1
EXHIBIT 99.1
FIAT SEAT BUSINESS
(an operating unit of Gilardini S.p.A.)
COMBINED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1993 AND SEPTEMBER 30, 1994,
TOGETHER WITH REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS
2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Gilardini S.p.A.:
We have audited the combined balance sheets of the Fiat Seat Business (an
operating unit of Gilardini S.p.A. as described in Note 1 to the financial
statements) at December 31, 1993 and September 30, 1994, and the related
combined statements of operations, changes in shareholders' investments and
cash flows for the years ended December 31, 1992 and 1993 and for the nine
months ended September 30, 1994. These financial statements are the
responsibility of the combined entity's management. Our responsibility is to
express an opinion on these 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
from 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 Fiat Seat
Business at December 31, 1993 and September 30, 1994 and the results of its
operations and its cash flows for the years ended December 31, 1992 and 1993
and for the nine months ended September 30, 1994, in conformity with United
States generally accepted accounting principles.
ARTHUR ANDERSEN & CO. s.a.s.
Turin, Italy
November 30, 1994
3
FIAT SEAT BUSINESS
(an operating unit of Gilardini S.p.A.)
COMBINED BALANCE SHEETS
AS OF DECEMBER 31, 1993 AND SEPTEMBER 30, 1994, (Note 1)
(In millions of Italian Lire)
Dec. 31, Sept. 30,
ASSETS 1993 1994
------ ---------- -----------
CURRENT ASSETS:
Cash 4,184 1,759
Financial receivables due from related parties (Note 4) 17,126 13,351
Trade receivables-
Related parties (Note 4) 214,529 210,874
Other customers (net of allowances for doubtful accounts of
Lire 2,017 and Lire 2,404 respectively) 12,003 40,758
Inventories (Note 5) 25,367 31,320
Other receivables and prepayments (Note 6) 16,559 23,643
------- -------
Total current assets 289,768 321,705
------- -------
PLANT, PROPERTY AND EQUIPMENT:
Land and buildings 27,261 35,946
Machinery and equipment 59,001 77,554
Construction in progress and advances 18,310 4,606
------- -------
104,572 118,106
Less- Accumulated depreciation (24,432) (32,513)
------- -------
Total plant, property and equipment, net 80,140 85,593
------- -------
OTHER ASSETS:
Investments in affiliates (Note 7) 7,531 7,333
Intangibles and deferred charges, net 1,465 823
------- -------
Total other assets 8,996 8,156
------- -------
Total assets 378,904 415,454
======= =======
The notes to the combined financial statements
form an integral part of these balance sheets.
4
FIAT SEAT BUSINESS
(an operating unit of Gilardini S.p.A.)
COMBINED BALANCE SHEETS
AS OF DECEMBER 31, 1993 AND SEPTEMBER 30, 1994, (Note 1)
(In millions of Italian Lire)
LIABILITIES AND Dec. 31, Sept. 30,
SHAREHOLDERS' INVESTMENTS 1993 1994
------------------------- ----------- -----------
CURRENT LIABILITIES:
Short-term borrowings (Note 8):
Related parties (Note 4) 108,904 90,215
Other - 94
Current portion of long-term debt (Note 9) 885 913
Trade payables-
Related parties (Note 4) 77,246 110,801
Other suppliers 125,815 142,390
Other payables and accrued expenses 21,809 29,737
------- -------
Total current liabilities 334,659 374,150
------- -------
LONG-TERM LIABILITIES:
Long-term debt (Note 9) 3,790 3,290
Reserve for employee termination indemnities 30,215 27,898
Deferred income taxes (Note 10) 1,833 1,756
------- -------
Total long-term liabilities 35,838 32,944
------- -------
Total liabilities 370,497 407,094
------- -------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' INVESTMENTS (Note 11):
Capital acccounts 56,122 48,880
Retained deficit (47,483) (39,314)
Cumulative translation adjustment (232) (1,206)
------- -------
Total shareholders' investments 8,407 8,360
------- -------
Total liabilities and shareholders' investments 378,904 415,454
======= =======
The notes to the combined financial statements
form an integral part of these balance sheets.
