<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended OCTOBER 2, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission file number: 33-47867
LEAR SEATING CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-3386776
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
21557 Telegraph Road, Southfield, MI 48034
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (313) 746-1500
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to the
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Number of shares of common stock outstanding at October 30, 1993: 1,075,758,
par value $.01 per share.
<PAGE> 2
LEAR SEATING CORPORATION
AMENDMENT NO. 1
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of reports pursuant to the undertaking
described in Part II, Item 5 of the Company's Quarterly Report for the period
ended October 2, 1993 as set forth in the pages attached hereto:
Item 5 -- Financial Statements and Exhibits
(a) Financial Statements of Business Acquired
1. Report of Independent Public Accountants
2. Balance Sheets -- September 30, 1993 and December 31, 1992
3. Statements of Income for the nine months ended September 30,
1993 and the years ended December 31, 1992 and 1991
4. Statements of Cash Flows for the nine months ended September
30, 1993 and the years ended December 31, 1992 and 1991
5. Notes to the Financial Statements
(b) Pro Forma Financial Information
1. Description of Pro Forma Financial Data
2. Pro Forma Statements of Operations for the three months ended
October 2, 1993 and the year ended June 30, 1993 together with
the notes thereto
3. Pro Forma Balance Sheet as of October 2, 1993 together with
the notes thereto
1
<PAGE> 3
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Ford Motor Company:
We have audited the balance sheet of The North American Business (an
operating component of Ford Motor Company, as described in Note 1 to the
financial statements) at September 30, 1993 and December 31, 1992, and the
related statements of income and cash flows for the nine months ended September
30, 1993 and the years ended December 31, 1992 and 1991. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our 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 from
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.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of The North American Business
(an operating component of Ford Motor Company, as described in Note 1 to the
financial statements) at September 30, 1993 and December 31, 1992, and the
results of its operations and its cash flows for the nine months ended September
30, 1993 and the years ended December 31, 1992 and 1991, in conformity with
generally accepted accounting principles.
As discussed in Note 5 to the financial statements, the company changed its
method of accounting for postretirement benefits other than pensions in 1992. As
discussed in Notes 1 and 11 to the financial statements, Ford Motor Company has
entered into an agreement for the sale of The North American Business.
COOPERS & LYBRAND
Detroit, Michigan
November 18, 1993
2
<PAGE> 4
THE NORTH AMERICAN BUSINESS
(AN OPERATING COMPONENT OF FORD MOTOR COMPANY)
BALANCE SHEET
<TABLE>
<CAPTION>
SEPT. 30, DEC. 31,
1993 1992
------------ ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents........................................ $ 2,743,000 $ 2,074,000
Accounts receivable, net of allowance of $4,500,000 and
$7,770,000, respectively....................................... 30,037,000 52,865,000
Inventories (Note 3)............................................. 36,864,000 42,574,000
Deferred income taxes (Note 6)................................... 1,995,000 3,138,000
Other current assets............................................. 691,000 1,067,000
------------ ------------
Total current assets...................................... 72,330,000 101,718,000
------------ ------------
Property, plant and equipment, net (Note 4)...................... 79,334,000 83,854,000
Deferred income taxes (Note 6)................................... 1,597,000 779,000
------------ ------------
Total assets.............................................. $153,261,000 $186,351,000
------------ ------------
------------ ------------
LIABILITIES AND EQUITY
Accounts payable, principally trade.............................. $ 32,401,000 $ 28,874,000
Accrued liabilities:
Salaries and wages............................................. 519,000 808,000
Vacations and holidays......................................... 653,000 928,000
Employee benefit programs...................................... 3,021,000 2,118,000
Other.......................................................... 779,000 704,000
Note payable to Ford Motor Company S.A. de C.V. (Note 7)......... 44,529,000 44,529,000
Income taxes payable............................................. 42,266,000 79,973,000
------------ ------------
Total current liabilities................................. 124,168,000 157,934,000
------------ ------------
Postretirement benefits other than pensions and other (Note 5)... 3,562,000 3,347,000
------------ ------------
Total liabilities......................................... 127,730,000 161,281,000
Equity and advances account (Note 8)............................. 25,531,000 25,070,000
------------ ------------
Total liabilities and equity.............................. $153,261,000 $186,351,000
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 5
THE NORTH AMERICAN BUSINESS
(AN OPERATING COMPONENT OF FORD MOTOR COMPANY)
STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1993
AND FOR THE YEARS ENDED DECEMBER 31, 1992 AND 1991
<TABLE>
<CAPTION>
NINE MONTH
PERIOD ENDED YEAR ENDED DEC. 31,
SEPT. 30, ----------------------------
1993 1992 1991
------------ ------------ ------------
<S> <C> <C> <C>
Net sales.......................................... $515,102,000 $677,260,000 $547,040,000
Costs of sales..................................... 384,138,000 442,243,000 381,616,000
Selling, administrative and other expenses......... 9,426,000 9,529,000 8,932,000
------------ ------------ ------------
Total costs and expenses...................... 393,564,000 451,772,000 390,548,000
