UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 2001 Commission file no. 0-21964 |
Shiloh Industries, Inc.
(Exact name of registrant as specified in its charter)
Delaware 51-0347683 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) |
Suite 202, 103 Foulk Road, Wilmington, Delaware 19803
(Address of principal executive offices--zip code)
(302) 998-0592
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $0.01 Per Share
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Annual Report on Form 10-K or any amendment to this Form 10-K. [_]
Aggregate market value of Common Stock held by non-affiliates of the registrant as of February 12, 2002 at a closing price of $1.40 per share as reported by the Nasdaq National Market was approximately $8,859,299. Shares of Common Stock beneficially held by each executive officer and director and their respective spouses have been excluded since such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
Number of shares of Common Stock outstanding as of February 12, 2002 was 14,798,094.
DOCUMENTS INCORPORATED BY REFERENCE
Parts of the following document are incorporated by reference to Part III of this Annual Report on Form 10-K: the Proxy Statement for the Registrant's 2002 Annual Meeting of Stockholders (the "Proxy Statement").
INDEX TO ANNUAL REPORT
ON FORM 10-K
Table Of Contents
Page ---- PART I: Item 1. Business...................................................... 3 Item 2. Properties.................................................... 9 Item 3. Legal Proceedings............................................. 10 Item 4. Submission of Matters to a Vote of Security Holders........... 10 Item 4A. Executive Officers of the Company............................. 10 PART II: Item 5. Market for the Company's Common Equity and Related Stockholder Matters....................................................... 13 Item 6. Selected Financial Data....................................... 14 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations..................................... 15 Item 7A. Quantitative and Qualitative Disclosures about Market Risk.... 25 Item 8. Financial Statements and Supplementary Data................... 26 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...................................... 51 PART III: Item 10. Directors and Executive Officers of the Company............... 51 Item 11. Executive Compensation........................................ 51 Item 12. Security Ownership of Certain Beneficial Owners and Management.................................................... 51 Item 13. Certain Relationships and Related Transactions................ 51 PART IV: Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8- K............................................................. 52 |
SHILOH INDUSTRIES, INC.
PART I
Item 1. Business
General
Shiloh is a full service manufacturer of blanks and stamped components for the automotive and light truck, heavy truck and other industrial markets. The Company's blanks, which are engineered two dimensional shapes cut from flat- rolled steel, are principally sold to automotive and truck original equipment manufacturers ("OEMs") and are used for exterior steel components, such as fenders, hoods and doors. These blanks include first operation exposed and unexposed blanks and more advanced engineered-welded blanks, which are manufactured from two or more blanks of different steel or gauges that are welded together utilizing both mash seam resistance and laser welding. The Company's stampings are principally used as components in mufflers, seat frames, structural rails, window lifts, heat shields, vehicle brakes and other structural body components.
The Company also builds modular assemblies, which include components used in the structural and powertrain systems of a vehicle. Structural systems include bumper beams, door impact beams, steering column supports, chassis components and structural underbody modules. Powertrain systems consist of deep draw components, such as oil pans, transmission pans and valve covers. To a lesser extent, the Company designs, engineers and manufactures precision tools and dies and welding and assembly equipment for use in its blanking and stamping operations, for sale to OEMs, Tier I automotive suppliers and other industrial customers. Furthermore, the Company provides a variety of intermediate steel processing services, such as oiling, cutting-to-length, slitting and edge trimming of hot and cold-rolled steel coils for automotive and steel industry customers. In addition, through its minority-owned investment in Valley City Steel LLC, as described below, the Company provides the intermediary steel processing service of pickling. The Company has sixteen wholly owned subsidiaries at locations in Ohio, Michigan, Georgia, Tennessee and Mexico.
History
In November 1996, the Company acquired substantially all of the assets of Greenfield Die & Manufacturing Corp. ("Greenfield"), which was headquartered in Canton, Michigan, a suburb of Detroit. Greenfield conducts operations as "Canton Manufacturing Division" and "Canton Die Division." In July 2000, the Company announced that it would seek strategic alternatives for Canton Die Division. As of October 31, 2000, the Company anticipated selling the assets of Canton Die Division for $11.8 million, recorded a pre-tax asset impairment charge of $12.8 million, and had classified these net assets as held for sale. The Company was unable to sell these assets during fiscal 2001; therefore, in October 2001, the decision was made to cease operations at this facility during fiscal 2002. As the Company currently does not have a specific plan for these assets, the assets of Canton Die Division are no longer classified as held for sale as of October 31, 2001. Certain assets of Canton Die Division may be transferred to other Shiloh locations or may be sold. During fiscal 2001, the Company recorded an additional pre-tax asset impairment charge of $1.5 million and a pre-tax restructuring charge of $0.4 million associated with the shutdown of this facility. The impairment charge was primarily taken to write down the long-lived assets to their current estimated fair value.
In August 1997, the Company acquired C&H Design Company, formerly d.b.a. C&H Die Technology and d.b.a. Utica Die Division, ("C&H") which was headquartered in Utica, Michigan. In October 2000, the Company closed the operations of C&H and transferred certain of its assets to other Shiloh locations. In July 1998, the Company commenced operation of Jefferson Blanking, Inc. ("Jefferson Blanking"), a blanking facility in Pendergrass, Georgia.
In November 1999, the Company acquired the automotive division of MTD Products Inc ("MTD Automotive") for $20.0 million in cash and 1,428,571 shares of common stock, par value $0.01 per share, of the Company (the "Common Stock"), of which 535,714 were contingently returnable at November 1, 1999.
Pursuant to the terms of the earnout provisions of the Asset Purchase Agreement, dated as of June 21, 1999, as amended (the "Purchase Agreement"), entered into by and among the Company, Shiloh Automotive, Inc. and MTD Products Inc ("MTD Products"), the aggregate consideration was increased due to the performance of MTD Automotive during the first twelve months subsequent to consummation of such acquisition. As a result of the subsequent performance of MTD Automotive, the 535,714 contingently returnable shares of Common Stock were not required to be returned to the Company and in January 2001, the Company issued MTD Products an additional 288,960 shares of Common Stock and the Company's wholly owned subsidiary issued a note in the aggregate principal amount of $4.0 million. The Company was guarantor of the note. In accordance with the Purchase Agreement, approximately $1.8 million was returned to the Company for settlement of price concessions and capital expenditure reimbursements relating to fiscal 2000. These adjustments were reflected in the Company's financial statements for the year ended October 31, 2000 as adjustments to the purchase price payable under the terms of the Purchase Agreement. During fiscal 2001, MTD Products forgave all interest relating to the note through October 31, 2001 in the aggregate amount of $0.3 million. The Company satisfied all of its remaining obligations under the note by issuing to MTD Products 42,780 shares of Series A Preferred Stock in accordance with an amendment to the Purchase Agreement, which was entered into as of December 31, 2001. The shares of Series A Preferred Stock were issued in January 2002. In October 2001, the Company settled a contingency set forth in the Purchase Agreement related to price concessions for fiscal 2001 for approximately $1.3 million. This additional reduction to the purchase price is reflected in the Company's financial statements as of October 31, 2001. Also in accordance with the Purchase Agreement, the purchase price may be adjusted at the end of fiscal 2002 upon resolution of a final contingency.
In July 2000, the Company commenced operation of Shiloh de Mexico S. A. de C.V. ("Shiloh of Mexico" or "Saltillo Welded Blank Division"), a blanking facility in Saltillo, Mexico utilizing laser welded technology. On August 29, 2000, the Company acquired substantially all the assets of A.G. Simpson (Tennessee), Inc., d.b.a. Dickson Manufacturing Division ("Dickson"), for approximately $49.2 million, including approximately $1.2 million in acquisition costs. In January 2001, certain purchase price adjustments were made pursuant to the terms of the purchase agreement with respect to the acquisition of Dickson in which approximately $4.5 million was released from escrow and returned to the Company. For accounting purposes, these adjustments were reflected in the Company's financial statements for the year ended October 31, 2000.
On July 31, 2001, the Company completed the sale of land, building and certain other assets of the Wellington Die Division for $3.5 million in cash resulting in a pre-tax loss of approximately $1.0 million. In addition, the Company recorded a pre-tax asset impairment charge of $2.2 million associated with the remaining assets of this facility and a restructuring charge of $0.2 million. The remaining operations at Wellington Die Division were transferred to Wellington Stamping Division in the first quarter of fiscal 2002.
On July 31, 2001, the Company completed the sale of certain assets and liabilities of its Valley City Steel division to Viking Industries, LLC ("Viking") for $12.4 million. In connection with this transaction, the Company and Viking formed a joint venture, Valley City Steel, LLC ("VCS LLC"), in which the Company owns a minority interest (49%) in the new entity and Viking owns a majority interest (51%). Viking contributed the assets purchased to the joint venture. The Company also contributed certain other assets and liabilities of Valley City Steel to the joint venture. The Company retained ownership of the land and building where the joint venture conducts its operations, and leases these facilities to the joint venture. The new entity continues to supply steel processing services to the Company. As of September 1, 2002 and on the first day of every month thereafter, the Company has the right to require VCS LLC to repurchase its interest at a put purchase price as defined in the operating agreement. In addition, as of September 1, 2002 and on the first day of every month thereafter, both the Company and Viking have the right to purchase the others' interest at a call purchase price as defined in the operating agreement. The land and building leased by VCS LLC and owned by the Company secures debt incurred by VCS LLC. The debt matures in August 2003. Once this debt is discharged and released, the Company's ownership in VCS LLC will be reduced to 40% and Viking's interest increased to 60%. As a result of the transaction changing from a 100% sale to a partial sale in fiscal 2001, the Company reduced its estimated asset impairment loss by $11.7 million.
In September 2001, the decision was made to cease operations at the Shiloh of Michigan ("SOM" or "Romulus Blanking Division") blanking facility during fiscal 2002. This facility, located in Romulus, Michigan, was opened in 1996. During the fourth quarter of fiscal 2001, the Company recorded a pre-tax asset impairment charge of $5.8 million to write down certain assets to their estimated fair value. In addition, the Company recorded a pre-tax restructuring charge of $0.4 million associated with the closing of this facility. As of October 31, 2001, the Company has classified $7.5 million of real property and certain machinery and equipment at this facility as assets held for sale. Remaining assets will be sold or transferred to other operations within the Company.
The Company's principal executive offices are located at Suite 202, 103 Foulk Road, Wilmington, Delaware 19803 and its telephone number is (302) 998- 0592. Unless otherwise indicated, all references to the "Company" or "Shiloh" refer to Shiloh Industries, Inc. and its direct and indirect subsidiaries.
Industry
Engineered Products
In the engineered products business, OEMs and Tier I automotive suppliers purchase steel components from suppliers such as the Company. The Company manufactures these components and also engineers and builds tools and dies used in its blanking and stamping operations. In addition, the Company produces tools and dies and welding and assembly equipment for its customers. OEMs typically find it more cost effective and time efficient to focus their core operations on vehicle assembly, marketing and distribution.
Intermediate Steel Processing
Primary steel producers typically find it more cost effective to focus on the sale of standard size and tolerance steel to large volume purchasers and view the intermediate steel processor as part of their customer base. End- product manufacturers seek to purchase steel free from oxidation and scale, with closer tolerances, on shorter lead times and with more reliable and more frequent delivery than the primary steel producers can provide efficiently. These factors, together with the lower cost structure typically found in the outside supplier, have caused many end-product manufacturers to find it more beneficial, from a cost, quality and manufacturing flexibility standpoint, to outsource much of the intermediate steel processing, which is required for the production of their end-products.
Products and Manufacturing Processes
Engineered Products
The Company produces precision stamped steel components through its blanking and stamping operations. Blanking is a process in which flat-rolled steel is cut into precise two dimensional shapes by passing steel through a press, employing a blanking die. These blanks are used principally by manufacturers in the automobile, heavy truck, heating, ventilation and air conditioning ("HVAC") and lawn and garden industries. These blanks are used by the Company's automotive and heavy truck customers for automobile exterior parts, including fenders, hoods, doors and side panels, and heavy truck wheel rims and brake components. The Company's HVAC and lawn and garden customers use blanks primarily for compressor housings and lawn mower decks.
The Company produces engineered-welded blanks utilizing both the mash seam resistance and laser weld processes. The engineered-welded blanks that are produced generally consist of two or more sheets of steel or aluminum of the same or different material grade, thickness or coating welded together into a single flat panel. The primary distinctions between mash seam resistance and laser welding are weld bead appearance and cost.
Stamping is a process in which steel is passed through dies in a stamping press in order to form the steel into three dimensional parts. The Company also produces stamped parts using precision single stage, progressive and transfer dies, which in most cases, the Company designs and manufactures. Some stamping and blanking operations also provide value-added processes, such as welding, assembly and painting capabilities.
The Company also manufactures deep draw stampings, such as mufflers, oil pans, transmission pans and valve covers. The Company's stampings and assemblies are principally used as components for bumper beams, door impact beams, steering column support, chassis components, seat frames, structural rails, window lifts, vehicle brakes and other structural body components for automobiles and light trucks.
The Company also designs, engineers and produces precision tools and dies and weld and assembly equipment. To support the manufacturing process, the Company supplies substantially all of the tools and dies used in the blanking and stamping operations and a portion of the welding and secondary assembly equipment used to manufacture modular systems. The Company also produces tools and dies for sale to OEMs, Tier I suppliers and other industrial customers. Advanced technology is maintained to conduct activities and improve tool and die production capabilities. The Company has computerized most of the design and engineering portions of the tool and die production process to reduce production time and cost.
Intermediate Steel Processing
The Company processes flat-rolled steel principally for primary steel producers and manufacturers that require processed steel for end-product manufacturing purposes. The Company also processes flat-rolled steel for internal blanking and stamping operations. The Company either purchases hot- rolled and cold-rolled steel from primary steel producers located throughout the Midwest or receives the steel on a toll-processing basis and does not acquire ownership of it. This steel typically requires additional processing to meet the requirements of the end-product manufacturers. The Company's intermediate processing operations include oiling, slitting, cutting-to-length, edge trimming, roller leveling and quality inspecting of flat-rolled steel. In addition, through its minority-owned investment in VCS LLC, the Company provides the steel processing service of pickling.
The first processing operation for hot-rolled steel typically involves pickling, a chemical process in which an acidic solution is applied to the steel to remove the surface oxidation and scale which develops on the steel shortly after it is hot-rolled. During the pickling process, the steel is either coated with oil to prevent oxidation or with a borax-based solution to prevent oxidation and facilitate the stamping process. After pickling, the steel is ready for either additional processing or delivery to the customer.
Cold-rolled and hot-rolled steel often go through additional processing operations to meet the requirements of end-product manufacturers. Slitting is the cutting of coiled steel to precise widths. Cutting-to-length produces steel cut to specified lengths ranging from 12 inches to 168 inches. Edge trimming removes a specified portion of the outside edges of the coiled steel to produce a uniform width. Roller leveling flattens the steel by applying pressure across the width of the steel to make the steel suitable for blanking and stamping. To achieve high quality and increased volume levels and to be responsive to customers' just-in-time supply requirements, most of the Company's steel processing operations are computerized and have combined several complementary processing lines, such as slitting and cutting-to-length at single facilities. In addition to cleaning, leveling and cutting steel, the Company inspects steel to detect production flaws and utilize computers to provide both visual displays and documented records of the thickness maintained throughout the entire coil of steel. The Company also performs inventory control services for some customers.
Customers
The Company produces blanked and stamped parts and processed flat-rolled steel for a variety of industrial customers. The Company supplies steel blanks, stampings and modular assemblies primarily to North American automotive manufacturers and stampings to Tier I automotive suppliers. The Company also supplies blanks and stampings to manufacturers in the lawn and garden, HVAC, home appliance and construction industries. Finally, the Company processes flat-rolled steel for a number of primary steel producers.
One of the Company's largest customers is the Parma, Ohio stamping facility of the metal fabricating division of General Motors. The Company has been working with General Motors for more than 20 years and operates a vendor managed program to supply blanks, which includes on-site support staff, electronic data
interchange, logistics support and a just-in-time delivery system. The acquisition of MTD Automotive in November 1999 established Ford Motor Company as another significant customer. The Company supplies Ford with stampings and assemblies.
In fiscal 2001, General Motors and Ford accounted for approximately 28.4% and 12.9% of the Company's revenues, respectively.
Sales and Marketing
The current sales force consists of approximately 40 individuals. These individuals directly market the Company's automotive and steel processing products and services. The sales force is organized to enable the Company to target sales and marketing efforts at three distinct types of customers:
. OEM customers;
. Tier I suppliers; and
. Steel consumers and producers.
To supplement the sales and marketing efforts, the Company operates a sales and technical center in Auburn Hills, Michigan, which is in close proximity to its automotive customers. The Company's engineering staff at this center provides total program management, technical assistance and advanced product development support to customers during the product development stage.
Operations and Engineering
The Company operates its steel processing facilities on an integrated basis. A significant portion of the flat-rolled steel used by the Company in its blanking and stamping operations is supplied through its other steel processing operations. The Company typically designs, engineers and manufacturers substantially all of the tools and dies used in its blanking and stamping operations. Eleven of the Company's facilities were constructed by the Company and were located and designed to facilitate the integrated flow of the Company's processing operations.
Raw Materials
The basic materials required for the Company's operations are hot and cold- rolled steel. The Company obtains steel from a number of primary steel producers. A significant portion of the steel processing products and services are provided to customers on a toll processing basis. Under these arrangements, the Company charges a specified fee for operations performed without acquiring ownership of the steel and being burdened with the attendant costs of ownership and risk of loss. Through centralized purchasing, the Company attempts to purchase raw materials at the lowest competitive prices for the quantity purchased. The amount of steel available for processing is a function of the production levels of primary steel producers.
Competition
Competition for sales of steel blanks and stampings is intense, coming from numerous companies, including independent domestic and international suppliers, and from internal divisions of General Motors, Ford and DaimlerChrysler, as well as independent domestic and international Tier I and Tier II suppliers, which have blanking facilities and greater financial and other resources than the Company. The market for the Company's steel processing operations is also highly competitive. The Company competes with a number of steel processors in its region, such as Worthington Industries, Liberty Steel Fabricating, Inc., Precision Strip, Inc., and primary steel producers, many of which also have comparable facilities and greater financial and other resources than the Company. The primary characteristics of competition encountered in each of these markets are product quality, service, price and technological innovation. In addition, competition for sales of automotive
stamped modules is intense. Primary competitors in North America for the stamping business are Aetna/Sofedit, Cosma, a division of Magna International, Oxford Automotive and Tower Automotive. The significant areas of competition with these companies are price, product quality, delivery and engineering capabilities.
Employees
As of December 31, 2001, the Company had approximately 3,080 employees. The employees at four of the subsidiaries, an aggregate of approximately 1,095 employees, are covered by five collective bargaining agreements that are due to expire in May 2002, June 2002, May 2004, August 2005 and June 2006. The collective bargaining agreement that expires in June 2002 relates to the Romulus Blanking Division where operations will cease during fiscal 2002.
Backlog
Because the Company generally conducts its steel processing operations on the basis of short-term orders, backlog is not a meaningful indicator of future performance.
Seasonality
The Company typically experiences decreased revenue and operating income during its first fiscal quarter of each year, usually resulting from generally slower overall automobile production during the winter months. The Company's revenues and operating income in its third fiscal quarter can also be affected by the typically lower automobile production activities in July due to manufacturers' changeover in production lines.
Environmental Matters
The Company is subject to environmental laws and regulations concerning:
. emissions to the air;
. discharges to waterways; and
. generation, handling, storage, transportation, treatment and disposal of waste and hazardous materials.
The Company is also subject to laws and regulations that can require the remediation of contamination that exists at current or former facilities. In addition, the Company is subject to other federal and state laws and regulations regarding health and safety matters. Each of the production facilities has permits and licenses allowing and regulating air emissions and water discharges. While the Company believes that at the present time they are in substantial compliance with environmental laws and regulations, these laws and regulations are constantly evolving and it is impossible to predict whether compliance with all liability under these laws and regulations may have a material adverse effect on the Company in the future.
MTD Automotive, at its facilities in Parma and Valley City, Ohio, has engaged in industrial manufacturing operations since 1946 and 1968, during which time various hazardous substances have been handled at each facility. As a consequence of these historic operations, the potential for liability relating to contamination of soil and groundwater may exist at the Parma facility, which the Company leases from MTD Products, and the Valley City facility, which the Company owns. Although the Company could be liable for cleanup costs at these facilities, MTD Products is contractually obligated to indemnify the Company against any such costs arising as a result of operations prior to the Company's acquisition of the MTD Automotive business.
Item 2. Properties
The Company is a Delaware holding company that has sixteen wholly owned subsidiaries located in Ohio, Michigan, Georgia, Tennessee and Mexico. The Company believes substantially all of its property and equipment is in good condition and that it has sufficient capacity to meet its current operational needs. The Company considers full capacity of its operating facilities to be three eight hour shifts for 5.5 days per week. At October 31, 2001, the Company was operating at approximately 50% capacity. The Company's facilities, all of which are owned (except for its Utica, some of its Canton and Auburn Hills, Michigan, Wellington and Cleveland, Ohio facilities), are as follows:
Square Date of Subsidiary Location Footage Operation Description of Use ---------- -------- ------- --------- ------------------ Shiloh Corporation, d.b.a. Blanking/Tool and Die Mansfield Blanking Division Mansfield, Ohio 295,240 1955 Production Medina Blanking, Inc., d.b.a. Medina Blanking Division and Ohio Welded Blank Division Valley City, Ohio 489,481 1986 Blanking The Sectional Die Company, d.b.a. Wellington Die Division Wellington, Ohio 85,667(1) 1998 Tool and Die Production Sectional Stamping, Inc., d.b.a. Wellington Stamping Division Wellington, Ohio 226,316 1987 Stamping VCS Properties, LLC Valley City, Ohio 260,000(2) 1977 Other Steel Processing Liverpool Coil Processing Incorporated, d.b.a. Liverpool Coil Processing Division Valley City, Ohio 244,000 1990 Other Steel Processing Shiloh of Michigan, LLC, d.b.a. Romulus Blanking Division Romulus, Michigan 170,600(3) 1996 Blanking Greenfield Die & Manufacturing Corp., d.b.a. Canton Manufacturing Division and Canton Die Stamping/Tool and Die Division Canton, Michigan 280,370(4) 1996 Production C&H Design Company, d.b.a. Utica Die Division Utica, Michigan 62,500(5) 1997 Tool and Die Production Jefferson Blanking, Inc., d.b.a. Jefferson Blanking Division Pendergrass, Georgia 190,600 1998 Blanking Shiloh de Mexico S.A. de C.V. Shiloh Industries, Inc., d.b.a. Saltillo Welded Blank Division Saltillo, Mexico 153,020 2000 Blanking Shiloh Automotive, Inc., d.b.a. Liverpool Stamping Division and MTD Automotive Valley City, Ohio 250,000(6) 1999 Stamping Shiloh Automotive, Inc., d.b.a. Cleveland Stamping Division, Cleveland Die Division and MTD Stamping/Tool and Die Automotive Cleveland, Ohio 395,000(6)(7) 1999 Production/Administration Dickson Manufacturing, d.b.a. Dickson Manufacturing Division Dickson, Tennessee 242,000 2000 Stamping |
(2) This facility is currently leased to Viking and VCS LLC conducts its operations from this site.
(3) The land, building and certain machinery and equipment at this facility are held for sale as of October 31, 2001.
(4) Represents five facilities, three of which are leased. The tool and die operations conducted by Canton Die Division will cease during fiscal 2002. The three leased facilities used by Canton Die Division are subject to a long term lease.
(5) Since October 31, 2000, operations of Utica Die Division ceased to be conducted at these facilities. The Company negotiated early termination of these leases during the first quarter of fiscal 2002.
(6) The Valley City facility is owned by the Company and the Cleveland facility is leased to the Company from MTD Products.
(7) Includes leased facilities that house the Sales and Technical Center in Auburn Hills, Michigan.
Item 3. Legal Proceedings
The Company is involved in various lawsuits arising in the ordinary course of business. In management's opinion, the outcome of these matters will not have a material adverse effect on the Company's financial condition, results of operations or cash flows.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders during the fourth quarter of fiscal 2001.
Item 4A. Executive Officers of the Company
The information under this Item 4A is furnished pursuant to Instruction 3 to Item 401(b) of Regulation S-K.
Curtis E. Moll, Chairman of the Board. Mr. Moll became Chairman of the Board of the Company in April 1999, and he has served as a Director of the Company since its formation in April 1993. Since 1980, Mr. Moll has served as the Chairman of the Board and Chief Executive Officer of MTD Products Inc, a privately-held manufacturer of outdoor equipment. Mr. Moll also serves as a director of Sherwin Williams Company and AGCO Corporation. Mr. Moll is 62 years old.
Theodore K. Zampetis, President and Chief Executive Officer. On January 28, 2002, Mr. Zampetis became the President and Chief Executive Officer of the Company. He has served as a director of the Company since 1993. From January 2001 to January 2002, he served as President of Strategic Partners International, LLC, a management consulting firm. From November 1999 to December 2000, Mr. Zampetis independently conducted research and performed certain consulting services. Previously, he had worked for 27 years at Standard Products Company, a manufacturer of rubber and plastic parts principally for automotive original equipment manufacturers, where he held various positions, including serving as the President and Chief Operating Officer of World Wide Operations from 1991 to 1999 at which point Standard Products was sold to Cooper Tire. Mr. Zampetis is 56 years old.
John F. Falcon, President and Chief Executive Officer. From April 1999 until January 28, 2002, Mr. Falcon had been the President and Chief Executive Officer and a Director of the Company. From 1995 to April 1999, Mr. Falcon held several positions at Lear Corporation, a supplier of automotive interior systems, including Director of Interiors for its General Motors division. Prior to that time, he had over twenty years of experience at General Motors, a manufacturer of vehicles, where he held several positions, including, among others, Worldwide Operations Manager for ignition and filtration products. Mr. Falcon is 53 years old. Mr. Falcon left the Company in January 2002.
Stephen E. Graham, Chief Financial Officer. Mr. Graham was named Chief Financial Officer in October 2001. From February 2000 to October 2001, Mr. Graham served as Executive Vice President and Chief Financial Officer of Republic Technologies International, a steel manufacturing company. From May 1996 to February 2000, Mr. Graham served as Vice President and Chief Financial Officer of Dura Automotive, a Tier I automotive supplier. Prior to that time, Mr. Graham held senior financial management positions with automotive and truck component manufacturers such as Magna International, Truck Components and Cambridge Industries. Mr. Graham is 44 years old.
David K. Frink, Vice President of Engineered Welded Blanks. Mr. Frink was named Vice President of Engineered Welded Blanks in July 1997. He also served as Director of Corporate Purchasing from May 1996 to November 1999. Mr. Frink was President of Steel Processing from August 1996 to July 1997. Prior to August 1996, Mr. Frink had been the plant general manager at Liverpool Coil Processing since June 1991. Prior to that time, Mr. Frink had over 21 years of experience in the integrated steel industry working for LTV Steel. Mr. Frink is 54 years old. Mr. Frink left the Company in February 2002.
Larry D. Paquin, Vice President of Quality and Continuous Improvement. Mr. Paquin has served as Vice President of Quality and Continuous Improvement since August 1999. Prior to his tenure with the Company, Mr. Paquin had been Vice President and General Manager of Thomas Madison Incorporated, a privately-held automotive stamping manufacturer, from April 1996 to July 1999. Prior to that time, Mr. Paquin served as President of the Crescive Die and Tool Company, a privately-held tool and die manufacturer. Mr. Paquin is 58 years old. Mr. Paquin left the Company in February 2002.
Mark D. Theisen, Vice President of Sales and Marketing. Mr. Theisen was named Vice President of Sales and Marketing in January 2001. Prior to that time, Mr. Theisen served as Vice President of Strategic Planning and Purchasing. Mr. Theisen was named Vice President of Strategic Planning of the automotive division of MTD Products in August 1998 and served as General Manager of the automotive division of MTD Products from June 1997 to August 1998. Prior to that time Mr. Theisen had been Marketing Manager of the automotive division of MTD Products from April 1995 to June 1997 and Sales Account Manager of the automotive division of MTD Products prior to that time. Mr. Theisen is 39 years old.
Patrick C. Boyer, Vice President of Tooling and Design. Mr. Boyer was named Vice President of Tooling and Design in June 1999. Prior to June 1999, Mr. Boyer was Vice President of Marketing from November 1998 to May 1999. Prior to that time, Mr. Boyer served as Plant General Manager of Wellington Stamping Division for a six-year period. Mr. P. Boyer is 46 years old. Mr. Boyer left the Company in January 2002.
Hayden M. Cotterill, Vice President of Engineered Products. Mr. Cotterill was named Vice President of Engineered Products in January 2000. Mr. Cotterill was employed by the Oxford Group, a Tier II supplier, from April 1998 to January 2000, where he held the position of General Manager of the suspension business unit. Prior to that time, he had over twenty-five years of experience with Eaton Corporation, a global diversified industrial manufacturer, in various positions, including general manager of two divisions of the automotive group. Mr. Cotterill is 54 years old. Mr. Cotterill left the Company in February 2002.
Stephen J. Tomasko, Vice President of Human Resources. Mr. Tomasko was named Vice President of Human Resources in April 2000. Prior thereto, Mr. Tomasko had been employed by the Reserve Group, a privately held company engaged in the acquisition and expansion of businesses involved in the production of steel and stampings. He held various positions at the Reserve Group and since 1995, he served as the Vice President of Administration. Mr. Tomasko is 58 years old. Mr. Tomasko left the Company in February 2002.
Robert A. Henderson, Vice President of Blanking. Mr. Henderson was named Vice President of Blanking in November 2000. Prior to that time, he served as Interim General Manager in charge of Mansfield Blanking and Romulus Blanking from November 1999 to November 2000. Prior thereto, he served as the Assistant Plant General Manager for Mansfield Blanking Division and in various accounting capacities for the Company since joining it in July 1996. Mr. Henderson began his career with Ernst & Young LLP. Mr. Henderson is 34 years old.
John R. Walker, Vice President of Technical and Strategic Planning. Mr. Walker was named Vice President of Technical and Strategic Planning in January 2001. From June 1998 to January 2001, Mr. Walker had been employed by Oxford Automotive, an automotive manufacturer of closure panels, structural components, and springs in the capacity of Executive Director of Advanced Modular Systems and Global Integration. From 1993 to June 1998 he was Vice President Engineering for A.O. Smith Corporation, an automotive products company. Prior to that time his experience included over 23 years in automotive related businesses, serving in key manufacturing, engineering, tooling, as well as product design and development roles. Mr. Walker is 54 years old.
James E. Buddelmeyer, Vice President of Materials and Procurement. Mr. Buddelmeyer was named Vice President of Materials and Procurement in November 1999. Prior thereto, Mr. Buddelmeyer had been employed by Arvin-Meritor, a Tier I heavy truck and automotive supplier. He had over twenty-three years of experience with Arvin-Meritor where he held positions in operations and materials management. Mr. Buddelmeyer is 50 years old. Mr. Buddelmeyer left the Company in February 2002.
Richard K. Holmes, Vice President of Engineering Technology. Mr. Holmes was named Vice President of Engineering Technology in November 1999. Prior to November 1999, Mr. Holmes held the position of Senior Vice President of Product Development of MTD Products. Prior thereto, Mr. Holmes served in various positions for MTD Products from 1993 to November 1998. Prior to that time, he had over 17 years of experience with Firestone Steel Products and General Motors. Mr. Holmes is 49 years old.
PART II
Item 5. Market for Company's Common Equity and Related Stockholder Matters
As of the close of business on February 11, 2002, there were 151
stockholders of record for the Company's Common Stock. The Company believes
that the actual number of stockholders of the Company's Common Stock exceeds
400. The Company has not declared or paid any cash dividends on shares of its
equity securities, including Common Stock, since its incorporation in April
1993. The Company currently intends to retain earnings and does not anticipate
paying dividends in the foreseeable future. The Common Stock is traded on the
Nasdaq National Market under the symbol "SHLO." On February 12, 2002, the
closing price for the Company's Common Stock was $1.40 per share.
The Company's Common Stock commenced trading on June 29, 1993. The table below sets forth the high and low bid prices for the Company's Common Stock for its four quarters in each of 2000 and 2001.
