Securities and Exchange Commission
Washington, D.C. 20549
Form 8-K/A
Amendment No. 1 to Current Report
Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): October 25, 1996
BREED Technologies, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware 1-11474 22-2767118
(State or Other Jurisdiction Commission File IRS Employee
of Incorporation Number) Identification No.
5300 Old Tampa Highway, Lakeland, Florida 33811
(Address of Principal Executive Offices) (Zip Code)
941-668-6000
(Registrant's Telephone Number, Including Area Code)
<PAGE>
On November 9, 1996, the Company filed a Current Report on Form 8-K dated
October 25, 1996 with the Securities and Exchange Commission (the Commission)
which described the Company's acquisition of certain assets and the assumption
of certain liabilities of the "North American Steering Wheels Operation" of
United Technologies and 100% of the outstanding shares of United Technologies
Automotive Clifford Limited (collectively referred to as United Steering
Systems, Inc. or USS). That report indicated that the financial statements
required by Rule 3-05 of Regulation S-X and the pro forma financial information
required by Article 11 of Regulation S-X will be filed by the Company in an
amendment to its report on Form 8-K. This Form 8-K/A files such financial
statements.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
Page
(a)Audited combined financial statements of Steering Wheels Business of
UT Automotive, Inc. (a wholly-owned business unit of United
Technologies Corporation) at October 25, 1996 and for the period from
January 1, 1996 through October 25, 1996, together with the report
thereon issued by Price Waterhouse LLP, independent
auditors............................................................4
(b) Unaudited pro forma financial information of BREED Technologies, Inc.
Unaudited Pro Forma Balance Sheet as of September 30, 1996....20
Unaudited Pro Forma Statement of Earnings for the year ended
June 30, 1996.................................................21
Unaudited Pro Forma Statement of Earnings for the three
months ended September 30, 1996...............................22
(c)Exhibits...................................................24
23---Consent of Price Waterhouse LLP, independent auditors
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Amendment No. 1 to its Current Report on Form
8-K dated October 25, 1996 to be signed on its behalf by the undersigned
thereunto duly authorized.
Date: January 7, 1997 BREED Technologies, Inc.
By: /s/ Edward H. McFadden
Edward H. McFadden
Executive Vice President and
Chief Financial Officer
<PAGE>
Report of Independent Accountants
December 17, 1996
To the Board of Directors and
Stockholders of United Technologies Corporation
In our opinion, the accompanying combined balance sheet and the related combined
statements of income and of cash flows present fairly, in all material respects,
the financial position of the Steering Wheels Business of UT Automotive, Inc. (a
wholly-owned business unit of United Technologies Corporation) at October 25,
1996, and the results of its operations and its cash flows for the period from
January 1, 1996 through October 25, 1996, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
management of UT Automotive, Inc.; our responsibility is to express an opinion
on these financial statements based on our audit. We conducted our audit of
these statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
<PAGE>
Steering Wheels Business
of UT Automotive, Inc.
(A wholly-owned business unit of
United Technlogies, Corporation)
Combined Balance Sheet
(Dollar amounts in thousands)
October 25, 1996
Assets
Current assets
Cash and cash equivalents $ 2,143
Accounts receivable, net 30,256
Inventories 9,350
Unbilled tooling costs 8,425
Other current assets 336
Deferred income taxes 1,512
---------
Total current assets 52,022
---------
Property, plant and equipment, net 16,639
---------
Deferred income taxes 2,939
Other assets 813
Goodwill, net 12,389
---------
$ 84,802
=========
Liabilities and Parent Company Investment
Current liabilities
Accounts payable-trade $ 15,691
Accrued expenses 5,311
UTC affiliate financing 16,893
---------
Total current liabilities 37,895
Other liabilities 2,980
---------
Total liabilities 40,875
---------
Parent company investment 43,927
---------
Commitments and contingencies (Note 12) $ 84,802
=========
See accompanying notes to combined financial statements.
<PAGE>
Steering Wheels Business
of UT Automotive, Inc.
(A wholly-owned business unit of
United Technlogies, Corporation)
Combined Statement of Income
(Dollar amounts in thousands)
For the period from
January 1, 1996
through
October 25, 1996
Sales $ 135,228
Cost of goods sold 123,226
-----------
Gross profit 12,002
Design and engineering 3,945
Selling, general and administrative expenses 4,581
-----------
3,476
Other income (expense)
Royalty income 330
Other income (expense) (89)
Interest expense (741)
-----------
Income before provision for income taxes 2,976
Provision for income taxes 2,063
-----------
Net income $ 913
===========
See accompanying notes to combined financial statements.
