<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------------
FORM 8-K/A
-------------------------------------
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) September 1, 1998
-------------
LEAR CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 1-11311 13-3386776
- - ------------------------------------- ------------------------------- ----------------------
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
21557 Telegraph Road
Southfield, Michigan 48086-5008
- - ---------------------------------------------------------------------- ---------------------
(Address of principal executive offices) (zip code)
</TABLE>
(248) 447-1500
---------------------------------------------------------
(Telephone number, including
area code, of agent for service)
No Change
--------------------------------------------------------
(Former name or former address,
if changes since last report)
<PAGE> 2
ITEM 5. OTHER EVENTS.
This 8-K/A is an amendment to the 8-K dated September 1, 1998 related
to the acquisition of the Delphi Automotive Systems' seating ("Delphi Seating")
business. The purpose of this amendment is to file the historical financial
statements of the business being acquired and the pro-forma statements related
to this transaction.
On September 1, 1998, Lear Corporation along with various wholly owned
subsidiaries of Lear Corporation (collectively the "Company"), acquired Delphi
Seating from General Motors Corporation. Delphi Seating consists of 16 locations
located in 10 countries and over 6,000 employees and supplies seating systems
and seating components to General Motors' locations in North America, Europe and
South Africa. The purchase was a combined asset and stock purchase.
The purchase price for Delphi Seating was approximately $250 million
and was determined based upon estimates of future earnings and evaluations of
the net worth of the assets acquired. General Motors Corporation is a
significant customer of Lear Corporation and accounted for approximately 27% of
the Company's sales in 1997. The funds for the purchase were obtained through
borrowings under the Company's $2.1 billion senior revolving credit facility
with a syndicate of banks.
2
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
A. Historical Financial Statements
1) Three Year Audited Financial Statements
[DELOITTE & TOUCHE LOGO] [DELOITTE & TOUCHE LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
Delphi Automotive Systems:
We have audited the accompanying statements of net assets to be sold of the
seating business, including certain subsidiaries, (the "Business") of the Delphi
Interior & Lighting Systems Division ("Delphi") of General Motors Corporation
("General Motors"), as of December 31, 1997 and 1996, and the related statements
of sales less costs and expenses and of cash flows for each of the three years
in the period ended December 31, 1997, pursuant to the Master Sale and Purchase
Agreement between General Motors and Lear Corporation (the "Buyer") dated August
31, 1998 (the "Agreement"). These financial statements are the responsibility of
Delphi 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 audits 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.
The accompanying financial statements were prepared for the purpose of complying
with the Agreement as discussed in Note 1, and are not intended to be a complete
presentation of the financial position, results of operations and cash flows of
the Business.
In our opinion, such financial statements present fairly, in all material
respects, the net assets to be sold, including certain subsidiaries, of the
Business as of December 31, 1997 and 1996, pursuant to the Master Sale and
Purchase Agreement referred to in Note 1, and their related sales less costs and
expenses and their cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
- - -------------------------------
August 21, 1998
3
<PAGE> 4
SEATING BUSINESS OF
DELPHI AUTOMOTIVE SYSTEMS
STATEMENTS OF NET ASSETS TO BE SOLD
AS OF DECEMBER 31, 1997 AND 1996
(THOUSANDS OF DOLLARS)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
ASSETS:
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 9,058 $ 10,191
Marketable securities 1,084 1,982
Accounts and notes receivable (Note 3) 23,623 23,238
Inventories (net of LIFO allowance of $18.6 million and $13.8 million
in 1997 and 1996, respectively) (Note 4) 41,773 34,474
Other 211 1,157
-------- --------
Total current assets 75,749 71,042
Property, plant and equipment (net of accumulated depreciation of $60.9
million and $58.9 million in 1997 and 1996, respectively, and
impairment amount of $53.0 million in 1997) (Note 5) 53,099
Deferred taxes 1,314 400
Other 3,627 3,209
-------- --------
Total assets 80,690 127,750
-------- --------
LIABILITIES:
Current liabilities:
Accounts and notes payable (including $17,230 and $13,350 with
affiliated entities in 1997 and 1996, respectively) 38,910 34,622
Accrued liabilities 727 2,109
Income taxes payable 2,482 4,277
-------- --------
Total current liabilities 42,119 41,008
Minority interest 1,269 3,430
Retirement obligations 1,529 996
Deferred taxes 1,954 1,492
Other 886 1,522
-------- --------
Total liabilities 47,757 48,448
COMMITMENTS AND CONTINGENCIES (Note 12)
NET ASSETS TO BE SOLD $ 32,933 $ 79,302
======== ========
</TABLE>
See notes to financial statements.