High Low ------- ------- 1st Quarter January 31, 2000........................................... $11.875 $ 8.00 2nd Quarter April 30, 2000............................................. $ 10.00 $9.0625 3rd Quarter July 31, 2000.............................................. $ 11.00 $ 5.50 4th Quarter October 31, 2000........................................... $ 9.25 $ 5.875 1st Quarter January 31, 2001........................................... $ 6.438 $ 2.50 2nd Quarter April 30, 2001............................................. $ 5.75 $ 2.850 3rd Quarter July 31, 2001.............................................. $ 5.680 $ 3.750 4th Quarter October 31, 2001........................................... $ 7.690 $ 1.90 |
On November 1, 1999, the Company issued 1,428,571 shares of its Common Stock to MTD Products as a portion of the consideration for the acquisition by the Company of MTD Automotive. As consideration owed by the Company to MTD Products Inc under the earnout provision of the Purchase Agreement, the Company issued 288,960 shares of its Common Stock in January 2001. In addition, as of December 31, 2001, the Purchase Agreement was further amended and in accordance therewith, in January 2002, the Company issued to MTD Products 42,780 shares of its Series A Preferred Stock. These issuances of shares of Common Stock and Preferred Stock were exempt from the registration requirements of the Securities Act of 1933 based on Section 4(2) of such Act.
Item 6. Selected Financial Data
The following table sets forth selected consolidated financial data of the Company. The data for each of the five years in the period ended October 31, 2001 is derived from the consolidated financial statements of the Company, which has been audited by PricewaterhouseCoopers LLP, independent accountants. The data presented below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Financial Statements and the notes thereto included elsewhere in this Annual Report.
Years Ended October 31, ----------------------------------------------- (Dollars in thousands, except 2001 2000 1999 1998 1997 per share) -------- -------- -------- -------- -------- STATEMENT OF OPERATIONS DATA: Revenues.................... $662,447 $630,762 $354,220 $299,350 $273,161 ======== ======== ======== ======== ======== Operating income (loss) as reported................... $(29,313) $ (7,269) $ 31,514 $ 30,019 $ 33,261 Change in inventory costing method (1)................. -- (798) (1,683) 42 (38) -------- -------- -------- -------- -------- Operating income (loss) as restated................... $(29,313) $ (8,067) $ 29,831 $ 30,061 $ 33,223 ======== ======== ======== ======== ======== Net income (loss) as reported................... $(35,482) $(12,555) $ 15,310 $ 15,542 $ 20,093 Change in inventory costing method (1)................. -- (476) (1,045) 26 (23) -------- -------- -------- -------- -------- Net income (loss) as restated................... $(35,482) $(13,031) $ 14,265 $ 15,568 $ 20,070 ======== ======== ======== ======== ======== EARNINGS (LOSS) PER SHARE:(2) Basic and diluted earnings (loss) per share: Net income (loss) as reported................... $ (2.40) $ (.88) $ 1.17 $ 1.19 $ 1.54 Change in inventory costing method (1)................. -- (.03) (.08) -- -- -------- -------- -------- -------- -------- Net income (loss) as restated................... $ (2.40) $ (.91) $ 1.09 $ 1.19 $ 1.54 ======== ======== ======== ======== ======== Basic weighted average number of common shares.... 14,798 14,290 13,081 13,061 13,032 Diluted weighted average number of common shares.... 14,798 14,290 13,085 13,103 13,066 OTHER DATA: Capital expenditures........ $ 41,171 $ 66,191 $ 58,417 $ 67,968 $ 63,164 Depreciation and amortiza- tion....................... 28,164 23,819 18,304 15,270 11,012 BALANCE SHEET DATA:(1)(2) Working capital............. $ 87,028 $138,963 $ 85,011 $ 57,387 $ 46,201 Total assets................ 529,460 572,107 425,419 354,693 290,344 Total debt.................. 268,545 251,545 171,450 135,865 96,400 Stockholders' equity........ 131,687 178,996 177,827 163,562 147,061 |
(2) Purchase price adjustments made in connection with the acquisitions of MTD
Automotive and Dickson Manufacturing Division are reflected in earnings
(loss) per share and balance sheet data for fiscal 2001 and 2000.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
General
The Company is a full service manufacturer of blanks and stamped components for the automotive and light truck, heavy truck and other industrial markets. The Company's engineered products include blanks, stamped components and modular assemblies. The Company also designs, engineers and manufactures precision tools and dies for the automotive and other industries. In addition, the Company provides a variety of intermediate steel processing services, such as oiling, cutting-to-length, slitting and edge trimming of hot and cold-rolled steel coils for automotive and steel industry customers. In addition, through its minority-owned investment, VCS LLC, the Company provides the intermediary steel processing service of pickling. In fiscal 2001, approximately 92.0% of the Company's revenues were generated by sales to the automotive and light and heavy truck industries.
The Company's origins date back to 1950 when its predecessor, Shiloh Tool & Die Mfg. Company, began to design and manufacture precision tools and dies. As an outgrowth of its precision tool and die expertise, Shiloh Tool & Die Mfg. Company expanded into blanking and stamping operations in the early 1960's. In April 1993, Shiloh Industries, Inc. was organized as a Delaware corporation to serve as a holding company for its operating subsidiaries and in July 1993 completed an initial public offering of Common Stock.
In August 1997, the Company acquired C&H, headquartered in Utica, Michigan. In October 1997, the Company incorporated Jefferson Blanking, Inc. and commenced operations at its facility located in Pendergrass, Georgia in July 1998.
On November 1, 1999, the Company acquired MTD Automotive, the automotive division of MTD Products Inc, headquartered in Cleveland, Ohio. MTD Automotive is primarily a Tier I supplier and primarily serves the automotive industry by providing metal stampings and modular assemblies. The aggregate consideration for the acquisition of MTD Automotive consisted of $20.0 million in cash and the issuance of 1,428,571 shares of Common Stock to MTD Products, of which 535,714 were contingently returnable at November 1, 1999. In January 2001, the aggregate consideration was increased based upon the performance of MTD Automotive during the first twelve months subsequent to closing. Specifically, the 535,714 contingently returnable shares of Common Stock were not required to be returned to the Company and the Company issued MTD Products an additional 288,960 shares of Common Stock and the Company's wholly owned subsidiary issued a note in the aggregate principal amount of $4.0 million. The Company was guarantor of the note. In addition, in accordance with the Purchase Agreement, approximately $1.8 million was returned to the Company for settlement of price concessions and capital expenditure reimbursements relating to fiscal 2000. These adjustments were reflected in the Company's financial statements for the year ended October 31, 2000 as adjustments to the purchase price payable under the terms of the Purchase Agreement. During fiscal 2001, MTD Products forgave all interest relating to the note through October 31, 2001 in the aggregate amount of $0.3 million. The Company satisfied all of its remaining obligations under the note by issuing to MTD Products 42,780 shares of Series A Preferred Stock in accordance with an amendment to the Purchase Agreement, which was entered into as of December 31, 2001. The shares of Series A Preferred Stock were issued in January 2002. In October 2001, the Company resolved a contingency in the Purchase Agreement related to price concessions for approximately $1.3 million. This additional reduction to the purchase price was recorded by reducing the value originally assigned to fixed assets and establishing an accounts receivable as of October 31, 2001. Also, in accordance with the Purchase Agreement, the purchase price may be adjusted at the end of fiscal 2002 upon resolution of a final contingency.
In July 2000, the Company announced that it would seek strategic alternatives for two of its tool and die facilities, C&H and Canton Die Division, and one of its steel processing facilities, Valley City Steel. In October 2000, the Company closed C&H and transferred certain of its assets to other Shiloh locations. During the fourth quarter of fiscal 2000, the Company recorded a pre-tax asset impairment charge of $6.5 million to write down certain long-lived assets to be disposed of. In addition, during the fourth quarter of fiscal 2000, the Company
recorded a pre-tax restructuring charge of $1.2 million associated with the closing of this facility. In October 2001, the Company recorded an additional pre-tax asset impairment charge of $0.3 million to write down long-lived assets to their current estimated fair value.
As of October 31, 2000, the Company anticipated selling the net assets of Canton Die Division for $11.8 million, recorded a pre-tax asset impairment charge of $12.8 million, and had classified these assets as held for sale. The Company was unable to sell these assets during fiscal 2001; therefore, in October 2001, the decision was made to cease operations at Canton Die Division during fiscal 2002. As the Company currently does not have a specific plan for these assets, the assets are no longer classified as held for sale as of October 31, 2001. Certain assets of Canton Die Division may be transferred to other Shiloh locations or may be sold. During fiscal 2001, the Company recorded an additional pre-tax asset impairment charge of $1.5 million and a pre-tax restructuring charge of $0.4 million associated with the shutdown of this facility. The impairment charge was primarily taken to write down the long- lived assets to their current estimated fair value.
On July 31, 2001, the Company completed the sale of certain assets and liabilities of its Valley City Steel division to Viking for $12.4 million. In connection with this transaction, the Company and Viking formed VCS LLC in which the Company owns a minority interest (49%) in the new entity and Viking owns a majority interest (51%). Viking contributed the assets purchased to the joint venture. The Company also contributed certain other assets and liabilities of Valley City Steel to the joint venture. The Company retained ownership of the land and building where the joint venture conducts its operations and leases these facilities to the joint venture. As of September 1, 2002 and on the first day of every month thereafter, the Company has the right to require VCS LLC to repurchase its interest at a put purchase price as defined in the operating agreement. In addition, as of September 1, 2002 and on the first day of every month thereafter, both the Company and Viking have the right to purchase the others interest at a call purchase price as defined in the operating agreement. The land and building leased by VCS LLC and owned by the Company secures debt incurred by VCS LLC. Once the debt matures in August 2003 and is discharged and released, the Company's ownership interest in VCS LLC will be reduced to 40% and Viking's interest will be increased to 60%. The new entity continues to supply steel processing services to the Company. As a result of the transaction changing from a 100% sale to a partial sale in fiscal 2001, the Company reduced its estimated asset impairment loss by $11.7 million.
In July 2000, the Company commenced operations of Saltillo Welded Blank Division. On August 29, 2000, the Company acquired substantially all the assets of A.G. Simpson (Tennessee), Inc., d.b.a. Dickson Manufacturing Division, for approximately $49.2 million, including approximately $1.2 million in acquisition costs. In January 2001, certain purchase price adjustments were made pursuant to the terms of the purchase agreement in which approximately $4.5 million was released from escrow and returned to the Company. For accounting purposes, these adjustments were reflected in the Company's financial statements for the year ended October 31, 2000.
On July 31, 2001, the Company completed the sale of building, land and certain other assets of the Wellington Die Division for $3.5 million in cash resulting in a pre-tax loss of $1.0 million. In addition, the Company recorded a pre-tax asset impairment charge of $2.2 million associated with the remaining assets of this facility and a restructuring charge of $0.2 million. The remaining operations at Wellington Die Division were transferred to Wellington Stamping Division in the first quarter of fiscal 2002.
In September 2001, the decision was made to cease operations at Romulus Blanking Division during fiscal 2002. During the fourth quarter of fiscal 2001, the Company recorded a pre-tax asset impairment charge of $5.8 million to write down certain assets to their estimated fair value. In addition, the Company recorded a pre-tax restructuring charge of $0.4 million associated with the closing of this facility. As of October 31, 2001, the Company has classified $7.5 million of real property and certain machinery and equipment at this facility as assets held for sale. The remaining assets will be sold or transferred to other operations within the Company.
During the fourth quarter of fiscal 2001, the Company recorded restructuring charges of $0.5 million associated with a reduction in its salaried workforce.
During the fourth quarter of fiscal 2001, the Company changed its method of inventory costing from last-in first-out ("LIFO") to first-in first-out ("FIFO") for certain inventories. Prior periods have been restated to
reflect this change. The method was changed because the Company's steel inventory has experienced declines in costs due to supply and demand in the market place and many of the Company's peer group currently use the FIFO method of inventory costing. Furthermore, the majority of the Company's inventory is currently recorded using the FIFO method; therefore, the change will provide for greater consistency in the accounting policies of the Company and will also provide a better matching of revenue and expenses. The change increased net loss in fiscal 2001 by $0.6 million or $.04 per share and $0.5 million or $.03 per share in 2000 and decreased net income by $1.0 million or $.08 per share in 1999, and increased retained earnings for years prior to 1999 by $0.7 million.
In analyzing the financial aspects of the Company's operations, you should consider the following factors.
Plant utilization levels are very important to profitability because of the capital-intensive nature of these operations. Because the Company performs a number of different operations, it is not meaningful to analyze simply the total tons of steel processed. For example, blanking and stamping involve more operational processes, from the design and manufacture of tools and dies to the production and packaging of the final product, than the Company's other services and therefore generally have higher margins.
A portion of the Company's steel processing and blanking products and services is provided to customers on a toll processing basis. Under these arrangements, the Company charges a tolling fee for the operations that it performs without acquiring ownership of the steel and being burdened with the attendant costs of ownership and risk of loss. Although the proportion of tons of steel which the Company uses or processes that is directly owned as compared to toll processed may fluctuate from quarter to quarter depending on customers' needs, the Company estimates that of total tons used or processed in its operations, approximately 67.1% in 2001, 75.9% in 2000 and 85.6% in 1999 were used or processed on a toll processing basis, excluding tons from which the Company receives a storage fee, approximately 61.0% in 2001, 72.5% in 2000 and 82.9% in 1999 were used or processed on a toll processing basis. Revenues from toll processing as a percent of total revenues were approximately 13.2% in 2001, 16.5% in 2000, and 27.6% in 1999. Revenues from operations involving directly owned steel include a component of raw material cost whereas toll processing revenues do not. Consequently, toll processing generally results in lower revenue, but higher gross margin, than directly owned steel processing. Therefore, an increase in the proportion of total revenues attributable to directly owned steel processing may result in higher revenues but lower gross margins. The Company's stamping operations generally use more directly owned steel than its other operations.
Changes in the price of scrap steel can have a significant effect on the Company's results of operations because substantially all of its operations generate engineered scrap steel. Engineered scrap steel is a planned by- product of the Company's processing operations. Changes in the price of steel, however, also can impact the Company's results of operations because raw material costs are by far the largest component of cost of sales in processing directly owned steel. The Company actively manages its exposure to changes in the price of steel, and, in most instances, passes along the rising price of steel to its customers. At times, however, the Company has been unable to do so.
Over the last several years, the Company's results of operations have been adversely affected by a large number of facility expansions and start-up operations in recent periods, such as Saltillo Welded Blank Division and Ohio Welded Blank Division, an expansion facility of Medina Blanking, Inc. Operations at expanded and new facilities are typically less efficient than established operations due to the implementation of new production processes. In addition, the Company depends on customers to implement their purchase programs in a timely manner, which affects the Company's ability to achieve satisfactory plant utilization rates. When the customers fail to implement their programs in a timely manner, the Company's results are negatively impacted. In the Company's experience, operations at expanded or new facilities may be adversely impacted by the above factors for several periods. In addition, during the last two fiscal years, the Company's results of operations have been adversely impacted as a result of the shutdown and sale of certain operations. During a shutdown, the Company typically continues to incur certain fixed costs, such as overhead related expenses, while also experiencing a diversion of certain resources, such as management-related resources.
The Company continues to maintain a customer/vendor relationship with LTV Steel Company ("LTV") with respect to purchasing processed steel from LTV's remaining inventory. In December 2000, LTV filed for bankruptcy protection under Title 11 of the United States Code. In December 2001, LTV was granted permission to liquidate assets under Title 7 of the United States Code. The Company's exposure to pre-petition and post-petition matters with LTV has been mitigated where appropriate and existing reserves are maintained to further reduce this exposure. The Company does not believe its exposure related to LTV, or other customers, will have a material adverse effect on the Company's financial results.
In August 2001, Statement of Financial Accounting Standards ("SFAS") No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets" was issued effective for all fiscal years beginning after December 15, 2001 with early application encouraged. This Statement, which supersedes certain aspects of SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long- Lived Assets to be Disposed of", addresses implementation issues associated with SFAS No. 121 and improves financial reporting by establishing one accounting model for long-lived assets to be disposed of by sale. The adoption of SFAS No. 144 is not expected to have a material effect on the Company's financial statements.
In July 2001, SFAS No. 142 "Goodwill and Other Intangible Assets" was issued effective for all fiscal quarters of fiscal years beginning after December 15, 2001 with earlier application permitted. This Statement establishes criteria for the recognition of intangible assets and their useful lives. It also results in companies ceasing the amortization of goodwill and requires companies to test goodwill for impairment on an annual basis. The Company is required to adopt SFAS No. 142 as of November 1, 2002. The Company is currently evaluating the impact that SFAS No. 142 will have on its financial condition and results of operations. The Company expects that it will no longer record $0.1 million of amortization associated with its $3.1 million of existing goodwill. The Company does not have any intangible assets impacted by SFAS No. 142.
Effective November 1, 2000, the Company adopted SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities," as amended. The adoption of SFAS No. 133 did not have a material effect on the Company's financial statements.
Results Of Operations
The following table sets forth statement of operations data of the Company expressed as a percentage of revenues for the periods indicated:
Years Ended October 31, --------------------- 2001 2000 1999 ----- ----- ----- Revenues.............................................. 100.0% 100.0% 100.0% Cost of sales......................................... 94.9 87.0 82.7 ----- ----- ----- Gross profit.......................................... 5.1 13.0 17.3 Selling, general and administrative expense........... 9.6 8.8 8.9 Asset impairment charges (recovery)................... (.2) 5.2 -- Restructuring charges................................. .2 .2 -- ----- ----- ----- Operating income (loss)............................... (4.5) (1.2) 8.4 Interest expense...................................... 3.2 2.4 2.1 Interest income....................................... * * * Minority interest..................................... -- -- .1 Other income (expense), net........................... (.4) .2 * ----- ----- ----- Income (loss) before taxes............................ (8.0) (3.4) 6.5 Provision (benefit) for income taxes.................. (2.6) (1.3) 2.5 ----- ----- ----- Net income (loss)................................... (5.4)% (2.1)% 4.0% ===== ===== ===== |
Year Ended October 31, 2001 Compared to Year Ended October 31, 2000 Revenues. Revenues increased by $31.7 million, or 5.0%, to $662.4 million for the year ended October 31, 2001 from $630.8 million for the comparable period in 2000. The increase in revenues is primarily due to Saltillo Welded Blank Division and Dickson Manufacturing Division being included in the operational results for an entire year and increased revenues at Ohio Welded Blank Division. The increases at Ohio Welded Blank Division are primarily a result of increases in production at this facility as a result of increased demand related to sport utility platforms on which the Company supplies certain parts. The increases at these locations were partially off-set by the overall slow down in the automotive and light truck and heavy truck markets. In addition, the increase in revenues was partially offset as a result of the loss of revenue with respect to the sale of Valley City Steel on July 31, 2001. The percentage of revenues from directly owned steel processed was 86.8% for fiscal 2001 compared to 83.5% for fiscal 2000. Revenues from the toll processed steel were 13.2% for fiscal 2001 compared to 16.5% for fiscal 2000. This shift in the mix of revenue from toll processing to directly owned steel processing is the result of the continued increase in revenue from automotive customers at Saltillo Welded Blank Division, Dickson Manufacturing Division and Ohio Welded Blank Division, which primarily use directly owned steel. In addition, scrap revenue decreased $4.5 million for fiscal 2001 both as a result of a decrease in the average scrap price per gross ton and a decrease in scrap volume as a result of a decrease in the total tons used or processed by the Company.
Gross Profit. Gross profit decreased by $48.6 million, or 59.2%, to $33.5 million for fiscal 2001 from $82.1 million for the comparable period in 2000. Gross margin decreased to 5.1% in fiscal 2001 from 13.0% for the comparable period in 2000. The significant decrease in gross profit and gross margin is primarily related to the decrease in revenues in the automotive and heavy truck markets not absorbing related fixed costs and the shift in the mix of revenue from toll processing to directly owned steel. In addition, lower gross margin and lower gross profit were experienced at Cleveland Die Division, Canton Die Division and Wellington Die Division as a result of the softening in the tool and die business and, with respect to results for the first nine months of fiscal 2001, at Valley City Steel as a result of the weakened steel industry.
Selling, General And Administrative Expenses. Selling, general and administrative expenses increased by $7.6 million, or 13.7%, to $63.3 million in fiscal 2001 from $55.7 million in fiscal 2000. As a percentage of revenues, these expenses increased to 9.6% for fiscal 2001 from 8.8% for fiscal 2000. The increase in both dollars and percentage was primarily the result of bad debt expense relating to certain steel industry customers, who are currently in bankruptcy proceedings, and automotive industry customers, the inclusion of Saltillo Welded Blank Division and Dickson Manufacturing Division and increases at Ohio Welded Blank Division. The increase was partially off-set by the closing of C&H in October 2000 and the sale of Valley City Steel in July 2001.
Other. The Company recognized an asset impairment recovery of $1.9 million for fiscal 2001 compared to an asset impairment charge of $33.2 million in fiscal 2000. The fiscal 2001 asset impairment recovery resulted from a reversal of the estimated loss associated with the sale of assets of Valley City Steel Company being held for sale offset by asset impairment charges resulting from the closings of Romulus Blanking Division, Wellington Die Division and Canton Die Division. In addition, a restructuring charge of $1.4 million was recognized for fiscal 2001 compared to a $1.2 million restructuring charge in fiscal 2000. The fiscal 2001 restructuring charge resulted from the closings of Romulus Blanking Division, Wellington Die Division, C&H and Canton Die Division and severance expenses related to a salaried workforce reduction. Interest expense increased to $21.2 million in fiscal 2001 from $15.4 million for the comparable period in fiscal 2000 due primarily to increased average borrowings outstanding for the purchase of Dickson Manufacturing Division, capital expansion at Saltillo Welded Blank Division and other capital expenditures made during fiscal 2000 and fiscal 2001. Interest expense of approximately $1.2 million relating to expansion of Ohio Welded Blank Division, the addition of Saltillo Welded Blank Division facility and new equipment at Dickson Manufacturing Division was capitalized in fiscal 2001. Other expense of $2.4 million for fiscal 2001 decreased from other income of $1.5 million in fiscal 2000 due primarily to loss on sale of assets at Wellington Die Division and C&H in fiscal 2001, which was partially offset by the gain on the Company jet of $1.2 million in fiscal 2000. The income tax benefit was $17.3 million in fiscal 2001 compared to $8.8 million in fiscal 2000, representing effective tax rates of 32.7% and 40.3%, respectively.
Net Income (Loss). The net loss for fiscal 2001 of $35.5 million was $22.5 million greater than the net loss of $13.0 million for the comparable period in fiscal 2000. The increase in the net loss was substantially the result of decreases in revenues in the automotive and heavy truck markets not absorbing related fixed costs and the shift in the mix of revenue from toll processing to directly owned steel, which was partially offset by a significant reduction in asset impairment charges (recovery) in fiscal 2001 compared to fiscal 2000.
Year Ended October 31, 2000 Compared To Year Ended October 31, 1999
Revenues. Revenues increased by $276.5 million, or 78.1%, to $630.8 million for the year ended October 31, 2000 from $354.2 million for the comparable period in 1999. The increase in revenues is primarily due to the inclusion of MTD Automotive and Ohio Welded Blank Division. MTD Automotive was acquired on November 1, 1999 and accounted for $207.1 million, or 74.9% of the revenue increase in fiscal 2000 as compared to fiscal 1999. Ohio Welded Blank Division, dedicated to engineered welded blanks for the automotive sector, became operational on November 1, 1999 and accounted for $60.0 million, or 21.7% of the revenue increase in fiscal 2000 as compared to fiscal 1999. In addition, in fiscal 2000, scrap revenue increased $6.9 million as a result of (1) an increase in the average scrap price per gross ton and (2) an increase in scrap volume, primarily as a result of the inclusion of MTD Automotive and Ohio Welded Blank Division. Excluding MTD Automotive and Ohio Welded Blank Division, scrap sales increased $4.1 million in fiscal 2000 as compared to fiscal 1999. The percentage of revenues from directly owned steel processed was 83.5% for fiscal 2000 compared to 72.4% for fiscal 1999. Revenues from the toll processed steel were 16.5% for fiscal 2000 compared to 27.6% for fiscal 1999. This shift in the mix of revenue from toll processing to directly owned steel primarily resulted from the addition of MTD Automotive and Ohio Welded Blank Division, which derived substantial revenue from directly owned steel.
Gross Profit. Gross profit increased by $20.8 million, or 34.0%, to $82.1 million for fiscal 2000 from $61.3 million for the comparable period in 1999. Gross margin decreased to 13.0% in fiscal 2000 from 17.3% for the comparable period in 1999. The increase in gross profit is primarily related to the acquisition of MTD Automotive, which has historically generated lower gross margins than the historical results of the Company's existing operations. The decline in gross margin is primarily a result of the addition of MTD Automotive and Ohio Welded Blank Division, which derive substantial revenue from sales of directly owned steel which results in higher revenues but lower gross margins. In addition, lower gross margin and lower gross profit were experienced at Canton Die Division and C&H as a result of the softening in the tool and die business and at Valley City Steel as a result of the weakening steel industry. Excluding MTD Automotive, Ohio Welded Blank Division, Canton Die Division, C&H and Valley City Steel, gross profit decreased by $2.7 million and gross margin increased to 19.7% for fiscal 2000.
Selling, General And Administrative Expenses. Selling, general and administrative expenses increased by $24.3 million, or 77.2%, to $55.7 million in fiscal 2000 from $31.4 million in fiscal 1999. As a percentage of revenues, these expenses decreased slightly to 8.8% for fiscal 2000 from 8.9% for fiscal 1999. The largest component of the increase, in dollars, arose principally from the addition of MTD Automotive and Ohio Welded Blank Division. Excluding MTD Automotive and Ohio Welded Blank Division, selling, general and administrative expenses increased $14.2 million from fiscal 1999 and as a percentage of revenues increased to 12.6% from fiscal 1999. Additional increases are the result of: the addition of corporate personnel and related costs, a bad debt write-off relating to one customer, increased depreciation on the new business system software, write-off of costs relating to the high yield bond offering that was terminated during the fourth quarter of fiscal 2000, administrative expenses relating to Dickson Manufacturing Division, acquired in August 2000 and administrative expenses for the start-up of the Saltillo Welded Blank Division.
Other. The Company recognized a one-time asset impairment charge of $33.2 million relating to assets held for sale at Canton Die Division and Valley City Steel as well as a one time charge of $1.2 million for restructuring related to the closing of C&H. Interest expense increased to $15.4 million in fiscal 2000 from $7.5 million for the comparable period in fiscal 1999 due primarily to increased average borrowings during fiscal 2000 that were primarily incurred in connection with acquisitions and capital expenditures made during
fiscal 1999 and fiscal 2000. Interest expense of approximately $2.6 million relating to expansion of several facilities was capitalized in fiscal 2000. The income tax benefit was $8.8 million in fiscal 2000 compared with a provision for income tax of $8.7 million in fiscal 1999, representing effective tax rates of 40.3% and 37.9%, respectively.
Net Income (Loss). Net income for fiscal 1999 decreased by $27.3 million to a net loss of $13.0 million for fiscal 2000. This decrease was substantially the result of the asset impairment charge and restructuring charge.
Liquidity And Capital Resources
At October 31, 2001, the Company had $87.0 million of working capital, representing a current ratio of 1.9 to 1 and debt to total capitalization of 67.1%.
Net cash provided by operating activities is primarily generated from operations of the Company plus non-cash charges for depreciation and amortization, which because of the capital intensive nature of the Company's business, are substantial. Net cash provided by operating activities for 2001 was $4.2 million as compared to $44.0 million for the comparable period in fiscal 2000. Fluctuations in working capital and operating losses were the primary factors causing the decrease in net cash provided by operations from fiscal 2000 to fiscal 2001. Net cash provided by operating activities has historically been used by the Company to fund a portion of its capital expenditures.
Net cash used in investing activities for fiscal 2001 was $18.7 million compared to $137.0 million for the comparable period in fiscal 2000. The primary reasons for the decrease are the result of no acquisitions occurring in fiscal 2001, a reduction in capital expenditures offset by proceeds received primarily from the sale of assets of Valley City Steel and Wellington Die Division. Net cash provided by financing activities was $18.1 million in fiscal 2001 compared to $92.6 million in fiscal 2000. The primary reason for the decrease in fiscal 2001 compared to fiscal 2000 relates to decreased capital spending, decreased acquisition activity and proceeds from asset sales.
The Company's estimated capital expenditures for fiscal 2002 are approximately $25.0 million. The capital expenditures in fiscal 2002 are anticipated to be primarily for support of new business, expected increases in existing business and to enhance productivity.
Capital expenditures, excluding acquisitions, were $41.2 million during the year ended October 31, 2001 and $66.2 million during fiscal 2000. The capital expenditures made during 2001 were primarily for expansions of existing facilities of approximately $34.1 million, as well as sustaining capital expenditures of approximately $7.1 million.
On August 11, 2000, the Company entered into a credit agreement with JP Morgan Chase, formerly The Chase Manhattan Bank, as administrative agent for a group of lenders, which replaced the KeyBank Agreement with KeyBank NA as agent for a group of lenders. The credit agreement had an original commitment of $300.0 million and expired in August 2005. All amounts outstanding under the KeyBank Agreement were refinanced and all existing obligations under the KeyBank Agreement were terminated. As a result of the refinancing, the Company capitalized deferred financing costs of $1.5 million associated with the new Chase Manhattan credit agreement in the fourth quarter of fiscal 2000, which is being amortized over the term of the debt.
Under the credit agreement, the Company has the option to select the applicable interest rate at the alternative base rate ("ABR"), as defined in the credit agreement to be the greater of the prime rate in effect on such day and the federal funds effective rate in effect on such day plus half of 1%, or the LIBOR rate plus a factor determined by a pricing matrix (ranging from 0.5% to 1.5% for the ABR and ranging from 1.5% to 2.5% for the LIBOR rate) based on funded debt to earnings before interest, taxes, depreciation and amortization.
On May 10, 2001, the Company amended the credit agreement primarily to change the covenant thresholds. This amendment also provided that, among other things, upon the sale of Valley City Steel, the amount of availability under the credit agreement would decrease by $10.0 million. In addition this amendment increased the pricing matrix such that the ABR factor ranges from 1.25% to 2.5% and the LIBOR factor ranges from 2.25% to 3.5%. The factor as determined by the pricing matrix was 3.5% as of October 31, 2001 and 2.0% as of October 31, 2000. As a result of this amendment, the Company capitalized deferred financing costs of $0.8 million which are being amortized over the remaining term of the debt.
The terms of the credit agreement also require an annual commitment fee based on the amount of unused commitments under the credit agreement and a factor determined by a pricing matrix (ranging from 0.375% to 0.5%) based on funded debt to earnings before interest, taxes, depreciation and amortization. The credit agreement also provides for the incurrence of debt under standby letters of credit and for the advancement of funds under a discretionary line of credit. The maximum amount of debt that may be incurred under each of these sources of funds is $15.0 million. Total availability at October 31, 2001 under the Company's credit agreement was $290.0 million, of which $23.5 million was unused. The interest rate at October 31, 2001 and 2000 was 5.875% and 8.625%, respectively.
The credit agreement is collateralized by an interest in all of the Company's and its wholly owned domestic subsidiaries' cash and cash accounts, accounts receivable, inventory, mortgages on certain owned real property and equipment, excluding fixtures and general intangibles such as patents, trademarks and copyrights.
The credit agreement includes, without limitation, covenants involving minimum interest coverage, minimum tangible net worth coverage and a minimum leverage ratio. In addition, the credit agreement limits the incurrence of additional indebtedness, capital expenditures, investments, dividends, transactions with affiliates, asset sales, leaseback transactions, acquisitions, prepayments of other debt, hedging agreements and liens and encumbrances and certain transactions resulting in a change of control. As of October 31, 2001, the Company was not in compliance with its debt covenants under the credit agreement.
