EXHIBIT 99(g)
GENERAL DYNAMICS SPACE SYSTEMS GROUP
COMBINED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
TOGETHER WITH AUDITORS' REPORT
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To General Dynamics Corporation:
We have audited the accompanying combined balance sheets of the GENERAL
DYNAMICS SPACE SYSTEMS GROUP as of December 31, 1993 and 1992, and the related
combined statements of operations and net investment and cash flows for each
of the three years in the period ended December 31, 1993. These combined
financial statements are the responsibility of the Group's management. Our
responsibility is to express an opinion on these combined 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 combined financial statements referred to above present
fairly, in all material respects, the financial position of the General
Dynamics Space Systems Group as of December 31, 1993 and 1992, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1993, in conformity with generally accepted
accounting principles.
The accompanying combined financial statements have been prepared assuming
that the Group will continue as a going concern. As discussed in Note 1, the
Group has suffered pretax losses from operations in each year since inception,
aggregating approximately $577 million as of December 31, 1993. These losses
have been funded by General Dynamics Corporation. These factors raise
substantial doubt about the Group's ability to operate on a standalone basis
without continued financial support. The accompanying combined financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.
As discussed in Note 9 to the combined financial statements, effective January
1, 1993, the Group changed its method of accounting for postretirement
benefits other than pensions.
/s/ ARTHUR ANDERSEN & CO.
ARTHUR ANDERSEN & CO.
San Diego, California
January 20, 1994
GENERAL DYNAMICS SPACE SYSTEMS GROUP
COMBINED BALANCE SHEETS
AS OF DECEMBER 31, 1993 AND 1992
1993 1992
(Amounts in thousands)
ASSETS
CURRENT ASSETS:
Cash $ 419 $ 170
Accounts receivable 31,427 4,896
Contracts in process 1,449,901 1,352,536
Other current assets 6,126 1,921
---------- ----------
Total current assets 1,487,873 1,359,523
NONCURRENT ASSETS:
Property, plant and equipment, net 80,769 87,455
---------- ----------
$1,568,642 $1,446,978
========== ==========
LIABILITIES AND NET INVESTMENT
CURRENT LIABILITIES:
Customer deposits $1,018,252 $ 862,839
Accounts payable and other current liabilities 94,668 93,103
Contract loss reserves 178,948 240,227
---------- ----------
Total current liabilities 1,291,868 1,196,169
DEFERRED TAXES 38,233 41,490
COMMITMENTS AND CONTINGENCIES
NET INVESTMENT BY GENERAL DYNAMICS CORPORATION 238,541 209,319
---------- ----------
$1,568,642 $1,446,978
========== ==========
The accompanying notes are an integral part of
these combined balance sheets.
GENERAL DYNAMICS SPACE SYSTEMS GROUP
COMBINED STATEMENTS OF OPERATIONS AND NET INVESTMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
1993 1992 1991
(Amounts in thousands)
NET SALES $529,006 $504,650 $367,099
OPERATING COSTS AND EXPENSES 556,943 556,254 382,237
------- -------- --------
OPERATING LOSS (27,937) (51,604) (15,138)
OTHER INCOME (EXPENSES), net 3,359 (384) 1,062
-------- -------- --------
Loss before income taxes (24,578) (51,988) (14,076)
BENEFIT FOR INCOME TAXES 9,000 16,912 4,946
-------- -------- --------
Net loss (15,578) (35,076) (9,130)
NET INTERDIVISIONAL ACTIVITY 44,800 (73,904) 29,584
NET INVESTMENT BY GENERAL DYNAMICS
CORPORATION:
Beginning of period 209,319 318,299 297,845
-------- -------- --------
End of period $238,541 $209,319 $318,299
======== ======== ========
The accompanying notes are an integral part of
these combined financial statements.
