FORM 8-K/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Amendment No. 1 to Form 8-K Report
Dated May 17, 1996
Date of Report (Date of earliest event reported): May 2, 1996
THE VALSPAR CORPORATION
- --------------------------------------------------------------------------------
Delaware 1-3011 36-2443580
- ----------------------------- ---------------- -------------------
(State or other Jurisdiction (Commission File (IRS Employer
of Incorporation) Number) Identification No.)
1101 Third Street South, Minneapolis, Minnesota 55415
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (612) 332-7371
Not Applicable
- --------------------------------------------------------------------------------
(Former name or former address, if changed, since last report)
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
COATES COATINGS S.A.
Report of Independent Public Accounts
Balance Sheet at December 31, 1995
Statement of Income at December 31, 1995
Statement of Changes in Shareholder's Equity at December 31, 1995
Statement of Cash Flows at December 31, 1995
Notes to Financial Statements
COATES BROTHERS PLC
Report of Independent Accountants
Statement of Specified Assets and Liabilities at December 31, 1995
Statement of Revenues and Expenses at December 31, 1995
Statement of Cash Flows at December 31, 1995
Notes to Financial Statements
COATES COATINGS AS
Report of Independent Public Accountants
Balance Sheet at December 31, 1995
Statement of Income at December 31, 1995
Statement of Changes in Shareholder's Equity at December 31, 1995
Statement of Cash Flows at December 31, 1995
Notes to Financial Statements
COATES COATINGS GMBH
Report of Independent Accountants
Balance Sheet at December 31, 1995
Statement of Income at December 31, 1995
Statement of Changes in Shareholder's Equity at December 31, 1995
Statement of Cash Flows at December 31, 1995
Notes to Financial Statements
COATES LORILLEUX, S.A.
Report of Independent Accountants
Statement of Specified Assets and Liabilities at December 31, 1995
Statement of Revenue and Expenses at December 31, 1995
Statement of Equity at December 31, 1995
Statement of Cash Flows at December 31, 1995
Notes to Financial Statements
(a) Financial Statements of Business Acquired
COATES BROTHERS AUSTRALIA PTY LIMITED
Report of Independent Public Accountants
Statement of Specified Assets and Liabilities at December 31, 1995
Statement of Revenue and Expenses at December 31, 1995
Statement of Cash Flows at December 31, 1995
Notes to Financial Statements
(b) Pro Forma Financial Information
Unaudited Pro Forma Combined Statement of Income, October 27, 1995
Attachment A(1) to Unaudited Pro Forma Combined Statement of Income,
October 27, 1995
Unaudited Pro Forma Combined Balance Sheet, Three Months
Ended January 26, 1996
Unaudited Pro Forma Combined Statement of Income, Three Months
Ended January 26, 1996
Attachment B(1) to Unaudited Pro Forma Combined Statement of Income,
Three Months Ended January 26, 1996
(c) Exhibits
23.1 Consents of Independent Auditors
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this Amendment No. 1 to the report on 8-K
to be signed on its behalf by the undersigned hereunto duly authorized.
THE VALSPAR CORPORATION
By /s/ Rolf Engh
Printed Name: Rolf Engh
Title: General Counsel and Secretary
Date: July 16, 1996
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To TOTAL S.A.:
We have audited the accompanying balance sheet of Coates Coatings S.A. as of
December 31, 1995, and the related statements of income, changes in
shareholder's equity and cash flows for the year then ended all expressed in
thousands of French Francs. 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 in accordance with generally accepted auditing standards
in France which are substantially consistent with generally accepted auditing
standards in the United States. 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 audit provides a reasonable basis
for our opinion.
As discussed in Note 1, the accompanying financial statements are intended to
present the assets, liabilities and results of Coates Coatings S.A. which have
been sold to an unrelated third party and are not intended to be a complete
presentation of the financial statements of Coates Coatings S.A. Additionally,
as discussed in Note 1, Coates Coatings S.A. has transactions with affiliated
companies of Total S.A. . Because of this relationship, the terms of some or all
of the transactions between Total S.A. and Coates Coatings S.A. included in the
accompanying financial statements are not necessarily indicative of that which
would have resulted if Coates Coatings S.A. was a stand-alone entity.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Coates Coatings S.A. as of
December 31, 1995, and the results of its operations and its cash flows for the
year ended December 31, 1995, in conformity with generally accepted accounting
principles in the United States.
Paris, France
February 27,1996
/s/ Philippe MONGIN
Philippe MONGIN
PGA
Member of Arthur Andersen SC
Coates Coatings S.A.
Balance Sheet
(FRF 1000)
ASSETS December 31, 1995
-----------------
Cash and cash equivalents 18
Prepaid expenses and other current assets (Note 3) 5.695
Accounts receivable (Note 4) 40.085
Inventories (Note 5) 37.221
-------
TOTAL CURRENT ASSETS 83.019
Investments (Note 6) 40
Other noncurrent assets (Note 7) 111
Property, plant and equipment (Note 8) 29.931
Intangible assets (Note 9) 602
-------
TOTAL ASSETS 113.703
=======
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term debt (Note 10) 53.000
Accounts payable (Note 11) 27.202
Other accrued expenses (Note 12) 6.498
-------
TOTAL CURRENT LIABILITIES 86.700
Long-term debt and capital lease obligation (Note 10) 600
Employee benefits (Note 13) 931
-------
TOTAL LIABILITIES 88.231
COMMITMENTS AND CONTINGENCIES (Note 20)
Common shares (195.000 common shares)
Paid-in capital 19.500
Retained earnings 5.972
TOTAL SHAREHOLDERS' EQUITY (Note 14) 25.472
-------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 113.703
=======
The accompanying notes are an integral part of these financial statements
Coates Coatings S.A.
Statement of Income
(FRF 1000)
December 31, 1995
-----------------
Sales and revenues 159.782
Costs of sales (129.210)
General and administrative expenses (24.073)
Depreciation and amortization (10.156)
Provision for impairment loss (Note 9) (97.000)
Other income, net (Note 15) 1.033
--------
LOSS BEFORE INTEREST AND INCOME TAX BENEFIT (99.624)
Interest expense, net (Note 16) (2.966)
--------
LOSS BEFORE TAX BENEFIT (102.590)
Income tax benefit (Note 17) (1.131)
--------
NET LOSS (101.459)
========
The accompanying notes are an integral part of these financial statements.
Coates Coatings S.A.
Statement of Changes in Shareholder's Equity
(FRF 1000)
Balance, January 1, 1995 126.931
Net loss for the year ended December 31, 1995 (101.459)
--------
Balance as of December 31,1995 25.472
========
The accompanying notes are an integral part of these financial statements.
Coates Coatings S.A.
Statement of cash flows
December 31, 1995
-----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
- -------------------------------------
Net loss (101.459)
Adjustments to reconcile net
loss to net cash flow provided by operating activities
Depreciation and amortization 10.247
Write-down of goodwill 97.000
Deferred income taxes (583)
Other deferred liabilities 100
Loss on disposal of assets 80
Changes in operating assets and liabilities
Accounts and notes receivable (6.671)
Inventories and prepaid expenses (16.983)
Accounts payable and other accrued expenses 3.409
Income taxes payable
Other
--------
Net cash flow used in operating activities (14.860)
--------
CASH FLOWS FROM INVESTING ACTIVITIES:
- -------------------------------------
Capital expenditures (6.223)
Proceeds from sales of assets 534
--------
Net cash flow provided by (used in) investing activities (5.689)
--------
CASH FLOWS FROM FINANCING ACTIVITIES:
- -------------------------------------
Net change in short term debt 20.643
Net payments on borrowings (100)
Dividends paid
Other
--------
Net cash flow used in financing activities 20.543
--------
DECREASE IN CASH AND CASH EQUIVALENTS: (6)
- --------------------------------------
Cash and cash equivalents, beginning of year 24
--------
Cash and cash equivalents, end of year 18
========
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:
- ---------------------------------------------------
Cash paid during the year for:
-Interest 461
-Income taxes (548)
The accompanying notes are an integral part of these financial statements.
Coates Coatings S.A.
Notes to Financial Statements
December 31, 1995
1. DESCRIPTION, PLANNED DISPOSITION AND BASIS OF FINANCIAL STATEMENT
PRESENTATION
1.1 Company's operations
The company's activities consist in developing, manufacturing
and selling of coatings, inks and resins for the metal
packaging industry.
1.2 Transaction
Coates Coatings S.A. is wholly-owned subsidiary of Total S.A.,
a public limited company organized under the laws of France.
At the end of the year 1995, Total S.A. was engaged in
negotiating an agreement to sell the shares of Coates Coatings
S.A. to an unrelated third party. The transaction was
completed on February 26, 1996.
1.3 Cost allocation method
No management fees are invoiced to the company by the parent
company, Total S.A., or by the headquarter of the Coatings
Division, Coates Brothers Plc.
The services rendered by Total S.A. or its subsidiaries to
Coates Coatings are invoiced at market value.
The support for software development by Coates Brothers Plc,
estimated at KFF 200 in 1995, are not invoiced by Coates
Brothers Plc.
1.4 Income tax situation
All the loss carryforwards as of December 31, 1995 is vested
to Total S.A. in accordance with the tax convention
(convention d'integration fiscale) signed between Total S.A.
and Coates Coatings S.A.
For the purpose of these financial statements, diferred taxes
relating to tax loss carryforwards are calculated as if Coates
Coatings S.A. was a stand alone tax entity.
1.5 Push down accounting
In December 1995, the Executive Committee of Total S.A. (the
parent company) has decided to sell a portion of its Can
Coatings activities.
As a result, negotiations started at the end of the year 1995
to sell the shares of Coates Coatings S.A. to an unrelated
third party. The transaction was completed on February 26,
1996.
For the purpose of these financial statements, push down
accounting principles have been applied. As a result, a
goodwill of KFF 119,000 recorded in 1990 has been pushed down.
As of January 1, 1995, the accumulated amortization of this
goodwill (amortized over a 30 year period using the
straight-line method) was KFF 18,000 and its net amount KFF
101,000. At the closing date an additional amortization of KFF
4,000 has been recorded and the net amount was therefore of
KFF 97,000.
As of December 31, 1995, an impairment loss of KFF 97,000 has
been recorded to reflect the difference between the carrying
amount of the goodwill and its market value which, in
accordance with the terms of the signed agreement, was equal
to zero.
2. SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements have been prepared in accordance
with generally accepted accounting principles in the United States.
a) Inventories
Inventories are stated at the lower of average cost (includes direct
material, labor and attributable overhead) or estimated realizable
value.
- Raw Material Cost is valued using the latest quarterly
standard raw material cost.
- A provision is made for slow moving items as follows:
Age from 12 to 36 months Write-off of 50%
Age greater than 36 months Write-off of 80%
b) Property, plant and equipment
Investments in property, plant and equipment are stated at cost.
Assets are depreciated by the straight-line method over their estimated
useful life, as follows:
Years of estimated useful life
------------------------------
Transportation equipment 5
Machinery and equipment 7 to 10
Tools --
Furniture and fixtures 5 to 10
Buildings 20
Routine maintenance and repairs are charged to income as incurred.
c) Intangible assets
* Goodwill recorded in these financial statements is a
result of push down accounting and is amortized on a
straight line basis over 30 years.
* Software is amortized on a straight line basis over 3
years.
d) Investments
The investments are recorded at cost.
e) Income taxes
Deferred tax liabilities and assets are evaluated on the
difference between financial and tax bases of assets and
liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse.
f) Revenue Recognition
Revenues are recognized when products are shipped.
g) Research and Development
Research and development expenditures are charged to expense
as incurred. Expenditures on research and development amounted
to approximately KFF 6,400 for the year ended December 31,
1995.
h) Employee benefits
The company recorded a reserve for pension plan based on the
collective wage agreement applicable to Coates Coatings S.A.
and on actuarial assumptions.
i) Cash and cash equivalents
Cash equivalents are highly liquid investments that are
readily convertible to cash and have original maturities of
three months or less.