5
FIAT SEAT BUSINESS
(an operating unit of Gilardini S.p.A.)
COMBINED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED
DECEMBER 31, 1992 AND 1993 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1994 (Note 1)
(In millions of Italian Lire)
YEAR ENDED DEC. 31, NINE MONTHS
----------------------------- ENDED
1992 1993 SEPT. 30 1994
----------- ----------- -------------
Net sales and revenues (Notes 4 and 12) 655,371 571,761 524,075
Cost of sales (620,614) (571,446) (513,043)
Selling, administrative and other expenses (29,904) (35,388) (36,773)
-------- ------- -------
Operating income (loss) 4,853 (35,073) (25,741)
Equity in losses of affiliate - (413) (54)
Interest income (expense), net (6,944) (6,986) (6,783)
Foreign exchange gains (losses), net (911) (441) (1,067)
-------- ------- -------
Loss before provision for income taxes (3,002) (42,913) (33,645)
Provision for income taxes (Note 10) 50 103 77
-------- ------- -------
Net loss (2,952) (42,810) (33,568)
======== ======= =======
The notes to the combined financial statements form
an integral part of these statements of operations.
6
FIAT SEAT BUSINESS
(an operating unit of Gilardini S.p.A.)
COMBINED STATEMENTS OF CHANGES IN SHAREHOLDERS' INVESTMENTS
FOR THE YEARS ENDED DECEMBER 31, 1992 AND 1993 AND FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1994 (Note 1)
(In millions of Italian Lire)
Cumulative
Capital Retained Translation
Accounts Deficit Adjustment Total
-------- ------------ ---------- -----------
Balances as of December 31, 1991 4,000 (3,853) 147
Cancellation of shares in Sepi S.p.A. to
partially offset deficit (2,132) 2,132 - -
Issuance of shares by Sepi S.p.A. for
payment 2,132 - - 2,132
Issuance of shares by Sepi S.p.A. for
acquisition of Sicam S.p.A. (Note 3) 47,300 - - 47,300
Net loss for the year - (2,952) - (2,952)
------ -------- ------ -------
Balances as of December 31, 1992 51,300 (4,673) - 46,627
Investment in FSB Poland (Note 1) 4,822 - - 4,822
Net loss for the year - (42,810) - (42,810)
Foreign currency translation - - (232) (232)
------ -------- ------ -------
Balances as of December 31, 1993 56,122 (47,483) (232) 8,407
Investment in FSB Poland 1,492 - - 1,492
Cancellation of shares and additional
paid-in capital in Sepi S.p.A. to
partially offset deficit (41,737) 41,737 - -
Issuance of additional shares by Sepi
S.p.A. for payment 33,003 - - 33,003
Net loss for the period - (33,568) - (33,568)
Foreign currency translation - - (974) (974)
------ -------- ------ -------
Balances as of September 30, 1994 48,880 (39,314) (1,206) 8,360
====== ======== ====== =======
The notes to the combined financial statements
form an integral part of these statements.
7
FIAT SEAT BUSINESS
(an operating unit of Gilardini S.p.A.)
