Attached files
file | filename |
---|---|
8-K/A - FORM 8-K AMENDMENT - ESTERLINE TECHNOLOGIES CORP | d239479d8ka.htm |
EX-99.2 - THE UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS - ESTERLINE TECHNOLOGIES CORP | d239479dex992.htm |
EX-23.1 - CONSENT OF MAZARS, CHARTERED ACCOUNTANTS - ESTERLINE TECHNOLOGIES CORP | d239479dex231.htm |
Exhibit 99.1
SOURIAU GROUP
Simplified joint stock company with share capital of 31 818 180 euros
Registered office: 9 ruc de la Porte de Buc, 78 000 VERSAILLES
Company registration number: 484 853 908
Consolidated Financial Statements
June 30, 2011
(All amounts are in thousands of Euros,
except if noted otherwise)
1
Independent Auditors Report on the Consolidated Financial Statements
For the Year Ended June 30, 2011
To the Shareholders
We have audited the consolidated balance sheets of Souriau Group as at June 30, 2011, and June 30, 2010, and the consolidated statements of income, shareholders equity and cash flows for the years then ended. These financial statements are the responsibility of the Corporations management. Our responsibility is to express an opinion on these financial statements based on our audits.
We have conducted our audits in accordance with generally accepted auditing standards in France and the United States. Those standards require that we plan and perform an audit to obtain reasonable assurance 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.
In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Corporation as of June 30, 2011, and 2010, and the results of its operations and its cash flows for the years then ended in accordance with French generally accepted accounting principles.
BRIGITTE NEHLIG | MAZARS | |||
Statutory Auditor | Statutory Auditors | |||
Paris, France | Paris, France | |||
October 5, 2011 | October 5, 2011 | |||
2
SOURIAU GROUP
CONSOLIDATED BALANCE SHEET
In Thousands | Note | June 30, 2011 | June 30, 2010 | |||||||||
Non-current assets |
| 156,211 | | 164,571 | ||||||||
Goodwill |
4 | 115,478 | 123,353 | |||||||||
Intangible assets |
5 | 2,393 | 3,025 | |||||||||
Property, plant and equipment |
6 | 37,965 | 37,831 | |||||||||
Investments |
7 | 375 | 362 | |||||||||
Current assets |
113,295 | 102,613 | ||||||||||
Inventories and work in progress |
8 | 54,400 | 48,559 | |||||||||
Trade receivables |
9 | 46,980 | 44,927 | |||||||||
Other receivables and adjustments |
9 | 11,915 | 9,127 | |||||||||
Cash and cash equivalents |
30,509 | 23,331 | ||||||||||
Short-term investments |
22,266 | 16,309 | ||||||||||
Cash |
8,243 | 7,022 | ||||||||||
|
|
|
|
|||||||||
Total Assets |
| 300,015 | | 290,515 | ||||||||
|
|
|
|
|||||||||
Group share of equity |
10 | | 20,456 | | 17,182 | |||||||
Capital stock |
31,818 | 31,818 | ||||||||||
Additional paid-in capital |
636 | 636 | ||||||||||
Consolidated reserves |
(16,409 | ) | (13,335 | ) | ||||||||
Conversion adjustments |
(1,942 | ) | 1,137 | |||||||||
Consolidated net income |
6,353 | (3,074 | ) | |||||||||
Minority interests |
10 | 1,110 | 1,028 | |||||||||
Provisions |
11 | 9,571 | 9,974 | |||||||||
Liabilities |
268,878 | 262,331 | ||||||||||
Indebtedness |
12 | 211,550 | 220,280 | |||||||||
Trade payables |
13 | 24,995 | 19,049 | |||||||||
Other payables and adjustments |
13 | 32,333 | 23,002 | |||||||||
|
|
|
|
|||||||||
Total Equity and Liabilities |
| 300,015 | | 290,515 | ||||||||
|
|
|
|
3
SOURIAU GROUP
CONSOLIDATED INCOME STATEMENT
In Thousands | Note | Fiscal year ended June 30, 2011 |
Fiscal year ended June 30, 2010 |
|||||||||
Sales |
14 | | 237,760 | | 201,037 | |||||||
Cost of sales |
(149,680 | ) | (132,432 | ) | ||||||||
Research and development costs |
(8,106 | ) | (7,564 | ) | ||||||||
Sales costs |
(22,572 | ) | (18,822 | ) | ||||||||
Administrative expenses |
(17,117 | ) | (15,220 | ) | ||||||||
Other operating expense |
(4,855 | ) | (3,864 | ) | ||||||||
|
|
|
|
|||||||||
Operating profit |
15 | 35,430 | 23,135 | |||||||||
Net financial expense |
16 | (14,651 | ) | (14,848 | ) | |||||||
|
|
|
|
|||||||||
Current profit of consolidated entities |
20,779 | 8,287 | ||||||||||
Net exceptional income (expense) |
17 | 55 | (1,024 | ) | ||||||||
Corporate income tax |
18 | (6,386 | ) | (2,325 | ) | |||||||
|
|
|
|
|||||||||
Profit after tax of consolidated entities |
14,448 | 4,938 | ||||||||||
Amortization of goodwill |
4 | (7,875 | ) | (7,875 | ) | |||||||
|
|
|
|
|||||||||
Net income of consolidated entities |
6,573 | (2,937 | ) | |||||||||
Minority interests |
(220 | ) | (137 | ) | ||||||||
|
|
|
|
|||||||||
Group share of net income |
| 6,353 | | (3,074 | ) | |||||||
|
|
|
|
4
SOURIAU GROUP
CONSOLIDATED STATEMENT OF CASH FLOWS
In Thousands | Fiscal year ended June 30, 2011 |
Fiscal year ended June 30, 2010 |
||||||
Net income of consolidated entities |
| 6,573 | | (2,937 | ) | |||
Elimination of non-cash income and expenses: |
14,185 | 18,311 | ||||||
Depreciation, amortization and provisions |
15,974 | 17,232 | ||||||
Changed in deferred tax |
(1,620 | ) | 1,050 | |||||