3. PREPAID EXPENSES AND OTHER CURRENT ASSETS
The detail of this caption is shown below:
December 31, 1995
-----------------
Cost Valuation allowance Net
---- ------------------- ---
Advance to suppliers 735 -- 735
Prepayments 38 -- 38
Deferred income taxes 4.592 3.449 1.143
Other 3.779 -- 3.779
----- ------ -----
Total 9.144 3.449 5.695
===== ====== =====
4. ACCOUNTS RECEIVABLE
Accounts receivable consist of:
December 31, 1995
-----------------
Cost Valuation allowance Net
---- ------------------- ---
Trade receivables 32.844 573 32.271
Notes receivable 7.814 / 7.814
------- ------ -------
Total 40.658 573 40.085
======= ====== =======
5. INVENTORIES
Inventories consist of:
December 31, 1995
-----------------
Raw materials and supplies 17.340
Work in process 3.383
Finished goods 19.741
Spare parts 522
--------
Gross value 40.986
======
Valuation allowance 3.765
------
Net value 37.221
======
6. INVESTMENTS
The detail of this caption is summarized below:
December 31, 1995
-----------------
Investments in shares of unlisted company 40
--
Total 40
==
7. OTHER NONCURRENT ASSETS
The detail of this caption is shown below:
December 31, 1995
-----------------
Cost Valuation allowance Net
---- ------------------- ---
Security deposits 111 111
--- ------ ---
Total 111 / 111
=== ====== ===
8. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment and the related accumulated depreciation
and amortization are as follows:
December 31, 1995
-----------------
Accumulated
depreciation and
Cost amortization Net
---- ------------ ---
Machinery, and equipment 41.194 27.431 13.763
Furniture and fixtures 3.369 2.702 667
Land 1.300 / 1.300
Buildings 25.664 12.365 13.299
Construction in progress 902 / 902
------- ------- --------
Total 72,429 42,498 29,931
------- ------- --------
9. INTANGIBLE ASSETS
Intangible assets consist of:
December 31, 1995
-----------------
Accumulated
Cost amortization Net
---- ------------ ---
Goodwill pushed down 119.000 119.000 0
Other goodwill 1.000 700 300
Software 581 279 302
-------- -------- ---
Total 120.581 119.979 602
======== ======== ===
For the purpose of these financial statements push down accounting has
been applied.
As a result, goodwill has been recorded at original cost (KFF 119,000
recognized in 1990) and is amortized on a straight line basis over 30
years beginning 1990.
The annual amortization amount is KFF 4,000 and the total amortization
recorded as of December 31,1995, amounts to KFF 22,000.
As the Executive Comittee of Total S.A. has decided to sell the shares
of Coates Coatings in december 1995 an impairment loss of KFF 97,000
has been provided for in 1995 to reflect the difference between the net
goodwill and its market value which, in accordance with the terms of
the signed agreement, was equal to zero.
10. DEBT
10.1 Long-term debt
* As of December 31, 1995, long term debt comprises a
8% fixed rate French Francs bank borrowing to be
repaid by installments until 2002.
* Repayment schedule (excluding short-term portion):
Years December 31,1995
----- ----------------
1996 /
1997 100
1998 100
1999 100
2000 100
2001 & after 200
---
Total 600
===
10.2 Short term debt
December 31, 1995
-----------------
Current portion of long term debt 100
Short term loans (Total S.A. current account) 49.810
Bank overdrafts 3.090
------
Total 53.000
======
Bank overdrafts:
- amount of credit facility is KFF 11.000
- amounts used at the closing date: KFF 3.090
- interest rate based on T4M + 0,35 % per year
The T4M rate amounted to 6.35% on average in 1995
11. ACCOUNTS PAYABLE
The main items under this caption are as follows:
December 31, 1995
-----------------
Trade payables 22.711
Notes payable 4.491
-------
Total 27.202
=======
12. OTHER ACCRUED EXPENSES
The main items under this caption are as follows:
December 31,1995
----------------
Payroll and social taxes 4.992
Deferred income taxes 1.129
Taxes other than payroll and income 248
Other 129
------
Total 6.498
======
13. EMPLOYEE BENEFITS
* Pension plans:
The following table summarizes the funded status of the
defined benefit pension plans:
December 31, 1995
-----------------
Actuarial present value of benefit obligation:
- Vested --
- Non-vested 1.050
-----
Accumulated benefit obligation 1.050
Effect of projected salary increases 353
------
Projected benefit obligation for services rendered to date 1.403
Plan assets available for benefits --
--------
Projected benefit obligation in excess of plan assets 1.403
Unrecognized net loss (472)
Unrecognized prior service cost --
--------
Pension liability included in the balance sheet 931
========
Net periodic pension cost includes the following components:
Year ended December 31,1995
---------------------------
Service cost (benefits earned during the year) 55
Interest cost on projected benefit obligation 45
Return on plan assets --
Plan deferrals and amortization --
----
Net periodic pension expense 100
====
Major assumptions used in the accounting for the defined
benefit pension plans are shown in the following table:
- discount rate 7%
- future salary increase 2%
14. SHAREHOLDERS' EQUITY
14.1 Common shares
- Description of the shares: common shares of FF. 100
per unit
- Number of shares: 195,000 shares
- Ownership of common shares: 100% Total S.A.
14.2 Retained earnings
Retained earnings consist of:
December 31, 1995
-----------------
- Legal reserve 3.000
- Unrestricted reserves 3.431
- Impact of goodwill push down 101.000
- Net loss of the year (101.459)
---------
Total 5.972
The impact of goodwill push down corresponds to the net
goodwill at the beginning of the year.
15. OTHER INCOME, NET
The main items included in this caption are as follows:
Year ended
----------
December 31, 1995
-----------------
Foreign exchange gains 79
Net loss on disposal of assets (80)
Other 1.034
-----
Total 1.033
=====
16. INTEREST INCOME (EXPENSE), NET
Year ended
----------
December 31, 1995
-----------------
Interest income 15
Other 6
Interest expense (2.987)
-------
Total (2.966)
=======
17. INCOME TAXES
The components of income tax benefit are as follows:
Year ended
----------
December 31, 1995
-----------------
Current income taxes --
Deferred income taxes (583)
Tax reimbursement (548)
-------
Income tax benefit (1.131)
=======
The tax reimbursement relates to a Tax Administration control on the
1991 exercice.
Reconciliation of the statutory income tax rate to the Company's
effective tax rate is as follows:
Year ended
----------
December 31, 1995
-----------------
Net loss (101.459)
Income tax benefit (1.131)
--------
Pre-tax loss (102.590)
Statutory tax rate 36,66%
Statutory tax rate applied to pre-tax loss (37.609)
RECONCILING ITEMS
Non deductible write off of Goodwill 35.560
Non deductible amortization of Goodwill 1.466
Tax reimbursement (548)
Deferred tax (583)
Other 583
--------
Income tax benefit (1.131)
========
The components of deferred tax balances are as follows:
December 31, 1995
-----------------
Deferred tax assets
* Employee benefits 343
* Accrued liabilities 95
* Loss carry forwards 3.449
* Other 705
------
Gross deferred tax asset 4.592
Valuation allowance (3.449)
------
Net deferred tax asset 1.143
======
December 31, 1995
-----------------
Deferred tax liabilities
* Excess tax over book depreciation
and temporary tax deductions 1.129
-----
Deferred tax liabilities 1.129
-----
Net deferred tax asset 14
18. RELATED PARTIES
The relationship with related parties is as follows:
* Sales:
a) The sale of can coating ink concentrates to the
European coating subsidiaries mainly UK (MFF 21).
b) The sale of coating resins to coating companies
internationally (MFF 23).
* Purchases: largely the purchase of 2-piece can coatings from
Coates Coatings UK (MFF 26).
* Interest expenses are the charges from Total S.A. on their
loan to Coates Coatings S.A.
* Other income consists of cross-charges to Cray Valley S.A. and
Coates Lorilleux S.A. for laboratory and occupancy services
provided.
Balances with related parties included in the financial
statements are as follows:
December 31, 1995
-----------------
Receivable: Trade accounts 10.677
Advances (Total S.A. current account) 49.810
Payable: Trade accounts 5.609
Year ended
----------
December 31, 1995
-----------------
Sales 50.427
Purchases (28.093)
Interest income (expense) (2.505)
Other income (expense) 909
19. PAYROLL AND STAFF
The main data relating to this caption consist of the following:
Year ended
----------
December 31, 1995
-----------------
Personnel expense
Wages and salaries (including social charges) 29.719
Average numbers of employees
- Management 13
- Other 93
---
Total 106
===
20. COMMITMENTS AND CONTINGENCIES
The company is currently contesting a tax claim amounting to KFF 448.
The company has booked a provision for tax adjustment of KFF 100 in the
financial statements.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To TOTAL:
1. We have audited the accompanying statement of specified assets and
liabilities of the Can Coatings Division of Coates Brothers Plc as of
December 31, 1995, and the related statement of revenues and expenses and
cash flows for the year then ended, together with related notes set out on
pages 5 to 14 (the "financial statements") all expressed in thousands of
Pounds Sterling. These financial statements are the responsibility of the
directors and management of Coates Brothers Plc. Our responsibility is to
express an opinion on these financial statements based on our audit.
2. We conducted our audit in accordance with generally accepted auditing
standards in the United States. 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 audit provides a reasonable basis for
our opinion.
3. As discussed in Note 1, the accompanying financial statements are intended
to present the assets, liabilities and results of the Can Coatings
Division of Coates Brothers Plc which have been sold to an unrelated third
party and are not intended to be a complete presentation of the financial
statements of the Can Coatings Division of Coates Brothers Plc. The Can
Coatings Division of Coates Brothers Plc has transactions with, and is
allocated certain costs from, Total group companies. The bases of these
transactions and allocations may not represent the trading terms or costs
which would have resulted if the Can Coatings Division of Coates Brothers
Plc had operated as a stand-alone entity during the year.
4. In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Can Coatings
Division of Coates Brothers Plc as of December 31, 1995, and the results
of its operations and its cash flows for the year ended December 31, 1995,
in conformity with generally accepted accounting principles in the United
States.
/s/ Arthur Andersen
Arthur Andersen
Chartered Accountants and Registered Auditors
London
6 March 1996
Coates Brothers Plc - Can Coatings Division
Statement of Specified Assets and Liabilities
December 31, 1995
-----------------
ASSETS (pound)'000
-------------
Cash 157
Prepaid expenses and other current assets (Note 3) 351
Accounts receivable (Note 4) 6,045
Inventories (Note 5) 2,856
------
TOTAL CURRENT ASSETS 9,409
Property, plant and equipment (Note 6) 4,788
------
TOTAL ASSETS 14,197
======
LIABILITIES AND EQUITY
Accounts payable (Note 7) 2,865
Accrued expenses (Note 8) 395
------
TOTAL CURRENT LIABILITIES 3,260
Deferred taxation (Note 12) 301
Commitments and contingencies (Note 15) --
------
TOTAL LIABILITIES 3,561
EQUITY (Note 10) 10,636
------
TOTAL LIABILITIES AND EQUITY 14,197
======
Coates Brothers Plc - Can Coatings Division
Statement of Revenues and Expenses
Year ended
December 31, 1995
(pound)'000
-----------------
Sales 20,918
Cost of sales (16,606)
General and administrative expenses (4,615)
Depreciation and amortization (431)
Other income, net (Note 11) 710
-------
LOSS BEFORE INCOME TAXES (24)
Income taxes (Note 12) (81)
-------
NET LOSS (105)
=======
Coates Brothers Plc - Can Coatings Division
Statement of cash flows
Year ended
December 31, 1995
(pound)'000
------------------
OPERATING ACTIVITIES:
Net loss (105)
Adjustments to reconcile net loss to net cash
flow provided by operating activities
Income taxes 81
Depreciation 431
Non-cash element of pension expense 270
Changes in operating assets and liabilities
Accounts receivable, prepaid expenses
and other current assets (1,342)
Inventories 496
Accounts payable and accrued expenses 329
------
Net cash provided by operating activities 160
------
INVESTING ACTIVITIES:
Capital expenditures on tangible fixed assets (575)
------
Net cash used in investing activities (575)
------
FINANCING ACTIVITIES:
Equity contribution by Coates Brothers Plc 494
------
Net cash provided by financing activities 494
------
INCREASE IN CASH AND CASH EQUIVALENTS: 79
Cash and cash equivalents, beginning of year 78
------
Cash and cash equivalents, end of year 157
======
Coates Brothers Plc - Can Coatings Division
Notes to Financial Statements
December 31, 1995
1. DESCRIPTION, PLANNED DISPOSITION AND BASIS OF FINANCIAL STATEMENT
PRESENTATION
The Can Coatings Division (the "Division") is a division of Coates
Brothers Plc, a public limited company organised under the laws of the
United Kingdom. The Division's principal business is the manufacture of
coatings and inks for use in the metal packaging market, principally in
Europe.
At December 31, 1995, Coates Brothers Plc was engaged in negotiating an
agreement to sell the assets and liabilities of the Division to an
unrelated third party.
The transaction was completed on February 26, 1996 by Coates Brothers
Plc.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the year. Actual results could differ from these
estimates.
