-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, bFRyuhhZ/+SKt58olfBEeVRwjsJar7EnTsHXplTl0vip8Y9qNjA90DwtMN8DZOYq KelduRifG/M6uqlTOtVUqg== 0000950124-94-000132.txt : 19940114 0000950124-94-000132.hdr.sgml : 19940114 ACCESSION NUMBER: 0000950124-94-000132 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19931002 FILED AS OF DATE: 19940113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LEAR HOLDINGS CORPORATION CENTRAL INDEX KEY: 0000887462 STANDARD INDUSTRIAL CLASSIFICATION: 2531 IRS NUMBER: 133479398 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 34 SEC FILE NUMBER: 033-47867-01 FILM NUMBER: 94501414 BUSINESS ADDRESS: STREET 1: 21557 TELEGRAPH RD CITY: SOUTHFIELD STATE: MI ZIP: 48034 BUSINESS PHONE: 3137461500 MAIL ADDRESS: STREET 1: 21557 TELEGRAPH ROAD CITY: SOUTHFIELD STATE: MI ZIP: 48034 10-Q/A 1 10-Q/A 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q/A2 (Mark One) [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended OCTOBER 2, 1993 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission file number: 33-47867 LEAR HOLDINGS CORPORATION (Exact name of registrant as specified in its charter) Delaware 13-3479398 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 21557 Telegraph Road, Southfield, MI 48034 (Address of principal executive offices) (zip code) Registrant's telephone number, including area code: (313) 746-1500 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Number of shares of common stock outstanding at October 30, 1993: 1,075,758, par value $.01 per share. 2 LEAR HOLDINGS CORPORATION AMENDMENT NO. 2 The undersigned registrant hereby amends the following items, financial statements, exhibits or other portions of reports pursuant to the undertaking described in Part II, Item 5 of the Company's Quarterly Report for the period ended October 2, 1993 as set forth in the pages attached hereto: Item 5 -- Financial Statements and Exhibits (a) Financial Statements of Business Acquired 1. Report of Independent Public Accountants 2. Balance Sheets -- September 30, 1993 and December 31, 1992 3. Statements of Income for the nine months ended September 30, 1993 and the years ended December 31, 1992 and 1991 4. Statements of Cash Flows for the nine months ended September 30, 1993 and the years ended December 31, 1992 and 1991 5. Notes to the Financial Statements (b) Pro Forma Financial Information 1. Description of Pro Forma Financial Data 2. Pro Forma Statements of Operations for the three months ended October 2, 1993 and the year ended June 30, 1993 together with the notes thereto 3. Pro Forma Balance Sheet as of October 2, 1993 together with the notes thereto 1 3 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Ford Motor Company: We have audited the balance sheet of The North American Business (an operating component of Ford Motor Company, as described in Note 1 to the financial statements) at September 30, 1993 and December 31, 1992, and the related statements of income and cash flows for the nine months ended September 30, 1993 and the years ended December 31, 1992 and 1991. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from 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 financial statements referred to above present fairly, in all material respects, the financial position of The North American Business (an operating component of Ford Motor Company, as described in Note 1 to the financial statements) at September 30, 1993 and December 31, 1992, and the results of its operations and its cash flows for the nine months ended September 30, 1993 and the years ended December 31, 1992 and 1991, in conformity with generally accepted accounting principles. As discussed in Note 5 to the financial statements, the company changed its method of accounting for postretirement benefits other than pensions in 1992. As discussed in Notes 1 and 11 to the financial statements, Ford Motor Company has entered into an agreement for the sale of The North American Business. COOPERS & LYBRAND Detroit, Michigan November 18, 1993 2 4 THE NORTH AMERICAN BUSINESS (AN OPERATING COMPONENT OF FORD MOTOR COMPANY) BALANCE SHEET
SEPT. 30, DEC. 31, 1993 1992 ------------ ------------ ASSETS Cash and cash equivalents........................................ $ 2,743,000 $ 2,074,000 Accounts receivable, net of allowance of $4,500,000 and $7,770,000, respectively....................................... 30,037,000 52,865,000 Inventories (Note 3)............................................. 36,864,000 42,574,000 Deferred income taxes (Note 6)................................... 1,995,000 3,138,000 Other current assets............................................. 691,000 1,067,000 ------------ ------------ Total current assets...................................... 72,330,000 101,718,000 ------------ ------------ Property, plant and equipment, net (Note 4)...................... 79,334,000 83,854,000 Deferred income taxes (Note 6)................................... 1,597,000 779,000 ------------ ------------ Total assets.............................................. $153,261,000 $186,351,000 ------------ ------------ ------------ ------------ LIABILITIES AND EQUITY Accounts payable, principally trade.............................. $ 32,401,000 $ 28,874,000 Accrued liabilities: Salaries and wages............................................. 519,000 808,000 Vacations and holidays......................................... 653,000 928,000 Employee benefit programs...................................... 3,021,000 2,118,000 Other.......................................................... 779,000 704,000 Note payable to Ford Motor Company S.A. de C.V. (Note 7)......... 44,529,000 44,529,000 Income taxes payable............................................. 42,266,000 79,973,000 ------------ ------------ Total current liabilities................................. 124,168,000 157,934,000 ------------ ------------ Postretirement benefits other than pensions and other (Note 5)... 3,562,000 3,347,000 ------------ ------------ Total liabilities......................................... 127,730,000 161,281,000 Equity and advances account (Note 8)............................. 25,531,000 25,070,000 ------------ ------------ Total liabilities and equity.............................. $153,261,000 $186,351,000 ------------ ------------ ------------ ------------
