UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A-1
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): October 20, 1995
SPS TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
Pennsylvania 1-4416 23-1116110
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
101 Greenwood Avenue, Suite 470
Jenkintown, Pennsylvania 19046
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 517-2000
2
SPS TECHNOLOGIES, INC. AND SUBSIDIARIES
Filed herewith as Items 7(a), (b) and (c) to this Form 8-
K/A-1 are the required financial statements and pro forma
financial information, relating to the acquisition by SPS
Technologies, Inc. (the "Registrant") of the outstanding capital
stock of Metalac S.A. Industria e Comercio, such transaction as
more fully described in the Current Report on form 8-K filed by
the Registrant on August 28, 1995.
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.
SPS Technologies, Inc.
(Registrant)
/s/William M. Shockley
William M. Shockley
Vice President, Chief Financial
Officer and Controller
Date: October 20, 1995
Mr. Shockley is signing on behalf of the Registrant and as
the Chief Financial Officer of the Registrant.
3
Item 7. Financial Statements, Pro Forma Information and Exhibits
(a) Financial Statements of Business Acquired
I. Metalac S.A. Industria e Comercio Audited Financial Statements
Report of Independent Accountants
Consolidated Balance Sheets as of December 31, 1994 and 1993
Consolidated Statements of Income for the Years Ended
December 31, 1994 and 1993
Consolidated Statements of Changes in Shareholders' Equity
for the Years Ended December 31, 1994 and 1993
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1994 and 1993
Notes to the Consolidated Financial Statements
II. Metalac S.A. Industria e Comercio Unaudited Interim
Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 1995 and
December 31, 1994
Condensed Consolidated Statements of Income for the
Six Months Ended June 30, 1995 and 1994
Condensed Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1995 and 1994
Notes to the Condensed Consolidated Financial Statements
(b) Pro Forma Financial Statements of SPS Technologies, Inc. and Metalac
S.A. Industria e Comercio
Introduction to Historical and Pro Forma
Consolidated Financial Statements
Unaudited Pro Forma Condensed Consolidated
Balance Sheets as of June 30, 1995
Unaudited Pro Forma Condensed Consolidated Statements
of Consolidated Operations for the Six Months Ended June 30,
1995 and for the Year Ended December 31, 1994
Notes to the Condensed Consolidated Pro Forma Financial
Statements
(c) Exhibits
23 Consent of Independent Accountants
4
COOPERS & LYBRAND
REPORT OF INDEPENDENT ACCOUNTANTS
To the
Shareholders and Board of Directors of
Metalac S.A. Industria e Comercio
1 We have audited the accompanying consolidated balance sheets
of Metalac S.A. Industria e Comercio and its subsidiaries as
of December 31, 1994 and 1993, and the related consolidated
statements of income, changes in shareholders' equity and
cash flows for the years then ended. 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.
2 We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
Management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
3 In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Metalac S.A. Industria e Comercio and
its subsidiaries as of December 31, 1994 and 1993, and the
consolidated results of their operations and their cash
flows for the years then ended, in conformity with
accounting principles generally accepted in the United
States.
Sorocaba, Brazil
January 20, 1995, except as
to notes 13 and 16 for which
date is May 25, 1995 /S/ Coopers & Lybrand
5
METALAC S.A. INDUSTRIA E COMERCIO
CONSOLIDATED BALANCE SHEETS
as of December 31, 1994 and 1993
(in thousands of U.S. dollars)
____________
ASSETS
1994 1993
Current Assets
Cash and Cash Equivalents 691 575
Accounts Receivable, Net (Note 3) 3,316 1,612
Inventories (Note 4) 6,673 4,948
Deferred Income Tax (Note 11) 483 652
Anticipated Income Tax 314 18
Other Current Assets 488 234
______ _____
Total Current Assets 11,965 8,039
______ _____
Long-Term Assets
Judicial Deposits and Other (Note 5) 779 541
Property, Plant and Equipment, Net (Note 6) 14,603 15,472
Deferred Charges 152 324
Other Investments 56 84
______ ______
Total Long-Term Assets 15,590 16,421
______ ______
Total Assets 27,555 24,460
====== ======
The accompanying notes are an integral part of the
consolidated financial statements.
6
METALAC S.A. INDUSTRIA E COMERCIO
CONSOLIDATED BALANCE SHEETS
as of December 31, 1994 and 1993
(in thousands of U.S. dollars)
_____________
LIABILITIES
1994 1993
Current Liabilities
Accounts Payable, Local Suppliers 507 25
Accounts Payable, Foreign Suppliers 151 324
Salaries and Payroll Taxes (Note 7) 1,668 430
Taxes Payable, Other than Income
Tax (Note 8) 729 719
Social Contribution 61 -
Note Payable and Current Portion of
Long-Term Debt (Note 9) 987 1,112
Dividends Payable (Note 12) 242 -
Other Accounts Payable 565 530
_____ _____
Total Current Liabilities 4,910 3,140
_____ _____
Long-Term Liabilities
Long-Term Debt (Note 9) 337 683
Deferred Income Tax (Note 11) 20 140
Other Liabilities (Note 10) 454 601
_____ _____
Total Long-Term Liabilities 811 1,424
_____ _____
Total Liabilities 5,721 4,564
===== =====
The accompanying notes are an integral part of the
consolidated financial statements.
