x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
For
the quarterly period ended September 30,
2006
|
|
or
|
|
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
For
the transition period from _____________
to
_____________
|
|
Delaware
|
36-3161171
|
(State
or Other Jurisdiction of Incorporation or Organization)
|
(I.R.S.
Employer Identification No.)
|
One
Dauch Drive, Detroit, Michigan
|
48211-1198
|
(Address
of Principal Executive Offices)
|
(Zip
Code)
|
Page
No.
|
||||
|
|
1 | ||
PART
I.
|
|
|||
ITEM 1. |
|
2
|
||
|
2
|
|||
|
3
|
|||
|
4
|
|||
|
|
5
|
||
ITEM
2.
|
|
14
|
||
ITEM
3.
|
|
24
|
||
ITEM 4.
|
|
24 | ||
PART
II.
|
|
|
||
ITEM
1.
|
|
25
|
||
ITEM
1A.
|
|
25
|
||
ITEM
6.
|
|
25
|
||
|
|
26
|
||
|
|
27
|
||
|
|
|
· |
reduced
purchases of our products by General Motors Corporation (GM),
DaimlerChrysler Corporation (DaimlerChrysler) or other
customers;
|
· |
reduced
demand for our customers’ products (particularly light trucks and SUVs
produced by GM and
DaimlerChrysler);
|
· |
our
ability and our suppliers’ ability to maintain satisfactory labor
relations and avoid work stoppages;
|
· |
our
ability to achieve cost reductions through our special attrition and
salaried retirement incentive
programs;
|
· |
our
customers’ and their suppliers’ ability to maintain satisfactory labor
relations and avoid work stoppages;
|
· |
supply
shortages or price increases in raw materials, utilities or other
operating supplies;
|
· |
our
ability and our customers’ and suppliers’ ability to successfully launch
new product programs;
|
· |
our
ability to respond to changes in technology or increased
competition;
|
· |
adverse
changes in laws, government regulations or market conditions including
increases in fuel prices affecting our products or our customers’ products
(including the Corporate Average Fuel Economy regulations);
|
· |
adverse
changes in the economic conditions or political stability of our
principal
markets (particularly North America, Europe, South America and
Asia);
|
· |
liabilities
arising from legal proceedings to which we are or may become a
party or
claims against us or our products;
|
· |
risks
of noncompliance with environmental regulations or risks of environmental
issues that could result in unforeseen costs at our
facilities;
|
· |
availability
of financing for working capital, capital expenditures, R&D or other
general corporate purposes, including our ability to comply with
financial
covenants;
|
· |
our
ability to attract and retain key
associates;
|
· |
other
unanticipated events and conditions that may hinder our ability
to
compete.
|
Three
months ended
|
Nine
months ended
|
||||||||||||
September
30,
|
September
30,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
(In
millions, except per share data)
|
|||||||||||||
Net
sales
|
$
|
701.2
|
$
|
848.1
|
$
|
2,410.6
|
$
|
2,534.7
|
|||||
Cost
of goods sold
|
763.2
|
764.8
|
2,319.2
|
2,293.7
|
|||||||||
Gross
profit (loss)
|
(62.0
|
)
|
83.3
|
91.4
|
241.0
|
||||||||
Selling,
general and administrative expenses
|
48.0
|
48.4
|
145.9
|
144.0
|
|||||||||
Operating
income (loss)
|
(110.0
|
)
|
34.9
|
(54.5
|
)
|
97.0
|
|||||||
Net
interest expense
|
(11.7
|
)
|
(7.3
|
)
|
(27.0
|
)
|
(20.0
|
)
|
|||||
Other
income (expense)
|
|||||||||||||
Debt refinancing costs
|
(0.3
|
)
|
-
|
(2.7
|
)
|
-
|
|||||||
Other, net
|
10.1
|
1.2
|
11.4
|
(0.2
|
)
|
||||||||
Income
(loss) before income taxes
|
(111.9
|
)
|
28.8
|
(72.8
|
)