------------ ------------ ------------
Operating income................................... 121,538,000 225,488,000 156,492,000
Interest expense................................... (2,026,000) (3,227,000) (3,556,000)
Other expenses..................................... (1,910,000) (1,144,000) (685,000)
------------ ------------ ------------
Income before income taxes and cumulative
effect
of a change in accounting principle......... 117,602,000 221,117,000 152,251,000
Provision for income taxes (Note 6)................ 42,591,000 76,842,000 54,184,000
------------ ------------ ------------
Income before cumulative effect of a change in
accounting principle........................ 75,011,000 144,275,000 98,067,000
Cumulative effect of a change in accounting
principle (Note 5)............................... -- (1,490,000) --
------------ ------------ ------------
Net income.................................... $ 75,011,000 $142,785,000 $ 98,067,000
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 6
THE NORTH AMERICAN BUSINESS
(AN OPERATING COMPONENT OF FORD MOTOR COMPANY)
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1993
AND FOR THE YEARS ENDED DECEMBER 31, 1992 AND 1991
<TABLE>
<CAPTION>
NINE MONTH YEAR ENDED DEC. 31,
PERIOD ENDED -----------------------------
SEPT. 30, 1993 1992 1991
-------------- ------------- ------------
<S> <C> <C> <C>
Net Income........................................ $ 75,011,000 $ 142,785,000 $ 98,067,000
Adjustments to reconcile net income to cash flows
from operating activities:
Cumulative effect of a change in accounting
principle.................................... -- 1,490,000 --
Depreciation.................................... 7,370,000 10,225,000 8,847,000
Foreign currency translation adjustment......... 1,659,000 1,030,000 825,000
Provision for deferred income taxes............. 325,000 (3,131,000) (1,274,000)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable... 22,828,000 (1,313,000) (27,754,000)
Decrease (increase) in inventory............. 5,710,000 (3,560,000) (4,252,000)
Increase (decrease) in accounts payable...... 3,527,000 (6,847,000) 6,759,000
Increase (decrease) in accrued liabilities... 414,000 780,000 1,143,000
Increase (decrease) in income taxes
payable.................................... (37,707,000) 24,515,000 (4,698,000)
Other........................................... 231,000 60,000 211,000
-------------- ------------- ------------
Net cash provided by operating
activities.............................. 79,368,000 166,034,000 77,874,000
-------------- ------------- ------------
Cash flows from investing activities:
Capital expenditures, net....................... (2,850,000) (13,246,000) (22,696,000)
Capital contributions........................... -- 10,000,000 --
-------------- ------------- ------------
Net cash (used in) investing activities.... (2,850,000) (3,246,000) (22,696,000)
Cash flows from financing activities:
Net funds transferred to Ford................... (76,230,000) (151,342,000) (59,929,000)
Changes in short-term debt...................... -- (12,600,000) 6,350,000
-------------- ------------- ------------
Net cash (used in) financing activities.... (76,230,000) (163,942,000) (53,579,000)
Effect of exchange rate changes on cash........... 381,000 (529,000) (152,000)
-------------- ------------- ------------
Net increase (decrease) in cash and cash
equivalents..................................... 669,000 (1,683,000) 1,447,000
Cash and cash equivalents, beginning of period.... 2,074,000 3,757,000 2,310,000
-------------- ------------- ------------
Cash and cash equivalents, end of period.......... $ 2,743,000 $ 2,074,000 $ 3,757,000
-------------- ------------- ------------
-------------- ------------- ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 7
THE NORTH AMERICAN BUSINESS
(AN OPERATING COMPONENT OF FORD MOTOR COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION:
The North American Business ("NAB") is an operating component of Ford Motor
Company ("Ford") and is not a separate legal entity. NAB consists of a portion
of the operations of Ford's Plastic and Trim Products Division, which
constitutes an integrated U.S. and Mexican maquiladora operation that provides
and supplies built-up seats and seat covers for Ford's North American vehicle
production. These financial statements include the results of identifiable
operating activities, transactions and assets and liabilities associated with
the business of NAB in the United States and Mexico.
The entity as described above is referred to as "NAB" or "the Company" in
the notes to the financial statements.
The financial statements have been prepared on a historical accounting
basis and do not reflect adjustments which may arise related to the transaction
described in Note 11.
The financial statements reflect an allocation of certain expenses from
Ford based upon the services provided by Ford. However, the financial position
and results of operations of the Company, as presented herein, may not be the
same as would have occurred had the Company been an entity independent of Ford.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
Inventory Valuation
Inventories are stated at the lower of cost or market. The cost of
inventories is determined by the first-in, first-out ("FIFO") method.
Foreign Currency Translation
The majority of the assets and liabilities of NAB's Mexican operations are
translated at current exchange rates with the exception of property, plant and
equipment which is translated at historical exchange rates. Translation gains
and losses are included in income.
Depreciation
Assets placed in service after January 1, 1993 are depreciated using the
straight-line method of depreciation. Assets placed in service prior to January
1, 1993 are depreciated using an accelerated method that results in accumulated
depreciation of approximately two-thirds of asset cost during the first half of
the asset's estimated useful life. On average, buildings and land improvements
are depreciable based on a 30-year life, and machinery, equipment and office
furniture are depreciated based on a 14-year life.