1.1 Details of specific assets and liabilities, revenues and
expenses allocated to the Division on a stand-alone basis
Caption (pound)'000 Allocation method used
- ------- ----------- ----------------------
Specified assets
- ----------------
* Cash 157 Specific identification
* Prepaid expenses and other current assets 351 Specific identification
* Accounts receivable 6,045 Specific identification
* Inventories 2,856 Specific identification
* Property, plant and equipment 4,788 Specific identification, with
------- allocation of one property
Total specified assets 14,197
=======
The following amounts have been allocated to the Division and included within
Property, plant and equipment:
(pound)'000
-----------
* Freehold land 378
* Leasehold buildings 516
---
894
===
These amounts are in respect of land and buildings occupied by the Division in
Machen, South Wales. The site is adjacent to a site occupied by Cray Valley
Limited (formerly the resins division of Coates Brothers Plc) and the legal
ownership of the entire site, including that occupied by the Division, was
transferred to Cray Valley Limited (a wholly owned subsidiary of Total) on its
formation. The book value of the buildings occupied by the Division remained in
the books of the Division within Coates Brothers Plc and is depreciated there.
The book value of the land is held in the books of Cray Valley Limited and the
relevant value, based on area, has been allocated to the Division for these
financial statements. The book value of the land and buildings is based on an
independent valuation performed in 1990 in connection with the acquisition of
Coates Brothers Plc by Total. No rent is payable to Cray Valley Limited for the
Division's use of any part of the site.
Specified liabilities (pound)'000 Allocation method used
- --------------------- ----------- ----------------------
* Accounts payable 2,865 Specific identification
* Accrued expenses 395 Specific identification
* Deferred taxation 301 Specific identification
------
Total specified liabilities 3,561
=====
Statement of revenues and expenses (pound)'000 Allocation method used
- ---------------------------------- ------------ ----------------------
* Sales 20,918 Specific identification
* Cost of sales (16,606) Specific identification
* General and administrative expenses,
excluding pension costs and allocated
administration expenses (3,876) Specific identification
* Pension costs (468) Allocation based on employee numbers
* Allocated administration expenses (Note 13) (271) Various
* Depreciation and amortization (431) Specific identification
* Other income, net (Note 11) 710 Specific identification
--------
Loss before income taxes (24)
---
Income taxes (81) Calculation
---
Net loss (105)
====
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared in accordance with
generally accepted accounting principles in the United States.
a) Inventories
Inventories of raw materials and supplies and of finished
goods are stated at the lower of cost (including, where
appropriate, direct material, labour and attributable
overheads) and estimated realizable value.
b) Property, plant and equipment
Investments in property, plant and equipment are stated at
cost or valuation. Where the asset is stated at a valuation,
it represents the amount determined by an independent
valuation performed in 1990 in connection with the acquisition
of Coates Brothers Plc by Total.
Assets are depreciated by the straight-line method over their
estimated useful lives, as follows:
Years of estimated useful life
------------------------------
Transportation equipment 3 to 4 years
Machinery and equipment 2 1/2 to 25 years
Furniture and fixtures 5 to 10 years
Leasehold buildings 20 to 50 years
Freehold buildings 40 years
Freehold land is not depreciated.
Routine maintenance and repairs are charged to expense as
incurred.
c) Income taxes
Deferred tax liabilities and assets are determined based on
the difference between financial and tax bases of assets and
liabilities using tax rates in effect for the year in which
the differences are expected to reverse.
d) Revenue recognition
Revenues are recognized as products are shipped.
e) Research and development
Research and development expenditures are charged to expense
as incurred. Expenditures on research and development amounted
to (pound)770,000 during the year.
f) Pension plan
Pension costs are based on the advice of an independent
actuary and are a substantially level percentage of current
and anticipated pensionable pay.
The cumulative non-cash element of the pension expense,
representing the excess of charges to expense over cumulative
contributions payable to the balance sheet date, is recorded
only in the accounts of Coates Brothers Plc and has not been
allocated to the Division.
3. PREPAID EXPENSES AND OTHER CURRENT ASSETS
December 31, 1995
(pound)'000
-----------
Prepayments 77
Royalty income receivable 274
---
Gross value 351
Valuation allowance -
---
Net value 351
===
4. ACCOUNTS RECEIVABLE
December 31, 1995
(pound)'000
-----------
Trade receivables 6,111
Valuation allowance (66)
------
Net value 6,045
======
5. INVENTORIES
December 31, 1995
(pound)'000
-----------
Raw materials and supplies 1,441
Finished goods 1,696
-----
Gross value 3,137
Valuation allowance (281)
-----
Net value 2,856
=====
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment and the related accumulated depreciation
are as follows:
December 31, 1995
-----------------
Cost or Depreciation Net Book
Valuation Value
(pound)'000 (pound)'000 (pound)'000
----------- ----------- -------------
Freehold land and buildings 1,692 (103) 1,589
Leasehold buildings 1,072 (216) 856
Machinery and equipment 3,845 (1,643) 2,202
Furniture and fixtures 336 (195) 141
Transportation equipment 14 (14) --
----- ----- -----
Total 6,959 (2,171) 4,788
====== ====== ======
There are no assets held under finance leases.
7. ACCOUNTS PAYABLE
December 31, 1995
(pound)'000
-----------
Trade payables 2,865
=====
8. ACCRUED EXPENSES
December 31, 1995
(pound)'000
-----------
Accrued expenses 395
===
9. PENSION PLAN
Employees are eligible to become members of the Coates Brothers Staff
Life Assurance & Pension Scheme or the Coates Brothers Plc Senior
Executive Scheme. These are defined benefit schemes with the assets
held separately from those of Coates Brothers Plc. Pension costs for
the year amounted to (pound)468,000.
10. EQUITY
The equity represents the difference between the specified assets and
the specified liabilities of the Can Coatings Division of Coates
Brothers Plc.
11. OTHER INCOME, NET
Year ended
December 31, 1995
(pound)'000
-----------
Technical fee income 770
Royalty income 30
Redundancy costs (90)
----
Total 710
===
12. INCOME TAXES
The components of income taxes are as follows:
Year ended
December 31, 1995
(pound)'000
-----------
Current income taxes 83
Deferred income taxes (2)
---
Income taxes 81
===
Reconciliation of the statutory income tax rate to the Company's effective tax
rate is as follows:
Year ended
December 31, 1995
(pound)'000
-----------
Net loss (105)
Income taxes 81
----
Pre-tax loss (24)
Statutory tax rate 33%
----
Statutory tax rate applied to pre-tax
loss representing income tax
benefit on loss before tax 8
Reconciling items
Non-cash element of pension expense (Note 2f) (89)
----
Income tax expense (81)
====
The components of the deferred tax balance are as follows:
December 31, 1995
(pound)'000
-----------
Deferred tax assets
* Depreciation on non-qualifying assets 34
----
Gross deferred tax asset 34
Valuation allowance -
----
Deferred tax asset 34
Deferred tax liabilities
* Excess of tax depreciation
over book depreciation 335
---
Deferred tax liabilities 335
===
Net deferred tax liability 301
===
13. RELATED PARTIES
Balances with related parties (Total group entities) included in the
financial statements are as follows:
December 31, 1995
(pound)'000
-----------
Receivables
Trade accounts 1,816
Payables
Trade accounts (1,522)
Year ended
December 31, 1995
(pound)'000
-----------
Sales 5,885
Purchases (8,895)
Other income 800
Administration expenses (allocated) (271)
14. PAYROLL AND STAFF
The main data relating to this caption consists of the following:
Year ended
December 31, 1995
(pound)'000
-----------
Personnel expense
Wages and salaries (including social charges,
and pension costs) 3,666
=====
Average numbers of employees
- Management 20
- Other 133
-----
Total 153
=====
15. COMMITMENTS AND CONTINGENCIES
Operating Lease Commitments
The future minimum operating lease payments on non-cancellable leases
to which the Division is committed as of December 31, 1995 are set
forth below:
Operating leases
(pound)'000
-----------
1996 124
1997 53
1998 16
1999 2
---
Future lease payments 195
===
Capital commitments
Capital commitments as of December 31, 1995 are set forth below:
Capital commitments
(pound)'000
-----------
Authorised but not contracted 404
Authorised and contracted 15
---
419
===
Contingencies
There are no contingencies as of December 31, 1995.
ARTHUR
ANDERSEN
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To TOTAL S.A.:
We have audited the accompanying balance sheet of Coates Coatings AS as of
December 31, 1995, and the related statements of income, changes in
shareholder's equity and cash flows for the year then ended all expressed in
thousands of Norwegian Kroner. 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 in accordance with generally accepted auditing standards
in Norway, which are substantially consistent with generally accepted auditing
standards in the United States. 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 audit provides a reasonable basis
for our opinion.
As discussed in Note 1, the accompanying financial statements are intended to
present the assets, liabilities and results of Coates Coatings AS which have
been sold to an unrelated third party and are not intended to be a complete
presentation of the financial statements of Coates Coatings AS. Additionally, as
discussed in Note 1, Coates Coatings AS has transactions with affiliated
companies of Total S.A. Because of this relationship, the terms of some or all
of the transactions between affiliated companies of Total S.A. and Coates
Coatings AS included in the accompanying financial statements are not
necessarily indicative of that which would have resulted if Coates Coatings AS
was a stand-alone entity.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Coates Coatings AS as of
December 31, 1995, and the results of its operations and its cash flows for the
year ended December 31, 1995, in conformity with generally accepted accounting
principles in the United States.
ARTHUR ANDERSEN & CO.
Member of Arthur Andersen & Co. SC
/s/ Oystein Fjeldberg
Oystein Fjeldberg
State Authorized Public
Accountant (Norway)
Oslo, Norway
February 27, 1996
COATES COATINGS AS, NORWAY
Balance Sheet
(NOK 1.000)
ASSETS December 31, 1995
-----------------
Cash on hand and in banks 3.299
Prepaid expenses and other current assets (Note 3) 458
Accounts receivable (Notes 4 and 9) 9.149
Inventories (Note 5) 12.569
------
TOTAL CURRENT ASSETS 25.475
Other noncurrent assets (Note 6) 1.878
Property, plant and equipment (Note 7) 5.389
Intangible assets (Note 8) 355
------
TOTAL ASSETS 33.097
======
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term debt (Note 9) 175
Accounts payable (Note 10) 7.977
Other accrued expenses (Note 11) 3.807
------
TOTAL CURRENT LIABILITIES 11.959
======
Long-term debt (Note 9) 2.755
Employee benefits (Note 12) 45
------
TOTAL LIABILITIES 14.759
SHAREHOLDERS' EQUITY (NOTE 13)
Common shares (11.100 shares authorized 11.100
and outstanding of NOK 1.000 par value)
Accumulated loss (22.762)
Revaluation capital (Note 13) 30.000
-- ------
TOTAL SHAREHOLDERS' EQUITY 18.338
======
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 33.097
======
COATES COATINGS AS, NORWAY
Statement of Income
(NOK 1.000)
Year ended
December 31, 1995
-----------------
Sales 72.504
Costs of sales 47.701
General and administrative expenses 24.595
Depreciation and amortization (Note 8) 4.151
Provision for impairment loss 18.000
Other income (Note 14) (566)
-------
LOSS BEFORE INTEREST AND INCOME TAX EXPENSE (21.377)
Interest expense, net (Note 15) (195)
-------
LOSS BEFORE TAX BENEFIT (21.572)
Income tax benefit (Note 16) 103
-------
NET LOSS (21.469)
=======
COATES COATINGS AS, NORWAY
Statement of Changes in Shareholder's Equity
(NOK 1.000)
Balance as of January 1, 1995 42.784
Dividend distributed (2.977)
Net loss for the year ended December 31, 1995 (21.469)
-------
Balance as of December 31, 1995 18.338
======
COATES COATINGS AS, NORWAY
Statement of cash flows
(NOK 1.000)
December 31, 1995
-----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) (21.469)
Adjustments to reconcile net income
(loss) to net cash flow provided by operating activities
Depreciation and amortization 4.151
Provision for impairment loss 18.000
Deferred income taxes (103)
Other deferred liabilities (563)
Gain on disposal of assets (78)
Write-down of assets to net realizable value 311
Changes in operating assets and liabilities
Accounts and notes receivable 473
Inventories and prepaid expenses 1.832
Accounts payable and other accrued expenses 136
Income taxes payable (1.207)
-------
Net cash flow provided by (used in) operating activities 1.483
-------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1.448)
Proceeds from sales of assets 90
Other (35)
-------
Net cash flow provided by (used in) investing activities (1.393)
-------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in advances and equity 0
Net (payments on) proceeds from borrowings 158
Dividends paid (2.977)
-------
Net cash flow provided by (used in) financing activities (2.819)
-------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:
Effect of exchange rate on cash and cash equivalents 0
Cash and cash equivalents, beginning of year 6.028
-------
Cash and cash equivalents, end of year 3.299
=======
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:
Cash paid during the year for:
- Interest (net of amount capitalized) 251
- Income taxes 1.207
COATES COATINGS AS, NORWAY
Notes to Financial Statements
December 31, 1995
1. DESCRIPTION, PLANNED DISPOSITION AND BASIS OF FINANCIAL STATEMENT
PRESENTATION
The company is located in Mjondalen, 55km south-west of Oslo and has
approximately 5.000 m2 of production, laboratory and administration
facilities.