<PAGE>
Steering Wheels Business
of UT Automotive, Inc.
(A wholly-owned business unit of
United Technlogies, Corporation)
Combined Statement of Cash Flows
(Dollar amounts in thousands)
For the period from
January 1, 1996
through
October 25, 1996
Cash flows from operating activities
Net income $ 913
Adjustments to reconcile net income
to net cash used for by operating activities
Depreciation and amortization 4,696
Loss on disposal of property, plant and equipment 515
Changes in assets and liabilities
Accounts receivable, net (9,553)
Inventories 553
Unbilled tooling costs and other current assets (1,614)
Deferred income taxes (1,285)
Accounts payable - trade (2,696)
Accrued expenses 251
Other assets 1,618
Other liabilities 1,573
-----------
Net cash used for operating activities (5,029)
-----------
Cash flows from investing activities
Additions to property, plant and equipment (3,142)
-----------
Net cash used for investing activities (3,142)
-----------
Cash flows from financing activities
Change in Parent company investment 4,458
Net change in UTC affiliate financing 5,818
----------
Net cash flows from financing activities 10,276
----------
Impact of exchange rate changes on cash 25
----------
Net increase in cash and cash equivalents 2,130
Cash and cash equivalents at beginning of period 13
----------
Cash and cash equivalents at end of period $ 2,143
==========
See accompanying notes to combined financial statements.
<PAGE>
1. Basis of Presentation and Organization
Pursuant to a Purchase Agreement dated as of September 20, 1996
("Agreement"), among wholly-owned subsidiaries of United Technologies
Corporation ("UTC"), including UT Automotive, Inc. ("UTA"), United
Technologies Automotive Systems, Inc., United Technologies Automotive
Systems de Mexico S.A. de C.V., IPCO, Inc. (collectively, the "UTC
entities") and Breed Technologies Inc. ("Breed"), the operations
comprising the worldwide Steering Wheels Business of the UTC entities
(the "Business") were sold to Breed effective October 25, 1996.
Under the terms of the Agreement, substantially all of the assets and
liabilities of the Business were sold with the exception of the
following:
- All cash, deposits, bank accounts and other cash equivalents;
- Prepaid insurance;
- All related party receivables and payables between
the Business and affiliates;
- Existing assets and liabilities related to providing certain
retirement benefits, welfare benefits, deferred compensation or other
employee benefits for employees of the North American operations;
- Pension assets and liabilities relating to North American operations;
- Land, building and certain equipment at the Niles, Michigan facility
- Federal and state income tax and franchise tax assets and liabilities
relating to the period prior to October 25, 1996; and
- Liabilities, including environmental reserves, relating to the Niles,
Michigan property to be retained by the UTC entities.
Throughout the period covered by the financial statements, the Business
was conducted and accounted for as an operating division of UTA. The
Business is comprised of parts of several legal entities. Historically,
separate financial statements were not prepared for the Business. These
financial statements were prepared to comply with the rules and
regulations of the Securities and Exchange Commission. These combined
financial statements were derived from the historical accounting records
of the UTC entities, and do not reflect the impact of the transaction
discussed above.
The Combined Statement of Income includes all revenues and costs
attributable to the Business, including allocation of costs for
facilities, functions and services used by the Business at sites shared
with other UTA operations, and costs for certain functions and services
performed by centralized UTA and UTC organizations either directly or
indirectly for the Business. All of the allocations and estimates in the
financial statements are based on assumptions that UTC management
believes are reasonable under the circumstances. However, these
allocations are not necessarily indicative of the costs that would have
resulted if the Business had been operated as a separate entity.
The Business is engaged in developing, manufacturing, marketing and
distributing automotive and industrial steering wheels, air bag covers,
horn pads and related molded products to original equipment automotive
manufacturers and their suppliers in North America and in Europe.
<PAGE>
2. Summary of Significant Accounting Policies
Basis of combination
The combined financial statements include the accounts of the various
units comprising the Business. In Europe, the operations of the Business
are conducted through United Technologies Automotive Clifford Limited
("UTAC"), a U.K. corporation with two manufacturing and assembly
facilities in Birmingham, England. In North America, operations have
been conducted at separate facilities for the Business in Niles,
Michigan and Grabill, Indiana and at facilities in Monterrey, Mexico and
Detroit, Michigan that are shared with other UTA businesses. All
material transactions among the units within the Business have been
eliminated. Sales from the Business to other UTC entities are not
significant.
