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EXHIBIT 99.3
COLTEC INDUSTRIES INC
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share data)
(unaudited)
Three Months Ended Six Months Ended
July 4 June 28 July 4 June 28
1999 1998 1999 1998
--------- --------- --------- ---------
Net sales $ 381,665 $ 394,754 $ 757,897 $ 769,195
Cost of sales 265,246 311,862 529,951 572,010
--------- --------- --------- ---------
Gross profit 116,419 82,892 227,946 197,185
Selling and administrative 53,918 64,124 109,500 125,123
--------- --------- --------- ---------
Operating income 62,501 18,768 118,446 72,062
Gain on sale of assets 6,140 56,194 6,140 56,194
Interest expense and other, net (12,348) (13,230) (24,728) (28,310)
--------- --------- --------- ---------
Earnings before income taxes, minority interest in net
loss of subsidiary and extraordinary item 56,293 61,732 99,858 99,946
Income taxes (19,139) (20,989) (33,951) (33,982)
Minority interest in net loss of subsidiary (net of tax) (1,300) (1,085) (2,600) (1,085)
--------- --------- --------- ---------
Earnings before extraordinary item 35,854 39,658 63,307 64,879
Extraordinary item (net of tax) -- (4,326) -- (4,326)
--------- --------- --------- ---------
Net earnings $ 35,854 $ 35,332 $ 63,307 $ 60,553
========= ========= ========= =========
Basic earnings per common share
Before extraordinary item $ .57 $ .60 $ 1.00 $ .98
Extraordinary item -- (.06) -- (.06)
--------- --------- --------- ---------
Net earnings $ .57 $ .54 $ 1.00 $ .92
========= ========= ========= =========
Basic weighted-average common shares 63,172 65,986 63,114 65,934
========= ========= ========= =========
Diluted earnings per common share
Before extraordinary item $ .54 $ .57 $ .96 $ .95
Extraordinary item -- (.06) -- (.06)
--------- --------- --------- ---------
Net earnings $ .54 $ .51 $ .96 $ .89
========= ========= ========= =========
Diluted weighted-average common and common
equivalent shares 69,089 71,304 68,902 69,220
========= ========= ========= =========
See notes to consolidated financial statements.
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COLTEC INDUSTRIES INC
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
July 4 Dec. 31
1999 1998
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 28,810 $ 21,785
Accounts and notes receivable, net of
allowance of $3,100 in 1999 and $3,109 in 1998 211,064 148,185
Inventories
Finished goods 42,553 42,447
Work in process and finished parts 144,471 154,707
Raw materials and supplies 55,317 38,849
---------- ----------
242,341 236,003
Deferred income taxes 24,340 20,464
Other current assets 81,294 15,612
---------- ----------
Total current assets 587,849 442,049
Property, plant and equipment, net 301,542 306,642
Costs in excess of net assets acquired, net 211,856 214,647
Other assets 106,938 92,310
---------- ----------
$1,208,185 $1,055,648
========== ==========
See notes to consolidated financial statements.
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COLTEC INDUSTRIES INC
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
July 4 Dec. 31
1999 1998
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 5,845 $ 5,127
Accounts payable 96,160 91,595
Accrued expenses 281,497 171,084
Current portion of liabilities of
discontinued operations 4,999 4,999
----------- -----------
Total current liabilities 388,501 272,805
Long-term debt 540,643 577,478
Deferred income taxes 148,049 139,909
Other liabilities 87,353 85,490
Liabilities of discontinued operations 132,545 134,995
Commitments and contingencies -- --
Company-obligated, mandatorily redeemable convertible
preferred securities of subsidiary Coltec Capital Trust 146,305 145,293
Shareholders' equity:
Preferred stock, $.01 par value, 2,500,000 shares authorized,
shares outstanding - none -- --
Common stock, $.01 par value, 100,000,000 shares authorized,
70,762,213 shares issued at July 4, 1999 and 70,583,695 at
December 31, 1998 (excluding 25,000,000 shares held by a
wholly owned subsidiary) 706 706
Capital surplus 647,107 643,615
Retained deficit (733,061) (795,356)
Unearned compensation (1,232) (2,671)
Accumulated other comprehensive income (loss) (21,962) (18,688)
----------- -----------
(108,442) (172,394)
Less cost of 7,433,629 shares and 7,526,960 shares
of common stock in treasury at
July 4, 1999 and December 31, 1998, respectively (126,769) (127,928)
----------- -----------
(235,211) (300,322)
----------- -----------
$ 1,208,185 $ 1,055,648
=========== ===========
See notes to consolidated financial statements.
