<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 8-K/A
AMENDMENT NO. 1 TO
CURRENT REPORT ON FORM 8-K DATED OCTOBER 30, 1997
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): OCTOBER 30, 1997
BREED Technologies, Inc.
------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 1-11474 22-2767118
- ------------------------ ---------------------------------- ---------------------------------
(State of incorporation) (Commission File Number) (IRS Employer Identification No.)
5300 Old Tampa Highway
Lakeland, Florida 33811
- ------------------------ ------------
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (941) 668-6000
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(Former name or former address, if changed since last report)
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<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired.
The following audited and unaudited combined financial statements and
notes thereto of the safety restraint systems business of
AlliedSignal Inc., together with a manually signed independent
auditors' report thereon, are included in Exhibit 99.1:
(i) Report of Independent Accountants;
(ii) Combined Balance Sheets as of September 30,
1997 (Unaudited) and December 31, 1996 and 1995;
(iii) Combined Statements of Operation for the
nine months ended September 30, 1997 and 1996 (Unaudited)
and each of the three years in the period ended December
31, 1996;
(iv) Combined Statements of Cash Flows for the
nine months ended September 30, 1997 and 1996 (Unaudited)
and each of the three years in the period ended December
31, 1996; and
(v) Notes to Financial Statements.
(b) Pro Forma Financial Information.
The unaudited Pro Forma Condensed Consolidated Financial Statements
of BREED Technologies, Inc. for the year ended June 30, 1997 and as
of and for the three months ended September 30, 1997 and the notes
thereto, are included in Exhibit 99.2.
(c) Exhibits.
2.1* Asset Purchase Agreement, dated as of August 27,
1997, among AlliedSignal Inc. (and certain subsidiaries
identified in the Agreement) and BREED Technologies, Inc. (and
certain subsidiaries identified in the Agreement).
2.2* Amendment dated October 3, 1997 to the Asset Purchase
Agreement dated as of August 27, 1997 by and between
AlliedSignal Inc., a Delaware corporation, BREED Technologies,
Inc., a Delaware corporation, and the other parties thereto.
23.1 Consent of Price Waterhouse LLP.
99.1 Combined Financial Statements of Safety Restraint
Systems, a division of AlliedSignal Inc. as described in
Item 7(a) of this Form 8-K/A.
99.2 Unaudited Pro Forma Condensed Consolidated Financial
Statements of BREED Technologies, Inc., as described in Item
7(b) of this Form 8-K/A.
- --------------------
*Previously filed.
-2-
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: January 13, 1998 BREED TECHNOLOGIES, INC.
By: /s/ Frank J. Gnisci
------------------------------
Frank J. Gnisci
Executive Vice President and
Chief Financial Officer
-3-
<PAGE> 4
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequentially
No. Exhibit Numbered Page
- ------- ------- -------------
<S> <C> <C>
2.1* Asset Purchase Agreement, dated as of August 27, 1997, among
AlliedSignal Inc. (and certain subsidiaries identified in the
Agreement) and BREED Technologies, Inc. (and certain subsidiaries
identified in the Agreement).
2.2* Amendment dated as of October 3, 1997 to the Asset Purchase Agreement
dated as of August 27, 1997 by and between AlliedSignal Inc., a Delaware
corporation, BREED Technologies, Inc., a Delaware corporation, and the
other parties thereto.
23.1 Consent of Price Waterhouse LLP.
99.1 Combined Financial Statements of Safety Restraint Systems, a
division of AlliedSignal Inc.
99.2 Unaudited Pro Forma Condensed Consolidated Financial Statements of BREED
Technologies, Inc.
</TABLE>
- --------------------
*Previously filed.
-4-
<PAGE> 1
EXHIBIT 23.1
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-8 (No. 33-57958,
33-54986, 33-54990)of Breed Technologies, Inc. of our report dated October 31,
1997 relating to the combined financial statements of Safety Restraint
Systems, A Division of AlliedSignal Inc., which appears in the Current Report
on Form 8-K/A of Breed Technologies, Inc. dated October 30, 1997.
/s/Price Waterhouse LLP
Price Waterhouse LLP
Detroit, Michigan
January 13, 1998
-5-
<PAGE> 1
SAFETY RESTRAINT SYSTEMS,
A DIVISION OF ALLIEDSIGNAL INC.
COMBINED FINANCIAL STATEMENTS AS OF
SEPTEMBER 30, 1997 (UNAUDITED),
DECEMBER 31, 1996 AND 1995 AND
FOR THE NINE-MONTHS ENDED
SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
AND FOR EACH OF THE THREE YEARS IN THE
PERIOD ENDED DECEMBER 31, 1996
<PAGE> 2
SAFETY RESTRAINT SYSTEMS,
A DIVISION OF ALLIEDSIGNAL INC.
INDEX TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGES
<S> <C>
Report of Independent Accountants........................................................1
Combined Balance Sheets as of September 30, 1997 (Unaudited) and
December 31, 1996 and 1995..............................................................2
Combined Statements of Operations - Nine Months Ended September 30, 1997
and 1996 (Unaudited) and Each of the Three Years in the Period
Ended December 31, 1996.................................................................3
Combined Statements of Cash Flows - Nine Months Ended September 30, 1997
and 1996 (Unaudited) and Each of the Three Years in the Period
Ended December 31, 1996.................................................................4
Notes to Financial Statements.........................................................5-17
</TABLE>
<PAGE> 3
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareowners and
Directors of AlliedSignal Inc.
In our opinion, the accompanying combined balance sheets and the related
combined statements of operations and of cash flows present fairly, in all
material respects, the financial position of Safety Restraint Systems, a
Division of AlliedSignal Inc. (the Company), at December 31, 1996 and 1995, and
the results of its operations and its cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
management of the Company; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits 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 from 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 audits provide a
reasonable basis for the opinion expressed above.
The Company, as disclosed in Note 2 to the accompanying financial statements,
is a member of the AlliedSignal Inc. group of affiliated companies and has
extensive transactions and relationships with AlliedSignal Inc. Because of
these relationships, it is possible that the terms of these transactions are
not the same as those that would result from transactions among wholly
unrelated parties.
As discussed in Note 19, on October 30, 1997, AlliedSignal Inc. sold certain
net assets of the Safety Restraint Systems division to Breed Technologies, Inc.
The accompanying financial statements do not give effect to this purchase
transaction.
Price Waterhouse LLP
Detroit, Michigan
October 31, 1997
<PAGE> 4
SAFETY RESTRAINT SYSTEMS, 2
A DIVISION OF ALLIEDSIGNAL INC.
COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ------------------
1997 1996 1995
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 22,441 $ 30,883 $ 7,955
Accounts and notes receivable, net 129,883 113,377 119,335
Inventories 45,174 50,688 52,973
Other current assets 26,139 22,359 24,489
------------ ------------ -------------
Total current assets 223,637 217,307 204,752
Property, plant and equipment, net 154,423 146,674 131,029
Cost in excess of net assets of acquired
companies, net 48,739 52,262 55,069
Other assets 17,890 13,495 19,928
------------ ------------ -------------
TOTAL ASSETS $ 444,689 $ 429,738 $ 410,778
============ ============ =============
LIABILITIES AND ALLIEDSIGNAL INC. INVESTMENT
Current liabilities
Accounts payable - trade $ 139,546 $ 134,912 $ 130,603
Accounts payable - related party 4,149 3,736
Accrued liabilities 43,882 48,754 47,673
------------ ------------ -------------
Total current liabilities 183,428 187,815 182,012
Deferred income taxes 14,653 14,660 12,393
Other liabilities 19,784 19,738 22,639
------------ ------------ -------------
Total liabilities 217,865 222,213 217,044
Commitments and contingencies
Cumulative foreign exchange translation
adjustment (2,284) 1,528 489
AlliedSignal Inc. investment 229,108 205,997 193,245
------------ ------------ -------------
TOTAL LIABILITIES AND ALLIEDSIGNAL INC.
