AMENDMENT TO APPLICATION OR REPORT
FORM 8-K/A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
AMENDMENT NO. 1
TO FORM 8-K DATED NOVEMBER 15, 1996
SECOM GENERAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
0-14299 87-0410875
(Commission File Number) (IRS Employer Identification Number)
26600 HEYN DRIVE, NOVI, MICHIGAN 48376
(Address of principal executive offices) (Zip Code)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
(a) On October 31, 1996, Milford Manufacturing Corporation ("Milford"), a
wholly owned subsidiary of Secom General Corporation ("Secom"),
consummated the acquisition of certain manufacturing assets and
operations of Varity Kelsey-Hayes Corporation's ("VKH") Agreement between
Milford and VKH (the "Agreement"). Assets and property acquired by
Milford include (1) an 82,000 square foot building situated on 6.6 acres
of land, and (2) machinery, equipment, and related tooling necessary for
the manufacture of various machined brake valve parts. The purchase price
and allocation to assets is estimated to be comprised as follows:
<TABLE>
<S> <C>
Consideration paid:
Cash paid $2,122,000
Liabilities assumed 3,813,000
----------
Total $5,935,000
Asset allocation:
Fixed assets $4,922,000
Inventories 938,000
Prepaids 75,000
----------
$5,935,000
</TABLE>
Milford paid the cash at closing from funds available under Secom's existing
revolving bank line of credit with First Chicago/NBD.
(b) Prior to the acquisition, the assets were used to manufacture brake
fluid valve parts for various VKH facilities. Milford intends to continue
this activity using the machinery and equipment acquired in the
transaction. In connection with the Agreement, Milford has entered into a
five-year supply agreement with VKH wherein Milford will supply brake
fluid valve parts to various VKH facilities.
Item 7: Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired.
The Milford Plant of Varity Kelsey-Hayes Corporation Balance
Sheet as of January 31, 1996 and the Related Statements of Sales
Less Costs and Expenses, Parent Company Invested Capital and Cash
Flows for the Year Ended January 31, 1996, and Independent
Auditors' Report.
The Milford Plant of Varity Kelsey-Hayes
Corporation Unaudited Balance Sheet as of
October 31, 1996 and the related Statements
of Sales Less Costs and Expenses, and Cash Flows
for the Nine Months Ended October 31, 1996
and 1995 (Unaudited)
(b) Pro Forma Financial Information.
Secom General Corporation
Pro Forma Financial Statements (unaudited)
Pro Forma Balance Sheet as of September 30, 1996
Pro Forma Statement of Operations for the Year Ended
September 30, 1996
(c) Exhibits.
2.1 Acquisition Agreement
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused to be signed on its behalf by:
SECOM GENERAL CORPORATION
(Registrant)
By: /s/ David J. Marczak Dated: January 14, 1997
-----------------------
David J. Marczak
Chief Financial Officer
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Description Page No.
- ----------- --------
(a) Financial Statements of Businesses Acquired.
The Milford Plant of Varity Kelsey-Hayes
Corporation Balance Sheet as of January 31, 1996
and the related Statements of Sales Less Costs and
Expenses, Parent Company Invested Capital and
Cash Flows for the Year Ended January 31, 1996.
Independent Auditors' Report F-1
The Milford Plant of Varity Kelsey-Hayes
Corporation Unaudited Balance Sheet as of
October 31, 1996 and the related Statements
of Sales Less Costs and Expenses and Cash
Flows for the Nine Months Ended October 31, 1996
and 1995 (Unaudited) F-12
(b) Pro Forma Financial Information.
Secom General Corporation
Pro Forma Financial Statements (unaudited) F-16
Pro Forma Balance Sheet as of September 30, 1996 F-17
Pro Forma Statement of Operations for the Year F-20
Ended September 30, 1996
<PAGE>
THE MILFORD PLANT OF VARITY KELSEY-HAYES CORPORATION
Balance Sheet as of January 31, 1996 and the
Related Statements of Sales Less Costs and Expenses,
Parent-Company Invested Capital, and Cash Flows
for the Year Ended January 31, 1996, and
Independent Auditors' Report
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Milford Plant of Varity Kelsey-Hayes Corporation
Midland, Michigan
We have audited the accompanying balance sheet of the Milford Plant of Varity
Kelsey-Hayes Corporation (the "Business") as of January 31, 1996, and the
related statements of sales less costs and expenses, changes in parent-company
invested capital, and cash flows for the year ended January 31, 1996. These
financial statements are the responsibility of the management of the Business.