On January 25, 2002, the Company's lenders consented to further amend the credit agreement. The amended and restated credit agreement was executed as of February 12, 2002. Significant provisions of the amendment and restatement include an increase in the pricing matrix such that the ABR factor ranges from 1.5% to 3.0% and the LIBOR factor ranges form 2.5% to 4.0%. In addition, the amended and restated credit agreement expires on April 30, 2004. The Company is required to obtain within 90 days of execution of the amendment and restatement $8.0 million in additional liquidity. This liquidity will be generated through certain transactions to be entered into with related parties and includes (1) the sale of certain machinery and equipment for $6.5 million, (2) payment of $1.0 million associated with a three year supply arrangement and (3) the issuance of two 9.0% promissory notes due May 1, 2004 in the aggregate principal of $0.5 million. In addition, the Company also has satisfied its requirement to generate approximately $12.0 million of additional liquidity, as defined in the amended and restated credit agreement, during the first quarter of fiscal 2002. Net proceeds from the sale, transfer, lease or other disposition of certain assets by the Company are required to be used to prepay outstanding debt, which will reduce the total commitment under the amended and restated credit agreement by the amount equal to such prepayment. Certain additional changes to covenant thresholds and additional reporting requirements were instituted in accordance with the amended and restated credit agreement, such as capital expenditures for the Company are limited to $29.1 million for the fiscal year ending October 31, 2002 and the Company is required to achieve earnings before interest, taxes, depreciation and amortization ("EBITDA") of $24.3 million for the year ending October 31, 2002. In connection with such amendment and restatement, the Company is required to pay an amendment fee to each lender equal to .25% of the aggregate amount of such lender's commitment. In addition, JP Morgan Chase received an arrangement fee of $0.2 million. Under the terms of the amended and restated credit agreement, the Company would have been in compliance with its covenants as of October 31, 2001. The Company is currently in compliance with its covenants under the amended and restated credit agreement.
On January 22, 2001, the Company's wholly-owned subsidiary, MTD Automotive, executed a note in the aggregate principal amount of approximately $4.0 million in favor of MTD Products Inc as partial payment of
the additional consideration owed to MTD Products based on the performance of MTD Automotive for the first twelve months subsequent to consummation of such acquisition. Specifically, aggregate consideration increased in that the 535,714 contingently returnable shares of Common Stock were not required to be returned to the Company, the Company issued MTD Products an additional 288,960 shares of Common Stock and the note was issued to MTD Products Inc. These adjustments were reflected in the Company's financial statements for the year ended October 31, 2000 as adjustments to the purchase price payable under the terms of the Purchase Agreement. During fiscal 2001, MTD Products forgave all interest relating to the note through October 31, 2001 in the aggregate amount of $0.3 million. The Company satisfied all of its remaining obligations under the note by issuing to MTD Products 42,780 shares of Series A Preferred Stock in accordance with an amendment to the Purchase Agreement, which was entered into as of December 31, 2001. The shares of Series A Preferred Stock were issued in January 2002.
In January 2001, due to certain purchase price adjustments made pursuant to the Asset Purchase Agreement, dated July 18, 2000, by and between the Company and Dickson Manufacturing Division, approximately $4.5 million was released from escrow and returned to the Company. For accounting purposes, these adjustments were reflected in the Company's financial statements for the year ended October 31, 2000.
In February 2001, the Company terminated its demand promissory note as of December 6, 1996 in favor of The Richland Bank in the aggregate principal amount of $4.0 million.
On July 31, 2001, the Company repaid the $5.4 million Medina County, Ohio variable rate industrial revenue bonds in connection with the sale of certain assets of Valley City Steel. These variable rate industrial revenue bonds due in 2010 had been issued in March 1995 by Medina County, Ohio on behalf of the Company for an aggregate of $5.4 million in principal amount. These bonds had been secured by a letter of credit.
On July 31, 2001, the Company completed the sale of certain assets and liabilities of its Valley City Steel division to Viking for $12.4 million. In connection with this transaction, the Company and Viking formed VCS LLC in which the Company owns a minority interest (49%) in the new entity and Viking owns a majority interest (51%). Viking contributed the assets purchased to the joint venture. The Company also contributed certain other assets and liabilities of Valley City Steel to the joint venture. The Company retained ownership of the land and building where the operations of the joint venture take place, and leases these to the joint venture. The new entity continues to supply steel processing services to the Company. The land and building leased by VCS LLC and owned by the Company secures debt incurred by VCS LLC. Once the debt matures in August 2003 and is discharged and released, the Company's ownership interest in VCS LLC will be reduced to 40% and Viking's interest will be increased to 60%. As a result of the transaction changing from a 100% sale to a partial sale in fiscal 2001, the Company reduced its estimated asset impairment loss by $11.7 million.
On July 31, 2001, the Company completed the sale of building, land and certain other assets of the Wellington Die Division for $3.5 million in cash resulting in a pre-tax loss of $1.0 million. In addition, The Company recorded a pre-tax asset impairment charge of $2.2 million associated with the remaining assets of this facility and a restructuring charge of $0.2 million. The remaining operations at Wellington Die Division were transferred to Wellington Stamping Division in the first quarter of fiscal 2002.
The Company continues to maintain a customer/vendor relationship with LTV with respect to purchasing processed steel from LTV's remaining inventory. In December 2000, LTV filed for bankruptcy protection under Title 11 of the United States Code. In December 2001, LTV was granted permission to liquidate assets under Chapter 7 of the United States Code. The Company's exposure to pre- petition and post-petition matters with LTV has been mitigated where appropriate and existing reserves are maintained to further reduce this exposure. The Company does not believe its exposure related to LTV, or other customers, will have a material adverse effect on the Company's business, financial condition or results of operations.
During 2001, the Company was unable to sell the net assets of Canton Die Division. In October 2001, the decision was made that operations at this facility would cease during fiscal 2002. The Company recorded a pre-tax asset impairment charge of $1.5 million and a pre-tax restructuring charge of $0.4 million associated with the shutdown of this facility. The impairment charge was primarily taken to write down the long-lived assets to their current estimated fair value.
In September 2001, the decision was made to cease operations at the Romulus Blanking Division during fiscal 2002. During the fourth quarter ended October 31, 2001, the Company recorded a pre-tax asset impairment charge of $5.8 million to write-down certain assets to their estimated fair value. Fair value was primarily based on appraisal values. Actual sale value may differ significantly from such estimates. In addition, the Company recorded a pre-tax restructuring charge of $0.4 million associated with the closing of the Romulus Blanking Division. The Company has classified $7.5 million of real property and certain machinery and equipment, which it intends to sell during fiscal 2002, as Net Assets Held for Sale as of October 31, 2001.
During the fourth quarter of fiscal 2001, the Company recorded restructuring charges of $0.5 million associated with a reduction in its salaried workforce.
The Company from time to time is involved in various stages of discussion or negotiation regarding other acquisitions, dispositions and other such transactions and strategic alternatives. There is no assurance that any such sale or strategic or other alternative will be consummated.
The Company is involved in various lawsuits arising in the ordinary course of business. In management's opinion, the outcome of these matters will not have a material adverse effect on the Company's financial condition, results of operations or cash flows.
The Company believes that it has sufficient resources available to meet the Company's cash requirements through at least the next twelve months. The Company believes that it can adequately fund its cash needs for the foreseeable future through borrowings under the amended credit agreement and cash generated from operations. In addition, the Company anticipates improving its cash position by accelerating receipt of payments from certain customers, obtaining tax refunds from federal and state government, reducing inventory levels and through the sale of certain plant, property and equipment. The Company's capital requirements will depend on and could increase as a result of many factors, including, but not limited to, the ability of the Company to accomplish its strategic objectives, further downturns in the automotive and light truck and heavy industries and in the economy in general.
Effect Of Inflation
Inflation generally affects the Company by increasing the interest expense of floating rate indebtedness and by increasing the cost of labor, equipment and raw materials. The general level of inflation has not had a material effect on the Company's financial results.
Euro
On January 1, 1999, eleven of the fifteen countries (the "Participating Countries") that are members of the European Union established a new uniform currency known as the "Euro." The currency existing prior to such date in the Participating Countries was phased out, effective January 1, 2002. Because the Company has no European operations and no material European sales, the Company does not anticipate that the introduction and use of the Euro will materially affect the Company's business, prospects, results of operations or financial condition.
Outlook
The statements contained in this Annual Report of Form 10-K that are not historical facts are forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties with respect to the Company's operations in fiscal 2001 as well as over the long term such as, without limitation, (i) the Company's dependence on the automotive and light truck and heavy truck industries, which are highly cyclical, the dependence of the automotive and light truck industry on consumer spending, which is subject to the impact of domestic and international economic conditions and regulations and policies regarding international trade, (ii) the ability of the Company to accomplish its strategic objectives with respect to external expansion
through selective acquisitions and internal expansion, (iii) increases in the
price of, or limitations on the availability of steel, the Company's primary
raw material, or decreases in the price of scrap steel (iv) risks associated
with integrating operations of acquired companies, (v) potential disruptions or
inefficiencies in operations due to or during facility expansions or start-up
facilities, (vi) risks related to conducting operations in a foreign country,
(vii) risks related to labor relations, labor expenses or work stoppages
involving the Company, its customers or suppliers or (viii) changes in the
estimated sale prices of assets held for sale. Any or all of these risks and
uncertainties could cause actual results to differ materially from those
reflected in the forward-looking statements. These forward-looking statements
reflect management's analysis only as of the date of the filing of this Annual
Report on Form 10-K. The Company undertakes no obligation to publicly revise
these forward-looking statements to reflect events or circumstances that arise
after the date hereof. In addition to the disclosure contained herein, readers
should carefully review risks and uncertainties contained in other documents
the Company files from time to time with the Securities and Exchange
Commission.
Item 7A. Quantitative And Qualitative Disclosures About Market Risk
The Company's major market risk exposure is primarily due to possible fluctuations in interest rates as they relate to its variable rate debt. The Company does not enter into derivative financial investments for trading or speculation purposes. As a result, the Company believes that its market risk exposure is not material to the Company's financial position, liquidity or results of operations.
Item 8. Financial Statements and Supplementary Data
INDEX TO FINANCIAL STATEMENTS
Page ---- Report of Independent Accountants........................................ 27 Consolidated Balance Sheets at October 31, 2001 and 2000................. 28 Consolidated Statements of Operations for the three years ended October 31, 2001................................................................ 29 Consolidated Statements of Cash Flows for the three years ended October 31, 2001................................................................ 30 Consolidated Statements of Stockholders' Equity for the three years ended October 31, 2001........................................................ 31 Notes to Consolidated Financial Statements............................... 32 |
Financial Statement Schedule for the three years ended October 31, 2001 is included in Item 14 of this Annual Report of Form 10-K.
II--Valuation and Qualifying Accounts and Reserves
All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Shiloh Industries, Inc.
In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Shiloh Industries, Inc. and its subsidiaries at October 31, 2001 and 2000 and the results of their operations and their cash flows for each of the three years in the period ended October 31, 2001 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
As discussed in Notes 2 and 6 to the consolidated financial statements, the Company changed its method of accounting for certain inventories in 2001.
/s/ PricewaterhouseCoopers LLP Cleveland, Ohio February 12, 2002 |
SHILOH INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
October 31, -------------------------- 2001 2000 ------------ ------------ ASSETS: Cash and cash equivalents.......................... $ 4,715,384 $ 1,172,597 Accounts receivable, net........................... 95,172,408 127,572,671 Income tax receivable.............................. 2,713,969 1,346,659 Inventories, net................................... 58,350,213 67,733,557 Net assets held for sale........................... 7,499,946 32,705,765 Deferred income taxes.............................. 11,535,482 13,980,429 Prepaid expenses................................... 3,237,120 5,039,467 ------------ ------------ Total current assets........................... 183,224,522 249,551,145 ------------ ------------ Property, plant and equipment, net................. 315,284,720 308,315,249 Goodwill, net...................................... 3,143,500 3,793,616 Investment and advances to affiliate............... 12,273,888 -- Other assets....................................... 15,533,845 10,447,412 ------------ ------------ Total assets................................... $529,460,475 $572,107,422 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY: Accounts payable................................... $ 78,753,589 $ 89,615,428 Advanced billings.................................. 382,120 580,758 Other accrued expenses............................. 17,060,767 20,391,366 ------------ ------------ Total current liabilities...................... 96,196,476 110,587,552 ------------ ------------ Long-term debt..................................... 268,545,392 251,545,392 Deferred income taxes.............................. 125,777 22,883,801 Long-term benefit liabilities...................... 31,096,229 6,296,336 Other liabilities.................................. 1,809,601 1,798,526 ------------ ------------ Total liabilities.............................. 397,773,475 393,111,607 ------------ ------------ Commitments and contingencies Stockholders' equity: Preferred stock, $.01 per share; 5,000,000 shares authorized and unissued......................... -- -- Common stock, par value $.01 per share; 25,000,000 shares authorized; 14,798,094 shares issued and outstanding at October 31, 2001 and 2000, respectively.............................. 147,980 147,980 Paid-in capital.................................. 53,924,048 53,924,048 Retained earnings................................ 89,783,206 125,265,330 Other comprehensive loss......................... (12,168,234) (341,543) ------------ ------------ Total stockholders' equity..................... 131,687,000 178,995,815 ------------ ------------ Total liabilities and stockholders' equity..... $529,460,475 $572,107,422 ============ ============ |
The accompanying notes are an integral part of these financial statements.
SHILOH INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended October 31, ---------------------------------------- 2001 2000 1999 ------------ ------------ ------------ Revenues.............................. $662,446,826 $630,761,934 $354,219,562 Cost of sales......................... 628,922,572 548,662,325 292,947,853 ------------ ------------ ------------ Gross profit.......................... 33,524,254 82,099,609 61,271,709 Selling, general and administrative expenses............................. 63,343,792 55,698,948 31,441,216 Asset impairment charges (recovery)... (1,917,523) 33,237,367 -- Restructuring charges................. 1,410,757 1,229,932 -- ------------ ------------ ------------ Operating income (loss)............... (29,312,772) (8,066,638) 29,830,493 Interest expense...................... 21,186,489 15,406,999 7,488,570 Interest income....................... 94,197 94,228 109,331 Minority interest..................... -- -- 473,975 Other income (expense), net........... (2,369,177) 1,535,679 65,682 ------------ ------------ ------------ Income (loss) before equity in net earnings of affiliated company and income taxes......................... (52,774,241) (21,843,730) 22,990,911 Equity in net earnings of affiliated company.............................. 20,809 -- -- ------------ ------------ ------------ Income (loss) before income taxes..... (52,753,432) (21,843,730) 22,990,911 Provision (benefit) for income taxes.. (17,271,308) (8,812,314) 8,725,480 ------------ ------------ ------------ Net income (loss)................... $(35,482,124) $(13,031,416) $ 14,265,431 ============ ============ ============ Basic earnings (loss) per share: Net income (loss)................... $ (2.40) $ (.91) $ 1.09 ============ ============ ============ Weighted average number of common shares............................. 14,798,094 14,290,105 13,080,563 ============ ============ ============ Diluted earnings (loss) per share:.... Net income (loss)................... $ (2.40) $ (.91) $ 1.09 ============ ============ ============ Weighted average number of common shares............................. 14,798,094 14,290,105 13,085,283 ============ ============ ============ |
The accompanying notes are an integral part of these financial statements.
SHILOH INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended October 31, ----------------------------------------- 2001 2000 1999 ------------- ------------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss)................. $ (35,482,124) $ (13,031,416) $14,265,431 Adjustments to reconcile net income (loss) from continuing operations to net cash provided by operating activities: Depreciation and amortization... 28,163,558 23,819,306 18,303,985 Asset impairment charges (recovery)..................... (1,917,523) 33,237,367 -- Equity in net earnings of affiliated company............. (20,809) -- -- Non cash restructuring charges.. 907,004 969,897 -- Minority interest............... -- -- (473,975) Deferred income taxes........... (12,946,000) (11,438,828) 6,817,461 Loss (gain) on sale of assets... 1,813,830 (1,554,620) (60,059) Changes in operating assets and liabilities, net of working capital changes resulting from acquisitions: Accounts receivable............. 33,377,456 (17,199,635) (32,867,804) Inventories..................... 13,790,600 (2,859,269) (651,921) Prepaids and other assets....... 3,273,070 7,085,956 (5,097,082) Payables and other liabilities.. (25,394,955) 27,620,310 11,887,914 Accrued income taxes............ (1,367,309) (2,633,435) 273,318 ------------- ------------- ----------- Net cash provided by operating activities................... 4,196,798 44,015,633 12,397,268 ------------- ------------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures.............. (41,170,566) (66,190,565) (58,416,797) Proceeds from sale of assets...... 16,167,109 1,785,532 11,452,211 Acquisitions, net of cash......... 6,298,772 (72,634,232) -- ------------- ------------- ----------- Net cash used in investing activities................... (18,704,685) (137,039,265) (46,964,586) ------------- ------------- ----------- CASH FLOWS FROM FINANCING ACTIVATES: Proceeds from short-term borrowings....................... -- -- 63,808,000 Repayments of short-term borrowings....................... -- -- (37,713,000) Book overdrafts................... 1,879,980 18,069,886 968,000 Proceeds from long-term borrowings....................... 359,900,000 352,350,000 30,458,000 Repayments of long-term borrowings....................... (342,900,000) (276,300,000) (20,968,000) Payment of debt financing costs... (829,306) (1,499,461) (1,052,601) ------------- ------------- ----------- Net cash provided by financing activities................... 18,050,674 92,620,425 35,500,399 ------------- ------------- ----------- Net increase (decrease) in cash and cash equivalents................... 3,542,787 (403,207) 933,081 Cash and cash equivalents at beginning of year.................. 1,172,597 1,575,804 642,723 ------------- ------------- ----------- Cash and cash equivalents at end of year............................... $ 4,715,384 $ 1,172,597 $ 1,575,804 ============= ============= =========== |
The accompanying notes are an integral part of these financial statements.
SHILOH INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock Accumulated Common ($.01 Additional Other Other Stock Par Paid-In Retained Comprehensive Comprehensive Shares Value) Capital Earnings Loss Total Loss ---------- -------- ----------- ------------ ------------- ------------ ------------- October 31, 1998........ 13,080,563 $130,805 $39,399,805 $123,287,186 $ -- $162,817,796 $ -- Cumulative effect on prior years change in inventory costing method (Note 6)........ -- -- -- 744,129 -- 744,129 -- Net income.............. -- -- -- 14,265,431 -- 14,265,431 -- ---------- -------- ----------- ------------ ------------ ------------ ------------ October 31, 1999........ 13,080,563 130,805 39,399,805 138,296,746 -- 177,827,356 Issuance of common shares................. 1,717,531 17,175 14,524,243 -- -- 14,541,418 -- Net loss................ -- -- -- (13,031,416) -- (13,031,416) (13,031,416) Minimum pension liability, net of tax of $218,363............ -- -- -- -- (341,543) (341,543) (341,543) ------------ Comprehensive income (loss)................. -- -- -- -- -- -- (13,372,959) ---------- -------- ----------- ------------ ------------ ------------ October 31, 2000........ 14,798,094 147,980 53,924,048 125,265,330 (341,543) 178,995,815 Net loss................ -- -- -- (35,482,124) -- (35,482,124) (35,482,124) Minimum pension liability, net of tax of $7,585,392.......... -- -- -- -- (11,826,691) (11,826,691) (11,826,691) ------------ Comprehensive income (loss)................. -- -- -- -- -- -- $(60,681,774) ---------- -------- ----------- ------------ ------------ ------------ ============ October 31, 2001........ 14,798,094 $147,980 $53,924,048 $ 89,783,206 $(12,168,234) $131,687,000 ========== ======== =========== ============ ============ ============ |
The accompanying notes are an integral part of these financial statements.
SHILOH INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1--Business
Shiloh Industries, Inc. and its subsidiaries (the "Company") is a full service manufacturer of blanks, stamped components and modular assemblies for the automotive and light truck, heavy truck and other industrial markets. The Company's blanks, stampings and modular assemblies are substantially sold to automotive and truck original equipment manufacturers ("OEMs"). To a lesser extent, the Company designs, engineers and manufacturers precision tools and dies and welding and assembly equipment for use in its blanking and stamping operations for sale to OEMs, Tier I automotive suppliers and other industrial customers. Furthermore, the Company, through its operations and minority-owned investment, provides a variety of intermediate steel processing services, such as pickling and oiling, cutting-to-length, slitting and edge trimming of hot and cold-rolled steel coils for automotive and steel industry customers. The Company has sixteen wholly owned subsidiaries at locations in Ohio, Michigan, Georgia, Tennessee and Mexico.
Note 2--Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and all wholly-owned and majority-owned subsidiaries. All significant intercompany transactions have been eliminated. An investment in a less than majority-owned affiliate is accounted for using the equity method.
Revenue Recognition
The Company recognizes revenue upon product shipment. Revenues include both direct sales as well as toll processing revenue. Toll processing revenue is generated as a result of the Company performing steel processing operations without acquiring ownership of the material and is recorded on a net basis. Revenues include $87,404,094, $103,937,259 and $97,937,323 of toll processing revenue for 2001, 2000 and 1999, respectively.
The Company recognizes revenue on tooling contracts when the contract is complete. Losses are provided for when estimates of total contract revenue and contract costs indicate a loss.
Shipping and Handling Costs
The Company classifies all amounts billed to a customer in a sales transaction related to shipping and handling as revenue. Additionally, the Company classifies costs incurred by the seller for shipping and handling as costs of goods sold.
Employee Benefit Plans
The Company accrues the cost of defined benefit pension plans which cover a majority of the Company's employees in accordance with Statement of Financial Accounting Standards ("SFAS") No. 87. The plans are funded based on the requirements and limitations of the Employee Retirement Income Security Act of 1974. The majority of employees of the Company participate in discretionary profit sharing plans administered by the Company. The Company also provides postretirement benefits to certain employees (Note 12).
Intangibles
Goodwill represents the excess of cost over the fair value of net assets of acquired entities and is amortized on a straight-line basis over its expected benefit period of 30 years. During 2001, 2000 and 1999,
SHILOH INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
goodwill amortization amounted to $139,280, $396,803 and $408,558 respectively. Accumulated amortization was $616,463 and $1,589,464 as of October 31, 2001 and 2000, respectively.
The Company uses an undiscounted cash flow method to review the recoverability of the carrying value of goodwill and other long-lived assets.
Deferred financing costs are amortized over the term of the debt. During 2001, 2000 and 1999, amortization of these costs amounted to $550,855, $232,475 and $17,543, respectively. Accumulated amortization was $800,873 and $250,018 as of October 31, 2001 and 2000, respectively.
Statement of Cash Flows Information
Cash and cash equivalents include checking accounts and all highly liquid investments with an original maturity of three months or less. Cash equivalents are stated at cost, which approximates market value.
Supplemental disclosures of cash flow information are as follows:
Years Ended October 31, ---------------------------------- 2001 2000 1999 ----------- ----------- ---------- Cash paid for: Interest.................................. $21,647,043 $17,223,100 $9,843,836 Income taxes, net of refunds.............. $ 920,000 $ 5,259,947 $1,606,386 Noncash investing and financing activities: Investment in affiliate through contributed assets....................... $12,446,734 $ -- $ -- Assets acquired by assumption of liabilities in a purchase business combination.............................. $ -- $26,675,532 $ -- Note payable issued in a purchase business combination.............................. $ -- $ 4,045,392 $ -- Accounts receivable from purchase business combinations............................. $ 1,326,000 $ 6,298,772 $ -- Common stock issued in a purchase business combination.............................. $ -- $14,541,419 $ -- |
The interest on the note payable issued in a purchase business combination was forgiven (see Note 10).
Inventories
Inventories are valued at the lower of cost or market, cost being determined by the first-in first-out ("FIFO") method, which approximates average cost. During the fourth quarter of fiscal 2001, the Company changed the method of inventory costing from last-in first-out ("LIFO") to FIFO for certain inventories. Prior periods have been restated to reflect this change (Note 6).
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Expenditures for maintenance, repairs and renewals are charged to expense as incurred, whereas major improvements are capitalized. The cost of these improvements is depreciated over their estimated useful lives. Useful lives range from five to twelve years for furniture and fixtures and machinery and equipment, fifteen to twenty years for land improvements and thirty to forty years for buildings and their related improvements. Depreciation is computed using principally the straight-line method for financial reporting purposes and accelerated methods for income tax purposes.
Income Taxes
The Company utilizes the asset and liability method in accounting for income taxes which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amount and tax basis of assets and liabilities.
SHILOH INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Concentration Of Credit Risk
The Company sells products to customers primarily in the automotive, light truck and heavy truck industries. The Company performs on-going credit evaluations of its customers and generally does not require collateral when extending credit. The Company maintains a reserve for potential credit losses. Such losses have historically been within management's expectations. Currently, the Company does not have financial instruments with off-balance sheet risk. During fiscal 2001, the Company's sales to General Motors and Ford Motor Company represented 28.4% and 12.9% of the Company's revenues, respectively.
As of October 31, 2001, the Company had approximately 3,100 employees. The employees at four of its subsidiaries, an aggregate of approximately 1,180 employees, are covered by five collective bargaining agreements that are due to expire in May 2002, June 2002, May 2004, August 2005 and June 2006. The collective bargaining agreement that expires in June 2002 relates to the Romulus Blanking Division where operations will cease during fiscal 2002.
Fair Value of Financial Instruments
The carrying amount of cash and investments, trade receivables and payables approximates fair value because of the short maturity of those instruments. The carrying value of the Company's long-term debt is considered to approximate the fair value of these instruments based on the borrowing rates currently available to the Company for loans with similar terms and maturities.
Stock-Based Compensation
The Company applies Accounting Principles Board Opinion No. 25 in accounting for stock-based employee compensation; however, the impact of the fair value based method described in SFAS No. 123, "Accounting for Stock-Based Compensation" is presented in the notes to the financial statements (Note 13).
Earnings (Loss) Per Share
Basic earnings (loss) per share are computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share reflects the potential dilutive effect of the Company's stock option plan by adjusting the denominator using the treasury stock method.
The outstanding stock options under the Company's Key Employee Stock Incentive Plan (Note 13) are included in the diluted earnings (loss) per share calculation to the extent they are dilutive. The only reconciling item between the average outstanding shares in each calculation is the stock options outstanding. The following is a reconciliation of the basic and diluted earnings (loss) per share computation for net income (loss):
Years Ended October 31, --------------------------------------- 2001 2000 1999 ------------ ------------ ----------- Net income (loss)...................... $(35,482,124) $(13,031,416) $14,265,431 ============ ============ =========== Basic weighted average shares.......... 14,798,094 14,290,105 13,080,563 Effect of dilutive securities: Stock options........................ -- -- 4,720 ------------ ------------ ----------- Diluted weighted average shares........ 14,798,094 14,290,105 13,085,283 ============ ============ =========== Basic earnings (loss) per share........ $ (2.40) $ (.91) $ 1.09 ============ ============ =========== Diluted earnings (loss) per share...... $ (2.40) $ (.91) $ 1.09 ============ ============ =========== |
SHILOH INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The 535,714 contingently returnable shares of Common Stock of the Company
and the 288,960 additional shares of Common Stock of the Company associated
with the MTD Automotive acquisition (Note 3) were not included in quarterly
weighted average shares when the Company published its quarterly reports on
Form 10-Q during fiscal 2000 since the earnout contingency had not been
resolved as of such time. Since the contingency was resolved by the end of
fiscal 2000, such shares are included in basic and diluted weighted average
shares from the beginning of the quarter in which they were earned for the
twelve months ended October 31, 2000. Weighted average shares and earnings
(loss) per share for each quarterly period presented in Note 16 were revised to
reflect shares earned during the respective period based on the contingency
resolution. The 288,960 additional shares were issued in January 2001 and were
considered issued and outstanding for financial reporting purposes at October
31, 2000.
Accounting Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure 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.
Reclassifications
Certain prior year amounts have been reclassified to be consistent with current year presentation.
New Accounting Standards
In August 2001, Statement of Financial Accounting Standards ("SFAS") No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets" was issued effective for all fiscal years beginning after December 15, 2001 with early application encouraged. This Statement, which supersedes certain aspects of SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long- Lived Assets to be Disposed of", addresses implementation issues associated with SFAS No. 121 and improves financial reporting by establishing one accounting model for long-lived assets to be disposed of by sale. The adoption of SFAS No. 144 is not expected to have a material effect on the Company's financial statements.
In July 2001, SFAS No. 142 "Goodwill and Other Intangible Assets" was issued effective for all fiscal quarters of fiscal years beginning after December 15, 2001 with earlier application permitted. This Statement establishes criteria for the recognition of intangible assets and their useful lives. It also results in companies ceasing the amortization of goodwill and requires companies to test goodwill for impairment on an annual basis. The Company is required to adopt SFAS No. 142 as of November 1, 2002. The Company is currently evaluating the impact that SFAS No. 142 will have on its financial condition and results of operations. The Company expects that it will no longer record approximately $123,000 of amortization associated with its $3,143,500 of existing goodwill. The Company does not have any intangible assets impacted by SFAS No. 142.
Effective November 1, 2000, the Company adopted SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities," as amended. The adoption of SFAS No. 133 did not have a material effect on the Company's financial statements.
Note 3--Acquisitions
On August 29, 2000 the Company acquired substantially all of the assets and assumed certain liabilities of A.G. Simpson (Tennessee) Inc. for approximately $49,222,546 consisting of $47,932,625 in cash and $1,289,921 in acquisition costs. In January 2001, certain purchase price adjustments were made pursuant to the terms of the Purchase Agreement in which $4,478,659 was released from escrow and returned to the Company.
SHILOH INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
For accounting purposes, these adjustments were reflected in the Company's financial statements for the year ended October 31, 2000. Accounts receivable at October 31, 2000 included $4,478,659 related to these adjustments. The acquisition was accounted for using the purchase method of accounting. The assets and liabilities of A.G. Simpson (Tennessee) Inc., d.b.a. Dickson Manufacturing Division were recorded at their fair values as of the date of the acquisition. The total cost of net assets acquired, after adjustments, was $44,743,887 and consisted of assets of $57,176,137 less liabilities assumed of $12,432,250. Assets acquired (at fair value) consisted primarily of accounts receivable of $12,396,976, inventories of $2,096,765, costs in excess of billings on uncompleted contracts of $3,176,462, prepaid expenses of $17,574, and fixed assets of $39,488,360. Liabilities assumed (at fair value) consisted primarily of accounts payable of $9,992,882, accrued liabilities of $1,946,667 and billings in excess of costs on uncompleted contracts of $492,701. The Consolidated Statement of Operations includes the results of operations of Dickson Manufacturing Division since the date of the acquisition.
On November 1, 1999, the Company acquired MTD Automotive, the automotive division of MTD Products Inc, a significant stockholder of the Company. The acquisition was accounted for using the purchase method of accounting. MTD Automotive is a manufacturer of stamped parts and components for the automotive industry, and sells primarily to original equipment manufacturers in the United States. MTD Automotive net sales were $192,850,382 in its fiscal year ended July 31, 1999.
Pursuant to the terms of the purchase agreement, the Company acquired substantially all of the assets of MTD Automotive for aggregate consideration of $20,000,000 in cash and 1,428,571 shares of Common Stock of the Company at a price of $14.00 per share. Of the original 1,428,571 shares of Common Stock issued, 535,714 shares were considered contingent consideration for the first three quarters of fiscal 2000 and did not enter into the purchase price allocation until the fourth quarter of fiscal 2000, when the contingency was resolved. The aggregate consideration was substantially increased in that the 535,714 contingently returnable shares of Common Stock were not required to be returned to the Company and a wholly owned subsidiary of the Company issued a note to MTD Products in the aggregate principal amount of $4,045,392. The Company was guarantor of the note. The note was payable in full on November 1, 2001. In addition, the purchase price decreased by $1,820,113 for settlement of certain price concessions and capital expenditures reimbursements. These adjustments were reflected in the Company's financial statements for the year ended October 31, 2000 as adjustments to the purchase price. In January 2001, the aggregate consideration was increased based upon the performance of MTD Automotive during the first twelve months subsequent to closing. Specifically, the contingently returnable shares were not required to be returned to the Company, and the Company issued to MTD Products an additional 288,960 shares of Common Stock, which were considered issued and outstanding for financial reporting purposes at October 31, 2000. During fiscal 2001, MTD Products forgave all interest relating to the note through October 31, 2001 in the aggregate amount of $348,713. The Company satisfied all of its remaining obligations under the note by issuing to MTD Products 42,780 shares of its Series A Preferred Stock in accordance with an amendment to the Purchase Agreement, which was entered into as of December 31, 2001. (Note 10 and Note 18).
