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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 8-K
-----------------------
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) August 17, 1995
COMMISSION FILE NUMBER: 1-11311
LEAR SEATING CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-3386776
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
21557 TELEGRAPH ROAD, SOUTHFIELD, MI 48034
(Address of principal executive offices) (zip code)
(810) 746-1500
(Registrant's telephone number, including area code)
NO CHANGE
(Former name or former address, if changes since last report)
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LEAR SEATING CORPORATION
ITEM 2: Acquisition of Assets
On August 17, 1995, Lear Seating Corporation (the "Company"), through
its wholly-owned subsidiary, AIHI Acquisition Corp. ("Acquisition Sub"),
acquired pursuant to a tender offer (the "Tender Offer Acquisition")
16,868,794 shares of Class A Common Stock, par value $.01 per share (the
"Shares"), of Automotive Industries Holding, Inc. ("AIHI"), representing
approximately 96% of the outstanding Shares of AIHI, at a purchase price of
$33.50 per Share net to the seller in cash. AIHI is a leading designer and
manufacturer of high quality interior trim systems and blow molded products
principally for North American and European car and light truck manufacturers.
The Tender Offer Acquisition occurred in accordance with an Agreement and Plan
of Merger (the "Merger Agreement") dated as of July 16, 1995, among the
Company, Acquisition Sub and AIHI pursuant to which the Company, through
Acquisition Sub, agreed to purchase all of the outstanding Shares of AIHI. On
August 22, 1995, pursuant to the terms of the Merger Agreement, Acquisition Sub
merged with and into AIHI, and AIHI became a wholly-owned subsidiary of the
Company (the "Merger"). In the Merger, each outstanding Share (other than (i)
Shares held by AIHI as treasury stock, (ii) Shares held by any subsidiary of
AIHI, (iii) Shares owned by the Company, Acquisition Sub or any subsidiary of
either of them and (iv) Shares held by stockholders, if any, who perfected
their appraisal rights under Delaware law) was converted into the right to
receive $33.50 in cash.
The aggregate purchase price for the acquisition of AIHI (the
"AIH Acquisition") was $926.4 million (including the assumption of $282.3
million of AIHI's existing indebtedness and payment of estimated fees and
expenses in connection with the AIH Acquisition). The aggregate purchase
price was determined based upon several factors, including evaluations of AIHI,
the market price of AIHI Shares, and negotiations with the management and
directors of AIHI. The financing for the Acquisition was provided under a
$1.5 billion revolving Credit Agreement (the "New Credit Agreement") dated as
of August 17, 1995 among the Company and a syndicate of financial institutions
for which Chemical Bank serves as administrative agent.
On July 7, 1995, AIHI, through an indirect wholly owned subsidiary,
acquired Plastifol GmbH & Co. KG and certain related entities ("Plastifol") for
a purchase price of approximately $60 million. The purchase price was funded
through borrowings under AIHI's then existing credit facility. The aggregate
purchase price was arrived at through arm's-length negotiations between the
parties.
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ITEM 7A: Financial Statements of Business being acquired
AUTOMOTIVE INDUSTRIES HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS AS OF
DECEMBER 31, 1994 AND JANUARY 1, 1994
TOGETHER WITH REPORT OF
INDEPENDENT PUBLIC ACCOUNTANTS
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Automotive Industries Holding, Inc.:
We have audited the accompanying consolidated balance sheets of Automotive
Industries Holding, Inc. (a Delaware corporation) and Subsidiaries as of
December 31, 1994 and January 1, 1994, and the related consolidated statements
of operations, shareholders' investment and cash flows for each of the three
years in the period ended December 31, 1994. 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 Automotive
Industries Holding, Inc. and Subsidiaries as of December 31, 1994 and January 1,
1994, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota,
January 26, 1995
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AUTOMOTIVE INDUSTRIES HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
DECEMBER 31, JANUARY 1,
1994 1994
------------ ----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................................... $ -- $ 1,156
Accounts receivable, net............................................ 107,106 53,314
Inventories......................................................... 42,117 19,338
Prepaid expenses.................................................... 2,357 666
Excess of cost over billings on uncompleted tooling projects........ 36,029 18,533
------------ ----------
Total current assets........................................... 187,609 93,007
------------ ----------
PROPERTY, PLANT AND EQUIPMENT, net.................................... 214,484 124,440
------------ ----------
OTHER ASSETS.......................................................... 16,932 --
INTANGIBLE ASSETS:
Goodwill............................................................ 155,468 124,331
Other............................................................... 7,113 6,194
------------ ----------
162,581 130,525
Less -- Accumulated amortization.................................... (14,189) (9,488)
------------ ----------
Intangible assets, net........................................... 148,392 121,037
------------ ----------
$567,417 $ 338,484
========== ========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Current maturities of long-term debt................................ $ 3,849 $ 1,862
Accounts payable.................................................... 63,654 18,039
Accrued compensation................................................ 11,871 7,086
Other accrued liabilities........................................... 8,946 6,982
Income taxes payable................................................ 7,897 1,996
------------ ----------
Total current liabilities...................................... 96,217 35,965
------------ ----------
LONG-TERM DEBT, net of current maturities............................. 216,920 93,829
DEFERRED INCOME TAXES................................................. 4,627 4,062
OTHER NONCURRENT LIABILITIES.......................................... 29,782 14,886
------------ ----------
SHAREHOLDERS' INVESTMENT:
Exchangeable preferred stock, par value $.01, redemption value $100:
Class A, Series A-2, 150 shares authorized, 68 and 69 issued
and outstanding................................................ 6,870 6,892
Class B, Series B-2, 75 shares authorized, 0 and 24 issued and
outstanding..................................................... -- 2,409
Common stock, par value $.01:
Class A, 100,000 shares authorized, 17,515 and 17,049 issued
and outstanding................................................ 175 170
Additional paid-in capital.......................................... 146,031 143,644
Retained earnings................................................... 69,301 36,627
Cumulative translation adjustment................................... (2,506) --
------------ ----------
Total shareholders' investment................................. 219,871 189,742
------------ ----------
$567,417 $ 338,484
========== ========
The accompanying notes are an integral part of these consolidated balance
sheets.
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AUTOMOTIVE INDUSTRIES HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
YEAR ENDED
------------------------------------------
DECEMBER 31, JANUARY 1, DECEMBER 26,
1994 1994 1992
------------ ---------- ------------
REVENUES.................................................. $512,760 $ 348,718 $272,396
Cost of sales........................................... 408,877 273,805 216,875
------------ ---------- ------------
GROSS PROFIT.............................................. 103,883 74,913 55,521
Selling, general and administrative expenses............ 35,296 24,330 16,671
Amortization expense.................................... 4,701 3,442 2,304
------------ ---------- ------------
OPERATING INCOME.......................................... 63,886 47,141 36,546
Interest expense, net................................... (9,318) (7,138) (9,456)
------------ ---------- ------------
INCOME BEFORE INCOME TAXES................................ 54,568 40,003 27,090
Provision for income taxes.............................. 21,825 15,984 10,962
------------ ---------- ------------
INCOME BEFORE PREFERRED DIVIDENDS AND EXTRAORDINARY
ITEM.................................................... 32,743 24,019 16,128
Non-cash dividends on Series A 9.5% Cumulative
redeemable exchangeable preferred stock.............. -- -- 988
------------ ---------- ------------
INCOME BEFORE EXTRAORDINARY ITEM.......................... 32,743 24,019 15,140
Extraordinary item -- loss on early extinguishment of
debt................................................. -- -- (8,259)
------------ ---------- ------------
NET INCOME................................................ $ 32,743 $ 24,019 $ 6,881
========== ======== ==========
Net income per common and common equivalent share:
Before extraordinary item............................... $1.77 $1.41 $ 1.11
Extraordinary item...................................... -- -- (0.61)
Total................................................ $1.77 $1.41 $ 0.50
Weighted average common and common equivalent shares
outstanding............................................. 18,578 17,052 13,620
The accompanying notes are an integral part of these consolidated financial
statements.
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AUTOMOTIVE INDUSTRIES HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
(IN THOUSANDS)
PREFERRED STOCK COMMON STOCK ADDITIONAL CUMULATIVE
------------------ ------------------- PAID-IN RETAINED TRANSLATION
CLASS A CLASS B CLASS A CLASS B CAPITAL EARNINGS ADJUSTMENT
-------- ------- -------- -------- ---------- -------- ----------
BALANCE, December 28, 1991........... $ -- $ -- $ 80 $ 6 $ 28,414 $ 5,788 $ --
Net income before dividends........ 7,869
Initial public offering of Class A
common stock -- 5,381 shares..... 54 68,783
Excercise of warrants -- 369
shares........................... 4 1,216
Dividends on Series A 9.5%
cumulative redeemable
exchangeable preferred stock..... (988)
Conversion premium on preferred
stock............................ (1,433)
-------- ------- -------- --- ---------- -------- ----------
BALANCE, December 26, 1992........... -- -- 138 6 96,980 12,669 --
Net income......................... 24,019
Issued in connection with
acquisition of ASAA
International, Inc.