Revenue recognition
Revenue is recognized upon shipment of the product to the customer.
Inventories
Inventories are valued at the lower of cost or market with cost being
determined on the first-in, first-out (FIFO) basis. Included in
inventory are direct material, direct labor and allocation of certain
manufacturing overhead costs.
Cash equivalents
Cash equivalents are comprised of highly-liquid investment instruments
purchased with a maturity of three months or less.
Property, plant and equipment
Property, plant and equipment are stated at cost. Expenditures for
additions and improvements are capitalized, and costs for repairs and
maintenance are charged to operations as incurred. For federal income
tax purposes, depreciation is computed using accelerated and
straight-line methods. For financial reporting purposes, depreciation is
computed using the straight-line method over the following estimated
useful lives:
Buildings and improvements 20-40
Machinery, tooling and equipment 3-12
Furniture and fixtures 3-12
Depreciation expense approximated $4,379 for the period from January 1,
1996 through October 25, 1996.
In accordance with Statement of Financial Accounting Standards No. 121,
the Business estimates the future undiscounted cash flows of the
operations to which the property, plant and equipment relates to ensure
that the carrying value has not been impaired. If the undiscounted
pre-tax cash flows are less than the carrying value of the assets, an
impairment loss is recognized for the difference between the estimated
fair value and the carrying value. Other than as provided in the Niles
plant closure costs discussed in Note 10, management believes no such
impairment exists at October 25, 1996.
2. Summary of Significant Accounting Policies (continued)
Income taxes
Other than UTAC, which files a separate tax return, the taxable income
or loss of the various units comprising the Business were included in
the tax return of the UTC entity of which they were a part. As such,
separate income tax returns were not prepared or filed for the Business.
Income tax expense and other tax related information in these combined
financial statements has been calculated substantially as if the
Business were a separate entity. The calculation of tax provisions and
deferred taxes necessarily required certain assumptions, allocations and
estimates which management believes are reasonable to accurately reflect
tax reporting for the Business as a stand-alone entity.
Deferred taxes are provided to give recognition to the effect of
expected future tax consequences of temporary differences between the
carrying amounts for financial reporting purposes and the tax basis of
assets and liabilities. Current tax liabilities are considered settled
through the Parent company investment account.
Foreign currency translation
The U.K. operations utilize the local currency as the functional
currency. Foreign currency assets and liabilities are translated into
U.S. dollars at the exchange rates in effect at the balance sheet date.
Results of operations are translated at average exchange rates during
the period for revenues and expenses. Translation gains and losses
resulting from fluctuations in the exchange rates are accumulated as a
separate component of equity.
The Mexican operations utilize the U.S. dollar as the functional
currency. Gains and losses resulting from translation of assets and
liabilities were immaterial during the period and are included in
operating results for the period.
Goodwill
Goodwill is net of $2,600 of amortization as of October 25, 1996 and is
being amortized on a straight-line basis over 40 years. Amortization
expense was approximately $313 for the period from January 1, 1996 to
October 25, 1996. On a periodic basis, the Business estimates the future
pre-tax cash flows (undiscounted and without interest charges) of the
operations to which goodwill relates to ensure that the carrying value
of such goodwill has not been impaired. On the basis of this analysis,
management believes no such impairment exists at October 25, 1996. If
the undiscounted pre-tax cash flows are less than the carrying value of
the assets, an impairment loss is recognized for the difference between
the estimated fair value and the carrying value.
Unbilled tooling costs
Unbilled tooling costs represent costs incurred on tooling projects in
process which have not yet been billed to customers. Tooling amounts
billed to customers are included in accounts receivable.
<PAGE>
2. Summary of Significant Accounting Policies (continued)
Financial instruments
The carrying amount of the Business' financial instruments, which
includes cash and cash equivalents, accounts receivable, accounts
payable and UTC affiliate financing, approximates their fair market
value at October 25, 1996.
Use of 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 disclosure 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.
3. Related Party Transactions
Corporate services
The combined financial statements include significant transactions with
other UTA and UTC organizations involving functions and services that
were provided to the Business. These services include information
systems support, certain centralized accounting functions, legal
services, benefits administration, quality control, executive office and
facilities. The costs of these functions and services allocated to the
Business approximated $1,400 for the period from January 1, 1996 through
October 25, 1996.