|
76.8
|
|||||||
Income
tax expense (benefit)
|
(49.0
|
)
|
9.5
|
(38.9
|
)
|
25.3
|
|||||||
Net
income (loss)
|
$
|
(62.9
|
)
|
$
|
19.3
|
$
|
(33.9
|
)
|
$
|
51.5
|
|||
Basic
earnings (loss) per share
|
$
|
(1.25
|
)
|
$
|
0.38
|
$
|
(0.67
|
)
|
$
|
1.03
|
|||
Diluted
earnings (loss) per share
|
$
|
(1.25
|
)
|
$
|
0.38
|
$
|
(0.67
|
)
|
$
|
1.01
|
September
30,
|
December
31,
|
|||||
2006
|
2005
|
|||||
(In
millions)
|
||||||
Assets
|
||||||
Current
assets
|
||||||
Cash
and cash equivalents
|
$
|
13.9
|
$
|
3.7
|
||
Accounts
receivable, net
|
352.5
|
328.0
|
||||
Inventories,
net
|
236.9
|
207.2
|
||||
Prepaid
expenses and other
|
81.6
|
45.5
|
||||
Deferred
income taxes
|
44.9
|
17.0
|
||||
Total
current assets
|
729.8
|
601.4
|
||||
Property,
plant and equipment, net
|
1,916.1
|
1,836.0
|
||||
Deferred
income taxes
|
35.9
|
3.0
|
||||
Goodwill
|
147.8
|
147.8
|
||||
Other
assets and deferred charges
|
76.4
|
78.4
|
||||
Total
assets
|
$
|
2,906.0
|
$
|
2,666.6
|
||
Liabilities
and Stockholders’ Equity
|
||||||
Current
liabilities
|
||||||
Accounts
payable
|
$
|
348.6
|
$
|
338.5
|
||
Trade
payable program liability
|
21.1
|
42.6
|
||||
Accrued
compensation and benefits
|
192.7
|
115.3
|
||||
Other
accrued expenses
|
42.6
|
52.8
|
||||
Total
current liabilities
|
605.0
|
549.2
|
||||
Long-term
debt
|
628.4
|
489.2
|
||||
Deferred
income taxes
|
96.3
|
116.1
|
||||
Postretirement
benefits and other long-term liabilities
|
625.5
|
517.3
|
||||
Total
liabilities
|
1,955.2
|
1,671.8
|
||||
Stockholders'
equity
|
||||||
Common
stock, par value $0.01 per share
|
0.5
|
0.5
|
||||
Paid-in
capital
|
378.1
|
385.6
|
||||
Retained
earnings
|
786.5
|
843.5
|
||||
Treasury
stock at cost, 5.1 million shares
|
||||||
in 2006 and 2005
|
(171.8
|
)
|
(171.7
|
)
|
||
Unearned
compensation
|
-
|
(14.8
|
)
|
|||
Accumulated
other comprehensive loss, net of tax
|
||||||
Minimum pension liability adjustments
|
(52.6
|
)
|
(52.6
|
)
|
||
Foreign currency translation adjustments
|
12.1
|
3.9
|
||||
Unrecognized gain (loss) on derivatives
|
(2.0
|
)
|
0.4
|
|||
Total
stockholders' equity
|
950.8
|
994.8
|
||||
Total
liabilities and stockholders' equity
|
$
|
2,906.0
|
$
|
2,666.6
|
Nine
months ended
|
||||||
September
30,
|
||||||
2006
|
2005
|
|||||
(In
millions)
|
||||||
Operating
activities
|
||||||
Net
income (loss)
|
$
|
(33.9
|
)
|
$
|
51.5
|
|
Adjustments
to reconcile net income (loss) to net cash
|
||||||
provided
by operating activities
|
||||||
Depreciation
and amortization
|
153.2
|
135.0
|
||||
Deferred
income taxes
|
(78.7
|
)
|
(3.9
|
)
|
||
Stock-based
compensation
|
8.0
|
3.5
|
||||
Pensions
and other postretirement benefits, net of contributions
|
82.1
|
50.4
|
||||
Loss
on retirement of equipment
|
5.7
|
2.5
|
||||
Debt
refinancing costs
|
2.7
|
-
|
||||
Changes
in operating assets and liabilities
|
||||||
Accounts
receivable
|
(22.8
|
)
|
(118.4
|
)
|
||
Inventories
|
(28.4
|
)
|
(16.8
|
)
|
||
Accounts
payable and accrued expenses
|
114.1
|
29.2
|
||||
Other
assets and liabilities
|
(40.3
|
)
|
10.4
|
|||
Net
cash provided by operating activities
|
161.7
|
143.4
|
||||
Investing
activities
|
||||||
Purchases
of property, plant and equipment
|
(243.5
|
)
|
(243.6
|
)
|
||
Purchase
buyouts of leased equipment
|
(19.5
|
)
|
-
|
|||
Net
cash used in investing activities
|
(263.0
|
)
|
(243.6
|
)
|
||
Financing
activities
|
||||||
Net
borrowings under revolving credit facilities
|
24.0
|
114.3
|
||||
