<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 8-K/A
AMENDMENT TO APPLICATION OR REPORT
Filed pursuant to Section 12, 13 or 15(d) of
THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 1-1511
FEDERAL-MOGUL CORPORATION
(Exact name of registrant as specified in its charter)
AMENDMENT NO. 2
The undersigned Registrant hereby amends the following items, financial
statements, exhibits or other portions of its Current Report dated
November 10, 1993 on Form 8-K, as previously amended by Form 8-K/A dated
December 3, 1993 as set forth in the pages attached hereto.
Item 7(a) is amended to amend the Financial Statements of the Business
Acquired with respect to the business of Sealed Power Corporation and
Sealed Power Corporation of Canada, Ltd. ("SPR") acquired by the Registrant
from SPX Corporation ("SPX").
Item 7(b) is refiled with the Pro Forma Financial Statements for the
Registrant and SPR.
Item 7(c) is amended to add the Consent of Independent Public Accountants
as Exhibit 24-1.
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, thereunto duly authorized.
FEDERAL-MOGUL CORPORATION
By: (James B. Carano)
--------------------------------------
JAMES B. CARANO
Vice President and Controller
Dated as of February 11, 1994
<PAGE> 2
Item 7(a) - Financial Statements of the Business Acquired.
- ----------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To SPX Corporation:
We have audited the accompanying combined statement of assets and liabilities
of the Sealed Power Corporation and Sealed Power of Canada Ltd. (the
"Business"), as of December 31, 1992 and 1991, and the related combined
statements of revenue and expenses and changes in equity and cash flows for
each of the two years in the period ended December 31, 1992. These financial
statements are the responsibility of the Business' management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
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.
These statements have been prepared for the purpose of complying with the
rules and regulations for filing with the Securities and Exchange Commission
pursuant to the Agreement of Purchase and Sale described in Note 1, between
SPX Corporation and Federal-Mogul Corporation dated as of September 15, 1993,
and is not intended to be a complete presentation of the Business' assets,
liabilities, equity, revenues, expenses and cash flows.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined assets and liabilities of the
Business as of December 31, 1992 and 1991, and the revenues and expenses and
changes in equity and their cash flows for each of the two years in the
period ended December 31, 1992, in conformity with generally accepted
accounting principles.
As discussed in Note 4 to the combined financial statements, effective
January 1, 1992, the Business changed its method of accounting for post
retirement benefits other than pensions.
ARTHUR ANDERSEN & CO.
(Arthur Andersen & Co.)
Chicago, Illinois
October 29, 1993
<PAGE> 3
<TABLE>
SEALED POWER CORPORATION AND
SEALED POWER CORPORATION OF CANADA, LTD.
COMBINED STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
December 31
-----------
1992 1991
---- ----
<S> (in thousands)
CURRENT ASSETS: <C> <C>
Cash and temporary cash investments $ 72 $ 293
Receivables, less reserves of $939 in 1992 and
$2,049 in 1991 (Note 5) 1,909 6,496
Inventories (Note 2 51,342 54,290
Prepaid and other current assets 537 638
-------- --------
Total current assets $ 53,860 $ 61,717
PROPERTY, PLANT, & EQUIPMENT, at cost (Notes 2 and 5) $ 27,851 $ 27,151
Less: Accumulated depreciation 10,919 10,493
-------- --------
Net property, plant, and equipment $ 16,932 $ 16,658
OTHER ASSETS 3,877 4,510
COSTS IN EXCESS OF NET ASSETS OF BUSINESSES
ACQUIRED (Note 2) 1,594 1,822
-------- --------
$ 76,263 $ 84,707
======== ========
CURRENT LIABILITIES:
Accounts payable (Note 7) $ 14,559 $ 8,922
Accrued liabilities 8,816 7,769
Capital lease obligation (Note 5) 75 767
Income taxes payable (Note 3) 404 313
-------- --------
Total current liabilities $ 23,854 $ 17,771
LONG-TERM LIABILITIES (Note 4) 5,210 -
LONG-TERM CAPITAL LEASE OBLIGATIONS (Note 5) 3,723 4,498
COMMITMENTS AND CONTINGENCIES (Note 5) - -
EQUITY (Note 6):
Business Equity $ 43,953 $ 62,207
Cumulative translation adjustments (477) 231
-------- --------
Total equity $ 43,476 $ 62,438
-------- --------
$ 76,263 $ 84,707
======== ========
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE> 4
<TABLE>
SEALED POWER CORPORATION AND
SEALED POWER CORPORATION OF CANADA, LTD.
COMBINED STATEMENTS OF REVENUES AND EXPENSES
AND CHANGES IN EQUITY
<CAPTION>
Years Ended December 31
-----------------------
1992 1991
---- ----
(In thousands)
<S> <C> <C>
NET REVENUES $163,236 $155,251
COSTS AND EXPENSES:
Cost of products sold 104,803 100,713
Selling, distribution, and administrative
expenses 46,528 44,145
Interest expense, net 474 482
Other (income) expense, net (Note 5) 1,959 787
-------- --------
$153,764 $146,127
-------- --------
REVENUES OVER EXPENSES BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
METHOD $ 9,472 $ 9,124
PROVISION FOR INCOME TAXES (Note 3) 3,488 3,304
-------- --------
REVENUES OVER EXPENSES BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING METHOD $ 5,985 $ 5,820
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
METHOD, NET OF TAXES (Note 4) $ 3,242 $ -
-------- --------
REVENUES OVER EXPENSES $ 2,743 $ 5,820
EQUITY AT BEGINNING OF YEAR 62,438 88,849
PAYMENTS TO SPX CORPORATION (20,997) (32,236)
TRANSLATION ADJUSTMENTS (708) 5
-------- --------
EQUITY AT END OF YEAR $ 43,476 $ 62,438
======== ========
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE> 5
<TABLE>
SEALED POWER CORPORATION AND
SEALED POWER CORPORATION OF CANADA, LTD.
