EXHIBIT 99.1
------------
UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited pro forma financial statements are based on the
historical financial statements of (i) the Company, (ii) the business acquired
in the 1997 Acquisitions (as defined below) and (iii) the safety restraints
systems businesses of AlliedSignal Inc. ("SRS"), which the Company acquired on
October 30, 1997 (the "SRS Acquisition"). The unaudited pro forma condensed
consolidated statement of earnings for the twelve months ended June 30,1997
gives effect to the SRS Transactions (as defined below), the 1997 Acquisitions
and the Refinancing of the Bridge Credit Facility (as defined below) as if they
had occurred on July 1, 1996. The unaudited pro forma condensed consolidated
statement of earnings for the nine months ended March 31, 1998 gives effect to
the SRS Transactions and the Refinancing of the Bridge Credit Facility as if
they had occurred on July 1, 1997.
The 1997 Acquisitions consist of the following: (i) the Company's acquisition
of certain assets and liabilities of the North American steering wheel
operations ("USS") of United Technologies, which was completed on October 25,
1996; and (ii) the Company's acquisition of the Custom Trim group of companies
("Custom Trim"), which was completed on February 25, 1997. All acquisitions,
including the SRS Acquisition, have been accounted for using the purchase method
of accounting.
On October 30, 1997, the Company consummated the SRS Acquisition. The Company
financed the SRS Acquisition with (i) borrowings under a $900.0 million bridge
credit facility (the "Bridge Credit Facility"), (ii) the proceeds received in
connection with the issuance and sale of $115.0 million of Series A Preference
Shares to Siemens Aktiengeselellschaft ("Siemens") (the "Siemens Investment")
and (iii) the proceeds from the issuance and sale of $200.0 million of Series B
Convertible Preferred Stock of the Company (the "PSCC Financing"), which was
subsequently redeemed with the proceeds received in connection with the issuance
and sale of $257.7 million of the Company's 6.50% Convertible Subordinated
Debentures due 2027 to BTI Capital Trust which, concurrently therewith, sold
$250 million aggregate liquidation amount of its 6.50% Convertible Trust
Preferred Securities (which are guaranteed by the Company) (the "Preferred
Securities") in a private transaction under Rule 144A under the Securities Act
of 1933 (the "Preferred Securities Offering"). The SRS Acquisition, the initial
borrowings under the Bridge Credit Facility, the Siemens Investment, the
Preferred Securities Offering and the application of the proceeds therefrom are
referred to herein collectively as the "SRS Transactions."
On April 28, 1998, the Company consummated the issuance and sale of $330.0
million of its 9 1/4% Senior Subordinated Notes due 2008 (the "Notes") in a
private transaction under Rule 144A under the Securities Act of 1933 (the
"Offering"). Concurrently therewith, the Company entered into a new $675.0
million revolving credit facility with certain lenders (the "New Credit
Facility"). The Company used the net proceeds from the Offering, together with
borrowings under the New Credit Facility, to, among other things, repay all
amounts outstanding under the Bridge Credit Facility (the "Refinancing of the
Bridge Credit Facility").
The unaudited pro forma financial statements have been prepared using the
purchase method of accounting, whereby the total cost of the SRS Acquisition and
the 1997 Acquisitions has been allocated to the tangible and intangible assets
acquired and liabilities assumed based upon their respective fair values at the
effective date of such acquisitions. The allocations with respect to the SRS
Acquisition are based on studies and valuations that have not yet been
completed. Accordingly, such allocations are preliminary and subject to
revisions.
As part of the purchase price allocation for the SRS Acquisition, the Company
evaluated the in-process research and development of SRS. Under generally
accepted accounting principles, 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 must be written-off.
Accordingly, the Company wrote off $77.5 million of acquired technology that has
not been established as technologically feasible during the three months ended
December 31, 1997 (the "R&D Write-Off").
