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<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 8-K/A
AMENDMENT TO CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: October 2, 1998
AUTOCAM CORPORATION
A Michigan Corporation
Commission File Number 0-19544
I.R.S. Employer Identification No. 38-2790152
4070 East Paris Avenue, Kentwood, Michigan 49512
Telephone: (616) 698-0707
<PAGE> 2
This Amendment amends the Current Report on Form 8-K of Autocam Corporation (the
"Company"), dated October 2, 1998. As provided in Item 7(a)(4) of the
instructions to Form 8-K, such Current Report on Form 8-K did not include
audited consolidated financial statements of Compagnie Financiere du Leman SA
("CFL"), the business acquired in the transaction, which were not available at
the time the Current Report on Form 8-K was filed. This Amendment is filed to
provide audited consolidated financial statements of CFL and the required pro
forma combining financial information.
The following information amends Item 7 of the Current Report on Form 8-K and
sets forth, in its entirety, the information as amended.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Consolidated Financial Statements of Business Acquired. The following
consolidated financial statements of CFL are filed as part of this Current
Report:
Independent Auditor's Report
Consolidated Balance Sheets as of September 30, 1998 (unaudited) and
December 31, 1997, 1996 and 1995
Consolidated Statements of Operations for the Nine Months Ended September
30, 1998 (unaudited) and the Years Ended December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the Nine Months Ended September
30, 1998 (unaudited) and the Years Ended December 31, 1997, 1996 and 1995
Notes to the Consolidated Financial Statements
(b) Pro Forma Combining Financial Information. The following unaudited
combining pro forma financial information is filed as part of this Current
Report:
Description of Pro Forma Combining Financial Information
Pro Forma Combining Balance Sheet as of September 30, 1998
Pro Forma Combining Statements of Operations for the three months ended
September 30, 1998 and for the year ended June 30, 1998.
Notes to Pro Forma Combining Financial Information
(c) Exhibits.
23 - Consent of PricewaterhouseCoopers (filed herewith, page E-1).
2
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: December 16, 1998
AUTOCAM CORPORATION
/s/ WARREN A. VELTMAN
------------------------------------------
Warren A. Veltman, Principal Financial and
Accounting Officer
3
<PAGE> 4
[PricewaterhouseCoopers Letterhead]
INDEPENDENT AUDITOR'S REPORT
TO THE BOARD OF DIRECTORS OF COMPAGNIE FINANCIERE DU LEMAN ("CFL")
We have audited the accompanying consolidated balance sheets of CFL and its
subsidiary as of December 31, 1997, 1996 and 1995 and the related consolidated
statements of operations and consolidated cash flow statements for each of the
years in the three year period ended December 31, 1997. These consolidated
financial statements are the responsibility of the management of CFL. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in France. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of CFL and its
subsidiary as of December 31, 1997, 1996 and 1995 and the results of their
operations and their cash flows for each of the years in the three year period
ended December 31, 1997, in conformity with generally accepted accounting
principles in France.
Accounting principles generally accepted in France vary in certain significant
respects from accounting principles generally accepted in the United States of
America. Application of accounting principles generally accepted in the United
States would have affected net income for the three years ended December 31,
1997 and shareholders' funds at December 31, 1997, 1996 and 1995 to the extent
summarized in Notes 8 and 15 to the consolidated financial statements.
Lyons, France Fiduciaire Continentale Lyon
Member of PricewaterhouseCoopers
December 8, 1998
/s/ Vidal Martin
Partner
F-1
<PAGE> 5
COMPAGNIE FINANCIERE DU LEMAN
UNAUDITED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
(IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
<TABLE>
<CAPTION>
NOTES FRENCH GAAP ADJUSTMENTS US GAAP
----- ----------- ----------- -------
<S> <C> <C> <C> <C>
Goodwill FF 45,919 FF 45,919
Other intangible fixed assets 1,071 FF 96 1,167
----------- ----------- -----------
Total intangible assets, net 46,990 96 47,086
----------- ----------- -----------
Land 1,550 1,550
Buildings 28,447 461 28,908
Industrial fixtures, equipment and tooling 126,410 74,714 201,124
Other tangible fixed assets 4,511 610 5,121
Fixed assets in-progress 1,984 1,984
Advances and prepayments 2,954 2,954
----------- ----------- -----------
Total property, plant and equipment, net 165,856 75,785 241,641
----------- ----------- -----------
Investments, net 1,449 1,449
Inventory, net 1 47,327 2,914 50,241
Accounts receivable, net 169,662 169,662
Deferred income taxes 2,281 4,047 6,328
Other receivables 4,675 4,675
----------- ----------- -----------
Total current receivables, net 6,956 4,047 11,003
----------- ----------- -----------
Deposits
Cash 6,794 6,794
----------- -----------
Total cash and cash equivalents 6,794 6,794
----------- -----------
Prepaid expenses 1,085 202 1,287
----------- ----------- -----------
TOTAL ASSETS FF 446,119 FF 83,044 FF 529,163
=========== =========== ===========
Common stock FF 95,200 FF 95,200
Additional paid-in capital 13,502 13,502
Retained earnings 32,881 FF 41,900 74,781
Net income or loss of the tax year 3,945 (2,233) 1,712
----------- ----------- -----------
Shareholders' equity 145,528 39,667 185,195
----------- ----------- -----------
Minority interest 57 57
Provisions for contingencies and losses 15,724 8,324 24,048
Bank borrowings 123,846 3,313 127,159
Other financial borrowings and debts 7,357 7,357
----------- ----------- -----------
Total financial debts 131,203 3,313 134,516
----------- ----------- -----------
Trade notes and related accounts payable 85,441 85,441
Liabilities on fixed assets and related accounts 19,526 19,526
Deferred income taxes 559 31,740 32,299
Other liabilities 48,081 48,081
----------- ----------- -----------
Total current liabilities 153,607 31,740 185,347
----------- ----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY FF 446,119 FF 83,044 FF 529,163
=========== =========== ===========
</TABLE>
F-2
<PAGE> 6
COMPAGNIE FINANCIERE DU LEMAN
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
<TABLE>
<CAPTION>
NOTES FRENCH GAAP ADJUSTMENTS US GAAP
----- ----------- ----------- -------
<S> <C> <C> <C> <C>
Net sales FF 378,214 FF 378,214
Stored production 67 FF 264 331
Capitalized production 863 863
Other operating income 7,081 7,081
Reversal of depreciation and accruals 1,475 1,475
----------- --------- -----------
Operating income 387,700 264 387,964
Raw materials (68,383) (68,383)
Inventory variation 623 623
Other purchases and expenses (115,351) 1,461 (113,890)
----------- --------- -----------
Added value 204,589 1,725 206,314
Taxes and assimilated payments (11,473) (11,473)
Wages and salaries (86,041) (86,041)
Contractual employees' profit sharing (1,026) (1,026)
Social security and contributions (34,115) (34,115)
----------- --------- -----------
Gross operating margin 71,934 1,725 73,659
Depreciation on fixed assets (54,097) (4,821) (58,918)
Reserve allowance on current assets (2,581) (1,237) (3,818)
Other expenses (404) (404)
----------- --------- -----------
Operating income 14,852 (4,333) 10,519
Financial income (4,823) (107) (4,930)
----------- --------- -----------
Current income before tax 10,029 (4,440) 5,589
Extraordinary income (100) (22) (122)
Legal employees' profit sharing (898) (898)
Current income tax (5,116) (5,116)
Deferred income taxes 30 2,229 2,259
----------- --------- -----------
NET INCOME FF 3,945 (FF 2,233) FF 1,712
=========== ========= ===========
</TABLE>
F-3
<PAGE> 7
COMPAGNIE FINANCIERE DU LEMAN
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income FF1,712
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 58,918
Change in reserve for inventory 456
Change in long-term provisions 2,645
Deferred income taxes (2,259)
Gain on sales of property, plant and equipment (2)
Increase/decrease in operating assets and liabilities:
Increase in trade accounts receivable (12,052)
Increase in inventories (957)
Decrease in other current assets 1,463
Increase in prepaid expenses (682)
Increase in trade accounts payable 2,044
Increase in liabilities on fixed assets 1,090
Increase in other current liabilities 7,459
---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 59,835
---------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of intangible assets (69)
Acquisitions of property, plant and equipment (63,785)
Acquisitions of investments (4)
Proceeds from sales of property, plant and equipment 398
New loans (accrued interest included) 40,961
Reimbursements of loans (accrued interest included) (38,073)
---------
NET CASH USED IN INVESTING ACTIVITIES (60,572)
---------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in overdrafts and miscellaneous debts 7,985
Dividends paid (3,002)
---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 4,983
---------
NET INCREASE IN CASH 4,246
Cash, beginning of period 2,548
---------
CASH, END OF PERIOD FF 6,794
=========
</TABLE>
F-4
<PAGE> 8
COMPAGNIE FINANCIERE DU LEMAN
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
1. INVENTORY
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
9/30/98 12/31/97 VARIATION VARIATION IN %
------- -------- --------- --------------
<S> <C> <C> <C> <C>
Net value -
Materials FF10,369 FF 9,621 FF 748 8%
Net value - WIP 28,878 27,621 (1,692) -17
Net value -
Finished goods 8,080 9,772 1,257 5
-------- -------- ------
TOTAL NET
VALUE FF47,327 FF47,014 FF313 1%
======== ======== ======
</TABLE>
2. SUBSEQUENT EVENT
The rights to all the outstanding common shares of CFL were purchased by Autocam
France SARL, a wholly-owned subsidiary of Autocam Corporation, effective October
1, 1998 for FF300 million.