INVESTMENT $ 444,689 $ 429,738 $ 410,778
============ ============ =============
</TABLE>
See accompanying notes to financial statements
<PAGE> 5
SAFETY RESTRAINT SYSTEMS, 3
A DIVISION OF ALLIEDSIGNAL INC.
COMBINED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------------ --------------------------------------
1997 1996 1996 1995 1994
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Sales
Trade sales $ 673,016 $ 705,865 $ 940,152 $ 872,589 $ 747,336
Intercompany sales 5,300 10,011 11,124 10,249
----------- ----------- ----------- ----------- -----------
678,316 715,876 951,276 882,838 747,336
----------- ----------- ----------- ----------- -----------
Cost of goods sold 608,300 630,888 849,778 781,924 671,942
Selling, general and administrative expense 30,620 32,415 42,052 35,817 30,847
----------- ----------- ----------- ----------- -----------
Income from operations 39,396 52,573 59,446 65,097 44,547
----------- ----------- ----------- ----------- -----------
Equity in income (loss) of affiliated
companies 375 1,721 2,221 (2,527) (191)
Other income (expense), net (3,176) (3,284) 4,764 (3,029) (3,858)
----------- ----------- ----------- ----------- -----------
Income before taxes on income 36,595 51,010 66,431 59,541 40,498
Taxes on income 15,035 21,006 25,448 21,281 15,589
----------- ----------- ----------- ----------- -----------
Net income $ 21,560 $ 30,004 $ 40,983 $ 38,260 $ 24,909
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements
<PAGE> 6
SAFETY RESTRAINT SYSTEMS, 4
A DIVISION OF ALLIEDSIGNAL INC.
COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
----------------- ----------------------------
1997 1996 1996 1995 1994
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 21,560 $ 30,004 $ 40,983 $ 38,260 $ 24,909
Adjustments to reconcile net income to net
cash provided by (used for) operating activities
Depreciation and amortization (includes costs
in excess of net assets of acquired companies,
net) 21,015 18,737 26,243 21,530 17,514
Gain on sale of investment (8,947)
Undistributed earnings of equity affiliates (375) (1,721) (2,221) 2,527 191
Deferred income taxes (807) 1,740 4,433 7,036 (3,322)
Changes in assets and liabilities
(net of acquisitions)
Accounts and notes receivable (16,506) (6,665) 5,958 14,091 (2,613)
Inventories 5,514 (7,327) 2,285 (3,555) 27,421
Other current assets (3,675) (3,363) 235 1,129 (665)
Accounts payable 485 2,766 4,722 3,024 23,051
Accrued liabilities (4,872) 5,221 1,081 (3,131) (4,857)
Other (3,382) 3,748 260 (14,483) (10,272)
---------- ---------- --------- --------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 18,957 43,140 75,032 66,428 71,357
---------- ---------- --------- --------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment (29,422) (27,694) (34,983) (32,038) (26,088)
Proceeds from disposal of property, plant and
equipment 331 464 838 466 3,188
Proceeds from sale of investment 11,000
Capital contribution in equity investment 141 (728) (2,030) (2,133)
Cash paid for acquisitions (80,936)
---------- ---------- --------- --------- ----------
NET CASH USED FOR INVESTING ACTIVITIES (28,950) (27,230) (23,873) (33,602) (105,969)
---------- ----------- --------- --------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Intercompany activity 1,551 6,218 (28,231) (25,492) 34,560
---------- ---------- --------- ---------- ----------
NET CASH PROVIDED BY (USED FOR)
FINANCING ACTIVITIES 1,551 6,218 (28,231) (25,492) 34,560
---------- ---------- --------- ---------- ----------
NET (DECREASE) INCREASE IN CASH (8,442) 22,128 22,928 7,334 (52)
Cash at beginning of the period 30,883 7,955 7,955 621 673
---------- ---------- --------- --------- ----------
Cash at end of the period $ 22,441 $ 30,083 $ 30,883 $ 7,955 $ 621
========== ========== ========= ========= ==========
</TABLE>
See accompanying notes to financial statements
<PAGE> 7
SAFETY RESTRAINT SYSTEMS, 5
A DIVISION OF ALLIEDSIGNAL INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- -------------------------------------------------------------------------------
1. DESCRIPTION OF BUSINESS
Safety Restraint Systems, a Division of AlliedSignal Inc. (SRS) is an
international supplier of safety restraint systems to automotive and
truck original equipment manufacturers (OEMs) in North America, Europe
and Asia. Major products include seat belt assemblies, pretensioners,
seat-integrated belts, integrated child seats and air bag systems,
including air bag modules, inflators and cushions. Sales to two major
customers, each of which exceeded 24% of trade sales annually,
aggregated $559,433, $465,509 and $467,324 in 1996, 1995 and 1994,
respectively.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The combined financial statements of SRS are comprised of the North
American Safety Restraint Systems business of AlliedSignal Inc.,
AlliedSignal Sistemi Di Sicurezza, AlliedSignal Sistemas de Seguridad,
S.A., Sistemas AlliedSignal de Seguridad, S.A. de C.V., AlliedSignal
Cinturones de Seguridad, S.A. de C.V., the Safety Restraint Systems
business of BSRD Limited, ICSRD Rueckhaltesysteme Fahrzeugsicherheit
Gmbh, AlliedSignal India, Inc., and their joint venture interests in
Bag, S.p.A., Morton Bendix, Bendix Atlantic Inflator Company and
Jaybharat-AlliedSignal Ltd. The combined financial statements of SRS
have been prepared on a carve-out basis and present the historical
financial position, results of operations and cash flows of SRS
previously included in the AlliedSignal Inc. (AlliedSignal) consolidated
financial statements. SRS financial information included herein is not
necessarily indicative of its financial position, results of operations
and cash flows in the future, or of the results which would have been
reported if SRS had operated as an unaffiliated enterprise.
The preparation of combined financial statements on a carve-out basis 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 periods. Actual
results could differ from those estimates.
Transactions between SRS and AlliedSignal (and other AlliedSignal
business units) are herein referred to as "intercompany" or "related
party" transactions.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially expose SRS to a concentration of
credit risk consist primarily of accounts receivable. SRS does not
require collateral from its customers. To minimize this risk, ongoing
credit evaluations of customers' financial condition are performed.
At December 31, 1996 and 1995, approximately 49% and 42%, respectively,
of trade accounts receivable were from two major OEM customers. SRS may
be impacted significantly by the economic stability of the OEM's as well
as the automotive and truck industries, or by the loss of an OEM
customer.
FINANCIAL INSTRUMENTS
The carrying value of SRS's financial instruments, comprising cash,
accounts receivable, accounts payable and accrued liabilities,
approximate their fair values.
<PAGE> 8
SAFETY RESTRAINT SYSTEMS, 6
A DIVISION OF ALLIEDSIGNAL, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- -------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes cash on hand and on deposit as well
as highly-liquid debt instruments with maturities generally of three
months or less. Cash payments for foreign income taxes during the years
1996, 1995 and 1994 were $1,301, $1,892 and $2,284, respectively.
INVENTORIES
Inventories are valued at the lower of cost or market using the first
in, first out (FIFO) method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are carried at cost and are generally
depreciated using estimated service lives. Depreciation is computed
principally on the straight-line method.