Class A -- 69 shares........... 6,892
Class B -- 24 shares........... 2,409
Offering of Class A common stock --
1,900 shares..................... 19 43,994
Dividends on Class B preferred
stock............................ (61)
Sale of stock under Employee Stock
Discount Purchase Plan --
4 shares......................... 81
Exchange of Class B common stock
for Class A common stock --
648 shares....................... 6 (6)
Exercise of warrants -- 740
shares........................... 7 2,431
Exercise of options -- 9 shares.... 158
-------- ------- -------- --- ---------- -------- ----------
BALANCE, January 1, 1994............. 6,892 2,409 170 -- 143,644 36,627 --
Net income......................... 32,743
Dividends on Class B preferred
stock............................ (69)
Sale of stock under Employee Stock
Discount Purchase Plan -- 36
shares........................... 1 826
Cancellation and redemption of
preferred stock
Class A -- 1 share............. (22)
Class B -- 24 shares........... (2,409)
Exercise of warrants -- 420
shares........................... 4 1,380
Exercise of options -- 10 shares... 181
Change in cumulative translation
adjustment....................... (2,506)
-------- ------- -------- --- ---------- -------- ----------
BALANCE, December 31, 1994........... $6,870 $ -- $175 $ -- $146,031 $69,301 ($ 2,506)
======== ======== ======== ======== ========= ======== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
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AUTOMOTIVE INDUSTRIES HOLDING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
YEAR ENDED
------------------------------------------
DECEMBER 31, JANUARY 1, DECEMBER 26,
1994 1994 1992
------------ ---------- ------------
OPERATING ACTIVITIES:
Net income............................................. $ 32,743 $ 24,019 $ 6,881
Adjustments to reconcile net income to net cash
provided by operating activities --
Extraordinary loss on early extinguishment of
debt.............................................. -- -- 8,259
Non-cash preferred stock dividends.................. -- -- 988
Depreciation and amortization....................... 21,907 15,859 12,013
Deferred income taxes............................... 8,019 503 (2,392)
Changes in operating assets and liabilities:
Accounts receivable............................... (32,481) (313) (7,472)
Inventories....................................... (8,613) 77 964
Other current assets.............................. (13,942) (5,112) (2,722)
Accounts payable and accrued liabilities.......... 27,918 (7,559) 2,085
Income taxes payable.............................. 5,163 (4,860) 2,906
Other assets and liabilities...................... (18,198) (5,530) --
------------ ---------- ------------
Net cash provided by operating activities...... 22,516 17,084 21,510
------------ ---------- ------------
INVESTING ACTIVITIES:
Capital expenditures, net.............................. (40,461) (22,369) (8,927)
Acquisitions, net of cash acquired..................... (91,001) (42,404) (7,569)
Other, net............................................. (80) -- --
------------ ---------- ------------
Net cash used for investing activities......... (131,542) (64,773) (16,496)
------------ ---------- ------------
FINANCING ACTIVITIES:
Proceeds from stock offerings.......................... -- 44,013 68,837
Proceeds from exercise of warrants and options......... 181 2,596 1,220
Redemption of preferred stock.......................... (2,431) -- --
Dividends on preferred stock........................... (69) (61) --
Proceeds from sale of stock under Employee Stock
Discount Purchase Plan.............................. 827 81 --
Conversion premium on preferred stock.................. -- -- (1,433)
Extraordinary loss on early extinguishment of debt, net
of non-cash expenses of $5,714...................... -- -- (2,545)
Proceeds from borrowings............................... 433,683 104,840 53,812
Repayment of debt...................................... (323,417) (102,624) (126,189)
Other, net............................................. (910) -- --
------------ ---------- ------------
Net cash provided by (used for) financing
activities................................... 107,864 48,845 (6,298)
------------ ---------- ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS..... (1,162) 1,156 (1,284)
EFFECT OF EXCHANGE RATE ON CASH.......................... 6 -- --
CASH AND CASH EQUIVALENTS:
Beginning of period.................................... 1,156 -- 1,284
------------ ---------- ------------
End of period.......................................... $ -- $ 1,156 $ --
========== ========= ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for --
Interest............................................ $ 8,516 $ 8,041 $ 10,450
========== ========= ==========
Income taxes........................................ $ 11,515 $ 16,171 $ 5,109
========== ========= ==========
The accompanying notes are an integral part of these consolidated financial
statements.
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AUTOMOTIVE INDUSTRIES HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND JANUARY 1, 1994
1. ORGANIZATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Automotive
Industries Holding, Inc. (AIHI) and its wholly owned subsidiaries, Automotive
Industries Holding, Ltd. and Automotive Industries, Inc. (Automotive),
collectively referred to as the Company. Automotive and its subsidiaries design
and manufacture high-quality interior trim systems and components and blow
molded plastic components principally for the automotive industry. The Company
has twenty manufacturing facilities in North America located in Virginia,
Indiana, Kentucky, Michigan, Ohio, Texas, Wisconsin, and Toronto, Ontario, and
three manufacturing facilities in the United Kingdom.
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
AIHI and its subsidiaries. All material subsidiaries are wholly owned. All
material inter-company accounts and transactions have been eliminated in
consolidation.
Fiscal Year
The Company's fiscal year ends on the Saturday closest to December 31.
Fiscal years 1994 and 1992 consisted of fifty-two weeks while fiscal year 1993
consisted of fifty-three weeks.
New Accounting Pronouncement
Effective January 2, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities", which requires a change in accounting for certain
investments from cost to fair value. The adoption did not have a material
effect on the accompanying consolidated financial statements.
Cash and Cash Equivalents
Cash equivalents include overnight investment grade commercial paper with
an original maturity of three months or less. Cash equivalents are stated at
cost which approximates fair value.
Inventories
Inventories are valued at the lower of first-in, first-out (FIFO) cost or
market.
Inventories consisted of the following (in thousands):
DECEMBER 31, JANUARY 1,
1994 1994
------------ ----------
Raw materials........................................... $ 24,097 $ 11,163
Work in process......................................... 3,223 3,086
Finished goods.......................................... 14,797 5,089
------------ ----------
$ 42,117 $ 19,338
========== =======
Excess of Cost Over Billings on Uncompleted Tooling Projects
Excess of cost over billings on uncompleted tooling projects represents
costs incurred by the Company in the development of new tooling used in the
manufacture of the Company's products. The Company is
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AUTOMOTIVE INDUSTRIES HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 31, 1994 AND JANUARY 1, 1994
reimbursed by its customers for the cost of the tooling, at which time the
tooling becomes the property of the customer.
Property, Plant and Equipment
Additions to property, plant and equipment are stated at cost. For
financial reporting purposes, depreciation and amortization are provided using
the straight-line method over the following estimated useful lives:
Buildings and improvements...................................... 3 to 30 years
Machinery and equipment......................................... 3 to 10 years
Accelerated depreciation methods are used for tax purposes.
Property, plant and equipment consisted of the following (in thousands):
DECEMBER 31, JANUARY 1,
1994 1994
------------ ----------
Land.................................................................. $ 7,391 $ 2,226
Buildings and improvements............................................ 63,818 44,623
Machinery and equipment............................................... 166,390 104,712
Construction in progress.............................................. 26,900 7,015
------------ ----------
264,499 158,576
Less-Accumulated depreciation......................................... (50,015) (34,136)
------------ ----------
$214,484 $ 124,440
========== ========
Maintenance and repairs are charged to expense as incurred. Major repairs
and improvements are capitalized and depreciated. Property, plant and equipment
retired or disposed of are removed from the related accounts, and any residual
values are charged or credited to income. During the year ended December 31,
1994 the Company capitalized interest of $481,000 related to the construction in
progress.
Other Assets
Other assets consist principally of the Company's interest in Interiores
Automotrices Summa, S.A. de C.V. (IASSA) and capitalized design and engineering
costs that will be recovered from the Company's customers as manufactured
products are shipped.
Intangible Assets
Goodwill represents the excess of the purchase price over the fair value of
net assets acquired and is being amortized on a straight-line basis over 40
years. Other intangible assets include debt issuance costs which are amortized
over the terms of the related financing using the interest method and license
agreements related to the use of certain technologies which are being amortized
on a straight-line basis over the lives of the agreements.
Income Taxes
The Company follows Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes", which requires the use of the liability method in
accounting for income taxes. Deferred income taxes are recognized at currently
enacted income tax rates to reflect the tax effect of temporary differences
between the financial reporting and tax basis of assets and liabilities.
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AUTOMOTIVE INDUSTRIES HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 31, 1994 AND JANUARY 1, 1994
Foreign Currency Translation
Assets and liabilities of the Company's foreign operations are translated
using the year-end rates of exchange. Results of operations are translated using
the average rates prevailing throughout the period. Translation gains or losses
are accumulated as a separate component of shareholders' investment.
Net Income Per Common and Common Equivalent Share
Net income per common and common equivalent share amounts are computed by
dividing net income by the weighted average number of common and common
equivalent shares outstanding. Common equivalent shares include the number of
shares issuable upon conversion of the outstanding exchangeable promissory notes
and exchangeable preferred stock and upon the exercise of the outstanding
warrants and options less the number of shares that could have been purchased
with the proceeds from the exercise of the warrants and options based on the
average market value of the Class A Common Stock during the year. Net income,
for purposes of computing net income per common and common equivalent share,
includes interest expense, net of related income tax benefits, on the
exchangeable promissory notes and dividends on the exchangeable preferred stock.
Net income for purposes of computing net income per common and common equivalent
share was $32,935,000 for the year ended December 31, 1994, $24,098,000 for the
year ended January 1, 1994 and $6,881,000 for the year ended December 26, 1992.
Reclassifications
Certain amounts previously reported in the 1993 and 1992 consolidated
financial statements have been reclassified to conform to the 1994 presentation.
These reclassifications had no effect on previously reported net income or
shareholders' investment.
3. ACQUISITIONS
In February 1992, the Company acquired the operating assets and assumed the
liabilities of Plasta Fiber Industries, Inc. (PFI), a manufacturer of automotive
sun visors and die cut insulating products, for a cash purchase price of
approximately $5.0 million. In July 1992, the Company acquired the operating
assets and assumed the liabilities of Cellasto Plastics Industries, Inc.
(Cellasto), a manufacturer of interior trim injection molded products, for cash
consideration of approximately $2.4 million, plus the assumption of $4.0 million
in debt.
In May 1993, the Company acquired all of the outstanding common stock of
ASAA International, Inc. (ASAA), a manufacturer of interior trim components, for
cash consideration and assumption of debt of approximately $34.1 million plus
$9.3 million in exchangeable preferred stock. In addition, the former
shareholders of ASAA may receive contingent consideration of up to $20 million
if certain operating income levels are achieved through 1996. No contingent
consideration is payable through December 31, 1994. Based on historical and
forecasted operating income levels, the Company does not anticipate any amounts
will be payable under this agreement.
In July 1993, the Company acquired the operating assets and assumed the
liabilities of Fibercraft//DESCon Engineering, Inc. (Fibercraft), an advanced
design, engineering and program management company for interior trim systems and
vehicle platforms, for cash consideration and assumed indebtedness of
approximately $10 million plus the issuance of $4.75 million in promissory
notes, bearing interest at 6.5%, exchangeable into Class A Common Stock of the
Company at the lower of $34.10 per share or the fair value at the date of
exchange.
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AUTOMOTIVE INDUSTRIES HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 31, 1994 AND JANUARY 1, 1994
In May 1994, the Company acquired all of the outstanding capital stock of
John Cotton, Ltd. (Cotton). Cotton, headquartered in Manchester, England,
manufactures interior trim components for the European automotive industry. The
acquisition consideration for the capital stock of Cotton included approximately
$34.0 million in cash and assumption of indebtedness.
