-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, lM/l4stx3dYtpLwE3rYKLWMTKzarJSs5xPxlnN6CrD5FHRkkMpUUW39Gaw87wy8i mpH+KkoR/I5hAoOU3gF4fg== 0000034879-94-000001.txt : 19940214 0000034879-94-000001.hdr.sgml : 19940214 ACCESSION NUMBER: 0000034879-94-000001 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19931110 ITEM INFORMATION: 3 FILED AS OF DATE: 19940211 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FEDERAL MOGUL CORP CENTRAL INDEX KEY: 0000034879 STANDARD INDUSTRIAL CLASSIFICATION: 3714 IRS NUMBER: 380533580 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 34 SEC FILE NUMBER: 001-01511 FILM NUMBER: 94506605 BUSINESS ADDRESS: STREET 1: 26555 NORTHWESTERN HGWY CITY: SOUTHFIELD STATE: MI ZIP: 48034 BUSINESS PHONE: 3133547700 8-K/A 1 11/10/93 FORM 8-K AMENDMENT 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------------- FORM 8-K/A AMENDMENT TO APPLICATION OR REPORT Filed pursuant to Section 12, 13 or 15(d) of THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 1-1511 FEDERAL-MOGUL CORPORATION (Exact name of registrant as specified in its charter) AMENDMENT NO. 2 The undersigned Registrant hereby amends the following items, financial statements, exhibits or other portions of its Current Report dated November 10, 1993 on Form 8-K, as previously amended by Form 8-K/A dated December 3, 1993 as set forth in the pages attached hereto. Item 7(a) is amended to amend the Financial Statements of the Business Acquired with respect to the business of Sealed Power Corporation and Sealed Power Corporation of Canada, Ltd. ("SPR") acquired by the Registrant from SPX Corporation ("SPX"). Item 7(b) is refiled with the Pro Forma Financial Statements for the Registrant and SPR. Item 7(c) is amended to add the Consent of Independent Public Accountants as Exhibit 24-1. Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this amendment to be signed on its behalf by the undersigned, thereunto duly authorized. FEDERAL-MOGUL CORPORATION By: (James B. Carano) -------------------------------------- JAMES B. CARANO Vice President and Controller Dated as of February 11, 1994 2 Item 7(a) - Financial Statements of the Business Acquired. - ---------------------------------------------------------- REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To SPX Corporation: We have audited the accompanying combined statement of assets and liabilities of the Sealed Power Corporation and Sealed Power of Canada Ltd. (the "Business"), as of December 31, 1992 and 1991, and the related combined statements of revenue and expenses and changes in equity and cash flows for each of the two years in the period ended December 31, 1992. These financial statements are the responsibility of the Business' management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. These statements have been prepared for the purpose of complying with the rules and regulations for filing with the Securities and Exchange Commission pursuant to the Agreement of Purchase and Sale described in Note 1, between SPX Corporation and Federal-Mogul Corporation dated as of September 15, 1993, and is not intended to be a complete presentation of the Business' assets, liabilities, equity, revenues, expenses and cash flows. In our opinion, the financial statements referred to above present fairly, in all material respects, the combined assets and liabilities of the Business as of December 31, 1992 and 1991, and the revenues and expenses and changes in equity and their cash flows for each of the two years in the period ended December 31, 1992, in conformity with generally accepted accounting principles. As discussed in Note 4 to the combined financial statements, effective January 1, 1992, the Business changed its method of accounting for post retirement benefits other than pensions. ARTHUR ANDERSEN & CO. (Arthur Andersen & Co.) Chicago, Illinois October 29, 1993 3 SEALED POWER CORPORATION AND SEALED POWER CORPORATION OF CANADA, LTD. COMBINED STATEMENT OF ASSETS AND LIABILITIES
December 31 ----------- 1992 1991 ---- ---- (in thousands) CURRENT ASSETS: Cash and temporary cash investments $ 72 $ 293 Receivables, less reserves of $939 in 1992 and $2,049 in 1991 (Note 5) 1,909 6,496 Inventories (Note 2 51,342 54,290 Prepaid and other current assets 537 638 -------- -------- Total current assets $ 53,860 $ 61,717 PROPERTY, PLANT, & EQUIPMENT, at cost (Notes 2 and 5) $ 27,851 $ 27,151 Less: Accumulated depreciation 10,919 10,493 -------- -------- Net property, plant, and equipment $ 16,932 $ 16,658 OTHER ASSETS 3,877 4,510 COSTS IN EXCESS OF NET ASSETS OF BUSINESSES ACQUIRED (Note 2) 1,594 1,822 -------- -------- $ 76,263 $ 84,707 ======== ======== CURRENT LIABILITIES: Accounts payable (Note 7) $ 14,559 $ 8,922 Accrued liabilities 8,816 7,769 Capital lease obligation (Note 5) 75 767 Income taxes payable (Note 3) 404 313 -------- -------- Total current liabilities $ 23,854 $ 17,771 LONG-TERM LIABILITIES (Note 4) 5,210 - LONG-TERM CAPITAL LEASE OBLIGATIONS (Note 5) 3,723 4,498 COMMITMENTS AND CONTINGENCIES (Note 5) - - EQUITY (Note 6): Business Equity $ 43,953 $ 62,207 Cumulative translation adjustments (477) 231 -------- -------- Total equity $ 43,476 $ 62,438 -------- -------- $ 76,263 $ 84,707 ======== ======== The accompanying notes are an integral part of these statements.