Gains and losses on disposal of assets |
(169 | ) | 29 | |||||
|
|
|
|
|||||
Cash flow of consolidated entities |
20,758 | 15,374 | ||||||
Change in working capital |
4,089 | 1,011 | ||||||
|
|
|
|
|||||
Cash generated by operations |
24,847 | 16,385 | ||||||
Cash used in investment |
(8,824 | ) | (3,185 | ) | ||||
Purchases of fixed assets |
(9,058 | ) | (3,182 | ) | ||||
Sales of fixed assets |
247 | | ||||||
Impact of changes in consolidation scope |
| | ||||||
Change in miscellaneous non-current financial assets |
(13 | ) | (3 | ) | ||||
Cash used in financing |
(8,845 | ) | (3,454 | ) | ||||
Capital stock increase |
| | ||||||
Dividends paid to minority stockholders |
(115 | ) | (85 | ) | ||||
Subscription of new loans |
| | ||||||
Repayment of loans |
(16,080 | ) | (10,260 | ) | ||||
Change in accrued interest |
7,350 | 6,891 | ||||||
|
|
|
|
|||||
Change in cash and cash equivalents |
| 7,178 | | 9,746 | ||||
|
|
|
|
|||||
Opening cash and cash equivalents |
| 23,331 | | 13,585 | ||||
Closing cash and cash equivalents |
30,509 | 23,331 | ||||||
|
|
|
|
|||||
Change in cash and cash equivalents |
| 7,178 | | 9,746 | ||||
|
|
|
|
DISCLOSURES
1. | Accounting framework |
Souriau Groups (Group) consolidated financial statements have been prepared in accordance with French generally accepted accounting principles as embodied in particular in accounting regulation 99-02.
2. | Main events of the period |
Following negotiations culminating in a transaction on July 26, 2011, with effect from that date, the Group has become a 100% subsidiary of Esterline via Esterline Technologies France Holding SNC. The Groups external financial borrowings were also repaid by the new shareholder on that date.
5
3. | Accounting policies |
Consolidation methods
The financial statements of the companies over which Souriau Technologies Holding Sas exercises, directly or indirectly and in law or in substance, exclusive control are fully consolidated.
The income and expenses of subsidiaries acquired or sold during the period are consolidated with effect from, or up to, the date of acquisition or sale.
All consolidated entities have June 30 annual balance sheet dates as for the parent company.
Conversion of the financial statements of foreign subsidiaries
The financial statements of foreign subsidiaries whose functional currency is not the euro are converted into euro as follows:
| Assets and liabilities are converted at the applicable closing rates; |
| Income and expenses are converted at the average rates for the period; |
| The resulting conversion differences are recognized in a specific equity account. |
Goodwill
The cost of businesses acquired is allocated to the identifiable assets and liabilities acquired based on their fair value. The difference between acquisition cost and the identifiable assets and liabilities acquired is recognized as goodwill, the carrying amount of which is assessed annually. Any excess of the carrying amount over the current fair value is subject to an exceptional charge for amortization.
Goodwill is amortized on a straight-line basis over 20 years.
Intangible assets
Intangible assets are recorded at their cost of acquisition. They mainly comprise of patents, which are amortized on a straight-line basis over five years, and application software, which is amortized over two to four years.
Property, plant and equipment
Property, plant and equipment are recorded at their cost of acquisition or production. They are depreciated on a straight-line basis over their useful lives estimated below:
Buildings |
20 years | |
Fixtures and fittings |
10 years | |
Machines |
5 to 8 years | |
Tooling |
3 to 5 years | |
Computer and office equipment |
3 to 7 years |
Inventories
Purchased items are recognized at weighted average cost. Finished goods are recognized on the basis of standard costs revised annually. Slow-moving inventories are subject to impairment allowances.
Operating receivables and payables
Operating receivables and payables are recognized at their nominal amounts. Impairment allowances are recognized against trade receivables whenever required.
Foreign currencies
Foreign currency denominated income and expenses are recognized at the applicable average rates of the month preceding their recognition. Receivables and payables are adjusted to the rates applicable at the balance sheet date. Conversion differences are recognized in profit or loss with the exception of differences applicable to the USD loan financing the acquisition of PAE which are recognized directly in equity.
6
Financial instruments
The Groups financial instruments are destined to hedge the risk of depreciation of the USD and JPY compared to the euro (mainly taking the form of forward sales and options to cover future USD receipts), as well as the risk of interest rate increases impacting the Groups indebtedness.
Finance leases
Leased assets are subject to finance lease accounting if the lessor is expected to sell the asset to the Group at the end of the lease term.
