SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-K/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996 Commission file number: 1-12162
---------------------
Borg-Warner Automotive, Inc.
(Exact name of registrant as specified in its charter)
Delaware 13-3404508
(State of Incorporation) (IRS Employer Identification No.)
200 South Michigan Avenue
Chicago, Illinois 60604
(312) 322-8500
(Address and telephone number of principal executive offices)
----------------------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, par value $.01 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
-----------------------------
Indicate by check mark whether registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ NO---
The aggregate market value of the voting stock of the registrant held by
stockholders (not including voting stock held by directors and executive
officers of the registrant) on June 13, 1997 was approximately $1.2 billion.
As of June 13, 1997, the registrant had 23,611,972 shares of Common Stock and
59,000 shares of Non-Voting Common Stock outstanding.
Indicate by check-mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated herein by reference
into the Part of the Form 10-K indicated.
DOCUMENT PART OF FORM 10-K INTO WHICH INCORPORATED
Borg-Warner Automotive, Inc. 1996 Annual Report to Stockholders Parts II and IV
Borg-Warner Automotive, Inc. Proxy Statement for the 1997
Annual Meeting of Stockholders Part III
PART II
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements (including the notes thereto) of the
Company and the Independent Auditors' Report as set forth on pages 20 through 34
in the Company's Annual Report are incorporated herein by reference and made a
part of this report. Supplementary financial information regarding quarterly
results of operations (unaudited) for the years ended December 31, 1996 and 1995
is set forth in Note 11 of the Notes to Consolidated Financial Statements on
page 32 of the Company's Annual Report. For a list of financial statements
filed as part of this report, see Item 14, "Exhibits, Financial Statement
Schedules, and Reports on Form 8-K" on page 13.
NSK-WARNER KABUSHIKI KAISHA
AND A SUBSIDIARY
Consolidated Financial Statements
March 31, 1997, 1996 and 1995
(With Independent Auditors' Report Thereon)
Independent Auditors' Report
The Board of Directors and Stockholders
NSK-Warner Kabushiki Kaisha:
We have audited the accompanying consolidated balance sheets (expressed in yen)
of NSK-Warner Kabushiki Kaisha and a subsidiary as of March 31, 1997 and 1996
and the related consolidated statements of earnings, stockholders' equity, and
cash flows for each of the years in the three-year period ended March 31, 1997.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of NSK-Warner Kabushiki
Kaisha and a subsidiary as of March 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the years in the three-year period
ended March 31, 1997 in conformity with United States generally accepted
accounting principles.
As discussed in notes 1(f) and 5, the Company changed its method of accounting
for investments to adopt the provisions of the Financial Accounting Standards
Board's Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," as of April 1, 1994.
The accompanying financial statements have been translated into United States
dollars solely for the convenience of the reader. We have recomputed the
translation and, in our opinion, the financial statements expressed in yen have
been translated into United States dollars on the basis set forth in note 1(o)
of the notes to financial statements.
KPMG PEAT MARWICK
- ------------------
KPMG PEAT MARWICK
Tokyo, Japan
April 25, 1997
NSK-WARNER KABUSHIKI KAISHA
AND A SUBSIDIARY
Consolidated Balance Sheets
March 31, 1997 and 1996
Japanese yen U.S. dollars
(thousands) (thousands)
(note 1(o))
---------- ----------
Assets 1997 1996 1997
- --------- ------- ------- -----
Current assets:
Cash and cash equivalents (note 12) Y 926,376 965,613 $ 7,471
Short-term investments (notes 3 and 12) 7,541,984 5,933,083 60,822
Receivables (notes 10 and 12):
Trade accounts 7,683,375 8,340,307 61,963
Other 16,793 15,029 135
-------- ---------- ------
Total receivables 7,700,168 8,355,336 62,098
---------- ---------- -------
Inventories (note 4) 1,368,131 1,153,064 11,033
Prepaid expenses and other current
assets (note 7) 343,974 316,596 2,775
---------- --------- -------
Total current assets 17,880,633 16,723,692 144,199
---------- ----------- --------
Marketable investment securities
(notes 5 and 12) 674,431 974,223 5,439
Investment in affiliated company 298,000 140,162 2,403
Property, plant and equipment, at cost
(notes 2 and 6):
Land 1,498,734 1,502,803 12,087
Buildings 11,410,826 11,398,395 92,023
Machinery and equipment 16,498,101 15,751,813 133,049
Vehicles 98,136 91,046 791
Tools, furniture and fixtures 3,926,922 3,697,670 31,669
------------- --------- --------
33,432,719 32,441,727 269,619
Less accumulated depreciation 19,351,398 17,658,821 156,060
------------- ----------- -------
Net property, plant and equipment 14,081,321 14,782,906 113,559
------------ ----------- --------
Other assets:
Patent, less accumulated amortization 15,625 21,875 126
Other 230,795 317,285 1,861
------------ -------- ------
Total other assets 246,420 339,160 1,987
------------ -------- ------
Y 33,180,805 32,960,143 $ 267,587
=========== =========== =======
Japanese yen U.S. dollars
(thousands) (thousands)
(note 1(o))
-------------- ----------
Liabilities and Stockholders' Equity 1997 1996 1997
- ------------------------------------------- ----- ------ ------
Current Liabilities:
Short-term bank loans (notes 6 and 12) Y 910,000 910,000 $ 7,339
Current installments of long-term debt
(Notes 2,6 and 12) - 1,523,298 -