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COLTEC INDUSTRIES INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six Months Ended
July 4 June 28
1999 1998
-------- ---------
Cash flows from operating activities:
Net earnings $ 63,307 $ 60,553
Adjustments to reconcile net earnings to cash provided by operating activities:
Extraordinary item -- 6,554
Depreciation and amortization 26,051 24,611
Deferred income taxes 4,264 5,607
Gain on divestiture (6,140) (56,194)
Payments of liabilities of discontinued operations (2,450) (6,894)
Foreign currency translation adjustment (3,274) (8,407)
Other operating items (14,454) (2,639)
Changes in assets and liabilities (net of effects from acquisitions
and divestitures):
Accounts and notes receivable (48,479) (42,911)
Inventories (6,338) 11,169
Other current assets (13,018) 1,908
Accounts payable 4,565 4,361
Accrued expenses 56,682 42,456
-------- ---------
Cash provided by operating activities 60,716 40,174
-------- ---------
Cash flows from investing activities:
Capital expenditures (18,960) (27,187)
Proceeds from divestiture -- 100,000
Proceeds from sale of assets 3,886 --
Acquisition of businesses, net -- (80,518)
-------- ---------
Cash used in investing activities (15,074) (7,705)
-------- ---------
Cash flows from financing activities:
Increase (decrease) in revolving facility, net (35,500) (440,000)
Repayment of long-term debt (617) (18,847)
Issuance of long-term debt, net -- 292,151
Issuance of convertible preferred securities, net -- 144,472
Repayment of borrowings under receivables facility (2,500) --
Purchase of treasury stock -- (994)
Payments for unclaimed stock -- (3,871)
-------- ---------
Cash provided by (used in) investing activities (38,617) (27,089)
-------- ---------
Increase (decrease) in cash and cash equivalents 7,025 5,380
Cash and cash equivalents - beginning of period 21,785 14,693
-------- ---------
Cash and cash equivalents - end of period $ 28,810 $ 20,073
======== =========
Supplemental cash flow data:
Cash paid for interest $ 26,111 $ 25,226
Cash paid (refunded) for income taxes (3,334) 13,645
See notes to consolidated financial statements.
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COLTEC INDUSTRIES INC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
Three Months Ended Six Months Ended
July 4 June 28 July 4 June 28
1999 1998 1999 1998
------- ------- -------- --------
Net earnings $35,854 $35,332 $ 63,307 $ 60,553
Other comprehensive income/(loss), net of tax
Foreign currency translation adjustment 886 (6,002) (3,274) (8,407)
------- ------- -------- --------
Comprehensive income $36,740 $29,330 $ 60,033 $ 52,146
======= ======= ======== ========
See notes to consolidated financial statements.
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COLTEC INDUSTRIES INC
Notes to Consolidated Financial Statements
(dollars in thousands)
(unaudited)
1. SUMMARY OF ACCOUNTING POLICIES
Financial Information: The unaudited consolidated financial
statements included herein reflect in the opinion of management of
Coltec Industries Inc (the "Company") all normal recurring
adjustments necessary to present fairly the consolidated financial
position and results of operations for the periods indicated. The
unaudited consolidated financial statements have been prepared in
accordance with the instructions to Form 10-Q and do not include all
of the information and footnotes required by generally accepted
accounting principles for complete financial statements. The
Consolidated Balance Sheet as of December 31, 1998 has been extracted
from the audited consolidated financial statements as of that date.
For further information, refer to the consolidated financial
statements and footnotes included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1998.
2. PENDING MERGER
On July 12, 1999, the company completed its merger with The B.F.
Goodrich Company ("BFGoodrich"). The merger will be accounted for as
a pooling-of-interests. As a result of the merger, Coltec became a
wholly-owned subsidiary of BFGoodrich. In accordance with the terms
of the merger, each share of Coltec common stock was converted into
the right to receive 0.56 shares of BFGoodrich common stock, or 35.5
million shares of BFGoodrich common stock.
In addition, BFGoodrich issued options to purchase 3.0 million shares
of BFGoodrich common stock in exchange for options to purchase Coltec
common stock outstanding immediately prior to the merger. These
options vest and become exercisable in accordance with the terms and
conditions of the original Coltec options. Also, the holders of
Coltec's 5 1/4 % Convertible Preferred Securities received the right
to convert each such convertible preferred security in 0.955248 of a
share of BFGoodrich common stock, subject to certain adjustments.
Since the merger was not consummated as of June 30 1999, the results
of BFGoodrich have not been included in the accompanying condensed
consolidated financial statements.