4
<PAGE> 5
SEATING BUSINESS OF
DELPHI AUTOMOTIVE SYSTEMS
STATEMENTS OF SALES LESS COSTS AND EXPENSES
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1997
(THOUSANDS OF DOLLARS)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------------------------
1997 1996 1995
NET SALES:
<S> <C> <C> <C>
General Motors Corporation $ 1,097,305 $ 1,335,940 $ 1,727,573
Other customers 307,625 113,544 74,654
----------- ----------- -----------
Total net sales 1,404,930 1,449,484 1,802,227
COST OF SALES (Including an impairment charge
of $75.8 million in 1997) (Note 2) 1,502,607 1,375,623 1,626,906
----------- ----------- -----------
GROSS PROFIT (LOSS) (97,677) 73,861 175,321
OPERATING EXPENSES:
Engineering 76,027 72,515 71,270
Sales and marketing 6,384 3,510 6,931
General and administrative 37,870 40,040 46,699
Corporate allocations (Note 1) 10,182 8,722 6,480
Loss on sale or plant closure (Note 10) 79,789 78,800 --
----------- ----------- -----------
Total operating expenses 210,252 203,587 131,380
----------- ----------- -----------
OPERATING INCOME (LOSS) (307,929) (129,726) 43,941
OTHER EXPENSE (INCOME) (Note 6) 4,379 (1,474) (5,292)
----------- ----------- -----------
SALES LESS COSTS AND EXPENSES
BEFORE INCOME TAX (312,308) (128,252) 49,233
INCOME TAX PROVISION (Note 7) 1,155 704 21,631
----------- ----------- -----------
SALES LESS COSTS AND EXPENSES $ (313,463) $ (128,956) $ 27,602
=========== =========== ===========
</TABLE>
See notes to financial statements.
5
<PAGE> 6
SEATING BUSINESS OF
DELPHI AUTOMOTIVE SYSTEMS
STATEMENTS OF CASH FLOWS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1997
(THOUSANDS OF DOLLARS)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------------------------
1997 1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Sales less costs and expenses $(313,463) $(128,956) $ 27,602
Adjustments to reflect cash provided by
(used in) operating activities:
Depreciation and amortization 6,070 4,992 3,358
Impairment charge 75,788 -- --
Loss on sale or plant closure 79,789 78,800 --
Changes in assets and liabilities:
Accounts and notes receivable 49,689 19,853 12,320
Inventories (10,506) (518) 15,322
Accounts payable and accrued liabilities 11,835 (4,161) 22,986
Other 5,717 7,191 (8,647)
--------- --------- ---------
Net cash provided by (used in) operating
activities (95,081) (22,799) 72,941
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (8,487) (8,398) (15,569)
Proceeds from sale of business -- 28,800 --
--------- --------- ---------
Net cash provided by (used in) investing
activities (8,487) 20,402 (15,569)
CASH FLOWS FROM FINANCING ACTIVITIES -
Net cash (to) from General Motors Corporation 103,631 8,688 (57,556)
EFFECT OF EXCHANGE RATE CHANGES ON
CASH (1,196) (976) (501)
--------- --------- ---------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (1,133) 5,315 (685)
CASH AND CASH EQUIVALENTS AT THE
BEGINNING OF THE YEAR 10,191 4,876 5,561
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT THE END
OF THE YEAR $ 9,058 $ 10,191 $ 4,876
========= ========= =========
ADDITIONAL CASH FLOW INFORMATION -
Cash paid during the year:
Income taxes $ 6,006 $ 7,756 $ 5,041
========= ========= =========
Interest $ 1,713 $ 1,582 $ 2,194
========= ========= =========
</TABLE>
See notes to financial statements.
6
<PAGE> 7
SEATING BUSINESS OF
DELPHI AUTOMOTIVE SYSTEMS
NOTES TO FINANCIAL STATEMENTS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1997
- - --------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
The accompanying financial statements have been prepared for the purpose
of presenting the net assets to be sold of the seating business (the
"Business") of the Delphi Interior & Lighting Systems Division ("Delphi")
of General Motors Corporation ("General Motors"), as of December 31, 1997
and 1996, and its sales less costs and expenses and cash flows from
General Motors Corporation for each of the three years in the period ended
December 31, 1997. The net assets to be sold were determined pursuant to
the Master Sale and Purchase Agreement between General Motors and Lear
Corporation (the "Buyer") dated August 31, 1998 (the "Agreement"),
including certain domestic and international assets, and the shares of
certain international subsidiaries of the Business. The Business is
engaged in the design, manufacture and sale of vehicle seating and seating
components for the North American and European automotive industries. The
Business operates manufacturing facilities in North America in Auburn
Hills and Grand Rapids, Michigan, and Juarez, Rio Bravo and Fuentes,
Mexico. In addition, the Business has European facilities in Epila and
Logrono, Spain; Nuneaton, England; Desio, Italy; Warsaw and Gliwice,
Poland; Lebach, Germany; and Ponte de Sor, Portugal. The Business also
includes majority-owned joint venture interests for operations in Turkey
and South Africa which are consolidated. During the period of the
financial statements, the Business included certain other operations,
principally a seating component facility in Trenton, New Jersey, for which
closure was announced in April 1997. During 1996 and 1995, the Business
included certain seating operations in Flint, Michigan and Windsor,
Ontario, Canada, which were sold to another buyer in December 1996.
The statements of net assets to be sold present the net assets to be sold
of the Business pursuant to the Agreement, while the statements of sales
less costs and expenses and of cash flows present the historical operating
performance of the Business. During all of the periods presented in the
accompanying financial statements, the Business operated as an integral
part of Delphi Automotive Systems and General Motors' overall operations.
The financial statements include 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
Business 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 on various factors which estimate usage of
particular corporate functions, and in certain instances other relevant
factors are used, such as the revenues or headcount of the Business. It is
not considered practicable to estimate the amount of such costs had the
Business operated on a stand-alone basis.
The following summarizes the primary elements of the Agreement which have
impacted the presentation of the accompanying financial statements:
CASH AND CASH EQUIVALENTS AND ACCOUNTS AND NOTES RECEIVABLES are presented
in the financial statements for those entities for which the common equity
shares are being sold. Cash and cash equivalents are defined as
short-term, highly liquid investments with original maturities of 90 days
or
7
<PAGE> 8
less. For all other entities, cash and accounts receivable are excluded
from the financial statements because such assets were retained by Delphi.
