-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LwX51yNDuuW+Hp47X3fvYf8P5t85gGfekMaDbOCQzBdfV4mt070G/mDZNNy95M0y hJSgVcriTnfTHg+3LXferw== 0000950124-98-007457.txt : 19981217 0000950124-98-007457.hdr.sgml : 19981217 ACCESSION NUMBER: 0000950124-98-007457 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981002 ITEM INFORMATION: FILED AS OF DATE: 19981216 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AUTOCAM CORP/MI CENTRAL INDEX KEY: 0000879235 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 382790152 STATE OF INCORPORATION: MI FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-19544 FILM NUMBER: 98770560 BUSINESS ADDRESS: STREET 1: 4070 EAST PARIS AVE CITY: KENTWOOD STATE: MI ZIP: 49512 BUSINESS PHONE: 6166980707 MAIL ADDRESS: STREET 1: 4070 EAST PARIS AVENUE SE CITY: KENTWOOD STATE: MI ZIP: 49512 8-K/A 1 FORM 8-K/A 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549 FORM 8-K/A AMENDMENT TO CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report: October 2, 1998 AUTOCAM CORPORATION A Michigan Corporation Commission File Number 0-19544 I.R.S. Employer Identification No. 38-2790152 4070 East Paris Avenue, Kentwood, Michigan 49512 Telephone: (616) 698-0707 2 This Amendment amends the Current Report on Form 8-K of Autocam Corporation (the "Company"), dated October 2, 1998. As provided in Item 7(a)(4) of the instructions to Form 8-K, such Current Report on Form 8-K did not include audited consolidated financial statements of Compagnie Financiere du Leman SA ("CFL"), the business acquired in the transaction, which were not available at the time the Current Report on Form 8-K was filed. This Amendment is filed to provide audited consolidated financial statements of CFL and the required pro forma combining financial information. The following information amends Item 7 of the Current Report on Form 8-K and sets forth, in its entirety, the information as amended. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (a) Consolidated Financial Statements of Business Acquired. The following consolidated financial statements of CFL are filed as part of this Current Report: Independent Auditor's Report Consolidated Balance Sheets as of September 30, 1998 (unaudited) and December 31, 1997, 1996 and 1995 Consolidated Statements of Operations for the Nine Months Ended September 30, 1998 (unaudited) and the Years Ended December 31, 1997, 1996 and 1995 Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 1998 (unaudited) and the Years Ended December 31, 1997, 1996 and 1995 Notes to the Consolidated Financial Statements (b) Pro Forma Combining Financial Information. The following unaudited combining pro forma financial information is filed as part of this Current Report: Description of Pro Forma Combining Financial Information Pro Forma Combining Balance Sheet as of September 30, 1998 Pro Forma Combining Statements of Operations for the three months ended September 30, 1998 and for the year ended June 30, 1998. Notes to Pro Forma Combining Financial Information (c) Exhibits. 23 - Consent of PricewaterhouseCoopers (filed herewith, page E-1). 2 3 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Date: December 16, 1998 AUTOCAM CORPORATION /s/ WARREN A. VELTMAN ------------------------------------------ Warren A. Veltman, Principal Financial and Accounting Officer 3 4 [PricewaterhouseCoopers Letterhead] INDEPENDENT AUDITOR'S REPORT TO THE BOARD OF DIRECTORS OF COMPAGNIE FINANCIERE DU LEMAN ("CFL") We have audited the accompanying consolidated balance sheets of CFL and its subsidiary as of December 31, 1997, 1996 and 1995 and the related consolidated statements of operations and consolidated cash flow statements for each of the years in the three year period ended December 31, 1997. These consolidated financial statements are the responsibility of the management of CFL. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in France. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of CFL and its subsidiary as of December 31, 1997, 1996 and 1995 and the results of their operations and their cash flows for each of the years in the three year period ended December 31, 1997, in conformity with generally accepted accounting principles in France. Accounting principles generally accepted in France vary in certain significant respects from accounting principles generally accepted in the United States of America. Application of accounting principles generally accepted in the United States would have affected net income for the three years ended December 31, 1997 and shareholders' funds at December 31, 1997, 1996 and 1995 to the extent summarized in Notes 8 and 15 to the consolidated financial statements. Lyons, France Fiduciaire Continentale Lyon Member of PricewaterhouseCoopers December 8, 1998 /s/ Vidal Martin Partner F-1 5 COMPAGNIE FINANCIERE DU LEMAN UNAUDITED CONSOLIDATED BALANCE SHEET SEPTEMBER 30, 1998 (IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
NOTES FRENCH GAAP ADJUSTMENTS US GAAP ----- ----------- ----------- ------- Goodwill FF 45,919 FF 45,919 Other intangible fixed assets 1,071 FF 96 1,167 ----------- ----------- ----------- Total intangible assets, net 46,990 96 47,086 ----------- ----------- ----------- Land 1,550 1,550 Buildings 28,447 461 28,908 Industrial fixtures, equipment and tooling 126,410 74,714 201,124 Other tangible fixed assets 4,511 610 5,121 Fixed assets in-progress 1,984 1,984 Advances and prepayments 2,954 2,954 ----------- ----------- ----------- Total property, plant and equipment, net 165,856 75,785 241,641 ----------- ----------- ----------- Investments, net 1,449 1,449 Inventory, net 1 47,327 2,914 50,241 Accounts receivable, net 169,662 169,662 Deferred income taxes 2,281 4,047 6,328 Other receivables 4,675 4,675 ----------- ----------- ----------- Total current receivables, net 6,956 4,047 11,003 ----------- ----------- ----------- Deposits Cash 6,794 6,794 ----------- ----------- Total cash and cash equivalents 6,794 6,794 ----------- ----------- Prepaid expenses 1,085 202 1,287 ----------- ----------- ----------- TOTAL ASSETS FF 446,119 FF 83,044 FF 529,163 =========== =========== =========== Common stock FF 95,200 FF 95,200 Additional paid-in capital 13,502 13,502 Retained earnings 32,881 FF 41,900 74,781 Net income or loss of the tax year 3,945 (2,233) 1,712 ----------- ----------- ----------- Shareholders' equity 145,528 39,667 185,195 ----------- ----------- ----------- Minority interest 57 57 Provisions for contingencies and losses 15,724 8,324 24,048 Bank borrowings 123,846 3,313 127,159 Other financial borrowings and debts 7,357 7,357 ----------- ----------- ----------- Total financial debts 131,203 3,313 134,516 ----------- ----------- ----------- Trade notes and related accounts payable 85,441 85,441 Liabilities on fixed assets and related accounts 19,526 19,526 Deferred income taxes 559 31,740 32,299 Other liabilities 48,081 48,081 ----------- ----------- ----------- Total current liabilities 153,607 31,740 185,347 ----------- ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY FF 446,119 FF 83,044 FF 529,163 =========== =========== ===========
F-2 6 COMPAGNIE FINANCIERE DU LEMAN UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 (IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
NOTES FRENCH GAAP ADJUSTMENTS US GAAP ----- ----------- ----------- ------- Net sales FF 378,214 FF 378,214 Stored production 67 FF 264 331 Capitalized production 863 863 Other operating income 7,081 7,081 Reversal of depreciation and accruals 1,475 1,475 ----------- --------- ----------- Operating income 387,700 264 387,964 Raw materials (68,383) (68,383) Inventory variation 623 623 Other purchases and expenses (115,351) 1,461 (113,890) ----------- --------- ----------- Added value 204,589 1,725 206,314 Taxes and assimilated payments (11,473) (11,473) Wages and salaries (86,041) (86,041) Contractual employees' profit sharing (1,026) (1,026) Social security and contributions (34,115) (34,115) ----------- --------- ----------- Gross operating margin 71,934 1,725 73,659 Depreciation on fixed assets (54,097) (4,821) (58,918) Reserve allowance on current assets (2,581) (1,237) (3,818) Other expenses (404) (404) ----------- --------- ----------- Operating income 14,852 (4,333) 10,519 Financial income (4,823) (107) (4,930) ----------- --------- ----------- Current income before tax 10,029 (4,440) 5,589 Extraordinary income (100) (22) (122) Legal employees' profit sharing (898) (898) Current income tax (5,116) (5,116) Deferred income taxes 30 2,229 2,259 ----------- --------- ----------- NET INCOME FF 3,945 (FF 2,233) FF 1,712 =========== ========= ===========
F-3 7 COMPAGNIE FINANCIERE DU LEMAN UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 (IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED) CASH FLOWS FROM OPERATING ACTIVITIES Net income FF1,712 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 58,918 Change in reserve for inventory 456 Change in long-term provisions 2,645 Deferred income taxes (2,259) Gain on sales of property, plant and equipment (2) Increase/decrease in operating assets and liabilities: Increase in trade accounts receivable (12,052) Increase in inventories (957) Decrease in other current assets 1,463 Increase in prepaid expenses (682) Increase in trade accounts payable 2,044 Increase in liabilities on fixed assets 1,090 Increase in other current liabilities 7,459 --------- NET CASH PROVIDED BY OPERATING ACTIVITIES 59,835 --------- CASH FLOWS FROM INVESTING ACTIVITIES Acquisitions of intangible assets (69) Acquisitions of property, plant and equipment (63,785) Acquisitions of investments (4) Proceeds from sales of property, plant and equipment 398 New loans (accrued interest included) 40,961 Reimbursements of loans (accrued interest included) (38,073) --------- NET CASH USED IN INVESTING ACTIVITIES (60,572) --------- CASH FLOWS FROM FINANCING ACTIVITIES Increase in overdrafts and miscellaneous debts 7,985 Dividends paid (3,002) --------- NET CASH PROVIDED BY FINANCING ACTIVITIES 4,983 --------- NET INCREASE IN CASH 4,246 Cash, beginning of period 2,548 --------- CASH, END OF PERIOD FF 6,794 =========
F-4 8 COMPAGNIE FINANCIERE DU LEMAN NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 (IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED) 1. INVENTORY
BALANCE AT BALANCE AT 9/30/98 12/31/97 VARIATION VARIATION IN % ------- -------- --------- -------------- Net value - Materials FF10,369 FF 9,621 FF 748 8% Net value - WIP 28,878 27,621 (1,692) -17 Net value - Finished goods 8,080 9,772 1,257 5 -------- -------- ------ TOTAL NET VALUE FF47,327 FF47,014 FF313 1% ======== ======== ======
2. SUBSEQUENT EVENT The rights to all the outstanding common shares of CFL were purchased by Autocam France SARL, a wholly-owned subsidiary of Autocam Corporation, effective October 1, 1998 for FF300 million. F-5 9 COMPAGNIE FINANCIERE DU LEMAN CONSOLIDATED BALANCE SHEET DECEMBER 31, 1997 (IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