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1992 AND 1993 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994 (Note 1)
(In millions of Italian Lire)
YEAR ENDED DEC. 31, NINE MONTHS
---------------------------- ENDED
1992 1993 SEPT. 30 1994
----------- ----------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period (2,952) (42,810) (33,568)
Adjustments to reconcile net loss to net cash flow from
operating activities-
Depreciation and amortization 8,453 14,386 12,118
Net change in working capital items (26,859) 39,134 19,534
Net change in reserve for employee termination
indemnities (1,402) 1,722 (2,317)
Other, net 374 707 (226)
------- ------- -------
Net cash provided (used) by operating activities (22,386) 13,139 (4,459)
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment and
other assets (19,199) (39,953) (17,564)
Disposals of property, plant and equipment and
other assets 3,631 1,779 834
Net cash acquired with Sicam S.p.A. (Note 3) 1,825 - -
------- ------- -------
Net cash used by investing activities (13,743) (38,174) (16,730)
CASH FLOWS FROM FINANCING ACTIVITIES
Capital increases 2,132 4,822 34,495
(Increase) decrease in financial receivables 165 (9,872) 3,775
Increase (decrease) in short-term borrowings 35,939 34,545 (18,595)
Repayment of long-term debt - (2,994) (550)
------- ------- -------
Net cash flow provided by financing activities 38,236 26,501 19,125
------- ------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH
- 225 (361)
------- ------- -------
NET INCREASE (DECREASE) IN CASH 2,107 1,691 (2,425)
------- ------- -------
CASH - BEGINNING OF PERIOD 386 2,493 4,184
------- ------- -------
CASH - END OF PERIOD 2,493 4,184 1,759
======= ======= =======
The notes to the combined financial statements
form an integral part of these statements
8
FIAT SEAT BUSINESS
(an operating unit of Gilardini S.p.A.)
NOTES TO COMBINED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The Fiat Seat Business ("FSB") is an operating unit of Gilardini
S.p.A. ("Gilardini", a majority-owned subsidiary of Fiat S.p.A.
operating in the auto components sector) and represents the combined
operations of Gilardini's Italian subsidiaries Sepi S.p.A. and Sepi
Sud S.p.A., and of the Seat division of its Polish subsidiary,
Gilardini Poland sp.z.oo. This combined entity is referred to as
"FSB" or "the Companies" in the following notes to the financial
statements, while the Polish business alone is referred to as "FSB
Poland".
These combined financial statements include the results of operating
activities, transactions and assets and liabilities associated with
the business of FSB in Italy and Poland. They also include Sepi
S.p.A.'s 49% interest in Industrias Cousin Freres S.L., a Spanish
company also operating in the Seat business, which is accounted for
under the equity method of accounting.
The combined financial statements have been prepared in conformity
with accounting principles generally accepted in the United States and
reflect certain adjustments and reclassifications to the financial
statements prepared by the Companies for legal and tax purposes in
their respective countries.
The combined financial statements have been prepared on a historical
accounting basis and do not reflect adjustments which may arise
related to the transaction described in Note 15.
The Companies' fiscal year end is December 31. Accordingly, the
combined financial statements for the period ended September 30, 1994
are for a nine month interim period.
2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Principles of Combination
Transactions and balances among the Companies have been eliminated in
the combined financial statements, including unrealized intercompany
profits and losses, where appropriate.
9
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Foreign Currency Translation and Transactions
The accompanying financial statements are presented in Italian Lira.
The balance sheet of the Polish entity and of the Spanish affiliate
accounted for under the equity method are translated into Italian Lira
applying the exchange rates in effect at period-end and the income
statements are translated at the average exchange rates for the
period. Translation gains or losses are reflected in combined
shareholders' investments.
Balances related to transactions denominated in currencies other than
the local currency of the combined entities are translated at the
exchange rate in effect at the end of the period and exchange rate
gains or losses are included in the statements of operations.
Revenue Recognition
Revenue relating to the sale of products is recognized at the time
that products are shipped to the customer.
Receivables and payables
Receivables and payables are recorded at face value. Receivables are
written down to their expected realizable value by recording
allowances for doubtful accounts and for customer returns and
allowances when appropriate. Amounts related to retroactive
adjustment of the values of sales and purchases are recorded when such
adjustments are subject to reasonable estimation.
Inventories
Inventories are valued at the lower of cost, substantially determined
using the first-in, first-out method (FIFO), or market. The cost of
inventory includes direct materials, labor and indirect manufacturing
costs.
Obsolete and slow-moving or excess inventories are stated at their
estimated realizable value by recording a valuation allowance when
appropriate.
10
- 3 -
Plant, property and equipment,
depreciation and capital
investment grants
Plant, property and equipment are stated at purchase price or
production cost.