During the three months ended December 31, 1997, the Company formulated a
repositioning program designed to reduce operating costs and increase
productivity (the "Repositioning Program"). The Repositioning Program consists
primarily of a 25% planned reduction in the Company's global workforce (or
approximately 4,900 employees) through the elimination of redundant and
overlapping positions resulting from recent acquisitions, the consolidation of
the Company's manufacturing, sales and engineering facilities primarily in North
America and Europe through the closing of approximately 50% (or 32) of its
manufacturing facilities and 33% (or 10) of its sales and engineering facilities
and the disposal of certain non-core assets. In connection with the
Repositioning Program, the Company incurred a $244.0 million repositioning
charge during the three months ended December 31, 1997 (the "Repositioning
Charge"). In addition, during the three months ended December 31, 1997, the
Company incurred a $28.4 million charge against cost of sales for inventory and
long-term customer contracts relating to manufacturing processes that will be
exited (the "COS Charge").
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 SRS Transactions, the 1997 Acquisitions and the Refinancing of
the Bridge Credit Facility occurred on the dates indicated or to predict the
Company's results of operations or financial condition in the future. The
unaudited pro forma financial statements give effect only to the adjustments set
forth in the accompanying notes and do not reflect any other benefits
anticipated by management as a result of the SRS Acquisition and the 1997
Acquisition and the implementation of its business strategy.
2
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
FOR THE TWELVE MONTHS ENDED JUNE 30, 1997
CUSTOM PRO FORMA
BREED USS(a) TRIM(b) SRS(c) ADJUSTMENTS PRO FORMA
------- ----- ------- ----- ----------- ---------
(dollars in millions, except per share data)
Net sales.......................... $ 794.9 $50.8 $68.1 $910.8 $ (70.8)(d) $ 1,753.8
Cost of sales...................... 631.3 44.8 54.2 765.3 (61.4)(d) 1,434.2
----------- ----- ----- ------ ------- ----------
Gross profit....................... 163.6 6.0 13.9 145.5 (9.4) 319.6
Selling, general and administrative
expenses.......................... 70.6 1.4 2.0 36.7 (2.2)(d) 108.5
Research, development and
engineering
expenses.......................... 36.1 1.5 __ 50.6 (1.8)(d) 86.4
Amortization of intangibles........ 6.3 __ 1.0 3.2 16.0 (e) 26.5
----------- ----- ----- ------ ------- ----------
Operating income (loss)............ 50.6 3.1 10.9 55.0 (21.4) 98.2
Other income (expense), net........ 3.5 (0.6) 3.7 7.2 (1.6)(d) 12.2
Interest expense, net.............. 24.5 __ 2.7 __ 3.4 (f) 85.7
55.1 (g)
----------- ----- ----- ------ ------- ----------
Earnings (loss) before income
taxes, distributions on
Preferred Securities
and extraordinary item............ 29.6 2.5 11.9 62.2 (81.5) 24.7
Income taxes (benefit)............. 14.8 1.3 4.6 23.3 (2.6)(d) 4.1
(37.3)(h)
Distributions on Preferred
Securities........................ __ __ __ __ 16.3 (i) 16.3
----------- ----- ----- ------ ------- ----------
Earnings (loss) before
extraordinary
loss(j)........................... $14.8 $ 1.2 $ 7.3 $ 38.9 $(57.9) $ 4.3
=========== ===== ===== ====== ======= ==========
EARNINGS PER SHARE(k):
Basic............................. $ 0.47 $ 0.14
=========== ===========
Diluted........................... $ 0.47 $ 0.12
=========== ==========
Basic weighted average number of
common shares outstanding...... 31,648,249 31,648,249
=========== ==========
Diluted weighted average number of
common shares outstanding...... 31,867,366 4,883,226 (l) 36,750,592
========== ========= ==========
OTHER DATA:
Depreciation and amortization...... $91.8
Ratio of earnings to combined
fixed charges and preferred
stock dividends(m)........ 1.1x
3
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
FOR THE NINE MONTHS ENDED MARCH 31, 1998
PRO FORMA
BREED(n) SRS(o) ADJUSTMENTS PRO FORMA