4 SEALED POWER CORPORATION AND SEALED POWER CORPORATION OF CANADA, LTD. COMBINED STATEMENTS OF REVENUES AND EXPENSES AND CHANGES IN EQUITY
Years Ended December 31 ----------------------- 1992 1991 ---- ---- (In thousands) NET REVENUES $163,236 $155,251 COSTS AND EXPENSES: Cost of products sold 104,803 100,713 Selling, distribution, and administrative expenses 46,528 44,145 Interest expense, net 474 482 Other (income) expense, net (Note 5) 1,959 787 -------- -------- $153,764 $146,127 -------- -------- REVENUES OVER EXPENSES BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING METHOD $ 9,472 $ 9,124 PROVISION FOR INCOME TAXES (Note 3) 3,488 3,304 -------- -------- REVENUES OVER EXPENSES BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING METHOD $ 5,985 $ 5,820 CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING METHOD, NET OF TAXES (Note 4) $ 3,242 $ - -------- -------- REVENUES OVER EXPENSES $ 2,743 $ 5,820 EQUITY AT BEGINNING OF YEAR 62,438 88,849 PAYMENTS TO SPX CORPORATION (20,997) (32,236) TRANSLATION ADJUSTMENTS (708) 5 -------- -------- EQUITY AT END OF YEAR $ 43,476 $ 62,438 ======== ======== The accompanying notes are an integral part of these statements.
5 SEALED POWER CORPORATION AND SEALED POWER CORPORATION OF CANADA, LTD. COMBINED STATEMENTS OF CASH FLOWS
Years Ended December 31 ----------------------- 1992 1991 ---- ---- (In thousands) Cash flows from operating activities: Revenues over expenses from operating activities $ 2,743 $ 5,820 Adjustments to reconcile revenues over expenses to net cash provided by operating activities - Cumulative effect of change in accounting method 3,242 - Depreciation and amortization 3,299 2,453 Decrease in receivables 4,587 11,811 Decrease in inventories 2,948 9,894 Decrease in prepaid and other current assets 101 127 Decrease in long term assets 633 2,748 Increase (decrease) in accounts payable 5,637 (2,212) Increase in accrued liabilities 1,047 2,366 Increase (decrease) in income taxes payable 91 (77) Increase in long term liabilities 298 - Other, net 1,375 176 -------- -------- Net cash provided by operating activities $ 26,001 $ 33,106 -------- -------- Cash flows from investing activities: Capital expenditures $ (3,758) $ (2,141) -------- -------- Cash flows from financing activities: Payments to SPX Corporation $(20,997) $(32,236) Net borrowings (payments) of capital lease obligation (1,467) 1,341 -------- -------- Net cash from financing activities $(22,464) $(30,895) -------- -------- Net change in cash and temporary cash investments $ (221) $ 70 Cash and temporary cash investments, beginning of period 293 223 -------- -------- Cash and temporary cash investments, end of period $ 72 $ 293 ======== ======== The accompanying notes are an integral part of these statements.
6 SEALED POWER CORPORATION AND SEALED POWER CORPORATION OF CANADA, LTD. NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 1992 (1) BASIS OF COMBINATION AND SUBSEQUENT SALE The combined financial statements include the accounts of Sealed Power Corporation, a wholly owned U.S. subsidiary of SPX Corporation ("SPX") and Sealed Power Corporation of Canada, Ltd., a wholly owned Canadian subsidiary of SPX, and are stated on the basis of historical cost. These combined statements have been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission, for inclusion in a Form 8-K filing. These operations, herein together referred to as the "business", represent SPX's operations that market and distribute replacement engine and under vehicle parts in the United States and Canada. Operating results as presented do not include any costs associated with financing of these operations nor charges for certain administrative and management functions provided centrally by SPX. As such, these statements may not necessarily reflect the combined income that would have resulted if the business had been conducted on an independent basis. On October 25, 1993, SPX sold the business to Federal-Mogul Corporation as of the close of business on October 22, 1993. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting and financial policies which affect significant elements of the combined financial statements of the business and which are not apparent on the face of the statements, or in other notes to the combined financial statements, are described below. A. Principles of Combination The combined financial statements include the accounts of the business after the elimination of all significant intercompany accounts and transactions between Sealed Power Corporation and Sealed Power Corporation of Canada, Ltd. Assets and liabilities of the business' Canadian operations are translated into U.S. dollars at the current rate of exchange, while revenues and expenses are translated at the average exchange rate during the year. Adjustments from translating Canadian operations financial statements are excluded from the Combined Statement of Revenues and Expenses and are reported as a component of Equity. B. Inventories Inventories are stated at the lower of cost or market. Domestic inventories, amounting to $47,942,000 and $50,988,000 at December 31, 1992 and 1991, respectively, are based on the last-in, first-out (LIFO) method. Such inventories, if priced on the first-in, first-out (FIFO) method, would have been approximately $22,784,000 and $23,809,000 greater at December 31, 1992 and 1991, respectively. During 1992 and 1991, certain inventory quantities were reduced resulting in liquidations of LIFO inventory quantities carried at lower costs prevailing in prior years. The effect was to increase net income by $1,423,000 in 1992 and by $122,000 in 1991. Canadian inventories are based on FIFO costs. 7 SEALED POWER CORPORATION AND SEALED POWER CORPORATION OF CANADA, LTD. NOTES TO COMBINED FINANCIAL STATEMENTS - (Continued) DECEMBER 31, 1992
The components of inventory at year-end were as follows: 1992 1991 ---- ---- (In thousands) Finished products $50,457 $53,601 Packaging supplies 885 689 ------- ------- $51,342 $54,290 ======= =======
C. Property, Plant, & Equipment The business uses principally the straight-line method for computing depreciation expense over the useful lives of the property, plant, and equipment. Asset additions and improvements are added to the property accounts while maintenance and repairs, which do not renew or extend the lives of the respective assets, are expensed currently. Upon sale or retirement of depreciable properties, the related cost and accumulated depreciation are removed from the property accounts. The net gain or loss on disposition of property is reflected in income.
