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 (Date of earliest event reported) December 20, 1994.
ECHLIN INC.
----------------------------------------------------
(Exact name of registrant as specified in charter)
CONNECTICUT 1-4651 06-0330448
- --------------------------- ------------- -------------------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
100 Double Beach Road
Branford, Connecticut 06405
- ---------------------------------------- ----------
(address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: 203-481-5751
------------
None
--------------------------------------------------------------
(Former name or former address, if changed since last report)
ECHLIN INC. [LOGO]
100 Double Beach Road
Branford, CT 06405
February 28, 1995
Securities and Exchange Commission
450 Fifth Street, N.W.
Judiciary Plaza
Washington, D.C. 20549
RE: Echlin Inc.
Amendment to Current Report on Form 8-K/A
Ladies/Gentlemen:
A complete copy of the amendment to the current report on Form 8-K/A
dated February 28, 1995, including financial statements required by item
7, is being filed with the Commission. A manually signed copy is being
held in our file.
Very truly yours,
/s/ Edward D. Toole
Edward D. Toole
Associate General Counsel
and Assistant Secretary
EDT/jeh
Enclosures
cc: New York Stock Exchange, Inc.
Pacific Stock Exchange
Item 7. Financial Statements and Exhibits
(a) Financial statements of business acquired.
(i) Audited consolidated financial statements of Preferred Technical
Group International, Inc. for the twelve month period ended June
25, 1994.
(b) Pro forma financial information.
(i) Combined statement of income for the fiscal year ended August 31,
1994.
(ii) Combined statement of income for the three month period ended
November 30, 1994.
(iii) Combined balance sheet as at November 30, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by
the undersigned, thereunto duly authorized.
ECHLIN INC.
February 28, 1995 By: /s/Jon P. Leckerling
Jon P. Leckerling
Vice President and
Secretary
Preferred Technical Group
International, Inc.
Consolidated Financial Statements
June 25, 1994
Report of Independent Accountants
August 3, 1994, except as to Note 17,
which is as of October 26, 1994
To the Board of Directors and Stockholders of
Preferred Technical Group International, Inc.
In our opinion, the accompanying consolidated balance sheet and
the related consolidated statements of income, of cash flows and
of changes in common stockholders' equity present fairly, in all
material respects, the financial position of Preferred Technical
Group International, Inc. and its subsidiaries at June 25, 1994,
and the results of their operations and their cash flows for the
year ended June 25, 1994 in conformity with generally accepted
accounting principles. 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
audit. We conducted our audit of these statements in accordance
with generally accepted auditing standards which 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, assessing the accounting principles used and
significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
Detroit, Michigan
PREFERRED TECHNICAL GROUP INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
June 25, 1994
(In thousands, except share related data)
ASSETS
Current Assets:
Cash and cash equivalents $ 1,498
Trade accounts and notes receivable, net of
allowance for doubtful accounts of $827 51,133
Inventories 17,142
Other current assets 1,000
Refundable and prepaid income taxes 942
Deferred income taxes 1,582
--------
Total current assets 73,297
Property, plant and equipment, net 40,609
Goodwill, net 11,803
Intangible and other assets, net 4,795
--------
$130,504
========
LIABILITIES, PREFERRED STOCK AND
COMMON STOCKHOLDERS' EQUITY
Current Liabilities:
Revolving credit facility $ 14,249
Current portion of long-term debt 2,845
Trade accounts payable 29,593
Accrued compensation and employee benefits 4,731
Accrued income taxes payable 724
Other accrued liabilities 1,606
--------
Total current liabilities 53,748
Long-term debt 46,777
Deferred income taxes 5,181
--------
105,706
--------
Preferred stock, subject to mandatory redemption
requirements, cumulative dividends at 12.5%,
$1,000 par value per share, 18,000 shares
authorized, 5,200 shares issued and outstanding
at issuance price plus accumulated dividends 6,399
--------
Common Stockholders' Equity:
Common stock, $0.01 par value per share, 2,550,000
shares authorized, 1,017,760 shares issued and
outstanding 10
Additional paid-in capital 4,787
Retained earnings 14,311
Cumulative translation adjustment (275)
Notes receivable for stock issuance (275)
Additional minimum pension liability (159)
--------
Total common stockholders' equity 18,399
--------
$130,504
========
The accompanying notes are an integral part of these consolidated
financial statements.
PREFERRED TECHNICAL GROUP INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF INCOME
Year Ended June 25, 1994
(In thousands)
Net sales $246,965
Cost of sales 211,877
--------
Gross profit 35,088
Operating expenses:
Selling, general and administrative 12,156
Research, development and engineering 949
--------
Income from operations 21,983
Other (income) expenses:
Interest expense 5,024
Foreign exchange gain (80)
--------
Income before provision for income taxes 17,039
Provision for income taxes 7,000
--------
Net income 10,039
Accrued dividends on preferred stock 710
--------
Net income applicable to common stock $ 9,329
========
The accompanying notes are an integral part of these consolidated
financial statements.
PREFERRED TECHNICAL GROUP INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended June 25, 1994
(In thousands)
Cash flows from operating activities:
Net income $ 10,039
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 4,695
Deferred income taxes 3,626
Changes in operating assets and liabilities,
net of the effects of acquisitions and
dispositions:
Trade accounts and notes receivable (18,680)
Inventories (3,012)
Other current assets (11)
Refundable, prepaid and accrued income taxes 877
Trade accounts payable 8,805
Accrued compensation and employee benefits 2,406
Other accrued liabilities (2,258)
--------
Net cash provided by operating activities 6,487
--------
Cash flows from investing activities:
Purchases of property, plant and equipment (5,736)
Proceeds from sale of plastic profile products
businesses 5,652
Receivable from UTA related to acquisition 994
Other investing activities (918)
--------
Net cash used in investing activities (8)
--------
Cash flows from financing activities:
Net borrowings under revolving credit facility 11,294
Repayment of long-term debt (2,778)
Proceeds from issuance of common stock and warrants 2
Redemption of warrants (5,062)
Deferred registration costs (2,017)
Net change in payable to UTA (10,752)
--------
Net cash used in financing activities (9,313)
--------
Effect of exchange rate changes on cash (1)
--------
Net decrease in cash and cash equivalents (2,835)
Cash and cash equivalents at beginning of period 4,333
--------
Cash and cash equivalents at end of period $ 1,498
========
The accompanying notes are an integral part of these consolidated
financial statements.