When plant and equipment are retired, the general policy is to charge the
cost of such assets, reduced by net salvage proceeds, to accumulated
depreciation. All maintenance, repairs and rearrangement costs are expensed as
incurred. Expenditures that increase the value or productive capacity of assets
are capitalized.
Revenue Recognition
Sales to outside customers are recognized when the product is shipped.
Prior to May 1993, sales to Ford and its affiliates were recognized when the
product was received by the customer. Subsequent to that date,
6
<PAGE> 8
THE NORTH AMERICAN BUSINESS
(AN OPERATING COMPONENT OF FORD MOTOR COMPANY)
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
sales to Ford and its affiliates are recognized when the product is shipped,
with the exception of sales to Ford's Canadian subsidiary, which are recognized
when the product is received by the customer in Canada.
(3) INVENTORIES:
The major classes of inventories were as follows:
<TABLE>
<CAPTION>
SEPT. 30, DEC. 31,
1993 1992
----------- -----------
<S> <C> <C>
Raw materials and work in progress......................... $24,918,000 $25,758,000
Finished goods............................................. 10,133,000 15,848,000
Nonproduction materials and supplies....................... 1,813,000 968,000
----------- -----------
Total................................................. $36,864,000 $42,574,000
----------- -----------
----------- -----------
</TABLE>
(4) PROPERTY, PLANT AND EQUIPMENT, NET:
Property, plant and equipment is stated at cost, net of accumulated
depreciation, and consisted of the following:
<TABLE>
<CAPTION>
SEPT. 30, DEC. 30,
1993 1992
------------ ------------
<S> <C> <C>
Land..................................................... $ 7,119,000 $ 7,119,000
Buildings and land improvements.......................... 49,616,000 49,712,000
Machinery, equipment and other........................... 75,360,000 72,705,000
Construction in progress................................. 620,000 1,805,000
------------ ------------
Total property, plant and equipment................. 132,715,000 131,341,000
Accumulated depreciation................................. (53,381,000) (47,487,000)
------------ ------------
Property, plant and equipment, net.................. $ 79,334,000 $ 83,854,000
------------ ------------
------------ ------------
</TABLE>
NAB's Mexican maquiladora has beneficial ownership of the land and
buildings through trust agreements with Banca Serfin, Institucion de Banca
Multiple, Grupos Financiero Serfin, Division Fiduciara. Substantially all other
assets are owned by the U.S. operations.
(5) EMPLOYEE RETIREMENT BENEFITS:
Employee Retirement Plans
Retirement benefits are provided to certain salaried employees of NAB under
the Ford General Retirement Plan (the "Plan"). Ford allocated to the Company the
costs associated with employees who participated in this Plan. The amount of
expense allocated to NAB from Ford was $178,000 during the nine months ended
September 30, 1993 and $177,000 and $165,000 during the years ended December 31,
1992 and 1991, respectively.
Post-Employment Health Care and Life Insurance Benefits
The same employees who receive the aforementioned retirement benefits are
also eligible to receive health care and insurance benefits upon retirement
through various Ford programs if they reach retirement age while still working
for Ford.
7
<PAGE> 9
THE NORTH AMERICAN BUSINESS
(AN OPERATING COMPONENT OF FORD MOTOR COMPANY)
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
Prior to 1992, Ford recognized the expense for these post-retirement health
care benefits based on actual expenditures for the year. Beginning in 1992, the
estimated cost for post-retirement health care benefits was accrued on an
actuarially determined basis, in accordance with Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other than Pensions." Ford elected to recognize the prior year unaccrued
accumulated post-retirement benefit obligation of this accounting change as a
cumulative adjustment to income in the first quarter of 1992. Ford has allocated
$2,258,000 of the cumulative adjustment, on a pre-tax basis, to NAB as of
January 1, 1992. Ford has allocated $245,100 and $388,900 for current period
expense to NAB for the periods ended September 30, 1993 and December 31, 1992,
respectively. The effect of the post-retirement benefits on 1991 income was not
material.
The components of the September 30, 1993 and December 30, 1992 obligation
consist of the following:
<TABLE>
<CAPTION>
SEPT. 30, DEC. 31,
1993 1992
---------- ----------
<S> <C> <C>
Health................................................ $2,739,000 $2,795,000
Life.................................................. 678,000 549,000
Other................................................. 145,000 3,000
---------- ----------
$3,562,000 $3,347,000
---------- ----------
---------- ----------
</TABLE>
(6) INCOME TAXES:
NAB adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS No. 109"), as of January 1, 1991. The
effect of this change in accounting principle was not material. Prior to the
adoption of SFAS No. 109, NAB's method of accounting for income taxes was the
deferred method under Accounting Principles Board Opinion No. 11.