GENERAL DYNAMICS SPACE SYSTEMS GROUP
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
1993 1992 1991
(Amounts in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(15,578) $(35,076) $ (9,130)
Adjustments to reconcile net
loss to net cash provided by (used in)
operating activities:
Depreciation and amortization 13,389 13,459 18,838
Deferred income taxes (3,257) 39,250 41,839
Investment write-off - 10,000 -
Decrease (increase) in:
Accounts receivable (26,531) 6,434 9,050
Contracts in process (97,365) (167,150) (237,868)
Other current assets (4,205) 2,696 1,005
Increase (decrease) in:
Customer deposits 155,413 180,704 196,445
Accounts payable and other
current liabilities 1,565 27,110 17,740
Contract loss reserves (61,279) 2,061 (44,834)
--------- -------- --------
Net cash provided by (used in)
operating activities (37,848) 79,488 (6,915)
--------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant
and equipment (6,703) (5,431) (22,654)
--------- -------- --------
Net cash used in investing
activities (6,703) (5,431) (22,654)
--------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net interdivisional activity 44,800 (73,904) 29,584
--------- -------- --------
Net cash provided by (used in)
financing activities 44,800 (73,904) 29,584
--------- -------- --------
NET INCREASE IN CASH $ 249 $ 153 $ 15
CASH AT BEGINNING OF YEAR 170 17 2
--------- --------- ---------
CASH AT END OF YEAR $ 419 $ 170 $ 17
========= ========= =========
SUPPLEMENTAL DISCLOSURES:
Notes received as customer deposits $ 67,616 $ 39,774 $ -
========= ========= =========
The accompanying notes are an integral part of
these combined financial statements.
GENERAL DYNAMICS SPACE SYSTEMS GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
(Amounts in thousands)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
Description of Business
The General Dynamics Space System Group (the Group) specializes in the
design, engineering, manufacturing and support of space launch vehicles and
related launch services. The major programs of the Group include the
Commercial Atlas Expendable Launch Vehicle (Atlas) program and the
Titan/Centaur program (Titan). Atlas includes the production and launch of
Atlas/Centaur vehicles for various U.S. and foreign Government, Civil, and
commercial customers. Titan includes the production of fifteen Centaur upper
stages for launch on the Titan IV launch vehicle. The Group is a
subcontractor to Martin Marietta on Titan.
Reporting Entity, Principles of Consolidation
The accompanying combined financial statements of the Group include the
accounts of General Dynamics Space Systems Division (GDSS), which is the
primary operating entity providing launch vehicles and services. GDSS is a
division of General Dynamics Corporation (GD). Also included are the accounts
of Commercial Launch Services, Inc., which is a wholly owned subsidiary of GD
that provides sales and marketing services to GDSS, and General Dynamics
Space Services Corporation, also a wholly owned subsidiary of GD which
provides engineering services to GDSS and other corporations in the aerospace
industry.
All intercompany transactions within the Group have been eliminated.
Assumption Regarding Going Concern
The accompanying combined financial statements have been prepared assuming
that the Group will continue as a going concern. The Group has suffered
pretax losses from operations in each year since inception, aggregating
approximately $577 million as of December 31, 1993. These losses have been
funded by GD. These factors raise substantial doubt about the Group's ability
to operate on a standalone basis without continued financial support. The
accompanying combined financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
Asset Purchase Agreement
On December 22, 1993, GD and Martin Marietta Corporation entered into an Asset
Purchase Agreement (the Agreement) to sell certain assets and liabilities of
the Group (excluding primarily certain property, plant and equipment) to
Martin Marietta Corporation for approximately $208,500, subject to certain
post-closing adjustments. GD management expects the transaction to be
completed during the second quarter of 1994.
Sales and Earnings Under Long-Term Contracts and Programs
The Atlas program is accounted for using the completed contract method of
accounting. Sales are recognized upon launch at the contract price. Atlas
revenues approximated $273,000, $245,000 and $130,000 for the years ended
December 31, 1993, 1992 and 1991, respectively. Cost of sales is based upon
the estimated unit cost. General and administrative expenses and product
development costs are treated as contract costs to the extent allocable to a
firm contract, otherwise these costs are expensed as incurred.
All other programs and contracts are accounted for using the
percentage-of-completion method of accounting. Sales and earnings on fixed
price type and cost reimbursement contracts are recognized as costs are
incurred on each individual contract. The sales and earnings on these
contracts are based, in part, on estimates. These estimates are revised
periodically and adjustments to sales and earnings resulting from such
revisions are recorded on a cumulative basis in the period of revision.
Any anticipated losses on contracts or programs are charged to earnings when
identified. Such losses encompass all costs, including general and
administrative expenses, allocable to the contracts. Revenue arising from the
claims process is not recognized either as income or as an offset against a
potential loss until it can be reliably estimated and its realization is
probable.
