SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
AMENDMENT TO APPLICATION OR REPORT
Filed pursuant to Section 12, 13 or 15(d) of the Securities Exchange Act of
1934
SIMPSON INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
MICHIGAN 0-6611 38-1225111
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
47603 Halyard Drive, Plymouth, Michigan 48170
(Address of Principal executive offices) (Zip Code)
Registrant's telephone number, including area code (313) 207-6200
(Former name or former address, if changed since last report)
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AMENDMENT NO. 1
The undersigned Registrant hereby amends the following items, financial
statements, exhibits or other portions of its Current Report on Form 8-K dated
June 27, 1997 as set forth in the pages attached hereto:
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired
(b) Pro Forma Financial Information
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned hereunto duly authorized.
SIMPSON INDUSTRIES, INC.
By: /S/ VINOD M. KHILNANI
Vinod M. Khilnani
Chief Financial Officer
Dated: September 9, 1997
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Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired
Filed with this Report are the following audited
financial statements of Cummins Engine Company, Inc.
Vibration Attenuation Business:
(1) Audited Combined Balance Sheet as of December 31, 1996; and
(2) Audited Combined Statements of Earnings, Retained
Earnings and Cash Flows for the year ended December 31,
1996.
(b) Pro Forma Financial Information
(1) A pro forma combined condensed balance sheet is not filed
with this Report because the entire transaction is already
fully reflected in the Registrant's June 30, 1997
Consolidated Balance Sheet, which was filed as part of the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997.
Filed with this Report is the following unaudited pro forma
financial statements of the Registrant:
(2) Pro Forma Consolidated Condensed Statement of Income
for the year ended December 31, 1996;
(3) Pro Forma Consolidated Condensed Statement of Income for the
six months ended June 30, 1997.
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CUMMINS ENGINE COMPANY, INC.
VIBRATION ATTENUATION BUSINESS
Combined Financial Statements
For the Year Ended December 31, 1996
(With Independent Auditors' Report Thereon)
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CUMMINS ENGINE COMPANY, INC.
VIBRATION ATTENUATION BUSINESS
Table of Contents
Page(s)
Independent Auditors' Report 1
Combined Balance Sheet 2
Combined Statement of Earnings 3
Combined Statement of Retained Earnings 4
Combined Statement of Cash Flows 5
Notes to Combined Financial Statements 6-11
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INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Simpson Industries, Inc.:
We have audited the accompanying combined balance sheet of Cummins Engine
Company, Inc. Vibration Attenuation Business as of December 31, 1996, and the
related combined statements of earnings, retained earnings, and cash flows for
the year then ended. These combined financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these combined financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Cummins Engine
Company, Inc. Vibration Attenuation Business as of December 31, 1996, and the
results of its operations and its cash flows for the year then ended, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Detroit, Michigan
September 3, 1997
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CUMMINS ENGINE COMPANY, INC.
VIBRATION ATTENUATION BUSINESS
Combined Balance Sheet
December 31, 1996
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 1,120
Receivables:
Trade receivables, net of allowance
for doubtful accounts of $89 18,338
Intercompany receivables - Cummins (note 2) 4,777
Total receivables 23,115
Inventory (note 3) 4,102
Prepaid expenses and other current assets 18
Total current assets 28,355
Property, plant, and equipment, net (note 4) 17,798
Other assets 328
$ 46,481
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable - trade $ 12,106
Intercompany payables - Cummins (note 2) 1,212
Accrued liabilities (note 5) 3,230
Total current liabilities 16,548
Intercompany long-term debt (note 7) 755
Total liabilities 17,303
Stockholder's equity:
Share capital 6,260
Retained earnings 19,527
Cumulative translation adjustment 3,391
Total stockholder's equity 29,178
Commitments and contingencies (notes 9 and 10) $ 6,481
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
CUMMINS ENGINE COMPANY, INC.
VIBRATION ATTENUATION BUSINESS
Combined Statement of Earnings
Year ended December 31, 1996
(in thousands)
Net sales $ 64,799
Cost of sales 45,911
Gross profit 18,888
Administrative and selling expenses 10,094
Operating income 8,794
Other income (expense):
Interest expense, net (223)
Other income 192
Income before income taxes 8,763
Income taxes (note 6) 3,341
Net income $ 5,422
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CUMMINS ENGINE COMPANY, INC.