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.
The accompanying financial statements were prepared in connection with an
acquisition of the Business by Secom General Corporation, as discussed in Note
8, and are not intended to be a presentation of the financial position,
results of operations and cash flows of the Business that would have
occurred, had the Business operated on a stand-alone basis.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Milford Plant of Varity Kelsey-Hayes
at January 31, 1996, and the results of their sales less costs and expenses
and their cash flows for year ended January 31, 1996, in conformity with
generally accepted accounting principles.
December 20, 1996
Detroit, Michigan
F-2
<PAGE>
<TABLE>
<CAPTION>
THE MILFORD PLANT OF VARITY KELSEY-HAYES CORPORATION
BALANCE SHEET
JANUARY 31, 1996
- ---------------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
<S> <C>
Cash $ 2,500
Accounts receivable (net of allowance of $54,000) 69,204
Inventories (Note 2) 865,308
Prepaids and other (includes intangible asset
related to additional minimum liability of $444,000)
(Note 2) 637,029
----------
Total current assets 1,574,041
PROPERTY, PLANT AND EQUIPMENT, NET (Note 3) 5,112,244
----------
TOTAL ASSETS $6,686,285
==========
LIABILITIES AND PARENT-COMPANY INVESTED CAPITAL
CURRENT LIABILITIES:
Trade accounts payable $1,387,510
Accrued liabilities (Note 4) 981,053
----------
Total current liabilities 2,368,563
Liability for pension and postretirement benefits (Note 7) 4,489,000
----------
Total liabilities 6,857,563
Parent-Company invested capital (deficit) (171,278)
----------
TOTAL LIABILITIES AND PARENT-COMPANY DEFICIT $6,686,285
==========
<FN>
See notes to financial statements.
</TABLE>
F-3
<PAGE>
<TABLE>
<CAPTION>
THE MILFORD PLANT OF VARITY KELSEY-HAYES CORPORATION
STATEMENT OF SALES LESS COSTS AND EXPENSES
YEAR ENDED JANUARY 31, 1996
- -----------------------------------------------------------------------------
<S> <C>
NET SALES $12,143,118
COST OF SALES 11,478,098
SELLING, GENERAL AND ADMINISTRATIVE (Note 1) 889,505
IMPAIRMENT OF FIXED ASSETS (Note 1) 3,276,000
-----------
EXCESS OF COSTS AND EXPENSES OVER SALES $ 3,500,485
===========
<FN>
See notes to financial statements.
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
THE MILFORD PLANT OF VARITY KELSEY-HAYES CORPORATION
STATEMENT OF CHANGES IN PARENT-COMPANY INVESTED CAPITAL
YEAR ENDED JANUARY 31, 1996
- --------------------------------------------------------------------------
<S> <C>
BALANCE, FEBRUARY 1, 1995 $ 5,493,944
Excess of costs and expenses over sales (3,500,485)
Net invested capital returned to Varity
Kelsey-Hayes Corporation (2,164,737)
-----------
BALANCE, JANUARY 31, 1996 $ (171,278)
===========
<FN>
See notes to financial statements.
</TABLE>
F-5
<PAGE>
<TABLE>
<CAPTION>
THE MILFORD PLANT OF VARITY KELSEY-HAYES CORPORATION
STATEMENT OF CASH FLOWS
YEAR ENDED JANUARY 31, 1996
- ---------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C>
Excess of costs and expenses over sales $(3,500,485)
Adjustments to reconcile excess of costs and
expenses over sales to net cash
provided by operations:
Depreciation and amortization 1,048,998
Impairment of fixed assets 3,276,000
Changes in operating assets and liabilities:
Accounts receivable 992,296
Inventories 48,792
Prepaids and other (329,265)
Trade accounts payable 33,010
Accrued liabilities 78,326
Liability for pension and postretirement benefits 771,303
------------
Net cash provided by operating activities 2,418,975
CASH FLOWS FROM INVESTING ACTIVITIES -
Capital expenditures (254,238)
------------
Net cash used in investing activities (254,238)
CASH FLOWS FROM FINANCING ACTIVITIES -
Parent-Company invested capital refunded (2,164,737)
------------
Net cash (used in) provided by financing
activities (2,164,737)
------------
NET INCREASE (DECREASE) IN CASH 0
CASH, BEGINNING OF PERIOD 2,500
------------
CASH, END OF PERIOD $ 2,500
============
<FN>
See notes to financial statements.