The accompanying notes are an integral part of the financial statements. 3 5 THE NORTH AMERICAN BUSINESS (AN OPERATING COMPONENT OF FORD MOTOR COMPANY) STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1993 AND FOR THE YEARS ENDED DECEMBER 31, 1992 AND 1991
NINE MONTH PERIOD ENDED YEAR ENDED DEC. 31, SEPT. 30, ---------------------------- 1993 1992 1991 ------------ ------------ ------------ Net sales.......................................... $515,102,000 $677,260,000 $547,040,000 Costs of sales..................................... 384,138,000 442,243,000 381,616,000 Selling, administrative and other expenses......... 9,426,000 9,529,000 8,932,000 ------------ ------------ ------------ Total costs and expenses...................... 393,564,000 451,772,000 390,548,000 ------------ ------------ ------------ Operating income................................... 121,538,000 225,488,000 156,492,000 Interest expense................................... (2,026,000) (3,227,000) (3,556,000) Other expenses..................................... (1,910,000) (1,144,000) (685,000) ------------ ------------ ------------ Income before income taxes and cumulative effect of a change in accounting principle......... 117,602,000 221,117,000 152,251,000 Provision for income taxes (Note 6)................ 42,591,000 76,842,000 54,184,000 ------------ ------------ ------------ Income before cumulative effect of a change in accounting principle........................ 75,011,000 144,275,000 98,067,000 Cumulative effect of a change in accounting principle (Note 5)............................... -- (1,490,000) -- ------------ ------------ ------------ Net income.................................... $ 75,011,000 $142,785,000 $ 98,067,000 ------------ ------------ ------------ ------------ ------------ ------------
The accompanying notes are an integral part of the financial statements. 4 6 THE NORTH AMERICAN BUSINESS (AN OPERATING COMPONENT OF FORD MOTOR COMPANY) STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1993 AND FOR THE YEARS ENDED DECEMBER 31, 1992 AND 1991
NINE MONTH YEAR ENDED DEC. 31, PERIOD ENDED ----------------------------- SEPT. 30, 1993 1992 1991 -------------- ------------- ------------ Net Income........................................ $ 75,011,000 $ 142,785,000 $ 98,067,000 Adjustments to reconcile net income to cash flows from operating activities: Cumulative effect of a change in accounting principle.................................... -- 1,490,000 -- Depreciation.................................... 7,370,000 10,225,000 8,847,000 Foreign currency translation adjustment......... 1,659,000 1,030,000 825,000 Provision for deferred income taxes............. 325,000 (3,131,000) (1,274,000) Changes in assets and liabilities: Decrease (increase) in accounts receivable... 22,828,000 (1,313,000) (27,754,000) Decrease (increase) in inventory............. 5,710,000 (3,560,000) (4,252,000) Increase (decrease) in accounts payable...... 3,527,000 (6,847,000) 6,759,000 Increase (decrease) in accrued liabilities... 414,000 780,000 1,143,000 Increase (decrease) in income taxes payable.................................... (37,707,000) 24,515,000 (4,698,000) Other........................................... 231,000 60,000 211,000 -------------- ------------- ------------ Net cash provided by operating activities.............................. 79,368,000 166,034,000 77,874,000 -------------- ------------- ------------ Cash flows from investing activities: Capital expenditures, net....................... (2,850,000) (13,246,000) (22,696,000) Capital contributions........................... -- 10,000,000 -- -------------- ------------- ------------ Net cash (used in) investing activities.... (2,850,000) (3,246,000) (22,696,000) Cash flows from financing activities: Net funds transferred to Ford................... (76,230,000) (151,342,000) (59,929,000) Changes in short-term debt...................... -- (12,600,000) 6,350,000 -------------- ------------- ------------ Net cash (used in) financing activities.... (76,230,000) (163,942,000) (53,579,000) Effect of exchange rate changes on cash........... 381,000 (529,000) (152,000) -------------- ------------- ------------ Net increase (decrease) in cash and cash equivalents..................................... 669,000 (1,683,000) 1,447,000 Cash and cash equivalents, beginning of period.... 2,074,000 3,757,000 2,310,000 -------------- ------------- ------------ Cash and cash equivalents, end of period.......... $ 2,743,000 $ 2,074,000 $ 3,757,000 -------------- ------------- ------------ -------------- ------------- ------------