7
METALAC S.A. INDUSTRIA E COMERCIO
CONSOLIDATED BALANCE SHEETS
as of December 31, 1994 and 1993
(in thousands of U.S. dollars)
_____________
SHAREHOLDERS' EQUITY
1994 1993
Shareholders' Equity
Capital Composed by:
Preferred Stock, without par Value,
Authorized 728,777,800 Shares, and
Issued 675,177,800 Shares
(675,177,800 Shares Issued in 1993)
Common Stock, without par Value,
Authorized and Issued 671,222,200
Shares (671,222,200 Shares Issued in
1993) 16,488 16,488
Preferred Stock in Treasury, at
Cost (Note 13) (222) -
Retained Earnings (Note 12) 5,568 3,408
______ ______
Total Shareholders' Equity 21,834 19,896
______ ______
Total Liabilities and
Shareholders' Equity 27,555 24,460
====== ======
The accompanying notes are an integral part of the
consolidated financial statements.
8
METALAC S.A. INDUSTRIA E COMERCIO
CONSOLIDATED STATEMENTS OF INCOME
for the years ended December 31, 1994 and 1993
(in thousands of U.S. dollars)
____________
1994 1993
Net Sales 25,530 21,193
Cost of Goods Sold (16,413) (13,789)
______ ______
Gross Profit 9,117 7,404
Operating Expenses
Management's Fees (421) (278)
General and Administrative Expenses (6,078) (5,199)
Financial Expenses (424) (582)
______ ______
Operating Income 2,194 1,345
Other Income (Expense)
Equity in Earnings of Affiliates - (31)
Financial Income 453 392
Translation Gain/(Loss) 331 (1,828)
Other, Net 184 498
______ ______
Total Other Income (Expense) 968 (969)
______ ______
Income Before Taxes on Income
and Social Contribution 3,162 376
Income Tax and Social
Contribution (Note 11) (636) 740
______ ______
Net Income for the Year 2,526 1,116
====== ======
The accompanying notes are an integral part of the
consolidated financial statements.
9
METALAC S.A. INDUSTRIA E COMERCIO
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
for the years ended December 31, 1994 and 1993
(in thousands of U.S. dollars)
_____________
Retained Common Shares
Capital Earnings in Treasury Total
Balances as of
December 31, 1992 16,488 2,292 - 18,780
Net Income 1,116 1,116
______ _____ ______ ______
Balances as of
December 31, 1993 16,488 3,408 - 19,896
Dividends (366) (366)
Common Shares
Purchased in
Treasury (222) (222)
Net Income 2,526 2,526
______ _____ ______ ______
Balances as of
December 31, 1994 16,488 5,568 (222) 21,834
====== ===== ====== ======
The accompanying notes are an integral part of the
consolidated financial statements.
10
METALAC S.A. INDUSTRIA E COMERCIO
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 1994 and 1993
(in thousands of U.S. dollars)
_________________
1994 1993
Cash Flows from Operating Activities
Net Income 2,526 1,116
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating
Activities:
Depreciation and Amortization 1,590 1,750
Equity in Earnings of Affiliates - 31
Deferred Income Tax, Net 49 (381)
Profit on Fixed Assets Sold (86) (197)
Changes in Assets and Liabilities
Increase in Trade Accounts Receivable (1,704) (485)
Increase in Inventories (1,725) (783)
Increase in Anticipated Income Tax (296) (18)
Increase in Judicial Deposits
Related to Legal Proceedings (238) (482)
Increase in Trade Accounts Payable 309 49
Increase/(Decrease) in Salaries and
Payroll Taxes 1,238 (71)
Increase/(Decrease) in Income Tax
Payable 71 (476)
Decrease in Other Assets and
Liabilities, Net (219) (51)
Decrease in Other Long-Term Liabilities (147) -
Increase in Dividends Payable 242 -
_____ _____
Net Cash Provided by Operating
Activities 1,610 2
Cash Flows Provided by/(Used in) Investing
Activities
Purchases of Fixed Assets (730) (376)
Proceeds from Sale of Fixed Assets 267 391
Proceeds from Other Investments 28 -
_____ _____
Net Cash Provided by/(Used in)
Investing Activities (435) 15
The accompanying notes are an integral part of the
consolidated financial statements.
11
METALAC S.A. INDUSTRIA E COMERCIO
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
for the years ended December 31, 1994 and 1993
(in thousands of U.S. dollars)
___________________
1994 1993
Cash Flows Used in Financing Activities
Decrease in Financings (471) (768)
Dividends (366) (50)
Purchases of Treasury Shares (222) -
______ ______
Net Cash Used in Financing Activities (1,059) (818)
______ ______
Net Increase/(Decrease) in Cash and
Cash Equivalents 116 (801)
Cash and Cash Equivalents at Beginning
of Year 575 1,376
______ ______
Cash and Cash Equivalents at End of Year 691 575
====== ======
Supplemental Cash Flow Disclosures
Interest Paid 193 93
Income Tax Paid (Refunded), Net 565 167
The accompanying notes are an integral part of the
consolidated financial statements.