In addition to the services described above, the Business participates
in UTC developed and administered insurance and employee benefit
programs, including group medical, general and product liability and
other standard liability coverage. Costs allocated to the Business
relating to these programs for the period from January 1, 1996 through
October 25, 1996 approximated $2,650. Employee benefit programs are
discussed in more detail in Note 11.
Allocations and charges for the programs described above have been made
based on historical or anticipated experience for the Business or based
on percentages of total costs for the services provided using methods
that UTC management believes are reasonable. Such charges and
allocations are not necessarily indicative of the costs that would have
been incurred if the Business had been a separate entity.
<PAGE>
3. Related Party Transactions (continued)
Transition services
In conjunction with the sale of the Business, transitional services
agreements have been executed between UTC entities and Breed which
provide for continuation of certain computer and administrative services
for a limited period of time. In addition, transitional lease agreements
have been executed with respect to certain administrative office space,
the Niles, Michigan and Monterrey, Mexico facilities, and Niles
employees. These agreements expire in 1997 and are generally cancelable
by Breed upon 30 days notice.
Cash management
The North American operations of the Business participate in UTC's
centralized cash management program with respect to intercompany sales
and accounts receivable, accounts payable and payroll/employee benefits.
Under this program, accounts receivable are collected and cash is
invested centrally. Additionally, disbursements are funded centrally. As
a result, the Business does not report a cash balance, other than petty
cash and cash balances of $2,141 relating to UTAC. The cash activities
of the North American operations of the Business are reflected in the
Parent company investment balance. Historically, the intercompany
receivables and payables have been considered settled in the normal
course of business and are not interest bearing. The net cumulative,
interdivisional balances are included in the combined balance sheets as
part of Parent company investment. A reconciliation of the Parent
company investment account activity for the period is as follows:
Balance, December 31, 1995 $ 38,484
Net income 913
Cumulative translation adjustment 72
Net intercompany transactions 4,458
---------
Balance,October 25, 1996 $ 43,927
=========
Interest
No interest is charged to the North American operations of the
Business relating to the Parent company investment. Interest
expense shown in the accompanying combined statement of income
relates only to the operations of UTAC (See Note 8). Interest is
considered settled on a current basis through the Parent
company investment account.
Investment in joint venture
The Business has a 31% equity interest in Hankook-Sheller Chusik Hoesa,
a Korean Corporation ("Hankook-Sheller"), whose primary business
operations are the manufacture and sale of steering wheels in Korea. The
Business' investment in Hankook-Sheller is accounted for using the
equity method. As a result of cumulative losses, the investment has been
reduced to zero at October 25, 1996 (which approximates the net equity
of Hankook-Sheller at October 25, 1996). The Business also has a
technical assistance agreement with Hankook-Sheller for which it
receives a royalty. Royalty income from Hankook-Sheller aggregated $330
for the period from January 1, 1996 to October 25, 1996.
<PAGE>
4. Accounts Receivable
Accounts receivable is comprised of the following:
October 25, 1996
Accounts receivable - trade $ 29,082
Tooling receivables 2,354
Miscellaneous receivables 376
Allowances (1,556)
-------------
$ 30,256
=============
The Business principally sells to major automotive companies. The
Business performs ongoing credit evaluations and generally does not
require collateral.
During the period from January 1, 1996 through October 25, 1996, the
percentage of sales to total sales for significant customers was as
follows: Ford Motor Company (43%); Chrysler Corporation (18%); TRW
(13%); and Rover (9%).
5. Inventories
October 25, 1996
Raw materials $ 3,768
Work in process 2,964
Finished goods 2,618
-------------
$ 9,350
=============
6. Property, Plant and Equipment October 25, 1996
Land $ 198
Buildings and improvements 9,615
Machinery, tooling and equipment 49,473
Construction in progress 1,228
-------------
60,514
Less- accumulated depreciation and reserves (43,875)
-------------
$ 16,639
=============
7. Accrued Expenses
October 25, 1996
Payroll and employee related $ 2,176
Property and other taxes 760
Niles closure costs-current portion 1,598
Other 777
-------------
$ 5,311
=============
8. UTC Affiliate Financing
UTAC has a revolving line of credit with and participates in a
world-wide cash netting system with UTC affiliates. The revolving line
of credit payable approximated $16,893 at October 25, 1996 and has been
shown as UTC affiliate financing in the accompanying Combined balance
sheet. Interest is charged on outstanding borrowings utilizing a
LIBOR-based rate which was 6.25% at October 25, 1996. Interest expense
relating to this facility approximated $741 for the period from January
1, 1996 through October 25, 1996 and is settled monthly. The principal
amount has been paid subsequent to October 25, 1996.