Deferred taxes
Deferred tax is recognized in respect of all temporary differences in the value of the Groups assets and liabilities for accounting and tax purposes, based on the rates applicable at the balance sheet date. Deferred tax assets are only recognized to the extent that their recovery appears probable within a reasonable period.
Provisions
Provisions are recognized to cover operating contingencies and costs. Provisions are recognized on the basis of the information available to the Group and whenever past or present events result in a probable risk for the Group at the balance sheet date the amount of which can be estimated with sufficient reliability. Their amount is reassessed at each balance sheet date and reversed in the event of use, or of extinction of the risk originally perceived.
Post-employment and long-service benefits
Lump sum post-employment benefits, and long-service benefits, are provided for in proportion to the entitlement acquired by employees. The provisions are determined using a prospective actuarial method.
Research and development costs
Research and development costs are charged to profit or loss as incurred.
Revenue recognition
Sales are recognized on the basis of deliveries performed.
Exceptional income and expense
Exceptional income and expenses are those material items which by nature and by their non-recurrent nature cannot be considered as inherent to the Groups operating activity.
4. | Goodwill |
Gross | Amortization | Net | ||||||||||
Balance as of June 30, 2010 |
| 157,467 | | (34,114 | ) | | 123,353 | |||||
Amortization for the period |
| (7,875 | ) | (7,875 | ) | |||||||
|
|
|
|
|
|
|||||||
Balance as of June 30, 2011 |
| 157,467 | | (41,989 | ) | | 115,478 | |||||
|
|
|
|
|
|
Goodwill is amortized over 20 years.
5. | Intangible assets |
June 30, 2010 |
Additions/ charges |
Conversion differences |
Reclassi- fications |
June 30, 2011 |
||||||||||||||||
Patents and trademarks |
| 2,133 | | (66 | ) | | (79 | ) | | | | 1,988 | ||||||||
Gross |
21,862 | | (576 | ) | | 21,286 | ||||||||||||||
Amortization |
(19,729 | ) | (66 | ) | 497 | | (19,298 | ) | ||||||||||||
Software |
892 | (51 | ) | (55 | ) | (381 | ) | 405 | ||||||||||||
Gross |
5,802 | 287 | (296 | ) | (300 | ) | 5,493 | |||||||||||||
Amortization |
(4,910 | ) | (338 | ) | 241 | (81 | ) | (5,088 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
| 3,025 | | (117 | ) | | (134 | ) | | (381 | ) | | 2,393 | |||||||
|
|
|
|
|
|
|
|
|
|
7
6. | Property, plant and equipment |
June 30, 2010 |
Additions/ charges |
Disposals | Reclassi fications |
Conversion differences |
June 30, 2011 |
|||||||||||||||||||
Gross amounts |
| 106,557 | | 8,771 | | (1,511 | ) | | 337 | | (4,555 | ) | | 109,599 | ||||||||||
Land |
1,609 | | | | (149 | ) | 1,460 | |||||||||||||||||
Buildings |
21,400 | 615 | | 2 | (952 | ) | 21,065 | |||||||||||||||||
Plant and equipment (1) |
72,531 | 4,225 | (1,510 | ) | 597 | (2,558 | ) | 73,285 | ||||||||||||||||
Other items |
9,154 | 769 | (1 | ) | 552 | (813 | ) | 9,661 | ||||||||||||||||
Assets under construction |
1,863 | 3,162 | | (814 | ) | (83 | ) | 4,128 | ||||||||||||||||
Depreciation |
(68,726 | ) | (8,087 | ) | 1,433 | 43 | 3,703 | (71,634 | ) | |||||||||||||||
Land |
| | | | | | ||||||||||||||||||
Buildings |
(11,358 | ) | (1,316 | ) | | (136 | ) | 620 | (12,190 | ) | ||||||||||||||
Plant and equipment (1) |
(47,540 | ) | (6,339 | ) | 1,432 | (1,606 | ) | 2,555 | (51,498 | ) | ||||||||||||||
Other items |
(9,828 | ) | (432 | ) | 1 | 1,785 | 528 | (7,946 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
| 37,831 | | 684 | | (78 | ) | | 380 | | (852 | ) | | 37,965 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(1) | Including a gross amount of 986 thousand of assets under finance lease subject to accumulated depreciation of 312 thousand. |
7. | Investments |
June 30, 2011 | June 30, 2010 | |||||||
Guarantee deposits |
| 375 | | 362 | ||||
Other non-current financial assets |
| | ||||||
|
|
|
|
|||||
Total |
| 375 | | 362 | ||||
|
|
|
|
8. | Inventories and work in progress |
June 30, 2011 | June 30, 2010 | |||||||
Raw materials |
| 1,837 | | 1,411 | ||||
Work in progress |
9,240 | 10,143 | ||||||
Intermediate and finished products |
53,825 | 47,492 | ||||||
|
|
|
|
|||||
Gross amount |
64,902 | 59,046 | ||||||
Impairment allowance |
(10,502 | ) | (10,487 | ) | ||||
|
|
|
|
|||||
Total |
| 54,400 | | 48,559 | ||||
|
|
|
|
9. | Operating receivables |
By maturity: | Total | <1 year | 1-5 years | >5 years | ||||||||||||
Trade receivables |
| 47,840 | | 47,840 | | | | | ||||||||
Impairment allowance |
(860 | ) | (860 | ) | | | ||||||||||
Other operating receivables (1) |
11,915 | 11,915 | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
| 58,895 | | 58,895 | | | | | ||||||||