NOTES FRENCH GAAP ADJUSTMENTS US GAAP ----- ----------- ----------- ------- Goodwill FF 48,980 FF 48,980 Other intangible fixed assets 2 1,520 FF 96 1,616 --------- ----------- ----------- Total intangible assets, net 50,500 96 50,596 --------- ----------- ----------- Land 2 1,550 1,550 Buildings 2 29,854 557 30,411 Industrial fixtures, equipment and tooling 2 108,625 79,256 187,881 Other tangible fixed assets 2 4,979 811 5,790 Fixed assets in-progress 2 3,829 3,829 Advances and prepayments 2 4,130 4,130 --------- ----------- ----------- Total property, plant and equipment, net 152,967 80,624 233,591 --------- ----------- ----------- Investments, net 2 1,445 1,445 Inventory, net 3 47,014 2,727 49,741 Accounts receivable, net 4 157,610 157,610 Deferred income taxes 14 2,280 3,465 5,745 Other receivables 5 6,138 6,138 --------- ----------- ----------- Total current receivables, net 8,418 3,465 11,883 --------- ----------- ----------- Deposits 6 473 473 Cash 6 2,075 2,075 --------- ----------- Total cash and cash equivalents 2,548 2,548 --------- ----------- Prepaid expenses 7 296 309 605 --------- ----------- ----------- TOTAL ASSETS FF420,798 FF 87,221 FF 508,019 ========= ========== =========== Common stock 8 FF 95,200 FF 95,200 Additional paid-in capital 8 13,502 13,502 Retained earnings 8 33,837 FF 37,745 71,582 Net income or loss of the tax year 8 2,046 4,156 6,202 --------- ----------- ----------- Shareholders' equity 144,585 41,901 186,486 --------- ----------- ----------- Minority interest 57 57 Provisions for contingencies and losses 9 14,243 7,160 21,403 Bank borrowings 10 110,620 4,774 115,394 Other financial borrowings and debts 10 8,249 8,249 --------- ----------- ----------- Total financial debts 118,869 4,774 123,643 --------- ----------- ----------- Trade notes and related accounts payable 11 83,397 83,397 Liabilities on fixed assets and related accounts 11 18,436 18,436 Deferred income taxes 14 589 33,386 33,975 Other liabilities 12 40,622 40,622 --------- ----------- ----------- Total current liabilities 143,044 33,386 176,430 --------- ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY FF420,798 FF 87,221 FF 508,019 ========= ========== ===========
F-6 10 COMPAGNIE FINANCIERE DU LEMAN CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997 (IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
NOTES FRENCH GAAP ADJUSTMENTS US GAAP ----- ----------- ----------- ------- Net sales 13 FF 486,546 FF 486,546 Stored production (597) (FF 53) (650) Capitalized production 1,478 1,478 Other operating income 154 154 Reversal of depreciation and accruals 4,085 4,085 ----------- ---------- ----------- Operating income 491,666 (53) 491,613 Raw materials (90,635) (90,635) Inventory variation (558) (558) Other purchases and expenses (137,248) 1,127 (136,121) ----------- ---------- ----------- Added value 263,225 1,074 264,299 Taxes and assimilated payments (13,441) (13,441) Wages and salaries (104,680) (104,680) Contractual employees' profit sharing (3,133) (3,133) Social security and contributions (41,291) (41,291) ----------- ---------- ----------- Gross operating margin 100,680 1,074 101,754 Depreciation on fixed assets (85,418) 13,440 (71,978) Reserve allowance on current assets (4,881) 544 (4,337) Other expenses (531) (531) ----------- ---------- ----------- Operating income 9,850 15,058 24,908 Financial expense (7,265) (93) (7,358) ----------- ---------- ----------- Current income before tax 2,585 14,965 17,550 Extraordinary income 4,121 (2,733) 1,388 Legal employees' profit sharing (473) (473) Current income tax 14 (4,359) (4,359) Deferred income taxes 14 172 (8,076) (7,904) ----------- ---------- ----------- NET INCOME FF 2,046 FF 4,156 FF 6,202 =========== ========== ===========
F-7 11 COMPAGNIE FINANCIERE DU LEMAN CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1997 (IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED) CASH FLOWS FROM OPERATING ACTIVITIES Net income FF 6,202 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 71,978 Change in reserve for inventory 439 Change in long-term provisions (1,423) Deferred income taxes 7,904 Gain on sales of property, plant and equipment (145) Increase/decrease in operating assets and liabilities: Increase in trade accounts receivable (10,819) Decrease in inventories 1,209 Increase in other current assets (3,332) Increase in prepaid expenses (412) Increase in trade accounts payable 1,009 Increase in liabilities on fixed assets 2,373 Decrease in other current liabilities (7,558) ---------- NET CASH PROVIDED BY OPERATING ACTIVITIES 67,425 ---------- CASH FLOWS FROM INVESTING ACTIVITIES Acquisitions of intangible assets (890) Acquisitions of property, plant and equipment (81,371) Acquisitions of investments (4) Proceeds from sales of property, plant and equipment 6,406 New loans (accrued interest included) 19,774 Reimbursements of loans (accrued interest included) (34,542) ---------- NET CASH USED IN INVESTING ACTIVITIES (90,627) ---------- CASH FLOWS FROM FINANCING ACTIVITIES Increase in overdrafts and miscellaneous debts 18,797 Dividends paid (5,003) ---------- NET CASH PROVIDED BY FINANCING ACTIVITIES (13,794) ---------- NET DECREASE IN CASH (9,408) Cash, beginning of period 11,956 ---------- CASH, END OF PERIOD FF 2,548 ==========
F-8 12 COMPAGNIE FINANCIERE DU LEMAN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1997 (IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: 1.1 Differences between French and US GAAP The accompanying financial statements have been prepared on the basis of the consolidated financial statements of Compagnie Financiere du Leman ("CFL"), prepared in accordance with French generally accepted accounting principles ("French GAAP") which differ in certain significant respects from those applicable in the United States ("US GAAP"). These differences, for which the effects of the adjustments on net profit and shareholders' equity are listed respectively in Notes 8 and 15, relate principally to the items set out below: Fixed assets - Fixed assets can be depreciated for tax purposes using the accelerated declining balance method in France. For US GAAP purposes, the straight-line method has been used and depreciation has been restated for purchased software, equipment, fixtures and fittings and others. Leases meeting the capitalization criteria as stated in Statement of Financial Accounting Standard No. 13, "Accounting for Leases," are not capitalized for French GAAP. A capital lease for a machine has been restated in compliance with US GAAP. Inventory - Finished goods and work in-progress inventory as computed by Frank & Pignard ("F&P") does not include administrative overhead (operating leases for buildings, Business Tax and computer department). For US GAAP purposes, a percentage of overhead has been allocated to inventory. Finished goods and work in-progress inventory has also been restated to include the impact of the correction of the depreciation method. Provision for contingencies and losses - Provisions recorded in French GAAP financial statements have been examined in the light of Statement of Financial Accounting Standard No. 5, "Accounting for Contingencies," and Emerging Issues Task Force Statement No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (Including Certain Costs Incurred in a Restructuring)." Adequate corrections have been made to the financial statements to comply with US GAAP on provisions for litigation and restructuring. Accruals for pension obligations are not mandatory in French GAAP. As a consequence, the company only accrued obligations for certain employees. This accrual has been increased to reflect the pension liability for all the employees. Minority interest - The impact of the adjustments between French and US GAAP has not been taken into account for the calculation of minority interest, as this would lead to an immaterial adjustment. 1.2 Management 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 disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. F-9 13 COMPAGNIE FINANCIERE DU LEMAN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1997 (IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED) 1.3 Consolidation The accompanying consolidated financial statements include the accounts of CFL and its majority-owned (99.9%) subsidiary, F&P. All significant intercompany transactions and balances are eliminated in consolidation. Following equity investments are not consolidated, as they are deemed not significant: - SC Thermipar, 74950, Scionzier: 50% of the capital - Sarl Les Pilotis, 74311, Thyez: 20% of the capital 1.4 Revenue recognition Revenue from sales of products is recognized upon shipment or delivery, depending on when title and risk of loss is transferred under the specific contractual terms of each sale, which may vary customer by customer. 1.5 Inventories Inventories are valued at the lower of manufacturing cost, which is principally comprised of raw material, labor costs, and overhead, or market (net realizable value). Cost is determined on a first-in, first-out basis for raw material (including shipping and storage costs) and by specific identification for finished goods. Appropriate consideration is given to deterioration, obsolescence and other factors in evaluating net realizable value. Inventories whose probability of being sold is very low (dead inventory) are depreciated by 100%. 1.6 Property, plant and equipment Property, plant and equipment is stated at historical cost. Depreciation of property, plant and equipment is calculated either by the straight-line ("SL") or the declining balance ("D") method over the estimated useful life of the assets concerned, as follows: Buildings........................................................20-25 years SL Installations..................................................10 years SL or D Equipment..................................................5-6.67 years SL or D Furniture, fixtures and fittings and others..................3-10 years SL or D
1.7 Intangible assets Intangible assets consist primarily of purchased software and goodwill. The basis for valuation of these assets is historical acquisition. Amortization of intangible assets is calculated by the straight-line method, as follows: Purchased software......................................................4 years Goodwill...............................................................20 years
1.8 Income taxes In December 1990, CFL and F&P entered into a tax sharing agreement. This agreement has been applicable since January 1, 1991. F-10 14 COMPAGNIE FINANCIERE DU LEMAN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1997 (IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED) 1.8 Income taxes - Concluded The Group accounts for deferred income taxes in accordance with Statement of Financial Accounting Standard No. 109 ("SFAS 109"), "Accounting for Income Taxes." Under SFAS 109, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured by applying enacted tax rates and laws to taxable years in which such differences are expected to reverse. 1.9 Translation of foreign currencies Receivables and payables denominated in foreign currencies are translated at year-end exchange rates. The resulting unrealized exchange gains and losses are carried to the statement of income. 2. FIXED ASSETS