The company was established in 1954 under name of Eianlakk AS. The
business activities are development, manufacturing and sales of can
coatings. The company's market share is relatively stable. On UK and
German markets the products are distributed through affiliated
companies.
In December 1995, the Executive Committee of Total S.A. (the ultimate
parent company) has decided to sell a portion of its Can Coatings
activities.
As a result, negotiations started by the end of the year 1995, to sell
the shares of Coates Coatings AS to an unrelated third party. The
transaction is completed on February 26, 1996 by Coates Brothers Plc.
For the purpose of these financial statements, push down accounting
principles have been applied. As a result, a goodwill of KNOK 30.000
recorded in 1991 has been pushed down.
As of January 1, 1995 the accumulated amortization of this goodwill
(amortized over a 10 year period using the straight-line method) was
KNOK 9.000 and its net amount KNOK 21.000.
As of December 31, 1995, an impairment loss of KNOK 18.000 has been
recorded to reflect the difference between the carrying amount of the
goodwill and its market value in accordance with the terms of the
signed agreement.
The tax situation for companies in Norway has been stable since the tax
reform in 1992. The statutory income tax rate is 28%. The most
important timing differences between accounting and tax bases exist in
the areas of receivables and inventory valuation allowances,
depreciation, pension plans, accruals for warranty claims and waste
disposals and similar items.
2. SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements have been prepared in accordance
with generally accepted accounting principles in the United States.
a) Inventories
Inventories are items used for sales provided to customers.
Inventories are stated at the lower of either average cost
(includes direct material, labor and attributable overhead) or
estimated realizable value.
b) Property, plant and equipment
Investments in property, plant and equipment are stated at
cost. Assets leasehold improvements are depreciated by the
straight-line method over their estimated useful life, as
follows:
Years of estimated useful life
Transportation equipment 5 years
Machinery and equipment 10 years
Furniture and fixtures 3 - 10 years
Leasehold improvements are depreciated over the residual lease
period of the buildings (until August 2001).
Routine maintenance and repairs are charged to income as
incurred.
c) Intangible assets
Goodwill accounted for in these financial statements as a
result of push down accounting is amortised on a straight line
basis over 10 years.
Other goodwill is amortised on the same basis over 5 years.
d) Income taxes
Deferred tax liabilities and assets are determined based on
the difference between financial and tax bases of assets and
liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse.
e) Revenue Recognition
Revenues are recognized as products are shipped.
f) Research and Development
Research and development expenditures are charged to expense
as incurred. Expenditures on research and development amounted
to approximately KNOK 3.200 for the year ended December 31,
1995.
g) Employee benefits
* Pension plans
The company has an agreement with a life insurance company
concerning a collective pension plan for the employees.
The employees become members of the plan when more than 25
years old and have been employed for more than one
calender year. The benefit from the plan together with
proceeds from the mandatory government plan amount to 60%
of the individual's salary effective on retirement age (67
years).
* Postemployment benefits
The company has a postemployment benefit plan for one
person. The person is entitled to a fixed annual cash
compensation of KNOK 35 until the benefisiary reaches the
age of 67 years.
i) Waste disposals
The expected costs of waste disposals are recognised as
inventories become obsolete.
3. PREPAID EXPENSES AND OTHER CURRENT ASSETS
The detail of these captions is shown below:
December 31, 1995
----------------------------------------
Cost Valuation allowance Net
---- ------------------- ---
VAT receivable 382 -- 382
Bonus receivable 76 -- 76
----- -- ---
Total 458 -- 458
=== == ===
4. ACCOUNTS RECEIVABLES
Accounts receivables consist of the following:
December 31, 1995
-----------------------------------------
Cost Valuation allowance Net
---- ------------------- ---
Trade receivable 9.366 217 9.149
===== === =====
5. INVENTORIES
Inventories consist of:
December 31, 1995
-----------------
Raw materials and supplies 7.634
Finished goods 7.857
------
Gross value 15.491
======
Valuation allowance 2.922
------
Net value 12.569
======
6. OTHER NONCURRENT ASSETS
The detail of this caption is shown below:
December 31, 1995
-----------------------------------------
Cost Valuation allowance Net
---- ------------------- ---
Net plan assets, see Note 12 577 577
Loans to employees 355 355
Deferred income tax asset - net 946 946
Other 95 95 0
----- -- -----
Total 1.973 95 1.878
===== == =====
7. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment and the related accumulated depreciation
and amortization are as follows:
December 31, 1995
-----------------
Accumulated
depreciation and
Cost amortization Net
---- ------------ ---
Transportation equipment 1.871 1.330 541
Machinery and equipment 12.459 9.227 3.232
Furniture and fixtures 1.387 877 510
Flat 360 60 300
Leasehold improvements 1.184 378 806
------ ------ -----
Total 17.261 11.872 5.389
====== ====== =====
8. INTANGIBLE ASSETS
Intangible assets consist of the following:
December 31, 1995
-----------------------------------------
Accumulated
Cost amortization Net
---- ------------ ---
Goodwill-push down 30.000 30.000 0
Other goodwill 611 256 355
------- ------ ---
Total 30.611 30.256 355
====== ====== ====
For the purpose of these financial statements, push down accounting
principles have been applied. As a result, a goodwill of KNOK 30.000
recorded in 1991 has been pushed down. As of January 1, 1995 the
accumulated amortization of this goodwill (amortized over a 10 year
period using the straight-line method) was KNOK 9.000 and its net
amount KNOK 21.000. As of December 31, 1995, an impairment loss of KNOK
18.000 has been recorded to reflect the difference between the carrying
amount of the goodwill and its market value in accordance with the
terms of the signed agreement.
9. DEBT
9.1 Long-term debt
* As of December 31, 1995, long term debt comprises:
December 31, 1995
-----------------
Secured Unsecured Total
------- --------- -----
Loan to Coates Lorilleux AS,
Norway (affiliated companies)
- Floating rate, Nibor 6 months
+ 1% 2.755 2.755
===== =====
* Repayment schedule (excluding short-term portion):
Years December 31, 1995
----- -----------------
1996 0
1997 2.755
-----
Total 2.755
-----
* Analysis by currency:
December 31, 1995
-----------------
Norwegian krone 2.755
9.2 Short term debt
December 31, 1995
-----------------
Bank overdraft 175
Amount of unused credit facility is DEM 60.383, equal to KNOK
266. The guarantee commission for the total facility is 0,5%
and the interest rate on balance drawn is 8,5 % p.a. KNOK 409
of trade receivables have been pledged as security for the
credti facility.
10. ACCOUNTS PAYABLE
The main items under this caption are as follows:
December 31, 1995
-----------------
Trade payables 7.977
-----
11. OTHER ACCRUED EXPENSES
The main items under this caption are as follows:
December 31, 1995
-----------------
Holiday pay 1.031
Employee redundancy accruals 283
Social security costs 1.293
Provisions for warranty claims 378
Provisions for waste disposals 606
Other 216
-----
Total 3.807
-----
12. EMPLOYEE BENEFITS
* Pension plans:
The following table summarizes the funded status of the defined benefit
pension plans:
December 31, 1995
-----------------
Actuarial present value of benefit obligation:
- Vested (1.891)
- Non-vested 0
-------
Accumulated benefit obligation (1.891)
Effect of projected salary increases 1.615
------
Projected benefit obligation for services rendered to date (3.506)
Plan assets available for benefits 4.079
------
Projected benefit obligation in excess of plan assets
Unrecognized net gain (loss) 4
Unrecognized prior service cost
-------
Pension asset included in the balance sheet 577
=======
Net periodic pension cost includes the following components:
Year ended
December 31, 1995
-----------------
Service cost (benefits earned during the year) 221
Interest cost on projected benefit obligation 218
Return on plan assets (274)
Net periodic pension expense 165
====
Major assumptions used in the accounting for the defined benefit
pension plans are shown in the following table:
- discount rates 7%
- future salary increase 2,5%
- expected return on assets 8%
* Postemployment benefit:
The postemployment liability for one former employee has a net
present value of KNOK 45 when applying a discount rate of 7%.
13. SHAREHOLDERS' EQUITY
13.1 Common shares
- Description of the shares: 1.000 par value
- Number of shares: 11.100
- Ownership of all common shares: Total Norge AS
13.2 Accumulated loss
Accumulated loss consists of:
December 31, 1995
-----------------
- Legal reserve 5.470
- Accumulated loss previous years (6.763)
- Net loss of the year (21.469)
-------
Total (22.762)
=======
13.3 Revaluation capital 30,000
=======
14. OTHER INCOME, NET
The main items included under this caption are as follows:
Year ended
December 31, 1995
-----------------
Foreign exchange gains 488
Gain on disposal of assets 78
----
Total 566
===
15. INTEREST (EXPENSE), NET
Year ended
December 31, 1995
-----------------
Interest income 133
Interest expense (328)
Less amounts capitalized 0
----
Total (195)
=====
16. INCOME TAXES
The components of income tax benefit are as follows:
Year ended
December 31, 1995
-----------------
Deferred income tax benefit 103
===
Reconciliation of the statutory income tax rate to the Company's
effective tax rate is as follows:
Year ended
December 31, 1995
-----------------
Net loss (21.469)
income tax benefit (103)
-------
Pre-tax income (loss) (21.572)
Statutory tax rate 28%
-------
Statutory tax rate applied to
pre-tax income (loss) (6.040)
RECONCILING ITEMS
PERMANENT DIFFERENCES 5.937
-------
Income tax benefit (103)
=======
The components of deferred tax balances are as follows:
December 31, 1995
-----------------
Deferred tax assets
* NOL's carryforwards 145
* Employee benefits 12
* Allowances for receivables 83
* Allowances for inventory 750
* Accrued for waste disposal 170
* Accrued for warranty claims 106
* Other accrued liabilities 19
-----
Gross deferred tax asset 1.285
-----
Valuation allowance
Net deferred tax asset 1.285
=====
December 31, 1995
-----------------
Deferred tax liabilities
* Excess tax over book depreciation 177
* Plan assets 162
---
Deferred tax liabilities 339
===
Net deferred tax asset 946
===
Deferred tax assets relating to NOL's carryforwards expire in the following
year:
2005 145
Unlimited 0
---
Total 145
===
17. LEASE COMMITMENTS
The future minimum lease payments on noncancelable leases to which the
Company is committed as of December 31, 1995 is set forth below:
Operating leases
1996 3.036
1997 3.036
1998 3.036
1999 3.036
2000 3.036
2001 and later years 2.024
-----
Future lease payments 17.204
======
There is no long term capital lease obligation.
The lease agreement which covers factory-, store and office buildings
and fixed equipments in the buildings, expires 15th August 2001. The
company has an option to continue the lease agreement after this date
or to buy the buildings.
For 1995 the lease amount was NOK 3.036 and the amount is regulated
every second year with 80% of the increase in the consumer price index.
Latest regulation was for 1995.
18. RELATED PARTIES
Balances with affiliated companies included in the financial statements
are as follows:
December 31, 1995
-----------------
Receivables
Trade accounts 1.683
Payables
Trade accounts 755
Loan to Coates Lorilleux AS, Norway 2.755
Year ended
December 31, 1995
-----------------
Sales: to affiliated companies 20.503
Purchases: from affiliated companies 2.508
Interest expense paid to Bostik Norge AS 158
(affiliated company)
19. PAYROLL AND STAFF
The main data relating to this caption consist of the following:
Year ended
----------
December 31, 1995
-----------------
Personnel expense
Wages and salaries (including social charges) 13.677
Average numbers of employees
- Management 6
- Other 36
-------
Total 42
-------
ARTHUR
ANDERSEN
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To TOTAL S.A.:
We have audited the accompanying balance sheet of COATES COATINGS GMBH, Erkrath,
Germany, as of December 31, 1995, and the related statements of income, changes
in shareholder's equity and cash flows for the year then ended all expressed in
thousands of Deutsche Mark. 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 in accordance with generally accepted auditing standards
in Germany which are substantially consistent with generally accepted auditing
standards in the United States. 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 audit provides a reasonable basis
for our opinion except for the following:
Scope exceptions:
* We did not participate in the physical inventory take as of December 31,
1995.