12
METALAC S.A. INDUSTRIA E COMERCIO
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the years ended December 31, 1994 and 1993
(in thousands of U.S. dollars)
________________
1 Summary of Activities
The main activity of Metalac S.A. Industria e Comercio
and its subsidiaries, "the Company", is the manufacture
and sale, in Brazil and abroad, of high-resistance
mechanical elements for fastening, such as screws, nuts,
pins and the like.
2 Significant Accounting Policies
2.1 Accounting Records
The legal accounting records of the Company are
maintained in Brazilian currency and in accordance with
local accounting practices and law. In order to present
financial statements in conformity with accounting
principles generally accepted in the United States, the
Company maintains additional accounting records which are
used solely for this purpose.
2.2 Currency Remeasurement
The Company follows Statement of Financial Accounting
Standards No. 52, Foreign Currency Translation. Under
this statement, the United States dollar is the
functional currency as Brazil is a high inflation
country. As such, the local accounts of the Company are
translated into United States dollars as follows:
2.2.1 Balance sheet accounts are translated into United States
dollars at current exchange rate for monetary items and
at historical rates for all other items. Revenue and
expense accounts are translated at the average exchange
rate in effect during each month, except for those
accounts which relate to assets and liabilities
translated at historical rates. Translation gains and
losses are recognized in the statements of income.
2.3 Effects of Inflation in the Local Accounting Records
Brazilian corporation law requires price-level
restatement of permanent assets (fixed assets, deferred
charges and permanent investments) and shareholderes'
equity accounts in the local records maintained in reais,
using the Tax Reference Unit (Ufir).
13
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
_______________
The monetary correction amounts computed are recorded in
the respective financial statement accounts with the net
amount recorded as a gain or loss in the statement of
income. Net monetary correction gains are taxable,
although to the extent that such gains exceed foreign
exchange losses and monetary correction adjustments on
real indebtedness, the payment of income tax thereon is
deferred. Net monetary correction losses are deductible
for income tax purposes. The effects of inflation are
eliminated for the financial statements in conformity
with accounting principles generally accepted in the
United States.
2.4 Principles of Consolidation
The consolidated financial statements include the
accounts of Metalac S.A. Industria e Comercio and its
wholly-owned subsidiaries, Metalac Exportacoes e
Participacoes Ltda., Metalinox Industria e Comercio
Ltda., International Fastener Trading Co. and MEPS
Produtos Sinterizados Ltda. All significant intercompany
balances and transactions have been eliminated in
consolidation.
2.5 Financial Instruments
The carrying value of the Company's financial instruments
as of December 31, 1994 and 1993 approximates their
estimated fair values. The following methods and
assumptions were used to estimate the fair value of each
class of financial instruments for which it is
practicable to estimate that value:
2.5.1 Cash and Cash Equivalents
The Company considers cash and cash equivalents to be all
highly liquid investments purchased with original
maturities of three months or less. The carrying amount
approximates fair value because of the short-term
maturity of these items.
2.5.2 Short-Term Borrowings
The carrying amount approximates fair value due to the
short-term maturity of these instruments.
14
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
________________
2.5.3 Long-Term Debt
The fair value of long-term debt is estimated based on
the quoted market prices for the same or similar issues.
2.5.4 Concentration of Credit Risk
The Company sells its principal products to a large
number of customers in different industries and
geographies. To reduce credit risk, the Company performs
ongoing credit evaluations of its customers' financial
conditions but does not generally require collateral.
The Company invests available cash in money market
securities of various banks with high credit ratings.
2.6 Inventories
Inventories are stated at the average acquisition or
production cost, less a provision for adjustment to net
realilzable value, whenever applicable.
2.7 Property, Plant and Equipment
Property, plant and equipment are carried at cost.
Depreciation of cost is provided over the estimated
useful lives of the assets using the straight-line
method. Repairs and maintenance are charged to expense
as incurred. Profits or losses resulting from the sale
of assets are included in the statements of income as
Other Income or Expense.
2.8 System Development Expenses
System development expenses, under the caption Deferred
Charges, are amortized by the straight-line method over
sixty (60) months from the implementation of each system.
2.9 Income Taxes
Taxes on income are determined under Statement of
Financial Accounting Standards No. 109 (FAS 109)
"Accounting for Income Taxes." Under this method,
deferred tax liabilities and assets are determined based
on the difference between financial statement and tax
basis of assets and liabilities using enacted statutory
tax rates in effect at the balance sheet dates.
15
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
________________
3 Accounts Receivable
Components are as follows:
1994 1993
Accounts Receivable, Trade 3,881 2,138
Discounted Exchange Bills (560) (521)
Allowance for Bad Debts (5) (5)
______ ______
3,316 1,612
______ ______
4 Inventories
Components are as follows:
1994 1993
Finished Goods 2,473 2,534
Work in Process 1,900 884
Raw Materials 1,016 706
Tools and Supplies 1,284 824
______ ______
6,673 4,948
______ ______
5 Judicial Deposits and Other
Components are as follows:
1994 1993
Finsocial 31 23
Income Tax 321 228
Compulsory Loan 152 108
Excise Tax (IPI) on Imports 94 68
Other 181 114
______ ______
779 541
====== ======
16
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
________________
6 Property, Plant and Equipment
1994 1993
Land 61 61
Building and Improvements 5,824 5,824
Machinery and Equipment 26,796 26,639
Construction in Progress 119 283
______ ______
32,800 32,807
Accumulated Depreciation (18,197) (17,335)
______ ______
14,603 15,472
====== ======
The useful lives in computing depreciation for buildings
and improvements are 33 years, machinery and equipment 13
and 7 years.