9. Income Taxes
Pre-tax income from North American operations approximated $4,899 and
pre-tax loss from UTAC operations approximated $1,923 for the period
from January 1, 1996 through October 25, 1996. The provision for income
taxes comprises the following:
Period ended
October 25, 1996
Current tax expense
U.S. federal $ 3,133
U.S. state and local 215
-------------
3,348
-------------
Deferred tax expense
U.S. federal (1,285)
-------------
Provision for income taxes $ 2,063
=============
<PAGE>
9. Income Taxes (continued)
A reconciliation of income taxes determined using the U.S. federal
statutory rate of 35% to actual income taxes provided is as follows:
Period ended
October 25, 1996
Income before provision for income taxes $ 2,976
-------------
Taxes at U.S. federal statutory rate 1,042
Foreign losses for which no benefit has been recorded 673
Non-deductible items 126
State income taxes 222
-------------
$ 2,063
=============
Deferred tax assets are comprised of the following:
October 25, 1996
Inventory valuation $ 482
Depreciation and fixed asset related reserves 1,938
Plant closure reserves 788
Environmental reserves 702
Other 541
-------------
$ 4,451
=============
Net operating loss carryforwards relating to UTAC were approximately
$4,900 at October 25, 1996. A valuation allowance has been provided with
respect to the entire amount of the tax benefits relating to the UTAC
loss carryforwards as management does not believe that the benefits will
be realized.
10. Niles Plant Closure Charges
During 1995, the Business accrued approximately $3,800 for expected
costs of closure of the Niles, Michigan facility. During the period from
January 1, 1996 through October 25, 1996, $138 of the reserve was
utilized and an additional $1,200 was recorded based on management's
revised estimates of the recoverability of fixed assets and facility
carrying costs. The reserve amounts included approximately $2,424 to
reduce fixed assets to their estimated recoverable values; $1,108 for
severance and other employee-related costs; and $1,468 for carrying and
other costs prior to sale of the facility. As of October 25, 1996,
$1,598 was included in current accrued liabilities and $853 was included
in long-term accrued liabilities in the combined balance sheet. Amounts
relating to fixed asset reserves have been reflected as a reduction of
property, plant and equipment at October 25, 1996.
<PAGE>
11. Employee Benefits
Pension
UTC sponsors various pension arrangements covering substantially all
domestic and foreign employees of the Business. Plan benefits are
generally formula based with recognition of years of service and
compensation levels. In accordance with the terms of the Agreement,
Breed will not assume obligations with respect to UTC United States
pension plans. For purposes of the combined financial statements, the
Business is considered to be a participant in multiemployer plans for
U.S. operations and a single employer plan with respect to UTAC. As
such, net pension expense has been recognized for costs of the U.S.
plans allocated to the Business. Such costs approximated $78 for the
period from January 1, 1996 through October 25, 1996 and are considered
settled as accrued through the Parent company investment account.
The UTAC plan is a defined benefit plan requiring employee
contributions. Investments are held by insurance companies. A discount
rate of 8.5% and a salary increase rate of 5.5% were utilized in the
valuation. Net periodic pension cost for the fiscal year covering the
period from December 1, 1995 through November 30, 1996 and the funded
status at November 30, 1995 are as follows:
Funded Status at November 30, 1995
Accumulated benefit obligation $ 9,583
Impact of projected future compensation levels 435
-----------
Projected benefit obligation 10,018
Market value of plan assets 9,701
-----------
(317)
Unrecognized net transition asset (366)
Unrecognized net loss 413
-----------
Accrued pension expense $ (270)
===========
Net Periodic Pension Cost
Service cost $ 460
Interest cost 866
Expected return plan assets (924)
Amortization of net transition asset (47)
Estimated employee contributions (252)
-----------
Net periodic pension cost $ 103
===========
11. Employee Benefits (continued)
Postretirement benefits other than pensions
UTC sponsors defined benefit postretirement plans that provide medical,
dental and life insurance benefits for certain eligible retirees and
dependents. For purposes of these combined financial statements, the
Business is considered to have participated in a multiemployer
postretirement plan as defined in Statements of Financial Accounting
Standards No. 106. For the period from January 1, 1996 through October
25, 1995, expenses related to these programs charged to the Business
approximated $319. These charges are settled currently through the
Parent company investment account.