PREFERRED TECHNICAL GROUP INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF COMMON STOCKHOLDERS' EQUITY
(In thousands, except share related data)
Class P
Series I & II Series I & II
------------------------ ----------------------
Shares Amount Shares Amount
------- ------ ------- ------
Balance at June 26, 1993 100,000 $ 1 900,000 $ 9
Accrued dividends on
preferred stock
Redemption of warrants
Exercise of stock options 17,760
Net income
Cumulative translation
adjustment
Minimum pension
liability adjustment
------- ------ ------- ------
Balance at June 25, 1994 100,000 $ 1 917,760 $ 9
------- ------ ------- ------
Notes Additional
Additional Cumulative Receivable Minimum Total
(CONTINUED) Paid-In Retained Translation For Stock Pension Stockholders'
Capital Earnings Adjustment Issuance Liability Equity
--------- -------- ---------- --------- --------- ----------
Balance at June 26, 1993 $ 9,847 $ 4,982 $ (274) $ (275) $ - $ 14,290
Accrued dividends on
preferred stock (710) (710)
Redemption of warrants (5,062) (5,062)
Exercise of stock options 2 2
Net income 10,039 10,039
Cumulative translation
adjustment (1) (1)
Minimum pension
liability adjustment (159) (159)
--------- -------- ---------- --------- --------- ----------
Balance at June 25, 1994 $ 4,787 $14,311 $ (275) $ (275) $ (159) $ 18,399
--------- -------- ---------- --------- --------- ----------
PREFERRED TECHNICAL GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
Note 1. Organization and Basis of Presentation
Preferred Technical Group International, Inc. (the
"Company") was incorporated in 1992 for the purpose of
acquiring (through a wholly-owned subsidiary) certain net
assets of United Technologies Automotive, Inc. ("UTA"). The
Company had no operations prior to September 25, 1992, other
than those related to its organization, capitalization and
negotiation of the asset purchase and related financing. The
Company and its subsidiaries are engaged in the manufacture
of coupled hose and extruded plastic products for the
automotive and other industries.
Note 2. Summary of Significant Accounting Policies
The following summarizes the significant accounting
policies applied in the preparation of the accompanying
consolidated financial statements.
Principles of Consolidation -- The consolidated financial
statements include the accounts of the Company and its
wholly-owned subsidiaries; Preferred Technical Group, Inc.
("PTG"), Multitec-PTG, Inc. ("Multitec") and Preferred
Technical Group-CHA, Ltd. ("CHA-Ltd."). All significant
intercompany accounts and transactions have been eliminated.
Fiscal Year -- The Company's fiscal year ends on the last
Saturday in June.
Financial Instruments -- The carrying amount of the
Company's financial instruments, which include cash,
receivables, revolving credit facility, accounts payable and
long-term debt, approximates their fair market value at June
25, 1994.
Cash and Cash Equivalents -- The Company considers all
highly liquid debt instruments with an initial maturity of
three months or less to be cash and cash equivalents.
Inventories -- Inventories are stated at the lower of
cost, which includes materials, labor and overhead, or
market, with cost being determined using the first-in,
first-out (FIFO) method.
Property, Plant and Equipment -- Property, plant and
equipment is recorded at cost. Additions and improvements,
unless of relatively minor amounts, are capitalized.
Expenditures for repairs and maintenance are charged to
expense as incurred. Upon disposal or retirement of
property, plant and equipment, the cost and accumulated
PREFERRED TECHNICAL GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
Note 2. Summary of Significant Accounting Policies
(continued)
depreciation are removed from the accounts and any gain or
loss is included in income. Depreciation is provided using
the straight-line method over the estimated useful lives of
individual assets as follows:
Buildings 20-31.5 years
Machinery and equipment 3-12 years
Office equipment and computers 3-12 years
Vehicles 3-5 years
Goodwill and Other Intangible Assets -- Goodwill
resulting from acquisitions is amortized over the estimated
period benefited of 40 years, using the straight-line
method. On an annual basis, the Company reviews the
recoverability of goodwill. The measurement of possible
impairment is based primarily on the ability to recover the
balance of the goodwill from expected future operating cash
flows on an undiscounted basis. In management's opinion, no
such impairment exists at June 25, 1994.
Other intangible assets consist primarily of deferred
registration and debt issuance costs, principally audit,
bank and legal fees, incurred in connection with the
expected issuance of common stock to the public and the
issuance of the debt instruments described in Note 8.
Deferred registration costs approximate $2,017 and will be
offset against the proceeds resulting from the expected
public offering or written off to expense during the period
in which it is determined that the public offering will not
proceed. Debt issuance costs are amortized over the term of
the related debt, ranging from three to seven years, using
the straight-line method. Accumulated amortization for
goodwill and other intangible assets was $1,039 at June 25,
1994.
Income Taxes -- The Company accounts for income taxes in
accordance with Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes" ("SFAS 109"), which
is an asset and liability method of accounting for income
taxes. Deferred income taxes are provided on the
differences in the book and tax bases of the assets and
liabilities at the statutory tax rates expected to be in
effect when such differences reverse. A valuation allowance
is provided on the tax benefits otherwise associated with
certain tax attributes unless it is considered more likely
than not that the benefits will be realized. Provision is
not made for deferred income taxes on undistributed earnings
of foreign subsidiaries as the undistributed earnings are
considered to be permanently reinvested.
PREFERRED TECHNICAL GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
Note 2. Summary of Significant Accounting Policies
(continued)
Research, Development and Engineering Expenses --
Research, development and engineering expenditures related
to the design and development of new products, planning and
design for new processes or facilities, and the technical,
engineering and regulatory compliance support for all
Company locations are expensed when incurred. Research,
development and engineering expenses are presented net of
reimbursements received from customers for the design and
development of new products.