Trade payables (notes 10 and 12):
Notes 2,062,529 2,372,279 16,633
Accounts 3,118,213 2,975,462 25,147
--------- ---------- ------
Total trade payables 5,180,742 5,347,741 41,780
Other payables (notes 10 and 12):
Notes 301,152 392,719 2,429
Accounts 180,207 184,378 1,453
---------- ---------- --------
Total other payables 481,359 577,097 3,882
--------- --------- --------
Income taxes payable (note 7) 1,923,485 1,711,259 15,512
Accrued expenses (notes 10 and 12) 1,481,359 1,493,689 11,946
Other current liabilities 28,033 35,787 226
---------- --------- ---------
Total current liabilities 10,004,978 11,598,871 80,685
----------- ---------- ---------
Noncurrent liabilities:
Accrued pension and severance cost (note 8) 367,591 443,712 2,965
Deferred income taxes (note 7) 626,852 742,617 5,055
-------- -------- ------
Total noncurrent liabilities 944,443 1,186,329 8,020
---------- -------- -------
Total liabilities 10,999,421 12,785,200 88,705
----------- --------- -------
Stockholders' Equity:
Common stock of Y10,000 par value (note 10)
Authorized 220,000 shares; issued
55,000 shares 550,000 550,000 4,435
Legal reserve (note 9) 137,500 137,500 1,109
Retained earnings 21,441,959 19,300,304 172,919
Foreign currency translation adjustment
(note 7) 2,387 - 19
Net unrealized gain on debt and marketable
equity securities (notes 5 and 7) 49,538 199,029 400
Minimum pension liability adjustment(note 7) - (11,890) -
--------- ---------- -------
Total stockholders' equity 22,181,384 20,174,943 178,882
----------- ---------- -------
Commitments and contingent liability Y 33,180,805 32,960,143 $ 267,587
(Note 11) =========== =========== =======
See accompanying notes to consolidated financial statements.
NSK-WARNER KABUSHIKI KAISHA
AND A SUBSIDIARY
Notes to Consolidated Financial Statements
March 31, 1997, 1996 and 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business
NSK-Warner Kabushiki Kaisha (the "Company") operates a plant in
Fukuroi City in Shizuoka Prefecture in Japan engaged in the production of one-
way clutch and related parts, and friction plates and related parts. These
products relate to the automatic mission system of passenger cars.
The Company sells most of its products to Nihon Seiko Kabushiki
Kaisha, a 50% stockholder of the Company. The products are eventually sold to
the automotive industry.
The Company's sales for the year ended March 31, 1997 were distributed
as follows: one-way clutch and related parts - 56%, friction plates and related
parts - 44%.
(b) PRINCIPLES OF CONSOLIDATION
NSK-Warner USA Inc. a wholly-owned subsidiary of the Company, was
established in the United Stated in January, 1997.
The consolidated financial statements include financial statements of the
Company and the subsidiary. All significant intercompany balances and
transactions have been eliminated in consolidation.
(c) BASIS OF PRESENTATION OF FINANCIAL STATEMENTS
The Company maintains its books of account in conformity with
financial accounting standards of Japan. However, the accompanying financial
statements have been prepared in a manner and reflect those adjustments which
management believes are necessary to conform with United States generally
accepted accounting principles. Such adjustments are summarized in note 13.
(d) CASH EQUIVALENTS
For purposes of the Statements of Cash Flows, the Company considers
all time deposits with a maturity of three months or less to be cash
equivalents.
(e) INVENTORIES
Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out method for parts and raw materials and
the average method for work in process and supplies.
2
NSK-WARNER KABUSHIKI KAISHA
AND A SUBSIDIARY
Notes to Consolidated Financial Statements
(f) MARKETABLE INVESTMENT SECURITIES
Statement of Financial Accounting Standards (SFAS) No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," was issued
in May 1993. This Statement addresses the accounting and reporting for
investments in equity securities that have readily determinable fair values and
for all investments in debt securities. The Company initially applied this
Statement as of April 1, 1994. Under SFAS No. 115, debt securities that are
classified as "held to maturity securities" are reported at amortized cost.
Debt and equity securities classified as "trading securities" are reported at
fair value, with unrealized gains and losses included in earnings. Other debt
and equity securities are classified as "available-for-sale securities" and are
reported at fair value, with unrealized gains or losses net of deferred taxes
reported as a separate component of stockholders' equity. All of the Company's
marketable investment securities are classified as "available-for-sale." As a
result of adopting SFAS No. 115, the carrying values of investments increased by
Y 315,637 thousand, deferred tax liabilities increased by Y 160,975 thousand and
stockholders' equity increased by Y 154,662 thousand, all at April 1, 1994.
Prior to April 1, 1994, marketable equity securities were carried at lower of
cost or market, and other investments were carried at cost.
A decline in the market value of any available-for-sale securities
below cost that is deemed other than temporary results is charged to earnings
resulting in the establishment of a new cost basis for the security.
Realized gains and losses for securities classified as available-for-
sale are included in earnings and are derived using the average method for
determining the cost of securities sold.
(g) INVESTMENT IN AFFILIATED COMPANY
Investment in the common stock of an affiliated company is accounted
for by the equity method.
(h) DEPRECIATION
Depreciation of property, plant and equipment is computed by the
declining-balance method over the estimated useful lives of assets.