In November 1994, the Company acquired certain operating assets and assumed
certain liabilities of the Gulfstream Division of O'Sullivan Corporation
(Gulfstream). Gulfstream manufactures interior trim components for the North
American automotive industry and has five manufacturing facilities in Ohio and
Virginia. Consideration for the acquisition of Gulfstream was approximately
$50.0 million in cash and was financed with the proceeds from borrowings under
the 8.89% Senior Notes and the Company's Revolving Credit Facility.
The acquisitions described above have been accounted for as purchases, and,
accordingly, the assets acquired and liabilities assumed have been recorded at
fair market value as of the date of the acquisition. The assets and liabilities
of Cotton and Gulfstream have been recorded based on preliminary estimates of
fair market value as of the dates of acquisition. The Company does not believe
the final allocation of the purchase price will be materially different than the
preliminary allocations. The purchase price in excess of the fair value of the
net assets acquired is included in goodwill in the accompanying consolidated
balance sheets. Results of operations from the acquired companies have been
included in the accompanying consolidated financial statements from the
respective dates of acquisition. The pro forma effects of the acquisitions of
PFI, Cellasto and Fibercraft for the periods prior to the acquisitions are not
material to the Company's financial position or results of operations. Following
are unaudited pro forma results of consolidated operations for the years ended
December 31, 1994 and January 1, 1994 as if the acquisitions of ASAA, Cotton and
Gulfstream were completed at the beginning of the respective periods.
The unaudited pro forma financial information does not purport to represent
what the Company's results of operations would actually have been if such
transactions had occurred at such date or to project the Company's future
results of operations (in thousands, except per share data):
PRO FORMA RESULTS FOR THE YEAR ENDED
--------------------------------------
DECEMBER 31, 1994 JANUARY 1, 1994
----------------- ---------------
(UNAUDITED)
Revenues...................................... $ 686,831 $ 550,778
============= ===========
Operating income.............................. $ 70,924 $ 58,199
============= ===========
Net income.................................... $ 33,874 $ 26,612
============= ===========
Weighted average common and common equivalent
shares outstanding.......................... 18,578 17,440
Net income per common and common equivalent
share....................................... $1.83 $1.49
In January 1994, the Company completed its acquisition of an initial forty
percent interest in IASSA. IASSA, headquartered in Mexico City, is the largest
interior trim supplier in Mexico with fiscal 1993 revenues of approximately $35
million. The total cost of the investment was approximately $9.2 million. The
investment is being accounted for using the equity method whereby the Company
records its proportionate share of income and losses and other increases and
decreases in the net assets of IASSA.
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AUTOMOTIVE INDUSTRIES HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 31, 1994 AND JANUARY 1, 1994
4. SHAREHOLDERS' INVESTMENT
Public Offerings of Class A Common Stock
In May 1992, the Company completed an initial public offering (the IPO),
including shares issued by the Company pursuant to the underwriters'
over-allotment option, of 5,380,784 shares of its Class A Common Stock at $14.00
per share resulting in net proceeds to the Company of approximately $68.8
million after deducting underwriting discounts of $5.2 million and expenses of
$1.3 million. In addition, the Company realized proceeds of $1.2 million from
the exercise of warrants. The net proceeds of the IPO and exercise of warrants
were used to retire the Company's outstanding senior indebtedness.
In August 1993, the Company completed an offering of an additional
1,900,000 shares of its Class A Common Stock at $24.50 per share. Net proceeds
from this offering of approximately $44 million, after deducting underwriting
discounts of $2.2 million and expenses of $352,000, and net proceeds of
approximately $2.3 million from the exercise of certain warrants were used to
retire the $28.7 million 9.5% junior subordinated notes and borrowings
outstanding under the Company's revolving credit facility.
Preferred Stock
In May 1992, AIHI exercised its option to convert its Series A 9.5%
Cumulative Redeemable Exchangeable Preferred Stock with a principal amount of
$28.7 million into junior subordinated notes. The cash payment to effect this
conversion, $1,433,000, was charged against additional paid-in capital. The
Company's Restated Certificate of Incorporation authorizes 10,000,000 shares of
preferred stock, none of which have been issued.
In connection with the Company's acquisition of ASAA described in Note 3,
ASAA issued 68,910 shares of its Class A, Series A-2 Exchangeable Preferred
Stock (Series A-2 Preferred Stock) and 24,090 shares of its Class B, Series B-2
Exchangeable Preferred Stock (Series B-2 Preferred Stock) with a total face
amount of $9.3 million. The Series B-2 Preferred Stock, which was redeemed by
the Company in September 1994 for a cash payment of approximately $2.4 million,
had a stated dividend rate of 4% per annum. The Series A-2 Preferred Stock has
no stated dividend rate. The Series A-2 Preferred Stock is exchangeable, at the
option of the holder, into the Company's Class A Common Stock at the lower of
$28.88 per share or the fair value at the date of exchange. In addition, the
Company may, at its option under certain circumstances, redeem the Series A-2
Preferred Stock at its face amount.
Common Stock
The holder of each share of Class A Common Stock outstanding is entitled to
one vote per share. Class B Common Stock is nonvoting. During the year ended
January 1, 1994, the holder of the Class B Common Stock exercised its option to
convert the Class B Common Stock to Class A Common Stock.
Warrants to Purchase Common Stock of AIHI
In connection with the IPO, certain holders exercised warrants to acquire
369,216 shares of Class A Common Stock. Total proceeds to the Company from the
warrant exercise were approximately $1.2 million. In connection with the August
1993 offering, certain holders exercised warrants to acquire 707,000 shares of
Class A Common Stock. Total proceeds to the Company from the warrant exercise
were approximately $2.3 million. In December 1993, a holder exercised warrants
to acquire 32,845 shares of Class A Common Stock resulting in proceeds to the
Company of $108,000. In October 1994, a holder exercised warrants to acquire
420,000 shares of Class A Common Stock. The exercise price of the warrants,
$1,384,000, was paid by the holder through a reduction in the 8.75% Senior Note
due to the holder.
12
14
AUTOMOTIVE INDUSTRIES HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 31, 1994 AND JANUARY 1, 1994
As of December 31, 1994, the Company had warrants outstanding to acquire up
to 633,497 shares of Class A Common Stock at an exercise price of $3.30 per
share. The warrants can be exercised anytime before their expiration in October
2001.
Stock Option Plan
In May 1992, the Company's board of directors adopted an employee stock
option plan (the Plan) that provides for the issuance of options to acquire up
to 790,000 shares of the Company's Class A Common Stock. The option exercise
price must be at least 100% of the fair value of Class A Common Stock at the
time of the issuance of the option. Non-qualified stock options granted under
the Plan generally vest ratably over 5 years and expire 10 years from the date
of grant.
Information regarding the Plan is as follows:
SHARES UNDER EXERCISE
OPTION PRICES
------------ --------------
Outstanding at December 28, 1991.................. -- --
Granted......................................... 184,600 $ 16.875
------------ --------------
Outstanding at December 26, 1992.................. 184,600 16.875
Granted......................................... 294,500 15.875-24.500
Exercised....................................... (9,360) 16.875
Terminated...................................... (10,700) 16.875
------------ --------------
Outstanding at January 1, 1994.................... 459,040 15.875-24.500
Granted......................................... 154,500 27.750
Exercised....................................... (10,320) 15.875-24.500
Terminated...................................... (39,280) 15.875-27.750
------------ --------------
Outstanding at December 31, 1994.................. 563,940 $16.000-27.750
========== =============
As of December 31, 1994, 122,646 options are fully vested and exercisable.
Employee Stock Discount Purchase Plan
In May 1993, the Company's shareholders approved the adoption of the
Employee Stock Discount Purchase Plan (ESDPP) which provides for the sale of up
to 500,000 shares of Class A Common Stock to eligible employees. Under the terms
of the ESDPP, eligible employees can authorize payroll deductions of up to
$5,200 per year for the purchase of Class A Common Stock. The Class A Common
Stock is purchased at 85% of the market price, as defined. During the years
ended December 31, 1994 and January 1, 1994, 36,077 and 3,854 shares of Class A
Common Stock were issued pursuant to the ESDPP, respectively.
13
15
AUTOMOTIVE INDUSTRIES HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 31, 1994 AND JANUARY 1, 1994
5. DEBT
Debt consisted of the following (in thousands):
DECEMBER 31, JANUARY 1,
1994 1994
------------ ----------
Senior Notes, due December 2004, unsecured, principal payable in
installments beginning in 1998, interest at 8.89%, payable
semi-annually....................................................... $ 40,000 $ --
Senior Notes, due April 2000, unsecured, principal payable in
installments beginning in 1998, interest at 8.75%, payable
semi-annually....................................................... 39,508 40,892
Borrowings under Revolving Credit Facility, $20,005 at prime (8.5% at
December 31, 1994 and 6% at January 1, 1994), and $83,590 at
LIBOR-based borrowings (6.625% at December 31, 1994 and 4.125% at
January 1, 1994).................................................... 103,595 36,500
Borrowings under United Kingdom revolving credit facility, interest at
bank base rate plus 1.95% (8.2% at December 31, 1994)............... 8,509 --
Promissory Notes, due July 2003, unsecured, interest at 6.5% payable
semi-annually, exchangeable into Class A Common Stock............... 4,750 4,750
Other, including obligations under capital leases and Industrial
Revenue Bonds....................................................... 24,407 13,549
------------ ----------
220,769 95,691
Less- Current maturities.............................................. (3,849) (1,862)
------------ ----------
$216,920 $ 93,829
========== =======
Future maturities of long-term debt are as follows as of December 31, 1994
(in thousands):
1995............................................................... $ 3,849
1996............................................................... 6,898
1997............................................................... 2,320
1998............................................................... 54,187
1999............................................................... 99,723
Thereafter......................................................... 53,792
--------
$220,769
========
The Company has an unsecured Revolving Credit Facility which expires in
December 1999 and provides for borrowings up to $175 million at an interest rate
of LIBOR plus .625% or prime. On December 2, 1997, the lower of $80 million or
the amount outstanding under the Revolving Credit Facility converts to a term
loan, payable in eight equal quarterly installments. The remaining $95 million
of availability remains a Revolving Credit Facility.
As of December 31, 1994, approximately $16.4 million of the amounts
outstanding under the Revolving Credit Facility is in British pound sterling
denominated borrowings.
The Company also has an unsecured Revolving Credit Facility in the United
Kingdom. This facility expires in April 1995. As of December 31, 1994, $8.5
million is outstanding under this Revolving Credit Facility.