|
|
|
|
|
|
|
|
(1) | Including 6,994 thousand of deferred tax assets. |
8
10. | Equity |
June 30, 2010 |
Appro- priation of net income |
Other movements |
Conversion differences |
June 30, 2011 |
||||||||||||||||
Capital stock and additional paid-in capital (1) |
| 32,454 | | | | | | | | 32,454 | ||||||||||
Consolidation reserves |
(13,335 | ) | (3,074 | ) | | | (16,409 | ) | ||||||||||||
Group share of net income |
(3,074 | ) | 3,074 | 6,353 | | 6,353 | ||||||||||||||
Conversion differences (2) |
1,137 | | | (3,079 | ) | (1,942 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Group share of equity |
| 17,182 | | | | 6,353 | | (3,079 | ) | | 20,456 | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Minority interests in opening entry |
| 891 | | 137 | | (115 | ) | | (23 | ) | | 890 | ||||||||
Minority interests in net income of the period |
137 | (137 | ) | 220 | | 220 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Minority interests |
| 1,028 | | | | 105 | | (23 | ) | | 1,110 | |||||||||
|
|
|
|
|
|
|
|
|
|
(1) | The capital stock comprises 31,818,180 shares of 1 euro each. |
(2) | Mainly due to changes in the USD. |
11. | Provisions |
June 30, 2010 |
Charge | Use | Reversal | Conversion differences |
June 30, 2011 |
|||||||||||||||||||
Lump sum retirement benefits |
| 7,321 | | 387 | | (557 | ) | | | | | | 7,151 | |||||||||||
Operating contingencies |
2,632 | 1,704 | (1,905 | ) | | (11 | ) | 2,420 | ||||||||||||||||
Foreign exchange exposure |
21 | | (21 | ) | | | | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
| 9,974 | | 2,091 | | (2,483 | ) | | | | (11 | ) | | 9,571 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
12. | Indebtedness |
June 30, 2010 |
Increase (1) | Decrease | Conversion differences |
June 30, 2011 |
||||||||||||||||
Convertible bonds |
| 37,245 | | | | | | | | 37,245 | ||||||||||
Applicable interest accrued |
19,876 | 5,789 | | | 25,665 | |||||||||||||||
Bank loans (2) |
156,398 | | (15,271 | ) | (809 | ) | 140,318 | |||||||||||||
Applicable interest accrued |
6,761 | 1,561 | | | 8,322 | |||||||||||||||
Miscellaneous borrowings |
| | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
| 220,280 | | 7,350 | | (15,271 | ) | | (809 | ) | | 211,550 | ||||||||
|
|
|
|
|
|
|
|
|
|
(1) | Including 7,350 thousand of interest capitalized. |
(2) | Including 638 thousand of finance lease obligations as of June 30, 2011. |
Principal | Accrued interest |
Total | ||||||||||
By currency: |
||||||||||||
Euro borrowings |
| 170,979 | | 33,988 | | 204,967 | ||||||
USD borrowings (1) |
9,516 | | 9,516 | |||||||||
Euro equivalent |
6,583 | | 6,583 | |||||||||
|
|
|
|
|
|
|||||||
Total |
| 177,562 | | 33,988 | | 211,550 | ||||||
|
|
|
|
|
|
(1) | Including 6,500 thousand relating to the investment in PAE. |
(2) | Including 638 thousand of finance lease obligations as of June 30, 2011 |
9
By maturity: | Total | <1 year | 1-5 years | >5 years | ||||||||||||
Euro borrowings |
| 204,967 | | 10,791 | | 131,265 | | 62,911 | ||||||||
USD borrowings |
9,516 | 4,665 | 4,851 | | ||||||||||||
Euro equivalents |
6,583 | 3,228 | 3,355 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
| 211,550 | | 14,019 | | 134,620 | | 62,911 | ||||||||
|
|
|
|
|
|
|
|
13. | Operating payables |
By maturity: | Total | <1 year | 1-5 years | >5 years | ||||||||||||
Trade payables |
| 24,995 | | 24,995 | | | | | ||||||||
Other operating payables |
32,333 | 32,333 | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
| 57,328 | | 57,328 | | | | | ||||||||
|
|
|
|
|
|
|
|
14. | Revenue breakdown |
June 30, 2011 |
Europe | North America |
Japan | Other countries |
||||||||||||||||
By geographic zone |
| 237,760 | | 125,301 | | 48,366 | | 12,425 | | 51,668 |
15. | Operating expenses |
Compensation: | Fiscal year ended June 30, 2011 |
Fiscal year ended June 30, 2010 |
||||||||||
Salaries and social contributions |
| 77,211 | | 71,222 | ||||||||
Average number of employees |
Total | 1,951 | 1,832 | |||||||||
Europe | 1,285 | 1,249 | ||||||||||
North America | 451 | 402 | ||||||||||
Asia | 215 | 181 | ||||||||||
Other operating income and expenses: | Fiscal year ended June 30, 2011 |
Fiscal year ended June 30, 2010 |
||||||||||
Miscellaneous depreciation and amortization |
| 4,763 | | 3,210 | ||||||||
Other miscellaneous expenses |
92 | 654 | ||||||||||
|
|
|
|
|||||||||
Total |
| 4,855 | | 3,864 | ||||||||
|
|
|
|
16. | Financial income and expense |
Fiscal year ended June 30, 2011 |
Fiscal year ended June 30, 2010 |
|||||||
Loan interest |
| (14,632 | ) | | (15,173 | ) | ||
Other items |
(19 | ) | 325 | |||||
|
|
|
|
|||||
Total |
| (14,651 | ) | | (14,848 | ) | ||
|
|
|
|
17. | Exceptional income and expense |
Net exceptional income included a 169 thousand gain on disposal of assets.