</TABLE>
F-6
<PAGE>
THE MILFORD PLANT OF VARITY KELSEY-HAYES CORPORATION
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED JANUARY 31, 1996
- ------------------------------------------------------------------------------
1. DESCRIPTION OF ENTITY, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING
POLICIES
Entity - The Milford Plant of Varity Kelsey-Hayes Corporation ("the
Milford Plant" or the "Company") is a single manufacturing plant located
in Milford, Michigan, producing machined brake parts, primarily sold to
the auto industry. Varity Kelsey-Hayes Corporation ("Varity
Kelsey-Hayes") was the sole owner of the plant until October 31, 1996,
when the plant and its machining business were sold to Secom General
Corporation ("Secom"). (See Note 8.)
Basis of Presentation - The financial statements include only the
accounts directly attributable to the Milford Plant. These include the
assets and liabilities used in and arising from the machining business,
the revenues generated from the machining business of the Milford Plant
and the expenses attributable to its manufacturing process or other
direct costs of the Milford Plant. The revenues, expenses and assets and
liabilities which resulted from operations of the assembly group of the
Milford Plant have been excluded from these financial statements. Such
assembly operations were transferred to another Varity Kelsey-Hayes plant
prior to January 31, 1996 and were not sold to Secom. During the period
presented in the accompanying financial statements, the Milford Plant
operated as an integral part of Varity Kelsey-Hayes' overall operations.
The financial statements include various allocated costs and expenses and
intercompany transactions, which are not necessarily indicative of the
costs and expenses or transaction terms that would have occurred, had the
Milford Plant operated on a stand-alone basis. However, all of the
allocations and estimates reflected in the financial statements are based
on assumptions which management believes are reasonable. Corporate
allocations were based principally on the relative revenues of the
Milford Plant, as compared to the respective consolidated amounts of
Varity Kelsey-Hayes. It is not considered practicable to estimate the
amount of such costs as if the Milford Plant operated on a stand-alone
basis.
Inventories are stated at the lower of cost or market, as determined
under the first-in, first-out method.
Property, Plant and Equipment are recorded at historical cost less
permanent impairment. Management has determined that during 1996 the
assets of the Milford Plant had been impaired due to changes in the
Company's business and have reduced the cost value of the assets by
approximately $3,276,000, the estimated net realizable value
of such assets. The Company capitalizes, as additions, expenditures
which extend the useful life or increase the value of related
assets. Maintenance and repairs are charged to operating expense as
incurred. Depreciation is computed using the straight-line method
over the estimated useful lives of the assets.
Income Taxes - There is no provision for income taxes in the accompanying
financial statements. The results of operations of the plant is included
in the Varity Kelsey-Hayes corporate income tax returns. Varity
Kelsey-Hayes does not allocate its income tax provision among
unincorporated plants. In management's opinion, inclusion of an income
tax provision in the Milford Plant financial statements would not be
useful to the readers of these financial statements. Management also
feels it would be impracticable to determine whether any income tax
benefit would be realizable by the Company.
F-7
<PAGE>
Environmental Liabilities - Varity Kelsey-Hayes and the Company are
involved in a remedial action under government regulations and laws
relating to cleaning up the environment around the Milford Plant
facility. Varity Kelsey-Hayes has recorded a reserve for such remediation
costs at the corporate level and has not pushed down such reserve to the
financial statements of the Milford Plant. As part of the purchase (see
Note 8) of the Milford Plant by Secom, Varity Kelsey-Hayes has
indemnified Secom and the Milford Plant for all such costs.
New Accounting Standard - Statement of Financial Accounting Standards
(SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of," was issued in March 1995. The
Statement is effective for fiscal years beginning after December 15,
1995, and requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. The Statement is not expected
to have a material effect on the financial statements of the Company when
adopted.
Use of Estimates - Preparation of financial statements in accordance with
generally accepted accounting principles requires management to make
estimates and assumptions. These estimates or assumptions affect reported
amounts of assets, liabilities revenues and expenses as reflected in the
financial statements. Actual results could differ from estimates.
