1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event reported): February 11, 1994
ROWAN COMPANIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
1-5491 75-0759420
(Commission File Number) (IRS Employer
Identification No.)
__________________________________
5450 Transco Tower
2800 Post Oak Boulevard
Houston, Texas 77056-6196
(Address of principal executive office, including zip code)
(713) 621-7800
(Registrant's telephone number, including area code)
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2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this amendment to be signed on its behalf by the
undersigned hereunto duly authorized.
ROWAN COMPANIES, INC.
By: /s/ E.E. Thiele
------------------------------------------
E.E. Thiele,
Vice President - Finance, Administration and
Treasurer (Principal Financial Officer)
Dated: March 30, 1994
3
Item 7. Financial Statements and Exhibits
(a) Financial Statements
INDEX TO FINANCIAL STATEMENTS
Page
ROWAN COMPANIES, INC. AND SUBSIDIARIES:
Unaudited:
Pro Forma Consolidated Balance Sheet, September 30, 1993 2
Pro Forma Consolidated Statement of Operations for the
Nine Months Ended September 30, 1993 3
Pro Forma Consolidated Statement of Operations for the
Year Ended December 31, 1992 4
Notes to Pro Forma Financial Statements 5
MARATHON LeTOURNEAU COMPANY AND SUBSIDIARIES:
Unaudited:
Consolidated Balance Sheet, September 30, 1993 6
Consolidated Statement of Operations for the Nine
Months Ended September 30, 1993 and 1992 7
Consolidated Statement of Cash Flows for the Nine
Months Ended September 30, 1993 and 1992 8
Audited:
Independent Auditors' Report 9
Consolidated Balance Sheet, December 31, 1992 10
Consolidated Statement of Operations and Retained
Earnings for the Year Ended December 31, 1992 11
Consolidated Statement of Cash Flows for the Year
Ended December 31, 1992 12
Notes to Consolidated Financial Statements 13
4
ROWAN COMPANIES, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The acquisition by Rowan of substantially all of the assets, and assumption of
certain of the liabilities, of Marathon LeTourneau is referred to herein as the
Acquisition. The Company refers to the combined operations of Rowan and
Marathon LeTourneau after the Acquisition.
The following pro forma consolidated financial statements present the pro forma
financial position of the Company as of September 30, 1993, as if the
Acquisition and related financing had been consummated at that date, and
present the pro forma operating results of the Company for the nine months
ended September 30, 1993, and for the year ended December 31, 1992, as if the
Acquisition and related financing had been consummated at January 1, 1992.
The pro forma consolidated financial statements have been prepared from, and
should be read in conjunction with, the historical financial statements of
Rowan, as reported in its Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 1993, and the historical financial statements of
Marathon LeTourneau, which are included in this Form 8-K.
The pro forma consolidated financial statements have been prepared using the
purchase method of accounting, whereby the total cost of the Acquisition is
allocated to the tangible assets acquired and liabilities assumed based upon
estimates of their respective fair values at the effective date of the
Acquisition and giving effect to the Company's preliminary operating plans and
accounting policies.
The pro forma consolidated financial statements are provided for informational
purposes only and are not necessarily indicative of the financial position or
operating results that would have occurred had the Acquisition and related
financing been consummated on the dates for which the consummation of the
Acquisition and related financing are being given effect, nor are they
necessarily indicative of future operating results or financial position of the
Company.
