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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
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CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) May 7, 1999
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LEAR CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 1-11311 13-3386776
- -------------------------------- ---------------------- ---------------------
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
21557 Telegraph Road
Southfield, Michigan 48086-5008
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(Address of principal executive offices) (zip code)
(248) 447-1500
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(Telephone number, including
area code, of agent for service)
No Change
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(Former name or former address,
if changes since last report)
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ITEM 5. OTHER EVENTS
On May 7, 1999, Lear entered into a definitive purchase agreement with
Johnson Electric Holdings Limited to sell its recently acquired Electric Motor
Systems (EMS) business for $310 million, subject to certain post-closing
adjustments. Lear acquired the EMS business in its May 4, 1999 acquisition of UT
Automotive, Inc. EMS is a supplier of industrial and automotive electric motors
and starter motors for small gasoline engines. EMS had 1998 sales of $351
million and has approximately 3,300 employees operating at locations in 10
countries.
Consummation of the acquisition is contingent upon expiration or
termination of applicable waiting periods provided under the Hart-Scott-Rodino
Antitrust Improvements Act, applicable foreign competition act approvals and
certain other customary conditions.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
B. Unaudited Pro Forma Consolidated Financial Statements.
The following unaudited pro forma consolidated statement of operations
of Lear for the year ended December 31, 1998 was prepared to illustrate the
effects of the completion of the acquisition of Delphi Seating, which was
completed on September 1, 1998, the UT Automotive acquisition, the amendment and
restatement of our prior senior credit facility in connection with the UT
Automotive acquisition, borrowings under our new credit facilities in connection
with the UT Automotive acquisition and the anticipated sale of EMS to Johnson
Electric Holdings Limited (collectively, the "Transactions"), as if such
Transactions had occurred on January 1, 1998.
The following unaudited pro forma consolidated balance sheet
(collectively with the unaudited pro forma consolidated statement of operations,
the "Pro Forma Statements") was prepared as if the Transactions had occurred as
of December 31, 1998. The Pro Forma Statements are not necessarily indicative of
the results that actually would have been achieved if the Transactions reflected
therein had been completed on the dates indicated or the results which may be
attained in the future.
The pro forma adjustments are based upon available information and upon
certain assumptions that we believe are reasonable. The Pro Forma Statements
exclude the estimated effects related to our planned refinancing of the $1.4
billion interim term loan incurred to provide a portion of the UT Automotive
purchase price. The Pro Forma Statements and accompanying notes should be read
in conjunction with the historical financial statements of Lear, UT Automotive
and Delphi Seating, including the notes thereto.
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UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
====================================================================================================================
Operating and Lear/UT Delphi Pro Forma
Lear UT Automotive Financing Automotive Seating as
Historical Historical(1) Adjustments Pro Forma Pro Forma (2) Adjusted
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(In millions, except per share data)
Net sales $ 9,059.4 $ 2,900.3 $ - $11,959.7 $ 669.0 $12,628.7
Cost of sales 8,198.0 2,365.4 - 10,563.4 651.2 11,214.6
- -------------------------------------------------------------------------------------------------------------------
Gross profit 861.4 534.9 - 1,396.3 17.8 1,414.1
Selling, general and
administrative expenses 337.0 362.7 - 699.7 41.5 741.2
Restructuring and other charges 133.0 - - 133.0 - 133.0
Amortization 49.2 13.0 20.2 (3) 82.4 3.2 85.6
- -------------------------------------------------------------------------------------------------------------------
Operating income 342.2 159.2 (20.2) 481.2 (26.9) 454.3
Interest expense 110.5 22.2 140.4 (4) 273.1 9.1 282.2
Other (income)/expense, net 22.3 (.6) - 21.7 (6.1) 15.6
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Income before income taxes 209.4 137.6 (160.6) 186.4 (29.9) 156.5
Income taxes 93.9 57.5 (49.1)(5) 102.3 (11.9) 90.4
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Net income $ 115.5 $ 80.1 $(111.5) 84.1 $ (18.0) $ 66.1
===================================================================================================================
Diluted net income per share $ 1.70
Weighted average shares
outstanding (in millions) 68.0
EBITDA (6) $ 561.9 $ 283.5 - $ 845.4 $ (14.8) $ 830.6
===================================================================================================================
YEAR ENDED DECEMBER 31, 1998
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Pro Forma Elimination
as of EMS
Adjusted Pro Forma(7) Pro Forma
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Net sales $12,628.7 $ (351.1) $12,277.6
Cost of sales 11,214.6 (282.8) 10,931.8
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Gross profit 1,414.1 (68.3) 1,345.8
Selling, general and
administrative expenses 741.2 (35.7) 705.5
Restructuring and other charge 133.0 - 133.0
Amortization 85.6 (5.2) 80.4
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Operating income 454.3 (27.4) 426.9
Interest expense 282.2 (19.1) 263.1
Other (income)/expense, net 15.6 - 15.6
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Income before income taxes 156.5 (8.3) 148.2
Income taxes 90.4 (6.3) 84.1
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Net income $ 66.1 $ (2.0) $ 64.1
=========================================================================
Diluted net income per share $ 0.94
Weighted average shares
outstanding (in millions) 68.0
EBITDA (6) $ 830.6 $ (47.5) $ 783.1
=========================================================================
(1) The UT Automotive historical information represents amounts derived from
the audited results of operations for UT Automotive's fiscal year ended
December 31, 1998. Certain amounts have been reclassified to conform to
Lear's presentation.