INCREASES - DECREASES GROSS VALUE ADDITIONS, CIP, ----------------------------------- GROSS VALUE AT AT 12/31/96 TRANSFER TRANSFERS DISPOSALS 12/31/97 ----------- -------- --------- --------- -------- Software FF 4,824 FF 890 FF 22 FF 5,692 ----------- ------------ ---------- ----------- TOTAL INTANGIBLE ASSETS 4,824 890 22 5,692 ----------- ------------ ---------- ----------- Land 1,550 1,550 ----------- ----------- Thyez building 5,560 5,560 Building installations 13,781 543 53 14,271 Pochons building 9,380 9,380 Ternier building 20,851 20,851 Apartment building 345 345 ----------- ------------ ---------- ----------- Subtotal Buildings 49,917 543 53 50,407 ----------- ------------ ---------- ----------- Machine tools 511,079 63,478 7,318 567,239 Used equipment 10,885 43 8 10,920 Plant equipment 9,021 5,746 4,241 10,526 ----------- ------------ ---------- ----------- Subtotal Machinery Equipment 530,985 69,267 11,567 588,685 ----------- ------------ ---------- ----------- Installations 12,013 1,765 147 13,631 Vehicles 1,854 481 374 1,961 Office equipment 4,952 948 672 5,228 Office furniture 1,666 62 1,728 ----------- ------------ ---------- ----------- Subtotal - Miscellaneous 20,485 3,256 1,193 22,548 ----------- ------------ ---------- ----------- CIP-Machinery and Equipment 2,856 3,754 FF 2,856 3,754 CIP-Miscellaneous 75 75 ----------- ------------ -------- ----------- Subtotal CIP 2,856 3,829 2,856 3,829 ----------- ------------ -------- -----------
F-11 15 COMPAGNIE FINANCIERE DU LEMAN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1997 (IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED) 2. FIXED ASSETS - CONCLUDED
INCREASES - DECREASES GROSS VALUE ADDITIONS, CIP, --------------------------------- GROSS VALUE AT AT 12/31/96 TRANSFER TRANSFERS DISPOSALS 12/31/97 ----------- -------- --------- --------- -------- Advances for CIP FF 2,298 FF 4,130 FF 2,298 FF 4,130 ----------- ------------ --------- ----------- TOTAL FIXED ASSETS 608,091 81,025 5,154 FF 12,813 671,149 ----------- ------------ --------- ----------- ----------- SUBTOTAL FIXED ASSETS BEFORE INVESTMENTS 612,915 81,915 5,154 12,835 676,841 ----------- ------------ --------- ----------- ----------- Equity investments 804 804 Receivables from equity investments 520 520 Other equity investments 106 4 110 Deposits and guaranties 11 11 TOTAL INVESTMENTS 1,441 4 1,445 ----------- ------------ ----------- TOTAL FIXED ASSETS FF 614,356 FF 81,919 FF 5,154 FF 12,835 FF 678,286 =========== ============ ========= =========== =========== Software FF 3,448 FF 746 FF 22 FF 4,172 ----------- ------------ ----------- ----------- TOTAL AMORTIZATION- INTANGIBLE ASSETS 3,448 746 22 4,172 ----------- ------------ ----------- ----------- Buildings 4,112 151 4,263 Leasehold buildings 5,896 1,525 7,421 Building installations 7,958 953 42 8,869 ----------- ------------ ----------- ----------- Subtotal Buildings 17,966 2,629 42 20,553 ----------- ------------ ----------- ----------- Machinery and equipment 410,816 74,977 5,733 480,060 ----------- ------------ ----------- ----------- Installations 9,700 1,571 133 11,138 Vehicles 985 394 286 1,093 Office furniture and equipment 4,991 1,019 672 5,338 ----------- ------------ ----------- ----------- Subtotal Miscellaneous 15,676 2,984 1,091 17,569 ----------- ------------ ----------- ----------- TOTAL DEPRECIATION - FIXED ASSETS 444,458 80,590 6,866 518,182 ----------- ------------ ----------- ----------- TOTAL AMORTIZATION AND DEPRECIATION FF 447,906 FF 81,336 FF 6,888 FF 522,354 =========== ============ =========== ===========
F-12 16 COMPAGNIE FINANCIERE DU LEMAN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1997 (IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED) 3. INVENTORY
BALANCE AT BALANCE AT 12/31/97 12/31/96 VARIATION VARIATION IN % -------- -------- --------- -------------- Raw materials FF 8,148 FF 8,487 (FF 339) -4% --------- --------- --------- Total raw materials 8,148 8,487 (339) -4 --------- --------- --------- Supplies 449 434 15 3 Packaging 288 520 (232) -45 Miscellaneous 1,081 1,082 (1) --------- --------- --------- Total other materials 1,818 2,036 (218) -11 --------- --------- --------- Gross value - Materials 9,966 10,523 (557) -5 Provisions (345) (541) (196) -36 --------- --------- --------- NET VALUE - MATERIALS FF 9,621 FF 9,982 (FF 361) -4% ========= ========= ========= Work in progress (WIP) FF 33,747 FF 29,520 FF 4,227 14% Finished goods 9,772 14,596 (4,824) -33 --------- --------- --------- Gross value - WIP & Finished goods 43,519 44,116 (597) -1 Provisions (6,126) (5,532) 594 11 --------- --------- --------- NET VALUE - WIP & FINISHED GOODS FF 37,393 FF 38,584 (FF 1,191) -3% ========= ========= ========= Total gross value FF 53,485 FF 54,639 (FF 1,154) -2% Provisions (6,471) (6,073) 398 7 --------- --------- --------- TOTAL NET VALUE FF 47,014 FF 48,566 (FF 1,552) -3% ========= ========= =========
F-13 17 COMPAGNIE FINANCIERE DU LEMAN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1997 (IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED) 4. TRADE ACCOUNTS RECEIVABLE
BALANCE AT BALANCE AT 12/31/97 12/31/96 VARIATION VARIATION IN % -------- -------- --------- -------------- Trade accounts receivable FF 66,193 FF 75,432 (FF 9,239) -12% Bills receivable 91,163 71,323 19,840 28 Accrued trade accounts receivable 537 319 218 68 ---------- ---------- ---------- Total trade accounts receivable 157,893 147,074 10,819 7 Allowance for doubtful accounts (283) (283) ---------- ---------- ---------- TOTAL TRADE ACCOUNTS RECEIVABLE (NET) FF 157,610 FF 146,791 FF 10,819 7% ========== ========== ==========
5. OTHER RECEIVABLES
BALANCE AT BALANCE AT 12/31/97 12/31/96 VARIATION VARIATION IN % -------- -------- --------- -------------- TOTAL OTHER RECEIVABLES FF6,138 FF2,806 FF3,332 119% ======= ======= =======
As of December 31, 1997, other receivables mainly consist of: - Value-added tax recoverable: FF1,877 - Accrued receivables (rebates from suppliers): FF704 - Income Tax refund: FF3,465 6. CASH AND CASH EQUIVALENTS
BALANCE AT BALANCE AT 12/31/97 12/31/96 VARIATION VARIATION IN % -------- -------- --------- -------------- Cash FF 2,027 FF 561 FF 1,466 261% Petty cash 48 48 ----------- ------------- Total cash 2,075 609 1,466 241 Total marketable securities 473 11,347 (10,874) -96 ----------- ------------- --------- TOTAL CASH AND CASH EQUIVALENTS FF 2,548 FF 11,956 (FF 9,408) -79% =========== ============= ========
F-14 18 COMPAGNIE FINANCIERE DU LEMAN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1997 (IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED) 7. PREPAID EXPENSES
BALANCE AT BALANCE AT 12/31/97 12/31/96 VARIATION VARIATION IN % -------- -------- --------- -------------- TOTAL PREPAID EXPENSES FF296 FF193 FF103 54% ===== ===== =====
As of December 31, 1997, prepaid expenses consist of operating expenses (FF277) and interest charges (FF19). 8. EFFECT ON SHAREHOLDERS' EQUITY OF DIFFERENCES BETWEEN FRENCH AND US GAAP
BALANCE AT 12/31/97 -------- SHAREHOLDERS' EQUITY AS REPORTED UNDER FRENCH GAAP FF144,585 US GAAP adjustments - - Fixed asset depreciation 75,633 - - Capital lease 622 - - Overheads allocation to inventory and impact of fixed assets depreciation on inventory 2,727 - - Provisions for litigation 1,157 - - Pension liability (8,316) - - Deferred taxation on US GAAP adjustments (29,922) --------- SHAREHOLDERS' EQUITY AS REPORTED UNDER US GAAP FF186,486 =========
9. PROVISIONS FOR CONTINGENCIES AND LOSSES
BALANCE AT BALANCE AT 12/31/97 12/31/96 VARIATION VARIATION IN % -------- -------- --------- -------------- Provisions for miscellaneous contingencies FF 9,876 FF13,881 (FF4,005) -29% Pension liability 4,367 3,619 748 21 ----------- -------- -------- TOTAL PROVISION FOR CONTINGENCIES AND LOSSES FF 14,243 FF17,500 (FF3,257) -19% =========== ======== ========
F-15 19 COMPAGNIE FINANCIERE DU LEMAN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1997 (IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED) 10. FINANCIAL DEBTS - SHORT AND LONG-TERM
BALANCE AT BALANCE AT 12/31/97 12/31/96 VARIATION VARIATION IN % -------- -------- --------- -------------- Long-term portion FF 50,129 FF 71,850 ( FF21,721) -30% Short-term portion 36,721 34,350 2,371 7 ---------- ---------- ---------- BANK LOANS FF 86,850 FF 106,200 (FF 19,350) -19% ---------- ---------- ---------- ACCRUED INTEREST - SHORT-TERM FF 735 FF 927 (FF 192) -21% ---------- ------------ ---------- OVERDRAFTS - SHORT-TERM FF 23,035 FF 3,865 FF 19,170 496% ---------- ----------- ---------- Long-term portion FF 1,584 FF 1,903 (FF 319) -17% Short-term portion 6,665 6,719 (54) -1 ---------- ---------- ---------- MISCELLANEOUS FINANCIAL DEBTS FF 8,249 FF 8,622 (FF 373) -4% ---------- ---------- ---------- Long-term portion FF 51,713 FF 73,753 (FF 22,040) -30% Short-term portion 67,156 45,861 21,295 46 ---------- ---------- ---------- TOTAL FINANCIAL DEBTS FF 118,869 FF 119,614 (FF 745) -1% ========== ========== ==========
As of December 31, 1997, miscellaneous debts include profit sharing (FF3,239) and a special fund for employees (FF4,817). 11. ACCOUNTS PAYABLE
BALANCE AT BALANCE AT 12/31/97 12/31/96 VARIATION VARIATION IN % -------- -------- --------- -------------- Trade accounts payable FF81,167 FF79,031 FF2,136 3% Accrued accounts payable 2,230 3,357 (1,127) -34 -------- -------- -------- TOTAL TRADE ACCOUNTS PAYABLE FF83,397 FF82,388 FF1,009 1% ======== ======== ======== Trade accounts payable - Bills payable FF52,023 FF54,433 FF2,410 -4% FIXED ASSET SUPPLIERS FF18,436 FF16,063 FF2,373 15% Fixed asset suppliers - Bills payable FF 8,086 FF 8,944 (FF 858) -10%
F-16 20 COMPAGNIE FINANCIERE DU LEMAN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1997 (IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED) 12. OTHER PAYABLES
BALANCE AT BALANCE AT 12/31/97 12/31/96 VARIATION VARIATION IN % -------- -------- --------- -------------- Taxes payable FF 3,582 FF 10,344 (FF 6,762) -65% Benefits payable 10,389 9,845 544 6 Salaries & wages payable 23,934 23,828 106 ---------- ---------- --------- Total taxes, benefits and salaries & wages payable 37,905 44,017 (6,112) -14 Miscellaneous payables 1,959 1,552 407 26 Deferred revenue - Operating 758 2,611 (1,853) -71 ---------- ---------- --------- TOTAL OTHER PAYABLES FF 40,622 FF 48,180 (FF 7,558) -16% ========== ========== =========
13. SALES
BALANCE AT BALANCE AT 12/31/97 12/31/96 VARIATION VARIATION IN % -------- -------- --------- -------------- France FF 394,761 FF 380,541 FF14,220 3.7% % 81.1% 79.5% Export FF 91,785 FF 98,093 (FF 6,308) 6.4% % 18.9% 20.5% TOTAL FF 486,546 FF 478,634 FF 7,912 1.7%
14. INCOME TAXES Deferred income taxes reflect the impact of temporary differences between the amount of assets and liabilities reported for financial reporting purposes and such amounts as measured in accordance with tax laws. F-17 21 COMPAGNIE FINANCIERE DU LEMAN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1997 (IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED) 14. INCOME TAXES - CONCLUDED A reconciliation of differences between the statutory French income tax and the Group's effective income tax follows:
BALANCE AT 12/31/97 -------- Group's net income before tax FF 18,465 ========== Statutory income tax (rate: 41.67%) (FF 7,694) Permanent differences - Tax impact: - - Goodwill depreciation (1,700) - - Non-tax deductible expenses (97) - - Impact of statutory tax rate increase (41.67% - 36.67%) (2,772) --------- GROUP'S INCOME TAX (FF12,263) =========