7 Salaries and Payroll Taxes
1994 1993
Vacation Provision Payable 439 240
Employee Profit Sharing 1,146 -
Payroll Taxes 83 190
_____ ____
1,668 430
===== ====
17
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
________________
8 Taxes Payable, Other than Income Tax
1994 1993
Excise Tax and Value-Added Tax 539 603
Cofins/Finsocial 81 17
Other 109 99
_____ _____
729 719
===== =====
9 Note Payable and Long-Term Debt
Current Liabilities
___________________
1994 1993
Local Financings
Loans Subject to Monetary
Restatement by TR, plus
Interest, as Follows:
- Working Capital Ranging
from 5.88 to 6.05% per
Month 555 190
- Financing of Fixed Assets
Ranging from 8 to 12% per
Year 63 85
Foreign Financings
Loans Subject to Exchange Variance
at the U.S. Dollar Rate, plus
Interest and Commission, as Follows:
- Working Capital - 16% per Year 206 5
- Financing of Fixed Assets -
7.49 per Year 163 569
- Other - 263
_____ _____
987 1,112
===== =====
18
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
________________
Long-Term Debt
_______________
1994 1993
Local Financings
Loans Subject to Monetary
Restatement by TR, plus
Interest, as Follows:
- Working Capital Ranging
from 5.88 to 6.05% per
Month - -
- Financing of Fixed Assets
Ranging from 8 to 12% per
Year 72 86
Foreign Financings
Loans Subject to Exchange Variance
at the U.S Dollar Rate, plus
Interest and Commission, as Follows:
- Working Capital - 16% per Year - 200
- Financing of Fixed Assets -
7.49 per Year 265 397
- Other - -
____ ____
337 683
==== ====
The above loans are collateralized by a chattel mortgage
of equipment.
Long-term debt is payable as follows:
Local Foreign
Financing Financing Total
1996 72 132 204
1997 - 133 133
___ ____ ____
Total 72 265 337
=== ==== ====
19
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
________________
10 Other Liabilities
1994 1993
Excise Tax and Value-Added Tax 207 425
Social Contribution (IPC 90) 113 80
Social Security on Management Fee 134 75
Other - 21
____ ____
454 601
==== ====
The Company was authorized by the federal and state
governments to pay the IPI (excise tax) and ICMS (state
value-added tax) in installments. The maturity of these
installments will be until September 1996, subject to
monetary correction based on Tax Reference Unit (Ufir)
variation.
11 Income Taxes
The components of the provision (benefits) for income
taxes on operations were as follows:
1994 1993
Reversal of Taxes on Income - (361)
Provision for Deferred Income Tax 304 (381)
Income Tax and Social
Contribution for the Year 1,799 378
Valuation Allowance (1,467) (376)
_____ _____
Total 636 (740)
===== =====
During 1993, the Company obtained an injunction suspending
the payment of income tax and social contribution, relating
to a suit involving monetary restatement of the 1990 balance
sheet. As a result, the Company reversed the provision for
income tax made in 1990 for this purpose, which resulted in a
credit of US$361 in 1993.
20
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
_________________
The reconciliation between the statutory and effective income tax
rate is as follows:
1994 1993
_________________ _________________
% Amount % Amount
Income before Taxes on
Income and Social
Contribution 3,162 376
Provision Computed at
Statutory Income Tax
Rate (41) (1,296) (41) (154)
Permanent Differences (16) (505) 94 352
Net Loss Subsidiaries (11) (354) (41) (155)
Valuation Allowance 46 1,467 100 376
Reversal of Tax
on Income - - 96 361
Other, Net 2 52 (11) (40)
_____ _____ _____ _____
Total Effective
Income Tax (20) (636) 197 740
===== ===== ===== =====
Deferred income tax assets result primarily from temporary
differences between tax and financial statement purposes as
follows:
1994 1993
Accrued Liabilities 416 467
Excise Tax and Value-Added Tax 55 185
Allowance for Bad Debts 12 -
Deferred Income Tax Asset on
Tax Loss Carryforward 1,541 2,782
Valuation Allowance (1,541) (2,782)
_____ _____
Total 483 652
===== =====
At December 31, 1994, a change in the income tax regulations was
introduced to increase federal income tax rates and to limit the
yearly utilization of income tax loss carryforwards to 30 percent
of taxable income as from January 1, 1995. New tax rate will be
of 25 percent for taxable income up to US$922, and of 43 percent
for taxable income exceeding that amount.