F-5
<PAGE> 9
COMPAGNIE FINANCIERE DU LEMAN
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
(IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
<TABLE>
<CAPTION>
NOTES FRENCH GAAP ADJUSTMENTS US GAAP
----- ----------- ----------- -------
<S> <C> <C> <C> <C>
Goodwill FF 48,980 FF 48,980
Other intangible fixed assets 2 1,520 FF 96 1,616
--------- ----------- -----------
Total intangible assets, net 50,500 96 50,596
--------- ----------- -----------
Land 2 1,550 1,550
Buildings 2 29,854 557 30,411
Industrial fixtures, equipment and tooling 2 108,625 79,256 187,881
Other tangible fixed assets 2 4,979 811 5,790
Fixed assets in-progress 2 3,829 3,829
Advances and prepayments 2 4,130 4,130
--------- ----------- -----------
Total property, plant and equipment, net 152,967 80,624 233,591
--------- ----------- -----------
Investments, net 2 1,445 1,445
Inventory, net 3 47,014 2,727 49,741
Accounts receivable, net 4 157,610 157,610
Deferred income taxes 14 2,280 3,465 5,745
Other receivables 5 6,138 6,138
--------- ----------- -----------
Total current receivables, net 8,418 3,465 11,883
--------- ----------- -----------
Deposits 6 473 473
Cash 6 2,075 2,075
--------- -----------
Total cash and cash equivalents 2,548 2,548
--------- -----------
Prepaid expenses 7 296 309 605
--------- ----------- -----------
TOTAL ASSETS FF420,798 FF 87,221 FF 508,019
========= ========== ===========
Common stock 8 FF 95,200 FF 95,200
Additional paid-in capital 8 13,502 13,502
Retained earnings 8 33,837 FF 37,745 71,582
Net income or loss of the tax year 8 2,046 4,156 6,202
--------- ----------- -----------
Shareholders' equity 144,585 41,901 186,486
--------- ----------- -----------
Minority interest 57 57
Provisions for contingencies and losses 9 14,243 7,160 21,403
Bank borrowings 10 110,620 4,774 115,394
Other financial borrowings and debts 10 8,249 8,249
--------- ----------- -----------
Total financial debts 118,869 4,774 123,643
--------- ----------- -----------
Trade notes and related accounts payable 11 83,397 83,397
Liabilities on fixed assets and related accounts 11 18,436 18,436
Deferred income taxes 14 589 33,386 33,975
Other liabilities 12 40,622 40,622
--------- ----------- -----------
Total current liabilities 143,044 33,386 176,430
--------- ----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY FF420,798 FF 87,221 FF 508,019
========= ========== ===========
</TABLE>
F-6
<PAGE> 10
COMPAGNIE FINANCIERE DU LEMAN
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
<TABLE>
<CAPTION>
NOTES FRENCH GAAP ADJUSTMENTS US GAAP
----- ----------- ----------- -------
<S> <C> <C> <C> <C>
Net sales 13 FF 486,546 FF 486,546
Stored production (597) (FF 53) (650)
Capitalized production 1,478 1,478
Other operating income 154 154
Reversal of depreciation and accruals 4,085 4,085
----------- ---------- -----------
Operating income 491,666 (53) 491,613
Raw materials (90,635) (90,635)
Inventory variation (558) (558)
Other purchases and expenses (137,248) 1,127 (136,121)
----------- ---------- -----------
Added value 263,225 1,074 264,299
Taxes and assimilated payments (13,441) (13,441)
Wages and salaries (104,680) (104,680)
Contractual employees' profit sharing (3,133) (3,133)
Social security and contributions (41,291) (41,291)
----------- ---------- -----------
Gross operating margin 100,680 1,074 101,754
Depreciation on fixed assets (85,418) 13,440 (71,978)
Reserve allowance on current assets (4,881) 544 (4,337)
Other expenses (531) (531)
----------- ---------- -----------
Operating income 9,850 15,058 24,908
Financial expense (7,265) (93) (7,358)
----------- ---------- -----------
Current income before tax 2,585 14,965 17,550
Extraordinary income 4,121 (2,733) 1,388
Legal employees' profit sharing (473) (473)
Current income tax 14 (4,359) (4,359)
Deferred income taxes 14 172 (8,076) (7,904)
----------- ---------- -----------
NET INCOME FF 2,046 FF 4,156 FF 6,202
=========== ========== ===========
</TABLE>
F-7
<PAGE> 11
COMPAGNIE FINANCIERE DU LEMAN
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income FF 6,202
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 71,978
Change in reserve for inventory 439
Change in long-term provisions (1,423)
Deferred income taxes 7,904
Gain on sales of property, plant and equipment (145)
Increase/decrease in operating assets and liabilities:
Increase in trade accounts receivable (10,819)
Decrease in inventories 1,209
Increase in other current assets (3,332)
Increase in prepaid expenses (412)
Increase in trade accounts payable 1,009
Increase in liabilities on fixed assets 2,373
Decrease in other current liabilities (7,558)
----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 67,425
----------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of intangible assets (890)
Acquisitions of property, plant and equipment (81,371)
Acquisitions of investments (4)
Proceeds from sales of property, plant and equipment 6,406
New loans (accrued interest included) 19,774
Reimbursements of loans (accrued interest included) (34,542)
----------
NET CASH USED IN INVESTING ACTIVITIES (90,627)
----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in overdrafts and miscellaneous debts 18,797
Dividends paid (5,003)
----------
NET CASH PROVIDED BY FINANCING ACTIVITIES (13,794)
----------
NET DECREASE IN CASH (9,408)
Cash, beginning of period 11,956
----------
CASH, END OF PERIOD FF 2,548
==========
</TABLE>
F-8
<PAGE> 12
COMPAGNIE FINANCIERE DU LEMAN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
1.1 Differences between French and US GAAP
The accompanying financial statements have been prepared on the basis of the
consolidated financial statements of Compagnie Financiere du Leman ("CFL"),
prepared in accordance with French generally accepted accounting principles
("French GAAP") which differ in certain significant respects from those
applicable in the United States ("US GAAP").
These differences, for which the effects of the adjustments on net profit and
shareholders' equity are listed respectively in Notes 8 and 15, relate
principally to the items set out below:
Fixed assets - Fixed assets can be depreciated for tax purposes using the
accelerated declining balance method in France. For US GAAP purposes, the
straight-line method has been used and depreciation has been restated for
purchased software, equipment, fixtures and fittings and others.
Leases meeting the capitalization criteria as stated in Statement of Financial
Accounting Standard No. 13, "Accounting for Leases," are not capitalized for
French GAAP. A capital lease for a machine has been restated in compliance with
US GAAP.
Inventory - Finished goods and work in-progress inventory as computed by Frank &
Pignard ("F&P") does not include administrative overhead (operating leases for
buildings, Business Tax and computer department). For US GAAP purposes, a
percentage of overhead has been allocated to inventory.
Finished goods and work in-progress inventory has also been restated to include
the impact of the correction of the depreciation method.
Provision for contingencies and losses - Provisions recorded in French GAAP
financial statements have been examined in the light of Statement of Financial
Accounting Standard No. 5, "Accounting for Contingencies," and Emerging Issues
Task Force Statement No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (Including Certain
Costs Incurred in a Restructuring)." Adequate corrections have been made to the
financial statements to comply with US GAAP on provisions for litigation and
restructuring.
Accruals for pension obligations are not mandatory in French GAAP. As a
consequence, the company only accrued obligations for certain employees. This
accrual has been increased to reflect the pension liability for all the
employees.
Minority interest - The impact of the adjustments between French and US GAAP has
not been taken into account for the calculation of minority interest, as this
would lead to an immaterial adjustment.
1.2 Management estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-9
<PAGE> 13
COMPAGNIE FINANCIERE DU LEMAN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
1.3 Consolidation
The accompanying consolidated financial statements include the accounts of CFL
and its majority-owned (99.9%) subsidiary, F&P. All significant intercompany
transactions and balances are eliminated in consolidation.
Following equity investments are not consolidated, as they are deemed not
significant:
- SC Thermipar, 74950, Scionzier: 50% of the capital
- Sarl Les Pilotis, 74311, Thyez: 20% of the capital
1.4 Revenue recognition
Revenue from sales of products is recognized upon shipment or delivery,
depending on when title and risk of loss is transferred under the specific
contractual terms of each sale, which may vary customer by customer.
1.5 Inventories
Inventories are valued at the lower of manufacturing cost, which is principally
comprised of raw material, labor costs, and overhead, or market (net realizable
value). Cost is determined on a first-in, first-out basis for raw material
(including shipping and storage costs) and by specific identification for
finished goods. Appropriate consideration is given to deterioration,
obsolescence and other factors in evaluating net realizable value. Inventories
whose probability of being sold is very low (dead inventory) are depreciated by
100%.
1.6 Property, plant and equipment
Property, plant and equipment is stated at historical cost. Depreciation of
property, plant and equipment is calculated either by the straight-line ("SL")
or the declining balance ("D") method over the estimated useful life of the
assets concerned, as follows:
<TABLE>
<S> <C>
Buildings........................................................20-25 years SL
Installations..................................................10 years SL or D
Equipment..................................................5-6.67 years SL or D
Furniture, fixtures and fittings and others..................3-10 years SL or D
</TABLE>
1.7 Intangible assets
Intangible assets consist primarily of purchased software and goodwill. The
basis for valuation of these assets is historical acquisition. Amortization of
intangible assets is calculated by the straight-line method, as follows:
<TABLE>
<S> <C>
Purchased software......................................................4 years
Goodwill...............................................................20 years
</TABLE>
1.8 Income taxes
In December 1990, CFL and F&P entered into a tax sharing agreement. This
agreement has been applicable since January 1, 1991.
F-10
<PAGE> 14
COMPAGNIE FINANCIERE DU LEMAN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
1.8 Income taxes - Concluded
The Group accounts for deferred income taxes in accordance with Statement of
Financial Accounting Standard No. 109 ("SFAS 109"), "Accounting for Income
Taxes." Under SFAS 109, deferred tax assets and liabilities are determined based
on differences between the financial reporting and tax basis of assets and
liabilities and are measured by applying enacted tax rates and laws to taxable
years in which such differences are expected to reverse.
1.9 Translation of foreign currencies
Receivables and payables denominated in foreign currencies are translated at
year-end exchange rates. The resulting unrealized exchange gains and losses are
carried to the statement of income.
2. FIXED ASSETS
<TABLE>
<CAPTION>
INCREASES - DECREASES
GROSS VALUE ADDITIONS, CIP, ----------------------------------- GROSS VALUE AT
AT 12/31/96 TRANSFER TRANSFERS DISPOSALS 12/31/97
----------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Software FF 4,824 FF 890 FF 22 FF 5,692
----------- ------------ ---------- -----------
TOTAL INTANGIBLE
ASSETS 4,824 890 22 5,692
----------- ------------ ---------- -----------
Land 1,550 1,550
----------- -----------
Thyez building 5,560 5,560
Building installations
13,781 543 53 14,271
Pochons building 9,380 9,380
Ternier building 20,851 20,851
Apartment building 345 345