As discussed in Note 1, the accompanying financial statements are intended to
present the assets, liabilities and results of COATES COATINGS GMBH; Erkrath,
Germany which have been sold to an unrelated third party and are not intended to
be a complete presentation of the financial statements of COATES COATINGS GMBH;
Erkrath, Germany. Additionally, as discussed in Note 1, COATES COATINGS GMBH;
Erkrath, Germany has transactions with Total S.A. and its subsidiaries and is
provided with some services free of charge. Because of this relationship, the
terms of some or all of the transactions and allocations between Total S.A. and
COATES COATINGS GMBH; Erkrath, Germany included in the accompanying financial
statements are not necessarily indicative of that which would have resulted if
COATES COATINGS GMBH; Erkrath, Germany was a stand-alone entity.
In our opinion, the financial statements referred to above present fairly, in
all material respects, except for the points raised under paragraph "scope
exceptions" referred to above, the financial position of COATES COATINGS GMBH;
Erkrath, Germany as of December 31, 1995, and the results of its operations and
its cash flows for the year ended December 31, 1995, in conformity with
generally accepted accounting principles in the United States.
ARTHUR ANDERSEN
Wirtschaftsprufungsgesellschaft
Steuerberatungsgesellschaft mbH
/s/ Michael Thierhoff /s/ Michael Molleken
Michael Thierhoff ppa. Michael Molleken
Dusseldorf, Germany
February 27, 1996
COATES COATINGS GMBH
(all amounts in thousands of Deutsche Mark)
Balance Sheet
ASSETS December 31, 1995
-----------------
Cash and cash equivalents 21
Prepaid expenses and other current assets (Note 3) 24
Accounts receivable (Note 4) 1,652
Inventories (Note 5) 794
-----
TOTAL CURRENT ASSETS 2,491
Other noncurrent assets (Note 6) 445
Property, plant and equipment (Note 7) 684
Intangible assets (Note 8) 109
-----
TOTAL ASSETS 3,729
=====
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term debt (Note 9) 339
Accounts payable (Note 10) 2.053
Other accrued expenses (Note 11) 212
-----
TOTAL CURRENT LIABILITIES 2,604
Other liabilities (Note 12) 209
-----
TOTAL LIABILITIES 2,813
COMMITMENTS AND CONTINGENCIES (Note 22)
Common shares 400
Paid-in capital 928
Retained earnings (includes loss for the year) (412)
----
TOTAL SHAREHOLDERS' EQUITY (Note 13) 916
-----
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 3,729
=====
COATES COATINGS GMBH
(all amounts in thousands of Deutsche Mark)
Statement of Income
December 31, 1995
-----------------
Sales and revenues 9,175
Costs of sales 8,007
General and administrative expenses 1,160
Depreciation and amortization 118
Other (income) expense, net (Note 14) 92
-----
LOSS BEFORE INTEREST AND INCOME TAX EXPENSE 202
Interest expense, net (Note 15) 48
-----
LOSS BEFORE TAX EXPENSE (BENEFIT) 250
Income tax expense (benefit) (Note 16) (100)
-----
NET LOSS 150
=====
COATES COATINGS GMBH
(all amounts in thousands of Deutsche Mark)
Statement of Changes in Shareholder's Equity
Balance, January 1, 1995 616
Increase in shareholder's equity 450
Net loss for the year ended December 31, 1995 (150)
---
Balance as of December 31, 1995
916
===
At the shareholder's meeting on December 22, 1995, the shareholder decided to
increase the paid-in capital by KDM 450 from KDM 478 to KDM 928. The payment was
made via bank transfer on December 29, 1995.
COATES COATINGS GMBH
(all amounts in thousands of Deutsche Mark)
Statement of cash flows
December 31, 1995
-----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss (150)
Adjustments to reconcile net income
(loss) to net cash flow provided by operating activities
Depreciation and amortization 227
Deferred income taxes (100)
Changes in operating assets and liabilities
Accounts and notes receivable (757)
Inventories and prepaid expenses (214)
Accounts payable and other accrued expenses 583
Other (including the change in bank overdraft
in the amount of KDM 200) 275
--- ---
Net cash flow used in operating activities (136)
----
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (316)
----
Net cash flow used in investing activities (316)
----
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in advances and equity 450
---
Net cash flow provided by financing activities 450
---
DECREASE IN CASH AND CASH EQUIVALENTS: (2)
Cash and cash equivalents, beginning of year 23
--
Cash and cash equivalents, end of year 21
==
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:
Cash paid during the year for:
-Interest 48
-Income taxes 0
COATES COATINGS GMBH
Notes to Financial Statements
December 31, 1995
1. DESCRIPTION, PLANNED DISPOSITION AND BASIS OF FINANCIAL STATEMENT
PRESENTATION
The company produces ink for the can production industry. Besides the
production and selling of these products the company also sells similar
products like coatings mainly to German customers.
COATES COATINGS GMBH is an affiliated company of Coates Brothers PLC, a
public limited company organized under the laws of the United Kingdom.
At the end of the year 1995, Coates Brothers PLC was engaged in
negotiating an agreement to sell the shares of COATES COATINGS GMBH to
an unrelated third party. The transaction is completed on February 26,
1996 by Coates Brothers Plc.
The company is subject to German corporate income tax and to trade tax
on income. As of December 31, 1995 tax loss carry forwards for
corporate income tax purposes amounted to KDM 978 approximately.
2. SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements have been prepared in accordance
with generally accepted accounting principles in the United States.
a) Inventories
Inventories are items used for sales to customers. Inventories
are stated at the lower of average cost (includes direct
material, labor and attributable overhead) or estimated net
realizable value.
b) Property, plant and equipment
Investments in property, plant and equipment are stated at
cost. Assets with acquisition costs below DM 800 are expensed
when acquired.
Assets are depreciated by the straight-line method over their
estimated useful life, as follows:
Years of estimated
useful life
-------------------
Transportation equipment 4-10
Machinery and equipment 5
Tools 4-10
Furniture and fixtures 10
Buildings (leasehold improvements) term of the lease
Routine maintenance and repairs are charged to income as
incurred.
c) Intangible assets
As of June 1, 1993, Coates Coating AS, Norway transfered its
entire sales affairs in Germany, Austria and Switzerland plus
the sales affair with one customer in France to COATES
COATINGS GMBH. For the transfer of the business activities
COATES COATINGS GMBH paid TDM 200 to Coates Coatings AS,
Norway. COATES COATINGS GMBH capitalized these costs. The
amortization period is 5 years.
d) Income taxes
The company has a tax loss carry forward in the amount of appr
KDM 978 as of December 31, 1995. The tax loss carry forward is
the number reported by the company in its tax filings. The
filings have yet not been subject to review by a tax audit.
e) Revenue Recognition
Revenues are recognized as services are completed or as
products are shipped.
f) Research and Development
No research and development expenditures incurred during the
year ended December 31, 1995.
g) Employee benefits
* Pension plans
There is no pension plan for employees of COATES
COATINGS GMBH.
* Postretirement benefits
There are no postretirement benefits for employees of
COATES COATINGS GMBH.
* Postemployment benefits
There are no postemployment benefits for employees of
COATES COATINGS GMBH.
h) Cash and cash equivalents
Cash equivalents are highly liquid investments that are
readily convertible to cash and have original maturities of
three months or less.
3. PREPAID EXPENSES AND OTHER CURRENT ASSETS
The detail of these captions is shown below:
December 31, 1995
Cost Valuation allowance Net
---- ------------------- ---
Advance to suppliers 0 0 0
Prepayments 0 0 0
Deferred income taxes 0 0 0
Other 24 0 24
-- - --
Total 24 0 24
== = ==
4. ACCOUNT RECEIVABLES
Account receivables consist of the following:
December 31, 1995
Cost Valuation allowance Net
---- ------------------- ---
Trade receivables 1.686 (34) 1.652
Notes receivable 0 0 0
----- -- -----
Total 1.686 (34) 1.652
===== == =====
5. INVENTORIES
Inventories consist of:
December 31,1995
----------------
Raw materials and supplies 322
Work in process 0
Finished goods 499
Spare parts 0
---
Gross value 821
===
Valuation allowance (27)
---
Net value 794
===
6. OTHER NONCURRENT ASSETS
The detail of this caption is shown below:
December 31, 1995
Cost Valuation allowance Net
---- ------------------- ---
Loans 0 0 0
Other loans 0 0 0
Loans to employees 55 0 55
Deferred income taxes 390 0 390
Other 0 0 0
--- - ---
Total 445 0 445
=== = ===
7. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment and the related accumulated depreciation
and amortization are as follows:
December 31, 1995
Accumulated
decpreciation and
Cost amortization Net
---- ------------------- ---
Transportation equipment 44 (21) 23
Machinery, and equipment 543 (171) 372
Tools 109 (46) 63
Furniture and fixtures 44 (12) 32
Buildings (leasehold
improvements) 251 (57) 194
Construction in progress 0 0 0
--- ---- --
Total 991 (307) 684
=== === ===
Property, plant and equipment presented above do not include any
amounts of facilities and equipment leases capitalized:
8. INTANGIBLE ASSETS
Intangible assets consist of the following:
December 31, 1995
-----------------
Cost Accumulated Net
---- amortization ---
------------
Patents and trademarks 0 0 0
License agreements 0 0 0
Other 228 (119) 109
--- ---- ---
Total 228 (119) 109
=== === ===
9. SHORT TERM DEBT
December 31,1995
----------------
Current portion of long term debt 0
Short term loans 0
Bank overdrafts 339
---
Total 339
===
Currently the arrangement regarding a line of credit for COATES
COATINGS GMBH by Dresdner Bank AG, Dusseldorf, are under
negotiation. The interest rate for the bank overdraft as of December
31, 1995, is 9,5% p.a.
10. ACCOUNTS PAYABLE
The main items under this caption are as follows:
December 31, 1995
-----------------
Trade payables 2.053
Notes payables 0
-----
Total 2.053
=====
11. OTHER ACCRUED EXPENSES
The main items under this caption are as follows:
December 31,
1995
------------
Payroll benefits 22
Other 190
---
Total 212
===
12. OTHER LIABILITIES
December 31, 1995
-----------------
0
Other 209
---
Total 209
===
13. SHAREHOLDERS' EQUITY
13.1 Common shares
- Description of the shares: DM 400.000 par value
- Number of shares: 2
- Ownership of common shares: Coates Lorilleux S.A., Puteaux
13.2 Retained earnings
Retained earnings consist of:
December 31,1995
----------------
- Loss carry forward (262)
- Net loss of the year (150)
----
Total (412)
====
14. OTHER INCOME (EXPENSE), NET
The main items included under this caption are as follows:
Year ended
December 31, 1995
-----------------
Foreign exchange losses (1)
Sales of assets (1)
Other (90)
---
Total (92)
===
15. INTEREST EXPENSE, NET
Year ended
December 31, 1995
-----------------
Interest income 0
Dividend income 0
Interest expense (48)
Less amounts capitalized 0
---
Total (48)
===
16. INCOME TAXES
The components of income tax expense (benefit) are as follows:
Year ended
December 31, 1995
-----------------
Current income taxes 0
Deferred income taxes (100)
----
Income tax expense (benefit) (100)
====
Reconciliation of the statutory income tax rate to the Company's
effective tax rate is as follows:
Year ended
December 31, 1995
-----------------
Net loss (150)
Income tax expense (benefit) (100)
----
Pre-tax loss (250)
----
Statutory tax rate (assuming income distribution) 40%
---
Statutory tax rate applied to pre-tax income (loss) (100)
----
Other, net ___
Income tax expense (benefit) (100)
====
The components of deferred tax balances are as follows:
December 31, 1995
-----------------
Deferred tax assets
* NOL's and tax credit carryforwards 390
* Employee benefits 0
* Accrued liabilities 0
* Other 0
---
Gross deferred tax asset 390
Valuation allowance 0
---
Net deferred tax asset 390
===
December 31, 1995
-----------------
Deferred tax liabilities
* Non deductible depreciation and amortization 0
* Excess tax over book depreciation and temporary
tax deductions 0
* Other 0
--
Deferred tax liabilities 0
==
Net deferred tax asset (liability) 0
==
Deferred tax assets relating to NOL's and tax credit carryforwards
expire in the following years:
1996 0
1997 0
1998 0
1999 0
2000 0
2001 and after 0
Unlimited 390
---
Total 390
===
17. LEASE COMMITMENTS
The future minimum lease payments on noncancelable leases to which the
Company is committed as of December 31, 1995 is set forth below:
Operating leases
----------------
1996 146
1997 126
1998 39
1999 0
2000 0
2001 and later years 0
---
Future lease payments 311
===
Less amount representing interest
Present value of net minimum lease payments
Less current portion of capital deases
There is no long term obligation.