The Company incurred an aggregate of $1,591,573 in acquisition costs associated with the acquisition of MTD Automotive. Cash in the amount of $20,000,000 was paid on the effective date of the acquisition and was financed by the Company's revolving credit facility and 1,428,571 shares of common stock were issued on the same date. The initial purchase price was calculated based on $20,000,000 cash paid at closing and 892,857 shares of Common Stock valued at $9,642,856, based on the market price at the date of the acquisition. The purchase price was increased by $4,045,392 in cash and 824,674 shares of Common Stock valued at $4,898,563 based on the market price at October 31, 2000, the time the performance contingency was resolved, and decreased by $1,820,113 for settlement of certain price concessions and capital expenditure reimbursements, which was included in accounts receivable at October 31, 2000.
SHILOH INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The purchase price was allocated to the underlying assets and liabilities based upon their estimated fair values at the date of the acquisition. The total cost of net assets acquired was $37,032,271 and consisted of assets of $50,956,180 less liabilities assumed of $13,923,909. Assets acquired (at fair value) consisted of accounts receivable of $19,366,134, inventory of $24,196,338, pension assets of $4,465,799, fixed assets of $2,807,225 and other assets of $120,684. Liabilities assumed (at fair value) consisted of accounts payable of $10,987,658 and accrued liabilities of $2,936,251. This allocation was adjusted in October 2001 as the Company settled a contingency set forth in the Purchase Agreement related to certain price concessions for fiscal 2001. This resolution decreased the purchase price by $1,326,000 and was recorded by reducing the value originally assigned to fixed assets and establishing an accounts receivable as of October 31, 2001. As set forth in the Purchase Agreement, the purchase price may be adjusted at the end of fiscal 2002 upon resolution of a final contingency. The Consolidated Statement of Operations includes the results of operations of MTD Automotive since the date of the acquisition.
The following are unaudited pro forma results of operations for the years ended October 31, 2000 and 1999 assuming the acquisitions of Dickson Manufacturing Division had occurred on November 1, 1998 and 1999 and MTD Automotive had occurred on November 1, 1998. The results are not necessarily indicative of future operations or what would have occurred had the acquisitions been consummated on November 1, 1998.
Unaudited Pro Forma Information Years Ended October 31, ------------------ 2000 1999 -------- -------- Total revenues........................................... $675,234 $597,160 Net income (loss)........................................ (10,410) 19,798 Diluted earnings (loss) per common share................. (.73) 1.51 |
Note 4--Asset Impairment Charges (Recovery) and Restructuring Charges
During the fourth quarter of 2001, the Company recorded restructuring charges of $489,941 associated with a reduction in its salaried workforce.
In September 2001, the decision was made to cease operations at the Romulus Blanking facility during fiscal 2002. During the fourth quarter ended October 31, 2001, the Company recorded a pre-tax asset impairment charge of $5,801,409 to write-down certain assets to their estimated fair value. Fair value was primarily based on appraisal values. Actual sale value may differ significantly from such estimates. In addition, the Company recorded a pre-tax restructuring charge of $365,914 associated with the closing of the Romulus Blanking facility. The restructuring charge consisted of personnel costs of $163,230, facility closing costs of $90,505, lease termination costs of $102,894 and other costs of $9,285. Approximately $457,000 remains as accrued exit costs at October 31, 2001. The Company has classified $7,499,946 of real property and certain machinery and equipment, which it intends to sell during fiscal 2002, as Net Assets Held for Sale as of October 31, 2001.
On July 31, 2001, the Company completed the sale of land, building and certain other assets of the Wellington Die Division for $3,580,815 in cash resulting in a pre-tax loss of approximately $973,000. In addition, the Company recorded a pre-tax asset impairment charge of $2,161,242 associated with remaining assets of this division and a restructuring charge of $182,855. Approximately $169,043 remained as accrued exit costs at October 31, 2001. The remaining operations at Wellington Die Division were transferred to Wellington Stamping Division in the first quarter of fiscal 2002.
On July 31, 2001 the Company completed the sale of certain assets and liabilities of Valley City Steel to Viking Industries, LLC ("Viking") for $12.4 million. In connection with this transaction, the Company and
SHILOH INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Viking formed a joint venture, Valley City Steel LLC ("VCS LLC"), in which the Company owns a minority interest (49%) in the new entity and Viking owns a majority interest (51%). Viking contributed the assets purchased to the joint venture. The Company also contributed certain other assets and liabilities of Valley City Steel to the joint venture. The Company retained ownership of the land and building where the joint venture conducts its operations and leases these facilities to the joint venture. The new entity continues to supply steel processing services to the Company. As a result of the transaction changing from a 100% sale to a partial sale in fiscal 2001, the Company reduced its estimated asset impairment loss of $13,873,882 at October 31, 2000 by $11,708,625. The resulting pre-tax loss on the transaction was $2,165,257.
As of October 31, 2000, the Company anticipated selling the net assets of Canton Die Division for $11,800,000, recorded a pre-tax asset impairment charge of $12,824,055, and had classified these assets as held for sale. During 2001, the Company was unable to sell the net assets of Canton Die Division. As a result, in October 2001, the decision was made to cease operations at this facility during fiscal 2002. As the Company currently does not have a specific plan for these assets, the assets of Canton Die Division are no longer classified as held for sale as of October 31, 2001. The Company recorded an additional pre-tax asset impairment charge of $1,492,502 and a pre-tax restructuring charge of $372,047 associated with the shut down of this facility. The impairment charge was primarily taken to write down the long- lived assets to their current estimated fair value. The restructuring charge consisted of personnel costs of $255,000 and other costs of $117,047. The $355,000 remains as accrued exit costs at October 31, 2001.
In October 2000 the Company committed to plans to sell Canton Die Division and Valley City Steel. Accordingly, the Company classified the net assets of Canton Die Division and Valley City Steel as Net Assets Held for Sale. The Company recorded an impairment charge associated with these facilities. The resulting pre-tax adjustment of $26,697,937 was recorded in the fourth quarter ended October 31, 2000. The carrying values of the net assets were written down to the Company's estimates of fair value. Fair value was based on then current offers to purchase these businesses, less costs to dispose. At October 31, 2000, the net assets of Canton Die Division and Valley City Steel had a remaining carrying amount of approximately $32,705,765. The Company operated these facilities while pursuing alternatives for their sale.
In October 2000, the Company closed C&H Design Company, d.b.a. Utica Tool & Die ("C&H"). During the fourth quarter ended October 31, 2000, the Company recorded a pre-tax asset impairment charge of $6,539,430 to write-down certain C&H long-lived assets to be disposed of to the Company's estimated fair value. Fair value was primarily based on appraisal values. Certain assets were transferred to other Shiloh locations. In addition, during the fourth quarter ended October 31, 2000, the Company recorded a pre-tax restructuring charge of $1,229,932 associated with the closure of C&H. The restructuring charge consisted of lease termination costs $802,237, facility closing costs $136,000, personnel costs $48,002, and other costs $243,693. In October 2001, the Company adjusted its current estimate of fair value for remaining assets and recorded an additional pre-tax asset impairment charge of $335,950. Approximately $421,918 and $969,897 remained as accrued exit costs at October 31, 2001 and 2000, respectively.
Payments for accrued exit costs aggregated $691,077 and $260,035 for the year ended October 31, 2001 and 2000, respectively.
The impairment charges were recorded in accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." The restructuring charges were recorded in accordance with EITF 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." SEC Staff Accounting Bulletin No. 100, "Restructuring and Impairment Charges," was utilized in the recording of the impairment and restructuring charges.
SHILOH INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Together, these five facilities recorded net sales of $52.9 million, $87.6 million and $102.6 million and contributed net operating losses of $13.2 million, $20.2 million and $6.8 million for the years ended October 31, 2001, 2000 and 1999, respectively, net of asset impairment, restructuring charges and inter-company sales and expenses.
Note 5--Accounts Receivable
Accounts receivable in the consolidated balance sheet are expected to be collected within one year and are net of provisions for doubtful accounts, in the amount of $6,134,463 and $1,777,611 at October 31, 2001 and 2000, respectively.
The Company continually monitors its exposure with its customers. During fiscal 2001, additional consideration was given to individual accounts in light of the current market conditions in the automotive industry.
The Company continues to maintain a customer/vendor relationship with LTV Steel Company ("LTV") with respect to purchasing processed steel from LTV's remaining inventory. In December 2000, LTV filed for bankruptcy protection under Title 11 of the United States Code. In December 2001 LTV was granted permission to liquidate assets under Title 7 of the United States Code. The Company's exposure to pre-petition and post-petition matters with LTV has been mitigated where appropriate and existing reserves are maintained to further reduce this exposure. The Company does not believe its exposure related to LTV, or other customers, will have a material adverse effect on the Company's business, financial condition or results of operations.
Note 6--Inventories
October 31, October 31, 2001 2000 ----------- ----------- Inventories consist of the following: Raw materials..................................... $23,279,585 $33,560,741 Work-in-process................................... 17,702,595 16,686,103 Finished goods.................................... 17,368,033 17,486,713 ----------- ----------- Total........................................... $58,350,213 $67,733,557 =========== =========== |
Total cost of inventory is net of reserves to reduce certain inventory from cost to net realizable value. Such reserves aggregated $3,522,082 and $2,133,831 at October 31, 2001 and 2000, respectively.
During the fourth quarter of fiscal 2001, the Company changed its method of inventory costing from LIFO to FIFO for certain inventories. Prior periods have been restated to reflect this change. The method was changed because the Company's steel inventory has experienced declines in costs due to supply and demand in the market place and many of the Company's peer group currently use the FIFO method of inventory costing. Furthermore, the majority of the Company's inventory is currently recorded using the FIFO method; therefore, the change will provide for greater consistency in the accounting policies of the Company. The change increased net loss in fiscal 2001 by $589,707 ($.04 per basic and diluted share) and increased retained earnings for years prior to 1999 by $744,129.
SHILOH INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following table presents the effect of the change on earnings (losses) for fiscal 2000 and fiscal 1999:
Years Ended October 31, ------------------------- 2000 1999 ------------ ----------- Net income (loss) as reported..................... $(12,555,041) $15,310,537 Change in inventory costing method................ (476,375) (1,045,106) ------------ ----------- Net income (loss) as restated..................... $(13,031,416) $14,265,431 ============ =========== Basic earnings (loss) per share: Net income (loss) as reported................... $ (.88) $ 1.17 Change in inventory costing method.............. (.03) (.08) ------------ ----------- Net income (loss) as restated................... $ (.91) $ 1.09 ============ =========== Diluted earnings (loss) per share: Net income (loss) as reported................... $ (.88) $ 1.17 Change in inventory costing method.............. (.03) (.08) ------------ ----------- Net income (loss) as restated................... $ (.91) $ 1.09 ============ =========== |
Note 7--Investments in and Advances to Affiliate
On July 31, 2001 the Company and Viking formed a joint venture, VCS LLC, in which Viking contributed the assets it purchased from Valley City Steel for $12.4 million and the Company contributed certain other assets and liabilities of Valley City Steel. Viking obtained a 51% interest in VCS LLC while the Company obtained a 49% interest (Note 4). The Company retained ownership of the land and building where the joint venture conducts its operations and leases the real property to the joint venture. VCS LLC continues to supply steel processing services to the Company. As of September 1, 2002 and on the first day of every month thereafter, the Company has the right to require VCS LLC to repurchase the Company's interest at a put purchase price as defined in the operating agreement. In addition, as of September 1, 2002 and on the first day of every month thereafter, both the Company and Viking have the right to purchase the others interest at a call purchase price as defined in the operating agreement. The land and building leased by VCS LLC and owned by the Company secures debt incurred by VCS LLC. The debt matures in August 2003. Once this debt is discharged and released, the Company's ownership in VCS LLC will be reduced to 40% and Viking's interest increased to 60%.
The Company accounts for this investment under the equity method. As of October 31, 2001, VCS LLC had total assets of $29,550,697, total liabilities of $17,617,401, total equity of $11,933,296 and a net loss for the three months ended October 31, 2001 of $166,429. The joint venture agreement provides a detailed calculation of the allocation of net income (loss) to Viking and the Company. In accordance with this agreement, the Company's share of VCS LLC's net loss for the three months ended October 31, 2001 was income of $20,809.
Transactions with the affiliate during the three months ended October 31, 2001 include purchases of $544,727 and rental income of $179,100. As of October 31, 2001 the Company had amounts owed to the affiliate of $193,656. Purchases from the affiliate were substantially at market prices.
SHILOH INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note 8--Other Assets
October 31, October 31, 2001 2000 ----------- ----------- Other assets consist of the following: Long-term pension assets.......................... $12,491,462 $ 6,370,125 Other............................................. 3,042,383 4,077,287 ----------- ----------- Total........................................... $15,533,845 $10,447,412 =========== =========== |
Note 9--Property, Plant and Equipment
Property, plant and equipment consist of the following:
October 31, October 31, 2001 2000 ------------ ------------ Land............................................. $ 9,059,876 $ 8,997,317 Buildings and improvements....................... 112,631,841 109,977,352 Machinery and equipment.......................... 275,734,678 223,257,278 Furniture and fixtures........................... 24,895,154 24,829,095 Construction in progress......................... 11,444,333 33,280,465 ------------ ------------ Total, at cost................................. 433,765,882 400,341,507 Less: Accumulated depreciation................... (118,481,162) (92,026,258) ------------ ------------ Net property, plant and equipment.............. $315,284,720 $308,315,249 ============ ============ |
Depreciation expense was $27,992,873, $23,390,660, and $17,838,676 for 2001, 2000 and 1999, respectively.
During the years ended October 31, 2001, 2000 and 1999, interest expense incurred was $22,426,390, $17,970,153, and $10,019,015, respectively, of which $1,239,901, $2,563,154, and $2,530,445 was capitalized as part of property, plant and equipment, respectively.
The Company had commitments for capital expenditures of approximately $3.2 million at October 31, 2001.
Note 10--Financing Arrangements
Long-term debt consists of the following:
October 31, October 31, 2001 2000 ------------ ------------ JP Morgan Chase Bank revolving credit loan-- interest at 5.875% and 8.625% at October 31, 2001 and 2000, respectively........................... $264,500,000 $242,100,000 MTD Products Inc promissory note (Note 3 and 18).. 4,045,392 4,045,392 Variable rate industrial development bond, collateralized by letter of credit, weighted average interest rate of 4.52% at October 31, 2000............................................. -- 5,400,000 ------------ ------------ $268,545,392 $251,545,392 ============ ============ |
SHILOH INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The weighted average interest rate was 7.56% for fiscal 2001, 8.26% for fiscal 2000 and 8.19% for fiscal 1999.
On August 11, 2000 the Company entered into a credit agreement with JP Morgan Chase Bank, formerly The Chase Manhattan Bank, as administrative agent for a group of lenders, which replaced the KeyBank Agreement with KeyBank NA as agent for a group of lenders. The credit agreement had an original commitment of $300.0 million and expired in August 2005. All amounts outstanding under the KeyBank Agreement were refinanced and all existing obligations under the KeyBank Agreement were terminated. As a result of the refinancing, the Company capitalized deferred financing costs of $1,499,461 associated with the JP Morgan Chase Bank credit agreement in the fourth quarter of fiscal 2000, which are being amortized over the term of the debt.
Under the credit agreement, the Company has the option to select the applicable interest rate at the alternative base rate ("ABR"), as defined in the credit agreement to be the greater of the prime rate in effect on such day and the federal funds effective rate in effect on such day plus half of 1%, or the LIBOR rate plus a factor determined by a pricing matrix (ranging from 0.5% to 1.5% for the ABR and ranging from 1.5% to 2.5% for the LIBOR rate) based on funded debt to earnings before interest, taxes, depreciation and amortization. The terms of the credit agreement also require an annual commitment fee based on the amount of unused commitments under the credit agreement and a factor determined by a pricing matrix (ranging from 0.375% to 0.5%) based on funded debt to earnings before interest, taxes, depreciation and amortization. The credit agreement also provides for the incurrence of debt under standby letters of credit and for the advancement of funds under a discretionary line of credit. The maximum amount of debt that may be incurred under each of these sources of funds is $15.0 million.
The credit agreement is collateralized by an interest in all of the Company's and its wholly owned domestic subsidiaries' cash and cash accounts, accounts receivable, inventory, mortgages on certain owned real property, equipment excluding fixtures and general intangibles such as patents, trademarks and copyrights.
The credit agreement includes, without limitation, covenants involving minimum interest coverage, minimum tangible net worth coverage and a minimum leverage ratio. In addition, the credit agreement limits the incurrence of additional indebtedness, capital expenditures, investments, dividends, transactions with affiliates, asset sales, leaseback transactions, acquisitions, prepayments of other debt, hedging agreements and liens and encumbrances and certain transactions resulting in a change of control.
On May 10, 2001, the Company amended the credit agreement primarily to change the covenant thresholds. This amendment also provided that, among other things, upon the sale of Valley City Steel, the amount of availability under the credit agreement would decrease by $10.0 million. In addition, this amendment increased the pricing matrix such that the ABR factor ranges from 1.25% to 2.5% and the LIBOR factor ranges from 2.25% to 3.5%. The Company's factor as determined by the pricing matrix was 3.5% as of October 31, 2001 and 2.0% as of October 31, 2000. As a result of this amendment, the Company capitalized deferred financing costs of $829,306 which are being amortized over the remaining term of the debt.
As of October 31, 2001, the Company was not in compliance with its debt covenants under the amended credit agreement. As a result, on January 25, 2002, the Company's lenders consented to further amend the credit agreement. The amended and restated credit agreement was executed as of February 12, 2002. Significant provisions of the amendment and restatement include an increase in the pricing matrix such that the ABR factor ranges from 1.5% to 3.0% and the LIBOR factor ranges from 2.5% to 4.0%. In addition, the amended and restated credit agreement expires on April 30, 2004. The Company is required to obtain within 90 days of the execution of the amendment and restatement $8.0 million of additional liquidity. This liquidity will be generated through certain transactions to be entered into with related parties and includes (1) the sale of certain
SHILOH INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
machinery and equipment for $6,540,600, (2) payment of $1,000,000 associated with a three year supply arrangement and (3) the issuance of two 9.0% promissory notes due May 1, 2004 in the aggregate principal of $460,000. In addition, the Company also has satisfied its requirement to generate approximately $12.0 million of additional liquidity, as defined in the amended and restated credit agreement, during the first quarter of fiscal 2002. Net proceeds from the sale, transfer, lease or other disposition of certain assets by the Company are required to be used to prepay outstanding debt, which will reduce the total commitment under the amended and restated credit agreement by the amount equal to such prepayment. Certain additional changes to covenant thresholds and additional reporting requirements were instituted in accordance with the amended and restated credit agreement, such as capital expenditures for the Company are limited to $29.1 million for the fiscal year ending October 31, 2002 and the Company is required to achieve earnings before interest, taxes, depreciation and amortization ("EBITDA") of $24.3 million for the year ending October 31, 2002. In connection with such amendment and restatement, the Company is required to pay an amendment fee to each lender equal to .25% of the aggregate amount of such lender's commitment. Under the terms of the amended and restated credit agreement, the Company would have been in compliance with its covenants as of October 31, 2001. The Company is currently in compliance with its covenants under the amended and restated credit agreement.
On July 31, 2001, the Company repaid the $5.4 million Medina County, Ohio variable rate industrial revenue bonds in connection with the sale of certain assets of Valley City Steel. These variable rate industrial revenue bonds due 2010 had been issued in March 1995 by Medina County, Ohio on behalf of the Company for an aggregate of $5.4 million in principal amount. These bonds had been secured by a letter of credit.
During fiscal 2001, MTD Products forgave all interest, in the aggregate amount of $348,713, relating to the note that was issued by a wholly owned subsidiary of the Company to MTD Products in January 2001 in the aggregate principal of $4,045,392. The Company was guarantor of the note. The principal was payable in full on November 1, 2001. The Company satisfied all of its remaining obligations under the note by issuing to MTD Products 42,780 shares of Series A Preferred Stock in accordance with an amendment to the Purchase Agreement, which was entered into as of December 31, 2001. The shares of Series A Preferred Stock were issued in January 2002. For financial reporting purposes the debt is classified as long-term as of October 31, 2001.
In February 2001, the Company terminated its demand promissory note as of December 6, 1996 in favor of The Richland Bank in the aggregate principal amount of $4.0 million. Interest had accrued on the outstanding principal balance at LIBOR plus 0.75%.
Book overdrafts were $20,917,866 and $19,037,886 at October 31, 2001 and 2000, respectively, and are included in Accounts Payable.
Total availability at October 31, 2001 under the Company's Credit Agreement and Line of Credit was $290,000,000, of which $23,495,000 was unused.
At October 31, 2001 the scheduled maturities of all long-term debt during the next five years is as follows:
2001.......................................................... -- 2002.......................................................... -- 2003.......................................................... -- 2004.......................................................... $264,500,000 2005.......................................................... -- |
SHILOH INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note 11--Leases
The Company leases certain equipment under operating leases. Rent expense under operating leases for 2001, 2000 and 1999 was $4,448,223, $1,509,600 and $1,869,524, respectively. Future minimum lease payments under operating leases are as follows at October 31, 2001:
2002............................................................ $4,501,674 2003............................................................ 4,297,900 2004............................................................ 4,048,462 2005............................................................ 3,765,099 2006............................................................ 3,177,908 |
Note 12--Employee Benefit Plans
The Company maintains pension plans covering most employees. The assets of the plans consist primarily of stocks and bonds. The Company provides postretirement health care benefits to certain employees (and their dependents) who retire early, but coverage generally continues only until age 65. Components of the plan obligations and assets, and the recorded liability at October 31, 2001 and 2000 are as follows:
Other Post Retirement Pension Benefits Benefits -------------------------- ------------------------ 2001 2000 2001 2000 ------------ ------------ ----------- ----------- Benefit obligation at beginning of year....... $(30,150,649) $(23,459,081) $(1,595,619) $(1,958,560) Service cost............. (2,648,551) (2,178,985) (85,663) (77,371) Interest cost............ (2,342,566) (2,077,961) (100,434) (122,516) Actuarial (gain) loss.... (5,139,094) 2,024,474 (197,367) 462,828 Amendments............... (2,109,411) (5,123,854) -- -- Divestiture.............. 558,714 -- -- -- Benefits paid............ 2,283,122 664,758 160,000 100,000 ------------ ------------ ----------- ----------- Benefit obligation at end of year................. (39,548,435) (30,150,649) (1,819,083) (1,595,619) Fair value of plan assets at beginning............ 25,669,388 26,505,557 -- -- Actual return on plan assets.................. (10,777,186) (1,019,693) -- -- Employer contribution.... 2,187,857 848,282 -- -- Divestiture.............. (531,436) -- -- -- Benefits paid............ (2,283,122) (664,758) -- -- ------------ ------------ ----------- ----------- Fair value of plan assets at end of year.......... 14,265,501 25,669,388 -- -- ------------ ------------ ----------- ----------- Funded status............ (25,282,934) (4,481,261) (1,819,083) (1,595,619) Unrecognized: Transition obligation/(asset)..... 553,178 641,300 322,010 348,620 Prior service cost...... 7,041,001 5,543,673 89,620 96,011 Net loss/(gain)......... 20,325,986 2,099,540 (87,952) (320,723) ------------ ------------ ----------- ----------- Prepaid (accrued) benefit cost before adjustment for minimum liability.............. 2,637,231 3,803,252 (1,495,405) (1,471,711) Adjustment to recognize minimum liability...... (27,347,805) (2,683,753) -- -- ------------ ------------ ----------- ----------- Prepaid (accrued) benefit cost........... $(24,710,574) $ 1,119,499 $(1,495,405) $(1,471,711) ============ ============ =========== =========== |
SHILOH INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The components of net periodic benefit cost for the years ended October 31 are as follows:
Other Post Retirement Pension Benefits Benefits ---------------------- ------------------ 2001 2000 2001 2000 ---------- ---------- -------- -------- Service cost..................... $2,648,551 $2,178,985 $ 85,663 $ 77,371 Interest cost.................... 2,342,566 2,077,961 100,434 122,516 Expected return on plan assets... (2,447,589) (2,360,315) -- -- Net amortization and deferrals... 578,123 536,987 (2,402) 20,704 ---------- ---------- -------- -------- Net periodic benefit cost........ $3,121,651 $2,433,618 $183,695 $220,591 ========== ========== ======== ======== |
The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the pension plan with accumulated benefit obligations in excess of plan assets were $39,548,435, $38,976,075 and $14,265,501, respectively as of October 31, 2001 and $13,044,446, $12,711,612, and $9,921,040, respectively as of October 31, 2000.
Actuarial assumptions used in the calculation of the recorded liabilities are as follows:
Other Pension Post Retirement Benefits Benefits ----------- --------------- Weighted-average assumptions as of October 31: 2001 2000 2001 2000 ---------------------------------------------- ----- ----- ------- ------- Discount rate.................................. 7.25% 8.00% 7.25% 8.00% Expected return on plan assets................. 9.50% 9.50% -- -- Rate of compensation increase.................. 4.50% 4.50% -- -- Projected healthcare cost trend rate........... -- -- 9.00% 7.00% |
Assumed healthcare cost trend rates have a significant effect on the amounts reported for the healthcare plan. A one-percentage point charge in assumed healthcare cost trend rates would have the following effects at October 31, 2001:
One-Percentage One-Percentage Point Increase Point Decrease -------------- -------------- Effect on total of service and interest cost components................................. $ 243,010 $ 141,640 Effect on post retirement obligation........ $2,337,522 $1,415,247 |
In addition to the defined benefit plans described above, the Company maintains a number of defined contribution plans. Under the terms of the plans, eligible employees may contribute a percentage of their base pay. The Company matches a percentage of the employees contributions up to stated percentage, subject to statutory limitations. In addition, the Company may make a discretionary profit sharing contribution on an annual basis. The Company recorded expense of $2,059,764, $1,420,529 and $1,473,566 during fiscal 2001, 2000 and 1999, respectively, for its defined contribution plans.
During 1997, the Company initiated a Supplemental Executive Retirement Plan ("SERP") for key employees of the Company. The Company has agreed to pay each covered employee a certain sum annually for ten (10) years upon retirement or, in the event of death, to their designated beneficiary. A benefit is also paid if the employee terminates employment (other than by discharge for cause). Compensation expense relating to this plan was $183,933, $283,933 and $285,593 in fiscal 2001, 2000 and 1999, respectively. The benefits accrued under this plan were $983,958 and $1,053,705 at October 31, 2001 and 2000, respectively.
SHILOH INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note 13--Stock and Bonus Plans
1993 Key Employee Stock Incentive Plan
The Company maintains a Key Employee Stock Incentive Program (the "Incentive Plan"), which authorizes grants to officers and other key employees of the Company and its subsidiaries of (i) stock options that are intended to qualify as "incentive stock options", (ii) nonqualified stock options and (iii) restricted stock awards. An aggregate of 1,700,000 shares of common stock, subject to adjustment upon occurrence of certain events to prevent dilution or expansion of the rights of participants that might otherwise result from the occurrence of such events, has been reserved for issuance upon the exercise of stock options.
Only non-qualified stock options have been granted to date and all options have been granted at market price at the date of grant. Options expire over a period not to exceed ten years from the date of grant. Options granted in 1999 and 2000 are exercisable over a period not to exceed five years and options granted in 2001 are exercisable over a period not to exceed ten years. A summary of option activity under the plan follows:
Number of Weighted Shares Average Under Option Option Price -------- -------- Outstanding at October 31, 1998......................... 314,500 $ 16.78 Granted............................................... 243,500 $13.327 Exercised............................................. -- $ -- Canceled.............................................. (29,400) $ 15.91 -------- ------- Outstanding at October 31, 1999......................... 528,600 $15.305 Granted............................................... 221,800 $ 9.50 Exercised............................................. -- $ -- Canceled.............................................. (325,000) $ 15.03 -------- ------- Outstanding at October 31, 2000......................... 425,400 $ 12.41 Granted............................................... 292,500 $ 3.75 Exercised............................................. -- $ -- Canceled.............................................. (191,050) $ 11.24 -------- ------- Outstanding at October 31, 2001......................... 526,850 $ 8.46 ======== ======= |
Exercise prices for options outstanding as of October 31, 2001 ranged from $3.75 to $18.625, with 94% of options outstanding having exercise prices in the range of $3.75 to $13.50 per share.
In accordance with the provisions of SFAS No. 123 "Accounting for Stock- Based Compensation," ("SFAS 123") the Company has elected to continue applying the intrinsic value approach under the Accounting Principles Board Opinion No. 25 in accounting for its stock-based compensation plans. Accordingly, the Company does not recognize compensation expense for stock options when the stock price at the grant date is equal to or greater than the fair market value of the stock at that date.
SFAS 123 requires pro forma information on net income (loss) and earnings
(loss) per share as if the fair value method for valuing stocks options, as
prescribed by SFAS 123, had been applied. The Company's pro forma information
follows:
2001 2000 ------------ ------------ Net income (loss)............................. $(35,795,278) $(13,424,717) Earnings (loss) per share: Basic....................................... $ (2.42) $ (.94) Diluted..................................... $ (2.42) $ (.94) |
SHILOH INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The fair value of these options was estimated at the date of grant using the Black-Sholes option-pricing model with the following weighted average assumptions for 2001 and 2000:
2001 2000 ------ ------ Risk-free interest........................................... 5.33% 6.00% Dividend yield............................................... 0.00% 0.00% Volatility factor-- market................................... 46.26% 30.10% Expected life of options-- years............................. 4.0 4.0 |
Executive Incentive Bonus Plan
The Company maintains a Short-Term Incentive Plan (the "Bonus Plan") which provides annual incentive bonuses to its eligible employees. The Bonus Plan provides for an aggregate annual bonus pool (the "Aggregate Amount") equal to 5% of the Company's operating earnings. Incentives up to the Aggregate Amount may be paid to the individual participants, in the case of the Chief Executive Officer, by the Board of Directors upon recommendation by the Compensation Committee and the Board of Directors. In determining the individual incentives, in the case of the Chief Executive Officer, 75% of the incentive depends upon meeting the corporate goal for return on equity and 25% of the incentive depends upon meeting specific, project-oriented goals. These goals are established by the Board of Directors. In the case of corporate executives eligible for the Bonus Plan, 65% of the incentive depends upon meeting the goal for return on equity and 35% of the incentive depends upon specific goals established by the Chief Executive Officer. Finally, in the case of the remaining employees eligible for the Bonus Plan, 50% of the incentive depends upon meeting the goal for operating return on assets established by the Chief Executive Officer and 50% of the incentive depends upon specific goals as established by the Chief Executive Officer. During fiscal 2001, 2000 and 1999, $0, $875,581 and $295,774, respectively, were expensed under the existing bonus plan.
Note 14--Income Taxes
The components of the provision for income taxes (benefits) on income from continuing operations were as follows:
Years Ended October 31, -------------------------------------- 2001 2000 1999 ------------ ------------ ---------- Current: Federal........................... $ (3,500,283) $ 1,992,928 $1,522,303 State and local................... (933,323) 580,433 385,716 Foreign........................... 82,536 37,991 -- ------------ ------------ ---------- (4,351,070) 2,611,352 1,908,019 Deferred: Total............................. (12,920,238) (11,423,666) 6,817,461 ------------ ------------ ---------- $(17,271,308) $ (8,812,314) $8,725,480 ============ ============ ========== |
SHILOH INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Temporary differences and carryforwards which give rise to deferred tax assets and liabilities were comprised of the following:
October 31, October 31, 2001 2000 ----------- ------------ Deferred tax assets: Bad debt reserves............................... $ 1,954,397 $ 376,874 Inventory reserves.............................. 220,315 853,210 State income and franchise taxes................ 4,288,836 2,864,823 Accrued group insurance......................... 468,876 322,018 AMT carryforwards............................... 2,050,894 1,938,398 Accrued vacation reserves....................... 733,009 773,442 Capital loss carryforwards...................... -- 4,912,050 Post retirement benefits........................ 617,637 563,922 Pension obligations............................. 7,876,822 430,173 Other reserves.................................. 1,458,415 350,599 Restructuring charge............................ 6,237,040 10,123,946 Goodwill amortization........................... 595,911 827,799 Net operating loss.............................. 14,664,340 -- Research and development credits................ 519,715 -- ----------- ------------ 41,686,207 24,337,254 Less: Valuation allowance......................... (3,666,760) (4,912,050) ----------- ------------ Total deferred tax assets......................... 38,019,447 19,425,204 Deferred tax liabilities: Fixed assets.................................... (24,467,029) (25,727,813) Joint venture investment........................ (1,704,652) (2,399,905) Other........................................... (438,061) (200,858) ----------- ------------ Net deferred tax asset (liability)................ $11,409,705 $ (8,903,372) =========== ============ Change in net deferred tax asset/(liability): Provision for deferred taxes.................... $12,920,238 $ 11,423,666 Other........................................... 25,811 -- Items of other comprehensive income/(loss)...... 7,367,028 218,364 ----------- ------------ Total change in net deferred tax.............. $20,313,077 $ 11,642,030 =========== ============ |
The fiscal 2001 valuation allowance relates to tax credit carryforwards which are not expected to be utilized. The fiscal 2000 valuation allowance relates to capital loss carryforwards that expired in fiscal 2001.