PROPERTY, PLANT AND EQUIPMENT, NET excludes certain facilities and other
assets of the Business which will be retained by Delphi, principally the
manufacturing site in Trenton, New Jersey, and certain other domestic and
international facilities. Except for subsidiaries subject to share sales,
tooling costs on customer-owned tools are excluded from the statements of
net assets to be sold because these are not subject to the transaction.
EMPLOYEE BENEFIT OBLIGATIONS - Certain employee benefit obligations, such
as outstanding and unreported medical claims, workers' compensation
claims, postemployment benefits for hourly and salaried employees, defined
benefit pension and postretirement benefit obligations, were not assumed
by the Buyer, but were retained by General Motors, and are therefore
excluded from the statements of net assets to be sold. Employee benefit
obligations are reflected in such statements for subsidiaries whose shares
were subject to sale under the Agreement.
OTHER LIABILITIES - Product liability claims, legal claims and
assessments, both asserted and unasserted, and environmental obligations,
except those related to the subsidiaries whose shares were subject to
sale, were excluded from the statements of net assets to be sold because
such obligations were retained by General Motors.
2. SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect amounts reported therein. Due to the
inherent uncertainty involved in making estimates, actual results reported
in future periods may be based upon amounts that differ from those
estimates.
INVENTORIES are stated at the lower of actual cost or market, as
determined substantially by the last-in, first-out (LIFO) method. The
Business inventory cost data is combined with similar data from other
General Motors divisions for purposes of applying the LIFO method of
accounting. The Business has been allocated a pro rata portion of General
Motors' LIFO reserve based on the relative inventory levels of the
Business before application of such reserve. If the first-in, first-out
method (FIFO) method had been used, the inventory balance would have been
$18.6 million and $13.8 million higher at December 31, 1997 and 1996,
respectively. In addition, the effect of the LIFO method of accounting was
to increase (decrease) sales less costs and expenses by $(4.8) million,
$6.0 million and $3.0 million in 1997, 1996 and 1995, respectively.
TOOLING COSTS on customer-owned tooling projects are generally recorded
based on costs accumulated under such projects. Upon project completion,
gains or losses on such projects are generally deferred and amortized over
a three-year period, which reflects the minimum term of related production
contracts to which the tooling projects relate. Except for subsidiaries
subject to share sales, all costs accumulated on customer-owned tooling
projects and deferred gains and losses were retained by General Motors and
consequently are excluded from the statements of net assets to be sold.
DEPRECIATION AND AMORTIZATION - Depreciation is provided based on
estimated useful lives of groups of property generally using accelerated
methods, which accumulate depreciation of approximately two-thirds of the
depreciable cost during the first half of the assets' estimated useful
lives.
8
<PAGE> 9
Leasehold improvements are amortized over the period of the lease or the
life of the property, whichever is shorter, with the amortization applied
directly to the asset account.
The estimated useful lives used for property, plant and equipment are as
follows, in years:
Buildings 40
Machinery, equipment and tooling 5-27
Office and data processing equipment 8-15
Significant renewals and betterments are capitalized and replaced units
are written off. Maintenance and repairs, as well as renewals of minor
amounts, are charged to expense as incurred.
IMPAIRMENT OF LONG-LIVED ASSETS - In accordance with Statement of
Financial Accounting Standards (SFAS) No. 121, Accounting for Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
management of the Business periodically evaluates the carrying value of
long-lived assets to be held and used when events or circumstances warrant
such a review. The carrying value of a long-lived asset is considered
impaired when the anticipated undiscounted cash flow from such asset is
separately identifiable and is less than its carrying value. In that
event, a loss is recognized based on the amount by which the carrying
value exceeds the fair market value of the long-lived asset. Fair market
value is determined primarily using the anticipated cash flows discounted
at a rate commensurate with the risk involved. Losses on long-lived assets
to be disposed of are determined in a similar manner, except that fair
market values are reduced for the cost to dispose.
Delphi initiated studies in 1997 concerning the long-term competitiveness
of all facets of their business. These studies were performed in
conjunction with the business planning cycle and were substantially
completed in December 1997. This re-evaluation was performed using product
specific cash flow information refined in connection with the separation
of Delphi from General Motors North American Operations during 1997. As a
result, the carrying values of certain long-lived assets were determined
to be impaired as the separately identifiable, undiscounted future cash
flows from such assets were less than their respective carrying values.
The resulting impairment charge represented the amount by which the
carrying value of such assets exceeded their estimated fair market value.
A charge of approximately $75.8 million, consisting of $53.0 million
related to assets included on the statement of net assets to be sold and
$22.8 million of other amounts related to assets of the Business retained
by General Motors, was recorded in cost of sales in the statement of sales
less costs and expenses for the year ended December 31, 1997 to reflect
the reduction in carrying value for these assets.
FAIR VALUE OF FINANCIAL INSTRUMENTS - Financial instruments included in
the statements of net assets to be sold have carrying values which
approximate fair value.
REVENUE RECOGNITION - Sales, net of estimated returns and allowances, and
cost of sales are recorded upon shipment of product to customers and
transfer of title under standard commercial terms.
RESEARCH AND DEVELOPMENT - Expenditures for research and development are
charged to costs and expenses as incurred and represent independent
research and development activities of the Business. Research and
development expenses recognized by the Business were $5.5 million, $5.4
million and $4.2 million during 1997, 1996 and 1995, respectively.
