SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
November 22, 1996
Date of Report (Date of earliest event reported)
AMERICAN MOBILE SATELLITE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 0-23044 93-0976127
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
10802 Parkridge Boulevard, Reston, Virginia 22091
(Address of principal executive offices) (Zip Code)
(703) 758-6000
(Registrant's telephone number, including area code)
<PAGE>
This Form 8-K/A amends and restates the Form 8-K/A filed February 6, 1997.
The Registrant hereby amends the following item of its Current Report on Form
8-K dated November 22, 1996, filed December 9, 1996.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements.
(1) Audited financial statements of Mobile Communications
Satellite Service a Business unit of Rockwell Collins,
Inc. as of September 30, 1996 and 1995 together with the
report of the auditors thereon. (Report of the
independent accountants thereon is filed herewith.)
(b) Pro Forma Financial Information.
(1) Unaudited pro forma combined balance sheet as if the
acquisition occurred on September 30, 1996 and unaudited
pro forma combined income statements for the year
ended December 31, 1995 and for the nine month period
ended September 30, 1996 as if the acquisition
occurred at the beginning of each of those respective
periods. (Filed herewith.)
(c) Exhibits.
10.61 -- Asset Sale Agreement dated as of November 22, 1996 by and among
Rockwell Collins, Inc., American Mobile Satellite Corporation and
AMSC Subsidiary Corporation (Incorporated by reference to Exhibit
10.61 previously filed with the initial filing of this Current
Report on Form 8-K dated November 22, 1996 and filed on December 9,
1996).
23.2 -- Consent of Deloitte & Touche LLP.
99.9 -- American Mobile Satellite Corporation Press Release No. 96-#25
dated November 25, 1996 (Incorporated by reference to Exhibit 99.9
previously filed with the initial filing of this Current Report
on Form 8-K dated November 22, 1996 and filed on December 9, 1996).
99.10 -- Audited financial statements of Mobile Communications Satelllite
Service a Business unit of Rockwell Collins, Inc. as of September
30, 1996 and 1995 together with the report of the auditors thereon.
99.11 -- Unaudited pro forma combined balance sheet as if the acquisition
occurred on September 30, 1996 and unaudited pro forma combined
income statements for the year ended December 31, 1995 and for the
nine month period ended September 30, 1996 as if the acquisition
occured at the beginning of each of those respective periods.
2
<PAGE>
On November 22, 1996, American Mobile Satellite Corporation acquired the assets
of Rockwell Collins, Inc. ("Rockwell") relating to its Land Transportation
Electronics Mobile Communications Satellite Service business (the "Business")
through which Rockwell had sold mobile messaging hardware and services to
commercial trucking fleets. The assets of the Business were acquired from
Rockwell through the assumption by the registrant of the various contracts and
obligations of Rockwell relating to the Business; no additional direct payments
were made or are to be made under the terms of the Asset Sale Agreement, dated
as of November 22, 1996.
The assets of the Business acquired from Rockwell include tangible equipment and
inventory used in connection with fulfilling the contracts transferred with the
Business. The registrant intends to continue such use in operating the Business.
The following pro forma financial information covers for the income statements:
the registrant's most recently completed fiscal year for which financial
statements have been filed with the commission, the year ended December 31,
1995, utilizing Rockwell's financial statements for the year ended September 30,
1995, and the for the registrant's nine month period ended September 30, 1996,
utilizing Rockwell's interim results for the last nine months of its fiscal year
ended September 30, 1996 and for the balance sheet: the registrant's interim
balance sheet as of September 30, 1996, utilizing Rockwell's balance sheet as of
its year end, September 30, 1996.
The pro forma income statements reflect the results of operations as if the
acquisition was consummated as of the beginning of the respective one year and
nine month period.
The pro forma balance sheet information reflects the registrant's financial
condition as if the acquisition was consummated on September 30, 1996.
The pro forma financial information presented reflects allocation of the
purchase price under the purchase method of accounting in accordance with
accounting principles board opinion no. 16.
3
<PAGE>
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.