Foreign Currency Translation -- The foreign currency
financial statements of the Company's foreign subsidiary,
where the local currency is the functional currency, are
translated using exchange rates in effect at period end for
assets and liabilities and at weighted average exchange
rates during the period for income statement accounts. The
resulting foreign currency translation adjustments are
recorded as cumulative translation adjustments which are
reflected as a separate component of common stockholders'
equity. Exchange gains and losses resulting from foreign
currency transactions are included in income during the
periods in which they occur.
Recently Issued Accounting Standards -- The Financial
Accounting Standards Board has issued Statements of
Financial Accounting Standards No. 112, "Employers'
Accounting for Postemployment Benefits" (SFAS 112"), and No.
115, "Accounting for Certain Investments in Debt and Equity
Securities" (SFAS 115"). SFAS 112 required that the costs
of benefits provided to employees after employment but
before retirement be recognized in the financial statements
on an accrual basis. SFAS 115 requires that, except for
debt securities classified as "held-to-maturity securities,"
as they are defined in the statement, investments in debt
and equity securities should be reported at fair value. The
Company will be required to implement SFAS 112 and SFAS 115
in fiscal 1995 and the pronouncements are not expected to
have a significant effect on the Company's financial
position or the results of its operations.
PREFERRED TECHNICAL GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
Note 3. Acquisitions
On September 25, 1992, the Company acquired certain net
assets of the Hose and Fittings and Plastic Extrusion
business units of UTA. The acquisition has been recorded in
accordance with the purchase method of accounting.
Accordingly, the purchase price plus direct costs of the
acquisition have been allocated to the assets acquired and
liabilities assumed based on their estimated fair values at
the date of acquisition. The excess of the total cost of the
acquisition over the estimated fair value of the net assets
acquired has been recorded as goodwill.
A summary of assets acquired, liabilities assumed and the
purchase price paid is as follows:
Consideration:
Cash $ 58,086
Preferred stock 5,200
Costs of acquisition 7,178
--------
70,464
Liabilities assumed 15,811
--------
86,275
Fair value of assets acquired 78,348
--------
Cost in excess of fair value of
net assets acquired $ 7,927
========
The cash portion of the purchase price was financed
through certain of the borrowings described in Note 8. In
addition, the Company issued 5,200 shares of its Cumulative
12.5% Preferred Stock (the "preferred stock") to UTA to
finance a portion of the purchase price (see Note 11). The
results of operations and cash flows of the Hose and
Fittings and Plastic Extrusion business units of UTA have
been included in the accompanying financial statements of
the Company since the acquisition date.
On May 7, 1993, the Company acquired (through its wholly-
owned subsidiary, Multitec) certain net assets of Multitec
Engineering, Inc. ("MEI") in exchange for cash of $5,999,
notes payable issued to the seller of $1,513 (see Note 8)
and stock purchase warrants in Multitec and the Company (see
Note 12). Consideration related to the stock purchase
warrants, in addition to any cash consideration that may be
paid, is contingent upon the future earnings of Multitec.
Under certain circumstances, Multitec may be required to, or
at its option may, repurchase the aforementioned warrants
during the three year period commencing September 30, 1996.
PREFERRED TECHNICAL GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
Note 3. Acquisitions (continued)
The acquisition of MEI has been recorded in accordance
with the purchase method of accounting. Accordingly, the
purchase price of $7,997 consisting of cash, notes payable
and direct costs, has been allocated to the assets acquired
and liabilities assumed based on their estimated fair values
at the date of acquisition. The excess of the total cost of
the acquisition over the estimated fair value of the net
assets acquired has been recorded as goodwill. Any cash
paid or the fair value of any shares issued in the future
under the Asset Purchase and Sale Agreement will be
accounted for as an adjustment of the purchase price and
will be allocated to the assets acquired, primarily goodwill
(see Note 17). The cash portion of the acquisition was
financed with proceeds from the Company's revolving credit
facility (see Note 7). The results of operations and cash
flows of Multitec have been included in the accompanying
consolidated financial statements since the acquisition
date.
Note 4. Net Assets Held for Sale
During 1993, management decided to dispose of the net
assets of the Company's plastic profile products businesses.
During late 1994, the Company completed the sale of these
businesses. The estimated fair market value of these assets
recorded in connection with the original acquisition of
these business units from UTA approximated the actual
selling prices.
Net sales and net loss attributable to the Company's
plastic profile products businesses were approximately
$12,675 and $(219), respectively, for the year ended
June 25, 1994 (through date of disposition), and are
included in the consolidated statements of operations of the
Company.
Note 5. Inventories
Inventories at June 25, 1994 consist of the following:
Raw materials $ 9,790
Work-in-process 3,775
Finished goods 3,577
--------
Total inventories $ 17,142
========
PREFERRED TECHNICAL GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
Note 6. Property, Plant and Equipment
Property, plant and equipment at June 25, 1994 consist of
the following:
Land $ 369
Buildings 6,358
Machinery and equipment 36,065
Office equipment and computers 1,447
Vehicles 321
Construction-in-progress 2,809
--------
47,369
Less - accumulated depreciation 6,760
--------
Property, plant and equipment, net $ 40,609
========
Note 7. Revolving Credit Facility
During 1992, the Company initially entered into a Credit
Agreement (the "Credit Agreement") with a bank which
provides for a revolving credit facility (the "revolver") of
up to $17,500 against eligible accounts receivable and
inventories. On June 3, 1994, the limit on the revolver was
increased to $30,000. Certain loans under the revolver bear
interest at a floating rate, computed by taking the higher
of (i) the Federal Funds rate plus .5%, plus the applicable
margin rate of up to 1.5% or (ii) the prime rate plus the
applicable margin rate of up to 1.5%. Other loans under the
revolver bear interest at the Eurocurrency Rate and may be
denominated in British pounds sterling. The Company is also
required to pay a quarterly commitment fee of .5% per annum
on the unused portion of the revolver. At June 25, 1994, the
outstanding balance under the revolver denominated in U.S.
dollars was $11,144 and the applicable interest rate on the
balance was 8.75%. The remaining balance outstanding under
the revolver at June 25, 1994 of $3,105 was denominated in
British pounds sterling (2,000) and the applicable interest
rate on this balance was 8.25%.