(2) The Delphi Seating pro forma information reflects (i) Delphi Seating
historical unaudited results of operations for the period from January 1,
1998 through September 1, 1998, the date on which Delphi Seating was
acquired by Lear and (ii) adjustments to reflect the elimination of net
sales between Delphi Seating and Lear, estimated interest on borrowings to
finance the acquisition of Delphi Seating, amortization of goodwill from
the acquisition of Delphi Seating, income tax effects of the adjustments
and the elimination of items with no continuing impact on Lear's results of
operations, including the capitalization of fixed asset purchases which
were accounted for as impaired assets by Delphi Seating, operating losses
at plants which were not included in the acquisition, a charge related to
the employee benefit obligations not assumed by Lear and the elimination of
certain expenses allocated from the parent.
(3) The adjustment to amortization represents the following:
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Year Ended
December 31, 1998
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(In millions)
Amortization of goodwill from the acquisition of UT Automotive (over 40 years) $ 33.2
Elimination of the historical goodwill amortization of UT Automotive (13.0)
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$ 20.2
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(4) The adjustment to interest expense represents the following:
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Year Ended
December 31, 1998
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(In millions)
Estimated interest on borrowings under our primary credit facilities to finance
the UT Automotive acquisition $ 145.7
Other changes in interest expense, commitment fees and amortization of
deferred finance fees due to the new credit facilities and the amendment and restatement
of our prior senior credit facility 15.0
Elimination of interest expense on UT Automotive intercompany debt retired upon acquisition (20.3)
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$ 140.4
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(5) Reflects the income tax effects of the operating and financing adjustments.
(6) "EBITDA" is operating income plus depreciation and amortization. EBITDA
does not represent and should not be considered as an alternative to net
income or cash flow from operations as determined by generally accepted
accounting principles. Excluding the $133.0 million restructuring and other
charges recorded in 1998, EBITDA would have been $694.9 million for Lear
on a historical basis and $916.1 million on a pro forma basis.
(7) The pro forma EMS information reflects (i) the elimination of EMS's
historical unaudited results of operations for the fiscal year ended
December 31, 1998 and (ii) adjustments to reflect reduced goodwill
amortization of $5.2 million resulting from the elimination of goodwill
from the anticipated sale of EMS, reduced interest expense of $19.1 million
resulting from the application of the proceeds from the anticipated sale
of EMS to reduce the borrowings under our amended and restated $2.1 billion
revolving credit facility and the income tax effects of the adjustments.