NAB's provision for income taxes was as follows:
<TABLE>
<CAPTION>
YEAR ENDED
NINE MONTH PERIOD --------------------------
ENDED DEC. 31, DEC. 31,
SEPT. 30, 1993 1992 1991
----------------- ----------- -----------
<S> <C> <C> <C>
Currently payable
U.S.............................................. $41,779,000 $79,400,000 $54,723,000
Mexican.......................................... 487,000 573,000 735,000
----------------- ----------- -----------
Total currently payable....................... $42,266,000 $79,973,000 $55,458,000
Deferred
U.S.............................................. 355,000 (2,762,000) (980,000)
Mexican.......................................... (30,000) (369,000) (294,000)
----------------- ----------- -----------
Total deferred................................ 325,000 (3,131,000) (1,274,000)
----------------- ----------- -----------
Total provision............................... $42,591,000 $76,842,000 $54,184,000
----------------- ----------- -----------
----------------- ----------- -----------
</TABLE>
8
<PAGE> 10
THE NORTH AMERICAN BUSINESS
(AN OPERATING COMPONENT OF FORD MOTOR COMPANY)
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
Deferred income taxes reflect the estimated future tax effect of a
temporary differences between the amounts of assets and liabilities for
financial reporting purposes and such amounts as measured by tax laws and
regulations. The components of deferred income tax assets and liabilities as of
September 30, 1993 and December 31, 1992 are as follows:
<TABLE>
<CAPTION>
SEPT. 30, 1993 DEC. 31, 1992
------------------------ ------------------------
DEFERRED DEFERRED DEFERRED DEFERRED
TAX TAX TAX TAX
ASSET LIABILITY ASSET LIABILITY
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Depreciation.......................... $1,520,000 -- $ 836,000 --
Receivable allowance.................. 1,575,000 -- 2,642,000 --
Employee benefit plans................ 1,622,000 -- 1,580,000 --
Inventory valuation................... -- $1,125,000 -- $1,141,000
---------- ---------- ---------- ----------
Total deferred taxes............. $4,717,000 $1,125,000 $5,058,000 $1,141,000
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
The effective tax rate differs from the U.S. statutory rates for all years
because of the effect of Mexican taxes.
The Company's income before taxes and cumulative effect of a change in
accounting principle for its U.S. and Mexican operations were as follows:
<TABLE>
<CAPTION>
NINE MONTH YEAR ENDED
PERIOD ENDED ----------------------------
SEPT. 30, DEC. 31, DEC. 31,
1993 1992 1991
------------ ------------ ------------
<S> <C> <C> <C>
United States.............................. $120,638,000 $225,403,000 $158,068,000
Mexico..................................... (3,036,000) (4,286,000) (5,817,000)
------------ ------------ ------------
$117,602,000 $221,117,000 $152,251,000
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
(7) NOTE PAYABLE TO FORD MOTOR COMPANY S.A. DE C.V.:
Interest rates on the note payable to Ford Motor Company S.A. de C.V.
("Ford of Mexico") ranged from 5.5 percent to 6.5 percent and 5.5 percent to 7.0
percent at September 30, 1993 and December 31, 1992, respectively.
Interest paid on the Ford of Mexico note was $2,025,000 for the nine months
ended September 30, 1993 and $3,207,000 and $4,227,000 during the years ended
December 31, 1992 and 1991, respectively.
(8) EQUITY AND ADVANCES ACCOUNT:
Equity and advances reflect the accumulation of transactions between NAB,
other operating components of Ford and various Ford affiliates. These
transactions include operating results, corporate assessments, advances and
other intercompany transactions. Additionally, the equity and advances account
reflects the common stock investment in the Mexican maquiladora held by Ford and
its affiliates.
Transactions of NAB in the U.S. are settled through Ford cash accounts.
These cash accounts are not separately allocated to the NAB operations.
Accordingly, these transactions also have been recorded through the equity and
advances account.
9
<PAGE> 11
THE NORTH AMERICAN BUSINESS
(AN OPERATING COMPONENT OF FORD MOTOR COMPANY)
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
(9) TRANSACTIONS WITH RELATED PARTIES:
Sales and purchases of products and technical and administrative services
are transacted between NAB and Ford and its affiliates. A summary of the amounts
included in the NAB statements of income follows:
<TABLE>
<CAPTION>
YEAR ENDED
NINE MONTH DEC. 31,
PERIOD ENDED ----------------------------
SEPT. 30, 1993 1992 1991
-------------- ------------ ------------
<S> <C> <C> <C>
Sales.............................................. $ 401,357,000 $568,605,000 $487,111,000
Purchases
Product.......................................... 18,388,000 23,302,000 27,351,000
Technical and administrative services............ 8,900,000 9,100,000 7,100,000
</TABLE>
Sales to nonrelated parties consist primarily of seat trim and assemblies
for further processing and subsequent resale to Ford and its affiliates.
Effective January 1, 1993, NAB agreed to reduce the selling prices of its
products to Ford. The effect of this agreement reduced revenues for the nine
months ended September 30, 1993 by approximately $66 million.
See previous notes for additional related party information.
(10) LITIGATION, CLAIMS AND CONTINGENCIES:
Various legal actions and claims are pending or may be instituted or
asserted in the future against the Company. Litigation is subject to many
uncertainties, the outcome of individual litigated matters is not predictable
with assurance and it is reasonably possible that some of the foregoing matters
could be decided unfavorably to NAB.