Borrowings
of long-term debt
|
260.9
|
-
|
||||
Payments
of long-term debt and capital lease obligations
|
(147.4
|
)
|
(3.6
|
)
|
||
Debt
issuance costs
|
(3.1
|
)
|
-
|
|||
Employee
stock option exercises
|
0.3
|
4.3
|
||||
Dividends
paid
|
(23.3
|
)
|
(22.7
|
)
|
||
Net
cash provided by financing activities
|
111.4
|
92.3
|
||||
Effect
of exchange rate changes on cash
|
0.1
|
(0.1
|
)
|
|||
Net
increase (decrease) in cash and cash equivalents
|
10.2
|
(8.0
|
)
|
|||
Cash
and cash equivalents at beginning of period
|
3.7
|
14.4
|
||||
Cash
and cash equivalents at end of period
|
$
|
13.9
|
$
|
6.4
|
||
Supplemental
cash flow information
|
||||||
Interest
paid
|
$
|
33.9
|
$
|
27.6
|
||
Income
taxes paid, net of refunds
|
$
|
47.7
|
$
|
26.8
|
September
30,
|
December
31,
|
|||||
2006
|
2005
|
|||||
(Dollars
in millions)
|
||||||
Raw
materials and work-in-progress
|
$
|
243.7
|
$
|
212.2
|
||
Finished
goods
|
30.5
|
29.9
|
||||
Gross
inventories
|
274.2
|
242.1
|
||||
LIFO
reserve
|
(14.6
|
)
|
(14.6
|
)
|
||
Other
inventory valuation reserves
|
(22.7
|
)
|
(20.3
|
)
|
||
Inventories,
net
|
$
|
236.9
|
$
|
207.2
|
September
30,
|
December
31,
|
|||||
2006
|
2005
|
|||||
(Dollars
in millions)
|
||||||
Revolving
Credit Facility
|
$
|
90.0
|
$
|
-
|
||
5.25%
Notes, net of discount
|
249.7
|
249.7
|
||||
2.00%
Convertible Notes
|
2.9
|
150.0
|
||||
Term
Loan
|
250.0
|
-
|
||||
Uncommitted
lines of credit
|
-
|
71.5
|
||||
Foreign
credit facilities and other
|
33.3
|
15.6
|
||||
Capital
lease obligations
|
2.5
|
2.4
|
||||
Long-term
debt
|
$
|
628.4
|
$
|
489.2
|
Pension
Benefits
|
|||||||||||||
Three
months ended
|
Nine
months ended
|
||||||||||||
September
30,
|
September
30,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
(Dollars
in millions)
|
|||||||||||||
Service
cost
|
$
|
8.4
|
$
|
8.0
|
$
|
25.2
|
$
|
24.8
|
|||||
Interest
cost
|
8.4
|
7.8
|
25.1
|
23.6
|
|||||||||
Expected
asset return
|
(7.9
|
)
|
(7.6
|
)
|
(23.6
|
)
|
(22.8
|
)
|
|||||
Amortized
loss
|
1.4
|
1.2
|
4.0
|
3.4
|
|||||||||
Amortized
prior service cost
|
0.7
|
0.7
|
2.3
|
2.3
|
|||||||||
Net
periodic benefit cost
|
$
|
11.0
|
$
|
10.1
|
$
|
33.0
|
$
|
31.3
|
Other
Postretirement Benefits
|
|||||||||||||
Three
months ended
|
Nine
months ended
|
||||||||||||
September
30,
|
September
30,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
(Dollars
in millions)
|
|||||||||||||
Service
cost
|
$
|
10.3
|
$
|
9.5
|
$
|
30.9
|
$
|
28.6
|
|||||
Interest
cost
|
8.1
|
7.3
|
24.1
|
21.7
|
|||||||||
Amortized
loss
|
1.4
|
0.9
|
4.2
|
2.9
|
|||||||||
Amortized
prior service cost
|
(0.4
|
)
|
(0.2
|
)
|
(1.1
|
)
|
(0.6
|
)
|
|||||
Net
periodic benefit cost
|
$
|
19.4
|
$
|
17.5
|
$
|
58.1
|
$
|
52.6
|
Three
months ended
|
Nine
months ended
|
||||||||||||
September
30,
|
September
30,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
|
(Dollars
in
millions)
|
||||||||||||
Net
income (loss)
|
$
|
(62.9
|
)
|
$
|
19.3
|
$
|
(33.9
|
)
|
$
|
51.5
|
|||
Foreign
currency translation adjustments,
net
of tax
|
2.2
|
4.3
|
8.2
|
12.0
|
|||||||||
Unrecognized
gain (loss) on derivatives,
net
of tax
|
(1.2
|
)
|
0.2
|
(2.4
|
)
|
(0.4
|
)
|
||||||
Comprehensive
income (loss)
|
$
|
(61.9
|
)
|
$
|
23.8
|
$
|
(28.1
|
)
|
$
|
63.1
|
Three
months ended
|
Nine
months ended
|
||||||||||||
September
30,
|
September
30,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
(In
millions, except per share data)
|
|||||||||||||
Numerator
|
|||||||||||||