10
18. | Corporate income tax |
Fiscal year ended June 30, 2011 |
Fiscal year ended June 30, 2010 |
|||||||
Current tax |
| (8,006 | ) | | (1,275 | ) | ||
Deferred tax |
1,620 | (1,050 | ) | |||||
|
|
|
|
|||||
Total |
| (6,386 | ) | | (2,325 | ) | ||
|
|
|
|
|||||
Temporary differences by type: |
||||||||
Tax losses carried forward |
| | | | ||||
Other temporary differences |
6,460 | 4,916 | ||||||
Consolidation adjustments |
534 | 905 | ||||||
|
|
|
|
|||||
Total |
| 6,994 | | 5,821 | ||||
|
|
|
|
|||||
Deferred tax assets |
| 6,994 | | 5,821 | ||||
Deferred tax liabilities |
| | ||||||
|
|
|
|
|||||
Net total |
| 6,994 | | 5,821 | ||||
|
|
|
|
|||||
Tax proof: | Fiscal year ended June 30, 2011 |
Fiscal year ended June 30, 2010 |
||||||
Net income before amortization of goodwill |
| 14,448 | | 4,938 | ||||
Corporate income tax |
6,386 | 2,325 | ||||||
|
|
|
|
|||||
Profit before tax |
20,834 | 7,263 | ||||||
Group tax rate |
34.33 | % | 34.33 | % | ||||
|
|
|
|
|||||
Theoretical tax |
| 7,152 | | 2,493 | ||||
Payment differences |
(952 | ) | (226 | ) | ||||
Tax rate differences |
186 | 58 | ||||||
Miscellaneous items |
| | ||||||
|
|
|
|
|||||
Actual tax |
| 6,386 | | 2,325 | ||||
|
|
|
|
Souriau Technologies Holding, Souriau Holding, Souriau SAS and Technocontract were consolidated for tax purposes as of June 30, 2011.
19. | Contingent assets and liabilities |
June 30, 2011 | ||||
Commitments provided: |
||||
Forward currency sales ($35,950 thousand) |
| 26,451 | ||
Liquidity guarantee provided to FCPE Souriau |
750 | |||
|
|
|||
Total |
| 27,201 | ||
|
|
Souriau Technologies Holding Sas has pledged its holding of Souriau Holding Sas stock as security for bank loans. Souriau USA has guaranteed the bank loans contracted by Souriau Technologies Holding Sas. Souriau Holding Sas has provided a complementary guarantee for the benefit of the holders of the senior debt of its parent Souriau Technologies Holding Sas. The shares held in Souriau Sas have been pledged for the benefit of the same creditors. Souriau Sas has provided the following security for the bank loans it has contracted:
| A pledge of its PAE stock; |
| Pledges of certain other business assets including certain patents; |
| Pledges of intragroup receivables. |
11
June 30, 2011 | ||||
Commitments received: |
||||
A CIC credit facility in respect of the liquidity guarantee provided to FCPE Souriau |
| 750 | ||
Forward currency purchases ($0 thousand) |
| |||
Miscellaneous guarantees |
73 | |||
|
|
|||
823 | ||||
Confirmed short-term credit facility |
10,000 | |||
|
|
|||
| 10,823 | |||
|
|
20. | Consolidation scope |
All Group subsidiaries are fully consolidated.
Company |
Country | Voting rights (1) | Interest | |||||||||
Souriau Technologies Holding Sas |
France | Parent | Parent | |||||||||
Souriau Holding Sas |
France | 100.00 | % | 100.00 | % | |||||||
Souriau Sas |
France | 99.07 | % | 99.07 | % | |||||||
Technocontract Sa |
France | 100.00 | % | 99.07 | % | |||||||
Souriau Japan KK |
Japan | 100.00 | % | 99.07 | % | |||||||
Souriau USA Inc. |
USA | 100.00 | % | 99.07 | % | |||||||
PAE |
USA | 100.00 | % | 99.07 | % | |||||||
Souriau DR Ltd |
Dominican Republic | 100.00 | % | 99.07 | % | |||||||
Souriau India Plc |
India | 100.00 | % | 99.07 | % | |||||||
Souriau Moroc |
Morocco | 100.00 | % | 99.07 | % | |||||||
Souriau UK Ltd |
UK | 100.00 | % | 99.07 | % | |||||||
Souriau Germany Gmbh |
Germany | 100.00 | % | 99.07 | % | |||||||
Souriau Italy Srl |
Italy | 100.00 | % | 99.07 | % | |||||||
Souriau Sweden Ab (2) |
Sweden | 100.00 | % | 99.07 | % |
(1) | No change from the previous year. |
(2) | Liquidated in June 2011. |
21. | Statutory audit fees |
Total statutory audit fees (including foreign subsidiaries) amount to 185 thousand.