While the Company may repay all or a portion of the
revolver borrowings at any time, any outstanding principal
must be repaid in full on October 15, 1999. The Credit
Agreement provides for mandatory prepayments of the revolver
borrowings under certain circumstances, including the event
of a sale of assets other than in the ordinary course of
business. As a result of the sale of the plastic profile
products businesses (see Note 4), a payment of $3,126 was
made on the revolver during the year ended June 25, 1994,
and the remaining payment due of $169 was made in July,
1994. Borrowings under the revolver are collateralized by
substantially all assets of the Company and its
subsidiaries.
PREFERRED TECHNICAL GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
Note 8. Long-Term Debt
Long-term debt at June 25, 1994 consists of the
following:
Series A senior secured note due October 15,
1999, interest payable monthly based upon
the London Interbank Offer Rate ("LIBOR")
plus the applicable margin (7% at June 25,
1994) $10,264
Series B senior secured note due October 15,
1999, payable in semiannual installments of
$2,500 commencing April 15, 1995, interest
payable monthly based upon the LIBOR rate
plus the applicable margin (7% at June 25,
1994) 25,000
Senior subordinated note due October 15,
2002, payable in semiannual installments of
$2,233 commencing April 15, 2000, 12%
interest payable quarterly, subordinated to
the revolving credit facility and the Series
A and B senior secured notes 13,400
Note payable to MEI, unsecured, due May 7,
1998, payable in sixty monthly installments
of $23, including principal and interest at
6% per annum 958
--------
49,622
Less - current portion 2,845
--------
Long-term debt $ 46,777
========
The Series A and B senior secured notes (the "Series A
and B notes") and the senior subordinated note (the "Senior
Note") (collectively referred to herein as the "senior loan
agreements") are held by a stockholder of the Company. In
addition, an officer of one of the Company's subsidiaries is
also the sole stockholder of MEI, the holder of the notes
payable described above. The note payable to MEI was repaid
in October 1994 (See Note 17).
In the event that the applicable margin on the Series A
and B notes is less than 1.5% for prime rate obligations and
3% for LIBOR obligations, the Company is required to pay a
Usage Fee, as defined. In addition to the scheduled
principal and interest payments on the Series A and B notes,
the lender is entitled to mandatory prepayments of principal
upon the occurrence of certain events such as excess cash
flow, as defined, a sale of assets other than in the
ordinary course of business or an initial public offering of
common stock. As a result of the sale of the plastic profile
businesses (see Note 4), a principal payment of $2,236 was
made on the Series A note during the year ended June 25,
PREFERRED TECHNICAL GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
Note 8. Long-Term Debt (continued)
1994, and the remaining payment due of $121 was made in
July, 1994. The Company may prepay the Series A and B notes
at any time subject to prepayment charges under certain
circumstances.
The Senior Note agreement provides for mandatory
prepayments of principal upon the occurrence of certain
events, including an initial public offering of stock, but
in any event not prior to full payment of the Series A and B
notes. The Company may prepay the Senior Note at any time
after October 15, 1994 subject to prepayment charges under
certain circumstances.
As required by the Series A and B senior secured note
agreement the Company entered into an interest rate cap
agreement that limits the LIBOR interest rate the Company
would pay to no more than 7% (plus applicable margin) on
$26,000 of debt. The interest rate cap agreement expires on
January 20, 1996.
Borrowings under the senior loan agreements are
collateralized by substantially all assets of the Company.
The Credit Agreement and senior loan agreements require the
Company to comply with certain affirmative and negative
covenants which include, among others, the maintenance of
specified financial ratios and limitations on payment of
cash dividends. The Company is in compliance with these
covenants at June 25, 1994. Cash paid for interest
approximated $4,888 for the year ended June 25, 1994.
The aggregate maturities of long-term debt are as
follows:
Fiscal year
-----------
1995 $ 2,845
1996 5,237
1997 5,252
1998 5,245
1999 5,000
Thereafter 26,043
--------
Total $ 49,622
========
PREFERRED TECHNICAL GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
Note 9. Retirement Plans
Defined Benefit Plan -- Effective October 1, 1992, the
Company adopted the PTG Hourly Employees Pension Plan (the
"Plan") which covers substantially all of the Company's
hourly employees. The Plan provides a monthly retirement
benefit to hourly employees based upon various fixed rates
and years of service. The Company's funding policy is to
contribute within the range of the minimum required and
maximum tax deductible contribution.
The net pension cost of the Plan for the year ended June
25, 1994 included the following components:
Service cost - for benefits earned $ 419
Interest cost on projected benefit
obligation 40
--------
Net pension cost $ 459
========
The funded status of the Plan at June 25, 1994 is as
follows:
Actuarial present value of:
Vested benefit obligation $ 739
Nonvested benefit obligation 155
--------
Accumulated benefit obligation $ 894
========
Projected benefit obligation $ 894
Plan assets at fair value 698
--------
Projected benefit obligation
in excess of plan assets (196)
Reconciling items:
Unrecognized prior service cost 21
Adjustment required to recognize
minimum liability 159
--------
Accrued pension cost $ (16)
========
Major assumptions used in accounting for the Company's
defined-benefit plan are as follows:
Discount rate for obligations 8.0%
Expected long-term rate of return on
plan assets 9.0%
PREFERRED TECHNICAL GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
Note 9. Retirement Plans (continued)
During the year ended June 25, 1994, the Company
contributed approximately $719 to the Plan.
Defined Contribution Plan -- On July 1, 1993 the Company
adopted the PTG 401(k) Savings Plan which covers
substantially all salaried employees. Under this plan, the
Company is required to match between 25% and 75% of an
employee's voluntary contributions. During the year ended
June 25, 1994, Company contributions of approximately $276
were charged to income.