The accompanying notes are an integral part of the financial statements. 5 7 THE NORTH AMERICAN BUSINESS (AN OPERATING COMPONENT OF FORD MOTOR COMPANY) NOTES TO THE FINANCIAL STATEMENTS (1) BASIS OF PRESENTATION: The North American Business ("NAB") is an operating component of Ford Motor Company ("Ford") and is not a separate legal entity. NAB consists of a portion of the operations of Ford's Plastic and Trim Products Division, which constitutes an integrated U.S. and Mexican maquiladora operation that provides and supplies built-up seats and seat covers for Ford's North American vehicle production. These financial statements include the results of identifiable operating activities, transactions and assets and liabilities associated with the business of NAB in the United States and Mexico. The entity as described above is referred to as "NAB" or "the Company" in the notes to the financial statements. The financial statements have been prepared on a historical accounting basis and do not reflect adjustments which may arise related to the transaction described in Note 11. The financial statements reflect an allocation of certain expenses from Ford based upon the services provided by Ford. However, the financial position and results of operations of the Company, as presented herein, may not be the same as would have occurred had the Company been an entity independent of Ford. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Inventory Valuation Inventories are stated at the lower of cost or market. The cost of inventories is determined by the first-in, first-out ("FIFO") method. Foreign Currency Translation The majority of the assets and liabilities of NAB's Mexican operations are translated at current exchange rates with the exception of property, plant and equipment which is translated at historical exchange rates. Translation gains and losses are included in income. Depreciation Assets placed in service after January 1, 1993 are depreciated using the straight-line method of depreciation. Assets placed in service prior to January 1, 1993 are depreciated using an accelerated method that results in accumulated depreciation of approximately two-thirds of asset cost during the first half of the asset's estimated useful life. On average, buildings and land improvements are depreciable based on a 30-year life, and machinery, equipment and office furniture are depreciated based on a 14-year life. When plant and equipment are retired, the general policy is to charge the cost of such assets, reduced by net salvage proceeds, to accumulated depreciation. All maintenance, repairs and rearrangement costs are expensed as incurred. Expenditures that increase the value or productive capacity of assets are capitalized. Revenue Recognition Sales to outside customers are recognized when the product is shipped. Prior to May 1993, sales to Ford and its affiliates were recognized when the product was received by the customer. Subsequent to that date, 6 8 THE NORTH AMERICAN BUSINESS (AN OPERATING COMPONENT OF FORD MOTOR COMPANY) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) sales to Ford and its affiliates are recognized when the product is shipped, with the exception of sales to Ford's Canadian subsidiary, which are recognized when the product is received by the customer in Canada. (3) INVENTORIES: The major classes of inventories were as follows:
SEPT. 30, DEC. 31, 1993 1992 ----------- ----------- Raw materials and work in progress......................... $24,918,000 $25,758,000 Finished goods............................................. 10,133,000 15,848,000 Nonproduction materials and supplies....................... 1,813,000 968,000 ----------- ----------- Total................................................. $36,864,000 $42,574,000 ----------- ----------- ----------- -----------
(4) PROPERTY, PLANT AND EQUIPMENT, NET: Property, plant and equipment is stated at cost, net of accumulated depreciation, and consisted of the following:
SEPT. 30, DEC. 30, 1993 1992 ------------ ------------ Land..................................................... $ 7,119,000 $ 7,119,000 Buildings and land improvements.......................... 49,616,000 49,712,000 Machinery, equipment and other........................... 75,360,000 72,705,000 Construction in progress................................. 620,000 1,805,000 ------------ ------------ Total property, plant and equipment................. 132,715,000 131,341,000 Accumulated depreciation................................. (53,381,000) (47,487,000) ------------ ------------ Property, plant and equipment, net.................. $ 79,334,000 $ 83,854,000 ------------ ------------ ------------ ------------
NAB's Mexican maquiladora has beneficial ownership of the land and buildings through trust agreements with Banca Serfin, Institucion de Banca Multiple, Grupos Financiero Serfin, Division Fiduciara. Substantially all other assets are owned by the U.S. operations. (5) EMPLOYEE RETIREMENT BENEFITS: Employee Retirement Plans Retirement benefits are provided to certain salaried employees of NAB under the Ford General Retirement Plan (the "Plan"). Ford allocated to the Company the costs associated with employees who participated in this Plan. The amount of expense allocated to NAB from Ford was $178,000 during the nine months ended September 30, 1993 and $177,000 and $165,000 during the years ended December 31, 1992 and 1991, respectively. Post-Employment Health Care and Life Insurance Benefits The same employees who receive the aforementioned retirement benefits are also eligible to receive health care and insurance benefits upon retirement through various Ford programs if they reach retirement age while still working for Ford. 7 9 THE NORTH AMERICAN BUSINESS (AN OPERATING COMPONENT OF FORD MOTOR COMPANY) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) Prior to 1992, Ford recognized the expense for these post-retirement health care benefits based on actual expenditures for the year. Beginning in 1992, the estimated cost for post-retirement health care benefits was accrued on an actuarially determined basis, in accordance with Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other than Pensions." Ford elected to recognize the prior year unaccrued accumulated post-retirement benefit obligation of this accounting change as a cumulative adjustment to income in the first quarter of 1992. Ford has allocated $2,258,000 of the cumulative adjustment, on a pre-tax basis, to NAB as of January 1, 1992. Ford has allocated $245,100 and $388,900 for current period expense to NAB for the periods ended September 30, 1993 and December 31, 1992, respectively. The effect of the post-retirement benefits on 1991 income was not material. The components of the September 30, 1993 and December 30, 1992 obligation consist of the following:
SEPT. 30, DEC. 31, 1993 1992 ---------- ---------- Health................................................ $2,739,000 $2,795,000 Life.................................................. 678,000 549,000 Other................................................. 145,000 3,000 ---------- ---------- $3,562,000 $3,347,000 ---------- ---------- ---------- ----------
(6) INCOME TAXES: NAB adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"), as of January 1, 1991. The effect of this change in accounting principle was not material. Prior to the adoption of SFAS No. 109, NAB's method of accounting for income taxes was the deferred method under Accounting Principles Board Opinion No. 11. NAB's provision for income taxes was as follows:
YEAR ENDED NINE MONTH PERIOD -------------------------- ENDED DEC. 31, DEC. 31, SEPT. 30, 1993 1992 1991 ----------------- ----------- ----------- Currently payable U.S.............................................. $41,779,000 $79,400,000 $54,723,000 Mexican.......................................... 487,000 573,000 735,000 ----------------- ----------- ----------- Total currently payable....................... $42,266,000 $79,973,000 $55,458,000 Deferred U.S.............................................. 355,000 (2,762,000) (980,000) Mexican.......................................... (30,000) (369,000) (294,000) ----------------- ----------- ----------- Total deferred................................ 325,000 (3,131,000) (1,274,000) ----------------- ----------- ----------- Total provision............................... $42,591,000 $76,842,000 $54,184,000 ----------------- ----------- ----------- ----------------- ----------- -----------
8 10 THE NORTH AMERICAN BUSINESS (AN OPERATING COMPONENT OF FORD MOTOR COMPANY) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) Deferred income taxes reflect the estimated future tax effect of a temporary differences between the amounts of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws and regulations. The components of deferred income tax assets and liabilities as of September 30, 1993 and December 31, 1992 are as follows:
SEPT. 30, 1993 DEC. 31, 1992 ------------------------ ------------------------ DEFERRED DEFERRED DEFERRED DEFERRED TAX TAX TAX TAX ASSET LIABILITY ASSET LIABILITY ---------- ---------- ---------- ---------- Depreciation.......................... $1,520,000 -- $ 836,000 -- Receivable allowance.................. 1,575,000 -- 2,642,000 -- Employee benefit plans................ 1,622,000 -- 1,580,000 -- Inventory valuation................... -- $1,125,000 -- $1,141,000 ---------- ---------- ---------- ---------- Total deferred taxes............. $4,717,000 $1,125,000 $5,058,000 $1,141,000 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
The effective tax rate differs from the U.S. statutory rates for all years because of the effect of Mexican taxes. The Company's income before taxes and cumulative effect of a change in accounting principle for its U.S. and Mexican operations were as follows:
NINE MONTH YEAR ENDED PERIOD ENDED ---------------------------- SEPT. 30, DEC. 31, DEC. 31, 1993 1992 1991 ------------ ------------ ------------ United States.............................. $120,638,000 $225,403,000 $158,068,000 Mexico..................................... (3,036,000) (4,286,000) (5,817,000) ------------ ------------ ------------ $117,602,000 $221,117,000 $152,251,000 ------------ ------------ ------------ ------------ ------------ ------------
(7) NOTE PAYABLE TO FORD MOTOR COMPANY S.A. DE C.V.: Interest rates on the note payable to Ford Motor Company S.A. de C.V. ("Ford of Mexico") ranged from 5.5 percent to 6.5 percent and 5.5 percent to 7.0 percent at September 30, 1993 and December 31, 1992, respectively. Interest paid on the Ford of Mexico note was $2,025,000 for the nine months ended September 30, 1993 and $3,207,000 and $4,227,000 during the years ended December 31, 1992 and 1991, respectively. (8) EQUITY AND ADVANCES ACCOUNT: Equity and advances reflect the accumulation of transactions between NAB, other operating components of Ford and various Ford affiliates. These transactions include operating results, corporate assessments, advances and other intercompany transactions. Additionally, the equity and advances account reflects the common stock investment in the Mexican maquiladora held by Ford and its affiliates. Transactions of NAB in the U.S. are settled through Ford cash accounts. These cash accounts are not separately allocated to the NAB operations. Accordingly, these transactions also have been recorded through the equity and advances account. 9 11 THE NORTH AMERICAN BUSINESS (AN OPERATING COMPONENT OF FORD MOTOR COMPANY) NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) (9) TRANSACTIONS WITH RELATED PARTIES: Sales and purchases of products and technical and administrative services are transacted between NAB and Ford and its affiliates. A summary of the amounts included in the NAB statements of income follows:
YEAR ENDED NINE MONTH DEC. 31, PERIOD ENDED ---------------------------- SEPT. 30, 1993 1992 1991 -------------- ------------ ------------ Sales.............................................. $ 401,357,000 $568,605,000 $487,111,000 Purchases Product.......................................... 18,388,000 23,302,000 27,351,000 Technical and administrative services............ 8,900,000 9,100,000 7,100,000
Sales to nonrelated parties consist primarily of seat trim and assemblies for further processing and subsequent resale to Ford and its affiliates. Effective January 1, 1993, NAB agreed to reduce the selling prices of its products to Ford. The effect of this agreement reduced revenues for the nine months ended September 30, 1993 by approximately $66 million. See previous notes for additional related party information. (10) LITIGATION, CLAIMS AND CONTINGENCIES: Various legal actions and claims are pending or may be instituted or asserted in the future against the Company. Litigation is subject to many uncertainties, the outcome of individual litigated matters is not predictable with assurance and it is reasonably possible that some of the foregoing matters could be decided unfavorably to NAB. NAB operates in Mexico under a maquilla program. Under the maquilla program, NAB can import into Mexico any fixed assets or materials necessary for production, without paying import taxes, as long as the assets are returned to the United States. If materials or fixed assets are not discharged properly or if the Company cannot prove that items are maintained in Mexico, the Mexican Custom Authority can levy an import tax (average tax rate - 35 percent) and a value-added tax (average rate - 10 percent). Although the amount of liability at September 30, 1993 with respect to these matters cannot be ascertained, the Company believes that any resulting liability should not materially affect the financial position of the Company at September 30, 1993. (11) AGREEMENT WITH LEAR SEATING CORPORATION: Pursuant to an agreement with Lear Seating Corporation ("Lear"), Ford sold NAB to Lear on November 1, 1993. Certain assets and liabilities (identified in the purchase agreement) presented in the September 30, 1993 and December 31, 1992 balance sheets are excluded from the purchase and will be retained by Ford. 10 12 PRO FORMA FINANCIAL DATA The following unaudited pro forma consolidated statements of operations and consolidated balance sheet (collectively, the "Pro Forma Statements") of the Company were prepared to illustrate the estimated effects of (i) the NAB Acquisition and the related incurrence of debt to finance such acquisition, (ii) the incurrence of indebtedness under the Credit Agreement to retire the GECC Mortgage Loan and to refinance the term loans outstanding under the Company's Original Credit Agreement, (iii) the Offering and the application of the net proceeds therefrom, (collectively, the "Pro Forma Transactions"), as if the Pro Forma Transactions had occurred for statement of operations purposes as of the beginning of each period presented and for balance sheet purposes as of October 2, 1993. The Pro Forma Statements do not purport to represent what the Company's financial position or results of operations would actually have been if such transactions in fact had occurred on such date or at the beginning of the periods indicated or to project the Company's financial position or results of operations for any future date or period. The pro forma adjustments are based upon available information and upon certain assumptions that management believes are reasonable. The Pro Forma Statements and accompanying notes should be read in conjunction with the historical financial statements of the Company and the NAB, including the notes thereto, and other financial information pertaining to the Company and the NAB, including "Capitalization" and related notes thereto included elsewhere in the Prospectus. The NAB Acquisition will be accounted for using the purchase method of accounting. The total purchase price of $195.5 million plus estimated acquisition costs of approximately $1.5 million will be allocated to the assets and liabilities of the NAB based upon their respective fair market values, with the remainder allocated to goodwill. Such allocations will be made based upon valuations and other studies which have not been finalized. Accordingly, the allocation of the purchase price included in the following Pro Forma Statements is preliminary. The final values may differ from those set forth in the historical financial statements of the NAB and from those set forth herein. 11 13 PRO FORMA STATEMENTS OF OPERATIONS (UNAUDITED, DOLLARS IN THOUSANDS)