2. INVENTORIES
<TABLE>
<CAPTION>
Inventories at January 31, 1996:
<S> <C>
Raw materials and factory supplies $646,903
Work-in-process 79,026
Finished goods 139,379
--------
Total $865,308
========
</TABLE>
3. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment at January 31, 1996 consist of:
<TABLE>
Estimated
Useful
Life
<S> <C> <C>
Machinery and equipment $ 6,341,879 8-15 years
Building and improvements 1,846,759 15-30 years
Land and improvements 17,500 N/A
Tooling 87,066 3-4 years
-----------
8,293,204
Less accumulated depreciation (3,180,960)
-----------
Total $ 5,112,244
===========
</TABLE>
F-8
<PAGE>
4. ACCRUED LIABILITIES
Accrued liabilities consist of the following at January 31, 1996:
<TABLE>
<S> <C>
Accrued vacation $126,000
Accrued workers' compensation 605,000
Other 250,053
--------
Total $981,053
========
</TABLE>
5. RELATED PARTY TRANSACTIONS
The Milford Plant conducts various business transactions with plants and
affiliates of its parent-company, Varity Kelsey-Hayes. These transactions
include sales to other Varity Kelsey-Hayes businesses of approximately
$7,212,000 during the year ended January 31, 1996.
The Milford Plant participates in certain employee benefit plans
sponsored by Varity Kelsey-Hayes including a 401(k) Plans and a defined
benefit pension plans for salaried and hourly employees, post retirement
benefits, workers' compensation, supplemental unemployment, health and
disability coverages. Expense for these items totaled approximately
$1,505,000 for the year ended January 31, 1996.
Certain administrative and corporate functions were provided to the
Milford Plant by Varity Kelsey-Hayes. These include, among others,
financial reporting and analysis, treasury, management information
systems, strategic planning, strategic marketing, and executive
management. The amount of such services was estimated to be $888,100 and
is included in general and administrative expenses.
6. LEASES
The Company leased certain machinery and equipment under noncancelable
operating leases. Rental expense was $152,145 for the year ended January
31, 1996.
Annual payments due under noncancelable operating leases are as follows:
<TABLE>
<S> <C>
Year ended January 31, 1997 $138,000
1998 and thereafter 130,000
--------
Total $268,000
========
</TABLE>
F-9
<PAGE>
7. PENSIONS AND OTHER POSTRETIREMENT BENEFITS
Varity Kelsey-Hayes had a defined benefit pension plan for eligible hourly
employees at the Milford plant. Benefits are based on years of service
and compensation during the years of service. The funding policy for
the plan was to contribute at least the amount required by law on an
annual basis. Pension expense for hourly employees of the machining
business only for the year ended January 31, 1996 consists of the
following:
<TABLE>
<S> <C>
Service costs $ 37,800
Interest cost 66,850
Actual return on plan assets (99,750)
Net amortization 68,600
---------
Net pension costs $ 73,500
=========
</TABLE>
Pension costs were determined using a 7.5% discount rate, a long term
rate of return of 9.0%, and no increases in wage rates. Plan assets
consist primarily of stocks and bonds. A valuation for only the machining
business was not available, accordingly, following is the funded status
of the plan for all active and retired hourly employees of the Milford
Plant at January 31, 1996:
<TABLE>
<S> <C>
Projected benefit obligation:
Actuarial present value of vested benefits $2,361,000
Actuarial present value of nonvested benefits 400,000
----------
Total 2,761,000
Plan assets at fair value 1,878,000
----------
Projected benefit obligation in excess of plan assets 883,000
Unrecognized prior service cost (444,000)
Unrecognized net loss (225,000)
Adjustment required to recognize minimum liability 669,000
----------
Accrued pension cost recognized in the balance sheet $ 883,000
==========
</TABLE>
Salaried employees of the machining business participate in a pension
covering eligible Varity Kelsey-Hayes employees. A provision for the cost
of this plan is charged to the Milford Plant by Varity Kelsey-Hayes. For
the year ended January 31, 1996, $60,180 is included in the statement of
sales less costs and expenses for this salaried pension plan.
Salaried employees may participate in defined contribution plans
sponsored by Varity Kelsey-Hayes. The expense related to these plans was
$151,494 during the year ended January 31, 1996.