Note 10. Income Taxes
The components of the provision for income taxes for the
year ended June 25, 1994 are as follows:
Current:
Federal $ 2,617
State 340
Foreign 417
--------
3,374
--------
Deferred:
Federal 3,041
State 488
Foreign 97
--------
3,626
--------
Total provision for taxes $ 7,000
========
PREFERRED TECHNICAL GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
Note 10. Income Taxes (continued)
Deferred tax assets (liabilities) at June 25, 1994 are
comprised of the following:
Deferred tax assets:
Differences in the valuation of
assets acquired and liabilities
assumed $ 36
Inventory valuation, principally
due to additional costs capitalized
for tax purposes 534
Receivables, due to allowance for
doubtful accounts 339
Deductions reported in different
periods for financial reporting and
tax purposes 673
--------
Gross deferred tax assets 1,582
--------
Deferred tax liabilities:
Depreciation and amortization (4,224)
Deductions reported in different
periods for financial reporting
and tax purposes (679)
Other (278)
--------
(5,181)
--------
Net deferred tax liability $ (3,599)
========
The differences between the effective tax rate and the
U.S. statutory federal tax rate for the year ended June 25,
1994 are as follows:
Taxes computed at the federal
statutory rate 35%
State income tax, net of federal
income tax benefit 5%
Other 1%
---
Effective tax rate 41%
===
Cash paid for income taxes for the year ended June 25,
1994 approximated $2,533.
PREFERRED TECHNICAL GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
Note 11. Preferred Stock
The holders of preferred stock are entitled to cumulative
dividends, at a rate of 12.5% per annum, based on par value
plus accumulated unpaid dividends. Upon dissolution,
liquidation or winding up of the Company, whether voluntary
or involuntary, holders of the preferred stock shall be
entitled to receive an amount per share equal to the
liquidation preference, defined as the par value per share
plus accumulated unpaid dividends. Dividend and liquidation
preference payments on the preferred stock are subordinate
to interest and liquidation preference payments on the
Series A and B senior secured notes (see Note 8).
The Company, at its option, may convert the preferred
stock into subordinated notes that bear interest at 12.5%.
In any event, the Company is required to redeem the
preferred stock (including unpaid dividends thereon) or, if
the preferred stock has been converted to notes, repay
principal and interest upon the earlier of a mandatory
redemption event, as defined, or February 1, 2003. A change
in control of the voting securities of the Company is a
mandatory redemption event.
The Company is restricted from issuing any shares of
stock which would have preference to or parity with the
preferred stock. The preferred stock has no voting rights,
except as provided by law.
Note 12. Common Stock
Common shares at June 25, 1994 consist of the following:
Issued and
Authorized outstanding
---------- -----------
Class P Common Stock
Series I 86,700 86,700
Series II 13,300 13,300
Undesignated 450,000
Common Stock
Series I 798,060 798,060
Series II 119,700 119,700
Undesignated 1,082,240 -
---------- ----------
2,550,000 1,017,760
========== ==========
PREFERRED TECHNICAL GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
Note 12. Common Stock (continued)
Voting Rights -- Holders of Series I common shares are
entitled to one vote per share. Holders of Series II common
shares have those voting rights as provided by law, with the
exception of certain specified events.
Dividends -- Dividend priorities on both classes of
common stock are based on Yield (defined as 15% of
Unreturned Cost plus unpaid Yield) and Unreturned Cost
(defined as original stock cost less distributions made in
excess of Yield). Dividends are first distributed to holders
of both series of Class P Common Stock to satisfy any
Unreturned Cost plus unpaid Yield. Any remaining dividends
are then distributed to the holders of both series of Common
Stock to the extent of any Unreturned Cost. Finally, any
remaining distribution is allocated ratably to all common
stockholders.
Conversion -- Certain shares of both classes of Series II
common stock are convertible at any time, at the option of
the holder, into an equal number of shares of Series I
common stock of the same class. Certain shares of both
classes of Series I common stock are also convertible at any
time, at the option of the holder, into an equal number of
shares of Series II common stock of the same class.
Common Stock Warrants -- In connection with the issuance
of the Senior Note (see Note 8), the Company sold a warrant
to purchase 100,514 shares of its Common Stock -- Series II
for $20. The warrants are exercisable at $.10 per share and
expire on January 15, 2003. In addition, upon the occurrence
of a Transaction Event, as defined, the holder, in lieu of
exercising the warrant, can require the Company to pay an
amount equal to 20% of the difference between (i) the
cumulative distributions made (including any made in
connection with the Transaction Event) and (ii) the original
cost of Class P Common shares outstanding on the date of
such an event. Alternatively, in the event that certain
conditions exist on the date of a Transaction Event, the
holder, in lieu of exercising the warrant, can require the
Company to pay an amount equal to 20% of the aggregate Yield
(paid and unpaid) on the Class P Common shares outstanding
on the date of such an event.
PREFERRED TECHNICAL GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
Note 12. Common Stock (continued)
In connection with the acquisition of certain net assets
of the Hose and Fittings and Plastic Extrusion business
units of UTA (see Note 3), certain advisors of the Company
were issued warrants to purchase 220,100 shares of its
Common Stock -- Series I. Of the total shares obtainable
upon exercise of this warrant, 37,000 shares were designated
as nominal shares and 183,100 shares were designated as IRR
shares. Nominal shares can be purchased at an exercise price
of $.10 per share and expire on January 15, 2003. IRR shares
can only be exercised upon the earlier to occur of (i) a
Transaction Event or (ii) January 15, 2003 at exercise
prices which range from $1.89 to $52.78, that are determined
based upon the date the warrant is exercised. These warrants
were fair valued in the accounting for the original
acquisition of certain net assets of the Hose & Fittings and
Plastic Extrusion business units of UTA.
A Transaction Event is defined as (i) a merger of the
Company with another entity, (ii) a sale or disposition of
substantially all of the assets or stock of the Company, or
(iii) a public offering of more than 50% of the Company's
common stock pursuant to one or more effective registration
statements under the Securities Act of 1933.
On June 6, 1994, the Company redeemed warrants to
purchase 140,621 shares of its Common Stock - Series I,
designated IRR shares, from the aforementioned advisors of
the Company for $5,062. The redemption has been shown as a
decrease in additional paid-in capital. In addition,
concurrent with the redemption, the advisors of the Company
exercised the warrants to purchase 17,760 shares of the
Company's Common Stock -Series I, designated nominal shares,
at a price of $.10 per share. Of the remaining 61,719
shares of the Company's Common Stock - Series I obtainable
upon exercise of these warrants at June 25, 1994, 19,240
shares are designated as nominal shares, and 42,479 are
designated as IRR shares.