12
SOURIAU GROUP
Appendix A
Reconciliation of French and U.S. GAAP
(All amounts are in thousands of Euros,
except if noted otherwise)
13
SOURIAU GROUP
CONSOLIDATED BALANCE SHEET
In Thousands
Notes |
June 30, 2011 | |||||||||||||
French GAAP | U.S. GAAP Adj | U.S. GAAP | ||||||||||||
Non-current assets |
| 156,211 | | 21,515 | | 177,726 | ||||||||
Goodwill |
1,2,5 | 115,478 | (46,665 | ) | 68,813 | |||||||||
Intangible assets |
2 | 2,393 | 66,488 | 68,881 | ||||||||||
Property, plant and equipment |
37,965 | | 37,965 | |||||||||||
Investments |
5,6 | 375 | 1,692 | 2,067 | ||||||||||
Current assets |
113,295 | | 113,295 | |||||||||||
Inventories and work in progress |
54,400 | | 54,400 | |||||||||||
Trade receivables |
46,980 | | 46,980 | |||||||||||
Other receivables and adjustments |
11,915 | | 11,915 | |||||||||||
Cash and cash equivalents |
30,509 | | 30,509 | |||||||||||
Short-term investments |
22,266 | | 22,266 | |||||||||||
Cash |
8,243 | | 8,243 | |||||||||||
|
|
|
|
|
|
|||||||||
Total Assets |
| 300,015 | | 21,515 | | 321,530 | ||||||||
|
|
|
|
|
|
|||||||||
Group share of equity |
| 20,456 | | (2,079 | ) | | 18,377 | |||||||
Capital stock |
31,818 | | 31,818 | |||||||||||
Additional paid-in capital |
636 | | 636 | |||||||||||
Consolidated reserves |
1,2,4,5,6,7 | (16,409 | ) | (7,049 | ) | (23,458 | ) | |||||||
Conversion adjustments |
7 | (1,942 | ) | (448 | ) | (2,390 | ) | |||||||
Consolidated net income |
6,353 | 5,418 | 11,771 | |||||||||||
Minority interests |
1,110 | | 1,110 | |||||||||||
Provisions |
9,571 | | 9,571 | |||||||||||
Liabilities |
268,878 | 23,594 | 292,472 | |||||||||||
Indebtedness |
211,550 | | 211,550 | |||||||||||
Trade payables |
24,995 | | 24,995 | |||||||||||
Other payables and adjustments |
2,4,9,10 | 32,333 | 23,594 | 55,927 | ||||||||||
|
|
|
|
|
|
|||||||||
Total Equity and Liabilities |
| 300,015 | | 21,515 | | 321,530 | ||||||||
|
|
|
|
|
|
14
SOURIAU GROUP
CONSOLIDATED INCOME STATEMENT
In Thousands | Fiscal year ended June 30, 2011 | |||||||||||||
Notes | French GAAP | U.S. GAAP Adj | U.S. GAAP | |||||||||||
Sales |
| 237,760 | | | | 237,760 | ||||||||
Cost of sales |
(149,680 | ) | | (149,680 | ) | |||||||||
Research and development costs |
(8,106 | ) | | (8,106 | ) | |||||||||
Sales costs |
(22,572 | ) | | (22,572 | ) | |||||||||
Administrative expenses |
9 | (17,117 | ) | 1,339 | (15,778 | ) | ||||||||
Other operating income and expense |
2,4,7,8 | (4,855 | ) | (2,362 | ) | (7,217 | ) | |||||||
|
|
|
|
|
|
|||||||||
Operating profit |
35,430 | (1,023 | ) | 34,407 | ||||||||||
Net financial expense |
5,6,7,8 | (14,651 | ) | (782 | ) | (15,433 | ) | |||||||
|
|
|
|
|
|
|||||||||
Current profit of consolidated entities |
20,779 | (1,805 | ) | 18,974 | ||||||||||
Net exceptional income (expense) |
8 | 55 | (55 | ) | | |||||||||
Corporate income tax |
10 | (6,386 | ) | (597 | ) | (6,983 | ) | |||||||
|
|
|
|
|
|
|||||||||
Profit after tax of consolidated entities |
14,448 | (2,457 | ) | 11,991 | ||||||||||
Amortization of goodwill |
1 | (7,875 | ) | 7,875 | | |||||||||
|
|
|
|
|
|
|||||||||
Net income of consolidated entities |
6,573 | 5,418 | 11,991 | |||||||||||
Minority interests |
(220 | ) | | (220 | ) | |||||||||
|
|
|
|
|
|
|||||||||
Group share of net income |
| 6,353 | | 5,418 | | 11,771 | ||||||||
|
|
|
|
|
|
15
SOURIAU GROUP
CONSOLIDATED STATEMENT OF CASH FLOWS
In Thousands | Fiscal year ended June 30, 2011 | |||||||||||||
Notes | French GAAP | U.S. GAAP Adj | U.S. GAAP | |||||||||||
Net income of consolidated entities |
| 6,573 | | 5,418 | | 11,991 | ||||||||
Elimination of non-cash income and expenses: |
14,185 | (7,875 | ) | 6,310 | ||||||||||
Depreciation, amortization and provisions |
1 | 15,974 | (7,875 | ) | 8,099 | |||||||||
Changed in deferred tax |
(1,620 | ) | | (1,620 | ) | |||||||||
Gains and losses on disposal of assets |
(169 | ) | | (169 | ) | |||||||||
|
|
|
|
|
|
|||||||||
Cash flow of consolidated entities |
20,758 | (2,457 | ) | 18,301 | ||||||||||
Change in working capital |
2,4,5,6,8 | 4,089 | 10,465 | 14,554 | ||||||||||
|
|
|
|
|
|
|||||||||
Cash generated by operations |
24,847 | 8,008 | 32,855 | |||||||||||
Cash used in investment |
(8,824 | ) | | (8,824 | ) | |||||||||
Purchases of fixed assets |
(9,058 | ) | | (9,058 | ) | |||||||||
Sales of fixed assets |
247 | | 247 | |||||||||||
Impact of changes in consolidation scope |