AMERICAN MOBILE SATELLITE CORPORATION
(Registrant)
Date: January 12, 1997 /s/ RANDY S. SEGAL
------------------
Randy S. Segal
Vice President and General Counsel
4
<PAGE>
EXHIBIT INDEX
Exhibit
Number Exhibit
- ------ -------
10.61 Asset Sale Agreement dated as of November 22, 1996 by and among Rockwell
Rockwell Collins, Inc., American Mobile Satellite Corporation and AMSC
Subsidiary Corporation.*
23.2 Consent of Deloitte & Touche LLP.
99.9 American Mobile Satellite Corporation Press Release No. 96-#25 dated
November 25, 1996.*
99.10 Audited financial statements of Mobile Communications Satelllite
Service a Business unit of Rockwell Collins, Inc. as of September
30, 1996 and 1995 together with the report of the auditors thereon.
99.11 Unaudited pro forma combined balance sheet as if the acquisition
occurred on September 30, 1996 and unaudited pro forma combined
income statements for the year ended December 31, 1995 and for the
nine month period ended September 30, 1996 as if the acquisition
occured at the beginning of each of those respective periods.
- --------------------
*Incorporated by reference to Exhibits of same number previously filed with the
initial filing of this Current Report on Form 8-K dated November 22, 1996 and
filed on December 9, 1996.
5
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
33-72852, Registration Statement No. 33-34250, and Registration Statement No.
33-91714 of American Mobile Satellite Corporation on Form S-8, of our report on
Mobile Communications Satellite Service dated January 17, 1997, appearing in the
Current Report on Form 8-K of American Mobile Satellite Corporation.
/s/Deloitte & Touche LLP
Cedar Rapids, Iowa
February 4, 1997
EXHIBIT 99.10
Deloitte & Touche LLP
MOBILE COMMUNICATIONS SATELLITE SERVICE
A BUSINESS UNIT OF ROCKWELL COLLINS, INC.
(A WHOLLY OWNED SUBSIDIARY OF ROCKWELL INTERNATIONAL CORPORATION)
Financial Statements for the
Years Ended September 30, 1996 and 1995 and
Independent Auditors' Report
<PAGE>
Deloitte & Touche LLP
Armstrong Centre, Suite 500 Telephone: (319) 362-7987
222 Third Avenue, S.E. Facsimile: (319) 362-6646
Cedar Rapids, Iowa 52401
INDEPENDENT AUDITORS' REPORT
To Rockwell Collins, Inc.:
We have audited the accompanying statements of assets and liabilities of Mobile
Communications Satellite Service ("MCSS"), a business unit of Rockwell Collins,
Inc. ("Rockwell Collins"), a wholly owned subsidiary of Rockwell International
Corporation, (jointly "Rockwell"), as of September 30, 1996 and 1995, and the
related statements of income and of cash flows for the years then ended. These
financial statements are the responsibility of Rockwell Collins' management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the assets and liabilities of MCSS as of September 30, 1996 and 1995,
and the results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
The accompanying financial statements do not include allocations for common
services provided by Rockwell (see Note 2) and are not necessarily indicative of
the financial position, results of operations and cash flows had MCSS operated
as a stand-alone entity.
As discussed in Note 3 to the financial statements, Rockwell discontinued the
Company's operations and entered into an asset sale agreement on November 22,
1996, to sell substantially all assets of the Company.
/s/Deloitte & Touche LLP
January 17, 1997
<PAGE>
MOBILE COMMUNICATIONS SATELLITE SERVICE
A BUSINESS UNIT OF ROCKWELL COLLINS, INC.