Depreciation is provided on a straight line basis, applying rates
which are considered representative of the estimated useful lives of
the related assets, as follows:
Years
-----
Industrial buildings 10 - 33
Machinery and equipment 4 - 10
Leasehold improvements Period of lease
Repairs and maintenance costs are charged to income in the year in
which they are incurred.
Government grants and customer payments towards capital expenditures
are recognized when their collectibility is reasonably assured and are
credited to income over the lives of the related assets.
Investments in affiliates
The investment in the affiliate Industrias Cousin Freres S.L. (Spain)
is accounted for under the equity method of accounting.
The investment in the Italian affiliate Cousin Italiana S.p.A. in
liquidazione is valued under the cost method at the lower of cost and
estimated net realizable value, since this is a non-operating company
in liquidation.
Income taxes
Income taxes are accounted for under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes".
Deferred income taxes are provided for differences between the
carrying value of assets and liabilities for financial reporting and
tax purposes and for the future tax benefits related to tax loss
carry-forwards. A valuation allowance is recorded on all deferred tax
assets for which realization is questionable.
11
- 4 -
Reserve for employee
termination indemnities
Italian law provides for an indemnity to be paid to all employees upon
termination of employment. The related reserves reflect the amounts
to be accrued according to the terms of the law and the labor
contracts by FSB's Italian entities. The law requires that the
provision for each period reflect both the indemnity accruing based
upon the compensation for that period, and the revaluation of prior
period accruals on the basis of an index which represents a
significant percentage of the annual increase in the Official Italian
Cost of Living Index. Provisions to the reserve in the years ended
December 31, 1993 and in the nine months ended September 30, 1994
amounted to Lire 5,637 million and Lire 6,312 million, respectively;
payments from the reserve in the same periods amounted to Lire 4,814
million and Lire 6,744 million, respectively.
In the opinion of the management, the amount of the reserve as of
December 31, 1993 and September 30, 1994, determined applying the
methodology required by Italian law described above, was higher than
that which would have been obtained applying the methodology set out
in Statement of Financial Accounting Standards No. 87 "Employers'
Accounting for Pensions". In these circumstances, the Emerging Issues
Task Force of the Financial Accounting Standards Board has indicated
that recording the Italian-basis liability is considered as being in
accordance with general accepted accounting principles.
Research and development
Research and development costs are charged to the statement of
operations in the accounting period in which they are incurred. Where
applicable, research-related revenue grants provided by the Italian
Government are credited to the statement of operations when their
collectibility is reasonably assured. In the year ended December 31,
1993 and in the nine months ended September 30, 1994 such costs
amounted to Lire 15,092 million and Lire 9,695 million, respectively.
Accruals for plant closure
and restructuring
Accruals are established for the costs incurred and expected to be
incurred related to plants closed and employees terminated prior to
the date of preparation of the financial statements.
12
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3. ACQUISITION OF SICAM S.p.A.
Effective June 1992, Sepi S.p.A. acquired a 100% interest in Sicam
S.p.A., ("Sicam"), which was an Italian subsidiary of the French group
Bertrand Faure S.A. and a supplier of Sepi, in exchange for the issue
of 166,660 new shares in Sepi S.p.A. with a par value of Lire 10
thousand per share.