18. RELATED PARTIES
The business relationship between the related parties and COATES
COATINGS GMBH can be described as follows:
COATES COATINGS purchases the raw material and all merchandise from
three related parties (Coates Coatings AS, Norway; Coates Coatings
Ltd., Whitney; Coates Coatings S.A., Nantes).
Balances with related parties included in the financial statements are
as follows:
December 31,1995
----------------
Receivables 0
Trade accounts 0
Loans 0
Advances 0
Payables 1.994
Trade accounts 1.994
Loans 0
Year ended
December 31, 1995
-----------------
Purchases 7.193
Interest expense 20
Other 0
19. PAYROLL AND STAFF
The main data relating to this caption consist of the following:
Year ended
December 31,1995
----------------
Personnel expense
Wages and salaries (including social charges) 1.244
Average numbers of employees
- Management 1
- Other 12
-----
Total 13
====
* No written contracts between the company and its Directors Mr.
Stainforth (general manager), Mr. Rosenberg (chief executive manager)
and Mr. Gaspard (non-executive manager) could be provided to us.
* Regarding Mr. Stainforth (general manager) and Mr. Eian, we received
employment contracts with Coates Brothers PLC. Both contracts confirm
the terms and conditions of the secondment of the two employees and
stated, that both of them still remain employees of their former
employer (Mr. Stainforth - Coates Coatings Ltd., Whitney, Great
Britain; Mr. Eian - Coates Coatings AS, Mjondalen, Norway).
* Mr. Gaspard charged fees in the total amount of KDM 36 to the company.
20. COMMITMENTS AND CONTINGENCIES
N/A.
21. SHAREHOLDERS' APPROVAL
The underlying statutory financial statements as of December 31, 1994
are subject to shareholders approval.
ARTHUR
ANDERSEN
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To TOTAL S.A.:
We have audited the accompanying statement of specified assets and liabilities
of the Can Coatings Division of Coates Lorilleux, S.A. as of December 31, 1995,
and the related statement of revenues and expenses, changes in equity and cash
flows for the year then ended, all expressed in million of Pesetas (see balance
sheet). 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 in accordance with generally accepted auditing standards
in Spain which are substantially consistent with generally accepted auditing
standards in United States. 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 audit provides a reasonable basis
for our opinion.
As discussed in Note 1, the accompanying financial statements are intended to
present the assets, liabilities and results of the Can Coatings Division of
Coates Lorilleux, S.A. which have been sold to an unrelated third party and are
note intended to be a complete presentation of the financial statements of the
Can Coatings Division of Coates Lorilleux, S.A. Additionally, as discussed in
Note 1, Coates Lorilleux, S.A. has transactions with Total S.A. and is allocated
certain costs from Total S.A. Because of this relationship, the terms of some or
all of the transactions and allocations between Total S.A. and Coates Lorilleux,
S.A. included in the accompanying financial statements are not necessarily
indicative of that which would have resulted if the Can Coatings Division of
Coates Lorilleux, S.A. was a stand-alone entity.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Can Coatings Division of
Coates Lorilleux, S.A. as of December 31, 1995, and the results of its
operations and its cash flows for the year ended December 31, 1995, in
conformity with generally accepted accounting principles in the United States.
ARTHUR ANDERSEN
/s/ Julio Haeffner
Julio Haeffner
February 27, 1996
Coates Lorilleux, S.A.
Statement of Specified Assets and Liabilities
Million of pesetas
ASSETS December 31, 1995
-----------------
Accounts receivable (Note 3) 101.1
Inventories (Note 4) 28.7
-----
TOTAL CURRENT ASSETS 129.8
TOTAL ASSETS 129.8
=====
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term debt (Note 5) 70.7
Accounts payable (Note 6) 19.2
Other accrued expenses (Note 7) 2.2
-----
TOTAL CURRENT LIABILITIES 92.1
TOTAL LIABILITIES
COMMITMENTS AND CONTINGENCIES (Note 13)
Equity 37.7
TOTAL EQUITY (Note 8) 37.7
-----
TOTAL LIABILITIES AND EQUITY 129.8
=====
Coates Lorilleux, S.A.
Statement of Revenue and Expenses
Million of Pesetas
December 31, 1995
-----------------
Sales and revenues 325.7
Costs of sales (241.1)
General and administrative expenses (93.1)
-----
INCOME (LOSS) BEFORE INTEREST AND INCOME TAX (8.5)
EXPENSE
Interest income (expense), net (Note 9) (3.4)
-----
INCOME (LOSS) BEFORE TAX EXPENSE (BENEFIT) (11.9)
Income tax expense (benefit) (Note 10) -
-----
NET INCOME (LOSS) (11.9)
=====
Coates Lorilleux S.A.
Statement of Equity
Balance, January 1, 1995 49.6
Net income (loss) for the year
ended December 31, 1995 (11.9)
-----
Balance as of December 31, 1995 37.7
=====
Statement of cash flows
Million of Pesetas
December 31, 1995
-----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) (11.9)
Adjustments to reconcile net income
(loss) to net cash flow provided by operating activities
Depreciation and amortization -
Deferred income taxes -
Other deferred liabilities -
(Gain) loss on disposal of assets -
Write-down of assets to net realizable value -
Changes in operating assets and liabilities
Accounts and notes receivable (25.4)
Inventories and prepaid expenses (11.6)
Accounts payable and other accrued expenses 13.2
Income taxes payable
Other 35.6
----
Net cash flow provided by (used in) operating activities (0.1)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures -
Proceeds from sales of assets -
Other -
----
Net cash flow provided by (used in) investing activities -
----
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in advances and equity -
Net (payments on) proceeds from borrowings (3.4)
Dividends paid -
Other -
----
Net cash flow provided by (used in) financing activities (3.4)
----
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:
Effect of exchange rate on cash and cash equivalents -
Cash and cash equivalents, beginning of year -
----
Cash and cash equivalents, end of year -
====
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:
Cash paid during the year for:
-Interest (net of amount capitalized) (3.5)
-Income taxes -
Coates Lorilleux, S.A.
Notes to Financial Statements
December 31, 1995
1. DESCRIPTION, PLANNED DISPOSITION AND BASIS OF FINANCIAL STATEMENT
PRESENTATION
The Can coatings activity is a division of Coates Lorilleux,
S.A., a affiliated company of Coates Brothers PLC, a public
limited company organized under the laws of the United Kingdom
of Great Britain.
At the end of the year 1995, Coates Brothers PLC was engaged
in negotiating an agreement to sell the Can coatings' assets
and liabilities of Coates Lorilleux, S.A. to an unrelated
third party. The transaction is completed on February 26, 1996
by Coates Brothers PLC.
1.1 Allocation of specified assets and liabilities, revenues and
expenses of the legal entity (Coates Lorilleux, S.A.)
1.11 ASSETS AND LIABILITIES
The specified assets and liabilities allocated to the Can
Coatings Division of Coates Lorilleux, S.A. were limited to
the following:
* ASSETS
Accounts receivable: The Company has been allocated
the clients whose buy to Can Coatings activity. If
one of them buy to other activity, the Company has
identified the specific balance of this account in
relation of Can Coatings activity.
Inventories: The Company has been allocated the
inventories used only by Can Coating activity.
* LIABILITIES
Short-term debt: The Company has included in this
account the banks overdrafts in relation with the
clients allocated.
Accounts payable: the Company has followed the same
criteria of account receivable.
Other acrued expenses: This account includes all the
amounts relationed with the specific Can Coatings
personnel, but it does not include the possible
indemnity in the case that these persons do not like
to move at the new society (amount Ptas 12 million).
1.12 REVENUES AND EXPENSES
Revenues and expenses were allocated between activities using
the following main criteria when applicable:
* The Company has allocated only the specific revenues
of its Can Coatings activity.
* The statements of expenses reflect all of its costs
of business and have been allocated all specific
expenses of its Can Coatings activity.
* The method of allocating common expenses has been in
relation to the services provided.
* Financial expenses have been allocated in relation to
the short-term debt allocated.
1.13 DETAIL OF SPECIFIC ASSETS AND LIABILITIES, REVENUES AND
EXPENSES ALLOCATED TO THE ACTIVITY SOLD AN A STAND-ALONE BASIS
Caption Amounts Allocation method used
- ------- ------- ----------------------
Specified assets
- ----------------
* Accounts receivable 101.1 Specifics customers of Can
Coating Division.
70.7 is corresponding to banks.
* Inventories 28.7 This amount was
---- obtained from the
inventory listing at
December 31, 1995.
Total specified assets 129.8
=====
Specified liabilities
- ---------------------
* Short term debt 70.7 Debt such as discounted
receivables.
* Accounts payable 19.2 The suppliers of Can Coating
Division are specifics.
* Other accrued liabilities 2.2 Accrued payroll from specific
---- employees of Can Coating
Division.
Total specified liabilities 92.1
====
Statement of revenues and expenses
- ----------------------------------
* Sales and revenues 325.7 This amount was the specific
sales and revenues of Can
Coatings activity.
* Cost of sales (241.1) The same than before.
* General and administrative (93.1) The majority expenses are
expenses estimated as a forfait included
in Budget 1995. The criteria of
allocate is in relation to the
services provided.
* Depreciation and amortization -
* Other (income) expense, net -
----
Operating income (loss) before
interest and income tax expense (8.5)
----
* Interest income (expense), net (3.4) Total expenses of dicounted
---- receivables multiplied by the
percentage of Can Coating from
total sales.
Income (loss) before tax
expense (benefit) (11.9)
-----
Income tax expense (benefit) -
-----
Net income (loss) (11.9)
=====
1.14 COST ALLOCATION METHODS
* Specific methods.
* In relation to the services provided.
1.15 DETERMINATION OF INCOME TAX EXPENSE (BENEFIT)
Not applicable because this activity has losses.
2. SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements have been prepared in accordance
with generally accepted accounting principles in the United States.
a) Inventories
Inventories are issues used for sales provided to customers.
Inventories are stated at the lower of average cost (includes
direct material, labor and attributable overhead) or estimated
realizable value.
b) Revenue Recognition
Revenues are recognized as services are completed or as
products are shipped.
c) Employee benefits
Here behind the employees of the Can coating activity:
Claus-Dieter Schorn
Federico Tellez
Manuel Fernandez
* Pension plans
F.Tellez takes part in a retirements pension plan, recognized
in Coates Lorilleux, S.A. The liability rewarded in Balance
Sheet for this concept amounts to Ptas. 0,1 Million.
* Postretirement benefits
The Company has the following advantages for all his
employees:
- A bonus for anticipated retirement.
- A premium for seniority.
For knowing the accrued liability due to Can Coating
personnel for these concepts it will be necessary an updated
actuarial study, that the Company had not at 31 December,
1995. An overall estimation showed us the low significance
of these liabilities.
There is an agreement with Mr. Shorn for giving him a maximum
of Ptas.1. Million per year for a life retirement insurance.
3. ACCOUNT RECEIVABLES
Accounts receivable consist of the following:
December 31, 1995
-----------------
Cost Valuation allowance Net
---- ------------------- ---
Trade receivables 100.5 (0.3) 100.2
Current Loans to employees 0.9 - 0.9
----- ---- -----
Total 101.4 (0.3) 101.1
===== ==== =====
4. INVENTORIES
Inventories consist of:
December 31, 1995
-----------------
Raw materials and supplies -
Work in process -
Finished goods 28.7
Spare parts -
----
Gross value 28.7
====
Valuation allowance -
----
Net value 28.7
====
5. DEBT
5.1 Short term debt
December 31, 1995
-----------------
Current portion of long term debt -
Short term loans -
Bank overdrafts 70.7
----
Total 70.7
====
6. ACCOUNTS PAYABLE
The main items under this caption are as follows:
December 31, 1995
-----------------
Trade payables 19.2
Notes payables -
----
Total 19.2
====
7. OTHER ACCRUED EXPENSES
The main items under this caption are as follows:
December 31, 1995
-----------------
Payroll and retiree benefits 2.2
Deferred income taxes -
Current income taxes -
Taxes other than payroll and income -
Deferred income -
Other -
---
Total 2.2
===
8. SHAREHOLDERS' EQUITY (OR EQUITY)
The equity represents the difference between the specified assets and
the specified liabilities of the Can Coatings Division of Coates
Lorilleux, S.A..
9. INTEREST INCOME (EXPENSE), NET
Year ended
----------
December 31, 1995
-----------------
Interest income -
Dividend income -
Interest expense (3.4)
Less amounts capitalized
----
Total (3.4)
====
10. INCOME TAXES
The components of income tax expense (benefit) are as follows:
Year ended
----------
December 31, 1995
-----------------
Current income taxes -
Deferred income taxes -
----
Income tax expense (benefit) -
====
Reconciliation of the statutory income tax rate to the Company's
effective tax rate is as follows:
Year ended
----------
December 31, 1995
-----------------
Net income (loss) (11.9)
Income tax expense (benefit) -
-----
Pre-tax income (loss) (11.9)
Statutory tax rate -%
-----
Statutory tax rate applied to pre-tax income (loss) -
RECONCILING ITEMS
(PERMANENT DIFFERENCES, CHANGE IN VALUATION ALLOWANCE, ETC.)