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5
ROWAN COMPANIES, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
(In Thousands)
SEPTEMBER 30, 1993
------------------------------------------------------
MARATHON PRO FORMA PRO FORMA
ROWAN LeTOURNEAU ADJUSTMENTS COMBINED
----------- ---------- -------------- ----------
ASSETS (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 121,091 $ 337 $ (10,707)(a)(b) $ 110,721
Receivables - net 77,193 26,429 (11,431)(a) 92,191
Inventories:
Raw materials 13,934 35,273 (12,279)(b) 36,928
Work-in-progress 11,728 (519)(b) 11,209
Finished goods 4,962 (2,987)(b) 1,975
Prepaid expenses and other 4,554 9,107 (9,014)(a) 4,647
---------- --------- ---------- ----------
Total current assets 216,772 87,836 (46,937) 257,671
---------- ---------- --------- ----------
PROPERTY, PLANT AND EQUIPMENT:
Cost 1,198,851 100,819 (82,882)(b) 1,216,788
Accumulated Depreciation 682,781 79,948 (79,948)(b) 682,781
---------- --------- --------- ----------
Property, plant and equipment - net 516,070 20,871 (2,934) 534,007
OTHER ASSETS AND DEFERRED CHARGES 41,597 2,349 (1,120)(a) 42,826
---------- --------- --------- ----------
TOTAL $ 774,439 $ 111,056 $ (50,991) $ 834,504
========== ========= ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 17,107 $ 5,162 $ 22,269
Accrued and other current liabilities 39,393 15,497 $ (4,106)(a) 50,784
---------- --------- --------- ----------
Total current liabilities 56,500 20,659 (4,106) 73,053
---------- --------- --------- ----------
LONG-TERM DEBT - less current maturities 209,160 41,700 (b) 250,860
---------- --------- --------- ----------
OTHER LIABILITIES AND DEFERRED CREDITS 49,973 2,200 (388)(a) 51,785
---------- --------- --------- ----------
STOCKHOLDERS' EQUITY:
Common stock, at par value 10,660 1 (1)(a) 10,660
Additional paid-in capital 384,724 41,921 (41,921)(a) 384,724
Retained earnings 65,907 46,275 (46,275)(a) 65,907
Less cost of treasury shares 2,485 2,485
---------- --------- ---------- ----------
Total stockholders' equity 458,806 88,197 (88,197) 458,806
---------- --------- ---------- ----------
TOTAL $ 774,439 $ 111,056 $ (50,991) $ 834,504
========== ========= ========= ==========
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6
ROWAN COMPANIES, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(In Thousands Except Per Share Amounts)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1993
---------------------------------------------------
MARATHON PRO FORMA PRO FORMA
ROWAN LeTOURNEAU ADJUSTMENTS COMBINED
---------- ---------- ----------- ----------
(Unaudited)
REVENUES:
Drilling Services $ 197,910 $ 197,910
Aircraft Services 64,352 64,352
Manufacturing sales and services $ 75,481 75,481
--------- ---------- --------- ---------
262,262 75,481 337,743
--------- ---------- --------- ---------
COSTS AND EXPENSES:
Operating Expenses:
Drilling services 156,946 156,946
Aircraft services 52,294 52,294
Manufacturing sales and services 69,795 69,795
Depreciation and amortization 39,535 1,881 $ (815)(c) 40,601
General and administrative 9,235 9,235
Administrative expense allocation 1,800 (1,800)(e)
--------- ---------- --------- ---------
Total costs and expenses 258,010 73,476 (2,615) 328,871
--------- ---------- --------- ---------
INCOME (LOSS) FROM OPERATIONS 4,252 2,005 2,615 8,872
--------- ---------- --------- ---------
OTHER INCOME (EXPENSE):
Interest expense (19,091) (2,189)(d) (21,280)
Interest income 1,424 1,424
Other - net 231 231
--------- ---------- --------- ---------
Total other income (expense) - net (17,436) (2,189) (19,625)
--------- ---------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES (13,184) 2,005 426 (10,753)
PROVISION FOR INCOME TAXES 347 936 (855)(f) 428
--------- ---------- --------- ---------
NET INCOME (LOSS) $ (13,531) $ 1,069 $ 1,281 $ (11,181)
========= ========= ========= =========
AVERAGE SHARES 78,667 78,667
--------- ---------
EARNINGS (LOSS) PER COMMON SHARE $ (.17) $ (.14)
========= =========
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ROWAN COMPANIES, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(In Thousands Except Per Share Amounts)
FOR THE YEAR ENDED DECEMBER 31, 1992
-----------------------------------------------
MARATHON PRO FORMA PRO FORMA
ROWAN LeTOURNEAU ADJUSTMENTS COMBINED
---------- ---------- ----------- ----------
(Unaudited)
REVENUES:
Drilling Services $ 162,121 $ 162,121
Aircraft Services 87,877 87,877
Manufacturing sales and services $ 128,907 128,907
--------- --------- --------- ---------
249,998 128,907 378,905
--------- --------- --------- ---------