COST IN EXCESS OF NET ASSETS OF ACQUIRED COMPANIES, NET
Cost in excess of net assets of acquired companies, net is being
amortized on a straight-line basis over 25 years. The cumulative amount
of cost in excess of net assets of acquired companies, amortized at
December 31, 1996 and 1995 is $6,693 and $3,465, respectively.
VALUATION OF LONG-LIVED ASSETS
In accordance with Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be disposed of, SRS periodically evaluates the carrying value
of long-lived assets to be held and used, including costs in excess of
net assets of acquired companies, when events and circumstances warrant
such a review. The carrying value of a long-lived asset is considered
impaired when the anticipated undiscounted cash flow from such asset is
separately identifiable and is less than its carrying value. In that
event, a loss is recognized based on the amount by which the carrying
value exceeds the fair market value of the long-lived asset. Fair market
value is determined primarily using the anticipated cash flows
discounted at a rate commensurate with the risk involved.
REVENUE RECOGNITION
Sales and related cost of sales are recognized upon the shipment of
products. Sales are recorded net of estimated returns and allowances.
RESEARCH, DEVELOPMENT AND ENGINEERING EXPENSES
Research, development and engineering expenses related to design and
development of new products and planning and design for new processes,
are expensed as incurred. Such amounts approximated $45,179, $38,938 and
$30,873 in 1996, 1995 and 1994, respectively, and are included in cost
of goods sold in the combined statements of operations.
<PAGE> 9
SAFETY RESTRAINT SYSTEMS, 7
A DIVISION OF ALLIEDSIGNAL INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- -------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
SRS is included in the consolidated U.S. federal income tax return of
AlliedSignal. In preparing its combined financial statements, SRS has
determined its tax provision on a separate return basis. Deferred tax
liabilities or assets reflect the impact of temporary differences
between amounts of assets and liabilities for financial and tax
reporting. Such amounts are subsequently adjusted, as appropriate, to
reflect changes in tax rates expected to be in effect when the temporary
differences reverse.
INTERIM FINANCIAL INFORMATION
The interim financial data as of September 30, 1997 and for the nine
months ended September 30, 1997 and 1996 is unaudited; however, in the
opinion of management, the interim data includes all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
statement of the results for the interim periods.
3. INTERCOMPANY TRANSACTIONS AND ALLOCATIONS
CASH MANAGEMENT
SRS utilizes AlliedSignal centralized cash management services. Under
this arrangement, SRS' accounts receivable are collected and its cash
disbursements are funded by AlliedSignal on a daily basis. Net activity
between AlliedSignal and SRS is reflected in AlliedSignal's investment
in SRS.
ALLOCATED CORPORATE SERVICES
AlliedSignal allocates costs associated with certain corporate overhead,
such as risk management, human resources, corporate law, corporate
finance and accounting, treasury and public affairs to its business
units through a corporate assessment charge which is generally allocated
based on sales or net investment. Charges from AlliedSignal for such
costs aggregated $16,525, $10,419 and $8,828 for the years ended
December 31, 1996, 1995 and 1994, respectively, and are included in
selling, general and administrative expense in the accompanying
statements of operations.
AlliedSignal also manages employee medical, dental, life insurance, and
workers' compensation benefits on a consolidated basis. AlliedSignal
charges SRS for its share of such employee-related costs based upon SRS'
estimated experience or headcount, depending on the nature of the cost.
Charges from AlliedSignal for such costs aggregated $13,302, $9,908 and
$9,260 for the years ended December 31, 1996, 1995 and 1994,
respectively, and are included in cost of sales in the accompanying
statements of operations.
AlliedSignal Business Services provides various information systems
assistance, employee payroll processing, travel and expense processing,
accounts payable, payment processing, general ledger maintenance and
project tracking assistance to SRS and other related units. These costs
are allocated to SRS based on certain criteria, including invoices or
checks processed, headcount, general ledger line items maintained,
predetermined rates or on actual services provided. Charges from
AlliedSignal Business Services for such costs aggregated $4,384, $3,696
and $2,949 for the years ended December 31, 1996, 1995 and 1994,
respectively, and are included in selling, general and administrative
expenses in the accompanying statements of operations.
<PAGE> 10
SAFETY RESTRAINT SYSTEMS, 8
A DIVISION OF ALLIEDSIGNAL INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- -------------------------------------------------------------------------------
3. INTERCOMPANY TRANSACTIONS AND ALLOCATIONS (CONTINUED)
Management believes that the methods utilized to allocate costs to SRS,
as discussed above, are reasonable. However, the terms of transactions
between SRS and AlliedSignal, including allocated costs, may differ from
those that would result from transactions with unrelated parties.
INTERCOMPANY SALES
Gross profit on intercompany sales approximated $2,225 and $2,050 in
1996 and 1995, respectively.
4. OTHER INCOME (EXPENSE), NET
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1996 1995 1994
<S> <C> <C> <C>
Interest (expense)/income, net $ (1,265) $ (29) $ 1,359
Foreign exchange (45) (165) (259)
Gain on sale of investment 8,947
Other (2,873) (2,835) (4,958)
-------- --------- ---------
$ 4,764 $ (3,029) $ (3,858)
======== ========= =========
</TABLE>
<PAGE> 11
SAFETY RESTRAINT SYSTEMS, 9
A DIVISION OF ALLIEDSIGNAL INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
5. TAXES ON INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1996 1995 1994
<S> <C> <C> <C>
Income before taxes on income
United States $ 59,782 $ 56,062 $ 40,640
Foreign 6,649 3,479 (142)
-------- --------- ---------
$ 66,431 $ 59,541 $ 40,498
======== ========= =========
Taxes on income
United States $ 23,376 $ 20,518 $ 15,522
Foreign 2,072 763 67
-------- --------- ---------
$ 25,448 $ 21,281 $ 15,589
======== ========= =========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1996 1995 1994
<S> <C> <C> <C>
Taxes on income consist of
Current
United States $ 19,921 $ 13,528 $ 15,604
Foreign 1,094 717 3,307
-------- --------- ---------
$ 21,015 $ 14,245 $ 18,911
======== ========= =========
Deferred
United States $ 3,455 $ 6,990 $ (82)
Foreign 978 46 (3,240)
-------- --------- ---------
$ 4,433 $ 7,036 $ (3,322)
======== ========= =========
</TABLE>
The principal items accounting for the difference in taxes on income
computed at the U.S. statutory rate and as recorded on an overall basis
are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1996 1995 1994
<S> <C> <C> <C>
Statutory U.S. federal income tax rate 35.0% 35.0% 35.0%
----- ------ -----
Taxes on foreign earnings over (under)
U.S. tax rate (.4)% (.8)% .3%
Nondeductible amortization .3 .4 .2
State income taxes, net of federal benefit 3.5 3.6 3.9
Tax benefits of Foreign Sales Corporation (1.5) (1.7) (2.2)
All other items, net 1.4 (.8) 1.3
----- ------ -----
38.3% 35.7% 38.5%
===== ====== =====
</TABLE>
<PAGE> 12
SAFETY RESTRAINT SYSTEMS, 10
A DIVISION OF ALLIEDSIGNAL INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- -------------------------------------------------------------------------------
5. TAXES ON INCOME (CONTINUED)
DEFERRED INCOME TAXES
Included in the following balance sheet accounts:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995
<S> <C> <C>
Other current assets $ 17,683 $ 19,578
Other assets 257 528
Deferred income taxes (14,660) (12,393)
----------- -----------
$ 3,280 $ 7,713
=========== ===========
</TABLE>
DEFERRED TAX ASSETS (LIABILITIES)
The temporary differences and carryforwards which give rise to deferred
tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995
<S> <C> <C>
Property, plant and equipment basis differences $ (13,729) $ (11,990)
Postemployment benefits 3,320 1,960
Inventory reserves 2,878 2,570
Accrued liabilities 9,558 12,122
Foreign net operating losses 1,413 2,619
All other items, net (160) 432
----------- -----------
$ 3,280 $ 7,713
=========== ===========
</TABLE>
<PAGE> 13
SAFETY RESTRAINT SYSTEMS, 11
A DIVISION OF ALLIEDSIGNAL INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- -------------------------------------------------------------------------------
6. ACCOUNTS AND NOTES RECEIVABLE
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1995
<S> <C> <C>
Trade 78,344 $ 88,276
Billed tooling 5,459 6,578
Related parties 3,357 2,474
Unbilled tooling 14,574 10,216
Other 12,890 12,768
----------- -----------
114,624 120,312
Less - allowance for doubtful accounts (1,247) (977)
----------- -----------
$ 113,377 $ 119,335
=========== ===========
</TABLE>
In North America, SRS participates in certain AlliedSignal arrangements
under which AlliedSignal can sell undivided interests in designated
pools of trade accounts receivable. AlliedSignal acts as an agent for
the purchasers in the collection and administration of the receivables.