15. EFFECT ON PROFIT ATTRIBUTABLE TO SHAREHOLDERS OF DIFFERENCES BETWEEN FRENCH AND US GAAP
BALANCE AT 12/31/97 -------- Profit attributable to shareholders as reported under French GAAP FF2,046 US GAAP adjustments: - - Depreciation on fixed assets 13,539 - - Capital lease 622 - - Overheads allocation to inventory and impact of fixed assets depreciation on inventory (95) - - Provisions for litigation (1,214) - - Pension liability (620) - - Deferred taxation on US GAAP adjustments (8,076) ------- PROFIT ATTRIBUTABLE TO SHAREHOLDERS AS REPORTED UNDER US GAAP FF6,202 =======
16. OTHER ITEMS MISCELLANEOUS COMMITMENTS: All of the bank loans (FF87,000) are the object of guaranties by equipment collateral. Commitment to repurchase a lease contract on behalf of a subcontractor: rent remaining at 12/31/97: FF3,959 Headcount: 689 employees F-18 22 COMPAGNIE FINANCIERE DU LEMAN CONSOLIDATED BALANCE SHEET DECEMBER 31, 1996 (IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
NOTES FRENCH GAAP ADJUSTMENTS US GAAP ----- ----------- ----------- ------- Goodwill FF 53,061 FF 53,061 Other intangible fixed assets 2 1,376 FF 96 1,472 ----------- ---------- ----------- Total intangible assets, net 54,437 96 54,533 ----------- ---------- ----------- Land 2 1,550 1,550 Buildings 2 31,951 681 32,632 Industrial fixtures, equipment and tooling 2 120,169 60,425 180,594 Other tangible fixed assets 2 4,808 894 5,702 Fixed assets in-progress 2 2,857 2,857 Advances and prepayments 2 2,298 2,298 ----------- ---------- ----------- Total property, plant and equipment, net 163,633 62,000 225,633 ----------- ---------- ----------- Investments, net 2 1,441 1,441 Inventory, net 3 48,566 2,822 51,388 Accounts receivable, net 4 146,791 146,791 Deferred income taxes 14 2,114 2,821 4,935 Other receivables 5 2,806 2,806 ----------- ---------- ----------- Total current receivables, net 4,920 2,821 7,741 ----------- ---------- ----------- Deposits 6 11,347 11,347 Cash 6 609 609 ----------- ----------- Total cash and cash equivalents 11,956 11,956 ----------- ----------- Prepaid expenses 7 193 193 ----------- ---------- ----------- TOTAL ASSETS FF 431,937 FF 67,739 FF 499,676 =========== ========== =========== Common stock 8 FF 95,200 FF 95,200 Additional paid-in capital 8 13,502 13,502 Retained earnings 8 32,561 FF 37,778 70,339 Net income or loss of the tax year 8 6,279 (32) 6,247 ----------- ---------- ----------- Shareholders' equity 147,542 37,746 185,288 ----------- ---------- ----------- Minority interest 57 57 Provisions for contingencies and losses 9 17,500 5,326 22,826 Bank borrowings 10 110,991 110,991 Other financial borrowings and debts 10 8,622 8,622 ----------- ----------- Total financial debts 119,613 119,613 ----------- ----------- Trade notes and related accounts payable 11 82,388 82,388 Liabilities on fixed assets and related accounts 11 16,063 16,063 Deferred income taxes 14 594 24,667 25,261 Other liabilities 12 48,180 48,180 ----------- ---------- ----------- Total current liabilities 147,225 24,667 171,892 ----------- ---------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY FF 431,937 FF 67,739 FF 499,676 =========== ========== ===========
F-19 23 COMPAGNIE FINANCIERE DU LEMAN CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
NOTES FRENCH GAAP ADJUSTMENTS US GAAP ----- ----------- ----------- ------- Net sales 13 FF 478,634 FF 478,634 Stored production 4,218 (FF 271) 3,947 Capitalized production 1,567 1,567 Other operating income 205 205 Reversal of depreciation and accruals 511 511 ----------- ------- ----------- Operating income 485,135 (271) 484,864 Raw materials (92,256) (92,256) Inventory variation 876 876 Other purchases and expenses (125,998) (125,998) ----------- ------- ----------- Added value 267,757 (271) 267,486 Taxes and assimilated payments (13,977) (13,977) Wages and salaries (103,012) (103,012) Contractual employees' profit sharing (6,180) (6,180) Social security and contributions (39,419) (39,419) ----------- ------- ----------- Gross operating margin 105,169 (271) 104,898 Depreciation on fixed assets (88,193) 17,659 (70,534) Reserve allowance on current assets (2,562) 753 (1,809) Other expenses (522) (522) ----------- ------- ----------- Operating income 13,892 18,141 32,033 Financial expense (9,342) (9,342) ----------- ------- ----------- Current income before tax 4,550 18,141 22,691 Extraordinary income (expense) 9,365 (18,191) (8,826) Legal employees' profit sharing (1,516) (1,516) Current income tax 14 (6,878) (6,878) Deferred income taxes 14 758 18 776 ----------- ------- ----------- NET INCOME FF 6,279 (FF 32) FF 6,247 =========== ======= ===========
F-20 24 COMPAGNIE FINANCIERE DU LEMAN CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED) CASH FLOWS FROM OPERATING ACTIVITIES Net income FF 6,247 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 107,404 Change in reserve for inventory 391 Change in long-term provisions 11,196 Deferred income taxes (776) Loss on sales of property, plant and equipment 232 Increase/decrease in operating assets and liabilities: Increase in trade accounts receivable (22,779) Increase in inventories (4,822) Increase in other current assets (1,522) Decrease in prepaid expenses 293 Increase in trade accounts payable 24,210 Decrease in liabilities on fixed assets (2,566) Increase in other current liabilities 10,551 --------- NET CASH PROVIDED BY OPERATING ACTIVITIES 128,059 --------- CASH FLOWS FROM INVESTING ACTIVITIES Acquisitions of intangible assets (507) Acquisitions of property, plant and equipment (77,516) Acquisitions of investment 23 Proceeds from sales of property, plant and equipment 4,893 New loans 5,000 Reimbursements of loans (35,242) --------- NET CASH USED IN INVESTING ACTIVITIES (103,349) --------- CASH FLOWS FROM FINANCING ACTIVITIES Decrease in overdrafts and miscellaneous debts (8,799) Common stock reimbursement (6,175) --------- NET CASH USED IN FINANCING ACTIVITIES (14,974) --------- NET INCREASE IN CASH 9,736 Cash, beginning of period 2,220 --------- CASH, END OF PERIOD FF 11,956 =========
F-21 25 COMPAGNIE FINANCIERE DU LEMAN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: 1.1 Differences between French and US GAAP The accompanying financial statements have been prepared on the basis of the consolidated financial statements of Compagnie Financiere du Leman ("CFL"), prepared in accordance with French generally accepted accounting principles ("French GAAP") which differ in certain significant respects from those applicable in the United States ("US GAAP"). These differences, for which the effects of the adjustments on net profit and shareholders' equity are listed respectively in Notes 8 and 15, relate principally to the items set out below: Fixed assets - Fixed assets can be depreciated for tax purposes using the accelerated declining balance method in France. For US GAAP purposes, the straight-line method has been used and depreciation has been restated for purchased software, equipment, fixtures and fittings and others. Inventory - Finished goods and work in-progress inventory as computed by Frank & Pignard ("F&P") does not include administrative overhead (operating leases for buildings, Business Tax and computer department). For US GAAP purposes, a percentage of overhead has been allocated to inventory. Finished goods and work in-progress inventory has also been restated to include the impact of the correction of the depreciation method. Provision for contingencies and losses - Provisions recorded in French GAAP financial statements have been examined in the light of Statement of Financial Accounting Standard No. 5, "Accounting for Contingencies," and Emerging Issues Task Force Statement No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (Including Certain Costs Incurred in a Restructuring)." Adequate corrections have been made to the financial statements to comply with US GAAP on provisions for litigation and restructuring. Accruals for pension obligations are not mandatory in French GAAP. As a consequence, the company only accrued obligations for certain employees. This accrual has been increased to reflect the pension liability for all the employees. Minority interest - The impact of the adjustments between French and US GAAP has not been taken into account for the calculation of minority interest, as this would lead to an immaterial adjustment. 1.2 Management 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 disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. F-22 26 COMPAGNIE FINANCIERE DU LEMAN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED) 1.3 Consolidation The accompanying consolidated financial statements include the accounts of CFL and its majority-owned (99.9%) subsidiary, F&P. All significant intercompany transactions and balances are eliminated in consolidation. Following equity investments are not consolidated, as they are deemed not significant: - SC Thermipar, 74950, Scionzier: 50 % of the capital - Sarl Les Pilotis, 74311, Thyez: 20 % of the capital 1.4 Revenue recognition Revenue from sales of products is recognized upon shipment or delivery, depending on when title and risk of loss is transferred under the specific contractual terms of each sale, which may vary customer by customer. 1.5 Inventories Inventories are valued at the lower of manufacturing cost, which is principally comprised of raw material, labor costs, and overhead, or market (net realizable value). Cost is determined on a first-in, first-out basis for raw material (including shipping and storage costs) and by specific identification for finished goods. Appropriate consideration is given to deterioration, obsolescence and other factors in evaluating net realizable value. Inventories whose probability of being sold is very low (dead inventory) are depreciated by 100%. 1.6 Property, plant and equipment Property, plant and equipment is stated at historical cost. Depreciation of property, plant and equipment is calculated either by the straight-line ("SL") or the declining balance ("D") method over the estimated useful life of the assets concerned, as follows: Buildings.................................................................................20-25 years SL Installations...........................................................................10 years SL or D Equipment...........................................................................5-6.67 years SL or D Furniture, fixtures and fittings and others...........................................3-10 years SL or D
1.7 Intangible assets Intangible assets consist primarily of purchased software and goodwill. The basis for valuation of these assets is historical acquisition. Amortization of intangible assets is calculated by the straight-line method, as follows: Purchased software...............................................................................4 years Goodwill........................................................................................20 years