This acquisition was accounted for as a purchase and, accordingly, the
results of Sicam have been included in the accompanying financial
statements since the date of acquisition. The purchase price has been
determined as Lire 47,300 million, representing the fair value at that
date attributed by the seller to the shares issued, and was allocated
to the purchased assets as follows (in millions of Italian Lire):
Property, plant and equipment 33,580
Net non-cash working capital 20,503
Other assets purchased and liabilities assumed, net (8,608)
------
45,475
Cash acquired 1,825
------
Total purchase price allocation 47,300
======
Assuming the acquisition had taken place effective January 1, 1992,
the consolidated pro-forma results of operation of the Company would
have been approximately as follows (unaudited; in millions of Italian
Lire):
Year ended
December 31, 1992
-----------------
Net sales 665,500
Net loss for the period (6,200)
=======
4. RELATED PARTY TRANSACTIONS
The Companies have significant transactions with other Fiat group
subsidiaries. In particular, they sell the majority of their finished
products to Fiat Auto S.p.A. and subsidiaries and receive certain
administrative and treasury management services from Gilardini and
from other Fiat group finance companies. The following tables
summarize the balances included in the consolidated financial
statements as of and for the periods ended December 31, 1992 and 1993
and September 30, 1994, which result from these transactions (in
millions of Italian Lire):
13
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Dec. 31, Dec. 31, Sept. 30,
1992 1993 1994
----------- ----------- -----------
Financial receivables
---------------------
Gilardini 6,815 10,534 -
Other 20 6,592 13,351
------- ------- -------
6,835 17,126 13,351
======= ======= =======
Trade receivables
-----------------
Fiat Auto 220,905 210,367 209,916
Other 7,846 4,162 958
------- ------- -------
228,751 214,529 210,874
======= ======= =======
Financial payables
------------------
Fiat Geva S.p.A. - 53,284 86,175
Sogespar S.p.A. 55,000 51,101 -
Other 18,568 4,519 4,040
------- ------- -------
73,568 108,904 90,215
======= ======= =======
Trade payables
--------------
Savafactoring S.p.A. 38,264 49,288 85,433
Fiat Auto 22,159 15,904 13,115
Comau S.p.A. - 4,955 7,475
Other 3,345 7,099 4,778
------- ------- -------
63,768 77,246 110,801
======= ======= =======
Net sales and revenues
----------------------
Fiat Auto 571,236 514,499 472,540
Others 43,846 18,083 1,543
------- ------- -------
615,082 532,582 474,083
======= ======= =======
Management believes that the related party transactions referred to
above are carried on in the normal course of business and on an arms'
length basis.
14
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5. INVENTORIES
Inventories as of December 31, 1993 and September 30, 1994 (net of
related write-down reserves of Lire 1,786 million and Lire 2,786
million, respectively) are comprised of the following (in millions of
Italian Lire):
Dec. 31, Sept. 30,
1993 1994
--------- ---------
Materials 16,066 21,794
Work in process 5,483 6,845
Finished products 3,818 2,681
------ ------
25,367 31,320
====== ======
6. OTHER RECEIVABLES AND
PREPAYMENTS
At December 31, 1993 and September 30, 1994, other receivables and
prepayments comprised the following (in millions of Italian Lire)
Dec. 31, Sep. 30,
1993 1994
--------- ---------
VAT recoverable 1,291 16,606
Due from tax authorities 3,956 3,632
Due from social security institutions 5,479 55
Other receivables and prepayments 5,833 3,350
------ ------
16,559 23,643
====== ======
7. INVESTMENTS IN AFFILIATES
Investments in affiliates at December 31, 1993 and September 30, 1994
and include the following (in millions of Italian Lire):
15
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Percent Dec. 31, Sept. 30,
Ownership 1993 1994
--------- -------- ---------
Industrias Cousin Freres S.L. (Spain) 49.99 7,321 7,133
Cousin Italiana S.p.A. in liquidazione 50.00 200 200
Others - 10 -
----- -----
7,531 7,333
===== =====
Industrias Cousin Freres S.L. is a manufacturer of car seating
components, controlled by the French group Bertrand Faure S.A.
Condensed financial statements of this affiliate as of and for the
periods ended December 31, 1993 and September 30, 1994 translated to
Italian Lire on the basis described in Note 2, are as follows (in
millions of Italian Lire):
Dec. 31, Sept. 30,
1993 1994
---------- ---------
Balance sheets
--------------
Property, plant and equipment and other assets 11,833 12,809
Current assets 14,687 14,423
Current liabilities (6,556) (7,659)
Long-term liabilities (6,127) (5,956)
------ ------
Shareholders' equity 13,837 13,617
====== ======
12 months 9 months
ended ended
Dec. 31, 1993 Sep. 30, 1994
------------- --------------
Statements of operations
------------------------
Net sales and revenues 28,018 25,582
Operating profit (loss) (459) 413
Interest and other income (expense), net (161) (366)
------ ------
Net income (loss) for the period (620) 47
====== ======
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8. SHORT-TERM BORROWINGS
Short-term borrowings consist of term loans and current accounts with
finance subsidiaries of Fiat S.p.A., which operate a centralized
treasury function for the Fiat Group. Interest rates on such
borrowings ranged from 6.6 percent to 14.1 percent in the year ended
December 31, 1993 and from 5.8 percent to 9.6 percent in the nine
months ended September 30, 1994.