A reconciliation of the statutory federal income tax rate to the effective income tax rate is as follows:
Years Ended October 31, ---------------- 2001 2000 1999 ---- ---- ---- Federal income tax at statutory rate....................... 34.0% 34.0% 34.0% State and local income taxes............................... 2.9 4.4 2.0 FAS 109 rate differential.................................. 0.7 1.3 0.8 FSC benefit................................................ 0.5 1.3 -- Valuation Allowance........................................ (3.4) -- -- Other...................................................... (2.0) (0.7) 1.1 ---- ---- ---- Effective income tax rate.................................. 32.7% 40.3% 37.9% ==== ==== ==== |
At October 31, 2001, the Company has operating loss carryforwards of $14,664,340 for tax purposes, some of which can be carried forward from ten to twenty years.
SHILOH INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note 15--Related Party Transactions
The Company had sales to MTD Products of $13,636,312, $18,410,324 and $10,943,440 for the years 2001, 2000 and 1999, respectively. At October 31, 2001 and 2000, the Company had receivable balances of $4,344,507 and $4,851,202, respectively, due from this shareholder and payable balances of $1,338,311 and $3,282,747 due to this shareholder. A wholly owned subsidiary of the Company issued a note to MTD Products in January 2001 in the principal amount of $4,045,392. This note was due in full on November 2001. Interest on the note was to be at a rate of 8.620%; however, MTD Products forgave all interest associated with the note in fiscal 2001 in the aggregate amount of $348,713. The Company satisfied all of its remaining obligations under the note by issuing MTD Products 42,780 shares of Series A Preferred Stock in accordance with an amendment to the Purchase Agreement, which was entered into as of December 31, 2001. These shares were issued in January 2002 (Note 18).
The Company leases real property to its 49% owned joint venture, VCS LLC (Note 7) under a non-cancelable operating lease. The lease is for five years commencing August 1, 2001 and calls for monthly payments of $59,700. VCS LLC has the option to purchase the real property throughout the course of the original lease term and has three two year term renewal options.
Note 16--Quarterly Results of Operations (Unaudited)
As discussed in Notes 2 and 6, the Company changed its method of inventory costing from LIFO to FIFO for certain inventories. The following information has been restated to reflect the change in accounting principle for all quarters for the years ended October 31, 2001 and October 31, 2000:
First Second Third Fourth October 31, 2001 Quarter Quarter Quarter Quarter ---------------- -------- -------- -------- -------- (Dollars in thousands, except per share) Revenues................................ $166,242 $172,836 $165,166 $158,203 Gross profit (loss)..................... 18,997 12,188 13,639 (11,300) Operating income (loss)................. 6,204 7,915 (3,856) (39,576) Net income (loss)....................... 602 1,677 (6,390) (31,371) Net income (loss) per share (basic/diluted)........................ .04 .11 (.43) (2.12) Weighted average number of shares: Basic.................................. 14,798 14,798 14,798 14,798 Diluted................................ 14,798 14,798 14,798 14,798 |
In the third quarter, the Company recorded an asset impairment recovery of $8,595 and restructuring charges of $183. Third quarter figures were reclassified to conform with presentation at October 31, 2001. In the fourth quarter, the Company recorded asset impairment charges of $6,677 and restructuring charges of $1,228.
SHILOH INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The change in accounting principle affected gross profit (loss) and operating income (loss) by $(664), $164, $(54) and $(322), net income (loss) by $(445), $110, $(36) and $(219) and net income (loss) per share by $(.03), $0, $0 and $(.01) for the first, second, third and fourth quarters, respectively, of fiscal 2001.
First Second Third Fourth October 31, 2000 Quarter Quarter Quarter Quarter ---------------- -------- -------- -------- -------- (Dollars in thousands, except per share) Revenues................................. $140,827 $165,666 $154,100 $170,169 Gross profit............................. 20,203 25,624 21,615 14,658 Operating income (loss).................. 8,630 11,982 9,274 (37,953) Net income (loss)........................ 4,129 5,574 3,460 (26,194) Net income (loss) per share (basic/diluted)......................... .30 .40 .24 (1.77) Weighted average number of shares: Basic................................... 13,973 14,036 14,352 14,798 Diluted................................. 13,976 14,056 14,352 14,798 |
In the fourth quarter, the Company recorded restructuring charges of $1,230 and asset impairment charges of $33,237.
The change in accounting principle affected gross profit (loss) by $(17), $52, $10 and $(648) and operating income (loss) by $(17), $52, $10 and $(843), net income (loss) by $(11), $33, $6 and $(504) and net income (loss) per share by $0, $0, $0 and $(.04) for the first, second, third and fourth quarters, respectively, of fiscal 2000.
Note 17--Commitments and Contingent Liabilities
The Company is a party to several lawsuits and claims arising in the normal course of its business. In the opinion of management, the Company's liability or recovery, if any, under pending litigation and claims would not materially affect its financial condition, results of operations or cash flows.
Note 18--Subsequent Events
In December 2001, the Company authorized 100,000 shares of Series A Preferred Stock. These shares, with a par value of $.01 per share, rank senior to the Company's common stock. The Series A Preferred Stock are entitled to cumulative dividends, at a rate of $5.75 per share per annum, as declared by the Company. They are non-voting and are not convertible into any other shares of the Company's stock. The Company may elect to redeem any or all outstanding shares of the Series A Preferred Stock annually for $100 per share plus all accrued but unpaid dividends.
The Company satisfied all of its remaining obligations under the $4,045,392 note payable November 1, 2001 by issuing to MTD Products 42,780 shares of Series A Preferred Stock in accordance with an amendment to the Purchase Agreement, which was entered into as of December 31, 2001. The shares of Series A Preferred Stock were issued in January 2002. For financial reporting purposes, the debt is classified as long-term as of October 31, 2001.
On January 25, 2002, the Company's lenders consented to amend the credit agreement. The amended and restated credit agreement is dated as of February 12, 2002 (Note 10).
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Company
Information with respect to Directors of the Company is set forth in the Proxy Statement under the heading "Election of Directors," which information is incorporated herein by reference. Information required by Item 401 of Regulation S-K regarding the executive officers of the Company is included as Item 4A of Part I of this Annual Report on Form 10-K as permitted by Instruction 3 to Item 401(b) of Regulation S-K. Information required by Item 405 of Regulation S-K is set forth in the Proxy Statement under the heading "Section 16(a) Beneficial Ownership Reporting Compliance," which information is incorporated herein by reference.
Item 11. Executive Compensation
Information with respect to executive compensation is set forth in the Proxy Statement under the heading "Election of Directors" and under the heading "Compensation of Executive Officers," which information is incorporated herein by reference (except for the Compensation Committee Report on Executive Compensation and the Comparative Stock Performance Graph).
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information with respect to security ownership of certain beneficial owners and management is set forth in the Proxy Statement under the heading "Beneficial Ownership of Common Stock," which information is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Information with respect to certain relationships and related transactions is set forth in the Proxy Statement under the heading "Election of Directors -- Compensation Committee Interlocks and Insider Participation and Certain Relationships and Related Transactions," which information is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as a part of this Annual Report on Form 10-K on Item 8.
1. Financial Statements.
Report of Independent Accountants
Consolidated Balance Sheets at October 31, 2001 and 2000.
Consolidated Statement of Income for the three years ended October 31,
2001.
Consolidated Statements of Cash Flows for the three years ended October 31,
2001.
Consolidated Statement of Stockholders' Equity for the three years ended
October 31, 2001.
Notes of Consolidated Financial Statements.
2. Financial Statement Schedule. The following consolidated financial statement schedule of the Company and its subsidiaries and the report of the independent accountants thereon are filed as part of this Annual Report on Form 10-K and should be read in conjunction with the consolidated financial statements of the Company and its subsidiaries included in the Annual Report on Form 10-K.
SCHEDULE II
SHILOH INDUSTRIES, INC.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Additions Balance at Charged to Balance at Beginning Costs and End of Description of Year Expenses Deductions Year ----------- ---------- ---------- ---------- ---------- Valuation account for accounts receivable Year ended October 31, 2001.. $1,777,611 $6,150,192 $1,793,340 $6,134,463 Year ended October 31, 2000.. $1,080,641 $2,013,499 $1,316,529(1) $1,777,611 Year ended October 31, 1999.. $ 919,704 $ 189,793 $ 28,856 $1,080,641 Reserve for excess, slow moving and potentially obsolete material Year ended October 31, 2001.. $2,133,831 $3,457,832 $2,069,581 $3,522,082 Year ended October 31, 2000.. $ 144,888 $2,018,943 $ 30,000 $2,133,831 Year ended October 31, 1999........................ $ 664,140 $ 94,888 $ 614,140 $ 144,888 Valuation allowance for deferred tax assets Year ended October 31, 2001.. $4,912,050 $1,795,040 $3,040,330 $3,666,760 Year ended October 31, 2000.. $4,912,050 $ -- $ -- $4,912,050 Year ended October 31, 1999.. $4,912,050 $ -- $ -- $4,912,050 |
3. Exhibits.
2.1 Asset Purchase Agreement, dated June 21, 1999, among the Company, Shiloh Automotive, Inc. and MTD Products Inc is incorporated herein by reference to Appendix A of the Company's Proxy Statement on Schedule 14A as filed with the Securities and Exchange Commission on August 3, 1999 (Commission File No. 0-21964). 2.2 First Amendment to Asset Purchase Agreement, dated August 31, 1999, among the Company, Shiloh Automotive, Inc. and MTD Products Inc. is incorporated herein by reference to Exhibit 2.2 of the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1999 (Commission File No. 0-21964). 2.3 Second Amendment to Asset Purchase Agreement, dated January 22, 2001, by and among the Company, Shiloh Automotive, Inc. and MTD Products Inc is incorporated herein by reference to Exhibit 2.3 of the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2000 (Commission File No. 0-21964). 2.4 Third Amendment to Asset Purchase Agreement, dated December 31, 2001, by and among the Company, Shiloh Automotive, Inc. and MTD Products Inc. 2.5 Closing Agreement, dated as of October 31, 1999, by and among the Company, Shiloh Automotive, Inc. and MTD Products Inc is incorporated herein by reference to Exhibit 2.1 of the Company's Current Report on Form 8-K as filed with the Securities and Exchange Commission on November 15, 1999 (Commission File No. 0-21964). 2.6 Asset Purchase Agreement, dated July 18, 2000 by and between the Company and A.G. Simpson (Tennessee) Inc. is incorporated herein by reference to the Company's quarterly report on Form 10-Q for the quarterly period ended July, 31, 2000 (Commission File No. 0-21964). 2.7 Asset Purchase Agreement, dated May 29, 2001, by and between Valley City Steel Company and Valley City Steel, LLC is incorporated herein by reference to the Company's Quarterly Report on Form 10-Q for the quarterly period ended April 30, 2001 (Commission File No. 0-21964). 3.1(i) Restated Certificate of Incorporation of the Company is incorporated herein by reference to Exhibit 3.1(i) of the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1995 (Commission File No. 0-21964). 3.1(ii) Certificate of Designation, dated December 31, 2001, authorizing the issuance of 100,000 shares of Series A Preferred Stock, par value $.01. 3.1(iii) By-Laws of the Company are incorporated herein reference to Exhibit 3.1 (ii) of the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1995 (Commission File No. 0-21964). 4.1 Specimen certificate for the Common Stock, par value $.01 per share, of the Company is incorporated herein by reference to Exhibit 4.1 of the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1995 (Commission File No. 0-21964). 4.2 Stockholders Agreement, dated June 22, 1993, by and among the Company, MTD Products Inc and the stockholders named therein is incorporated herein by reference to Exhibit 4.3 of the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1995 (Commission File No. 0-21964). 4.3 Registration Rights Agreement, dated June 22, 1993, by and among the Company, MTD Products Inc and the stockholders named therein is incorporated herein by reference to Exhibit 4.3 of the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1995 (Commission File No. 0-21964). 4.4 First Amendment to Stockholders Agreement, dated March 11, 1994, by and among the Company, MTD Products Inc and the stockholders named therein is incorporated herein by reference to Exhibit 4.4 of the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1995 (Commission File No. 0-21964). 4.5 Termination of Stockholders Agreement dated as of May 29, 2001, by and among the Company, MTD Products Inc and the stockholders named therein. |
10.1 Loan Agreement, dated February 1, 1995, by and between Medina County, Ohio and Valley City Steel Company is incorporated herein by reference to Exhibit 10.4 of the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 1996 (Commission File No. 0-21964). 10.2 Operating Agreement for Shiloh of Michigan, L.L.C., dated January 2, 1996, by and among Shiloh of Michigan, L.L.C., Rouge Steel Company and the Company is incorporated herein by reference to Exhibit 10.5 of the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 1996 (Commission File No. 0-21964). 10.3 Master Unsecured Demand Promissory Note of Shiloh Corporation to The Richland Trust Company of Mansfield, dated April 2, 1991, is incorporated herein by reference to Exhibit 10.7 of the Company's Annual Report of Form 10-K for the fiscal year ended October 31, 1995 (Commission File No. 0-21964). 10.4* Amended and Restated 1993 Key Employee Stock Incentive Plan is incorporated herein by reference to Exhibit B of the Company's Proxy Statement on Schedule 14A for the fiscal year ended October 31, 2000 (Commission File No. 0-21964). 10.5* Executive Incentive Bonus Plan is incorporated herein by reference to Exhibit 10.9 of the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1995 (Commission File No. 0-21964). 10.6* Indemnification Agreement, dated July 2, 1993, by and between the Company and Robert L. Grissinger (with an attached schedule identifying the directors and officers of the Company that have entered into an identical agreement) is incorporated herein by reference to Exhibit 10.10 of the Company's Annual Report on From 10-K for the fiscal year ended October 31, 1995 (Commission File No. 0-21964). 10.7* Option Agreement, dated May 28, 1993, by and between the Company and Robert L. Grissinger (with an attached schedule identifying the other optionees that have entered into option agreements with the Company) is incorporated herein by reference to Exhibit 10.15 of the Company's Annual Report on From 10-K for the fiscal year ended October 31, 1995 (Commission File No. 0-21964). 10.8 Master Unsecured Demand Promissory Note of Shiloh Corporation to The Richland Trust Company of Mansfield, dated December 6, 1996 is incorporated herein by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q/A for the fiscal quarter ended January 1, 1997 (Commission File No. 0-21964). 10.9* Supplemental Retirement Trust Agreement, dated June 1, 1997, by and among the Company, First Union National Bank of North Carolina and Robert L. Grissinger is incorporated herein by reference to Exhibit 10.15 to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1997 (Commission File No. 0-21964). 10.10 Credit Agreement, dated August 11, 2000 by and among the Company, the lenders a party thereto, The Chase Manhattan Bank as Administrative Agent and Collateral Agent, KeyBank National Association as Syndication Agent and Bank One Michigan as Documentation Agent is incorporated herein by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q for the quarterly period ended July 31, 2000 (Commission File No. 0-21964). 10.11 Amendment No. 1 to the Credit Agreement, dated as of May 10, 2001, is incorporated herein by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q for the quarterly period ended July 31, 2001 (Commission File No. 0-21964). 10.12 Transitional Services Agreement, dated October 31, 1999, by and among the Company, Shiloh Automotive, Inc. and MTD Products Inc is incorporated herein by reference to Exhibit 10.11 of the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1999 (Commission File No. 0-21964). 10.13 $4,045,392 Cognovit Note of Shiloh Automotive, Inc. to MTD Products Inc, dated as of January 22, 2001 is incorporated herein by reference to Exhibit 10.12 of the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2000 (Commission File No. 0-21964). |
10.14 Operating Agreement for Valley City Steel LLC, dated July 31, 2001, by and among Viking Steel, Valley City Steel Company and Valley City Steel- 779, LLC. 10.15 Joint Development Agreement, dated June 4, 2001, by and between the Company and Pullman Industries, Inc. 10.16 Credit Agreement, as amended and restated as of February 12, 2002 by and among the Company, the lenders a party thereto, JPMorgan Chase Bank as Administrative Agent and Collateral Agent, KeyBank National Association as Syndication Agent and Bank One, Michigan as Documentation Agent and J.P. Morgan Securities Inc. as Lead Arranger and Book Manager. 18.1 Letter from PricewaterhouseCoopers LLP regarding a change in accounting principle. 21.1 Subsidiaries of the Company. 23.1 Consent of PricewaterhouseCoopers LLP. 24.1 Powers of Attorney. |
(b) Reports on Form 8-K
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SHILOH INDUSTRIES, INC.
Date: February 13, 2002 /s/ Stephen E. Graham By: _________________________________ Stephen E. Graham Chief Financial Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and the capabilities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/ Theodore K. Zampetis President and Chief February 13, 2002 ______________________________________ Executive Officer and Theodore K. Zampetis Director (Principal Executive Officer) /s/ Stephen E. Graham Chief Financial Officer February 13, 2002 ______________________________________ (Principal Accounting and Stephen E. Graham Principal Financial Officer) * Chairman and Director February 13, 2002 ______________________________________ Curtis E. Moll * Director February 13, 2002 ______________________________________ Maynard H. Murch IV * Director February 13, 2002 ______________________________________ Ronald C. Houser * Director February 13, 2002 ______________________________________ David J. Hessler * Director February 13, 2002 ______________________________________ James A. Karman * Director February 13, 2002 ______________________________________ John J. Tanis |
* The undersigned, by signing his name hereto, does sign and execute this Annual Report on Form 10-K pursuant to the Powers of Attorney executed by the above-named officers and Directors of the Company and filed with the Securities and Exchange Commission on behalf of such officers and Directors.
/s/ Stephen E. Graham By: _________________________________ Stephen E. Graham, Attorney-In-Fact |
EXHIBIT INDEX
Exhibit No. Exhibit Description ------- ------------------- 2.1 Asset Purchase Agreement, dated June 21, 1999, among the Company, Shiloh Automotive, Inc. and MTD Products Inc is incorporated herein by reference to Appendix A of the Company's Proxy Statement on Schedule 14A as filed with the Securities and Exchange Commission on August 3, 1999 (Commission File No. 0-21964). 2.2 First Amendment to Asset Purchase Agreement, dated August 31, 1999, among the Company, Shiloh Automotive, Inc. and MTD Products Inc. is incorporated herein by reference to Exhibit 2.2 of the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1999 (Commission File No. 0-21964). 2.3 Second Amendment to Asset Purchase Agreement, dated January 22, 2001, by and among the Company, Shiloh Automotive, Inc. and MTD Products Inc is incorporated herein by reference to Exhibit 2.3 of the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2000 (Commission File No. 0-21964). 2.4 Third Amendment to Asset Purchase Agreement, dated December 31, 2001, by and among the Company, Shiloh Automotive, Inc. and MTD Products Inc. 2.5 Closing Agreement, dated as of October 31, 1999, by and among the Company, Shiloh Automotive, Inc. and MTD Products Inc is incorporated herein by reference to Exhibit 2.1 of the Company's Current Report on Form 8-K as filed with the Securities and Exchange Commission on November 15, 1999 (Commission File No. 0-21964). 2.6 Asset Purchase Agreement, dated July 18, 2000 by and between the Company and A.G. Simpson (Tennessee) Inc. is incorporated herein by reference to the Company's quarterly report on Form 10-Q for the quarterly period ended July, 31, 2000 (Commission File No. 0-21964). 2.7 Asset Purchase Agreement, dated May 29, 2001, by and between Valley City Steel Company and Valley City Steel, LLC is incorporated herein by reference to the Company's Quarterly Report on Form 10-Q for the quarterly period ended April 30, 2001 (Commission File No. 0-21964). 3.1(i) Restated Certificate of Incorporation of the Company is incorporated herein by reference to Exhibit 3.1(i) of the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1995 (Commission File No. 0-21964). 3.1(ii) Certificate of Designation, dated December 31, 2001, authorizing the issuance of 100,000 shares of Series A Preferred Stock, par value $.01. 3.1(iii) By-Laws of the Company are incorporated herein reference to Exhibit 3.1 (ii) of the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1995 (Commission File No. 0-21964). 4.1 Specimen certificate for the Common Stock, par value $.01 per share, of the Company is incorporated herein by reference to Exhibit 4.1 of the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1995 (Commission File No. 0-21964). 4.2 Stockholders Agreement, dated June 22, 1993, by and among the Company, MTD Products Inc and the stockholders named therein is incorporated herein by reference to Exhibit 4.3 of the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1995 (Commission File No. 0-21964). 4.3 Registration Rights Agreement, dated June 22, 1993, by and among the Company, MTD Products Inc and the stockholders named therein is incorporated herein by reference to Exhibit 4.3 of the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1995 (Commission File No. 0-21964). 4.4 First Amendment to Stockholders Agreement, dated March 11, 1994, by and among the Company, MTD Products Inc and the stockholders named therein is incorporated herein by reference to Exhibit 4.4 of the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1995 (Commission File No. 0-21964). |
Exhibit No. Exhibit Description ------- ------------------- 4.5 Termination of Stockholders Agreement dated as of May 29, 2001, by and among the Company, MTD Products Inc and the stockholders named therein. 10.1 Loan Agreement, dated February 1, 1995, by and between Medina County, Ohio and Valley City Steel Company is incorporated herein by reference to Exhibit 10.4 of the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 1996 (Commission File No. 0-21964). 10.2 Operating Agreement for Shiloh of Michigan, L.L.C., dated January 2, 1996, by and among Shiloh of Michigan, L.L.C., Rouge Steel Company and the Company is incorporated herein by reference to Exhibit 10.5 of the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 1996 (Commission File No. 0-21964). 10.3 Master Unsecured Demand Promissory Note of Shiloh Corporation to The Richland Trust Company of Mansfield, dated April 2, 1991, is incorporated herein by reference to Exhibit 10.7 of the Company's Annual Report of Form 10-K for the fiscal year ended October 31, 1995 (Commission File No. 0-21964). 10.4* Amended and Restated 1993 Key Employee Stock Incentive Plan is incorporated herein by reference to Exhibit B of the Company's Proxy Statement on Schedule 14A for the fiscal year ended October 31, 2000 (Commission File No. 0-21964). 10.5* Executive Incentive Bonus Plan is incorporated herein by reference to Exhibit 10.9 of the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1995 (Commission File No. 0-21964). 10.6* Indemnification Agreement, dated July 2, 1993, by and between the Company and Robert L. Grissinger (with an attached schedule identifying the directors and officers of the Company that have entered into an identical agreement) is incorporated herein by reference to Exhibit 10.10 of the Company's Annual Report on From 10-K for the fiscal year ended October 31, 1995 (Commission File No. 0- 21964). 10.7* Option Agreement, dated May 28, 1993, by and between the Company and Robert L. Grissinger (with an attached schedule identifying the other optionees that have entered into option agreements with the Company) is incorporated herein by reference to Exhibit 10.15 of the Company's Annual Report on From 10-K for the fiscal year ended October 31, 1995 (Commission File No. 0-21964). 10.8 Master Unsecured Demand Promissory Note of Shiloh Corporation to The Richland Trust Company of Mansfield, dated December 6, 1996 is incorporated herein by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q/A for the fiscal quarter ended January 1, 1997 (Commission File No. 0-21964). 10.9* Supplemental Retirement Trust Agreement, dated June 1, 1997, by and among the Company, First Union National Bank of North Carolina and Robert L. Grissinger is incorporated herein by reference to Exhibit 10.15 to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1997 (Commission File No. 0-21964). 10.10 Credit Agreement, dated August 11, 2000 by and among the Company, the lenders a party thereto, The Chase Manhattan Bank as Administrative Agent and Collateral Agent, KeyBank National Association as Syndication Agent and Bank One Michigan as Documentation Agent is incorporated herein by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q for the quarterly period ended July 31, 2000 (Commission File No. 0-21964). 10.11 Amendment No. 1 to the Credit Agreement, dated as of May 10, 2001, is incorporated herein by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q for the quarterly period ended July 31, 2001 (Commission File No. 0-21964). 10.12 Transitional Services Agreement, dated October 31, 1999, by and among the Company, Shiloh Automotive, Inc. and MTD Products Inc is incorporated herein by reference to Exhibit 10.11 of the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1999 (Commission File No. 0-21964). |
Exhibit No. Exhibit Description ------- ------------------- 10.13 $4,045,392 Cognovit Note of Shiloh Automotive, Inc. to MTD Products Inc, dated as of January 22, 2001 is incorporated herein by reference to Exhibit 10.12 of the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2000 (Commission File No. 0-21964). 10.14 Operating Agreement for Valley City Steel LLC, dated July 31, 2001, by and among Viking Steel, Valley Steel Company and Valley City Steel- 779, LLC. 10.15 Joint Development Agreement, dated June 4, 2001, by and between the Company and Pullman Industries, Inc. 10.16 Credit Agreement, as amended and restated as of February 12, 2002 by and among the Company, the lenders a party thereto, JPMorgan Chase Bank as Administrative Agent and Collateral Agent, KeyBank National Association as Syndication Agent and Bank One, Michigan as Documentation Agent and J.P. Morgan Securities Inc. as Lead Arranger and Book Manager. 18.1 Letter from PricewaterhouseCoopers LLP regarding a change in accounting principle. 21.1 Subsidiaries of the Company. 23.1 Consent of PricewaterhouseCoopers LLP. 24.1 Powers of Attorney. |
(b) Reports on Form 8-K
Exhibit 2.4
THIRD AMENDMENT TO
ASSET PURCHASE AGREEMENT
THIS THIRD AMENDMENT TO ASSET PURCHASE AGREEMENT (the "Third Amendment"),
dated as of December 31, 2001, is made by and among SHILOH INDUSTRIES, INC., a
Delaware corporation (the "Parent"), SHILOH AUTOMOTIVE, INC., an Ohio
corporation ("Buyer"), and MTD PRODUCTS INC, an Ohio corporation ("Seller").
WHEREAS, the Parent, Buyer and Seller entered into a certain Asset Purchase Agreement, dated as of June 21, 1999 (the "Purchase Agreement") for the sale and purchase of substantially all of the assets of the unincorporated automotive division of Seller; and
WHEREAS, the parties amended the Purchase Agreement by a First Amendment to Asset Purchase Agreement, dated as of August 31, 1999; and
WHEREAS, the closing of the transaction contemplated under the Purchase Agreement occurred effective as of November 1, 1999; and
WHEREAS, the parties amended the Purchase Agreement by a Second Amendment to Asset Purchase Agreement dated as of January 22, 2001; and
WHEREAS, pursuant to Section 10.11 of the Purchase Agreement, the parties hereto desire to further amend said Purchase Agreement as more fully set forth herein; and
WHEREAS, in connection with the payment of the cash portion of the Earnout Amount pursuant to the terms and conditions of the Second Amendment to Asset Purchase Agreement, the parties agreed that Buyer would satisfy its obligations with respect to the Cash Earnout Amount by executing and delivering to Seller a Promissory Note ("Promissory Note") in the principal amount of $4,045,392.00; and
WHEREAS, the parties have determined to have Seller issue certain shares of preferred stock of Seller in lieu of payment of the Promissory Note.
NOW, THEREFORE, in consideration of the promises and the mutual covenants and agreements hereinafter set forth, the parties hereto, intending to be legally bound hereby, covenant and agree as follows:
IN WITNESS WHEREOF, each of the parties hereto has caused this Third Amendment to be duly executed and delivered as of the date first above written.
SHILOH INDUSTRIES, INC.
/s/ John F. Falcon ---------------------------------- By: John F. Falcon Its: Chief Executive Officer |
SHILOH AUTOMOTIVE, INC.
/s/ John F. Falcon ---------------------------------- By: John F. Falcon Its: President |
MTD PRODUCTS INC
/s/ Ronald C. Houser ---------------------------------- By: Ronald C. Houser Its: Executive Vice President and Chief Financial Officer |
Exhibit 3.1(ii)
SHILOH INDUSTRIES, INC.
CERTIFICATE OF DESIGNATION OF THE POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL AND OTHER SPECIAL RIGHTS OF SERIES A
PREFERRED STOCK AND QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS THEREOF
Pursuant to Section 151 of the General Corporation Law of the State of Delaware
The undersigned officers of Shiloh Industries, Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Company"), do hereby certify:
That, pursuant to authority conferred upon the board of directors of the Company (the "Board of Directors") by the Company's Restated Certificate of Incorporation (hereinafter referred to as the "Certificate of Incorporation"), the Board of Directors hereby authorizes the issuance of 100,000 shares of the Series A Preferred Stock, par value $.0l per share (the "Series A Preferred Stock"), hereinafter provided for and establishes the voting power thereof and further authorizes a committee of such Board of Directors consisting of the disinterested members (the "Committee") to fix the designations and any preferences or rights of such shares as provided pursuant to Section 151 of the General Corporation Law of the State of Delaware.
At a meeting, the Committee duly adopted the following resolution:
RESOLVED, that, pursuant to the authority vested in the Board of Directors in accordance with the Certificate of Incorporation, a new series of Preferred Stock of the Company is hereby designated as the Series A Preferred Stock.
The designations and amount and the voting power, preferences and relative, participating, optional and other rights of the shares of Series A Preferred Stock, and the qualifications, limitations or restrictions thereof, are as set forth below:
dividends, combinations or splits with respect to such shares), if, when and as declared by the Board of Directors out of the assets of the Company legally available therefor.
As long as any shares of Series A Preferred Stock remain outstanding, the Company shall not declare or pay on or set apart for the Common Stock or any Junior Securities any dividend or other distribution whatsoever, except for dividends payable in shares of Common Stock with respect to shares of Common Stock outstanding, unless all accrued dividends on the then outstanding shares of Series A Preferred Stock shall have first been paid or shall have been declared and set apart for payment to the holders of the Series A Preferred Stock.
On or prior to December 15 of any year that any shares of Series A Preferred Stock remain outstanding (each such date, a "Redemption Date"), the Company may elect, at its sole option, to redeem any or all of the shares of Series A Preferred Stock then outstanding, in cash out of funds legally available therefor, at a price of $100.00 per share, subject to adjustment for any stock dividends, combinations or splits with respect to such shares, plus all accrued but unpaid dividends thereon (the "Redemption Price").
The Company shall provide each holder of Series A Preferred Stock with a written notice of redemption (addressed to the holder at its address as it appears on the stock transfer books of the Company), not earlier than sixty (60) nor later than twenty (20) days before the applicable Redemption Date. The notice of redemption shall specify (A) the Redemption Date; (B) the number of shared to be redeemed; (C) the amount of the Redemption Price; and (D) the place of the holders of Series A Preferred Stock may obtain payment of the Redemption Price upon surrender of their certificates. On or before the applicable Redemption Date, each holder of shares of Series A Preferred Stock to be redeemed on such Redemption Date shall surrender the certificate or certificates representing such shares to the Company, in the manner and at the place designated in the Redemption Notice, and thereupon the Redemption Price for such share will be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof. In the event less than all of the shares of Series A Preferred Stock represented by a certificate are redeemed, a new certificate representing the unredeemed shares of Series A Preferred Stock shall be issued forthwith.
laws in any manner that would alter or change the rights, preferences, privileges or restrictions of the Series A Preferred Stock so as to adversely affect such Series A Preferred Stock.