The components of property, plant, and equipment, at cost, at year-end were as follows: 1992 1991 ---- ---- (In thousands) Land $ 532 $ 532 Buildings 8,807 8,796 Machinery and equipment 18,134 17,443 Construction in progress 378 380 ------- ------- $27,851 $27,151 ======= =======
D. Costs in Excess of Net Assets of Businesses Acquired The business amortizes costs in excess of the net assets of businesses acquired on a straight-line method over the estimated periods benefitted, not to exceed 40 years. Such amortization was $228,000 in 1992 and 1991. At December 31, 1992, total costs in excess of net assets of businesses acquired was $2,628,000 and accumulated amortization of costs in excess of net assets of businesses acquired was $1,034,000. (3) INCOME TAXES The results of operations of Sealed Power Corporation is reported for Federal income tax purposes in the consolidated U.S. income tax returns of SPX. The results of operations of Sealed Power Canada, Ltd. are reported in individual income tax returns in Canada. SPX does not have a formal tax sharing agreement with its subsidiaries. Domestic subsidiaries are charged an amount equal to the applicable Federal and state statutory tax rates on pretax book income. All domestic prepaid, deferred and payable tax balances are maintained by SPX. The difference between the effect of statutory rates and the domestic provision (benefit) computed on a separate company basis is borne by SPX. 8 SEALED POWER CORPORATION AND SEALED POWER CORPORATION OF CANADA, LTD. NOTES TO COMBINED FINANCIAL STATEMENTS - (Continued) DECEMBER 31, 1992 In 1992, SPX adopted Statement of Financial Accounting Standards (SFAS) No. 109 - "Accounting for Income Taxes". Under SFAS No. 109, deferred tax balances are stated at tax rates expected to be in effect when taxes are actually paid or recovered. SPX's cumulative effect of adopting SFAS No. 109 in 1992 was a $5 million aftertax benefit. SPX's 1991 financial statements have not been restated to reflect the new accounting method for income taxes. No benefit from adoption was allocated by SPX to the business. The provision for income taxes consists of the following:
1992 1991 ---- ---- (In thousands) U.S. Federal $2,658 $2,620 State 156 154 Foreign 631 530 ------ ------ Total $3,488 $3,305 ====== ======
(4) EMPLOYEE BENEFIT PLANS Pension Plans Substantially all U.S. employees of the business are covered under defined benefit plans of SPX. The hourly and nonexempt employees of the distribution centers and field warehouses are covered under separated pension plans. The other nonexempt salary employees and all management employees participate in the SPX Corporation Pension Plan No. 3. Pension expense for SPX Corporation Pension Plan No. 3, which includes employees from various other SPX entities, and the above mentioned separate plans consisted of:
1992 1991 ---- ---- (In thousands) Service cost-benefits earned during the period $ 1,520 $ 1,364 Interest cost on projected benefit obligation 3,439 3,285 Actual gain on assets (5,676) (4,971) Net amortization and deferral (510) (360) ------- ------- Net periodic pension benefit $(1,227) $ (682) ======= =======
1992 1991 ---- ---- Actuarial assumptions used: Discount rates 8.25% 8.25% Rates of increase in compensation levels 5.5 5.5 Expected long-term rate of return on assets 9.5 9.5
9 SEALED POWER CORPORATION AND SEALED POWER CORPORATION OF CANADA, LTD. NOTES TO COMBINED FINANCIAL STATEMENTS - (Continued) DECEMBER 31, 1992 The above mentioned pension plans assets consist of equity and fixed income security investments. The following table sets forth the funded status of these plans:
1992 1991 ---- ---- (In thousands) Actuarial present value of benefit obligations: Vested benefit obligation $ 33,030 $ 31,178 ======== ======== Accumulated benefit obligation $ 36,599 $ 32,400 ======== ======== Projected benefit obligation $ 43,739 $ 41,967 Plan assets at fair value 68,589 65,700 -------- -------- Projected benefit obligation less plan assets $ 24,850 $ 23,733 Unrecognized net gain (13,665) (13,373) Prior service costs not yet recognized in the net periodic pension cost (664) (538) Unrecognized net asset at January 1, 1996 (1,545) (1,846) -------- -------- Prepaid pension cost $ 8,976 $ 7,976 ======== ========
The amount of pension cost (benefit) charged to the business for U.S. employees covered under these plans was $(240,000) in 1992 and $(136,000) in 1991. These amounts were allocated to the business based upon estimated percentages of relative compensation. There were no assets or liabilities of the SPX Corporation Pension Plan No. 3 allocated to the business as of December 31, 1992 and 1991. The Canadian employees are also covered under a pension plan. The business converted its Defined Benefit Pension Plan to a Defined Contribution Plan ("the Plan") effective December 31, 1990. The Plans provide pension benefits that are primarily based on the employee's years of service. Current pension costs are expensed as funded. Upon conversion of the Plan, an unfunded liability existed for $300,000. This unfunded liability will be funded by the business over a period of 15 years. The business has provided $64,000 and $0 in 1992 and 1991, respectively, towards this liability. Postretirement Health Care and Life Insurance Effective January 1, 1992, SPX implemented Statement of Financial Accounting Standards (SFAS) No. 106 - "Employers' Accounting for Postretirement Benefits Other Than Pensions", using the immediate recognition transition option. SFAS No. 106 requires recognition, during the employees' service with the business, of the cost of their retiree health and life insurance benefits. At January 1, 1992, SPX's accumulated postretirement benefit obligation was $16.8 million and was recorded as a pretax transition obligation. SPX's decrease in net earnings and equity was $10.7 million aftertax. Aside from the one-time effect of the adjustment, adoption of SFAS No. 106 resulted in an incremental $600,000 expense for SPX in 1992. SPX's recorded liability for postretirement health and life benefits was $18.5 million as of December 31, 1992. 