----------- ------------ ---------- -----------
Subtotal Buildings 49,917 543 53 50,407
----------- ------------ ---------- -----------
Machine tools 511,079 63,478 7,318 567,239
Used equipment 10,885 43 8 10,920
Plant equipment 9,021 5,746 4,241 10,526
----------- ------------ ---------- -----------
Subtotal Machinery
Equipment 530,985 69,267 11,567 588,685
----------- ------------ ---------- -----------
Installations 12,013 1,765 147 13,631
Vehicles 1,854 481 374 1,961
Office equipment 4,952 948 672 5,228
Office furniture 1,666 62 1,728
----------- ------------ ---------- -----------
Subtotal -
Miscellaneous 20,485 3,256 1,193 22,548
----------- ------------ ---------- -----------
CIP-Machinery and
Equipment 2,856 3,754 FF 2,856 3,754
CIP-Miscellaneous 75 75
----------- ------------ -------- -----------
Subtotal CIP 2,856 3,829 2,856 3,829
----------- ------------ -------- -----------
</TABLE>
F-11
<PAGE> 15
COMPAGNIE FINANCIERE DU LEMAN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
2. FIXED ASSETS - CONCLUDED
<TABLE>
<CAPTION>
INCREASES - DECREASES
GROSS VALUE ADDITIONS, CIP, --------------------------------- GROSS VALUE AT
AT 12/31/96 TRANSFER TRANSFERS DISPOSALS 12/31/97
----------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Advances for CIP FF 2,298 FF 4,130 FF 2,298 FF 4,130
----------- ------------ --------- -----------
TOTAL FIXED ASSETS 608,091 81,025 5,154 FF 12,813 671,149
----------- ------------ --------- ----------- -----------
SUBTOTAL FIXED ASSETS
BEFORE INVESTMENTS
612,915 81,915 5,154 12,835 676,841
----------- ------------ --------- ----------- -----------
Equity investments 804 804
Receivables from equity
investments 520 520
Other equity investments
106 4 110
Deposits and guaranties
11
11
TOTAL INVESTMENTS 1,441 4 1,445
----------- ------------ -----------
TOTAL FIXED
ASSETS FF 614,356 FF 81,919 FF 5,154 FF 12,835 FF 678,286
=========== ============ ========= =========== ===========
Software FF 3,448 FF 746 FF 22 FF 4,172
----------- ------------ ----------- -----------
TOTAL AMORTIZATION-
INTANGIBLE ASSETS 3,448 746 22 4,172
----------- ------------ ----------- -----------
Buildings 4,112 151 4,263
Leasehold buildings 5,896 1,525 7,421
Building installations 7,958 953 42 8,869
----------- ------------ ----------- -----------
Subtotal Buildings 17,966 2,629 42 20,553
----------- ------------ ----------- -----------
Machinery and
equipment 410,816 74,977 5,733 480,060
----------- ------------ ----------- -----------
Installations 9,700 1,571 133 11,138
Vehicles 985 394 286 1,093
Office furniture and
equipment 4,991 1,019 672 5,338
----------- ------------ ----------- -----------
Subtotal Miscellaneous 15,676 2,984 1,091 17,569
----------- ------------ ----------- -----------
TOTAL DEPRECIATION -
FIXED ASSETS 444,458 80,590 6,866 518,182
----------- ------------ ----------- -----------
TOTAL
AMORTIZATION
AND
DEPRECIATION FF 447,906 FF 81,336 FF 6,888 FF 522,354
=========== ============ =========== ===========
</TABLE>
F-12
<PAGE> 16
COMPAGNIE FINANCIERE DU LEMAN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
3. INVENTORY
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
12/31/97 12/31/96 VARIATION VARIATION IN %
-------- -------- --------- --------------
<S> <C> <C> <C> <C>
Raw materials FF 8,148 FF 8,487 (FF 339) -4%
--------- --------- ---------
Total raw materials 8,148 8,487 (339) -4
--------- --------- ---------
Supplies 449 434 15 3
Packaging 288 520 (232) -45
Miscellaneous 1,081 1,082 (1)
--------- --------- ---------
Total other
materials 1,818 2,036 (218) -11
--------- --------- ---------
Gross value -
Materials 9,966 10,523 (557) -5
Provisions (345) (541) (196) -36
--------- --------- ---------
NET VALUE -
MATERIALS FF 9,621 FF 9,982 (FF 361) -4%
========= ========= =========
Work in progress
(WIP) FF 33,747 FF 29,520 FF 4,227 14%
Finished goods 9,772 14,596 (4,824) -33
--------- --------- ---------
Gross value - WIP
& Finished
goods 43,519 44,116 (597) -1
Provisions (6,126) (5,532) 594 11
--------- --------- ---------
NET VALUE - WIP
& FINISHED
GOODS FF 37,393 FF 38,584 (FF 1,191) -3%
========= ========= =========
Total gross value FF 53,485 FF 54,639 (FF 1,154) -2%
Provisions (6,471) (6,073) 398 7
--------- --------- ---------
TOTAL NET
VALUE FF 47,014 FF 48,566 (FF 1,552) -3%
========= ========= =========
</TABLE>
F-13
<PAGE> 17
COMPAGNIE FINANCIERE DU LEMAN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
4. TRADE ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
12/31/97 12/31/96 VARIATION VARIATION IN %
-------- -------- --------- --------------
<S> <C> <C> <C> <C>
Trade accounts receivable FF 66,193 FF 75,432 (FF 9,239) -12%
Bills receivable 91,163 71,323 19,840 28
Accrued trade accounts
receivable 537 319 218 68
---------- ---------- ----------
Total trade accounts receivable 157,893 147,074 10,819 7
Allowance for doubtful
accounts (283) (283)
---------- ---------- ----------
TOTAL TRADE
ACCOUNTS
RECEIVABLE (NET) FF 157,610 FF 146,791 FF 10,819 7%
========== ========== ==========
</TABLE>
5. OTHER RECEIVABLES
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
12/31/97 12/31/96 VARIATION VARIATION IN %
-------- -------- --------- --------------
<S> <C> <C> <C> <C>
TOTAL OTHER
RECEIVABLES FF6,138 FF2,806 FF3,332 119%
======= ======= =======
</TABLE>
As of December 31, 1997, other receivables mainly consist of:
- Value-added tax recoverable: FF1,877
- Accrued receivables (rebates from suppliers): FF704
- Income Tax refund: FF3,465
6. CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
12/31/97 12/31/96 VARIATION VARIATION IN %
-------- -------- --------- --------------
<S> <C> <C> <C> <C>
Cash FF 2,027 FF 561 FF 1,466 261%
Petty cash 48 48
----------- -------------
Total cash 2,075 609 1,466 241
Total marketable
securities 473 11,347 (10,874) -96
----------- ------------- ---------
TOTAL CASH
AND CASH
EQUIVALENTS FF 2,548 FF 11,956 (FF 9,408) -79%
=========== ============= ========
</TABLE>
F-14
<PAGE> 18
COMPAGNIE FINANCIERE DU LEMAN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
7. PREPAID EXPENSES
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
12/31/97 12/31/96 VARIATION VARIATION IN %
-------- -------- --------- --------------
<S> <C> <C> <C> <C>
TOTAL
PREPAID
EXPENSES FF296 FF193 FF103 54%
===== ===== =====
</TABLE>
As of December 31, 1997, prepaid expenses consist of operating expenses (FF277)
and interest charges (FF19).
8. EFFECT ON SHAREHOLDERS' EQUITY OF DIFFERENCES BETWEEN FRENCH AND US GAAP
<TABLE>
<CAPTION>
BALANCE AT
12/31/97
--------
<S> <C>
SHAREHOLDERS' EQUITY AS REPORTED UNDER FRENCH GAAP FF144,585
US GAAP adjustments
- - Fixed asset depreciation 75,633
- - Capital lease 622
- - Overheads allocation to inventory and impact of fixed assets depreciation on
inventory 2,727
- - Provisions for litigation 1,157
- - Pension liability (8,316)
- - Deferred taxation on US GAAP adjustments (29,922)
---------
SHAREHOLDERS' EQUITY AS REPORTED UNDER US GAAP FF186,486
=========
</TABLE>
9. PROVISIONS FOR CONTINGENCIES AND LOSSES
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
12/31/97 12/31/96 VARIATION VARIATION IN %
-------- -------- --------- --------------
<S> <C> <C> <C> <C>
Provisions for
miscellaneous
contingencies FF 9,876 FF13,881 (FF4,005) -29%
Pension liability 4,367 3,619 748 21
----------- -------- --------
TOTAL PROVISION
FOR
CONTINGENCIES
AND LOSSES FF 14,243 FF17,500 (FF3,257) -19%
=========== ======== ========
</TABLE>
F-15
<PAGE> 19
COMPAGNIE FINANCIERE DU LEMAN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
10. FINANCIAL DEBTS - SHORT AND LONG-TERM
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
12/31/97 12/31/96 VARIATION VARIATION IN %
-------- -------- --------- --------------
<S> <C> <C> <C> <C>
Long-term portion FF 50,129 FF 71,850 ( FF21,721) -30%
Short-term portion 36,721 34,350 2,371 7
---------- ---------- ----------
BANK LOANS FF 86,850 FF 106,200 (FF 19,350) -19%
---------- ---------- ----------
ACCRUED INTEREST -
SHORT-TERM FF 735 FF 927 (FF 192) -21%
---------- ------------ ----------
OVERDRAFTS -
SHORT-TERM FF 23,035 FF 3,865 FF 19,170 496%
---------- ----------- ----------
Long-term portion FF 1,584 FF 1,903 (FF 319) -17%
Short-term portion 6,665 6,719 (54) -1
---------- ---------- ----------
MISCELLANEOUS
FINANCIAL DEBTS FF 8,249 FF 8,622 (FF 373) -4%
---------- ---------- ----------
Long-term portion FF 51,713 FF 73,753 (FF 22,040) -30%
Short-term portion 67,156 45,861 21,295 46
---------- ---------- ----------
TOTAL
FINANCIAL
DEBTS FF 118,869 FF 119,614 (FF 745) -1%
========== ========== ==========
</TABLE>
As of December 31, 1997, miscellaneous debts include profit sharing (FF3,239)
and a special fund for employees (FF4,817).
11. ACCOUNTS PAYABLE
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
12/31/97 12/31/96 VARIATION VARIATION IN %
-------- -------- --------- --------------
<S> <C> <C> <C> <C>
Trade accounts payable FF81,167 FF79,031 FF2,136 3%
Accrued accounts
payable 2,230 3,357 (1,127) -34
-------- -------- --------
TOTAL TRADE
ACCOUNTS
PAYABLE FF83,397 FF82,388 FF1,009 1%
======== ======== ========
Trade accounts
payable - Bills
payable FF52,023 FF54,433 FF2,410 -4%
FIXED ASSET
SUPPLIERS FF18,436 FF16,063 FF2,373 15%
Fixed asset
suppliers - Bills
payable FF 8,086 FF 8,944 (FF 858) -10%
</TABLE>
F-16
<PAGE> 20
COMPAGNIE FINANCIERE DU LEMAN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
12. OTHER PAYABLES
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
12/31/97 12/31/96 VARIATION VARIATION IN %
-------- -------- --------- --------------
<S> <C> <C> <C> <C>
Taxes payable FF 3,582 FF 10,344 (FF 6,762) -65%
Benefits payable 10,389 9,845 544 6
Salaries & wages
payable 23,934 23,828 106
---------- ---------- ---------
Total taxes, benefits
and salaries &
wages payable 37,905 44,017 (6,112) -14
Miscellaneous payables
1,959 1,552 407 26
Deferred revenue -
Operating 758 2,611 (1,853) -71
---------- ---------- ---------
TOTAL
OTHER
PAYABLES FF 40,622 FF 48,180 (FF 7,558) -16%
========== ========== =========
</TABLE>
13. SALES
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
12/31/97 12/31/96 VARIATION VARIATION IN %
-------- -------- --------- --------------
<S> <C> <C> <C> <C>
France FF 394,761 FF 380,541 FF14,220 3.7%
% 81.1% 79.5%
Export FF 91,785 FF 98,093 (FF 6,308) 6.4%
% 18.9% 20.5%
TOTAL FF 486,546 FF 478,634 FF 7,912 1.7%
</TABLE>
14. INCOME TAXES
Deferred income taxes reflect the impact of temporary differences between the
amount of assets and liabilities reported for financial reporting purposes and
such amounts as measured in accordance with tax laws.
F-17
<PAGE> 21
COMPAGNIE FINANCIERE DU LEMAN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
14. INCOME TAXES - CONCLUDED
A reconciliation of differences between the statutory French income tax and the
Group's effective income tax follows:
<TABLE>
<CAPTION>
BALANCE AT
12/31/97
--------
<S> <C>
Group's net income before tax FF 18,465
==========
Statutory income tax (rate: 41.67%) (FF 7,694)
Permanent differences - Tax impact:
- - Goodwill depreciation (1,700)
- - Non-tax deductible expenses (97)
- - Impact of statutory tax rate increase (41.67% - 36.67%) (2,772)
---------
GROUP'S INCOME TAX (FF12,263)
=========
</TABLE>
15. EFFECT ON PROFIT ATTRIBUTABLE TO SHAREHOLDERS OF DIFFERENCES BETWEEN FRENCH
AND US GAAP
<TABLE>
<CAPTION>
BALANCE AT
12/31/97
--------
<S> <C>
Profit attributable to shareholders as reported under French GAAP FF2,046
US GAAP adjustments:
- - Depreciation on fixed assets 13,539
- - Capital lease 622
- - Overheads allocation to inventory and impact of fixed assets depreciation on
inventory (95)
- - Provisions for litigation (1,214)
- - Pension liability (620)
- - Deferred taxation on US GAAP adjustments (8,076)
-------
PROFIT ATTRIBUTABLE TO SHAREHOLDERS AS REPORTED UNDER
US GAAP FF6,202
=======
</TABLE>
16. OTHER ITEMS
MISCELLANEOUS COMMITMENTS:
All of the bank loans (FF87,000) are the object of guaranties by equipment
collateral.