The following unaudited selected pro forma combined financial data
are presented for informational purposes only. They are not
necessarily indicative of the results of operations or of the
financial position which would have occurred had the Merger been
completed during the periods or as of the date for which the pro
forma data are presented. They are also not necessarily indicative of
the combined company's future results of operations or financial
position. In particular, the combined company expects to realize
significant operating cost savings as a result of the Merger. No
adjustment has been included in the pro forma combined financial data
for these anticipated operating cost savings nor for the one-time
merger and consolidation costs expected to be incurred upon
consummation of the Merger.
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The Company is still in the process of reviewing the respective
accounting policies of the two companies to determine if they are
consistent or if they need to be conformed. As a result of this
review, the historical financial statements may need to be restated to
conform to those accounting policies that are most appropriate. No
restatements of prior periods have been included in the unaudited pro
forma combined financial data below.
Pro forma per share amounts for the combined company are based on the
exchange ratio of 0.56 of a share of BFGoodrich common stock for each
share of Company common stock.
UNAUDITED SELECTED PRO FORMA COMBINED FINANCIAL DATA
(Dollars in millions, except per share amounts)
Three Months Ended Six Months Ended
July 4 June 28 July 4 June 28
1999 1998 1999 1998
----------- ----------- ----------- -----------
Pro Forma Combined Statement of Income Data:
Sales $ 1,463.4 $ 1,405.8 $ 2,875.2 $ 2,717.9
Income from continuing operations $ 97.5 $ 95.5 $ 174.2 $ 175.0
Income from continuing operations
per diluted common share $ 0.87 $ 0.84 $ 1.56 $ 1.55
Weighted average number of common shares
and assumed conversion (on a fully diluted
basis) (millions) 113.9 115.2 113.6 113.9
July 4
1999
-----------
Pro Forma Combined Balance Sheet Data:
Total assets $ 5,553.6
Total shareholders' equity $ 1,423.6
Book value per common share $ 12.93
3. EARNINGS PER SHARE
Basic earnings per common share is computed by dividing net income by
the weighted-average number of shares of common stock outstanding
during the year.
Diluted earnings per common share is computed by using the treasury
stock method to determine shares related to stock options and
restricted stock.
(In Thousands) Three Months Ended Six Months Ended
July 4 June 28 July 4 June 28
1999 1998 1999 1998
------- -------- ------- --------
Income available to common shareholders $35,854 $ 39,658 $63,307 $ 64,879
Dividends on convertible preferred
securities, net of tax 1,300 1,085 2,600 1,085
------- -------- ------- --------
Net income available to common
shareholders before extraordinary item
plus assumed conversions 37,154 40,743 65,907 65,964
Extraordinary item, net of tax -- (4,326) -- (4,326)
------- -------- ------- --------
Net income available to common
shareholders plus assumed conversions $37,154 $ 36,417 $65,907 $ 61,638
======= ======== ======= ========
Basic weighted-average 63,172 65,986 63,114 65,934
Stock options and restricted stock issued 800 1,054 671 1,154
Convertible preferred securities 5,117 4,264 5,117 2,132
------- -------- ------- --------
Diluted weighted-average common shares 69,089 71,304 68,902 69,220
======= ======== ======= ========
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4. ACQUISITIONS AND DIVESTITURES
In January 1998, the Company acquired certain Marine and Petroleum
Mfg. Inc.'s manufacturing facilities based in Texas for approximately
$17,000. The plants acquired produce flexible graphite and
polytetrafluoroethylene (PTFE) fluid sealing products used in the
petrochemical industry. The Company also acquired Tex-o-Lon and
Repro-Lon for approximately $25,000. Tex-o-Lon manufactures, machines
and distributes PTFE products, primarily for the semiconductor
industry. Repro-Lon reprocesses PTFE compounds for the chemical and
semiconductor industries. The acquisitions were accounted for as
purchases; accordingly, the purchase price, which was financed
through available cash resources, was allocated to the acquired
assets based upon their fair market values. The $31,697 million
combined excess of the purchase price over net assets is being
amortized over 25 years.
In February 1998, the Company purchased the Sealing Division of
Groupe Carbone Lorraine for $45,600. This division, with facilities
in France and South Carolina, produces high-technology metallic
gaskets used in the nuclear, petroleum and chemical industries. This
acquisition was accounted for as a purchase and the purchase price,
also financed through available cash resources, was allocated to the
acquired assets based upon their fair market values. The $25,042
excess of the purchase price over net assets is being amortized over
25 years.
In May 1998, the Company sold the capital stock of its Holley
Performance Products subsidiary to Kohlberg & Co., L.L.C., a private
merchant banking firm located in Mount Kisco, New York, for $100
million in cash. The sale resulted in a pre-tax gain of $56,194, net
of liabilities retained.
