## RESULTS OF OPERATIONS 

YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000 

## Net Sales 

Net sales for the year ended December 31, 2001 decreased $82.7 million, or 12.4%, to $584.5 million from $667.2 mil- lion in 2000. Sales revenues in 2001 were unfavorably impacted by the prolonged weakness in production in the automotive and commercial vehicle markets, combined with new product launch delays and slower production ramp-ups in the next-generation vehicle, seat track posi- tion switch and fuel cutoff switch. 

Sales for the year ended December 31, 2001 for North America decreased by $81.9 million to $498.0 million from $579.9 million in 2000. North American sales accounted for 85.2% of total sales in 2001 compared with 86.9% in 2000. Sales in 2001 outside North America decreased by $0.8 million to $86.5 million from $87.3 million in 2000. Sales outside North America accounted for 14.8% of total sales in 2001 compared with 13.1% in 2000. 

## Cost of Goods Sold 

Cost of goods sold for the year ended December 31, 2001 decreased by $46.7 million, or 9.4%, to $449.4 million from $496.1 million in 2000. As a percentage of sales, cost of goods sold increased to 76.9% in 2001 from 74.4% in 2000. The corresponding reduction in margin was primarily attributable to the continued weakness of the automotive and commercial vehicle markets, price pressures from customers, and costs related to pre-production ramp-ups and new program launches. Partially offsetting the afore- mentioned were cost reduction initiatives including Six Sigma and lean manufacturing. 

## Selling, General and Administrative Expenses 

Selling, general and administrative (SG&A) expenses, including research and development, increased by $3.6 million to $99.6 million for the year ended December 31, 2001 from $95.9 million in 2000. As a percentage of sales, SG&A expenses increased to 17.0% in 2001 from 14.4% in 2000. This increase is primarily attributable to higher 

design and development costs, which were required pre- dominately to support efforts associated with awarded programs. This increase also includes $0.6 million related to costs associated with the Company’s attempted offering of senior subordinated notes in the third quarter of 2001. 

## Interest Expense, net 

Interest expense for the year ended December 31, 2001 was $31.3 million compared with $29.5 million in 2000. Average outstanding indebtedness was $317.9 million and $331.0 million for the years ended December 31, 2001 and 2000, respectively. The cost of borrowing increased in 2001 as a result of an amended credit agreement. 

## Other Expense / Income, net 

Other expense was $0.3 million for the year ended December 31, 2001, and primarily consisted of equity loss- es of unconsolidated subsidiaries. Other income was $1.1 million for the year ended December 31, 2000, and prima- rily consisted of equity losses of unconsolidated sub- sidiaries and a gain on sale of idle fixed assets. 

## Income Before Income Taxes 

As a result of the foregoing, income before income taxes decreased by $42.9 million for the year ended December 31, 2001 to $3.9 million from $46.8 million in 2000. 

## Provision for Income Taxes 

The Company recognized provisions for income taxes of $1.0 million and $14.1 million for federal, state and foreign income taxes for the years ended December 31, 2001 and 2000, respectively. The decline in the effective tax rate to 24.4% in 2001 from 30.1% in 2000 was primarily a result of the implementation of certain tax planning strategies and non-recurring tax refunds. The effective tax rate is expect- ed to increase in future years. 

## Net Income 

As a result of the foregoing, net income decreased by $29.8 million, or 91.0%, to $2.9 million for the year ended December 31, 2001 from $32.7 million in 2000. 

YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999 

## Net Sales 

Net sales for the year ended December 31, 2000 decreased by $8.0 million, or 1.2%, to $667.2 million from $675.2 mil- lion in 1999. Sales of core products increased by $13.9 mil- lion, or 2.1%, to $667.2 million during 2000 compared to $653.3 million in 1999. This increase is primarily attributa- ble to the increase in core product sales from the 1999 acquisition of TVI Europe Ltd. (TVI) of $15.9 million, which was offset by a decrease in existing core product sales of $2.0 million, or 0.3%, compared to 1999. Contract manu- facturing sales totaling $21.9 million, which were phased out during the second quarter of 1999, accounted for 3.2% of total sales for the year ended December 31, 1999. The remaining decline in sales revenues in 2000 was primarily attributable to the continuing slowdown in the North American commercial vehicle markets, as well as the downturn in the North American automotive and light- truck market that occurred during the fourth quarter. 

Sales for the year ended December 31, 2000 for North America decreased by $19.4 million to $579.9 million from $599.3 million in 1999. North American sales accounted for 86.9% of total sales in 2000 compared with 88.8% in 1999. Sales in 2000 outside North America increased by $11.4 million to $87.3 million from $75.9 million in 1999. Sales outside North America accounted for 13.1% of total sales in 2000 compared with 11.2% in 1999. The increase is primarily a result of the Company’s 1999 acquisitions par- tially offset by the impact of unfavorable foreign currency exchange rate fluctuations. 

## Cost of Goods Sold 

Cost of goods sold for the year ended December 31, 2000 increased by $8.8 million, or 1.8%, to $496.1 million from $487.3 million in 1999. As a percentage of sales, cost of goods sold increased to 74.4% in 2000 from 72.2% in 1999. The increase as a percent of sales was primarily attributa- ble to material shortages and their related impact on pro- duction costs, an unfavorable shift in product mix, and costs related to pre-production ramp-ups and new pro- gram launches. In addition, unfavorable foreign currency exchange rate fluctuations contributed to this increase. 

## Selling, General and Administrative Expenses 

SG&A expenses increased by $5.3 million to $95.9 million for the year ended December 31, 2000 from $90.6 million in 1999. As a percentage of sales, SG&A expenses increased to 14.4% in 2000 from 13.4% in 1999. The increase is due primarily to higher development costs to support new program launches for safety-related products, including the seat track position sensor, fuel cutoff switch, and a new modular assembly program titled the next-gen- eration vehicle. The commercial costs related to the newly acquired companies and geographical expansion also con- tributed to this increase. 

## Interest Expense, net 

Interest expense for the year ended December 31, 2000 was $29.5 million compared with $30.7 million in 1999. Average outstanding indebtedness was $331.0 million and $343.8 million for the years ended December 31, 2000 and 1999, respectively. 

## Other Income, net 

Other income, which primarily represented equity losses of unconsolidated subsidiaries and gain on sale of idle fixed assets, was $1.1 million for the year ended December 31, 2000 compared with $0.5 million in 1999. 

## Income Before Income Taxes 

As a result of the foregoing, income before income taxes decreased by $20.2 million for the year ended December 31, 2000 to $46.8 million from $67.0 million in 1999. 

## Provision for Income Taxes 

The Company recognized provisions for income taxes of $14.1 million and $25.9 million for federal, state and for- eign income taxes for the years ended December 31, 2000 and 1999, respectively. The decline in the effective tax rate to 30.1% in 2000 from 38.6% in 1999 was primarily a result of the implementation of certain tax planning strategies and non-recurring tax refunds. The effective tax rate is expected to increase in future years. 

## Net Income 

As a result of the foregoing, net income decreased by $8.5 million, or 20.6%, to $32.7 million for the year ended December 31, 2000 from $41.2 million in 1999. 