General and Administrative Expenses
General and administrative expenses are allocated to contracts in process and
included in operating costs and expenses at the time of sales recognition with
the exception of certain Atlas contracts as discussed above. Total general
and administrative expenses incurred amounted to approximately $65,000 in
1993, $62,000 in 1992, and $60,000 in 1991.
Certain GD corporate general and administrative costs attributed to the
Group's operations are charged to the Group by GD. Total allocated corporate
expenses were approximately $12,000, $8,000 and $5,000 in 1993, 1992 and 1991,
respectively. No assurances can be given that such expenses would not vary
significantly if the Group had operated as an unaffiliated entity.
Research and Development Costs
Customer-sponsored research and development costs are accounted for as direct
costs.
Company-sponsored research and development costs, including bid and proposal
costs, amounted to approximately $9,000 in 1993, $12,000 in 1992 and $10,000 in
1991. Specifically reimbursable costs are allocated to contracts in process and
included in operating costs and expenses at time of sales recognition.
Contracts in Process
Contracts in process for the Atlas program are stated at cost incurred less
cost allocated to delivered units. All other contracts in process are stated
at cost incurred, plus estimated earnings, less progress payments. Incurred
costs consist of, among other things, production costs and related overhead,
which includes general and administrative expenses allocated to contracts.
Revenue which has not yet been billed is included in contracts in process.
Property, Plant and Equipment
The Group uses straight-line and accelerated methods of depreciation for its
depreciable assets.
Customer Deposits
Customer deposits represent primarily advance payments from Atlas program
customers. In the event of contract termination, a certain portion of the
deposit would be refunded to the customer in accordance with contract terms.
At December 31, 1993, customer deposits are net of $67,616 of notes receivable
from a related party received in connection with one specific contract in the
Atlas program. These notes are due 60 days prior to launch, which is currently
scheduled for the fourth quarter of 1994, and bear interest at rates ranging
from 6.5% to 7%.
Classification
Consistent with industry practice, contracts in process, customer deposits and
other assets and liabilities relating to long-term contracts and programs are
classified as current although a portion of these amounts is not expected to
be realized within one year.
2. ATLAS PROGRAM
During 1993, 1992 and 1991, the Group recognized $29,000, $53,000 and
$8,000, respectively, of losses on certain contracts in the Atlas program
representing primarily the costs to investigate launch failures, related
corrective actions, the estimated impact of launch delays on existing
contracts, and certain other increases in expected costs.
All of the aforementioned losses, as well as losses identified in
earlier periods, have been reflected in contract loss reserves in the
accompanying balance sheets.
The Group's investment in the Atlas program includes recorded amounts
of inventoried costs, customer deposits and liabilities relating to the
previously discussed losses. The Group's ability to recover its significant
investment in the Atlas program is dependent upon, among other things, the
vehicle demonstrating the level of reliability required by its customers. In
addition, the Group has a remaining firm commitment for the purchase of rocket
engines of approximately $300,000 and other firm commitments of approximately
$165,000 as of December 31, 1993.
3. ACCOUNTS RECEIVABLE
Accounts receivable consist of the following as of December 31:
1993 1992
Government: long-term contracts
or programs $13,172 $2,212
Commercial and other 18,255 2,684
------- ------
$31,427 $4,896
======= ======
Direct sales to the U.S. Government were approximately $387,000, $359,000, and
$243,000 in 1993, 1992 and 1991, respectively.
4. CONTRACTS IN PROCESS
Contracts in process consist of the following as of December 31:
1993 1992
Government contracts in process $ 194,969 $ 298,453
Commercial programs in process 1,385,138 1,289,883
---------- ----------
1,580,107 1,588,336
Less--Advances and progress payments (130,206) (235,800)
---------- ----------
$1,449,901 $1,352,536
========== ==========
Substantially all government contracts in process represent unbilled costs
incurred plus estimated earnings that will be billed to the customer upon the
completion of certain milestones.
Under the contractual arrangements by which progress payments are received,
the U.S. Government asserts that it has a security interest in the contracts
in process identified by the related contracts.
5. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment is stated at cost. The major classes of
property, plant and equipment are as follows:
1993 1992
Land and improvements $ 1,750 $ 1,750
Buildings and improvements 75,564 72,660
Machinery and equipment 80,299 76,500
-------- --------
157,613 150,910
Less--Accumulated depreciation
and amortization (76,844) (63,455)
-------- --------
$ 80,769 $ 87,455
======== ========
Certain plant facilities aggregating approximately 815 square feet are
provided by the U.S. Government at an annual lease cost of approximately $873.
6. ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES
Accounts payable and other current liabilities consist of the following at
December 31:
1993 1992
Accounts payable $57,358 $73,178
Accrued salaries and wages 17,654 12,982
Other current liabilities 19,656 6,943
------- -------
$94,668 $93,103
======= =======
7. INCOME TAXES
The Group is included in GD's consolidated federal income tax return. Under the
provisions of an informal tax sharing agreement with GD, the Group computes
federal income taxes to approximate a separate company basis. Taxes currently
payable or refundable based on this computation are reflected in the Group's
intercompany account balance with GD. Such intercompany balance is reflected in
Net Investment by General Dynamics Corporation in the accompanying combined
financial statements. Deferred taxes are shown separately in the accompanying
combined financial statements.
The benefit for federal income taxes is summarized as follows:
1993 1992 1991
Current $ (5,743) $(56,162) $(46,785)
Deferred (3,257) 39,250 41,839
---------- ---------- ----------
$ (9,000) $ (16,912) $ (4,946)
========== ========== ==========
Deferred federal income taxes result primarily from differences in accounting
for long-term contracts, certain accrued costs, contract loss reserves, and
depreciation for financial reporting and income tax reporting purposes.
Earnings under long-term contracts (other than Atlas, see Note 1) are recorded
either under the percentage-of-completion or completed contract methods of
accounting for income tax reporting purposes.
The provision for state and local income taxes, which is primarily allocable
to U.S. Government contracts, is included in operating costs and expenses.
8. COMMITMENTS AND CONTINGENCIES
Outsourcing of Information Technology Operations
In November 1991, GD signed an agreement with Computer Sciences
Corporation (CSC) for the sale of the information technology operations of GD's
Data Systems Division. Under a related agreement, CSC has the exclusive right to
provide information technology services to the Group for the next ten years. The
agreement provides for minimum aggregate payments to CSC during the first three
years of the service agreement and payments equal to 90 percent of the Company's
estimated annual usage thereafter.
Atlas Program Commitments
The Group has offered different types of launch insurance coverage to
its customers under certain Atlas contracts. This insurance coverage is
generally designed to protect the customer from incurring losses relating to
any one or a combination of the following:
- Launch failure
- Damage or other loss to the satellite during launch and flight
- Satellite performance for specified period subsequent to launch
Generally, the Group has sold this insurance to its customers at fixed
premium rates. However, the Group generally does not purchase the related
insurance until sometime thereafter. The future availability and cost of this
insurance is subject to market conditions which can vary greatly and
significantly impact the profitability of launch contracts. The Group has
committed to providing, in certain circumstances, significant amounts of
launch insurance coverage falling outside of the insurance contract currently
in place.
The Company has entered into debt and lease guarantees in connection with
certain contracts in the Atlas program. As of December 31, 1993, the Company was
contingently liable on guarantees and other arrangements aggregating up to a
maximum of approximately $104,000.
Rental Expense and Lease Commitments
Rent expense, substantially all of which is minimum rental expense, was
approximately $7,000, $7,000 and $10,000 in 1993, 1992 and 1991, respectively.
Rental commitments under existing operating leases at December 31, 1993, are
approximately $5,000 in 1994, $4,000 in 1995, $4,000 in 1996, $4,000 in 1997,
$4,000 in 1998 and $3,000 thereafter.
Legal
The Group is involved in various legal matters in the ordinary course
of its business activities. Management does not expect these matters to have
a significant impact on the Group's financial condition or results of its
operations.
9. RETIREMENT PLANS AND POSTRETIREMENT BENEFITS
The Group participates in five GD sponsored trustee noncontributory retirement
plans covering substantially all of its employees. Under certain of the
plans, retirement benefits are primarily a function of both the employee's
years of service and level of compensation. Under other plans, benefits are a
function only of years of service.