(A WHOLLY OWNED SUBSIDIARY OF ROCKWELL INTERNATIONAL CORPORATION)
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
FOR THE YEARS ENDED SEPTEMBER 30, 1996 AND 1995
- --------------------------------------------------------------------------------
<CAPTION>
1996 1995
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Accounts receivable - net $ 922,000 $ 2,142,000
Inventories 6,065,000 10,703,000
Prepaid expenses and other current assets 355,000 239,000
--------- ---------
Total current assets 7,342,000 13,084,000
PROPERTY AND EQUIPMENT - NET 8,192,000
--------- ---------
TOTAL 7,342,000 21,276,000
--------- ---------
LIABILITIES
CURRENT LIABILITIES:
Accounts payable - Trade 1,406,000 2,029,000
Accounts payable - Rockwell 3,584,000 5,131,000
Accrued expenses 1,457,000 1,505,000
Deferred revenues 2,326,000 474,000
Accrued warranty reserve 5,798,000 3,772,000
Accrued restructuring reserve 13,396,000
---------- ---------
Total current liabilities 27,967,000 12,911,000
---------- ---------
COMMITMENTS AND CONTINGENCIES (Note 10)
NET ASSETS (LIABILITIES) $ (20,625,000) $ 8,365,000
=============== ============
See notes to financial statements
</TABLE>
-2-
<PAGE>
MOBILE COMMUNICATIONS SATELLITE SERVICE
A BUSINESS UNIT OF ROCKWELL COLLINS, INC.
(A WHOLLY OWNED SUBSIDIARY OF ROCKWELL INTERNATIONAL CORPORATION)
<TABLE>
STATEMENT OF INCOME
FOR THE YEARS ENDED SEPTEMBER 30, 1996 AND 1995
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
1996 1995
<S> <C> <C>
NET SALES $ 9,769,000 $ 14,183,000
COST OF SALES 35,749,000 28,742,000
------------ ------------
Gross margin (25,980,000) (14,559,000)
OPERATING EXPENSES
General and administrative 2,473,000 2,559,000
Sales and marketing 6,168,000 4,389,000
Research and development 1,599,000 6,193,000
Other operating expenses 673,000 39,000
Restructuring charges 22,130,000
------------ ------------
Total operating expenses 33,043,000 13,180,000
------------ ------------
LOSS FROM OPERATIONS (59,023,000) (27,739,000)
OTHER INCOME 67,000 56,000
LOSS BEFORE PROVISION FOR INCOME TAXES (58,956,000) (27,683,000)
PROVISION FOR INCOME TAXES (Note 11)
------------ ------------
NET LOSS $(58,956,000) $(27,683,000)
============= =============
See notes to financial statements
</TABLE>
-3-
<PAGE>
MOBILE COMMUNICATIONS SATELLITE SERVICE
A BUSINESS UNIT OF ROCKWELL COLLINS, INC.
(A WHOLLY OWNED SUBSIDIARY OF ROCKWELL INTERNATIONAL
CORPORATION)
<TABLE>
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1996 AND 1995
- --------------------------------------------------------------------------------
<CAPTION>
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $(58,956,000) $(27,683,000)
Adjustments to net loss to arrive at net cash
used for operating activities:
Restructuring charges 22,130,000
Depreciation 3,198,000 1,749,000
Changes in assets and liabilities:
Accounts receivable 1,220,000 623,000
Inventories 4,638,000 (3,339,000)
Accounts payable - Trade (623,000) 1,244,000
Accounts payable - Rockwell (1,547,000) 3,375,000
Deferred revenues 1,852,000 474,000
Other assets and liabilities 1,862,000 2,659,000
---------- ----------
Net cash used for operating activities (26,226,000) (20,898,000)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES - Additions
to property and equipment (3,740,000) (2,672,000)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES - Net cash 29,966,000 23,570,000
---------- ----------
transferred from Rockwell Collins Inc.
NET CHANGE IN CASH 0 0
CASH AT BEGINNING OF YEAR 0 0
---------- ----------
CASH AT END OF YEAR $ 0 $ 0
============ =============
See notes to financial statements
</TABLE>
-4-
<PAGE>
MOBILE COMMUNICATIONS SATELLITE SERVICE
A BUSINESS UNIT OF ROCKWELL COLLINS, INC.