NAB operates in Mexico under a maquilla program. Under the maquilla
program, NAB can import into Mexico any fixed assets or materials necessary for
production, without paying import taxes, as long as the assets are returned to
the United States. If materials or fixed assets are not discharged properly or
if the Company cannot prove that items are maintained in Mexico, the Mexican
Custom Authority can levy an import tax (average tax rate - 35 percent) and a
value-added tax (average rate - 10 percent).
Although the amount of liability at September 30, 1993 with respect to
these matters cannot be ascertained, the Company believes that any resulting
liability should not materially affect the financial position of the Company at
September 30, 1993.
(11) AGREEMENT WITH LEAR SEATING CORPORATION:
Pursuant to an agreement with Lear Seating Corporation ("Lear"), Ford sold
NAB to Lear on November 1, 1993. Certain assets and liabilities (identified in
the purchase agreement) presented in the September 30, 1993 and December 31,
1992 balance sheets are excluded from the purchase and will be retained by Ford.
10
<PAGE> 12
PRO FORMA FINANCIAL DATA
The following unaudited pro forma consolidated statements of operations and
consolidated balance sheet (collectively, the "Pro Forma Statements") of the
Company were prepared to illustrate the estimated effects of (i) the NAB
Acquisition and the related incurrence of debt to finance such acquisition, (ii)
the incurrence of indebtedness under the Credit Agreement to retire the GECC
Mortgage Loan and to refinance the term loans outstanding under the Company's
Original Credit Agreement, (iii) the Offering and the application of the net
proceeds therefrom, and (iv) the merger of Lear Holdings Corporation into Lear
Seating Corporation (collectively, the "Pro Forma Transactions"), as if the Pro
Forma Transactions had occurred for statement of operations purposes as of the
beginning of each period presented and for balance sheet purposes as of October
2, 1993.
The Pro Forma Statements do not purport to represent what the Company's
financial position or results of operations would actually have been if such
transactions in fact had occurred on such date or at the beginning of the
periods indicated or to project the Company's financial position or results of
operations for any future date or period.
The pro forma adjustments are based upon available information and upon
certain assumptions that management believes are reasonable. The Pro Forma
Statements and accompanying notes should be read in conjunction with the
historical financial statements of the Company and the NAB, including the notes
thereto, and other financial information pertaining to the Company and the NAB,
including "Capitalization" and related notes thereto included elsewhere in the
Prospectus.
The NAB Acquisition will be accounted for using the purchase method of
accounting. The total purchase price of $195.5 million plus estimated
acquisition costs of approximately $1.5 million will be allocated to the assets
and liabilities of the NAB based upon their respective fair market values, with
the remainder allocated to goodwill. Such allocations will be made based upon
valuations and other studies which have not been finalized. Accordingly, the
allocation of the purchase price included in the following Pro Forma Statements
is preliminary. The final values may differ from those set forth in the
historical financial statements of the NAB and from those set forth herein.
11
<PAGE> 13
PRO FORMA STATEMENTS OF OPERATIONS
(UNAUDITED, DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1993
-------------------------------------------------------------------------------------------------------
EXCLUDED CONSOLIDATION
COMPANY NAB NAB OPERATIONS NAB AND FINANCING
HISTORICAL HISTORICAL(1) BUSINESS(2) ADJUSTMENTS(3) ADJUSTED ADJUSTMENTS PRO FORMA
---------- ------------- ----------- -------------- -------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales.................. $1,756,510 $ 701,901 $ (56,000) $ (98,798) $547,103 $ (68,463)(4) $2,235,150
Cost of sales.......... 1,604,011 498,648 (31,360) 19,915 487,203 (68,463)(4) 2,022,751
---------- ------------- ----------- -------------- -------- ------------- ----------
Gross profit........... 152,499 203,253 (24,640) (118,713) 59,900 -- 212,399
Selling, general and
administrative
expenses............. 61,898 11,048 -- 7,661 18,709 -- 80,607
Amortization........... 9,548 -- -- 2,286 2,286 -- 11,834
---------- ------------- ----------- -------------- -------- ------------- ----------
Operating income....... 81,053 192,205 (24,640) (128,660) 38,905 -- 119,958
---------- ------------- ----------- -------------- -------- ------------- ----------
Interest expense,
net.................. 47,832 2,964 -- -- 2,964 1,482(5) 52,278
Other expense.......... 5,260 1,851 -- -- 1,851 -- 7,111
---------- ------------- ----------- -------------- -------- ------------- ----------
Income before provision
for income taxes..... 27,961 187,390 (24,640) (128,660) 34,090 (1,482) 60,569
Provision for income
taxes................ 17,847 66,359 (8,673) (45,288) 12,398 (521) 29,724
---------- ------------- ----------- -------------- -------- ------------- ----------
Net income (loss)...... $ 10,114 $ 121,031 $ (15,967) $ (83,372) $ 21,692 $ (961) $ 30,845(6)
