Document JJQEZJoDq62yLKQ8adRvOe2BO

| Peat,Marwick,Mitchell&Ca Certified Public Accountants Peat Marwick Plaza 303 East Wacker Drive Chicago, Dlinois 60601 (312) 938-1000 The Board of Directors Borg-Warner Corporation: We have examined the combined balance sheet of the Automotive Aftermarket Operations of Borg-Wamer Corporation as of February 28, 1981 and have issued our report thereon dated July 9, 1981. Our examination was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In connection with the aforementioned examination, we have reviewed the accompanying calculation of net operating investment of Borg-Wamer Corporation with respect to the / ''motive Aftermarket Operations as of February 28, 1981 as defined in section 1.4 of ti.. Agreement for Sale of Assets dated February 28, 1981 between Borg-Wamer Corporation and The Echiin Manufacturing Company. In our opinion, such calculation is in accordance with section 1.4 of the Agreement for Sale of Assets. AUTOMOTIVE AFTERMARKET OPERATIONS OF BORG-WARNER CORPORATION COMBINED BALANCE SHEET FEBRUARY 28, 1981 (With Accountants' Report Thereon) r E00252 Pteat, Marwick,Mitchell &Ca Certified Public Accountants Peat Marwick Plaza 303 East Wacker Drive Chicago, Dlioois 60601 (312) 938-1000 The Board of Directors Borg-Warner Corporation: We have examined the combined balance sheet of the Automotive Aftermarket Operations of Borg-Warner Corporation as of February 28, 1981. Our examination was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, the aforementioned combined balance sheet presents fairly the financial position of the Automotive Aftermarket Operations of Borg-Warner Corporation at February 28, 1981, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding period. July 9, 1981 t E002S3 automotive aftebmabket opebahons of bobg-wabneb cobpobation COMBINED BALANCE SHEET ASSETS CURRENT ASSETS: Cash....................................................................................... Accounts and notes receivable: Trade (less allowance for doubtful accounts of $610 thousand)................................................................ Other................................................................................... Affiliates........................................................................... Inventories............................................................................... Prepaid expenses................................................................... Total current assets................................................ PROPERTY: Cost....................................................................................... Less accumulated depreciation............................................ Net property........................................................... OTHER ASSETS....................................................................... TOTAL........................................ LIABILITIES AND EQUITY CURRENT LIABILITIES: Accounts payable - trade....................................................... Accounts payable - affiliates ........................ -.................... Current portion of capitalized lease liabilities................ Accrued liabilities: Taxes other than income................................................... Salaries, wages and related expenses................................ Other................................................................................... Total current liabilities............................... LONG-TERM CAPITALIZED LEASE LIABILITIES................ EQUITY OF BORG-WARNER CORPORATION.................... TOTAL................................................ (In Thousands) February 28, 1981 $ 33 20,842 2,758 184 30,974 781 55,572 13,709 (6,658) 7,051 876 $63,499 $ 8,759 5,372 375 337 593 1,249 16,685 2,032 44,782' $63,499 See accompanying notes to combined balance sheet. E00254 automotive aftermarket operations of borg-warner corporation NOTES TO COMBINED BALANCE SHEET FEBRUARY 28, 1981 L. Summary of Accounting Policies Principles of Combination rhe accompanying combined balance sheet represents the combined accounts of the Automotive Aftermarket Operations of Borg-Warner Corporation. All significant trans lations among members of the combination have been eliminated. Inventories nventories are valued at the lower of cost or market. Cost is generally determined on lie first-in, first-out (FIFO) basis. Property and Depreciation Property is valued at cost less accumulated depreciation. Expenditures for maintenance, epairs and renewals of relatively minor items generally are charged to income as incurred, lenewals of significant items are capitalized. Depreciation has been calculated using principally the straight-line method based on the ollowing estimated useful lives: Buildings and improvements................................................... Machinery and equipment....................................................... Automobiles and trucks........................................................... Office furniture and equipment............................................ Tooling ................................................................................... Years 10 to 20 5 to 20 2 to 5 4 to 10 2 to 5 Dost of assets sold, retired or fully depreciated and the related amounts of accumulated iepreciation are eliminated from the accounts, and the resulting gains or losses on disposal if assets are credited or charged to income. Stock Returns and Warranties Jo amounts are accrued for future stock returns or warranties, except for approximately 340 thousand related to one of the units of the Automotive Aftermarket Operations. Dharges for such amounts are generally recognized as incurred. Income Taxes Tie Automotive Aftermarket Operations are included in the U.S. federal, state and foreign icome tax returns of Borg-Warner Corporation and its subsidiaries. No charges have been lade by Borg-Wamer Corporation to the Automotive Aftermarket Operations for income ax liabilities. Thus, no liability has been provided for taxes based upon income. E00255 ( AUTOMOTIVE aftermarket operations of borg-warner corporation NOTES TO COMBINED BALANCE SHEET (Continued) ^ Operations Outside The United States Equity in the net assets of combined operations located in Canada is summarized as follows (In thousands): February 28, 1981 Current assets . . Non-current assets Total assets . . . Current liabilities. Equity in net assets $ 1,395 36 1,431 81 $ 1,350 3. Inventories Inventories are as follows (in thousands): Raw material. Work in process Finished goods Total February 28, 1981 $ 3,696 313 26,965 $30,974 4. Property P ;rty is summarized as follows (in thousands): Land ............................................................... Buildings and improvements............................ Machinery and equipment................................ Capitalized leases................................................ Less accumulated depreciation and amortization................................ Property - net.................................................... February 28, 1981 $ 93 3,340 6,038 4,238 13,709 6,658 $ 7,051 Accumulated capital lease amortization amounted to $2,062 thousand at February 28, 1981. 5. Retirement Benefit Plans Substantially all U.S. employees of the Automotive Aftermarket Operations are covered by non-contributory retirement benefit plans providing life insurance and medical benefits. Under these plans, benefits are charged to earnings as claims are paid. A number of these employees are also covered by non-contributory plans which provide pension benefits and these plans are funded currently, including amortization of prior service costs over periods not exceeding 40 years. As of the date of the most recent valuation (December 31, 1980), assets of each pension plan exceeded the actuarially computed value of vested benefits. E00256 f AUTOMOTIVE aftermarket operations of borg-warner corporation NOTES TO COMBINED BALANCE SHEET (Continued) g. Lease Commitments The Automotive Aftermarket Operations are committed at February 28, 1981 to make payments on non-cancellable leases as summarized below (in thousands): Operating Leases Capital Leases Principal Interest Total 10 months 1981 . . . . 1982 ................ 1983 ................ 1984 ................ 1985 ................ 1986-1990 . . . . . . 1991-1995 . . . ... $ 694 1,013 48 $3,555 $ 312 268 262 275 288 702 300 * $2,407 $ 118 124 107 92 76 194 34 $ 745 $ 430 392 369 367 364 896 334 $3,152 Capitalized leases are primarily for buildings and machinery and bear an average interest rate of 6.1%. Contingent Compensation Plan Certain employees of the Automotive Aftermarket Operations participate in Borg-Wamer's Contingent Compensation Plan. Bonuses awarded under the program are payable currently or may be deferred at the option of the participant. Liabilities related to deferred portions of the award have not been reflected in the combined balance sheet due to the policy of funding by Borg-Warner corporate of this expense. 8. Segment Data Segment data is not provided as the Automotive Aftermarket Operations are engaged in one business and operate solely in North America. 9. Contingencies It is the opinion of counsel and the management of Borg-Warner Corporation that various claims and litigation in which the Automotive Aftermarket Operations are currently involved will not materially affect the combined financial position of the Automotive Aftermarket Operations. E00257 ASSIGNMENT WHEREAS, BORG-WARNER CORPORATION ("Assignor"), a Delaware corporation, having its principal place of business at 200 South Michigan Avenue, Chicago, Illinois 60604, is the owner of the entire right, title and interest in and to the trademarks and registrations of said marks listed in Exhibit "A" annexed hereto; and WHEREAS, THE ECHLIN MANUFACTURING COMPANY ("Assignee") a Connecticut corporation, having its principal place of business at 175 North Branford Road, Branford, Connecticut, s desirous of acquiring all rights, title and interest in and to said trademarks and registrations listed in Exhibit "A" annexed hereto; NOW, THEREFORE, in consideration of the sum of One Dollar ($1.00) and other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged. Assignor does hereby assign unto Assignee all rights, title and interest in and to the trademarks listed in Exhibit "A" annexed hereto, together with the applications for registration and registrations thereof and the good will of the business symbolized by the marks, BORG-WARNER CORPORATION E00258 EXHIBIT "A" FEDERAL AND STATE TRADEMARK REGISTRATIONS Trademark Federal AUTO-MECH CAPSUL-PAC & Design CAPSUL-PAC & Design DITTMER & Design DITTMER & Design KOOLWIRE POWER BRUTE SHURHIT SHURHIT TRU-POWER & Design Number 831,769 770,548 784,390 584,526 829,428 967,421 921,043 444,794 832,851 598,452 Trademark Missouri TRU-POWER & Design Number 3311 E00259