Accounts and notes receivable have not been adjusted to reflect
participation in these arrangements. Additionally, in Europe, SRS
periodically sells trade accounts receivable. The combined balance
sheets have been reduced by $36,477 and $17,001 in 1996 and 1995,
respectively, reflecting such sales.
7. INVENTORIES
<TABLE>
<CAPTION>
SEPTEMBER 30,
1997 DECEMBER 31,
------------ -------------------
(UNAUDITED) 1996 1995
<S> <C> <C> <C>
Raw materials $ 32,147 $ 37,035 $ 40,631
Work-in-process 8,311 7,050 8,458
Finished goods 8,990 12,132 9,796
Supplies and containers 2,413 2,175 1,943
----------- ----------- -----------
51,861 58,392 60,828
Less - Inventory reserve (6,687) (7,704) (7,855)
----------- ----------- -----------
$ 45,174 $ 50,688 $ 52,973
=========== =========== ===========
</TABLE>
<PAGE> 14
SAFETY RESTRAINT SYSTEMS, 12
A DIVISION OF ALLIEDSIGNAL INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- -------------------------------------------------------------------------------
8. OTHER CURRENT ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1995
<S> <C> <C>
Current deferred income taxes $ 17,683 $ 19,578
Other 4,676 4,911
----------- -----------
$ 22,359 $ 24,489
=========== ===========
</TABLE>
9. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE
(YEARS) DECEMBER 31,
------------ -------------------
1996 1995
<S> <C> <C> <C>
Land and land improvements $ 3,306 $ 3,445
Buildings 35-40 29,928 29,018
Machinery, office furniture and equipment 3-15 201,578 174,834
Construction-in-progress 15,648 10,075
----------- -----------
250,460 217,372
Less - Accumulated depreciation (103,786) (86,343)
----------- -----------
$ 146,674 $ 131,029
=========== ===========
</TABLE>
10. OTHER ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1995
<S> <C> <C>
Patents, licenses and other $ 11,406 $ 17,698
Equity investments in affiliates 1,832 1,702
Long-term deferred income taxes 257 528
----------- -----------
$ 13,495 $ 19,928
=========== ===========
</TABLE>
Patents, licenses and other includes patents and licenses of $10,551 and
$14,504 which are being amortized on a straight-line basis over five
years. Additionally, in 1995 SRS had investments of $1,945 at cost,
which were subsequently sold in 1996.
SRS has a 50% partnership interest in Morton Bendix, accounted for under
the equity method. Morton Bendix assembles passenger side modules for
automotive inflatable restraint systems in North America.
<PAGE> 15
SAFETY RESTRAINT SYSTEMS, 13
A DIVISION OF ALLIEDSIGNAL INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- -------------------------------------------------------------------------------
11. ACCRUED LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1995
<S> <C> <C>
Payroll and payroll taxes $ 5,461 $ 4,290
Liability insurance, workers'
compensation and healthcare 15,909 15,699
Vacation 5,267 5,197
Postemployment benefits 8,300 4,900
Other 13,817 17,587
----------- -----------
$ 48,754 $ 47,673
=========== ===========
</TABLE>
12. OTHER LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1995
<S> <C> <C>
Accumulated deficit in affiliates $ 14,935 $ 17,042
Other 4,803 5,597
----------- -----------
$ 19,738 $ 22,639
=========== ===========
</TABLE>
Accumulated deficit in affiliates includes investments in
Bendix-Atlantic Inflator Company (BAICO) and Bag S.p.A. accounted for
under the equity method. SRS has a 50% partnership interest in BAICO
which produces hybrid non azide inflators for use in inflatable occupant
safety restraint systems for motor vehicles in North America. SRS has a
33% partnership in Bag S.p.A., which designs, produces and sells airbags
in Europe.
Combined selected financial data for these two entities is summarized as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1996 1995 1994
<S> <C> <C> <C>
Net sales $ 133,835 $ 80,467 $ 48,731
Income (loss) from operations 6,563 (3,298) (4,082)
Net income (loss) 1,958 (7,897) (7,195)
</TABLE>
<PAGE> 16
SAFETY RESTRAINT SYSTEMS, 14
A DIVISION OF ALLIEDSIGNAL INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- -------------------------------------------------------------------------------
12. OTHER LIABILITIES (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1995
<S> <C> <C>
Current assets $ 44,556 $ 37,576
Total assets 84,982 71,988
Current liabilities 60,262 51,687
Noncurrent liabilities 54,842 54,463
Accumulated deficit (30,124) (34,162)
</TABLE>
Noncurrent liabilities at BAICO consist of borrowings under an agreement
to borrow up to $60 million. The borrowings are guaranteed equally by
AlliedSignal and the partner (Atlantic Research Company, a third party).
Additionally, BAICO may borrow up to $5 million under a line of credit
agreement with AlliedSignal.
At December 31, 1996, and 1995, Bag S.p.A. has approximately $29 million
and $20 million of borrowings, under a line of credit. Approximately $19
million of the line is guaranteed jointly by the shareholders.
13. CUMULATIVE FOREIGN EXCHANGE TRANSLATION ADJUSTMENT
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1996 1995 1994
<S> <C> <C> <C>
Balance at beginning of year $ 489 $ (249) $ (1,548)
Translation adjustment 1,039 738 1,299
-------- --------- ---------
Balance at end of year $ 1,528 $ 489 $ (249)
======== ========= =========
</TABLE>
14. ALLIEDSIGNAL INVESTMENT
The AlliedSignal investment balance represents the cumulative
intercompany activity from transactions, cost allocations, cash
management and other charges and credits, between SRS and AlliedSignal
(and its other business units). A summary of changes in AlliedSignal
investment follows.