COMBINED STATEMENTS OF CASH FLOWS
<CAPTION>
Years Ended December 31
-----------------------
1992 1991
---- ----
(In thousands)
<S>
Cash flows from operating activities: <C> <C>
Revenues over expenses from operating activities $ 2,743 $ 5,820
Adjustments to reconcile revenues over expenses to
net cash provided by operating activities -
Cumulative effect of change in accounting method 3,242 -
Depreciation and amortization 3,299 2,453
Decrease in receivables 4,587 11,811
Decrease in inventories 2,948 9,894
Decrease in prepaid and other current assets 101 127
Decrease in long term assets 633 2,748
Increase (decrease) in accounts payable 5,637 (2,212)
Increase in accrued liabilities 1,047 2,366
Increase (decrease) in income taxes payable 91 (77)
Increase in long term liabilities 298 -
Other, net 1,375 176
-------- --------
Net cash provided by operating activities $ 26,001 $ 33,106
-------- --------
Cash flows from investing activities:
Capital expenditures $ (3,758) $ (2,141)
-------- --------
Cash flows from financing activities:
Payments to SPX Corporation $(20,997) $(32,236)
Net borrowings (payments) of capital lease
obligation (1,467) 1,341
-------- --------
Net cash from financing activities $(22,464) $(30,895)
-------- --------
Net change in cash and temporary cash investments $ (221) $ 70
Cash and temporary cash investments, beginning of
period 293 223
-------- --------
Cash and temporary cash investments, end of period $ 72 $ 293
======== ========
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE> 6
SEALED POWER CORPORATION AND
SEALED POWER CORPORATION OF CANADA, LTD.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1992
(1) BASIS OF COMBINATION AND SUBSEQUENT SALE
The combined financial statements include the accounts of Sealed Power
Corporation, a wholly owned U.S. subsidiary of SPX Corporation ("SPX") and
Sealed Power Corporation of Canada, Ltd., a wholly owned Canadian subsidiary
of SPX, and are stated on the basis of historical cost. These combined
statements have been prepared for the purpose of complying with the rules
and regulations of the Securities and Exchange Commission, for inclusion in
a Form 8-K filing.
These operations, herein together referred to as the "business", represent
SPX's operations that market and distribute replacement engine and under
vehicle parts in the United States and Canada. Operating results as
presented do not include any costs associated with financing of these
operations nor charges for certain administrative and management functions
provided centrally by SPX. As such, these statements may not necessarily
reflect the combined income that would have resulted if the business had
been conducted on an independent basis.
On October 25, 1993, SPX sold the business to Federal-Mogul Corporation
as of the close of business on October 22, 1993.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and financial policies which affect significant elements of
the combined financial statements of the business and which are not apparent
on the face of the statements, or in other notes to the combined financial
statements, are described below.
A. Principles of Combination
The combined financial statements include the accounts of the business after
the elimination of all significant intercompany accounts and transactions
between Sealed Power Corporation and Sealed Power Corporation of Canada, Ltd.
Assets and liabilities of the business' Canadian operations are translated
into U.S. dollars at the current rate of exchange, while revenues and
expenses are translated at the average exchange rate during the year.
Adjustments from translating Canadian operations financial statements are
excluded from the Combined Statement of Revenues and Expenses and are
reported as a component of Equity.
B. Inventories
Inventories are stated at the lower of cost or market. Domestic
inventories, amounting to $47,942,000 and $50,988,000 at December 31, 1992
and 1991, respectively, are based on the last-in, first-out (LIFO) method.
Such inventories, if priced on the first-in, first-out (FIFO) method, would
have been approximately $22,784,000 and $23,809,000 greater at December 31,
1992 and 1991, respectively. During 1992 and 1991, certain inventory
quantities were reduced resulting in liquidations of LIFO inventory
quantities carried at lower costs prevailing in prior years. The effect was
to increase net income by $1,423,000 in 1992 and by $122,000 in 1991.
Canadian inventories are based on FIFO costs.
<PAGE> 7
<TABLE>
SEALED POWER CORPORATION AND
SEALED POWER CORPORATION OF CANADA, LTD.
NOTES TO COMBINED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 1992
<CAPTION>
The components of inventory at year-end were as follows:
1992 1991
---- ----
(In thousands)
<S> <C> <C>
Finished products $50,457 $53,601
Packaging supplies 885 689
------- -------
$51,342 $54,290
======= =======
</TABLE>
C. Property, Plant, & Equipment
The business uses principally the straight-line method for computing
depreciation expense over the useful lives of the property, plant, and
equipment.
Asset additions and improvements are added to the property accounts while
maintenance and repairs, which do not renew or extend the lives of the
respective assets, are expensed currently. Upon sale or retirement of
depreciable properties, the related cost and accumulated depreciation are
removed from the property accounts. The net gain or loss on disposition of
property is reflected in income.
<TABLE>
<CAPTION>
The components of property, plant, and equipment, at cost, at year-end were
as follows:
1992 1991
---- ----
(In thousands)
<S> <C> <C>
Land $ 532 $ 532
Buildings 8,807 8,796
Machinery and equipment 18,134 17,443
Construction in progress 378 380
------- -------
$27,851 $27,151
======= =======
</TABLE>
D. Costs in Excess of Net Assets of Businesses Acquired
The business amortizes costs in excess of the net assets of businesses
acquired on a straight-line method over the estimated periods benefitted,
not to exceed 40 years. Such amortization was $228,000 in 1992 and 1991.