In October 1992, certain officers of the Company were
granted warrants to purchase 58,500 shares of its Common
Stock -- Series I. Of the total shares obtainable upon
exercise of these warrants, 36,000 shares are designated as
nominal shares and 22,500 shares are designated as IRR
shares. Nominal shares vest ratably over a three year period
ending in October 1995, expire on January 15, 2003, and can
PREFERRED TECHNICAL GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
Note 12. Common Stock (continued)
be purchased at an exercise price of $.10 per share. IRR
shares expire on January 15, 2003 and although the shares
vest ratably over a three year period, the warrant can be
exercised only upon the earlier to occur of (i) a
Transaction Event, or (ii) January 15, 2003. In April 1993,
by shareholder resolution, the exercise price of the IRR
shares was fixed at $1.00 per share; all other terms of the
warrants remained the same. As a result of this amendment,
the Company will recognize total compensation of
approximately $315, which is being amortized to expense over
the period earned of ten years.
In connection with the acquisition of certain net assets
of MEI (see Note 3), the Company issued a warrant to
purchase shares of its Common Stock -- Series I. Shares
obtainable upon exercise of this warrant vest upon the
earlier of September 30, 1996 or the occurrence of a
Transaction Event. Upon the occurrence of a Transaction
Event subsequent to June 30, 1996, the number of shares
obtainable upon exercise of this warrant will be determined
pursuant to a formula that is based upon the earnings before
interest and income taxes of Multitec. Prior to June 30,
1996, the number of shares obtainable upon exercise of this
warrant will be mutually agreed upon by the holder and the
Company, however, in no event will the number of shares
obtainable exceed the amount determined by the above
described formula. Of the total shares obtainable upon
exercise of this warrant, an equal amount of shares will be
designated as nominal shares and IRR shares. Nominal shares
can be purchased at an exercise price of $.10 per share and
expire on January 15, 2003. IRR shares can only be exercised
upon the earlier to occur of (i) a Transaction Event or (ii)
January 15, 2003 at exercise prices which range from $1.89
to $52.78, that are determined based upon the date the
warrant is exercised. During October 1994, the Company
repurchased these warrants (See Note 17).
Also in connection with the acquisition of certain net
assets of MEI, a warrant to purchase 1,756 shares of
Multitec's common stock was issued by Multitec. The warrant
can only be exercised during the period from September 30,
1996 through September 30, 1999 at an exercise price of $.10
per share. During this period, Multitec has an option to
repurchase, and the holder has a right to require Multitec
to repurchase, the warrant. In addition, prior to September
30, 1996 the holder can require Multitec to repurchase the
warrant upon the occurrence of a Transaction Event. In the
event that the warrant must be repurchased, the repurchase
price will be determined pursuant to formulas that are based
upon the earnings before interest and income taxes of the
Company and Multitec. During October 1994, the Company
repurchased these warrants (See Note 17).
PREFERRED TECHNICAL GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
Note 13. Stock Option Plans
1992 Stock Option Plan -- Under the 1992 Stock Option
Plan (the "1992 Plan"), directors, officers, employees and
certain other individuals may be awarded shares or granted
options and rights to purchase up to 97,916 shares of the
Company's Common Stock -- Series I. Stock options under the
1992 Plan are non-qualified, and may be granted at exercise
prices not less than the fair market value of the stock at
the date of option grant. Stock options granted under the
1992 Plan vest over periods determined by the Board of
Directors, not to exceed ten years.
Stock option activity is summarized as follows:
Exercise price
Shares per share
------- --------------
Outstanding at June 26, 1993 10,100 $15.00 - $128.00
Granted 38,850 $60.00 - $199.29
Exercised
Terminated (250)
------
Outstanding at June 25, 1994 48,700 $15.00 - $199.29
======
At June 25, 1994, no outstanding options were exercisable
and 49,216 shares were available for future grant. Upon the
Sale of the Company, as defined, all unvested stock options
become immediately exercisable; an initial public offering
of the Company's stock is a Sale of the Company.
Upon the consummation of the Company's initial public
offering of common stock, the number of shares reserved for
the issuance under the 1992 Plan shall be frozen and the
number of shares available for further grants or sales
thereunder shall only be available for issuance under the
1994 Stock Option Plan described below.
1994 Stock Option Plan -- The Board has authorized, and
the stockholders of the Company have approved, the 1994
Stock Option Incentive Plan (the "1994 Plan") for members of
management, key employees and outside consultants and
advisors of the Company. The 1994 Plan is effective upon the
consummation of the Company's initial public offering of
common stock. No stock options or stock appreciation rights
are currently outstanding under the 1994 Plan, nor have any
yet been granted.
PREFERRED TECHNICAL GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
Note 13. Stock Option Plans (continued)
1994 Non-Employee Directors Stock Option Plan -- The
Board has authorized, and the stockholders of the Company
have approved, the 1994 Non-Employee Directors Stock Option
Plan (the "1994 Directors Plan") for directors of the
Company who are not employees. The 1994 Directors Plan is
effective upon the consummation of the Company's initial
public offering of common stock. No stock options are
currently outstanding under the 1994 Plan.
Note 14. Segment and Major Customer Information
The Company's operations have been classified into two
segments; coupled hose and plastic extrusion products. The
coupled hose products segment is engaged in the design and
manufacture of coupled hose assemblies to facilitate the
flow of fluids, principally through the power steering,
brake, air conditioning and heating systems of automobiles.
The plastic extrusion products segment is engaged in the
formulation and extrusion of plastic for plastic end-product
manufacturers (include plastics profile products businesses
prior to date of disposition - See Note 4).
Summarized financial information by business segment for
the year ended June 25, 1994 is as follows:
Net sales:
Coupled hose products $186,807
Plastic extrusion products 60,158
--------
Total $246,965
--------
Income (loss) from operations:
Coupled hose products $ 21,751
Plastic extrusion products 5,689
Corporate and eliminations (5,457)
--------
Total $ 21,983
========
Identifiable assets:
Coupled hose products $ 95,977
Plastic extrusion products 26,659
Corporate and eliminations 7,868
--------
Total $130,504
========
PREFERRED TECHNICAL GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
Note 14. Segment and Major Customer Information (continued)
Summarized financial information by geographical area for
the year ended June 25, 1994 is as follows:
Net sales:
United States $230,559
United Kingdom 16,406
--------
Total $246,965
========
Income from operations:
United States $ 20,439
United Kingdom 1,544
--------
Total $ 21,983
========
Identifiable assets:
United States $121,728
United Kingdom 8,776
--------
Total $130,504
========
Operations in the United Kingdom consist of a subsidiary
which designs and produces coupled hose assemblies for
European and American automobile manufacturers.