<TABLE>
<CAPTION>
NINE
MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
1997 ----------------------------
(UNAUDITED) 1996 1995 1994
--------------
<S> <C> <C> <C> <C>
Beginning AlliedSignal Inc. investment $ 205,997 $ 193,245 $ 180,477 $ 121,008
Net income 21,560 40,983 38,260 24,909
Intercompany activity 1,551 (28,231) (25,492) 34,560
---------- ---------- ---------- -----------
Ending AlliedSignal Inc. investment $ 229,108 $ 205,997 $ 193,245 $ 180,477
========== ========== ========== ===========
</TABLE>
<PAGE> 17
SAFETY RESTRAINT SYSTEMS, 15
A DIVISION OF ALLIEDSIGNAL INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- -------------------------------------------------------------------------------
14. ALLIEDSIGNAL INVESTMENT (CONTINUED)
Included in other income (expense), net in the combined statement of
operations is an allocated investment charge. The investment charge is
based on average net investment as a percent of projected AlliedSignal
interest expense. The investment charge for 1996, 1995 and 1994
approximated $2,519, $2,487 and $4,630, respectively.
15. EMPLOYEE BENEFIT PLANS
PENSIONS
Substantially all employees of SRS participate in defined benefit
pension plans covering AlliedSignal employees. Plan benefits are
generally based on years of service and the employee's compensation. For
the purpose of these financial statements, SRS is considered to have
participated in multi-employer pension plans. SRS recorded net periodic
pension cost of $5,325, $6,195 and $5,121 for the years ended December
31, 1996, 1995 and 1994, respectively, related to its participation in
the AlliedSignal defined benefit pension plans.
AlliedSignal also sponsors a number of defined contribution pension
plans. Participation in these plans is available to substantially all
salaried employees. AlliedSignal contributions to these plans are
generally based on a percentage of employee contributions. The cost to
SRS for providing benefits under the AlliedSignal defined contribution
plans was $1,412, $1,400 and $1,492 for the years ended December 31,
1996, 1995 and 1994, respectively.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
U.S. retiree medical programs cover employees who retire with pension
eligibility for hospital, professional and other medical services
(programs) including SRS' eligible retired employees. Most of the
programs require deductibles and copayments and virtually all are
integrated with Medicare. Retiree contributions are generally required
based on coverage type, plan and Medicare eligibility. AlliedSignal also
sponsors retiree life insurance programs which generally provide a flat
benefit of at least two thousand dollars or a benefit as a percent of
pay.
For most non-union employees retiring after July 1, 1992, the Company
has implemented an approach which bases the Company's contribution to
retiree medical premiums on years of service and also establishes a
maximum Company contribution in the future at approximately twice the
current level at the date of implementation.
For the purpose of these financial statements, SRS is considered to have
participated in multi-employer postretirement benefit plans. SRS charged
to expense $2,390, $2,057 and $2,299 for the years ended December 31,
1996, 1995 and 1994, respectively, related to its participation in the
AlliedSignal postretirement programs.
<PAGE> 18
SAFETY RESTRAINT SYSTEMS, 16
A DIVISION OF ALLIEDSIGNAL INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- -------------------------------------------------------------------------------
16. LEASE COMMITMENTS
SRS leases certain buildings and equipment under operating lease
agreements. Future minimum lease payments under operating leases having
initial or remaining noncancelable lease terms in excess of one year are
as follows:
AT DECEMBER 31, 1996
<TABLE>
<S> <C>
1997 $ 3,964
1998 2,957
1999 2,691
2000 2,528
2001 2,352
Thereafter 1,580
----------
$ 16,072
==========
</TABLE>
Rent expense of $4,541, $4,327 and $5,045 was included in costs and
expenses for 1996, 1995 and 1994, respectively.
17. COMMITMENTS AND CONTINGENCIES
SRS is subject to a number of lawsuits, investigations and claims (some
of which involve substantial amounts) arising out of the conduct of its
business, including those relating to commercial transactions, product
liability and environmental safety and health matters. Management does
not expect that settlement amounts or losses, if any, will have a
material adverse effect on the combined results of operations or the
financial position of SRS.
SRS has issued or is a party to various direct and indirect guarantees,
bank letters of credit and customer guarantees. Management does not
expect these guarantees will have a material adverse effect on the
combined results of operations or the financial position of SRS.
<PAGE> 19
SAFETY RESTRAINT SYSTEMS 17
A DIVISION OF ALLIEDSIGNAL INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- ------------------------------------------------------------------------------
18. GEOGRAPHIC AREAS - FINANCIAL DATA
<TABLE>
<CAPTION>
ADJUSTMENTS
NORTH OTHER AND
AMERICA EUROPE INTERNATIONAL ELIMINATIONS TOTAL
------------ ------------ ------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Net sales 1996 $ 689,941 $ 269,543 $ 6,703 $ (14,911) $ 951,276
1995 677,070 196,319 14,912 (5,463) 882,838
1994 594,352 153,247 - (263) 747,336
Net income 1996 46,085 197 164 (5,463) 40,983
1995 38,635 2,288 647 (3,310) 38,260
1994 27,335 (483) - (1,943) 24,909
Assets 1996 291,527 133,623 4,335 253 429,738
1995 292,058 113,997 4,642 81 410,778
Liabilities 1996 129,131 95,782 1,697 (4,397) 222,213
1995 146,743 72,265 2,556 (4,520) 217,044
</TABLE>
Sales between geographic areas approximate market and are not
significant. SRS corporate office income, expenses, assets and
liabilities are included in the North America column. Included in the
North America net sales are export sales of $80,487, $97,361 and $68,864
for each of the respective years.
19. SUBSEQUENT EVENTS
On October 30, 1997, AlliedSignal sold substantially all of the net
assets of SRS to Breed Technologies, Inc. for approximately $710
million, subject to certain post-closing adjustments. The accompanying
financial statements do not give effect to this transaction.
<PAGE> 1
Unaudited Pro Forma Financial Statements
The following unaudited pro forma financial statements are based on the
historical financial statements of BREED Technologies, Inc. ("BREED" or the
"Company"), the businesses acquired in the 1997 Acquisitions (as hereinafter
defined), and the safety restraint systems business ("SRS") of AlliedSignal
Inc. (the "SRS Acquisition") as of and for the twelve-month period ended June
30, 1997 and the three-month period ended September 30, 1997. The unaudited pro
forma condensed consolidated statement of earnings for the twelve-month period
ended June 30, 1997 gives effect to the 1997 Acquisitions and the Transactions
(as hereinafter defined) and the application of the net proceeds therefrom as
if they had occurred at July 1, 1996. The unaudited pro forma condensed
consolidated statement of earnings for the three-month period ended September
30, 1997 gives effect to the Transactions and the application of the net
proceeds therefrom as if they had occurred at July 1, 1997. The unaudited pro
forma condensed consolidated balance sheet gives effect to the Transactions and
the application of the net proceeds therefrom as if they had occurred on
September 30, 1997.
The 1997 Acquisitions consist of the following: (i) the Company's acquisition
of certain assets and the assumption of certain liabilities of the North
American steering wheel operation ("USS") of United Technologies, which was
completed on October 25, 1996; and (ii) the Company's acquisition of the stock
of the holding company for the Custom Trim group of companies ("Custom Trim"),
which was completed on February 25, 1997. In addition to the 1997 Acquisitions,
the Company completed the acquisition of Gallino Plasturgia, S.r.l. ("Gallino")
on the first day of fiscal 1997. Because the results of operations of Gallino
are included in the Company's fiscal 1997 statement of earnings for the entire
year, no pro forma adjustments have been made with respect to this acquisition.
All acquisitions, including the SRS Acquisition, have been accounted for using
the purchase method of accounting.