At December 31, 1992, total costs in excess of net assets of businesses
acquired was $2,628,000 and accumulated amortization of costs in excess
of net assets of businesses acquired was $1,034,000.
(3) INCOME TAXES
The results of operations of Sealed Power Corporation is reported for
Federal income tax purposes in the consolidated U.S. income tax returns of
SPX. The results of operations of Sealed Power Canada, Ltd. are reported in
individual income tax returns in Canada.
SPX does not have a formal tax sharing agreement with its subsidiaries.
Domestic subsidiaries are charged an amount equal to the applicable Federal
and state statutory tax rates on pretax book income. All domestic prepaid,
deferred and payable tax balances are maintained by SPX. The difference
between the effect of statutory rates and the domestic provision (benefit)
computed on a separate company basis is borne by SPX.
<PAGE> 8
SEALED POWER CORPORATION AND
SEALED POWER CORPORATION OF CANADA, LTD.
NOTES TO COMBINED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 1992
In 1992, SPX adopted Statement of Financial Accounting Standards (SFAS)
No. 109 - "Accounting for Income Taxes". Under SFAS No. 109, deferred
tax balances are stated at tax rates expected to be in effect when taxes
are actually paid or recovered. SPX's cumulative effect of adopting SFAS
No. 109 in 1992 was a $5 million aftertax benefit. SPX's 1991 financial
statements have not been restated to reflect the new accounting method
for income taxes. No benefit from adoption was allocated by SPX to the
business.
<TABLE>
The provision for income taxes consists of the following:
<CAPTION>
1992 1991
---- ----
(In thousands)
<S> <C> <C>
U.S. Federal $2,658 $2,620
State 156 154
Foreign 631 530
------ ------
Total $3,488 $3,305
====== ======
</TABLE>
(4) EMPLOYEE BENEFIT PLANS
Pension Plans
Substantially all U.S. employees of the business are covered under defined
benefit plans of SPX. The hourly and nonexempt employees of the
distribution centers and field warehouses are covered under separated
pension plans. The other nonexempt salary employees and all management
employees participate in the SPX Corporation Pension Plan No. 3. Pension
expense for SPX Corporation Pension Plan No. 3, which includes employees
from various other SPX entities, and the above mentioned separate plans
consisted of:
<TABLE>
<CAPTION>
1992 1991
---- ----
(In thousands)
<S> <C> <C>
Service cost-benefits earned during the period $ 1,520 $ 1,364
Interest cost on projected benefit obligation 3,439 3,285
Actual gain on assets (5,676) (4,971)
Net amortization and deferral (510) (360)
------- -------
Net periodic pension benefit $(1,227) $ (682)
======= =======
</TABLE>
<TABLE>
<CAPTION>
1992 1991
---- ----
<S>
Actuarial assumptions used: <C> <C>
Discount rates 8.25% 8.25%
Rates of increase in compensation levels 5.5 5.5
Expected long-term rate of return on assets 9.5 9.5
</TABLE>
<PAGE> 9
SEALED POWER CORPORATION AND
SEALED POWER CORPORATION OF CANADA, LTD.
NOTES TO COMBINED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 1992
<TABLE>
The above mentioned pension plans assets consist of equity and fixed income
security investments. The following table sets forth the funded status of
these plans:
<CAPTION>
1992 1991
---- ----
(In thousands)
<S>
Actuarial present value of benefit obligations: <C> <C>
Vested benefit obligation $ 33,030 $ 31,178
======== ========
Accumulated benefit obligation $ 36,599 $ 32,400
======== ========
Projected benefit obligation $ 43,739 $ 41,967
Plan assets at fair value 68,589 65,700
-------- --------
Projected benefit obligation less plan assets $ 24,850 $ 23,733
Unrecognized net gain (13,665) (13,373)
Prior service costs not yet recognized in the
net periodic pension cost (664) (538)
Unrecognized net asset at January 1, 1996 (1,545) (1,846)
-------- --------
Prepaid pension cost $ 8,976 $ 7,976
======== ========
</TABLE>
The amount of pension cost (benefit) charged to the business for U.S.
employees covered under these plans was $(240,000) in 1992 and $(136,000) in
1991. These amounts were allocated to the business based upon estimated
percentages of relative compensation. There were no assets or liabilities
of the SPX Corporation Pension Plan No. 3 allocated to the business as of
December 31, 1992 and 1991.
The Canadian employees are also covered under a pension plan. The business
converted its Defined Benefit Pension Plan to a Defined Contribution Plan
("the Plan") effective December 31, 1990. The Plans provide pension benefits
that are primarily based on the employee's years of service. Current pension
costs are expensed as funded. Upon conversion of the Plan, an unfunded
liability existed for $300,000. This unfunded liability will be funded by
the business over a period of 15 years. The business has provided $64,000
and $0 in 1992 and 1991, respectively, towards this liability.
Postretirement Health Care and Life Insurance
Effective January 1, 1992, SPX implemented Statement of Financial Accounting
Standards (SFAS) No. 106 - "Employers' Accounting for Postretirement Benefits
Other Than Pensions", using the immediate recognition transition option.
SFAS No. 106 requires recognition, during the employees' service with the
business, of the cost of their retiree health and life insurance benefits.
At January 1, 1992, SPX's accumulated postretirement benefit obligation was
$16.8 million and was recorded as a pretax transition obligation. SPX's
decrease in net earnings and equity was $10.7 million aftertax. Aside from
the one-time effect of the adjustment, adoption of SFAS No. 106 resulted in
an incremental $600,000 expense for SPX in 1992. SPX's recorded liability
for postretirement health and life benefits was $18.5 million as of
December 31, 1992.