------- ------- ------- ---------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
Net sales ......................................... $ 968.0 $297.4 19.9)(d) $1245.5
Cost of sales ..................................... 837.4 266.5 (17.7)(d) 1086.2
------- ------ ------- -------
Gross profit ...................................... 130.6 30.9 (2.2) 159.3
Selling, general and administrative expenses ...... 59.7 11.8 (0.6)(d) 70.9
Research, development and engineering expenses .... 49.9 19.9 __ 69.8
Repositioning Charge .............................. 244.0 __ __ 244.0
R&D Write-Off ..................................... 77.5 __ __ 77.5
Amortization of intangibles ....................... 13.0 1.0 5.3(e) 19.3
------- ------ ------- -------
Operating income (loss) ........................... (313.5) (1.8) (6.9) (322.2)
Other income (expense), net ....................... 1.2 (3.9) 0.4 (d) (2.3)
Interest expense, net ............................. 62.1 -- (13.5)(f) 59.2
10.6 (g)
------- ------ ------- -------
Earnings (loss) before income taxes, distributions on
Preferred Securities and extraordinary item ....... (374.4) (5.7) (3.6) (383.7)
Income taxes (benefit) ............................. (54.3) (1.7) (0.4)(d) (59.4)
(3.0)(h)
Distributions on Preferred Securities .............. 5.7 -- 6.5 (i) 12.2
------- ------ ------- -------
Earnings (loss) before extraordinary loss(j) ....... $(325.8) $ (4.0) $(6.7) $(336.5)
======= ====== ======= =======
EARNINGS PER SHARE(k):
Basic and diluted loss ............................. $ (9.92) $ (10.22)
======== =======
Basic and diluted weighted average number of
common shares outstanding .......................... 32,922,510 32,922,510
========== ==========
OTHER DATA:
Depreciation and amortization ..................... $59.9
Ratio of earnings to combined fixed charges and
preferred stock dividends(m) ................ __
4
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(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.
(d) Represents the exclusion of the results of operations attributable to
certain operations of SRS that were not acquired by the Company in the SRS
Acquisition, estimated by the Company as follows:
TWELVE NINE
MONTHS MONTHS
ENDED ENDED
JUNE 30, 1997 MARCH 31, 1998
------------ ---------------
Net sales................................ $70.8 $19.9
Cost of sales............................ 61.4 17.7
Selling, general and administrative...... 2.2 0.6
Engineering, research and development.... 1.8 --
Other income (expense), net.............. 1.6 (0.4)
Income taxes............................. 2.6 0.4
The reduction in income taxes was estimated using the effective tax rate of
SRS for the twelve months ended June 30, 1997.
(e) Estimated goodwill and preliminary allocation of purchase price to
identifiable intangible assets acquired in the SRS Acquisition are as
follows (in millions):
Purchase price..................................................... $710.0
Less:
Estimated fair market value of SRS (net assets acquired less
assumed liabilities).......................................... $122.8
Adjustment for planned closings of facilities................... (45.0)
Adjustment for estimated costs of planned employee termination.. (16.7) (61.1)
------ -----
648.9
Estimated costs related to SRS Acquisition............................ 15.0
Other................................................................. 19.4
Less estimated in-process research and development.................... (77.5)
Excess of purchase price over net assets acquired........................ $605.8
======
5
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
EARNINGS (CONTINUED)
AMORTIZATION
VALUE OF PERIOD IN
INTANGIBLES YEARS
----------- ----
(IN MILLIONS)
Trained workforce........ $ 10.3 10
Developed technology..... 158.1 22
Goodwill................. 437.4 40
------
$605.8
======
The allocations with respect to the SRS Acquisition are based on studies and
valuations that have not yet been completed. Accordingly, such allocations are
preliminary and subject to revision.