VIBRATION ATTENUATION BUSINESS
Combined Statement of Retained Earnings
Year ended December 31, 1996
(In thousands)
Balance at January 1, 1996 $ 20,257
Net income 5,422
Dividends paid (6,152)
Balance at December 31, 1996 $ 19,527
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
CUMMINS ENGINE COMPANY, INC.
VIBRATION ATTENUATION BUSINESS
Combined Statement of Cash Flows
Year ended December 31, 1996
(in thousands)
Cash flows from operating activities:
Net income $ 5,422
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 3,028
Changes in assets and liabilities:
Increase in accounts receivable (3,089)
Increase in inventories (418)
Increase in accounts payable and
accrued expenses 4,481
Other, net 1,491
Net cash provided by operating activities 10,915
Cash flows from investing activities:
Purchase of property, plant, and equipment (3,455)
Net cash used in investing activities (3,455)
Cash flows from financing activities:
Net repayment on borrowings (1,064)
Dividend payments (6,152)
Net cash used in financing activities (7,216)
Effect of exchange rate changes on cash 16
Net increase in cash and cash equivalents 260
Cash and cash equivalents - beginning of the year 860
Cash and cash equivalents - end of the year $ 1,120
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
CUMMINS ENGINE COMPANY, INC.
VIBRATION ATTENUATION BUSINESS
Notes to Combined Financial Statements
December 31, 1996
(All amounts in thousands)
(1) Nature of Business
The Vibration Attenuation Business (Company) of Cummins Engine Company,
Inc. (Cummins), was acquired by Simpson Industries, Inc., on June 27, 1997.
The acquisition was effected by acquiring the common stock of Cummins'
subsidiaries in certain countries and by acquiring net assets in certain other
countries. Cummins will continue to be a customer of the Company after the
sale.
The Company supplies rubber dampers for light- and medium-duty engines and
viscous dampers for heavy-duty diesel engine customers. Manufacturing
operations are located in England, France, Spain, Mexico, Brazil, and Korea.
The Company is also a minority partner in a joint venture in India.
(2) Summary of Significant Accounting Principles
Principles of Combination
The combined financial statements of the Vibration Attenuation Business
have been extracted from the accounts of Cummins and its subsidiary companies.
The combined statements include the accounts of the entire Vibration
Attenuation Business. Hodek, an affiliated company in India in which Cummins
does not have a controlling interest, is accounted for as an investment at its
historical cost. All significant intercompany balances and transactions have
been eliminated in the combination.
Related Party Transactions with Cummins
The Company has normal transactions with other Cummins business units
outside the Vibration Attenuation Business. Intercompany receivables and
payables arise through these normal business transactions, which will continue
under Simpson's ownership. Included in net sales is $6,374 of intercompany
sales to Cummins business units.
In April 1997, the French subsidiary paid a dividend of approximately $4.2
million to its direct parent, a subsidiary of Cummins.
CUMMINS ENGINE COMPANY, INC.
VIBRATION ATTENUATION BUSINESS
Notes to Combined Financial Statements, Continued
(2) Summary of Significant Accounting Principles, Continued
Revenue Recognition
The Company recognizes revenues on the sale of its products, net of
estimated costs of returns, allowances, and sales incentives, when the
products are shipped to customers.
Product Coverage Programs
Estimated costs of commitments for product coverage programs are charged to
earnings at the time the Company sells its products.
Foreign Currency
The Company uses the local currency as the functional currency for its
manufacturing operations outside the United States, except those in Brazil and
Mexico, for which it uses the U.S. dollar.
At operations which use the local currency as the functional currency,
results are translated into U.S. dollars using the average exchange rates for
the year. Assets and liabilities are translated into U.S. dollars using
year-end exchange rates, with the exception of certain nonmonetary assets such
as share capital and opening retained earnings, which are translated into U.S.
dollars using historical exchange rates. The resulting translation
adjustments are recorded as a separate component of shareholders' investment.
At the Company's operations in Brazil and Mexico, cash and certain other
monetary assets and liabilities (such as receivables and payables) and
revenues and expenses are translated into U.S. dollars using current exchange
rates. Inventories and nonmonetary assets, such as fixed assets, are
translated into U.S. dollars using historical exchange rates. The resulting
translation adjustments and gains and losses from foreign currency
transactions are reflected in net earnings.