9
<PAGE> 10
INCOME TAXES - The Business is included in the General Motors'
consolidated federal and state income tax returns and accounts for income
taxes based on the provisions of SFAS No. 109, Accounting for Income
Taxes. A tax benefit has been allocated to the Business by General Motors
related to its operating losses only when such benefits would be
recognizable on a separate return basis, through carryback against
previous taxable income of the Business. Where applicable, a tax provision
on income earned in foreign jurisdictions is recognized; also, a deferred
tax provision is recognized on differences between the book and tax bases
of assets and liabilities based on applicable statutory rates. Deferred
tax assets or liabilities have been reflected in the accompanying
statements of net assets to be sold only in connection with operations of
the Business subject to a sale of shares, in those instances where the tax
bases of assets and liabilities transferred differ from their related
historical carrying value.
DERIVATIVE FINANCIAL INSTRUMENTS - General Motors is party to a variety of
foreign exchange, interest rate and commodity forward contracts and
options entered into in connection with the management of its exposure to
fluctuations in foreign exchange rates, including certain exposures
affecting the Business. These derivatives are entered into and managed on
behalf of the Business by General Motors; although the settlement of
derivative instrument positions is accomplished by General Motors, the
related gains or losses from such positions are allocated to the Business,
to the extent they hedge underlying commitments of the Business.
Foreign exchange forward and option contracts are accounted for as hedges
to the extent they are designated, and are effective as, hedges of firm
foreign currency commitments. Other such foreign exchange contracts and
options are marked to market on a current basis.
On behalf of the Business, General Motors may also enter into commodity
forward and option contracts. Since General Motors has the discretion to
settle these transactions either in cash or by taking physical delivery,
these contracts are not considered financial instruments for accounting
purposes. Commodity forward contracts and options are accounted for as
hedges to the extent they are designated, and are effective as, hedges of
firm or anticipated commodity purchase contracts. Other commodity forward
contracts and options are marked to market on a current basis.
Gains (losses) on derivative financial instruments are not considered
material. The statements of net assets to be sold do not include any
unrecognized gains or losses, because any derivative financial instruments
allocable to the Business will be retained by General Motors.
LABOR FORCE - The Business has a concentration of labor supply related to
substantially all of its hourly workforce working under union collective
bargaining agreements that will expire in 1999. Certain customers and
suppliers of the Business also have represented work forces. Work
stoppages by employees of the Business or by employees of customers or
suppliers of the Business could disrupt the production of or demand for
automotive components.
10
<PAGE> 11
3. ACCOUNTS AND NOTES RECEIVABLE
Accounts and notes receivable is summarized at December 31 as follows (in
thousands):
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Trade (including $19,304 and $18,208 with affiliated entities in
1997 and 1996, respectively) $ 22,477 $ 22,998
Other 1,146 240
-------- --------
Accounts and notes receivable $ 23,623 $ 23,238
======== ========
</TABLE>
4. INVENTORIES
Major classes of inventories are summarized at December 31 as follows (in
thousands):
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Productive material, work-in-process and supplies $ 47,946 $ 38,663
Finished goods 12,391 9,576
-------- --------
Inventories, gross 60,337 48,239
Less allowances to adjust the carrying value of certain
inventories to LIFO 18,564 13,765
-------- --------
Inventories, net $ 41,773 $ 34,474
======== ========
</TABLE>
5. PROPERTY, PLANT AND EQUIPMENT
Property is summarized at December 31 as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Land and leasehold improvements $ 3,664 $ 3,636
Buildings 28,560 30,675
Machinery, equipment and tooling 77,137 73,811
Office and data processing equipment 1,412 1,753
Construction-in-progress 3,144 2,158
-------- --------
Total 113,917 112,033
Less accumulated depreciation 60,874 58,934
Less impairment reserve 53,043
-------- --------
Property, plant and equipment, net None $ 53,099
======== ========
</TABLE>
11
<PAGE> 12
6. OTHER (INCOME) EXPENSE
Other (income) expense is summarized at December 31 as follows (in
thousands):
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Foreign transaction loss (gain) $ 5,148 $ 1,833 $ (7,148)
Minority interest share of income (loss) (1,668) 121 2,475
Interest expense 949 721 879
Claims, commissions and grants (2,245) (1,685) (595)
Other, net 2,195 (2,464) (903)
-------- ------- --------
Total $ 4,379 $(1,474) $ (5,292)
======== ======= ========
</TABLE>
7 INCOME TAX PROVISION
The domestic and foreign income (loss) before income tax of the Business
is summarized as follows for each of the years ended December 31 (in
thousands):
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Domestic $ (283,987) $ (92,358) $ 40
Foreign (28,321) (35,894) 49,193
---------- ---------- --------
Total $ (312,308) $ (128,252) $ 49,233
========== ========== ========
</TABLE>
The components of the income tax provision (benefit) for each of the years
ended December 31 are as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
United States - Federal None $ (5,346) $ 12
------- -------- --------
Foreign:
Current $ 1,314 6,395 21,983
Deferred (159) (345) (364)
------- -------- --------
Total foreign 1,155 6,050 21,619
------- -------- --------
Total $ 1,155 $ 704 $ 21,631
======= ======== ========
</TABLE>
A reconciliation between the United States statutory rate and the
effective rate applicable to the pre-tax operating results is as follows
for the years ended December 31:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Federal statutory rate 34% 34% 34%
Domestic losses not subject to tax benefit (30) (20)
Foreign losses not subject to tax benefit (4) (17) 4
Foreign rates different from U.S. statutory rate 2 6
--- --- ---
Effective tax rate 0% (1)% 44%
=== === ===
</TABLE>
12
<PAGE> 13
A deferred tax liability related to the repatriation of earnings of
foreign subsidiaries has not been established as such earnings are
considered permanently reinvested; however, such amounts totaled $17.9
million and $21.0 million at December 31, 1997 and 1996, respectively.