The Transactions consist of the following: (i) the SRS Acquisition; (ii) the
issuance of Series A Preference Shares to Siemens Aktiengesellschaft
("Siemens") for $115 million in cash (these securities may be converted into
shares of common stock on a share-for-share basis); (iii) the borrowing of $800
million (the "Bank Borrowing") under a new $900 million credit facility (the
"New Credit Facility"); (iv) the issuance of $250 million of Company-obligated
Mandatorily Redeemable Preferred Securities of BTI Capital Trust holding solely
Convertible Debentures issued by the Company (the "Preferred Securities"); (v)
the repayment of the amounts outstanding under the Company's old credit
facility (the "Previous Credit Facility"); and (vi) the issuance and subsequent
redemption in full of the $200 million of Series B Convertible Preferred Stock
(the "PSCC Financing").
The following unaudited pro forma financial statements do not purport to
represent what the Company's results of operations or financial condition would
have been had the 1997 Acquisitions and the Transactions and the application of
the net proceeds therefrom actually occurred on the dates indicated or to
predict the Company's results of operations or financial condition in the
future.
<PAGE> 2
The unaudited pro forma financial statements have been prepared using the
purchase method of accounting, whereby the total cost of the SRS Acquisition
will be allocated to the tangible and intangible assets acquired and
liabilities assumed based upon their respective fair values at the effective
date of the SRS Acquisition. Such allocations will be based on studies and
valuations which have not yet been completed. Accordingly, the allocations
reflected in the unaudited pro forma financial statements are preliminary and
subject to revision. As part of the purchase price allocation, the Company is
evaluating the in-process research and development of SRS. If the technological
feasibility of the acquired technology has not been established and the
technology has no future alternative uses, such in-process research and
development will be written-off. The Company's preliminary estimate of the
amount of the in-process research and development for SRS that will be written
off is between $70 million and $80 million, although there can he no assurance
that the amount when ultimately determined will not be less than $70 million
nor more than $80 million. The unaudited pro forma condensed consolidated
balance sheet reflects a charge of $80 million (which the Company currently
believes is the more likely amount) in the form of a reduction in retained
earnings.
During the quarter ended December 31, 1997, the Company committed to a plan to
reposition and combine certain of BREED and SRS manufacturing and distribution
facilities. The effects of repositioning and combining facilities of SRS will
generally be considered in the purchase price allocation process. The effects
of repositioning and combining facilities of the Company will be recorded as
repositioning and other special charges in its statement of earnings. The
Company has committed to the plan of repositioning but has not yet finalized
its estimate of the impact of the plan on the Company's results of operations.
The Company currently estimates the amount of these repositioning and other
special charges could range from $180 million to $260 million although the
actual amount, when ultimately determined, could be less than $180 million or
more than $260 million. The unaudited pro forma condensed balance sheet
reflects a charge of $250 million, (which the Company currently believes is the
more likely amount) net of the estimated tax effect in the form of a reduction
in retained earnings.
The unaudited pro forma financial statements give effect only to the
adjustments set forth in the accompanying notes and does not reflect any other
benefits anticipated by management as a result of the SRS Acquisition and the
1997 Acquisitions and the implementation of its business strategy.
Statements herein regarding estimated write-offs for in-process research and
development (the "R&D Write-Off") and repositioning and other special charges
(collectively, the "Repositioning Charge") constitute forward-looking
statements within the meaning of the Securities Act of 1933 and the Securities
Exchange Act of 1934. Such statements are subject to certain risks and
uncertainties that could cause actual amounts to differ materially from those
projected. With respect to the amount of the Repositioning Charge, management
has made assumptions regarding, among other things, the timing of plant
closures, the costs to be incurred in connection with labor force reductions,
the amount of any necessary write-down of long-lived assets in connection with
plant closures and the amount of any possible impairment of the value of
certain acquired assets. With respect to the R&D Write-Off, management has made
certain assumptions
<PAGE> 3
regarding, among other things, whether or not certain technologies acquired in
the SRS Acquisition are "proven" or have alternative uses under generally
accepted accounting principles. The amount of the R&D Write-Off and
Repositioning Charge are subject to certain risks, including, among other
things, the risks that expected costs and write-downs in connection with plant
closures have been underestimated, unexpected costs and expenses will be
incurred in connection with plant closures and current expectations regarding
which SRS technology is "proven" or has alternative uses are inaccurate.
Management believes these forward looking statements are reasonable; however,
undue reliance should not be placed on such forward looking statements, which
are based on current expectations.
<PAGE> 4
BREED Technologies, Inc.
Unaudited Pro Forma Condensed
Consolidated Statement of Earnings
For the twelve-month period ended June 30, 1997
<TABLE>
<CAPTION>
1997 ACQUISITIONS BREED
------------------------ INCLUDING
CUSTOM TRIM 1997 PRO FORMA
BREED USS (A) (B) ACQUISITIONS SRS(C) ADJUSTMENTS PRO FORMA
----------------------------------------------------------------------------------------
(in millions except share and per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 794.9 $50.8 $ 68.1 $ 913.8 $ 910.8 $ (70.8)(d) $ 1,753.8
Cost of sales 631.3 44.8 54.2 730.3 765.3 (61.4)(d) 1,434.2
----------------------------------------------------------------------------------------
Gross profit 163.6 6.0 13.9 183.5 145.5 (9.4) 319.6
Engineering, research and
development 36.1 1.5 - 37.6 50.6 (1.8)(d) 86.4
Selling, general and
administrative 69.9 1.4 2.0 73.3 36.7 (2.2)(d) 107.8
Amortization of goodwill 6.3 - 1.0 7.3 3.2 9.1 (e) 19.6
----------------------------------------------------------------------------------------
Operating income 51.3 3.1 10.9 65.3 55.0 (14.5) 105.8
Other income (expense), net 3.5 (0.6) 3.7 6.6 7.2 (1.6)(d) 12.2
Amortization of deferred
financing costs 0.7 - - 0.7 - 42.8 (f) 43.5
Interest expense, net 24.5 - 2.7 27.2 - 68.3 (g) 95.5
----------------------------------------------------------------------------------------
Income (loss) before income
taxes and Distributions on
Company-obligated
Mandatorily Redeemable
Convertible Preferred
Securities of BTI Capital Trust
holding solely Convertible 29.6 2.5 11.9 44.0 62.2 (127.2) (21.0)
Debentures
Income taxes (benefit) 14.8 1.3 4.6 20.7 23.3 (68.4)(h) (27.0)
(2.6)(d)
Distributions on Company-
obligated Mandatorily
Redeemable Convertible
Preferred Securities of BTI
Capital Trust holding solely
Convertible Debentures - - - - - 16.3 (i) 16.3
----------------------------------------------------------------------------------------
Net earnings (loss) $ 14.8 $ 1.2 $ 7.3 $ 23.3 $ 38.9 $ (72.5) $ (10.3)
========================================================================================
Earnings (loss) per share $ 0.47 $ (0.28)
========== ===========
Weighted average number of
common shares outstanding 31,648,249 4,883,227(j) 36,531,476
========== ========== ===========
</TABLE>
<PAGE> 5
BREED Technologies, Inc.