5. EXTRAORDINARY ITEM
The Company incurred an extraordinary charge of $4,326, net of income
taxes of $2,228, in the second quarter of 1998 in connection with
early debt repayment.
6. COMMITMENTS AND CONTINGENCIES
The Company and certain of its subsidiaries are defendants in various
lawsuits, including actions involving asbestos-containing products
and certain environmental proceedings.
With respect to asbestos product liability and related litigation
costs, as of July 4, 1999 two subsidiaries of the Company were among
a number of defendants (typically 15 to 40) in approximately 92,600
actions (including approximately 12,800 actions in advanced stages of
processing) filed in various states by plaintiffs alleging injury or
death as a result of exposure to asbestos fibers. During the first
six months of 1999, these two subsidiaries of the Company received
approximately 18,100 new actions compared to approximately 20,100 new
actions received during the first six months of 1998. Through July 4,
1999, approximately 268,800 of the approximately 361,400 total
actions brought have been settled or otherwise disposed.
The damages claimed for personal injury or death vary from case to
case, and in many cases plaintiffs seek $1,000 or more in
compensatory damages and $2,000 or more in punitive damages from an
extensive list of defendants.
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Although the law in each state differs to some extent, it appears,
based on advice of counsel, that liability for compensatory damages
would be shared among all responsible defendants, thus limiting the
potential monetary impact of such judgments on any individual
defendant.
Following a decision of the Pennsylvania Supreme Court, in a case in
which neither the Company or any or its subsidiaries were parties,
that held insurance carriers are obligated to cover asbestos-related
bodily injury actions if any injury or disease process, from first
exposure through manifestation, occurred during a covered policy
period (the "continuous trigger theory of coverage"), the Company
settled litigation with its primary and most of its first-level excess
insurance carriers, substantially on the basis of the court's ruling.
The Company has negotiated a final agreement with most of its excess
carriers that are in the layers of coverage immediately above its
first layer. The Company is currently receiving payments pursuant to
this agreement. The Company believes that, with respect to the
remaining carriers, a final agreement can be achieved without
litigation and on substantially the same basis that it has resolved
the issues with its other carriers. Payments were made by the Company
with respect to asbestos liability and related costs aggregating
$30,576 and $21,527 for the first six months of 1999 and 1998,
respectively, substantially all of which were covered by insurance.
Settlements are generally made on a group basis with payments made to
individual claimants over periods of one to four years. Related to
payments not covered by insurance, the Company recorded charges to
operations amounting to $4,000 for each of the first six months of
1999 and 1998.
In accordance with the Company's internal procedures for the
processing of asbestos product liability actions and due to the
proximity to trial or settlement, certain outstanding actions have
progressed to a stage where the Company can reasonably estimate the
cost to dispose of these actions. As of July 4, 1999, the Company
estimates that the aggregate remaining cost of the disposition of the
settled actions for which payments remain to be made and actions in
advanced stages of processing, including associated legal costs, is
approximately $154,087 and the Company expects that this cost will be
substantially covered by insurance.
With respect to the 79,800 outstanding actions as of July 4, 1999,
which are in preliminary procedural stages, the Company lacks
sufficient information upon which judgments can be made as to the
validity or ultimate disposition of such actions, thereby making it
difficult to estimate with reasonable certainty the potential
liability or costs to the Company. The lawsuits are disposed of over a
period of time ranging from one year to more than five years, with the
majority being disposed of by the third year after filing. When
asbestos actions are received, they are typically forwarded to local
counsel to ensure that the appropriate preliminary procedural response
is taken. The complaints typically do not contain sufficient
information to permit a reasonable evaluation as to their merits at
the time or receipt, and in jurisdictions encompassing a majority of
the outstanding actions, the practice has been that little or no
discovery or other action is taken until several months prior to the
date set for trial. Accordingly, the Company generally does not have
the information necessary to analyze the actions in sufficient detail
to estimate the ultimate liability or costs to the Company, if any,
until the actions appear on a trial calendar. A determination to seek
dismissal, to attempt to settle or proceed to trial is typically not
made prior to the receipt of such information.