10 SEALED POWER CORPORATION AND SEALED POWER CORPORATION OF CANADA, LTD. NOTES TO COMBINED FINANCIAL STATEMENTS - (Continued) DECEMBER 31, 1992 Prior to 1992, SPX recognized postretirement health care and life insurance benefits as expense when claims or premiums were paid. These costs totaled approximately $958,000 in 1991. The following summarizes the 1992 expense for postretirement health and life insurance recognized by SPX (in thousands): Recognition of transition obligation $16,829 Benefit cost for service during the year - net of employee contributions 315 Interest cost on accumulated post-retirement benefit obligation 1,306 ------- Postretirement benefit cost $18,450 ======= The actuarial assumptions used to determine 1992 costs and benefit obligation includes a discount rate of 8.25% and an assumed rate of future increase in per capita cost of health care benefits (health care trend rates) of 13% in 1992, decreasing gradually to 6% by the year 2002. Increasing the health care trend rate by one percentage point would increase the accumulated postretirement benefit obligation by $1.3 million and would increase the 1992 postretirement benefit cost by $.1 million. The liability for and amount of postretirement health and life insurance costs charged to the business in 1992 was as follows (in thousands): Recognition of transition obligation $ 4,912 Benefit cost for service during the year - net of employee contributions 124 Interest cost on accumulated post-retirement benefit obligation 442 ------- Postretirement benefit cost $ 5,478 ======= These amounts were allocated to the business based upon estimated percentages of relative active and retired employees covered under the benefit plans. Other Employees of the U.S. business participate in SPX's Employee Stock Ownership Plan. The business expensed $831,000 in 1992 and $644,000 in 1991 for costs of the plan. Payment for this benefit is made to SPX Corporation in the first quarter of the year subsequent to when the costs were incurred. Accordingly, the business had a liability recorded for this benefit of $831,000 and $644,000 as of December 31, 1992 and 1991, respectively. The business provides a Retirement Savings Plan for eligible employees. Employees can contribute up to 15% of their earnings with the business matching a portion of the amount up to 6% of their earnings. The business's contribution to this plan was $137,000 in 1992 and $98,000 in 1991. Certain management employees of the business participate in SPX's Stock Compensation Plan. This plan did not result in an expense to the business in 1992 and 1991. 11 SEALED POWER CORPORATION AND SEALED POWER CORPORATION OF CANADA, LTD. NOTES TO COMBINED FINANCIAL STATEMENTS - (Continued) DECEMBER 31, 1992 By 1994, the business must adopt Statement of Financial Accounting Standards, No. 112, "Employers' Accounting for Postemployment Benefits". The business' preliminary assessment of this statement indicates that it should not have a significant impact on the financial position or expenses of the business. (5) COMMITMENTS AND CONTINGENT LIABILITIES The business leases certain offices, warehouses and equipment under lease agreements which expire at various dates through 2009. Major leased assets, which have been capitalized, include a distribution center in both 1992 and 1991 and a computer in 1991. The assets included in property, plant, and equipment relating to these leases were $4,000,000 and $5,400,000 as of December 31, 1992 and 1991, respectively and the related accumulated depreciation was $700,000 and $500,000 as of December 31, 1992 and 1991. Future minimum payments, by year and in the aggregate, under the capital lease and noncancellable operating leases with initial or remaining terms of one year or more consisted of the following at December 31, 1992: Capital Operating Leases Leases ------- --------- (in thousands) 1993 $ 541 $2,335 1994 541 2,040 1995 541 1,868 1996 541 1,065 1997 541 871 Subsequent to 1997 6,216 1,549 ------ ------ Total lease payments $8,921 $9,728 ====== Amounts representing interest (5,123) ------ Present value of future minimum lease payments $3,798 Less amounts due in one year 75 ------ Long-term capital lease obligation $3,723 ====== Rentals on operating leases were approximately $2.9 million in 1992 and $2.4 million in 1991. Certain claims, including suits and complaints arising in the ordinary course of business, have been filed or are pending against the business. In the opinion of management, all such matters are without merit or are of such kind, or involve such amounts, as would not have a significant effect on the financial position or results of operations of the business if disposed of unfavorably. Additionally, the business has insurance to minimize its exposures of this nature. Since April of 1991, SPX has participated in a three year agreement with a financial institution whereby the business agreed to sell undivided fractional interests in designated pools of domestic trade accounts receivable, in an amount not to exceed $30 million. In order to maintain the balance in the designated pools of trade accounts receivable sold, the 12 SEALED POWER CORPORATION AND SEALED POWER CORPORATION OF CANADA, LTD. NOTES TO COMBINED FINANCIAL STATEMENTS - (Continued) DECEMBER 31, 1992 business sells participating interests in new receivables as existing receivables are collected. At December 31, 1992 and 1991, the business had sold $16.5 million and $25.5 million of trade accounts receivable under this program. Under the terms of this agreement, the business is obligated to pay fees which approximate the purchasers' cost of issuing a like amount in commercial paper plus certain administrative costs. The amount of such fees in 1992 and 1991 were $1,275,000 and $744,000 respectively. These fees are included in other (income) expense, net. (6) EQUITY