Other, net -
-----
Income tax expense (benefit) -
=====
11. RELATED PARTIES
Balances with related parties included in the financial statements are
as follows:
December 31, 1995
-----------------
Receivables
Trade accounts 4.6
Loans 0
Advances 0
Payables
Trade accounts 7.6
Loans 0
Year ended
----------
December 31, 1995
-----------------
Sales 11.9
Purchases 87.5
Interest income (expense) 0
Other income (expense) 0
Other (a) 0
12. PAYROLL AND STAFF
The main data relating to this caption consist of the following:
Year ended
----------
December 31, 1995
-----------------
Personnel expense
Wages and salaries (including social charges) 26.5
Average numbers of employees
- Management 1
- Other 2
----
Total 3
====
13. COMMITMENTS AND CONTINGENCIES
There is no commitments nor contingencies.
ARTHUR ANDERSEN
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To TOTAL S.A.:
We have audited the accompanying statement of specified assets and liabilities
of the Can Coatings Division of Coates Brothers Australia Pty Limited as of
December 31, 1995, and the related statement of revenues and expenses, and cash
flows for the year then ended, all expressed in thousands of Australian Dollars.
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 in accordance with generally accepted auditing standards
in the United States which do not differ substantially from those in Australia.
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 audit provides a reasonable basis for our opinion.
As discussed in Note 1, the accompanying financial statements are intended to
present the assets, liabilities and results of the Can Coatings Division of
Coates Brothers Australia Pty Limited which have been sold to an unrelated third
party and are not intended to be a complete presentation of the financial
statements of the Can Coatings Division of Coates Brothers Australia Pty
Limited. Additionally, as discussed in Note 1, Coates Brothers Australia Pty
Limited has transactions with Total S.A. and is allocated certain costs from
Total S.A. Because of this relationship, the terms of some or all of the
transactions and allocations between Total S.A. and Coates Brothers Australia
Pty Limited included in the accompanying financial statements are not
necessarily indicative of that which would have resulted if the Can Coatings
Division of Coates Brothers Australia Pty Limited was a stand-alone entity.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Can Coatings Division of
Coates Brothers Australia Pty Limited as of December 31, 1995, and the results
of its operations and its cash flows for the year ended December 31, 1995, in
conformity with generally accepted accounting principles in the United States.
This report is intended solely for the information and use of the Board of
Directors of Total S.A. in connection with the sale of Can Coatings division and
should not be used for any other purpose.
/s/ Arthur Andersen
Arthur Andersen
Chartered Accountants - Member of Arthur Andersen S.C.
Sydney, Australia
27 February 1996
COATES BROTHERS, AUSTRALIA PTY. LIMITED
Statement of Specified Assets and Liabilities
ASSETS December 31, 1995
-----------------
Accounts receivable (Note 3) 485
Inventories (Note 4) 1181
----
TOTAL CURRENT ASSETS 1666
Other non current assets (Note 5) 44
Property, plant and equipment (Note 6) 438
----
TOTAL ASSETS 2148
====
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable (Note 7) 143
Other accrued expenses (Note 8) 171
----
TOTAL CURRENT LIABILITIES 314
Employee benefits (Note 9) 77
----
TOTAL LIABILITIES 391
COMMITMENTS AND CONTINGENCIES (Note 13)
EQUITY (Note 11) 1757
----
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 2148
====
COATES BROTHERS, AUSTRALIA PTY. LIMITED
Statement of Revenue and Expenses
December 31, 1995
-----------------
Sales and revenues 3787
Cost of sales 3004
General and administrative expenses 614
Depreciation and amortization 82
----
INCOME BEFORE INTEREST AND INCOME TAX EXPENSE 87
----
INCOME BEFORE TAX EXPENSE 87
Income tax expense (Note 1 0) 31
----
NET INCOME 56
====
COATES BROTHERS, AUSTRALIA PTY. LIMITED
Statement of Cash Flows
December 31, 1995
-----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) 56
Adjustments to reconcile net income (loss)
to net cash flow provided by operating activities
Depreciation and amortization 82
Deferred income taxes 44
Other deferred liabilities -
(Gain) loss on disposal of assets -
Write-down of assets to net realizable value -
Changes in operating assets and liabilities
Accounts and notes receivable 69
Inventories and prepaid expenses 126
Accounts payable and other accrued expenses 9
Income taxes payable (9)
----
Net cash flow provided by (used in) operating activities 377
----
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash expenditures -
Proceeds from sales of assets -
Other -
----
Net cash flow provided by (used in) activities -
----
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in advances and equity -
Net (payments on) proceeds from borrowings -
Dividends paid -
Other -
----
Net cash flow provided by (used in) financing activities -
----
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:
Effect of exchange rate on cash and cash equivalents -
Cash and cash equivalents, beginning of year -
----
Cash and cash equivalents, end of year 377
----
COATES BROTHERS, AUSTRALIA PTY. LIMITED
Notes to Financial Statements - December 31, 1995
1. DESCRIPTION PLANNED DISPOSITION AND BASIS OF FINANCIAL STATEMENT
PRESENTATION
The Can Coatings activity is a division of Coates Brothers, Australia
Pty. a wholly owned subsidiary of Coates Brothers PLC, a public limited
company organized under the laws of the United Kingdom of Great
Britain.
At the end of the year 1995, Coates Brothers PLC was engaged in
negotiating an agreement to sell the Can Coatings' assets and
liabilities of Coates Brothers, Australia Pty. Limited to an unrelated
third party. The transaction was completed on February 26, 1996 by
Coates Brothers PLC.
1.1 Allocation of specified assets and liabilities, revenues and expenses
of the legal entity Coates Brothers, Australia Pty. Limited.
1.11 Assets and Liabilities
The specified assets and liabilities allocated to the Can
Coatings Division of Coates Brothers, Australia Pty. Limited
were limited to the following:
Assets
The completeness of the assets as identified in 1.13 is based
upon management's identification.
Liabilities
The completeness of the liabilities as identified in 1.13 is
based upon management's identification. Any liabilities not
specifically identified in these statements that relate to the
Can Coatings division, or part thereof, that are subsequently
identified will be paid by Coates Brothers, Australia Pty,
Limited. Hence there will be no effect on the net assets and
thus purchase price.
1.12 Revenues and expenses
Revenues and expenses were allocated between activities using
the following main criteria when applicable.
THE ALLOCATION OF EXPENSES BELOW THE GROSS MARGIN LINE WAS
PERFORMED ON THE RATIO OF CAN COATINGS SALES TO TOTAL COMPANY
SALES. THIS RESULTED IN AN ALLOCATION OF 8% TO 8.4% OF ALL
COSTS WHICH WERE SHARED OR COULD NOT BE DIRECTLY ALLOCATED TO
CAN COATINGS.
1.13 Detail of specific assets and liabilities, revenues and
expenses allocated to the activity sold on a stand-alone
basis.
Caption Amount Allocation method used
- ------- ------ ----------------------
Specified assets
- ----------------
* Accounts receivables 485 Specific identification
* Inventories 1181 Specific identification
* Property, plant and equipment Specific identification
used 100% 357
used more than 50% 81
* Intangible assets - deferred tax 44 Specific identification
----
Total specified assets 2148
====
Specified liabilities
- ---------------------
* Accounts payable 143 Specific identification
* Other accrued liabilities 96 Specific identification
* Employee benefits 77 Specific identification
* Tax payable 75 Specific identification
----
Total specified liabilities 391
====
Statement of revenues and expenses
- ----------------------------------
* Sales and revenues 3787 Specific identification
* Cost of sales 3004 Specific identification
* General & administrative expenses 614 Allocation
* Depreciation and amortization 82 Allocation
----
Operating and income (loss) before 87
interest and income tax expense ----
Income before tax expense 87
Income tax expense 31
----
Net Income 56
====
1.14 Cost allocation methods
% of Total Company Costs and Direct Costs - refer 1.12
1.15 Determination of income tax expense
The income tax expense figure was determined on the basis that
there were no permanent differences; i.e. 36% of operating
profit. The tax provision was determined after adding back non
tax deductible items:
employee entitlement 77
inventory provision 33
doubtful debt provision 13
2. SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements have been prepared in accordance
with generally accepted accounting principles in the United States.
a) Inventories
Inventories are items used for sales provided to customers.
Inventories are stated at standard cost (includes direct
material, labor and attributable overhead).
b) Property, plant and equipment
Investments in property, plant and equipment are stated at
cost and where applicable at directors' valuation.
Years of estimated useful life
------------------------------
Machinery and Equipment 10 - 15 Years
Motor Vehicles 5 Years
Routine maintenance and repairs are charged to income as
incurred.
c) Income Taxes
Deferred tax liabilities and assets are determined based on
the difference between financial and tax bases of assets and
liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse.
d) Revenue Recognition
Revenues are recognized as services are completed or as
products are shipped.
e) Statement of Cash Flows
As the division does not maintain a separate bank account, the
statement of cash flows represents the cash flows that have
occurred during the year with the ending balance being that
included in the total company balance. In addition no opening
balance has been disclosed as it could not be specifically
identified as relating to the division.
3. ACCOUNT RECEIVABLES
Account receivables consist of the following
December 31, 1995
-----------------
Valuation
Cost Allowance Net
---- --------- ---
Trade receivables 498 13 485
--- -- ---
498 13 485
=== == ===
4. INVENTORIES
Inventories consist of: December 31,1995
----------------
Raw materials and supplies 465
Work in process - raw material cost 99
Finished goods - raw material cost 497
----
Total raw material cost 1061
====
Labour and overhead 153
----
Gross Value 1214
====
Obsolescence provision 33
----
Net Value 1181
====
5. OTHER NON CURRENT ASSETS
The detail of this caption is shown below:
December 31, 1995
-----------------
Valuation
Cost Allowance Net
---- --------- ---
Deferred income taxes 44 - 44
--- --- ---
44 - 44
=== === ===
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment and the related accumulated depreciation
and amortization are as follows:
December 31, 1995
-----------------
Accumulated
depreciation and
Cost amortization Net
---- ------------ ---
Motor Vehicles 107 35 72
Machinery & euqipment
used 100% 453 168 285
used more than 50% 29 6 23
* used more than 50% 58 - 58
--- --- ---
647 209 438
=== === ===
* At Directors' Valuation
7. ACCOUNTS PAYABLE
The main items under this caption are as follows:
December 31,1995
----------------
Trade payables 143
---
Total 143
===
8. OTHER ACCRUED EXPENSES
The main items under this caption are as follows:
December 31,1995
----------------
Current income taxes 75
Other 96
----
Total 171
====
9. EMPLOYEE BENEFITS
Superannuation
Coates Brothers, Australia Pty. Limited operate the Coates Brothers
Australia Superannuation Fund which is a defined benefit fund. The
Directors report that the fund is fully funded for all members.
There are consequently no actual or contingent liabilities in respect
of the fund.
December 31, 1995
-----------------
Accrued Benefits
Accrued Long Service Leave
and Holiday Pay 77
===
10. INCOME TAXES
The components of income tax expense (benefit) are as follows:
Year ended
December 31, 1995
-----------------
Current income taxes 75
Deferred income taxes 44
--
Income tax expense 31
==
Reconciliation of the statutory income tax rate to the Company's
effective tax is as follows:
Year ended
December 31, 1995
-----------------
Net income 56
Income tax expense 31
--
Pre-tax income 87
Statutory tax rate 36%
--
Statutory tax rate applied to
pre-tax income 31
RECONCILING ITEMS (PERMANENT DIFFERENCES, CHANGE IN VALUATION
ALLOWANCE, ETC.)
Other, net Nil
----
Income tax expense (benefit) 31
====
The components of deferred tax balances are as follows:
December 31, 1955
-----------------
Deferred tax assets
* NOL's and tax credit carryforwards -
* Employee benefits 77
* Doubtful debts 13
* Stock obsolescence 33
---
Gross deferred tax asset 123
Valuation allowance 36%
---
Net deferred tax asset 44
===
11. SHAREHOLDERS' EQUITY
The equity represents the difference between the specified assets and
the specified liabilities of the Can Coatings Division of Coates
Brothers, Australia Pty. Limited.