(A WHOLLY OWNED SUBSIDIARY OF ROCKWELL INTERNATIONAL CORPORATION)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1996 AND 1995
- --------------------------------------------------------------------------------
1. THE BUSINESS
------------
Mobile Communications Satellite Service ("MCSS") is a business unit of
Rockwell Collins, Inc. ("Rockwell Collins"), a wholly owned subsidiary of
Rockwell International Corporation (hereafter, jointly referred to as
"Rockwell").
MCSS sells mobile messaging hardware and services to commercial trucking
fleets. MCSS assembles and sells multi-mode communications systems which
use integrated satellite and land-based technologies to provide commercial
trucking fleets with two-way data communications and global vehicle
location services. Land based technology ensures communications while
vehicles travel in urban areas where tall buildings may block the line of
sight to the satellite; satellite technology ensures the availability of
communications while vehicles travel through areas where land-based
coverage is non-existent. MCSS is headquartered in Cedar Rapids, Iowa.
2. SIGNIFICANT ACCOUNTING POLICIES
-------------------------------
Basis of Presentation - The accompanying financial statements have been
---------------------
prepared in accordance with generally accepted accounting principles
utilizing the accounting practices and procedures of Rockwell and have
been derived from the accounting records of Rockwell Collins. The
financial statements do not include allocations for common services
provided by Rockwell and are not necessarily indicative of the financial
position, results of operations or cash flows had MCSS operated as a
stand-alone entity.
Rockwell's cash resources are managed under a centralized system wherein
receipts are deposited to Rockwell corporate accounts and disbursements
are centrally funded. Accordingly, the accompanying financial statements
do not include cash, marketable securities or borrowings, or related
interest income, expenses, receivables or payables arising from these cash
management activities.
Expenses for certain common services provided by Rockwell, such as cash
management and other treasury services and legal, patent, tax, insurance
administration, payroll administration, corporate accounting, audit, and
human resources have not been included in the financial statements.
Certain expenses incurred by Rockwell have been allocated to MCSS based on
a budget formula that was agreed upon at the beginning of the year.
Individual expense categories are generally allocated on the basis of
sales or other measures of business unit activity levels.
-5-
<PAGE>
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 disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates. Material estimates that are particularly susceptible to
significant change in the near-term relate to the determination of
warranty reserves, allowance for uncollectible accounts receivable,
inventory obsolescence and restructuring reserve.
Revenue Recognition - Revenue from communications systems and products is
-------------------
generally recognized at the time the units are shipped and over the period
during which messaging services are provided, except for shipments under
arrangements involving satisfaction guarantee requirements. Under such
arrangements, revenue is recognized when MCSS has substantially met its
satisfaction guarantee obligations.
Substantially all of MCSS' revenues are derived from the North American
trucking industry. MCSS generally requires no collateral from its
customers. During the year ended September 30, 1996, two customers
accounted for 12% and 11% of total annual sales, respectively. During the
year ended September 30, 1995, two different customers accounted for 23%
and 11% of total annual sales, respectively.
Inventories - Inventories are valued at the lower of average cost or
-----------
market. Market is determined on the basis of estimated realizable values.
Income Taxes - The business computes income taxes giving recognition to
------------
deferred income tax assets and liabilities, based on enacted laws, for all
temporary differences between the financial reporting and tax bases of
assets and liabilities.
Property And Equipment - Property and equipment are recorded at cost less
-----------------------
accumulated depreciation. Depreciation is computed using accelerated and
straight-line methods over the estimated useful lives of the assets.
Estimated useful lives for major asset categories are 15-19 years for
buildings, 8 years for transmission equipment and 5 years for computer
equipment and furniture and fixtures. Significant improvements and
betterments are capitalized and replaced units are written off.
Maintenance and repairs are charged to expense as incurred.
Property and equipment include certain common allocated assets of Rockwell
Collins Inc. Common property is allocated to the various business units
based on the causal beneficial relationship between each common function
and the operating units.
Product Warranty - MCSS' Product warranty costs include all costs
-----------------
associated with repairs through the end of the expressed warranty period
and any subsequent extensions. There were significant extensions to
accommodate product design modifications. Warranty costs are accrued when
determinable, based on historical and anticipated breakdown of equipment.