21
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
_________________
The Company has offsettable accumulated tax losses in the
amount of US$3,759 (US$6,801 in 1993) which can be offset
against future taxable income, as follows:
Fiscal Year Amount Expiration Date
1991 1,878 1995
1992 1,025 No expiration date
1993 433 1997
1994 423 1998
_____
Total 3,759
=====
12 Capital Stock and Retained Earnings
As of December 31, 1994 and 1993, the capital stock is
represented by 1,346,400,000 shares, without par value
and determined in reais (local currency), monetarily
restated in accordance with Brazilian Corporate
Legislation. As of December 31, 1994 the Company's by-
law and statutory records reflected capital in local
currency of R$20,397,077,equivalent to US$24,110,020 at
the exchange rate ruling at the balance sheet date (in
1993 R$2,029,048 equivalent to US$17,110,695).
The capital stock composition can be demonstrated as
follows:
1994
______________________________
Common Preferred
Shares Shares
Brazilian Shareholders 382,596,400 337,877,800
Foreign Shareholders 288,625,800 337,300,000
___________ ___________
Total of Shares 671,222,200 675,177,800
=========== ===========
Equivalent in US Dollars 12,019,594 12,090,426
=========== ===========
22
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
_________________
1993
______________________________
Common Preferred
Shares Shares
Brazilian Shareholders 382,596,400 337,877,800
Foreign Shareholders 288,625,800 337,300,000
___________ ___________
Total of Shares 671,222,200 675,177,800
=========== ===========
Equivalent in US Dollars 8,530,212 8,580,483
=========== ===========
Brazilian corporate law permits the payment of cash
dividends to foreign shareholders based on retained
earnings reflected in the Company's local statutory
records. As of December 31, 1994, the Company's statutory
records reflected retained earnings, in local currency of
R$418 (R$782 in 1993), equivalent to US$493 (US$2,398 in
1993).
The preferred shares are nonvoting, have a minimum dividend
of 25 percent of net profit, adjusted in accordance with
Corporate Law for this purpose, and share equally with
common shares on liquidation of the Company.
Cash dividends credited or paid to shareholders domiciled
in the United States are subject to a withholding tax of 15
percent.
23
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
_________________
Dividends distributed during the fiscal year ended December
31, 1994, in local currency, amounted to R$316 (equivalent
to US$366), which represented 32.86% of the adjusted net
income as follows:
Local Currency
________________
R$
Accumulated Losses (1,611,906)
Net Income for the Year 2,263,791
Revaluation Reserve Realization 421,771
Legal Reserve (113,189)
_________
Adjusted Net Income 960,467
_________
Dividends Paid 105,085
Monetary Correction of Dividends Paid 5,542
Dividends Declared 205,000
_________
Total Dividends 315,627
=========
32.86%
=========
At December 31, 1994, SPS International Investment Co. had
registered capital with Central Bank of Brazil in the
amount of US$4,106.
13 Treasury Shares
In August 1994, the Company acquired 32,835,000 shares at
the average cost of R$6.04 (US$6.77) per lot of 1,000
shares - minimum cost of R$6.03 (US$6.76) and maximum cost
of R$6.63 (US$7.43).
In a meeting held on December 15, 1994, the Board of
Directors decided to cancel the acquired shares; this
decision and the consequent reduction in the number of the
existing shares were approved in the Shareholders' Meeting
held on April 28, 1995.
24
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
_________________
14 Subscription Bonus
At April 5, 1994, the Company issued 13,500,000
subscription bonuses at the unit price of R$0.01 (US$0.01),
the purchasers of such bonuses will be entitled to
subscribe the shares within three years at the value of
R$10.00 (US$11.79) per lot of 1,000 preferred shares.
15 Profit Sharing
In 1994, the Company signed an agreement with CREM, the
Metalac's Representative Employee Commission, and with the
Metalworkers' Union of Sorocaba which provides for Metalac
S.A.'s employees to receive profit sharing calculated based
on the excess of generated operating income for the year
versus operating income budgeted by the Company's
Management. The amount of US$1,376 accounted for as profit
sharing was charged to Cost of Goods Sold by US$1,016 and
to Operating Expenses by US$360 in 1994.
16 Subsequent Event
In May 1995, SPS Technologies, Inc. entered into a
definitive purchase agreement with certain shareholders to
acquire approximately 48% of the outstanding stock of the
Company. The proposed transaction, which is subject to
various regulatory approvals, increases SPS's ownership to
approximately 95%. The transaction is expected to be
completed in the third quarter of 1995.
25
METALAC S.A. INDUSTRIA E COMERCIO
CONDENSED CONSOLIDATED BALANCE SHEETS
as of June 30, 1995 and December 31, 1994
(in thousands of U.S. dollars)
(unaudited)
_______________
ASSETS
June 30, December 31,
1995 1994
Current Assets
Cash and Cash Equivalents 406 691
Accounts Receivable, Net 4,138 3,316
Inventories (Note 2) 9,309 6,673
Deferred Income Tax (Note 4) 866 483
Other Current Assets 720 488
Anticipated Income Tax (Note 4) 684 314
______ ______
Total Current Assets 16,123 11,965
______ ______
Long-Term Assets
Judicial Deposits and Other 799 779
Property, Plant and Equipment, Net 14,300 14,603
Deferred Charges 46 152
Other Investments 56 56
______ ______
Total Long-Term Assets 15,201 15,590
______ ______
Total Assets 31,324 27,555
====== ======
The accompanying notes are an integral part of the
condensed consolidated financial statements.