Research and Development
Expenditures for research and development of new products, as well as
engineering expenditures during early production and ongoing efforts to
improve existing products, are charged to earnings as incurred, net of
contract reimbursements.
CUMMINS ENGINE COMPANY, INC.
VIBRATION ATTENUATION BUSINESS
Notes to Combined Financial Statements, Continued
(2) Summary of Significant Accounting Principles, Continued
Cash Equivalents
Cash equivalents are investments that are readily convertible to known
amounts of cash and have original maturities of three months or less.
Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected
to be recovered or settled. The effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that includes
the enactment date.
Tax provisions for the separate countries are prepared on a stand-alone
basis.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
using standard costs calculated to reflect all appropriate material and
production expenses, together with attributable overheads. Standard costs
approximate costs determined on the first in, first out basis.
Property, Plant, and Equipment and Depreciation
Depreciation is computed using the straight-line method for financial
reporting purposes. The estimated service lives to compute depreciation range
from 20 to 40 years for building and 3 to 20 years for machinery, equipment,
and fixtures. Where appropriate, the Company uses accelerated depreciation
methods for tax purposes. Maintenance and repair costs are charged to
earnings as incurred.
CUMMINS ENGINE COMPANY, INC.
VIBRATION ATTENUATION BUSINESS
Notes to Combined Financial Statements, Continued
(2) Summary of Significant Accounting Principles, Continued
Financial Instruments
The Company values financial instruments as required by Statement of
Financial Accounting Standards No. 107, Disclosures About Fair Value of
Financial Instruments. The carrying amounts of cash, receivables, and
accounts payable approximate fair value due to the short maturity periods of
these instruments. The Company's debt bears interest at rates which fluctuate
with market rates, and therefore, the carrying amount approximates fair value.
Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results
could differ from those estimates.
Retirement Plans
All UK employees are eligible to join the Cummins UK pension and life
assurance scheme. It is a 40-year defined benefits scheme, and members are
contracted out of the State Earnings Related Scheme.
There is no Company pension scheme for employees in France and Spain.
Employees are expected to make their own pension investments or they rely on
the state pension. Both the employees and the employer pay contributions to
the General Social Security Fund.
U.S. employees are eligible to join the Cummins pension scheme.
(3) Inventories
Inventories are comprised of:
Finished products $2,372
Work in process and raw materials 1,730
$4,102
CUMMINS ENGINE COMPANY, INC.
VIBRATION ATTENUATION BUSINESS
Notes to Combined Financial Statements, Continued
(4) Property, Plant, and Equipment
Property, plant, and equipment are comprised of:
Land and buildings $ 4,800
Machinery, equipment, and fixtures 30,910
Construction in process 1,715
37,425
Less accumulated depreciation (19,627)
$ 17,798
(5) Accrued Liabilities
Accrued liabilities are comprised of:
Employee compensation and fringe benefits accruals $ 1,273
Other 1,957
$ 3,230
(6) Income Taxes
The business of the Company in France, Spain, and Korea is conducted within
stand-alone Cummins' subsidiaries. The business of the Company in England,
Mexico, Brazil, and the United States is conducted within other Cummins
subsidiaries which also include non-vibration attenuation business.
The effective tax rate of 38.1 percent is higher than the U.S. statutory
tax rate of 34 percent because a higher proportion of income before income
taxes was earned in countries with higher statutory corporate income tax
rates. Deferred income taxes of the business are not significant.
(7) Intercompany Debt
The Company has a loan from Cummins. No maturity date is stipulated in the
loan agreement and the interest rate is 8.5%.
CUMMINS ENGINE COMPANY, INC.
VIBRATION ATTENUATION BUSINESS
Notes to Combined Financial Statements, Continued
(8) Line of Credit Facility
The Company maintains a line of credit facility in Spain in the amount of
50 million pesetas at current interest rates. The line was unused at
December 31, 1996.
(9) Operating Leases
The Vibration Attenuation Business leases certain manufacturing equipment,
office furniture and fixtures, and motor vehicles. Most of these leases
require fixed rental payments, expire over the next five years and can be
renewed or replaced with similar leases. Rental expense under these leases
approximated $233 in 1996. Future minimum payments for leases with original
terms of more than one year are $233 in 1997, $127 in 1998, $58 in 1999, $23
in 2000, and $3 in 2001.