| | | |||||||||||
Change in miscellaneous non-current financial assets |
(13 | ) | | (13 | ) | |||||||||
Cash used in financing |
(8,845 | ) | (8,008 | ) | (16,853 | ) | ||||||||
Capital stock increase |
| | | |||||||||||
Dividends paid to minority stockholders |
(115 | ) | | (115 | ) | |||||||||
Subscription of new loans |
| | | |||||||||||
Repayment of loans |
7 | (16,080 | ) | (658 | ) | (16,738 | ) | |||||||
Change in accrued interest |
8 | 7,350 | (7,350 | ) | | |||||||||
|
|
|
|
|
|
|||||||||
Change in cash and cash equivalents |
| 7,178 | | | | 7,178 | ||||||||
|
|
|
|
|
|
|||||||||
Opening cash and cash equivalents |
| 23,331 | | 23,331 | ||||||||||
Closing cash and cash equivalents |
30,509 | 30,509 | ||||||||||||
|
|
|
|
|||||||||||
Change in cash and cash equivalents |
| 7,178 | | 7,178 | ||||||||||
|
|
|
|
16
SOURIAU GROUP
CONSOLIDATED STATEMENT OF EQUITY
In Thousands | As of June 30, 2011 | |||||||||||||||
Notes | French GAAP | U.S. GAAP Adj | U.S. GAAP | |||||||||||||
Share capital and contributed surplus |
| 31,818 | | | | 31,818 | ||||||||||
Retained earnings, beginning of period |
1,2,4,5,6,7 | (15,773 | ) | (7,049 | ) | (22,822 | ) | |||||||||
Net income |
1,2,4,5,6,7 | 6,353 | 5,418 | 11,771 | ||||||||||||
|
|
|
|
|
|
|||||||||||
Retained earnings, end of period |
(9,420 | ) | (1,631 | ) | (11,051 | ) | ||||||||||
Cumulative translation adjustment |
(2,390 | ) | | (2,390 | ) | |||||||||||
Accumulated other comprehensive income |
7 | 448 | (448 | ) | | |||||||||||
|
|
|
|
|
|
|||||||||||
Shareholders Equity |
| 20,456 | | (2,079 | ) | | 18,377 | |||||||||
|
|
|
|
|
|
DISCLOSURE ON U.S. GAAP ADJUSTMENTS
1. | Goodwill |
Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. Goodwill is not amortized.
Goodwill is evaluated for impairment annually and on an interim basis as events and circumstances warrant. Goodwill is evaluated for impairment by allocating the total amount of goodwill to the entitys reporting units, testing the recoverability of the reporting unit on a fair-value basis, and, if the reporting unit is not recoverable, recognizing an impairment charge, if necessary, to reduce the goodwill assigned to the reporting unit to the goodwills implied fair value.
For U.S. GAAP reconciliation, the amortization has been reversed through the P&L for the yearly amortization (7.9 million) and through consolidated reserves for the past (34.1 million).
Under French GAAP, goodwill is amortized over 20 years, resulting in an annual expense of 7.9 million.
2. | Purchase Accounting |
In January 2006, Souriau was acquired by Sagard under a leveraged buy-out arrangement and in March 2007, Souriau acquired PAE, a connector manufacturer. Under U.S. GAAP acquired tangible and intangible assets and liabilities of a business are recorded at fair value and the excess of fair value of acquired net assets is recorded as goodwill. Esterline, in agreement with management estimated that 40% of the purchase price should be allocated to intangible assets and that the estimated useful life of the acquired intangibles assets should be 15 years. The impact on the consolidated financial statements is an allocation of 103 million to intangibles. As of June 30, 2011, the yearly amortization was 6.9 million, cumulative amortization represents 19.5 million and associated deferred tax liability amounted to 22.9 million.
Under French GAAP, the excess of purchase price over historical book values of assets and liabilities for these business combinations was recorded as goodwill, which is being amortized over 20 years.
3. | Retirement Benefits |
The Companys obligations for defined retirement benefits plan and other long term employee benefits are limited to statutory obligations which are significant only in France: retirement indemnity and jubilee awards.
17
The Company accrues for the full amount of the defined benefit obligation as determined by an actuary at a discount rate of 3.7% at June 30, 2011. All additions/reversals to the accrual are charged to other operating expense, including the impact of actuarial gain/losses or plan amendments.
4. | Derivative Financial Instruments |
A significant portion of the Companys sales are denominated in USD. The Company has adopted a foreign exchange risk policy whose main objective is to manage its exposure to foreign exchange (FX) risk impacting its Consolidated Financial Statements.