<PAGE> 10
SEALED POWER CORPORATION AND
SEALED POWER CORPORATION OF CANADA, LTD.
NOTES TO COMBINED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 1992
Prior to 1992, SPX recognized postretirement health care and life insurance
benefits as expense when claims or premiums were paid. These costs totaled
approximately $958,000 in 1991. The following summarizes the 1992 expense
for postretirement health and life insurance recognized by SPX
(in thousands):
Recognition of transition obligation $16,829
Benefit cost for service during the year - net of
employee contributions 315
Interest cost on accumulated post-retirement benefit
obligation 1,306
-------
Postretirement benefit cost $18,450
=======
The actuarial assumptions used to determine 1992 costs and benefit
obligation includes a discount rate of 8.25% and an assumed rate of future
increase in per capita cost of health care benefits (health care trend
rates) of 13% in 1992, decreasing gradually to 6% by the year 2002.
Increasing the health care trend rate by one percentage point would increase
the accumulated postretirement benefit obligation by $1.3 million and would
increase the 1992 postretirement benefit cost by $.1 million.
The liability for and amount of postretirement health and life insurance
costs charged to the business in 1992 was as follows (in thousands):
Recognition of transition obligation $ 4,912
Benefit cost for service during the year - net of
employee contributions 124
Interest cost on accumulated post-retirement benefit
obligation 442
-------
Postretirement benefit cost $ 5,478
=======
These amounts were allocated to the business based upon estimated
percentages of relative active and retired employees covered under the
benefit plans.
Other
Employees of the U.S. business participate in SPX's Employee Stock Ownership
Plan. The business expensed $831,000 in 1992 and $644,000 in 1991 for costs
of the plan. Payment for this benefit is made to SPX Corporation in the
first quarter of the year subsequent to when the costs were incurred.
Accordingly, the business had a liability recorded for this benefit of
$831,000 and $644,000 as of December 31, 1992 and 1991, respectively.
The business provides a Retirement Savings Plan for eligible employees.
Employees can contribute up to 15% of their earnings with the business
matching a portion of the amount up to 6% of their earnings. The
business's contribution to this plan was $137,000 in 1992 and $98,000 in
1991.
Certain management employees of the business participate in SPX's Stock
Compensation Plan. This plan did not result in an expense to the business
in 1992 and 1991.
<PAGE> 11
SEALED POWER CORPORATION AND
SEALED POWER CORPORATION OF CANADA, LTD.
NOTES TO COMBINED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 1992
By 1994, the business must adopt Statement of Financial Accounting Standards,
No. 112, "Employers' Accounting for Postemployment Benefits". The business'
preliminary assessment of this statement indicates that it should not have a
significant impact on the financial position or expenses of the business.
(5) COMMITMENTS AND CONTINGENT LIABILITIES
The business leases certain offices, warehouses and equipment under
lease agreements which expire at various dates through 2009.
Major leased assets, which have been capitalized, include a distribution
center in both 1992 and 1991 and a computer in 1991. The assets included
in property, plant, and equipment relating to these leases were $4,000,000
and $5,400,000 as of December 31, 1992 and 1991, respectively and the
related accumulated depreciation was $700,000 and $500,000 as of
December 31, 1992 and 1991.
Future minimum payments, by year and in the aggregate, under the capital
lease and noncancellable operating leases with initial or remaining terms of
one year or more consisted of the following at December 31, 1992:
Capital Operating
Leases Leases
------- ---------
(in thousands)
1993 $ 541 $2,335
1994 541 2,040
1995 541 1,868
1996 541 1,065
1997 541 871
Subsequent to 1997 6,216 1,549
------ ------
Total lease payments $8,921 $9,728
======
Amounts representing interest (5,123)
------
Present value of future minimum lease
payments $3,798
Less amounts due in one year 75
------
Long-term capital lease obligation $3,723
======
Rentals on operating leases were approximately $2.9 million in 1992 and
$2.4 million in 1991.
Certain claims, including suits and complaints arising in the ordinary
course of business, have been filed or are pending against the business.
In the opinion of management, all such matters are without merit or are of
such kind, or involve such amounts, as would not have a significant effect
on the financial position or results of operations of the business if
disposed of unfavorably. Additionally, the business has insurance to
minimize its exposures of this nature.
Since April of 1991, SPX has participated in a three year agreement with a
financial institution whereby the business agreed to sell undivided
fractional interests in designated pools of domestic trade accounts
receivable, in an amount not to exceed $30 million. In order to maintain
the balance in the designated pools of trade accounts receivable sold, the
<PAGE> 12
SEALED POWER CORPORATION AND
SEALED POWER CORPORATION OF CANADA, LTD.
NOTES TO COMBINED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 1992
business sells participating interests in new receivables as existing
receivables are collected. At December 31, 1992 and 1991, the business had
sold $16.5 million and $25.5 million of trade accounts receivable under this
program. Under the terms of this agreement, the business is obligated to pay
fees which approximate the purchasers' cost of issuing a like amount in
commercial paper plus certain administrative costs. The amount of such fees
in 1992 and 1991 were $1,275,000 and $744,000 respectively. These fees are
included in other (income) expense, net.