(i) AMORTIZATION
Patents purchased from Borg-Warner Automotive K.K. are amortized on a
straight-line basis over a period of eight years.
3
NSK-WARNER KABUSHIKI KAISHA
AND A SUBSIDIARY
Notes to Consolidated Financial Statements
(j) RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred.
Research and development costs charged to earnings for the years ended
March 31, 1997, 1996 and 1995 amounted to Y 1,280,682 thousand ($10,328
thousand), Y 1,215,177 thousand and Y 1,144,668 thousand, respectively.
(k) INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes."
Under the asset and liability method of SFAS No. 109, deferred tax assets and
liabilities are recognized for the estimated future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and operating
loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. Under SFAS No. 109, the effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that includes the
enactment date.
(l) RETIREMENT AND SEVERANCE BENEFITS
The Company accounts for its defined benefit pension plans and
retirement plans in accordance with Statement of Financial Accounting Standards
(SFAS) No. 87, "Employers' Accounting for Pensions."
(m) USE OF ESTIMATES
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities to prepare these financial
statements in conformity with United Sates generally accepted accounting
principles. Actual results could differ from those estimates.
(n) IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED
OF
The Company adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, on
April 1, 1996. This Statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceed the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell. Adoption of this Statement did not have a material impact on the
Company's financial position, results of operations, or liquidity.
4
NSK-WARNER KABUSHIKI KAISHA
AND A SUBSIDIARY
Notes to Consolidated Financial Statements
(o) U.S. DOLLAR AMOUNTS
The accompanying consolidated financial statements are expressed in
Japanese yen as of and for the year ended March 31, 1997, the currency of the
country in which the Company operates. The translation of Japanese yen amounts
into U.S. dollar amounts is included solely for the convenience of readers and
has been made at the rate of Y 124 to US $1, the approximate rate of exchange
reported by the Tokyo Foreign Exchange Market on March 31, 1997. Such
translation should not be construed as a representation that the amounts shown
could be converted into U.S. dollars at the above rate.
(2) ASSETS PLEDGED
At March 31, 1996, land and buildings amounting to Y 5,106,333 thousand
($41,180 thousand) at net book value were pledged as security for long-term
debt. At March 31, 1997, no assets were pledged as security.
(3) SHORT-TERM INVESTMENTS
Short-term investments, at cost, which approximates market, at March 31,
1997 and 1996 consisted of the following:
Japanese yen U.S. dollars
(thousands) (thousands)
------------- -------------
1997 1996 1997
----- ------ -----
Time deposits with a maturity
of more than three months Y 191,000 196,500 $ 1,540
Certificates of deposit purchased
under resale agreements 7,315,743 5,701,342 58,998
Government bonds and other 35,241 35,241 284
--------- ---------- ---------
Y 7,541,984 5,933,083 $ 60,822
========= =========== ========
(4) INVENTORIES
Inventories at March 31, 1997 and 1996 are summarized as follows:
Japanese yen U.S. dollars
(thousands) (thousands)
------------- -------------
1997 1996 1997
----- ------ -----
Work in process Y 1,053,416 934,372 $ 8,495
Raw materials 215,525 123,077 1,738
Supplies 78,858 58,143 636
Goods in transit 20,332 37,472 164
--------- -------- ------
Y 1,368,131 1,153,064 $ 11,033
========= ========= ========
5 /TABLE
NSK-WARNER KABUSHIKI KAISHA
AND A SUBSIDIARY
Notes to Consolidated Financial Statements
(5) MARKETABLE INVESTMENT SECURITIES
The amortized cost, gross unrealized holding gains, gross unrealized holding
losses and fair value for available-for-sale securities by major security type
at March 31, 1997 and 1996, were as follows:
Japanese yen (thousands)
-------------------------
Gross Gross
Unrealized Unrealized
Holding Holding
Cost Gains Losses Fair Value
----- ------- ------- -----------
At March 31, 1997
Available-for-sale:
Debt security Y 100,000 - - 100,000
Equity securities 473,332 126,197 25,098 574,431
-------- -------- -------- ---------
Y 573,332 126,197 25,098 674,431
======== ======== ========= =========
U.S. dollars (thousands)
-------------------------
Gross Gross
Unrealized Unrealized
Holding Holding
Cost Gains Losses Fair Value
------ ------- -------- -----------
At March 31, 1997
Available-for-sale:
Debt security $ 806 - - 806
Equity securities 3,817 1,018 202 4,633
------- ------ ------- --------
$ 4,623 1,018 202 5,439
======= ======= ====== =======
Japanese yen (thousands)
------------------------
Gross Gross
Unrealized Unrealized
Holding Holding
Cost Gains Losses Fair Value
------ ------- ------- -----------
At March 31, 1997
Available for-sale:
Debt security Y 100,000 37,000 - 137,000
Equity securities 468,042 369,181 - 837,223
--------- --------- --------- --------
Y 568,042 406,181 - 974,223
========= ========= ========= ========
The debt security at March 31, 1997 is due in 2001.
6 Net realized gains during the years 1997, 1996 and 1995 were insignificant.
NSK-WARNER KABUSHIKI KAISHA
AND A SUBSIDIARY
Notes to Consolidated Financial Statements
(6) SHORT-TERM BANK LOAN AND LONG-TERM DEBT
The weighted average interest rate on short-term bank loans outstanding at March
31, 1997 and 1996 was 1.63%.