The debt agreements described above contain various restrictive covenants
which, among other matters, require the Company to maintain minimum consolidated
net worth levels, as defined, and certain financial ratios. The agreements also
limit additional indebtedness, capital expenditures and cash dividends. The
Company was in compliance with all debt covenants as of December 31, 1994.
14
16
AUTOMOTIVE INDUSTRIES HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 31, 1994 AND JANUARY 1, 1994
6. INCOME TAXES
The income tax provision consisted of the following (in thousands):
YEAR ENDED
------------------------------------------
DECEMBER 31, JANUARY 1, DECEMBER 26,
1994 1994 1992
------------ ---------- ------------
Currently payable.......................................... $ 13,806 $ 15,481 $ 13,354
Deferred................................................... 8,019 503 (2,392)
------------ ---------- ------------
$ 21,825 $ 15,984 $ 10,962
========== ======= ==========
The deferred provision (benefit) consisted of the following (in thousands):
YEAR ENDED
------------------------------------------
DECEMBER 31, JANUARY 1, DECEMBER 26
1994 1994 1992
------------ ---------- ------------
Depreciation lives and methods............................. $4,181 $ (663) $ (94)
Reserves and accruals deductible in different periods for
tax reporting purposes................................... 3,838 1,166 (2,298)
------------ ---------- ------------
$8,019 $ 503 $ (2,392)
========== ======= ==========
A reconciliation of income taxes at the statutory rates to the provision
for income taxes is as follows (in thousands):
YEAR ENDED
------------------------------------------
DECEMBER 31, JANUARY 1, DECEMBER 26,
1994 1994 1992
------------ ---------- ------------
Taxes at statutory rates.................... $ 19,099 $ 14,001 $ 9,211
State income taxes, net of federal
benefit................................... 2,093 1,430 948
Effect of permanent differences primarily
goodwill amortization and other........... 633 553 803
------------ ---------- ------------
Provision for income taxes.................. $ 21,825 $ 15,984 $ 10,962
========== ======= ==========
A summary of deferred tax liabilities (assets) is as follows (in
thousands):
DECEMBER 31, JANUARY 1,
1994 1994
------------ ----------
Depreciation lives and methods.......................... $ 13,341 $ 11,669
Reserves and accruals deductible in different periods
for tax reporting purposes............................ (8,714) (7,607)
------------ ----------
Net deferred tax liability.............................. $ 4,627 $ 4,062
========== =======
7. MAJOR CUSTOMERS
The Company sells directly to each of the three major domestic automobile
manufacturers, to certain of the Japanese manufacturers operating in North
America and to certain automobile manufacturers operating in
15
17
AUTOMOTIVE INDUSTRIES HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 31, 1994 AND JANUARY 1, 1994
Europe. Following is a summary of customers that accounted for more than 10% of
consolidated revenues for each of the three years in the period ended December
31, 1994:
YEAR ENDED
--------------------------------------------
DECEMBER 31, JANUARY 1, DECEMBER 26,
1994 1994 1992
------------ ---------- ------------
Ford..................................... 45% 49% 50%
General Motors........................... 17% 17% 18%
Chrysler................................. 12% 13% 15%
Receivables from these three customers represented 62% of total accounts
receivable at December 31, 1994, and 75% of total accounts receivable at January
1, 1994.
8. RELATED-PARTY TRANSACTIONS
The Company paid underwriting fees to a shareholder of approximately $1.3
million in connection with the IPO, and $2.1 million in connection with the
August 1993 offering.
The Company paid Hidden Creek Industries, an affiliate of the Company,
$600,000 during the year ended December 31, 1994 and $300,000 during the year
ended January 1, 1994 for acquisition related services.
9. EMPLOYEE BENEFIT PLANS
The Company sponsored three defined benefit pension plans in 1994 and two
defined benefit pension plans in 1993 and 1992 which cover employees at certain
manufacturing facilities. The Company's policy is to make annual contributions
to the plan to fund the normal cost and the unfunded frozen initial liability
over 20 years.
Net pension expense consisted of the following (in thousands):
YEAR ENDED
------------------------------------------
DECEMBER 31, JANUARY 1, DECEMBER 26,
1994 1994 1992
------------ ---------- ------------
Service cost-benefits earned during the period............. $ 720 $ 550 $ 382
Interest cost on projected benefit obligation.............. 244 201 157
Return on plan assets...................................... 363 (278) (263)
Net amortization and deferral.............................. (510) 141 128
------------ ---------- ------------
Net pension expense........................................ $ 817 $ 614 $ 404
========== ======= ==========
16
18
AUTOMOTIVE INDUSTRIES HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 31, 1994 AND JANUARY 1, 1994
The funded status of the Company's plans as of October 1 is as follows (in
thousands):
1994 1993
------ ------
Actuarial present value of:
Vested benefit obligation................................................. $1,596 $2,438
====== ======
Accumulated benefit obligation............................................ $2,244 $3,345
====== ======
Projected benefit obligation.............................................. $3,108 $4,438
Plan assets at fair value................................................... 3,104 2,988
------ ------
Projected benefit obligation in excess of plan assets..................... 4 1,450
Unrecognized net gain (loss).............................................. 547 (853)
Prior service cost........................................................ (376) (405)
Adjustment to recognize minimum liability................................. -- 707
------ ------
Accrued pension costs....................................................... $ 175 $ 899
====== ======
Accumulated and projected benefit obligation is determined using an assumed
discount rate of 7.25% for hourly plan and 7.50% for the salaried plan in 1994
and 5.75% for both plans in 1993. The averaged assumed long-term rate of return
on assets is 7.75% in 1994 and 1993. Plan assets consist principally of
investments in annuity contracts.
10. COMMITMENTS AND CONTINGENCIES
Leases
The Company leases office and warehouse space under operating lease
agreements which require the Company to pay maintenance, insurance, taxes and
other expenses in addition to annual rentals. Future annual rental commitments
under these leases are as follows (in thousands):
YEAR AMOUNT
-------------------------------------------------------------------- -------
1995................................................................ $ 4,467
1996................................................................ 3,174
1997................................................................ 2,407
1998................................................................ 1,449
1999................................................................ 1,380
Thereafter.......................................................... 2,193
-------
$15,070
=======
Rent expense under the leases was $4,550,000 for the year ended December
31, 1994, $2,526,000 for the year ended January 1, 1994 and $448,000 for the
year ended December 26, 1992.
Contingencies
In the normal course of business, the Company becomes involved with
potential litigation and other matters which could lead to contingent
obligations. Management believes it has provided adequate reserves for any such
contingencies and that they will not have any material effect on the Company's
financial position or results of operations.
17
19
AUTOMOTIVE INDUSTRIES HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 31, 1994 AND JANUARY 1, 1994
11. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a condensed summary of actual quarterly results of
operations for 1994 and 1993 (in thousands except per share amounts):
NET INCOME
PER COMMON
AND COMMON
GROSS OPERATING EQUIVALENT
REVENUES PROFIT INCOME NET INCOME SHARE
-------- -------- --------- ---------- ----------
1994:
First............................. $107,736 $ 21,633 $12,921 $ 6,755 $ 0.37
Second............................ 129,021 28,962 18,822 10,080 0.55
Third............................. 122,188 23,345 12,810 6,352 0.35
Fourth............................ 153,815 29,943 19,333 9,556 0.52
-------- -------- --------- ---------- ----------
$512,760 $103,883 $63,886 $ 32,743 $ 1.77
======== ======== ======= ======== ==========
1993:
First............................. $ 78,835 $ 15,468 $10,240 $ 4,880 $ 0.31
Second............................ 92,060 20,498 13,823 6,994 0.43
Third............................. 82,828 17,397 10,119 4,972 0.28
Fourth............................ 94,995 21,550 12,959 7,173 0.39
-------- -------- --------- ---------- ----------
$348,718 $ 74,913 $47,141 $ 24,019 $ 1.41
======== ======== ======= ======== ==========
The sum of the quarterly net income per common and common equivalent share
for the year ended December 31, 1994 does not equal the total for the year due
to the effect of outstanding options, warrants, exchangeable preferred stock and
exchangeable promissory notes.
________________________________________________________________________________
EVENTS SUBSEQUENT TO DATE OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS.
On July 7, 1995, the Company completed the acquisition of (i) all of the
outstanding limited partnership interests of Plastifol GmbH & Co. KG, (ii) all
of the outstanding partnership interests of Manfred Rothe KG and (iii) all of
the outstanding shares of Plastifol Verwaltungs GmbH (the entities referred
to in clauses (i), (ii) and (iii) are referred to herein collectively as
"Plastifol"). Plastifol, headquartered near Munich, Germany, supplies interior
trim systems and components to the European automotive industry. Plastifol had
1994 revenues of approximately $75 million. Total consideration for the
partnership interests and stock of Plastifol was approximately $60 million and
was financed with borrowings under the Company's revolving credit facility.
On August 17, 1995, Lear Seating Corporation, through its wholly owned
subsidiary, AIHI Acquisition Corp. ("Acquisition Sub"), acquired (the "Tender
Offer Acquisition") 16,928,204 shares of Class A Common Stock, par value $.01
per share, (the "Shares") of AIHI representing approximately 96.4% of the
outstanding shares of AIHI, at a purchase price of $33.50 per share. The Tender
Offer Acquisition occurred in accordance with an Agreement and Plan of Merger
(the "Merger Agreement") dated as of July 16, 1995, among the Company,
Acquisition Sub and AIHI whereby the Company, through Acquisition Sub, agreed
to purchase all of the outstanding Shares of AIHI. On August 22, 1995, pursuant
to the terms of the Merger Agreement, the Company acquired the remaining shares
of AIHI pursuant to a second-step merger of Acquisition Sub with and into AIHI
at a purchase price of $33.50 per share, and AIHI became a direct wholly-owned
subsidiary of the Company.
18
20
AUTOMOTIVE INDUSTRIES HOLDING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED
(Amounts in Thousands Except per Share Amounts - Unaudited)
July 1, 1995 July 2, 1994
------------ ------------
Revenues $188,376 $129,021
Cost of sales 150,358 100,059
------------ ------------
Gross profit 38,018 28,962
Selling, general and administrative expenses 12,124 8,988
Amortization expense 1,294 1,152
------------ ------------
Operating income 24,600 18,822
Interest expense, net 4,414 1,911
------------ ------------
Income before income taxes 20,186 16,911
Provision for income taxes 8,034 6,831
------------ ------------
Net income $12,152 $10,080
============ ============
Net income available to common shareholders $12,197 $10,128
============ ============
Net income per common and
common equivalent share $0.66 $0.55
============ ============
Weighted average number of
common and common equivalent
shares outstanding 18,600 18,569
============ ============
The accompanying notes to condensed consolidated financial statements
are an integral part of these statements.