1.8 Income taxes In December 1990, CFL and F&P entered into a tax sharing agreement. This agreement has been applicable since January 1, 1991. F-23 27 COMPAGNIE FINANCIERE DU LEMAN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED) 1.8 Income taxes - Concluded The Group accounts for deferred income taxes in accordance with Statement of Financial Accounting Standard No. 109 ("SFAS 109"), "Accounting for Income Taxes." Under SFAS 109, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured by applying enacted tax rates and laws to taxable years in which such differences are expected to reverse. 1.9 Translation of foreign currencies Receivables and payables denominated in foreign currencies are translated at year-end exchange rates. The resulting unrealized exchange gains and losses are carried to the statement of income. 2. FIXED ASSETS
INCREASES - DECREASES GROSS VALUE ADDITIONS, CIP, ----------------------------------- GROSS VALUE AT AT 12/31/95 TRANSFER TRANSFERS DISPOSALS 12/31/96 ----------- -------- --------- --------- -------- Software FF 4,317 FF 507 FF 4,824 ---------- ---------- ----------- TOTAL INTANGIBLE ASSETS 4,317 507 4,824 ---------- ---------- ----------- Land 1,550 1,550 ---------- ----------- Thyez building 5,560 5,560 Building installations 12,833 948 13,781 Pochons building 9,380 9,380 Ternier building 20,186 665 20,851 Apartment building 345 345 ---------- ---------- ----------- Subtotal Buildings 48,304 1,613 49,917 ---------- ---------- ----------- Machine tools 450,137 75,427 FF 14,485 511,079 Used equipment 10,743 290 148 10,885 Plant equipment 8,200 4,411 3,590 9,021 ---------- ---------- ----------- ----------- Subtotal Machinery Equipment 469,080 80,128 18,223 530,985 ---------- ---------- ----------- ----------- Installations 11,213 800 12,013 Vehicles 1,806 764 716 1,854 Office equipment 4,790 662 500 4,952 Office furniture 1,605 61 1,666 ---------- ---------- ----------- ----------- Subtotal Miscellaneous 19,414 2,287 1,216 20,485 ---------- ---------- ----------- ----------- CIP-Machinery and Equipment 2,448 2,856 FF 2,448 2,856 CIP-Miscellaneous ---------- ---------- --------- Subtotal CIP 2,448 2,856 2,448 2,856 ---------- ---------- --------- -----------
F-24 28 COMPAGNIE FINANCIERE DU LEMAN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED) 2. FIXED ASSETS - CONTINUED
INCREASES - DECREASES GROSS VALUE ADDITIONS --------------------------------- GROSS VALUE AT AT 12/31/95 CIP, TRANSFER TRANSFERS DISPOSALS 12/31/96 ----------- ------------- --------- --------- -------- Advances for CIP FF 9,218 FF 2,298 FF 9,218 FF 2,298 ---------- ----------- -------- ----------- TOTAL FIXED ASSETS 550,014 89,182 11,666 FF19,439 608,091 ---------- ----------- -------- -------- ----------- SUBTOTAL FIXED ASSETS BEFORE INVESTMENTS 554,331 89,689 11,666 19,439 612,915 ---------- ----------- -------- -------- ----------- Equity investments 804 804 Receivables from equity investments 520 520 Other equity investments 102 4 106 Deposits and guaranties 27 11 ---------- ----------- -------- ----------- 38 TOTAL INVESTMENTS 1,464 27 1,441 ---------- ----------- -------- ----------- 4 TOTAL FIXED ASSETS FF555,795 FF 89,693 FF11,666 FF19,466 FF 614,356 ========== =========== ======== ======== =========== Software FF 2,566 FF 882 FF 3,448 ---------- ----------- ----------- TOTAL AMORTIZATION-INTANGIBLE ASSETS 2,566 882 3,448 ---------- ----------- ----------- Buildings 3,961 151 4,112 Leasehold buildings 4,390 1,506 5,896 Building installations 5,851 2,107 7,958 ---------- ----------- ----------- Subtotal Buildings 14,202 3,764 17,966 ---------- ----------- ----------- Machinery and equipment 331,477 94,116 FF14,777 410,816 ---------- ----------- -------- ----------- Installations 7,365 2,335 9,700 Vehicles 1,338 255 608 985 Office furniture and equipment 4,102 1,389 500 4,991 ---------- ----------- -------- ----------- Subtotal Miscellaneous 12,805 3,979 1,108 15,676 ----------- ------------ -------- ----------- TOTAL DEPRECIATION - FIXED ASSETS 358,484 101,859 15,885 444,458 ---------- ----------- -------- ----------- TOTAL AMORTIZATION AND DEPRECIATION FF 361,050 FF 102,741 FF15,885 FF447,906 ========== =========== ======== ===========
F-25 29 COMPAGNIE FINANCIERE DU LEMAN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED) 2. FIXED ASSETS - CONCLUDED Depreciation can be split between: Normal depreciation FF 84,112 Extraordinary depreciation on Bendix project fixed assets 18,629 ------------ FF 102,741
3. INVENTORY
BALANCE AT BALANCE AT 12/31/96 12/31/95 VARIATION VARIATION IN % -------- -------- --------- -------------- Raw materials FF 8,487 FF 8,276 FF 211 3% ----------- ----------- ----------- Total raw materials 8,487 8,276 211 3 ----------- ----------- ----------- Supplies 434 304 130 43 Packaging 520 383 137 36 Miscellaneous 1,082 685 397 58 ------------ ----------- ----------- Total other materials 2,036 1,372 664 48 ------------ ----------- ----------- Gross value - Materials 10,523 9,648 875 9 Provisions (541) (444) 97 22 ------------ ----------- ----------- NET VALUE - MATERIALS FF 9,982 FF 9,204 FF 778 8% ============ =========== =========== Work in progress (WIP) FF 29,520 FF 26,902 FF 2,618 10% Finished goods 14,596 12,997 1,599 12 ------------ ----------- ----------- Gross value - WIP & Finished goods 44,116 39,899 4,217 11 Provisions (5,532) (5,189) 343 7 ------------ ----------- ----------- NET VALUE - WIP & FINISHED GOODS FF 38,584 FF 34,710 FF3,874 11% ============ =========== =========== Total gross value FF 54,639 FF 49,547 FF 5,092 10% Provisions (6,073) (5,633) 440 8 ------------ ----------- ----------- TOTAL NET VALUE FF 48,566 FF43,914 FF 4,652 11% ============ =========== ===========
F-26 30 COMPAGNIE FINANCIERE DU LEMAN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED) 4. TRADE ACCOUNTS RECEIVABLE
BALANCE AT BALANCE AT 12/31/96 12/31/95 VARIATION VARIATION IN % -------- -------- --------- -------------- Trade accounts receivable FF 75,432 FF 66,916 FF 8,516 13% Bills receivable 71,323 56,519 14,804 26 Accrued trade accounts receivable 319 860 (541) -63 ---------- --------- -------- Total trade accounts receivable 147,074 124,295 22,779 18 Allowance for doubtful accounts (283) (283) ---------- --------- TOTAL TRADE ACCOUNTS RECEIVABLE (NET) FF 146,791 FF124,012 FF22,779 18% ========== ========= ========
5. OTHER RECEIVABLES
BALANCE AT BALANCE AT 12/31/96 12/31/95 VARIATION VARIATION IN % -------- -------- --------- -------------- TOTAL OTHER RECEIVABLES FF2,806 FF1,284 FF1,522 119% ======= ======= =======
As of December 31, 1996, other receivables mainly consist of: - Value-added tax recoverable: FF1,596 - Accrued receivables (rebates from suppliers): FF450 - Business Tax (Taxe Professionnelle) refund: FF540 6. CASH AND CASH EQUIVALENTS
BALANCE AT BALANCE AT 12/31/96 12/31/95 VARIATION VARIATION IN % -------- -------- --------- -------------- Cash FF 561 FF2,177 (FF1,616) -74% Petty cash 48 43 5 12 ----------- ------- -------- Total cash 609 2,220 (1,611) -73 Total marketable securities 11,347 11,347 ----------- ------- -------- TOTAL CASH AND CASH EQUIVALENTS FF 11,956 FF2,220 FF 9,736 439% =========== ======= ========
F-27 31 COMPAGNIE FINANCIERE DU LEMAN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED) 7. PREPAID EXPENSES
BALANCE AT BALANCE AT 12/31/96 12/31/95 VARIATION VARIATION IN % -------- -------- --------- -------------- TOTAL PREPAID EXPENSES FF193 FF486 (FF293) -60% ===== ===== ======
As of December 31, 1996, prepaid expenses consist of operating expenses (FF150) and interest charges (FF43). 8. EFFECT ON SHAREHOLDERS' EQUITY OF DIFFERENCES BETWEEN FRENCH AND US GAAP
BALANCE AT 12/31/96 -------- SHAREHOLDERS' EQUITY AS REPORTED UNDER FRENCH GAAP FF147,542 US GAAP adjustments - - Fixed asset depreciation 62,096 - - Overheads allocation to inventory and impact of fixed assets depreciation on inventory 2,822 - - Provisions for litigation 2,371 - - Pension liability (7,697) - - Deferred taxation on US GAAP adjustments (21,846) --------- SHAREHOLDERS' EQUITY AS REPORTED UNDER US GAAP FF185,288 =========
9. PROVISIONS FOR CONTINGENCIES AND LOSSES
BALANCE AT BALANCE AT 12/31/96 12/31/95 VARIATION VARIATION IN % -------- -------- --------- -------------- Provisions for miscellaneous contingencies FF 13,881 FF 872 FF13,009 Pension liability 3,619 3,108 511 16% --------- ------- -------- TOTAL PROVISION FOR CONTINGENCIES AND LOSSES FF 17,500 FF3,980 FF13,520 340% ========= ======= ========
F-28 32 COMPAGNIE FINANCIERE DU LEMAN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED) 10. FINANCIAL DEBTS - SHORT AND LONG-TERM
BALANCE AT BALANCE AT 12/31/96 12/31/95 VARIATION VARIATION IN % -------- -------- --------- -------------- Long-term portion FF 71,850 FF 101,200 (FF 29,350) -29% Short-term portion 34,350 34,685 (335) -1 ------------ ----------- ----------- BANK LOANS FF 106,200 FF 135,885 (FF 29,685) -22% ------------ ----------- ----------- ACCRUED INTEREST - SHORT-TERM FF 927 FF 1,483 (FF 556) -38% ------------ ----------- ----------- OVERDRAFTS - SHORT-TERM FF 3,865 FF 16,273 (FF 12,408) -76% ------------ ---------- ----------- Long-term portion FF 1,903 FF 3,802 (FF 1,899) -50% Short-term portion 6,719 1,211 5,508 455 ------------ ----------- ----------- MISCELLANEOUS FINANCIAL DEBTS FF 8,622 FF 5,013 FF 3,609 72% ------------ ----------- ----------- Long-term portion FF 73,753 FF 105,002 (FF 31,249) -30% Short-term portion 45,861 53,652 (7,791) -15 ------------ ----------- ----------- TOTAL FINANCIAL DEBTS FF 119,614 FF 158,654 (FF 39,040) -25% ============ =========== ===========
As of December 31, 1996, miscellaneous debts include profit sharing (FF2,678) and a special fund for employees (FF5,783). 11. ACCOUNTS PAYABLE
BALANCE AT BALANCE AT 12/31/96 12/31/95 VARIATION VARIATION IN % -------- -------- --------- -------------- Trade accounts payable FF 79,031 FF 56,056 FF 22,975 41% Accrued accounts payable 3,357 2,122 1,235 58 ------------ ----------- ----------- TOTAL TRADE ACCOUNTS PAYABLE FF 82,388 FF 58,178 FF 24,210 42% ============ =========== =========== Trade accounts payable - Bills payable FF 54,433 FF 42,590 FF 11,843 28% FIXED ASSET SUPPLIERS FF 16,063 FF 18,629 (FF 2,566) -14% Fixed asset suppliers - Bills payable FF 8,944 FF 12,702 (FF 3,758) -30%
F-29 33 COMPAGNIE FINANCIERE DU LEMAN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED) 12. OTHER PAYABLES
BALANCE AT BALANCE AT 12/31/96 12/31/95 VARIATION VARIATION IN % -------- -------- --------- -------------- Taxes payable FF 10,344 FF 2,895 FF 7,449 257% Benefits payable 9,845 8,671 1,174 14 Salaries & wages payable 23,828 21,230 2,598 12 ----------- ----------- ---------- Total taxes, benefits and salaries & wages payable 44,017 32,796 11,221 34 Miscellaneous payables 1,552 1,000 552 55 Deferred revenue - Operating 2,611 3,833 (1,222) -32 ----------- ----------- ---------- TOTAL OTHER PAYABLES FF 48,180 FF 37,629 FF 10,551 28% =========== =========== ==========
13. SALES
BALANCE AT BALANCE AT 12/31/96 12/31/95 VARIATION VARIATION IN % -------- -------- --------- -------------- France FF 380,541 FF 374,867 FF 5,674 1.5% % 79.5% 82.4% Export FF 98,093 FF 79,809 FF 18,284 22.9% % 20.5% 17.6% TOTAL FF 478,634 FF 454,676 FF 23,958 5.3%
14. INCOME TAXES Deferred income taxes reflect the impact of temporary differences between the amount of assets and liabilities reported for financial reporting purposes and such amounts as measured in accordance with tax laws. F-30 34 COMPAGNIE FINANCIERE DU LEMAN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED) 14. INCOME TAXES - CONCLUDED A reconciliation of differences between the statutory French income tax and the Group's effective income tax follows:
BALANCE AT 12/31/96 -------- Group's net income before tax FF12,349 ========= Statutory income tax (rate: 36.67%) (FF 4,526) Permanent differences - Tax impact: - - Goodwill depreciation (1,496) - - Non-tax deductible expenses (87) - - Tax on capital gains 6 - - Tax credit 1 --------- GROUP'S INCOME TAX (FF 6,102) =========
15. EFFECT ON PROFIT ATTRIBUTABLE TO SHAREHOLDERS OF DIFFERENCES BETWEEN FRENCH AND US GAAP
BALANCE AT 12/31/96 -------- Profit attributable to shareholders as reported under French GAAP FF 6,279 US GAAP adjustments: - - Depreciation on fixed assets (2,153) - - Overheads allocation to inventory and impact of fixed assets depreciation on inventory (221) - - Provisions for litigation 3,003 - - Pension liability (679) - - Deferred taxation on US GAAP adjustments 18 -------- PROFIT ATTRIBUTABLE TO SHAREHOLDERS AS REPORTED UNDER US GAAP FF 6,247 ========
16. OTHER ITEMS MISCELLANEOUS COMMITMENTS: All of the bank loans (FF106,000) are the object of guaranties by equipment collateral. Commitment to repurchase a lease contract on behalf of a subcontractor: rent remaining at 12/31/96: FF5,479 Headcount: 676 employees F-31 35 COMPAGNIE FINANCIERE DU LEMAN CONSOLIDATED BALANCE SHEET DECEMBER 31, 1995 (IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
NOTES FRENCH GAAP ADJUSTMENTS US GAAP ----- ----------- ----------- ------- Goodwill FF 57,143 FF 57,143 Other intangible fixed assets 2 1,751 FF 96 1,847 ----------- ---------- ----------- Total intangible assets, net 58,894 96 58,990 ----------- ---------- ----------- Land 2 1,550 1,550 Buildings 2 34,102 747 34,849 Industrial fixtures, equipment and tooling 2 137,603 62,719 200,322 Other tangible fixed assets 2 6,609 686 7,295 Fixed assets in-progress 2 2,448 2,448 Advances and prepayments 2 9,218 9,218 ----------- ---------- ----------- Total property, plant and equipment, net 191,530 64,152 255,682 ----------- ---------- ----------- Investments, net 2 1,464 1,464 Inventory, net 3 43,914 3,043 46,957 Accounts receivable, net 4 124,012 124,012 Deferred income taxes 14 1,442 2,829 4,271 Other receivables 5 1,284 1,284 ----------- ---------- ----------- Total current receivables, net 2,726 2,829 5,555 ----------- ---------- ----------- Deposits Cash 6 2,220 2,220 ----------- ----------- Total cash and cash equivalents 2,220 2,220 ----------- ----------- Prepaid expenses 7 486 486 ----------- ---------- ----------- TOTAL ASSETS FF 425,246 FF 70,120 FF 495,366 =========== ========== =========== Common stock 8 FF 97,700 FF 97,700 Additional paid-in capital 8 13,502 13,502 Retained earnings 8 37,656 FF 33,559 71,215 Net income or loss of the tax year 8 (1,420) 4,218 2,798 ----------- ---------- ----------- Shareholders' equity 147,438 37,777 185,215 ----------- ---------- ----------- Minority interest 57 57 Provisions for contingencies and losses 9 3,980 7,650 11,630 Bank borrowings 10 153,642 153,642 Other financial borrowings and debts 10 5,013 5,013 ----------- ----------- Total financial debts 158,655 158,655 ----------- ----------- Trade notes and related accounts payable 11 58,178 58,178 Liabilities on fixed assets and related accounts 11 18,629 18,629 Deferred income taxes 14 680 24,693 25,373 Other liabilities 12 37,629 37,629 ----------- ---------- ----------- Total current liabilities 115,116 24,693 139,809 ----------- ---------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY FF 425,246 FF 70,120 FF 495,366 =========== ========== ===========
F-32 36 COMPAGNIE FINANCIERE DU LEMAN CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1995 (IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
NOTES FRENCH GAAP ADJUSTMENTS US GAAP ----- ----------- ----------- ------- Net sales 13 FF 454,676 FF 454,676 Stored production 7,940 (FF 409) 7,531 Capitalized production 403 403 Other operating income 316 316 Reversal of depreciation and accruals 898 898 ----------- ---------- ----------- Operating income 464,233 (409) 463,824 Raw materials (88,689) (88,689) Inventory variation 556 556 Other purchases and expenses (127,607) (127,607) ----------- ---------- ----------- Added value 248,493 (409) 248,084 Taxes and assimilated payments (12,805) (12,805) Wages and salaries (95,375) (95,375) Contractual employees' profit sharing (4,754) (4,754) Social security and contributions (37,501) (37,501) ----------- ---------- ----------- Gross operating margin 98,058 (409) 97,649 Depreciation on fixed assets (86,127) 11,795 (74,332) Reserve allowance on current assets (3,588) (1,163) (4,751) Other expenses (514) (514) ----------- ---------- ----------- Operating income 7,829 10,223 18,052 Financial expense (9,114) (9,114) ----------- ---------- ----------- Current income (loss) before tax (1,285) 10,223 8,938 Extraordinary income 1,404 (918) 486 Legal employees' profit sharing Current income tax 14 (1,535) (1,535) Deferred income taxes 14 (4) (5,087) (5,091) ----------- ---------- ----------- NET INCOME (LOSS) (FF 1,420) FF 4,218 FF 2,798 =========== ========== ===========
F-33 37 COMPAGNIE FINANCIERE DU LEMAN CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1995 (IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED) CASH FLOWS FROM OPERATING ACTIVITIES Net income FF2,798 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 74,332 Change in reserve for inventory 2,720 Change in long-term provisions 619 Deferred income taxes 5,090 Loss on sales of property, plant and equipment 482 Increase/decrease in operating assets and liabilities: Decrease in trade accounts receivable 5,977 Increase in inventories (8,087) Increase in other current assets (209) Increase in prepaid expenses (180) Decrease in trade accounts payable (20,113) Decrease in liabilities on fixed assets (8,305) Increase in other current liabilities 4,069 -------- NET CASH PROVIDED BY OPERATING ACTIVITIES 59,193 -------- CASH FLOWS FROM INVESTING ACTIVITIES Acquisitions of intangible assets (1,145) Acquisitions of property, plant and equipment (106,231) Acquisitions of investment (497) Proceeds from sales of property, plant and equipment 503 New loans 74,204 Reimbursements of loans (31,843) -------- NET CASH USED IN INVESTING ACTIVITIES (65,009) -------- CASH FLOWS FROM FINANCING ACTIVITIES Increase in overdrafts and miscellaneous debts 2,924 Dividends paid (10) -------- NET CASH PROVIDED BY FINANCING ACTIVITIES 2,914 -------- NET DECREASE IN CASH (2,902) Cash, beginning of period 5,122 CASH, END OF PERIOD FF 2,220 ========
F-34 38 COMPAGNIE FINANCIERE DU LEMAN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1995 (IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: 1.1 Differences between French and US GAAP The accompanying financial statements have been prepared on the basis of the consolidated financial statements of Compagnie Financiere du Leman ("CFL"), prepared in accordance with French generally accepted accounting principles ("French GAAP") which differ in certain significant respects from those applicable in the United States ("US GAAP"). These differences, for which the effects of the adjustments on net profit and shareholders' equity are listed respectively in Notes 8 and 15, relate principally to the items set out below: Fixed assets - Fixed assets can be depreciated for tax purposes using the accelerated declining balance method in France. For US GAAP purposes, the straight-line method has been used and depreciation has been restated for purchased software, equipment, fixtures and fittings and others. Inventory - Finished goods and work in-progress inventory as computed by Frank & Pignard ("F&P") does not include administrative overhead (operating leases for buildings, Business Tax and computer department). For US GAAP purposes, a percentage of overhead has been allocated to inventory. Finished goods and work in-progress inventory has also been restated to include the impact of the correction of the depreciation method. Provision for contingencies and losses - Provisions recorded in French GAAP financial statements have been examined in the light of Statement of Financial Accounting Standard No. 5, "Accounting for Contingencies," and Emerging Issues Task Force Statement No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (Including Certain Costs Incurred in a Restructuring)." Adequate corrections have been made to the financial statements to comply with US GAAP on provisions for litigation and restructuring. Accruals for pension obligations are not mandatory in French GAAP. As a consequence, the company only accrued obligations for certain employees. This accrual has been increased to reflect the pension liability for all the employees. Minority interest - The impact of the adjustments between French and US GAAP has not been taken into account for the calculation of minority interest, as this would lead to an immaterial adjustment. 1.2 Management 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 disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 1.3 Consolidation The accompanying consolidated financial statements include the accounts of CFL and its majority-owned (99.9%) subsidiary, F&P. All significant intercompany transactions and balances are eliminated in consolidation. F-35 39 COMPAGNIE FINANCIERE DU LEMAN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1995 (IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED) 1.3 Consolidation - Concluded Following equity investments are not consolidated, as they are deemed not significant: - SC Thermipar, 74950, Scionzier: 50% of the capital - Sarl Les Pilotis, 74311, Thyez: 20% of the capital 1.4 Revenue recognition Revenue from sales of products is recognized upon shipment of delivery, depending on when title and risk of loss is transferred under the specific contractual terms of each sale, which may vary customer by customer. 1.5 Inventories Inventories are valued at the lower of manufacturing cost, which is principally comprised of raw material, labor costs, and overhead, or market (net realizable value). Cost is determined on a first-in, first-out basis for raw material (including shipping and storage costs) and by specific identification for finished goods. Appropriate consideration is given to deterioration, obsolescence and other factors in evaluating net realizable value. Inventories whose probability of being sold is very low (dead inventory) are depreciated by 100%. 1.6 Property, plant and equipment Property, plant and equipment is stated at historical cost. Depreciation of property, plant and equipment is calculated either by the straight-line ("SL") or the declining balance ("D") method over the estimated useful life of the assets concerned, as follows: Buildings.................................................................................20-25 years SL Installations...........................................................................10 years SL or D Equipment...........................................................................5-6.67 years SL or D Furniture, fixtures and fittings and others...........................................3-10 years SL or D