Commitment to repurchase a lease contract on behalf of a subcontractor: rent
remaining at 12/31/97: FF3,959
Headcount: 689 employees
F-18
<PAGE> 22
COMPAGNIE FINANCIERE DU LEMAN
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
(IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
<TABLE>
<CAPTION>
NOTES FRENCH GAAP ADJUSTMENTS US GAAP
----- ----------- ----------- -------
<S> <C> <C> <C> <C>
Goodwill FF 53,061 FF 53,061
Other intangible fixed assets 2 1,376 FF 96 1,472
----------- ---------- -----------
Total intangible assets, net 54,437 96 54,533
----------- ---------- -----------
Land 2 1,550 1,550
Buildings 2 31,951 681 32,632
Industrial fixtures, equipment and tooling 2 120,169 60,425 180,594
Other tangible fixed assets 2 4,808 894 5,702
Fixed assets in-progress 2 2,857 2,857
Advances and prepayments 2 2,298 2,298
----------- ---------- -----------
Total property, plant and equipment, net 163,633 62,000 225,633
----------- ---------- -----------
Investments, net 2 1,441 1,441
Inventory, net 3 48,566 2,822 51,388
Accounts receivable, net 4 146,791 146,791
Deferred income taxes 14 2,114 2,821 4,935
Other receivables 5 2,806 2,806
----------- ---------- -----------
Total current receivables, net 4,920 2,821 7,741
----------- ---------- -----------
Deposits 6 11,347 11,347
Cash 6 609 609
----------- -----------
Total cash and cash equivalents 11,956 11,956
----------- -----------
Prepaid expenses 7 193 193
----------- ---------- -----------
TOTAL ASSETS FF 431,937 FF 67,739 FF 499,676
=========== ========== ===========
Common stock 8 FF 95,200 FF 95,200
Additional paid-in capital 8 13,502 13,502
Retained earnings 8 32,561 FF 37,778 70,339
Net income or loss of the tax year 8 6,279 (32) 6,247
----------- ---------- -----------
Shareholders' equity 147,542 37,746 185,288
----------- ---------- -----------
Minority interest 57 57
Provisions for contingencies and losses 9 17,500 5,326 22,826
Bank borrowings 10 110,991 110,991
Other financial borrowings and debts 10 8,622 8,622
----------- -----------
Total financial debts 119,613 119,613
----------- -----------
Trade notes and related accounts payable 11 82,388 82,388
Liabilities on fixed assets and related accounts 11 16,063 16,063
Deferred income taxes 14 594 24,667 25,261
Other liabilities 12 48,180 48,180
----------- ---------- -----------
Total current liabilities 147,225 24,667 171,892
----------- ---------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY FF 431,937 FF 67,739 FF 499,676
=========== ========== ===========
</TABLE>
F-19
<PAGE> 23
COMPAGNIE FINANCIERE DU LEMAN
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
<TABLE>
<CAPTION>
NOTES FRENCH GAAP ADJUSTMENTS US GAAP
----- ----------- ----------- -------
<S> <C> <C> <C> <C>
Net sales 13 FF 478,634 FF 478,634
Stored production 4,218 (FF 271) 3,947
Capitalized production 1,567 1,567
Other operating income 205 205
Reversal of depreciation and accruals 511 511
----------- ------- -----------
Operating income 485,135 (271) 484,864
Raw materials (92,256) (92,256)
Inventory variation 876 876
Other purchases and expenses (125,998) (125,998)
----------- ------- -----------
Added value 267,757 (271) 267,486
Taxes and assimilated payments (13,977) (13,977)
Wages and salaries (103,012) (103,012)
Contractual employees' profit sharing (6,180) (6,180)
Social security and contributions (39,419) (39,419)
----------- ------- -----------
Gross operating margin 105,169 (271) 104,898
Depreciation on fixed assets (88,193) 17,659 (70,534)
Reserve allowance on current assets (2,562) 753 (1,809)
Other expenses (522) (522)
----------- ------- -----------
Operating income 13,892 18,141 32,033
Financial expense (9,342) (9,342)
----------- ------- -----------
Current income before tax 4,550 18,141 22,691
Extraordinary income (expense) 9,365 (18,191) (8,826)
Legal employees' profit sharing (1,516) (1,516)
Current income tax 14 (6,878) (6,878)
Deferred income taxes 14 758 18 776
----------- ------- -----------
NET INCOME FF 6,279 (FF 32) FF 6,247
=========== ======= ===========
</TABLE>
F-20
<PAGE> 24
COMPAGNIE FINANCIERE DU LEMAN
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income FF 6,247
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 107,404
Change in reserve for inventory 391
Change in long-term provisions 11,196
Deferred income taxes (776)
Loss on sales of property, plant and equipment 232
Increase/decrease in operating assets and liabilities:
Increase in trade accounts receivable (22,779)
Increase in inventories (4,822)
Increase in other current assets (1,522)
Decrease in prepaid expenses 293
Increase in trade accounts payable 24,210
Decrease in liabilities on fixed assets (2,566)
Increase in other current liabilities 10,551
---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 128,059
---------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of intangible assets (507)
Acquisitions of property, plant and equipment (77,516)
Acquisitions of investment 23
Proceeds from sales of property, plant and equipment 4,893
New loans 5,000
Reimbursements of loans (35,242)
---------
NET CASH USED IN INVESTING ACTIVITIES (103,349)
---------
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in overdrafts and miscellaneous debts (8,799)
Common stock reimbursement (6,175)
---------
NET CASH USED IN FINANCING ACTIVITIES (14,974)
---------
NET INCREASE IN CASH 9,736
Cash, beginning of period 2,220
---------
CASH, END OF PERIOD FF 11,956
=========
</TABLE>
F-21
<PAGE> 25
COMPAGNIE FINANCIERE DU LEMAN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
1.1 Differences between French and US GAAP
The accompanying financial statements have been prepared on the basis of the
consolidated financial statements of Compagnie Financiere du Leman ("CFL"),
prepared in accordance with French generally accepted accounting principles
("French GAAP") which differ in certain significant respects from those
applicable in the United States ("US GAAP").
These differences, for which the effects of the adjustments on net profit and
shareholders' equity are listed respectively in Notes 8 and 15, relate
principally to the items set out below:
Fixed assets - Fixed assets can be depreciated for tax purposes using the
accelerated declining balance method in France. For US GAAP purposes, the
straight-line method has been used and depreciation has been restated for
purchased software, equipment, fixtures and fittings and others.
Inventory - Finished goods and work in-progress inventory as computed by Frank &
Pignard ("F&P") does not include administrative overhead (operating leases for
buildings, Business Tax and computer department). For US GAAP purposes, a
percentage of overhead has been allocated to inventory.
Finished goods and work in-progress inventory has also been restated to include
the impact of the correction of the depreciation method.
Provision for contingencies and losses - Provisions recorded in French GAAP
financial statements have been examined in the light of Statement of Financial
Accounting Standard No. 5, "Accounting for Contingencies," and Emerging Issues
Task Force Statement No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (Including Certain
Costs Incurred in a Restructuring)." Adequate corrections have been made to the
financial statements to comply with US GAAP on provisions for litigation and
restructuring.
Accruals for pension obligations are not mandatory in French GAAP. As a
consequence, the company only accrued obligations for certain employees. This
accrual has been increased to reflect the pension liability for all the
employees.
Minority interest - The impact of the adjustments between French and US GAAP has
not been taken into account for the calculation of minority interest, as this
would lead to an immaterial adjustment.
1.2 Management estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-22
<PAGE> 26
COMPAGNIE FINANCIERE DU LEMAN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
1.3 Consolidation
The accompanying consolidated financial statements include the accounts of CFL
and its majority-owned (99.9%) subsidiary, F&P. All significant intercompany
transactions and balances are eliminated in consolidation.
Following equity investments are not consolidated, as they are deemed not
significant:
- SC Thermipar, 74950, Scionzier: 50 % of the capital
- Sarl Les Pilotis, 74311, Thyez: 20 % of the capital
1.4 Revenue recognition
Revenue from sales of products is recognized upon shipment or delivery,
depending on when title and risk of loss is transferred under the specific
contractual terms of each sale, which may vary customer by customer.
1.5 Inventories
Inventories are valued at the lower of manufacturing cost, which is principally
comprised of raw material, labor costs, and overhead, or market (net realizable
value). Cost is determined on a first-in, first-out basis for raw material
(including shipping and storage costs) and by specific identification for
finished goods. Appropriate consideration is given to deterioration,
obsolescence and other factors in evaluating net realizable value. Inventories
whose probability of being sold is very low (dead inventory) are depreciated by
100%.
1.6 Property, plant and equipment
Property, plant and equipment is stated at historical cost. Depreciation of
property, plant and equipment is calculated either by the straight-line ("SL")
or the declining balance ("D") method over the estimated useful life of the
assets concerned, as follows:
<TABLE>
<S> <C>
Buildings.................................................................................20-25 years SL
Installations...........................................................................10 years SL or D
Equipment...........................................................................5-6.67 years SL or D
Furniture, fixtures and fittings and others...........................................3-10 years SL or D
</TABLE>
1.7 Intangible assets
Intangible assets consist primarily of purchased software and goodwill. The
basis for valuation of these assets is historical acquisition. Amortization of
intangible assets is calculated by the straight-line method, as follows:
<TABLE>
<S> <C>
Purchased software...............................................................................4 years
Goodwill........................................................................................20 years
</TABLE>
1.8 Income taxes
In December 1990, CFL and F&P entered into a tax sharing agreement. This
agreement has been applicable since January 1, 1991.
F-23
<PAGE> 27
COMPAGNIE FINANCIERE DU LEMAN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
1.8 Income taxes - Concluded
The Group accounts for deferred income taxes in accordance with Statement of
Financial Accounting Standard No. 109 ("SFAS 109"), "Accounting for Income
Taxes." Under SFAS 109, deferred tax assets and liabilities are determined based
on differences between the financial reporting and tax basis of assets and
liabilities and are measured by applying enacted tax rates and laws to taxable
years in which such differences are expected to reverse.
1.9 Translation of foreign currencies
Receivables and payables denominated in foreign currencies are translated at
year-end exchange rates. The resulting unrealized exchange gains and losses are
carried to the statement of income.