The FX management strategy consists of a combination of: (1) outstanding firm hedging commitments, (2) optional hedging instruments, and (3) stop losses. The foreign exchange exposure is assessed in accordance with the budget process. The time horizon of the FX exposure is equal to 18 months on a rolling basis. The target is to hedge 50% of the eighteen months revenue. The hedging is made depending of the market and optimized based on market conditions. As a consequence, we estimate that we hedge 100% of the first year and 50% of the six following months.
To comply with U.S. GAAP, the hedging derivatives are marked to market and foreign exchange gains or losses are recognized in Other Operating Income and Losses, offsetting the gains or losses resulting from the translation at end-of-year rates of foreign currency payables and receivables.
The Company uses principally two types of hedging instruments: forward contracts and options. The Companys policy prohibits utilizing these hedging instruments for speculative or active trading purposes. The Company is required to execute such instruments only with high standard international financial institutions.
As of June 30, 2011 |
||||||||||||
Hedging Instruments | Notional Amount |
Fair value | Gain (Loss) | |||||||||
Forward contracts |
15,900 K | | 16,741 K | | 841 K | | ||||||
Purchase options |
10,551 K | | 11,190 K | | 639 K | | ||||||
Total |
1,480 K | |
In French GAAP, unrealized hedging gains or losses are deferred until the forward contract or option are settled.
5. | Debt Issuance Costs |
Debt costs, which include underwriting, legal, and other direct costs related to the issuance of debt, are amortized to interest expense account over the contractual term of the debt (0.5K in 2011). These debt issuance costs are related to the 2006 LBO. In U.S. GAAP, these costs have been recognized as other assets for a net value of 1.2m at the end of June 2011.
Under French GAAP, all transaction costs had been included in the determination of the goodwill (2.8m).
6. | Debt Modification |
There was a minor debt modification due to the breach of certain financial covenants. The Company paid a 0.8M euros to modify the debt fee in February 2010. The purpose of this debt modification was to strengthen the Companys ability to maintain key debt covenants.
In U.S. GAAP, these costs have been recognized as other assets for a net value of 0.5m at the end of June 2011 and are amortized to interest expense over the remaining term of the debt (0.1m in 2010 and 0.2m in 2011).
In French GAAP, these costs were expensed as incurred.
18
7. | Foreign Exchange Gains/Losses |
Foreign currency translation or translation adjustments result from the process of translating financial statements from the Companys functional currency into the reporting currency. They are disclosed and accumulated in a separate component of consolidated equity (OCI).
Foreign currency translation or transaction gains or losses result from a change in exchange rates between the functional currency and the currency in which a foreign currency transaction is denominated. They are generally included in determining net income for the period in which exchange rates change.
For U.S. GAAP purpose, these gains or losses have been reclassified as other income and expense.
Under French GAAP, all foreign currency transaction gains and losses are recorded within financial income/expense.
8. | Exceptional Items |
The Company considers extraordinary items as events and transactions that are distinguished by their unusual nature and by the infrequency of their occurrence. Therefore, both of the following criteria should be met to classify an event or transaction as an extraordinary item: (1) Unusual nature event or transaction with a high degree of abnormality; unrelated to, or only incidentally related to, the ordinary and typical activities of the enterprise; (2) Infrequency of occurrence event or transaction not reasonably expected to recur in the foreseeable future. Extraordinary items are presented separately in the income statement, net of any related income tax effect. Events or transactions that are either unusual or infrequent, but not both are classified and reported as separate components of income from continuing operations. Exceptional costs reported under French GAAP do not meet the U.S. GAAP definition of an extraordinary item.
Under French GAAP, exceptional items are presented separately in the income statement, below operating and financial results. As these costs do not meet the U.S. GAAP definition, a reclassification to other income and expense account has been made.
9. | Business Tax |
The Company is subject to CVAE tax. The contribution on value added is a new tax applicable on all corporations and individuals (professionals non-salaried) with total sales (turnover) above 152,000 euros doing business in France. It became effective on January 1, 2010. The CVAE tax is equal to 1.5% of the value added produced by the corporations or individuals during the taxable calendar year or during the last 12 months of the year if different.
The value added produced by corporations or individuals is the difference between total sales (turnover) realized and purchases made and expense incurred. Certain items such as interest income/expense and exceptional items are excluded from the computation. Under U.S. GAAP, CVAE is reclassified as income tax.
Under French GAAP, the CVAE is classified within operating expense.
10. | Corporate Tax Adjustment |
This adjustment includes the reclassification of the CVAE tax and the application of deferred tax on previous disclosures, as follows:
Deferred tax on intangible amortization |
2.4 m | |
PAEs NOL |
(0.4) m | |
CVAE reclassification |
(1.3) m | |
Hedging |
(1.1) m | |
Debt issuance costs |
0.2 m | |
Foreign exchange impact on USD loan |
(0.3) m | |
| ||
Tax adjustment |
(0.5) m |
19
11. | Operating Leases |
The Companys leases for office space, plant and vehicles are accounted for as operating leases. The majority of the Companys leases include options under which the Company may extend the lease term beyond the initial commitment period, subject to terms agreed to at lease inception. Some leases also include early termination options, which can be exercised under specific conditions. The minimum lease terms generally range from 3 to 10 years.
2012 |
2,075 K | |||
2013 |
1,754 K | |||
2014 |
1,602 K | |||
2015 |
994 K | |||
Thereafter |
1,992 K |
20