Net
income (loss)
|
$
|
(62.9
|
)
|
$
|
19.3
|
$
|
(33.9
|
)
|
$
|
51.5
|
|||
Denominators
|
|||||||||||||
Basic
shares outstanding -
|
|||||||||||||
Weighted-average
shares outstanding
|
50.3
|
50.2
|
50.3
|
50.1
|
|||||||||
Effect
of dilutive securities -
|
|||||||||||||
Dilutive
stock-based compensation
|
-
|
1.2
|
-
|
1.0
|
|||||||||
Diluted
shares outstanding -
|
|||||||||||||
Adjusted
weighted-average shares after assumed conversions
|
50.3
|
51.4
|
50.3
|
51.1
|
|||||||||
Basic
EPS
|
$
|
(1.25
|
)
|
$
|
0.38
|
$
|
(0.67
|
)
|
$
|
1.03
|
|||
Diluted
EPS
|
$
|
(1.25
|
)
|
$
|
0.38
|
$
|
(0.67
|
)
|
$
|
1.01
|
7. |
STOCK-BASED
COMPENSATION
|
Three
months ended
|
Nine
months ended
|
|||||
September
30,
|
September
30,
|
|||||
2005
|
2005
|
|||||
(In
millions, except per share data)
|
||||||
Net
income, as reported
|
$
|
19.3
|
$
|
51.5
|
||
Deduct:
Total employee stock option
|
||||||
expense determined under the fair value method, net of tax
|
(2.9
|
)
|
(9.2
|
)
|
||
Pro
forma net income
|
$
|
16.4
|
$
|
42.3
|
||
Basic
- as reported
|
$
|
0.38
|
$
|
1.03
|
||
Basic
- pro forma
|
$
|
0.33
|
$
|
0.84
|
||
Diluted
- as reported
|
$
|
0.38
|
$
|
1.01
|
||
Diluted
- pro forma
|
$
|
0.31
|
$
|
0.82
|
2006
|
2005
|
||||||
Expected
volatility
|
41.31
|
%
|
41.64
|
%
|
|||
Risk-free
interest rate
|
4.78
|
%
|
4.36
|
%
|
|||
Dividend
yield
|
3.70
|
%
|
2.25
|
%
|
|||
Expected
life of option
|
7
years
|
7
years
|
|||||
Weighted
average grant-date fair value
|
$
|
5.33
|
$
|
10.50
|
8. |
Postemployment
Benefits
|
9. |
Subsequent
Events
|
10. |
Legal
Proceedings
|
· |
Lower
operating income;
|
· |
Lower
contributions to pension and other postretirement benefit
plans;
|
· |
Lower
profit sharing payout;
|
· |
Higher
tax payments; and
|
· |
Ongoing
productivity improvements including material cost
reductions.
|
Three
months ended
|
Nine
months ended
|
||||||||||||
September
30,
|
September
30,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
(Dollars
in millions)
|
|||||||||||||
Net
income (loss)
|
$
|
(62.9
|
)
|
$
|
19.3
|
$
|
(33.9
|
)
|
$
|
51.5
|
|||
Interest
expense
|
11.8
|
7.6
|
27.2
|
20.5
|
|||||||||
Income
tax expense (benefit)
|
(49.0
|
)
|
9.5
|
(38.9
|
)
|
25.3
|
|||||||
Depreciation
and amortization
|
52.8
|
46.2
|
153.2
|
135.0
|
|||||||||
EBITDA
|
$
|
(47.3
|
)
|
$
|
82.6
|
$
|
107.6
|
$
|
232.3
|
Nine
months ended
|
|||||||
September
30,
|
|||||||
2006
|
2005
|
||||||
(Dollars
in millions)
|
|||||||
Net
cash provided by operating activities
|
$
|
161.7
|
$
|
143.4
|
|||
Less:
Purchases of property, plant and equipment
|
243.5
|
243.6
|
|||||
Net
operating cash flow
|
(81.8
|
)
|
(100.2
|
)
|
|||
Less:
Dividends paid
|
23.3
|
22.7
|
|||||
Free
cash flow
|
$
|
(105.1
|
)
|
$
|
(122.9
|
)
|
(a)
|
Exhibits
required by Item 601 of Regulation S-K are listed in the Exhibit
Index.
|
By:
/s/
Michael K. Simonte
|
Michael
K. Simonte
|
Vice
President - Finance &
|
Number
|
Description
of Exhibit
|
*10.53
|
|
*31.1
|
Certification
of Richard E. Dauch, Co-Founder, Chairman of the Board & Chief
Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange
Act
|
*31.2
|
Certification
of Michael K. Simonte, Vice President - Finance & Chief
Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange
Act
|
*32
|
Certifications
of Richard E. Dauch, Co-Founder, Chairman of the Board & Chief
Executive Officer and Michael K. Simonte, Vice President - Finance
&
Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|