COSTS AND EXPENSES:
Operating Expenses:
Drilling services 162,816 162,816
Aircraft services 74,347 74,347
Manufacturing sales and services 126,689 126,689
Depreciation and amortization 51,367 2,919 $ (1,286)(c) 53,000
General and administrative 12,092 12,092
Administrative expense allocation 1,436 (1,436)(e)
--------- --------- --------- ---------
Total costs and expenses 300,622 131,044 (2,722) 428,944
--------- --------- --------- ---------
INCOME (LOSS) FROM OPERATIONS (50,624) (2,137) 2,722 (50,039)
--------- --------- --------- ---------
OTHER INCOME (EXPENSE):
Interest expense (26,254) (4) (2,919)(d) (29,177)
Interest income 2,658 2,658
Other - net 896 896
--------- --------- --------- ---------
Total other income (expense) - net (22,700) (4) (2,919) (25,623)
--------- --------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES (73,324) (2,141) (197) (75,662)
PROVISION (CREDIT) FOR INCOME TAXES 429 (455) 1,011 (f) 985
--------- --------- --------- ---------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING FOR INCOME TAXES $ (73,753) $ (1,686) $ (1,208) $ (76,647)
========= ========= ========= =========
AVERAGE SHARES 73,021 73,021
--------- ---------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING FOR INCOME
TAXES PER COMMON SHARE $ (1.01) $ (1.05)
========= =========
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ROWAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars In Thousands)
(a) Reflects Marathon LeTourneau assets, liabilities and equity
not being acquired or assumed under the Acquisition:
Cash $ (337)
Receivable from parent (11,431)
Prepaid pension cost (2,939)
Deferred tax assets:
Current (6,075)
Noncurrent (1,120)
Accrued expenses 4,106
Other liabilities 388
Common stock 1
Additional paid-in capital 41,921
Retained earnings 46,275
----------
Net assets acquired $ 70,789
==========
(b) Reflects allocation of the total cost of the Acquisition and
recording of the related financing:
Acquisition cost:
Cash paid $ 10,370
Debt issued 41,700
----------
Total 52,070
Net assets acquired 70,789
----------
Reduction in net assets acquired $ (18,719)
==========
Allocated to:
Inventories $ (15,785)
Property, plant and equipment (2,934)
----------
Total $ (18,719)
==========
(c) Reflects reduction in depreciation expense due to reduced
property, plant and equipment balance following purchase price
allocation.
(d) Reflects accrual of interest on Acquisition debt.
(e) Reflects reversal of administrative expense allocation from
parent.
(f) Reflects adjustment to present deferred income taxes on a
consolidated basis.
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MARATHON LETOURNEAU AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In Thousands Except Per Share Amount)
SEPTEMBER 30,
------------
1993
------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 337
Receivables - net 26,429
Inventories:
Raw materials 35,273
Work-in-progress 11,728
Finished goods 4,962
Prepaid expenses and other 9,107
----------
Total current assets 87,836
----------
PROPERTY, PLANT AND EQUIPMENT:
Cost 100,819
Accumulated Depreciation 79,948
----------
Property, plant and equipment - net 20,871
OTHER ASSETS AND DEFERRED CHARGES 2,349
----------
TOTAL $ 111,056
==========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 5,162
Accrued and other current liabilities 15,497
----------
Total current liabilities 20,659
----------
OTHER LIABILITIES AND DEFERRED CREDITS 2,200
----------
STOCKHOLDER'S EQUITY:
Common stock, $1 par value 1
Additional paid-in capital 41,921
Retained earnings 46,275
----------
Total stockholder's equity 88,197
----------
TOTAL $ 111,056
==========
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MARATHON LETOURNEAU AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(In Thousands)
FOR THE
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1993 1992
---------- ----------
(Unaudited)
REVENUES $ 75,481 $ 96,966
---------- ----------
COSTS AND EXPENSES:
Operating expenses 69,795 97,658
Depreciation and amortization 1,881 1,905
Administrative expense allocation 1,800
---------- ----------
Total costs and expenses 73,476 99,563
---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES 2,005 (2,597)
PROVISION (CREDIT) FOR INCOME TAXES 936 (478)
---------- ----------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING FOR INCOME TAXES 1,069 (2,119)
CUMULATIVE BENEFIT OF CHANGE IN
ACCOUNTING FOR INCOME TAXES 8,824
---------- ----------
NET INCOME $ 1,069 $ 6,705
========== ==========
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11