21
AUTOMOTIVE INDUSTRIES HOLDING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED
(Amounts in Thousands Except per Share Amounts - Unaudited)
July 1, 1995 July 2, 1994
------------ ------------
Revenues $377,086 $236,757
Cost of sales 304,099 186,162
-------- --------
Gross profit 72,987 50,595
Selling, general and administrative expenses 24,930 16,628
Amortization expense 2,614 2,224
-------- --------
Operating income 45,443 31,743
Interest expense, net 8,953 3,577
-------- --------
Income before income taxes 36,490 28,166
Provision for income taxes 14,556 11,331
-------- --------
Net income $ 21,934 $ 16,835
======== ========
Net income available to
common shareholders $ 22,024 $ 16,931
======== ========
Income per common and common
equivalent share $1.18 $0.91
======== ========
Weighted average number of
common and common equivalent
shares outstanding 18,640 18,569
======== ========
The accompanying notes to condensed consolidated financial statements
are an integral part of these statements.
22
AUTOMOTIVE INDUSTRIES HOLDING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
Assets July 1, 1995 Dec. 31, 1994
------------------------------------------------- ------------ -------------
(unaudited)
Current assets:
Cash and cash equivalents $ -- $ --
Accounts receivable 123,223 107,106
Inventories 41,971 42,117
Other current assets 40,597 38,386
-------- --------
Total current assets 205,791 187,609
Property, plant and equipment, net 233,448 214,484
Other assets 25,683 16,932
Goodwill and other intangible assets, net 146,424 148,392
-------- --------
$611,346 $567,417
======== ========
Liabilities and Shareholders' Investment
--------------------------------------------------------
Current liabilities:
Current maturities of long-term debt $ 3,909 $ 3,849
Accounts payable 75,371 63,654
Accrued liabilities 23,698 20,817
Income taxes payable 14,649 7,897
--------- ---------
Total current liabilities 117,627 96,217
Long-term debt, net of current maturities 221,066 216,920
Deferred income taxes 4,437 4,627
Other noncurrent liabilities 26,889 29,782
Shareholders' investment:
Exchangeable preferred stock 6,861 6,870
Common stock 175 175
Additional paid-in capital 146,586 146,031
Retained earnings 91,235 69,301
Cumulative translation adjustment (3,530) (2,506)
-------- --------
Total shareholders' investment 241,327 219,871
-------- --------
$611,346 $567,417
======== ========
The accompanying notes to condensed consolidated financial statements
are an integral part of these statements.
-4-
23
AUTOMOTIVE INDUSTRIES HOLDING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
(Amounts in Thousands - Unaudited)
July 1, 1995 July 2, 1994
------------ ------------
OPERATING ACTIVITIES:
Net income $21,934 $16,835
Adjustments to reconcile net income to
net cash provided by operating activities -
Depreciation and amortization 14,966 10,135
Changes in other operating items (10,302) (17,151)
--------- ---------
Net cash provided by operating activities 26,598 9,819
--------- ---------
INVESTING ACTIVITIES:
Capital expenditures, net (30,792) (18,617)
Acquisitions, net of cash acquired -- (42,658)
Changes in other assets, net (2,927) (46)
--------- ---------
Net cash used in investing activities (33,719) (61,321)
--------- ---------
FINANCING ACTIVITIES:
Proceeds from borrowings 225,412 180,241
Repayment of debt (218,821) (130,273)
Other, net 547 378
--------- ---------
Net cash provided by financing activities 7,138 50,346
--------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS 17 (1,156)
EFFECT OF EXCHANGE RATE ON CASH (17) --
CASH AND CASH EQUIVALENTS:
Beginning of period -- 1,156
--------- ---------
End of period $0 $0
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for --
Interest $8,125 $3,466
========= =========
Income taxes $7,804 $5,324
========= =========
The accompanying notes to condensed consolidated financial statements
are an integral part of these statements.
-5-
24
AUTOMOTIVE INDUSTRIES HOLDING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The condensed consolidated financial statements have been prepared by
Automotive Industries Holding, Inc. (the "Company"), without audit,
pursuant to the rules and regulations of the Securities and Exchange
Commission. The information furnished in the condensed consolidated
financial statements includes normal recurring adjustments and reflects
all adjustments which are, in the opinion of management, necessary for
a fair presentation of such financial statements. Certain information
and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations.
Although the Company believes that the disclosures are adequate to make
the information presented not misleading, it is suggested that these
condensed consolidated financial statements be read in conjunction with
the audited financial statements and the notes thereto included in the
Company's 1994 Annual Report to Shareholders.
Revenues and operating results for the three months and six months
ended July 1, 1995 are not necessarily indicative of the results to be
expected for the full year.
2. Inventories, which are valued at the lower of first-in, first-out
(FIFO) cost or market, consisted of the following (in thousands):
July 1, 1995 December 31, 1994
------------ -----------------
Raw materials $23,391 $24,097
Work-in-process 6,370 3,223
Finished goods 12,210 14,797
------- -------
$41,971 $42,117
======= =======
3. In December 1994, the Company acquired certain operating assets and
assumed certain liabilities of the Gulfstream Division of O'Sullivan
Corporation (Gulfstream). Gulfstream manufactures interior trim
components for the North American automotive industry and has five
manufacturing facilities in Ohio and Virginia. Consideration for the
acquisition of Gulfstream was approximately $50.0 million in cash and
was financed with the proceeds from borrowings under the 8.89% Senior
Notes and the Company's Revolving Credit Facility.
In May 1994, the Company acquired all of the outstanding capital stock
of John Cotton (Colne) Limited (Cotton). Cotton, headquartered in
Manchester, England manufactures interior trim components for the
European automotive industry. The acquisition consideration for the
capital stock of Cotton included approximately $34.0 million in cash
and assumption of $10.6 million of indebtedness. The cash acquisition
consideration was financed through the Company's existing revolving
line of credit.
The acquisitions of Cotton and Gulfstream have been accounted for as
purchases and, accordingly, their assets acquired and liabilities
assumed have been recorded at fair market value as of the dates of the
acquisitions. The assets and liabilities of Cotton and Gulfstream have
been recorded based on preliminary estimates of fair market value as of
the dates of acquisition. The Company does not believe the final
allocation of the purchase price will be materially different than the
preliminary allocations. The purchase price in excess of the fair
value of the net assets acquired is included in goodwill in the
accompanying condensed consolidated balance sheets. Results of
operations from the acquired companies have been
-6-
25
included in the accompanying condensed consolidated financial statements from
the respective dates of acquisition. Following are unaudited pro forma results
of consolidated operations for the six months ended July 2, 1994 as if the
acquisitions of Cotton and Gulfstream were completed at the beginning of the
period. The unaudited pro forma financial information does not purport to
represent what the Company's results of operations would actually have been if
such transactions had occurred at such date (in thousands, except per share
data):
Six Months
Ended
July 2, 1994
------------
Revenues $343,045
=============
Operating income $36,151
=============
Net income available to
common shareholders $18,024
=============
Weighted average common and
common equivalent shares
outstanding 18,569
=============
Net income per common and
common equivalent share $0.97
=============
4. In February 1995, the Company borrowed an additional $25 million
pursuant to its 8.89% Senior Notes. Proceeds from the borrowings were used
to retire borrowings outstanding under the Company's revolving credit
facility.
5. On July 7, 1995, the Company completed the acquisition of (i) all of
the outstanding limited partnership interests of Plastifol GmbH & Co. KG,
(ii) all of the outstanding partnership interests of Manfred Rothe KG and
(iii) all of the outstanding shares of Plastifol Verwaltungs GmbH (the
entities referred to in clauses (i), (ii) and (iii) are referred to herein
collectively as "Plastifol"). Plastifol, headquartered near Munich,
Germany, supplies interior trim systems and componets to the European
automotive industry. Plastifol had 1994 revenues of approximately $75
million. Total consideration for the partnership interests and stock of
Plastifol was approximately $60 million and was financed with borrowings
under the Company's revolving credit facility.
On July 16, 1995, the Company, Lear Seating Corporation ("Lear") and
AIHI Acquisition Corp., a wholly owned subsidiary of Lear ("Purchaser"),
entered into an Agreement and Plan of Merger (the "Merger Agreement"),
pursuant to which (i) Purchaser was to commence a tender offer to purchase,
for cash, all of the outstanding shares of the Company's Class A Common
Stock at a price of $33.50 per share (the "Offer") and (ii) following the
completion of the Offer and the satisfaction of certain conditions,
Purchaser was to merge with and into the Company (the "Merger"). The
Company's board of directors (the "Board") unanimously approved the Offer
and the Merger and determined that the terms of the Offer and the Merger are
fair to, and in the best interests of, the
26
shareholders of the Company. Accordingly, the Board recommended that
shareholders of the Company accept the Offer and tender all of their shares
pursuant thereto.
On July 20, 1995, Purchaser commenced the Offer and the Company filed with the
Securities and Exchange Commission a Schedule 14D-9, which contained certain
information regarding the Offer and the Merger, including the approval and
recommendation of the Board and information considered by the Board prior to
approving and recommending the Offer and Merger. The Offer is conditioned
upon, among other things, (i) there being validly tendered prior to the
expiration of the Offer and not withdrawn that number of shares which, together
with the shares then owned by Lear, represents at least a majority of the
shares outstanding on a fully diluted basis; (ii) Lear having received the
financing necessary to consummate the Offer and the Merger from Chemical Bank
and Chemical Securities Inc. and (iii) other customary conditions, including
antitrust approval. The Offer will expire on August 16, 1995, unless it is
extended pursuant to the Merger Agreement.
27
PLASTIFOL GmbH & CO. KG
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1994
Table of Contents
1. Independent Auditors' report
2. Balance sheet of December 31, 1994
3. Profit and loss statement for the period from January 1, 1994 to December
31, 1994
4. Cash flow statement for the year ended December 31, 1994
5. Voluntary notes to the financial statements
6. Significant differences between German and United States Generally Accepted
Accounting Principles
19
28
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Plastifol GmbH & Co. KG
We have audited the accompanying balance sheet of Plastifol GmbH & Co. KG as of
31 December 1994 and the related profit and loss account and cash flow
statement for the year then ended. The financial statements are the
responsibility of the company's management. Our responsibility is to express
an opinion on the financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
in the United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Plastifol GmbH &
Co. KG as of 31 December 1994 and the results of their operations and their
cash flow for the year then ended in conformity with generally accepted
accounting principles in Germany.