The Company believes that it will continue to receive some number of
asbestos lawsuits into the foreseeable future. It is difficult,
however, to predict the number of asbestos lawsuits that the Company's
subsidiaries will receive or the time frame in which they will be
received. The Company has noted that, with respect to recently settled
actions
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or actions in advanced stages of processing, the mix of the injuries
alleged and the mix of the occupations of the plaintiffs have been
changing from those traditionally associated with the Company's
asbestos-related actions. The Company is not able to determine with
reasonable certainty whether this trend will continue. Based upon the
foregoing, and due to the unique factors inherent in each of the
actions, including the nature of the disease, the occupation of the
plaintiff, the presence or absence of other possible causes of a
plaintiff's illness, the availability of legal defenses, such as the
statute of limitations or state of the art, the jurisdiction in which
a lawsuit is filed, the pendency of tort reform and whether the
lawsuit is an individual one or part of a group, management is unable
to estimate with reasonable certainty the cost of disposing of
outstanding actions in preliminary procedural stages or of actions
that may be filed in the future. However, the Company believes that
its subsidiaries are in a favorable position compared to many other
defendants because, among other things, the asbestos fibers in its
asbestos-containing products were encapsulated. Subsidiaries of the
Company continue to distribute encapsulated asbestos-bearing product
in the United States with annual sales of less than $1.5 million. All
sales are accompanied by appropriate warnings. The end users of such
product are sophisticated users, who utilize the product for critical
applications where no known substitutes exist or have been approved.
Insurance coverage of a small non-operating subsidiary formerly
distributing asbestos-bearing products is nearly depleted. Considering
the foregoing, as well as the experience of the Company's subsidiaries
and other defendants in asbestos litigation, the likely sharing of
judgments among multiple responsible defendants, and given the
substantial amount of insurance coverage that the Company expects to
be available from its solvent carriers to cover the majority of its
exposure, the Company believes that pending and reasonably anticipated
future actions are not likely to have a materially adverse effect on
the Company's consolidated results of operations or financial
condition. Although the insurance coverage which the Company has is
substantial, it should be noted that insurance coverage for asbestos
claims is not available to cover exposures initially occurring on and
after July 1, 1984. The Company's subsidiaries continue to be named as
defendants in new cases, some of which allege initial exposure after
July 1, 1984.
In addition to claims for personal injury, the Company's subsidiaries
have been involved in an insignificant number of property damage
claims based upon asbestos-containing materials found in schools,
public facilities and private commercial buildings. Based upon
proceedings to date, the overwhelming majority of these claims have
been resolved without a material adverse impact on the Company.
Likewise, the insignificant number of claims remaining to be resolved
are not expected to have a materially adverse effect on the Company's
consolidated results of operations or financial condition.
The Company has recorded an accrual for its liabilities for
asbestos-related matters that are deemed probable and can be
reasonably estimated (settled actions and actions in advanced stages
of processing), and has separately recorded an asset equal to the
amount of such liabilities that is expected to be recovered by
insurance. In addition, the Company has recorded a receivable for that
portion of payments previously made for asbestos product liability
actions and related litigation costs that is recoverable from its
insurance carriers. Liabilities for asbestos-related matters and the
receivable from insurance carriers included in the Consolidated
Balance Sheets are as follows:
July 4 Dec. 31
1999 1998
-------- -------
Accounts and notes receivable $126,753 $95,448
Other assets 37,589 32,577
Accrued expenses 124,160 93,700
Other liabilities 29,927 22,833
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With respect to environmental proceedings, the Company has been
notified that it is among the potentially responsible parties under
federal environmental laws, or similar state laws, relative to the
costs of investigating and in some cases remediating contamination by
hazardous materials at several sites. Such laws impose joint and
several liability for the costs of investigating and remediating
properties contaminated by hazardous materials. Liability for these
costs can be imposed on present and former owners or operators of the
properties or on parties who generated the wastes that contributed to
the contamination. The Company's policy is to accrue environmental
remediation costs when it is both probable that a liability has been
incurred and the amount can be reasonably estimated. While it is often
difficult to reasonably quantify future environmental-related
expenditures, the Company currently estimates its future non-capital
expenditures related to environmental matters to range between $26,300
and $57,100. In connection with these expenditures, the Company has
accrued $37,800 at July 4, 1999, representing management's best
estimate of probable non-capital environmental expenditures. These
non-capital expenditures are estimated to be incurred over the next 10
to 20 years. In addition, capital expenditures aggregating $5,000 may
be required during the next two years related to environmental
matters. Although the Company is pursuing insurance recovery in
connection with certain of these matters, no receivable has been
recorded with respect to any potential recovery of costs in connection
with any environmental matters.