MARATHON LETOURNEAU AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands)
FOR THE
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1993 1992
---------- ----------
(Unaudited)
Cash Provided by (Used in):
Operations:
Net income $ 1,069 $ 6,705
Noncash charges (credits) to net income:
Depreciation and amortization 1,881 1,905
Gain on disposals of property, plant
and equipment (1,125) (82)
Deferred income taxes 855 (9,835)
Curtailment gain (1,518)
Changes in current assets and liabilities:
Receivables - net 12,688 (5,310)
Inventories 2,648 3,932
Prepaid expenses and other (2,573) (11)
Accounts payable (1,405) 2,522
Accrued and other current liabilities (1,304) (5,701)
Other - net 1,936 (2,436)
---------- ----------
Net cash provided by (used in) operations 14,670 (9,829)
---------- ----------
Investing activities:
Capital expenditures (638) (505)
Proceeds from disposals of property,
plant and equipment 1,180 707
Other 5 311
---------- ----------
Net cash provided by investing activities 547 513
---------- ----------
Financing activities - contributions and
net advances from (to) parent (15,081) 9,251
---------- ----------
Increase (Decrease) in Cash and Cash Equivalents 136 (65)
Cash and Cash Equivalents, January 1 201 488
---------- ----------
Cash and Cash Equivalents, September 30 $ 337 $ 423
========== ==========
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INDEPENDENT AUDITORS' REPORT
To the Shareholder of
Marathon LeTourneau Company
Longview, Texas
We have audited the accompanying consolidated balance sheet of Marathon
LeTourneau Company and subsidiaries (the "Company"), a wholly owned subsidiary
of General Cable Corporation, as of December 31, 1992, and the related
consolidated statements of operations and retained earnings and of cash flows
for the year then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company at December 31, 1992,
and the results of its operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.
As discussed in Note 7 to the consolidated financial statements, the Company
changed its method of accounting for income taxes in 1992 to conform with
Statement of Financial Accounting Standards No. 109.
DELOITTE & TOUCHE
Houston, Texas
February 25, 1993 (except for the last paragraph of
Note 8, as to which the date is December 3, 1993)
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MARATHON LETOURNEAU COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF GENERAL CABLE CORPORATION)
CONSOLIDATED BALANCE SHEET, DECEMBER 31, 1992
ASSETS 1992
(In thousands)
--------------
CURRENT ASSETS:
Cash $ 201
Receivables, net 27,686
Inventories 54,611
Prepaid expenses and other 459
Current deferred tax asset 7,166
--------
Total current assets 90,123
NONCURRENT RECEIVABLES, Net 859
PROPERTY, PLANT AND EQUIPMENT, Net 22,174
NONCURRENT PREPAID PENSION ASSET 2,515
NONCURRENT DEFERRED TAX ASSET 884
--------
TOTAL $116,555
========
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 6,567
Accounts liabilities and other 16,801
--------
Total current liabilities 23,368
--------
NONCURRENT LIABILITIES:
Intercompany advances, net (General Cable Corporation) 3,650
Other 2,409
--------
Total noncurrent liabilities 6,059
--------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDER'S EQUITY:
Common stock, $1 par value, 10,000 shares authorized, 1,000 shares
issued and outstanding 1
Capital surplus 41,921
Retained earnings 45,206
--------
Total shareholder's equity 87,128
--------
TOTAL $116,555
========
See notes to consolidated financial statements.
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MARATHON LETOURNEAU COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF GENERAL CABLE CORPORATION)
CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1992
1992
(In thousands)
--------------
NET SALES $128,907
--------
COSTS AND EXPENSES:
Cost of sales 115,837
Operating expenses 3,418
Selling, general and administrative expenses 10,353
Administrative expense allocation - General Cable Corporation 1,436
--------
Total 131,044
--------
OPERATING LOSS (2,137)
OTHER EXPENSE - Intercompany interest (4)
--------
LOSS BEFORE INCOME TAXES (2,141)
BENEFIT (PROVISION) FOR INCOME TAXES
U.S. federal - deferred 1,011
State (556)
--------
Total 455
--------
LOSS BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
FOR INCOME TAXES (1,686)
CUMULATIVE BENEFIT OF CHANGE IN ACCOUNTING FOR
INCOME TAXES 8,824
--------
NET INCOME 7,138
RETAINED EARNINGS, BEGINNING OF YEAR 39,853
LESS TAX BENEFITS UTILIZED BY PARENT COMPANIES (1,785)
--------
RETAINED EARNINGS, END OF YEAR $ 45,206
========
See notes to consolidated financial statements.