2. FIXED ASSETS
<TABLE>
<CAPTION>
INCREASES - DECREASES
GROSS VALUE ADDITIONS, CIP, ----------------------------------- GROSS VALUE AT
AT 12/31/95 TRANSFER TRANSFERS DISPOSALS 12/31/96
----------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Software FF 4,317 FF 507 FF 4,824
---------- ---------- -----------
TOTAL INTANGIBLE
ASSETS 4,317 507 4,824
---------- ---------- -----------
Land 1,550 1,550
---------- -----------
Thyez building 5,560 5,560
Building
installations 12,833 948 13,781
Pochons building 9,380 9,380
Ternier building 20,186 665 20,851
Apartment building 345 345
---------- ---------- -----------
Subtotal Buildings 48,304 1,613 49,917
---------- ---------- -----------
Machine tools 450,137 75,427 FF 14,485 511,079
Used equipment 10,743 290 148 10,885
Plant equipment 8,200 4,411 3,590 9,021
---------- ---------- ----------- -----------
Subtotal Machinery
Equipment 469,080 80,128 18,223 530,985
---------- ---------- ----------- -----------
Installations 11,213 800 12,013
Vehicles 1,806 764 716 1,854
Office equipment 4,790 662 500 4,952
Office furniture 1,605 61 1,666
---------- ---------- ----------- -----------
Subtotal
Miscellaneous 19,414 2,287 1,216 20,485
---------- ---------- ----------- -----------
CIP-Machinery and
Equipment 2,448 2,856 FF 2,448 2,856
CIP-Miscellaneous
---------- ---------- ---------
Subtotal CIP 2,448 2,856 2,448 2,856
---------- ---------- --------- -----------
</TABLE>
F-24
<PAGE> 28
COMPAGNIE FINANCIERE DU LEMAN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
2. FIXED ASSETS - CONTINUED
<TABLE>
<CAPTION>
INCREASES - DECREASES
GROSS VALUE ADDITIONS --------------------------------- GROSS VALUE AT
AT 12/31/95 CIP, TRANSFER TRANSFERS DISPOSALS 12/31/96
----------- ------------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Advances for CIP FF 9,218 FF 2,298 FF 9,218 FF 2,298
---------- ----------- -------- -----------
TOTAL FIXED ASSETS 550,014 89,182 11,666 FF19,439 608,091
---------- ----------- -------- -------- -----------
SUBTOTAL FIXED ASSETS
BEFORE INVESTMENTS
554,331 89,689 11,666 19,439 612,915
---------- ----------- -------- -------- -----------
Equity investments 804 804
Receivables from equity
investments 520 520
Other equity investments
102 4 106
Deposits and guaranties
27 11
---------- ----------- -------- -----------
38
TOTAL INVESTMENTS 1,464 27 1,441
---------- ----------- -------- -----------
4
TOTAL FIXED
ASSETS FF555,795 FF 89,693 FF11,666 FF19,466 FF 614,356
========== =========== ======== ======== ===========
Software FF 2,566 FF 882 FF 3,448
---------- ----------- -----------
TOTAL
AMORTIZATION-INTANGIBLE
ASSETS 2,566 882 3,448
---------- ----------- -----------
Buildings 3,961 151 4,112
Leasehold buildings 4,390 1,506 5,896
Building installations 5,851 2,107 7,958
---------- ----------- -----------
Subtotal Buildings 14,202 3,764 17,966
---------- ----------- -----------
Machinery and
equipment 331,477 94,116 FF14,777 410,816
---------- ----------- -------- -----------
Installations 7,365 2,335 9,700
Vehicles 1,338 255 608 985
Office furniture and
equipment 4,102 1,389 500 4,991
---------- ----------- -------- -----------
Subtotal Miscellaneous 12,805 3,979 1,108 15,676
----------- ------------ -------- -----------
TOTAL DEPRECIATION -
FIXED ASSETS 358,484 101,859 15,885 444,458
---------- ----------- -------- -----------
TOTAL
AMORTIZATION
AND
DEPRECIATION FF 361,050 FF 102,741 FF15,885 FF447,906
========== =========== ======== ===========
</TABLE>
F-25
<PAGE> 29
COMPAGNIE FINANCIERE DU LEMAN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
2. FIXED ASSETS - CONCLUDED
Depreciation can be split between:
<TABLE>
<S> <C>
Normal depreciation FF 84,112
Extraordinary depreciation on Bendix project fixed assets 18,629
------------
FF 102,741
</TABLE>
3. INVENTORY
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
12/31/96 12/31/95 VARIATION VARIATION IN %
-------- -------- --------- --------------
<S> <C> <C> <C> <C>
Raw materials FF 8,487 FF 8,276 FF 211 3%
----------- ----------- -----------
Total raw materials 8,487 8,276 211 3
----------- ----------- -----------
Supplies 434 304 130 43
Packaging 520 383 137 36
Miscellaneous 1,082 685 397 58
------------ ----------- -----------
Total other
materials 2,036 1,372 664 48
------------ ----------- -----------
Gross value -
Materials 10,523 9,648 875 9
Provisions (541) (444) 97 22
------------ ----------- -----------
NET VALUE -
MATERIALS FF 9,982 FF 9,204 FF 778 8%
============ =========== ===========
Work in progress
(WIP) FF 29,520 FF 26,902 FF 2,618 10%
Finished goods 14,596 12,997 1,599 12
------------ ----------- -----------
Gross value - WIP
& Finished
goods 44,116 39,899 4,217 11
Provisions (5,532) (5,189) 343 7
------------ ----------- -----------
NET VALUE - WIP
& FINISHED
GOODS FF 38,584 FF 34,710 FF3,874 11%
============ =========== ===========
Total gross value FF 54,639 FF 49,547 FF 5,092 10%
Provisions (6,073) (5,633) 440 8
------------ ----------- -----------
TOTAL
NET VALUE FF 48,566 FF43,914 FF 4,652 11%
============ =========== ===========
</TABLE>
F-26
<PAGE> 30
COMPAGNIE FINANCIERE DU LEMAN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
4. TRADE ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
12/31/96 12/31/95 VARIATION VARIATION IN %
-------- -------- --------- --------------
<S> <C> <C> <C> <C>
Trade accounts receivable FF 75,432 FF 66,916 FF 8,516 13%
Bills receivable 71,323 56,519 14,804 26
Accrued trade accounts
receivable 319 860 (541) -63
---------- --------- --------
Total trade accounts
receivable 147,074 124,295 22,779 18
Allowance for doubtful
accounts (283) (283)
---------- ---------
TOTAL TRADE ACCOUNTS
RECEIVABLE (NET)
FF 146,791 FF124,012 FF22,779 18%
========== ========= ========
</TABLE>
5. OTHER RECEIVABLES
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
12/31/96 12/31/95 VARIATION VARIATION IN %
-------- -------- --------- --------------
<S> <C> <C> <C> <C>
TOTAL OTHER
RECEIVABLES FF2,806 FF1,284 FF1,522 119%
======= ======= =======
</TABLE>
As of December 31, 1996, other receivables mainly consist of:
- Value-added tax recoverable: FF1,596
- Accrued receivables (rebates from suppliers): FF450
- Business Tax (Taxe Professionnelle) refund: FF540
6. CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
12/31/96 12/31/95 VARIATION VARIATION IN %
-------- -------- --------- --------------
<S> <C> <C> <C> <C>
Cash FF 561 FF2,177 (FF1,616) -74%
Petty cash 48 43 5 12
----------- ------- --------
Total cash 609 2,220 (1,611) -73
Total marketable
securities 11,347 11,347
----------- ------- --------
TOTAL CASH
AND CASH
EQUIVALENTS FF 11,956 FF2,220 FF 9,736 439%
=========== ======= ========
</TABLE>
F-27
<PAGE> 31
COMPAGNIE FINANCIERE DU LEMAN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
7. PREPAID EXPENSES
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
12/31/96 12/31/95 VARIATION VARIATION IN %
-------- -------- --------- --------------
<S> <C> <C> <C> <C>
TOTAL
PREPAID
EXPENSES FF193 FF486 (FF293) -60%
===== ===== ======
</TABLE>
As of December 31, 1996, prepaid expenses consist of operating expenses (FF150)
and interest charges (FF43).
8. EFFECT ON SHAREHOLDERS' EQUITY OF DIFFERENCES BETWEEN FRENCH AND US GAAP
<TABLE>
<CAPTION>
BALANCE AT
12/31/96
--------
<S> <C>
SHAREHOLDERS' EQUITY AS REPORTED UNDER FRENCH GAAP FF147,542
US GAAP adjustments
- - Fixed asset depreciation 62,096
- - Overheads allocation to inventory and impact of fixed assets depreciation on
inventory 2,822
- - Provisions for litigation 2,371
- - Pension liability (7,697)
- - Deferred taxation on US GAAP adjustments (21,846)
---------
SHAREHOLDERS' EQUITY AS REPORTED UNDER US GAAP FF185,288
=========
</TABLE>
9. PROVISIONS FOR CONTINGENCIES AND LOSSES
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
12/31/96 12/31/95 VARIATION VARIATION IN %
-------- -------- --------- --------------
<S> <C> <C> <C> <C>
Provisions for
miscellaneous
contingencies FF 13,881 FF 872 FF13,009
Pension liability 3,619 3,108 511 16%
--------- ------- --------
TOTAL PROVISION
FOR
CONTINGENCIES
AND LOSSES FF 17,500 FF3,980 FF13,520 340%
========= ======= ========
</TABLE>
F-28
<PAGE> 32
COMPAGNIE FINANCIERE DU LEMAN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
10. FINANCIAL DEBTS - SHORT AND LONG-TERM
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
12/31/96 12/31/95 VARIATION VARIATION IN %
-------- -------- --------- --------------
<S> <C> <C> <C> <C>
Long-term portion FF 71,850 FF 101,200 (FF 29,350) -29%
Short-term portion 34,350 34,685 (335) -1
------------ ----------- -----------
BANK LOANS FF 106,200 FF 135,885 (FF 29,685) -22%
------------ ----------- -----------
ACCRUED INTEREST -
SHORT-TERM FF 927 FF 1,483 (FF 556) -38%
------------ ----------- -----------
OVERDRAFTS -
SHORT-TERM FF 3,865 FF 16,273 (FF 12,408) -76%
------------ ---------- -----------
Long-term portion FF 1,903 FF 3,802 (FF 1,899) -50%
Short-term portion 6,719 1,211 5,508 455
------------ ----------- -----------
MISCELLANEOUS
FINANCIAL DEBTS FF 8,622 FF 5,013 FF 3,609 72%
------------ ----------- -----------
Long-term portion FF 73,753 FF 105,002 (FF 31,249) -30%
Short-term portion 45,861 53,652 (7,791) -15
------------ ----------- -----------
TOTAL
FINANCIAL
DEBTS FF 119,614 FF 158,654 (FF 39,040) -25%
============ =========== ===========
</TABLE>
As of December 31, 1996, miscellaneous debts include profit sharing (FF2,678)
and a special fund for employees (FF5,783).
11. ACCOUNTS PAYABLE
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
12/31/96 12/31/95 VARIATION VARIATION IN %
-------- -------- --------- --------------
<S> <C> <C> <C> <C>
Trade accounts
payable FF 79,031 FF 56,056 FF 22,975 41%
Accrued accounts
payable 3,357 2,122 1,235 58
------------ ----------- -----------
TOTAL TRADE
ACCOUNTS
PAYABLE FF 82,388 FF 58,178 FF 24,210 42%
============ =========== ===========
Trade accounts
payable - Bills
payable FF 54,433 FF 42,590 FF 11,843 28%
FIXED ASSET
SUPPLIERS FF 16,063 FF 18,629 (FF 2,566) -14%
Fixed asset
suppliers - Bills
payable FF 8,944 FF 12,702 (FF 3,758) -30%
</TABLE>
F-29
<PAGE> 33
COMPAGNIE FINANCIERE DU LEMAN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
12. OTHER PAYABLES
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
12/31/96 12/31/95 VARIATION VARIATION IN %
-------- -------- --------- --------------
<S> <C> <C> <C> <C>
Taxes payable FF 10,344 FF 2,895 FF 7,449 257%
Benefits payable 9,845 8,671 1,174 14
Salaries & wages
payable 23,828 21,230 2,598 12
----------- ----------- ----------
Total taxes,
benefits and
salaries & wages
payable 44,017 32,796 11,221 34
Miscellaneous
payables 1,552 1,000 552 55
Deferred revenue -
Operating 2,611 3,833 (1,222) -32
----------- ----------- ----------
TOTAL
OTHER
PAYABLES FF 48,180 FF 37,629 FF 10,551 28%
=========== =========== ==========
</TABLE>
13. SALES
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
12/31/96 12/31/95 VARIATION VARIATION IN %
-------- -------- --------- --------------
<S> <C> <C> <C> <C>
France FF 380,541 FF 374,867 FF 5,674 1.5%
% 79.5% 82.4%
Export FF 98,093 FF 79,809 FF 18,284 22.9%
% 20.5% 17.6%
TOTAL FF 478,634 FF 454,676 FF 23,958 5.3%
</TABLE>
14. INCOME TAXES
Deferred income taxes reflect the impact of temporary differences between the
amount of assets and liabilities reported for financial reporting purposes and
such amounts as measured in accordance with tax laws.