(6) EQUITY
<TABLE>
<CAPTION>
Combined equity at December 31, consists of the following:
1992 1991
---- ----
(Dollars in thousands)
<S>
Sealed Power Corporation:
Common Stock: $.10 par value, authorized
2,000 shares; issued and outstanding <C> <C>
2,000 shares $ - $ -
Preferred Stock: no par value, authorized
1,000 shares; no shares issued and
outstanding - -
Retained Earnings 23,062 21,301
Due to SPX Corporation 12,878 33,873
------- -------
$35,940 $55,174
------- -------
Sealed Power Corporation of Canada, Ltd.:
Common Stock: C$1 par value, authorized
50,000 shares; issued and outstanding
24,000 shares $ 19 $ 21
Retained Earnings 7,994 7,013
Cumulative Translation Adjustment (477) 231
------- -------
$ 7,536 $ 7,264
------- -------
Total Equity $43,476 $62,438
======= =======
</TABLE>
(7) RELATED PARTY TRANSACTIONS
The business purchases replacement engine parts, principally piston rings,
cylinder sleeves and valve lifters from Sealed Power Technologies, Limited
Partnership (49% owned by SPX) at arm's-length prices. Purchases from the
partnership during 1992 and 1991 were $27.8 million and $27.0 million. At
December 31, 1992 and 1991, the business owed the partnership $.6 million
and $.5 million, which is included in accounts payable.
SPX centrally manages certain insurance coverages, employee benefits and
Federal and state income taxes for the business. These costs are charged
to the business through the intercompany account included in Equity (see
Note 6). In addition, the business' net cash position is managed by SPX's
centralized treasury system through the intercompany account.
<PAGE> 13
Sealed Power Corporation and Sealed Power Corporation of Canada, Ltd.
Combined Condensed Financial Statements (Unaudited)
Page
Combined Condensed Balance Sheet
(Unaudited) at September 30, 1993 14
Combined Condensed Statement of Earnings
(Unaudited) Nine Months Ended September 30, 1993 and 1992 15
Combined Condensed Statement of Cash Flows
(Unaudited) Nine Months Ended September 30, 1993 and 1992 16
Notes to Combined Condensed Financial Statements (Unaudited) 17
<PAGE> 14
<TABLE>
SEALED POWER CORPORATION AND
SEALED POWER CORPORATION OF CANADA, LTD.
COMBINED CONDENSED STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
<CAPTION>
September 30
------------
1993
----
(in thousands)
<S>
CURRENT ASSETS: <C>
Cash and temporary cash investments $ 465
Receivables 2,299
Inventories 41,637
Prepaid and other current assets 519
--------
Total current assets 44,920
PROPERTY, PLANT, & EQUIPMENT, NET 16,265
OTHER ASSETS 3,324
COSTS IN EXCESS OF NET ASSETS OF BUSINESSES
ACQUIRED 1,423
-------
$ 65,932
========
CURRENT LIABILITIES
Accounts payable $ 12,072
Accrued liabilities 9,861
Capital lease obligation 85
--------
Total current liabilities 22,018
LONG-TERM LIABILITIES 5,200
LONG-TERM CAPITAL LEASE OBLIGATIONS 3,638
EQUITY 35,076
--------
$ 65,932
========
See Notes to Unaudited Combined Condensed Financial Statements.
</TABLE>
<PAGE> 15
<TABLE>
SEALED POWER CORPORATION AND
SEALED POWER CORPORATION OF CANADA, LTD.
COMBINED CONDENSED STATEMENTS OF REVENUES AND EXPENSES (UNAUDITED)
<CAPTION>
Nine Months Ended
September 30
-----------------
1993 1992
---- ----
(In thousands)
<S> <C> <C>
NET REVENUES $129,594 $127,599
COSTS AND EXPENSES:
Cost of products sold 84,987 83,289
Selling, distribution, and administrative
expenses 35,430 35,287
Interest expense, net 350 356
Other, net 595 1,251
------- -------
121,362 120,183
------- -------
REVENUES OVER EXPENSES BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
METHOD 8,232 7,416
PROVISION FOR INCOME TAXES 3,210 2,670
------- -------
REVENUES OVER EXPENSES BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING METHOD 5,022 4,746
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
METHOD, NET OF TAXES - 3,242
------- -------
REVENUES OVER EXPENSES $ 5,022 $ 1,504
======= =======
See Notes to Unaudited Combined Condensed Financial Statements.
</TABLE>
<PAGE> 16
<TABLE>
SEALED POWER CORPORATION AND
SEALED POWER CORPORATION OF CANADA, LTD.
COMBINED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
Nine Months Ended
September 30,
-----------------
1993 1992
---- ----
(In thousands)
<S>
Cash flows from operating activities: <C> <C>
Revenues over expenses from operating activities $ 5,022 $ 1,504
Adjustments to reconcile revenues over expenses to
net cash provided by operating activities -
Cumulative effect of change in accounting method - 3,242
Depreciation and amortization 2,932 2,157
Increase in receivables (390) 3,874
Decrease in inventories 9,705 5,008
Decrease (increase) in prepaid and other current
assets 18 48
Decrease (increase) in long term assets 553 (106)
(Decrease) increase in accounts payable (2,487) 5,829
Increase in accrued liabilities 1,045 1,848
(Decrease) increase in income taxes payable (404) 251
(Decrease) increase in long term liabilities (10) 922
------- -------
Net cash provided by operating activities 15,984 24,577
Cash flows from investing activities:
Capital expenditures (2,094) (3,923)
Cash flows from financing activities:
Net payments to SPX Corporation (13,422) (20,320)
Payment of capital lease obligation (75) (468)
-------- --------
Net cash from financing activities (13,497) (20,788)
Net change in cash and temporary cash investments $ 393 $ (134)
Cash and temporary cash investments, beginning of
period 72 293
-------- --------
Cash and temporary cash investments, end of period $ 465 $ 159
======== ========
See Notes to Unaudited Combined Condensed Financial Statements.
</TABLE>
<PAGE> 17
NOTES TO COMBINED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
Interim Statements
The combined financial statements include the accounts of Sealed Power
Corporation, a wholly owned U.S. subsidiary of SPX Corporation ("SPX") and
Sealed Power Corporation of Canada, Ltd., a wholly owned Canadian subsidiary
of SPX, herein together referred to as SPR.