8. PENSION COST
Substantially all of the employees of the Business in the United States
participate in the defined benefit plans of General Motors. Plans covering
represented U.S. employees generally provide benefits of negotiated stated
amounts for each year of service as well as significant supplemental
benefits for employees who retire with 30 years of service before normal
retirement age. The benefits provided by the plans covering U.S. salaried
employees are generally based on years of service and the employee's
salary history. The accumulated plan benefit obligation and plan net
assets for employees of the Business are not determined separately;
however, a total pension cost of approximately $11.9 million, $10.7
million and $13.4 million was allocated based on applicable headcount to
the Business in 1997, 1996 and 1995, respectively. Certain of the
Business's non-U.S. entities have pension plans established for the
benefit of their employees, through government sponsored or administered
programs. The total pension cost of these non-U.S. plans allocated to the
Business was $1.0 million, $7.4 million and $8.0 million for 1997, 1996
and 1995, respectively. Pursuant to the terms of the Agreement, except for
operations subject to a sale of shares, prior service pension obligations
related to the Business will be retained by General Motors and,
consequently, no obligation is included on the statements of net assets to
be sold of the Business. The retirement obligations accrued for operations
subject a sale of shares totaled $1.5 and $1.0 million, respectively, at
December 31, 1997 and 1996.
Substantially all of the U.S. employees of the Business were eligible to
participate in 401(k) retirement plans sponsored by General Motors which
allow employees to contribute up to a specified percentage of compensation
into tax deferred accounts. Pension expense recognized by the Business
relating to amounts contributed into these plans was $.4 million, $.2
million and $.2 million during 1997, 1996 and 1995, respectively.
9. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Substantially all of the employees of the Business in the United States
and Canada participate in various postretirement medical, dental, vision
and life insurance plans of General Motors. The accumulated plan benefit
obligation and plan net assets for the employees of the Business are not
determined separately; however, a total non-pension postretirement cost of
approximately $34.0 million, $42.1 million and $39.6 million was allocated
based on headcount of the Business in 1997, 1996 and 1995, respectively.
Pursuant to the terms of the Agreement, prior service postretirement
obligations related to the Business for domestic employees will be
retained by General Motors, and consequently, no related obligation is
included on the statements of net assets to be sold of the Business.
General Motors and the Business do not admit or otherwise acknowledge that
such amounts or existing postretirement benefit plans of the Business
(other than pensions) represents legally enforceable liabilities of
General Motors and the Business.
13
<PAGE> 14
10. LOSS ON SALE AND PLANT CLOSURE
The Business recognizes costs for the closing or sale of certain
facilities in accordance with generally accepted accounting principles.
Site-related write-downs and accruals are recognized when a definitive
decision is made to sell or abandon a facility, and the net realizable
value can be reasonably estimated. Postemployment benefits are recognized
when a definitive decision is made by management and announced to
employees, and when the applicable benefits are determined.
In 1997, the Business decided to cease production in Trenton, New Jersey,
and recognized an $79.8 million charge to provide for postemployment
benefits and other site-related closure costs.
In 1996, certain assets and operations of the Business were sold, along
with certain other trim and hardware operations of Delphi. The total loss
recognized on the sale was approximately $252.5 million, of which $78.8
million was allocable to the operations of the Business.
11. SEGMENT INFORMATION
The Business operates in one primary segment for vehicle seating systems
and components. Export sales from domestic operations and intersegment
transactions are not significant. Information concerning the operating
results and identifiable assets of the principal geographic areas of the
Business, in accordance with Statement of Financial Accounting Standards
(SFAS) No. 14, Financial Reporting for Segments of a Business Enterprise,
are set forth as follows (in thousands):
<TABLE>
<CAPTION>
EUROPE
NORTH AMERICA AND OTHER TOTAL
<S> <C> <C> <C>
1997
Net revenue $ 1,132,743 $ 272,187 $ 1,404,930
Net loss (283,127) (30,336) (313,463)
Net assets to be sold 30,064 2,869 32,933
1996
Net revenue 1,151,637 297,847 1,449,484
Net loss (121,330) (7,626) (128,956)
Net assets to be sold 49,654 29,648 79,302
1995
Net revenue 1,574,910 227,317 1,802,227
Net income 26,038 1,564 27,602
</TABLE>
14
<PAGE> 15
12. COMMITMENTS AND CONTINGENCIES
Rental expense of the Business totaled $3.6 million, $3.6 million and $2.8
million for the years ended December 31, 1997, 1996 and 1995,
respectively. Commitments related to operating leases that will be assumed
by the Buyer, as of December 31, 1997 were $17.3 million, which become due
in the following periods ending December 31: 1998 - $2.6 million; 1999 -
$2.9 million; 2000 - $2.7 million; 2001 - $2.7 million; 2002 - $2.7
million and thereafter - $3.7 million.
Management believes that various lawsuits and claims pending or asserted
with respect to the Business, to the extent not retained by General
Motors, will be disposed of without having a material adverse effect on
the statements of net assets to be sold, sales less costs and expenses or
cash flows of the Business.