Long-term debt at March 31, 1997 and 1996 is summarized as follows:
Japanese yen U.S. dollars
(thousands) (thousands)
------------- ----------
1997 1996 1997
Mortgage debentures:
1st series, due June 1996, interest 5.3% Y - 700,000 $ -
2nd series, due July 1996, interest 5.3% - 600,000 -
------- ---------- -----
- 1,300,000 -
Less unamortized discount on bond - 762 -
-------- ---------- -----
Net mortgage debentures - 1,299,238 -
-------- ---------- -----
Loans from banks and an insurance company,
secured by mortgage on land and buildings,
due 1996, interest from 2.1% to 3.6% - 224,060 -
-------- ---------- -----
- 1,523,298 -
Less current installments - 1,523,298 -
-------- ---------- -----
Y - - $ -
========= ========== ======
The long-term debt agreements provided, among other things, that, if requested,
the Company submit to the lenders for approval the proposed appropriation of
earnings (including dividends) before such appropriation can be submitted to the
stockholders.
As is customary in Japan, security may have to be given if requested by a
lending bank and such bank has the right to offset cash deposited with it
against any debt or obligation that becomes due and, in the case of default or
certain other specified events, against all debts payable to the bank.
7
NSK-WARNER KABUSHIKI KAISHA
AND A SUBSIDIARY
Notes to Consolidated Financial Statements
(7) INCOME TAXES
The Company is subject to a number of taxes based on income, which in the
aggregate result in a normal tax rate of approximately 51%. The Company's
subsidiary in the U.S. was not liable to pay income taxes in 1997.
The effective tax rates of the Company for the years ended March 31, 1997, 1996
and 1995 differ from the normal income tax rate for the following reasons:
1997 1996 1995
----- ----- -----
Computed normal income tax rate 51.0% 51.0% 51.0%
Other (0.3) (0.4) (0.5)
----- ----- -----
Effective income tax rate 50.7% 50.6% 50.5%
===== ===== =====
Net deferred income tax assets and liabilities are reflected on the accompanying
balance sheets under the following captions:
Japanese yen U.S. dollars
(thousands) (thousands)
------------- -------------
1997 1996 1997
----- ----- -----
Prepaid expenses and other
current assets Y 340,103 311,456 $2,743
Noncurrent liabilities (626,852) (742,617) (5,055)
-------- --------- --------
Y (286,749) (431,161) $(2,312)
========= ========= ========
Increase (decrease) in net deferred income tax is allocated as follows.
Japanese yen U.S. dollars
(thousands) (thousands)
------------ ------------
1997 1996 1995 1997
----- ----- ----- -----
Earnings Y (3,678) 42,818 57,384 $ (30)
Stockholders' equity:
Foreign currency translation
adjustment 2,483 - - 20
Net unrealized gains on marketable
debt and equity securities
(155,592) 99,433 107,719 (1,255)
Minimum pension liability adjustment 12,375 7,447 (19,822) 100
--------- ------- -------- -----
Y (144,412)149,698 145,281 $ (1,165)
======== ======= ======== ======
8
NSK-WARNER KABUSHIKI KAISHA
AND A SUBSIDIARY
Notes to Consolidated Financial Statements
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at March 31, 1997 and
1996 are presented below:
Japanese yen U.S. dollars
(thousands) (thousands)
------------- -------------
1997 1996 1997
----- ----- -----
Deferred tax assets:
Business tax 215,399 193,200 1,738
Employee bonus 2,761 17,961 22
Accrued expense 78,553 152,825 1,440
Accrued pension and severance cost 89,709 63,233 723
Minimum pension liability adjustment- 12,375 -
------- -------- -------
Total deferred tax assets 486,422 439,594 3,923
------- --------- -------
Deferred tax liabilities:
Allowance for doubtful receivables 56,610 52,530 457
Capital gain deferred in connection
with the acquisition of new
property (see note 10) 454,634 478,810 3,666
Special depreciation 45,809 56,143 369
Loss for investment 12,578 4,637 101
Equity pick-up 151,980 71,483 1,226
Investment in securities 51,560 207,152 416
-------- -------- -------
Total deferred tax liabilities 773,171 870,755 6,235
-------- -------- -------
Net deferred tax liabilities (286,749)(431,161) (2,312)
========= ========= ========
There was no valuation allowance on deferred tax assets at March 31, 1997 and
1996.
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income
in making this assessment. Based upon the level of historical taxable income
and projections for future taxable income over the periods which the deferred
tax assets are deductible, management believes it is more likely than not the
Company will realize the benefits of these deductible differences at March 31,
1997.
The Company's corporate tax returns through March 31, 1996 have been examined by
the Japanese tax authorities.
9
NSK-WARNER KABUSHIKI KAISHA
AND A SUBSIDIARY
Notes to Consolidated Financial Statements
(8)RETIREMENT AND SEVERANCE BENEFITS
Employees of the Company are covered by the following defined pension and
severance benefit plans.
The Company has an unfunded lump-sum payment retirement plan covering
substantially all employees. Under the plan, employees are entitled to lump-sum
payments based on current rate of pay, length of service and certain other
factors upon retirement or termination of employment for reasons other than
dismissal for cause. Directors and statutory auditors are covered by a separate
plan. It was not the policy of the Company to fund the retirement and severance
benefits described above.
The Company also has a funded pension plan covering substantially all employees
who meet age and service plan requirements. Net periodic pension cost of the
plans was calculated using the unit credit actuarial cost method.