The unaudited combined condensed financial statements are based in part on
approximations and are subject to adjustments that may develop in connection
with an audit of the financial statements; however, in the opinion of
management, all adjustments (which consist of normal recurring accruals)
necessary for a fair presentation of the results of operations for the
periods presented have been included except that the operating results as
presented do not include any costs associated with financing of its
operations nor charges for certain administrative and management functions
provided centrally by SPX. Results of operations for any interim period are
not necessarily indicative of the results to be expected for the full year.
Postretirement Health Care and Life Insurance
Effective January 1, 1992, SPX implemented Statement of Financial Accounting
Standards (SFAS) No. 106 -- "Employer's Accounting for Postretirement
Benefits Other Than Pensions," using the immediate recognition transition
option. The cumulative effect allocated to SPR of $3.2 million was based on
estimated percentages of relative active and retired employees covered under
the benefit plans. Further disclosure is provided in the Postretirement
Health Care and Life Insurance Footnote to the December 31, 1992 and 1991
combined Financial Statements for SPR.
<PAGE> 18
Item 7(b). Pro Forma Financial Statements.
- ------------------------------------------
Pro Forma Combined Condensed Financial Statements (Unaudited)
Page
Pro Forma Combined Condensed Statement of Earnings
(Unaudited) Nine Months Ended September 30, 1993 20
Pro Forma Combined Condensed Balance Sheet
(Unaudited) at September 30, 1993 21
Pro Forma Combined Condensed Statements of Earnings
(Unaudited) Year Ended December 31, 1992 22
Notes to Pro Forma Combined Condensed Financial Statements
(Unaudited) 25
<PAGE> 19
Basis of Presentation
The unaudited pro forma combined condensed statement of earnings
for the nine months ended September 30, 1993 reflects the
acquisition of Sealed Power Corporation and Sealed Power
Corporation of Canada, Ltd. (SPR) by Federal-Mogul Corporation
(Federal-Mogul) as if it had occurred at the beginning of the
period presented. The unaudited pro forma combined condensed
balance sheet at September 30, 1993 reflects the SPR acquisition as
if it occurred on that date.
There are three pro forma combined condensed statements of earnings
for the year ended December 31, 1992 presented herein. The first
reflects the acquisition of both SPR and the automotive aftermarket
business acquired from TRW (AAB) on October 20, 1992 as if they had
occurred at the beginning of the period presented. Additionally,
separate pro forma combined condensed statements of earnings for
the year ended December 31, 1992 are presented; one with the pro
forma earnings results of Federal-Mogul and SPR; and one with the
pro forma earnings results of Federal-Mogul and AAB, in each case
as if the acquisitions had occurred January 1, 1992.
<PAGE> 20
<TABLE>
Federal-Mogul Corporation, Sealed Power Corporation and Sealed Power
Corporation of Canada, Ltd.
Pro Forma Combined Condensed Statement of Earnings (Unaudited)
Nine Months Ended September 30, 1993
(Millions of Dollars, Except Per Share Amounts)
<CAPTION>
Federal- Pro Forma Pro Forma
Mogul SPR Adjustments Combined
-------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales $ 1,182 $ 129 $ (7)A $ 1,304
Cost of products sold 950 85 (7)A 1,028
Selling, distribution
and administrative expenses 169 35 (17)B 187
--------- -------- ------ ---------
Operating earnings 63 9 17 89
Other income (expense):
Interest expense (20) (5)C (25)
Interest income 5 5
International currency
exchange losses (4) (4)
Amortization of intangible assets (5) (2)D (7)
Other, net 9 (1) 8
--------- -------- ------ ---------
Earnings Before Income Taxes 48 8 10 66
Income taxes 15 3 4E 22
--------- -------- ------ ---------
Net earnings 33 5 6 44
Preferred stock dividends,
net of tax benefits 7 - - 7
--------- -------- ------ ---------
Net Earnings Available
for Common Shares $ 26 $ 5 $ 6 $ 37
========= ======== ====== =========
Earnings Per Common Share:
Primary $ .97 $ 1.39
========= =========
Fully diluted $ .93 $ 1.27
========= =========
Average Number of Common
Shares Outstanding (In Millions):
Primary 26.6 26.6
========= =========
Fully Diluted 33.3 33.3
========= =========
</TABLE>
<PAGE> 21
<TABLE>
Federal-Mogul Corporation, Sealed Power Corporation and Sealed Power
Corporation of Canada, Ltd.
Pro Forma Combined Condensed Balance Sheet (Unaudited)
September 30, 1993
(Millions of Dollars)
<CAPTION>
Federal- Pro Forma Pro Forma
Mogul SPR Adjustments Combined
-------- -------- ----------- ---------
<S>
ASSETS
Current Assets <C> <C> <C> <C>
Cash and equivalents $ 17 $ $ (3)F $ 14
Accounts receivable 170 2 23 G 195
Inventories 269 42 21 H 332
Prepaid expenses and other 20 1 21
-------- -------- ------- --------
Total Current Assets 476 45 41 562
Property, plant and equipment 390 16 (5)I 401
Business investments and other assets 236 5 81 J
(5)G 317
-------- -------- ------- --------
TOTAL ASSETS $ 1,102 $ 66 $ 112 $ 1,280
======== ======== ======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term debt $ 34 $ $ $ 34
Accounts payable 81 12 (8)G 85
Accrued compensation 35 35
Other accrued liabilities 98 10 (8)G 126
26 K
-------- -------- ------- --------
Total Current Liabilities 248 22 10 280
Long-term debt 231 4 143 L 378
Deferred income taxes 20 20
Postretirement benefits other
than pensions 150 5 (5)G 150
Pension and other liabilities 80 80
-------- -------- ------- --------
Total Liabilities 729 31 148 908
-------- -------- ------- --------
Shareholders' Equity 373 35 (36)G 372
-------- -------- ------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 1,102 $ 66 $ 112 $ 1,280
======== ======== ======= ========
</TABLE>
<PAGE> 22
<TABLE>
Federal-Mogul Corporation, The Automotive Aftermarket Business, Sealed Power
Corporation and Sealed Power Corporation of Canada, Ltd.