1.7 Intangible assets Intangible assets consist primarily of purchased software and goodwill. The basis for valuation of these assets is historical acquisition. Amortization of intangible assets is calculated by the straight-line method, as follows: Purchased software...............................................................................4 years Goodwill........................................................................................20 years
1.8 Income taxes In December 1990, CFL and F&P entered into a tax sharing agreement. This agreement has been applicable since January 1, 1991. F-36 40 COMPAGNIE FINANCIERE DU LEMAN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1995 (IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED) 1.8 Income taxes - Concluded The Group accounts for deferred income taxes in accordance with Statement of Financial Accounting Standard No. 109 ("SFAS 109"), "Accounting for Income Taxes." Under SFAS 109, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured by applying enacted tax rates and laws to taxable years in which such differences are expected to reverse. 1.9 Translation of foreign currencies Receivables and payables denominated in foreign currencies are translated at year-end exchange rates. The resulting unrealized exchange gains and losses are carried to the statement of income. 2. FIXED ASSETS
INCREASES - DECREASES GROSS VALUE ADDITIONS, CIP, ----------------------------------- GROSS VALUE AT AT 12/31/94 TRANSFER TRANSFERS DISPOSALS 12/31/95 ----------- -------- --------- --------- -------- Software FF 4,179 FF 1,145 FF 1,007 FF 4,317 ---------- -------- --------- ---------- TOTAL INTANGIBLE ASSETS 4,179 1,145 1,007 4,317 ---------- -------- --------- ---------- Land 1,550 1,550 ---------- ---------- Thyez building 5,560 5,560 Building installations 9,034 3,799 12,833 Pochons building 9,380 9,380 Ternier building 8,616 11,570 20,186 Apartment building 345 345 ---------- --------- ---------- Subtotal Buildings 32,935 15,369 48,304 ---------- --------- ---------- Machine tools 378,178 74,734 2,775 450,137 Used equipment 8,101 2,770 128 10,743 Plant equipment 5,248 4,312 1,360 8,200 ---------- --------- --------- ---------- Subtotal Machinery Equipment 391,527 81,816 4,263 469,080 ---------- --------- --------- ---------- Installations 9,945 1,268 11,213 Vehicles 1,754 186 134 1,806 Office equipment 3,593 1,197 4,790 Office furniture 1,343 390 128 1,605 ---------- --------- --------- ---------- Subtotal Miscellaneous 16,635 3,041 262 19,414 ---------- --------- --------- ---------- CIP-Machinery and Equipment 1,549 2,448 FF 1,549 2,448 CIP-Miscellaneous ---------- --------- -------- Subtotal CIP 1,549 2,448 1,549 2,448 ---------- --------- -------- ----------
F-37 41 COMPAGNIE FINANCIERE DU LEMAN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1995 (IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED) 2. FIXED ASSETS - CONCLUDED
INCREASES - DECREASES GROSS VALUE ADDITIONS, --------------------------------- GROSS VALUE AT AT 12/31/94 CIP, TRANSFER TRANSFERS DISPOSALS 12/31/95 ----------- ------------- --------- --------- -------- Advances for CIP FF 4,112 FF 9,218 FF 4,112 FF 9,218 ----------- ----------- --------- --------- TOTAL FIXED ASSETS 448,308 111,892 5,661 FF 4,525 550,014 ----------- ----------- --------- --------- --------- SUBTOTAL FIXED ASSETS BEFORE INVESTMENTS 452,487 113,037 5,661 5,532 554,331 ----------- ----------- --------- --------- --------- TOTAL FIXED ASSETS FF 453,454 FF 113,801 FF 5,923 FF 5,537 FF555,795 =========== =========== ========= ========= ========= Software FF 2,622 FF 951 FF 1,007 FF 2,566 ----------- ----------- --------- --------- TOTAL AMORTIZATION- INTANGIBLE ASSETS 2,622 951 1,007 2,566 ----------- ----------- --------- --------- Buildings 3,810 151 3,961 Leasehold buildings 3,234 1,156 4,390 Building installations 4,949 902 5,851 ----------- ----------- --------- Subtotal Buildings 11,993 2,209 14,202 ----------- ----------- --------- Machinery and equipment 259,814 75,920 4,257 331,477 ----------- ----------- --------- --------- Installations 5,720 1,645 7,365 Vehicles 1,222 206 90 1,338 Office furniture and equipment 3,103 1,112 113 4,102 ----------- ----------- --------- --------- Subtotal Miscellaneous 10,045 2,963 203 12,805 ----------- ----------- --------- --------- TOTAL DEPRECIATION - FIXED ASSETS 281,852 81,092 4,460 358,484 ----------- ----------- --------- --------- TOTAL AMORTIZATION AND DEPRECIATION FF 284,474 FF 82,043 FF 5,467 FF361,050 =========== =========== ========= =========
F-38 42 COMPAGNIE FINANCIERE DU LEMAN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1995 (IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED) 3. INVENTORY
BALANCE AT BALANCE AT 12/31/95 12/31/94 VARIATION VARIATION IN % -------- -------- --------- -------------- Raw materials FF 8,276 FF 8,246 FF 30 ----------- ----------- ---------- Total raw materials 8,276 8,246 30 ----------- ----------- ---------- Supplies 304 224 80 36% Packaging 383 155 228 147 Miscellaneous 685 973 (288) -30 ----------- ----------- ---------- Total other materials 1,372 1,352 20 1 ----------- ----------- ---------- Gross value - Materials 9,648 9,598 50 1 Provisions (444) (290) 154 53 ----------- ----------- ---------- NET VALUE - MATERIALS FF 9,204 FF 9,308 (FF 104) -1% =========== =========== ========== Work in progress (WIP) FF 26,902 FF 24,070 FF 2,832 12% Finished goods 12,997 6,962 6,035 87 ----------- ----------- ---------- Subtotal THYEZ 39,899 31,032 8,867 29 Work in progress (WIP) 228 (228) -100 Finished goods 193 (193) -100 ----------- ---------- Subtotal CLUSES 421 (421) -100 Work in progress (WIP) 26,902 24,298 2,604 11 Finished goods 12,997 7,155 5,842 82 ----------- ----------- ---------- Gross value - WIP & Finished goods 39,899 31,453 8,446 27 Provisions (5,189) (2,737) 2,452 90 ----------- ----------- ---------- NET VALUE - WIP & FINISHED GOODS FF 34,710 FF 28,716 FF 5,994 21% =========== =========== ========== Total gross value FF 49,547 FF 41,051 FF 8,496 21% Provisions (5,633) (3,027) 2,606 86 ----------- ----------- ---------- TOTAL NET VALUE FF 43,914 FF 38,024 FF 5,890 15% =========== =========== ==========
F-39 43 COMPAGNIE FINANCIERE DU LEMAN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1995 (IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED) 4. TRADE ACCOUNTS RECEIVABLE
BALANCE AT BALANCE AT 12/31/95 12/31/94 VARIATION VARIATION IN % -------- -------- --------- -------------- Trade accounts receivable FF 66,916 FF 71,736 (FF4,820) -7% Bills receivable 56,519 57,716 (1,197) -2 Accrued trade accounts receivable 860 820 40 5 --------- --------- -------- Total trade accounts receivable 124,295 130,272 (5,977) -5 Allowance for doubtful accounts (283) (283) --------- --------- -------- TOTAL TRADE ACCOUNTS RECEIVABLE (NET) FF124,012 FF129,989 (FF5,977) -5% ========= ========= ========
5. OTHER RECEIVABLES
BALANCE AT BALANCE AT 12/31/95 12/31/94 VARIATION VARIATION IN % -------- -------- --------- -------------- TOTAL OTHER RECEIVABLES FF1,284 FF1,075 FF209 20% ======= ======= =====
As of December 31, 1995, other receivables mainly consist of: - Value-added tax recoverable: FF720 - Accrued receivables (rebates from suppliers): FF423 6. CASH AND CASH EQUIVALENTS
BALANCE AT BALANCE AT 12/31/95 12/31/94 VARIATION VARIATION IN % -------- -------- --------- -------------- Cash FF2,177 FF2,596 (FF 419) -16% Petty cash 43 47 (4) -8 ------- ------- -------- Total cash 2,220 2,643 (423) -16 Total marketable securities 2,479 (2,479) -100 ------- ------- -------- TOTAL CASH AND CASH EQUIVALENTS FF2,220 FF5,122 (FF2,902) -57% ======= ======= ========
F-40 44 COMPAGNIE FINANCIERE DU LEMAN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1995 (IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED) 7. PREPAID EXPENSES
BALANCE AT BALANCE AT 12/31/95 12/31/94 VARIATION VARIATION IN % -------- -------- --------- -------------- TOTAL PREPAID EXPENSES FF486 FF306 FF180 59% ===== ===== =====
As of December 31, 1995, prepaid expenses consist of operating expenses (FF373) and interest charges (FF113). 8. EFFECT ON SHAREHOLDERS' EQUITY OF DIFFERENCES BETWEEN FRENCH AND US GAAP
BALANCE AT 12/31/95 -------- SHAREHOLDERS' EQUITY AS REPORTED UNDER FRENCH GAAP FF147,438 US GAAP adjustments - - Fixed asset depreciation 64,248 - - Overheads allocation to inventory and impact of fixed assets depreciation on inventory 3,043 - - Provisions for litigation (632) - - Pension liability (7,018) - - Deferred taxation on US GAAP adjustments (21,864) --------- SHAREHOLDERS' EQUITY AS REPORTED UNDER US GAAP FF185,215 =========
9. PROVISIONS FOR CONTINGENCIES AND LOSSES
BALANCE AT BALANCE AT 12/31/95 12/31/94 VARIATION VARIATION IN % -------- -------- --------- -------------- Provisions for miscellaneous contingencies FF 872 FF1,481 (FF609) -41% Pension liability 3,108 2,929 179 6 ------- ------- ------ TOTAL PROVISION FOR CONTINGENCIES AND LOSSES FF3,980 FF4,410 (FF430) -10% ======= ======= ======
F-41 45 COMPAGNIE FINANCIERE DU LEMAN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1995 (IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED) 10. FINANCIAL DEBTS - SHORT AND LONG-TERM
BALANCE AT BALANCE AT 12/31/95 12/31/94 VARIATION VARIATION IN % -------- -------- --------- -------------- Long-term portion FF101,200 FF 67,385 FF 33,815 50% Short-term portion 34,685 26,842 7,843 29 --------- ------------ ---------- BANK LOANS FF135,885 FF 94,227 FF 41,658 44% --------- ------------ ---------- ACCRUED INTEREST - SHORT-TERM FF 1,483 FF 779 FF 704 90% --------- ------------ ---------- OVERDRAFTS - SHORT-TERM FF 16,273 FF 12,036 FF 4,237 35% --------- ------------ ---------- Long-term portion FF 3,802 FF 5,096 (FF 1,294) -25% Short-term portion 1,211 1,230 (19) -1 --------- ------------ ---------- MISCELLANEOUS FINANCIAL DEBTS FF 5,013 FF 6,326 (FF 1,313) -21% --------- ------------ ---------- Long-term portion FF105,002 FF 72,481 FF 32,521 45% Short-term portion 53,652 40,887 12,765 31 --------- ------------ ---------- TOTAL FINANCIAL DEBTS FF158,654 FF 113,368 FF 45,286 40% ========= ============ ==========
As of December 31, 1995, miscellaneous financial debts mainly consist of profit sharing (FF4,811). 11. ACCOUNTS PAYABLE
BALANCE AT BALANCE AT 12/31/95 12/31/94 VARIATION VARIATION IN % -------- -------- --------- -------------- Trade accounts payable FF 56,056 FF 76,156 (FF 20,100) -26% Accrued accounts payable 2,122 2,135 (13) -1 --------- ------------ ---------- TOTAL TRADE ACCOUNTS PAYABLE FF 58,178 FF 78,291 (FF 20,113) -26% Trade accounts payable - Bills payable FF 42,590 FIXED ASSET SUPPLIERS FF 18,629 FF 26,934 (FF 8,305) -31% ========= ============ ========== Fixed asset suppliers - Bills payable FF 12,702
F-42 46 COMPAGNIE FINANCIERE DU LEMAN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1995 (IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED) 12. OTHER PAYABLES
BALANCE AT BALANCE AT 12/31/95 12/31/94 VARIATION VARIATION IN % -------- -------- --------- -------------- Taxes payable FF 2,895 FF 1,407 FF 1,488 106% Benefits payable 8,671 7,581 1,090 14 Salaries & wages payable 21,230 18,996 2,234 12 -------- -------- -------- Total taxes, benefits and salaries & wages payable 32,796 27,984 4,812 17 Miscellaneous payables 1,000 754 246 33 Deferred revenue - Operating 3,833 4,821 (988) -20 -------- -------- -------- TOTAL OTHER PAYABLES FF37,629 FF33,559 FF 4,070 12% ======== ======== ========