Prior to any proposed transfer of any shares of the Series A Preferred Stock, the holder thereof shall give written notice to the Company of his intention to effect such transfer. Each such notice shall describe the manner of the proposed transfer and, if requested by the Company, shall be accompanied by an opinion of counsel reasonably satisfactory to the Company to the effect that the proposed transfer may be effected without registration under the Securities Act of 1933 (the "Securities Act"), whereupon such holder shall be entitled to transfer the shares of the Series A Preferred Stock in accordance with the terms of the notice. No transfer shall be effective until such transfer is reflected on the register for the Series A Preferred Stock maintained by the Company's transfer agent. Each certificate transferred as above provided shall bear the legend set forth in paragraph (k)(ii) below, except that such certificate or instrument shall not bear such legend if (A) there is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such registration statement, (B) such transfer is in accordance with the provisions of Rule 144 (or any other rule permitting public sale without registration under the Securities Act) or (C) the opinion of counsel referred to above is to the further effect that the transferee and any subsequent transferee would be entitled to transfer such shares of Series A Preferred Stock in a public sale without registration under the Securities Act.
Each certificate representing shares of the Series A Preferred Stock shall be stamped or otherwise imprinted with a legend substantially similar to the following (in addition to any legend required under applicable laws):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), OR QUALIFIED UNDER ANY SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, ENCUMBERED OR IN ANY MANNER DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS OR UNLESS AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND LAWS IS AVAILABLE AND, IF REQUESTED BY THE COMPANY, AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, IS DELIVERED TO THE COMPANY PROVIDING THAT SUCH REGISTRATION AND QUALIFICATION IS NOT REQUIRED."
The Company's transfer agent shall refuse to register any attempted transfer of shares of the Series A Preferred Stock not in compliance with this paragraph (k).
IN WITNESS WHEREOF, Shiloh Industries, Inc. has caused this Certificate of Designation to be executed in its corporate name by John F. Falcon, its President and Chief Executive Officer, and attested by David J. Hessler, its Secretary, this 31/st/ day of December, 2001.
SHILOH INDUSTRIES, INC.
By: /s/ John F. Falcon -------------------- John F. Falcon President and Chief Executive Officer Attest: By: /s/ David J. Hessler ---------------------- David J. Hessler Secretary |
Exhibit 4.5
TERMINATION OF STOCKHOLDERS AGREEMENT
THIS TERMINATION OF STOCKHOLDERS AGREEMENT (this "Agreement"), dated as of May 29, 2001, is made by and among SHILOH INDUSTRIES, INC., a Delaware corporation (the "Company"), MTD PRODUCTS INC, an Ohio corporation ("MTD"), and the individuals signing this Agreement below (the "Remaining Original Shiloh Stockholders").
RECITALS
A. The Company, MTD, the Remaining Original Shiloh Stockholders and certain other Original Shiloh Stockholders (as hereinafter identified) were parties to a Stockholders Agreement dated as of June 22, 1993 (the "Stockholders Agreement") relating to their respective ownership of the Common Stock, par value $.01 per share, of the Company. Capitalized terms used herein and not otherwise defined have the meaning ascribed to them in the Stockholders Agreement.
B. All of the parties to the Stockholders Agreement amended the Stockholders Agreement pursuant to a First Amendment to Stockholders Agreement dated as of March 11, 1994 ("First Amendment to Stockholders Agreement") in order to remove and release certain of the Original Shiloh Stockholders from the scope of the Stockholders Agreement (identified as follows: Patricia A. Patrick, Nancy K. LaYacona, Vincent J. Fanello Trust, Michelle Fanello Trust and Michael C. Fanello).
C. The remaining parties to the Stockholders Agreement wish to terminate the Stockholders Agreement.
AGREEMENTS
NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
The parties hereto agree that as of the date hereof, the Stockholders Agreement shall terminate and extinguish. The provisions of Section 2.1 of the Stockholders Agreement regarding corporate governance and composition of the Board of Directors of the Company shall terminate. In addition, the restrictions on Transfer set forth in Section 3.1 of the Stockholders Agreement shall terminate.
The provisions of Section 3.5 of the Stockholders Agreement shall no longer apply as to the portion of the legend which refers to the Stockholders Agreement. The Company will assist with the reissuance of any certificates to reflect the removal of such provisions.
3.3 This Agreement may be executed by the parties in two or more counterparts each of which when executed shall be deemed an original and all of which when taken together shall constitute one and the same document. The signature of any party to any counterpart shall be deemed a signature to, and may be appended to, any other counterpart.
IN WITNESS WHEREOF, the Company, MTD and the Remaining Original Shiloh Stockholders have executed this Termination of Stockholders Agreement as of the day and year first above written.
MTD PRODUCTS INC SHILOH INDUSTRIES, INC.
By: /s/ Dieter Kaesgen By: /s/ John F. Falcon ----------------------------- ------------------------------ Its: President Its: Chief Executive Officer |
DOMINICK C. FANELLO TRUST JAMES C. FANELLO TRUST
By: The Richland Bank, By: Key Bank, N.A., formerly as Trustee known as Society Bank & Trust at Mansfield, as Trustee By: /s/ John P. Stewart By: /s/ Nicholas Gesour ----------------------------- ------------------------------ Title: Vice President & Trust Title: Vice President Officer |
[ADDITIONAL SIGNATURES ON FOLLOWING PAGE]
ROSE M. FANELLO TRUST KATHLEEN M. FANELLO TRUST
By: The Richland Bank, By: Key Bank, N.A., formerly as Trustee known as Society Bank & Trust at Mansfield, as Trustee By: /s/ John P. Stewart By: /s/ Nicholas Gesour ----------------------------- ------------------------------ Title: Vice President & Trust Title: Vice President Officer By: Robert L. Grissinger By: Robert E. Sutter /s/ Robert L. Grissing /s/ Robert E. Sutter ------------------------------------ ------------------------------------- |
OPERATING AGREEMENT
OF
VALLEY CITY STEEL-7779, LLC
An Ohio Limited Liability Company
THIS OPERATING AGREEMENT (the "Agreement") is made and entered into and shall be effective as of the 31st day of July, 2001, by and among VALLEY CITY STEEL-7779, LLC, an Ohio limited liability company (the "Company"), VALLEY CITY STEEL COMPANY, an Ohio corporation ("VCS") and VIKING STEEL, LLC, an Ohio limited liability company ("Viking") (VCS and Viking may be referred to hereinafter individually as a "Member", and, collectively, as the "Members"), on the following terms and conditions.
For purposes of this Agreement, unless the context clearly indicates otherwise, (i) all of the capitalized words in this Agreement shall have the meanings set forth in the text or Appendix and (ii) all non-capitalized words defined in the Act (as hereinafter defined) shall have the meanings set forth therein.
may, from time to time, change the Agent by filing the appropriate documents with the Ohio Secretary of State. If the registered Agent ceases to act as such for any reason, the Members shall promptly designate a replacement Agent. The Members shall promptly file with the Ohio Secretary of State the documents required by the Act with respect to any change of the registered Agent or his address. If the Members shall fail to designate a replacement registered Agent or if the Members or the Agent fail to file the appropriate notice of a change of agent or his address, any Member may designate a replacement Agent or file a notice of change of agent or his address.
activities. Neither the Company nor any Member shall have any right by virtue of this Agreement to share or participate in such other slitting and/or cutting to length of cold rolled steel activities of a Member permitted hereunder. Each Member will conduct business with the Company on an Arms-Length Transaction basis and no Member under any circumstances may interfere with or restrict the operations or management of the Company unless otherwise specifically permitted under this Agreement.
(a) A current list of the full names, in alphabetical order, and last known business or residence address of each Member;
(b) Copies of the Articles, all amendments thereto, and executed copies of any powers of attorney pursuant to which the Articles or the amendments have been executed;
(c) Copies of this Agreement, all amendments hereto, and executed copies of any powers of attorney pursuant to which this Agreement and such amendments have been executed;
(d) Copies of the Company's federal, state, and local income tax returns and reports, for the five (5) most recent years;
(e) Copies of any financial statements of the Company for the three (3) most recent years;
(f) Any other agreements or documents required by the Act or this Agreement.
Each Member shall have the right to inspect and copy any books and records of the Company during normal business hours, at such Member's own expense.
accrue on any Capital Contribution and no Member shall have any right to withdraw or to be repaid any Capital Contribution except as provided in this Agreement.
i. Repayment of the amount of the Unpaid Contribution, together with interest thereon at an annual interest rate equal to four percent (4%) over the prime rate of interest designated by KeyBank, N.A., (the "Bank") as being its prime rate (the "Prime Rate"), from time to time, commencing on the due date for such contribution until the Unpaid Contribution shall have been paid in full by the Defaulting Member, together with interest thereon as herein provided; and the right to receive such Defaulting Member's share of all Distributions to which the Defaulting Member would have been entitled until such time as the full amount advanced on behalf of the Defaulting Member, together with interest thereon, as herein provided, is fully repaid; or
ii. Treat the amount of the Defaulting Member's Unpaid Contribution as a proportionate addition to the Capital Accounts of the Contributing Members. To the extent the Unpaid Contribution is contributed by any other Member, the Defaulting Member's ownership percentage shall be reduced, and the percentage of each Contributing Member shall be increased, so that each Member's percentage is equal to a fraction, the numerator of which is that Member's total Capital Contribution and the denominator of which is the
total Capital Contributions of all Members. The Chairman or Chief Executive Officer shall thereafter amend Exhibit "A" accordingly; or
iii. Purchase (either directly or through a subsidiary, assignee or nominee) the Membership Units of the Defaulting Member for a purchase price equal to ninety percent (90%) of the Defaulting Member's Capital Account as of the date of default. If the option to purchase is exercised, the Contributing Members will pay the Defaulting Member such purchase price, in equal annual installments, over not less than a three (3) year period with interest at the rate considered the Prime Rate of the Bank from time to time, commencing on the date the aforesaid option to purchase is exercised; or
iv. Treat the failure to make a required Capital Contribution as an event of withdrawal of the Member thereby invoking the provisions of this Agreement in the event of a voluntary withdrawal of a Member; or
v. Require the Company to repay such excess to the advancing Member, with interest thereof, at an interest rate equal to two percent (2%) over the Bank's Prime Rate.
(a) At the inception of the Company, the Preferential Cash Balance to VCS as a Member of the Company shall be zero.
(b) The Preferential Cash Balance of VCS as a Member of the Company shall be increased by:
(ii) The portion of additional voluntary Capital Contributions by VCS, if any, to the Company, utilized by the Company to cover the Original Debt Servicing Payments.
(a) Except for situations in which the approval of the Members is required by this Agreement or by nonwaivable provisions of the Act, and subject to the provisions of subsection (b) below, the powers of the Company shall be exercised by or under the authority of, and the business and affairs of the Company shall be managed under the
direction of, Managers acting by and through a Management Committee (as defined below). The Management Committee as hereinafter defined, pursuant to a majority vote of its Managers, shall manage, control, administer and operate, and make all decisions relating to, the business and affairs of the Company and exercise all power conferred upon the Company in the Act, except such as are by law, by the Articles or by this Agreement conferred upon or reserved to the Members. The Management Committee pursuant to a majority vote of its Managers shall have the right to delegate to the officers of the Company, if any, authority to exercise any power, duty or responsibility of the Management Committee not specifically reserved to the Management Committee or the Members under this Agreement. The day-to-day operations and management of the Company shall be by or under the authority of the Chairman of the Management Committee as hereinafter designated.
(b) Notwithstanding any other provision of this Agreement to the contrary, the following actions may be undertaken only upon the affirmative vote of all the Managers:
(i) Admit a new or Substitute Member;
(ii) Make investments in Growth Capital for the Business;
(iii) Amend or restate the Articles of Organization or this Agreement;
(iv) Except in connection with the Asset Purchase Agreement or any instrument, document or agreement executed therewith, or contemplated thereby, enter into, amend or terminate, any agreement between the Company and any Member of the Company, other than on terms of an Arm's-Length Transaction basis;
(v) Guarantee any loans to a third party;
(vii) Invest in, acquire, merge with or form a legally binding affiliation or association with another entity or be a party to a merger, consolidation, exchange or acquisition;
(viii) Change the nature of the Company's business or the purpose for which the Company was formed from other than that of pickling and slitting hot rolled steel and related processing services;
(ix) Make any request for or accept additional Contributions of capital from a Member or offer an equity interest in the Company to any third-party;
(x) Borrow money or otherwise commit the credit of the Company for Company activities if such borrowing or commitment of credit requires a guarantee or security from a Member or any of its affiliates;
(xi) Change the status or certification of the Company as a Minority Business Enterprise;
(xii) Becoming contingently liable with respect to the indebtedness of others except for the endorsement of instruments in the ordinary course of business;
(xiii) Initiate or settle any litigation for an amount in excess of One Hundred Thousand Dollars ($100,000) and/or which is likely to affect a significant customer relationship, except for litigation involving routine employment matters or in connection with the Asset Purchase Agreement or any document, instrument or agreement executed therewith;
(xiv) Pay any management fees to Viking or Viking Management, LLC other than for periods ending before the twelve (12) consecutive calendar months commencing after the date hereof; or
(xv) Restore deficit Capital Accounts.
In the event that any such action is consummated without the consent of Managers, such act shall be null and void and of no legal force or effect and shall be terminated.
(c) Prior to filing a bankruptcy petition on behalf of the Company; or making any assignment for the benefit of creditors of the Company; or compromising any material sums due the Company; or appointing the Plant Manager of the Company; or approving the annual budget for the Company, the Management Committee in a meeting at which a quorum of Managers are present shall discuss said bankruptcy petition, assignment, compromise, appointment or budget.
VCS Appointees Viking Appointees -------------- ----------------- John F. Falcon Patrick K. James Jim Buddelmeyer Michael Klinginsmith 13 |
Jay L. Schabel |
The Managers each shall be either an officer, director or employee of the Member that appointed such Manager and each shall serve at the pleasure and on behalf of the Member that appointed such Manager. Any Manager may be removed, with or without cause, only by the Member that appointed such Manager. Any vacancy shall be filled by the Member that appointed the Manager whose seat is then vacant. Each Manager shall serve in such capacity until resignation or until removed by the Member that appointed such Manager or until such seat otherwise becomes vacant. The Managers shall act by and through a management committee (the "Management Committee") consisting of all five (5) Managers, and no individual Manager shall have authority to act individually on behalf of the Company or to bind the Company absent a specific grant of authority from the Management Committee. Viking shall designate from among the Managers of the Management Committee appointed by Viking, one (1) designee to act as Chairman (the "Chairman") of the Management Committee.
represented at such meeting or vote thereat, and execute consents, waivers and releases, and exercise any of his other rights, by proxy or proxies appointed by a writing signed by such person.
notes, and other instruments requiring his signature; and shall have all the powers and duties as may from time to time be assigned to him by the Management Committee. The Chairman shall also have general supervision of the day-to-day management and operations of the plant, including the authority to hire and terminate production personnel, and shall be responsible for the productivity of the plant and the quality of the products produced therefrom.
of the Company, Manager, officer or member of the Management Committee, against
expenses (including counsel fees), judgments, settlements, penalties and fines
(including excise taxes assessed with respect to employee benefit plans)
actually or reasonably incurred in accordance with such action, suit or
proceeding, if the Person acted in good faith and in a manner reasonably
believed by the Person to have been, in the best interest of the Company and not
opposed to the best interests of the Company, and, with respect to any criminal
action or proceeding, either the Person had no reasonable cause to believe such
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement or conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the Person did
not meet the prescribed standard of conduct.
(a) Constitute such transferee, as an Assignee or a Substitute Member;
(b) Confirm that the Person acquiring Units, or being admitted as a Member, has agreed to be subject to and bound by this Agreement, as it may be further amended, regardless of whether the Person is to be admitted as a Substitute Member or will merely be an Assignee;
(c) Preserve the Company's status under the laws of each jurisdiction in which the Company is qualified, organized or does business after the Transfer;
(d) Maintain the Company's classification as a partnership for federal income tax purposes;
(e) Assure compliance with any applicable state and federal laws including securities laws and regulations; and
(f) Maintain the Company's status as a certified MBE, unless otherwise provided herein.
determined and resolved. Accumulated income will be credited to the Capital Account of the Member whose interest is in question.
determined in accordance with GAAP by the then current public accounting firm engaged by the Company, plus the sum of interest expense for such period, all amounts attributable to depreciation and amortization for such period, and any extraordinary or unusual charges for such period to the extent such applicable expenses or deductions were deducted to determine net income or loss, and minus the sum of any extraordinary gains to the extent included to determine net income or loss for such period ("trailing EBITDA").
(i) The Company shall cause the Company to either raise additional funds and/or incur debt and borrow money up to an amount which if outstanding on the Valuation Date would not cause the Threshold Leverage Ratio to be exceeded ("Additional Funds"), and utilize such Additional Funds to pay at closing the cash portion of the purchase for the Membership Interests of VCS; and
(ii) The balance of the purchase price to be paid by the Company, if any, for the Membership Interest of VCS shall be paid to VCS in equal installments pursuant to the Purchase Price Note.
Notwithstanding the above, the Company shall not have an obligation to
acquire the whole or any part of the Membership Interest of VCS under
Section 9.9(a), if such acquisition of the whole or any part thereof, would
cause the Company to be in default under the agreements of the Company with
its secured lender, applicable to the Original Debt.
within such ninety (90) day period, the closing shall take place within ten (10) days after the determination of such purchase price at the time, date and place designated by the acquiring Member.
The Members and the Company agree and acknowledge that any and all taxes owed
by VCS as a result of the transfer of the Membership Interest provided in this
Section 9.10, shall be paid by Viking, or the Company, provided however, if paid
by the Company, such taxes and payments thereof shall be allocated solely to
Viking and not VCS.
Member and Assignee to become a "notice partner" within the meaning of Section 6223 of the Code. The Tax Matters Partner shall not take any action contemplated by Sections 6223 through 6229 of the Code without the approval by a Majority Vote of the Members. The Tax Matters Partner shall keep all Members informed of all notices from government taxing authorities that may come to the attention of the Tax Matters Partner. The Company shall pay and be responsible for all reasonable third party costs and expenses incurred by the Tax Matters Partner in performing those duties. A Member shall be responsible for any costs incurred by the Member with respect to any tax audit or tax related administrative or judicial proceeding against any Member, even though it relates to the Company. The Tax Matters Partner shall not compromise any dispute with the Internal Revenue Service except upon a Majority Vote of the Members. The Tax Matters Partner may be replaced upon ninety (90) days notice with the approval by a Majority Vote of the Members.
The Units represented by this certificate are subject to an Agreement restricting the sale of Units of Ownership in this Company. The Agreement provides certain restrictions on the transfer of this certificate which restrictions must be complied with. The aforesaid obligations and the full terms thereof are contained in the Operating Agreement of the Company, a copy of which is on file at the office of the Company and a copy of which will be provided upon written request.
The Members agree that if any certificate, in addition to or in substitution for the certificates of the Units of Ownership of the Company presently owned by them, is issued or reissued, they will cause the Company to place a legend on the certificate similar to the foregoing legend. The Members further agree that any additional Units of Ownership issued by the Company shall be subject to the terms of this Agreement.
(a) The withdrawal of a Member, provided the same is consented to by the non-withdrawing Member, (unless all of the other Members have consented to the withdrawal, the withdrawing Member will be liable for damages if the Company is taxed as anything other than a partnership for federal income tax purposes);
(b) The Member makes an assignment for the benefit of creditors;
(c) The Member files a voluntary petition of bankruptcy;
(d) The Member is adjudged bankrupt or insolvent;
(e) The Member files a petition or answer seeking for the Member any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any statue, law or regulation;
(f) The Member files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against the Member in any proceeding described in Subsection (e);
(g) Any proceeding against the Member seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any statute, law, or regulation, continues for one hundred twenty (120) days after the commencement thereof, or the appointment of a trustee, receiver, or liquidator for the Member or all or any substantial part of the Member's properties without the Member's agreement or acquiescence, which appointment is not vacated or stayed for ninety (90) days or, if the appointment is stayed, for ninety (90) days after the expiration of the stay during which period the appointment is not vacated;
(h) In the case of a Member who is acting as a Member by virtue of being a trustee of a trust, the termination of the trust (but not merely the substitution of a new trustee);
(i) If the Member is a partnership or limited liability company, the dissolution and commencement of winding up of the partnership or limited liability company; or
(j) In the case of a Member that is a corporation, the filing of a certificate of dissolution, or its equivalent, for the corporation or the revocation of its charter if not reinstated within ninety (90) days.
(a) If the Dissociation causes a dissolution and winding up of the Company pursuant to the terms of this Agreement, the Member shall be entitled to participate in the winding up of the Company to the same extent as any other Member, except that any Distributions to which the Member would have been entitled shall be reduced by the damages sustained by the Company as a result of the dissolution and winding up; and
(b) If the Dissociation does not cause a dissolution and winding up of the Company pursuant to this Agreement, the dissociated Person shall have no right to compel a liquidation of his Units.
(a) The unanimous written consent of all of the Members;
(b) Any other event causing dissolution of the Company under the Act; or
(c) Upon entry of a decree of judicial dissolution.
Notwithstanding the foregoing, at the election of VCS, the Company shall be dissolved and its affairs wound up if the Company is not certified as a Minority Business Enterprise ("MBE") by the North East Ohio Minority Business Development Council ("NEOMBDC") within one hundred eighty (180) days of the date hereof or if the Company ceases to be certified as an MBE by the NEOMBDC (or its successor organization) at any time.
Upon the occurrence of any Event of Dissolution, a certificate of dissolution containing the information required by the Act shall be delivered to the Secretary of State of the State of Ohio for filing. The business of the Company may be continued with the written consent of the remaining Members representing at least two-thirds of the remaining equitable ownership of the Company within seventy-five (75) days after Dissociation.
(a) The satisfaction of any outstanding obligations and liabilities to creditors of the Company who are not Members;
(b) Establishment of any reserves which such persons as are supervising and controlling the liquidation of the Company may deem advisable with respect to any contingent or unforeseen liabilities or obligations of the Company, such reserves to be maintained in a regular trust account and at the expiration of such reasonable period of time as such persons shall deem advisable the remaining balance in the trust fund shall be distributed to the Members in accordance with the priorities herein provided for;
(c) Payment of any positive cumulative Preferential Cash Balance to VCS;
(d) Payment to the Members of any accrued but unpaid interest on and repayment, if any, of the outstanding principal of any loans made to the Company by the Members hereunder or any other debts of the Company to the Members;
(e) Distribution to the Members of that portion of such property and assets then remaining as will result in a return to each Member of the balance of its Capital Account; if such remaining property and assets are not sufficient to return to the Members the entire amounts of their Capital Accounts, such remaining property and assets shall be distributed between the Members in proportion to their Capital Accounts; and
(f) Distribution of any balance remaining, after deducting the cost of liquidation, to the Members in accordance with their respective unit ownership.
(a) Distributed to a trust established for the benefit of the Members for the purposes of liquidating Company assets, collecting amounts owed to the Company, and paying any contingent or unforeseen liabilities or obligations of the Company or the Members arising out of or in connection with the Company. The assets of any such trust shall be distributed to the Members from time to time, in the reasonable discretion of the Members, in the same proportions as the amount distributed to such trust by the Company would otherwise have been distributed to the Members pursuant to this Operating Agreement; or
(b) Withheld to provide a reasonable reserve for Company liabilities (contingent or otherwise) and to reflect the unrealized portion of any installment obligations owed to the Company, provided that such withheld amounts shall be distributed to the Members as soon as practicable.
administrator of a deceased Member, or guardian or personal representative of a disabled Member, shall undertake such action in his or her representative capacity for and on behalf of said Member.
Any controversy arising under or out of this Agreement shall be submitted to and settled by binding arbitration in accordance with the governing rules of the American Arbitration Association as administered through the Cleveland, Ohio office. The commercial arbitration rules of the American Arbitration Association shall apply and the controversy shall be governed by the laws of the State of Ohio. The arbitration shall be conducted before a panel of three (3) arbitrators, one of which shall be chosen by the initiating party, one of which shall be chosen by the responding party and the third of which shall be chosen by the arbitrators chosen by the parties, all of which have extensive experience in the steel industry, in Cleveland, Ohio in accordance with the commercial arbitration rules, as existing as of the time the arbitration is commenced, of the American Arbitration Association. The award rendered by the panel of arbitrators shall be final and judgment may be entered upon it in accordance with applicable law in any court having jurisdiction thereof, including a federal district court, pursuant to the Federal Arbitration Act. In preparation for the arbitration hearing, each party may utilize all methods of discovery authorized by the Ohio Rules of Civil Procedure, and may enforce the right to such discovery in the manner provided by said Rules. All fees and expenses of the arbitration shall be borne by the parties equally. However, each party shall bear the expense of its own counsel, experts, witnesses, and preparation and presentations. Notwithstanding the above, the arbitrators are authorized to award any party such sums as shall be deemed proper for the time, expense, and inconvenience of arbitration, including arbitration fees and attorneys fees. The arbitrators will not have authority, under any circumstances, to award punitive or exemplary damages.
IN WITNESS WHEREOF, this Agreement has been executed as of the date first above written.
VALLEY CITY STEEL COMPANY
/s/ John F. Falcon ------------------------ By: John F. Falcon Its: President |
VIKING STEEL, LLC
/s/ Patrick James ----------------------- By: Patrick James Its: President and Member |
VALLEY CITY STEEL-7779, LLC
/s/ Patrick James ----------------------- By: Patrick James Its: Chairman |
Exhibit 10.15
JOINT DEVELOPMENT AGREEMENT
The initial purpose of the Joint Development Agreement is to utilize the expertise of Pullman Industries in roll-formed products and Shiloh Industries in steel processing and stamped welded products to develop and market innovative products for OEM customers. Under the terms of this agreement Pullman Industries will be considered the sole source for roll-formed products and Shiloh Industries will be considered the sole source for Engineered Welded Blanks and metallic stamped products unless specifically designated by the OEM. In all instances, each company will endeavor to recommend each other as a supplier of their respective product capabilities.
Shiloh Industries and Pullman Industries will negotiate on a project by project basis the relationship each other will have to the OEM customer. Generally, this will depend greatly on each company's product content for the project and which of the two companies has the best relationship with the customer. Whenever possible both companies will work with the customer together.
For new proposal pricing, Pullman and Shiloh will work together and agree upon pricing for joint development products. Whenever possible Shiloh and Pullman will present one price to the customer.
For any program under consideration for award both companies will generate a Statement of Work before the customer releases a purchase order. The SOW will outline the responsibilities of each party and the productivity improvement price reductions for each year. Once a SOW is agreed, its terms will prevail over any conflicting provisions of this agreement in connection with all matters pertaining to the specific program for which the SOW was prepared. All new assembly business awarded will be shared by both parties on a (50/50) basis.
Shiloh and Pullman shall be responsible for the product design, analysis, program management and production launch costs of the respective components they will supply.
Shiloh and Pullman will jointly investigate potentially defective parts. After completing the investigation, a joint final resolution will be agreed upon and presented to the customer.
Expenses associated with resolution of the defect will be borne by the company producing it. In the event of a dispute over responsibility, the dispute shall be resolved by the dispute resolution process hereinafter referred to.
Where a customer specifies that the supplier is required to assume warranty obligations, the parties will agree in the SOW on the terms of the warranty to be provided, and on the sharing of the warranty liability between the parties.
Between Shiloh and Pullman, each party's standard product warranty shall apply and, except as specifically provided herein, the exclusive remedy for breach of warranty shall be repair or replacement of any defective part or refund of the purchase price. Except for the reimbursement of out of pocket expenses and the indemnity for warranty costs caused by such party's defective parts, neither party shall be liable to the other for any other kind of damages including incidental and consequential damages.
In order to encourage the parties to the Agreement to fully cooperate to provide customers integrated roll-formed and stamped assemblies and to achieve the anticipated efficiencies, and other benefits of the alliance, and to prevent any party from taking unfair advantage of the relationship the parties believe the following restrictions are necessary and reasonable.
During the term of the Agreement, with the exception of either a customer directed quote or a (50%) owned entity of Pullman, Pullman agrees to use Shiloh as its exclusive supply for Engineered Welded Blanks and stamped metallic componentry in the global marketplace.
Shiloh agrees that during the term of the Agreement, it will work exclusively with Pullman as its supply for products produced by roll-forming.
For greater certainty nothing in this Agreement shall be construed as prohibiting Pullman or Shiloh from supplying products directly to a motor vehicle manufacturer who determines these products apply only to one company's area of expertise.
Where a customer, who does not source stamped assemblies including roll-formed product as a system, requests Shiloh to quote on the supply of roll-formed parts, Shiloh agrees to actively promote Pullman Industries to the customer to give Pullman the opportunity to supply roll-formed products directly to the customer. Similarly, where such a customer approaches Pullman to quote stamped components and welded blank capabilities, Pullman agrees to actively promote Shiloh's stamped components and welded blank capabilities to the customer to give Shiloh the opportunity to supply stamped assemblies and welded blanks directly to the customer.
It is agreed that any information provided by one party to the other during the term of the Agreement concerning the provider's business, technology, product and equipment design, manufacturing processes, business systems, suppliers and customers ("Confidential
Information") shall be treated by the recipient of the information in the strictest of confidence and shall be treated by the recipient in the same way it treats its own confidential proprietary information.
During the term of the Agreement and for a period of one year after termination of the Agreement, the recipient of Confidential Information agrees not to disclose such Confidential Information to anyone other than its officer, employees, agents and consultants who have a need to know the information and not to make any commercial use of the Confidential Information except only to further the objectives of the Agreement. The foregoing shall not apply to information that is known to the recipient at the time of disclosure; information that is publicly known or later made public knowledge through no wrongful act of the recipient; information received from a third party who is not prohibited from transferring the information by a contractual, legal or fiduciary obligation; and information independently developed by the recipient.
It is recognized that the success of the Agreement will depend on mutual trust and each party always dealing with the other in the utmost of good faith. If a dispute shall arise which cannot be resolved at an operational level, that the Presidents of Shiloh and Pullman shall at the call of either President convene a meeting and resolve the dispute to their mutual satisfaction.
The Agreement shall ensure to the benefit of and be binding upon the parties and their respective successors and assigns. If a party's business focus changes such that it intends not to manufacture products used in the Agreement, then such party may withdraw from the Agreement by giving written notice to the other party; provided, however, that such withdrawing party shall complete the performance of any programs for which it has accepted purchase orders. If a party (i) fails to deliver products to or perform services for the customer at the times and in accordance with purchase orders of the customer or (ii) fails to perform any of its obligations pursuant hereto, then the party shall have a period of (3) months from the giving of the written notice to resolve the issues raised by the notifying party and during the said (3) month period both parties shall use their best good faith efforts to work cooperatively towards a resolution of the issues. If at the end of the (3) month period, the issues raised by the notifying party have not been resolved to the satisfaction of the notifying party, the notifying party may give the other party a further (3) month's notice of its intention to terminate the Agreement effective on the expiry of the second (3) month period. In addition, either party may terminate the Agreement upon written notice of termination if the other party becomes insolvent, makes an assignment in favor of creditors, enters bankruptcy or dissolution procedures sells all or substantially all of its assets to a third party or is acquired or amalgamated with a third party resulting in a change of control.
Each party shall continue to have sole and exclusive responsibility for the management and operation of its business and for the products and services produced by it. In performing its obligation under the Agreement, each party is acting solely as an independent contractor.
The foregoing terms set out the fundamental objectives of both parties in entering the Agreement and the basic group rules for getting started. No doubt our day to day operational experience under the Agreement will necessitate flexibility on both of our parts. Will good will on both sides, I am confident the Agreement will prove to be beneficial to both of our organizations. If you are in agreement with the above terms, please so indicate by signing and returning the enclosed copy of this letter.