Postretirement Benefits - The Milford Plant postretirement benefits plan
provides certain medical benefits to qualifying employees. Net
postretirement benefit cost includes the following components:
<TABLE>
<S> <C>
Service cost $182,000
Interest cost on accumulated benefit obligation 270,000
--------
Total $452,000
========
</TABLE>
F-10
<PAGE>
Benefit costs are estimated assuming retiree health care costs will
increase initially at an 8.0% annual rate, decreasing to an annual rate
of increase of 6.0%. A 1% increase in those annual trend rates would have
increased the accumulated postretirement obligation at January 31, 1996
by $324,000, with a corresponding increase in expense for the year of
$41,000. The discount rate used to estimate the accumulated
postretirement benefit obligation was 7.5%. The Milford Plant's practice
is to fund postretirement benefits on a pay as you go basis, and
therefore, the plan has no assets at January 31, 1996.
The status for the machining business for the Milford Plant's plan at
January 31, 1996 was as follows:
<TABLE>
<S> <C>
Accumulated postretirement benefit obligation $3,606,000
Plan assets at fair value 0
----------
Accrued postretirement benefit obligation $3,606,000
==========
</TABLE>
8. SUBSEQUENT EVENT
Effective October 31, 1996, the Milford Plant was acquired by Secom in a
purchase of assets. The acquisition agreement provided for Secom to
acquire the land, building, machinery and equipment, inventories,
contracts and lease obligations of the Milford Plant along with its
machining business. Secom also assumed certain liabilities of the Milford
Plant.
The purchase price is comprised of the following consideration:
<TABLE>
<S> <C>
Cash paid $2,100,000
Liabilities assumed 3,800,000
----------
Total $5,900,000
==========
</TABLE>
Pursuant to the acquisition agreement, the Milford Plant and its new
parent Secom entered into a machined products supply agreement with
Varity Kelsey-Hayes whereby the Milford Plant will supply machined parts
to Varity Kelsey-Hayes for the next five years. The supply agreement also
includes a provision whereby Varity Kelsey-Hayes will pay Secom
$1,000,000 during 1997 as a payment in lieu of a price increase for
products to be shipped during 1997.
******
F-11
<PAGE>
THE MILFORD PLANT OF VARITY KELSEY-HAYES CORPORATION
The Milford Plant of Varity Kelsey-Hayes
Corporation Balance Sheet as of
October 31, 1996 and the related Statements
of Sales Less Costs and Expenses. Parent
Company Invested Capital and Cash Flows
for the Nine Months Ended October 31, 1996
and 1995 (Unaudited).
The following financial statements have been prepared by the Company,
without audit. In the opinion of Company management, the financial statements
reflect all adjustments (consisting of normal recurring accruals) which are
necessary to represent a fair statement of the results for the periods
presented.
F-12
<PAGE>
<TABLE>
<CAPTION>
THE MILFORD PLANT OF THE VARITY KELSEY-HAYES CORPORATION
BALANCE SHEET (UNAUDITED)
OCTOBER 31, 1996
<S> <C>
ASSETS
CURRENT ASSETS:
Accounts receivable $ 155,700
Inventories 938,800
Other current assets 75,100
-----------
TOTAL CURRENT ASSETS 1,169,600
PROPERTY, PLANT AND EQUIPMENT, NET 5,527,814
-----------
TOTAL ASSETS $ 6,697,414
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable $ 902,500
Accrued Liabilities 943,300
-----------
TOTAL CURRENT LIABILITIES $ 1,845,800
Liability for pension and
postretirement benefits 4,145,000
-----------
Total Liabilities 5,990,800
Parent-Company Invested capital 706,614
-----------
$ 6,697,414
===========
</TABLE>
F-13
<PAGE>
<TABLE>
<CAPTION>
THE MILFORD PLANT OF THE VARITY KELSEY-HAYES CORPORATION
STATEMENTS OF SALES LESS COSTS AND EXPENSES (UNAUDITED)
NINE MONTHS ENDED OCTOBER 31, 1996 AND 1995
1996 1995
---- ----
<S> <C> <C>
NET SALES $ 7,922,733 $ 10,279,512
COST OF SALES 8,029,576 9,265,220
SELLING, GENERAL AND ADMINISTRATIVE 662,000 677,000
IMPAIRMENT OF FIXED ASSETS -- 3,276,000
------------ ------------
EXCESS OF COSTS AND EXPENSES OVER SALES $ (708,843) $ (2,938,708)
============ ============
</TABLE>
F-14
<PAGE>
<TABLE>