******
15
<PAGE> 16
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
A. Historical Financial Statements
2) Interim Financial Statement
SEATING BUSINESS OF DELPHI
INTERIOR AND LIGHTING SYSTEMS
(an operating component of General Motors Corporation)
CONSOLIDATED STATEMENT OF NET ASSETS SOLD
AS OF AUGUST 31, 1998
(Unaudited, in thousands of dollars)
<TABLE>
<CAPTION>
AUGUST 31,
1998
----
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 6,638
Accounts and notes receivable, net 15,469
Inventories 34,810
Other current assets 666
---------
57,583
---------
OTHER LONG-TERM ASSETS 3,719
---------
$ 61,302
=========
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts and notes payable $ 23,422
Accrued liabilities 3,607
Income taxes payable 1,728
---------
28,757
---------
LONG-TERM LIABILITIES
Minority interests 259
Other long-term liabilities 2,614
---------
2,873
---------
EQUITY
Net equity 29,672
---------
$ 61,302
=========
</TABLE>
The accompanying notes are an integral part of this statement.
16
<PAGE> 17
SEATING BUSINESS OF DELPHI
INTERIOR AND LIGHTING SYSTEMS
(an operating component of General Motors Corporation)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE EIGHT MONTHS ENDED AUGUST 31, 1998
(Unaudited, in thousands of dollars)
<TABLE>
<CAPTION>
Eight Months Ended
AUGUST 31, 1998
---------------
<S> <C>
Net sales $ 777,325
Cost of sales 818,352
Selling, general and administrative expenses 97,616
---------
Operating loss (138,643)
---------
Other income, net 6,168
---------
Loss before provision for income taxes (132,475)
Provision for income taxes (1,432)
---------
Net loss $ (133,907)
==========
</TABLE>
The accompanying notes are an integral part of this statement.
17
<PAGE> 18
SEATING BUSINESS OF DELPHI
INTERIOR AND LIGHTING SYSTEMS
(an operating component of General Motors Corporation)
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited, in thousands of dollars)
<TABLE>
<CAPTION>
EIGHT MONTHS ENDED
AUGUST 31, 1998
---------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (133,907)
Adjustments to net income to net cash used in
operating activities:
Changes in working capital 1,300
Other, net (1,448)
----------
Net cash used in operating activities (134,055)
----------
CASH FLOWS FROM INVESTING ACTIVITIES, OTHER 1,222
----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net cash provided from General Motors Corporation 130,366
Other, net (1,317)
----------
Net cash provided by financing activities 129,049
----------
Effect of foreign exchange translation 280
----------
NET CHANGE IN CASH AND CASH EQUIVALENTS (3,504)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 10,142
----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,638
==========
CHANGES IN WORKING CAPITAL:
Accounts receivable, net 8,154
Inventories 6,963
Accounts payable (15,488)
Accrued liabilities and other 1,671
----------
$ 1,300
==========
SUPPLEMENTAL DISCLOSURE:
Cash paid for interest $ --
Cash paid for income taxes $ 2,186
</TABLE>
The accompanying notes are an integral part of this statement.
18
<PAGE> 19
SEATING BUSINESS OF DELPHI
INTERIOR AND LIGHTING SYSTEMS
(an operating component of General Motors Corporation)
NOTES TO THE CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared for
the purpose of presenting the financial position of the seating
business (the "Business") of Delphi Interior & Lighting Systems
Division ("Delphi") of General Motors Corporation ("General Motors") as
of August 31, 1998, and its results of operation and cash flows from
General Motors Corporation for the eight months ended August 31, 1998.
The net assets to be sold were determined pursuant to the Master Sale
and Purchase Agreement between General Motors and Lear Corporation (the
"Buyer") dated August 31, 1998 (the "Agreement"), including certain
domestic and international assets, and the shares of international
subsidiaries of the Business. The Business is engaged in the design,
manufacture and sale of vehicle seating and seating components for the
North American and European automotive industries. The Business
operates manufacturing facilities in North America in Auburn Hills and
Grand Rapids, Michigan, and Juarez, Rio Bravo and Fuentes, Mexico. In
addition, the Business has European facilities in Epila and Logrono,
Spain; Nuneaton, England; Desio, Italy; Warsaw and Gliwice, Poland;
Lebach, Germany; and Ponte de Sor, Portugal. The Business also includes
majority-owned joint venture interests for operations in Turkey and
South Africa which are consolidated. During the period of the
unaudited financial statements, the Business included certain other
operations, principally a seating component facility in Trenton, New
Jersey, for which closure was announced in April 1997.
The consolidated statement of net assets sold presents the net assets
sold of the Business pursuant to the Agreement, while the statements of
operations and of cash flows present the historical operating
performance of the Business. Through August 31, 1998, the Business
operated as an integral part of Delphi Automotive Systems and General
Motors' overall operations. The financial statements include 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 Business 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 on various factors
which estimate usage of particular corporate functions, and in certain
instances other relevant factors are used, such as the revenues or
headcount of the Business. It is not considered practicable to estimate
the amount of such costs had the Business operated on a stand-alone
basis.
In the opinion of management, all adjustments, consisting of only
normal recurring items which are necessary for a fair presentation have
been included. The results for the interim period is not necessarily
indicative of results which may be expected from any other interim
period or for the full year and may not necessarily reflect the
consolidated results of operations, financial position and cash flows
of the Business in the future or what they would have been had the
Business been a separate stand-alone entity during the period.