---------- ------------- ----------- -------------- -------- ------------- ----------
---------- ------------- ----------- -------------- -------- ------------- ----------
Depreciation........... $ 31,106 $ 10,054 $ -- $ (1,275) $ 8,779 -- $ 39,885
EBITDA(7).............. 121,707 202,259 (24,640) (127,649) 49,970 -- 171,677
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED OCTOBER 2, 1993
-------------------------------------------------------------------------------------------------------
EXCLUDED CONSOLIDATION
COMPANY NAB NAB OPERATIONS NAB AND FINANCING
HISTORICAL HISTORICAL(1) BUSINESS(2) ADJUSTMENTS(3) ADJUSTED ADJUSTMENTS PRO FORMA
---------- ------------- ----------- -------------- -------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales.................. $ 399,066 $ 156,060 $ (14,000) $ (14,145) $127,915 $ (23,349)(4) $ 503,632
Cost of sales.......... 377,239 118,692 (7,840) 4,528 115,380 (23,349)(4) 469,270
---------- ------------- ----------- -------------- -------- ------------- ----------
Gross profit........... 21,827 37,368 (6,160) (18,673) 12,535 -- 34,362
Selling, general and
administrative
expenses............. 12,695 3,142 -- 1,293 4,435 -- 17,130
Amortization........... 2,187 -- -- 572 572 -- 2,759
---------- ------------- ----------- -------------- -------- ------------- ----------
Operating income....... 6,945 34,226 (6,160) (20,538) 7,528 -- 14,473
Interest expense,
net.................. 11,418 675 -- -- 675 596(5) 12,689
Other expense.......... 1,070 659 -- -- 659 -- 1,729
---------- ------------- ----------- -------------- -------- ------------- ----------
Income before provision
for income taxes and
extraordinary
items................ (5,543) 32,892 (6,160) (20,538) 6,194 (596) 55
Provision for income
taxes................ 5,286 11,907 (2,230) (7,435) 2,242 (216) 7,312
---------- ------------- ----------- -------------- -------- ------------- ----------
Net income (loss)
before extraordinary
items................ (10,829) 20,985 (3,930) (13,103) 3,952 (380) (7,257)
Extraordinary loss on
early extinguishment
of debt.............. 535 -- -- -- -- (535)(8) --
---------- ------------- ----------- -------------- -------- ------------- ----------
Net income (loss)...... $ (11,364) $ 20,985 $ (3,930) $ (13,103) $ 3,952 $ 155 $ (7,257)
---------- ------------- ----------- -------------- -------- ------------- ----------
---------- ------------- ----------- -------------- -------- ------------- ----------
Depreciation........... $ 8,111 $ 2,457 $ -- $ (262) $ 2,195 -- $ 10,306
EBITDA(7).............. 17,243 36,683 (6,160) (20,228) 10,295 -- 27,538
</TABLE>
- -------------------------
(1) The NAB historical information represents amounts derived from the unaudited
quarterly financial statements of the NAB, including an allocation of
year-end adjustments.
(2) Reflects elimination of the approximate sales and cost of sales associated
with a non-seating product line of the NAB that the NAB will continue to
produce until its anticipated phase-out in the third quarter of calendar
year 1994.
(3) Operations adjustments consist of pro forma adjustments to the historical
revenues and expenses of the NAB to reflect (i) the Company's estimates of
the impact of product pricing reductions negotiated as part of the NAB
Acquisition, (ii) estimated actual expenses associated with ongoing
engineering activities in support of Ford seating programs and the
reallocation of the NAB engineering expenses among financial statement
categories for consistency with the financial statements of the Company,
(iii) incremental ongoing overhead and administrative expenses associated
with the NAB Acquisition, including amounts to be paid to Ford for
continuation of certain support
12
<PAGE> 14
functions, (iv) estimated adjustments to amortization and depreciation
expense resulting from the revaluation of NAB assets and (v) the estimated
income tax effects of these items. The adjustments include the following
items:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
JUNE 30, OCTOBER 2,
1993 1993
---------- ------------
<S> <C> <C>
Effects of product pricing agreements negotiated between the Company and
Ford in the NAB Acquisition............................................... $ 98,798 $ 14,145
Incremental ongoing NAB engineering, overhead and administrative expenses... 28,851 6,083
Amortization of goodwill resulting from the NAB Acquisition................. 2,286 572
Decrease in NAB depreciation expense........................................ (1,275) (262)
Estimated income tax effects of operations adjustments...................... (45,288) (7,435)
---------- ------------
$ 83,372 $ 13,103
---------- ------------
---------- ------------
</TABLE>
The estimated effects of the product pricing adjustments were derived by
management through the application of agreed upon average price reductions
effective as of the date of the NAB Acquisition to the historical revenues
of the NAB by product line. The adjustment is proportionately greater for
the year ended June 30, 1993 than for the three months ended October 2, 1993
due to additional pro forma adjustments in the year ended June 30, 1993 to
reflect price reductions from the NAB to Ford which were effective as of
January 1, 1993.
(4) Reflects the elimination in consolidation of sales from the NAB to other
Lear locations.