<CAPTION>
THE MILFORD PLANT OF VARITY KELSEY-HAYES CORPORATION
STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED OCTOBER 31, 1996 AND 1995
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Excess of costs and expenses over sales (768,843) (2,938,708)
Adjustments to reconcile excess of costs and
expenses over sales to net cash provided
by operations:
Depreciation and amortization 744,430 776,600
Impairment of fixed assets -- 3,276,000
Changes in operating assets 404,241 263,400
Changes in operating liabilities (866,763) 490,818
---------- ----------
Net cash provided by operating activities (486,935) (1,868,110)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures (1,162,300) (230,000)
CASH FLOWS FROM FINANCING ACTIVITIES --
Change in parent-Company invested capital 1,646,735 2,098,110
---------- ----------
NET INCREASE (DECREASE) IN CASH (2,500) --
CASH AT BEGINNING OF PERIOD 2,500 2,500
---------- ----------
CASH AT END OF PERIOD $ 2,500
========== ==========
</TABLE>
F-15
<PAGE>
SECOM GENERAL CORPORATION
PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
The following unaudited pro forma financial statements for Secom as of
September 30, 1996 have been prepared based upon the consolidated historical
financial results of Secom and give effect to the acquisition of Milford
Manufacturing Corporation.
The pro forma financial statements should be read in conjunction with the
accompanying notes and the separate consolidated financial statements and
related notes thereto of Secom contained in its Form 10-K for the year ended
September 30, 1996, and of Milford Manufacturing Corporation contained herein.
The pro forma results are not necessarily indicative of the results which
would actually have been attained if the Transaction had been consummated at
the beginning of the period presented or which may be attained in the future.
F-16
<PAGE>
SECOM GENERAL CORPORATION
PRO FORMA BALANCE SHEET-UNAUDITED
SEPTEMBER 30, 1996
The following unaudited pro forma balance sheet of Secom has been prepared
based upon the historical audited consolidated balance sheet of Secom as of
September 30, 1996 and adjusted to reflect the acquisition of
VarityKelsey-Hayes Corporation's Milford Plant (Milford Manufacturing
Corporation) as if the Transaction occurred on September 30, 1996.
F-17
<PAGE>
<TABLE>
<CAPTION>
SECOM GENERAL CORPORATION AND SUBSIDIARIES
PRO FORMA BALANCE SHEET
SEPTEMBER 30, 1996
SECOM GENERAL MILFORD
AND ITS MANUFACTURING PRO FORMA PRO FORMA
SUBSIDIARIES(1) CORPORATION(2) ADJUSTMENTS COMBINED
--------------- -------------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 319,600 $ 1,000,000 (8) $ 319,600
(1,000,000)(8)
Accounts receivable 4,163,900 $ 155,700 (155,700)(3) 4,163,897
Inventories 5,170,500 938,800 6,109,300
Other current assets 1,117,200 75,100 1,192,300
------------ ----------- ----------- -----------
TOTAL CURRENT ASSETS 10,771,200 1,169,600 (155,700) 11,785,100
CASH RESTRICTED FOR EQUIPMENT 4,089,000 4,089,000
PROPERTY, PLANT AND EQUIPMENT, NET 17,758,600 5,527,800 (605,500)(4) 22,680,900
OTHER ASSETS 2,335,700 2,335,700
------------ ----------- ----------- -----------
TOTAL ASSETS $ 34,954,500 $ 6,697,400 $ (761,200) $40,890,700
============ =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
ACCOUNTS PAYABLE $ 2,856,800 $ 902,500 $ (902,500)(6) $ 2,856,800
CURRENT LIABILITIES 3,006,200 943,300 (724,100)(7) 3,225,400
LONG-TERM LIABILITIES 13,724,300 4,145,000 (550,000)(5) 18,441,300
1,122,000 (9)
DEFERRED INCOME 1,000,000 (8) 1,000,000
DEFERRED TAX LIABILITIES 1,331,300 1,331,300
------------ ----------- ----------- -----------
Total Liabilities 20,918,600 5,990,800 (54,600) 26,854,800
STOCKHOLDERS' EQUITY 14,035,900 706,600 (706,600)(10) 14,035,900
------------ ----------- ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 34,954,500 $ 6,697,400 $ (995,700) $40,890,700
============ =========== =========== ===========
(See next page for footnotes)
F-18
<PAGE>
<FN>
Footnotes to Pro forma Balance Sheet as of September 30, 1996
(1) Amounts from Secom's audited financial statements as of September 30,
1996.