Pro Forma Combined Condensed Statement of Earnings (Unaudited)
Year Ended December 31, 1992
(Millions of Dollars, Except Per Share Amounts)
<CAPTION>
Pro Forma
Federal-
Mogul
and AAB Pro Forma Pro Forma
Combined SPR Adjustments Combined
-------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales $ 1,520 $ 163 $ (11)A,M $ 1,672
Cost of products sold 1,245 105 (11)A,M 1,340
1 H
Selling, distribution
and administrative expenses 209 47 (22) B 234
------- ------- ------ -------
Operating earnings 66 11 21 98
Other income (expense):
Interest expense (33) (6)C (39)
Interest income 8 8
International currency exchange
losses (6) (6)
Amortization of intangible assets (8) (3)D (11)
Special charges (14) (14)
Other, net 8 (2) 6
------- ------- ------ -------
Earnings From Continuing Operations
Before Income Taxes 21 9 12 42
Income taxes 9 3 4E 16
------- ------- ------ -------
Net Earnings From Continuing
Operations 12 6 8 26
Preferred stock dividends, net of
tax benefits 9 - - 9
------- ------- ------ -------
Net Earnings From Continuing
Operations
Available for Common Shares $ 3 $ 6 $ 8 $ 17
======= ======= ====== =======
Earnings From Continuing Operations
Per Common Share:
Primary $ .12 $ .76
======= =======
Fully Diluted $ .12 $ .76
======= =======
Average Number of Common Shares
Outstanding (In Millions):
Primary 22.4 22.4
======= =======
Fully Diluted 29.2 29.2
======= =======
Note: The pro forma fully diluted earnings per share amounts are not
reported separately as the effects are anti-dilutive.
</TABLE>
<PAGE> 23
<TABLE>
Federal-Mogul Corporation, Sealed Power Corporation and Sealed Power
Corporation of Canada, Ltd.
Pro Forma Combined Condensed Statement of Earnings (Unaudited)
Year Ended December 31, 1992
(Millions of Dollars, Except Per Share Amounts)
<CAPTION>
Federal- Pro Forma Pro Forma
Mogul SPR Adjustments Combined
-------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales $ 1,264 $ 163 $ (10)A $ 1,417
Cost of products sold 1,055 105 (10)A 1,151
1 H
Selling, distribution
and administrative expenses 166 47 (22)B 191
-------- -------- ------- --------
Operating earnings 43 11 21 75
Other income (expense):
Interest expense (27) (6)C (33)
Interest income 8 8
International currency exchange
losses (6) (6)
Amortization of intangible assets (3) (3)D (6)
Special charges (14) (14)
Other, net 8 (2) 6
-------- -------- ------- --------
Earnings From Continuing
Operations
Before Income Taxes 9 9 12 30
Income taxes 5 3 4 12
-------- -------- ------- --------
Net Earnings From Continuing
Operations 4 6 8 18
Preferred stock dividends,
net of tax benefits 4 - - 4
-------- -------- ------- --------
Net Earnings From Continuing
Operations
Available for Common Shares $ - $ 6 $ 8 $ 14
======== ======== ======= ========
Earnings From Continuing Operations
Per Common Share:
Primary $ (.01) $ .63
======== ========
Fully Diluted $ (.01) $ .61
======== ========
Average Number of Common Shares
Outstanding (In Millions):
Primary 22.4 22.4
======== ========
Fully Diluted 26.0 26.0
======== ========
</TABLE>
<PAGE> 24
<TABLE>
Federal-Mogul Corporation and The Automotive Aftermarket Business
Pro Forma Combined Condensed Statement of Earnings (Unaudited)
Year Ended December 31, 1992
(Millions of Dollars, Except Per Share Amounts)
<CAPTION>
Federal- Pro Forma Pro Forma
Mogul AAB Adjustments Combined
-------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales $ 1,264 $ 262 $ (6)N $ 1,520
Cost of products sold 1,055 209 (6)N 1,245
4 O
(17)P
Selling, distribution
and administrative expenses 166 46 17 P 209
(21)Q
1 R
-------- -------- ------- --------
Operating earnings 43 7 16 66
Other income (expense):
Interest expense (27) (1) (6)S (33)
1 T
Interest income 8 8
International currency exchange
losses (6) (6)
Amortization of intangible assets (3) (5)U (8)
Special charges (14) (14)
Other, net 8 8
-------- -------- ------- --------
Earnings From Continuing
Operations
Before Income Taxes 9 6 6 21
Income taxes 5 2 2 V 9
-------- -------- ------- --------
Net Earnings (Loss) From
Continuing Operations 4 4 4 12
Preferred stock dividends,
net of tax benefits 4 - 5 W 9
-------- -------- ------- --------
Net Earnings Loss From
Continuing Operations
Available for Common Shares $ - $ 4 $ (1) $ 3
======== ======== ======= ========
Earnings From Continuing Operations
Per Common Share:
Primary $ (.01) $ .12
======== ========
Fully Diluted $ (.01) $ .12
======== ========
Average Number of Common Shares
Outstanding (In Millions):
Primary 22.4 22.4
======== ========
Fully Diluted 26.0 29.2
======== ========
Note: The pro forma fully diluted earnings per share amount is not reported
separately as the effect is anti-dilutive.