The funded status of the plans as of March 31, 1997 and 1996 is as follows:
Japanese yen U.S. dollars
(thousands) (thousands)
------------- -------------
1997 1996 1997
----- ----- -----
Actuarial present value of benefit obligations:
Vested benefits Y 948,949 940,804 $7,653
Nonvested benefits 1,086 1,405 9
-------- -------- --------
Accumulated benefit obligation 950,035 942,209 7,662
======== ======== ========
Projected benefit obligation 1,406,725 1,308,763 11,345
Plan assets at fair value 586,317 498,497 4,729
-------- -------- --------
Projected benefit obligation in excess of plan
assets
820,408 810,266 6,616
Unrecognized net loss (339,333) (390,819) (2,737)
Unrecognized net obligation from
initial application of SFAS No.87 (10,190) (11,464) (82)
Unrecognized prior service cost (103,294) (97,069) (832)
Adjustment required to recognize minimum
liability - 132,798 -
--------- --------- -------
Accrued pension and severance cost Y 367,591 443,712 $ 2,965
========= ========= ========
Significant actuarial assumptions:
Discount rate 4.5% 4.5%
Rate of salary increase 4.16% 4.08%
Expected long-term rate of return
on plan assets 4.5% 4.5%
10
NSK-WARNER KABUSHIKI KAISHA
AND A SUBSIDIARY
Notes to Consolidated Financial Statements
For the above plans, the components of pension costs for the years ended
March 31, 1997, 1996 and 1995 are as follows:
Japanese yen U.S. dollars
(thousands) (thousands)
------------- -------------
1997 1996 1995 1997
----- ----- ----- -----
Components of pension costs:
Service cost for benefits earned
during the year Y 117,809 111,907 81,998 $ 950
Interest cost on projected benefit
obligation 56,944 50,529 42,573 459
Actual return on plan assets (10,512) (38,775) 5,708 (85)
Net amortization and deferral 12,088 45,312 (14,611) 97
------- ------- ------- ------
Y 176,329 168,973 115,668 $1,421
======== ======== ======= ======
(9) LEGAL RESERVE AND CASH DIVIDENDS
The Japanese Commercial Code provides that at least ten percent of any cash
payments out of retained earnings be appropriated as a legal reserve until such
reserve equals 25% of stated capital. This reserve is not available for
dividends, but may be used to reduce a deficit or be transferred to stated
capital. Presently, the legal reserve is equal to the maximum requirement of
25% of stated capital.
Cash dividends charged to retained earnings during the three years ended
March 31, 1997, 1996 and 1995 represent dividends paid out during those years.
The accompanying consolidated financial statements do not include any provision
for a dividend to be proposed by the Board of Directors of Y 20,000 ($161) per
share aggregating Y 1,100,000 thousand ($8,871 thousand) and reversal of reserve
for replacement of property amounting to Y 47,406 thousand ($382 thousand) (see
note 10) in respect of the year ended March 31, 1997.
11
NSK-WARNER KABUSHIKI KAISHA
AND A SUBSIDIARY
Notes to Consolidated Financial Statements
(10) BALANCES AND TRANSACTIONS WITH AFFILIATED COMPANIES
The Company is a joint-venture corporation and its capital stock is held in
equal amounts by NSK Ltd. and Borg-Warner Automotive NW Corporation, a wholly-
owned subsidiary of Borg-Warner Automotive, Inc.
Balances with the affiliated companies at March 31, 1997 and 1996 were as
follows:
Japanese Yen U.S. Dollars
(Thousands) (Thousands)
--------------------- -----------------------
Borg-Warner Borg-Warner
NSK Ltd. Automotive, Inc. NSK Ltd. Automotive, Inc.
--------- ------------- -------- --------------
At March 31, 1997:
Trade accounts receivableY 7,638,400 14,207 $ 61,600 115
---------- ------ ------- -----
Trade accounts payable 931,040 - 7,508 -
Other notes payable 83,842 - 676 -
Accrued expenses 166,381 - 1,342 -
--------- ------- ------- -----
Net receivable Y 6,457,137 14,207 $52,074 115
========= ======== ======= =====
At March 31, 1996:
Trade accounts receivableY 8,297,075 29,806
---------- --------
Trade accounts payable 884,609 -
Other notes payable 93,699 -
Accrued expenses 238,163 -
---------- ---------
Net receivable Y 7,080,604 29,806
=========== ========
12
NSK-WARNER KABUSHIKI KAISHA
AND A SUBSIDIARY
Notes to Consolidated Financial Statements
During the years ended March 31, 1997, 1996 and 1995, significant transactions
with the affiliated companies were as follows:
Japanese yen U.S. dollars
(thousands) (thousands)
----------------------- ------------------------
Borg-Warner Borg-Warner
NSK Ltd. Automotive, Inc. NSK Ltd. Automotive, Inc.