9. LONG-TERM DEBT WITH
FINANCIAL INSTITUTIONS
Long-term debt with financial institutions at September 30, 1994
refers to the following loans (in millions of Lire):
Banca Nazionale del Lavoro, 1992-1998, original amount Lire 5,520
million, repayable in half-yearly installments, interest 4.75 per cent
per year 3,593
Italian Ministry of Industry, 1985-2000, original amount Lire 845
million, repayable in annual installments from 1990, interest 11.28 per
cent per year 610
-----
4,203
=====
The analysis of the outstanding balance by repayment date is as
follows (in millions of Lire):
1995 913
1996 961
1997 1,013
1998 1,068
After 1998 248
-----
4,203
Less- Current portion (913)
-----
3,290
=====
The above loans are collateralized by plant, property and equipment.
17
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10. INCOME TAXES
The taxable profits (losses) reported by Sepi S.p.A. and Sepi Sud
S.p.A. for Italian corporate income taxes ("IRPEG", for which the
standard rate is 36%) in each of the fiscal years open for inspection
by the tax authorities is as follows (in millions of Italian Lire):
Reported taxable
income (loss)
----------------------------- Year of expiration
Sepi Sud of tax loss
Tax year Sepi S.p.A. S.p.A. carry forwards
-------- ----------- ---------- --------------------
1989 2,349 - -
1990 (2,457) - 1995
1991 (2,699) (1,627) 1996
1992 (6,534) (6,435) 1997
1993 (39,855) (11,592) 1998
In addition, taxable income generated by certain of the Companies'
facilities located in Southern Italy is exempt from corporate (IRPEG)
and local (ILOR) income taxes for various future periods, in
accordance with the applicable Italian tax regulations.
Deferred income taxes represent temporary differences in the
recognition of certain items for income tax and financial reporting
purposes. The components of the net deferred income tax liability are
summarized as follows (in millions of Italian Lire):
Sept. 30, 1994 Dec. 31, 1993
-------------- -------------
Deferred income tax liabilities
Depreciation and basis differences 2,190 2,267
Other 402 402
------- -------
2,592 2,669
------- -------
Deferred income tax assets:
Tax loss carryforwards (37,827) (25,631)
Other (645) (882)
------- -------
(38,472) (26,513)
Valuation allowance 37,636 25,677
------- -------
(836) (836)
------- -------
Net deferred income tax liability 1,756 1,833
======= =======
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11. SHAREHOLDERS' INVESTMENTS
CAPITAL ACCOUNTS--
Capital accounts at September 30, 1994 include the following (in
millions of Lire):
Share capital of Sepi S.p.A. 34,485
Additional paid in capital recorded by Sepi S.p.A. 7,721
Capital invested in FSB Poland 6,314
------
48,880
======
The share capital of Sepi S.p.A.at September 30, 1994, consisted of
3,484,538 ordinary shares with a par value of Lire 10 thousand each,
held by the following shareholders:
No. of shares %
------------- ------
Gilardini S.p.A. 3,176,508 91.16
Bertrand Faure S.A. 43,348 1.24
Societe Industrielle Pankert "Sip" S.A. (a subsidiary of
Bertrand Faure S.A.) 264,682 7.60
--------- ------
3,484,538 100.00
========= ======
RETAINED DEFICIT OF SEPI S.P.A. AS OF
SEPTEMBER 30, 1994 AND SUBSEQUENT
CAPITAL CONTRIBUTIONS --
Because of the operating losses reported by Sepi S.p.A. in the period
ending September 30, 1994, the accumulated losses at that date
exceeded one third of share capital and required action under art.