YEAR ENDED JUNE 30, 1993 ------------------------------------------------------------------------------------------------------- EXCLUDED CONSOLIDATION COMPANY NAB NAB OPERATIONS NAB AND FINANCING HISTORICAL HISTORICAL(1) BUSINESS(2) ADJUSTMENTS(3) ADJUSTED ADJUSTMENTS PRO FORMA ---------- ------------- ----------- -------------- -------- ------------- ---------- Sales.................. $1,756,510 $ 701,901 $ (56,000) $ (98,798) $547,103 $ (68,463)(4) $2,235,150 Cost of sales.......... 1,604,011 498,648 (31,360) 19,915 487,203 (68,463)(4) 2,022,751 ---------- ------------- ----------- -------------- -------- ------------- ---------- Gross profit........... 152,499 203,253 (24,640) (118,713) 59,900 -- 212,399 Selling, general and administrative expenses............. 61,898 11,048 -- 7,661 18,709 -- 80,607 Amortization........... 9,548 -- -- 2,286 2,286 -- 11,834 ---------- ------------- ----------- -------------- -------- ------------- ---------- Operating income....... 81,053 192,205 (24,640) (128,660) 38,905 -- 119,958 ---------- ------------- ----------- -------------- -------- ------------- ---------- Interest expense, net.................. 47,832 2,964 -- -- 2,964 1,482(5) 52,278 Other expense.......... 5,260 1,851 -- -- 1,851 -- 7,111 ---------- ------------- ----------- -------------- -------- ------------- ---------- Income before provision for income taxes..... 27,961 187,390 (24,640) (128,660) 34,090 (1,482) 60,569 Provision for income taxes................ 17,847 66,359 (8,673) (45,288) 12,398 (521) 29,724 ---------- ------------- ----------- -------------- -------- ------------- ---------- Net income (loss)...... $ 10,114 $ 121,031 $ (15,967) $ (83,372) $ 21,692 $ (961) $ 30,845(6) ---------- ------------- ----------- -------------- -------- ------------- ---------- ---------- ------------- ----------- -------------- -------- ------------- ---------- Depreciation........... $ 31,106 $ 10,054 $ -- $ (1,275) $ 8,779 -- $ 39,885 EBITDA(7).............. 121,707 202,259 (24,640) (127,649) 49,970 -- 171,677
THREE MONTHS ENDED OCTOBER 2, 1993 ------------------------------------------------------------------------------------------------------- EXCLUDED CONSOLIDATION COMPANY NAB NAB OPERATIONS NAB AND FINANCING HISTORICAL HISTORICAL(1) BUSINESS(2) ADJUSTMENTS(3) ADJUSTED ADJUSTMENTS PRO FORMA ---------- ------------- ----------- -------------- -------- ------------- ---------- Sales.................. $ 399,066 $ 156,060 $ (14,000) $ (14,145) $127,915 $ (23,349)(4) $ 503,632 Cost of sales.......... 377,239 118,692 (7,840) 4,528 115,380 (23,349)(4) 469,270 ---------- ------------- ----------- -------------- -------- ------------- ---------- Gross profit........... 21,827 37,368 (6,160) (18,673) 12,535 -- 34,362 Selling, general and administrative expenses............. 12,695 3,142 -- 1,293 4,435 -- 17,130 Amortization........... 2,187 -- -- 572 572 -- 2,759 ---------- ------------- ----------- -------------- -------- ------------- ---------- Operating income....... 6,945 34,226 (6,160) (20,538) 7,528 -- 14,473 Interest expense, net.................. 11,418 675 -- -- 675 596(5) 12,689 Other expense.......... 1,070 659 -- -- 659 -- 1,729 ---------- ------------- ----------- -------------- -------- ------------- ---------- Income before provision for income taxes and extraordinary items................ (5,543) 32,892 (6,160) (20,538) 6,194 (596) 55 Provision for income taxes................ 5,286 11,907 (2,230) (7,435) 2,242 (216) 7,312 ---------- ------------- ----------- -------------- -------- ------------- ---------- Net income (loss) before extraordinary items................ (10,829) 20,985 (3,930) (13,103) 3,952 (380) (7,257) Extraordinary loss on early extinguishment of debt.............. 535 -- -- -- -- (535)(8) -- ---------- ------------- ----------- -------------- -------- ------------- ---------- Net income (loss)...... $ (11,364) $ 20,985 $ (3,930) $ (13,103) $ 3,952 $ 155 $ (7,257) ---------- ------------- ----------- -------------- -------- ------------- ---------- ---------- ------------- ----------- -------------- -------- ------------- ---------- Depreciation........... $ 8,111 $ 2,457 $ -- $ (262) $ 2,195 -- $ 10,306 EBITDA(7).............. 17,243 36,683 (6,160) (20,228) 10,295 -- 27,538
- ------------------------- (1) The NAB historical information represents amounts derived from the unaudited quarterly financial statements of the NAB, including an allocation of year-end adjustments. (2) Reflects elimination of the approximate sales and cost of sales associated with a non-seating product line of the NAB that the NAB will continue to produce until its anticipated phase-out in the third quarter of calendar year 1994. (3) Operations adjustments consist of pro forma adjustments to the historical revenues and expenses of the NAB to reflect (i) the Company's estimates of the impact of product pricing reductions negotiated as part of the NAB Acquisition, (ii) estimated actual expenses associated with ongoing engineering activities in support of Ford seating programs and the reallocation of the NAB engineering expenses among financial statement categories for consistency with the financial statements of the Company, (iii) incremental ongoing overhead and administrative expenses associated with the NAB Acquisition, including amounts to be paid to Ford for continuation of certain support 12 14 functions, (iv) estimated adjustments to amortization and depreciation expense resulting from the revaluation of NAB assets and (v) the estimated income tax effects of these items. The adjustments include the following items:
THREE MONTHS YEAR ENDED ENDED JUNE 30, OCTOBER 2, 1993 1993 ---------- ------------ Effects of product pricing agreements negotiated between the Company and Ford in the NAB Acquisition............................................... $ 98,798 $ 14,145 Incremental ongoing NAB engineering, overhead and administrative expenses... 28,851 6,083 Amortization of goodwill resulting from the NAB Acquisition................. 2,286 572 Decrease in NAB depreciation expense........................................ (1,275) (262) Estimated income tax effects of operations adjustments...................... (45,288) (7,435) ---------- ------------ $ 83,372 $ 13,103 ---------- ------------ ---------- ------------