------- ---------------- -------- ----------------
1997:
Sales Y 32,372,975 63,847 261,072 515
Cost of sales:
Purchases 6,626,242 3,172 53,437 26
Pension cost 4,562 - 37 -
Selling, general and
administrative expenses:
Rent 1,672 - 13 -
Pension cost 1,687 - 14 -
Purchases of property,
plant and equipment 245,230 - 1,978 -
Sales of property, plant
and equipment 35,507 - 286 -
1996:
Sales Y 31,159,709 69,000
Cost of sales:
Purchases 6,604,190 14,337
Pension cost 4,440 -
Selling, general and
administrative expenses:
Rent 1,637 -
Pension cost 1,480 -
Purchases of property,
plant and equipment 490,202 -
1995:
Sales Y 32,165,079 95,865
Cost of sales:
Purchases 6,424,264 2,109
Pension cost 5,834 -
Selling, general and
administrative expenses:
Rent 2,632 -
Pension cost 1,743 -
Purchases of property,
plant and equipment 273,919 -
Sales of property, plant
and equipment 967 -
/TABLE
NSK-WARNER KABUSHIKI KAISHA
AND A SUBSIDIARY
Notes to Consolidated Financial Statements
On June 30, 1988, the Company sold land and a part of factory buildings of
the Fujisawa plant to NSK Ltd. in connection with the relocation of its
manufacturing facilities to the new factory in Shizuoka Prefecture. The capital
gain resulting therefrom was recognized as income for the year ended March 31,
1989. However, as permitted under the Special Taxation Measures Law, capital
gain has been deferred for tax purposes as reserve for replacement of property
as an appropriation of retained earnings. The related deferred income tax
liability at March 31, 1997 and 1996 in the amount of Y 454,634 thousand ($3,666
thousand) and Y 478,810 thousand, respectively, has been provided in the
accompanying balance sheets (see notes 6, 7 and 9).
(11) COMMITMENTS AND CONTINGENT LIABILITY
At March 31, 1997, the Company had commitments for the purchase of
property, plant and equipment of approximately Y 192,545 thousand ($1,553
thousand).
The Company utilizes certain facilities, including warehouses and employee
dormitories, under cancellable lease agreements with third parties. Rent
expense for the years ended March 31, 1997, 1996 and 1995 under the foregoing
lease agreements amounted to Y 231,193 thousand ($1,864 thousand), Y 215,395
thousand and Y 213,714 thousand, respectively.
The Company had no noncancellable lease commitments at March 31, 1997.
(12) DISCLOSURE ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash and cash equivalents, Short-term investments, Receivables, Trade and
other payables and Accrued expenses:
The carrying amounts approximate fair value because of the short maturity of
these instruments.
Marketable investment securities:
The fair values of the Company's investments in securities are based
on market related prices (see note 5).
Short-term bank loans and current installment of long-term debt:
The carrying amount of the Company's borrowings under its short-term
revolving credit agreements and current installment of long-term debt
approximate their fair value because of the short maturity of these instruments.
14
NSK-WARNER KABUSHIKI KAISHA
AND A SUBSIDIARY
Notes to Consolidates Financial Statements
(13) ADJUSTMENTS TO CONFORM WITH UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
Japanese yen (thousands)
------------------------
1997 1996 1995
------ ------ -----
Net Retained Net Retained Net Retained
earnings earnings at earnings earnings at earnings earnings at
for year end of year for year end of year for year end of year
------- -------- ------- --------- -------- ---------
Per legal
books Y 3,322,318 20,486,381 3,295,764 18,278,915 3,158,123 16,096,649
Adjustments:
Bonus to
officers (16,400) (16,400) (14,850) (14,850) (13,500) (13,500)
Allowance for doubtful
receivables 8,000 111,000 16,000 103,000 22,000 87,000
Special
depreciation(20,263) 89,821 (25,257) 110,084 (20,185) 135,341
Accrued pension and severance
cost 3,033 281,773 14,521 278,740 87,782 264,219
Goodwill - - (27,000) - (27,000) 27,000
Deferred income
taxes (23,122) 271,694 (80,318) 294,816 (87,384) 375,134
Marketable investment
securities 15,570 24,663 - 9,093 9,093 9,093
Investments in
affiliates 152,968 293,130 105,878 140,162 34,284 34,284
Accrued
expense (200,449) (100,103) (196,420) 100,344 296,764 296,764
-------- --------- ----------- ------- --------- ---------
(80,663) 955,578 (207,444) 1,021,389 301,854 1,215,335
--------- --------- ---------- ------- --------- ----------
Per accompanying consolidated financial
statements Y 3,241,655 21,441,959 3,088,320 19,300,304 3,459,977 17,311,984
======== ========== ========= ========== ========== ==========
U.S. dollars (thousands)
------------------------
1997
-----
Net Retained
earnings earnings at
for year end of year
------------- --------------
Per legal books $ 26,793 165,213
Adjustments:
Bonus to officers (132) (132)
Allowance for doubtful receivables 65 895
Special depreciation (163) 724
Accrued pension and severance cost 24 2,272
Goodwill - -
Deferred income taxes (186) 2,191
Marketable investment securities 126 199
Investments in affiliates 1,233 2,364
Accrued expense (1,618) (807)
-------- --------
(651) 7,706
--------- ---------
Per accompanying consolidated
financial statements $ 26,142 172,919
========= =========
NSK-WARNER KABUSHIKI KAISHA
AND A SUBSIDIARY
Consolidated Statements of Cash Flows
Years ended March 31, 1997, 1996 and 1995
U.S. Dollars
Japanese Yen (thousands)
(thousands) (note 1(o))
---------------- ------------
1997 1996 1995 1997
------- -------- ------- ------
Cash flows from operating activities:
Net earnings Y 3,241,655 3,088,320 3,459,977 $26,142