Research and Development - Research and development costs are expensed as
------------------------
incurred.
-6-
<PAGE>
3. RESTRUCTURING AND SALE OF MCSS
------------------------------
In the fourth quarter of fiscal year 1996, a restructuring charge of $36.3
million was recorded to cover restructuring costs and asset impairments.
Restructuring charges included $8.7 million for property and equipment
impairment, $3.4 million for termination of a satellite usage agreement
and $10.0 million for estimated transition costs and costs to manufacture
and retrofit mobile terminals. Approximately $14.2 million was recorded as
cost of sales relating to write-downs of inventory.
On November 22, 1996, substantially all of the assets of MCSS, net of
certain liabilities, were sold.
In the accompanying balance sheet the assets and liabilities at September
30, 1996 have been adjusted to reflect the effects of the above mentioned
restructuring and sale of MCSS.
4. RELATED PARTY TRANSACTIONS
--------------------------
MCSS purchases all of its requirements of transceivers and antennas from
Rockwell Semiconductor Systems (RSS) facility in El Paso, Texas, a unit of
Rockwell International Corporation. Total purchases from RSS amounted to
$5.8 million and $12.7 million for the years ended September 30, 1996 and
1995, respectively.
Direct expenses incurred by Rockwell that are applicable to MCSS have been
allocated to MCSS and are included in the statements of income. Such
amounts were $2.2 million and $2.8 million for the years ended September
30, 1996 and 1995, respectively.
5. PENSION PLANS
-------------
Rockwell has a pension plan which covers substantially all MCSS employees
and provides for monthly pension payments to eligible employees upon
retirement. Pension benefits for salaried employees are based on years of
credited service and compensation.
Net pension expense is calculated on a corporate wide basis for Rockwell.
MCSS pension expense for the years ended September 30, 1996 and 1995 was
derived from such calculation and consists of the following:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Service cost--benefits earned during the year $117,000 $ 48,000
Interest accrued on projected benefit obligation 418,000 196,000
Assumed return on plan assets (408,000) (191,000)
Initial net asset amortization (34,000) (17,000)
Prior service cost amortization 22,000 15,000
Net actuarial loss amortization 51,000 12,000
-------- --------
Net pension expense $166,000 $ 63,000
======== ========
</TABLE>
-7-
<PAGE>
Pension plan assets are primarily equity securities, United States
Government obligations and fixed income investments whose values are
subject to fluctuations of the securities market. The following table
reconciles the funded status of the assets and liabilities of MCSS share
of Rockwell's pension plan to amounts recorded in the balance sheet:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Accumulated benefit obligation, principally vested $2,223,000 $ 956,000
Effects of projected compensation increases 414,000 199,000
---------- ----------
Projected benefit obligation 2,637,000 1,155,000
Fair value of plan assets 2,742,000 1,117,000
---------- ----------
Plan assets in excess of (less than) projected benefit obligation 105,000 (38,000)
Items not yet recognized in the balance sheet:
Net actuarial losses 48,000 180,000
Prior service cost 73,000 37,000
Remaining initial net asset (100,000) (59,000)
---------- ----------
Prepaid pension costs at September 30 $ 126,000 $ 120,000
========== ==========
</TABLE>
<TABLE>
<CAPTION>
1996 1995
Assumptions used (June 30 measurement date):
<S> <C> <C>
Discount rate 7.75% 7.50%
Compensation increase rate 4.50% 4.50%
Long-term rate of return on plan assets 9.00% 9.00%
</TABLE>
Rockwell also sponsors certain defined contribution savings plans for
eligible employees. Expense related to MCSS were $73,000 and $92,000 for
the years ended September 30, 1996 and 1995, respectively.
6. RETIREMENT MEDICAL PLANS AND POST EMPLOYMENT BENEFITS
-----------------------------------------------------
Rockwell has retirement medical plans which cover MCSS employees and
provide for the payment of medical costs of eligible employees and
dependents upon retirement.