Exhibit 10.16
CREDIT AGREEMENT
dated as of August 11, 2000,
as Amended and Restated as of February 12, 2002,
among
SHILOH INDUSTRIES, INC.,
The Lenders Party Hereto,
JPMORGAN CHASE BANK,
as Administrative Agent
and Collateral Agent
KEYBANK NATIONAL ASSOCIATION,
as Syndication Agent
and
BANK ONE, MICHIGAN,
as Documentation Agent
J.P. MORGAN SECURITIES INC.,
as Lead Arranger and Book Manager
TABLE OF CONTENTS
ARTICLE I
Page ---- SECTION 1.01. Defined Terms ........................................................................ 1 ------------- SECTION 1.02. Classification of Loans and Borrowings ............................................... 21 -------------------------------------- SECTION 1.03. Interpretation; Terms Generally ...................................................... 21 ------------------------------- SECTION 1.04. Accounting Terms; GAAP ............................................................... 22 ---------------------- ARTICLE II The Credits ----------- SECTION 2.01. Commitments .......................................................................... 22 ----------- SECTION 2.02. Loans and Borrowings ................................................................. 22 -------------------- SECTION 2.03. Requests for Borrowings .............................................................. 23 ----------------------- SECTION 2.04. Swingline Loans ...................................................................... 24 --------------- SECTION 2.05. Letters of Credit .................................................................... 25 ----------------- SECTION 2.06. Funding of Borrowings ................................................................ 29 --------------------- SECTION 2.07. Interest Elections ................................................................... 29 ------------------ SECTION 2.08. Termination and Reduction of Commitment .............................................. 31 --------------------------------------- SECTION 2.09. Repayment of Loans; Evidence of Debt ................................................. 31 ------------------------------------ SECTION 2.10. Prepayment of Loans .................................................................. 32 ------------------- SECTION 2.11. Fees ................................................................................. 33 ---- SECTION 2.12. Interest ............................................................................. 34 -------- SECTION 2.13. Alternate Rate of Interest ........................................................... 34 -------------------------- SECTION 2.14. Increased Costs ...................................................................... 35 --------------- SECTION 2.15. Break Funding Payments ............................................................... 36 ---------------------- SECTION 2.16. Taxes ................................................................................ 36 ----- SECTION 2.17. Payments Generally; Pro Rata Treatment Sharing of Setoffs ............................ 37 --------------------------------------------------------- SECTION 2.18. Mitigation Obligations; Replacement of Lenders ....................................... 39 ---------------------------------------------- ARTICLE III Representations and Warranties ------------------------------ SECTION 3.01. Organization; Powers ................................................................. 40 -------------------- SECTION 3.02. Authorization; Enforceability ........................................................ 40 ----------------------------- SECTION 3.03. Governmental Approvals; No Conflicts ................................................. 40 --------------------------------------- SECTION 3.04. Financial Condition; No Material Adverse Change ...................................... 40 ----------------------------------------------- SECTION 3.05. Properties ........................................................................... 41 ---------- SECTION 3.06. Litigation and Environmental Matters ................................................. 42 ------------------------------------ SECTION 3.07. Compliance with Laws and Agreements .................................................. 42 ----------------------------------- |
SECTION 3.08. Investment and Holding Company Status.................................................. 42 ------------------------------------ SECTION 3.09. Taxes ................................................................................. 42 ----- SECTION 3.10. ERISA.................................................................................. 42 ----- SECTION 3.11. Disclosure............................................................................. 43 ---------- SECTION 3.12. Subsidiaries........................................................................... 43 ------------ SECTION 3.13. Insurance ............................................................................. 43 --------- SECTION 3.14. Labor Matters.......................................................................... 43 ------------- SECTION 3.15. Solvency............................................................................... 43 -------- SECTION 3.16. Senior Indebtedness.................................................................... 44 ------------------- SECTION 3.17. Security Documents..................................................................... 44 ------------------ SECTION 3.18. Federal Reserve Regulations............................................................ 45 --------------------------- ARTICLE IV Conditions ---------- SECTION 4.01. Closing Date........................................................................... 45 ------------ SECTION 4.02. Each Credit Event...................................................................... 46 ----------------- ARTICLE V Affirmative Covenants --------------------- SECTION 5.01. Financial Statements and Other Information............................................. 47 ------------------------------------------ SECTION 5.02. Notices of Material Events............................................................. 48 -------------------------- SECTION 5.03. Information Regarding Collateral....................................................... 49 -------------------------------- SECTION 5.04. Existence; Conduct of Business......................................................... 49 ------------------------------ SECTION 5.05. Payment of Obligations ................................................................ 49 ---------------------- SECTION 5.06. Maintenance of Properties.............................................................. 50 ------------------------- SECTION 5.07. Insurance.............................................................................. 50 --------- SECTION 5.08. Casualty and Condemnation.............................................................. 50 ------------------------- SECTION 5.09. Books and Records; Inspection and Audit Rights......................................... 50 ---------------------------------------------- SECTION 5.10. Compliance with Law ................................................................... 51 ------------------- SECTION 5.11. Use of Proceeds and Letters of Credit.................................................. 51 ------------------------------------- SECTION 5.12. Additional Subsidiaries................................................................ 51 ----------------------- SECTION 5.13. Further Assurances .................................................................... 51 ------------------ SECTION 5.14. Collateral Field Examination........................................................... 52 ---------------------------- SECTION 5.15. Additional Cash Funding................................................................ 52 ----------------------- SECTION 5.16. Additional Capital Expenditures........................................................ 52 ------------------------------- SECTION 5.17. Deposit Accounts and Lockboxes; Security Agreement..................................... 52 -------------------------------------------------- ARTICLE VI Negative Covenants ------------------ SECTION 6.01. Indebtedness: Certain Equity Securities................................................ 53 --------------------------------------- SECTION 6.02. Liens.................................................................................. 54 ----- SECTION 6.03. Fundamental Changes.................................................................... 55 ------------------ SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions.............................. 55 --------------------------------------------------------- SECTION 6.05. Asset Sales ........................................................................... 56 ----------- SECTION 6.06. Sale and Leaseback Transactions........................................................ 57 ------------------------------- SECTION 6.07. Hedging Agreements..................................................................... 58 ------------------ SECTION 6.08. Restricted Payments; Certain Payments of Indebtedness.................................. 58 ----------------------------------------------------- SECTION 6.09. Transactions with Affiliates........................................................... 59 ---------------------------- |
SECTION 6.10. Restrictive Agreements................................................................. 59 ---------------------- SECTION 6.11. Amendment of Material Documents........................................................ 59 ------------------------------- SECTION 6.12. Minimum Consolidated EBITDA............................................................ 60 --------------------------- SECTION 6.13. Minimum Coverage Ratio................................................................. 60 ---------------------- SECTION 6.14. Senior Leverage Ratio.................................................................. 61 --------------------- SECTION 6.15. Consolidated Tangible Net Worth........................................................ 61 ------------------------------- SECTION 6.16. Capital Expenditures................................................................... 62 -------------------- SECTION 6.17. Designated Senior Indebtedness......................................................... 62 ------------------------------ ARTICLE VII Events of Default ................................................................................... 63 ----------------- ARTICLE VIII The Administrative Agent............................................................................. 65 ------------------------ ARTICLE IX Miscellaneous ------------- SECTION 9.01. Notices................................................................................ 67 ------- SECTION 9.02. Waivers; Amendments.................................................................... 68 ------------------- SECTION 9.03. Expenses; Indemnity; Damage Waiver..................................................... 69 ---------------------------------- SECTION 9.04. Successors and Assigns................................................................. 70 ---------------------- SECTION 9.05. Survival............................................................................... 73 -------- SECTION 9.06. Counterparts; Integration; Effectiveness............................................... 73 ---------------------------------------- SECTION 9.07. Severability........................................................................... 74 ------------ SECTION 9.08. Right of Setoff........................................................................ 74 --------------- SECTION 9.09. GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS............................. 74 ---------------------------------------------------------- SECTION 9.10. WAIVER OF JURY TRIAL................................................................... 75 -------------------- SECTION 9.11. Headings............................................................................... 75 -------- SECTION 9.12. Confidentiality........................................................................ 75 --------------- SECTION 9.13. Interest Rate Limitation............................................................... 76 ------------------------ |
Schedule 1.01(a) -- Existing Letters of Credit
Schedule 1.01(b) -- Mortgaged Properties
Schedule 1.01(c) -- Specified Lines
Schedule 2.01 -- Lenders and Commitments Schedule 3.05 -- Owned and Leased Real Property Schedule 3.06 -- Disclosed Matters Schedule 3.12 -- Subsidiaries Schedule 3.13 -- Insurance Policies Schedule 4.01 -- Effective Date Additional Cash Funding Transactions Schedule 6.01 -- Existing Indebtedness Schedule 6.02 -- Existing Liens Schedule 6.04 -- Existing Investments Schedule 6.10 -- Existing Restrictions EXHIBITS: -------- Exhibit A -- Form of Assignment and Acceptance |
Exhibit B -- Form of Opinion of Wegman, Hessler, Vanderburg & O'Toole Exhibit C -- Form of Guarantee Agreement Exhibit D -- Form of Indemnity, Subrogation and Contribution Agreement Exhibit E -- Form of Security Agreement Exhibit F -- Form of Pledge Agreement Exhibit G -- ACF Note Interest Payment Test |
CREDIT AGREEMENT dated as of August 11, 2000, as |
Accordingly, the parties hereto agree as follows:
ARTICLE I
Leases, (vii) Specified Vendor Financings and (viii) the Ford Accounts Receivable Acceleration Program.
========================================================================================================= Applicable Rate ========================================================================================================= ABR Eurodollar Commitment Fee --- ---------- -------------- Total Leverage Ratio: Spread Spread Rate --------------------- ------ ------ ---- --------------------------------------------------------------------------------------------------------- Category 1 ---------- Total Leverage Ratio of greater than or equal to 6.50 to 1.0 3.00% 4.00% 0.500% --------------------------------------------------------------------------------------------------------- Category 2 ---------- Total Leverage Ratio of less than 6.50 to 1.0 but greater than or equal to 5.00 to 1.0 2.75% 3.75% 0.500% --------------------------------------------------------------------------------------------------------- Category 3 ---------- Total Leverage Ratio of less than 5.00 to 1.0 but greater than or equal to 4.00 to 1.0 2.50% 3.50% 0.500% --------------------------------------------------------------------------------------------------------- Category 4 ---------- Total Leverage Ratio of less than 4.00 to 1.0 but greater than or equal to 3.50 to 1.0 2.25% 3.25% 0.500% --------------------------------------------------------------------------------------------------------- Category 5 ---------- Total Leverage Ratio of less than 3.50 to 1.0 but greater than or equal 2.75 to 1.0 2.00% 3.00% 0.500% --------------------------------------------------------------------------------------------------------- Category 6 ---------- Total Leverage Ratio of less than 2.75 to 1.0 1.50% 2.50% 0.375% ========================================================================================================= |
Interests representing more than 20% of either the aggregate ordinary voting power or the aggregate equity value represented by the issued and outstanding Equity Interests in the Borrower; (b) occupation of a majority of the seats (other than vacant seats) on the Board of Directors of the Borrower by Persons who were neither (i) members of the Board of Directors as of the Closing Date or nominated by the current Board of Directors nor (ii) appointed by directors so nominated; (c) the acquisition of direct or indirect Control of the Borrower by any Person or group, other than MTD; or (d) the occurrence of a change in control (or similar event, however denominated) with respect to the Borrower or any Subsidiary under any agreement or instrument in respect of Material Indebtedness.
(a) the Administrative Agent shall have received either (i) a
counterpart from each Loan Party thereto of each of (A) the Guarantee
Agreement, (B) the Indemnity, Subrogation and Contribution Agreement,
(C) the Pledge Agreement and (D) the Security Agreement duly executed
and delivered on behalf of such Loan Party or (ii) in the case of any
Person that becomes a Loan Party after the Closing Date, a supplement
from such Person to each of the Guarantee Agreement, the Indemnity,
Subrogation and Contribution Agreement, the Pledge Agreement and the
Security Agreement, in each case in the form specified therein, duly
executed and delivered on behalf of such Loan Party;
(b) to the extent not already delivered to the Administrative Agent within 45 days following the Amendment Effective Date, all outstanding Equity Interests, if any, of each Subsidiary (other than Shiloh of Michigan, LLC, until it becomes a Wholly Owned Subsidiary) owned by
or on behalf of any Loan Party shall have been pledged pursuant to the Pledge Agreement (except that the Loan Parties shall not be required to pledge more than 65% of the outstanding voting Equity Interests of any Foreign Subsidiary to the extent that the pledge of any greater percentage could result in adverse tax consequences to the Borrower or any Subsidiary) and the Administrative Agent shall have received certificates or other instruments representing all such Equity Interests, together with stock powers or other instruments of transfer with respect thereto endorsed in blank;
(c) to the extent not already delivered to the Administrative Agent within 45 days following the Amendment Effective Date, all Indebtedness of the Borrower and each Subsidiary (other than Shiloh of Michigan, LLC, until it becomes a Wholly Owned Subsidiary) that is owing to any Loan Party, if any, shall be evidenced by a promissory note and shall have been pledged pursuant to the Pledge Agreement and the Administrative Agent shall have received all such promissory notes, together with instruments of transfer with respect thereto endorsed in blank;
(d) all documents and instruments, including Uniform Commercial Code financing statements, required by law or reasonably requested by the Administrative Agent to be filed, registered or recorded to create the Liens intended to be created by the Security Agreement and perfect such Liens to the extent required by, and with the priority required by, the Security Agreement, shall have been filed, registered or recorded or delivered to the Administrative Agent for filing, registration or recording; and
(e) each Loan Party shall have obtained all consents and approvals required to be obtained by it in connection with the execution and delivery of all Security Documents to which it is a party, the performance of its obligations thereunder and the granting by it of the Liens thereunder.
conformity with GAAP and (B) the effect of (w) the ACF Notes, (x) non-cash charges resulting from changes in GAAP after the Effective Date, (y) non-cash restructuring charges in an aggregate amount not to exceed $10,000,000 during the term of this Agreement and (z) price reductions made in accordance with the Manufacturing Supply Agreement in an aggregate amount not to exceed $750,000 during any fiscal year of the Borrower.
compliance with any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) any actual or alleged exposure to any Hazardous Materials, (d) the Release or threatened Release of any Hazardous Materials or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.
Motor Company and its Affiliates, as identified in the E&Y Report and described at the Bank Meeting held on January 17, 2002, in Cleveland, Ohio.
agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price hedging arrangement.
Acceptance. Unless the context otherwise requires, the term "Lenders" includes the Swingline Lender.
any payment made under any Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, any Loan Document.
(a) Liens imposed by law for taxes or other governmental charges that
are not yet due and payable or are being contested in compliance with
Section 5.05;
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days or are being contested in compliance with Section 5.05;
(c) pledges and deposits made in the ordinary course of business in compliance with workers' compensation, unemployment insurance and other social security laws or regulations;
(d) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business;
(e) judgment liens in respect of judgments that do not constitute an Event of Default under clause (k) of Article VII; and
(f) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of the Borrower or any Subsidiary;
(a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full1 faith and credit of the United States of America), in each case maturing within one year horn the date of acquisition thereof
(b) investments in commercial paper maturing within 270 days from the date of acquisition thereof and having, at such date of acquisition, the highest credit rating obtainable from S&P or from Moody's;
(c) investments in certificates of deposit, banker's acceptances and time deposits maturing within 180 days from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof that has a combined capital and surplus and undivided profits of not less than $.500,000,000;
(d) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria described in clause (c) above; and
(e) investments in money market funds substantially all the assets of which are comprised of securities of the type described in clauses (a) through (d) above.
environment (including ambient air, surface water, groundwater, land surface or subsurface strata) or within any building, structure, facility or future.
"Specified Vendor Financings" means certain vendor or customer financing of tooling equipment, as identified in the E&Y Report and described a the Bank Meeting held on January 17, 2002, in Cleveland, Ohio.
with GAAP (other than the Indebtedness of the type referred to in clause (i) of the definition of the term "Indebtedness", except to the extent of any unreimbursed drawings thereunder).
be deemed to not have occurred for purposes of this Agreement and (f) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.
ARTICLE II
(c) At the commencement of each Interest Period for any Eurodollar Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $5,000,000. At the time that each ABR Revolving
(d) Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date.
(i) the aggregate amount of such Borrowing;
(ii) the date of such Borrowing, which shall be a Business Day;
(iii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing;
(iv) in the case of a Eurodollar Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term "Interest Period"; and
(v) the location and number of the Borrower's account to which funds are to be disbursed, which shall comply with the requirements of Section 2.06.
If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month's duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender's Loan to be made as part of the requested Borrowing.
(b) To request a Swingline Loan, the Borrower shall notify the Administrative Agent of such request by telephone (confirmed by telecopy), not later than 12:00 noon, New York City time, on the day of a proposed Swingline Loan. Each such notice shall be irrevocable and shall specify the requested date (which shall be a Business Day) and amount of the requested Swingline Loan. The Administrative Agent will promptly advise the Swingline Lender of any such notice received from the Borrower. The Swingline Lender shall make each Swingline Loan available to the Borrower by means of a credit to the general deposit account of the Borrower with the Swingline Lender (or, in the case of a Swingline Loan made to finance the reimbursement of an LC Disbursement as provided in Section 2.05(e), by remittance to the Issuing Bank) by 3:00 p.m., New York City time, on the requested date of such Swingline Loan.
paragraph and to the Swingline Lender, as their interests may appear. The purchase of participations in a Swingline Loan pursuant to this paragraph shall not relieve the Borrower of any default in the payment thereof.
foregoing, each Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the Issuing Bank, such Lender's Applicable Percentage of each LC Disbursement made by the Issuing Bank and not reimbursed by the Borrower on the date due as provided in paragraph (e) of this Section, or of any reimbursement payment required to be refunded to the Borrower for any reason. Each Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. All payments with respect to an LC Disbursement made pursuant to this paragraph shall be made in Dollars.
Issuing Bank, except that interest accrued on and after the date of payment by any Lender pursuant to paragraph (e) of this Section to reimburse the Issuing Bank shall be for the account of such Lender to the extent of such payment.
the occurrence of an Event of Default, such amount plus any accrued interest or realized profits on account of such amount (to the extent not applied as aforesaid) shall be returned to the Borrower within three Business Days after all Events of Default have been cured or waived. If the Borrower is required to provide an amount of cash collateral hereunder pursuant to Section 2.10(b), such amount plus any accrued interest or realized profits on account of such amount (to the extent not applied as aforesaid) shall be returned to the Borrower as and to the extent that, after giving effect to such return, the Borrower would remain in compliance with Section 2.10(b) and no Default shall have occurred and be continuing.
(b) Unless the Administrative Agent shall have received notice from a
Lender prior to the proposed date of any Borrowing that such Lender will not
make available to the Administrative Agent such Lender's share of such
Borrowing, the Administrative Agent may assume that such Lender has made such
share available on such date in accordance with paragraph (a) of this Section
and may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. In such event, if a Lender has not in fact made its share
of the applicable Borrowing available to the Administrative Agent, then the
applicable Lender and the Borrower severally agree to pay to the Administrative
Agent forthwith on demand such corresponding amount with interest thereon, for
each day from and including the date such amount is made available to the
Borrower to but excluding the date of payment to the Administrative Agent, at
(i) in the case of such Lender, the greater of the Federal Funds Effective Rate
and a rate determined by the Administrative Agent in accordance with banking
industry rules on interbank compensation or (ii) in the case of the Borrower,
the interest rate applicable to ABR Loans. If such Lender pays such amount to
the Administrative Agent, then such amount shall constitute such Lender's Loan
included in such Borrowing.
(b) To make an election pursuant to this Section, the Borrower shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.03 if the Borrower were requesting a Revolving Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request in a form approved by the Administrative Agent and signed by the Borrower.
(c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02 and paragraph (f) of this Section:
(i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing);
(ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and
(iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term "Interest Period".
If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month's duration.
(d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of such Lender's portion of each resulting Borrowing.
(e) If the Borrower fails to deliver a timely Interest Election Request with respect to a Eurodollar Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the request of the Required Lenders, so notifies the Borrower, then, so long as an Event of Default is continuing (i) no outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto.
(d) Any termination or reduction of the Commitments shall be permanent. Each reduction of the Commitments shall be made ratably among the Lenders in accordance with their respective Commitments.
(b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.
(c) The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Class and Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender's share thereof.
(e) Any Lender may request that Loans of any Class made by it be evidenced by a promissory note. In such event, the Borrower shall prepare, execute and deliver to such Lender a promissory note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the Administrative Agent. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 9.04) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns).
(b) In the event that and on each occasion on which the total
Exposure exceeds the total Commitments, the Borrower shall prepay Revolving
Borrowings or Swingline Borrowings (or, if no such Borrowings are outstanding,
deposit cash collateral in an account with the Administrative Agent pursuant to
Section 2.05(j)) in an aggregate amount equal to such excess.
(c) In the event that and on the occasion on which the Borrower issues or incurs Subordinated Debt, the Borrower shall, upon such issuance or incurrence, prepay Loans in an aggregate amount equal to the net proceeds of such Subordinated Debt.
(d) Not more than three Business Days after the occurrence of a Prepayment Event, the Borrower or its Subsidiary shall prepay Revolving Loans (with a corresponding reduction of the Commitments) in an amount equal to the Net Proceeds of such Prepayment Event.
(e) Prior to any optional or mandatory prepayment of Borrowings hereunder, the Borrower shall select the Borrowing or Borrowings to be prepaid and shall specify such selection in the notice of such prepayment pursuant to paragraph (f) of this Section.
an advance of a Borrowing of the same Type as provided in Section 2.02, except as necessary to apply fully the required amount of a mandatory prepayment. Each prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.12.
(c) The Borrower agrees to pay to the Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between the Borrower and the Administrative Agent.
(d) All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent (or to the Issuing Bank, in the case of fees payable to it) for distribution, in the case of commitment fees and participation
fees, to the Lenders entitled thereto. Fees paid shall not be refundable under any circumstances.
(b) The Loans comprising each Eurodollar Borrowing shall bear interest at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Rate.
(c) Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by the Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, 2.00% plus the rate otherwise applicable to such Loan as provided in the preceding paragraphs of this Section or (ii) in the case of any other amount, 2.00% plus the rate applicable to ABR Revolving Loans as provided in paragraph (a) of this Section.
(e) All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is based on the Prime Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate or Adjusted LIBO0 Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error.
(a) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIB0 Rate for such Interest Period; or
(b) the Administrative Agent is advised by the Required Lenders that the Adjusted LIBO Rate for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing for such Interest Period;
then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made as an ABR Borrowing.
(i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate) or the Issuing Bank; or
(ii) impose on any Lender or the Issuing Bank or the London interbank market any other condition affecting this Agreement or Eurodollar Loans made by such Lender or any Letter of Credit or participation therein;
and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to increase the cost to such Lender or the Issuing Bank of participating in, issuing or maintaining any Letter of Credit or to reduce the amount of any sum received or receivable by such Lender or the Issuing Bank hereunder (whether of principal, interest or otherwise), then the Borrower will pay to such Lender or the Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Bank, as the case may be, for such additional costs incurred or reduction suffered.
(b) If any Lender or the Issuing Bank determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender's or the Issuing Bank's capital or on the capital of such Lender's or the Issuing Banks holding company, if any, as a consequence of this Agreement or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by the Issuing Bank, to a level below that which such Lender or the Issuing Bank or such Lender's or the Issuing Bank's holding company could have achieved but for such Change in Law (taking into consideration such Lender's or the Issuing Bank's policies and the policies of such Lender's or the Issuing Bank's holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender or the Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Bank or such Lender's or the Issuing Bank's holding company for any such reduction suffered.
(c) A certificate of a Lender or the Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or the Issuing Bank or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender or the Issuing Bank, as the case may be, the amount shown as due on any such certificate within 10 days after receipt thereof.
(d) Failure or delay on the part of any Lender or the Issuing Bank to demand compensation pursuant to this Section shall not constitute a waiver of such
(b) In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.
(c) The Borrower shall indemnify the Administrative Agent, each Lender and the Issuing Bank, within 10 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent, such Lender or the Issuing Bank, as the case may be, on or with respect to any payment by or on account of any obligation of the Borrower hereunder or under any other Loan Document (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender or the Issuing Bank, or by the Administrative Agent on its own behalf or on behalf of a Lender or the Issuing Bank, shall be conclusive absent manifest error.
(d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.
(e) Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law or reasonably requested by the Borrower as will permit such payments to be made without withholding or at a reduced rate, provided that such Foreign Lender has received written notice from the Borrower advising it of the availability of such exemption or reduction and supplying all applicable documentation.
of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments under each Loan Document shall be made in Dollars.
(b) If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, unreimbursed LC Disbursements, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards payment of principal and unreimbursed LC Disbursements then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and unreimbursed LC Disbursements then due to such parties.
(d) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the Issuing Bank hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the Issuing Bank, as the case may be, the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders or the Issuing Bank, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or Issuing Bank with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.
(e) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.04(c), 2.05(d) or (e), 2.06(b), 2.17(d) or 9.03(c), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender's obligations under such Sections until all such unsatisfied obligations are fully paid.
ARTICLE III
The Borrower represents and warrants to the Lenders and the Issuing Bank that:
year-end audit adjustments and the absence of footnotes in the case of the statements referred to in clauses (ii) and (iii) above.
(b) The Borrower has heretofore furnished to the Lenders its pro forma consolidated balance sheet as of the Closing Date, prepared giving effect to the Transactions as if the Transactions had occurred on such date. Such pro forma consolidated balance sheet (i) has been prepared in good faith based on the same assumptions used to prepare the pro forma financial statements included in the Information Memorandum (which assumptions are believed by the Borrower to be reasonable), (ii) is based on the best information available to the Borrower after due inquiry, (iii) accurately reflects all adjustments necessary to give effect to the Transactions and (iv) presents fairly, in all material respects, the pro forma financial position of the Borrower and its consolidated subsidiaries as of the Closing Date, as if the Transactions had occurred on such date (it being understood that such pro forma consolidated balance sheet does not constitute a guarantee of performance).
(c) Except as disclosed in the financial statements referred to above or the notes thereto or in the Information Memorandum and except for the Disclosed Matters, after giving effect to the Transactions, none of the Borrower or the Subsidiaries has, as of the Closing Date, any material contingent liabilities, unusual long-term commitments or material unrealized losses.
(d) There has been no material adverse change in the business, operations, properties, assets, financial condition, contingent liabilities, prospects or material agreements of the Borrower and the Subsidiaries, taken as a whole since October 31, 1999.
(b) Each of the Borrower and the Subsidiaries owns, or is licensed to use, all trademarks, trade names, copyrights, patents and other intellectual property material to its business, and the use thereof by the Borrower and the Subsidiaries does not infringe upon the rights of any other Person, except for any such infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.
(c) Schedule 3.05 sets forth the address of each real property that is owned or leased by the Borrower or any of the Subsidiaries as of the Closing Date after giving effect to the Transactions that occur on the Closing Date.
(d) As of the Closing Date, neither the Borrower or any of the Subsidiaries has received notice of, or has knowledge of, any pending or contemplated condemnation proceeding affecting any Mortgaged Property or any sale or disposition thereof in lieu of condemnation. Neither any Mortgaged Property nor any interest therein is subject to any right of first refusal, option or other contractual right to purchase such Mortgaged Property or interest therein.
(b) Except for the Disclosed Matters and except with respect to any other matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, neither the Borrower nor any of the Subsidiaries (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability.
(c) Since the date of this Agreement, there has been no change in the status of the Disclosed Matters that, individually or in the aggregate, has resulted in, or materially increased the likelihood of a Material Adverse Effect.
statements reflecting such amounts, exceed by more than $5,000,000 the fair market value of the assets of all such underfunded Plans.
absolute and matured; and (d) each Loan Party will not have unreasonably small capital with which to conduct the business in which it is engaged as such business is now conducted and is proposed to be conducted following the Closing Date.
(b) The Security Agreement is effective to create in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid and enforceable security interest in the Collateral (as defined in the Security Agreement) and, when financing statements in appropriate form are filed in the offices specified on Schedule 6 to the Perfection Certificate, the Security Agreement shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the grantors thereunder in such Collateral (other than the Intellectual Property (as defined in the Security Agreement)), in each case prior and superior in right to any other Person, other than with respect to Liens expressly permitted by Section 6.02.
(c) When the Security Agreement (or a summary thereof) is filed in the United States Patent and Trademark Office and the United States Copyright Office, the Security Agreement shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in the Intellectual Property (as defined in the Security Agreement) in which a security interest may be perfected by filing, recording or registering a security agreement, financing statement or analogous document in the United States Patent and Trademark Office or the United States Copyright Office, as applicable, in each case prior and superior in right to any other Person (it being understood that subsequent recordings in the United States Patent and Trademark Office and the United States Copyright Office may be necessary to perfect a lien on registered trademarks, trademark applications and copyrights acquired by the Loan Parties after the Closing Date), other than with respect to Liens permitted by Section 6.02.
(d) The Mortgages are effective to create, subject to the exceptions listed in each title insurance policy covering such Mortgage, in favor of the Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid and enforceable Lien on all of the Loan Parties' right, title and interest in and to the Mortgaged Properties thereunder and the proceeds thereof, and when the Mortgages are filed in the offices specified on Schedule 1.01(b), the Mortgages shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in such Mortgaged Properties and the proceeds thereof, in each case prior and superior in right to any other Person, other than with respect to the rights of Persons pursuant to Liens expressly permitted by Section 6.02.
(b) No part of the proceeds of any Loan or any Letter of Credit will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, for any purpose that entails a violation of the provisions of the Regulations of the Board, including Regulation T, U or X.
ARTICLE IV
(a) The Administrative Agent (or its counsel) shall have received from the Borrower and the Required Lenders either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement.
(b) The Administrative Agent (or its counsel) shall have received from the Borrower either (i) a counterpart of the Security Agreement signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of the Security Agreement) that such party has signed a counterpart of the Security Agreement.
(c) The Administrative Agent shall have received a true and complete copy of the Capital Expenditures Plan for the Borrower's fiscal year ending October 31, 2002, as certified by the Borrower's Chief Financial Officer, which Capital Expenditures Plan shall be satisfactory to the Administrative Agent.
(d) The Borrower shall have received not less than $12,340,000 in aggregate gross cash proceeds from the Additional Cash Funding transactions set forth on Schedule 4.01.
(e) The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Effective Date, including the Amendment Fee, and to the extent invoiced, reimbursement or payment of all out-of-pocket expenses (including fees, charges and disbursements of counsel) required to be reimbursed or paid by any Loan Party hereunder or under any other Loan Document.
(f) The Administrative Agent (or its counsel) shall have received from the Borrower (i) to the extent not already delivered to the Administrative Agent, all
outstanding Equity Interests, if any, of each Subsidiary owned by or on behalf of any Loan Party and required to be pledged pursuant to the Pledge Agreement, including any Equity Interests distributed or issued in respect of or in exchange for (as result of a merger, consolidation or otherwise) Equity Interests previously pledged pursuant to the Pledge Agreement, together with stock powers or other instruments of transfer with respect thereto endorsed in blank and (ii) to the extent not already delivered to the Administrative Agent, all Indebtedness of the Borrower and each Subsidiary that is owing to any Loan Party, if any, required to be pledged pursuant to the Pledge Agreement, together with instruments of transfer with respect thereto endorsed in blank.
(g) The Administrative Agent shall have received from the Borrower all documentation in respect of the Ford Accounts Receivable Acceleration Program, in form and substance satisfactory to the Required Lenders.
(h) The Administrative Agent shall have received from the Borrower
(i) an executed perfection certificate in form and substance satisfactory
to the Administrative Agent and (ii) a certificate of the Borrower's chief
financial officer certifying that (A) the representations and warranties of
each Loan Party set forth in the Loan Documents are true and correct on and
as of the Effective Date except to the extent a representation or warranty
relates to a specific earlier date, in which case such representation or
warranty shall be true and correct in all material respects on such date
and (B) to the best knowledge of such chief financial officer after
reasonable investigation the information contained in the E&Y Report is
true and correct in all material respects as of the Effective Date.
The Administrative Agent shall notify the Borrower and the Lenders of the Effective Date, and such notice shall be conclusive and binding. Notwithstanding the foregoing, the obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit hereunder shall not become effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section 9.02) and, in the event such conditions are not so satisfied or waived, the Original Credit Agreement shall remain in effect without giving effect to any amendments thereto contemplated hereby.
(a) The representations and warranties of each Loan Party set forth in the Loan Documents shall be true and correct on and as of the date of such Borrowing or the date of issuance, amendment, renewal or extension of such Letter of Credit, as applicable except to the extent a representation or warranty relates to a specific earlier date, in which case such representation or warranty shall be true and correct in all material respects on such date.
(b) At the time of and immediately after giving effect to such Borrowing or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, no Default shall have occurred and be continuing.