F-30
<PAGE> 34
COMPAGNIE FINANCIERE DU LEMAN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
14. INCOME TAXES - CONCLUDED
A reconciliation of differences between the statutory French income tax and the
Group's effective income tax follows:
<TABLE>
<CAPTION>
BALANCE AT
12/31/96
--------
<S> <C>
Group's net income before tax FF12,349
=========
Statutory income tax (rate: 36.67%) (FF 4,526)
Permanent differences - Tax impact:
- - Goodwill depreciation (1,496)
- - Non-tax deductible expenses (87)
- - Tax on capital gains 6
- - Tax credit 1
---------
GROUP'S INCOME TAX (FF 6,102)
=========
</TABLE>
15. EFFECT ON PROFIT ATTRIBUTABLE TO SHAREHOLDERS OF DIFFERENCES BETWEEN FRENCH
AND US GAAP
<TABLE>
<CAPTION>
BALANCE AT
12/31/96
--------
<S> <C>
Profit attributable to shareholders as reported under French GAAP FF 6,279
US GAAP adjustments:
- - Depreciation on fixed assets (2,153)
- - Overheads allocation to inventory and impact of fixed assets depreciation on
inventory (221)
- - Provisions for litigation 3,003
- - Pension liability (679)
- - Deferred taxation on US GAAP adjustments 18
--------
PROFIT ATTRIBUTABLE TO SHAREHOLDERS AS REPORTED UNDER US GAAP
FF 6,247
========
</TABLE>
16. OTHER ITEMS
MISCELLANEOUS COMMITMENTS:
All of the bank loans (FF106,000) are the object of guaranties by equipment
collateral.
Commitment to repurchase a lease contract on behalf of a subcontractor: rent
remaining at 12/31/96: FF5,479
Headcount: 676 employees
F-31
<PAGE> 35
COMPAGNIE FINANCIERE DU LEMAN
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995
(IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
<TABLE>
<CAPTION>
NOTES FRENCH GAAP ADJUSTMENTS US GAAP
----- ----------- ----------- -------
<S> <C> <C> <C> <C>
Goodwill FF 57,143 FF 57,143
Other intangible fixed assets 2 1,751 FF 96 1,847
----------- ---------- -----------
Total intangible assets, net 58,894 96 58,990
----------- ---------- -----------
Land 2 1,550 1,550
Buildings 2 34,102 747 34,849
Industrial fixtures, equipment and tooling 2 137,603 62,719 200,322
Other tangible fixed assets 2 6,609 686 7,295
Fixed assets in-progress 2 2,448 2,448
Advances and prepayments 2 9,218 9,218
----------- ---------- -----------
Total property, plant and equipment, net 191,530 64,152 255,682
----------- ---------- -----------
Investments, net 2 1,464 1,464
Inventory, net 3 43,914 3,043 46,957
Accounts receivable, net 4 124,012 124,012
Deferred income taxes 14 1,442 2,829 4,271
Other receivables 5 1,284 1,284
----------- ---------- -----------
Total current receivables, net 2,726 2,829 5,555
----------- ---------- -----------
Deposits
Cash 6 2,220 2,220
----------- -----------
Total cash and cash equivalents 2,220 2,220
----------- -----------
Prepaid expenses 7 486 486
----------- ---------- -----------
TOTAL ASSETS FF 425,246 FF 70,120 FF 495,366
=========== ========== ===========
Common stock 8 FF 97,700 FF 97,700
Additional paid-in capital 8 13,502 13,502
Retained earnings 8 37,656 FF 33,559 71,215
Net income or loss of the tax year 8 (1,420) 4,218 2,798
----------- ---------- -----------
Shareholders' equity 147,438 37,777 185,215
----------- ---------- -----------
Minority interest 57 57
Provisions for contingencies and losses 9 3,980 7,650 11,630
Bank borrowings 10 153,642 153,642
Other financial borrowings and debts 10 5,013 5,013
----------- -----------
Total financial debts 158,655 158,655
----------- -----------
Trade notes and related accounts payable 11 58,178 58,178
Liabilities on fixed assets and related accounts 11 18,629 18,629
Deferred income taxes 14 680 24,693 25,373
Other liabilities 12 37,629 37,629
----------- ---------- -----------
Total current liabilities 115,116 24,693 139,809
----------- ---------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY FF 425,246 FF 70,120 FF 495,366
=========== ========== ===========
</TABLE>
F-32
<PAGE> 36
COMPAGNIE FINANCIERE DU LEMAN
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
<TABLE>
<CAPTION>
NOTES FRENCH GAAP ADJUSTMENTS US GAAP
----- ----------- ----------- -------
<S> <C> <C> <C> <C>
Net sales 13 FF 454,676 FF 454,676
Stored production 7,940 (FF 409) 7,531
Capitalized production 403 403
Other operating income 316 316
Reversal of depreciation and accruals 898 898
----------- ---------- -----------
Operating income 464,233 (409) 463,824
Raw materials (88,689) (88,689)
Inventory variation 556 556
Other purchases and expenses (127,607) (127,607)
----------- ---------- -----------
Added value 248,493 (409) 248,084
Taxes and assimilated payments (12,805) (12,805)
Wages and salaries (95,375) (95,375)
Contractual employees' profit sharing (4,754) (4,754)
Social security and contributions (37,501) (37,501)
----------- ---------- -----------
Gross operating margin 98,058 (409) 97,649
Depreciation on fixed assets (86,127) 11,795 (74,332)
Reserve allowance on current assets (3,588) (1,163) (4,751)
Other expenses (514) (514)
----------- ---------- -----------
Operating income 7,829 10,223 18,052
Financial expense (9,114) (9,114)
----------- ---------- -----------
Current income (loss) before tax (1,285) 10,223 8,938
Extraordinary income 1,404 (918) 486
Legal employees' profit sharing
Current income tax 14 (1,535) (1,535)
Deferred income taxes 14 (4) (5,087) (5,091)
----------- ---------- -----------
NET INCOME (LOSS) (FF 1,420) FF 4,218 FF 2,798
=========== ========== ===========
</TABLE>
F-33
<PAGE> 37
COMPAGNIE FINANCIERE DU LEMAN
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income FF2,798
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 74,332
Change in reserve for inventory 2,720
Change in long-term provisions 619
Deferred income taxes 5,090
Loss on sales of property, plant and equipment 482
Increase/decrease in operating assets and liabilities:
Decrease in trade accounts receivable 5,977
Increase in inventories (8,087)
Increase in other current assets (209)
Increase in prepaid expenses (180)
Decrease in trade accounts payable (20,113)
Decrease in liabilities on fixed assets (8,305)
Increase in other current liabilities 4,069
--------
NET CASH PROVIDED BY OPERATING ACTIVITIES 59,193
--------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of intangible assets (1,145)
Acquisitions of property, plant and equipment (106,231)
Acquisitions of investment (497)
Proceeds from sales of property, plant and equipment 503
New loans 74,204
Reimbursements of loans (31,843)
--------
NET CASH USED IN INVESTING ACTIVITIES (65,009)
--------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in overdrafts and miscellaneous debts 2,924
Dividends paid (10)
--------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,914
--------
NET DECREASE IN CASH (2,902)
Cash, beginning of period 5,122
CASH, END OF PERIOD FF 2,220
========
</TABLE>
F-34
<PAGE> 38
COMPAGNIE FINANCIERE DU LEMAN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
1.1 Differences between French and US GAAP
The accompanying financial statements have been prepared on the basis of the
consolidated financial statements of Compagnie Financiere du Leman ("CFL"),
prepared in accordance with French generally accepted accounting principles
("French GAAP") which differ in certain significant respects from those
applicable in the United States ("US GAAP").
These differences, for which the effects of the adjustments on net profit and
shareholders' equity are listed respectively in Notes 8 and 15, relate
principally to the items set out below:
Fixed assets - Fixed assets can be depreciated for tax purposes using the
accelerated declining balance method in France. For US GAAP purposes, the
straight-line method has been used and depreciation has been restated for
purchased software, equipment, fixtures and fittings and others.
Inventory - Finished goods and work in-progress inventory as computed by Frank &
Pignard ("F&P") does not include administrative overhead (operating leases for
buildings, Business Tax and computer department). For US GAAP purposes, a
percentage of overhead has been allocated to inventory.
Finished goods and work in-progress inventory has also been restated to include
the impact of the correction of the depreciation method.
Provision for contingencies and losses - Provisions recorded in French GAAP
financial statements have been examined in the light of Statement of Financial
Accounting Standard No. 5, "Accounting for Contingencies," and Emerging Issues
Task Force Statement No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (Including Certain
Costs Incurred in a Restructuring)." Adequate corrections have been made to the
financial statements to comply with US GAAP on provisions for litigation and
restructuring.
Accruals for pension obligations are not mandatory in French GAAP. As a
consequence, the company only accrued obligations for certain employees. This
accrual has been increased to reflect the pension liability for all the
employees.
Minority interest - The impact of the adjustments between French and US GAAP has
not been taken into account for the calculation of minority interest, as this
would lead to an immaterial adjustment.
1.2 Management estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
1.3 Consolidation
The accompanying consolidated financial statements include the accounts of CFL
and its majority-owned (99.9%) subsidiary, F&P. All significant intercompany
transactions and balances are eliminated in consolidation.
F-35
<PAGE> 39
COMPAGNIE FINANCIERE DU LEMAN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
1.3 Consolidation - Concluded
Following equity investments are not consolidated, as they are deemed not
significant:
- SC Thermipar, 74950, Scionzier: 50% of the capital
- Sarl Les Pilotis, 74311, Thyez: 20% of the capital
1.4 Revenue recognition
Revenue from sales of products is recognized upon shipment of delivery,
depending on when title and risk of loss is transferred under the specific
contractual terms of each sale, which may vary customer by customer.
1.5 Inventories
Inventories are valued at the lower of manufacturing cost, which is principally
comprised of raw material, labor costs, and overhead, or market (net realizable
value). Cost is determined on a first-in, first-out basis for raw material
(including shipping and storage costs) and by specific identification for
finished goods. Appropriate consideration is given to deterioration,
obsolescence and other factors in evaluating net realizable value. Inventories
whose probability of being sold is very low (dead inventory) are depreciated by
100%.
1.6 Property, plant and equipment
Property, plant and equipment is stated at historical cost. Depreciation of
property, plant and equipment is calculated either by the straight-line ("SL")
or the declining balance ("D") method over the estimated useful life of the
assets concerned, as follows:
<TABLE>
<S> <C>
Buildings.................................................................................20-25 years SL
Installations...........................................................................10 years SL or D
Equipment...........................................................................5-6.67 years SL or D
Furniture, fixtures and fittings and others...........................................3-10 years SL or D
</TABLE>
1.7 Intangible assets
Intangible assets consist primarily of purchased software and goodwill. The
basis for valuation of these assets is historical acquisition. Amortization of
intangible assets is calculated by the straight-line method, as follows:
<TABLE>
<S> <C>
Purchased software...............................................................................4 years
Goodwill........................................................................................20 years
</TABLE>
1.8 Income taxes
In December 1990, CFL and F&P entered into a tax sharing agreement. This
agreement has been applicable since January 1, 1991.
F-36
<PAGE> 40
COMPAGNIE FINANCIERE DU LEMAN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
1.8 Income taxes - Concluded
The Group accounts for deferred income taxes in accordance with Statement of
Financial Accounting Standard No. 109 ("SFAS 109"), "Accounting for Income
Taxes." Under SFAS 109, deferred tax assets and liabilities are determined based
on differences between the financial reporting and tax basis of assets and
liabilities and are measured by applying enacted tax rates and laws to taxable
years in which such differences are expected to reverse.
1.9 Translation of foreign currencies
Receivables and payables denominated in foreign currencies are translated at
year-end exchange rates. The resulting unrealized exchange gains and losses are
carried to the statement of income.