12. Commitments and Contingencies
Leases
During 1995, UTAC entered into two operating leases for certain tooling
relating to Rover programs with quarterly payments approximating $60,000
through 1998. In conjunction with these agreements, UTAC entered into
two tooling usage contracts with Rover, whereby Rover provides quarterly
payments to UTAC in amounts equal to the payments on the leases noted
above. In addition, the Business is party to leases for certain
warehousing space.
Rent expense was $198 and $110 for the tooling and warehouse space,
respectively, for the period from January 1, 1996 through October 25,
1996. At October 25, 1996, minimum lease commitments on long-term leases
are as follows: 1996 (remaining 2 months)- $73; 1997- $310; and 1998-
$181.
Environmental
The operations of the Business are subject to environmental regulation
by federal, state and local authorities in the United States and
regulatory authorities with jurisdiction over its foreign operations. It
is the policy of the Business to accrue environmental investigatory and
remediation costs when it is probable that a liability has been incurred
and the amount of the loss can be reasonably estimated. Where no amount
within a range of estimates is more likely, the minimum is accrued. The
measurement of the liability is based on an evaluation of currently
available facts with respect to each individual site and takes into
account factors such as existing technology, presently enacted laws and
regulations, and prior experience in remediation of contaminated sites.
As of October 25, 1996, long-term accrued liabilities includes $2,006,
including approximately $1,500 accrued during the period from January 1,
1996 through October 25, 1996, relating to estimated environmental
remediation costs. While management cannot predict the total costs of
these actions with certainty, based on known information management does
not believe the ultimate resolution of these matters will have a
material adverse impact on cash flows, results of operations or
financial position of the Business.
General
In addition to environmental exposures, there are pending actions
incident to the normal course of business. While it is possible that the
outcome of these matters may differ from the recorded liability,
management believes that the resolution of these matters will not have a
material adverse effect on the cash flows, results of operations or
financial position of the Business.
13. Geographic Information
Sales and operating loss relating to UTAC United Kingdom activities for
the period from January 1, 1996 through October 25, 1996 approximated
$32,376 and $1,182, respectively. Identifiable assets relating to UTAC
were approximately $16,800 at October 25, 1996.
<PAGE>
BREED Technologies, Inc.
Unaudited Pro Forma Condensed Combined Financial Statements
On October 25, 1996, BREED Technologies, Inc. (the Company) acquired the North
American Steering Wheels Operations of United Technologies and 100% of the
outstanding shares of United Technologies Automotive Clifford Limited
(collectively United Steering Systems, Inc. or USS), as reported in the
Company's Form 8-K filed on November 9, 1996. The aggregate purchase price was
$159,500,000, including assumed liabilities of $36,418,000, and is subject to
adjustments as provided in the agreements. The funds used by the Company to pay
the aggregate purchase price were obtained from borrowings under the Company's
Revolving Credit Agreements.
The accompanying unaudited pro forma condensed combined financial statements
present the condensed historical financial statements of the Company and USS,
pro forma adjustments and the pro forma results under the purchase method of
accounting. The historical financial information of the Company was prepared
from audited and unaudited financial statements previously filed with the
Commission. The historical combined information for USS was prepared from the
unaudited books and records of USS for the year ended June 30, 1996, and the
unaudited books and records of USS for the three-month period ended September
30, 1996.
The unaudited pro forma condensed combined balance sheet is based upon the
historical financial position of the Company at September 30, 1996 and USS at
October 25, 1996, and reflects pro forma acquisition adjustments as if the
acquisition had occurred on September 30, 1996. The unaudited pro forma
condensed combined statement of earnings for the year ended June 30, 1996 is
based upon the historical statement of earnings of the Company for its year
ended June 30, 1996 and the historical statement of earnings of the USS for the
year ended June 30, 1996. The unaudited pro forma condensed combined statement
of earnings for the three months ended September 30, 1996 is based upon the
historical statement of earnings of the Company and USS for the three-month
period ended September 30, 1996. The unaudited pro forma condensed combined
statements of earnings for the year ended June 30, 1996 and for the three months
ended September 30, 1996 give effect to the acquisition as though it had
occurred on July 1, 1995 and July 1, 1996, respectively.