The amortization expense of intangibles incurred as a result of the SRS
Acquisition is as follows:
TWELVE NINE
MONTHS MONTHS
ENDED ENDED
JUNE 30, 1997 MARCH 31, 1998
------------- --------------
(IN MILLIONS)
Goodwill amortization related to
SRS Acquisition.......................... $19.2 $14.4
Amortization of intangible assets
previously recorded by SRS................ (3.2) (1.0)
Amortization of intangible assets recorded
by SRS post-acquisition................... (8.1)
-----
Net increase in goodwill amortization....... $16.0 $ 5.3
====== ======
6
Notes to Unaudited Pro Forma Condensed Consolidated
Statement of Earnings (continued)
(f) Reflects various financing and advisory fees relating to the New Credit
Facility and the Offering, which aggregate $23.9 million and will be paid in
cash. Fees of $12.3 million relating to the New Credit Facility are being
amortized over the weighted average life of the facility of 5.5 years and fees
of $11.6 million relating to the Offering are being amortized over the ten-
year life of the Notes. These fees would have affected the amortization of
deferred financing costs as follows:
TWELVE MONTHS NINE MONTHS
ENDED ENDED
JUNE 30, 1997 MARCH 31, 1998
------------------- ----------------
(in millions)
Amortization of fees relating to New Credit
Facility...................................... $2.2 $ 1.7
Amortization of fees relating to the Offering. 1.2 0.9
Less amortization of fees on Bridge
Credit Facility............................... __ (15.9)
Less amortization of fees on previous credit
facility replaced by Bridge Credit Facility.... __ (0.2)
------ ------
$3.4 $(13.5)
======= ======
(g) Represents the additional interest expense that would have been incurred if
the Notes and borrowings under the New Credit Facility incurred in
connection with the Refinancing of the Bridge Credit Facility had been
outstanding for the entire period.
TWELVE MONTHS NINE MONTHS
ENDED ENDED
JUNE 30, 1997 MARCH 31, 1998
-------------- ----------------
(IN MILLIONS)
Interest expense on the New Credit Facility. $ 41.6 $ 31.2
Interest expense on the Notes............... 30.5 22.9
Interest expense under the Bridge Credit
Facility and credit facility replaced by
Bridge Credit Facility................... (17.0) (41.9)
Interest expense attributable to
PSCC Financing........................... __ (1.6)
------ ------
Net increase in interest expense............ $ 55.1 $ 10.6
====== ======
The interest rate for the New Credit Facility is based on base interest rates
selected by the Company plus applicable margins.
7
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(CONTINUED)
(h) The income tax expense (benefit) is calculated using the historical
effective income tax rates as follows:
TWELVE MONTHS NINE MONTHS
ENDED ENDED
JUNE 30, 1997 MARCH 31, 1998
--------------- -----------------
Earnings (loss) before income taxes,
distributions on Preferred Securities
and extraordinary item................. $ 24.7 $(383.7)
Distributions on Preferred Securities.... 16.3 12.2
------ -------
8.4 (395.9)
Historical effective tax rate............ 49% 15%
------ -------
Pro forma income tax expense (benefit)... 4.1 (59.4)
Previously recorded income taxes expense
(benefit).............................. 41.4 (56.4)
------ -------
Pro forma adjustment..................... $(37.3) $ (3.0)
====== =======
(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.
TWELVE MONTHS NINE MONTHS
ENDED ENDED
JUNE 30, 1997 MARCH 31, 1998
-------------- ----------------
(IN MILLIONS)
Distributions on the Preferred $16.3 $12.2
Securities.........................
Distributions previously recorded... __ (5.7)
----- ------
$16.3 $ 6.5
===== =====
8
(j) Assuming that the SRS Transactions and the Refinancing of the Bridge Credit
Facility had occurred as of the first day of the respective periods,
unamortized fees relating to the Bridge Credit Facility and the credit
facility that it replaced would have been recorded as an extraordinary loss,
net of tax benefit.