Retirement medical expense is calculated on a corporate wide basis for
Rockwell. MCSS retirement medical expense for the years ended September
30, 1996 and 1995 was derived from such calculation and consists of the
following:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Service cost--benefits attributed to service during the year $ 15,000 $ 7,000
Interest accrued on accumulated retirement medical obligation 110,000 53,000
Amortization of plan amendments and net actuarial gains (27,000) (17,000)
--------- --------
Retirement medical expense $ 98,000 $43,000
========= ========
</TABLE>
-8-
<PAGE>
The retirement medical obligation related to MCSS participants at
September 30, 1996 and 1995 consists of the following:
<TABLE>
<CAPTION>
1996 1995
Accumulated retirement medical obligation:
Retirees
<S> <C> <C>
Employees eligible to retire $ 129,000 $ 73,000
Employees not eligible to retire 220,000 131,000
---------- ----------
Total 349,000 204,000
Unamortized amounts:
Plan amendments 122,000 72,000
Net actuarial losses (160,000) (78,000)
---------- ----------
Recorded liability $ 311,000 $ 198,000
========== =========
Assumptions used (June 30 measurement date):
Discount rate 7.75% 7.50%
Health care cost trend rates 8.0%* 8.5%*
*Decreasing to 5.5% after 2015
</TABLE>
Changing the health care cost trend rates by one percentage point would
change the accumulated retirement medical obligation at September 30, 1996
by approximately $24,000 and would change retirement medical expense by
approximately $2,000.
7. ACCOUNTS RECEIVABLE
-------------------
Accounts receivable at September 30, 1996 and 1995 are summarized as
follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Trade accounts $ 1,460,000 $ 2,100,000
Other receivables 5,000 42,000
Less: Allowance for doubtful accounts (543,000)
----------- -----------
Accounts receivable, net $ 922,000 $ 2,142,000
=========== ===========
</TABLE>
8. INVENTORIES
-----------
Inventories at September 30, 1996 and 1995 are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Raw materials $ 1,704,000 $ 652,000
Work-in-process 249,000 1,371,000
Finished goods 4,112,000 8,680,000
------------ -------------
Total inventories $ 6,065,000 $ 10,703,000
============ =============
</TABLE>
-9-
<PAGE>
9. PROPERTY AND EQUIPMENT
----------------------
Property and equipment at September 30, 1996 and 1995 are summarized as
follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Building $ 1,622,000 $ 944,000
Machinery & equipment 10,260,000 3,363,000
Transportation 250,000 156,000
Furniture & fixtures 4,180,000 4,415,000
Construction in process 393,000 4,087,000
------------- ------------
Total 16,705,000 12,965,000
Less: Accumulated depreciation (7,971,000) (4,773,000)
Less: Valuation reserve (8,734,000) -
------------- ------------
Property & equipment - net $ - $ 8,192,000
============= ============
</TABLE>
10. COMMITMENTS AND CONTINGENCIES
-----------------------------
Various lawsuits, claims and proceedings have been or may be instituted or
asserted against Rockwell relating to the conduct of its business,
including those pertaining to product liability, safety and health,
environmental , and employment matters. Although the outcome of litigation
cannot be predicted with certainty, management believes that the
disposition of the matters which are pending or asserted will not have a
material adverse effect on MCSS' financial condition, results of
operations, or cash flows.
11. INCOME TAXES
------------
The operations of MCSS are included in the consolidated income tax returns
of Rockwell. The income tax provisions reflected in the statements of
income and the related statement of assets and liabilities were calculated
as if MCSS files separate tax returns.