The estimated effects of the product pricing adjustments were derived by management through the application of agreed upon average price reductions effective as of the date of the NAB Acquisition to the historical revenues of the NAB by product line. The adjustment is proportionately greater for the year ended June 30, 1993 than for the three months ended October 2, 1993 due to additional pro forma adjustments in the year ended June 30, 1993 to reflect price reductions from the NAB to Ford which were effective as of January 1, 1993. (4) Reflects the elimination in consolidation of sales from the NAB to other Lear locations. (5) Reflects interest expense changes as follows:
THREE MONTHS YEAR ENDED ENDED JUNE 30, OCTOBER 2, 1993 1993 ---------- ------------ Estimated interest on borrowings under the Credit Agreement to finance the NAB Acquisition........................................................... $ 7,969 $ 1,953 Interest expense on the Notes, at the assumed rate of 9.0%.................. 13,050 3,262 Elimination of interest expense on the 14% Subordinated Debentures.......... (18,900) (4,725) Interest expense on short-term notes payable used to finance the NAB Acquisition, at 8%........................................................ 1,200 300 Elimination of interest expense on Favesa note payable prepaid in connection with the NAB Acquisition.................................................. (1,476) (369) Difference between interest expense on Favesa note payable at 6% prior to acquisition, 11.5% subsequent............................................. 1,095 274 Net reduction in interest expense due to refinancing of the Original Credit Agreement and retirement of the GECC Mortgage Loan........................ (1,362) (265) Interest on borrowings under the Credit Agreement to finance fees and expenses related to the Pro Forma Transactions............................ 631 153 Change in deferred financing fee amortization due to refinancing of the Original Credit Agreement, issuance of the Notes, retirement of the GECC Mortgage Loan and redemption of the 14% Subordinated Debentures........... (725) 13 ---------- ------------ Net increase in interest expense........................................ $ 1,482 $ 596 ---------- ------------ ---------- ------------
(6) Net income excludes extraordinary losses due to the redemption of the 14% Subordinated Debentures and the refinancing of the Original Credit Agreement as follows:
THREE MONTHS YEAR ENDED ENDED JUNE 30, OCTOBER 2, 1993 1993 ---------- ------------ Write-off of unamortized deferred financing fees related to the Original Credit Agreement.......................................................... $ 2,452 $ 763 Write-off of unamortized deferred financing fees related to the 14% Subordinated Debentures................................................... 4,207 3,664 Write-off of unamortized deferred financing fees related to the GECC Mortgage Loan............................................................. 1,192 995 Prepayment premium on redemption of 14% Subordinated Debentures............. 7,290 7,290 Estimated income tax effects................................................ (5,148) (4,322) ---------- ------------ $ 9,993 $ 8,390 ---------- ------------ ---------- ------------
(7) "EBITDA" is operating income (loss) plus depreciation and amortization. The Company believes that EBITDA provides additional information for determining its ability to meet debt service requirements. EBITDA does not represent and should not be considered as an alternative to net income or cash flow from operations as determined by generally accepted accounting principles, and EBITDA does not necessarily indicate whether cash flow will be sufficient for cash requirements. (8) Reflects the elimination of the extraordinary loss on the refinancing of the Original Credit Agreement which was recorded in the first quarter of fiscal 1994. Such loss would have been incurred in a prior period had the NAB Acquisition taken place at the beginning of the periods presented. 13 15 PRO FORMA CONSOLIDATED BALANCE SHEET (UNAUDITED, DOLLARS IN THOUSANDS) AS OF OCTOBER 2, 1993
ACQUISITION COMPANY NAB EXCLUDED NAB AND VALUATION FINANCING HISTORICAL HISTORICAL NAB ITEMS(1) ADJUSTED OF NAB(2) ADJUSTMENTS PRO FORMA --------- ---------- ------------ -------- ------------- ----------- --------- ASSETS Current Assets: Cash............................. $ 42,531 $ 2,743 $ -- $ 2,743 $(185,000) $ 185,000(3) $ 45,274 Accounts receivable, net......... 176,099 30,037 (30,037) -- -- -- 176,099 Inventories...................... 43,177 36,864 -- 36,864 -- -- 80,041 Other current assets............. 15,937 2,686 -- 2,686 -- -- 18,623 --------- ---------- ------------ -------- ------------- ----------- --------- 277,744 72,330 (30,037) 42,293 (185,000) 185,000 320,037 --------- ---------- ------------ -------- ------------- ----------- --------- Property, Plant And Equipment: Land............................. 12,979 7,119 -- 7,119 9,987 -- 30,085 Buildings and improvements....... 73,331 49,616 -- 49,616 (10,803) -- 112,144 Machinery and equipment.......... 186,086 75,980 -- 75,980 (41,790) -- 220,276 --------- ---------- ------------ -------- ------------- ----------- --------- 272,396 132,715 -- 132,715 (42,606) -- 362,505 Less: Accumulated depreciation... (109,582) (53,381) -- (53,381) 53,381 -- (109,582) --------- ---------- ------------ -------- ------------- ----------- --------- 162,814 79,334 -- 79,334 10,775 -- 252,923 --------- ---------- ------------ -------- ------------- ----------- --------- Other Assets: Goodwill, net.................... 306,978 -- -- -- 91,450 -- 398,428 Deferred finance fees and other.......................... 