2446 of the Italian Civil Code.
On November 28, 1994, Gilardini S.p.A. paid in additional capital of
Lire 9,000 million as a payment on account for the subscription of a
further 900,000 shares in the common stock of Sepi S.p.A.
12. SEGMENT INFORMATION
The Companies manufacture and sell car-seating systems to vehicle
manufacturers, represented primarily by Fiat Auto group companies
(Note 4) located in Italy.
19
- 12 -
13. CAPITAL EXPENDITURE GRANTS
AND SUBSIDIES RECEIVABLE
The combined entity Sepi Sud S.p.A. is engaged in the construction and
start-up of new manufacturing facilities at Melfi in Southern Italy
which are eligible for investment subsidies (in the form of capital
expenditure and revenue grants and low interest rate loans) available
under the terms of Italian law n. 64/1986 and specific agreements
between the Fiat Group and the Italian government, dated November 5,
1991.
In connection with this project, Sepi Sud has presented to the
authorities an investment plan for the period 1992-1995 totalling
approximately Lire 50 billion which, under existing regulations, would
qualify for cash grants of approximately Lire 10 billion and low
interest rate loans for approximately Lire 27 billion.
As of September 30, 1994, the expenditures incurred under this
investment plan included in construction in progress at that date,
approximated Lire 23 billion, which would qualify for cash grants of
approximately Lire 5 billion and low interest rate loans for
approximately Lire 13 billion. However, no amounts have been recorded
in these consolidated financial statements related to these items as
such amounts are considered as contingent assets and will not be
accounted for until the investment plan is approved by the authorities
and it is reasonably assured that government funding is available for
payment of the subsidies.
14. COMMITMENTS, GUARANTEES AND
CONTINGENT LIABILITIES
The combined entities are involved in various commercial disputes and
legal actions arising in the normal course of business; however, the
outcomes of these actions are not expected to have a material effect
on FSB's financial position or future results of operations.
As of September 30, 1994, the Companies had commitments for the
purchase of property, plant and equipment ordered by not yet delivered
for approximately Lire 5,200 million.
Outstanding commitments under operating leases at the same date were
not material.
The Companies have in process a survey, being carried out by
independent expert consultants, to verify their past and current
compliance with applicable environmental regulations and standards of
enforcement. Although the results of this survey are not yet known,
they are not expected to have a significant impact on the combined
financial position or future results of operations of the Companies.
20
- 13 -
15. AGREEMENT WITH LEAR SEATING
CORPORATION
On November 15, 1994, Gilardini entered into an agreement with Lear
Seating Corporation for the sale of FSB to Lear Seating Corporation.
21
EXHIBIT F
"Subsidiary" and "Subsidiary Stock" shall mean:
1) The following entities and all share interests of the Company therein,
respectively:
Number of
Shares
Owned by Percentage
Entity the Company Ownership
- ------ ----------- ----------
SEPI SUD S.p.A. 520,000 100%
Industrias Cousin Freres, S. L. 63,747 49.9%
2) The following entities and all share interest of the Seller therein,
respectively:
Number of
Shares
Owned by Percentage
Entity Seller Ownership
- ------ ----------- ----------
SEPI Poland Sp. Z o.o. 40 100%
Markol Otomotiv Yan Sanayi Ve 10,500,000 35%
Ticaret Anonim Sirketi
22
EXHIBIT G
Purchase Price Allocation
The 250 billion Italian Lira Purchase Price shall be allocated among
the Purchased Shares as follows:
1) The Markol Shares shall be valued at their paid-in capital value
of 13.125 billion Turkish Lira;
2) The SEPI Poland Shares shall be valued based upon the net asset
value of SEPI Poland as reflected on the Poland Closing Balance Sheet,
which is preliminarily estimated to be 81 billion Polish zloty; and
3) The remainder of the Purchase Price shall be allocated to the Company
Shares.