1 to Venture's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000 (File No. 333-86217), 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.
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' 9 1/2% 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.
10.7.1 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.
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.
10.13.2 Amendment to Sales/Management Representative Agreements dated October 1, 2000, by and between Venture Industries Corporation, Vemco, Inc., Venture Holdings Corporation and Venture Sales & Engineering Corporation.
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 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.
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 filed as Exhibit 10.29 to Venture's Annual Report on Form 10-K for the year ended December 31, 1999 (Registration No. 333-82617) and incorporated herein by reference.
12.1 Statement Regarding Computation of Ratio of Earnings to Fixed Charges.
14(a)2 Valuation and Qualifying Accounts.
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.