</TABLE>
<PAGE> 25
Notes to Pro Forma Combined Condensed Financial Statements (Unaudited)
Note A-Pro Forma Financial Statements
The pro forma information for the year ended December 31, 1992 is based on
historical financial statements of Federal-Mogul and SPR after giving effect
to the transactions and the adjustments described in Note B. The pro forma
information as of September 30, 1993 and for the nine months then ended is
based on unaudited financial statements of Federal-Mogul and SPR. The pro
forma information for AAB for the year ended December 31, 1992 is based on
unaudited financial statements of AAB. The unaudited financial statements
include all adjustments, consisting of normal recurring accruals, which
Federal-Mogul, SPR and AAB consider necessary for a fair presentation of
the financial position and results of operations for this period, except
that the operating results of SPR as presented do not include any costs
associated with financing of its operations nor charges for certain
administrative and management functions provided centrally by SPX
Corporation.
The pro forma financial statements may not be indicative of the results that
actually would have occurred if the transactions had occurred on the dates
assumed and do not project Federal-Mogul's financial position or results of
operations at any future date or period then ended. The pro forma financial
statements should be read in conjunction with the financial statements and
related notes of SPR contained elsewhere herein and the financial statements
and related notes of AAB included in Federal-Mogul's Form 8 dated
January 4, 1993, filed as Amendment No. 1 to its Form 8-K dated
October 20, 1992.
Note B-Pro Forma Adjustments
The accompanying pro forma combined condensed financial statements
include adjustments to increase (decrease) pro forma combined earnings
before taxes or increase (decrease) pro forma combined shareholders'
equity, as follows (in millions):
A) Elimination of intercompany sales and purchases between
Federal-Mogul and SPR.
B) Estimated savings of $22 million per year and $17 million for
the nine months ended September 30, 1993 from rationalization of
combined Federal-Mogul and SPR business operations. The pro forma
statements of earnings do not reflect a pre tax charge of
approximately $1 million for nonrecurring rationalization costs
related to Federal-Mogul facilities expected to be expensed by
Federal-Mogul upon completion of the acquisition.
C) Interest at 4 3/8% (1% over the current three-month London
Interbank Offered Rate (LIBOR) of 3 3/8%) on the $143 million draw
on the revolving credit agreement, made to finance the acquisition.
<PAGE> 26
Notes to Pro Forma Combined Condensed Financial Statements (Unaudited)
Note B-Pro Forma Adjustments - Continued
D) Amortization of intangible assets acquired of $81 million over
periods ranging from 4 to 40 years.
E) Estimated income tax effect of pro forma adjustments.
F) Net cash effect of the following pro forma adjustments
(in millions):
Proceeds of debt $ 143
Payment of financing costs (1)
Payment of purchase price (143)
Payment of professional fees (2)
-----
$ (3)
=====
G) Elimination of excluded assets, liabilities and net investment
from historical SPR combined statements. Accounts receivable
reflects a net addition as Federal-Mogul purchased receivables that
SPR had previously reflected as sold.
H) Net effect of changing SPR's inventory costing method from last in,
first out (LIFO) to fair value at date of acquisition.
I) Fair value adjustment of $5 million to acquired property, plant
and equipment, primarily relating to abandoned assets.
J) Intangible assets acquired in connection with the acquisition of
$81 million.
K) Accrual of rationalization costs of $25 million of SPR related
costs capitalized as part of the acquisition and $1 million of
Federal-Mogul related rationalization costs expected to be expensed
after the acquisition.
L) Proceeds from the draw on the revolving credit agreement.
M) Elimination of intercompany sales and purchases between AAB and SPR.
N) Elimination of intercompany sales and purchases between
Federal-Mogul and AAB.
O) Effect of changing AAB's inventory costing method from last-in,
first-out (LIFO) to fair value at date of acquisition.
P) Reclassification of AAB costs and expenses to conform with
Federal-Mogul classifications.
<PAGE> 27
Notes to Pro Forma Combined Condensed Financial Statements (Unaudited)
Note B-Pro Forma Adjustments - Continued
Q) Estimated savings from rationalization of combined Federal-Mogul
and AAB business operations.
R) Additional depreciation to reflect the fair market value of
acquired property, plant and equipment.
S) Additional interest at 6.25% on $125 million of long-term debt
obtained to partially finance the acquisition.
T) Elimination of AAB interest expense on debt not assumed in the
acquisition.
U) Amortization of intangible assets acquired of $72 million over
periods ranging from 6 to 40 years.
V) Estimated income tax effect of pro forma adjustments.
W) Dividends at 7.75% on convertible exchangeable stock issued to
partially finance the acquisition of AAB.
Note C-Other Matters
The pro forma statements of earnings do not reflect a pretax charge of
approximately $1 million for nonrecurring rationalization costs related
to Federal-Mogul facilities expected to be expensed by Federal-Mogul upon
completion of the acquisition of SPR.
<PAGE> 28
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereto duly authorized.
FEDERAL-MOGUL CORPORATION
By: (James B. Carano)
--------------------------------------
JAMES B. CARANO
Vice President and Controller
Dated as of February 11, 1994
<PAGE> 1
Item 7(c).
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report included in this Form 8-K/A and to its incorporation by reference in
Federal-Mogul Corporation's Registration Statements Nos. 33-51265 on Form S-3,
33-51403 on Form S-8, 33-32429 on Form S-8, 33-32323 on Form S-8, 33-30172 on
Form S-8 and 2-93179 on Form S-8.
ARTHUR ANDERSEN & CO.
(Arthur Andersen & Co.)
Chicago, Illinois
February 11, 1994