Combined equity at December 31, consists of the following: 1992 1991 ---- ---- (Dollars in thousands) Sealed Power Corporation: Common Stock: $.10 par value, authorized 2,000 shares; issued and outstanding 2,000 shares $ - $ - Preferred Stock: no par value, authorized 1,000 shares; no shares issued and outstanding - - Retained Earnings 23,062 21,301 Due to SPX Corporation 12,878 33,873 ------- ------- $35,940 $55,174 ------- ------- Sealed Power Corporation of Canada, Ltd.: Common Stock: C$1 par value, authorized 50,000 shares; issued and outstanding 24,000 shares $ 19 $ 21 Retained Earnings 7,994 7,013 Cumulative Translation Adjustment (477) 231 ------- ------- $ 7,536 $ 7,264 ------- ------- Total Equity $43,476 $62,438 ======= =======
(7) RELATED PARTY TRANSACTIONS The business purchases replacement engine parts, principally piston rings, cylinder sleeves and valve lifters from Sealed Power Technologies, Limited Partnership (49% owned by SPX) at arm's-length prices. Purchases from the partnership during 1992 and 1991 were $27.8 million and $27.0 million. At December 31, 1992 and 1991, the business owed the partnership $.6 million and $.5 million, which is included in accounts payable. SPX centrally manages certain insurance coverages, employee benefits and Federal and state income taxes for the business. These costs are charged to the business through the intercompany account included in Equity (see Note 6). In addition, the business' net cash position is managed by SPX's centralized treasury system through the intercompany account. 13 Sealed Power Corporation and Sealed Power Corporation of Canada, Ltd. Combined Condensed Financial Statements (Unaudited) Page Combined Condensed Balance Sheet (Unaudited) at September 30, 1993 14 Combined Condensed Statement of Earnings (Unaudited) Nine Months Ended September 30, 1993 and 1992 15 Combined Condensed Statement of Cash Flows (Unaudited) Nine Months Ended September 30, 1993 and 1992 16 Notes to Combined Condensed Financial Statements (Unaudited) 17 14 SEALED POWER CORPORATION AND SEALED POWER CORPORATION OF CANADA, LTD. COMBINED CONDENSED STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
September 30 ------------ 1993 ---- (in thousands) CURRENT ASSETS: Cash and temporary cash investments $ 465 Receivables 2,299 Inventories 41,637 Prepaid and other current assets 519 -------- Total current assets 44,920 PROPERTY, PLANT, & EQUIPMENT, NET 16,265 OTHER ASSETS 3,324 COSTS IN EXCESS OF NET ASSETS OF BUSINESSES ACQUIRED 1,423 ------- $ 65,932 ======== CURRENT LIABILITIES Accounts payable $ 12,072 Accrued liabilities 9,861 Capital lease obligation 85 -------- Total current liabilities 22,018 LONG-TERM LIABILITIES 5,200 LONG-TERM CAPITAL LEASE OBLIGATIONS 3,638 EQUITY 35,076 -------- $ 65,932 ======== See Notes to Unaudited Combined Condensed Financial Statements.
15 SEALED POWER CORPORATION AND SEALED POWER CORPORATION OF CANADA, LTD. COMBINED CONDENSED STATEMENTS OF REVENUES AND EXPENSES (UNAUDITED)
Nine Months Ended September 30 ----------------- 1993 1992 ---- ---- (In thousands) NET REVENUES $129,594 $127,599 COSTS AND EXPENSES: Cost of products sold 84,987 83,289 Selling, distribution, and administrative expenses 35,430 35,287 Interest expense, net 350 356 Other, net 595 1,251 ------- ------- 121,362 120,183 ------- ------- REVENUES OVER EXPENSES BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING METHOD 8,232 7,416 PROVISION FOR INCOME TAXES 3,210 2,670 ------- ------- REVENUES OVER EXPENSES BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING METHOD 5,022 4,746 CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING METHOD, NET OF TAXES - 3,242 ------- ------- REVENUES OVER EXPENSES $ 5,022 $ 1,504 ======= ======= See Notes to Unaudited Combined Condensed Financial Statements.
16 SEALED POWER CORPORATION AND SEALED POWER CORPORATION OF CANADA, LTD. COMBINED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended September 30, ----------------- 1993 1992 ---- ---- (In thousands) Cash flows from operating activities: Revenues over expenses from operating activities $ 5,022 $ 1,504 Adjustments to reconcile revenues over expenses to net cash provided by operating activities - Cumulative effect of change in accounting method - 3,242 Depreciation and amortization 2,932 2,157 Increase in receivables (390) 3,874 Decrease in inventories 9,705 5,008 Decrease (increase) in prepaid and other current assets 18 48 Decrease (increase) in long term assets 553 (106) (Decrease) increase in accounts payable (2,487) 5,829 Increase in accrued liabilities 1,045 1,848 (Decrease) increase in income taxes payable (404) 251 (Decrease) increase in long term liabilities (10) 922 ------- ------- Net cash provided by operating activities 15,984 24,577 Cash flows from investing activities: Capital expenditures (2,094) (3,923) Cash flows from financing activities: Net payments to SPX Corporation (13,422) (20,320) Payment of capital lease obligation (75) (468) -------- -------- Net cash from financing activities (13,497) (20,788) Net change in cash and temporary cash investments $ 393 $ (134) Cash and temporary cash investments, beginning of period 72 293 -------- -------- Cash and temporary cash investments, end of period $ 465 $ 159 ======== ======== See Notes to Unaudited Combined Condensed Financial Statements.