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization 1,997,587 2,138,726 2,347,074 16,110
Loss on retirement of property,
plant and equipment, net 65,725 88,035 79,934 530
Equity in income of affiliate (157,838) (105,878) (34,284) (1,273)
Increase (decrease) in deferred
income taxes (3,678) 42,818 57,384 (30)
Decrease (increase) in receivables 655,168 (779,192) (3,005,229) 5,284
Decrease (increase) in inventories (215,067) 19,497 143,049 (1,734)
Decrease in prepaid expenses and
other current assets 1,269 7,863 2,160 10
Increase (decrease) in trade
payables (166,999) 614,143 575,323 (1,347)
Increase (decrease) in other
payables (95,738) 19,591 (261,641) (772)
Increase (decrease) in accrued
expenses (12,330) 258,787 (254,361) (99)
Increase (decrease) in income taxes
payable 212,226 (589,408) 885,156 1,712
Increase (decrease) in other current
liabilities (7,754) 17,543 2,355 (63)
Other, net 56,677 61,839 (34,466) 457
------- --------- ------- -----
Total adjustments 2,329,248 1,794,364 502,454 18,785
------ --------- ------- ----
Net cash provided by operating
activities 5,570,903 4,882,684 3,962,431 44,927
--------- --------- --------- ------
Cash flows from investing activities:
Increase in short-term
investments (1,608,901)(1,188,945) (1,973,793) (12,975)
Proceeds from sale of property,
plant and equipment 6,996 1,232 2,887 56
Payments from purchase of property,
plant and equipment (1,355,848) (1,386,084) (1,372,298) (10,934)
Increase in all other investments(28,668) (21,623) (16,295) (231)
Other, net (5,290) (1,407) - (43)
-------- ----------- ---------- --------
Net cash used in investing
activities (2,991,711) (2,596,827) (3,359,499) (24,127)
------------ ----------- ---------- --------
Cash flows from financing activities:
Increase (decrease) in short-term
bank loans (1,523,298) (1,000,000) 900,000 (12,284)
Decrease in long-term debt - (334,740) (752,970) -
Dividends paid (1,100,000) (1,100,000) (852,500) (8,871)
---------- ----------- --------- --------
Net cash used in financing
activities (2,623,298) (2,434,740) (705,470) (21,155)
-------- ------------ ---------- ----------
Effect of exchange rate
changes on cash and
cash equivalents 4,869 - - 39
----------- ------------ ---------- ------
Net decrease in cash and
cash equivalents (39,237) (148,883) (102,538) (316)
Cash and cash equivalents at
beginning of year 965,613 1,114,496 1,217,034 7,787
-------- ------------- ------------- -------
Cash and cash equivalents at
end of year Y 926,376 965,613 1,114,496 $7,741
======== ======== ========= ======
Supplemental information of cash flows:
Cash paid during the year for:
Interest Y 24,340 118,498 195,172 $ 196
Income taxes 3,124,508 3,706,909 2,584,844 25,198
========= ========= ========= =======
See accompanying notes to consolidated financial statements.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. The following consolidated financial statements of the Company on
pages 20 through 34 of the Company's Annual Report are incorporated herein by
reference:
Independent Auditors' Report
Consolidated Statements of Operations - three years ended December 31,
1996, 1995 and 1994
Consolidated Balance Sheets - December 31, 1996 and 1995
Consolidated Statements of Cash Flows - years ended December 31, 1996,
1995 and 1994
Consolidated Statements of Stockholders' Equity - years ended December
31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
Financial Statements of NSK-Warner Kabushiki Kaisha (including the
notes thereto)
2. Certain schedules for which provisions are made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and therefore have
been omitted.
3. The exhibits filed in response to Item 601 of Regulation S-K are
listed in the Exhibit Index on page A-1.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Company during the three-month
period ended December 31, 1996.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BORG-WARNER AUTOMOTIVE, INC.
By: WILLIAM C. CLINE
-------------------------------------------
William C. Cline
Vice President and Controller
(Principal Accounting Officer)
Date: June 26, 1997
EXHIBIT INDEX
Sequential
Exhibit DOCUMENT DESCRIPTION Page
Number --------------------- Number
*3.1 Restated Certificate of Incorporation of the Company (incorporated by
reference to Exhibit No. 3.1 of the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1993).
*3.2 By-laws of the Company (incorporated by reference to Exhibit No. 3.2
of the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1993).
*4.1 Indenture, dated as of November 1, 1996, between Borg-Warner Automotive,
Inc. and The First National Bank of Chicago (incorporated by reference
to Exhibit No.4.1 to Registration Statement No. 333-14717).
*10.1 Credit Agreement dated as of December 7, 1994 among Borg-Warner
Automotive, Inc., as Borrower, the Lenders listed therein, as Lenders,
Chemical Bank and the Bank of Nova Scotia, as Co-Arrangers, Chemical
Bank, as Administrative Agent and The Bank of Nova Scotia as
Documentation Agent (incorporated by reference to Exhibit No. 10.1 to
the Company's Annual Report on Form 10-K for the year ended December
31, 1994).
*10.2 First Amendment of Credit Agreement dated as of December 15, 1995
(incorporated by reference to Exhibit 10.2 of the Company's Annual
Report on Form 10-K for the year ended December 31, 1995).
10.3 Second Amendment of Credit Agreement dated as of January 16, 1996.
*10.4 Replacement and Restatement Agreement dated as of October 10, 1996
to the Credit Agreement dated as of December 7, 1994 (incorporated by
reference to Exhibit 10.1 on Form 10-Q for the quarter ended
September 30, 1996).