Accounting principles generally accepted in Germany vary in certain significant
respects from accounting principles generally accepted in the United States. A
narrative description of certain significant differences, as applicable to
Plastifol GmbH & Co. KG, is included as an annex to the financial statements.
Munich, Germany KPMG Deutsche Treuhand-Gesellschaft
August 23, 1995 Aktiengesellschaft
Wirtschaftsprufungsgesellschaft
20
29
PLASTIFOL GmbH & CO. KG
BALANCE SHEET AS AT DECEMBER 31, 1994
ASSETS
as of December 31, 1994
----------------------------------
DM DM
A. FIXED ASSETS
I. PROPERTY, PLANT AND EQUIPMENT
1. Technical equipment, machinery 2,681,328,00
2. Other equipment 962,737,00
3. Advances paid and construction in
progress 207,736,16 3,851,801,16
II. FINANCIAL ASSETS
Investments 1,055,000,00
B. CURRENT ASSETS
I. INVENTORY
1. Raw materials and supplies 3,371,702,74
2. Work-in-process 178,764,00
3. Finished goods 1,611,760,00
4. Advances paid 1,546,190,40
-------------
6,708,417,14
LESS
Advances received 0,00 6,708,417,14
-------------
II. ACCOUNTS RECEIVABLE AND OTHER
ASSETS
1. Trade receivables 13,684,157,37
2. Accounts receivable due from
affiliates 3,522,264,29
3. Other assets 122,487,56 17,328,909,22
-------------
III. CASH AT BANK AND IN HAND 19,098,599,43
--------------
48,042,726,95
==============
EQUITY AND LIABILITIES
Allocation
Balance at Adjustments for Withdrawals of net Balance at
January 1, 1994 tax audit(1) reclassification income December 31, 1994
--------------- ----------- ---------------- ------------- -----------------
DM DM DM DM DM
A. EQUITY
I. Unlimited partners
--no shareholding--
II. Limited partners
Capital accounts 12,196,688,00 0,00 0,00 103,312,00 12,300,000,00
Current accounts 7,359,458,57 737,374,88 -8,248,873,19 17,351,708,49 17,199,668,75
------------- ---------- ------------- -------------- --------------
19,556,146,57 737,374,88 -8,248,873,19 17,455,020,49 29,499,668,75
============= ========== ============= ============= ==============
B. SPECIAL RESERVES WITH
EQUITY PORTION
Reserve acc. to Sect. 34,
Para. 5 EStR 725,534,00
C. ACCRUALS
1. Accrual for pensions and
similar obligations 347,256,00
2. Tax accruals 2,010,000,00
3. Other accruals 3,471,100,00 5,828,356,00
------------
D. LIABILITIES
1. Trade payables 7,257,836,60
2. Liabilities due to affiliates 410,905,33
3. Other liabilities 4,320,426,27 11,989,168,20
------------ -------------
18,543,058,20
-------------
48,042,726,95
=============
(1) adjusted without affecting the profit and loss statement.
21
30
PLASTIFOL GmbH & CO. KG
PROFIT AND LOSS STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1994
1994
----------------------------------
DM DM
1. Turnover 106.038.627.56
2. Increase/decrease in finished goods and work-in-process 200.196.10
3. Other operating income 4.879.293.84
4. Material costs
a) Cost of raw materials, supplies and merchandise 47.238.760.06
b) Cost of purchased services 27.516.70 47.266.276.76
-------------
5. Personnel expenses
a) Wages and salaries 22.096.840.14
b) Social security, pensions and other benefit costs 3.959.803.95
--thereof for pensions - DM 74.773.00-- 26.056.644.09
-------------
6. Depreciation 4.525.518.92
--thereof accelerated depreciation DM 2.114.127.00--
7. Other operating expenses 13.294.113.22
--thereof addition to special reserve with equity portion DM 0.00
8. Other interest and similar income 1.139.099.85
9. Interest and similar expenses 86.474.85
10. Expense due to transfer to losses 226.436.95
-------------
Results from ordinary activities 20.801.752.56
11. Income taxes 3.204.685.50
12. Other taxes 142.046.57
-------------
13. Net profit for the year (1) 17.455.020.49
=============
(1) before interest relating to current accounts
22
31
PLASTIFOL GmbH & CO. KG
CASH FLOW STATEMENT FOR THE YEAR ENDED DECEMER 31, 1994
KDM
I. CASH FLOWS FROM OPERATIONS
1. Net profit 17,455
2. Depreciation + 4,526
3. Decrease in special reserves with equity portion - 5,063
-------
16,918
4. Increase in inventory - 2,058
5. Increase in trade receivables - 4,224
6. Increase in trade payables + 2,646
7. Increase in short-term accruals + 1,765
-------
15,047
8. Increase in other assets - 182
9. Decrease in other liabilities - 6,822
-------
Cash-flow from operations 8,043
-------
II. CASH FLOWS FROM INVESTMENTS
1. Investments in fixed assets - 4,753
2. Disposals of fixed assets + 41
-------
- 4,712
-------
III. CASH FLOWS FROM FINANCING ACTIVITIES
Withdrawals/Paid to the limited partners - 7,512
-------
KDM
Cash at beginning of period 23.280
Cash at end of period 19.099 - 4.181
------ =======
23
32
VOLUNTARY NOTES TO THE 1994 FINANCIAL STATEMENTS
-- NOT REQUIRED BY GERMAN LAW FOR THE COMPANY --
General
-------
The Company is a limited partnership under German law and is registered with
the German Commercial Register of the District Court of Munich/Germany. The
personally liable (unlimited) partner is Plastifol Verwaltungs GmbH,
Ebersberg/Germany. The unlimited partner does not participate in the
Company's equity. Management and representation of the Company is performed by
the unlimited partner. General managers of the Company were Mr. Michael Kobe
and (since July 1, 1994) Ms. Franziska Schedlbauer.
Accounting policies
-------------------
The financial statements have been prepared in accordance with Sections
238 - 256 of the German Commercial Code (HGB); with respect to the
classification, Section 266 and Section 275 have been applied as deemed
appropriate. As the Company operates as a partnership, such provisions of the
HGB provide that footnotes to the financial statement are optional. The
Company has provided certain footnote information for the benefit of the
reader.
No changes have been made to the accounting policies compared to the prior
year. Valuation is based mainly on taxation principles within the scope allowed
in commercial law.
Fixed assets have been stated at acquisition or manufacturing costs, less
scheduled depreciation and accelerated depreciation according to the provisions
of the law for the Promotion of the Economic Development of the German Border
Areas ("Zonenrandforderungsgesetz", ZonenRFG) and subsidies.
Raw materials and supplies have been stated at acquisition costs; other
inventory are valued using the inverse method (i.e. sales price less profit and
selling expenses): the reduction made is unchanged compared to the previous
year. Financial assets have been stated at acquisition costs.
Receivables are stated at nominal value. The general credit risk has been
covered by a general bad debt provision. The reserve provided according to
ZonenRFG was released in 1994.
All risks are adequately covered by accruals.
Liabilities are valued at the amount to be repaid.
Receivables and liabilities stated in foreign currency are translated into the
respective local currency at the buying or selling rate on the day they are
incurred. If translation at the rates applicable on the balance sheet date
lowers the receivables or increases the liabilities in DM, these rates are
used.
24
33
NOTES TO THE BALANCE SHEET AND INCOME STATEMENT
A. MOVEMENT OF FIXED ASSETS AND INVESTMENT
<Caption
net book value Additions/re- Investment net book value
classifications Subsidy Disposals Depreciation Accelerated
01.01.1994 depreciation 31.12.1994
----------------------------------------------------------------------------------------
KDM KDM KDM KDM KDM KDM KDM
Technical equipment, machinery 2.522 4.353 429 33 1.802 1.930 2.681
Other equipment 1.143 662 41 8 609 184 963
Advances paid and construction in progress 0 208 0 0 0 0 208
TANGIBLE FIXED ASSETS 3.665 5.223 470 41 2.411 2.114 3.852
shares in subsidiaries 1.055 0 0 0 0 0 1.055
INVESTMENTS 1.055 0 0 0 0 0 1.055
------ ----- --- -- ----- ----- -----
FIXED ASSETS 4.720 5.223 470 41 2.411 2.114 4.907
====== ===== === == ===== ===== =====
A.II SHARES IN SUBSIDIARIES
Shareholding Equity
-------------------------
% KDM
Plastifol Beteiligungen GmbH, Ebersberg 100.00 1.000
AVB GmbH, Ebersberg 55.00 100
B.III CASH AT BANK AND IN HAND
KDM
Petty cash 12
cash in postal bank account 1
cash at banks 19.086
------
19.099
======
C.3 OTHER ACCRUALS
KDM
Bonuses 1.094
outstanding supplier's charge 842
vacation not yet taken 428
occupational insurance 395
severance payment 400
Other 312
------
3,471
======
D. LIABILITIES
All liabilities are due within one year
25
34
1. TURNOVER KDM
Germany 100.879
Abroad 5.911
-------
106.790
LESS
Discounts -747
rebates -4
-------
106.039
=======
3. OTHER OPERATING INCOME
KDM
Release of special reserve with equity portion
(Sect 3 ZonenRFG) 4.594
Income from the sale of fixed assets 236
Other 49
-------
4.879
=======
7. OTHER OPERATING EXPENSES
KDM
Rent expenses 2.659
Operating expenses 5.981
Administrative expenses 1.604
Selling expenses 3.050
-------
13.294
=======
AVERAGE NUMBERS OF EMPLOYEES
Commercial employees 32
Technical employees 32
Industrial workers 410
-------
474
=======
26
35
ANNEX TO THE 1994 FINANCIAL STATEMENTS
SIGNIFICANT DIFFERENCES BETWEEN GERMAN AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AS APPLICABLE
TO THE COMPANY
The Company's Financial Statements have been prepared in accordance
with the German Commercial Code (Handelsgesetzbuch) which represents generally
accepted accounting principles in Germany ("German GAAP"). German GAAP differs
in certain significant respects from United States generally accepted
accounting principles ("U.S. GAAP"). The Company has not prepared a
reconciliation between its financial position and results of operations
calculated under German GAAP to the comparable figures under U.S. GAAP.