The unaudited pro forma condensed combined financial statements should be read
in connection with the Company's Annual Report on Form 10-K for the year ended
June 30, 1996. The pro forma information does not purport to be indicative of
the results that would have occurred if the acquisition had been consummated on
the dates indicated, nor of the results that may be obtained in the future.
<PAGE>
<TABLE>
BREED Technologies, Inc.
Unaudited Pro Forma Condensed Combined Balance Sheet
(In thousands)
September 30, October 25,
1996 1996 Adjustments
------------- ------------- for assets
BREED United and Liabilities
Technologies Steering Not Acquired Pro Forma Pro Forma
(as reported) Systems, Inc. (Note 6) Adjustments Combined
<S> <C> <C> <C> <C> <C>
------------ ------------ --------------- ----------- ----------
Assets
Current assets:
Cash and short-term investments $ 11,636 $ 2,143 $ 0 $ 0 $ 13,779
Accounts receivable 171,097 38,681 (782) 0 208,996
Inventories 83,831 9,350 0 0 93,181
Other 22,424 1,848 (1,512) 0 22,760
----------- ----------- ----------- ---------- ----------
Total current assets 288,988 52,022 (2,294) 0 338,716
Property, plant and equipment, net 303,577 16,639 (998) 17,285 (2) 336,503
Other assets 58,703 16,141 (15,328) 76,033 (2) 135,549
=========== ============ =============== =============== ===============
Total assets $651,268 $84,802 $(18,620) $ 93,318 $810,768
=========== ============= =============== ============= ===============
Liabilities and stockholders' equity
Current liabilities:
Notes payable and current maturities
of long-term debt $112,121 $ 0 $ 0 $ 0 $112,121
Notes payable to affiliates 0 16,893 0 (16,893) (7) 0
Accounts payable 107,631 15,691 0 0 123,322
Other 36,811 5,311 (1,598) 0 40,524
---------- ------------ --------- ------------- ----------------
Total current liabilities 256,563 37,895 (1,598) (16,893) 275,967
Long-term debt 82,318 0 0 123,082 (2) 222,293
16,893
Other long-term liabilities 31,524 2,980 (2,859) 0 31,645
---------- ------------ ------------ ------------ ----------------
Total liabilities 370,405 40,875 (4,457) 123,082 529,905
---------- ------------ ------------ ------------ ----------------
Parent company investment 0 43,927 (14,163) (29,764) (2) 0
Stockholders' equity:
Common stock 316 0 0 0 316
Additional paid-in capital 76,668 0 0 0 76,668
Retained earnings 207,613 0 0 0 207,613
Other (3,734) 0 0 0 (3,734)
------------ ---------- ------------- ------------- ----------------
Total stockholders' equity 280,863 0 0 0 280,863
============ ========== ============= ============= ================
Total liabilities and stockholders'
equity $651,268 $84,802 $(18,620) $ 93,318 $810,768
============ ========== ============= ============= ================
See notes to unaudited pro forma condensed combined financial statements.
</TABLE>
<PAGE>
<TABLE>
BREED Technologies, Inc.
Unaudited Pro Forma Condensed Combined Statement of Earnings
Year ended June 30, 1996
(In thousands, except earnings per share)
BREED Technologies, Inc.
-----------------------------------------------
Pro Forma
Adjustments for
BREED Previous BREED United
Technologies Acquisitions Technologies Steering Pro Forma Pro Forma
(as reported) (Note 1) (as adjusted) Systems, Inc. Adjustments Combined
---------------- ----------------- -------------------------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Net sales $431,689 $379,539 $811,228 $152,324 $ 0 $963,552
Cost of sales 282,715 339,111 621,826 138,870 0 760,696
Operating expenses 56,160 27,558 83,718 8,644 1,900 (3) 95,990
1,728 (3)
-------- ----------- -------- --------- ----------- -------
Operating income 92,814 12,870 105,684 4,810 (3,628) 106,866
Other income (expense), net 5,524 (26,987) (21,463) (2,886) (9,098) (4) (33,447)
-------- ----------- -------- --------- ----------- -------
Earnings before income taxes 98,338 (14,117) 84,221 1,924 (12,726) 73,419
Income taxes 35,300 (2,208) 33,092 1,582 (4,581) (5) 30,093
======== =========== ======== ========= =========== =======
Net earnings $ 63,038 $ (11,909) $ 51,129 $ 342 $ (8,145) $43,326
======== =========== ======= ========= =========== =======
Earnings per share $ 2.00 $ 1.62 $ 1.37
======== ======= =======
Average shares outstanding 31,550 31,550 31,550
======== ======== =======
See notes to unaudited pro forma condensed combined financial statements.
