Document pee4Y6Eb111G75m0kavE0bdQj

In December 1993. in conjunction with the acquisition of DCBU, the Company recorded a SSS million acquisition integration charge ($34 million after income tax credits, or $.49 per Common Share). Part of a comprehensive business plan, the charge addressed the costs of inte grating the ICPDO 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 $20 million with the remaining $35 million expected to occur primarily over the next three years. The remaining expenditures will be funded through cash flow from the combined operations. On November 16,1994, the Company acquired the common stock of Lectron Products, Inc. (Lectron) through the issuance of 1.6 million Common Shares. Lectron, a privately-held manufacturer of electronic and precision electromechanical controls for automotive manufactur ers, had annual sales of $128 million for the most recent fiscal year. This acquisition was accounted for as a pooling-of-interests. Financial statements for periods prior to the acquisition were not restated for the acquisition since the effect would not be material. During 1994, in conjunction with the acquisition of DCBU, the Company sold certain DCBU operations to Thomas & Betts Corporation (T&B) in exchange for cash aggregating $61 million and $14 million of T&B common stock. These divestitures resulted in no gain or loss. During 1994,1993 and 1992, the Company acquired and divested other 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 issuance costs, was $11 million ($7 million after income tax credits, or $.10 per Common Share). ACCOUNTING CHANGES In 1992, the Company adopted Statement of Financial Accounting Standard (SFAS) No. 106, ``Employers'Accounting for Postretire ment Benefits Other Than Pensions" and SFAS No. 109, "Accounting for Income Taxes." SFAS No. 106 requires accrual of postretirement benefits other than pensions, primarily postretirement health care and life insurance for retirees in the United States, over the working lives of employees rather than recognition of expenses as claims are incurred. Net income for 1992 was reduced by the cumulative effect of this accounting change for prior years of $442 million ($274 million after income tax credits, or $3.97 per Common Share). SFAS No. 106 has no effect on cash flows since claims will continue to be paid as incurred. The adoption of SFAS No. 109 changed the method of accounting for income taxes to the liability method from the' deferred method. The liability method requires recognition of deferred income taxes based on temporary differences between the financial reporting and income -~4ax bases of assets and liabilities, using currently-enacted income tax ties and regulations. Net income for 1992 was increased by the cumu lative effect of this accounting change for prior years of $6 million, or $ 09 per Common Share. SFAS No. 109 has no effect on cash flows. ACCOUNTS RECEIVABLE AND INVENTORIES Accounts receivable are net of an allowance for doubtful accounts (in millions) of $14 and $10 at the end of 1994 and 1993, respectively. The components of inventories at December 31 follow (in millions): Raw materials Work in process Finished goods Gross inventories at RFO Excess of current cost over LIFO cost Net inventories at LIFO 1994 $213 358 216 787 (89) $698 1993 $141 238 139 518 (84) $434 Gross inventories accounted for using the LIFO method (in millions) were $367 and $314 at the end of 1994 and 1993, respectively. INVESTMENT IN LIFE INSURANCE In 1993, the Company purchased company-owned life insurance poli cies insuring the lives of a portion of active United States employees. The policies accumulate asset values to meet future liabilities includ ing the payment of employee benefits such as health care. At December 31,1994 and 1993, the investment in the policies included in other assets (in millions) was $10 and $7, net of policy loans of $226 and S110, respectively. Net life insurance expense (in millions) of $5 and S2, including interest expense of $15 and $4 in 1994 and 1993, respectively, was included in selling and administrative expense. DEBT AND OTHER FINANCIAL INSTRUMENTS The Company's subsidiaries outside the United States have lines of credit, primarily short-term, aggregating $115 million from various banks worldwide. Most of these arrangements are reviewed periodi cally for renewal. At December 31. 1994, the Company had $19 mil lion outstanding under these lines of credit with banks. The weighted average interest rate on short-term debt, excluding immaterial amounts for highly inflationary countries, at December 31, 1994 and 1993 was 6.8% and 8.1%, respectively. Long-term debt at December 31, excluding the current portion, follows (in millions): 1994 1993 .Voles of Employee Slock Ownership Plan due through 1999 6- 3/8% notes due 1999 9% notes due 2001 S% debentures due 2006 (due 1996 at option of debenture holders l 8.9% debentures due 2006 7% debentures due 2011, net of unamortized discount of S93 million in 1994 and S95 million in 1993 (effective interest rate 14.6%) 8-7/8% debentures due 2019 (due 2004 at option of debenture holders) S. l.% debentures due 2022 7- 5/8% debentures due 2024 Cnsecured notes (6% to 6.4%) Other S 66 S 82 100 100 100 86 86 100 100 107 105 38 100 100 210 46 s7o5~3 38 100 38 S~649 25