*10.5 Distribution and Indemnity Agreement dated January 27, 1993 between
Borg-Warner Automotive, Inc. and Borg-Warner Security Corporation
(incorporated by reference to Exhibit No.10.2 to Registration
Statement No. 33-64934).
*10.6 Tax Sharing Agreement dated January 27, 1993 between Borg-Warner
Automotive, Inc. and Borg-Warner Security Corporation (incorporated by
reference to Exhibit No. 10.3 to Registration Statement No.33-64934).
+*10.7 Borg-Warner Automotive, Inc. Management Stock Option Plan, as amended
(incorporated by reference to Exhibit No. 10.6 to Registration
Statement No. 33-64934).
+*10.8 Borg-Warner Automotive, Inc. 1993 Stock Incentive Plan as amended
effective November 8, 1995 (incorporated by reference to Exhibit 10.7
of the Company's Annual Report on Form 10-K for the year ended
December 31, 1995).
*10.9 Receivables Transfer Agreement dated as of January 28, 1994 among BWA
Receivables Corporation, ABN AMRO Bank N.V. as Agent and the Program
LOC Provider and Windmill Funding Corporation (incorporated by refe-
rence to Exhibit No. 10.12 to the Company's Annual Report on Form
10-K for the year ended December 31, 1993).
*10.10 First Amendment of Receivables Transfer Agreement dated as of December
21, 1994(incorporated by reference to Exhibit No. 10.11 to the Com-
pany's Annual Report on Form 10-K for the year ended December 31,
1994).
*10.11 Second Amendment of Receivables Transfer Agreement dated as of January
1, 1995(incorporated by reference to Exhibit No. 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1995).
*10.12 Third Amendment of Receivables Transfer Agreement dated as of October
23, 1995 (incorporated by reference to Exhibit No. 10.11 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1995).
*10.13 Fourth Amemdment of Receivables Transfer Agreement dated as of June
21, 1996 (incorporated by reference to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1996).
*10.14 Service Agreement, dated as of December 31, 1992, by and between Borg-
Warner Security Corporation and Borg-Warner Automotive, Inc.
(incorporated by reference to Exhibit No. 10.10 to Registration
Statement No. 33-64934).
*10.15 Borg-Warner Automotive, Inc. Transitional Income Guidelines for
Executive Officers amended as of May 1, 1989 (incorporated by
reference to Exhibit 10.16 to the Company's Annual Report on Form
10-K for the year ended December 31, 1993).
+*10.16 Borg-Warner Automotive, Inc. Management Incentive Bonus Plan dated
January 1, 1994 (incorporated by reference to Exhibit No. 10.18 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1993).
+*10.17 Borg-Warner Automotive, Inc. Retirement Savings Excess Benefit Plan
dated January 27, 1993 (incorporated by reference to Exhibit No.
10.20 of the Company's Annual Report on Form 10-K for the year ended
December 31, 1993).
+*10.18 Borg-Warner Automotive, Inc. Retirement Savings Plan dated January 27,
1993 as further amended and restated effective as of April 1, 1994
(incorporated by reference to Exhibit 10.18 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1995).
+*10.19 Borg-Warner Automotive, Inc. Deferred Compensation Plan dated January
1, 1994 (incorporated by reference to Exhibit No. 10.24 of the
Company's Annual Report on Form 10-K for the year ended December
31, 1993).
+*10.20 Form of Employment Agreement for John F. Fiedler (incorporated by
reference to Exhibit No. 10.0 of the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1994).
+*10.21 Form of Change of Control Employment Agreement for Executive Officers
(incorporated by reference to Exhibit No. 10.0 to the Company's
Quarterly Report on Form 10-Q for the Quarter ended September 30,
1995).
*10.22 Assignment of Trademarks and License Agreement (incorporated by
reference to Exhibit No. 10.0 of the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1994).
+*10.23 Borg-Warner Automotive, Inc. Executive Stock Performance Plan
(incorporated by reference to Exhibit No. 10.23 of the Company's
Annual Report on Form 10-K for the year ended December 31, 1995).
*10.24 Agreement of Purchase and Sale dated as of May 31, 1996 by and among
Coltec Industries Inc., Holley Automotive Group, Ltd., Holley Auto-
motive Inc., Coltec Automotive Inc., and Holley Automotive Systems
GmbH and Borg-Warner Automotive, Inc.,Borg-Warner Automotive Air/Fluid
Systems Corporation and Borg-Warner Automotive Air/Fluid Systems
Corporation of Michigan (incorporated by reference to Exhibit 10.1 of
the Company's Current Report on Form 8-K dated as of June 17, 1996).
13.1 Annual Report to Stockholders for the year ended December 31, 1996
with manually signed Independent Auditors' Report. (The Annual Report,
except for those portions which are expressly incorporated by
reference in the Form 10-K, is furnished for the information
of the Commission and is not deemed filed as part of the Form 10-K).
21.1 Subsidiaries of the Company.
23.1 Independent Auditors' Consent.
23.2 Independent Auditors' Consent.
24.1 Power of Attorney.
27.1 Financial Data Schedule.
99.1 Cautionary Statements.
- ---------------------------------------------------
</Table
* Incorporated by reference.
+ Indicates a management contract or compensatory plan or arrangement required to be filed pursuant to
Item 14(c).