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UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1998
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Acquisition Operating and Lear/UT
Lear UT Automotive and Valuation Financing Automotive
Historical Historical(1) of UT Automotive(2) Adjustments Pro Forma
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(In millions)
ASSETS
Current assets:
Cash and cash equivalents $ 30.0 $ 43.4 $(2,312.9) $2,312.9(4) $ 73.4
Accounts receivable, net 1,373.9 575.2 - - 1,949.1
Inventories 349.6 170.7 - - 520.3
Recoverable customer engineering and tooling 221.4 - - - 221.4
Other current assets 223.1 70.0 - - 293.1
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2,198.0 859.3 (2,312.9) 2,312.9 3,057.3
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Property, plant and equipment, net 1,182.3 709.7 - - 1,892.0
Goodwill and other intangibles, net 2,019.8 333.1 993.5 - 3,346.4
Other 277.2 85.3 (26.7)(3) 18.6(5) 354.4
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$ 5,677.3 $ 1,987.4 $(1,346.1) $2,331.5 $ 8,650.1
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 82.7 $ 7.8 $ - $ - $ 90.5
Accounts payable and drafts 1,600.8 377.0 - - 1,977.8
Accrued liabilities 797.5 193.5 (15.2)(3) - 975.8
Current portion of long-term debt 16.5 1.6 - - 18.1
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2,497.5 579.9 (15.2) - 3,062.2
Long-term liabilities:
Long-term debt 1,463.4 5.2 - 2,331.5(6) 3,800.1
Deferred national income taxes 39.0 38.4 - - 77.4
Other 377.4 98.9 (65.9)(3) - 410.4
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1,879.8 142.5 (65.9) 2,331.5 4,287.9
Stockholders' Equity 1,300.0 1,265.0 (1,265.0) - 1,300.0
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$ 5,677.3 $ 1,987.4 $(1,346.1) $ 2,331.5 $8,650.1
=======================================================================================================================
Lear/UT
Automotive Elimination of
ASSETS Pro Forma EMS Pro Forma(7) Pro Forma
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Current assets:
Cash and cash equivalents $ 73.4 $ (3.2) $ 70.2
Accounts receivable, net 1,949.1 (85.9) 1,863.2
Inventories 520.3 (21.2) 499.1
Recoverable customer engineering and tooling 221.4 - 221.4
Other current assets 293.1 (6.7) 286.4
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3,057.3 (117.0) 2,940.3
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Property, plant and equipment, net 1,892.0 (72.0) 1,820.0
Goodwill and other intangibles, net 3,346.4 (204.8) 3,141.6
Other 354.4 (27.8) 326.6
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$ 8,650.1 $(421.6) $8,228.5
===================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 90.5 $ - $ 90.5
Accounts payable and drafts 1,977.8 (60.8) 1,917.0
Accrued liabilities 975.8 (17.6) 958.2
Current portion of long-term debt 18.1 - 18.1
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3,062.2 (78.4) 2,983.8
Long-term liabilities:
Long-term debt 3,800.1 (314.6) 3,485.5
Deferred national income taxes 77.4 - 77.4
Other 410.4 (28.6) 381.8
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4,287.9 (343.2) 3,944.7
Stockholders' equity 1,300.0 - 1,300.0
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$8,650.1 $(421.6) $8,228.5
===================================================================================================
(1) The UT Automotive historical information represents amounts obtained from
the audited balance sheet of UT Automotive as of December 31, 1998.
Certain amounts have been reclassified to conform to Lear's presentation.
(2) Assumes a purchase price of $2,312.9 million which consists of $2,300.0
million to acquire UT Automotive and $12.9 million to pay estimated fees
and expenses related to the acquisition of UT Automotive. The acquisition
of UT Automotive was accounted for using the purchase method of accounting,
and the total purchase price was allocated first to assets and liabilities
based on their respective fair values, with the remainder ($1,326.6
million) allocated to goodwill. The adjustment to stockholders' equity
reflects the elimination of UT Automotive's equity. The allocation of the
purchase price above is based on historical costs and management's
estimates which may differ from the final allocation due to appraisals of
fixed assets and the finalization of plans of restructuring.
(3) Represents the elimination of certain items which are being retained by the
seller of UT Automotive.
(4) Reflects proceeds of borrowings under our primary credit facilities of
$2,312.9 million.
(5) Reflects the capitalization of fees incurred in establishing our new credit
facilities of $18.6 million.
(6) Reflects the effects of the Transactions as follows:
===========================================================================================================================
Borrowings under our primary credit facilities to finance the acquisition of UT
Automotive $ 2,312.9
Borrowings under our primary credit facilities to pay fees and expenses incurred
in establishing the new credit facilities 18.6
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$ 2,331.5
===========================================================================================================================
(7) The pro forma EMS information reflects (i) the elimination of EMS's
historical unaudited balance sheet as of December 31, 1998, including
$204.8 million of goodwill recorded in connection with the acquisition of
UT Automotive and (ii) an adjustment to reflect reduced borrowings under
the amended and restated $2.1 billion revolving credit facility resulting
from the application of the assumed proceeds of $310.0 million from the
anticipated sale of EMS.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
C. Exhibits
10.1 Stock Purchase Agreement, dated as of May 7, 1999, between Lear
Corporation and Johnson Electric Holdings Limited.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
LEAR CORPORATION
/s/ Donald J. Stebbins
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Donald J. Stebbins
Senior Vice President and
Chief Financial Officer
May 11, 1999
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INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
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10.1 Stock Purchase Agreement, dated as of May 7, 1999, between
Lear Corporation and Johnson Electric Holdings Limited.