Each Borrowing and each issuance, amendment, renewal or extension of a Letter of
Credit shall be deemed to constitute a representation and warranty by the
Borrower on the date thereof as to the matters specified in paragraphs (a) and
(b) of this Section.
ARTICLE V
Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees payable hereunder shall have been paid in full and all Letters of Credit shall have expired or terminated and all LC Disbursements shall have been reimbursed, the Borrower covenants and agrees with the Lenders and the Issuing Bank that:
(a) within 90 days after the end of each fiscal year of the Borrower, its audited consolidated and consolidating balance sheet and related statements of operations, stockholders' equity and cash flows as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by independent public accountants of recognized national standing (without a "going concern" or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of the Borrower and its consolidated subsidiaries on a consolidated basis in accordance with GAAP consistently applied;
(b) within 45 days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower, its consolidated and consolidating balance sheet and related statements of operations, stockholders' equity and cash flows as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year, all certified by one of its Financial Officers as presenting fairly in all material respects the financial condition and results of operations of the Borrower and its consolidated subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes;
(c) within 30 days after the end of each of the first two fiscal months of each fiscal quarter of the Borrower, its (i) summary balance sheet and related statement of income as of the end of and for such fiscal month and the then elapsed portion of the fiscal year and (ii) summary statement of cash flows for the then elapsed portion of the fiscal year;
(d) concurrently with any delivery of financial statements under clause (a), (b) or (c) above, a certificate of a Financial Officer of the Borrower (i) certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto,
(ii) setting forth reasonably detailed calculations demonstrating
compliance with Sections 6.12, 6.13, 6.14, 6.15 and 6.16 and (iii) stating
whether any change in GAAP or in the application thereof has occurred since
the date of the Borrower's audited financial statements referred to in
Section 3.04 and, if any such change has occurred, specifying the effect of
such change on the financial statements accompanying such certificate;
(e) concurrently with any delivery of financial statements under clause (a) above, a certificate of the accounting firm that reported on such financial statements stating whether they obtained knowledge during the course of their examination of such financial statements of any Default (which certificate may be limited to the extent required by accounting rules or guidelines);
(f) at least 30 days prior to the commencement of each fiscal year thereafter, a detailed consolidated budget for such fiscal year (including a projected consolidated balance sheet and related statements of projected operations and cash flows as of the end of and for such fiscal year and setting forth the assumptions used for purposes of preparing such budget) and, promptly when available, any significant revisions of such budget;
(g) not later than August 31, 2002, a Capital Expenditures Plan for the Borrower's fiscal year ending October 31, 2003, which Capital Expenditures Plan shall be (x) no less detailed than the Capital Expenditure Plan for the Borrower's fiscal year ending October 31, 2002, and (y) otherwise shall be in form and substance reasonably satisfactory to the Lenders;
(h) within 5 days after the end of each fiscal month of the Borrower, a report setting forth the cash flow projections for the Borrower and the Subsidiaries for the 13 week period following the date of such report;
(i) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by the Borrower or any Subsidiary with the Securities and Exchange Commission, or any Governmental Authority succeeding to any or all of the functions of said Commission, or with any national securities exchange, as the case may be; and
(j) promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of the Borrower or any Subsidiary, or compliance with the terms of any Loan Document, as the Administrative Agent or any Lender may reasonably request.
(a) the occurrence of any Default;
(b) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting the Borrower or any Affiliate thereof that, if adversely determined, could reasonably be expected to result in a Material Adverse Effect;
(c) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrower and the Subsidiaries in an aggregate amount exceeding $5,000,000; and
(d) any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a statement of a Financial Officer or other executive officer of the Borrower setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.
(b) Each year, at the time of delivery of annual financial statements with respect to the preceding fiscal year pursuant to clause (a) of Section 5.01, the Borrower shall deliver to the Administrative Agent a certificate of a Financial Officer and the chief legal officer of the Borrower (i) setting forth the information required pursuant to the Perfection Certificate or confirming that there has been no change in such information since the date of the Perfection Certificate delivered on the Closing Date or the date of the most recent certificate delivered pursuant to this Section and (ii) certifying that all Uniform Commercial Code financing statements (including fixture filings, as applicable) or other appropriate filings, recordings or registrations, including all refilings, rerecordings and reregistrations, containing a description of the Collateral have been filed of record in each governmental, municipal or other appropriate office in each jurisdiction identified pursuant to clause (i) above to the extent necessary to protect and perfect the security interests under the Security Agreement for a period of not less than 18 months after the date of such certificate (except as noted therein with respect to any continuation statements to be filed within such period).
prohibit any merger, consolidation, liquidation or dissolution permitted under
Section 6.03.
account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities. The Borrower will, and will cause each of the Subsidiaries to, permit any representatives designated by the Administrative Agent or any Lender, upon reasonable prior notice, to visit and inspect its properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times and as often as reasonably requested.
(b) Letters of Credit will be used by the Borrower for ordinary course purposes.
(c) No part of the proceeds of any Loan or any Letter of Credit will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations T, U and X.
(b) If any material assets are acquired by the Borrower or any
Subsidiary Loan Party after the Closing Date (other than (i) real property and
(ii) assets constituting
Collateral under the Security Agreement that become subject to the Lien of the Security Agreement upon acquisition thereof), the Borrower will notify the Administrative Agent and the Lenders thereof, and, if requested by the Administrative Agent or the Required Lenders, the Borrower will cause such assets to be subjected to a Lien securing the Obligations and will take, and cause the Subsidiary Loan Parties to take, such actions as shall be necessary or reasonably requested by the Administrative Agent to grant and perfect such Liens, including actions described in paragraph (a) of this Section, all at the expense of the Loan Parties.
(c) Within 90 days following the Closing Date, the Administrative Agent shall have received (i) counterparts of a Mortgage with respect to each Mortgaged Property duly executed and delivered by the record owner of such Mortgaged Property, (ii) a policy or policies of title insurance issued by a nationally recognized title insurance company insuring the Lien of each such Mortgage as a valid first Lien on the Mortgaged Property described therein, free of any other Liens except as expressly permitted by Section 6.02, together with such endorsements, coinsurance and reinsurance as the Administrative Agent or the Required Lenders may reasonably request, and (iii) such abstracts, appraisals, legal opinions and other documents as the Administrative Agent or the Required Lenders may reasonably request with respect to any such Mortgage or Mortgaged Property.
ARTICLE VI
Until the Commitments have expired or terminated and the principal of and interest on each Loan and all fees payable hereunder have been paid in full and all Letters of Credit have expired or terminated and all LC Disbursements shall have been reimbursed, the Borrower covenants and agrees with the Lenders and the Issuing Bank that:
(a) Indebtedness created under the Loan Documents;
(b) the Subordinated Debt;
(c) Indebtedness existing on the Closing Date and set forth in Schedule 6.01 and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof or result in an earlier maturity date or decreased weighted average life thereof;
(g) Hedging Agreements permitted under Section 6.07;
(i) Indebtedness evidenced by the ACF Notes; and
(j) Specified Government Financings.
(a) Liens created under the Loan Documents;
(b) Permitted Encumbrances;
(b) The Borrower will not, and will not permit any of the Subsidiaries to, engage to any material extent in any business other than businesses of the type conducted by the Borrower on the date of execution of this Agreement and businesses reasonably related thereto.
(b) investments existing on the Effective Date and set forth on Schedule 6.04.
(c) investments by the Borrower and the Subsidiaries in Equity Interests in their respective wholly owned Subsidiaries that are Loan Parties immediately prior to such investment;
(d) loans or advances made by the Borrower to any wholly owned Subsidiary that is a Loan Party and made by any such Subsidiary to the Borrower or any wholly owned Subsidiary that is a Loan Party;
(g) Hedging Agreements permitted under Section 6.07.
(a) sales of inventory, used or surplus equipment and Permitted Investments in the ordinary course of business;
Greenheld Die & Manufacturing Corp. (Tooling Division) the reduction in Commitments shall not exceed an aggregate amount of $10,000,000 in respect of such Specified Asset Sales (the "Initial Reduction") and (b) in addition to the Initial Reduction, the Borrower shall reduce the Commitments by an additional $15,000,000 (or, if the aggregate Specified Asset Sale Amount in connection with the Specified Asset Sales of VCS Properties LLC (Valley City Steel Company) and Greenfield Die & Manufacturing Corp. (Tooling Division) does not equal or exceed $25,000,000, the amount by which such Specified Asset Sale Amount exceeds $10,000,000) at or prior to April 15, 2002;
(f) any sale and leaseback transaction permitted by Section 6.06 may be effected; and
(g) the Specified Lines Sale;
(a) the aggregate consideration received by the Borrower and the Subsidiaries pursuant to sales and transfers effected pursuant to this clause (a) shall not exceed $10,000,000 (less the fair market value of any assets sold pursuant to Section 6.05(d));
(b) to the extent not permitted by clause (a) above, (i) the aggregate consideration received by the Borrower and the Subsidiaries pursuant to sales and transfers effected pursuant to this clause (b) shall not exceed $50,000,000 (less the fair market value of assets sold pursuant to Section 6.05(e)), (ii) the Borrower shall reduce the Commitments in accordance with Section 2.08 by an amount equal to the aggregate consideration received in respect of such sale or transfer effected pursuant to this clause (b) and (iii) if after giving effect to any reduction in Commitments pursuant to clause (ii) hereof, the sum of the Exposures would exceed the total Commitments, the Borrower shall prepay Loans in accordance with Section 2.10 in an amount equal to such excess; and
(c) such transactions are part of Capital Expenditures identified on the Capital Expenditure Plan for the Borrower's fiscal year ending October 31, 2002, provided that the aggregate consideration received by the Borrower and the Subsidiaries pursuant to sales and transfers effected pursuant to this clause (c) shall not exceed $20,000,000 in the aggregate;
(b) The Borrower will not, and will not permit any Subsidiary to, make or agree to pay or make, directly or indirectly, any payment or other distribution (whether in
cash, securities or other property) of or in respect of principal of or interest on any Indebtedness, or any payment or other distribution (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancelation or termination of any Indebtedness, except:
(i) payment of Indebtedness created under the Loan Documents;
(ii) payment of regularly scheduled interest (including any additional interest arising pursuant to any registration rights agreement related thereto) and principal payments as and when due in respect of any Indebtedness other than payments in respect of the Subordinated Debt prohibited by the subordination provisions thereof;
(iii) refinancings of Indebtedness to the extent permitted by Section 6.01; and
(iv) payment of secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness (including the purchase of any asset subject to a capital lease obligation pursuant to a purchase option) permitted by this Agreement.
apply to customary provisions in leases and other contracts restricting the assignment thereof.
-------------------------------------------------------------------------------- Period Amount ------ ------ -------------------------------------------------------------------------------- Month Ending on November 30, 2001 $ 842,000 -------------------------------------------------------------------------------- 2 Months Ending on December 31, 2001 $ (415,000) -------------------------------------------------------------------------------- 3 Months Ending on January 31, 2002 $ 818,000 -------------------------------------------------------------------------------- 4 Months Ending on Febraury 28, 2002 $ 1,852,000 -------------------------------------------------------------------------------- 5 Months Ending on March 31, 2002 $ 3,220,000 -------------------------------------------------------------------------------- 6 Months Ending on April 30, 2002 $ 5,468,000 -------------------------------------------------------------------------------- 7 Months Ending on May 31, 2002 $ 8,840,000 -------------------------------------------------------------------------------- 8 Months Ending on June 30, 2002 $ 11,919,000 -------------------------------------------------------------------------------- 9 Months Ending on July 31, 2002 $ 11,622,000 -------------------------------------------------------------------------------- 10 Months Ending on August 31, 2002 $ 15,395,000 -------------------------------------------------------------------------------- 11 Months Ending on September 30, 2002 $ 19,335,000 -------------------------------------------------------------------------------- 12 Months Ending on October 31, 2002 $ 24,261,000 -------------------------------------------------------------------------------- 12 Months Ending on November 30, 2002 $ 26,862,000 -------------------------------------------------------------------------------- 12 Months Ending on December 31, 2002 $ 28,698,000 -------------------------------------------------------------------------------- 12 Months Ending on January 31, 2003 $ 31,412,000 -------------------------------------------------------------------------------- 12 Months Ending on February 28, 2003 $ 33,976,000 -------------------------------------------------------------------------------- 12 Months Ending on March 31, 2003 $ 36,909,000 -------------------------------------------------------------------------------- 12 Months Ending on April 30, 2003 $ 38,841,000 -------------------------------------------------------------------------------- 12 Months Ending on May 31, 2003 $ 39,348,000 -------------------------------------------------------------------------------- 12 Months Ending on June 30, 2003 $ 41,153,000 -------------------------------------------------------------------------------- 12 Months Ending on July 31, 2003 $ 42,472,000 -------------------------------------------------------------------------------- 12 Months Ending on August 31, 2003 $ 42,915,000 -------------------------------------------------------------------------------- 12 Months Ending on September 30, 2003 $ 44,064,000 -------------------------------------------------------------------------------- 12 Months Ending on October 31, 2003 $ 44,725,000 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- |
Period Ratio ------ ----- November 1, 2002, to January 31,2003 1.60 to 1.00 February 1, 2003 to April 30, 2003 2.45 to 1.00 May 1, 2003 to July 31, 2003 1.90 to 1.00 August 1, 2003 to October 31, 2003 3.15 to 1.00 Thereafter 3.50 to 1.00 |
Period Ratio ------ ----- November 1, 2002, to January 31, 2003 9.00 to 1.00 February 1, 2003 to April 30, 2003 7.25 to 1.00 May 1, 2003 to July 31, 2003 6.50 to 1.00 August 1, 2003 to October 31, 2003 6.00 to 1.00 Thereafter 3.00 to 1.00 |
Period Amount ------ ------ August 1, 2001 to October 31, 2001 $ 125,000,000 November 1, 2001 to January 31, 2002 $ 117,000,000 February 1, 2002 to April 30, 2002 $ 112,000,000 May 1, 2002 to July 31, 2002 $ 108,000,000 August 1, 2002 to October 31, 2002 $ 110,000,000 November 1, 2002 to January 31, 2003 $ 109,000,000 February 1, 2003 to April 30, 2003 $ 111,000,000 May 1, 2003 to July 31, 2003 $ 110,000,000 ================================================================================ |
Period Amount ------ ------ August 1, 2003 to October 31, 2003 $ 113,000,000 |
In addition, the Borrower will not permit the Consolidated Tangible Net Worth as of any day after October 31, 2003, to be less than the sum of $113,000,000 plus 50% of Consolidated Net Income (if positive) for the period (taken as a single accounting period) from November 1, 2003, and ending on the last day of the quarter as to which compliance with this Section 6.15 is being determined.
(b) Notwithstanding Section 6.16(a), the Borrower will not permit the aggregate amount of Capital Expenditures in respect of any period ending on a date set forth below to exceed the amount set forth in the table below opposite such period:
-------------------------------------------------------------------------------- Period Amount ------ ------ -------------------------------------------------------------------------------- Month Ending on November 30, 2001 $ 4,000,000 -------------------------------------------------------------------------------- 2 Months Ending on December 31, 2001 $ 6,750,000 -------------------------------------------------------------------------------- 3 Months Ending on January 31, 2002 $ 9,250,000 -------------------------------------------------------------------------------- 4 Months Ending on Febraury 28, 2002 $ 13,500,000 -------------------------------------------------------------------------------- 5 Months Ending on March 31, 2002 $ 14,750,000 -------------------------------------------------------------------------------- 6 Months Ending on April 30, 2002 $ 16,000,000 -------------------------------------------------------------------------------- 7 Months Ending on May 31, 2002 $ 18,200,000 -------------------------------------------------------------------------------- 8 Months Ending on June 30, 2002 $ 20,000,000 -------------------------------------------------------------------------------- 9 Months Ending on July 31, 2002 $ 22,400,000 -------------------------------------------------------------------------------- 10 Months Ending on August 31, 2002 $ 25,700,000 -------------------------------------------------------------------------------- 11 Months Ending on September 30, 2002 $ 27,500,000 -------------------------------------------------------------------------------- 12 Months Ending on October 31, 2002 $ 29,100,000 -------------------------------------------------------------------------------- |
(c) Notwithstanding Section 6.16(a), the Borrower will not make, and will not permit any Subsidiary to make, any Capital Expenditures after October 31, 2002, other than as determined in accordance with Section 5.16.
ARTICLE VII
(a) the Borrower shall fail to pay any principal of any Loan or any reimbursement obligation in respect of any LC Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fix for prepayment thereof or otherwise;
(b) the Borrower shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount referred to in clause (a) of this Article) payable under this Agreement or any other Loan Document, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of three Business Days;
(c) any representation or warranty that is qualified as to materiality and made or deemed made by or on behalf of the Borrower or any Subsidiary in or in connection with any Loan Document or any amendment or modification thereof or waiver thereunder, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with any Loan Document or any amendment or modification thereof or waiver thereunder, shall prove to have been incorrect when made or deemed made or any such representation or warranty that is not qualified as to materiality shall prove to have been incorrect in any material respect when made or deemed made;
(d) the Borrower shall fail to observe or perform any covenant, condition or agreement contained in Section 5.02, 5.04 (with respect to the existence of the Borrower), 5.11, 5.14, 5.15 or 5.17 or in Article VI;
(e) any Loan Party shall fail to observe or perform any covenant, condition or agreement contained in any Loan Document (other than those specified in clause (a), (b) or (d) of this Article), and such failure shall continue unremedied for a period of 30 days after notice thereof from the Administrative Agent to the Borrower (which notice will be given at the request of any Lender);
(f) the Borrower or any Subsidiary shall fail to make any payment (whether of principal or interest and regardless of amount) in respect of any Material Indebtedness, when and as the same shall become due and payable;
(g) any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits (with or without the giving of notice, the lapse of time or both) the holder or holders of any Material Indebtedness (or any portion of the principal amount thereof) or any
(h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Borrower or any Subsidiary or its debts, or of a substantial part of its assets, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Subsidiary or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered;
(i) the Borrower or any Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (h) of this Article, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Subsidiary or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing;
(j) the Borrower or any Subsidiary shall become unable, admit in writing its inability or fail generally to pay its debts as they become due;
(k) one or more judgments for the payment of money in an aggregate amount in excess of $5,000,000 shall be rendered against the Borrower, any Subsidiary or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of the Borrower or any Subsidiary to enforce any such judgment;
(l) an ERISA Event shall have occurred that, in the reasonable opinion of the Required Lenders, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrower and the Subsidiaries in an aggregate amount exceeding (i) $2,500,000 in any year or (ii) $5,000,000 for all periods;
(m) (i) any Lien purported to be created under any Security Document shall cease to be, or shall be asserted by any Loan Party not to be, a valid and perfected Lien on any Collateral having a value in excess of $250,000, with the priority required by the applicable Security Document, except as a result of the sale or
other disposition of the applicable Collateral in a transaction permitted under the Loan Documents or (ii) the Obligations of the Borrower or any Subsidiary pursuant to a Guarantee Agreement, shall cease to, or shall be asserted not to be, senior indebtedness under the subordination provisions of any document or instrument evidencing any permitted subordinated Indebtedness or such subordination provisions shall be invalidated or otherwise cease to be, or shall be asserted not to be, legal, valid and binding obligations of the parties thereto, enforceable in accordance with their terms; or
(n) a Change in Control shall occur;
then, and in every such event (other than an event with respect to the Borrower described in clause (h) or (i) of this Article), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Borrower, take either or both of the following actions, at the same or different times: (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; and in case of any event with respect to the Borrower described in clause (h) or (i) of this Article, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower.
ARTICLE VIII
Each of the Lenders and the Issuing Bank hereby irrevocably appoints the Administrative Agent as its agent and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms of the Loan Documents, together with such actions and powers as are reasonably incidental thereto. For purposes of this Article VIII and for the purposes of Article IX, all references to the Administrative Agent are deemed to include the Collateral Agent.
The bank serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrower or any Subsidiary or any Affiliate thereof as if it were not the Administrative Agent hereunder.
The Administrative Agent shall not have any duties or obligations except those expressly set forth in the Loan Documents. Without limiting the generality of the
foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated by the Loan Documents that the Administrative Agent is required to exercise in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.02), and (c) except as expressly set forth in the Loan Documents, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of the Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.02) or in the absence of its own gross negligence or wilful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until written notice thereof is given to the Administrative Agent by the Borrower or a Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with any Loan Document, (ii) the contents of any certificate, report or other document delivered thereunder or in connection therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth in any Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV or elsewhere in any Loan Document, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.
The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.
The Administrative Agent may perform any of and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent.
Subject to the appointment and acceptance of a successor Administrative Agent as provided in this paragraph, the Administrative Agent may resign at any time by notifying the Lenders, the Issuing Bank and the Borrower. Upon any such resignation, the Required Lenders shall have the right, in consultation with the Borrower, to appoint a successor. If no successor shall have been so appointed by the Required Lenders and shall
have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may, on behalf of the Lenders and the Issuing Bank, appoint a successor Administrative Agent that shall be a bank with an office in New York, New York, or an Affiliate of any such bank. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the Administrative Agent's resignation hereunder, the provisions of this Article and Section 9.03 shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as Administrative Agent.
Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or related agreement or any document furnished hereunder or thereunder.
The Lenders identified in this Agreement as the Documentation Agent and the Syndication Agent shall not have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Lenders. Without limiting the foregoing, neither the Documentation Agent nor the Syndication Agent shall have or be deemed to have a fiduciary relationship with any Lender. Each Lender hereby makes the same acknowledgments with respect to the Documentation Agent and the Syndication Agent as it makes with respect to the Administrative Agent or any other Lender in this Article VIII.
ARTICLE IX
(a) if to the Borrower, to it at 5389 West 130 St., Cleveland, Ohio 44130, Attention of Stephen E. Graham (Telecopy No. (216) 265-4244), with a copy to Wegman, Hessler & Vanderburg at 6055 Rockside Woods Boulevard, Suite 200, Cleveland, Ohio 44131, Attention of Steven E. Pryatel (Telecopy No. (216) 642-8826)
(b) if to the Administrative Agent, to JPMorgan Chase Bank, Loan and Agency Services Group, One Chase Manhattan Plaza, 8th Floor, New York, New York 10081, Attention of Jesus Sang (Telecopy No. (212) 552-5650), with a copy to The Chase Manhattan Bank, 270 Park Avenue, New York, New York 10017, Attention of Julie Long (Telecopy No. (212) 270-5127);
(c) if to the Issuing Bank, to JPMorgan Chase Bank USA, N.A., Letter of Credit Department; 8th Floor, 1201 Market Street, Wilmington, Delaware 19801, Attention of Mike Handago (Telecopy No. (302) 428-3390);
(d) if to the Swingline Lender, to JPMorgan Chase Bank, Loan and Agency Services Group, One Chase Manhattan Plaza, 8th Floor, New York, New York 10081, Attention of Jesus Sang (Telecopy No. (212) 552-5650); and
(e) if to any other Lender, to it at its address (or telecopy number) set forth in its Administrative Questionnaire.
Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt.
(d) To the extent permitted by applicable law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or Letter of Credit or the use of the proceeds thereof. In addition, no Indemnitee shall be liable for any damages arising from the use by others of information or other materials obtained through electronic, telecommunications or other information transmission systems.
(e) All amounts due under this Section shall be payable not later than five days after written demand therefor.
Bank that issues any Letter of Credit) and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, the Issuing Bank and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.
(d) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, the assignee's completed
Administrative Questionnaire (unless the assignee shall already be a Lender
hereunder), the processing and recordation fee referred to in paragraph (b) of
this Section and any written consent to such assignment required by paragraph
(b) of this Section, the Administrative Agent shall accept such Assignment and
Acceptance and record the information contained therein in the Register. No
assignment shall be effective for purposes of this Agreement unless it has been
recorded in the Register as provided in this paragraph.
(f) A Participant shall not be entitled to receive any greater
payment under Section 2.14 or 2.16 than the applicable Lender would have been
entitled to receive with respect to the participation sold to such Participant,
unless the sale of the participation to such Participant is made with the
Borrower's prior written consent. A Participant that would be a Foreign Lender
if it were a Lender shall not be entitled to the benefits of Section 2.16
unless the Borrower is notified of the participation sold to such Participant
and such Participant agrees, for the benefit of the Borrower, to comply with
Section 2.16(e) as though it were a Lender.
agreements with respect to fees payable to the Administrative Agent constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement.
(b) The Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to any Loan Document, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or any other Loan Document shall affect any right that the Administrative Agent, the Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against the Borrower or their properties in the courts of any jurisdiction.
(c) The Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.
(d) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.01. Nothing in this Agreement or any other Loan Document will affect the right of any party to this Agreement to serve process in any other manner permitted by law.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.
SHILOH INDUSTRIES, INC.,
by /s/ Stephen E. Graham ------------------------ Name: Stephen E. Graham Title: Chief Financial Officer |
JPMORGAN CHASE BANK, individually and as Administrative Agent and Collateral Agent,
by /s/ Julie S. Long -------------------------- Name: Julie S. Long Title: Vice President |
KEYBANK NATIONAL ASSOCIATION,
individually and as Syndication
Agent,
by /s/ Michael Lugui -------------------------- Name: Michael Lugui Title: SVP |
BANK ONE, MICHIGAN, individually and as Documentation Agent,
Title:
SIGNATURE PAGE TO AMENDED AND
RESTATED CREDIT AGREEMENT DATED AS
OF February 12, 2002
Bank One, NA Name of Institution: -------------------------------- by: /s/ Joanna W. Anderson ----------------------------- Name: Joanna W. Anderson Title: Officer |
SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF February 12, 2002 Name of Institution: Comerica Bank -------------------------------- by: /s/ Nicholas G. Mester ----------------------------- Name: Nicholas G. Mester Title: Vice President |
SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF February 12, 2002 Name of Institution: The Mitsubishi Trust and Banking Corporation -------------------------------- by: /s/ Hiroyuki Tsuru ----------------------------- Name: Hiroyuki Tsuru Title: Deputy General Manager |
SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF February 12, 2002 Name of Institution: LaSalle Bank National Association --------------------------------- by: /s/ Robert M. Walker ------------------------------ Name: Robert M. Walker Title: AVP |
SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF February 12, 2002 Name of Institution: The Bank of Nova Scotia -------------------------------- by: /s/ Daniel A. Costigan ----------------------------- Name: Daniel A. Costigan Title: Director |
SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF February 12, 2002 Name of Institution: Sky Bank -------------------------------- by: /s/ Jerry S. Sutherin ----------------------------- Name: Jerry S. Sutherin Title: V.P. Specialty Lending Group |
SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF February 12, 2002 Name of Institution: GE Capital CEE, Inc. -------------------------------- by: /s/ William S. Richardson ----------------------------- Name: William S. Richardson Title: Duly Authorized Signatory |
SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF February 12, 2002 |
Name of Institution: U.S. Bank National Association -------------------------------- f/k/a Firstar Bank National -------------------------------- Association -------------------------------- by: /s/ Mark E. Storer ----------------------------- Name: Mark E. Storer Title: Senior Vice President |
SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF February 12, 2002 Name of Institution: PNC Bank, N.A. -------------------------------- by: /s/ Eric L. Moore ----------------------------- Name: Eric L. Moore Title: Vice President |
SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF February 12, 2002 Name of Institution: National City Bank -------------------------------- by: /s/ Robert S. Coleman ----------------------------- Name: Robert S. Coleman Title: Senior Vice President |
Exhibit 18.1
February 12, 2002
Board of Directors Shiloh Industries, Inc. 5389 West 130/th/ Street Cleveland, Ohio 44130
Dear Directors:
We are providing this letter to you for inclusion as an exhibit to your Form 10-K filing pursuant to Item 601 of Regulation S-K.
We have audited the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended October 31, 2001 and issued our report thereon dated February 12, 2002. Notes 2 and 6 to the consolidated financial statements describe a change in accounting principle from the last-in, first-out method to the first-in, first-out method for determining the cost of certain inventories. It should be understood that the preferability of one acceptable method of accounting over another for accounting for inventory has not been addressed in any authoritative accounting literature, and in expressing our concurrence below we have relied on management's determination that this change in accounting principle is preferable. Based on our reading of management's stated reasons and justification for this change in accounting principle in the Form 10-K, and our discussions with management as to their judgement about the relevant business planning factors relating to the change, we concur with management that such change represents, in the Company's circumstances, the adoption of a preferable accounting principle in conformity with Accounting Principles Board Opinion No. 20.
Very truly yours,
/s/ PricewaterhouseCoopers LLP |
Exhibit 21.1
LIST OF SUBSIDIARIES OF SHILOH INDUSTRIES, INC.
The following is a list of the subsidiaries of Shiloh Industries, Inc., a Delaware corporation (the "Corporation"). The common stock of all the corporations listed below is wholly owned, directly or indirectly, by the Corporation. If indented, the corporation is a wholly owned subsidiary of the corporation under which it is listed unless otherwise noted.
NAME OF CORPORATION STATE OF INCORPORATION Shiloh Corporation Ohio The Sectional Die Company Ohio Sectional Stamping, Inc. Ohio Medina Blanking, Inc.(1) Ohio Liverpool Coil Processing, Incorporated Ohio Shiloh of Michigan, LLC (2) Michigan VCS Properties LLC Ohio Valley City Steel, LLC (3) Ohio Greenfield Die & Manufacturing Corp. Michigan Shiloh Incorporated Michigan C&H Design Company Michigan Jefferson Blanking, Inc. Georgia Shiloh Automotive, Inc. Ohio Shiloh de Mexico S.A. de C.V. Shiloh Industries, Inc. (4) Mexico Shiloh International S.A. de C.V. (5) Mexico Shiloh Industries International Inc Barbados Dickson Manufacturing Division Tennesse __________________ |
(1) Medina Blanking, Inc. is 22% owned by the Corporation and 78% owned by Shiloh Corporation.
(2) Shiloh of Michigan is 80% owned by Shiloh Corporation and 20% owned by Shiloh Automotive, Inc.
(3) Valley City Steel, LLC is owned 49% by VCS Propertries and 51% by an unrelated third party.
(4) Shiloh de Mexico S. A. de C.V. Shiloh Industries, Inc. is owned 99% by the Corporation and 1% by Medina Blanking, Inc.
(5) Shiloh International S.A. de C.V. is owned 99% by Shiloh de Mexico S.A. de C.V. and 1% by the Corporation.
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-21161) of our report dated February 12, 2002 relating to the financial statements and financial statement schedule, which appears in Shiloh Industries, Inc.'s Annual Report on Form 10-K for the year ended October 31, 2001.
/s/ PricewaterhouseCoopers LLP Cleveland, Ohio February 12, 2002 |
Exhibit 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors and officers of Shiloh Industries, Inc., a Delaware corporation, hereby constitutes and appoints John F. Falcon, Stephen E. Graham and Thomas C. Daniels, and each of them, as the true and lawful attorney or attorneys-in-fact, with full power of substitution and revocation, for each of the undersigned and in the name, place and stead of each of the undersigned, to sign on behalf of each of the undersigned an Annual Report on Form 10-K for the fiscal year ended October 31, 2001 pursuant to Section 13 of the Securities Exchange Act of 1934 and to sign any and all amendments to such Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, including, without limitation, a Form 12b-25, with the Securities and Exchange Commission, granting to said attorney or attorneys-in-fact, and each of them, full power and authority to do so and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney or attorneys-in-fact or any of them or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
This Power of Attorney may be executed in multiple counterparts, each of which shall be deemed an original with respect to the person executing it.
Executed as of this 25/th/ day of December 2001.
/s/ John F. Falcon ---------------------------------- ----------------------------------- John F. Falcon James C. Fanello President, Chief Executive Director Officer (Principal Executive Officer) and Director /s/ David J. Hessler /s/ Curtis E. Moll ---------------------------------- ----------------------------------- David J. Hessler Curtis E. Moll Director Chairman of the Board and Director /s/ James A. Karman /s/ Maynard H. Murch, IV ---------------------------------- ----------------------------------- James A. Karman Maynard H. Murch, IV Director Director /s/ Ronald C. Houser /s/ John J. Tanis ---------------------------------- ----------------------------------- Ronald C. Houser John J. Tanis Director Director /s/ Stephen E. Graham /s/ Theodore K. Zampetis ---------------------------------- ----------------------------------- Stephen E. Graham Theodore K. Zampetis Treasurer and Chief Financial Director Officer (Principal Financial and Accounting Officer) |