The components of the provision for income taxes for the years ended
September 30, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Current $ - $ -
Deferred - -
------ -----
Provision for income taxes $ - $ -
====== =====
</TABLE>
The following table presents the principal reasons for the difference
between the effective tax rate and the United States federal statutory
income tax rate:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Statutory tax rate (35.0)% (35.0)%
State & local income tax (4.0)% (4.0)%
Nonrecognition of benefits of current loss 39.0 % 39.0 %
------- -------
Effective tax rate 0% 0%
======= =======
</TABLE>
-10-
<PAGE>
Current and non-current deferred income tax assets (liabilities) arise
principally from the following:
<TABLE>
<CAPTION>
1996 1995
Current:
<S> <C> <C>
Accrued liabilities and reserves $ 5,300,000 $ 1,600,000
Other 300,000 -
------------ ------------
Subtotal 5,600,000 1,600,000
Valuation Allowance (5,600,000) (1,600,000)
------------ ------------
Net current deferred tax asset $ - $ -
============ ============
Noncurrent:
Property & equipment $ - $ 2,000,000
Net operating loss carry forward 20,000,000 8,400,000
------------ -------------
Subtotal 20,000,000 10,400,000
Valuation allowance (20,000,000) (10,400,000)
------------ -------------
Net concurrent deferred tax asset $ - $ -
============ =============
Due to the cumulative losses experienced by MCSS, the deferred tax assets
have been reduced by a valuation allowance.
</TABLE>
* * * * *
-11-
<PAGE>
EXHIBIT 99.11
AMSC
Pro Forma Balance Sheet
Reflecting Acquisition of Rockwell's MCSS Business
(in thousands)
Historical Balance Sheets
<TABLE>
<CAPTION>
Pro Forma
AMSC MCSS Combined
as of as of Pro Forma Income
9/30/96 9/30/96 Adjustments Statement
Assets
Current Assets:
<S> <C> <C> <C> <C>
Cash and cash equivalents 2,388 - 2,388
Short-term investments 1,000 - 1,000
Inventory 39,960 6,065 (6,065) a 39,960
Accounts receivable-trade 7,043 922 (922) b 7,043
Other current assets 1,482 355 9,538 a 11,377
(355) b
- - 357 c
------ ------ ----- ------
Total current assets 51,873 7,342 2,553 61,768
Property and Equipment in Service, net 274,758 - 274,758
Deferred Charges and Other Assets, net 16,298 - (381) c 15,917
------ ------ ----- ------
Total Assets $ 342,929 $ 7,342 $ 2,172 $ 352,443
========== ======== ======== ==========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued expenses 51,739 6,447 (1,437) d 56,749
Accrued warranty reserves - 5,798 (5,298) d 500
Accrued restructuring charges - 13,396 (13,396) e -
Deferred revenue - 2,326 (1,799) d 527
Current portion of negative goodwill - - 696 f 696
Obligations under capital leases due
within one year 4,245 - - 4,245
Obligation to related party for equipment
financing 6,297 - - 6,297
Current portion of long-term debt 11,113 - - 11,113
------ ------ ----- ------
Total current liabilities 73,394 27,967 (21,234) 80,127
Long-term Liabilities:
Obligations under Term Loan Facility 77,000 - - 77,000
Capital lease obligations 3,566 - - 3,566
Long term portion of negative goodwill - - 2,781 f 2,781
------- ------ ------ ------
Total liabilities 153,960 27,967 (18,453) 163,474
======= ====== ======= =======
Stockholders' Equity:
Preferred stock, par value $0.01;
no shares issue - -
Common stock, voting, par value $0.01 251 251
Additional paid-in capital 451,178 451,178
Common stock purchase warrants 23,848 23,848
Unamortized guarantee warrants (18,000) (18,000)
Accumulated Deficit (268,308) (268,308)
--------- --------
Total stockholders' equity 188,969 (20,625) 20,625 g 188,969
------- -------- ------ -------
Total liabilities and stockholders' equity $ 342,929 $ 7,342 $ 2,172 $ 352,443
========== ======== ======== =========
</TABLE>
Pro forma Adjustments:
a) Purchase accounting adjustment based on APB 16 to record the value of
inventory to be received as part of the Asset Sale Agreement.
b) To reverse assets that do not transfer to AMSC as part of the Asset Sale
Agreement.
c) To adjust certain accounts receivable due AMSC from Rockwell.
d) To adjust liabilities for purchase accounting adjustments based on APB 16.
e) To reverse accrued restructuring charges recorded by Rockwell to cover the
write-down of inventory and fixed assets to net realizable value and to
fulfill its obligations under the Asset Sale Agreement with AMSC.
f) To record negative goodwill arising from purchase accounting adjustments
made based on APB 16.
g) Net impact of purchase accounting adjustments.