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MARATHON LETOURNEAU COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF GENERAL CABLE CORPORATION)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1992
1992
(In thousands)
--------------
CASH FLOWS OF OPERATING ACTIVITIES:
Net income $ 7,138
Adjustments to reconcile net income to net cash flows of operating activities:
Depreciation and amortization 2,919
Cumulative benefit of change and benefit for income taxes (9,835)
Curtailment gain (1,518)
Net gain on disposals of property, plant and equipment (112)
Changes in assets and liabilities:
Decrease in receivables 358
Decrease in inventories 8,118
(Increase) in prepaid expenses and other assets (431)
(Decrease) in accounts payable (50)
(Decrease) in accrued liabilities and other (10,517)
(Decrease) in other noncurrent liabilities (3,553)
(Decrease) in pension related liabilities (224)
--------
Net cash flows of operating activities (7,707)
--------
CASH FLOWS OF INVESTING ACTIVITIES:
Capital expenditures (1,176)
Proceeds from sale of property, plant and equipment 520
Receipts from collection of notes receivable 111
--------
Net cash flows of investing activities (545)
--------
CASH FLOWS OF FINANCING ACTIVITIES:
Contribution from General Cable Corporation 3,650
Contribution from The Penn Central Corporation 4,315
--------
Net cash flows of financing activities 7,965
--------
NET DECREASE IN CASH (287)
CASH, BEGINNING OF YEAR 488
--------
CASH, END OF YEAR $ 201
========
SUPPLEMENTAL CASH FLOWS DISCLOSURE:
State income taxes paid during the year $ 839
========
Note receivable obtained in sale of property, plant and equipment $ 220
========
See notes to consolidated financial statements.
-12-
16
MARATHON LETOURNEAU COMPANY AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF GENERAL CABLE CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1992
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Marathon LeTourneau Company ("Marathon") and subsidiaries (the
"Company") became a wholly owned subsidiary of General Cable Corporation
("General Cable") as of July 1, 1992. Previous to that date, the
Company was wholly owned by The Penn Central Corporation ("PCC"). The
consolidated financial statements include the accounts of Marathon and
its wholly owned subsidiaries, Marathon LeTourneau Equipment Company,
Marathon LeTourneau Sales & Service Company and Marathon LeTourneau
Australia, Pty. Ltd. All significant intercompany accounts and
transactions have been eliminated in consolidation.
General - On February 12, 1992, the Board of Directors of PCC approved
in principle, subject to formal declaration of a dividend at a later
date, a plan for the distribution (the "Distribution") to holders of
PCC's common stock of approximately 88 percent of the outstanding shares
of common stock of General Cable, a subsidiary of PCC formed to own
PCC's principal manufacturing businesses. On July 1, 1992, PCC
transferred to General Cable the materials handling machinery and
equipment and marine equipment manufacturing and steel mill businesses
conducted by the Company as well as other manufacturing businesses.
Such transfer was among parties under common control and accounted for
in a manner similar to a pooling of interests.
Inventories - Inventories are stated at the lower of cost or market
value. The first-in, first-out method is used to determine cost for
substantially all of the Company's inventories.
Property, Plant and Equipment - Property, plant and equipment is stated
at cost. Depreciation is provided principally using the straight-line
method over the expected useful lives of the assets. Upon sale or
retirement of significant assets, the cost and related accumulated
depreciation and amortization are eliminated from the accounts, as
applicable, and the resulting gain or loss is included in income.
Revenue Recognition - In general, product sales are recorded when
shipped. Sales in connection with long-term contracts are principally
recorded using the percentage-of-completion method.
Warranty - The Company records an accrual for warranties related to
certain products it sells based on sales agreements for such products.
Income Taxes - Marathon and its domestic subsidiaries are included in
the consolidated federal income tax return of PCC for periods ending on
or prior to the Distribution and General Cable for periods ending after
the Distribution. As of July 1, 1992, the Company became part of the
General Cable consolidated group (see Note 7).
-13-
17
Most state and all foreign tax returns are filed independently of the
Company's parent, and the respective provisions are calculated
accordingly.