It is GD's policy to fund retirement plans to the maximum extent deductible
under existing federal income tax regulations. Such contributions are intended
to provide not only for benefits attributed to service to date but also for
those expected to be earned in the future.
Assumptions used in accounting for the plans are as follows as of December 31:
1993 1992 1991
Discount rates 7% 8% 8%
Varying rates of increase in
compensation levels based on age 4.5-10% 4.5-10% 4.5-10%
Expected long-term rate on assets 8% 8% 8%
The Group's net periodic pension cost calculated pursuant to Statement of
Financial Accounting Standards NO. 87, "Employers' Accounting for Pensions,"
included the following:
1993 1992 1991
Year ended December 31:
Service costs - benefits earned
during period $ 9,404 $ 9,096 $ 8,935
Interest cost on projected
benefit obligation 15,325 12,651 11,004
Actual return on plan assets (26,289) (11,863) (33,501)
Net amortization and deferral 11,309 (1,275) 23,243
------- ------- --------
$ 9,749 $ 8,609 $ 9,681
======== ======= ========
Increases in prior service cost resulting from plan amendments are amortized
on a straight-line basis over the average remaining service period of
employees expected to receive benefits under the plan. If the unrecognized
gain or loss at the beginning of the year exceeds 10 percent of the greater of
the projected benefit obligation or the market related value of plan assets,
the excess is amortized on a straight-line basis over the average remaining
service period of employees expected to receive benefits under the plan.
GD's stock is not included in the assets of any of the plans. At December 31,
1993, approximately 54 percent of the assets are invested in U.S. Government
securities, 34 percent in common stock and equivalents and 12 percent in
diversified corporate fixed income securities. In the event GD terminates
certain plans with assets that exceed accumulated benefits, the U.S. Government
may receive an equitable interest in those assets.
The following table sets forth the Group's share of the plans' funded status:
1993 1992
Actuarial present value of
benefit obligations:
Vested benefit obligation $(207,191) $(143,870)
========= =========
Accumulated benefit obligation (210,639) (146,899)
========= =========
Projected benefit obligation (246,417) (172,103)
Plans' assets at fair value 223,214 195,992
--------- ---------
Plans' assets (less than) in excess
of projected benefit obligation (23,203) 23,889
Unrecognized net gain (7,752) (35,542)
Prior service cost not yet recognized
in net periodic pension cost 33,191 15,219
Unrecognized net asset at January 1, 1986 (5,274) (5,910)
--------- ---------
Accrued pension cost recognized
in the combined balance sheets $ (3,038) $ (2,344)
========= =========
The Group provides certain health care and life insurance benefits for retired
employees. The cost of these benefits totaled $1,756, $1,450 and $750 in 1993,
1992 and 1991, respectively, based on the claims paid.
Effective January 1, 1993, the Group adopted FAS No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions", which requires the recognition
of postretirement benefits over the period in which active employees become
eligible for such benefits. Previously, the Group recognized these costs on the
cash basis. The Group has elected to implement this new standard by recognizing
the transition obligation prospectively over the average estimated remaining
service life of active employees. The remaining transition obligation at January
1, 1994, is approximately $9,000.
Item 7 (b)
UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial statements
have been prepared by Martin Marietta Corporation's (the "Corporation's")
management from its historical consolidated financial statements and from the
historical financial statements of General Dynamics Space Systems Group which
are included in this Current Report on Form 8-K. The unaudited pro forma
combined condensed statement of earnings reflect adjustments as if the
transaction had occurred on January 1, 1993. The unaudited pro forma combined
condensed balance sheet reflects adjustments as if the transaction had occurred
on December 31, 1993. See "Note 1 -- Basis of Presentation." The pro forma
adjustments described in the accompanying notes are based upon preliminary
estimates and certain assumptions that management of the Corporation believes
are reasonable in the circumstances.
The unaudited pro forma combined condensed financial statements are not
necessarily indicative of what the financial position or results of operations
actually would have been if the transaction had occurred on the applicable dates
indicated. Moreover, they are not intended to be indicative of future results
of operations or financial position. The unaudited pro forma combined condensed
financial statements should be read in conjunction with the historical
consolidated financial statements of the Corporation and the related notes
thereto which were included in the Corporation's Annual Report on Form 10-K for
the year ended December 31, 1993, which was filed with the Securities and
Exchange Commission on February 28, 1994. The unaudited pro forma combined
condensed financial statements should also be read in conjunction with the
historical financial statements of General Dynamics Space Systems Group which
are included in this Current Report on Form 8-K.