26
METALAC S.A. INDUSTRIA E COMERCIO
CONDENSED CONSOLIDATED BALANCE SHEETS
as of June 30, 1995 and December 31, 1994
(in thousands of U.S. dollars)
(unaudited)
_______________
LIABILITIES
June 30, December 31,
1995 1994
Current Liabilities
Accounts Payable - Trade 1,287 658
Salaries and Payroll Taxes 1,686 1,668
Taxes Payable, other than
Income Tax 920 729
Income Tax and Social
Contribution (Note 4) 1,183 61
Note Payable and Current
Portion of Long-Term Debt 1,161 987
Dividends Payable 15 242
Other Accounts Payable 1,147 565
_____ _____
Total Current Liabilities 7,399 4,910
_____ _____
Long-Term Liabilities
Long-Term Debt 240 337
Deferred Income Tax 21 20
Other Liabilities 339 454
_____ _____
Total Long-Term Liabilities 600 811
_____ _____
Total Liabilities 7,999 5,721
===== =====
The accompanying notes are an integral part of the
condensed consolidated financial statements.
27
METALAC S.A. INDUSTRIA E COMERCIO
CONDENSED CONSOLIDATED BALANCE SHEETS
as of June 30, 1995 and December 31, 1994
(in thousands of U.S. dollars)
(unaudited)
_______________
SHAREHOLDERS' EQUITY
June 30, December 31,
1995 1994
Shareholders' Equity
Capital Composed by:
Preferred Stock, without par
Value, Authorized 728,777,800
Shares and Issued 642,342,000
Shares (675,177,800 Shares
Issued in 1994)
Common Stock, without par Value,
Authorized and Issued 671,222,200
Shares (671,222,200 Shares
Issued in 1994) 16,488 16,488
Retained Earnings 6,837 5,346
______ ______
Total Shareholders' Equity 23,325 21,834
______ ______
Total Liabilities and
Shareholders' Equity 31,324 27,555
====== ======
The accompanying notes are an integral part of the
condensed consolidated financial statements.
28
METALAC S.A. INDUSTRIA E COMERCIO
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
for the six-month periods ended June 30, 1995 and 1994
(in thousands of U.S. dollars)
(unaudited)
_______________
June 30,
______________________
1995 1994
Net Sales 17,945 10,490
Cost of Goods Sold (11,889) (6,610)
_______ ______
Gross Profit 6,056 3,880
Selling, General and Administrative
Expense (3,817) (2,607)
_______ ______
Operating Earnings 2,239 1,273
Other Income (Expense)
Interest Income 141 330
Interest Expense (290) (196)
Translation Gain/(Loss) 124 (241)
Other, Net 61 (3)
_______ ______
Total Other Income (Expense) 36 (110)
_______ ______
Earnings before Income Taxes 2,275 1,163
Provision for Income Taxes (784) (151)
_______ ______
Net Earnings 1,491 1,012
======= ======
The accompanying notes are an integral part of the
condensed consolidated financial statements.
29
METALAC S.A. INDUSTRIA E COMERCIO
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
for the six-month periods ended June 30, 1995 and 1994
(in thousands of U.S. dollars)
(unaudited)
_______________
June 30,
_________________
1995 1994
Net Cash Provided by Operating Activities 545 983
______ _____
Cash Flows Used by Investing Activities
Additions to Property, Plant and Equipment (680) (426)
______ _____
Cash Flows Provided (Used) by Financing
Activities
Increase (Decrease) in
Notes Payable and in Loans 77 (380)
Payments of Cash Dividends (227) -
______ _____
Net Cash Used by Financing Activities (150) (380)
______ _____
Net Increase (Decrease) in Cash and
Cash Equivalents (285) 177
Cash and Cash Equivalents at Beginning
of Period 691 575
______ _____
Cash and Cash Equivalents at End of
Period 406 752
====== =====
The accompanying notes are an integral part of the
condensed consolidated financial statements.
30
METALAC S.A. INDUSTRIA E COMERCIO
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of U.S. dollars)
(unaudited)
_______________
1. Financial Statements
In the opinion of the Company's Management, the accompanying
unaudited condensed consolidated financial statements
contain all adjustments necessary to present fairly the
financial position as of June 30, 1995, the results of
operations of the six-month periods ended June 30, 1995 and
1994, and cash flows for the six-month periods ended June
30, 1995 and 1994. The December 31, 1994 condensed
consolidated balance sheet data were derived from audited
financial statements, but do not include all disclosures
required by generally accepted accounting principles. All
financial information has been prepared in conformity with
the accounting principles reflected in the financial
statements for the year ended December 31, 1994, applied on
a consistent basis.
2. Inventories 1995 1994
Finished Goods 4,156 2,473
Work in Process 2,603 1,900
Raw Materials and Supplies 2,550 2,300
_____ _____
9,309 6,673
===== =====
3. Treasury Shares
In August 1994, the Company acquired 32,835,000 shares at
the average cost of R$6.04 (US$6.77 per lot of 1,000 shares
- minimum cost of R$6.03 (US$6.76) and maximum cost of
R$6.63 (US$7.43).
In a meeting held on December 15, 1994, the board of
directors decided to cancel the acquired shares; this
decision and the consequent reduction in the number of the
existing shares were approved in the shareholders' meeting
held on April 28, 1995.
