Document gbREDZ5oRR8G2o8QgKnxL3Q4V

ACQUISITIONS AND OIVESTITURES OF BUSINESSES On January 31,1994, the Company acquired the Distribution and Control Business Unit (DC8U) of Westinghouse Electric Corporation for $1,050 billion. DC8U, a leading North American manufacturer of electrical dis tribution equipment and industrial controls, had sales of $1.1 billion in 1993. The acquisition was accounted for as a purchase and, according ly, the statements of consolidated income include the results of DCBU beginning February 1,1994. The assets acquired and liabilities assumed in the acquisition follow (in millions}: Fair value el assets acquired including identified intangible assets of S95 Liabilities assumed Excess ol cost over net assets acquired Purchase price, net ot cash acquired S 742 (298) 606 $1,050 In December 1993, in conjunction with the acquisition of DC8U, the Company recorded a $55 million acquisition integration charge ($34 mil lion after income tax credits, or $.49 per Common Share), the charge ad dressed the costs of integrating existing product lines and manufacturing operations with DCBU, related workforce reductions and a $9 million write-down of assets, largely in the United States. To date, expenditures and charges total $39 million with the remaining $16 million expected to x--occur primarily over the next two years. On November 16,1994, the Company acquired the common stock of Lednon Products, Inc. (Lectron) through the issuance of 1.6 million Com mon Shares. Lectron, a privately-held manufacturer of electronic and pre cision electromechanical controls for automotive manufacturers, had sales of $128 million in 1994. This acquisition was accounted for as a pool ing-of-interests. Financial statements for periods prior to the acquisition were not restated for the acquisition since the effect was not material. Effective May 1,1995, in two separate transactions, the Company ac quired the IKU Group of The Netherlands and the Emwest electrical switchgear and controls business from Email Ltd. of Australia for a com bined purchase price of $120 million. The IKU Group is a leading supplier of electric mirror actuators for automotive manufacturers in the United States, Europe and Korea. Emwest manufactures and distributes a wide range of electrical equipment including circuit breakers, panelboards, contactors and switchgear in the Pacific Region. These two acquisitions had combined sales of $110 million in 1994. These acquisitions have been accounted for as purchases and, accordingly, the statements of con solidated income include the results of their operations since the effec tive date of acquisition. During 1994, in conjunction with the acquisition of DCBU, the Com pany sold certain DCBU operations to Thomas & Betts Corporation (T&8) in exchange for cash aggregating $61 million and $14 million of T&B com mon stock. These divestitures resulted in no gain or loss. During 1995,1994 and 1993, the Company also acquired and divested Hher smaller operations. EXTRAORDINARY ITEM During 1993, the Company called for redemption $74 million of 9% debentures and $89 million of 8.5% debentures. The extraordinary loss on these redemptions, including the write-off of unamortized debt is suance costs, was $11 million ($7 million after income tax credits, or $. 10 per Common Share). ACCOUNTS RECEIVABLE AND INVENTORIES Accounts receivable are net of an allowance for doubtful accounts (in millions) of $15 and $14 at the end of 1995 and 1994, respectively. The components of inventories at December 31 follow (in millions): Raw materials WorV in process Finished goods Gross Inventories at FIFO Excess of current cost over LIFO cost Net inventories 1995 $225 369 235 829 (94) $735 1994 $213 358 218 787 (89) $698 Gross inventories accounted for using the UFO method (in millions) were $328 and $367 at the end of 1995 and 1994, respectively. INVESTMENT IN LIFE INSURANCE The Company has company-owned life insurance policies insuring the lives of a portion of active United States employees. The policies accu mulate asset values to meet future liabilities including the payment of employee benefits such as health care. At December 31.1995 and 1994, the Investment in the policies included in other assets On millions) was $10, net of policy loans of $348 and $226, respectively. Net life insurance expense On millions) of $7 in 1995, $5 in 1994 and $2 in 1993, including interest expense of $27, $15 and $4 in 1995,1994 and 1993, respectively, was included in selling and administrative expense. DEBT ANO OTHER FINANCIAL INSTRUMENTS The Company's subsidiaries outside the United States have lines of credit, primarily short-term, aggregating $109 million from various banks world wide. At December 31,1995, the Company had $34 million outstanding under these lines of credit. The weighted average interest rate on short term debt, excluding immaterial amounts for highly inflationary countries, at December 31,1995 and 1994 was 6.3% and 6.8%. respectively.