12. RELATED PARTIES
Balances with related parties included in the financial statements are
as follows:
December 31, 1995
-----------------
Payables
Coates Coatings UK 1
---
Year ended
December 31, 1995
-----------------
Purchases
Coates Coatings UK 5
Coates Coatings France 83
Coates Coatings Norway 46
---
TOTAL 134
===
13. PAYROLL AND STAFF
Year ended
December 31, 1995
-----------------
Personnel expense
Wages and salaries (including social charges) 419
Average numbers of employees
- Management 1
- Other 10
---
Total 11
===
14. COMMITMENTS AND CONTINGENCIES
There are no commitments or contingencies.
THE VALSPAR CORPORATION
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
Effective April 30, 1996, the Company completed the first phase of its
acquisition of the Coates Coatings (Coates) affiliates of TOTAL SA. The first
phase included the Coates businesses in the United Kingdom, France, Norway,
Germany, Spain, Australia, and United States. The terms of the acquisition and
the resulting allocation of the purchase price were the result of an arms-length
negotiation between the parties. The total consideration for this first phase of
the transaction was approximately $50 million in cash; including approximately
$40 million paid for assets and share capital of certain Coates affiliates, and
approximately $10 million paid to acquire intercompany debts owed by certain of
the acquired Coates affiliates. The consideration paid for this first phase is
subject to adjustment as provided in the Acquisition Agreement. The transaction
will be accounted for as a purchase.
The unaudited pro forma balance sheet at January 26, 1996 presents the
combined financial position of Valspar as of that date with the financial
position of the Coates entities as of March 31, 1996. The unaudited pro forma
statements of income for the three months ended January 26, 1996 and twelve
months ended October 27, 1995 present the results of Valspar's operations for
such periods assuming the acquisition had occurred as of October 29, 1994, the
beginning of the earliest period presented. The unaudited pro forma statement of
income for the period ended January 26, 1996 includes the results of operations
of the Coates entities for the three month period ended March 31, 1996. The
unaudited pro forma statement of income for the period ended October 27, 1995
includes the results of operations of the Coates entities for the twelve months
ended December 31, 1995.
The unaudited pro forma financial information has been prepared by
adjusting the historical statements of income and balance sheets for the effect
of costs, expenses, assets and liabilities which might have been incurred or
assumed had the acquisition been effected on the date indicated. The unaudited
pro forma financial information is provided for informational purposes only and
does not purport to be indicative of the future results or financial position of
Valspar. This information should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's Form 10-K for
the year ended October 27, 1995 and Forms 10-Q for the three and six months
ended January 26, 1996 and April 26, 1996, respectively.
THE VALSPAR CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
Year Ended October 27, 1995
(Dollars in thousands, except per share amounts)
The Valspar Combined Pro Forma
Corporation Coates (1) Adjustments Pro Forma
----------- ---------- ----------- ---------
Net Sales $ 790,175 $ 74,090 $ -- $ 864,265
Cost of Sales 561,170 57,980 (600)(3) 618,250
-- -- (300)(3) --
--------- --------- --------- ---------
Gross Profit 229,005 16,110 900 246,015
Research 27,746 3,587 (500)(3) 30,833
Selling and Administrative 118,598 38,646 (24,050)(2) 132,814
(380)(3)
Other (Income) Expense (763) (2) -- (765)
Interest Expense 4,216 831 2,200(4) 7,247
--------- --------- --------- ---------
Income before Income Taxes 79,208 (26,952) 23,630 75,886
Income Tax Expense (Benefit) 31,688 (157) (1,350)(5) 30,181
--------- --------- --------- ---------
Net Income $ 47,520 $ (26,795) $ 24,980 $ 45,705
========= ========= ========= =========
Earnings Per Share $ 2.15 $ 2.07
========= =========
Average Shares Outstanding 22,091 22,091
========= =========
(1) From Attachment A.
(2) To exclude the effect of push down accounting recorded by TOTAL SA
(3) To record cost savings associated with employee terminations, net of
additional depreciation and amortization expense.
(4) To record the interest cost on the additional borrowing to fund the
acquisition.
(5) To record the income tax effect for the Coates entities results of
operations and the pro forma adjustments at the effective tax rates for
each individual country.
THE VALSPAR CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
Year Ended October 27, 1995
ATTACHMENT A (1)
(Dollars in thousands)
United United Combined
Kingdom France Norway Germany Spain Australia States Eliminations(2) Coates
------- ------ ------ ------- ----- --------- ------ --------------- --------
Net Sales $ 33,069 $ 31,458 $ 12,734 $ 6,439 $ 2,625 $ 2,802 $ 1,163 $(16,200) $ 74,090
Cost of Sales 26,252 26,059 10,669 5,620 1,943 2,222 1,415 (16,200) 57,980
-------- -------- -------- -------- -------- -------- -------- -------- --------
Gross Profit 6,817 5,399 2,065 819 682 580 (252) -- 16,110
Research 1,257 1,277 575 -- -- -- 478 -- 3,587
Selling and
Administrative 5,503 24,133 5,436 897 750 515 1,412 -- 38,646
Other (Income) Expense 95 (6) (102) 65 -- -- (54) -- (2)
Interest Expense -- 595 35 34 27 -- 140 -- 831
-------- -------- -------- -------- -------- -------- -------- -------- --------
Income before
Income Taxes (38) (20,600) (3,879) (177) (95) 65 (2,228) -- (26,952)
Income Tax
Expense (Benefit) 128 (227) (19) (70) -- 23 8 -- (157)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net Income $ (166) $(20,373) $ (3,860) $ (107) $ (95) $ 42 $ (2,236) $ -- $(26,795)
======== ======== ======== ======== ======== ======== ======== ======== ========
(1) Represents U.S. dollar equivalent results of operations for each Coates
entity for the period ended December 31, 1995, prepared from the audited
financial statements for that period.
(2) To eliminate sales and purchases made between Phase I Coates entities.
THE VALSPAR CORPORATION
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
January 26, 1996
(Dollars in thousands)
Coates Entities Historical (1)
Historical ---------------------------------------------------------------------------------
The Valspar United United
Corporation Kingdom France Norway Germany Spain Australia States
----------- ------- ------ ------ ------- ----- --------- ------
ASSETS:
Current assets:
Cash and short-term securities $ 3,094 $ -- $ 2 $ 187 $ 15 $ -- $ -- $ (62)
Accounts receivable-net 111,094 7,546 8,729 2,031 1,073 816 344 541
Inventories 80,514 4,288 6,906 1,756 591 270 843 566
Other current assets 28,069 139 854 79 18 -- -- 26
--------- --------- --------- --------- --------- --------- --------- ---------
Total Current Assets 222,771 11,973 16,491 4,053 1,697 1,086 1,187 1,071
Property, plant and equip-net 131,447 7,258 6,147 899 429 -- 344 3,912
Other assets 29,719 -- 143 403 366 -- 36 469
--------- --------- --------- --------- --------- --------- --------- ---------
TOTAL ASSETS $ 383,937 $ 19,231 $ 22,781 $ 5,355 $ 2,492 $ 1,086 $ 1,567 $ 5,452
========= ========= ========= ========= ========= ========= ========= =========
LIABILITIES & STOCKHOLDERS'
EQUITY:
Current Liabilities:
Notes payable to banks $ 17,888 $ 539 $ 10,942 $ -- $ 517 $ 360 $ -- $ 4,086
Trade accounts payable 55,135 2,932 5,343 1,057 1,129 134 125 146
Income taxes 8,482 -- -- -- -- -- -- --
Accrued liabilities 45,904 452 1,434 637 125 -- 123 92
--------- --------- --------- --------- --------- --------- --------- ---------
Total current liabilities 127,409 3,923 17,719 1,694 1,771 494 248 4,324
Long-term debt 21,538 -- 119 483 -- -- -- --
Other long-term liabilities 18,191 460 185 6 165 -- 67 --
Stockholders' equity 216,799 14,848 4,758 3,172 556 592 1,252 1,128
--------- --------- --------- --------- --------- --------- --------- ---------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $ 383,937 $ 19,231 $ 22,781 $ 5,355 $ 2,492 $ 1,086 $ 1,567 $ 5,452
========= ========= ========= ========= ========= ========= ========= =========
[WIDE TABLE CONTINUED FROM ABOVE]
Coates Pro Forma
Eliminations (2) Adjustments (3) Pro Forma
---------------- --------------- ---------
ASSETS:
Current assets:
Cash and short-term securities $ -- $ -- $ 3,236
Accounts receivable-net (2,800) (1,200) 128,174
Inventories (1,800) 93,934
Other current assets -- -- 29,185
--------- --------- ---------
Total Current Assets (2,800) (3,000) 254,529
Property, plant and equip-net 2,000 152,436
Other assets 9,500 40,636
--------- --------- ---------
TOTAL ASSETS $ (2,800) $ 8,500 $ 447,601
========= ========= =========
LIABILITIES & STOCKHOLDERS'
EQUITY:
Current Liabilities:
Notes payable to banks $ -- $ (16,400) $ 17,932
Trade accounts payable (2,800) (300) 62,901
Income taxes -- 8,482
Accrued liabilities -- 2,000 50,767
--------- --------- ---------
Total current liabilities (2,800) (14,700) 140,082
Long-term debt -- 49,700 71,840
Other long-term liabilities -- (200) 18,874
Stockholders' equity -- (26,300) 216,805
--------- --------- ---------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $ (2,800) $ 8,500 $ 447,601
========= ========= =========
(1) Represents U.S. dollar equivalent balance sheets for each Coates entity
as of March 31, 1996.
(2) To eliminate accounts receivable and trade accounts payable balances
outstanding between Phase I Coates entities.
(3) To reflect the acquisition of the Phase I Coates entites and related
acquisition costs effective as of April 30, 1996 as described on Form 8-K
filed as of May 17, 1996.
THE VALSPAR CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
Three Months Ended January 26, 1996
(Dollars in thousands, except per share amounts)
The Valspar Combined Pro Forma
Corporation Coates (1) Adjustments Pro Forma
----------- ---------- ----------- ---------
Net Sales $ 165,304 $ 17,784 $ -- $ 183,088
Cost of Sales 120,451 14,247 (125)(2) 134,573
--------- -------- ----- ---------
Gross Profit 44,853 3,537 125 48,515
Research 6,720 955 (125)(2) 7,550
Selling and administrative 27,536 3,850 (25)(2) 31,361
Other (Income) Expense (288) 23 -- (265)
Interest Expense 463 259 490(3) 1,212
--------- -------- ----- ---------
Income before Income Taxes 10,422 (1,550) (215) 8,657
Income Tax Expense (Benefit) 4,190 4 (690)(4) 3,504
--------- -------- ----- ---------
Net income $ 6,232 $ (1,554) $ 475 $ 5,153
========= ======== ===== =========
Earnings Per Share $ 0.28 $ 0.23
========= =========
Average Shares Outstanding 22,161 22,161
========= =========
(1) From Attachment B
(2) To record cost savings associated with employee terminations, net of
additional depreciation and amortization expense.
(3) To record the interest cost on the additional borrowing to fund the
acquisition.
(4) To record the income tax effect for the Coates entities results of
operations and the pro forma adjustments at the effective tax rates for
each individual country.
THE VALSPAR CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
Three Months Ended January 26, 1996
ATTACHMENT B (1)
(Dollars in thousands)
United United Combined
Kingdom France Norway Germany Spain Australia States Eliminations(2) Coates (1)
------- ------ ------ ------- ----- --------- ------ --------------- ----------
Net Sales $ 7,196 $ 7,977 $ 2,731 $ 1,563 $ 740 $832 $ 445 $(3,700) $ 17,784
Cost of Sales 5,766 6,849 2,216 1,349 611 680 476 (3,700) 14,247
------- ------- ------- ------- ----- ---- ----- ------- --------
Gross Profit 1,430 1,128 515 214 129 152 (31) -- 3,537
Research 279 303 147 -- 16 44 166 -- 955
Selling and Administrative 1,430 1,150 429 241 129 67 405 -- 3,851
Other (Income) Expense -- (13) (2) 32 8 -- (2) -- 23
Interest Expense -- 180 4 5 16 -- 54 -- 259
------- ------- ------- ------- ----- ---- ----- ------- --------
Income before Income Taxes (279) (492) (63) (64) (40) 41 (654) -- (1,551)
Income Tax Expense (Benefit) -- 7 (18) -- -- 15 -- -- 4
------- ------- ------- ------- ----- ---- ----- ------- --------
Net income $ (279) $ (499) $ (45) $ (64) $ (40) $ 26 $(654) $ -- $ (1,555)
======= ======= ======= ======= ===== ==== ===== ======= ========
(1) Represents U.S. dollar equivalent results of operations for each Coates
entity for the period ended March 31, 1996 derived from each entity's
historical financial statements for that period.
(2) To eliminate sales and purchases made between Phase I Coates affiliates.