Unaudited Pro Forma Combined
Condensed Statement of Earnings
($ in millions, except per share data)
For the Year Ended December 31, 1993
Martin GD Space Pro Forma Pro Forma
Marietta Systems Adjustments Combined
Net sales $9,435.7 $529.0 2(d) ($149.0) $9,815.7
Cost of sales, other costs and expense 8,647.2 556.9 2(d) (149.0) 9,041.2
2(e) (13.9)
-------- ------- ------- --------
Earnings from operations 788.5 (27.9) 13.9 774.5
Other income and expenses, net 47.0 3.3 - 50.3
-------- ------- -------- --------
835.5 (24.6) 13.9 824.8
Interest expense on debt 110.2 - - 110.2
-------- ------- -------- --------
Earnings before taxes on income and
cumulative effect of accounting chan 725.3 (24.6) 13.9 714.6
Taxes on income 275.0 (9.0) 2(f) 5.3 271.3
-------- ------- -------- --------
Earnings before cumulative effect of
accounting changes 450.3 (15.6) 8.6 443.3
Cumulative effect of changes in accounting for
postretirement benefits other than pensions
and for post-employment benefits (429.4) - - (429.4)
-------- ------- -------- --------
Net Earnings (Loss) $20.9 ($15.6) $8.6 $13.9
======== ======= ======== ========
Net Earnings (Loss) Per Common Share
Assuming no dilution:
Before cumulative effect of accounting changes $4.25 N/A $4.18
Cumulative effect of accounting changes (4.51) N/A (4.51)
-------- ------- -------
($0.26) N/A ($0.33)
======== ======= =======
Assuming full dilution:
Before cumulative effect of accounting changes $3.80 N/A $3.75
Cumulative effect of accounting changes * N/A *
-------- ------- -------
* N/A *
======== ======= =======
*Anti-dilutive
Unaudited Pro Forma Combined
Condensed Balance Sheet
($ in millions)
As of December 31, 1993
Martin GD Space Pro Forma Pro Forma
Marietta Systems Adjustments Combined
ASSETS
Current Assets:
Cash and cash equivalents $373.1 $0.4 2(a) ($208.5) $164.6
2(b) (0.4)
Receivables 1,435.5 31.4 1,466.9
Inventories 358.8 1,449.9 2(c) (140.0) 1,668.7
Current deferred income taxes 238.6 - - 238.6
Other current assets 42.2 6.1 - 48.3
-------- -------- --------- --------
Total Current Assets 2,448.2 1,487.8 (348.9) 3,587.1
Other Noncurrent Assets 707.8 - - 707.8
Noncurrent Deferred Income Tax Benefit 206.1 - 2(c) 22.9 229.0
Property, Plant & Equipment, net 1,692.8 80.8 2(b) (42.8) 1,739.8
2(c) 9.0
Cost in Excess of Net Assets Acquired 1,914.9 - 2(c) 144.7 2,059.6
Other Intangibles 775.1 - - 775.1
-------- -------- --------- --------
$7,744.9 $1,568.6 ($215.1) $9,098.4
======== ======== ========= ========
LIABILITIES AND SHAREOWNERS' EQUITY
Current Liabilities
Accounts payable $536.8 $94.7 $ - $631.5
Customer deposits - 1,018.3 - 1,018.3
Other current liabilities 572.3 178.9 - 751.2
Salaries, benefits and payroll taxes 333.6 - - 333.6
Income taxes 48.9 - - 48.9
Current maturities of long-term debt 318.5 - - 318.5
-------- -------- --------- --------
Total Current Liabilities 1,810.1 1,291.9 - 3,102.0
Noncurrent Deferred Income Tax Liability - 38.2 2(b) (38.2) -
Long-term Debt 1,479.6 - - 1,479.6
Postretirement Benefits 740.6 - 2(c) 6.6 747.2
Other Noncurrent Liabilities 838.2 - 2(c) 55.0 893.2
Shareowners' Equity 2,876.4 238.5 2(c) (238.5) 2,876.4
-------- -------- --------- --------
$7,744.9 $1,568.6 ($215.1) $9,098.4
======== ======== ========= ========
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited pro forma combined condensed statement of
earnings presents the historical results of operations of the Corporation and
the General Dynamics Space Systems Group for the year ended December 31, 1993,
with pro forma adjustments as if the transaction had taken place on January 1,
1993. The unaudited pro forma combined condensed balance sheet presents the
historical balance sheets of the Corporation and the General Dynamics Space
Systems Group as of December 31, 1993, as if the transaction had been
consummated as of December 31, 1993, in a transaction accounted for as a
purchase in accordance with generally accepted accounting principles.