(10) Contingencies
The Company is subject to various claims and legal proceedings arising out
of the normal course of business, none of which, in the opinion of management,
is expected to have a material effect on the Company's financial position or
results of operations.
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SIMPSON INDUSTRIES, INC.
PRO FORMA FINANCIAL INFORMATION
Unaudited Pro Forma Combined Statement of Income and Notes
Set forth below are the respective historical statements of income of Simpson
Industries, Inc. ("Simpson") and the Cummins Engine Company, Inc. Vibration
Attenuation Business ("Holset VA") and the pro forma combined statements of
income for the year ended December 31, 1996, as if the transaction had been
completed as of January 1, 1996. The presentation reflects the purchase of
all assets and the assumption of certain liabilities of Holset VA. This pro
forma combined statement of income should be read in conjunction with the
historical financial statements of Simpson and Holset VA and the pro forma
combined statement of income for the six months ended June 30, 1997, included
with this Amendment. This pro forma combined statement of income is not
necessarily indicative of future earnings or earnings that would have been
reported for the period indicated had the transaction been completed at
January 1, 1996.
Pro Forma Combined Condensed Statement of Income (Unaudited)
Year Ended December 31, 1996
(In thousands, except per share amounts)
Historical Pro Forma
Simpson Holset VA Adjustments Combined
Net sales $407,999 $ 64,799 $ 472,798
Cost and expenses
Cost of products sold 365,253 45,911 2,269* 413,433
Administrative and
selling 13,173 10,094 23,267
378,426 56,005 2,269 436,700
Operating Earnings 29,573 8,794 (2,269) 36,098
Investment and other
income, net 1,425 192 1,617
Interest expense (5,354) (223) (5,250)** (10,827)
Earnings Before
Income Taxes 25,644 8,763 (7,519) 26,888
Income taxes 8,037 3,341 (2,820)*** 8,558
Net Earnings $17,607 $5,422 $(4,699) $18,330
Net Earnings Per Share $ 0.97 $1.01
Average number
of common
equivalent shares 18,108,439 18,108,439
* To reflect the incremental depreciation on the write-up of fixed assets
and amortization expense on the unallocated purchase cost.
** To reflect interest expense on the debt issued to finance the purchase
of Holset VA.
*** To reflect the income taxes on the pro forma adjustment at a rate
of 37.5%.
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SIMPSON INDUSTRIES, INC.
PRO FORMA FINANCIAL INFORMATION
Unaudited Pro Forma Combined Statement of Income
Set forth below are the respective historical statements of income of Simpson
Industries, Inc. ("Simpson") and the Cummins Engine Company, Inc. Vibration
Attenuation Business ("Holset VA") and the pro forma combined statement of
income for the six months ended June 30, 1997, as if the transaction had been
completed as of January 1, 1997. The presentation reflects the purchase of
all assets and the assumption of certain liabilities of Holset VA. This pro
forma combined statement of income should be read in conjunction with the
historical financial statements of Simpson and Holset VA and the pro forma
combined statement of income for the year ended December 31, 1996, included
with this Amendment. This pro forma combined statement of income is not
necessarily indicative of future earnings or earnings that would have been
reported for the period indicated had the transaction been completed at
January 1, 1997.
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME (UNAUDITED)
Six Months Ended June 30, 1997
(In thousands, except per share amounts)
Historical Pro Forma
Simpson Holset VA Adjustments Combined
Net sales $ 216,148 $ 35,763 $ 251,911
Cost and expenses
Cost of products sold 192,292 26,597 995 219,884
Administrative and
selling 6,223 5,024 11,247
198,515 31,621 995 231,131
Operating Earnings 17,633 4,142 (995) 20,780
Investment and
other income, net 526 201 727
Interest expense (2,717) (59) (2,625) (5,401)
Earnings Before
Income Taxes 15,442 4,284 (3,620) 16,106
Income taxes 5,637 1,793 (1,552) 5,878
Net Earnings $ 9,805 $ 2,491 $ (2,068) $ 10,228
Net Earnings Per Share $ 0.54 $ 0.56
Average number
of common
equivalent shares 18,163,432 18,163,432