19
<PAGE> 20
(2) INVENTORIES
Inventories are summarized as follows as of August 31, 1998 (in
thousands):
Productive inventory $ 44,865
Non-productive inventory 2,449
--------
Inventories, gross 47,314
Less: Allowances to adjust
the carrying value of certain
inventories to LIFO (12,504)
--------
$ 34,810
========
(3) COMMITMENTS AND CONTINGENCIES
Management believes that various lawsuits or claims pending or asserted
with respect to the Seating Business to the extent not retained by
General Motors will be disposed of without having a material adverse
effect on the statement of net assets sold, results of operations or
cash flows of the Business.
20
<PAGE> 21
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
B. Pro-Forma Consolidated Financial Statements.
The following pro-forma unaudited condensed combined consolidated statements of
operations of the Company for the nine months ended September 26, 1998 and for
the year ended December 31, 1997 were prepared to illustrate the estimated
effects of the acquisition of Delphi Seating by the Company and the incurrence
of indebtedness under the Company's $2.1 billion senior revolving credit
facility to finance such acquisition, as if the acquisition had occurred on
January 1, 1997.
A pro-forma unaudited consolidated balance sheet of the Company is not required
to be presented herein as the acquisition has already been reflected in the
Company's historical September 26, 1998 unaudited consolidated balance sheet,
which has been included in this 8-K/A.
The pro-forma statements do not purport to represent (i) the actual results of
operations had the acquisition of Delphi Seating occurred on the date assumed or
(ii) the results expected in the future.
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 Delphi Seating, including the notes
thereto.
21
<PAGE> 22
LEAR CORPORATION AND SUBSIDIARIES
PRO-FORMA CONDENSED COMBINED CONSOLIDATED STATEMENTS
(Unaudited, in millions, except per share data)
<TABLE>
<CAPTION>
Nine Months Ended September 26, 1998
---------------------------------------------------------------------------------------------
Delphi
Lear Seating (1) Adjustments Eliminations (8) Pro-Forma
-------------- --------------- -------------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
Net sales $ 6,153.6 $ 777.3 $ -- $ (108.3) $ 6,822.6
Cost of sales 5,559.8 818.3 (58.8) (2) (108.3) 6,211.0
SG&A expenses 238.6 97.6 (56.1) (4) -- 280.1
Amortization of goodwill 35.8 -- 3.2 (5) -- 39.0
------------- -------------- --------------- -------------- ----------------
Operating income/(loss) 319.4 (138.6) 111.7 -- 292.5
Interest expense 79.2 -- 8.6 (6) -- 87.8
Other (income)/expense, net 18.0 (6.1) -- -- 11.9
------------- -------------- --------------- -------------- ----------------
Income/(loss) before income
taxes 222.2 (132.5) 103.1 -- 192.8
Provision for income taxes 87.6 1.4 (13.1) (7) -- 75.9
------------- -------------- --------------- -------------- ----------------
Net income/(loss) $ 134.6 $ (133.9) $ 116.2 $ -- $ 116.9
============= ============== =============== ============== ================
Basic net income per share $ 2.01 $ 1.74
============= ================
Diluted net income per
share $ 1.97 $ 1.71
============= ================
<CAPTION>
Year Ended December 31, 1997
-------------------------------------------------------------------------------------------
Delphi
Lear Seating (1) Adjustments Eliminations (8) Pro-Forma
-------------- --------------- -------------- ------------- -----------------
Net sales $ 7,342.9 $ 1,404.9 $ -- $ (336.7) $ 8,411.1
Cost of sales 6,533.5 1,502.6 (147.6) (3) (336.7) 7,551.8
SG&A expenses 286.9 210.2 (112.2) (4) -- 384.9
Amortization of goodwill 41.4 -- 4.9 (5) -- 46.3
------------- -------------- ------------- ------------ ----------------
Operating income/(loss) 481.1 (307.9) 254.9 -- 428.1
Interest expense 101.0 -- 12.9 (6) -- 113.5
Other expense, net 28.8 4.4 -- -- 33.2
------------- --------------- ------------- ------------ ----------------
Income/(loss) before income
taxes and extraordinary item 351.3 (312.3) 242.0 -- 281.0
Provision for income
taxes and extraordinary item 143.1 1.2 (27.9) (7) -- 116.4
------------- --------------- ------------- ------------ ----------------
Income (loss) before
extraordinary item $ 208.2 $ (313.5) $ 269.9 $ -- 164.6
============= =============== ============= ============ ================
Basic net income per share
before extraordinary item $ 3.14 $ 2.48
============= ================
Diluted net income per
share before extraordinary
item $ 3.05 $ 2.41
============= ================
</TABLE>
22
<PAGE> 23
(1) The Delphi Seating historical information represents the unaudited sales
less costs and expenses for the eight months ended August 31, 1998 and the
audited sales less costs and expenses for the year ended December 31, 1997.
The sales less costs and expenses for the one month ended September 26,
1998 are included in the historical results of the Company.
(2) Represents the elimination of items with no continuing impact on the
Company's results of operations due to differences in accounting policies
of (i) the capitalization of fixed asset purchases which were expensed by
Delphi Seating of $31.2 million; (ii) recognition of depreciation expense
on fixed assets which Delphi Seating had previously written off of $8.9
million; and (iii) the elimination of favorable LIFO inventory adjustment
of $6.1 million. Also represents the elimination of (i) operating losses
at plants which were not included in the acquisition of $27.3 million and
(ii) a charge related to the employee benefit obligations not assumed by
the Company of $15.3 million.