However, the following represent the significant differences that would affect
the determination of the net income (loss) and stockholders' equity of the
Company for the period for which the financial statements have been presented
herein:
FIXED TANGIBLE ASSETS
The Company depreciates through the income statement fixed tangible assets
(plant and equipment) based upon depreciation rates prescribed by German tax
law. Under U.S. GAAP tangible fixed assets are depreciated either on a
straight-line or accelerated basis through the income statement over their
useful life. If the Company was depreciating its fixed tangible assets on a
straight-line basis over their expected useful lives the net book value of
tangible assets at December 31, 1994 would be substantially higher.
PENSIONS
The Company provides for pension costs and similar obligations including post
retirement benefits based upon actuarial studies using the entry age methods as
defined in the German tax code. U.S. GAAP is more prescriptive particularly as
to the use of actuarial assumptions and requires that a different actuarial
method (the projected unit credit method) be used.
TRANSLATION OF FOREIGN CURRENCIES
Under German GAAP, receivables and liabilities stated in foreign currency are
translated into the respective local currency at the buying or selling rate on
the day they are incurred. If translation at the rates applicable on the
balance sheet date lowers the receivables or increases the liabilities in DM,
these rates are used. Under U.S. GAAP, assets and liabilities denominated in a
foreign currency are recorded at period end rates wth any resulting gain or loss
recognized in the income statement.
27
36
DEFERRED TAXES
Under German GAAP, deferred tax assets are generally recognized only for
exceptional tax depreciation not included in the financial statements and for
consolidation adjustments. Under U.S. GAAP, deferred taxes are provided for
all temporary differences, including net operating loss carryforwards where it
is more likely than not that the tax benefit will be realised in future
periods, based upon enacted tax rates. The Company has no deferred tax assets
or liabilities in their financial statements under German GAAP.
RECORDING OF PROVISIONS, RESERVES, VALUATION ADJUSTMENTS
Since under German tax law a company's financial statements prepared for
commercial purpose are also the basis of its tax accounts, tax considerations
influence their preparation. Companies therefore may tend to apply more
conservative valuation methods in their financial statements than they might
otherwise report. German GAAP permits the recognition of accruals or
provisions for uncertain liabilities and loss contingencies. The amount of
such accruals or provisions represents the anticipated expense to the Company.
Under U.S. GAAP, an accrual for loss contingency is recorded by a charge to
income if it is both probable that an asset has been impaired or a liability
has been incurred and the minimum amount of loss can be reasonably estimated.
Unspecified liability reserves for future losses, costs or risks do not meet the
condition for accrual under U.S. GAAP. Application of German GAAP may lead to
higher accrual balances and reserves for possible risks than allowed under U.S.
GAAP. However, under German GAAP, provisions, reserves and valuation
adjustments previously established may also be released in subsequent periods
with a resultant increase in reported profits in the period released.
PRESENTATION OF STATEMENT OF OPERATIONS
A statement of operations under German GAAP is normally prepared in the
expenditure format, rather than the cost of sales format as required by US
GAAP.
28
37
ITEM 7B: PRO FORMA FINANCIAL DATA
The following pro forma unaudited consolidated statements of operations of
the Company were prepared to illustrate the estimated effects of (i) the AIH
Acquisition (including the refinancing of certain debt of AIH pursuant to the
New Credit Agreement), (ii) the acquisition by the Company in 1994 of the
primary automotive seat systems supplier to Fiat S.p.a. (the "FSB
Acquisition"), (iii) certain acquisitions completed by AIH prior to the
acquisition of AIH by the Company, (iv) the initial public offering of Common
Stock by the Company (the "IPO") and the application of the net proceeds
therefrom in April 1994, (v) the refinancing of the Company's 14% Subordinated
Debentures due 2000 (the "Subordinated Debentures") with its 8 1/4%
Subordinated Notes due 2002 (the "Subordinated Notes") and (vi) the refinancing
of the prior credit facility (the "Prior Credit Facility") with borrowings
under the New Credit Agreement (collectively, the "Pro Forma Transactions"),
as if the Pro Forma Transactions had occurred on January 1, 1994.
The following pro forma unaudited consolidated balance sheet (collectively
with the pro forma unaudited consolidated statements of operations, the "Pro
Forma Statements") was prepared as if the AIH Acquisition and the acquisition of
Plastifol by AIH had occurred as of July 1, 1995.
The Pro Forma Statements do not purport to represent (i) the actual results
of operations or financial position of the Company had the Pro Forma
Transactions occurred on the dates assumed or (ii) the results to be expected in
the future.
The pro forma adjustments are based upon available information and upon
certain assumptions that management believes are reasonable. The Pro Forma
Statements and accompanying notes should be read in conjunction with the
historical financial statements of the Company, AIH, FSB and Plastifol,
including the notes thereto.
PRO FORMA UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JULY 1, 1995
AIH OPERATING AND
LEAR AIH ACQUISITIONS AIH AIH FINANCING
HISTORICAL HISTORICAL(1) HISTORICAL(2) ADJUSTMENTS(3) PRO FORMA ADJUSTMENTS PRO FORMA
---------- ------------- -------------- -------------- --------- ------------- ---------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
Net sales................ $ 2,186.1 $ 377.1 $ 49.1 $ -- $ 426.2 $ -- $2,612.3
Cost of sales............ 2,014.7 304.1 36.4 -- 340.5 -- 2,355.2
---------- ------------- ------ ------ --------- ------------- ---------
Gross profit............. 171.4 73.0 12.7 -- 85.7 -- 257.1
Selling, general and
administrative
expenses............... 50.1 24.9 4.2 -- 29.1 (0.4)(4) 78.8
Amortization............. 6.4 2.6 -- .5 3.1 4.7(5) 14.2
---------- ------------- ------ ------ --------- ------------- ---------
Operating income......... 114.9 45.5 8.5 (.5) 53.5 (4.3) 164.1
Interest expense......... 28.5 9.0 -- 2.1 11.1 23.7(6) 63.3
Other expense, net....... 5.8 -- -- -- -- -- 5.8
---------- ------------- ------ ------ --------- ------------- ---------
Income before income
taxes.................. 80.6 36.5 8.5 (2.6) 42.4 (28.0) 95.0
Income taxes............. 34.7 14.6 4.3 (.7) 18.2 (8.2)(7) 44.7
---------- ------------- ------ ------ --------- ------------- ---------
Net income............... $ 45.9 $ 21.9 $ 4.2 $ (1.9) $ 24.2 $ (19.8) $ 50.3
======== ========== =========== ============ ======== =========== ========
Net income per share..... $ .92 $ 1.01
Weighted average shares
outstanding (in
millions).............. 49.6 .1(10) 49.7
29
38
PRO FORMA UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994
AIH
LEAR FSB FSB LEAR/FSB AIH ACQUISITIONS AIH AIH
HISTORICAL HISTORICAL(8) ADJUSTMENTS(9) PRO FORMA HISTORICAL(1) HISTORICAL(2) ADJUSTMENTS(3) PRO FORMA
---------- ------------- -------------- --------- ------------- --------------- -------------- ---------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
Net sales........ $ 3,147.5 $ 451.1 $ 4.8 $3,603.4 $ 512.8 $ 239.4 $ -- $ 752.2
Cost of sales.... 2,883.9 443.9 (1.0) 3,326.8 408.9 210.7 (1.8) 617.8
---------- ------------- ------ --------- ------------- ------- ------ ---------
Gross profit..... 263.6 7.2 5.8 276.6 103.9 28.7 1.8 134.4
Selling, general
and
administrative
expenses....... 82.6 31.5 (5.5) 108.6 35.3 14.4 (2.9) 46.8
Amortization..... 11.4 -- 2.0 13.4 4.7 -- 1.5 6.2
---------- ------------- ------ --------- ------------- ------- ------ ---------
Operating income
(loss)......... 169.6 (24.3) 9.3 154.6 63.9 14.3 3.2 81.4
Interest
expense........ 46.7 5.3 4.4 56.4 9.3 (.3) 8.7 17.7
Other expense
(income),
net............ 8.1 .8 -- 8.9 -- (.2) .3 .1
---------- ------------- ------ --------- ------------- ------- ------ ---------
Income (loss)
before income
taxes.......... 114.8 (30.4) 4.9 89.3 54.6 14.8 (5.8) 63.6
Income taxes..... 55.0 .2 (1.5) 53.7 21.9 3.5 (1.7) 23.7
---------- ------------- ------ --------- ------------- ------- ------ ---------
Net income
(loss)......... $ 59.8 $ (30.6) $ 6.4 $ 35.6 $ 32.7 $ 11.3 $ (4.1) $ 39.9
======== ========== ============ ======== ========== ============ ============ ========
Net income per
share.......... $ 1.26
Weighted average
shares
outstanding (in
millions)...... 47.4
OPERATING AND
LEAR/FSB AIH FINANCING
PRO FORMA PRO FORMA ADJUSTMENTS PRO FORMA
--------- --------- ------------- ---------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
Net sales........................................... $3,603.4 $ 752.2 $ -- $4,355.6
Cost of sales....................................... 3,326.8 617.8 -- 3,944.6
--------- --------- ------------- ---------
Gross profit........................................ 276.6 134.4 -- 411.0
Selling, general and administrative expenses........ 108.6 46.8 (.6)(4) 154.8
Amortization........................................ 13.4 6.2 9.5 (5) 29.1
--------- --------- ------------- ---------
Operating income.................................... 154.6 81.4 (8.9) 227.1
Interest expense.................................... 56.4 17.7 24.8 (6) 98.9
Other expense, net.................................. 8.9 .1 -- 9.0
--------- --------- ------------- ---------
Income before income taxes.......................... 89.3 63.6 (33.7) 119.2
Income taxes........................................ 53.7 23.7 (8.5)(7) 68.9
--------- --------- ------------- ---------
Net income.......................................... $ 35.6 $ 39.9 $ (25.2) $ 50.3
======== ======== =========== ========
Net income per share................................ $ 1.01
Weighted average shares outstanding (in millions)... 2.2(11) 49.6
-------------------------
(1) The AIH Historical information represents the audited results of operations
for the year ended December 31, 1994 and the unaudited results of
operations for the six months ended July 1, 1995.