2. FIXED ASSETS
<TABLE>
<CAPTION>
INCREASES - DECREASES
GROSS VALUE ADDITIONS, CIP, ----------------------------------- GROSS VALUE AT
AT 12/31/94 TRANSFER TRANSFERS DISPOSALS 12/31/95
----------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Software FF 4,179 FF 1,145 FF 1,007 FF 4,317
---------- -------- --------- ----------
TOTAL
INTANGIBLE
ASSETS 4,179 1,145 1,007 4,317
---------- -------- --------- ----------
Land 1,550 1,550
---------- ----------
Thyez building 5,560 5,560
Building
installations 9,034 3,799 12,833
Pochons building 9,380 9,380
Ternier building 8,616 11,570 20,186
Apartment building 345 345
---------- --------- ----------
Subtotal Buildings 32,935 15,369 48,304
---------- --------- ----------
Machine tools 378,178 74,734 2,775 450,137
Used equipment 8,101 2,770 128 10,743
Plant equipment 5,248 4,312 1,360 8,200
---------- --------- --------- ----------
Subtotal Machinery
Equipment 391,527 81,816 4,263 469,080
---------- --------- --------- ----------
Installations 9,945 1,268 11,213
Vehicles 1,754 186 134 1,806
Office equipment 3,593 1,197 4,790
Office furniture 1,343 390 128 1,605
---------- --------- --------- ----------
Subtotal
Miscellaneous 16,635 3,041 262 19,414
---------- --------- --------- ----------
CIP-Machinery and
Equipment 1,549 2,448 FF 1,549 2,448
CIP-Miscellaneous
---------- --------- --------
Subtotal CIP 1,549 2,448 1,549 2,448
---------- --------- -------- ----------
</TABLE>
F-37
<PAGE> 41
COMPAGNIE FINANCIERE DU LEMAN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
2. FIXED ASSETS - CONCLUDED
<TABLE>
<CAPTION>
INCREASES - DECREASES
GROSS VALUE ADDITIONS, --------------------------------- GROSS VALUE AT
AT 12/31/94 CIP, TRANSFER TRANSFERS DISPOSALS 12/31/95
----------- ------------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Advances for CIP FF 4,112 FF 9,218 FF 4,112 FF 9,218
----------- ----------- --------- ---------
TOTAL FIXED ASSETS 448,308 111,892 5,661 FF 4,525 550,014
----------- ----------- --------- --------- ---------
SUBTOTAL FIXED ASSETS
BEFORE INVESTMENTS 452,487 113,037 5,661 5,532 554,331
----------- ----------- --------- --------- ---------
TOTAL FIXED
ASSETS FF 453,454 FF 113,801 FF 5,923 FF 5,537 FF555,795
=========== =========== ========= ========= =========
Software FF 2,622 FF 951 FF 1,007 FF 2,566
----------- ----------- --------- ---------
TOTAL
AMORTIZATION-
INTANGIBLE ASSETS 2,622 951 1,007 2,566
----------- ----------- --------- ---------
Buildings 3,810 151 3,961
Leasehold buildings 3,234 1,156 4,390
Building installations 4,949 902 5,851
----------- ----------- ---------
Subtotal Buildings 11,993 2,209 14,202
----------- ----------- ---------
Machinery and
equipment 259,814 75,920 4,257 331,477
----------- ----------- --------- ---------
Installations 5,720 1,645 7,365
Vehicles 1,222 206 90 1,338
Office furniture and
equipment 3,103 1,112 113 4,102
----------- ----------- --------- ---------
Subtotal Miscellaneous 10,045 2,963 203 12,805
----------- ----------- --------- ---------
TOTAL DEPRECIATION -
FIXED ASSETS 281,852 81,092 4,460 358,484
----------- ----------- --------- ---------
TOTAL
AMORTIZATION
AND
DEPRECIATION FF 284,474 FF 82,043 FF 5,467 FF361,050
=========== =========== ========= =========
</TABLE>
F-38
<PAGE> 42
COMPAGNIE FINANCIERE DU LEMAN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
3. INVENTORY
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
12/31/95 12/31/94 VARIATION VARIATION IN %
-------- -------- --------- --------------
<S> <C> <C> <C> <C>
Raw materials FF 8,276 FF 8,246 FF 30
----------- ----------- ----------
Total raw materials 8,276 8,246 30
----------- ----------- ----------
Supplies 304 224 80 36%
Packaging 383 155 228 147
Miscellaneous 685 973 (288) -30
----------- ----------- ----------
Total other
materials 1,372 1,352 20 1
----------- ----------- ----------
Gross value -
Materials 9,648 9,598 50 1
Provisions (444) (290) 154 53
----------- ----------- ----------
NET VALUE -
MATERIALS FF 9,204 FF 9,308 (FF 104) -1%
=========== =========== ==========
Work in progress
(WIP) FF 26,902 FF 24,070 FF 2,832 12%
Finished goods 12,997 6,962 6,035 87
----------- ----------- ----------
Subtotal THYEZ 39,899 31,032 8,867 29
Work in progress
(WIP) 228 (228) -100
Finished goods 193 (193) -100
----------- ----------
Subtotal CLUSES 421 (421) -100
Work in progress
(WIP) 26,902 24,298 2,604 11
Finished goods 12,997 7,155 5,842 82
----------- ----------- ----------
Gross value - WIP
& Finished
goods 39,899 31,453 8,446 27
Provisions (5,189) (2,737) 2,452 90
----------- ----------- ----------
NET VALUE - WIP
& FINISHED
GOODS FF 34,710 FF 28,716 FF 5,994 21%
=========== =========== ==========
Total gross value FF 49,547 FF 41,051 FF 8,496 21%
Provisions (5,633) (3,027) 2,606 86
----------- ----------- ----------
TOTAL NET
VALUE FF 43,914 FF 38,024 FF 5,890 15%
=========== =========== ==========
</TABLE>
F-39
<PAGE> 43
COMPAGNIE FINANCIERE DU LEMAN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
4. TRADE ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
12/31/95 12/31/94 VARIATION VARIATION IN %
-------- -------- --------- --------------
<S> <C> <C> <C> <C>
Trade accounts receivable FF 66,916 FF 71,736 (FF4,820) -7%
Bills receivable 56,519 57,716 (1,197) -2
Accrued trade accounts
receivable 860 820 40 5
--------- --------- --------
Total trade accounts
receivable 124,295 130,272 (5,977) -5
Allowance for doubtful
accounts (283) (283)
--------- --------- --------
TOTAL TRADE
ACCOUNTS
RECEIVABLE (NET) FF124,012 FF129,989 (FF5,977) -5%
========= ========= ========
</TABLE>
5. OTHER RECEIVABLES
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
12/31/95 12/31/94 VARIATION VARIATION IN %
-------- -------- --------- --------------
<S> <C> <C> <C> <C>
TOTAL
OTHER
RECEIVABLES FF1,284 FF1,075 FF209 20%
======= ======= =====
</TABLE>
As of December 31, 1995, other receivables mainly consist of:
- Value-added tax recoverable: FF720
- Accrued receivables (rebates from suppliers): FF423
6. CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
12/31/95 12/31/94 VARIATION VARIATION IN %
-------- -------- --------- --------------
<S> <C> <C> <C> <C>
Cash FF2,177 FF2,596 (FF 419) -16%
Petty cash 43 47 (4) -8
------- ------- --------
Total cash 2,220 2,643 (423) -16
Total marketable
securities 2,479 (2,479) -100
------- ------- --------
TOTAL CASH
AND CASH
EQUIVALENTS FF2,220 FF5,122 (FF2,902) -57%
======= ======= ========
</TABLE>
F-40
<PAGE> 44
COMPAGNIE FINANCIERE DU LEMAN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
7. PREPAID EXPENSES
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
12/31/95 12/31/94 VARIATION VARIATION IN %
-------- -------- --------- --------------
<S> <C> <C> <C> <C>
TOTAL
PREPAID
EXPENSES FF486 FF306 FF180 59%
===== ===== =====
</TABLE>
As of December 31, 1995, prepaid expenses consist of operating expenses (FF373)
and interest charges (FF113).
8. EFFECT ON SHAREHOLDERS' EQUITY OF DIFFERENCES BETWEEN FRENCH AND US GAAP
<TABLE>
<CAPTION>
BALANCE AT
12/31/95
--------
<S> <C>
SHAREHOLDERS' EQUITY AS REPORTED UNDER FRENCH GAAP FF147,438
US GAAP adjustments
- - Fixed asset depreciation 64,248
- - Overheads allocation to inventory and impact of fixed assets depreciation on
inventory 3,043
- - Provisions for litigation (632)
- - Pension liability (7,018)
- - Deferred taxation on US GAAP adjustments (21,864)
---------
SHAREHOLDERS' EQUITY AS REPORTED UNDER US GAAP FF185,215
=========
</TABLE>
9. PROVISIONS FOR CONTINGENCIES AND LOSSES
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
12/31/95 12/31/94 VARIATION VARIATION IN %
-------- -------- --------- --------------
<S> <C> <C> <C> <C>
Provisions for
miscellaneous
contingencies FF 872 FF1,481 (FF609) -41%
Pension liability 3,108 2,929 179 6
------- ------- ------
TOTAL PROVISION
FOR
CONTINGENCIES
AND LOSSES FF3,980 FF4,410 (FF430) -10%
======= ======= ======
</TABLE>
F-41
<PAGE> 45
COMPAGNIE FINANCIERE DU LEMAN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
10. FINANCIAL DEBTS - SHORT AND LONG-TERM
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
12/31/95 12/31/94 VARIATION VARIATION IN %
-------- -------- --------- --------------
<S> <C> <C> <C> <C>
Long-term portion FF101,200 FF 67,385 FF 33,815 50%
Short-term portion 34,685 26,842 7,843 29
--------- ------------ ----------
BANK LOANS FF135,885 FF 94,227 FF 41,658 44%
--------- ------------ ----------
ACCRUED INTEREST -
SHORT-TERM FF 1,483 FF 779 FF 704 90%
--------- ------------ ----------
OVERDRAFTS -
SHORT-TERM FF 16,273 FF 12,036 FF 4,237 35%
--------- ------------ ----------
Long-term portion FF 3,802 FF 5,096 (FF 1,294) -25%
Short-term portion 1,211 1,230 (19) -1
--------- ------------ ----------
MISCELLANEOUS
FINANCIAL DEBTS FF 5,013 FF 6,326 (FF 1,313) -21%
--------- ------------ ----------
Long-term portion FF105,002 FF 72,481 FF 32,521 45%
Short-term portion 53,652 40,887 12,765 31
--------- ------------ ----------
TOTAL
FINANCIAL
DEBTS FF158,654 FF 113,368 FF 45,286 40%
========= ============ ==========
</TABLE>
As of December 31, 1995, miscellaneous financial debts mainly consist of profit
sharing (FF4,811).
11. ACCOUNTS PAYABLE
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
12/31/95 12/31/94 VARIATION VARIATION IN %
-------- -------- --------- --------------
<S> <C> <C> <C> <C>
Trade accounts
payable FF 56,056 FF 76,156 (FF 20,100) -26%
Accrued accounts
payable 2,122 2,135 (13) -1
--------- ------------ ----------
TOTAL TRADE
ACCOUNTS
PAYABLE FF 58,178 FF 78,291 (FF 20,113) -26%
Trade accounts
payable - Bills
payable FF 42,590
FIXED ASSET
SUPPLIERS FF 18,629 FF 26,934 (FF 8,305) -31%
========= ============ ==========
Fixed asset
suppliers - Bills
payable FF 12,702
</TABLE>
F-42
<PAGE> 46
COMPAGNIE FINANCIERE DU LEMAN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
12. OTHER PAYABLES
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
12/31/95 12/31/94 VARIATION VARIATION IN %
-------- -------- --------- --------------
<S> <C> <C> <C> <C>
Taxes payable FF 2,895 FF 1,407 FF 1,488 106%
Benefits payable 8,671 7,581 1,090 14
Salaries & wages
payable 21,230 18,996 2,234 12
-------- -------- --------
Total taxes,
benefits and
salaries & wages
payable 32,796 27,984 4,812 17
Miscellaneous
payables 1,000 754 246 33
Deferred revenue -
Operating 3,833 4,821 (988) -20
-------- -------- --------
TOTAL
OTHER
PAYABLES FF37,629 FF33,559 FF 4,070 12%
======== ======== ========
</TABLE>
13. SALES
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
12/31/95 12/31/94 VARIATION VARIATION IN %
-------- -------- --------- --------------
<S> <C> <C> <C> <C>
France FF 374,867 FF 300,197 FF74,670 24.9%
% 82.4% 80.6%
Export FF 79,809 FF 72,209 FF 7,600 10.5%
% 17.6% 19.4%
TOTAL FF454,676 FF372,406 FF82,270 22.1%
</TABLE>
14. INCOME TAXES
Deferred income taxes reflect the impact of temporary differences between the
amount of assets and liabilities reported for financial reporting purposes and
such amounts as measured in accordance with tax laws.