17 NOTES TO COMBINED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) Interim Statements The combined financial statements include the accounts of Sealed Power Corporation, a wholly owned U.S. subsidiary of SPX Corporation ("SPX") and Sealed Power Corporation of Canada, Ltd., a wholly owned Canadian subsidiary of SPX, herein together referred to as SPR. The unaudited combined condensed financial statements are based in part on approximations and are subject to adjustments that may develop in connection with an audit of the financial statements; however, in the opinion of management, all adjustments (which consist of normal recurring accruals) necessary for a fair presentation of the results of operations for the periods presented have been included except that the operating results as presented do not include any costs associated with financing of its operations nor charges for certain administrative and management functions provided centrally by SPX. Results of operations for any interim period are not necessarily indicative of the results to be expected for the full year. Postretirement Health Care and Life Insurance Effective January 1, 1992, SPX implemented Statement of Financial Accounting Standards (SFAS) No. 106 -- "Employer's Accounting for Postretirement Benefits Other Than Pensions," using the immediate recognition transition option. The cumulative effect allocated to SPR of $3.2 million was based on estimated percentages of relative active and retired employees covered under the benefit plans. Further disclosure is provided in the Postretirement Health Care and Life Insurance Footnote to the December 31, 1992 and 1991 combined Financial Statements for SPR. 18 Item 7(b). Pro Forma Financial Statements. - ------------------------------------------ Pro Forma Combined Condensed Financial Statements (Unaudited) Page Pro Forma Combined Condensed Statement of Earnings (Unaudited) Nine Months Ended September 30, 1993 20 Pro Forma Combined Condensed Balance Sheet (Unaudited) at September 30, 1993 21 Pro Forma Combined Condensed Statements of Earnings (Unaudited) Year Ended December 31, 1992 22 Notes to Pro Forma Combined Condensed Financial Statements (Unaudited) 25 19 Basis of Presentation The unaudited pro forma combined condensed statement of earnings for the nine months ended September 30, 1993 reflects the acquisition of Sealed Power Corporation and Sealed Power Corporation of Canada, Ltd. (SPR) by Federal-Mogul Corporation (Federal-Mogul) as if it had occurred at the beginning of the period presented. The unaudited pro forma combined condensed balance sheet at September 30, 1993 reflects the SPR acquisition as if it occurred on that date. There are three pro forma combined condensed statements of earnings for the year ended December 31, 1992 presented herein. The first reflects the acquisition of both SPR and the automotive aftermarket business acquired from TRW (AAB) on October 20, 1992 as if they had occurred at the beginning of the period presented. Additionally, separate pro forma combined condensed statements of earnings for the year ended December 31, 1992 are presented; one with the pro forma earnings results of Federal-Mogul and SPR; and one with the pro forma earnings results of Federal-Mogul and AAB, in each case as if the acquisitions had occurred January 1, 1992. 20 Federal-Mogul Corporation, Sealed Power Corporation and Sealed Power Corporation of Canada, Ltd. Pro Forma Combined Condensed Statement of Earnings (Unaudited) Nine Months Ended September 30, 1993 (Millions of Dollars, Except Per Share Amounts)
Federal- Pro Forma Pro Forma Mogul SPR Adjustments Combined -------- -------- ----------- --------- Net sales $ 1,182 $ 129 $ (7)A $ 1,304 Cost of products sold 950 85 (7)A 1,028 Selling, distribution and administrative expenses 169 35 (17)B 187 --------- -------- ------ --------- Operating earnings 63 9 17 89 Other income (expense): Interest expense (20) (5)C (25) Interest income 5 5 International currency exchange losses (4) (4) Amortization of intangible assets (5) (2)D (7) Other, net 9 (1) 8 --------- -------- ------ --------- Earnings Before Income Taxes 48 8 10 66 Income taxes 15 3 4E 22 --------- -------- ------ --------- Net earnings 33 5 6 44 Preferred stock dividends, net of tax benefits 7 - - 7 --------- -------- ------ --------- Net Earnings Available for Common Shares $ 26 $ 5 $ 6 $ 37 ========= ======== ====== ========= Earnings Per Common Share: Primary $ .97 $ 1.39 ========= ========= Fully diluted $ .93 $ 1.27 ========= ========= Average Number of Common Shares Outstanding (In Millions): Primary 26.6 26.6 ========= ========= Fully Diluted 33.3 33.3 ========= =========
21 Federal-Mogul Corporation, Sealed Power Corporation and Sealed Power Corporation of Canada, Ltd. Pro Forma Combined Condensed Balance Sheet (Unaudited) September 30, 1993 (Millions of Dollars)