</TABLE>
<PAGE>
<TABLE>
BREED Technologies, Inc.
Unaudited Pro Forma Condensed Combined Statement of Earnings
Three months ended September 30, 1996
(In thousands, except earnings per share)
BREED United
Technologies Steering Pro Forma Pro Forma
(as reported) Systems, Inc. Adjustments Combined
----------------- ---------------- ----------------- ----------
<S> <C> <C> <C> <C>
Net sales $158,671 $38,104 $ 0 $196,775
Cost of sales 117,023 33,600 0 150,623
Operating expenses 23,438 2,169 475 (3) 26,514
432 (3)
----------------- ---------------- ----------------- -----------
Operating income 18,210 2,335 (907) 19,638
Other income (expense), net (5,064) (480) (2,275) (4) (7,819)
----------------- ---------------- ----------------- ----------
Earnings before income taxes 13,146 1,855 (3,182) 11,831
Income taxes 5,300 982 (1,145) (6) 5,136
================= ================ ================= ========
Net earnings $ 7,846 $ 873 $(2,036) $ 6,683
================= ================ ================= =======
Earnings per share $ .25 $ .21
================= =======
Average shares outstanding 31,628 31,628
================= =======
See notes to unaudited pro forma condensed combined financial statements
</TABLE>
BREED Technologies, Inc.
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
1. The historical condensed statement of earnings of BREED Technologies,
Inc. has been adjusted to reflect the pro forma effects of its previous
acquisitions of MOMO S.p.A. and G. Holding, S.r.1. (collectively MOMO),
Italtest S.r.1. and Force Imaging Technology, Inc. made during the year
ended June 30, 1996 and the acquisition of the automobile industry
supplier business of an affiliated group of Italian companies
(collectively the Gallino Group) made on July 1, 1996. The pro forma
adjustments for the previous acquisitions give effect to such
acquisitions as though they had occurred on July 1, 1995.
2. Represents adjustments to record the preliminary assigned values of
United Steering System, Inc.'s acquired assets and liabilities and to
allocate the excess of the purchase piece over the fair value of the net
assets acquired (goodwill). The allocations are subject to revision after
more detailed analysis and evaluations are completed.
In thousands
Cash purchase price $123,082
Liabilities assumed 36,418
----------------
159,500
Net book value of assets acquired (66,182)
Excess of fair value over the net book
value of property, plant and equipment (17,285)
================
Excess of purchase price over the fair
value of net assets acquired $ 76,033
================
3. To reflect depreciation expense and amortization of goodwill based upon
the preliminary estimated fair value of the net assets resulting from the
purchase. Such amount assigned to property, plant and equipment is being
depreciated over an estimated weighted average life of 10 years and the
amount assigned to goodwill is being amortized over an estimated life of
40 years. The lives assigned to property, plant and equipment and
goodwill are subject to revision after more detailed analysis and
evaluations are completed.
4. To reflect interest expense as a result of the $123 million increase in
borrowings to provide the cash paid for the acquisition and $17 million
increase in borrowings to repay notes payable to affiliate of former
parent of USS.
5. To reflect the pro forma effects on income taxes due to the pro forma
depreciation, amortization and interest expense adjustments. The pro
forma amortization of the excess of purchase price over fair value of
assets acquired is assumed to be deductible for income tax purposes.
6. Represents adjustments to reflect assets and liabilities of USS not
acquired by BREED.
7. Notes payable to affiliate paid by the Company concurrent with the
acquisition of USS.
<PAGE>
Exhibit 23
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-57958, 33-54986, 33-73350 and 33-54990) of BREED
Technologies, Inc. of our report dated December 17, 1996 relating to the
combined financial statements of the Steering Wheels Business of UT Automotive,
Inc., which appears on page 4 in the current Report on Form 8-K/A of BREED
Technologies, Inc. dated January 7, 1997.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Detroit, Michigan
January 7, 1997