6. Supplemental Guarantor Information
In April 1998, the Company privately placed $300,000 principal amount
of 7 1/2% Senior Notes due 2008 (Senior Notes). Substantially all the
Company's subsidiaries incorporated in the United States (the
"Subsidiary Guarantors") have fully and unconditionally guaranteed, on
a joint and several basis, the Company's obligations to pay principal
and interest with respect to the Senior Notes. Each Subsidiary
Guarantor is wholly owned and management has determined that separate
financial statements for the Subsidiary Guarantors are not material to
investors. The subsidiaries of the Company that are not Subsidiary
Guarantors are referred to in this note as the "Non-Guarantor
Subsidiaries".
The following supplemental consolidating condensed financial
statements present balance sheets as of July 4, 1999 and December 31,
1998 and statements of earnings and of cash flows for the three months
and six months ended July 4, 1999 and June 28, 1998. In the
consolidating financial statements, Coltec Industries Inc ("Parent")
accounts for its investments in wholly-owned subsidiaries using the
equity method and the Subsidiary Guarantors account for their
investments in Non-Subsidiary Guarantors using the equity method.
Interest expense related to the indebtedness under the Company's
credit agreement and its three series of senior notes is allocated to
United States subsidiaries based on net sales.
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COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Consolidating Condensed Statement of Earnings
Three Months Ended July 4, 1999
--------------------------------------------------------------------------
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
--------- ------------ ------------- ------------ ------------
Net sales $ 132,253 $ 146,220 $ 117,556 $(14,364) $ 381,665
Cost of sales 94,610 98,781 86,219 (14,364) 265,246
--------- --------- --------- -------- ---------
Gross profit 37,643 47,439 31,337 -- 116,419
Selling and administrative 17,616 23,266 13,036 -- 53,918
--------- --------- --------- -------- ---------
Operating income 20,027 24,173 18,301 -- 62,501
Equity earnings of affiliates 31,664 15,280 -- (46,944) --
Gain on divestiture 3,640 -- 2,500 -- 6,140
Interest expense and other, net (13,044) (7,619) 8,190 125 (12,348)
--------- --------- --------- -------- ---------
Earnings before income taxes, and
minority interest 42,287 31,834 28,991 (46,819) 56,293
Income taxes (6,433) (4,535) (8,171) -- (19,139)
Minority interest in net loss of
subsidiaries, net of tax -- -- (1,300) -- (1,300)
--------- --------- --------- -------- ---------
Net earnings $ 35,854 $ 27,299 $ 19,520 $(46,819) $ 35,854
========= ========= ========= ======== =========
Consolidating Condensed Statement of Earnings
Six Months Ended July 4, 1999
--------------------------------------------------------------------------
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
--------- ------------ ------------- ------------ ------------
Net sales $ 255,632 $ 298,388 $ 233,944 $ (30,067) $ 757,897
Cost of sales 186,243 200,796 172,979 (30,067) 529,951
--------- --------- --------- --------- ---------
Gross profit 69,389 97,592 60,965 -- 227,946
Selling and administrative 37,132 45,553 26,815 -- 109,500
--------- --------- --------- --------- ---------
Operating income 32,257 52,039 34,150 -- 118,446
Equity earnings of affiliates 53,132 28,530 -- (81,662) --
Gain on divestiture 3,640 2,500 -- 6,140
Interest expense and other, net (26,281) (15,777) 17,330 (24,728)
--------- --------- --------- --------- ---------
Earnings before income taxes, and
minority interest 62,748 64,792 53,980 (81,662) 99,858
Income taxes 559 (19,454) (15,056) -- (33,951)
Minority interest in net loss of
subsidiaries, net of tax -- -- (2,600) -- (2,600)
--------- --------- --------- --------- ---------
Net earnings $ 63,307 $ 45,338 $ 36,324 $ (81,662) $ 63,307
========= ========= ========= ========= =========
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COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Consolidating Condensed Statement of Earnings
Three Months Ended June 28, 1998
--------------------------------------------------------------------------
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
--------- ------------ -------------- ------------ ------------
Net sales $ 128,909 $ 163,431 $ 114,787 $(12,373) $ 394,754
Cost of sales 128,899 110,687 84,649 (12,373) 311,862
--------- --------- --------- -------- ---------
Gross profit 10 52,744 30,138 -- 82,892