1
<PAGE>
AMSC
Pro Forma Income Statement
Reflecting Acquisition of Rockwell's MCSS Business
(in thousands, except per share data)
<TABLE>
Historical Income Statements
----------------------------
<CAPTION>
Pro Forma
AMSC MCSS Combined
Year Ended Year Ended Pro Forma Income
12/31/95 9/30/95 Adjustments Statement
-------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Revenue 6,873 14,183 21,056
Cost of Sales - 28,742 (1,749) a 26,993
-------- ------- ---------- --------
Gross Margin 6,873 (14,559) 1,749 (5,937)
Operating Expenses:
Engineering operations 18,839 - 18,839
Research and development - 6,193 6,193
Sales and marketing 25,908 4,389 30,297
General and administrative 21,409 2,598 24,007
Depreciation and amortization 11,218 - 11,218
-------- ------- --------
Total Operating Expenses 77,374 13,180 - 90,554
Loss from Operations (70,501) (27,739) 1,749 (96,491)
Interest and Other Income 4,500 56 696 b 5,252
Interest Expense (916) - - (916)
-------- ------- ----------- ---------
Net Loss $ (66,917) $ (27,683) $ 2,445 $ (92,155)
========== ========== ======= ==========
Loss Per Share of Common Stock ($2.69) ($1.11) $0.10 ($3.70)
Weighted-Average Common Shares
Outstanding During Period 24,900 24,900 24,900 24,900
</TABLE>
Proforma Adjustments:
a) To reverse depreciation recorded by Rockwell that will not be incurred by
AMSC due to the write-down of all fixed assets acquired to zero in
allocating the purchase price to assets acquired.
b) To reflect the amortization of negative goodwill, over five years, arising
from the acquisition of net assets.
2
<PAGE>
AMSC
Pro Forma Income Statement
Reflecting Acquisition of Rockwell's MCSS Business
(in thousands, except per share data)
Historical Income Statements
<TABLE>
<CAPTION>
Pro Forma
AMSC MCSS Combined
9 months 9 months Pro Forma Income
ended 9/30/96 ended 9/30/96 Adjustments Statement
------------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
Revenue 18,523 5,603 24,126
(14,200) a
Cost of Sales 23,116 28,486 (2,399) b 35,004
------ ------ --------- ------
Gross Margin (4,593) (22,883) 16,599 (10,878)
Operating Expenses:
Engineering operations 23,258 - 23,258
Research and development - 1,153 1,153
Sales and marketing 18,048 4,669 22,717
General and administrative 13,635 2,378 16,013
Depreciation and amortization 32,975 - 32,975
Restructuring Charge - 22,130 (22,130) a -
------ ------ ---------- ------
Total Operating Expenses 87,916 30,330 (22,130) 96,116
Loss from Operations (92,509) (53,213) 38,729 (106,994)
Interest and Other Income 485 51 522 c 1,058
Interest Expense (11,364) - - (11,364)
-------- -------- -------- ---------
Net Loss $ (103,388) $ (53,162) $ 39,251 $ (117,300)
=========== ========== ======== ===========
Loss Per Share of Common Stock ($4.13) ($2.12) $1.57 ($4.69)
Weighted-Average Common Shares
Outstanding During Period (000's) 25,024 25,024 25,024 25,024
</TABLE>
Pro forma Adjustments:
a) To reverse restructuring charges recorded by Rockwell to cover the
write-down of inventory and fixed assets to net realizable value and to
fulfill its obligations under the Asset Sale Agreement with AMSC.
b) To reverse depreciation recorded by Rockwell that will not be incurred by
AMSC due to the write-down of all fixed assets acquired to zero in
allocating the purchase price to assets acquired.
c) To reflect the amortization of negative goodwill, over five years,
arising from the acquisition of net assets.
<PAGE>
3