Unaudited Pro Forma Condensed
Consolidated Statement of Earnings
For the three-month period ended September 30, 1997
<TABLE>
<CAPTION>
PRO FORMA
BREED(K) SRS (C) ADJUSTMENTS PRO FORMA
--------------------------------------------------------------------
(in millions except share and per share data)
<S> <C> <C> <C> <C>
Net sales $ 195.2 $210.0 $ (14.2)(d) $391.0
Cost of sales 166.9 182.4 (12.2)(d) 337.1
-------------------------------------------------------------------
Gross profit 28.3 27.6 (2.0) 53.9
Engineering, research and development 8.9 13.2 - 22.1
Selling, general and administrative 16.2 9.5 (0.4)(d) 25.3
Amortization of goodwill 2.0 0.8 2.3 (e) 5.1
-------------------------------------------------------------------
Operating income 1.2 4.1 (3.9) 1.4
Other income (expense), net (0.7) (3.1) 1.2 (d) (2.6)
Amortization of deferred financing costs - - 22.2 (f) 22.2
Interest expense, net 8.1 - 14.6 (g) 22.7
-------------------------------------------------------------------
Income (loss) before income taxes and
Distributions on Company-obligated
Mandatorily Redeemable Convertible
Preferred Securities of BTI Capital Trust
holding solely Convertible Debentures (7.6) 1.0 (39.5) (46.1)
Income taxes (benefit) (3.4) 0.7 (21.6)(h) (24.2)
0.1 (d)
Distributions on Company-obligated Mandatorily
Redeemable Convertible Preferred Securities
of BTI Capital Trust holding solely
Convertible Debentures - - 4.1 (i) 4.1
-------------------------------------------------------------------
Net earnings (loss) $ (4.2) $ 0.3 $ (22.1) $ (26.0)
===================================================================
Loss per share $ (0.13) $ (0.71)
=========== =============
Weighted average number of common shares
outstanding 31,681,582 4,883,227 (j) 36,564,809
=========== ========= =============
</TABLE>
<PAGE> 6
BREED Technologies, Inc.
Notes To Unaudited Pro Forma Condensed
Consolidated Statement of Earnings
(in millions except share and per share data)
(a) Represents USS's results of operations for the four months ended October
25, 1996, the date of acquisition.
(b) Represents Custom Trim's results of operations for the eight months ended
February 22, 1997, the date of acquisition.
(c) Represents SRS's results of operations for the twelve months ended June
30, 1997 and the three months ended September 30, 1997, as the case may be.
(d) Represents the exclusion of items related to certain SRS operations which
were not acquired by the Company in the SRS Acquisition. These items
include:
<TABLE>
<CAPTION>
TWELVE-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED
JUNE 30 SEPTEMBER 30 1997
1997
------------------------------------
<S> <C> <C>
Net sales $70.8 $14.2
Cost of sales 61.4 12.2
Engineering, research and development 1.8 -
Selling, general and administrative 2.2 0.4
Other income (expense), net 1.6 (1.2)
Income taxes (benefit) (2.6) 0.1
</TABLE>
The income tax benefit was estimated using the effective tax rate of SRS
for the twelve months ended June 30, 1997.
(e) Represents the amortization expense of goodwill expected to be incurred as
a result of the SRS Acquisition using an estimated life of 40 years.
Management is continuing to evaluate the appropriate amortization periods
and existence of any other intangible assets.
<TABLE>
<CAPTION>
TWELVE-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED
JUNE 30 SEPTEMBER 30
1997 1997
------------------------------------
<S> <C> <C>
Goodwill amortization related to SRS Acquisition $ 12.3 $ 3.1
Goodwill amortization previously recorded by SRS (3.2) (0.8)
====================================
Increase in goodwill amortization $ 9.1 $ 2.3
====================================
</TABLE>
<PAGE> 7
BREED Technologies, Inc.
Notes To Unaudited Pro Forma Condensed
Consolidated Statement of Earnings (continued)
(f) Reflects various financing and advisory fees related to the SRS
Acquisition. These fees include $42.6 paid or to be paid in cash and the
value of warrants. These fees are being amortized over six months because
the Company expects to replace the New Credit Facility within six months.
The adjustment for the twelve-month period ended June 30, 1997 includes
the net of the write-off of $0.9 deferred financing costs related to the
Previous Credit Facility less the previously recorded amortization of $0.7
related to the Previous Credit Facility. The adjustment for the
three-month period ended September 30, 1997 includes the write-off of $0.9
deferred financing costs related to the Previous Credit Facility.
The estimate of the value of the warrants is based on 250,000 warrants
vesting immediately on the closing of the New Credit Facility. If the
Company provides an operating plan reasonably acceptable to the lender
within 90 days and receives $300.0 of equity capital (which the Company
has received as a result of the Siemens Investment and the PSCC Financing
and which condition continued to be met following the redemption in full
of the PSCC Securities with the proceeds of the issuance and sale of the
Preferred Securities), no other warrants will vest within the six-month
period. The Company expects to meet the condition regarding delivery of an
acceptable operating plan. However, if the Company does not meet this
condition, and the amounts due under the New Credit Facility are not paid,
up to 2,750,000 additional warrants may vest within 270 days. In that
event, the value of the additional warrants will be charged to expense.
(g) This adjustment represents the additional interest expense that would have
been incurred if the Bank Borrowing were outstanding for the entire period
rather than the Previous Credit Facility.
<TABLE>
<CAPTION>
TWELVE-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED
JUNE 30 SEPTEMBER 30
1997 1997
-----------------------------------
<S> <C> <C>
Interest expense on the Bank Borrowing $85.3 $21.3
Interest expense under the Previous Credit Facility (17.0) (6.7)
===================================
Net increase in interest expense $68.3 $14.6
===================================
</TABLE>
<PAGE> 8
BREED Technologies, Inc.
Notes To Unaudited Pro Forma Condensed
Consolidated Statement of Earnings (continued)
The interest rate for the New Credit Facility is based on base interest
rates selected by the Company plus applicable margins. The Company is
obligated to enter into interest rate swap agreements in notional amounts
of at least $300 as long as $300 is outstanding under the New Credit
Facility and one-half of the amount outstanding under the New Credit
Facility if the amount outstanding is less than $300.
For each increase or decrease in the base interest rates of one-quarter
percentage point on Bank Borrowing balances of $800, the annual interest
expense would increase or decrease by $2, without giving effect to any
interest rate swap agreements.
(h) Income tax benefits are estimated for net pro forma adjustments at the
Company's effective tax rate for fiscal 1997 for the following items:
<TABLE>
<CAPTION>
TWELVE-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED
JUNE 30 SEPTEMBER 30
1997 1997
------------------------------------
<S> <C> <C>
Amortization of goodwill related to SRS $ 12.2 $ 3.1
Amortization of deferred financing costs 42.8 22.2
Increase in interest expense 68.3 14.6
------------------------------------
Total decrease to net income 123.3 39.9
Distributions on the Preferred Securities 16.3 4.1
------------------------------------
Net adjustments 139.6 44.0
Company's effective tax rate 49% 49%
------------------------------------
Income tax benefits $ 68.4 $ 21.6
====================================
</TABLE>
(i) Represents Distributions at the annual rate of 6.50% that would have been
recorded if the Preferred Securities had been outstanding for the entire
period.
(j) The pro forma weighted average number of common shares outstanding
includes the impact of converting the Series A Preferred Shares issued in
the Siemens Investment to Common Stock as of the beginning of the period.
The Preferred Securities are not dilutive.
(k) The BREED statement of earnings for the three-month period ended
September 30, 1997 includes the results of operations for the businesses
acquired in the 1997 Acquisitions for the entire period.
<PAGE> 9
BREED Technologies, Inc.