31
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS,
(Continued)
_______________
4. Income Taxes
Effective January 1, 1995, a change in the income tax
regulations was introduced to increase federal income tax
rates and to limit the yearly utilization of income tax loss
carryforwards to 30 percent of taxable income as from
January 1, 1995. In addition the new tax rate is 25 percent
for taxable income up to R$780 (equivalent to US$922), and
is 43 percent for taxable income exceeding that amount. As
a result, the Company's effective tax rate for the six-month
period ended June 30, 1995 is higher than 1994 for the same
period.
5. Profit Sharing
On November 1, 1994, the Company signed an agreement with
CREM, the Metalac's Representative Employee Commission, and
with the Metalworkers' Union of Sorocaba which provides for
Metalac S.A.'s employees to receive profit sharing
calculated based on the excess of generated operating income
for the year versus operating income budgeted by the
Company's Management. This agreement was confirmed for the
year ended December 31, 1995 on July 28, 1995. The amount
of US$303 accounted for as salaries and payroll payable was
charged to cost of goods sold (US$234) and to administrative
expenses (US$69) in net income for period ended June 30,
1995.
32
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
SPS TECHNOLOGIES, INC. AND METALAC S.A. INDUSTRIA E COMERCIO
The following pro forma consolidated financial statements of
SPS Technologies, Inc. (the "Company") have been prepared to
reflect the acquisition of approximately 48 percent of the
outstanding stock of Metalac for $4 million in cash and 141,666
shares of the Company's common stock (approximate market value on
August 16, 1995 of $5.7 million). With the acquisition, the
Company increased its ownership to approximately 95 percent.
The unaudited pro forma condensed consolidated balance
sheets are prepared as if all of the transactions occurred as of
June 30, 1995. The unaudited pro forma condensed consolidated
statements of income are prepared as if the transaction occurred
as of the beginning of the periods presented.
The unaudited pro forma condensed consolidated statements of
income do not purport to represent what the Company's results of
operations for the period would actually have been had the
acquisition in fact occurred on the aforementioned dates, or to
project the Company's results of operations for any future
periods. The pro forma adjustments are based upon available
information and upon certain assumptions that management believes
are reasonable under the circumstances. These adjustments are
directly attributable to the consummated transaction and are
expected to have continuing impact on the financial position and
results of operations of the Company.
The unaudited pro forma condensed consolidated financial
statements of operations should be read in conjunction with the
Company's consolidated financial statements, including notes
thereto.
33
SPS TECHNOLOGIES, INC.
Unaudited Historical & Pro Forma Condensed Consolidated Balance Sheets
as of June 30, 1995
(in thousands of U.S. dollars)
Historical (a)
_________________ Pro Forma
SPS Tech Metalac Adjustments Pro Forma
ASSETS
Current Assets
Cash and Cash Equivalents 8,400 406 (4,000) 4,806
Accounts Receivable, Net 63,439 4,138 - 67,577
Inventories 80,684 9,309 - 89,993
Deferred Income Taxes 13,265 866 - 14,131
Net Asssets Held for Sale 2,362 - - 2,362
Other Current Assets 2,270 1,404 - 3,674
________ _______ ______ ________
Total Current Assets 170,420 16,123 (4,000) 182,543
________ _______ ______ ________
Investments in Affiliates 16,545 - (10,963) 5,582
Property, Plant and Equipment, Net 93,751 14,300 (1,439) 106,612
Other Assets 27,308 901 (90) 28,119
________ _______ ______ ________
Total Long-Term Assets 137,604 15,201 (12,492) 140,313
________ _______ ______ ________
Total Assets 308,024 31,324 (16,492) 322,856
======== ======= ====== ========
The accompanying notes are an integral part of the pro forma
consolidated financial statements.
34
SPS TECHNOLOGIES, INC.
Unaudited Historical & Pro Forma Condensed Consolidated Balance Sheets
as of June 30, 1995
(in thousands of U.S. dollars)
Historical (a)
_________________ Pro Forma
SPS Tech Metalac Adjustments Pro Forma
LIABILITIES
Current Liabilities
Notes Payable 5,076 1,161 - 6,237
Accounts Payable 25,479 1,287 - 26,766
Accrued Expenses 37,093 2,606 1,166 40,865
Income Taxes Payable 1,865 1,183 - 3,048
Other Current Liabilities - 1,162 - 1,162
_______ _____ _____ _______
Total Current Liabilities 69,513 7,399 1,166 78,078
_______ _____ _____ _______
Deferred Income Tax 10,894 21 - 10,915
Long-Term Debt 68,233 240 - 68,473
Other Liabilities 26,133 339 - 26,472
_______ _____ _____ _______
Total Long-Term Liabilities 105,260 600 - 105,860
_______ _____ _____ _______
Total Liabilities 174,773 7,999 1,166 183,938
======= ===== ===== =======
The accompanying notes are an integral part of the
pro forma consolidated financial statements.
35
SPS TECHNOLOGIES, INC.