Selling and administrative 11,291 35,094 17,739 -- 64,124
--------- --------- --------- -------- ---------
Operating income (11,281) 17,650 12,399 -- 18,768
Equity earnings of affiliates 19,302 10,409 -- (29,711) --
Gain on divestiture 56,194 -- -- -- 56,194
Interest expense and other, net (18,917) (627) 6,847 (533) (13,230)
--------- --------- --------- -------- ---------
Earnings before income taxes,
minority interest and
extraordinary item 45,298 27,432 19,246 (30,244) 61,732
Income taxes (5,640) (11,128) (4,221) -- (20,989)
Minority interest in net loss
of subsidiaries -- -- (1,085) -- (1,085)
--------- --------- --------- -------- ---------
Earnings before extraordinary
item 39,658 16,304 13,940 (30,244) 39,658
Extraordinary item (net of tax) (4,326) -- -- -- (4,326)
--------- --------- --------- -------- ---------
Net earnings $ 35,332 $ 16,304 $ 13,940 $(30,244) $ 35,332
========= ========= ========= ======== =========
Consolidating Condensed Statement of Earnings
Six Months Ended June 28, 1998
--------------------------------------------------------------------------
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
--------- ------------ -------------- ------------ ------------
Net sales $ 244,008 $ 331,861 $ 217,255 $(23,929) $ 769,195
Cost of sales 209,430 225,814 160,695 (23,929) 572,010
--------- --------- --------- -------- ---------
Gross profit 34,578 106,047 56,560 -- 197,185
Selling and administrative 29,793 59,566 35,764 -- 125,123
--------- --------- --------- -------- ---------
Operating income 4,785 46,481 20,796 -- 72,062
Equity earnings of affiliates 39,983 17,423 -- (57,406) --
Gain on divestiture 56,194 -- -- -- 56,194
Interest expense and other, net (27,256) (18,157) 18,157 (1,054) (28,310)
--------- --------- --------- -------- ---------
Earnings before income taxes,
minority interest and
extraordinary item 73,706 45,747 38,953 (58,460) 99,946
Income taxes (8,827) (13,550) (11,605) -- (33,982)
Minority interest in net loss
of subsidiaries -- -- (1,085) -- (1,085)
--------- --------- --------- -------- ---------
Earnings before extraordinary
item 64,879 32,197 26,263 (58,460) 64,879
Extraordinary item (net of tax) (4,326) -- -- -- (4,326)
--------- --------- --------- -------- ---------
Net earnings $ 60,553 $ 32,197 $ 26,263 $(58,460) $ 60,553
========= ========= ========= ======== =========
13
14
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Consolidating Condensed Balance Sheet
July 4, 1999
--------------------------------------------------------------------------
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
--------- ------------ -------------- ------------ ------------
Cash and cash equivalents $ 16,227 $ 4,455 $ 8,128 $ 28,810
Accounts and notes receivable, net -- 6,820 204,244 211,064
Inventory, net 74,871 58,236 109,234 242,341
Deferred income taxes 13,983 8,532 1,825 24,340
Other current assets 68,539 2,282 10,473 81,294
--------- --------- ---------- ----------- ----------
Total current assets 173,620 80,325 333,904 -- 587,849
Intercompany, net (941,867) 367,338 574,529 --
Investments in affiliates 1,071,283 110,508 2,391 $(1,184,182) --
Property, plant and
equipment 110,000 109,127 82,415 301,542
Cost in excess of net assets
acquired, net 58,249 134,455 19,152 211,856
Other assets 55,251 3,181 48,506 106,938
--------- --------- ---------- ----------- ----------
Total assets $ 526,536 $ 804,934 $1,060,897 $(1,184,182) $1,208,185
========= ========= ========== =========== ==========
Total current liabilities $ 154,334 $ 49,508 $ 184,659 $ 388,501
Long term debt 448,110 861 91,672 540,643
Deferred income taxes (18,127) 141,446 24,730 148,049
Other liabilities 44,885 5,996 37,687 $ (1,215) 87,353
Liabilities of discontinued
operations 132,545 -- -- 132,545
Company-obligated, mandatorily
redeemable convertible preferred
securities -- -- 146,305 146,305
Shareholders' equity (235,211) 607,123 575,844 (1,182,967) (235,211)
--------- --------- ---------- ----------- ----------
Total liabilities and
shareholders' equity $ 526,536 $ 804,934 $1,060,897 $(1,184,182) $1,208,185
========= ========= ========== =========== ==========
14
15
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Consolidating Condensed Balance Sheet
December 31, 1998
--------------------------------------------------------------------------
Non-
Guarantor Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
--------- ------------ -------------- ------------ ------------
Cash and cash equivalents $ 6,422 $ 8,522 $ 6,841 $ 21,785
Accounts and notes receivable, net -- 20,943 127,242 148,185