No reclassifications have been made to the historical financial statements
of the General Dynamics Space Systems Group in preparing the pro forma combined
condensed financial statements.
2. PRO FORMA ADJUSTMENTS
The following adjustments give pro forma effect to the transaction:
(a) To record the cash purchase consideration at closing in the
amount of $208.5 million.
(b) To reflect the excluded assets and liabilities at closing.
(c) To adjust the acquired assets and assumed liabilities to their
estimated fair values, including the recording of the cost in
excess of net assets acquired of $144.7 million.
(d) Adjustments for the elimination of the Titan/Centaur program
intercompany sales and cost of sales which would not have been
recognized if the transaction had occurred on January 1, 1993.
(e) Adjustments for: (i) items charged to General Dynamics Space
Systems Group which would or would not have been incurred if the
transaction had occurred on January 1, 1993; (ii) additional
depreciation expense on the step-up of certain fixed assets
to fair value over an estimated life of ten years; and (iii) the
amortization of excess costs over acquired net assets over an
estimated life of 20 years. Such depreciation and amortization
expenses are subject to possible adjustment resulting from
completion of the valuation analyses.
(f) The tax effect, using a 38% statutory rate, on the pro forma
adjustments.
The pro forma combined condensed statements of earnings do not reflect
the total cost savings or economies of scale that the Corporation's
management believes would have been achieved had the transaction occurred
on January 1, 1993.
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS -- Continued
3. COMPUTATION OF PRO FORMA EARNINGS PER SHARE
(Dollars in Millions, except share and per share data)
For the Year Ended
December 31, 1993
Pro Forma
Historical Combined
ASSUMING NO DILUTION:
Average number of common shares
outstanding (1) 95,346,614 95,346,614
========== ==========
Earnings before cumulative effect
of accounting changes $ 450.3 $ 443.3
Less: Preferred stock dividends 45.3 45.3
------ ------
Earnings before cumulative effect
of accounting changes applicable
to common stock 405.0 398.0
Cumulative effect of accounting changes ( 429.4) ( 429.4)
------ ------
Net loss applicable to common stock $( 24.4) $( 31.4)
====== ======
Net earnings (loss) per common share:
Before cumulative effect
of accounting changes $ 4.25 $ 4.18
Cumulative effect of
accounting changes (4.51) (4.51)
------ ------
$( .26) $( .33)
==== ====
(1) Excludes common stock equivalents since the
dilutive effect on earnings per share assuming
no dilution is less than 3%.
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS -- Continued
3. COMPUTATION OF PRO FORMA EARNINGS PER SHARE (Continued)
(Dollars in Millions, except share and per share data)
For the Year Ended
December 31, 1993
Pro Forma
Historical Combined
ASSUMING FULL DILUTION:
Average number of common shares
outstanding 95,346,614 95,346,614
Dilutive stock options -- based
on the treasury stock method
using the December 31 market
prices, if higher than average
market price 1,294,357 1,294,357
Assumed conversion of the Convertible
Preferred Stock from the date of
issuance 21,706,100 21,706,100
----------- -----------
118,347,071 118,347,071
=========== ===========
Earnings before cumulative effect
of accounting changes applicable
to common stock $ 405.0 $ 398.0
Add: Preferred stock dividends 45.3 45.3
------ ------
Earnings before cumulative effect
of accounting changes 450.3 443.3
Cumulative effect of accounting changes ( 429.4) ( 429.4)
------ ------
Net earnings $ 20.9 $ 13.9
====== ======
Net earnings per common share:
Before cumulative effect of
accounting changes $ 3.80 $ 3.75
Cumulative effect of accounting
changes * *
----- -----
$ * $ *
===== =====
* Anti-dilutive