Unaudited Historical & Pro Forma Condensed Consolidated Balance Sheets
as of June 30, 1995
(in thousands of U.S. dollars)
Historical (a)
_________________ Pro Forma
SPS Tech Metalac Adjustments Pro Forma
Shareholders' Equity
Capital Composed by:
Common and Preferred Stock 6,408 16,488 (16,488) 6,408
Additional Paid in Capital 68,896 - 4,522 73,418
Retained Earnings 70,691 6,837 (6,837) 70,691
Minimum Pension Liability (1,235) - - (1,235)
Common Stock in Treasury, at Cost (5,991) - 1,145 (4,846)
Cumulative Translation Adjustments (5,518) - - (5,518)
_______ ______ ______ _______
Total Shareholders' Equity 133,251 23,325 (17,658) 138,918
_______ ______ ______ _______
Total Liabilities and
Shareholders' Equity 308,024 31,324 (16,492) 322,856
======= ====== ====== =======
The accompanying notes are an integral part of the
pro forma consolidated financial statements.
36
SPS TECHNOLOGIES, INC.
Unaudited Historical & Pro Forma Condensed Statements
of Consolidated Operations
For the six months ended June 30, 1995
(in thousands of U.S. dollars except per share data)
Historical
_________________ Pro Forma
SPS Tech Metalac Adjustments Pro Forma
Net Sales $203,013 $17,945 $ - $220,958
Cost of Goods Sold 166,995 11,889 (b) (75) 178,809
_______ ______ ______ _______
Gross Profit 36,018 6,056 75 42,149
Selling, General & Administrative
Expense 23,813 3,817 - 27,630
_______ ______ ______ _______
Operating Earnings 12,205 2,239 75 14,519
Other Income (Expense)
Interest Income 266 141 (c) (100) 307
Interest Expense (3,180) (290) - (3,470)
Equity in Earnings of
Affiliates 1,014 - (d) (550) 464
Translation Gain/(Loss) - 124 - 124
Other, Net (150) 61 (e) (150) (239)
_______ ______ ______ ______
Total Other Income (Expense) (2,050) 36 (800) (2,814)
_______ ______ ______ ______
Earnings before Income Taxes 10,155 2,275 (725) 11,705
Provision for Income Taxes 3,180 784 (f) (250) 3,714
_______ ______ ______ ______
Net Earnings $ 6,975 $ 1,491 $ (475) $ 7,991
======= ====== ====== ======
Primary and fully diluted $1.20 $1.34
earnings per share ===== =====
Weighted average number of
common shares used to compute
earnings per share 5,795 5,948
The accompanying notes are an integral part of the
pro forma consolidated financial statements.
37
SPS TECHNOLOGIES, INC.
Unaudited Historical and Pro Forma
Statements of Consolidated Operations
for the Year ended December 31, 1994
(in thousands of U.S. Dollars except per share data)
Historical
_________________ Pro Forma
SPS Tech Metalac Adjustments Pro Forma
Net Sales $348,905 $25,530 $ - $374,435
Cost of Goods Sold 292,580 16,413 (b) (150) 308,843
_______ ______ _______ _______
Gross Profit 56,325 9,117 150 65,592
Selling, General and Administrative
Expense 44,847 6,923 - 51,770
Restructuring Charge, Net 3,500 - - 3,500
_______ ______ _______ _______
Operating Earnings 7,978 2,194 150 10,322
Other Income (Expense)
Interest Income 440 453 (c) (200) 693
Interest Expense (6,924) - - (6,924)
Equity in Earnings of
Affiliates 1,726 - (d) (887) 839
Translation Gain/(Loss) - 331 - 331
Other, Net 2,900 184 (e) (300) 2,784
_______ ______ _______ ______
Total Other Income (Expense) (1,858) 968 (1,387) (2,277)
_______ ______ _______ ______
Earnings before Income Taxes 6,120 3,162 (1,237) 8,045
Provision for Income Taxes 2,920 636 (f) (450) 3,106
_______ ______ _______ ______
Net Earnings $ 3,200 $ 2,526 $ (787) $ 4,939
======= ====== ======= ======
Net Earnings per share $.62 $.94
==== ====
Weighted average number of
common shares used to compute
earnings per share 5,132 5,263
The accompanying notes are an integral part of the
consolidated financial statements.
38
NOTES TO THE
UNAUDITED HISTORICAL AND PRO FORMA
FINANCIAL STATEMENTS
The Pro Form Adjustments to the Unaudited Pro Forma Condensed
Consolidated Balance Sheets as of June 30, 1995 and the Pro Forma
Condensed Statements of Consolidated Operations for the six
months ended June 30, 1995 and Statements of Consolidated
Operations for the year ended December 31, 1994 are as follows:
(a) Represents the acquisition of approximately 48 percent of
the outstanding stock of Metalac for $4 million in cash and
141,666 shares of the Company's common stock (approximate
market value on August 16, 1995 of $5.7 million). With the
acquisition, the Company increased its ownership to
approximately 95 percent. The Company allocated the total
cost of this acquisition to the individual assets and
liabilities in accordance with Accounting Principles Board
Opinion No. 16 (Business Combinations). This allocation
resulted in a writedown of the machinery and equipment ($1.4
million) and other non-current assets ($90 thousand).
(b) Represents the decrease in depreciation and amortization
resulting from the writedown of the machinery and equipment
and other non-current assets.
(c) Represents a decrease in interest income resulting from the
cash payment portion of the acquisition cost.
(d) Prior to this acquisition, the Company accounted for its
minority ownership in Metalac as an affiliate on the equity
method.
(e) Represents payments under the terms of the covenant not to
compete agreement.
(f) Represents the tax effects of (c), (d) and (e) above at the
appropriate statutory tax rate.