13. SALES
BALANCE AT BALANCE AT 12/31/95 12/31/94 VARIATION VARIATION IN % -------- -------- --------- -------------- France FF 374,867 FF 300,197 FF74,670 24.9% % 82.4% 80.6% Export FF 79,809 FF 72,209 FF 7,600 10.5% % 17.6% 19.4% TOTAL FF454,676 FF372,406 FF82,270 22.1%
14. INCOME TAXES Deferred income taxes reflect the impact of temporary differences between the amount of assets and liabilities reported for financial reporting purposes and such amounts as measured in accordance with tax laws. F-43 47 COMPAGNIE FINANCIERE DU LEMAN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1995 (IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED) 14. INCOME TAXES - CONCLUDED A reconciliation of differences between the statutory French income tax and the Group's effective income tax follows:
BALANCE AT 12/31/95 -------- Group's net income before tax FF 9,424 ========= Statutory income tax (rate: 36.67%) (FF 3,455) Permanent differences - Tax impact: - - Goodwill depreciation (1,496) - - Non-tax deductible expenses (87) - - Tax on capital gains 3 - - Tax credit 9 - - Impact of statutory tax rate increase (36.67% - 33.33%) (1,600) --------- GROUP'S INCOME TAX (FF 6,626) =========
15. EFFECT ON PROFIT (LOSS) ATTRIBUTABLE TO SHAREHOLDERS OF DIFFERENCES BETWEEN FRENCH AND US GAAP
BALANCE AT 12/31/95 -------- Loss attributable to shareholders as reported under French GAAP (FF 1,420) US GAAP adjustments: - - Depreciation on fixed assets 10,877 - - Overheads allocation to inventory and impact of fixed assets depreciation on inventory (523) - - Provisions for litigation (700) - - Pension liability (349) - - Deferred taxation on US GAAP adjustments (5,087) --------- PROFIT ATTRIBUTABLE TO SHAREHOLDERS AS REPORTED UNDER US GAAP FF 2,798 =========
16. OTHER ITEMS MISCELLANEOUS COMMITMENTS: All of the bank loans (FF136,000) are the object of guaranties by equipment collateral. Commitment to repurchase a lease contract on behalf of a subcontractor: rent remaining at 12/31/95: FF2,741 Headcount: 663 employees F-44 48 AUTOCAM CORPORATION PRO FORMA COMBINING FINANCIAL INFORMATION Effective October 1, 1998, Autocam Corporation (the "Company"), through its wholly-owned subsidiary, Autocam France SARL, a French limited liability company, acquired the rights to all the outstanding common shares of Compagnie Financiere du Leman SA ("CFL"), a French holding corporation, which owns all of the equity interest of Frank & Pignard SA, a French corporation ("F&P") for 300 million French Francs ("FF"). The associated Stock Purchase Agreement, dated October 1, 1998, is incorporated by reference to Exhibit 2.1 of the Company's Form 8-K, filed October 14, 1998. The following unaudited pro forma combining balance sheet as of September 30, 1998 is based upon the historical consolidated financial statements of the Company and the consolidated financial statements of CFL as of that date, after giving effect to the acquisition as if such transaction had occurred on September 30, 1998. The following unaudited pro forma combining statements of operations for the three months ended September 30, 1998 and for the year ended June 30, 1998 are based upon the historical consolidated financial statements of the Company and consolidated financial statements of CFL for those periods, after giving effect to the acquisition as if such transaction had occurred on July 1, 1997. The pro forma combining financial statements may not be indicative of the results that actually would have been attained if the acquisition had occurred on the dates indicated or which may be attained in the future. The pro forma combining adjustments are described in the accompanying notes to the pro forma combining financial statements. The pro forma combining financial statements should be read in conjunction with the notes thereto and the consolidated financial statements of the Company included in its Annual Report on Form 10-K for the year ended June 30, 1998 and Quarterly Report on Form 10-Q for the three months ended September 30, 1998, and the consolidated financial statements of CFL presented elsewhere in this Amendment to Current Report on Form 8-K. F-45 49 AUTOCAM CORPORATION UNAUDITED PRO FORMA COMBINING BALANCE SHEET SEPTEMBER 30, 1998 (IN THOUSANDS OF U.S. DOLLARS)
THE COMPANY PRO FORMA PRO FORMA (1) CFL (2) ADJUSTMENTS (3) COMBINED --- ------- --------------- -------- ASSETS Current assets: Cash and equivalents $ 1,334 $ 1,230 $ 2,564 Accounts receivable, net 12,912 30,708 43,620 Inventories, net 6,876 9,093 15,969 Prepaid expenses and other current assets 1,517 1,079 2,596 -------- -------- Total current assets 22,639 42,110 64,749 Property, plant and equipment, net 66,789 43,201 $ 23,187 133,177 Restricted cash and equivalents 4,240 4,240 Goodwill and other intangible assets, net 13,894 8,522 9,941 32,357 Other long-term assets 9,807 797 (234) 10,370 -------- -------- -------- -------- TOTAL ASSETS $117,369 $ 94,630 $ 32,894 $244,893 ======== ======== ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current maturities of long-term obligations $ 894 $ 894 Accounts payable 7,402 $ 18,999 26,401 Accrued liabilities 3,570 8,702 $ 2,608 14,880 -------- -------- -------- -------- Total current liabilities 11,866 27,701 2,608 42,175 Long-term obligations, net of current maturities 46,752 24,347 54,299 125,398 Deferred taxes 10,799 4,701 9,506 25,006 Deferred credits and other 507 4,352 4,859 Minority interest 2,520 10 2,530 Shareholders' equity 44,925 33,519 (33,519) 44,925 -------- -------- -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $117,369 $ 94,630 $ 32,894 $244,893 ======== ======== ======== ========
See notes to unaudited pro forma combining financial statements. F-46 50 AUTOCAM CORPORATION UNAUDITED PRO FORMA COMBINING STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 (IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
THE COMPANY PRO FORMA PRO FORMA (1) CFL (2) ADJUSTMENTS NOTES COMBINED --- ------- ----------- ----- -------- Sales $ 24,020 $19,691 $ 43,711 Cost of sales 20,579 18,669 ($2,254) (4) 36,994 -------- -------- ------- -------- Gross profit 3,441 1,022 2,254 6,717 Selling, general and administrative 1,742 1,694 3,436 Other operating expenses 52 52 -------- -------- ------- -------- Income (loss) from operations 1,647 (672) 2,254 3,229 Interest and other expense, net 790 278 944 (5) 2,012 Minority interest in net income 153 153 -------- -------- ------- -------- Income (loss) before tax provision (benefit) 704 (950) 1,310 1,064 Tax provision (benefit) 526 (334) 537 (6) 729 -------- -------- ------- -------- NET INCOME (LOSS) $ 178 ($ 616) $ 773 $ 335 ======== ======== ======= ======== BASIC NET INCOME PER SHARE (7) $ 0.05 DILUTED NET INCOME PER SHARE (7) $ 0.05 Basic weighted average shares outstanding (7) 6,410 Diluted weighted average shares outstanding (7) 6,611
See notes to unaudited pro forma combining financial statements. F-47 51 AUTOCAM CORPORATION UNAUDITED PRO FORMA COMBINING STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1998 (IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
THE PRO FORMA PRO FORMA COMPANY (1) CFL (2) ADJUSTMENTS NOTES COMBINED ----------- ------- ----------- ----- -------- Sales $ 90,361 $ 81,734 $ 172,095 Cost of sales 69,436 70,415 ($8,174) (4) 131,677 -------- -------- ------- --------- Gross profit 20,925 11,319 8,174 40,418 Selling, general and administrative 5,879 5,817 11,696 Other operating expenses 207 207 -------- -------- ------- --------- Income from operations 14,839 5,502 8,174 28,515 Interest and other expense, net 2,719 1,558 3,622 (5) 7,899 Minority interest in net income 166 166 -------- -------- ------- --------- Income before tax provision 11,954 3,944 4,552 20,450 Tax provision 4,213 2,538 1,866 (6) 8,617 -------- -------- ------- --------- NET INCOME $ 7,741 $ 1,406 $2,686 $ 11,833 ======== ======== ======= ========= BASIC NET INCOME PER SHARE (7) $ 1.87 DILUTED NET INCOME PER SHARE (7) $ 1.80 Basic weighted average shares outstanding (7) 6,342 Diluted weighted average shares outstanding (7) 6,558
See notes to unaudited pro forma combining financial statements. F-48 52 AUTOCAM CORPORATION NOTES TO UNAUDITED PRO FORMA COMBINING FINANCIAL INFORMATION FOR THE THREE MONTHS AND YEAR ENDED SEPTEMBER 30 AND JUNE 30, 1998, RESPECTIVELY 1. Historical Balance Sheet as of September 30, 1998 and the historical Statements of Operations for the three months ended September 30, 1998 and the year ended June 30, 1998 of the Company. 2. Historical Balance Sheet as of September 30, 1998 and the historical Statements of Operations for the three months ended September 30, 1998 and the year ended June 30, 1998 of CFL. 3. Represents the unaudited pro forma combining balance sheet adjustments required to account for the acquisition as a purchase, including the following: - To eliminate certain property, plant and equipment not purchased. - To adjust equipment acquired to its estimated fair market value. - To record goodwill as the excess of the acquisition cost over the fair value of the net assets acquired. - To record a tax liability assumed related to the spin-off of real estate not purchased by the Company. - To record financing transactions related to the acquisition. Financing included a FF281 million five-year term note and FF19 million borrowed against the Company's revolving credit note, both of which are classified as long-term obligations. - To record $2,000,000 representing various acquisition costs (e.g., professional services and investment banking fees). - To record the deferred tax liability assumed. - To adjust the pension liability to its present value. - To eliminate CFL's historical shareholders' equity. 4. Represents the unaudited pro forma combining statements of operations adjustments required to account for the acquisition as a purchase, including the following: - To adjust depreciation expense reflecting the differences in the fair market value of the property, plant and equipment purchased and CFL's depreciable base of such assets. o To record goodwill amortization related to this acquisition and to amortize such over forty years on a straight-line basis. 5. Represents interest expense associated with the financing of the acquisition. 6. To adjust the tax provision for the effects of the pro forma adjustments. 7. All share and per share amounts have been adjusted to reflect a 5% share dividend issued on November 16, 1998 to shareholders of record on November 2, 1998. F-49 53 Exhibit Index -------------
Exhibit No. Description - ----------- ----------- 23 Consent of PricewaterhouseCoopers
EX-23 2 CONSENT OF PRICEWATERHOUSECOOPERS 1 EXHIBIT 23 ========== [PricewaterhouseCoopers Letterhead] INDEPENDENT AUDITOR'S CONSENT AUTOCAM CORPORATION Grand Rapids, Michigan We consent to the incorporation of our report, dated December 8, 1998, relating to our audit of the consolidated financial statements of Compagnie Financiere du Leman for the years ended December 31, 1997, 1996 and 1995 on Form 8-K for Autocam. Lyons, France Fiduciaire Continentale Lyon December 14, 1998 Member of PricewaterhouseCoopers /s/ Vidal Martin Partner E-1 -----END PRIVACY-ENHANCED MESSAGE-----