(2) Amounts from Milford's unaudited financial statements as of October 31,
1996.
(3) To eliminate accounts receivable, which were not included in the assets
acquired by Secom.
(4) To reduce fixed assets to the value determined from allocation of the
purchase price.
(5) To reduce the underfunded pension liability to the amount assumed by
Secom.
(6) To eliminate accounts payable, which were not included in the liabilities
assumed by Secom.
(7) To eliminate other liabilities, principally worker's compensation claims,
which were not assumed by Secom.
(8) To record $1 million paid by VKH to Secom in lieu of 10% product price
increase for first year sales to VKH from Milford, and then the wire
transfers by Secom to VKH of $ 1 million as part of the purchase price.
(9) To record use of bank line of credit for additional cash paid to VKH in
connection with the transaction.
(10) To eliminate the equity of Milford in connection with
the asset purchase.
</TABLE>
F-19
<PAGE>
SECOM GENERAL CORPORATION
PRO FORMA STATEMENT OF OPERATIONS - UNAUDITED
The following unaudited pro forma statement of operations for Secom has been
prepared from the audited historical consolidated results of operations of
Secom for the year ended September 30, 1996 and from the unaudited results of
Milford for the year ended September 30, 1996.
The pro forma statement of operations presents the combined income and
expenses of Secom and Milford as if the acquisition of Milford by Secom had
occurred on October 1, 1995. Pro forma adjustments reflect the assets
acquired, consideration paid and liabilities assumed by Secom.
F-20
<PAGE>
<TABLE>
<CAPTION>
SECOM GENERAL CORPORATION AND SUBSIDIARIES
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1996
SECOM GENERAL MILFORD
AND ITS MANUFACTURING PRO FORMA PRO FORMA
SUBSIDIARIES(1) CORPORATION(2) ADJUSTMENTS COMBINED
--------------- --------------- ----------- -----------
<S> <C> <C> <C> <C>
NET SALES $ 30,877,100 $ 11,970,435 $42,847,536
COST OF SALES 25,064,900 11,918,605 $(121,000)(3) 36,862,505
------------ ------------ --------- -----------
GROSS PROFIT 5,812,200 51,830 121,000 5,985,030
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 4,920,700 896,501 (900,000)(4) 5,117,201
200,000 (5)
------------ ------------ --------- -----------
INCOME FROM OPERATIONS 891,500 (844,671) 821,000 867,829
OTHER INCOME (EXPENSE):
Interest (847,600) (100,000)(6) (947,600)
Other, net 14,600 14,600
------------ ------------ --------- ----------
INCOME BEFORE INCOME TAXES 58,500 (844,671) 721,000 (65,171)
INCOME TAX BENEFIT (EXPENSE)
(17,900) (17,900)
------------ ------------ --------- -----------
NET INCOME (LOSS)
$ 40,600 $ (844,671) $ 721,000 $ (83,071)
============ ============ ========= ===========
NET INCOME (LOSS) PER COMMON SHARE $ 0.01 $ 0.06
============ ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 4,874,600 4,874,600
============ ===========
(See next page for footnotes)
F-21
<PAGE>
<FN>
Footnotes to Pro Forma Statement of Operations
(1) Amounts from Secom's audited financial statements for the year ended
September 30, 1996.
(2) Amounts from Milford's unaudited financial statements for the year ended
September 30, 1996.
(3) To reduce depreciation and amortization expense based on the asset values
and useful lives established after the transaction.
(4) To eliminate VKH's corporate services expense for the period presented.
(5) To record Secom's corporate services expense for the period presented.
(6) To record interest expense on the anticipated bank line of credit usage
associated with Milford for the period presented.
</TABLE>
F-22
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No.
- ----------- ----------- --------
2.1 Acquisition Agreement dated
October 31, 1996 between
Milford Acquisition, Inc.
(n/k/a Milford Manufacturing
Corporation) and Kelsey-Hayes
Company (d/b/a Varity Kelsey-Hayes)(1)
(1) Previously filed under the corresponding Exhibit No. with the
Company's Report on 8-K dated November 15, 1996, and incorporated
herein by reference.