In July 1996, the Company acquired Gallino Plasturgia, S.r.1. ("Gallino"), a
manufacturer of steering wheels and plastic interior and exterior parts
based in Italy, for $74 million in cash and the assumption of $52 million of
liabilities. During the three months ended June 30, 1997, the Company
committed to a plan to dispose of the plastic interior and exterior parts
business (the "Gallino Disposition") and is currently in negotiations with a
third party relating to the sale of this business. The following table sets
forth the adjustments necessary to exclude the results of operations
attributable to the assets being disposed of in connection with the Gallino
Disposition:
TWELVE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, 1997 DECEMBER 31, 1997
--------------------------------- ------------------------------
PRO FORMA PRO FORMA
GALLINO EXCLUDING PRO GALLINO EXCLUDING
PRO FORMA ADJUSTMENTS GALLINO FORMA ADJUSTMENTS GALLINO
--------- ----------- --------- -------- ----------- ---------
(in millions)
Net sales..................... $1,753.8 $(182.2) $1,571.6 $1,245.5 $(125.7) $1,119.8
Cost of sales................. 1,434.2 (168.4) 1,265.8 1,086.2 (117.9) 968.3
-------- ------- -------- -------- ------- --------
Gross profit.................. 319.6 (13.8) 305.8 159.3 (7.8) 151.5
Selling, general and
administrative
expenses..................... 108.5 (9.9) 98.6 70.9 (6.5) 64.4
Research, development
and engineering
expenses..................... 86.4 (2.5) 83.9 69.8 (3.1) 66.7
Repositioning Charge.......... -- -- -- 244.0 -- 244.0
R&D Write-Off................. -- -- -- 77.5 -- 77.5
Amortization of
intangibles.................. 26.5 -- 26.5 19.3 -- 19.3
-------- ------- -------- -------- ------- --------
Operating income
(loss)....................... 98.2 (1.4) 96.8 (322.2) 1.8 (320.4)
Other income (expense),
net.......................... 12.2 (1.0) 11.2 (2.3) (1.7) (4.0)
Interest expense, net......... 85.7 (3.8) 81.9 59.2 (2.8) 56.4
-------- ------- -------- -------- ------- --------
Earnings (loss) before
income taxes,
distributions on
Preferred Securities
and extraordinary
item......................... 24.7 1.4 26.1 (383.7) 2.9 (380.8)
Income taxes (benefit)........ 4.1 0.7 4.8 (59.4) 0.4 (59.0)
Distribution on Preferred
Securities................... 16.3 -- 16.3 12.2 -- 12.2
-------- ------- -------- -------- ------- --------
Earnings (loss) before
extraordinary loss........... $ 4.3 $ 0.7 $ 5.0 (336.5) 2.5 (334.0)
======== ======= ======== ======== ======= ========
9
Notes To Unaudited Pro Forma Condensed
CONSOLIDATED STATEMENT OF EARNINGS (CONTINUED)
(k) Earnings per share have been adjusted to conform to the provisions of SFAS
No. 128.
(l) The pro forma basic weighted average number of common shares outstanding
does not include the impact of the conversion by Siemens of 4,883,226 of its
Series A Preference Shares into an equal number of shares of Common Stock,
which occurred on January 20, 1998. The pro forma diluted weighted average
number of common shares outstanding includes the impact of converting such
Series A Preference Shares into Common Stock as of the beginning of the
period for the twelve months ended June 30, 1997, but are not included in
the nine months ended March 31, 1998 because they are anti-dilutive.
(m) For purposes of computing the ratio of earnings to combined fixed charges
and preferred stock dividends, earnings consist of earnings before income
taxes and extraordinary items plus combined fixed charges and preferred
stock dividends. Combined fixed charges and preferred stock dividends
consist of interest expense, whether expensed or capitalized, amortization
of debt issuance costs, an estimated portion of rental expense that is
representative of the interest factor in such rentals and distributions on
the Preferred Securities (which are calculated on the basis of the amount of
pre-tax income required to pay such distributions). Earnings were
insufficient to cover combined fixed charges and preferred stock dividends
by $396.0 million for the nine months ended March 31, 1998. The ratio of
earnings to combined fixed charges and preferred stock dividends for the
nine months ended March 31, 1998 reflects the Repositioning Charge, the R&D
Write-Off and the COS Charge.
(n) The BREED statement of earnings for the nine months ended March 31, 1998
includes the results of operations for the 1997 Acquisitions for the entire
period.
(o) Represents SRS's results of operations for the four months ended October 30,
1997, the date of acquisition.
10