F-43
<PAGE> 47
COMPAGNIE FINANCIERE DU LEMAN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS OF FRENCH FRANCS, UNLESS OTHERWISE NOTED)
14. INCOME TAXES - CONCLUDED
A reconciliation of differences between the statutory French income tax and the
Group's effective income tax follows:
<TABLE>
<CAPTION>
BALANCE AT
12/31/95
--------
<S> <C>
Group's net income before tax FF 9,424
=========
Statutory income tax (rate: 36.67%) (FF 3,455)
Permanent differences - Tax impact:
- - Goodwill depreciation (1,496)
- - Non-tax deductible expenses (87)
- - Tax on capital gains 3
- - Tax credit 9
- - Impact of statutory tax rate increase (36.67% - 33.33%) (1,600)
---------
GROUP'S INCOME TAX (FF 6,626)
=========
</TABLE>
15. EFFECT ON PROFIT (LOSS) ATTRIBUTABLE TO SHAREHOLDERS OF DIFFERENCES BETWEEN
FRENCH AND US GAAP
<TABLE>
<CAPTION>
BALANCE AT
12/31/95
--------
<S> <C>
Loss attributable to shareholders as reported under French GAAP (FF 1,420)
US GAAP adjustments:
- - Depreciation on fixed assets 10,877
- - Overheads allocation to inventory and impact of fixed assets depreciation on
inventory (523)
- - Provisions for litigation (700)
- - Pension liability (349)
- - Deferred taxation on US GAAP adjustments (5,087)
---------
PROFIT ATTRIBUTABLE TO SHAREHOLDERS AS REPORTED UNDER
US GAAP FF 2,798
=========
</TABLE>
16. OTHER ITEMS
MISCELLANEOUS COMMITMENTS:
All of the bank loans (FF136,000) are the object of guaranties by equipment
collateral.
Commitment to repurchase a lease contract on behalf of a subcontractor: rent
remaining at 12/31/95: FF2,741
Headcount: 663 employees
F-44
<PAGE> 48
AUTOCAM CORPORATION
PRO FORMA COMBINING FINANCIAL INFORMATION
Effective October 1, 1998, Autocam Corporation (the "Company"), through its
wholly-owned subsidiary, Autocam France SARL, a French limited liability
company, acquired the rights to all the outstanding common shares of Compagnie
Financiere du Leman SA ("CFL"), a French holding corporation, which owns all of
the equity interest of Frank & Pignard SA, a French corporation ("F&P") for 300
million French Francs ("FF"). The associated Stock Purchase Agreement, dated
October 1, 1998, is incorporated by reference to Exhibit 2.1 of the Company's
Form 8-K, filed October 14, 1998.
The following unaudited pro forma combining balance sheet as of September 30,
1998 is based upon the historical consolidated financial statements of the
Company and the consolidated financial statements of CFL as of that date, after
giving effect to the acquisition as if such transaction had occurred on
September 30, 1998. The following unaudited pro forma combining statements of
operations for the three months ended September 30, 1998 and for the year ended
June 30, 1998 are based upon the historical consolidated financial statements of
the Company and consolidated financial statements of CFL for those periods,
after giving effect to the acquisition as if such transaction had occurred on
July 1, 1997.
The pro forma combining financial statements may not be indicative of the
results that actually would have been attained if the acquisition had occurred
on the dates indicated or which may be attained in the future.
The pro forma combining adjustments are described in the accompanying notes to
the pro forma combining financial statements. The pro forma combining financial
statements should be read in conjunction with the notes thereto and the
consolidated financial statements of the Company included in its Annual Report
on Form 10-K for the year ended June 30, 1998 and Quarterly Report on Form 10-Q
for the three months ended September 30, 1998, and the consolidated financial
statements of CFL presented elsewhere in this Amendment to Current Report on
Form 8-K.
F-45
<PAGE> 49
AUTOCAM CORPORATION
UNAUDITED PRO FORMA COMBINING BALANCE SHEET
SEPTEMBER 30, 1998
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
THE COMPANY PRO FORMA PRO FORMA
(1) CFL (2) ADJUSTMENTS (3) COMBINED
--- ------- --------------- --------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 1,334 $ 1,230 $ 2,564
Accounts receivable, net 12,912 30,708 43,620
Inventories, net 6,876 9,093 15,969
Prepaid expenses and other current assets 1,517 1,079 2,596
-------- --------
Total current assets 22,639 42,110 64,749
Property, plant and equipment, net 66,789 43,201 $ 23,187 133,177
Restricted cash and equivalents 4,240 4,240
Goodwill and other intangible assets, net 13,894 8,522 9,941 32,357
Other long-term assets 9,807 797 (234) 10,370
-------- -------- -------- --------
TOTAL ASSETS $117,369 $ 94,630 $ 32,894 $244,893
======== ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term obligations $ 894 $ 894
Accounts payable 7,402 $ 18,999 26,401
Accrued liabilities 3,570 8,702 $ 2,608 14,880
-------- -------- -------- --------
Total current liabilities 11,866 27,701 2,608 42,175
Long-term obligations, net of current
maturities 46,752 24,347 54,299 125,398
Deferred taxes 10,799 4,701 9,506 25,006
Deferred credits and other 507 4,352 4,859
Minority interest 2,520 10 2,530
Shareholders' equity 44,925 33,519 (33,519) 44,925
-------- -------- -------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $117,369 $ 94,630 $ 32,894 $244,893
======== ======== ======== ========
</TABLE>
See notes to unaudited pro forma combining financial statements.
F-46
<PAGE> 50
AUTOCAM CORPORATION
UNAUDITED PRO FORMA COMBINING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
THE COMPANY PRO FORMA PRO FORMA
(1) CFL (2) ADJUSTMENTS NOTES COMBINED
--- ------- ----------- ----- --------
<S> <C> <C> <C> <C> <C>
Sales $ 24,020 $19,691 $ 43,711
Cost of sales 20,579 18,669 ($2,254) (4) 36,994
-------- -------- ------- --------
Gross profit 3,441 1,022 2,254 6,717
Selling, general and administrative 1,742 1,694 3,436
Other operating expenses 52 52
-------- -------- ------- --------
Income (loss) from operations 1,647 (672) 2,254 3,229
Interest and other expense, net 790 278 944 (5) 2,012
Minority interest in net income 153 153
-------- -------- ------- --------
Income (loss) before tax provision (benefit)
704 (950) 1,310 1,064
Tax provision (benefit) 526 (334) 537 (6) 729
-------- -------- ------- --------
NET INCOME (LOSS) $ 178 ($ 616) $ 773 $ 335
======== ======== ======= ========
BASIC NET INCOME PER SHARE (7) $ 0.05
DILUTED NET INCOME PER SHARE (7) $ 0.05
Basic weighted average shares outstanding (7)
6,410
Diluted weighted average shares outstanding (7) 6,611
</TABLE>
See notes to unaudited pro forma combining financial statements.
F-47
<PAGE> 51
AUTOCAM CORPORATION
UNAUDITED PRO FORMA COMBINING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1998
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
THE PRO FORMA PRO FORMA
COMPANY (1) CFL (2) ADJUSTMENTS NOTES COMBINED
----------- ------- ----------- ----- --------
<S> <C> <C> <C> <C> <C>
Sales $ 90,361 $ 81,734 $ 172,095
Cost of sales 69,436 70,415 ($8,174) (4) 131,677
-------- -------- ------- ---------
Gross profit 20,925 11,319 8,174 40,418
Selling, general and administrative 5,879 5,817 11,696
Other operating expenses 207 207
-------- -------- ------- ---------
Income from operations 14,839 5,502 8,174 28,515
Interest and other expense, net 2,719 1,558 3,622 (5) 7,899
Minority interest in net income 166 166
-------- -------- ------- ---------
Income before tax provision 11,954 3,944 4,552 20,450
Tax provision 4,213 2,538 1,866 (6) 8,617
-------- -------- ------- ---------
NET INCOME $ 7,741 $ 1,406 $2,686 $ 11,833
======== ======== ======= =========
BASIC NET INCOME PER SHARE (7) $ 1.87
DILUTED NET INCOME PER SHARE (7) $ 1.80
Basic weighted average shares outstanding (7) 6,342
Diluted weighted average shares outstanding (7) 6,558
</TABLE>
See notes to unaudited pro forma combining financial statements.
F-48
<PAGE> 52
AUTOCAM CORPORATION
NOTES TO UNAUDITED PRO FORMA COMBINING FINANCIAL
INFORMATION FOR THE THREE MONTHS AND YEAR ENDED SEPTEMBER 30
AND JUNE 30, 1998, RESPECTIVELY
1. Historical Balance Sheet as of September 30, 1998 and the historical
Statements of Operations for the three months ended September 30, 1998 and
the year ended June 30, 1998 of the Company.
2. Historical Balance Sheet as of September 30, 1998 and the historical
Statements of Operations for the three months ended September 30, 1998 and
the year ended June 30, 1998 of CFL.
3. Represents the unaudited pro forma combining balance sheet adjustments
required to account for the acquisition as a purchase, including the
following:
- To eliminate certain property, plant and equipment not purchased.
- To adjust equipment acquired to its estimated fair market value.
- To record goodwill as the excess of the acquisition cost over the fair
value of the net assets acquired.
- To record a tax liability assumed related to the spin-off of real estate
not purchased by the Company.
- To record financing transactions related to the acquisition. Financing
included a FF281 million five-year term note and FF19 million borrowed
against the Company's revolving credit note, both of which are classified
as long-term obligations.
- To record $2,000,000 representing various acquisition costs (e.g.,
professional services and investment banking fees).
- To record the deferred tax liability assumed.
- To adjust the pension liability to its present value.
- To eliminate CFL's historical shareholders' equity.
4. Represents the unaudited pro forma combining statements of operations
adjustments required to account for the acquisition as a purchase,
including the following:
- To adjust depreciation expense reflecting the differences in the fair
market value of the property, plant and equipment purchased and CFL's
depreciable base of such assets. o To record goodwill amortization
related to this acquisition and to amortize such over forty years on a
straight-line basis.
5. Represents interest expense associated with the financing of the
acquisition.
6. To adjust the tax provision for the effects of the pro forma adjustments.
7. All share and per share amounts have been adjusted to reflect a 5% share
dividend issued on November 16, 1998 to shareholders of record on November
2, 1998.
F-49
<PAGE> 53
Exhibit Index
-------------
<TABLE>
<CAPTION>
<S> <C>
Exhibit No. Description
- ----------- -----------
23 Consent of PricewaterhouseCoopers
</TABLE>
<PAGE> 1
EXHIBIT 23
==========
[PricewaterhouseCoopers Letterhead]
INDEPENDENT AUDITOR'S CONSENT
AUTOCAM CORPORATION
Grand Rapids, Michigan
We consent to the incorporation of our report, dated December 8, 1998, relating
to our audit of the consolidated financial statements of Compagnie Financiere
du Leman for the years ended December 31, 1997, 1996 and 1995 on Form 8-K for
Autocam.
Lyons, France Fiduciaire Continentale Lyon
December 14, 1998 Member of PricewaterhouseCoopers
/s/ Vidal Martin
Partner
E-1
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