(5) Reflects interest expense changes as follows:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
JUNE 30, OCTOBER 2,
1993 1993
---------- ------------
<S> <C> <C>
Estimated interest on borrowings under the Credit Agreement to finance the
NAB Acquisition........................................................... $ 7,969 $ 1,953
Interest expense on the Notes, at the assumed rate of 9.0%.................. 13,050 3,262
Elimination of interest expense on the 14% Subordinated Debentures.......... (18,900) (4,725)
Interest expense on short-term notes payable used to finance the NAB
Acquisition, at 8%........................................................ 1,200 300
Elimination of interest expense on Favesa note payable prepaid in connection
with the NAB Acquisition.................................................. (1,476) (369)
Difference between interest expense on Favesa note payable at 6% prior to
acquisition, 11.5% subsequent............................................. 1,095 274
Net reduction in interest expense due to refinancing of the Original Credit
Agreement and retirement of the GECC Mortgage Loan........................ (1,362) (265)
Interest on borrowings under the Credit Agreement to finance fees and
expenses related to the Pro Forma Transactions............................ 631 153
Change in deferred financing fee amortization due to refinancing of the
Original Credit Agreement, issuance of the Notes, retirement of the GECC
Mortgage Loan and redemption of the 14% Subordinated Debentures........... (725) 13
---------- ------------
Net increase in interest expense........................................ $ 1,482 $ 596
---------- ------------
---------- ------------
</TABLE>
(6) Net income excludes extraordinary losses due to the redemption of the 14%
Subordinated Debentures and the refinancing of the Original Credit Agreement
as follows:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
JUNE 30, OCTOBER 2,
1993 1993
---------- ------------
<S> <C> <C>
Write-off of unamortized deferred financing fees related to the Original
Credit Agreement.......................................................... $ 2,452 $ 763
Write-off of unamortized deferred financing fees related to the 14%
Subordinated Debentures................................................... 4,207 3,664
Write-off of unamortized deferred financing fees related to the GECC
Mortgage Loan............................................................. 1,192 995
Prepayment premium on redemption of 14% Subordinated Debentures............. 7,290 7,290
Estimated income tax effects................................................ (5,148) (4,322)
---------- ------------
$ 9,993 $ 8,390
---------- ------------
---------- ------------
</TABLE>
(7) "EBITDA" is operating income (loss) plus depreciation and amortization. The
Company believes that EBITDA provides additional information for determining
its ability to meet debt service requirements. EBITDA does not represent and
should not be considered as an alternative to net income or cash flow from
operations as determined by generally accepted accounting principles, and
EBITDA does not necessarily indicate whether cash flow will be sufficient
for cash requirements.
(8) Reflects the elimination of the extraordinary loss on the refinancing of the
Original Credit Agreement which was recorded in the first quarter of fiscal
1994. Such loss would have been incurred in a prior period had the NAB
Acquisition taken place at the beginning of the periods presented.
13
<PAGE> 15
PRO FORMA CONSOLIDATED BALANCE SHEET
(UNAUDITED, DOLLARS IN THOUSANDS)
AS OF OCTOBER 2, 1993
<TABLE>
<CAPTION>
ACQUISITION
COMPANY NAB EXCLUDED NAB AND VALUATION FINANCING
HISTORICAL HISTORICAL NAB ITEMS(1) ADJUSTED OF NAB(2) ADJUSTMENTS PRO FORMA
--------- ---------- ------------ -------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash............................. $ 42,531 $ 2,743 $ -- $ 2,743 $(185,000) $ 185,000(3) $ 45,274
Accounts receivable, net......... 176,099 30,037 (30,037) -- -- -- 176,099
Inventories...................... 43,177 36,864 -- 36,864 -- -- 80,041
Other current assets............. 15,937 2,686 -- 2,686 -- -- 18,623
--------- ---------- ------------ -------- ------------- ----------- ---------
277,744 72,330 (30,037) 42,293 (185,000) 185,000 320,037
--------- ---------- ------------ -------- ------------- ----------- ---------
Property, Plant And Equipment:
Land............................. 12,979 7,119 -- 7,119 9,987 -- 30,085
Buildings and improvements....... 73,331 49,616 -- 49,616 (10,803) -- 112,144
Machinery and equipment.......... 186,086 75,980 -- 75,980 (41,790) -- 220,276
--------- ---------- ------------ -------- ------------- ----------- ---------
272,396 132,715 -- 132,715 (42,606) -- 362,505
Less: Accumulated depreciation... (109,582) (53,381) -- (53,381) 53,381 -- (109,582)
--------- ---------- ------------ -------- ------------- ----------- ---------
162,814 79,334 -- 79,334 10,775 -- 252,923
--------- ---------- ------------ -------- ------------- ----------- ---------
Other Assets:
Goodwill, net.................... 306,978 -- -- -- 91,450 -- 398,428
Deferred finance fees and
other.......................... 19,013 1,597 -- 1,597 -- 4,896(4) 25,506
--------- ---------- ------------ -------- ------------- ----------- ---------
325,991 1,597 -- 1,597 91,450 4,896 423,934
--------- ---------- ------------ -------- ------------- ----------- ---------