The general terms and conditions relating to the Distribution provide
that PCC will indemnify and hold harmless the Company and its
subsidiaries against all liabilities for federal income taxes, including
interest and penalties, with respect to periods prior to the
Distribution.
Dollar Amounts - Dollar amounts presented in the tabulations within the
notes to the consolidated financial statements are stated in thousands
of dollars.
2. VICKSBURG MARINE OPERATIONS
In 1991, the Company reported a provision for restructuring and
consolidating the marine operations of the Company, primarily located in
Vicksburg, Mississippi ("Vicksburg Marine Operations"). Such provision
was primarily related to the estimated costs of employee severance and
relocation and transferring machinery, equipment and other items from
Vicksburg to Longview, Texas.
Operations include the following amounts related to the 1992 Vicksburg
Marine Operations that management of the Company does not expect to
recur in the foreseeable future:
Net sales $ 8,215
=======
Operating loss $(2,697)
=======
Since July 1, 1992, all marine operations have been conducted from the
Company's Longview facility. Primary assets remaining at Vicksburg at
December 31, 1992 were as follows:
Land $ 1,716
Buildings 5,966
Machinery, equipment and office furnishings 11,797
--------
Total 19,479
Accumulated depreciation and amortization (17,275)
--------
Total property, plant and equipment 2,204
Inventories, net 477
--------
Total $ 2,681
========
-14-
18
3. RECEIVABLES
Receivables consist of the following:
Trade accounts receivable $27,451
Notes receivable 2,057
Other 68
Allowance for doubtful accounts (1,031)
-------
Total, net 28,545
Less current receivables, net 27,686
-------
Noncurrent receivables, net $ 859
=======
4. INVENTORIES
Inventories consist of the following:
Raw materials $36,671
Work-in-progress 11,947
Finished goods 5,993
-------
Total $54,611
=======
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
Land $ 4,753
Buildings and leasehold improvements 26,923
Machinery, equipment and office furnishings 70,194
Construction in progress 828
--------
Total 102,698
Accumulated depreciation and amortization (80,524)
--------
Total $ 22,174
========
Maintenance and repair costs charged to costs and expenses for the year
ended December 31, 1992 was $4,504,000.
-15-
19
6. ACCRUED LIABILITIES AND OTHER
Accrued liabilities and other consist of the following:
Accrual for insurance claims and related expenses $ 5,026
Warranty reserves 3,509
Accrued accounts payable 3,409
Payroll and related expenses 1,956
Taxes other than income 1,074
Other accrued liabilities 1,827
-------
Total $16,801
=======
7. INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME
TAXES
Effective January 1, 1992, the Company (as part of the General Cable
consolidated group) adopted Statement of Financial Accounting Standards
("SFAS") No. 109, "Accounting for Income Taxes," which requires an asset
and liability approach for computing deferred income taxes. The benefit
(provision) for income taxes for 1992 has been computed by the Company
as if it were a separate taxpayer. The cumulative effect resulting from
the adoption of SFAS No. 109 as of January 1, 1992 was an increase in
net income of approximately $8,824,000.
As of December 31, 1992, the Company had gross deferred tax assets of
approximately $13,002,000, primarily resulting from tax loss and credit
carryforwards and other provisions that have not been recognized for tax
purposes. The Company also had gross deferred tax credits of
approximately $4,635,000, which were primarily attributable to
depreciation. A valuation allowance of $317,000 has been recorded for
investment tax credits that are likely to expire before utilization.
Because the Company did not have a tax sharing arrangement with PCC or
General Cable, part of the Company's 1992 tax losses were utilized by
other PCC and General Cable consolidated group members. The $1,785,000
tax benefit utilized by such other consolidated group members has been
reported similar to a distribution to shareholders by reducing capital
surplus.
As of December 31, 1992 the Company had federal net operating loss
carryforwards of approximately $6,838,000 of which $1,570,000 expires in
1995 and $5,268,000 expires in 2007. The Company also has investment
tax credit carryforwards of approximately $2,813,000 which expire in
various amounts from 1993 through 2000.
8. PENSION PLANS AND OTHER RETIREMENT BENEFITS
The Company provides retirement benefits through a defined contribution
plan and a noncontributory defined benefit plan for substantially all
regular full-time employees. The Company does not provide any
postretirement benefits to its employees.