Federal- Pro Forma Pro Forma Mogul SPR Adjustments Combined -------- -------- ----------- --------- ASSETS Current Assets Cash and equivalents $ 17 $ $ (3)F $ 14 Accounts receivable 170 2 23 G 195 Inventories 269 42 21 H 332 Prepaid expenses and other 20 1 21 -------- -------- ------- -------- Total Current Assets 476 45 41 562 Property, plant and equipment 390 16 (5)I 401 Business investments and other assets 236 5 81 J (5)G 317 -------- -------- ------- -------- TOTAL ASSETS $ 1,102 $ 66 $ 112 $ 1,280 ======== ======== ======= ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Short-term debt $ 34 $ $ $ 34 Accounts payable 81 12 (8)G 85 Accrued compensation 35 35 Other accrued liabilities 98 10 (8)G 126 26 K -------- -------- ------- -------- Total Current Liabilities 248 22 10 280 Long-term debt 231 4 143 L 378 Deferred income taxes 20 20 Postretirement benefits other than pensions 150 5 (5)G 150 Pension and other liabilities 80 80 -------- -------- ------- -------- Total Liabilities 729 31 148 908 -------- -------- ------- -------- Shareholders' Equity 373 35 (36)G 372 -------- -------- ------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,102 $ 66 $ 112 $ 1,280 ======== ======== ======= ========
22 Federal-Mogul Corporation, The Automotive Aftermarket Business, Sealed Power Corporation and Sealed Power Corporation of Canada, Ltd. Pro Forma Combined Condensed Statement of Earnings (Unaudited) Year Ended December 31, 1992 (Millions of Dollars, Except Per Share Amounts)
Pro Forma Federal- Mogul and AAB Pro Forma Pro Forma Combined SPR Adjustments Combined -------- -------- ----------- --------- Net sales $ 1,520 $ 163 $ (11)A,M $ 1,672 Cost of products sold 1,245 105 (11)A,M 1,340 1 H Selling, distribution and administrative expenses 209 47 (22) B 234 ------- ------- ------ ------- Operating earnings 66 11 21 98 Other income (expense): Interest expense (33) (6)C (39) Interest income 8 8 International currency exchange losses (6) (6) Amortization of intangible assets (8) (3)D (11) Special charges (14) (14) Other, net 8 (2) 6 ------- ------- ------ ------- Earnings From Continuing Operations Before Income Taxes 21 9 12 42 Income taxes 9 3 4E 16 ------- ------- ------ ------- Net Earnings From Continuing Operations 12 6 8 26 Preferred stock dividends, net of tax benefits 9 - - 9 ------- ------- ------ ------- Net Earnings From Continuing Operations Available for Common Shares $ 3 $ 6 $ 8 $ 17 ======= ======= ====== ======= Earnings From Continuing Operations Per Common Share: Primary $ .12 $ .76 ======= ======= Fully Diluted $ .12 $ .76 ======= ======= Average Number of Common Shares Outstanding (In Millions): Primary 22.4 22.4 ======= ======= Fully Diluted 29.2 29.2 ======= ======= Note: The pro forma fully diluted earnings per share amounts are not reported separately as the effects are anti-dilutive.
23 Federal-Mogul Corporation, Sealed Power Corporation and Sealed Power Corporation of Canada, Ltd. Pro Forma Combined Condensed Statement of Earnings (Unaudited) Year Ended December 31, 1992 (Millions of Dollars, Except Per Share Amounts)
Federal- Pro Forma Pro Forma Mogul SPR Adjustments Combined -------- -------- ----------- --------- Net sales $ 1,264 $ 163 $ (10)A $ 1,417 Cost of products sold 1,055 105 (10)A 1,151 1 H Selling, distribution and administrative expenses 166 47 (22)B 191 -------- -------- ------- -------- Operating earnings 43 11 21 75 Other income (expense): Interest expense (27) (6)C (33) Interest income 8 8 International currency exchange losses (6) (6) Amortization of intangible assets (3) (3)D (6) Special charges (14) (14) Other, net 8 (2) 6 -------- -------- ------- -------- Earnings From Continuing Operations Before Income Taxes 9 9 12 30 Income taxes 5 3 4 12 -------- -------- ------- -------- Net Earnings From Continuing Operations 4 6 8 18 Preferred stock dividends, net of tax benefits 4 - - 4 -------- -------- ------- -------- Net Earnings From Continuing Operations Available for Common Shares $ - $ 6 $ 8 $ 14 ======== ======== ======= ======== Earnings From Continuing Operations Per Common Share: Primary $ (.01) $ .63 ======== ======== Fully Diluted $ (.01) $ .61 ======== ======== Average Number of Common Shares Outstanding (In Millions): Primary 22.4 22.4 ======== ======== Fully Diluted 26.0 26.0 ======== ========
24 Federal-Mogul Corporation and The Automotive Aftermarket Business Pro Forma Combined Condensed Statement of Earnings (Unaudited) Year Ended December 31, 1992 (Millions of Dollars, Except Per Share Amounts)
Federal- Pro Forma Pro Forma Mogul AAB Adjustments Combined -------- -------- ----------- --------- Net sales $ 1,264 $ 262 $ (6)N $ 1,520 Cost of products sold 1,055 209 (6)N 1,245 4 O (17)P Selling, distribution and administrative expenses 166 46 17 P 209 (21)Q 1 R -------- -------- ------- -------- Operating earnings 43 7 16 66 Other income (expense): Interest expense (27) (1) (6)S (33) 1 T Interest income 8 8 International currency exchange losses (6) (6) Amortization of intangible assets (3) (5)U (8) Special charges (14) (14) Other, net 8 8 -------- -------- ------- -------- Earnings From Continuing Operations Before Income Taxes 9 6 6 21 Income taxes 5 2 2 V 9 -------- -------- ------- -------- Net Earnings (Loss) From Continuing Operations 4 4 4 12 Preferred stock dividends, net of tax benefits 4 - 5 W 9 -------- -------- ------- -------- Net Earnings Loss From Continuing Operations Available for Common Shares $ - $ 4 $ (1) $ 3 ======== ======== ======= ======== Earnings From Continuing Operations Per Common Share: Primary $ (.01) $ .12 ======== ======== Fully Diluted $ (.01) $ .12 ======== ======== Average Number of Common Shares Outstanding (In Millions): Primary 22.4 22.4 ======== ======== Fully Diluted 26.0 29.2 ======== ======== Note: The pro forma fully diluted earnings per share amount is not reported separately as the effect is anti-dilutive.