Revenues from one domestic automobile manufacturer
totaled approximately $136,000 (55%) for the year ended June
25, 1994.
Note 15. Related Party Transactions
In connection with the acquisition of the Hose and
Fittings and Plastic Extrusion business units of UTA (see
Note 3), the Company entered into a transition services
agreement with UTA covering accounting and management
information services, assistance with certain supplier
relationships and contracts, insurance coverage and
administration, and human resource administration. In
accordance with its terms, the Company terminated the
services agreement as of July 31, 1993. Service fees charged
to income were $50 for the year ended June 25, 1994.
PREFERRED TECHNICAL GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
Note 15. Related Party Transactions (continued)
In October 1992, the Company issued common stock to
certain officers of the Company in exchange for notes. The
notes are due in October 1996 and bear interest at the LIBOR
rate plus 3% (6.375% at June 25, 1994).
Consulting services provided to the Company by a
stockholder aggregated $265 for year ended June 25, 1994.
In addition, certain other stockholders of the Company
provide administrative support services for which the
Company pays a monthly management fee of $50. Management
fees charged to income were $600 for the year ended June 25,
1994. Amounts payable to these parties were $263 at June 25,
1994 and are included in other accrued liabilities.
Note 16. Commitments and Other
Leases -- The Company leases its corporate office
facilities and certain equipment under operating leases
expiring on various dates through April, 1999. At June 25,
1994, future minimum lease payments under operating leases
with initial or remaining noncancelable terms of one or more
years are as follows:
Fiscal year
-----------
1995 $ 969
1996 959
1997 789
1998 746
1999 405
--------
Total $ 3,868
========
The Company leases the land on which one of its
facilities operates. This lease requires annual rental
payments of $5, expires on September 30, 2091, and may be
terminated by the Company at any time upon payment of $10.
In addition, the Company has an option to purchase the land
at any time for a purchase price of one hundred dollars.
Rental expense charged to operations approximated $1,120
for the year ended June 25, 1994.
Environmental Matters -- The Company is subject to
various federal, state, and local environmental laws and
regulations. The Company negotiated certain indemnification
provisions as part of the Asset Sale Agreement (the
"Agreement") with UTA. To date, environmental laws and
regulations have not had a material effect on the financial
condition of the Company.
PREFERRED TECHNICAL GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
Note 17. Adjustment to the MEI Purchase Price
As described in Notes 3 and 12, the Company acquired
certain net assets of MEI in May 1993. The final purchase
price related to the acquisition of such net assets was
contingent upon consideration related to the stock purchase
warrants as well as future earnings of Multitec, as defined
in the Asset Purchase and Sale Agreement. In October 1994,
the Company, at its option, repurchased all of the stock
purchase warrants issued to MEI and settled the purchase
price contingency in exchange for a $4,000 note payable.
The $4,000 will be accounted for as an adjustment of the
purchase price, and accordingly, will be allocated to
goodwill. In addition, in conjunction with the
aforementioned transaction, the Company repaid the note
payable to MEI described in Note 8. The accompanying
consolidated financial statements are presented without
giving effect to the aforementioned transactions.
Note 18. Event Subsequent to Report Dates (Unaudited)
On December 20, 1994, the outstanding capital stock of
the Company was sold to Echlin, Inc. for cash consideration
of $190,000. The aggregate purchase price is subject to a
dollar-for-dollar post closing adjustment to the extent the
closing date net book value varies from $85,500. However,
in no event shall the post closing adjustment to the
purchase price exceed $11,400. The accompanying consolidated
financial statements are presented without giving effect to
the aforementioned transaction.
PREFERRED TECHNICAL GROUP INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
Note 19. Quarterly Consolidated Financial Information (Unaudited)
Quarter Quarter Quarter Quarter Year
ended ended ended ended ended
September 25, December 25, March 26, June 25, June 25,
1993 1993 1994 1994 1994
------------- ------------- ----------- --------- ---------
Net sales $52,761 $59,406 $63,329 $71,469 $246,965
======= ======= ======= ======= ========
Gross profit $ 6,506 $ 7,682 $ 8,814 $12,086 $ 35,088
======= ======= ======= ======= ========
Net income $ 1,512 $ 1,772 $ 2,688 $ 4,067 $ 10,039
Accrued dividends
on preferred stock 167 167 188 188 710
------- ------- ------- ------- --------
Net income applicable
to common stock $ 1,345 $ 1,605 $ 2,500 $ 3,879 $ 9,329
======= ======= ======= ======== ========
ECHLIN INC. AND PREFERRED TECHNICAL GROUP INTERNATIONAL, INC.
PRO FORMA COMBINED STATEMENTS OF INCOME (UNAUDITED)
(in thousands, except per share data)
The following pro forma combined statements of income have been prepared by
combining the consolidated statement of income of Echlin Inc. and the
consolidated statement of income of Preferred Technical Group International,
Inc. ("PTG"). The results of PTG for the three months ended November 30,
1994 were derived from its unaudited internal financial statements while
its results for the year ended August 31, 1994 were derived from its
audited financials for the year ended June 25, 1994. Adjustments have been
made to reflect the acquisition of PTG by Echlin Inc. as if it had occurred
on September 1, 1993. The pro forma earnings are not necessarily indicative
of what actual earnings of the combined companies would have been if combined
for the periods or what they will be in the future.