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The defined contribution plan provides for basic employee contributions
of 2%-6% of their regular salary and additional employee contributions
of 1%-6% of their regular salary. The employer makes monthly
contributions of 50% of employee basic contributions. Expenses under
this plan for 1992 were $501,000.
Benefits provided under the noncontributory defined benefit plan are
based on years of service and the employee's level of compensation
during the last five years of service. Contributions to this plan are
based on generally accepted actuarial methods which may differ from the
methods used to determine pension expense. The amounts funded for any
plan year are not less than the minimum required under federal law or
more than the maximum amount deductible for federal income tax purposes.
As described in Note 2, the Vicksburg Marine Operations were transferred
to Longview, Texas, as of July 1, 1992, resulting in the termination of
a significant number of employees. The portion of the projected benefit
obligation based on expected future compensation levels of these
employees was $2,087,000. As a result, the Company recognized a
curtailment gain of $1,518,000 as of December 31, 1992.
Amounts related to 1992 net periodic pension cost include the following
components:
Service cost - benefits earned during the period $ 763
Interest cost on projected benefit obligation 2,356
Return on assets (1,875)
Net amortization and deferral (749)
Curtailment gain (1,518)
-------
Net periodic pension cost $(1,023)
=======
The following table sets forth the funded status of the Company's
defined benefit plan and amounts recognized in the Company's
consolidated balance sheet related to the plan:
Actuarial present value of accumulated benefit obligation:
Vested $23,772
Nonvested 1,210
-------
Total $24,982
=======
Plan assets at fair value $30,245
Projected benefit obligation 27,942
-------
Projected benefit obligation less than plan assets 2,303
Prior service cost not yet recognized in net periodic pension cost 142
Unrecognized net obligation 460
-------
Prepaid pension cost $ 2,905
=======
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The weighted average discount rate and the weighted average rate of
increase in future compensation levels used in determining the actuarial
present value of the projected benefit obligation was 8.5% and 6.0%,
respectively. The assumed long-term rate of return on assets was 9.5%.
Plan assets consist primarily of marketable equity and debt securities
and insurance contracts.
On April 28, 1993, the Board of Directors of the Company approved the
plan's merger into the General Cable Plan effective April 30, 1993 and
provided that the rights of all participants in the plan be governed by
the terms of the General Cable Plan. There are no significant
differences between the terms of the plan and the General Cable Plan.
The assets of the plan were transferred to the General Cable Plan on May
1, 1993.
9. COMMITMENTS AND CONTINGENCIES
The Company has entered into various operating lease agreements related
principally to certain administrative and manufacturing facilities and
transportation equipment. Future minimum rental payments required under
noncancelable lease agreements at December 31, 1992 were as follows:
1993 $ 148
1994 148
1995 148
1996 148
1997 148
Thereafter 505
------
Total $1,245
======
The Company has an option, exercisable at various times within the
ten-year period ending in 2001, to purchase the assets currently leased
for its Tucson, Arizona location. The option amounts range from
$1,200,000 to $1,650,000, depending on the exercise date.
Rent expense recorded under operating leases was $716,000 for 1992.
There are various lawsuits and claims pending against the Company, none
of which, individually or in the aggregate, in the opinion of
management, will have a material effect on the consolidated financial
position or operations of the Company.
10. RELATED PARTY TRANSACTIONS
General Cable has allocated corporate administrative costs to the
Company during 1992. Allocations were generally made on a percentage
basis calculated by using the three factors of total assets, payroll
dollars and net sales of the Company as compared to the total equivalent
items for General Cable and their consolidated subsidiaries.
An intercompany funds agreement between PCC and the operating entities
of General Cable provided for a charge of interest on the net
outstanding balance of funds provided by PCC, however, such agreement
terminated at Distribution. The allocations of intercompany interest
expense by PCC are based upon the average outstanding intercompany
balance multiplied by the existing prime rate for each period. As of
December 31, 1992, the Company and General Cable do not have an
intercompany funds agreement.
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In the opinion of management of General Cable, these allocations have
been made on a basis which is believed to be reasonable; however, they
are not necessarily indicative of the level of expenses which might have
been incurred by the Company operating on a stand-alone basis.
As of July 1, 1992, the outstanding intercompany balance owed to PCC by
Marathon was contributed to Marathon's capital.
* * * * * *
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