$ 766,549 $ 153,261 $(30,037) $123,224 $ (82,775) $ 189,896 $ 996,894
--------- ---------- ------------ -------- ------------- ----------- ---------
--------- ---------- ------------ -------- ------------- ----------- ---------
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term borrowings............ $ 3,202 $ 44,529 $(24,614) $ 19,915 $ 10,500 $ 15,000 $ 48,617
Cash overdrafts.................. 26,153 -- -- -- -- -- 26,153
Accounts payable................. 193,593 32,401 (32,401) -- -- -- 193,593
Accrued liabilities.............. 93,414 47,238 (42,266) 4,972 1,500 (10,405)(5) 89,481
Current portion of long-term
debt........................... 1,202 -- -- -- -- -- 1,202
--------- ---------- ------------ -------- ------------- ----------- ---------
317,564 124,168 (99,281) 24,887 12,000 4,595 359,046
--------- ---------- ------------ -------- ------------- ----------- ---------
Long-Term Liabilities:
Long-term debt................... 340,209 -- -- -- -- 193,065(6) 533,274
Deferred national income taxes... 11,962 -- -- -- -- -- 11,962
Other............................ 31,260 3,562 -- 3,562 -- -- 34,822
--------- ---------- ------------ -------- ------------- ----------- ---------
383,431 3,562 -- 3,562 -- 193,065 580,058
--------- ---------- ------------ -------- ------------- ----------- ---------
Common stock subject to limited
redemption, net.................. 3,885 -- -- -- -- -- 3,885
--------- ---------- ------------ -------- ------------- ----------- ---------
Stockholders' Equity:
Common stock..................... 12 -- -- -- -- -- 12
Additional paid-in capital....... 150,993 -- -- -- -- -- 150,993
Warrants......................... 10,000 -- -- -- -- -- 10,000
Common stock held in treasury.... (10,000) -- -- -- -- -- (10,000)
Retained deficit................. (85,896) -- -- -- -- (7,764)(7) (93,660)
Minimum pension liability
adjustment..................... (3,240) -- -- -- -- -- (3,240)
Cumulative translation
adjustment..................... (200) -- -- -- -- -- (200)
Equity and advances account --
NAB............................ -- 25,531 69,244 94,775 (94,775) -- --
--------- ---------- ------------ -------- ------------- ----------- ---------
61,669 25,531 69,244 94,775 (94,775) (7,764) 53,905
--------- ---------- ------------ -------- ------------- ----------- ---------
$ 766,549 $ 153,261 $(30,037) $123,224 $ (82,775) $ 189,896 $ 996,894
--------- ---------- ------------ -------- ------------- ----------- ---------
--------- ---------- ------------ -------- ------------- ----------- ---------
</TABLE>
- -------------------------
(1) The assets acquired and liabilities assumed by the Company in the NAB
Acquisition excluded accounts receivable, accounts payable, certain
short-term borrowings, and certain accrued liabilities (primarily accrued
income taxes).
(2) The purchase price of $195,500 included $185,000 in cash and $10,500 in
promissory notes. The acquisition cost also included fees and expenses
estimated at $1,500. The NAB Acquisition will be
14
<PAGE> 16
accounted for using the purchase method of accounting and the total
purchase cost will be allocated first to assets and liabilities based upon
their respective fair values, with the remainder allocated to goodwill.
Historical NAB equity balances are eliminated for purposes of the pro forma
consolidated balance sheet. The allocation of the purchase price reflected
above is based on estimates and may differ from the final allocation.
(3) Reflects proceeds of borrowings under the Credit Agreement of $170,000, and
borrowings under short-term notes payable of $15,000.
(4) Reflects fees of $9,370 related to the refinancing of the Original Credit
Agreement and the Offering, net of the write-off of unamortized fees of
$4,474 related to the redemption of the 14% Subordinated Debentures and the
retirement of the GECC Mortgage Loan.
(5) Reflects payment of accrued and unpaid interest of $6,405 on the 14%
Subordinated Debentures, together with the tax benefit of the loss of
$4,000 on the redemption of the 14% Subordinated Debentures and the
retirement of the GECC Mortgage Loan.
(6) Reflects the effects of the Pro Forma Transactions as follows:
<TABLE>
<S> <C>
Borrowings under the Credit Agreement to finance a portion of the
NAB Acquisition................................................. $ 170,000
Issuance of the Notes............................................. 145,000
Redemption of the 14% Subordinated Debentures..................... (135,000)
Borrowings under the Credit Agreement to pay a portion of the
accrued and unpaid interest on the 14% Subordinated Debentures
and the fees and expenses related to the Pro Forma
Transactions.................................................... 13,065
---------
Net increase in long-term debt............................... $ 193,065
---------
---------
</TABLE>
(7) Reflects loss on the redemption of the 14% Subordinated Debentures and the
retirement of the GECC Mortgage Loan, which includes the prepayment premium
on the redemption of the 14% Subordinated Debentures of $7,290, and the
write-off of deferred financing fees of $4,474, net of the related tax
benefit of $4,000.
15
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused the report to be signed on its behalf by the
undersigned thereunto duly authorized.
LEAR SEATING CORPORATION
Dated: January 12, 1994 By: /s/ JAMES H. VANDENBERGHE
James H. Vandenberghe
Executive Vice President
and Secretary
16