Pro Forma Pro Forma
Echlin PTG Adjustments Combined
-------- ----- ------------- ----------
Year ended August 31, 1994
- --------------------------
Net sales $2,229,474 $246,965 $2,476,439
Cost of goods sold (Note 1) 1,571,256 211,877 (5,402) 1,777,731
---------- -------- -------- ----------
Gross profit 658,218 35,088 5,402 698,708
Selling and administrative expenses 468,511 13,025 8,014 489,550
(Note 1 and 3) ---------- -------- -------- ----------
Income from operations 189,707 22,063 (2,612) 209,158
Interest expense, net (Note 2) 11,661 5,024 2,196 18,881
---------- -------- -------- ----------
Income before taxes 178,046 17,039 (4,808) 190,277
Provision for taxes (Note 4) 56,975 7,000 (250) 63,725
---------- -------- -------- ----------
Net income from continuing
operations 121,071 10,039 (4,558) 126,552
========== ======== ======== ==========
Average shares outstanding 58,996 58,996
========== ==========
Net income per share $2.06 $2.15
====== ======
ECHLIN INC. AND PREFERRED TECHNICAL GROUP INTERNATIONAL, INC.
PRO FORMA COMBINED STATEMENTS OF INCOME (UNAUDITED) - Continued
(in thousands, except per share data)
Pro Forma Pro Forma
Echlin PTG Adjustments Combined
-------- ----- ------------- ----------
Three months ended November 30, 1994
- ------------------------------------
Net sales $600,615 $77,934 $678,549
Cost of goods sold (Note 1) 424,556 62,659 (586) 486,629
-------- ------- -------- --------
Gross profit 176,059 15,275 586 191,920
Selling and administrative expenses 126,298 4,545 1,239 132,082
(Note 1 and 3) -------- ------- ------- --------
Income from operations 49,761 10,730 (653) 59,838
Interest expense, net (Note 2) 3,002 1,467 1,003 5,472
-------- ------- ------- --------
Income before taxes 46,759 9,263 (1,656) 54,366
Provision for taxes (Note 4) 14,963 3,797 (189) 18,571
-------- ------- ------- --------
Net income from continuing
operations 31,796 5,466 (1,467) 35,795
======== ======= ======= ========
Average shares outstanding 59,321 59,321
======== ========
Net income per share $0.54 $0.60
======== ========
ECHLIN INC. AND PREFERRED TECHNICAL GROUP INTERNATIONAL, INC.
NOTES TO PRO FORMA COMBINED STATEMENTS OF INCOME (UNAUDITED)
The following footnotes should be read in conjunction with the pro forma
combined statements of income.
(1) Reclassify PTG expenses to conform to Echlin's basis of presentation.
(2) Record interest expense associated with the issuance of debt at the time
of the acquisition at interest rates of 3.8% and 5.2% for the year ended
August 31, 1994 and three months ended November 30, 1994, respectively,
and eliminate interest expense on PTG debt repaid at the time of the
acquisition.
(3) Record amortization expense on the goodwill resulting from the purchase
accounting entry of $2,612 and $653 for the year ended August 31, 1994 and
the three months ended November 30, 1994, respectively.
(4) Record tax effect of the above entries.
ECHLIN INC. AND PREFERRED TECHNICAL GROUP INTERNATIONAL, INC.
PRO FORMA COMBINED BALANCE SHEET (UNAUDITED)
(in thousands)
The following unaudited pro forma combined balance sheet was developed by
combining the consolidated balance sheet of Echlin Inc. with the consolidated
balance sheet of Preferred Technical Group International, Inc. as of November
30, 1994. Adjustments have been made to give effect to the acquisition as if
it occurred on November 30, 1994.
November 30, 1994
------------------------------------------------------
Pro Forma Pro Forma
Echlin PTG Adjustments Combined
------- ------ ------------ ----------
ASSETS
Current assets:
Cash and cash equivalents $54,509 $1,629 $56,138
Accounts receivable, net 295,412 57,269 352,681
Inventories 607,688 17,456 625,144
Other current assets 29,377 2,065 31,442
----------- -------- -------- ----------
Total current assets 986,986 78,419 1,065,405
Property, plant and equipment, net 451,067 42,433 493,500
Marketable securities 112,606 112,606
Other assets (Note 1 and 2) 102,109 20,549 101,371 224,029
---------- -------- -------- ----------
Total assets $1,652,768 $141,401 $101,371 $1,895,540
========== ======== ======== ==========
ECHLIN INC. AND PREFERRED TECHNICAL GROUP INTERNATIONAL, INC.
PRO FORMA COMBINED BALANCE SHEET (UNAUDITED) - Continued
(in thousands)
November 30, 1994
------------------------------------------------------
Pro Forma Pro Forma
Echlin PTG Adjustments Combined
------- ------ ------------ ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to banks (Note 1) $4,611 $15,851 ($15,851) $4,611
Current portion of long-term debt (Note 1) 2,108 6,941 (6,941) 2,108
Accounts payable, trade 164,223 26,921 191,144
Accrued taxes on income 48,754 4,274 53,028
Accrued liabilities (Note 1 and 4) 199,729 4,919 11,477 216,125
---------- -------- -------- -----------
Total current liabilities 419,425 58,906 (11,315) 467,016
Long-term debt (Note 1 and 3) 342,317 45,602 144,398 532,317
Deferred income taxes 56,211 5,181 61,392
Shareholders' equity (Note 1) 834,815 31,712 (31,712) 834,815
---------- -------- -------- -----------
Total liabilities and shareholder's equity $1,652,768 $141,401 $101,371 $1,895,540
========== ======== ======== ==========
ECHLIN INC. AND PREFERRED TECHNICAL GROUP INTERNATIONAL, INC.
NOTES TO PRO FORMA COMBINED BALANCE SHEET (UNAUDITED)
(in thousands)
On December 20, 1994, Echlin Inc. acquired all of the outstanding capital stock
of Preferred Technical Group International, Inc. for a cash purchase price of
$190,000. This purchase price is subject to a dollar for dollar post closing
adjustment to the extent that the audited closing net book value varies from
$85,500 ("target net worth").
The purchase accounting adjustments presented below represent estimates and are
subject to change based upon the finalization of this transaction.
(1) Represents the elimination of assets not acquired and liabilities not
assumed.
(2) To record as goodwill the difference between the purchase price and the
net assets acquired.
Purchase price $190,000
Estimated purchase price adjustment 12,043
--------
202,043
Net assets acquired 97,543
--------
Goodwill $104,500
========
(3) To record issuance of debt at the time of the acquisition, net of PTG debt
not assumed.
(4) Estimated purchase price adjustment representing the difference between
actual and target net worth.