25 Notes to Pro Forma Combined Condensed Financial Statements (Unaudited) Note A-Pro Forma Financial Statements The pro forma information for the year ended December 31, 1992 is based on historical financial statements of Federal-Mogul and SPR after giving effect to the transactions and the adjustments described in Note B. The pro forma information as of September 30, 1993 and for the nine months then ended is based on unaudited financial statements of Federal-Mogul and SPR. The pro forma information for AAB for the year ended December 31, 1992 is based on unaudited financial statements of AAB. The unaudited financial statements include all adjustments, consisting of normal recurring accruals, which Federal-Mogul, SPR and AAB consider necessary for a fair presentation of the financial position and results of operations for this period, except that the operating results of SPR as presented do not include any costs associated with financing of its operations nor charges for certain administrative and management functions provided centrally by SPX Corporation. The pro forma financial statements may not be indicative of the results that actually would have occurred if the transactions had occurred on the dates assumed and do not project Federal-Mogul's financial position or results of operations at any future date or period then ended. The pro forma financial statements should be read in conjunction with the financial statements and related notes of SPR contained elsewhere herein and the financial statements and related notes of AAB included in Federal-Mogul's Form 8 dated January 4, 1993, filed as Amendment No. 1 to its Form 8-K dated October 20, 1992. Note B-Pro Forma Adjustments The accompanying pro forma combined condensed financial statements include adjustments to increase (decrease) pro forma combined earnings before taxes or increase (decrease) pro forma combined shareholders' equity, as follows (in millions): A) Elimination of intercompany sales and purchases between Federal-Mogul and SPR. B) Estimated savings of $22 million per year and $17 million for the nine months ended September 30, 1993 from rationalization of combined Federal-Mogul and SPR business operations. The pro forma statements of earnings do not reflect a pre tax charge of approximately $1 million for nonrecurring rationalization costs related to Federal-Mogul facilities expected to be expensed by Federal-Mogul upon completion of the acquisition. C) Interest at 4 3/8% (1% over the current three-month London Interbank Offered Rate (LIBOR) of 3 3/8%) on the $143 million draw on the revolving credit agreement, made to finance the acquisition. 26 Notes to Pro Forma Combined Condensed Financial Statements (Unaudited) Note B-Pro Forma Adjustments - Continued D) Amortization of intangible assets acquired of $81 million over periods ranging from 4 to 40 years. E) Estimated income tax effect of pro forma adjustments. F) Net cash effect of the following pro forma adjustments (in millions): Proceeds of debt $ 143 Payment of financing costs (1) Payment of purchase price (143) Payment of professional fees (2) ----- $ (3) ===== G) Elimination of excluded assets, liabilities and net investment from historical SPR combined statements. Accounts receivable reflects a net addition as Federal-Mogul purchased receivables that SPR had previously reflected as sold. H) Net effect of changing SPR's inventory costing method from last in, first out (LIFO) to fair value at date of acquisition. I) Fair value adjustment of $5 million to acquired property, plant and equipment, primarily relating to abandoned assets. J) Intangible assets acquired in connection with the acquisition of $81 million. K) Accrual of rationalization costs of $25 million of SPR related costs capitalized as part of the acquisition and $1 million of Federal-Mogul related rationalization costs expected to be expensed after the acquisition. L) Proceeds from the draw on the revolving credit agreement. M) Elimination of intercompany sales and purchases between AAB and SPR. N) Elimination of intercompany sales and purchases between Federal-Mogul and AAB. O) Effect of changing AAB's inventory costing method from last-in, first-out (LIFO) to fair value at date of acquisition. P) Reclassification of AAB costs and expenses to conform with Federal-Mogul classifications. 27 Notes to Pro Forma Combined Condensed Financial Statements (Unaudited) Note B-Pro Forma Adjustments - Continued Q) Estimated savings from rationalization of combined Federal-Mogul and AAB business operations. R) Additional depreciation to reflect the fair market value of acquired property, plant and equipment. S) Additional interest at 6.25% on $125 million of long-term debt obtained to partially finance the acquisition. T) Elimination of AAB interest expense on debt not assumed in the acquisition. U) Amortization of intangible assets acquired of $72 million over periods ranging from 6 to 40 years. V) Estimated income tax effect of pro forma adjustments. W) Dividends at 7.75% on convertible exchangeable stock issued to partially finance the acquisition of AAB. Note C-Other Matters The pro forma statements of earnings do not reflect a pretax charge of approximately $1 million for nonrecurring rationalization costs related to Federal-Mogul facilities expected to be expensed by Federal-Mogul upon completion of the acquisition of SPR. 28 SIGNATURE Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized. FEDERAL-MOGUL CORPORATION By: (James B. Carano) -------------------------------------- JAMES B. CARANO Vice President and Controller Dated as of February 11, 1994 EX-24.1 2 CONSENT 1 Item 7(c). CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our report included in this Form 8-K/A and to its incorporation by reference in Federal-Mogul Corporation's Registration Statements Nos. 33-51265 on Form S-3, 33-51403 on Form S-8, 33-32429 on Form S-8, 33-32323 on Form S-8, 33-30172 on Form S-8 and 2-93179 on Form S-8. ARTHUR ANDERSEN & CO. (Arthur Andersen & Co.) Chicago, Illinois February 11, 1994 -----END PRIVACY-ENHANCED MESSAGE-----