Unaudited Pro Forma Condensed
Consolidated Balance Sheet
September 30, 1997
<TABLE>
<CAPTION>
PRO FORMA
BREED SRS ADJUSTMENTS PRO FORMA
-------------------------------------------------------------
ASSETS (in millions except share and per share data)
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 12.0 $ 22.4 $ 33.2 (1) $ 95.2
50.0 (2)
(17.2)(2)
(5.2)(3)
Accounts receivable, principally trade 192.2 129.9 (4.5)(3) 267.6
(50.0)(2)
Inventories 79.3 45.2 (1.7)(3) 122.8
Prepaid expenses and other current assets 20.4 26.1 (1.6)(3) 27.1
(17.8)(2)
-------------------------------------------------------------
Total current assets 303.9 223.6 (4.8) 512.7
Property, plant and equipment 367.7 154.4 (4.0)(3) 518.1
Less accumulated depreciation (95.3) - - (95.3)
-------------------------------------------------------------
272.4 154.4 (4.0) 422.8
Intangible assets, net 219.4 48.7 483.6 (4) 701.1
(48.7)(2)
(1.9)(3)
Net assets held for sale 56.9 - - 56.9
Other noncurrent assets 13.0 17.9 28.3 (5) 57.3
(1.0)(2)
(0.9)(12)
-------------------------------------------------------------
Total assets $865.6 $444.6 $ 440.6 $1,750.8
=============================================================
LIABILITIES, CONVERTIBLE PREFERRED SECURITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion of long-term $195.7 $ - $(169.5)(6) $ 26.2
debt
Accounts payable 129.2 139.5 (2.4)(3) 266.3
Accrued expenses 25.2 43.9 (0.6)(3) 58.8
(4.4)(13)
(5.3)(14)
Repositioning and other charges 200.0 (15) 200.0
-------------------------------------------------------------
Total current liabilities 350.1 183.4 17.8 551.3
Long-term debt 240.9 - 800.0 (11) 840.9
(200.0)(6)
Other long-term and deferred liabilities 15.5 34.4 (14.7)(2) 24.7
(.2)(2)
(10.3)(2)
Company-obligated Mandatorily Redeemable Convertible
Preferred Securities of BTI Capital Trust holding
solely Convertible Debentures - - 250.0 (7) 250.0
Stockholders' equity:
Common stock 0.3 - - 0.3
Preferred stock--Siemens - - 115.0 (8) 115.0
Additional paid-in capital 77.6 - 1.3 (9) 78.9
Retained earnings 203.7 - (.9)(12) (87.8)
(80.0)(4)
(10.0)(7)
(4.6)(13)
(1.3)(13)
5.3 (14)
(200.0)(15)
Foreign currency translation adjustment (22.1) - - (22.1)
Unearned compensation (0.4) - - (0.4)
SRS foreign currency translation adjustment - (2.3) 2.3 (10) -
SRS equity - 229.1 (229.1)(10) -
-------------------------------------------------------------
Total stockholders' equity 259.1 226.8 (402.0) 83.9
-------------------------------------------------------------
Total liabilities, convertible preferred
securities and stockholders' equity $865.6 $444.6 $ 440.6 $1,750.8
=============================================================
</TABLE>
<PAGE> 10
BREED Technologies, Inc.
Notes to Unaudited Pro Forma Condensed
Consolidated Balance Sheet
(in millions except share and per share data)
(1) Reflects sources and uses of cash related to the Transactions:
<TABLE>
<S> <C>
Bank Borrowing $ 800.0
Preferred Stock--Siemens 115.0
Preferred Securities 250.0
Repayment of outstanding borrowings under the Previous Credit Facility (369.5)
Payment of purchase price for the SRS Acquisition (710.0)
Dividends paid on the PSCC Securities (1.3)
Fees and expenses related to the Transactions (51.0)
===================
$ 33.2
===================
</TABLE>
(2) The following is a summary of the book value of SRS, with adjustments
for assets not acquired and liabilities not assumed by the Company in
the SRS Acquisition:
<TABLE>
<S> <C>
Book value of SRS at September 30, 1997 $226.8
Less assets not acquired:
Cash and cash equivalents (17.2)
Goodwill (48.7)
Long-term deferred tax assets (1.0)
Current deferred tax assets (17.8)
Net assets of the portion of the SRS business not acquired--see Note 3 (15.9)
Plus liabilities not assumed:
Net capital deficit of joint venture 10.3
Warranty reserve 0.2
Long-term deferred tax liabilities 14.7
===================
Adjusted book value of SRS at September 30, 1997--see Note 4 $151.4
===================
</TABLE>
The above information is an estimate of the assets to be acquired and
liabilities assumed by the Company as of September 30, 1997. The actual
determination will be made subsequent to the date hereof and the amounts
may be different and the differences may be material. If the actual net
assets are greater than $175.3, the Company is required to pay the
difference to AlliedSignal and if the actual net assets are less than
$175.3, AlliedSignal is required to pay the difference to the Company.
AlliedSignal has advanced $50.0 in cash to the Company related to this
provision. This is reflected as an increase in cash and a reduction in
accounts receivable.
<PAGE> 11
BREED Technologies, Inc.
Notes to Unaudited Pro Forma Condensed
Consolidated Balance Sheet (continued)
(3) The following is a summary of certain balance sheet items for the
portion of the SRS business not acquired by the Company that are being
used to adjust the net book value of SRS at September 30, 1997 in Note 2
above:
<TABLE>
<S> <C>
Cash $ (5.2)
Accounts receivable (4.5)
Inventories (1.7)
Prepaid expenses and other current assets (1.6)
Property, plant and equipment (4.0)
Patents (1.9)
Accounts payable 2.4
Other accrued expenses 0.6
-------------------
Net assets not acquired--see Note 2 $(15.9)
===================
</TABLE>
(4) Reflects estimated goodwill from the SRS Acquisition as follows:
<TABLE>
<S> <C>
Purchase price $710.0
Less:
Adjusted book value of SRS (net assets acquired)--See Note 2 (151.4)
Less estimated in-process research and development (80.0)
-------------------
Excess of purchase price over net assets acquired 478.6
Capitalized acquisition costs 5.0
Goodwill -------------------
$483.6
===================
</TABLE>
The above estimate of goodwill does not reflect any allocation of
purchase price to any identifiable intangible assets nor any potential
fair value adjustments related to property, plant and equipment, as the
Company has not yet obtained appraisals. In addition, the estimate does
not reflect any additional costs that may be incurred related to closure
of any SRS facilities or the costs related to any future termination of
SRS employees. Any such additional costs will increase the amount of
goodwill. Management expects to amortize the goodwill over a 40-year
life and is currently evaluating potential other intangible assets and
continues to evaluate the assigned lives.
(5) Reflects deferred financing costs of $28.3 paid in cash and warrants.
(6) Reflects repayment of outstanding borrowings under the Previous Credit
Facility.
<PAGE> 12
BREED Technologies, Inc.
Notes to Unaudited Pro Forma Condensed
Consolidated Balance Sheet (continued)
(7) Reflects the Offering of Preferred Securities, including the related $10
of issuance expenses which are reflected as a reduction of retained
earnings.
(8) Reflects the issuance of Series A Preference Shares to Siemens.
(9) Reflects the fair value of warrants issued for financing costs.
(10) Eliminates equity of SRS.
(11) Reflects the Bank Borrowing.
(12) Reflects write-off of deferred financing fees related to the Previous
Credit Facility.
(13) Reflects the fees and expenses, including advisory fees, related to the
issuance of the PSCC Securities, net of $4.4 in income taxes, as well as
the assumed $1.3 in accrued dividends.
(14) Reflects the tax effect of the following:
<TABLE>
<S> <C>
Write-off of deferred financing fees related to the Previous Credit Facility $ 0.9
Expenses of issuing Preferred Securities 10.0
-------------------
10.9
Estimated effective income tax rate 49%
-------------------
Tax effect $ 5.3
===================
</TABLE>
(15) To reduce retained earnings for repositioning and other special charges of
$250 million, net of the estimated income tax effect of $50 million.