19,013 1,597 -- 1,597 -- 4,896(4) 25,506 --------- ---------- ------------ -------- ------------- ----------- --------- 325,991 1,597 -- 1,597 91,450 4,896 423,934 --------- ---------- ------------ -------- ------------- ----------- --------- $ 766,549 $ 153,261 $(30,037) $123,224 $ (82,775) $ 189,896 $ 996,894 --------- ---------- ------------ -------- ------------- ----------- --------- --------- ---------- ------------ -------- ------------- ----------- --------- LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Short-term borrowings............ $ 3,202 $ 44,529 $(24,614) $ 19,915 $ 10,500 $ 15,000 $ 48,617 Cash overdrafts.................. 26,153 -- -- -- -- -- 26,153 Accounts payable................. 193,593 32,401 (32,401) -- -- -- 193,593 Accrued liabilities.............. 93,414 47,238 (42,266) 4,972 1,500 (10,405)(5) 89,481 Current portion of long-term debt........................... 1,202 -- -- -- -- -- 1,202 --------- ---------- ------------ -------- ------------- ----------- --------- 317,564 124,168 (99,281) 24,887 12,000 4,595 359,046 --------- ---------- ------------ -------- ------------- ----------- --------- Long-Term Liabilities: Long-term debt................... 340,209 -- -- -- -- 193,065(6) 533,274 Deferred national income taxes... 11,962 -- -- -- -- -- 11,962 Other............................ 31,260 3,562 -- 3,562 -- -- 34,822 --------- ---------- ------------ -------- ------------- ----------- --------- 383,431 3,562 -- 3,562 -- 193,065 580,058 --------- ---------- ------------ -------- ------------- ----------- --------- Common stock subject to limited redemption, net.................. 3,885 -- -- -- -- -- 3,885 --------- ---------- ------------ -------- ------------- ----------- --------- Stockholders' Equity: Common stock..................... 12 -- -- -- -- -- 12 Additional paid-in capital....... 150,993 -- -- -- -- -- 150,993 Warrants......................... 10,000 -- -- -- -- -- 10,000 Common stock held in treasury.... (10,000) -- -- -- -- -- (10,000) Retained deficit................. (85,896) -- -- -- -- (7,764)(7) (93,660) Minimum pension liability adjustment..................... (3,240) -- -- -- -- -- (3,240) Cumulative translation adjustment..................... (200) -- -- -- -- -- (200) Equity and advances account -- NAB............................ -- 25,531 69,244 94,775 (94,775) -- -- --------- ---------- ------------ -------- ------------- ----------- --------- 61,669 25,531 69,244 94,775 (94,775) (7,764) 53,905 --------- ---------- ------------ -------- ------------- ----------- --------- $ 766,549 $ 153,261 $(30,037) $123,224 $ (82,775) $ 189,896 $ 996,894 --------- ---------- ------------ -------- ------------- ----------- --------- --------- ---------- ------------ -------- ------------- ----------- ---------
- ------------------------- (1) The assets acquired and liabilities assumed by the Company in the NAB Acquisition excluded accounts receivable, accounts payable, certain short-term borrowings, and certain accrued liabilities (primarily accrued income taxes). (2) The purchase price of $195,500 included $185,000 in cash and $10,500 in promissory notes. The acquisition cost also included fees and expenses estimated at $1,500. The NAB Acquisition will be 14 16 accounted for using the purchase method of accounting and the total purchase cost will be allocated first to assets and liabilities based upon their respective fair values, with the remainder allocated to goodwill. Historical NAB equity balances are eliminated for purposes of the pro forma consolidated balance sheet. The allocation of the purchase price reflected above is based on estimates and may differ from the final allocation. (3) Reflects proceeds of borrowings under the Credit Agreement of $170,000, and borrowings under short-term notes payable of $15,000. (4) Reflects fees of $9,370 related to the refinancing of the Original Credit Agreement and the Offering, net of the write-off of unamortized fees of $4,474 related to the redemption of the 14% Subordinated Debentures and the retirement of the GECC Mortgage Loan. (5) Reflects payment of accrued and unpaid interest of $6,405 on the 14% Subordinated Debentures, together with the tax benefit of the loss of $4,000 on the redemption of the 14% Subordinated Debentures and the retirement of the GECC Mortgage Loan. (6) Reflects the effects of the Pro Forma Transactions as follows: Borrowings under the Credit Agreement to finance a portion of the NAB Acquisition................................................. $ 170,000 Issuance of the Notes............................................. 145,000 Redemption of the 14% Subordinated Debentures..................... (135,000) Borrowings under the Credit Agreement to pay a portion of the accrued and unpaid interest on the 14% Subordinated Debentures and the fees and expenses related to the Pro Forma Transactions.................................................... 13,065 --------- Net increase in long-term debt............................... $ 193,065 --------- ---------
(7) Reflects loss on the redemption of the 14% Subordinated Debentures and the retirement of the GECC Mortgage Loan, which includes the prepayment premium on the redemption of the 14% Subordinated Debentures of $7,290, and the write-off of deferred financing fees of $4,474, net of the related tax benefit of $4,000. 15 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused the report to be signed on its behalf by the undersigned thereunto duly authorized. LEAR SEATING CORPORATION (As successor by MERGER to LEAR HOLDINGS CORPORATION) Dated: January 12, 1994 By: /s/ JAMES H. VANDENBERGHE James H. Vandenberghe Executive Vice President and Secretary 16 -----END PRIVACY-ENHANCED MESSAGE-----