Inventory, net 88,474 56,470 91,059 236,003
Deferred income taxes 9,388 8,532 2,544 20,464
Other current assets 6,030 5,123 4,459 15,612
--------- --------- --------- ----------- ----------
Total current assets 110,314 84,792 246,943 -- 442,049
Intercompany, net (915,938) 324,944 590,994 --
Investments in affiliates 1,024,416 74,489 850 $(1,099,755) --
Property, plant and equipment 113,069 109,991 83,582 306,642
Cost in excess of net assets
acquired, net 58,924 134,861 20,862 214,647
Other assets 46,922 2,953 42,435 92,310
--------- --------- --------- ----------- ----------
Total assets $ 437,707 $ 746,828 $ 970,868 $(1,099,755) $1,055,648
========= ========= ========= =========== ==========
Total current liabilities $ 89,170 $ 31,605 $ 152,030 $ 272,805
Long term debt 484,107 2,096 91,275 577,478
Deferred income taxes (19,731) 141,446 18,194 139,909
Other liabilities 49,488 12,018 28,750 $ (4,766) 85,490
Liabilities of discontinued
operations 134,995 -- -- 134,995
Company-obligated, mandatorily
redeemable convertible
preferred securities 145,293 145,293
Shareholders' equity (300,322) 559,663 535,326 (1,094,989) (300,322)
--------- --------- --------- ----------- ----------
Total liabilities and
shareholders' equity $ 437,707 $ 746,828 $ 970,868 $(1,099,755) $1,055,648
========= ========= ========= =========== ==========
15
16
COLTEC INDUSTRIES INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Consolidating Condensed Statement of Cash Flows
Six Months Ended July 4, 1999
------------------------------------------------------------------------
Non-Guarantor
Parent Guarantor Subsidiaries Eliminations Consolidated
-------- --------- ------------- -------------- -------------
Cash from operating activities $ 63,496 $(4,067) $ 1,287 -- $ 60,716
-------- ------- ------- --------- --------
Cash flows from investing activities:
Capital expenditures (7,147) (8,076) (3,737) (18,960)
Proceeds from divestiture 3,886 3,886
Cash from (to) Parent (11,813) 8,076 3,737 --
-------- ------- ------- --------- --------
Cash used in investing activities (15,074) -- -- -- (15,074)
-------- ------- ------- --------- --------
Cash flows from financing activities:
Decrease in revolving facility, net (35,500) -- -- (35,500)
Repayment of borrowings under receivables
facility (2,500) (2,500)
Repayment of long-term debt (40) (577) (617)
Cash from (to) Parent (577) 577 -- --
-------- ------- ------- --------- --------
Cash provided by financing activities (38,617) -- -- -- (38,617)
-------- ------- ------- --------- --------
Increase (decrease) in cash and
cash equivalents 9,805 (4,067) 1,287 7,025
Cash and cash equivalents--
beginning of period 6,422 8,522 6,841 21,785
-------- ------- ------- --------- --------
Cash and cash equivalents--
end of period $ 16,227 $ 4,455 $ 8,128 -- $ 28,810
======== ======= ======= ========= ========
Consolidating Condensed Statement of Cash Flows
Six Months Ended June 28, 1998
-----------------------------------------------------------------------------
Non-Guarantor
Parent Guarantor Subsidiaries Eliminations Consolidated
--------- --------- ------------ ------------ ------------
Cash provided by operating activities $ 37,735 $ 3,877 $ (1,438) -- $ 40,174
--------- --------- --------- ---------- ---------
Cash flows from investing activities:
Capital expenditures (11,663) (10,288) (5,236) (27,187)
Proceeds from divestiture 100,000 100,000
Acquisition of business (25,000) (17,000) (38,518) (80,518)
Cash from (to) Parent (71,042) (27,288) 43,754 -- --
--------- --------- --------- ---------- ---------
Cash used in investing activities (7,705) -- -- -- (7,705)
--------- --------- --------- ---------- ---------
Cash flows from financing activities:
Increase (decrease) in revolving facility, net (480,000) 40,000 (440,000)
Repayment of long-term debt (4,591) (154) (14,102) (18,847)
Issuance of long-term debt 292,151 292,151
Issuance of convertible preferred securities -- 144,472 144,472
Payments for unclaimed stock (3,871) (3,871)
Purchase of treasury stock (994) (994)
Cash from (to) Parent 170,216 154 (170,370) --
--------- --------- --------- ---------- ---------
Cash used in financing activities (27,089) -- -- -- (27,089)
--------- --------- --------- ---------- ---------
Cash and cash equivalents:
Increase (decrease) in cash and cash
equivalents 2,941 3,877 (1,438) 5,380
Cash and cash equivalents--
beginning of period 9,912 722 4,059 14,693
--------- --------- --------- ---------- ---------
Cash and cash equivalents--
end of period $ 12,853 $ 4,599 $ 2,621 -- $ 20,073
========= ========= ========= ========== =========
16