(2) The AIH Acquisitions Historical information represents the results of
operations for three companies acquired by AIH prior to their respective
acquisitions by AIH. The acquisitions were (i) John Cotton Limited
("Cotton") headquartered in Manchester, England and acquired in May 1994,
(ii) the Gulfstream Division of O'Sullivan Corporation ("Gulfstream")
located in Ohio and Virginia and acquired in December 1994, and (iii)
Plastifol headquartered in Ebersberg, Germany and acquired in July 1995.
(3) The AIH Adjustments information with respect to the Cotton, Gulfstream and
Plastifol acquisitions represents (i) adjustments to depreciation expense
due to the revaluation of assets; (ii) reclassifications needed to present
information on a basis that is consistent with AIH Historical information;
(iii) the elimination of management fees charged by a previous owner of
Gulfstream; (iv) interest on borrowings by AIH to finance the acquisitions;
and (v) the related income tax effects.
(4) Represents the elimination of certain management fees charged to AIH by an
affiliate of AIH which ceased to be payable upon the completion of the AIH
Acquisition.
30
39
(5) The adjustment to goodwill for the AIH Acquisition represents the
following:
SIX MONTHS ENDED YEAR ENDED
JULY 1, 1995 DECEMBER 31, 1994
---------------- -----------------
(DOLLARS IN MILLIONS)
Amortization of goodwill from the AIH Acquisition................. $ 7.3 $14.7
Elimination of the historical goodwill amortization of AIH........ (2.6) (5.2)
------ ------
$ 4.7 $ 9.5
=============== ===============
(6) Reflects interest expense changes as follows:
SIX MONTHS ENDED YEAR ENDED
JULY 1, 1995 DECEMBER 31, 1994
---------------- -----------------
(DOLLARS IN MILLIONS)
Estimated interest on borrowings to finance the AIH Acquisition at
interest rates of 7.2% in the first six months of 1995 and 5.1%
for the year ended December 31, 1994............................. 32.6 46.2
Elimination of interest on AIH debt being refinanced............... (10.1) (18.6)
Reduction in interest due to application of proceeds from the
IPO.............................................................. -- (1.2)
Elimination of interest on the Subordinated Debentures............. -- (3.3)
Interest on the Subordinated Notes................................. -- 1.1
Interest on borrowings to finance fees and expenses related to the
New Credit Agreement............................................. .3 .5
Change in commitment fees due to increased availability under the
New Credit Agreement............................................. .4 .9
Change in interest expense due to rate differences between the
Prior Credit Facility and the New Credit Agreement............... .2 (1.6)
Change in deferred finance fees due to the refinancing of the Prior
Credit Facility and the issuance of the Subordinated Notes....... .3 .8
------ -------
$ 23.7 $ 24.8
====== =======
(7) Reflects the income tax effects of the operating and financing adjustments.
(8) The FSB Historical information for the year ended December 31, 1994
represents the results of operations of FSB translated from lira to U.S.
dollars at an average exchange rate of 1,611 Lira to one U.S. dollar.
(9) The FSB Adjustments information represents (i) management's estimates of
the effects of product pricing adjustments negotiated in connection with
the FSB Acquisition of $4.8 million; (ii) the elimination of certain costs
being assumed by the seller of $1.5 million; (iii) an increase in
depreciation expense due to the revaluation of the assets of $.5 million;
(iv) on-going savings of $3.5 million as a result of consolidating
technical centers; (v) the elimination of management fees charged by the
parent of the seller of $2.0 million; (vi) amortization of goodwill as a
result of the FSB Acquisition of $2.0 million; (vii) an increase in
interest expense to finance the FSB Acquisition of $4.4 million; and (viii)
the related income tax effects of $1.5 million. The results from operations
of FSB for the six months ended July 1, 1995 are included in the historical
results of the Company.
(10) Reflects the effect on weighted average shares outstanding of options
originally granted under the Automotive Industries Holding, Inc. 1992 Key
Employee Stock Option Plan (the "AIH Options") which were converted into
options to purchase Common Stock in connection with the AIH Acquisition.
(11) Reflects the effect on weighted average shares outstanding as if the IPO
occurred on January 1, 1994.
31
40
PRO FORMA UNAUDITED CONSOLIDATED BALANCE SHEET
AS OF JULY 1, 1995
OPERATING
ACQUISITION AND AND
LEAR AIH AIH AIH VALUATION OF FINANCING
HISTORICAL HISTORICAL ACQUISITIONS(1) ADJUSTED AIH(2) ADJUSTMENTS PRO FORMA
---------- ---------- -------------- -------- ---------------- ----------- ---------
(DOLLARS IN MILLIONS)
ASSETS
Current Assets:
Cash....................... $ 53.0 $ -- $ -- $ -- $ (904.3) $ 904.3(3) $ 53.0
Accounts receivable, net... 700.2 123.2 9.8 133.0 -- -- 833.2
Inventories................ 111.0 42.0 4.8 46.8 -- -- 157.8
Other current assets....... 94.9 40.6 0.4 41.0 -- -- 135.9
---------- ---------- ----- -------- ------- ----------- ---------
959.1 205.8 15.0 220.8 (904.3) 904.3 1,179.9
---------- ---------- ----- -------- ------- ----------- ---------
Property, Plant and
Equipment, net............. 363.9 233.4 21.3 254.7 -- -- 618.6
Other Assets:
Goodwill and other
intangibles, net......... 494.4 146.4 39.1 185.5 404.0 -- 1,083.9
Deferred finance fees and
other.................... 37.7 25.7 3.1 28.8 -- 5.3 (4) 71.8
---------- ---------- ----- -------- ------- ----------- ---------
532.1 172.1 42.2 214.3 404.0 5.3 1,155.7
---------- ---------- ----- -------- ------- ----------- ---------
$1,855.1 $611.3 $ 78.5 $689.8 $ (500.3) $ 909.6 $2,954.2
======== ======== =========== ======= ============= ========== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities:
Short-term borrowings...... $ 19.2 $ -- $ -- $ -- $ -- $ -- $ 19.2
Cash overdrafts............ 55.2 -- -- -- -- -- 55.2
Accounts payable........... 766.0 75.4 5.2 80.6 -- -- 846.6
Accrued liabilities........ 199.5 38.3 5.4 43.7 -- (1.5)(4) 241.7
Current portion of
long-term debt........... 1.7 3.9 -- 3.9 -- -- 5.6
---------- ---------- ----- -------- ------- ----------- ---------
1,041.6 117.6 10.6 128.2 -- (1.5) 1,168.3
---------- ---------- ----- -------- ------- ----------- ---------
Long-Term Liabilities:
Long-term debt............. 460.1 221.1 60.0 281.1 (264.8) 913.8 (5) 1,390.2
Deferred national income
taxes.................... 24.3 4.4 7.9 12.3 -- -- 36.6
Other...................... 82.6 26.9 -- 26.9 3.9 -- 113.4
---------- ---------- ----- -------- ------- ----------- ---------
567.0 252.4 67.9 320.3 (260.9) 913.8 1,540.2
---------- ---------- ----- -------- ------- ----------- ---------
Stockholders' Equity......... 246.5 241.3 -- 241.3 (239.4) (2.7)(6) 245.7
---------- ---------- ----- -------- ------- ----------- ---------
$1,855.1 $611.3 $ 78.5 $689.8 $ (500.3) $ 909.6 $2,954.2
======== ======== =========== ======= ============= ========== ========
-------------------------
(1) Represents the allocation of the purchase price to net assets of Plastifol
which was acquired by AIH in July 1995.
(2) The purchase price of $926.4 million consists of: (i) $625.7 million to
purchase all of the common stock of AIH ($623.8 million in cash and $1.9
million in new Lear options), (ii) $282.3 million of debt assumed
in connection with the AIH Acquisition, and (iii) $18.4 million to pay fees
and expenses related to the AIH Acquisition. The AIH Acquisition was
accounted for using the purchase method of accounting and the total purchase
cost was allocated first to assets and liabilities based on their respective
fair values, with the remainder allocated to goodwill. The allocation of the
purchase price above is based on historical costs and management's estimates
which may differ from the final allocation.
(3) Reflects proceeds of borrowings under the New Credit Agreement of $904.3
million.
(4) Reflects the capitalization of fees incurred in establishing the New Credit
Agreement of $9.5 million, net of the unamortized portion of fees from the
Prior Credit Facility of $4.2 million being written-off. Also reflects the
related income tax benefit of $1.5 million from the write-off.
(5) Reflects borrowings under the New Credit Agreement of $913.8 million to
finance the AIH purchase price and fees and expenses incurred to establish
the New Credit Agreement.
(6) Reflects the write-off of deferred finance fees, net of income
taxes, of $2.7 million related to the refinancing of the Prior Credit
Facility.
32
41
ITEM 7C: Listing of Exhibits
2.1 Agreement and Plan of Merger, dated as of July 16, 1995, among the
Company, AIHI Acquisition Corp. and Automotive Industries Holding, Inc.
23.1 Consent of Arthur Andersen LLP with respect to AIH Financial
Statements.
23.2 Consent of KPMG Deutsche Treuhand-Gesellschaft with respect to
Plastifol GmbH & Co. KG Financial Statements.
99.1 Credit Agreement, dated as of August 17, 1995, among Lear Seating
Corporation, the several financial institutions parties thereto
(collectively, the "Banks"), Chemical Bank, a New York banking
corporation, as administrative agent for the Banks and the Managing
Agents, Co-Agents and Lead Managers identified therein.
33
42
LEAR SEATING CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on behalf by the
undersigned thereunto duly authorized.
LEAR SEATING CORPORATION
Dated: August 25, 1995 By: /s/ James H. Vandenberghe
-------------------------
James H. Vandenberghe
Executive Vice President
Chief Financial Officer
34
43
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE NO.
----------- ----------- --------
2.1 Agreement and Plan of Merger, dated as of July 16, 1995, among the Company,
AIHI Acquisition Corp. and Automotive Industries Holding, Inc.
23.1 Consent of Arthur Andersen LLP with respect to AIH Financial Statements.
23.2 Consent of KPMG Deutsche Treuhand-Gesellschaft with respect to Plastifol
GmbH & Co. KG Financial Statements.
99.1 $1.5 Billion Credit Agreement, dated as of August 17, 1995, among Lear
Seating Corporation, a Delaware corporation (the "Borrower"), The several
financial institutions parties to this Agreement from time to time
(collectively, the "Banks"; individually, a "Bank"), Chemical Bank, a New York
banking corporation, as administrative agent for the Banks hereunder (in such
capacity, the "Agent"), and the Managing Agents, Co-Agents and Lead Managers
indentified on the signature pages hereof.