(3) Represents the elimination of items with no continuing impact on the
Company's results of operations of (i) a one-time asset impairment charge
recorded by the seller of $75.8 million; (ii) operating losses at plants
which were not included in the acquisition of $46.3 million; (iii) a charge
related to the employee benefit obligations not assumed by the Company of
$20.7 million; and (iv) a LIFO inventory adjustment which is inconsistent
with the Company's accounting policy, which is to account for inventory on
a FIFO basis, of $4.8 million.
(4) Represents the elimination of the following items with no continuing impact
on the Company's results of operations:
<TABLE>
<CAPTION>
Nine Months Ended Year Ended
September 26, 1998 December 31, 1997
------------------ -----------------
<S> <C> <C>
One-time charge related to the closure of
a plant not acquired by the Company $ - $ 80.0
Elimination of certain allocated expenses 56.1 32.2
------- -------
$ 56.1 $ 112.2
======= =======
</TABLE>
(5) The adjustment to goodwill amortization represents additional goodwill
amortization resulting from the acquisition of Delphi Seating.
(6) The adjustment to interest expense represents estimated interest on
borrowings under the Company's revolving credit facility to finance the
Delphi Seating acquisition.
(7) Reflects the income tax effects of the operating and financing adjustments
and an adjustment to reflect the appropriate provision for the consolidated
operations.
(8) Reflects the elimination of net sales between Delphi Seating and the
Company.
23
<PAGE> 24
LEAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited, in millions)
<TABLE>
<CAPTION>
September 26,
1998
----
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 32.7
Accounts receivable, net 1,299.2
Inventories 332.7
Recoverable customer engineering and tooling 227.3
Other 173.6
----------
2,065.5
----------
LONG-TERM ASSETS:
Property, plant and equipment, net 1,132.1
Goodwill, net 2,002.0
Other 279.7
----------
3,413.8
----------
$ 5,479.3
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 45.9
Accounts payable, net 1,473.7
Accrued liabilities 767.2
Current portion of long-term debt 10.8
----------
2,297.6
----------
LONG-TERM LIABILITIES:
Deferred national income taxes 71.1
Long-term debt 1,466.3
Other 334.7
----------
1,872.1
----------
STOCKHOLDERS' EQUITY:
Common stock 0.7
Additional paid-in capital 855.2
Notes receivable from sale of common stock (0.1)
Less - Common stock held in treasury at cost (18.3)
Retained earnings 535.9
Minimum pension liability adjustment (0.5)
Cumulative translation adjustment (63.3)
----------
1,309.6
----------
$ 5,479.3
==========
</TABLE>
24
<PAGE> 25
LEAR CORPORATION
NOTES TO THE CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
(1) Purchase Price Allocation
The Delphi Seating acquisition was accounted for as a purchase, and
accordingly, the assets purchased and liabilities assumed in the
acquisition have been reflected in the accompanying balance sheet of
the Company as of September 26, 1998. The aggregate purchase price of
the acquisition and related allocation, were as follows (in millions):
<TABLE>
<CAPTION>
<S> <C>
Consideration paid to seller, net of $6.6 million cash acquired $ 211.1
Deferred purchase price 30.0
Debt assumed 0.5
Estimated fees and expenses 2.0
----------
Cost of acquisition $ 243.6
===========
Property, plant and equipment $ 70.2
Net working capital 7.4
Other assets purchased and liabilities assumed, net (28.0)
Goodwill 194.0
-----------
Total cost allocation $ 243.6
===========
</TABLE>
The preliminary purchase price allocation is based on historical costs and
management's estimates which may differ from the final allocation. Management is
currently evaluating the business acquired and adjustments to the preliminary
allocation may result upon finalization of this evaluation.
(2) Goodwill
The amount of goodwill recorded as a result of the acquisition is being
amortized on a straight - line basis over 40 years.
25
<PAGE> 26
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
LEAR CORPORATION
/s/ Donald J. Stebbins
-----------------------------------
Donald J. Stebbins
Senior Vice President and
Chief Financial Officer
November 16, 1998
26
<PAGE> 27
INDEX TO EXHIBITS
EXHIBIT NUMBER
- - --------------
23.1 Consent of Deloitte & Touche LLP
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference of our report dated August 21,
1998 on the Seating Business of the Delphi Interior & Lighting Systems Division
of General Motors Corporation, appearing in this Form 8-K/A of Lear Corporation
dated September 1, 1998, in the following Registration Statements of Lear
Corporation:
<TABLE>
<CAPTION>
Form Registration Statement No. Description
- - ---- -------------------------- -----------
<S> <C> <C>
S-8 333-62647 Personal Savings Plan for Delphi Hourly-Rate Employees
S-8 333-59467 Executive Compensation
S-3 333-43085 Shelf Registration
S-8 333-28419 Outside Directors Compensation
S-3 333-16341 Direct Stock Purchase Plan
S-8 333-16413 Long-term Stock Incentive Plan
S-8 333-16415 Bargaining and Non-Bargaining Savings Plan
S-8 333-03383 1996 Stock Option Plan
S-8 333-06209 Masland Options
S-8 33-61739 Automotive Industries Holding, Inc. Options
S-8 33-57237 Lear 401(k)
S-8 33-55783 1988, 1992 and 1994 Option Plans
</TABLE>
/s/Deloitte & Touche LLP
Detroit, Michigan
November 16, 1998
